Income Tax Appellate Tribunal - Delhi
Prime Telesystems Ltd., New Delhi vs Assessee
66 IN THE INCOME TAX APPELLATE TRIBUNAL
DELHI BENCH "F" NEW DELHI
BEFORE SHRI R.P. TOLANI AND SHRI R.C. SHARMA
ITA No. 630/Del/10
A.Y.: 1999-2000
M/s Prime Telesystems Ltd., Vs. ACIT, Noida.
202, Nilgiri,
9, Barakhamba Road,
New Delhi-110001.
PAN/ GIR No. AAACP3838L
( Appellant ) ( Respondent )
Appellant by : Shri K. Sampath Adv.
Respondent by : Shri H.K. Lal Sr. DR
ORDER
PER R.P. TOLANI, J.M:
This is assessee's appeal against the order of CIT(Appeals), Ghaziabad dated 21-12-2009 relating to A.Y. 1999-2000. Sole ground raised is as under:
"On the facts and in the circumstances of the case and in law, the authorities below wrongly added a sum of Rs. 1,43,37,219/- as unexplained investment despite that being share application monies and despite directions of the Hon'ble Tribunal to them to carry out the verification on their own. The addition has been made without carrying out necessary verification and without abiding by the directions of the Hon'ble Tribunal. At any rate the issue is now squarely covered by the decision of the apex court in the case of Lovely Exports 216 CTR 195 and so the addition as now sustained by the authorities below merits to be quashed."
2. Brief facts are that assessee is a limited company, engaged in the business of telecom consultancy and technology products. The assessee filed its return on 31-12-1999 declaring income of Rs. 46,987/- (30% of book profit computed u/s 115Ja). The assessment was originally completed on 22- 03-2002 ex party u/s 144 of I.T. Act by making an addition of Rs.
1,43,37,219/- as unexplained investment in share capital u/s 69. Assessee filed appeal before ld. CIT(A), who upheld the ex party assessment in principle. As regards the addition of Rs. 1,43,37,219/- as unexplained investment, the ld. CIT(A) required the assessee to file certain information in respect of shares allotted and share application money like, names/ address/ PAN/ date and mode of receipt of money/ copies of share application forms and confirmation, assessee complied therewith. CIT(A) deleted additions of Rs. 96,49,219/- where confirmations were filed and by holding that confirmations were not proper, confirmed the balance addition of Rs.
46,88,000/-.
2.1. The department filed appeal before ITAT against order of Ld. CIT(A) against deletion of Rs. 96,49,219/- while the assessee filed cross objection against the addition of Rs. 46,88,000/- confirmed by CIT(A). Both the appeals and cross objections were disposed off by ITAT vide order No. ITA no. 4565/Del/03 dated 13th October, 2006. Vide this order, ITAT restored the matter to the file of AO with directions to examine the evidence adduced by assessee before Ld. CIT(A) and take a decision afresh in accordance with law. The relevant para of ITAT, is reproduced hereunder:
"14. For these reasons, we set aside the order of the CIT(A). We restore the matter to the file of the AO with a direction to him to examine the evidence adduced by the assessee before the CIT(A) and take a decision afresh in accordance with law. Needless to add that the assessee shall be given adequate opportunity of being heard. Thus, both the appeals are deemed to be allowed for statistical purposes."
2.2. AO consequent to these directions proceeded to reframe the assessment proceedings and issued notices u/s 143(2) and 142(1) on 24-8- 2008. During the course of these proceedings, AO desired the assessee to file following more documents than what were adduced before CIT(A):-
"1. List with names/ old address, current address/PAN/Current landline or mobile no., place where they are assessed at that time, place where they are assessed at present.
2. List containing date of receipt of money from each person in question/ whether in cash or DD or cheque/ if by DD or cheque then no. and bank on which drawn and date of drawn.
3. Copy of bank statement of each person showing debit entry in bank for DD/ Cheque/ cash., copy of bank statement showing credit entries.
4. For those who gave share application money- were shares allotted or money returned back, evidence for allotment/ refund in form of bank statement of yourself and person in question.
5. Copy of land line phone bill/ voter ID card/ Electricity bill/ driving licence etc. of person in question (any one or two of these).
6. Copy of ITR for relevant year in question."
2.3. Assessee in reply, vide letter dated 28-11-2008 expressed its difficulty to produce more papers as the matter was about 8 years old and requested to consider evidence adduced before CIT(A). The contents of the letter are as under:
"Please note that we are not in possession of any papers for A.Y. 1999-2000 as Company Law or Income Tax guidelines do not require a company to maintain supports and accounting papers beyond eight years. Also kindly note that company management and ownership changed in 2001, subsequent to which most of the earlier shareholders ceased to be shareholders in the company. The company has no empowerment to seek details such as those indicated by you (phone bill/ electricity bill/ voter ID card etc.) nor were we required to collect or maintain these by prevalent law when the share capital was raised in the nineties.
