TaxTMI 
TaxTMI 
2019 (2) TMI 1433
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....erred in law and on facts of the case in deleting the amount of Rs. 1,00,04,952/- made on account of income from unexplained source without examining and adjudicating upon on merits of the case. 3) (a) The order of the CIT(A) is erroneous and not tenable in law and on facts. (b) The assessee 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. ITA NO. 4874/DEL/2014 (AY 2009-10) 1) The CIT(A) has erred in law and on facts of the case in admitting the additional evidence and deleting the amount of Rs. 1,50,0,000/- made on account of unexplained cash credit. 2) The CIT(A) has erred in law and on facts of the case in admitting the additional evidence and deleting the addition of Rs. 75,000/- made on account of commission. 3) The CIT(A) has erred in law and on facts of the case in deleting the addition of Rs. 74,67,928/- made on account of claiming the forfeited amount in respect of transaction of properties, in expenses by the assessee. 4) The CIT(A) has erred in law and on facts of the case in deleting the addition of Rs. 73,06,000/- made on account of income from unexplained sources. 5) The CIT(A) has....
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.... his impugned order dated 17.6.2014 has allowed the appeal for statistical purposes. Aggrieved with the impugned order, Revenue is in appeal before the Tribunal. 3. Ld. CIT(DR) relied upon the order of the Assessing Officer and reiterated the contentions raised in the grounds of appeal. With regard to ground no. 1. relating to addition of Rs. 1,50,00,000/- made u/s. 68 of the Act on account of acceptance of share application money is concerned, she submitted that there was Non-compliance of the summons u/s 131 of the Act issued to the share applicant; Opportunity was given to produce persons along with evidences of source of investment, but assessee failed to produce those persons; there was report of Inspector that the share applicants don't exist at the addresses given; the shares were allotted at huge premium of Rs. 900 premium of face value of Rs. 100 each when there was no business plan which could affect the profitability of the company. Hence, she submitted that the addition in dispute was rightly made by the AO. In support of her contention, she stated that the following decisions may kindly be considered with regard to addition u/s. 68 of the I.T. Act and filed the copies....
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....d was liable to be taxed under section 68. 7. CIT Vs Nova Promoters & Finlease (P) Ltd (18 taxmann.com 217, 206 Taxman 207, 342 ITR 169, 252 CTR 187) where Hon'ble Delhi High Court held that amount received by assessee from accommodation entry providers in garb of share application money, was to be added to its taxable income under section 68. 8 CIT Vs Ultra Modern Exports (P.) Ltd (40 taxmann.com 458, 220 Taxman 165) where Hon'ble Delhi High Court held that where in order to ascertain genuineness of assessee's claim relating to receipt of share application money, Assessing Officer sent notices to share applicants which returned unserved, however, assessee still managed to secure documents such as their income tax returns as well as bank account particulars, in such circumstances, Assessing Officer was justified in drawing adverse inference and adding amount in question to assessee's taxable income under section 68. 9 CIT Vs Frostair (P.) Ltd (26 taxmann.com 11, 210 Taxman 221) where Hon'ble Delhi High Court held that where details furnished by assessee about share applicants were incorrect, addition under section 68 was proper 10 CIT Vs N R Portfolio Pvt Ltd f2013l 29 ta....
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....) which consist of copy of ITR's of the share applicants of the subsequent years; Confirmation of the loan, Memorandum of Association, Share application form, Company Master data, list of signatories, latest communication by income tax department, Copies of Share certificates, audited balance sheet, e-filed ITR-V etc already filed before the AO during assessment proceedings. The additional evidences have been admitted by the Ld. CIT(A) which were filed under Rule 46A of the I.T. Rules, 1962. He submitted that the department has not raised any grievance on admission of the additional evidences by the Ld. CIT(A). The additional evidences were referred to the AO during appeal proceedings by the Ld. CIT(A) and the remand report obtained. The Ld. CIT(A) has discussed the remand report and rejoinder of the assessee in para 4.3 and 4.4 at pages 21-23 of CIT(A) order. It was further submitted that on the allegation of AO that inspector report was obtained during assessment proceedings showing that the parties did not exist. In the rejoinder, para 1.5.4 at page 22 of Ld. CIT(A) order, it was mentioned that the share applicant companies are actually working companies as evident from latest ....
