IN THE INCOME TAX APPELLATE TRIBUNAL
DELHI BENCH "E", NEW DELHI
BEFORE SHRI H.S. SIDHU, JUDICIAL MEMBER
AND
SHRI PRASHANT MAHARISHI, ACCOUNTANT MEMBER
I.T.A. No. 180/DEL/2016
A.Y. : 2010-11
ITO, WARD 18(1), VS. NET HEALTCARE SERVCIES (P)
NEW DELHI LTD.
572, 2ND FLOOR, GANDHI
CLOTH MARKET,
CHANDNI CHOWK,
DELHI
(PAN: AACCN6291P)
(ASSESSEE) (RESPONDENT)
Revenue by : Ms. Rinku Singh, Sr. Dr.
Assessee by : None
ORDER
PER H.S. SIDHU : JM
The Revenue has filed this Appeal against the impugned Order
dated 30.10.2015 of the Ld. CIT(A)-42, New Delhi relevant to
assessment year 2010-11.
2. The grounds raised in the appeal read as under:-
i) Whether facts and circumstances of the case and in law
the Ld. CIT(A) is justified in deleting addition of Rs. 20
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lakhs and Rs. 2.81 crore by admitting additional evidence
under rule 46A of Income Tax Rule, 1962 (the Rule) even
when the assessee was not prevented by sufficient cause
from producing books of accounts and evidence with
regards to identity, genuineness and creditworthiness of
investor of share application money?
ii) Whether in facts and circumstances of the case and
in law Ld CIT(A) is justified in admitting additional
evidence under Rule 46A of the Rule only on the basis of
self serving and unproven claims by the assessee and
ignoring ratio decidendi as laid down on the similar issue
of non cooperation by the assessee during assessment
proceedings by Hon'ble Delhi High Court in case of CIT v
Gold Leaf Capital Corporation Ltd (2013) 353 ITR 163
(Delhi) and Hon'ble Supreme Court in the case of Salil
Dutta v T.M and M.C. Private Ltd 1993-002 SCC-185-SC?
iii) Whether in facts and circumstances of the case and in
law, the Ld CIT(A) is justified in deleting addition of Rs.
2.81 crore on account of unexplained share application
money without considering his own finding that the
assessee did not carryout of any business activity and
had no source of income i.e. the assessee had no worth
as well as following findings as evident from remand
report dated 09.09.2015:
· no evidence of creditworthiness of investors
investing Rs. 2.95 crore as share application money was
filed;
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· even audit report of investing companies (total
investment of Rs. 95.66 lakhs) was not filed; and
· Copies of bank A/c of investors indicated deposit of
cash or cheque immediately before investment in share
application money?
4. Whether in facts and circumstances of the case and
in law, the Ld CIT(A) is justified in deleting addition
of Rs. 2.81 crore u/s 68 of the Act by wrongly
quoting the AO that the assessee had filed copies of
audit reports, Board's resolutions and affidavit
affirmed by the directors of the 15 investor
companies during remand proceedings?
5. Whether in facts and circumstances of the case and
in law Ld. CIT (A) is justified in deleting addition of
RS. 2.81 crore on account of unexplained share
application money without making further enquiry
as directed by Hon'ble Delhi High Court in case of
CIT v Jansampark Advertising and Marketing P. Ltd
(2015) 375 ITR 373 (Del) and without analyzing
copies of bank account and document as provided
by the AO alonwith remand report?
6. Whether in facts and circumstances of the case and
in law the Ld CIT(A) is justified in deleting addition
of Rs. 2.81 crore on account of unexplained share
application money by holding that creditworthiness
was proved by mere production of details of Income
Tax Return details or issues of cheques or by
furnishing copy of bank account and ignoring ratio
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decidendi laid down by Hon'ble Delhi High Court on
the issue in the cases of CIT v N.R. Portfolio Pvt.
Ltd (2014) 2 ITR-OL-68, CIT v Nipun Builders and
Developers P. Ltd (2013) 350 ITR 407, CIT v
Navodaya Castles Pvt. Ltd (2014) 367 ITR 306?
7. Whether in facts and circumstances of the case and
in law, the Ld CIT(A) is justified in deleting addition
of Income of Rs. 20 lakhs as estimated by the AO
u/s 144 by taking into account facts and
circumstanced of the case and due to non-
production of the books of accounts by the
assessee?
8. That the order of the CIT(A) is erroneous and is
not tenable on facts and in law.
9. That the appellant craves leave to add, alter,
amend or forgo any ground(s) of appeal either
before or at the time of hearing of the appeal.
10. That the appellant craves leave to add, alter,
amend or forgo any ground(s) of appeal either
before or at the time of hearing of the appeal.
