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ACIT, Circle-10(1), New Delhi. Vs Divine (India) Infrastructure Pvt. Ltd., 323, Agarwal Plaza, Plot No.3, Community Centre, Sector-14, Rohini, New Delhi.
December, 11th 2014
ITA No.2082/Del/2011
Asstt.Year: 2007-08

                   DELHI BENCHES `B' NEW DELHI


                       ITA NO. 2082/DEL/2011
                       ASSTT.YEAR: 2007-08

ACIT,                       vs    Divine (India) Infrastructure Pvt. Ltd.,
Circle-10(1),                     323, Agarwal Plaza, Plot No.3,
New Delhi.                        Community Centre, Sector-14,
                                   Rohini, New Delhi.
(Appellant)                                    (Respondent)
                         Appellant by: Smt. Parwinder Kaur, Sr. DR
                             Respondent by: Shri Vivek Gupta, CA

                            O R D E R


       This appeal has been filed by the revenue against the order of the CIT(A)-

XVIII, New Delhi dated 06.01.2011 in Appeal No. 47/10-11 for AY 2007-08.

The revenue has raised sole ground in this appeal which reads as under:-

             "1. On the facts and circumstances of the case and in
        law, the ld. CIT(A) has erred in deleting the addition of
        Rs.21,00,000/- made by the AO u/s 68 of the I.T.Act, 1961, on
        account of share application money."
2.     Briefly stated, the facts giving rise to this appeal are that the assessee is

engaged in the business of real estate development and filed return of income

ITA No.2082/Del/2011
Asstt.Year: 2007-08

electronically on 15.11.2007 declaring an income of Rs.91,21,962/-.

Subsequently, the case was selected for scrutiny assessment and the AO made

certain disallowances including an addition of Rs. 21 lakh u/s 68 of the Income

Tax Act, 1961 on account of introduction of bogus share capital. The assessee

preferred an appeal which was allowed by directing the AO to delete the

impugned addition made u/s 68 of the Act. Now, the aggrieved revenue is

before this Tribunal with the sole ground as reproduced hereinabove.

3.     Apropos sole ground of the assessee, we have heard arguments of both

the sides and carefully perused the relevant material placed on record, specially

assessment order as well as impugned order of the CIT(A). Ld. DR submitted

that the AO rightly observed that the assessee had received Rs.21 lakh as share

application money. The DR further contended that the AO was informed by the

Investigation Wing of the department that four entry operator companies were

indulged in providing accommodation entries to the various beneficiaries either

in the form of loans or share application money and, therefore, the assessee was

asked to produce these entities in person along with their books of accounts,

bank statement for the relevant period and source of investment for verification

of their identity, creditworthiness and genuineness of the transaction. The DR

further submitted that despite several opportunities, the assessee failed to

produce these persons or representative of the entities and alleged

ITA No.2082/Del/2011
Asstt.Year: 2007-08

accommodation entry providers did not respond to the summons issued u/s 131

of the Act and, therefore, the AO rightly made the addition in this regard.

4.     The DR further contended that the CIT(A) was not justified in deleting

the impugned addition merely observing that where the assessee provides

details pertaining to the alleged share application money contributors and the

assessee is unable to produce them, then mere non-production of

lenders/shareholders cannot be a ground for making addition. The DR also

contended that the conclusion of the CIT(A) is not sustainable that there is no

further responsibility of the assessee to show that it has come from accounted

source of the lender/share application money contributor.

