Modern Dalkhola Flour Mills Pvt. Ltd., Kolkata V. DCIT, Circle-2, Jalpaiguri, Jalpaiguri

ITA 1199/KOL/2017

• Counselvise Citation: [2019] 116 COUNSELVISE.COM (IT) 4587 (ITAT-KOLKATA)
• Duration Of Justice: 2 year(s) 3 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-08-2019
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Assessment Year: 2012-2013
• Appeal Filed On: 25-05-2017
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: MRINAL KANTI BISWAS CITSRDR
• Assessee Lawyers: MANISH TIWARI
• Keywords: Unexplained cash credit
• Section: 143(3); 133(6); 195; 131; 68

Judgement Text

, B , IN THE INCOME TAX APPELLATE TRIBUNAL KOLKATA BENCH B KOLKATA BEFORE SHRI S.S.GODARA, JUDICIAL MEMBER AND DR. A.L. SAINI, ACCOUNTANT MEMBER ITA NO. 1199 & 1323 / KOL / 2017 ASSESSMENT YEAR :2012-13 MODERN DALKHOLA FLOUR MILLS PVT. LTD., P.O. DALKHOLA, DIST. UTTAR DINAJPUR, PIN-733201 [ PAN NO.AAACD 9274 A ] DCIT, CIRCLE-2(1), 2 ND FLOOR, CENTRAL REVENUE BUILDING, RACE COURSE PARA, NAYA BASTY, JALPAIGURI- 735101 V/S . V/S . DCIT, CIRCLE-2(1), 2 ND FLOOR, CENTRAL REVENUE BUILDING, RACE COURSE PARA, NAYA BASTY, JALPAIGURI-735101 MODERN DALKHOLA FLOUR MILLS PVT. LTD., P.O. DALKHOLA, DIST. UTTAR DINAJPUR /APPELLANT .. / RESPONDENT /BY ASSESSEE SHRI MANISH TIWARI, AR /BY REVENUE SHRI MRINAL KANTI BISWAS, ADDL. CIT-SR-DR /DATE OF HEARING 23-08-2019 /DATE OF PRONOUNCEMENT 28-08-2019 / O R D E R PER S.S.GODARA, JUDICIAL MEMBER:- THE ASSESSEE AND REVENUE HAVE FILED THEIR INSTANT CROSS-APPEAL IN ITA NO.1199/KOL/2017 AND ITA NO.1323/KOL/2017 FOR ASSES SMENT YEAR 2012-13 AGAINST THE COMMISSIONER OF INCOME TAX (APPEALS)-JA LPAIGURIS COMMON ORDER DATED 31.03.2017 PASSED IN CASE NO.22/JAL/CIT (A)/15-16 RESTRICTING ASSESSING OFFICERS ACTION TREATING THE FORMER SHAR E APPLICATION / PREMIUM ITA NO.1199& 1323/KOL/2017 A.Y.2012-13 MODERN DALKHOLA FLOUR MILLS PVT. LTD. VS. DCIT, CIR-2, JALPAIGURI PAGE 2 AMOUNT OF 326,50,000/- AS UNEXPLAINED CASH CREDITS U/S 68 TO 75 LAC ONLY, IN PROCEEDINGS U/S 143(3) OF THE INCOME TAX ACT, 1961; IN SHORT THE ACT. HEARD BOTH THE LEARNED REPRESENTATIVES AGAINST AND IN SUPPORT OF THEIR RESPECTIVE PLEADINGS SEEKING TO DELETE AND RESTORE THE ENTIRE AMOUNT OF UNEXPLAINED SHARE APPLICATION / PREMIUM ADDITION; R ESPECTIVELY. 2. THEY INVITE OUR ATTENTION TO THE CIT(A)S DETAIL ED DISCUSSION ON THE ABOVE SOLE ISSUE AS UNDER:- 4.2 I HAVE CONSIDERED THE ISSUE IN THE ASSESSMENT ORDER FRAMED BY THE AO IN LIGHT OF THE ARGUMENTS MADE BY THE APPELLANT. THE SHORT ISSU E FOR MY CONSIDERATION IS THAT WHETHER THE SHARE APPLICATION MONIES ALONG WITH PRE MIUM IN THE AGGREGATE OF RS3,25,50,OOOI- DISCLOSED BY THE APPELLANT INVITE T HE MISCHIEF OF THE PROVISIONS OF S. 68 OF THE ACT OR NOT. THE PROVISIONS OF S. 58 OF TH E ACT DEAL WITH CASH CREDIT WHICH READS AS UNDER: '68. WHERE ANY SUM IS FOUND CREDITED IN THE BOOKS O F AN ASSESSEE MAINTAINED FOR ANY PREVIOUS YEAR, AND THE ASSESSEE OFFERS NO E XPLANATION ABOUT THE NATURE AND SOURCE THEREOF OR THE EXPLANATION OFFERE D BY HIM IS NOT, IN THE OPINION OF THE. ASSESSING OFFICER, SATISFACTORY. TH E SUM SO CREDITED MAY BE CHARGED TO INCOME-TAX AS THE INCOME OF THE ASSESSEE OF THAT PREVIOUS YEAR. ' 4.3 ACCORDING TO THIS SECTION, IF IDENTITY, CREDITW ORTHINESS OF THE CREDITOR AND GENUINENESS OF THE TRANSACTION IS NOT PROVED OR THE EXPLANATION OFFERED BY THE ASSESSEE IS NOT, IN THE OPINION OF THE ASSESSING OF FICER, SATISFACTORY, THE SUM SO CREDITED MAY BE CHARGED TO INCOME-TAX AS INCOME OF THE ASSESSEE OF THAT PREVIOUS YEAR. IN THE INSTANT CASE, THE APPELLANT HAD DISCLO SED RECEIPT OF SHARE CAPITAL MONEY INCLUDING SHARE PREMIUM MONEY OF RS.3,26,50,000/- F ROM 8 (EIGHT) INDIVIDUALS WHO ARE RELATIVES OF THE DIRECTOR OF THE APPELLANT COMP ANY AS WELL AS 3 (THREE) CORPORATE BODIES WHO ARE GROUP ENTITIES OF THE