SOUTHERN PORT TERMINAL P. LTD, MUMBAI V. ITO 13(2)(2), MUMBAI

ITA 1458/MUM/2017

• Counselvise Citation: [2019] 118 COUNSELVISE.COM (IT) 4826 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 11 month(s) 13 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 14-02-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: Not Allotted
• Assessment Year: 2012-2013
• Appeal Filed On: 02-03-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: CH ARUN KUMAR SINGH LD
• Assessee Lawyers: BHUPENDRA SHAH LD
• Section: 68; 143(3)

Judgement Text

ITA NO. 1458/MUM/2017 SOUTHERN PORT TERMINAL PVT. LTD. ASSESSMENT YEAR: 2012-13 1 IN THE INCOME TAX APPELLATE TRIBUNAL G BENCH, MUMBAI , , BEFORE HONBLE SHRI PAWAN SINGH, JM AND HONBLE SHRI MANOJ KUMAR AGGARWAL, AM ./ I.T.A. NO.1458/MUM/2017 ( / ASSESSMENT YEAR: 2012-13) SOUTHERN PORT TERMINAL PRIVATE LIMITED 205D, VEENA NAGAR MALAD(W), CHINCHOLI ROAD MUMBAI-400 064 / VS. INCOME TAX OFFICER - 13(2 )(2) MUMBAI ./ ./PAN/GIR NO. AAFCS-5840-L ( /APPELLANT ) : ( / RESPONDENT ) ASSESSEE BY : BHUPENDRA SHAH- LD. AR REVENUE BY : CH. ARUN KUMAR SINGH- LD.DR !' / DATE OF HEARING : 07/02/2019 ! ' / DATE OF PRONOUNCEMENT : 14/02/2019 / O R D E R PER MANOJ KUMAR AGGARWAL (ACCOUNTANT MEMBER) 1. AFORESAID APPEAL BY ASSESSEE FOR ASSESSMENT YEAR [AY] 2012-13 CONTEST THE ORDER OF THE LD. COMMISSIONER OF INCOME -TAX (APPEALS)-21 [CIT(A)], MUMBAI, APPEAL NO. CIT(A)-21/ITO-13(2)(2)/IT-140/2015-16 DATED 23/01/2017 ON FOLLOWING GROUNDS OF APPEAL: - ITA NO. 1458/MUM/2017 SOUTHERN PORT TERMINAL PVT. LTD. ASSESSMENT YEAR: 2012-13 2 1. IN THE FACTS AND THE CIRCUMSTANCES OF THE CASE A ND IN LAW, THE ASSESSING OFFICER HAS MADE AN ADDITION OF RS.2,21,00,000/- U/S 68 ONL Y ON THE BASIS OF ASSUMPTION, SURMISES AND PREMISES IN RESPECT OF UNSECURED LOAN RECEIVED DURING THE YEAR. 2. IN THE FACTS AND THE CIRCUMSTANCES OF THE CASE A ND IN LAW, THE LD. COMMISSIONER OF INCOME TAX (A) ERRED IN CONFIRMING ALL THE ABOVE ADDITION BY OVERLOOKING THE DETAILED SUBMISSIONS FILED BEFORE HIM. 3. IN THE FACTS AND THE CIRCUMSTANCES OF THE CASE A ND IN LAW, THE LD. ASSESSING OFFICER ERRED IN CHARGING INTEREST U/S 234 AND INIT IATING PENALTY U/S 271(1)(C). THE ASSESSMENT FOR IMPUGNED AY WAS FRAMED BY LD. INCOME TAX OFFICER-13(2)(2), MUMBAI [AO] IN SCRUTINY ASSESSMENT U/S 143(3) OF THE INCOME TAX ACT, 1961 ON 30/03/2015 WHEREIN THE INCOME OF THE ASSESSEE WAS DETERMINED AT RS.221 LACS AFTER SOLE A DDITION U/S 68 FOR RS.221 LACS AS AGAINST NIL RETURN FILED BY THE ASSESSEE ON 28/09/2012. 