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Income Tax Appellate Tribunal, DELHI BENCH: ‘C’: NEW DELHI
Before: SH. ABY T. VARKEY & SH. O.P. KANT
ORDER PER O.P. KANT, A.M.: The present appeal by the Revenue is directed against the order dated 02.04.2013 of learned Commissioner of Income Tax(Appeals)-XV, New Delhi, for the assessment year 2004-05, raising the following grounds of appeal: i. On the facts and in the circumstances of the case, the learned Commissioner of Income Tax(Appeals) erred in deleting the addition of Rs. 10,55,000/- u/s 68 of the I.T. Act, 1961. ii. On the facts and in the circumstances of the case, the learned Commissioner of Income Tax(Appeals) erred in deleting the addition of Rs. 10,55,000/- u/s 68 of the Act despite the settled position of law that the onus was on the assessee to establish the identity, creditworthiness and genuineness of the transaction which assessee had failed to do. The learned Commissioner of Income Tax(Appeals) has deleted the addition of Rs. 10,55,000/- u/s 68 of the Act, disregarding the finding of the department that the assessee has introduced its own unaccounted money in its bank as accommodation entries.
2 iii. The appellant craves to add, alter, amend, modify, add or forego any ground of appeal at any time before or during the hearing of this appeal.
2. The facts in brief are that for the assessment year in consideration, the assessee filed its return of income on 11.08.2004 declaring income of Rs. 1,16,168/-. The return was processed under Section 143(1) of the Income-tax Act, 1961 (for short “the Act”). Consequently upon the information received from the Director of Income Tax (Investigation), New Delhi, that the assessee was one of the beneficiaries of the accommodation entry in the form of share application money in the financial year 2003-04 relevant to the assessment year 2004-05, the Assessing Officer issued notice under Section 148 of the Act, dated 18.03.2001 for reopening of the assessment. In response to this notice, the assessee filed a letter dated 15.04.2011 requesting to treat the original return of income filed as return filed against the notice under Section 148 of the Act. The Assessing Officer provided a copy of the reasons recorded for reopening through letter dated 19.08.2011. The reasons recorded are reproduced as under: “As per information received from the officer of the DIT(Inv.), New Delhi, the assessee company has taken following accommodation entry totaling to Rs. 10,55,000/- Value of Date of From whom taken Instrument entry taken entry No. Rs. 2,00,000 12.04.2003 M/s B.I.C. Consultants Pvt. - Ltd. (A/c No. 50088, State Bank of Patiala, Darya Ganj, Delhi) Rs. 2,00,000 12.04.2003 M/s Nishant Finvest Pvt. Ltd. - (A/c No. 50080, State Bank of Patiala, Darya Ganj, Delhi) Rs. 2,00,000 22.04.2003 M/s Rabik Exports Ltd. (A/c 56612 No. 49, Ratnakar Bank, Karol Bagh, New Delhi)
3 Rs. 2,80,000 24.04.2003 M/s Shattarchi Fin. & Leasing 51736 Pvt. Ltd. (A/c No. 71, Ratnakar Bank, Karol Bagh, New Delhi) Rs. 1,75,000 28.04.2003 M/s M.V. Mktg. Pvt. Ltd. (A/c 8649 No. 47, Ratnakar Bank, Karol Bagh, New Delhi The said amount has been credited into assessee’s bank account with OBC, LSC-6, Derawala Nagar, Delhi by way of transfer entries. On investigation made by the Investigation Wing it has been found that assessee is a beneficiary of taking the aforesaid accommodation entries. I have also perused various materials and report from Investigation Wing and on that basis it is evident that the assessee company has introduced its own unaccounted money in its bank by way of accommodation entries, therefore, I have reason to believe that the income amounting to at least Rs. 10,55,000/- has escaped assessmen.” 2.2 In the assessment proceedings, the assessee filed a letter on 09.12.2011 enclosing photocopies of confirmation letter, balance sheet etc. of seven share applicants including the five share applicants mentioned in the reasons recorded for reopening of the assessment. It was contended by the assessee before the Assessing Officer that all those persons are the persons of means, having their own funds to invest in the assessee company and all the share application money had been received through account payee cheques through regular banking channels. The Assessing Officer further issued a show cause notice to the assessee stating the share application money of Rs. 10.55 lacs was accommodation entry, as per the information received from the Investigation Wing of the Department and fixed the hearing on 15.12.2011. In response to the said show cause, neither anyone attended nor any written submissions was filed and therefore the Assessing Officer completed the assessment holding the share application money of Rs. 10.55 lacs received as unexplained credit on the basis 4 of material available before him. The relevant findings of the Assessing Officer are as under: “Whatever submissions made by the assessee have