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TMI Blog2019 (11) TMI 1028X X X X Extracts X X X X X X X X Extracts X X X X ..... during the appellate proceedings before him either by himself or by remand to the AO. A perusal of Section 251(1)(a) shows that in an appeal against an order of assessment, Ld. CIT(A) may confirm, reduce, enhance or annul, the assessment. However, w.e.f. 1.6.2001, as a result of amendment to Income Tax Act, the power of Ld. CIT(A) to set aside an order of assessment has been withdrawn. Therefore, any necessary inquiry / investigation or verification is required to be carried out during pendency of the appellate proceedings before Ld. CIT(A). Perusal of Section 250(4) shows that Ld. CIT(A) has powers, before disposing off any appeal, to make such further inquiry as he thinks fit, or he may direct the AO to make further inquiry and report the result of the same to the Ld. CIT(A). It is well settled that powers of CIT(A) are coterminus with powers of the AO. We may refer to the order of Apex Court decision in CIT vs. Kanpur Coal Syndicate [ 1964 (4) TMI 18 - SUPREME COURT] in which it was held that AAC has plenary powers in disposing off an appeal; that the scope of his power is co-terminus with that of the ITO, and that he can do what the ITO can do and can also direct him to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... evenue by: Shri Sanjog Kapoor, Sr. DR Assessee by: None ORDER PER ANADEE NATH MISSHRA, AM [A]. This appeal has been filed by Revenue against the impugned appellate order dated 27.03.2008 passed by Learned Commissioner of Income Tax (Appeals), Muzaffarnagar, [in short, Ld.CIT(A) ] pertaining to Assessment Year 2002-03, on the following grounds: 1. That the Ld. Commissioner of Income Tax (Appeals) has erred in law on facts by deleting the addition of Accommodation entries of ₹ 18,54,625/-, even when 11 months time was given by Assessing Officer for furnishing the evidences. The Hon ble S.C. has held in 57 ITR 532, 53 ITR 623 that burden to prove nature and source of receipt was on the assessee, which has not been discharged by the assessee in this case. 2. That the Ld. Commissioner of Income Tax (Appeals) has erred in law by deleting the share capital of ₹ 4,28,50,000/- , and addition made u/s 68. Notices u/s 144 dated 16-10-2007 and 6-11-2007 were served properly on the assessee but no share capital subscriber was produced before Assessing Officer and Ld. CIT(A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Navneet Trading DD of P SB. MZN ₹ 2,00,500/- 132636 26 May, 2001 Sita Devi DD of SBI. MZN ₹ 2,00,500/- 123564 02 June, 2001 Raj Rani Bansal DD of SBI. MZN ₹ 2,00,500/- 116579 02 June, 2001 Ram Prakash DD of SBI. MZN ₹ 1,50,375/- 144537 02 June, 2001 Shree Ram garg DD of P SB. MZN ₹ 2,00,500/- 505261 03 July, 2001 Bansal Trading Co. Total Value ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... adjourned the case sine die. Accordingly, assessee company was intimated that reasons have already been supplied vide letter dated 25.01.2007 and company was again asked to make compliance as per questionnaire dated 30.04.2007 and date was fixed for compliance on 11.06.2007 through notice u/s 142(1) dated 30.05.2007 attached with the reply. Again the compliance was made on the dated fixed nor any adjournment was sought. Hence notice u/s 148/ 143(2) /142(1) was issued on 06.11.2007 as under: To, The Principal Officer, M/s Rana Papers Ltd., Jansath Raod, Muzaffarnagar, Sub: Assessment Proceedings u/s 148/143(3) of I.T. Act, 1961 A.Y. 2002-03 notice u/s 144 of the I.T. Act, 1961- Final opportunity- Regarding. Please refer to the above, Your attention is invited to wards following notices issued from time to time and have already been served upon you. 1. Notice u/s 148 dt. 12.12.2006 served on 21.12.2006 2. Notice u/s 143(2) issued alongwith notice under section 142(1) and questionnaires and Annexure A dt. 30.04.2007 duly s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... some more elaborate and specific documentary evidence, if any, in your passions for u/s 148 available, the same may please be communicated so that proper compliance' reply can be made. 2. The assessee has receipt the money for purchase of shares through account payee demand draft only and the application are identifiable, assessed to tax and created worthy, in support of which the copies of the applications receipt for shares purchases are being filed for your ready reference. 