SKYLINE MOTORS (I) PVT. LTD.,NEW DELHI vs. ASSESSING OFFICER, NEW DELHI

IN THE INCOME TAX APPELLATE TRIBUNAL (DELHI BENCH ‘G’ : NEW DELHI) BEFORE SHRI N.K. SAINI, ACCOUNTANT MEMBER and SHRI A.T. VARKEY, JUDICIAL MEMBER ITA No.1220/Del./2010 (ASSESSMENT YEAR : 2001-02) M/s. Skyline Motors (I) Pvt. Ltd., vs. AO, Ward 8(4), 63, Manavsathali, New Delhi. CGHS, Vasundhra Enclave, New Delhi – 110 096. (PAN : AAGCS1956C) (APPELLANT) (RESPONDENT) ASSESSEE BY : Shri K. P. Garg, C.A. REVENUE BY : Shri Sujit Kumar, Senior DR Date of Hearing : 18.11.2015 Date of Pronouncement : 27.11.2015 ORDER PER A.T.VARKEY JUDICIAL MEMBER :

These two appeals arise from the order dated 02nd February, 2010 & 19th November, 2012 of CIT (Appeals)-XI, New Delhi and relates to assessment year 2001-02. 2. is the quantum appeal and ITA No.743/Del/2013 is the appeal relating to levy of penalty u/s 271(1) (c) of the Income Tax Act, 1961 (hereinafter the Act’).

./2010 ITA No.743/Del./2013 3. The grounds raised by the assessee in the quantum appeal are effectively against an addition of Rs.3,05,000/- representing share capital, brought to tax u/s 68 of the Act.

“24. We have heard the parties and perused the record of the case. The assessee is a private Limited company engaged in the business of plying buses on hire. During the year under consideration the assessee had received share application money in cash from the following persons. (1) Mohammad Aslam (Rs. 1,20,000/-) (2) Shri Rajinder Singh (Rs. 30,000/-) (3) Shri Vijay Chauhan (Rs. 80,000/-) (4) Dinesh Dubey (Rs. 50,000/-) (5) Ashok Dubey (Rs. 25,000/-) 25. The assessee produce one Mohammad Aslam, however, Shri Aslam failed to establish his identity nor he could satisfactorily explained the source of money of Rs.1,20,000/- deposited as share application money with the assessee. With regard to other share applicants, the Assessing Officer has proceeded to make the addition on the assumption that the hire charges paid by the assessee to these persons has been returned to the assessee by way of share application money and as such the payment of hire charges has been held as bogus. Therefore, he has treated the same as un-explained income of the assessee under section 68 of Income Tax Act. However, it may be mentioned that this observation of the AO has been held to be without any basis as aforesaid. Therefore, the matter needs to be ./2010 ITA No.743/Del./2013 examined in view of the provisions of section 68 of the Income Tax Act. The Ld. CIT(A) has also made the general observation in respect of this issue. The matter has not been examined in proper perspective. In the circumstances, we are of the view that it is in the interest of justice the matter needs to be set aside and restore to the file of the AO for considering same in accordance with the law after affording a reasonable opportunity of being heard to the assessee. It is ordered accordingly.”

“2.7 The short question to be answered as to whether in the facts and in the circumstances of the present case the AO was right in treating Rs.3,05,000/- as unexplained income in the hands of the appellant.

2.8 In the present case in order to establish the creditworthiness, it was shown that Rs.3,05,000/- has been received from five persons. When the identity of the persons fail, it will be no point at this stage to go for other two criteria i.e. creditworthiness of the investor and the genuineness of transaction. Two persons out of five investors never appeared and three persons who appeared failed to establish their creditworthiness.

2.9 On these materials, no one can form an opinion that this applicant/creditor had any income exigible to tax under Income tax laws. Since it is not known whether these five investors did have any source of income or business which could be derived and which could help them to invest Rs.3,05,000/- by way of share capital/cash credit. Therefore, on the basis of material produced, it was not just possible for any reasonable man to form an opinion with regard to creditworthiness of the investor/entry operator. There is no material evidence on record to establish that the amount was held by these five investors to prove its creditworthiness.” is an ex-parte order, the issue of non-recording of statements by the AO of the two parties were not discussed by the CIT(A). He contended that in the second round, the parties were in fact produced, who reconfirmed the investments and produced evidence with regard to identity and sources. It was submitted that the authorities below have ignored the fact that these parties were found to be not genuine with regard to payment of hire charges by account payee cheques, which payments ware held by the Tribunal to be genuine payments made to genuine persons. It was, therefore, prayed that the addition be deleted.

(i) Mohd.Aslam Rs.1,20,000/- (ii) Rajinder Singh Rs. 30,000/- (iii) Vijay Chauhan Rs. 80,000/- (iv) Dinesh Dubey Rs. 50,000/- (v) Ashok Dubey Rs. 25,000/- Total : Rs.3,05,000/- Admittedly, out of the five parties, three parties, namely, Mohamed Aslam (Rs.1,20,000/-), Rajinder Singh (Rs.30,000/-) and Vijaypal Singh (Rs.80,000) the statement on the ground that in his opinion, parties did not have creditworthiness to make the investment, keeping in view of the stated sources of income. The assessee, however, contends that by producing all the three parties before the AO and filing the confirmation, bank statement of the share holders, share-certificate, the assessee has discharged its onus in respect to section 68 of the Act. According to the AR, AO is asking the assessee, to prove the source of source which is not permissible. We notice that the Tribunal, in the first round, has held that the addition was made on the assumption that the hire-charges were returned to the assessee as share application money, and as such payment of hire-charges was held as bogus.

This basis of disallowance of hire- charges was not accepted by the Tribunal.

But the matter was set-aside to examine the applicability of section 68 of the Act. In the instant case we find that the assessee by leading evidence of confirmation, bank-statement and production of three share-holders has discharged its initial onus. The authorities below have not led any cogent evidence other than to disbelieve the explanation of the share holders. In view thereof, we delete the addition of Rs.2,35,000/-. However, so far as other two share-holders, namely, Ashok Dubey and Dinesh Dubey , are concerned, no relevant evidence has been led to discharge the initial onus u/s 68 of the Act.

Neither from the orders below nor from the synopsis it is apparent that any ./2010 ITA No.743/Del./2013 relevant evidence was placed on record. The contention of the Ld. AR that both the parties appeared late before the AO, is not discernible from any evidence placed on record and therefore rejected. Therefore, we confirm the addition of these two parties. i.e. Rs.75,000/-. 9. In the result the quantum appeal of the assessee is partly allowed. 10. Coming next to the penalty appeal, since we have deleted an addition of Rs.2,35,000/-and confirmed amount of Rs 75,000/-, accordingly, the penalty levied in respect of addition Rs.2,35,000/- is deleted and in respect of addition of Rs.75,000/- is confirmed.