ITA No.1644/Del/2012
Asstt.Year: 2003-04
IN THE INCOME TAX APPELLATE TRIBUNAL
DELHI BENCHES `C' NEW DELHI
BEFORE SHRI G.D. AGRAWAL, VICE PRESIDENT
AND
SHRI CHANDRAMOHAN GARG, JUDICIAL MEMBER
ITA NO. 1644/DEL/2012
ASSTT.YEAR: 2003-04
ACIT, vs Gulshan Polyols Ltd.,
Circle-12(1), G-81, Preet Vihar,
New Delhi. New Delhi-110092
(PAN: AABCG3954F)
(Appellant) (Respondent)
Appellant by: Shri Satpal Singh, Sr. DR
Respondent by: Shri Mohmmad Shahid, CA
O R D E R
PER CHANDRAMOHAN GARG, J.M.
This appeal of the Revenue has been directed against the order of the
CIT(A)-XV, New Delhi dated 31.1.2012 in Appeal No.243/10-11/CIT(A)-XV
for AY 2003-04.
2. The Revenue has raised only one ground in this appeal which reads as
under:-
"1. Whether ld. CIT(A) was correct on facts and
circumstances of the case and in law in deleting the
addition/disallowance of Rs.25,00,000/- made by the AO on
account of share capital/share application money."
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3. Briefly stated the facts giving rise to this appeal are that information was
received from the Investigation Wing that the assessee has taken
accommodation entries from certain entry operators and has introduced Rs.25
lakh in the garb of share capital from three different corporate entities. The AO
issued notice u/s 148 of the Act for reopening of assessment on 22.3.2010 and
objections of the assessee against the said notice were dismissed by the AO's
order dated 24.12.2010. Subsequently, the AO proceeded to frame
reassessment and the AO made addition of Rs.25 lakh to the income of the
assessee, treating the share application money as unexplained credit u/s 68 of
the Income Tax Act, 1961. The aggrieved assessee preferred an appeal before
the CIT(A) which was allowed by passing the impugned order. Now, the
aggrieved revenue is before this Tribunal with the sole ground as reproduced
hereinabove.
4. Apropos the only ground raised by the revenue, we have heard arguments
of both the sides and carefully perused the relevant material placed on record
including reassessment order, impugned order of the CIT(A), Paper Book filed
by the assessee spread over 87 pages and ratio of the decisions relied by both
the parties. Ld. DR submitted that the AO reopened the assessment by way of
issuing notice u/s 148 of the Act and objections to the reopening of the assessee
were found unsustainable. The DR further contended that the AO rightly
observed that the entry operators have already given statement under oath to the
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Asstt.Year: 2003-04
income tax authorities that they are entry providers and have received cash from
the beneficiaries before issuing cheques to the respective entities, therefore, the
AO was right in making addition of Rs.25 lakh to the income of the assessee,
treating the amount received in the garb of share capital as unexplained credit
u/s 68 of the Act. The DR further contended that the CIT(A) was not justified
in deleting the impugned addition without any justified and reasonable cause.
The DR vehemently contended that the CIT(A) grossly erred in holding that the
transaction regarding share application money received by the assessee was a
genuine transaction and the same was not accommodation entry. The DR
finally prayed that the impugned order may be set aside by restoring that of the
AO.
5. Replying to the above, ld. Counsel appearing for the assessee submitted
that when the assessee has discharged its initial onus of establishing the bona
fides of transaction by way of submitting identity of the subscribers, their
addresses, PAN Nos., assessment particulars etc. and when the assessee has
discharged the initial onus to establish the bonafides of the transaction, then the
AO was not justified in ignoring various evidences submitted by the assessee.
Ld. Counsel further contended that the AO kept aside all relevant evidence
details and explanation of the assessee and simply relied on the statement of the
so-called entry providers recorded by the Investigation Wing of the Department
on the back of the assessee and the assessee was not provided due opportunity
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Asstt.Year: 2003-04
of cross-examining these so-called entry providers. Ld. Counsel vehemently
contended that the AO took a hyper technical approach in rejecting the evidence
and explanation of the assessee at the threshold without any examination and
verification and the AO was also not justified in making the addition simply
relying on the statement of the so-called entry providers recorded by the
Investigation Wing on the back of the assessee.
6. On careful consideration of above submission and factual matrix of the
case, we observe that the CIT(A) has granted relief to the assessee by following
the decision of Hon'ble Supreme Court in the case of CIT vs Divine Leasing
& Finance Ltd. (CC375/2008 dated 21.1.08). The relevant operative part of
the impugned order reads as under:-
"7.10 Hon'ble Delhi High Court in the case of CIT vs.