APPELLANT. IT IS FOUND THAT IN COURSE OF THE ASSESSMENT PROCEEDINGS THE AO OBSERVED THAT THE ASS ESSEE HAS RECEIVED EQUITY SHARES APPLICATION MONIES AT A PREMIUM. THE AO HAS ISSUED NOTICES U/S 133(6) TO ALL THE SHARE APPLICANTS AND SUCH NOTICES WERE FULLY CO MPLIED WITH BY THE SHARE APPLICANTS. THE AO FURTHER STATES THAT SUMMON U/S 1 31 WAS ALSO ISSUED TO THE DIRECTOR OF THE ASSESSEE COMPANY WHO DULY APPEARED BEFORE HIM AND WHOSE STATEMENT WAS RECORDED BY THE AO. THE APPELLANT HAD DULY FILED ITS RETURN OF TOTAL INCOME U/S 139(1) OF THE ACT IN RESPECT OF THE AY 2 012-13. IN THE COURSE OF THE ASSESSMENT PROCEEDINGS, THE APPELLANT IN RESPONSE T O THE REQUISITIONS MADE BY THE AO, FROM TIME TO TIME, FILED COPIES OF ITS AUDITED ANNUAL ACCOUNTS INCLUDING VARIOUS DETAILS AND OTHER DOCUMENTS AS DESIRED BY THE AO. T HE DETAILS AND DOCUMENTS SO PRODUCED AND FILED WITH THE AO INCLUDED, INTER ALIA , FULL DETAILS OF EACH OF THE SHARE APPLICANTS, WHO HAD SUBSCRIBED TO THE AGGREGATE SHA RES ALONG WITH SHARE PREMIUM RAISED BY THE APPELLANT DURING THE ASSESSMENT YEAR UNDER APPEAL 44 IT IS OBSERVED THAT THE AO HAD ISSUED NOTICES U/ S 133(6) OF THE ACT, TO EACH OF THE SHARE APPLICANTS. SUCH NOTICES WERE DULY SERVED UPO N THE RESPECTIVE SHARE SUBSCRIBER AT THEIR RESPECTIVE ADDRESSES. SERVICE O F SUCH NOTICES U/S 133(6) OF THE ACT TO THE SHARE APPLICANTS AT THEIR RESPECTIVE KNO WN ADDRESSES PROVES THEIR RESPECTIVE IDENTITIES. IT IS FURTHER OBSERVED THAT THE CORPORATE SHARE APPLICANTS ARE REGISTERED UNDER THE COMPANIES ACT, 1956 AND ARE ON THE RECORDS OF REGISTRAR OF COMPANIES FUNCTIONING UNDER MINISTRY OF CORPORATE A FFAIRS, GOVERNMENT OF INDIA AND THE INDIVIDUALS ARE HAVING PERMANENT ACCOUNT NUMBER S. IN FACT, ALL SHARE SUBSCRIBERS ITA NO.1199& 1323/KOL/2017 A.Y.2012-13 MODERN DALKHOLA FLOUR MILLS PVT. LTD. VS. DCIT, CIR-2, JALPAIGURI PAGE 3 HAVE RESPONDED TO THE STATUTORY NOTICES ISSUED TO T HEM U/S 133(6) OF THE ACT. IN THEIR RESPECTIVE REPLIES, THE SHARE SUBSCRIBERS HAD DISCL OSED, INTER ALIA, THEIR PERMANENT ACCOUNT NUMBERS ALONG WITH THE ACKNOWLEDGMENT OF SU BMISSION OF THEIR RETURN OF INCOME AND FURNISHED AUDIT REPORT AND FINANCIAL STA TEMENTS WHICH IN MY HUMBLE OPINION PROVES THEIR IDENTITIES. FURTHER, EACH OF T HE SHARE APPLICANTS ACCEPTED THE FACT THAT THEY HAD SUBSCRIBED TO THE SHARES ISSUED BY TH E APPELLANT COMPANY AND THAT SUCH TRANSACTIONS WERE DULY REFLECTED IN THEIR RESP ECTIVE BOOKS OF ACCOUNTS, AS WELL AS IN THEIR BALANCE SHEETS. THESE FACTS, IN MY OPIN ION, CLEARLY PROVE THE GENUINENESS OF THE TRANSACTIONS. 4.5 FURTHER THE HON'BLE SUPREME COURT IN CIT VS. LO VELY EXPORTS LTD. (2008) 216 CTR 195 (SC) WHEREIN HAS HELD AS UNDER: '2 CAN THE AMOUNT OF SHARE MONEY BE REGARDED AS UND ISCLOSED INCOME UNDER SECTION 68 OF IT ACT, 1961? WE FIND NO MERIT IN THI S SPECIAL LEAVE PETITION FOR THE SIMPLE REASON THAT IF THE SHERE APPLICATION MON EY IS RECEIVED BY THE ASSESSEE COMPANY FROM ALLEGED BOGUS SHAREHOLDERS, W HOSE NAMES ARE GIVEN TO THE AO, THEN THE DEPARTMENT IS FREE TO PRO CEED TO REOPEN THEIR INDIVIDUAL ASSESSMENTS IN ACCORDANCE WITH LAW' IN OTHER WORDS, IT IS OBSERVED THAT IF SHARE APPLIC ATION MONEY IS RECEIVED BY AN ASSESSEE FROM SUBSCRIBERS. WHOSE NAMES ARE GIVEN TO THE AO, ARE ALLEGEDLY BOGUS THEN THE REVENUE IS FREE TO PROCEED TO REOPEN THEIR INDIVIDUAL ASSESSMENTS IN ACCORDANCE WITH LAW THE FACTS OF THE PRESENT ARE ON A BETTER FOOTING TO THE ONE AS DECIDED ABOVE. IN THE INSTANT CASE, ALL THE SHARE A PPLICANTS HAD CONFIRMED THEIR INVESTMENT WITH THE APPELLANT AND AS SUCH, THERE WA S NO BASIS FOR THE AO TO COME TO ANY ADVERSE CONCLUSION AND ACCORDINGLY, THE ENTIRE AMOUNT RECEIVED BY THE APPELLANT ON ACCOUNT OF SHARE APPLICATION AS WELL AS SHARE PR EMIUM MONIES CANNOT BE REGARDED AS UNDISCLOSED INCOME U/S 68 OF ACT 4.6 I FIND THAT SHARE APPLICATION