M/s. Fine Finance and Leasing (P) Ltd., New Delhi v. ITO, New Delhi

CO 175/DEL/2010 | 2001-2002
Pronouncement Date: 15-07-2011 | Result: Dismissed

Appeal Details

RSA Number 17520123 RSA 2010
Assessee PAN AAACF2029H
Bench Delhi
Appeal Number CO 175/DEL/2010
Duration Of Justice 1 year(s) 13 day(s)
Appellant M/s. Fine Finance and Leasing (P) Ltd., New Delhi
Respondent ITO, New Delhi
Appeal Type Cross Objection
Pronouncement Date 15-07-2011
Appeal Filed By Assessee
Order Result Dismissed
Bench Allotted B
Tribunal Order Date 15-07-2011
Date Of Final Hearing 04-10-2010
Next Hearing Date 04-10-2010
Assessment Year 2001-2002
Appeal Filed On 02-07-2010
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL [ DELHI BENCH B DELHI ] BEFORE SHRI R. P. TOLANI JM & SHRI K. D. R ANJAN AM I. T. APPEAL NO. 1578 (DEL) OF 2010. ASSESSMENT YEAR : 200102. THE INCOME-TAX OFFICER M/S. FINE FINANCE AND LEASING P. LTD. W A R D : 11 (2) VS. 301 DHAKA CHAMBER N E W D E L H I. 2068/38 NAIWALA KAROL BAGH N E W D E L H I 110 005. P A N / G I R NO. AAA CF 2029 H. A N D C. O. NO. 175 (DEL) OF 2010. I. T. APPEAL NO. 1578 (DEL) OF 2010. ASSESSMENT YEAR : 200102. M/S. FINE FINANCE AND LEASING P. LTD. THE INC OME-TAX OFFICER 301 DHAKA CHAMBER VS. W A R D : 11 (2) 2068/38 NAIWALA KAROL BAGH N E W D E L H I. P A N / G I R NO. AAA CF 2029 H. ( APPELLANTS ) ( RESPONDENTS ) ASSESSEE BY : SHRI MANOJ KUMAR C. A.; DEPARTMENT BY : SHRI MANISH GUPTA SR. D. R .; O R D E R. PER K. D. RANJAN AM : THIS APPEAL BY THE REVENUE AND THE CROSS OBJECTION BY THE ASSESSEE FOR ASSESSMENT YEAR 2001-02 ARISE OUT OF THE ORDER OF THE LD. CIT (APPE ALS)XIII NEW DELHI. THESE APPEALS WERE 2 I. T. APPEAL NO. 1578 (DEL) OF 2010. A N D C. O. NO. 175 (DEL) OF 2010. HEARD TOGETHER AND FOR THE SAKE OF CONVENIENCE ARE DISPOSED OF BY THIS CONSOLIDATED ORDER. FIRST WE TAKE UP THE APPEAL FILED BY THE REVENUE. 2. THE GROUNDS OF APPEAL RAISED BY THE REVENUE REA D AS UNDER:- 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW THE ORDER OF THE LD. CIT (A) IS WRONG PERVERSE ILLEGAL AND AGAINST THE PROVISIONS OF LAW WHICH IS LIABLE TO BE SET ASIDE; 2. ON THE FACTS AND CIRCUMSTANCES OF THE CASE THE LD. CIT (A) HAS ERRED IN DELETING THE ADDITION OF RS.20.38 LAKHS MADE BY THE AO TO THE INCOME OF THE ASSESSEE ON ACCOUNT OF UNEXPLAINED CASH CREDIT UNDE R SECTION 68 OF I. T. ACT; 3. ON THE FACTS AND CIRCUMSTANCES OF THE CASE THE LD. CIT (A) HAS ERRED IN DELETING THE ADDITIONS EVEN THOUGH M/S. IRIS INFRAS TRUCTURE P. LTD. HAS BEEN ESTABLISHED TO BE AN ENTRY PROVIDER BELONGING TO TH E PADMINI GROUP AND WAS ENGAGED IN THE ACTIVITY OF GIVING ACCOMMODATION ENT RIES IN LIEU CASH GIVEN BYTHE BENEFICIARIES; 4. ON THE FACTS AND CIRCUMSTANCES OF THE CASE THE LD. CIT (A) HAS ERRED IN NOT CONSIDERING THE FACT THAT THE ASSESSEE COULD NOT PR ODUCE THE PURCHASER OF SHARES FROM IT BUT MERELY FILED OLD CONFIRMATIONS OR BILLS ISSUED BY THIS PARTY (M/S. IRIS INFRASTRUCTURAL P. LTD.) IN SUPPORT OF THE SHARE TR ANSACTIONS; 5. ON THE FACTS AND CIRCUMSTANCES OF THE CASE THE LD. CIT (A) HAS ERRED IN NOT CONSIDERING THE FACT THAT THE ASSESSEE HAD ALLEGEDL Y SOLD THE SHARES OF A LISTED COMPANY OUTSIDE THE FLOOR OF THE STOCK EXCHANGE TO GIVE THE TRANSACTION OF ACCOMMODATION ENTRY THE COLOUR OF GENUINENESS AND A S HELD BY THE SUPREME COURT IN THE CASE OF MC DOWELL & CO. LTD. VS. CTO ( 1985) 154 ITR 148 COLOURABLE DEVICES CANNOT BE PART OF TAX PLANNING. 