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Income Tax Appellate Tribunal, DELHI BENCH “A”, NEW DELHI
Before: SHRI H.S. SIDHU & SHRI PRASHANT MAHARISHI
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 23.5.2014 passed by the Ld. CIT(A)-XXXIII, New Delhi relevant to assessment year 2011-12 on the following grounds:-
1. That on the facts and in the circumstances of the case and in law, the Assessing Officer has erred in assessing the income of the appellant company at Rs. 65,27,640 as against return filed declaring income at Rs. 33,23,900 after making addition/disallowance aggregating Rs. 32,03,740, on wholly illegal and frivolous grounds, untenable in law. It is prayed that the addition made to income be directed to be deleted.
2. That the Assessing Officer has erred in adding amounts received from following three entities towards share capital as undisclosed income of the assessee company under section 68 of The Income Tax, Act, 1961:
(i) Rs 10,25,000 received from M/s Galaxy Cornmonsales Pvt Ltd. (ii) Rs 6,50,000 received from M/s Umapati Vinmay Pvt Ltd.
(iii) Rs. 15,00,000 received from Sh Kunal Shikarpuri.
It is prayed that the addition made to income be directed to be deleted.
That The Assessee company has discharged the onus cast upon it in law to establish the identity and credit worthiness of the share holder who had subscribed to the share capital of the company, and the genuineness of the transactions. The addition made to income u/s 68 of the Act, is .thus illegal, without jurisdiction, and requires to be deleted in entirety.
4.01 That the addition made to income is incorrect and is against law in view of the decision of The Hon'ble Apex Court in Commissioner of Income Tax vs Lovely Exports (P) Ltd., 216 CTR 195, subsequently followed and applied by The Hon'ble Delhi High Court in commissioner Of Income-Tax vs Stellar Investment Ltd (Delhi), wherein the Hon'ble Courts have held that where the share application money is alleged to have been received from alleged bogus shareholders, whose names are given to the AO, the Revenue should proceed to reopen the assessments of such shareholders in accordance with law.
4.02 That the addition made to income is incorrect and is against law in view of the decision of The Full Bench of The Delhi High Court in Commissioner of Income Tax Vs. Sophia Finance Ltd., 205 ITR 98, wherein it is held that where the shareholders exist, no further enquiry need be made, and the amount invested is a capital receipt in the hands of the recipient company.
4.03 That the addition made to income is incorrect and is against law in view of the decision of The Hon'ble Bombay High Court in CIT Vs. M/s Creative World Telefilms Ltd., wherein it is held that no addition to income can be made where the assessee provides details, names, address, PAN, chq Nos, name of the banks of the shareholders, and the AO did nothing, except issue summons which were returned back with an endorsement 'not traceable', and fails to make proper investigation.
4.04 That the addition made to income is incorrect and is against law in view of the decision of The Hon'ble Karnataka High Court in Madhuri Investments Pvt. Ltd. Vs. ACIT, wherein it is held that addition to income on the basis that the share applicants did not appear and notices sent to them were returned with remarks "no such person" is incorrect and not sustainable.
4.05 That the addition made to income is incorrect and is against law in view of the decision of The Hon'ble Rajasthan High Court in Commissioner of Income Tax Vs. AKJ Granites (P) Ltd. 301 ITR 298 (Raj.) referring to the decision in the case of Barkha Synthetics Ltd. Vs. Asst. CIT (2005) 197 CTR (Raj.) 432, wherein it is held that where share applications are received and accompanied with 3 share application money, no presumption can be drawn that the same belong to the assessee, and no amount can be assessed as undisclosed income of the assessee.
4.06 That the AO has made addition to income u/s. 68 of the Act on mere surmise and conjecture, in haste and without providing any reasonable opportunity to the assessee company to defend its case, vitiating the assessment, rendering it bad in law, liable to be quashed.
4.07 That the addition made to income in respect of amount received from Kunal Shikarpuri, is on mere surmise and conjecture and disbelief, and thus illegal, unwarranted and untenable in law, liable to be quashed / deleted, as the AO expressed satisfaction with regard to identity, credit worthiness and genuineness of the amount received and sought no further details, information, explanation from the assessee company, and did not also make any further investigation from the share holder.
That the appellant company craves leave to amend, modify, delete all or any of the grounds of appeal above, and to add any further ground of appeal, before and during the appeal proceedings.
