Nakoda Machinery Pvt.Ltd, Ahmednagar V. Assistant Commissioner of Income-tax, Ahmednagar Circle, Ahmednagar

CO 9/PUN/2019

• Counselvise Citation: [2019] 116 COUNSELVISE.COM (IT) 8067 (ITAT-PUNE)
• Duration Of Justice: 3 month(s) 28 day(s)
• Appeal Type: Cross Objection
• Pronouncement Date: 08-07-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 2009-2010
• Appeal Filed On: 11-03-2019
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Tangible material; Reason to believe; Set aside
• Section: 143(3); 143(1); 68; 148

Judgement Text

] IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH B , PUNE BEFORE MS. SUSHMA CHOWLA, JM AND SHRI ANIL CHATURVEDI, AM . / ITA NO.651/PUN/2017 / ASSESSMENT YEAR : 2009-10 THE ASST.COMMISSIONER OF INCOME TAX , AHMEDNAGAR CIRCLE, AHMEDNAGAR. . APPELLANT V/S NAKODA MACHINERY PVT. LTD., A-4/5, RAJ CHAMBERS, KOTHALA STAND, AHMEDNAGAR. PAN : AABCN9055E. RESPONDENT !. / CO NO.09/PUN/2019 (ARISING OUT OF ITA NO.651/PUN/2017 / ASSESSMENT YEAR : 2009-10 NAKODA MACHINERY PVT. LTD., A-4/5, RAJ CHAMBERS, KOTALA STAND, AHMEDNAGAR. PAN : AABCN9055E. . CROSS-OBJECTOR. V/S THE ASST.COMMISSIONER OF INCOME TAX, AHMEDNAGAR CIRCLE, AHMEDNAGAR. . APPELLANT IN THE APPEAL. ASSESSEE BY : SHRI PANKAJ GARG. REVENUE BY : SHRI NIKHIL PATHAK. / ORDER PER ANIL CHATURVEDI, AM : 1. THE PRESENT APPEAL FILED BY THE REVENUE AND THE C.O. FILE D BY THE ASSESSEE ARE DIRECTED AGAINST THE ORDER OF COMM ISSIONER OF / DATE OF HEARING : 12.06.2019 / DATE OF PRONOUNCEMENT: 08.07.2019 2 INCOME TAX (APPEALS) 2, PUNE DATED 28.11.2016 FOR THE ASSESSMENT YEAR 2009-10. 2. THE RELEVANT FACTS AS CULLED OUT FROM THE MATERIAL ON R ECORD ARE AS UNDER:- ASSESSEE IS A COMPANY STATED TO BE ENGAGED IN THE BUS INESS OF MANUFACTURING AND TRADING OF INDUSTRIAL MACHINERY, ROCK DR ILL MACHINERY AND SPARE PARTS. ASSESSEE FILED ITS ORIGINAL RET URN OF INCOME FOR A.Y. 2009-10 ON 29.09.2009 DECLARING TOTAL INCOME OF RS.308,27,880/-. SUBSEQUENTLY, NOTICE WAS ISSUED U/S 148 OF THE ACT DATED 30.03.2014 WAS SERVED ON THE ASSESSEE AND IN RESPONSE TO WHICH ASSESSEE SUBMITTED THAT THE RETURN FILED BY THE ASSESSEE ON 29.09.2009 BE CONSIDERED AS RETURN FILED IN RE SPONSE TO NOTICE U/S 148 OF THE ACT. THE CASE WAS TAKEN UP FOR SCRUTINY AND THEREAFTER ASSESSMENT WAS FRAMED U/S 143(3) R.W.S. 14 7 OF THE ACT VIDE ORDER DT.27.02.2015 DETERMINING TOTAL INCOME A T RS.5,33,27,880/-. AGGRIEVED BY THE ORDER OF AO, ASSESSEE CARRIED THE MATTER BEFORE LD.CIT(A), WHO VIDE ORDER DT.28.11.2016 (IN APPEAL NO.PN/CIT(A)-2/DCIT, CIR/PN/61/2015-16) UPHELD THE RE-OPENING OF THE ASSESSMENT, BUT HOWEVER ON MERITS DELE TED THE ADDITION MADE U/S 68 OF THE ACT. AGGRIEVED BY THE ORDER OF LD.CIT(A), REVENUE IS NOW IN APPEAL BEFORE US AND HAS RAISE D THE FOLLOWING GROUNDS : 1. THE ORDER OF THE LEARNED COMMISSIONER OF INCOME -TAX (APPEALS) IS CONTRARY TO LAW AND TO THE FACTS AND CIRCUMSTANCES OF THE CASE. 2. THE LEARNED COMMISSIONER OF INCOME-TAX(APPEALS) ERRED IN DELETING THE ADDITION OF RS.2,25,00,000/- MADE BY T HE AO U/S 68 OF THE IT ACT. 3 3. THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS) GROSSLY ERRED, IN IGNORING THE FACT THAT THE ASSESSEE FAILE D TO ESTABLISH GENUINENESS AND CREDITWORTHINESS OF THE S HARE APPLICATION MONEY. 4. THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS) GROSSLY ERRED, IN IGNORING THE FACT THAT THE ASSESSEE NEITH ER PRODUCED THE PRINCIPAL PERSONS OF THE COMPANY WHO INVESTED I N SHARES NOR MADE ANY SUBMISSION IN THIS REGARD. 5. THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS) GROSSLY ERRED, IN IGNORING THE FACT THAT THE INVESTOR COMPA NIES ARE HAVING NIL FIXED ASSETS, AS SUCH THEY ARE JUST PAPE R COMPANIES. 6. FOR THESE AND SUCH OTHER GROUNDS AS MAY BE URGED AT THE TIME OF HEARING, THE ORDER. OF THE LD. COMMISSIONER OF INCOME-TAX (APPEALS) MAY BE VACATED AND THAT OF THE ASSESSING OFFICER BE RESTORED. 3. ON THE OTHER HAND, ASSESSEE HAS FILED C.O. AND T HE GROUNDS RAISED BY THE ASSESSEE READS AS UNDER : 1. THE LEARNED CIT(A) ERRED IN CONFIRMING THE VA LIDITY OF REOPENING U/S 148 WITHOUT APPRECIATING THAT THE REOPENING OF THE CASE WAS BASED ON REASON TO SUSPECT AND NOT REASON TO BELIEV E AND ACCORDINGLY, THE REOPENING WAS INVALID IN LAW. 2. THE LEARNED CIT(A) FAILED TO APPRECIATE THAT T HE LEARNED A.O. HAS REOPENED THE CASE ON THE BASIS OF INFORMATION RECEI VED FROM ROC WITHOUT INDEPENDENTLY APPLYING HIS MIND AND THEREFO RE, SINCE THE REASONS RECORDED ARE VAGUE AND NOT BASED ON ANY TAN GIBLE MATERIAL, THE REOPENING U/S 148 IS INVALID IN LAW AND ACCORDINGLY, THE REASST. ORDER PASSED U/S 147 BE DE CLARED NULL AND VOID. 4. IN THE C.O., THE ASSESSEE HAS CHALLENGED THE VALIDITY OF THE RE-OPENING OF ASSESSMENT. WE THEREFORE FIRST PROCEED TO DECIDE THE C.O. FILED BY THE ASSESSEE. 5. BEFORE US, LD.A.R. POINTED TO THE REASONS FOR RE-OPENING OF ASSESSMENT WHICH ARE NOTED BY LD.CIT(A) AT PARA 4 AND 5 OF THE ORDER. FROM THE AFORESAID REASONS, HE SUBMITTED THAT TH E ASSESSMENT WAS RE-OPENED ONLY FOR THE REASON THAT AS SESSEE HAD ISSUED SHARES AT A HUGE PREMIUM. HE SUBMITTED THAT AO WAS OF 4 THE OPINION THAT CONSIDERING THE FACT THAT HUGE PREMIUM W AS RECEIVED BY THE ASSESSEE, THE SHARE PREMIUM RECEIVED BY THE ASSESSEE HAS ESCAPED ASSESSMENT. HE POINTING TO THE R EASONS SUBMITTED THAT THE AO HAS NOT POINTED OUT AS TO HOW T HE PREMIUM RECEIVED BY THE ASSESSEE WAS UNREASONABLE AND HE HAD ONLY REFERRED TO THE INFORMATION RECEIVED FROM ROC IN RESP ECT OF THE PILOT PROJECT AND HAD NOT INDEPENDENTLY APPLIED HIS M IND WHILE RE-OPENING THE CASE. HE SUBMITTED THAT AO HAS PRO CEEDED ONLY ON THE BASIS OF THE INFORMATION RECEIVED FROM ROC AND THERE HAS BEEN NO APPLICATION OF MIND BY THE AO TO COME TO AN INDEPENDENT CONCLUSION THAT HE HAD REASON TO BELIEVE THAT INCOME HAS