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M/s. Vatsal Hotels Pvt. Ltd., B-173, Yamuna Sports Complex, Delhi. Vs. D.C.I.T., Circle 26(1), New Delhi.
November, 15th 2019

Referred Sections:
Section 143(3) of the Income Tax Act, 1961
Section 68 of the Act.
Section 133(6) of the Act
Section Rule 46A of Income Tax Rules, 1962

Referred Cases / Judgments:
CIT Vs Empire Biotech P Ltd 361 ITR 258 (Del)
CIT Vs Oasis Hospitalities Private Limited 333 ITR 119 (Del)
CIT Vs NDR promoter’s private Limited in ITA 49/2018.

                   In the Income-Tax Appellate Tribunal,
                         Delhi Bench `F', New Delhi

                Before : Shri H.S. Sidhu, Judicial Member And
                       Shri O.P. Kant, Accountant Member

                           ITA No. 7696/Del/2018
                          Assessment Year: 2013-14

      M/s. Vatsal Hotels Pvt. Ltd., B-173,    vs. D.C.I.T., Circle 26(1),
      Yamuna Sports Complex, Delhi.               New Delhi.
      PANAACCV3668A
      (Appellant)                                  (Respondent)

               Appellant by         Sh. Sandeep Sapra, Advocate
               Respondent by        Smt. Sulekha Verma, CIT/DR

                 Date of Hearing                  03.09.2019
                 Date of Pronouncement            14.11.2019

                                     ORDER
Per O.P. Kant, A.M.:
     This appeal by the assessee is directed against order dated 10/09/2018

passed by the Ld. Commissioner of Income-tax (Appeals)-9, New Delhi [in short

the Ld. CIT(A)] for assessment year 2013-14 raising following grounds:


     "1. That the Ld. A.O. erred on facts and in law in issuing/sending notices
     dated 04/03/2016 u/s. 133(6) of I.T. Act on wrong addresses to various
     share subscribers thereby violating the principles of natural justice.

     2.     That the Ld. A.O. erred on facts and in law in not confronting the
     Appellant that notices u/s. 133(6) of I.T. Act had been issued/sent to various
     share subscribers which had been returned back undelivered thereby
     violating the principles of natural justice.
                                                       ITA No. 7696/Del/2018   2


      3.    That the Ld. A.O. erred on facts and in law in confirming the addition
      of Rs.12,64,35,000 u/s. 68 of I.T. Act by completely ignoring the
      documentary evidence filed to prove the identity, genuineness and
      creditworthiness of various share subscribers. At any rate, the addition as
      made is very excessive.

      4.    The ld. CIT(A) has erred in making various observations which are
      factually incorrect particularly that the Appellant had filed additional
      evidence alongwith application under Rule 46A of I.T. Rules, whereas no
      additional evidence was filed before the Ld. CIT(A).

      5.    That the total income assessed at Rs.11,87,56,430 and the income-tax
      demand of Rs.3,85,48,402/- as worked out and interest thereon of
      Rs.1,38,37,608/- u/s. 234B aggregating to Rs.5,23,86,010/- is illegal.

      6.   That the Appellant reserves its right to add, amend/modify the
      grounds of appeal."

2.    Briefly stated, facts of the case are that the assessee company is engaged

in the business of running hotel under the name and style of " Park ascent" at

Noida (UP). For the year under consideration, the assessee filed return of

income on 30/09/2013 declaring loss of Rs.76,78,838/-. In the scrutiny

assessment completed on 20/04/2016 under section 143(3) of the Income Tax

Act, 1961 (in short the Act), the Assessing Officer made addition mainly for the

share application money received of Rs.12,64,35,000/-by the assessee in the

year under consideration as unexplained cash credit under section 68 of the

Act. On further appeal by the assessee, the ld. CIT(A) upheld the addition.
                                                       ITA No. 7696/Del/2018   3


Aggrieved with the order of ld. CIT(A),      assessee is in appeal before the

Tribunal, raising the grounds as reproduced above.


