Income Tax Appellate Tribunal - Delhi
Ito, New Delhi vs M/S. Royal Finvest Pvt. Ltd., New Delhi on 30 August, 2017
IN THE INCOME TAX APPELLATE TRIBUNAL
DELHI BENCH 'F' NEW DELHI
BEFORE SHRI G.D. AGRAWAL, HON'BLE PRESIDENT
AND
SHRI SUDHANSHU SRIVASTAVA, JUDICIAL MEMBER
ITA No. 1060/Del/2010
AY: 2006-07
Income Tax Officer, vs Royal Finvest Pvt. Ltd.,
Ward -15(4), Room No. 487/95, Peera Garhi,
223, Rohtak Road,
C.R. Building, I.P. estate, New Delhi-110087
New Delhi. (PAN: AAACR6437M)
Appellant by: Shri Atiq Ahmad, Sr. DR
Respondent by: None
Date of Hearing 04.07.2017
Date of pronouncement
ORDER
PER SUDHANSHU SRIVASTAVA, JUDICIAL MEMBER
This appeal has been filed by the Revenue against the order of the ld. CIT(A)-XVIII, New Delhi dated 24.12.2009 and pertains to assessment year 2006-07.
2. Brief facts of the case are that the return was filed declaring taxable income of Rs. 1,05,441/- after initially processing the appeals u/s 143(1) of the Income Tax Act, 1961 (hereinafter referred to as the Act). The case was subsequently selected for scrutiny. During the course of assessment proceedings, the I.T.A. No. 1060/Del/2010 Assessment Year :2006-07 Assessing Officer observed that the assessee had received share application money amounting to Rs. 85 lakh as under:- 1 SI. No. Party name PAN [Cheque/DDNo Amount
1. M/s Changia Steel Pvt Ltd. AABCC0706 H DD No.094059 dated 4,00,0007- 20.06.2005
2. Division Trading Pvt. Ltd AABCD2582Q DD No.094062dated 5,00,0007- 20.06.2005
3. Garg Finvest Pvf. Ltd AMCG3754E DD No. 093807 dated 7,00,000/-
11,05,2005 4 Garg Infine Pvt. Ltd MACG4449G DD No.093806 and DD Total No.094060 dated 14.02,2006 11,00,0007-
5. Kesari Industrial Lab Pvt, AAACK8837C fDD No. 093959 dated* 13,00,0007-
Ltd. 07.06.2005and DD
No.859976 dated 14.02.2006
6, Kesari Lab Electronics Pvt AACCK3115F 093676 dated DD No.093958 10,00,0007-
Ltd. dated 07.06.2005
7. Meghdoot Express Pvf. MACM8555F DD No.094061 dated 13,00,0007-
Ltd. 20.06.2005 DD No.859978
dated 14.02.2006
8. Nisnant Rnvest Pvt. Ltd. AMCf\J2824IM DD No. 874920 dated 12,00,0007-
03.06,2005 DD No,371462
dated MO.02.2006
__ J
9. Sekhawanti Finvest Pvt. AABCS5S86Q DD No.371461 dated 6,00,0007-
Ltd. 10.02.2006
10 V.R. Traders Pvt. Ltd. AABCV6114A DD No. 874921 dated 4,00,0007-
03.06,200503.06.2005
3. The Assessing Officer issued notices to all the share applicants at the addresses provided by the assessee. However, all the said notices were received back in the income tax office. Subsequently, the assessee was asked to furnish reply to a 2 I.T.A. No. 1060/Del/2010 Assessment Year :2006-07 detailed questionnaire and also to prove the genuineness, identity and creditworthiness of the share application money transaction. The Assessing Officer was directed to produce the Managing Director of the companies who had given the share application money. The assessee in response submitted copies of ITRs, copies of balance sheets of the share applicants. However, the Assessing Officer proceeded to add the amount of Rs. 85 lakh as unexplained cash credit u/s 68 of the Act. Further, the Assessing Officer also made an addition of Rs. 13.50 lakh being cash deposits in the bank account of the assessee company with Bank of India.
4. Aggrieved, the assessee preferred an appeal before the ld. CIT(A) who deleted both the additions and now, the department has approached the ITAT and has challenged the deletion of Rs. 85 lakh deleted by the ld. CIT(A). The grounds of appeal read as under:-
"1. That on the facts and circumstances of the case and in law the Ld.CIT(A) erred in deleting the addition of Rs. 85,00.000/- made on account of share application money u/s 68 of the Income Tax Act. 1961.
2. That on the facts and circumstances of the case as well as in law. the Ld. C1T(A) erred in ignoring the fact that the judgment of the Supreme Court in the case of Lovely Exports (P) Ltd. 216 CTR 199(SC) cannot be extended to a situation where 3 I.T.A. No. 1060/Del/2010 Assessment Year :2006-07 a mechanism has been formed to introduce unaccounted money in the books of accounts with the help of accommodation entry providers, which has been exposed by deep and detailed investigation carried out by the Investigation wing of the Department.
3. That the C1T(A) has erred in applying the judgment of the Hon'ble Supreme Court in the case of M/s Lovely Exports (P) Ltd. 216 CTR 199 (SC) which is not applicable where the share application is not received in a Public Issue.
4. The appellant craves to be allowed to add, delete or amend any other grounds of appeal."
5. Ld. Sr. DR appearing for the department placed reliance on the order of the Assessing Officer and vehemently argued that the assessee had only filed copies of the ITRs and the balance sheets of the share applicants but had failed to produce the Managing Directors even after being specifically directed by the Assessing Officer. He further submitted that by merely filing the confirmatory letters and the relevant particulars, the assessee had not discharged the onus.
