Gopi Pvt. Ltd., New Delhi vs Department Of Income Tax

Delhi dated 19.4.2011 in appeal no. 297/2009-10 for AY 2002-03. 2 ITA NO. 3320/ Del/2011

2. The revenue has raised following grounds in this appeal :-

1. On the facts and circumstances of the case the CIT(A) has erred in deleting the addition of Rs. 20,02,2000/- on account of unexplained credits u/s 68 of the I.T.Act. Ignoring the following fate :-

(v) All companies from whom the assessee received share application money are providers of accommodation entries.

(vi) All companies (accommodation entries providers) first deposited cash of the same amount in their bank accounts and then issued cheques to the assessee.

(vii) In their statements the accommodation entries providers have categorically stated that when they provided cheques in lieu of cash to the assessee, they also signed same paper, which were handed over to these beneficiaries and these paper might be confirmation deeds or gifts etc.

(viii) The accommodation entires providers have given statements under oath to the income Tax authorities that they are entry providers and have received cash from beneficiaries before issuing cheques.

2. On the facts and circumstances of the case, the CIT(A) has failed to appreciate that facts of this case are clearly distinguishable from that of Lovely Exports and therefore, the judgment of the Apex Court is not applicable to the facts of this case."

3. Briefly stated the facts of this appeal are that the assessee filed

return of income on 29.10.2002 declaring the income of Rs. 55,703/-

and assessment was framed u/s 143(1) of the Income Tax Act, 1961

(for short the Act) on 9.1.2003. Subsequently, proceedings u/s

147/148 of the act were initiated against the assessee in the wake of

specific information received from the Investigation Wing of the

department vide DIT ( Investigation), New Delhi, letter no. 1322 and 3 ITA NO. 3320/ Del/2011

letter no. 1536 dated 5.2.2007, wherein it was reported to the AO that

the assessee company was a beneficiary of accommodation entries

which had generalized its unaccounted money in the garb of share

application money in lieu of cash paid by the beneficiary to the entries

providers. The AO opened the assessment and finalized re-

assessment order by making addition of Rs. 20,02,000/- u/s 68 of the

Act. The aggrieved assessee preferred an appeal before CIT(A) it was

allowed by passing of the impugned order and entire addition was

deleted by following the decision of Hon'ble Supreme Court in the case

of CIT Vs. Lovely Exports Pvt. Ltd. 2008, 216 CTR 195 (SC). Now the

aggrieved revenue is before this Tribunal in this 2nd appeal with the

grounds as reproduced hereinbefore.

4. The Ld. Departmental Representative (DR) submitted that the

CIT(A) has erred in deleting the addition made by the AO on account

of unexplained credits u/s 68 of the Act by the including certain glaring

facts that all companies from whom the assessee received share

application money are accommodation entry providers and as per

Modus Oprendi adopted by them, the entry providers deposited cash

of the same amount in their bank accounts and then issued cheque to

the assessee and at the same time they also signed same papers 4 ITA NO. 3320/ Del/2011

which were handed over to the beneficiaries and these papers were

confirmation deeds and other fabricated documents to support the

bogus transaction. The Ld. DR, further, contended that before the

investigation wing the accommodation entry providers have given

statements under oath that they are entry providers and have received

cash from the beneficiaries before issuing cheques. The Ld. DR

strenuously contended that the First Appellate Authority has failed to

appreciate that the present case is clearly distinguishable from the

facts of the case of Lovely Exports Pvt. Ltd. (Supra) and therefore this

judgment of Hon'ble apex Court is not applicable to the present case.

The Ld. DR finally submitted that the impugned order may be set aside

by restoring that of the AO.

5. The Ld. DR also placed reliance on the decision of Hon'ble High

Court of Delhi in the case of CIT Vs. Empire buildtac Pvt. Ltd. dated

27.1.2014 in ITA No. 493/2013.

