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Income Tax Appellate Tribunal, DELHI BENCH “D” NEW DELHI
Before: SHRI S.V. MEHROTRA : & SHRI I.C. SUDHIR :
order : 06/10/2015. O R D E R PER S.V. MEHROTRA, A.M.: The captioned appeals, preferred by different assessees of the same group, have been preferred by the assessee against separate orders dated 30- 7-2010 passed by the ld. CIT(Appeals)-VII, New Delhi in appeal nos. 196/08-09 and 197/08-09 respectively, relating to asstt. Year 2006-07. Common grounds have been raised in both the appeals, therefore, they were
2 ITA 4426 & 4427/D/2010 heard together and are being disposed of by a consolidated order for the sake of convenience.
Brief facts of the case are that the assessee company filed its return of income declaring loss of Rs. 583/-. The AO noticed that during the year the assessee company had not carried out any business activity. The AO, after considering the assessee’s submissions made addition of Rs. 15,00,000/- on account of unexplained cash credit u/s 68 in respect of share capital received from M/s Well Wish credits Pvt. Ltd.
3. Ld. CIT(A) deleted the addition, inter alia, following the decision of Hon’ble Supreme Court in the case of CIT Vs. Lovely Exports (P) Ltd. (2008) 216 CTR (SC) 195. Being aggrieved, the deprtment is in appeal before us and has taken following grounds of appeal. “1. The order of the learned CIT(Appeals) is erroneous & contrary to facts & law.
2. On the facts and in the circumstances of the case, and in law, the Ld. CIT(A) has erred in deleting the addition of Rs.15,00,000/-made by the A.O u/s 68 of the I.T. Act 1961, being the unexplained cash credits. 2.1 The Id CIT(A) ignored the fact that the assessee did not discharge the onus of proving the existence/credit worthiness of the creditors and genuineness of the transactions. The Id CIT(A) also ignored the findings recorded by the A.O that the assessee received the money in question from the entry operators.
3. The appellant craves leave to add, to alter, or amend any grounds of the appeal raised above at the time of the hearing.”
3 ITA 4426 & 4427/D/2010 4. Brief facts of the case are that in course of assessment proceedings the AO noticed that during previous year assessee had received share capital amounting to Rs. 62,50,000/- out of which Rs. 15,00,000/- was shown to have been received from M/s Well Wish credits Pvt. Ltd. He noted that as per the investigation conducted by Directorate of Income Tax (Investigation), this company was found to be an entry operator. Accordingly, he issued notice u/s 133(6) to M/s Well Wish credits Pvt. Ltd. at the address submitted by assessee but the said notice was received back undelivered from the postal authorities. This fact was informed to the assessee and he was required to produce the party, give correct address of M/s Well Wish credits Pvt. Ltd. to prove that this was not an accommodation entry. The AO has observed in para 3 of his order that assessee neither furnished the latest address nor produced the above party nor proved its creditworthiness. Instead, vide letter dated 24-12-2008 the assessee submitted that it had already filed confirmation, copy of ITR, certificate of incorporation and bank statement of the said company and, therefore; amount received from M/s Well Wish Credits Pvt. Ltd. should not be added u/s 68. The AO after considering the assessee’s submissions made addition of Rs. 15,00,000/- by observing as under:
“The investigations of the department have clearly established that M/s Well Wish Credit Pvt. Ltd was an accommodation entry provider company managed and operated by Sh Rajesh Bansal w.b0 had admitted before the Investigation Authorities that he was doing work of providing accommodation entries on commission. The assessee could not produce the said party or furnish its latest address. Genuineness and 4 ITA 4426 & 4427/D/2010 creditworthiness of the said Share capital Subscriber have not been established by the assessee. In view of these facts, the amount of Rs.15,00,000/- received from the above company has to be treated as Unexplained Cash Credits in the hands of the assessee company.” 4.1. He also relied on the legal position, which has been noted in para 5 of his order.
5. Before ld. Ld. CIT(A), the assessee had given detailed submissions which have been reproduced at pages 2 to 5 of his order. The assessee had also relied on following case laws:
- CIT vs. Lovely Exports (P) Ltd. (2008) 216 CTR (SC) 195; - CIT vs. Divine Leasing & Finance Ltd. (2007) 299 ITR 268 (Del.); - CIT vs. Value Capital Services Ltd. (2008) 307 ITR 334 (Del.); - CIT Vs. TDI Marketing Pvt. Ltd. (2009) 26 DTR (Del.) 358; and - Bhav Shakti Steel Mines (P) Ltd. Vs. CIT (2009) 179 Taxman 25.
5.1. After considering the assessee’s submissions and various case laws, relied upon by assessee, ld. CIT(A) deleted the addition, inter alia, observing in para 5.3 that assessee had given all the necessary details in order to establish the identity of the share applicant. Therefore, it was fair to conclude that the share applicant was an existing party and the payments were made through banking channel. The AO did not point out any discrepancy in the evidences relied upon by assessee.
