Income Tax Appellate Tribunal - Delhi
Craftpac Containers Pvt. Ltd., New ... vs Ito, New Delhi on 28 August, 2017
IN THE INCOME TAX APPELLATE TRIBUNAL, DELHI 'B' BENCH,
NEW DELHI
BEFORE SHRI B.P. JAIN, ACCOUNTANT MEMBER AND
SHRI K.N. CHARY, JUDICIAL MEMBER.
ITA No. 547/DEL/2017
[Assessment Year: 2011-12]
Craftpac Containers Private Limited Vs. The I.T.O
M - 259, Greater Kailash - II, Ward - 3(4)
New Delhi New Delhi
PAN : AAACC 0305 M
[Appellant] [Respondent]
Date of Hearing : 02.08.2017
Date of Pronouncement : 28.08.2017
Assessee by : Shri Ved Jain,
Shri Rano Jain, Adv.
Shri Ashish Goel, CA
Revenue by : Shri Anshu Prakash, CIT-DR
ORDER
PER B.P. JAIN, ACCOUNTANT MEMBER,
This appeal of the assessee arises from the order of the ld. CIT(A)-2, New Delhi vide order dated 12.10.2016 for assessment year 2011-12.
2ITA No. 547/DEL/2017
2. The assessee has raised the following grounds of appeal;
"1. On the facts and circumstances of the case, the order passed by the learned Commissioner of Income Tax (Appeals) [CIT(A)] is bad both in the eye of law and on facts.
2. On the facts and circumstances of the case, the learned CIT(A) has erred both on facts and in law in enhancing the income of the assessee by Rs.4.00 Crores without following due procedure as prescribed under the law.
3. On the facts and circumstances of the case, the learned CIT(A) has erred both on facts and in law in making addition of an amount of Rs.4.00 Crores in the hands of the appellant company.
4(i) On the facts and circumstances of the case, the learned CIT(A) has erred both on facts and in law in treating the amount of Rs.4.00 Crores received by Mr. Harish Kanwar and Mrs. Anjali Kanwar as advance against sale of property from M/s OEC Diascans Ltd. as representing the undisclosed income of the appellant company.
(ii) On the facts and circumstances of the case, the learned CIT(A) has erred both on facts and in law in ignoring the explanation and evidences submitted by the appellant company in support of its contention.3 ITA No. 547/DEL/2017
iii) On the facts and circumstances of the case, the learned CIT(A) has erred both on facts and in law in making the abovesaid addition of Rs.4.00 Crores as unexplained income of the appellant company despite the fact that the appellant company had discharged its onus of having received the amount from its two directors, viz., Mr. Harish Kanwar and Mrs. Anjali Kanwar.
5. On the facts and circumstances of the case, the learned CIT(A) has erred both on facts and in law in drawing adverse inference against the appellant company by collecting material at the back of the appellant company and without giving an opportunity of rebuttal/ cross examination.
6. The appellant craves leave to add, amend or alter any of the grounds of appeal."
3. Brief facts of the case are that the assessee company filed a return of income declaring a total income of Rs. 32,35,365/-. Subsequently, the case of the assessee was selected for scrutiny assessment and a notice under section 143(2) of the Income-tax Act, 1961 [hereinafter referred to as 'the Act' for short] was issued to the assessee company. The assessment was completed by making a protective addition of Rs. 1,00,35,866/- in the hands of the appellant company under section 2(22)(e) of the Act.
4ITA No. 547/DEL/2017
4. Aggrieved by the assessment order dated 28.02.2014, the assessee preferred appeal before the CIT(A). The CIT(A) deleted the protective addition of Rs. 1,00,35,866/- under section 2(22)(e) of the Act. However, the income of the appellant company was enhanced by Rs. 4 crores by the CIT(A).
5. The assessment record would reveal that during the year under consideration, the assessee company made two fixed deposits of Rs. 4 crores each in Citibank, Gurgaon. The addition of Rs. 1,00,35,866/- pertains to the first FDR made by the assessee company and the enhancement made by the CIT(A) of Rs. 4 crores relates to the second FDR. In the present appeal, we are concerned with the facts relating to the second FDR of Rs. 4 crores.
6. The Ld. AR submits that the second FDR was made in cash received by the Directors of the appellant company, Sh. Harish Kanwar and Smt. Anjali Kanwar. The Directors received the said amount from M/s OEC Diascans Ltd. as advance against sale of their property being Plot No. 14 of Champa Marg measuring 420 sq. metres situated at DLF Qutab Enclave Complex, Village Ghosi, DLF Complex, Phase-1, Sikkandarpur, District Gurgaon. The said directors were owners of the 5 ITA No. 547/DEL/2017 aforesaid property. The Ld. AR then refers to the agreement to sell dated 10.09.2010 entered into between the Directors and M/s OEC Diascans Ltd. regarding the sale of the aforesaid property and also the receipt attached thereof. It was further submitted that the name of M/s OEC Diascans was changed to M/s Silver Sand Corporation Ltd. and the address, PAN, balance sheet was submitted by the appellant to the CIT(A). The Ld. AR argued that the said amount was returned back by the Bank as the deal was not materialized and the amount was refunded to M/s OEC Diascans Ltd. by the Directors of the company. He thus submitted that the appellant company has proved the genuineness, creditworthiness and identity w.r.t. the transaction of Rs. 4 crores.
7. The ld. DR, on the other hand, relied upon the order passed by the CIT(A). It was submitted that no advance was actually given by M/s OEC Diascans Ltd. to the Directors of the appellant company. It was further submitted that the agreement to sell was not a genuine document and the amount of Rs. 4 crores out which the second FDR with CITI Bank was made represents the undisclosed income of the appellant company.
