Income Tax Appellate Tribunal - Delhi
Acit, Ghaziabad vs M/S. Mona Advertising & Marketing Pvt. ... on 25 May, 2018
IN THE INCOME TAX APPELLATE TRIBUNAL
(DELHI BENCH 'E' : NEW DELHI)
BEFORE HON'BLE PRESIDENT, SHRI G.D. AGRAWAL
and
SHRI KULDIP SINGH, JUDICIAL MEMBER
ITA No.3324/Del./2012
(ASSESSMENT YEAR : 2003-04)
ITA No.3325/Del./2012
(ASSESSMENT YEAR : 2004-05)
ITA No.3326/Del./2012
(ASSESSMENT YEAR : 2005-06)
ITA No.3327/Del./2012
(ASSESSMENT YEAR : 2006-07)
ITA No.3328/Del./2012
(ASSESSMENT YEAR : 2007-08)
ITA No.3329/Del./2012
(ASSESSMENT YEAR : 2008-09)
ITA No.3330/Del./2012
(ASSESSMENT YEAR : 2009-10)
ACIT, Central Circle, vs. M/s. Mona Advertising & Marketing Pvt. Ltd.,
Ghaziabad. 3522/3, Narang Colony, Tri Nagar,
New Delhi - 110 035.
(PAN : AAACM1663L)
(APPELLANT) (RESPONDENT)
ASSESSEE BY : Shri C.S. Aggarwal, Senior Advocate
Shri Ravi Pratap Mall, Advocate
REVENUE BY : Ms. Deepika Mittal, CIT DR
Date of Hearing : 22.05.2018
Date of Order : 25.05.2018
2 ITA No.3324 to 3330/Del./2014
ORDER
PER BENCH :
Since common questions of facts and law have been raised in the aforesaid appeals, the same are being disposed of by way of consolidated order to avoid repetition of discussion.
2. This is second round of litigation. Coordinate Bench of the Tribunal vide order dated 29.10.2014 in the first round of litigation dismissed the appeals filed by the Revenue who has carried the matter before the Hon'ble Delhi High Court by way of filing the appeal bearing ITA 982/2015 and the Hon'ble High Court vide order dated 21.12.2015, available at pages 781 & 782 of the paper book, set aside the order passed by the Tribunal and remanded the same back to the Tribunal for fresh determination in terms of the decision passed by the Hon'ble High Court in ITA No.727/2015 in Pr. Commissioner of Income-tax-06 vs. Matchless Glass Services Pvt. Ltd. order dated 18.12.2015, available at pages 783 to 805 of the paper book.
3. Since the facts and issue raised in the aforesaid appeals are identical, the facts of ITA No.3324/Del/2012 for AY 2003-04 are taken up to decide all the aforesaid appeals by way of consolidated order.
3 ITA No.3324 to 3330/Del./2014
4. The appellant, M/s. Mona Advertising & Marketing Pvt. Ltd., (hereinafter referred to as 'the assessee') by filing the present appeals, sought to set aside the impugned orders all dated 14.03.2012 passed by Ld. CIT (Appeals), Meerut on the identical grounds except the difference in the amount. For the sake of brevity, grounds taken in ITA No.3324/Del/2014 are reproduced, that :-
"1. That Ld. CIT (A) has erred in law and on facts in deleting the addition of Rs.21,78,753/- made as unexplained cash credit u/s 68 of the IT Act, 1961, without appreciating the fact that the assessee could not prove with satisfactory details the source of the cash credits found in the assessee's account, and thus rendering the provisions of section 68 redundant.
2. That Ld. CIT (A) has erred in Jaw and on facts in deleting the addition of Rs.21,78,753/- made as unexplained cash credit u/s 68 of the IT Act, 1961 and directing the A.O. to assess the aforesaid cash credit in the hands of the respective beneficiaries on substantive basis; without appreciating the fact that the cash credits were found in the books of account of the assessee company not in the books of account of the respective beneficiaries, and were not satisfactory explained by the assessee.
