DCIT, Sambalpur V. M/s Shree Baba Baikanath Roller Flour Mill Pvt. Ltd, Sambalpur

ITA 136/CTK/2010

• Counselvise Citation: [2011] 134 COUNSELVISE.COM (IT) 4373 (ITAT-CUTTACK)
• Duration Of Justice: 1 year(s) 2 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-06-2011
• Appeal Filed By: Department
• Bench Allotted: DB
• Next Hearing Date: 22-06-2011
• Assessment Year: 2001-2002
• Appeal Filed On: 16-04-2010
• Court: TRIBUNAL
• Department Lawyers: A K PATRA
• Keywords: Unexplained cash credit; Onus to prove
• Section: 68; 69

Judgement Text

IN THE INCME TAX APPELLATE TRIBUNAL, CUTTACK BENCH, CUTTACK BEFORE : HONBLE SHRI K.K.GUPTA, ACCOUNTANT MEMBER, AND HONBLE SHRI K.S.S.PRASAD RAO, JUDICIAL MEMBER. ITA NO. 136/CTK/2010 (ASSESSMENT YEAR 2001 - 02) DEPUTY COMMISSIONER OF INCOME - TAX, CIR CLE 2(1),SAMBALPUR. VERSUS M/S.SHREE BABA BAIJANATH ROLLER FLOUR MILL PVT. LTD., AINTHAPALI, SAMBALPUR PRESENT ADDRESS : LOHIA NIWAS, GOLEBAZAR CHOWK, SAMBALPUR PAN: AAGCS 0581 F (APPELLANT) (RESPONDENT) FOR THE APPELLANT: SHRI A.K.PATRA, DR FOR THE RES PONDENT NONE ORDER SHRI K.K.GUPTA, ACCOUNTANT MEMBER : THE REVENUE HAS FILED THIS APPEAL AGAINST THE ORDER OF THE LEARNED COMMISSIONER OF INCOME - TAX (APPEALS) RAISING THE ONLY GROUND THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LEARNED CIT(A) IS NOT JUSTIFIED IN DELETING THE ADDITION MADE TOWARDS UNEXPLAINED CASH CREDIT OF RS.46,78,624. 2. DURING THE ASSESSMENT YEAR UNDER CONSIDERATION THE ASSESSEE HAS SHOWN CASH CREDIT UNDER THE HEAD SHARE APPLICATION MONEY OF RS.46,78,624. IN SUPPORT THERE OF, THE ASSESSEE PRODUCED THE COMPLETE INCOME - TAX RECORDS OF THE PERSONS WHO HAD MADE SHARE APPLICATION TO THE ASSESSEE COMPANY. THE ASSESSING OFFICER EXAMINED ALL SUCH DETAILS AND FOR THE REASONS RECORDED IN HIS ORDER HELD THE CLAIM OF SHARE APPLICATION M ONEY TO BE NOT GENUINE. THE REASONS SO RECORDED BY THE ASSESSING OFFICER IN HIS ORDER IS THAT IN ALL CASES HE FOUND THAT INCOME EARNED BY THE SO CALLED SHAREHOLDERS ARE MARGINAL AND WITHDRAWAL FOR THE FAMILY MAINTENANCE AND FOR OTHER OBLIGATION MOST ARE NO T SHOWN IN THE CAPITAL ACCOUNT. ALL THE I.T.RETURNS AND ACCOUNTS PRODUCED IN RESPECT OF CLAIM OF SHARE APPLICATION MONEY ARE PREPARED IN A MANNER THAT SOMEHOW THE CLAIM OF INVESTMENT ARE ITA NO.136/CTK/2010 2 TO BE SUBSTANTIATED THE NATURE OF BUSINESS, MARGINAL EARNING, CAPITAL BUILD UP SHOWING RECEIVED OF LOAN FROM DIFFERENT PARTIES AND NON - WITHDRAWAL FOR FAMILY EXPENSES IN MOST CASE LEAD TO CONCLUDE THAT ALL THE I.T.RETURNS ARE PREPARED WITH AN INTENTION TO SHOW THE INVESTMENT IN SHARE SOMEHOW . THE REASONABLENESS AND CREDITWOR THINESS OF THE ACCOUNTS AND MAKING OF PAYMENT FROM REASONABLE SOURCE IN THE HEAD OF SHARE AS QUESTIONED COULD NOT BE PROVE D AT ALL. ACCORDINGLY THE ASSESSING OFFICER DISALLOWED THE CLAIM OF CASH CREDIT AND ADDED THE SUM OF RS.46,78,624 TO THE TOTAL INCOME OF THE ASSESSEE. AGGRIEVED, THE ASSESSEE PREFERRED APPEAL BEFORE THE LEARNED CIT(A) AND THE LEARNED CIT(A) RELYING ON THE DECISIONS IN THE CASE OF STELLAR INVESTMENT LTD (251 ITR 263) AND IN THE CASE OF CIT V. DIVINE LEASING & FINANCE LTD., DELETED THE SA ID ADDITION. AGGRIEVED THE REVENUE IS IN APPEAL BEFORE THE TRIBUNAL. 