ITO,Ward-3(2), Kolkata, Kolkata V. M/s. Steel Emporium Ltd, Kolkata

ITA 1061/KOL/2012

• Counselvise Citation: [2016] 121 COUNSELVISE.COM (IT) 3237 (ITAT-KOLKATA)
• Duration Of Justice: 3 year(s) 6 month(s) 20 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 05-02-2016
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 25-08-2014
• Assessment Year: 2009-2010
• Appeal Filed On: 16-07-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SANJIT DAS JCIT SRDR
• Assessee Lawyers: JAI NARAYAN GUPTA
• Keywords: Earning of tax free income; Speculation loss; Speculative transactions
• Section: 143(3); 14A; 133(6); 68

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL KOLKATA BENCH B KOLKATA BEFORE SHRI N.V.VASUSDEVAN, JUDICIAL MEMBER AND SHRI WASEEM AHMED, ACCOUNTANT MEMBER ITA NO. 1061 / KOL / 2012 ASSESSMENT YEAR :2009-10 ITO WARD-3(2), ESPLANADE EAST, DWARLI HOUSE, GR. FLOOR, KOLKATA-700069 V/S . M/S STEEL EMPORIUM LTD., 51, N.S. ROAD, KOLKATA 700 001 [ PAN NO.AADCS 9113 N ] /APPELLANT .. / RESPONDENT /BY APPELLANT SHRI SANJIT DAS, JCIT, SR-DR /BY RESPONDENT JAI NARAYAN GUPTA, FCA /DATE OF HEARING 21-12-2015 /DATE OF PRONOUNCEMENT 05-02-2016 / O R D E R PER WASEEM AHMED, ACCOUNTANT MEMBER:- THIS APPEAL BY THE REVENUE IS AGAINST THE ORDER OF COMMISSIONER OF INCOME TAX (APPEALS)-I, KOLKATA DATED 23.04.2012. A SSESSMENT WAS FRAMED BY ITO WARD-3(2), KOLKATA U/S 143(3) OF THE INCOME TAX ACT, 1961 (HEREINAFTER REFERRED TO AS THE ACT) VIDE HIS ORDER DATED 27.1 2.2011 FOR ASSESSMENT YEAR 2009-10 AND REVENUE HAS RAISED FOLLOWING GROUNDS:- 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE THE LD. CIT(A) WAS ERRED DELEING THE ADDITION OF SHORT TERM CAPITA L GAIN OF RS.14,34,741.17 (WITHOUT STT PAYMENT) OUT OF PURCHA SE AND SALE OF UNITS OF MUTUAL FUND AND TAXED AT NORMAL RATE AND E RRED IN DELETING THE DISALLOWANCE OF SET OFF OF SPECULATION LOSS OUT OF SALE AND PURCHASE OF SHARES WITH SHORT TERM CAPITAL GAIN OUT OF SALE AND PURCHASE OF UNITS OF MUTUAL FUND IN VIOLATION OF SEC. 73. ITA NO.1061/KOL/2012 A.Y. 2009-10 ITO WD.3(2) KOL. VS. M/S STEEL EMPORIUM LTD. PAGE 2 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E THE LD. CIT(A) WAS ERRED DELEING THE DISALLOWANCE OF RS.4,08,937 M ADE U/S. 14A READ WITH RULE 8D WITHOUT CONSIDERING THE MERIT. 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E THE LD. CIT(A) WAS ERRED DELEING THE ADDITION MADE U/S 68 WITHOUT CONS IDERING THE MERIT. 2. THE FIRST ISSUE RAISED BY THE REVENUE IN THIS AP PEAL IS THAT LD. CIT(A) ERRED IN DELETING THE ADDITION MADE BY THE AO ON AC COUNT OF SHORT TERM CAPITAL GAIN OF RS. 14,34,741.00 AND TREATING THE SPECULATI ON LOSS AS PER EXPLANATION TO SECTION 73 OF THE ACT AS LOSS FROM CAPITAL GAIN. 2.1 THE FACTS OF THE CASE ARE THAT THE ASSESSEE IS A LIMITED COMPANY AND IS ENGAGED IN BUSINESS OF TRADING OF IRON & STEEL. DUR ING THE YEAR THE ASSESSEE HAS SHOWN THE FOLLOWING INCOME. 