Income Tax Appellate Tribunal - Delhi
Acit, New Delhi vs M/S Poltavsky- Tps Power Services Ltd., ... on 9 April, 2018
IN THE INCOME TAX APPELLATE TRIBUNAL
DELHI BENCH: 'F' NEW DELHI
BEFORE SHRI JOGINDER SINGH, JUDICIAL MEMBER
&
SHRI P. MAHARISHI, ACCOUNTANT MEMBER
ITA No.-969/Del/2011
(Assessment Year: 2002-03)
ACIT vs Poltavsky-TPS Power Services Ltd.
Circle 14(1) 45, M-Block, Commercial Complex,
Room No. 415, Greater Kailash-II,
4th Floor, New Delhi.
C.R. Bldg., PAN No. AABCP2692R
I.P. Estate,
New Delhi.
&
ITA No.-5458/Del/2013
(Assessment Year: 2003-04)
Poltavsky-TPS Power Services vs ACIT
Ltd. Circle 14(1)
45, M-Block, Commercial Room No. 415,
Complex, 4th Floor,
Greater Kailash-II, C.R. Bldg.,
New Delhi. I.P. Estate,
PAN No. AABCP2692R New Delhi.
Assessee by Ms. Sangeeta Singh &
Ms. Kanishka Aggarwal, CAs
Revenue by Sh. Atiq Ahmad, Sr. DR
Date of Hearing 05.04.2018
Date of Pronouncement 09.04.2018
ITA Nos. 969/Del/2011 & 5458/Del/2013
Poltavsky-TPS Power Services Ltd.
ORDER
PER JOGINDER SINGH, J.M.
The Revenue is in appeal for AY 2002-03 challenging the impugned order dated 01.11.2010 of the Ld. First Appellate Authority, New Delhi, whereas the assessee is in appeal for AY 2003-04 (ITA No. 5458/Del/2013) confirming the addition of Rs. 21,50,000/-, being the amount of share application money and consequent addition u/s 68 of the of the Income Tax Act, 1961 (hereinafter the 'Act') by order dated 12.07.2013.
2. First we shall take up the appeal of the Revenue (ITA No. 969/Del/2011). The crux of arguments advanced by Shri Atiq Ahmad, Ld. Sr. DR is in support of addition made u/s 69 of the Act which was deleted by the Ld. CIT(A). It was contended that accommodation entries were taken by the assessee for which our attention was invited to page 9 (para 4 of the impugned order) and further para 4.3 (page 15) of the order in appeal. On the other hand, the Ld. Counsel for the assessee Ms. Sangeeta Singh alongwith Ms. Kanishka Aggarwal, contended that share application was received by the assessee in a justifiable manner and the assessee duly filed confirmation. Our attention was invited to page 184 of the Paper Book containing the letter dated 16.05.2011, addressed to the ACIT, 2 ITA Nos. 969/Del/2011 & 5458/Del/2013 Poltavsky-TPS Power Services Ltd.
Circle 14(1), asking for copy of reasons recorded for issuance of notice u/s 147 of the Act by explaining that the recording by the authorities that reasons were supplied is factually incorrect. The impugned order was defended.
2.1 We have considered the submissions of Ld. DR and perused the material available on record. The facts in brief are that the assessee is a limited company engaged in the business of trading in spare parts for power generation equipments, declared income of Rs. 11,04,408/- in its return filed on 30.10.2002, which was processed u/s 143(1) of the Act. The Ld. AO received information from the Investigation Wing that the assessee company received accommodation entry amounting to Rs. 4 lakh in the FY 2001-02 in the form of share application money. On the basis of this information the Ld. AO reopened the assessment u/s 147 of the Act with the issuance of notice u/s 148 of the Act. The receipt of share application money/share capital was duly reflected in the audited accounts during the year 2001-02 and there is no dispute with respect to acceptance of share application money. The grievance of the assessee is that such share application money was treated as accommodation entry by the Ld. AO. It is noted that the assessee filed necessary confirmation from the share applicants alongwith their PAN numbers, bank particulars. However, the Ld. AO treated the amount of Rs. 3 ITA Nos. 969/Del/2011 & 5458/Del/2013
Poltavsky-TPS Power Services Ltd.
55,25,000/- as accommodation entry as against the claim of share application money.
2.2 On appeal before the Ld. CIT (A), the factual matrix was considered in the light of various judicial pronouncements and finally found that all the share applicants are assessed to tax and further the share application money passed through banking channel and the assessee also filed confirmation letters with supporting evidence from such share applicants. All the shares were also allotted to the share subscribers. It is further noted that the demand report was also called from the Ld. AO and it was observed by the Ld. First Appellate Authority that the AO did not make detailed investigation either at the stage of assessment proceedings or at the time of remand report and the assessment was made merely on the basis of information received from Investigation Wing. We are in agreement with the finding of the Ld. CIT (A) that it was the duty of the Ld. Assessing Officer to make an independent enquiry with respect to the information and the consequent addition could have been made with the help of any positive material and establishing that the share application money claimed by the assessee was not genuine. The totality of facts and the material evidence produced by the assessee clearly establishes that the assessee sufficiently proved that the share capital was in fact paid by the respective share subscribers. 4 ITA Nos. 969/Del/2011 & 5458/Del/2013
Poltavsky-TPS Power Services Ltd.
Thus, we find merit in the contention advanced by the Ld. Counsel for the assessee.
2.3 Now, we shall deal with Section 68 & 69 of the Act so that we can reach to a fair conclusion. As per the provisions of section 68 of the Act, the assessee is expected to offer an explanation with respect to the nature and source of cash credits to the satisfaction of the Assessing Officer. For ready reference section 68 of the Act is reproduced hereunder:-
"68. Where any sum is found credited in the books of an assessee maintained for any previous year, and the assessee offers no explanation about the nature and source thereof or the explanation offered by him is not, in the opinion of the Assessing Officer, satisfactory, the sum so credited may be charged to income-tax as the income of the assessee of that previous year :
Provided that where the assessee is a company (not being a company in which the public are substantially interested), and the sum so credited consists of share application money, share capital, share premium or any such amount by whatever name called, any explanation offered by such assessee-company shall be deemed to be not satisfactory, unless--
(a) the person, being a resident in whose name such credit is recorded in the books of such company also offers an explanation about the nature and source of such sum so credited; and
(b) such explanation in the opinion of the Assessing Officer aforesaid has been found to be satisfactory:
Provided further that nothing contained in the first proviso shall apply if the person, in whose name the sum referred to therein is recorded, is a venture capital fund or a venture capital company as referred to in clause (23FB)of section 10." 2.4 As per section 68 of the Act, onus is upon the assessee to discharge the burden so cast upon. First burden is upon the 5 ITA Nos. 969/Del/2011 & 5458/Del/2013 Poltavsky-TPS Power Services Ltd.
assessee to satisfactorily explain the credit entry contained in his books of accounts. The burden has to be discharged with positive material (Oceanic Products Exporting Company vs CIT 241 ITR 497 (Kerala.). The legislature had laid down that in the absence of satisfactory explanation, the unexplained cash credit may be charged u/s 68 of the Act. Our view is fortified by the ratio laid down in Hon'ble Apex Court in P. Mohankala (2007)(291 ITR 278)(SC). A close reading of section 68 and 69 of the Act makes it clear that in the case of section 68, there should be credit entry in the books of account whereas in the case of 69 there may not be an entry in such books of account. The law is well settled, the onus of proving the source of a sum, found to be received/transacted by the assessee, is on him and where it is not satisfactorily explained, it is open to the Revenue to hold that it is income of the assessee and no further burden lies on the Revenue to show that income is from any other particular source. Where the assessee failed to prove satisfactorily the source and nature of such credit, the Revenue is free to make the addition. The principle laid down in Ganpati Mudaliar (1964) 53 ITR 623/A. Govinda Rajulu Mudaliar (34 ITR 807)(SC) and also CIT vs Durga Prasad More (72 ITR 807)(SC) are the landmark decisions. The ratio laid down therein are that if the explanation of the assessee is unsatisfactory, the amount can be treated as income of the assessee. 6 ITA Nos. 969/Del/2011 & 5458/Del/2013
Poltavsky-TPS Power Services Ltd.
