Income Tax Appellate Tribunal - Delhi
Shakti Securities P. Ltd., New Delhi vs Assessee on 10 September, 2015
ITA NO.3475/Del/2009 & 3129/DEL/2010
IN THE INCOME TAX APPELLATE TRIBUNAL
DELHI BENCH "G", NEW DELHI
BEFORE SHRI H.S. SIDHU, JUDICIAL MEMBER
AND
SHRI O.P. KANT, ACCOUNTANT MEMBER
I.T.A. No. 3475/DEL/2009
A.Y. : 2001-02
INCOME TAX OFFICER, M/S SHAKTI SECURITIES PVT.
WARD-8(1), VS. LTD.,
ROOM NO. 197-A, C.R. BLDG., 3948, 2ND FLOOR, NAYA BAZAR,
I.P. ESTATE, DELHI
NEW DELHI
(APPELLANT) (RESPONDENT)
AND
I.T.A. NO. 3129/DEL/2010
A.Y. : 2002-03
M/S SHAKTI SECURITIES PVT. LTD., INCOME TAX OFFICER,
3948, 2 ND FLOOR, NAYA BAZAR, VS. WARD-8(1),
DELHI ROOM NO. 197-A, C.R.
BUILDING,
I.P. ESTATE,
NEW DELHI
(APPELLANT) (RESPONDENT)
Assessee by : Shri Kapil Goel, Advocate
Department by : Sh. Sujit Kumar, Sr. DR
Date of Hearing : 17-08-2015
Date of Order : 10-09-2015
ORDER
PER H.S. SIDHU : JM These are two Appeals, one is filed by the Revenue which is against the Ld. CIT(A)'s order dated 4.5.2009 for the asstt. year 2001-02 and another is filed by the Assessee aggrieved with the order of the Ld. CIT(A) 12.5.2010 for the asstt. year 2002-03. Since 1 ITA NO.3475/Del/2009 & 3129/DEL/2010 the issues involved in both the appeals are related to one assessee, hence, these appeals are being consolidated by this common order for the sake of convenience.
2. The following grounds have been raised in the Revenue's Appeal for the asstt. year 2001-02.
"1. Ld. CIT(A) erred, in law and on the facts circumstance of the case, in deleting the addition of Rs. 17,00,000/- made by the AO u/s. 68 of the I.T. Act, 1961.
2. The appellant craves to amend, modify, alter, add or forego any ground of appeal at any time before or during the hearing of this appeal."
3. The assessee has raised the following grounds in its Appeal for the asstt. year 2002-03
1. Whether the CIT(A) has failed to appreciate that the reassessment proceedings for the year are based on re- verification of records submitted in the course of original assessment proceedings completed after due scrutiny under sec 143 (3) of IT Act, thus not valid.
2. Whether the order of the CIT(A) is just and reasonable in the facts and circumstances to confirm the order of A.O. even when it is pointed out that it is a case of "Change of Opinion" on the information already submitted.
3. Whether CIT(A) has passed the order without appreciation of information already on record, reasons of satisfaction recorded for reopening, and the 2 ITA NO.3475/Del/2009 & 3129/DEL/2010 reassessment order passed by A.O. are all not connected with each other.
4. Whether the assessee having discharged obligations and filed all necessary documents, confirmations at the time of original assessment sufficient to meet the satisfaction under section 148 proceedings when the assessing officer having accepted those confirmation and information in original assessment proceedings.
5. Whether in the reassessment proceedings the entire assessment is thrown open for enquiry or the AO is required to confirm himself to the reasons recorded for the reopening of the assessment.
6. Whether the order passed by CIT(A) in the facts and circumstances is just, fair and legal."
REVENUE'S APPEAL (A.Y. 2001-02) (ITA NO. 3475/DEL/2009)
4. The brief facts of the case are that the assessee is an investor company which is engaged in the business of dealing in shares and securities. For this year return declaring total income of Rs. 16,290/- was filed on 31.10.2011. The return was processed u/s. 143(1) but no scrutiny assessment was made. Subsequently on the basis of information received from the office of DIT(Inv.) a notice u/s. 148 was issued after recording of reasons and served on the assessee on 26.3.2008. In response to that the assessee requested to treat the original return as the return in response to notice u/s. 148. The assessment was made u/s. 147 by order dated 5.12.2008 determining the total income of Rs. 26,16,290/- and addition of Rs. 26,00,000/- passed u/s. 148/143(3) of the Income Tax Act, 1961.
3ITA NO.3475/Del/2009 & 3129/DEL/2010
5. Aggrieved with the aforesaid assessment order dated 5.12.2008, Assessee was in appeal before the Ld. CIT(A), who vide impugned order dated 4.5.2009 has deleted the addition in dispute by partly allowing the appeal of the assessee.
6. Against the aforesaid order of the Ld. CIT(A), Revenue is in appeal before the Tribunal.
7. Ld. DR relied upon the order of the AO.
8. On the other hand, Ld. Counsel for the assessee relied upon the order of the Ld. CIT(A) and requested that impugned order may be upheld.
9. We have heard both the counsel and perused the relevant records available with us, especially the orders passed by the Revenue Authority. We find that the Ld. CIT(A) has considered the Written Submissions of the assessee as well as the documentary evidence filed by the assessee and decided the issue in dispute in favour of the assessee. The relevant paragraph i.e. para no. 3.1 to 3.3 at pages 3 to 7 of the impugned order are reproduced hereunder for the sake of convenience.
"3.1 The other issue under dispute is addition of Rs 26 lacs made by the AO u/s 68. On the basis of information received from the office of DIT(Inv) the AO was of the view that the appellant had received accommodation entries from a number of parties. Accordingly the appellant was asked to prove the genuineness of transaction of receipt of money from Onyx Exim & Sales Pvt Ltd, Aay Kay Investments, Deeksha Fincap Securities Pvt Ltd, M V Marketing Pvt Ltd, Polo Leasing & Finance Pvt Ltd. The appellant's AR filed confirmation, copy of 4 ITA NO.3475/Del/2009 & 3129/DEL/2010 accounts, share application & some other documents with various letters before the AO. The AO required the appellant to produce the parties for examination. A show cause notice was also issued as to why these amounts should not be treated as income of the appellant in absence of further explanation. The appellant replied to the AO by letter dated 12/11/08 that it was not able to produce these parties and the AO may exercise powers as provided in law to call the parties directly. The AO issued summons to these parties but none of them attended. The AO accordingly noted that the appellant failed to comply with the requirements of notices and did not discharge its onus to prove the genuineness of these entries. Therefore he added aggregate amount of Rs 26 lacs received in respect of seven parties namely Sh Shujjit Hussain Mall, Amit Kr Singh, Onyx Exim & Sales Pvt Ltd., Krishna Cinema (India), Aay Kay Investment, M V Marketing Pvt Ltd and Polo Leasing & Finance P Ltd as unexplained credit u/s 68.
3.2 In the appeal proceedings the appellant's AR furnished the details of payments which the AO had noted in the order two reasons recorded by him for reopening as under:-
S.No. Party Name Amount Cheque Date
No.
1 Onyx Exim & Sales Pvt. 300000 61786 05/05/00
Ltd.
2 Onyx Exim & Sales Pvt. 300000 61786 05/05/00
Ltd.
5
ITA NO.3475/Del/2009 & 3129/DEL/2010
3 Swastic Advertisement 100000 39349 05/05/00
Agencies
4 Swastic Advertisement 100000 39349 05/05/00
Agencies
5 AAY Kay Investment 200000 159478 05/05/00
6 Maa Shakumbarii Stone 400000 916362 22/03/00
Crusher Pvt. Ltd.
7 Maa Shakumbarii Stone 400000 916362 22/03/00
Crusher Pvt. Ltd.