3. The brief facts of the case are that the assessee filed the
return of income on 01.04.2011 at Rs. NIL and it was processed u/s
143(1) of the Income Tax Act, 1961 (hereinafter referred as "Act")
and later picked up for scrutiny by issue of notice u/s 143(2) of the
Act on 28.09.2011, which was claimed by the AO to have been
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served upon assesssee in person. On various subsequent dates,
notices were issued but the assessee did not comply with. A
questionnaire dated 04.04.2012 was then issued for hearing on
24.04.2012, but was not complied with. In response to the notice
dated 20.12.2012 scheduling the hearing for 28.12.2012, the AR of
the assessee appeared and filed a letter on 24.12.2012, whereby
the new address of the assessee company and its new management
was filed. It was also informed that the old management had sold of
shares of the company to the new management. Subsequently, a
detailed questionnaire was issued along with a notice u/s 143(2) of
the Act on 26.12.2012, which was again not complied with. Under
the circumstances, the AO issued a final show cause notice on
27.02.2013, in which the assessee was informed that any further
non-compliance will lead to best judgement assessment. The AO
also had informed that in such a case, the share application money
of Rs. 2.95 crore would be deemed as income u/s 68 of the Act
and the business income of the assessee will be assessed at Rs. 20
lakh. This notice was received back on 04.03.2013 with the remark
"No such firm at such address". Thereafter, the notice was served
by affixture by the Inspector. However, no further compliance was
made. Under the circumstances, the AO treated the share
application money of Rs. 2.95 crores received during the year as
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unexplained cash credit u/s 68 of the Act vide his order dated
11.3.2013 passed u/s. 144 of the Income Tax Act, 1961. Secondly,
in the absence of any books of account, the business income was
estimated at Rs. 20 lakh and accordingly the income of the assessee
was assessed at Rs. 3,15,00,000/-. Against the assessment order,
the assessee filed the appeal before the Ld. CIT(A) who vide his
impugned order dated 30.1.2015 has partly allowed the appeal of
the assessee. Aggrieved with the order of the Ld. CIT(A)-42, New
Delhi the Revenue is in appeal before the Tribunal.
4. Ld. CIT(DR) relied upon the Order of the AO and reiterated the
contentions raised in the grounds of appeal.
5. In this case, Notice of hearing to the assessee was sent by the
Registered AD post, in spite of the same, assessee, nor its
authorized representative appeared to prosecute the matter in
dispute, nor filed any application for adjournment. Keeping in view
the facts and circumstances of the present case and the issue
involved in the present Appeal, we are of the view that no useful
purpose would be served to issue notice again and again to the
assessee, therefore, we are deciding the present appeal exparte
qua assessee, after hearing the Ld. DR and perusing the records.
6.
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add ld. counsel for not granting opportunity of cross exaqmination
by the AO and CIT(A) also add andoman nikobar decision and delete
the same.
We have heard the Ld. DR and perused the records, especially the
impugned order. With regard to ground no. 1 & 2 are concerned,
relating to admission of additional evidence under Rule 46A of the
Income Tax Rules, 1962 are concerned, we find that assessee was
asked to file evidence in support of appointments/representation of Mr.
Ashok Khandewal as counsel for the assessee. It is noted that assessee
filed before the Ld. CIT(A) a copy of the letter dated 21.12.2012, which
was received by the ITO W. 13(2) on 24.12.2013. In the said letter, the
said counsel has mentioned that the assessee company had sold its
shares to the persons mentioned in the share purchase agreement (new
management) and informed the current address of the company and of its
Directors. Thus, the fact that Mr. Ashok Khandewal was the assessee's
authorised representative stands duly proved. In view of the above, as
the said counsel failed to represent before the AO in response to various
notices, which were provided to him by the assessee shows that the
assessee was prevented by sufficient cause from producing the evidence,
which was called upon to be produced before the AO. We further find that
the AO has objected to admit the additional evidence on the ground that
adequate opportunities were given to the assessee during the assessment
proceedings and, hence, the assessee cannot take plea that he was
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prevented by sufficient cause for filing the necessary evidence. However,
it is evident that the AO has not examined the plea of the assessee that
the non-compliance of the assessee was due to professional negligence on
the part of its counsel as alleged by its Director in the affidavit affirmed,
which was enclosed along with additional evidence. Keeping in view the
above, as the said counsel failed to provide the correct new address of the
company subsequent upon its acquisition by the new management as a
result of share purchase agreement, a copy of which was placed before
the AO, evidently, the assessee could not have complied with the notices
issued at the old address. This is more so relevant as at no stage the new
management would have come to know about the issuance of notice u/s
143(2) of the Act fixing the hearing, which was dispatched at the old
address as per record. It is evident that the first notice at the given
address was dispatched on 20.12.2012, which was handed over to the
counsel of the appellant company, who was looking after the assessee's
case in earlier years assuming that he was well versed with the matters.
The said counsel thereafter did not appear before the AO, nor informed
the assessee about developments in assessment proceedings. Therefore,
the Directors of the company were prevented by sufficient cause from
producing the evidence. Under the circumstances, Ld. CIT(A) has rightly
held that it is a fit case to admit additional evidence under Rule 46A(l)(b)
& (c) of the I.T. Rules, 1962. It is noted that AO has challenged such
admission in the circumstances mentioned in clause(d), however, the
assessee has not made the request under clause(d). Therefore, the
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objections of the AO in this regard are misplaced and are over-ruled.
