M/s Marigold Logistics Pvt Ltd , Bangalore V. The Income Tax Officer Ward-4(1)(3), Bangalore

ITA 147/BANG/2019

• Counselvise Citation: [2020] 111 COUNSELVISE.COM (IT) 3250 (ITAT-BANGALORE)
• Duration Of Justice: 1 year(s) 1 month(s) 10 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 06-03-2020
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 17-02-2020
• Assessment Year: 2015-2016
• Appeal Filed On: 25-01-2019
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: MANJEET SINGH
• Keywords: Unexplained cash credit
• Section: 68; 142(1); 143(2)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH : BANGALORE BEFORE SHRI. B. R. BASKARAN, ACCOUNTANT MEMBER AND SMT. BEENA PILLAI, JUDICIAL MEMBER ITA 147/BANG/2019 ASSESSMENT YEAR : 2015 16 M/S. MARIGOLD LOGISTICS PVT. LTD., SITE NO. 17/1, 17/2, KANEKALLU VILLAGE, JADIGANAHALLI HOBLI, HOSKOTE, BANGALORE 562 114. PAN NO : AAGCM 8037 Q VS. THE INCOME TAX OFFICER, WARD 4(1) (3), BANGALORE. APPELLANT RESPONDENT APPELLANT BY : SHRI. H. V. GOWTHAMA, CA RESPONDENT BY : SHRI. MANJEET SINGH, ADDL. CIT DATE OF HEARING : 17-02-2020 DATE OF PRONOUNCEMENT : 06-03-2020 ORDER PER BEENA PILLAI, JUDICIAL MEMBER PRESENT APPEAL HAS BEEN FILED BY ASSESSEE AGAINST O RDER DATED 22/11/2018 PASSED BY LD. CIT(A) 2, BANGALOR E FOR ASSESSMENT YEAR 2015 16 ON FOLLOWING GROUNDS OF A PPEAL: 1. THE LEARNED COMMISSIONER OF INCOME TAX ERRED IN CON FIRMING THE ORDER OF THE LEARNED ASSESSING OFFICER ADDING SUM OF RS.68,3 6,000/- SHARE PAGE 2 OF 6 ITA 147/BANG/2019 A. Y : 2015 16 APPLICATION MONEY RECEIVED FROM FOUR ALLOTTEES OF S HARES AS PER PROVISIONS OF SECTION 68 OF INCOME TAX ACT. 2. THE LEARNED COMMISSIONER OF INCOME TAX OUGHT TO HAV E CONSIDERED THE FACT THAT ALL THE FOUR ALLOTTEES OF SHARES HAVE GIV EN CONFIRMATION FOR INVESTMENT IN SHARES ALONG WITH NECESSARY DOCUMENTA RY PROOF IN RESPECT OF THEIR SOURCE OF INVESTMENT. 3. THE APPELLANT SUBMITS THAT ALL THE FOUR ALLOTTEES O F SHARES HAVE THEIR INDEPENDENT SOURCE OF INCOME AND HAVE ISSUED LETTER OF CONFIRMATION OF INVESTMENT AND THEREFORE THE LEARNED COMMISSIONE R OF INCOME TAX OUGHT TO HAVE CONSIDERED THE SAME AND DELETED THE A DDITIONS MADE BY LEARNED INCOME TAX OFFICER. 4. THE APPELLANT FURTHER SUBMITS THAT IF AT ALL THERE IS ANY ADDITION TO BE MADE, IT CAN ONLY BE IN THE HANDS OF RESPECTIVE SHA RE HOLDERS AND NOT IN THE HANDS OF THE COMPANY. 5. FOR THE ABOVE & ANY OTHER GROUNDS THAT MAY BE ADVAN CED AT THE TIME OF HEARING, THE APPELLANT PRAYS THAT THE APPEAL BE ALLOWED. 