8 Deeksha Fincap Securities 100000 131809 27/03/01
Pvt. Ltd.
9 Deeksha Fincap Securities 100000 131809 27/03/01
Pvt. Ltd.
10 MV Marketing 300000 915527 03/02/01
11 Polo Leasing & Finance Pvt. 300000 535820 13/02/01
Ltd.
It was submitted that all the payment except for Sr No 5, 10 & 11 have been considered by the AO twice which amounts to double addition. The appellant had in fact not received the amount of Rs 26 lacs as alleged by the AO but only 17 lacs if the double entries are ignored. As about the individual payments received from difference parties following explanation was filed:-
Onyx Exim The sum of Rs 1,50,000 was received against sale of 15000 shares of a company Eexpressly Oriental Express Pvt Ltd. Total 25000 shares of this company were reflected in the balance sheet of the appellant as on 6 ITA NO.3475/Del/2009 & 3129/DEL/2010 31/3/00 and all were sold during the year. The balance amount of Rs 1,50,000 was repaid to Onyx Exim as excess amount received. Confirmation and copy of account was enclosed.
Swastic Advertisement Out of 25000 shares of Eexpressly Oriental Express Pvt Ltd held by the appellant 15000 shares were sold to Onyx Exim as explained above and balance 10000 shares were sold to this party. The payment of Rs 1 lac was received against the sale of these shares. Confirmation and copy of account was enclosed.
AAY KAY INVESTMENT The payment of Rs 2 lacs against sale of shares of another company KSB holding Pvt Ltd. Shares of this company were also reflected in the balance sheet of the appellant as on 31.3.00 which were sold during the year. Confirmation & copy of account was enclosed.
Maa Shakumbari Stone, M V Marketing Pvt Ltd & Polo Leasing The amount of Rs 4 lacs, 3 lacs & Rs 3 lacs respectively was received from these parties towards share application money. Copy of share application form, confirmation and acknowledgement of return of the said party was filed.
Deeksha Fincap Securities Pvt Ltd Payment from company was also received by way of share application money. Copy of share application 7 ITA NO.3475/Del/2009 & 3129/DEL/2010 form and confirmation was enclosed. , However this amount was returned to that party by account payee cheque in the next year on 28/08/01 which fact is also mentioned in the confirmation letter.
It was submitted that the relevant documents in support of the transaction were filed before the AO during the assessment proceedings. The appellant's AR contended that the AO's observation that the appellant failed to comply with the notice u/s 142(1) was in correct because the details required by the AO were duly filed before him. On the other hand it was contended that the AO has mentioned in the names of Sujjit Husain Mallick, Krishna 'Cinema India Ltd and Amit Kr Singh without any relevance because no payments were received from these parties during the, year. These parties do not find mention in the reasons recorded by the AO. This shows non-application of mind on part of the AO. It was also contended that in the 147 proceedings the primary onus was upon the AO to produce some material 0:- information which could prove that these receipts were accommodation entries. The assessee has to be given opportunity to counter or rebut such material or evidence. However the AO did not confront the appellant with any evidence or material which could show that the appellant company had received accommodation entries. To sum up it was contended that a part of the payment was towards sale of assets which were reflected in the balance sheet of the appellant company in the earlier years and some part was towards share application money for which necessary evidence was filed. The 8 ITA NO.3475/Del/2009 & 3129/DEL/2010 amounts were received by account payee cheques and were duly reflected in the ledger account of the relevant parties. Reliance was placed on a number of decisions including Lovely Exports by Supreme Court to contend that once the identity of the part was proved addition in respect of share application money or share capital could not be made in the case of company.
3.3 I have carefully considered the submissions made on behalf of appellant. It is seen from the copy of reasons recorded in respect of escapement of Rs 20 lacs that the four instrument Nos have been repeated twice by the AO. The AO has not mentioned specific amounts against the parties or the instruments Nos according to which they have been received. The appellant has tabulated this information which is shown in para 3.2 above. It is very clear that in respect of four parties at S No 1, 3, 6 & 8 of the table, the amounts have been considered twice. Since the instrument No is same it is obvious that the entries has been repeated by the AO.
