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2015 (8) TMI 10
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....as erred, in violation of Rule 46A of the Income Tax Rules, 1962 by not following the decision of Hon'ble Delhi High court in the case of Manish Build Well Pvt. Ltd. 204 Taxman 106, wherein it was held by the Hon'ble Jurisdictional High court to give two stage opportunity under rule 46A i.e. first before admission of additional evidence and second after admission of additional evidences. 3. The order of the CIT(A) is erroneous and is not tenable on facts and in law. 4. The appellant craves leave to add, alter or amend any / all of the grounds of appeal before or during the course of the hearing of the appeal. 3. The grounds raised in Assessee's Cross Objection No. 140/Del/2013 (A.Y. 2006-07) are as under:- 1. That on the facts and circumstances of the case, the CIT(A) has erred both in law and on facts in confirming the proceedings initiated under section 153A of the I.T. Act, which is bad in law in the absence of any incriminating material belonging to the assessee being found during the course of search. 2. That on the facts and circumstances of the case, the CIT(A) has erred both in law and on facts in confirming the validate of impugned asses....
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....for that summons were issued u/s. 131(1) of the Act, and information was called u/s. 133(6) of the Act. In the assessment order the AO observes that the requirement of Section 68 of the Act is that the onus to prove the credit entry in the books of accounts is primarily on the assessee and not on the department. According to him, the assessee has not fully discharged its onus to prove the creditworthiness of the creditors companies. He further observed that merely establishing the identity of the creditor is not enough. In this regard, he placed reliance on various judicial pronouncements and held that the amount introduced by the assessee is under the garb of 'share application money/ share capital/ share premium' and therefore treated it as income of the assessee from undisclosed sources within the meaning of section 68 of the Act and the additions of Rs. 2,20,00,000/- was made while completing the assessment u/s. 153A/145(3) of the Act vide his order dated 29.12.2011. 5. Against the aforesaid order of the Assessing Officer, assessee appealed before the Ld. CIT(A), who vide his impugned order dated 28.2.2014 has partly allowed the appeal of the assessee and deleted the ....
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....the paper book filed by the assessee and we take note that the AO made the addition of Rs. 220 lacs u/s. 68 of the Act towards the share subscription money received from three entities i.e. (i) M/s Caplin Commercial Pvt. Ltd. (ii) M/s Raf Steel Pvt. Ltd. and (iii) M/s Universal Electique Pvt. Ltd. For the following reasons:- a) Notice u/s. 131/133(6) issued to aforesaid three entities, were not complied with. b) The AO asked the assessee to produce the director of aforesaid entities, which assessee failed to produce. c) Copy of Bank statement and audited balance sheet were not filed d) The AO was not satisfied with the identity and creditworthiness of the three entities in question based upon ITR of the aforesaid entities filled by the assessee. 9.2 Let us now examine on merits whether the AO's reasons for making the addition u/s 68 of the Act can be justified. The AO alleged that copy of Audited Balance Sheet of the aforesaid entities were not filed by the assessee. We find that the above allegation of the AO is against the material on record. In fact the assessee had furnished the copy of the audited Balance Sheet and ....
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....the A. Y 2007-08. (PB page 105) ⦁ Copy of Acknowledgement of Income Tax Return for the A. Y 2010-11. (PB- page 106) ⦁ Detail of Source of investment mode by the M/s Caplin Commercial Pvt. Ltd. in the share capital of Appellant. (PB - page 102) ⦁ Detail of Director of M/s Caplin Commercial Pvt Ltd. ⦁ Copy of Affidavit filed by the M/s Caplin Commercial Pvt Ltd. before Asstt Commission of Income Tax. (PB - page 107-108) 9.4 The following documents were filed in respect to M/s Raf Steel Pvt Ltd (PB Page 129 to 138) ~ Share Application Forms ~ Copy of Confirmation ~ Copy of ITR for the A. Y 2005-06 and AY 06-07 ~ Copy of Audited Balance Sheet and P&L A/c for the A. Y. 2006-07. ~ Copy of Photocopy of Cheque received by the Assessee in respect of share application Money. 9.5 The following documents were filed before the A.O. in respect to M/s Universal Electrique Pvt Ltd (PB Page 139 to 147) ~ Share Application Forms ~ Confirmation of A/c with certificate of Investment. ~. Copy of ITR for the A. Y 2005-06 ~ Copy of Audited Bal....
