DCIT, CIRCLE - 6, KOLKATA, KOLKATA vs. M/S. GREAT WALL MARKETING (P) LTD., KOLKATA

This is an appeal by the Revenue directed against the order dated 24.02.2011 of CIT(A)-VI, Kolkata relating to A.Y.2002-03.

Great Wall Marketing (P)Ltd. A.Yr.2002-03 3. In the proceedings u/s 148 of the Act AO called upon the assessee to explain the receipt of Rs.1,74,00,000/- as share application money towards share capital during the previous year.

3.1. The AO firstly held that the four companies referred to by the Director of Income Tax (Investigation) New Delhi were non-existent companies and did not have capacity to invest in the share capital of the assessee. Accordingly the following amounts received as share application money from the following companies were treated as unexplained by the AO a) Ram Sons Drugs Ltd. – 1/56, Sunder Vihar, N.Delhi-87 Rs. 5,00,000/- b) Prateek Securities (P)Ltd. Rs. 5,00,000/- c) Roopin Capital (P)Ltd-301, Dhaka Chamber, N.Delhi-5. Rs.10,00,000/- d) Enpol (P)Ltd-1756 Naya Gatai, N.Delhi. Rs. 6,00,000/- Rs.26,00,000/- 3.2. Thereafter the AO issued notice u/s 133(6) of the Act to the other share applicants. The result of exercise carried out by the AO has been summarized in the following chart given by the AO in the order of Assessment. Sl.No. Name of Applicant & Address as in Reason for Return of query Application application u/s 133(6) as mentioned by Amount Postal Authority 1. Kailash Chand Sharma This name does not exist in Rs.2,50,000/- 765, Chabiganj, Kash Mere gate, this address. Give full Delhi-110006. address. Mention C/o.

2. Argent Finvest (P)Ltd. House is closed for long Rs.10,00,000/- SFS 256 4-5-B, Paschim Vihar, time. N.Delhi-110063.

3. Nemi Chand Sawani Address not found. Rs.2,50,000/- Near –Mahadev Temple, Umed Chowk(Jodhpur),Rajasthan 4. Welkin Commercials (P)Ltd. House is closed for the last Rs.12,50,000/- SFS 256 A-5/B-4, Gali No.7, 1 year Paschim Vihar, N.Delhi-110063.

5. Lionine Packaging (P)Ltd. House is closed for the last Rs.9,50,000/- SFS 256 4-5-B, Paschim Vihar, 1 yr. N.Delhi-110063.

6. Saviour Leasing (P)Ltd. House is closed for the last Rs.8,00,000/- SFS 256 4-5-B, Paschim Vihar, 1 yr. N.Delhi-110063.

7. N.S.R.Consultancy (P)Ltd. No such firm in this Rs.12,50,000/- Great Wall Marketing (P)Ltd. A.Yr.2002-03 21/18, 2nd Flr. Shakti Nagar, New address. Delhi-110007.

8. Issant Pharmaceuticals (P)Ltd. No such firm this address Rs.6,00,000/- 2250,Naya Bazar, N.Delhi-110006.

9. Omni Present Credits (P)Ltd. Left Rs.1,00,000/- 208/27, V.S.Block, Vikas marg, Shakarpur,N.Delhi-110092.

10. Priya Financial Services (P)Ltd. Left Rs.1,00,000/- 208/27, V.S.Block, Vikas Marg, Shkarpur,N.Delhi-110092.

Great Wall Marketing (P)Ltd. A.Yr.2002-03 3.2. The results of the inquiry conducted by the AO was confronted to the assessee. The assessee gave new addresses for 15 of the 22 parties which were as follows :-

Sl.No. Name of the Company Present Address as per ROC 1. Asija Securities Pvt. Ltd. 204/1,Chitra Gupta Road,Paharganj,NewDelhi-55.

2. Sahri-Kahri Investments Pvt. Ltd. 203/H,Osian Building,12, Nehru Place,New Delhi- 19.

3. Total Info. Solution Pvt. Ltd. 8-35, East Krishna Nagar,Delhi-110051.

6. Basil Investment & Hospitality Services (P)Ltd(Formerly known As Jovial Suppliers Pvt.Ltd.) 7. Agent Finvest Private Ltd. 192, Sector-23,Pociket-1,Rohini,Delhi-85.

