Appeal details
Counselvise Citation
[2011] 100 COUNSELVISE.COM (IT) 2219 (ITAT-DELHI)
Assessee PAN
Bench
Appeal Number
Duration Of Justice
1 year(s) 2 month(s) 25 day(s)
Appellant
Respondent
Appeal Type
Income Tax Appeal
Pronouncement Date
31-03-2011
Appeal Filed By
Assessee
Order Result
Dismissed
Bench Allotted
G
Next Hearing Date
15-02-2011
Assessment Year
2001-2002
Appeal Filed On
06-01-2010
Judgement Text
IN THE INCOME TAX APPELLATE TRIBUNAL [ DELHI BENCH G DELHI ] BEFORE SHRI A. D. JAIN, JM AND SHRI K. D. RANJ AN, AM I. T. A. NO. 69 (DEL) OF 2010 ASSESSMENT YEAR : 2001-02. SHELLY MARKETING PVT. LTD., ASST T. COMMISSIONER OF INCOME-TAX, 6 COMMUNITY CENTRE, VS. C I R C L E : 23 (1), EAST OF KAILASH, N E W D E L H I. N E W D E L H I 110 065. PAN / GIR NO. AAE CS 8542 E. ( APPELLANT ) ( RESPONDENT ) ASSESSEE BY : SHRI PRAMOD JAIN, C. A.; DEPARTMENT BY : SHRI RAVI RAM CHANDRAN, SR. D.R. O R D E R. PER K. D. RANJAN, AM : THIS APPEAL BY THE ASSESSEE FOR ASSESSMENT YEAR 20 01-02 ARISES OUT OF ORDER OF THE LD. CIT (APPEALS)-XI, NEW DELHI. 2. THE GROUNDS OF APPEAL RAISED BY THE ASSESSEE ARE REPRODUCED AS UNDER:- 1. THAT THE LD. AUTHORITIES ERRED IN INVOKING T HE PROVISION OF SECTION 148 IN SPITE OF THE APPELLANT OBJECTING THAT REASON FOR REOPENING HAS NEVER BEEN COMMUNICATED AND LD. CIT (A) DID NOT TAKE UP SAID G ROUND IN FIRST APPEAL; 2. THAT THE LD. AUTHORITIES ERRED IN INVOK ING PROVISION OF SECTION 68 OF THE I. T. ACT IN SPITE OF THE FACT THAT SAID AMOUNT WAS FOR INVESTMENT IN SHARES OF THE APPELLANT COMPANY AND LD. CIT (A) CONFIRMING SAID ADDITION; 2 I. T. A. NO. 69 (DEL) OF 2010 3. THAT AUTHORITIES BELOW ERRED IN NOT FOL LOWING VARIOUS DECISION OF HONBLE SUPREME COURT AND JURISDICTIONAL HIGH COURT AND ITA T IN SPITE OF THE FACT THAT IDENTIFICATION OF SHARE APPLICANT WAS PROVED; RELIEF CLAIMED ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE I T IS PRAYED THAT : I) NOTICE ISSUED UNDER SECTION 148 BE QUASHED FOR WANT OF PROPER COMMUNICATION OF REASON OF RE-OPENING OF ASSESSMENT AND CONSEDQUENTLY ORDER UNDER SECTION 147 / 143/ (3) SET ASIDE; II) ADDITION OF RS.1,00,000/- UNDER SECTION 68 BE DELET ED. 3. DURING THE COURSE OF HEARING, THE ASSESSEE DID N OT PRESS GROUND NO. 1 RELATING TO RE-OPENING OF ASSESSMENT UNDER SECTION 148 OF THE A CT. AS SUCH, THE SAME IS DISMISSED, AS NOT PRESSED. 