Gowri Gopal Hospitals Private Limited, Hyderabad V. Asst. Commissioner of Income Tax, Circle-2(2), Hyderabad

ITA 1305/Hyd/2019

• Counselvise Citation: [2022] 105 COUNSELVISE.COM (IT) 3694 (ITAT-HYDERABAD)
• Duration Of Justice: 2 year(s) 8 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-04-2022
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB-A
• Assessment Year: 2013-2014
• Appeal Filed On: 18-08-2019
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: K.K. GUPTA
• Section: 68

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD ‘A’ BENCH, HYDERABAD. BEFORE SHRI LILET KUMAR, JUDICIAL MEMBER AND SHRI L. P. SAHU, ACCOUNTANT MEMBER ITA No.1305/Hyd/2019 (Assessment Year : 2013-14) M/s. Gowri Gopal Hospitals Pvt. Ltd., Hyderabad. PAN AACCS 9035Q .....Appellant. Vs. Asst. Commissioner of Income Tax, Circle 2(2), Hyderabad. .....Respondent. Appellant By : Shri K.K. Gupta, C.A. Respondent By : Shri T. Sunil Goutam. (D.R.) Date of Hearing : 25.04.2022. Date of Pronouncement : 27.04.2022. O R D E R Per Shri Laliet Kumar, J.M. : This assessee’s appeal for Asst. Year 2013-14 arises from the order of Commissioner of Income Tax (Appeals)-9, Hyderabad dt.29.07.2019. 2. The grounds raised by the learned A.R. in the present appeal is as under : 2 ITA No.1305/Hyd/2019 “1. The appellant company has complied with the requirements u/s.68 of providing the identity / genuineness and creditworthiness of the applicants in respect of share application money. The onus cast on the appellant u/s.68 was discharged by the appellant. 2. On the above and other grounds that may arise during the appeal, the appellant requests for an order deleting the addition made in the assessment order.” 3. The learned AR for the assessee has submitted that the assessee company during the Asst. Year 2013-14 has received share application money for Rs.70 lakhs from various persons. The details of applicants are as under : S.No. Name of the party Amount Rs. 1. K Praveen Kumar 500000 2. K Lakshmi 500000 3. M Sasikala 1000000 4. K Srinivasulu 500000 5. K Surendra Kumar 500000 6. G Siva Nagamani 500000 7. Praneeth Gopal 500000 8. Srikanth 1500000 9. Anitha Srikanth 1500000 Total : 70,00,000 3 ITA No.1305/Hyd/2019 4. It was the case of the assessee that during the assessment proceedings the assessee had provided the information as called for by the Assessing Officer namely applicant’s PAN Number, confirmation letter, share application form, copies of the cheques, etc. The assessee had received share application money through banking channel and therefore the assessee was able to show the identity, genuineness and credit worthiness of the share application money. It was also submitted that the assessee had established all necessary requirements u/s.68 of the Income Tax Act, 1961 (in short “the Act”) and the A.O. was not justified in making the addition u/s.68 of the Act. In fact the assessee had also submitted that all the shares were not allotted to the applicants and there were refunds also and the same was confirmed by the share applicants. The details of such refunds were provided at pages 11 to 21 of the paper book. 4.1 Aggrieved by the order of A.O., the assessee had filed an appeal before the learned CIT(Appeals). The 4 ITA No.1305/Hyd/2019 CIT(Appeals) confirmed the order of the Assessing Officer and vide para 5.2 he dismissed the appeal of the assessee as under : “5.2 On 10.04.2019, Sri K.K. Gupta, admitted that subsequently, share application money has been returned to the share applicants, however, no evidence was filed. The A.O. has observed that share capital has been increased, then how this money has been returned back without buy back of the shares. The initial stand taken before the A.O. is totally incorrect, that paid up capital is increased to Rs.3,381,60,000, even in the ground of appeal same plea has been taken, this is the basic reason why alleged share holders did not turned up even during the remand proceedings, and even in rejoinder no reply has been given on merit. This is an admittance that share capital was not genuine. On facts it has been established that credits were not genuine, merely entry by cheque is not conclusive even the explanation given has been established as incorrect. Therefore, this ground of appeal is dismissed.” 4.2 Feeling aggrieved by the order of CIT(A), the assessee is in appeal before us for the grounds stated herein above. 5. The learned AR had filed the written submission as under : 5 ITA No.1305/Hyd/2019 “ The position in law after the dismissal of series of SLPs by the Supreme Court on 11th January 2008 is that the onus cast upon the assessee company is discharged upon disclosure of the names and particulars of the shareholders. It is for the Dept. to conduct its own enquiry thereafter and additions if any may be made in the hands of the shareholders. The honourable Delhi High Court in the case of 'CIT vs. Value Capital Services Ltd. ' in its judgment dated 25.04.2008 whilst rejecting the appeal of the CI1~ held that, even if the applicant does not have the means to make the investment, the investment made by the applicant actually emanated from the coffers of the assessee so as to enable it to be treated as the undisclosed income of the assessee, if it has to be treated as its undisclosed income. The honourable Supreme Court of India in the case of C1T- Vs-Lovely Exports Pvt Ltd., it was held that the source of the sources need not be explained by the assessee company, as below: " ..... Can the amount of share money be regarded as undisclosed income under s. 68 of IT Act, 1961 ? We find no merit in this Special Leave Petition for the simple reason that if the share application money is received by the assessee company from alleged bogus shareholders, whose names are given to the AD, then the Department is free to proceed to reopen their individual assessments in accordance with law. Hence, we find no infirmity with the impugned judgment. Subject to the above, Special Leave Petition is dismissed ..... " The honourable Madras High Court, in the case of M/s Lalitha Jewellery Mart Pvt. Ltd. Vs. Deputy Commissioner of Income tax and Another, U20171399 ITR 425 (Mad)-( Madras High Court), held that: " 42. On the other hand, the legal principle enunciated by the Supreme Court, as noticed supra by us, is that so long as the proof and identity of the investor and the payment received from him is through a doubtless channel like that of a banking channel, the receipt in the ands of the assessee towards share capital or share premium does not change its colour. The money so invested in the assessee company would still be the money available and belonging to the investors. The consistent principle followed is that the investors sources and credit worthiness cannot be explained by the assessee. If the department has a doubt about the genuineness of the investors capacity, it is open to it to proceed against those investors. Without taking such a course of action, the Assessing Officer and the Tribunal are proceeding on conjectures that the assessee has, in fact, ploughed back the money. The very approach of the Assessing Officer and the Tribunal are completely opposed to settled legal principles enunciated and they have arrived at conclusions contrary to the legal principles on the subject....” 6 ITA No.1305/Hyd/2019 The honourable ITAT, Hyderabad, A-Bench, in the case of KLR Industries Ltd., Hyderabad Vs. DCIT, CC2(l), has held that the Assessee has to establish identity and genuineness of the depositor. The honourable Co-ordinate bench, in the case of Brilliant Biopharma Ltd. Vs. DCIT, Circle-1(3), Hyd, (ITA No. 1791/Hyd/2017 & SA No.168/Hyd/2019, Asst Year: 2011-12) accepted the position that no 'addition’ is called for when confirmations of the depositors/ applicants (showing the identity and genuineness) were filed. The honourable Co-ordinate bench, in the case of Brilliant Industries Pvt Ltd-Vs- DClT; Circle-1(2),lIyd, (ITA No. 912/Ilyd/2017, Asst Year: 2012-13) accepted the position that no 'addition' is called for when confirmations of the depositors / applicants (showing the identity and genuineness) were filed. Copies of order are filed herewith for ready reference. Now it is a settled law, relating to the Deposits/Share Application Money, that the assessee (who has accepted the share application money/deposits) if furnishes Name, PAN and address of the Depositors/Share Applicants, it is to be considered as genuine. Since, the share application money has been accepted through banking channel and the assessee has furnished the Name, PAN and Address of the share applicants/depositors the transactions are to be considered as genuine. The source of the source need not be explained by the assessee. The assessing officer may refer to the jurisdictional assessing officer of the Depositor/Share Applicant. In view of the above facts and information and as per above rulings and legal position, the addition of 'Share Application Money' under section 68 is not correct and justified, the assessee request you to pass order to delete the additions made to the total income in the assessment order.” 6. Per contra, the learned Departmental Representative had drawn our attention to the Hon’ble Apex Court decision in the case of NRA Iron and Steel (P) Ltd. Vs. Pr. CIT (Central) (2020) 117 taxmann.com 752 (SC). 7 ITA No.1305/Hyd/2019 7. We have heard the rival contentions and perused the material available on record. The A.O. in paragraphs 4.2 to 4.4 has recorded the findings as under : “ 4.2 However the assessee did not furnish any evidence in support of source of the above share capital. Hence the assessee was given another opportunity vide order sheet entry dtd.14.01.2016 to furnish confirmation letter, bank account statements and Return of Income of share capital investors on or before 22.01.2016. However the assessee failed to furnish the same within the prescribed date. Subsequently on 4.2.2016 the assessee’s AR Sri K. Surya Bhagavan appeared and furnished confirmation of balance and share application forms. However the assessee did not furnish any evidence to prove the genuineness of the transactions and identity and creditworthiness of the above mentioned persons. Hence the AR was asked vide order sheet entry dtd.4.2.2016 to show cause as to why Rs.70,00,000/- being the increase in paid up share capital should not be treated as income of the assessee u/s.68 of the I.T. Act. In response to the same the assessee's AR vide letter dtd.5.2.2016 submitted as follows : “ In respect of Share Application Money all the receipts are through cheques / banking channel and the applicants are identifiable and their PANs are furnished. Your kind attention is drawn to the decision of honourable ITAT (Hyderabad-A Bench) in the case of KLR Industries Ltd., Hyderabad Vs. DCIT, Central Circle 2(1), Hyderabad.” 4.3 The submission of the assessee was considered and found to be not acceptable for the following facts and reasons : 8 ITA No.1305/Hyd/2019 i. Inspite of the repeated opportunities given as explained above, the assessee has failed to produce any material evidence to prove the identity and creditworthiness of the above persons and genuineness of the share capital transactions. The assessee failed to furnish even the PAN No.s (only few furnished), income tax details, Return of Income and bank account statement of the above mentioned persons. Thus the assessee has failed to discharge the onus cast on it u/s.68 of the Act to prove the nature and source of Rs.70,00,000/-. The mere fact that the as. Received the money through Banking Channel, does not make athe transaction genuine. The genuineness should be supported by material evidence. ii. The case law relied upon by the assessee was perused and the facts involved in the said case were found to be different from that of the instant case. For instance, in the case of KLR Industries Ltd. Vs. DCIT, the assessee furnished all details viz. name, address, PAN and Income Tax particulars of the share applicants. Further, inthat case share applicants filed affidavits mentioning their source to invest in M/s. KLR Industries Ltd. Whereas in the instant case, the assessee did not even furnish confirmation from the share capital investors about the source of investment. Further, Asst. Year involved in the decision of ITAT relied upon by the assessee is prior to insertion of proviso 1 to section 68 of the Act. Hence, the decision of ITAT in the case of M/s. KLR Industries Vs. DCIT is not applicable to the facts of the assessee's case. 9 ITA No.1305/Hyd/2019 10 ITA No.1305/Hyd/2019 11 ITA No.1305/Hyd/2019 However, before the learned CIT(A) it was submitted by the assessee that the assessee had returned the money received from the share applicants. 12 ITA No.1305/Hyd/2019 7.1 However the Ld. CIT(A) has not accepted this contention of the assessee, as mentioned by the Ld. CIT(A) in paragraph 5.2 of his order. It is also the case of the assessee that at that time, the necessary evidences / documents were not produced before the Ld. CIT(A) and therefore there was no factual determination by the concerned authorities. 7.2 Now our attention was drawn to page 11 of the paper book where the details of return of application money was mentioned. The details furnished by the assessee are as under : 13 ITA No.1305/Hyd/2019 7.3 Admittedly, the above said documents shows refund of entire share application money which was neither examined by the A.O. nor by the learned CIT(A), as the fresh document was filed before us along with appeal. In our considered opinion these fresh document/evidence showing the return of the shared application money to the respective applicants are essential to be examined by the lower authorities and factual finding is required to be given. In view of the above we admit document now filed before us and remand back the matter to the file of the lower authority. 7.4 This is a new fact to be verified by the lower authorities and based on the outcome of the examination, a view has to be taken as per the provisions of section 68 of the Act. As the assessee had allegedly returned back the share application money in subsequent year which, as per the case of the assessee was accepted by the revenue in the subsequent assessment years and no additions were made thereof. 14 ITA No.1305/Hyd/2019 7.5 In the light of the above discussion, we deem it appropriate to remit the matter back to the file of learned CIT(A) with a direction to verify the details from assessment record for the A.Ys 2013-14, 2014-15 & 2015-16 to find whether Rs.70,00,124 was returned back by the assessee and what was the treatment given by the share applicants in their respective return of income at the time of filing the share application, allotment of shares if any and at the time of receipt of alleged refund amount from the assessee. The same exercises is also required to be carried out in the in the hands of assessee also. Needless to say that if the learned CIT(A) comes to the conclusion that the assessee before us has returned the application money then an appropriate order shall be passed in accordance with law. While doing so, if the learned CIT(A) decided to examine the transaction, then the assessee shall co-operate and file the necessary documents including income tax returns filed, balance sheet, bank account etc. of these persons for a year prior to the receipt of the share application. 15 ITA No.1305/Hyd/2019 8. In the result, the appeal of the assessee is allowed for statistical purposes. Order pronounced in the open court on 27th April, 2022. Sd/- Sd/- (L.P. SAHU) (LALIET KUMAR) Accountant Member Judicial Member Hyderabad, Dt.27.04.2022. * Reddy gp Copy to : 1. M/s. Gowri Gopal Hospitals Pvt. Ltd., B Block, 8 th Floor, IT Towers, AC Guards, Masab Tank, Hyderabad-500 004 2. ACIT, Circle 2(2), Hyderabad. 3. Addl. C I T, Range-2, Hyderabad. 4. CIT(Appeals)-9 / CIT(A)-2 Hyderabad. 5. DR, ITAT, Hyderabad. 6. Guard File. By Order Sr. Pvt. Secretary, ITAT, Hyderabad.