ITO, New Delhi v. M/s. P.D. Chem (P) Ltd, New Delhi

ITA 4476/DEL/2009 | 2001-2002
Pronouncement Date: 21-05-2010 | Result: Dismissed

Appeal Details

RSA Number 447620114 RSA 2009
Bench Delhi
Appeal Number ITA 4476/DEL/2009
Duration Of Justice 5 month(s) 27 day(s)
Appellant ITO, New Delhi
Respondent M/s. P.D. Chem (P) Ltd, New Delhi
Appeal Type Income Tax Appeal
Pronouncement Date 21-05-2010
Appeal Filed By Department
Order Result Dismissed
Bench Allotted F
Tribunal Order Date 21-05-2010
Date Of Final Hearing 08-04-2010
Next Hearing Date 08-04-2010
Assessment Year 2001-2002
Appeal Filed On 24-11-2009
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL (DELHI BENCH : F NEW DELHI) BEFORE SHRI A.D. JAIN JUDICIAL MEMBER AND SHRI R.C. SHARMA ACCOUNTANT MEMBER ITA NO.4476/DEL./2009 (ASSESSMENT YEAR : 2001-02) ITO WARD 14(1) VS. M/S P.D. POLY CHEM (P) LTD. NEW DELHI. 936 TILAK BAZAR DELHI-110 006. (PAN/GIR NO.AACCP1099B) C.O. NO.19/DEL./2010 ITA NO.4476/DEL./2009 (ASSESSMENT YEAR : 2001-02) M/S P.D. POLY CHEM (P) LTD. VS. ITO WARD 14(1) DELHI. NEW DELHI. (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI R.S. SINGHVI CA REVENUE BY : SMT. BANITA DEVI NAREON SR.DR ORDER PER A.D. JAIN: JM THIS IS DEPARTMENTS APPEAL AND THE ASSESSEES CROS S OBJECTION FOR AY 201-02. 2. AT THE OUTSET THE LD.AR FOR THE ASSESSEE STATED AT THE BAR THAT THE CROSS OBJECTION IS NOT PRESSED AND AS SUCH THE SAME IS DISMISSED AS NOT PRESSED. 3. THE DEPARTMENTS APPEAL IS AGAINST THE ACTION OF THE CIT(A) IN DELETING THE ADDITION OF RS.7.50 LAKHS MADE U/S 68 OF THE I.T. A CT. 4. THE FACTS ARE THAT AS PER THE ASSESSMENT ORDER THE COMPLETED ASSESSMENT OF THE ASSESSEE WAS REOPENED SINCE ON THE BASIS OF INFORMA TION FROM THE INVESTIGATION WING OF THE INCOME-TAX DEPTT. I.E. FOR AY 2001-02 THE ASSE SSEE COMPANY HAD RECEIVED AMOUNTS OF RS.5 LAKHS AND RS.2.5 LAKHS ON 30.3.2001 AS ACC OMMODATION ENTRIES FROM M/S NEEL GAGAN POLYMERS & MARKETING (P) LTD. WHO HAD BEEN F OUND BY THE INVESTIGATION WING OF THE I.T. DEPARTMENT TO BE INDULGING IN PROVIDING AC COMMODATION ENTRIES. IN REPLY TO THE SHOW-CUASE NOTICE ISSUED TO THE ASSESSEE BY THE AO ASKING THE ASSESSEE TO EXPLAIN THE IDENTITY AND CREDITWORTHINESS OF THE CREDITOR AND T HE GENUINENESS OF THE TRANSACTIONS THE ASSESSEE FILED REPLY AND COPY OF CONFIRMATION OF TH E CREDITORS PARTY. OBSERVING THAT THE REPLY OF THE ASSESSEE AND THE CONFIRMATION OF THE P ARTY DID NOT PROVE THE IDENTITY OR THE CREDITWORTHINESS OF THE CREDITOR OR THE GENUINENESS OF THE TRANSACTIONS THE AO MADE ADDITION OF THE AMOUNT OF RS.7.50 LAKHS TO THE INCO ME OF THE ASSESSEE U/S 68 OF THE ACT. AN AMOUNT OF RS.18750/- REPRESENTING COMMISSION PAI D BY THE ASSESSEE TO THE ENTRY OPERATOR @ 2.5% WAS ALSO ADDED AS HAVING BEEN PAID OUT OF UNDISCLOSED SOURCES. 