Income Tax Appellate Tribunal - Delhi
Ramesh Chand Investment & Leasing Pvt. ... vs Acit, New Delhi on 26 May, 2017
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IN THE INCOME TAX APPELLATE TRIBUNAL
[ DELHI BENCHES: "F" NEW DELHI ]
BEFORE SHRI I. C. SUDHIR, JUDICIAL MEMBER
AND SHRI O. P. KANT, ACCOUNTANT MEMBER
ITA. No.1056/Del/2013
Assessment Year : 2003-04.
Ramesh Chand Investment Asstt. Commissioner
and Leasing Pvt. Ltd., Vs. of Income Tax,
69/2A, Najafgarh Road Ind. Area, Circle : 15 (1),
New Delhi - 110 052. New Delhi.
AND C/o. Garg Bros. & Associates, CAs.;
203/88, Nehru Place,
New Delhi - 110 019.
PAN : AACCR 3585 Q
(Appellant) (Respondent)
Assessee by : Shri K. P. Garg, C. A.;
Department by : Shri F. R. Meena, Sr. D. R.;
Date of Hearing : 21.03.2017
Date of Pronouncement : 26.05.2017
O R D E R.
PER I. C. SUDHIR, J. M. :
The assessee has questioned first appellate order on the following
grounds :-
" 1. The ld. CIT (Appeals) has erred on facts and in law in
upholding the impugned order of the learned Assessing
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Officer which is contrary to law, equity and justice and facts
and material on record, devoid of jurisdiction, arbitrary based
on conjectures and surmises, passed without application of
mind without granting proper opportunity to defend as no
notice under section 143(2) or section 144 was issued after
the filing of return till the assessment was made under
section 144. The order under section 144 is bad in law;
2. The appellant denies his liability to tax as upheld by the
ld. CIT (Appeals) and determined and computed by the
learned Assessing Officer and the manner in which it has
been so determined or computed;
3. The ld. CIT (Appeals) has erred in law and on facts in
sustaining the impugned addition of Rs.4,50,000/- under
section 68 received as Share application money;
4. The ld. CIT (Appeals) has erred in law and on facts in
sustaining the impugned addition of Rs.8,00,000/- under
section 68 which has been already considered as income as
sale proceeds. "
2. During the course of hearing the ld. AR submitted that the
assessee does not wish to press ground No. 1. The same is accordingly
rejected, as such.
3. Heard and considered the arguments advanced by the parties
in view of orders of the authorities below, material available on record
and the decisions relied upon.
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4. The facts in brief are that on the basis of information received
from Investigation Wing of the Department that the assessee company
had received Rs.25 lakhs during the year out of which Rs. 9 lakhs had
been received from JMK Securities Pvt. Ltd. and Rs.16 lakhs had been
received from Elbee Portfolio Pvt. Ltd. on 27.06.2002 and 11.10.2002
respectively, the Assessing Officer issued notice under section 148 of the
Act and framed assessment making the addition of Rs.25 lakhs under
section 68 of the Act treating the share capital as unexplained cash
credit. The assessee went in first appeal and the ld. CIT (Appeals) has
restricted the addition at Rs.12,50,000/-. This action of the ld. CIT
(Appeals) has been questioned by the assessee before the Tribunal.
5. Ground Nos. 3 & 4 : In ground No. 3 the addition of
Rs.4,50,000/- under section 68 on account of unexplained share
application money sustained by the ld. CIT (Appeals) has been
questioned. In ground No. 4 the assessee has questioned the sustaining
of addition of Rs.8 lakhs under section 68 of the Act received from
Elbee Portfolio Pvt. Ltd.
5.1 In support of ground No. 3, the ld. AR submitted that shares
of face value of only Rs.9,000/- were allotted to JMK Securities Pvt.
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Ltd. for which Rs.4,50,000/- was received. The assessee had received
Rs.25,05,000/- against sale of shares from RPS Securities and Financial
Services, against which Rs.22,05,000/- was received during the year.
The assessee has submitted copy of confirmation of receipt of payment of
Rs.4,50,000/- from JMK Securities Pvt. Ltd., copy of share application
for allotment of 90 equity shares, copy of affidavit of Shri Surender
Kumar, Director of JMK Securities Pvt. Ltd. confirming the investment,
copy of ledger account of RPS Securities and Financial Services in
support of genuineness of the transaction towards the share capital
subscribed by JMK Securities Pvt. Ltd. The ld. AR referred page Nos.
