M/s. Smriti Television Media and Films Pvt. Ltd., Bhopal V. The ACIT, 1(2), Bhopal

CO 64/IND/2012

• Counselvise Citation: [2019] 112 COUNSELVISE.COM (IT) 6181 (ITAT-INDORE)
• Duration Of Justice: 6 year(s) 6 month(s) 29 day(s)
• Appeal Type: Cross Objection
• Pronouncement Date: 21-01-2019
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: DB
• Next Hearing Date: 12-12-2018
• Assessment Year: 2005-2006
• Appeal Filed On: 22-06-2012
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: ASHIMA GUPTA
• Assessee Lawyers: S S DESHPANDE
• Keywords: Depreciation; Income from undisclosed sources; Search and seizure; Onus to prove
• Section: 133A; 153A; 195; 201; 68; 132

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL INDORE BENCH, INDORE BEFORE HON'BLE KUL BHARAT, JUDICIAL MEMBER AND AND HON'BLE MANISH BORAD, ACCOUNTANT MEMBER IT(SS)A NO.144/IND/2012 ASSESSMENT YEAR: 2005-06 ACIT - 1(2) BHOPAL / VS. M/S. SMRITI TELEVISION MEDIA AND FILMS PVT. LTD., 35, ZONE-II, M.P. NAGAR ( REVENUE ) (RE SPONDENT ) P.A. NO.AAICS2988Q CO NO.64/IND/2012 (ARISING OUT OF IT(SS)A NO.144/IND/2012) ASSESSMENT YEAR: 2005-06 M/S. SMRITI TELEVISION MEDIA AND FILMS PVT. LTD., 35, ZONE-II, M.P. NAGAR / VS. ACIT - 1(2) BHOPAL ( APPELLANT ) ( REVENUE ) P.A. NO. AAICS2988Q APPELLANT BY SHRI S.S. DESHPANDE , CA REVENUE BY SMT. ASHIMA GUPTA , CIT - DR DATE OF HEARING: 12.12.2018 DATE OF PRONOUNCEMENT: 21 .01.2019 / O R D E R PER KUL BHARAT, J.M: THIS APPEAL AND CROSS OBJECTION BY THE REVENUE AND ASSESSEE ARE AGAINST COMPOSITE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS)-I, BHOPAL, M.P. DATED 29.02.2012 PERTAINI NG TO A.YS. SMRITI TELEVISION MEDIA AND FILMS PVT. LTD. 2 2005-06 TO 2009-10. THE PRESENT APPEAL RELATES TO T HE ASSESSMENT YEAR 2005-06. BOTH, THE APPEAL AND CROSS OBJECTION WERE TAKEN UP FOR HEARING TOGETHER AND ARE BEING DISPOSED OF BY W AY OF CONSOLIDATED ORDER FOR THE SAKE OF CONVENIENCE AND BREVITY. FIRST, WE TAKE UP REVENUESS APPEAL IN ITA NO.144/I ND/2012 THE REVENUE HAS RAISED FOLLOWING GROUNDS OF APPEAL : ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) HAS ERRED IN: DELETING THE ADDITION OF RS.65,00,000/- MADE BY TH E AO U/S 68 ON ACCOUNT OF INVESTMENT INTO SHARE CAPITAL. 2. THE ONLY EFFECTIVE GROUND IN THE APPEAL IS AGAIN ST DELETION OF ADDITION OF RS.65,00,000/- MADE BY THE AO BY INVOK ING PROVISIONS OF SECTION 68 OF THE INCOME TAX ACT, 1961 (HEREINAF TER CALLED AS THE ACT). 3. THE FACTS GIVING RISE TO PRESENT APPEAL ARE THAT SEARCH AND SEIZURE OPERATION WAS CARRIED OUT U/S 132 OF THE AC T AT THE RESIDENTIAL PREMISES OF SHRI BIPIN GOSWAMI AND SMT. AARTI GOSWAMI AT 72-73 PARAS MAJESTIC, E-8, ARERA COLONY, BHOPAL 30.05.2008. THEY ARE DIRECTORS OF SMRITI TELEVISION MEDIA AND FILMS PRIVATE LIMITED THE ASSESSEE HEREIN. A SURVEY WAS C ONDUCTED U/S 133A OF THE ACT AT THE OFFICE CUM FLAT OF THE ASSES SEE COMPANY. IT IS RECORDED BY THE ASSESSING OFFICER THAT VARIOUS INCR IMINATING DOCUMENTS AS PER AN-LPS-1 TO LPS-3 WERE SEIZED FROM THE RESIDENTIAL PREMISES OF THE DIRECTORS OF THE ASSESS EE COMPANY. AFTER SEARCH THE CASE WAS CENTRALIZED WITH THE OFFICE OF THE ACIT-1(1), BHOPAL AND NOTICES U/S 153A DATED 20.07.2010 WERE I SSUED TO THE ASSESSEE TO FILE THE RETURN FOR A.YS. 2004-05 TO 20 09-10. IT IS SMRITI TELEVISION MEDIA AND FILMS PVT. LTD. 3 RECORDED BY THE ASSESSING OFFICER THAT ON BEHALF OF THE ASSESSEE, IT WAS SUBMITTED THAT REGULAR RETURNS FILED MAY BE TRE ATED AS RETURN FILED IN RESPONSE TO THE NOTICE U/S 153A. THEREAFTE R, THE ASSESSING OFFICER PROCEEDED TO FRAME ASSESSMENT IN RESPECT OF THE ASSESSMENT YEAR UNDER APPEAL. THE ASSESSING OFFICER AFTER CONS IDERING THE MATERIAL ON RECORD ASSESSED INCOME AT RS.72,96,595/ - AGAINST THE INCOME DECLARED AT RS.4,66,938/-. THE ASSESSING OFF ICER MADE ADDITION OF RS.65,00,000/- BY INVOKING THE PROVISIO N OF SECTION 68 OF THE ACT BEING INVESTMENT INTO SHARE CAPITAL. THE REASON FOR SUCH ADDITION AS PER THE ASSESSING OFFICER IS THAT THE D OCUMENTS RELATES TO SHAREHOLDER IS FOUND AT THE RESIDENCE OF THE DIRECT ORS OF THE COMPANY. THE ASSESSING OFFICER WAS OF THE VIEW THAT THE PRESENCE OF SUCH DOCUMENTS AT THE PLACE OF THE DIRECTORS OF THE COMPANY, NATURE OF ENTRIES IN THE BANK ACCOUNTS OF THE SHARE HOLDING COMPANIES CLEARLY SUGGESTS THAT THESE ENTRIES OF SH ARE CAPITAL MUST HAVE BEEN ARRANGED. IT IS THE UNACCOUNTED MONEY OF THE DIRECTORS WHICH HAS BEEN UTILIZED BY THE DIRECTORS OF THE ASS ESSEE COMPANY TO GET SHARE CAPITAL ACCOMMODATION ENTRY FROM THESE SO CALLED INVESTOR COMPANIES AT MUMBAI. FURTHER, THE ASSESSING OFFICE R ALSO MADE DISALLOWANCE OF DEPRECIATION CLAIMED ON MUMBAI FLAT AMOUNTING TO RS.1,20,055/- AND DISALLOWANCE OF DEPRECIATION ON G OODWILL OF RS.2,09,602/- WAS MADE. 4. AGGRIEVED BY THIS THE ASSESSEE PREFERRED AN APPE AL BEFORE THE LD. CIT(A) WHO AFTER CONSIDERING THE SUBMISSIONS PARTLY ALLOWED THE APPEAL. THEREBY, THE LD. CIT(A) DELETED THE ADDITIO N OF SMRITI TELEVISION MEDIA AND FILMS PVT. LTD. 4 RS.65,00,000/- HOWEVER SUSTAINED THE ADDITION MADE IN RESPONSE OF DISALLOWANCE OF DEPRECIATION. 5. AGAINST THIS REVENUE IS AN APPEAL AND THE ASSESS EE IS IN CROSS OBJECTION. 6. LD. DEPARTMENTAL REPRESENTATIVE(DR) SUPPORTED TH E ASSESSMENT ORDER AND SUBMITTED THAT LD. CIT(A) WAS NOT JUSTIFI ED IN DELETING THE ADDITION. HE SUBMITTED THAT THE ASSESSING OFFICER O N THE BASIS OF THE INCRIMINATING MATERIAL GATHERED DURING THE SEARCH F OUND THAT THE TRANSACTIONS WERE DUBIOUS AND WERE SURROUNDED WITH SUSPICION. HE SUBMITTED THAT IT IS A COMMON PRACTIC E IN ORDER TO, EVADE THE TAX, THE COMPANIES OR INDIVIDUAL ASSESSEE S THROUGH COLORABLE DEVICE IN THE FORM OF SHARE APPLICATION O R OTHERWISE ENTER INTO SUCH TRANSACTIONS TO ESCAPE THE TAX LIABILITY. 7. LD. DR CONTENDED THAT ON EXAMINATION OF MATERIAL IT HAS BEEN FOUND THAT THE TRANSACTIONS ARE CARRIED OUT WITH TH E PAPER COMPANIES WHO HAVE NO BUSINESS ESTABLISHMENT. THE S HARES ARE ROUTED THROUGH CIRCUITOUS ROUTE AT HIGHER PREMIUM A ND SOLD EITHER TO THE DIRECTORS OR THE OTHER ENTITIES RELATED TO T HE COMPANIES AT A VERY LOW RATE. HE SUBMITTED THAT THUS MONEY IS ROUT ED THROUGH THIS CIRCUITOUS ROUTE WITHOUT PAYING DUE TAX. THEREFORE, ASSESSING OFFICER WAS JUSTIFIED IN MAKING ADDITIONS. PER CONTRA LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE LD. CITI(A) HAS RIGHTLY DELETED THE ADDITIONS. HE REITERATED THE SUBMISSIONS AS MADE IN THE WRITTEN SYNOPSIS: THE BRIEF FACTS OF THE CASE AND A CONSOLIDATED SUBM ISSIONS ARE FILED HEREWITH. 