been considered carefully, but not found acceptable. It should not be ignored the facts emerged from the survey/search operation conducted on various companies/individuals etc. by the Investigation Wing of the department. It was found during these operations and post enquiries that many companies/individuals and other entities are involved in giving or taking accommodation entries. The purpose of taking/giving these entries was nothing but to route through their unaccounted money into business. The findings were referred to all the assessing officers alongwith list of name of the persons and details of transactions for further necessary action. The details were not prepared baselessly. In fact, it was based on facts revealed during & after search/survey operations. Extensive enquiries were made by the Investigation Wings by looking into numerous Bank accounts, the account holders, the persons operating these accounts and the persons for whom such account holders are working.” 2.3 Aggrieved, the assessee filed an appeal before the Commissioner of Income Tax (Appeals). Before the Commissioner of Income Tax (Appeals), the assessee submitted that it had met all the conditions required under Section 68 of the Act in respect of five companies but the learned Assessing Officer had neither examined nor found any adverse observations in respect of those evidences. Further, the assessee submitted that its case was covered by the findings of the Hon’ble Delhi High Court in the case of Commissioner of Income Tax Vs. Gangeshwari Metal (P.) Ltd., [2013] 30 taxmann.com 328 (Delhi). After considering the submissions of the assessee, the learned Commissioner of Income Tax (Appeals) deleted the additions with the following findings: “6. I have carefully considered the facts of the case in the light of the submission made by the appellant and the applicable law in this regard. On 5 careful consideration, I find that the appellant during the course of assessment proceedings, the appellant had furnished details in support of identity, genuineness and creditworthiness of the companies which had invested an amount of Rs.14,70,000/-(AO examined only an amount of Rs.10.55 lakh out of it) in the appellant company as share application money, by providing copies of PAN card, income tax return, registration certificate issued by ROC and bank statement in support of the fact that such money was invested through the banking channel through cheque. This information was furnished to the AO by the AR vide letter dated 9.12.2011.The AO has also acknowledged these facts, however, having acknowledged the same, he sat idle and did not use this information for further verification. The AO proceeded ahead by treating the' information from the Investigation Wing as gospel truth. No evidences whatsoever against the contention of the appellant was gathered by the Ld. AO and accordingly, the appellant's case is directly covered under the second category of the cases in terms of the decision of the Hon'ble Delhi High Court in the case (CIT Vs Gangeswari Metals (supra) read with decision of the same High Court in the case of CIT vs Nova Promoters and Finlease Pvt. Ltd. (supra). In view of the above, since the appellant had duly substantiated the identity, genuineness and creditworthiness of the cash creditors in respect of an amount of Rs.10.55 lakhs received during the year as share application money, the addition made by the Ld. AO under Section 68 cannot be sustained. Accordingly, addition made is deleted.”
At the outset, the learned Authorized Representative submitted that the tax effect in the Revenue appeals was below Rs. 4 lacs and therefore relying on the decision of Income Tax Officer Vs. Sh. Om Prakash, dated 16.06.2015, the appeal of the Revenue may be dismissed.
4. However, the learned Departmental Representative brought to our knowledge that the tax effect in the present case was Rs. 3,78,482/- and in view of the judgment of Hon’ble Supreme Court in the case of Commissioner of Income Tax-VIII Vs. Suman Dhamija, Civil Appeal Nos. 4919-4920 of 2015, dated July 1st, 2015, the CBDT Circular in respect of not filing an appeal when less than tax effect of Rs. 4 was prospective and not retrospective. He submitted 6 that the CBDT circular for non filing of appeals before the Tribunal having tax effect less than Rs. 4 lacs was issued on 10.07.2014 whereas the present appeal was filed on 12.04.2013 and therefore the said circular was not applicable in the case of the assessee. We agree with the submissions of the learned Sr. Departmental Representative and therefore the appeal is heard on merit.
Learned Sr. Departmental Representative relied on the order of the Assessing Officer and submitted that the fact of accommodation entries was brought to the knowledge of the assessee, however, the assessee did not submit any documents controverting the finding of the Investigation Wing in respect of the five share applicants.
