ITO, WARD- 7(3), NEW DELHI v. DIRECT MERCANTILE COMPANY PVT. LTD., NEW DELHI

ITA 5221/DEL/2017 | 2012-2013
Pronouncement Date: 19-03-2021 | Result: Partly Allowed

Appeal Details

RSA Number 522120114 RSA 2017
Assessee PAN AADCD9171F
Bench Delhi
Appeal Number ITA 5221/DEL/2017
Duration Of Justice 3 year(s) 7 month(s) 7 day(s)
Appellant ITO, WARD- 7(3), NEW DELHI
Respondent DIRECT MERCANTILE COMPANY PVT. LTD., NEW DELHI
Appeal Type Income Tax Appeal
Pronouncement Date 19-03-2021
Appeal Filed By Department
Order Result Partly Allowed
Bench Allotted B
Tribunal Order Date 19-03-2021
Assessment Year 2012-2013
Appeal Filed On 11-08-2017
Judgment Text
1 ITA NO. 5221/DEL/2017 IN THE INCOME TAX APPELLAT E TRIBUNAL DELHI BENCH: B NEW DELHI BEFORE SHRI R. K. PANDA ACCOUNTANT MEMBE R AND MS SUCHITRA KAMBLE JUDIC IAL MEMBER ITA NO. 5221/DEL/2017 ( A.Y 2012-13) (THROUGH VIDEO CONFEREN CING) ITO WARD-7(3) ROOM NO. 400-B C. R. BUILDING NEW DELHI (APPELLANT) VS DIRECT MERCANTILE COMPANY PVT. LTD. C-103 GF RIGHT SIDE KH NO. 115 PANCHSHEEL VIHAR KHIRKI NEW DELHI PAN: AADCD9171F (RESPONDENT) APPELLANT BY SH. JAGDISH SINGH SR. DR RESPONDENT BY SH. VED JAIN ADV & SH. ASHISH GOEL CA ORDER PER SUCHITRA KAMBLE JM THIS APPEAL IS FILED BY THE REVENUE AGAINST THE ORD ER DATED 05.05.2017 PASSED BY CIT(A)-3 NEW DELHI FOR ASSESSMENT YEAR 2012-13. 2. THE GROUNDS OF APPEAL ARE AS UNDER:- 1. LD. COMMISSIONER OF INCOME TAX (APPEAL) ERRED I N LAW AND ON FACTS OF THE CASE IN DELETING THE ADDITION OF RS. 3 14 16 000/- MADE BY THE A.O ON ACCOUNT OF UNEXPLAINED SHARE CAPITAL & SHARE PREMIUM AND RS . 2 10 00 000/- ON ACCOUNT OF UNEXPLAINED INVESTMENT 3. DURING THE YEAR UNDER CONSIDERATION THE ASSESSE E HAS SHOWN INCOME FROM HANDLING CHARGES AND APART FROM BUSINESS INCOM E NO OTHER SOURCE OF DATE OF HEARING 10.02.2021 DATE OF PRONOUNCEMENT 19.03.2021 2 ITA NO. 5221/DEL/2017 INCOME WAS ADMITTED BY THE ASSESSEE. RETURN DECLARI NG OF INCOME RS. 1 11 507/- WAS FILED ON 30/09/2012 WHICH WAS PROCES SED U/S 143(1) AND SUBSEQUENTLY SELECTED FOR SCRUTINY UNDER CASS. IN THE YEAR UNDER CONSIDERATION THE ASSESSEE HAS SHOWN TO HAVE RECEI VED SHARE PREMIUM TO THE TUNE OF RS. 2 76 76 553/-. THE ASSESSEE CONTENDED THAT ISSUE OF SHARES AT PREMIUM IS A COMMERCIAL DECISION AND DOES NOT REQUI RE ANY JUSTIFICATION AND EXPLAINED THAT SHARE PREMIUM WAS RAISED BY COMPLYIN G THE PROVISIONS OF COMPANIES ACT 1956. DURING THE COURSE OF ASSESSME NT PROCEEDINGS INFORMATION U/S 133(6) HAVE BEEN CALLED FOR FROM TH E SHARE HOLDERS WHO HAVE PAID SHARE PREMIUM TO THE ASSESSEE COMPANY. THE DE TAILS