Case Law Details

Case Name : ITO Vs Rakam Money Matters P. Ltd (ITAT Delhi)
Appeal Number : ITA No.2821/Del./2011
Date of Judgement/Order : 16/10/2014
Related Assessment Year :
Courts : All ITAT (7482) ITAT Delhi (1764)

The only issue here is the addition of Rs.60 lacs made by the Assessing Officer as unexplained credit on account of the share application money. On going through the facts of the case, we notice that assessee has filed the relevant details which it could have filed in support of its contention of having received the share application money from each of these shareholder companies.

The Assessing Officer has issued summons to the directors of these shareholder companies. In response there to, the directors have not Assessing Officer has not conducted any further inquiry for non-attendance of the persons. Non-attendance on issuing summons itself, cannot be a ground for rejecting all the relevant documents furnished by the assessee company. Summons issued by Assessing Officer have not been received back as unserved. Therefore, it cannot be said that these companies were not in existence at the given addresses. The documents filed with the Registrar of Companies show that these companies were active during the relevant period. Assessing Officer has not verified any of the relevant documents submitted by Assessing Officer for discharging onus u/s 68 of the Act. We also note that the Assessing Officer has not referred nor discussed about the so-called alleged statement of entry providers against the assessee company. It is also not known whether assessee’ s name figured in that statement. The contention of the assessee has been rejected without examination and verification of the documents submitted by the assessee. The information received by him from the Investigation department has been made the basis of addition without any further investigation in this regard. Even the process of examination of the directors by issue of summons has not been taken to the logical end as after the failure of the directors to attend in response to the summons issued to them no further steps were taken. The Assessing Officer could have done cross verification about the status of these companies with the respective Assessing Officer of these shareholder companies.

In the case of CIT vs Fair Finvest Ltd ITA no. 232/2012 dated 22- 11-2012, the jurisdictional Delhi High Court has held as under:-

“6. This Court has considered the submissions of the parties. In this case the discussion by the CIT(Appeals) would reveal that the assessee has filed documents including certified copies issued by the Registrar of Companies in relation to the share application, affidavits of the Directors, Form 2 filed with the ROC by such applicants confirmations by the applicant for company’s shares, certificates by auditors etc. Unfortunately, the assessing officer chose to base himself merely on the general inference to be drawn from the reading of the investigation report and the statement of Mr. Mahesh Garg. To elevate the inference which can be drawn on the basis of reading of such material into judicial conclusions would be improper, more so when the assessee produced material. The least that the assessing officer ought to have done was to enquire into the matter by, if necessary, invoking his powers under Section 131 summoning the share applicants or directors. No effort was made in that regard. In the absence of any such finding that the material disclosed was untrustworthy or lacked credibility the assessing officer merely concluded on the basis of enquiry report, which collected certain facts and the statements of Mr. Mahesh Garg that the income sought to be added fell within the description of Section 68.

7. Having regard to the entirety of facts and circumstances, the Court is satisfied that the finding of the Tribunal in this case accords with the ratio of the decision of the Supreme Court in Lovely Exports (supra). 8. The decision in this case is based on the peculiar facts which attract the ratio of Lovely Exports (supra). Where the assessee adduces evidence in support of the share application monies, it is open to the assessing officer to examine it and reject it on tenable grounds. In case he wishes to rely on the report of the investigation authorities, some meaningful enquiry ought to be conducted by him to establish a link between the assessee and the alleged hawala operators; such a link was shown to be present in the case of Nova Promoters &Finlease (P) Ltd. (supra) relied upon by the revenue. We are therefore not to be understood to convey that in all cases of share capital added under section 68, the ratio of Lovely Exports (supra) is attracted, irrespective of the facts, evidence and material. No substantial question of law arises. The appeal is accordingly dismissed.”

In the present case, as noted above, the AO has not been able to bring on record any valid material or evidence to discredit the evidences and the explanation given by the assessee company. The only evidence which has been referred by the AO is statement of third parties recorded by the Investigation Wing. Admittedly these statements were not recorded by the AO but were recorded by the Investigation Wing at the back of the assessee. The AO has not even referred to the relevant portion of such statement so as to establish the collusive arrangement the assessee company had with these persons.

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  1. CA PRAKASH D.SHAH. says:

    Really good judgement considering latest legal position.In this regard, argument related to newly instereted proviso to section 68 of the Income Tax alongwith Honble Apex Court Order in the case of Lovely Export, may have been made.

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