3. THE ONLY ISSUE FOR CONSIDERATION IN REVENUES AP PEAL RELATES TO DELETING THE ADDITION OF RS.20.38 LAKHS MADE BY THE ASSESSING OFFICER ON ACC OUNT OF UN-EXPLAINED CASH CREDIT UNDER SECTION 68 OF THE ACT. THE FACTS OF THE CASE STATED IN BRIEF ARE THAT THE RETURN OF INCOME FOR ASSESSMENT YEAR 2001-02 WAS FILED BY THE ASSESSEE D ECLARING INCOME OF THE ASSESSEE AT RS1 529/-. THE RETURN OF INCOME WAS PROCESSED UNDER SECTION 14 3(1) OF THE ACT. LATER ON INFORMATION WAS RECEIVED FROM THE INVESTIGATION WING OF THE DEPARTM ENT THAT THE ASSESSEE HAD RECEIVED ACCOMMODATION ENTRIES FROM ENTRY OPERATORS AFTER PA YING ITS UNACCOUNTED CASH. ASA PER THE 3 I. T. APPEAL NO. 1578 (DEL) OF 2010. A N D C. O. NO. 175 (DEL) OF 2010. INFORMATION THE ASSESSEE RECEIVED RS.10 01 000/- VI DE CHEQUE NO. 326905 DATED 6/04/2000 AND RS.10 01 000/- VIDE CHEQUE NO. 326909 DATED 10/04/2 000 FROM THE BANK ACCOUNT OF M/S. IRISH INFRASTRUCTURE P. LTD. THE NAME OF THE ASSESSEE FIG URED AS ONE OF THE BENEFICIARIES OF THESE ALLEGED BOGUS TRANSACTIONS GIVEN BY THE DIRECTORATE OF INVESTIGATION. ON THE BASIS OF THIS INFORMATION THE ASSESSING OFFICER RECORDED REASONS TO BELIEVE THAT THE TRANSACTIONS INVOLVING RS.20 02 000/- CONSTITUTED FRESH INFORMATION AND TH E INCOME OF RS.20 02 000/- HAD ESCAPED ASSESSMENT. THE AO ISSUED NOTICE UNDER SECTION 148 ON 31 ST MARCH 2008 AFTER RECORDING REASONS WHICH WAS SERVED ON THE ASSESSEE WITHIN THE STATUTO RY TIME PERIOD. 4. THE ASSESSEE DID NOT FILE RETURN OF INCOME IN RE SPONSE TO NOTICE ISSUED UNDER SECTION 148 OF THE ACT. THEREAFTER THE ASSESSING OFFICER VIDE L ETTER DATED 22/09/2008 ASKED THE ASSESSEE TO FURNISH ITS RETURN AND SUBMISSIONS IN THE MATTER. THE ASSESSEE FILED LETTER DATED 10/10/2008 REQUESTING THE ASSESSING OFFICER TO TREAT THE RETUR N FILED EARLIER AS ONE FILED UNDER SECTION 148 OF THE ACT. THE ASSESSEE ALSO ASKED FOR REASONS RECOR DED FOR REOPENING OF THE ASSESSMENT WHICH WERE HANDED OVER TO THE AUTHORIZED REPRESENTATIVE O F THE ASSESSEE. 5. DURING THE COURSE OF ASSESSMENT PROCEEDINGS THE ASSESSEE STATED THAT IT WAS ENGAGED IN THE BUSINESS OF SALE AND PURCHASE OF SHARES. THE AS SESSEE SOLD 17 500 SHARES OF PADMINI POLYMERS TO M/S. IRISH INFRASTRUCTURE P. LTD. AGAIN ST WHICH PAYMENT OF RS.20 38 070/- HAD BEEN RECEIVED. THE ASSESSEE FILED DETAILS OF SHARES SOL D COPIES OF PURCHASE AND SALE BILLS. THIS CONTENTION OF THE ASSESSEE WAS REJECTED BY THE ASSE SSING OFFICER ON THE GROUND THAT THE ASSESSEE WAS ENGAGED IN THE ACTIVITY OF PROVIDING AND RECEIV ING ACCOMMODATION ENTRIES AND THE NAME OF M/S. IRISH INFRASTRUCTURE P. LTD. FIGURED PROMINENT LY IN THE LIST OF THE DIRECTORATE OF INVESTIGATION. THERE WAS A SYSTEMIC PLAN IN WHICH CASH WAS GIVEN T O THE ENTRY OPERATOR WHO IN