M/S Tax Holdings [Pvt. ][Ltd' v. Commisstoner Of [Income ][Tax

j. IN THE HIGH COURT OF +rTA 805 0F 20Ll- tudoment Delivered On: 24.8.2077 % ....APPELLANT M/S TAX HOLDINGS [PVT. ][LTD'] Through: Mr.Kanan Kapur, Advocate. VERSUS . ..RESPONDENT COMMISSTONER OF Through: Mr.Deepak Chopra, Advocate. tonau ,- , HON',BLE MR. JUSTICE [A.K' ] HON'BLE MR. JUSTICE [M.L'MEHTA] 1. Whether Reporters of Local [newspapers ][may be ][allowed ][to ][see]the Judgment?2. To be referred to the Reporter [or ][not?] 3. Whether the Judgment [should be ][reported ][in ][the ][Digest?] A.K. SlKRl, | [(Oral)] 1. [' ]This appeal impugns [the ][order dated ][31't ]January, [20II ][passed] by the lncome-Tax Appellate [Tribunal ][whereby ][the ][Tribunal ][has]remanded the matter back [to ][the ][file ][of ][the ][Assessing ][Officer ][for ][his]fresh adjudication. The issue [pertains ][to ][the ][addition ][made ][by ][the]Assessing officer under Section 68 [of ][the ][Income-Tax ][Act ][(hereinafter]referred to ['the ]Act'). However, [according ][to the ][Tribunal ][some ][more] Page 1 of 8 tTA 805/11 Signature Not Verified Digitally Signed By:AMULYACertify that the digital file andphysical file have been compared andthe digital data is as per the physicalfile and no page is missing. n investigation is needed which resulted in restoring the case back toQKAssessing Officer. 2. Brief facts under which precise issue has arisen for considerationare noted hereinafter. The assessee is a private limited company. For the assessment year 2002-03 it had filed its return of income on l8th September 2002showing business loss of { 5,00,000/-. This return was accepted as it*.,j5.However, the Assessing Officer subsequently received certain-s_showing business loss of { 5,00,000/-. This return was accepted as it*.,j5.However, the Assessing Officer subsequently received certain-s_information from the ADI (lnv.) of the Department inter a/ia stating thata survey was conducted under Section 133A of the Act at the officepremises of one Sh. sanjay Rastogi at 2ro, Vakil chamber, A-115,Shakarpur, Delhi on 4th March, 2003. The said survey revealed thatMr. Rastogi and his associates were giving accommodation entries ona survey was conducted under Section 133A of the Act at the officepremises of one Sh. sanjay Rastogi at 2ro, Vakil chamber, A-115,Shakarpur, Delhi on 4th March, 2003. The said survey revealed thatMr. Rastogi and his associates were giving accommodation entries onlarge scale to various companies. lt was noticed by the Departmenta that this activity of giving accommodation entries or bogus entries wasa that this activity of giving accommodation entries or bogus entries was.-,being carried out through bank accounts in different banks at Delhi andoutside. Statement of Mr. Rastogi was also recorded on 20th April,2003 under Section 131 of the Act wherein he had admitted theaforesaid facts. He also admitted that apart from the professionaloutside. Statement of Mr. Rastogi was also recorded on 20th April,2003 under Section 131 of the Act wherein he had admitted theaforesaid facts. He also admitted that apart from the professionalwork, he was also providing certain services in connection with therTA 805/11Page 2 of 8 a companies/concerns/entities that were not doing the real or genuine business and for that purpose, he has given his address at 210 VakilChamber, Vikas Marg, Delhi. Mr. Rastogi flouted certain companieswhich were used as conduit for providing accommodation entries ortransactions, which were not real in nature. During furtherinvestigation it was found that the assessee company was also one ofthe beneficiaries of the bogus entries taken from one Ms/ FrenzyProducts Pvt. Ltd. flouted by Shri Rastogi, from its account No.205,Corporation Bank Laxmi Nagar, Delhi. a companies/concerns/entities that were not doing the real or genuine business and for that purpose, he has given his address at 210 VakilChamber, Vikas Marg, Delhi. Mr. Rastogi flouted certain companieswhich were used as conduit for providing accommodation entries ortransactions, which were not real in nature. During furtherinvestigation it was found that the assessee company was also one ofthe beneficiaries of the bogus entries taken from one Ms/ FrenzyProducts Pvt. Ltd. flouted by Shri Rastogi, from its account No.205,Corporation Bank Laxmi Nagar, Delhi. )-;1 [In ][other words, information ][was received ]by the department thatM/s Frenzy Products from its account No. 205, Corporation Bank, LaxmiNagar, Delhi provided accommodation entries to the assesseeCompany. [The ]details of the entries are as under:-Date particulars of chequeAmount [paid]31.5.2001 ChequeNo. 