ITO 9(3)(4), MUMBAI V. ROYAL HEALTH CARE P.LD, MUMBAI

ITA 119/MUM/2013

• Counselvise Citation: [2014] 120 COUNSELVISE.COM (IT) 8284 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 11 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 10-12-2014
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: D
• Next Hearing Date: 30-10-2014
• Assessment Year: 2009-2010
• Appeal Filed On: 03-01-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: NEIL PHILIP
• Assessee Lawyers: DR ARUN CHAMARIA IN PERSON
• Keywords: Rejection of books of accounts; Unexplained investment; Depreciation; Assessment record
• Section: 69; 68

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH, MUMBAI BEFORE HONBLE S/SHRI H.L. KARWA, PRESIDENT AND B. R.BASKARAN (AM) . . , . . , ./I.T.A. NO.119/MUM/2013 ( / ASSESSMENT YEAR : 2009-10) INCOME TAX OFFICER, WARD 9(3)(4) ROOM NO.216B, 2 ND FLOOR, AAYAKAR BHAVAN, M K ROAD, MUMBAI-400020 / VS. M/S ROYAL HEALTH CARE PVT.LTD., 21, DIAMOND PLAZA, LAXMINARAYAN SHOPPING CENTER, PODDAR ROAD, MALAD (E), MUMBAI-400097 ( / APPELLANT) .. ( ! / RESPONDENT) ./ '# ./ PAN/GIRNO.:AAACR2225D $ / APPELLANT BY : SHRI NEIL PHILIP ! % $ /RESPONDENT BY DR.ARUN CHAMARIA IN PERSON & ' % ( ) / DATE OF HEARING : 30.10.2014 *+ % ( ) /DATE OF PRONOUNCEMENT : 10.12.2014. / O R D E R PER B.R.BASKARAN, ACCOUNTANT MEMBER: THE APPEAL FILED BY THE REVENUE IS DIRECTED AGAINS T THE ORDER DATED 22.10.2012 PASSED BY LD CIT(A)-20, MUMBAI AND IT RE LATES TO THE ASSESSMENT YEAR 2009-10. 2. THE REVENUE IS IN APPEAL AGAINST THE DECISION RE NDERED BY LD CIT(A) IN RESPECT OF THE FOLLOWING ISSUES: A) REJECTION OF BOOKS OF ACCOUNTS AND ESTIMATION OF NET PROFIT; B) ASSESSMENT OF SECURITY DEPOSIT AT RS.2,06,31,700 /-; C) ASSESSMENT OF INVESTMENT U/S 69 OF THE INCOME T AX ACT, 1961 (THE ACT) AMOUNTING TO RS.3,70,50,000/- AND ; D) ASSESSMENT OF RS.20,00,000/- U/S 68 OF THE ACT. 3. THE FACTS RELATING TO THE CASE ARE STATED IN BRI EF. THE ASSESSEE COMPANY IS RUNNING A DENTAL CLINIC. THE RETURN OF INCOME FOR THE YEAR UNDER CONSIDERATION ITA NO.119//M/2012 2 WAS TAKEN FOR SCRUTINY AND THE AO DETERMINED THE TO TAL INCOME AT RS.6,24,01,765/- BY MAKING VARIOUS TYPES OF ADDIT IONS. IT IS PERTINENT TO NOTE THAT THE AO, INTER ALIA, REJECTED THE BOOKS OF ACCO UNT MAINTAINED BY THE ASSESSEE AND ACCORDINGLY ESTIMATED THE INCOME FROM PROFESSIO N. THE APPEAL FILED BY THE ASSESSEE BEFORE THE LD. CIT(A) CHALLENGING THE VA RIOUS ADDITIONS MADE BY THE AO WAS PARTLY ALLOWED. AGGRIEVED BY THE DECISION O F THE LD. CIT(A), THE REVENUE HAS FILED THIS APPEAL BEFORE US. 4. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE R ECORD. THE FIRST ISSUE RELATES TO REJECTION OF BOOKS OF ACCOUNT AND ESTIMA TION OF PROFIT. THE ASSESSEE IS A PRIVATE LIMITED COMPANY AND IT HAS GOT ITS ACCOUN T AUDITED UNDER THE PROVISIONS OF COMPANIES ACT, 1956. THE ASSESSEE HAS STATED THAT IT WAS FOLLOWING CASH SYSTEM OF ACCOUNTING. HOWEVER THE AO TOOK THE VIE W THAT THE ASSESSEE, BEING A PRIVATE LIMITED COMPANY, IS REQUIRED TO FOLLOW M ERCANTILE SYSTEM OF ACCOUNTING IN ACCORDANCE WITH COMPANIES ACT. SINCE THE ASSESS EE HAD FOLLOWED CASH SYSTEM OF ACCOUNTING AND SINCE THE SAME IS AGAINST THE MANDATE OF PROVISION OF COMPANIES ACT, THE AO TOOK THE VIEW THAT THE BOOKS OF ACCOUNTS OF THE ASSESSEE ARE NOT RELIABLE. FURTHER, CITING SOME MOR E REASONS, THE REJECTED THE BOOKS OF ACCOUNT AND ESTIMATED THE NET PROFIT OF TH E ASSESSEE @ 15% OF THE TURNOVER OF THE ASSESSEE COMPANY. 5. IN THE APPELLATE PROCEEDINGS, THE ASSESSEE SUBMI TTED BEFORE THE LD. CIT(A) THE PROFIT DECLARED BY IT INCLUDING THE AMOUNT OF DEPRECIATION WORKS OUT TO 10% OF THE TURNOVER DURING THE YEAR UNDER CONSIDERATION AN D ALSO IN THE IMMEDIATELY PRECEDING YEAR. IT WAS ALSO SUBMITTED THAT THE ASS ESSEE IS FOLLOWING CONSISTENTLY CASH SYSTEM OF ACCOUNTING AND SINCE THERE IS NO CHA NGE IN IT, THE AO WAS NOT JUSTIFIED IN REJECTING THE BOOKS OF ACCOUNT MAINTAI NED BY THE ASSESSEE, MORE PARTICULARLY, IN VIEW OF THE FACT THAT THE AO DID NOT FIND ANY DEFECT OR FAULT IN THE BOOKS OF ACCOUNTS. THE LD.CIT(A) WAS CONVINCED WI TH THE CONTENTIONS OF THE ASSESSEE AND ACCORDINGLY SET ASIDE THE DECISION OF THE AO RELATING TO REJECTION OF THE BOOKS OF ACCOUNT AND CONSEQUENTLY THE ESTIMA TION OF INCOME ALSO. THE RELEVANT OBSERVATIONS MADE BY THE LD. CIT(A) IN THI S REGARD ARE EXTRACTED BELOW, FOR THE SAKE OF CONVENIENCE: ITA NO.119//M/2012 3 5.3 I HAVE CONSIDERED RIVAL SUBMISSION AND FINDING OF THE A.O CAREFULLY. I FIND THAT A.O. HAS WRONGLY REJECTED THE VERACITY OF BOOKS OF ACCOUNTS ON THE BASIS OF HIS PRESUMPTION WHICH IS NOT AT ALL JU STIFIABLE. THE AO HAS REJECTED THE BOOKS OF ACCOUNTS ON THE BASIS OF FIVE GROUNDS AND IT IS FOUND THAT NONE OF THE GROUND IS MAINTAINABLE. CONTRARY T O THE PRESUMPTION OF THE AO, IT IS FOUND FROM THE RECORD ITSELF THAT AO HAS NOT PROPERLY ANALYSED THE VERACITY OF THE BOOKS OF ACCOUNTS NOR HAS PROPE RLY APPRECIATED THE VARIOUS FACTS. IT IS WRONG TO BELIEVE THAT THE ASSE SSEE HAS NOT SHOWN SECURITY DEPOSIT OF RS.3,70.50,000/-. THIS ISSUE SH ALL BE FURTHER DISCUSSED IN RESPECT OF INDIVIDUAL GROUNDS OF APPEAL BASED ON THIS ADDITION. AS REGARDS SUB POINT NO.2 OF PARA 9 OF THE ASSESSMENT ORDER, IT IS WORTHWHILE TO MENTION THAT IF THERE IS ANY DEFECT IN AUDIT REP ORT THAT DOES NOT MEAN THAT BOOKS OF ACCOUNTS OF THE APPELLANT IS DEFECTIV E. THE LOGIC OF ASSESSING OFFICER IS BASELESS, SIMILARLY INTEREST INCOME HAS BEEN PROPERLY SHOWN IN THE ACCOUNTS OF MR. A.K. CHAMARIA, PROPRIETOR OF J. P. DENTAL. IT APPEARS THAT AO HAS NOT PROPERLY SCRUTINIZED THE RECORD. SI MILARLY AN AMOUNT OF RS.1,26,90,000/-, IT APPEARS THAT AO HAS NOT PROPERLY SCRUTINIZED RECORDS OF BOTH THE COMPANIES DULY ASSE SSED BY HIM VIZ. M/S ROYAL DENTAL CLINIC PVT. LTD. AND ROYAL HEALTH CARE PVT. LTD. THIS FINDING FURTHER GETS SUPPORT WHILE DECIDING THE INDIVIDUAL GROUNDS OF APPEAL. SIMILARLY, I DO NOT FIND ANY MERIT IN SUB POINT 5 O F PARA 9. ONLY ON THE BASIS OF DEBIT OF DEPRECIATION IN PROFIT & LOSS ACCOUNT, VERACITY OF BOOKS OF ACCOUNTS CANNOT BE CHALLENGED. THE ARGUMENTS OF AO IS FOUND TO BE BASELESS. I HAVE GONE THROUGH THE RIVAL SUBMISSIONS AND AM OF THE OPINION THAT AS PER INCOME TAX LAW, ASSESSEE CAN MAINTAIN ITS BOOKS OF ACCOUNTS ON CASH BASIS OR MERCANTILE BASIS. IT IS NOT THE CA SE OF A.O. THAT ASSESSEE HAS MAINTAINED ITS BOOKS ON HYBRID SYSTEM WHICH HAS BEEN DONE AWAY WITH, BY THE INCOME TAX ACT 1961. FURTHER, ASSESSEE HAS NOT CHANGED ITS METHOD OF ACCOUNTING SINCE INCEPTION. THEREFORE, TH IS IS NO GROUND FOR REJECTION OF BOOKS OF ACCOUNT. IN ANY EVENT, EVEN A FTER REJECTING OF THE BOOKS OF ACCOUNTS A.O. COULD NOT HAVE ASSESSED NET PROFIT @15% ON TURNOVER WITHOUT ANY VERIFIABLE EVIDENCE IN POSSESS ION. THERE IS NO BASIS FOR THE SAME. AS A MATTER OF FACT, IF ANY ASSESSEE COMPANY INVESTS AND EXPANDS ITS BUSINESS, THE DEPRECIATION WOULD INCREA SE AND IF A FIXED NET PROFIT IS ASSESSED, THE ENTIRE PROVISIONS OF ALLOWI NG DEPRECIATION WOULD BECOME MEANINGLESS. I AM THEREFORE OF THE OPINION T HAT THE AMOUNT OF RS.20,41,386/- ADDED BY ASSESSING OFFICER TO ASSESS ES HIGHER INCOME, ON THIS GROUND BEING UNSUBSTANTIATED, IS DELETED 6. WE HAVE CAREFULLY CONSIDERED THE REASONING GIVEN BY THE FIRST APPELLATE AUTHORITY. THE FIRST APPELLATE AUTHORITY HAS HELD THAT THE ASSESSEE, UNDER THE PROVISIONS OF INCOME TAX LAW, CAN MAINTAIN ITS BOOK S OF ACCOUNTS EITHER ON CASH BASIS OR MERCANTILE BASIS. HE HAS FURTHER HELD THA T THE AO HAS NOT PROPERLY ANALYZED THE VERACITY OF BOOKS OF ACCOUNT NOR HAS H E PROPERLY APPRECIATED VARIOUS FACTS. THE LD CIT(A) HAS ALSO HELD THAT TH E VARIOUS OTHER REASONS GIVEN ITA NO.119//M/2012 4 BY THE AO IN SUPPORT OF HIS DECISION TO REJECT THE BOOKS OF ACCOUNT ARE, IN FACT, TRIVIAL IN NATURE, WHICH DOES NOT WARRANT SUCH A DE CISION. ACCORDINGLY, THE LD. CIT(A) HAS CAME TO THE CONCLUSION THAT THE REJECTI ON OF BOOKS OF ACCOUNT OF THE ASSESSEE AND CONSEQUENTLY ESTIMATION OF NET PROF IT IS NOT JUSTIFIED. THUS, WE NOTICE THAT THE LD. CIT(A) HAS PROPERLY ANALYZED TH E FACTS PREVAILING IN THE INSTANCE CASE AND HAS TAKEN CONSCIOUS DECISION ON T HIS MATTER. FURTHER, IT IS SEEN THAT THE AO HAS NOT FOUND ANY DEFECT IN THE BO OKS OF ACCOUNT. AT THE TIME OF HEARING, THE LD. DR COULD NOT FILE ANY MATERIAL TO CONTROVERT THE FINDINGS GIVEN BY THE LD. CIT(A). HENCE, WE DO NOT FIND ANY REASO N TO INTERFERE WITH THE DECISION ARRIVED AT BY THE LD. CIT(A) ON THIS ISSUE. THE GR OUNDS RELATING TO THIS ISSUE ARE REJECTED. 7. THE NEXT ISSUE RELATES TO THE ASSESSMENT OF SECU RITY DEPOSIT RECEIVED BY THE ASSESSEE. THE FACTS RELATING TO THE SAID ISSUE ARE STATED IN BRIEF. THE ASSESSEE HAD FLOATED PROMOTIONAL HEALTH SCHEME AND ACCORDINGLY RECEIVED DEPOSITS FROM THE PROSPECTIVE PATIENTS. THE SECUR ITY DEPOSITS ACCOUNT HAD A OPENING BALANCE OF RS.79,41,700/-. FURTHER, DURIN G THE YEAR UNDER CONSIDERATION, THE ASSESSEE HAD RECEIVED A SUM OF R S.1,26,90,000/- UNDER THE SCHEME. THE AO TOOK THE VIEW THAT THE OPENING BA LANCE OF SECURITY DEPOSIT OF RS.79,41,700/- PLUS THE AMOUNT RECEIVED DURING THE YEAR AMOUNTING TO RS.1,26,90,000/- SHOULD BE TAXED IN THE HANDS OF T HE ASSESSEE EITHER AS CESSATION OF LIABILITY U/S 41 (1) OF THE ACT OR AS PERQUISITES U/S 28(IV) OF THE ACT, SINCE THE AO TOOK THE VIEW THAT THE ASSESSEE HAS RE CEIVED THE DEPOSITS IN THE COURSE OF CARRYING ON THE BUSINESS. IN THIS REGARD, THE AO TOOK SUPPORT OF THE DECISION RENDERED BY HONBLE SUPREME COURT IN THE C ASE OF TVS SUNDARAM IYENGAR & SONS, 222 ITR 344 (SC). ACCORDINGLY, THE AO ASSESSED THE ABOVE SAID AMOUNTS AS INCOME IN THE HANDS OF THE ASSESSEE . 8. BEFORE THE LD. CIT(A), THE ASSESSEE CONTENDED TH AT THE RATIO OF DECISION OF TVS SUNDARAM IYENGAR & SONS (SUPRA) IS NOT APPLICAB LE, SINCE THE FACTS PREVAILING IN THE INSTANT CASE ARE DIFFERENT, I.E., THE ASSESSEE SUBMITTED THAT THE LIABILITY HAS NOT CEASED TO EXIST IN ITS CASE, WHER E AS IN THE CASE OF T.V. SUNDRAM IYENGAR & SONS, THE LIABILITY HAD CEASED AND THE AS SESSEE THEREIN HAD TAKEN THE AMOUNT TO ITS PROFIT AND LOSS ACCOUNT. THE ASSESSE E, ON THE CONTRARY, RELIED ITA NO.119//M/2012 5 UPON THE FOLLOWING DECISIONS AND CONTENDED THAT THE DEPOSITS CANNOT BE ASSESSED AS ITS INCOME. A) LIQUIDATOR, MYSORE AGENCIES P. LTD V/S CIT (19 78) 114 ITR 853 (KARN); B) CIT V/S INDIAN RESEARCH INSTITURE PR. LTD (197 9) TAX LR (NOC) 66 (CAL),; C) K V MOOSAKOYA & CO V/S ITO (1989) 175 ITR 120, 124 (KER) AND D) BOMBAY DYEING AND MFG CO.LTD V/S STATE OF BOMBA Y (1958) SCR 112,1135= AIR 1958 SC 328, ACCORDINGLY, THE ASSESSEE CONTENDED THAT THERE IS N O CESSATION OF LIABILITY AS PRESUMED BY THE AO. FURTHER, THE ASSESSEE ALSO CON TENDED THAT IT HAS NOT RECEIVED ANY BENEFIT LIKE PERQUISITE AND HENCE THE PROVISIONS OF SECTION 28(IV) ALSO WILL NOT APPLY. 9. THE LD. CIT(A) CONSIDERED THE ENTIRE SPECTRUM OF FACTS AND NOTICED THAT THE ASSESSEE HAS RECEIVED THE SECURITY DEPOSIT FROM THE PROSPECTIVE PATIENTS UNDER THE PROMOTIONAL SCHEME FLOATED BY THE ASSESSEE. T HE LD. CIT(A) ALSO NOTICED THAT THE ITAT IN ASSESSEES OWN CASE, VIDE ITS ORDE R DATED 4.2.2004, IN ITA NO.3367/MUM/1998 RELATING TO THE ASSESSMENT YEAR 19 98-99 AND ALSO IN ITA NO.880/MUM/1998, VIDE ITS ORDER DATED 14.7.2003, RE LATING TO THE ASSESSMENT YEAR 1992-93 HAS HELD THAT THE DEPOSITS RECEIVED BY THE ASSESSEE UNDER THE PROMOTIONAL SCHEME ARE REFUNDABLE AND HENCE IT CANN OT BE PERCEIVED THAT SUCH LIABILITY IS NOT LONGER PAYABLE. THE LD. CIT(A) A LSO NOTICED THAT THE ASSESSEE HAS GIVEN COPIES OF ALL DEPOSITS, DETAILS OF PATIENTS, AMOUNT RECEIVED, COPIES OF DENTAL RECORD TO THE AO. THE LD CIT(A) ALSO NOTICED THAT THE ASSESSEE HAS REFUNDED SOME DEPOSITS DURING THE INSTANT YEAR. ACCORDINGLY, THE LD. CIT(A) HELD THAT THE AO WAS WRONG IN PRESUMING THAT THERE WAS CESSATION OF LIABILITY WITHIN THE MEANING OF SECTION 41(1) OF THE ACT AND ACCORDINGL Y, DIRECTED THE AO TO DELETED THIS ADDITION. 10. WE NOTICE THAT THE AO HAS PROCEEDED TO ASSESS T HIS AMOUNT UNDER THE IMPRESSION THAT THE ASSESSEE IS NOT LIABLE TO REPAY THE SECURITY DEPOSIT RECEIVED BY IT. ON THE CONTRARY, THE TRIBUNAL, IN THE ASS ESSEES OWN CASE, REFERRED ABOVE HAS GIVEN FINDINGS THAT THE SECURITY DEPOSIT ARE RE PAYABLE AS PER THE SCHEME FLOATED BY THE ASSESSEE. THE LD. CIT(A) HAS ALSO GI VEN A FINDING THAT THE ASSESSEE HAS REFUNDED THE SECURITY DEPOSIT TO THE P ATIENTS. HENCE, IN OUR VIEW, ITA NO.119//M/2012 6 THE LD. CIT(A) WAS JUSTIFIED IN HOLDING THAT THERE IS NO CESSATION OF LIABILITY IN RESPECT OF THE SECURITY DEPOSITS. SINCE THE ASSES SEE IS LIABLE TO REPAY THE SECURITY DEPOSIT, THE QUESTION OF ASSESSING THE SAM E U/S 28(IV) ALSO DOES NOT ARISE. UNDER THESE SET OF FACTS, WE ARE OF THE VIE W THAT THE LD. CIT(A) WAS JUSTIFIED IN DELETING THIS ADDITION. 11. THE NEXT ISSUE RELATES TO THE ASSESSMENT OF RS. 3,70,50,000/- UNDER SECTION 69 OF THE ACT. THE ASSESSEE IS HAVING A SISTER CONCERN NAMED M/S ROYAL DENTAL CLINIC PVT LTD. FROM THE BALANCE S HEET OF M/S ROYAL DENTAL CLINIC PVT LTD., THE AO NOTICED THAT THE ASSESSEE HAS PAID A SUM OF RS.3,70,50,000/- TO M/S ROYAL DENTAL CLINIC PRIV ATE LIMITED. HOWEVER, THE AO NOTICED THAT THE SAID PAYMENT WAS NOT REFLECTED IN THE BALANCE SHEET OF THE ASSESSEE AND HENCE THE AO ASSESSED THE ABOVE SAID AMOUNT AS UNEXPLAINED INVESTMENT IN THE HANDS OF THE ASSESSEE UNDER SECTI ON 69 OF THE ACT. 12. THE LD. CIT(A) NOTICED THAT THE ASSESSEE HAS CL UBBED TOGETHER THE SECURITY DEPOSIT ACCOUNT AND THE M/S ROYAL DENTAL C LINIC (P) LTD, WHILE PREPARING THE BALANCE SHEET AND ACCORDINGLY THE NET AMOUNT O NLY WAS DISCLOSED IN THE BALANCE SHEET. THE MANNER OF DISCLOSURE OF THE S ECURITY DEPOSIT ACCOUNT AND THE AMOUNT GIVEN TO M/S ROYAL DENTAL CLINIC PVT. LTD IS EXTRACTED BY LD CIT(A) AS UNDER : A. FROM BANKS B.FROM OTHERS NIL 7941700.00 SECURITY DEPOSITS FROM PATIENTS OPENING BALANCE DURING THE YEAR (846 X 15000) REFUND DURING THE YEAR (3 X 15000, 25 X 2400) ROYAL DENTAL OPENING BALANCE DURING THE YEAR 32406700.00 12690000.00 (-)105000.00 44991700.00 (-)24465000.00 (-)12585000.00 (-)37050000.00 7941700.00 ITA NO.119//M/2012 7 .ACCORDINGLY, THE LD. CIT(A) HELD THAT THE ASSESSE E HAS IN FACT, ACCOUNTED FOR THE DEPOSIT OF RS.3.70 CRORES PAID TO M/S ROYAL DENTAL CLINIC PVT.LTD IN ITS BOOKS OF ACCOUNT BUT THE SAME WAS