TMI Blog2016 (1) TMI 1416X X X X Extracts X X X X X X X X Extracts X X X X ..... essee : S h. Kapil Goel, Adv. ORDER PER H.S. SIDHU : JM Revenue has filed this Appeal against the impugned Order dated 06.2.2012 passed by the Ld. CIT(A)-XIII, New Delhi relevant to assessment year 2003-04 on the following grounds:- 1. On the facts and circumstances of the case and in law the Ld. CIT(A) has erred in deleting the addition of ₹ 46,50,000/- made under section 68 of the I.T. Act on account of unexplained cash credits being share application money. 2. On the facts and circumstances of the case and in law the Ld. CIT(A) has erred while ignoring the findings of the AO in the assessment order with respect to the identity, creditworthiness of creditors and genuineness of transactions. 3. On the facts and circumstances of the case and in law Ld. CIT(A) has erred in ignoring the decision of Hon ble Delhi High Court in the case of CIT vs. Nova Promoters and Finlease Pvt. Ltd. in ITA No. 342/2011. 4. The appellant craves leave to add, alter or amend any ground of appeal raised above at the time of hearing. 2. The brief facts of the case are that the assessee has filed its return on 28.10.2003 declaring a loss of ₹ 49,953/- and return wa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l Nos. 4327-29 of 2008 (Arising out of SLP (C) Nos. 17346-47 of 2005) in the case of M/s Deepak Agro Foods vs. State of Rajasthan Ors. - Hon ble Delhi High Court Decision dated 25.8.2014 in ITA No. 320/2012 in the case of CIT vs. M/s Navodaya Castles Pvt. Ltd. - Hon ble Supreme Court of India judgment dated 16.1.2015 in SLP(C) No. 374 of 2015 in the case of Navodaya Castle (P) Ltd. vs. CIT [in favour of Revenue) - Hon ble High Court of Delhi judgment dated 11.3.2015 in ITA No. 525 of 2014 in the case of CIT vs Jansampark Advertising Marketing (P) Ltd. 6. On the contrary, Ld. Counsel of the Assessee moved an Application under Rule 27 of the ITAT Rules, 1963 and stated that the Assessee can support the order of the Ld. CIT(A), though it may not have appealed, against on any of the grounds decided against the assessee. He stated that Ld. CIT(A) has decided the legal issue against the assessee and deleted the addition made by the AO. But assessee has not filed the Appeal or Cross Objection against the impugned order passed by the Ld. CIT(A), but now assessee is invoking Rule 27 of the ITAT Rules, 1963 and raising the legal issue by challenging the action of the AO for i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... filed. This is borne out from the expression `though he may not have appealed used in the context of a assessee. This amply indicates the existence of a pre-right of the respondent to appeal, which may have remained un-availed. This Rule cannot help the respondent in a situation where he is otherwise debarred from filing cross appeal or cross objection. If no right to file a cross appeal or cross objection statutorily vests in the respondent, then it cannot be inferred indirectly by taking recourse to Rule 27. We have found out supra that, in the given facts, the Assessee has a right to file cross appeal or cross objection against the adverse direction given by the Ld. CIT(A) as contained in his appellate order. Thus, the first element, namely, the condition precedent for invoking rule 27, stands satisfied. 7.2 The next element is the scope of interference by the respondent. This is contained in the later part of the rule, which provides that the respondent `may support the order appealed against on any of the grounds decided against him . A cursory reading of this part divulges that the respondent can support the impugned order on any of the grounds which were decided against ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aid view is supported by the ITAT, I-2, Delhi Benches decision dated 02.12.2015 passed in ITA No. 1313/Del/2015 (AY 2011-12) in the case of SIS Live vs. ACIT, as referred by the Ld. Counsel of the Assessee. 8. Now let us examine the legal issue raised by the Ld. Counsel for the assessee challenging the issuance of notice u/s. 148 of the I.T. Act issued by the Assessing Officer. 9. Ld. Counsel for the assessee has stated that in the reasons recorded in instant case the AO has not referred to any specific adversarial material (statement etc.) and also has not described exact nature of transaction in the reasons and has used share application / share capital / unsecured loans etc. in the reasons and has miserably failed to bring during entire reopening proceedings any specific tangible material which established assessee is beneficiary of accommodation entries, which all are sufficient to nullify the extant reopening action. Even there is no annexure/enclosure to reasons to corroborate the same. No reference and details of investigation wing information is available. There is no live nexus / rational connection between Investigation Wing information and belief that assessee s ce ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is given to the entry operator who in turn issues cheques which are given the colour of share application money/ share capital/ unsecured loans etc. I have therefore, reason to believe that the undisclosed income of the assessee during the year under consideration to the extent of ₹ 46,50,000/- has escaped assessment. 11.1 On going through the above reasons recorded by the AO, we are of the view that AO has not applied his mind so as to come to an independent conclusion that he has reason to believe that income has escaped during the year. In our view the reasons are vague and are not based on any tangible material as well as are not acceptable in the eyes of law. The AO has mechanically issued notices u/s. 148 of the Act, on the basis of information allegedly received by him from the Directorate of Income Tax (Investigation), New Delhi. Keeping in view of the facts and circumstances of the present case and the law applicable in the case of the assessee, we are of the considered view that the reopening in the case of the assessee for the Asstt. Year in dispute is bad in law and deserves to be quashed. Our view is supported by the following judgments/decisions:- (a) P ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to, applying his mind to the materials, conclude that he has reason to believe that income of the Assessee has escaped assessment. Unless that basic jurisdictional requirement is satisfied a post mortem exercise of analysing materials produced subsequent to the reopening will not rescue an inherently defective reopening order from invalidity . 14. In the circumstances, the conclusion reached by the ITAT cannot be said to be erroneous. No substantial question of law arises. 