ACIT, CHENNAI V. CPL Jewellers Pvt Ltd., Tirupattur

ITA 1269/CHNY/2016

• Counselvise Citation: [2017] 130 COUNSELVISE.COM (IT) 8053 (ITAT-CHENNAI)
• Duration Of Justice: 8 month(s) 16 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-01-2017
• Appeal Filed By: Department
• Bench Allotted: A
• Assessment Year: 2011-2012
• Appeal Filed On: 09-05-2016
• Court: TRIBUNAL
• Department Lawyers: SHIVA SRINIVAS
• Keywords: Unexplained cash credit; Principle of natural justice; Additional evidence; Reasonable cause; Corroborative evidences; Sham transactions
• Section: 68

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH : CHENNAI , ! ' . #$ % &' BEFORE SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER AND SHRI DUVVURU RL REDDY , JUDICIAL MEMBER ./ I.T.A.NO.1269/MDS./2016 / ASSESSMENT YEAR : 2011-12 THE ACIT, CENTRAL CIRCLE 2(3), FIRST FLOOR, INVESTIGATION WING, ROOM NO.126,CHENNAI-34. VS. M/S.CPL JEWELLER PVT LTD., 118,CUTCHERY STREET, TIRUPATTUR 635 601. [PAN AAECC 2056 P ] ( () / APPELLANT) ( *+() /RESPONDENT) / APPELLANT BY : SHRI SHIVA SRINIVAS, JCIT D.R /RESPONDENT BY : NONE / DATE OF HEARING : 27 - 12 - 2016 / DATE OF PRONOUNCEMENT : 25 - 01 - 2017 , / O R D E R PER CHANDRA POOJARI, ACCOUNTANT MEMBER THIS APPEAL OF THE REVENUE IS DIRECTED AGAINST THE ORDER OF THE COMMISSIONER OF INCOME-TAX (APPEALS)-13,CHENNA I DATED 04.01.2016 PERTAINING TO ASSESSMENT YEAR 2011-12. ITA NO.1269/16 :- 2 -: 2. THE REVENUE HAS RAISED THE FOLLOWING GROUNDS FO R OUR ADJUDICATION. 1. THE ORDER OF THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) IS ERRONEOUS TO FACTS OF THE CASE AND LAWS. 2. THE ID. CIT(A) ERRED IN DELETING THE ADDITION MA DE BY THE ASSESSING OFFICER OF THE UNEXPLAINED SHARE APPLICAT ION MONEY AMOUNTING TO RS. 9,45,00,000/- TREATING IT AS UNEXP LAINED CREDIT U/S 68 OF THE IT ACT. 2.1 THE ID. CIT(A) ERRED IN HOLDING THAT THE UNEXPL AINED CREDIT U/S 68 ARISING FROM UNEXPLAINED SHARE APPLICATION MONEY SH OULD BE ASSESSED IN THE CASE OF THE ALLEGED SHAREHOLDERS, W HEN THE ASSESSEE BEING A PRIVATE LIMITED COMPANY, HAS NOT P ROVED THE GENUINENESS OF THE EXISTENCE OF THE ALLEGED INVESTO RS WITH NECESSARY DOCUMENTARY EVIDENCE. 2.2 THE LD.CIT(A) OUGHT TO HAVE APPRECIATED THAT TH E SHARE CAPITAL INTRODUCED IS A CREDIT IN THE BOOKS OF THE ASSESSEE AND THE ASSESSEE COMPANY HAS FAILED TO EXPLAIN THE SOURCES FOR THE CREDIT WITH SUPPORTING EVIDENCE AND AS SUCH THE ASSESSING OFFICER HAS RIGHTLY ASSESSED SUCH UNEXPLAINED CREDIT IN THE HAN DS OF THE ASSESSEE COMPANY. 