1) INCOME FROM BUSINESS A) IRON & STEEL BUSINESS RS. 66,551.00 B) DERIVATIVE TRADING BUSINESS RS. 18,24,635.0 0 2) INCOME FROM SPECULATIVE BUSINESS RS. 8,864.00 3) INCOME FROM CAPITAL GAIN A) SHORT TERM CAPITAL LOSS FROM SHARES RS. (-) 33 ,90,390.00 B) LONG TERM CAPITAL LOSS RS. (-) 5,41,900.00 C) LONG TERM CAPITAL LOSS RS. (-) 2,78,523.00 D) SHORT TERM CAPITAL LOSS RS. (-) 17,588.00 E) SHORT TERM CAPITAL GAIN ON UNITS RS. 14,34, 741.00 4) INCOME FROM OTHER SOURCES A) INTEREST INCOME RS. 6,01,018.00 B) DIVIDEND INCOME RS. 16,03,000.00 2.3 FROM THE ABOVE THE AO FOUND THAT THE EXPLANATIO N TO SECTION 73 OF THE ACT IS ATTRACTED TO THE LOSSES WHICH THE ASSESSEE C LAIMED TO BE CAPITAL GAIN LOSSES. THEREFORE THE LOSS OF RS. 42,19,538/- AFTER ADJUSTING THE SPECULATION PROFIT OF RS. 8,864/- NEEDS TO BE COMPUTED AS SPECU LATION BUSINESS LOSS AND NOT AS CAPITAL GAIN. ACCORDINGLY THE GAIN FROM THE SALE AND REDEMPTION OF UNITS FOR AN AMOUNT OF RS. 14,34,741.00 IS NOT ALLOWED TO BE ADJUSTED FROM THE ITA NO.1061/KOL/2012 A.Y. 2009-10 ITO WD.3(2) KOL. VS. M/S STEEL EMPORIUM LTD. PAGE 3 SPECULATION LOSS RATHER TO BE TAXED AT THE NORMAL R ATE OF TAX. ACCORDINGLY THE AO ISSUED NOTICE TO THE ASSESSEE FOR SEEKING THE CL ARIFICATION ON TREATING THE CAPITAL GAIN LOSS AS DISCUSSED AS SPECULATION LOSS. THE ASSESSEE SUBMITTED THAT THE EXPLANATION TO SECTION 73 OF THE ACT IS NO T APPLICABLE TO THE ASSESSEE AS THE GROSS TOTAL INCOME OF THE ASSESSEE IS MAINLY FROM THE CAPITAL GAIN. HOWEVER THE AO DISREGARDED THE CLAIM OF THE ASSESSE E BY HOLDING THAT THAT AS PER EXPLANATION TO SECTION 73 OF THE ACT, THE PART OF THE BUSINESS OF THE ASSESSEE CONSISTS IN THE PURCHASE AND SALE OF SHARE S OF OTHER COMPANIES SHALL FOR THE PURPOSE OF SECTION 73 OF THE ACT BE D EEMED TO BE CARRYING ON SPECULATION BUSINESS TO THE EXTENT TO WHICH THE BUS INESS CONSISTS OF SALE AND PURCHASE OF SHARES. HENCE THE LOSS FROM SPECULATION BUSINESS AMOUNTING TO RS. 42,19,537.00 IS ALLOWED TO BE CARRIED FORWARD T O THE SUBSEQUENT YEAR. THE INCOME OF RS. 14,34,741.00 FROM MUTUAL FUND SHALL B E TAXED AT THE NORMAL RATE OF TAX. 3. AGGRIEVED ASSESSEE PREFERRED AN APPEAL BEFORE LD . CIT(A) WHO DELETED THE ADDITION MADE BY THE AO BY OBSERVING AS UNDER : I HAVE CAREFULLY GONE THROUGH THE ASSESSMENT ORDER AND THE SUBMISSIONS OF THE APPELLANT. THE APPELLANT COMPLIE S WITH ONE OF THE 2 TESTS OF NON-APPLICABILITY OF EXPLANATION TO SECTIO N 73. THE INCOME OF THE APPELLANT, DOES, IN FACT, MAINLY COMES FROM THE 4 HEADS OF INCOME AS STATED IN THE APPELLANTS SUBMISSION, WHICH IS T HE REQUIREMENT OF THE PROVISIONS IN THE STATUTE. THEREFORE, THE AO IS DIR ECTED ASSESS THE LOSS FROM SHARE TRADING UNDER THE HEAD CAPITAL GAINS. BEING AGGRIEVED BY THIS ORDER OF LD. CIT(A) REVENUE IS IN APPEAL BEFORE US. SHRI JAI NARAYAN GUPTA, LD. AUTHORIZED REPRESENTATI VE APPEARING ON BEHALF OF ASSESSEE AND SHRI SANJIT DAS, LD. DEPARTMENTAL REPR ESENTATIVE APPEARING ON BEHALF OF REVENUE. 