ACIT CEN CIR-40, MUMBAI V. RUCHI CREDIT CORPORATION LTD, MUMBAI

ITA 1049/MUM/2009

• Counselvise Citation: [2010] 136 COUNSELVISE.COM (IT) 7393 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 26 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-03-2010
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: D
• Next Hearing Date: 04-03-2010
• Assessment Year: 2004-2005
• Appeal Filed On: 16-02-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: T T JACOB
• Keywords: Unexplained cash credit; Additional evidence; Reasonable cause
• Section: 143(3); 133(6); 143(2); 131; 68

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL 'D' BENCH, MUMBAI BEFORE SHRI R.K. GUPTA, JUDICIAL MEMBER AND SHRI B. RAMAKOTAIAH, ACCOUNTANT MEMBER ITA NO. 1049/MUM/2009 (ASSESSMENT YEAR: 2004-05) ACIT, CENTRAL CIRCLE 40 M/S. RUCHI CREDIT CORPORATI ON LTD. ROOM NO. 653, 6TH FLOOR 706, TULSAINI CHAMBERS AAYAKAR BHAVAN, M.K. ROAD VS. NARIMAN POINT, MUMBAI 400021 MUMBAI 400020 PAN - AAACR 0976 R APPELLANT RESPONDENT APPELLANT BY: SHRI T.T. JACOB RESPONDENT BY: NONE O R D E R PER B. RAMAKOTAIAH, A.M. THIS APPEAL BY THE REVENUE IS AGAINST THE ORDER OF THE CIT(A), CENTRAL VII, MUMBAI DATED 01.12.2008. 2. REVENUE HAS RAISED THE FOLLOWING GROUND: - ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) ERRED IN DELETING THE ADDITION OF RS.30,00,0 00/- MADE ON ACCOUNT OF UNEXPLAINED CASH CREDIT U/S 68, EVEN THOUGH THE ONUS CAST ON THE ASSESSEE TO PROVE IDENTITY, CREDITWORTHINESS OF THE PARTIES AS ALSO GENUINENESS OF THE RELEVANT TRANSACTIONS WAS NOT DI SCHARGED TO THE SATISFACTION OF THE ASSESSING OFFICER. 3. BRIEF FACTS LEADING TO THE PRESENT APPEAL ARE THAT THE A.O. HAS MADE AN ADDITION OF RS.30,00,000/- RECEIVED OUT OF THE SHAR E APPLICATION MONEY OF RS.51.50 LAKHS DURING THE YEAR. THE ABOVE RS.30,00, 000/- HAS BEEN RECEIVED FROM 3 GROUP COMPANIES OF RS.10,00,000/- EACH TO WH OM SUBSEQUENTLY 1 LAKH SHARES HAVE BEEN ALLOTTED. THE ASSESSING OFFIC ERS MAIN REASON FOR DISALLOWANCE IS THAT THE ENQUIRIES MADE BY THE INSP ECTOR AT THE GIVEN ADDRESSES INDICATES THAT THE COMPANIES DO NOT EXIST AND THE DETAILED QUESTIONNAIRES ISSUED TO THE ASSESSEE COMPANY YIELD ED ONLY PAN AND HAS NOT GIVEN ANY DETAILED REPLY TO THE ENQUIRIES RAISE D. THE A.O. WAS OF THE OPINION THAT THESE 3 COMPANIES ARE ONLY PAPER COMPA NIES AND SO THE SHARE ITA NO. 1049/MUM/2009 M/S. RUCHI CREDIT CORPORATION LTD. 2 APPLICATION MONEY IS TREATED AS INCOME UNDER SECTI ON 68 OF THE INCOME TAX ACT. THE ASSESSEE CONTESTED THE SAME AND AMONGST OT HER CONTENTIONS IT WAS THE CONTENTION THAT THE A.O. HAS NOT GIVEN ENOUGH O PPORTUNITY TO FURNISH ADDITIONAL EVIDENCES IN SUPPORT OF THE CONTENTIONS THAT THE THREE COMPANIES HAVE GAVE THE AMOUNT BY ACCOUNT PAYEE CHEQUES. THE INVESTMENT HAS BEEN SHOWN IN THE BALANCE SHEET, THERE WERE CONFIRMATION S FROM THOSE COMPANIES AND THEIR RETURNS HAVE BEEN ACCEPTED BY THE DEPARTM