IN THE INCOME TAX APPELLATE TRIBUNAL
DELHI BENCH `A', NEW DELHI
Before Sh. R. S. Syal, AM And Sh. A. T. Varkey, JM
ITA No. 361/Del/2011 : Asstt. Year : 2000-01
Deputy Commissioner of Income Vs M/s Brijwasi Impex Pvt. Ltd.,
Tax, Central Circle-12, 1170, Kucha Mahajani, Chandni
New Delhi Chowk, Delhi
(APPELLANT) (RESPONDENT)
CO No. 8/Del/2013 : Asstt. Year : 2000-01
M/s Brijwasi Impex Pvt. Ltd., Vs Deputy Commissioner of Income
1170, Kucha Mahajani, Chandni Tax, Central Circle-12,
Chowk, Delhi New Delhi
(APPELLANT) (RESPONDENT)
PAN No. AABCB7530L
Assessee by : Sh. Rajiv Saxena, Adv.
Revenue by : Sh. A. Misra, CIT DR
Date of Hearing : 29.09.2014 Date of Pronouncement : 30 .9.2014
ORDER
Per R. S. Syal, AM:
This appeal by the Revenue and Cross objection by the assessee
arise out of the order passed by CIT(A) on 14.10.2010 in relation to the
Assessment year 2000-01.
2. Firstly we are taking up the Cross objection filed by the assessee,
which is time barred by 683 days. Pleading for the condonation of delay,
2 ITA No. 361/Del/2011 & CO 8/Del/2013
Brijwasi Impex Pvt. Ltd.
it was stated that the assessee was not well aware of the technicalities of
the Income-tax provisions and no Cross Objection was filed before the
Tribunal as per the advice given by the then counsel. It was only when
the assessee engaged the new counsel to argue its case before the
Tribunal, that it was learnt that the Cross objection (CO) ought to have
been filed in response to the Revenue's appeal. That is how, the ld. AR
made out a case for the condonation of delay on the basis of the mistake
committed by the earlier counsel as constituting a reasonable cause
warranting admission of the CO. The ld. DR strongly objected to the
condonation of delay.
3. We have heard the rival submissions and perused the relevant
material on record. It is noticed that this Cross objection was filed
belatedly by one year and 318 days. A request of condonation of delay
has been made on the plea that the earlier counsel did not properly guide
the assessee. However, no affidavit of the earlier counsel has been
placed on record to substantiate this contention raised before us. Apart
from this submission, no other argument was raised warranting
condonation of delay.
4. We are reminded of the binding judgment of the Hon'ble
jurisdictional High Court in Surendra Boveja Vs CWT (2006) 287 ITR
52 (Delhi) in which one of the appeals was filed late by one year and
154 days. The appellant's request for the condonation of delay was
3 ITA No. 361/Del/2011 & CO 8/Del/2013
Brijwasi Impex Pvt. Ltd.
turned down by the Hon'ble High Court. In this judgment, their
Lordships have held that want of due care, ignorance of law or failure to
seek legal advice are not sufficient grounds for condonation of delay.
Similar view has been taken by the Hon'ble Madras High Court in
Madhu Dadha Vs ACIT (2009) 317 ITR 458 (Madras). A third member
decision of the Tribunal in JCIT Vs TFE Ltd. (2007) 104 ITD 149
(Chennai) (TM) also supports the same view.
5. Adverting to the facts of the instant case, we find that except for a
bald submission, there is nothing on record to substantiate that the
earlier counsel did not properly guide the assessee. The theory of
mistake of counsel propounded by the assessee is absolutely without any
foundation. The assertion so made in the application for condonation of
delay is a mere self serving statement. The further argument that the
appellant was ignorant of the legal provisions also does not stand in
view of the fact that it is a private limited company regularly filing
returns of income. In view of foregoing discussion, we are of the
considered opinion that there is no substance in the plea for condonation
of delay which is to the extent of one year and 318 days. Accordingly,
the Cross objection filed by the assessee is dismissed as barred by time.
