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ACIT, Circle 12(1) New Delhi Vs. Hindustan Commerce Pvt. Ltd. 40-41, Community Centre, New Friends Colony, New Delhi
March, 26th 2015
              IN THE INCOME TAX APPELLATE TRIBUNAL
                           DELHI BENCH "C",
                              NEW DELHI
            BEFORE SHRI J.S. REDDY, ACCOUNTANT MEMBER
                                 AND
                 SHRI A.T. VARKEY, JUDICIAL MEMBER


                              ITA No. 406/Del/2012
                            (Assessment Year: 2002-03)

            ACIT,                  Hindustan Commerce Pvt. Ltd.
            Circle 12(1)           40-41, Community Centre,
            New Delhi        Vs.   New Friends Colony,
                                   New Delhi
                                   (PAN: aabch0593f)
            (Appellant)            (Respondent)


                                C.O. NO. 247/DEL/201
                                (In ITA NO.406/DEL/2012)
                                      A.Y. : 2002-03
      Hindustan Commerce Pvt. Ltd.     VS.    ACIT,
      40-41, Community Centre,                Circle 12(1)
      New Friends Colony,                     New Delhi
      New Delhi
      (PAN: AABCH0593F)
      (APPELLANT)                            (RESPONDENT)

                 Department by      :        Sh. Satpal Singh, Sr. DR
                    Assessee by     :        Sh. R.S. Singhvi, CA

               Date of Hearing             01.01.2015
               Date of pronouncement        25.03.2015


                                   ORDER

PER A. T. VARKEY, JUDICIAL MEMBER

      The Revenue has filed the present appeal and the Assessee has filed
the Cross Objection against the impugned order dated 24/11/2011 passed
by the Ld. Commissioner of Income Tax (Appeals)-XXVIII, New Delhi for the
assessment year 2002-03 on the following grounds:-

2.    The Revenue has raised the following grounds in its Appeal:-

      "1.   Whether Ld. CIT(A) was correct on facts and circumstances of
            the case and in law in deleting the addition of Rs. 75,00,000/-
                                                                            Page 2 of 8


              made by the AO u/s. 68 of the Act         treating the share
              application money as unexplained cash credit.

      2.      The appellant craves leave, to add, alter or amend any ground
              of appeal raised above at the time of the hearing."

3.    The Assessee has raised the following grounds in its Cross Objection:-

      "1(i)   That on the facts and circumstances of the case, the CIT(A) was
              not justified in sustaining reopening u/s. 148 of the I.T. Act, 1961.
      (ii)    That there is no factual or legal basis for assuming jurisdiction
              u/s. 148 and order passed by the lower authorities are not
              sustainable on facts and under the law.
      2.      That the issue of reopening is fully covered as per order of the
              ITAT in assessee's own case for assessment year 2001-02."

4.    First we take up the Cross Objection filed by the assessee. The facts in
brief are that the return     of income in this case was filed on 28.10.2002
declaring income of Rs. 1,28,908/-.     This return was processed under section
143(1) of the Act. Later on AO had issued a notice u/s. 148 of the Act on
27.3.2009 for reopening of assessment on the basis of the report from the
Investigation   Wing    of   the   Department     regarding    allegation     about
accommodation entries to the extent of Rs. 1,93,73,050/-. The AO provided
photocopy of the reasons in which it was observed that the Assessee has
obtained accommodation entries to the extent of Rs. 1,93,73,050/-. In this
case vide letter dated 21.4.2009 of the assessee company, the assessee
company has stated that the return of income already furnished u/s. 139
may be treated as having been furnished in pursuance of notice u/s. 148
dated 27.3.2009. In response to the statutory notices, A.R. of the Assessee
attended the proceedings from time to time. As required by the assessee a
copy of the reasons recorded for reopening of the case has been provided
to the assessee. Thereafter, after considering the details, AO has completed
the assessment vide his assessment order dated 21.12.2009 u/s. 147/143(3) of
the I.T. Act, 1961 made additions.        Being aggrieved with the aforesaid
assessment order, assessee appealed before the Ld. CIT(A), who vide
impugned order dated 03.1.2012 has deleted the addition and the appeal of
the Assessee was partly allowed, but sustained the legal ground of assuming
the jurisdiction under section 148 of the Act by the AO.
                                                                       Page 3 of 8


5.    Now the Assessee has filed the Cross Objection regarding the
assumption of jurisdiction by AO u/s. 148 of the I.T. Act.

