DCIT, CIR-12(1), KOLKATA, Kolkata V. M/s Energy Development Co. Ltd., Kolkata

ITA 1368/KOL/2015

• Counselvise Citation: [2019] 118 COUNSELVISE.COM (IT) 6038 (ITAT-KOLKATA)
• Duration Of Justice: 3 year(s) 2 month(s) 13 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-01-2019
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2006-2007
• Appeal Filed On: 10-11-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Accommodation entries; Reassessment proceedings
• Section: 143(3); 133(6); 147; 68; 6

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL B, BENC H KOLKATA BEFORE SHRI S. S. GODARA, JM &DR. A.L.SAINI, AM ./ITA NO.1368/KOL/2015 ( / ASSESSMENT YEAR: 2006-07) DCIT, CIR-12(1), KOLKATA P-7, CHOWRINGHEE SQUARE, AAYAKAR BHAWAN, 7 TH FLOOR, KOL- 700 069. VS. M/S. ENERGY DEVELOPMENT CO. LTD. 1A, ELGIN ROAD, EDCL HOUSE, KOLKATA 700 020. ./ ./PAN/GIR NO.: AAACE 6969 K (APPELLANT) .. (RESPONDENT) APPELLANT BY :SHRI A.K. SINGH, C IT-DR RESPONDENT BY :SMT. VANDANA BHANDARI , FCA / DATE OF HEARING : 29/11/2018 /DATE OF PRONOUNCEMENT : 23/01/2019 / O R D E R PER DR. A. L. SAINI: THE CAPTIONED APPEAL FILED BY THEREVENUE,PERTAINING TO ASSESSMENT YEAR 2006-07, IS DIRECTED AGAINST AN ORDER PASSED BY THE LD. COMMISSIONER OF INCOME TAX (APPEALS)-4, KOLKATA IN APPEAL NO.1942/CIT(A)-4 /CIRCLE-12(1)/KOL/14-15 DATED 20.08.2015, WHICH IN TURN ARISES OUT OF AN OR DER PASSED BY THE ASSESSING OFFICER,U/S 143(3)/147 OF THE INCOME TAX ACT, 1961 (HEREINAFTER REFERRED TO AS THE ACT) DATED 31.03.2014. 2. THE GRIEVANCES RAISED BY THE REVENUEARE AS FOLLO WS: 1. IN THE FACTS AND CIRCUMSTANCES OF THE CASE THE LD. CIT(A) HAS ERRED BY NOT APPRECIATING THE FACT THAT VARIOUS PETTY COMPANIES WERE FOUND IN DULGING IN PROVIDING ACCOMMODATION ENTRIES TO BUSINESS COMPANIES AFTER VARIOUS ENQUIRI ES/SEARCH & SURVEY OPERATION CONDUCTED BY INCOME TAX INVESTIGATION WING FROM TIME TO TIME. 2. IN THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) HAS IGNORING THE STATEMENT OF SHRI ARUN KR. NANGALIA WHO HAD ADMITTED IN HIS SWOR N STATEMENT U/S. 132(4) OF THE IT. ACT, OF PROVIDING ACCOMMODATION ENTRIES THROUGH THE VARI OUS COMPANIES MANAGED BY HIM WHICH INCLUDED THE SAID TWO INVESTOR COMPANIES, NAMELY RM PL & EVL AND THESE TWO COMPANIES PROVIDED THE ACCOMMODATION ENTRY TO THE ASSESSMENT COMPANY HENCE, THERE WAS NOTHING MORE TO PROVE BY THE AO IN RESPECT OF BOGUS CREDIT MADE BY THE ASSESSEE COMPANY IN ITS BOOKS IN THE GARB OF SHARE CAPITAL THROUGH THE