All documents as sought during the appeal proceedings were submitted in original to the Hon'ble Commissioner (Appeals), New Delhi including documents relating to court cases filed for declaration of accounts since the company is not empowered by law to seek information from past shareholders. These cases were replied to proving that the purposeless to wait for the fifteen to twenty years that it would take to get a final order in this matter and inspite of not being at any fault whatsoever, we had requested the Commissioner (Appeals) to take the stand he deemed appropriate and close the matter. The income tax department would definitely have access to the records collected by the Hon'ble Commissioner (Appeals) and we would request you to access those from the record rooms of the income tax department as our sets are not available. All original documents had been submitted."
2.4. AO in the assessment order at para 8 has recorded the fact, the CIT(A) required the assessee to file some evidence and it was complied with by following observations:
"(2) During the appellate proceedings, the appellant company was required by Ld C1T(A) to file the following information in respect of the shares allotted and also the share application money:
a) Complete name and postal address of the person to whom the shares have been allotted/from whom the share application money has been received.
b) Permanent Account Number of the concerned person.
c) Date of receipt of money and mode of receipt.
d) Photocopy of the share application and also the confirmations of the concerned persons.
In response the appellant company filed the details vide their letter dated 5th Dec. 2002 in the following form: -
- Summary chart showing complete break-up of share application money and list of shareholders.
- Section A: Confirmation from Company Founder and association totaling Rs. 38.8 lakhs.
- Section B: Confirmation from Angel Investor Group totaling Rs. 40 lakhs.
- Section C: Details of share application money received through broker along with cheque details and copy of bank statement of receiving account totaling Rs. 25.6. lakhs.
- Section D: Details of share application in the name of B. Nag and P. Lohia along with proof of them not being contactable totaling Rs.
- Section E: Details of share application in the name of company stakeholders totaling Rs. 14.2 lakhs.
- Section F: Confirmation from current shareholder who has acquired shares from appended list of original contributors Rs. 21 lakhs
- Section G: One of the shareholders is a non-resident Indians who is not exigible to income tax in India. He is away on overseas engagements and confirmation vide e-mail is enclosed total Rs. 2.91. lakhs (1) Mr. Satish Mehta (additions during the year Rs. 3489 lakhs) and Sh. H. Mehta (addition during the year Rs.
2.91 lakh).
Before Ld CIT(A) the appellant company had filed confirmatory letters from both of these persons. In the confirmatory letters complete address of the persons and their PANs have also been mentioned. Ld, CIT(A) held that from these letters, the identity of the persons stands established and the persons in question have also confirmed that they have invested in shares of he appellant company. Therefore, these investments were treated to be r and addition to that extent was deleted by Ld. ClT(A).
During the present assessment proceedings vide questionnaire dated 24.8.2008, assessee was asked to file copy of bank statement of each person showing debit entry in bank for DD/cheque/cash, copy of bank statement showing the credit entry. Shri Satish Mehta attended the proceedings from time to time but did not file his own bank statement. In fact assessee merely submitted that we are not in possession of any paper for A.Y 1999-2000. Assessee further stated that it has no empowerment to seek details such as hose indicated by the Assessing Officer (phone bid/electricity bill/voter ID card etc.) nor was it required to collect or maintain these by prevalent law when the share capital was raised in the nineties. Shri Satish Mehta who attended the proceedings from time to time could have filed the relevant paper with respect to addition of Rs.34.89 Lakh made by him during the relevant year, but he chose not to do so. In case of Shri H Mehta assessee did not provide his current address as sought vide the questionnaire dated 24.8.2008. Hence notice u/s 133(6) or summons u/s 131 could not be issued und no investigation regarding the genuinity of the claim of the assessee could be made.. In the absence of these, genuineness of these investments is not proved and addition to that extent is made.
(2) Mr A Sarin (addition during the year Rs. 25.47 lakhs) Mr. N Sarin (addition during the year Rs. 12.50 lakhs) And Mr. D. Sarin (addition during the year Rs. 2.50 lakhs) In the cases of these persons also, confirmations along with complete postal address and PANs have been filed. Therefore Ld. CIT(A) accepted the explanation of the assessee with regard to investment by these persons. During the course of assessment proceedings vide questionnaire dated 24.8.2008 assessee was required to provide the current address, copy of bank account of each persons etc. However assessee submitted that it has no empowerment to seek details such as those indicated by the Assessing Officer (phone bill/ electricity bill/voter ID card etc) nor was it required to collect or maintain these by prevalent law when the share capital was raised in the nineties. Even if the assessee was not empowered to seek their Bank statement etc. he could have made effort to seek their addresses, but assessee chose not to do so since he was not ready to put any person to test of enquiry. Assessee company has a limited number of shareholders. Various types of information/dividend etc have to be communicated/delivered by the company to such shareholder. Also persons who have genuinely invested their hard earned money in shares of the company always track the same for various reasons and company can easily trace them if it desires so. However assessee did not provide their current address as sought vide the questionnaire dated 24.8.2008. Hence notice u/s 133(6) or summons u/s 131 could not be issued and no investigation regarding the genuinity of the claim of the assessee could be made. In he absence of these, genuineness of these investments is not proved and addition to that extent is made.