1. THE ASSESSEE IS A PRIVATE LIMITED COMPANY DOING THE BUSINESS OF SMRITI TELEVISION MEDIA AND FILMS PVT. LTD. 5 MEDIA & C OMMUNICATIONS WHICH IS MAINLY AS AN ADVERTISING AGENTS FOR TELEVISION AND HOARDINGS. THE ASSESSEE S TARTED BUSINESS DURING THE A. Y. 2004-05. THE REGULAR RETURNS ARE B EING FILED. THE RETURN FOR THE YEAR UNDER CONSIDERATION WAS FILED D ECLARING THE TOTAL INCOME AT RS.14,84,975/- 2. THE ASSESSMENT WAS COMPLETED U/S.143(3) AFTER DUE S CRUTINY OF INVESTMENTS AND THE GENUINENESS OF SHARE APPLICATIO N AT A PREMIUM. THE ASSESSMENT WAS COMPLETED ON 27.12.2007 ON A TOTAL INCOME OF RS.22,06,6001- (PG.10FPB). DURING THE COU RSE OF THE ORIGINAL ASSESSMENT PROCEEDINGS VARIOUS QUERIES WER E RAISED WHICH ARE ENUMERATED AS UNDER. I. ON 04.10.2007 A SPECIFIC QUERY WAS RAISED ASKING TH E DETAILS OF SHAREHOLDERS AND NEW APPLICATION MONEY. (PG. 2 O F DEPARTMENT'S PB). II. ON 11.10.2007 THE ASSESSEE GAVE A REPLY AND SUBMITT ED THE DETAILS OF CAPITAL AND SHAREHOLDERS (PG. 5 OF THE S UBMISSIONS DATED 23.07.2012). III. ON 11.10.2007 A FURTHER QUERY IS RAISED TO PRODUCE SHAREHOLDING REGISTER AND SHARE TRANSFER REGISTER.( PG.3 OF DEPARTMENT'S PB QUERY NO.16). IV. ON 07.12.2007 A FURTHER QUERY WAS RAISED AND THE FO LLOWING DETAILS WERE ASKED (PG. 4 OF DEPARTMENT'S PB): I. MOU AND AOA (ARTICLES OF ASSOCIATION) OF SHAREHOLDI NG COMPANIES OF VANGUARD JEWELS LTD JAVDA INDIA IMPEX LTD VIREN DIAMOND EXPORTS LTD YASH V JEWELS ALKA DIAMOND INDUSTRIES LTD II. DETAILS OF BALANCE SHEET AND P&L ACCOUNT O F ALL ABOVE COMPANIES. III. BANK STATEMENT OF THESE ABOVE COMPANIES. NEXT DATE OF HEARING ISFIXED ON 11.12.2007 IV. ON 11.12.2007 THE DETAILS WERE FILED THE ENTRY IN THE ORDER SHEET IS - SHRI KANTI GANDHI, SMT. AARTI GOSWAMI AT TENDED THE HEARING AND THE CASE WAS DISCUSSED HE MADE THE SUBM ISSIONS. 3. AFTER CONSIDERING THE SUBMISSIONS MADE BY THE AS SESSEE AND THE DETAILS FILED DURING THE COURSE OF THE ASSESSME NT PROCEEDINGS THE LD. A.O. ACCEPTED THE GENUINENESS OF THE SHARE TRANSACTION (PG. 1 OF PB). 4. A SEARCH WAS CONDUCTED AT THE RESIDENTIAL PREMIS ES OF THE DIRECTOR SHRI BIPIN GOSWAMI ON 30.05.2008. THE DOCU MENTS WHICH WERE FOUND AT THE RESIDENCE WERE THE PAPERS RELATIN G TO SHARE SMRITI TELEVISION MEDIA AND FILMS PVT. LTD. 6 APPLICATIONS, BALANCE SHEETS OF VARIOUS COMPANIES, THEIR CONFIRMATION LETTERS AND OTHER PERTAINING DOCUMENTS WHICH WERE FILED DURING THE COURSE OF THE ORIGINAL ASSESSMENT PROCEEDINGS. SIMULTANEOUSLY, WITH THE SEARCH, A SURVEY WAS ALSO CONDUCTED AT THE BUSINESS PREMISES OF THE ASSESSEE. NO INCRIMINA TING PAPERS OR DOCUMENTS WERE FOUND DURING THE COURSE OF THE SURVE Y. THE DETAILED LIST OF DOCUMENTS FOUND DURING THE COURSE OF SEARCH HAS BEEN GIVEN AT PG. 9 OF THE ASSESSMENT ORDER. AT PG. 11 THE LD. A.O. OBSERVES THAT THE DOCUMENT RELATE TO SHAREHOLDERS F OUND AT THE RESIDENCE OF SMT. AARTI GOSWAMI AND SHRI BIPIN GOSWAMI SUGGESTS MORE THAN WHAT MEETS THE EYES. THE PRESENC E OF SUCH DOCUMENTS WITH THEM, THE NATURE OF ENTRIES IN THE B ANK ACCOUNT OF THE SHAREHOLDING COMPANIES CLEARLY SUGGESTS THAT TH ESE ENTRIES OF SHARE CAPITAL MUST HAVE BEEN ARRANGED IT IS THE UNA CCOUNTED MONEY OF THE DIRECTORS WHICH HAS BEEN UTILIZED BY T HE DIRECTORS OF THE ASSESSEE COMPANY TO GET SHARE CAPITAL ACCOMMODA TION ENTRY FROM THESE SO CALLED INVESTOR COMPANY AT MUMBAI. TH E LD. A.O. FURTHER IN THE SUBSEQUENT PARAGRAPH REMARKS THAT IT IS NOT UNDERSTANDABLE WHY THE INVESTOR COMPANIES HAVE SOLD OUT SHARES PURCHASED AT COST OF RS. 25 PER SHARE WITHIN A PERI OD OF TWO YEARS AT A COST OF RS. 2 PER SHARE. THE ASSESSEE HAS STATED THAT THE ENTIRE TRANSACTION WAS DONE THROUGH CHEQUES AND HEN CE GENUINENESS OF TRANSACTIONS CANNOT BE DOUBTED HOWEV ER I AM OF THE OPINION THAT THE TRANSACTION IS BOGUS AND CANNO T BE ACCEPTED BECAUSE OF THE FACT THAT BLANK SHARE TRANSFER FORMS OF ALL THE COMPANIES WERE FOUND AT THE RESIDENCE OF DIRECTORS AT THE TIME OF SEARCH. THE LD. A.O. THUS MADE THE ADDITION OF RS. 65,00,000/- AS UNACCOUNTED INCOME OF THE DIRECTORS OF THE ASSESSEE COMPANY BROUGHT BACK IN THE FORM OF SHARE APPLICATION MONEY . 5. THE LD. CIT(A) AFTER DISCUSSING THE SUBMISSIONS OF THE ASSESSEE (AT PAGES- 5 TO 10) UPHELD THE ACTION OF THE LD. AO THAT THE NOTICE U/S 153C WAS VALIDLY ISSUED AND SUCH AN ADDITION CO ULD BE MADE IN THE ASSESSMENT. THE LD. CIT(A) DID NOT FOLLOW TH E DECISION OF THE ITAT INDORE BENCH IN THE CASE OF S.K JAIN, 14 ITJ 4 34 AND IN THE CASE OF CI AUTOMOTORS 8 ITJ 146. HOWEVER, THE LD. C IT(A) ON MERITS DISCUSSED THE MATTERS IN DETAILS AND ALLOWED THE AS SESSEE'S APPEAL AND AT PG. 18 & 19 HE OBSERVED 'ON CAREFUL CONSIDERING OF ALL FACTS AND CIRCUMSTAN CES INCLUDING THE CASE LAWS RELIED UPON THE APPELLANT IT IS NOTED THA T IN THIS CASE THOUGH THERE WAS A SEARCH CONDUCTED ON THE PREMISES OF THE APPELLANT COMPANY BUT PRIMA FACIE NO INCRIMINATING DOCUMENTS WERE FOUND OR CEASED WHICH MAY INDICATE THAT THE TR ANSACTIONS OF SUCH SHARE CAPITAL WAS NOT OF A GENUINE NATURE. THE IDENTITY OF THE SHAREHOLDER I.E. THE COMPANIES WHO HAVE INVESTED IN THE SHARE CAPITAL IS NOT DISPUTED. ALL THESE COMPANIES ARE FO UND TO BE IN SMRITI TELEVISION MEDIA AND FILMS PVT. LTD. 7 EXISTENCE. DURING THE ASSESSMENT PROCEEDINGS THESE COMPANIES HAVE FILED CONFIRMATION OF HAVING INVESTED IN SHARE S OF APPELLANT COMPANY, COPIES OF THEIR AUDIT ACCOUNTS ALONGWITH T HEIR IT RETURNS AND OTHER DOCUMENTS BY WAY OF RESOLUTION PASSED BY THESE COMPANIES, AS ALSO MEMORANDUM AND ARTICLES OF ASSOC IATION ETC. WERE FILED. THE CREDIT WORTHINESS OF THESE COMPANIE S IS PRIMA FACIE PROVED FROM THESE DOCUMENTS. THERE IS NOTHING ON RE CORD WHICH MAY INDICATE THAT THE AMOUNT OF SHARE CAPITAL WAS N OT GENUINELY INVESTED BY THESE COMPANIES. ALL THE TRANSACTIONS A RE THROUGH BANKING CHANNEL. THE A.O. HAD MADE REFERENCE OF SOM E OF THEIR BANK ACCOUNTS BUT EVEN FROM THEIR BANK ACCOUNTS IT CANNOT BE PRESUMED OR PROVED THAT SUCH TRANSACTIONS ARE NOT G ENUINE. NO IMMEDIATE CASH IS STATED TO BE DEPOSITED IN SUCH AC COUNT. THE FINDING OF THE A. O. ARE ALSO IN CONTRADICTION IN A S MUCH AS IN THE ASSESSMENT ORDER AT SOME PLACE IT HAS BEEN MENTIONE D THAT THE MONEY OWNED BY THE DIRECTORS WAS INVESTED AS SHARE CAPITAL THROUGH THESE COMPANIES. AS REGARDS THE OBSERVATION OF THE A.O. THAT THE TRANSACTIONS ARE NOT GENUINE IN AS MUCH AS SUBSEQUENTLY AFTER TWO YEARS THE DIRECTORS OF THE APPELLANT COMP ANY PURCHASED THE SHARE AT THE RATE OF RS. 2 PER SHARE, IT MAY BE STATED THAT THE ISSUE UNDER CONSIDERATION WAS SHARE CAPITAL AMOUNTI NG TO RS. 65,00,000/- IN A.Y. 2005-06 IN RESPECT OF WHICH THE APPELLANT HAS OVER WHELMING FURNISHED THE DOCUMENT TO PROVE THE I DENTITY, CREDIT WORTHINESS AND THE GENUINENESS OF THE TRANSACTIONS. THE SUBSEQUENT LATER TRANSACTION AFTER 2 YEARS MAY NOT BE A BASIS TO HOLD THE TRANSACTIONS OF ASSESSMENT YEAR 2005-06 TO BE NOT GENUINE. MOREOVER, THE SUBSEQUENT TRANSACTIONS WERE HELD BETWEEN THE DIRECTORS AND THE SUBSCRIBING COMPANIES AND NOT BETWEEN