M/s. Jindal Filaments Pvt.Ltd., Surat V. The Income tax Officer,Ward-1(3), Surat

CO 3/AHD/2009

• Counselvise Citation: [2012] 122 COUNSELVISE.COM (IT) 6922 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 year(s) 2 month(s) 15 day(s)
• Appeal Type: Cross Objection
• Pronouncement Date: 28-03-2012
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: D
• Next Hearing Date: 16-01-2012
• Assessment Year: 2005-2006
• Appeal Filed On: 12-01-2009
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Assessee Lawyers: B L YADAV
• Keywords: Bogus Share capital; Unexplained investment

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, D BENCH, AHMEDABAD BEFORE SHRI BHAVNESH SAINI , JUDICIAL MEMBER AND SHRI A. K. GARODIA, ACCOUNTANT MEMBER I.T.A. NO. 3912/ AHD/2008 (ASSESSMENT YEAR 2005-06) ITO, WARD 1(3), MAJURA GATE, SURAT VS. JINDAL FILAMENTS PVT. LTD., 5048, TRADE HOUSE, RING ROAD, SURAT C.O.NO.03/AHD/2009 (ASSESSMENT YEAR 2005-06) JINDAL FILAMENTS PVT. LTD., VS. ITO, WARD 1(3), 5048, TRADE HOUSE, SURAT RING ROAD, SURAT PAN/GIR NO. : AABCJ4189K (APPELLANT) .. (RESPONDENT) APPELLANT BY: SHRI B L YADAV, DR RESPONDENT BY: NONE DATE OF HEARING: 16.01.2012 DATE OF PRONOUNCEMENT: 28.03.2012 O R D E R PER SHRI A. K. GARODIA, AM:- THIS APPEAL IS FILED BY THE REVENUE AND CROSS OBJE CTION BY THE ASSESSEE WHICH ARE DIRECTED AGAINST ORDER OF LD. CI T(A) I, SURAT DATED 22.09.2008 FOR THE ASSESSMENT YEAR 2005-06. 2. NONE APPEARED ON BEHALF OF THE ASSESSEE IN SPITE OF THE NOTICE AND HENCE, THE SAME ARE HEARD EX-PARTE QUA THE ASSESSEE . THE GROUNDS RAISED BY THE ASSESSEE IN THE C.O. ARE AS UNDER: 1) ON THE FACTS AND CIRCUMSTANCES OF THE CASE, AS WELL AS THE LAW ON THE SUBJECT, THE LD. CIT(A) HAS ERRED IN SUSTAIN ING THE REJECTION OF BOOK RESULTS U/S 145(3) OF THE I. T. ACT. 2) ON THE FACTS AND CIRCUMSTANCES OF THE CASE, AS W ELL AS THE LAW ON THE SUBJECT, THE LD .CIT HAS ERRED IN SUSTAINING THE ADDITION OF I.T.A.NO. 3912/AHD/2008 C.O.NO.03/AHD/2009 2 RS.2,53,361/- TREATING THE DIFFERENCE OF STOCK OF P OY AS UNEXPLAINED INVESTMENT. 