ITO, WD-6(2), KOLKATA, Kolkata V. M/s Linkpoint Dealcom Pvt. Ltd., Kolkata

ITA 1209/KOL/2015

• Counselvise Citation: [2018] 125 COUNSELVISE.COM (IT) 5863 (ITAT-KOLKATA)
• Duration Of Justice: 2 year(s) 10 month(s) 2 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-07-2018
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: C
• Assessment Year: 2011-2012
• Appeal Filed On: 17-09-2015
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: G MALLIKARJUNA
• Keywords: Earning of tax free income; Capital receipt
• Section: 14A; 133(6); 68

Judgement Text

ITA NO.1200/KOL/2015 & 1209/KOL/2015 M/S. LUXURY VY APAAR PVT. LTD & M/S LINKPOINT DEALCOM PVT. LTD. A.Y.2011-12 1 IN THE INCOME TAX APPELLATE TRIBUNAL, BENCH C KOL KATA [BEFORE HONBLE SHRI J.SUDHAKAR REDDY, AM & SHRI S.S.GODARA, JM] ITA NO.1200 /KOL/2015 ASSESSMENT YEAR : 2011-12 I.T.O., WARD-6(2) -VERSUS- M/S LUXURY VYAPA AR PVT. LTD. KOLKATA KOLKATA (PAN: AABCL 9493 Q) (APPELLANT) (RESPONDENT) ITA NO.1209 /KOL/2015 ASSESSMENT YEAR : 2011-12 I.T.O., WARD-6(2) -VERSUS- M/S LINKPO INT DEALCOM PVT. LTD. KOLKATA KOLKATA (PAN: AABCL 7770 N) (APPELLANT) (RESPONDENT) FOR THE APPELLANT: SHRI G.MALLIKARJUNA, CIT, DR FOR THE RESPONDENT: NONE DATE OF HEARING : 05.07.2018. DATE OF PRONOUNCEMENT : 20.07.2018. ORDER PER S.S.GODARA, JM: THESE TWO REVENUES APPEALS IN CASE OF DIFFERENT A SSESSES ARISE AGAINST THE CIT(A)-2, KOLKATAS ORDERS BOTH DATED 26.06.2015 PA SSED IN APPEAL NOS.1804 & 1811/CIT(A)-2/(13-14)/2014-15 REVERSING ASSESSING O FFICERS IDENTICAL ACTION ADDING SHARE PREMIUM (S) OF RS.31,69,00,000/- AND RS.28,80 ,00,000/- IN ASSESSMENT ORDERS DATED 26.03.2014 IN BOTH CASES; RESPECTIVELY INVOL VING PROCEEDINGS U/S 143 (3) OF THE INCOME TAX ACT, 1961 (ACT). CASE FILES PERUSED. NONE APPEARS AT ASSESSEES BEHE ST. THE REGISTRY HAS SENT SEPARATE RPAD NOTICES TO BOTH ASSESSEES DATED 11.0 5.2018. THE SAME STAND RETURNED BACK UNSERVED WITH IDENTICAL REMARK THAT NO SUCH ENTITY HAS BEEN FOUND AT THIS ADDRESS . THEY ARE ACCORDINGLY PROCEEDED EXPARTE. ITA NO.1200/KOL/2015 & 1209/KOL/2015 M/S. LUXURY VY APAAR PVT. LTD & M/S LINKPOINT DEALCOM PVT. LTD. A.Y.2011-12 2 2. LEARNED DEPARTMENTAL REPRESENTATIVE STATES AT TH E OUTSET THAT THE RELEVANT FACTS INVOLVING IN BOTH THESE CASES CULMINATING IN SIMILA R SECTION 68 ADDITION OF THE RESPECTIVE SHARE