Income Tax Appellate Tribunal - Delhi
Nipun Builders & Developers Pvt. Ltd., ... vs Department Of Income Tax on 19 February, 2007
ITA NOS. 557-558/DEL/2010
IN THE INCOME TAX APPELLATE TRIBUNAL
DELHI BENCH "E" NEW DELHI
BEFORE SHRI C.L. SETHI, JUDICIAL MEMBER
AND
SHRI SHAMIM YAHYA, ACCOUNTANT MEMBER
I.T.A. Nos. 557 & 558/Del/2010
A.Yrs. : 2004-05 & 2005-06
DCIT, Circle 13(1), vs. M/s Nipun Builders & Developers
Room No. 406, C.R. Building, Pvt Ltd.,
I.P. Estate, 501, Nipun Tower, Plot No. 15,
New Delhi Community Centre,
Karkardooma, Delhi
(PAN: AABCN 7240B)
(Appellant) (Respondent)
Asseessee by : Sh. Ajay Vohra, Advocate and Sh.
Rohit Garg, CA
Department by : Mrs. Srujani Mohanty, Sr. D.R.
ORDER
PER SHAMIM YAHYA : AM These appeals by the Revenue are directed against the respective orders of the Ld. Commissioner of Income Tax (Appeals) for the assessment years 2004-05 & 2005-06 respectively. ITA NO. 557/DEL/2010
2. The issues raised read as under:-
"That on the facts and circumstances of the case and in law the Ld. Commissioner of Income Tax (Appeals) erred in deleting the addition of ` 1,47,00,000/- made on account of share application u/s 68 of the Income Tax Act, 1961.1
ITA NOS. 557-558/DEL/2010 That on the facts and circumstances of the case and in law the Ld. Commissioner of Income Tax (Appeals) erred in deleting the addition of ` 3,67,500/- made on account of commission u/s. 68 of the Income Tax Act, 1961 holding that since the addition made on account of 'unexplained cash credit' u/s. 68 has been deleted, there remains no justification for sustaining this addition."
3. In this case Assessing Officer noted that there was information that assessee has received amount from entry operators as under:-
Sl.No. Amount Date of Entry Name of the Entry Giver 1 600000/- 15/7/03 Globe Tech Solutions Pvt. Ltd. 2 900000/- -do- Kohinoor Oil Mills Ltd.
3 600000/- 17/7/03 Rapid Impex Pvt. Ltd.
4 1000000/- 27/12/03 Niti Housing Development & Fin.
Cor. Ltd.
5 500000/- 12/7/03 Shattarchi Fin & Leasing 6 1000000/- 12/7/03 Polo Leasingh & Finance Pvt.
Ltd.
7 800000/- 12/7/03 Satwant Singh Sodhi Const. 8 700000/- 12/7/03 Saheb Enterprises 9 800000/- 15/7/03 Labh Tronics Overseas Pvt. Ltd. 10 800000/- 15/7/03 Shashi Sales and Marketing Pvt.
Ltd.
11 500000/- 15/7/03 Fair 'N' Square Exports Pvt. Ltd. 12 500000/- 15/7/03 Dignity Finvest Pvt Ltd. 13 800000/- 17/7/03 Tashi Contractors Pvt. Ltd. 14 600000/- 17/7/03 VPS Values & Tubes P Ltd. 15 800000/- 17/7/03 Nishant Finvest 16 500000/- 22/7/03 Division Trading Pvt. Ltd. 17 50000/- 26/7/03 Mestro MKT & Advertising 18 700000/- 17/7/03 Dinanath Luhariwal Spl. Mill 19 600000/- 17/7/03 Right Choice Const. P Ltd. 20 50000/- 26/7/03 Dinanath Luhariwal Spl. Mill 21 400000/- 12/7/03 Arun Finvest Pvt. Ltd.
22 600000/- 12/7/03 MV Marketing Pvt. Ltd.
23 900000/- 15/7/03 Eathnic Creation Pvt. Ltd.2
ITA NOS. 557-558/DEL/2010 3.1 Assessing Officer noted that the summons were issue to these parties and the same were returned back as un-served. Considering the above, Assessing Officer opined that these companies are not existing and hence, he added the amount u/s 68 of the IT Act amounting to ` 1,47,00,000/-. Assessing Officer further added ` 3,67,500/- i.e. 2.5% of ` 1,47,00,000/- as commission paid in these transactions.