ESCAPED ASSESSMENT DURING THE YEAR. HE HAS SUBMIT TED THAT THE REASONS RECORDED FOR REOPENING NOTICE ARE VAGUE A ND ARE NOT BASED ON ANY TANGIBLE MATERIAL. HE FURTHER SUBMITTED THA T THE AO HAS NOT REFERRED TO ANY INFORMATION OR MATERIAL AVAILABLE WITH HIM TO HOLD A BELIEF THAT THE TRANSACTION OF ISSUE OF SHARE S IS BOGUS. HE SUBMITTED THAT MERELY BECAUSE THE SHARES W ERE ISSUED AT A PREMIUM CANNOT BE A GROUND TO TREAT THE SHARE P REMIUM AS THE INCOME OF THE ASSESSEE. HE THEREAFTER POINTED TO TH E SUBMISSIONS MADE BY THE ASSESSEE BEFORE LD.CIT(A) WHICH A RE REPRODUCED AT PAGE NO.6 OF THE PAPER BOOK AND FROM THE AFORESAID TABLE, HE POINTED TO THE FACT THAT THE BOOK VA LUE PER SHARE OF THE ASSESSEE OF RS.100/- EACH WAS RS.1361.93 AN D HAD ISSUED EQUITY SHARES AT RS.1500/- PER SHARE AND THUS IT WAS NOT A CASE OF AN UNREASONABLE PREMIUM. HE THEREAFTER SUBMITT ED THAT TO ASCERTAIN THE NATURE AND JUSTIFICATION FOR CHARGIN G SHARE PREMIUM, THE AO MUST HAVE REASON TO BELIEVE THAT CHARG ING OF 5 SHARE PREMIUM OVER AND ABOVE THE INTRINSIC VALUE OF THE SHARE IS INCOME WHICH HAS ESCAPED ASSESSMENT. HE PLACED RELIANCE ON THE DECISION OF HONBLE BOMBAY HIGH COURT IN THE CASE OF KHUBCHANDANI HEALTHPARKS (P.) LTD., VS. ITO REPORTED IN (2016 ) 68 TAXMANN.COM 91 AND ALSO PLACED ON RECORD THE COPY O F THE AFORESAID DECISION. HE ALSO PLACED RELIANCE ON THE DECISION OF HONBLE GUJARAT HIGH COURT IN THE CASE OF PUSHPAK BULLION (P) LTD., VS. DCIT REPORTED IN (2016) 71 TAXMANN.COM 326 AND A LSO THE DECISION OF MUMBAI BENCH OF THE TRIBUNAL IN THE CASE O F DCIT VS. KARGWAL PRODUCTS PVT. LTD. REPORTED IN (2018) 54 CCH 0 515. HE ALSO PLACED ON RECORD THE COPY OF THE AFORESAID DECIS IONS. HE THEREFORE SUBMITTED THAT THE ORDER OF RE-ASSESSMENT PA SSED BY THE AO BE SET ASIDE. LD. D.R. ON THE OTHER HAND SUPPOR TED THE ORDER OF AO. 6. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. THE ISSUE IN THE PRESENT GROUND IS W ITH RESPECT TO CHALLENGING THE VALIDITY OF THE ASSESSMENT U/S 148 OF THE ACT. IT IS AN UNDISPUTED FACT THAT THE CASE WAS RE -OPENED BY THE AO FOR THE REASONS AS NOTED FOR ISSUING NOTICE WAS T HAT ASSESSEE HAD ALLOTTED 1500 EQUITY SHARES WITH THE TOTAL PREMIUM AMOUNTING OF RS.2.10 CRORE AND ACCORDING TO THE AO, THE SHARES WERE ALLOTTED AT A VERY HIGH PREMIUM AND THUS, HE HAD RE ASON TO BELIEVE THAT INCOME TO THE EXTENT OF RS.2.10 CRORE HAS ES CAPED ASSESSMENT. THE AFORESAID INFORMATION OF RECEIPT OF HUGE PREMIUM FOR ISSUE OF SHARES WAS ON THE BASIS OF THE INFORMA TION RECEIVED FROM ROC. THE PERUSAL OF THE REASONS DOES NOT INDICATE 6 OR QUANTIFY THE EXTENT TO WHICH THE SHARE PREMIUM RECE IVED BY THE ASSESSEE WAS IN EXCESS OF ITS INTRINSIC VALUE WHICH H AS ESCAPED ASSESSMENT. WE FIND THAT IDENTICAL ISSUE AROSE BE FORE THE HONBLE BOMBAY HIGH COURT IN THE CASE OF KHUBCHAND ANI HEALTHPARKS PVT. LTD. (SUPRA) WHEREIN IT HELD THAT THE NOT ICE ISSUED