4. THE ONLY REMAINING ISSUE FOR CONSIDERATION REL ATES TO INVOKING THE PROVISIONS OF SECTION 68 OF I. T. ACT, 1961 IN RESPECT OF INVESTMENT IN S HARES OF THE ASSESSEE COMPANY. THE FACTS OF THE CASE STATED IN BRIEF ARE THAT THE ASSESSING OFFICER RE-OPENED THE ASSESSMENT UNDER SECTION 147 ON 25 TH MARCH, 2008 ON THE GROUND THAT THE ASSESSEE HAS BE EN BENEFICIARIES OF ACCOMMODATION ENTRIES BEING PROVIDED BY CERTAIN ENTRY OPERATORS. AS PER THE INFORMATION RECEIVED FROM DIT, INVESTIGATION, THE ASSESSEE HAD TAKEN RS.1 LAKH FRO M SHRI KAMAL DHAWAN. THE ASSESSEE WAS REQUIRED TO PRODUCE SHRI KAMAL DHAWAN AS THE GENUIN ENESS OF THE TRANSACTION WAS TO BE EXAMINED. HOWEVER, THE ASSESSEE HAD FAILED TO PROD UCE THE CREDITOR. THE ASSESSING OFFICER OBTAINED BANK STATEMENT OF SHRI KAMAL DHAWAN UNDE R SECTION 133(6) FROM CORPORATION BANK, PASCHIM VIHAR, NEW DELHI. ON SCRUTINY OF THE BANK STATEMENT IT WAS FOUND BY THE AO THAT CASH AMOUNTING TO RS.1 LAKH WAS DEPOSITED ON 17/11/2000 I.E. ONE DAY BEFORE THE CHEQUE WAS ISSUED TO THE ASSESSEE. THE AO, THEREFORE, CAME TO THE CO NCLUSION THAT THE AMOUNT OF RS.1 LAKH WAS GIVEN BY THE ASSESSEE TO SHRI KAMAL DHAWAN TO OBTAI N A LOAN. SINCE THE GENUINENESS OF THE TRANSACTION WAS NOT PROVED, THE AO INVOKED THE PROV ISIONS OF SECTION 68 AND MADE ADDITION OF RS.1 LAKH AS UNDISCLOSED INCOME OF THE ASSESSEE. 3 I. T. A. NO. 69 (DEL) OF 2010 5. BEFORE LD. CIT (APPEALS) IT WAS SUBMITTED THAT THE ASSESSEE RECEIVED SHARE APPLICATION MONEY FROM SHRI KAMAL DHAWAN. THE AO HAD ISSUED NO TICE UNDER SECTION 133(6) TO THE BANKERS OF SHRI KAMAL DHAWAN I.E. CORPORATION BANK AND THER EAFTER HE DID NOTHING ON HIS OWN. HE HAD FULL INFORMATION OF SHRI KAMAL DHAWAN. HOWEVER, HE NEITHER ISSUED NOTICE UNDER SECTION 133(6) NOR UNDER SECTION 131 OF THE ACT. THE ASSESSEE PLA CED RELIANCE ON THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF CIT VS. LOVELY EXPORTS 216 CTR 195 (SC). SINCE THE LD. AR OF THE ASSESSEE RAISED A QUESTION ABOUT NON-CONDUCTING OF PROPER ENQUIRY, THE LD. CIT (APPEALS) IN ORDER TO FILL UP THE GAP ASKED THE ASSESSEE TO GIVE PROPER ADDRESS OF SHRI KAMAL DHAWAN. THE LD. AR OF THE ASSESSEE COULD NOT GIVE PRESENT ADDRESS O F SHRI KAMAL DHAWAN. AFTER AN ENQUIRY WAS CAUSED BY THE LD. CIT (A) IT WAS FOUND THAT SHRI KA MAL DHAWAN SON OF SHRI PRITHVI RAJ DHAWAN WAS A RESIDENT OF C-43-A, VISHNU GARDEN, NEW DELHI. HE HAD ALSO FILED