M/s Tulip Engineering Pvt. Ltd., New Delhi v. ITO, New Delhi

CO 374/DEL/2010 | 2002-2003
Pronouncement Date: 21-01-2011 | Result: Dismissed

Appeal Details

RSA Number 37420123 RSA 2010
Assessee PAN AAOPJ7697N
Bench Delhi
Appeal Number CO 374/DEL/2010
Duration Of Justice 2 month(s) 2 day(s)
Appellant M/s Tulip Engineering Pvt. Ltd., New Delhi
Respondent ITO, New Delhi
Appeal Type Cross Objection
Pronouncement Date 21-01-2011
Appeal Filed By Assessee
Order Result Dismissed
Bench Allotted H
Tribunal Order Date 21-01-2011
Assessment Year 2002-2003
Appeal Filed On 18-11-2010
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH H DELHI BEFORE SHRI A.D. JAIN AND SHRI K.G. BANSAL I.T.A.NO. 4629(DEL)/2010 ASSESSMENT YEAR: 2002-03 INCOME-TAX OFFICER M /S TULIP ENGINEERING PVT. LTD. WARD 16(4) NEW DELHI. VS. G-24 VI SHNU GARDEN NEW DELHI-110018. C.O. NO. 374(DEL)/2010 (ARISING OUT OF I.T.A.NO. 4629(DEL)/2010) ASSESSMENT YEAR: 2002-03 M/S TULIP ENGINEERING PVT. LTD. INCOM E-TAX OFFICER G-24 VISHNU GARDEN VS. WAR D 16(4) NEW DELHI. NEW DELHI. (APPELLANT) (RESPONDENT ) DEPARTMENT BY : SHRI ANARENDRA KUMAR SR. DR ASSESSEE BY : SHRI PRAMOD JAIN FCA ORDER PER K.G. BANSAL : AM THE FACTS OF THE CASE ARE THAT INFORMATION WAS RECEIVED BY THE AO FROM THE INVESTIGATION WING THAT THE ASSESSEE RE CEIVED ACCOMMODATION ENTRIES AGGREGATING TO RS. 27 85 500/- FROM VARIOUS PARTIES. THE ENQUIRY REVEALS THAT THESE PARTIES ARE NOT CARRYING ON ANY BUSINESS ACTIVITY. THE MODUS OPERANDI OF FURNISHING ACCOMMODATION ENTRY WAS STATED TO BE THAT THE ENTRY PROVIDER OPERATES A NUMBER OF ACC OUNTS IN THE NAMES OF COMPANIES/FIRMS/PROPRIETARY CONCERNS ETC. THE BAN K ACCOUNTS ARE OPENED ITA NO. 4629(DEL)/2010 & C.O. NO.374(DEL)/2010 2 IN SUCH NAMES. THE PERSON WHO WANTS TO AVAIL OF THE BENEFIT OF ACCOMMODATION ENTRY APPROACHES THE OPERATOR AND H ANDS OVER CASH ALONG WITH COMMISSION IN LIEU OF THE CHEQUE THE DEM AND DRAFT OR PAY ORDER. THE CASH IS DEPOSITED IN THE BANK ACCOUNT FROM WHI CH THE ENTRY IS PROVIDED TO THE BENEFICIARY. IN VIEW OF THIS INFORMATION THE REASONS WERE RECORDED U/S 147 AND NOTICE WAS ISSUED U/S 14 8 ON 24.3.2009. IN THE COURSE OF ASSESSMENT PROCEEDINGS THE ASSESSEE WAS REQUIRED TO PROVE THE IDENTITY OF THE CREDITOR HIS CAPACITY AND TH E GENUINENESS OF THE TRANSACTION. IT IS MENTIONED THAT THE ASSESSEE FAILED TO PROVE THE AFORESAID INGREDIENTS NECESSARY TO DISCHARGE ONUS U/S 68. THEREFORE THE AMOUNT OF RS. 27 85 500/- HAS BEEN BROUGHT TO TAX. A FURTH ER SUM OF RS. 41 782/- HAS BEEN ADDED TO THE INCOME IN RESPECT OF COMMIS SION PAID TO THESE PERSONS CALCULATED @ 1.5% OF THE AGGREGATE OF TH E ENTRIES AMOUNTING TO RS. 27 85 000/-. TAKING INTO ACCOUNT THE INCOME OF RS. 255/- DECLARED BY THE ASSESSEE THE TOTAL INCOME HAS BEEN COMPUTED AT RS.28 27 530/-. 2. IN APPEAL THE LD. CIT(A) CAME TO THE CONCLUSIO N THAT SHRI RANJAN JASSAL AND SHRI RADHUVIR SINGH HAD CONTRIBUTED R S. 4 50 000/- AND RS. 4 70 000/- RESPECTIVELY TOWARDS SHARE CAPITAL OF THE COMPANY. THUS THE SUM OF RS.9 20 000/- WAS IN RESPECT OF CONTRIBU TION TOWARDS SHARE CAPITAL. ITA NO. 4629(DEL)/2010 & C.O. NO.374(DEL)/2010 3 VARIOUS AMOUNTS WERE RECEIVED FROM FOUR OTHER PERSONS NAMELY M/S G.P. ENTERPRISES M/S MANAK INTERNATIONAL SHRI PERMINDER SINGH AND SHRI KAMAL DHAWAN. THE AMOUNTS ARE RS. 3 22 500/- RS. 10 93 000/- RS. 3 50 000/- AND RS. 1 00 000/- RESPECTIVELY AGGR EGATING TO RS. 18 65 500/-. THESE AMOUNTS WERE RECEIVED AS SALE PROCEEDS OF 186550 SHARES OF UTTRANCHAL FINANCE LTD. THE ASSESSEE HAD ACQU IRED 2 LAKH SHARES OF THIS COMPANY IN FINANCIAL YEAR 2001-02 OUT OF WHIC H 186550 SHARES WERE SOLD AT PAR IN THIS YEAR TO THE AFORESAID PERSON . 