TAS Holdings Pvt LTd, v. ITO Ward 16 (1),

ITA 1458/DEL/2007 | 2002-2003
Pronouncement Date: 31-01-2010 | Result: Partly Allowed

Appeal Details

RSA Number 145820114 RSA 2007
Assessee PAN AAACT0390F
Bench Delhi
Appeal Number ITA 1458/DEL/2007
Duration Of Justice 2 year(s) 10 month(s) 7 day(s)
Appellant TAS Holdings Pvt LTd,
Respondent ITO Ward 16 (1),
Appeal Type Income Tax Appeal
Pronouncement Date 31-01-2010
Appeal Filed By Assessee
Order Result Partly Allowed
Bench Allotted H
Tribunal Order Date 31-01-2010
Date Of Final Hearing 12-07-2010
Next Hearing Date 12-07-2010
Assessment Year 2002-2003
Appeal Filed On 23-03-2007
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL IN THE INCOME TAX APPELLATE TRIBUNAL IN THE INCOME TAX APPELLATE TRIBUNAL IN THE INCOME TAX APPELLATE TRIBUNAL DELHI DELHI DELHI DELHI BENCH H BENCH H BENCH H BENCH H : NEW DELHI : NEW DELHI : NEW DELHI : NEW DELHI BEFORE SHRI BEFORE SHRI BEFORE SHRI BEFORE SHRI C.L.SETHI JM AND SHRI A.K.GARODIA AM C.L.SETHI JM AND SHRI A.K.GARODIA AM C.L.SETHI JM AND SHRI A.K.GARODIA AM C.L.SETHI JM AND SHRI A.K.GARODIA AM ITA NO. ITA NO. ITA NO. ITA NO. 1458/DEL/2007 1458/DEL/2007 1458/DEL/2007 1458/DEL/2007 ASSESSMENT YEAR : ASSESSMENT YEAR : ASSESSMENT YEAR : ASSESSMENT YEAR : 2002 2002 2002 2002 - -- - 03 0303 03 M/S TAS HOLDINGS PVT.LTD. M/S TAS HOLDINGS PVT.LTD. M/S TAS HOLDINGS PVT.LTD. M/S TAS HOLDINGS PVT.LTD. FLAT NO.4 11/71 FLAT NO.4 11/71 FLAT NO.4 11/71 FLAT NO.4 11/71 PUNJABI BAGH (WEST) PUNJABI BAGH (WEST) PUNJABI BAGH (WEST) PUNJABI BAGH (WEST) NEW DELHI NEW DELHI NEW DELHI NEW DELHI 110 026. 110 026. 110 026. 110 026. PAN NO. PAN NO. PAN NO. PAN NO.AAACT0390F. AAACT0390F. AAACT0390F. AAACT0390F. VS. VS. VS. VS. INCOME TAX OFFICER INCOME TAX OFFICER INCOME TAX OFFICER INCOME TAX OFFICER WARD WARD WARD WARD- -- -16(1) 16(1) 16(1) 16(1) NEW DELHI. NEW DELHI. NEW DELHI. NEW DELHI. (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI Y.K.KAPOOR ADVOCATE AND SHRI SUBODH GUPTA CA. RESPONDENT BY : SHRI N.K.CHAND SR.DR. ORDER ORDER ORDER ORDER PER BENCH PER BENCH PER BENCH PER BENCH : :: : THE ASSESSEE IS IN APPEAL AGAINST THE ORDER DATED 5.2.2007 PASSED BY LEARNED CIT(A) IN THE MATTER OF ASSESSMEN T MADE BY THE AO U/S 143(3)/148 OF THE INCOME-TAX ACT 1961 (THE ACT ) PERTAINING TO THE AY 2002-03. 2. IN THIS CASE THE ASSESSEE IS A PRIVATE LIMITED COMPANY. FOR THE RELEVANT ASSESSMENT YEAR UNDER CONSIDERATION I.E. A Y 2002-03 THE ASSESSEE FILED ITS RETURN OF INCOME ON 18.9.2002 SH OWING BUSINESS LOSS OF `53 641/-. THIS RETURN FILED BY THE ASSESSEE WA S MERELY PROCESSED U/S 143(1) ON 28.1.2003. NO REGULAR ASSESSMENT U/S 143(3) WAS MADE WITH REFERENCE TO THIS RETURN OF INCOME FILED BY TH E ASSESSEE. SUBSEQUENTLY AO ISSUED A NOTICE U/S 148 DATED 16.8 .2004 WHICH WAS DULY SERVED UPON THE ASSESSEE. THE NOTICE U/S 148 WAS ISSUED BY THE AO ON CERTAIN INFORMATION FROM ADI(INV.) OF THE DEP ARTMENT. THE AO RECEIVED A SURVEY REPORT CONDUCTED U/S 133A OF THE ACT AT THE OFFICE PREMISES OF ONE SHRI SANJAY RASTOGI AT 210 VAKIL C HAMBER A-115 SHAKARPUR DELHI ON 4.3.2003. THIS SURVEY WAS COND UCTED BY THE