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Income Tax Appellate Tribunal, DELHI BENCH ‘SMC’, NEW DELHI
Before: SHRI H.S. SIDHU
The Assessee has filed the Appeal against the impugned Order dated 29.7.2016 of Ld. CIT(A)-6, Delhi pertaining to assessment year 2007-08. The assessee has raised the following grounds:-
1. Under the circumstances & facts of the case, the order passed by Ld CIT (A) 6, New Delhi is bad in Law in general.
2. The Ld CIT(A) has erred on facts and in law under the circumstances of the case by dismissing the additional grounds No 1(I) to 1(IY) in the order passed vide appeal no 650/14-15 dated 29/07/2016. Following additional ground were raised: (i) The Ld. AO has erred in law & on facts to issue notice u/s 148 for AY 2007-08 whereas income believed to have escaped assessment by Ld. AO relates to Asstt. Year 2006-07, thereby renders the notice u/s 148 as barred by time limitation & void-ab-initio.
(ii) Without prejudice to above, on facts and under the law, notice u/s 148 issued by Ld. AD in this case is arbitrary, unjust, illegal on the substance of the matter on which reason to believe have been framed by Ld. AO. (iii) Without prejudice to above, consequently the impugned reassessment order passed u/s 143(3)/147 dated 27-02-2015 is illegal, void-ab-initio & under invalid jurisdiction assumed by Ld. AO being based on invalid foundation of 148 notices and therefore deserves to be cancelled/quashed/set aside.
(iv) Thus addition of Rs 10 lacs are not sustained being arisen out of invalid & illegal assessment order. 3. The Ld. CIT (A) has erred in law by considering the credit entry appearing in the bank statement of assessee in April 2006 as cash credit entry in the books of account of assessee for the AY. 2007-08 which is against the mandate of provision of Section Income Tax Act, 1961.
4. The Ld.CIT (A) has erred on facts in law by not adjudicating the case on merits when assessee has duly explained the source of share application money, identity of the applicants and genuineness of the transaction.
5. The CIT (A) has erred on facts & under the law by upholding the addition of Rs 10 Laces as share application money from two applicants in F.Y 2005-06 under the disguise of Section 68 of Income tax act as unexplained cash credit by assessee.
6. The Ld. CIT (A) has erred in law on facts by upholding an addition of Rs 30,000/- as 3% commission u/s 69C as undisclosed income on the unexplained share application money of Rs 10 Lacs.
7. The assessee craves leave to add, alter or delete any ground of appeal during the course of appeal Proceedings.
The brief facts of the case are that the assessee filed its return of income on 13.9.2007 declaring total income of Rs. 1,17,438/-. The case was assessed u/s. 143(3) of the I.T. Act at Rs. 1,17,438/- vide order dated 16.11.2009. AO observed that the assessee company had received accommodation entries to the extent of Rs. 10 lacs during the financial year 2006-07 relevant to the assessment year 2007-08 from the bogus / paper company of Sh. Surender Kumar Jain group of companies/ cases, who admitted to be mere entry operators and stated that his various companies are used for providing accommodation entries only and the assessee company was found in the list of beneficiaries of such accommodation entries. Accordingly, the case of the assessee was therefore, reopened u/s. 147 of the I.T. Act, 1961 and notice u/s. 148 of the I.T. Act, 1961 dated 26/3/2014 was issued and served. In response to the same the assessee vide letter dated 4.4.2014 has submitted the copy of the return already filed alongwith its annexures and thereafter submitted objections also against the reopening of assessment u/s. 148 of the I.T.
Act, 1961. The objections were considered and disposed off by the AO. AO has observed that under the provision of section 68 of the Act, where any sum is found credited in the books an assessee, maintained for any previous year, and the assessee offers no explanation about the nature and source thereof or the explanation offered by him, in his opinion the sum so credited may be charged to income as income of the assessee of that previous year. In view of the above, AO made the addition of Rs. 10 lacs and further made the addition on account of commission @ 3% for arranging the bogus transaction of Rs. 10 lacs, which works out to Rs. 30,000/-. The AO finalized the assessment vide order dated 27.2.2015 under section 143(3)/147 of the I.T. Act, 1961 at an assessed income of Rs. 11,47,440/- after making addition of Rs. 10,30,000/-.
Now the Assessee is aggrieved against the impugned order and filed the present appeal before the Tribunal.