4.01 That the addition made to income is incorrect and is against law in view of
The brief facts of the case are that the return of income for the assessment year 2011-12 was e-filed on 30.9.2011 declaring total income of Rs. 33,23,900/- by the assessee company. The case was selected for scrutiny under CASS under compulsory category and a statutory notice under section 143(2) of the I.T. Act, 1961 dated 3.8.2012 was issued and served on the assessee. Thereafter, notice u/s.142(1) of the Act with a questionnaire was issued on 31.5.2013 and after the change of the charge of the case, new notice u/s. 142(1) dated 28.12.2013 was issued and served on the assessee personally. In response thereto, the assessee’ Director and Sh. Vipin Jain, CA attended the proceedings on behalf of the assessee company from time to time and submitted /produced the necessary details, documents and clarifications. Books of account of assesssee, bank accounts and some supporting bills and vouchers were produced which were seen on test check basis. During the year, the assessee company is engaged in the business of advertising and purchase and sale of shares / derivatives. Thereafter, the AO completed the assessment at an income of Rs. 65,27,640/- by passing the order dated 07.3.2014 u/s. 143(3) of the I.T. Act, 1961 by holding that the new share capital of Rs. 6350/- and share premium of Rs. 31,68,650/- totaling to Rs. 31,75,000/- credited in the books of accounts of the assessee is unexplained credits u/s.68 of the I.T. Act, 1961 and the same was added to the income of the assessee. It was further held that in earlier year i.e. in AY 2010-11 also, the assessee had debited the loss from speculative transactions in the P/L a/c which was also disallowed.
3. Against the order of the Ld. AO, assessee appealed before the Ld. CIT(A), who vide impugned order dated 23.5.2014 has partly allowed the appeal of the assessee.
Aggrieved with the order of the Ld. CIT(A), Assessee is in appeal before the Tribunal.
5. Ld. Counsel of the Assessee stated that assessee has filed all necessary documentary evidence 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 5 wrongly made the addition in dispute. He draw our attention towards the Paper Book filed by him containing pages 1 to 106 in which he has attached various documentary evidences filed by the assessee before the lower authorities. He further draw our attention towards page no. 28 to 73 establishing that he assessee has filed share application forms dated 11.12.2010 and 3.1.2011; copy of affidavits of the Director of Share applicant company; copy of acknowledgement of ITR for AY 2010-11; copy of audited financial statements of the share applicant company for AY 2011-12; copy of bank statement of the share applicant company for the relevant period; copy of bank statement of the assessee company reflecting the transactions ; copy of notice dated 17.2.2014 issued by the AO requesting the assessee to produce the controlling persons of the share applicant companies in order to prove the genuineness and creditworthiness of the parties; copy of the letter dated 22.2.2014 issued by M/s Galaxy Commonsales Pvt. Ltd. confirming the investment made in assesee company and further giving their updated address; copy of letter dated 21.2.2014 by M/s Umapati Vinimay Pvt. Ltd. confirming the investment made in assessee company and further giving their updated address and the copy of written submissions filed before the Ld. CIT(A) which was not disputed by the AO in this order. Ld. Counsel for the assessee further submitted that in spite of the aforesaid documentary evidence filed by the assessee before the revenue authority for establishing the creditworthiness, identity and genuineness of the transactions. The Revenue Authority only emphasize upon the productions of details of persons with complete address of the new investors alongwith details of share allotted to them. The assessee was also asked to produce the copies of bank statement of investors and their income tax details. The assessee submitted all these documents. Ld. Counsel of the assessee also stated that the since the onus of proving cash credit in the books is reubuttable. The assessee has to discharge the initial onus by proving the identity of the creditor by filing the confirmatory letter and other relevant details. It was further stated that by filing the confirmatory letter; copy of ITR; copy of share application form and complete name and address of share applicants the assessee has established the identity of the share applicant and the genuineness of transaction is routed through bank channel, hence, the transaction is established. In support of his contention he relied upon the following case laws and stated that the issue in dispute is squarely covered by these decisions and requested to delete the addition in dispute. It was further stated that AO has nowhere been able to point out any defect or error in the said evidences.
- Jurisdictional High Court decision in the case of Pr. CIT vs. Softline Creations Pvt. Ltd. (2016) 387 ITR 636 (Del.)
- Jurisdictional High Court decision in the case of Pr. CIT vs. Green Valley Plywood Limited (ITA No. 358/2016 dated 1.6.2016)
- CIT vs. Fair Finvest Ltd. (2013) 357 ITR 146 (Del.) - CIT vs. Goel Sons Golden Estate P Ltd. dated 11.4.2012. - CIT vs. Gangeshwari Metal (P) Ltd. (2014) 361 ITR 10 (Delhi) (HC) - Pr. CIT vs. Rakam Money Matters P Ltd. (Delhi HC) - CIT vs. Lovely Exports Pvt. Ltd. (2009) 319 ITR 5 (SC).
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. In support of his contention,
We have heard both the parties and perused the records available with us and the synopsis submitted by the Ld. Counsel of the assessee and the case laws relied by him. We find that assessee has filed all the necessary documentary evidences before the AO as well as before the Ld. CIT(A) for substantiating its claim. On perusing the Paper Book, we note that assessee has attached various documentary evidences which he filed before the lower authorities. The page nos. 28 to 73 have been establishing that he assessee has filed share application forms dated 11.12.2010 and 3.1.2011; copy of affidavits of the Director of Share applicant company; copy of acknowledgement of ITR for AY 2010-11; copy of audited financial statements of the share applicant company for AY 2011-12; copy of bank statement of the share applicant company for the relevant period; copy of bank statement of the assessee company reflecting the transactions ; copy of notice dated 17.2.2014 issued by the AO requesting the assessee to produce the controlling persons of the share applicant companies in order to prove the genuineness and creditworthiness of the parties; copy of the letter dated 22.2.2014 issued by M/s Galaxy Commonsales Pvt. Ltd. confirming the investment made in assesee company and further giving their updated address; copy of letter dated 21.2.2014 by M/s Umapati Vinimay Pvt. Ltd. confirming the investment made in assessee company and further giving their updated address and the copy of written submissions filed before the Ld. CIT(A) which was not disputed by the AO in this order.