2.1 THE ASSESSEE HAD FILED VARIOUS DETAILS IN RESPECT OF SHARE APPLICATION MONEY WHICH HAVE BEEN MENTIONED ON P AGE 6 OF THE IMPUGNED ORDER IN A TABULAR FORM. THIS TABLE IS REPRODUCED BELOW:- S.NO. NAME & ADDRESS SHARE CAPITAL REMARKS 1 SHRI RAJAN JASSAL WZ-134 PLOT NO. 170 VISHNU GARDEN NEW DELHI-110018. 4 50 000 COPIES OF APPLICATION FOR SHARES AFFIDAVIT CONFIRMATION LETTER AND 143(1)A) INTIMATION WERE FILED. PAN:AAOPJ7697N 2 SHRI RAGHUBIR SINGH G-24 VISHNU GARDEN NEW DELHI-110018. 4 70 000 COPIES OF APPLICATION FOR SHARES IT RETURN ACK. AFFIDAVIT AND CONFIRMATION LETTER WERE FILED. PAN-ANAPS3637G WARD-21(6) NEW DELHI. TOTAL: 920 000 ITA NO. 4629(DEL)/2010 & C.O. NO.374(DEL)/2010 4 2.2 THE DETAILS OF SALE PROCEEDS HAVE BEEN ME NTIONED ON PAGES 10 AND 11 OF THE ORDER. THE TABLE CONSISTING OF TH ESE DETAILS IS REPRODUCED BELOW:- S.NO. NAME & ADDRESS NO.OF SHARES SOLD SALE PROCEEDS OF SHARES/CHEQUE NO. REMARKS 1 M/S G.P.ENTERPRISES RZ-105 NAND RAM PARK UTTAM NAGAR NEW DELHI-59 32000 3 22 500/- CHEQUE NO. 37106 COPIES OF STATEMENT OF ACCOUNT AFFIDAVIT OF PREET KUMAR (PROP. OF M/S G.P. ENTERPRISES) CONFIRMATION LETTER AND SALE BILL WERE FILED. PAN: AGOPK2641R 2 M/S MANAK INTERNATIONAL 3/143 SUBHASH NAGAR NEW DELHI. 109000 10 93 000/- CHEQUE NO. 255305 255311 255313 255315 COPIES OF I.T. RETURN ACK. STATEMENT OF ACCOUNT AFFIDAVIT OF AJAY KAPAHI (PROP. OF M/S MANAK INTERNATIONAL) CONFIRMATION LETTER AND SALE BILL WERE FILED. PAN:ABBPK6962D WARD: 17(4) NEW DELHI. 3 SHRI PERMINDER SINGH 1179-80 T.C.HUTS SUBHASH NAGAR CROSSING NEW DELHI-27. 35000 3 50 000 COPIES OF STATEMENT OF ACCOUNT AFFIDAVIT CONFIRMATION LETTER AND SALE BILL WERE FILED. PAN: ANAPS3632D 4. SHRI KAMAL 10000 1 00 000/- COPIES OF STATEMENT ITA NO. 4629(DEL)/2010 & C.O. NO.374(DEL)/2010 5 DHAWAN C-43 VISHNU GARDEN NEW DELHI-18. CHEQUE NO. 855943 OF ACCOUNT AFFIDAVIT CONFIRMATION LETTER AND SALE BILL WERE FILED. PAN:AEKPD8587K TOTAL: 18 65 500/- 2.3 ON THE BASIS OF AFORESAID DETAILS THE LD. CIT(A) HAS HELD THAT THE ASSESSEE HAS PROVIDED REQUISITE DETAILS OF TH E SHARE APPLICANTS. THUS IT HAS DISCHARGED THE ONUS CAST ON IT. THEREFORE THE ADDITION OF RS. 9 20 000/- HAS BEEN DELETED. IN THE CASE OF SA LE PROCEEDS OF THE SHARES OF UTTRANCHAL FINANCE LTD IT HAS BEEN MENTIONED THA T THE AO HAS NOT DISPUTED THE ACQUISITION OF SHARES BY THE ASSESSEE AND T HE PURCHASE CONSIDERATION HAS BEEN PAID THROUGH CHEQUES. NECESSARY EVID ENCE IN RESPECT OF SALE OF 186550 SHARES HAS ALSO BEEN PLACED ON RECORD OF THE AO. THE AO HAS NOT CONTROVERTED THESE FACTS EXCEPT STATING THAT THE TRANSACTIONS WERE NOT BELIEVABLE. THE LD. CIT(A) HELD THAT THE IDE NTITY OF THE PURCHASERS HAS BEEN PROVED. THE TRANSACTIONS OF SALE HAVE BEE N SETTLED BY PAYMENT THROUGH CHEQUES. THERE IS NOTHING UNUSUAL ABOUT THESE TRANSACTIONS. THEREFORE THE ADDITION OF RS. 18 65 500/- HAS ALSO BEEN DELETED. 2.4 THE ADDITION ON ACCOUNT OF COMMISSION HAS BEE N HELD TO BE CONSEQUENTIAL IN NATURE. SINCE THE ENTRIES HAVE B EEN HELD TO BE GENUINE ITA NO. 4629(DEL)/2010 & C.O. NO.374(DEL)/2010 6 ENTRIES THE AMOUNT OF RS.41 782/- HAS ALSO BEEN DELETED FROM THE ASSESSMENT. 