3. SINCE NOBODY HAS APPEARED BEFORE US, IN SPITE OF NOTICE, IT IS INFERRED THAT THE ASSESSEE IS NOT INTERESTED IN PRO SECUTING THE CROSS OBJECTION AND THE SAME IS REJECTED AS NOT PRESSED. FOR THIS, WE FIND SUPPORT FROM THE FOLLOWING DECISIONS: IN THE CASE OF CIT VS B.N. BHATTACHARGEE AND ANOTHE R, REPORTED IN 118 ITR 461 (RELEVANT PAGES 477 AND 478) WHEREIN TH EIR LORDSHIPS HAVE HELD THAT THE APPEAL DOES NOT MEAN MERELY FIL ING OF THE APPEAL BUT EFFECTIVELY PURSUING IT. IN THE CASE OF ESTATE OF LATE TUKOJIRAO HOLKAR VS C IT 223 ITR 480 (M.P.) WHILE DISMISSING THE REFERENCE MADE AT THE I NSTANCE OF THE ASSESSEE IN DEFAULT MADE FOLLOWING OBSERVATION IN T HEIR ORDER:- IF THE PARTY, AT WHOSE INSTANCE THE REFERENCE IS M ADE, FAILS TO APPEAR AT THE HEARING, OR FAILS IN TAKING STEPS FOR PREPARATION OF THE PAPER BOOKS SO AS TO ENABLE HEARING OF THE REFERENC E, THE COURT IS NOT BOUND TO ANSWER THE REFERENCE. IN THE CASE OF CIT VS MULTIPLAN INDIA LIMITED; 38 ITD 320 (DEL), THE APPEAL WAS FILED BY THE REVENUE BEFORE THE TRIB UNAL, WHICH WAS FIXED FOR HEARING. BUT ON THE DATE OF HEARING, NOB ODY REPRESENTED THE REVENUE/APPELLANT NOR ANY COMMUNICATION FOR ADJ OURNMENT WAS RECEIVED. THERE WAS NO COMMUNICATION OR INFORMATIO N AS TO WHY THE REVENUE CHOSE TO REMAIN ABSENT ON DATE. THE TR IBUNAL ON THE BASIS OF INHERENT POWERS, TREATED THE APPEAL FILED BY THE REVENUE AS UNADMITTED IN VIEW OF THE PROVISIONS OF RULE 19 OF THE APPELLATE TRIBUNAL RULES, 1963. 4. THE GROUNDS RAISED BY THE REVENUE IN APPEAL ARE AS UNDER: I.T.A.NO. 3912/AHD/2008 C.O.NO.03/AHD/2009 3 [1] ON THE FACT AND CIRCUMSTANCES OF THE CAS E AND IN LAW, THE LEARNED CIT(A)-I, SURAT HAS ERRED IN HOLDING THAT T HE A.O. HAS MADE THE ADDITION ON ACCOUNT OF REJECTION OF WASTAG E PURELY ON CONJECTURE AND SURMISE BASIS WITHOUT, BRINGING ON R ECORD ANY MATERIAL EVIDENCE TO SHOW THAT THE WASTAGE OF 2.48% WAS IN EXCESS AND WASTAGE OF 1.5% ADOPTED BY THE A.O. WAS CORRECT WITHOUT APPRECIATING THE FACT THAT THE A.O. HAD COMPARED TH E PERCENTAGE OF WASTAGE CLAIMED BY THE ASSESSEE AND OTHERS IN THE S AME OF LINE OF BUSINESS AS WELL AS WITHOUT APPRECIATING THE FACT T HAT THE ASSESSEE HAS NOT MAINTAINED DAY TO DAY PRODUCTION REGISTER F ROM WHICH THE CORRECT WASTAGE COULD HAVE BEEN VERIFIED AND WORKED OUT. [2] ON THE FACT AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED CIT(A)-I, SURAT HAS ERRED IN HOLDING THAT T HE A.O. HAS NOT BROUGHT ON RECORD ANY MATERIALS WHICH MAY SHOW THAT 25% OF WASTAGE OF OIL IS WRONG AND WHY 2% OIL GAIN IS CORR ECT IGNORING THE MATERIAL FACT THAT NO OTHER CONCERN ENGAGED IN THE SIMILAR LINE OF BUSINESS HAD CLAIMED 25% OF EVAPORATION AND NORMAL OIL GAIN SHOWN BY THEM IS RANGES FROM 1.75% TO 2.5%. [3] ON THE FACT AND CIRCUMSTANCES OF THE CASE A ND IN LAW, THE LEARNED CIT(A)-I, SURAT HAS ERRED IN APPLYING THE R ATIO OF THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE O F M/S. LOVELY EXPORTS PVT. LTD. REPORTED IN 6 DTR 308 WHEREIN IT IS HELD BY THE HONBLE APEX COURT THAT WHEN THE ASSESSEE HAS FURNI SHED SHARE APPLICATION, INCOME-TAX RETURN COPY, BALANCE SHEET, PAN CARD, ETC. TO THE A.O., THE IDENTITY IS ESTABLISHED AND THE DE PARTMENT IS FREE TO PROCEED TO REOPEN THEIR INDIVIDUAL ASSESSMENTS IN A CCORDANCE WITH LAW BUT IT CANNOT BE TREATED AS UNEXPLAINED INCOME OF THE ASSESSEE- COMPANY. THE LD. CIT(A) HAS, HOWEVER, NOT APPRECIAT ED THAT OUT OF EIGHT PARTIES, SEVEN PARTIES WERE NOT ASSESSED T O INCOME-TAX AND APART FROM THE REQUEST OF THE A.O., THE ASSESSEE HA D NOT PRODUCED THEM BEFORE THE A.O. FOR CROSS VERIFICATION DURING THE COURSE OF ASSESSMENT PROCEEDINGS AND THEREBY THEIR IDENTITY I TSELF IS NOT PROVED BY THE ASSESSEE. [4] ON THE FACTS AND CIRCUMSTANCES OF THE CAS E AND IN LAW, THE LEARNED CIT(A)-I, SURAT HAS ERRED IN DELETING THE A DDITIONS MADE BY THE A.O. (I) RS. 3,51,622/- ON ACCOUNT OF REJECTION OF WASTA GE, (II) RS. 1,51,368/- ON ACCOUNT OF SUPPRESSION OF OI L GAIN (III) RS. 18,00,000/-ON ACCOUNT OF UNEXPLAINED SHAR E CAPITAL. [5] ON THE FACTS AND IN THE CIRCUMSTANCES OF T HE CASE, THE LEARNED CIT (A) OUGHT TO HAVE UPHELD THE ORDER OF T HE ASSESSING OFFICER ON THIS ISSUE. I.T.A.NO. 3912/AHD/2008 C.O.NO.03/AHD/2009 4 [6] IT IS, THEREFORE, PRAYED THAT THE ORDER OF THE CIT (A) BE SET ASIDE AND THAT THE ORDER OF THE ASSESSING OFFICER B E RESTORED. 5. LD. D.R. OF THE REVENUE SUPPORTED THE ASSESSMENT ORDER. 6. REGARDING 1 ST ASPECT, WE FIND THAT EFFECTIVELY, THE GRIEVANCE OF THE REVENUE IS NARRATED IN GROUND NO.4 ABOVE. REGARDIN G DELETION OF ADDITION OF RS.3,51,622/-, WE FIND THAT THIS ASPECT WAS DECI DED BY LD. CIT(A) IN PARA 4.3 OF HIS ORDER WHICH IS REPRODUCED BELOW: I HAVE CONSIDERED THE SUBMISSIONS MADE BY THE APPE LLANT AND THE OBSERVATION OF THE A.O. I AGREE WITH THE APPELLANT . THE ADDITION IS MADE ON CONJECTURE AND SURMISE BASIS WITHOUT BRINGI NG ANY MATERIAL ON RECORD TO SHOW THAT THE WASTAGE OF 2.48 % WAS IN EXCESS AND WASTAGE OF 1.5% ADOPTED BY THE A.O. WAS CORRECT . IN ABSENCE OF ANY SUCH MATERIAL AND IN ABSENCE OF BASIS OF ADO PTION OF 1.5% THE ADDITION MADE BY THE A.O. IS DELETED. THIS GRO UND OF APPEAL IS, THEREFORE, ALLOWED. 