3. That Ld. CIT (A) has erred in law and on facts In deleting the addition of Rs.21,78,753/- made as unexplained cash credit u/s 68 of the IT Act, 1961, without appreciating the fact that the A.O. was lawfully justified in treating the cash credit found in the assessee's books of account to be the undisclosed income of the assessee company, as the explanation offered by the assessee was not found to be satisfactory in the opinion of the Assessing Officer.4 ITA No.3324 to 3330/Del./2014
4. That Ld. CIT (A) has erred in law and on facts in allowing assessee's appeal on merit, without considering the fact that the addition of Rs.21,78,753/- made u/s 68 of the IT Act in the case of the assessee company was as a consequence of failure of the assessee to satisfactorily explain source of the credits in the bank account even after being given various opportunities during the course of assessment proceedings.
5. That Ld. CIT (A) has erred in law and on facts in allowing assessee's appeal on merit and directing the AO to make protective addition in the hands of assessee company, instead of substantive addition without appreciating the fact that the onus of proving the source of credits in the assessee's account was on the assessee which it did not discharge during the course of assessment proceedings.
6. That Ld. CIT (A) has erred in law and on facts in applying the ratio of decision of Hon'ble Supreme Court in the case of Smt. Tara Devi Agrawal Vs. CIT [1972] 88-ITR-323 [SC], even when this income was assessable in the hands of the assessee company as per provisions of section 68 of the IT Act, 1961.
7. That the order of the Ld. CIT (A) deserves to be vacated and the assessment order passed by the A.O. be restore."
5. Briefly stated the facts necessary for adjudication of the controversy at hand are : search and seizure operation was conducted on 14.10.2008 on the premises of the assessee with regard to the share capital contribution provided to SVP Group of concerns but no books of account or any document pertaining to assessee company was found or seized in this case nor it was found 5 ITA No.3324 to 3330/Del./2014 operating form the address which has been declared as its registered office which is a Janta Flat for residential purposes. On the basis of material seized from the premises of SVP group concerns qua investment of shares through cash, proceedings under section 153C of the Income-tax Act, 1961 (for short 'the Act') were initiated in respect of 12 companies mentioned in the Table-II given in the assessment order. From the documents brought on record by the assessee as well as Revenue, AO came to the conclusion that there existed a nexus between shareholders and the SVP Group initially having value of Rs.81.19 crores which have been bought back at cheaper rate of Rs.10.38 crores i.e. at an average rate of Rs.1.04 per share. AO further came to the conclusion that the assessee company and the companies mentioned in Table-I, II & III are not genuine investors of SVP Group. Managing Director of the company, Vijay Jindal has given vague reply during recording of statement u/s 132 (4) of the Act. So, in the absence of incomplete details filed, all the credit entries appearing in the bank statement has been treated as unexplained credit u/s 68 of the Act for want of satisfactory details furnished by the assessee despite availing numerous opportunities. AO proceeded to assess the total income of the assessee at Rs.21,64,462/-, Rs.26,61,762/-, Rs.90,87,621/-, Rs.49,94,260/-, 6 ITA No.3324 to 3330/Del./2014 Rs.49,93,340/-, Rs.49,93,550/- & Rs.49,93,515/- for AYs 2003-04, 2004-05, 2005-06, 2006-07, 2007-08, 2008-09 & 2009-10 respectively.
6. Assessee carried the matter by way of appeals before the ld. CIT (A) who has deleted the substantive additions in the hands of the assessee but directed to add the same on protective basis in all the aforesaid appeals. Feeling aggrieved, the Revenue has approached the Tribunal by way of filing the appeals and these appeals were dismissed. Needless to say that Hon'ble High Court vide order dated 21.12.2015 set aside the order passed by the Tribunal by remanding the case back to the Tribunal.
7. We have heard the ld. Authorized Representatives of the parties to the appeal, gone through the documents relied upon and orders passed by the revenue authorities below in the light of the facts and circumstances of the case.
8. Undisputedly, assessee's cases belonged to Table-I category of shareholders which is reproduced as under for ready perusal :-
"Accordingly the following 20 companies were also covered u/s 132 of the I.T. Act 1961 many of which were located at the same address as per the IT records.