TURN ISSUED CHEQUES OF EQUAL AMOUNTS. THE ASSESSING OFFICER FUR THER OBSERVED THAT SALE AND PURCHASE OF SHARES OF PADMINI POLYMERS LTD. TOOK PLACE OUTSIDE THE FLOOR OF THE STOCK EXCHANGE EVEN THOUGH THE SHARES TRADED WERE OF LISTED COMPANY. AS PER TH E INFORMATION RECEIVED FROM DIRECTORATE OF INVESTIGATION M/S. IRISH INFRASTRUCTURE P. LTD. WAS AN ENTRY PROVIDER ASSOCIATED WITH PADMINI 4 I. T. APPEAL NO. 1578 (DEL) OF 2010. A N D C. O. NO. 175 (DEL) OF 2010. GROUP. HE ALSO NOTED THAT PRODUCTION OF CONFIRMATOR Y LETTERS SUPPORTING THE EXISTENCE OF SHARES WOULD NOT BE SUFFICIENT WHERE THERE WAS EVIDENCE TO ESTABLISH THAT THE STATE OF THINGS APPARENT FROM THE DOCUMENTS PRODUCED WAS A MERE FAADE PUT O N TO CONCEAL TRUE NATURE OF FACTS. THE TRANSACTIONS UNDERTAKEN OUTSIDE THE STOCK EXCHANGE WERE FOR FACILITATING THE ARRANGEMENT BETWEEN THE TWO PARTIES. SINCE THE GENUINENESS OF THE TRAN SACTIONS WAS NOT ESTABLISHED THE ASSESSING OFFICER APPLIED THE PROVISIONS OF SECTION 68 AND AD DED THE AMOUNT OF RS.20 38 750/- TO THE RETURNED INCOME. 6. ON APPEAL THE ASSESSING OFFICER CHALLENGED THE A DDITION ON MERITS AS WELL AS ASSUMPTION OF JURISDICTION UNDER SECTION 147 OF THE ACT. 7. BEFORE THE LD. CIT (APPEALS) IT WAS SUBMITTED BY THE ASSESSEE THAT THE ASSESSEE PURCHASED 17 500 SHARES OF PADMINI POLYMERS LTD. ON 17 TH AUGUST 1999 FOR A SUM OF RS.1 92 500/- FROM CHARUWALA EXPORTS PVT. LTD. THE ASSESSEE SOLD THES E SHARES OF PADMINI POLYMERS LTD. HAVING DISTINCTIVE NUMBER 43348954 TO 43366453 TO M/S. IRI SH INFRASTRUCTURE LTD. VIDE BILL / CREDIT NOTE NO. PURCHASE / FINE/01 ON 14.01.2000 AT THE RATE O F RS.116.50 FOR RS.20 38 750/-. THE SALE WAS DULY REFLECTED IN THE BOOKS OF ACCOUNTS MAINTAINED FOR FINANCIAL YEAR 1999-2000 AND PROFIT WAS DULY DECLARED IN THE RETURN OF INCOME FILED BY THE ASSESSEE. IT WAS ALSO SUBMITTED THAT THE ASSESSEE HAD PAID THE PURCHASE PRICE TO M/S. CHARUW ALA EXPORTS PVT. LTD. AT RS.1 92 500/- VIDE CHEQUE NO. 449193 DRAWN ON BANK OF PUNJAB KAROL BA GH NEW DELHI ON 26/11/2000. THE ASSESSEE FILED COPIES OF PURCHASE BILLS CONFIRMATI ONS FROM IRISH INFRASTRUCTURE PVT. LTD. AND DELIVERY NOTES OF SHARES OF PADMINI POLYMERS LTD. T O M/S. IRISH INFRASTRUCTURE LTD. IT WAS ALSO SUBMITTED THAT DURING THE FINANCIAL YEAR 2000-01 RE LEVANT TO ASSESSMENT YEAR 2001-02 THE ASSESSEE HAD RECEIVED PAYMENTS OF RS.10 00 000/- EA CH ON 6/4/2000 AND 10/4/2000. THE BALANCE AMOUNT OF RS.38 750/- WAS RECEIVED ON 23 RD NOVEMBER 2000. THEREFORE DURING THE YEAR UNDER CONSIDERATION THE ASSESSEE HAD RECEIVED ONLY THE SA LE PROCEEDS OF THE SHARES SOLD IN FINANCIAL YEAR 1999-2000. HENCE NO ADDITION COULD BE MADE IN THE HANDS OF THE ASSESSEE. IT WAS ALSO SUBMITTED THAT THE TRANSACTIONS INVOLVING RECEIPT O F OUTSTANDING BALANCE OF LAST YEAR FROM IRISH 5 I. T. APPEAL NO. 1578 (DEL) OF 2010. A N D C. O. NO. 175 (DEL) OF 2010. INFRASTRUCTURE LTD. FOR WAS NEITHER SHAM NOR ACCOMM ODATION ENTRY AS ALLEGED BY THE ASSESSING OFFICER BUT A BONAFIDE ONE. THE AO HAD NEITHER GI VEN ANY DOCUMENTARY EVIDENCE TO PROVE THAT IT WAS AN ACCOMMODATION ENTRY NOR