OF WHICH IS AS UNDER:- A) M/S SARAS DEVELOPERS PVT. LTD. B) M/S DIRECT TRADING COMPANY PVT. LTD. C) M/S DOMAIN ENTERPRISES PVT. LTD. D) M/S RAM RAHIM TRADING CO. PVT. LTD. E) M/S RAJ TRADING CO. PVT. LTD. F) M/S LEGACY MERCANTILE CO. PVT. LTD. F) M/S KABIR ENTERPRISES PVT. LTD. G) M/S NACHIKETA AGROTECH PVT. LTD. THE ASSESSING OFFICER MADE AN ADDITION OF RS. 3 14 16 000/- ON ACCOUNT OF SHARE CAPITAL AND SHARE PREMIUM U/S 68 OF THE ACT A ND ADDITION OF RS. 2 10 00 000/- ON ACCOUNT OF INVESTMENT OUT OF BOOKS . 4. BEING AGGRIEVED BY THE ASSESSMENT ORDER THE ASS ESSEE FILED APPEAL BEFORE THE CIT(A). THE CIT(A) PARTLY ALLOWED THE APPEAL O F THE ASSESSEE. 5. THE LD. DR SUBMITTED THAT THE ASSESSING OFFICE H AS TAKEN INTO ACCOUNT THE EVIDENCES FILED BY THE ASSESSEE AND FROM THE PE RUSAL OF SUCH EVIDENCE THE ASSESSING OFFICER CAME TO THE CONCLUSION THAT SOME OF THE PARTY DETAILS WERE NOT PROPER AND THEREFORE MADE THE ADDITIONS UNDER THE CAPTION SHARE CAPITAL AND SHARE PREMIUM U/S 68 OF THE ACT AND ADDITION ON ACCOUNT OF INVESTMENT 3 ITA NO. 5221/DEL/2017 OUT OF BOOKS. THE CIT(A) THOUGH HAS TAKEN COGNIZANC E OF ADDITIONAL EVIDENCE BEFORE HIM HAS FAILED TO TAKE INTO ACCOUNT THAT THE RE ARE CERTAIN PARTIES FOR WHICH NO DETAILS/INSUFFICIENT DETAILS WERE FILED. THUS THE LD. DR SUBMITTED THAT THE ADDITIONS ON BOTH ACCOUNTS SHOULD BE SUSTA INED. THE LD. DR RELIED UPON THE DECISION OF CIT VS. M/S JANSAMPARK ADVERTI SING (ITA NO. 525/2014 ORDER DATED 11/3/205 DELHI HIGH COURT). 6. THE LD. AR RELIED UPON THE ORDER OF THE CIT(A) A ND SUBMITTED THAT ALL THE DETAILS WERE BEFORE THE ASSESSING OFFICER AS WELL AS BEFORE THE CIT(A). THE CONFIRMATIONS OF THE PARTIES AND THE DETAILS OF SHA RE CAPITAL AND SHARE PREMIUM AS WELL AS INVESTMENTS WERE BEFORE THE CIT(A) AS WE LL AS ASSESSING OFFICER. THUS THE CIT(A) HAS PROPERLY ADJUDICATED THE APPE AL OF THE ASSESSEE. THE LD. AR FURTHER SUBMITTED THAT THIS IS THE CASE OF NORMA L SCRUTINY ASSESSMENT UNDER SECTION 143(3) OF THE INCOME TAX ACT. THERE I S NO INFORMATION RECEIVED BY THE ASSESSING OFFICER FROM THE THIRD PARTY OR INVES TIGATION CELL OF THE DEPARTMENT AGAINST THE SHARE APPLICANTS. THERE IS N O ALLEGATION OF CASH DEPOSITS IN THE BANK ACCOUNT OF INVESTORS. ALL THE TRANSACTIONS HAVE BEEN MADE THROUGH BANKING CHANNELS AND ARE RECORDED IN THE BO OKS OF ACCOUNTS OF THE ASSESSEE. THE ASSESSEE HAS DISCHARGED HIS ONUS AND FILED ALL THE DOCUMENTS BEFORE THE ASSESSING OFFICER. NO DEFECT HAS BEEN PO INTED OUT BY THE ASSESSING OFFICER IN RESPECT OF THE DOCUMENTS FILED BY THE AS SESSEE. THE ASSESSING OFFICER HAS