6.    During the hearing, Ld. Counsel of the assessee has stated that the
similar issue has been dealt by this Tribunal in favour of the assessee in
assessee's own case for the asstt. Year 2001-02 regarding assumption of
jurisdiction u/s. 148 and also stated that the facts and circumstances of the
case in the present asstt. Year i.e. 2002-03 are identical and same, hence, the
order dated 31.1.2011 of the Tribunal for the asstt. Year 2001-02 may be
followed in this year regarding assumption of jurisdiction u/s. 148 of the Act.
In this behalf, Ld. Counsel of the assessee has filed the copy of order dated
31.1.2011 of the Tribunal. Therefore, he requested that Cross Objection of the
Assessee may be allowed by following the order dated 31.1.2011 passed by
the Tribunal in assessee's own case for the asstt. Year 2001-02 on this legal
ground.




7.    On the other hand, Ld. DR relied upon the order of the AO.

8.    We have heard the both parties and perused and considered the
relevant record available with us specially the impugned orders passed by
the Revenue Authorities and the copy of the Tribunal's order dated 31.1.2011
of this Bench passed in assessee's own case         for the asstt. Year 2001-02,
wherein the Tribunal has adjudicated the issue as under:-

      "Relevant extract from the order of ITAT, Delhi in appellants own case
      for A.Y. 2001-02 in ITA No. 600/Del/2010, dt. 31/01/2011.

      6. We have duly considered the rival contentions and gone through
      the record carefully. Section 147 of the Act provides that if the
      Assessing Officer has reason to believe that any income chargeable to
      tax has escaped assessment for any assessment year, he may subject
      to the provisions of sec. 148 to 153, assess or reassess such income and
      also any other such income chargeable to tax which has escaped
      assessment and which comes to his notice subsequently in the course
      of assessment proceedings under this section. Thus, a bare perusal of
      section 147 would make it clear that if the Assessing Officer has reasons
      to believe that any income chargeable to tax as escaped assessment
      for any assessment year, he may, issue the notice under sec. 148 for
      reopening of the assessment. The interdiction available in the proviso
      appended to this section put an embargo upon the powers of the
      Assessing Officer for issuing such notice. The proviso prohibits the
                                                                  Page 4 of 8


issuance of such notice, if an assessment under sec. 143(3) was framed
and four years have expired. In such cases, Assessing Officer will be
able to issue notice only in the circumstance, if he established that an
assessee failed to disclose fully and truly all material facts necessary for
his assessment for that assessment year. It means that Assessing Officer
has to demonstrate on the record that assessee failed to disclose all
material facts fully and truly m respect of assessment of income in the
assessment year. Let us see in the present case how the Assessing
Officer is able to demonstrate this aspect in the reasons recorded or
otherwise in the reassessment order. The reasons are available at page
No.31 of the paper book. These have been reproduced also by the
Assessing Officer in the assessment order. Assessee has filed objections
to these- reasons and Assessing Officer has disposed of those
objections vide letter dated 19th September 2008. This order of the
Assessing Officer is also available on page Nos. 27 to 29 of the paper
book. We have considered the objections of the assessee available at
page 30, reasons recorded by the Assessing Officer as well as the order
vide which objections have been disposed of. We have also
considered two letters written by M/s. Performance trading & Inv. Co.
Pvt. Ltd. dated 27.01.2003 and M/s. Star garments dated 5.2.2003 which
has been placed on page nos. 1 to 11 of the supplementary paper
book. On due consideration of all the material, we find that
application of mind with the live nexus between the information and vis
& vis formation of belief at the end of the Assessing Officer is totally
missing. The assessment has been reopened in a Casual manner. In the
reasons, Assessing Officer has made a reference to 14 entries, out of
these 8 alleged not to have been received by the assessee as held by
the Learned CIT(Appeals). The share application money according to
the assessee has been received in respect of two entities, instead of 5
referred by the Assessing Officer in the reasons. In respect of these two
entities, assessee has submitted the details in the original assessment
proceedings. Assessing Officer had issued letters under sec. 133(6) of
the Act and required these two concerns to supply necessary
information. They have responded to the letter of Assessing Officer and
submitted their ITRs, confirmation and PAN etc. Assessing Officer has
not made any addition thereafter. It suggests that he must have
considered this aspect, though it is not discernible in the assessment
order passed under sec. 143(3) of the Act. In the order vide which
objections have been disposed of by the Assessing Officer, he did not
bother to examine this aspect. It clearly suggests that Assessing Officer
has not applied his mind to the information alleged to have been
received from the Investigation Wing viz-viz the material available on
record. He took the information as a gospel truth and proceed to
reopen the assessment. Hon'ble Delhi High Court has considered this
aspect in the case of Sarthak Enterprises in ITA No. /Del/ declared on ,
wherein the Hon'ble High Court has quashed the reopening of the
assessment. In view of the above discussion, we find merit in the cross-
objection filed by the assessee and accordingly the cross-objection is
allowed and reopening of the assessment is quashed."
                                                                       Page 5 of 8


