TRIDENT TOWERS PVT. LTD.,NEW DELHI vs. ITO, NEW DELHI

ORDER ORDER ORDER ORDER PER PER H.S. SIDHU PER PER H.S. SIDHU H.S. SIDHU : : : : JM H.S. SIDHU Assessee has filed this Appeal against the impugned Order dated 21.11.2012 passed by the Ld. CIT(A)-19, New Delhi relevant to assessment year 2002-03 on the following grounds:-

“1. That on the facts and in the circumstances of the case, the Commissioner of Income Tax (Appeal) erred in not holding that the order passed by the Assessing Officer under section 147/143(3) of the Income Tax Act, 1961 ('the Act') is beyond jurisdiction, bad in law and void-ab-initio.

1.1 That on the facts and in the circumstances of the case, the Commissioner of Income Tax (Appeal) erred in upholding the action of the Assessing Officer in initiating proceedings under section 147 1 of the Act without forming any "reason to believe" that any income of the assessee had escaped assessment and without satisfying other conditions precedent for initiating proceedings under that section.

1.2 That on the facts and in the circumstances of the case, the Commissioner of Income Tax (Appeal) erred in upholding the action of the Assessing Officer in initiating proceedings under section 147 of the Act solely on the basis of certain information purportedly received from the Investigation Wing, without any independent application of mind, which is sine qua non for assumption of valid jurisdiction.

2. For that the Learned Commissioner Income Tax (Appeal) is not justified in upholding the addition made u/s 68 of the Income Tax Act, 1961 by the Income Tax Officer amounting to Rs. 10,01,000/- (Rupees Ten Lakhs One Thousand Only) received from the following parties: a. Rabik Exports Ltd. Rs. 5,00,500/- b. Dignity Finvest Pvt. Ltd. Rs. 5,00,500/- The addition amounting to Rs. 10,01,000/- may, please be deleted and the share application money may not be treated as unexplained cash credit as per provisions of section 68 of the Income Tax Act, 1961.

2. The brief facts of the case are that the return of income for the assessment year 2002-03 was filed on 31.10.2002 declaring total income of Rs. 26,633. The return was processed u/s. 143(1) of the I.T. Act, 1961 on 4.2.2003 at the returned income. In this case, certain information was received from the Directorate of Income Tax (Investigation), giving details that the assessee had received the following amounts stating that these amounts received by the assessee are in the nature of accommodation entries, which the assessee had taken after paying unaccounted cash to the accommodation entry providers amounting to Rs. 10,01,000/- i.e. Rs. 5,00,500/- each from M/s Rabik Exports Ltd. and M/s Dignity Finvest Pvt. Ltd. AO observed that the assessee filed the details alongwith the return of income does not indicate the transactions held with the above parties. AO further observed that the Investigation Wing had a detailed enquiry in this regard and came to a conclusion that the assessee had received the above receipts under the name of share application money/ share subscription. AO observed that thus, the assessee had ploughed back unaccounted money of Rs. 10,01,000/- in its business through the channel of accommodation entry. In view of the above, the AO had the reason to believe that the income to the tune of Rs. 10,01,000/- has escaped assessment. Accordingly, after recording due satisfaction notice u/s. 148 of the Act read with section 147 of the Act was issued to the assessee on 24.3.2009. In response to the above notice, the assessee vide its letter dated 15.4.2009 has submitted that to treat the return filed on 31.10.2002 in resposnet o the notice issued u/s. 148 of the Act. Subsequently, notice u/s. 143(2) and 142(1) of the Act were issued and in response thereto the A.R. of the assessee attended the proceedings and file the details which was examined by the AO. 3 Thereafter, the AO observed that assessee has failed to offer any explanation about credits appearing in its books. Thereafter, the AO completed the assessment at an income of Rs. 10,25,636/- by passing the order dated 31.12.2009 u/s. 143(3)/147 of the I.T. Act, 1961.