DEPARTMENT ON THE BASIS OF INFORMATION RECEIVED THA T SHRI SANJAY ITA-1458/DEL/2007 2 RASTOGI AND HIS ASSOCIATES WERE GIVING ACCOMMODATIO N ENTRIES ON LARGE SCALE TO VARIOUS COMPANIES. IT WAS NOTICED BY THE DEPARTMENT THAT THIS ACTIVITY OF GIVING ACCOMMODATION ENTRIES OR BOGUS E NTRIES WERE CARRIED OUT THROUGH BANK ACCOUNTS IN DIFFERENT BANKS AT DEL HI AND OUTSIDE. A STATEMENT TO THAT EFFECT ADMITTING BOGUS ENTRIES WA S ALSO GIVEN BY SHRI SANJAY RASTOGI IN HIS STATEMENT RECORDED ON 20.4.20 03 U/S 131 OF THE ACT. IN HIS STATEMENT SHRI RASTOGI ADMITTED THAT A PART FROM PROFESSIONAL WORK HE WAS ALSO PROVIDING CERTAIN SE RVICES IN CONNECTION WITH THE COMPANIES/CONCERNS/ENTITIES THAT WERE NOT DOING THE REAL OR GENUINE BUSINESS AND FOR THAT PURPOSE HE HAS GIVEN HIS ADDRESS AT 210 VAKIL CHAMBER VIKAS MARG DELHI. SHRI RASTOG I FLOUTED CERTAIN COMPANIES WHICH WERE USED AS CONDUIT FOR PROVIDING ACCOMMODATION ENTRIES OR TRANSACTIONS WHICH WERE NOT REAL IN NAT URE. DURING FURTHER INVESTIGATION IT WAS FOUND THAT THE ASSESSEE COMPA NY WAS ALSO ONE OF THE BENEFICIARIES OF THE BOGUS ENTRIES TAKEN FROM O NE M/S FRENZY PRODUCTS PVT.LTD. FLOUTED BY SHRI RASTOGI FROM ITS ACCOUNT NO.205 CORPORATION BANK LAXMI NAGAR DELHI. IN OTHER WORD S INFORMATION WAS RECEIVED BY THE DEPARTMENT THAT M/S FRENZY PRODUCTS FROM ITS ACCOUNT NO.205 CORPORATION BANK LAXMI NAGAR DELHI PROVID ED ACCOMMODATION ENTRIES TO THE ASSESSEE COMPANY. THE DETAILS OF THE ENTRIES ARE AS UNDER:- DATE PARTICULARS OF CHEQUE AMOUNT PAID 31.5.2001 CHEQUE NO.0159426 `4 00 000/- 6.10.2001 CHEQUE NO.0159446 `4 50 000/- TOTAL : `8 50 000/- 3. IN THE LIGHT OF THESE INFORMATIONS THE AO HAD R EASON TO BELIEVE THAT INCOME TO THE EXTENT OF `8 50 000/- HAS ESCAPE D ASSESSMENT. THE AO THEREFORE ISSUED A NOTICE U/S 148 DATED 16.8.2 004 UPON THE ASSESSEE IN RESPONSE TO WHICH THE ASSESSEE FILED RETURN OF INCOME ON 27.9.2004 DECLARING LOSS OF `53 640/-. NOTICES U/S 143(2) WERE ISSUED ITA-1458/DEL/2007 3 AND SERVED UPON THE ASSESSEE AND WERE ALSO COMPLIED WITH. ONE SHRI MUKESH AGGARWAL CA ATTENDED THE AO FROM TIME TO TI ME AND FILED NECESSARY DETAILS. BOOKS OF ACCOUNT ALONGWITH VOUC HERS WERE PRODUCED AND EXAMINED ON TEST CHECK BASIS. 4. DURING THE COURSE OF REASSESSMENT PROCEEDINGS I T WAS NOTICED BY THE AO THAT THE ASSESSEE HAD SHOWN RECEIPT OF SH ARE APPLICATION MONEY AMOUNTING TO `9 60 000/- OUT OF WHICH `8 50 000/- WAS RECEIVED FROM M/S FRENZY PRODUCTS PVT.LTD. NOTICE U/S 133(6) WAS ISSUED TO M/S FRENZY PRODUCTS PVT.LTD. WHICH WAS SE RVED THROUGH REGISTERED POST FIXING THE HEARING ON 12.9.2005. H OWEVER NO COMPLIANCE OF THIS NOTICE WAS MADE. THE ASSESSEES AUTHORIZED REPRESENTATIVE WAS THEN ASKED VIDE ORDER SHEET ENTR Y DATED 13.9.2005 TO PRODUCE THE PRINCIPAL OFFICER OF M/S FRENZY PROD UCTS PVT.LTD. ON 15.9.2005. SHRI MUKESH AGGARWAL AUTHORIZED REPRES ENTATIVE FOR THE ASSESSEE ATTENDED ON 15.9.2005 AND STATED THAT SHRI SANJAY RASTOGI WAS NOT TRACEABLE AT THAT MOMENT. AO THEREFORE T REATED THE AMOUNT OF `8 50 000/- BEING SHARE APPLICATION MONEY AS UNE XPLAINED WITHIN THE MEANING OF SECTION 68 OF THE ACT AND ADDED THE SAME TO THE ASSESSEES TOTAL INCOME. 