(3) K.A.Khan/ Y.A. Khan (addition during the year Rs. 8.25 Jakhs), Ritu Dalmia (addition during the year Rs. 3 lakhs), R. Marwaha (addition during the year Rs. 5 lakhs), A. Vaghani (addition during the year Rs. 4.35 lakhs) and A.Khurana (addition during the year Rs. 5 lakhs) The appellant company has failed to file confirmations in respect of these persons. Instead of their postal addresses, details of the cheques through which the amounts have been received and copy of the bank statement of the appellant company showing the receipt of these amounts have been filed. Further it is stated that the appellant company has filed a suit in the court against these persons for rendition of accounts. Ld. CIT(A) has held that the assessee has failed to file any confirmatory letters from these persons even though it was allowed more than adequate opportunity to do the same. Ld. CIT(A) held that AO was justified in treating these amounts as unexplained investments of the appellant company Further perusal of the bank statement tiled before CIT(A) reveals that the narration against these deposits in the bank account of the assessee are as under:
Name Amount Narration mentioned remarks
In the Bank statement
A.Akhan/Y.A.Khan Rs. 2,55,000 CD-582
Rs. 70,000 CD-71
Rs. 1,00,000 CD-582
Rs.4,00,000 TRF.C/D-100582
R.Dalmia Rs.3,00,000 CD 622 Bank deposit of Lakh.
Remaining 5 lakh
Stated to be that of
Shri R. Marwah.
R.Marwaha Already mentioned in remarks column of R.Dalmia
A.Khurana Rs.2,00,000 TRFCD 622
Rs.3,00,000 By CLG/ZN MI/SET
Hence from the details of the bank entries, the source of these credits is not explained. Bank statement merely conveys that the money has been credited, but does not indicate the source or the person from whom the sum has been received. On the basis of mere credit entry, it cannot be accepted as interred as to who has given this amount. Assessee had further stated that the appellant company has filed a suit in the court against these persons for rendition of accounts. However assessee has made no effort to get the case expedited. If assessee was really interested, it should have taken steps to get the heating in the court case expedited. In fact during the course of assessment proceedings assessee admitted that he has not pursued the court case. Assessee failed to file any confirmatory letters from these persons even though it was allowed more than adequate opportunity by Ld.CIT(A) to do the same. Even the PANs of these persons have not been mentioned. Even during the current proceedings assessee did not file their current addresses, Therefore not notice u/s 133(6) or summons u/s 131 could be issued and no investigation could be carried out. Hence it is evident that the assessee was not able to prove the genuinity of his claim. Therefore these amounts are treated as unexplained investments of the assessee.
(4) R. Behl (addition during the year Rs. 2.20 lakhs), K Sarkar (addition during the year Rs.2 lakhs), S. Rajkunda (addition during the year Rs. 4 lakhs) and M.Singh (addition during the year Rs, 2 lakhs) Confirmations along with complete postal address in respect of all these persons have been filed by the assesseee before Ld. CIT(A). Ld. CIT(A) held that the identity of these persons stands established and they accept to have made these investments in the shares of the appellant company. During the course of assessment proceedings vide questionnaire dated 24.8.2008 assessee was required to provide the current address, copy of bank account of each persons etc. However assessee submitted that it has no empowerment to seek details such as those indicated by the Assessing Officer (phone bull electricity bill/ voter ID card etc) nor was it required to collect or maintain these by prevalent law when the share capital was raised in the nineties. Even if the assessee was not empowered to seek their Bank statement etc he could have made effort to seek their addresses, but assessee chose not to do so since he was not ready to put any person to test of enquiry. Assessee company has a limited number of shareholders. Various types of information/ dividend etc have to be communicated/delivered by the company to such shareholder. Also persons who have genuinely invested their hard earned money in shares of the company always track the same for various reasons and company can easily trace them if it desires so. However assessee did not provide their current address as sought vide the questionnaire dated 24.8.2008. Hence notice u/s 133(6) or summons u/s 131 could not be issued and no investigation regarding the genuinity of the claim of the assessee could be made. In the absence of these, genuineness of these investments is not proved and addition to that extent is made.
(5) Sh. S. Kochar (addition during the year Rs. 2 lakhs), Sh. R. Jerath (addition during the year Rs. 10 lakhs). V. Tangri (addition during the year Rs. 2 lakhs) and J. Aggarwal (addition during the year Rs. 7 lakhs) No confirmation in respect of these shareholders has been filed by the appellant company. Their PANs have also not been mentioned. It is claimed that these persons are not exigible to tax in India as they are non residents. Ld. CIT(A) held that the explanation of the appellant company cannot be accepted because of the absence of confirmations and the PANs, it cannot be said that their identity has been proved. Hence it is evident that the assessee was not able to prove the genuinity of his claim. Therefore the these amounts are treated as unexplained investments of the assessee.