The ratio laid down in Daulat Ram Rawatmal 87 ITR 349 (SC) further supports the case of the assessee. In the case of a cash entry, it is necessary for the assessee to prove not only the identity of the creditor but also the capacity of the creditor and genuineness of the transactions. The onus lies on the assessee, under the facts available on record. A harmonious construction of section 106 of the evidence Act and section 68 of the Income Tax Act will be that apart from establishing the identity of the creditor, the assessee must establish the genuineness of the transaction as well as the creditworthiness of the creditors. In CIT vs Korlay Trading Company Ltd. 232 ITR 820 (Cal.), it was held that mere mention of file number of creditor will not suffice and each entry has to be explained separately by the assessee (CIT vs R.S. Rathaore) 212 ITR 390 (Raj.). The Hon'ble Guwahati High Court in Nemi Chandra Kothari vs CIT (264 ITR 254)(Gau) held that transaction by cheques may not be always sacrosanct. In the present appeal, the assessee duly fulfilled the conditions enshrined u/s 69 of the Act and produced necessary evidence for its claim.
2.5 The ratio laid down in ACIT vs Rajeev Tandon 294 ITR (AT) 219 (Del.), which was confirmed by Hon'ble High Court , in 294 ITR 488, supports the case of the Revenue. Identical ratio was laid down in CIT vs Anil Kumar 392 ITR 552 (Del.), wherein it was held 7 ITA Nos. 969/Del/2011 & 5458/Del/2013 Poltavsky-TPS Power Services Ltd.
that mere identification of the donor and movement of gift through banking channel is not sufficient to prove the genuineness of gift. Now, in the light of the foregoing discussion, we shall examine the facts of the present appeal. The totality of facts clearly indicates that the assessee duly furnished the necessary details of share applicants by filing their names, confirmation letters from them and thus, their identity is not in dispute. The Ld. CIT(A) has individually dealt with such shares subscribers and found them genuine. The Ld. AO merely made the addition based upon the information received from the Investigation Wing but did not bring on record any material evidence that the share application received by the assessee was not genuine. Considering the totality of facts, we find no infirmity in the impugned order, as the onus cast upon the assessee has been duly discharged, therefore, we upheld the order of the Ld. First Appellate Authority.
The appeal of the Revenue is dismissed.
3. Now, we shall take up the appeal of the assessee (ITA No. 5458/Del/2013), wherein confirming the addition of Rs. 21,50,000/-, being the amount of share application money received by the assessee and consequent addition u/s 68 of the Act made by the Ld. AO has been challenged. The Ld. Counsel for the assessee challenged the reopening of assessment u/s 147 of the Act on the 8 ITA Nos. 969/Del/2011 & 5458/Del/2013 Poltavsky-TPS Power Services Ltd.
ground that the observation made by the Ld. CIT(A) that the assessee never asked the AO for supply of reason is factually incorrect. It was contended that the copy of reasons was never provided to the assessee. At the stage, the Bench asked the Ld. Counsel for the assessee whether any request was made by the assessee for supplying the reasons to the AO, the Ld. Counsel invited our attention to page 37 & 38 of the Paper Book, wherein a letter dated 16.05.2011 was addressed to the Ld. ACIT. Our attention was further invited to pages 185 and 186 of the Paper Book containing letter dated 06.02.2012 and 16.01.2012. The Ld. Counsel further invited our attention to various pages of the Paper Book to substantiate its contention. On the other hand, the Ld. DR contended that these are accommodation entries for which our attention was invited to para 7.12 (page 22 of the PB).
3.1 We have considered the rival submissions and perused the material available on record. The facts in brief are that the assessee originally filed its return on 03.11.2003, declaring income of Rs. 11,46,707/-, which was processed u/s 143(1) of the Act. Subsequently, the Ld. AO was of the opinion that income has escaped assessment, therefore, he initiated proceedings u/s 147 of the Act and issued a notice u/s 148 of the Act on 22.03.2010 after duly recording the reasons. The assessee vide letter dt. 21.04.2010 9 ITA Nos. 969/Del/2011 & 5458/Del/2013 Poltavsky-TPS Power Services Ltd.
submitted that return already filed by the assessee may be treated to be return filed u/s 148 of the Act. The Ld. AO framed assessment u/s 143(3) r.w.s. 147 of the Act on 24.10.2010 by making addition of Rs. 21,50,000/- on account of introduction of fresh share capital and assessed at an income of Rs. 32,96,710/-. Before us, the Ld. Counsel for the assessee has strongly contended that the copy of reasons recorded was never supplied to the assessee. It is noted that the assessee has filed paper book, wherein a certificate has been signed below the index that the papers annexed in the paper book were filed before the Ld. CIT(A) as well as before the Ld. AO respectively. At page 38 of the PB there is a letter dated 16.05.2011 addressed to the Ld. ACIT asking for copy of reasons recorded for issuance of notice, whereas we find that the assessment order was passed on 24.12.2010 itself and further pursuance to notice issued to the assessee u/s 143(2) of the Act, the assessee attended the proceedings. It is further noted that the assessee vide letter dated 21.04.2010 (page 1 of the asstt. order) asked the Ld. AO that the return already filed by the assessee may be treated to be return filed to the notice u/s 148 of the Act issued to the assessee. Thus, the letter of the assessee for asking the reason is of later date (16.05.2011), therefore, is of no use and such letter should have been filed before framing the assessment order. So, on this ground 10 ITA Nos. 969/Del/2011 & 5458/Del/2013 Poltavsky-TPS Power Services Ltd.
of non supply of reason by the Ld. AO is not convincing and is merely an afterthought.
3.2 In the light of the foregoing discussions, it is our bounded duty to examine the validity of reopening u/s 147 r.w.s 148 of the Act. Before adverting further we are reproducing hereunder the relevant provision of section 147 of the Act for ready reference and analysis:-
". If the Assessing Officer has reason to believe that any income chargeable to tax has escaped assessment for any assessment year, he may, subject to the provisions of sections 148 to 153, assess or reassess such income and also any other income chargeable to tax which has escaped assessment and which comes to his notice subsequently in the course of the proceedings under this section, or recompute the loss or the depreciation allowance or any other allowance, as the case may be, for the assessment year concerned (hereafter in this section and in sections 148 to 153 referred to as the relevant assessment year) :
Provided that where an assessment under sub-section (3) of section 143 or this section has been made for the relevant assessment year, no action shall be taken under this section after the expiry of four years from the end of the relevant assessment year, unless any income chargeable to tax has escaped assessment for such assessment year by reason of the failure on the part of the assessee to make a return under section 139 or in response to a notice issued under sub- section (1) of section 142 or section 148 or to disclose fully and truly all material facts necessary for his assessment, for that assessment year:
Provided further that nothing contained in the first proviso shall apply in a case where any income in relation to any asset (including financial interest in any entity) located outside India, chargeable to tax, has escaped assessment for any assessment year:
Provided also that the Assessing Officer may assess or reassess such income, other than the income involving matters which are the subject matters of any appeal, reference or revision, which is chargeable to tax and has escaped assessment.
Explanation 1.--Production before the Assessing Officer of account books or other evidence from which material evidence could with due diligence have been discovered by the 11 ITA Nos. 969/Del/2011 & 5458/Del/2013 Poltavsky-TPS Power Services Ltd.