3. It is further requested, that the assessee is filing the complete postal addresses of the applicants for your ready reference and it required the applicants may either be contacted u/s 133(6) or may be summons u/s 131. at the cost of the assessee, so that the real picture of these applicants will come out before the department The copies of Share Application are being enclosed as available with the assessee in support of amount received. In any circumstances these entries cannot be assessed and considered accommodation entries as purposed because the assessee has already allotted shares to these parties. The assessee also relied on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ove that the amount s credited in accounts do not represent income and the issue of genuineness of such credit I to be considered in the light to human probability and surroundings circumstances. In the instant case surrounding circumstances clearly speaks that assessee company has introduced its unaccounted money through accommodation entries. Therefore, assessee s contention is not acceptable and accommodation entries of ₹ 18,54,625/- are treated as income from undisclosed sources and added to the income of the assessee company. (Addition ₹ 18,54,625/-) Share Capital In the year under consideration company s authorized Share Capital has increased from ₹ 4,50,000/- to ₹ 9,05,00,000/-. The Issued, Subscribed and paid up capital in previous year was ₹ 4,08,98,000/- which in the year under consideration has increased to ₹ 8,37,48,000/-. Thus, there is increase of ₹ 4,28,50,000/- in the issued subscribed and paid up capital for which not details, evidences etc. have filed. The company was specifically required to file details of increase in Share Capital that is names, addresses, amount ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2007 enclosing therewith details of unsecured loans as under:- S.No. Name Amount 1. Sh. Noor Saleen Rana ₹ 6,06,549/- 2. M/s Doaba Rolling Mills Ltd. MZN ₹ 51,90,000/- 3. M/s Sanjay Sales Corporation ₹ 10,00,000/- 4. M/s A.P. Enterprises, Chandigarh ₹ 3,00,000/- 5. M/s Bharat Trading Co. ₹ 12,00,000/- 6. M/s Paras Paper Co. ₹ 10,00,000/- 7. M/s Shree Sales ₹ 10,00,000/- 8. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 7; 289,97,100/-. Since no evidence in this regard has been enclosed with the return of income nor filed during the course of assessment proceedings, the same is not allowable. Besides, there is no mention in the Audit Report by the Auditor in this regard. Therefore, no deduction on this account is being allowed. With these remarks the income of the assessee company is computed as under: Net profit as per P L account ₹ 45,66,713/- Add: Depreciation for separate consideration ₹ 32,54,315/- ₹ 78,21,028/- Added back: 1. Penalty on PF debited to P L a/c ₹ 22,676/- 2. Excise duty paid related to earlier year ₹ 6,45,131/- 3. P.F. paid delayed ₹ 32,655/- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... IT(A) against the aforesaid Assessment Order dated 05.12.2007. Vide aforesaid impugned appellate order dated 27.03.2008 the Ld. CIT(A) deleted the additions of ₹ 18,54,625/- (on account of accommodation entries), ₹ 4,28,50,000/- (on account of addition made U/s 68 of I.T. Act towards share capital) and ₹ 1,18,63,549/- (on account of unsecured loans). The relevant portion of the order of the Ld. CIT(A) is reproduced as under:- The appeal has been filed against the order of DCIT, Cirlce- I, Muzaffarnagar passed u/s 143(3)of the Act lor assessment years 2002-03 2. In response to notice, Shri Dinesh Mohan, Advocate attended, filed written submission and argued the appeal. 3. The assessee is a company engaged in the business of manufacturing of paper. ROI was filed on 31.10.2002 declaring, lose of ₹ 2,59,78,987/-. Later, notices U/s 148 was issued on 12.12.2006 on the basis of information received from Director of Income Lax (lnv.1), New Delhi through Commissioner of Income-tax, Muzaffarnagar that the assessee company had received following accommodation entries: The assessee ob ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... loaners or depositors nor the said confirmation letter or reply explaining the source of deposits etc. were filed. The AO, therefore, treated these amounts of ₹ 1,19,63,549/- as unexplained and added to the income of the assessee. 3.4 The AO disallowed ₹ 58.415/- debited in profit and loss account as Income-tax expenses. 3.5 The AO further disallowed ₹ 30,261/- debited under the head subscription membership expenses for which no details/evidences were filed. 4. Written submissions made by the appellant s counsel during the appellate proceedings are reproduced as under: Sir, With reference \n the above, it A most respectfully submitted us under:- That the assessee is a Private Limited Company carrying business of Manufacturing and Trading of Craft Paper which is a Raw-material for Packaging Industry mainly. The company is using Paper Scrap and Sugar Cane Baggasse and Taut a etc. as a Rawmaterial for pulping purpose and from that by adding certain chemicals, the Craft Paper is being manufactured. For the year under consideration, the Return of Income has been filed on a B ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... quiry specifically to be satisfied regarding the cash credit. It he is satisfied that these entries are not genuine he has every right to add these amounts as income from other sources. The satisfaction of the Assessing Officer is the basis of invocation of the powers under section 