4. WE HAVE HEARD RIVAL SUBMISSIONS OF BOTH THE PART IES AND PERUSED THE MATERIALS AVAILABLE ON RECORD. LD. DR VEHEMENTLY RE LIED ON THE ORDER OF AO WHEREAS LD. AR RELIED ON THE ORDER OF LD. CIT(A). L D. AR SUBMITTED PAPER ITA NO.1061/KOL/2012 A.Y. 2009-10 ITO WD.3(2) KOL. VS. M/S STEEL EMPORIUM LTD. PAGE 4 BOOK WHICH IS RUNNING PAGES 1 TO 230. BEFORE US THE LD. AR SUBMITTED THAT THE AO HAS FIRST TREATED THE CAPITAL GAIN/ LOSS FROM SH ARES AS SPECULATIVE TRANSACTIONS AND THEREAFTER COMPUTED THE TEST OF AP PLICABILITY OF EXPLANATION TO SECTION 73 OF THE ACT WRONGLY. THE AO FIRST SHOULD HAVE DETERMINED THE INCOME UNDER VARIOUS HEADS OF INCOME WITHOUT DECIDI NG THE NATURE OF SHARE TRANSACTIONS AND THEN SHOULD HAVE APPLIED THE TEST OF APPLICABILITY OF EXPLANATION TO SECTION 73 OF THE ACT. ON THE OTHER HAND THE LD. DR VEHEMENTLY SUPPORTED THE ORDER OF THE AO. FROM THE AFORESAID D ISCUSSION WE FIND THAT THE AO HAS TREATED THE LOSSES DECLARED BY THE ASSESSEE ARE IN THE NATURE OF SPECULATIVE LOSS IN TERM OF EXPLANATION TO SECTION 73 OF THE ACT. THEREFORE THE GAIN ARISING FROM THE MUTUAL FUND WILL NOT BE ALLOW ED TO BE SET OFF AGAINST THE SPECULATION LOSS. HOWEVER WE FIND THAT THE AO HAS W RONGLY HELD THE LOSSES FROM CAPITAL GAIN AS SPECULATION BY MISINTERPRETING THE PROVISIONS OF EXPLANATION TO SECTION 73 OF THE ACT. THE FIRST CON DITIONS USED THE WORDS MAINLY RELEVANT TO THE INCOME FROM THE SPECIFIED FOUR HE ADS OF INCOME WHICH HAS TO BE UNDERSTOOD IN TRUE LEGAL TERMS. THE DICTI ONARY MEANING OF THE WORD MAINLY IS CHIEFLY, PRINCIPALLY, MUCH ETC. THIS IS VERY C LEAR THAT THE AGGREGATE INCOME FROM THE SPECIFIED FOUR HEADS SHOULD BE THE MAIN PORTION OF THE GROSS TOTAL INCOME OF THE COMPANY. THE PLAIN MEANING OF T HE WORD MAINLY IS MORE THAN HALF. IT MEANS ANY ELEMENT WHICH HAS THE PRESE NCE OF MORE THAN HALF IN THE TOTAL SHALL BE TERMED AS MAIN ELEMENT. SO, IF T HE AGGREGATE INCOME OF THE FOUR SPECIFIED HEADS IS MORE THAN 50% OF THE GROSS TOTAL INCOME OF A COMPANY, IT CAN BE SAID THAT THE COMPANY HAS THE MA IN INCOME FROM THE FOUR SPECIFIED HEADS. SO, IF THE AGGREGATE INCOME OF THE FOUR SPECIFIED HEADS IS 51% AND ABOVE OF THE GROSS TOTAL INCOME OF A COMPAN Y, IT SHOULD BE SAID THE COMPANY HAS THE INCOME MAINLY FROM THE FOUR SPECIFI ED HEADS. FROM THE FIGURES PUT NARRATED BY THE LD AO AS REPRODUCED ABO VE, IT IS EVIDENT THAT THE GROSS TOTAL INCOME O THE COMPANY CONSISTED MAINLY O F INCOME WHICH IS CHARGEABLE UNDER THE HEADS CAPITAL GAINS AND INC OME FROM OTHER SOURCES. SUCH A COMPANY IS EXEMPTED FROM EXPLANATION TO SECT ION 73. ITA NO.1061/KOL/2012 A.Y. 2009-10 ITO WD.3(2) KOL. VS. M/S STEEL EMPORIUM LTD. PAGE 5 IN VIEW OF ABOVE WE FIND THAT THE EXPLANATION TO SE CTION 73 OF THE ACT DOES NOT APPLY TO ASSESSEE. THEREFORE WE FIND NO REASON TO I NTERFERE IN THE ORDER OF THE LD. CIT(A). ACCORDINGLY THE GROUND RAISED BY REVENU E IS DISMISSED. 