V. VIMLA PROPERTIES P.LTD, MUMBAI V. ITO 13(3)(3), MUMBAI

CO 86/MUM/2017

• Counselvise Citation: [2017] 123 COUNSELVISE.COM (IT) 3106 (ITAT-MUMBAI)
• Duration Of Justice: 2 month(s) 14 day(s)
• Appeal Type: Cross Objection
• Pronouncement Date: 20-06-2017
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: Not Allotted
• Assessment Year: 2007-2008
• Appeal Filed On: 06-04-2017
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Keywords: Share purchase agreement; Principle of natural justice; Source of fund; Accommodation entries; Onus to prove
• Section: 133(6); 131; 68; 69; 148

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES SMC, MUMBAI BEFORE SHRI B R BASKARAN, ACCOUNTANT MEMBER ITA NO.7053/MUM/2016 ASSESSMENT YEAR : 2007-2008 ITO 13(3)(3) MUMBAI VS. V VIMLA PROPERTIES PVT. LTD., 6 NEW PRATASHTHAN CO-OP HSG. SOC. LTD., SIDDHI SADAN COLONY, MANDPESHWAR ROAD, BORIVALI (W) MUMBAI- 400 103 PAN AACCV1199G (APPELLANT) RESPONDENT) CO 86/MUM/2017 (ARISING OUT OF ITA NO.7053/MUM/2016 FOR ASSESSMENT YEAR : 2007-2008 V VIMLA PROPERTIES PVT. LTD., MUMBAI- 400 103 PAN AACCV1199G VS. ITO 13(3)(3) MUMBAI (CROSS-OBJECTOR) RESPONDENT) APPELLANT BY : SHRI T A KHAN CROSS-OBJECTOR BY : DR K SHIVRAM & MS. NEELAM JADHA V DATE OF HEARING : 20.06.2017 DATE OF PRONOUNCEMENT : 20 .06.2017 O R D E R THE APPEAL FILED BY THE REVENUE AND THE CROSS-OBJEC TION FILED BY THE ASSESSEE ARE DIRECTED AGAINST THE ORDER DATED 19.09.2016, PA SSED BY THE LEARNED CIT(A)-21, MUMBAI, AND THEY RELATE TO ASSESSMENT YEAR 2007-08. THE REVENUE IS AGGRIEVED BY 2 ITA NO.7053MUM/2016 CO 86/MUM/2017 VIMLA PROPERTIES PVT. LTD. THE DECISION OF THE LEARNED CIT(A) IN DELETING THE ADDITION OF ` 46 LACS RELATING TO SHARE APPLICATION MONEY RECEIVED BY THE ASSESSEE MA DE U/S. 68 OF THE ACT. THE ASSESSEE HAS FILED THE CROSS-OBJECTION CHALLENGING THE VALIDITY OF RE-OPENING OF ASSESSMENT. 2. I HEARD THE PARTIES AND PERUSED THE RECORD. THE ASSESSEE DID NOT CARRY ON ANY BUSINESS ACTIVITIES DURING THE YEAR UNDER CONSI DERATION. IT FILED ITS RETURN OF INCOME DECLARING NIL INCOME AND THE SAME WAS PROCES SED U/S. 143(1) OF THE ACT. SUBSEQUENTLY, THE AO REOPENED THE ASSESSMENT BY ISS UING NOTICE U/S. 148 OF THE ACT. DURING THE YEAR UNDER CONSIDERATION, THE ASSE SSEE HAD RECEIVED SHARE APPLICATION MONEY OF ` .47 LACS AS PER THE DETAILS GIVEN