DY. COMMISSIONER OF INCOME TAX CENRAL CIRCLE 1(1), MUMBAI V. BHANDERI CORPORATION LTD, MUMBAI

ITA 1369/MUM/2023

AI Insights

The case involves the Deputy Commissioner of Income-tax, Central Circle 1(1), Mumbai as the appellant and Bhanderi Corporation Ltd. as the respondent. The dispute arose from the assessment order under Section 143(3) read with Section 153A of the Income Tax Act, 1961, where the Assessing Officer treated the share capital and share premium received by the Assessee as unexplained cash credits under Section 68 of the Act. The CIT(A) deleted this addition, leading to the Revenue's appeal. The Tribunal found that the CIT(A) erred in concluding that the assessment proceedings for the Assessment Year 2012-13 did not abate post-search, as the assessment order was passed before the search date. The Tribunal remanded the issue back to the CIT(A) for a decision on the merits of the addition under Section 68.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 113449 (ITAT-MUMBAI)
• Duration Of Justice: 5 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-09-2023
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 10-09-2023
• Assessment Year: 2012-2013
• Appeal Filed On: 23-04-2023
• Other Referred Cases: CIT Vs Continental Warehousing (Nhava Sheva) Ltd.
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Keywords: Onus to prove
• Section: 68; 132; 143(3); 153A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL "B" BENCH, MUMBAI SHRI PRASHANT MAHARISHI, ACCOUNTANT MEMBER SHRI RAHUL CHAUDHARY, JUDICIAL MEMBER ITA No. 1369/MUM/2023 (Assessment Year: 2012-13) Deputy Commissioner of Income-tax, Central Circle 1(1), Mumbai, Room No. 905, 9 th Floor, Pratshtha Bhavan, Old C.G.O. Bldgs., (Annexe), M.K. Road, Mumbai - 400020 Bhanderi Corporation Ltd., B-9/10, Jabunka Complex, Near Bajrangdas Ashram, Thakarbapa Nagar, Ahmedabad, Gujarat - 382350 [PAN: AABCG5528P] ............. Vs ............. Assessee Respondent CO No. 64/MUM/2023 Arising out of ITA No. 1369/Mum/2023 (Assessment Year: 2012-13) Bhanderi Corporation Ltd., B-9/10, Jabunka Complex, Near Bajrangdas Ashram, Thakarbapa Nagar, Ahmedabad, Gujarat - 382350 [PAN: AABCG5528P] ............. Assessee Deputy Commissioner of Income-tax, Central Circle 1(1), Mumbai, Room No. 905, 9 th Floor, Pratshtha Bhavan, Old C.G.O. Bldgs., (Annexe), M.K. Road, Mumbai - 400020 Vs ............. Respondent Appearance For the Assessee/Assessee For the Respondent/Department : : Dr. K. Shivaram Shri Rahul Hakani Shri Ashok Kumar Ambastha ITA No.1369//Mum/2023 (Assessment Year 2012-13) CO No.64/Mum/2023 (Assessment Year: 2012-13) 2 Date Conclusion of hearing Pronouncement of order : : 11.09.2023 25.09.2023 O R D E R Per Rahul Chaudhary, Judicial Member: 1. The present appeal filed by the Revenue and Cross-Objection filed by the Assessee pertaining to the Assessment Year 2012-13 arise from the order, dated 02/02/2023, passed by the Ld. Commissioner of Income Tax (Appeals)-47, Mumbai [hereinafter referred to as ‘the CIT(A)’], whereby the Ld. CIT(A) had partly allowed appeal of the Assessee against the Assessment Order, dated 04/02/2015, passed under Section 143(3) read with Section 153A of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act’). 2. The Revenue has raised following grounds of appeal in ITA No. 1369/Mum/2023: 1. “Whether the on the facts and circumstances of the case, the CIT(A) was right in giving relief to the extent of Rs. 4.0. crores being additions made u/s. 68 of Income Tax Act, 1961, though the creditworthiness and genuineness of the parties from whom share application money was received were not proved" 2. Whether the on the facts and circumstances of the case and in law, the Ld. CIT(A), Mumbai is right in holding that no incriminating material was found to sustain the addition without appreciating the Hon'ble Bombay High Court order in the case of Continental Warehousing Corporation, wherein para 31, the Hon'ble Court has upheld the Special Benches understanding of legal position of Sec. 153A w.r.t. the scope of assessment, assessment will be made on the basis of books of account and other documents not produced during the course of original assessment but found in the course of search". 2.1. The Assessee has raised following grounds of cross objection: ITA No.1369//Mum/2023 (Assessment Year 2012-13) CO No.64/Mum/2023 (Assessment Year: 2012-13) 3 “1. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) rightly deleted the addition of Rs 4 Crores u/s 68 of the Act on merits hence the order of CIT(A) may be affirmed on facts and law. 2. Without prejudice to above the Respondent has proved the identity, capacity and creditworthiness of the share holders hence the deletion of addition by the CIT(A) may be affirmed. 3. Without prejudice to above the Respondent need not prove the source of the source and the proviso introduced to section 68 by the Finance Act 2022, w.e.f. 1-4-2023 is not applicable for the Assessment Year 2012-13, hence the deletion of addition by the CIT(A) may be affirmed.” 