RAVI METAL TRADING P. LTD, MUMBAI V. ITO WWD 5(3)(1), MUMBAI

ITA 1192/MUM/2014

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 101130 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 7 month(s) 2 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-09-2015
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: D
• Assessment Year: 2007-2008
• Appeal Filed On: 21-02-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Reopening of assessment; Unexplained cash credit; Income from undisclosed sources; Onus to prove
• Section: 143(3); 68; 148; 6

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH, MUMBAI BEFORE S/SHRI B.R.BASKARAN ,AM AND LALIT KUMAR, JM ./ I.T.A. NO . 1192 / MUM/20 1 4 ( / ASSESSMENT YEA R : 200 7 - 08 ) M/S RAVI METAL TRA DING PVT LTD., 56, 1 ST FLOOR, OFFICE NO.9, KIKA STREET, GULALWADI, MUMBAI - 400 004 / VS. INCOME TAX OFFICER 5 ( 3 )( 1 ), AAYAKAR BHAVAN, M K ROAD, MUMBAI - 4000 20 . ( / APPELLANT ) .. ( / RESPONDENT ) ./ ./PA N : AADCR3884P / APPELLANT BY SHRI NEELKANTH KHANDELWAL / RSPONDENT BY MS.ANU AGGARWAL / DATE OF HEARING : 20. 8 . 201 5 / DATE OF PRONOUNCEMENT: 23. 9 . 20 1 5 / O R D E R P ER B R BASKARAN, AM: THE ASSESSEE HAS FILED THIS APPEAL CHALLENGING THE ORDER 01 - 01 - 2014 PASSED BY LD CIT(A) - 9 MUMBAI CONFIRMING THE ADDITION MADE U/S 68 OF THE ACT BY THE AO FOR ASSESSMENT YEAR 2007 - 08. 2. THE FA CTS IN BRIEF ARE THAT THE ASSESSEE WAS INCORPORATED ON 26 - 08 - 2006. HENCE THE FINANCIAL YEAR ENDING 31.3.2007 RELEVANT TO THE ASSESSMENT YEAR 2007 - 08 IS THE FIRST YEAR OF OPERATION FOR THE ASSESSEE. IT IS ENGAGED IN THE BUSINESS OF IMPORTER & TRADER IN FER ROUS AND NON - FERROUS METAL. IT FILED ITS RETURN OF INCOME FOR AY 2007 - 08 ON 08 - 10 - 2007. THE ITA NO. 1192/MUM/2014 2 RETURN OF INCOME WAS INITIALLY PROCESSED U/S 143(1) OF THE ACT. LATER THE ASSESSMENT U/S 143(3) WAS COMPLETED ON 29 - 10 - 2009. 3. THE REVENUE CARRIED OUR SE ARCH AND SEIZURE OPERATIONS IN THE HANDS OF SHRI MUKESH CHOKSI AND HIS GROUP OF HIS COMPANIES. DURING THE COURSE OF SEARCH, IT CAME TO LIGHT THAT THEY WERE INDULGING IN PROVIDING BOGUS ACCOMMODATION BILLS IN ORDER TO ENABLE ASSESSEES TO GENERATE BOGUS LON G TERM CAPITAL GAINS ON SALE OF SHARES AND ALSO HELPING THE PEOPLE TO CONVERT THEIR UNACCOUNTED MONEY INTO ACCOUNTED MONEY BY SUBSCRIBING THE SHARE CAPITAL. THE INVESTIGATION WING GATHERED DETAILS OF THE PERSONS WHO HAD TRANSACTED WITH MUKESH CHOKSI AND HIS GROUP OF COMPANIES. IT WAS NOTICED THAT HIS GROUP COMPANIES HAVE GIVEN SHARE APPLICATION MONEY TO THE ASSESSEE COMPANY. THE AO INITIALLY NOTICED THAT THE GROUP COMPANIES HAVE GIVEN SHARE APPLICATION MONEY TO THE TUNE OF RS.40.00 LAKHS. BASED ON THE SAID INFORMATION, THE ASSESSMENT UNDER CONSIDERATION WAS REOPENED BY THE AO IN THE HANDS OF THE ASSESSEE. 