3. IN ITS APPEAL THE REVENUE HAS CHALLENGED T HE DELETION OF CREDITS ON THE GROUNDS INTER-ALIA THAT CREDITWORTHINESS OF T HE PAYERS HAS NOT BEEN ESTABLISHED AND THERE WERE CASH DEPOSITS IN THE IR ACCOUNTS PRIOR TO ISSUANCE OF THE CHEQUES. IN RESPECT OF THE AMOUNT OF RS. 18 65 500/- ONE MORE GROUND HAS BEEN TAKEN THAT THE LD. CIT(A) ADMITTED ADDITIONAL EVIDENCE IN CONTRAVENTION OF THE PROVISION CONTAINE D IN RULE 46A OF THE INCOME-TAX RULES 1962. THE DELETION OF THE ADDI TION ON ACCOUNT OF COMMISSION FROM THE ASSESSMENT HAS ALSO BEEN CHA LLENGED. ON THE OTHER HAND THE ASSESSEE HAS CHALLENGED THE UPHOLDING THE VALIDITY OF NOTICE U/S 148. ALL OTHER GROUNDS ARE IN SUPPORT OF THE ORDE R OF THE LD. CIT(A) IN WHICH IT HAS INTER-ALIA BEEN MENTIONED THAT TH E COMMISSIONER HAS ERRED IN CONTESTING THAT THE CIT(A) ADMITTED ADDITION AL EVIDENCE WHICH WAS NOT ADDITIONAL EVIDENCE BUT THE DOCUMENT WAS REQU IRED BY THE LD. CIT(A). 4. WE PROCEED WITH THE APPEAL OF THE REVENUE A T THE FIRST INSTANCE. ITA NO. 4629(DEL)/2010 & C.O. NO.374(DEL)/2010 7 4.1 THE LD. DR DREW OUR ATTENTION TO PARAGRAPH NO.8 OF THE ASSESSMENT ORDER IN WHICH IT IS MENTIONED THAT THERE IS A UNIFORM PATTERN OF DEPOSITS AND WITHDRAWALS. THE PAYMENTS ARE PRECEDED BY DE POSITS OF EQUIVALENT AMOUNTS IN CASH OR BY WAY OF CHEQUES. IT IS FURTH ER MENTIONED THAT UNLESS THE IDENTITY AND CREDITWORTHINESS OF THE PERSONS AND THE TRANSACTIONS REPRESENTED BY THE ENTRIES IN THE BANK ARE CO-RE LATED WITH BUSINESS ACTIVITY AND THE BOOKS OF ACCOUNT OF THE ENTITIE S ARE PRODUCED A VALID CONCLUSION CAN BE DRAWN THAT THE ACCOUNTS HAVE BEE N USED ONLY FOR THE PURPOSE OF PROVIDING ACCOMMODATION ENTRIES. FURT HER OUR ATTENTION IS DRAWN TOWARDS PARAGRAPH NO. 11 IN WHICH IT IS ME NTIONED THAT IN VIEW OF THE FAILURE OF THE ASSESSEE TO FURNISH THE DETAI LS AS ABOVE AND IN VIEW OF THE NATURE OF THE TRANSACTIONS AND OTHER FACTS THE AMOUNT OF RS. 27 85 500/- IS NOTHING BUT A CAMOUFLAGE TO IN TRODUCE OWN UNACCOUNTED MONEY IN THE BUSINESS. 4.2 OUR ATTENTION HAS ALSO BEEN DRAWN TOWARDS PA RAGRAPH NO. 3 OF THE IMPUGNED ORDER IN WHICH THE DETAILS FURNISHED BY THE ASSESSEE IN RESPECT OF SHARE APPLICATION MONEY AND SALE PROCEEDS HAVE BEEN MENTIONED. FURTHER OUR ATTENTION HAS BEEN DRAWN TOWARD S PARAGRAPH NO. 17.2 IN WHICH THE LD. CIT(A) HAS MENTIONED THE FINDINGS OF HONBLE DELHI HIGH ITA NO. 4629(DEL)/2010 & C.O. NO.374(DEL)/2010 8 COURT IN THE CASE OF CIT VS. DIVINE LEASING A ND FINANCE LTD. 207 CTR 38 WHICH IS REPRODUCED BELOW:- ON APPEAL THIS COURT HELD THAT:- THERE CANNOT BE TWO OPINIONS ON THE ASPECT THAT T HE PERNICIOUS PRACTICE OF CONVERSION OF UNACCOUNTED MONEY THROUGH THE MASQUERADE OR CHANNEL OF INVESTMENT IN THE SHARE CAPITAL OF A COMPANY MUST BE FIRMLY EXCORIATED BY THE REVENUE. EQUALLY WHERE THE PREPONDERANCE OF EVI DENCE INDICATES ABSENCE OF CULPABILITY AND COMPLEXITY O F THE ASSESSEE IT SHOULD NOT BE HARASSED BY THE REVE NUES INSISTENCE THAT IT SHOULD PROVE THE NEGATIVE. IN THE CASE OF PUBLIC ISSUE THE COMPANY CONCERNED CANNOT BE E XPECTED TO KNOW EVERY DETAILS PERTAINING TO THE IDENTITY A S WELL AS FINANCIAL WORTH OF EACH OF ITS SUBSCRIBERS. THE COMPANY MUST HOWEVER MAINTAIN AND MAKE AVAILABLE TO THE ASSESSING OFFICER FOR HIS PERUSAL ALL THE IN FORMATION CONTAINED IN THE STATUTORY SHARE APPLICATION DO CUMENTS. IN THE CASE OF PRIVATE PLACEMENT THE LEGAL REGIME WOULD NOT BE THE SAME. A DELICATE BALANCE MUST BE MAINT AINED WHILE WALKING THE TIGHTROPE OF SECTION 68 AND 69 OF THE INCOME- TAX ACT. THE BURDEN OF PROOF CAN SELDOM BE DIS CHARGED TO THE HILT BY THE ASSESSEE; IF THE ASSESSING OF FICER HARBOURS DOUBTS OF THE LEGITIMACY OF ANY SUBSCRIPTION HE I S EMPOWERED NAY DUTY BOUND TO CARRY OUT THROUGH INVESTIG ATIONS. BUT IF THE ASSESSING OFFICER FAILS TO UNEARTH ANY WRONG OR ILLEGAL DEALINGS HE CANNOT OBDURATELY ADHERE TO HIS S USPICIONS AND TREAT THE SUBSCRIBED CAPITAL AS THE UNDISCLOSED INCOME OF THE COMPANY. FURTHER A DISTILLATION