Income Tax Appellate Tribunal - Delhi
Esprit Finco Pvt. Ltd., New Delhi vs Ito, New Delhi on 27 January, 2017
IN THE INCOME TAX APPELLATE TRIBUNAL
DELHI BENCH: 'SMC-1' NEW DELHI
BEFORE SMT DIVA SINGH, JUDICIAL MEMBER
I.T.A .No.-1834/Del/2015
(ASSESSMENT YEAR-2004-05)
Espirit Finco Pvt.Ltd., vs ITO,
56, Kapil Vihar, Pitampura, Ward-11(2),
New Delhi-110034. New Delhi.
PAN-AAACE9951B
(APPELLANT) (RESPONDENT)
Appellant by Sh. Ved Jain, Adv.
Respondent by Sh.Anil K. Sharma, Sr.DR
Date of Hearing 08.12.2016
Date of Pronouncement 27.01.2017
ORDER
The present appeal has been filed by the assessee assailing the correctness of the order dated 21.01.2015 of CIT(A)-3, Delhi pertaining to 2004-05 assessment year on the following grounds:-
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 the facts.
2. On the facts and circumstances of the case, the learned CIT(A) has erred, both on facts and in law, in rejecting the contention of the assessee that the initiation of the proceedings under Section 147, read with Section 148, is bad and liable to be quashed as the condition and procedure prescribed under the statute have not been satisfied and complied with.
3. On the facts and circumstances of the case, the learned CIT(A) has erred both on facts and in law in rejecting the contention of the assessee that the reassessment proceedings initiated by the learned A.O. are bad in the eye of law as the reasons recorded for the issue of notice under Section 148 are bad in the eye of law and are vague.
4. On the facts and circumstances of the case, learned CIT(A) has erred both on facts and in law in confirming the addition of Rs.20,50,000/-
made by the AO on account of share capital money under section 68 of the Act.
5(i) On the facts and circumstances of the case, learned CIT(A) has erred both on facts and in law in confirming the above addition rejecting the explanation and evidences brought on record by the assessee to prove the I.T.A .No.-1834/Del/2015 identity, creditworthiness of the shareholder and genuineness of the transaction.
(ii) That the addition had been made without pointing out any defect or irregularity in the evidences filed by the assessee.
6. On the facts and circumstances of the case, learned CIT(A) has erred both on facts and in law in confirming the said addition despite the fact that the same has been made on the basis of material and evidences collected at the back of the assessee without giving it an opportunity to rebut the same in clear violation of the principle of natural justice.
7. On the facts and circumstances of the case, learned CIT(A) has erred both on facts and in law in confirming the addition despite the same being made on the basis of statements of some person without giving assessee an opportunity to cross examine and in clear violation of principle of natural justice.
8. On the facts and circumstances of the case, learned CIT(A) has erred both on facts and in law in confirming the addition rejecting the contention of the assessee that the notices under section 133(6) to the shareholders having got replied directly to the A.O., no adverse inference against the assessee can be drawn.
9. The appellant craves leave to add, amend or alter any of the grounds of appeal."
2. The relevant facts of the case are that the assessee declared a loss income of Rs.(-)2,17,650/- on 01.11.2004. The said return was processed u/s 143(1) on 13.04.2005. Thereafter, by issuance of notice u/s 148 dated 16.03.2011 the case was re-opened and notices u/s 143(2)/142(1) etc. were issued leading to the passing of the order dated 28.11.2011 u/s 143(3)/147. The AO in the afore-said order took note of the fact that the assessee company in the year under consideration was engaged in the business of market financial products like credit cards, personal loans, insurance policies, car loans etc. of Standard Chartered Bank and earned commission thereon. The assessment was concluded at an income of Rs.18,32,350/- by the AO as a result of the addition of Rs.20,50,000/-. 2.1. The reopening was made in the background of and based on the information received by the AO from the Investigation Wing. The AO required the assessee to explain the deposits and rejecting the explanation offered concluded that the assessee was a recipient of accommodation entries from tainted companies. The Page 2 of 19 I.T.A .No.-1834/Del/2015 issue travelled in appeal before the CIT(A) wherein the assessee unsuccessfully challenged the order of the AO on jurisdiction as well as on merits. Pursuant to the dismissal of its appeal by the CIT(A), the present appeal has been filed by the assessee.
