N Commissioner Of Income Tax Hl, Ludhiana v. M/S Shree Dadu Auto(P) Limited,Ita

ITA No.665 of 2009 (O&M) 1 IN THE HIGH COURT OF PUNJAB AND HARYANA ATCHANDIGARH ITA No.665 of 2009 (O&M)Date of decision: 10.9.2014 Commissioner of Income Tax II, Chandigarh Vs, .....- Appe M/s Cheema Boilers Limited ....mesponden CORAM: HON’BLE MR. JUSTICE AJAY KUMAR MITTALHON’ BLE MR. JUSTICE FATEH DEEP SINGH Present: Ms. Urvashi Dhugga, Advocate for the appellant. Mr.Ravi Shankar and Mr.B.M.Monga, Advocates for therespondent. Ajay Kumar Mittal,J, inThis appeal has been preferred by the revenue under Section|260A of the Income Tax Act, 1961 (in short, “‘the Act’) against the ordedated 30.4.2009, Annexure A.3 passed by Income Tax Appellate Tribunal,Chandigarh Bench ‘A’, (in short, “the Tribunal’) in ITA No.884/CHD/2008for the assessment year 2005-06. The revenue has claimed the followingsubstantial question of law:- *“Whether on the facts and in the circumstances of the case, thorder of the Hon'ble ITAT is perverse in deleting the additionmade by the Assessing Officer under Section 68 of the Act,since the assessee had failed to discharge its onus to explain thesource of share capital raised from the so called shareholders?”| | A few facts relevant for the decision of the controversy ITA No.665 of 2009 (O&M) | involved as narrated 1n the appeal may be noticed. The assessee company 1sengaged in the business of manufacturing and sales of boilers. It filed itsreturn of income for the assessment year 2005-06 atLy43,79,750/- on30.10.2005 alongwith Tax Audit Report as per section 44AB of the Act,which was processed under Section 143(1) and refund of=a19,492/- wasgranted to the assessee. Subsequently, the case was selected for scrutiny asper Board's guidelines and notice under Section 143(2) of the Act wasissued to the assessee on 21.9.2006. During the assessment year 1n question,the assessee company's share capital increased froma1,31,27,750/- in theprevious year to<a3,81,83,750/-. The issue of increase in share capital wasthoroughly examined under section 133(6) of the Act. Reference was alsomade to the Additional DIT(Inv.) Unit No.IV, New Delhi for verifying thegenuineness of contribution made to share capital of the assessee companyand credit worthiness of M/s Aglow Financial Services Pvt. Limited,Creative Capital Services Limited and RDP Finance Pvt. Limited vide letterdated 9.5.2007. The DDIT(Inv.), Unit IV(3), New Delhi after investigatingthe matter observed that all the three companies were running on paperswithout any office being actually run and none of the Directors of thecompany actually appeared to verify the genuineness of these companiesand transactions made by them. Assessment was completed under section143(3) of the Act vide order dated 28.12.2007, Annexure A.! makingaddition ofa20,00,000/- under Section 68 of the Act on account of shareapplication money. Feeling aggrieved, the assessee filed appeal before theCommissioner of Income Tax (Appeals) [CIT(A)]. Vide order dated16.9.2008, Annexure A.2, the CIT(A) partly allowed the appeal, sustaining ITA No.665 of 2009 (O&M) the addition ofv20,00,000/- made by the Assessing Officer. Still notsatisfied, the assessee filed appeal before the Tribunal. Vide order dated30.4.2009, Annexure A.3, the Tribunal partly allowed the appeal, deletingthe addition of LT20,00,000/-. Hence the instant appeal by the revenue. 3]We have heard learned counsel for the parties and perused the record. ITA No.665 of 2009 (O&M) the addition ofv20,00,000/- made by the Assessing Officer. Still notsatisfied, the assessee filed appeal before the Tribunal. Vide order dated30.4.2009, Annexure A.3, the Tribunal partly allowed the appeal, deletingthe addition of LT20,00,000/-. Hence the instant appeal by the revenue. 3]We have heard learned counsel for the parties and perused the record. 4 Learned counsel for the revenue relied upon the report of DDIT(Inv.) Unit No.