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2016 (8) TMI 899 - ITAT DELHI

2016 (8) TMI 899 - ITAT DELHI - TMI - Addition u/s. 68 - unexplained / bogus cash credit and the unaccounted cash paid for obtaining the accommodation entries - Held that:- After going through all the evidences produced by the Assessee before the Ld. CIT(A), the Ld. CIT(A) has deleted the addition in dispute by holding that once the identity, creditworthiness of the share holders and genuineness of the transactions is proved by furnishing all particulars of the share applicants alongwith other d .....

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have been filed by the Department against the separate orders of the Ld. CIT(A)-VII, New Delhi dated 27.11.2009 in quantum proceedings and order dated 15.12.2009 in penalty proceedings, pertaining to same assessment year i.e. 2002-03. Since the issue are inter-connected, hence, these appeals were heard together and are being disposed of by this common order for the sake of convenience. 2. The Revenue has raised the following grounds in its appeal No. 306/Del/2010:- 1. The order of the Ld. CIT(A) .....

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f the transaction. 3. The appellant craves leave to add, to alter, or amend any grounds of the appeal raised above at the time of the hearing. 3. The Revenue has raised the following grounds in its appeal No. 647/Del/2010:- 1. The order of the Ld. CIT(A) is erroneous and contrary to fact and law. 2. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) has erred in deleting the penalty of ₹ 25,23,990/- levied by the AO u/s. 271(1)(c) of the I.T. Act. 2.1 The ld. CIT( .....

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o a refund of ₹ 13,225/-, which was issued to the assessee. Subsequently, on the basis of information received from DIT(Inv,) regarding beneficiaries and operations of accommodation entries in Delhi the AO after recording the reasons issued notice dated 5.3.2007 u/s. 148 of the I.T. Act to reopen the case. As the notice was received back, the same was got served through the Inspector and Notice Server of the Department by affixture. Later on vide notice u/s. 142(1) of the I.T. Act dated 12 .....

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gly, on perusal of the balance sheet as on 31.3.2002 AO observed that the assessee has enhanced its authorized share capital from ₹ 50 lacs to ₹ 2.25 crores. The assessee has also enhanced its issue, subscribed and paid up capital from ₹ 24,90,000/- to ₹ 2,04,90,000/-. AO further observed that since the confirmations, bank statements of concerned parties and their Income Tax Returns alongwith all annexures in respect of the credit entries appearing in the assessee s bank .....

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to the entry operators being 1% of the undisclosed income and AO completed the assessment at an income of ₹ 70,77,290/- u/s. 144/147 of the I.T. Act, 1961 vide order dated 29.11.2007. 5. Against the aforesaid assessment order, the assessee appealed before the Ld. CIT(A), who vide impugned order dated 27.11.2009 has partly allowed the appeal of the assessee and deleted the additions in dispute. 6. Aggrieved with the impugned order, the Revenue is in appeal before the Tribunal. 7. Ld. DR rel .....

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Appellate Authority has elaborately discussed the issues in dispute raised in ground no. 2 by considering the submissions of the Ld. Counsel of the assessee and adjudicated the same vide para no. 5 to 5.6 at pages 9 to 14 of his impugned order. For the sake of convenience, we are reproducing the relevant portion of the impugned order i.e. para no. 5 to 5.6 as under:- 5. During the appellate proceedings, the copies of the following documents evidencing the identity and creditworthiness of the sha .....

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tment; iii) Affidavits from shareholders containmg the complete details number, Date, Bank particulars, PAN and Income-Tax particulars; iv) Confirmation from shareholders containing the complete details of amount invested, Cheque number, Date, Bank particulars, PAN and Income-Tax particulars; v) Copy of balance sheet, Profit & loss account for the year under consideration; vi) Copies of their Bank Statements showing source of payments made by these companies to the assessee company, their ma .....

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the - appellate proceedings were treated as additional evidences. In its response a report was submitted by the A.O. on 30-10-2009 wherein objections have raised against the admission of the additional evidences as sufficient opportunities have been given by the AO which has not been availed by the assessee. 5.2 At this juncture, reference may be made to Rule-46 which provides that the assessee shall not be entitled to produce before the first appellate authority any evidence other than that pr .....