On the other hand, the learned Authorized Representative submitted that the case of the assessee was squarely covered by the judgments of the Hon’ble Jurisdictional High court in the case of Gangeshwari Metal (P.) Ltd (supra).
As grounds nos. 1 and 2 of the appeal of the Revenue are in respect of the addition of Rs. 10.55 lacs made under Section 68 of the Act and being interrelated, they are being taken together.
We have heard the rival submissions of the parties and perused the material on record. We observed that the Assessing Officer had received information from the Director of Income Tax (Investigation), New Delhi that those five share applicants have provided accommodation entry to the assessee. The persons who provide money to the taxpayers through cheques against receipt of cash are called as accommodation entry providers. However, we have 7 also noted that the Assessing Officer did not carry out any independent inquiry in respect of the alleged accommodation entry provider, nor brought on record the statement or confession of alleged entry providers given before the officers of the Investigation Wing of Income Tax Department. The Assessing Officer has merely described theoretical information in respect of the informations collected by the Investigation Wing. He did not bring on record any documentary evidence leading to conclusion that those five share applicants were accommodation entry providers, whereas the assessee has submitted confirmation letter certificate of incorporation of share application money, a copy of PAN certificate, copy of acknowledgment of income tax return filed, copy of balance sheet and profit and loss account of share applicants. In the case of Gangeshwari Metal (P.) Ltd (supra), the Hon’ble High Court has held that when there was a clear lack of inquiry on the part of the Assessing Officer, once the assessee had furnished all the material, then in such eventuality, no addition could be made under Section 68 of the Act. The relevant findings of the aforesaid case are as under: “9. As can be seen from the above extract, two types of cases have been indicated. One in which the assessing officer carries out the exercise which is required in law and the other in which the assessing officer 'its back with folded hands' till the assessee exhausts all the evidence or material in his possession and then comes forward to merely reject the same on the presumptions. The present case falls in the latter category. Here the assessing officer, after noting the facts, merely rejected the same. This would be apparent from the observations of the assessing officer in the assessment order to the following effect: - "Investigation made by the Investigation Wing of the Department clearly showed that this was nothing but a sham transaction of accommodation entry. The assessee was asked to explain as to why the said amount of 8 Rs. 1,11,50,000/- may not be added to its income. In response, the assessee has submitted that there is no such credit in the books of the assessee. Rather, the assessee company has received the share application money for allotment of its share. It was stated that the actual amount received was Rs. 55,50,000/- and not Rs. 1,11,50,000/- as mentioned in the notice. The assessee has furnished details of such receipts and the contention of the assessee in respect of the amount is found correct. As such the unexplained amount is to be taken at Rs. 55,50,000/-. The assessee has further tried to explain the source of this amount of Rs. 55,50,000/- by furnishing copies of share application money, balance sheet, etc. of the parties mentioned above and asserted that the question of addition in the income of the assessee does not arise. This explanation of the assessee has been duly considered and found not acceptable. This entry remains unexplained in the hands of the assessee as has been arrived by the Investigation wing of the Department. As such entries of Rs. 55,50,000/- received by the assessee are treated as an unexplained cash credit in the hands of the assessee and added to its income. Since I am satisfied that the assessee has furnished inaccurate particulars of its income, penalty proceedings under section 271(1)(c) are being initiated separately."
The facts of Nova Promoters and Finlease (P) Ltd. (supra) fall in the former category and that is why this Court decided in favour of the revenue in that case. However, the facts of the present case are clearly distinguishable and fall in the second category and are more in line with facts of Lovely Exports (P) Ltd. (supra). There was a clear lack of inquiry on the part of the assessing officer once the assessee had furnished all the material which we have already referred to above. In such an eventuality no addition can be made under section 68 of the Act. Consequently, the question is answered in the negative. The decision of the Tribunal is correct in law.
The appeal is dismissed.”
We are in agreement with the learned Authorized Representative of the assessee that the case of the assessee is squarely covered with the above cited case. In view of the above, we hold that no interference is required in the findings of the Commissioner of Income Tax (Appeals). Accordingly, ground nos. 1 & 2 of the Revenue are dismissed.
10. Ground no. 3 is general in nature therefore no decision is required.
9 11. In the result, the appeal filed by the Revenue is dismissed. The decision is pronounced in the open court on 18th December, 2015.