NETTED OF AGAINST THE SE CURITY DEPOSIT WHILE PREPARING THE BALANCE SHEET. ACCORDINGLY, THE LD. CIT(A) DE LETED THE ADDITION MADE BY THE AO WITH THE OBSERVATIONS THAT THERE IS NO JUSTIFI CATION IN MAKING THIS ADDITION. SINCE, THE LD. CIT(A) HAS GIVEN CLEAR FINDING THAT THE ASSESSEE HAS ACCOUNTED FOR THE INVESTMENT MADE IN M/S ROYAL DENTAL CLINIC P VT LTD IN BOOKS OF ACCOUNT, AND SINCE THE ASSESSEE HAS FOLLOWED A PARTICULAR ME THOD FOR GROUPING THE ACCOUNT S AND PRESENTED ONLY THE NET BALANCE IN TH E BALANCE SHEET, IN OUR VIEW, IT CANNOT BE HELD THAT THE ASSESSEE HAS NOT ACCOUN TED FOR THE INVESTMENT OF RS.3.70 CRORES MADE WITH M/S ROYAL DENTAL CLINIC PVT.LTD. ACCORDINGLY, WE ARE OF THE VIEW THAT THE LD. CIT(A) WAS JUSTIFIED IN DELETING THIS ADDITION. 13. THE NEXT ISSUE RELATES TO ADDITION OF RS.20 LA KHS MADE U/S 68 OF THE ACT. THE AO, ON PERUSAL OF THE ACCOUNT OF M/S J P DENTAL CLINIC (PROP.DR.ARUN CHAMARIA WHO IS THE DIRECTOR OF THE ASSESSEE COMPAN Y), NOTICED THAT DR. ARUN CHAMARIA HAS MADE PAYMENTS OF RS.20 LAKHS TO THE AS SESSEE COMPANY TOWARDS SHARE APPLICATION MONEY. HOWEVER, THE AO FOUND TH AT THE SAID RECEIPT WAS NOT REFLECTED IN THE BALANCE SHEET OF ASSESSEE COMPANY. ACCORDINGLY, HE ASSESSED RS.20 LAKHS AS INCOME OF THE ASSESSEE U/S 68 OF THE ACT. THE LD. CIT(A) NOTICED THAT THE ASSESSEE HAD ACTUALLY ACCOUNTED FOR THE AP PLICATION MONEY OF RS.20 LAKHS RECEIVED FROM DR. ARUN CHAMARIA . AT THE SAME TIME, DR ARUN CHAMARIA HAD A DEBIT BALANCE OF AN EQUAL AMOUNT. SINCE THE ASSESSEE COMPANY DID NOT ISSUE SHARES TO HIM, THE SHARE APPLICATION MONEY OF RS.20 LAKHS WAS ADJUSTED AGAINST THE DEBIT BALANCE BY PASSING A JOURNAL ENTR Y IN APRIL 2008. HENCE THE SHARE APPLICATION ACCOUNT WAS SHOWING NIL BALANCE A ND IT WAS NOT REFLECTED IN THE BALANCE SHEET. IT WAS ALSO SUBMITTED BEFORE HE LD. CIT(A) THAT DR.ARUN CHAMERUIA HAS ALSO MAINTAINED REGULAR BOOKS OF ACC OUNT AND THESE TRANSACTIONS HAVE BEEN DULY REFLECTED IN HIS BOOKS ALSO. ACCORD INGLY, IT WAS CONTENDED THAT THE ASSESSEE HAS PROVED IDENTITY AND CAPACITY OF TH E CREDITOR AS WELL AS GENUINENESS OF TRANSACTION RELATING TO SHARE APPLIC ATION. THE LD. CIT(A) WAS CONVINCED WITH THE EXPLANATION OF THE ASSESSEE AND ACCORDINGLY DELETED HE ADDITION OF RS.20 LAKHS WITH THE FOLLOWING OBSERVA TIONS : ITA NO.119//M/2012 8 8.3 I HAVE CONSIDERED THE RIVAL SUBMISSIONS OF T HE APPELLANT