5. BY VIRTUE OF THE IMPUGNED ORDER THE CIT(A) DELE TED THE ABOVE ADDITION HOLDING THAT IN THE CASE OF SHARE APPLICATION THE ONUS OF THE ASSESSEE IS LIMITED TO THE EXTENT OF ESTABLISHING THE IDENTITY OF THE APPLICANT AND THE OWNING UP OF SUCH SHARE APPLICATION BY THE SHARE APPLICANT. THE CIT(A) RELIED ON THE DECI SION OF THE HONBLE DELHI HIGH COURT IN THE CASE OF M/S LOVELY EXPORTS 299 ITR 268 AS UPHELD BY THE HONBLE SUPREME COURT IN CIT VS. M/S LOVELY EXPORTS 216 CTR 195 (S C). AGGRIEVED THE DEPARTMENT IS IN APPEAL. 6. LD.DR OF THE REVENUE CHALLENGING THE ORDER UNDE R APPEAL HAS CONTENDED THAT THE CIT(A) HAS ERRED IN DELETING THE ADDITION OF RS.7.5 LAKHS MADE U/S 68 OF THE ACT; THAT WHILE DOING SO THE CIT(A) HAS ERRED IN RELYING ON THE CASE OF M/S LOVELY EXPORTS (SUPRA); THAT THE CIT(A) HAS ERRED IN IGNORING THAT THE JUDGMENT IN M/S LOVELY EXPORTS (SUPRA) CANNOT BE EXTENDED TO A SITUATION WHERE A M ECHANISM HAS BEEN FOUND TO INTRODUCE UNACCOUNTED MONEY IN THE BOOKS OF ACCOUNT WITH THE HELP OF ACCOMMODATION ENTRY PROVIDERS; THAT THE ASSESSEES CASE WAS CLEARLY THA T OF PROVIDING ACCOMMODATION ENTRIES AS FOUND BY THE INVESTIGATION WING OF THE I.T. DEPARTM ENT; AND THAT AS SUCH THE ORDER OF THE CIT(A) BE SET ASIDE AND THAT OF THE AO REVIVED. 7. ON THE OTHER HAND LD.AR OF THE ASSESSEE HAS PLA CED RELIANCE ON THE IMPUGNED ORDER. IT HAS BEEN ASSERTED THAT IT IS NOT AT ALL A MATTER CONCERNING ANY ACCOMMODATION ENTRY. ATTENTION HAS BEEN DRAWN TO A COPY OF THE ACKNOWLEDGMENT OF THE RETURN OF INCOME FILED BY THE M/S NEEL GAGAN POLYMERS & MARKE TING (P) LTD. FOR AY 2001-02 AT PAGE 1 OF THE ASSESSEES PAPER BOOK (APB FOR SHOR T). ATTENTION HAS ALSO BEEN DRAWN TO PAGES 2-8 OF THE APB WHICH COMPRISE A COPY OF THE BALANCE-SHEET OF M/S NEEL GAGAN POLYMERS & MARKETING (P) LTD. ALONG WITH SCHEDULE O F INVESTMENT AS ON 31.3.2001; ATTENTION HAS FURTHER BEEN DRAWN TO APB 9-13 COMPR ISING A COPY OF ASSESSMENT ORDER OF M/S NEEL GAGAN POLYMERS & MARKETING (P) LTD. PASSE D U/S 143(2) OF THE ACT FOR AY 2003-04. WE HAVE ALSO BEEN TAKEN THROUGH THE SHARE APPLICATION ACCOUNT OF M/S NEEL GAGAN POLYMERS & MARKETING (P) LTD. (APB 14) AND TH E COPY OF BANK STATEMENT OF THE ASSESSEE COMPANY CONCERNING RECEIPT OF THE APPLICAT ION MONEY IN QUESTION (APB 15). APB 16 & 17 ARE COPIES OF ACCOUNT PAYEE CHEQUES ISS UED BY M/S NEEL GAGAN POLYMERS & MARKETING (P) LTD. IN FAVOUR OF THE ASSESSEE FOR RS.5 LAKH AND RS.2.5 LAKH RESPECTIVELY. APB 18 IS A COPY OF RETURN OF ALLOTM ENTS OF EQUITY SHARES IN THE CASE OF THE ASSESSEE COMPANY. 