Assessing Officer will not necessarily amount to disclosure within the meaning of the foregoing proviso. Explanation 2.--For the purposes of this section, the following shall also be deemed to be cases where income chargeable to tax has escaped assessment, namely :--
(a) where no return of income has been furnished by the assessee although his total income or the total income of any other person in respect of which he is assessable under this Act during the previous year exceeded the maximum amount which is not chargeable to income-tax ;
(b) where a return of income has been furnished by the assessee but no assessment has been made and it is noticed by the Assessing Officer that the assessee has understated the income or has claimed excessive loss, deduction, allowance or relief in the return ;
(ba) where the assessee has failed to furnish a report in respect of any international transaction which he was so required under section 92E;
(c) where an assessment has been made, but--
(i) income chargeable to tax has been underassessed ; or
(ii) such income has been assessed at too low a rate ; or
(iii) such income has been made the subject of excessive relief under this Act ; or
(iv) excessive loss or depreciation allowance or any other allowance under this Act has been computed;
(d) where a person is found to have any asset (including financial interest in any entity) located outside India.
Explanation 3.--For the purpose of assessment or reassessment under this section, the Assessing Officer may assess or reassess the income in respect of any issue, which has escaped assessment, and such issue comes to his notice subsequently in the course of the proceedings under this section, notwithstanding that the reasons for such issue have not been included in the reasons recorded under sub-section (2) of section 148.
Explanation 4.--For the removal of doubts, it is hereby clarified that the provisions of this section, as amended by the Finance Act, 2012, shall also be applicable for any assessment year beginning on or before the 1st day of April, 2012." 3.3 If the aforesaid provision of the Act is analyzed, we find that after insertion of Explanation -3 to section 147 of the Act by the Finance (No.2) Act of 2009 with effect from 01/04/1989 section 147 12 ITA Nos. 969/Del/2011 & 5458/Del/2013 Poltavsky-TPS Power Services Ltd.
has an effect that Assessing officer has to assess or reassess income (such income) which has escaped assessment and which was basis of formation of belief and, if he does so, he can also assess or reassess any other income which has escaped assessment and which came to the notice during the course of proceedings. Identical ratio was laid down by Hon'ble jurisdictional High Court in CIT vs Jet Airways India Pvt. Ltd. (2010) 195 taxman 117 (Mum.) and the full Bench decision from Hon'ble Kerala High Court in CIT vs Best Wood Industries and Saw Mills (2011) 11 taxman.com 278 (Kerala)(FB). A plain reading of explanation-3 to section 147 clearly depicts that the Assessing Officer has power to make addition, where he arrived to a conclusion that income has escaped assessment which came to his notice during the course of proceedings of reassessment u/s 148. Our view is fortified by the decision in Majinder Singh Kang vs CIT (2012) 25 taxman.com 124/344 ITR 358 (P & H) and Jay Bharat Maruti Ltd. Vs CIT (2010) Tax LR 476 (Del.) and V. Lakshmi Reddy vs ITO (2011) 196 taxman 78 (Mad.). The provision of the Act is very much clear as with effect from 01/04/1989, the Assessing Officer has wide powers to initiate proceedings of reopening. The Hon'ble Kerala High Court in CIT vs Abdul Khadar Ahmad (2006) 156 taxman 206 (Kerala) even went to the extent so long as the AO has independently 13 ITA Nos. 969/Del/2011 & 5458/Del/2013 Poltavsky-TPS Power Services Ltd.
applied his mind to all the relevant aspect and has arrived to a belief the reopening cannot be said to be invalid.
3.4 We are aware that "mere change of opinion" cannot form the basis of reopening when the necessary facts were fully and truly disclosed by the assessee in that situation, the ITO is not entitled to reopen the assessment merely on the basis of change of opinion. However, powers under amended provision are wide enough where there is a reasonable belief with the Assessing Officer, that income has escaped assessment, because the powers with effect from 01/04/1989 are contextually different and the cumulative conditions spelt out in clauses (a) and (b) of section 147, prior to its amendment are not present in the amended provision. The only condition for action is that the Assessing Officer "should have reason to believe"
that income chargeable to tax has escaped assessment. Such belief can be reached in any manner and is not qualified by a pre-condition of faith and true disclosure of material facts by an assessee as contemplated in pre-amended section 147. Viewed in that angle, power to reopen assessment is much wider under the amended provision. Our view is fortified by the decision from Hon'ble Delhi High Court in Bawa Abhai Singh vs DCIT (2001) 117 taxman 12 and Rakesh Agarwal vs ACIT (1996) 87 taxman 306 (Del.). The Hon'ble Apex Court in CIT vs Sun Engineering works Pvt. Ltd. 198 ITR 297 14 ITA Nos. 969/Del/2011 & 5458/Del/2013 Poltavsky-TPS Power Services Ltd.
(SC) clearly held that proceedings u/s 147 are for the benefit for the Revenue, which are aimed at gathering the 'escaped income'. At the same time, We are aware that powers u/s 147 and 148 of the Act are not unbridled one as it is hedged with several safeguards conceived in the interest of eliminating room for abuse of this power by the AO.
However, the material available on record, clearly indicates that income chargeable to tax had escaped assessment,therefore, the ld. Assessing Officer was within his jurisdiction to reopen the assessment. The Hon'ble Apex Court in Ess Ess Kay Engineering Co. Pvt. Ltd. (2001) 247 ITR 818 (SC) held that merely because the case of the assessee was correct in original assessment for the relevant assessment year, it does not preclude the ITO to reopen the assessment of an earlier year on the basis of finding of his fact that fresh material came to his knowledge.
3.5 Under section 147, as substituted with effect from 01/04/1989, the scope of reassessment has been widened. After such substitution, the only restriction, put in that section is that "reason to believe". That reason has to be a reason of a prudent person which should be fair and not necessarily due to failure of the assessee to disclose fully and partially some material facts relevant for assessment (Dr. Amin's Pathology Laboratory vs JCIT (2001) 252 ITR 673, 682 (Bom.) Identical ratio was laid down by Hon'ble Delhi 15 ITA Nos. 969/Del/2011 & 5458/Del/2013 Poltavsky-TPS Power Services Ltd.
High court in United Electrical Company Pvt. Ltd. vs CIT (2002) 258 ITR 317, 322 (Del.) and Prafull Chunnilal Patel vs ACIT 236 ITR 832, 838 (Guj.). The essential requirement for initiating reassessment proceeding u/s 147 r.w.s 148 of the Act is that the ld. Assessing Officer must have reason to believe that any income chargeable to tax has escaped assessment for any assessment year. The Hon'ble Gujara High Court in Prafull Chunnilal Patel vs ACIT (supra) even went to the extent that at the initiation stage formation of reasonable belief is needed and not a conclusive finding of facts. Identical ratio was laid down in Brijmohan Agrawal vs ACIT (2004) 268 ITR 400, 405 (All.) and Ratnachudamani S. Utnal vs ITO (2004) 269 ITR 272, 277 (Karnataka) applying Sowdagar Ahmed Khan vs ITO (1968) 70 ITR 79(SC).