COPY OF STATEMENT RE CORDED AT THE BACK OF THE ASSESSEE HAD BEEN CONFRONTED TO THE ASSESSEE DURING ASSESSMENT PROCEE DINGS. FOR THE TRANSACTIONS WITH M/S. IRISH INFRASTRUCTURE PVT. LTD. BURDEN WAS ON THE DEPARTME NT TO PROVE THE SAME BY PLACING CREDIBLE COGENT AND LEGAL EVIDENCE DIFFERENT FROM SUSPICION CONJECTURES AND SURMISES. IT WAS ALSO SUBMITTED THAT SINCE THE ASSESSEE HAD FILED REQUISI TE DOCUMENTS IN SUPPORT OF ITS VERSION AND DISCHARGED ITS ONUS OF GENUINENESS OF THE TRANSACTI ON AND THEREFORE NO ADDITION COULD BE MADE. THEREFORE IT WAS PLEADED THAT THE SO-CALLED INVEST IGATION REPORT OF THE INVESTIGATION WING OF THE DEPARTMENT WAS BASELESS ARBITRARY AND HIGHLY GENER ALIZED. IT DID NOT RELATE TO THE ASSESSEE AND THEREFORE IT SHOULD NOT INFLUENCE THE DECISION OF LD. COMMISSIONER. IT WAS THEREFORE PLEADED THAT THE ASSESSMENT ORDER FRAMED BY THE AO ONLY ON THE BASIS OF INFORMATION RECEIVED FROM INVESTIGATION WING OF THE DEPARTMENT WITHOUT MAKING INVESTIGATION WOULD NOT REPRESENT ASSESSEES UNDISCLOSED INCOME. NO ADVERSE MATERIAL WAS BROUGHT ON RECORD BY THE AO TO ESTABLISH THAT THE SALE CONSIDERATION ON SALE OF SH ARES RECEIVED BY THE ASSESSEE REPRESENTED ITS UNDISCLOSED INCOME. THE ASSESSEE PLACED RELIANCE O N SEVERAL DECISIONS IN SUPPORT OF HIS CONTENTION. 8. THE LD. CIT (APPEALS) AFTER GOING THROUGH THE FACTS AND JUDICIAL PRONOUNCEMENTS HELD THAT THE ASSESSEE DURING THE COURSE OF ASSESSMENT P ROCEEDINGS HAD DISCHARGED THE INITIAL ONUS OF ESTABLISHING THE BONAFIDE OF THE TRANSACTION AND TH E AO WAS NOT JUSTIFIED IN IGNORING VARIOUS EVIDENCES PROVIDED TO HIM BY THE ASSESSEE. THE ASS ESSMENT HAS BEEN FRAMED BY THE ASSESSING OFFICER ON THE BASIS OF INFORMATION RECEIVED FROM I NVESTIGATION WING OF THE DEPARTMENT WITHOUT MAKING ANY FURTHER INVESTIGATION. NOTHING ADVERSE MATERIAL WAS BROUGHT ON RECORD BY THE AO TO ESTABLISH THAT THE SALE CONSIDERATION ON SALE OF SH ARES RECEIVED BY THE ASSESSEE REPRESENTED ITS OWN UNDISCLOSED INCOME. THE LD. CIT (A) FURTHER NO TED THAT THE AO IN ASSESSMENT ORDER HAS OBSERVED THAT THE ACCOUNT FROM WHICH TRANSFER WAS R ECEIVED HUGE SUM OF CASH WAS DEPOSITED AT VARIOUS TIME AND PAYMENTS WERE RECEIVED FROM TRANSF ER ENTRIES FROM ACCOUNTS IN WHICH CASH WAS DEPOSITED. HOWEVER LD. CIT (A) OBSERVED THAT IT IS A SETTLED LAW THAT SOURCE OF THE SOURCE COULD 6 I. T. APPEAL NO. 1578 (DEL) OF 2010. A N D C. O. NO. 175 (DEL) OF 2010. NOT BE ENQUIRED. AS REGARDS APPLICABILITY OF DECIS ION OF HONBLE SUPREME COURT IN THE CASE OF MC DOWELL & CO. LTD. VS. CTO 115 ITR 148 (SC) WHERE IN IT HAS BEEN HELD THAT THE TAX PLANNING MAY BE LEGITIMATE PROVIDED IT IS WITHIN THE FRAME-W ORK OF LAW ; COLOURABLE DEVICES CANNOT BE PART OF THE TAX PLANNING AND IT IS WRONG TO ENTERTAIN TH E BELIEF THAT IT IS A HONOURABLE TO AVOID THE PAYMENT OF TAX BY RESORTING TO DUBIOUS METHOD. THE LD. CIT (A) IN THE ABSENCE OF ANY CLINCHING EVIDENCE TO SUPPORT THE DECISION TAKEN BY HIM OBS ERVED THAT RATIO OF THE JUDGEMENT IN THE CASE OF MC DOWELL LTD. WAS NOT APPLICABLE. HE ACCORDING LY HELD THAT THE ASSESSEE HAD PROVIDED EVIDENCES TO SUBSTANTIATE THE TRANSACTION REGARDING SALE OF SHARES AND CONSIDERATION RECEIVED WAS A GENUINE TRANSACTION AND THE SAME WAS NOT ACCO MMODATION ENTRY. THE AO HAD NOT COLLECTED ANY EVIDENCE WHICH COULD PROVE OTHERWISE. HE ACCORDINGLY DELETED THE ADDITION OF RS.20 38 750/-. 