68 and the satisfaction must be derived from relevant factors on the basis of proper enquiry envisaged under section 68 is an enquiry which is reasonable and just [Khundelwal Construction v. CIT, (1997)227 JTR 900,904( Gauh )]f In the facts of that case ,it has been held that the amount of cash credits could not be included in the total income of the assessee because the enquiry was not properly made. Amount found credited in the books of a company as receipt of shore application money:- Section 68 is very widely woeded and the Assessing Officer is not precluded from making an enquiry as to the nature and source of a sum credited in the books of account of the assessee-company even if the same is credited as receipt of share application money . Where, therefore ,an assessee-company represents that it has issued shares on receipt of share application money they the amount so receiv ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... holding that the transactions appearing in certain names were genuine transactions and the addition made under section 68 was untenable. In order to establish the fact of the receipt of the cash credit as required under section 68, the assessee must prove three important conditions .namely.) I) the identity of the person, (2) the genuineness of the transaction, and (3) the capability of the person giving the cash credit IJ(dan Timbers v.CIT, (1997)223 ITR 11,17 (Gauh)j The Assessing Officer s rejection, not of the explanation of the assessee, but of the explanation regarding the source of income of the depositor, cannot by itself lead to any inference regarding the non- genuine or fictitious character of the intries in the assessee s books of account /Sarogi Credit Corporation b, CIT,(1976) 103 ITR 344, 349-50(Pat)]. There cannot be one general or universal proposition of law which could be the guiding yardstick in matter, Each case has got to be decided on the facts and circumstances of that case, The surrounding circumstance to be considered must however be objective facts, evidence adduced before the taxing authorities , presu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s appearing in his books, if the evidence is shut out and the witnesses produced are not permitted to explain the credit, it will be open to the Tribunal to appraise the evidence as it is and reach its own conclusion which may result in the cash credit being accepted as genuine [CIT vs Ishwar Puss Shurnui ,(1986) 158 ITR 168,169 (Del)]. Explanation offered by the assessee:- An explanation prima facie reasonable cannot be rejected on capricious or arbitrary grounds [R.B.N.J.Naidu v. CIT, (1956) 29 ITR 194 (Nag); Kanpur steel Co. Ltd. v. CIT,(1957)32 ITR 56(All)] or on mere suspicion or on imaginary or irrelevant grounds [Lajwanti Sial v. CIT, (1956)30 ITR 228 (Nag)]. Where an assessee furnishes reasonable explanation , there is no justification for accepting his explanation in part and discarding / in relation to the rest [Chunilul Ticamchand coal Co. Ltd. v. CIT, (1955) 27 ITR 602 (Pat); Mehta Parikh co. v CIT, (1956) 30 ITR [D] This present appeal has been filed by Revenue against the aforesaid impugned ap ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ncome 14. Copy of Documents filed in respect of Smtk. Shamia Zeenat. a) Copy of the Application of Equity Shares b) Copy of Return of income 15. Copy of Documents filed in respect of Smt Shahin Khatoon. a) Copy of the Application of Equity Shares b) Copy of Return of income 16. Copy of Documents filed in respect of Shir Noor Saleem Rana. a) Copy of the Application of Equity Shares b) Copy of Return of income 17. Copy of Documents filed in respect of Smt Saida Begam. a) Copy of the Application of Equity Shares b) Copy of Return of income 18. Copy of Documents filed in respect of Shri Ganeshi Lal Propk. Ganesh Trading Company. a) Copy of the Application of Equity Shares b) Copy of Intimation U/s 143(1) c) Copy of the Order passed U/s 154 d) Co9py of the Intimation U/s 143(1)(a) 19. Copy of Documents filed in respect of M/s Labh Tronics Overseas Pvt. Ltd. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... b) Copy of Confirmation c) Copy of Bank Account 30. Copy of Documents filed in respect t of Saudamini Trading Investment Co. Pvt. Ltd. a) Copy of the Application of Equity Shares b) Copy of Confirmation c) Copy of Bank Account 31. Copy of Documents filed in respect of Chemax (India) Pvt. Ltd. a) Copy of the Application of Equity Shares b) Copy of Confirmation 32. Copy of Documents filed in respect of Ashian Needless Pvt. Ltd. a) Copy of the Application of Equity Shares b) Copy of Confirmation 33. Copy of Documents filed in respect of KVF Securities Pvt. Ltd. a) Copy of the Application of Equity Shares b) Copy of Confirmation c) Copy of Bank Account 34. Copy of Documents filed in respect of Sparrow Resorts Pvt. Ltd. a) Copy of the Application of Equity Shares b) Copy of Confirmation c) Copy of Bank Account 35. Copy of Do ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Application