OF THE PRECEDENTS YIELDS THE FOLLOWING PROPOSITION OF LAW IN THE CONTEXT OF SECTION 68 O F THE INCOME TAX ACT. THE ASSESSEE HAS TO PRIMA FACIE PROVE (1) THE IDENTITY OF THE CREDITOR/SUBSCRIBER; (2) THE GE NUINENESS OF THE TRANSACTION NAMELY WHETHER IT HAS BEEN TRANSMIT TED THROUGH BANKING OR OTHER INDISPUTABLE CHANNELS; (3) THE CREDITWORTHINESS OR FINANCIAL STRENGTH OF THE CREDI TOR/SUBSCRIBER; (4) IF RELEVANT DETAILS OF THE ADDRESS OF P AN IDENTITY OF ITA NO. 4629(DEL)/2010 & C.O. NO.374(DEL)/2010 9 THE CREDITOR/SUBSCRIBER ARE FURNISHED TO THE D EPARTMENT ALONG WITH COPIES OF THE SHAREHOLDERS REGISTER SHARE APPLICATION FORMS SHARE TRANSFER REGISTER ETC. IT WOULD CONSTITUTE ACCEPTABLE PROOF OR ACCEPTABLE EXPLANATION BY T HE ASSESSEE; (5) THE DEPARTMENT WOULD NOT BE JUSTIFIED IN D RAWING AN ADVERSE INFERENCE ONLY BECAUSE THE CREDITOR/SUBSCR IBER FAILS OR NEGLECTS TO RESPOND TO ITS NOTICE; (6) THE ONU S WOULD NOT STAND DISCHARGED IF THE CREDITOR/SUBSCRIBER DENI ED OF REPUDIATED THE TRANSACTION SET UP BY THE ASSESSEE NOR SHOULD THE ASSESSING OFFICER TAKE SUCH REPUDIA TION AT FACE VALUE AND CONSTRUE IT WITHOUT MORE AGAINST THE ASSESSEE; (7) THE ASSESSING OFFICER IS DUTY BOUND TO INVESTIGATE THE CREDIT WORTHINESS OF THE CREDITOR/SUBSCRIBER THE GENUINEN ESS OF THE TRANSACTION AND THE VERACITY OF THE REPUDIATION. 4.3 OUR ATTENTION HAS ALSO BEEN DRAWN TOWARDS PA RAGRAPH NO. 18 IN WHICH IT HAS BEEN HELD THAT THE ASSESSEE HAS DIS CHARGED ITS ONUS BY PROVIDING REQUISITE DETAILS INCLUDING ASSESSMENT PARTICULARS OF THE CONTRIBUTING COMPANIES. IN PARAGRAPH NO. 21 IT H AS BEEN MENTIONED THAT THE AO SIMPLY ACTED ON THE INFORMATION RECEIVED FROM THE INVESTIGATION WING WITHOUT VERIFYING THE DETAILS FURNISHED BY THE ASSESSEE. THE FINDINGS OF THE INVESTIGATION WING AND INFORMATION IN POS SESSION HAVE NOT BEEN PLACED BEFORE THE ASSESSEE WHICH VIOLATES THE PRINCIPLES OF NATURAL JUSTICE. IN PARAGRAPH NO. 22 IT HAS BEEN MENTION ED THAT THE AO HAS NOT DOUBTED THE IDENTITY OF THE APPLICANTS WHICH IS T HE MAIN ISSUE IN RESPECT OF WHICH ONUS LIES ON THE ASSESSEE. FINALLY OUR ATTENTION HAS BEEN DRAWN ITA NO. 4629(DEL)/2010 & C.O. NO.374(DEL)/2010 10 TOWARDS PARAGRAPH NOS. 26 TO 28 UNDER WHICH BOTH THE ADDITIONS HAVE BEEN DELETED. 4.4 THE CASE OF THE LD. DR IS THAT THE ASSESSEE HAS NOT FURNISHED BANK STATEMENT OF THE CONTRIBUTORS OR PURCHASERS OF SHAR ES. THEREFORE CREDITWORTHINESS OF THE PARTIES HAS NOT BEEN E STABLISHED. EVEN IF THERE WAS SOME LAPSE ON THE PART OF THE AO IN MAKING FULL ENQUIRY THE POWERS VESTED IN THE CIT(A) ARE CO-TERMINUS WI TH THE POWERS OF THE AO AND THEREFORE HE SHOULD HAVE MADE FURTHER EN QUIRIES OR CAUSED FURTHER ENQUIRY TO BE MADE IN THE MATTER. IN THE CASE O F SALE OF SHARES IT IS SUBMITTED THAT ADDITIONAL EVIDENCE WAS FILED RE GARDING PURCHASE OF TWO LAKH SHARES OF UTTRANCHAL FINANCE LTD. THIS EV IDENCE WAS NOT FORWARDED TO THE AO FOR HIS REBUTTAL. THE BALANCE-SHEET OF UTTRANCHAL FINANCE LTD. HAS NOT BEEN FILED AND THEREFORE THE VALUE OF IT S SHARES ON THE DATE OF THE SALE IS NOT KNOWN. IT IS ALSO NOT KNOWN WHETHER THE SHARES ARE QUOTED OR UNQUOTED THOSE WERE IN MATERIAL OR DEMAT FOR M AND WHO WAS THE BROKER. THEREFORE THE MATTER REGARDING PURCHA SE AND SALE OF SHARES SHOULD HAVE BEEN REMANDED TO THE AO. THUS IT IS URGED THAT THE ORDER OF THE AO MAY BE UPHELD OR THE MATTER MAY BE REMAN DED TO THE FILE OF THE AO FOR FURTHER ENQUIRY. ITA NO. 4629(DEL)/2010 & C.O. NO.374(DEL)/2010 11 5. IN REPLY THE LD. COUNSEL SUBMITTED THAT THE REASONS FOR ISSUANCE OF NOTICE U/S 148 WERE FURNISHED TO THE ASSESSEE O