0159426t 4,00,0006.10.2001 Cheque No. 0159446T 4,50,000 j" Total: t 8,50,000 il 3. On thebasis of thesaid information and copy of survey reportreceived bythe AssessingOfficer, he issued notice dated 16th August,2004 underSection l48of the Act and recorded his 'Reasons to Page 3 of 8 tTA 805/11 Believe' that income to the extent of T 8.50 lacs had escapedassessment. Pursuant to the said notice, the assessee filed its returnmaintaining the original return wherein it had shown the business lossof t53,6401-. During the course of reassessment proceedings, it wasnoticed by the AO that the assessee had shown receipt of sharegpplication money amounting to t9,60,000/- out of which Rs,8,50,000/- was received from Ms/ Frenzy Products Pvt, Ltd. Noticeunder Section 133 (6) was issued to M/s Frenzy Products Pvt. Ltd whichwas served through registered post fixing the hearing on 72.9.2005.assessment. Pursuant to the said notice, the assessee filed its returnmaintaining the original return wherein it had shown the business lossof t53,6401-. During the course of reassessment proceedings, it wasnoticed by the AO that the assessee had shown receipt of sharegpplication money amounting to t9,60,000/- out of which Rs,8,50,000/- was received from Ms/ Frenzy Products Pvt, Ltd. Noticeunder Section 133 (6) was issued to M/s Frenzy Products Pvt. Ltd whichwas served through registered post fixing the hearing on 72.9.2005.1H'owever, [no ][compliance ][of ][this ][notice was ][made. ][The ][assessee's]authorized representative was then asked vide order sheet entry dated:13.9.2005 to produce the Principal Officer of M/s Frenzy Products Pvt.Ltd. on 15.9.2005. Shri Mukesh Aggarwal, authorized representativefor the assessee was present on 15.9.2005 and stated that Shri SanjayRastogi was not traceable at that moment. AO, therefore, treated theamount of Rs, 8,50,000 being share application money as unexplainedauthorized representative was then asked vide order sheet entry dated:13.9.2005 to produce the Principal Officer of M/s Frenzy Products Pvt.Ltd. on 15.9.2005. Shri Mukesh Aggarwal, authorized representativefor the assessee was present on 15.9.2005 and stated that Shri SanjayRastogi was not traceable at that moment. AO, therefore, treated theamount of Rs, 8,50,000 being share application money as unexplained' within the meaning of Section 68 of the Act and added the same to the''*assessee's total income. The assessee filed appeal thereagainst''*assessee's total income. The assessee filed appeal thereagainstwhich was however, dismissed by the CIT (A) confirming the saidaddition. In further appeal filed by the assessee before the ITAT, theassessee had not succeeded in getting the said addition deleted.tTA 805/11Page 4 of 8addition. In further appeal filed by the assessee before the ITAT, theassessee had not succeeded in getting the said addition deleted.tTA 805/11Page 4 of 8 ! ! However, at the same time the Tribunal has taken the view that matteris to be enquired afresh and remitted the case back to the Assessingofficer for fresh adjudication. The ITAT has found that admittedly theis to be enquired afresh and remitted the case back to the Assessingofficer for fresh adjudication. The ITAT has found that admittedly theassessee has shown the receipt of t 8.50 lacs on account of shareapplication money allegedly received from M/s Frenzy Products Pvt.Ltd. in its books of accounts. The assessee had, however, submittedl.that it had given back t 5 lacs vide three account payee chequesapplication money allegedly received from M/s Frenzy Products Pvt.Ltd. in its books of accounts. The assessee had, however, submittedl.that it had given back t 5 lacs vide three account payee chequesdated I.3.2004,6.3.2004 and 11.3.2004 in the sum of t 1.5 lacs, t 1.5lacs anc.l r 2 lacs respectively. The lrAT, however, observed that,lhouOh [the ][amount of ][t ][8.5 ][lacs ][was received ][on ][30.5.2001 ][(t ][4 ][lacs]on 31.5.2001 and T 4.5 lacs on 6.10.2001) which was admittedlyreceived as share application money, repayment of T 5 lacs was madeafter a gap of more than two years. In other words, it is the assessee'sCase [that ]share to the extent of T 5 lacs were not allotted to the shareapplicant but the money was refunded. In the course of hearing oflacs anc.l r 2 lacs respectively. The lrAT, however, observed that,lhouOh [the ][amount of ][t ][8.5 ][lacs ][was received ][on ][30.5.2001 ][(t ][4 ][lacs]on 31.5.2001 and T 4.5 lacs on 6.10.2001) which was admittedlyreceived as share application money, repayment of T 5 lacs was madeafter a gap of more than two years. In other words, it is the assessee'sCase [that ]share to the extent of T 5 lacs were not allotted to the shareapplicant but the money was refunded. In the course of hearing ofthis appeal, the assessee was asked to point out the necessaryevidences such as share application submitted by share applicant, and,the letter of allotment as well as the letter for refunding the shareapplication money. The ITAT found that the assessee has not filedany document or evidence such as share application submitted by the,the letter of allotment as well as the letter for refunding the shareapplication money. The ITAT found that the assessee has not filedany document or evidence such as share application submitted by thes.hare applicant