5. THE SECOND ISSUE RAISED BY THE REVENUE IN THIS A PPEAL IS THAT LD. CIT(A) ERRED IN DELETING THE DISALLOWANCE OF RS. 4,08,937/ - MADE U/S 14A OF THE ACT. 5.1 THE ASSESSEE HAS MADE AN INCOME FROM DIVIDEND I NCOME OF RS. 16.03 LACS WHICH THE ASSESSEE CLAIMED TO BE EXEMPTED FROM THE TAX BY VIRTUE OF THE PROVISIONS OF SECTION 10(34) OF THE ACT. THE ASSESS EE HAS DISALLOWED THE EXPENSES FOR EARNING THE DIVIDEND INCOME TO THE TUN E OF RS. 58,611/- IN THE COMPUTATION OF INCOME. THE AO DURING THE COURSE OF ASSESSMENT PROCEEDINGS RECORDED HIS DISSATISFACTION REGARDING THE CORRECTN ESS OF THE CLAIM OF THE ASSESSEE IN RESPECT OF EXPENDITURE IN RELATION TO E XEMPT INCOME AND ISSUED NOTICE TO THE ASSESSEE FOR THE CLARIFICATION. THE A SSESSEE SUBMITTED THAT THE EXPENSES INCURRED IN RELATION TO THE EXEMPTED INCOM E FOR RS. 58,612.00 ONLY. THE ASSESSEE FURTHER DEMONSTRATED TO THE AO TO BRIN G SOMETHING ON RECORD FOR HIS DISSATISFACTION OF THE EXPENSES. HOWEVER TH E AO DISREGARDED THE CLAIM OF THE ASSESSEE AND APPLIED THE RULE 8D OF THE INCO ME TAX RULES 1962. AS PER THE PROVISIONS OF RULE 8D THE DISALLOWANCE WAS WORK ED OUT FOR RS.4,08,937/- @ % OF THE AVERAGE VALUE OF INVESTMENT ( % OF 1065 84628 + 56990209)/2. 6. AGGRIEVED, ASSESSEE PREFERRED AN APPEAL BEFORE L D. CIT(A) WHO DELETED THE ADDITION MADE BY THE AO BY OBSERVING AS UNDER : I HAVE CAREFULLY GONE THROUGH THE ASSESSMENT ORDER AND THE SUBMISSIONS OF THE APPELLANT. IT IS TRUE THAT THE A PP HAD, HIMSELF COMPUTED THE AMOUNT DISALLOWABLE U/S. 14A. THE AO H AS NOT DISPUTED THE COMPUTATION OF THE APPELLANT. MERELY STATING TH AT HE IS NOT SATISFIED WITH THE CORRECTNESS OF THE CLAIM WITHOUT RECORDING THE REASONS OF HIS DISALLOWANCE-SATISFACTION, GOES BEYOND THE FOUR COR NERS OF THE PROVISIONS OF SECTION 14A. HAD IT BEEN SO, THERE WO ULD NOT HAVE BEEN ANY REQUIREMENT OF SATISFACTION OF THE AO. IN FACT, INSTEAD OF ASKING THE APPELLANT TO EXPLAIN THE CLAIM AND RAISING QUERIES REGARDING THE SAME TO SATISFY HIMSELF, THE AO HAS FIRST APPLIED RULE 8D I N HIS LETTER DATED 09- ITA NO.1061/KOL/2012 A.Y. 2009-10 ITO WD.3(2) KOL. VS. M/S STEEL EMPORIUM LTD. PAGE 6 12-2011 AND THEREAFTER ASKED THE APPELLANT TO EXPLA IN HIS COMPUTATION OF DISALLOWANCE. THE ADDITION MADE BY THE AO IS ARB ITRARY AND AGAINST THE SPIRIT OF SECTION 14A. THEREFORE, I DIRECT THE AO TO DELETE THE ADDITION OF RS.4,08,937 IS DISALLOWED U/S. 14A(2) READ WITH RULE 8D WHICH WAS OVER OF THE ABOVE EXPENSES OF RS.58,611/- DISALLOWE D BY THE ASSESSEE IN SCHEDULE 13 OF PROFIT AND LOSS A/C. BEING AGGRIEVED BY THIS ORDER OF LD. CIT(A) REVENUE IS IN APPEAL BEFORE US. 7. WE HAVE HEARD RIVAL SUBMISSIONS OF BOTH THE PART IES AND PERUSED THE MATERIALS AVAILABLE ON RECORD. BEFORE US THE LD. AR HAS SUBMITTED THAT THE ASSESSEE HAD IDENTIFIED THE EXPENSES AMOUNTING TO R S.58611 AS ATTRIBUTABLE TO THE EXEMPTED INCOME AND ADDED BACK THE SAME TO T HE TAXABLE INCOME. THE LD. AO, DID NOT SPECIFY THE REASONS FOR HIS DISSATI SFACTION OF THE