Income Tax Appellate Tribunal - Delhi
Ito, New Delhi vs M/S. Computer Home Information Plus ... on 24 May, 2019
IN THE INCOME TAX APPELLATE TRIBUNAL
DELHI BENCH: 'B' NEW DELHI
BEFORE SHRI BHAVNESH SAINI, JUDICIAL MEMBER
&
SHRI N.K. BILLAIYA, ACCOUNTANT MEMBER
ITA No. 5680/Del/2016
Assessment Year: 2012-13
ITO vs Computer Home Information Plus
Ward 6(2), Pvt. Ltd.
Room No. 380C, F-114/A, Mayur Vihar,
C.R. Building, Phase-II,
New Delhi. Delhi.
PAN No. AABCC8767G
APPELLANT RESPONDENT
Revenue by Ms. Ashima Neb, Sr. DR
Assessee by Shri Ved Jain, Sr. Adv.
Sh. Rishabh Jain, CA
Ms. Umang Luthra, Adv.
Date of Hearing 23.05.2019
Date of Pronouncement 24.05.2019
ORDER
PER SHRI N.K. BILLAIYA, A.M.
With this appeal, the Revenue has challenged the correctness of the order of CIT(A)-2, New Delhi dated 29.07.2016 pertaining to AY 2012-13.
2 ITA No. 5680/Del/20162. The solitary grievance of the Revenue is that the CIT(A) erred in deleting the addition of Rs. 1.14 crores on account of unexplained cash credit u/s 68 of the IT Act.
3. The representatives of both the sides were heard at length. Case records carefully perused and with the assistance of the Counsel, we have carefully perused the relevant documentary evidences brought on record in the form of Paper Book in thelight of Rule 18(6) of the ITAT Rules.
4. At the very outset, we have to state that in our considered view, whether a person has discharged the onus is purely a question of fact and, therefore, the judicial decisions relied upon by both the representatives will be considered, if we find parity in the facts with the facts of the case in hand.
5. Facts emanating from the records show that the assessee company is engaged in teaching students accommodated by the National Institute for Entrepreneurship and Small business under the Ministry of Micro, Small and Medium Enterprises, Government of India. The return of income for the year was filed on 16.02.2013 which was selected for scrutiny assessment and, accordingly, statutory notices were issued and served upon the assessee.
6. During the course of scrutiny assessment proceedings, the AO found that the assessee has received unsecured loans amounting to Rs. 1.14 crores from the following companies:
3 ITA No. 5680/Del/2016S.No. Name of Lenders Amount
1. M/s AVS Alloy India Pvt. Ltd. 6,50,000/-
2. M/s PHV Securities Pvt. Ltd. 22,50,000/-
3. M/s Royal Mirage Financial 35,00,000/-
Consultant Pvt. Ltd.
4. M/s SNG Securities Pvt. Ltd. 30,00,000/-
5. M/s Super Sine Technologies Pvt. 20,00,000/-
Ltd.
Total 1,14,00,000/-
7. The assessee was asked to justify the unsecured loans in the light of the provisions of section 68 of the Act. In its reply, the assessee furnished the master data of all lender companies, acknowledgement of Income-tax returns, bank statement and confirmation of account of lender companies. The assessee also filed affidavits from the lender companies in respect of unsecured loans along with audited financial statements of lender companies.
8. The AO examined the documents furnished by the assessee and found that out of five lender companies, three companies have nil income and the income of remaining two companies was miniscule. On examining the bank statements, the AO noticed that prior to the issue of cheques by these lender companies to the assessee, similar amount was found to be deposited/transferred from other accounts.
9. Proceedings further in his investigation, the AO issued notices u/s 133(6) of the Act which were returned back by the postal authority with remarks "Incomplete Address".
10. The assessee was confronted with this who filed fresh affidavits alongwith the current addresses of the lender 4 ITA No. 5680/Del/2016 companies. The AO did not accept the genuineness of the affidavits and deputed Inspector for field enquiry.
11. The Inspector in his report stated that these companies are functionally non-existent and no business activity was carried out by these companies.
12. On the basis of the facts gathered by him, the AO concluded as under:
I. It is clearly evident from the above discussion that none of these companies were engaged in any worthwhile business activity. Even the enquiries conducted by the Inspector have confirmed that no business is being carried out by these companies.
II. Examination of bank accounts of these companies clearly evidence that these companies were acting as conduit to transfer funds from one entity to another in the garb of loan/advances. The astounding volume of transactions reflected in these bank accounts, as well as,the recurring pattern of credit of funds into these accounts from some source followed by its immediate transfer to some other entity forms clear proof that these bank accounts were utilized just to confer semblance of genuineness to credit introduced in the books of the assessee.
