DCIT, CENTRAL CIRCLE- 28, NEW DELHI vs. PAM JEWELLERS PVT. LTD., NEW DELHI
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Income Tax Appellate Tribunal, DELHI BENCH ‘H’, NEW DELHI
Before: SHRI SAKTIJIT DEY, VICE- & DR. BRR KUMAR
This is an appeal by the Revenue against order dated
11.08.2021 of learned Commissioner of Income-tax (Appeals)-29, Delhi for the assessment year 2012-13.
Grounds raised by the Revenue are as under :
“1. That on the facts and in the circumstances of the case, the Ld.' CIT (A) has erred and on facts in deleting the addition of Rs. 6,70,00,000/- made u/s 68 of the I.T. Act by the AO ignoring the fact
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that assessee has failed to produce any concrete and additional/fresh evidences in support of its version. 2. That on the facts and in the circumstances of the case, Ld. CIT (A) has relied on the decision of Hon’ble ITAT in the case of M/s SRM Securities Pvt. Ltd. is not accepted by the department and the same is pending before the Hon’ble High Court of Delhi for adjudication. 3. That the order of the CIT (A) is perverse, erroneous and is not tenable on facts and in law. 4. That the grounds of appeal are without prejudice to each other. 5. That the appellant craves leave to add, amend, alter or forgo any ground (s) of appeal either before or at the time of hearing of the appeal.” 3. As could be seen from the grounds raised, the dispute is
confined to deletion of addition made under section 68 of the Income-
tax Act, 1961.
Briefly, the facts are, the assessee is a resident corporate entity.
In the assessment under dispute, the assessee filed its return of
income on 29.09.2012 declaring income of Rs.2,60,430/-. A search
and seizure operation was carried out in case of SRM group of
companies on 15.10.2013. Consequent upon the search and seizure
operation, assessee’s case was selected for scrutiny. In course of
assessment proceeding, the Assessing Officer observed that during
the search operation and post search enquiries in case of SRM group,
it was found that huge unaccounted money of the group have been
introduced in the books of accounts of many companies of the group
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in the form of share capital with high premium during the financial year
2011-12 through large number of Delhi and Kolkata based companies.
He found that in financial year 2011-12, the assessee has received
share capital with huge premium aggregating to Rs.6.70 crores from
seven different companies. He, therefore, called upon the assessee to
explain the identity and creditworthiness of the investors as well as the
genuineness of the investments.
In response to the queries raised, the assessee filed certain
details and documents relating to the investors, such as, copy of
share application money, copy of Income-tax returns of the investors,
copy of PAN cards of the investors, copies of audited balance sheets
of the investors, copies of bank statements in case of some investors
etc. After perusing the details furnished by the assessee, the
Assessing Officer observed that the assessee did not furnish the
details in requisite proforma. Further, he observed that considering the
meagre income of the investors, their creditworthiness is doubtful. He,
therefore, called upon the assessee to produce the directors of the
investing companies. He also issued notices under section 133(6) of
the Act to investor companies seeking certain informations. As
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observed by the Assessing Officer, some of the notices issued under
section 133(6) were not served and returned back. Some notices,
though, were served, but no compliance was made. In some cases,
compliance was made. Thus, the Assessing Officer, ultimately,
concluded that the materials brought on record do not establish the
creditworthiness of the investors nor the genuineness of the
transactions. Therefore, he proceeded to complete the assessment by
treating the entire investment of Rs.6.7 crores as unexplained cash
credits under section 68 of the Act and added back to the income of
the assessee.
The assessee contested the aforesaid addition before the first
appellate authority, inter alia, on the ground that while framing the
assessment, the Assessing Officer has not complied with the rules of
natural justice. It was submitted by the assessee that neither the result
of enquiry conducted through notices issued under section 133(6) of
the Act were confronted to the assessee nor the adverse materials
brought on record, such as, statements recorded from the directors of
investing companies and other parties were confronted to the
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assessee. Learned Commissioner (Appeals), however, did not find
merit in the submissions of the assessee and confirmed the addition.
Being aggrieved, the assessee went in further appeal before the
Tribunal. Accepting assessee’s claim that rules of natural justice were
not complied with, the Tribunal restored the issue back to the
Assessing Officer for fresh adjudication after providing due and
reasonable opportunity of being heard to the assessee. While
completing the assessment in pursuance to the directions of the
Tribunal, the Assessing Officer again repeated the addition.
Against the assessment order so passed, the assessee
preferred appeal before learned first appellate authority. After
considering the submissions of the assessee and verifying the
materials on record, learned Commissioner (Appeals) having found
that the Assessing Officer has completed the assessment without
following the directions of the Tribunal, in the sense, that neither the
adverse materials were confronted to the assessee nor the result of
enquiry was provided, held that the addition made is unsustainable.
