ITO, New Delhi v. M/s Sanraj Engg. Pvt. Ltd.,, New Delhi

ITA 5/DEL/2010 | 2006-2007
Pronouncement Date: 14-05-2010 | Result: Partly Allowed

Appeal Details

RSA Number 520114 RSA 2010
Assessee PAN AACCS6897E
Bench Delhi
Appeal Number ITA 5/DEL/2010
Duration Of Justice 4 month(s) 12 day(s)
Appellant ITO, New Delhi
Respondent M/s Sanraj Engg. Pvt. Ltd.,, New Delhi
Appeal Type Income Tax Appeal
Pronouncement Date 14-05-2010
Appeal Filed By Department
Order Result Partly Allowed
Bench Allotted G
Tribunal Order Date 14-05-2010
Date Of Final Hearing 10-05-2010
Next Hearing Date 10-05-2010
Assessment Year 2006-2007
Appeal Filed On 01-01-2010
Judgment Text
I.T.A. NO. 05 /DEL/2010 1/10 IN THE INCOME TAX APPELLATE TRIBUNAL NEW DELHI BENCH G BEFORE SHRI A.D. JAIN JUDICIAL MEMBER AND SHRI A K GARODIA ACCOUTANT MEMBER ITA NO.05 /DEL/2010 (ASSESSMENT YEAR 2006-07) ITO WARD 7(3) VS. M/S. SANRAJ ENGG. PVT. LTD. NEW DELHI A-4/B-1 MOHAN COOPERATIVE INDL. ESTATE NEW DELHI. (APPELLANTS) (RESPONDENTS) PAN / GIR NO. AACCS6897E APPELLANT BY: SHRI GAJANAND MEENA CIT DR RESPONDENT BY: SHRI ASHWANI KUMAR CA ORDER PER A. K. GARODIA AM: 1. THIS REVENUES APPEAL HAS BEEN DIRECTED AGAINST THE ORDER OF LD. CIT(A)-X NEW DELHI DATED 23.10.204 FO R THE ASSESSMENT YEAR 2006-07. THE GROUNDS RAISED BY THE REVENUE READ AS UNDER: BRIEFLY STATED THE FACTS OF THE CASE ARE THAT IT IS NOTED BY 1) LD. CIT(A) ERRED IN LAW AND ON THE FACTS AND CIRCUMSTANCES OF THE CASE IN DELETING THE ADDITION OF RS.240 LACS MADE BY THE A.O. U/S 68 OF THE I. T. AC T. 2) LD. CIT(A) ERRED IN LAW AND ON THE FACTS AND CIRCUMSTANCES OF THE CASE IN DELETING THE ADDITION S OF RS.96 98 457/- MADE BY THE A.O. ON ACCOUNT OF DIVIDEND INCOME. I.T.A. NO. 05 /DEL/2010 2/10 3) LD. CIT(A) ERRED IN LAW AND ON THE FACTS AND CIRCUMSTANCES OF THE CASE BY ACCEPTING ADDITIONAL EVIDENCES UNDER RULE 46A OF THE I. T. RULES 1962. 2. THE A.O. IN THE ASSESSMENT ORDER THAT THE ASSESS EE HAS RECEIVED FRESH LOANS OF RS.414.40 LACS FROM 13 PART IES. OUT OF THIS THE A.O. HAS DRAWN ADVERSE INFERENCE W ITH REGARD TO 6 PARTIES FROM WHOM THE ASSESSEE HAD RECE IVED FRESH UNSECURED LOANS OF RS.240 LACS DURING THIS YE AR. THE REASON FOR DRAWING THE ADVERSE INFERENCE WAS TH AT NOTICES SENT TO TWO PARTIES U/S 133(6) HAVE COME BA CK UNSERVED WITH THE REMARKS LEFT IN THE CASE OF M/S . CACTUS MENSWEAR FASHION P. LTD. AND WITH THE REMARK S NO SUCH COMPANY IN THIS NUMBER IN THE CASE OF NIRVANA INDIA P. LTD. WITH REGARD TO THIRD PARTY I. E. MS. PARUL GUPTA IT IS NOTED BY THE A.O. THAT AS PER TH E REPLY RECEIVED FROM HER ON 12.02.2008 IT IS STATED BY HE R THAT SHE HAS NOT GIVEN ANY LOAN TO THIS ASSESSEE IN FINA NCIAL YEAR 2005-06. FOR