M/s BCC Investment Pvt. Ltd., Indore V. The Addl.CIT Range-3, Indore

CO 2/IND/2012

• Counselvise Citation: [2016] 112 COUNSELVISE.COM (IT) 4306 (ITAT-INDORE)
• Duration Of Justice: 4 year(s) 7 month(s) 5 day(s)
• Appeal Type: Cross Objection
• Pronouncement Date: 17-08-2016
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: DB
• Next Hearing Date: 11-05-2016
• Assessment Year: 2007-2008
• Appeal Filed On: 12-01-2012
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: RAJEEV VARSHNEY; R A VERMA DRS
• Assessee Lawyers: ARPIT GAUR CAS
• Keywords: Bogus Share capital; Opportunity of being heard; Accommodation entries; Tax effect; Documents seized
• Section: 143(3); 142(1); 153A; 143(2); 139(1); 68; 12; 139

Judgement Text

BCC INVESTMENT (SS)109/IND/2011 AND OTHERS 1 IN THE INCOME TAX APPELLATE TRIBUNAL INDORE BENCH, INDORE BEFORE SHRI D.T. GARASIA, JUDICIAL MEMBER AND SHRI B.C. MEENA, ACCOUNTANT MEMBER IT(SS)A NO.109/IND/2011 A.Y. 2005-06 BCC INVESTMENT INDIA P. LTD., (NOW KNOWN AS BCC ENTERPRISES (INDIA) LTD., INDORE PAN AAACB 6748 D :: ASSESSEE VS ADDL. CIT, RANGE-3, INDORE :: RESPONDENT IT(SS)A NO.154/IND/2011 A.Y. 2007-08 ADDL. CIT, RANGE-3, INDORE :: ASSESSEE VS BCC INVESTMENT INDIA P. LTD., (NOW KNOWN AS BCC ENTERPRISES (INDIA) LTD., INDORE PAN AAACB 6748 D :: RESPONDENT C.O. NO.02/IND/2012 ARISING OUT OF IT(SS)A NO.154/IND/2011 A.Y. 2007-08 BCC INVESTMENT INDIA P. LTD., (NOW KNOWN AS BCC ENTERPRISES (INDIA) LTD., INDORE PAN AAACB 6748 D :: ASSESSEE VS ADDL. CIT, RANGE-3, INDORE :: RESPONDENT BCC INVESTMENT (SS)109/IND/2011 AND OTHERS 2 ASSESSEE BY SHRI ANIL KAMAL GARG AND SHRI ARPIT GAUR, CAS RESPONDENT BY SHRI RAJEEV VARSHNEY AND SHRI R.A. VERMA, DRS DATE OF HEARING 18.5.2016 DATE OF PRONOUNCEMENT 18.5.2016 O R D E R PER SHRI D.T. GARASIA, JM THE ABOVE APPEALS FILED BY THE ASSESSEE AND REVENUE AND CROSS- OBJECTION FILED BY THE ASSESSEE ARE DIRECTED AGAINS T THE DIFFERENT ORDERS OF LD. CIT(A)-I, INDORE, DATED 16.9.2011. ASSESSEES APPEAL IT(SS)A NO.109/IND/2011 A.Y. 2005 -06 2. SHORT FACTS OF THE CASE ARE THAT THE ASSESSEE IS A CLOSELY HELD PUBLIC LIMITED COMPANY DULY INCORPORATED AND REGIST ERED UNDER THE COMPANIES ACT, 1956, ON 28-04-1997. IT IS ONE OF TH E VARIOUS COMPANIES OF WELL KNOWN BHATIA GROUP (ALSO KNOWN AS BCC G ROUP) OF INDORE. THE ASSESSEE COMPANY IS REGULARLY ASSESSED TO INCOME-TA X SINCE ITS INCEPTION. THE ASSESSEE COMPANY FURNISHED ITS ORIGI NAL RETURN OF INCOME, PERTAINING TO THE ASSESSMENT YEAR UNDER CON SIDERATION, U/S. 139(1) OF THE INCOME-TAX ACT, 1961, ON 25-10-2005 W ITH THE THEN ACIT- 5(1), INDORE, DECLARING AN INCOME OF RS.3,18,240/-. A COPY OF THE ACKNOWLEDGEMENT OF THE ORIGINAL RETURN AND A COPY O F COMPUTATION OF TOTAL INCOME ARE PLACED AT PAGE NO. 15 & 16 OF PAPE R BOOK. ALONG WITH THE RETURN OF INCOME, THE ASSESSEE FURNISHED ALL TH E NECESSARY DOCUMENTS SUCH AS COPY OF THE AUDITORS REPORT, COP Y OF THE AUDITED BALANCE-SHEET, AUDITED PROFIT & LOSS ACCOUNT AND SC HEDULES ETC. A COPY OF SUCH DOCUMENTS ARE PLACED AT PAGE NO. 19 TO 35 OF THE PAPER BCC INVESTMENT (SS)109/IND/2011 AND OTHERS 3 BOOK. IN RESPONSE TO THE RETURN OF INCOME, FURNISHE D BY THE ASSESSEE U/S. 139 OF THE INCOME-TAX ACT, 1961, A NOTICE UNDE R S.143(2) WAS ISSUED TO THE ASSESSEE. HOWEVER, NO ASSESSMENT GOT FRAMED UPTILL THE DATE OF SEARCH I.E. 25-09-2007. A SEARCH U/S. 132(1 ) OF THE INCOME-TAX ACT, 1961 WAS CARRIED OUT BY THE ASSISTANT DIRECTOR OF INCOME-TAX (INV.)