THE APPELLANT COMPANY. EVEN SUCH OBSERVATIO N OF THE A.O. THAT SUCH TRANSACTIONS ARE NOT GENUINE IS BASED ON PRESUMPTIONS AND NOT ON ANY MATERIAL FACTS. THE DEPARTMENT IS IN APPEAL AGAINST THIS DELETION. IT IS SUBMITTED THAT ALL THE TRANSACTION IS GENUINE AND ALL THE DET AILS WERE FOILED DURING THE COURSE OF THE ASSESSMENT PROCEEDINGS. TH E BLANK SHARE TRANSFER FORMS ARE OF NO RELEVANCE SINCE AT THE TIM E OF SEARCH THE SHARES WERE ALREADY TRANSFERRED. THESE BLANK TRANSF ER FORMS WERE COLLECTED AS AN ABUNDANT CAUTION AT THE TIME OF TRA NSFER OF SHARE. IF ANY MISTAKE IS FOUND IN THE SHARE TRANSFER FORMS TH ESE BLANK TRANSFER FORMS COULD HAVE BEEN USED. THE FINDING OF BLANK TRANSFER FORMS IS NOT MATERIAL AFTER THE SHARES HAVE BEEN TR ANSFERRED. IT IS FURTHER SUBMITTED THAT ALL THESE COMPANIES ARE DOIN G SUBSTANTIAL BUSINESS. THE SALES OF EACH COMPANY ARE STATED HERE UNDER: NAME OF THE COMPANY SALES CAPITAL PB PAGE (IN CRORES) (IN CRORES) SMRITI TELEVISION MEDIA AND FILMS PVT. LTD. 8 JAVDA INDIA IMPEX LTD. RS.34.48 RS.3.67 14 & 15 VANGUARD JEWELS RS.14.55 RS.3.72 85 & 86 VIREN DIAMOND EXPORTS RS.13.96 RS.4.00 157&158 YASH JEWELLERS RS.44.43 RS.2.75 218&219 THUS IT IS STATED THAT THE COMPANIES ARE IN EXISTEN CE AND THEY ARE THE PERSON OF MEANS AND THE TRANSACTION IS GENUINE. IN THIS CONNECTION REFERENCE IS SOLICITED TO THE FOLLOWING JUDGMENTS THE COPIES OF WHICH ARE ATTACHED HEREWITH. CIT VS LOVELY EXPORTS 216 CTR 195 PEOPLES HOSPITAL VS CIT 356 ITR 65 (MP) CIT VS OANGADEEP INFRASTRUCTURE 394 ITR 680 (BORN) CIT VS OP INTERNATIONAL LTD. 325 ITR 25 (P&H) P CIT VS SOFTLINE CREATIONS 387 ITR 636 (DEL) P CIT VS LAXMAN INDUSTRIAL RESOURCES 397 ITR 106(DE I) CIT VS ARL INFRATECH 394 ITR 383 (RAJ.) 8. IN REJOINDER LD. DR OPPOSED THE SUBMISSIONS AND SUBMITTED THAT THE AO HAS RIGHTLY TAXED THE COMPANY BEING RECIPIEN T OF SHARE APPLICATION MONEY. 9. WE HAVE HEARD THE RIVAL CONTENTIONS, PERUSED THE MATERIAL AVAILABLE ON RECORD. THE ASSESSING OFFICER HAD MADE ADDITIONS BY OBSERVING AS UNDER: DURING THE COURSE OF ASSESSMENT PROCEEDINGS, IT WAS FOUND THAT THE FOLLOWING COMPANIES HAVE MADE INVESTMENT IN THE ASS ESSEE COMPANY IN FORM OF SHARE CAPITAL IN THE F.Y. 2004-05 CORRES PONDING TO ASSESSMENT YEAR 2005-06 AS UNDER:- SR. NO. NAME & ADDRESS NO. OF SHARES AMOUNT REMARK FACE VALUE PREMIUM 1 JAVDA INDAIA IMPEX LTD. 626, PANCHRATNA OPERA HOUSE, MUMBAI-400004 80,000 8,00,000 12,00,000 ALLOTED @ RS. 25/- PER SHARE (RS. 10/- FACE VALUE + RS.15/- PREMIUM) 2. VANGUARD JEWELS 40,000 4,00,000 6,00,000 -DO- SMRITI TELEVISION MEDIA AND FILMS PVT. LTD. 9 LTD. 626, PANCHRATNA OPERA HOUSE, MUMBAI-400004 3. VIREN DIAMONDS EXPORTERS LTD. 4-D, NAVRATNA, 8, DR. D.D. SATHE MARG, OPERA HOUSE, MUMBAI-400004 60,000 6,00,000 9,00,000 -DO- 4. YASH V JEWELS LTD. 626, PANCHRATNA OPERA HOUSE, MUMBAI-400004 40,000 4,00,000 6,00,000 -DO- 5. ALKA DIAMOND INDUSTRIES LTD. 233, PANCHRATNA OPERA HOUSE, MUMBAI-400004 40,000 4,00,000 6,00,000 -DO- TOTAL 26,00,000 39,00,000 TOTAL INVESTMENT (26,00,000+39,00,000)= RS.65,00,00 0/- FURTHER, IT IS SEEN THAT THESE SHARES WERE PURCHASE D BACK BY THE TWO DIRECTORS OF THE COMPANY VIZ. BIPIN GOSWAMI & S MT. AARTI GOSWAMI FROM THE ABOVE COMPANIES IN F.Y. 2006-07 (A .Y. 2007- 08) @ RS.2/- PER SHARE AS UNDER: SOLD BY PURCHASED BY DIRECTOR NO. OF SHARES YASH V JEWELS LTD. 626, PUNCHRATNA OPERA HOUSE, MUMBAI-400004 AARTI GOSWAMI 40,000 ALKA DIAMOUND INDUSTREIS LTD. 233, PUNCHRATNA OPERA HOUSE, MUMBAI-400004 AARTI GOSWAMI 40,000 TOTAL NO. OF SHARE PURCHASE BY AARTI GOSWAMI 80,000 JAVDA INDAIA IMPEX LTD. BIPIN GOSWAMI 80,000 SMRITI TELEVISION MEDIA AND FILMS PVT. LTD. 10 626, PANCHRATNA OPERA HOUSE, MUMBAI-400004 VANGUARD JEWELS LTD. 626, PANCHRATNA OPERA HOUSE, MUMBAI-400004 BIPIN GOSWAMI 40,000 VIREN DIAMONDS EXPORTERS LTD. 4-D, NAVRATNA, 8, DR. D.D. SATHE MARG, OPERA HOUSE, MUMBAI-400004 BIPIN GOSWAMI 60,000 TOTAL NO. OF SHARE PURCHASE BY BIPIN GOSWAMI 1,80,000 FROM THE ABOVE TRANSACTION, IT IS NOT UNDERSTANDABL E AS TO WHY A PRUDENT INVESTOR WOULD PURCHASE SHARES @ RS 25/~ PER SHARE AND WOULD SELL THE SAME BACK AT RS 2/- PER SHARE WITHIN 2 YEARS TO THE DIRECTORS OF THE COMPANY. THE ABOVE TRANSACTION, TH EREFORE, DOES NOT SEEMS TO BE GENUINE. DURING THE COURSE OF SEARCH AT THE RESIDENCE OF DIRE CTORS OF THE ASSESSEE COMPANY VARIOUS DOCUMENTS RELATED TO INVESTO R COMPANIES, THEIR BANK ACCOUNT SHOWING TRANSACTION OF RELEVANT DATE AND BLANK SHARE TRANSFER FORM WERE FOUND VIDE ANNEXURE LPS - 3 T O PANCHNAMA. DETAILS OF WHICH ARE AS UNDER:- PAGE NO 1 TO 26 IT CONTAINS COPY OF ARTICLES OF ASS OCIATION OF JAVDA INDIA IMPEX LIMITED, COMMENCEMENT OF BUSINESS, REGISTRATION AND INCORPORATION OF ALKA FINLEASE LIMI TED PAGE NO 27 IT CONTAINS SHARE TRANSFER FORM OF M/S SM RITI TELEVISION MEDIA & FILMS PVT LIMITED - 40000 SHARES PAGE NO 28 IT CONTAINS SALE NOTE OF 40000 SHARES FR OM JAVDA INDIA IMPEX LTD, MUMBAI. PAGE NO 30 IT CONTAINS INVESTMENT IN EQUITY SHARES O F SMRITI TELEVISION MEDIA & FILMS PVT LTD BY JAVDA INDIA IMPEX LTD - 40000 EQUITY SHARES - AMOUNT INVESTED RS 10 LACS - C HEQUE NO 13602, UTI BANK, MUMBAI BRANCH DATED 24.12.2004 PAGE NO 31 IT CONTAINS APPLICATION FOR EQUITY SHARE S OF RS 10 PER SHARE - JAVDA INDIA IMPEX LTD PAGE NO 32 TO 34 IT CONTAINS APPLICATION FORM FOR E QUITY SHARES, DETAILS OF SHARE TRANSFER TRANSACTIONS DATED 23.9.20 06 BY SMRITI SMRITI TELEVISION MEDIA AND FILMS PVT. LTD. 11 TELEVISION MEDIA & FILM P. LTD. PAGE NO 35 TO 41 IT CONTAINS SHARE TRANSFER FORM OF YASH V JEWELS ALONG WITH SALE NOTE OF 40000 SHARES, COPY O F CHEQUE NO. 4672296 OF ICICI BANK AMOUNTING TO RS.10 LACS, INVESTMENT IN E QUITY SHARES AND APPLICATION FORM PAGE NO 43 TO 46 IT CONTAINS SHARE TRANSFER FORM OF SMRITI TELEVISION, APPLICATION' SALE NOTE AND INVESTMENT OF RS 51ACS CHEQUE NO 005502 . OF UTY BANK, MUMBAI 'BY VIRENDIA MOND EXPORTS OF 20000 SHARES ' PAGE NO 47 TO 70 IT CONTAINS COPY OF APPLICATION FO RM FOR 20000 EQUITY SHARES AND COPY OF IT RETURNS OF JAVDA INDIA JMPEX LIMITED. PAGE NO 71 TO 97 IT CONTAINS VARIOUS PAPERS RELATED TO YASH V JEWELS LTD VIZ ARTICLES AND MEMORANDUM OF ASSOCIATION, CERTIFICATE OF INCORPORATION, COPY OF IT RETURNS, DETAILED TURNO VER, BALANCE SHEET PAGE NO 98 TO 101 IT CONTAINS INVESTMENT IN EQUITY SHARES OF SMRITI FILMS BY VIREN DIAMONDS OF 40000 SHARES, COPY OF CHE QUE NO 005501 OF UTI BANK AMOUNTING RS 10 LACS. PAGE NO 102 TO 147 IT CONTAINS VARIOUS PAPERS RELAT ED TO ALKA DIAMONDS VIZ ARTICLES AND MEMORANDUM OF ASSOCIATION, CERTIFICATE OF INCORPORATION, ANNEXURE OF IT RETURNS, SHARE TRANSF ER FORM , SALE NOTE, COPY OF CHEQUE NO 142471 OF RS 10 LACS OF ICI CI BANK, APPLICATION FORM AND INVESTMENT IN 40000 EQUITY SHAR ES PAGE NO 148 TO 167 IT CONTAINS