Income Tax Appellate Tribunal - Delhi
Hi- Tech Accurate Communication Pvt. ... vs Department Of Income Tax on 7 March, 2012
IN THE INCOME TAX APPELLATE TRIBUNAL
(DELHI BENCH 'C' NEW DELHI)
BEFORE SHRI R.P. TOLANI, JUDICIAL MEMBER
AND
SHRI T.S. KAPOOR, ACCOUNTANT MEMBER
I.T.A. No.1125/Del/2012
Assessment year : 2002-03
ITO, M/s Hi Tech Accurate
Ward-12 (4), Communication Pvt. Ltd.,
New Delhi. V. Plot No.490, Patparganj Indl. Area,
New Delhi.
AND
C.O. No. 107/Del/2012
In I.T.A. No.1125/Del/2012
Assessment year : 2002-03
M/s Hi Tech Accurate ITO,
Communication Pvt. Ltd., Ward-12 (4),
Patparganj Indl. Area, New Delhi.
New Delhi. V.
(Appellant) (Respondent)
PAN /GIR/No.AABCH
/GIR/No.AABCH-
AABCH-0096=F
Department by : Shri Umesh Chander Dubey, Sr. DR
Appelant by : Shri G.N. Gupta, Advocate.
ORDER
PER TS KAPOOR, AM:
This is an appeal filed by the revenue against the order of CIT(A), XXVIII, New Delhi dated 7.3.2012. The assessee has filed cross objection to the appeal vide memorandum of cross objection. These were heard together and therefore are being disposed off by a 2 ITA No1125 & CO. 107/Del/2012 common order. The grounds of appeals taken by the revenue and in the cross objection are as under:-
I.T.A. 1125/Del/2012 (Department's appeal):
1. Whether on the facts and circumstances of the case and in law, the Ld CIT(A) erred in deleting the addition of `.21.42 lakhs made by the Assessing Officer.
2. Whether on the facts and circumstances of the case and in law, the Ld CIT(A) has ignored the facts that the notices have been received by the assessee and proceedings were attended by the counsel of the assessee.
3. Whether on the facts and circumstances of the case and in law, the Ld CIT(A) has ignored the facts that the assessee has not submitted the details in response to various notices issued by the Assessing Officer.
4. Whether on the facts and circumstances of the case and in law, the Ld CIT(A) has erred in accepting the additional;
evidences as per provisions of Rule 46A (1) since this is not an exceptional case.
5. Whether on the facts and circumstances of the case and in law, the Ld CIT(A) has erred in relying upon the decision in the case of M/s Lovely Exports ignoring that the facts in the said case are essentially different in as much as in this case the assessee company is a private company and no member of the public participated.
3 ITA No1125 & CO. 107/Del/2012
6. Whether on the facts and the circumstances of the case and in law the Ld CIT(A) has ignored the fact that since the identity of the subscriber has not been established it will be impractical at this stage to go for other two criteria i.e. creditworthiness of the investor and the genuineness of transaction being, necessary ingredients required for invoking section 68 of the IT Act, 1961. The Hon'ble High Court while analyzing the decision in the case of CIT v., Stellar Investment Ltd. (2001) 251 ITR 263 (SC) has clearly enunciated that all the three ingredients of section 658 (viz identity and creditworthiness of the investor and genuineness of the transaction) have to be proved.
7. Whether on the facts and the circumstances and in law, the Ld CIT(A) has erred in stating that no opportunity to cross examination has been provided to the assessee company. The Hon'ble SC in the case of State of J&K v. Bakshi Gulam Mohd. AIR 1967 (SC) 122 and in the case of Nath International Sales v. UOI AIR 1992 Del 295 has held that the right of hearing does not include a right to cross examination.
8. The appellant craves leave to add, alter or amend any ground of appeal raised above at the time of hearing.
C.O. No. 107/Del/2012 (Assessee's appeal):
1. The CIT(A)-XXVIII, New Delhi has erred in holding that the Assessing Officer has rightly reopened the assessment u/s 147/148 of the Income Tax Act, 1961 .
4 ITA No1125 & CO. 107/Del/2012
2. The brief facts of the case are that the assessee filed a return of income on 31st October, 2002 declaring income of `.59,580/-.The case was reopen vide issuance of notice u/s 148 of the Act and re-
assessment was completed at `.22,01,580/- u/s 147/144 of the Act and the following additions were made:-
1. `.6,00,300/- On the basis of information from DIT (Inv.) that the assessee has received accommodation entries from one S/Shri Sanjay Kumar, Shree Ram Garg and Sushila Devi Garg for an amount of `.2,00,300/-, `.2,00,000/- and `.2,m00,000/-
respectively from the above persons.
2. `.3,00,070/- On account of share application money received from five persons as found from the reply filed vide this letter dated 27.11.2009.
3. `.7,75,500/- On account of increase in un-secured loans from share holders.