6ITA No. 547/DEL/2017
8. We have heard the rival submissions and perused the record and judgments relied upon. The second FDR of Rs. 4 crores was made in cash by the assessee company in CITI Bank, Gurgaon. The Ld. AR has referred to the ledger account in the books of M/s OEC Diascans Ltd. and the ledger account in the books of Mr. Harish Kanwar and Ms. Anjali Kanwar of M/s OEC Diascans Ltd. The ledger accounts support the submissions made by the Ld. AR that the amount of Rs. 4 crores were received by the Directors Ms. Anjali Kanwar and Mr. Harish Kanwar from M/s OEC Diascans Ltd. Thereafter, the receipt of cash by the assessee company from Ms. Anjali Kanwar and Mr. Harish Kanwar is also evident from the copy of ledger account of both the directors in the books of the assessee company. The Department has not brought anything on record to dispute the aforesaid sequence of transactions. Moreover, the return of amount to the Directors and by the Directors to M/s OEC Diascans Ltd. is also evidenced by the bank statements and the certificate given by the bank to the Directors. This clearly shows that the transaction was genuine within the meaning of section 68 of the Act.
9. It is seen that the department had tried serving notice to M/s OEC Diascans Ltd. which remained un-served. However, the Department despite having the address of the changed company M/s 7 ITA No. 547/DEL/2017 Silver Sand Corporation did not make any enquiry with respect to the aforesaid transactions. The net worth of the company M/s Silver Sand Corporation Ltd. from its balance-sheet reveals that it is regularly filing its return of income and total sources of funds are Rs. 85.46 crores. The DIN and the address of the said company are also on record. The assessee had therefore, proved the genuineness, creditworthiness and identity as required under section 68 of the Act. The addition cannot be made in the hands of the assessee for not proving the source of source of investment and the assessee is not required to prove that the sub creditor had the creditworthiness of making the investment.
10. In the case of Nemi Chand Kothari Vs. CIT 264 ITR 254, the Hon'ble High Court held as under:-
"Keeping in view the above position of law, when we turn to the factual matrix of the present case, we find that so far as the appellant is concerned, he has established the identity of the creditors, namely, Nemichand Nahata and Sons (HUF) and Pawan Kumar Agarwalla. The appellant had also shown, in accordance with the burden, which rested on him under section 106 of the Evidence Act, that the said amounts had been received by him by way of cheques from the creditors aforementioned. In fact, the 8 ITA No. 547/DEL/2017 fact that the assessee had received the said amounts by way of cheques was not in dispute. Once the assessee had established that he had received the said amounts from the creditors aforementioned by way of cheques, the assessee must be taken to have proved that the creditor had the creditworthiness to advance the loans.
Thereafter the burden had shifted to the Assessing Officer to prove the contrary. On mere failure on the part of the creditors to show that their sub-creditors had creditworthiness to advance the said loan amounts to the assessee, such failure, as a corollary, could not have been and ought not to have been, under the law, treated as the income from the undisclosed sources of the assessee himself, when there was neither direct nor circumstantial evidence on record that the said loan amounts actually belonged to, or were owned by, the assessee. Viewed from this angle, we have no hesitation in holding that in the case at hand, the Assessing Officer had failed to show that the amounts, which had come to the hands of the creditors from the hands of the sub-creditors, had actually been received by the sub-creditors from the assessee. In the absence of any such evidence on record, the Assessing Officer could not have treated the said amounts as income derived by the appellant from undisclosed sources. The learned Tribunal seriously fell into error in treating the said amounts as income derived by the appellant from undisclosed sources merely on the failure of the sub-creditors to prove their creditworthiness".9 ITA No. 547/DEL/2017
11. In the case of Sarogi Credit Corporation Vs. CIT 103 ITR 344 (Patna), the Hon'ble' High Court observed as under:-
"Once the identity of the third party is established before the Income Tax Officer and such other evidence are prima facie placed before him pointing to the fact that the entry is not fictitious, the initial burden lying on the assessee can be said to have been duly discharged by him. It will not, therefore, be for the assessee to explain further as to how or in what circumstances the third party obtained the money or how or why he came to make advance of the money as a loan to the assessee. Once such identity is established and the creditors, as in the present case, have pledged their oath that they have advanced the amounts in question to the assessee, the burden immediately shifts on the department to show as to why the assessee's case could not be accepted and as to why it must be held that the entry, though purporting to be in the name of the third party, still represented the income of the assessee from a suppressed source. And, in order to arrive at such a conclusion, even the department has to be in possession of sufficient and adequate materials.
The Income Tax Officer's rejection, not of the explanation of the assessee, but of the explanation regarding the source of income of the depositors, could not by itself lead to any inference regarding the non-genuine or fictitious character of the entries in the assessee's book of account".10 ITA No. 547/DEL/2017
12. In view of the above judicial pronouncements, the grounds raised by the appellant company are allowed.
13. In the result, the appeal of the assessee in ITA No. 547/DEL/2017 is allowed.
The order is pronounced in the open court on 28.08.2017.
Sd/- Sd/-
[K.N. CHARY] [B.P. JAIN]
JUDICIAL MEMBER ACCOUNTANT MEMBER
Dated: 28th AUGUST, 2017
VL/
Copy forwarded to:
1. Appellant
2. Respondent
3. CIT
4. CIT(A)
5. DR
Asst. Registrar,
ITAT, New Delhi