TABLE - I
SL. NAME ADDRESS
NO
1 Broad Traders & Finances Pvt. Ltd. B-4/71A,
Lawrence Road,
Keshav Puram
Delhi- 35
7 ITA No.3324 to 3330/Del./2014
2 Busy Trading & Finances Pvt. Ltd. -do-
3 Virtuoso Tech Consultant Pvt. Ltd. -do-
4 Rainbow Powder Coaters Pvt. Ltd. -do-
5 Cyrus Information Services Pvt. Ltd. -do-
6 Matchless Glass & Services Pvt. Ltd. -do-
7 Nazar Trading Pvt. Ltd. -do-
8 Mona Advertising & Marketing Pvt. Ltd. L-119 Shastri
Nagar Delhi-52
9 Chitransh Software & Marketing Pvt. Ltd. -do-
10 Bedreck Estates & Properties Pvt. Ltd L-132 Shastri
Nagar Delhi-52
11 Solo Mio Manufacturing Pvt. Ltd. -do-
12 Lajree Spinning & Weaving Pvt. Ltd. -do-
13 Twinkle Steels Pvt. Ltd -do-
14 Legend Promoters Pvt. Ltd. A-2/58B,
Lawrence Road,
Keshav Puram,
Delhi
15 Noble Mercantile Pvt. Ltd -do-
16 Pranjul Overseas Pvt. Ltd. -do-
17 X-Ray Rims & Advertising Pvt. Ltd . -do-
18 Diana Builders & Contractors Pvt. Ltd. -do-
19 Wellset Pharmaceuticals & Drugs Pvt. Ltd. -do-
20 Yugant Travels Pvt. Ltd. L-119, Shastri
Nagar, Delhi-52
9. Hon'ble High Court in order dated 21.12.2015 vide which present appeals have been remanded has held that this set of appeals of the assessees stands covered by decision dated 18.12.2015 rendered by Hon'ble High Court in ITA No.727/2015 in Pr. Commissioner of Income-tax-06 vs. Matchless Glass Services Pvt. Ltd..
10. Since undisputedly the present appeals are covered by the decision rendered by Hon'ble High Court in Pr. Commissioner of Income-tax-06 vs. Matchless Glass Services Pvt. Ltd. (supra) case which was also remanded to the Tribunal and the Tribunal in its 8 ITA No.3324 to 3330/Del./2014 wisdom has decided the same vide ITA Nos. 3122 to 3127/Del/2013 order dated 27.02.2017 by setting aside the same to AO to decide afresh.
11. In the backdrop of the aforesaid facts and circumstances of the case, we would like to refer to the operative part of the decision rendered by Hon'ble High Court in Pr. Commissioner of Income-
tax-06 vs. Matchless Glass Services Pvt. Ltd. (supra) case which is reproduced as under for ready perusal :-
"24. In the aforesaid circumstances, the only issue that needs to be examined is whether the findings of the ITAT are in consonance with the settled law relating to Section 68 of the Act. A perusal of the order passed by the ITAT, insofar as the present Assessee is concerned, indicates that the appeals filed by the Revenue in respect of the Assessee were not taken up for hearing in view of the statement made by the parties that the facts and the issues involved were identical to that in the case of Pranjul Overseas (P) Ltd. Thus, it is apparent that the ITAT did not examine whether the Assessee had established the identity, genuineness of the transaction and the creditworthiness of the persons from whom the Assessee claimed that it had received the funds used by the Assessee for purchasing shares of other companies. The AO also could not examine the explanation of the Assessee during the assessment proceedings since at that stage the Assessee had not provided the necessary evidence to establish the identity of the persons as well as the genuineness of the transactions relating to the credit entries in its books. The AO had, therefore, held that the Assessee had failed to provide the necessary material and had not cooperated in the assessment proceedings. He had, accordingly, made additions under Section 68 of the Act as indicated hereinbefore. The Assessee had assailed the assessment orders, inter alia, on the ground that it had not been provided a reasonable opportunity to furnish the necessary evidence during the assessment proceedings. Before CIT(A), this ground was stoutly disputed by the AO and according to him the Assessee had been provided several opportunities but had failed to comply with the notices and questionnaires issued relating in the additions made by the AO. However, the grievance of the Assessee was allayed as CIT(A) gave sufficient opportunities to the Assessee, during the appellate 9 ITA No.3324 to 3330/Del./2014 proceedings, to produce the relevant material in support of the credit entries in its books of accounts.