146 to 150 of the paper book with this submission that these were
the evidences filed by the assessee in support of genuineness of
the capital subscribed by JMK Securities Pvt. Ltd. These documents
are :-
(i) Comparative share holder list as on 31.03.2002 and
31.03.2003 showing additions during assessment year 2003-04;
(ii) Ledger account of JMK SPL showing receipt of Rs.4.50 lakhs;
(iii) Register of members and ledger - JMK SPL;
(iv) Confirmation of payment of Rs.4.50 lakhs by cheque dated
25.06.2002;
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(v) Copy of share application of JMK SPL for 90 equity shares;
(vi) Copy of affidavit of Shri Surender Kumar, Director of JMK
SPL confirming investment;
(vii) Extract of Board Resolution of JMK SPL;
(viii) ROC Profile of JMK Securities Pvt. Ltd.
(ix) Copy of assessment order under section 143(3) for
assessment year 2002-03 passed on 27.12.2004 accepting similar
increase in share capital and share premium by Rs.8,63,200/- and
Rs.4,22,96,800/- respectively.
5.2 The ld. AR submitted that in view of the above submission
and furnishing of sufficient evidence in support there was no reason
or material or any evidence with the ld. CIT (Appeals) to disbelieve
the similar evidence regarding increase in share capital and premium
during assessment year 2003-04, which has been accepted in
assessment year 2002-03 in the assessment framed under section
143(3) of the Act. The ld. CIT (Appeals) has failed to consider the
entire evidence and has erred in concluding that the assessee had
offered no creditable explanation. In support of the above submission
the ld. AR placed reliance on the following decisions :-
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(i) CIT Vs. TWOBRO Investment and Finance Ltd.,
ITA. 5/2014, order dated 14.1.2014 (Delhi High Court);
(ii) ITO Vs. TWOBRO Investment and Finance Ltd. & Other,
ITA. 4486/Del/2011 & Others (A.Y. 2003-04) -
order dated 7.06.2013;
(iii) Akshay Portfolio (P) Ltd. Vs. ITO
ITA. 789/Del/2010 (A.Y. 2000-01) -
order dated 13.07.2012;
(iv) CIT Vs. Vishal Holding & Capital P. Ltd.
ITA. 1031/2010 - Judgement dated 9.8.2010 (Delhi High Court);
(v) ITO Vs. MF Portfolio P. Ltd. & Other,
ITA. 1866/Del/2011 (A.Y. 2002-03) - order dated 8.08.2013;
(vi) CIT Vs. Anirudh Narain Aggarwal (2013)
38 taxman.com 367 (All.);
(vii) CIT Vs. Vrindavan Farms (P) Ltd.
ITA. 71-72 & 84 of 2015 - [order dated 12th August, 2015]
(Delhi High Court).
5.3 In support of ground No. 3, the ld. AR submitted that cheques
of Rs. 8 lakh (Rs.4 lakhs each) were not received from Elbee Portfolio Pvt.
Ltd. and these cheques have not been received against share capital. He
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submitted that in the normal course of its business of dealing in shares
the assessee had share trading transactions with RPS Securities and
Finance Services, both purchases and sales. During the assessment
year 2003-04, there was a sale transaction of Rs.25,500/- against which
the assessee realized Rs.22,5000/- during the year leaving a balance of
Rs.3 lakhs as outstanding against the debtor. The assessee filed
evidence of trading transactions with RPS Securities as called for by the
ld. CIT (Appeals) made available at page Nos. 165 to 219 of the paper
book. The assessee filed complete evidence of business of assessee as
trading in shares in assessment year 2002-03 and 2003-04 as
specifically required by the ld. CIT (Appeals) showing the sale proceeds
as income, made available at page Nos. 162 to 219 and 220 to 259. In
support the assessee also filed copy of assessment order under section
143(3) for assessment year 2002-03, accepting trading in shares as the
regular business of the assessee company, made available at Page No.