MONEY WITH SHARE PREMIUM OF AGGREGATE AMOUNT OF RS.323,50.000/- WAS RECEIVED FROM ELEVEN PARTIES OU T OF WHICH THREE ARE CORPORATE ENTITIES BELONGING TO SAME GROUP AND REMAINING EIGH T PARTIES ARE INDIVIDUALS AS WELL AS RELATIVES OF DIRECTORS OF APPELLANT COMPANY IT I S ALSO FOUND THAT SHARE APPLICATION MONEY WITH PREMIUM OF RS.1,28,50,000/- PAID BY M/S . DARJEELING FLOUR MILLS PVT. LTD. IS THROUGH A/C PAYEE CHEQUE AND FOR OTHERS IT IS BY CASH. IN VIEW OF ABOVE, IT IS PRUDENT TO DEAL WITH CORPORATE SHARE APPLICANTS AND INDIVIDUALS SHARE APPLICANTS SEPARATELY WHICH IS AS FOLLOWS: - DARJEELING FLOUR MILLS PVT. LTD . IT APPEARS THAT IN RESPONSE TO NOTICE U/S 133(6) TH E SHAREHOLDER SUPPLIED ALL THE DOCUMENTS AS REQUISITIONED WHICH INCLUDED, INTER-AL IA, CURRENT ALE STATEMENT FROM 01.06.2011 TO 10.06.2011. I HAVE GONE THROUGH THE A DVERSE COMMENTS OF AO ON SUCH BANK STATEMENT IT IS NOT PROPER TO DRAW ADVERS E INFERENCE ON THE PLEA THAT SUCH BANK STATEMENT IS ILLEGIBLE AND 1 OR DO NOT REFLECT THE NAME OF ACCOUNT HOLDER OR A/C NUMBER. THE AO HAS THE OPTIONS TO CALL FOR THE ORIG INAL BANK STATEMENT FROM THE SHAREHOLDER AND ACT ACCORDINGLY. I HAVE ALSO EXAMIN ED THE CONTENTIONS OF LD. A/R AS WELL VERIFIED PAPER BOOK PAGE 184 TO 195 WHICH CONT AINS THE NAME, ADDRESS OF THE SHARE APPLICANTS ALONG WITH TRANSACTIONS AND BANK A DDRESS. THE FACTS EMERGING FROM SUCH DOCUMENTS REVEAL THAT A SUM OF RS.1,31,50,000/ - WAS RECEIVED AS ADVANCE AGAINST SHARE APPLICATION. OUT OF WHICH RS.1,28,50, 000/- WAS ACCOUNTED TOWARDS ALLOTMENT OF 377942 SHARES OF RS. 101- EACH WITH PR EMIUM OF RS. 24/- PER SHARE AND EXCESS RECEIPT WAS REFUNDED TO THE SHARE APPLICANT. IT IS TO BE SEEN THAT WHETHER IDENTITY. CAPACITY AN D GENUINENESS TEST ARE MET IDENTITY- APPARENTLY THIS COMPANY IS ONE OF THE GRO UP CONCERN OF THE ASSESSEE ITA NO.1199& 1323/KOL/2017 A.Y.2012-13 MODERN DALKHOLA FLOUR MILLS PVT. LTD. VS. DCIT, CIR-2, JALPAIGURI PAGE 4 GROUP, WITH VALID ADDRESS OF SILIGURI, THEREFORE TH ERE IS NO DOUBT ABOUT THE IDENTITY OF THIS COMPANY. CAPACITY- IT IS SEEN FROM THE BALANCE SHEET OF THIS COMPANY THAT ITS SHARE CAPITAL PLUS RESERVE IS RS4,92,71,316/-. THE TURNOVER OF TH IS SHARE APPLICANT IS RS 19,05,01,4071- AND THE DISCLOSED NET PROFIT OF THIS APPLICANT IS RS 46,76,3621- ENTIRE SHARE CAPITAL HAS BEEN SUBSCRIBED BY FAMILY MEMBERS OF THE DIRECTOR AS WELL AS M/S S.C.GHOSH REALTORS (P) LTD WHICH IS KNOWN GROUP CON CERN OF ASSESSEE GROUP. IN VIEW OF MONEY COMING FROM RELATIVES & GROUP CONCERN , THE CAPACITY OF THE SHARE APPLICANT IS ALSO ESTABLISHED. GENUINENESS- AO HAS NOT BROUGHT ON RECORD ANY EVIDE NCE WHICH CAN LEAD TO DOUBT REGARDING GENUINENESS OF THE TRANSACTION OTHE R THAN THE FACT THAT THE SHARE APPLICATION MONEY HAS BEEN RECEIVED IN CASH. HOWEVE R THERE IS NO BAR IN LAW IN RECEIVING THE SHARE APPLICATION MONEY IN CASH. THER EFORE THERE IS NOTHING ON RECORD TO DOUBT GENUINENESS OF THE TRANSACTION. APART FROM ABOVE, I FIND FROM THE AUDITED ACCOUNTS OF THE APPLICANT THAT IT HAD SUFFICIENT CAPITAL AND RESERVES TO ADVANCE THIS SUM OF MONEY TO THE APPELLANT AND HENCE, THE CREDITWORTHINESS OF THE SHARE APPLICANTS IS BEYOND ANY CONTROVERSY. THUS THE APPLICANT'S IDENTITY AND CREDITWORTHINESS CANNO T BE DOUBTED. SINCE ALL THE TRANSACTIONS ARE THROUGH BANKING CHANNEL THE GENUIN ENESS CANNOT BE DOUBTED. I FIND THAT THE AO HAS NOT POINTED OUT ANYTHING AGAINST TH E EVIDENCES FILED BY THE APPELLANT OR THE SHARE APPLICANT REGARDING THE TRANSACTIONS. I AGREE WITH THE CONTENTIONS OF THE AR OF THE APPELLANT THAT THE FINDING OF THE AO THAT PAYMENTS MADE BY THE SHARE APPLICANT IS FROM ITS CASH CREDIT ACCOUNT GOES IN F AVOUR OF THE APPELLANT AS THE SOURCE OF MONEY IS FURTHER EXPLAINED AND IT IS COMMON KNOW LEDGE THAT THE BANK GRANTS CREDIT LIMIT TO THOSE HAVING CREDITWORTHINESS. THUS