2. DURING ASSESSMENT PROCEEDINGS, IT TRANSPIRED THA T THE ASSESSEE HAD NOT CARRIED OUT ANY BUSINESS ACTIVITY. THE PERU SAL OF FINANCIAL STATEMENTS REVEALED THAT THE ASSESSEE OBTAINED INTE REST-FREE UNSECURED LOANS AGGREGATING TO RS. 221 LACS FROM TWO ENTITIES AS PER THE FOLLOWING DETAILS: - NO. NAME OF LOAN CREDITORS AMOUNT (RS.) 1. BHARJUNA KRISHI VIGYAN KENDRA PRIVATE LTD. RS.12 1 LACS 2. SATNA KRISHI KENDRA PRIVATE LTD. RS.100 LACS TOTAL RS. 221 LACS THE ASSESSEE, IN THE SIMILAR MANNER, ADVANCED INTER EST FREE LOANS TO TWO ENTITIES AS PER THE FOLLOWING DETAILS: - NO. NAME TO WHOM MONEY WAS ADVANCED AMOUNT (RS.) 1. SWASTIK WORLDWIDE PRIVATE LTD. RS.5.249 LACS 2. REHWA CORPORATION LTD. RS.221 LACS TOTAL RS.226.249 LACS THE PERUSAL OF THESE TRANSACTIONS LED THE LD. AO TO FORM A BELIEF THAT THERE WAS ONLY A CIRCULATION OF MONEY, WITHOUT INTE REST, BETWEEN THE ENTITIES WITHOUT ANY SPECIFIC REASONS PARTICULARLY WHEN THE ASSESSEE HAD ITA NO. 1458/MUM/2017 SOUTHERN PORT TERMINAL PVT. LTD. ASSESSMENT YEAR: 2012-13 3 NOT CARRIED OUT ANY BUSINESS ACTIVITY SINCE INCORPO RATION. IN DEFENSE, THE ASSESSEE FURNISHED ACKNOWLEDGEMENT OF INCOME TAX RE TURNS, ANNUAL REPORT OF THE LOAN CREDITORS AND RELEVANT BANK STAT EMENT OF THE TWO LOAN CREDITORS TO ESTABLISH THE IDENTITY, CREDITWORTHINE SS AND GENUINENESS OF THE TRANSACTIONS. HOWEVER, IT WAS NOTED THAT THE IN COME OF THE TWO LOAN CREDITORS WAS BELOW RS.1.50 LACS. THE ASSESSEE WAS ASKED TO PROVIDE, INTER-ALIA, THE AGREEMENT FOR LOAN TRANSACTIONS AND DETAILS OF SECURITIES ETC. THE ASSESSEE SUBMITTED THAT LOAN CREDITORS AND LOAN DEBTORS KNEW EACH OTHER BUT HAD NO RELATION WITH THE ASSESSEE CO MPANY. FINALLY, THE SUBMISSIONS AND FACTUAL MATRIX LED THE LD. AO TO BE LIEVE THAT THE ASSESSEE FAILED TO EXPLAIN THE EXACT NATURE OF TRAN SACTIONS AND COULD NOT PROVE THE GENUINENESS OF THE TRANSACTIONS. RESULTAN TLY, APPLYING THE PROVISIONS OF SECTION 68, UNSECURED LOANS OF RS.221 LACS WERE ADDED TO THE INCOME OF THE ASSESSEE. 