ACIT, Chandigarh V. M/s Swarna Industries Ltd., Chandigarh

ITA 1082/CHANDI/2010

• Counselvise Citation: 108221514 RSA 2010
• Duration Of Justice: 2 year(s) 1 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-10-2012
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 04-10-2012
• Assessment Year: 2006-2007
• Appeal Filed On: 16-08-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Unexplained cash credit
• Section: 68; 69

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL CHANDIGARH BENCH A CHANDIGARH BEFORE MS.SUSHMA CHOWLA, JUDICIAL MEMBER AND SHRI MEHAR SINGH, ACCOU NTANT MEMBER ITA NO. 1082/CHD/2010 ASSESSMENT YEAR: 2006-07 ACIT, CIRCLE 5(1), V M/S SWARNA IND.LTD., CHANDIGARH. SCF 93, SECTOR 26, GRAIN MARKET, CHANDIGARH. PAN: AAICS-0231Q (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI AKHILESH GUPTA RESPONDENT : SHRI AJAY JAIN DATE OF HEARING : 04.10.2012 DATE OF PRONOUNCEMENT :09.10.2012 ORDER PER MEHAR SINGH, AM THE PRESENT APPEAL FILED BY THE REVENUE IS DIRECTED AGAINST THE ORDER DATED 17.05.2010 PASSED BY THE LD . CIT(A) U/S 250(6) OF THE INCOME-TAX ACT,1961 (IN SHORT 'TH E ACT'). 2. IN THIS APPEAL, THE REVENUE HAS RAISED THE FOLLO WING GROUNDS OF APPEAL: 1.ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW, THE LD CIT(APPEALS) HAS ERRED IN ALLOWING APPEAL OF THE ASSESSEE WITHOUT APPRECIATING THE FACTS OF THE CASE . 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE A ND IN LAW, THE LD CIT(APPEALS) HAS ERRED IN DELETING THE ADDIT ION OF RS. ONE CRORE MADE BY THE AO ON ACCOUNT OF UNEXPLAINED CASH CREDIT U/S 68 OF THE INCOME-TAX ACT,1961. 3. IT IS PRAYED THAT THE ORDER OF THE LD CIT(APPEALS) BE SET ASIDE AND THAT OF THE AO MAY BE RESTORED. 2 4. THE APPELLANT CRAVES LEAVE TO ADD OR AMEND ANY GROU NDS OF APPEAL BEFORE THE APPEAL IS HEARD OR IS DISPOSED OF F. 3. IN THE COURSE OF PRESENT APPELLATE PROCEEDINGS, LD. 'DR' REFERRED TO PARA 3 OF CIT(APPEALS) ORDER, WHICH NAR RATES THE FACTUAL MATRIX OF THE CASE. LD. 'DR' FURTHER REFER RED TO PAGE 24 OF THE TRIBUNALS ORDER IN ITA NO. 264/CHD/2010 (SHRI RAJESH GUPTA V JCIT) A.Y. 2006-07 AND ITA NO. 411/CHD/2010 (DCIT V RAJESH GUPTA) A.Y. 2006-07, ADJUDICATED VIDE ORDER DATED 31.05.2012. LD. 'DR' WAS FAIR ENOUGH TO STATE THAT THE ISSUE IS COVERED BY THE DE CISION OF THE TRIBUNAL IN ITA NO. 411/CHD/2010 ASSESSMENT YEA R 31.5.2012. HE PLACED RELIANCE ON THE ORDER PASSED B Y THE AO. 4. LD. 'AR' SUPPORTED THE FINDINGS OF THE CIT(APPEA LS) AND REFERRED TO HIS FINDING ON THE ISSUE IN PARA 3 OF T HE APPELLATE ORDER DATED 17.05.2010 FOR THE ASSESSMENT YEAR 2006 -07. LD. 'AR' ALSO CONTENDED THAT THE ISSUE IS SQUARELY COVERED BY THE DECISION OF THE TRIBUNAL IN REVENUES APPEAL IN ITA NO. 411/CHD/2010 (SUPRA). 