IN THE INCOME TAX APPELLATE TRIBUNAL
(
BEFORE SHRI U.B.S. BEDI, JUDICIAL MEMBER
and
SHRI B.C. MEENA, ACCOUNTANT MEMBER
ITA No.4738/Del./2009
(ASSESSMENT YEAR : 2001-02)
ITO, Ward 5 (2),
(APPELLANT)
Vs.
M/s. Kautilya Monetary Services Pvt. Ltd.,
10, Local Shopping Complex, Kalkaji,
(PAN: AAACK3995P)
(RESPONDENT)
ASSESSEE BY: Shri Adesh K. Jain, CA
REVENUE BY:
ORDER
PER B.C. MEENA, ACCOUNTANT MEMBER :
This appeal filed by the revenue emanates from the order of CIT (Appeals)-VIII,
“1. The order of the learned CIT (Appeals) is erroneous and contrary of facts & Law.
2. On the facts and in the circumstances of the case and in law, the learned CIT (Appeals) has erred in deleting the addition of Rs.36,00,000/- made by A.O. u/s 68 of the I.T. Act being the bogus cash credits.
2.1 The Ld. CIT (A) ignored the fact that the assessee did not discharge the onus of proving the credit worthiness of the creditors and genuineness of the transactions.
3. The appellant craves leave to add, or amend any grounds of appeal raised above at the time of the hearing.”
Thereafter, the revenue has submitted an additional ground of appeal which read as under:-
“The Ld. CIT (A) is erred in holding that initiation of reassessment proceedings was not sustainable in law and that the proceedings were initiated without any cogent reasons and definite material.”
2. The assessee is a private limited company engaged in the business of providing professional services and trading of shares. The return of income for the year under consideration was filed on 31.10.2001 declaring net income of Rs.13,833/-. The reassessment proceedings under section 147 were initiated by issue a notice under section 148 on 28.03.2008. The assessee submitted that the return filed under section 139 (1) was treated as return of income filed under section 148 of the Act. The Assessing Officer made an addition of Rs.36 lacs. The assessee has challenged the reassessment proceedings as well as the additions made before the CIT (A). The CIT (A) allowed the assessee’s appeal on both the grounds, i.e., the initiation of reassessment proceedings as well as on merits of the addition.
3. The learned DR was heard in length on both the issues of reopening as well as on merits of the case. On the reopening issue, raised in additional ground, she pleaded that the assessee has not submitted true and fair disclosures as the details of the credit entries being questioned by revenue
under section 148 proceedings as in the case the facts were not fully and truly disclosed. Assessing Officer had power to investigate and brought forward creditors as held in the case of Suresh Kumar T. Jain vs. ITO 2010-TIOL- 354-ITAT-
Constructions – 2010-TIOL-496-ITAT-DEL. She further pleaded that the existence of tangible material established by the letter / information received from the DI, Investigation Wing with regard to entries on that basis any prudent person can reach to a logical conclusion that income has escaped assessment. The sufficiency of reasons cannot be challenged at that stage. For this proposition, she relied on the decision of Bombay High Court in the case of Indo European Breweries Ltd. vs. ITO – 2011-TIOL-759-HC-MUMIT(
4. On the other hand, the learned AR submitted that reasons recorded by the Assessing Officer clearly show that he has not applied his independent mind to arrive at the satisfaction as required by law. He also pleaded that it is a settled position of law that Assessing Officer has to reach to his own satisfaction that some income has escaped assessment. The satisfaction has to be based on some reliable material and judicious application of mind.