25. The documents filed by the Assessee before the CIT(A) have not been filed in these proceedings except in ITA 362/2015, which relates to the AY 2003-04. A perusal of the documents filed by the Assessee indicates that the Assessee had filed affidavits of several persons who claimed to have made large cash payments to the Assessee as share application money for allotment of shares. It is seen that one Vijay Kumar, Director of M/s Chyris Information Management Services (P) Ltd. had filed an affidavit affirming that M/s Chyris Information Management Services (P) Ltd. had made a cash payment of Rs.6 lacs to the Assessee. The registered office of the said company was affirmed as B-4/71A, Lawrence Road, Delhi, which was the same as the registered office of the Assessee Company. A similar affidavit was filed by one Manoj Kumar in his capacity as a Director of M/s Lawrence Distributors (P) Ltd. affirming that Lawrence Distributors (P) Ltd. had made a cash payment of Rs.5 lacson 6th November, 2006 as share application money to the Assessee. The registered office of Lawrence Distributors (P) Ltd. was also shown as B-4/71A, Lawrence Road, Delhi. Vijay Kumar affirmed another affidavit as a Director of Sharwan Advertising (P) Ltd. affirming that the said company had paid Rs.5 lacs in cash to the Assessee as share application money. The registered office of Sharwan Advertising (P) Ltd. was also reflected at B-4/71A, Lawrence Road, Delhi-35. One Ghanshyam Dass who was a Director of the Assessee Company at the material time, also furnished affidavits on behalf of the M/s Broad Traders & Finances Pvt. Ltd, M/s Busy Traders and Finances Pvt. Ltd. and Aggarwal Plasto Chem Pvt. Ltd. affirming that the said companies had made cash payments of Rs.5 lacs each to the Assessee Company as share application money. It is also relevant to note that the registered office of all the three said companies was reflected at B-4/71A, Lawrence Road, Delhi. Mr Ghanshyam Dass and Vijay Kumar also affirmed affidavits in their individual capacity of having made large cash payments to the Assessee Company. In addition to the above, one Jasoud Singh and one Manoj Kumar also affirmed affidavits of having made cash payments of Rs.5 lacs each to the Assessee Company as share application money. The affidavits also affirmed them to be residents of B-4/71A, Lawrence Road, Delhi. During the course of the proceedings before us, we pointedly asked Mr Aggarwal whether it was disputed that B-4/71A, Lawrence Road, Delhi was a Janta Flat and, if so, how was it possible that it housed several residents as well as offices of several companies. While it was not disputed that B-4/71A, Lawrence Road, Delhi which is the registered office of the Assessee was a residential Janta Flat, Mr Aggarwal stressed that it was not unusual for offices to be located in residential buildings and it was also not unusual for a 10 ITA No.3324 to 3330/Del./2014 single dwelling unit to be used as a registered office for several companies.
26. We are unable to accept that such affidavits as filed before the CIT(A) could have been accepted to establish the genuineness of the transaction or the creditworthiness of the investors. More so, when the AO had noted that during the search, no office was found to exist at the address and one Bhajarang Bahadur Dubey who was a resident of the said address had also stated that he had not heard of the Assessee Company. The fact that a common address is shared by several companies may not be a ground to doubt the identity or the creditworthiness of the companies; however in the given facts there are several factors, which viewed cumulatively, clearly provide a good reason to doubt the veracity of the Assessee's claims. The address is that of a Janta flat which is normally used as residence by persons of limited means; the said address is also stated to be residential address of several individuals, who are ostensibly not related to each other; large payments have been made in cash; shares are stated to have been subscribed at a premium even though the Assessee company has no track record and for two years (out of six years in question) did not even have a bank account; and even though the Assessee company has not made significant profits, does not employ any qualified personnel (its expense on salary and wages is insignificant) and has not made any investment in traded securities yet it has attracted large subscriptions to its share capital. These factors are required to be considered for ascertaining whether the Assessee has established the creditworthiness of the persons who are stated to have made payments to the Assessee as well as to the genuineness of the transactions.