THE OB JECTIONS RAISED BY AO ARE FOUND TO BE BASELESS AND THE ADDITION MADE U/S 68 OF RS.1,28 ,50,000/- RELATABLE TO THIS SHAREHOLDER IS DIRECTED TO BE DELETED. AIRVIEW SUDHIR HOTELS & TOURISM PVT. LTD . THIS SHAREHOLDER PAID RS. 5,00,000/- TOWARDS SHARE APPLICATION MONEY WITH PREMIUM THROUGH CASH AND CONFIRMED SUCH INVESTMENT WITH ALL NECESSARY DOCUMENTS IN RESPONSE TO NOTICE U/S 133(6). THE RELEVANT DOCUMEN TS ARE VERIFIABLE FROM PAPER BOOK SUBMITTED IN COURSE OF APPEAL. AO HAS CONSIDER ED SUCH RECEIPT AS UNEXPLAINED CASH CREDIT U/S 68 ON THE GROUND THAT THE AMOUNT WA S PAID IN CASH AND THAT THE COMPANY HAD NOT DECLARED ANY INCOME IN THE CURRENT YEAR. IN FACT IT DECLARED LOSSES FROM BUSINESS & PROFESSION. I HAVE EXAMINED THE CONTENTIONS OF LD. AIR ON THE A DVERSE COMMENTS MADE BY AO. THE SHARE APPLICANT EXPLAINED THE SOURCE OF INVESTM ENT AS OUT OF ITS ACCUMULATED FUND OVER THE YEAR. IT IS TO BE SEEN THAT WHETHER I DENTITY, CAPACITY AND GENUINENESS TEST ARE MET. IDENTITY- APPARENTLY THIS COMPANY IS ONE OF THE GROUP CONCERN OF THE ASSESSEE GROUP, WITH VALID ADDRESS OF. SILIGURI, TH EREFORE THERE IS NO DOUBT ABOUT THE IDENTITY OF THIS COMPANY. CAPACITY- IT IS SEEN FROM THE BALANCE SHEET OF THIS COMPANY THAT ITS SHARE CAPITAL PLUS RESERVE IS RS.3,31,86,453/-. ENTIRE SHARE CAPI TAL HAS BEEN SUBSCRIBED BY M/S FANTASTIC VINTRADE (P) LTD AND M/S DARJEELING FLOUR MILLS (P) LTD WHICH ARE KNOWN GROUP CONCERN OF ASSESSEE GROUP. IN VIEW OF MONEY C OMING FROM ALL GROUP CONCERNS , THE CAPACITY OF THE SHARE APPLICANT IS ALSO ESTABLI SHED. GENUINENESS- AO HAS NOT BROUGHT ON RECORD ANY EVIDE NCE WHICH CAN LEAD TO DOUBT REGARDING GENUINENESS OF THE TRANSACTION OTHE R THAN THE FACT THAT THE SHARE ITA NO.1199& 1323/KOL/2017 A.Y.2012-13 MODERN DALKHOLA FLOUR MILLS PVT. LTD. VS. DCIT, CIR-2, JALPAIGURI PAGE 5 APPLICATION MONEY HAS BEEN RECEIVED IN CASH. HOWEVE R THERE IS NO BAR IN LAW IN RECEIVING THE SHARE APPLICATION MONEY IN CASH. THER EFORE THERE IS NOTHING ON RECORD TO DOUBT GENUINENESS OF THE TRANSACTION. THEREFORE THE ADDITION U/S 68 OF RS.5,00,000/- RELA TABLE TO THIS SHAREHOLDER IS DIRECTED TO BE DELETED. RANISATI TARDELINK PVT. LTD . THIS SHAREHOLDER PAID RS. 35,00,000/- TOWARDS SHARE APPLICATION MONEY WITH PREMIUM THROUGH CASH AND CONFIRMED SUCH INVESTMENT WITH ALL NECESSARY DOCUMENTS IN RESPONSE TO NOTICE U/S 133(6). THE RELEVANT DOCU MENTS ARE VERIFIABLE FROM PAPER BOOK SUBMITTED IN COURSE OF APPEAL. AO. HAS CONSIDE RED SUCH RECEIPT AS UNEXPLAINED CASH CREDIT U/S 68 ON THE GROUND THAT THE AMOUNT WA S PAID IN CASH AND THAT THE COMPANY HAD NOT DECLARED ANY INCOME IN THE CURRENT YEAR. IN FACT IT DECLARED LOSSES FROM BUSINESS & PROFESSION. I HAVE EXAMINED THE CONTENTION OF LD. A/R ON THE AD VERSE COMMENTS MADE BY AG. THE SHARE APPLICANT EXPLAINED THE SOURCE OF INVESTM ENT AS OUT OF LIQUIDATION OF CURRENT INVESTMENT AS EVIDENT FROM NOTE 4 OF THE AU DITED FINANCIAL STATEMENT. MOREOVER, THE CAPITAL INCLUDING RESERVES AGGREGATES TO RS.5,28,46,299/- OUT OF WHICH INVESTMENT WITH APPELLANT COMPANY IS OF RS. 33,50,0 00/- WHICH WORKS TO ONLY 6.62%. IT IS TO BE SEEN THAT WHETHER IDENTITY, CAPACITY AN D GENUINENESS TEST ARE MET. IDENTITY- APPARENTLY THIS COMPANY IS ONE OF THE GRO UP CONCERN OF THE ASSESSEE GROUP, WITH VALID ADDRESS OF SILIGURI, THEREFORE TH ERE IS NO DOUBT ABOUT THE IDENTITY OF THIS COMPANY. CAPACITY- IT IS SEEN FROM THE BALANCE SHEET OF THIS COMPANY THAT ITS SHARE CAPITAL PLUS RESERVE IS RS.5,28,46,299/-. ENTIRE SHARE CAPI TAL HAS BEEN SUBSCRIBED BY FANTASTIC VINTRADE (P) LTD. AND AIRVIEW SUDHIR HOTE L & TOURISM (P) LTD. WHICH ARE KNOW GROUP CONCERN OF ASSESSEE GROUP. IN ADDITION T HE COMPANY HAS SHARE APPLICATION MONEY OF RS.91 LAKHS WHICH IS AGAIN FRO M ANOTHER GROUP CONCERN M/S DARJEELING FLOUR MILLS (P) LTD. IN VIEW OF MONEY CO MING FROM ALL GROUP CONCERNS, THE CAPACITY OF THE SHARE APPLICANT IS ALSO ESTABLISHED . GENUINENESS- AG HAS NOT BROUGHT ON RECORD ANY EVIDE NCE WHICH CAN LEAD TO DOUBT REGARDING GENUINENESS OF THE TRANSACTION OTHE R THAN THE FACT THAT THE SHARE APPLICATION MONEY HAS BEEN RECEIVED IN CASH. HOWEVE R THERE IS NO BAR IN LAW IN RECEIVING THE SHARE APPLICATION MONEY IN CASH. THER EFORE THERE IS NOTHING ON RECORD TO DOUBT GENUINENESS OF THE TRANSACTION. THEREFORE THE ADDITION U/S 68 OF RS. 35,00,000/- RE LATABLE TO THIS SHAREHOLDER IS DIRECTED TO BE DELETED. 