of Equity Shares b) Copy of Returns of Incomes c) Copy of Intimation U/s 143(1) 48. Copy of Document filed in respect of Shri Ghanshyam Dass Prop. Navneet Trading Co. a) Copy of the Application of Equity Shares b) Copy of the Intimation U/s 143(1) c) Copy of Order U/s 154 49. Copy of Document filed in respect of Shri Ram Garg. a) Copy of the Application of Equity Shares b) Copy of Returns of Incomes 50. Copy of Document filed in respect of Shri Ram Prakash. a) Copy of the Application of Equity Shares b) Copy of Returns of Incomes 51. Copy of Document filed in respect of Shri Amit Bansal. a) Copy of the Application of Equity Shares b) Copy of Returns of Incomes c) Copy of Intimation U/s 143(1) 52. Copy of Document filed in respect of Shri Shyam Lal. a) Copy of the Application of Equity Shares b) Copy of Returns of Income ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... umar. a) Copy of the Application of Equity Shares b) Copy of Returns of Incomes c) Copy of Intimation U/s 143(1) 65. Copy of Document filed in respect of Shri Jagmohan Ram. a) Copy of the Application of Equity Shares b) Copy of Returns of Incomes c) Copy of Intimation U/s 143(1) 66. Copy of Document filed in respect of Smt. Santosh Kumari. a) Copy of the Application of Equity Shares b) Copy of Returns of Incomes 67. Copy of Document filed in respect of Smt. Rekha Bansal. a) Copy of the Application of Equity Shares b) Copy of the Intimation 68. Copy of Document filed in respect of Shri Subhash Kumar. a) Copy of the Application of Equity Shares b) Copy of Returns of Incomes 69. Copy of Document filed in respect of Shri Rajesh Kumar. a) Copy of the Application of Equity Shares b) Copy of Returns of Incomes c) Copy of Intimation ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Intimations 82. Copy of Document filed in respect of Shri Raja Ram. a) Copy of the Application of Equity Shares b) Copy of Returns of Incomes c) Copy of Intimation 83. Copy of Document filed in respect of Shri S K Mittal Propk. M/s S.K. Trading Co. a) Copy of the Application of Equity Shares b) Copy of Intimation 84. Copy of Document filed in respect of Shri Ved Prakash. a) Copy of the Application of Equity Shares b) Copy of Returns of Incomes c) Copy of Intimation 85. Copy of Document filed in respect of Shri Vishwas Kumar. a) Copy of the Application of Equity Shares b) Copy of Returns of Incomes c) Copy of Intimation 86. Copy of Document filed in respect of Shiv Shakti Merchants Pvt. Ltd. a) Copy of the Confirmations b) Copy of Returns of Incomes 87. Copy of Document filed in respect of Touch Woods Agencies Pvt. Ltd. a) Co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 177 TAXMAN 133 (Delhi); Hon ble High Court of Punjab Haryana in the case of Abheshek Industries Ltd. v. Commissioner of Income-tax, Central Circle [2009] 177 Taxman 335 (Punj. Har.); Co-ordinate Bench of ITAT, Amritsar in the case of A.P. S. Associates (P.) Ltd. v. Assistant Commissioner of Income-tax, Range-III, [2006] 101 ITD 215 (ASR.); Co-ordinate Bench of ITAT, Jodhpur, in the case of Bhilwara Spinners Ltd. v. Commissioner of Income-tax, Udaipur [2006] 101 ITD 237 (JODH.); were also brought to the attention of ITAT. At the time of hearing on 07.11.2019, Revenue was represented by Shri Sanjog Kapoor, the learned Senior Departmental Representative ( Ld. Sr. DR , for short). However, none was present from the assessee s side. This is a very old appeal filed in 2008, and hearings first started in this case on 12.11.2008 since then the appeal came up for hearing many times in the past. After several adjournments, on 26.08.2019, the hearing was adjourned to 07.11.2019 as last opportunity to the Ld. Authorized Representative ( Ld. AR , for short) of the assessee. In the absence of any representation from assessee s side on 07.11.2019, at the time of hearing before us, we heard th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ns. 20. Now, when we go to the order of the Tribunal in the present case, we notice that the Tribunal has merely reproduced the order of the Commissioner of Income-tax (Appeals) and upheld the deletion of the addition. In fact, they substantially relied upon and quoted the decision of its co-ordinate Bench in the case of MAF Academy P. Ltd., a decision which has been overturned by the Delhi High Court, vide its judgment in CIT v. MAF Academy P. Ltd. [2014] 206 DLT 277 ; [2014] 361 ITR 258 (Delhi)). In the impugned order it is accepted that the assessee was unable to produce directors and principal officers of the six shareholder companies and also the fact that as per the information and details collected by the Assessing Officer from the concerned bank, the Assessing Officer has observed that there were genuine concerns about identity, creditworthiness of shareholders as well as genuineness of the transactions. 