4. IN THE REASSESSMENT PROCEEDING, THE AO NOTICED THAT THE ASSESSEE COMPANY HAS RECEIVED SHARE APPLICATION TO THE TUNE OF RS.70.00 LAKHS. THOUGH THE ASSESSEE FURNISHED ALL THE RELEVANT DETAILS TO PROVE THE SHARE APPLICATION MONEY, YET THE AO CHOSE TO DISREGARD THEM BY SOLELY PLACING RELIANCE ON THE STATEMENT GIVEN BY SHRI MUKESH CHOKSI. ACCORDINGLY, THE ASSESSING OFFICER ASSESSED SHARE APPLICATIO N MONEY OF RS.70.00 LAKHS AS UNEXPLAINED CASH CREDIT U/S 68 OF THE ACT. THE LD CIT(A) ALSO CONFIRMED THE SAME AND HENCE THE ASSESSEE HAS FILED THIS APPEAL BEFORE US. 5. THE LD COUNSEL SUBMITTED THAT THE ASSESSEE HAS BEEN INCORPORATED ONLY DURING THE YEA R UNDER CONSIDERATION AND HENCE THE ASSESSEE COULD NOT HAVE EARNED UNACCOUNTED MONEY TO THE TUNE OF RS.70.00 LAKHS. HE FURTHER SUBMITTED THAT THE ASSESSEE HAS DISCHARGED THE BURDEN PLACED ITA NO. 1192/MUM/2014 3 UPON IT U/S 68 OF THE ACT BY PROVING THE THREE MAIN INGREDIENTS, VI Z., THE IDENTITY OF THE SHARE APPLICANTS, THE GENUINENESS OF TRANSACTIONS AND THE CREDIT WORTHINESS OF THE SHARE APPLICANTS. HOWEVER, THE TAX AUTHORITIES DID NOT FIND FAULT WITH THE DOCUMENTS FURNISHED BY THE ASSESSEE, BUT CHOSE TO PLACE RELIANCE ON THE S TATEMENT GIVEN BY SHRI MUKESH CHOKSI. HE FURTHER SUBMITTED THAT SHRI MUKESH CHOKSI DID NOT REFER THE ASSESSEE COMPANYS NAME ANYWHERE. INSTEAD THE INVESTIGATION WING HAS FOUND THE INVESTMENT MADE BY THE GROUP COMPANIES INTO THE ASSESSEE COMPANY AND ACCOR DINGLY DRAWN ADVERSE INFERENCE. ACCORDINGLY HE SUBMITTED THE AO HAS REOPENED THE ASSESSMENT BY DRAWING ADVERSE INFERENCES ON THE BASIS OF INFORMATION GIVEN BY THE INVESTIGATION WING WITHOUT EXAMINING THE VERACITY OF THE SAME. HE FURTHER SUBMITTED THAT TH E ASSESSEE HAS FURNISHED ALL THE DETAILS RELATING TO SHARE APPLICATION MONEY DURING THE COURSE OF ORIGINAL ASSESSMENT PROCEEDINGS. HE SUBMITTED THAT THE INFORMATION GIVEN BY THE INVESTIGATION WING DOES NOT BRING ANY NEW EVIDENCE WARRANTING REOPENING OF ASS ESSMENT. ACCORDINGLY HE CONTENDED THAT THE REOPENING OF ASSESSMENT IS BAD IN LAW. IN THIS REGARD, HE PLACED RELIANCE ON THE DECISION