4.7 INDIVIDUAL SHARE APPLICANTS THE FACTUAL POSITION EMERGING FROM THE OBSERVATIONS AT EARLIER PART OF THIS ORDER THAT TOTAL SHARE APPLICATION MONEY WITH PREMIUM OF RS.1, 55,00,000/- WAS RECEIVED FROM EIGHT INDIVIDUALS WHOSE IDENTITY AND GENUINENESS OF TRANSACTIONS HAVE NOT BEEN DOUBTED BY THE AG. SINCE ALL THE EIGHT INDIVIDUAL C ONFIRMED THEIR SOURCE OF INVESTMENT AS INCOME OF CURRENT YEAR AS WELL AS PAST ACCUMULAT ION OF INCOME. STATEMENT OF ACCOUNTS WITH PROFIT & LOSS ALE AND BALANCE SHEET W ERE ALSO FURNISHED IN SUPPORT. THE ADDITIONS OF THE ENTIRE AMOUNT MADE BY AG ON SU SPICION IS FOUND TO BE INCORRECT. AO. HAS CONSIDERED THAT NONE OF EIGHT INDIVIDUAL SH ARE APPLICANTS ARE WORTHY OF HAVING POSSESSING CASH SINCE THEY MAINTAIN SAVINGS ALE WITH BANK. ACCORDINGLY AO ITA NO.1199& 1323/KOL/2017 A.Y.2012-13 MODERN DALKHOLA FLOUR MILLS PVT. LTD. VS. DCIT, CIR-2, JALPAIGURI PAGE 6 HAS CONSIDERED THE AGGREGATE SUM OF RS. 1,55,00,000 1- RECEIVED FROM EIGHT SHARE APPLICANTS AS UNEXPLAINED CASH CREDIT U/S 68 FOR WA NT OF CREDITWORTHINESS. I HAVE GONE THROUGH THE CONTENTIONS OF LD. A/R CONT ESTING THE ADVERSE INFERENCE MADE BY AG. I HAVE ALSO EXAMINED INCOME TAX RETURN ACKNOWLEDGEMENT, COMPUTATION OF INCOME, BALANCE SHEET, COPY OF CASH BOOK ETC OF ALL THE EIGHT INDIVIDUAL SHARE APPLICANTS. IT APPEARS ON SUCH EXA MINATION THAT ALL THE EIGHT INDIVIDUAL FILED THEIR RETURN IN ITR 4 WHICH PROVES THAT ALL OF THEM ARE HAVING THEIR INDIVIDUAL BUSINESS ACTIVITIES. THE BALANCE SHEET S HOWS SUBSTANTIAL CAPITAL OF THEIR OWN. ACCORDING TO LT. RETURN ACKNOWLEDGEMENT COPY R ELEVANT TO A.Y. 2012-13 THE SHARE APPLICANTS DECLARED TOTAL INCOME AFTER CLAIMI NG DEDUCTION UNDER CHAPTER VI A AS NOTED AGAINST EACH. NAME OF SHARE APPLICANTS TOTAL INCOME DECLARED OPEN ING CAPITAL SUKUMAR GHOSH 11,04,060/- 1,19,80,792/- JOYA GHOSH 3,14,250/- 33,56,428/- MANJU GHOSH 3,08,480/- 35,73,907/- MILI GHOSH 3,54,270/- 39,77,550/- DIPA GHOSH 3,53,950/- 76,70,974/- BIMALA BALA GHOSH 3,35,950/- 59,60,125/- SIKHA GHOSH 2,44,500/- 51,92,709/- GAURAV GHOSH 1,70,230/- 9,38,195/- I FIND THAT THE AO HAS NOT DOUBTED THE EXISTENCE OF ANY BUSINESS BY THESE INDIVIDUALS. FURTHER THE AO'S OBSERVATION THAT THE CASH WAS NOT AVAILABLE WITH THESE SHARE APPLICANT'S IS ALSO PURELY' BASED ON SUSPICION. I FIND THAT THESE APPLICANT HAVE CONFIRMED TO THE TRANSACTION AND ARE SEPARATE LT ASSESSES. I FIND FROM THE BALAN CE SHEET AS WELL AS OTHER DOCUMENTS FILED BY THE SHARE APPLICANTS IN RESPONSE TO 133(6) NOTICES THAT IT WOULD NOT BE PROPER TO TREAT THE ENTIRE SUM OF MONEY RECEIVED BY THE APPELLANT A S UNEXPLAINED MONEY. I ALSO FIND THAT THE AD ISSUED SUMMON TO THE DIRECTOR OF THE APPELLANT C OMPANY. THE DIRECTOR MR SUBROTO GHOSH APPEARED BEFORE THE AO AND HIS STATEMENT WAS RECORD ED BY THE AO. THE AO HAS REPRODUCED THE EXTRACT OF SUCH STATEMENT IN THE ASS ESSMENT ORDER. I FIND THAT THE DIRECTOR HAS ALSO CONFIRMED TO THE TRANSACTIONS AND EXPLAINED TH E CASE OF THE APPELLANT AND NO ADVERSE INFERENCE CAN BE DRAWN FROM HIS STATEMENT. HOWEVER I FIND THAT INDEED THE SHARE APPLICANTS DID NOT FILE ANY WEALTH TAX RETURN AND THUS IN VIEW OF THE TOTALITY OF FACTS AND FIGURES RELATING TO INCOME DECLARED AS WELL AS AVAILABLE CAPITAL BALANC E AS ON 01.04.2011 AS PER BALANCE