9.    In view of the above, we find considerable cogency in the submission
of assessee's counsel on the issue in hand and find that the present legal
issue involved is squarely covered by the aforesaid Tribunal's decision dated
3.1.2011, as aforesaid, decided in assessee's own case for the asstt. Year
2001-02, therefore, respectfully following the precedent, we allow the cross
objection filed by the assessee and reopening of the assessment is quashed.

Revenue's Appeal

10.   On merit, the grievance of the Revenue is that the Ld. CIT(A) has erred
in deleting the addition of Rs. 75,00,000/- made by the AO u/s. 68 of the Act
treating the share application money as unexplained cash credit. On this
issue, as per the Report of the Investigation Wing bogus entries to the extent
of Rs. 75,00,000/- were accepted by the assessee. The AO issued notice u/s.
142(1) dated 3.12.2009, inter alia was called upon to furnish the following
details / documents in respect of issuance of share capital/ share application
money.

            a)       Confirmations of the entries

            (b)      Copy of ITR of the share applicants / lenders for the AY
                     200-03.

            c)       The copy of bank statement of the share applicants/
                     lenders.

            d)       A complete set of audited accounts for the year ending
                     31.3.2002 in respect of the share applicants / lenders

            e)       Copy of account of share applicants/ lenders in your
                     book.

            f)       Photocopy of share application forms.

11.   On perusal of the documents filed in respect of alleged share
applicants following observations / findings were noted:-

            a) Photocopies of undated confirmations have been filed.
            b) No ITR for AY 2002-03 filed as required. The same is filed for AY
                  2000-01 only.
                                                                      Page 6 of 8


            c) The acknowledgement of return for AY 2000-01, either loss or
                meager income is shown, which not at all proves the
                creditworthiness of the alleged share applicants.
            d) Even audited accounts for FY 2001-02 not filed the same have
                been filed for FY 2000-01 only.

      Accordingly, in view of the facts and circumstance of the case and
      evidences coupled with the preponderance of probabilities (as held in
      the case of Sumati Dayal vs. CIT) and the finding of the Investigation
      Wing, the AO observed that the genuineness of transaction and
      creditworthiness of the alleged share applicants remained to be
      proved and thus the said addition of Rs. 75,00,000/- was being treated
      as unexplained entry and added back to the income of the assessee
      u/s. 68 as income from undisclosed sources under the head "income
      from other sources".

12.   Aggrieved with the aforesaid order of the AO, assessee appealed
before the Ld. CIT(A), who vide impugned order dated 24.11.2011 by
following the tribunal's order dated 31.1.2011 in assessee's own case for the
asstt. Year 2001-02 has deleted the addition of Rs. 75,00,000/-.

13.   Against the above order the Revenue is in appeal before the Tribunal.

14.   Ld. DR relied upon the order of the AO and reiterated the contentions
raised in the grounds of appeal.

15.   On the other hand, Ld counsel for the assessee has stated that Ld.
CIT(A) has rightly followed the order of the Tribunal dated 31.1.2011 passed in
assessee's own case for the asstt. Year 2001-02       wherein the Tribunal has
adjudicated the issue on merit as under:-