5. BEING AGGRIEVED WITH THE ADDITION THE ASSESSEE PREFERRED AN APPEAL BEFORE THE CIT(A). AFTER CONSIDERING THE AS SESSEES SUBMISSION AND CONSIDERING THE FACTS OF THE CASE THE CIT(A) C ONFIRMED THE ADDITION BY OBSERVING AND HOLDING AS UNDER:- FROM A CLOSED STUDY OF THE ASSESSMENT ORDER IT IS MORE THAN OBVIOUS THAT THERE IS NO DENYING THE FACT THAT THE TRANSACTIONS HAVE BEEN DONE THROUGH THE BANKING CHANNELS. THE PLEA TAKEN BY THE AR OF THE APPELLAN T THAT TRANSACTION HAS TAKEN PLACE THROUGH BANK AND CHEQUE S DOES NOT HOLD GOOD BECAUSE THE ISSUE HERE IS NOT TH E TRANSACTION THROUGH THE BANK OR WITHOUT THE BANK. THE ISSUE IS THAT SUCH TRANSACTION THOUGH MADE THROUGH BANK IS FOR SOME SPECIFIC ULTERIOR MOTIVE. THE AO HAS NOWH ERE ITA-1458/DEL/2007 4 DENIED THAT TRANSACTION HAS NOT TAKEN PLACE THROUGH BANK. HE HAS LAID EMPHASIS ON THE MOTIVE BEHIND THE SAID TRANSACTIONS. THE AMOUNT OF RS.8.50 LACS HAS RIGHT LY BEEN ADDED IN THE HANDS OF THE APPELLANT BECAUSE IT IS N OTHING BUT AN ACCOMMODATION ENTRY. THE ALLEGATION AGAINST SHRI SANJAY RASTOGI WAS THAT HE WAS PROVIDING ACCOMMODAT ION ENTRIES ON LARGE SCALE TO VARIOUS COMPANIES. IT WA S CONCLUDED AFTER THE SURVEY IN HIS OFFICE PREMISE TH AT SUCH ACCOMMODATION ENTRIES WERE BEING CARRIED OUT THROUG H BANK ACCOUNTS IN DIFFERENT BANKS AT DELHI AND OUTSI DE. A STATEMENT OF SHRI SANJAY RASTOGI WAS RECORDED U/S 1 31 OF THE I.T.ACT 1961 ON 20 TH APRIL 2003. IT IS TO BE KEPT IN MIND THAT THE SURVEY TOOK PLACE ON 4 TH MARCH 2003 AND THE STATEMENT RELIED UPON BY THE AO WAS RECORDED SUBSEQUENTLY ON 20 TH APRIL 2003. IN HIS STATEMENT SHRI RASTOGI HAS ADMITTED THAT HE WAS PROVIDING ACCOMMODATION/BOGUS ENTRIES TO VARIOUS COMPANIES. FURTHER INVESTIGATIONS WERE MADE AND IT WAS FOUND T HAT THE APPELLANT COMPANY WAS ONE OF THE BENEFICIARIES OF S UCH ACCOMMODATION/BOGUS ENTRIES THE DETAILS OF WHICH A RE CLEARLY STATED IN ASSESSMENT ORDER. THE PLEA TAKEN BY THE APPELLANT IS THAT MONEY WAS PARTLY RETURNED TO THE TUNE OF RS.5 LACS BEFORE ISSUANCE OF NOTICE U/S 148 AND THE REFORE SHOULD BE ACCEPTED. IT IS NOT SUFFICIENT TO GET OU T OF THE TAX LIABILITY ON THE MERE PLEA THAT THE MONEY WAS RETUR NED. FROM THE WRITTEN SUBMISSION FILED BEFORE ME IT IS FOUND THAT TOTAL AMOUNT RETURNED WAS ON DIFFERENT DATES. RS.1.50 LACS WAS RETURNED ON 1 ST MARCH 2004 THEN ON 11 TH MARCH 2004 RS.2 LACS WAS RETURNED AND THEN ON 6 TH MARCH 2006 AN AMOUNT OF RS.1.50 LACS WAS RETURNED. NOTICE U/S 148 WAS ISSUED ON 16.8.2004 I.E. NOT A MATERIAL FACT IN THIS CASE THAT ABOUT 3.50 LACS WERE RETURNED BEFORE THE ISSUE OF NOTICE U/S 148. ASSESSMENT ORDER WAS PASSED BY THE AO ON 22.9.2005. ON A CLOSED SCRUTINY OF THE FACTS I T IS APPARENT THAT THE APPELLANT COMPANY TOOK ADVANTAGE OF THE FACT THAT A SURVEY HAD TAKEN PLACE IN THE CASE OF SHRI SANJAY RASTOGI AND HE HAD ADMITTED THIS FACT IN HIS STATEMENT ON OATH THAT HE HAD PROVIDED ACCOMMODATIO N ENTRY TO THE APPELLANT COMPANY. THEREFORE PART OF THE MONEY WAS RETURNED TO HIM TO MAKE THE TRANSACTION L OOK GENUINE. HOWEVER THE INVESTIGATIONS MADE BY THE DEPARTMENT CONCLUDED OTHERWISE. THIS IS AN ACCOMMODATION ENTRY TO SUIT THE NEEDS OF THE APPELL ANT COMPANY. THE AO RIGHTLY MADE AN ADDITION OF RS.8.5 0 LACS AND I UPHOLD THE SAID DECISION. 