243 of the paper book. The ld. AR submitted that after considering part
of evidence the ld. CIT (Appeals) treated Rs.8 lakhs out of total receipts of
Rs.22,05,000/- on account of sale consideration from RPS as cash
credits and upheld the addition. Thus, replacing the addition made by
the Assessing Officer on account of Elbee Portfolio Pvt. Ltd. as capital
contribution by unexplained receipts from RPS rejecting the entire
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evidence on the basis of conjecture and surmises. He referred to page
Nos. 19 to 22 of the first appellate order in this regard. The ld. CIT
(Appeals) has upheld the addition of Rs.8 lakhs in spite of accepting
and recording the findings that cheques for Rs.4 lakhs have not
been received from Elbee Portfolio Pvt. Ltd. on account of which the
Assessing Officer has made the addition and that these cheques have
not been received against share capital. The Assessing Officer had
not submitted the report before the ld. CIT (Appeals) on the submission
made by the assessee supported with evidence in spite of repeated
reminders. The documents filed by the assessee clearly support that
similar amount was received from RPS Securities against sale of
shares, which has been duly reflected in the trading account as
income. Thus the addition made by the ld. CIT (Appeals) has resulted
into accounting of the same income twice, submitted the ld. AR once
by the assessee and again by the ld. CIT (Appeals). If at all this addition
had to be made by the ld. CIT (Appeals) then she ought to have
reduced the same amount from the trading receipts accounted for by
the assessee. The same amount cannot be considered both as
trading income and cash credit. The ld. AR also made following
submissions :-
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" The assessee had brought on record complete evidence in this
regard for AY two years regarding opening stock, purchases, sales
and closing stock with quantitative statement and value (P.220-259)
and as filed before the AO for AY 02-03 where assessment order u/s
143(3) had been made accepting the fact that assessee is a trader in
shares and accepting the closing stock in trade as on 31.3.02. Asstt
order at page-243.
The entire evidence has been rejected by the Ld. CITA on conjectures
and surmises stating at page-19/22 of the order: "the assessee
was, however, unable to produce either the share certificates,
evidence of purchase & sale, confirmation of the parties with whom
the purchase/sale transaction had been undertaken and the copy of
bank account showing payment against purchase of shares."
Regarding trading receipts of Rs.8,00,000/- for which addition
u/s.68 has been sustained by Ld. CITA it is humbly submitted that
the case is squarely covered by the judgment of Hon'ble Delhi ITAT,
"C" Bench (constitution: Shri Rajpal Yadav, JM and Shri K.G. Bansal,
AM) reported as Eland International (P) Ltd. vs. DCIT and vice versa -
(2009) 124 TTJ (Del) 554: held in Para 5.4 of the order in cross
appeals "When transactions of sale and purchase were recorded in
the books of account and these transactions led to the profit of
assessee, which was brought to tax, therefore, the said transactions
could not be regarded as bogus and no addition under S. 68 was
called for. "
After a detailed discussion on facts of the case in Para 5, 5.1 to 5.3,
the Hon'ble ITAT summarised the issue in Para 5.4 and Held, "It is
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clear that the transactions of purchase and sale were recorded in
the books of account and these transactions led to profit to the
assessee, which was brought to tax. If sales have been effected out
of purchases made from these parties, then, it cannot be said that
the purchases were bogus. The finding of bogus sale can only lead
to the inference that the corresponding amount should be deleted
from the turnover of the assessee. The AO has also not rejected the
books of account to estimate profit on these transactions in case it
was a firm finding that purchases and sales were bogus. The facts
of the case of La Medica (supra) are different in the sense that
detailed enquiries were made into the purchases made by the
assessee, which were held to be bogus by the AO. It was found that
the purchase consideration got deposited in a bank account of an
employee in Calcutta, which was opened with the introduction of
the assessee. No such enquiry was made in this case. In the case of
La Medica, it was also not the case that Sales were effected from
the purchases made and, thus, the purchases could not be out-
rightly termed as bogus. Therefore, we are of the view that the facts
of the two cases are distinguishable. In absence of displacing the
finding of the CIT(A) and the fact that the assessee showed profit
from these transactions, it is held that there is no such error in the
order of learned CIT(A) which requires correction from us. Thus
this ground is dismissed"
: In the present case before Your Honors:
• The transactions of purchase and sale were duly recorded in the
books of account and these transactions led to profit to the assessee,
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which has been brought to tax. (See assessments for AY 02-03 &
03-04).