6. The ld. AR then contended that if the Cross objection was to be
dismissed, then its application under Rule 27 of the Income-tax
Appellate Tribunal Rules, 1963, be admitted. On the basis of the ground
4 ITA No. 361/Del/2011 & CO 8/Del/2013
Brijwasi Impex Pvt. Ltd.
taken in such application, the ld. AR contended that the assessment order
be quashed because the search warrant was in the joint name; no
incriminating material was found during the course of search; and the
original assessment for the assessment year 2002-03 was already made
u/s 143(3) and a decision was taken by the ld. CIT(A) in assessee's
favour on the same issue.
7. Before taking up the question of admission of the assessee's
application under Rule 27 of the ITAT Rule, 1963, it will be apposite to
note the mandate of the rule as under:
`Respondent may support order on grounds decided against him
27. The respondent, though he may not have appealed, may support the
order appealed against on any of the grounds decided against him".
8. A bare perusal of the above rule indicates that the respondent can
support the order appealed against on any ground which was decided
against him. Applying it to the present factual position in which the
Revenue has preferred appeal, the assessee can support the conclusion
drawn by the ld. CIT(A) by challenging any decision taken against him.
In order to invoke Rule 27, it is a sine qua non that there must be some
finding against the assessee in an appeal filed by the Revenue, which can
be challenged by the assessee through application under the rule. The
expression `on any of the grounds decided against him' throws ample
5 ITA No. 361/Del/2011 & CO 8/Del/2013
Brijwasi Impex Pvt. Ltd.
light on the scope of application under this rule. There has necessarily to
be some decision of the ld. CIT(A) against the respondent with the
ultimate conclusion against the appellant. It can be cited with an
example. When the AO reopens an assessment and makes an addition on
a particular issue; and in the first appeal, the assessee challenges both the
initiation of reassessment and also the addition on merits. If the CIT(A)
deletes the addition on merits but upholds the validity of initiation of
reassessment and the Revenue files appeal against the deletion of
addition on merits, then the assessee can take recourse to rule 27 to
support the order of the CIT(A) in deleting the addition by arguing that
he ought to have decided the question of initiation of reassessment also
in favour of the assessee. This adverse decision against the respondent
constitutes the basis for application under rule 27. We want to clarify
that such application will also embrace `no decision' on an issue raised
before the first appellate authority. The crux of the matter is that either
there should be some ground decided against the respondent or some
ground taken up before the ld. CIT(A) which would have remained
undisposed off. The natural corollary which, therefore, follows is that
the assessee must have raised a particular ground before the ld. CIT(A)
which should have been either been decided against it or had remained
undecided. Unless there is a specific ground raised before the ld.
CIT(A), there can be no question of taking recourse to the Rule 27.
6 ITA No. 361/Del/2011 & CO 8/Del/2013
Brijwasi Impex Pvt. Ltd.
9. Adverting to the facts of the instant case, it is seen that the assessee
in its application under Rule 27 has questioned the validity of the
assessment order on the following ground : -
`1. That the assessment order passed under section 153A is bad in law
and required to be quashed because of the following amongst other
grounds : -
a. The search warrant was in the joint name and no income or property
was assessed in the joint name during assessment.
b. The same is based on no search material or seized document in the
case of the assessee and without which assessment cannot be made u/s
153A specifically when there was a joint search warrant and joint
Panchnama.
c. The original assessment for AY 2002-03 was already made u/s 143(3)
which was subsequently decided by the CIT(A) and no subsequent
appeal was filed by the revenue dealing with similar issue in detail
which includes investment made during the year also.'
10. When the ld. AR was directed to invite our attention towards the
impugned order deciding such issues against the assessee, he candidly
accepted that there was no adverse finding given by the ld. CIT(A) on
the above issues. On being called upon to explain as to how the
application under Rule 27 lies in the absence of any adverse finding, the
7 ITA No. 361/Del/2011 & CO 8/Del/2013
Brijwasi Impex Pvt. Ltd.
ld. AR contended that the assessee had raised such issues before the ld.
first appellate authority through ground no. 1 of its appeal, which
remained undisposed off. It will not be out of place to reproduce ground
no. 1 raised by the assessee before the ld. CIT(A), which reads as
under:-
"The Assessing Officer had erred in not appreciating the facts and
circumstances of the case or the submission of the applicant and had
further erred in passing the order, which is bad in law and on facts".