6. HENCE THE ASSESSEE IS IN FURTHER APPEAL BEFORE US. ITA-1458/DEL/2007 5 7. THE FIRST GROUND OF APPEAL TAKEN BY THE ASSESSEE IS DIRECTED AGAINST THE AOS ACTION IN INITIATING PROCEEDINGS U /S 147 OF THE ACT AND IN ISSUING THE NOTICE DATED 16.8.2004 U/S 148 OF TH E ACT. ON THIS ISSUE NO SUBSTANTIVE ARGUMENT HAS BEEN PLACED BY THE LEAR NED COUNSEL FOR THE ASSESSEE AT THE TIME OF HEARING OF THIS APPEAL. IN THE PRESENT CASE THE AO HAS ISSUED NOTICE U/S 148 ON THE BASIS OF CE RTAIN INFORMATION RECEIVED FROM ADI(INV.) THAT ASSESSEE HAD TAKEN ACC OMMODATION ENTRY OF `8.50 LAKHS FROM ONE CONCERN NAMELY M/S FRENZY P RODUCTS WHICH WAS USED AS A CONDUIT BY ONE SHRI SANJAY RASTOGI FO R THE PURPOSE OF PROVIDING ACCOMMODATION ENTRY TO THE BENEFICIARIES. THE FACTS STATED BY THE AO IN THE ASSESSMENT ORDER FOR ISSUING THE N OTICE U/S 148 OF THE ACT CLEARLY INDICATES THAT AO HAD RECEIVED SPECIFIC INFORMATION FROM THE INV.WING AS REGARDS THE TRANSACTIONS ENTERED INTO B Y THE ASSESSEE COMPANY WITH M/S FRENZY PRODUCTS WHO HAD PROVIDED ACCOMMODATION ENTRY TO THE ASSESSEE IN THE GARB OF SHARE APPLICAT ION MONEY AND AO HAD ALSO INFORMATION THAT THEY WERE NOT GENUINE TRA NSACTIONS. IN OUR CONSIDERED OPINION THIS MATERIAL TO WHICH THE AO H AS APPLIED HIS INDEPENDENT MIND ARE SUFFICIENT MATERIAL ON THE BA SIS OF WHICH NOTICE U/S 148 CAN BE ISSUED. THE EXPRESSION REASON TO B ELIEVE HAS BEEN APPROPRIATELY UNDERSTOOD BY THE AO AND THERE IS COG ENT AND RELEVANT MATERIAL AVAILABLE WITH THE AO ON THE BASIS OF WHIC H THE NOTICE WAS ISSUED. THE AO HAS APPLIED HIS MIND TO THE INFORMA TION RECEIVED FROM INVESTIGATION WING AND INDEPENDENTLY ARRIVED AT A B ELIEF ON THE BASIS OF MATERIAL WHICH HE HAD BEFORE HIM THAT INCOME HAD ES CAPED ASSESSMENT WITHIN THE MEANING OF SECTION 147 OF THE ACT. WE THEREFORE DO NOT FIND ANY INFIRMITY IN THE AOS AC TION IN INITIATING PROCEEDINGS U/S 147 OF THE ACT AND THEN ISSUING NOT ICE U/S 148 OF THE ACT. THUS THIS GROUND RAISED BY THE ASSESSEE IS R EJECTED. 8. NOW WE COME TO THE NEXT ISSUE WHETHER THE ADDIT ION OF `8.50 LAKHS MADE BY THE AO AND FURTHER CONFIRMED BY THE C IT(A) IS JUSTIFIED ITA-1458/DEL/2007 6 ON ACCOUNT OF UNEXPLAINED ALLEGED SHARE APPLICATION MONEY TAKEN FROM M/S FRENZY PRODUCTS. 9. THE LEARNED COUNSEL FOR THE ASSESSEE HAS SUBMITT ED THAT THE AMOUNT OF SHARE APPLICATION MONEY OF `8.50 LAKHS WA S RECEIVED BY CHEQUE FROM M/S FRENZY PRODUCTS AS IS CLEAR FROM TH E INFORMATION RECEIVED FROM THE INVESTIGATION WING BY THE AO HIMS ELF. HE THEREFORE SUBMITTED THAT THE FACT THAT THE ASSESSEE HAD RECEI VED SHARE APPLICATION MONEY FROM M/S FRENZY PRODUCTS BY ACCOU NT PAYEE CHEQUE IS ADMITTED POSITION AND THEREFORE NO ADDITION IS CALLED FOR IN THE LIGHT OF THE DECISION OF HON'BLE SUPREME COURT IN THE CAS E OF LOVELY EXPORTS 216 CTR 195 (SC). HE FURTHER SUBMITTED THAT AO H AS FAILED TO PROVE AND ESTABLISH THAT THE MONEY HAS BEEN EMANATED FROM THE ASSESSEES COFFERS SO AS TO TREAT THE SAME AS UNDISCLOSED INCO ME OF THE