• as per evidence filed before AO and the CITA for AY 2002-03
and AY 03-04 the facts accepted in the original assessment made
u/s. 143(3) are:
AY 02-03 AY 03-04
Opening stock of shares (trading asset)-P.251/222 26694824 39519299
Purchases - P251/222 41462000 2302107
Sales (cost 2302107 plus gp 60,903/-) P251/222 28637000 2363010
Closing Stock - P.251/222 39519299 41882309
Trading Loss/profit - P.251/222 -52560903
The trading loss of Rs.525 and net loss of Rs.27147/- has been
accepted in the assessment order for AY 2002-03, passed
u/s.143(3)-(Page-243).
The Ld. CITA made the addition by rejecting the transactions of
purchase and sale, which had been duly accepted as the business
of the assessee in Assessment u/s. 143(3) for AY 2002-03 and
subsequently, trading in shares being the business of the Co.
The business of trading in shares has not been disputed even by
the Ld. CITA.
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PRAYER: Thus the present case is squarely covered by the above
judgment of the co-ordinate bench of the Hon'ble Delhi ITAT in Eland
International (P) Ltd. vs. DCIT and vice versa - (2009) 124 TTJ (Del)
554 and should be followed. For easy reference, the print out of both
the judgments are enclosed. "
5.4 The ld. Sr. DR, on the other hand, placed reliance on the
orders of the authorities below. He submitted that onus lies upon
the claimant to establish genuineness of the claim to which the assessee
has thoroughly failed to. The assessee has failed to establish identity
and creditworthiness of the share applicant and genuineness of the
transaction. The authorities below were thus justified in making and
sustaining the addition of Rs.4,50,000/- under section 68 of the Act
on account of unexplained share application money received from
JMK Securities Pvt. Ltd.
5.5 On having gone through the orders of the authorities below that
the ld. CIT (Appeals) has asked the assessee to produce the parties from
whom share capital was received during the year to produce the share
transfer register, specify the dates on which shares were allotted and to
produce evidence whether confirmation, proof of identity and source of
investment had been filed before the Assessing Officer and if not, can it
be filed during first appellate proceedings. The ld. CIT (Appeals) had also
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called for a report from the Assessing Officer in regard to the additional
evidence produced by the assessee. The Assessing Officer despite
repeated reminders did not file any report in compliance of the direction
of the ld. CIT (Appeals). The ld. CIT (Appeals) proceeded to make
enquiries herself. Regarding the addition of Rs.4,50,000/- on account of
share capital from JMK Securities Pvt. Ltd., the contention of the
assessee remained that as per audited accounts during the assessment
year 2003-04 the total capital allotted during the year was only
Rs.1,09,300/-. Out of which Rs.9,000/- was from JMK Securities and
the balance was on account of premium shown in capital reserve. The
assessee accepted receipt of Rs.4,50,000/- from JMK Securities towards
contribution to share capital, which was allotted and shares were issued.
The Assessing Officer alleged receipt of cash from the assessee or its
Director made addition of Rs.25,00,000/- under section 68 as
unexplained share application money. This addition of Rs.25,00,000/-
consisted of Rs.9,00,000/- on account of unexplained share application
money received from JMK Securities Pvt. Ltd. and remaining
Rs.16,00,000/- as share application money received from Elbee Portfolio
Pvt. Ltd. In support of receipt from JMK Securities Pvt. Ltd. the
assessee filed confirmation, copy of share application, resolution of board
of directors, affidavit of Shri Surender Kumar, Director of JMK
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conforming the payment/investment of Rs.4,50,000/-, affidavit of the
then Director of the assessee company, ledger account of JMK Securities
Pvt. Ltd., JMK Securities Status i.e. copies of company master details, as
per ROC website indicating that the company is Government as on
20.02.2012. On the contrary the authorities below were having nothing
on record to falsify the evidence filed by the assessee except the
information of the Investigation Wing of the Department that the entry
operators named therein had alleged that it is part of the accommodation
entry business carried on by them. There is no any information therein
that the assessee had paid in cash and if so to whom it was paid. There
is no any explanation regarding subsequent sale by JMK Securities of
those shares to somebody else and how the proceeds were recorded. In
its recent decision the Hon'ble High Court of Delhi in the case of CIT Vs.