BELOW: SR. NO NAME OF THE PERSON NO. OF SHARES HELD VALUE PER SHARE AMOUNT OF INVESTMENT IN SHARES (RS.) 1 SHRL BIPIN LAXMICHAND DEDHIA 5000 10 50,000 2 SUIT. SHOBHANA BIPIN DEDHIA 5000 10 50,000 3. KHUSH HINDUSTAN ENTERTAINMENT PVT. LTD, 70000 10 7,00,000 4. M/S. REAL GOLD T RADING CO. PVT LTD. 80000 10 8,00,000 5. M/S. ALKA DIAMOND INDUSTRIES PVT. LTD. 80000 10 8,00,000 6. M/S JAVDA IMPEX PVT LTD. 80000 10 8,00,000 7 M/S LEXUS INFO TECH LTD. 90000 10 9,00,000 8 M/S VANGUARD JEWEL LTD. 60000 10 6,00,000 470000 47,00,000 3 ITA NO.7053MUM/2016 CO 86/MUM/2017 VIMLA PROPERTIES PVT. LTD. 3. THE AO ACCEPTED THE SHARE APPLICATION MONEY OF ` 50,000/- EACH RECEIVED FROM SHRI BIPIN LAXMICHAND DEDHIA & SMT. SHOBHANA B IPIN DEDHIA, SINCE THEY ARE DIRECTORS OF THE COMPANY AND, FURTHER, THEY HAD MAD E INVESTMENTS IN THE EARLIER YEAR ALSO. THE AO ISSUED NOTICES U/S. 133(6) OF TH E ACT TO THE REMAINING SHARE HOLDERS BUT THE NOTICES WERE RETURNED UNSERVED WITH THE NOTING LEFT/DETAILS NOT FOUND. THE AO NOTICED THAT THE ABOVE SAID COMPANIE S ARE BEING CONTROLLED BY ONE SHRI PRAVIN JAIN, WHO HAD ADMITTED IN THE STATEMENT U/S. 132(4) OF THE ACT, THAT HE HAS PROVIDED ONLY ACCOMMODATION ENTRIES BY WAY OF S HARE APPLICATION MONEY. ACCORDINGLY, THE AO ASSESSED THE SHARE APPLICATION MONEY RECEIVED FROM THE APPLICANT COMPANY AGGREGATING TO ` 47 LACS AS INCOME OF THE ASSESSEE U/S. 68 OF THE ACT. THE LEARNED CIT(A) DELETED THE SAME AND, HENC E, REVENUE HAS FILED THIS APPEAL BEFORE THE TRIBUNAL. 4. THE LEARNED DR PLACED STRONG RELIANCE ON THE ORD ER PASSED BY THE AO WHEREAS THE LEARNED AR PLACED STRONG RELIANCE ON TH E ORDER PASSED BY THE LEARNED CIT(A). 5. I NOTICED THAT THE LEARNED CIT(A) HAS GRANTED RE LIEF TO THE ASSESSEE BY CONSIDERING THE FACTS OF THE CASE AND ALSO BY APPRE CIATING THE EVIDENCES AND FOLLOWING THE LAW LAID DOWN BY THE COURTS IN THIS R EGARD. FOR THE SAKE OF CONVENIENCE, I EXTRACT THE OPERATIVE PORTION OF THE ORDER PASSED BY THE LEARNED CIT(A): 5.6. I HAVE CONSIDERED THE FACTS AND SUBMISSIONS C AREFULLY. THE INVESTORS HAD COMPLIED WITH THE NOTICES ISSUED U/S 133(6) BY THE ASSESSING OFFICER. THE ASSESSING OFFICER DID NOT EXAMINE THE INVESTORS NOR DID HE CARRY OUT 4 ITA NO.7053MUM/2016 CO 86/MUM/2017 VIMLA PROPERTIES PVT. LTD. ANY FURTHER INVESTIGATIONS. THE SIX INVESTOR COMPAN IES ARE ASSESSED TO TAX AND THEIR IDENTITY IS NOT IN DOUBT. THEY HAVE CONFI RMED THE TRANSACTIONS AND THE AMOUNTS ARE PAID BY WAY OF CHEQUES THROUGH BANKING CHANNELS. COPY OF THEIR BANK STATEMENTS HAVE BEEN FILED. THE SHARES HAVE BEEN ISSUED AT PAR TO THESE SIX COMPANIES AS WELL AS TO PROMOTER AND HIS FAMILY. 