3. The relevant facts in brief are that the Assessee, a company engaged in the business of construction of housing projects at the relevant time, filed return of income for the Assessment Year 2012- 13 on 18/09/2012 declaring total income of INR 1,04,10,300/-. 4. A search was conducted by DDIT (Inv) - Unit IV(2), Thane on 28/01/2015 on the premises of Balaji Group of cases. Subsequently, the premises of the Assessee situated at Ahmedabad were also covered. Notice under Section 153A of the Income Tax Act, 1961 was issued on 28/07/2016 and served on the Assessee on 16/08/2016. In response to notice issued under Section 153A of the Act, the Assessee filed return of income on 13/10/2016 declaring total income of INR 1,04,10,300/-. The Assessing Officer noted that during the relevant previous year, the Assessee- company had issued 1,00,000 equity shares of INR 10/- each fully paid up at a premium of INR 390/- per share and thus, received INR 10,00,000/- towards equity share capital and INR 3,90,00,000/- towards share premium from the following two parties: ITA No.1369//Mum/2023 (Assessment Year 2012-13) CO No.64/Mum/2023 (Assessment Year: 2012-13) 4 - Jai Adhyashakti Marketing Pvt. Ltd. – INR 75,00,000/- - GSD Trading and Financial Services Pvt. Ltd. – INR 3,25,00,000/ 5. The Assessee was asked to prove the identity and credit worthiness of the above subscribers and the genuineness of the transaction during the assessment proceedings. The Assessee was also asked to show cause as to why the amount received as share capital and share premium should not be added to the total income of the Assessee as unexplained cash credit under Section 68 of the Act. In response, the Assessee furnished ledger account confirmation, and bank statement of the parties in which payment made to the Assessee was reflected. It was submitted on behalf of the Assessee that the payments were received by the Assessee through banking channels. The Assessee also furnished copy of Income Tax Return, Auditor's Report, Balance Sheet, Profit & Loss Account along with schedules of both the parties. It was submitted on behalf of the Assessee the parties had substantial net worth, taxable income and high bank balances. On the basis of the aforesaid, it was submitted on behalf of the Assessee that the onus to prove the genuineness of the transaction and identity & credit worthiness of the subscribers was discharged by the Assessee. Therefore, no addition under Section 68 of the Act was warranted. However, the submissions made by the Assessee were rejected by the Assessing Officer. The Assessing Officer relied on the statement of Shri Rajesh Daftary, the Director of one of the subscriber companies wherein it was admitted by him that he was engaged in the activity of providing accommodation entries. The Assessing Officer passed the Assessment Order under Section 143(3) read with Section 153A of the Act on 30/12/2016 treating the share capital and share premium of INR 4,00,00,000/- as unexplained cash credits under ITA No.1369//Mum/2023 (Assessment Year 2012-13) CO No.64/Mum/2023 (Assessment Year: 2012-13) 5 Section 68 of the Act received by the Assessee. 6. Before the CIT(A), it was contended on behalf of the Assessee that the Assessing Officer failed to appreciate the fact that in his statement, Shri Rajesh Daftary has not named the Assessee. Further, neither the copy of such statement was provided to the Assessee nor an opportunity to cross examine of Shri Rajesh Daftary was given to the Assessee. It was also highlighted that the issue of increase in share capital and share premium was already examined during original assessment proceedings under Section 143(3) of the Act and no incriminating material was found during the search. Hence, the action of the Assessing Officer was contrary to the judgement of Hon'ble Bombay High Court in the case of CIT Vs Continental Warehousing (Nhava Sheva) Ltd. (2015) 374 ITR 645 (Bombay). The last contention raised by the Appellant found favour with the CIT(A) who deleted the addition of INR 4,00,00,000/- made by the Assessing Officer vide order, dated 04/02/2015 observing as under: “6.18 Conclusion- As stated above, the AO has not brought on record through the assessment order any incriminating document or material found or seized during the Search and Seizure action u/s 132 of the Act, which can be connected with this addition. Considering the totality of the facts and circumstances, I am of the considered view that this addition cannot survive de hors the incriminating evidences as held in the above binding judicial decisions. The AO is accordingly directed to delete the impugned addition of Rs. 4,00,00,000/- made u/s 68 of the Act in the assessment order. Thus, the ground of appeal no. 2 is allowed.” (Emphasis Supplied) 7. Being aggrieved, the Revenue is now in appeal before us against the order dated 02/02/2023, passed by the CIT(A) on the grounds ITA No.1369//Mum/2023 (Assessment Year 2012-13) CO No.64/Mum/2023 (Assessment Year: 2012-13) 6 reproduced in paragraph 2 above, while the Assessee has filed cross-objections supporting the order passed by the CIT(A) raising grounds reproduced in paragraph 2.1 above. Since all the issues raised were connected the same are being taken up together hereinafter. 