IN THE HIGH COURT OF DELHI AT NEW DELHI
.
.
.
ITA 1187/2011
.
.
.
KCA ALLIED SERVICES PVT LTD ..... Appellant
.
Through Mr. Kaanan Kapoor, Adv.
.
.
.
versus
.
.
.
ITO WARD 5(1) ..... Respondent
.
Through Mr. Sanjeev Sabharwal, Sr. Standing Counsel.
.
.
.
CORAM:
.
HON'BLE MR. JUSTICE SANJIV KHANNA
.
HON?BLE MR. JUSTICE G.P.MITTAL
.
.
.
O R D E R
.
24.10.2011
.
.
.
This appeal under Section 260A of the Income Tax Act, 1961 (Act,
for short) is directed against the order of the Income Tax Appellate
Tribunal (for short, the tribunal) dated 28th February, 2011 passed in
ITA No.5634/Del./2010, which relates to the assessment year 2002-03.
.
2. By the impugned order, tribunal has disposed of the appeal filed by
the Revenue against the order of the CIT (Appeals) dated 18th October,
.
2010 deleting addition of Rs.8,50,000/- made under Section 68 of the Act towards unexplained share capital and Rs.4,250/-being unaccounted amount
paid as commission for obtaining accommodating entries. These shares had
been allotted to Division Trading Pvt. Ltd., Nishant Finvest Pvt. Ltd.
and SRS Vijay Sales Pvt. Ltd. The tribunal has not decided the issue on
merits, but has remitted the matter to the Assessing Officer for fresh
consideration.
.
3. The appellant-assessee submits that they had established identity
of the shareholders, and also the factum that the share application money
was paid through banking channels. The appellant-assessee had placed on
record share application forms pursuant to which shares were applied.
Reference is made to the order of the Commissioner of Income Tax
(Appeals).
.
4. Commissioner of Income Tax (Appeals) while allowing the appeal had
held as under:-
.
?5.3 I have carefully considered the submissions made on behalf of
the appellant company and findings recorded by the ld AO and I have also
gone through the judgments relied upon by the ld. Counsel for the
appellant. On consideration, I find that the ratio laid down by the
Hon?ble Courts in the cases relied upon by the ld. Counsel squarely
covers the facts of the appellant?s case. In the case of the appellant,
though the AO refers to an enquiry conducted by the investigation wing of
the department, No attempt is made by him to establish the facts that the
money in question has original from the coffers of the assessee company.
Merely casting a shadow of doubt is not sufficient to charge the assessee
with the tax liability without collecting positive evidences to convert
the doubts into a real act of tax evasion.
.
5.4. Therefore, I do not find that the AO has really made out a case for
taxing the share application money received though banking channels from
the persons regularly assessed to tax. Under the circumstances, the
addition of Rs.8.50 lacs is not sustainable and is accordingly being
deleted.
.
5.5. For the reasons discussed in para 4.1 to 4.6, the addition of
Rs.4250 made u/s 68 of the Act on account of alleged commission to so
called Hawala operators is also being deleted.?
.
.
.
5. The Assessing Officer, on the other hand, had relied upon the
statement of Mr. Mahesh Garg recorded on oath under Section 131 of the
Act to make the said addition. The Assessing Officer in his order had
stated as under:-
.
?9.1.1 Statement on oath u/s 131 of the Act, 1961 of Sh. Mahesh
Garg, S/o Late Sh. RS Garg, R/o G-8/94, Sector-15, Rohini, Delhi was
recorded by the Addl. DIT (Inv.), Unit-I, New Delhi on 22.9.03. In this
statement, Sh. Mahesh Garg has admitted to have opened bank accounts in
the names of various individual, firms and companies which were being
.
used by him for providing accommodation entries. A duly signed list of such entities were also given by Sh. Mahes Garg. The above four companies
find specific mentioned in the list given by Sh. Mahesh Garg during the
course of statement on oath. A copy of this statement was provided to the
assessee, but the assessee has neither rebutted the statement nor denied
the contents of the same and has not even filed by evidences, reply etc.
as a rebuttal.