3. THE LEARNED DR SUPPORTED THE ORDER OF THE ASSESSING OFFICER AND CONTENDED THAT SINCE THE ASSESSEE WAS FAILED TO PROVE THE GENUINENESS OF SHARE APPLICATION MONEY, THE LEARNED CIT(A) IS NOT JUSTIFIED IN DELETING THE SAME. 4. AT THE TIME OF HEARING NONE WAS PRESENT ON BEHALF OF THE ASSESSEE. AFTER HEARING THE LEARNED DR AND PERUSING THE MATERIAL AVAILABLE ON RECORD, WE FIND THAT THERE IS NO DISPUTE TO THE FACT THAT IN SUPPORT OF THE CLAIM OF CASH CREDIT ON ACCOUNT OF SHARE APPLICATION MONEY, THE ASSESSEE HAS PRODUCED THE COMPLETE INCOME - TAX RECORDS OF THE PERSONS WHO HAD MADE SHARE APPLICATION TO THE COMPANY. THE ASSESSING OFFICER HAS ALSO EXAMINED THE SAME AND CAME TO THE CONCLUSION THAT T HE REASONABLENESS AND CREDITWORTHINESS OF THE ACCOUNTS AND MAKING OF PAYMENT FROM REASONABLE SOURCE IN THE HEAD OF SHARE AS QUESTIONED COULD NOT BE PROVED AT ALL. BUT THE UNDISPUTED FACT REMAINS THAT THE ASSESSEE HAS RECEIVED THE MONEY QUESTION ITA NO.136/CTK/2010 3 FROM THOSE PERSONS AS SHARE APPLICATION MONEY. IN THE CASE OF STELLAR INVESTMENT LTD (251 ITR 263) IT WAS HELD BY HONBLE SUPREME COURT THAT UNACCOUNTED MONEY OF THE SHAREHOLDERS IF INVESTED IN THE FORM OF SHARE APPLICATION MONEY COULD NOT BE ADDED IN THE HANDS OF TH E COMPANY. HON'BLE DELHI HIGH COURT IN CIT VS. DIVINE LEASING AND FINANCE LTD. [2008] 299 ITR 268 HELD AS UNDER: IN THE CASE OF A COMPANY THE FOLLOWING ARE THE PROPOSITIONS OF LAW UNDER SECTION 68. THE ASSESSEE HAS TO PRIMA FACIE PROVE (1) THE IDENTITY OF THE CREDITOR/SUBSCRIBER ; (2) THE GENUINENESS OF THE TRANSACTION, NAMELY, WHETHER IT HAS BEEN TRANSMITTED THROUGH BANKING OR OTHER INDISPUTABLE CHANNELS ; (3) THE CREDITWORTHINESS OR FINANCIAL STRENGTH OF THE CREDITOR/SUBSCRIBER ; (4) IF RELEVANT DETAILS OF THE ADDRESS OR PAN IDENTITY OF THE CREDITOR/SUBSCRIBER ARE FURNISHED TO THE DEPARTMENT ALONG WITH COPIES OF THE SHAREHOLDERS REGISTER, SHARE APPLICATION FORMS, SHARE TRANSFER REGISTER, ETC., IT WOULD CONSTITUTE ACCEPTABLE PROOF OR ACCEPTABLE EXPLANATIO N BY THE ASSESSEE ; (5) THE DEPARTMENT WOULD NOT BE JUSTIFIED IN DRAWING AN ADVERSE INFERENCE ONLY BECAUSE THE CREDITOR/SUBSCRIBER FAILS OR NEGLECTS TO RESPOND TO ITS NOTICES ; (6) THE ONUS WOULD NOT STAND DISCHARGED IF THE CREDITOR/SUBSCRIBER DENIES OR RE PUDIATES THE TRANSACTION SET UP BY THE ASSESSEE NOR SHOULD THE ASSESSING OFFICER TAKE SUCH REPUDIATION AT FACE VALUE AND CONSTRUE IT, WITHOUT MORE, AGAINST THE ASSESSEE ; AND (7) THE ASSESSING OFFICER IS DUTY BOUND TO INVESTIGATE THE