3.    In the grounds raised, the assessee has challenged the addition of

Rs.12,64,35,000/-made by the Assessing Officer and upheld by the Ld.CIT(A). In

ground No. 1 & 2, the assessee has raised the issue of violation of the principle

of the natural justice, inter alia that notices under section 133(6) were issued

by the Assessing Officer at the wrong address to various share subscribers,

which had returned back undelivered. In ground No. 3, the assessee has raised

that the ld. CIT(A) has upheld the addition ignoring the documentary evidences

filed. In ground No. 4, the assessee has raised that the ld. CIT(A) has given

factually incorrect finding regarding additional evidence filed under Rule 46A of

Income Tax Rules, 1962. The ground No. 5 is raised in relation to income tax

demand and interest consequent to the addition sustained.






4.    The brief facts qua the issue in dispute are that during the year under

consideration, the assessee received share application money from following

persons:


           Name of Applicants            Amount received

           CCL International Limited     4,70,75,000
           Tanvi Fincap Pvt Ltd          20,00,000
                                                             ITA No. 7696/Del/2018   4




         Lokesh Chand                         34,75,000

         Sarika Goel                          61,10,000

         Saurabh Goel                         1,24,20,000
         Saurabh Goel HUF                     5,00,000
         Suresh Chand                         18,50,000

         Manju Rani                           36,05,000

         Gyanindra Singh                      3,50,000

         JG International                     25,00,000

         Shipra Daga                          3,00,000
         Vatsal Liquors & Beverages Pvt Ltd   2,55,00,000
         Amarjeet Singh                       87,50,000
         Amarjeet Singh HUF                   60,00,000
         Rajindra Arora                       60,00,000

         Total                                12,64,35,000



4.1   The Assessing Officer called for documentary evidences to prove the

identity and creditworthiness of the persons and genuineness of the

transaction. The information filed by the assessee vide letter dated 28/12/2015

and 27/01/2016 was not found to be incomplete by the Assessing Officer and

therefore he issued a letter dated 19/02/2016 indicating the deficiency of

documents in respect of each share subscriber. The Assessing Officer also asked

the assessee to produce all the share subscribers before him. The further

information filed by the assessee was also not found sufficient by the Assessing
                                                          ITA No. 7696/Del/2018   5


Officer to establish identity & creditworthiness of the parties and genuineness

of the transaction. The Assessing Officer issued notices under section 133(6) of

the Act to few parties for verifying genuineness of the transaction, but in case of

M/s. CCL International Ltd and Suresh Chand, the notices remained undelivered

and in case of Tanvi Fincap P Ltd, Gynindrasingh, JG International , the notices

were delivered but replies were not received. The ld. Assessing Officer

observed that no one appeared before him except one party namely Sh. Suarabh

Goel . The Ld. Assessing Officer made following conclusions as under:


       a. All the persons has failed to appear before this office to prove their
          identity except Mr. Surabh Goel.
       b. Notice u/s. 133(6) has been returned back undelivered creates doubt
          about the genuinity of the parties.
       c. No response has been received where notices u/s. 133(6) has been
          delivered till date of this order.
       d. Non submission of complete documents by assessee also creates doubt
          about the genuineness of the transaction and creditworthiness of the
          parties."

In view of the conclusions and various decisions relied upon, the ld. Assessing

Officer made addition of the entire share application money of Rs.12,64,35,000

as unexplained cash credit under section 68 of the Act.