6. The Ld. Counsel of the assessee replied that the assessing

officer opened the assessment on the fake information of Investigation

Wing. The Ld. Counse, further, pointed out that the assessee

submitted before the AO that the assessee has not received any share

application money from Sh. Nitin Kumar and M/s Acoot India Pvt. Ltd. 5 ITA NO. 3320/ Del/2011

and the assessee received share application money from M/s Blizm

Metal Pvt. Ltd. Rs. 2,00,000/- and M/s Amba Alloys Pvt. Ltd. Rs.

4,00,000/- to account payee cheque. Ld. Counsel also pointed out that

the assessee filed written submissions letter dated 13.09.2009 before

AO, wherein the assessee expressed its inability to filed current IT

particulars and to present these parties and persons. The Ld. Counsel

further pointed out that the AO did not exercise powers available to

him u/s 131 & 133(6) of the act. The Ld. Counsel vehemently

contended that the AO was not right in discarding the confirmations

and other relevant evidence filed by the assessee and in simply relying

on statements of alleged entry providers which were recorded on the

back of assessee. The Ld. Counsel supporting the impugned order

submitted that the CIT(A) rectified all the mistakes committed by the

AO and properly considered relevant evidence of the assessee which

clearly show that the transactions were genuine and the assessing

officer without examining the same simply proceeded to reject the

explanation and evidence of the assessee. The Ld. Counsel finally

submitted that the CIT(A) was quite justified in following the decision of

Hon'ble Supreme Court in the case of CIT Vs. Lovely Export Pvt. Ltd. 6 ITA NO. 3320/ Del/2011

(supra) and the case of present assessee is squarely covered vide this

decision and hence impugned order may kindly be upheld.

7. On careful consideration and above submissions and available

material placed on record, we note that during the assessment

proceedings the assessee pointed out that the assessee has not

received any share application money from Shri Nitin Kumar and M/s

Acoot India Pvt. Ltd. appearing in serial no. 3 and 5 in the double given

in the reasons recorded by the AO. The assessee further, clarified that

instead of above two entities the assessee actually received share

application money from M/s Bliz Pvt. Ltd. and M/s Amba Pvt. Ltd. From

last para at page 3 , we also note that the assessee expressed his

inability to file current IT particulars and to present directors or officers

of alleged entities in person. Thereafter the assessing officer

proceeded to exercise powers available to him u/s 133(6) of the act

which act and received copies of the bank accounts which revealed

that all the applicants were deposited cash of same amount of which

cheque was given to the assessee company. Further, AO doubted the

genuineness and creditworthiness of the amount credits and held that

confirmation filed by the assessee does not prove genuineness and

creditworthiness of the shareholders. At the same time, the AO relied 7 ITA NO. 3320/ Del/2011

on the statements of the entry providers recorded by the Investigation

Wing of the department and went on to held that the assessee got the

confirmation from these entry providers at the time of receiving credits

of the share application money and in fact no real transaction were

took place.

8. From the operative part of the impugned order, we note that the

CIT(A) granted relief by following decision of Hon'ble Apex Court Vs.

CIT(A) Vs. Lovely Export Pvt. Ltd. (supra) by holding as under :

"5.1 It is observed that the Assessing Officer has made the addition u/s 68 of the Act on account of share capital as above, primarily in view of the information received from the office of the DIT (Inv.), New Delhi, that the assessee company was a beneficiary of accommodation entries, based ont eh statement of certain person that he was involved in the business of providing accommodation entries. This, however, cannot be taken as a sufficient ground for making such addition in the absence of any further evidence brought on record.