So far as the merits of the issue is concerned, learned Commissioner
(Appeals) having found that in case of a sister concern, M/s. SRM
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Securities Pvt. Ltd., the Tribunal has deleted similar addition, followed
the decision therein and deleted the addition.
Before us, learned Departmental Representative submitted that
in the original assessment proceedings, the assessee had failed to
furnish credible evidence to prove the creditworthiness of the
investors and genuineness of the transactions. She submitted, after
conducting thorough enquiry, the Assessing Officer has concluded
that the investments by way of share capital and share premium
credited to the books of accounts of the assessee are in the nature of
cash credits and accordingly made addition. She submitted, though
original assessment order was set aside by the Tribunal, however, in
the fresh assessment proceeding, despite the Assessing Officer
calling upon the assessee to furnish supporting evidence to prove
creditworthiness of the creditors and genuineness of the transactions,
the assessee failed to furnish any fresh evidence except whatever
was furnished in course of original assessment proceeding. Thus, she
submitted, the assessee having failed to establish creditworthiness of
the creditors and genuineness of the transaction, the Assessing
Officer was justified in making addition under section 68 of the Act.
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She submitted, learned first appellate authority has deleted the
addition merely on the ground that the Assessing Officer did not carry
out any fresh enquiry/investigation and did not confront the adverse
materials brought on record at the time of original assessment
proceeding. She submitted, the initial burden to prove the amounts
credited in the books of account is wholly on the assessee. She
submitted, the assessee has failed to discharge such initial burden
both in course of original assessment proceedings as well as in
assessment proceeding in pursuance to the directions of the Tribunal.
She submitted, if the first appellate authority was of the view that the
Assessing Officer has failed to make proper enquiry, he was under an
obligation to conduct necessary enquiries to get to a logical end.
Thus, she submitted, the first appellate authority having failed to
exercise his powers in conducting enquiries, the order deserves to be
set aside and the issue has to be restored back to the Assessing
Officer for making fresh assessment. In support of such contention,
learned Departmental Representative relied upon the decision of the
Hon’ble jurisdictional High Court in case of CIT vs. M/s. Jan Sampark
Advertising and Marketing (P) Ltd. (ITA No. 525/2014) judgment dated
11.03.2015.
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In reply, learned counsel for the assessee submitted, since, in
the original assessment proceedings, the Assessing Officer had
grossly violated the principles of natural justice by not confronting the
adverse material and information brought on record to the assessee,
the Tribunal had restored the issue back to him with specific direction
to confront the adverse materials to the assessee and decide the
issue afresh after providing adequate opportunity. He submitted, in the
fresh assessment proceedings, in pursuance to the directions of the
Tribunal, the Assessing Officer has done nothing much except
reiterating the observations made in the original assessment order. He
submitted, not only in course of original assessment proceedings, but
in course of fresh assessment proceeding as well, the assessee has
discharged the initial burden cast upon it by furnishing credible
documentary evidence to prove the three ingredients, such as, identity
and creditworthiness of the creditors and genuineness of the
transactions. Whereas, the Assessing Officer in spite of having in his
possession the documentary evidences furnished by the assessee,
has not conducted any further enquiry to get to the logical end. He
submitted, in course of proceeding before the first appellate authority
in the second round, the Assessing Officer was again given an
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opportunity to make enquiry based on evidences available on record
and submit a report. He submitted, in spite of the opportunity given,
the Assessing Officer failed to conduct any enquiry. Thus, he
submitted, in the given circumstances, learned first appellate authority
was justified in deleting the addition. More so, when he found that in
case of another group company, M/s. SRM Securities Pvt. Ltd., on
identical set of facts and circumstances, the addition made under
section 68 was deleted by the Tribunal. Thus, he submitted, the order
passed by the first appellate authority should be confirmed.
We have considered rival submissions and perused materials on
record. We have also applied our mind to the judicial precedent cited
before us. Undisputedly, based on information/material received in
course of a search and seizure operation conducted in case of SRM
Group of companies, it was found that SRM group through various
group entities was introducing unaccounted money to its books of
account through various entities based in Delhi and Kolkata. In
respect of investments received by the assessee towards share
capital and share premium, the Assessing Officer initiated assessment
proceedings in case of the assessee and has called upon the
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assessee to prove the genuineness of such investment. The assessee
on its part has furnished various documentary evidences to establish
identity and creditworthiness of the investors and genuineness of the
transactions.
