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ITO .Ward 11(1) New Delhi. Vs. M/s. Emperor International Ltd. E-18, Model Town New Delhi.
July, 21st 2014
                     DELHI BENCH : B : NEW DELHI


                          ITA No. 2038/Del/2009
                        Assessment Year: 2003-04

ITO                           .     vs.       M/s. Emperor International Ltd.
Ward 11(1)                                    E-18, Model Town
New Delhi.                                    New Delhi.
                                             (PAN AABCE2801J)

                           CO No. 152/Del/2010
                         (ITA No. 2038/Del/2009)
                        Assessment Year: 2003-04

M/s. Emperor International Ltd.     vs.       ITO
E-18, Model Town,                             Ward 11(1)
New Delhi.                                     New Delhi.
(Appellant)                                     (Respondent)

              Appellant by                : Shri Ved Jain, CA
              Respondent by               : Shri Gagan Sood, Sr. DR



     The revenue has questioned first appellate order on the following


1 On the facts and circumstances of the case and in law, the CIT(A) has
erred in deleting the addition of Rs. 27,00,000/- made u/s 68 of the I.T.
Act, 1961.
                                                 ITA No. 2038/Del/2009
                                                 CO No. 152/Del/2010
2. On the facts and circumstances of the case and in law, the CIT(A) had
erred in deleting the addition of Rs. 54,000/- made u/s 69 of the I.T. Act,

2.     The assessee on the other hand in its cross objection objected the

action of the Ld. CIT(A) in holding the reopening of the assessment u/s 147

of the Act as valid. First we have heard appeal of the revenue. In support of

the grounds the Ld. DR has basically placed reliance on the assessment

order. He submitted that the assessee failed to produce the persons from

whom amounts were received. Summons issued by the assessee to them

were also not complied with. The AO was thus justified in observing that

merely by filing the PAN/ITR details onus of the assessee is not discharged.

AO has also observed on perusal of the bank accounts of those four parties

that immediately before issuing cheque, cash has been deposited in their

bank accounts. Thus there were sufficient reasons to doubt the

genuineness of the claimed transaction. The Ld. CIT(A) was therefore not

justified in deleting the addition of Rs. 27 lacs made u/s 68 of the Act and

addition of Rs. 54,000/- made u/s 69 of the Act on the account of

commission for providing accommodation entries @ 2%.

3.    In opposition the Ld. AR has reiterated the submissions made before

the authorities below and placed reliance on the following decisions of the

Tribunal, Delhi Benches :
                                               ITA No. 2038/Del/2009
                                               CO No. 152/Del/2010

1. CIT vs. Vishal Holding and Capital (P) Ltd. ITA No. 1031/2010 order
   dated 9.8.2010 asstt. year 2000-01

2. ITO vs. F. Seven Pharmaceuticals Pvt. Ltd., ITA No. 2553/D/2010
   (asstt. year 2002-03) order dated 19.11.2010

4.    He also refereed copies of several documents filed in support of the

genuineness of the claimed transactions made available at page Nos. 1 to

83 of the paper book.

5.    Having gone through the orders of the authorities below we find that

the AO had denied the genuineness of the claimed receipts of Rs. 27 lacs

on the basis that the assessee failed to produce all those four persons,

summons issued by the AO to them were also not complied with and that

immediately before issuing cheques those four parties had deposited cash

in their respective bank accounts. The submission of the assessee on the

other hand remained that it had received Rs. 5 lac from M/s. Ethnic

Creations P. Ltd., Rs. 7,50,000/- from Arun Finvest Pvt. Ltd., Rs.

10,50,000/- from M/s. Polo Leasing & fin. P. Ltd. and Rs. 4,00,000/- from

M/s. M.V. Marketing Pvt. Ltd. against selling of its investments acquired

earlier years. The details of those sales were provided to the AO alongiwth

details of the purchases, confirmations copy of income tax returns and

supporting documents. It was submitted that the shares sold were acquired

in earlier years and the same had been transferred during this year on the
                                              ITA No. 2038/Del/2009
                                              CO No. 152/Del/2010
basis of which amounts had been received from the said four parties. It was

decided that onus lies upon the revenue to prove that unexplained money

has actually emanated from the coffers of the assessee before it could be

treated as undisclosed income of the assessee. It was submitted that the

AO has not disputed various documents relating to income tax returns,

confirmations and details of investment which have been sold during the

year. It was contended further that it is not a case for making the addition

u/s 68 of the Act considering that it is only a case of         receiving a

consideration towards sale of shares already fully explained by the

assessee. It was argued that just because the creditor did not appear in

response to summon u/s 131 should not lead to adverse inference against

the assessee. Considering these submissions and evidence filed in support

the Ld. CIT(A) has given following finding :-

"I have carefully gone through the facts and circumstances of the
case, submissions of the AR of the appellant and the various judicial
pronouncements related to the issue. The crucial observations and
findings on the basis of which this ground of the appellant is being
finalized are as follows:-