MADE THE INDEPENDENT ENQUIRY BY ISSUING NOTICES UNDER SECTION 133(6) WHICH HAVE BEEN DULY SERVED UPON THE INVESTORS. INV ESTORS HAVE REPLIED TO THE NOTICES ISSUED AND FILED THEIR CONFIRMATIONS ITRS AND BANK STATEMENTS DURING THE ASSESSMENT PROCEEDINGS. THE ASSESSING OFFICER D ID NOT MAKE ANY FURTHER INVESTIGATION IN SUPPORT OF HIS ALLEGATIONS THAT TH ESE INVESTOR COMPANIES ARE ENTRY PROVIDERS. ALL THE DIRECTORS OF THE INVESTOR COMPANY WERE PRODUCED BEFORE CIT(A) IN RESPONSE TO THE NOTICES SENT BY CIT(A) BY EXERCISING HIS POWERS IN VIEW OF SECTION 250(4) OF THE INCOME TAX ACT. THE LD. AR RELIED UPON THE FOLLOWING DECISIONS: 4 ITA NO. 5221/DEL/2017 DELHI HIGH COURT CIT VS. RAKAM MONEY MATTERS PVT. LTD. IN ITA NO. 778 OF 2015 DATED 13/10/2015 BOMBAY HIGH COURT IN THE CASE OF CIT(A) VS. CREATI VE WORLD TELEFILMS LTD. [2011]333 ITR 100 DELHI TRIBUNAL IN THE CASE OF ITO VS. SOFTLINE CREA TIONS P. LTD. IN ITA NO. 744/DEL/2012 DATED 10/02/2016 DELHI ITAT IN THE CASE OF PRAYAG POLYTECH PVT. LTD. VS. ADDL. CIT ITA NO. 6015/DEL/2017 ORDER DATED 18.06.2019 DELHI ITAT IN THE CASE OF ITO VS. COMPUTER HOME INF ORMATION PLUS PVT. LTD. ITA NO. 680/DEL/2016 ORDER DATED 24/05/2 019. DELHI HIGH COURT IN THE CASE OF PCIT VS. GOODVIEW T RADING PVT. LTD. ITA NO. 377/2016 ORDER DATED 21.11.2016 DELHI HIGH COURT IN THE CASE OF CIT VS. VRINDAVAN F ARMS PVT. LTD ETC ITA NO. 71 OF 2015 DATED 12 TH AUGUST 2015(DEL). HON'BLE SUPREME COURT IN THE CASE OF LALCHAND BHAGA T AMBICA RAM VS. CIT BIHAR AND ORISSA (1959) 37 ITR 288 (SC) HON'BLE SUPREME COURT JUDGMENT IN DHADESHWARI COTTO N MILLS LTD. VS. CIT (1955) 27 ITR 126 (SC) 7. WE HAVE HEARD BOTH THE PARTIES AND PERUSED ALL T HE RELEVANT MATERIAL AVAILABLE ON RECORD. FROM PAGE 108 TO 110 OF THE PAPER BOOK IT CAN BE SEEN THAT ALFA ASSOCIATES AND RAM RAHIM THESE TWO ENTIT IES CONFIRMATIONS WERE NOT MENTIONING ANY DETAILS THEREOF. IN-FACT THE CIT(A ) HAS NOT TAKEN PROPERLY SUFFICIENT EVIDENCES ON ACCOUNT AND SIMPLICITOR DEL ETED THE ADDITIONS. WE FIND THAT THE TREATMENT GIVEN BY THE CIT(A) IN CERTAIN S HARE PREMIUM COMPANIES WAS NOT AT ALL SUFFICIENT FOR DELETING THE ADDITION S. IT REQUIRES FURTHER 5 ITA NO. 5221/DEL/2017 APPLICATION OF MIND. THE HONBLE DELHI HIGH COURT IN CASE OF CIT VS. M/S JANSAMPARK ADVERTISING (ITA NO. 525/2014 ORDER DAT ED 11.03.2015) HELD AS UNDER: 37. THUS WHEN THE AO SETS ABOUT SEEKING EXPLANATI ON FOR THE UNACCOUNTED CREDIT ENTRIES IN THE BOOKS OF ACCOUNTS OF THE ASSESSEE IN TERMS OF SECTION 68 IT IS LEGITIMATELY EXPECTED THAT THE EXERCISE WOULD BE TAKEN TO THE LOGICAL END IN ALL