PREMIUM SEEMS TO BE NEITHER GENUIN E NOR CREDITWORTHY; ARE IDENTICAL. WE THUS TAKE UP FORMER CASE ITA NO.1200/KOL/2015 AS THE LEAD CASE. 3. THE FORMER ASSESSEE M/S LUXURI VYAPAAR PVT. LTD CARRIES TRADE AND INVESTMENT BUSINESS IN SHARES AND FINANCE. IT FILED ITS RETURN OF INCOME ON 10.08.2011 DECLARING INCOME OF RS.3,458/- ONLY. THE SAME STOOD PROCESSED U/S 143(1) OF THE ACT. THE CASE WAS SELECTED FOR SCRUTINY. THE ASSESSING OFFICER NO TICED IN COURSE THEREOF THAT THE ASSESSEE HAD ISSUED ITS SHARES OF RS.1 EACH WITH A PREMIUM OF RS.249/- TO SIXTEEN DIFFERENT COMPANIES IN LIEU OF RECEIVING THE SHARE PREMIUM AS ISSUE OF RS.31,69,00,000/-. HE SOUGHT TO VERIFY IDENTITY, SO URCE, GENUINENESS AND CREDITWORTHINESS THEREOF. THE ASSESSEE FURNISHED CO PY OF FINAL ACCOUNT, INCOME TAX ACKNOWLEDGEMENTS, BANK STATEMENT AND SHARE APPLICAT ION MONEY DETAILS RECEIVED FROM ITS INVESTOR PARTIES. THIS MADE THE ASSESSING OFFIC ER TO NOTICE THAT THE ASSESSEE AS WELL AS ITS INVESTOR ENTITIES HAD FOUR TO FIVE COMMON D IRECTORS AS WELL AS ADDRESSES AND THEIR BANK ACCOUNTS HAD ALSO BEEN OPENED IN THE SAM E PERIOD IN THE SAME BRANCH. HE ISSUED SECTION 133(6) NOTICE TO THE SAID INVESTOR E NTITIES. IT TRANSPIRES THAT THESE INVESTOR ENTITIES DID NOT HAVE EITHER BUSINESS ACTI VITIES OR ANY FIXED ASSETS. THEIR RETURNED INCOMES WERE FOUND TO BE VERY NOMINAL. TH E ASSESSING OFFICER OBSERVED IN ASSESSMENT ORDER DATED 27.03.2014 THAT MAIN SOURCE AS EVIDENT FROM VERIFICATION THEREOF WAS ONLY TRANSFER OF MONEY FROM ONE COMPANY TO ANOTHER COMPANY AGAINST SALE OF SHARES. HE WAS OF THE VIEW THAT THE ASSESSE ES PREMIUM HAD COME FROM THIS SOURCE OF INCOME ONLY. WE FIND FROM PAGE-4 OF THE A SSESSMENT ORDER THAT HE PREPARED A DETAIL COMPILATION OF THE ASSESSEES BANK ACCOUNT S INDICTING SUDDEN CREDIT AND WITHDRAWALS WITHIN A VERY SHORT SPAN OF TIME. HE TH EREFORE SOUGHT TO KNOW FROM ASSESSEES DIRECTORS ABOUT THE ADDRESS PROOF, VOTER ID AND RESIDENTIAL PROOF., INCOME TAX RETURNS, BANK STATEMENT IN HIS RETURN FILED BE FORE ROC, ANY CHANGE IN MANAGEMENT AND PROOF OF IDENTITY, GENUINENESS AND CREDITWORTHI NESS OF THE ABOVE SHARE APPLICANTS. HE ISSUED SIMILAR NOTICES TO THE DIRECTORS OF SOME OF THE ABOVE SAID SIXTEEN COMPANIES. ITA NO.1200/KOL/2015 & 1209/KOL/2015 M/S. LUXURY VY APAAR PVT. LTD & M/S LINKPOINT DEALCOM PVT. LTD. A.Y.2011-12 