AND FINDING OF THE ASSESSING OFFICER, CAREFULLY. I FIND THAT LD. ASSESSING OFFICER HAS WRONGLY MADE THE ADDITION U/S.68. SINCE THE ENTRY OF SHARE APPLICATION MONEY WAS SQUARED OFF DURING THE SAME YEAR IT WOULD NOT APPEAR IN THE BALANCE SHEET. FURTHER, TH E CREDITOR DR. ARUN CHAMRIA, IN HIS INDIVIDUAL CAPACITY HAD PERSO NALLY APPEARED BEFORE THE A.O. IN RESPONSE TO NOTICE U/S.133(6) AN D CONFIRMED THE AFORESAID ENTRIES WITH REQUIRED EVIDENCES INCLUDING THE ROL, THE BALANCE SHEETS OF THE RELEVANT YEAR AS WELL OF THE PREVIOUS YEAR ETC. IN MY OPINION, APPELLANT HAD DISCHARGED ITS ONUS O F PROVING THE IDENTITY, CAPACITY AND GENUINENESS OF THE TRANSACTI ON. DR.ARUN CHAMARIA HAS EXPLAINED BEFORE ME AND CONFIRMED TH E AFORESAID TRANSACTIONS DULY SUPPORTED BY THE TRIAL BALANCE OF ASSESSEE COMPANY WHICH SHOWS THAT THE ENTRY OF SHARE APPLICA TION WAS SQUARED OFF DURING THE SAME YEAR. I AM, THEREFORE, OF THE OPINION THAT THE ADDITION MADE BY A.O. OF RS.20,00,000/- U/ S.68 OF I.T. ACT 1961 IS NOT SUSTAINABLE, HENCE DELETED. WE NOTICE THAT DR.ARUN CHAMARIA IS ALSO ASSESSED BY THE SAME OFFICER AND UPON EXAMINATION OF HIS ASSESSMENT RECORD ONLY, THE AO HAS COME TO KNOW OF THE FACT THAT THE ASSESSEE HAS RECEIVED THE SHARE APPL ICATION MONEY RS.20 LAKHS FROM DR.ARUN CHAMARIA. THE REASONS FOR NOT DISCLO SING THE SAME IN THE BALANCE SHEET HAS BEEN DULY EXPLAINED BY THE ASSESSEE BEFOR E LD. CIT(A) AND THE SAME HAS BEEN FOUND TO BE CORRECT BY THE FIRST APPELLATE AUTHORITY ALSO. UNDER THESE SET OF FACTS, WE ARE OF THE VIEW THAT THERE IS NO G ROUND TO SUSPECT THE GENUINENESS OF RECEIPT OF RS.20 LAKHS AND ALSO TO S USPECT ABOUT THE CREDITWORTHINESS OF DR.ARUN CHAMARIA. HENCE, IN OUR VIEW, THE LD. CIT(A) WAS JUSTIFIED IN DELETING THIS ADDITION. 14. IN THE RESULT, THE APPEAL FILED BY REVENUE IS D ISMISSED. THE ABOVE ORDER WAS PRONOUNCED IN THE OP EN COURT ON 10TH DEC, 2014 . *+ & , -. / 0 10TH DEC, 2014 + % 1' 2 SD SD ( . . / H.L. KARWA) ( . . ,/ B.R. BASKARAN) / PRESIDENT / ACCOUNTANT MEMBER - & ' MUMBAI: 10TH DEC,2014. ITA NO.119//M/2012 9 . . ./ SRL , SR. PS / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. ! / THE RESPONDENT. 3. & 3( ( ) / THE CIT(A)- CONCERNED 4. & 3( / CIT CONCERNED 5. 6. 45 1 (6 , ) 6 , - & ' / DR, ITAT, MUMBAI CONCERNED 1 7 ' / GUARD FILE. 8 & / BY ORDER, TRUE COPY 9 ' (ASSTT. REGISTRAR) ) 6 , - & ' /ITAT, MUMBAI