Income Tax Appellate Tribunal - Delhi
Prominent Insurance Brokers Pvt. Ltd., ... vs Department Of Income Tax
IN THE INCOME TAX APPELLATE TRIBUNAL
(DELHI BENCH `F' : NEW DELHI)
BEFORE SHRI U.B.S. BEDI, JUDICIAL MEMBER AND
SHRI S.V. MEHROTRA, ACCOUNTANT MEMBER
ITA No.2494/Del./2011
(Assessment Year : 2008-09)
ITO, Ward 14(4), Vs. Prominent Insurance Brokers Pvt. Ltd.,
New Delhi. C-52, Vivek Vihar,
New Delhi.
(PAN/GIR No.AADCP3196J)
(Appellant) (Respondent)
Assessee by : Shri Kapil Goel, Adv.
Revenue by : Smt. Renuka Jain Gupta, Sr.DR
ORDER
PER U.B.S. BEDI, J.M.
This appeal of the department is directed against the order passed by CIT(A)- XVII, New Delhi dated 28.2.2011 relevant to assessment year 2008-09 whereby deletion of addition of Rs.1,10,00,000/- made by the Assessing Officer u/s 68 of I.T. Act, 1961 on account of unexplained transaction has been challenged.
2. Assessing Officer while making the impugned addition has observed at pages 2 & 3 of his order as under:
"In the meanwhile it was noticed that during the period under consideration the assessee has received Rs.1,10,00,000/- from the companies. He was asked to show cause by order sheet entry dated 22.12.2010 why a transactions of Rs. 1,10,00,000/- made during the year under consideration should not be treated as your income u/s 68 and also asked to produce the parties. The assessee company failed to produce all the parties for recording their statement, though specifically asked for, the identity, genuineness and creditworthiness for these parties could not be established by the assessee. Since the assessee is a private limited company in the case of such companies there is close and proximate relationship between the company and there should have been no difficulty on the part of assessee to produce somebody for identification. The assessee knows the parties and he made 2 I.T.A. No.2494/Del./2011 (A.Y. : 2008-09) the transaction made with them the onus lies on him to produce the parties with whom the transactions are made. The mere filing of the papers doesn't prove the identity, creditworthiness and genuineness of transactions as required by sec. 68 of the I.T. Act. The assessee has failed to discharge his obligation/onus u/s 68 with regard to the creditworthiness and genuineness of transaction and identification, adequate opportunities were given to the assessee but remain uncomplied though the assessee has taken a contention that money so received is the refund of loan of earlier Advance. Since this office is quite satisfied that money so received is an undisclosed source for which assessee has deliberately tried to divert the attention from the crore issue therefore I left no option but to add transaction as an income from other source in the hands of the assessee u/s 68 of the I.T. Act."
3. The assessee took up the matter in appeal and challenged the impugned addition made u/s 68 of the I.T. Act, 1961 on following counts:
"That mere basis of making addition is statement of one Mr Tarun Goel CA who's statement is neither confronted to your appellant despite specific request nor the said person is offered for cross examination to assessee herein. That is, in these facts the stated third party statement becomes zero in evidentiary value as held by SC in Kishan Chand Chella Ram 125 ITR 713 specially when there is no material except said statement to support the said addition. This is the view of Jurisdictional DHC in following cases:
* Ashwani Gupta 322 ITR 396
* CIT vs SMC Share Brokers Ltd. 288 ITR 345
* FLAWLESS HOLDING & INDUSTRIES LTD. I.T. Act, 1961 400/2010.
* Further, we find we find that the Department has not controverted the
charge of the assessee that additions were made on general statements and more importantly, no opportunity for cross-examination was provided to the assessee and hence, assessment order has been right set aside.
* Further order of Delhi Bench of ITAT in Pawan Kumar Gupta is to the same effect.
* Further, BHC in Or. Prabhu Santosh Kamlesh has held as under: The Assessing Officer purportedly relied upon a telephonic conversation which he had with the donor. The Tribunal was justified in holding that the transcript of the alleged telephonic conversation could not be used against the assessee since the conversation was recorded behind the back of the assessee and the assessee himself was not given an opportunity of cross 3 I.T.A. No.2494/Del./2011 (A.Y. : 2008-09) examination. In any event in the course of the conversation the donor confirmed having furnished the gift ...
