Income Tax Appellate Tribunal - Delhi
Neelkanth Towers Pvt. Ltd , New Delhi vs Department Of Income Tax
IN THE INCOME TAX APPELLATE TRIBUNAL
DELHI BENCH "F" NEW DELHI
BEFORE SHRI R.P. TOLANI AND SHRI B.C. MEENA
ITA No. 1930/Del/10
A.Y.: 2003-04
Income-tax Officer, Vs. M/s Neelkanth Towers Pvt. Ltd.,
Ward-13(2), New Delhi C/o Deepak Bansal,
415, Krishna APRA Plaza,
Sector-18, Noida (UP)
PAN/ GIR No. AABCN 8360Q
( Appellant ) ( Respondent )
Appellant by : Shri H.K. Lal
Respondent by : Shri K.P. Garg Adv.
ORDER
PER R.P. TOLANI, J.M:
This is revenue's against the order of CIT(Appeals)-XVI, New Delhi dated 6-2-2008 relating to A.Y. 2003-04. Following grounds are raised:
"1. The Ld. CIT(A) erred in law in deleting the addition of Rs. 40,00,000/- made u/s 68 with respect to the money claimed to have been received as share application money without appreciating the facts and the circumstances of the case which proved that the transactions were nothing but accommodation entries, in the right perspective.
2. The Ld. CIT(A) further erred in law in deleting the addition of Rs. 1,00,000/- made as unexplained expenditure with respect to commission for arranging the share application accommodation entries without appreciating the fats and circumstances of the case in the right perspectives.
2 ITA 1930/Del/10 M/s Neelkanth Towers Pvt. Ltd.
2. Learned DR relied on the order of AO.
3. Learned counsel for the assessee vehemently argues that assessee discharged its burden in proving the amount received by the share applicants to be genuine. During the course of assessment before AO assessee filed various documents in the form of copy of share applications, return and balance-sheet of the share-applicants, their PAN nos. and addresses etc. Assessee thus discharged its initial onus. AO wanted to rely on the statements of some third parties, namely, Mukesh Gupta, Surinder Pal Singh, Rajan Jassal and Rohit Rana, which were given by them u/s 131 in the proceeding relating to their accommodation entries. Assessee requested for an opportunity to cross-examine the persons whose statements were proposed to be used against it. AO denied the opportunity to cross-examine these parties by following observations:
"The assessee has asked for an opportunity to cross-examine the above persons. Such right, as held in various decisions, is not an absolute right and depends not only the circumstances of the case but also on the statute concerned. The Hon'ble Supreme Court has held in the case of State of J&K Vs. Bakshi Gulam Mohd. AIR 1967 (SC) 122, and in the case of Nath International Sales Vs. UOI AIR 1992 Del 295 that the right of hearing does not include a right to cross examine. The right to cross examine must depend upon the circumstances of each case and also on the statue concerned.
In the case of T. Devasahaya Nadar V. CIT (1964) 51 ITR 20 (Mad) it was held that "It is not a universal rule that any evidence upon which the department may rely should have been subjected to cross-examination. If the assessing officer refuses to produce an informant for cross-examination by the assessee there cannot be any violation of natural justice."
In the case of GTC Industries Ltd. V. Asstt. CIT (1998) 60 TTJ (Bom. Trib) 308 it was held that where statement and report of 3 ITA 1930/Del/10 M/s Neelkanth Towers Pvt. Ltd.
third parties are only the secondary and subordinate material which were used to buttress the main matter connected with the amount of addition, denial of opportunity to cross-examine third parties did not amount to violation of natural justice."
3.1. The compliance of the summons issued by AO on the shareholders was not in the hands of the assessee, therefore, AO held that no shareholder attended consequent to the summons. The additions, therefore, were made.
3.2. CIT(A), relying on various case laws, deleted the addition by observing as under:
"After going through the facts of the case and the judicial pronouncements on this issue, I am of the opinion that the appellant has discharged the initial onus of establishing the bonafide of the transactions and the AO was not justified in ignoring various evidences provided to him by the appellant. It is seen that the Assessing Officer had not done any investigation/ enquiry, during the course of assessment proceedings, he ahs framed the assessment order only on the basis of the information received from the Investigation Wing of the Department, without making any further investigation. Nothing adverse has been brought on record by the AO to establish that the Share Application Money received by the appellant, represents appellant's own undisclosed income.