27. At this stage, we must also observe that the stand of the Revenue is somewhat unclear; while the Revenue is contending that the Assessee is liable to pay tax on the amount credited in its books as under Section 68 of the Act. It is also deleted the amount invested by the Assessee in shares of SVP Group companies on the ground that the Assessee is only a conduit. The AO has been influenced by the fact that several companies who had subscribed to share capital of SVP Group aggregating a sum of Rs.85,48,50,000/- out of which shares subscribed/purchased at an aggregate value of Rs. 81,19,32,000/- had subsequently been sold/transferred to other SVP concerns/promoters for a sum of Rs.10,38,65,200/-. Resultantly, the shareholders of SVP group had acquired shares corresponding to funds of Rs.81,19,32,000/- infused in SVP Group of companies for an aggregate consideration of Rs.10,38,65,200/-. Thus, acquiring hidden capital of 70,80,66,800/- without payment of corresponding taxes required to generate that wealth. This fact had led the AO to believe that all the companies that had 11 ITA No.3324 to 3330/Del./2014 subscribed to the share capital of core SVP Group companies and had subsequently transferred them at a fraction of the value, had acted as a conduit for routing the money generated by SVP operational companies by charging 'on money' on booking of flats. Although, the transactions at such scale definitely give rise to suspicion that money generated by SVP Group has been re- routed, the same cannot be established as a fact without other relevant evidence. Thus, the AO cannot be faulted for proceeding on a hypothesis that the funds invested into SVP Group by the Assessee and other such companies were cash funds generated by SVP Group that had been routed through companies such as the Assessee. However, AO needed evidence to establish the hypothesis and without any material to establish the link between the source of funds received by the Assessee Company (and such other companies) and the investee companies of SVP Group, it was not permissible for the AO to hold that the Assessee had acted as a conduit. There was no material before the AO which would establish that the funds received by the SVP Group were cash funds generated by the SVP Group and, therefore, the question of deleting any alleged unexplained credit on account of the funds invested with the SVP Group did not arise. In the circumstances, the only issue that could be examined by the AO and the CIT(A) was whether the Assessee had explained the sources of the credit entries in its books. It cannot be disputed that the fact; (a) that the Assessee's registered office was located at a Janta Flat occupied by the persons belonging to lower middle class; (b) that no commercial activity was found at the registered office of the company; (c) that several persons/companies which the Assessee claimed had paid funds to the Assessee for acquiring its share capital or for purchase of shares of other companies held by the Assessee were also stated to be located/residents of the same Janta Flat, it was also the registered office of the Assessee Company; (d) that a large amount of payments received by the Assessee were in cash; (e) that the Assessee did not have a bank account in two years, would certainly be relevant factors in determining whether the credit entries in the books of the Assessee were genuine and from creditworthy sources. However, it was for the fact-finding authorities to finally examine the evidence on record and determine whether the Assessee could satisfactorily explain the credit entry in its books and could establish the genuineness of the transactions claimed to have been entered into by it. Clearly, the ITAT has not examined the facts relating to the Assessee. The ITAT had simply proceeded on the basis of the facts obtaining in the case of Pranjul Overseas(P) Ltd. on the statement of the parties that the facts of that case were similar to the facts in the case of the Assessee. However, an examination of the documents filed before us, it does not appear that the facts in the case of Pranjul Overseas (P) Ltd. were similar to that as obtaining in the present case. While it appears that in the case of 12 ITA No.3324 to 3330/Del./2014 Pranjul Overseas (P) Ltd., the Assessee disputed that any search took place at its registered office, the written submissions filed by the Assessee in this case, does not indicate that any such dispute was raised. Even before us it has not been contended that no search took place at the declared registered office of the Assessee.
28. In the circumstances, we find it is necessary to remand the matter to the Tribunal to examine the facts relevant to the Assessee for determining whether an addition under Section 68A of the Act was sustainable. Needless to mention that it would also be open for the ITAT to remand the matter for further enquiries if it is so considered necessary.
29. Before concluding, it would be necessary for us to observe that it is not open for the Assessee to challenge the validity of the search under Section 132 of the Act or the assumption of jurisdiction under Section 153A of the Act, as those issues had not been pressed by the Assessee before the ITAT. Mr Aggarwal's contention that since in the case of Pranjul Overseas (P) Ltd., the ITAT had held that no addition could be made under Section 153A of the Act as no incriminating material had been found and the search was also not valid, the findings of ITAT in that case would also enure to the benefit of the Assessee.