As discussed earlier, the assessee has furnished copies of
share applications, PAN cards, Income-tax returns, audited balance
sheets, bank statements of the investors. However, based on certain
adverse material collected through search and seizure operation and
post search enquiry, the Assessing Officer has rejected the evidences
furnished by the assessee and treated the investments as
unexplained cash credits under section 68 of the Act. When the matter
went upto the Tribunal, the assessee pleaded that neither adverse
materials such as statements recorded from the directors of the
investor companies and other entities as well as the information
collected through notices under section 133(6) of the Act were
confronted to the assessee nor proper opportunity was given to rebut
the contents of adverse materials. Considering the aforesaid factual
position, which remained uncontroverted, the Tribunal restored the
issue back to the Assessing Officer for fresh adjudication after
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complying with the requirement of Rules of Natural Justice. However,
on a reading of the fresh assessment order passed in pursuance to
the directions of the Tribunal, it is evident that the Assessing Officer
has not complied with the directions of the Tribunal in letter and spirit.
Pertinently, though in the body of assessment order, the Assessing
Officer has reproduced the specific directions of the Tribunal and has
also stated that the Tribunal has remanded the issue back to the file of
Assessing Officer on the ground that the assessment order does not
mention whether outcome of the notices under section 133(6) was
ever confronted to the assessee or the copies of statements were
supplied nor was the assessment record produced before the Bench,
however, he did not comply with the specific directions.
It is also relevant to observe, in paragraph No. 6 of the
assessment order, the Assessing Officer himself has noted that in
course of fresh assessment proceedings, the assessee had again
requested for copies of statements/enquiries and adverse materials.
However, the Assessing Officer has brushed aside such request of
the assessee by merely stating that such argument of the assessee is
not relevant, as the main reason for addition was assessee’s failure to
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satisfactorily prove the identity and creditworthiness of the alleged
share holders and the genuineness of the transactions. He also
declined to share the information of any enquiry conducted through
notices issued under section 133(6) of the Act with the assessee. This
act on the part of the Assessing Officer, in our view, is in clear
violation of the directions of the Tribunal.
It is to be noted that while considering assessee’s appeal arising
out of the original assessment proceedings, the Tribunal in ITA No.
6191/Del/2017 has passed order on 22.01.2018 restoring the issue to
the Assessing Officer. The reason being, before the Tribunal, the
assessee specifically pleaded that the assessment order was passed
without allowing adequate opportunity and without confronting the
adverse materials collected behind the back of the assessee. It was
also pleaded that the result of discrete enquiry conducted by the
Assessing Officer was never confronted to the assessee. The Tribunal
has also noted the fact that though the Bench wanted to verify the
relevant facts by examining the assessment record, however, learned
Departmental Representative expressed his inability to produce the
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assessment record, which compelled the Bench to restore the issue
back to the Assessing Officer with specific directions.
It is also relevant to observe that it is not a case where in the
second round, learned first appellate authority has not conducted any
enquiry. On the contrary, learned first appellate authority had again
called upon the Assessing Officer to verify the evidences furnished by
the assessee and furnish a remand report. However, on a perusal of
the remand report dated 21.02.2020 furnished by the Assessing
Officer, a copy of which is placed in the paper book, it is observed,
instead of doing any fresh enquiry, the Assessing Officer has called
upon the assessee to furnish further information. Thus, in our view,
the Assessing Officer has acted in a totally irresponsible manner in
complying with the directions of the Tribunal. Therefore, in our view,
case law cited by learned Departmental Representative will not fit into
the facts of the present appeal, hence, would be of no help to the
Revenue.
As regards the submission of learned Departmental
Representative that the issue may be restored back to the Assessing
Officer for conducting proper enquiry, we are unable to accept such
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submission. While deciding assessee’s appeal arising out of original
assessment order, the Tribunal has clearly expressed its helplessness
in deciding the issue on merits considering the fact that the Revenue
expressed its inability to furnish the assessment records for enabling
the Tribunal to examine the facts as a final fact finding authority. Thus,
when the Revenue has failed to furnish even the assessment records,
in our view, no fruitful result will come out in restoring back the issue
and giving a third inning to the Assessing Officer. Thus, given the
factual position emerging on record, in our view, the decision of
learned Commissioner (Appeals) in deleting the addition cannot be
interfered with. Accordingly, we uphold the order of learned first
appellate authority by dismissing the grounds raised.
In the result, appeal is dismissed.
Order pronounced in the open court on 31/10/2023. Sd/- Sd/- (DR. B.R.R. KUMAR) (SAKTIJIT DEY) ACCOUNTANT MEMBER VICE-PRESIDENT
Dated: 31.10.2023 *aks/-