Further, if there was doubt about the source of investment of the said companies, then additions should have been made in the case of those companies and not in the hands of the appellant company.
It is also seen that the Assessing Officer has not provided the appellant any opportunity to cross examine the persons/ entry operators, on the basis of whom, adverse inference was taken in the case of the appellant.
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In the light of the above discussion, I am inclined to agree with the arguments and evidences provided by the appellant to substantiate that the transaction regarding share application money received by it were genuine transactions and the same were not accommodation entries. I also do not find any evidence collected by the AO which could prove otherwise. Accordingly, the AO was not justified in treating the amount of share application money received by the appellant as its undisclosed income.
In view of the aforesaid discussion, I delete the addition of Rs. 40,00,000/- made by the AO u/s 68 of the I.T. Act, 1961."
3.3. Learned counsel contends that the issue about the burden of proof on the assessee in the case of share applications is now well settled by the ratio of decisions in the cases of :
CIT V. Steller Investment Ltd. (2001) 251 ITR 263 (SC); CIT Vs. Lovely Exports (P) Ltd. [2008] 299 ITR 268 (SC); CIT v. Divine Leasing & Finance Ltd. (2007) 158 Taxman 440 (Del.) CIT Vs. Dwarkadhish Investment (P) Ltd. in CM no. 12293 of 2010 in IT appeal nos. 911 to 919 of 2010 dated 2-8-1010.
3.4. The assessee having supplied the requisite information about share applicants, discharged its burden, the share application money thus cannot be added u/s 68, holding it to be unexplained. 3.5. Learned counsel further relied on the ratio of decision of Hon'ble Supreme Court in the case of CIT Vs. Orissa Corpn. Pvt. Ltd. (1986) 159 ITR 78 (SC) for the proposition that non-attendance of a summoned witness 5 ITA 1930/Del/10 M/s Neelkanth Towers Pvt. Ltd.
cannot be held against the assessee, as it is for the AO to take action for non- compliance of the summons.
4. We have heard rival submissions and have gone through the entire material available on record. As the facts emerge, it is clear that assessee supplied all the requisite information by way of copy of share applications, return and balance-sheet of the share-applicants, their PAN nos. and addresses etc. The assessee maintains regular books of account, transactions are through banking channels, therefore, the initial burden cast on the assessee is discharged. The AO has admitted that he has not allowed the assessee the opportunity to cross-examine the persons whose statements taken in some other proceedings were proposed to be relied on against the assessee. In our view, this is a deliberate violation of the principles of natural justice. Similarly, non-compliance of summons issued on third party i.e. share applicants cannot be held by AO against the assessee as held by Hon'ble Supreme Court in the case of Orissa Corp. Pvt. Ltd. (supra). Therefore, it remains undisputed that the assessee had discharged its onus as cast by sec. 68 and as streamlined by the Hon'ble Supreme Court in the case of Lovely Exports (supra).
4.1. The issue about the repeated appeals by department came up before the Hon'ble Delhi High Court in the case of CIT Vs. Dwarkadhish Investment (P) Ltd. in CM no. 12293 of 2010 in IT appeal nos. 911 to 913 of 20101 dated 2-8-2010, who has held as under:
"7. Consequently, the doctrine of merger would apply and the judgment of the Supreme Court in Lovely Exports (P) Ltd. Ltd.'s case (supra) would cover the field with regard to interpretation of section 68 of the Act, 1961.
6 ITA 1930/Del/10 M/s Neelkanth Towers Pvt. Ltd.
8. In any matter, the onus of proof is not a static one. Though in section 68 proceedings, the initial burden of proof lies on the assessee yet once he proves the identity of the creditors/ share applicants by either furnishing their PAN number or Income tax assessment number and shows the genuineness of transaction by showing money in his books either by account payee cheque or by draft or by any other mode, then the onus of proof would shift to the revenue. Just because the creditors/ share applicants could not be found at the address given, it would not give the revenue the right to invoke section 68. One must not lose sight of the fact that it is the revenue which has all the power and wherewithal to trace any person. Moreover, it is settled law that the assessee need not to prove the 'source of source'.
