Oswal Pumps Pvt. Ltd., Delhi vs Assessee

M/s. Oswal Pumps Pvt. Ltd., vs. ITO, Ward 13 (4), C - 5/2A, Rana Pratap Bagh, New Delhi. Opp. CC Colony, Delhi - 110 005.

(PAN : AAACO6417C)

(APPELLANT) (RESPONDENT)

ASSESSEE BY : Shri Ved Jain, CA and Shri V.M. Chaurasiya, Advocate REVENUE BY : Shri P. Dam Kanunjha, Senior DR

Date of Hearing : 24.02.2015 Date of Pronouncement : 31.03.2015

ORDER

PER B.C. MEENA, ACCOUNTANT MEMBER :

The appeal filed by the assessee emanates from the order of the CIT

(Appeals)-XVI, Delhi dated 22.01.2013.

2. In this case, the original return of income was filed on 29.10.2004

declaring income of Rs.58,120/-. A notice u/s 148 of the Income-tax Act, 1961

was issued on 25.03.2011. The assessment u/s 147/143(3) was finalized on

26.12.2011 at an income of Rs.62,71,870/-. The action of the Assessing Officer 2 ITA No.1480/Del./2013

has been affirmed by the CIT (A). Now the assessee is in appeal by taking the

following grounds of appeal :-

"1. On the facts and circumstances of the case, the order passed by the learned Commissioner of Income Tax (Appeals) [CIT(A)] is bad, both in the eye of law and on the facts.

2. On the facts and circumstances of the case, the learned CIT(A) has erred both on facts and in law in rejecting the contention of the assessee that the initiation of the reassessment proceedings and the reassessment order are bad both on facts and in law and liable to be quashed as the statutory conditions and procedure prescribed under the statute have not been complied with.

3. On the facts and circumstances of the case, the learned CIT(A) has erred both on facts and in law in rejecting the contention of the assessee that the reassessment order passed by the A.O. is bad and liable to be quashed as the same has been reopened on the basis of the reasons which are vague and has been recorded without application of mind on the part of the A.O.

4. On the facts and circumstances of the case, the learned CIT(A) has erred both on facts and in law in rejecting the contention of the assessee that the order passed by the learned A.O. is bad and liable to be quashed being barred by limitation since the reasons recorded were provided to the assessee after a period of six years from the end of relevant assessment year.

5 (i) On the facts and circumstances of the case, the learned CIT(A) has erred both on facts & in law in confirming the addition of Rs.62, 13,750/- on account of share capital and share application money received by the assessee.

(ii) On the facts and circumstances of the case, the learned CIT(A) has erred both on facts and in law in confirming the above addition despite the assessee bringing all material and evidences on record to prove the identity, genuineness of the share applicants.

6. That the above-said additions are otherwise untenable in the eye of law, having been made on the basis of the material collected at the back of the assessee and without providing copy of the same & providing opportunity to rebut the same.

3 ITA No.1480/Del./2013 7. The appellant craves leave to add, amend or alter any of the grounds of appeal."

3. Ground Nos.1, 6 & 7 are general in nature and do not require any

adjudication.

4. In the ground nos.2, 3 & 4, the assessee is challenging the upholding of

the action of the Assessing Officer for reopening of the assessment.

5. We have heard both the sides on the issue. The notice u/s 148 issued on

25.03.2011 was duly served on the assessee well within the limitation prescribed

by the Act. The assessee has responded to the notice and submitted that return

filed earlier should be treated as the return filed u/s 147 and the copy of the said

return was also enclosed. The assessee has sought copy of reasons recorded u/s

147. The assessee company was provided reasons for reopening vide letter dated

28.09.2011 and these objections were disposed off by an order dated

02.09.2011. Therefore, in our considered view, there are no legal and procedural

lacunae in the re-assessment proceedings. This reopening was based on the

information received from the Investigation Wing of the Income-tax Department

with regard to the beneficiary of accommodation entries. Considering all these

aspects, we find no merits in the ground nos.2 to 4 of the appeal which are

dismissed accordingly.

6. In the ground nos.5(i) & (ii), the assessee has challenged the addition of

Rs.62,13,750/- on account of share capital and share application money received

by the assessee.

7. We have heard both the sides on the issue. The assessee has shown

receipt of share application money from four entities as under :- 4 ITA No.1480/Del./2013

S.No. Name Amount (Rs.) 1. Fair N Square Exports Pvt. Ltd. 20,04,000/- 2. Tashi Contractors (P) Ltd. 15,03,000/- 3. Satwant Singh Sodhi Const. (P) Ltd. 2,03,000/- 4. Rabik Exports Ltd. 25,03,750/- Total : 62,13,750/-

The assessee has submitted following documents with regard to the entities:-

- M/s. Satwant Singh Sodhi Constructors (P) Ltd.

(i) Copy of share application form (ii) Copy of affidavit (iii) Copy of certificate issued at the end of year by the party (iv) Copy of Board Resolution (v) Copy of confirmation from party (vi) Copy of bank statement (vii) Copy of acknowledgement of ITR

(viii) Copy of balance sheet and P&L account

(ix) Copy of appointment of and changes among Directors

(x) Copy of Certificate of Incorporation

(xi) Copy of Memorandum of Association & Articles of Association

- M/s. Tashi Contractors (P) Ltd.

