M/s. OSS Aviation Pvt. Ltd., Bhopal V. The ACIT., Bhopal

ITA 162/IND/2010

• Counselvise Citation: [2011] 134 COUNSELVISE.COM (IT) 9680 (ITAT-INDORE)
• Duration Of Justice: 9 month(s) 21 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-01-2011
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: DB
• Next Hearing Date: 21-12-2010
• Assessment Year: 2006-2007
• Appeal Filed On: 30-03-2010
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: ARUN DEWAN
• Assessee Lawyers: C P RAWKA F
• Keywords: Unexplained cash credit
• Section: 143(3); 68

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, INDORE BENCH, INDORE BEFORE SHRI JOGINDER SINGH, J.M. AND SHRI R.C.SHARM A, A.M. PAN NO. : AAACO5609A I.T.A.NO.162/IND/2010 A.Y. : 2006-07 M/S.OSS AVIATION (P) LIMITED, ACIT, CIRCLE 2(1), BHOPAL. VS BHOPAL APPELLANT RESPONDENT APPELLANT BY : SHRI C.P. RAWKA, F.C.A.. RESPONDENT BY : SHRI ARUN DEWAN, SR. DR DATE OF HEARING : 17.10.2011 DATE OF PRONOUNCEMENT : 20.10.2011 O R D E R PER R. C. SHARMA, A.M. THIS IS AN APPEAL FILED BY THE ASSESSEE AGAINST THE ORDER OF CIT(A) DATED 20 TH JANUARY, 2010, FOR THE ASSESSMENT YEAR 2006-07 IN THE MATTER OF ORDER PASSED U/S 143(3) OF THE INCOME-TAX ACT, 1961. -: 2: - 2 2. FOLLOWING TWO GROUNDS HAVE BEEN TAKEN BY THE ASSESSEE :- 1. THAT THE LD. CIT(A) ERRED IN LAW AND FACTS OF THE C ASE AND CONFIRMED THE ADDITION MADE BY THE ASSESSING OFFICER ON ACCOUNT OF SHARE APPLICATION MONEY AT RS. 15,00,000/- TREATING I AS UNEXPLAINED CASH CREDIT U/S 68 OF THE INCOME-TAX ACT, 1961, WITHOUT CONSIDERING FULL FACTS. THE ADDITION MADE BY THE ASSESSING OFFICER AND CONFIRMED BY THE LD. CIT(A) I S TOTALLY WRONG AND ILLEGAL ON THE FACTS OF THE CASE. 2. THAT THE LD. CIT(A) ERRED IN LAW AND FACTS OF THE C ASE AND CONFIRMED THE LUMPSUM DISALLOWANCE AT RS. 50000/- OUT OF RS. 10000/- MADE BY AO ON ACCOUNT OF TRAVELLING EXPENSES. VEHICLE RUNNING EXPENSES, TELEPHONE & FAX EXPENSES WITHOUT CONSIDERING FULL FACTS. 3. RIVAL CONTENTIONS HAVE BEEN HEARD AND RECORDS PERUSED. DURING THE COURSE OF SCRUTINY ASSESSMENT, THE AO FOUND THAT THE ASSESSEE HAS RECEIVED SHARE APPLICAT ION MONEY OF RS. 15 LAKHS DURING THE YEAR FROM ADITYA AGNIHOT RI S/O SHRI -: 3: - 3 GUNVANT, 73, PANDHRI NATH PANTH, INDORE. ON 25.07.2 008 STATEMENT OF SHRI ADITYA AGNIHOTRI WAS RECORDED AND IT WAS NOTICED :- 1. HE IS 29 YEAR OLD PERSON. 2. HE HAS STUDIED UP TO THE 10 TH STANDARD. 3. HIS YEARLY INCOME IS RS. 1,00,000/-. 4. HE IS BASICALLY AN AGRICULTURIST. 5. HE IS NOT FILING RETURN OF INCOME. 