3. Addressing the grounds raised and relying upon the written synopsis filed, the Ld.AR inviting attention to the record submitted that all the evidences in support of the share capital received from the following six parties have been made available to the AO in the re-assessment proceedings. Considering the evidences and the facts the addition it was submitted could not have been made nor sustained. Addressing the facts, the Ld.AR invited attention to the assessment order wherein the AO has concluded that the assessee has received accommodation entries from the following parties:-
Date on Name of the Bank from Branch A/c No. of Instrument Value of which A/c holder of which of entry entry no by entry entry entry giving entry given giving giving which taken taken account Bank account entry taken 21.10.03 Techno Com SBBJ New 24589 5,00,000 Associates Rohtak Pvt.Ltd. Road 22.01.04 Virdi Travel Jai Laxmi Fatehpuri 3472 385329 3,00,000 Pvt.Ltd. Coop Bank 22.01.04 Lokesh Tools & Jai Laxmi Fatehpuri 3568 405868 2,50,000 Trading Coop Bank Pvt.Ltd.
22.01.04 Suraj Cycle Jai Laxmi Fatehpuri 3450 517394 2,50,000
Mart Pvt.Ltd. Coop Bank
06.02.04 Natraj Jai Laxmi Fatehpuri 3033 257445 2,50,000
Communication Coop Bank
Pvt.Ltd.
05.11.03 V R Traders SBBJ New 24781 5,00,000
Pvt.Ltd. Rohtak
Road
Total 20,50,000
3.1. Copy of the reply dated 16.11.2011 to the AO it was submitted is placed at pages 33 to 187 of the Paper Book. Inviting attention to the same, it was Page 3 of 19 I.T.A .No.-1834/Del/2015 submitted that the detailed evidences available on record had been ignored by the AO. As a result thereof, the assessee had to come in appeal before the CIT(A). It was submitted that no additional evidences were filed by the assessee before the CIT(A) and in order to carry out the verification of the evidences which already stood filed by the assessee in the assessment proceedings the CIT(A) directed the AO to carry out verification in respect of all these six shareholders.
3.2. As a result of this direction, it was submitted the AO in the Remand proceedings issued notices u/s 133(6) to all these six parties. Service it was submitted had been completed on all the six parties. The said fact it was submitted proved the fact that they were in existence. Reply admittedly was on record from four parties as they had replied to the AO alongwith all the necessary details. Copy of these evidences, it was submitted are available at Paper Book pages 208 to 351 specific pages 208, 236, 282 & 329. The fact that 4 parties replied it was submitted is evident from the Remand Report dated 10.02.2014 of the AO itself. Copy of this, it was submitted is available at Paper Book pages 354 to 357. Referring to the same, it was submitted the AO has admitted that following the directions of the CIT(A), notices u/s 133(6) were issued to all the six companies on 08.01.2013 and initially no reply was received from them but later on reply was received from 4 parties.
3.3. Referring to this factual finding, it was submitted the CIT(A) has not only failed to note the import and significance of this fact and evidence, but has also ignoring the facts and without addressing this aspect or the facts on record has upheld the additions making inherently and patently on incorrect factual findings.Page 4 of 19
I.T.A .No.-1834/Del/2015 3.4. Reiterating the facts, it was submitted that in the investigation carried out on the directions of the CIT(A), the AO in the remand proceedings issued notices u/s 133(6) to all the six parties which were duly served upon them and there is no allegation on record that any notice was returned unserved. It was reiterated that replies have been received from four shareholders which factual position has been confirmed by the AO himself in the Remand Report dated 10.02.2014. The relevant extract of page 356 which is a copy of the Remand Report was heavily relied upon. The same is reproduced hereunder for ready-reference:-
"As per the direction notice u/s 133(6) were issued to the above six companies on 08.01.2013 for 22.01.2013. But no reply was received on 22.01.2013. But later on, on receiving the reminder letter no.F.No.CIT(A)- XIII/2013-14/223 dated 13.01.2014 letter from this office no.612 dated 20.01.2014 was issued to the assessee for 28.01.2014 wherein he was informed of the above facts. Meanwhile on 27.28-01-2014 the reply from four creditors out of six has filed the reply in response to notice u/s 133(6) which are given as below:-
