I.T.O Vs Placid Buildwell Pvt Ltd (ITAT Delhi)
The case of I.T.O Vs Placid Buildwell Pvt Ltd, heard by the ITAT Delhi, centers around the validity of an addition under section 68 of the Income Tax Act. The Revenue challenged the deletion of an addition of Rs. 16,55,00,000 made by the AO. The case involved scrutiny of transactions between the assessee and various entities.
The Revenue argued that the funds received by the assessee from certain entities lacked creditworthiness and authenticity. They alleged that these entities were merely paper companies without substantial income or net worth. However, the assessee contended that the transactions were legitimate and supported by evidence.
During the assessment, it was revealed that the assessee had received significant sums as share capital/premium from multiple entities. The Assessing Officer made additions based on suspicions regarding the nature of these transactions.
However, the CIT(A) and subsequently the ITAT Delhi found in favor of the assessee. They held that the assessee had sufficiently demonstrated the legitimacy of the funds received. The assessment status of the entities involved, particularly their acceptance in other assessments, bolstered the assessee’s case.
The ITAT emphasized the importance of proving creditworthiness by demonstrating the availability of funds from legitimate sources. They noted that creditworthiness cannot be solely judged based on the returned income of the entities involved. Through examination of balance sheets and other financial documents, the assessee successfully rebutted the allegations of the Revenue.
The decision in I.T.O Vs Placid Buildwell Pvt Ltd reaffirms the principle that the burden of proof lies on the assessee to establish the genuineness of transactions. In this case, by providing adequate evidence and demonstrating the legitimacy of the funds received, the addition under section 68 was deemed invalid.
FULL TEXT OF THE ORDER OF ITAT DELHI
The above captioned appeal by the Revenue and cross objection by the assessee are directed towards the very same order of the CIT(A) – XXV, New Delhi dated 02.08.2018 pertaining to A.Y. 2009-10.
2. Since the appeal and cross objections were heard together, they are disposed of by this common order for the sake of convenience and brevity.
3. Grievances of the Revenue read as under:
“(1) Whether on the facts and under the circumstances of the case, the Ld. CIT (A) has erred in law as well as on facts of the case in deleting the addition of Rs. 16,55,00,000/ – made by the AO on account of unexplained cash credit u/ s 68 of the Act received by the assessee from M/ s. Luminous Infrastructure Pvt. Ltd, M/ s. Heaven Infracon Pvt Ltd and M/ s. Shine Infracon Pvt Ltd.
(2) Whether on the facts and under the circumstances of the case, the Ld. CIT (A) has erred in law without considering the Modus operandi with the fact that all three companies were created on 28.04.2008 with same directors in Placid Buildwell Pvt. Ltd. and RPS infrastructure Ltd.
(3) Whether on the facts and under the circumstances of the case, the Ld. CIT (A) has erred in law without considering the survey conducted by the Investigation Wing of the department that the share applicant companies are only layering companies having no substantial income/ revenue which may justify source of such huge funds invested on the assessee company.
(4) The appellant craves to be allowed to add any fresh ground(s) of appeal and/ or delete or amend any of the ground(s) of appeal.”
4. Cross objections by the assessee are as under:
1. On the facts and circumstances of the case, the order passed by the learned Commissioner of Income Tax (Appeals) [CIT(A)] is bad, both in the eye of law and on the facts.
2. On the facts and circumstances of the case, the learned CIT(A) has erred, both on facts and in law, in ignoring the contention of the assessee that the proceedings initiated under Section 147 and order passed by the learned Assessing Officer (AO) under Section 147/143(3) is without jurisdiction.
3. On the facts and circumstances of the case, the learned CIT(A) has erred both on facts and in law in ignoring the contention of the assessee that the assessment framed under Section 147 is bad and liable to be quashed as no valid notice under Section 148 as required under the law has been issued and served on the
4. On the facts and circumstances of the case, the learned CIT(A) has erred, both on facts and in law, in upholding the reopening of assessment done by the AO, despite the fact that the initiation of the proceedings under Section 147, read with Section 148 of the Act is bad and liable to be quashed, as the conditions and procedures prescribed under the statute have not been satisfied and complied with.
5. On the facts and circumstances of the case, learned CIT(A) has erred both on facts and in law in confirming the reopening despite the fact that the same has been made by the AO without independent application of mind.
6. On the facts and circumstances of the case, the learned CIT(A) has erred, both on facts and in law, in rejecting the contention of the assessee that the notice issued under section 148 of the Act is bad and liable to be quashed as the same is barred by limitation having being issued beyond the four years from the end of relevant assessment year.
7. On the facts and circumstances of the case, the CIT(A) has erred both on facts and in law, in rejecting the contention of the assessee that reopening of assessment is bad without there being any whisper in the reasons recorded by the AO that the income has escaped assessment on account of failure on part of the assessee to disclose fully and truly all material facts necessary for assessment.
8. On the facts and circumstances of the case, the CIT(A) has erred both on facts and in law, in rejecting the contention of the assessee that the assessment has been reopened by the AO on the basis of the reasons which are mere change of opinion as the issue was already examined during the course of assessment under Section 143(3) of the Act.
9. The respondent craves leave to add amend on alter any of the grounds of cross objection.”
5. Representatives of both the sides were heard at length. Case records carefully perused. Relevant documentary evidence brought on record duly considered in light of Rule 18(6) of the ITAT Rules.
6. Briefly stated, the facts of the case are that original return of income was filed on 16.09.2019. Return was selected for scrutiny assessment through CASS and accordingly, statutory notices were issued and served upon the assessee.
7. The assessee is engaged in the business of trading of under constructed flats. Returned income of Rs. 2,78,127/- was assessed at Rs. 3,27,511/- vide order dated 25.11.2011 framed u/s 143(3) of the Income-tax Act, 1961 [the Act, for short]. Vide notice dated 29.03.2016, assessment was reopened u/s 147 of the Act. Reopening was done on the basis of information received from the office of the ADIT, INV 1, Faridabad from which it came to the knowledge that various group companies of RPS Group have received share capital/premium from various dummy entities and the assessee is one of the group companies of RPS Group and has received share capital/premium amounting to Rs. 14,89,50,000/- during the F.Y. 2008-09 from Heaven Infracon Pvt Ltd and Luminous Infrastructure Pvt Ltd.
8. Return of income of the assessee was analyzed and the following facts came to the knowledge of the Assessing Officer:
