Referred Sections:
Section 68 of the Income Tax Act.
Section 115JB
Section 133(6) of the I.T. Act
Section 131
Referred Cases / Judgments:
Sumanti Dayal vs. CIT 214 ITR 801
Pr. CIT (Central)-I Vs. NRA Iron & Steel Private Limited, 103 taxmann.com 48 (SC).
$~34.
* IN THE HIGH COURT OF DELHI AT NEW DELHI
+ Date of Decision: 15.11.2019
% ITA No. 811/2019
VASHULINGA FINANCE PVT.LTD. ..... Appellant
Through: Dr. Rakesh Gupta, Ms. Monika Ghai,
Ms. Tani Malik and Mr. Rohit Kumar
Gupta, Advocates.
versus
DEPUTY COMMISSIONER OF INCOME TAX ..... Respondent
Through: Ms. Vibhooti Malhotra and
Mr.Siddharth Manocha, Advocates.
CORAM:
HON'BLE MR. JUSTICE VIPIN SANGHI
HON'BLE MR. JUSTICE SANJEEV NARULA
VIPIN SANGHI, J. (ORAL)
1. The appellant has preferred the present appeal to assail the order dated
18.04.2019 passed by the Income Tax Appellate Tribunal, Delhi Bench "D":
Delhi in ITA No.190/Del/2009 in respect of the Assessment Year 2004-05.
The Tribunal has allowed the appeal preferred by the Revenue against the
order dated 03.11.2008 of CIT (Appeals).
2. The CIT (Appeals) had deleted the addition of Rs.1.17 Crore made by
the Assessing Officer on account of unexplained cash credits under Section
68 of the Income Tax Act. The assessee had filed its return of income on
ITA No. 811/2019 Page 1 of 8
30.11.2004 declaring ,,Nil income. However, tax was paid under Section
115JB on the book profit of Rs.24,86,664/-. The assessees case was
selected for scrutiny. During the year, the assessee company received fresh
share application money to the tune of Rs.1,54,40,710/- from 16 entities
which were as follows:
KSK Share & Stock Brokers (P) Ltd., Kolkata 6,00,000
B.T. Technet Ltd., Delhi 20,00,000
Vital Fincon (P) Ltd., Kolkata 10,00,000
Lodhasons Consultancy Services (P) Ltd., Kolkata 10,00,000
Bothra Suitings Pvt. Ltd., Kolkata 3,00,000
Changia Steels Pvt. Ltd., Delhi 5,00,000
Sekhawati Finance Pvt. Ltd., Delhi 5,00,000
Dadhichi Trading & Holding Pvt. Ltd., Kolkata 15,00,000
KBR Township Pvt. Ltd., Kolkata 6,00,000
Everlast Fincon Pvt. Ltd., Kolkata 1,00,000
Sparton Commerce Ltd., Ludhiana 5,00,000
Reposit Trading Pvt. Ltd., Kolkata 5,00,000
Labh Tronics Overseas Pvt. Ltd., Delhi 5,00,000
Savera Commercial Enterprises Ltd., Ludhiana 5,00,000
Gracious Portfolio Pvt. Ltd., Delhi 10,00,000
Era Advertising & Marketing Co. Pvt. Ltd., Delhi 5,00,000
1,17,00,000
ITA No. 811/2019 Page 2 of 8
3. The assessee was asked to furnish details of the share application
money received, and was also asked to furnish copy of the ITR and audited
accounts for Assessment Year in question of all the persons who had
advanced the share application money to the assessee company. Bank
statements from where the said investment in share application money was
made were also called for. After examining the materials produced, the
Assessing Officer made the aforesaid addition, since the Assessing Officer
was not satisfied with the explanation offered by the appellant assessee. In
the order passed by the ITAT, the ITAT has paraphrased the findings
returned by the Assessing Officer in the following words:
"2.1 On perusal of the bank statements of the above
Companies, A.O. noticed that just before debit entry favouring
the assessee company, there was credit entry of the similar
amount and in some cases even cash was deposited just before
debit entry. Moreover, in some cases, the confirmation was
given by the Companies in respect of purchase of shares i.e.,
they have confirmed that they have purchased the shares with
the money so advanced. As against said confirmation, the
assessee company has shown only the receipt of share
application money pending allotment in the names of those
Companies. Moreover, in none of the confirmation letters (All
confirmations were on the Letter Head of the respective
Companies), the telephone number of the respective Company
was mentioned. Besides this, the A.O. observed that Sparton
Commerce Ltd., Ludhiana and Savera Commercial Enterprises
Ltd., Ludhiana were having their Offices in Ludhiana and have
been filing the returns in Ludhiana, but, the Auditors who have
conducted the statutory audit of both these companies were
situated in Kolkata and the Bank Account, through which,
investment was made were maintained with Vijaya Bank, New
Delhi. All these facts created suspicion and in order to satisfy
the genuineness
address of outside Delhi. and summons under see`tt
ITA No. 811/2019 Page 3 of 8
of the transaction, assessee was asked to produce the Principal
Officers of the Companies situated in Delhi for verifying the
genuineness of the transaction, but, the assessee company failed
to do the needful. Thereafter, the A.O. with a view to verify the
genuineness of the transaction, has issued notice under Section
133(6) of the I.T. Act to the Companies having address of
outside Delhi and summons under Section 131 were issued to
the Companies having their addresses in Delhi. In the notice
under Section 133(6), the Principal Officer of their respective
Companies were asked to furnish the details of all the
transactions with the assessee company for earlier year and
assessment year under appeal, copy of the account of the
parties in their-books, copy of the bank statements, copy of the
income tax returns along with computation of income and
balance-sheet. Summons issued under section 131 to Principal
Officer of these Companies were required to appear in person
with similar details above. Out of the above summons and
notices sent, summons sent to Gracious Portfolio Pvt. Ltd.,
Delhi and Changia Steels Pvt. Ltd., Delhi and notices under
section 133(6) sent to Savera Commercial Enterprises Ltd.,
Ludhiana and Spartan Commerce Ltd., Ludhiana were received
back un-served from the postal authorities with the remarks 'no
such firm exists at the mentioned address". The assessee was,
therefore, confronted with the same facts. The assessee was
requested to get the compliance of these notices/ summons. On
the date fixed, the A.P. received replies from courier from three
Investors In respect of notice under section 133(6) of the I.T.
Act viz. Reposit Trading Private Ltd., Kolkata, Bothra Suitings
Pvt. Ltd,, Kolkata and Everlast Fincon Pvt. Ltd., Kolkata. Only
a letter was received from these companies. These companies
have not sent the Copies of the audited accounts copy of the ITR
and copy of the Bank account which could prove the
genuineness of the transaction. The A.O. also noted from the
envelopes that these envelopes have been sent through courier
from Darya Ganj, New Delhi, which were also incorrect. The
A.O. also received reply from Savera Commercial Enterprises
Ltd., Ludhiana: and Sparton Commerce Ltd., Ludhiana where
ITA No. 811/2019 Page 4 of 8
notices under section 133(6) could not be served and returned
with the remarks "no such Company exists". The A.O.
therefore, noted that assessee failed to explain the identity,
creditworthiness of the Investors and genuineness of the
transaction in the matter. The A.O. accordingly made addition
of Rs. 1.17 crores under section 68 of the I.T. Act, 1961."
4. The appeal preferred by the appellant before the CIT (Appeals)
succeeded. As noticed above, the ITAT has reversed the order passed by the
CIT (Appeals).
5. The ITAT has examined the position as emerging on record and the
findings returned by it are as follows:
"6. We have considered the rival submissions. It is not in
dispute that assessee received share application money from 16
parties as reproduced above. It is not in dispute that before
giving the amounts in question to the assessee company, there
are credit entries of the similar amounts in the accounts of the
Investors and in some cases even cash had been deposited
before making investment in assessee company. In some cases
the alleged amount of share application money was paid but no
share have been allotted. The assessee did not explain as to
why the premium was paid and why the amount has been taken
from the Investors was kept pending for allotment of shares. No
telephone number have been mentioned, on the Letter Head of
the Investors. In the case of Ludhiana Investors, their accounts
have been audited by the C.A. of Kolkata. The Ludhiana
Investors have maintained Bank account at New Delhi. The
assessee did not produce any of the Directors/Principal Officer
of Investor Companies before A.O. for verification of the
genuineness of the transaction in the matter. The A.O. issued
summons under section 131 of the I.T. Act and notices under
section 133(6) to the Investors to produce the documents and
appeared personally before A.O, but, the same have not been
complied with by the Investors, or the assessee. Some of the
ITA No. 811/2019 Page 5 of 8
notices also returned un-served with the remarks "no such
person exist at the given address". All these facts were
confronted to the assessee to make compliance and to produce
Directors/Principal Officer of the Investor Companies, but, no
compliance have been made. Few of the Investors have filed
their reply to the notice under section 133(6) of the I.T. Act,
but, their replies have not been sent from Kolkata as same have
been sent through courier from Darya Ganj, New Delhi without
documents. Ludhiana Investors sent their reply to the notice
under Section 133(6) of the I.T. Act from Ludhiana address
where they do not exist as per the report of the postal
authorities. These factors clearly create a doubt and suspicion
in the explanation of assessee. It is well settled Law that burden
is upon assessee to prove identity of the Investors, their
creditworthiness and genuineness of the transaction in the
matter. However, the assessee failed to do so. The assessee
merely filed confirmation and certain documents which did not
inspire confidence of the A.O. Whatever documentary evidences
were produced, were full of doubts and did not prove
creditworthiness of the Investors and genuineness of the
transaction.