4. `.3,99,500/- On account of increase in un-secured loans from Director.
3. The re-assessment order was passed u/s 144 as according to Assessing Officer the assessee did not file detail to prove identity, genuineness and creditworthiness of alleged lenders despite many request. Aggrieved, the assessee filed appeal before ld CIT(A) and challenged the reopening of assessment u/s 147/148 of the Act by taking additional ground.
5 ITA No1125 & CO. 107/Del/2012
4. The Ld CIT(A) after hearing the submissions made by Ld AR accepted to admit the additional ground and additional evidence. However, while adjudicating on this ground, she dismissed the admitted ground of appeal. The operative part of CIT(A)'s order in this regard is reproduced below:-
"There is no dispute that the Assessing Officer acted on the basis of specific information provided by the Investigation Wing so there was a valid ground before the Assessing Officer to act on the information. This shows that the Assessing Officer assumed jurisdiction after careful consideration of facts and material on record."
5. Regarding merits of the case, the Ld AR submitted the following submissions:-
i) That loans were received by appellant through banking channel from directors, their wives and parents only and that all are income tax payees and has been filing returns since last year.
ii) That the identity of the lender is duly proved, they are income tax assessee and also either working as director or are father or mother or wife of director.
iii) That creditworthiness of lender is also proved as they had declared source of income and are filing income tax return.
iv) That the appellant had given interest on the amount of loan and had deducted TDS thereon.
6. After hearing the arguments of ld AR and after obtaining remand report from the Assessing Officer and after going through the 6 ITA No1125 & CO. 107/Del/2012 justification filed by the Ld. AR in respect of genuineness, creditworthiness of various lenders, the Ld CIT(A) deleted the addition made by the Assessing Officer in respect of increase in un-secured loans to the extent of `.11,69,000/-.
7. Regarding addition of `.9,73,000/- made by the Assessing Officer in respect of share application, the CIT(A) observed as under:-
"There is no dispute that the appellant had not furnished various documents in support of the share capital before the Assessing Officer during the assessment proceedings. The appellant had further requested that if the Assessing Officer had recorded any statement and there was adverse material he may be provided relevant details and right to cross examination of the concerned parties. It is seen that the appellant had furnished details in the form of additional evidence which was referred back to the Assessing Officer for remand report. However, the Assessing Officer neither examined them nor offered his comments on the same. The appellant has filed a list of the share holders and also various documents in support of share capital including assessment particulars and PAN.
In the case of CIT v. Divine Leasing and Finance Limited (2007) 158 Taxman 440) it has been held that if the relevant details of the address or PAN identity of the creditor are furnished to the Department it would constitute acceptable proof or acceptable explanation by the assessee. In this case the share applicants' existence is recognized as the company is in the records of the IT Department, since the appellant has submitted their PAN and also copies of Income tax records. The Hon'ble Supreme Court in 7 ITA No1125 & CO. 107/Del/2012 the case of CIT v. Lovely Exports Pvt. Limited 116 CTR 185 in its order dated 11.01.2008 has held as under:-
"Can the amount of share money be regarded as undisclosed income u/s 69 of the IT 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 share holders whose names are given to the Assessing Officer then the Department is free to proceed to reopen their individual assessments according with law. Hence, we find no infirmity with the impugned judgment."
The Hon'ble Delhi High Court in the case of CIT v. Value Capital Service Pvt. Ltd. 307 ITR 334 has held that even if the share applicant did not have the sources to make the investment the onus is on the revenue to show that such investment is emanated from the coffers of the assessee so as to enabnle it to be treated as the undisclosed income of the assessee. Relying on the various documents placed on record and the principle laid down by the Hon'ble SC in the case of M/s Lovely Exports Pvt. Ltd. which is directly on the issue of share capital, the addition on account of share capital cannot be sustained. The Assessing Officer has no where proved that documents in support of the identity of the share holders have not been placed on record and they were forged documents. In view of the discussions made above the addition of `.9,73,000/- is deleted."
8. Aggrieved the revenue is in appeal against the above deletions of `.21,42,000/- being `.11,69,000/- unsecured loans and `.9,73,000/-
8 ITA No1125 & CO. 107/Del/2012 share capital and assessee has filed cross objection in so far as on the point that Ld CIT(A) erred in holding that Assessing Officer has rightly reopened the assessment u/s 147/148 of the Income Tax Act, 1961.
9. The Ld AR argued that Assessing Officer had not applied his mind while issuing notice u/s 147/148 of the Act. In this respect he took us to page 2 of assessment order wherein he invited our attention to date of entry with respect to first entry which was dated 26th March, 2001 and which he argued related to assessment year 2001-02 and not 2002-03.