7. REGARDING 2 ND ASPECT I.E. FOR DELETION OF ADDITION OF RS.1,51,36 8/-, WE FIND THAT THIS ISSUE HAS BEEN DECIDED BY LD. CIT (A) AS PER PARA 5.3 OF HIS ORDER WHICH IS REPRODUCED BELOW: 5.3 I HAVE CONSIDERED THE SUBMISSION MADE BY THE A PPELLANT AND THE OBSERVATION OF THE A.G, I AGREE WITH THE APPELL ANT. THE A.O. HAS JUST NOT DISCUSSED THIS ISSUE AS TO WHY OIL GAI N OF 2% IS CORRECT. THE A.O. HAS BROUGHT NO MATERIAL ON RECORD TO SHOW THAT 25% WASTAGE OF OIL IS WRONG AND WHY THE 2% OIL GAIN IS CORRECT. THE A.O. HAS NOT EVEN MENTIONED THAT HOW LOW OIL GAIN I S SHOWN BY THE ASSESSEE WHENEVER THE HON'BLE I.T.A.T, HAS ADOPTED OIL GAIN OF 1.62% IN THE CASE OF MARMO TEXTURISING PVT. LTD., V IDE ITA N0.338/AHD/1994 IN THE ORDER DATED 27.07,1994, WHER EIN THE OIL USED WAS 5.12% OF THE YARN CONSUMED AND THE WASTAGE WAS ALMOST 3,5% OF THE YARN CONSUMED, IN VIEW OF THIS REASON, THE ADDITION MADE BY THE A.O, IS CLEARLY BASED ON CONJECTURE AND SURMISES AND THE A.O. HAS NOT BROUGHT ANY MATERIAL ON RECORD AND HENCE THE ADDITION IS DELETED AND THIS GROUND OF APPEAL IS, T HEREFORE, ALLOWED. I.T.A.NO. 3912/AHD/2008 C.O.NO.03/AHD/2009 5 8. REGARDING 3 RD ASPECT I.E. DELETION OF RS.18,00,000/- ON ACCOUNT OF UNEXPLAINED SHARE CAPITAL, WE FIND THAT THIS ISSUE HAS BEEN DECIDED BY LD. CIT(A) AS PER PARA 6.2 OF HIS ORDER WHICH IS REPROD UCED BELOW: DURING THE APPELLATE PROCEEDINGS, THE APPELLANT SI MPLY STATED THAT NO ADDITION CAN BE MADE IN RESPECT OF SHARE APPLICA TION MONEY OR SHARE CAPITAL IN VIEW OF THE DECISION OF THE HON'BL E SUPREME COURT IN THE CASE OF LOVELY EXPORTS PVT. LTD. (6-DTR-308) , WHEREIN THE HON'BLE SUPREME COURT STATED THAT IF THE SHARE APPL ICATION MONEY IS RECEIVED BY THE ASSESSEE COMPANY FROM ALLEGED BO GUS SHAREHOLDERS, WHOSE NAMES ARE GIVEN TO THE A.O,, TH EN THE DEPARTMENT IS FREE TO PROCEED TO REOPEN THEIR INDIV IDUAL ASSESSMENTS IN ACCORDANCE WITH LAW, BUT IT CANNOT B E RECORDED AS UNDISCLOSED INCOME OF THE ASSESSEE COMPANY. 9. AFTER GOING THROUGH THE ORDERS OF AUTHORITIES BE LOW ON ALL THESE THREE ISSUES, WE ARE OF THE CONSIDERED OPINIO N THAT NO INTERFERENCE IS CALLED FOR IN THE ORDER OF LD. CIT(A) IN ANY OF THE SE ISSUES. ON THE 1 ST ASPECT, IT IS HELD BY LD. CIT(A) THAT ADDITION IS M ADE BY THE A.O. ON CONJECTURE AND SURMISES WITHOUT BRINGING ANY MATERI AL ON RECORD INDICATING THAT WASTAGE OF 2.48% WAS IN EXCESS AND WASTAGE OF 1.5% ADOPTED BY THE A.O. WAS CORRECT. BEFORE US, LD. D. R. COULD NOT CONTRADICT THIS FINDING OF