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....addition to what is held by the Ld. CIT(A), the assessee's counsel submitted that the assessment year in question is the year just before search/s 132 of the Act by the department and no evidences have been found by the department to dispute or question the cash credits in question. There is no material provided by the investigation wing in case of investigation in other cases that those parties are bogus and fictitious entities. The inspector report appears to have been obtained in the month of Dec 2011 which is clearly contrary to the material on record which show that in notices/summons were issued to those share applicants in the year 2013 were duly served and also income tax returns were filed in subsequent years: S.No Name of Share Applicants Detail of Communication/ Filling of ITR 1. M/s APT Properties Pvt Ltd On 13.08.2013, notice was served by AO, Coy Ward 2(1) (PB 86). Return for AY 2012-13 filed on 31.03.2013. (PB 89). 2. M/s Kay Buildwell Pvt Ltd Summon u/s 131 was served on 18.02.2013 by Dy CIT-14(1), New Delhi. (PB 103). Return for AY 2011-12 filed on 30.03.2012. (PB 106). 3. Multitech SemiConductorsPLtd. Summon u/s 131 was served on 18.02.2013 by Dy CIT-1....
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....he following judgements wherein it has been conclusively held, relying on the decisions in the case of Lovely Exports Pvt Ltd (216 CTR 195) (SC), that as long as the identity of the share applicant was proved, the burden of proving the creditworthiness was not on the Assessee Company. It was also held that if the share application money is received from alleged bogus shareholders, whose names are given to the Assessing Officer, then the department is free to proceed to reopen their individual assessments in accordance with law. But the said amount cannot be taken as unexplained income in the hands of the recipient assessee. The above view was followed in plethora of judgments some of them are mentioned below: (1) Sofia Finance Ltd (205 ITR 98) (Del) (FB) (2) CIT vs Steller Investment Ltd (192 ITR 287) (Del) upheld in CIT vs Steller Investment Ltd (251 ITR 263) (SC) (3) CIT VS Vrindavan Farms (P) Ltd ITA No. 71 to 72 & 84/2015 (Del) dated 12.08.2015 (PB 1-2) (4) CIT vs Fair Invest P Ltd ITA No.232/2012 Dt:22.11.2012 (Del) (PB 75-78); (5) Pr. CIT vs. Goodview Trading Pvt. Ltd. ITA No.377 of 2016 (Del) dated 21.11.2016 (PB 93-95) (6) Pr. CIT vs Green Valley Plywood Ltd ITA 358/2....
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.... is a settled law that suspicion, howsoever strong, cannot take place of proof and there can be no addition on the basis of mere suspicion. Reference, in this regard, may be made to the following decisions:- (1) Lalchand Bhagat Ambica Ram v CIT (1959) 37ITR 288 (SC); (2) CIT v. Paras Cotton Co (2007) 288 ITR 211 (Raj.) (3) Faqir Chand Chaman Lai v. ACIT (2004) 1 SOT 914 (Asr.) [Department's appeal dismissed by P&H High Court in 262 ITR 295 and also by SC in 268 ITR 215 (St); (4) ITO vs Shreedham Construction P Ltd in ITA No. 3754- 3756/Mum/2017 Dt: 14.11.2017 (PB 41 -60) 4.1.8 It was further submitted that Ld. CIT(A) has taken objection to the premium of Rs. 900 per share on the face value of Rs. 100 per share charged by the assessee company considering the lack of proven track record. The identical issue came for consideration before Hon'ble Delhi High Court in the case Pr. CIT vs A.R. Leasing Pvt Ltd in ITA No.361/2017 Dated: 03.07.2017 wherein it was held that if the AO disregards the documents furnished by the assessee to discharge onus u/s 68 and comes to the conclusion that transaction of receiving money as share capital was not a genuine one primarily because t....
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....nue to the share applicant companies on 16.12.2011 for compliance on 21.12.2011 and physical verification was also carried out by the revenue through the Inspector. Thus, the entire process of verification of share capital and framing of the assessment was completed in a period of last month before the proceeding was barred by limitation on 31.12.2011. Since the notice u/s 153A of the Act initiating the scrutiny proceeding was issued much earlier on 13.04.2010, the inescapable conclusion that can be reached is that the assessment was completed in a hurried manner, and therefore the defence of the assessee that it was not provided adequate opportunity appears correct. Further, we do not find from the record that the assessee was ever confronted with the Inspector's report based on which the adverse view was finally taken by the revenue. The revenue has also not commented on the replies received by post. Principles of natural justice are applicable to tax proceedings and, therefore, non-supply of the Inspector's report and failure to comment on the replies received from the parties adversely affected the right of the assessee to be heard. In these circumstances, the assessee cannot....