1. The assessing officer has made an addition of Rs. 27 lacs u/s 68
of the Income Tax Act primerly on grounds that the persons to whom
the sale was made did not respond to summons u/s 131 and they
were also not produced before the assessing officer. The AO also
observed that there were cash deposits in the bank accounts of these
parties which provided indications that this transaction was in the
nature of accommodation entries. The AO observed that providing
confirmations or income tax returns of these parties was not sufficient
to establish the genuineness of the same.
                                             ITA No. 2038/Del/2009
                                             CO No. 152/Del/2010
I am of the opinion that since the assessing officer has not disputed
that these shares had been accounted for by the appellant from
earlier years and the sale of the shares had also not been disputed by
the AO, since the income tax returns and the confirmations had been
provided by the appellant, it should be sufficient to establish that a
genuine sale had taken place. Even if there were cash deposits which
appear to the suspicious, they should be considered first in the hands
of those parties unless there is some evidence to establish that these
cash deposits belong to the appellant. In this regard reliance placed
by the AR of the appellant all the decision of CIT Vrs. Value capital
(Supra) is also very relevant.

II. The AR of the appellant has emphasised that the sale of shares
has not been disputed by the AO and the receipts against the sale
cannot be termed as unexplained income of the appellant. From the
facts available it is observed that the AR has provided various details
regarding the acquisition of the shares and the sale of the shares to
the various parties. Merely because of non compliance to summons
u/s 131 or non appearance of these parties before the AO cannot in
itself be considered enough for taking an adverse view against the
appellant specially since ITR, confirmations from these parties had
been filed before the AO. In this regard reliance is placed on the
decision of CIT Vrs. Divine Leasing and Finance Pvt. Ltd 299 ITR (Del)
and CIT Vrs. Orissa Corporation (Supra). In the present set of facts it
is clear that the only dispute raised by the assessing officer was
related to the non appearance of the parties to whom the sale was
made and the cash deposits found in their bank accounts. On both
these grounds, in view of. the various judicial pronouncements, it can
be very validly decided that since the identity and genuineness of the
transaction has been established by the appellant there was no case
for making an addition u/s 68 of the income tax act.

     On the basis of the above observations I am inclined to conclude
that the transaction of sale of shares itself has not been disputed by
the AO and details of income tax return; confirmations etc. have been
provided with regards to the parties to whom sale was made. Under
these circumstances the assessing officer was not justified in making
the addition u/s 68 of the Income tax act. This ground of appellant is
therefore treated as allowed.
                                             ITA No. 2038/Del/2009
                                             CO No. 152/Del/2010
6.      Before the Tribunal the assessee has also filed those documents

before the authorities below in support of the claim. These are copies of

acknowledge of return of income alongwith computation thereof, audited

balance sheet and profit and loss account, replies of the assessee filed

before the AO, ledger account of investment, statement showing details of

investment as on 31.3.2002 and 31.3.2003, statement of details of

investments sold, statement of bank account for the period 1.4.2002 to

31.3.2003, purchase details of investment sold during the year alongwith

corresponding bank statement, details of parties to whom investments were

sold, etc. Considering all these material facts in its totality we are of the

view that the Ld. CIT(A) has rightly deleted the addition of Rs. 27 lacs made

by the AO u/s 68 of the Act. In consequence he was also justified in

deleting the addition of Rs. 54,000/- made on account of commission for

providing alleged accommodation entries @ 2%. The first appellate order as

discussed above is comprehensive and reasoned one, hence we are not

inclined to interfere therewith, the same is upheld. Ground Nos. 1 & 2 are

accordingly rejected.

7.     In the result, appeal is dismissed.

8.      In view of the above finding on the merits of the case the issue

raised in the cross objection regarding the validity of reopening proceedings
                                           ITA No. 2038/Del/2009
                                           CO No. 152/Del/2010
u/s 147 of the Act has become academic in nature which does not need

adjudication. It is accordingly disposed off.

9.       In summary both the appeal and cross objection are dismissed.

         Order is pronounced in the open court on 17th July, 2014.

              sd/-                                       sd/-

        (G.D. AGRAWAL)                            ( I.C. SUDHIR )
       VICE PRESIDENT                           JUDICIAL MEMBER

Dated 17th July, 2014


Copy of order forwarded to:

     1. Appellant       2. Respondent           3.     CIT(A)

     4. CIT              5. DR
                                                     By Order

                                                     Asstt. Registrar, ITAT
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