3. Against the order of the Ld. AO, assessee appealed before the Ld. CIT(A), who vide impugned order dated 21.11.2012 has dismissed the appeal of the assessee.

4. Aggrieved with the order of the Ld. CIT(A), Assessee is in appeal before the Tribunal.

5. At the time of hearing, Ld. Counsel of the assessee has certified that assessee has filed all the documentary evidences before the AO as well as before the Ld. CIT(A) for substantiating its claim and in spite of the same the Revenue authority has wrongly made the addition in dispute. In support of his contention, Ld. Counsel of the assessee has also filed a Paper Book containing pages 1 to 49 having the copy of Audited Balance Sheet alongwith Annexure of Allotted shares, Ledger A/c copy Bank Statement; Written submission to CI”T(A) vide letter dated 6.11.2012; Form No. 2 of Companies Act for allotment of shares and filing with the ROC on 29.5.2002; Application for asking for reasons; Filing of objections dated 25.11.2009; Letter to AO dated 11.12.2009; Details of Investors i.e. (a) Rabik Exports Limited: Share Application Form, Minutes of Board Meeting, Details of CIN NO., MOA, Confirmation, Affidavit, ITR and Financial Statement; (b) Dignity Finvest Private Limited : Share Application Form, Minutes of Board Meeting; CIN No., MOA, PAN No., ITR, Confirmation and Affidavit. Ld. Counsel of the assessee further stated that since the onus of proving cash credit in the books is reubuttable and the transaction is established and filed the copy of the ITAT, Delhi Bench decision in the case of ITO vs. OPG Leasing & 4 Finance P. Ltd. passed in vide order dated 25.1.2016 and relied on the same.

6. On the contrary, Ld. DR relied upon the orders of the authorities below. He stated that the primary onus is on the assessee to prove that it did not take an accommodation entry, which the assessee has not done. Therefore, he stated that the lower authorities were right in making the additions in dispute, which does not need any interference on our part and accordingly, the Assessee’s appeal may be dismissed.

7.1 In this case, we note that AO vide his order dated 31.12.2009 has passed the following order:-

Sl.No. Name of the Details of Instrument Total amount party from Bank No. and whom amount date received 1. M/s Rabik Ratnakar 2260 Rs. 5,00,500/- Exports Ltd. Co-op. dated Bank, 26.11.2001 Karol Bagh 2. M/s Dignity Vijaya 2945 Rs. 5,00,500/- Finvest Pvt. Bank, dated Ltd. Rani Bagh 27.11.2001 The details filed alongwith the return of income does not indicate the transactions held with the above parties. Further, the investigation wing had a detailed enquiry in this regard and came to a conclusion that the assessee had received the above receipts under the name of share application money / share subscription. Thus, the assessee had ploughed back unaccounted money of Rs. 10,01,000/- in its business through the channel of accommodation entry. Therefore, it is failure on the part of the assessee to disclose fully and truly all material facts necessary for its assessment, for the assessment year 2002-03 and has not paid tax on such amount. The unaccounted moneys which should have been charged to tax are being ploughed back to business without paying due tax on it. In view of the above facts the then AO had the reason to believe that the income to the tune of Rs. 10,01,000/- has escaped assessment.

Accordingly, after recording due satisfaction notice u/s. 148 of the Act read with Section 147 of the Act was issued to the assessee on 24.3.2009. In response to the above notice, the assessee vide its letter dated 15.4.2009 has submitted that to treat the return filed on 31.10.2002 in response to the notice issued u/s. 148 of the Act. Subsequently Notice u/s. 143(2) and 142(1) of the Act were issued. In response thereto Sh. Bhawani Shankar Sharma, CA and AR of the assessee attended the proceedings and file the details, the same are examined and placed on record.