N 2.12.2009. MOST OF THE NAMES AND PAN WERE WRONG. OUR ATTENTION HAS BEEN DRAWN TO PAGE NOS. 1 TO 3 OF THE PAPER BOOK WHICH IS A LETT ER DATED 11.12.2009 ADDRESSED BY THE ASSESSEE TO THE AO IN THE COURSE OF ASSESSMENT PROCEEDINGS. IN THIS LETTER THE CORRECT DETAI LS OF VARIOUS PERSONS HAVE BEEN MENTIONED. IT IS ALSO SUBMITTED THAT INCOME -TAX RETURN PAN AND CONFIRMATION WILL BE SUBMITTED ON THE NEXT DATE OF HEARING. THE ASSESSEE ALSO REQUESTED FOR AN OPPORTUNITY TO CROSS-EXAMINE THE PERSONS WHO STATED THAT THE PAYMENTS ARE NOT GENUINE. IT IS ARGU ED THAT THE OPPORTUNITY OF CROSS-EXAMINATION WAS NOT GIVEN TO THE ASSESSEE. FURTHER OUR ATTENTION HAS BEEN DRAWN TOWARDS LETTER DATED 15.12.2009 A DDRESSED TO THE AO IN WHICH CONFIRMED ACCOUNTS OR CONFIRMATION CERTIFI CATES FROM THE FOLLOWING PERSONS WERE FILED:- 1. CONFIRMATION OF ACCOUNT A. MANAK INTERNATIONAL PROP. AJAY KAPAHI B. G.P. ENTERPRISES PROP. PREET KUMAR C. PERMINDER SINGH D. KAMAL DHAWAN 2. CONFIRMATION CERTIFICATES A. G.P. ENTERPRISES PROP. PREET KUMAR B. MANAK INTERNATIONAL PROP. AJAY KAPAHI C. PERMINDER SINGH D. KAMAL DHAWAN ITA NO. 4629(DEL)/2010 & C.O. NO.374(DEL)/2010 12 E. RAJAN JASSAL F. RAGHUBIR SINGH 5.1 OUR ATTENTION HAS ALSO BEEN DRAWN FROM PAGES 41 TO 56 BEING A LETTER DATED 21.12.2009 IN WHICH FURTHER EVIDEN CE WAS FILED AS UNDER:- 1. COPY OF SHARE APPLICATION : A. RAJAN JASSAL B. RAGHUBIR SINGH 2. COPY OF PAN/ITR/RATION CARD OF THE FOLLOWING C. PREET KUMAR D. AJAY KAPAHI E. PERMINDER SINGH F. KAMAL DHAWAN G. RAJAN JASSAL H. RAGHUBIR SINGH 5.2 OUR ATTENTION HAS ALSO BEEN DRAWN TOWARDS PAG E NOS. 62 TO 72 WHICH CONTAIN AFFIDAVITS FROM THE FOLLOWING PERS ONS: A. PREET KUMAR B. AJAY KAPAHI C. PERMINDER SINGH D. KAMAL DHAWAN E. RAJAN JASSAL F. RAGHUBIR SING 5.3 IN THE COURSE OF HEARING OF THE APPEAL THE LD. CIT(A) WANTED PROOF IN RESPECT OF PURCHASE OF TWO LAKH SHARES OF UTTRANCHAL FINANCE LTD. ITA NO. 4629(DEL)/2010 & C.O. NO.374(DEL)/2010 13 IN VIEW THEREOF THE APPLICATION AND THE ALLOTM ENT ADVICE WERE FILED WHICH HAVE NOW BEEN PLACED IN THE PAPER BOOK ON PAGE NOS. 15 TO 17. IT IS ARGUED THAT THE AO DID NOT UNDERTAKE AN Y ENQUIRY INTO ALL THESE EVIDENCES WHICH WERE REJECTED. THEREFORE IT IS ARGUED THAT THE ADDITION HAS BEEN MADE ON THE BASIS OF INFORMATION RECEIV ED FROM THE INVESTIGATION WING WHICH HAS NOT BEEN AUTHENTICAT ED. ACCORDINGLY IT IS STRONGLY URGED THAT THE ORDER OF THE LD. CIT( A) MAY BE UPHELD. 6. WE HAVE CONSIDERED THE FACTS OF THE CASE AND R IVAL SUBMISSIONS. THE FACTS IN RESPECT OF GROUND NO. 1 ARE THAT THE AS SESSEE RECEIVED SHARE APPLICATION MONEY OF RS. 4 50 000/- FROM SHRI RANJA N JASSAL AND RS. 4 70 000/- FROM SHRI RAGHUBIR SINGH. IN THE CASE OF SHRI RANJAN JASSAL COPIES OF APPLICATION AFFIDAVIT CONFIRMATION AN D INTIMATION U/S 143(1)(A) WERE FILED. THIS PERSON IS ASSESSED TO TAX AND HIS PERMANENT ACCOUNT NUMBER WAS ALSO FURNISHED. IN CASE OF SHRI RAGH UBIR SINGH COPIES OF APPLICATION ACKNOWLEDGMENT OF INCOME-TAX RETURN AFFIDAVIT AND CONFIRMATION WERE FILED. THIS PERSON IS ALSO ASSESSED TO TAX AND HIS PAN WAS FURNISHED. ITA NO. 4629(DEL)/2010 & C.O. NO.374(DEL)/2010 14 6.1 IN THE CASE OF CIT VS. M. GANAPATHI MUDALIAR (1964) 53 ITR 623 (SC) RELIED UPON BY THE LD. DR THE FACTS ARE TH AT THE AO ASSESSED THE REMITTANCES FROM SINGAPORE AT RS.61 538/-. THE PR OFITS WERE ASSESSED AT RS. 2 10 600/- WHICH COVERED THE REMITTANCES. T HE AAC SUBSTANTIALLY CONFIRMED THE FINDINGS OF THE AO BUT HELD THAT IN ABSENCE OF ACCOUNTS SHOWING THE EXACT INCOME WHICH THE APPELLANT GOT FROM THE SOURCE HIS INCOME INCLUSIVE OF PROFITS