and the letter of allotment and refund of sharerrA 805/11Page 5 of 8of 88 Page 5 of 8of 88 qpplication money. The assessee had also [not ][produced ][the ][details]about the share register or the [share certificate ][numbers ][and]distinctive numbers of the share allegedly [allotted by ][the ][assessee]company to the share applicant [in ][question, ][In ][other ][words, ][whether]the amount of t 8.50 lacs was received [by ][the ][assessee towards]share application money had not [been proved and established by ][the]assessee by way of [producing ]and [furnishing ][the ][necessary ][evidence]such as share application submitted by the [applicant, ][letter ][of]allotment, letter of refund of money and [share register ][alongwith]'a$rtiticate [numbers ][and distinctive ][numbers ][allotted ][by ][the ][assessee]to M/s Frenzy Products. I4 On this basis, the ITAT recorded that [initial ][onus ][was ][on ][the]assessee to prove these facts which it [had ]not discharged. [The]Tribunal, in this behalf, stated as under:- "lt was the assessee's argument at the time of ahearing that present case is to be decided [in ][the]light of proposition laid down by the Hon'bleDelhi High Court in the case of Divine Leasing &Finance Ltd. [(supra)."] 5. After giving the aforesaid findings, the Tribunal could [have]dismissed the appeal affirming the appeal of [the ][CIT(A). ][However, the]Tribunal still chose to give another opportunity to the [assessee]tTA 805/r.r.Page 6 of 8of 88 Page 6 of 8of 88 a /,, thinking that sufficient opportunity to discharge [prima ]facie burdenwas not provided to the assessee. lt, thus held as under:- "lt was the assessee's argument at the time of ahearing that present case is to be decided [in ][the]light of proposition laid down by the Hon'bleDelhi High Court in the case of Divine Leasing &Finance Ltd. [(supra)."] 5. After giving the aforesaid findings, the Tribunal could [have]dismissed the appeal affirming the appeal of [the ][CIT(A). ][However, the]Tribunal still chose to give another opportunity to the [assessee]tTA 805/r.r.Page 6 of 8of 88 Page 6 of 8of 88 a /,, thinking that sufficient opportunity to discharge [prima ]facie burdenwas not provided to the assessee. lt, thus held as under:- "We are, therefore of the considered view that ifone more opportunity is [given ]to the assessee toprima-facie prove his case by submitting thevarious details in the manner as laid down by theHon'ble Delhi High Court in the case of DivineLeasing & Finance Ltd., it would meet the ends ofiustice. [We, ][therefore, ][restore ][the ][matter ][back]to the file of the AO for fresh adjudication, afterproviding reasonable opportunity to theassessee to produce share application form inoriginal, shareholder register, share transferregister, shaie allotment register and refund ofshare application money alongwith PAN/GlRnumber of the alleged share applicant M/s FrenzyProducts and their lT records and other details asso laid down in the decision of Divine Leasing &Finance Ltd. and Lovely Exports (supra). Theassessee shall also explain that how the shareapplication money received on 31.5.2001 and6.10.2001 has been retained for such a longtime without there being allotment and underwhat provision the share application money of t5 lakhs was allegedly refunded in the month ofMarch, 2004. The assessee shall also producethe board of todirectors' meeting register explain .as to how and in what manner the sharesto the extent of t 3,50,000/- were allegedlyallotted to M/s Frenzy Products and the balancesum of { 5 lakhs was refunded. All theseaspects of the matter have to be explained bythe assessee in order to its initialdischarge burden to prove that the assessee has receivedshare application money from M/s FrenzyProducts. The assessee is hereby directed todischarge its initial burden in the manner as laiddown by the Hon'ble Delhi High Court in the caseof Divine Leasing & Finance Ltd. and LovelyExports p. Ltd. (supra) and as indicated above. i In case during the [qourse ]of [fresh]assessment [proceedings, ]if [the ][assessee ][is ][able]to discharge its initial burden, the [department]shall be free to rebut the assessee's [case after]to cross examine [Shri]providing opportunity Sanjay Rastogi before using his [statement]recorded by the Investigation [Wing, ][and ][shall]allow the assessee an opportunity to [rebut ][all]the material and information that [have ][been]collected by the department [and ][used ][against]the assessee before rejecting the [assessee's]case." v 6. 6. On reading the order and hearing [the ][counsel ][for ][the ][parties, ][we]are of the opinion that the Tribunal [has shown ][benevolence ][to ][the]rOby [giving ]another opportunity.There is no reason for theiJ ssessee assessee to nurture [grudge ]against [such ][an]order. a 1 No substantial question of law arises. [This]appeal is accordingly7 dismissed. tft* (h.K. SIKRI)JUDGE c-(,4^tln1,.-2(lvt.l-. MEHTA)JUDGE nlicusr 24,zoLL.skb tTA 805/11 Page 8 of 8