5. WE HAVE HEARD THE RIVAL SUBMISSIONS AND CAREFULL Y PERUSED AND CONSIDERED FACTS OF THE CASE AND THE RE LEVANT AVAILABLE RECORDS. THE FACTS OF THE CASE, AS CULLE D OUT FROM THE RELEVANT RECORDS, ARE THAT DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER NOTED THAT THE ASSESSEE HAD RECEIVED A SUM OF RS. 1,20,00,000/ - AS SHARE APPLICATION MONEY AND HAD SHOWN THE SAME IN T HE BALANCE SHEET. WHEN ASKED FOR DETAILS, HE SUBMITTED THAT AN 3 AMOUNT OF RS. 20,00,000/- RELATES TO PROMOTERS AND BALANCE AMOUNT OF RS. 1,00,00,000/- HAS BEEN SHOWN IN ITS B OOKS OF ACCOUNTS AS SHARE APPLICATION MONEY, AS RECEIVED FR OM SHRI RAJESH GUPTA, PROP. M/S BANSAL AGRO FEED, SCF 164, SECTOR 26, CHANDIGARH, BEING TRANSFERRED FROM CREDITORS AC COUNT. WHEN THIS FACT WAS VERIFIED FROM THE BALANCE SHEET OF SH. RAJESH GUPTA, PROP. M/S BANSAL AGRO FEED, IT WAS NO TICED THAT HE HAS NOT SHOWN AN AMOUNT OF RS. 1,00,00,000/ - AS AN INVESTMENT IN SHARE APPLICATION MONEY OF M/S SWA RNA INDUSTRIES. WHEN THIS FACT WAS BROUGHT TO THE NOTIC E OF THE ASSESSEE, IT WAS SUBMITTED THAT SH. RAJESH GUPTA PR OP. M/S BANSAL AGRO HAD NOT GIVEN ANY SHARE APPLICATION IN FORM OF CHEQUE/DEMAND DRAFT OR HAS NOT APPLIED FOR THE SAME IN SHAPE OF SHARE APPLICATION FORM, CREDIT BALANCE AS APPEARING IN THE BOOKS OF ACCOUNTS OF THE ASSESSEE WHICH WAS TRANSFERRED FROM SUNDRY CREDITORS TO SHARE APPLICAT ION ACCOUNT AND THIS WAS DONE ON THE BASIS OF ORAL UNDERSTANDING. 6. THE RELEVANT FINDINGS OF THE CIT(APPEALS), AS CO NTAINED IN PARA 13 TO 15 ARE REPRODUCED HEREUNDER : 13 I HAVE CAREFULLY CONSIDERED RIVAL SUBMISSIONS, FACTS OF THE CASE AND VARIOUS JUDICIAL PRONOUNCEMENTS ON THE ISSUE. I FIND THAT THIS ISSUE HAS ALREADY BEEN DEALT WITH IN THE CASE OF SH. RAJE SH GUPTA, PROP. BANSAL AGRO FEED, SCF 164, SECTOR 26, CHANDIGARH IN APPEAL NO. 460/P/08-09, ORDER DATED 29.01.2010 WHEREIN IT WAS HELD THAT M/S SWARNA INDUS. LTD. WAS A DEBTOR IN THE BOOKS OF M/S BANSAL AGRO FOR RS . 1,35,20,686/- AND THE APPELLANT HAS SHOWN M/S BANSAL AGRO AS CREDITOR IN ITS BOOKS. THE SUM OF RS. 1 CRORE WAS TRANSFERRED TO SHARE APPLICATION BY THE APPELLANT THEREBY MAKING A BOOK ADJUSTMENT OF RS. 1 CRORE. SINCE THE APPELLANT COMPANY ONLY 4 TRANSFERRED THE SUNDRY CREDITORS TO SHARE APPLICATI ON, THE ASSESSING OFFICER HAD WRONGLY TREATED THE AMOUNT OF RS. 1 CRORE AS UN EXPLAINED / BOGUS CREDIT INTRODUCED IN THE BOOKS OF ACCOUNTS AS SHARE APPLIC ATION MONEY. MOREOVER, THE ISSUE OF SHARE APPLICATION MONEY HAS BEEN SETTL ED BY THE HON'BLE SUPREME COURT IN THE CASE OF LOVELY EXPORTS PVT. LT D., 216 CTR 195, BY HOLDING THAT EVEN IF THE SHARE APPLICATION MONEY IS RECEIVED FROM BOGUS SHAREHOLDERS, THE DEPARTMENT HAS AN OPTION TO PROCE ED AGAINST THEM BUT THIS AMOUNT CANNOT BE TREATED AS UNDISCLOSED INCOME OF THE ASSESSEE. 14 IN THE INSTANT CASE, THE IDENTITY OF THE P ERSON GIVING SHARE APPLICATION MONEY HAS BEEN ESTABLISHED. SH. RAJESH GUPTA HAS GI VEN A CERTIFICATE WHICH READS AS UNDER : 'I, RAJESH GUPTA, S/O SH. RAM KUMAR GUPT A, PROP, OF M/S BANSAL AGRO FEED, R/O 164, GRAIN MARKET, SECTOR 26, CHANDI GARH DO HEREBY CONFIRM THAT 1 HAVE GIVEN A SUM OF RS. 1,00,00,000/- (RUPEE S ONE CRORE ONLY) AS SHARE MONEY FOR ALLOTMENT OF EQUITY SHARES OF M/S SWARNA INDUSTRIES LTD., SCF 93, SECTOR 26, CHANDIGARH. THE ABOVE FUNDS WERE ADJUSTE D FROM MY DUES WITH COMPANY. ' 15 NOW TO TREAT THIS MONEY A BOGUS CREDIT IN THE BO OKS OF APPELLANT COMPANY IS NOT JUSTIFIED. THE ADDITION SO MADE IS THEREFORE DELETED ALLOWING ASSESSEE'S GROUND ON THIS ISSUE. 7. THE ISSUE HAS ALSO BEEN DEALT WITH BY THE TRIBUN AL IN APPEAL OF THE REVENUE IN ITA NO. 411/CHD/2010 (A.Y. 2006-07) IN THE CASE OF DCIT, CIRCLE 5(1) CHANDIGAR H V RAJESH GUPTA, SECTOR 26, CHANDIGARH. THE RELEVANT PART OF THE DECISION IS REPRODUCED HEREUNDER : 24. THE REVENUE HAS RAISED FOUR GROUNDS OF APPEAL. HOWEVER, SOLE SUBSTANTIVE GROUND OF APPEAL, BEARING NO.2 PERTAINS TO THE DELETION OF ADDITION OF RS.ONE CRORE, IN RESPECT OF ADDITION MADE BY THE AO, ON ACCOUNT OF SHARE APPLICATION, FOR WANT OF VERIFICAT ION OF NATURE AND SOURCE THEREOF. 5 25. LD. 'DR' PLACED RELIANCE ON THE ORDER OF THE AO . HOWEVER, LD. 'AR' SUBMITTED THAT THE MONEY REPRESENTED SALE PROCEEDS TO M/S SWARNA ENTERPRISES AND THE ENTRIES ARE JUST ADJUSTMENT ENTRIES, AS HEL D BY THE CIT(A). HE PLACED RELIANCE ON THE ORDER OF THE CIT(A). IT WOULD BE PERTINENT TO REPRODUCE FINDING S OF THE CIT(A) IN THE MATTER : 37 REITERATING WHAT HAS ALREADY BEEN DISCUSSED IN THE 'BRIEF FACTS & BACKGROUND' TO GROUND NO. 2 OF THIS ORDER, THE ASSESSEE IS SELLING GOODS TO M/S SWARNA INDS. LTD. AND SHOWED T HE NET RECEIVABLE AS ON 31.3.06 IN BALANCE SHEET UNDER THE HEAD 'DEBTORS'. THE ASSESSEE FILED COPY OF ACCOUNT OF M/S SWARNA IN DS. LTD. WHICH SHOWS THAT FROM THE BALANCE PAYABLE BY M/S SWARNA I NDS, RS. 1 CRORE HAS BEEN TRANSFERRED TO SHARE APPLICATION MONEY ACC OUNT AND BALANCE WAS REDUCED BY THAT AMOUNT. THE ASSESSING OFFICER N OTICED THAT THE ASSESSEE HAS NOT SHOWN RS. 1 CRORE IN BOOKS OF ACCO UNTS AND BALANCE SHEET AND SHE MADE AN ADDITION OF RS. 1 CRORE UNDER SECTION 69 OF THE INCOME TAX ACT. 38 FROM THE SUBMISSIONS AND RECORD, IT HAS BEEN FOU ND THAT M/S SWARNA INDS. PASSED JOURNAL ENTRY IN BOOKS OF ACCOU NTS AS ON 31.3.06 AS UNDER: M/'S BANSAL AGRO (CREDITOR) DR. RS.L C RORE. TO SHARE APPLICATION MONEY C R. RS. 1 CRORE. 39 BY MAKING THE ABOVE BOOK ENTRY, CREDITOR BALANCE WAS REDUCED AND SHARE APPLICATION MONEY WAS INCREASED BUT NET IMPAC T ON LIABILITIES IN BOOKS OF ACCOUNTS IS NIL. THE ASSESSEE HAS NOT PASSED ANY BOOK ENTRY - ONLY DEBTOR BALANCE ON ACCOUNT OF SALE HAS BEEN REFLECTE D. HAD THE ASSESSEE PASSED BOOK ENTRY, THE DEBTOR BALANCE WOULD HAVE REDUCED AND IN VESTMENT BALANCE WOULD HAVE BEEN INCREASED AND NET IMPACT ON TOTAL ASSETS WOULD BE NIL. 40 THEREFORE, IN MY VIEW AND AS PER RECORDS, IT IS NOT A CASE OF UNRECORDED INVESTMENT BUT IT IS ONLY BOOK-ADJUSTMEN T. THERE BEING NO IMPACT ON ASSETS & LIABILITIES OF ASSESSEE AND M/S SWARNA INDUSTRIES, THE ADDITION SO MADE IS DELETED ALLOWING ASSESSEE'S SEC OND GROUND OF APPEAL. 26. WE HAVE CAREFULLY PERUSED THE RIVAL SUBMISSIONS , FACTS OF THE CASE AND THE RELEVANT RECORD. A BARE 6 PERUSAL OF THE FINDINGS OF THE CIT(A), REVEALS THAT ASSESSEE IS SELLING GOODS TO M/S SWARNA INDUSTRIES LTD. AND SHOWED NET RECEIVABLE AS ON 31.3.2006 IN T HE BALANCE SHEET, UNDER THE HEAD DEBTORS. THE ASSES SEE FILED COPY OF ACCOUNT OF M/S SWARNA INDUSTRIES LTD. , WHICH SHOWS RS.ONE CRORE, BEING BALANCE PAYABLE TO THE ASSESSEE APPELLANT, HAD BEEN TRANSFERRED TO SHA RE APPLICATION MONEY ACCOUNT AND THE BALANCE WAS REDUCED BY THAT AMOUNT. THE AO, NOTICED THAT ASSESSEE, HAD NOT SHOWN RS. ONE CRORE, IN THE BOOKS OF ACCOUNT AND CONSEQUENTLY, MADE THE ADDITION OF T HE IMPUGNED AMOUNT. THE AO, HAD IGNORED THE FACTUM THAT THE IMPUGNED AMOUNT, REPRESENTED SALE PROCEEDS , OF THE SALES MADE BY THE ASSESSEE, TO M/S SWARNA INDUSTRIES LTD. LD. CIT(A), HAS DISCUSSED IN DETAI L THE OUTSTANDING ENTRIES IN THE BOOKS OF ACCOUNT OF M/S SWARNA INDUSTRIES LTD. THE CIT(A), FOUND THAT CRED IT BALANCE WAS REDUCED BY MAKING THE ENTRIES, AS INDICATED IN PARA 38 OF THE APPELLATE ORDER, AND SH ARE APPLICATION MONEY WAS INCREASED, AND NET IMPACT ON LIABILITIES IN THE BOOKS OF ACCOUNT, IS NIL. IT IS, FURTHER, OBSERVED BY THE CIT(A), THAT ASSESSEE HAD NOT PASSED ANY BOOK ENTRY ONLY DEBTOR BALANCE, ON ACCOUNT OF SALE, HAS BEEN REFLECTED. CONSEQUENTLY, HAVING REGARD TO THE RELEVANT RECORDS, THE CIT(A) RECORDED A FINDING, THAT IT IS NOT A CASE OF UNRECO RDED INVESTMENT, BUT REPRESENTS ONLY BOOK ADJUSTMENT. I T WAS, FURTHER, OBSERVED BY THE CIT(A), THAT THERE BE ING NO IMPACT OF ASSETS AND LIABILITIES ON ASSESSEE, AN D M/S SWARNA INDUSTRIES LTD., THE IMPUGNED ADDITION WAS DELETED BY THE CIT(A). WE, DO NOT FIND, ANY INFIRMITY IN THE FINDINGS OF THE CIT(A), HAVING REG ARD TO THE FACTUAL MATRIX OF THE ISSUE IN QUESTION. THERE FORE, GROUND NO.2 RAISED BY THE REVENUE IS DISMISSED. 8. HAVING REGARD TO THE ABOVE LEGAL AND FACTUAL DISCUSSION, AND CAREFULLY CONSIDERING THE FINDINGS OF THE 7 CIT(APPEALS) AND THE TRIBUNAL, IN THE MATTER, AS RE PRODUCED ABOVE, WE ARE OF THE CONSIDERED OPINION THAT THE FI NDINGS OF THE CIT(APPEALS) DESERVE TO BE UPHELD. ACCORDINGLY , FINDINGS OF THE CIT(APPEALS) ARE UPHELD AND THE GROUND OF AP PEAL OF THE REVENUE IS DISMISSED. 9. IN THE RESULT, APPEAL OF THE REVENUE IS DISMISSE D. ORDER PRONOUNCED IN THE OPEN COURT ON 9 TH OCT.,2012. SD/- SD/- (SUSHMA CHOWLA) (MEHAR SINGH) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 9 TH OCT.,2012. POONAM COPY TO: THE APPELLANT, THE RESPONDENT, THE CIT(A), THE CIT,DR ASSISTANT REGISTRAR, ITAT CHANDIGARH