5.7. THE INVESTMENT AND THE CORRESPONDING SOURCE OF FUNDS OF INVESTORS AS SEEN FROM THE COPY OF THEIR AUDITED ACCOUNTS FOR FY 2007-08 IS TABULATED BELOW. 5.8. IT CAN BE SEEN FROM THE OBSERVATION OF THE ASS ESSING OFFICER THAT HE HAS ONLY REFERRED THE INFORMATION RELATED TO THE OU TCOME OF SEARCH IN THE CASE OF SHRI PRAVIN KUMAR JAIN GROUP WHO WERE PROVI DING ACCOMMODATION ENTRIES BUT THE LD.ASSESSING OFFICER HAS FAILED TO DEMONSTRATE ANY SUCH EVIDENCE THAT THE APPELLANT HAS IN REALITY OBTAINED ANY ACCOMMODATION ENTRIES. WHEN THESE COMPANIES ARE FILING REGULAR RE TURN OF INCOME AND THERE IS A TRANSACTION THROUGH BANKING CHANNEL, NO ADDITION CAN BE MADE WITHOUT HAVING ANY CONTRARY OR COGENT EVIDENCES IN POSSESSIONS. OVER SUCH ISSUE THERE ARE PLETHORA OF JUDGEMENTS TO SUPP ORT THE APPELLANT. SOME OF THEM ARE DISCUSSED HERE BELOW:- SR.NO. NAME OF THE SHARE HOLDER TOTAL AMOUNT INVESTED IN (RS.) SHARE CAPITAL AND RESERVES PROFIT AS PER P&L ACCOUNT. - (RS.) 1. M/S KUSH HINDUSTAN ENTERTAINMENT LTD 7,00,000 3,58,30,148 9,41,041 2. M/S REALGOLD TRADING CO. PVTLTD 8,00,000 2,26,22,501 901,383 3. M/S ALKA DIAMOND INDUSTRIES LTD 8,00,000 8,85,42,697 7,04,781 4. M/S JAVDA IMPEX PVT LTD 8,00,000 4,78,74,050 19,99,371 5. M/S LEXUS INFOTECH LTD 9,00,000 3,03,85,264 9,74,361 6. M/S VANGUARD JEWEL LTD 6,00,000 4,87,17,269 5,55,237 TOTAL 46,00,000 5 ITA NO.7053MUM/2016 CO 86/MUM/2017 VIMLA PROPERTIES PVT. LTD. '(I) THE HON'BLE SUPREME COURT IN THE CASE OF CIT V /S LOVELY EXPORTS 6 DTR 308 HAS HELD AS UNDER: 'IF THE SHARE APPLICATION MONEY IS RECEIVED BY THE ASSESSEE COMPANY FROM ALLEGED BOGUS SHARE HOLDERS WHO'S NAME ARE G IVEN TO THE ASSESSING OFFICER THEN THE DEPARTMENT IS FREE TO PR OCEED TO REOPEN THEIR INDIVIDUAL ASSESSMENTS IN ACCORDANCE WITH LAW BUT I T CANNOT BE REGARDED AS UNDISCLOSED INCOME OF ASSESSEE COMPANY'. (II) THE HON'BLE BOMBAY HIGH COURT IN THE CASE OF CIT V/ S CREATIVE WORLD TELEFILMS LTD 333ITR 100 HAS HELD AS UNDER: 'IF THE SHARE APPLICATION MONEY IS RECEIVED BY THE ASSESSEE COMPANY FROM ALLEGED BOGUS SHARE