3.6 So far as, the meaning of expression, "reason to believe"
is concerned, it refers to belief which prompts the Assessing Officer to apply section 147 to a particular case. It depend upon the facts of each case. The belief must be of an honest and reasonable person based on reasonable grounds. The Assessing Officer is required to act, not on mere suspicion, but on direct or circumstantial evidence. Our view find support from the ratio laid down in following cases:-
i. Epica Laboratories Ltd. vs DCIT 251 ITR 420, 425-426 (Bom.), ii. Vishnu Borewell vs ITO (2002) 257 ITR 512 (Orissa), 16 ITA Nos. 969/Del/2011 & 5458/Del/2013 Poltavsky-TPS Power Services Ltd.
iii. Central India Electric Supply Company Ltd. vs ITO (2011) 333 ITR 237 (Del.), iv. V.J. Services Company Middle East ltd. vs DCIT (2011) 339 ITR 169 (Uttrakhand), v. CIT vs Abhyudaya Builders (P. ) Ltd. (2012) 340 ITR 310 (All.), vi. CIT vs Dr. Devendra Gupta (2011) 336 ITR 59 (Raj.), vii. Emirates Shipping Line FZE vs Asst. DIT (2012) 349 ITR 493 (Del.). viii. Reference may also made to following judicial decisions:- ix. Safetag international India P. Ltd. (2011) 332 ITR 622 (Del.), x. CIT vs Orient Craft Ltd. (2013) 354 ITR 536 (Del.) xi. Acorus Unitech Wirelss Pvt. Ltd. vs ACIT (2014) 362 ITR 417 (Del.). xii. Praful Chunilal Patel: Vasant Chunilal Patel vs Asst. CIT (1999) 832, 843-44, 844-45 (Guj.), xiii. Venus Industrial Corporation vs Asst. CIT (1999) 236 ITR 742, 746 (Punj.), xiv. Srichand Lalchand Talreja vs Asst. CIT (1998) 98 taxman 14, 19 (Bom.), xv. Usha Beltron Ltd. vs JCIT (1999) 240 ITR 728, 736-37, 739 (Pat.) xvi. Kapoor Brothers vs Union of India (2001) 247 ITR 324, 331, 332-33 xvii. Vippy Processors Pvt. Ltd. vs CIT (2001) 249 ITR 7, 8 (MP) 3.7 In Dilip S. Dahanukar vs Asst. CIT (2001) 248 ITR 147, 150-51 (Bom.). The Hon'ble jurisdictional High Court held as under:-
"Held, that there was material on record on the basis of survey and statement of person to show that the assessee had wrongfully claim deduction u/s 80IA. Therefore, the Assessing Officer had reason to believe that income had escaped assessment for assessment year 1994-95."
Identically in the case of Srichand Lalchand Talreja v. Asst. CIT, (1998) 98 Taxman 14, 19 (Bom), where the information 17 ITA Nos. 969/Del/2011 & 5458/Del/2013 Poltavsky-TPS Power Services Ltd.
regarding acquisition of the asset was not available with the Assessing Officer during the relevant assessment year 1992-93 and such information was disclosed in the return for the assessment year 1995-96, the Hon'ble jurisdictional High Court held that the Assessing Officer can form a bona fide belief that there was escapement of income in relation to assessment year 1992-93.
3.8 The Hon'ble Bombay High Court in Export Credit Guarantee Corporation of India Ltd. v. Addl. CIT, (2013) 350 ITR 651 (Bom), where there had been no application of mind to the relevant facts during the course of the assessment proceedings by the Assessing Officer, the reopening of the assessment was held to be valid.
3.9 The Hon'ble Bombay High Court in Girilal & Co. v. S.L. Meena, ITO, (2008) 300 ITR 432 (Bom), held that in order to invoke the extraordinary jurisdiction of the court the petitioner must also make out a case that no part of the relevant material had been kept out from the Assessing Officer). The information was in the annexures and consequently Explanation 2(c)(iv) of section 147 would apply. The reassessment proceedings after four years were valid. 18 ITA Nos. 969/Del/2011 & 5458/Del/2013
Poltavsky-TPS Power Services Ltd.
3.10 In the case of Deputy CIT v. Gopal Ramnarayan Kasat, (2010) 328 ITR 556 (Bom), it was not the case of the assessee that the notice issued was after the expiry of the time limit provided in section 153(2). The reassessment proceedings were held to be valid. In Indian Hume Pipe Co. Ltd. v. Asst. CIT, (2012) 348 ITR 439 (Bom), both in the computation of taxable long-term capital gains in the original return of income and in the computation that was submitted in response to the query of the Assessing Officer there was a complete silence in regard to the dates on which the amounts were invested, as such there being a failure to disclose fully and truly material facts necessary for assessment. The reassessment proceedings were held to be valid. This view was also confirmed in following cases:-
a. Dalmia P. Ltd. v. CIT, (2012) 348 ITR 469 (Del); b. CIT v. K. Mohan & Co. (Exports), (2012) 349 ITR 653 (Bom); c. Remfry & Sagar v. CIT, (2013) 351 ITR 75 (Del); d. OPG Metals & Finsec Ltd. v. CIT, (2013) 358 ITR 144 (Del). 3.11 In the case of Venus Industrial Corporation v. Asst. CIT, (1999) 236 ITR 742, 746 (P & H) [Where initiation was started within four years for re-examining the deduction under section 80HHC, was held to be wrongly allowed in the original assessment. Identically, in the case of Happy Forging Ltd. v. CIT, (2002) 253 ITR 413,416-17 (P & H), where excise duty paid in advance was shown as an asset in the balance sheet and was allowed as a deduction, reassessment 19 ITA Nos. 969/Del/2011 & 5458/Del/2013 Poltavsky-TPS Power Services Ltd.
notice on the ground that excise duty was shown as an asset in the balance sheet and was not routed through the profit and loss account. The reopening at this stage was held to be valid. In the case of Vipan Khanna v. CIT, (2002) 255 ITR 220, 230 (P & H), where from the facts it was clear that the assessee had claimed depreciation in the return at the rate of 50 per cent and he had nowhere disputed the fact that the admissible rate of depreciation to him was 40 per cent., such fact alone was sufficient to initiate reassessment proceedings under section 147 and, therefore, such initiation was sustained. The Hon'ble Punjab & Haryana High Court in Mrs. Rama Sinha v. CIT, (2002) 256 ITR 481, 483, 486, where the reassessment notice has been issued on the basis of definite information from CBI regarding investments by the assessee which had not been disclosed during the original assessment proceedings, such initiation has been upheld. 3.12 In the case of Pal Jain v. ITO, (2004) 267 ITR 540, 544-45, 548, 549 (P & H), applying Phool Chand Bajrang Lal v. ITO, (1993) 203 ITR 456 (SC), although the transaction of sale of shares was disclosed and accepted in the original assessment, but the subsequent discovery by the DDI (Investigation) revealed that the transaction was not genuine, a reassessment notice after four years has been held to be valid because there was no true disclosure of the 20 ITA Nos. 969/Del/2011 & 5458/Del/2013 Poltavsky-TPS Power Services Ltd.
material facts. In this regard, the petitioner-assessee cannot draw any support from the statement for challenging the validity of the notice for reassessment. It goes without saying that for the purpose of making the assessment, the Assessing Officer shall have to confront the petitioner with the entire material in his possession on the basis of which he proposes to make the additions. In Punjab Leasing Pvt. Ltd. v. Asst. CIT, (2004) 267 ITR 779, 781-82 (P & H), where depreciation was allowed to the assessee, who was engaged in the business of financing of vehicles and consumer durables on 'hire-purchase basis' as well as on 'lease/rent basis', a reassessment notice issued after four years has been held not to suffer from any illegality as the same was based on the bona fide action of the competent authority to determine whether or not the vehicles in respect of which the petitioner had been claiming depreciation, were actually owned by it. 3.13 In Jawand Sons v. CIT(A), (2010) 326 ITR 39 (P & H), in the initial assessment, the benefit of deduction of the duty drawback and DEPB under section 80-IB was wrongly granted to the assessee, for which it was not entitled. Therefore, reassessment proceedings to withdraw the deduction were held to be valid. Likewise, in CIT v. Hindustan Tools & Forgings P. Ltd., (2008) 306 ITR 209 (P & H), where, the assessee in the regular assessment had been allowed deduction more than actually allowable under section 80HHC. 21 ITA Nos. 969/Del/2011 & 5458/Del/2013
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Therefore, the action initiated by the AO for reassessment under section 147(b) could not be held to be invalid.