1. Techno Com Associates Pvt.ltd. 205, Delhi Chambers, Delhi Gate, Delhi-02.
2. Virdi Travels Pvt.ltd. 2250, Naya Bazar, Delhi-06.
3. V.R.Traders Pvt.Ltd. 1930, Gali Durga mandir, Lal Kuan, Delhi-06.
4. Natraj Communication Pvt.ltd. B-2, Kiran Garden, uttam Nagar, New Delhi-59."
The copy of the same are enclosed herewith for necessary action at our end. However, during the time of assessment also notice u/s 133(6) were issued on 11.10.2011 for 17.10.2011 to all the six concern but no reply is filed on the record."
(emphasis provided) 3.5. Relying upon the above extract of the Remand Report, it was submitted that it clearly shows that on both the occasions i.e. during the Remand proceedings as well as the assessment proceedings notices u/s 133(6) were issued and there is no allegation of their returning unserved. These facts it was submitted sufficiently prove that the parties were in existence and were not fictitious or bogus concerns. It was submitted that in case the department wants to claim that these were Page 5 of 19 I.T.A .No.-1834/Del/2015 bogus concerns then the department should place evidence in support of the suspicion on the basis of which assessment has been opened. It was submitted that even after re-opening the assessment the department still has failed to place any evidence and is still forcing the assessee to continue litigation based on the suspicions harboured by the Revenue.
3.6. Addressing the lack of reply by all the parties and only by four parties, it was submitted by the Ld.AR that if the parties do not care to reply to the AO, it is not possible for the assessee to force them. However, there was nothing to stop the AO to carry on the investigation to its logical conclusion and it is not for the assessee to insist with the tax authorities that the attendance of the parties be enforced.
4. Addressing the jurisdictional issues addressed in Ground Nos.2 & 3 in the present appeal, attention was invited to copy of the reasons recorded which is placed at Paper Book page 17. Addressing the same, it was submitted that no independent belief can be said to have been formed by the AO on the basis of the notings in the reasons recorded. It was submitted that the Courts are clear the re-opening should be based on the independent reasoning of the AO and the AO alone and this formation of belief it was submitted should be evident from the reasons recorded itself. It was re-iterated that the issue is well-settled and even the Courts cannot substitute the reason recorded by its own reasons. In the facts of the present case, it was submitted it would be evident that there is no independent belief of the AO. Accordingly, it was submitted that since the requisite criteria itself is not fulfilled nor is there any nexus of the reasons recorded with the formation of any belief that income has escaped assessment, the Page 6 of 19 I.T.A .No.-1834/Del/2015 re-opening in the circumstances it was submitted is bad in law. The power it was submitted has been mechanically exercised by the AO based only on the report received from Investigation Wing. The information forwarded by the Investigation Wing, it was submitted has been blindly accepted by the AO and no reference to any independent exercise has been made which may indicate that there is any independent application of mind of the AO. On a reading of the reasons, it was submitted that it is not possible to understand how the AO termed the receipt of money as bogus accommodation entries as there is no investigation carried out by the AO, no witnesses has been examined by him who implicated the assessee. It was argued that solely on the basis of information of the Investigation Wing and relying upon some statements recorded in some other case by the Investigation Wing the AO has blindly accepted them as gospel truth. It was his submission that the law postulates that it is the AO who is to form a belief and not the DIT (Investigation). The reasons recorded it was submitted neither show any application of mind nor do they show how any independent belief can be said to have been arrived at. Addressing the same, it was argued there is no finding by the AO that the assessee has failed to disclose truly and fully material facts that any income has escaped assessment.
