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Income Tax Appellate Tribunal, DELHI BENCH: ‘B’ NEW DELHI
Before: SHRI S.V. MEHROTRA & MS. SUCHITRA KAMBLE
ORDER
PER SUCHITRA KAMBLE, JM
This appeal and cross objection are filed by the Revenue and assessee, respectively, against the order dated 15/6/2010 passed by Ld. CIT (A)’s IV, New Delhi, by the Revenue.
The grounds of appeal are as follows:-
“1. On the facts and circumstances of the case and in law, the order of the Ld. CIT(A) is wrong, perverse, illegal and against the provisions of law which is liable to be set aside.
2. The Ld. CIT(A) has erred in law and on facts in treating the penalty levied by the Assessing Officer u/s 271(1) (c) of the I.T. Act as invalid ignoring the fact that provisions of Section 271 (1B) of the I.T. Act are clearly applicable in this case.
3. The Ld. CIT(A) has erred in law and on facts in deleting addition of Rs.30,00,000/- made by the Assessing Officer u/s 68 of the I.T Act, ignoring the fact that the assessee failed to prove the physical identity of the persons in order to verify the genuineness of the transaction related to sale of shares.
The grounds of appeal are as follows (C.O’s Ground)
1. That on the facts and in circumstances of the case, the Learned Commissioner of Income tax (Appeals) erred in law in upholding the validity of reassessment proceedings u/s 147/148 of the Income tax Act, 1961, even though notice u/s 148 was issued after the expiry of four years from the end of the relevant assessment year without recording reason about failure on the part of the assessee to disclose fully and truly all material facts necessary for its assessment, when assessment has already completed u/s 143(3) of the Income tax Act, 1961.
An information has been received from the Investigation Wing, New Delhi that certain persons called beneficiaries have resorted to money laundering by giving unaccounted cash to persons called entry operators and in turn taking from them cheques, DDs in the garb of share application money of sale proceeds of non-existing goods, thereby ploughing back thereto undeclared cash into its accounts/business. Some of persons engaged in providing accommodation entries were M/s H. B Relan & Co. The Investigation Wing after completing the investigation analysis information collected by itself from various sources including Banks & such entry operators. The case was reopen u/s 147 of the Act after recording the reasons and reopening and taking necessary approval from the higher authorities required under the provisions of Income tax Act on 31/3/2008, in response to which the assessee filed a letter dated 16/4/2008 requesting to treat the return filed earlier as return filed u/s 148 of the Income tax Act vide letter dated 12/11/2008. The assessee was once again asked to file the return in the prescribed format. The assessee in compliance to this letter filed the return of income vide its letter dated 19/11/2008 in the meanwhile the assessee vide his letter dated 16/4/2008 asked for the reasons to reopening the assessment proceedings which were supplied to him. Subsequently, the assessee vide letter dated 22/8/2008 raised certain objections to reopening of assessment proceedings till without dated the assessee had not applied with the provisions of the Act like the assessee has not filed the return of income in proper format. The assessee was then asked to comply upon which, he filed return of income on 19/11/2008 and raised certain objections as listed in the letter dated 22/8/2008. The objections raised by the assessee were discussed of vide speaking order on 19/12/2008. Vide notice dated 19/12/2008 the assessee was asked to submit the details in regard to the transaction with M/s H. B Relan & Co. during the financial year 2000-01. The assessee submitted certain details vide its letter dated 29/12/2008, the assessee has stated that it has sold 1,10,000/- shares of M/s ECO Holding Pvt. Ltd. for value of RS. 11 lacs at Rs. 10.02%. It is relevant to mention here that the cost of acquisition of these shares as reported in the books of the assessee where the sum of Rs. 11 lacs. The assessee has sold these shares after investigating Rs. 11 lacs for such a long time without gaining anything from his investment. It is more relevant to point out and these juncture that no dividend has been received by the assessee even after holding the 1,10,000/- shares for such a long time. This unique feature does not happen to the assessee in this script only but each and every script which the assessee has sold to M/s H. B. Relan & Company in case of another script i.e. M/s Bilu Securities Pvt. Ltd. the assessee was holding 20,000/- shares of this script and again sold the share at RS. 10.02 per share totaling Rs. 2 lacs i.e at the cost of acquisition living not gain to the assessee no dividend earned, no interest received, and no profit book in its profit and loss account. The Assessing Officer observed that it is hard to assume that the assessee who investigated such big amount i.e. of Rs.30 lacs and even after one year gains nothing on any other scripts in which it deals each and every share which the assessee has sold to M/s H. B. Relan & Co. which at cost price and the gain to the assessee remains zero. This aspect defies human preponderances.