ENT. THE THREE ESSENTIAL INGREDIENTS OF IDENTITY, CAPACITY AND GEN UINENESS HAVE BEEN SUBMITTED TO THE A.O. AND THE A.O. HAS SIMPLY DISAL LOWED THE AMOUNT ON INSPECTORS ENQUIRY, WHICH WAS NOT CONFRONTED TO TH E ASSESSEE. THE CIT(A) REMANDED THE ADDITIONAL EVIDENCES TO THE A.O. UNDER RULE 46A AND AFTER OBTAINING THE REPORT DELETED THE SAID ADDITION BY H OLDING AS UNDER: - 5. IT MAY BE STATED HERE THAT THE APPELLANT IN THE COURSE OF APPEAL PROCEEDINGS, SUBMITTED CERTAIN DOCUMENTS AND PAPERS STATED TO BE ADDITIONAL EVIDENCE AS THE SAME COULD NOT BE SUBMIT TED AT THE TIME OF ASSESSMENT PROCEEDINGS. IT IS CONTENDED THAT THE AP PELLANT IS ONE OF THE ENTITIES OF THE RUCHI GROUP OF CASES IN WHICH SEARC H ACTION WAS UNDERTAKEN AND SEARCH ASSESSMENT PROCEEDINGS WERE T AKEN UP AT A TIME. THE APPELLANT, DESPITE WORKING DAY AND NIGHT IN MAK ING COMPLIANCE TO NOTICES, LOST SIGHT OF CERTAIN DETAILS WHICH HAVE B EEN FURNISHED AT THE APPELLATE STAGE. BESIDES, ASSESSMENT PROCEEDINGS WE RE TAKEN UP FOR HEARING IN THE MONTH OF OCTOBER, 2007 AND THE ASSES SMENTS FOR SEVERAL YEARS WERE COMPLETED ON 31.12.2007 WITHOUT GIVING A DEQUATE TIME AND OPPORTUNITY. IN VIEW OF SUCH CONTENTIONS OF THE APP ELLANT, IN TERMS OF RULE 46A, SUCH ADDITIONAL EVIDENCES WERE ACCEPTED AND TH E SAME WERE DULY FORWARDED TO THE ASSESSING OFFICER FOR SUBMISSION O F NECESSARY COMMENTS/REPORT VIDE LETTER DATED 13.3.2008. HOWEVE R, AFTER SEVERAL REMINDERS, THE ASSESSING OFFICER HAS PREFERRED TO C ONTEST ACCEPTANCE OF SUCH ADDITIONAL EVIDENCES RATHER THAN THE GIVING RE PORT ON MERITS THEREOF. IT IS STATED THAT THE APPELLANT DESPITE ADEQUATE OP PORTUNITY ALLOWED IN THE MATTER DID NOT COME WITH RELEVANT EVIDENCES AT THE TIME OF ASSESSMENT PROCEEDINGS AND AS SUCH THESE EVIDENCE COULD NOT BE ENTERTAINED AT THIS STAGE, IN VIOLATION OF THE PROVISIONS OF RULE 46A. ON DUE CONSIDERATION SUCH CONTENTION AND THE SUBMISSION MADE BY THE APPE LLANT, I DO NOT FIND ANY MERIT IN THE OBJECTIONS RAISED BY THE ASSESSING OFFICER. IT IS EVIDENT FROM THE ABOVE STATED FACTS THAT THE APPELLANT WAS PREVENTED FROM REASONABLE CAUSE IN PRODUCING RELEVANT DETAILS DURI NG ASSESSMENT PROCEEDINGS AS LARGE NUMBER OF ASSESSMENT PROCEEDIN GS OF VARIOUS GROUP CONCERNS WERE TAKEN UP FOR SEVERAL ASSESSMENT YEARS , ALMOST SIMULTANEOUSLY BY SAME ASSESSING OFFICER. MOREOVER, THE ASSESSMENT PROCEEDINGS WERE TAKEN UP QUITE LATE WITH ONLY A FE W DAYS LEFT FOR THE ASSESSMENTS TO GETTING BARRED BY TIME LIMITATION WH ICH IS EVIDENT FROM THE FACT THAT THOUGH THE RETURN WAS FILED BY THE APPELL ANT ON 9.8.2007, THE FIRST NOTICE U/S 143(2) WAS SERVED AS LATE AS 8.10. 