We find that evidences which have been furnished by the assessee have not been discussed; and if the Director has not been found then it cannot be said that identity of the company is not established especially in wake of income tax records and share allotment form and other host of documents. If in the inquiry, by the ITI it was found that on the said addressee the company of the Director was not traceable, then AO should have confronted to the assessee and assessee should have been given the opportunity to produce the concerned person from the said company. Even the Ld. CIT (A) in his order though sought for the remand report but has not given the mandate to the AO to confront the same to the assessee. Accordingly, the under the facts and circumstances of the case we are of the opinion that matter should be restored back to the file of the AO and assessee will ensure full corporation and produce the concerned person from the said company and or provide correct details of the said company for issuing of summon. Thereafter the AO shall examine the entire source of credit after considering the entire material placed on record and decide the issue afresh after giving due opportunity to the assessee to substantiate this case.
FULL TEXT OF THE ITAT JUDGMENT
The aforesaid cross appeals have been filed by the assessee as well as by the revenue against the impugned order dated 29.12.2014 passed by Ld. CIT (A) –7, Delhi for the quantum of assessment passed u/s 143(3) for the assessment year 2011-12.
2. At the outset it is noted that in the revenue’s appeal following amount of addition has been disputed:-
1. 6,13,630/- on account of vehicle repair and maintenance and depreciation;
2. Addition of Rs. 14,50,000/- u/s 68
3. Since tax effect on the disputed issue is less than Rs. 10 lacs, therefore, the Revenue’s appeal is not maintainable as per CBDT Circular No. 21/2015 dated 10th December, 2015, F. No. 279/ Misc./ 142/2007-ITJ(Pt.) and hence same is dismissed as not maintainable.
4. In so far as the assessee’s appeal is concerned in the grounds of appeal assessee has challenged the addition of Rs. 15 lacs made by the AO u/s 68 on account of investment made by M/s. Kangaroo Financial Services Pvt. Ltd. as share application money received by the assessee for which shares have been issued, the facts in brief are that, during the year assessee has received share application money for issue and allotment of 6000 shares at the face value of Rs. 10 and share premium of Rs. 240/-. During the course of assessment proceedings the assessee in support of such share application money had filed; i) share application form; ii) ITR; iii) bank statement of the creditor; iv) proof of allotment of shares; v) confirmation letter; vi) copy of register of members showing the investor’s name; vii) balance sheet etc. The AO had issued a summons u/s 131 to the Director of M/s. Kangaroo Financial Services and also sent Income Tax Inspector from where it was gathered that the Director, Shri M K Arora does not live in the said address and people of the nearby place were not aware of such company. Accordingly, AO concluded that assessee was unable to substantiate the genuineness of the transactions and accordingly after relying upon various decisions he has made the addition of Rs. 15 Lacs u/s 68 after detail discussion.
5. Before the Ld. CIT(A) assessee reiterated the same evidence and also pointed out that entire transaction has been through account payee cheque and in this regard following submissions were made before the CIT(A) :-
“During the course of assessment proceedings your appellant filed i) Copy of Account, ii) Bank Statement and iii) Copy of ITR and iv) Ledger copy of the account of the Loan Creditor before the Ld. Assessing Officer which were quite sufficient and enough to prove his identity, capacity, credit worthiness, source of the money advanced and genuineness of the transaction. The Ld. AO, however, preferred to issue summon u/s 131 for the personal deposition of and by the loan creditor on 03-01-2014 even after passing and signing the assessment order on 31-12-2013. The said summon could not be served due to change of address so at the request of the appellant the said loan creditor sent the documents such as i) Confirmation of Account, ii) Copy of Bank Statement and iii) Copy of ITR directly to the office of the Ld. AO by speed post well in time on 21-11-2013 but the Ld. AO did not consider the said documents having been received by him through speed post at all and he accordingly closed the assessment proceedings and passed the assessment order on 31-12-2013 by making addition on account of cash credit of Rs.14,50,OOOI-. It is not lesser interesting to note that he conducted enquiries into this matter on 03-01-2014 by issue of summons u/s 131 through his inspector and staff which is incorporated in the order already passed by him on 31-12-2013 i.e. three days prior to the investigation on 03-01-2014. The cash credit of Rs.14,50,000/- in this case as such was genuine and undisputed till the date of passing of the order on 31-12-2013 as the so called adverse material if any was brought on the file only on 03-01-2014 i.e. three days after passing of the order. Most of the case laws cited and relied upon in respect of addition on account of the share application money as cited herein above are applicable to the loans I cash credits also.