3.14 In the case of Markanda Vanaspati Mills Ltd. v. CIT, (2006) 280 ITR 503 (P & H), wherein, the information furnished by the assessee gave no clue to the payment of liability in regard of the sales tax collected in excess. The Assessing Officer was held to be validly initiated the reassessment proceedings under section 147 for both the years under consideration. In the case of Sat Narain v. CIT, (2010) 320 ITR 448 (P & H), the document did not form the sole basis for the Assessing Officer to initiate reassessment proceeding but he also took into consideration the letter written by the Assistant Commissioner as well as the fact that no return had been filed by the assessee for assessment year 1995-96. Thus, it was held that the Assessing Officer had rightly invoked the jurisdiction to initiate the reassessment proceedings under section 147. In the case of CIT v. Hukam Singh, (2005) 276 ITR 347 (P & H), it was held that the respondents did not have the locus standi to question the orders of reassessment on the ground of lack of notice. Non-issuance of notice to some of the legal heirs of the late P was merely an irregularity and the same did not affect the validity of the reassessment orders. Likewise, in Tilak Raj Bedi v. Joint CIT, (2009) 319 ITR 385 (P & H), wherein, facts coming to light in a subsequent assessment year could 22 ITA Nos. 969/Del/2011 & 5458/Del/2013 Poltavsky-TPS Power Services Ltd.
validly form the basis for initiating reassessment proceedings, in view of Explanation 2 to section 147. The action of the income tax authorities in reopening the assessment of the assessee and restricting the deduction under section 80-IB was held to be valid. 3.15 In the case of Smt. Usha Rani v. CIT, (2008) 301 ITR 121 (P & H), there was nothing on record to show the relationship between the donor and the donee, capacity of the donor to make gifts and the occasion therefore. The assessee had failed to discharge the onus to prove the gifts. The reassessment proceedings were held to be valid. In the case of Usha Beltron Ltd. v. Joint CIT, (1999) 240 ITR 728, 736- 37, 739 (Pat), where the investigation report indicated that the Officer had reason to believe that on account of failure on the part of the petitioner-assessee to disclose true and full facts, income had been grossly under assessed, reassessment proceedings were held validly initiated.
3.16 In the case of Kapoor Brothers v. Union of India, (2001) 247 ITR 324, 331, 332-33 (Pat), where the material evidence for the purpose of reopening of the assessment already completed has been brought to the notice of the authority during the course of enquiry. The notice was held to be valid by the Hon'ble High Court. In the case of Vippy Processors Pvt. Ltd. v. CIT, (2001) 249 ITR 7, 8 (MP), 23 ITA Nos. 969/Del/2011 & 5458/Del/2013 Poltavsky-TPS Power Services Ltd.
where the need to issue notice arose due to noticing of vast difference in value of properties disclosed by the assessee and that of the report of the Valuation Officer and the reasons that led to the issue of the notice were duly recorded and the same were also adequate and based on relevant facts and material, initiation was upheld. In Triple A Trading & Investment Pvt. Ltd. v. Asst. CIT, (2001) 249 ITR 109, 110-11 (MP), where the notice was issued after recording reasons in that regard, initiation was upheld. 3.17 Likewise, Hon'ble Gujarat High Court in Garden Finance Ltd. v. Add/. CIT, (2002) 257 ITR 481, 489, 494-95, special leave petition dismissed by the Supreme Court: (2002) 255 ITR (St.) 7-8 (SC), where the assessee was holding shares in an amalgamating company and he was allotted shares in the amalgamated company and such shares were sold by him and he has disclosed the market price of such shares as on the date of amalgamation as the cost of acquisition of such shares and has not disclosed the cost of acquisition of shares in the amalgamating company in accordance with section 49(2) read with section 47(vii), initiation of reassessment proceedings after four years has been sustained because there was failure on the part of the assessee to disclose material facts necessary for assessment. Likewise, in Suman Steels v. Union of 24 ITA Nos. 969/Del/2011 & 5458/Del/2013 Poltavsky-TPS Power Services Ltd.
India, (2004) 269 ITR 412,418-19 (Raj), where the return of the assessee for assessment year 1995-96 was processed under section 143(1)(a) accepting the net profit rate declared by the assessee, who carried on con- tract business, initiation of reassessment proceedings by issuing a notice dated 15-5-2001 proposing to reassess petitioner- assessee at higher rate in view of the presumptive rate prescribed under section 44AD has been sustained. In the case of Dr. Sahib Ram Giri v. ITO, (2008) 301 ITR 294 (Raj), the reassessment proceedings were initiated after recording reasons in writing by the AO. The non-availability of a few documents demanded by the assessee would not make the reassessment proceedings initiated for the reasons recorded in detail illegal.
3.18 In the case of Desh Raj Udyog : Chaman Udyog v. ITO, (2009) 318 ITR 6 (All), in the assessment years in question, the matter was still to be decided finally by the assessing authority whether the income should be treated under the head 'Business income' or 'property income'. The assessee would get opportunity to show sufficient cause to the assessing authority during the course of assessment. Thus, it could not be said that there was no relevant material to initiate proceedings under section 147. In the case of Kartikeya International v. CIT, (2010) 329 ITR 539 (All), in view of the 25 ITA Nos. 969/Del/2011 & 5458/Del/2013 Poltavsky-TPS Power Services Ltd.
matter, the petitioner was not entitled for the deduction on the duty drawback amount under section 80-IB and since it had been allowed in the assessment order passed under section 143(1), it had escaped assessment. On these facts the initiation of the proceedings under section 147 read with section 148 for assessment years 2005-06 and 2006-07 was legal and in accordance with law.
3.19 Likewise, in the case of Sunil Kumar lain: Suresh Chandra lain v. ITO, (2006) 284 ITR 626 (All), notwithstanding the fact that the amount had been assessed to tax in the hands of P, he had taken a stand that the amount did not belong to him and instead belonged to S. Thus, it was not clear as to in whose hands the amount in question had to be assessed. The ITO was justified in taking proceedings under section 147 for assessing the amounts in the hands of the petitioners according to the claim made by the petitioners. Likewise, Hon'ble Kerala High Court in CIT v. Dr. Sadique Ummer, (2010) 322 ITR 602 (Ker), where, the Assessing Officer collected further information to complete the reassessments which was also permissible under the Act. The finding of the first appellate authority as well as the Tribunal, that the Assessing Officer had no material to believe that the income had escaped assessment was wrong and contrary to facts. The assessee had not maintained 26 ITA Nos. 969/Del/2011 & 5458/Del/2013 Poltavsky-TPS Power Services Ltd.
any books of account. Therefore, the reopening of assessments was held to be valid and within time. In the case of CIT v. Uttam Chand Nahar, (2007) 295 ITR 403 (Raj), the notice requiring the assessee to file the return within 30 days was in accordance with section 148 as it must be deemed to be in force with effect from 1-4-1989, and in force as on the date notice was issued. There was no violation of section 148 in respect of the specified period within which the return is to be submitted. The reassessment proceedings were held to be valid. 3.20 In the case of CIT v. C. V. layachandran, (2010) 322 ITR 520 (Ker), where, the assessee did not concede the income on capital gain either under the un-amended provision or un-der the amended provision, the recourse open to the Department was to bring to tax income escaping assessment under section 147 which was not time barred or otherwise invalid. Likewise, in Atul Traders v. ITO, (2006) 282 ITR 536 (All), the account books or record and other material were all common which were being considered by the CIT(A) in the proceedings relating to three appeals. The petitioner had notice and opportunity of being heard. The reassessment proceedings were held to be validly initiated. In the case of Inductotherm (India) P. Ltd. v. lames Kurian, Asst. CIT, (2007) 294 ITR 341 (Guj), the Assessing Officer had found that there were errors in the computation of 27 ITA Nos. 969/Del/2011 & 5458/Del/2013 Poltavsky-TPS Power Services Ltd.