RENDERED BY JODHPUR BENCH OF ITAT IN THE CASE OF M/S SURBHI MINCHEM PVT LTD VS. ITO (ITA NOS.102 & 103/JODH/2014 DATED 16 - 05 - 2014). ON MERITS HE SUBMITTED THAT THE IDENTICAL ADDITIONS MADE IN THE FOLLOWING CASES HAVE BEEN DELETED BY THE TRIBUNAL. (A) ITO VS. J J MULTITRADE PVT LTD (ITA NO.2158 & 2159/MUM/2014 DATED 11.3.2015) (B) M/S SDB ESTATE PRIVATE LTD VS. ITO (ITA NO .584/M/2015 DATED 15.4.2015) 6. THE LD A.R FURTHER INVITED OUR ATTENTION TO THE ADDITIONAL GROUNDS OF APPEAL RAISED BY THE ASSESSEE. INVITING OUR ATTENTION THE COPY OF NOTICE ISSUED U/S 148 OF THE ACT, THE LD A.R SUBMITTED THAT THE ASSESSING OFFICER H AS OBTAINED APPROVAL OF THE ADDL. COMMISSIONER OF INCOME TAX U/S 151(2) ITA NO. 1192/MUM/2014 4 OF THE ACT. HE SUBMITTED THAT THE ORIGINAL ASSESSMENT IN THE HANDS OF THE ASSESSEE HAS BEEN COMPLETED U/S 143(3) OF THE ACT AND HENCE THE APPROVAL SHOULD HAVE BEEN OBTAINED U/S 151(1) OF THE ACT. ACCORDINGLY HE SUBMITTED THAT THE REOPENING OF ASSESSMENT IS BAD IN LAW, SINCE THE SANCTION HAS BEEN OBTAINED UNDER WRONG PROVISIONS OF THE ACT. 7. ON THE CONTRARY, THE LD D.R PLACED STRONG RELIANCE ON THE ORDER PASSED BY LD CIT(A). 8. WE HEARD RIVAL CONTENTIONS AND PERUSED THE RECORD. IT IS AN ADMITTED FACT THAT THE ASSESSMENT YEAR UNDER CONSIDERATION IS THE FIRST YEAR OF ASSESSMENT FOR THE ASSESSEE. WE HAVE ALREADY NOTICED THAT THE ASSESSEE COMPANY WAS INCORPORATED ONLY IN AUGUST, 2006 AND HENCE THE FIRST YEAR CONSISTED OF ONLY SEVEN MONTHS OF OPERATION. DURING THE YEAR UNDER CONSIDERATION, THE ASSESSEE HAS ACHIEVED SALES OF RS.5.69 CRORES AND MADE A PROFIT OF RS.4.78 LAKHS. SINCE THE ASSESSEE COMPANY IS A LEGAL PERSON, THE POSSIB ILITY OF EARNING RS.70.00 LAKHS, WHICH WAS ALLEGED TO HAVE BEEN INTRODUCED AS SHARE APPLICATION MONEY, WAS REMOTE AND HENCE, PRIMA FACIE, THERE IS MERIT IN THE CONTENTIONS URGED BY THE ASSESSEE IN THIS ANGLE. 9. ON MERITS, WE NOTICE THAT THE ASSESSEE H AS DISCHARGED THE INITIAL BURDEN PLACED UPON IT U/S 68 OF THE ACT BY PROVING THE IDENTITY AND CREDIT WORTHINESS OF SHARE APPLICANTS AND THE GENUINENESS OF THE TRANSACTIONS. THE ASSESSEE HAS PLACED THE FINANCIAL STATEMENTS OF ALL THE APPLICANTS IN THE PAPE R BOOK. A CAREFUL PERUSAL OF THE SAME WOULD SHOW THAT THE SHARE APPLICANTS ARE HAVING ADEQUATE RESOURCES TO INVEST IN THE SHARE CAPITAL OF THE ASSESSEE COMPANY. IT IS A WELL SETTLED PROPOSITION THAT THE BURDEN WOULD SHIFT UPON THE ASSESSING OFFICER U/S 6 8 OF THE ACT, ONCE THE ASSESSEE DISCHARGES THE INITIAL BURDEN PLACED UPON HIM. IN THE INSTANT CASE, THE ITA NO. 1192/MUM/2014 5 ASSESSING OFFICER HAS NOT DISCHARGED THE BURDEN SHIFTED UPON HIM BY BRINGING ANY OTHER CREDIBLE MATERIALS ON RECORD TO DISPROVE THE DOCUMENTS FURNISHED BY THE ASSESSEE. 