5.     Replying to the above, ld. AR supported the impugned order and

submitted that the assessee submitted all details before the AO but the AO

proceeded to make addition in a hasty manner ignoring the fact that the assessee

vide its reply dated 8.10.2009 furnished a chart showing names along with

addresses of the 15 parties from whom share application money was received

with their share application form and PAN No. The AR further submitted that

the assessee has also furnished copies of the affidavits in respect of all parties

along with copies of the return of income. The AR further contended that the

AO simply considered the note of postal authorities in three cases and the AO

without verifying the explanation and detail submitted by the assessee and

without allowing opportunity for the assessee to cross-examine the persons

ITA No.2082/Del/2011
Asstt.Year: 2007-08

whose statement were recorded by the Investigation Wing on the back of the

assessee.    Supporting the impugned order, the ld. AR submitted that the

assessee discharged its onus to submit relevant details, addresses, PAN No.,

copies of the affidavits before the AO but without properly examining and

verifying the same and without affording due opportunity of cross-examination

on the persons whose statements were recorded by the Investigation Wing, the

AO proceeded to make addition u/s 68 of the Act which is not justified and

sustainable and the same was rightly deleted by the CIT(A).

6.     We have considered the rival arguments of both the parties and carefully

perused the relevant material placed on record.       On bare reading of the

impugned order, we see that CIT(A) granted relief for the assessee with final

conclusion and by relying upon various decisions of Hon'ble Supreme Court

and Jurisdictional High Court including the judgment of Hon'ble Apex Court in

the case of Lovely Export (supra). The relevant operative part of the impugned

order reads as under:-

        "9.2.7. Further, the Hon'ble Delhi High Court relying on the
        judgement of the Apex Court in Lovely Exports Pvt. Ltd.
        (supra) has dismissed the department's appeals in limine vide
        its recent orders in the case of CIT v. Dwarkadhish Investment
        Pvt. Ltd. and Dwarkadhish Capital Pvt. Ltd (ITA nos.
        911/2010 and 913/2010 order dated 02.08.2010), CIT v.
        Green Tech Tower Builders Pvt. Ltd. (ITA no. 1113/2010
        order dated 12.08.2010) and CIT v. Ultratech Finance &
        Investment Ltd. (ITA no. 1122/2010 order dated 12.08.2010).
        In the case of-Dwarkadhish Investment Pvt. Ltd. and
        Dwarakdhish Capital Pvt. Ltd. (supra) the Hon'ble

ITA No.2082/Del/2011
Asstt.Year: 2007-08

        jurisdictional High Court vide its common order dated
        02.08.2010 has interalia observed as under:
        "7. Consequently, the doctrine of merger would apply and the
        judgment of the Supreme Court in Lovely Exports (P) Ltd.
        (supra) would cover the field with regard to interpretation of
        Section 68 of Act, 1961.
        8. In any matter, the onus of proof is not a static one. Though
        in Section 68 proceedings, the initial burden of proof lies on
        the assessee yet once he proves the             identity of the
        creditors/share applicants by either furnishing their PAN
        number or income tax assessment number and shows the
        genuineness of transaction by showing money in his books
        either by account payee cheque or by draft or by any other
        mode, then the onus of proof would shift to the Revenue. Just
        because the creditors/share applicants could not be found at
        the address given, it would not give the Revenue the right to
        invoke Section 68. One must not lose sight of the fact that it is
        the Revenue which has all the power and wherewithal to trace
        any person. Moreover, it is settled law that the assessee need
        not to prove the "source of source".
        10. We are also informed that a Special Leave Petition against
        the aforesaid Division Bench judgment in the case of the
        respondent-assessee has been dismissed by the Supreme
        Court. Accordingly, we are of the opinion that no question of
        law arises in the present cases as the matter is fully covered by
        the judgment of the Supreme Court in Lovely Exports (P) Ltd.
        (supra) as well as the Division Bench judgment of this Court in
        the case of the respondent-assessee itself
        11. Consequently, we are of the view that the present appeals
        amount to relitigation. The Supreme Court in K.K. Modi Vs.
        K.N. Modi and Ors., (1998) 3 SCC 573 has held, "It is an
        abuse of the process of the court and contrary to justice and
        public policy for a party to relitigate the same issue which has
        already been tried and decided earlier against him. The
        reagitation mayor may not be barred as res judicata. But if the
        same issue is sought to be reagitated, it also amounts to an
        abuse of the process of the court...."