2.3 THE ID.CIT(A) OUGHT TO HAVE APPRECIATED THAT ME RE FURNISHING OF DETAILS OF PARTIES DOES NOT ABSOLVE THE ASSESSEE FR OM DISCHARGING ITS ONUS OF PROVING THE GENUINENESS OF ANY INVESTME NT BY WAY OF SHARE APPLICATION MONEY AS HELD BY VARIOUS COURTS I NCLUDING HONBLE APEX COURT. ITA NO.1269/16 :- 3 -: 2.4 THE LD.CIT(A) OUGHT TO HAVE APPRECIATED THAT SU FFICIENT OPPORTUNITIES WERE GIVEN TO THE ASSESSEE TO PROVE T HE GENUINENESS OF THE TRANSACTIONS AND TO PRODUCE THE INVESTORS BEFORE THE ASSESSING OFFICER TO PROVE THE CREDIT WO RTHINESS OF THE ALLEGED INVESTORS. 2.5 THE ID.CIT(A) OUGHT TO HAVE APPRECIATED THE FIN DING GIVEN BY THE ASSESSING OFFICER THAT SUCH TRANSACTION TOWARDS SHA RE APPLICATION MONEY MADE BY THE ALLEGED INVESTORS ARE ONLY SHAM T RANSACTION BASED ON THE REPORT OF THE INVESTIGATION FURNISHED BY THE DDIT(LNV.), KOLKOTTA. 2.6 THE ID.CIT(A) OUGHT TO HAVE CONSIDERED THE STAT EMENT GIVEN BY SRI. C.L. RAGHUNATHAN, DIRECTOR OF M/S CPL JEWELLER S PVT. LTD WHEREIN HE HAS ADMITTED THAT THE INVESTORS NEITHER KNEW HIM PERSONALLY NOR HIS BANK ACCOUNT AND THAT THE INVEST ORS MADE SUCH HUGE INVESTMENT WITHOUT VERIFYING THE POTENTIAL OF THE ASSESSEE COMPANY BUT ONLY ON MERE SUGGESTION OF THEIR CA. 2.7 HAVING REGARD TO THE ENQUIRY REPORT FURNISHED B Y DDIT (LNV.), KOLKATTA AND THE FINDING GIVEN BY ASSESSING OFFICER REGARDING SHAM TRANSACTIONS AND THE SAID STATEMENT GIVEN BY T HE DIRECTOR OF THE ASSESSEE COMPANY THAT SUCH INVESTMENTS IN SHARE APPLICATION MONEY WAS MADE BY MERE WORDS OF THE AUDITOR, THE LD .CIT(A) OUGHT TO HAVE UPHELD THE ENTIRE ADDITION MADE BY TH E ASSESSING OFFICER TOWARDS UNEXPLAINED SHARE APPLICATION MONEY U/S 68 OF THE IT ACT. 3. THE FACTS OF THE CASE ARE THAT THIS CASE WAS POS TED FOR HEARING ON 21.12.2016. THE AUTHORISED REPRESENTATIVE OF ASS ESSEE ITA NO.1269/16 :- 4 -: MR.T.VASUDEVAN FILED AN ADJOURNMENT PETITION WITH V AKALAT STATING THAT HE HAS TO OBTAIN THE BACK RECORDS AND OTHER MATERIA L PAPERS FROM THE ASSESSEE AND TO PRESENT THE CASE BEFORE THE TRIBUNA L. AFTER CONSIDERING THE REQUEST OF THE LD.A.R, THE CASE WAS ADJOURNED TO 27.12.2016. ON 27.12.2016, THE RESPONDENT I.E. THE ASSESSEE, FILED AN ADJOURNMENT PETITION STATING THAT ASSESSEE WAS CONT EMPLATING TO CHANGE THE COUNSEL FOR REPRESENTING THE APPEAL BEFO RE THIS TRIBUNAL AND SOUGHT FOR ADJOURNMENT. HENCE, NEITHER THE ASSE SSEE NOR ANY NEW COUNSEL WAS APPEARED TO PROSECUTE THE CASE. ON THE OTHER HAND, THE COUNSEL, WHO APPEARED FOR THE ASSESSEE ON EARLIER O CCASION, SOUGHT FOR ADJOURNMENT. IN OUR OPINION, THERE IS NO REASONABLE CAUSE FOR SEEKING THIS KIND OF ADJOURNMENT AND ASSESSEE IS CALLOUS IN ITS ATTITUDE AND WE ARE NOT IN A POSITION TO ADJOURN