3 4. A PERUSAL OF THE CASE FILE REVEALS THAT THE SAID NOTICES FAILED TO EVOKE ANY RESPONSE. THE ASSESSING OFFICER THEREFORE OBSERVED THAT ALL THE ABOVE NARRATED FACTS SUFFICIENTLY INDICATED THAT THE SHARE PREMIUM IN QU ESTION WAS NEITHER GENUINE NOR CREDITWORTHY. HE QUOTED HONBLE APEX COURTS DECISI ON IN CIT VS. DURGA PRASAD MORE[1971] 82 ITR 540 AND SUMATI DAYAL VS CIT [1995 ] 80 TAXMAN 89/214 ITR 801 (SC) THAT ALL THE RELEVANT DOCUMENTARY EVIDENCE FIL ED BEFORE THE COURTS OR TRIBUNAL HAVE TO BE APPRECIATED APPLYING TEST OF HUMAN PROB ABILITIES. ALL THIS RESULTED IN THE IMPUGNED UNEXPLAINED SHARE APPLICATION MONEY ADDITI ON OF RS.31,69,00,000/- U/S 68 OF THE ACT. 5. THE CIT(A) REVERSES THE ASSESSING OFFICERS ACTI ON AS FOLLOWS :- I HAVE GONE THROUGH THE SUBMISSIONS AND RECORDS A ND HAS OBSERVED THAT THE ADDITION MADE BY AO IS MADE WITHOUT ANY PROPER FIND ING AND IS DEVOID OF ANY REASON AND LOGIC. ON THE EVIDENCES AND CORROBORATIV E FINDINGS ABOUT THE ASSESSMENT OF INCOME AND PARTICULARS OF RETURN OF I NCOME BY OTHER JURISDICTIONAL ASSESSING OFFICERS OF THE SUBSCRIBERS, WE CAN'T ADJ UDICATE THAT THE IDENTITY OF SUBSCRIBERS TO THE CAPITAL IS NOT PROVEN AND THE AU THENTICITY OF THE TRANSACTIONS ARE IN DOUBT. THE MONEY WAS CREDITED AS SHARE APPLI CATION MONEY FOR ALLOTMENT OF SHARES. THE SHARES WERE ALLOTTED WITHIN 31ST MAR CH 2011. THE INVESTORS ARE BODY CORPORATE(S). THE INVESTOR IS ASSESSED TO INCO ME TAX. THE AMOUNT WAS RECEIVED THROUGH PROPER BANKING CHANNEL AND RECEIVE D BY ACCOUNT PAYEE CHEQUES. THE INVESTOR IS IDENTIFIABLE AND HAVING AD EQUATE CAPACITY TO INVEST. THE INVESTORS NET WORTH ARE MANY FOLD MORE THAN THE AMO UNT INVESTED BY THEM. THE AO BEFORE ARRIVING AT ANY CONCLUSION SHOULD' HAVE V ERIFIED THE INCOME TAX RECORDS OF THE SUBSCRIBERS TO THE CAPITAL TO FIND O UT THE TRUTH. AS STATED IN INSTRUCTION 212015 [F. NO. 500115/2014-APA-I] DATED 29.01.2015, THE RECEIPT OF SHARE PREMIUM IS A CAPITAL RECEIPT AND DON'T GIVE R ISE TO ANY INCOME. THUS THE ADDITION OF SHARE PREMIUM AND CAPITAL AS INCOME U/S 68 IS IN CONTRARY TO SAID INSTRUCTION ISSUED BY CBDT IN LIGHT OF VODAFONE CAS E. HENCE THE SHARE CAPITAL AND SHARE PREMIUM IS NOT AN UNEXPLAINED CASH CREDI T, HENCE THE ADDITION MADE UNDER SECTION 68 OF RS. 31,69,00,000 BE DELETED IN FULL. I HAVE GONE THROUGH THE ANNUAL