.
9.2 the assessee has filed documents in support of its claim that
the amounts in question were share application money received from the
four parties. These documents include copies of undated application for
shares, undated board resolution and undated certificates of having made
investments in the equity shares of the assessee company. What we are
dealing with here
.
.
.
is not a normal business transaction where the genuineness may be proved
if both the parties confirm the same. This is a case of collusive and sham
transaction which exists only on paper and which has been entered into to
facilitate both the parties. In such a scenario self serving evidence
have been generated and produced before the department.?
.
.
.
6. The tribunal, after hearing arguments of the parties and looking at
the nature of the dispute, evidence on record and relied upon by the
parties, has held that the matter requires deeper consideration and
scrutiny at the level of Assessing Officer. Paragraph 6 of the order of
the tribunal reads:-
.
?6. After hearing both the sides, we find that the Hon?ble
jurisdictional High Court in its order dated 31.1.2011 in the case of CIT
vs. Oasis Hospitalities (Pvt.) Ltd. In ITA Nos.2093 of 2010 and 2095 of
2010 and Ors. has held, after considering the various decisions of Hon?ble
Courts including CIT vs. Divine Leasing and Finance Limited 299 ITR 268,
CIT vs. Sophia Finance Ltd. 205 ITR 98, CIT vs. Dolphin Canpack Ltd. 283
ITR 190 and CIT vs. Lovely Exports (P) Ltd. 216 CTR 195 (SC), that the
initial burden is upon the assessee to explain the nature and source of
share application money received and in order to discharge this burden,
the assessee is required to prove not only the identity of the
shareholders but also the genuineness of the transaction and
creditworthiness of the shareholders. The investigation wing of income-
tax department, New Delhi made an investigation where the modus operandi
for introducing the unaccounted money in the regular books of account by
way of accommodation entries was detected. As per this modus operandi,
the cheques/demand drafts/Pos were issued in the name of beneficiary from
the account where the cash is deposited and in some cases, the amount is
transferred to another bank account by showing it as receipt by clearing.
The statement of Shri Mashes Garg, s/o Late Shri R.S. Garg R/o G-8/94,
Sector 15, Rohini, Delhi was recorded by additional DIT (Inv.), Unit-1,
Delhi on 22.9.2003 and in this statement, Shri Mahesh Garg admitted to
have opened bank accounts in the names of various individual, firms and
.
companies where were being used by him for providing accommodation entries. The companies from whom the assessee has shown receipt of share
application money were mentioned in the list given by Shri Mahesh Garg
during the course of statement used for providing bogus accommodation
entries. The copy of statement was provided to the assessee by Assessing
Officer and assessee has failed to file a rebuttal to the same. The
assessee has also not denied the contents of the statement made by Shri
Mahesh Garg. As we have stated above, in view of the latest decision of
the Hon?ble jurisdictional High Court, the assessee has to discharge the
burden in respect of the identity of the shareholders. No rebuttal or
explanation was furnished in respect of the statement of Shri Mahesh
Garg. The status of the income-tax assessment of Shri Mahesh Garg is also
not known with regard to income earned for the accommodation business. In
view of these facts and in the interest of justice, we set aside the
issue to the file of Assessing Officer to decide the issue de novo after
providing an opportunity to the assessee to prove three ingredients i.e.,
identity of the shareholders, genuineness of the transactions and
creditworthiness of the shareholders in respect of persons from whom
money was received.?
.
.
.
7. In view of the aforesaid, we do not think that any substantial
question of law arises or requires consideration in this appeal and the
same is accordingly dismissed, without any order as to costs. It is
clarified that we have not expressed any opinion on merits. The
observations made by the tribunal will be treated tentative and the
authorities will independently apply their minds on the facts in issue.
.
.
.
.
.
.
.
SANJIV KHANNA, J.
.
.
.
.
.
.
.
G.P. MITTAL, J.
.
OCTOBER 24, 2011
.
NA
.
.
.
52
.