SHEET OF THE EIGHT INDIVIDUAL SHARE APPLICANTS. DURING TH E COURSE OF HEARING THE AUTHORIZED REPRESENTATIVE WAS ASKED TO FURNISH THE DETAILS OF LAST 3 YEAR OF INCOME FOR ALL THE INDIVIDUALS TO HAVE SUBSCRIBED TO THE SHARES IN CASH. THE DETAI LS OF INCOME EARNED BY THESE INDIVIDUALS IN THE LAST 3 YEARS IS AS UNDER:- NAME GROSS TOTAL INCOME (AY) SHARE APPLICATION 2010-11 2011-12 2012-13 JAYA GHOSOH 408941 391900 351960 2500000 MANJU GHOSH 369199 372656 351587 2000000 MILI GHOSH 457033 464522 454274 1650000 DIPA GHOSH 539654 619392 453471 2000000 BIMLA GHOSH 314577 249890 357099 3200000 SIKHA GHOSH 309478 362710 344496 1550000 GOURAV GHOSH 225578 207893 246312 500000 SUKUMAR GHOSH 1115790 1199525 1204056 2100000 3740250 3868488 3763255 I) JAYA GHOSH ITA NO.1199& 1323/KOL/2017 A.Y.2012-13 MODERN DALKHOLA FLOUR MILLS PVT. LTD. VS. DCIT, CIR-2, JALPAIGURI PAGE 7 CONSIDERING THAT SHE HAS EARNED INCOME OF RS. 11,52 ,8011- IN LAST 3 YEARS AND ALSO CONSIDERING THAT SHE IS MIDDLE AGED PERSON AND WOUL D HAVE EARNED SIMILAR INCOMES IN THE PAST AND WOULD HAVE SAVED SOME MONEY. THEREF ORE, SHE POSSESSION OF CASH IN HAND DURING F.Y. 2011-12 CANT BE DENIED. HOWEVER IT IS UNLIKELY THAT SHE WOULD BE HAVING SUCH A HUGE CASH BALANCE OF RS. 25 LAKHS IN HAND TO SUBSCRIBE TO THE SHARES. FURTHER SHE IS NOT FILING ANY WEALTH TAX RETURN {WH ICH WOULD BE THE CASE IF WE ASSUME THAT SHE WOULD BE OWNER OF JEWELLRY OF AROUND 500 G RAMS ( CONSIDERING HER FAMILY STATUS ). LOOKING INTO CIRCUMSTANCES OF THE CASE T AM OF T HE OPINION THAT CASH IN HAND WITH HER DURING THE F.Y. 2011-12 WOULD BE ESTIMATED AT RS.10 LAKHS. THE BALANCE AMOUNT OF SUBSCRIPTION AMOUNT I.E. RS. 25 LAKSH (-) RS. 10 LAKHS I.E. RS. 15 LAKHS MAY BE ADDED IN THE HANDS OF THE ASSESSEE COMPANY AS UN EXPLAINED CASH CREDIT UNDER SECTION 68. THEREFORE THE ADDITION MADE BY THE ASSE SSING OFFICER ON THIS ACCOUNT IS PARTLY UPHELD. II) SIMILAR IS THE POSITION IN THE CASE OF MANJU GH OSH, MIII GHOSH, DEEPA GHOSH,BIMLA BALA GHOSH C..LLD SHIKHA GHOSH. THEREFO RE FOLLOWING LOGIC GIVEN IN THE CASE OF JAYA GHOSH AFTER GIVING ALLOWANCE OF RS. 10 LAKHS AS CASH IN HAND. THE BALANCE AMOUNT OF ADDITION UNDER SECTION 68 IS HERE BY CONFIRMED. III) IN CASE OF GAURAV GHOSH THE SUBSCRIPTION OF SH ARES IN HAND IS ONLY RS. 5 LAKHS. CONSIDERING HIS INCOME OF LAST 3 YEARS AS GIVEN IN THE TABLE THE ENTIRE AMOUNT OF CASH IN HAND SEEMS TO BE PROBABLE AND THEREFORE IS BEING ALLOWED. IV) IN CASE OF SUKUKAR GHOSH HIS RETURNED INCOME FO R LAST 3 YEARS COMES TO RS. 3519371/-. CONSIDERING THE HIGHER INCOME RETURNED B Y HIM THE CASH IN HAND IN HIS CASE IS ESTIMATED @ RS. 15 LAKH AND THE EXCESS AMOU NT OF SUBSCRIPTION IN SHARES MAY BE ADDED IN THE HANDS OF THE COMPANY. THE POSIT ION OF ALL THESE INDIVIDUAL SHARES' SUBSCRIBERS AS DECIDED ABOVE CAN BE SUMMARI ZED AS BELOW: NAME GROSS TOTAL INCOME (AY) SHARE APPLICATION ALLOWED CON FIRMED 2010-11 2011-12 2012-13 JAYA GHOSH 408941 391900 451960 21500000 1000000 15 ,00,000 MANJU GHOSH 369199 372656 351587 2000000 1000000 10 ,00,000 MILI GHOSH 457033 464522 454274 165000 1000000 6,50 ,000 DIPA GHOSH 539654 619392 453471 2000000 100000 10,0 0,000 BIMLA GHOSH 3145577 249890 357099 3200000 1000000 2 2,00,000 SIKHA GHOSH 309478 362710 344496 1550000 1000000 5,5 0,000 GOURAV GHOSH 225578 207893 246312 500000 500000 -- SUKUMAR GHOSH 1115890 1199525 1204056 2100000 15,00, 000 6,00,000 3740250 3868488 3763255 1,55,00,000 80,00,000 75,0 0,000 IN VIEW OF THE ABOVE DISCUSSION THIS GROUND IS PART LY ALLOWED. 