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....lained above and respectfully following the aforesaid precedent, we are of the view that the addition made by the AO was not legally sustainable and therefore, the same was rightly deleted by the Ld. CIT(A), which does not need any interference on our part, hence, we uphold the action of the Ld. CIT(A) on the issue in dispute and reject the ground no. 1 raised by the assessee. 6. As regards ground no. 2 relating to addition of Rs. 75,000/- on account of unaccounted commission paid on the accommodation entry of share application is concerned, Ld. CIT(DR) has relied upon the order of the AO on this issue and stated that the AO has treated the share application money as a accommodation entries. She further submitted that AO calculated the commission of Rs. 75,000/- @ 0.5% on share application money of Rs. 1,50,00,000/-. 6.1 However, Ld. Counsel for the assessee has relied upon the order of the Ld. CIT(A) and stated that AO has not bring any material or evidence on record which basis above addition of Rs. 75,000/- was made and the AO has referred general practice of accommodation entry providers in para 7 of the assessment order. He further submitted that no live link found in suppor....
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....tted that the liability in question is a contingent liability and deduction thereof is not permitted under law. She further submitted that there was no commercial expediency involved in claiming such deduction as no prudent businessman would make payment so early which on earlier occasions has been forfeited obviously for noncompliance of certain condition by those parties and the genuineness of the claim has been doubled and has been treated as ex- gratia payments no allowed u/s 37(1) as not incurred wholly and exclusively for the purpose of business. Despite that detail has been submitted at the fag end of the proceedings and therefore there was no time available for making inquiries. Hence, the AO has rightly made the addition which needs to be upheld. 7.1 However, Ld. Counsel for the assessee relied upon the order of the Ld. CIT(A) and stated that the additional evidences were submitted before Ld. CIT(A) which consist of agreements with the five parties which could not be submitted before the AO during assessment proceedings. For admission of additional evidences, application under rule 46A were filed before Ld. CIT(A) and in rule 46A Application, the assessee explained the re....
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....er years and same has been accepted in the earlier assessments, writing off such undisputed advances cannot be questioned by the department on the ground that these advances are not genuine. Finally, he stated that assessee has relied on number of judgments before Ld CIT(A) which are reproduced in Ld.CIT(A) order in para 1.7.6 to 1.7.9 on pages 29-30. In view of the above submission made before the Ld. CIT(A), also submitted in the present appeal and Copies of agreements to sell with the parties are enclosed in paper book at pages 24-48, the deletion of addition of Rs. 74,67,928/- need be upheld. 7.2 After hearing both the parties and perusing the records, we find that the assessee had carried on the business of sale of katha and real estate. Revenue from real estate business was shown at Rs. 2,93,91,700/-. Real estate developers usually buy land stock from farmers at agreed rates. Cash advances are given to the prospective seller landowners to book the properties. Sometimes, dispute arise between farmers and developers as to the terms of the sale. In such circumstances, the agreements fall through and the amounts of advances given are forfeited by the sellers. It is usual practic....
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....ourse of search u/s 132 of the Act that the above unaccounted coal has produced income in excess of the income of Rs. 6 Crore offered to tax. The onus lies on the assessing officer to prove with evidence that the assessee has earned income in excess of what has been declared by assessee in its return of income. There cannot be any onus lay upon the assessee to prove a negative fact. The assessee has given a detailed working which is reproduced by the AO on page 12 of the assessment order where unaccounted sales have been estimated at Rs. 36.80 Crore in the hands of the assessee out of total unaccounted sales of Rs. 44.80 Crore noted in annexure A-4/S2. He submitted that the AO does not dispute the above bifurcation as the other party namely M/s Raj Katha Products P Ltd has offered additional income of Rs. 80 lakh in its return of income. From the working of unaccounted sales of Rs. 36.80 Crore, the payment for coal amounting to Rs. 73,06,000/- cannot exceed the coal expenses to be incurred for making the above unaccounted sales. The coal consumption for sale of Katha Rs. 17.40 (PB 16 Schedule H of P&L Account) Crore is Rs. 1.07 Crore(PB 17 Schedule J of P&L Account) which comes to....
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....) and its sister concern namely M/s Raj Katha Products P Ltd. The AO objected to attribution of unaccounted sales to M/s Raj Katha Products P Ltd but he missed the point that the in the statement of Sh Mahesh Mehta, Director of assessee company recorded u/s 132(4) in reply to question No.8 is relevant. The question in the statement was "Q.No.8 You are requested to broadly workout the details of unaccounted receipts as recorded in BAHI A-1 to A-4 for F.Y.2008-09 and F.Y.2009-10. Ans. My accountant Sushil Sharma has worked out the gross unaccounted cash receipts recorded for F.Y.2008-09 are approximately Rs. 40 crore for sale of katta outside the books of accounts. It includes unaccounted sale of katta produced at both my factories i.e M/s Raj Kattha Product (P) Ltd. and M/s Mahesh Wood Products (P) Ltd. Bahalgarh, Sonepat. Further Rs. 20 crore (approximately) pertain to the cash receipt of real estate transactions undertaken by me which are not recorded in regular books of accounts. Similarly for F.Y.2009-10 (i.e. 01.04.2009 to 30.06.2009) unaccounted cash receipt from kattha sale is Rs. 10 crore and unaccounted cash receipt from real estate transactions is Rs. 0.40 crore." In view....