* Further, Ahd. Bench of ITAT in Suman Silk Mills (P) Ltd ITA No. 3794/Ahd/2008: Duty of AO when relying upon third party statement claiming to be owner of no of entities allegedly run by him to accommodate assessee for issuing bogus purchase bills: Incumbent upon AO to enquire from OSTENSIBLE OWNERS: Held -
Merely issuing summons by the AO to Rohit Panwala is not enough to discharge the onus which has to be ensured that Rohit Panwala attends his office and assessee attends his office and he is offered for cross examination by the assessee. The entire case of the Revenue revolves around the statement of Rohit Panwala. Since no cross examination of Rohit Panwala is allowed to the assessee then his statement recorded at the back of the assessee cannot be read in evidence against him. Accordingly, we are of the considered view that there is violation of natural justice and, therefore, addition cannot be made on the basis of such statement of Rohit Panwala alone. We accept the arguments of Id. AR that all the concerns from whom assessee has shown to have made purchases of colour and chemicals are owned by different persons. It was incumbent on the AO to call these persons or prove that they were nonexistent. If there are some existing owners of these concerns then their statements should have been recorded and these persons should have also been offered for cross- examination. The statement of any other person claiming to be the owner of these concerns applying to the facts of assessee's case cannot be blindly relied upon without confronting the ostensible owner. Since no enquiry/investigation has been carried out into the existence of ostensible owner the reliance of the AO merely on the statement of Rohit Panwa/a is vitiated ... Merely on the strength of statement of Rohit Panwa/a it cannot be held that purchases are bogus.
That is, since admittedly no enquiry is conducted in present case by Ld AO from three parties vis a vis alleged adverse statement of third party, given the fact that there is positive response on enquiry by Ld AO u/s 133(6) from al/ three parties in subject assessment proceedings (refer paper book pages 37 to 98), we are of the humble submission that said third party statement looses its effect in favor of documentary evidence adduced before Ld AO."
2. This is based on cardinal principle of taxation that when it comes to oral statement and documentary evidence, latter shall prevail over former as held by DHC in ITA 2049/2010: OMEGA COMPONENTS PVT LTD" ... On one hand the Assessing Officer has oral statements made by Shri Rajan Jassal and Shri K.K. Bansal whereas on the other hand, the assessee has documentary evidence in the form of share application, confirmations, income-tax returns and copy of bank 4 I.T.A. No.2494/Del./2011 (A.Y. : 2008-09) statements of these share holders. When two different forms of evidences are available, the same have to be weighed simultaneously and one cannot be taken in isolation disregarding the other. After the Assessing Officer had oral statements of the two parties, the assessee placed contrary documentary evidence. It is settled law that a documentary evidence will always carry more weight than an oral statement. After the oral statements were available to the Assessing officer, the assessee proved such oral statements to be incorrect by filing documentary evidence. Thereafter the Assessing Officer did not prove the documentary evidence to be untrue. The Assessing Officer never confronted the documentary evidence to the persons whose oral statements were recorded. Therefore, the oral statements loose their evidentiary value in the light of the documentary evidence placed by the assessee." ITAT order upheld by DHC.
3. That the aforesaid matter stands squarely covered by Delhi bench of ITA T order in case of Decent Foods (Paper Book pages 1 to 6) wherein it is held that:
M/s Decent Foods Pvt. Ltd./ITA No. 2471/Del./2010/ 07.12.2010.: HELD:
"8. We have heard the parties and perused the material on record. It remains irrefuted that the assessee company did not take any loan from the two concerns, these concerns were also not creditors of the assessee company. The amount of '8,25,000 had been advanced by the assessee to the said supplier parties and when they failed to make supply in time, these amounts were refunded to the assessee. It was this refund which represented the credit entries of '8,25, 000. The assessment order does not show any investigation have been carried out or any information collected by the department to conclude that the payment received by the assessee was actually accommodation entries. It has not been shown as to how the two parties concerned were not creditors to the assessee. Once they are not established to be creditors. operation of section 68 of the I. T. Act does not come into play. No material was brought by the AD to prove that the money was the assessee's own undisclosed income. It was merely that the information received from the Inv. Wing of the department was relied on, without verification of the facts qua-the-assessee. The assessee successfully explained the entries 9. In view of the above, none of the case laws relied on by the department is applicable, since there is no applicability of section 68 of the Act, as parties concerned were not creditors of the assessee"
4. That insistence of Ld AO to personally produce the stated parties on part of your honor's appellant, in our humble submission is misconceived and is against the provisions of law in as much as power to enforce the attendance of creditor lies with department. This is so held by Delhi High Court in Dwarkadish Investments (P) Ltd. 194 Taxman 43: One must not lose sight of the fact that it is the Revenue which has all the power and wherewithal to trace any person 5 I.T.A. No.2494/Del./2011 (A.Y. : 2008-09)
5. That books results have been accepted and there is no invocation of section 145 in present case. Further, in case of person returning advance (Sundari Fin Man) department has accepted the genuineness of amount returned (order page 27,28 paper book).