(6) R. Dehmubed (addition during the year Rs. 2,91.000/- lakhs) Sh. R. Dehmubed is stated to be residing overseas. He operates on a U.S. Green Card. Before Ld. CIT(A), assessee had filed a copy of E-mail massage received from him whereby he has confirmed to have paid the above mentioned amount for the purchase of shares of the assessee in the year 1998-99. He has also stated that he is not required to file any tax returns in India because he is on a Green Card.
Filing of e-mail confirmation is not the correct method of filing confirmation as any person can create a e-mail identity. Further no evidence regarding his green card status has been filed. Hence identity of the person is not proved. Therefore these amounts are treated as unexplained investments of the (7) V. Mehra (addition during the year Rs. 2,91,000/- Iakhs) No information / confirmation what so ever has been filed in respect of this person. Hence it is evident that the assessee was not able to prove the genuinity of his claim. Therefore the these amounts are treated as unexplained investments of the assessee.
Keeping in view of the above, addition of Rs.1 .43 is made on account of unexplained investment in share capital for which penalty proceedings u/s 271(1)(c) are attracted.
Addition of Rs. 1,43,37,219/-."
2.5. Aggrieved, assessee preferred first appeal, where CIT(A) confirmed the action of AO by following observations:
"5. The issue has been considered. Facts on record show that the Hon'ble ITAT has set aside the order of CIT(A) and restored the matter to the file of the AO with the direction to examine the evidence adduced by the assessee before the CIT((A) and to take decision afresh in accordance with law after giving adequate opportunity of being heard to the assessee. Record shows that the AO, in compliance to the directions of the Hon'ble ITAT,. Issued statutory notices u/s 143(2) & 142(1) along with a query letter dated 24-08-2008 fixing the case for 22-09-2008 on which date no compliance was made. Thereafter also the AO had allowed the assessee further opportunities to comply with the queries raised vide letter dated 24-8-2008. The AO has brought on record that in spite of opportunities provided, the assessee failed to provide the current addresses of persons from whom the share application money amounting to Rs. 1,43,37,219/- was stated to have been received. The AO has stated that since the assessee did not provide the current address of these persons/ parties as required vide query letter dated 24-8-2008, no notice u/s 133(6) or summons u/s 131 could be issued to those persons and hence no investigation regarding the genuineness of the claim of the assessee could be made. The AO has further brought on record that in few cases even the confirmatory letters has not been furnished. All these facts clearly show that during re- assessment proceedings u/s 143(3)/254, in spite of specific requirement, the assessee did not provide the AO current addresses of the persons from whom the share application money amounting to Rs. 1,43,37,219/- was claimed to have been received by the assessee, which prevented the AO in making enquiries from these persons regarding the genuineness of assessee's claim. Thus, admittedly, the AO had no option but to treat the sum of Rs. 1,43,37,219/- as unexplained investment. Even during appellate proceedings the Director of the assessee company who attended before me could not furnish any cogent material/ explanation to controvert the findings given by the AO in the assessment order. Considering the entire facts and circumstances of the case, it is held that the AO was justified in making addition of Rs. 1,43,37,219/- as unexplained investment. The addition so made is, therefore, hereby confirmed."
3. Aggrieved, assessee is before us. Learned counsel for the assessee contends that :
(i) ITAT had set aside this case with clear direction to consider the evidence adduced by the assessee before CIT(A). There are reasons for this directions inasmuch as that the original assessment was framed ex parte u/s 144, therefore, the assessee was under
compulsion to file additional evidence before the CIT(A). Additional evidence was duly forwarded to AO for remand report. AO objected to the admission of additional evidence and alternatively claimed that in case evidence was admitted, AO should be given an opportunity to make further enquiries. AO should have examined the evidence as the purpose of remanding the papers was to examine and make necessary enquiries and submit a remand report. Instead, AO retained volte-face and only objected to the admission of evidenced and without carrying further enquiries issued a caveat that in case material is admitted he may be given further time to enquiry. CIT(A) is a superior authority and apart from deciding the appeal, has independent powers of further inquiry and enhancing the assessment also. AO has himself observed that some documents were requested by CIT(A), implying thereby that CIT(A) invoked his powers of inquiry. CIT(A) decided the issue about admission of additional evidence and rejected the AO's alternative request inasmuch it was AO failed to carry the necessary inquiries for submitting the remand report. A lower functionary cannot ask the superior appellate forum to decide one issue first and then give further time for another issue as it will result into waste of time and delaying the justice. CIT(A) thereafter passed an order on merits. ITAT in this background only in the interest of natural justice set aside the matter back to AO with specific directions to examine the material adduced before CIT(A) which was in possession of AO also for remand report. Learned counsel, therefore, contends that the scope of ITAT direction was clear that AO should carry out further inquiries on the basis of which revenue accepted the order of ITAT setting aside the matter back to the file of AO.