HIS RETURN OF INCOME IN WARD : 46 (3) AGAINST PAN : AEKPD8587K. DURING THE COURSE OF HEARING THE ASSESSEE FILED AN AFFIDAVIT FROM SHRI KAMAL DHJAWAN AND A COPY OF ACK NOWLEDGEMENT OF RETURN FOR ASSESSMENT YEAR 2001-02. THE LD. CIT (A) ISSUED SUMMONS UNDER SECTION 131 TO SHRI KAMAL DHAWAN, BUT THE SAME WAS RETURNED UN-SERVED WITH THE POSTAL REM ARKS LEFT. THE LD. CIT (A) THEREAFTER SUMMONED SHRI RAKESH GUPTA, THE DIRECTOR OF THE ASS ESSEE COMPANY AND HIS STATEMENT ON OATH WAS RECORDED ON 7 TH OCTOBER, 2009. IN THE STATEMENT IT WAS SUBMITTED THAT THE SHARE APPLICATION MONEY WAS RECEIVED FROM SHRI KAMAL DHAWAN THROUGH C HEQUE NO.940523 DATED 30/10/2000 DRAWN ON PASCHIM VIHAR BRANCH, NEW DELHI. THE ASSE SSEE WAS NOT HAVING COMMUNICATION WITH SHRI KAMAL DHAWAN. IT WAS ALSO SUBMITTED THAT SHAR ES HAVE BEEN ALLOTTED TO SHRI KAMAL DHAWAN, BUT NO SHARE CERTIFICATE HAD BEEN HANDED OV ER BY SHRI KAMAL DHAWAN AND ORIGINAL SHARE CERTIFICATE WAS STILL LYING WITH THE COMPANY. IT WAS ALSO SUBMITTED THAT SHRI KAMAL DHAWAN HAD LEFT INDIA ALONG WITH HIS FAMILY MEMBERS FEW MONTHS BACK. THE LD. CIT (A) THEREAFTER EXAMINED THE INGREDIENTS OF SECTION 68 O F THE ACT. THE LD. CIT (A) WAS OF THE VIEW THAT SINCE SHRI KAMAL DHAWAN COULD NOT BE PRODUCED BY THE ASSESSEE AND THE SUMMONS ISSUED UNDER SECTION 131 RETURNED UNSERVED PROVED THE FACT THAT THE ADDRESS OF THE SAID PARTY WAS BOGUS. AS REGARDS THE GENUINENESS AND CREDITWORTHINESS OF THE TRANSACTION, THE LD. CIT (A) WAS OF THE VIEW THAT IT WAS NOT KNOWN WHETHER SHRI KAMAL DHAWA N HAD ANY SOURCE OF INCOME OR BUSINESS. NO MATERIAL WAS PRODUCED BEFORE HIM OR BEFORE THE A O TO PROVE THE CREDITWORTHINESS OF THE INVESTOR. THE LD. CIT (A) THEREAFTER EXAMINED THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF LOVELY EXPORTS (SUPRA). HE OBSERVED THAT THE DE CISION IN THE CASE OF LOVELY EXPORTS PVT. LTD. 4 I. T. A. NO. 69 (DEL) OF 2010 WAS RENDERED ALONG WITH THE DECISION IN THE CASE OF DIVINE LEASING AND FINANCE LTD. IN THE CASE OF DIVINE LEASING & FINANCE LTD., THE SHARE APPLICA TION MONEY WAS RECEIVED BY A PUBLIC ISSUE, WHICH WAS NOT A FACT IN THE PRESENT CASE. THE LD. CIT (A) ALSO NOTED THAT IDENTITY OF THE SUBSCRIBER WAS NOT ESTABLISHED AND ALSO THE GENUINE NESS OF THE TRANSACTION COULD NOT BE ESTABLISHED. NEITHER THE CREDITWORTHINESS NOR THE FINANCIAL STRENGTH OF THE SUBSCRIBER COULD BE