SAID TWO INVESTOR COMPANIES. M/S. ENERGY DEVELOPMENT CO. LTD. ITA NO.1368/KOL/2015 ASSESSMENT YEAR: 2006-07 P PP PA AA AG GG GE EE E | || | 2 22 2 3. IN THE FACTS AND CIRCUMSTANCES OF THE CASE, LD. CIT(A) HAS ERRED BY IGNORING THE FACT THAT SHRI NANGALIA, IN COURSE OF INVESTIGATION BY THE IN VESTIGATION WING, FAILED TO EXPLAIN THE SOURCE OF MONEY BEING INVESTED IN DIFFERENT COMPANI ES AND ACCEPTED INDULGING HIMSELF IN THE ACTIVITY OF PROVIDING ACCOMMODATION ENTRIES THR OUGH THE COMPANY MANAGED BY HIM WHICH WAS INCLUDING THE SAID TWO INVESTOR COMPANIES , THEREBY CREDITWORTHINESS & GENUINENESS OF THE INVESTOR COMPANIES WERE LAPSE. 4. LN THE FACTS AND CIRCUMSTANCES OF THE CASE, LD. CIT(A) HAS ERRED BY IGNORING THE FACT THAT THE PERIOD OF DIRECTORSHIP OF SHRI NANGALIA IN THE SAID TWO INVESTOR COMPANIES DOES NOT MATTER RATHER THE IMPORTANT POINT IS THAT AT SOME P OINT OF TIME HE WAS DIRECTOR IN THESE TWO COMPANIES WHOSE MAIN ACTIVITY WAS TO PROVIDE ACCOMM ODATION ENTRY THROUGH HIS COMPANY(IES) HENCE, THE SAID TWO INVESTOR COMPANIES , BY THEIR NATURE, WERE THE ENTRY PROVIDER ONLY IRRESPECTIVE OF THE FACT THAT SHRI NA NGALIA WAS DIRECTOR OR SHAREHOLDER IN THE SAID TWO COMPANIES IN THE RELEVANT PREVIOUS YEAR OR NOT.' 5. IN THE FACTS AND CIRCUMSTANCES OF THE CASE, LD. CIT(A) HAS ERRED BY APPRECIATING THAT EVEN IF THERE WAS NO ADVERSARIAL FINDING NOTED BY T HE RESPECTIVE AOS OF THE SAID TWO INVESTOR COMPANIES IN THEIR ORDER OF ASSESSMENT THE N ALSO THE SAME CANNOT BE A BASIS OF GIVING RELIEF TO THE SPECIALLY, IN THE LIGHT OF THE FINDING OF THE INVESTIGATION WING & AO. 3. THE BRIEF FACTS QUA THE ISSUE ARE THAT THE ASSES SEE HAD FILED ITS RETURN OF INCOME FOR THE ASSESSMENT YEAR 2006-07, ON 30.11.20 06, DECLARING TOTAL INCOME OF RS.39,04,753/-. THE CASE WAS SELECTED FOR SCRUTI NY AND THE ASSESSMENT WAS COMPLETED BY THE ASSESSING OFFICER U/S 143(3) OF TH E ACT ON 18.12.2008 AT AN ASSESSED INCOME OF RS.52,55,550/-. LATER, THE ASSES SEES CASE WAS REOPENED U/S 147 OF THE ACT, AND FINALLY CONCLUDED U/S 147/143(3 ) ON 31.03.2014 ATAN RE- ASSESSED INCOME OF RS.16,72,55,550/-. 4. AGGRIEVED BY THE ORDER OF THE ASSESSING OFFICER, THE ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE THE LD. CIT(A) WHO HAS DELE TED THE ADDITION MADE BY THE ASSESSING OFFICER. AGGRIEVED BY THE ORDER OF THE L D. CIT(A), THE REVENUE IS IN APPEAL BEFORE US.THE LD. DR FOR THE REVENUE HAS PRI MARILY REITERATED THE STAND TAKEN BY THE ASSESSING OFFICER WHICH WE HAVE ALREAD YNOTED IN OUR EARLIER PARA AND IS NOT BEING REPEATED FOR THE SAKE OF BREVITY.ON TH E OTHER HAND, THE LD. COUNSEL FOR THE ASSESSEE RELIED ON THE SUBMISSIONS MADE BEFORE THE LD. CIT(A) AND DEFENDED THE ORDER PASSED BY THE LD CIT(A). 