Loading judgment…
No AI summary yet for this case.
Income Tax Appellate Tribunal, DELHI BENCH “SMC-1”, NEW DELHI
Before: SHRI S.V. MEHROTRA
IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH “SMC-1”, NEW DELHI BEFORE SHRI S.V. MEHROTRA, ACCOUNTANT MEMBER Assessment Year : 2004-05 Integrated Database & Research ITO, Ward 11(4), Centre Pvt. Ltd., New Delhi Vs. F – 13, 2nd Floor, Vijay Chowk, Laxmi Nagar, New Delhi PAN : AAACI 2994 Q (Appellant) (Respondent) Appellant by : Shri Subodh Gupta, CA Respondent by : Shri S. K. Jain, Sr. DR Date of hearing : 24-10-2016 : 01-12-2016 Date of pronouncement O R D E R PER S.V. MEHROTRA, A.M :
This is an appeal filed by the assessee against the order dated 23.01.2015 passed by the Commissioner of Income Tax (Appeals)-4, New Delhi, u/s 143(3)/147 of the Income Tax Act, 1961 (in short “the Act”) relating to A.Y. 2004-05.
Brief facts of the case are that the assessee had filed return of income declaring income of Rs.9,490/-. Subsequently, the Assessing Officer received information from the office of DIT(Inv.) that the assessee company had introduced unaccounted money in its books without paying tax with the help of entry operators. It was informed that assessee company had received Rs.3,00,000/- from M/s Basant Agencies Pvt. Ltd. and Rs.4,00,000/- from M/s Right Choice Construction Pvt. Ltd.. Accordingly, assessment was reopened u/s 148 of the Act. In the course of assessment proceedings, it was informed by the assessee company that it had allotted 400 equity shares of face-value of Rs.100/- at a premium of Rs.900/- to M/s Right Choice Construction Pvt. Ltd. and 300 shares of face-value of Rs.100/- at a premium of Rs.900/- to M/s Basant Agencies Pvt. Ltd.. The Assessing Officer had issued summons u/s 131 of the Act to M/s Right Choice Construction Pvt. Ltd. and M/s Basant Agencies Pvt. Ltd. to produce/ furnish documents in respect of identification, copy of bank statement and documentary evidence of source of investment. Since both the parties did not comply with the requirements of summons issued u/s 131, the Assessing Officer concluded that the identity, creditworthiness and genuineness of the transactions were not proved and added the amount of Rs.7,00,000/- on account of undisclosed cash credit. The assessee company filed an appeal before the Ld. CIT(A), who dismissed the assessee’s appeal.
Thereafter, assessee preferred an appeal before the ITAT, who set-aside the matter back to the file of Assessing Officer with direction to examine as to whether the assessee could receive share premium of Rs.900/- per share against face-value of Rs.100/- per share. The ITAT also directed to make necessary enquiries from ROC in this regard. In the backdrop of these facts, the Assessing Officer started fresh assessment proceedings and simultaneously requested the office of ROC, vide letter dated 27.02.2012, as to whether the assessee could receive share premium of Rs.900/- per share against face-value of Rs.100/- per share on the basis of the financial statement of the assessee company for Assessment Years 2002-03 and 2003-04. Office of the ROC did not give any information pointing out that it was not to carry out any analysis. It was, further, pointed out by ROC that as per Ministry Circular No.3/46/11-CL-2 dated 13.07.2011 the matter was referred to Regional Director (NR) Ministry of Corporate Affairs, Noida. In the meantime, the assessee company furnished confirmation of M/s Basant Agencies Pvt. Ltd. and M/s Right Choice Construction Pvt. Ltd. but expressed its inability in furnishing bank statement for the relevant assessment year. Therefore, the Assessing Officer deputed Inspector to conduct necessary enquiry about the physical presence of the companies M/s Basant Agencies Pvt. Ltd. and M/s Right Choice Construction Pvt. Ltd. at 8/94, Sector-15, Rohini, Delhi. The Assessing Officer has reproduced the Inspector’s report wherein he, inter-alia, stated that resident land-lady did tell that the accommodation was residential flats and no commercial activity was being carried out from there and she had never heard the names of M/s Basant Agencies Pvt. Ltd. and M/s Right Choice Construction Pvt. Ltd..