6. IN FINANCIAL YEAR 2005-06, HE WAS HAVING TOTAL AGRICULTURE LAND OF 25 ACRES OUT OF THE ABOVE LAND HE HAS SOLD 10 ACRES OF LAND TO MS. RASHMI BORASI IN JUNE 2005 IN CASH AND ON THE SAME DAY THE SAID AMOUNT WAS PAID TO HIM. VIDE QUESTION NO. 8 OF STATEMENT SHRI ADITYA AGNIHOTRI SAID THAT IN JUNE 2005 ONLY HE HAS DEPOSITED RS. 15,00,000/- IN THE BANK ACCOUNT. HOWEVER, AS PER HIS BANK STATEMENT RS. 15,00,000/- WAS DEPOSITED ON 25.01.2006 IN CASH AND ON 25.01.2006 AND VIDE CHEQUES NO. 251995 THE AMOUNT WAS TRANSFERRED TO THE ASSESSEE COMPANY AS SHARE APPLICATION MONEY. THE COPY OF -: 4: - 4 BANK ACCOUNT OF SHRI ADITYA AGNIHOTRI IS PLACED AS ANNEXURE B TO THIS ORDER. IN VIEW OF THE ABOVE, IT IS VERY MUCH CLEAR THAT CREDITWORTHINESS OF SHRI ADITY A AGNIHOTRI IS NOT ESTABLISHED. 4. AFTER VERIFICATION OF THE BANK ACCOUNT OF SHRI ADI TYA AGNIHOTRI, THE AO OBSERVED THAT HE HAS DEPOSITED RS . 15 LAKHS IN HIS BANK ACCOUNT AND THEREAFTER ISSUED CHEQUES F OR THE SHARES. THE AO FURTHER OBSERVED THAT THOUGH THE IDE NTITY OF CREDITOR IS ESTABLISHED BUT GENUINENESS OF TRANSACT ION IS DOUBTFUL AND CREDITWORTHINESS OF A PARTY IS NOT EST ABLISHED. ACCORDINGLY, HE ADDED THE AMOUNT IN ASSESSEES INCO ME. 5. BY THE IMPUGNED ORDER, THE LD. CIT(A) CONFIRMED THE ACTION OF AO AFTER HAVING FOLLOWING OBSERVATIONS :- 4.4 I HAVE CAREFULLY CONSIDERED THE SUBMISSION OF THE APPELLANT AND FACTS OF THE CASE. THE APPELLANT IS A CLOSELY HELD PVT.LTD. COMPANY. THERE ARE TWO DIRECTORS NAMELY SHRI SUJAY SUMBH AND SMT. AMITA SARKARI. IT MAY NOT BE OUT OF PLACE TO MENTIO N HERE THAT SHRI AGNIHOTRI, IN WHOSE NAME ADVANCE OF RS. 15 LAC HAS BEEN SHOWN TO BE RECEIVED AS SHARE -: 5: - 5 APPLICATION MONEY, IS A RELATIVE OF SMT. AMITA SARKARI, DIRECTOR OF THE APPELLANT . THE SHARE APPLICATION MONEY SHOWN TO BE HAVE BEEN RECEIVED ON 25.01.2006 BUT NO SHARES WERE ALLOTTED DURING THE PREVIOUS YEAR AND EVEN IN THE SUBSEQUENT PREVIOUS YEAR UP TO 31.03.2007. IN THESE CIRCUMSTANCES, IN MY OPINION, THE AO WAS JUSTIFIED IN TREATING THE ADVANCE OF RS. 15 LAKHS RECEIVED BY THE APPELLANT AS UNSECURED AMOUNT AND NOT AS SHARE CAPITAL. IN THIS REGARD RELIANCE CAN BE PLACE D ON THE DECISION OF HON'BLE DELHI HIGH COURT IN THE CASE OF INDUS VALLEY PROMOTERS LTD VS. CIT, (2008) 305 ITR 202 (DEL). IN THIS CASE, DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE AO NOTICED AN INCREASE IN THE SHARE APPLICATION MONEY ACCOUNT AS COMPARED TO THE PRECEDING ASSESSMENT YEAR AND THAT A SUM OF RS. 11.82 LACS HAD BEEN DEPOSITED IN THE ACCOUNT OF THE DIRECTOR. HE FURTHER NOTICED THA T NO SHARES WERE ALLOTTED DURING THE PREVIOUS YEAR AND IN THE YEAR UNDER CONSIDERATION AND THAT THE -: 6: - 6 SHARE APPLICATION MONEY RETAINED THE SAME FORM AND CHARACTER EVEN IN TWO SUBSEQUENT YEARS. SHARES WERE ALLOTTED THEREAFTER. THE AO TREATED THIS AMOUN T AS UNSECURED AMOUNT AND NOT AS SHARE APPLICATION MONEY. AS ASSESSEE HAD NOT PRODUCED ANY EVIDENCE IN RESPECT OF SOURCE OF THE DEPOSIT, THE AO ADDED T HE SUM OF RS. 11.82 LAKHS TO THE INCOME. THE CIT(A) AS WELL AS I.T.A.T. DISMISSED THE APPEAL FILED BY THE ASSESSEE. ON FURTHER APPEAL, THE HON'BLE HIGH COURT HELD AS UNDER :- HELD DISMISSING THE APPEAL, (I) THAT AS NO SHARES WERE ALLOTTED TO THE DIRECTOR DURING THE YEAR IN QUESTION AND FOR THE SUBSEQUENT TWO ASSESSMENT YEARS AND SHARES WERE ALLOTTED AFTER ENQUIRY DONE BY THE ASSESSING OFFICER, THE AMOUNT OF RS. 11.82 LAKHS COULD BE TREATED AS UNSECURED LOAN. THE AMOUNT HAD BEEN DEPOSITED IN CASH AND IN SPITE OF ENQUIRY, THE SOURCE OF THE DEPOSIT WAS NOT EXPLAINED. THE CREDITWORTHINESS OF THE CREDITORS TO MAKE THE -: 7: - 7 PAYMENT WAS NOT CLEAR FROM THE INCOME SHOWN BY THEM. THERE WAS NO INFIRMITY IN THE REASONING GIVING BY THE TRIBUNAL FOR UPHOLDING THE ACTION OF THE TAX AUTHORITIES IN BRINGING TO TAX THE SUM OF RS. 11.82 LAKHS. NOW, IN INSTANT CASE ALSO, THE AMOUNT OF RS. 15 LAKHS, THOUGH HAS BEEN SHOWN AS SHARE APPLICATION MONEY BUT NO SHARES WERE ALLOTTED DURING THE YEAR UNDER CONSIDERATION AND EVEN IN THE SUBSEQUENT ASSESSMENT YEAR. THEREFORE, THE AO WAS JUSTIFIED IN TREATING THIS AMOUNT IN THE NATURE OF UNSECURED CASH CREDIT AND, THUS, THE ONUS IS ON THE APPELLANT TO PROVE THE GENUINENESS OF THE CREDIT IN ITS BOOK OF RS. 15 LAKHS DURING THE YEAR UNDER CONSIDERATION. SECTION 68 OF THE INCOME-TAX ACT, 1961, REQUIRES AN ASSESSEE TO PROVE THREE IMPORTANT FACTS, NAMELY, (I ) THE IDENTITY OF CREDITOR; (II) THE CAPACITY OF THE CREDITOR TO ADVANCE THE MONEY; AND (III) THE GENUINENESS OF THE TRANSACTION. WHAT EVIDENCE WOULD BE SUFFICIENT TO ESTABLISH THE SAID FACT OR W HAT -: 8: - 8 MATERIAL WOULD BE RELEVANT IN A PARTICULAR CASE WOULD DEPEND ON THE FACT OF EACH CASE. THERE CAN NOT BE ONE GENERAL YARDSTICK IN THE MATTER. IN THE CASE OF CIT VS. PRECISION FINANCE PVT.LTD.(1994) 20 8 ITR 465 (CAL), THE HON'BLE CALCUTTA HIGH COURT OBSERVED IN REGARD TO SECTION 68 THAT MERE FURNISHING OF THE PARTICULARS IS NOT ENOUGH. MERE PAYMENT BY ACCOUNT PAYEE CHEQUES IS NOT SACROSANCT NOR CAN IT MAKE A NON-GENUINE TRANSACTION GENUINE. SIMILARLY, IN THE CASE OF CIT VS. KORLAY TRADING CO.LTD., 232 ITR 820 ( CAL) IT WAS HELD THAT MERE FILING OF INCOME TAX FILE NUMBER IS NOT ENOUGH TO PROVE GENUINENESS OF THE CASH CREDIT. IN THE CASE OF CIT VS. K. MAHIM, (1995) 213 ITR 820 (KER), IT WAS HELD THAT MERE FILING OF CONFIRMATION LETTER DOES NOT DISCHARGE THE ONUS U/S 68 THAT LIES ON THE ASSESSEE. 