5. WE HAVE GIVEN A CAREFUL CONSIDERATION TO THE RIV AL SUBMISSIONS AND PERUSED THE MATERIALS AVAILABLE ON RECORD, WE NOTE THAT IN THE ASSESSEE`S CASE UNDER CONSIDERATION THE AO HAS RECLASSIFIED THE RECEIPTS OF SHARE CAPITAL AND SHARE M/S. ENERGY DEVELOPMENT CO. LTD. ITA NO.1368/KOL/2015 ASSESSMENT YEAR: 2006-07 P PP PA AA AG GG GE EE E | || | 3 33 3 WARRANTS AGGREGATING TO RS. 16.20 CRORES AS UNEXPLA INED CREDIT U/S 68 OF THE ACT AND ADDED THE SAME TO THE INCOME OF THE ASSESSEE. W E NOTE THAT THE ASSESSEE IS A PUBLIC LIMITED COMPANY WHOSE SHARES ARE TRADED ON T HE BSE/NSE. DURING THE YEAR, THE APPELLANT HAS RECEIVED RS.15 CRORE AGAINS T ISSUE OF SHARES AND RS. 1.20 CRORES AGAINST ISSUE OF SHARE WARRANTS. THE PARTY W ISE DETAILS ARE AS FOLLOWS: I. ROTTEX : RS. 12.90 CRORES (RS. 12 CRORES AGAINST SH ARES AND RS. 0.90 (AGAINST WARRANTS) II. EXUDE : RS. 3.30 CRORES (RS. 3 CRORES AGAINST SHAR ES AND RS. 0.30 (AGAINST WARRANTS) THE AO ISSUED NOTICES U/S 133(6) AND ALSO CALLED FO R THE PERSONAL APPEARANCE OF THE DIRECTORS. BOTH THE SUBSCRIBERS RESPONDED TO TH E NOTICES AND SUBMITTED THE REQUIRED INFORMATION BUT THE DIRECTOR OF EXUDE COUL D NOT MAKE A PERSONAL APPEARANCE. THE AO ACCEPTED ALL THE INFORMATION BUT WAS NOT SATISFIED AND SO PROCEEDED TO CONCLUDE THAT THE SAID RECEIPTS WERE U NEXPLAINED CREDITS U/S 68 OF THE ACT. THE REPORT SENT BY THE INVESTIGATION WING THRO UGH THE ITO (LNV.), UNIT-III, NEW DELHI WAS ALSO MARKED TO THE AOS OF THE TWO INV ESTOR COMPANIES. DURING THE COURSE OF THE PROCEEDINGS, THE ASSESSEE HAS PLACED ON RECORD THE ASSESSMENT ORDER OF THE TWO INVESTOR COMPANIES. A PERUSAL OF THE SAI D ASSESSMENT ORDERS REVEALS THAT ON THE BASIS OF THE REPORT SENT BY THE INVESTIGATIO N WING THROUGH THE ITO (LNV.), UNIT-LLL, NEW DELHI, THE RESPECTIVE AOS HAD INITIAT ED REASSESSMENT PROCEEDINGS WITH RESPECT TO THE INVESTOR COMPANIES. FURTHER, A READING OF THE ASSESSMENT ORDERS REVEALS THAT DURING THE COURSE OF THE REASSESSMENT, NO ADVERSE FINDINGS HAVE BEEN RECORDED. IN BOTH THE ASSESSMENT ORDERS, THE CONCLU SION IS NOT ADVERSE. HENCE IT CAN BE REASONABLY CONCLUDED THAT INVESTIGATION INTO THE AFFAIRS OF THE INVESTOR COMPANIES HAS NOT BROUGHT TO LIGHT ANY IRREGULARITY WITH RESPECT TO THE