FROM HIS OWN BUSINE SS MAY BE TAKEN AT RS. 1 80 000/-. THE MATTER WAS TAKEN UP BEFORE THE T RIBUNAL. IT IS MENTIONED THAT IT WAS NOT INCLINED TO ACCEPT THE VERSION OF THE ASSESSEE THAT THE MONEY CREDITED IN THE BOOKS OF ACCOUNT REPRESENT ED SALE PROCEEDS OF CLOSING STOCK OF GOODS. IN THE COURSE OF HEARING BEFORE THE HIGH COURT A FRESH STATEMENT OF THE CASE WAS CALLED WHICH WAS SUBMITTED. THE HONBLE SUPREME COURT CAME TO THE CONCLUSION THAT THERE WAS AMPLE MATERIAL ON RECORD TO SUPPORT THE FINDING THAT T HE ASSESSEES INCOME WAS RS. 1 80 000/-. ONCE IT IS HELD THAT 86 500 DOLL ARS WAS THE INCOME OF THE ASSESSEE IT WAS NOT NECESSARY FOR THE REVENUE T O LOCATE ITS EXACT SOURCE. FROM THE FACTS IT WILL BE SEEN THAT THE ASSESSEE HAD NOT MAINTAINED BOOKS OF ACCOUNT AND IT FURNISHED AN UNBELIEVABLE EXPLANATION. THE FACTS OF THE CASE AT HAND ARE DISTINGUISHABLE BECAUS E CREDITS HAVE BEEN ITA NO. 4629(DEL)/2010 & C.O. NO.374(DEL)/2010 15 RECEIVED FROM TWO PERSONS IN INDIA WHO ARE A SSESSED TO TAX UNDER THE ACT. THEY HAVE FILED CONFIRMATIONS AND PANS ALON G WITH COPIES OF SHARE APPLICATION. NOTHING HAS BEEN BROUGHT ON RECORD TO SHOW THAT THESE ARE UNBELIEVABLE. IN THE CASE OF AMTRAC AUTOMOTIVE I NDIA (P) LTD. VS. ACIT (2002) 2 ITR (TRIB) 649 (DEL) THE FACTS AR E THAT THE ASSESSEE IS ENGAGED IN THE TRADING OF SHARES. IT WAS NOTIC ED THAT IT INTRODUCED FRESH SHARE CAPITAL AND THE PREMIUM CHARGED WAS NINE TIMES THE FACE VALUE. NO PROSPECTUS WAS ISSUED. SUMMONS WERE ISSUED U/S 131 OF THE ACT TO 15 PERSONS WHICH WERE RETURNED UNSERVED. THE AO HELD THAT THE AMOUNT REPRESENTED UNEXPLAINED CASH CREDIT. THE ADDIT ION WAS UPHELD BY THE LD. CIT(A). IN THE SECOND APPEAL IT HAS BEEN HELD TH AT THE TRANSACTIONS COULD NOT BE PROVED AS THE APPLICANTS WERE NOT FOUND T O EXIST AT THE GIVEN ADDRESS. THEREFORE THE ADDITION HAS BEEN UPHE LD. THE FACTS OF THIS CASE THOUGH APPARENTLY SIMILAR ARE DISTINGUISHABLE IN MATERIAL RESPECT. THE ASSESSEE HAD ISSUED SHARES AT A VALUE 10 TIMES THE FACE VALUE. THE TRIBUNAL DISTINGUISHED THE CASE OF CIT VS. LOVEL Y EXPORTS (P) LTD. (2008) 299 ITR 268 BY MENTIONING THAT THE AO HAD ISSUE D SUMMONS IN THIS CASE WHICH RETURNED UNSERVED WITH THE REMARKS N O SUCH PERSON ON THE ABOVE ADDRESS. THE ASSESSEE HAS ALSO FAILED TO PRODUCE THESE PERSONS. SOME OF THE SHAREHOLDERS ARE APPARENTLY ENTRY PRO VIDERS AS STATED BY ITA NO. 4629(DEL)/2010 & C.O. NO.374(DEL)/2010 16 THEM BEFORE THE INVESTIGATION WING. THEREFORE IT CANNOT BE SAID THAT THE AO HAS NOT CARRIED OUT ANY INVESTIGATION. THE F ACTS OF THIS CASE ARE ALSO DISTINGUISHABLE. IN THE FIRST PLACE THE SHARES H AVE BEEN ISSUED AT PAR AND NOT AT PREMIUM AT NINE TIMES THE FACE VALUE. T HE AO HAS NOT CARRIED OUT ANY ENQUIRY WHATSOEVER TO PROVE THAT SHAREHOLDERS ARE NON-EXISTENT. 6.1 THE LD. COUNSEL HAS RELIED ON THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF LOVELY EXPORTS (P) LTD. (S UPRA). THE HONBLE SUPREME COURT AFFIRMED THE DECISION OF HONBLE DELHI HIGH COURT BY OBSERVING AS UNDER:- CAN THE AMOUNT OF SHARE MONEY BE REGARDED AS UN DISCLOSED INCOME UNDER S. 68 OF IT ACT 1961? WE FIND NO ME RIT IN THIS SPECIAL LEAVE PETITION FOR THE SIMPLE REASON THAT IF THE SHARE APPLICATION MONEY IS RECEIVED BY THE ASSESSEE COM PANY FROM ALLEGED BOGUS SHAREHOLDERS WHOSE NAMES ARE GIVEN TO THE AO THEN THE DEPARTMENT IS FREE TO PROCEED TO REOPEN THEIR INDIVIDUAL ASSESSMENTS IN ACCORDANCE WITH LAW. HENCE WE FIND NO INFIRMITY WITH THE IMPUGNED JUDGMENT. 