REMAINING THREE PARTIES BANK STATEMENT ETC. WERE NOT PRODUCED TO ESTABLISH CREDITWORTHINESS. THE A.O. HAD ASKED THE ASSESSEE TO PRODUCE ALL THESE LOAN CREDITORS. IT IS FURTHER NO TED BY THE A.O. THAT THREE PERSONS I.E. MS. SONAL GUPTA G AURI GUPTA AND NAVNEET GUPTA HUF HAVE NOT GIVEN COPIES OF THEIR BANK STATEMENTS IN ADDITION TO THE THREE P ARTIES NAMED ABOVE FOR WHICH IN TWO CASES NOTICE U/S 133(6 ) I.T.A. NO. 05 /DEL/2010 3/10 COULD NOT BE SERVED AND IN ONE CASE OF MS. PARUL GU PTA WHO HAD DENIED REGARDING GIVING ANY LOAN IN THIS YE AR. BY MAKING THESE OBSERVATIONS THE A.O. MADE ADDITIO N OF RS.240/- U/S 68 ON THE BASIS THAT ASSESSEE COULD NOT SUBSTANTIATE THE CREDITWORTHINESS OF THESE SIX PERS ONS. BEING AGGRIEVED THE ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE THE LD. CIT(A) WHO HAS DELETED THIS ADDITION BY MAKING FOLLOWING OBSERVATIONS IN PARA 2 .9 OF HIS ORDER: I HAVE GONE THROUGH THE CONTENTS OF THE ASSESSMENT ORDER AND THE SUBMISSION MADE BY THE A.R. ON BEHALF OF THE APPELLANT COMPANY AND IT IS SEEN THAT THE CA SH CREDITORS HAVE BEEN IDENTIFIED AND IT HAS BEEN ESTABLISHED THEY HAVE LENT MONEY TO THE APPELLANT COMPANY. THEREFORE NO RECOURSE CAN BE MADE TO THE PROVISIONS OF S.68. THIS BEING THE CASE THE ADDITI ON OF RS.2 40 00 000/- MADE BY THE A.O. IS DELETED AND IT IS HELD THAT NO GROUND EXISTS FOR RESORT TO THE PROVISIONS OF SECTION 68. THIS GROUND OF APPEAL IS ALLOWED AND THE APPELLANT COMPANY GETS A RELIEF OF RS.2 40 00 000/-. NOW THE REVENUE IS IN APPEAL BEFORE US. 3. WITH REGARD TO GROUND NO.2 THE FACTS ARE THAT IT IS NOTED BY THE A.O. IN THE ASSESSMENT ORDER THAT THE ASSESSEE HAS GIVEN LOAN AND ADVANCES TO 7 PARTIES TOTALING RS.531.50 LACS. IT HAS ALSO BEEN OBSERVED BY THE A.O. THAT THE ASSESSEE IS NOT A COMPANY IN WHIC H PUBLIC IS SUBSTANTIALLY INTERESTED. IT IS FURTHER NOTED BY I.T.A. NO. 05 /DEL/2010 4/10 THE A.O. THAT ASSESSEE HAS NOT FURNISHED THE SHARE HOLDINGS PATTERN OF THE ASSESSEE COMPANY AS WELL AS OF TWO COMPANIES TO WHOM ADVANCES WERE GIVEN BY THE ASSESSEE COMPANY I.E. M/S. SANCORP EUROBASE LTD. RS.161.50 LACS AND E.C.A. ENGG. P. LTD. RS.260 LACS . IT HAS ALSO BEEN OBSERVED BY THE A.O. THAT THE ASSESSE E COMPANY HAD ACCUMULATED PROFIT TO THE EXTENT OF RS.96 98 457/- AND TO THIS EXTENT THE A.O. HAS MAD E ADDITION OF RS.96 98 457/- U/S 2(22)(E) OF THE I. T . ACT. IT IS FURTHER OBSERVED BY THE A.O. THAT THIS INCOME IS SUBJECT TO SPECIAL RATE OF TAX AS IN THE CASE OF DI VIDEND DISTRIBUTION ON WHICH TAX IS TO BE PAID @ 10% U/S 115(O) OF THE I. T. ACT. BEING AGGRIEVED THE ASSE SSEE CARRIED THE MATER IN APPEAL BEFORE LD. CIT(A) ON TH IS ISSUE ALSO AND THIS ISSUE WAS ALSO DECIDED BY THE L D. CIT(A) IN