4.1. Thus, relying upon the decision of the Hon'ble High Court in the case of CIT vs Independent Media Pvt.Ltd. dated 19.11.2015 in ITA No.108/2015 and Pr.CIT vs G. & G. Pharma India Ltd. [2016] 384 ITR 147 (Del.) and order dated 22.4.2016 in ACIT vs Gulshan International Pvt.Ltd. in ITA No.115/Del/2012 [ITAT, Del.]; M/s RMG Polyvinyl (I) Ltd. vs DCIT [ITA No.1596/Del/2014 dated 12.04.2016]; Sabharwal Properties Industries Pvt. Ltd. vs ITO [2016] 382 ITR 547 Page 7 of 19 I.T.A .No.-1834/Del/2015 (Del.); ITO vs M/s James Capital & Finance Pvt. Ltd. [ITA No.278/Del2010 dated 10.05.2016]; Genius Electricals & Electronics Pvt.Ltd. vs ITO [ITA No.3623/Del/2014 dated 22.04.2016]; CIT vs SFIL Stockbroking Co. [2010] 325 ITR 285 (Del.); Sarthak Securities Company PVt.Ltd. vs ITO [2009] 329 ITR 110; and Signature Hotels (P.) Ltd. vs ITO [2011] 338 ITR 51 (Del.), it was submitted that the assessment deserves to be quashed.
5. On merits, it was again submitted that the assessee has brought on record that the evidences from each of the shareholders which included confirmations, copy of ITR, balance sheet, assessment order etc. has been made available and the AO has not controverted these facts either at the assessment order stage nor in the remand proceedings. The additions in the circumstances has been made on conjectures and surmises ignoring the facts and evidences on record. 5.1. Addressing the replies supported by evidences on record, it was submitted that the AO has not controverted the facts thereby leading to the conclusion that he did not have any doubts as he has not given any adverse finding. No infirmity in the confirmation of replies it was submitted had been pointed out by the AO. It was argued that it is not even the case of the AO that the remaining two shareholders have not received the notice. Thus merely because they do not chose to reply an adverse conclusion has been drawn against the assessee which is against all accepted principles of law. The said proposition it was submitted is supported by the decision of CIT, Orissa vs Orissa Corporation Pvt.Ltd. [1986] 159 ITR 78 (SC).
5.2. It was also submitted that despite having the Remand Report before him the CIT(A) also proceeded to conclude the issue in haste against the assessee referring Page 8 of 19 I.T.A .No.-1834/Del/2015 to facts which are not relatable to the present case. Accordingly, it was argued that the impugned order also fortifies the fact that the action has been sustained by upholding the jurisdiction and the addition without any application of mind even at the stage of the First Appellate Authority. In support of the said argument, attention was invited to the following finding of fact recorded at page 11 of the impugned order:-
"The Assessing Officer on receipt of the affidavits from the Assessee called for the information under Section 133(6) from the 6 parties, who had executed the affidavits. The letters were received back unserved."
(emphasis provided) 5.3. The said finding it was submitted is contrary to facts on record as in the Remand Report there is no allegation that letters were received back un-served. The AO only notes that initially no reply was filed thereafter replies have been received in the remand proceedings from four shareholders. 5.4. The above wrong factual recording it was submitted is again repeated at Page 28 un-numbered Para 4 of the impugned order by the CIT(A) when he observes:-
"Notices to the investors could not be served. The fact that the lenders namely Mahesh Garg and Deepak Gupta categorically stated that these companies are not doing any genuine business and only provide the accommodation entries and as such, all the entries in the books were merely accommodation entries."
(emphasis provided) 5.5. The said factual recording it was submitted is contrary to record and shows not only non-application of mind but also suggests that probably the facts of some other case may have been taken note of by the CIT(A) who confirmed the addition ignoring the facts of the present case where notices on all the six parties had been duly served and replies had also been received in four cases. Page 9 of 19
I.T.A .No.-1834/Del/2015 5.6. Accordingly inviting attention again to the Remand Report, it was submitted that only two shareholders did not reply and no adverse conclusions have been drawn by the AO. In these circumstances, the following finding of the CIT(A) at page 28 para 4 that "Notices to the investor could not be served" yet again shows that the conclusion has been arrived at without any application of mind. It was further submitted that probably the fact of some other case may have clouded the judgement as evidently all the six parties were served copies of notice and reply had been received from four of these. Inviting attention to para 5 page 28 of the CIT(A)'s order wherein the CIT(A) notes in Para 5 on Pg. 28 of his order. The perusal of the bank statements clearly establishes that these parties were depositing cash in the bank accounts used for providing entries. 5.7. It was submitted that the said observation is also wrong since as per the bank statement available on record there is no cash deposit. For the said submissions, attention was invited to pages 52, 92, 115 & 151. Accordingly it was submitted that the issue is squarely covered in favour of the assessee by the Jurisdictional High Court in its order dated 31.08.2016 in ITA No.504/16 which confirmed the judgement of the ITAT dated 10.02.2016 in ITA No.744/Del/2012 in the case of ITO vs M/s Softline Creation P.Ltd. [ITA No.744/Del/2012 dated 10.02.2016 ITAT Delhi]. Reliance was placed upon CIT vs Fair Finvest Ltd. [2013] 357 ITR 146 (Del.) Hon'ble Jurisdictional High Court; DCIT vs M/s G.S.Control I.P.Ltd. [ITA No.1560/Del/2010 dated 13.03.2015]; and Jurisdictional High Court in the case of CIT vs Goel Sons Golden Estate P.Ltd. [ITA No.212/2012 dated 11.04.2012].