(ii) Learned counsel vehemently argues that in the mean while by the time fresh proceedings could be taken up a long period of about 8 years elapsed. AO instead of carrying out the directions of ITAT insisted for more evidence from the assessee, which was beyond the directions of the ITAT order. Assessee brought this fact to the notice of AO and requested that the matter being old, assessee was not in a position to supply further documents. AO has himself recorded in his order that assessee had filed a list of documents before CIT(A). Having accepted this list on record, it was not fair on his part to overlook the same and make the addition on the reason that assessee did not file fresh evidence. Learned counsel, therefore, contends that AO's order in this behalf is beyond the direction of setting aside by ITAT in the peculiar facts of this case.
Any addition made on the reasoning of non-production of new evidence deserves to be quashed.
(iii) Coming to CIT(A)'s order learned counsel contends that in earlier year CIT(A) had given substantial relief and this time AO not only overlooked the observations of earlier CIT(A) in giving the substantial relief, however, disallowed the entire amount. Assessee gave proper reasons before CIT(A) pleading that the AO could not have insisted for fresh documents after elapse of 8 years and should have confined his observations and findings to the material available on record as directed by ITAT. CIT(A) has neither considered this vital aspect nor considered the merits of the other arguments and summarily upheld the order of AO by merely reproducing his observations. Learned counsel then contends that apropos each and every shareholder, assessee filed sufficient documentsin original proceedings to establish their identity, genuineness of transaction and creditworthiness of applicants. Assessee is a techno managed company and the MD has a very illustrious record who came in India to start the business of telecom consultancy and technology products. The shareholders are prominent professionals having sound credentials. There is no whisper in the orders of the entire proceedings that assessee had any relation what-so-ever with the accommodation entries. AO's findings are totally baseless inasmuch as all the observations made are contrary to record. The name of share-subscribers AO's view and evidence on record i.e. paper book pleaded to be as under:
Subscriber Amount Evidence AO's view
(Lakhs)
1. Satish Mehta 34.89 Party is founder of Notices confirmation
company.(PB 124) (1) This from record, that it
party was before the AO has complete address
herself.(2) PB-126- and PAN. Asks for
Confirmation with PAN and bank statement, phone
address filed with letter dated bill, voter ID. This
05-12-02.(3) PB A-7-CIT(A) party appeared before
has discussed this issue and held the AO himself.
that identity stood proved.(4) PB
67 r.w. PB 60-Mode of payment
conveyed.(5) PB 81-82-Copy of
share application register.(6) PB
83-Details of shares issued
against individual payments,
transfers, etc. (7) PB 115 r.w.
114-Share allotment form -
Promoter Quota.
2. H. Mehta 4 Party is a director.(pb 124) (1) Notices confirmation
PB-129- Confirmation with from record, that it
PAN and address filed with has complete address
letter dated 05-12-02. (2) PB A- and PAN. Asks for 7-CIT(A) discussed this issue bank statement, phone and held that identity stood bill, voter ID. States proved. (3) PB66 r.w. PB 60- that current address Mode of payment conveyed. (4) not provided by PB 81-82- Copy of share Assessee, so application register.(5) PB 93- summons could not be Details of share issued against issued.
individual payments, transfers,
etc. (6) PB 118 r.w. 114- share
allotment form -Promoter
Quota.
3. A. Sarin. 25.47 Investment through Angel Notices confirmation
Investment Group. (PB131) from record, that it
Now director (PB 19) (1) PB- has complete address
133- Confirmation with PAN and PAN. Asks for
and address filed with letter bank statement, phone
dated 05-12-02. (2) PBA-7- bill, voter ID. States
CIT(A) discussed this issue and that current address
held that identity stood proved. not provided by
(3) PB66 r.w. PB 60-Mode of Assessee, so
payment conveyed. (4) PB 81- summons could not be
82- Copy of share application issued.
register.(5) PB 87- Details of
shares issued against individual
payments, transfers etc. (6) PB
117 r.w. 114- share allotment
form - Angel Investor Quota.
4. N. Sarin 12.5 Investment through Angel Notices confirmation
Investment Group. (PB131) (1) from record, that it
PB-136- Confirmation with has complete address
PAN and address filed with and PAN. Asks for
letter dated 05-12-02. (2) PBA- bank statement, phone
7-CIT(A) discussed this issue bill, voter ID. States
and held that identity stood that current address
proved. (3) PB102- Details of not provided by
share transfer as per ROC Assessee, so
record. (4) PB-67 r.w. PB 60- summons could not be
Mode of payment conveyed. (5) issued.
PB 81-82- Copy of share
application register. (6) PB 117
r.w. 114- share allotment form -
Angel Investor Quota.