HOLDERS WHO'S NAME ARE GIV EN TO THE ASSESSING OFFICER THEN THE DEPARTMENT CAN ALWAYS PROCEED AGAI NST THEM AND IF NECESSARY REOPEN THEIR INDIVIDUAL ASSESSMENTS. HELD, DISMISSING THE APPEAL, THAT THERE WAS NO DISP UTE THAT THE ASSESSEE HAD GIVEN THE DETAILS OF NAMES AND ADDRESSES OF THE SHAREHOLDERS, THEIR PAN/ GIR NUMBERS AND HAD ALSO GIVEN THE CHEQUE NUMB ERS, NAME OF THE BANKERS. THE ASSESSING OFFICER OUGHT TO HAVE FO UND OUT THEIR DETAILS THROUGH PAN CARDS, BANK REHOLDERS. THUS, THE VIEW T AKEN BY THE TRIBUNAL COULD NOT BE FAULTED. (III) THE HON'BLE SUPREME COURT OF INDIA IN THE CASE OF C IT VS. ORISSA CORPORATION REPORTED IN 159 ITR 78 (SC) HAS HELD AS UNDER: 'THAT IN THIS CASE THE RESPONDENT HAD GIVEN THE NAM ES AND ADDRESSES OF THE ALLEGED CREDITORS. IT WAS IN THE KNOWLEDGE OF T HE REVENUE THAT THE SAID CREDITORS WERE INCOME-TAX ASSESSEE'S. THEIR IN DEX NUMBERS WERE IN THE FILE OF THE REVENUE. THE REVENUE, APART FROM IS SUING NOTICE UNDER SECTION 131 AT THE INSTANCE OF THE RESPONDENT, DID NOT PURSUE THE MATTER FURTHER. THE REVENUE DID NOT EXAMINE THE SOURCE OF INCOME OF THE SAID ALLEGED CREDITORS TO FIND OUT WHETHER THEY ARE CRED ITWORTHY. THERE WAS NO EFFORT MADE TO PURSUE THE SO-CALLED ALLEGED CRED ITORS. IN THOSE CIRCUMSTANCES, THE RESPONDENT COULD NOT DO ANYTHING FURTHER. IN THE PREMISES, IF THE TRIBUNAL CAME TO THE CONCLUSION TH AT THE RESPONDENT HAD DISCHARGED THE BURDEN THAT LAY ON IT, THEN IT C OULD NOT BE SAID THAT SUCH A CONCLUSION WAS UNREASONABLE OR PERVERSE OR B ASED ON NO EVIDENCE'. RELIANCE IS ALSO PLACED ON THE FOLLOWING DECISIONS: 6 ITA NO.7053MUM/2016 CO 86/MUM/2017 VIMLA PROPERTIES PVT. LTD. I. HON'BLE DELHI SIGH COURT IN CASE O/COMMISSIONER OF INCOME TAX V/S. VALUE CAPITAL SERVICES P.LTD. (2OO8) 3O7 ITR 334 (DELHI). II. HON'BLE PUNJAB AND HARYANA HIGH COURT IN THE CASE OF COMMISSIONER OF INCOME TAX V/S. GP INTERNATIONAL LT D. (2O1O)325 ITR 25 (P&H). III. HON'BLE MADRAS HIGH COURT IN THE CASE OF COMMISSION ER OF INCOME TAX V/S. ELECTRO POLYCHEM LTD (2OO7) 294 ITR 661 (MAD). IV. HON'BLE RAJASTHAN HIGH COURT IN CASE OF COMMISSIONE R OF INCOME TAX V/S. AKJ GRANITES P.LTD. (2O08) 3O1 ITR 298 (RAJ.) V. HON'BLE DELHI HIGH COURT IN CASE OF COMMISSIONER OF INCOME TAX V/S. OASIS HOSPITALITIES (PVT.) LTD. (2O11) 51 DTR 74 (DELHI). SEC. 69 PLACES THE BURDEN OF PROOF ON THE