8. Profound Exports Private Ltd. 1/18-B, Asaf Ali Road, Daryaganj, Delhi-

1. 1.

9. NSR Consultancy Services(P)Ltd. 8-M.M.Road, New Delhi-55.

10. Lionine Packaging(P)Ltd. 192, Sector-23,Pocker-1,Rohini,Delhi-85. AK-94, 1st Floor, Shalimar Bagh, Delhi-88.

11. Jayshree Growth Funds Pvt.Ltd.

12. Welkin Commercial Pvt.Ltd. 2023/7, Gali No.7, Chuna Mandi,Paharganj, Delhi.

13. Eco Star Securities Privagte ltd. 2023/7, Gali No.7, Chuna Mandi,Paharganj, Delhi.

14. Protend Services Private Ltd. B-40, Madhu Vihar ITO Extn.New Delhi-92.

15. Sviour Leasing Private Ltd. AG-415,Ground Floor, Shalimar Bagh, Delhi-88. 3.3. Notices u/s133 (6) were again sent to all the above parties on 11-11-2009. Out of which the following notices came back unserved in the new address provided by the assessee. No further address was provided by the assessee in respect of other parties.

1. Total Info. Solution Pvt. Ltd. 2. Argent Finvest Pvt. Ltd. 3. NSR Consultancy Services (P)Ltd. 4. Saviour Leasing Private Ltd. 5. Eco Star Securities Pvt. Ltd. 6. Welkin Commercial Pvt. Ltd.

7. Omni Present Credits Pvt. Ltd. 3.4. In the above circumstances, the AO came to the conclusion that the assessee has failed to provide any satisfactory explanation regarding receipt of money as share application money and/or source and/or creditworthiness of the following parties apart Great Wall Marketing (P)Ltd. A.Yr.2002-03 from the 4 parties which are found to be non-existent by investigating of I.Tax, New Delhi. Sl.No. Name of Assessee & Address Amount of Investment 1. Kailash Chand Sharma Rs.2,50,000/- 765, Chabiganj, Kash Mere gate, Delhi-110006.

2. Argent Finvest (P)Ltd. Rs.10,00,000/- SFS 256 4-5-B, Paschim Vihar, N.Delhi-110063.

6. N.S.R.Consultancy (P)Ltd. Rs.12,50,000/- 21/18, 2nd Flr. Shakti Nagar, New Delhi-110007.

8. Omni Present Credits (P)Ltd. Rs.1,00,000/- 208/27, V.S.Block, Vikas marg, Shakarpur,N.Delhi-110092.

9. Ridhkaran Gollcha Rs.2,50,000/- A-156, Gerawal Nagar, N.Delhi-110009.

10. Kaushalya Devi Sharma Es.2,50,000/- Sadar Bazar, Makrana, Rajasthan 11. Manju Devi Bhama Rs.2,50,000/- Sadar Bazar, Madrana, Rajasthan 12. Associated Finlease Ltd. Sawak House, 1E/12, Rs.5,00,000/- Jhandewatan Extension, N.Delhi-110055.

13. ECO Star Securities & Credits (P)Ltd. Rs.9,00,000/- 205,J.J.Complex, G-29, Laxmi Nagar, N.Delhi-110092. Jay Shree Growth Funds (P)Ltd. 18/24, 1st Floor., Shakti 14. Rs.5,00,000/- Nagar, N.Delhi-110007.

Great Wall Marketing (P)Ltd. A.Yr.2002-03 “I am being informed by M/s. Great Wall Marketing Private Limited that their assessment for the A.Y. 2002-03 has been re-opened and as I was one of the applicant they want me to send the following” The AO therefore concluded that from the contents of these letters it was evident that the assessee itself sent these letters where the notices sent by the department came unserved from the addresses furnished by the assessee. Therefore, the AO did not take cognizance to such letters, which were not in response to our notice u/s 133(6). The AO accordingly held that the existence and definitely the creditworthiness (the capacity to invest) is very much doubtful in respect of above mentioned 15 parties and the 4 parties reported by the DIT(Inv.) New Delhi. Therefore, Rs.77,50,000/- introduced as share application money of such these 15 parties and Rs.26,00,000/- introduced by 4 parties are treated as cash credit u/s 68 and added back to the income of the assessee.