8. We have considered the rival submissions and perused the material on record. 9. It emerges that while deleting the addition of INR 4,00,00,000/- made by the Assessing Officer under Section 68 of the Act, the CIT(A) moved on the incorrect premises that the assessment proceedings for the Assessment Year 2016-17 stood concluded and did not abate on search. Therefore, in paragraph 6.7 of the order impugned, the CIT(A) had concluded that the issue of increase of share capital and share premium was already examined during the original assessment proceedings under Section 143(3) of the Act and since no infirmity was found during the course of search, no addition could have been made in view of the judgment of the Hon’ble Bombay High Court in the case of CIT Vs. Continental Warehousing Corporation (Nhavasheva Ltd.) (2015) 374 ITR 645 (Bom). However, on perusal of the original assessment order passed under Section 143(3) of the Act placed before us by Ld. Senior Counsel appearing for the Assessee, we find that the assessment order under Section 143(3) of the Act was passed on 04/02/2015. The search in the case of the assessee took place on 05/01/2015. The submissions advanced on behalf of the Assessee is that qua the Assessee, the assessment stood completed since the hearing were concluding and no further hearings took place after 05/01/2015 and finally, the order came up passed on 04/02/2015. ITA No.1369//Mum/2023 (Assessment Year 2012-13) CO No.64/Mum/2023 (Assessment Year: 2012-13) 7 Therefore, it can be said that as on the date of the search i.e. 01/01/2015, the assessment qua the Assessee stood concluded and therefore, it cannot be said that the assessment proceedings for the Assessment Year 2012-13 stood abated. However, we are not inclined to accept the aforesaid submissions advanced on behalf of the Assessee in view of the second proviso to Section 153A of the Act which read as under: “Provided further that assessment or reassessment, if any, relating to any assessment year falling within the period of six assessment years referred to in this sub-section pending on the date of initiation of the search under section 132 or making of requisition under section 132A, as the case may be, shall abate” 10. The Second proviso to Section 153A of the Act clearly provides that the assessment proceeding pending on the date of initiation of search under Section 132 of the Act shall abate. Since the assessment order was passed on 04/02/2015 as on the date of search i.e. 05/01/2015, the assessment proceedings for the Assessment Year 2012-13 were pending since the assessment order had not been passed. We note that while the Assessee had challenged the addition of INR 4,00,00,000/- made under Section 68 of the Act before the CIT(A) on merit, the CIT(A) did not adjudicate upon the merits of the addition made under Section 68 of the Act. Accordingly, we deem it appropriate to remand the issue back to the file of CIT(A). Accordingly, we restore the appeal before CIT(A) with the directions to adjudicate the ground/contention raised by the Assessee challenging the merit on addition under Section 68 of the Act as per law. In terms of the aforesaid, Ground No. 2 raised by the Revenue is allowed for statistical purposes while Ground No. 1 raised by the Revenue is dismissed as being infructuous. In view of the aforesaid, Ground Nos. 1 to 3 raised by ITA No.1369//Mum/2023 (Assessment Year 2012-13) CO No.64/Mum/2023 (Assessment Year: 2012-13) 8 the Assessee in Cross-Objections are disposed of as being infructuous with the liberty to the Assessee to raise all ground and contentions before the CIT(A) as the Assessee may deem fit. 11. In result, appeal preferred by the Revenue is allowed for statistical purposes and Cross Objection preferred by the Assessee are dismissed as being infructuous. Order pronounced on 25.09.2023. Sd/- Sd/- (Prashant Maharishi) Accountant Member (Rahul Chaudhary) Judicial Member म ुंबई Mumbai; दिन ुंक Dated : 25.09.2023 Alindra, PS आदेश की प्रतितिति अग्रेतिि/Copy of the Order forwarded to : 1. अपील र्थी / The Assessee 2. प्रत्यर्थी / The Respondent. 3. आयकर आय क्त/ The CIT 4. प्रध न आयकर आय क्त / Pr.CIT 5. दिभ गीय प्रदिदनदध, आयकर अपीलीय अदधकरण, म ुंबई / DR, ITAT, Mumbai 6. ग र्ड फ ईल / Guard file. आिेश न स र/ BY ORDER, सत्य दपि प्रदि //True Copy// उप/सह यक पुंजीक र /(Dy./Asstt. Registrar) आयकर अपीलीय अदधकरण, म ुंबई / ITAT, Mumbai