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
IN THE INCOME TAX APPELLATE TRIBUNAL
DELHI BENCHES `B' NEW DELHI
BEFORE SHRI J.SUDHAKAR REDDY, ACCOUNTANT MEMBER
SHRI CHANDRAMOHAN GARG, JUDICIAL MEMBER
ITA NO. 2082/DEL/2011
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 by: Smt. Parwinder Kaur, Sr. DR
Respondent by: Shri Vivek Gupta, CA
O R D E R
PER CHANDRAMOHAN GARG, J.M.
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
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
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
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
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...."
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
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
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
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,
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
(J.S. REDDY) (CHANDRAMOHAN GARG)
ACCOUNTANT MEMBER JUDICIAL MEMBER
DT. 08th DECEMBER, 2014
Copy forwarded to:-
4. C.I.T. 5. DR