THE CASE. HENCE, W E PROCEED TO ADJUDICATE THE ISSUE IN DISPUTE AFTER HEARING THE L D.D.R. 4. THE FACTS OF THE CASE ARE THAT THE ASSESSEE IS A CO MPANY, IN WHICH THE PUBLIC ARE NOT SUBSTANTIALLY INTERESTED, INCORPORAT ED ON 01-10-2010 AND THE ASSESSEE IS A DEALER IN GOLD, BULLION AND SILVER. F OR THE ASSESSMENT YEAR 2011-12, THE ASSESSEE HAD FURNISHED A RETURN OF I NCOME ADMITTING TOTAL INCOME OF RS.87,170/-. THE RETURN WAS TAKEN UP FOR SCRUTINY AND RELEVANT NOTICES SERVED ON THE ASSESSEE. THE ASSESSMENT WAS FINALIZED ON 29-03-2014 AND THE TOTAL INCOME DETERMINED AT RS.9,45,87,170/- . THE ADDITION MADE IN ITA NO.1269/16 :- 5 -: THE ASSESSMENT WAS BY DISALLOWING SHARE APPLICATION MONEY AMOUNTING TO RS.9,45,00,000, RECEIVED BY THE ASSESSEE FROM THE U NDER- MENTIONED PARTIES: 1] SHREEHARI VINIMAY PRIVATE LIMITED. 2] GLACIER TRADELINK PRIVATE LIMITED. 3] SHOBHAGYA VINIMAY PRIVATE LIMITED. 4] MORNING STAR VANIJYA PRIVATE LIMITED. 5] PURVANIL TRADE AND COMMERCE PRIVATE LIMITED. 6] AGRADOOTI VANIJYA PRIVATE LIMITED. 7] SPRINT VANIJYA PRIVATE LIMITED. 8] EVERLINK COMMOTRADE PRIVATE LIMITED IN THE ASSESSMENT ORDER, THE ASSESSING OFFICER HAS TREATED THE SHARE APPLICATION MONIES RECEIVED FROM THE ABOVE PARTIES AS CASH CREDITS AND ASSESSED THE SAME AS UNEXPLAINED INCOME OF THE ASSE SSEE UNDER SECTION 68 OF THE ACT. AGGRIEVED WITH THE ORDER OF THE AO, THE ASSESSEE CARRIED THE APPEAL BEFORE THE LD.CIT(A). 4.1 ON APPEAL, THE LD.CIT(A) OBSERVED THAT THE ASS ESSING OFFICER HAD RECORDED A STATEMENT FROM ONE OF THE DIRECTORS OF T HE ASSESSEE COMPANY WHEREIN HE HAD STATED THAT HE DID NOT DIRECTLY KNOW THE DIRECTORS OF THE ABOVE-MENTIONED COMPANIES. ACCORDING TO LD.CIT(A), THE CONTENTION OF THE ASSESSING OFFICER IS THAT THE VERY FACT THAT THE DI RECTOR OF THE ASSESSEE COMPANY AND THE DIRECTORS OF THE INVESTOR-COMPANIES ARE NOT PERSONALLY KNOWN, THE TRANSACTION IS NOTHING BUT CIRCUITOUS TR ANSACTION OF MONEY ROUTED FROM THE ASSESSEE COMPANY TO PAPER COMPANIES AND TH EN ROUTED BACK TO THE ASSESSEE. BEFORE LD.CIT(A), IT IS FINALLY CONTENDE D BY THE ASSESSEE THAT THE ALLEGED REPORT OF THE DEPUTY DIRECTOR OF INCOME-TAX (INVESTIGATION) HAD NOT ITA NO.1269/16 :- 6 -: BEEN MADE AVAILABLE TO THE ASSESSEE AND THEREFORE T HE ASSESSEE WAS NOT AWARE OF THE CONTENTS OF THE ALLEGED INVESTIGATION REPORT, AND HOW BASED ON SUCH A REPORT THE ASSESSING OFFICER COULD DRAW A CO NCLUSION THAT THE TRANSACTIONS WERE SHAM TRANSACTIONS. THE ASSESSEE P LEADS THAT NON- FURNISHING OF A COPY OF THE INQUIRY REPORT WHICH WA S OBTAINED BEHIND ITS BACK, AND RELYING ON SUCH A REPORT TO REJECT THE AP PELLANTS CASE AMOUNTS TO A CLEAR INSTANCE OF DENIAL OF NATURAL JUSTICE. THE LD.CIT(A), RELYING ON THE JUDGEMENT OF DELHI HIGH COURT IN THE CASE OF CIT VS . LOVELY EXPORTS PVT. LTD. IN 299 ITR 268(DEL.), DIRECTED THE AO TO RECOMPUTED THE TOTAL INCOME AFTER DELETING THE ADDITION OF ` 945,00,000/- BEING SHARE CAPITAL CONTRIBUTIONS. AGAINST THIS, THE REVENUE IS IN APPEAL BEFORE US. 5. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE MATERIAL ON RECORD. THE ORDER OF CIT(A) IS VERY CRYPTIC. THE LD.CIT(A) PLACING RELIANCE ON JUDGEMENT OF DELHI HIGH COURT IN THE CASE OF CIT VS . LOVELY EXPORTS PVT. LTD., CITED SUPRA, DELETED THE ADDITIO N. HE HAS NOT EXPLAINED HOW THE JUDGMENT RELIED BY HIM IS APPLICABLE TO THE FACTS OF THE CASE. IN OUR OPINION, THE LD.CIT(A) BEING THE QUASI JUDICIAL AU THORITY SHOULD HAVE PASSED A REASONED ORDER AS HELD BY SUPREME COURT IN THE CA SE OF KRANTI ASSOCIATES P.LTD VS. MASOOD AHMED KHAN [2010] 9 SCC 496 WHICH STATUTORILY REQUIRES RECORDING OF REASONS AND REQUIREMENT OF PASSING A R EASONED ORDER BY AN AUTHORITY WHETHER ADMINISTRATIVE, QUASI-JUDICIAL OR JUDICIAL, HAD LAID DOWN AS UNDER:- ITA NO.1269/16 :- 7 -: (A) IN INDIA THE JUDICIAL TREND HAS ALWAYS BEEN T O RECORD REASONS, EVEN IN ADMINISTRATIVE DECISIONS, IF SUCH DECISIONS AFFECT ANYONE PREJUDICIALLY. (B) A QUASI-JUDICIAL AUTHORITY MUST RECORD REASON S IN SUPPORT OF ITS CONCLUSIONS. (C) INSISTENCE ON RECORDING OF REASONS IS MEANT TO SERVE THE WIDER PRINCIPLE OF JUSTICE THAT JUSTICE MUST NOT ONLY BE DONE IT MUST ALSO APPEAR TO BE DONE AS WELL. (D) RECORDING OF REASONS ALSO OPERATES AS A VALID RESTRAINT ON ANY POSSIBLE ARBITRARY EXERCISE OF JUDICIAL AND QUASI JUDICIAL O R EVEN ADMINISTRATIVE POWER. (E) REASONS REASSURE THAT DISCRETION HAS BEEN EXER CISED BY THE DECISION MAKER ON RELEVANT GROUNDS AND BY DISREGARDING EXTRA NEOUS CONSIDERATIONS. (F) REASONS HAVE VIRTUALLY BECOMES AS INDISPENSABL E COMPONENT OF A DECISION MAKING PROCESS AS OBSERVING PRINCIPLES OF NATURAL JUSTICE BY JUDICIAL, QUASI-JUDICIAL AND EVEN BY ADMINISTRATIVE BODIES. (G) REASONS FACILITATE THE PROCESS OF JUDICIAL REVI EW BY SUPERIOR COURTS. (H) THE ONGOING JUDICIAL TREND IN ALL COUNTRIES CO MMITTED TO RULE OF LAW AND CONSTITUTIONAL GOVERNANCE IS IN FAVOUR OF REASONED DECISIONS BASED ON RELEVANT FACTS. THI S IS VIRTUALLY THE LIFE BLOOD OF JUDICIAL DECISION MAKING JUSTIFYING THE PR INCIPLE THAT REASON IS THE SOUL OF JUSTICE. (I) JUDICIAL OR EVEN QUASI-JUDICIAL OPINIONS THESE DAYS CAN BE AS DIFFERENT AS THE JUDGES AND AUTHORITIES WHO DELIVER THEM. ALL T HESE DECISIONS SERVE ONE COMMON PURPOSE WHICH IS TO