6.1. It may also be noted here that assessee filed return of
income declaring NIL income. However, the tax was paid under
section 115JB on the book profit of Rs.24,86,664/-. The
assessee did not explain when assessee filed NIL returned
income, why such Investors would make investment in assessee
company that too at Premium without verifying the financials of
the assessee, which were mostly from Kolkata and Ludhiana.
6.2. On going through the returned income filed by the
Investor Companies, it was found that they have filed their
returns of income at meager/low net income which ranges
income in hundres to thousands only after claiming deductions.
Thus, the assessee as well as the Investors have not justified for
entering into such transaction. It also creates doubt in the
explanation of assessee. It may also be noted here that four
Investors from Kolkata have been operating from the same
ITA No. 811/2019 Page 6 of 8
address: Three more Investors from Kolkata are also having
the same address. Two Ludhiana parties have also given the
same address, but, the postal authorities reported that no such
company exist at the given address. These facts clearly show
that though the assessee may be able to prove the identity of the
creditors because they are assessed to tax, but, assessee failed
to prove the creditworthiness of all the Investors as well as
genuineness of the transaction in the matter. The Hon'ble
Supreme Court in the case of Durgaprasad More 82 ITR 540
and in the case of Sumanti Dayal vs. CIT 214 ITR 801 held that
"Courts and Tribunals have to judge the evidence before them
by applying the test of human probabilities". If the said test is
applied in this matter, it clearly established that assessee has
failed to prove the genuineness of the credits received in the
matter, Thus, there was no justification for the Ld. CIT(A) to
have deleted the addition on very vague and cryptic reasons."
6. The Tribunal has also noticed several decisions of this Court as well
as the decision of the Supreme Court in Pr. CIT (Central)-I Vs. NRA Iron
& Steel Private Limited, 103 taxmann.com 48 (SC).
7. The submission of learned counsel for the appellant is that the
Tribunal has not disclosed any reasons as to why the order passed by the
CIT (Appeals) was erroneous. We do not find any merit in this submission
since the order of the Tribunal clearly sets out its reasons as to why it had
disagreed with the findings of the CIT (Appeals).
8. Learned counsel for the appellant has also submitted that the appellant
had submitted several documents before the Tribunal which do not find any
reference in the impugned order. Even this submission has no merit. It is
not that the Tribunal is expected to deal with each & every document that
ITA No. 811/2019 Page 7 of 8
the assessee may produce before it. The Tribunal is required to examine the
basis on which the Assessing Officer has made the additions, since those
additions have been set aside by the CIT (Appeals) in appeal.
9. We have consciously extracted the findings returned by the Assessing
Officer as well as by the ITAT, only to demonstrate that there is in-depth
consideration of all the facts & circumstances as emerging from the record,
and it is absolutely clear and evident that the appellant assessee failed to
discharge the onus placed upon it under Section 68 of the Act to establish
the genuineness of the transaction and the creditworthiness of the investors/
creditors. The assessee had only disclosed the identity of the investors, who
too remained faceless despite notices to them.
10. In the present case, the first two aspects as taken note of
hereinabove, were not clearly established. In our view, no question of law
arises for our consideration in the present appeal since the impugned order is
primarily premised on appreciation of evidence.
11. Dismissed.
VIPIN SANGHI, J
SANJEEV NARULA, J
NOVEMBER 15, 2019
B.S.Rohella
ITA No. 811/2019 Page 8 of 8
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