6.2 THUS THE DECISION IS THAT IF THE NAMES ARE GIVEN TO THE AO THE DEPARTMENT IS FREE TO PROCEED TO REOPEN THEIR ASSESSMENTS IN ACCORDANCE WITH LAW BUT AMOUNT OF SHARE MONEY RECEIVED BY THE COMPANY CANNOT BE REGARDED UNDISCLOSED INCOME U/S 68 OF THE ACT. WE MAY ALSO REPRODUCE ITA NO. 4629(DEL)/2010 & C.O. NO.374(DEL)/2010 17 THE RELEVANT PORTION OF THE JUDGMENT OF HONBLE DELHI HIGH COURT IN THIS CASE WHICH READS AS UNDER:- THE INCOME-TAX APPELLATE TRIBUNAL HAS DISMISSED T HE REVENUES APPEAL AND THUS THERE ARE CONCURRENT FINDINGS PE RTAINING TO THE FACTUAL MATRIX. THE FOLLOWING PARAGRAPH FROM THE IMPUGNED DECISION ADEQUATELY ENCAPSULATES THE NECESSARY DE TAILS: THUS THE QUESTION IS WHETHER IN THE PRESE NT CASE THE ASSESSING OFFICER HAD MATERIAL TO CONCLUDE THAT THE SHARE APP LICANTS IN QUESTION DID NOT EXIST. IT IS SEEN THAT THE ASSESSEE-COMPA NY HAS FURNISHED THE NECESSARY DETAILS SUCH AS PERMANENT ACCOUNT NUMB ER/INCOME-TAX WARD NO./RATION CARD OF THE SHARE APPLICANTS AND S OME OF THEM ARE ASSESSED TO TAX. THE SHARE APPLICATION MONEY HAS BEEN RECEIVED THROUGH BANKING CHANNEL. IN SOME CASE THE CONF IRMATIONS/AFFIDAVITS OF SHARE APPLICANTS CONTAINING THE ABOVE DETAI L WERE ALSO FILED. IT IS SEEN THAT THE ASSESSING OFFICER DID NOT CARRY OUT ANY INQUIRY INTO THE INCOME-TAX RECORD OF THE PERSONS WHO H AVE GIVEN THE PERMANENT ACCOUNT NUMBER/WARD NUMBER IN ORDER TO ASCERTAIN THE NON-EXISTENCE OF THE SHARE APPLICANTS IN QUESTION . THE ASSESSING OFFICER HAS NEITHER CONTROVERTED NOR DISAPPROVED THE MATERIAL FILED BY THE ASSESSEE. IN THE CASE OF CIT VS. MAKH NI AND TYAGI P. LTD. REPORTED IN (2004) 267 ITR 43 (DELHI) THE JURI SDICTIONAL HIGH COURT HAS HELD THAT WHEN THE DOCUMENTARY EVIDENC E WAS PLACED ON RECORD TO PROVE THE IDENTITY OF ALL THE SHAREH OLDERS INCLUDING THEIR PERMANENT ACCOUNT NUMBER/GIR NUMBERS AND FILING OF OTHER DOCUMENTARY EVIDENCE IN THE FORM OF RATION CARD ETC. WHICH HAD NEITHER BEEN CONTROVERTED NOR DISAPPROVED BY THE ASSESSING OFFICER NO INTERFERENCE WAS CALLED FOR. THE TRIBUNAL WA S JUSTIFIED IN DELETING THE ADDITION. THE ASSESSING OFFICER PRO CEEDED TO MAKE THE IMPUGNED ADDITION ON THE GROUND THAT IN SOME CAS E SOME SUMMONS ISSUED WERE RETURNED UNSERVED AND IN SOME CASE S UMMONS THOUGH SERVED BUT THERE WAS NO COMPLIANCE. IN THIS C ONNECTION IT MAY BE MENTIONED THAT IN THE CASE OF CIT VS. ORISSA CO RPORATION P. LTD. [1986] 159 ITR 78 (SC) THE HONBLE COURT HAS HELD THAT WHEN THE ASSESSEE BORROWS THE LOAN AND IF AN ASSESSEE GIVES NAMES AND ADDRESSES OF THE CREDITORS WHO ARE ASSESSED TO T AX AND FULL PARTICULARS IS FURNISHED THEN ASSESSEE HAS DISC HARGED THE DUTY. IF THE REVENUE MERELY ISSUES SUMMONS UNDER SECTIO N 131 AND DOES ITA NO. 4629(DEL)/2010 & C.O. NO.374(DEL)/2010 18 NOT PURSUE THE MATTER FURTHER THE ASSESSEE DOES NOT BECOME RESPONSIBLE FOR THE SAME EVEN IF THE CREDITORS DO NOT APPEAR. ADDITION CANNOT BE MADE U/S 68. 6.3 WE FIND THAT THE FACTS ARE SIMILAR TO THE F ACTS OF LOVELY EXPORTS (P) LTD. (SUPRA). THE ASSESSEE HAS PROVIDED ALL THE DETAILS NECESSARY FOR ESTABLISHING THE IDENTITY OF THE CONTRIBUTORS. THE AO HAS DISCARDED THE WHOLE EVIDENCE WITHOUT ANY ENQUIRY AND CHOSE TO FOLLOW THE FINDINGS OF THE INVESTIGATION WING. THIS IS NOT IN ACCORDANC E WITH THE DECISION OF THE JURISDICTIONAL HIGH COURT AND THE APEX COURT. THE REFORE IT IS HELD THAT THE AMOUNT COULD NOT HAVE BEEN CHARGED TO TAX U/S 68. 