U/S 148 OF THE ACT TO BE WITHOUT JURISDICTION IN TH E ABSENCE OF REASON TO BELIEVE THAT INCOME HAD ESCAPED ASSESSMENT. THE RELEVANT PARA READS AS UNDER : 9. THE REASON IN SUPPORT OF THE IMPUGNED NOTICE PR OCEED ON THE BASIS THAT THE REGULAR RETURN OF INCOM E WAS ASSESSED BY INTIMATION UNDER SECTION 143(1) OF THE ACT AND NO S CRUTINY ASSESSMENT WAS DONE . IN TH E ABOVE VIEW, TO ASCERTAIN THE NATURE AND THE JUSTIFICATION FOR CHARGING SHARE PREMIUM, T HE ASSESSING O F FICE R HAS REASON TO BELIEVE THAT CHARGING OF SHARE PREMIU M OVER AND ABOVE THE INTRINSIC VALUE OF THE SHAR E I S INCOME WHICH HAS ESCAPED ASSESSMENT . THE NOTICE ITSELF DOES NOT INDICATE THE APPROXIMATE AMOUNT OF INCOME, WHICH THE ASSESSING OFFICER HAS REASON TO B ELIEVE HAS ESCAPED ASSESSMENT NOR DOES IT QUANT L1 Y TH E EXTENT TO WHICH THE SHARE PREMIUM RECEIVED WAS IN E X CESS OF INTRINSIC VALUE, WHICH HAS ESC A P E D ASSESSMENT . IT GIVES NO REASONS TO INDICATE THE BASIS OF COMING TO THE CONC LUSION THAT SHARE PREMIUM IS EXCESSIVE AND, THEREFORE, INCOME. MOREOVER, THE NOTICE ALSO DOES NOT DISPUTE THAT TH IS I S A SH ARE PRE M I UM BUT SEEK JUSTIFICATION FO R CHARGING THE SHARE PRE MIUM OVER AND ABOVE INTRINSIC VALUE O F THE S H A R E PR E MI U M . PRIMA - FACI E , WE ARE OF THE VIEW THAT THE BASIS OF THE IMPUGNED NOTICE STANDS C ONCLUDED BY TH E D EC I S I O N OF TH I S COURT IN VODAFONE INDIA SERVICES (P . )LTD . V . CIT [2014] 368 ITR 1 / 50 TAXMANN.COM 3 0 0 / [ 201 5] 228 TAXMAN 25 (BOM . ), WHEREIN IT HAS BEEN HELD THAT THE SHARE PREMIUM BEING ON THE CAPITAL AMOUNT C A NN OT B E SUBJECTED TO TAX AS INCOME. IN THE PRESENT CASE, WE ARE OF THE VIEW THAT THE RATIO OF DECISION OF HONBLE BOMBAY HIGH COURT IN THE CASE OF KHUBCHANDANI HEALTHPARKS (SUPRA) WOULD BE APPLICABLE. WE THEREFORE RELYIN G ON THE AFORESAID DECISION HOLD THAT THE RE-OPENING OF THE ASS ESSMENT TO BE INVALID. THUS, THE GROUNDS OF THE ASSESSEE ARE ALLOWED. 7 7. AS FAR AS APPEAL OF REVENUE IN ITA NO.651/PUN/20 17 IS CONCERNED, S INCE WE HAVE HEREIN ABOVE HELD THE RE-OPENING OF THE ASSESSMENT ITSELF TO BE INVALID, THE OTHER GROUNDS RAISED B Y THE REVENUE ON MERITS HAVE BEEN RENDERED ACADEMIC AND TH EREFORE REQUIRES NO ADJUDICATION AND HENCE, THE SAME ARE NOT AD JUDICATED AND THEREFORE DISMISSED. THUS, THE GROUNDS OF THE REVENUE ARE DISMISSED. 8. IN THE RESULT, THE C.O. OF THE ASSESSEE IS ALLOWED AND THE APPEAL OF REVENUE IS DISMISSED. ORDER PRONOUNCED ON 8 TH DAY OF JULY, 2019. SD/- SD/- ( SUSHMA CHOWLA ) ( ANIL CHATURVEDI ) $ / JUDICIAL MEMBER %$ / ACCOUNTANT MEMBER PUNE; DATED : 8 TH JULY, 2019. YAMINI &'()*)' / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. ! / THE RESPONDENT 3. 4. 5. 6. CIT(A) -2, PUNE. PR.CIT-1, PUNE. '#$!% %&',)! !&' , / DR, ITAT, B PUNE; $+,-/ GUARD FILE. / BY ORDER , ! // / TRUE COPY / / // TRUE COPY // . /0%1&2 / SR. PRIVATE SECRETARY )! !&' , / ITAT, PUNE.