SCHEDULES, BALANCE SH EETS AND AUDITORS REPORT PAGE NO 168 TO 173 IT CONTAINS BANK STATEMENTS OF V IREN DIAMONDS, YASH V JEWELS, ANGUARD JEWELS, ALKA DIAMOND INDUSTRIES , JAVDA INDIA IMPEX LTD PAGE 168 - BANK ACCOUNT OF VIREN DIAMOND EXPORTS LT D (001105006673) (1.10.2003 TO 31.10.2003). IT SHOWS HIGH VALUE TRANSACTIONS WITH OTHER SHARE HOLDING CONCERNS ON A REGULAR/FREQUENT BASIS. PAGE 169- BAN A/C OF VIREN DIAMOND EXPORTS LTD. (233010200003339) FOR PERIOD 19.07.2004 TO 31.12.20 04 SHOWING CERTAIN HIGH VALUE TRANSACTIONS WITH CERTAIN COMPAN IES INCLUDING OTHER SHARE HOLDING CONCERNS. PAGE 170-ICICI BANK A/C OF YASH V JEWELS LTD. A/C NO.001105006871(PERIOD 1.8.2004 TO 31.8.2004) SHOWS DEPOSITS BY CLEARING ON 3.8.2004 OF RS.10 LACS AND ITS TRANSF ER TO BHOPAL (SOME A/C) BY CHEQUE NO.467286 ( CORRELATE WITH PG N O.35-41) SMRITI TELEVISION MEDIA AND FILMS PVT. LTD. 12 WHICH IS M/S SMRITI TELEVISION MEDIA & FILMS PVT. L TD. PAGE 171 - ICICI BANK A/C OF VANGUARD JEWELS LTD A/C NO. 001105006872 (PERIOD 1.7.2004 TO 31.7.2004) SHOWS CE RTAIN DEPOSITS IN THIS A/C FROM M/S KUNAL GEMS AND IMMEDIAT E TRANSFER TO BHOPAL (M/S SMRITI TELEVISION MEDIA & FILMS PVT LTD) (CORRELATE WITH PAGE 33-35) PAGE 172 - ICICI BANK A/C OF M/S ALKA DIAMONDS INDUS TRIES LTD AC/ NO 000405014130 (1.8.2004 TO 31.8.2004) SHOWS H IGH VALUE DEPOSITS FROM M/S KUNAL GEMS AND IMMEDIATE TRANSFER B Y CHEQUE NO. 142471 TO M/S SMRITI TELEVISION MEDIA & FILMS PVT LTD ON 11.8.2004 (CORRELATE WITH PAGE 34) PAGE 173 - ICICI BANK A/C OF JAVDA INDIA IMPEX LTD, A/C NO. 000405012827 (1.7.2007 TO 31.7.2004) SHOWS HIGH VAL UE DEPOSIT FROM M/S KUNAL GEMS AND ITS TRANSFER TO BHOPAL. DOCUMENTS RELATE TO SHARE HOLDER FOUND AT THE RESIDEN CE OF SMT AARTI GOSWAMI AND SHRI BIPIN GOSWAMI SUGGEST MORE THA N WHAT MEETS THE EYES. THE PRESENCE OF SUCH DOCUMENTS WITH THEM, THE NATURE OF ENTRIES IN THE BANK ACCOUNT OF SHARE HOLD ING COMPANIES CLEARLY SUGGEST THAT THESE ENTRIES OF SHARE CAPITAL . IT IS THE UNACCOUNTED MONEY OF DIRECTORS WHICH HAS BEEN UTILIZ ED BY THE DIRECTORS OF THE ASSESSEE COMPANY TO GET SHARE CAPI TAL ACCOMMODATION ENTRY FROM THESE SO CALLED INVESTOR C OMPANIES AT MUMBAI. WHY COMPANIES RELATED TO THE BUSINESS OF JEWELLERY/D IAMOND TRADING AND EXPORT AT MUMBAI WILL INVEST IN A CONCER N WHICH DOES WORK IN THE FIELD OF MEDIA AND FILMS. THE ASSESSEE FAI LED TO PROVE DURING THE COURSE OF ASSESSMENT PROCEEDINGS THAT HOW THESE INVESTOR COMPANIES CAME 'INTO CONTACT WITH THE ASSE SSEE COMPANY AND APPLIED FOR SHARE APPLICATION ON SUCH A HIGH PREM IUM OF A NEWLY INCORPORATED COMPANY. IT IS ALSO NOT UNDERSTAND ABLE THAT WHY THE INVESTOR COMPANIES HAVE SOLD OUT SHARE PURCH ASED AT A COST OF RS. 25/- PER SHARE WITHIN PERIOD OF TWO YEAR S AT A COST OF RS.2/- PER SHARE AND THAT TOO TO THE DIRECTORS OF C OMPANY EVEN WHEN COMPANY WAS SHOWING GOOD PROFIT. .THE ASSESSEE HAS GIVEN. VERY EVASIVE REPLY. THE AS SESSEE HAS STATED THAT' THE 'ENTIRE' TRANSACTION 'WAS 'DONE TH ROUGH CHEQUE AND' HENCE GENUINENESS OF TRANSACTION CANNOT BE DOUBTED. HOWEVER, I AM OF THE OPINION THAT THE TRANSACTION IS BOGUS AND CAN NOT BE ACCEPTED BECAUSE ON THE FACT THAT BLANK SHARE TRANSFER FORMS OF ALL THE COMPANIES WERE FOUND AT THE RESIDENCE OF DIRECTOR S AT THE TIME OF SEARCH AND THERE IS NO LOGIC OF PROFIT HAS BEEN A LIED BY THE INVESTORS COMPANIES EITHER AT THE TIME OF INVESTMEN T OR AT THE TUNE REDEMPTION. IMMEDIATE DEPOSITS OF MONEY IN THE ACCOU NTS ALL INVESTORS COMPANIES AND TRANSFER TO THE ACCOUNT 0F ASSESSEE COMPANY GIVES A CLEAR PICTURES OF REAL AFFAIR OF T HE TRASANCTIONS. I, SMRITI TELEVISION MEDIA AND FILMS PVT. LTD. 13 THEREFORE, ADD RS. 65,00,000/- U/S 68 BEING INVESTM ENT INTO SHARE CAPITAL MADE IN A.Y. 2005-06 (F.Y. 2004- 05 B ABOVE COMPANIES WHICH WAS THE UNACCOUNTED INCOME OF DIRECTORS OF THE ASSESSEE COMPANY BROUGHT BACK IN THE FORM 0F SHARE APPLICATION MONEY. I AM SATISFIED THAT THE ASSESSEE HAS FURNISHED . ACCU RATE PARTICULARS AND CONCEALED THE INCOME, THEREFORE PENALTY PROCEEDI NGS U/S 271 (1 )( C) ARE HEREBY INITIATED SEPARATELY. 10. HOWEVER, THE AFORESAID FINDING WAS REVERSED BY THE LD. CIT(A): 8.4 I HAVE CAREFULLY CONSIDERED THE SUBMISSION OF T HE APPELLANT AS ALSO THE OBSERVATION OF THE AO. THE APPELLANT COMPANY HAS SH OWN SHARE CAPITAL AND RECEIPT AMOUNTING TO RS.65 LAKHS FROM FIVE COMPANIES-MENTIONED AND DISCUSSED ABOVE BY WAY OF ALLOTMENT OF SHARES AT PR EMIUM OF RS.25 PER SHARE. THE AU'S CASE IS THAT VARIOUS DOCUMENTS RELA TING TO SUCH COMPANIES WERE FOUND IN THE NATURE OF THEIR AUDIT REPORTS, AR TICLE OF ASSOCIATION BANK ACCOUNTS, SHARE TRANSFER FORMS FROM THE PREMISES OF THE APPELLANT COMPANY DURING THE COURSE OF SEARCH OPERATIONS AND THAT SUC H DOCUMENTS PRIMA- FACIE INDICATE THAT THE TRANSACTIONS OF SHARE ALLOT MENT WAS AN ARRANGED ONE. IT IS ALSO STATED THAT SUBSEQUENTLY DURING A.Y.2007 -08 THE DIRECTORS OF THE APPELLANT COMPANY PURCHASED SUCH SHARES AT THE COST OF .RS.2 PER SHARE. THE AO ACCORDINGLY DOUBTED THE GENUINENESS OF SUCH TRAN SACTIONS. ON THE OTHER HAND THE APPELLANT COMPANY HAS CONTENDED THAT SUCH SHARE CAPITAL WAS GENUINELY RECEIVED FROM THE ABOVE MENTIONED FIVE CO MPANIES AND THAT ALL NECESSARY DOCUMENTS IN SUPPORT OF THERE IDENTITY, C REDIT WORTHINESS AND GENUINENESS WERE FILED DURING THE ASSESSMENT PROCEE DINGS. THE APPELLANT COMPANY FURTHER STATED THAT T HE ISSUE OF SHARE CAPITAL WAS EXAMINED BY THE AO WHILE COMPLETING THE EARLIER ASSESSMENT FOR A.Y. 2005 BEFORE SEARCH AND EVEN SCRUTINY OF EXAMINATION DURING THAT ASSESSMENT PROCEEDING, NO ADDITION WAS MADE. IT IS CONTENDED THAT THE DOCUMEN TS PERTAINING TO SUCH COMPANIES FOUND DURING THE COURSE OF SEARCH WERE I N ACT COLLECTED AND OBTAINED BY THE APPELLANT DURING ASSESSMENT PROCEED INGS OF A.Y.2005-06 (EARLIER ASSESSMENT BEFORE SEARCH)'. THE APPELLANT HAS ALSO FILED COPY OF QUERY LETTER DATED 04.07.2007 IN RESPECT OF THAT AS SESSMENT INDICATING THAT SUCNE ISSUE WAS EXAMINED BY THE AO. IT IS FURTHER C ONTENDED THAT EVEN DURING SEARCH ACTION NO INCRIMINATING DOCUMENTS WER E FOUND OR SEIZED IN RESPECT OF ACCEPTANCE OF SHARE CAPITAL MONEY. IT IS STATED THAT IN THIS BACK GROUND MAKING OF SUCH ADDITION IN THE SUBSEQUENT AS SESSMENT WAS LEGALLY AND FACTUAL WAS NOT CORRECT U/S 153A OF IT ACT. THE APPELLANT HAS FURTHER CONTENDED THAT THERE IS NO DOUBT OR DISPUTE ON THE IDENTITY AND CREDITWORTHINESS OF SUCH SHAREHOLDERS AND GENUINENE SS IS DOUBTED SIMPLY ON THE REASON THAT IN SUBSEQUENT PERIOD THE SHARES OF APPELLANT COMPANY SMRITI TELEVISION MEDIA AND FILMS PVT. LTD. 14 WERE PURCHASED BY THE DIRECTORS OF THE COMPANY. IT IS ARGUED THAT SUBSEQUENT PURCHASE OF SHARES AFTER TWO YEARS BY TH E DIRECTORS WAS ON THE PREVAILING MARKET CONDITION AND THAT CANNOT BE BASI S