9. We also find that in the case of respondent-assessee itself, a Division Bench of this Court in CIT v. Dwarikadhish Investment (P) Ltd. (2008) 167 Taxman 321 had dealt with a similar issue with regard to the assessment year 1997-98. The relevant portion of the order passed by the Division Bench in the said judgment is reproduced hereinbelow:-
"3. The Assessing Officer required the assessees to furnish details and documents. The assessees produced copies of sale and purchase bills of the share brokers through whom the transactions took place and photocopies of confirmations of persons who had contributed the fresh share application money. The assessee furnished the PAN(GIR) numbers of the applicants, the details of the cheque numbers and dates. The assessees contended that letters sent to the shareholders had not been responded to.
4. The Assessing Officer required the assessee to furnish bank statement to substantiate the money availability with the assessee and also to prove the genuineness of the transactions. This not having been done, the Assessing Officer got enquiries made through an Income-tax Inspector who found that none of the 7 ITA 1930/Del/10 M/s Neelkanth Towers Pvt. Ltd.
applicants were found to exist at the address given in the confirmations. However, the report of the Income-tax Inspector was furnished to the assessees on 22nd February, 2000 and the assessment order was passed on the very next day, that is, 23rd February, 2000 giving the assessees no time to respond.
5. Before the Cit(A) the assessees furnished additional evidence, copies of which were sent by the CIT(A) to the Assessing Officer for comments. Despite reminders, no response was received from the Assessing Officer by the CIT(A) on the additional evidence. The Cit(a) then admitted the additional evidence. After examining the entire record, the CIT(A) deleted the addition on account of the unexplained share application money for .....
6. In the appeal by the revenue, the Tribunal found that the facts of the case were no different from those in the case of the group company of the present assessee namely M/s. Dwarkadhish Financial Services. In the said case the tribunal had deleted the addition made by the Assessing Officer on account of unexplained share application money. The said decision was upheld by this Court in its order in CIT v. Dwearkadhish Financial Services (2005) 148 Taxman 54.
7. That apart, the Tribunal again examined the documents giving the details of each of the applicants. It noted that "the above documents were available on the file of the Assessing Officer? Accordingly it dismissed the revenue's appeals."
8. Learned counsel for the revenue sought to distinguish this Court's decision in the case of the group company of the assessees, on the ground that the facts there were different. However, we find that the findings of the CIT(A) as extracted hereinabove are sufficient to show that the additions made by the Assessing Officer were not justified. The reasoning and conclusions arrived 8 ITA 1930/Del/10 M/s Neelkanth Towers Pvt. Ltd.
at concurrently by the CIT(A) and the Tribunal suffer from no perversity and are consistent with the law as explained by this Court in CIT v. Divine Leasing & Finance Ltd. [IT Appeal no. 53/2005 decided on 16-11- 2006, reported in [2007] 207 CTR (Delhi)38] and in particular para 16 which reads thus:
"In this analysis, a distillation of the precedent yields the following propositions of law in the context of section 68 of the Income-tax Act. The assessee has to prima facie prove 91) the identity of the creditor/ subscriber; (2) the genuineness of the transaction, namely, whether it has been transmitted through banking or other indisputable channels; (3) the creditworthiness 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 the copies of the shareholders Register, shares application forms, share transfer register etc., it would constitute acceptable proof or acceptable explanation by the assessee; (5) the Department would not be justified in drawing an adverse inference only because the creditor/ sub- scriber 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 take such repudiation at face value and construe it, without more, against the assessee; (7) The Assessing Officer is duty - bound to investigating the creditworthiness of the creditor/ subscriber the genuineness of the transaction and the veracity of the repudiation."
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9. We are of the view that no substantial question of law arises in these appeals. Accordingly, these appeals are dismissed."
10. We are also informed that a Special Leave Petition against the aforesaid Division Bench judgment in the case of the respondent-assessee has been dismissed by the Supreme Court. Accordingly, we are of the opinion that no question of law arises in the present cases as the matter is fully covered by the judgment of the Supreme Court in Lovely Exports (P) Ltd.'s case (supra) as well as Division bench judgment of this Court in the case of the respondent-assessee itself.