ESTABLISHED. ALTHOUGH THE PAN OF SHRI KAMAL DHAWAN WAS GIVEN, BUT WHETHER THE SAID PERSON WAS FILING THE RETURN ON REGULAR BASIS, COULD NOT B E STATED BY THE LD. AR OF THE ASSESSEE AND WITH THIS SUBMISSION NO FRUITFUL ENQUIRY COULD BE CAUSED BY THE DEPARTMENT. FURTHER ENQUIRY PROVED THAT SHRI KAMAL DHAWAN HAD FILED RETURN OF INCOME L AST TIME FOR AY 2004-05 AND THEREAFTER NO RETURNS OF INCOME WERE FILED. SINCE THE DEPARTMENT HAD ESTABLISHED, THAT THE IDENTITY OF SUCH PERSON, WHOSE PAN WAS GIVEN DOES NOT HAVE CREDITWOR THINESS AS SUCH IDENTITY ITSELF REMAINS TO BE VERIFIED. THE ONUS AUTOMATICALLY SHIFTS FROM TH E DEPARTMENT TO THE ASSESSEE AND NOW IT WAS FOR THE ASSESSEE TO ESTABLISH BEFORE DEPARTMENT SUC H CREDITWORTHINESS OF SHRI KAMAL WHO HAD INVESTED FUNDS. ALL SUCH MATERIAL EVIDENCE NEVER B ROUGHT ON RECORD IN THE CASE OF LOVELY EXPORTS (SUPRA) OR DIVINE LEASING (SUPRA). HENCE, THOSE CASES WERE DISTINGUISHABLE ON FACTS. HE FURTHER NOTED THAT NON FURNISHING OF CURRENT RETURN , FAILURE OF THE ASSESSEE TO PRODUCE NECESSARY EVIDENCE BEFORE THE AO AS ALSO BEFORE HIM, SUDDEN D ISAPPEARANCE OF SHRI KAMAL FROM THE SCENE OF INVESTIGATION WAS PECULIAR TO THE CASE IN HAND. HE FURTHER NOTED THAT SHRI KAMAL DHAWAN HAD FILED IN AFFIDAVIT DATED 31 ST MARCH, 2009, BUT ACCORDING TO THE ASSESSEE HE HAD LEFT INDIA ALONG WITH HIS FAMILY MEMBERS FEW MONTHS BACK. HENCE ACCO RDING TO OWN SUBMISSIONS OF THE ASSESSEE NO FRUITFUL INQUIRY COULD BE CAUSED FROM SH. KAMAL DHAWAN. THE SUDDEN DISAPPEARANCE OF SHRI KAMAL DHAWAN FROM THE SCENE UNDER NO STRETCH OF IMA GINATION COULD JUSTIFY ANY CAUSE REGARDING IDENTITY OR CREDITWORTHINESS OF THE CREDITOR/INVEST OR TO ESTABLISH THE CREDENTIALS OF SHARE APPLICATION MONEY RECEIVED. THE LD. CIT (A) THEREF ORE, OBSERVED THAT THE ASSESSEE IN ITS OWN ADMISSION HAD DEPOSED BEFORE HIM UNDER OATH THAT NO SHARE CERTIFICATE WAS HANDED TO SHRI KAMAL DHAWAN AND CERTIFICATES IN ORIGINAL WERE STILL LYIN G WITH THE ASSESSEE. HE, THEREFORE, CONCLUDED THAT NO PRUDENT BUSINESSMAN WILL DO THE SAME AND IF SO, WHAT BENEFIT WAS DERIVED BY THE PERSON WHO HAD INVESTED FUNDS IN THE SHARE APPLICATION. S INCE THE SHARE CERTIFICATES WERE WITH THE ASSESSEE, THERE WAS NO LIABILITY TO PAY THE ALLEGED SHARE CAPITAL OR TO PAY ANY ANNUAL AMOUNT BY WAY OF DIVIDEND ETC. HE ALSO NOTED THAT THERE WAS NOTHING ON RECORD TO SHOW AS TO HOW SHRI