- II, INDORE, ON 25-09-2007, IN THE BUSINESS PREMISES OF THE ASSESSEE COMPANY AS ALSO IN THE RESIDENTIAL PREMISES OF ITS DIRECTORS. DURING THE COURSE OF THE SEARCH, THE BHATIA GROUP HAD ADMITTED ADDITIONAL INCOME AGGREGATING TO RS.26,15,24,529/- AND AS AGAINST SUC H ADMITTED INCOME OF RS.26,15,24,529/-, THE GROUP, AS A WHOLE, HAD SH OWN AN ADDITIONAL INCOME OF RS.27,33,73,087/- IN THE RETURNS OF INCOM E FURNISHED UNDER S.153A OF THE ACT. HOWEVER, THE ASSESSEE NEITHER AD MITTED NOR DECLARED ANY ADDITIONAL INCOME IN ITS RETURN OF INCOME. SUCH FACTS ARE EVIDENT FROM THE FINDINGS GIVEN BY THE CIT(A) AT PARA 2 & 2 .1 AT PAGE NO. 2 & 3 OF HIS ORDER. DURING THE COURSE OF THE SEARCH, NO U NDISCLOSED OR UNEXPLAINED MONEY, BULLION, JEWELLERY, VALUABLE ART ICLES OR THINGS PERTAINING TO THE ASSESSEE WERE FOUND OR SEIZED FRO M THE PREMISES OF ANY PERSON IN WHOSE CASE SEARCH UNDER S.132 WAS INI TIATED. SUBSEQUENTLY, A NOTICE DATED 03-03-2008 WAS ISSUED BY THE ADDL. COMMISSIONER OF INCOME-TAX, RANGE-3, INDORE, U/S. 1 53A OF THE INCOME-TAX ACT, 1961. UNDER SUCH NOTICE, THE ASSESS EE WAS REQUIRED TO FURNISH ITS RETURN OF TOTAL INCOME PERTAINING TO TH E ASSESSMENT YEAR UNDER REVIEW, WITHIN A PERIOD OF 15 DAYS FROM THE D ATE OF SERVICE OF THE NOTICE. A COPY OF THE NOTICE UNDER S. 153A IS PLACE D AT PAGE NO. 1 OF THE PAPER BOOK. IN RESPONSE TO THE NOTICE U/S. 153A, TH E ASSESSEE, FURNISHED ITS RETURN OF TOTAL INCOME ON 28-03-2008 VIDE ACK. NO. 0030100101 DECLARING THE SAME INCOME OF RS.3,18,240/- AS WAS D ECLARED BY IT IN THE ORIGINAL RETURN FURNISHED U/S. 139(1) (PB PAGE NO. 17 & 18). THE CASE OF THE ASSESSEE WAS SELECTED FOR SCRUTINY AND NOTICES U/S. 143(2) & 142(1) BCC INVESTMENT (SS)109/IND/2011 AND OTHERS 4 ALONG WITH QUESTIONNAIRES WERE ISSUED FROM TIME TO TIME. IN RESPONSE TO SUCH NOTICES, THE ASSESSEE COMPANY THROUGH ITS AUTH ORIZED REPRESENTATIVE ATTENDED THE HEARINGS BEFORE THE ASS ESSING OFFICER FROM TIME TO TIME AND MADE WRITTEN SUBMISSIONS ALONG WIT H NECESSARY DOCUMENTARY EVIDENCES. FINALLY, THE ASSESSING OFFIC ER FRAMED THE ASSESSMENT ON 29-12-2009, U/S. 153A READ WITH SECTI ON 143(3) OF THE INCOME-TAX ACT, 1961, DETERMINING THE TOTAL INCOME OF THE ASSESSEE AT RS.6,58,18,240/- AS AGAINST THE RETURNED INCOME OF RS.3,18,240/- THEREBY MAKING HUGE ADDITION OF RS.6,55,00,000/-. T HE ENTIRE ADDITION OF RS.6,55,00,000/- HAS BEEN MADE BY THE LEARNED AO, U NDER THE PROVISIONS OF SECTION 68 OF THE INCOME-TAX ACT, 196 1, BY HOLDING THAT THE SHARE APPLICATION MONEY/ SHARE CAPITAL CLAIMED TO H AVE BEEN RECEIVED BY THE ASSESSEE COMPANY ARE NOT GENUINE. GROUND NOS. 1.1 & 1.2 3. THESE GROUNDS ARE DIRECTED AGAINST THE AOS ACTI ON OF MAKING ADDITIONS U/S 153A OF THE I.T. ACT ON THOSE ISSUES IN RESPECT OF WHICH NO INCRIMINATING MATERIAL WAS FOUND OR SEIZED DURING T HE COURSE OF SEARCH. 4. THE AO HAS NOT GIVEN ANY SPECIFIC FINDING ON THE ISSUE. IN THE INSTANT CASE, THE AO HAS MADE ONLY ONE ADDITION OF RS.6,55,00,000/- ON ACCOUNT OF ALLEGED UNEXPLAINED SHARE CAPITAL. FOR M AKING THE ADDITION, THE AO HAS TAKEN THE LEAD FROM THE AUDITED BALANCE SHEET OF THE ASSESSEE COMPANY WHICH IS EVIDENT FROM THE PAGE NO. 3 & 4 OF THE ASSESSMENT ORDER. 5. MATTER CARRIED TO LEARNED CIT(A), WHO DISMISSED THE APPEAL OF THE ASSESSEE BY UPHOLDING THE ADDITION MADE BY THE AO U NDER S. 68 OF THE INCOME-TAX ACT, 1961. THE CIT(A) IN HIS FINDINGS G IVEN AT PARA 5.1, P. 10 OF THE ORDER HAS HELD THAT ADDITIONS AND DISALLO WANCES IN RESPECT OF BCC INVESTMENT (SS)109/IND/2011 AND OTHERS 5 VARIOUS ITEMS DULY RECORDED IN THE REGULAR BOOKS OF ACCOUNT AND DULY DISCLOSED BEFORE THE DEPARTMENT CAN ALSO BE MADE EV EN WHEN NO INCRIMINATING DOCUMENT WAS FOUND OR SEIZED DURING T HE COURSE OF THE SEARCH. THE CIT(A) HAS RELIED UPON HIS OWN FINDINGS GIVEN WHILE ADJUDICATING THE APPEAL IN THE CASE OF ONE OF THE G ROUP ASSESSEES NAMELY, SHRI AMANDEEP SINGH BHATIA, FOR A.Y. 2002-0 3. 6. THE LD. AR FOR THE ASSESSEE HAS MADE ORAL AS WEL L AS WRITTEN SUBMISSION AS UNDER: IT IS SUBMITTED THAT FOR THESE GROUNDS, A DETAILED SUBMISSION HAS BEEN MADE IN THE CASE OF APPEAL OF ONE OTHER GROUP ASSES SEE NAMELY OF SHRI AMANDEEP SINGH BHATIA IN APPEAL NO. IT(SS)A-11 2/IND/2011 FOR A.Y. 2002-03 PENDING FOR ADJUDICATION BEFORE THIS H ONBLE BENCH. SINCE, WHILE ADJUDICATING THE GROUNDS OF APPEAL RAI SED BEFORE THE CIT(A), THE CIT(A) HAS RELIED UPON HIS OWN FINDINGS GIVEN IN THE AFORESAID CASE OF SHRI AMANDEEP SINGH BHATIA, OUR S UBMISSIONS MADE BEFORE THIS HONBLE BENCH IN THE CASE OF SHRI AMAND EEP SINGH BHATIA MAY KINDLY BE TAKEN INTO CONSIDERATION. RELEVANT DOCUMENTS FILED IN THE PAPER BOOK ON WHICH THE ASSESSEE IS PLACING RELIANCE FOR THESE GROUNDS PAGE NO. NATURE OF DOCUMENT FILED FOR THE PURPOSE OF FROM TO 2 9 COPY OF THE PANCHNAMA DRAWN IN THE CASE OF THE ASSESSEE AND COPY OF THE INVENTORY OF THE DOCUMENTS SEIZED. ESTABLISHING THAT THE DOCUMENTS WERE MERELY IN THE NATURE OF SHARE APPLICATION FILED AND THESE WERE NOT IN THE NATURE OF INCRIMINATING DOCUMENTS. 15 16 COPY OF ACKNOWLEDGMENT OF RETURN FILED UNDER S.139 OF THE ACT FOR A.Y. 2005-06 ESTABLISHING THAT MUCH PRIOR TO THE DATE OF SEARCH, THE ASSESSEE HAD FURNISHED ITS RETURN OF INCOME UNDER S.139 19 35 COPY OF AUDITED FINANCIAL STATEMENTS OF THE ASSESSEE FOR THE ESTABLISHING THAT THE RECEIPT OF SHARE CAPITAL AND SHARE PREMIUM WAS BCC INVESTMENT (SS)109/IND/2011 AND OTHERS 6 FINANCIAL YEAR ENDED ON 31-03-2005 DULY RECORDED IN THE REGULAR BOOKS OF ACCOUNT AND THE SAME WAS ALSO DISCLOSED TO THE DEPARTMENT BY WAY OF FILING AUDITED BALANCE SHEET ALONG WITH THE RETURN OF INCOME AND THEREFORE, THE SHARE CAPITAL AND SHARE PREMIUM CANNOT BE HELD TO BE A NEW ITEM DISCOVERED DURING THE COURSE OF SEARCH. 40 41 COPY OF THE SHOW CAUSE NOTICE DATED 07- 12-2009 ISSUED BY THE AO, CONTAINING INTER ALIA, THE ISSUE OF SHARE CAPITAL. ESTABLISHING THAT THE ISSUE OF SHARE CAPITAL EMANATED FROM THE ASSESSMENT PROCEEDINGS THEMSELVES AND SUCH RECEIPTS WERE FOUND CREDITED IN THE REGULAR BOOKS OF ACCOUNT OF THE ASSESSEE. 7. LD. DRS HAVE RELIED ON THE ORDERS OF THE REVENUE AUTHORITIES AND SUBMITTED THAT OUR ARGUMENTS ADVANCED IN THE CASE O F AMANDEEP SINGH BHATIA ON IDENTICAL FACTS MAY BE TAKEN INTO CONSIDE RATION. 