DEMONSTRATE BY REASON THAT THE RELEVANT FACTORS HAVE BEEN OBJECTIVELY CONSIDER ED. THIS IS IMPORTANT FOR SUSTAINING THE LITIGANTS FAITH IN TH E JUSTICE DELIVERY SYSTEM. (J) INSISTENCE ON REASON IS A REQUIREMENT FOR BOTH JUDICIAL ACCOUNTABILITY AND TRANSPARENCY. (K) IF A JUDGE OR A QUASI-JUDICIAL AUTHORITY IS NO T CANDID ENOUGH ABOUT HIS/HER DECISION MAKING PROCESS THEN IT IS IMPOSSIB LE TO KNOW WHETHER ITA NO.1269/16 :- 8 -: THE PERSON DECIDING IS FAITHFUL TO THE DOCTRINE OF PRECEDENT OR TO THE PRINCIPLES OF INCREMENTALISM. (L) REASONS IN SUPPORT OF DECISIONS MUST BE COGENT , CLEAR AND SUCCINCT. A PRETENCE OF REASONS OR RUBBER STAMP REASONS, IS N OT TO BE EQUATED WITH A VALID DECISION MAKING PROCESS. (M) IT CANNOT BE DOUBTED THAT TRANSPARENCY IS THE SINE QUA NON OF RESTRAINT ON ABUSE OF JUDICIAL POWERS. TRANSPARENCY IN DECISION MAKING NOT ONLY MAKES THE JUDGES AND DECISION MAKERS LESS PRONE TO ERRORS BUT ALSO MAKES THEM SUBJECT TO BROADER SCRUTINY.(SE E DAVID SHAPIRO IN DEFENCE OF JUDICIAL CANDOR (1987) 100 HARWARD LAW REVIEW 731-737) (N) SINCE THE REQUIREMENT TO RECORD REASONS EMANAT ES FROM THE BROAD DOCTRINE OF FAIRNESS IN DECISION MAKING, THE SAID R EQUIREMENT IS NOW VIRTUALLY A COMPONENT OF HUMAN RIGHTS AND WAS CONSI DERED PART OF STRASBOURG JURISPRUDENCE. SEE RUIZ TORIJA V. SPAIN [1994] 19 EHRR 553, AT 562 PARA 29 AND ANYA V. UNIVERSITY OF OXFOR D [2001] EWCA CIV 405(CA) WHEREIN THE COURT REFERRED TO ARICLE 6 OF THE EUROPEAN CONVENTION OF HUMAN RIGHTS WHICH REQUIRES, ADEQUAT E AND INTELLIGENT REASONS MUST BE GIVEN FOR JUDICIAL DECISIONS. (O) IN ALL COMMON LAW JURISDICTIONS, JUDGMENTS PLAY A VITAL ROLE IN SETTING UP PRECEDENTS FOR THE FUTURE. THEREFORE, FOR DEVELOPMENT OF LAW, REQUIREMENT OF GIVING REASONS F OR THE DECISION IS OF THE ESSENCE AND IS VIRTUALLY A PART OF DUE PROC ESS. 6. IN VIEW OF THE ABOVE DISCUSSION, WE ARE INCLINE D TO REMIT THE ISSUE IN DISPUTE TO THE FILE OF LD.CIT(A) FOR PASSING A SPE AKING ORDER ON THE ISSUE IN DISPUTE AND IF THE ASSESSEE HAS FILED ANY FRESH MAT ERIAL OR ADDITIONAL EVIDENCE BEFORE HIM, HE SHOULD CONFRONT THE SAME TO THE AO AND DECIDE IN ACCORDANCE WITH LAW. ITA NO.1269/16 :- 9 -: 7. IN THE RESULT, THE APPEAL OF THE REVENUE IS PA RTLY ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED ON 25 TH JANUARY, 2017, AT CHENNAI. SD/ - SD/ - ! ' # . $ %& ' ( DUVVURU RL REDDY ) ) % / JUDICIAL MEMBER ( ) (CHANDRA POOJARI) / ACCOUNTANT MEMBER () / CHENNAI *+ / DATED: 25 TH JANUARY, 2017. K S SUNDARAM +,-- ./-0/ / COPY TO: - 1 . / APPELLANT 4. - 1 / CIT 2. / RESPONDENT 5. /23- 4 / DR 3. - 1-!' / CIT(A) 6. 3&-5 / GF