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Income Tax Appellate Tribunal, DELHI BENCH: ‘C’ NEW DELHI
Before: SHRI N. K. SAINI & SMT SUCHITRA KAMBLE
ORDER PER SUCHITRA KAMBLE, JM
This appeal is filed by the Revenue against the order dated 26/03/2013 passed by CIT(A) XV, New Delhi for Assessment Year 2004-2005.
The ground of appeal raised by the Revenue is as follows:
“1. Whether Ld. CIT(A) was correct on facts and circumstances of the case and in law in holding that AO’s action in reopening the proceedings u/s 148 was incorrect?
2. Whether Ld. CIT(A) was correct on facts and circumstances of the case and in law in deleting the addition of Rs.45,900,000/- made by the AO on account of unexplained credit under section 68 of the IT Act, 1961.”
The assessee has filed its return of income on 8th September, 2004 declaring business loss of Rs. 11,03,2002/- as well s income of Rs. 70,70,033/- u/s. 115 JB of the Income Tax Act, 1961. The said return was selected for scrutiny. The AO has issued a detailed questionnaire. In response thereto, the assessee has filed detailed reply vide letter dated 6th December, 2006 thereby assessee submitted all the details including the details of the share application money received during the year along with confirmation and documentary evidences thereof (Paper Book Pg. 25-26, relevant Para 8 on Page 26.) The AO thereafter completed the assessment u/s 143(3) vide order dated 29th December, 2006 (Paper Book Pg. 30-33). Thereafter the assessee received a notice u/s 148 dated 30th March, 2011. The assessee filed the return in response thereto. As per the reasons supplied by the AO the assessment was reopened on the basis of allegation that the assessee has received accommodation entry of Rs.45,00,000/- during the year under consideration.
In response thereto, the assessee filed complete details of the share capital received during the year (Paper Book Pg. 39-40) along with evidences which included share application form,
Board resolution, confirmation, Memorandum of Articles, Bank Statement, Cheque Copy, Income Tax Return, Balance Sheet, Form No. 18 and 32, etc.
The AO passed an order whereby making an addition of Rs.45,00,000/-. The AO held that an amount of Rs.45,00,000/- has been credited in the books of the assessee for which no explanation has been placed on record.
Aggrieved by the order of the AO, the assessee filed an appeal before the CIT(A) whereby it challenged:-
(i) the reopening of the assessment
(ii) It challenged that the amount added Rs.45,00,000/- is not correct amount.
(iii) It also challenged that addition on account of share capital cannot be made in view of the evidences submitted by the assessee.
The CIT(A) allowed the appeal on all the three grounds. The CIT(A) quashed the reopening and accordingly upheld the contention of the assessee that reopening is bad.
The DR submitted that the assessee has received cheques amounting to Rs. 45,00,000/- through transactions, where in fact no real transactions took place. The genuineness and creditworthiness of the persons giving capital to the assessee was not proved and the assessee failed to discharge its onus of proving the genuineness and creditworthiness of the person who claimed to be the shareholder of the assessee company. The DR totally relied upon the order of the Assessing Officer. The DR submitted that the re-opening was proper. The DR further submitted that the assessee’s case is governed by Hon’ble Supreme Court case Navodaya Castle (P.) Ltd. Vs. CIT [2015] 56 Taxman.com 18 (SC). For this submission the detailed order of the Hon’ble Delhi High Court ([2014] 367 ITR 306 (Del) was submitted during the course of hearing. The Hon’ble High Court held that “It was accepted that the assessee was unable to produce the directors and the principal officers of the six shareholder companies and also that as per the information and details collected by the Assessing Officer from the concerned bank, the Assessing Officer had observed that there were genuine concerns about identity, creditworthiness of shareholders as well as genuineness of the transactions. Thus, the matter was remitted to the Tribunal for fresh adjudication.” The DR further submitted that the confirmation and the evidence has to be taken into account and the onus lies on the assessee and not on the Department. Therefore, the AO has correctly taken
into account all the factors. The DR further submitted that the CIT(A) has wrongly stated that “the appellant has discharged the initial onus of establishing the bonafide all the transactions and the AO was not justified in ignoring various evidences provided to him by the assessee.” The finding given by the CIT(A) that nothing adverse has been recorded by the AO to establish that the amount of share application money of Rs.45 lacs received by the assessee from the said parties, are not proper as per the DR. The DR also relied upon the judgment of CIT vs. Empire Builtech P. Ltd. [2014] 366 ITR 110 (Del) wherein again the Hon’ble Delhi High Court held that the initial burden is upon the assessee to show the genuineness of the identity of the individuals or entities which seek to subscribe to its share capital.
The AR submitted that the assessee has given details of share application money raised during the year along with confirmation and documentary evidence therefore the Assessing Officer was not justified in reopening the matter under Section 148. (Pg. 26 point 8 of the Paper Book). The AR further submitted that the case of Navodaya Castles Pvt. Ltd. (Supra) will not be applicable as in the present case the assessee has discharged the burden of proof by submitting the documentary evidence at the time of original assessment.
Similarly, the AR submitted that the case of Empire Builtech (Supra) will also be not applicable in present case.
We have perused all the proceedings and heard both the parties after going through the judgments submitted by the assessee as well as by the Department. As regarding the issue of reopening of the assessment, it is to be noted that AO in the reasons has mentioned a sum of Rs.45,00,000/- from 9 parties. Wherein the amount in the case of Kuberco Sales Pvt. Ltd and M/s Shriniwas Leasing & Finance has been mentioned twice. Further, the assessee has not received any share capital from M/s VR Traders and M/s Shriniwas Leasing & Finance. Therefore the correct amount is Rs.25,00,000/- from five parties. This factual aspect has been confirmed by the CIT(A) and the same was not denied by the DR. This shows non-application of mind by AO at the time of reopening of the assessment and hence reopening is bad in law. Thus, the Navodaya Case will not be applicable in the present case as the assessee has given the substantial evidence during the course of original assessment along with confirmation to the AO. The same was ignored by the AO. Hence, on this issue the Ground No. 1 of the Revenue is dismissed.
On the issue of the disputed amount being Rs.25,00,000 as against Rs. 45,00,000/- recorded in the reasons and for which addition was made, the CIT(A) upheld the contention of the assessee that assessee has not received any share capital from M/s VR Traders and M/s Shriniwas Leasing & Finance. It also held that the amount in the case of Kuberco Sales Pvt. Ltd. And M/s Shriniwas Leasing & Finance has been mentioned twice. Accordingly the CIT(A) held that the disputed amount of the share capital on the basis of which addition has been made by the AO comes to Rs.25,00,000/-. The CIT(A) after examination of the evidences and the various judgments further held that assessee has discharged its onus and AO has not brought any material to discredit the evidences submitted by the assessee. Hence CIT(A) rightly deleted the addition made on merit.
In the result, appeal of the Revenue is dismissed.
The order is pronounced in the open court on 30th of September 2015.