4.2.   The ld. CIT(A) has recorded that the assessee filed certain additional

evidences along with application under section Rule 46A of Income Tax Rules,
                                                         ITA No. 7696/Del/2018   6


1962, which the ld. CIT(A) rejected. The Ld. CIT(A) analysed the documents

which were filed by the assessee before the Assessing Officer and upheld the

finding of the Assessing Officer observing as under:


      "5.5 Apart from written submission, the appellant has also produced
      copies of documents produced before AO as mentioned above in appellant's
      submission. I have examined these documents. Instead of supporting the
      case of appellant, these documents only reinforces the findings of the AO
      which are based on his detailed and wide analysis of the facts and
      circumstances of the case and is in congruence with the detailed set of
      observations and factors pointed out by the investigation wing. It is
      observed that the appellant has not been able to provide any evidence or
      document to prove the observations of the Assessing officer to be wrong.
      Except by scribbling over the similar set of documents, the appellant has
      nowhere been able to answer or clarify any of the observation levelled by
      the appellant. Therefore, it can be easily construed that the share
      application to the appellant company, as obvious from the indepth analysis
      provided by the assessing officer, are merely sham and bogus transactions,
      with an intent to mask the actual face of the amount received via the mode
      of share application money.
      5.6. Against the above background where the AO has demonstrated that
      the third party documents furnished by the appellant produced a picture
      which is otherwise that of the appellant, the non submission of complete
      documents, as well as the non service/replies of the notices, truly refelect
      that the actual nature of the transaction appear to be a camouflage over
      the real nature reflected by the appellant. Hence, a heavier onus is cast on
      the appellant to prove the genuineness of such transactions, identity and
      credit worthiness of such share applicants, by adducing evidences and
      giving explanations, which are capable of proving beyond any doubt that its
      transactions of share money are distinctly genuine. Appellant's insistence
      on the genuineness of transactions based on such minimal documents, fails
      to mitigate the severities of pointed out by the assessing officer and the
      corresponding inferences drawn from the documents presented by the
      appellant. Evidences as well as detailed analysis of all the parameters of the
      share applicant concerns clearly lay out the lack of genuineness in the
                                                         ITA No. 7696/Del/2018   7


       transactions, as well as the identity and the credit worthiness of applicant.
       The appellant, even during the appellate proceeding, has failed to explain
       such transactions. Most importantly, the very fact that one of the applicant,
       in his statement, has presented facts, that is otherwise false vis a vis the
       books of accounts of the appellant, goes on in depth to prove that the
       applicant had simply cooked up an entry, to hide the actual nature of
       transaction."
5.     Before us, the Ld. counsel of the assessee filed a paper-book containing

pages 1 to 566 and submitted that the Assessing Officer had not issued notice

under section 133(6) of the Act in case of all the parties and whatever notices

issued were at wrong address resulting into non-delivery. According to him, the

assessee has not been provided opportunity to respond the fact of non-delivery

of notice under section 133(6) of the Act. He further referred to page 560 of the

paper book which is a copy of letter dated 28/08/2018 filed before the learned

CIT(A) requesting to produce all the parties from whom fresh share application

money was raised during the year under consideration. The Ld. counsel

submitted that the learned CIT(A) did not provide any opportunity to the

assessee to produce those parties either before him or before the learned

Assessing Officer and decided the matter against the assessee in violation of the

principle of natural justice.


5.1.   Before us the Ld. counsel of the assessee has given undertaking that if

matter is restored back to the Assessing Officer for deciding afresh, the assessee
                                                         ITA No. 7696/Del/2018   8







shall produce all the share subscribers along with all required documents for

necessary examination by the Assessing Officer.


6.    Ld. DR on the other hand submitted that the assessee did not comply

before the Assessing Officer. Accordingly, the Ld. CIT(A) did not allow the

additional evidences in terms of rule 46A of Income Tax Rules, 1962. With

reference to ground No. one and two of the appeal, She submitted that notices

under section 133(6) were sent to the addresses provided by the persons in

their ITR for assessment year 2013-14 and assessee did not submit any

evidence that those persons have changed their addresses in the latest ITR filed,

and thus, the Assessing Officer cannot be faulted for non-delivery of notice

under section 133(6) of the Act. The Ld. DR submitted that the assessee has not

furnished any explanation for the show cause notice issued dated 19/02/2016

with direction to produce the share applicant parties and the assessee

deliberately failed to produce them with an intention to thwart the enquiry. The

Ld. DR referred to the decision of the Hon'ble Delhi High Court in the case of CIT