Pradeep Gupta 207 CTR 115, which has also been relied upon
by the Delhi ITAT in the recent judgement in the case of
Babita Gupta ITA No. 2897/06, wherein it is held that in the
facts of the case before us it may be seen that from the very
beginning Ld AD had shifted entire burden upon the assessee
and no material was brought by him to prove his allegation
that the impugned amount represented assessee company's
undisclosed income. Therefore, on this ground alone the entire
addition deserves to be deleted and may kindly be held so.
7.11 In view of the factual position as well as the judicial
pronouncement on the subject, discussed above, I am of the
considered view that the appellant has discharged the initial
onus of establishing the bona-fides of the transactions and the
AO was not justified in ignoring various evidences provided to
him by the appellant. Nothing adverse has been brought on
record by the AO to establish that the amount of share
application money of Rs. 25,00,000 Lacs received by the
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appellant from the said parties represents its own undisclosed
income.
If there was doubt about the source of investment of the said
company, then additions should have been made in the case of
investor company and not in the hands of the appellant
company. The appellant has relied upon the decision of
Hon'ble Supreme Court in CIT Vs DIVINE LEASING &
FINANCE LTD. (CC 375/2008) dated 21/01/2008 wherein it
was held -
"We find no merit in this Special Leave Petition for the simple
reason 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 re-open their individual assessments in accordance
with law."
7.12 Reliance in this regard is also placed on the decision of
Hon'ble Delhi High Court in the case of CIT vs. Pondy Metal
and Rolling Mill Pvt Ltd (Delhi)(ITA No. 788/2006) dated
19.02.2007, wherein the Hon'ble Court concurred with the
findings of the Appellate Tribunal, Delhi Bench IF' that once
the identity of the investor has been manifest and is proved, the
investment cannot be said to be the undisclosed income of the
assessee. At best, the amount could be added in the hands of
the investor but it certainly could not be treated as undisclosed
income of the Assessee. The appeal filed against the said
decision, was dismissed by the Hon'ble Supreme Court in C.C.
12860/2007 dated 08/01/2008.
8.13 In the light of the above discussion, I am inclined to agree
with the arguments and evidences provided by the appellant to
substantiate that the transaction regarding Share Application
Money received by it was genuine transactions and the same
was not accommodation entry. I also do not find any evidence
collected by the AO which could prove otherwise. Accordingly,
the AO was not justified in treating the amount of share
application money received by the appellant as its undisclosed
income.
In view of our aforesaid discussion, I delete the addition of
25,00,000, made by the AO under Section 68 of the Income
Tax Act, 1961."
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7. In view of above, we are inclined to hold that the AO was not justified in
rejecting the evidence and details submitted by the assessee without any further
verification and examination of the same. We also observe that the AO made
addition by accepting the statement of the alleged entry providers recorded by
the Investigation Wing accepting the same as gospel truth without affording
opportunity of cross-examination to the assessee. At this juncture, we
respectfully take guidance from the decision of Hon'ble Apex Court in the case
of CIT vs Divine Leasing and Finance Ltd. (supra) wherein dismissing the
special writ petition of the department, their lordships held that if 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. Under
the facts and circumstances of the present case, we are in agreement with the
conclusion of the CIT(A) that once the identity of the investor has been
manifested and proved by the assessee by submitting their names, addresses,
PAN Nos. and other relevant details, then the capital receipt of share application
money cannot be said to be the undisclosed income of the assessee and addition
u/s 68 of the Act is not sustainable. However, the AO is free to proceed to
reopen the individual assessments of the respective persons who provided share
capital money.
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Asstt.Year: 2003-04
8. Accordingly, we hold that there is no ambiguity, perversity or any other
valid reason to interfere with the impugned order and we uphold the same.
9. In the result, sole ground of the revenue being devoid of merits is
dismissed and resultantly, the appeal of the revenue is also dismissed.
Order pronounced in the open court on 28.11.2014.
Sd/- Sd/-
(G.D. AGRAWAL) (CHANDRAMOHAN GARG)
VICE PRESIDENT JUDICIAL MEMBER
DT. 28th NOVEMBER, 2014
`GS'
Copy forwarded to:-
1. Appellant
2. Respondent
3. C.I.T.(A)
4. C.I.T.
5. DR
By Order
Asstt.Registrar
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