(i) Copy of share application form (ii) Copy of affidavit (iii) Copy of certificate issued at the end of year by the party (iv) Copy of confirmation from party (v) Copy of Board Resolution (vi) Copy of bank statement (vii) Copy of acknowledgement of ITR

(viii) Copy of balance sheet and P&L account

(ix) Details of PAN

(x) Copy of appointment of and changes among Director

(xi) Copy of Certificate of Incorporation

(xii) Copy of Memorandum of Association & Articles of Association

- M/s. Rabik Exports Ltd.

(i) Copy of share application form (ii) Copy of affidavit (iii) Copy of certificate issued at the end of year by the party (iv) Copy of confirmation from party 5 ITA No.1480/Del./2013

(v) Copy of Board Resolution (vi) Copy of bank statement (vii) Copy of acknowledgement of ITR

(viii) Copy of balance sheet and P&L account

(ix) Details of PAN

(x) Copy of appointment of and changes among Director

(xi) Copy of Certificate of Incorporation

(xii) Copy of Memorandum of Association & Articles of Association

- M/s. Fair 'N' Square Exports (P) Ltd.

(i) Copy of share application form (ii) Copy of affidavit (iii) Copy of certificate issued at the end of year by the party (iv) Copy of confirmation from party (v) Copy of Board Resolution (vi) Copy of bank statement (vii) Copy of acknowledgement of ITR

(viii) Copy of balance sheet and P&L account

(ix) Details of PAN

(x) Copy of appointment of and changes among Director

(xi) Copy of Certificate of Incorporation

(xii) Copy of Memorandum of Association & Articles of Association

We would also like to mention that this was the first year of the establishment of

the company and there appears to be no business activity during the year.

Therefore, the revenue's allegation that assessee has introduced his own

unaccounted money in the share application money is contrary to the facts of the

case. Since the assessee has not done any business during the year there cannot

be any occasion to generate unaccounted funds which can be routed back to the

assessee company in the form of share application money. The assessee has

submitted all the relevant papers before the Assessing Officer which include

share application forms, confirmations, affidavits, balance sheets, certificate

issued to the Board Resolution, confirmations from the party, bank statements of

the parties, Copy of ITRs, balance sheets and profit & loss account, copy of 6 ITA No.1480/Del./2013

certificate of incorporation and Memorandum and Articles of Association, copy

of PAN card. Therefore, primarily, the assessee was able to discharge the onus

casted upon it. It was on Assessing Officer to verify the veracity of these

documents and if found not satisfactory, then only the burden shifts on the

assessee. The assessee has submitted the correct address of the parties. Latest

assessment particulars of these parties were also filed which includes the PAN

number, assessment details, the Assessing Officer's details and bank account

details. The money has been received through the regular bank accounts of these

companies. All these companies have shown name of the assessee company in

their 'schedule' of investment. In the case of CIT vs. Value Capital Services

Pvt. Ltd. - 307 ITR 334, the Hon'ble jurisdictional High Court has held as

under:-

"In any case, what is clinching is the additional burden on the Revenue. It must show that even if the applicant does not have the means to make the investment, the investment made by the applicant actually emanated from the coffers of the assessee so as to enable it to be treated as the undisclosed income of the assessee. This has not been shown insofar as the present case is concerned and that has been noted by the Tribunal also."

Similarly in the case of CIT vs. Diwan Leasing Leasing and Finance Ltd. - 299

ITR 268, the Hon'ble High Court has held as under :-

"The department would not be justified in drawing adverse inference only because the creditor/subscriber fails or neglects to respond to its notices."

The Hon'ble Supreme Court in the case of CTI vs. Kamdhenu Steel & Alloys

Ltd. in SLP (CC) No.15640 of 2012 dated 17.09.2010 has dismissed the Special

Leave Petition against the order of the Hon'ble Delhi High Court in the case of 7 ITA No.1480/Del./2013 CIT vs. Kamdhenu Steel L& Alloys Ltd. in which it has been held that once

adequate evidence and material given by the assessee, which would prima facie

discharge the burden of the assessee in proving the identity of shareholders,

genuineness of the transaction and creditworthiness of the shareholders,

thereafter, in case such evidence is to be discarded or it is proved that the

assessee has created evidence, the revenue is supposed to make thorough probe

before it could nail the assessee and fasten the assessee with such a liability u/s

68/69 of the Act. Considering all these aspects, we set aside the orders of the

authorities below and allow the assessee's appeal on this ground.

8. In the result, the appeal of the assessee is partly allowed.

Order pronounced in open court on this 31st day of March, 2015.

Sd/- sd/- (GEORGE GEORGE K) (B.C. MEENA) JUDICIAL MEMBER ACCOUNTANT MEMBER

Dated the 31st day of March, 2015 TS

Copy forwarded to: 1.Appellant 2.Respondent 3.CIT 4.CIT(A)-XVI, New Delhi. 5.CIT(ITAT), New Delhi. AR, ITAT NEW DELHI.