11. A bare perusal of the above ground, which has been claimed to be
the cornerstone of its application under rule 27, makes it is manifest that
the same is simply a general ground, without any specific limbs
challenging the validity of the assessment order on the counts on which
application has been moved under Rule 27. We are unable to appreciate
the view canvassed by the ld. AR in moving application under Rule 27
on issues which were not at all taken up before the ld. CIT(A). No
material has been placed on record to demonstrate that the validity of
search was challenged before the ld. CIT(A) on all the issues now sought
to be taken up before us. The reason for the `no discussion' of such
issues in the impugned order is that these were not at all raised before
the ld. CIT(A). If such issues had actually been raised before the ld.
CIT(A), then the least to be expected of the assessee was the moving of
a rectification application u/s 154 pointing out his failure in dealing
8 ITA No. 361/Del/2011 & CO 8/Del/2013
Brijwasi Impex Pvt. Ltd.
with such issues. Nothing of the sort has been done in the instant case.
As such we hold that the assessee's application under Rule 27 of the
ITAT Rules, 1963 is not maintainable because there is no adverse
decision of the ld. CIT(A) on the issues which are now sought to be
raised before us through the application.
12. Now we take up the Revenue's appeal having five grounds. All
these grounds are against the deletion of addition of Rs. 50,00,000/-
made by the A.O on account of unconfirmed, unexplained and
unverified share capital in the books of the assessee.
13. Briefly stated the facts of case are that a search action u/s 132 was
taken on the assessee on 9.12.2005. Notice u/s 153A was issued. The
assessee filed return declaring Nil income. It was observed that the
assessee had shown `Advances from Body Corporate' amounting to
Rs.50,00,000/-. The assessee was requested vide point 4 of the
questionnaire dated 27.11.2007 to furnish complete details in respect of
such advances. Through this point, the assessee was required to furnish
the following information : -
"a) Name and address of the Body Corporate from whom
Advance has been received.
9 ITA No. 361/Del/2011 & CO 8/Del/2013
Brijwasi Impex Pvt. Ltd.
b) Copy of account of the Body Corporate from whom Advance
has been taken for the period 1.4.1999 to 31.3.2000 as
appearing in your Books of account.
c) Mode of receipt of Advance along with complete details of
mode of receipt of Advance i.e. cheque/draft or otherwise."
14. The assessee did not furnish complete details as required through
point 4 of the questionnaire. Resultantly, the Assessing Officer treated
this amount as unexplained cash credit and made addition. During the
course of the first appellate proceedings, the assessee furnished certain
details in respect of share application money Rs. 50,00,000/- received
from six corporate entities as under:
Sr. Name of the Private Amount of share
PAN
No. Limited Company application money
received
1 Date Base Computers AAACD2777L 6,00,000
Pvt. Ltd.
F-6, Vijay Chowk,
Laxmi Nagar, Delhi-
110092
2 Choudhary AAACC1931D 10,00,000
Consultants Pvt. Ltd.
F-6, Vijay Chowk,
Laxmi Nagar, Delhi-
11--92
3 Kuldeep Hardware AAACK4882D 10,00,000
Pvt. Ltd.
F-6, Vijay Chowk,
Laxmi Nagar, Delhi-
10 ITA No. 361/Del/2011 & CO 8/Del/2013
Brijwasi Impex Pvt. Ltd.
110092
4 Selvel Financial AAACS6929D 6,00,000
Services Pvt. Ltd.
304E, 35, Shri Ganesh
Complex, Jawahar
Park, Laxmi Nagar,
Delhi-110092
5 Sunrays Construction AABCS8615H 15,00,000
& Marketing Pvt. Ltd.
B-63, Safdarjung
Enclave, New Delhi
6 Tyagi Trading Pvt. AAACT3944L 3,00,000
Ltd.