4. Upon assessee's appeal Ld. Commissioner of Income Tax (Appeals) elaborately considered the issue. Ld. Commissioner of Income Tax (Appeals) noted that assessee has submitted the following, with regard to the share application money.
i) Return of allotment of shares filed with ROC.
ii) Share application forms along with Memorandum and Articles of Associations.
iii) Affidavit from the parties.
iv) Confirmation of the investor parties.
v) Copies of their Bank Accounts.
4.1 Considering the above, Ld. Commissioner of Income Tax
(Appeals) held as under:-
"After careful consideration of above facts, I am of the view that in view of various judgements of Jurisdictional High Court as well as Hon'ble Supreme Court, no addition on account of share application money (received from other corporate entities/ parties) can be made in the hands of the appellant company. The Assessing Officer has not affected any enquiries to bring out any 3 ITA NOS. 557-558/DEL/2010 fact which could suggest that these parties have given accommodation entries to the appellant and that the money received from these parties is appellant's own undisclosed income. Even appellant has not been provided with an opportunity to cross examine the so called entry providers. He has simply relied upon the information provided by the Investigation Wing of the Department without making any concrete effort to verify the facts stated therein. On the contrary, the appellant has filed copies of share application form which contained names, addresses, PAN, bank details, confirmations of the investors, copy of the annual returns and returns of allotment filed with the Registrar of Companies, etc. and hence, in view of various judicial pronouncements, no addition can be made in appellant's hand. In the case of Addl. C.I.T. vs. Hanuman Pd.
Aggarwal 151 ITR 151 (Patna) it was held that assessee having furnished the correct name and address of the creditor, having confirmatory letter from the creditor and all materials show prima facie not only identity of the creditor but also the genuineness of the transaction, no adverse inference can be drawn. Reference can also be made to the judgement of Hon'ble Apex Court in the case of Stellar Investment Ltd. (2001) 251 ITR 263 (SC), wherein it was held that even if the subscribers to the increased share capital of assessee company were not genuine, the amount could not be regarded as undisclosed income of the assessee company. The above view point of the Hon'ble Apex court has also been expressed by Jurisdictional Delhi High Court in the case of Divine Leasing and Finance Ltd. (2008) 299 ITR 268 (Del0< A- One Housing Complex Ltd. vs. ITO 110 ITD 361 (Del), C.I.T. v. 4
ITA NOS. 557-558/DEL/2010 Value Capital Service Pvt. Ltd. 307 ITR 334 (Del) and C.I.T. vs. General Exports and Credits Ltd. (2008) 299 ITR 268 (Del). In the case of C.I.T. vs. Lovely Exports Pvt. Ltd. (2008) 299 ITR 268 (Del), A-One Delhi High Court held that once the identity of the share holder has been established, even if there is a case of bogus share capital, it cannot be added in the hands of the company unless any adverse evidence is on record. The Hon'ble Delhi High Court in the case of C,I.T. vs. Divine Leasing and Finance Ltd. (Supra) has laid down the law on the subject as to what is the extent of the burden that lies on the assessee to prove the cash credit in the shape of share capital. The Hon'ble Court held that "if the relevant details of the address or PAN, identity of the creditor/ subscriber are furnished to the Department alongwith the copies of share holder's Register, share application money forms, share transfer registrar, etc. it would constitute acceptable proof or acceptable explanation by the assessee. The Department would not be justified in drawing an adverse inference only because the creditors /subscribers fails or neglects to respond to its notices. The onus would not stand discharged if the creditor / subscriber denies or repudiates the transaction set up by the assessee nor should the Assessing Officer take such repudiation at face value and construe it, without more against the assessee." The Department filed an SLP against the decision of Delhi High Court in the case of Divine Leasing and Finance Ltd. (supra) where the Apex Court, while dismissing the appeal filed by the Department held as follows:-
"We find no merit in this Special Leave Petition for the simple reason that if the share application money is 5 ITA NOS. 557-558/DEL/2010 received by the assessee company from alleged bogus share holders, whose names are given to the Assessing Officer, then the Department is free to proceed to reopen their individual assessment in accordance with law."