FAVOUR OF THE ASSESSEE BY MAKING THE FOLLOWING OBSERVATIONS IN PARA 3.3. OF HIS ORDER: I HAVE GONE THROUGH THE CONTENTS OF THE ASSESSMENT ORDER AND THE SUBMISSION MADE BY THE A.R. ON BEHALF OF THE APPELLANT COMPANY. AFTER GOING THROUGH THE CONTENTS OF THE ASSESSMENT ORDER AND THE ARGUMENTS ADVANCED ON BEHALF OF THE APPELLANT COMPANY I AM CONVINCED THAT THE PROVISIONS OF SECTION 2(22)(E) A RE NOT ATTRACTED IN THE INSTANT CASE. THIS GROUND OF APPEAL IS DECIDED IN FAVOUR OF THE APPELLANT COMPAN Y AND IT GETS AS RELIEF OF RS.96 98 457/-. ON THIS ISSUE ALSO THE REVENUE IS IN APPEAL BEFORE US. I.T.A. NO. 05 /DEL/2010 5/10 4. THE 3 RD GROUND OF THE REVENUE IS REGARDING ACCEPTING ADDITIONAL EVIDENCE BY LD. CIT(A) UNDER RULE 46A OF THE I T RULES 1962. REGARDING 3 RD GROUND I.E. REGARDING ACCEPTING THE ADDITIONAL EVIDENCE BY THE LD. CIT(A) IT IS SUBMITTED BY THE LD. A.R. THAT A SEPARATE ORDER DATED 18.03.2009 WAS PASSED BY THE LD. CIT(A) UNDER RULE 46A OF THE I T RULES. COPY OF THAT ORDER WAS SUBMI TTED AND OUR ATTENTION WAS DRAWN TO PARA 2 OF THIS ORDE R OF CIT(A) WHEREIN IT IS NOTED BY HIM THAT AS PER THE ASSESSEE IN CERTAIN CASES DUE TO RELUCTANCE OF TH E DEPOSITORS PROVIDE COPIES OF BANK STATEMENT THE ASSESSEE WAS NOT IN A POSITION TO PROVIDE THOSE BAN K STATEMENTS OF LOAN CREDITORS TO THE A.O. IN THE COU RSE OF ASSESSMENT PROCEEDINGS AND HENCE THE ASSESSEE WAS PREVENTED BY SUFFICIENT CAUSE FROM FILING THESE DET AILS BEFORE THE A.O. IN VIEW OF THIS FINDING OF LD. CIT (A) WHICH COULD NOT BE CONTROVERTED BY THE LD. D.R. AND IN VIEW OF HIS FACT THAT REMAND REPORT WAS OBTAINED BY THE LD. CIT(A) FROM THE A.O. WE ARE OF THE CONSIDERED OPINION THAT NO FAULT COULD BE FOUND IN THIS ORDER OF LD. CIT(A) REGARDING ADMISSION OF ADDITIONAL EVIDENCE B Y THE LD. CIT(A) AND WE THEREFORE REJECT GROUND NO. 3 OF THE REVENUES APPEAL. 5. WITH REGARD TO GROUND NO.1 LD. D.R. SUPPORTED TH E ASSESSMENT ORDER. IT HAS BEEN SUBMITTED BY HIM THA T THE I.T.A. NO. 05 /DEL/2010 6/10 CREDITWORTHINESS AND GENUINENESS WERE NOT ESTABLISH ED AND FOR THE PURPOSE OF SECTION 68 THESE ARE THE ESS ENTIAL INGREDIENTS. RELIANCE WAS PLACED BY HIM ON THE FOLLOWING JUDGEMENTS: (A) ITO VS. DIZA HOLDINGS P. LTD. 255 ITR 573 (KERALA) (B) SHANKER INDUSTRIES VS CIT 114 ITR 689 (CAL.) (C) INDUS VELLY PROMOTERS VS. CIT 305 ITR 202 (DEL.) (D) LOVELY AUTO P. LTD. VS ACIT 177 TAXMAN 261 (E) ITO VS. ARYAN MANAGEMENT SERVICES P. LTD. 210 TIOL 48 ITAT- DEL. DATED 08.01.2010; (F) ITO VS SOUTH EAST MULTIPLEX P. LTD. I.T.A. NO. 2089/DEL/2008 DATED 26.03.2010. 