6. In our humble submission, without doubting book entries of last year from which debit balance of three parties was carried forward in instant year and without doubting the source of original advance in its year of inception, return of advance in present year cannot be treated as "unexplained cash credit" u/s 68 of the Act."
4. The CIT(A) while considering and accepting the plea of the assessee in the light of various documents and case laws cited has concluded in para.2.3 of his order as under:
"2.3 I have carefully considered the submissions of the Ld. AR and perused the order passed by the AO. I find that the AO has based his conclusions on the basis of statement of some Tarun Goel which was for two entities (for Aries Craft and Sundari Fin Man Total amount Rs. 60,00,000) and has ended up with the inference that aforesaid transaction represents money received from undisclosed sources including the transaction of Tejasvi Investments Pvt. Ltd Rs. 50,00,000/-. I find that the AO has not confronted the assessee regarding the alleged adverse statement of Tarun Goel. He has also not allowed the assessee to cross examine Mr. Tarun Goel, though his statement was used as evidence against the assessee to initiate the proceedings. However, it was found later on that the said statement is not connected to the appellant's case so as to infer undisclosed income on part of assessee from subject realization of last years advances. I further find that the AO has not brought out any positive evidence on record to establish that the assessee has received an accommodation entry from the said entities. I further find that the AO has insisted on production of said debtors. In view of the above, the contention of the Ld. AR that when on enquiry from said debtors by the AO, some positive response is received from all the three parties, confirming their respective transactions, neither assessee can be asked to produce the debtors as held by Jurisdictional Delhi High Court in Dwarkadhish case (supra) nor the said response of three debtors can be ignored without brining any material on record. In this connection, I further find from pages 37 to 98 of assessee's paper book wherein response of said three parties as submitted to the AO is contained along with the fact that there is no addition/adverse inference, made in hands of M/s Sundari Fin Man in its assessment framed u/s 143(3) /153C of the Act for subject year. I find in assessee's letter written to Ld AO dated 22/12/2010 (Assessee's paper book page 99,100) wherein it is categorically contended by assessee that directors of said three entities has nothing in common to Mr. Tarun Goel as apparent from list of Directors of these companies. The submission of Ld. AR that when book results have not been rejected and when source of said advance is 6 I.T.A. No.2494/Del./2011 (A.Y. : 2008-09) not in doubt, realization of said advances in subject year per se cannot be treated as income of current year has force. I find merit in the same as adjudicated by Hon'ble Delhi Bench_of ITAT in Decent Foods case (supra). In view of the above facts and circumstances of the case and various judicial pronouncements on the issue cited by the Ld. AR, I am of the considered view that the addition made by the AO on account of realization of advances of previous years from aforesaid three parties is not justified and therefore, the same cannot be sustained, hence the same is deleted. These ground of appeal are allowed."
5. Aggrieved by this order of CIT(A), department has come up in appeal and it is contended that CIT(A) has failed to appreciate the fact that assessee has failed to discharge his obligation/onus with regard to the creditworthiness and genuineness of the transaction as required by section 68 of the I.T. Act, 1961. In the instant case, assessee was specifically asked to produce the parties for proving their genuineness, identity and creditworthiness, yet none could be produced before the Assessing Officer by the assessee. Therefore, relying upon the basis and reasoning as given by the Assessing Officer, Ld.DR contended for setting aside the order of CIT(A) and restoring that of the Assessing Officer.