Therefore I agree with the appellant's contention that the correct amount received by it only Rs 17 lacs and not Rs 23 lacs. Hence addition to the extent of Rs 9 lacs is deleted forthwith. As regards explanation about the remaining amount of Rs 17 lacs it is noted that the part of the amount aggregating to Rs 6 lacs was received towards sale of shares. which were held by the company and were duly reflected in its balance sheets. Since it was not loan/ advance or any credit received by the appellant, section 68 was not applicable to these receipts. The balance amount was received towards share application 9 ITA NO.3475/Del/2009 & 3129/DEL/2010 money from different parties to one of the parties it was returned in subsequent years. I agree with the appellant's contention that in 147 proceedings primary onus was upon the AO to confront the appellant with evidence or material on the basis of which allegation about escapement of income is made. The appellant has to give opportunity to rebut or counter the said material. This has been held by Delhi High Court in the case of Pradeep Kumar Gupta 207 CTR 115. However the AO did not bring on record any material or evidence proves that the various payments received were in the nature of accommodation entry. Simply the explanation was called for in response to which the appellant submitted various documents in support of the transactions. All the transactions have been carried out through account payee cheque and confirmations, share application forms, written acknowledgement of these parties have been filed. The AO rejected the said explanation merely on the ground that the summons issued by him was not responded to. Since the concerned parties were assessed to tax and their return acknowledgements were submitted, the facts could have been verified from their assessment records. The appellant has furnished sufficient documents to prove the identity of the parties and therefore in view of the decision of Supreme Court in the case of Lovely Exports no additions in the company have been made as regards share application money. Therefore entire addition of Rs 17 lacs is deleted"
10ITA NO.3475/Del/2009 & 3129/DEL/2010 9.1 We have thoroughly gone through the aforesaid finding of the Ld. CIT(A) and we are of the considered view that Ld. CIT(A) has deleted the addition in dispute after considering all the relevant evidences produced by the assessee, as discussed above. Therefore, we are of the considered view that no interference is called for in the well reasoned order passed by the Ld. CIT(A), hence, we uphold the order on the issue in dispute by dismissing the appeal filed by the Revenue.
10. In the result, the Appeal filed by the Revenue stands dismissed.
ASSESSEE'S APPEAL NO. 3129/Del/2010 (A.Y. 2002-03)- SHAKTI SECURITIES P LTD.
11. The brief facts of the case are that the assessee company was incorporated on 2.5.1996 and has been engaged in the business of sale and purchase of shares as stock in trade and also as investments. The return of income was filed on 11.11.02 declaring total income of Rs. 4,000/-. The return was processed u/s. 143(1) of the Act and thereafter the case was selected for scrutiny. The assessment was completed u/s. 143(3) on 28.2.2005 computing total income at Rs. 4000/- i.e. as declared by the assessee in its returned of income. Subsequently, the case was reopened u/s 147 of the Act by duly recording reason u/s 148(2) of the Act. The submission of the assessee were examined and thereafter assessment was completed u/s. 147/143(3) of the Act on 30.12.2009 computing total income at Rs. 16,04,000/- as against returned income of Rs. 4000/-. The only addition include Rs. 16,00,000/- received from 9 person (including 3 Pvt. Ltd. company and 1 Ltd. Company and 5 individuals) u/s. 68 of the Act as share application money, which resulted a demand of Rs. 11,30,940/-.11
ITA NO.3475/Del/2009 & 3129/DEL/2010
12. Aggrieved with the same, assessee filed the Appeal before the Ld. CIT(A) who vide impugned order dated 12.5.2010 dismissed the appeal of the assessee.