III. These companies, which the assessee has claimed to have advanced such huge amount of funds to the assessee do not any functional business activity, their annual income as declared in their ITRs is very nominal, and the annual turnover declared by these companies in their P&L account is in no way commensurate with the voluminous financial
13. Having observed as hereinabove, the AO further found that these lender companies are operated by one Shri Himanshu Verma who had admitted himself as entry provider in his statement recorded an oath by the Investigation Wing, Delhi during the course of search and seizure operation conducted on 29.03.2012.
5 ITA No. 5680/Del/201614. The AO finally concluded by holding that the assessee has failed to discharge its onus of establishing the identity, genuineness and creditworthiness of the source of funds introduced in his books of account and added Rs. 1.14 crores u/s 68 of the Act.
15. Assessee carried the matter before the CIT(A) and once again furnished the relevant documentary evidences. The CIT(A) considered the submissions and the documentary evidences and examined each lender company as under:
(a) "AVS Alloy India Private Limited The appellant company has received unsecured loan of Rs.
6,50,000/- from M/s AVS Alloy India Pvt. Ltd. The appellant company submitted the copy of bank statement, income tax return, PAN and audited financial statements for the AY 2012-13 of the lender company in support of its claim. Confirmed ledger a/c of lender company as appearing in the books of accounts of the appellant has also been submitted by the appellant company.
On perusal of balance sheet of the lender company it was noticed that the company has owned funds in the form of share capital, reserve and surplus of Rs. 31,13,29,096/- and debt funds of Rs. 64,15,000/-. The appellant company has also submitted the copy of bank statement of the lender company with Axis Bank, Delhi and highlighted the amount received by it on account of unsecured loans. The particulars of the bank statement have been verified by the AO from the banker itself u/s 133(6) of the Act. There are no cash deposits in bank a/c of the lender company prior to issue of funds to the appellant. The lender company is assessed to tax under PAN AAHCA1513G and has filed Income Tax Return of the year under consideration wherein loss of Rs. 10,804/- has been declared.
6 ITA No. 5680/Del/2016(b) PHV Securities Private Limited The appellant company has received unsecured loan of Rs. 22,50,000/- from M/s PHV Securities Pvt. Ltd. The appellant company submitted the copy of bank statement, income tax return, PAN and audited financial statements for the AY 2012-13 of the lender company in support of its claim. Confirmed ledger account of lender company as appearing in the books of accounts of the appellant has also been submitted.
On perusal of balance sheet of the lender company it was noticed that the company has owned funds in the form of share capital, reserve and surplus of Rs. 18,17,71,954.75/-. The appellant company has also submitted the copy of bank statement of the lender company with Dhanlaxmi Bank, Delhi and highlighted the amount received by it on account of unsecured loans. There are no cash deposits in bank a/c of the lender company prior to issue of funds to the appellant. The lender company is assessed to tax under PAN AAFCP3048M and has filed Income Tax Return of the year under consideration wherein loss of Rs. 23,73,593/- for the AY 2012-13 has been declared.
(c) Royal Mirage Financial Consultant Private Limited The appellant company has received unsecured loan of Rs. 35,00,000/- from M/s AVS Alloy India Pvt. Ltd. The appellant company submitted the copy of bank statement, income tax return, PAN and audited financial statements for the AY 2012-13 of the applicant company in support of its claim. Confirmed ledger account of lender company as appearing in the books of accounts of the appellant has also been submitted.
On perusal of balance sheet of the lender company it was noticed that the company has owned funds in the form of share capital, reserve & surplus of Rs. 12,85,25,493.27 and debt funds of Rs. 13,50,000/-. The appellant company has also submitted the copy of bank statement of the lender company with Axis Bank, Delhi and highlighted the amount received by it on account of unsecured loans. The particulars of the bank statement have been verified by the AO from the banker itself u/s 133(6) of the Act. There are no cash deposits in bank a/c of the lender company before issue of funds to the appellant. The lender company is assessed to tax under PAN AAECR6098N and has filed Income Tax Return of the year under 7 ITA No. 5680/Del/2016 consideration wherein gross total income of Rs. 62,414/- for the AY 2012-13 has been declared.
(d) SNG Securities Private Limited] The appellant company has received unsecured loan of Rs. 30,00,000/- from M/s SNG Securities Pvt. Ltd. The appellant company submitted the copy of bank statement, income tax return, PAN and audited financial statements for the AY 2012-13 of the lender company in support of its claim. Confirmed ledger account of lender company as appearing in the books of accounts of the appellant has also been submitted.
On perusal of balance sheet of the lender company it was noticed that the company has owned funds in the form of share capital, reserve & surplus of Rs. 5,63,29,673.01 and debt funds of Rs. 6,54,00,000/-. The appellant company has also submitted the copy of bank statement of the lender company with Axis Bank, Delhi and highlighted the amount received by it on account of unsecured loans. The particulars of the bank statement have been verified by the AO from the banker itself u/s 133(6) of the Act. There are no cash deposits in bank a/c of the lender company before it issued funds to the appellant. The lender company is assessed to tax under PAN AANCS3668J and has filed Income Tax Return of the year under consideration wherein gross total income of Rs. 23,704/- for the AY 2012-13 has been declared.