In our view, the aforesaid contentions cannot be entertained as the Assessee had, concededly, not pressed the legal issues under Section 153A of the Act which was expressly recorded by the ITAT in its order. In the circumstances, notwithstanding the ITAT's findings in the appeals relating to Pranjul Overseas (P) Ltd., it is not open for the Assessee to contend that its challenge to the maintainability of the proceedings has been upheld. On the contrary, it is now no longer open for the Assessee to even raise that challenge.
30. Question (i) is decided in favour of the Revenue and against the Assessee. These appeals are remanded to the ITAT to decide afresh after considering the facts relevant to the Assessee."
12. When we examine the findings returned by AO in the light of the decision rendered by Hon'ble High Court in Pr. Commissioner of Income-tax-06 vs. Matchless Glass Services Pvt. Ltd. (supra) case, it has come on record that the AO has proceeded to decide the issue in controversy on the basis of material collected 13 ITA No.3324 to 3330/Del./2014 during search and seizure operation at the premises of SVP Group as well as on the basis of statement recorded u/s 132 (4) of the Act by specifically recording that, "in the absence of incomplete details filed, all the credit entries appearing in the bank statement are treated as unexplained credits u/s 68 of the IT Act, as no satisfactory details whatsoever has been furnished despite several opportunities provided to assessee."
13. So, the assessee has failed to render necessary evidence so as to establish the identity of the persons as well as genuineness of the transaction relating to credit entries in the books. In the Pr. Commissioner of Income-tax-06 vs. Matchless Glass Services Pvt. Ltd. (supra) case, assessee also raised this specific plea before the Hon'ble High Court that he has not been provided with reasonable opportunity to lead necessary evidence during assessment proceedings and this fact has come on record from the assessment order itself.
13. Moreover, Revenue has specifically brought on record that assessee has failed to establish that assessee company is operating from given address, L-119, Shastri Nagar, Delhi, which is a Janta Flat. No display board with name of the company is there and one Sachin Garg available there stated that it is a residential house and neither he or nor his family members have any business connection 14 ITA No.3324 to 3330/Del./2014 with Mona Advertising & Marketing Private Ltd.. So, this fact has also not been displaced by the assessee before AO by bringing on record any evidence.
14. In the given circumstances, as has been held by Hon'ble High Court in Pr. Commissioner of Income-tax-06 vs. Matchless Glass Services Pvt. Ltd. (supra) case, AO and CIT (A) was required to examine whether the assessee has explained the source of credit entries in its books. Particularly in the face of the fact that assessee's registered office is located at Janta Flat being used for residential purposes where no commercial activities were found. So, all these facts are required to be examined and decided afresh by the AO on perusing the evidences of the assessee, if any, on record or to be brought on record. Hon'ble High Court has also held that it is not open to the assessee to challenge the validity of search u/s 132 of the Act or the assumption of jurisdiction u/s 153A of the Act as this legal issue was not pressed by the assessee before the Tribunal.
15. In view of what has been discussed above and the fact that when undisputedly this case is covered by Pr. Commissioner of Income-tax-06 vs. Matchless Glass Services Pvt. Ltd. (supra) case having identical issues as has been held by Hon'ble High Court in ITA 982/2015 vide order dated 21.12.2015 and the said case was 15 ITA No.3324 to 3330/Del./2014 remanded to the Tribunal and the coordinate Bench of the Tribunal heard the case on merits and vide order dated 27.02.2017 remanded the same back to AO to decide afresh on merits. Consequently, all the aforesaid appeals filed by the Revenue are set aside to the file of the AO to decide afresh so as to examine cash credits in the form of share capital and premium or as to sale of shares by providing an opportunity of being heard to the assessee to discharge the initial onus in order to prove the identity, creditworthiness and genuineness of the transaction as required u/s 68 of the Act. Hence, all the appeals are allowed for statistical purposes.
Order pronounced in open court on this 25th day of May, 2018.
Sd/- sd/-
(G.D. AGRAWAL) (KULDIP SINGH)
PRESIDENT JUDICIAL MEMBER
Dated the 25th day of May, 2018
TS
Copy forwarded to:
1.Appellant
2.Respondent
3.CIT
4.CIT(A), Meerut.
5.CIT(ITAT), New Delhi. AR, ITAT
NEW DELHI.