3. AGGRIEVED, THE ASSESSEE AGITATED THE SAME WITHOU T ANY SUCCESS BEFORE LD. FIRST APPELLATE PARTY VIDE IMPUGNED ORDE R DATED 23/01/2017 AND AGITATED THE ADDITIONS ON THE STRENGTH OF DOCUM ENTARY EVIDENCES IN THE FORM OF FINANCIAL STATEMENTS, BANK STATEMENTS E TC. THE LD. CIT(A), NOTED THAT IDENTICAL AMOUNTS WERE CREDITED IN THE B ANK ACCOUNTS OF LOAN CREDITORS BEFORE TRANSFERRING THE SAME TO THE ASSES SEE, THE SOURCE OF WHICH REMAINED UNEXPLAINED. IT WAS ALSO NOTED THAT THE ASSESSEE DID NOT CARRY OUT ANY BUSINESS ACTIVITY IN PRECEDING AS WEL L AS IN SUCCEEDING YEAR AND THERE WAS NO JUSTIFICATION TO OBTAIN AS WE LL AS GRANT UNSECURED LOANS. THEREFORE, THE GENUINENESS COULD NOT BE DEMO NSTRATED AND EVEN CREDITWORTHINESS WAS NOT ESTABLISHED. RELIANCE WAS PLACED ON MANY JUDICIAL PRONOUNCEMENTS TO CONCLUDE THAT THE PROVIS O TO SECTION 68 WAS ITA NO. 1458/MUM/2017 SOUTHERN PORT TERMINAL PVT. LTD. ASSESSMENT YEAR: 2012-13 4 CLARIFICATORY AND HENCE RETROSPECTIVE AND THEREFORE , IT WAS OPEN FOR LD. AO TO LOOK INTO SOURCE OF MONEY RECEIVED BY THE ASS ESSEE ON SHARE APPLICATION MONEY AND IF THE SOURCE COULD NOT BE PR OVED, SECTION 68 WAS ATTRACTED. FINALLY, THE ADDITIONS MADE U/S 68 WERE UPHELD, AGAINST WHICH THE ASSESSEE IS IN FURTHER APPEAL BEFORE US. 4. THE PRIME ARGUMENT OF LD. AUTHORIZED REPRESENTAT IVE [AR], REVOLVES AROUND THE FACT THAT THE PROVISO TO SECTIO N 68, IN TERMS OF JUDGMENT OF HONBLE BOMBAY HIGH COURT RENDERED IN PCIT VS. VEEDHATA TOWERS PVT. LTD. [ITA NO. 819 OF 2015 DATED 17/04/2 018], WAS PROSPECTIVE IN NATURE & COULD APPLY W.E.F. AY 2013- 14 ONLY AND THEREFORE, NOT APPLICABLE FOR THE IMPUGNED AY. OUR ATTENTION IS FURTHER DRAWN TO THE FACT THAT CASE LAWS RELIED UPON BY LD. FIRST APPELLATE AUTHORITY ARE RELATED WITH RECEIPT OF SHARE APPLICA TION MONEY AND THEREFORE, NOT APPLICABLE TO THE FACTS OF THE ASSES SEE. PER CONTRA , LD. DR SUBMITTED THAT THE ASSESSEE FAILED TO DEMONSTRATE T HE FULFILLMENT OF THREE PRIME INGREDIENTS OF SECTION 68 AND THEREFORE, THE ADDITIONS WERE JUSTIFIED. 5.1 WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSI ONS AND PERUSED RELEVANT MATERIAL ON RECORD. THE UNDISPUTED FACT TH AT EMERGE IS THAT THE ASSESSEE WAS IN RECEIPT OF INTEREST-FREE UNSECURED LOANS AGGREGATING TO RS.221 LACS FROM TWO ENTITIES WHICH HAS FURTHER BEE N ADVANCED TO ANOTHER TWO ENTITIES, WITHOUT INTEREST. IT IS ALSO UNDISPUTED POSITION THAT THE ASSESSEE HAS NOT CARRIED OUT ANY BUSINESS ACTIV ITY EITHER DURING IMPUGNED AY OR DURING PRECEDING / SUCCEEDING YEARS AND THE PURPOSE OF THESE TRANSACTIONS REMAINED UNEXPLAINED PARTICULARL Y WHEN THE ASSESSEE, DURING ASSESSMENT PROCEEDINGS, SUBMITTED THAT THE LOAN ITA NO. 1458/MUM/2017 SOUTHERN PORT TERMINAL PVT. LTD. ASSESSMENT YEAR: 2012-13 5 CREDITORS AND DEBTORS WERE KNOWN TO EACH OTHER BUT HAD NO RELATION WITH THE ASSESSEE. THE LOAN TRANSACTIONS WERE NOT BACKED BY ANY WRITTEN AGREEMENT AND THE ASSESSEE COULD NOT ADDUCE ANY EVI DENCE TO DEMONSTRATE NECESSITY OF OBTAINING INTEREST FREE LO ANS TO ADVANCE THE SAME, IN THE SIMILAR MANNER. IN OUR OPINION, THE CO MPLETE ONUS TO ESTABLISH THE CREDITWORTHINESS OF THE LENDERS AS WE LL AS TO ESTABLISH THE GENUINENESS OF THE TRANSACTIONS RESTED UPON THE ASS ESSEE AND THE SAME HAS REMAINED UNFULFILLED DURING ASSESSMENT AS WELL AS APPELLATE PROCEEDINGS. 5.2 AT THE SAME TIME, WE FIND THAT LD. FIRST APPELL ATE AUTHORITY COULD NOT APPRECIATE THE FACTUAL MATRIX IN THE PROPER PERSPEC TIVE SINCE THE CASE LAWS RELIED UPON BY HIM PERTAINED TO TRANSACTIONS O F SHARE CAPITAL / SHARE APPLICATION MONEY. FURTHER, THE PROVISO TO SECTION 68 WAS PROSPECTIVE IN NATURE IN TERMS OF THE BINDING JUDICIAL PRECEDENT A S CITED BY LD. AR AND THEREFORE, COULD NOT BE APPLIED TO IMPUGNED AY. 5.3 THEREFORE, KEEPING IN VIEW THE OVERALL FACTUAL MATRIX, THE BENCH FORMED AN OPINION THAT THE MATTER WAS TO BE REMITTE D BACK TO LD. FIRST APPELLATE AUTHORITY FOR RE-ADJUDICATION IN THE LIGH T OF ABOVE OBSERVATIONS AFTER PROVIDING SUFFICIENT OPPORTUNITY OF BEING HEA RD TO THE ASSESSEE. THE ASSESSEE, IN TURN, IS DIRECTED TO DEMONSTRATE THE F ULFILLMENT OF THREE PRIMARY INGREDIENTS OF SECTION 68 FAILING WHICH LD. FIRST APPELLATE AUTHORITY SHALL BE AT LIBERTY TO RE-ADJUDICATE THE SAME ON THE BASIS OF MATERIAL ON RECORD. 6. THE APPEAL STANDS ALLOWED FOR STATISTICAL PURPOS ES. ITA NO. 1458/MUM/2017 SOUTHERN PORT TERMINAL PVT. LTD. ASSESSMENT YEAR: 2012-13 6 ORDER PRONOUNCED IN THE OPEN COURT ON 14 TH FEBRUARY, 2019. SD/- SD/- (PAWAN SINGH) (MAN OJ KUMAR AGGARWAL) / JUDICIAL MEMBER / ACCOUNTANT MEMBER % MUMBAI; DATED : 14.02.2019 SR. PS THIRUMALESH / COPY OF THE ORDER FORWARDED TO : 1. ! / THE APPELLANT 2. '# ! / THE RESPONDENT 3. $$% ( ) / THE CIT(A) 4. $$% / CIT CONCERNED 5. & ''() , $) , / DR, ITAT, MUMBAI 6. ' +,- / GUARD FILE / BY ORDER, / % (DY./ASSTT.REGISTRAR) , / ITAT, MUMBAI.