9. BEFORE US THE LD. SR. DR SUBMITTED THAT IT IS A CASE OF ACCOMMODATION ENTRY WHICH IS EVIDENT FROM THE ASSESSMENT ORDER. IT WAS ALSO SUB MITTED THAT THE LD. CIT (A) HAS DELETED THE ADDITION MERELY ON THE BASIS OF SUBMISSIONS MADE BY THE ASSESSEE. HE HAD NOT EXAMINED THE CASE WITH REFERENCE TO THE RECEIPT OF MONEY. THEREFORE THE ORDER PASSED BY THE LD. CIT (A) DESERVES TO BE SET ASIDE. THE ASSESSEE HAD SOLD SHARES OF P ADMINI POLYMERS LTD. A LISTED COMPANY OF THE STOCK EXCHANGE. HE FURTHER SUBMITTED THAT NEITHER CHARUWALA EXPORTS PVT. LTD. NOR IRISH INFRASTRUCTURE LTD. ARE BROKERS. THEREFORE THE GE NUINENESS OF THE TRANSACTION OF PURCHASE OF 17050 SHARES FROM CHARUWALA EXPORTS AND SALE OF THE SAME TO IRISH INFRASTRUCTURE PVT. LTD. IS PROVED. THEREFORE THE GENUINENESS OF THE TRANSACT ION IS NOT ESTABLISHED. HENCE THE LD. CIT (A) IS NOT JUSTIFIED IN DELETING THE ADDITION. 10. ON THE OTHER HAND THE LD. AR OF THE ASSESSEE S UBMITTED THAT IT IS NOT A CASE OF ACCOMMODATION ENTRIES BUT A REALIZATION OF SALE PR OCEEDS OF SHARES SOLD ON 14/01/2000. THE ASSESSEE HAD RECEIVED SALE PROCEEDS OF 17 500 SHARE S SOLD TO IRISH INFRASTRUCTURE PVT. LTD. RS.10 LAKHS WAS RECEIVED ON 6 TH APRIL 2000 AND ANOTHER RS.10 LAKHS ON 10/04/2000. THE BALANCE AMOUNT OF RS.38 750/- WAS RECEIVED ON 23 RD NOVEMBER 2000. THE ASSESSEE HAD FILED 7 I. T. APPEAL NO. 1578 (DEL) OF 2010. A N D C. O. NO. 175 (DEL) OF 2010. CONFIRMATIONS BOTH FROM CHARUWALA EXPORTS AS WELL AS IRISH INFRASTRUCTURE PVT. LTD. IN SUPPORT OF CONTENTION THAT TRANSACTIONS ARE PURCHASE AND SALE OF SHARES. THEREFORE THE LD. CIT (A) WAS JUSTIFIED IN DELETING THE ADDITION. 11. SUBSEQUENTLY THE CASE WAS FIXED FOR CLARIFICA TION ON 21/01/2011. DURING THE COURSE OF HEARING FIXED FOR CLARIFICATION THE LD. AR OF THE ASSESSEE WAS ASKED TO EXPLAIN THE SALE OF SHARES OF 17 500/- SHARES OF PADMINI POLYMERS IN THE PROFI T AND LOSS ACCOUNT AS WELL AS BALANCE SHEET FOR THE YEAR ENDED 31 ST MARCH 2000 AND 31 ST MARCH 2001. THE LD. AR OF THE ASSESSEE COULD NOT SHOW THE PROFITS ARISING ON SALE OF SHARES FROM PRO FIT AND LOSS ACCOUNT. THE CROSS OBJECTIONS FILED BY THE ASSESSEE WAS HEARD ON 3.5.2011. 12. WE HAVE HEARD BOTH THE PARTIES. LD CIT(A) HAS DELETED THE ADDITION WITHOUT EXAMINATION OF THE FACTS EMERGING OUT OF PROFIT AND LOSS ACCOU NT AND BALANCE SHEET FOR THE RELEVANT PERIOD. HE HAS ALLOWED RELIEF RELYING ON JUDICIAL PRONOUNCEMEN TS. IT IS A SETTLED LAW THAT A DECISION APPLY TO THE FACTS A PARTICULAR CASE. HENCE WE ARE IN AGREEM ENT WITH THE DECISION OF LD. CIT(A) THAT THE TRANSACTION INVOLVING PURCHASE AND SALE OF SHARES W ERE GENUINE. WE HAVE GONE THROUGH THE PROFIT AND LOSS ACCOUNT AND THE BALANCE SHEET FOR T HE RELEVANT PERIOD. THE FIGURES FOR THE YEAR ENDING 31 ST MARCH 2000 ARE ALSO INCORPORATED IN THE PROFIT