(i) CIT vs. Atul Jain - (2007) 164 Taxman 33 (
(ii) Durga Prashad Goyal vs. ITO – (2006) 98 ITD 227 (Asr) (SB);
(iii) CIT vs. Smt. Paramjit Kaur – (2008) 168 Taxman 39 (HC-P&H);
(iv) CIT vs. Vignesh Kumar Jewellers (2009) Taxman 18 (HC-Madras);
(v) CIT vs. Shree Rajasthan Syntex Ltd. (2009) 178 Taxman 33 (HCRajasthan)
(i) Ganga Saran & Sons Private Ltd. vs. ITO – (1981) 130 ITR 1 (SC);
(ii) Phool Chand Bajrang Lal vs. ITO – (1976) 203 ITR 456 (SC)
(iii) ITO vs. Lakhmani Mewal Das – (1976) 103 ITR 437 (SC);
(iv) S. Narayanappa vs. CIT (1973) 63 ITR 219 (SC);
(v) Peerless General Finance & Investment Co. Ltd. vs. DCIT – (2005) 273 ITR 16;
(vi) ACIT vs. Star Ferro Alloys Pvt. Ltd. – (2004) 90 ITD 63 (
5. We have heard both the sides on the issue. We have also perused material on the records. In this case, the return of income was filed under section 139 (1) on 31.10.2001. The same was processed under section 143(1)(a) of the Income-tax Act. There was no scrutiny assessment under section 143(3) of the Income-tax Act. The reassessment proceedings u/s 147 was initiated by issuing notice u/s 148 on 28.03.2008 by recording the reasons. The reopening proceedings were initiation on the information received from Investigation Wing that assessee has received accommodation entries during the year. Thus, the Assessing Officer had considered the information received form investigation wing and has formed an opinion on the basis of that material and then initiated the proceedings for reassessment. Since there were no original assessment proceedings, therefore, there is no question of change of opinion of the Assessing Officer. The sufficiency of reasons is not a material fact for annulling the reassessment proceedings. The material was received from the investigation wing which prima facie sufficient to make the conclusion that the assessee company had received accommodation entries. The information received contains details of the dates and the amount and details of the bank from where the amounts were received. The variance in the quantum of amount shall not be so fatal which can make the reassessment proceedings null and void. After consideration of all the facts of the case minutely, we are of the view that the CIT (A) was not justified in holding that reassessment proceedings are not sustainable in law. Therefore, on this issue, we allow the revenue’s appeal.
6. In the original grounds no.2 & 2.1, the issue is raised regarding the deletion of addition of Rs.36 lacs made by Assessing Officer u/s 68 of the Income-tax Act treating the same as bogus cash credits.
7. We have heard both the sides on the issue. We have also gone through the records minutely. In the present case, the assessee has submitted evidences which have been placed on record. The assessee has filed the audited balance sheet and accounts for the year ending on 31.3.2001 wherein the closing balance of the previous year which is opening balance for the year under consideration and the closing balance of the year under consideration year has been shown (page 9 of paper book). Assessee also furnished the details of opening stock of investment in shares as on 01.04.2000 to the Assessing Officer (placed at page 34 of the paper book). The assessee also submitted the details of closing stock of investment in shares held on 31.03.2011 (page 35 of paper book). Assessee also submitted the copy of the bank account No.CA 11022591 held by assessee with Centurian Bank of
8. The learned DR submitted that the issue should not be taken as covered by the decision of ITAT in other cases. The judicial decisions in a particular provision of law may be construed in a different manner than the manner in which construed earlier and she pleaded that distinguishing features and subsequent judgments have to be taken into account by the ITAT. For this proposition, she relied on the decision of Hon'ble Madras High Court in the case of G. Krishnammal vs. DCIT reported in 66 ITD 83. She also submitted that to perpetuate an error is no heroism and to rectify it is the compulsion of the judicial conscience. For this proposition, she relied on the decision of Hon'ble Supreme Court in the case of Distributors (
were submitted. She finally pleaded that assessee has not submitted true and fair disclosures as the details of the credit entries being questioned by the revenue u/s 148 proceedings. Finally, she pleaded to set aside the order of CIT (A). She also pleaded to restore the issue to the file of the Assessing Officer for providing the assessee adequate opportunity to produce the share applicants as also the purchasers of the shares, as has been done in the case of ITO vs. M/s. New Tech Steels Pvt. Ltd. – 2010-TIOL-496-ITAT-DEL.