ASSESSEE. IN THIS CONNECTION HE PLACED RELIANCE ON THE DECIS ION OF HON'BLE DELHI HIGH COURT IN THE CASE OF CIT VS. VALUE CAPITAL SER VICES (P) LTD. 307 ITR 334 (DEL). HE FURTHER SUBMITTED THAT OUT OF `8 .50 LAKHS THE ASSESSEE COMPANY HAD RETURNED A SUM OF `5 LAKHS TO THE SUBSCRIBER WHICH GOES TO SHOW THAT THE SAID APPLICATION MONEY RECEIVED BY THE ASSESSEE FROM M/S FRENZY PRODUCTS WAS GENUINE. THE LEARNED COUNSEL FOR THE ASSESSEE FURTHER SUBMITTED THAT THE AO HAS FAILED TO PROVIDE OPPORTUNITY TO CROSS EXAMINE SHRI SANJAY RASTOGI ON THE BASIS OF WHOSE STATEMENT THE AO HAD ISSUED NOTICE U/S 147 OF THE A CT AND HAS MADE THE ADDITION ACCORDINGLY. HE FURTHER SUBMITTED THA T ALLEGED STATEMENT OF SHRI SANJAY RASTOGI HAD NO REFERENCE TO THE TRAN SACTION IN QUESTION SO AS TO TREAT THE AMOUNT OF `8.50 LAKHS RECEIVED F ROM M/S FRENZY PRODUCTS TO BE IN THE NATURE OF ACCOMMODATION ENTRY . HE FURTHER SUBMITTED THAT OUT OF THE SHARE APPLICATION MONEY O F `9.60 LAKHS THE REST SHARE APPLICATION MONEY AMOUNTING TO `1.10 LAK HS HAS BEEN ACCEPTED TO BE GENUINE WITHOUT MAKING ANY ENQUIRY B Y THE AO AND THEREFORE THERE WAS NO REASON TO DISBELIEVE REST S HARE APPLICATION MONEY OF `8.50 LAKHS RECEIVED FROM M/S FRENZY PRODU CTS. HE ITA-1458/DEL/2007 7 THEREFORE SUBMITTED THAT MERELY ON THE BASIS OF SH RI SANJAY RASTOGIS STATEMENT THE ADDITION CANNOT BE MADE AND IT DESER VES TO BE DELETED. 10. THE LEARNED DR ON THE OTHER HAND SUPPORTED TH E ORDERS OF AUTHORITIES BELOW TO CONTEND THAT THE ASSESSEE HAS PRIMA-FACIE FAILED TO PROVE THAT THE AMOUNT OF `8.50 LAKHS RECEIVED FR OM M/S FRENZY PRODUCTS WAS IN THE NATURE OF SHARE APPLICATION MON EY. HE FURTHER SUBMITTED THAT THE INITIAL BURDEN THAT LAY UPON THE ASSESSEE HAS NOT AT LEAST BEEN DISCHARGED BY THE ASSESSEE. HE FURTHER SUPPORTED THE ORDER OF THE AO AS WELL AS OF THE CIT(A). 11. WE HAVE HEARD BOTH THE PARTIES AND HAVE GONE TH ROUGH THE ORDERS OF THE AUTHORITIES BELOW. IN THIS CASE IT IS NOT IN DISPUTE THAT THE ASSESSEE HAS SHOWN IN THE BOOKS OF ACCOUNT THE RECEIPT OF `8.50 LAKHS ON ACCOUNT OF SHARE APPLICATION MONEY ALLEGED LY RECEIVED FROM M/S FRENZY PRODUCTS. THE ASSESSEE HAS CLAIMED THAT OUT OF THE AFORESAID SUM OF `8.50 LAKHS RECEIVED FROM M/S FREN ZY PRODUCTS A SUM OF `5 LAKHS WAS REPAID IN THE FOLLOWING MANNER:- 1.3.2004 CHEQUE NO.482598 `1 50 000/- 6.3.2004 CHEQUE NO.482599 `1 50 000/- 11.3.2004 CHEQUE NO.482600 `2 00 000/- 12. THE SHARE APPLICATION MONEY WAS CLAIMED TO HAVE BEEN RECEIVED BY THE ASSESSEE ON 30.5.2001 AMOUNTING TO `4 LAKHS AND ON 6.10.2001 AMOUNTING TO `4 50 000/-. FROM THE ALLEGED RECEIPT OF PAYMENT ON 30.5.2001 AND 6.10.2001 AND REPAYMENT OF `5 LAKHS O N 20.2.2004 3.3.2004 AND 8.3.2004 IT IS SEEN THAT THERE IS A G AP OF MORE THAN TWO YEARS IN REFUND OF ALLEGED SHARE APPLICATION MONEY TO THE EXTENT OF `5 LAKHS OUT OF TOTAL ALLEGED SHARE APPLICATION MONEY OF `8.50 LAKHS RECEIVED BY THE ASSESSEE. IN OTHER WORDS IT IS TH E ASSESSEES CASE THAT SHARE TO THE EXTENT OF `5 LAKHS WERE NOT ALLOTTED T O THE SHARE APPLICANT ITA-1458/DEL/2007 8 BUT THE MONEY WAS REFUNDED. IN THE COURSE OF HEARI NG OF THIS APPEAL THE ASSESSEE