At the threshold, Ld. Counsel of the Assessee has only pressed ground no. 5 & 6 and stated that the issue/ground no. 5 involved in the present appeal is squarely covered by the ITAT, ‘SMC’ Bench, Mumbai decision dated 12.8.2016 passed in & 4224 (Mum) of 2015 (Ayrs. 2011-12) in the case of Smt. Manasi Mahendra Pitkar vs. ITO. In this behalf, he filed the copy of the said decision and requested that by following the same reasoning, the addition of Rs. 10 lacs in dispute may be deleted and accordingly, the addition of Rs. 30,000/- on account of commission @3% on the addition amount may also be deleted.
On the contrary, Ld. Sr. DR relied upon the orders of the authorities below.
I have heard both the parties and perused the records, especially the impugned order passed by the Ld. CIT(A) and the decision referred by the Ld. Counsel of the assessee of the ITAT, ‘SMC’ Bench, Mumbai dated 12.8.2016 passed in & 4224 (Mum) of 2015 (Ayrs. 2011-12) in the case of Smt. Manasi Mahendra Pitkar vs. ITO. I find considerable cogency in the assessee’s counsel in relying upon the aforesaid decision of the ITAT, Mumbai. For the sake of clarity, I am reproducing the finding given vide para no. 9 & 9.1 of the ITAT, Mumbai decision dated 12.8.2016 in the case of Smt. Manasi Mahendra Pitkar vs. ITO, Mumbai passed in ITA Nos. 4223 & 4224 (Mum) of 2015 (AY 2011-12) as under:-
“9. I have carefully considered the rival submissions.
In the present case the addition has been made by the income tax authorities by treating the cash deposits in the bank account as an unexplained cash credit within the meaning of section 68 of the Act. The legal point raised by the assessee is to the effect that the bank Pass Book is not an account book maintained by the assessee so as to fall within the ambit of section 68 of the Act. Under section 68 of the Act, it is only when an amount is found credited in the account books of the assessee for any previous year that the deeming provisions of section 68 of the Act would apply in the circumstances mentioned therein. Notably, section 68 of the Act would come into play only in a situation
"where any sum is found credited in the books of an assessee.
The Hon'ble Bombay High.Court in the case of Shri
Bhaichand Gandhi (supra) has approved the proposition that a bank Pass Book maintained by the bank cannot be regarded as a book of the assessee for the purposes of section 68 of the Act. Factually speaking, in the present case, assessee is not maintaining any books - of account and section 68 of the Act has been invoked by the Assessing Officer only on the basis of the bank Pass Book. The invoking of section 68 of the Act has to fail because as per the judgment of the Hon'ble Bombay High Court in the case of Shri Bhaichand N Gandhi (supra), the bank
Pass Book or bank statement cannot be construed to be a book maintained by-the assessee for any previous year as understood for the purposes of section 68 of the Act. Therefore, on this account itself, the impugned addition deserves to be deleted. I hold so.
9.1 Even otherwise, I find that the explanation rendered by the assessee has been merely disbelieved without establishing any credible infirmity or fallacy in the same. Ostensibly, the circumstances in which the cash deposits have been made and the purpose for which such monies have been utilized is emerging from record and in any case, there is no material found by the Assessing Officer to disprove the same. Of course, the assessee could not produce any formal corroborative evidence of having received respective amounts from friends and relatives, so however, it is to be appreciated that section 68 is a rule of evidence; and, the Assessing Officer is expected to consider the explanation rendered in the context of the circumstances of each case. Be that as it may, since I have already held that the addition is unsustainable following the ratio of the judgment in the case of Shri
Bhaichand N Gandhi (supra), I do not deal with the instant aspect any further. In the result, the order of the CIT (A) is set-aside and the Assessing Officer is directed to delete the addition of Rs. 27,36,500/- made under section. 68 of the Act. 9.2 Resultantly, appeal of the assessee in ITA No.
4224/Mum/2015 is allowed.”
After perusing the aforesaid decision of the ITAT, Mumbai, I am of the considered view that the issue in dispute is squarely covered by the aforesaid decision, because the facts and circumstances of the present case are exactly similar and identical to that of case of Smt. Manasi Mahendra Pitkar vs. ITO (Supra). Therefore, respectfully following the aforesaid decision dated 12.8.2016 of the ITAT, ‘Mumbai’ SMC Bench, passed in & 4224//Mum/2015 (AY 2011-12) in the case of Smt. Manasi Mahendra Pitkar vs. ITO, Thane, the addition of Rs. 10 lacs in dispute is deleted and accordingly, the ground no. 5 appeal of the assessee is allowed.
7.1 Since I have deleted the addition of Rs. 10 lacs u/s. 68 of the Act, as aforesaid, hence, the addition of Rs. 30,000/- u./s. 69A of the Act on account of commission income @3% does not survive, therefore, the same is also deleted and accordingly, the ground no. 6 is allowed.