6. None appeared for the assessee.
7. We have heard the Ld. Sr. DR and have also perused the records. We find from the order of the Ld. CIT(A) that Ld. CIT(A) has given a finding that the share application money was received through demand draft and the relevant details regarding the same were furnished during the course of assessment 4 I.T.A. No. 1060/Del/2010 Assessment Year :2006-07 proceedings. Ld. CIT(A) has also noted that the assessee had filed the PAN Nos. of the share applicants along with the copy of ITRs, audited balance sheets, Memorandum and Articles of Association and also a copy of the applicant companies muster. He has also noted that the assessee had produced copies of share certificates issued to the investor companies as well as copies of Form no. 2 filed with the Registrar of Companies. Ld. CIT(A) noted that the Managing Directors and the bank statements of the investor companies could not be produced by the assessee. Thereafter, the Ld. CIT(A) has adjudicated the issue in para 6 of the impugned order which is being reproduced hereinunder for a ready reference:-
"6. I have carefully considered the assessment order as well as the submissions made by the Id. AR. From the facts as discussed above, I find that the appellant has furnished all relevant documents in support of its claim of having received the share application money from the 10 companies. It is established judicial position that in the matter of cash credit, the initial onus lies on the assessee to prove the genuineness of the transaction along with the Identity of the lender/investor and his creditworthiness. Having done so, the appellant in the instant case has discharged the onus cast upon it. Beyond this, for the charge of unexplained cash credit to stick, the onus lies on the AO to disprove the claim of the assessee by establishing that the evidence filed by the assessee was false and by bringing new material on record, which I find the AO has failed to do in this case. Further, I find that the Apex Court 5 I.T.A. No. 1060/Del/2010 Assessment Year :2006-07 in CIT v Lovely Exports (P) Ltd. (2008) 216 CTR 195 held that the even if the share application money received by the appellant company is from alleged bogus shareholder, whose identity is produced by the appellant company, the revenue can always proceed against such shareholders and if necessary reopen their individual assessment. Following the aforesaid decision, the Hon'ble Mumbai High Court in the recent judgement in the case of CIT v Creative World Telifilms Ltd. (order dated 12.10.2009 in ITA(L) no. 2182 of 2009) has held as under:
"The question sought to be raised in the appeal was also raised before the Tribunal and the Tribunal was pleased to follow the judgement of the Apex Court in the case of CIT vs. Lovely Exports (P) Ltd. reported in (2008) 216 CTR 195 (SC) wherein the Apex Court observed that if the share application money is received by the assessee company from alleged bogus shareholders, whose names are given to the assessing officer, then the department can always proceed against them and if necessary reopen their individual assessments. In the case in hand, it is not disputed that the assessee has given the details of name and address of the shareholders, their PA/GIR number and had also given the cheque number, name of the bank. It was expected on the part of the assessing officer to make proper investigation and reach the shareholders. The assessing officer did nothing except issuing summons which was ultimately returned back with an endorsement 'not tenable'. In our considered view, the assessing officer ought to have found out their details through PAN Card, Bank Account details or from their bankers so as to reach the shareholders since all the relevant material details and particulars were given by the assessee to the assessing officer. In the above circumstances, the view taken by the Tribunal cannot be faulted. No substantial question of law is involved in the appeal. In the result, the appeal is dismissed in limine with no order as to costs. "
Similar decision has also been taken by the Hon'ble Chatisgarh High Court in ACIT vs Venkateshwar Ispat Pvt. Ltd. (2009) 319 ITR 393. In view of the factual and legal 6 I.T.A. No. 1060/Del/2010 Assessment Year :2006-07 position as discussed above and respectfully following the aforecited decision of the Hon'ble Apex Court and High Courts, I am of the opinion that the addition of Rs. 85,00,000/- made by the AO u/s 68 cannot be sustained. The same is, therefore, deleted."
8. A perusal of the above reveals that the Ld. CIT(A) has accepted the assessee as having discharged the initial onus after due consideration of the facts as well as the established judicial precedents. The Ld. CIT(A) has followed the ratio of the judgment of the Hon'ble Apex Court in CIT vs Lovely Exports Pvt. Ltd. reported in 216 CTR 195 which we find has been correctly relied upon. We agree with the adjudication of the Ld. CIT(A) that once the initial onus cast upon by the assessee regarding the genuineness, creditworthiness and identity has been discharged by the assessee, the onus shifts to the department to disprove the claim of the assessee by cogent evidence to the contrary. Therefore, we find no reason to interfere with the findings of the Ld. CIT(A) and respectfully following the ratio of the Ld. Apex Corut in the case of CIT vs Lovely Exports (supra), we uphold the orders of the Ld. CIT(A) and dismiss the grounds raised by the department.
9. In the result, the appeal of the department stands dismissed.
7 I.T.A. No. 1060/Del/2010 Assessment Year :2006-07 Order pronounced in the Open Court on 30th August, 2017.
Sd/- Sd/-
(G.D. AGRAWAL) (SUDHANSHU SRIVASTAVA)
PRESIDENT JUDICIAL MEMBER
DT. 30th AUGUST 2017
'GS'
Copy forwarded to:-
1. Appellant
2. Respondent
3. CIT(A)
4. CIT
5. DR
By Order
Asstt. Registrar
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