The Assessing Officer further observed that more over there are more reasons than one reason to question the genuineness of the transaction entered by the assessee with M/s H. B. Relan & Co. the assessee in each and every script has failed to submit the distinctive numbers of the scripts it has sold. The assessee has not only failed in substantiating the reasons of selling the shares at cost price but also fail to produce the supporting evidences which can support the claim of the assessee that the price of all these scripts were uniformly and uniquely at Rs. 10.02 per share. The Assessing Officer made an addition on account of cash credit to the extent of 30 lacs and cit while deciding the matter observed that the sale of shares has already been reported by the assessee as part of its regular trading transactions and the various deals including the existence of these shares as per the balance-sheet of the assessee has not been disputed accordingly. It cannot be held that the amount of Rs.30 lacs has been received against non-existence of shares. With regard to the sale price of the shares, the cost of acquisition of remaining the same this fact in itself is not sufficient to arrive at an adverse inference against the assessee. The CIT(A) partly allowed the appeal of the assessee.
The Ld. DR relied upon the order of the Assessing Officer and submitted that there was nothing on record to show that the gap between the purchase and the sale and was not pointed out from the bank details by the assessee. The Ld. DR further submitted that there was no material given for verification by the assessee to the Assessing Officer. The sale price of all shares was 10.02% only which does not appear to be best and proper. As mentioned in CIT (A)’s order there was no report by the assessee or there was no balance-sheet reflection in the previous year shown by the assessee to the Assessing Officer how the CIT(A) has arrived at this conclusion is not elaborated in the CIT(A)’s order. The DR submitted that no verification of balance-sheet of earlier year has been produced by the assessee. The mode of purchase from whom the purchase of share was made and how the same was sold was not justified by the assessee before the Assessing Officer. Thus, it is bogus accommodation entry as per the Ld. DR.
The Ld. AR contended that the assessee has filed cross- objection and submitted that no investigation by A.O was done as related to the quantum and the same was not known to the Assessing Officer when the income of the assessee was already assessed. The Ld. AR submitted that Ground No. 2 of the Department’s appeal is not proper. As relates to the cross objection, the Ld. AR further submitted that there was no proper reasoning given. As related to the Revenue’s appeal, the AR pointed out that at Page 10 of the paper book point 11 was related to the finance investment and page 17 of the paper book there was stocking in mentioned as opening stock. The Ld. AR also pointed out page 73 & 74 of the paper book and heard on that the stocking trade is an opening balance for the assessee. The Ld. AR relied upon the CIT (A)’s order and held that the CIT(A) rightly set aside the order of the Assessing Officer.
The Ld. DR gave the rejoinder to the AR’s contentions that the investigation was properly done and when the Assessing Officer got information from investigation department, the A.O had valid reasons to reopen the assessment proceedings. There was a prima facie belief. There was a failure on part of the assessee and therefore cross objection does not sustain. The DR submitted that Ground No. 2 of Revenue’s appeal is not pressed.
We have perused all the records and heard both the parties. Ground No. 2 of the Revenue’s appeal is dismissed as not pressed. As relates to other ground of the Department’s appeal, it is submitted that the CIT (A) while allowing the appeal of the assessee has mentioned that various details including the existence of shares as per the balance-sheet of the appellant from earlier years has not been disputed. This particular finding is not proper as before the Assessing Officer, the balance-sheet was not produced by the assessee and the same was not produced during the CIT (A) proceedings. The CIT (A) has simplicitor taken the stocking trade opening balance as previous years balance but not verification has been done by the CIT (A) to the genuineness of the submission of the assessee. In view of this, it is proper to remand back the matter before the CIT (A) for verifying the previous year’s balance-sheet and to give proper finding.
The Cross-objection will not sustain as the proper reasoning after investigation has been given by the Assessing Officer for reopening the matter. The reasons were provided to the assessee and the objection to the reopening was submitted by the assessee before the A.O after considering of rightly the Assessing Officer has reopen the matter.
In result, the appeal of the Revenue is partly allowed for statistical purpose and the Cross-objection of the assessee is dismissed.
The order is pronounced in the open court on 19th of January, 2016.