ITO, New Delhi v. M/s Pukar Adv. & Marketing Pvt. Ltd.,, New Delhi

ITA 4262/DEL/2009 | 2006-2007
Pronouncement Date: 08-01-2010 | Result: Allowed

Appeal Details

RSA Number 426220114 RSA 2009
Assessee PAN AADCP5712G
Bench Delhi
Appeal Number ITA 4262/DEL/2009
Duration Of Justice 2 month(s) 3 day(s)
Appellant ITO, New Delhi
Respondent M/s Pukar Adv. & Marketing Pvt. Ltd.,, New Delhi
Appeal Type Income Tax Appeal
Pronouncement Date 08-01-2010
Appeal Filed By Department
Order Result Allowed
Bench Allotted F
Tribunal Order Date 08-01-2010
Date Of Final Hearing 04-01-2010
Next Hearing Date 04-01-2010
Assessment Year 2006-2007
Appeal Filed On 04-11-2009
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL [ DELHI BENCH B DELHI ] BEFORE SHRI A. D. JAIN JM SHRI K. D. RANJAN AM I. T. APPEAL NO. 4262 (DEL) OF 2009. ASSESSMENT YEAR : 2006-07 THE INCOME-TAX OFFICER M/S. PUKAR ADV. & MARK ETING PVT. LTD. W A R D : 14 (4) VS. R-Z-E : 668/15-A GALI NO. 18C-1 N E W D E L H I. SADH NAGAR P A R T : II PALAM COLONY NEW DELHI-110 045. P A N / G I R NO. AAD CP 5712 G. ( APPELLANT ) ( RESPONDE NT ) ASSESSEE BY : SHRI S. RAM CHANDANI ADV.; DEPARTMENT BY : SHRI H. K. LAL SR. D.R.; O R D E R. PER K. D. RANJAN AM : THIS APPEAL BY THE REVENUE FOR ASSESSMENT YEAR 200 6-07 ARISES OUT OF THE ORDER OF THE LD. COMMISSIONER OF INCOME TAX (APPEALS)-XVII NEW DELHI. 2. THE ONLY ISSUE FOR CONSIDERATION RELATES TO DELE TING THE ADDITION OF RS.49 85 000/- MADE BY THE ASSESSING OFFICER UNDER SECTION 68 OF T HE I. T. ACT 1961. THE FACTS OF THE CASE STATED IN BRIEF ARE THAT DURING THE PREVIOUS YEAR RELEVANT ASSESSMENT YEAR 2006-07 THE 2 I. T. APPEAL NO. 4262 (DEL) OF 2009. ASSESSEE HAD ALLOTTED PAID UP SHARES OF RS.49 85 000/-. THE ASSESSING OFFICER MADE ENQUIRIES FROM THE ASSESSEE REGARDING THE GENUINENESS OF SUCH INVESTMENTS. THE ASSESSEE FILED CONFIRMATIONS GIVING ADDRESSES AND PAN OF ALL THE A PPLICANTS. THE ASSESSING OFFICER BEFORE MAKING ADDITION UNDER SECTION 68 OF THE ACT ASKED T HE ASSESSEE TO SHOW CAUSE AS TO WHY THE AMOUNT OF RS.49 85 000/- SHOULD NOT BE TREATED AS C ASH CREDIT UNDER SECTION 68 OF THE ACT. THE ASSESSEE IN RESPONSE TO THE QUERY RAISED FILED REPLY VIDE LETTER DATED 26/12/2008 STATING THAT SHARE APPLICANTS ARE WELL ESTABLISHED AND ARE VERY MUCH CAPABLE OF HAVING FUNDS WITH THEM. AS REGARDS PRODUCING THE SHARE APPLICANTS I T WAS STATED THAT DUE TO PAUCITY OF TIME THEY WERE