Delhi High Court
Commissioner Of Income Tax vs N Tarika Properties Investment ... on 28 November, 2013
Author: Sanjeev Sachdeva
*IN THE HIGH COURT OF DELHI AT NEW DELHI
% Judgment reserved on : 23 rd August, 2013
th
Judgment pronounced on: 28 November, 2013
+ ITA 2080/2010
COMMISSIONER OF INCOME T AX ..... Appellant
Through: Mr. Abhishek Maratha , Adv
Versus
N TA RIKA PROP ERTIES INVE STME NT PVT. LT D.
..... Respondent
Through: Mr. Arvind Bansal, Adv
CORAM:
HON'BLE MR. JUSTICE SANJIV KHANNA
HON'BLE MR. JUSTICE SANJEEV SACHDEVA
SANJEEV SACHDEVA, J.
1. This is an appeal under Section 260A of the Income
Tax Act (hereinafter referred to as "the Act") filed by
the Revenue against the order dated 24.08.2009 ,
passed by the Income Tax Appellate Tribunal
(hereinafter referred to as the "ITAT") whereby the
ITAT has dismissed the appeal of the Revenue against
the order of the Commissioner Income Tax (Appeals)
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(hereinafter referred to as the "CIT (Appeals)")
deleting the addition of Rs.34,50,000/- made under
Section 68 of the Act with respect to the share
application money received by the Assessee.
2. Vide order dated 11.05.2012, the following substantial
question of law was framed:
"Whether the order of the tribunal dated
24.8.2009 ignores and does not deal with the
factual findings recorded by the assessing
officer and is, therefore, perverse?"
3. The case pertains to the Assessment Year 2001-02.
Return was filed on 31.10.2001 by the Assessee
declaring total income of Rs. 1,42,508/-. Assessment
was completed under Section 143(3) on 26.03.2004 at
income of Rs. 8,90,160/-.
4. On giving appeal effect, vide order dated 10.02.2005 ,
the revised income stood assessed at Rs.8,64,414/-.
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5. Information was received from the Investigation Wing
of the appellant that the Assessee was identified as
one of the beneficiaries who had received bogus
entries from the following parties:-
Name Cheque Amount Date
No. in Rs.
M/s. Landmark 494833 5,00,300 19.08.2000
Communication Pvt.
Ltd.
M/s. Landmark 494835 5,00,750 30.08.2000
Communication Pvt.
Ltd.
M/s. Fair N. Square 111077 4,50,360 16.06.2000
Exports Pvt. Ltd.
6. Notice under Section 148 of the Act was issued to the
Assessee on 15.02.2007. In response to which the
Assessee filed a letter dated 21.02.2007 stating that
return originally filed may be treated as return in
response to the notice under Section 148.
7. Notice under Section s 143(2) & 142(1) was issued on
21.06.2007 and the Assessee was required to furnish
information in respect of persons who had been
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allotted shares between the period 31.03.2001 and
31.03.2007, besides seeking other information and
details. The notice was not complied with and a
second notice was issued again on 06.07.2007, which
was also not complied with. Instead, the Assessee
vide letter dated 28.09.2007, challenged the validity
and legality of the action taken under Sections 147
and 148 of the Act. The Assessee raised objections to
the action taken under Section 148. The objections
were disposed of vide order dated 12.12.2007.
8. On 18.12.2007, the Assessee filed confirmation from
the respective persons who had subscribed to the
share capital, in the Financial Year 2000-01, relevant
to the Assessment Year 2001-02 in issue. The
Assessee was directed to prove the creditworthiness
in respect of the parties from whom share application
money had been received during the Financial Year
2000-01. The subscription of share capital during the
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relevant financial year is as under:
Name Amount in Rs.
M/s. Landmark Communication Pvt. 10,00,000
Ltd.
M/s. Jai Baba Traders Pvt. Ltd. 8,00,000
M/s. S J Hosiery Pvt. Ltd. 10,00,000
M/s. Bhawani Engineering Pvt. Ltd. 6,50,000
34,50,000
9. The Assessee requested for and was provided the
photocopies of the extracts of the bank statements
which were filed by the Assessee during the course of
original assessment proceedings. The Assessee was
provided with the bank statements of M/s. Landmark
Communication Pvt. Ltd. and M/s. Jai Baba Traders
Pvt. Ltd. that had been filed by the Assessee during
the original assessment proceedings.