EXPENSES IDENTIFIED BY THE ASSESSEE AS ATTRIBUTABLE TO THE E XEMPTED INCOME. HE HAS NEVER RAISED ANY OBJECTION TO THE CLAIM OF THE ASSE SSEE EITHER DURING THE ASSESSMENT PROCEEDINGS OR IN THE ASSESSMENT ORDER. HE NEVER RAISED ANY QUERY ABOUT SPECIFIC INFORMATION AND EXPLANATION RE QUIRED WITH RESPECT TO THE CLAIM. HERE WAS NO SCOPE FOR EXPLANATION SINCE THE LD. AO HAS NEVER DISPUTED THE EXPENSES AS DETERMINED BY THE ASSESSEE. AS SUCH , RULE 8B WAS NOT ATTRACTED AT ALL. THE LD AO HAD HAD PREDETERMINED T O DISALLOW THE CLAIM, EVEN BEFORE SEEKING THE EXPLANATION FROM THE ASSESSEE, W HEN HE STATED IN HIS AFORESAID LETTER DATED 09-12-2011 THAT HE PROPOSED TO DISALLOW AMOUNT OF EXPENDITURE AS PER SEC. 14A READ WITH RULE 8D. IT I S OBLIGATORY ON THE PART OF THE LD. AO TO FIRST EXAMINE THE CLAIM OF THE ASSESS EE BY RAISING QUERIES AND SOLICITING EXPLANATION AND DOCUMENTS IN SUPPORT OF THE EXPLANATION. IN THE PRESENT CASE, THE AO HAS PREDETERMINED TO DISALLOW THE CLAIM OF THE ASSESSEE EVEN BEFORE RAISING ANY QUERY OR SOLICITING THE EXP LANATION FROM THE ASSESSEE. THE LD. AO HAS NOT BROUGHT ANY MATERIAL ON RECORD A S TO THE REASONS FOR HIS REJECTING THE CLAIM OF THE ASSESSEE. IN FACT, THE L D. AO HAS NEVER BOTHERED TO EXAMINE THE CLAIM OF THE ASSESSEE. LD. AO DOES NOT HAVE SUO-MOTO RIGHT TO RESORT TO RULE 8D. IT IS IMPERATIVE ON THE PART OF THE LD. AO TO RESORT TO APPLICATION OF RULE 8D ONLY IF HE IS NOT SATISFIED WITH THE CORRECTNESS OF THE QUANTUM OF DISALLOWANCE ADMITTED BY THE ASSESSEE. ITA NO.1061/KOL/2012 A.Y. 2009-10 ITO WD.3(2) KOL. VS. M/S STEEL EMPORIUM LTD. PAGE 7 FROM THE AFORESAID DISCUSSION WE FIND THAT THE AO H AS DISALLOWED THE EXPENSES AS PER THE PROVISIONS OF RULE 8D OF INCOME TAX RULES 1962. THE AO HAS NOT RECORDED THE DISSATISFACTION ABOUT SPECI FIC EXPENSES IN RELATION TO THE EXEMPTED INCOME. THE ITAT DELHI BENCH IN THE CA SE OF DCIT VS. JINDAL PHOTO LTD. IN ITA NO. 814/DEL/2011 FOR AY 2008-09 DATED 23.09.2011, WHERE THE TRIBUNAL HAS HELD THAT RULE 8D R.W.S. 14A(2) CA N BE INVOKED ONLY IF THE ASSESSING OFFICER HAVING REGARD TO THE ACCOUNTS OF THE ASSESSEE, IS NOT SATISFIED WITH THE CORRECTNESS OF THE CLAIM OF THE ASSESSEE IN RESPECT OF EXPENDITURE INCURRED IN RELATION TO TAX-FREE INCOM E. THE BURDEN ION THE ASSESSING OFFICER TO ESTABLISH NEXUS OF EXPENSES IN CURRED WITH THE EARNING OF EXEMPT INCOME, BEFORE MAKING ANY DISALLOWANCE UNDER SECTION 14A. THERE CANNOT BE ANY PRESUMPTION THAT THE ASSESSEE MUST HA VE INCURRED EXPENDITURE TO EARN TAX FREE INCOME. THE AO CANNOT PROCEED TO D ETERMINE THE AMOUNT OF EXPENDITURE INCURRED IN RELATION TO EXEMPT INCOME W ITHOUT RECORDING A FINDING THAT HE IS NOT SATISFIED WITH THE CORRECTNESS OF TH E CLAIM OF THE ASSESSEE. THIS IS A CONDITION PRECEDENT. WHILE REJECTING THE CLAIM OF THE ASSESSEE WITH REGARD TO THE EXPENDITURE OR NO EXPENDITURE IN RELATION TO EXEMPT INCOME, THE AO WILL HAVE TO INDICATE COGENT REASONS FOR THE SAME RULE 8 D OF THE IT RULES, COMES INTO PLAY ONLY WHEN THE AO RECORDS A FINDING THAT H E IS NOT SATISFIED WITH THE ASSESSEES METHOD. IN VIEW OF ABOVE, WE FIND NO REA SON TO INTERFERE IN THE ORDER OF THE LD. CIT(A). ACCORDINGLY THE GROUND RAI SED BY REVENUE IS DISMISSED. 