INVESTMENTS MADE BY THE SAID INVESTOR COMPANIES IN ENERGY DEVEL OPMENT COMPANY LIMITED, THE ASSESSEE. IT IS A WELL ACCEPTED PRINCIPLE THAT UNDER SECTION 68, TO ACCEPT A CREDIT IN THE FORM OF A SHARE CAPITAL / APPLICATION MONEY MADE BY AN INVESTOR AS GENUINE, ALL THE THREE CONDITIONS I.E. IDENTITY OF INVESTOR WHO HAS INVESTED THE MONEY, GENUINENESS OF TRANSACTION AND CREDITWORTHINESS OF THE INVESTOR HAS TO BE SATISFIED. IF ANY OF THE AFORESAID CONDITIONS ARE ABSENT, THE SAID TRANSACTION COMES UNDER A M/S. ENERGY DEVELOPMENT CO. LTD. ITA NO.1368/KOL/2015 ASSESSMENT YEAR: 2006-07 P PP PA AA AG GG GE EE E | || | 4 44 4 CLOUD. THE ONUS TO SATISFY THE ABOVE THREE CONDITIO NS IS ON THE ASSESSEE. IN THE GIVEN CASE, THE ASSESSEE HAS SATISFIED ALL THE THRE E CONDITIONS DURING THE COURSE OF THE ASSESSMENT PROCEEDINGS AND ALSO IN THE COURSE O F APPELLATE PROCEEDINGS. 6. WE NOTE THAT BASED ON THE MATERIALS ON RECORD, I T IS CLEAR THAT THE INVESTOR COMPANIES ARE INCOME TAX ASSESSEES WHO HAVE MADE TH E INVESTMENTS THROUGH THE BANKING CHANNELS FOR WHICH THERE IS NO DOUBT BASED ON THE MATERIALS ON RECORD. IN THE GIVEN CASE, IT IS FOUND THAT THE INVESTOR COMPA NIES WERE IDENTIFIED AND THE ASSESSEE HAD SUBMITTED THEIR BANK STATEMENTS AND RE TURNS FILING RECEIPTS. FURTHER, IT IS OBSERVED THAT THE INVESTOR COMPANIES HAD RESPOND ED TO THE SUMMONS ISSUED BY THE AO AND HAD PRESENTED ALL THE RELEVANT DETAILS. FURTHER, IT IS OBSERVED THAT THE INVESTOR COMPANIES HAVE BEEN INVESTIGATED BY THE DE PARTMENT IN CONNECTION WITH PROVIDING OF ACCOMMODATION ENTRIES TO THE ASSESSEE BUT NO SUCH ADVERSE FINDINGS HAVE BEEN BROUGHT TO RECORD AS A RESULT OF THESE IN VESTIGATIONS. THE ASSESSMENT ORDERS OF THE INVESTOR COMPANIES DO NOT BRING ABOUT ANY ADVERSARIAL FINDINGS SO AS TO IMPUTE THE ASSESSEE OF HAVING ACCOMMODATED ANY D UBIOUS ENTRIES IN ITS ACCOUNTS. IN THE GIVEN FACTS AND CIRCUMSTANCES, IT IS APPARENT THAT NOT ONLY THE IDENTITY OF THE INVESTOR COMPANIES BUT THEIR CREDIT WORTHINESS HAVE ALSO BEEN ESTABLISHED BEYOND DOUBT. BASED ON THE MATERIAL ON RECORD IT CAN BE SAID THAT THE MONIES INVESTED BY THE INVESTORS IN THE FORM OF SHA RE CAPITAL / APPLICATION MONEY CANNOT BE TERMED AS MERE ACCOMMODATION ENTRIES. WE NOTE THAT THE ASSESSEE UNDER CONSIDERATION TO DI SCHARGED HIS PRIMARY ONUS IN RESPECT OF IDENTITY OF SUBSCRIBER, GENUINENESS OF T HE TRANSACTION AND CREDITWORTHINESS OF THE SUBSCRIBER. THE ASSESSEE HA S SUBMITTED THE COPY OF THE ANNUAL ACCOUNTS, COPY OF