The amounts received are not out of the cash deposits if any into the bank account of the share applicant or the loan creditor as the case may be.
Copies of documents such as i) ITR, ii) Forwarding Letter of the documents having been sent by the party through speed post, iii) Confirmation of A/c of the assessee iv) Copy of A/c in the books of the loan creditor and v) Bank A/c are enclosed as ANNEXURE C-1 to C-6.
In continuation to the written submissions filed before your honour by me on 14-07-2014 read with the abovesaid remand report dated11-09-2014 submitted by the Ld. DCIT Circle – 14(1) New Delhi particularly and especially in respect of his comments at Para 3 of Page 4 of the said report regarding date of summons u/s 131 dated 03-01-2014 issued in the name of t-t/s Superior Facility Management Pvt. Ltd. and the Inspector’s report in respect thereof it may be very humbly and respectfully stated and and submitted as hereunder ;-
1) Your kind attention is invited to the assessee’s application dated 12-5-2014 filed before the Ld. DCIT Circle 14(1) New Delhi (Copy enclosed) requesting for issuance of certified copies of some documents particularly and specially including that of i) Copy of the Order Sheet at SI. No.1, ii) Copy of the documents directly sent by the loan creditor M/s Superior Facility Management Pvt. Ltd. under Speed Post on 21-11-2013 at SI. No.4 which remained unconsidered throughout the assessment proceedings and ii)Copy of summons u/s 131dated 03-01-2014 issued in the name of M/s Superior Facility Management Pvt. Ltd. and Inspector’s Report thereon as mentioned at SI. No.6 of the said application. The Ld. DCIT instead of supplying the required certified copies as requested in the application asked the assessee to file the application in his office for passing of appropriate order thereon but no order was passed nor the certified copies supplied till date which makes it suspicious, contradictory and unbelievable that the mistake in mentioning the date as 03-01-2014 (INSTEAD OF WHICH DATE?) could have happened due to typographical error more so because all the digits in respect of date, month as well as the year relate to a future period which was coming very soon and also because as per last line of the remand report at Page 4 the last entry on the order sheet noted by the AR of the assessee was on 27-12-2013 and thereafter 28-12-2013 was Saturday and 29-12-2013 was Sunday and on Tuesday the 31st day of December 2013 the order is wrongly said to appear as having been passed on that date.”
6. CIT (A) has confirmed the said addition on the ground that assessee has not produced any person from M/s. Kangaroo Financial Services Pvt. Ltd. and therefore, identity of the person giving the credit has not been proved and also creditworthiness has also not been established. He also relied upon various case laws.
7. Before us Ld. Counsel submitted that, despite furnishing all the documents including the income tax return copy of audited balance sheet and all the supporting documents of the said company, AO without verifying the same form the department choose to issue summon to the company which could not be served and even the ITI inquiry happened on the back of the assessee and same was not confronted to the assessee. Before the Ld. CIT (A) despite raising various objections and furnishing all the documents, he has given a very erroneous finding of fact that nothing has been produced to prove identity and creditworthiness of the creditor.
8. On the other hand, Ld. DR after referring to the various observations made by the AO and the Ld. CIT(A) submitted that the inquiry made by the AO on the address as given by the assessee was not found to be correct and therefore, the inference drawn by the AO cannot be disturbed.
9. After considering the rival submissions and on perusal of the relevant finding given in the impugned order as well as the material placed on record, we find that evidences which have been furnished by the assessee have not been discussed; and if the Director has not been found then it cannot be said that identity of the company is not established especially in wake of income tax records and share allotment form and other host of documents. If in the inquiry, by the ITI it was found that on the said addressee the company of the Director was not traceable, then AO should have confronted to the assessee and assessee should have been given the opportunity to produce the concerned person from the said company. Even the Ld. CIT (A) in his order though sought for the remand report but has not given the mandate to the AO to confront the same to the assessee. Accordingly, the under the facts and circumstances of the case we are of the opinion that matter should be restored back to the file of the AO and assessee will ensure full corporation and produce the concerned person from the said company and or provide correct details of the said company for issuing of summon. Thereafter the AO shall examine the entire source of credit after considering the entire material placed on record and decide the issue afresh after giving due opportunity to the assessee to substantiate this case. Accordingly, grounds raised by the assessee are allowed for statistical purposes.
10. In the result the appeal of the revenue is dismissed and appeal of the assessee is allowed for statistical purposes.
Order pronounced in the Open Court on 2nd July, 2018.