8. WE HAVE HEARD RIVAL CONTENTIONS OF BOTH THE PART IES AND PERUSED MATERIAL AVAILABLE ON RECORD. THE CIT(A) HAS RELIED UPON HIS OWN FINDINGS GIVEN IN THE CASE OF SHRI AMANDEEP SINGH B HATIA. HOWEVER, WE FIND THAT SINCE THE ASSESSMENT FOR THE A.Y. 2005-06 IS ABATED, THE PRESENT ISSUE IN ASSESSEES APPEALS IT(SS)A NOS.109 /IND/2011 FOR THE A.Y. 2005-06 WAS NOT PRESSED BY THE LD. COUNSEL FOR THE ASSESSEE DURING THE COURSE OF HEARING, THEREFORE, SAME IS DI SMISSED FOR THE A.Y. 2005-06. BCC INVESTMENT (SS)109/IND/2011 AND OTHERS 7 GROUND NO. 2 9. THIS GROUND IS DIRECTED AGAINST THE CIT(A)S FIN DING OF UPHOLDING AOS ACTION OF PASSING THE ASSESSMENT ORDER ARBITRA RILY WITHOUT GIVING PROPER OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. THE CIT(A) HAS DEALT WITH THIS GROUND. ACCORDING TO THE CIT(A), THE ASSE SSEE WAS GIVEN DUE OPPORTUNITY BY THE AO. BEFORE US, LD. COUNSEL FOR T HE ASSESSEE DID NOT PRESS THIS GROUND. THEREFORE, SAME IS DISMISSED BEI NG NOT PRESSED. GROUND NO. 3 10. THIS GROUND OF APPEAL IS DIRECTED AGAINST UPHOL DING THE ADDITION MADE BY THE AO AT RS.6,55,00,000/- ON ACCOUNT OF SH ARE CAPITAL/SHARE APPLICATION/SHARE PREMIUM. 11. SHORT FACTS OF THE CASE ARE THAT THE AO HAS DEA LT WITH THIS ISSUE AT PAGE NO. 3 TO 105 OF HIS ORDER. THE AO, AT PAGE NO. 104 OF THE ORDER, HAS HELD THE CAPITAL INTRODUCED BY THE ASSESSEE COM PANY THROUGH PARTLY CONVERTIBLE SHARES WERE NOT GENUINE AS THE ASSESSEE COULD NOT ESTABLISH THE IDENTITY AND CREDITWORTHINESS OF THE SHARE APPL ICANT COMPANIES. THE AO MADE THE ADDITION BY INVOKING PROVISIONS OF SECT ION 68 OF THE ACT. THE MAIN GROUNDS TAKEN BY THE AO WERE : (I) HUGE SH ARE CAPITAL AND SHARE PREMIUM MONEY WERE RECEIVED BY THE ASSESSEE A ND OTHER GROUP COMPANIES DURING THE PERIODS UNDER ASSESSMENT; (II) IN RECENT YEARS, THE FIELD OFFICERS OF THE INCOME-TAX DEPARTMENT HAVE CO ME ACROSS TO A SITUATION IN WHICH CALCUTTA, MUMBAI AND SURAT BASED COMPANIES ARE PROVIDING ACCOMMODATION ENTRIES TO INDORE BASED COM PANIES; (III) SHARE APPLICANT COMPANIES ARE VERY SYSTEMATICALLY ISSUING HUGE AMOUNTS OF CHEQUES TO EACH OTHER WITHOUT ANY COMMERCIAL SENSE; (IV) SHARE APPLICANT COMPANIES WERE INDULGED IN MONEY LAUNDERI NG ACTIVITIES; (V) BALANCE SHEET OF SOME SHARE APPLICANT COMPANIES WER E NOT AVAILABLE; BCC INVESTMENT (SS)109/IND/2011 AND OTHERS 8 (VI) IN THE BANK ACCOUNTS OF THE SHARE APPLICANT CO MPANIES CALLED UNDER S.133(6) OF THE ACT, TRANSFER OF HUGE AMOUNT IN OTH ER ACCOUNTS THROUGH CHEQUES WERE FOUND AND IN SOME CASES, CASH DEPOSITS WERE MADE IN THE ACCOUNT OF THIRD PARTIES FROM WHOM CHEQUES WERE TAKEN; (VII) THE COPIES OF MEMORANDUM & ARTICLES OF ASSOCIATION, CER TIFICATE OF INCORPORATION, BOARD RESOLUTION OF THE SHARE APPLIC ANT COMPANIES WERE FOUND IN THE PREMISES OF THE GROUP; (VIII) MOST OF THE NOTICES ISSUED UNDER S.133(6) RETURNED UNSERVED; AND (IX) THE SHAR ES WERE ULTIMATELY REPURCHASED FROM THE SHARE APPLICANT COMPANIES BY T HIRD PARTIES/ GROUP ASSESSEES AT THE NOMINAL PRICE. 12. MATTER CARRIED TO LEARNED CIT(A), WHO HAS DEALT WITH THE ISSUE AT PARA 2.4.1, PAGE NO. 8 OF THE ORDER. THE CIT(A) HA S, AT PARA 2.4.1, GIVEN A TABLE SHOWING VARIOUS GROUNDS RAISED BY THE ASSES SEE, THE ISSUE INVOLVED AND THE APPEAL OF THE ASSESSEE/GROUP ASSES SEE WHERE THE SUBJECT ISSUE HAS BEEN DISCUSSED BY HIM. ACCORDING LY, THE CIT(A) DISMISSED THIS GROUND RAISED BY THE ASSESSEE FOLLOW ING HIS OWN FINDINGS GIVEN IN THE CASE OF THE ONE OF THE GROUP ASSESSEES NAMELY M/S. BHATIA INTERNATIONAL LTD. IN APPEAL NO. IT-262/09-10 FOR A .Y. 2002-03. 