FAIRNESS TAKING INTO ACCOUN T THE MATERIAL SUBMITTED BY THE ASSESSEE IN SUPPORT OF HIS ASSERTION THAT THE P ERSON MAKING THE PAYMENT IS REAL AND NOT NON-EXISTENT AND THAT SUCH OTHER PERSON WAS ACTUALLY THE SOURCE OF THE MONEY FORMING THE SUBJECT MATTER OF T HE TRANSACTION AS INDEED THAT THE TRANSACTION IS REAL AND GENUINE SAME AS I T IS REPRESENTED TO BE. HAVING EMBARKED UPON SUCH EXERCISE THE AO IS NOT E XPECTED TO SHORT-SHRIFT THE INQUIRY OR IGNORE THE MATERIAL SUBMITTED BY THE ASSESSEE. PARA 40 TO 42 READS AS UNDER:- 40. THE CIT (APPEALS) AS ALSO THE ITAT IN THE CA SE AT HAND IN OUR VIEW UNJUSTIFIABLY CRITICIZED THE AO FOR NOT HAVING CONF RONTED THE ASSESSEE WITH THE FACTS REGARDING RETURN OF SOME OF THE SUMMONS UNDER SECTION 131 OR NOT HAVING GIVEN OPPORTUNITY FOR THE IDENTITY OF ALL TH E SHARE APPLICANTS TO BE PROPERLY ESTABLISHED. THE ORDER SHEET ENTRIES TAKEN NOTE OF IN THE ORDER OF CIT (APPEALS) SEEM TO INDICATE OTHERWISE. THE ORDER OF CIT (APPEALS) WHICH WAS CONFIRMED BY ITAT IN THE SECOND APPEAL DOES NOT DE MONSTRATE AS TO ON THE BASIS OF WHICH MATERIAL IT HAD BEEN CONCLUDED THAT THE GENUINENESS OF THE TRANSACTIONS HAD BEEN DULY ESTABLISHED. THERE IS VI RTUALLY NO DISCUSSION IN THE SAID ORDERS ON SUCH SCORE EXCEPT FOR VAGUE DES CRIPTION OF THE MATERIAL SUBMITTED BY THE ASSESSEE AT THE APPELLATE STAGE. W HILST IT DOES APPEAR THAT THE TIME GIVEN TO THE ASSESSEE FOR PROVING THE IDEN TITY OF THE THIRD PARTY WAS TOO SHORT AND FURTHER THAT IT IS PROBABLY NOT ALWA YS POSSIBLE FOR THE ASSESSEE PLACED IN SUCH SITUATION TO BE ABLE TO ENFORCE THE PHYSICAL ATTENDANCE OF SUCH THIRD PARTY (WHO IN THE CASE OF SHARE APPLICANTS V IS- A-VIS A COMPANY WOULD 6 ITA NO. 5221/DEL/2017 BE INDIVIDUALS AT LARGE AND MAY NOT BE EVEN IN DIRE CT OR PERSONAL CONTACT) THE CURTAINS ON SUCH EXERCISE AT VERIFICATION MAY NOT B E DRAWN AND ADVERSE INFERENCES REACHED ONLY ON THE BASIS OF RETURNING U NDELIVERED OF THE SUMMONSES UNDER SECTION 131. CONVERSELY WITH DOUBT S AS TO THE GENUINENESS OF SOME OF THE PARTIES PERSISTING ON AC COUNT OF NON- DELIVERY OF THE PROCESSES THE INITIAL BURDEN ON THE ASSESSEE TO ADDUCE PROOF OF IDENTITY CANNOT BE TREATED AS DISCHARGED. 41. WE ARE INCLINED TO AGREE WITH THE CIT (APPEALS) AND CONSEQUENTLY WITH ITAT TO THE EXTENT OF THEIR CONCLUSION THAT T HE ASSESSEE HEREIN HAD COME UP WITH SOME PROOF OF IDENTITY OF SOME OF THE ENTRI ES IN QUESTION. BUT FROM THIS INFERENCE OR FROM THE FACT THAT THE TRANSACTIONS W ERE THROUGH BANKING CHANNELS IT DOES NOT NECESSARILY FOLLOW THAT SATIS FACTION AS TO THE CREDITWORTHINESS OF THE PARTIES OR THE GENUINENESS OF THE TRANSACTIONS IN QUESTION WOULD ALSO HAVE BEEN ESTABLISHED. 