FOR MAKING THE ADDITION IN THE HANDS OF THE APPELLANT COMPANY. ON CAREFULLY CONSIDERING OF ALL FACTS AND CIRCUMSTANCES INCLUDING THE VASE LAWS RELIED UPON THE APPELLANT IT IS NOTED THAT IN THIS CASE THOUGH THER E WAS A SEARCH CONDUCTED ON THE PREMISES OF THE APPELLANT COMPANY BUT PRIMA FACIE NO INCRIMINATING DOCUMENTS WERE FOUND OR SEIZED WHICH MAY INDICATE T HAT THE TRANSACTIONS OF SUCH SHARE CAPITAL WAS NOT OF GENUINE NATURE. TH E IDENTITY OF SHARE HOLDERS I.E. THE COMPANIES WHO HAVE INVESTED IN THE SHARE CAPITAL IS NOT DISPUTED. ALL THESE COMPANIES ARE FOUND TO BE IN EX ISTENCE. DURING THE ASSESSMENT PROCEEDINGS THESE COMPANIES HAVE FILED C ONFIRMATION OF HAVING INVESTED IN SHARES OF APPELLANT COMPANY, COPIES OF THEIR AUDIT ACCOUNT ALONG WITH THEIR IT RETURNS AND OTHER DOCUMENTS BY WAY OF RESOLUTION PASSED BY THESE COMPANIES AS ALSO MEMORANDUM AND ARTICLES OF ASSOCIATIONS ETC. WERE FILED. THE CREDIT WORTHINESS OF THESE COMPAIES IS PRIMA FAICES PROVED FROM THESE DOCUMENTS. THERE IS NOTHING ON RECORD WH ICH MAY INDICATE THAT THE AMOUNT OF SHARE CAPITAL WAS NOT GENUINENLY INVE STED BY THESE COMPANIES. ALL THE TRANSACTIONS ARE THROUGH BANKING CHANNEL. THE AO HAD MADE REFERENCE OF SOME OF THEIR BANK ACCOUNTS BUT E VEN FROM THEIR BANK ACCOUNTS IT CANNOT BE PRESUMED OR PROVED THAT SUCH TRANSACTIONS ARE NOT GENUINE. NO IMMEDIATE CASH IS STYATED TO BE DEPOSIT ED IN SUCH ACCOUNT. THE FINDING OF THE AO ARE ALSO IN CONTRADICTION IN AS M UCH AS IN THE ASSESSMENT ORDER AT SOME PLACE IT HAS BEEN MENTIONED THAT THE MONEY OWNED BY THE DIRECTORS WAS INVESTED AS SHARE CAPITAL THROUGH THE SE COMPANIES . AS REGARDS THE OBSERVATION OF THE AO THAT THE TRANSACT IONS ARE NOT GENUINE IN AS MUCH AS SUBSEQUENTLY AFTER TWO YEARS THE DIRECTO RS OF THE APPELLANT COMPANY PURCHASED THE SHARES AT THE RATE OF RS.2 PE R SHARE, IT MAY BE STATED THAT THE ISSUE UNDER CONSIDERATION WAS SHARE CAPITAL AMOUNTING TO RS.65 LAKHS IN A.Y. 2005-06, IN RESPECT OF WHICH TH E APPELLANT HAS OVER WHELMINGLY FURNISHED DOCUMENTS TO PROVE THE IDENTIT Y, CREDIT WORTHINESS AND GENUINENESS OF THE TRANSACTIONS. THE SUBSEQUENT LATER TRANSACTIONS OF AFTER TWO YEARS MAY NOT BE BASIS TO HOLD THE TRANSA CTIONS OF A.Y. 2005-06 TO BE NON-GENUINE. MOREOVER THE SUBSEQUENT TRANSACTION S WER HELD BETWEEN THE DIRECTORS AND THE SUBSCRIBING COMPANIES AND NOT BETWEEN THE APPELLANT COMPANY. EVEN SUCH OBSERVATION OF THE AO THAT SUCH TRANSACTIONS ARE NOT GENUINE IS BASED ON PRESUMPTIONS AND NOT ON ANY MAT ERIAL FACTS. IT MAY BE STATED THAT IN THE CASE OF SHARE CAPITAL RECEIVED Y THE COMPANY, THE VARIOUS APPELLATE COURTS HAVE HELD THAT IN CASE OF AMOUNT O F SHARE CAPITAL IF THE IDENTITY OF SHAREHOLDER IS PROVED THEN ONUS ON THE PART OF ASSESSEE IN TERMS OF SECTION 68 IS DEEMED TO BE DISCHARGED. IN SUCH C IRCUMSTANCES, IF ADDITION SMRITI TELEVISION MEDIA AND FILMS PVT. LTD. 15 HAS TO BE MADE, THE REVENUE HAS TO BRING ON RECORD RELEVANT FACTS TO REBUT THE ASSESSEE'S CONTENTION. RELIANCE IS PLACED ON TH E FOLLOWING CASE LAWS:- 1. CIT VS. LOVELY EXPORT (P) LTD., ( 2008 ) 6 DTR ( SC) 30~ 2. CIT VS. SAMIR BIOTECH (P) LTD., (2010) 325 ITR 2 94 (DEL) 3. CIT VS. VICTOR ELECTRODE LTD., (329 ITR (DEL) 2 71 4. CIT VS/ORBITAL COMMUNICATIONS (P) LTD., (20 I 0) 327 ITR 56.Q,(DEL) 5. CIT VS. K.C. FIBERS LTD. (2011) 332 ITR 481 (DEL ) 6. ORBITAL COMMUNICATIONS (P) LTD. (2010) 327 ITR 5 60 (DEL) 7.ACIT VS. DEVSHREE PROJECT (P) LTD., (2011) 17 ITJ 60I (IND-TRIB) 8. ACIT VS. MS. SHREE KELA PRAKASHAN (P) LTD .. (2 010) 14 ITJ 539 (IND-TRIB) 9. ACIT VS. VENKATESHWAR [SAT (P) LTD., (2010)14 I TJ 83 (CG.) 10. PEOPLES GENERAL HOSPITAL (P) LTD VS. ACIT, (201 1) 17 ITJ 355 (LND-TRIB) 11. SWIFT INDERMEDIA CONVERGENCE LTD VS ACIT,(2009) 13 ITJ 90' (IND-TRIB) 12. ACIT VS. RAJAT ISPAT (P) LTD (2009) 13 ITJ 201 (BILASPUR) 13. ACIT VS. JAGDAMBA SPONGE (P) LTD., (2010) 15 IT J 121(BILASPUR)' 14.UMA POLYMERS (P) LTD VS. DCIT,(2006) 101 TTJ 124 ((JD) TM) 15. SHRI BARKHA SYNTHETICS LTD VS. ACIT,(2006) 283 ITR 377 (RAJ) 16.ACIT VS. DHARAM DEVELOPERS & FINEST LTD,( 2007) 8 ITJ/488 /492 (IND- TRIB)- IN VIEW OF ABOVE DISCUSSIONS AND ALSO KEEPING IN VI EW THE VARIOUS 'JUDICIAL PRONOUNCEMENTS MENTIONED ABOVE, THE ADDITION OF RS. 65 LAKHS MADE BY THE AO CANNOT BE SUSTAINED. THE ADDITION IS ACCORDINGLY DELETED. THE GROUND OF APPEAL IS ALLOWED. 11. FROM THE ABOVE FINDING OF LD. CIT(A), IT IS EVI DENT THAT HE HAD ACCEPTED THE TRANSACTION ON THE BASIS OF MATERIAL P LACED BEFORE HIM. HE DID NOT DELIBERATE AS TO HOW THE SHARES PURCHASE D AT HIGHER RATE ARE SOLD TO THE DIRECTORS AT A THROW AWAY PRICE. NO PRUDENT PERSON WOULD DO SO, IT IS NOT THE CASE WHERE THE SHARES HA VE BEEN SOLD TO THE THIRD PARTY OR UNRELATED PARTY TO THE ASSESSEE. MOREOVER, NO MATERIAL IS PLACED TO DEMONSTRATE THAT WHY THERE WA S SO DRASTIC CHANGE INTO VALUATION OF THE SHARE OF THE COMPANY. ADMITTEDLY, THE TRANSACTIONS ARE OFF MARKET HAVE NOT BEEN CARRIED O UT THROUGH EXCHANGE. HENCE, WAS WITHIN THE CONTROL OF THE TRAN SACTING PARTIES. THEREFORE, THE MOOT QUESTION IS WHAT WERE THE COMPE LLING CIRCUMSTANCES, EVEN IF WE PRESUME THE ENTITIES AS G ENUINE, THAT SMRITI TELEVISION MEDIA AND FILMS PVT. LTD. 16 MADE THEM TO SELL THE SHARES AT THROW AWAY PRICE. T HIS ACT DEFINITELY CANNOT BE PART OF AN HONEST TAX PLANNING. IT IS ARG UED ON BEHALF OF THE ASSESSEE THAT IT HAD DISCHARGED PRIMARY ONUS AN D MOREOVER TRANSACTIONS ARE AMONG THIRD PARTIES WHICH CANNOT B E THE BASIS FOR FASTENING THE TAX LIABILITY TO THE ASSESSEE. THIS A RGUMENT OF THE LD. COUNSEL HAS NO LEG TO STAND, THE ASSESSEE IS A CORP ORATE ENTITY AND FUNCTION THROUGH HUMAN FACE I.E. DIRECTORS AND THE OTHER PRINCIPAL OFFICERS. IN THE PRESENT CASE, THE SHARES WERE ALLO TTED TO VARIOUS COMPANIES AT THE RATE OF RS. 25 PER SHARE INCLUDING PREMIUM AND SOLD TO THE DIRECTORS OF THE COMPANY AT RS.2 PER SH ARE WITHIN A VERY SHORT SPAN TO THE DIRECTORS OF THE COMPANY BY THE I NVESTING COMPANIES. NO MATERIAL IS PLACED TO DEMONSTRATE AS TO WHY SUCH SALE WAS MADE. NO DISTRESS OR COMPELLING EVENT IS B ROUGHT TO THE NOTICE OF THIS TRIBUNAL. IN OUR CONSIDERED VIEW, IT IS SIMPLICITOR A COLOURABLE DEVICE WHICH IS DEVISED TO EVADE TAX LIA BILITY ON THE HIDDEN EXCHANGE OF CASH AMOUNT. IT IS NOT A SIMPLE CASE OF TAX PLANNING BUT IT IS A LIVING EXAMPLE OF EVASION OF T AX. THE ASSESSEE WAS REQUIRED TO PROVE THE GENUINENESS OF TRANSACTIO N I.E. ALLOTMENT OF SHARES TO THE AFOREMENTIONED COMPANIES. NO ATTEM PT IS MADE BY THE ASSESSEE IN THIS REGARD. THE SUBSEQUENT ACT OF THE ENTITY TO TRANSFER SUCH SHARES IN FAVOUR OF THE DIRECTORS OF THE COMPANY CAUSES SUSPICIONS. MOREOVER, IT WOULD NOT ABSOLVE T HE ASSESSEE COMPANY FROM DISCHARGING THE BURDEN TO PROVE THE AL LOTMENT OF SHARES WAS A GENUINE ACT. THE RECOVERY OF THE DOCUM ENTS I.E. SHARES ALLOTMENT FORMS ETC. AT THE HOUSE OF THE DIRECTORS IS SUFFICIENT TO DISBELIEVE THE TRANSACTIONS BEING GENUINE. THE CASE LAWS AS RELIED SMRITI TELEVISION MEDIA AND FILMS PVT. LTD. 17 BY THE LD. COUNSEL FOR THE ASSESSEE DOES NOT COME T O AID OF THE ASSESSEE UNDER THE FACTS AND CIRCUMSTANCES OF THE P RESENT CASE. WE, THEREFORE, REVERSE THE FINDING OF THE LD. CIT(A ) AND RESTORE THE ORDER OF THE ASSESSING OFFICER ON THIS ISSUE. THE GROUND OF THE REVENUES APPEAL IS ALLOWED. 