ITO, NEW DELHI vs. M/S CHANDARMAULI TRADEX PVT. LTD., NEW DELHI

The aforesaid appeal has been filed by theRevenue against impugned order dated 2.9.2010, passed by the ld. CIT (Appeals)-VI, New Delhi for the quantum of assessment passed u/s 143(3) for the A.Y. 2007-08. In the grounds of appeal Revenue has raised following grounds of appeal:-

The facts in brief as culled out from the impugned order are that the assessee is engaged in the business of providing consultancy and is also a commission agent. During the year under consideration the assessee has received share application money of Rs. 3,52,65,000/- from the six entities, the details of which are as under:- Sr. No. Entity Name Rupees 1 M/s. CGG Global Trading Co. Ltd. 1,64,50,000/- 2 M/s. Shentracon Financial Services 18,50,000/- Pvt. Ltd. 3 M/s. Locus Software Solutions Pvt. 35,00,000/- Ltd. 4 M/s. Rolex Exports Pvt. Ltd. 50,000/- 5 M/s. Vimsai Trading India Pvt. LTd. 34,50,000/- 6 M/s. Gamma Avionics Distribution 99,65,000/- Pvt. Ltd.

Before us Learned CIT(Appeals), the assessee submitted that, already a copy of confirmation letters from share applicants along with the details of amount invested, copy of their PAN, bank statements andcopy of acknowledgement of return of income was filed before the Assessing Officer. In fact in two cases, the parties have filed their confirmations along with the supporting documents directly before the Assessing Officer in compliance of notice u/s 133(6). Regarding other Companies, the assessee submitted that notices which were sent by the AO were on wrong addresses and this fact was duly intimated to the Assessing Officer who did not issue further notice on the correct addresses. Further, the Assessing Officer has not given sufficient opportunityafter the report of ITI, and all the enquiry was done without the knowledge of the assessee.

Learned CIT(Appeals), accepted the assessee’s contention and has deleted the said addition after making following observations:- “1.3 I have carefully considered the submissions of Id AR and have gone through the assessment order. The Assessing Officer has made the addition mainly on the ground that the appellant has failed to produce the person with whom the assessee had made the transactions. He has also mentioned in the assessment order that the inspector was deputed to make enquiries in respect of M/s. Vimasai Trading Pvt. Ltd. and M/s. CGG Global Trading Pvt Ltd and as per the Inspector’s report no such company existed on the given address. However, no where it is mentioned in the assessment order that results of these enquiries were made available to the assessee. In such circumstances, when the appellant has not been provided opportunity to rebut the results of enquiries conducted u the back of assessee. The Assessing Officer was not justified in drawing any adverse conclusion. Moreover, the issue in the present case relates to the share capital money received by the assessee. This issue is covered in favour of the appellant by various decisions wherein it has been held that once the assessee has filed the requisite details e.g. PAN confirmation etc. before the Assessing Officer, the initial onus is discharged.

On the other hand the learned counsel for the assessee submitted that, the assessee had discharged its prima-facie onus to prove the genuineness and credit worthiness of the share application money and the share applicants. He submitted that all the six entities were private limited companies who have given their letter of confirmations, their bank statements, PAN and acknowledgement of Page 5 of 10 IT return. These document itself goes to prove the source and genuineness of the transaction. The ld. Assessing Officer, did not confront to the assessee with the fact that either the notices could not be served or confronted with the report of the ITI that these companies were not available on the given addresses. The assessee had given the correct address to the Assessing Officer later on which he did not carry out any further enquiry. Apart from that, it is also a matter of record that majority of the share application money has been refunded back in the subsequent years and for balance amount shares have been allotted. All the primary requirements for furnishing of the evidences as required from the assessee to prove the nature and source of credit u/s 68 has been discharged. Therefore, there is no infirmity in the order of the Learned CIT(Appeals) the same should be affirmed.

We have heard the rival submissions, perused the relevant findings given in the impugned order as well as material placed on record. In this case, the assessee company has received share application money from six entities for sums aggregating to Rs. 3,52,65,000/-. The Assessing Officer in his assessment order to cull out that the transaction of share application is not genuine has noted certain fact that, firstly, information u/s 133(6) was sought from all the above companies, however no confirmation was received from two companies; secondly, he had asked the assessee to produce the Principal Officer or the persons controlling these companies in case of 3 companies to examine the genuineness of the share application money, however none from these companies were produced before him; and lastly, in case of two companies he deputed ITI who reported that these two companies do not exist on Page 6 of 10 the given addresses. On the other hand the assessee’s case, before the Learned CIT (Appeals) has been that all the details of share applicants have been filed, viz., confirmation letters from share holders; details of amount invested by them; a copy of their bank statements; copy of PAN; and copy of their acknowledgement of return of income. It had been further submitted that AO got the enquiries done on the wrong addresses as the addresses were changed. The Ld. CIT (A) in light of these assertions of the assessee has deleted the additions and observed that AO has not rebutted these evidences.

After going through the entire contentions raised by the parties before us and also on perusal of material on record, we find that though the assessee may have filed certain information and details to prima facie prove the nature and source of the credit appearing in its books of account which was in the form of share application money received from six companies, however when the Assessing Officer had carried out his own set of enquiries and found that some of the transactions are either not confirmed independently or they were not found at the given addresses or they have not responded to the notices issued u/s 133(6), then in such circumstances the onus shifts back to the assessee to controvert that outcome of such enquiry was erroneous. The assessee has to prove that that these are not shell companies, existing only in papers. More so, on the perusal of the income tax returns of all the companies, it is seen that in all the cases, return of income has been filed showing ‘Nil’ income and what has been their source of income or source of availability of funds is also not discernible. When a doubt has been well founded by the AO in his preliminary enquiry, Page 7 of 10 then assessee has to dispel that doubt by proving that the transactions were genuine. If before the Ld. CIT (Appeals) the assessee has pointed out that the ITI was not sent on the correct address or there has been some change of address later on, then it was incumbent upon the Ld. CIT (Appeals) to himself got the enquiry done through the Assessing Officer or should have asked the Assessing Officer for the remand report to examine the veracity of the claim of the assessee made before the Ld. CIT (Appeals) or should have asked the assessee to produce creditors. None of such exercise has been done by Ld. CIT (A) which he is required to do so under law as a first appellate authority having co-terminus power with the Assessing officer. Even the confirmations letters which have been given along with the other details have not been examined properly by the Ld. CIT (Appeals) or even as a matter of fact by the Assessing Officer, especially when during the year the assessee has only received the share application money and none of the share applicants were allotted shares in this year and it has also not been properly scrutinized as to how much money has been refunded back in the subsequent years and to whom shares have been allotted and when. All these facts needs to thoroughly scrutinized and examined by both the authorities. The Learned CIT (Appeals) before granting relief should have at least examined himself/herself or should have asked for the remand report from the Assessing Officer. Thus, under the facts and circumstances of the cases, we are of the opinion that the entire matter of the share application money should be remitted back to the file of the Assessing Officer who shall examine the evidences and also carry out proper enquiry on the correct address provided by the assessee in the case of all the six companies. The assessee shall cooperate in providing all the necessary details as and Page 8 of 10 when required by the Assessing Officer. Thus, we set aside the order of the Learned CIT (Appeals) and remand back the entire issue to the file of Assessing Officer to decide the share application money issue afresh and in accordance with the law after giving due and proper opportunity to the assessee to represent its case. Accordingly, the Revenue’s appeal is treated as allowed for statistical purposes.