Page 10 of 19
I.T.A .No.-1834/Del/2015
6. The Ld. Sr. DR in reply addressing the decision relied upon by the Ld.AR submitted that reliance placed upon the various decisions of the ITAT or the High Court is not of any relevance in the facts of the present case as it is a case of a Private Limited Company and not of a Public Limited Company. This differentiation it was submitted has been brought out by the CIT(A) at page 30 of his order and the Revenue would want to heavily rely upon the same. The relevant extract from the impugned order is reproduced hereunder:-
"In contrast to the above judgements, in the present case, the assessee is a private limited company and in the factual matrix, I have held that the assessee has not been able to discharge the initial onus and has not been able to establish the identity, creditworthiness of the share applicants and the genuineness of the transaction. Though, in my considered opinion, none of the above judgements, referred to by the assessee respondent, are applicable in the facts of the present case and in view of the findings recorded by me hereinabove."
6.1. On the factual inaccuracies in the impugned order in regard to service of notice on the six parties and replies received from four of these as noted in the Remand Report pointed out by the ld.AR, the Ld.Sr.DR submitted that the matter may be remanded back to the CIT(A).
7. The prayer for remand was opposed by the ld.AR vehemently who submitted that no fresh evidence has been relied upon by the assessee and the evidence in support of its claim was always before the AO even at the assessment stage. Thus if the evidence available is ignored by the Department and when the assessee challenged this fact before the CIT(A) who instead of addressing the evidence on record chooses to instead direct the AO to start yet another enquiry afresh in a certain direction requiring the AO to issue notices to all the six parties which admittedly have been served on all the parties. These directions of the CIT(A) admittedly were carried out and the replies from four out of the six parties have Page 11 of 19 I.T.A .No.-1834/Del/2015 been received on record. Notice to all six parties have been served. None of the evidence available on record, it was submitted has been commented negatively by the tax authorities despite being consistently available on record. In the said background the request of the department simply to deny relief to the assessee without first negatively commenting upon the evidences all along available on record, it was submitted should not be allowed. The evidence it was submitted is repeatedly ignored by them as they cannot assail it and then to seek a fresh round of hearing by remand, it was submitted should not be permitted. It was submitted that these arguments are dehorse the fact that the impugned order brings out the adamant stand of the Revenue to show that addition must be maintained whether on correct facts or wrong facts. It was submitted that even today, the Ld.Sr.DR has not cared to assail the evidence available on record right from the assessment stage in the Paper Book available. It was submitted that reliance on the conclusion drawn by the CIT(A) where the CIT(A) admittedly formed the conclusion based on facts of some other case, can be of no help to the Revenue. Attention was invited to the fact that the assessee is not a bogus company and is engaged in the business of market financial products like credit cards, personal loans, insurance policies, car loans etc. of Standard Chartered Bank and this factual finding by the AO, it was submitted remains unrebutted on record. Accordingly, it was his prayer that the addition deserved to be deleted.
8. I have heard the rival submissions and perused the material available on record. I note from the record that the AO addressing the nature of assessee's business has noted as under:-
Page 12 of 19
I.T.A .No.-1834/Del/2015 "The assessee company was engaged in the business of market financial products like credit cards, personal loans, insurance policies, car loans etc. of Standard Chartered Bank and earned commission thereon. During the year, the assessee has shown total receipts of Rs.73,12,079/- as compared to preceding year's receipts of Nil rupees."