13. THE LD. AR FOR THE ASSESSEE HAS MADE ORAL AS WE LL AS WRITTEN SUBMISSION AS UNDER: AS REGARD THIS GROUND TAKEN BY THE ASSESSEE IN THE PRESENT APPEAL, IT IS SUBMITTED THAT SIMILAR GROUNDS FOR THE ASSESSMENT Y EAR 2002-03 HAS BEEN TAKEN IN THE CASE OF M/S. BHATIA INTERNATIONAL LTD. IN APPEAL NO. IT(SS)A 104/IND/2011. THE FACTS OF THE GROUNDS OF THE ASSES SEE IN THE PRESENT APPEAL ARE IDENTICAL WITH THAT OF THE GROUNDS OF M/S. BHAT IA INTERNATIONAL LTD. FOR A.Y. 2002-03. THEREFORE, IN ORDER TO AVOID REPETITION, W E WISH TO PLACE OUR RELIANCE ON OUR SYNOPSIS MADE ON THE RESPECTIVE GROUNDS MADE IN RESPECT OF M/S. BHATIA INTERNATIONAL LTD. FOR A.Y. 2002-03 IN APPEA L NO. IT(SS)A 104/IND/2011. RELEVANT DOCUMENTS FILED IN THE PAPER BOOK ON WHICH THE ASSESSEE IS PLACING RELIANCE FOR THESE GROUNDS BCC INVESTMENT (SS)109/IND/2011 AND OTHERS 9 PAGE NO. NATURE OF DOCUMENT FILED FOR THE PURPOSE OF FROM TO 45 46 LIST OF SHARE APPLICANT COMPANIES GIVING THE DETAILS OF SHARE APPLICANT COMPANIES 184 1375 SHARE APPLICATION FORMS, MOA/AOA, INCORPORATION CERTIFICATE, BOARD RESOLUTION, AUDITED FINANCIAL STATEMENTS, ITR, BANK CERTIFICATE REGARDING VERIFICATION OF SIGNATURE OF DIRECTOR OF SHARE APPLICANTS, CONFIRMATION LETTERS, MASTER DATA OF SHARE APPLICANTS DOWNLOADED FROM OFFICIAL WEBSITE OF MCA, LIST OF DIRECTORS, PAN, TAN, BANK STATEMENTS, CERTIFICATE OF REGISTRATION GRANTED BY RBI FOR NBFC ESTABLISHING IDENTITY AND CREDITWORTHINESS OF SHARE APPLICANTS ALONG WITH GENUINENESS OF THE TRANSACTIONS 14. LD. DR RELIED ON THE ORDERS OF THE REVENUE AUTH ORITIES AND SUBMITTED THAT SUBMISSIONS MADE IN THE CASE OF M/S. BHATIA INTERNATIONAL LTD. MAY KINDLY BE TAKEN INTO CONSIDERATION IN THE PRESENT CASE TOO. 15. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS OF BOT H THE PARTIES AND GONE THROUGH THE MATERIAL AVAILABLE ON THE FILE. WE FIND THAT WHILE ADJUDICATING THE SAME ISSUE IN CASE OF ANOTHER GROU P ASSESSEE NAMELY, M/S. BHATIA INTERNATIONAL LTD. IN APPEAL NO. IT(SS) A NO.104/IND/2011 FOR A.Y. 2002-03, WE HAVE HELD THAT THE ASSESSEE COULD BE ABLE TO DISCHARGE THE BURDEN OF PROVING THE CASH CREDIT AS CONTEMPLATED U/S 68 OF THE ACT AND HAVE DIRECTED TO DELETE THE ENTIRE A DDITION MADE BY THE ASSESSING OFFICER ON ACCOUNT OF SHARE CAPITAL/SHARE PREMIUM/ SHARE APPLICATION MONEY. WE FIND THAT THE FACTS AND CIRCU MSTANCES OF THE PRESENT APPEAL OF THE ASSESSEE ARE THE SAME WITH TH AT OF THE APPEAL FOR BCC INVESTMENT (SS)109/IND/2011 AND OTHERS 10 ASSESSMENT YEAR 2002-03 (SUPRA). THE ARGUMENT OF BO TH THE PARTIES ARE ALSO THE SAME AND THEREFORE, FOLLOWING OUR OWN FIND ING GIVEN IN THE CASE OF ANOTHER GROUP ASSESSEE FOR THE ASSESSMENT YEAR 2 002-03 (SUPRA), WE DIRECT TO DELETE THE ADDITIONS OF RS. 6,55,00,000/- MADE BY THE ASSESSING OFFICER ON ACCOUNT OF SHARE CAPITAL/SHARE PREMIUM/ SHARE APPLICATION MONEY AND ALLOW THE GROUND NO.3 OF THE PRESENT APPE AL OF THE ASSESSEE. GROUND NO. 4 16. THIS GROUND OF APPEALS TAKEN IN THE APPEALS OF BOTH THE PRESENT ASSESSEE IS DIRECTED AGAINST CHARGING OF INTEREST U NDER S. 234A AND 234B. THIS GROUND IS CONSEQUENTIAL IN NATURE, THERE FORE, DOES NOT REQUIRE ANY SEPARATE ADJUDICATION. 