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amine the aforementioned evidences but he has not made any comments on the merits of these additional evidences. Under the circumstances stated above, it can be safely presumed that the Assessing Officer has no objection against the additional evidences on merits. It is also significant to note that the assessment has been completed under section 144 of the Act. Considering the totality of facts and circumstances of the case, it was found that the additional evidences were very vital & relev .....

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ed (i) the names and addresses of the share applicants (ii) the GIR Nos./P.A.N. Nos. (iii) the Ward Nos. where assessed (iv) the mode of payment and (v) other information which the assessee knows or possesses, then it can be said that initial burden on the assessee can be said to be discharged. Once the identity of the shareholders was established it also stands established that the shareholders have invested money in the purchase of shares and hence the onus, on the part of the assessee company .....

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spect that the pernicious practice of conversion of unaccounted money through the masquerade or channel of investment in the share capital of a company must be firmly excoriated by the revenue. Equally, where the preponderance of evidence indicates absence of culpability and complexity of the assessee it should not be harassed by the Revenue's insistence that it should prove the negative. In the case of a public issue, the Company concerned cannot be expected to know every detail pertaining .....

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Assessing Officer harbours doubts of the legitimacy of any subscription he is empowered, nay duty-bound, to carry out thorough investigations. But if the Assessing Officer fails to unearth any wrong or illegal dealings, he cannot obdurately adhere to his suspicions and treat the subscribed capital as the undisclosed income of the Company. 16. In this analysis, a distillation of the precedents yields the following propositions of law in the context of section 68 of the Income-tax Act. The assesse .....

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constitute acceptable proof or acceptable explanation by the assessee. (5) The Department would not be justified in drawing an adverse inference only because the creditor/subscriber fails or neglects to respond to its notices; (6) the onus would not stand discharged if the creditor/subscriber denies or repudiates the transaction set up by the assessee nor should the Assessing Officer take such repudiation at face value andconstrue it, without more, against the assessee. (7) The Assessing Office .....

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CIT v. Sophia Finance Ltd. [J99-1} 205 ITR 98. Several other decisions have been rendered by this court following the above two decisions. The principle that has been laid down by the various decisions rendered by this court from time to time is that if the existence of the applicant is proved, normally no further inquiry is necessary. 6. Learned counsel for the Revenue submits that the creditworthiness of the applicants can nevertheless be examined by the Assessing Officer. It is quite obvious .....

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s the undisclosed income of the assessee. This has not been done in so far as the present case is concerned and that has been noted by the Tribunal also. 8. Under the circumstances. we are of the view that the Tribunal has not committed any error in deleting the addition: 9. No substantial question of law arises". iv) CIT vs. TDI Marketing Pvt. Ltd, (2009) 26 DTR (Del.) 358; and v) Bhav Shakti Steel Mines (P) Ltd. vs. CrT (2009) 179 Taxman 25, wherein the Hon ble Delhi High Court has observ .....

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o proceed to assess them individually, in accordance with law. The Supreme Court did not find any infirmity with the impugned judgment of the High Court which was a common order along with the decision in CIT v. Divine Leasing & Finance Ltd. [2008} 299 ITR 268 (Delhi). Since the Commissioner of Income-tax (A) has not only found that the identity of each of the shareholders stood established, but has also examined the fact that each of them were income-tax assessees and had disclosed the shar .....

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ase the assessee can be said to have discharged its onus under section 68 of The appellant has given all the necessary details in order to establish the identity of the share applicants. After considering the entire material placed on record, it is fair to conclude that the share applicants were existing parties and the payments were made through banking channels. It is also observed that the Assessing Officer could not point out any discrepancy in the evidences relied upon by the assessee. He h .....

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oduced by the assessee in support of its claim it was very much open to the AO to do his independent enquiry and verification. This has not been done by the A.O. Though, the share-applicants could not be examined by the AO, since they were existing on the file of the Income Tax Department and their income-tax details were made available to the AO, it was equally the duty of the AO to have taken steps to verify their assessment records and if necessary to also have them examined by the respective .....