8. THE THIRD ISSUE RAISED BY THE REVENUE IN THIS AP PEAL IS THAT LD. CIT(A) ERRED IN DELETING THE ADDITION MADE BY THE AO FOR R S.1.83 CRORES U/S. 68 OF THE ACT. 8.1 DURING THE YEAR THE ASSESSEE HAS RECEIVED A SUM OF RS.4 CRORES TOWARDS THE SHARE APPLICATION MONEY FROM 25 COMPANI ES. THE AO DURING THE COURSE OF ASSESSMENT PROCEEDINGS OBSERVED THAT THE ASSESSEE HAS GIVEN THE ADDRESSES OF 9 COMPANIES OUT 25 COMPANIES WHICH ARE HAVING THE SAME ITA NO.1061/KOL/2012 A.Y. 2009-10 ITO WD.3(2) KOL. VS. M/S STEEL EMPORIUM LTD. PAGE 8 ADDRESS AT 12, WATERLOO STREET, KOLKATA-700069. THE DETAILS OF SUCH COMPANIES ARE AS UNDER : NAME OF THE ALLEGED SHARE APPLICANT COMPANY AMOUNT OF ALLEGED APPLICATION MONEY 1. WOODBURN NIKETAN PVT. LTD. RS. 10,00,000 2 AUXILIUM LEASING AND FINANCIAL LTD. RS. 20,00,0 00 3 BARGAIN CREDIT CAPITAL PVT. LTD. RS. 10,00,000 4 HINDUSTHAN INSTRUMENTATION & INDUSTRIES PVT. LTD. RS. 10,00,000 5 INDUJA NIRYAT PVT. LTD. RS. 25,00,000 6 LIFE LINE FOODS LTD. RS. 25,00,000 7 MEGHANA NIRYAT PVT. LTD RS. 43,00,000 8 NEOROB POLYMER INDUSTRIES PVT. LTD. RS. 28,00,0 00 9 TRIDEV TRADE LINK PVT. LTD. RS. 20,00,000 TOTAL RS.1,8 3,00,000 HOWEVER AS PER THE ROC RECORDS, THE COMPANIES WERE REGISTERED AT DIFFERENT ADDRESS. THE CONFIRMATION LETTERS SENT TO THE COMPA NIES WERE RECEIVED BY A SINGLE/ SAME PERSON WHO ACKNOWLEDGES THE RECEIPT OF NOTICE WITH DIFFERENT RUBBER STAMPS. THE AO FURTHER OPINED THAT THE ASSES SEE HAS INTRODUCED ITS OWN UNDISCLOSED INCOME IN THE DISGUISE OF SHARE APP LICATION MONEY. ON QUERY BY THE AO, THE ASSESSEE SUBMITTED THAT THE ADDRESSE S OF THE COMPANIES HAVE CHANGED SINCE THE DATE OF THE ALLOTMENT OF SHARES A ND NECESSARY FORMS FOR CHANGE OF ADDRESSES HAVE BEEN SUBMITTED TO THE ROC. BUT THE AO FOUND THAT THE ASSESSEE HAS NOT REPLIED ON THE QUERY OF SIGNIN G THE ACKNOWLEDGMENT BY THE SINGLE PERSON. THEREFORE THE AO HAS DISREGARDED THE CLAIM OF THE ASSESSEE AND ADDED A SUM RS. 1.83 CRORES U/S 68 OF THE ACT TO THE TOTAL INCOME OF THE ASSESSEE. 9. AGGRIEVED ASSESSEE PREFERRED AN APPEAL TO LD. CI T(A) WHO DELETED THE ADDITION MADE BY THE AO BY OBSERVING AS UNDER:- 16. I HAVE CAREFULLY GONE THROUGH THE ASSESSMENT O RDER AND THE SUBMISSIONS OF THE APPELLANT. I AM IN AGREEMENT WIT H THE SUBMISSIONS, WHICH IS BASED ON DOCUMENTARY EVIDENCES. THE ADDITI ON MADE BY AO IN RESPECT OF SHARES APPLICATION MONEY SUBSCRIBED BY 9 OUT OF 25 APPLICANTS IS UNWARRANTED. JUST ON FLIMSY GROUND OF NOTICE U/S. 133(6), HAVING BEEN SERVED AT ANY PARTICULAR ADDRESS, WHICH HAPPENED TO BE THE OLD ADDRESS OF THOSE COMPANY SHARE APPLICANTS, HE CANNOT MAKE ITA NO.1061/KOL/2012 A.Y. 2009-10 ITO WD.3(2) KOL. VS. M/S STEEL