4. Before CIT(A) the assessee challenged the validity of initiation of proceedings u/s 147 of the Act by the AO. It was submitted that the reasons recorded by the AO were vague and cannot be the basis on which the AO could have formed a belief that income of the assessee chargeable to tax has escaped assessment. The CIT(A) did not agree with the submissions so made by the assessee. CIT(A) held that the information received from the D.I.T.(Investigation), New Delhi that the assessee was a beneficiary of a racket involved in providing accommodation entries related to share capital was sufficient for the AO to initiate proceedings u/s 148 of the Act. CIT(A), however on merits of the addition made by the AO u/s 68 of the Act held that the same cannot be sustained. The following were the conclusions of the CIT(A) :- 1. “In respect of 4 parties about whom the AO got information from DIT (lnv) Delhi the AO did not conduct any separate inquiry but made addition on the basis of mere information provided by the Investigation Wing Delhi. 2. With reference to the 26 parties, from whom the Assessee received share application money, the CIT(A) found that during the assessment proceedings vide a letter dtd. 10.07.2009 the assessee provided the copies of the share applications made by all the 26 parties (including the 4 parties) and the details of the share application money sent by these parties. In the share application letters the name, address and PAN/GIR Great Wall Marketing (P)Ltd. A.Yr.2002-03 nos of all these parties were given. However the AO did not make any inquiries from these parties. Subsequently vide its letter dtd. 17.12.2009 the assessee also furnished the copies of the return of income, balance sheet and Profit & Loss account in respect of some of these parties for the relevant Assessment Year and also confirmation letters .from these parties) certificates of their incorporation as a company etc. For some parties the copy of the bank statement from where cheque was issued to the assessee was also submitted. However, the AO did not accept these evidences as satisfactory and treated the share application money from these 4 parties as unexplained. The CIT(A) was of the view that by filing these' documents the assessee discharged its, onus to prove the genuineness of the share application money received from these parties. The onus was on the AO to prove it otherwise. The CIT(A) held that the AO has failed, to bring any evidence on record to show that the share application money received belonged to the assessee.

3. As regards 15 parties whose share application money has been treated by the AO as unexplained on the basis of his own inquiries, the CIT(A) was of the view that in respect of the 5 individual parties listed at Nos. 1,3,9, 10 and 11 in the list made on page 4 of the, assessment' order( and reproduced in the earlier part of this order) that in the assessment records the letters of confirmations sent by them through 'post' were available. The AO has rejected their confirmations only on the ground that in their letters they have mentioned to have sent these letters on the advice of the assessee. The CIT(A) was of the view that this approach was wrong. The CIT(A) also observed that share application money was given in the year 2001-02 and hence it was about 7-8 years old matter. In such situation if the assessee asks the shareholders to send their confirmations there cannot be anything wrong in that. \ 4. As regards the companies listed at Sr.No. 2,4,5,6,7,8,12,13, 14 and 15 in the list on page 4 of the assessment order the AO and set out in the earlier part of this order, the CIT(A) was of the view that the notices sent to these parties were returned un- served. However, in respect of all the 26 parties the Assessee submitted a full set of documents containing different types of evidences such as identity proofs, address proofs I.T. returns, balance sheets and Profit & loss account, confirmation letters, copies of bank statements etc. In these documents the evidence about these 10 companies were also available. Hence the CIT(A) held that by providing these documents the assessee discharged its onus to prove the genuineness of these share

Great Wall Marketing (P)Ltd. A.Yr.2002-03 holders. It was not justified on the part of the AO to reject the genuineness of these share holders on the ground that-notices to them were not served. He also held that the assessee has provided the names, addresses and confirmations from these companies, the copies of their certificates of incorporation and PAN numbers. In many of the cases the copies of the returns of income, balance sheet, P& L account, and bank statement have also been furnished. In view of these evidences the existence of these parties cannot be refuted.” For the reasons given as above, the CIT(A) held that the share application money received from the above discussed 19 parties cannot be treated as unexplained in the hands of the assessee u/s 68 of the 1. T. Act. Hence, the addition of Rs. 1,02,80,000 made by the AO on this account was deleted by the CIT(A).

