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Income Tax Appellate Tribunal, DELHI BENCH “SMC-II”, NEW DELHI
Before: SHRI H.S. SIDHU
the impugned order dated 29/4/2013 passed by the Ld. Commissioner of Income Tax (Appeals)-IX, New Delhi on the following grounds:-
1. Whether on the facts and circumstances of the case and in law, the Ld. CIT(A) has erred in deleting the addition made
by the AO as cash credits u/s. 68 on account of share application money amounting to Rs. 15,00,000/- taken from entry operator?
2. Whether on the facts and circumstances of the case and in law, the Ld. CIT(A) has erred in deleting the addition of Rs.
28,00,000/- made by the AO as cash credits u/s. 68 of the Income Tax Act, 1961?
3. Whether on the facts and circumstances of the case and law, the ld. CIT(A) has erred in deleting the addition made
by the AO on account of commission paid to entry operator, amounting to Rs. 45,000?
4. That the order of the Ld. CIT(A) is erroneous and is not tenable on facts and in law.
5. That the appellant craves leave to add, alter, amend or forego any ground(s) of the appeal raised above at the time
of the hearing.
The facts in brief are that the return of income for the AY 2005- 06 was filed on 25.10.2005 declaring NIL Income. This return was processed initially u/s. 143(1) of the I.T. Act, 1961. Subsequently, information was received from DIT(Investigation) that the assessee received accommodation entry in the form of share application money to the tune of Rs. 15,00,000/-. Accordingly, the case was reopened and notice u/s. 148 of the I.T. Act was issued. The assessment u/s. 147(143(3) of the I.T. Act, 1961 was completed on 30.3.2013 at Rs. 43,45,000/- by making addition of Rs. 43,00,000/- as cash credits and Rs. 45,000/- as commission earned on the entry provided.
Aggrieved with the aforesaid assessment order, assessee preferred an appeal before the Ld. CIT(A), who vide his impugned order dated 13.11.2014 has deleted the additions and partly allowed the appeal of the assessee.
Now the Revenue is aggrieved against the impugned order and filed the present appeal before the Tribunal.
At the time of hearing Ld. DR relied upon the order of the AO and reiterated the contentions raised by the Revenue in the grounds and requested that Appeal of the Revenue may be allowed.
On the contrary, Ld. Counsel of the Assessee has relied upon the order of the Ld. CIT(A) on the legal issue as well as on merits also. He stated that the Revenue has not challenged the decision of the Ld. CIT(A) before the ITAT on the legal issue in which the assessment has been quashed by the Ld. CIT(A) vide para no. 5.3 at page no. 10 of the impugned order, hence, the appeal of the Revenue may be dismissed on this account. Further, Ld. Counsel of the assessee has relied upon the order of the Ld. CIT(A) on merit and stated that Ld. CIT(A) has passed a well reasoned order on merits also which needs to be upheld and accordingly, the appeal of the Revenue may be dismissed.
I have heard both the parties and perused the records, especially the impugned order passed by the Ld. CIT(A). I find that on legal issue i.e. quashing of assessment, the Ld. First Appellate Authority has observed that the information received from the Investigation Wing are scanty and inadequate to form a reasonable believe. Ld. CIT(A) has observed that at this stage and even during the assessment stage the AO failed to make any enquiry and establish the cash credit with document evidence, therefore, the opening of the assessment without proper application of the mind is bad in law and hence the assessment was rightly quashed by the Ld. CIT(A). However, I note that the Revenue has not challenged this legal ground of appeal before the Tribunal, as a result thereof, the Revenue’s Appeal stands dismissed on the legal ground itself.
Even otherwise, on merit also, I find that Ld. CIT(A) has held vide para no. 6.3 at page no. 19 to 20 as under:-
“6.3 The reason given by AO and the submission of the appellant are considered. The decision of the AO is based on the information received from the Investigation Wing, statement given by Auditor of M/s VPC Financial Pvt. Ltd., statement of General
Manager Hindustan Times Group and submission made by the appellant. The information received from the Investigation Wing is very scanty without any details of bank account and the name of the creditors. The AO did not make any enquiry to reveal the real nature of the information received.
Hence, as submitted by the appellant, the AO could ascertain the names of the creditors, only from the details given by the appellant in response to notice u/s. 148. Regarding reliability of the CA who was supposed to sign the balance sheet, the name of the company mentioned in the reply to question no. 4 mentioned in the impugned assessment order is ‘Mehul Finvest Pvt. Ltd.’ and not M/s VPC
Financial Services Pvt. Ltd. Thus, the statement cannot be used as a proof regarding identity issue of the creditor. The statement of General Manager of Hindustan Times Group only indicates that there was transfer of ownership of M/s VPC Financial
Services Pvt. Ltd. Thus, the identity of creditor is established. Moreover, these third party evidences are never confronted to the person confirming the transaction. The AO did not make any further enquiry to verify whether the payment made by the creditor through the banking channel is actually travelled from the coffers of the appellant.
Regarding the second category of creditors, the AO did not even mention the source of information he received. No further enquiry was made about these creditors and addition has been made only the based on some assumptions. Certainly, addition u/s. 68 cannot be justified with a casual approach.
In view of this, the addition made is deleted and the grounds of appeal are allowed.”
7.1 After going through the findings of the Ld. CIT(A), as aforesaid, I find that the decision of the AO is based on the information received from the Investigation Wing, statement given by Auditor of M/s VPC Financial Pvt. Ltd., statement of General Manager Hindustan Times Group and submission made by the assessee. The information received from the Investigation Wing is very scanty without any details of bank account and the name of the creditors. I also note that the AO did not make any enquiry to reveal the real nature of the information received. Hence, the AO could ascertain the names of the creditors, only from the details given by the assessee in response to notice u/s. 148 of the I.T. Act, 1961 With regard to reliability of the CA who was supposed to sign the balance sheet, the name of the company mentioned in the reply to question no. 4 mentioned in the impugned assessment order is ‘Mehul Finvest Pvt. Ltd.’ and not M/s VPC Financial Services Pvt. Ltd. Thus, the statement cannot be used as a proof regarding identity issue of the creditor. The statement of General Manager of Hindustan Times Group only indicates that there was transfer of ownership of M/s VPC Financial Services Pvt. Ltd. Thus, the identity of creditor is established. Moreover, these third party evidences are never confronted to the person confirming the transaction. The AO did not make any further enquiry to verify whether the payment made by the creditor through the banking channel is actually travelled from the coffers of the assessee. Regarding the second category of creditors, the AO did not even mention the source of information he received. No further enquiry was made about these creditors and addition has been made only the based on some assumptions. Hence, the observation of the Ld. CIT(A) that certainly, addition u/s. 68 cannot be justified with a casual approach was right. Therefore, the addition in dispute was rightly deleted by the Ld. CIT(A) which does not need any interference on my part, hence, I uphold the same.
In the result, the appeal of the Revenue is dismissed.
Order pronounced in the Open Court on 03/1/2017.