NOT ABLE TO PRODUCE THEM AT THAT TIME. T HE ASSESSING OFFICER WAS OF THE OPINION THAT THE ASSESSEE HAD NOT SUBMITTED ANY DOCUMENTARY EVID ENCE IN RESPECT OF CAPABILITY OF SHARE APPLICANTS TO INVEST IN SHARES AND ALSO HAD NOT DIS CHARGED THE ONUS CAST UPON HIM TO PROVE THE IDENTITY GENUINENESS AND CREDITWORTHINESS OF THE S HARE APPLICANTS. HE THEREFORE TREATED THE AMOUNT OF SHARE APPLICATION MONEY AS UNEXPLAINED UN DER SECTION 68 OF THE INCOME-TAX ACT 1961. 3. ON APPEAL IT WAS SUBMITTED THAT GENUINENESS OF T HE SHARE APPLICANTS WAS NOT OPEN TO DOUBT SINCE THOSE APPLICANTS WERE COMPANIES INCORPO RATED UNDER THE COMPANIES ACT REGISTERED WITH THE REGISTRAR OF COMPANIES AND WERE REQUIRED TO FILE ANNUAL RETURNS DISCLOSING SUCH TRANSACTIONS. IT WAS ALSO SUBMITTED THAT UNLI KE CASH CREDITS THE ASSESSEE WAS REQUIRED TO ESTABLISH ONLY THE IDENTITY OF THE INVESTORS AND CO NFIRMATION TO THAT EFFECT FROM SUCH INVESTORS. DUE TO EXIGENCIES OF BUSINESS THE AMOUNTS WERE RAI SED IN CASH ON WHICH THERE WAS NO BAR SO LONG AS THE INVESTORS WERE IDENTIFIABLE AND THE INV ESTMENT WAS ACKNOWLEDGED BY THEM. SINCE CONFIRMATIONS WERE FILED GIVING PAN ADDRESSES AND ACKNOWLEDGEMENT OF INVESTMENT THE PROVISIONS OF SECTION 68 OF THE ACT WERE NOT APPLIC ABLE. RELIANCE WAS PLACED ON THE DECISION OF HON'BLE SUPREME COURT IN THE CASE OF LOVELY EXPO RTS P. LTD. 216 CTR 195. THE LD. CIT (APPEALS) CONSIDERING THE FACTS OF THE CASE AND IN VIEW OF DECISION OF HON'BLE SUPREME COURT IN THE CASE OF LOVELY EXPORTS P. LTD. (SUPRA) DELET ED THE ADDITION. 4. BEFORE US THE LD. SR. DR SUBMITTED THAT THE ASSE SSEE HAD NOT PRODUCED THE INVESTORS FROM WHOM THE AMOUNT WAS RECEIVED IN CASH. THE CRE DITWORTHINESS OF THE PARTIES WAS NOT PROVED AS NO OTHER EVIDENCE WAS FILED FROM THE INVE STORS. ON THE OTHER HAND THE LD. AR OF THE ASSESSEE SUBMITTED THAT THE ASSESSEE HAD FILED CONFIRMATIONS FROM THE PARTIES. IT WAS ALSO 3 I. T. APPEAL NO. 4262 (DEL) OF 2009. SUBMITTED THAT THE INVESTORS WERE NOT PRODUCED AS S UFFICIENT TIME WAS NOT PROVIDED TO THE ASSESSEE TO PRODUCE THEM. 5. WE HAVE HEARD BOTH THE PARTIES AND GONE THROUGH THE MATERIAL AVAILABLE ON RECORD. WE HAVE ALSO GONE THROUGH THE CONFIRMATIONS FILED B Y THE INVESTORS. FROM THE PERUSAL OF CONFIRMATIONS FILED WE FIND THAT ALL 19 SHARE APPL ICANTS HAVE FILED THE CONFIRMATIONS IN THE SAME LANGUAGE EXCEPT DIFFERENCE IN THE AMOUNTS. IN NONE OF THE CONFIRMATIONS THE