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Asstt. Commissioner of Income Tax Versus M/s. Arvindo Fabnoplast Pvt. Ltd.

2015 (5) TMI 923 - ITAT DELHI

Unexplained credits in the books of account u/s 68 - CIT(A) deleted the addition - Held that:- AO denied opportunity of being heard for the assessee and the CIT(A) wrongly shifted onus on the revenue authorities and misunderstood the meaning of onus with regard to section 68 of the Act. Hence, we are of the considered opinion that the issue of share application money was not adjudicated by the lower authorities as per provisions of section 68 of the Act and as per ratio and proposition laid down .....

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affording due opportunity of hearing for the assessee - Decided in favour of revenue for statistical purposes. - ITA No. 1308/Del/2010 - Dated:- 8-5-2015 - Shri N. K. Saini And Shri Chandramohan Garg,JJ. For the Appellant : Shri Y. Kakkar DR For the Respondent : Shri Alok Kumar Gupta, CA ORDER Per C. M. Garg, Judicial Member This appeal has been directed by the Revenue against the order of the CIT, Faridabad dated 27.01.2010 in Appeal No.150/09-10 for AY 2005-06. 2. The sole ground raised by the .....

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ard arguments of both the sides and carefully perused the relevant material placed on record, inter alia assessment order, impugned order of the CIT(A), assessee s paper books spread over 164 pages and citations, judgments and orders relied by both the parties. Ld. DR has drawn our attention towards para no. 8 to 11 of the assessment order and submitted that the assessee failed to produce the persons who have given credit to the assessee company during the year under consideration, leave apart t .....

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to produce relevant evidence during assessment proceedings with the desire to prevent inquiry/investigation, then adverse inference should be drawn against the assessee. Ld. DR further contended that mere production of Permanent Account Number (PAN) or assessment particulars does not establish the identity of a person which includes the place of work, staff members and the fact that such person was actually carrying on business and further the recommendation of the company or individual in the e .....

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s onus of proving the genuineness and creditworthiness of the person who claimed to be the shareholder of the assessee company. Ld. DR pointed out that as per operative part of the impugned order in the last line of para 6, the CIT(A) granted relief for the assessee without any justified basis and by wrongly holding that the AO has not discharged his onus at all. Ld. DR has also drawn our attention towards decision of Hon ble Delhi High Court in the case of CIT vs MAF Academy P. Ltd. (supra) par .....

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this was not sufficient to discharge required onus of the assessee to prove identity, creditworthiness and genuineness of the transaction. Ld. DR finally prayed that the impugned order may be set aside by restoring that of the AO. 4. Ld. AR supporting the impugned order submitted that the AO made additions with pre-determined mind and she has thrown away all relevant explanation, details and evidence filed by the assessee during the assessment proceedings. Ld. AR has further drawn our attention .....

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dvocate Shri Devender Singh to provide information about the share application money providers but the AO did not allow the same. Ld. AR also pointed out page no. 164 of the Paper book and submitted that this letter was also submitted by the alleged share application money providers on 30.12.2009 but the AO passed assessment order by mentioning the date of 29.12.2009 denying opportunity of hearing to the assessee and the alleged share application money providers. Ld. AR has further drawn our att .....

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iry or investigation simply proceeded to make addition u/s 68 of the Act, then such addition is not sustainable in the light of decision of Hon ble Supreme Court in the case of CIT vs Lovely Exports (P) Ltd. (2008) 216 CTR 195 (SC) as relied by the CIT(A) while granting relief for the assessee. 5. On careful consideration of above submissions of both the sides, at the very outset, we note that admittedly the assessee filed evidence in support of admissibility and sustainability of share applicat .....

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urned back unserved. Then the AO asked the assessee to furnish whereabouts of the said parties from whom the credit entries/share application money appearing in the books of accounts were received. From para no. 6 of the assessment order, we note that from 14.12.2009 to 29.12.2009 regularly the AO was making efforts to verify and investigate the alleged share application money provider but without result and the Inspector s report was also called on 24.12.2009 which was supplied to the assessee .....

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s also submitted some details and documents for the consideration of the AO but the assessment order was passed on 29.12.2009. Although we are unable to see from record which details were filed by the alleged share application money provider on 30.12.2009, there was an attempt to submit information and submission from the AO on behalf of the share applicants. At this juncture, we respectfully take guidance from the decision of Hon ble Delhi High Court in the case of CIT vs MAF Academy P. Ltd. wh .....