F-6, Vijay Chowk,
Laxmi Nagar, Delhi-
110092
50,00,000
15. Certain other supporting evidence were also filed before the ld.
CIT(A). All such things were sent to the Assessing Officer for
submitting the remand report. The AO furnished remand report which
was received by the ld. CIT(A) on 12.3.2010. The AO reported that
summons u/s 131 of the Act were sent to all the six entities but none of
them appeared for hearing. Confirmation was received from three parties
given at serial nos. 1, 3 and 6 of the above Table. Inspector of Income-
tax was deputed for conducting inquiries and serving summons to all the
six parties. The Inspector reported that he visited premises no. F-6, Vijay
Chowk, Laxmi Nagar, New Delhi for serving the summons on parties at
serial no. 1, 2, 3 and 6 of the above Table. On verification, it was noticed
11 ITA No. 361/Del/2011 & CO 8/Del/2013
Brijwasi Impex Pvt. Ltd.
that none of the above named companies existed at the given address for
last so many years. This was reported on the basis of inquiry conducted
from one Shri Ashok Tyagi, a Chartered Accountant running profession
in the name of M/s Tyagi and Tyagi. As regards company at serial no. 4
of the Table, the Inspector reported that he visited premises no. 304 E35,
Ganesh Complex, Jawahar Park, Laxmi Nagar, New Delhi for serving
the summons u/s 131 of the Act. One Shri Mahesh Sharma, running
office of a Chartered Accountant, intimated that no company with this
name ever existed at the given address. In the like manner, when the
Inspector visited the premises of a company at serial no. 5 of the Table
above, it was found that the address was incomplete inasmuch as there
were sub-blocks in the colony and he visited many sub-blocks like B-
3/63, B-1/63 but found no company with this name on the given address.
The A.O's remand report was given to the assessee for rejoinder. The
assessee contended through two rejoinders dated 2.9.2010 and 20.9.2010
that since the share application money was received through banking
channel from all the six entities who were having regular permanent
account nos., there could be no case of making any addition u/s 68. The
ld. CIT(A) got convinced with the assessee's submissions and deleted
the addition. The Revenue is aggrieved against the deletion of addition
of Rs. 50,00,00/-.
16. We have heard the rival submissions and perused the relevant
material on record in the light of precedents cited before us. It is clear
12 ITA No. 361/Del/2011 & CO 8/Del/2013
Brijwasi Impex Pvt. Ltd.
from the record of proceedings noted above that the assessee did not
furnish complete details during the course of assessment proceedings in
support of the genuineness of the share applicants totaling Rs.
50,00,000/-. Pointed queries raised by the Assessing Officer, as
reproduced above, remained un-complied with. When the assessee
furnished documentary evidence before the ld. CIT(A) in support of the
genuineness of the credits, the Assessing Officer in remand proceedings
ventured to conduct inquires from the six companies who the assessee
claimed to have given share application money to it. Firstly the
summons were issued by the Assessing Officer to all the six companies,
which remained uncomplied with. When the Assessing Officer deputed
Inspector to conduct inquiries at the addresses given by the assessee of
these six companies, it transpired that five companies never existed at
the given addresses. As regards the sixth company, namely, M/s Sunrays
Construction & Marketing Pvt. Ltd., the address turned out to be
incomplete. The attempts made by the Income-tax Inspector to cure
some irregularity in the given address, also met with failure. When the
A.O's remand report was given to the assessee for rejoinder, the assessee
kept on harping on the documentary evidence in support of the
genuineness of the credits. The assessee did not come out with a
proposal either to produce the representatives of these companies, who
were claimed to be its shareholders or to get the notices served on them
enabling the AO to conduct further inquiry.
13 ITA No. 361/Del/2011 & CO 8/Del/2013
Brijwasi Impex Pvt. Ltd.
17. At this stage, it is relevant to mention that the Revenue has placed
on record a letter dated 09.02.2012 addressed to the Tribunal in respect
of appellate proceeding in the case of the assessee for the assessment
year 2004-05. Through this letter it has been submitted that the
Investigation Wing, New Delhi carried out investigation in respect of
accommodation entries and found a list of beneficiaries who had taken
such accommodation entries. A CD containing such list is also appended
along with this letter. It has been mentioned that the name of the
assessee appears in the list of beneficiaries at serial no. 2889 to 2906.
The said CD is also stated to contain the statement of Manoj Gupta and
his associates, who provided accommodation entries, inter alia, to the
assessee company. We want to make it clear that this letter though
placed in the present appeal folder has been written in respect of the
proceedings for the assessment year 2004-05 in which year again the
assessee allegedly received share application money.