6. AS AGAINST THIS LD. D.R. SUPPORTED THE ORDER OF LD. CIT(A). IT IS SUBMITTED BY HIM THAT THE ADDITIONS WERE MADE BY THE A.O. FOR THE REASON THAT BANK STATEMENT S OF THESE LOAN CREDITORS COULD NOT BE MADE AVAILABLE BE FORE HIM AND SINCE THE BANK STATEMENTS WERE MADE AVAILAB LE BEFORE THE LD. CIT(A) AND REMAND REPORT WAS OBTAIN ED BY THE LD. CIT(A) FROM THE A.O. AND NO DEFECT HAS B EEN POINTED OUT BY THE A.O. IN THE REMAND REPORT DATED 19.05.2009 THE ORDER OF LD. CIT(A) SHOULD BE CONFIRMED. I.T.A. NO. 05 /DEL/2010 7/10 7. REGARDING THE 2 ND ISSUE IT IS SUBMITTED BY THE LD. D.R. THAT THE ORDER OF LD. CIT(A) ON THIS ISSUE IS VERY CRYPTIC AND HAS NOT STATED THE BASIS ON WHICH IT WAS HELD BY HIM THAT PROVISIONS OF SECTION 2(22)(E) OR NOT ATTR ACTED IN THE PRESENT CASE. IT WAS SUBMITTED BY HIM THAT THE MATTER SHOULD GO BACK TO THE FILE OF LD. CIT(A) ON THIS ISSUE FOR A SPEAKING ORDER. LD. A.R. ALSO AGREED W ITH THIS PROPOSITION OF LD. D.R. WITH REGARD TO GROUND NO.2 OF THE APPEAL. 8. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PERU SED THE MATERIAL ON RECORD AND HAVE GONE THROUGH THE OR DERS OF AUTHORITIES BELOW. WE FIND THAT IT IS NOTED BY THE LD . CIT(A) IN PARA 2.6 OF HIS ORDER THAT BANK STATEMENT S OF ALL THESE 6 PARTIES WERE DULY FILED IN THE FORM OF ADDITIONAL EVIDENCE WHICH HAVE BEEN ADMITTED BY THE LD. CIT(A) UNDER RULE 46A OF THE I.T. RULES. AFTER MENTIONING THESE FACTS IN PARA 2.6 OF HIS ORDER LD . CIT(A) HAS NOTED THE ARGUMENTS OF THE LD. A.R. BEFO RE HIM IN PARA 2.7 AND 2.8 OF HIS ORDER AND THEREAFTER HE HAS DECIDED THE ISSUE IN FAVOUR OF THE ASSESSEE AS PER PARA 2.9 OF HIS ORDER WHICH HAS ALREADY BEEN REPROD UCED HEREINABOVE AT PARA 2. IN THIS PARA LD. CIT(A) HA S NOT GIVEN ANY FINDING REGARDING CREDITWORTHINESS OF THE SE LOAN CREDITORS. HE HAS SIMPLY STATED THAT AS PER T HE SUBMISSION OF THE LD. A.R. IT IS SEEN THAT THE CRE DITORS I.T.A. NO. 05 /DEL/2010 8/10 HAVE BEEN IDENTIFIED AND IT HAS BEEN ESTABLISHED TH AT THEY HAVE LENT THE MONEY TO THE ASSESSEE COMPANY WITHOUT GIVING ANY FINDING AS TO HOW THE CREDITWORTHINESS OF THESE LOAN CREDITORS IS ESTABLI SHED. IN THE ABSENCE OF ANY FINDING REGARDING CREDITWORTH INESS OF THE LOAN CREDITORS MERE FURNISHING THE BANK STATEMENTS OF THE LOAN CREDITORS COULD BE EQUATED W ITH ESTABLISHING THE CREDITWORTHINESS. EVEN THESE BANK STATEMENTS ARE NOT MADE AVAILABLE BEFORE US ENABLIN G US TO APPLY OUR MIND ON THIS ASPECT. SINCE NO SPEAKI NG ORDER HAS BEEN PASSED BY THE LD. CIT(A) AS TO HOW T HE CREDITWORTHINESS OF THESE LOAN CREDITORS HAS BEEN ESTABLISHED WE FEEL THAT THIS MATTER SHOULD GO BAC K TO THE FILE OF THE LD. CIT(A) FOR FRESH DECISION AFTER EXAMINING THIS ASPECT AND HENCE WE SET ASIDE THE OR DER OF LD. CIT(A) ON THIS ISSUE AND RESTORE THIS MATTER BACK TO HIS FILE FOR A FRESH DECISION. LD. CIT(A) SHOUL D GIVE