WARD / CIRCLE IN WHICH SHARE APPLICANTS ARE ASSESSED HAS B EEN MENTIONED. THEREFORE THE ASSESSING OFFICER COULD NOT HAVE MADE ANY VERIFICATION IN THE ABSENCE OF CIRCLE / WARD WHERE SUCH INVESTORS ARE ASSESSED TO TAX. MOREOVER THE CREDI TWORTHINESS AND GENUINENESS OF TRANSACTIONS IS ALSO NOT PROVED. THE ASSESSEE HAD PLEADED BEFOR E THE LD. CIT (A) AS WELL AS BEFORE US THAT THE INVESTORS COULD NOT BE PRODUCED AS SUFFICIENT W AS NOT PROVIDED. 6. HONBLE DELHI HIGH COURT IN THE CASE OF COMMISSI ONER OF INCOME-TAX V. DIVINE LEASING & FINANCE LTD. [2007] 158 TAXMAN 440 IN PAR A 13 HAS HELD AS UNDER:- 13. THERE CANNOT BE TWO OPINIONS ON THE ASPECT THA T THE PERNICIOUS PRACTICE OF CONVERSION OF UNACCOUNTED MONEY THROUGH THE MASQUER ADE OR CHANNEL OF INVESTMENT IN THE SHARE CAPITAL OF A COMPANY MUST BE FIRMLY EX CORIATED BY THE REVENUE. EQUALLY WHERE THE PREPONDERANCE OF EVIDENCE INDICATES ABSEN CE OF CULPABILITY AND COMPLEXITY OF THE ASSESSEE IT SHOULD NOT BE HARASSED BY THE R EVENUES INSISTENCE THAT IT SHOULD PROVE THE NEGATIVE. IN THE CASE OF A PUBLIC ISSUE THE COMPANY CONCERNED CANNOT BE EXPECTED TO KNOW EVERY DETAIL PERTAINING TO THE IDE NTITY AS 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 INFO RMATION CONTAINED IN THE STATUTORY SHARE APPLICATION DOCUMENTS. IN THE CASE OF A PRIVA TE PLACEMENT THE LEGAL REGIME WOULD NOT BE THE SAME. A DELICATE BALANCE MUST BE M AINTAINED WHILE WALKING THE TIGHTROPE OF SECTIONS 68 AND 69. THE BURDEN OF PROO F CAN SELDOM BE DISCHARGED TO THE HILT BY THE ASSESSEE. IF THE ASSESSING OFFICER HARB OURS DOUBTS OF THE LEGITIMACY OF ANY SUBSCRIPTION HE IS EMPOWERED NAY-DUTY-BOUND TO CA RRY OUT THOROUGH INVESTIGATIONS. BUT IF THE ASSESSING OFFICER FAILS TO UNEARTH ANY W RONG OR ILLEGAL DEALINGS HE CANNOT 4 I. T. APPEAL NO. 4262 (DEL) OF 2009. OBDURATELY ADHERE TO HIS SUSPICIONS AND TREAT THE S UBSCRIBED CAPITAL AS THE UNDISCLOSED INCOME OF THE COMPANY. FURTHER HONBLE HIGH COURT IN PARA 16 OF THIS ORDE R HELD AS UNDER:- 16. IN THIS ANALYSIS A DISTILLATION OF THE PREC EDENTS YIELDS THE FOLLOWING PROPOSITIONS OF LAW IN THE CONTEXT OF SECTION 68 OF THE INCOME-TAX ACT. THE ASSESSEE HAS TO PRIMA FACIE PROVE (1) THE IDENTITY OF THE CR EDITOR/SUB-SCRIBER; (2) THE GENUINENESS OF THE TRANSACTION NAMELY : WHETHER IT HAS BEEN TRANSMITTED THROUGH BANKING OR OTHER INDISPUTABLE CHANNELS; (3) THE CRE DITWORTHINESS OR FINANCIAL STRENGTH OF THE