2007 AND THE ITA NO. 1049/MUM/2009 M/S. RUCHI CREDIT CORPORATION LTD. 3 ASSESSMENT ORDER WAS PASSED AFTER A FEW HEARINGS ON 28.12.2007, WITHOUT MAKING ANY EFFORT TO EXAMINE THE MATTER IND EPENDENTLY AND CONDUCTING ANY ENQUIRY WORTH THE NAME. BESIDES, THE ASSESSING OFFICER HAS CHOSEN TO INFRINGE ON THE JUDICIAL POWERS OF TH E APPELLATE AUTHORITY RATHER THAN THE APPRECIATING AND ANALYZING THE EVID ENCES FURNISHED BY THE APPELLANT AT THE APPELLATE STAGE. IT IS A SETTL ED LAW THAT THE CIT(A), IN THE INTERESTS OF JUSTICE CAN ENTERTAIN ANY PIECE OF EVIDENCE WHICH HELPS HIM IN DECIDING THE APPEAL BEFORE HIM. 5.1 IN THE CASE OF CIT VS. SURETECH HOSPITAL AND RESEARCH LTD. (2007) 164 TAXMAN 168 (BOM), IT HAS BEEN CATEGORICALLY HELD THAT THE CIT(A) HAS THE POWER TO RECEIVE NEW/ADDITIONAL EVID ENCE FOR DECIDING ISSUES IN TERMS OF RULE 46A(4), IF THE SAME IS NECE SSARY FOR DISPOSAL ON MERITS. IN ANOTHER CASE OF CIT VS. SHIYA DAWOODI BOHRA JAMAMT (2008) 170 TAXMAN 293 9MP), IT WAS HELD BY THE HON'BLE COURT THAT EVERY APPELLANT HAS THE RIGHT TO FILE ADDITIONAL EV IDENCE IN SUPPORT OF ITS CASE AND IF THE APPELLATE AUTHORITY FEELS THAT ADDI TIONAL EVIDENCES ARE MATERIAL FOR DECIDING CONTROVERSY IN THAT CASE, THE N IN THE INTEREST OF JUSTICE SAME CAN BE ALLOWED TO BE FILED. IN YET ANO THER CASE OF DCIT VS THORESEN CHARTERING SINGAPORE (PTE) LTD (2008) 24 S OT 433 (MUM), LIKEWISE, IT WAS HELD THAT RULE 46A(4) PROVIDES TH AT CIT(A) HAS THE POWER FOR PRODUCTION OF ANY DOCUMENT ETC. FOR E NABLING HIM TO DISPOSE OF THE APPEAL. RELIANCE IS ALSO PLACED ON T HE CASE OF ITO VS INDUSTRIAL ROADWAYS (2008) 112 TID 293 (MUM) AND AR UNA JAIN VS DCIT (2008) 21 SOT 218 (DEL) WHERE SIMILAR DECISION HAS BEEN RENDERED. THE FACT REMAINS THAT IN TERMS OF RULE 46 A, THE ASSESSING OFFICER WAS DULY CONFRONTED WITH THE ADDITIONAL EVI DENCES AND EVEN AFTER A LAPSE OF MORE THAN SEVEN MONTHS, HE HAS CHOSEN TO CONTEST ON TECHNICAL GROUND AND NOT ON MERITS OF THE CASE. IN VIEW OF THE FACTS AND CIRCUMSTANCES OF THE CASE AND THE DECISIONS CITED A BOVE, ADDITIONAL EVIDENCES FILED BY THE APPELLANT ARE BEING CONSIDER ED WHILE ADJUDICATING ON THE MERITS OF THE ADDITION MADE BY THE ASSESSING OFFICER. 5.2 ON CAREFUL CONSIDERATION OF THE FACTS AND THE C IRCUMSTANCES OF THE CASE, I DO NOT FIND ANY MERIT IN THE ACTION OF THE SO IN MAKING THE ADDITION WITHOUT MAKING ANY EFFORT TO SUBSTANTIATE THE CONCLUSION DRAWN BY HIM. FROM DETAILS SUBMITTED BY THE APPELLANT DUR ING ASSESSMENT AND APPEAL PROCEEDINGS, IT IS APPARENT THAT ALL THE ABO VE SHAREHOLDERS WHO ARE ALL PART OF RUCHI GROUP AND ARE NOT STRANGERS T O THE APPELLANT, ARE REGULARLY ASSESSED TO INCOME TAX IN THEIR RESPECTIV E CASES. IN FACT, INU EXPORTS P. LTD. HAS BEEN ASSESSED BY THE ITO, 3(2)( 1), MUMBAI FOR AY 2005-06 VIDE ASSESSMENT ORDER DATED 28.12.2007 U/S 143(3) OF THE ACT. IT HAS BEEN REGULARLY FILING INCOME TAX RETURNS FOR PAST YEARS AS WELL AS EVIDENT FROM COPIES OF ACKNOWLEDGEMENT OF RETURNS F OR AY 2003-04/ 2004-05. LIKEWISE, ANOTHER COMPANY I.E. JAVA IMPEX P. LTD. HAS BEEN ASSESSED FOR AY 2005-06 VIDE ORDER DATED 27.12.2007 BY ITO, 9(2)(1), MUMBAI U/S 143(3) AND HAS FILED RETURN FOR AY 2004- 05 AS WELL. SIMILARLY, THE OTHER COMPANY