17. IN THE RESULT, THE APPEAL OF THE ASSESSEE PARTL Y ALLOWED. DEPARTMENTAL APPEAL IT(SS)A NO.154/IND/2011 A.Y. 20 07-08 AND ASSESSEES C.O. NO.02/IND/2012 A.Y. 2012 18. SHORT FACTS OF THE CASE ARE THAT THE ASSESSEE I S A CLOSELY HELD PUBLIC LIMITED COMPANY DULY INCORPORATED AND REGIST ERED UNDER THE COMPANIES ACT, 1956, ON 28-04-1997. IT IS ONE OF TH E VARIOUS COMPANIES OF WELL KNOWN BHATIA GROUP (ALSO KNOWN AS BCC G ROUP) OF INDORE. THE ASSESSEE COMPANY IS REGULARLY ASSESSED TO INCOM E-TAX SINCE ITS INCEPTION. THE ASSESSEE COMPANY FURNISHED ITS ORIGI NAL RETURN OF INCOME, PERTAINING TO THE ASSESSMENT YEAR UNDER CON SIDERATION, U/S. 139(1) OF THE INCOME-TAX ACT, 1961, ON 18-10-2007 W ITH THE THEN ITO- 5(1), INDORE, DECLARING AN INCOME OF RS.NIL. A COPY OF THE ACKNOWLEDGEMENT OF THE ORIGINAL RETURN AND A COPY O F COMPUTATION OF TOTAL INCOME ARE PLACED AT PAGE NO. 15 & 16 OF THE PAPER BOOK. ALONG WITH THE RETURN OF INCOME, THE ASSESSEE FURNISHED A LL THE NECESSARY BCC INVESTMENT (SS)109/IND/2011 AND OTHERS 11 DOCUMENTS SUCH AS COPY OF THE AUDITORS REPORT, COP Y OF THE AUDITED BALANCE-SHEET, AUDITED PROFIT & LOSS ACCOUNT AND SC HEDULES ETC.. A COPY OF SUCH DOCUMENTS ARE PLACED AT PAGE NO. 45 TO 53 OF THE PAPER BOOK. A SEARCH U/S. 132(1) OF THE INCOME-TAX ACT, 1 961 WAS CARRIED OUT BY THE ASSISTANT DIRECTOR OF INCOME-TAX (INV.)-II, INDORE, ON 25-09-2007, IN THE BUSINESS PREMISES OF THE ASSESSEE COMPANY AS ALSO IN THE RESIDENTIAL PREMISES OF ITS DIRECTORS. DURING THE C OURSE OF THE SEARCH, THE BHATIA GROUP HAD ADMITTED ADDITIONAL INCOME AGGREGA TING TO RS.26,15,24,529/- AND AS AGAINST SUCH ADMITTED INCO ME OF RS.26,15,24,529/-, THE GROUP, AS A WHOLE, HAD SHOWN AN ADDITIONAL INCOME OF RS.27,33,73,087/- IN THE RETURNS OF INCOM E FURNISHED UNDER S.153A OF THE ACT. HOWEVER, THE ASSESSEE NEITHER AD MITTED NOR DECLARED ANY ADDITIONAL INCOME IN ITS RETURN OF INCOME. SUCH FACTS ARE EVIDENT FROM THE FINDINGS GIVEN BY THE CIT(A) AT PARA 2 & 2 .1 AT PAGE NO. 2 & 3 OF HIS ORDER. DURING THE COURSE OF THE SEARCH, NO U NDISCLOSED OR UNEXPLAINED MONEY, BULLION, JEWELLERY, VALUABLE ART ICLES OR THINGS PERTAINING TO THE ASSESSEE WERE FOUND OR SEIZED FRO M THE PREMISES OF ANY PERSON IN WHOSE CASE SEARCH UNDER S.132 WAS INI TIATED. SUBSEQUENTLY, THE ASSESSEE FURNISHED ITS RETURN OF TOTAL INCOME UNDER S.153A OF THE ACT ON 30-06-2008 VIDE ACKNOWLEDGEMEN T NO. 22255471300608 DECLARING THE SAME INCOME OF RS.NIL AS WAS DECLARED BY IT IN THE ORIGINAL RETURN FURNISHED U/S. 139(1) (PB PAGE NO. 17 TO 44). THE CASE OF THE ASSESSEE WAS SELECTED FOR SCRUTINY AND NOTICES U/S. 143(2) & 142(1) ALONG WITH QUESTIONNAIRES WERE ISSU ED FROM TIME TO TIME. IN RESPONSE TO SUCH NOTICES, THE ASSESSEE COMPANY T HROUGH ITS AUTHORIZED REPRESENTATIVE ATTENDED THE HEARINGS BEF ORE THE ASSESSING OFFICER FROM TIME TO TIME AND MADE WRITTEN SUBMISSI ONS ALONG WITH NECESSARY DOCUMENTARY EVIDENCES. FINALLY, THE LEARN ED ASSESSING OFFICER FRAMED THE ASSESSMENT ON 04-12-2009, U/S. 1 53A READ WITH BCC INVESTMENT (SS)109/IND/2011 AND OTHERS 12 SECTION 143(3) OF THE INCOME-TAX ACT, 1961, DETERMI NING THE TOTAL INCOME OF THE ASSESSEE AT RS.15,38,170/- AS AGAINST THE RETURNED INCOME OF RS.NIL THEREBY MAKING ADDITION OF RS.15,3 8,170/-. THE ENTIRE ADDITION OF RS.15,38,170/- HAS BEEN MADE