AN D LOSS ACCOUNT AND THE BALANCE SHEET FOR ASSESSMENT YEAR UNDER CONSIDERATION. THE AUTHORIZED CAPITAL OF THE ASSESSEE CONSISTS OF 10 000 EQUITY SHARES OF RS.10/- EACH AT RS.1 00 000 /-. THE ISSUED SUBSCRIBED AND PAID-UP CAPITAL AS ON 31 ST MARCH 2001 IS RS.200/- [20 EQUITY SHARES OF RS.10 /- FULLY PAID]. AS ON 31 ST MARCH 2000 ALSO THE AUTHORIZED CAPITAL IS OF RS.1 00 000/ - AND ISSUED CAPITAL IS OF RS.200/-. THE ASSESSEE IS CARRYING ON BUSINESS IN DEALING IN SHAR ES WITH PAID UP CAPITAL OF RS 200/- AND THAT TOO WITHOUT BEING A MEMBER OF STOCK EXCHANGE. THE ASS ESSEE HAD SHOWN SHARE APPLICATION MONEY RECEIVED AT RS.1 59 90 000/- AS ON 31 ST MARCH 2000 AND 31 ST MARCH 2001. THE AUTHORIZED SHARE CAPITAL OF THE ASSESSEE CANNOT BE INCREASED UNLESS THE REGISTRAR OF COMPANIES AUTHORIZES THE ASSESSEE TO RAISE FURTHER SHARE CAPITAL AND THE ASS ESSEE HAD TO PAY THE PRESCRIBED FEE TO THE REGISTRAR OF COMPANIES. IN THE ABSENCE OF INCREASE OF AUTHORIZED SHARE CAPITAL THE ASSESSEE IS NOT 8 I. T. APPEAL NO. 1578 (DEL) OF 2010. A N D C. O. NO. 175 (DEL) OF 2010. PERMITTED UNDER COMPANIES ACT TO RECEIVE SHARE APPL ICATION MONEY. BE IT AS IT MAY THE FACT IS THAT THE ASSESSEE HAD SHOWN TO HAVE RECEIVED SHARE APPLICATION MONEY OF RS.1 59 90 000/- AS ON 31 ST MARCH 2000 AND 31 ST MARCH 2001. SINCE THERE IS NO APPROVAL OF REGIST RAR OF COMPANIES TO INCREASE AUTHORIZED SHARE CAPITAL THE SHARE APPLIC ATION MONEY APPEARING IN THE BALANCE SHEET HAS TO BE TAKEN TOWARDS REMAINING 9 980 SHARES WHICH R EMAIN TO BE SUBSCRIBED. THE ASSESSEE HAS SHOWN THE RECEIPT OF SHARE APPLICATION MONEY OF RS .1 59 90 000/- AGAINST 9980 SHARE MEANING THEREBY THAT SHARES ARE TO BE ISSUED AT RS 1602.20 PER SHARE AS AGAINST FACE VALUE OF RS. 10/-. THUS THE ASSESSEE HAD RECEIVED SHARE APPLICATION MO NEY ON PREMIUM OF RS. 1 592.20 PER SHARE. WE HAVE ALSO GONE THROUGH THE PROFIT AND LOSS ACCOU NT FOR THE YEAR ENDED 31 ST MARCH 2001. THE INCOME FROM OPERATIONS HAD BEEN SHOWN AT RS.14 722/ - AS AGAINST RS.84 005/- FOR ASSESSMENT YEAR 2000-01. THE NET PROFIT FOR THE YEAR ENDED 31 ST MARCH 2000 IS RS.924/- AS AGAINST RS.3 946/- FOR THE YEAR ENDED ON 31 ST MARCH 2000. 12.1 FURTHER THE CURRENT LIABILITY SHOWS THE FOLLOW ING AS PER SCHEDULE 4 TO THE BALANCE SHEET:- 31 ST MARCH 2000 31 ST MARCH 2001 AUDIT FEE PAYABLE RS.7 750/- RS.7 750- /- ACCOUNTING CHARGERS PAYABLE RS.2 200/- RS. NIL. PROVISION FOR INCOME-TAX RS.4 490/- RS. 605/- 12.3 SCHEDULE 3 GIVES THE DETAILS OF LOANS AND ADVA NCES AND ARE REPRODUCED AS BELOW :- 31 ST MARCH 2000 31 ST MARCH 2001 LOANS RS.44 500/- RS.30 11 620 /- ADVANCE INCOME-TAX (1997-98) RS.1 000/- RS. NI L 9 I. T. APPEAL NO. 1578 (DEL) OF 2010. A N D C. O. NO. 175 (DEL) OF 2010. 12.3 SCHEDULE 2 GIVES THE DETAILS OF CURRENT ASSETS AND ARE REPRODUCED AS BELOW :- 31 ST MARCH 2000 31 ST MARCH 2001 CASH IN HAND. RS.23 347/- RS.19 031/- CASH AT BANK RS.3 915/- RS.3 988/- FROM ABOVE FINANCIAL BACK GROUND OF THE ASSESSEE I T UNBELIEVABLE THAT A COMPANY HAVING ISSUED CAPITAL OF RS 200/- AND HAVING MEAGER INCOME WILL R ECEIVE PREMIUM OF RS 1592.20 PER SHARE. 