6. Ld. DR submitted that the findings of ld. CIT(A) are based on earlier orders. He referred to the decision of Hon’ble Delhi High Court in the case of Nova Promoters & Finlease (P) Ltd. 342 ITR 169 and pointed out that the 5 ITA 4426 & 4427/D/2010 law on this issue has been succinctly elaborated. He submitted that in this case the AO had made inquiries and when the notice u/s 133(6) was received back, the assessee was required to produce the party but the same was not done. He further referred to the decision of Hon’ble Delhi High Court in the case of Empire Buildtech P. Ltd. 366 ITR 110, wherein it has been held that if a person who is investing the money has meager income then the same is to be adversely viewed. In this regard ld. DR referred to page 5 of PB wherein the acknowledgement in regard to return of income filed by M/s Well Wish Credits Pvt. Ltd. is contained and pointed out that the total income returned by the company was only Rs. 530/-. He, therefore, submitted that the investment of Rs. 15,00,000/- by the said company was wholly inconceivable. Ld. DR further submitted that mere disclosure of identity is not sufficient and the genuineness of the transaction is to be viewed having regard to the creditworthiness of the lender.
7. Ld. counsel submitted that the income cannot be the criteria for deciding the creditworthiness of the party and, therefore, matter may be restored to the file of AO for fresh adjudication.
We have considered the rival submissions and have perused the record of the case. We find considerable force in the submission of ld. DR. In view of the decision of Hon’ble Delhi High Court in the case of Nova Promoters & Finlease (P) Ltd. (supra) and in the case of Empire Buildtech Pvt. Ltd. (supra), unless all the three ingredients for invoking section 68 are fully satisfied, addition cannot be deleted merely on the ground that the identity had been established. We find that in order to establish the creditworthiness the assessee had claimed that the investor company was assessed to tax.
6 ITA 4426 & 4427/D/2010 However, as rightly pointed out by ld. CIT(DR), the investor had returned income of Rs. 530/-. Therefore, it is necessart6y that what was the source of investment of the investor has to be clearly brought on record. Mere filing of return cannot establish the creditworthiness.Therefore, we restore this matter to the file of AO to provide one more opportunity to assessee to establish the genuineness and creditworthiness of M/s Well Wish Credits Pvt. Ltd., as requested by ld. counsel for the assessee.
In the result, revenue’s appeal is allowed for statistical purposes.
Brief facts of the case are that the assessee company filed its return of income declaring loss of Rs. 15/-. The AO noticed that during the year the assessee company had not carried out any business activity. The AO, after considering the assessee’s submissions made addition of Rs. 8,00,000/- u/s 68 on account of unexplained cash credit u/s 68 in respect of share capital received M/s Hari Har Export Pvt. Ltd.
Ld. CIT(A) deleted the addition, inter alia, following the decision of Hon’ble Supreme Court in the case of CIT Vs. Lovely Exports (P) Ltd. (2008) 216 CTR (SC) 195. Being aggrieved, the department is in appeal before us and has taken following grounds of appeal. “1. The order of the learned CIT(Appeals) is erroneous & contrary to facts & law.
2. On the facts and in the circumstances of the case, and in law, the Ld. CIT(A) has erred in deleting the addition of Rs.8,00,000/-made by the A.O u/s 68 of the I.T. Act 1961, being the unexplained cash credits.
7 ITA 4426 & 4427/D/2010 2.1 The Id CIT(A) ignored the fact that the assessee did not discharge the onus of proving the existence/credit worthiness of the creditors and genuineness of the transactions. The Id CIT(A) also ignored the findings recorded by the A.O that the assessee received the money in question from the entry operators. 3. The appellant craves leave to add, to alter, or amend any grounds of the appeal raised above at the time of the hearing.”
Admittedly, facts of the case in respect of this assessee are identical to the facts in the case of M/s Lipi Buildcon Pvt. Ltd., above, wherein we have restored the matter back to the file of AO to provide one more opportunity to assessee to establish the genuineness and creditworthiness of the investor company. For the same reasons herein also we restore the matter to the file of AO for decision afresh.
In the result, revenue’s appeal is allowed for statistical purposes.
Order pronounced in open court on 06/10/2015.
Sd/- Sd/- (I.C. SUDHIR) (S.V. MEHROTRA) JUDICIAL MEMBER ACCOUNTANT MEMBER Dated: 06/10/2015. *MP* Copy of order to: 1. Assessee 2. AO 3. CIT 4. CIT(A) 5. DR, ITAT, New Delhi.
8 ITA 4426 & 4427/D/2010 -+ Date Initial 1. Draft dictated on -10.2015 PS
2. Draft placed before author 1.9.2015 PS
Draft proposed & placed before the second JM/AM member
Draft discussed/approved by Second 4. JM/AM Member.
Approved Draft comes to the Sr.PS/PS PS/PS
Kept for pronouncement on PS
File sent to the Bench Clerk PS
8. Date on which file goes to the AR
9. Date on which file goes to the Head Clerk.
10. Date of dispatch of Order.