WAS ASKED TO POINT OUT THE NECESSARY E VIDENCES SUCH AS SHARE APPLICATION SUBMITTED BY SHARE APPLICANT AND THE LETTER OF ALLOTMENT AS WELL AS THE LETTER FOR REFUNDING THE S HARE APPLICATION MONEY. WE HAVE GONE THROUGH THE PAPER BOOK FILED B Y THE ASSESSEE AND FIND THAT ASSESSEE HAS NOT FILED ANY DOCUMENT O R EVIDENCE SUCH AS SHARE APPLICATION SUBMITTED BY THE SHARE APPLICANT AND THE LETTER OF ALLOTMENT AND REFUND OF SHARE APPLICATION MONEY. T HE ASSESSEE HAS ALSO NOT PRODUCED BEFORE US THE DETAILS ABOUT THE S HARE REGISTER OR THE SHARE CERTIFICATE NUMBERS AND DISTINCTIVE NUMBERS O F THE SHARES ALLEGEDLY ALLOTTED BY THE ASSESSEE COMPANY TO THE S HARE APPLICANT IN QUESTION. IN OTHER WORDS WHETHER THE AMOUNT OF `8 .50 LAKHS WAS RECEIVED BY THE ASSESSEE TOWARDS SHARE APPLICATION MONEY HAS NOT BEEN PROVED AND ESTABLISHED BY THE ASSESSEE BY WAY OF PRODUCING AND FURNISHING THE NECESSARY EVIDENCE SUCH AS SHARE APP LICATION SUBMITTED BY THE APPLICANT LETTER OF ALLOTMENT LETTER OF RE FUND OF MONEY AND SHARE REGISTER ALONGWITH CERTIFICATE NUMBERS AND DI STINCTIVE NUMBERS ALLOTTED BY THE ASSESSEE TO M/S FRENZY PRODUCTS. I N THE CASE OF CIT VS. DIVINE LEASING AND FINANCE LTD. GENERAL MOTORS AND CREDITS LTD. & LOVELY EXPORTS P.LTD. 299 ITR 268 THE HON'BLE DE LHI HIGH COURT HAS INTERPRETED SECTION 68 OF THE ACT BY OBSERVING AS U NDER:- IN THE CASE OF A COMPANY THE FOLLOWING ARE THE PROPOSITIONS OF LAW UNDER SECTION 68. THE ASSESSEE HAS TO PRIMA FACIE PROVE (1) THE IDENTITY OF THE CREDITOR/ SUBSCRIBER; (2) THE GENUINENESS OF THE TRANSACTION NAMELY WHE THER IT HAS BEEN TRANSMITTED THROUGH BANKING OR OTHER INDISPUTABLE CHANNELS; (3) THE CREDITWORTHINESS OR FINANCIAL STRENGTH OF THE CREDITOR/SUBSCRIBER; (4) IF RELEVAN T DETAILS OF THE ADDRESS OR PAN IDENTITY OF THE CREDITOR/SUBSCRI BER ARE FURNISHED TO THE DEPARTMENT ALONG WITH COPIES OF TH E SHAREHOLDERS REGISTER SHARE APPLICATION FORMS SH ARE TRANSFER REGISTER ETC. IT WOULD CONSTITUTE ACCEPT ABLE PROOF OR ACCEPTABLE EXPLANATION BY THE ASSESSEE; (5) THE DEPARTMENT WOULD NOT BE JUSTIFIED IN DRAWING AN ADV ERSE INFERENCE ONLY BECAUSE THE CREDITOR/SUBSCRIBER FAIL S OR NEGLECTS TO RESPOND TO ITS NOTICES; (6) THE ONUS WO ULD NOT ITA-1458/DEL/2007 9 STAND DISCHARGED IF THE CREDITOR/SUBSCRIBER DENIES OR REPUDIATES THE TRANSACTION SET UP BY THE ASSESSEE N OR SHOULD THE ASSESSING OFFICER TAKE SUCH REPUDIATION AT FACE VALUE AND CONSTRUE IT WITHOUT MORE AGAINST THE AS SESSEE; AND (7) THE ASSESSING OFFICER IS DUTY BOUND TO INVE STIGATE THE CREDITWORTHINESS OF THE CREDITOR/SUBSCRIBER THE GENUINENESS OF THE TRANSACTION AND THE VERACITY OF THE REPUDIATION. IN THE CASE OF A PUBLIC ISSUE THE CO MPANY CONCERNED CANNOT BE EXPECTED TO KNOW EVERY DETAIL PERTAINING TO THE IDENTITY AS WELL AS FINANCIAL WOR TH OF EACH OF ITS SUBSCRIBERS. THE COMPANY MUST HOWEVER MAI NTAIN AND MAKE AVAILABLE TO THE ASSESSING OFFICER FOR HIS PERUSAL ALL THE INFORMATION CONTAINED IN THE STATUTORY SHAR E APPLICATION DOCUMENTS. A DELICATE BALANCE MUST BE MAINTAINED WHILE WALKING THE TIGHTROPE OF SECTIONS 68 AND 69 OF THE INCOME-TAX ACT. THE BURDEN OF PROOF CAN SELDOM BE DISCHARGED TO THE HILT BY THE ASSESSEE; IF THE A SSESSING OFFICER HARBOURS DOUBTS OF THE LEGITIMACY OF ANY SUBSCRIPTION HE IS EMPOWERED TO CARRY OUT THOROUG H INVESTIGATIONS. BUT IF THE ASSESSING OFFICER FAILS TO UNEARTH ANY WRONG OR ILLEGAL DEALINGS HE CANNOT ADHERE TO HIS SUSPICIOUS AND TREAT THE SUBSCRIBED CAPITAL AS THE UNDISCLOSED INCOME OF THE COMPANY. 