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tual assertion by the Assessee before him. In case an Assessee deliberately and intentionally fails to produce evidence before the assessing officer with the desire to prevent inquiry or investigation, an adverse inference should be drawn. The said case, i.e., N.R. PORTFOLIO PRIVATE LIMITED (SUPRA ), was also one of the cases where accommodation entries were being provided by Mahesh Garg Group of entry providers as in the present case . It has been noticed in that case that the modus operandi us .....

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losely held company having proxima te relationship between promoters and shareholders and usually in closely held companies, share capital subscription is from friends, relatives and not from unrelated/unknown third parties/general public. 26. We have further in N.R.PORTFOLIO PRIVATE LIMITED (SUPRA ) held that mere production of PAN Number or assessment particulars does not establish the identity of a person. The identification of a person includes the place of work, the staff and the fact that .....

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ently disclosing the identity of the individual. 27. Referring to the various judgments of the Supreme Court {A. GOVINDARAJU LU MUDALIAR VS CIT (1958) 34 ITR 807 (SC), CIT VS M. GANAPATHI MUDALIAR (1964) 53 ITR 623 (SC) AND CIT VS DEVI PRASAD VISHWANATH PRASAD (1969 (72) ITR 194 (SC)} we have in N.R.P ORTFOLIO PRIVATE LIMITED (SUPRA) rejected the contention that the revenue must have evidence to show a circulation of money from the Assessee to third parties. Following CIT VS NOVA PROMOTERS AND F .....

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nvestment do not lose touch or become incommunicado. In the case of private limited companies where normally there is close proximity between the company, i.e., the directors and shareholders and the investors. The Assessee cannot simply furnish details and remain quiet even when summons issued to the shareholders under Section 131 are returned unserved and uncomplied. In N.R.P ORTFOLIO PRIVATE LIMITED (SUPRA ) we have held that the Assessee cannot plead as a general preposition that they had re .....

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dicate a cover up. The production of incorporation details, PAN numbers or income tax details may indicate towards completion of paper work or documentation but genuineness, creditworthiness and identity of investment and the investors are deeper and obtrusive than mere completion of paper work or documentation. 6. In view of above noted facts and circumstances, we note that since the assessment was getting barred on 31.12.2009, therefore, the AO denied even one day adjournment to the assessee a .....

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ion and submissions regarding alleged share application money and this request of the assessee was rejected by the AO. From Paper Book page no. 164, we also note that there was an attempt by the alleged share application money contributors through their Advocate to submit supporting documents but the same were not considered as the assessment order was passed on 29.12.2009 itself. From careful reading of the impugned order, we note that the CIT(A) granted relief for the assessee with following o .....

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the 5 persons involved and that the AO has no material on record to prove that all these credits of ₹ 25 lakhs were mere accommodation entries and not genuine credits in the books of account as per the provisions of section 68 of the Income Tax Act, because the appellant had proved also the identity an credit-worthiness of all the parties through their confirmations and accounts through the banking channels which left no room for any shred of doubt for the genuineness of the credits in th .....

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in the case of a company has been finally clinched recently by the Apex Court's decision in the case of CIT Vs. Lovely Exports Pvt. Ltd. (2008) 216 ITR (SC) 195 wherein it has been held that if the share application money is received by the assessee company from alleged bogus share holders whose names are given to the AD, then the department is free to proceed to reopen their individual assessment in accordance with law, but it cannot be regarded as undisclosed income of the assessee company .....

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e immunities for himself and for the members of his family and such mere confessional statement by a third party would not be sufficient to hold that the assessee's income had escaped assessment for invoking the provisions of section 147/148 of the Income Tax Act, 1961. Moreover, as has been decided by the various Courts, when the Revenue has taken the recourse to the provisions of section 147/148 of the Income Tax Act, 1961, its intent and the duty of the Revenue is to establish its case by .....

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e assessee u/s 68 of the Act and the assessment proceedings were completed, keeping in view the fact that the assessment was getting time barred on 31.12.2009. During first appellate proceedings, CIT(A) granted relief for the assessee by holding that the duty of the revenue is to establish its case by bringing material on record and the AO has not discharged his onus at all. At this stage, we respectfully take cognizance of the ratio of the decision of Hon ble Jurisdictional High Court of Delhi .....

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