5. Aggrieved by the order of the CIT(A) the revenue has preferred the second appeal before the Tribunal.

raised by the revenue read as follows :-

1. That the Ld. CIT(A)-VI, Kolkata has erred in law as well as on the facts by deleting the disallowance made by the A.O. on account of cash credit u/s 68 of Rs.1,02,50,000/- in spite of the fact that the parties (shareholders) could not be found and their creditworthiness and genuineness could not be established by the assessee.”

7. Before us the learned counsel for the assessee filed a petition under Rule 27 of ITAT Rules. As per Rule 27 of ITAT Rules 1963, a respondent in an appeal, though he may not have appealed, may support the order appealed against any of the grounds raised against him. Since the issue with regard to the validity of initiation of proceedings u/s 148 of the Act was decided against the asessee, the assessee without filing a cross objection has sought to challenge the order of CIT(A) upholding the validity of initiation of re-assessment proceedings u/s 148 of the Act. The application under Rule 27 has therefore to be decided.

Great Wall Marketing (P)Ltd. A.Yr.2002-03 8.1.We have considered the submissions of the learned counsel for the assessee. As far as the validity of initiation of re-assessment proceedings are concerned the reasons recorded by the AO for initiating proceedings u/s 148 are as follows :-

“No.DCIT/Cir-6/reasons for reopening/09-10 Dated 22/04/2009 To The Principal Officer Greatwall Marketing (P) Ltd. clo Sri. S.M. Daga 11, Clive Row, Room No. 2 .z-. Fir. Kolkata- 700001. Sir. Sub: Recorded Reasons for Reopening in the case of Greatwall Marketing (P) Ltd. for Asst. Yr. 02-03 Ref: Your letter dated 02/04/09 Please refer to the above. As per information received from investigation wing New Delhi the introduced share capital during the year. had been received from corporate bodies which are non existent and whose capacity to invest ( credit worthiness ) could not be established . Therefore I have reasons to believe that unexplained cash credit had been introduced in your books of accounts in the name of introduction of share capital and receipt of share application money. In absence of satisfactory identity and credit worthiness of the other parties. the entire introduced capital and share application money will be treated as your income for that year. I will therefore continue the proceedings for reassessment of your return u/s 147. Statutory notices u/s 143(2) and 142(1) are enclosed herewith. Yours faithfully. Sd/- ( Sanjay Mukherjee) DCIT /Cir-6/Kol “

8.2. The submissions of the learned counsel for the assessee before us was that the reasons recorded by the AO were mere information received from D.I.T.(Investigation), New Delhi. There was no independent application of mind by the AO based on which it can be said that he arrived at the satisfaction that the income of the assessee is chargeable to tax has escaped assessment. It was submitted that Great Wall Marketing (P)Ltd. A.Yr.2002-03 information received by the AO was vague and uncertain and cannot be construed to be sufficient and relevant material on the basis of which reasonable person can form belief regarding escapement of income. Reliance was placed by the learned counsel for the assessee on the decision of the Hon’ble Delhi High Court in the case of CIT vs Insceticides (India) Ltd 357 ITR 330 and CIT vs SFIL Stock Broking Ltd. 325 ITR 285 (Delhi). In both the aforesaid decisions the reasons recorded by the AO for initiating proceedings u/s 148 of the Act the Hon’ble Delhi High Court upheld the order of the Tribunal quashing the proceedings. Reliance was also placed on the decision of ITAT, Kolkata ‘C’ Bench in the case of M/s. Controlla Electrotech (P)Ltd vs DCIT in & 1444/Kol/2014 wherein on identical facts the Tribunal was pleased to quash the reassessment proceedings. On merits the learned counsel for the assessee relied on the order of CIT(A).

9.1. Even on merits we hold that the conclusion drawn by CIT(A) are justified and do not call for any interference. Accordingly the appeal of the revenue is dismissed.

Order pronounced in the court on 03.02.2016.