6. AGAINST THIS, THE ASSESSEE IS IN FURTHER APPEAL BEF ORE US. -: 9: - 9 7. WE HAVE CONSIDERED THE RIVAL CONTENTIONS, CAREFULL Y GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW VI S--VIS STATEMENT OF SHRI ADITYA AGNIHOTRI RECORDED BY THE ASSESSING OFFICER WITH RESPECT TO THE SHARES APPLIED BY HIM. WE FOUND THAT DURING HIS STATEMENT, SHRI AGNIHOTRI HAS STATE D REGARDING HIS LAND HOLDING OF 25 ACRES OUT OF WHICH HE HAS SO LD 10 ACRES OF LAND IN CASH WHICH WAS DEPOSITED IN HIS BANK ACC OUNT AND OUT OF WHICH CHEQUES FOR SHARE APPLICATION WAS ISSU ED TO ASSESSEE COMPANY. SHRI AGNIHOTRI ALSO STATED THAT T HE LAND WAS SOLD TO MS.RASHMI BORASI, DAUGHTER OF SHRI PREM CHAND GUDDU SITTING MLA OF M.P. ASSEMBLY. THE ONLY OBJECT ION OF THE AO WAS THAT LAND WAS SOLD IN JUNE, 2005 FOR RS. 16. 40 LAKHS, WHEREAS CASH WAS DEPOSITED IN THE BANK IN JUNE, 200 6. THE ASSESSEE HAS ALSO FILED AFFIDAVIT CONFIRMING ALL TH ESE FACTS BEFORE THE CIT(A). THERE IS NO CONTRARY FINDING WIT H REGARD TO THE CONTENTS OF THE AFFIDAVIT. THUS, IT IS CLEAR FR OM THE STATEMENT RECORDED BY THE ASSESSING OFFICER THAT NO T ONLY SHARE APPLICANT HAS APPEARED BEFORE THE AO, WHEREIN HE CONFIRMED THE TRANSACTION AND ALSO EXPLAINED THE SO URCE OF DEPOSIT AND FOR THAT THERE ARE NO ANY CONTRARY FIND ING BY THE -: 10: - 10 ASSESSING OFFICER. THE ASSESSEE HAS ALSO CONFIRMED THE SAME BY WAY OF AFFIDAVIT WHICH HAVE NOT BEEN REVERTED OR FOUND WRONG BY THE DEPARTMENTAL AUTHORITIES. THUS, IN OUR CONSIDERED OPINION, ALL THE THREE INGREDIENTS I.E. IDENTITY, GENUINENESS AND SOURCE OF CREDIT WAS EXPLAINED. ONC E THE CHEQUES IS ISSUED OUT OF THE BANK ACCOUNT, WHEREIN CORRESPONDING DEPOSIT HAS BEEN DULY EXPLAINED, THER E CANNOT BE ANY ALLEGATION FOR GENUINENESS. FURTHERMORE, SOU RCE OF ISSUE OF CHEQUES WAS ALSO EXPLAINED BY SHRI AGNIHOT RI OUT OF THE SALE PROCEEDS OF THE LAND, WHICH CLEARLY ESTABL ISHES THE CREDITWORTHINESS OF THE SHARE APPLICANT. THE SHARES WERE ALSO ALLOTTED TO HIM IN SUBSEQUENT YEARS. KEEPING IN VIE W THE PROPOSITION LAID DOWN BY THE HON'BLE SUPREME COURT IN THE CASE OF LOVELY EXPORTS, 11 ITJ 357, NO ADDITION IS WARRANTED IN THE HANDS OF THE ASSESSEE. 8. DISALLOWANCE OF RS. 1 LAKH WAS MADE TO OUT OF EXPENDITURE OF RS. 3.7 LAKHS INCURRED ON ACCOUNT OF TRAVELLING, VEHICLE RUNNING AND TELEPHONE EXPENSES ON THE GROUN D OF NON- VERIFIABILITY OF EXPENDITURE. BY THE IMPUGNED ORDER , THE LD. CIT(A) RESTRICTED THE DISALLOWANCE TO THE EXTENT OF RS. 50,000/- -: 11: - 11 ON ACCOUNT OF PERSONAL AND NON-BUSINESS USE OF VEHI CLE AND TELEPHONE. KEEPING IN VIEW THE FACT THAT THE ASSESS EE COULD NOT VERIFY ALL THE EXPENDITURE, WE DIRECT THE AO TO RES TRICT THE DISALLOWANCE TO THE EXTENT OF 10 %. WE DIRECT ACCOR DINGLY. 9. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALLOWE D IN PART. THIS ORDER HAS BEEN PRONOUNCED IN THE OPEN COURT ON 20 TH OCTOBER, 2011. SD/- SD/- (JOGINDER SINGH) ( R.C.SHARMA) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED : 20 TH OCTOBER, 2011. CPU* 1819