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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