9. Learned. AR submitted before us that the shares were sold through Batra Investments and on similar facts, the ITAT in the case of ITO vs. Intercity Finvest Pvt. Ltd. in ITA No.3131/Del/2010 and 2348/Del/2010 and CO Nos.369 & 370/Del/2010 has confirmed the deletion of addition by the CIT (A). In the assessee’s case, the sale proceeds are received from the M/s. Batra Investments which is evident from the ledger account. The opening stock of investment in shares is not doubted by revenue. It was also declared that opening stock was sold and net profit of Rs.1,92,900/- was earned.
10. We have heard both the sides. From the documents submitted in the form of paper book by the assessee, we find that the assessee company had sold shares which were held as investment as on 31.03.2000 through M/s. Batra Investments. These sale proceeds have been taken into account while preparing the profit & loss account of the assessee for the year. The assessee had earned profit of Rs.1,92,900/- on the sale of such shares held as investment as on 31.03.2000 which has been duly declared in the return of income for the assessment year under consideration. This amount has been received through various cheques aggregating to Rs.22 lacs from M/s. Batra Investments on account of sale of shares. These receipts had been deposited in the account maintained by the assessee with Centurian Bank of
“5. We have considered the facts of the case and submissions made before us. It is seen that the assessee had filed the confirmed account from its books of account, showing transactions with M/s Batra Investments. The account shows that 30000 shares of Superior Industries were sold @ Rs. 50/- per share for a consideration of Rs. 15.00 lakh on 05.03.2001. Further, 5000 shares of M/s Surjeet Hire Purchase (P) Ltd. were sold @ Rs. 100/- per share for a total consideration of Rs. 5.00 lakh on 31.3.2001. The assessee received five sums of Rs. 8.00 lakh, Rs. 2.00 lakh, Rs. 2,50,000/-, Rs. 5.00 lakh and Rs. 2,50.000/- on 9.3.2001, 12.3.2001, 15.3.2001, 16.3.2001 and 31.3.2001 respectively. The corresponding sale bills have also been placed in the paper book. Further, it is seen that shares of Superior Industries Ltd. were allotted to the assessee on 01.09.2000 at Rs. 50/- per share consisting of face value of Rs. 10/- and premium of Rs. 40/-. The distinctive numbers of these shares have been placed on record. Further, the share certificates were received on 8.9.2000. Similar information in respect of Surjeet Hire Purchase (P) Ltd. was also placed before the AO. The AO has not disputed that purchase consideration of these shares was not accounted for by the assessee. These very shares were sold through M/s Batra Investments. In such circumstances, the sale proceeds received by the assessee cannot be termed as unexplained credit u/s 68 of the Act. Therefore, we are of the view that the ld. CIT(Appeals) was right in deleting the addition.”
Similarly, recently in the case of ITO vs. Goodwill Cresec Pvt. Ltd., ITAT Bench ‘C’,
“14. We have carefully considered the rival submissions in the light of the material placed before us. In the present case, the assessee had submitted ample evidence which has already been discussed in the above part of this order to contend that the share transaction entered into by it with MKM Finsec Pvt. Ltd. was a genuine transaction. The shares which were subject matter of sale were standing in the balance sheet of the assessee which were subject matter of sale. The party to whom the sales have been made have confirmed the transactions and the transaction was supported by documentary evidence. It is also the case of the assessee that no material has been brought on record by the revenue that the share transaction of the assessee was not genuine. The addition has been made on the basis of information received by the Assessing Officer from the Investigation Wing. It is found that in respect of the very same party an addition of Rs.49,55,300/- was made in the case of ITO vs. Vishal Holding and Capital Pvt. Ltd. (supra) and learned CIT (A) had deleted the addition and the said deletion was contested by the revenue before the Tribunal and it was decided by the Tribunal vide order dated 17th July, 2009 in ITA No.1788/Del/2009 and the order of the CIT (A) was upheld with the following observations:-
“5. We have considered rival contentions and gone through the records. In our view the order of the CIT(A) does not require any interference. First of all the assessee has produced all details in respect of its transactions. Copies of the contract notes and bills, that were issued to it, were all made available. The Assessing Officer has not verified these details and in respect of the material, which has been relied upon by him, he has not provided any findings of the investigation to the assessee. Therefore, in these circumstances, the addition made by the Assessing Officer cannot be said to be on the basis of some evidence that was put to the assessee in the course of assessment proceedings. The learned CIT(A) has correctly deleted the addition and we decline to interfere. Accordingly, order of CIT(A) on the issue in question is upheld.