21. In view of the aforesaid discussion, we feel that the matter requires an order of remit to the Tribunal for fresh adjudication keeping in view the aforesaid case law. Navodava Castle Pvt Ltd Vs CIT ^20151 56 taxm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s liable to be taxed under section 68. It was held as follows: 12. A perusal of the order of the Tribunal shows that it has gone on the basis of the documents submitted by the assessee before the AO and has held that in the light of those documents, it can be said that the assessee has established the identity of the parties. It has further been observed that the report of the investigation wing cannot conclusively prove that the assessee's own monies were brought back in the form of share application money. As noted in the earlier paragraph, it is not the burden of the AO to prove that connection. There has been no examination by the Tribunal of the assessment proceedings in any detail in order to demonstrate that the assessee has discharged its onus to prove not only the identity of the share applicants, but also their creditworthiness and the genuineness of the transactions. No attempt was made by the Tribunal to scratch the surface and probe the documentary evidence in some depth, in the light of the conduct of the assessee and other surrounding circumstances in order to see whether the assessee has discharged its onus under Section 68. With respect, it a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... perceive and regard as correct position of law is that the court or tribunal should be convinced about the identity, creditworthiness and genuineness of the transaction. The onus to prove the three factum is on the assessee as the facts are within the assessee's knowledge. Mere production of incorporation details, PAN Nos. or the fact that third persons or company had filed income tax details in case of a private limited company may not be sufficient when surrounding and attending facts predicate a cover up. These facts indicate and reflect proper paper work or documentation but genuineness, creditworthiness, identity are deeper and obtrusive. Companies no doubt are artificial or juristic persons but they are soulless and are dependent upon the individuals behind them who run and manage the said companies. It is the persons behind the company who take the decisions, controls and manage them. 10. CIT Vs Empire Builtech (P.) Ltd (366 ITR 110) where Hon ble Delhi High Court held that u/s 68 it is not sufficient for assessee to merely disclose address and identities of shareholders; it has to show genuineness of such individuals or entities ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uld be justified to take remedial action in the hands of the company. In the present case, AO can still make such indepth inquiry, in case he finds it worthwhile. But he would have to take pains to issue notices U/s 131 of the Income- tax Act, 1961, and take further action as mentioned earlier. With this line of reasoning, the Ld. CIT(A) went on to delete the aforesaid addition of ₹ 4,28,50,000/-. [E.3] In respect of the aforesaid addition of ₹ 1,19,63,549/- (on account of unsecured loans); perusal of paragraph 10 of the aforesaid impugned appellate order dated 27.03.2008, shows that the Ld. CIT(A) admitted additional evidences and went on to delete the aforesaid addition of ₹ 1,19,63,549/-, on the basis of additional evidences so admitted. [F] From perusal of the foregoing, we find that as far as aforesaid additions amounting to ₹ 18,54,625/- (subject matter to ground 1 of appeal) and the aforesaid addition of ₹ 4,28,50,000/- (subject matter of ground 2 of this appeal) are concerned; the Ld. CIT(A) was of the view that further inquiry / investigation / verification in these aspects were desirable but, according to the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n / verification; to not ensure that such further inquiries / investigation / verification were done during the pendency of appellate proceedings before the Ld. CIT(A); and in accordance with Section 250(4) of I.T. Act. For coming to this conclusion, we are guided by order of Hon ble Delhi High Court in the case of Commissioner of Income Tax vs. M/s Jansampark Advertising And Marketing (2015) 375 ITR 373 (Del.) in which Hon ble Delhi High Court held as under: 42. The AO here may have failed to discharge his obligation to conduct a proper inquiry to take the matter to logical conclusion. But CIT (Appeals), having noticed want of proper inquiry, could not have closed the chapter simply by allowing the appeal and deleting the additions made. It was also the obligation of the first appellate authority, as indeed of ITAT, to have ensured that effective inquiry was carried out, particularly in the face of the allegations of the Revenue that the account statements reveal a uniform pattern of cash deposits of equal amounts in the respective accounts preceding the transactions in question. This necessitated a detailed scrutiny of the material submitted by the assessee in r ..... X X X X Extracts X X X X X X X X Extracts X X X X
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