During the course of assessment proceedings, vide letter dated 11.12.2009, it was submitted that the above money was received on account of share application from the above persons. This office has issued summons u/s. 131 of the Act on 14.12.2009 to M/s Digvijay Finvest Pvt. Ltd. and M/s Rabik Exports Ltd. for their personal deposition and proof of identity. For which the case was fixed on 21.12.2009. However, on this date, these persons were not attended the proceedings, hence, the assessee was asked vide note sheet entry dated 22.12.2009 to produce the above persons in order to verify the genuineness of the transaction, for which the case was fixed for hearing on 24.12.2009. However, on 24.12.2009, the assessee has neither attended the proceedings nor any reply has been received. Further, it is pertinent to mention here with that Sh. Mukesh Kumar R/o WZ-414, Nariana Village, New Delhi, as in the capacity of Director in the companies M/s Dignity Finvest Pvt. Ltd. and M/s Rabik Exports Ltd. in his statement recorded on 06.1.2004 by the Addl. Director of Income Tax (Inv.) has admitted that the investment made in the assessee company is nothing but a accommodation entry. In view of the above, the creditworthiness, identity, genuineness of the transaction could not be proved by the assessee. Accordingly, the amount of Rs. 10,01,000/- is hereby treated as unexplained credits as pr the provisions of section 68 of the I.T. Act, 1961. Accordingly, an amount of Rs. 10,01,000/- was made to the total income of the assessee and assessed under the head income from other sources. As the assessee has failed to offer any explanation about credits appearing in its books, hence, I am satisfied that it has concealed the particulars of its income and furnished inaccurate particulars of the same. It is therefore, liable for penalty u/s. 271(1)© of the I.T. Act, 1961 proceedings for which is being initiated separately.

With these remarks, the income of the assessee is computed as under:-

Income returned as per return of income : Rs. 24,636 Add: Un-explained credits u/s. 68 (as discussed 8 Above) : Rs. 10,01,000

Total income : Rs.10,25,636/- Rounded off to Rs. 10,25,640/- Assessed accordingly on a total income at Rs. 10,25,640/-. Give credit to pre-paid taxes, charge interest u/s. 234B of the I.T. Act. Issue demand notice, Challan and copy of ITNS 150 ……………………….”

7.2 We further note that Ld. CIT(A) while dismissing the appeal of the assessee has passed a detailed order 21.11.2012 by observing as under:-

“3.4 The appellant has argued that the companies shown as share applications are having PAN and payments are made by cheque. The Appellant’s argument is unacceptable in view of the specific information received from the Investigation Wing regarding investigations which shows that the appellant had received bogus accommodation entries. It is well known that in such cases, companies are registered and documentation created with the sole purpose of showing accommodation entries as genuine transactions. It is settled law that mere filing of returns and routing of transactions through bank is not sufficient proof of genuineness. The copy of documents filed shows typical characteristics of companies engaged in providing bogus accommodation entries. The companies have nominal income from unknown sources. Their returns have not been scrutinized u/s. 143(3). The mere that the returns have been processed u/s. 143(1) does not mean that the income shown has been examined. In any case it was only subsequently that inquiries by the Investigation Wing led to unearthing of a racket in bogus accommodation entries. Therefore, the filing of returns by these companies does not mean that their capacity or genuineness has been proven. In this case, the appellant has not filed any copy of bank statements of these companies therefore, capacity remains unproven. The appellant has argued that confirmation from these companies has been filed. The filing of confirmation is not sufficient because of the collusive nature of these transactions. In such cases, the entry provider provides bogus accommodation entries in return for a fee. He gives the cheque after receiving the amount in cash. In this way, the assessee’s own unaccounted income is introduced into his books of account in the garb of share application money etc. In these circumstances, the standard of proof required has to be stricter than in say, the case of a large public limited company where shares are transacted on the stock exchange. In view of the specific information from the Investigation Wing, a heavy burden lay on the appellant to prove that the credits were genuine. In view of the facts discussed above, the appellant has clearly failed to discharge his onus of proof.