-IV New Delhi to submit that the said officer afterconducting investigation had recorded that the three companies namely M/sAglow Financial Services Pvt. Limited, Creative Capital Services Limitedand RDP Finance Pvt. Limited were bogus companies. In such a situation,the addition was rightly made by the Assessing Officer and sustained byCIT(A). It was urged that the Tribunal had erred 1n reversing the same onirrelevant considerations holding that the transactions were genuine. Thefinding being based on non consideration of material evidence, was vitiated.4 On the other hand, learned counsel for the assessee besidessupporting the order passed by the Tribunal contended that the transactionswere genuine and in view ofjudgment of the Apex Court 1nCIT ys. LovelyExports Pyt. Limited, (2008) 216 CTR 195 (SC) and judgment of this Court 1n Commissioner of income Tax Hl, Ludhiana vs. M/s Shree Dadu Auto(P) Limited,ITA No.704 of 2009, decided on 30.3.2010, the Tribunal hadrightly deleted the addition. 6]After hearing learned counsel for the parties, we find force inthe submissions of learned counsel for the revenue. 7 A perusal of the assessment order shows thatas_ per ITA No.665 of 2009 (O&M) investigation conducted by the DDIT(Inv.) New Delhi, all the threecompanies were being run on papers without any office being actually runand none of the directors of the company actually appeared to verify thegenuineness of these companies and transactions made by them. Whileexamining the records of first company 1.e. M/s Aglow Financial ServicesPrivate Limited, it was noticed that when summons were issued on6.8.2007, no compliance was made on 13.8.2007. The telephone numbersgiven in the letter head of the company were also non existing. On perusalof the details collected, 1t was found that the application for allotment ofshares to M/s Cheema Boilers Limited by the aforesaid three companies wasnot in proper form and bore no date. It was concluded that genuineness ofthe affairs of the company was not proved and it was being run purely byShri Sudhir Kumar Aggarwal, CA in the names of Shri Atul KumarAggarwal and Mrs. Rajni Khetarpal whose correct residential addresseswere not provided by him. He had been controlling the affairs of all thethree companies himself as these companies were previously incorporatedby him but later on he became the director of these companies. None of thedirectors had actually appeared to verify the genuineness of thesecompanies and the transactions made by them. The source ofL5 lacs givento M/s Cheema Boilers Limited was also not proved. Similar was theposition in respect of second and third company i.e. Creative CapitalServices Limited and RDP Finance Pvt. Limited. Since the assesee hadfailed to rebut the report of the DDIT(Inv.), addition of Ly20 lacs underSection 68 of the Act was made to the income of the assessee on account ofshare application money. The addition was sustained by the CITI(A), ITA No.665 of 2009 (O&M) ITA No.665 of 2009 (O&M) However, the Tribunal deleted the addition and had not appreciated that thethree companies were not genuine from whom the assessee had shown tohave received amount on account of share application money. The Tribunalhas allowed the appeal without assigning any cogent and convincingreasons to upset the findings of the Assessing Officer and the CIT(A). ||In view of the above, it is clear that since the three companiesthemselves with whom the respondent assessee was dealing, were bogusand the transactions made by them were not genuine, therefore, the additionmade by the Assessing Officer and sustained by the CIT(A) was valid. Thefinding recorded by the Tribunal deleting the addition cannot be sustained.The judgments relied upon by the learned counsel for the assessee inLovely Exports Pvt. LimitedandM/s Shree Dadu Auto (P) Limited'"s casebeing based on individual fact situation involved therein do not come to therescue of the assessee. Consequently, the substantial question of law 1sanswered in favour of the revenue and against the assessee. As a result, theappeal stands allowed. (Ajay Kumar Mittal)sudge September 10, 2014 =/%= (Fateh Deep Singh)sudge