6. Ld.Counsel for the assessee while relying upon the basis and reasoning given by the CIT(A) has pleaded for confirmation of the impugned order. It was strongly pleaded that Assessing Officer has made the impugned addition relying upon alleged statement recorded from Shri Tarun Goel, who is stated to be giving accommodation entries and when assessee filed necessary details of the debtors carried forward from earlier year and requested the Assessing Officer to give the copy of the statement recorded of said Shri Tarun Goel and also summon him for cross examination by the assessee. Neither any statement was provided to the assessee nor the cross-examination of said Shri Tarun Goel was allowed. When assessee did file not only confirmation from the parties, but also 7 I.T.A. No.2494/Del./2011 (A.Y. : 2008-09) their assessment records for several years, their bank accounts and other relevant details which were not even considered by the Assessing Officer and huge addition of Rs.1,10,00,000/- has just been made, which has rightly been deleted by CIT(A) while considering and appreciating the facts of the case and case law relied upon by Ld.Counsel for the assessee to delete the impugned addition. Neither any contrary material has been placed on record nor the documentary evidence filed by the assessee has been rebutted by the Assessing Officer during the assessment proceedings or in appeal proceedings. Therefore, relying upon CIT vs. Orissa Corporation P. Ltd., 159 I.T.R. 78(SC) and Delhi High Court decision in CIT vs. Kamdhenu Steel & Alloys Ltd., I.T.A. No.972 of 2009 & Others dated 23.12.2011 and in the case Mahindra & Mahindra Ltd. vs. DCIT, reported in 30 SOT 374 (Mum.)(SB), it was pleaded that the impugned addition made by the Assessing Officer has rightly been deleted whose action needs further confirmation. It was thus urged for confirmation of the impugned order.
7. In order to counter the submission of the Ld.Counsel for the assessee, Ld.DR submitted that so far as lists of directors of the concerned companies furnished by the assessee are concerned, those do not relate to year under consideration, but those details are for subsequent period i.e. 2009-10 , whereas year involved is 2008-09 and reference was made to page 103 of paper book. So, it cannot be said that Shri Tarun Goel was not connected or concerned with these companies and CIT(A) has just accepted the contention of the assessee without looking into certain vital aspects which have been highlighted by the Assessing Officer to just delete the impugned addition whose action is not legally correct which may be reversed and that of the Assessing Officer should be restored.
8 I.T.A. No.2494/Del./2011(A.Y. : 2008-09)
8. We have heard both the sides, considered the material on record as well as precedents relied upon by the assessee which were referred to by the CIT(A) and find that impugned addition of Rs.1,10,00,000/- has been made by the Assessing Officer mainly on the ground that parties concerned are fictitious parties and it is a case of accommodation entries having been provided by three parties and there is no genuinity in such transactions and mere filing of relevant assessment records or details from ROC cannot absolve the assessee form discharging its onus of establishing the requirement envisaged u/s 68 of the I.T. Act, 1961. But, from the material available on record and CIT(A)'s order, it is seen that it is a case where the amount has been returned back to the assessee by three parties during the year under consideration which was earlier advanced by the assessee to these parties and necessary documentary evidence are duly furnished before the Assessing Officer on 22nd December, 2010, which has just been brushed aside while passing the order on 23rd December, 2010. The Assessing Officer has not even discussed or considered such material which was submitted before him and copies of the same were filed before CIT(A).From such material,it is found that all necessary document and material have duly been placed by the assessee to establish its case of having advanced the amount in earlier years and receiving it back in the year under consideration. No link or connection has been established by the department with so- called Shri Tarun Goel, as alleged by the Assessing Officer nor despite asking for opportunity of cross-examination, Assessing Officer summoned said Tarun Goel in order to allow the assessee to cross-examine him in order to establish that there is any accommodation entry. In the absence of any cogent material or evidence, we are unable to accept the contention of the department,and we concur with the finding and conclusion 9 I.T.A. No.2494/Del./2011 (A.Y. : 2008-09) as drawn by the CIT(A) whose action is upheld and appeal of the department is dismissed.
12. As a result, the appeal of the department is dismissed.
Order pronounced in open court on 04.04.2012.
Sd/- Sd/-
(S.V. MEHROTRA) (U.B.S. BEDI)
ACCOUNTANT MEMBER JUDICIAL MEMBER
Dated : April 04, 2012
SKB
Copy of the order forwarded to:-
1. Appellant
2. Respondent
3. CIT
4. CIT(A)-XVII, New Delhi.
5. CIT(ITAT) Deputy Registrar, ITAT