KAMAL DHAWAN CAME INTO CONTACT WITH THE ASSESSEE AN D WHY HE BECAME SO GENEROUS TO INVEST 5 I. T. A. NO. 69 (DEL) OF 2010 FUNDS WITH THE ASSESSEE AND THEREAFTER WENT OUT OF THE SCENE LEAVING THE FUNDS FOR UTILIZATION OF ASSESSEE FOR ANY NUMBER OF YEARS TO COME. UNDER TH ESE CIRCUMSTANCES, THE LD. CIT (A) TREATED THE SHARE APPLICATION MONEY AS UN-SECURED LOAN. HE PLACED RELIANCE ON THE DECISION OF HONBLE DELHI HIGH COURT IN THE CASE OF INDUS VALLEY PROMOT ERS P. LTD. VS. CIT 305 ITR 202 (DEL.) WHEREIN IT HAD BEEN HELD THAT CREDITWORTHINESS OF T HE DEPOSITORS MUST BE ESTABLISHED TO THE SATISFACTION OF THE AO. SINCE THE CREDITWORTHINESS , IDENTITY AND GENUINENESS WAS NOT PROVED, THE LD. CIT (A) CAME TO THE CONCLUSION THAT THE ASSESSE E HAD INTRODUCED RS.1 LAKH BY WAY OF ALLEGED SHARE CAPITAL IN THE NAME OF SHRI KAMAL DHAWAN, WHI CH WAS NOTHING, BUT UNEXPLAINED UNSECURED AMOUNT AND WAS NOT TO BE TREATED AS SHARE APPLICATI ON MONEY. SINCE THE ASSESSEE HAD NOT PROVED THE IDENTITY, CREDITWORTHINESS AND GENUINENESS OF T HE TRANSACTION, HE UPHELD THE DISALLOWANCE OF RS.1 LAKH. 6. BEFORE US THE LD. AR OF THE ASSESSEE SUBMITTED T HAT THE ASSESSEE HAS RECEIVED SHARE APPLICATION MONEY FROM SHRI KAMAL DHAWAN. THE ASSE SSEE HAS FILED COPY OF PAN NUMBER, COPY OF RATION CARD AND AFFIDAVIT CONFIRMING THE INVESTM ENT MADE IN SHARE CAPITAL. THEREFORE, THE ASSESSEE HAS DISCHARGED INITIAL ONUS AND THE CASE I S COVERED BY THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF CIT VS. LOVELY EXPORTS 216 CT R 195 (SC). ON THE OTHER HAND, THE LD. SR. DR SUPPORTED THE ORDER OF THE LD. CIT (APPEALS). 7. WE HAVE HEARD BOTH THE PARTIES AND GONE THROUGH THE MATERIAL AVAILABLE ON RECORD. THE LD. CIT (APPEALS) CAUSED ENQUIRY AND IT WAS FOUND T HAT SHRI KAMAL DHAWAN SON OF SHRI PRITHVI RAJ DHAWAN WAS RESIDENT OF C-43-A, VISHNU GARDEN, N EW DELHI 110 008. THE LD. CIT (A) ISSUED SUMMONS TO SHRI KAMAL DHAWAN, WHICH WAS RECE IVED BACK UNSERVED WITH THE POSTAL REMARKS LEFT. THEN DIRECTOR OF THE ASSESSEE COMP ANY, SHRI RAKESH GUPTA WAS SUMMONED UNDER SECTION 131 AND HIS STATEMENT ON OATH WAS TAK EN. DURING THE COURSE OF HIS STATEMENT, IT WAS SUBMITTED THAT THE ASSESSEE WAS NOT HAVING ANY COMMUNICATION WITH SHRI KAMAL DHAWAN. IT WAS ALSO STATED THAT SHRI KAMAL DHAWAN HAD LEFT IND IA ALONG WITH HIS FAMILY MEMBERS A FEW MONTHS BACK. SHARES WERE ALLOTTED TO SHRI KAMAL DH AWAN BUT NO SHARE CERTIFICATES WERE GIVEN TO SHRI KAMAL DHAWAN AND THE SHARE CERTIFICATES IN ORI GINAL WERE STILL LYING WITH THE ASSESSEE. 