Income Tax Appellate Tribunal - Delhi
Ito, Ward- 6(4), New Delhi vs Creative Techno Solutions Pvt. Ltd., ... on 10 October, 2023
1
ITA No. 4265/Del/2017
IN THE INCOME TAX APPELLATE TRIBUNAL
DELHI BENCH "B": NEW DELHI
BEFORE SHRI KUL BHARAT, JUDICIAL MEMBER
AND
SHRI PRADIP KUMAR KEDIA, ACCOUNTANT MEMBER
ITA No. 4265/DEL/2017
Assessment Year: 2012-13
Income-tax Officer, Vs M/s Creative Techno Solutions
Ward-6(4), New Delhi. Pvt. Ltd.,
Pocket 8-A, Hosue No. 1,
Manave Chowk, Sector-15,
Rohini, New Delhi-110088
PAN- AACCC7550N
APPELLANT RESPONDENT
Assessee represented by None
Department represented by Sh. Vivek Kumar Upadhyav, Sr. DR
Date of hearing 05.10.2023
Date of pronouncement 10.10.2023
ORDER
PER KUL BHARAT, JM:
This appeal, by the Revenue, is directed against the order of the learned Commissioner of Income-tax (Appeals)-2, New Delhi, dated 23.02.2017, pertaining to the assessment year 2012-13. The Revenue has raised following grounds of appeal:
"1. Whether on the facts and in the circumstances of the case and in law, the Ld. CIT(A) has erred in deleting the addition made u/s 68 of the Act 2 ITA No. 4265/Del/2017 amounting to Rs.3,00,00,000/- received by the assessee company as unexplained cash credit in the garb of share application money/premium.
2. Whether on the facts and in the circumstances of the case and in law, the Ld. CIT(A) has failed to prove the identity, genuineness and creditworthiness of the transactions as per judgment of Hon'ble Delhi High Court in case of M/s. Nova Promoters and Finlease Pvt. Ltd. where it was held that mere filing of PAN No., acknowledgment of ITRs, Bank Account Statements of the applicants was not sufficient to discharge the onus.
3. Whether on the facts and in the circumstances of the case and in law, the Ld. C1T(A) has earned in accepting the creditworthiness and genuineness of transactions merely on the basis that transaction were through banking channel or by account payee instruments but it did not reflect their actual genuine business activities.
4. Whether on the facts and in the circumstances of the case and in law, the Ld. C1T (A) did not notice that the share subscribers did not have its own profit making apparatus. It merely rotated money, which was coming through the bank accounts. The bank accounts did not reflect their creditworthiness of transaction
5. The appellant craves leave for reserving the right to amend, modify, alter, add or forego any ground(s) of appeal at any time before or during the hearing of this appeal."
2. Facts, in brief, are that the assessee is a company and filed its return of income through electronic mode on 30.09.2012. Thereafter the case was selected for scrutiny assessment. In response to the notice, the authorized representative of the assessee attended the proceedings. During the course of assessment proceedings the AO noticed that the authorized share capital of the assessee company for the year under consideration was Rs. 40,00,000/-. No fixed assets were acquired during the year. Share capital and share premium received by the 3 ITA No. 4265/Del/2017 assessee company had been appropriated to loans and advances paid to other companies. The AO noticed that assessee had received share capital/share premium from seven parties valuing Rs. 3,00,00,000/-. During the course of assessment the AO conducted inquiry through Income-tax Inspector who reported that such entity did not exist at the given address. The AO further noticed that the assessee failed to produce the investors who invested in the assessee company. On the basis of material available on record the AO proceeded to make addition of Rs. 3,00,00,000/- u/s 68 of the Income-tax Act, 1961, hereinafter referred to as the "Act". Feeling aggrieved, the assessee preferred appeal before the learned CIT(A), who deleted the addition. Now the Revenue is in appeal before this Tribunal.
3. At the time of hearing no one attended the proceedings on behalf of the assessee. It is seen from the record that one Shri Narender Abrol had been attending the proceedings and sought adjournment on behalf of the assessee. However, it is seen from the record that the person who was appearing has not placed on record the power of attorney by the assessee, authorizing him to appear before this Tribunal. Under these facts the appeal is taken up for hearing in the absence of the assessee and is being decided on the basis of material available on record.
4ITA No. 4265/Del/2017
4. Apropos to the grounds of appeal, learned DR vehemently argued that the learned CIT(A) was not justified in deleting the addition. He contended that learned CIT(A) did not provide sufficient opportunity to the assessing authority for rebutting the submissions of the assessee. Moreover, the learned CIT(A) without verifying the correctness of the claim of the assessee proceeded to delete the addition, which is unjustified.