Under these circumstances, the Assessing Officer required the assessee to furnish/explain the following details :-
“1. Please produce director of M/s Right Choice Constructions Pvt. Ltd. and M/s Basant Agency Pvt. Ltd. alongwith their Permanent Account Number. 2. ITRs filed by them alongwith computation of income for the A.Y. 2004-05. 3. Proof of share allotted to them by you and same is reflected by them in their balance sheet as investment.”
The assessee company in its reply expressed its inability to produce the directors of both the companies as it had no information of where about of the directors. The assessee also relied on the decision in the case of M/s Lovely Exports Ltd. and Devine Leasing & Finance Ltd., for the proposition that share application money could not be treated as undisclosed income in the hands of assessee-company. In the backdrop of these facts, the Assessing Officer confirmed the addition of Rs.7,00,000/- relying on the decision of the Hon’ble Delhi High Court in the case of CIT vs. Himalaya International Ltd.. He also relied on the decision in the cases of CIT vs. Rathod, 212 ITR 390 (Raj) and Roshan Di Hatti vs. CIT, 107 ITR 938. He observed that the onus was on the assessee company to substantiate its claim of activity of business of being carried out by these companies viz. M/s Basant Agencies Pvt. Ltd. and M/s Right Choice Construction Pvt. Ltd..
The Ld. CIT(A) dismissed the assessee’s appeal for the following reasons :-
(a) Inspite of correspondence done with Ministry of Corporate Affairs as noted in para 5.2 of his order, no clarification could be obtained. (b) He pointed out that absence of this information in itself could not be considered as a hurdle in deciding the issue on the basis of well-settled conditions laidout through several judicial decisions for deciding cash credit u/s 68 of the Act. He pointed out that this was an additional information directed by Tribunal for examining the bona- fide of the transaction and not as the exclusive legal yardstick to explain cash credit u/s 68 of the Act. (c) Apart from the Inspector’s report in the first round as well as in the second round pointing out that no such party was there at the given address, the Ld. CIT(A) had issued summons u/s 131 at the address furnished by the assessee. However, the letter to M/s Right Choice Construction Pvt. Ltd., 890 Tandon Market, Kucha Kabila Attar, Chandni Chowk, Delhi-6 came back with the remark “No such firm”, while the summon to M/s Basant Agencies Pvt. Ltd. was returned with the remarks “left”. (d) The directors of companies were not produced. The assessee pleaded that both the cash creditors had sold out the investments in the assessee company and submitted that as both these companies were in the process of being struck off from MOCA records, the case may be decided on the basis of available evidences. (e) The Assessing Officer in the original assessment proceedings had carried out enquiry from the banks and ascertained that the aforesaid two companies before issuing cheque to the assessee company for share application money had received the equivalent amounts in cash on the same day or just a day or two prior to that. He pointed out that the enquiry with the cash creditors u/s 133(6) could have elicited further information about the source of such cash credit, however, in the absence of the assessee producing the concerned directors of the cash creditors, the enquiry could not further proceeds. (f) Investigation Wing had carried out investigation of certain persons, who were found to be providing accommodation entries in the form of cheques on receipt of cash through various companies through which cheque amount was given to the ultimate beneficiary. (g) The assessee’s company name was found in the list of such companies and the amount of receipt of such cash credit along with date and name of share applicants also duly tallied. (h) The assessee’s case was held to be covered by the decision in the case of Nova Finlease and Promoters (P) Ltd., 342 ITR 169 (Delhi-HC) as by carrying out enquiry at the addresses furnished by the assessee and on finding no such cash creditors at such addresses, the Assessing Officer had discharged the onus, which stands shifted to the assessee.
Ld. counsel for the assessee referred to page 127 – 128 of Paper Book and pointed out that share premium was received from 9 companies and the same was accepted in the case of 7 companies. Ld. counsel pointed out that section 56(viib) has been inserted w.e.f. 01.04.2013 wherein it has been laid down that if consideration for issue of shares exceeds the face-value of such shares the aggregate consideration received as exceeds the fair market value of the shares would be treated as income. Ld. counsel further referred to page 4 of the Paper Book wherein the submissions made before Ld. CIT(A) are contained and pointed out that as per section 78 of the Companies Act, 1956, shares could be issued at premium by company. Ld. counsel further referred to page 133 – 134 of Paper Book wherein the Balance-Sheet and Profit & Loss Account of M/s Right Choice Construction Pvt. Ltd. for Assessment Year 2002-03 is contained. He also referred to page 137 – 138 of Paper Book wherein the Balance-Sheet and Profit & Loss Account for Assessment Year 2002-03 of M/s Basant Agencies Pvt. Ltd. is contained.