6. In the result, revenue ‘s appeal is dismissed.”
15. The aforementioned order of the Tribunal was considered by Hon’ble jurisdictional High Court in the aforementioned case of CIT vs. Vishal Holding and Capital Pvt. Ltd. which is now reported at 200 Taxman 186 and the order of the Tribunal was upheld by the Hon’ble High Court with the following observations:-
“6. We are of the view that the assessee had produced copies of accounts, bills and contract notes issued by M/s. MKM Finsec Pvt. Ltd. and had been maintaining books of account as per Companies Act. The assessee had also demonstrated the purchase and sale of shares over a period of time as seen from the balance sheet/s. In our opinion, the AO has simply acted on the information received from the Investigation Wing without verifying the details furnished by the assessee. The assessee has also produced best possible evidence to support its claim. Consequently the addition made by the Assessing Officer cannot be sustained.
7. In any event, the factual findings of the final fact finding authority are neither perverse nor contrary to record. Accordingly, we find that no substantial question of law arises in the present appeal which, being bereft of merit, is dismissed in limine but with no order as to costs.”
16. In this view of the situation, we find that so far as it relates to issue on merits, the case of the assessee is covered by the aforementioned decision of the Tribunal which has been confirmed by Hon’ble High Court. Therefore, we decline to interfere in the deletion made by the learned CIT (A) and the appeal filed by the revenue is dismissed.”
In the case of ITO vs. Capital Audit Video Limited in ITA No.2921/Del/2011 dated 23.09.2011, the ITAT has held as under:-
“5. We have duly considered the rival contentions and gone through the record carefully. The assessee has purchased the shares in the year 2000. These shares were shown in the books of account. Payment was made through account payee cheques for the purchases. In the year under appeal, these shares alleged to have been sold. Assessing Officer is doubting the sale of shares. The evidence possessed by the Assessing Officer is the statement of certain persons recorded by the investigation wing in 2005. These statements were recorded not by the Assessing Officer and not in presence of the assessee. Thus, they carry the status of information but losses their credibility for reading them as an evidence for doubting the other evidence submitted by the assessee. More so, in this year, there is no unexplained investment. The assessee has just sold the shares. If any addition ought to be made then it is the year in which alleged shares have been purchased. In this year, the shares are no more appearing in the accounts of assessee. Their purchases have not been doubted by the Assessing Officer, then, the alleged sale proceeds cannot be treated as unexplained cash credits. Learned CIT(Appeals) has appreciated these aspects while deleting the addition. Taking into consideration the facts and circumstances and the evidence on record, we do not find any error in the order of the Learned CIT(Appeals).”
As held by various Benches of ITAT,
11. In the result, the appeal of the revenue is partly allowed.
Order pronounced in open court on this 29th day of February, 2012.
Sd/- Sd/-
(U.B.S. BEDI) (B.C. MEENA)
JUDICIAL MEMBER ACCOUNTANT MEMBER
Dated the 29th day of February, 2012
TS
Copy forwarded to:
1. Appellant
2. Respondent
3. CIT
4. CIT (A)-VIII,
5. CIT (ITAT),
AR, ITAT