I.E. TARULATA TRADING P. LTD. HAS BEEN ASSESSED U/S 143(3) BY THE ITO, 3 (3)(3), MUMBAI FO R AY 2001-02 AS PER ORDER DATED 12.3.2004 AND HAS ALSO FILED RETURN FOR AY 2003-04. THE ITA NO. 1049/MUM/2009 M/S. RUCHI CREDIT CORPORATION LTD. 4 COPIES OF AUDITED ACCOUNTS OF SUCH COMPANIES CLEARL Y BRING OUT THE FACT OF SHAREHOLDING IN THE APPELLANT COMPANY BY THEM. 5.3 THUS, SEEN IN THE CONTEXT OF SUCH OVERWHELMING EVIDENCES, I DO NOT FIND ANY MERIT IN THE ACTION OF THE ASSESSING O FFICER IS HURRYING TO THE CONCLUSION THAT THE IMPUGNED SUM WAS LIABLE TO BE T AXED AS UNEXPLAINED CASH CREDIT IN THE HANDS OF THE APPELLANT. IT IS AP PARENT THAT HE HAS FAILED TO MAKE ANY INDEPENDENT ENQUIRY IN THE MATTE R AND BASED THE ADVERSE FINDINGS ON THE REPORT OF THE INSPECTOR ONL Y. THERE IS NO MATERIAL ON RECORD TO SHOW THAT EVEN A LETTER U/S 133(6) OR SUMMONS U/S 131 WERE ISSUED TO ANY OF SUCH COMPANIES. THE APPELLANT HAD PROVIDED THE PAN OF THE COMPANIES BUT NO EFFORT SEEMS TO HAVE BE EN MADE TO OBTAIN RELEVANT INFORMATION FROM THE RESPECTIVE AOS, THOUG H ALL SUCH COMPANIES ARE BEING ASSESSED AT MUMBAI ITSELF. EVEN, IN THE R EMAND PROCEEDINGS, THE ASSESSING OFFICER PREFERRED TO SIT OVER THE MAT TER WITHOUT MAKING ANY SUCH EFFORT. THERE IS ABSOLUTELY NO SUBSTANCE IN TH E ADDITION MADE AS THE APPELLANT HAS DISCHARGED THE PRIMARY ONUS IN THE MA TTER BY ESTABLISHING THE IDENTITY AND CREDITWORTHINESS OF THE SHAREHOLDE R COMPANIES AS ALSO THE GENUINENESS OF THE TRANSACTIONS. ACCORDINGLY, T HE ADDITION MADE IS HEREBY DELETED . 4. WE HAVE HEARD THE LEARNED D.R. AND PERUSED THE RECO RD. AS SEEN FROM THE FACTS OF THE CASE AND THE DETAILED ORDER PASSED BY THE CIT(A), WE DO NOT SEE ANY REASON TO CONSIDER THE GROUND OF THE REVENU E. IT IS A FACT THAT THE A.O. HAS HURRIED THE ASSESSMENT PROCEDURE AND HAS N OT MADE ANY DETAILED ENQUIRIES. THE CIT(A) VALIDLY CONSIDERED THE ADDITI ONAL EVIDENCES, SENT THEM TO THE A.O. FOR EXAMINATION AND REPORT AND AFTER LA PSE OF CONSIDERABLE TIME THE A.O. CHOOSE TO CONTEST ON TECHNICAL ISSUES RATH ER THAN CONSIDERING THE MERITS. THE CIT(A) HAS CONSIDERED THE EVIDENCES ON RECORD, VARIOUS LEGAL PRINCIPLES AND ALSO THE FACTS OF GENUINENESS OF SHA RE APPLICATION MONEY RECEIVED AND ACCORDINGLY HE DELETED THE ADDITION. S INCE NOTHING WAS BROUGHT ON RECORD BY THE REVENUE TO CONTEST THE FINDINGS OF THE CIT(A), WE UPHOLD THE SAID ORDER. THE REVENUES GROUND IS REJECTED. 5. IN THE RESULT, APPEAL DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 12 TH MARCH 2010. SD/- SD/- (R.K. GUPTA) (B. RAMAKOTAIAH) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI, DATED: 12 TH MARCH 2010 ITA NO. 1049/MUM/2009 M/S. RUCHI CREDIT CORPORATION LTD. 5 COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT(A) CENTRAL VII, MUMBAI 4. THE CIT CENTRAL IV, MUMBAI CITY 5. THE DR, D BENCH, ITAT, MUMBAI BY ORDER //TRUE COPY// ASSISTANT REGISTRAR ITAT, MUMBAI BENCHES, MUMBAI N.P.