5.2. The appellant on the other hand has furnished all the relevant details in this regard during the course of the assessment proceedings as well as in the appellate proceedings, which have been placed on record. 5.3. At the outset, it has been submitted that the order has been passed by the Assessing Officer without bringing any material on record in support of his contention. The Assessing Officer has not conducted any enquiry from his own side to verify the transactions stated in the report of Investigation Wing, either from the books of account of the assessee or from the subscribers. Therefore, he has failed to discharge the statutory duty cast upon him as laid down by higher judicial authorities for examining the issue u/s 68 of the Act. On the other hand, the assessee has discharged its 8 ITA NO. 3320/ Del/2011

onus fully as cast by section 68 of the Act, with respect to identity of subscribers, genuineness of the transactions and creditworthiness of the subscribers to share capital, by disclosing all the material facts truly and correctly and produced/ filed the following details during the course of the assessment proceedings with respect to its subscribers to share capital :-

- Name and address of subscribers as registered with the company along with complete detail of investments.

- Changed address as available with Registrar of Companies.

- Certificate of incorporation along with copy of Memorandum of Association

- Permanent Account no. along with copy of return of income

- Confirmation / affidavit.

- Copy of Resolution passed by the subscriber company authorizing its director to invest in shares of the assessee company

- Share Application Form

- Detail of Shares along with copy of Share Certificates

- Status as per ROC Record

- Copy of bank statement with credit entry of amount received.

It is further submitted that all the investing companies were incorporated many years back."

In view of observations of the AO as well as CIT(A) we clearly note

that the AO noted that the assessee expressed its inability to

produce copies of IT Return and director or of Officer of the

company which provided or contributed share application money

and the CIT(A) in para 5.2 at page 16 observes that the assessee

has furnished all the relevant details during the course of

assessment proceedings and granted relief by relying of decision of

Hon'ble Apex Court in the case of Lovely Exports (Supra). Hence, 9 ITA NO. 3320/ Del/2011

we are unable to satisfy ourselves as to whether the assessee

discharged its onus before AO to prove the identity of the third party

or contributor which made payment, its creditworthyness and

genuineness of the transaction on casted upon the assessee to

escape from addition u/s 68 of the Act to presume that the onus is

thus shifted to the Revenue to controvered explanation and

supporting evidence and material filed by the assessee while

discharging its onus as required as per ratio of the recent decision

dated 19.02.2015 of Hon'ble High Court of Delhi in the case of CIT

Vs. M/s Jasampark Advertising and Marketing (P) Ltd. in ITA No.

525/2014.

Therefore, in view of contrary observations of the Authorities

below we are inclined to hold that the authorities below have not

adjudicated the issue as per provisions of the Act and as per ratio of

the decision of Hon'ble Supreme Court in case of Lovely Exports

(supra) and decision of Hon'ble High Court of Delhi in the case of

M/s Jansampark (Supra), hence, sole issue require verification and

examination atht end of the AO. Therefore, the sole issue is restored

to the file of the AO for proper of adjudication after affording due

opportunity of hearing for the assessee and without being prejudiced 10 ITA NO. 3320/ Del/2011

from earlier orders and by following provisions of the Act and the

ratio of the decisions on this issue including ratio of the decision as

respectfully noted above. Therefore, ground no. 1 & 2 of the

Revenue are deemed to be allowed for statistical purposes.

In the result, appeal of the Revenue is deemed to be allowed as

indicated above.

Order pronounced in open court on 26th March, 2015.

Sd/- Sd/- (R.S.SYAL) (C.M.Garg) Accountant Member Judicial Member

Dated 26th March, 2015 B.Rukhaiyar

Copy forwarded to 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT (A) 5. CIT (ITAT), New Delhi. By order

AR, ITAT New Delhi 11 ITA NO. 3320/ Del/2011

Sl. Description Date No.

1. Date of dictation by the Author 19-25.03. 2015

2. Draft placed before the Dictating 25.03.2015 Member

3. Draft placed before the Second Member

4. Draft approved by the Second Member

5. Date of approved order comes to the Sr. PS

6. Date of pronouncement of order

7. Date of file sent to the Bench Clerk

8. Date on which file goes to the Head Clerk

9. Date of dispatch of order