ACCOUNTS AND IS OF OPINION THAT THE ARGUMENTS OF THE AR ABOUT THE DISPUTE ON DISALLOWANCE U/S 14A RE AD WITH RULE 8D DOES NOT HOLD GOOD THAT THE MAJOR FUNDS HAVE BEEN UTILISED B Y THE ASSESSEE TOWARDS INVESTMENTS IN SHARE. THESE INVESTMENTS WOULD EARN INCOME BY WAY OF DIVIDEND IN FUTURE WHICH IS AN EXEMPT INCOME. THE ADMINISTRATIV E EXPENDITURES INCURRED BY THE ASSESSEE ARE PARTLY FOR THE INVESTMENT ACTIVITI ES, HENCE THE PROBABILITY OF EXPENDITURE RELATABLE TO EXEMPT INCOME CANNOT BE R ULED OUT. IN MY OPINION ITA NO.1200/KOL/2015 & 1209/KOL/2015 M/S. LUXURY VY APAAR PVT. LTD & M/S LINKPOINT DEALCOM PVT. LTD. A.Y.2011-12 4 SECTION 14A IS A JUSTIFIED CHARGING SECTION AS THE TAXABLE INCOME IS NET OF EXPENDITURE SO THE NON TAXABLE OR EXEMPT INCOME SH OULD ALSO BE NET OF ANY OUTGOING, HENCE I DECLINE TO INTERFERE WITH THE DEC ISION OF AO ON THIS GROUND. THE ADDITION ON ACCOUNT OF DISALLOWANCE IS CONFIRME D. THE AR HAS NOT PRESSED FOR DISALLOWANCE MADE OF EXPENDITURE UNDER SECTION 35D. 6. LEARNED DEPARTMENTAL REPRESENTATIVE VEHEMENTLY C ONTENDS DURING THE COURSE OF HEARING THAT THE CIT(A) HAS ERRED IN LAW AS WELL AS ON FACTS IN REVERSING THE ASSESSING OFFICERS ACTION ADDING SHARE APPLICATION /PREMIUM MONEY OF RS.31.69 CRORES TO BE BOTH GENUINE AND CREDITWORTHY. WE FIND CONSIDERABLE MERIT IN THE REVENUES INSTANT ARGUMENT. IT HAS COME ON RECORD T HAT THE ABOVE INVESTOR ENTITIES HAD MEAGRE INCOMES MAINLY FROM SHARE TRANSFERS ONLY FRO M ONE ACCOUNT TO ANOTHER, NO BUSINESS ACTIVITY OR FIXED ASSETS, THEIR COMMON DIR ECTORS HAD FAILED TO FILE ANY RESPONSE TO ASSESSING OFFICERS REPEATED NOTICES, AS WELL AS THE FACT THAT THE ASSESSEES BANK ACCOUNT HAD SEEN CORRESPONDING DEPOSITS FOLLOWED BY FREQUENT WITHDRAWALS IN THE RELEVANT ACCOUNTING PERIOD(SUPRA). THE CIT(A) HAS F AILED TO CONSIDER ALL THESE RELEVANT FACTS WHILST ACCEPTING THE ASSESSEES CONTENTIONS G OING BY ONLY DOCUMENTARY EVIDENCE ON RECORD WITHOUT APPLYING HUMAN PROBABILITIES TEST HEREINABOVE WE THEREFORE CONCLUDE THAT THE CIT(A)S FINDINGS DO NOT DESERVE TO BE CONCURRED WITH PAR SE ON MERITS QUA GENUINENESS AND CREDITWORTHINESS ASPECT. 