INCOME TAX RETURN AND OTHE R DETAILS LIKE COPIES OF BANK ACCOUNTS WHICH CLEARLY ESTABLISHED THE EXISTENCE OF THE SUBSCRIBER IN THE ASSESSEESCASE. THE ASSESSEE SUBMITTED COPIES OF BA NK STATEMENT SHOWING RECEIPT OF SUBSCRIPTION MONEY AND THE COPIES OF BANK STATEM ENT OF THE SUBSCRIBERS WHICH CLEARLY SHOW THAT THE TRANSACTIONS ARE GENUINE AND HAVE BEEN TRANSMITTED THROUGH THE BANKING CHANNELS AND THIS CANNOT BE DISPUTED. T HE ANNUAL ACCOUNTS OF THE SUBSCRIBERS CLEARLY INDICATE THAT THEY HAVE INVEST ED IN THE INSTRUMENT ISSUED BY THE M/S. ENERGY DEVELOPMENT CO. LTD. ITA NO.1368/KOL/2015 ASSESSMENT YEAR: 2006-07 P PP PA AA AG GG GE EE E | || | 5 55 5 ASSESSEE BASED ON THEIR OWN EXISTING BALANCE SHEET STRENGTH AND HAVE NOT DEPENDED ON ANY ACCOUNT OF CREDIT INFUSION OF FUNDS DURING T HE YEAR. IN FACT, THERE HAS BEEN NO INCREASE IN THE SOURCE OF THE FUNDS OF THE SUBSC RIBER DURING THE ASSESSMENT YEAR 2006-07. THE BALANCE SHEET OF THE SUBSCRIBERS CLEARLY EVIDENCES THE ADEQUACY OF FUNDS. THE FOLLOWING TABLE SHOWS THE MOVEMENT OF NET WORTH OF THE SUBSCRIBERS DURING THE YEAR. (RUPEES IN LACS) S. NO. COMPANY NAME NET WORTH AS ON 31.03.2005 31.03.2006 1 RMPL 2201.02 2201.04 2 EVL 707.64 707.66 FROM THE ABOVE TABLE IT IS OBVIOUS THAT THE SUBSCRI BER COMPANIES HAVE NOT RAISED ANY FUNDS DURING THE AY 2006-07. THIS CLEARLY INDIC ATES THE CREDITWORTHINESS OF THE SUBSCRIBING COMPANIES. SO FAR IDENTITY IS CONCERNED,THE DETAILS OF THE ADD RESS ANDPAN OF THE CREDITOR/SUBSCRIBERSWERE FURNISHED TO THE DEPARTMEN T ALONG WITH COPIES OF THE SHAREHOLDERS REGISTER, SHARED APPLICATION FORMS, SH ARE TRANSFER REGISTER ETC. WE NOTE THAT ONCE THE ASSESSEE HAS DISCLOSED THE SO URCE FROM WHICH HE HAS RECEIVED MONEY AND ESTABLISHED THAT THIS SHARE SUBS CRIBERS ARE GENUINE AND HAD THE CREDITWORTHINESS TO SUBSCRIBE THE SHARES, ASSESSEE HAD ISSUED, THE ASSESSEE DISCHARGES HIS BURDEN SO PLACED ON HIM BY SECTION 6 8. WHEN THE BURDEN IS SO DISCHARGED BY THE ASSESSEE, THE ONUS SHIFTS TO THE AO. IF THE AO WANTS TO ASSESS THE SHARE CAPITAL AS INCOME OF THE ASSESSEE AS UNEXPLAI NED CASH CREDIT THEN HE HAS TO PROVE BY DIRECT EVIDENCE THAT THE MONEY WHICH ASSES SEE RECEIVED FROM THE SHARE SUBSCRIBERS ACTUALLY BELONG TO ITSELF. 