18. Coming back to the facts of the instant case it is seen that apart
from placing on record some documentary evidence in support of the
genuineness of the transaction of receipt of share application money, the
assessee failed to prove the very first ingredient of sec. 68, being the
identity of the creditors. The addresses of these corporate entities turned
out to be fake or not available. It is beyond our comprehension as to
14 ITA No. 361/Del/2011 & CO 8/Del/2013
Brijwasi Impex Pvt. Ltd.
what prevented the assessee to produce the representatives of such
companies before the AO for verification, more specifically, if they were
not strangers but its shareholders. The AO in our considered opinion has
successfully proved the non-existence of such companies. When the
very identity of a creditors is not proved, there can be no way to prove
the genuineness of transactions through the documentary evidence so as
to come out of the mischief of section 68 of the Act.
19. The Hon'ble Jurisdictional High Court in CIT Vs Nova Promoters
and Finlease (P) Ltd. (2012) 342 ITR 169 (Delhi) has upheld the
addition u/s 68 of the Act in respect of share application money when
the Assessing Officer issued summons which were not served and the
investigation proved that the company routed its own money through
non existing company using the banking channel in the shape of share
application money. The Assessing Officer in that case made the addition
after conducting due inquiry, which was deleted by the Tribunal.
Reversing the order of the Tribunal, the Hon'ble High Court restored the
addition. Similar view has been taken again by the Hon'ble jurisdictional
High Court in the case of CIT Vs Empire Builtech Pvt. Ltd. (2014) 366
ITR 110 (Delhi). The Hon'ble Delhi High Court in the case of CIT Vs
Titan Securities Ltd. (2013) 357 ITR 184 (Delhi) and CIT Vs Youth
Construction Pvt. Ltd. (2013) 357 ITR 197 (Delhi) has upheld the
addition made u/s 68 of the Act on account of share application money
in respect of which the assessee failed to prove the existence of the share
15 ITA No. 361/Del/2011 & CO 8/Del/2013
Brijwasi Impex Pvt. Ltd.
applicants or the genuineness of the credits. All the above decisions
along with a chain of such other decisions are authority for the
proposition that where some share application money etc. has been
shown to have been allegedly received by the assessee but on the inquiry
conducted by the Assessing Officer, it transpires that the alleged share
applicants are non-existent, addition u/s 68 of the Act has to follow
notwithstanding the assessee placing on record the documentary
evidence about the genuineness of the transactions. Here we want to
clarify that in all cases where some share application money is received
do not automatically fall within the ambit of sec. 68. Where the
Assessing Officer, despite information about accommodation entries,
fails to make any inquiry and simply makes the addition by relying on
the report of the Investigation wing about the accommodation entries,
then no addition can be sustained. This view has been taken by the
Hon'ble Delhi High Court in CIT Vs Fair Finvest Ltd. (2013) 357 ITR
146 (Delhi) and CIT Vs Oasis Hospitalities Pvt. Ltd. (2011) 333 ITR 119
(Delhi).
20. When we consider the two sets of cases, one in which addition has
been upheld and the other in which the addition has been deleted, the
line of distinction becomes quite bright. Where the Assessing Officer
failed to conduct any inquiry and simply made the addition on the basis
of information received from Investigation Wing, then such addition
16 ITA No. 361/Del/2011 & CO 8/Del/2013
Brijwasi Impex Pvt. Ltd.
cannot be sustained. On the other hand, where the Assessing Officer
conducted proper inquiry and proved that the so called share applicants
were non-existing entities, the addition is rightly called for. We find that
the present case falls in the second category inasmuch as the Assessing
Officer conducted due and proper inquiry which transpired that these six
companies were non-existent and further the assessee took no steps to
prove the existence of such companies. We, therefore, set aside the
impugned order on this issue and restore the addition of Rs. 50,00,000/-
made by the Assessing Officer.
21. In the result, the appeal of the Revenue is allowed and the CO is
dismissed.
Order pronounced in the open Court on 30/9/2014.
Sd/- Sd/-
(A. T. Varkey) (R. S. Syal)
JUDICIAL MEMBER ACCOUNTANT MEMBER
Dated: 30/9/2014
*Subodh*
Copy forwarded to:
1. Appellant
2. Respondent
3. CIT
4. CIT(Appeals)
5.DR: ITAT
ASSISTANT REGISTRAR
|