6 I. T. A. NO. 69 (DEL) OF 2010 THE LD. CIT (A) HAS RELIED ON SEVERAL DECISIONS TO ARRIVE AT HIS CONCLUSION THAT WHERE THE IDENTITY, THE CREDITWORTHINESS AND GENUINENESS OF THE TRANSAC TION IS NOT PROVED, THE AMOUNT IS TO BE ADDED UNDER SECTION 68 OF THE ACT. IN THE CASE BEFORE US , AS HELD BY THE LD. CIT (A), THE IDENTITY OF THE INVESTOR HAD NOT BEEN PROVED. HONBLE DELHI HIGH C OURT IN A RECENT DECISION IN THE CASE OF VIJAY POWER GENERATORS VS. DIT [ORDER DATED 31 ST JANUARY, 2011 IN ITA. NO. 514 OF 2007 HAS HELD THA T THE INITIAL BURDEN IS UPON THE ASSESSEE TO EXPLAIN THE NATURE AND SHARE APPLICATION MONEY RECEIVED BY THE ASSESSEE. IN ORDER TO DISCHARGE THIS BURDEN , THE ASSESSEE IS REQUIRED TO PROVE THE IDENTITY OF THE SHARE-HOLDER, THE GENUINENESS OF THE TRANSAC TION AND CREDITWORTHINESS OF THE SHARE-HOLDER. IN THE INSTANT CASE, THE ASSESSEE HAS NOT BEEN ABLE TO PROVE THE IDENTITY OF THE SHARE-HOLDER. THE SHARES ALLEGED TO HAVE BEEN ISSUED ARE STILL IN THE CUSTODY OF THE ASSESSEE AND AS PER ASSESSEE, SHRI KAMAL DHAWAN HAD LEFT INDIA WITH HIS FAMILY MEMBERS . THESE FACTS CLEARLY SHOW THAT THE ASSESSEE HAD INTRODUCED ITS OWN MONEY IN THE FORM O F SHARE APPLICATION MONEY IN THE NAME OF SHRI KAMAL DHAWAN, WHOSE IDENTITY HAS NOT BEEN ESTA BLISHED. THE AMOUNT OF RS 1,00,000/- WAS DEPOSITED IN HIS BANK ACCOUNT A DAY BEFORE THE DATE OF ISSUE OF CHEQUE. THUS THE CAPACITY TO INVEST HAS ALSO NOT BEEN EXPLAINED. THEREFORE, IN OUR CONSIDERED OPINION, THE LD. CIT (A) IS JUSTIFIED IN TREATING THE ALLEGED SHARE APPLICATION MONEY AS UNEXPLAINED UN-SECURED AMOUNT. HE WAS RIGHTLY UPHELD THE ADDITION. ACCORDINGLY, WE D O NOT FIND ANY INFIRMITY IN THE ORDER PASSED BY THE LD. CIT (A) CONFIRMING THE ADDITION OF RS.1, 00,000/-, UNDER SECTION 68 OF THE ACT. 8. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS DISMISSED. THE ORDER PRONOUNCED IN THE OPEN COURT ON : 31 ST MARCH, 2011. SD/- SD/- [ A. D. JAIN ] [ K. D. RANJAN ] JUDICIAL MEMBER ACCOUNTANT MEMBER DATED : 31 ST MARCH, 2011. *MEHTA * 7 I. T. A. NO. 69 (DEL) OF 2010 COPY OF THE ORDER FORWARDED TO : - 1. APPELLANT. 2. RESPONDENT. 3. CIT, 4. CIT (APPEALS), 5. DR, ITAT, NEW DELHI. TRUE COPY. BY ORDER. ASSISTANT REGISTRAR, ITAT.