11. Consequently, we are of the view that the present appeals amount to relitigation. The Supreme Court in K.K. Modi v. K.N. Modi [1998] 3 SCC 573 has held, "It is an abuse of the process of t he court and contrary to justice and public policy for a party to relitigate the same issue which has already been tried and decided earlier against him. The reagitation may or may not be barred as res judicata. But if the same issue is sought to be reagitated, it also amounts to an abuse of the process of the court....".
12. Though we are initially inclined to impose costs yet we are of the opinion that ends of justice would be met by giving a direction to the revenue to be more careful before filing appeals in a routine manner. In our view, appeal should not be filed in matters where either no question of law arises or the issue of law is settled one. We give this direction because the 'judicial capital' in terms of manpower and resources is extremely limited.
13. Registry is directed to communicate copies of this order to all the Chief Commissioners of Income-tax in Delhi for necessary action. With the aforesaid direction, the present appeals are dismissed in limine but without any order as to costs."
4.3. The onus cast on the assessee in the case of share applications has been explained by Hon'ble Supreme Court in the case of CIT Vs. Lovely 10 ITA 1930/Del/10 M/s Neelkanth Towers Pvt. Ltd.
Exports (P) Ltd. [2008] 299 ITR 268 (SC) by holding that if the assessee furnishes identity of the share-holders then amount cannot be added as unexplained in the hands of the assessee company. Hon'ble Supreme Court has further held that AO is at liberty to take up the issue in the hands of the share-holders. AO has not done any exercise in the hands of the share- holders either in the original proceedings or reframed proceedings. The assessee having discharged its part of burden, there is no justification at all in making the entire addition of share applications in the hands of the assessee more so when their identity and creditworthiness has been repeatedly established, some of them appeared before AO and documents were already on record, as explained in detail above. Similar view has been upheld by Hon'ble Delhi High Court in the cases of :
(ii) CIT Vs. Victor Electodes Ltd. in ITA no. 586/2010 dated 12-05- 2010; and
(iii) CIT Vs. Winstral Petrochemicals Pvt. Ltd. in ITA no. 592/2010 dated 12-05-2010.
4.4. In view of above judgments, the main consideration for examining the share application money is to verify the identity of the share holder. The identity can be established by various documents like confirmation, PAN, bank account and ROC record, share application etc. Hon'ble Supreme Court in the case of CIT Vs. Divine Leasing & Finance Ltd. 299 ITR 268; and CIT Vs. Lovely Exports (P) Ltd. (supra), has held that in case of share applicants, onus on the assessee at the best is to establish the identity of the share-holders and revenue has been alternatively directed to pursue the matter of share capital subscription in the cases of share-holder concerned. . In assessee's case, not only identity, but sufficient evidence for their creditworthiness and genuineness of transaction has been filed. In our view, 11 ITA 1930/Del/10 M/s Neelkanth Towers Pvt. Ltd.
assessee has duly discharged its onus viewed from any angle and the addition u/s 68 is not justified in this case. Hon'ble Delhi High Court in the case of CIT Vs. Dwarkadhish Investment (P) Ltd. (supra), CIT Vs. Victor Electodes Ltd. (supra); and CIT Vs. Winstral Petrochemicals Pvt. Ltd. (supra), has reasserted the directions in this behalf, which squarely support assessee's case. In consideration of all the facts and circumstances we see no infirmity in the order of CIT(A), deleting the addition in question.
5. Since we have upheld the order of CIT(A) in deleting the addition on account of share application money, the consequent addition of Rs. 1,00,000/- on account of alleged commission on accommodation, does not survive and we uphold the order of CIT(A) in deleting the same.
6. In the result, revenue's appeal is dismissed. Order pronounced in open court on 22-12-2010.
Sd/- Sd/-
( B.C. MEENA ) ( R.P. TOLANI )
ACCOUNTANT MEMBER JUDICIAL MEMBER
Dated: 22-12-2010.
MP
Copy to :
1. Assessee
2. AO
3. CIT
4. CIT(A)
5. DR
12 ITA 1930/Del/10
M/s Neelkanth Towers Pvt. Ltd.