BY THE LEA RNED AO ON ACCOUNT OF DISALLOWANCE OF INTEREST EXPENSES BY INVOKING TH E PROVISIONS OF SECTION 40A(2)(B) OF THE INCOME-TAX ACT, 1961. DEPARTMENTAL GROUND NO.1 AND ASSESSEES GROUND NO.1 19. THIS GROUND OF APPEAL OF THE REVENUE IS DIRECTE D AGAINST THE CIT(A)S ACTION OF DELETING THE ADDITION MADE BY TH E AO ON ACCOUNT OF DISALLOWANCE OF INTEREST EXPENSES UNDER S.40(A)(2)( B) OF THE ACT. THE ASSESSEE COMPANY HAS FILED ITS COUNTER OBJECTION IN RESPECT OF THE CIT(A)S ACTION OF CONFIRMING THE ADDITION TO THE E XTENT OF RS.3,27,314/- OUT OF TOTAL ADDITION OF RS.15,37,170/- MADE BY THE AO ON THE AFORESAID COUNT. 20. SHORT FACTS OF THE ISSUE ARE THAT THE AO HAS DE ALT WITH THE ISSUE AT PAGE NO. 3 & 4 OF HIS ORDER. THE CRUX OF THE FINDIN GS OF THE AO, AS GIVEN AT PAGE NO. 4 OF THE ORDER, IS THAT THE ASSESSEE HA S MADE THE INTEREST PAYMENT ON LOAN OBTAINED FROM ITS GROUP COMPANY NAM ELY M/S. BHATIA COAL TRADING & CONSIGNMENT P. LTD. TO REDUCE THE IN TEREST EARNED FROM THE FDRS AND ULTIMATELY, REDUCE ITS TAX LIABILITY. FINALLY, THE AO MADE THE ADDITION OF RS.15,38,170/- ON ACCOUNT OF DISALLOWAN CE OF INTEREST EXPENSES UNDER THE PROVISIONS OF SECTION 40A(2)(B) OF THE ACT. 21. MATTER CARRIED TO LEARNED CIT(A), WHO PARTLY AL LOWED THE APPEAL OF THE ASSESSEE GRANTING A RELIEF OF RS.12,10,856/- TO THE ASSESSEE ON ACCOUNT OF INTEREST PAYMENT, CONFIRMED THE ADDITION TO THE EXTENT OF RS.3,27,314/- OUT OF THE TOTAL ADDITION OF RS.15,38 ,170/- MADE BY THE AO. IN THE APPELLATE ORDER, THE CIT(A) HAS REPRODUCED T HE WRITTEN BCC INVESTMENT (SS)109/IND/2011 AND OTHERS 13 SUBMISSION OF THE ASSESSEE MADE ON THIS ISSUE AT P AGE NO. 8 & 9 OF HIS ORDER. THE CIT(A) HAS DEALT WITH THE ISSUE AT PARA 5.2, PAGE NO. 10 & 11 OF THE ORDER. AT PARA 5.2, P.10, WHILE ADJUDICATING THE GROUND NO. 2, THE CIT(A) HAS DELETED THE ADDITION TO THE EXTENT OF RS .12,10,856/- OUT OF THE TOTAL ADDITION OF RS.15,38,170/- MADE BY THE AO THE REBY CONFIRMING A SUM OF RS.3,27,314/- ON ACCOUNT OF DISALLOWANCE OF INTEREST EXPENSES. NOW, AGAINST THE ORDER OF THE LEARNED CIT(A), THE R EVENUE HAS PREFERRED THE PRESENT APPEAL BEFORE WHEREAS THE ASSESSEE HAS FILED ITS CROSS- OBJECTION BEFORE THIS TRIBUNAL. 22. THE LD. AR FOR THE ASSESSEE HAS MADE ORAL AS WE LL AS WRITTEN SUBMISSION AS UNDER: 1.00 THAT, THE ASSESSEE HAS OBTAINED UNSECURED LOA N FROM M/S. BHATIA COAL TRADING & CONSIGNMENT PVT. LTD. AND PAID INTER EST @4% P.A. 2.00 AS REGARD OBSERVATION OF THE LEARNED AO THAT T HE ASSESSEE WAS HAVING SUFFICIENT INTEREST FREE FUNDS AVAILABLE, IT IS SUBMITTED THAT AT THE BEGINNING OF THE RELEVANT PREVIOUS YEAR, THE ASSESS EE WAS HAVING FIXED DEPOSITS TO THE TUNE OF RS.5,66,33,663/- WHICH GOT REDUCED TO RS.1,50,00,000/- AT THE END OF THE RELEVANT PREVIOU S YEAR. THE FDRS WERE MADE BY THE ASSESSEE IN THE YEAR 2005 FOR A LONG PE RIOD AND IF THE ASSESSEE WOULD HAVE BROKEN THESE FDRS BEFORE THE MATURITY, T HE BANK WOULD HAVE CHARGED THE RATE OF INTEREST BY 1% AS PRE-MATURE PE NALTY AND FURTHER, THE RATE OF INTEREST WOULD ALSO HAVE REDUCED FOR THE SHORTER PERIOD. THEREFORE, AS A PRUDENT BUSINESSMAN, THE ASSESSEE DECIDED NOT TO BR EAK THE FDRS ON WHICH IT WAS DERIVING INTEREST INCOME BETWEEN 4.5% TO 5% AND TO MEET OUT ITS SHORT- TERM FUNDS REQUIREMENT BY OBTAINING UNSECURED LOAN FROM ITS GROUP COMPANY AT A LOWER INTEREST OF 4%. 