13. FROM THE SAID DECISION IT IS THUS CLEAR THAT A SSESSEE HAS TO PRIMA-FACIE PROVE THE CASE BY SUBMITTING RELEVANT D ETAILS OF THE ADDRESS OR PAN IDENTITY OF THE CREDITORS OR SUBSCRI BERS ALONGWITH COPIES OF THE SHAREHOLDER REGISTER SHARE APPLICATION FORM SHARE TRANSFER REGISTER ETC. IN THE PRESENT CASE THE ASSESSEE HA S NOT FURNISHED THE COPY OF SHAREHOLDER REGISTER SHARE APPLICATION FOR M WITH A VIEW TO DISCHARGE ITS INITIAL BURDEN. THE ASSESSEE HAS ALSO NOT FURNISHED ANY CONFIRMATION LETTER FROM ALLEGED SHARE APPLICANTS A LONGWITH PAN/GIR NO. CONFIRMING THE TRANSACTIONS. THE ASSESSEE HAS H EAVILY RELIED UPON THIS SAID DECISION TO SUPPORT HIS CASE. HOWEVER A PPLYING THE PRINCIPLE LAID DOWN BY THE HON'BLE DELHI HIGH COURT IN THE CA SE OF DIVINE LEASING & FINANCE LTD. (SUPRA) WE ARE OF THE CONSIDERED VI EW THAT THE ASSESSEE HAS NOT DISCHARGED ITS PRIMA-FACIE BURDEN IN THE MANNER AS LAID DOWN IN THIS JUDGMENT. IT WAS THE ASSESSEES ARGUMENT AT THE TIME OF HEARING THAT PRESENT CASE IS TO BE DECIDED IN TH E LIGHT OF PROPOSITION ITA-1458/DEL/2007 10 LAID DOWN BY THE HON'BLE DELHI HIGH COURT IN THE CA SE OF DIVINE LEASING & FINANCE LTD. (SUPRA). 14. THE LEARNED COUNSEL FOR THE ASSESSEE HAS CONTEN DED THAT THE ASSESSEE HAD RECEIVED SHARE APPLICATION MONEY FROM M/S FRENZY PRODUCTS HAS BEEN ESTABLISHED FROM THE REPORT OF TH E INVESTIGATION WING ITSELF AND THEREFORE THE ASSESSEE SHALL NOT B E REQUIRED TO PROVE THAT THE AMOUNT RECEIVED BY THE ASSESSEE WAS TOWARD S SHARE APPLICATION MONEY. AFTER CONSIDERING THE TOTALITY OF FACTS AND CIRCUMSTANCES OF THE CASE WE DO NOT AGREE WITH THI S PROPOSITION INASMUCH AS IF WE ACCEPT THE REPORT OF THE INVESTIG ATION WING IT IS TO BE ACCEPTED AS A WHOLE AND THEREFORE ALLEGED SHARE MONEY RECEIVED FROM M/S FRENZY PRODUCTS IS TO BE CONSIDERED IN THE NATURE OF ACCOMMODATION ENTRY AS SO CONCLUDED BY THE INVESTIG ATION WING. HERE WE ARE NOT DECIDING THE CASE FROM THE POINT O F VIEW OF THE DEPARTMENT TO REBUT THE ASSESSEES CASE BUT THE CAS E IS BEING DECIDED AS TO WHETHER ASSESSEE HAS BEEN ABLE TO PRIMA-FACIE DISCHARGE HIS INITIAL BURDEN IN THE MANNER AS LAID DOWN BY THE HO N'BLE DELHI HIGH COURT IN THE CASE OF DIVINE LEASING & FINANCE LTD. (SUPRA). 15. IN THIS CASE THE AO ASKED THE ASSESSEE VIDE OR DER SHEET ENTRY DATED 13.5.2005 TO PRODUCE THE PRINCIPAL OFFICER OF M/S FRENZY PRODUCTS ON 15.9.2005 WHEN ASSESSEES REPRESENTATIVE EXPRESS ED HIS INABILITY ON THE GROUND THAT SHRI SANJAY RASTOGI WAS NOT TRAC EABLE AT THAT MOMENT AND THEREAFTER THE AO COMPLETED THE ASSESSM ENT MAKING THE ADDITION. IN OTHER WORDS WE ARE OF THE CONSIDERED OPINION THAT ASSESSEE WAS NOT PROVIDED SUFFICIENT OPPORTUNITY TO DISCHARGE ITS PRIMA-FACIE BURDEN IN THE MANNER LAID DOWN BY THE H ON'BLE DELHI HIGH COURT