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ss examination of all the adverse material on the basis of which impugned addition has been made in the assessment order. It is settled proposition of law that the information gathered behind the back of the assessee cannot be used against him unless until an opportunity of rebutting the same is given to the assessee. It is against the principle of natural justice. Reliance is placed on the decision of Hon'ble Supreme Court in case of Prakash Chand Nahta v. Union of India [2001] 247 ITR 274 .....

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fficer does not do so, no inference can be drawn against the assessee. Reliance is also placed on the decision of the jurisdictional High Court i.e. Delhi High Court in Commissioner of Income-tax Vs. Pradeep Kumar Gupta and Vijay Gupta(2008) 303 ITR 95(Delhi) wherein it was held that reopening of assessment is not permissible on mere adverse statements from others. Such statement by itself does not constitute information, unless the Assessing Officer has made enquiries thereon and inferred under .....

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ial addition on account of commission of ₹ 70,000/- for obtaining the said accommodation entries is also directed to be deleted. As a result, grounds no. 5,6, 7, 8 and 9 are allowed. 9.1 We have heard both the parties and perused the records available with us, especially the impugned order passed by the Ld. First Appellate Authority as reproduced above. After going through the same, we are of the considered view that the assessee has filed the Application under Rule 46A(3) of the Income Ta .....

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pplicant companies authorizing to make investment; iii) Affidavits from shareholders containmg the complete details number, Date, Bank particulars, PAN and Income-Tax particulars; iv) Confirmation from shareholders containing the complete details of amount invested, Cheque number, Date, Bank particulars, PAN and Income-Tax particulars; v) Copy of balance sheet, Profit & loss account for the year under consideration; vi) Copies of their Bank Statements showing source of payments made by these .....

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T(A) has deleted the addition in dispute by holding that once the identity, creditworthiness of the share holders and genuineness of the transactions is proved by furnishing all particulars of the share applicants alongwith other documentary evidences, then the Assessee has discharged its onus and there cannot be any addition in the hands of the assessee company in the matter of share application money or share capital. The view of the Ld. CIT(A) has also been supported by the decision of the Ho .....

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erference is required on our part in the well reasoned order passed by the Ld. CIT(A), hence, we uphold the same. Accordingly, the ground no. 2 raised by the Revenue stands dismissed. As a result, the appeal filed by the Revenue stands dismissed. ITA No. 647/DEL/2010 (AY 2002-03) 10. This Appeal has been filed by the Revenue against the order dated 15.12.2009 passed by the Ld. CIT(A) relevant for the assessment year 2002-03 in the penalty proceedings u/s. 271(1)(c) of the I.T. Act. The facts of .....

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enalty u/s. 271(1)(c) should not be imposed on account of furnishing of inaccurate particulars of its income and the case was fixed for hearing on 21.5.2008. This show cause notice was also served through the Inspector and the Notice Server through affixture on 13.5.2008. However, the same was remained uncomplied with. AO observed that as the penalty proceedings are going to be barred by limitation on 31.5.2008 and nothing is heard from the assessee s side till date, therefore, the penalty proce .....

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as income of the assessee u/s. 68 of the Act and commission as ₹ 70,000/- paid for raising this amount and levied the penalty of ₹ 25,23,990/- u/s. 271(1)(c) of the I.T. Act being 100% of tax sought to be evaded vide his order dated 30.5.2008. 11. Against the aforesaid penalty order, the assessee appealed before the Ld. CIT(A), who vide impugned order dated 15.12.2009 who has deleted the penalty in dispute and allowed the appeal of the assessee. 12. Aggrieved with the impugned order .....

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especially the orders of the authorities below. We find that Ld. First Appellate Authority has elaborately discussed the issue in dispute raised in ground no. 2 by considering the submissions of the Ld. Counsel of the assessee and adjudicated the same vide para no. 3 to 5 at pages 1 to 2 of his impugned order. For the sake of convenience, we are reproducing the relevant portion of the impugned order i.e. para no. 3 to 6 as under:- 3. It was pointed out by the AR at the time of hearing that the .....

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