10. On 24.12.2007, a request for adjournment was made
on behalf of the Assessee to 27.12.2007. However,
on 27.12.2007, none appeared for the Assessee, so
the assessment was made on the basis of details filed
by the Assessee, inquiries made by the AO and details
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available in the original assessment records.
11. The Assessing Officer noticed that the extracts of bank
accounts submitted by the Assessee during the
original assessment proceedings had been fabricated.
The Assessing Officer had requisitioned the bank
statements from the banks which established that
immediately before the issuance of ch eques for the
purpose of making pay order or demand draft, there
was a deposit of cash. The A ssessing Officer noticed
that the entry by transfer shown in the bank account
(furnished by the Assessee in the original assessment
proceedings) was fabricated. The Assessing Officer
prepared the following chart as a comparison between
the fabricated entries and actual bank statement
obtained from the bank.
M/s. Landmark Communication Pvt. Ltd.
(A/c No.3194 with Jai Laxmi Co-op. Bank)
FABRICATED STATEMENT
Date Narration Cheque Debit Credit Balance
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No.
28 /0 8 /20 00 By Tr -- -- 5,01, 500 5,03, 050
cr.
29 /0 8 /20 00 To Tr (to 494 83 3 5,00, 750 -- 2,30 0
pay cr
or der)
29 /0 8 /20 00 By 5,00, 000 5,02, 300
cle ar ing cr.
30 /0 8 /20 00 To Tr 494 83 5 5,00, 750 1,55 0
(pay cr.
or der)
ACTUAL STATEMENT as obtained from Bank by this office.
Date Narration Cheque Debit Credit Balance
No.
28 /0 8 /20 00 By Cas h -- -- 220, 00 0 4,42, 210
Cr.
28 /0 8 /20 00 By Cas h -- -- 60,0 00 5,02, 210
Cr.
28 /0 8 /20 00 To Tr 494 82 8 5,00, 300 -- 1,91 0
(PAY Cr.
ORDER)
29 /0 8 /20 00 By Cas h -- -- 300 00 0 3,01, 910
Cr.
29 /0 8 /20 00 By Cas h -- -- 200 00 0 5,01, 910
Cr.
29 /0 8 /20 00 By Cas h -- -- 700 5,02, 610
Cr.
29 /0 8 /20 00 To Tr 494 83 3 5,00, 300 -- 2,31 0
(PAY Cr.
ORDER)
30 /0 8 /20 00 By Cas h -- -- 300 00 0 3,02, 310
Cr.
30 /0 8 /20 00 By Cas h -- -- 500 00 0 8,02, 310
Cr.
30 /0 8 /20 00 By Cas h -- -- 200 00 0 10,0 2,31 0
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Cr.
30 /0 8 /20 00 To 494 83 4 5,00, 000 -- 5,02, 310
Cle aring Cr.
30 /0 8 /20 00 To Tr 494 83 5 5,00, 750 -- 1,56 0 Cr.
(PAY
ORDER)
M/s. Jai Baba Traders Pvt. Ltd. (A/c. No.17757 with Canara Bank,
Ballimaran Delhi)
FABRICATED STATEMENT
Date Narration Cheque Debit Credit Balance
No.
31 AUG TR -- -- 450 00 0 4,55, 366
200 0 Cr.
31 AUG TR -- -- 350 00 0 8,05, 366
200 0 Cr.
31 AUG DD 198 96 0 8,01, 200 4,16 6
200 0 Cr.
ACTUAL STATEMENT as obtained from Bank by this office.
Date Narratio Cheque Debit Credit Balance
n No.
31 AUG CASH -- -- 450 00 0 452 51 6.7 7
200 0 Cr.
31 AUG CASH -- -- 351 00 0 803 51 6.7 7
200 0 Cr.
31 AUG DD 198 96 0 8,00, 000 -- 2,71 6.7 7
200 0 Cr.
31 AUG CASH 800 -- 1,91 6.7 7
200 0 CHARGE Cr.
12. The Assessing Officer noticed that the bank statement
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furnished during the original assessment proceedings
was fabricated and misled the Assessing Officer in as
much as it omitted to show the deposit of cash
immediately prior to issuance of cheques for
preparation of pay order s or DDs in favour of the
Assessee regarding subscription of its share capital.
The AO found that the Assessee had adopted unfair
practice by adducing false evidence to get undue
advantage of giving colour of genuineness to bogus
entries through fabricated bank accounts.
13. The Assessing Officer found that the deposits were
mostly by cash or transfer entries from the same bank
of the entry providers. The AO held that there were
facilitating accounts which showed transfer entries
from one account to another to avoid direct reflection
of deposits/withdrawal of cash. Further that the
Assessee had received accommodation entries to
launder unaccounted money in the sha pe of
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subscription to its share capital. With regard to the
share subscribed by M/s. Bhawani Engineering Pvt.
Ltd. and M/s. SJ Hosiery Pvt. Ltd., the Assessing
Officer found that the pay order/DDs in respect of both
the companies were made out of the bank account of
M/s. Bhawani Engineering Pvt. Ltd. The transactions
in the bank accounts showed that there was a
corresponding withdrawal of the amount in cash on the
very same day of the crediting of cheques and there
was immediate issuance of cheques/DDs on deposit of
cash and simultaneously, they were facilitating
accounts which showed transfer entries from one
account to the other to avoid direct reflection of
deposit/withdrawal of cash.
14. The Assessing Officer held that the said companies
had no creditworthiness, financial worth or regular
resources to justify their subscription of share capital
money in the Assessee company. The Assessing
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Officer held that the Assessee had failed to discharge
the onus to prove the creditworthiness of the said
investors in terms of Section 68 of the Act, more so, in
view of the fact that the extracts of bank statements
furnished by the Assessee were fabricated.
15. The Assessing Officer relying on the decision of the
Delhi High Court in CIT VS . H IMA LAYA IN TERNA TIONA L
LTD . (2008) 214 CTR 437 (D EL.) vide order dated
28.12.2007 held that the Assessee had failed to
discharge the onus in proving the Identify of the
creditors/subscribers, genuineness of the transactions
and the creditworthiness. The Assessing Officer
accordingly made an addition of Rs.30,50,000/- in the
hands of the Assessee.
16. On an appeal by the Assessee, the CIT (Appeals),
vide order dated 03.03.2009, deleted the addition
made by the Assessing Officer. The CIT (Appeals)
accepted the contention of the Assessee that once the
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share applicants were identified, there could not be
any addition under Section 6 8 in the hands of the
recipient company even if the share applicants/share
holders are bogus and the other parameters i.e.
creditworthiness and genuineness of transaction were
not required to be fulfilled in respect of share
application money/share capital once identity was
established.
17. The CIT (Appeals) held that the Assessee had filed
confirmation letters which contained the addresses,
PAN numbers and other details and that the Assessee
had discharged its burden on proving basic details that
were required for verification to fulfill the conditions i.e.
identity of creditors, creditworthiness of the creditors
and genuineness of transactions. The CIT (Appeals)
held that the AO had not verified the details or the IT
records of the investors. The CIT (Appea ls) held that
the Assessee had provided the necessary details and
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discharged the onus cast on it.
18. With regard to the discrepancy between the bank
accounts maintained by the share applicants and the
copy of the bank accounts furnished in the course of
assessment proceedings, the CIT (Appeals) held that
it was a case of reopening of assessment of the share
applicants i.e. M/s. Landmark Communication Pvt. Ltd.
and M/s. Jai Baba Traders Pvt. Ltd. The CIT
(Appeals) held that the Assessee could not be
penalized for the mistakes/faults committed by the
share applicants and that the AO had not found any
discrepancy in the bank accounts maintained by the
Assessee. The CIT (Appeals) directed the AO to
reopen the assessment of the said two shar e
applicants to bring to tax the deposits made in their
respective bank accounts. The CIT (Appeals)
accordingly deleted the addition made of
Rs.34,50,000/-.