3. WE HAVE GIVEN OUR THOUGHTFUL CONSIDERATION TO RI VAL PLEADINGS. WE MAKE IT CLEAR FIRST OF ALL THAT THERE IS HARDLY ANY DISP UTE BETWEEN THE PARTIES INTER ALIA ABOUT THE BASIC ADMITTED FACT OF THE ASSESSEE TO HA VE RAISED THE IMPUGNED SHARE APPLICATION MONEY FROM ELEVEN RELATED PARTIES , THE ASSESSING OFFICER HAVING TAKEN RECOURSE TO SEC. 131/133(6) PROCESS IN ALL OF THEIR CASES, THESE INVESTORS HAVING REPLIED FROM THE OTHER END IN SUPP ORT OF THE CORRECTNESS OF THE SHARE APPLICATION MONEY. THE ASSESSEES ELEVEN SHAR E APPLICANTS CONFIRMED THE ASSESSEES CASE BY FLING ALL NECESSARY DOCUMENT ARY EVIDENCE AS WELL. ITA NO.1199& 1323/KOL/2017 A.Y.2012-13 MODERN DALKHOLA FLOUR MILLS PVT. LTD. VS. DCIT, CIR-2, JALPAIGURI PAGE 8 THERE IS FURTHER NO ISSUE BETWEEN THE ASSESSEE AND THE DEPARTMENT ABOUT THEIR IDENTITY, AT LEAST WITH SATISFIES FIRST OF T HE THREE RELEVANT PARAMETERS IDENTITY GENUINENESS AND CREDITWORTHINESS INVOLVING UNEXPLAINED CASH CREDITS SEC. 68 OF THE ACT. WE WISH TO EMPHASISE HERE THAT ALL ELEVEN PARTIES HAPPEN TO BE ASSESSEES ASSOCIATE CONCERNS / INDIVIDUALS I .E. EIGHT OF THEM ARE ITS DIRECTORS RELATIVES AND THE REMAINING THREE TURN O UT TO GROUP ENTITIES (SUPRA). THEY ARE ALSO ASSESSED IN THE SAME JURISDICTION. WE NOTICE IN THESE BACKDROP OF FACTS THAT HON'BLE GUJARAT HIGH COURTS DECISION IN TAX APPEAL NO.118 OF 2018 PCIT VS. GYSCOAL ALLEYS LTD . DECIDED ON 01.10.2018 UPHOLDS THE TRIBUNALS ORDER DELETING SIMILAR ADDITION IN CASE OF SUCH RELATED PARTIES AS UNDER:- (PER : HONOURABLE MR. JUSTICE AKIL KURESHI) REVENUE IS IN APPEAL AGAINST THE JUDGMENT OF THE INCOME TAX APPELLATE TRIBUNAL, AHMEDABAD BENCH {'TRIBUNAL' FOR SHORT} RAISING THE FOLLOWING SUBSTANTIAL QUESTI ON FOR OUR CONSIDERATION : 'WHETHER APPELLATE TRIBUNAL HAS ERRED IN LAW AND ON FACTS IN DELETING THE ADDITION MADE BY THE ASSESSING OFFICER ON ACCOUNT O F RS. 9,99,99,900/= AS PER THE PROVISION OF SECTION 68 OF THE INCOME-TAX ACT, WITHOUT PROPERLY APPRECIATING THE FACTS OF CASE AND THE MATERIAL BRO UGHT ON RECORD ?' C/TAXAP/1180/2018 ORDER THE ISSUE PERTAINS TO THE S HARE APPLICATION MONEY RECEIVED BY THE RESPONDENT-ASSESSEE-COMPANY. THE AS SESSING OFFICER ADDED A SUM OF RS. 9.99 CRORES [ROUNDED OFF] IN THE HANDS OF TH E ASSESSEE WITH THE AID OF SECTION 68 OF THE INCOME-TAX ACT, 1961 ['THE ACT' FOR SHORT]. CIT [A] DELETED SUCH ADDITION PRIMARILY ON THE GROUND THAT THE ASSESSEE HAD ESTAB LISHED THE SOURCE, GENUINENESS OF THE TRANSACTIONS AND THE CREDITWORTHINESS OF THE INVESTORS. IN FURTHER DETAILED CONSIDERATION, THE TRIBUNAL CONFIRMED THE VIEW OF C IT [A], MAKING THE FOLLOWING OBSERVATIONS :- 'I HAVE CAREFULLY CONSIDERED THE FACTS OF THE CASE, THE ASSESSMENT ORDER AND THE WRITTEN SUBMISSION OF THE APPELLANT. THE APPELL ANT HAS RECEIVED AN AMOUNT OF RS. 9,,99,99,900/- ON ACCOUNT OF SHARE CA PITAL AND SHARE PREMIUM FROM M/S. GENERAL CAPITAL AND HOLDING CO. PVT. LTD, AHMEDABAD DURING THE YEAR. THE AO HELD THAT THE CREDITWORTHINESS AND THE GENUINENESS OF THE TRANSACTION WERE NOT PROVED BY THE APPELLANT AND AC CORDINGLY MADE THE ADDITION UNDER SECTION 68 OF THE ACT FOR THE ABOVE AMOUNT. THE APPELLANT HAS SUBMITTED THAT ALL THREE INGREDIENTS SUCH AS, CREDI T WORTHINESS, GENUINENESS AND THE IDENTITY OF THE SHARE APPLICANT HAVE BEEN P ROVED AND THEREFORE, THE ADDITION SHOULD NOT HAVE BEEN MADE BY THE AO.C/TAXA P/1180/2018 ORDER DURING THE COURSE OF APPELLATE PROCEEDINGS, THE ASS ESSMENT RECORDS WERE ALSO OBTAINED FROM AO AND THE SAME HAVE ALSO BEEN E XAMINED BY ME TO ASCERTAIN THE FACTS CORRECTLY. THE SHARE APPLICANT COMPANY M/S. GENERAL CAPITAL HAS BEEN DULY CONFIRMED THE FACT OF MAKING INVESTMENT IN THE APPELLATE COMPANY. THE AMOUNTS HAVE BEEN RECEIVED T HROUGH BANKING CHANNEL. THE SAME ARE DULY REFLECTED IN THE ANNUAL ACCOUNTS OF THAT COMPANY. ITA NO.1199& 1323/KOL/2017 A.Y.2012-13 MODERN DALKHOLA FLOUR MILLS PVT. LTD. VS. DCIT, CIR-2, JALPAIGURI PAGE 9 THE EXTRACTS OF THE BANK STATEMENT WHICH HAVE BEEN FILED BEFORE ME DURING THE COURSE OF APPELLATE PROCEEDINGS AS WELL AS BEFO RE THE AO CLEARLY SHOW THAT THERE ARE NO CASH DEPOSITS AS MENTIONED BY THE AO IN THE ASSESSMENT