12. AS A RESULT, APPEAL OF THE REVENUE IS ALLOWED. NOW COME TO THE CROSS OBJECTION OF THE ASSESSEE 13. THE ASSESSEE HAS RAISED FOLLOWING GROUNDS OF CR OSS OBJECTION: 1. LD. CIT(A) ERRED IN CONFIRMING THE CLAIM OF DEPREC IATION ON MUMBAI FLAT TO THE EXTENT OF 5% OF THE WDV AGAINST THE CLAIM OF THE ASSESSEE COMPANY AT THE RATE OF 10% PA ON WDV BASIS . 2. LD. CIT(A) ERRED IN CONFIRMING THE CLAIM OF DEPRE CIATION ON GOODWILL AND NON TREATING OF GOODWILL AS INTANGIBLE ASSETS. 14. THE ASSESSEE HAS ALSO TAKEN ADDITIONAL GROUNDS OF CROSS OBJECTION READ AS UNDER: 1.THE LD. CIT(A) HAS ERRED IN REJECTING THE LEGALITY OF THE ASSESSMENT U/S 153A AND THE ADDITION MADE. THE ADDITIONS OF RS.6 5,00,000/- DELETED BY THE LD. CIT(A) OR MERITS DESERVES TO BE DEL ETED ON ACCOUNT OF LEGALITY ALSO. 2.SINCE NO INCRIMINATING PAPER WERE FOUND DURING THE COURSE OF THE SEARCH AND ADDITIONS MADE BY THE LD. AO ON ACCOUNT O F SHARE CAPITAL INVESTMENT OF RS.65,00,000/- ARE ILLEGAL AND BAD IN LAW. 15. LD. COUNSEL FOR THE ASSESSEE REITERATED THE SUB MISSIONS AS MADE IN THE WRITTEN SYNOPSIS IN RESPECT OF THE ADDI TIONAL GROUND: THE PAPERS FILED DURING THE COURSE OF THE ORIGINAL ASSESSMENT PROCEEDINGS HAVE ALREADY BEING SUBMITTED IN PAPER BO OK. THE LD. A. O. HAS EXAMINED IN DETAIL ALL THE PAPERS FILED. THE SP ECIFIC REQUISITION FOR FILING THE DOCUMENTS WERE MADE ON DIFFERENT DATE S WHICH ARE ENUMERATED IN OUR SUBMISSIONS DATED 30.11.2018 ON PG . 2. THE LD. CIT (DR) HAS DRAWN THE ATTENTION TO PAGE NO. 40 WHIC H CONTAINS THE SHARE TRANSFER TRANSACTION BETWEEN TWO SHAREHOLDERS AS ON SMRITI TELEVISION MEDIA AND FILMS PVT. LTD. 18 23.09.2006. IT IS HUMBLY SUBMITTED THAT ALL THESE TR ANSACTIONS HAVE ALREADY TAKEN PLACE PRIOR TO THE DATE OF SEARCH AS ON 30.05.2008.THESE TRANSACTIONS HAVE BEEN RECORDED IN THE BOOKS OF ALL THE COMPANIES AND ALSO BY THE DIRECTORS. THE PAP ER ITSELF GIVES THE DETAILS ABOUT THE CHEQUE NUMBERS AND THE BANKS THROUG H WHICH THE PAYMENT IS MADE. THUS THESE TRANSACTIONS ARE ALL DO NE THROUGH THE BANKING CHANNEL AND ARE RECORDED IN THE BOOKS OF THE RESPECTIVE PARTIES. SINCE THEY ARE ALL RECORDED IN THE BOOKS THE SAME CANNOT BE TREATED AS AN INCRIMINATING MATERIAL. THE INCRIMINAT ING MATERIAL WOULD CONSTITUTE THE TRANSACTIONS WHICH ARE NOT RECO RDED OR WHICH MIGHT NOT BE DISCLOSED TO THE DEPARTMENT. THUS THIS PAPER CANNOT BE TREATED AS INCRIMINATING MATERIAL. IT IS FURTHER SUB MITTED THAT THESE TRANSACTIONS ARE FOUND AT THE RESIDENCE OF THE DIRECT ORS AND HAVE TAKEN PLACE BETWEEN THE DIRECTORS AND THE INVESTMENT COMPANIES. THE ASSESSEE IS IN NO WAY INVOLVED IN THIS TRANSACTI ON. IT CANNOT BE LINKED WITH THE ASSESSEE COMPANY UNDER ANY CIRCUMSTAN CES AND THUS CANNOT BE TREATED AS INCRIMINATING MATERIAL IN THE HANDS OF THE COMPANY. UNDER THESE CIRCUMSTANCES NO ADDITION CAN B E MADE IN THE HANDS OF THE ASSESSEE. IN THIS CONNECTION ATTENTION IS DRAWN TO THE JUDGEMENT OF THE HON. INDORE TRIBUNAL IN THE CASE O F ANANT STEELS PVT. LTD. IN INCOME-TAX ACT, 1961. 28T031IIND/20 1 0 DELIVERED ON 28.11.2015 REPORTED IN 28 IT] 47(PB DATED 11.07.2016 PAGE 13-61). THE FACTS ARE ABSOLUTELY IDENTICAL WHEREIN THE SHAR ES WERE ALLOTTED AT A PREMIUM OF RS.40 PER SHARE. THE SAME WAS BOUGHT B ACK BY THE OTHER SHAREHOLDERS AT MUCH LESSER AMOUNT. THE HON T RIBUNAL AFTER DISCUSSING THE SUBMISSIONS MADE BY THE ASSESSEE AND AFTER RELYING ON THE VARIOUS CASE LAWS DELETED THE ADDITION. REGA RDING RE- PURCHASE OF THE SHARES THE HON. TRIBUNAL AT PAGE 70 OF THE JUDGEMENT IN PARA 2.9.2 OBSERVED AS UNDER THAT THE ASSESSEE COMPANY HAD NOT PURCHASED ANY SHARE. THE PURCHASE OF THE SHARES WAS BY THE DIFFERENT FAMILY MEMBERS. HENCE IN ANY C ASE ADDITION TO THE INCOME OF THE ASSESSEE WAS NOT JUSTIFIED. IF THE LD. CIT(A) WAS OF THE OPINION THAT SHARES WERE PURCHASED AT VERY LOW P RICE IN THAT CASE, NECESSARY ADDITION IS TO BE MADE IN THE HANDS OF THE DIRECTOR AND FAMILY MEMBERS BUT NOT IN THE CASE OF THE APPEL LANT COMPANY. THE HON. TRIBUNAL RELIED ON THE JUDGMENT OF THE MUMBAI BENCH IN A CIT VS. KRISHNA SEED PROCESSORS. IN VIEW OF THE ABOVE SUBMISSIONS IT IS HUMBLY SUBMI TTED THAT THE PAPER RELIED ON BY THE DEPARTMENT CANNOT BE TREATED TO BE INCRIMINATING AND NO ADDITION CAN BE MADE ON THIS ACCOUNT. 16. ON THE CONTRARY LD. DR OPPOSED THE SUBMISSIONS AND SUPPORTED THE ASSESSMENT ORDER. LD. DR SUBMITTED TH AT THE SMRITI TELEVISION MEDIA AND FILMS PVT. LTD. 19 ASSESSING OFFICER HAS POINTED OUT THAT FROM THE PRE MISES OF THE DIRECTORS INCRIMINATING MATERIAL IN THE FORM OF LPS -3 TO PANCHNAMA WERE RECOVERED AND THESE DOCUMENTS ARE SU FFICIENT TO PROVE THAT THE ASSESSMENT PROCEEDINGS BASED ON THE INCRIMINATING MATERIAL. 17. WE HAVE HEARD THE RIVAL CONTENTIONS, PERUSED TH E MATERIAL AVAILABLE ON RECORD GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW. IT IS UNDISPUTED FACT THAT THE DOCUMENTS REL ATED TO TRANSACTIONS WERE RECOVERED FROM THE PREMISES OF TH E DIRECTORS OF THE ASSESSEE COMPANY. THE RECOVERY OF SUCH DOCUMENT S ON THE PREMISES OF THE DIRECTORS SUGGESTED THAT THE TRANSA CTIONS WERE ARRANGED ALTHOUGH THE CONTENTION OF THE ASSESSEE IS THAT SUCH DOCUMENTS CANNOT BE TREATED AS INCRIMINATING MATERI AL. IN OUR VIEW IS DEVOID OF MERIT, RATHER RECOVERY OF SUCH DOCUMEN TS PROVE THE ARRANGED OR MANIPULATED TRANSACTIONS THEREFORE, THE ADDITIONAL GROUNDS AS RAISED BY THE ASSESSEE ARE REJECTED. 