7. IN RESPECT OF GROUND NO. 2 THERE IS A PRELI MINARY QUESTION AS TO WHETHER THE LD. CIT(A) ADMITTED ANY FRESH EVID ENCE WHICH WAS NOT FILED BEFORE THE AO. IT IS SEEN THAT THE CLAIM OF THE ASSESSEE IS THAT HE SOLD SHARES TO FOUR PERSONS. THE LD. CIT(A) WANTED IT TO FILE EVIDENCE TO SHOW THE PURCHASE OF THE SHARES. THIS EVIDENCE WAS NO T FILED SUO MOTU BY THE ASSESSEE BUT WAS REQUISITIONED BY THE LD. CIT( A). THEREFORE THE EVIDENCE CANNOT BE SAID TO BE ADDITIONAL EVIDEN CE. NEEDLESS TO SAY THAT THE LD. CIT(A) COULD CALL FOR SUCH EVIDENCE. IN SUCH CIRCUMSTANCES NO USEFUL PURPOSE WILL BE SERVED BY REMANDING THE MAT TER TO THE AO FOR FURTHER VERIFICATION. ITA NO. 4629(DEL)/2010 & C.O. NO.374(DEL)/2010 19 7.1 THE FACTS ARE THAT THE ASSESSEE PURCHASED TWO LAKH SHARES AT THE FACE VALUE FOR THIS YEAR AND SOLD 186550 SHARE S TO FOUR PERSONS AT PAR. THUS THERE WAS NEITHER PROFIT NOR LOSS. THE SALE PROCEEDS WERE RECEIVED BY WAY OF CHEQUES. THE ASSESSEE HAS FUR NISHED SUFFICIENT EVIDENCE TO ESTABLISH THE IDENTITY OF THE PURCHASE RS. THUS IT CAN BE SAID THAT THIS IS NOT A CASE OF CASH CREDIT SIMPLI CITOR. THE MONIES HAVE BEEN RECEIVED AS SALE PROCEEDS THE RESULT OF WHICH I S THAT AN ASSET HELD BY THE ASSESSEE HAS BEEN CONVERTED INTO MONEY. THE AO DID NOT MAKE ANY ENQUIRY FROM ANY OF THE BUYERS OF THE SHARES. TH E WHOLE EVIDENCE WAS DISBELIEVED WITHOUT MAKING ANY ENQUIRY. IN SUCH CIRCUMSTANCES WE DO NOT FIND ANY ERROR IN THE ORDER OF THE LD. CIT(A) TO THE EFFECT THAT THERE IS NOTHING UNUSUAL WITH THE TRANSACTION OF SALE A ND THE AMOUNT DOES NOT REPRESENT UNEXPLAINED CASH CREDIT U/S 68. 8. BEFORE PARTING WE MAY MENTION THAT IT WAS ALSO ONE OF THE CONTENTIONS OF THE LD. DR THAT IF THE AO FAILED TO MAKE ENQUIRY THE LD. CIT(A) OUGHT TO HAVE CONDUCTED FURTHER ENQUIRY. IN THIS CONNECTION HE RELIED ON THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF CIT VS. KANPUR COAL SYNDICATE (1964) 53 ITR 225 IN WHICH IT HAS BEEN HELD THAT ITA NO. 4629(DEL)/2010 & C.O. NO.374(DEL)/2010 20 THE POWERS OF THE APPELLATE ASSISTANT COMMISSIONER (MAY BE READ AS CIT(A) NOW) ARE CO-TERMINUS WITH THE POWERS OF TH E AO. HE CAN DO WHAT THE AO CAN DO AND HE CAN ALSO CAUSE THE AO TO CO NDUCT ENQUIRY. IT IS NO DOUBT TRUE THAT THE CIT(APPEALS) IS COMPETENT UN DER THE ACT TO CARRY OUT ANY ENQUIRY FOR THE PURPOSE OF DECIDING THE APPE AL BEFORE HIM. IN FACT HE MADE ENQUIRY IN REGARD TO PURCHASE OF SHARES BY THE ASSESSEE SO THAT CREDITS IN RESPECT OF SALE PROCEEDS OF 186550 S HARES COULD BE PUT IN PROPER PERSPECTIVE. IN SO FAR AS SHARE APPLICA TION MONEY IS CONCERNED THERE WAS NO REASON TO DOUBT THE EXISTENCE OF THE PERSON AND ONCE THE IDENTITY IS PROVED NOTHING FURTHER IS REQUIRED TO BE DONE. ACTION IF ANY CAN ONLY BE TAKEN IN THE HANDS OF THE CONTRIBUTORS AS PER THE DECISION OF HONBLE SUPREME COURT. THEREFORE WHILE THE AR GUMENT OF THE LD. DR IS VALID IT HAS NO APPLICATION TO THE FACTS OF THE CASE. 8.1 AS ALL THE CREDITS HAVE BEEN HELD TO BE SATIS FACTORILY EXPLAINED THERE IS NO REASON FOR UPHOLDING ADDITION IN RESPECT OF COMMISSION. 9. COMING TO THE CROSS OBJECTION OF THE ASSESSEE THE GROUND REGARDING INITIATION OF ACTION U/S 148 HAS BECOME INFRUCTUO US IN VIEW OF THE FACT THAT THE CASE OF THE ASSESSEE HAS BEEN ACCEPTED ON ME RITS. ALL OTHER GROUNDS ITA NO. 4629(DEL)/2010 & C.O. NO.374(DEL)/2010 21 SUPPORT THE ORDER OF THE CIT(A) WHICH HAS BEEN U PHELD BY US. THUS THESE GROUNDS ARE ALSO INFRUCTUOUS. 10. IN THE RESULT THE APPEAL OF THE REVENUE IS DI SMISSED AND CROSS OBJECTION OF THE ASSESSEE IS DISMISSED AS INFRUCT UOUS. THIS ORDER WAS PRONOUNCED IN THE OPEN COURT ON 21 JANUARY 2011. SD/- SD/- (A.D. JAIN) (K.G.BANSAL) JUDICIAL MEMBER ACCOUNTANT MEMBER DATE OF ORDER: 21 ST JANUARY 2011. SP SATIA COPY OF THE ORDER FORWARDED TO: TULIP ENGINEERING PVT. LTD. NEW DELHI. ITO WARD 16(4) NEW DELHI. CIT(A) CIT THE DR ITAT NEW DELHI. ASSISTANT REGISTRAR.