allowances. The reassessment proceedings were held to be valid. In the case of Papaya Farms Pvt. Ltd. vs. DCIT, (2010) 323 ITR 60 (Mad), where the assessee had furnished incorrect particulars and therefore, the reopening of the assessment was held to be justified. 3.21 In the case of CIT v. Kerala State Cashew Development Corporation Ltd., (2006) 286 ITR 553 (Ker), wherein, the assessee was following the mercantile system of accounting should not have claimed deduction of penal interest which had accrued not in the previous year relevant to the assessment year but in earlier years. This the assessee had not disclosed. The reassessment was held to be valid. Likewise, in Kusum Industries P. Ltd. v. CIT, (2008) 296 ITR 242 (All), as the award had become final it would be taken that the directors of the assessee had accepted the factum of earning of secret profit not reflected in the books of account, which was also binding on the company. The non-appearance of one of the arbitrators and one of the directors in respect of the summon issued under section 131 would not make the reassessment invalid. The Hon'ble Kerala High Court in CIT v. Indo Marine Agencies (Kerala) P. Ltd., (2005) 279 ITR 372 (Ker), held that the entry would amount to an order under section 144. The mere fact that it was not communicated to the assessee would not make such an assessment 28 ITA Nos. 969/Del/2011 & 5458/Del/2013 Poltavsky-TPS Power Services Ltd.
recorded in the order sheet illegal and that would not bar further proceedings under section 147. Thus, the assessment was held to be validly reopened under Explanation 2(c) to section 147. Likewise, in CIT v. N. Jayaprakash, (2006) 285 ITR 369 (Ker), where, the assessee could not, after having persuaded the assessing authority to withdraw the notice dated 1-10-1993, pointing out that it was not in conformity with law, be allowed to contend that the notice was valid due to the omission of the time-limit by the Finance (No.2) Act, 1996, with effect from 1-4-1989. In the absence of specific provision in the Finance (No. 2) Act, 1996, invalidating proceedings initiated by the Income-tax Officer, the action taken by him applying the then existing law could not be said to be invalid.
3.22 Likewise, in CIT v. S.R. Talwar, (2008) 305 ITR 286 (All), the factum of taking advances or loan from T and K, in which the assessee was one of the directors had not been disclosed nor a copy of the ledger account of the assessee maintained by the company filed. In view of the absence of these details, the Assessing Officer could not examine the taxability of advances or loan raised by the assessee. There was failure to disclose material facts necessary for assessment. The reassessment proceedings were held to be valid. In another case, the Hon'ble Allahabad High Court in Chandra 29 ITA Nos. 969/Del/2011 & 5458/Del/2013 Poltavsky-TPS Power Services Ltd.
Prakash Agrawal v. Asst. CIT, (2006) 287 ITR 172 (All), wherein, the Income-tax Department had sent a requisition on 27-3-2002, under section 132A requisitioning the books of account and other documents seized by the Central Excise Department. The record of the proceeding dated 18-4-2002, showed that the requisition was not fully executed as all the books of account and other documents had not been delivered to the requisitioning authority. The proceedings initiated under section 147 was held to be valid.
3.23 In Ramilaben Ratilal Shah v. CIT, (2006) 282 ITR 176 (Guj), held that the noting in the diary constituted sufficient information for the escapement of income by either non- declaration of correct sale consideration or furnishing of inaccurate particulars as regards sale consideration. Thus, the Tribunal was justified in holding that the assessee had failed to disclose fully and truly all material facts necessary for the assessment of the relevant assessment year. The reassessment proceedings had been validly initiated.
3.24 Likewise, in CIT v. Abdul Khader Ahamed, (2006) 285 ITR 57 (Ker), it was clear from the reasons recorded by the Deputy CIT that he prima facie had reason to believe that the assessee had 30 ITA Nos. 969/Del/2011 & 5458/Del/2013 Poltavsky-TPS Power Services Ltd.
omitted to disclose fully and truly the material facts and that as a consequence income had escaped assessment. The reassessment was held to be valid. In the case of U.P. State Brassware Corporation Ltd. v. CIT, (2005) 277 ITR 40 (All), the principles laid down by the Calcutta High Court in CIT v. New Central Jute Mills Co. Ltd. : (1979) 118 ITR 1005 (Cal) did constitute information on a point of law which should be taken into consideration by the ITO in forming his belief that the income to that extent had escaped assessment to tax and, the reassessment was held to be valid. In Sunder Carpet Industries v. ITO, (2010) 324 ITR 417 (All), held that the Departmental Valuer's Report constituted material for entertaining a belief of escaped income in the years under consideration. The reassessment proceeding was held to be valid.
3.25 In Aurobindo Sanitary Stores v. CIT, (2005) 276 ITR 549 (Ori), there being a substantial difference between the figures of liabilities towards sundry creditors in the party ledgers of the assessee-firm and the figures of liabilities towards sundry creditors in the balance-sheet of the assessee-firm for the previous year relevant to the assessment year 1989-90. These materials had a direct link and nexus for formation of a belief by the Assessing Officer that income of the assessee-firm had escaped assessment because of 31 ITA Nos. 969/Del/2011 & 5458/Del/2013 Poltavsky-TPS Power Services Ltd.
failure of the assessee to disclose fully and truly all material facts necessary for the assessment. In the case of CIT v. Best Wood Industries & Saw Mills, (2011) 331 ITR 63 (Ker), the assessee challenged the validity of the reassessment on the ground that the AO had exceeded his jurisdiction under section 147 and both the first appellate authority as well as the Tribunal accepted the contention of the assessee holding that so far as the reassessments related to assessment of unexplained trade credits, they were invalid. On appeal, it has been held that the reassessments were to be valid. In Honda Siel Power Products Ltd. v. Deputy CIT, (2012) 340 ITR 53 (Del), there being omission and failure on the part of the assessee to disclose fully and truly material facts Thus reassessment proceedings were held to be valid.
3.26 In Atma Ram Properties Private Ltd. v. Deputy CIT, (2012) 343 ITR 141 (Del), as the books of account and other material were not produced and no letter was filed, the order passed by the Commissioner (Appeals) in the assessment year 2001-02 would constitute 'information' or material from any external source and, as such, the reassessment proceedings for the assessment year 2000- 01 were held to be valid. Likewise, in the case of CIT v. Smt. R. Sunanda Bai, (2012) 344 ITR 271 (Ker), the reassessment in 32 ITA Nos. 969/Del/2011 & 5458/Del/2013 Poltavsky-TPS Power Services Ltd.
question were held to be valid on the fact that the assessee claimed and was given relief under section 80HHA for the three preceding year which disentitled her for deduction under section 80HH for the assessment years 1992-93 and 1993-94.