TAX PAYER TO EXPLAIN THE NATURE AND SOURCE OF ANY CREDIT FOUND IN THE BOOKS. BUT, W HEN ASSESSEE PROVES OR SUBMIT THE BASIC INFORMATION LIKE IDENTIFICATION , GENUINENESS OF TRANSACTIONS AND CREDITWORTHINESS OF THE CREDITORS, ONUS IS DISCHARGED BY HIM AND IF ASSESSING OFFICER DISBELIEVE THE GENUINE NESS OF THE SAME, HE HAS TO PROVE OTHERWISE, MERELY, DOUBTING OR POINTIN G OUT SOME DISCREPANCY IS NOT THE FOUNDATION FOR DISCARDING TH E GENUINENESS OF THE DEPOSIT OR SHARE MONEY OR SUBSTANCE OF THE MATTER, HELD BY THE HON'BLE SUPREME COURT IN THE CASE OFCIT V. GUJARAT HEAVY CH EMICALS LTD. (2002) 256 ITR 795 (SC). IN VIEW OF THE ABOVE THE QUESTION OF MAKING ANY ADD ITION U/S. 68 OF THE ACT DOES NOT ARISE.' 5.9. FURTHER, HON'BLE JURISDICTIONAL ITAT IN THE CA SE OF ITO-10(2)(3) VS. M/S J.J. MULTITRADE PVT.LTD. ITA NO.2158 & 2159/MUM /2014 ORDER DATED 11.03.2015 HAS DELETED ADDITIONS ON SIMILAR FACTS. FURTHER, THE HON'BLE JURISDICTIONAL ITAT IN THE CASE OF M/S S.D.B. ESTAT E PVTLTD. VS ITO-5(3)(2) ITA NO.584/M/2015 HAS DELETED SIMILAR ADDITION MADE U/S 68 OF THE I.T. ACT. THE HON'BLE ITAT (JAIPUR BENCH) IN THE CASE OF BHARTI SYNTEX LTD. VS. DCIT ITA NOS.172 & 173/JP/2010 HAS HELD IN PARA 24. 4 AS UNDER:- '24.4 IN THIS CASE ALSO NO CROSS EXAMINATION WAS AL LOWED TO THE ASSESSEE. THEREFORE, ADVERSE INFERENCE CANNOT BE DRAWN ONLY O N THE STATEMENT OF SHRI MUKESH CHOKSI. WE FURTHER NOTED THAT ALL OTHER NECESSARY DETAILS HAVE BEEN FILED BEFORE AG. AMOUNTS WERE RECEIVED TH ROUGH ACCOUNT PAYEE CHEQUE. BOTH THE COMPANIES ARE ASSESSED TO TA X IN MUMBAI. CONFIRMATION ALONG WITH COPIES OF SHARE CERTIFICATE , BANK STATEMENT, 7 ITA NO.7053MUM/2016 CO 86/MUM/2017 VIMLA PROPERTIES PVT. LTD. MEMORANDUM OF ARTICLES, COPY OF SHARE APPLICATION M ONEY, AUDITED BALANCE SHEET AND P&L A/C OF THESE PARTIES WERE FIL ED. THESE ARE SIMILAR DETAILS AS WERE FILED IN CASE OF THREE OTHER COMPAN IES FOR ASST. YR. 2005- 06. WE HAVE ALREADY DISPOSED OF THE APPEAL FOR ASST . YR. 2005-06 WHEREBY WE HAVE HELD THAT THE ASSESSEE HAS DISCHARGED ITS O NUS BY FILING NECESSARY DETAILS AND FURTHER HAVE RELIED ON THE DE CISIONS OF HON'BLE SUPREME COURT AND HON'BLE DELHI HIGH COURT ALONG WI TH VARIOUS OTHER DECISIONS OF TRIBUNAL AND HAVE HELD THAT ADDITION C ANNOT BE MADE UNDER S.6J8 IN THE HANDS OF THE ASSESSEE COMPANY. THEREFO RE, IN VIEW OF