Vs Empire Biotech P Ltd 361 ITR 258 (Del) where it is held that when the

assessee does not produce evidence or tries to avoid the appearance before the

assessing   authority,   it   necessarily   creates   difficulties   and   prevents

ascertainment of truth and correct facts as the AO is denied advantage of the
                                                       ITA No. 7696/Del/2018   9


attendance before him and adverse opinion should be drawn. With reference to

ground No. 3 of the appeal, the Ld DR referred to decision of the Hon'ble

Supreme Court in the case of NRA Iron and steel (P) Ltd reported in (2019) 103

taxmann.com 48(SC). She further referred to decision of the Hon'ble Delhi High

Court in the case of CIT Vs Oasis Hospitalities Private Limited 333 ITR 119 (Del)

wherein it is held that merely providing the identity of the investor does not

discharge the onus of the assessee if the capacity or creditworthiness has not

been established. The DR submitted that one of the share applicants was a

penny stock company which provided bogus long-term capital gains to various

persons. The Ld. DR also relied on decision of Hon'ble Delhi High Court dated

17/01/2019 in the case of CIT Vs NDR promoter's private Limited in ITA

49/2018. In view of the arguments, she objected for restoring the matter back

to the file of the Assessing Officer.


7.    We have heard rival submission of the parties and perused the relevant

material on record. On perusal of the order of the Assessing Officer and the Ld.

CIT(A), it is evident that notices under section 133(6) have not been issued to

all the share applicant parties and the notices have been issued on the basis of

the addresses of the share applicants provided in return of income filed by

them for assessment year 2013-14. The assessee has contended that those
                                                       ITA No. 7696/Del/2018   10


share applicant parties shifted to new addresses and therefore the notices

could not be served upon them. The contention of the Revenue is that onus was

on the assessee to provide complete and correct address to the Assessing

Officer. In the facts of the case, we are of the opinion that whatever may be the

reasons, it is evident that those parties could not respond to the notices issued

under section 133(6) of the Act and the assessee also failed to produce them

before the Assessing Officer. Now, before us, the Ld. Counsel of the assessee has

given undertaking that if matter is restored back to the Assessing Officer, the

assessee shall produce all the share applicant parties along with all the required

documents to discharge its onus of proving the identity & creditworthiness of

the share applicant parties and genuineness of the transaction as required

under section 68 of the Act. In view of the facts and circumstances of the case

and the undertaking given by the Ld. counsel of the assessee, in the interest of

the substantial justice, we feel it appropriate that the assessee must be

provided an opportunity to produce all those share applicant parties, which the

learned CIT(A) did not provide despite request on the part of the assessee.

Accordingly, we restore the issue in dispute involved in the grounds of the

appeal to the file of the Ld. Assessing Officer for deciding afresh with the

direction to the assessee to produce all the share applicant parties before the
                                                             ITA No. 7696/Del/2018      11


Assessing Officer along with all documentary evidences which it wants to rely

upon. The assessee shall be afforded adequate opportunity of being heard. The

grounds of the appeal of the assessee are accordingly allowed for the statistical

purposes.


8.      In the result, the appeal of the assessee is allowed for the statistical

purposes.


Order pronounced in the open court on 14/11/2019.

              Sd/-                                            Sd/-

        (H.S. Sidhu)                                  (O.P. Kant)
        Judicial member                            Accountant Member

Dated: 14/11 / 2019
*aks*
Copy of order forwarded to:
(1)     The appellant                 (2)   The respondent
(3)     Commissioner                  (4)   CIT(A)
(5)     Departmental Representative   (6)   Guard File
                                                                                     By order

                                                                         Assistant Registrar
                                                              Income Tax Appellate Tribunal
                                                                   Delhi Benches, New Delhi

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