7.1 We further note from the assessment order that the Assessing Officer has not disputed the correctness of all these documents or made any adverse comments in respect of the same. Further, there is no adverse information from Investigation Wing or from any other agency. As per these documents, it is evident that assessee has established identity, source and genuineness of share capital. There is thus no ground or basis to dispute the correctness of the share capital as the same is fully supported from facts and settled legal principles as laid down in the following cases:-
A. CIT Vs. Rhombus International Pvt. Ltd. (ITA No. 223/13. The relevant observation of the Hon'ble Delhi Court are extracted hereunder:
“14. It is not the case of the revenue that these persons are entry providers and there was any other material or doubt that these were bogus entries routed through fictitious or name lenders. Assessing Officer did not conduct any investigation by sending Inspector to the address and nothing has been brought on record to show steps or attempt by the assessing officer to go deeper and find out/check veracity of the assertion. The share application money addition is not in isolation but has to be examined with other additions on similar grounds. Absence of verification, different additions made and reasoning given for deleting the additions are plausible. The order of the tribunal is not perverse and does not require interference. No substantial question of law arise.
B. CIT .v. Gangeshwari Metal (P.) Ltd. (2014) 361 ITR 10 (Delhi) (HC)
S.68 Cash credits-Share application money-Evidence furnished by assessee-Addition was not justified. The assessee received certain amount as share application money. In order to prove genuineness of transaction, the assessee brought on record various documents such as names and addresses of share applicants, confirmatory letters of share applicants, copies of their bank statements etc. The Assessing Officer found the assessee's explanation to be unacceptable and, consequently, added the amount of share application money to assessee's taxable income which was deleted by the Commissioner(Appeals). The Tribunal upheld the order of the Commissioner (Appeals).On appeal High Court held that, there was a clear lack of inquiry on the part of the Assessing Officer once the assessee had furnished all the relevant material. In such an eventuality no addition can be made under S. 68. (A Y. 2004-05).
C. CIT v. KAMDHENU STEEL & ALLOYS LTD., SLP (CC) no. 15640 of 2012, dated 17-09-2012 (Supreme Court)
Issue Involved: "Whether once the assessee has discharged the initial burden by filing adequate evidence/material, Revenue is supposed to dislodge the initial burden discharged by the assessee and to throw the ball again in the assessee's' court demanding the assessee to give some more proofs, as the documents produced earlier by the assessee either become suspect or are rendered insufficient in view of the material produced by the Department rebutting the assessee's documentary evidence?" Decided in Favour of : Assessee
Held: The Hon'ble Supreme Court has dismissed the Special Leave Petition filed by the Revenue against the decision of Hon'ble Delhi High Court in the case CIT v. Kamdhenu Steel & Alloys Ltd. [2014] 361 ITR 220 in which it has been held: Cash credits--Unexplained 10 investments--Burden of proof--Share application money--Assessee explaining source' of money-Identities of applicants and their creditworthiness established--Burden of proof discharged by assessee--Onus shifted to Department--No evidence to show transactions were not genuine--Sections 68 and 69 not applicable- -Income-tax Act, 1961, ss. 68, 69: D. Besides, above case laws, the Hon’ble Apex Court also in the case of CIT Vs. Lovely Exports 216 CTR 195 has held that that if the share application money is received by the assessee company from alleged bogus shareholders, whose names are given to the Assessing Officer, then the Department is free to proceed to reopen their individual assessments in accordance with law, but it cannot be regarded as undisclosed income of the assessee. E. Delhi High Court in the case of Pr. CIT vs. Goodview Trading Pvt. Ltd. 2016 (12) TMI 617 dated 21.11.2016 wherein the Court has held as under:- The CIT(A)’s reasoning that the materials clearly pointed to the share applicants’ possessing substantial means to invest in the assessee’s company. The AO seized certain material to say that minimal or unsubstantial amounts was paid as tax by such share applicants and did not carry out a deeper analysis or rather chose to ignore it. In these circumstances, the inferences drawn by the CIT(A) are not only factual but facially accurate – Decided in favor of the Assessee.
7.2 In the background of the aforesaid discussions and respectfully following the precedents of the Hon’ble Supreme Court and High Courts, we are of the view that the assessee has fully proved its burden and discharged the onus upon the Department, however, no contrary evidence was shown by the AO which will prove that the transactions were not genuine, therefore, the addition made by the AO and confirmed by the Ld. CIT(A) is totally unwarranted and the same needs to be deleted. Accordingly, we delete the addition in dispute and allow this ground of appeal of the assessee.
8. In the result, the appeal filed by the Assessee is allowed.
Order pronounced in the Open Court on 22/3/2017.