EMPORIUM LTD. PAGE 9 THE ADDITION WHEN A HOST OF OTHER EVIDENCES ARE SUP PORTING THE IDENTITY OF THE APPLICANTS, GENUINENESS OF THE TRANSACTION A ND CREDITWORTHINESS OF THE APPLICANTS. IN FACT, THE AO HAS, ALL ALONG, RESORTED TO GUESSWORK AND SURMISES. HE HAS USED THE WORDS, IT APPEARS SEVERAL TIMES IN THE ASSESSMENT ORDER. THEREFORE, I DIRECT THE AO TO DEL ETE THE ADDITION. BEING AGGRIEVED BY THIS ORDER OF LD. CIT(A) REVENUE IS IN APPEAL BEFORE US. 10. WE HAVE HEARD BOTH THE RIVAL PARTIES AND PERUSE D THE MATERIALS AVAILABLE ON RECORD. THE LD. DR VEHEMENTLY SUPPORTE D THE ORDER OF THE AO. BEFORE US THE LD. AR SUBMITTED THAT THE ASSESSEE RA ISED SHARE APPLICATION MONEY DURING THE YEAR FROM 25 APPLICANTS. THE AO WA S FURNISHED WITH THE COPY OF FORM 2 OF ALLOTMENT OF SHARES TO THE APPLIC ANTS AS FILED WITH THE REGISTRAR OF COMPANIES, WEST BENGAL. ON THE DATE OF RECEIPT OF SHARE APPLICATIONS FROM THE APPLICANTS, THEY FURNISHED TH EIR ADDRESSES, WHICH WERE RECORDED IN THE REGISTER OF MEMBERS. THE AO OBSERVE D THAT AS PER ROC RECORDS THE ADDRESSES OF THE NINE COMPANIES WERE DI FFERENT FROM THE ADDRESS AS PER FORM FILED WITH HIM. THE AO ISSUED NOTICES U /S.133(6) TO ALL THE COMPANIES AT THE ADDRESSES FURNISHED IN FORM 2 AS F ILED WITH HIM, WHICH WERE DULY SERVED AT THE GIVEN ADDRESSES. THE AO ARGUED THAT THE LETTERS SHOULD NOT HAVE BEEN SERVED AT THE GIVEN ADDRESS BY THE ASSESS EE. HE SERVED A SHOW A CAUSE NOTICE DATED 09.12.2011 ASKING FOR THE EXPLAN ATION FROM THE ASSESSEE AS TO HOW THE NOTICES U/S. 133(6) COULD BE SERVED T O THESE NINE COMPANIES WHO HAD DIFFERENT ADDRESS AS PER ROC RECORDS. THE A O WAS EXPLAINED VIDE LETTER DATED 20.12.2011 OF THE ASSESSEE THAT THOSE COMPANIES HAD CHANGED THEIR ADDRESSES SINCE FILING OF FORM 2 WITH THE REG ISTRAR. FURTHER, IT WAS NONE OF THE BUSINESS OF THE ASSESSEE TO QUESTION THE ADD RESSES OF THE APPLICANTS AS LONG AS THEY AFFIRM THE ADDRESS. THE APPLICANTS WER E DULY INCORPORATED BODIES UNDER THE COMPANIES ACT, 1956 SINCE LONG. THEY HAVE BEEN REGULARLY FILING THEIR RETURNS OF INCOME UNDER THE INCOME TAX ACT AN D ARE BEING ASSESSED BY THE REVENUE SINCE LONG. SOME OF THEM ARE EVEN REGIS TERED AS NON-BANKING FINANCIAL COMPANIES WITH RESERVE BANK OF INDIA. THE Y HAVE BEEN FILING RETURNS REGULARLY WITH REGISTRAR OF COMPANIES AND R BI SINCE LONG. THE LETTERS ITA NO.1061/KOL/2012 A.Y. 2009-10 ITO WD.3(2) KOL. VS. M/S STEEL EMPORIUM LTD. PAGE 10 MIGHT HAVE BEEN RECEIVED AT THEIR OLD ADDRESSES BEC AUSE IN CASE OF CHANGE IN THE ADDRESS, PEOPLE INSTRUCT THE INCUMBENTS AT OLD ADDRESSES NOT TO REFUSE THE RECEIPT OF LETTERS AND RECEIVE THE SAME. JUST BECAU SE, A LETTER WAS RECEIVED AT THE OLD ADDRESS INSTEAD OF PRESENT ADDRESS, IT CANN OT BE SAID THAT THE IDENTITY OF THE APPLICANT HAS NOT BEEN VERIFIED. ALL OF THES E COMPANIES HAD DULY REPLIED TO NOTICE U/S. 133(6) AND CONFIRMED THE TRANSACTION WITH ALL THE EVIDENCES. THE AO HAS NOT RAISED ANY OBJECTION