THE SAME REASONING, WE CANCEL THE ENTIRE ADDITION MADE AND CONFIRMED BY THE LOWER AUTHORITIES HERE ALSO. THE ABOVE DECISION OF ITAT ALSO RELATED TO MR.MUKES H CHOKSI'S CASE OF INVESTMENT IN SHARE APPLICATION MONEY. ON PERUSAL O F ABOVE CASE IT IS CLEAR THAT IF A BOGUS SHAREHOLDER HAS INVESTED THE MONEY AND IF APPELLANT RECEIVES SUCH MONEY AS SHARE APPLICATION MONEY AND APPELLANT DURING ASSESSMENT PROCEEDINGS PROVIDES THE DETAILS LIKE NA ME & ADDRESS OF THE CORPORATE ENTITY, PAN NO., ROC NO., THEN ITAT HELD THAT THIS MAY BE REFERRED TO THE CONCERNED A.O. FOR PROCEEDING AGAIN ST SUCH BOGUS SHAREHOLDERS INSTEAD OF ADDING THE AMOUNT U/S. 68 O F THE I.T. ACT IN THE NAME OF THE COMPANY.' 5.10. THE ASSESSING OFFICER HAS NOT BEEN ABLE TO BR ING ON RECORD ANY DIRECT OR CORROBORATIVE EVIDENCE THAT THE SHARE APP LICATION MONEY RECEIVED IS UNEXPLAINED AS COVERED U/S 68 EVEN AFTER OPPORTU NITY WAS GIVEN IN THE REMAND PROCEEDINGS. THE STATEMENT OF SHRI PRAVEEN J AIN IS NOT SHOWN TO NAME THE APPELLANT SPECIFICALLY. IN ANY CASE, IT IS CARDINAL PRINCIPLE OF NATURAL JUSTICE, THAT BEFORE CONCLUSIONS ARE DRAWN AGAINST A PERSON BASED ON STATEMENT OF A THIRD PARTY, HE MUST BE ALLOWED A N OPPORTUNITY FOR CROSS EXAMINATION. THIS HAS NOT BEEN PROVIDED. IN THIS FACT MATRIX, AND THE JUDICIAL DECISIONS COVERING THE SCOPE OF SECTIO N 68, THE ADDITION MADE OF RS 46 LAKHS U/S 68 IN THE CASE OF THE APPELLANT IS DELETED. THE GROUND OF APPEAL NO 3 IS ALLOWED. 6. SINCE THE LEARNED CIT(A) HAS PASSED A REASONED O RDER, I DO NOT FIND ANY REASON TO INTERFERE WITH THE SAME. SINCE I UPHOLD THE RELIEF GRANTED BY THE LEARNED CIT(A) ON MERITS, I DO NOT FIND IT NECESSARY TO DIS POSE OF THE GROUND RELATING TO THE VALIDITY OF RE-OPENING OF ASSESSMENT URGED BY THE A SSESSEE IN THE CROSS-OBJECTION. 8 ITA NO.7053MUM/2016 CO 86/MUM/2017 VIMLA PROPERTIES PVT. LTD. 7. IN THE RESULT, THE APPEAL FILED BY THE REVENUE A ND THE CROSS-OBJECTION FILED BY THE ASSESSEE ARE DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS DAY OF 20 TH JUNE 2017 SD/- (B R BASKARAN) ACCOUNTANT MEMBER MUMBAI, DATED : 20 TH JUNE, 2017. SA COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT. 2. THE RESPONDENT. 3. THE C I T(A), MUMBAI. 4. THE C I T 5. THE DR, SMC BENCH, ITAT, MUMBAI BY ORDER //TRUE COPY// (ASSISTANT REGISTRAR) INCOME TAX APPELLATE TRIBUNAL, MUMBAI