3.5 In the assessment order, the AO has observed that the appellant was given an opportunity to produce the share applications shown for cross examination however, the appellant failed to produce them. The appellant has not claimed that any request was made to issue summons to 10 these persons. In view of these facts, the appellant’s failure to produce these persons for cross examination means that the documents relied upon by the appellant have not been corroborated and cannot therefore, be taken as sufficient proof of capacity and genuineness.”

7.2.1 We further note that Ld. CIT(A) has supported and upheld the addition made by the AO by the following judicial decisions and held that the addition made u/s. 68 is justified. i) CIT vs. Nova Promoters & Finlease P Ltd. (2012) 324 ITR 169 (Delhi) ii) CIT vs. Gold Leaf Capital Corpn Ltd. (2012) 205 Taxman 16 (Delhi) iii) ITO vs. Diza Holdings P Ltd. (2002) 255 ITR 573 (Ker) iv) CIT vs. United Commercial & Indl. Co. P Ltd. (1991) 187 ITR 596 (Cal) v) CIT vs. Neelkanth Ispat Udhyog Pvt. Ltd. 2012-TIOL- 606-HC-DEL-IT vi) ITO vs. Onassis Axies Pvt. Ltd. 2012-TIOL-415-ITAT- DEL vii) Dhingra Global Credence (P) Ltd. vs. ITO (2010) 1 ITR Trib. 529 (Delhi)

7.3 We have carefully gone through the assessment order as well as appellate order. We find that AO in the assessment order has not at all discussed and corroborated the documentary evidences which were available with him, as certified by the Ld. Counsel of the Assessee. The same documentary evidences are being filed before the Tribunal also in the shape of Paper Book i.e. copy of Audited Balance Sheet alongwith Annexure of Allotted shares, Ledger A/c copy Bank Statement; Written submission to CI”T(A) vide letter dated 6.11.2012; Form No. 2 of Companies Act for allotment of shares and filing with the ROC on 29.5.2002; Application for asking for reasons; Filing of objections dated 25.11.2009; Letter to AO dated 11.12.2009; Details of Investors i.e. (a) Rabik Exports Limited: Share Application Form, Minutes of Board Meeting, Details of CIN NO., MOA, Confirmation, Affidavit, ITR and Financial Statement; (b) Dignity Finvest Private Limited : Share Application Form, Minutes of Board Meeting; CIN No., MOA, PAN No., ITR, Confirmation and Affidavit. We further note that AO emphasized on the Report of the Investigation Wing of the Income Tax Department about the accommodation entries and believing on the same the AO held that the creditworthiness, identity, genuineness of the transaction could not be proved by the assessee and accordingly, the amount of Rs. 10,01,000/- was treated as unexplained credits as per the provisions of section 68 of the I.T. Act, 1961 and added the same in the hands of the assessee, which establish that AO has not appreciated and corroborated the evidences as filed by the assessee and passed a non-speaking order, which is not sustainable in the eyes of law, which needs to be set aside. However, on the other hand, Ld. CIT(A) has passed a detailed order and upheld the addition made by the AO, but Ld. CIT(A) has not at all appreciated the facts and circumstances of the case as discussed by the AO in the assessment order. We further find that Ld. CIT(A) also not obtained any Remand Report from the AO which is very much essential before adjudicating upon the issue in dispute. 7.4 In the background of the aforesaid discussions, we are of the considered view that AO has passed a non-speaking order and Ld. CIT(A) has passed a detailed order and upheld the action of the AO, without discussing and appreciating the facts of the case as narrated by the AO in the assessment order. Therefore, in the interest of justice, we cancel both the orders of the revenue authorities and set aside the issues in dispute raised in grounds of appeal to decide the same afresh, after giving adequate opportunity of being heard to the assessee and pass a detailed and speaking order, in accordance with law. AO is also directed to verify the correctness of the documentary evidences, as mentioned in the Paper Book and consider the same, as per law.

8. In the result, the appeal filed by the Assessee is allowed for statistical purposes.

Order pronounced in the Open Court on 07/04/2017.