5. D.Sarin 2.5 Investment through Angel Notices confirmation
Investment Group. (PB131) (1) from record, that it
PB-134- Confirmation with has complete address
PAN and address filed with and PAN. Asks for
letter dated 05-12-02. (2) PBA- bank statement, phone
7-CIT(A) discussed this issue bill, voter ID. States
and held that identity stood that current address
proved. (3) PB-109 Details of not provided by
share transfer as per ROC Assessee, so
records. (4) PB 81-82- Copy of summons could not be
share application register. (5) issued.
PB 117 r.w. 114- share
allotment form - Angel Investor
Quota.
6. K.A. Khan 8.25 Investment through Broker as Postal address, cheque
per waiver of Promoter Quota details, and copy of
(PB 139) (1) PB-2-PAN given Assessee's bank
vide letter dated 15-09-03, along statement filed. No with cheque details. (2) PB-5- confirmation or PAN Copy of suit filed. Same address given. Since current @ PB-8, counsel appears for address not given, party. (3) PB-39-Order in suit - summons could not be PB 45, 46, 47 relevant and issued. Assessee telling (4) Affidavit of K.A. states cases have been Khan in suit (5) PB 67 r.w.. PB filed against party for 60-Mode of payment conveyed. rendition of accounts, (6) PB-81-82 Copy of share but AO holds that application register (7) PB 91- they have not been Details of shares issued against pursued.
individual payments, transfers etc. (8) PB 139- Cheque details.
(9) PB 140-143- Copy of our bank statement.
7. Ritu Dalmia. 3 Shares issued through broker. Postal address, cheque (PB-140)(1) PB-2- PAN given details, and copy of vide letter dated 15-09-03, along Assessee's bank with cheque details. (2) PB-152- statement filed. No AD slip of letter to party asking confirmation or PAN for confirmation. (3) PB 155- given. Since current Copy of letter. (4) PB-103- address not given, Details of share transfer as per summons could not be ROC records. (5) PB 81-82- issued. Assessee Copy of share application states cases have been register. (6) PB-152-153- filed against party for Details of cheque received rendition of accounts, through broker with our bank but AO holds that statement. they have not been pursued.
8. R. Marwaha 5 Investment through broker (PB- Postal address, cheque
152)-(1) PB 104- Details of details, and copy of share transfer as pr ROC Assessee's bank records. (2) PB 65 r.w. PB 60- statement filed. No Suit for rendition of account had confirmation or PAN been filed.(3) PB 67 r.w. PB 60- given. Since current Mode of payment conveyed. (4) address not given, PB 81-82 - Copy of share summons could not be application register. (5) PB-151- issued. Assessee Address given. (6) PB-152-153- states cases have been Details of cheque received filed against party for through broker with our bank rendition of accounts, statement. but AO holds that they have not been pursued.
9. A. Vaghani 4.35 Investment through Broker as Postal address, cheque per waiver of promoter quota details, and copy of (PB 146) (1) PB-9- Copy of suit Assessee's bank filed. Same address. @ PB12, statement filed. No counsel appears for party.(2) confirmation or PAN PB-15- Order in Vaghani's case. given. Since current PB 21, 22, 23 relevant and address not given, telling. (3) Ajay Vaghani's summons could not be affidavit in the suit. (4) PB 66 issued. Assessee r.w. PB 60- Mode of payment states cases have been conveyed. (5) PB 81-82- Copy filed against party for of share application register. (6) rendition of accounts, PB 146-148- Payment details & but AO holds that copy of our bank statement. they have not been pursued.
10. A. Khurana 5 Investment through Broker as Postal address, cheque per waiver of promoter quota details, and copy of (PB 158) (1) PB-3- PAN given Assessee's bank vide letter dated 15-09-03, along statement filed. No with cheque details. (2) PB-60- confirmation or PAN Party is in Baltimore, USA (3) given. Since current PB 106- Details of share transfer address not given, as per ROC records. (4) PB 65 summons could not be r.w. PB 60- Suit for rendition of issued. Assessee accounts had been filed. (5) PB states cases have been 66 r.w. PB 60- Mode of filed against party for payment conveyed. (6) PB 81- rendition of accounts, 82- Copy of share application but AO holds that register. (7) PB 158-160- they have not been Cheque details and copy of our pursued.
bank statement
11. R. Behl 4 Allottee is company Stakeholder Confirmation along (PB 175) (1) PB-A-8-CIT(A) with complete address notices confirmation from party on record. Further with full address, and holds that asked to provide identity stands established. (2) current address, copy Pb 179- confirmation with of bank account, voter address. (3) Pb 81-82- Copy of ID, etc. Assessee ahs share application register. not even provided the current address, so summons could not be issued.