SPECIFIC FINDING AS TO WHETHER THE CREDITWORTHINESS OF THESE LOAN CREDITORS ARE ESTABLISHED OR NOT AND HE SHOULD INDICATE THE BASIS OF HIS DECISION. HE SHOULD PASS NECESSARY ORDER AS PER LAW AS PER ABOVE DISCUSSION AFTER PROVIDING ADEQUATE OPPORTUNITY OF BEING HEARD TO BO TH THE SIDES. GROUND NO.1 OF THE REVENUES APPEAL STA NDS ALLOWED FOR STATISTICAL PURPOSES. I.T.A. NO. 05 /DEL/2010 9/10 9. REGARDING GROUND NO.2 OF THE REVENUES APPEAL W E FIND THAT THE A.O. HAS INVOKED THE PROVISION OF SEC TION 2(22)(E) OF THE ACT ON THE BASIS THAT THE ASSESSEE HAS NOT FURNISHED SHARE HOLDING PATTERN OF THE ASSESSEE COM PANY AS WELL AS OF THOSE COMPANIES TO WHOM LOANS WERE ADVANCED BY THE ASSESSEE COMPANY BEING M/S. SANCROP EUROBASE LTD. RS.161.50 LACS AND E.C.A. ENGG. P. LT D. RS.260 LACS. THIS FINDING IS GIVEN BY THE A.O. THA T THE ASSESSEE COMPANY POSSESS ACCUMULATED PROFIT TO THE EXTENT OF RS.96 98 457/- AND ADDITION WAS MADE BY T HE A.O. TO THIS EXTENT ONLY ALTHOUGH THE LOAN AMOUNT W AS TO THE TUNE OF RS.531.50 LACS. NOW SINCE THERE IS ACCUMULATED PROFIT IN THE HANDS OF THE ASSESSEE COMPANY WHICH FACT IS NOT DISPUTED BEFORE US THE O THER BASIS ON WHICH IT CAN BE SAID THAT THE PROVISIONS O F SECTION 2(22)(E) ARE NOT APPLICABLE CAN BE ON THE BASIS THAT THOSE PERSONS/COMPANIES TO WHOM LOANS AND ADVANCES WERE GIVEN BY THE ASSESSEE COMPANY WERE N OT HOLDING 10% OR MORE OF THE VOTING POWER OF THE ASSESSEE COMPANY AND THERE IS NO OTHER BASIS TO INV OKE THE PROVISIONS OF SECTION 2(22)(E) BUT NO SUCH DETA ILS REGARDING SHAREHOLDING PATTERN OF THE ASSESSEE COMP ANY AND TO THOSE COMPANIES TO WHOM ADVANCES WERE GIVEN BY THE ASSESSEE COMPANY ARE BROUGHT OUT ON RECORD. NO BASIS IS INDICATED BY THE LD. CIT(A) IN HIS ORDER O N I.T.A. NO. 05 /DEL/2010 10/10 WHICH IT IS STATED BY HIM THAT THE PROVISIONS OF SE CTION 2(22)(E) ARE NOT APPLICABLE IN THE PRESENT CASE. H ENCE ON THIS ISSUE ALSO WE SET ASIDE THE ORDER OF LD. C IT(A) AND RESTORE THE MATTER BACK TO HIS FILE FOR A FRESH DECISION. HE SHOULD INDICATE THE BASIS IN HIS ORDE R REGARDING HIS DECISION AS TO WHETHER THE PROVISIONS OF SECTION 2(22)(E) ARE APPLICABLE IN THE PRESENT CASE OR ARE NOT APPLICABLE. HE SHOULD PASS SPEAKING ORDER AS P ER ABOVE DISCUSSION AFTER PROVIDING ADEQUATE OPPORTUNI TY OF BEING HEARD TO BOTH THE SIDES. 10. IN THE RESULT APPEAL OF THE REVENUE STANDS PAR TLY ALLOWED FOR STATISTICAL PURPOSES. 11. THIS DECISION WAS PRONOUNCED IN THE OPEN COURT ON 14 TH MAY 2010. SD./- SD./- (A. D. JAIN) (A K GARODIA) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED:14 TH MAY 2010 SP. COPY FORWARDED TO 1. APPELLANT 2. RESPONDENT 3. CIT TRUE COPY: BY ORDER 4. CIT(A) 5. DR DY. REGISTRAR ITAT NEW DELHI