3.00 THAT, THE CIT(A) HAS CONFIRMED THE ADDITION TO THE EXTENT OF RS.3,27,314/- BY HOLDING THE DIFFERENCE OF EXCESS O F INTEREST EXPENSES OF RS.15,38,170/- OVER INTEREST INCOME AT RS.12,10,856 /- WITHOUT CONSIDERING THE MATERIAL FACT THAT THE ASSESSEE HAS DERIVED INTERES T INCOME AT A HIGHER RATE THAN WHAT IT HAS PAID ON LOANS OBTAINED BY IT. FURT HER, THE INTEREST INCOME HAS GOT REDUCED DURING THE RELEVANT PREVIOUS YEAR FOR T HE REASON THAT THE ASSESSEE COMPANY HAS GOT ITS FDRS MATURED, AS AFORE SAID, TO REPAY OFF ITS OTHER TERM LIABILITIES. IN OTHER WORDS, THE ASSESSE E COMPANY HAS SAVED THE INTEREST COST BY REPAYING OFF ITS LIABILITIES. THER EFORE, NO DISALLOWANCE OF INTEREST EXPENSES DESERVE TO BE MADE/ CONFIRMED BY THE AUTHORITIES BELOW. RELEVANT DOCUMENTS FILED IN THE PAPER BOOK ON WHICH THE ASSESSEE IS PLACING RELIANCE FOR THESE GROUNDS BCC INVESTMENT (SS)109/IND/2011 AND OTHERS 14 PAGE NO. NATURE OF DOCUMENT FILED FOR THE PURPOSE OF FROM TO 45 53 COPY OF AUDITED FINANCIAL STATEMENTS OF THE ASSESSEE COMPANY FOR THE FINANCIAL YEAR ENDED ON 31-03- 2007 ESTABLISHING THAT THE INTEREST EXPENSES OF RS.15,38,170/- HAVE BEEN GENUINELY INCURRED BY THE ASSESSEE COMPANY AS GETTING REFLECTED IN ITS AUDITED PROFIT & LOSS ACCOUNT. 23. LD. DR HAS RELIED ON THE ORDER OF THE ASSESSING OFFICER. 24. WE HAVE HEARD RIVAL CONTENTIONS OF BOTH THE PAR TIES AND PERUSED MATERIAL AVAILABLE ON RECORD. WE FIND THAT THE ASSE SSEE CO. PAID INTEREST OF RS.15,38,170/- TO THE GROUP COS. THE ASSESSEE AL SO RECEIVED INTEREST AMOUNTING TO RS.12,10,856/- INCLUDING THE INTEREST OF RS.10.70 LACS ON FDRS. THE ASSESSING OFFICER DISALLOWED THE ENTIRE A MOUNT OF RS.15,38,170/-. HOWEVER, IF WE GO THROUGH THE ORDER OF THE LD. CIT(A), WE FIND THAT LD. CIT(A), CONSIDERING THE SUBMISSIONS A ND MATERIAL, REDUCED THE ADDITION TO THE EXTENT OF RS.3,27,314/- IN VIEW OF THE FACT THAT IN THE AY 2008-09, THE ASSESSEE IN THE SIMILAR CIRCUMSTANC ES HAS DISALLOWED AND ADDED BACK SUO MOTU THE AMOUNT OF INTEREST TO T HE EXTENT OF RS.13,94,505/-. BUT, DURING THE PRESENT AY, NO SUCH DISALLOWANCE SUO MOTU HAS BEEN MADE BY THE ASSESSEE. IN VIEW OF THES E FACTS, THE LD. CIT(A) HELD THAT THE ASSESSING OFFICER, AT THE MOST , COULD HAVE MADE DISALLOWANCE OF THE NET AMOUNT OF INTEREST TO THE E XTENT OF RS.3,27,314/- (RS.15,38,170 RS.12,10,856). ON CONSIDERATION OF ABOVE, WE FIND THE LD. CIT(A) HAS REASONABLY GIVEN PART RELIEF AND SUS TAINED THE ADDITION TO THE EXTENT OF RS.3,27,314/-. ACCORDINGLY, WE DO NOT FIND ANY REASON TO INTERFERE WITH THE ORDER OF THE LD. CIT(A). THUS, D EPARTMENTAL APPEAL AND BCC INVESTMENT (SS)109/IND/2011 AND OTHERS 15 CO FILED BY THE ASSESSEE ARE DISMISSED. WE MAY ALSO NOTE THAT THE TAX EFFECT IN DEPARTMENTAL APPEAL COMES TO BELOW RS.10 LACS. THEREFORE, THE DEPARTMENTAL APPEAL BEING FILED IN CONTRAVENTION WI TH THE CBDT CIRCULAR NO.21/2015 DATED 10.12.2015 ALSO DESERVES TO BE DIS MISSED BEING NOT MAINTAINABLE. 25. IN RESULT, DEPARTMENTAL APPEAL AND CO FILED BY THE ASSESSEE ARE DISMISSED. ORDER WAS PRONOUNCED IN THE OPEN COURT ON 18.5.201 6. SD/- (B.C. MEENA) ACCOUNTANT MEMBER SD/- ( D.T. GARASIA) JUDICIAL MEMBER DATED : 17.8.2016 COPY TO: ASSESSEE/RESPONDENT/CIT(A)/CIT/DR, INDORE