8.1. It is seen that the assessment was re-opened on the basis of some information that Sh. Mahesh Garg, Entry Operator had provided accommodation entries to some bogus concerns. The statement allegedly recorded and relied upon were not confronted to the assessee. The assessee as per replies on record claimed the transaction to be genuine relying on evidence filed before the AO.
However, the AO despite noting in para 1 of his order that replies were given to the detailed questionnaires issued from time to time in response to which the ld.AR attended and filed necessary details, considered it necessary instead to make observations qua the modus operandi of the accommodation entry providers generally and noting that the assessee did not file any objections to reasons recorded proceeded to make, the addition referring to the chart reproduced in the earlier part of this order. The assessee filed an appeal before the CIT(A) who it is noted instead of addressing the evidences on record directed the AO to further enquire in terms of his direction. The result of the enquiry it is found reproduced in the impugned order at page 3 para 2 of this order. The said page reproduces the extract of the assessee's reply to the Remand Report which is reproduced in the later part of this order. A perusal of the same shows that notice u/s 133(6) was served on all the six concerns. Out of these six concerns, reply of four was available on record. However, while concluding the Ld.CIT(A) looses track of the basic facts of the specific case and instead refers to facts which are not applicable to the case at hand to uphold the addition made. Contradictory reference bringing Page 13 of 19 I.T.A .No.-1834/Del/2015 out the confusion of the Ld.CIT(A) has been amply brought out on record by the Ld.AR in the earlier part of this order. The allegations of factual inaccuracies in the order, I find have not even been defended by the Ld.Sr.DR who instead has requested for a remand. Thus it is evident that the factual contents of the Remand Report of the AO available on record was admittedly incorrectly taken note of by the Ld.CIT(A). The factual reliance on the Remand Report by the assessee is further highlighted from the following submissions on record:-
2. "The ground no. 3 has been raised by the appellant regarding the reopening of the assessment u/s 147/148 of the Act. The submissions made by the appellant in this regard are reproduced as under:
"That as per Remand Report produced by the Ld. A.O. a notice u/s 133(6) was issued to six share subscribers by requiring the confirmation of details of share allotted to them by the Appellant company. Out of six, only four subscribers has submitted their details/ confirmation as under :-
1. Technocom Associated Pvt. Ltd. 205, Delhi Chambers, Delhi Gate. Delhi-02.
2. Virdi Travels Pvt. Ltd. 2250, Naya Bazar, Delhi-06.
3. V R Traders Pvt. Ltd. 1930, Gali Durga Mandir, Lal Kaun, Delhi-06.
4. Natraj Communication Pvt. Ltd. B-2, Kiran Garden, Uttam Nagar, New Delhi-59.
However as per our record of submissions, it is very clear that Appellant has duly submitted the evidences of all the six share subscribers at the time of assessment proceedings before the Ld. A.O. vide letter dated 16.11.2011 in which said six share subscribers details is also submitted alongwith following evidences. A photocopy of our letter dated 16.11.2011 is enclosed herewith alongwith evidence are submitted.
Date on Name of the Bank from Branch of A/c no. of Instrument Value entry which entry a/c holder of which entry entry giving entry giving no.by which taken taken entry giving is given bank account entry taken account 21.10.03 Techno Com SBBJ New Rohtak 24589 5,00,000 Associates Road Pvt.Ltd.
22.01.04 Virdi Travels Jai Laxmi Fatehpuri 3472 385329 3,00,000
Pvt.Ltd. Coop Bank
22.01.04 Lokesh Tools & Jai Laxmi Fatehpuri 3568 405868 2,50,000
Trading Pvt. Coop Bank
Ltd.
22.01.04 Suraj Cycle Jai Laxmi Fatehpuri 3450 517394 2,50,000
Maret Pvt. Ltd. Coop Bank
06.02.04 Natraj Jai Laxmi Fatehpuri 3033 257445 2,50,000
Communication Coop Bank
Pvt.Ltd.
Page 14 of 19
I.T.A .No.-1834/Del/2015
05.11.03 V R Traders SBBJ New Rohtak 24781 5,00,000
Pvt.ltd. Road
20,50,000
i) Confirmation from the subscribers
ii) Bank statements
iii) Share Certificates Copies
iv) Audited Balance Sheet & Copy of acknowledgment of I. Tax Return
v) Copy of Pan Card
vi) Copy of MOA
viii) ITR particulars
As per section 68 the assessee had to prove the identity, creditworthiness and document evidence of the subscribers to the shares. In all respects the Appellant company has duly submitted the identity, creditworthiness, ITR particulars, mode of payments with share application forms, share certificates, confirmations and all other evidences at the time of hearing before the Ld. A.O.. At the time of Assessment proceedings, the Appellant Company has requested for cross examination of the directors of above mentioned persons but the Ld. A.O. has not considered the above request and reason recorded for re-opening the case u/s 148 by saving accommodation entries are invalid and factually incorrect. Hence, in the Assessment order, the Ld.AO has made the addition of Rs.20,50,000/- arbitrary which is bad in law and against facts of the case and without any basis.
2). That Ld. A.O. has mentioned in his Remand Report that the assessee has been given sufficient opportunity to produce the same and further new evidences can not produced under Rule 46A of the Income Tax Rule,1962.
But as per our record the Appellant has duly submitted the required documents as stated above of said six share subscribers at the time of assessment. The Appellant company has not submitted any new evidences at the time of hearing of Appeal as per rule 46A. So, Ld. A.O. has wrongly stated in his Remand Report that these are new evidences and not covered under Rule 46A. The fact can be verified from the Department assessment files.
Therefore, the Appellant prays to quash the illegal order or such other order may be passed which justified the Appellant against the additions. Re- opening of the case u/s 148 is not legally valid. Hence, it is prayed that addition u/s 68 of Rs.2050000/- be deleted or any other order may be justified with appellant."
(emphasis provided) 8.2. Accordingly, in the circumstances admittedly the repeated factual inaccuracies made in the impugned order that notices could not be served on the six parties and replies could not be received are patently incorrect and is not even the case of the AO. For the record, the glaring fact that the notices were served upon all the six parties and replied were received from four of these, is evident Page 15 of 19 I.T.A .No.-1834/Del/2015 from the Remand Report of the AO itself (copy of which has been placed at Paper Book page 354-357). A perusal of the same shows that the replies have been received from following four parties:-
1. Techno Com Associates Pvt.Ltd., 205, Delhi Chambers, Delhi Gate, Delhi-02.
2. Virdi Travels Pvt.ltd., 2250, Naya Bazar, Delhi-06.
3. V R Traders Pvt.ltd. 1930, Gali Durega Mandir, Lal Kuan, Delhi-06.
4. Natraj Communication Pvt.Ltd., B-2, Kiran Garden, Uttam Nagar, New Delhi-59.
8.3. It has been argued by the Ld.AR that these were not cash deposits and were deposits by way of specific instruments found mentioned in the details extracted in the assessment order itself. Though notice u/s 133(6) on the directions have been issued and served upon all the six concerns. Four out of the six have replied and confirmed. This fact is evident from Paper Book Page 208 wherein Techno Com Associates Pvt. Ltd. confirms the transaction of investment. It supports its claim relying upon the bank statement showing debit of cheque given for the said investment; acknowledges that shares certificate have been received by them; Balance sheet and copy of acknowledgement of income tax return field was relied upon vide reply dated 25.01.2014 before the AO. The record shows that the Remand Report by the AO is undated. However, the fact that there was a remand directed by the Commissioner on 17.12.2012 and again on 13.01.2014 is acknowledged in the first part of the Remand Report. Similarly from Paper Book page 236, it is evident that Virdi Travel Pvt. Ltd. confirmed the investment in shares of Rs. 3 lacs by relying upon bank statement reflecting the investment; copy of share certificate received; copy of income tax return filed alongwith balance sheet in support of the said assertion. The fact that this was received and filed is evident from the fact that it was diarised as per stamp of AO, Page 16 of 19 I.T.A .No.-1834/Del/2015 Ward-11, New Delhi stamp dated 27.01.2014. Similar is the position in regard to other two replies received by the AO from Natraj Communication Pvt. Ltd. and V.R. Traders Pvt. Ltd. at Paper Book page 282 and 329. It is seen that the evidences available on record right from assessment stage have not been assailed negatively at any of the stages by the AO nor by the CIT(A) or for that matter even before the ITAT. Qua the other two concerns who did not reply though notice u/s 133(6) was served upon them, it is seen that as per record Lokesh Tools & Trading Pvt. Ltd. who it is claimed had paid Rs.2,50,000/- vide Instrument No.-