8. WE HAVE HEARD THE PARTIES AND HAVE PERUSED THE M ATERIAL ON RECORD. DURING THE YEAR THE ASSESSEE COMPANY HAD RECEIVED SHARE APPLI CATION MONEY OF RS.7.50 LAKH FROM M/S NEEL GAGAN POLYMERS & MARKETING (P) LTD. BEFORE THE AO THE ASSESSEE FILED CONFIRMATION LETTER GIVING ADDRESSES PAN AND COPY OF ACKNOWLEDGEMENT OF THE RETURN OF INCOME FILED BY M/S NEEL GAGAN POLYMERS & MARKETING (P) LTD. THE AO MADE THE ADDITION OBSERVING THAT THE DOCUMENTS FILED DID NOT PROVE ANY OF THE INGREDIENTS OF SECTION 68 OF THE ACT. THE CIT(A) DELETED THE ADDI TION APPLYING THE DECISION IN THE CASE OF LOVELY EXPORTS (SUPRA). THE ISSUE IS AS TO WHET HER THE ACTION OF THE CIT(A) IS CORRECT IN LAW. 9. THE DOCUMENTS FILED IN THE PAPER BOOK AS REFERR ED TO ABOVE ARE STATED TO HAVE BEEN FILED BEFORE THE AUTHORITIES BELOW. THE ACKNO WLEDGMENT OF THE RETURN OF INCOME FILED BY M/S NEEL GAGAN POLYMERS & MARKETING (P) LT D. SHOWS THE RETURN TO HAVE BEEN FILED ON 22.10.2001. THE BALANCE SHEET OF M/S NEEL GAGAN POLYMERS & MARKETING (P) LTD. AS ON 31.3.2001 UNDER APPLICATION OF FUNDS S HOWS INVESTMENT OF RS.27.50 LAKHS. THE BREAK-UP OF THIS AMOUNT OF RS.27.50 LAKH IS SHO WN IN THE SCHEDULE OF INVESTMENT AS ON 31.3.2001 FORMING PART OF THE BALANCE-SHEET OF M/S NEEL GAGAN POLYMERS & MARKETING (P) LTD. APB 8 SHOWS INVESTMENT OF RS.7. 5 IN THE ASSESSEE COMPANY I.E. M/S P.D. POLY CHEM (P) LTD. ALL THESE DOCUMENTS ARE HA VING ENOUGH EVIDENTIARY VALUE REGARDING THE IDENTITY OF M/S NEEL GAGAN POLYMERS & MARKETING (P) LTD. I.E. THE ASSESSEES CREDITOR SHAREHOLDER COMPANY. HOWEVER THE ASSESSMENT ORDER DATED 26.12.2007 (APB 9-13) IN THE CASE OF M/S NEEL GAGAN POLYMERS & MARKETING (P) LTD. FOR ASSESSMENT YEAR 2003-04 SHOWS ADDITION TO HAVE BEEN MADE IN THE HANDS OF M/S NEEL GAGAN POLYMERS & MARKETING (P) LTD. ON A PROT ECTIVE BASIS. COPY OF LEDGER ACCOUNT OF M/S NEEL GAGAN POLYMERS & MARKETING (P) LTD. SHOWS CREDIT ENTRIES OF RS.5 AND RS.2.50 LAKH AMOUNTING TO RS.7.5 LAKHS I.E. THE AMOUNT IN QUESTION. COPY OF STATEMENT OF ACCOUNTS OF THE ASSESSEE COMPANY (APB 15) SHOWS BOTH OF THE AMOUNTS TO HAVE BEEN CREDITED. COPY OF RETURN OF ALLOTMENTS P URSUANT TO SECTION 75(1) OF THE COMPANIES ACT 1956 IN THE ASSESSEES CASE SHOWS M /S NEEL GAGAN POLYMERS & MARKETING (P) LTD. TO BE AN ALLOTTEE AS ON 11.3.200 2. 10. M/S LOVELY EXPORTS (SUPRA) PROVIDES THAT IN T HE CASE OF SHARE APPLICATION THE ONUS OF THE ASSESSEE IS LIMITED TO ESTABLISHING THE IDENTITY OF THE APPLICANT AND THE OWNING UP OF THE SHARE APPLICATION BY THE SHARE APPLICANT. THIS PRECISELY IS THE FACT SITUATION IN THE ASSESSEES CASE. THE ASSESSEE ON QUERY DULY PROVIDED BEFORE THE AO PAN AND COPY OF ACKNOWLEDGMENT OF RETURN OF INCOME OF ITS SHARE APPLICANT M/S NEEL GAGAN POLYMERS & MARKETING (P) LTD. THAT BEING SO IT CANNOT BE SAID THAT CIT(A) IS WRONG IN APPLYING THE DECISION OF M/S LOVELY EXPORTS (SUPRA). 