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.... disclosed in the return is concerned, Ld. CIT(DR) relied upon the order of the AO and submitted that the total surrender of income as per statement of the director Sh Mahesh Mehta was Rs. 10 crore and AO found that the assessee has offered following additional income of Rs. 6.80 Crore and additional income of Rs.l,97,22,505/- (Rs.73,06,000/- plus Rs.l,24,16,505/-) made by him and there remained shortage of Rs.l,22,77,495/-. She submitted that AO took the right view that the above short disclosure need be taxed as the same was made based on the incriminating documents found in the course of search. Hence, she requested not to interfere in the addition in dispute and cancel the order of the Ld. CIT(A) on the issue in dispute. 10.1 However, Ld. Counsel for the assessee relied upon the order of the Ld. CIT(A) and submitted that the statement recorded u/s 132(4) of the Act have no evidentiary value unless corroborating evidence found in respect of income offered to tax as recorded in statement. It was further submitted that the director of the assessee company Sh Mahesh Mehta at the time of statement u/s 132(4) of the Act has roughly disclosed income of Rs. 10 Crore from unaccounted s....
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....e been pointed out by AR and accepted by the Ld. CIT(A). The addition made has no basis, except a general admission at the time of search. We note that the AO has himself accepted that the undisclosed income based on transactions recorded in seized documents came to Rs. 9,34,79,821/-. Thus, the question of any further addition with regard to the undisclosed income as per the seized documents does not arise. Hence, the addition made cannot be legally sustained and therefore, was rightly deleted by the Ld. CIT(A), which does not need any interference on our part, therefore, we uphold the action of the Ld. CIT(A) on the issue in dispute and reject the ground no. 6 raised by the Revenue. 11. In the result, the Revenue's Appeal No. 4874/Del/2014 (AY 2009- 10) stand dismissed. ITA NO. 4873/Del/2014 (AY 2008-09) 12. As regards ground no. 1 relating to addition of Rs. 1,50,00,000/- u/s. 68 of the Act on account of unexplained cash credit is concerned, Ld. CIT(DR) has relied upon the order of the AO and stated that AO made addition for failure of the assessee in furnishing copy of bank statements, copy of ITR of the lenders; there was report of inspector that the lenders does not exist ....
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....ssments involved based on seized material, the late commencement of assessment proceedings was indeed cruel for the assessee from the point of view of compliance. It was also submitted that on 30.11.2011 the AO required assessee to file confirmations of unsecured loans and nothing else which was submitted. Thereafter, the AO vide notice u/s 142(1) dated 15.12.2011 (PB 32) required assessee in para 7 to provide proof of identity/creditworthiness and genuineness of the five parties only out of which four parties are the parties with addition of Rs. 1,20,00,000/- were the fresh cash credit for which addition of Rs. 1,50,00,000/- was made. He further submitted that the Ld. CIT(A) admitted the additional evidences on four grounds in para 5.2 at page 11 viz. (A) Adequate opportunity was not provided to furnish these evidences and first opportunity was given on 15.12.2011 to furnish evidences; (B) The reply to letters u/s 133(6)/summons by the revenue were independently tiled by the creditors and inspector was deputed to verify their addresses; (C) The assessment was completed in hurried manner in a month; (D) The inspector report was never confronted to the assessee and neither during a....
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....s. 1,00,04,952/- by M/s Raj Katha Products P Ltd which is not reflected in regular books of account. She further submitted that the AO treated the above document in the hands of assessee although it has been also been dealt in the assessment of M/s Raj Katha Products P Ltd. Hence, she requested to sustain the addition in dispute and cancel the order of the Ld. CIT(A) on this issue. We further note that Ld. Counsel for the assessee, on the other hand, submitted that the documents pertains to M/s Raj Katha Products P Ltd and there is a finding by the Ld. CIT(A) for AY 2008-09 that the document pertain to M/s Raj Katha Product P Ltd. Based on the above annexure, the above company had offered the additional income of Rs. 6 crore from unrecorded transactions. He further submitted that Ld. CIT in para 6.2, there is a finding that the Raj Katha Products P Ltd appeal was decided were unaccounted sales of Rs.l,00,004,952/- and unaccounted expenses of Rs. 85,00,698/- were considered to compute the additional income of Rs. 15,04,254/- and the same are subjected to tax in AY 2009-10 and not in AY 2008-09. In view of above, there is no justification to consider the same document in the case o....