15. The appeal is dismissed. (b) Signature Hotels (P)_ Ltd. vs. ITO and another reported in 338 ITR 51 (Del) has under similar circumstances as follows:- For the A.Y. 2003-04, the return of income of the assessee company was accepted u/s.143(1) of the Income-tax Act, 1961 and was not selected for scrutiny. Subsequently, the Assessing Officer issued notice u/s.148 which was objected by the assessee. The Assessing Officer rejected the objections. The assessee company filed writ petition and challenged the notice and the order on objections. The Delhi High Court allowed the writ petition and held as under: (i) Section 147 of the Income-tax Act, 1961, is wide but not plenary. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... I.T. Act on account of unexplained cash credits being share application money. After hearing both the parties and perusing the orders passed by the Revenue Authorities, we find that the Ld. CIT(A) has elaborately discussed the issue in dispute as under vide para no. 6.3 at Pages 19 to 25 of his impugned order dated 6.2.2012:- I have considered the observation of the AO as contained in the assessment order, submissions of the appellant and judicial pronouncements on the issue. The appellant company, during the year under consideration had received share application money of ₹ 46,50,000/- from following parties. Name of Company who provided entry Amount Date Name of Bank A/c No. Dignity Finvest (P) Ltd. 600000 27.3.03 SBH 50042 KR Fincap P Ltd. 400000 7.2.03 SBP 50072 Technoco M Associates Pvt Ltd. 400000 7.2.03 SBP 50060 Jar Metails Industries P Ltd. 500000 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mount of ₹ 46,50,000/- received as share application money from the above mentioned parties was not treated as-genuine and it was held as an accommodation entry. It is seen that summons issued by the AO were served upon the investor companies however the same remained uncomplied with. It is also seen that no further action was taken by the A.O. to enforce their attendance. The A.O. did not initiate any action against the said investor companies for non compliance of the summons issued by him. There are enough powers given to the AOs I Investigating Officers to deal with such delinquent persons, but nothing of that sort has been done in the instant case. Moreover, if the said investor is not complying the summons of the Department, then how the appellant, who has no authority or legal power to compel the said parties, can enforce their attendance before the Assessing Officer. In this regard reliance is placed on the decision of the Hon'ble Supreme Court in the case of CIT vs Orissa Corporation (P) Ltd., 159 ITR 78, wherein it has been held that in case the creditor does not appear in response to summon issued under Section 131, no adverse inference can be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... courts that AO must bring on record some positive material or evidence to indicate that the share holders were benamidars, fictitious persons or that any part of the share capital money represented the company's own income from undisclosed sources. The appellant has relied upon the judgment of Hon'ble Apex Court in the case of Steller Investment Ltd. (2001) 251 ITR 263 (SC), wherein it has been held that even if the subscribers to the increased share capital of assessee company were not genuine, the amount could not be regarded as undisclosed income of the assessee company. Hon'ble Delhi High Court in CIT V. Sophia Finance Ltd (1994) 205 ITR -0098 - (Del.) has held that: If the shareholders exist then, possibly, no further enquiry need be made. But if the Income-tax Officer finds that the alleged shareholders do not exist, then in effect, it would mean that there is no valid issuance of share capital. In CIT V. Makhni and Tyagi (P.) Ltd. (2004) 267 ITR 433 -(Del.), the Court held: This court is of the opinion that when documentary evidence was placed on record to prove the identity of all the shareholders including their P AN/GIR numbers and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... their address, as well as, PAN, Assessment particulars etc. Based on these facts, the Hon'ble Delhi Court dismissed the appeal of revenue. In yet another decision as to the correctness of treating share application money on par with cash credit, the Hou'ble Delhi High Court in CIT vs. Value Capital Services P. Ltd. (2008) 307 ITR 334 (Delhi) found after referring to the two of the decisions of the Delhi High Court on the subject that in respect of share capital amounts, they cannot be assessed in the hands of the company, unless the Department is able to show that the amount received towards share capital actually emanated from the coffers of the assessee company. Hon'ble Delhi High Court in the case of CIT vs. Pradeep Gupta 207 CTR 115, which has also been relied upon by the Delhi ITA T in the recent judgement in the case of Babita Gupta ITA No. 2897/06, wherein it is held that in the facts of the case before us it may be seen that from the very beginning Ld A.O. had shifted entire burden upon the assessee and no material was brought by him to prove his allegation that the impugned amount represented assessee company's undisclosed income. Therefore, on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vidences provided by the appellant to substantiate that the transaction regarding Share Application Money received by' the appellant were genuine transactions and the same were not accommodation entries. I also do not find any evidence collected by the A.O. which could prove otherwise. Accordingly, the AO was not justified in treating the amount of share application money received by the appellant as its undisclosed income. In view of the aforesaid discussion, I delete the addition of 46,50,000/-, made by the AO U/S 68 of the I.T. Act, 1961. 14. We also find that the case law as cited by the Ld. DR i.e. CIT vs. Nova Promoters Finlease (P) Ltd. 342 ITR 169 (Del) is distinguishable on the facts of the present case. There inquiries were made by the AO on the basis of the information supplied by the assessee whereas in the present case no such attempt appears to have been made. Similarly, the other judgments/decisions cited by the Ld. DR also on different facts and circumstances of the case, hence, not applicable in the present case. 15. In the background of the detailed discussions, we are in agreement with the finding of the Ld. CIT(A) that arguments and evidence ..... X X X X Extracts X X X X X X X X Extracts X X X X
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