3.27 In the case of Aquagel Chemicals P. Ltd. v. Asst. CIT, (2013) 353 ITR 131 (Guj), since there being sufficient material on record for the Assessing Officer to form a belief as regards the escapement of income in relation to the claim of depreciation in respect of the building of coal fire boiler, the reassessment was held to be valid. In the case of Convergys Customer Management v. Asst. DIT, (2013) 357 ITR 177 (Del), where there being prima facie material in the possession of the Assessing Officer to form a tentative belief that section 9(1)(i) held attracted, said reason by itself constituted a relevant ground to reopen the assessment of the assessee. Reference may also be made to i. Ajai Verma v. CIT [(2008) 304 ITR 30 (All)];
ii. Ashok Arora v. CIT [(2010) 321 ITR 171 (Del)];
iii. CIT v. Chandrasekhar BaLagopaL [(2010) 328 ITR 619 (Ker)]; iv. Jayaram Paper Mills Ltd. v. CIT [(2010) 321 ITR 56 (Mad)]; v. Kerala Financial Corporation v. Joint CIT [(2009) 308 ITR 434 (Ker)]; vi. Mavis Satcom Ltd. v. Deputy CIT [(2010) 325 ITR 428 (Mad)]; vii. CIT v. Madhya Bharat Energy Corporation Ltd. [(2011) 337 ITR 389 (Del)]; viii. Kone Elevator India P. Ltd. v. ITO [(2012) 340 ITR 454 (Mad)]; ix. Vijay Kumar Saboo v. Asst. CIT [(2012) 340 ITR 382 (Karn)]; x. Siemens Information Systems Ltd. v. Asst. CIT [(2012) 343 ITR 188 (Bom)]; 33 ITA Nos. 969/Del/2011 & 5458/Del/2013
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xi. I.P. Patel & Co. v. Deputy CIT [(2012) 346 ITR 207 (Guj)]; xii. Dishman Pharmaceuticals & Chemicals Ltd. v. Deputy CIT [(2012) 346 ITR 228 (Guj)];
xiii. Video Electronics Ltd. v. Joint CIT [(2013) 353 ITR 73 (Del)]; xiv. A G Group Corporation v. Harsh Prakash [(2013) 353 ITR 158 (Guj)]; xv. Inductotherm (India) P. Ltd. v. M. GopaLan, Deputy CIT [(2013) 356 ITR 481 (Guj)];
CIT v. Dhanalekshmi Bank Ltd. [(2013) 357 ITR 448 (Ker)]; xvi. Sitara Diamond Pvt. Ltd. v. ITO [(2013) 358 ITR 424 (Bom)]; xvii. Rayala Corporation P. Ltd. v. Asst. CIT [(2014) 363 ITR 630 (Mad)]. 3.28 So far as, the decision in the case of CIT vs Kelvinator of India Ltd. (2010) 320 ITR 561 (SC) is concerned, the Hon'ble Apex Court, while coming to a particular conclusion, only in a situation, when not a single piece of paper or document was recovered, therefore, the Hon'ble Court held that since there was no tangible material found and the addition was merely on the basis of statement only then reopening of assessment u/s 147 of the Act was not permissible. Likewise, in the case of CIT vs S. Khader Khan Son (2012) 254 CTR 228 (SC), affirming the decision of Madras High Court in (2008) 300 ITR 157 (Mad.), the whole addition was made solely on the basis of statement u/s 133A and no other material was found, in that situation, it was held that the such statement has no evidentiary value.
3.29 If the material available on record and the judicial pronouncements discussed hereinabove are kept in juxtaposition with the facts of the present appeal, we find that the Ld. Assessing Officer 34 ITA Nos. 969/Del/2011 & 5458/Del/2013 Poltavsky-TPS Power Services Ltd.
was genuinely of the view that income chargeable to tax has escaped assessment as the assessee could not prove the genuineness of the purchases. It is also noted that there was an information received from the State Sales Tax Department that the assessee made purchases from the parties who are not existing at the addresses and further notices issued u/s.133(6) were also returned back by the postal authorities with the remarks 'not known'. The Sales Tax Department has also declared these three parties as hawala dealers and the assessee could not adduce any evidence substantiating the purchases made from these parties. It is also noted that the Ld.AO also received information from the DGIT(Inv.) that a scam was unearthed by the Sales Tax Department regarding issue of Hawala bills/accommodation entries to reduce the tax liability and the assessee is one of the beneficiaries of bogus bills. Thus, the totality of facts available on record, clearly indicates that there was reasonable belief with the Assessing Officer that income chargeable to tax had escaped assessment. Thus, so far as reopening is concerned, in the light of foregoing discussion, we do not find any infirmity in the conclusion of the Ld. Commissioner of Income Tax (Appeal), thus, this ground of the assessee is devoid of any merit, consequently, dismissed the ground raised by the assessee and upheld the reopening of assessment to be valid.
35 ITA Nos. 969/Del/2011 & 5458/Del/2013
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4. So far as, merits of the case and consequent addition of Rs. 21,50,000/- as an unexplained addition u/s 68 of the Act is concerned. The facts in brief are that there was an information with the Ld. AO that the assessee has taken accommodation entry of Rs. 5 lakh from M/s FNS Consultancy P. Ltd. in the grab of share application money/share capital. It was further noted from the balance sheet of the assessee that share application money of Rs. 31.80 lakh was taken from various persons as mentioned in the asstt. order. As per the Ld. AO the assessee filed photocopy of confirmation from various parties, photocopies of affidavits, share application form and acknowledgment etc. As per the Revenue, the assessee failed to file confirmation of giving share application money, proof regarding creditworthiness including copy of bank account, PAN and ITR etc. The crux of the argument on behalf of the Revenue is that the share application money to the tune of Rs. 21.50 lacs remained an unexplained. The Ld. AO made the addition of Rs. 21,50,000/- u/s 68 of the Act. On appeal before the Ld. CIT(A) the addition so made was confirmed against which the assessee is in appeal before this Tribunal.
4.1 If the observation made in the asstt. order, conclusion drawn in the impugned order, material available on record and the assertions made by the Ld. Respective Counsel if kept in juxtaposition and 36 ITA Nos. 969/Del/2011 & 5458/Del/2013 Poltavsky-TPS Power Services Ltd.
analyzed, under the facts available on record, the party wise details of the share application, name of the parties, addresses and the amount received from them is summarized hereunder:
Name of the Party Address Amount (In Rs.)
M/s Umeshneh Securities A-35, Jain Nagar 3,00,000
P. Ltd. Extension, Kanjhawala
Road, New Delhi -
110081
Sh. Roop Kishor Gupta A-35/2, Jain Nagar 1,50,000
Extension, Kanjhawala
Road, New Delhi -
110081
M/s Nector Marketing A-35, Jain Nagar 2,00,000
Securities P. Ltd. Extension, Kanjhawala
Road, New Delhi -
110081
Sh. G.B. Gupta A-35, Jain Nagar 2,00,000
Extension, Kanjhawala
Road, New Delhi -
110081
rd
M/s Shrey Fin Cap Ltd. 1366/21, 3 Floor, 3,00,000
Naiwala, Karol Bagh,
New Delhi - 110005
M/s FNS Consultancy P. A-22A, New Four Storey, 5,00,000
Ltd. Tagore Garden Exten.,
New Delhi
rd
M/s Arushi Fin Cap Ltd. 1366/21, 3 Floor, 5,00,000
Naiwala, Karol Bagh,
New Delhi - 110005
TOTAL 21,50,000
4.2 In the light of the aforesaid summary/factual matrix, now we
shall analysis section 68 of the Act in which the addition has been made by the Ld. Assessing Officer, for ready reference, it is reproduced hereunder:
"68. Where any sum is found credited in the books of an assessee maintained for any previous year, and the assessee offers no explanation about the nature and source thereof or the explanation offered by him is not, in the opinion of the Assessing Officer, satisfactory, the sum so credited may be charged to income-tax as the income of the assessee of that previous year :
Provided that where the assessee is a company (not being a company in which the public are substantially interested), and the sum so credited consists of share application money, share capital, share premium or any such amount by 37 ITA Nos. 969/Del/2011 & 5458/Del/2013 Poltavsky-TPS Power Services Ltd.