IN THE CASE OF DIVINE LEASING & FINANCE LTD. (SUPRA) BY PRODUCING THE COPIES OF SHAREHOLDER REGISTER SHARE APPLICATI ON FORMS SHARE TRANSFER RECORDS AND OTHER DETAILS AS MENTIONED IN THE JUDGMENT. WE ARE THEREFORE OF THE CONSIDERED VIEW THAT IF ONE MORE OPPORTUNITY IS ITA-1458/DEL/2007 11 GIVEN TO THE ASSESSEE TO PRIMA-FACIE PROVE HIS CASE BY SUBMITTING THE VARIOUS DETAILS IN THE MANNER AS LAID DOWN BY THE H ON'BLE DELHI HIGH COURT IN THE CASE OF DIVINE LEASING & FINANCE LTD. IT WOULD MEET THE ENDS OF JUSTICE. WE THEREFORE RESTORE THE MATTER BACK TO THE FILE OF THE AO FOR HIS FRESH ADJUDICATION AFTER PROVIDING REASONABLE OPPORTUNITY TO THE ASSESSEE TO PRODUCE SHARE APPLIC ATION FORM IN ORIGINAL SHAREHOLDER REGISTER SHARE TRANSFER REGI STER SHARE ALLOTMENT REGISTER AND REFUND OF SHARE APPLICATION MONEY ALON GWITH PAN/GIR NUMBER OF THE ALLEGED SHARE APPLICANT M/S FRENZY PR ODUCTS AND THEIR IT RECORDS AND OTHER DETAILS AS SO LAID DOWN IN THE DE CISION OF DIVINE LEASING & FINANCE LTD. AND LOVELY EXPORTS (SUPRA). THE ASSESSEE SHALL ALSO EXPLAIN THAT HOW THE SHARE APPLICATION MONEY R ECEIVED ON 31.5.2001 AND 6.10.2001 HAS BEEN RETAINED FOR SUCH A LONG TIME WITHOUT THERE BEING ALLOTMENT AND UNDER WHAT PROVIS ION THE SHARE APPLICATION MONEY OF `5 LAKHS WAS ALLEGEDLY REFUNDE D IN THE MONTH OF MARCH 2004. THE ASSESSEE SHALL ALSO PRODUCE THE B OARD OF DIRECTORS MEETING REGISTER TO EXPLAIN AS TO HOW AND IN WHAT M ANNER THE SHARES TO THE EXTENT OF `3 50 000/- WERE ALLEGEDLY ALLOTTE D TO M/S FRENZY PRODUCTS AND THE BALANCE SUM OF `5 LAKHS WAS REFUND ED. ALL THESE ASPECTS OF THE MATTER HAVE TO BE EXPLAINED BY THE A SSESSEE IN ORDER TO DISCHARGE ITS INITIAL BURDEN TO PROVE THAT THE ASSE SSEE HAS RECEIVED SHARE APPLICATION MONEY FROM M/S FRENZY PRODUCTS. THE ASSESSEE IS HEREBY DIRECTED TO DISCHARGE ITS INITIAL BURDEN IN THE MANNER AS LAID DOWN BY THE HON'BLE DELHI HIGH COURT IN THE CASE OF DIVINE LEASING & FINANCE LTD. AND LOVELY EXPORTS P.LTD. (SUPRA) AND AS INDICATED ABOVE. 16. IN CASE DURING THE COURSE OF FRESH ASSESSMENT P ROCEEDINGS IF THE ASSESSEE IS ABLE TO DISCHARGE ITS INITIAL BURDEN T HE DEPARTMENT SHALL BE FREE TO REBUT THE ASSESSEES CASE AFTER PROVIDING O PPORTUNITY TO CROSS- EXAMINE SHRI SANJAY RASTOGI BEFORE USING HIS STATEM ENT RECORDED BY THE INVESTIGATION WING AND SHALL ALLOW THE ASSESSE E AN OPPORTUNITY TO REBUT ALL THE MATERIAL AND INFORMATION THAT HAVE BE EN COLLECTED BY THE ITA-1458/DEL/2007 12 DEPARTMENT AND USED AGAINST THE ASSESSEE BEFORE REJ ECTING THE ASSESSEES CASE. 17. IN THE RESULT THE APPEAL FILED BY THE ASSESSEE IS PARTLY ALLOWED FOR STATISTICAL PURPOSES IN THE MANNER AS INDICATED ABOVE. DECISION PRONOUNCED IN THE OPEN COURT ON 31 ST JANUARY 2011. SD/- SD/- (C (C(C (C .L.SETHI .L.SETHI .L.SETHI .L.SETHI ) )) ) (A.K.GARODIA (A.K.GARODIA (A.K.GARODIA (A.K.GARODIA ) )) ) JUDICIAL MEMBER JUDICIAL MEMBER JUDICIAL MEMBER JUDICIAL MEMBER ACCOUNTANT ACCOUNTANT ACCOUNTANT ACCOUNTANT MEMBER MEMBER MEMBER MEMBER DATED : 31.01.2011. VK. COPY FORWARDED TO: - 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR ITAT ASSISTANT REGISTRAR ITA-1458/DEL/2007 13