13. Against the order of the Ld. CIT(A) dated 12.5.2010, the assessee is in appeal before the Tribunal.
14. Ld. Counsel of the assessee reiterated the contention raised in its Appeal wherein he stated that the reassessment proceedings for the year are based on re- verification of records submitted in the course of original assessment proceedings completed after due scrutiny under sec 143(3) of IT Act, thus not valid. He further submitted that whether the order of the Ld. CIT(A) is just and reasonable in the facts and circumstances to confirm the order of A.O. even when it is pointed out that it is a case of "Change of Opinion" on the information already submitted; the order passed by the authorities below is passed without appreciation of information already on record, reasons of satisfaction recorded for reopening, and the reassessment order passed by A.O. are all not connected with each other. He further submitted that assessee had discharged obligations and filed all necessary documents, confirmations at the time of original assessment sufficient to meet the satisfaction under section 148 proceedings when the assessing officer having accepted those confirmation and information in original assessment proceedings. To support his contention, he referred the various case laws of the Delhi High Court by which the present case of the assessee is covered including the case of Signature Hotel Pvt. Ltd. (2011) 338 ITR 51. He further relied upon the ITAT, 'C' Bench, Delhi in which on the similar facts and circumstances the issue in dispute has been dealt by the Tribunal in the case of Shri Govind Kripa Builders and Promoters vs. ITO passed in ITA No. 304/Del/2013 (AY 2008-09) vide order dated 19.12.2014 in which Hotel Signatures Pvt.12
ITA NO.3475/Del/2009 & 3129/DEL/2010 Ltd. decision (supra) was followed. Later the Department went in Appeal before the Delhi High Court, in ITA No. 486/2015 in the case of Pr. CIT vs. Sh. Govind Kripa Builders Pvt. Ltd. which was dismissed on 4.8.2015 by the Hon'ble High Court of Delhi. Hence, he requested that the reassessment proceedings may be quashed.
15. On the other hand, Ld. DR relied upon the order passed by the Ld. CIT(A) on the issue in dispute.
16. We have heard both the parties and perused the records. We find that the AO has recorded the reasons for belief that income has escaped assessment as under. The same is attached with the Paper Book filed by the assessee.
"Reasons for belief that income has escaped assessment:
Return of income declaring an income of Rs. 4,000/- was filed on 11.11.2002. The assessment was completed u/s. 143(3) on 28.2.2005 in the income declared accepted. However, an information was received from DIT(Inv.) that the assessee was a beneficiary of in respect of Rs. 34.50 lacs received from various parties which were in the nature of accommodation entries. A copy of the extract of information is enclosed for ready reference.
I have, therefore, reasons to believe that the income to the extent of Rs. 24.50 lacs has escaped assessment by reason of failure on the part of the assessee to disclose fully and truly all material facts necessary for assessment. In view of the above, it is requested to kindly accord approval u/s. 151 of the I.T. Act for issuance of notice u/s. 148 for AY 2002-03."13
ITA NO.3475/Del/2009 & 3129/DEL/2010 16.1 We find considerable cogency in the submissions of the Ld. Counsel of the assessee that the facts and circumstances of the present case are similar and identical to that of case of Shri Govind Kripa Builders and Promoters vs. ITO, decided by the 'C' Bench, ITAT, New Delhi in ITA No. 304/Del/2013 (AY 2008-09) vide order dated 19.12.2014 (in which one of the Judicial Member was the Party), wherein the Hotel Signatures Pvt. Ltd. (Supra) decision of the Delhi High Court was followed. Against the order dated 19.12.2014 of the Tribunal, the Department went in Appeal before the Hon'ble Delhi High Court, in ITA No. 486/2015 in the case of Pr. CIT vs. Sh. Govind Kripa Builders Pvt. Ltd. and the Hon'ble High Court of Delhi vide its order dated 04.8.2015 has observed as under:-
"3. It is seen that the ITAT has in the impugned order dated 19th December, 2014 passed in ITA No. 304/Del/2013 for the Assessment Year 2008-09 relied upon the judgment of this Court in Signature Hotels P. Ltd., vs. ITO [2011] 338 ITR 51 (Delhi) and come to the conclusion that the AO did not apply his own mind to the information and the materials forming the basis of the information.