Ld. counsel referred to page 76 of Paper Book wherein the Annual Report filed before ROC is contained and list of share-holders as on 25.09.2005 at page 82 is contained. He pointed out that both the share-holder companies viz. M/s Basant Agencies Pvt. Ltd. and M/s Right Choice Construction Pvt. Ltd. have transferred the shares in favour of Sil Verline Agro Industries Limited and Aarthik Finance & Leasing Pvt. Ltd.. Ld. counsel pointed out that notice was issued u/s 148 in March 2007 by which date both the share- holders had already transferred their shares. Therefore, it was difficult to locate them.
Ld. DR referred to assessment order and pointed that it was clearly noted by the Assessing Officer that the address of both the companies was fake as was corroborated by the statement of land-lady. No bank account was produced by assessee and the directors were not produced. He relied upon the findings of Ld. CIT(A) noted earlier.
Ld. counsel in the rejoinder submitted that date of Inspector’s visit was 11th June, 2013 and as per the details of both the companies on MOCA they are under process of being struck off as it evident from page 41 – 42 of the Paper Book. He submitted that there is no restriction of residential premises being used as company registered office address.
I have considered the submissions of both the parties and have perused the record of the case. This is the second round of proceedings in which assessee was provided opportunity to again substantiate its claim of its shares being acquired by M/s Basant Agencies Pvt. Ltd. and M/s Right Choice Construction Pvt. Ltd. at a premium of Rs.900/- each. In the second round of proceedings, the assessee has taken a plea that on account of considerable time gap and on account of both the companies being under the process of being struck off by ROC, assessee was not in a position to produce the directors of both the companies to establish the source of availability of cash with these two companies which was utilized to acquire the shares of assessee company at premium. The Tribunal in first round of proceedings had also pointed out that information could be obtained from ROC in this regard which has elaborately been considered by Ld. CIT(A) in his order as to how the same could not be made available to the Department.
At page 132 of Paper Book, the copy of return of M/s Right Choice Construction Pvt. Ltd. is contained wherein copy of return of income is available for Assessment Year 2002-03. The returned income shown is at Rs.6,033/-. As regards M/s Basant Agencies Pvt. Ltd. the copy of return of income for assessment year 2002-03 is contained at page 136 of Paper Book wherein returned income has been shown at Rs.6,070/-. This clearly shows that both the companies had meager incomes to their credit. As per the Balance Sheet of M/s Right Choice Construction Pvt. Ltd. the reserve and surplus was at Rs.4081.18 and in the case of M/s Basant Agencies Pvt. Ltd. the reserve and surplus was at Rs.14,359/-. Apart from that there are unsecured loans and current liabilities and, hence, it is evident that the net worth was not sufficient to acquire shares at such high premium for no reason or purpose being demonstrated. It is well-settled law that onus of substantiating the facts, as alleged by assessee, squarely lies on assessee and not on Assessing Officer. It was for the assessee to substantiate its claim that the shares were worth so much that it could fetch premium of Rs.900/-.
Moreover, it was for the assessee to establish that the two companies had sufficient net worth to acquire shares. Since assessee has failed on all fours, therefore, mere filing of confirmation from these two parties was of little significance.
Ld. counsel has submitted that shares were issued at premium to other concerns also for which Assessing Officer had not made any addition. In this regard, I may point out that in the second round of proceedings Tribunal has to examine the issue in the light of observations made in first round of proceedings. Moreover, it is not necessary that because Assessing Officer accepted the credit worthiness in case of other shareholder-companies, he should have accepted in case of the two impugned shareholders also. I, therefore, do not find any force in this submission of assessee.
In the result, the assessee’s appeal is dismissed. Order pronounced in the open court on this 01st day of December, 2016.