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19. The appeal filed by the Revenue against the order of
the CIT (Appeals) has been dismissed by the IT AT
vide the impugned order dated 24.08.2009. The ITAT ,
relying on the decision of the Supreme Court in the
case of CIT vs. Lovely Exports P. Ltd. 216 CTR 195
(SC), has held that since in the present case details of
all persons from whom the share application money
was received were furnished alongwith PANs, account
details, share application forms and also confirmation
letters and bank accounts, the addition could not be
made in the hands of the Assessee by invoking
provisions of Section 68 of the Act. The ITAT
confirmed the findings of the CIT (Appeals).
20. Aggrieved by the order of the CIT (Appeals) as
confirmed by the ITAT, the Revenue has filed the
present appeal.
21. Learned Counsel for the Appellant/Revenue has
submitted that the orders of the CIT (Appeals) and the
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ITAT are perverse in as much as they have failed to
appreciate the fabrication in the bank statements of
the share applicants that had been filed by the
Assessee. The Assessee had failed to establi sh the
creditworthiness of the investors and also the
genuineness of the transaction.
22. The Learned counsel for the Respondent/Assessee
submitted that by providing the PANs, account details ,
share application forms and confirmation letters the
Assessee had discharged the onus and no addition
could be made in the hands of the Assessee.
Additions if any could be made in the hands of the
applicants. In support of his contention learned
Counsel relied upon the Judgment of this court in the
case of CIT VS GAN GESHWAR I M ETA LS P VT L TD . 2013
(2) A.D. (D E LHI ) 378.
23. We have heard the learned counsel for the parties. We
are of the considered opinion that the orders of the
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CIT (Appeals) and the ITAT in deleting the addition s
made by the AO under Section 68 of the Act are
perverse and are clearly unsustainable.
24. Recently in the case of C OMM ISSIONER O F INCOME TAX
VS NR P OR TFO LIO P V T. L TD (INCOME TAX A PPEA L N O .
1018 OF 2011 AND 1019 OF 2011) vide Judgment dated
22 nd November, 2013 we have held that mere
production of PAN Number or assessment particulars
does not establish the identity of a person. The
identification of a person includes the place of work,
the staff and the fact that it was actually carrying on
business and further recognition of the said
company/individual in the eyes of public. We have
further noticed that PAN Numbers are allotted on the
basis of applications without actual de facto
verification of the identity or ascertainment of the
active nature of business activity. PAN Number is
allotted as a facility to revenue to keep track of
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transactions. The PA N Number cannot be blindly and
without consideration of surrounding circumstances
treated as sufficiently disclosing the identity of the
individual.
25. Following CIT VS N OVA P ROMOTERS AND F IN LEASE
P RIVATE L IMITED CASE (2012) 342 ITR 169 (D E LH I) we
have held that in view of the link between the entry
providers and incriminating evidence, mere filing of
PAN Number, acknowledgement of Income Tax
Returns of the entry providers, bank account
statement is not sufficient to discharge the onus on the
Assessee.
26. We have further held that the Court or Tribunal should
be convinced about the identity, creditworthiness and
genuineness of the transactions. The onus to prove
the three factum is on the Assessee as the facts are
within the personal knowledge of the Assessee. Mere
production of incorporation details, PA N Numbers or
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income tax returns may not be sufficient when
surrounding and attending facts predicat e a cover up.
The production of incorporation details, PAN numbers
or income tax details may indicate towards completion
of paper work or documentation but genuineness,
creditworthiness and identity of investment and the
investors are deeper and obtrusive than mere
completion of paper work or documentation.