7. WE NOTE THAT UNDISPUTEDLY THE SHARE APPLICATION MONEY WAS RECEIVED BY THE ASSESSEE BY WAY OF ACCOUNT PAYEE CHEQUES, THROUGH N ORMAL BANKING CHANNELS. IT WAS NOT THE CASE OF THE REVENUE THAT THE PAYMENT OF SHARE APPLICATION MONEY WAS NOT MADE FROM THE BANK ACCOUNT OF THE ASSESSEE COMP ANY. ADMITTEDLY, COPIES OF APPLICATIONS FOR ALLOTMENT OF SHARES WERE ALSO PROV IDED TO THE ASSESSING OFFICER. IT M/S. ENERGY DEVELOPMENT CO. LTD. ITA NO.1368/KOL/2015 ASSESSMENT YEAR: 2006-07 P PP PA AA AG GG GE EE E | || | 6 66 6 WAS NOT THE CASE OF THE REVENUE THAT THE SHARE APPL ICATIONS WERE NOT SIGNED ON BEHALF OF THE ASSESSEE COMPANIES AND WERE FORGED DO CUMENTS OR THE SHARES WERE NOT ACTUALLY ALLOTTED TO THE COMPANIES. ADMITTEDLY, COPIES OF APPLICATIONS FOR ALLOTMENT OF SHARES WERE ALSO PROVIDED TO THE ASSES SING OFFICER. THEREFORE, THE LD. CIT(A) WAS JUSTIFIED IN HOLDING THAT THE GENUINENES S OF THE TRANSACTIONS HAD BEEN DULY ESTABLISHED BY THE ASSESSEE. FOR THAT WE RELY ON THE JUDGMENT OF DELHI HIGH COURT IN THE CASE OF CIT VS. WINSTRAL PETROCHEMICAL S (P) LTD. IN ITA NO.592 OF 2010 ORDER DATED 12.05.2010 ON THE SIMILAR FACTS. W E ALSO RELY ON THE JUDGMENT OF THE HONBLE SUPREME COURT IN THE CASE OF CIT VS. LO VELY EXPORTS (P) LTD. [2008] 216 CTR (SC) 195, WHEREIN IT WAS HELD AS FOLLOWS: 2.CAN THE AMOUNT OF SHARE MONEY BE REGARDED AS UND ISCLOSED INCOME UNDER SECTION 68 OF INCOME TAX ACT, 1961? WE FIND NO MERI T 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, W HOSE NAMES ARE GIVEN TO THE ASSESSING OFFICER, THEN THE DEPARTMENT IS FREE TO P ROCEED TO REOPEN THEIR INDIVIDUAL ASSESSMENTS IN ACCORDANCE WITH LAW. HENC E, WE FIND NO INFIRMITY WITH THE IMPUGNED JUDGMENT. UNDER THE FACTS AND CIRCUMSTANCES OF THE CASE, WE D O NOT FIND ANY PALPABLE MERIT IN THE ACTION OF THE AO IN MAKING THE IMPUGNED ADDI TION OF RS. 16.20 CRORES U/S 68 OF THE ACT. THAT BEING SO WE DECLINE TO INTERFERE I N THE ORDER PASSED BY THE LD. CIT(A), HIS ORDER ON THIS ISSUE IS HEREBY UPHELD AN D THE GROUNDS OF APPEAL RAISED BY THE REVENUE IS DISMISSED. 8. IN THE RESULT, THE APPEAL RAISED BY THE REVENUE IS DISMISSED. ORDER IS PRONOUNCED IN THE OPEN COURT ON 23.01.2019 SD/- ( S. S. GODARA ) SD/- (A.L.SAINI) / JUDICIAL MEMBER / ACCOUNTANT MEMBER /KOLKATA; / DATE: 23/12/2018 ( RS, SR.PS ) M/S. ENERGY DEVELOPMENT CO. LTD. ITA NO.1368/KOL/2015 ASSESSMENT YEAR: 2006-07 P PP PA AA AG GG GE EE E | || | 7 77 7 / COPY OF THE ORDER FORWARDED TO : TRUE COPY BY ORDER ASSISTANT REGISTRAR, I.T.A.T, KOLKATA BENCHES, KOLKATA . 1. /THE APPELLANT- DCIT, CIR-12(1), KOLKATA 2. ! / THE RESPONDENT- M/S. ENERGY DEVELOPMENT CO. LTD. 3. ' ( ) / THE CIT(A), 4. ' / CIT 5. #$% &&'( , '( , / DR, ITAT, KOLKATA 6. %)*+ / GUARD FILE. !# &