Accordingly, the additional evidences were rightly admitted by the Ld.
CIT(A), which does not need any interference on our part, therefore,
we uphold the action of the Ld. CIT(A) on the issues in dispute and
reject the grounds raised by the Revenue.
6.1 With regard to ground no. 3, 4, 5 & 6 relating to deletion of
addition of Rs.2.81 crores on account of unexplained share
application money are concerned, we find that AO has examined the
additional evidences during the remand proceedings and, hence, verified
that the assessee had filed a copy of ITR, Audit Report, bank statement,
share application, Board's Resolution, Stamp Duty as per ROC record and
affidavit affirmed by the Directors of the 15 investor companies, who had
invested an aggregate amount of Rs. 2,95,25,000/- as share application
money in the assessee company. The AO issued notice u/s 133(6), in
which all the share applicants have confirmed having been given the
cheques to the appellant and have further submitted a copy of ITR,
Balance Sheet and the bank statement. The AO also deputed an Inspector
for field enquiry, who has verified the documents in support of identity,
genuineness and creditworthiness. The AO has also verified that the said
share applicants have duly recorded such investments in their balance
sheet also. Thus, the AO has confirmed that other than 3 persons,
namely, M/s Ravi Sales Corporation, Shyam Lai and M/s Hind Pharma, in
all other cases, there was no cash deposit in the bank account prior to
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issuing the cheque as share application with the assessee company. It is
also noted that in case of the above-referred 3 share applicants, namely,
M/s Ravi Sales Corporation, Shyam Lai and M/s Hind Pharma, there were
cash deposits just before issue of cheques to the appellant company. No
satisfactory explanation with regard source of such cash deposit was
given before the AO nor before me. The AO had issued summons to these
3 parties in the remand proceedings, who failed to comply before the AO.
The assessee could not produce these parties nor could furnish any
cogent reason for their non-appearance. Under the circumstances,
genuineness of cash credits in respect of these three parties remains
unexplained. In view of this, cash credits aggregating to Rs. 14 lakh
received from these 3 parties are held as unexplained cash credit u/s 68.
However, as in respect of other 12 parties, there is no adverse evidence
on record to suspect their identity, genuineness or creditworthiness, and
the AO has verified the authenticity of supporting documents filed by the
appellant in this regard, the balance share application money received
from such parties is held as explained. Accordingly, the assessee got part-
relief by the Ld. CIT(A), which does not need any interference on our
part, therefore, we uphold the action of the Ld. CIT(A) on the issue
in dispute and reject the grounds raised by the Revenue.
6.2 Apropos ground no. 7 is concerned, relating to deletion of
addition of Rs. 20 lacs, we find that AO was compelled to make some
kind of estimation with regard addition to income in the absence of any
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compliance made by the assesse before the AO during the assessment
proceedings. As discussed above, we have upheld the action of the Ld.
CIT(A) for allowing the admission of additional evidences on the grounds
that the assessee was prevented by sufficient cause to produce evidences
called for by the AO during the assessment proceeding on account of
professional negligence by its AR, Mr. Ashok Khandewal, CA, who was
handling the tax matters of appellant prior to its take-over by the new
management. It is also seen that the AO had, vide notice dated
08.03.2013, required the assessee to produce books of account. The
appellant has pleaded that even though the books of accounts were not
produced before the AO due to the above mentioned reason, yet the
audited financial accounts were enclosed with the return of income and
are available on the assessment record. It was submitted that the
assessee was carrying out no business during the current year and also in
the immediately preceding year and its return for the immediately
preceding year was accepted by the AO as such. Since the AO has not
brought out any evidence on record to suggest that the assessee was
carrying out any business activity during the year from whom, it had
earned income and has not raised any query on the audited financial
accounts filed by the appellant along with the return of income, the action
of the AO of estimating the income is held to be baseless and arbitrary
without support of any evidence gathered in this regard or based on any
material available on record. In the one-line order on this issue, the AO
has not discussed the basis for estimating the business income of Rs. 20
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lakh. Therefore, such addition was rightly deleted by the Ld. CIT(A),
which does not need any interference on our part, therefore, we
uphold the action of the Ld. CIT(A) on the issue in dispute and
reject the ground raised by the Revenue.
6.3 Ground no. 8, 9, & 10 are general in nature, hence, need not
be adjudicated.
7. In the result, the Revenue's Appeal stands dismissed
Order pronounced on 05/02/2019.
Sd/- Sd/-
[PRASHANT MAHARISHI] [H.S. SIDHU]
ACCOUNTANT MEMBER JUDICIAL MEMBER
Date 05/02/2019
SRBHATNAGAR
Copy forwarded to: -
1. Assessee -
2. Respondent -
3. CIT
4. CIT (A)
5. DR, ITAT TRUE COPY
By Order,
Assistant Registrar, ITAT, Delhi Benches
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