LD. CIT(A) BY SHOWING T HAT THE BASIS ADOPTED BY THE A.O. IS CORRECT. SIMILARLY, ON THE 2 ND ASPECT I.E. DELETION OF ADDITION OF RS.1,51,368/-, WE FIND THAT LD. CIT(A) HAS DECIDED THIS ISSUE ON THE BASIS OF THE DECISION RENDERED IN THE CASE O F MARMO TEXTURIZING P. LTD. IN I.T.A.NO. 338/AHD/94 DATED 27.07.1994. ON THIS ASPECT ALSO, LD. D.R. COULD NOT POINT OUT ANY SPECIFIC DEFECT IN THE ORDER OF LD. CIT(A) AND HE COULD NOT SHOW AS TO HOW THE TRIBUNAL ORDER FOLLOWED BY LD. CIT(A) IS NOT APPLICABLE IN THE PRESENT CASE. ON THE 3 RD ASPECT ALSO, I.E. REGARDING DELETION OF RS.18 LACS IN RESPECT OF UNE XPLAINED SHARE CAPITAL, WE FIND THAT LD. CIT(A) HAD DELETED THIS ADDITION B Y FOLLOWING THE JUDGEMENT OF HONBLE APEX COURT RENDERED IN THE CAS E OF LOVELY EXPORTS PVT. LTD. AS REPORTED IN 216 CTR 195 (S.C.) AND 6 D TR 308. HE HAS ALSO I.T.A.NO. 3912/AHD/2008 C.O.NO.03/AHD/2009 6 GIVEN A FINDING THAT THE ASSESSEE HAD GIVEN COPY OF SHARE APPLICATION, INCOME TAX RETURN, COPY OF BALANCE SHEET, P & L ACC OUNT, PAN ETC. TO THE A.O. AS PER WHICH THE IDENTITY AND OTHER TWO INGRED IENT I.E. CREDITWORTHINESS AND GENUINENESS ARE ESTABLISHED. UNDER THESE FACTS, WE DO NOT FIND ANY REASON TO INTERFERE IN THE ORDER OF LD. CIT(A) ON THIS ASPECT ALSO. 10. IN THE RESULT, THE APPEAL OF THE REVENUES IS DI SMISSED. 11. IN THE COMBINED RESULT, APPEAL OF THE REVENUE A ND THE CROSS OBJECTION OF THE ASSESSEE ARE DISMISSED. 12. ORDER PRONOUNCED IN THE OPEN COURT ON THE DATE MENTIONED HEREINABOVE. SD./- SD./- (BHAVNESH SAINI) (A. K. GARODIA) JUDICIAL MEMBER ACCOUNTANT MEMBER SP ORDER PRONOUNCED ON SD./-(KB)AM SD./-(AKG)AM COPY OF THE ORDER FORWARDED TO: 1. THE APPLICANT 2. THE RESPONDENT 3. THE CIT CONCERNED 4. THE LD. CIT (APPEALS) 5. THE DR, AHMEDABAD BY ORDER 6. THE GUARD FILE AR,ITAT,AHMEDABAD 1. DATE OF DICTATION 2/3/12 2. DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE DICTATING MEMBER 20/3/12.OTHER MEMBER 3. DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR. P .S./P.S. 4. DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE D ICTATING MEMBER FOR PRONOUNCEMENT 28/3 5. DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR. P.S./P.S.28/3 6. DATE ON WHICH THE FILE GOES TO THE BENCH CLERK 28/3/2012 7. DATE ON WHICH THE FILE GOES TO THE HEAD CLERK .. 8. THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT RE GISTRAR FOR SIGNATURE ON THE ORDER . 9. DATE OF DESPATCH OF THE ORDER. .