11. FURTHER IN RECENT DECISIONS INTER ALIA THE H ONBLE DELHI HIGH COURT AND THE HONBLE KARNATAKA HIGH COURT UNDER SIMILAR CIRCUMS TANCES HAVE APPLIED THE RATIO OF M/S LOVELY EXPORTS (SUPRA). THE HONBLE DELHI HIGH COURT DID SO IN THE CASE OF INTEX TECHNOLOGY (INDIA) LTD. ITA NO.1239 OF 2009 AND NA RENDER BANSAL IN ITA NO.1245 OF 2009 VIDE ORDER DATED 28.4.2010. THE HONBLE KARN ATAKA HIGH COURT IN ARUNA NANDA TEXTILES PVT. LTD. IN ITA NO.1515 OF 2005 VIDE OR DER DATED 2.3.2010 HAS REITERATED AS LAID DOWN BY THE HONBLE SUPREME COURT IN THE CASE OF CIT VS. STELLAR INVESTMENT LTD. 251 ITR 263 THAT IT IS NOT FOR THE ASSESSEE TO PLA CE MATERIAL BEFORE THE AO WITH REGARD TO THE CREDITWORTHINESS OF THE SHAREHOLDERS; THAT IF T HE COMPANY HAS GIVEN THE ADDRESSES OF THE SHAREHOLDERS AND THEIR IDENTITY IS NOT IN DISPU TE WHETHER THEY WERE CAPABLE OF INVESTING THE AO SHALL INVESTIGATE; THAT IT IS NOT FOR THE ASSESSEE COMPANY TO ESTABLISH BUT FOR THE DEPARTMENT TO ENQUIRE WITH THE INVESTOR S ABOUT THEIR INVESTING THE AMOUNT IN THE SHARES. AND IN SHREE DADU AUTO PVT. LTD. IN ITA NO.704 OF 2009 VIDE ORDER DATED 30.3.2010 THE HONBLE PUNJAB & HARYANA HIGH COURT HELD THAT IN SUCH CASES THE PROPER COURSE FOR THE AO COULD HAVE BEEN TO REOPEN THE ASSESSMENT OF THE SHARE APPLICANTS/SHAREHOLDERS RATHER THAN MAKING ADDITION IN THE HANDS OF THE ASSESSEE COMPANY. 12. GROUND NO.3 RAISED IN THE APPEAL PREFERRED BY T HE REVENUE IS WHETHER THE CIT(A) HAS ERRED IN APPLYING THE JUDGMENT OF THE HONBLE S UPREME COURT IN THE CASE OF LOVELY EXPORTS (P) LTD. 216 CTR 199 (SC) WHICH IS NOT APP LICABLE WHERE THE SHARE APPLICATION IS NOT RECEIVED IN A PUBLIC ISSUE. IN THIS REGARD IN UMA POLYMERS (P) LTD. VS. DCIT 100 ITD 01 (JODH.)(TM) IT HAS BEEN HELD THAT IN RESPEC T OF SHARE CAPITAL MONEY THE ASSESSEE HAS TO PROVE ONLY THE EXISTENCE OF THE PERSON IN WH OSE NAME THE SHARE APPLICATION IS RECEIVED AND THERE IS NO FURTHER BURDEN ON THE ASSE SSEE COMPANY TO PROVE WHETHER THAT PERSON HAS HIMSELF INVESTED THE MONEY OR SOME OTHER PERSON HAS INVESTED THE SAME IN HIS NAME; THAT THE DISTINCTION BETWEEN A PUBLIC COMPANY AND PRIVATE COMPANY WAS NOT VERY MATERIAL FOR THIS PURPOSE. THEN EVEN IN LOVELY E XPORTS LOVELY EXPORTS WAS A PRIVATE LTD. COMPANY. AS SUCH THIS GROUND IS REJECTED. 13. IN VIEW OF THE ABOVE FINDING NO ERROR IN THE O RDER OF THE CIT(A) THE SAME IS HEREBY CONFIRMED REJECTING THE GRIEVANCE SOUGHT TO BE RAISED BY THE DEPARTMENT. 14. IN THE RESULT THE CROSS OBJECTION RAISED BY TH E ASSESSEE IS DISMISSED AS NOT PRESSED AND THE APPEAL OF THE DEPARTMENT IS DISMISSED. 15. ORDER PRONOUNCED IN OPEN COURT ON 21.05.2010. SD/- SD/- (R.C. SHARMA) (A.D.JAIN) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED MAY 21 2010. *SKB* COPY FORWARDED TO:- 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT 4. THE CIT(A)-XVII NEW DELHI. 5. THE DR ITAT LOKNAYAK BHAWAN KHAN MARKET NEW DELHI. BY ORDER (ITAT NEW DELHI).