Vrindavan Farms (P) Ltd. (supra) on the issue of validity of addition made
under section 68 of the Act has been pleased to hold that if the identity
and other details of share applicants are available, the share application
money cannot be treated as undisclosed income in the hands of the
company. The addition, if at all, could be in the hands of the applicants
if their creditworthiness cannot be proved. Again in the case of Lovely
Exports 216 CTR (SC) 195, the Hon'ble Supreme Court had been pleased
to hold that if the assessee had given details of the subscribing
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applicants and the Department alleged that the applicants were bogus, it
was free to proceed against the applicants. It was held that share
application money received could not be regarded as undisclosed income
of the assessee company under section 68 of the I. T. Act. The ld. CIT
(Appeals) was not justified in rejecting the evidences filed by the assessee
merely on the ground that the assessee had established paper trail of all
the trading transactions as per audited accounts, but without producing
the relevant parties. The submission of the assessee in this regard
remained that it was beyond power and control of the assessee to
produce relevant parties in 2012 for examining the trading transactions,
which took place in the financial year 2001-02 and further that
assessment upto assessment year 2002-03 had been framed under
section 143(3) after a detailed scrutiny. Under these circumstances, we
are of the view that the ld. CIT (Appeals) was not justified in sustaining
the addition of Rs.4,50,000/- under section 68 of the Act on account of
unexplained share application money received from JMK Securities Pvt.
Ltd. The same is directed to be deleted. The ground No. 3 is accordingly
allowed.
6. So far as ground No. 4 is concerned, the assessee is aggrieved by
sustaining the addition of Rs.8 lakhs made under section 68 of the Act
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by the Assessing Officer on account of investment by Elbee Portfolio Pvt.
Ltd. in the capital of the assessee company. The assessee thoroughly
denied any receipt from them as share capital as also the alleged
transaction of Rs.16 lakhs in any other manner. In support the assessee
filed affidavit of Director on 13.03.2012 confirming some trading
transaction to the extent of Rs.2 lakhs only for which the assessee had
filed affidavit in the current date supported by copies of bills, ledger
account and company master details as per ROC record as on
20.02.2012. The Assessing Officer did not bother to furnish report on
the evidences filed by the assessee despite repeated reminders by the ld.
CIT (Appeals) to him. The assessee also showed its inability to produce
Director of the said company in the year 2012 for verification of trading
transactions, if any, which took place in the financial year 2001-02. It is
also worth noting that assessment for the assessment year 2002-03 was
framed under section 143(3) of the Act. In our view, the evidences filed
by the assessee in support of its claim, cannot be brushed aside alleging
that these are nothing, but paper trail only. The orders of the authorities
below are not tenable in law. An allegation without evidence in support
cannot be accepted as an established fact of the case for the denial of the
claim of the assessee. We thus, while setting aside the orders of the
authorities below in this regard, direct the Assessing Officer to delete the
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addition of Rs.8 lakhs made under section 68 of the Act, by the
Assessing Officer on account of un-explained investment by Elbee
Portfolio Pvt. Ltd. in the capital of the assessee company. The ground
No. 4 is accordingly allowed.
7. In result, appeal is allowed.
8. The order is pronounced in the Open Court on : 26th May, 2017.
Sd/- Sd/-
( O. P. KANT ) ( I. C. SUDHIR )
ACCOUNTANT MEMBER JUDICIAL MEMBER
Dated : the 26th May, 2017.
*MEHTA*
Copy of the Order forwarded to:-
1. Appellant;
2. Respondent;
3. CIT;
4. CIT (Appeals);
5. DR, ITAT, ND.
BY ORDER
ASSISTANT REGISTRAR 18 Date Draft dictated on 26.05.2017 Draft placed before author 26.05.2017 Draft proposed & placed before the second member Draft discussed/approved by Second Member.
Approved Draft comes to the Sr.PS/PS Kept for pronouncement on File sent to the Bench Clerk Date on which file goes to the AR Date on which file goes to the Head Clerk.
Date of dispatch of Order.
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