13. NOW COMING TO THE TRANSACTIONS OF PURCHASE AND SALE OF 17 500 SHARES OF PADMINI POLYMERS LTD. THROUGH CHARUWALA EXPORTS THE ASSESS EE HAS ALLEGED TO HAVE PURCHASED THESE SHARES ON 17 TH AUGUST 1999 FOR A SUM OF RS.1 92 000/-. NO PAYME NT WAS MADE BY THE ASSESSEE FOR PURCHASE OF THESE SHARES AT THE TIME OF PURCHAS E. THE LAST PAYMENT ON ACCOUNT OF ALLEGED SALE OF SHARES MADE ON 14 TH JANUARY 2000 WAS RECEIVED ON 25 TH NOVEMBER 2000 AT RS.38 750/-. M/S. CHARUWALA EXPORTS WAS PAID ON 28 TH NOVEMBER 2000 WHEN THE ASSESSEE ALLEGED TO HAVE R ECEIVED THE ENTIRE PAYMENTS FROM IRISH INFRASTRUCTURE PVT. LTD. THEREFORE AS ON 31 ST MARCH 2000 M/S. CHARUWALA EXPORTS PVT. LTD. SHOULD BE A CREDITOR TO THE ASSESSEE AND SHOULD HAVE BEEN SHOWN AS PAYABLE IN THE CURRENT LIABILITIES. AS ON 31 ST MARCH 2000 THE CURRENT LIABILITIES HAVE BEEN SHOW N AT RS.14 440/-(RS.7 750/- + RS.2 200/- + RS.4 490/- ) AS PER SCHEDULE 4 MENTIONED ABOVE. HAD THIS TRANSACTION BEEN GENUINE THE CURRENT LIABILIT IES PAYABLE BY THE ASSESSEE SHOULD HAVE INCLUDED THE PAYMENT TO BE MADE TO CHARUWALA EXPORTS AT RS.1 92 500/- BUT THIS LIABILITY IS CONSPICUOUSLY ABSENT IN THE BALANACE SHEET. SIMILARLY THE ALLEGE D SALES WERE MADE ON 14 TH JANUARY 2000 TO IRISH INFRASTRUCTURE PVT. LTD. THE PAYMENT OF RS.10 00 0 00/- EACH WAS RECEIVED ON 6 TH APRIL AND 10 TH APRIL 2000 AND THE BALANCE OF RS.38 750/- WAS RECE IVED ON 25 TH NOVEMBER 2000. THEREFORE IN THE BALANCE SHEET M/S. IRISH INFRASTRUCTURE PVT. L TD. SHOULD HAVE BEEN INCLUDED IN THE CURRENT ASSETS AS DEBTOR. THE CURRENT ASSETS AS ON 31 ST MARCH 2000 ARE AT RS.27 262/-( RS.23 347/- + RS.3 915/- ) AS PER SCHEDULE 2. M/S. IRISH INFRASTR UCTURE PVT. LTD. IS NOT SHOWN AS DEBTOR. THE 10 I. T. APPEAL NO. 1578 (DEL) OF 2010. A N D C. O. NO. 175 (DEL) OF 2010. ASSESSEE HAD SHOWN LOANS AND ADVANCES OF RS.30 12 6 20/- WHICH HAS COME OUT OF ALLEGED SHARE APPLICATION MONEY RECEIVED AND OUT OF BUSINESS TRAN SACTION OF THE ASSESSEE. FROM THESE FACTS IT IS EVIDENT THAT NEITHER M/S CHARUWALA EXPORTS PVT LTD HAS BEEN SHOWN AS CREDITOR ON ACCOUNT OF THE PURCHASE OF SHARES NOR M/S. IRISH INFRASTRUCTUR E PVT. LTD. AS DEBTOR ON ACCOUNT OF THE SALE OF SHARES IS REFLECTED IN THE BALANCE SHEET. 14. THE ASSESSING OFFICER WHILE ADDING THE AMOUN T HAS ALSO NOTED THAT THE PURCHASE AND SALE OF SHARES HAS BEEN MADE OUTSIDE THE FLOOR OF THE ST OCK EXCHANGE THOUGH THE SHARES WERE LISTED ON STOCK EXCHANGE. M/S. IRISH INFRASTRUCTURE PVT. LTD . AS PER INFORMATION RECEIVED FROM DIRECTORATE OF INVESTIGATION WAS AN ENTRY PROVIDER. THE THEORY OF THE ASSESSEE THAT THE AMOUNT WAS RECEIVED AS SALE PROCEEDS HAS BEEN DEMOLISHED FROM ITS AUDIT ED ACCOUNTS. ANOTHER IMPORTANT POINT TO BE NOTED IS THAT THE ASSESSEE HAD NOT PAID M/S. CHARUW ALA EXPORTS FOR PURCHASE OF 17 500 SHARES OF PADMINI POLYMERS ON 17/08/2000. THE PAYMENT HAS BE EN SHOWN AFTER RECEIPT OF THE PAYMENT FROM M/S. IRISH INFRASTRUCTURES PVT. LTD. 15. ANOTHER IMPORTANT POINT TO BE NOTED IS THAT AS PER THE BALANCE SHEET THE ASSESSEE HAD RECEIVED RS.1 59 27 000/- AS SHARE APPLICATION MONE