12. M. Kapoor 2.2. Allottee is company Stakeholder Confirmation along (PB 175) (1) PB-A-8-CIT(A) with complete address notices confirmation from party on record. Further with full address, and holds that asked to provide identity stands established. (2) current address, copy Pb 176- confirmation with of bank account, voter address.(3) PB 99- Details of ID, etc. Assessee ahs share transfer as per ROC not even provided the records. (4) Pb 81-82- Copy of current address, so share application register. summons could not be issued.
13. K. Sarkar 2 Allottee is company Stakeholder Confirmation along (PB 175) (1) PB-A-8-CIT(A) with complete address notices confirmation from party on record. Further with full address, and holds that asked to provide identity stands established. (2) current address, copy This party was before AO. (3) of bank account, voter PB-177- confirmation with full ID, etc. Assessee ahs address. (4) PB 100- Details of not even provided the share transfer as per ROC current address, so records. (5) Pb 81-82- Copy of summons could not be share application register. issued.
14. S. Rajkundra 4 Allottee is company Stakeholder Confirmation along (PB 175) (1) PB-A-8-CIT(A) with complete address notices confirmation from party on record. Further with full address, and holds that asked to provide identity stands established. (2) current address, copy Pb 181- confirmation with full of bank account, voter address. (3) PB 68 r.w. PB 60- ID, etc. Assessee ahs Mode of payment conveyed. (4) not even provided the Pb 81-82- Copy of share current address, so application register. (5) PB 113- summons could not be Details of shares issued against issued.
individual payments, transfers, etc.
15. M. Singh 2 Allottee is company Stakeholder Confirmation along (PB 175) (1) PB-A-8-CIT(A) with complete address notices confirmation from party on record. Further with full address, and holds that asked to provide identity stands established. (2) current address, copy Pb 180- confirmation with full of bank account, voter address. (3) PB 105- Details of ID, etc. Assessee ahs share transfer as per ROC not even provided the records. (4) PB 67 r.w. PB 60- current address, so Mode of payment conveyed. (5) summons could not be Pb 81-82- Copy of share issued.
application register.
16. S. Kochar 2 (1) PB-3-PAN given vide letter No confirmation filed, dated 15-09-03. (2) PB-60- no PAN. Assessee Party is in Portland, Oregon, claims they are NRI's USA (3) PB 81-82- Copy of and not exigible to tax share application register. (4) in India. In absence of PB 111-Details of share issued confirmation and against individual payments, PAN, identity not transfers, etc. (5) PB 183-Letter proved.
from Broker asking for transfer of shares.
17. R. Jerath 10 (1) PB-3-PAN given vide letter Confirmation along dated 15-09-03.along with with complete address cheque details. (2) PB-101- on record. Further Details of share transfer as per asked to provide ROC records. (3) PB 81-82- current address, copy Copy of share application of bank account, voter register. (4) PB 183-Letter from ID, etc. Assessee ahs Broker asking for transfer of not even provided the shares. current address, so summons could not be issued.
18. V. Tangri 2 (1) PB-3-PAN given vide letter Confirmation along dated 15-09-03. (2) PB-60- with complete address Party is in Ottawa, Canada. (3) on record. Further PB-96 Details of share transfer asked to provide as per ROC records. (4) PB 68 current address, copy r.w. PB 60- Mode of payment of bank account, voter conveyed. (5) PB 81-82- Copy ID, etc. Assessee ahs of share application register. (4) not even provided the PB 183-Letter from Broker current address, so asking for transfer of shares. summons could not be issued.
19. J. Aggarwal 7 (1) PB-3-PAN given vide letter Confirmation along dated 15-09-03.along with with complete address cheque details. (2) PB-60- Party on record. Further is in Milan, Italy. (3) PB-97- asked to provide Details of share transfer as per current address, copy ROC records. (4) PB 66 r.w. PB of bank account, voter 60-Mode of payment conveyed. ID, etc. Assessee ahs (5) PB 81-82- Copy of share not even provided the application register. (6) PB 183- current address, so Letter from Broker asking for summons could not be transfer of shares. issued.
20. R. Dehmubed 2.91 (1) PB A-9-CIT(A) notices Stated to be Green evidence and directs relief. (2) Card Holder, resident PB 107- Details of share transfer in USA. Email as per ROC records. (3) PB 81- confirmation 82- Copy of share application available, but held to register. (4) PB 190- Email be wrong method of confirmation from party. filing confirmation.
No evidence of green card status. Identity not proved.
21. Y. Mehra 2.91 (1) PB 90- Details of share No confirmation transfer as per ROC records. (2) whatsoever filed. PB 68 r.w. PB 60- Mode of Identity not proved.
payment conveyed. (3) PB 81- 82- Copy of share application register.
3.1. Learned counsel thereafter adverted to the issues about nature of burden on assessee while proving the share application money. Reliance is placed on the following decisions:
(i) 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, holding 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.
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 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 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."
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."
3.2. Learned counsel contends that lower authorities have tried to impose an impossible burden on the assessee to re-establish its case after a gap of 8 years. The onus cast on the assessee has been explained by Hon'ble Supreme Court in the case of CIT Vs. Lovely 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.