whatever name called, any explanation offered by such assessee-company shall be deemed to be not satisfactory, unless--
(a) the person, being a resident in whose name such credit is recorded in the books of such company also offers an explanation about the nature and source of such sum so credited; and
(b) such explanation in the opinion of the Assessing Officer aforesaid has been found to be satisfactory:
Provided further that nothing contained in the first proviso shall apply if the person, in whose name the sum referred to therein is recorded, is a venture capital fund or a venture capital company as referred to in clause (23FB)of section 10." 4.3 If the aforesaid provision of the Act is analyzed, we are in agreement with the argument that as per section 68 of the Act, onus is upon the assessee to discharge the burden so cast upon. First burden is upon the assessee to satisfactorily explain the credit entry contained in his books of accounts. The burden has to be discharged with positive material (Oceanic Products Exporting Company vs CIT 241 ITR 497 (Kerala.). The legislature had laid down that in the absence of satisfactory explanation, the unexplained cash credit may be charged u/s 68 of the Act. Our view is fortified by the ratio laid down in Hon'ble Apex Court in P. Mohankala (2007) (291 ITR
278)(SC). A close reading of section 68 and 69 of the Act makes it clear that in the case of section 68, there should be credit entry in the books of account whereas in the case of 69 there may not be an entry in such books of account. The law is well settled, the onus of proving the source of a sum, found to be received/transacted by the assessee, is on him and where it is not satisfactorily explained, it is 38 ITA Nos. 969/Del/2011 & 5458/Del/2013 Poltavsky-TPS Power Services Ltd.
open to the Revenue to hold that it is income of the assessee and no further burden lies on the Revenue to show that income is from any other particular source. Where the assessee failed to prove satisfactorily the source and nature of such credit, the Revenue is free to make the addition. The principle laid down in Ganpati Mudaliar (1964) 53 ITR 623/A. Govinda Rajulu Mudaliar (34 ITR
807)(SC) and also CIT vs Durga Prasad More (72 ITR 807)(SC) are the landmark decisions. The ratio laid down therein are that if the explanation of the assessee is unsatisfactory, the amount can be treated as income of the assessee. The ratio laid down in Daulat Ram Rawatmal 87 ITR 349 (SC) further supports the case of the assessee. In the case of a cash entry, it is necessary for the assessee to prove not only the identity of the creditor but also the capacity of the creditor and genuineness of the transactions. The onus lies on the assessee, under the facts available on record. A harmonious construction of section 106 of the evidence Act and section 68 of the Income Tax Act will be that apart from establishing the identity of the creditor, the assessee must establish the genuineness of the transaction as well as the creditworthiness of the creditors. In CIT vs Korlay Trading Company Ltd. 232 ITR 820 (Cal.), it was held that mere mention of file number of creditor will not suffice and each entry has to be explained separately by the assessee (CIT 39 ITA Nos. 969/Del/2011 & 5458/Del/2013 Poltavsky-TPS Power Services Ltd.
vs R.S. Rathaore) 212 ITR 390 (Raj.). The Hon'ble Guwahati High Court in Nemi Chandra Kothari vs CIT (264 ITR 254)(Gau) held that transaction by cheques may not be always sacrosanct. In the present appeal, the assessee duly fulfilled the conditions enshrined u/s 69 of the Act and produced necessary evidence for its claim. 4.4 The ratio laid down in ACIT vs Rajeev Tandon 294 ITR (AT) 219 (Del.), which was confirmed by Hon'ble High Court , in 294 ITR 488, supports the case of the Revenue. Identical ratio was laid down in CIT vs Anil Kumar 392 ITR 552 (Del.), wherein it was held that mere identification of the donor and movement of gift through banking channel is not sufficient to prove the genuineness of gift. Now, in the light of the foregoing discussion, we shall examine the facts of the present appeal. The first requirement u/s 68 of the Act is that the assessee has to establish the identity of such share applicants. From the aforesaid chart, it is abundantly clear that the assessee has duly furnished the names of the parties, their addresses and the amount involved, therefore, so far as identity is concerned, the assessee has discharged its onus. The second requirement is with respect to genuineness and creditworthiness of such parties. The assessee received the share application money through banking channel is not in dispute. The addition was made by the Ld. AO and sustained by the Ld. CIT(A) is on the plea that the 40 ITA Nos. 969/Del/2011 & 5458/Del/2013 Poltavsky-TPS Power Services Ltd.
amount was deposited in the respective bank account and was withdrawn on the same day or at the earliest. However, we are of the view that no evidence has been brought on record by the Revenue that in fact cash was deposited by the assessee. The assessee duly filed the confirmation supported by affidavits from the concerned parties. If the Ld. AO was still not satisfied nothing prevented him to examine those parties. So far as the contention of the Ld. AO that such parties were having meager income, is concerned, the onus was upon such parties to explain the source of such deposits for which the assessee cannot be held liable. If the Ld. AO was still apprehensive about the source of such deposit in their respective account nothing prevented the Ld. AO to examine them and ask such parties to explain the source and if something malafide would have been found it could have been added in their respective hands and not in the hands of the present assessee. The Ld. CIT (A) observed that the deposit and immediate withdrawal of money throws doubt on the genuineness of the transaction. However, now question arises whether addition can be made merely on the basis of doubt, we are of the view that presumption and doubt cannot take the shape of evidence, however, strong it may be. Our view find support from the decision of Hon'ble Apex Court in Lovely Exports. It is noteworthy that while coming to this particular conclusion the Ld. CIT(A) has 41 ITA Nos. 969/Del/2011 & 5458/Del/2013 Poltavsky-TPS Power Services Ltd.
discussed the decision of the Indore Bench of the Tribunal in the case of M/s Aggarwal Coal Corporation P. Ltd., wherein it was observed that the case of Lovely Exports will be applicable only after identity of the share applicant is established. In that situation, the Bench took the decision because in the case of M/s Aggarwal Coal Corporation the Bench asked the assessee whether he can produce any of the promoters/directors before the AO. The assessee showed its inability to produce them. However, in the case of the present assessee the facts are all together different as the assessee duly furnished the identity alongwith their addresses (as summarized above), the money was subscribed through banking channel. An elaborate discussion was made by the Indore Bench of the Tribunal in the case of M/s Aggarwal Coal Corporation (supra) and one of us is signatory to the order. Totality of facts clearly indicates that the onus cast upon the assessee was duly discharged, therefore, the addition cannot be made merely on the basis of doubt, thus, on merit we find force in the appeal of the assessee, on the ground in hand, thus, we delete the addition so made by the Ld. AO and confirmed by the Ld. CIT(A). On this count, we allow the grounds raised by the assessee. Thus, this appeal of the assessee is partly allowed.
42 ITA Nos. 969/Del/2011 & 5458/Del/2013
Poltavsky-TPS Power Services Ltd.
Finally, the appeal of the Revenue (ITA No. 969/Del/2011) is dismissed, whereas the appeal of the assessee (ITA No. 5458/Del/2013) is partly allowed.
This order was pronounced in the open court, at the conclusion of the hearing, in the presence of Ld. DR on 09.04.2018.
Sd/- Sd/-
(P. MAHARISHI) (JOGINDER SINGH)
ACCOUNTANT MEMBER JUDICIAL MEMBER
Dated: 09.04.2018
*Kavita Arora
Copy forwarded to:
1. Appellant
2. Respondent
3. CIT
4. CIT(Appeals)
5. DR: ITAT
TRUE COPY
ASSISTANT REGISTRAR
ITAT NEW DELHI
This order was directly dictated on Computer to the P.S. Draft dictated on 05.04.2018 to 09.04.2018 Draft proposed & placed before 09.04.2018 the second member Draft discussed/approved by Second Member.
Approved Draft comes to the 12.04.18
Sr.PS/PS
Kept for pronouncement on 09.4.18
File sent to the Bench Clerk 12.04.18
Date on which file goes to the
AR
Date on which file goes to the
Head Clerk.
Date of dispatch of Order.
43