CREDITWORTHINESS OF THE CREDITOR/SUBSCRIBER THE GENUINENESS OF THE TRANSACTION AND THE VERACITY OF THE REPUDIATION. IN THE CASE OF A PUBLIC ISSUE, THE COMPANY CONCERNED CANNOT BE EXPECTED TO KNOW EVERY DETAIL PERTAINING TO THE IDENTITY AS WELL AS FINANCIAL WORTH OF EACH OF IT S SUBSCRIBERS. THE COMPANY MUST, HOWEVER, MAINTAIN AND MAKE AVAILABLE TO THE ASSESSING OFFICER FOR HIS PERUSAL, ALL THE INFORMATION CONTAINED IN THE STATUTORY SHARE APPLICATION DOCUMENTS. A DELICATE BALANCE MUST BE MAINTAINED WHILE WALKING THE TIGHTROPE OF SECTIONS 68 AND 69 OF THE INCOME - TAX ACT. THE BURDEN OF PROOF CAN SELDOM BE DISCHARGED TO THE HILT BY THE ASSESSEE ; IF THE ASSESSING OFFICER HARBOURS DOUBTS OF THE LEGITIMACY OF ANY SUBSCRIPTION, HE IS EMPOWERED, TO CARRY OUT THOROUGH INVESTIGATIONS. BUT IF THE ASSESSING OFFICER FAILS TO UNEARTH ANY WRONG OR ILLEGAL DEALINGS, HE CANNOT ADHERE TO HIS SUSPICIONS AND TREAT THE SUBSCRIBED CAPITAL AS THE UNDISCLOSED INCOME OF THE COMPANY. THIS DECISION WAS AFFIRMED BY SUPREME COURT IN CIT VS. DIVINE LEASING & FINANCE LIMITED IN CC375/2008 JUDGMENT DATED 21/01/2008 (UNREPORTED) WHILE DISMISSING THE SPECIAL LEAVE PETITION, BY HOLDING THAT IF THE SHARE ITA NO.136/CTK/2010 4 APPLICATION MONEY IS RECEIVED BY THE ASSESSEE - COMPANY FROM ALLEGED BOGUS SHAREHOLDERS, WHOSE NAMES ARE GIVEN T O THE AO, THEN THE DEPARTMENT IS FREE TO PROCEED TO RE - OPEN THEIR INDIVIDUAL ASSESSMENTS IN ACCORDANCE WITH LAW. FURTHER THE SHARE APPLICATION MONEY COULD NOT UNDER ANY CIRCUMSTANCE BE CONSIDERED AS TAXABLE U/S.68 MORE SO IN VIEW OF THE DECISION OF THE HON BLE APEX COURT IN THE CASE OF CIT V. LOVELY EXPORTS P LTD [216 CTR (SC) 195]. IN VIEW OF THE ABOVE JUDICIAL PRONOUNCEMENTS AND THE ASSESSEE HAVING PRODUCED ALL NECESSARY DETAILS BEFORE THE ASSESSING OFFICER AND IN ABSENCE OF FINDING OF THE ASSESSING OFFIC ER THAT THE PERSONS FROM WHOM THE ASSESSEE HAD RECEIVED THE SHARE APPLICATION MONEY ARE BOGUS , WE DO NOT ANY INFIRMITY IN THE IMPUGNED ORDER OF THE LEARNED CIT(A) IN DELETING THE IMPUGNED ADDITION OF RS.46,78,624 BEING SHARE APPLICATION MONEY RECEIVED BY T HE ASSESSEE. WE, THEREFORE, UPHOLD THE IMPUGNED ORDER OF THE LEARNED CIT(A) AND DISMISS THE APPEAL OF THE REVENUE. 5. IN THE RESULT, THE APPEAL OF THE REVENUE IS DISMISSED. PRONOUNCED IN OPEN COURT ON DT. 23TH JUNE, 2011 S D/ - S D/ - (K.S.S.PRASAD RAO) JUDIC IAL MEMBER (K.K.GUPTA) ACCOUNTANT MEMBER DATE: 23TH JUNE, 2011 H.K.PADHEE, SENIOR PRIVATE SECRETARY. COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT: DEPUTY COMMISSIONER OF INCOME - TAX, CIRCLE 2(1),SAMBALPUR. 2. THE RESPONDENT: M/S.SHREE BABA BAIJANATH ROLLER FLOUR MILL PVT. LTD., AINTHAPALI, SAMBALPUR PRESENT ADDRESS : LOHIA NIWAS, GOLEBAZAR CHOWK, SAMBALPUR. 3. THE CIT, 4. THE CIT(A), 5. THE DR, CUTTACK 6. GUARD FILE (IN DUPLICATE) TR UE COPY, BY ORDER, SENIOR PRIVATE SECRETARY.