Delhi High Court in the case of C.I.T. v. M/s Pondy Metal and Rolling Mill Pvt. Ltd. (ITA No. 788/2006) dated 19.2.2007 has concurred with the findings of the Appellate Tribunal, Delhi Bench 'F', New Delhi that once the identity of the investor has been manifest and is proved, the investment cannot be said to be the undisclosed income of the assessee. At best, the amount could be added in the hands of the investor but it certainly could not be treated as undisclosed income of the assessee. The appeal filed against the said decision, was dismissed by the Hon'ble Supreme Court in C.C. 12860/2007 dated 8.1.2008. As no adverse / incriminating material has been gathered by the Assessing Officer during the course of the assessment proceedings hence, I do not see any justification on the part of the Assessing Officer to make any addition on account of share application money received from different parties especially when the Assessing Officer has been provided with PAN and other documentary evidences to prove the identity of the share subscribers.
It has been held in plethora of judicial pronouncements that if the information or the source of that information is collected at the back of the assessee and the same is not confronted to the assessee or the assessee is not given reasonable opportunity to rebut the same, then the said information / material cannot be 6 ITA NOS. 557-558/DEL/2010 used against the assessee. Reliance in this regard is placed on the following judicial pronouncements given by Hon'ble Apex court and jurisdiction High Court :-
• C. Vasantlal & Co. v. C.I.T. (1962) 45 ITR 206 (SC) • Meenglas Tea Estate vs. Its Worken, 1963-(050)-AIR- 1719-SC • Dhakeswari Cotton Mills Ltd. v. C.I.T. 26 ITR 775, 782-3 (SC) • Menka Gandhi v. UOI (AIR 1978 SC 597) • J.T. (India) Exports and another vs. UOI and another (2003) 262 ITR 269 (Del-FB) As the facts are present in the instant case coupled with the fact that the appellant has discharged the initial onus of establishing the identity of the subscribers and the bonafides of the transactions hence the Assessing Officer is not justified in ignoring various evidences provided to him by the appellant.
Nothing adverse has been brought on record by the Assessing Officer to establish that the amount of share application money of ` 1,47,00,000/- received by the appellant represents its own undisclosed income. In view of the our aforesaid discussion, I delete the addition of ` 1,47,00,000/-, made by the Assessing Officer u/s 68 of the Act."
4.2 Ld. Commissioner of Income Tax (Appeals) further held that since he has deleted the addition of ` 1,47,00,000/- made on account of unexplained cash credits u/s 68 of the IT Act, there is no justification 7 ITA NOS. 557-558/DEL/2010 for making and sustaining the addition of ` 3,67,500/- on account of commission paid. Hence, he delete the same also.
5. Against the above order the Revenue is in appeal before us.
6. We have heard the rival contentions in light of the material produced and precedent relied upon. We find that assessee in this case has duly submitted all the details to establish the identity of the parties, the income tax particulars in the form of PAN were also provided by the assessee. The assessee has further submitted return of allotment of shares filed with ROC, share application forms alongwith Memorandum and Articles of Association, Affidavits from the parties, confirmation of the parties, copies of bank accounts. In the background of the above details, it can be said that assessee has submitted enough details to establish the identity of the parties. Assessing Officer has primarily relied upon the Report of the Investigation Wing which cannot conclusively prove that assessee own money was invested in the form of share application money. Moreover, it has been pointed out by the Ld. Commissioner of Income Tax (Appeals) that assessee has not been confronted with the information collected. In these circumstances, we find that the order of the Ld. Commissioner of Income Tax (Appeals) is quite reasonable. 8
ITA NOS. 557-558/DEL/2010 6.1 In this regard, we place reliance of the Hon'ble Apex Court decision delivered in the case of CIT Vs. Lovely Exports 216 CTR 195. In this case it was held that if the share application money is received by the assessee company from alleged bogus shareholders, whose names are given to the Assessing Officer, then the Department is free to proceed to reopen their individual assessments in accordance with law, but it cannot be regarded as undisclosed income of the assessee. 6.2 We further place reliance upon the decision of the Hon'ble Jurisdictional High Court in the case of C.I.T. v Gourdin Herbals India Ltd. in ITA No. 665/2009 vide order dated 17.4.2009 wherein it has been held as under:-
"Three companies, viz., M/s Kuberco Sales Pvt. Ltd., M/s Garg Finvest Pvt. And M/s Mafico Leasing and Consultants Pvt. Ltd. had subscribed to the share capital issued by the assessee. The Assessing Officer had some doubts about the source of the investment made by those three companies and therefore, made certain inquiries. In response, the assessee produced the copy of the bank accounts of all the three companies, their certificates of incorporation and also the income tax returns filed by them.