405868 and Suraj Cycle Mart Pvt.Ltd. who also has paid Rs.2,50,000/- by Instrument No.517394 the record shows that the details of banks; amounts; instruments and dates were all along available on record wherein no further enquiry was considered necessary by the AO. The fact remains that the notices have been served upon these parties. Thus, in a case were 4 out of 6 concerns admittedly reply the two who though do not reply but their evidences remain unassailed per se cannot be the reason for sustaining the addition in the facts and circumstances of the present case. In the facts where all details are available notice u/s 133(6) have been served, four have replied thus, if the department still had any further doubts about their existence or genuineness then their presence should have been enforced as the whereabouts of these two concerns were known to the department as notices were served upon these parties at the address given is a fact on record. In the afore-mentioned peculiar facts and circumstances, the request of the Revenue to direct yet another remand does not make any sense. It is seen that when the evidences on record are considered qua the stated business of the assessee, I find that the addition on merits cannot be sustained. Though Page 17 of 19 I.T.A .No.-1834/Del/2015 the Ld.AR has also argued the jurisdictional issue relying upon various propositions of law, however finding thereon may not be so relevant as the decisions proceed on facts peculiar to their own. In the facts of the present case the ld.AR necessarily had to refer to the facts on record in order to demonstrate that jurisdiction on facts was lacking. Thus while considering and discussing them, reference has been made at length on the facts available on record to canvass that no independent view could have been formed by the AO that these were bogus accommodation entries warranting a re-opening because if the facts had been seen by the AO the assessment would not have been re-opened. Accordingly, it has been canvassed that the conclusions have been drawn accepting the information of the Investigation Wing as a gospel truth. In order to consider the merits of the arguments, it is noticed that finding has necessarily to be given and conclusion was required to be drawn to hold whether the assessee's claim is correct or not. Thus, necessarily so, I find that the crux of the arguments all along have been focused on the merits of the addition made. Considering the peculiar facts, I find that the issue being purely factual can be decided on the basis of the facts and evidences available on record of the specific case and thus without referring to the decisions which are relied upon for quashing the proceedings, conclusion is capable of being drawn as it is fact specific. Since the arguments of the parties before the Bench have been considered and dealt with at length on the basis of which on merits, it has been held that the addition on facts was wrongly made as there is nothing on record justifying the addition except the suspicion of the Revenue which cannot be the basis of either making or sustaining an addition as at best it could have been the basis for making a further enquiry Page 18 of 19 I.T.A .No.-1834/Del/2015 which already stood directed. Accordingly, I am of the view that the jurisdictional issue in the face of the patent and obvious factual findings has probably not been canvassed by the assessee as vigorously as the action of the Revenue in sustaining the addition on merit. On considering the facts on record, legal propositions and arguments of the parties before the Bench, I am of the view that in the peculiar facts as available on record for the reasons given herein above, the addition has wrongly been made and sustained by the CIT(A). Without assailing the evidences, the addition cannot be sustained. Suspicion however strong cannot form the basis of either making or sustaining the addition. It is the evidence and evidence alone which can dictate the true picture of things which in the facts as they stand fully demonstrate the case of the assessee. Accordingly, on a careful consideration of the material available on record, the addition is directed to be deleted.
9. In the result, the appeal of the assessee is allowed in part.
The order is pronounced in the open court on 27th January 2017.
Sd/-
(DIVA SINGH) JUDICIAL MEMBER *Amit Kumar* Copy forwarded to:
1. Appellant
2. Respondent
3. CIT
4. CIT(Appeals)
5. DR: ITAT ASSISTANT REGISTRAR, ITAT NEW DELHI Page 19 of 19