18. APROPOS GROUNDS NO.1 & 2 RAISED IN THE CROSS OB JECTION, WE FIND THAT LD. CIT(A) HAS DECIDED THE ISSUE OF DEPRECIATI ON ON FLAT IN RESPECT OF PARA 9.4 OF HIS ORDER AS UNDER: 9.4 I HAVE CAREFULLY CONSIDERED THE OBSERVATION OF THE AO AS ALSO THE SUBMISSION OF THE APPELLANT ON THIS ISSUE. THE AO H AS ALLOWED DEPRECIATION A 5% BY HOLDING THAT HIGHER RATE OF DE PRECIATION WAS ALLOWABLE ONLY IN RESPECT OF BUILDINGS IN THE NATUR E OF FACTORY BUILDING AND ALSO BY OBSERVING THAT THE SAID FLAT WAS USED FOR R ESIDENTIAL PURPOSES. WHEREAS, THE APPELLANT CASE IS THAT IN THIS FLAT, O FFICER OF THE APPELLANT COMPANY IS SITUATED AND THAT THE ALL PRACTICAL PROP OSES FLAT IS MAINLY USED FOR OFFICIAL PURPOSED. AS PER APPENDIX-1 TO RULE 5, BUILDINGS WHICH ARE USED MAINLY FOR RESIDENTIAL PURPOSES (EXCEPT HOTELS AND BOARDING HOUSES) ARE TO BE ALLOWED DEPRECIATION @ 5% OF WDV. THE APP ELLANT HAS CONTENDED THAT FOR ALL PRACTICAL PURPOSES, THE FLAT WAS MAINL Y USED FOR OFFICE PURPOSES AND NOT RESIDENTIAL. IT IS ALSO STATED THAT ON THIS PREMISES SEARCH WAS SMRITI TELEVISION MEDIA AND FILMS PVT. LTD. 20 CONDUCTED AND VARIOUS DOCUMENTS WERE FOUND/SEIZED. IT IS ALSO STATED THAT THE DIRECTORS ARE RESIDING AT BHOPAL AND NOT AT MUM BAI. IT MAY BE NOTICED THAT THE MAIN BUSINESS OF THE APPELLANT COMPANY IS AT BHOPAL AND IN THE STATE OF MADHYA PRADESH. IT MAY ALSO BE SEEN THAT T HE ONUS WAS UPON THE APPELLANT COMPANY TO PROVE THAT SUCH FLAT WAS USED SUBSTANTIVELY FOR OFFICE PURPOSES AS HIGHER RATE OF DEPRECIATION IS C LAIMED. IT MAY BE SEEN THAT DURING THE ASSESSMENT PROCEEDINGS OR DURING AP PELLATE PROCEEDINGS. THE APPELLANT HAS NOT FILED ANY CONCRETE EVIDENCE T O SUPPORT SUCH CONTENTION THAT SUCH FLAT WAS SUBSTANTIVELY USED FO R OFFICE PURPOSED. PRIMA FACIE IT APPEARS THAT THE FLAT WAS USED FOR RESIDEN TIAL PURPOSED OF THE DIRECTORS AND OTHER STAFF AS AND WHEN THEY GO TO MU MBAI FOR OFFICE PURPOSES. IT IS ALSO NOTICED THAT THE FLAT IS SITUA TED IN THE RESIDENTIAL AREA AND AS PER NORMS OF THE SOCIETY WHERE THE FLAT IS S ITUATED IT CANNOT BE USED SUBSTANTIALLY FOR BUSINESS. IN SUCH CIRCUMSTANCES, THE CLAIM OF HIGHER DEPRECIATION MAY NOT BE JUSTIFIED. THEREFORE, THE D ISALLOWANCE OF 5% OF DEPRECIATION ON SUCH FLAT WAS JUSTIFIED. 19. THE CONTENTION OF THE LD. COUNSEL FOR THE ASSES SEE IS THAT THE FLAT WAS BEING UTILIZED FOR THE BUSINESS PURPOSES, THEREFORE, WAS ELIGIBLE FOR HIGHER RATE OF DEPRECIATION. LD. DR OP POSE THIS CONTENTION AND SUBMITTED THAT NO EVIDENCE IS FURNIS HED THAT WAS BEING USED FOR BUSINESS PURPOSES. 20. WE HAVE HEARD THE RIVAL CONTENTIONS, PERUSED TH E MATERIAL AVAILABLE ON RECORD AND GONE THROUGH THE ORDERS OF THE LOWER AUTHORITIES. THE CLAIM OF THE ASSESSEE WAS DISALLOW ED ON THE BASIS THAT NO EVIDENCE WAS FURNISHED THAT THE FLAT WAS BE ING USED FOR THE BUSINESS PURPOSES. EVEN, BEFORE THIS TRIBUNAL NO EV IDENCE IS PLACED SUGGESTING THAT THIS FLAT WAS BEING USED FOR BUSINE SS PURPOSES EXCEPT THE ASSERTION THAT THE DOCUMENTS RELATED TO THE BUSINESS TRANSACTION WAS RECOVERED FROM THIS FLAT. MERELY, R ECOVERY OF DOCUMENTS WOULD NOT BE SUFFICIENT TO HOLD THAT FLAT WAS BEING USED FOR OFFICE PURPOSE. NO MATERIAL IS PLACED SUGGEST ING THAT THE SMRITI TELEVISION MEDIA AND FILMS PVT. LTD. 21 PROPERTY WAS ASSESSED AS AN OFFICE BY THE HOUSE TAX AUTHORITY. THUS, NO INTERFERENCE IS CALLED FOR, GROUND RAISED IS DISMISSED. UNDER COMING TO THE ISSUE OF DEPRECIATION OF GOODWI LL LD. CIT(A) IN PARA 10.3 & 4 OF HIS ORDER HAS DECIDED THIS ISSUE BY OBSERVING AS UNDER: 10.3. DURING THE APPELLATE PROCEEDINGS, IT IS STAT ED THAT HIS ADDITION HAS BEEN MADE BY THE AO SIMILAR TO THE ADDITION MADE IN THE REGULAR ASSESSMENT FRAMED ON 27.12.2007 EARLIER TO THE SEAR CH. IT IS STATED THAT THE MAIN REASON GIVEN FOR MAKING THE DISALLOWA NCE OF DEPRECIATION BOTH IN REGULAR ASSESSMENT AS WELL AS I N THE ASSESSMENT FRAMED U/S 153A IS THAT GOODWILL DOES NOT FALL UNDER THE CATEGORY OF INTANGIBLE ASSETS. IT IS STATED THAT SUCH REASONING IS FAULTY AND IT IS SETTLED POSITION OF LAW THAT GOODWI LL IS AN INTANGIBLE ASSET ON WHICH DEPRECIATION WAS ALLOWABLE. IT WAS SU BMITTED THAT THE ASSESSEE COMPANY HAS TAKEN OVER RUNNING BUSINES S OF M/S. SMRITI FILMS WHICH WAS A PROPRIETORSHIP BUSINESS CO NCERN OF MS. ARTI GOSWAMI AND AMOUNT OF RS.8,38,410/- WAS PAID TO HER . IT WAS CONTENDED THAT AN INTANGIBLE ASSET WAS PURCHASED BY M AKING SUCH PAYMENT AND THE ASSESSEE COMPANY WAS ELIGIBLE FOR SU CH DEPRECIATION. THE APPELLANT HAS QUOTED FOLLOWING CASE LAWS IN HIS SUPPORT: (I) KOTAK FOREX BROKERAGE LTD. VS. ACIT (2010) 41 DT R 387(I.T.A.T. MUMBAI) (II) JAIPUR SUGAR COMPANY VS. ACIT (2011) 56 DTR 229 (I.T.A.T. VISHAKHAPATTANAM) (III) CIT VS. HINDUSTAN COCOCOLA BEVERAGES PVT. LTD. 1391/2010 DATED 14.1.2011 10.4 I HAVE CAREFULLY CONSIDERED THE SUBMISSIONS OF THE APPELLANT AS ALSO FINDINGS OF THE AO IN ASSESSMENT ORDER. THE PROVISI ONS OF SECTION 32(1) OF IT ACT IN RESPECT OF CLAIM OF DEPRECIATION READS AS UNDER: 32 (1) IN RESPECT OF DEPRECIATION OF (I) BUILDINGS, MACHINERY, PLANT FOR FURNITURE BEING TAN GIBLE ASSETS: (II) KNOW-HOW, PATENTS, COPY RIGHTS, TRADEMARK, LICENSE, FRANCHISE OR ANY OTHER BUSINESS OR COMMERCIAL RIGHTS OF SIMILAR NATU RE BEING TANGIBLE ASSET ACQUIRED ON OR AFTER THE 1 ST DAY OF APRIL. 1998, OWNED, WHOLLY OR PARTLY, BY THE ASSESSEE AND USED FOR THE PURPOSE OF THE BUSINESS OR PROFESSION THE FOLLOWING DEDUCTIONS SHALL BE ALLOWE D. THE CLAIM OF THE APPELLANT IS TO BE EXAMINED WITH RE SPECT TO PROVISIONS OF SECTION 32 OF IT ACT. IT IS NOTICED TH AT THE APPELLANT SMRITI TELEVISION MEDIA AND FILMS PVT. LTD. 22 HAS CLAIMED DEPRECIATION ON GOODWILL IN A.YS. 2005- 06 TO 2008- 09. THE ESSENTIAL CONDITION FOR CLAIM OF DEPRECIATIO N IS THAT THE ASSET SHOULD BE OWNED BY THE PERSON WHO CLAIMED DEPRE CIATION ON SUCH ASSET AND THAT SUCH ASSET IS USED FOR THE PUR POSES OF THE BUSINESS OR PROFESSION, UNDER THE PROVISIONS OF SECT ION 32 THE WORK GOODWILL IS NOT MENTIONED AND THEREFORE, IT H AS TO BE SEEN WHETHER THE ITEM OF ASSET ON WHICH DEPRECIATION WAS CLAIMED STATING TO BE GOODWILL WAS IN THE NATURE OF KNOW-HO W, PATENTS, COPY RIGHT, TRADE MARK, LICENSES, FRANCHISE OR ANY OTHER BUSINESS OR COMMERCIAL RIGHT OF SIMILAR NATURE BEING INTANGI BLE ASSET. THE ISSUE AS TO WHAT CONSTITUTE GOODWILL AND ALLOWABILIT Y OF DEPRECIATION ON THE GOODWILL CAME FOR EXAMINATION BE FORE THE HON'BLE I.T.A.T., VISHAKHAPATANAM BENCH IN THE CASE OF JAIPUR SUGAR CO. LTD. VS. ACIT REPORTED (2011) 44 SOT 625, THE CASE LAWS ALSO RELIED UPON BY THE APPELLANT ALSO AND THE H ON'BLE I.T.A.T. HAVING EXAMINED VARIOUS CASE LAWS OBSERVED T HAT- HAVING CAREFULLY EXAMINED THE AFORESAID JUDGMENT OF THE APEX COURT VARIOUS HIGH COURTS AND ALSO OF THE TRIBUNAL, WE ARE OF THE VIEW THAT DEPRECIATION U/S 32(1)(I) AND (II) IS TO B E ALLOWED ON TANGIBLE AND INTANGIBLE ASSETS. INTANGIBLE ASSETS SH OULD EITHER BE KNOW-HOW, PATENTS, COPYRIGHTS, TRADEMARK, LICENSE, FRANCHISE OR ANY OTHER BUSINESS OR COMMERCIAL RIGHTS OF SIMILAR NATURE. IN THE CASE OF B. RAVEENDRAN (SUPRA), IT HAS BEEN CATEGORI CALLY HELD THAT THE EROSION IN THE VALUE OF THE ASSETS IS NOT A REL EVANT FACTOR TO DECIDE WHETHER IT IS ENTITLED FOR DEPRECIATION OR NOT. IN CL.