10. WE ALSO NOTICE THAT THE CO - ORDINATE BENCH OF TRIBUNAL HAS CONSIDERED IDENTICAL ISSUES IN THE CASE OF J J MULTITRADE PVT LTD (SUPRA) AND M/S SDB ESTATE PRIVATE LTD (SUPRA). THE DECISION RENDERED IN THE CASE OF J J MUTITRADE PVT LTD WAS FOLLOWED IN THE OTHER CASE REFERRED ABOVE. THE OBSERVATIONS MADE IN THE CASE OF J J MULTITRADE PVT LTD (SUPRA) IS EXTRACTED BELOW FOR THE SAKE OF CONVENIENCE: - 6. WE HAVE HEARD BOTH THE PARTIES AND THEIR CONTENTIONS HAVE CAREFULLY BEEN CONSIDERED. THE ASSESSEE HAD FILED EVIDENCE TO SUPPORT THE RECEIPT OF SHARE APPLICATION MONEY WHICH WAS SUPPORTED BY COPIES OF SHARE APPLICATION MONEY, CONFIRMATION FROM SHARE HOLDER AND OTHER DOCUMENTS. ACCORDING TO DEPARTMENT AS PER STATEMENT RECORDED OF MR. MUKE SH C CHOKSI, THESE TRANSACTIONS OF THE ASSESSEE ARE TO BE CONSIDERED AS BOGUS. HOWEVER, IT WAS THE CONTENTION OF THE ASSESSEE THAT IN NONE OF THE STATEMENT RECORDED BY THE DEPARTMENT THE NAME OF THE ASSESSEE EXIST. SUCH CONTENTION OF THE ASSESSEE HAS NOT BEEN FOUND TO BE INCORRECT. TO FURTHER SUPPORT, THE ASSESSEE HAS FILED COPY OF ITS BANK ACCOUNT TO CONTEND THAT THERE NO CASH DEPOSITS OR WITHDRAWALS. HOWEVER, THE DEPARTMENT HAS NOT ACCEPTED ALL THESE EVIDENCES AND MADE THE ADDITION. LD CIT(A) AFTER A PPRECIATING THE EVIDENCES SUBMITTED BY THE ASSESSEE AND RELYING UPON CERTAIN DECISIONS HAS COME TO THE CONCLUSION THAT SUCH ADDITION WAS NOT CALLED FOR. ON THE BASIS OF THE SIMILAR STATEMENT OTHER TRANSACTIONS ENTERED INTO BY OTHER ASSESSEES WITH THE CONC ERNS OF MR. MUKESH C CHOKSI WERE CONSIDERED AS BOGUS AND THIS ISSUE HAD COME BEFORE THE TRIBUNAL AND TRIBUNAL AFTER CONSIDERING THE FACTS HAS DELETED THOSE ADDITIONS. 6.1 IN VIEW OF THE ABOVE POSITION, WE SEE NO INFIRMITY IN THE ORDE PASSED BY LD CIT( A) WHICH IMPUGNED ADDITIONS HAVE BEEN DELETED. 