3.3. Learned counsel further contends that relevant details in respect of each and every share applicant, which could reasonably establish the identity of share-holders, their creditworthiness and genuineness of share applicants were already filed before CIT(A) and were forwarded to AO as well, therefore, the findings that there is absence of sufficient material to establish their identity, is contrary to record. Assessee explained before AO and CIT(A) that the direction of the ITAT was limited to verify the documents filed by assessee before CIT(A), however, both the lower authorities have chosen to uphold the addition going beyond the ITAT directions and further in not considering the material which was available on their record. Section 68 puts initial burden on the assessee which has been duly discharged, the entire material has been ignored merely because new evidence was not filed by assessee. Even in the case of ex parte assessment, same has to be fair and reasonable after considering the material available on record, in this case entire share application money has been added without justification and considering the material available on record, which is not disputed by lower authorities.
4. We have heard rival contentions and perused the entire material on record. Assessee has filed a paper book which contains the documents already filed before CIT(A) during the course of first appeal, same was also forwarded to AO also to file a remand report thereon. AO insisted only on non-admission of additional evidence and did not carry out any further inquiry on the material. AO skirted the examination of material by asking the CIT(A) that in case additional evidence was admitted, he should be given further time. Since AO did not file any remand report about the inquiries CIT(A) proceeded to decide the appeal in first round giving substantial relief. Be that as it may, on appeals of both the parties, ITAT set aside the matter back to the file of AO, however, with direction that:
"14. For these reasons, we set aside the order of the CIT(A). We restore the matter to the file of the AO with a direction to him to examine the evidence adduced by the assessee before the CIT(A) and take a decision afresh in accordance with law. Needless to add that the assessee shall be given adequate opportunity of being heard. Thus, both the appeals are deemed to be allowed for statistical purposes."
4.1. The setting aside was in peculiar circumstances as revenue pleaded ITAT to give the AO a chance to verify the material adduced before CIT(A). ITAT accordingly, set aside the issue with this clear direction to verify the material filed before CIT(A). In our view, by this direction AO should have examined the material available on record and decide the issue accordingly. Instead he wanted new evidence to be filed, which was explained to be difficult by assessee due to elapse of long time of 8 years and having no control over share-holders to enforce their attendance or documents. In our view AO was not right in going beyond the ITAT direction and call for new evidence which could not be filed by assessee.
Now coming to the issue as to whether the material available on record in respect of share applicants was sufficient to discharge the burden of the assessee, following emerges from record:
(1) Satish Mehta: Confirmation, PAN no. with other details are filed. (2) A. Sarin: The investment is through a broker, confirmation, PAN, address filed.
(3) A. Sarin: The investment is through a broker, confirmation, PAN, address filed.
(4) N. Sarin: The investment is through a broker, confirmation, PAN, address filed.
(5) D. Sarin: The investment is through a broker, confirmation, PAN, address filed.
(6) K.A. Khan: Assessee has filed suit against this share-holder, which is not disputed.
(7) Ritu Dalmia: Investment through broker. PAN number, ROC record filed.
(8) R. Marwaha: Investment through broker. Assessee ahs field suit against this share-holder.
(9) A. Vaghani: Investment through broker. Suit is filed by the assessee with other details.
(10) A. Khurana: Investment through broker. Details of cheques, PAN. Applicant is NRI and suit filed.
(11) R. Behl: Confirmation; address full details filed. (12) M. Kapoor: Confirmation; address full details filed. (13) K. Sarkar: Confirmation; address full details filed. (14) S. Rajkundra: Confirmation; address full details filed. (15) M. Singh: Confirmation; address full details filed. (16) S. Kochar: Confirmation; address full details filed. (17) R. Jerath: PAN no., details of share transfer, ROC record given. (18) V. Tangri: NRI; details of share transfer, ROC record, request for transfer of shares filed.
(19) J. Aggarwal: NRI, PAN details, ROC record filed. (20) R. Dehmubed: Details of share transfer and ROC record filed. (21) Y. Mehra: Details of share transfer, ROC record, mode of payment, copy of share application filed.
4.2. 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. In our view, assessee has filed most of the details in respect of each and every share applicants. In some cases assessee filed new confirmatory Emails, since long time had elapsed and parties were away, out of India. Lower authorities have given lot of preference to the requirement of filing of new evidence ignoring that at the relevant time assessee had filed documents to discharge its onus. 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, 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 hold that the assessee has established the share applications to be genuine by reasonable evidence and the additions are deleted.
5. In the result, assessee's appeal is allowed. Order pronounced in open court on 12-11-2010.
Sd/- Sd/- (R.C. SHARMA ) ( R.P. TOLANI ) ACCOUNTANT MEMBER JUDICIAL MEMBER Dated: 12-11-2010. MP Copy to : 1. Assessee 2. AO 3. CIT 4. CIT(A) 5. DR