CREDITOR/SUBSCRIBER; (4) IF RELEVANT DETAILS OF THE ADDRESS OR PAN IDENTITY OF THE CREDITOR/SUBSCRIBER ARE FURNISHED TO THE DEPARTMENT ALONG WITH COPIES OF THE SHAREHOLDERS REGISTER SHARE APPLICATION FORMS SHA RE TRANSFER REGISTER ETC. IT WOULD CONSTITUTE ACCEPTABLE PROOF OR ACCEPTABLE EXP LANATION BY THE ASSESSEE. (5) THE DEPARTMENT WOULD NOT BE JUSTIFIED IN DRAWING AN ADV ERSE INFERENCE ONLY BECAUSE THE CREDITOR/SUBSCRIBER FAILS OR NEGLECTS TO RESPOND TO ITS NOTICES; (6) THE ONUS WOULD NOT STAND DISCHARGED IF THE CREDITOR/SUBSCRIBER DENIES OR REPUDIATES THE TRANSACTION SET UP BY THE ASSESSEE NOR SHOULD THE ASSESSING OFFICER TA KE SUCH REPUDIATION AT FACE VALUE AND CONSTRUE IT WITHOUT MORE AGAINST THE ASSESSEE . (7) THE ASSESSING OFFICER IS DUTY- BOUND TO INVESTIGATE THE CREDITWORTHINESS OF THE CR EDITOR/SUBSCRIBER THE GENUINENESS OF THE TRANSACTION AND THE VERACITY OF THE REPUDIATION . 7. FURTHER HONBLE DELHI HIGH COURT IN THE CASE OF BHAV SHAKTI STEEL MINES (P.) LTD V CIT [2009] 179 TAXMAN 25(DEL) HAS HELD THAT HON'BLE SUPREME COURT DID NOT FIND ANY INFIRMITY WITH THE IMPUGNED JUDGMENT OF THE HIGH CO URT WHICH WAS A COMMON ORDER ALONG WITH THE DECISION IN CIT V. DIVINE LEASING & FINANC E LTD. [2008] 299 ITR 268 (DELHI). SINCE THE ASSESSEE HAD NOT PRODUCED THE PARTIES BEFORE TH E ASSESSING OFFICER AND THE LD. CIT (APPEALS) HAS DELETED THE ADDITION BY FOLLOWING THE DECISION OF HON'BLE SUPREME COURT IN THE CASE OF LOVELY EXPORTS PVT. LTD. (SUPRA) IN OUR CO NSIDERED OPINION THE MATTER SHOULD GO BACK TO THE ASSESSING OFFICER IN VIEW OF DECISION O F HON'BLE DELHI HIGH COURT IN THE CASE OF COMMISSIONER OF INCOME-TAX V. DIVINE LEASING & FINA NCE LTD.(SUPRA) FOR GIVING AN OPPORTUNITY TO THE ASSESSEE TO EXAMINE THE CASE IN THE LIGHT OF DECISION OF HON'BLE DELHI HIGH 5 I. T. APPEAL NO. 4262 (DEL) OF 2009. COURT. THE ASSESSING OFFICER WILL PROVIDE SUFFICIE NT OPPORTUNITY TO THE ASSESSEE BEFORE DECIDING THE ISSUE ON MERITS. 8. IN THE RESULT THE APPEAL FILED BY THE REVENUE I S ALLOWED FOR STATISTICAL PURPOSES. THE ORDER PRONOUNCED IN THE OPEN COURT ON : 08TH JANUARY 2010. SD/- SD/- [ A. D. JAIN ] [ K. D. RANJAN ] JUDICIAL MEMBER ACCOUNTANT MEMBER DATED : 08TH JANUARY 2010. *MEHTA * COPY OF THE ORDER FORWARDED TO : - 1. APPELLANT. 2. RESPONDENT. 3. CIT 4. CIT (APPEALS) 5. DR ITAT NEW DELHI. TRUE COPY. BY ORDER. ASSISTANT REGISTRAR ITAT. 6 I. T. APPEAL NO. 4262 (DEL) OF 2009.