4. The Court finds no legal error whatsoever in the ITAT coming to the above conclusion. In the facts and circumstances of the present case, no substantial question of law arises for determination by the Court."
16.2 We also find from the records that earlier scrutiny assessment u/s. 143(3) was completed vide order dated 28.2.2005 and (ii) four years have elapsed on date of instant reopening 14 ITA NO.3475/Del/2009 & 3129/DEL/2010 (23.3.2009) and (iii) in reasons recorded allegation was made for income escaping assessment of Rs. 24.50 lacs as mentioned on page no. 1 of the impugned order also whereas income escaping assessment was found to be Rs. 16 lacs in the very same order. On these reasons merely based on investigation wing information without surveillance of substantiation and without any statement being mentioned therein and without nature of transaction being narrated therein and without tangible material, and further without application of mind on amount of income escaping assessment, shows that the reopening is bad in law and needs to be quashed.
16.3 In the background of the aforesaid discussions, we are of the considered view that only effective ground in this appeal is reassessment proceedings u/s. 148 of the I.T. Act, the Assessee has reiterated that reassessment proceedings are illegal and without jurisdiction in the absence of any tangible evidence or material in respect of any undisclosed income and recording of requisite satisfaction in respect of any such undisclosed income. After hearing both the parties on the issue in dispute as well as after going through the orders passed by the Revenue Authorities alongwith order dated 21.7.2011 passed by the Hon'ble Jurisdictional High Court in the case of Signature Hotels P. Ltd. vs. Income Tax Officer [2011] 338 ITR 0051 wherein the Hon'ble High Court has held matter as under:-
"Held, allowing the petition, that the reassessment proceeding were initiated on the basis of information received from the Director of Income Tax (Investigation) that the petitioner had introduced money amounting to Rs. 5 lacs during 15 ITA NO.3475/Del/2009 & 3129/DEL/2010 the financial year 2002-03 as stated in the Annexure. According to the information, the amount received from a company, S, was nothing but an accommodation entry and the assesee was the beneficiary. The reasons did not satisfy the requirements of Section 147 of the Act. There was no reference to any document or statement, except the annexure. The annexure could not be regarded as a material or evidence that prima facie showed or established nexus or link which disclosed escapement of income. The annexure was not a pointer and did not indicate escapement of income.
Further, the Assessing Officer did not apply his own mind to the information and examine the basis and material of the information. There was no dispute that the company, S, had a paid-up capital of Rs. 90 lakhs and was incorporated on January 4, 1989, and was also allotted a permanent account number in September, 2001. Thus, it could not be held to be a fictitious person. The reassessment proceedings were not valid and were lliable to be quashed."
17. In view of above, we are of the considered view that above issue is exactly the similar to the issue involved in the present 16 ITA NO.3475/Del/2009 & 3129/DEL/2010 appeal and is squarely covered by the aforesaid decision of the Hon'ble High Court of Delhi delivered in Hotel Signatures Ltd.
(Supra). Hence, respectfully following the above precedent, we decide the legal issue in dispute in favour of the Assessee and against the Revenue and accordingly quash the reassessment proceedings. The other issues are not dealt with as the same have become academic in nature.
18. In the result, the Revenue's Appeal No. 3475/Del/2009 (AY 2001-02) stands dismissed and the Assessee's Appeal No. 3129/Del/2010 (AY 2002-03) stands allowed.
Order pronounced in the Open Court on 10/9/2015.
Sd/- Sd/-
[O.P. KANT] [H.S. SIDHU]
ACCOUNTANT MEMBER JUDICIAL MEMBER
Date 10/9/2015
"SRBHATNAGAR"
Copy forwarded to: -
1. Appellant -
2. Respondent -
3. CIT
4. CIT (A)
5. DR, ITAT TRUE COPY
By Order,
Assistant Registrar,
ITAT, Delhi Benches
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