42. THE AO HERE MAY HAVE FAILED TO DISCHARGE HIS O BLIGATION TO CONDUCT A PROPER INQUIRY TO TAKE THE MATTER TO LOGICAL CONCLU SION. BUT CIT (APPEALS) HAVING NOTICED WANT OF PROPER INQUIRY COULD NOT HA VE CLOSED THE CHAPTER SIMPLY BY ALLOWING THE APPEAL AND DELETING THE ADDI TIONS MADE. IT WAS ALSO THE OBLIGATION OF THE FIRST APPELLATE AUTHORITY AS INDEED OF ITAT TO HAVE ENSURED THAT EFFECTIVE INQUIRY WAS CARRIED OUT PAR TICULARLY IN THE FACE OF THE ALLEGATIONS OF THE REVENUE THAT THE ACCOUNT STATEME NTS REVEAL A UNIFORM PATTERN OF CASH DEPOSITS OF EQUAL AMOUNTS IN THE RE SPECTIVE ACCOUNTS PRECEDING THE TRANSACTIONS IN QUESTION. THIS NECESS ITATED A DETAILED SCRUTINY OF THE MATERIAL SUBMITTED BY THE ASSESSEE IN RESPON SE TO THE NOTICE UNDER SECTION 148 ISSUED BY THE AO AS ALSO THE MATERIAL SUBMITTED AT THE STAGE OF APPEALS IF DEEMED PROPER BY WAY OF MAKING OR CAUSI NG TO BE MADE A 'FURTHER INQUIRY' IN EXERCISE OF THE POWER UNDER SECTION 250 (4). THIS APPROACH NOT HAVING BEEN ADOPTED THE IMPUGNED ORDER OF ITAT AN D CONSEQUENTLY THAT OF CIT (APPEALS) CANNOT BE APPROVED OR UPHELD. 7 ITA NO. 5221/DEL/2017 THUS FROM THE PERUSAL OF THE ASSESSMENT ORDER AND THE EVIDENCE PRODUCED BEFORE US BY THE ASSESSEE WE FIND THAT THE EVIDENC E IS INADEQUATE TO SUPPORT ASSESSEES CONTENTIONS THAT THE ASSESSEE HAS PLACED ALL THE DETAILS OF THE PARTIES WHO HAVE PAID SHARE CAPITAL AND SHARE PREMI UM. THOUGH THE LD. AR ALSO RELIED UPON THE DECISIONS AS MENTIONED IN PARA 6 HEREINABOVE BUT THE FACTS IN ALL THE CASES ARE SOMEWHAT DIFFERENT FROM THE PRESENT ASSESSEES CASE AS IN THE PRESENT CASE THE ASSESSEE HAS GIVEN INAD EQUATE EVIDENCE WHICH DOES NOT FULLY DEMONSTRATE THAT THE TRANSACTION RELATING TO SHARE CAPITAL AND SHARE PREMIUM IS GENUINE. SIMILAR IS THE CASE AS REGARDIN G INVESTMENTS OUTSIDE THE BOOKS OF ACCOUNT. HENCE WE REMAND BACK THIS ISSUE TO THE FILE OF THE CIT(A) FOR TAKING PROPER COGNIZANCE OF THE EVIDENCE WHICH HAS TO BE PRODUCED BY THE ASSESSEE BEFORE HIM. NEEDLESS TO SAY THE ASSESSEE BE GIVEN OPPORTUNITY OF HEARING BY FOLLOWING PRINCIPLES OF NATURAL JUSTICE. 8. IN RESULT THE APPEAL OF THE REVENUE IS PARTLY A LLOWED FOR STATISTICAL PURPOSE. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 19TH DA Y OF MARCH 2021. SD/- SD/- (R. K. PANDA) (SUCHITRA KAMBLE) ACCOUNTANT MEMBER JUDICIAL M EMBER DATED: 19/03/2021 R. NAHEED COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(APPEALS) 5. DR: ITAT ASSISTANT REGISTRAR ITAT NEW DELHI 8 ITA NO. 5221/DEL/2017