5. We have heard learned DR and perused the material available on record. We find that the learned CIT(A) has deleted the addition, inter alia, by observing as under:
"4.1.6 I have carefully considered the facts of the case in the light of the submissions made by the appellant and the applicable judgments in this regard. I am inclined to agree with the arguments and evidences provided by the appellant to substantiate that the transactions regarding share application money received by it were genuine transactions. The seven subscriber companies from whom share application money/share premium aggregating to Rs.3.00,00.000/- was received by the appellant during the year are all live companies (as per company master data pertaining to them produced by the appellant), having Permanent Account Numbers (PANs) and had filed their Income Tax returns. Copies of their bank statements were also produced during assessment and appellate stages. They also replied to the notices u/s 133 (6) of the I.T. Act issued by the A.O. All the aforementioned facts establish the existence/identities of the share applicants. The share applicants had filed their returns of income and although the returned incomes were not substantial, their balance sheets reflect that they had high net worth so as to be able to invest in the 5 ITA No. 4265/Del/2017 appellant company. The creditworthiness of the share applicant parties is therefore not in doubt. As regards the genuineness of the transactions, perusal of the bank statements of the share subscribers reveals that all the transactions were through banking channels and that there was no deposit of cash in the bank accounts of the appellant before issue of funds in favour of the appellant company. The aforesaid establishes the genuineness of the transactions. Once these evidences in respect of the three ingredients of section 68 were before the A.O., the initial onus, which lay on the appellant, shifted to the Assessing Officer and in order to make the impugned addition, what was required of him was to place material on record to controvert the claim of the appellant or to discredit the evidences produced by the appellant. However, no such thing has been done by the A.O. The A.O. has observed that enquiries by the ITI of his office revealed that the share applicant companies were not present at the given addresses but it is not clear from the order whether this fact was confronted to the appellant and also how replies to notices u/s 133 (6) sent by the A.O. were received from the share subscriber companies. It has also been observed by the A.O. in para 3.6 of the impugned order that in some cases share capital/share premium was not received through banking channel. Copies of the bank statements (which were filed at the assessment and appellate stages) reflect each and every transaction of subscription to share capital of the appellant company by the seven companies in question and therefore this observation of the Assessing Officer is factually incorrect. I do not find any evidence collected by the A.O. which could prove that the transactions in question were not genuine or that the share application money/share premium received by the appellant during the year was its own undisclosed income. Mere fact of non-production of directors of the share applicants also cannot be held against the appellant in the light of judicial pronouncements including CIT vs. Orissa Corporation Pvt. Ltd., [1986] 159 1TR 78 (SC), In view of the aforesaid discussion, I delete the addition of Rs. 3,00,00,000/- made by the A.O. u s 68 of the Act. Grounds nos. 3 & 4 of the appeal are allowed."6 ITA No. 4265/Del/2017
5.1 However, the AO in the assessment order made the addition, inter alia, by observing as under:
"4.3 The present case of the assessee company presents the same set of circumstances. Despite being accorded sufficient opportunities to present its case, the assessee company did not present the concerned investors which has resulted into restricting the scope of enquiries which could have been undertaken at this end. By not discharging its onus as cast upon it by section 68, the assessee company has hampered the assessment proceedings. Perhaps the assessee company was aware of the fact that if any investigations are to be carried out then the real facts would emerge and the genuineness of the transactions would be revealed.
4.4 Further it is concluded that since it is known fact that various companies and group of companies are involved in financial manipulation and providing accommodation entries. In the present case also circumstances indicate that the assessee has not having any adequate financial creditabilitv as per the return filed by the assessee. The assessee has also not discharged the onus of establishing the identity, genuineness and creditworthiness of the parties and also appears to be involved in financial manipulations.
4.5 In view of above facts and the non cooperation of the assessee company and considering the facts that although share capital , share premium was received through banking channel but assessee has failed to prove the identity, genuineness and creditworthiness of the parties. I hereby treat the same as unexplained cash credit u s 68 of the I.T. Act. 1961 and accordingly an addition of Rs.3.00.00.000'- is hereby added to the income of the assessee company on totally failure in discharging its onus as laid down in the provision of the Section 68 of the Income tax Act, 1961. I am also satisfied that the assessee has furnished inaccurate particulars thereby concealing the particulars of its income and rendering itself liable for initiation of penalty proceedings u/s 291(1)(c) read with section 274 of the I.T. Act, 1961. The same is being initiated separately."
5.2 We observe that certain pertinent points were not addressed by CIT(A) viz.
(i) purpose of such large investment by the subscribers in a private company where 7 ITA No. 4265/Del/2017 the potential to earn income in immediate future looks quite grim; (ii) the subscriber companies were not found traceable on the addresses made available;
(iii) the concerned investors were not presented before AO to elicit information on the reasons for such investment despite negligible income of their own and near lack of fund flow; and (iv) financial credibility of subscribers under serious doubt.
5.3 The CIT(A) has decided the issue in haste and in an abrupt manner without seeking any remand report. No enquiries appears to have been made by CIT(A) himself either as desirable in exercise of coterminous and co-extensive powers on such crucial points. The CIT(A) has readily accepted the plea of the assessee on discharge of onus overlooking vital aspects. Needless to say, the powers of CIT(A) are wide enough to include the power to examine all matters covered the assessment order and even to correct the assessment in respect of all such matters to the prejudice of the assessee. In the instant case, the CIT(A) has rather not addressed itself on the points raised by the AO.
5.4 We, therefore, looking to the totality of facts and material placed before us, are of the view that the learned CIT(A) ought to have verified the correctness of the claim of the assessee and adverted to the objections raised by the AO. Hence, the impugned order of the learned CIT(A) is set aside and the matter is restored to the file of learned CIT(A) to decide the appeal of the assessee afresh, after making 8 ITA No. 4265/Del/2017 necessary verification about the genuineness of transactions and creditworthiness of investors. Grounds raised by the Revenue are allowed for statistical purposes.
6. In the result, appeal of the Revenue stands allowed for statistical purposes. Order pronounced in open court on 10th October, 2023.
Sd/- Sd/-
(PRADIP KUMAR KEDIA) (KUL BHARAT)
ACCOUNTANT MEMBER JUDICIAL MEMBER
*MP*
Copy forwarded to:
1. Appellant
2. Respondent
3. CIT
4. CIT(Appeals)
5. DR: ITAT
ASSISTANT REGISTRAR
ITAT, NEW DELHI
Draft dictated 05.10.2023
Draft placed before author 05.10.2023
Approved Draft comes to the Sr. PS/PS
Order signed and pronounced on
File comes to P.S.
File sent to the Bench Clerk
Date on which file goes to the AR
Date on which file goes to the Head Clerk
Date of dispatch of Order
Date of uploading on the website