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....note that M/s Caplin Commercial Pvt Ltd. had furnished the desired details directly to the AO and filed its reply on 12.12.2011 {P.B. Page No. - 81} alongwith a copy of the same to the assessee. The assessee also furnished the copy of reply of M/s Caplin Commercial Pvt Ltd. to the AO. {Refer P.B.Page 89-90). 9.9 When the two other entities i.e. M/s Raaf Steel and M/s Universal Electrique Motors did not respond to his summons and when the notices returned back to him, he could have collected the address from ROC, which he did not do. Not only that, the assessee pointed out to the AO, that these companies had proved its identity, creditworthiness and genuineness in proceedings before him/ Department in earlier assessment years in the case of assessee/ sister concerns in scrutiny assessments u/s. 143(3) of the Act. In order to prove the identity of these companies the assessee had filed the following documents also: (a) Registration with Registrar of Companies, NCT of Delhi and Haryana, New Delhi. (b) PAN Number (c) Audited Annual Accounts. (d) Copy of ITR (e) Confirmation letter 9.9 In order to prove the creditwort....
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....ear ending on 31st March 2006 reveals that the said company has shareholder funds of more than Rs. 169 lakhs, which is sufficient to pay Rs. 10 lakhs to subscribe the shares of the assessee company. M/s Universal Electrique Motors Pvt Ltd To establish creditworthiness of share holder, the assessee company has filed the Audited balance sheet as on 31/3/2006 of the said company. The Audited balance sheet of the companies for the year ending on 31st March 2006 indicates that the said company has shareholder funds of more than Rs. 151 lakhs, which is sufficient to pay Rs. 10 Lakhs to subscribe the shares of the assessee company. The opinion of the AO that the share subscriber have no creditworthiness or Sufficient money to subscribe in the share capital of the assessee on the basis of income declared by them in their ITR is not correct. Creditworthiness of a person can be viewed/adjudged from the 'Net Owned fund' of a person rather than taxable Income earned by the person in a particular year. In the case of a corporate entity creditworthiness of a company can be adjudged from its share capital and reserve and surplus, therefore the opinion of the AO about th....
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....t us examine the finding of the Ld. CIT(A). 9.12 We find that the Ld. CIT(A) in order to verify creditworthiness and identity of M/s Caplin Commercial Pvt. Ltd. has took the assistance of the "Remand Report" which was called by him in the earlier appellate proceedings in the case of assessee's group / sister company namely M/s Basant Projects Ltd. for assessment year 2006-07 in which the said M/s Caplin Commercial P. Ltd. had given Rs. 1.50 crore to it i.e. M/s Basant Project. The Ld. CIT(A) has taken note about the fact that in that case the AO in his remand report dt. 14.12.2012 of M/s Basant Project, has clearly admitted the identity, creditworthiness and genuineness of the transaction with M/s Caplin Commercial P Ltd. with the said company (i.e. M/s Basant Project, sister concern of the assessee). The Ld. CIT(A) has reproduced the said 'Remand Report' of the AO which is reproduced again for the sake of convenience "That the requisite documents has been filed by the Caplin Commercial Pvt. Ltd. & from the examination of the document the identity, creditworthiness and genuineness of transaction with Caplin Commercial P. Ltd. stands established". In the light of....
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....ctrique Motors Pvt Ltd. have filed its replies to notice under section 133(6) and various documents were also filed before the AO, to prove its creditworthiness and identity and genuineness of the transactions and that were duly accepted by the Department. Similarly in the assessee's own assessment proceedings for the Assessment Year 2005-06 all the corporate shareholders including M/s Raf Steel Pvt Ltd and M/s Universal Electrique Motors Pvt Ltd. have filed the requisite details before the AO in response to notices under section 133(6) in order to prove their creditworthiness and identity and genuineness of the transactions, and the same were duly accepted by the Department. Therefore, the Ld. CIT(A) rightly opined that just because in the proceedings under section 153A, notice issued by the department under section 131 could not be complied with by these two companies, the AO could conclude that money received from M/s Raf Steel Pvt. Ltd. and M/s Universal Electrique Motors Pvt. Ltd. are unexplained credit. The Ld. CIT(A) took note of the fact that the AO had enough power bestowed on him by the Act to ensure the attendance of these companies directors and Ld. CIT(A) found tha....
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....nd for drawing adverse inference against the assessee, as having been drawn by A.O. in this case to make the addition u/s. 68 of the Act. 9.18 Ld. CIT(A) has relied on the legal maxim - "lex non cojit ad impossibilia" - which means "the law does not compel a man to do that which he cannot possibly perform". In this regard, he has made reference and relied on the judgment by Hon'ble Supreme Court in Cochin State Power & Light Corporation Ltd. v. State of Kerala [AIR 1965 SC 1688, 1691]; Vinod Krishna Kaul v. Union of India [JT 1995(9) SC 205, 208]; Attiq-Ur-Rehman v. Municipal Corporation of Delhi [JT 1996 (2) SC 670, 678]; Manohar Joshi v. Nitin Bhaurao Patil [(1996) 1 SCC 169, 179]; Life Insurance Corporation of India v. CIT[(1996) 219 ITR 410, 418 (SC)]. 9.19 Ld. CIT(A) took note of the fact that the assessing officer was aware of the particulars of bank accounts of shareholders from which these companies made the investment and the assessing officer could have verified the same by making inquiries from bank if he wanted to, but he has chosen not to do. So it was not justified to make the addition. The ld. CIT(A) has taken note that no incriminating document/evidence....