27. As we have held that PAN Numbers are allotted on the
basis of applications without actual de facto
verification of the identity or ascertainment of the
active nature of business activity. PAN Number is
allotted as a facility to revenue to keep track of
transactions. The PA N Number cannot be blindly and
without consideration of surrounding circumstances
treated as sufficiently disclosing the identity of the
individual. The mere filing of share application is not
enough as the said application is not an
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unimpeachable document and does not on its own
prove the genuineness or authenticity of the
transaction. It can at best be treated as a
corroborative document. Since the share application
form is not an unimpeachable document, it cannot on
its own be treated as sufficient for cross -verification of
the transaction. We have already held that that mere
production of PAN Number or assessment particulars
does not establish the identity of a person. The
identification of a person includes the place of work,
the staff and the fact that it was actually carrying on
business and further recognition of the said
company/individual in the eyes of public.
28. The Assessing Officer had requisitioned the Bank
Statements of the share applicants as there was a
doubt about the correctness of the bank statements
furnished by the Assessee during the original
assessment proceedings. The bank statements
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requisitioned from the banks established that
immediately before the issuance of cheques for the
purpose of making pay order or demand draft, there
was a deposit of cash. The entry by transfer shown in
the bank account (furnished by the Assessee in the
original assessmen t proceedings) was fabricated.
29. The bank statements of the investors furnished by the
Assessee during the original assessment proceedings
were fabricated and misleading. They omitted to show
that there was deposit of cash immediately prior to
issuance of cheques for preparation of pay or ders or
DDs in favour of the A ssessee regarding subscription
of its share capital. False evidence had been adduced
by the Assessee during the original proceedings to get
undue advantage of giving colour of genuineness to
bogus entries through the bank accounts. The
deposits were mostly by cash. With regard to the
share subscribed by M/s. Bhawani Engineering Pvt.
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Ltd. and M/s. SJ Hosiery Pvt. Ltd., the Assessing
Officer has noticed that the pay order/DDs in respect
of both the companies were made out of the bank
account of M/s. Bhawani Engineering Pvt. Ltd. The
AO has held that the transactions in the bank accounts
showed that there was a corresponding withdrawal of
the amount in cash on the very same day of the
crediting of cheques and there was immediate
issuance of cheques/DDs on deposit of cash.
30. The Judgment in the case of M/S GANGESHWAR I
M ETALS P VT. L TD . (SUPRA ), does not advance the case
of the respondent inasmuch as in the said judgment it
has been held that tehre are two types of cases. One
in which the assessing officer carries out the exercise
which is required in law and the other in which the
assessing officer 'sits back with folded hands' till the
assessee exhausts all the evidence or material in his
possession and then comes forward to merely re ject
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the same on the presumptions. The High Court held
that case to be falling in the second category. In the
present case the asessing officer has not sat back with
folded hands but has conducted the enquiry. He has
requisitioned and examined the bank acc ounts and
found discrepancy in the bank statement filed by the
Assessee at the time of the orignal assessment and
the ones requisitioned. The said judgment is clearly
not applicable in the facts of the present case.
31. We are of the considered opinion that the Assessee
has not been able to discharge the initial onus and has
not been able to establish the identity,
creditworthiness of the share applicants and the
genuineness of the transaction. The surrounding
circumstances and inquiries made by the Assessing
Officer were significant but the said finding though not
disturbed have been ignored. Further the Tribunal has
failed to take holistic view and has relied upon neutral
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and general evidence without noticing other evidence,
which are :-
a) The Respondent - Assessee is a private limited
company.
b) The subscribers were unknown persons, not
related or friends.
c) The subscribers bank account statements
furnished were forged and fabricated.
d) There were corresponding cash deposits in the
bank accounts before issue of share application
cheques.
e) The subscriber companies it has been shown
were carrying on effective and day to day
business or were angle investors.
f) The subscribers did not bother and ensure
protection of their investment.
32. In view of the above, we are of the view that the
Assessee has not discharged the onus satisfactorily
and the additions made by the Assessing Officer was
justified and sustainable and the order of the Tribunal
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ignoring and nor dealing with the factual findings
recorded by the assessing officer is perverse .
33. The substantial question of law is thus answered in
favour of the Appellant/Revenue and against the
Respondent/Assessee. The appeal is accordingly
allowed with costs that are assessed at Rs. 20,000/-.
SANJEE V SACHDEVA, J.
28 th NOVE M BE R, 2013 SANJIV KHANNA, J.
st
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