From the above documents, the identity and genuineness of these companies is clearly established. The only ground for 9 ITA NOS. 557-558/DEL/2010 making addition by the Assessing Officer was that the bank accounts of the three companies revealed that the amounts in cash were deposited in those accounts and thus cheques were issued in favour of the assessee company alongwith share application money.
In these circumstances, we are of the opinion that following the judgement of the Supreme Court in the case of Commissioner of Income Tax vs. Lovely Exports Pvt. Ltd., 216 CTR 195, the ITAT has rightly held that the assessee had discharged its burden. In case those three companies had received certain cash, which were deposited in the bank accounts, it was for the Income Tax Department to take action against the said companies."
6.3 We further place reliance upon the decision of the Hon'ble Jurisdictional High Court in the case of C.I.T. vs. Dwarkadish Investment P Ltd. The relevant paras of this judgement of Hon'ble Delhi High Court i.e. para No. 6, 7 & 8 are reproduced herein below:-
"6. In our opinion, as section 68 of the Act, 1961 has been interpreted as recently as 2008 by a Division Bench of this Court in Divine Leasing and Finance Ltd. (Supra) after considering all the relevant judgements, we do not have to 10 ITA NOS. 557-558/DEL/2010 reconsider all the judgements referred to by Mr. Sahni which are prior in date and time to the aforesaid judgement. In fact, a Special Leave Petition filed against the said Division Bench Judgement was dismissed by the Supreme Court by way of speaking order in C.I.T. vs. Lovely Exports (P) Ltd. 216 CTR 195 (SC). The Supreme Court in Lovely Exports Pvt. Ltd. (Supra) has held as under:-
"Can the amount of share money be regarded as undisclosed income under section 68 of the Income Tax Act, 1961. We find no merit in this Special Leave Petition for the simple reason that if the share application money is received by the assessee company from alleged bogus shareholders, whose names are given to the Assessing Officer, then the Department is free to proceed to reopen their individual assessments in accordance with law. Hence, we find no infirmity with the impugned judgement."
7. Consequently, the doctrine of merger would apply and the judgement of the Supreme Court in Lovely Exports (P) Ltd. 11
ITA NOS. 557-558/DEL/2010 (Supra) would cover the field with regard to interpretation of section 68 of the Act.
8. In any manner, the onus of proof is not a static one.
Though in section 68 proceedings, the initial burden of proof lies on the assessee yet once he proves the identity of the creditors/ share applicants by either furnishing their PAN number or income tax assessment number and shows the genuineness of transaction by showing money / his books either by account payee cheque or by draft or by any other mode, then the onus of proof would shift to the revenue. Just because the creditors /share applicants could not be found at the address given, it would not give the revenue the right to invoke section 68. One must not lose sight of the fact that it is the revenue which has all the power and wherewithal to trace any person. Moreover, it is settled law that the assessee need not to prove the source of source." 6.4 On examining the present case on the anvil of the above said Hon'ble Apex Court decision and two Hon'ble Jurisdictional High Court decisions , we do not find any infirmity or illegality in the order of the Ld. Commissioner of Income Tax (Appeals), accordingly, we uphold the same.
12
ITA NOS. 557-558/DEL/2010
7. In the result, the appeal filed by the Revenue stands dismissed. ITA No. 558/Del/2010
8. The issues raised read as under:-
"That on the facts and circumstances of the case and in law the Ld. Commissioner of Income Tax (Appeals) erred in deleting the addition of ` 1,77,00,000/- made on account of share application u/s 68 of the Income Tax Act, 1961.
That on the facts and circumstances of the case and in law the Ld. Commissioner of Income Tax (Appeals) erred in deleting the addition of ` 4,42,500/- made on account of commission u/s. 68 of the Income Tax Act, 1961 holding that since the addition made on account of 'unexplained cash credit' u/s. 68 has been deleted, there remains no justification for sustaining this addition."