(e) Super Sine Technologies Private Limited The appellant company has received unsecured loan of Rs. 20,00,000/- from M/s Super Sine Technologies Pvt. Ltd. The appellant company submitted the copy of bank statement, income tax return, PAN and audited financial statements for the AY 2012-13 of the lender company in support of its claim. Confirmed ledger account of lender company as appearing in the books of accounts of the appellant has also been submitted.
On perusal of balance sheet of the lender company it was noticed that the company has owned funds in the form of share capital, reserve & surplus of Rs. 5,41,44,077.60 in its balance sheet. The appellant company has also submitted the copy of bank statement of the lender company with Axis Bank, Delhi and highlighted the amount received by it on account of unsecured loans. The particulars of the bank statement have been verified by the AO from the banker itself u/s 133(6) of the Act. There are no cash deposits in bank a/c of the lender company before it issued funds to 8 ITA No. 5680/Del/2016 the appellant company. The lender company is assessed to tax under PAN AAOCS6718G and has filed Income Tax Return of the year under consideration wherein loss of Rs. 98,351/- for the AY 2012-13 has been declared."
16. After analyzing each lender company the CIT(A) came to the conclusion that the source of the loan given by these companies to the assessee have been explained.
17. The CIT(A) further analyzed the statement of Shri Himanshu Verma and found that nowhere Shri Verma had stated to have given any accommodation entry in the form of unsecured loan to the assessee. After discussing certain judicial decisions, the CIT(A) deleted the addition.
18. We have also thoroughly examined the financial accounts of the five lender companies. At the very outset, we have to state that that income may be a good reason for examining the source of a person but it is certainly not the "be all end all". Let us take an example, if person is drawing salary of Rs. 10 lakhs p.a. and purchases a residential flat of Rs. 50 lakhs. Can merely on the basis of his income addition be made as unexplained investment? The answer is evidently "No" because that person may have taken housing loan of Rs. 40 lakhs to purchase the residential flat.
19. By the same analogy on examining the balance sheet of each of the lender company which are exhibited from pages 233 to 330 of the Paper Book. We find that each of the lender company has generated either short term borrowings or have liquidated current assets which are more than sufficient to extend the loan to the 9 ITA No. 5680/Del/2016 assessee company. It is pertinent to mention that the AO had also served notices u/s 133(6) of the Act to the banks of each lender company who has furnished the bank statement of the lender companies. The bank statements are exhibited from pages 31 to 56 of the Paper Book. A perusal of the same reveals that no cash was found to be deposited prior to the date of the issue of cheques to the assessee company. This conclusively proves that the assessee has not purchased cheques by paying cash to the lender companies. Since, the banks have responded to the notice by furnishing the Articles of Association, Memorandum of Association, bank opening forms of the lender companies which clearly demonstrated that all the companies have fulfilled KYC Norms of banks. Therefore, the identity of these lender companies have been established beyond doubts.
20. The genuineness of the transaction can be safely concluded as all the transactions have been done through proper banking channel.
21. The source of funds are clearly established from the financial statements of these lender companies irrespective of their meager income or nil income.
22. Considering the facts of the case in totality, in our considered view, the assessee has discharged the onus cast upon it by the provisions of section 68 of the Act and, therefore, we do not find any reason to interfere with the findings of the CIT(A).
10 ITA No. 5680/Del/201623. Appeal filed by the Revenue is dismissed.
24. Before closing as mentioned else where, the judicial decisions relied upon by the representatives of both the sides have been duly considered. In our considered view, we do not find any parity in the facts of the decisions relied upon with the peculiar facts of the case in hand.
25. In the result, the appeal filed by the Revenue is dismissed.
Order pronounced in the open Court.
Sd/- Sd/-
(BHAVNESH SAINI) (N.K. BILLAIYA)
JUDICIAL MEMBER ACCOUNTANT MEMBER
Dated: 24/05/2019
*Kavita Arora
Copy forwarded to:
1. Appellant
2. Respondent
3. CIT
4. CIT(Appeals)
5. DR: ITAT
TRUE COPY
ASSISTANT REGISTRAR
ITAT NEW DELHI
11
ITA No. 5680/Del/2016
Date of dictation 23.05.2019
Date on which the typed draft is placed before the dictating 24.05.2019
Member
Date on which the typed draft is placed before the Other Member Date on which the approved draft comes to the Sr. PS/PS 24.5.19 Date on which the fair order is placed before the Dictating Member 24.5.19 for pronouncement Date on which the fair order comes back to the Sr. PS/PS 24.5.19 Date on which the final order is uploaded on the website of ITAT 24.5.19 Date on which the file goes to the Bench Clerk 24.5.19 Date on which the file goes to the Head Clerk The date on which the file goes to the Assistant Registrar for signature on the order Date of dispatch of the Order