ITA No.2082/Del/2011
Asstt.Year: 2007-08

        12. Though we were initially inclined to impose costs yet we
        are of the opinion that ends of justice would be met by giving
        a direction to the Revenue to be more careful before filing
        appeals in a routine manner, In our view, appeal should not be
        filed in matters where either no question of law arises or the
        issue of law is a settled one. We give this direction because the
        'judicial capital" in terms of manpower and resources is
        extremely limited.
        13. Registry is directed to communicate copies of this order to
        all the Chief Commissioners of Income Tax in Delhi for
        necessary action. With the aforesaid direction, the present
        appeals are dismissed in limine but without any order as to
        costs. "
        9.2.8. Considering the facts and circumstances of the case as
        discussed above and respectfully following the plethora of
        judicial pronouncements on the subject, the impugned addition
        of Rs. 21,00,000/- in the hands of the appellant company is
        found to be legally unsustainable. In view of the above, the
        impugned addition is deleted."
7. Considering the factual matrix of the present case, we note that the initial onus lies on the assessee to prove the genuineness of the transaction along with identity of the investor and its creditworthiness. We further note that having done so, the assessee company had discharged the above onus cast upon it by furnishing details, PAN Nos., addresses and confirmations in the form of affidavits of share applicants/contributors. We further note that after discharge of onus by the assessee, the onus shifts on the AO to disprove the claim of the assessee by establishing that the evidence filed by the assessee was false and by bringing new adverse material on record and failure to do so at the end of AO would certainly vitiate the addition made u/s 68 of the Act. The CIT(A) has relied on the decision of Hon'ble Supreme Court in the case of CIT vs Bedi & Co. Pvt. Ltd. 230 ITR 580(SC) wherein it was held that where prima facie, the inference on facts is that the assessee's explanation 6 ITA No.2082/Del/2011 Asstt.Year: 2007-08 is probable, then the onus will shift on the revenue to disprove it and the assessee's explanation in such cases cannot be rejected merely on the basis of surmises and conjectures. In the present case, when the summons issued to the alleged investors could not be complied with, without any further effort and verification, the AO proceeded to make an addition u/s 68 of the Act merely relying on the information received from the Investigation Wing of the department which is not a proper approach. From the assessment order, we observe that the assessee claimed to have received share application money of Rs. 1,01,77,000 during the year under consideration but the AO disputed the four transactions on the basis of information of Investigation Wing of the department. The AO issued summons u/s 131 of the Act to these four entities. The summon to M/s Samrendra Leathers Pvt. Ltd. was returned by postal authorities with the remark "Lock closed" and the summons u/s 131 of the Act to other three entities was received unserved with the common remark "no such person at the given address". At this juncture, we respectfully take note of decision of Hon'ble Supreme Court in the case of CIT vs Lovely Export (supra) wherein it has been held that if the share application money is received by the assessee company from alleged bogus shareholders whose names are given to the AO, then the department is free to proceed to reopen their individual assessment in accordance with law but no such exercise has been conducted by the AO in the instant case. Hence, we are unable to see any perversity, 7 ITA No.2082/Del/2011 Asstt.Year: 2007-08 ambiguity or any other valid reason to interfere with the impugned order and we uphold the same. Accordingly, sole ground of the revenue is dismissed. 8. In the result, the appeal of the revenue is dismissed. Order pronounced in the open court on 08.12.2014 Sd/- Sd/- (J.S. REDDY) (CHANDRAMOHAN GARG) ACCOUNTANT MEMBER JUDICIAL MEMBER DT. 08th DECEMBER, 2014 `GS' Copy forwarded to:- 1. Appellant 2. Respondent 3. C.I.T.(A) 4. C.I.T. 5. DR By Order Asstt. Registrar 8
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