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....e Motors Pvt Ltd represents assessee's own undisclosed income. 9.23 Thus, in view of the factual position as well as the judicial pronouncement on the subject, discussed above, Ld. CIT(A) has rightly held that the assessee has discharged the initial onus of establishing the bona-fides of the transactions and the AO was not justified in ignoring various evidences produced by the assessee and which were available before him on record of the department itself in reassessment proceedings of North Delhi Projects Pvt Ltd for the A.Y 2004-05 and in assessee's own case for AY 2005-06 as stated before in para 9.16 and when no incriminating documents/ evidence is found during the search to suggest that the M/s Raf Steel Pvt Ltd and M/s Universal Electrique Motors Pvt Ltd are sham entities and when its respective balance sheet speaks otherwise. 9.24 Further it is observed by the Ld. CIT(A) that the AO has accepted the identity, creditworthiness and genuineness of these companies in following assessments:- a) M/s Universal Electrique Motors P. Ltd Creditworthiness/genuineness of investment of Rs. 10,00,000 made by Universal Electrique Motors P. Ltd i....
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....y. The assessee was asked to explain as to why the said amount of Rs. 1,11,50,000/- may not be added to its income. In response, the assessee has submitted that there is no such credit in the books of the assessee. Rather, the assessee company has received the share application money for allotment of its share. It was stated that the actual amount received was Rs. 55,50,000/- and not Rs. 1,11,50,000/- as mentioned in the notice. The assessee has furnished details of such receipts and the contention of the assessee in respect of the amount is found correct. As such the unexplained amount is to be taken at Rs. 55,50,000/-. The assessee has further tries to explain the source of this amount of Rs. 55,50,000/- by furnishing copies of share application money, balance sheet etc. of the parties mentioned above and asserted that the question of addition in the income of the assessee does not arise. This explanation of the assessee has been duly considered and found not acceptable. This entry remains unexplained in the hands of the assessee as has been arrived by the Investigation wing of the department. As such entries of Rs. 55,50,000/- received by the assessee are treated as an unexplain....
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....ed on the basis of enquiry report, which collected certain facts and the statements of Mr.Mahesh Garg that the income sought to be added fell within the description of S.68 of the Income Tax Act 1961. Having regard to the entirety of facts and circumstances, the Court is satisfied that the finding of the Tribunal in this case accords with the ratio of the decision of the Supreme Court in Lovely Exports (supra). The decision in this case is based on the peculiar facts which attract the ratio of Lovely Exports (supra). Where the assessee adduces evidence in support of the share application monies, it is open to the Assessing Officer to examine it and reject it on tenable grounds. In case he wishes to rely on the report of the investigation authorities, some meaningful enquiry ought to be conducted by him to establish a link between the assessee and the alleged hawala operators, such a link was shown to be present in the case of Nova Promoters & Finlease (P) Ltd. (supra) relied upon by the revenue. We are therefore not to be understood to convey that in all cases of share capital added under Section 68, the ratio of Lovely Exports (supra) is attracted, irrespective....
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....Rule 46A. Moreover, the learned DR could not point out any additional evidence which has been adduced before the ld. CIT(A) for the first time to invoke Rule 46A. Hence, the contention raised by the Department regarding violation of Rule 46A, has no merits, therefore, we reject the ground no. 2 raised in the appeal. 11. In the result the Revenue's appeal is dismissed. CROSS OBJECTION No. 140/DEL/2013 (AY 2006-07) 12. We find that similar Cross Objection was raised by the Assesee in CO No. 245/Del/2014 (In ITA No. 2288/Del/2013) (A.Y. 2007-08) in the case of Aggarwal Plaza Pvt. Ltd. vs. DCIT wherein similar issues have been raised. We have already dealt with the same at length and we have followed in that case the Coordinate Bench decision of even date in the case of that assessee's own case for A.Y. 2008-09, wherein on identical grounds emanating from the same search which resulted in proceedings u/s Section 153A wherein, the Bench has held as under:- "14. Since the Special Bench has decided this issue in this manner, it is not possible for us to deviate from the same. There has to be some consistency in the view taken by the Tribunal. Once a ....