(II) OF SECTION 32(1) DEPRECIATION IS TO BE OUT RIGHTLY ALL OWED ON KNOW- HOW, PATENTS COPYRIGHTS, TRADEMARK, LICENSE, FRANCH ISE BUT WITH RESPECT OF OTHER TANGIBLE ASSETS, DEPRECIATION WOUL D ONLY BE ALLOWED IF BUSINESS OR COMMERCIAL RIGHTS ARE OF SIM ILAR NATURE, TO THAT OF KNOW-HOW PATENTS, COPYRIGHTS, TRADEMARK, LI CENSE, FRANCHISE. THE BUSINE3SS OR COMMERCIAL RIGHT MUST B E OF THE SAME GENESIS. THE GOODWILL HAS ALREADY BEEN DEFINED THROUGH VARIOU S JUDICIAL PRONOUNCEMENT AND IT HAS BEEN HELD THAT THE GOODWILL IS BASICALLY A BUNDLE OF COMMERCIAL BENEFITS AND RIGHTS. IT DEPEN DS UPON A VARIETY OF CIRCUMSTANCES OR A COMBINATION OF THEM. THE LOCATION, THE SERVICE, THE STANDING OF BUSINESS, THE HONESTY OF THOSE WHO RUN IT, THE LACK OF COMPETITION AND MANY OTHER FACTO RS GO INDIVIDUALLY OR TOGETHER TO MAKE UP THE GOODWILL. G OODWILL ALSO INCLUDES CERTAIN BUSINESS OR COMMERCIAL RIGHTS MOVE ALONG WITH THE ESTABLISHMENTS. NOW, THE QUESTION ARISES WHETHE R ALL THE COMPONENTS OF THE GOODWILL OR THE GOODWILL AS A WHO LE IS ENTITLE FOR SMRITI TELEVISION MEDIA AND FILMS PVT. LTD. 23 DEPRECIATION FROM LOOKING TO THE NATURE OF VARIOUS C OMPONENTS OF GOODWILL. WE ARE OF THE VIEW THAT CERTAIN COMPONENT S CAN BE CALLED TO BE THE BUSINESS OR COMMERCIAL RIGHTS. THER EFORE, THOSE COMMERCIAL BENEFITS WHICH MOVE ALOGWITH THE ESTABLI SHMENT ON ITS SELL AND NOT AKIN TO THE KNOW-HOW PATENTS, COPY WRIT E, TRADE MARK, LICENSES, FRANCHISE ARE NOT ENTITLE FOR DEPREC IATION. THE LEGISLATURE HAS USED THE WORK IN A RESIDUARY CLAUSE IS OTHER BUSINESS OR COMMERCIAL RIGHTS OF SIMILAR NATURE. T HE COMMERCIAL RIGHTS CANNOT BE EQUATED WITH THE COMMERCIAL BENEFIT S. COMMERCIAL RIGHTS CONFER CERTAIN RIGHT UPON THE PUR CHASER TO CARRY ON ITS TRADE IN A PARTICULAR MANNER IN ORDER TO EAR N MORE PROFIT. THEREFORE, THE COMMERCIAL RIGHTS CAN BE CALLED TO B E EQUATED WITH THE KNOW-HOW, PATENTS COPYRIGHTS, TRADEMARK, LICENS E, FRANCHISE ETC. AS ALL THESE ITEMS CONFER CERTAIN RIGHTS UPON THE OWNER TO CARRY ON ITS TRADE IN A PARTICULAR WAY. THEREFORE, WE ARE OF THE CONSIDERED VIEW THAT THE COMMERCIAL BENEFITS WHICH MO VE ALONG WITH THE ESTABLISHMENT ON ITS SALE ARE NOT AKIN TO OR DO NOT BELONG TO THE SAME GENESIS OF KNOW-HOW, PATENTS, COPYRIGHT S, TRADEMARK, LICENSE, FRANCHISE BECAUSE THEY DO NOT CONFER ANY R IGHT UPON THE PURCHASER. THESE BENEFITS ARE LIKE THE LOCALITY PAR TICULAR TYPE OF CUSTOMER, THE PERSON WHO OWNED IT ETC. AND THESE BENE FITS THOUGH THEY ARE THE PART OF THE GOODWILL, BUT THEY ARE NOT ENTITLED FOR DEPRECIATION U/S 32(1)(II) OF THE ACT. WHEREAS, THE BUSINESS OR COMMERCIAL RIGHTS WHICH CONFERS UPON THE PURCHASER A RIGHT TO CARRY ON ITS TRADE IN A PARTICULAR MANNER ARE AKIN TO THE KNOW- HOW PATENTS, COPYRIGHTS TRADEMARK, LICENSE FRANCHIS E TEC. THAT IS WHY THEIR LORDSHIPS OF THE APEX COURT IN THE CASE O F TECHNO SHARE (SUPRA) HAVE HELD THAT THEREFORE, THEIR LORDSHIPS HAV E HELD THAT THE GOODWILL COMPRISE OF NAME OF THE HOSPITAL LOGO, TRA DEMARK, STAFF, EQUIPMENT ETC. IS ENTITLED FOR DEPRECIATION. THE SAME ISSUE ALSO CAME FOR CONSIDERATION BEFORE H ON'BLE I.T.A.T. AHMEDABAD C BENCH IN THE CASE OF BHARAT BHAI J VYAS VS. ITO (2006) 97 ITR 248 AND THE HON'BLE I.T.A.T. HELD AS U NDER: THE LEGISLATURE HAS INSERTED A FICTION, BY WHICH S PECIFIED INTANGIBLE ASSETS ARE HELD TO DEPRECIATE AND ALLOWANC E IS GIVEN THEREFORE, KNOW HOW, PATENTS, COPYRIGHTS, TRADEMARK , LICENSE, FRANCHISE ETC. ARE SOMETIMES ASSIGNED DIFFERENT NAME S AND THEREFORE, BY USING THE WORKS SIMILAR NATURE THE LE GISLATURE HAS RESTRICTED THE SCOPE OF TANGIBLE ASSETS SIMILAR TO T HE SPECIFIED ONE. THE ASSESSEE HAS NOWHERE ESTABLISHED THAT IT HAS ACQ UIRED ANY KNOW-HOW PATENTS, COPYRIGHTS, TRADEMARK, LICENSE FR ANCHISE ETC. WHAT IT HAS PAID FOR SIMPLICITOR IS AN AMOUNT AS A C ONSIDERATION SMRITI TELEVISION MEDIA AND FILMS PVT. LTD. 24 FOR RETIREMENT OF ONE PARTNER, AS GOODWILL, WHICH A MOUNTS TO GIVING COMPENSATION TO A RETIRING PARTNER AND THE TERM HAS BEEN USED AS GOODWILL. THIS DOES NOT SIGNIFY ACQUISITION OF ANY KNOW-HOW, PATENTS, COPYRIGHTS, TRADEMARK, LICENSE, FRANCHISE ETC. OR ANY BUSINESS OR COMMERCIAL RIGHTS OF SIMILAR NATURE. IN THESE CIRCUMSTANCES, THE AMOUNT OF CO CALLED GOODWILL IS C ONSIDERATION PAID FOR RETIREMENT OF PARTNER WITHOUT ANY ACQUISITI ON OF ANY INTANGIBLE ASSETS AS CONTEMPLATED IN S.32(1)(II). T HERE MAY BE INNUMERABLE NUMBER OF INTANGIBLE ASSETS WHICH MAY B E TRANSACTED IN BUSINESS REALITIES. THERE CANNOT BE A DISPUTE ABOUT TERMING SUCH COMPENSATION AS A GOODWILL BUT WHILE D ECIDING THE ALLOWABILITY OF DEPRECIATION ONE HAS TO TAKE RECOURS E OF SPECIFIC PROVISIONS. IN THE FACTS AND CIRCUMSTANCES OF THE CA SE, THE AMOUNT PAID BY THE ASSESSEE AS GOODWILL DID NOT RESULT INTO ACQUISITION OF ANY KNOW-HOW, PATENTS, COPYRIGHTS, TRADEMARK, LICEN SE, FRANCHISE ETC. AS PRESCRIBED IN THIS BEHALF CONSEQUENTLY, THE ASSESSEE IS NOT ENTITLED TO CLAIM OF DEPRECIATION RUSTOM CAVASJEE COO PER VS. UNION OF INDIA AIR 1970 HON'BLE SUPREME COURT 564 DISTINGUISHED. KEEPING IN VIEW, THE DETAILS DISCUSSION AND JUSTIFIC ATION AS TO IN WHICH CIRCUMSTANCES, DEPRECIATION CAN BE ALLOWED ON G OODWILL, IT IS NOTICED THAT DEPRECIATION ON GOODWILL CAN BE ALLOW ED IF SUCH GOODWILL WAS ACQ1UIED THROUGH COMMERCIAL RIGHTS AND M ADE PAYMENT FOR SUCH COMMERCIAL RIGHTS AND THE APPELLANT SHOULD HAVE USED SUCH COMMERCIAL RIGHTS FOR FURTHERANCE OF ITS BUSINESS. IT IS NOTED THAT THE APPELLANT COMPANY HAS ACQUIRED THE RUNNING BUSINESS WHEREIN ALL COMMERCIAL BENEFITS HAVE ACCRU ED TO THE COMPANY BUT NO SPECIFIC COMMERCIAL RIGHTS AKIN TO K NOW HOW TRADE MARK OR INTANGIBLE ASSET IN THE FORM OF GOOD W ILL WAS ACQUIRED WHICH MAY HAVE CONFERRED A RIGHT TO THE APP ELLANT TO CARRY OUT ITS BUSINESS IN A PARTICULAR MANNER. IN T HE ABSENCE OF SUCH ESSENTIAL REQUIREMENT THE APPELLANT CLAIM OF DE PRECIATION ON GOODWILL IS NOT ALLOWABLE. THESE GROUNDS OF APPEAL A RE DISMISSED. 21. THE ISSUE FOR OUR CONSIDERATION IS WHETHER THE ASSESSEE IS ENTITLED FOR DEPRECIATION ON GOODWILL. THE LD. CIT( A) DECLINED TO ALLOW DEPRECIATION ON GOODWILL ON THE GROUND THAT T HE ASSESSEE COMPANY HAD ACQUIRED THE RUNNING BUSINESS WHEREIN A LL COMMERCIAL BENEFITS HAVE ACCRUED TO THE COMPANY BUT NO SPECIFIC SMRITI TELEVISION MEDIA AND FILMS PVT. LTD. 25 COMMERCIAL RIGHTS AKIN TO KNOW HOW TRADE MARK OR IN TANGIBLE ASSET IN THE FORM OF GOOD WILL WAS ACQUIRED WHICH MAY HAVE C ONFERRED A RIGHT TO THE APPELLANT TO CARRY OUT ITS BUSINESS IN A PARTIC ULAR MANNER. THE ASSESSEE HAS NOT CONTRADICTED THIS FINDING. HENCE N O REASON TO INTERFERE IN THE FINDING OF LD. CIT(A) SAME IS HEREBY AFFIRM. GROUNDS RAISED IN CROSS OBJECTION ARE DISMISSED. 22 . IN THE RESULT, APPEAL OF THE REVENUE IN ITANO.144/ IND/2012 IS ALLOWED AND CROSS OBJECTION OF THE ASSESSEE IN CO N O.64/IND/2012 IS DISMISSED. ORDER WAS PRONOUNCED IN THE OPEN COURT ON 21 .01.2 019. SD/- (MANISH BORAD) SD/- (KUL BHARAT) A CCOUNTANT MEMBER JUDICIAL MEMBER INDORE; DATED : 21/01/2019 CTX? P.S/. . . COPY TO: ASSESSEE/AO/PR. CIT/ CIT (A)/ITAT (DR)/GUA RD FILE. BY ORDER ASSISTANT REGISTRAR, INDORE