Y AND HAS BEEN SHOWN AS INVESTMENTS. NO DETAILS OF SUCH INVESTMENTS OR INCOME ARISING THERE -FROM HAS BEEN GIVEN IN THE BALANCE SHEET. THE ISSUE OF SHARE CAPITAL AT PREMIUM IS TO BE APPR OVED BY THE REGISTRAR OF COMPANIES AND SHOULD DEPEND ON NET WORTH OF THE COMPANY. IN THIS CASE THE SUBSCRIBED CAPITAL IS OF RS.200/- ONLY AND THERE IS NO RESERVES AND THE INCOME SHOWN FROM OPERATIONS IS ALSO VERY SMALL FOR EXAMPLE IN ASSESSMENT YEAR 2001-02 IS RS.924/- AND THE NET PROFIT CARRIED TO THE BALANCE SHEET IS LOSS OF RS.1 036/-. NEITHER ASSESSING OFFICER NOR LD CIT(A) HAS LOOKED INTO BALANCE SHEET AND PROFIT AND LOSS ACCOUNT. PRIMA FACIE ALL THESE FACT S INDICATE THAT THIS COMPANY IS A PAPER COMPANY WHICH IS ALSO ENGAGED IN PROVIDING ENTRIES TO OTHER COMPANIES. HOWEVER TO ARRIVE AT CONCLUSIVE DECISION SOME MORE INVESTIGATIONS FROM REGISTRAR OF COMPANIES THE ALLEGED SHARE APPLICANTS STOCK EXCHANGES ETC. HAVE TO BE MADE. THE SHARES O F PADMINI POLYMERS LTD. ARE IN THE SAME SERIES. TO WHOM THESE SHARE WERE ORIGINALLY ALLOTTE D AND HOW SHARES HAVE BEEN RECORDED IN THE 11 I. T. APPEAL NO. 1578 (DEL) OF 2010. A N D C. O. NO. 175 (DEL) OF 2010. BOOKS OF PADMINI POLYMERS LTD FROM WHOM THE ASSE SSEE HAD PURCHASED SHARES. THE ACTIVITIES OF M/S. CHARUWALA EXPORTS AND M/S. IRISH INFRASTRU CTURES PVT. LTD HAVE TO BE LOOKED INTO IN ORDER TO ASCERTAIN THE GENUINENESS OF THE TRANSACTIONS. T HE INNOCENT TAX PAYERS ARE TO BE ENCOURAGED BUT THOSE INDULGING IN FAKE TRANSACTIONS SHOULD BE DEAL T STERNLY. THE ADDRESS OF THE ASSESSEE IS 202 C.A. CHAMBER 18/12 WEA KAROL BAGH NEW DELHI. THE ASSESSING OFFICER MAY ALSO EXAMINE AS TO WHETHER SOME CHARTERED ACCOUNTANT IS INVOLVED IN WHOLE TRANSACTIONS. IF IT IS FOUND TO BE SO MATTER MAY BE REFERRED TO THE INSTITUTE OF CHARTERE D ACCOUNTANTS OF INDIA FOR TAKING NECESSARY ACTION AGAINST SUCH PERSON. DECISION OF HONBLE SUP REME COURT CANNOT BE APPLIED BLINDLY WITHOUT ASCERTAINING THE FULL FACTS OF THE CASE. SI NCE THE ISSUE BEFORE US NOT WAS EXAMINED PROPERLY WE FEEL IT PROPER TO SET ASIDE THE MATTER TO THE FILE OF ASSESSING OFFICER. WE THEREFORE SET ASIDE THE ORDER OF THE LD. CIT (APPEALS) AND RE STORE THE MATTER TO THE FILE OF THE ASSESSING OFFICER WITH THE DIRECTIONS TO EXAMINE THE CASE IN THE LIGHT OF ABOVE OBSERVATIONS AND FRAME ASSESSMENT DE-NOVO. 16. SINCE WE HAVE SET ASIDE THE ISSUE ARISING IN TH E APPEAL FILED BY THE REVENUE TO THE FILE OF THE ASSESSING OFFICER THE CROSS OBJECTION FILED BY THE ASSESSEE BECOMES INFRUCTUOUS AND DISMISSED AS SUCH. 17. IN THE RESULT THE APPEAL FILED BY THE REVENUE IS ALLOWED FOR STATISTICAL PURPOSES AND CROSS OBJECTION FILED BY THE ASSESSEE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT TODAY ON : 15 TH JULY 2011. SD/- SD/- [ R. P. TOLANI ] [ K. D. R ANJAN ] JUDICIAL MEMBER ACCOUNTANT MEMBER DATED : 15 TH JULY 2011. *MEHTA * 12 I. T. APPEAL NO. 1578 (DEL) OF 2010. A N D C. O. NO. 175 (DEL) OF 2010. COPY OF THE ORDER FORWARDED TO : - 1. APPELLANTS. 2. RESPONDENTS. 3. CIT 4. CIT (APPEALS) 5. DR ITAT NEW DELHI. TRUE COPY. BY ORDER. ASSISTANT REGISTRAR ITAT.