      On merit, the grievance of revenue is that Learned CIT(Appeals) has
      erred in deleting the addition made by the Assessing Officer. With the
      assistance of learned representative, we have gone through the
      record carefully. In the assessment order, the Assessing Officer has
      nowhere discussed the details of applicants from whom the assessee
      has received the share application money. He made a reference to
                                                                       Page 7 of 8


      the parties M/ s. Performance Trading & Inv. Pvt. Ltd. and M/ s. Star
      Garments. He has not discussed how many other share applicants are?
      The contentions of the assessee before the Learned CIT(Appeals) was
      that Assessing Officer has made a reference of Rs. 46,05,500/- in the
      reasons recorded for reopening. In fact, the relevant amount was of
      only Rs.15 lacs which relate to the two concerns, namely, M/ s.
      Performance Trading & Inv. Pvt. Ltd. and M/ s. Star Garments. A sum of
      Rs. 10,00,000/- was alleged to have been received from M/ s.
      Performance Trading & Inv. Pvt. Ltd. and Rs.5,00,000/- from M/ s. Star
      Garments. Assessing Officer has made the addition of Rs.1 crore. The
      assessee contended that it has filed confirmation from all the share
      applicants in the original proceedings and that has been accepted by
      the Assessing Officer. The assessee has placed on record details of
      such share applicants on page nos. 61 to 65 of the paper book.
      Learned CIT(Appeals) after taking into consideration the evidence
      produced by the assessee has deleted the addition. Learned DR relied
      upon the order of the Assessing Officer. He was unable to controvert
      the findings of fact recorded by the Learned CIT(Appeals). On the
      other hand, learned counsel for the assessee relied upon Learned
      CIT(Appeals)'s order as well as made a reference to the details
      available on page 61 to 65 of the paper book.

      8.     We have duly considered the rival contentions and gone
      through the record carefully. The assessee has received share
      application money from 21 parties which includes M/ s. Star Garments
      and M/ s. Performance Trading & Inv. Pvt. Ltd. The details of all other
      applicants are available on page Nos. 61 to 65 where the assessee has
      disclosed the names and address, PAN and the mode through which it
      has received the money. Assessing Officer did not make any reference
      to any of the share applicants how their identity was not proved. He
      has not made any inquiry about the genuineness of the transaction or
      otherwise. The reference to the information supplied by the
      Investigation Wing is related to Rs. 15 lacs only. That information was
      only an information at the most for have initiation of some inquiry, it
      cannot be such an evidence to disbelieve all other details submitted
      by the assessee without making any reference to those details. In view
      of these facts coupled with the detailed finding of the Learned
      CIT(Appeals) on the strength of authoritative pronouncement of
      Hon'ble High Court as well as of Hon'ble Supreme Court, referred by the
      Learned CIT(Appeals), we do not see any reason to interfere in his
      order. The appeal of the revenue is dismissed."

16.   In view of the above finding of the Tribunal, Ld. CIT(A) has observed
that in the instant case the AO has not given a finding that documents in
support of the identity of the share holders have not been placed on record
and they were forged documents. In view of the discussions made above
the addition of Rs. 75,00,000/- is uncalled for. However, the AO is free to take
                                                                        Page 8 of 8


appropriate action as may be permissible under the law in the case of
various share holders alleged to be entry providers.

17.      Accordingly, Ld. CIT(A) has rightly held that in view of the facts and
circumstances of the case which are similar to Asstt. Year 2001-02 and the
finding of the CIT(A) and ITAT, Delhi Bench, he was of the considered opinion
that the action of the AO by making an addition of Rs. 75,00,000/- u/s. 68 of
the I.T. Act in respect of share market is unjustified and therefore, deleted. In
view of the above, we do not see any reason to interfere in the order of the
Ld. CIT(A) on this issue, hence, we uphold the same by upholding the order
of the Ld. CIT(A) on this issue. In the result, the appeal of the Revenue is
dismissed.

18.      In the result, the Cross Objection filed by the assessee stands allowed
and Appeal filed by the Revenue stands dismissed.

         Order pronounced in the open court on 25.03.2015.


                   -Sd/-                                      -Sd/-
          (J.S.REDDY)                                    (A. T. VARKEY)
       ACCOUNTANT MEMBER                               JUDICIAL MEMBER
 Dated:25/03/2015

A K Keot

Copy forwarded to

      1. Applicant
      2. Respondent
      3. CIT
      4. CIT (A)
      5. DR:ITAT
                                                              ASSISTANT REGISTRAR
                                                                ITAT, New Delhi

 
 
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