10. The Ld AR further argued that the assessee had no bank account with Punjab National Bank or Jai Lakshmi Bank. He also took us to page 177 of paper book where balance sheet of the company as on 31.3.2002 was placed. He invited our attention to the fact that there was net increase in share capital to the extent of `.5.70,000/- only and not `.9,73,000/- as alleged and added back by the Assessing Officer. In view of the above fact, Ld AR argued that notices u/s 147/148 were issued without application of mind and therefore entire re-assessment is bad in law.
11. The Ld DR relied on the order of Ld CIT(A) regarding reopening of the case.
12. We have heard the rival submissions of both the parties and have gone through the material available on record. We have observed that the Ld CIT(A) had admitted additional ground of appeal on the request of assessee and she has extensively dealt with this matter regarding powers and limitation of Assessing Officer with respect to provisions of section 147/148 of the Act. Though Assessing Officer had 9 ITA No1125 & CO. 107/Del/2012 made 2-3 mistakes while framing re-assessment order yet, there was sufficient material before Assessing Officer for initiation of proceedings u/s 147/148. The report of DIT (Inv.) is a primary source of evidence for initiating proceedings u/s 147/148 of the Act and the Assessing Officer had rightly initiated re-assessment proceedings. Therefore, we do not see any reason to interfere in the decision of Ld CIT(A). Hence, the cross objection filed by the assessee is dismissed.
13. Now regarding Department's appeal with respect to deletions made by Ld CIT(A). The Ld Dr argued that despite various requests, the assessee had not filed documents with Assessing Officer, therefore, ld CIT(A) should not have accepted the additional evidence. He further argued that the case of the assessee is squarely covered by the Nova Promoters reported in 342 ITR 169, and therefore he argued that order of ld CIT(A) be reversed and that of Assessing Officer be upheld.
14. The Ld AR, on the other hand, argued that in the interest of justice if Ld CIT(A) during appellate proceedings wants some additional information/document he can call it as per provisions of Rule 46A. Therefore, ld CIT(A) had rightly accepted the additional evidence. He further argued that additional evidence was admitted only after calling remand report from the Assessing Officer. Regarding merits of the case the Ld AR argued that assessee had received only `.5,70,000/- as share application money whereas the Assessing Officer had made addition of `.9,73,000/-. He took us to page 177 of paper book where he invited our attention to the fact that the difference between the share capital of 31.3.2001 and 31.1.2002 is only `.5,70,000/- and not `.9,73,000/-. He further argued that all amounts of share application money were received through A/c payee cheques and invited our attention to pages 5-31 of paper book wherein copies of affidavits, 10 ITA No1125 & CO. 107/Del/2012 applicant's request for shares, copies of cheques issued by applicant and copies of bank account of applicant were placed.
15. Regarding addition on account of fresh un-secured loans, the Ld AR argued that during appellate proceedings each and every detail including PAN number, copies of income tax returns and copies of pass book showing transactions were filed with Ld CIT(A). He further argued that loans were taken from directors and their close relatives only and interest on loans were provided after deduction of tax thereon. In this respect he took us to page 32 of paper book, where consolidated chart of un-secured loans along with their addresses, PAN numbers etc. were placed. He also took us to pages 33 to 81 of paper book wherein supporting documents such as Income tax returns, copies of pass book of lenders were placed.
16. We have heard the rival submissions of both the parties and have gone through the material available on record. From the various arguments of Ld AR and from relevant pages of paper book, we find that assessee has completed his part of duty as he had proved before Ld CIT(A) all the three ingredients viz identity of lenders, creditworthiness of lenders/share holders and genuineness of transactions. The ratio laid down in the case of Nova Promoters reported in 342 ITR 169 as relied upon by the Ld DR cannot be applied in this case as in the case of Nova Promoters (supra). There were statements recorded from persons confirming the facts that the assessee had obtained accommodation entries. In the present case no statements were recorded and in fact the assessee has filed necessary documents to prove the genuineness of transactions, identity of investors and creditworthiness of investors. In view of this, we are of 11 ITA No1125 & CO. 107/Del/2012 the opinion that Ld CIT(A) has rightly deleted the addition. Therefore, we do not see any reason to interfere in the order of ld CIT(A).
17. In the result, the appeal of the revenue and cross objection filed by the assessee are dismissed.
18. Order pronounced in the open court on the Ist day of June, 2012.
Sd/- Sd/-
(R.P. TOLANI) (T.S. KAPOOR)
JUDICIAL MEMBER ACCOUNTANT MEMBER
Dt.1.6.2012.
HMS
Copy forwarded to:-
1. The appellant
2. The respondent
3. The CIT
4. The CIT (A)-, New Delhi.
5. The DR, ITAT, Loknayak Bhawan, Khan Market, New Delhi.
True copy.
By Order
(ITAT, New Delhi).
Date of hearing 3.5.2012
Date of Dictation 28.5.2012
Date of Typing 28.5.2012
Date of order signed by
both the Members & 1.6.2012
12 ITA No1125 & CO. 107/Del/2012
pronouncement.
Date of order sent to the
Bench concerned. 1.6.2012