11. THE FACTS PREVAILING IN THE INSTANT CASE IS IDENTICAL IN NATURE, I.E., THE ASSESSEE HAS FURNISHED ALL THE RELEVANT DOCUMENTS, BUT THE TAX AUTHORITIES HAVE REJECTED THEM WITHOUT EXAMINING THEM. FURTH ER, IT IS THE CASE OF THE ITA NO. 1192/MUM/2014 6 ASSESSEE THAT THE SWORN STATEMENT GIVEN BY SHRI MUKESH CHOKSI NOWHERE IMPLICATES THE ASSESSEE HEREIN. THE SAID CLAIM OF THE ASSESSEE HAS NOT BEEN PROVED TO BE INCORRECT. AS STATED EARLIER, THE ASSESSEE HAS DISCHARGED THE INITIAL BURDEN OF PROOF PLACED UPON IT U/S 68 OF THE ACT, BUT THE AO HAS NOT DISPROVED THE SAME WITH CREDIBLE MATERIALS. UNDER THESE SET OF FACTS, WE ARE OF THE VIEW THAT THE ADDITION MADE BY THE ASSESSING OFFICER WAS NOT JUSTIFIED IN LAW. ACCORDINGLY, WE SET AS IDE THE ORDER OF LD CIT(A) AND DIRECT THE AO TO DELETE THE IMPUGNED ADDITION. 12. WE FURTHER NOTICE THAT THE ASSESSEE HAS FURNISHED ALL THE DETAILS PERTAINING TO THE SHARE APPLICATION MONEY RECEIVED BY IT DURING THE COURSE OF ORIGINAL ASSESSMENT PROCE EDINGS. THE COPIES OF RELEVANT LETTERS FURNISHED TO THE AO IN THE COURSE OF ORIGINAL ASSESSMENT PROCEEDINGS ARE PLACED AT PAGES 73 TO 75 OF THE PAPER BOOK. THE ASSESSING OFFICER, HAVING CONSIDERED THE SAME IN THE ORIGINAL ASSESSMENT PROCEEDINGS, HAS REO PENED THE ASSESSMENT WITHIN FOUR YEARS FROM THE END OF THE RELEVANT ASSESSMENT YEAR, ON THE BASIS OF INFORMATION RECEIVED BY HIM FROM INVESTIGATION WING. THOUGH, IN THE REASONS RECORDED, THE ASSESSING OFFICER HAS STATED THAT SHRI MUKESH CHOKSI HAS ADMITTE D TO HAVE RECEIVED CASH FROM THE ASSESSEE COMPANY FOR INTRODUCING UNACCOUNTED INCOME AS SHARE APPLICATION MONEY, YET THE CONTENTIONS OF THE ASSESSEE IS THAT SHRI MUKESH CHOKSI HAS NOT SPECIFICALLY MENTIONED THE NAME OF THE COMPANY AND HENCE THE AO HAS ONLY DRAWN INFERENCE. HENCE THE ASSESSEE IS CHALLENGING THE VALIDITY OF THE REOPENING OF ASSESSMENT WITH THE CONTENTION THAT THERE WAS NO REASON AVAILABLE WITH THE AO TO FORM A BELIEF THAT THERE IS ESCAPEMENT OF INCOME. THE LD A.R HAS ALSO CONTENDED THAT TH E ASSESSING OFFICER HAS OBTAINED SANCTION FROM THE ADDITIONAL COMMISSIONER OF INCOME TAX U/S 151(2) OF THE ACT INSTEAD OF SEC. 151(1) OF THE ACT. SINCE WE HAVE DELETED THE ADDITION ON MERITS, WE DO NOT FIND IT NECESSARY TO ADDRESS THE LEGAL ISSUES URGED BY THE ASSESSEE. ITA NO. 1192/MUM/2014 7 13. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS TREATED AS ALLOWED. PRONOUNCED ACCORDINGLY ON 23RD SEPT, 2015. 23RD SEPT, 2015 SD SD ( LALIT KUMAR) ( B.R. BASKARAN) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI: 23RD SEPT, 2015 . . . ./ SRL , SR. PS / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. ( ) / THE CIT(A) - CONCERNED 4. / CIT CONC ERNED 5. , , / DR, ITAT, MUMBAI CONCERNED 6. / GUARD FILE. / BY ORDER, TRUE COPY (ASSTT. REGISTRAR) , /ITAT, MUMBAI