2. BRIEF FACTS OF THE CASE ARE AS UNDER: ASSESSEE IS A COMPANY AND FILED ITS RETURN OF INCOM E FOR YEAR UNDER CONSIDERATION ON 21/09/2015 DECLARING LO SS OF RS.44,12,902/-. LD. AO OBSERVED THAT, ASSESSEE IS IN THE BUSINESS OF LOGISTICS SERVICES. THE CASE WAS SEL ECTED FOR LIMITED SCRUTINY TO VERIFY LARGE EXPENSES CLAIMED IN PROFIT AND LOSS ACCOUNT IS A MISMATCHING AMOUNT PAID TO RELATED PER CENT UNDER SECTION 40A(2)(B), REPORTED IN AUDIT REPORT AND ITR . SUBSEQUENTLY, THE CASE WAS CONVERTED TO COMPLETE SC RUTINY AND NOTICE UNDER SECTION 143(2) WAS ISSUED TO ASSESSEE FOLLOWED BY NOTICE UNDER SECTION 142(1) AND QUESTIONNAIRE. IN RESPONSE TO STATUTORY NOTICES, REPRESENTATIVE OF ASSESSEE APPEA RED BEFORE LD. AO AND FILED REQUISITE DETAILS AS CALLED FOR. PAGE 3 OF 6 ITA 147/BANG/2019 A. Y : 2015 16 3. DURING ASSESSMENT PROCEEDINGS LD. AO OBSERVED THAT, ASSESSEE IS ISSUED 30 LAKHS EQUITY SHARES OF RS.10 EACH TO EXISTING SHAREHOLDERS DURING YEAR UNDER CONSIDERATI ON. LETTERS WERE ISSUED TO THE SHAREHOLDERS BILAYER LD. AO TO E XPLAIN SOURCE OF INVESTMENT IN SHARES CAPITAL. UPON RECEIPT OF CO NFIRMATION FROM THE SHAREHOLDERS, THE INVESTORS WERE EXAMINED AND LD. AO OBSERVED THAT IN SOME CASES EXPLANATION FURNISHED W AS NOT SATISFACTORY. 4. LD. AO THUS INVOKED SECTION 68 AND MADE THE INVESTMENT IN SHARES CAPITAL OF ASSESSEE BY FOLLOWI NG 4 PERSONS TO BE UNEXPLAINED CREDIT IN THE BOOKS OF ASSESSEE: 1 PG THYAGARAJAN - RS.22,00,000/- 2 SUSHEELA THYAGARAJAN - RS. 5,50,000/- 3 RAJESHWARI SWAMINATHAN - RS.22,86,000/- 4 LUCY HENRY - RS.18,00,000/- TOTAL = RS.6 8,36,000/- AGGRIEVED BY ADDITIONS MADE BY LD. AO, ASSESSEE PRE FERRED APPEAL BEFORE LD. CIT(A). 5. LD. CIT(A) RECORDED THAT, THOUGH THERE IS NO DIRECT EVIDENCE TO PROVE THAT ASSESSEE HAD ONLY ROOTED ITS UNDISCLOSED MONIES IN THE FORM OF SHARE APPLICATION MONEY BY VI RTUE OF OPERATION OF DEEMING PROVISION OF SECTION 68, ADDIT ION MADE BY LD.AO IS JUSTIFIED. AGGRIEVED BY ORDER OF LD. CIT (A) ASSESSEE IS IN AP PEAL BEFORE US NOW. 6. ALL GROUNDS RAISED BY ASSESSEE IS ON ACCOUNT OF ADD ITION MADE UNDER SECTION 68 OF THE ACT TOWARDS THE SHARE APPLICATION MONEY RECEIVED FROM 4 ALLOTTEES BY ASSESSEE. LD.AR SUBMITTED PAGE 4 OF 6 ITA 147/BANG/2019 A. Y : 2015 16 THAT, ALL PAYMENTS RECEIVED FROM SHAREHOLDERS WERE EITHER BY RTGS OR BY DEMAND DRAFT AND THAT THE STATEMENT FILED BY ASSESSEE THAT REFERRED TO THE OPENING BALANCE OF LOAN ACCOUNT, TO TAL DEBIT AND CREDIT IN THE LOAN ACCOUNT AND THE CLOSING BALANCE. PLACING RELIANCE UPON VILLAGERS STATEMENTS PLACED AT PAGE 74-75, LD .AR SUBMITTED THAT, IN CASE OF SHRI.P.G.THYAGARAJAN, THERE IS A R UNNING ACCOUNT MAINTAINED WITH ASSESSEE, AND THAT SHARE APPLICATIO N MONEY DEPOSITED BY SMT.SUSHEELA THYAGARAJAN IS ACTUALLY P AID BY SHRI.P.G.THYAGARAJAN AGAINST WHICH SHARES WERE ALLO TTED TO HER. 7. IT HAS BEEN SUBMITTED THAT, ALL RELEVANT REQUIREMEN TS FALL PURPOSES OF VERIFICATION UNDER SECTION 68 OF T HE ACT HAS BEEN SUBMITTED BY ASSESSEE TO LD.AO AGAINST WHICH NO DOU BT HAS BEEN CASTED. HE ALSO SUBMITTED THAT, ALL SHARE APPLICANT S ARE REGULAR INCOME TAX ASSESSEE AND THEREFORE THE DETAILS FILED BY THEM WAS VERIFIABLE. 8. PLACING RELIANCE ON DECISION OF HONBLE DELHI HIGH COURT IN CASE OF DCIT VS. SOFT LINE CREATIONS PRIVATE LIMITED REPORT ED IN (2017) 81 TAXMANN.COM 269, HE SUBMITTED THAT, WHERE ASSESSEE HAD PROVIDED SUFFICIENT INFORMATION BY WAY OF PERMA NENT ACCOUNT NUMBERS TO HIGHLIGHT THE IDENTITY OF THE SHARE APPL ICANTS AS WELL AS PRODUCED AFFIDAVITS OF DIRECTORS AND FURTHERMORE TH E BANK DETAILS OF SHARE APPLICANTS TO HAVE BEEN PROVIDED IT WAS HE LD THAT, ASSESSEE HAD ESTABLISHED THE IDENTITY OF THE SHARE APPLICANTS, THE GENUINENESS OF TRANSACTION AND THE CREDITWORTHINESS AND THEREFORE ADDITION MADE UNDER SECTION 68 IS NOT JUSTIFIED. 9. ON THE CONTRARY LD. SR. DR SUBMITTED THAT, IN THE PRESENT FACTS OF THE CASE ASSESSEE ONLY PROVIDED LE DGER ACCOUNT IN CASE OF SHRI. P.G. THYAGARAJAN AND SMT. SUSHEELA TH YAGARAJAN, PAGE 5 OF 6 ITA 147/BANG/2019 A. Y : 2015 16 PAN NO. OF THE 4 ALLEGED SHARE APPLICANTS, CONFIRMA TION IS FROM ALL FOR SHARE APPLICANTS. HE SUBMITTED THAT, THESE DOC UMENTS DO NOT FULFIL THE REQUIREMENT AS SPECIFIED UNDER SECTION 6 8 TO SATISFY THE CREDITWORTHINESS AND GENUINENESS OF THE TRANSACTION THOUGH IDENTITY STANDS ESTABLISHED. HE SUBMITTED THAT, IN CASE OF RAJESHWARI SWAMINATHAN AND LUCY HENRY, LD.CIT (A) R ECORDS THAT, NO DOCUMENTS HAS BEEN FILED TO ESTABLISH CREDITWORT HINESS OF THESE SHARE APPLICANTS. HE THUS SUPPORTED THE VIEW TAKEN BY LD.CIT(A) AND SUBMITTED THE ADDITION TO BE CONFIRMED. WE HAVE PERUSED SUBMISSIONS ADVANCED BY BOTH SIDES IN LIGHT OF RECORDS PLACED BEFORE US. 9. IT IS OBSERVED AS RIGHTLY POINTED OUT BY LD. SR. DR THAT, ASSESSEE HAS ONLY ESTABLISHED IDENTITY OF ALLEGED S HARE APPLICANTS BY PROVIDING PAN NUMBERS. HOWEVER, CREDITWORTHINESS AND GENUINENESS OF THE TRANSACTION HAS NOT BEEN ESTABLI SHED AT ALL IN CASE OF RAJESHWARI SWAMINATHAN AND LUCY HENRY. IN CASE OF SHRI. P.G. THYAGARAJAN AND SMT. SUSHEELA THYAGARAJAN BEIN G DIRECTORS OF ASSESSEE AND HAVING RUNNING LOAN ACCOUNT WITH AS SESSEE WOULD NOT ESTABLISH THE CREDITWORTHINESS OF THE TRANSACTI ON. THOUGH IN THEIR CASE IT IS NOTED THAT LOAN HAS BEEN REPAID IN THE FORM OF SHARES BEING ALLOTTED TO SOME EXTENT. 10. IN THE INTEREST OF JUSTICE TO BOTH SIDES WE ARE OF THE OPINION THAT LD.AO SHOULD REVISIT THE SHARE APPLICA TION MONEY RECEIVED FROM THESE ALLEGED SHARE APPLICANTS. ASSES SEE IS ACCORDINGLY DIRECTED TO FILE ALL REQUISITE DETAILS WHICH COULD ESTABLISH THE CREDITWORTHINESS AND GENUINENESS OF T HE TRANSACTION. LD.AO SHALL THEN VERIFY THE DETAILS FI LED BY ASSESSEE AND CONSIDER THE CLAIM, IN ACCORDANCE WITH LAW. PAGE 6 OF 6 ITA 147/BANG/2019 A. Y : 2015 16 ACCORDINGLY, GROUNDS RAISED BY ASSESSEE STANDS ALLO WED FOR STATISTICAL PURPOSES. IN THE RESULT, APPEAL FILED BY ASSESSEE STANDS ALLO WED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 6 TH MARCH, 2020. SD/- SD/- (B. R. BASKARAN) (BEENA PILLAI) ACCOUNTANT MEMBER JUDICIAL ME MBER BANGALORE, DATED, THE 6 TH MARCH, 2020. /MK/ COPY TO: 1. APPELLANT 4. CIT(A) 2. RESPONDENT 5. DR, ITAT, BANGALORE 3. CIT 6. GUARD FILE BY ORDER ASSISTANT REGISTRAR, INCOME TAX APPELLATE TRIBUNAL. BANGALORE.