ON ANY OF THE INFOR MATION FURNISHED BEFORE HIM. THE AO HAS NOT ASKED THE RESPECTIVE COMPANY AP PLICANTS ALSO TO EXPLAIN THE ALLEGED DISCREPANCY IN THE ADDRESS. THE AO HAS NOT BROUGHT ANY MATERIAL ON ACCOUNT OF RECORD TO DISBELIEF THE EVIDENCES FUR NISHED WITH HIM AND TREAT THE TRANSACTION AS NOT GENUINE. THE ASSESSEE SUBMI TTED THE FOLLOWING MATERIAL AT THE TIME OF ASSESSMENT. A) COPY OF SHARE APPLICATIONS FROM THE SHARE APPLIC ANTS (COPIES ENCLOSED) B) COPY OF FORM 2 FILED WITH REGISTRAR OF COMPANIES , WEST BENGAL (COPY ENCLOSED) C) COPY OF FORM 18 ABOUT THE REGISTERED OFFICE OF T HE APPLICANTS FOR CHANGE OF ADDRESS SUBSEQUENT TO THE DATE OF ALLOTME NT, I.E. 31.03.2009 (COPIES ENCLOSED) D) MEMBERS REGISTER E) SHARE APPLICATION & ALLOTMENT REGISTER F) COPY OF BOARD RESOLUTION. G) REPLIES FROM SHARE APPLICANTS TO THE NOTICE U/S. 133(6) ISSUED TO THEM BY THE AO SEEKING INFORMATION AND DOCUMENTS ABOUT T HE SOURCES AND TO EXAMINE THEIR IDENTITY, GENUINENESS OF THE TRANSACT ION AND THEIR CREDITWORTHINESS. (COPY ENCLOSED). H) COPY OF AUDITED ACCOUNTS. I) COPY OF BANK STATEMENTS. J) COPY OF INCOME TAX ACKNOWLEDGMENT OF RETURN FILE D FOR AY 2009-10. K) COPY OF PAN CARD. L) DETAILS OF SOURCES OF FUNDS. M) COPY OF COVERING LETTER FOR DELIVERY OF SHARES. N) COPY OF MASTER DATA AS PER MINISTRY OF COMPANY A FFAIRS RECORDS. O) COPY OF ANNUAL RETURN. P) COPY OF MEMORANDUM AND ARTICLES OF ASSOCIATION. FINALLY THE LD. AR RELIED ON THE ORDER OF THE LD. C IT(A) ITA NO.1061/KOL/2012 A.Y. 2009-10 ITO WD.3(2) KOL. VS. M/S STEEL EMPORIUM LTD. PAGE 11 10.1 FROM THE AFORESAID DISCUSSION WE FIND THAT THE AO HAS MADE THE ADDITION OF THE SHARE APPLICATION MONEY BECAUSE ALL THE NINE COMPANIES WERE HAVING THE COMMON ADDRESS AND THE NOTICE SENT UNDER SECTION 133(6) WAS RECEIVED BY THE SINGLE PERSON. ACCORDINGLY THE AO O PINED THAT THE ASSESSEE HAS USED ITS UNACCOUNTED MONEY IN THE SHARE APPLICA TION TRANSACTIONS. HOWEVER WE FIND THAT ALL THE MONEY RECEIVED IN THE FORM OF SHARE CAPITAL IS DULY SUPPORTED WITH THE REQUISITE DOCUMENT AS DISCU SSED ABOVE. TO OUR MIND THE BASIS ON WHICH THE ADDITION WAS MADE BY THE AO IS NOT TENABLE. THE LD. DR ALSO COULD NOT BROUGHT ANYTHING ON RECORD TO CON TROVERT THE FINDINGS OF THE LD. CIT(A). IN VIEW OF ABOVE WE FIND NO REASON TO I NTERFERE IN THE ORDER OF THE LD. CIT(A). ACCORDINGLY THE GROUND RAISED BY REVENU E IS DISMISSED. 11. IN THE RESULT, REVENUES APPEAL IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT 05/ 02/2016 SD/- SD/- (N.V.VASUDEVAN) (WASEEM AHMED) (JUDICIAL MEMBER) (ACCOUNTANT MEMBER) KOLKATA, *DKP !- 05 / 02 /201 6 / COPY OF ORDER FORWARDED TO:- 1. /APPELLANT-ITO WARD-3(2), 8/2 ESPLANADE EAST, DWARL I HOUSE, GR. FL. KOL.69 2. /RESPONDENT- M/S STEEL EMPORIUM LTD. 51, N.S. ROAD, KOLKATA-700 001 3. ) *+ - / CONCERNED CIT KOLKATA 4. -- / CIT (A) KOLKATA 5. 012 33*+, *+ , / DR, ITAT, KOLKATA 6. 267 89 / GUARD FILE. BY ORDER/ , /TRUE COPY/ / *+ ,