ORDER. THE OBSERVATION OF THE AO THAT THE CASH HAS BEEN DEPOSITED AND SUBSEQUENTLY CHEQUES WERE ISSUED IS FACTUALLY INCOR RECT. THE DIRECTOR OF THE COMPANY ALSO ATTENDED BEFORE AO AND CONFIRMED THE F ACT. IT IS ALSO NOTED THAT BOTH THE COMPANIES, THAT IS THE APPELLANT COMPANY A S WELL AS THE SHARE APPLICANT ARE MANAGED BY THE SAME GROUP OF PERSONS. HONOURABLE HIGH COURT OF GUJARAT HAS CONSISTENTLY H ELD THAT IF THE ASSESSEE HAS GIVEN SUFFICIENT PROOF IN RESPECT OF THE SHARE APPLICATION, NO ADDITION CAN BE MADE IN THE HANDS OF THE ASSESSEE. IF THE AO HAS ANY DOUBT ABOUT THE SOURCE OF THE SHARE APPLICANT FURTHER INVESTIGATION CAN BE MADE IN THE HANDS OF THE SHARE APPLICANT, BUT NOT IN THE CASE OF THE APPELLANT. .' ORDER IT CAN THUS BE SEEN THAT THE ENTIRE ISSUE IS BASED ON APPRECIATION OF MATERIAL ON RECORD. CIT [A] AND THE TRIBUNAL CONCURRENTLY CA ME TO THE CONCLUSION THAT THE ASSESSEE HAD DISCHARGES ITS BASIC ONUS. THE INVESTO RS HAVE CONFIRMED THE TRANSACTIONS. SUCH TRANSACTIONS WERE CARRIED OUT TH ROUGH THE BANKING CHANNEL. THE DIRECTOR OF THE INVESTING COMPANY HAD ALSO APPEARED BEFORE THE ASSESSING OFFICER AND ALSO CONFIRMED THE TRANSACTIONS. THE CIT [A] AN D THE TRIBUNAL ALSO DID NOT CONFIRM THE ASSESSING OFFICER'S FINDING THAT THE AS SESSEE FAILED TO ESTABLISH THE CREDITWORTHINESS OR GENUINENESS OF THE TRANSACTIONS . WE PROCEED FURTHER TO NOTICE THAT FACTUAL POSITION IS NO DIFFERENT HEREIN AS WELL, WHEREIN THE ASSESSEE HAS PRODUCED ORAL OR DOCUMENTA RY EVIDENCE. LEARNED DEPARTMENTAL REPRESENTATIVE AT THIS STAGE SUBMITS T HAT THERE IS NO JUSTIFICATION FOR ASSESSEES EXTRA-ORDINARY EXORBITANT PREMIUM IN CASE OF INVESTOR PARTIES HAVING MEAGRE SOURCE OF INCOME. WE FIND NO MERIT IN REVENUES STAND SINCE THERE IS NO EVIDENCE ON RECORD WHICH COULD SUGGEST THAT ANY OF THE ASSESSEES ELEVEN INVESTOR HAD BEEN HAVING ANY DUBIOUS TRANSAC TIONS IN THEIR ACCOUNTS. HON'BLE GUJARAT HIGH COURTS YET ANOTHER DECISION O F PUSPUK BULLION LTD. VS. DCIT (2016) 17 TAXMAN.COM 326 (GUJ) HOLDS THAT MERE FAC TUM OF SUCH A SIZABLE PREMIUM DOES NOT IF SO FACTO LEAD TO CONCLU DING THAT IT IS AN INSTANCE OF ARTIFICIALLY INCREASED SUM. WE ALSO CLARIFY HERE TH AT CONCERNED ASSESSEES INVESTORS IN THE SAID CASES WERE ALSO RELATED PARTI ES AS IS THE FACT IN THE PRESENT CASE. WE TAKE INTO ACCOUNT ALL THE PRECEDIN G FACTUAL AND LEGAL POSITION TO CONCLUDE THAT THE ASSESSING OFFICER ERRED IN TRE ATING THE ASSESSEES SHARE APPLICATION / PREMIUM AMOUNT OF 3,26,50,000/- AS UNEXPLAINED CASH CREDITS IN ENTIRETY. THE CIT(A)S FINDINGS RESTRICTING THE SAM E TO 75 LAC ONLY STAND REVERSED THEREFORE. THE ASSESSEE SUCCEEDS IN ITS CO RRESPONDING FORMER ITA NO.1199& 1323/KOL/2017 A.Y.2012-13 MODERN DALKHOLA FLOUR MILLS PVT. LTD. VS. DCIT, CIR-2, JALPAIGURI PAGE 10 SUBSTANTIVE GROUND WHEREAS THE REVENUE FAILS IN ITS SOLE GRIEVANCE AS WELL AS ITS MAIN APPEAL ITA NO.1323/KOL/2017. MR. TIWARI STATES AT THE BAR THAT THE ASSESSEE DOES NOT WISH TO PRESS FOR ITS SECOND SUBSTANTIVE GROUND CHALLENGING OUTSTANDI NG LIABILITY ADDITION OF 3,21,590/- IN THE NAME OF M/S ANIRBANA GANGULY. THI S ADDITION STANDS CONFIRMED ACCORDINGLY. 4. THE ASSESSEES APPEAL ITA NO.1199/KOL/2017 IS PA RTLY ALLOWED IN ABOVE TERMS. THE REVENUES CROSS-APPEAL ITA NO.1323/KOL/2 017 IS DISMISSED. ORDERED ACCORDINGLY. ORDER PRONOUNCED IN THE OPEN COURT 28 /08/2019 SD/- SD/- ( ) (( ) ( A.L.SAINI) (S.S.GODARA) (ACCOUNTANT MEMBER) (JUDICIAL MEMBER) KOLKATA, *DKP )- 28 / 08 /201 9 / COPY OF ORDER FORWARDED TO:- 1. /ASSESSEE-MODERN DALKHOALA FLOUR MILLS PVT. LTD. P. O. DALKHOLA, DIST. UTTAR DINAJPUR, PIN-733201 2. /REVENUE-DCIT, CIR-2, C.R. BUILDING, RACE COURSE RO AD, NAYABASTI, JALPAIGURI PIN-7333201 3. 4 5 / CONCERNED CIT KOLKATA 4. 5- / CIT (A) KOLKATA 5. 8 ((4, 4, / DR, ITAT, KOLKATA 6. = / GUARD FILE. BY ORDER/ , /TRUE COPY/ 4,