9. In this case Assessing Officer noted that Assessing Officer made the addition of ` 1,77,00,000/- on account share application money and further found that the name of the parties were in the Report of the Investigation Wing. Assessing Officer further noted the summons were issued to the concerned parties, but not complied with. Hence, he made the addition of `, 1,77,00,000/-. He further added 442500/- i.e. 2.5% of ` 1,77,00,000/- as commission paid in this transaction. 13
ITA NOS. 557-558/DEL/2010
10. Upon assessee's appeal Ld. Commissioner of Income Tax (Appeals) considered the issue and held as under:-
"I have considered the submissions made by the Ld. Authorised Representative of the appellant company. It is noticed that the Assessing Officer has made addition of ` 1,77,00,000/- on account of share application money received from M/s Arun Finvest Pvt. Ltd. (` 14,00,000/-), M/s Ethnic Creations Pvt. Ltd. (` 14,00,000/-), M/s MV Marketing Pvt. Ltd. (` 14,00,000/-), M/s Salwan Developers & Promoters Pvt. Ltd. 14,00,000/-), M/s Niti Housing Finance and Dev. Corpn. Ltd. (` 60,00,000/-), M/s RSG Marketing Pvt. Ltd. (` 21,00,000/-), M/s Jai Shiv Fabricator Pvt. Ltd. (` 40,00,000). I happened to go through the ledger accounts of above mentioned seven parties and it is noticed that in the case of M/s Arun Finvest Pvt. Ltd. the opening balance as on 1.4.2004 is ` 14,00,000/- against which shares worth ` 1,40,000/- have been issued on 25.4.2004 and the balance amount of ` 12,60,000/- has been taken to share premium account. In case of M/s Ethnic Creations Pvt. Ltd., there is a opening balance of ` 14,00,000/- as on 1.4.2004 against which the appellant company issued share capital worth ` 1,40,000/- on 25.5.2004 and the balance amount of ` 12,60,000/- is taken to share premium account. In the case of M/s MV Marketing Pvt. Ltd, the opening balance is ` 14,00,000/- with similar details existing for issue of share capital and appropriation to share premium account as in the case of M/s Ethnic Creations Pvt. Ltd. and M/s Arun Finvest Pvt. Ltd. In the case of M/s Salwan Developers and Promoters Pvt. Ltd., the appellant received ` 14,00,000/- by cheque no. 792585 14 ITA NOS. 557-558/DEL/2010 and 792586 dated 4.11.2003 which means that the amount has been received during the period relevant to assessment year 2004-05 and not during the year under consideration. In the case of M/s Niti Housing Finance & Dev. Corpn. Ltd., M/s RSG Marking Pvt Ltd. and M/s Jaishiv Fabricators Pvt. Ltd, the opening balances as on 1.4.2004 are as ` 60,00,000/-, ` 21,00,000/- and ` 40,00,000/- respectively. As the amounts in all the above mentioned seven parties have been received during the previous year relevant to assessment year 2004-05 hence, no addition on account of any cash credit u/s 68 can be made for assessment year 2005-06 i.e. year under consideration. In view of this, I direct the Assessing Officer to delete the addition as no addition can be made u/s 68 as the appellant received the share application money from the above mentioned seven parties in the previous year relevant to assessment year 2004-05."
11. Against the above order the Revenue is in appeal before us.
12. We have heard the rival contentions in light of the material produced and precedent relied upon. We find that the Ld. Commissioner of Income Tax (Appeals) has given a categorical finding that the amount from the seven parties in this case have been received during the previous year relevant to assessment year 2004- 05, hence, no addition on account of any cash credit u/s 68 can be made for assessment year 2005-06.
15
ITA NOS. 557-558/DEL/2010 12.1 Ld. Departmental Representative could not controvert this finding.
12.2 Accordingly, we do find any infirmity or illegality in the order of the Ld. Commissioner of Income Tax (Appeals), hence, we uphold the same.
13. In the result, both the appeals filed by the Revenue stand dismissed.
Order pronounced in the open court on 08/7/2011.
Sd/- Sd/-
[C.L. SETHI] [SHAMIM YAHYA]
JUDICIAL MEMBER ACCOUNTANT MEMBER
Date:- 08/7/2011
SRB
Copy forwarded to: -
1. Appellant 2. Respondent 3. CIT 4. CIT (A)
5. DR, ITAT
TRUE COPY
By Order,
Assistant Registrar,
ITAT, Delhi Benches
16