7. COMING TO THE CIT(A)S FINDING THAT SUCH KIND OF A SHARE PREMIUM IS NOT TAXABLE AS REVENUE RECEIPT, AS PER HONBLE APEX COU RTS DECISION IN VODAFONE CASE (SUPRA) WE ARE OF THE VIEW THAT THERE IS NO DISPUTE ABOUT THE SAID SETTLED LEGAL POSITION. THE QUESTION THAT IS INVOLVED IN THIS APPEAL IS ALT OGETHER ON A DIFFERENT FOOTING. THE ASSESSEE HAS FAILED TO PROVE THE GENUINENESS AND CR EDITWORTHINESS OF ITS SHARE PREMIUM IN VIEW OF THE ABOVE OVERWHELMING CIRCUMSTANCES RAI SING SERIOUS DOUBTS IN VIEW OF MULTIPLE FACTUAL ASPECTS HEREINABOVE. WE THEREFORE ARE OF THE OPINION THAT THE HONBLE APEX COURTS DECISION WOULD APPLY ONLY IF THE ASSES SEE SATISFIES ALL THE RELEVANT PARAMETERS OF IDENTITY, SOURCE, GENUINENESS AND CRE DITWORTHINESS OF THE AMOUNTS RECEIVED FROM INVESTOR ENTITIES ONLY AND NOT IN ISO LATION. THE CIT(A)S FINDINGS ARE ITA NO.1200/KOL/2015 & 1209/KOL/2015 M/S. LUXURY VY APAAR PVT. LTD & M/S LINKPOINT DEALCOM PVT. LTD. A.Y.2011-12 5 THEREFORE CONTRARY TO SECTION 250(6) OF THE ACT PRE SCRIBING BOTH POINTS OF DETERMINATION TO BE FOLLOWED BY A DETAILED ADJUDICA TION IN LOWER APPELLATE PROCEEDINGS. WE THEREFORE LEAVE IT OPEN FOR THE ASS ESSING OFFICER TO EXAMINE THE ENTIRE ISSUE ONCE AGAIN AS PER LAW AFTER MAKING THO ROUGH ENQUIRIES. NEEDLESS TO SAY, SUFFICIENT OPPORTUNITIES OF HEARING WOULD BE AFFORD ED TO THE ASSESSEE IN CONSEQUENTIAL PROCEEDINGS. THE REVENUES FORMER APPEAL ITA NO.120 0/KOL/2015 IS ACCEPTED FOR STATISTICAL PURPOSES. 8. SAME ORDER TO FOLLOW IN REVENUES LATTER APPEAL NO.1209/KOL/2015 INVOLVING SIMILAR UNEXPLAINED SHARE PREMIUM ADDITION OF RS.38 ,80,00,000/- WHEREIN THE CIT(A) HAS PASSED THE VERY ORDER AS EXTRACTED IN PRECEDING PARAGRAPHS. THIS LATTER APPEAL ITA NO.1209/KOL/2015 IS ALSO ACCEPTED FOR STATISTICAL P URPOSES. 9. THESE TWO REVENUES APPEALS ARE ALLOWED FOR STAT ISTICAL PURPOSES. O RDER PRONOUNCED IN THE COURT ON 20.07.2018. SD/- SD/- [J.SUDHAKAR REDDY ] [ S.S.GODARA ] ACCOUNTANT MEMBER JUDICIAL MEMBER DATED : 20.07.2018. [RG SR.PS] COPY OF THE ORDER FORWARDED TO: 1.M/S LUXURY VYAPAAR PVT. LTD., FE-326, SECTOR-III, SALT LAKE CITY, KOLKATA-700106. 2. M/S. LINKPOINT DEALCOM PVT. LTD., FE-326, SECTOR -III, SALT LAKE CITY, KOLKATA- 700106. 3. I.T.O., WARD-6(2), KOLKATA. 3. C.I.T.(A)- 2, KOLKATA 4. C.I.T-2, KOLKATA 5. CIT(DR), KOLKATA BENCHES, KOLKATA. TRUE COPY BY ORDER, SENIOR PRIVATE SECRETARY HEAD OF OFFICE/D.D.O, ITAT KOLKATA BENCHES ITA NO.1200/KOL/2015 & 1209/KOL/2015 M/S. LUXURY VY APAAR PVT. LTD & M/S LINKPOINT DEALCOM PVT. LTD. A.Y.2011-12 6