Gopal Extrusions Pvt Ltd, Jalgaon V. Income-tax Officer, Ward - 1(2), Jalgaon

ITA 1633/PUN/2017

• Counselvise Citation: [2021] 109 COUNSELVISE.COM (IT) 0043 (ITAT-PUNE)
• Duration Of Justice: 3 year(s) 8 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 17-03-2021
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 17-03-2021
• Assessment Year: 2008-2009
• Appeal Filed On: 27-06-2017
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Assessee Lawyers: ARISES OUT OF PASSED
• Keywords: Reason to believe; Reassessment proceedings
• Section: 133(6); 13; 68; 148

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH A, PUNE VIRTUAL COURT BEFORE SHRI R.S. SYAL, VICE PRESIDENT AND SHRI S.S.VISWANETHRA RAVI, JUDICIAL MEMBER . / ITA NO.1633/PUN/2017 / ASSESSMENT YEAR 2008-09 GOPAL EXTRUSIONS PVT. LTD., G-51, MIDC AREA, JALGAON 425 003 PAN : AAACG8418K VS. ITO, WARD-1(2), JALGAON APPELLANT RESPONDENT / ORDER PER R.S. SYAL, VP : THIS APPEAL BY THE ASSESSEE ARISES OUT OF THE ORDER PASSE D BY THE CIT(A)-2, NASHIK ON 01-05-2017 IN RELATION TO THE ASSES SMENT YEAR 2008-09. 2. THE APPEAL WAS FIXED FOR HEARING FOR THE FIRST TIME ON 27-07- 2020. NONE WAS PRESENT AND IT WAS ADJOURNED FOR 10-08 -2020. THEREAFTER, IT WAS ADJOURNED FOUR TIMES BY SENDING NOTICES TO THE ASSESSEE THROUGH SPEED POST, ALL OF WHICH HAVE BEEN RETUR NED BY THE POSTAL AUTHORITIES WITH REMARKS LEFT ADDRESS - RETURN TO SENDER ON 10-08-2020, 12-09-2020, 30-09-2020 AND 11-01-2021 R ESPECTIVELY. IN VIEW OF THE ABOVE SCENARIO, WHERE THE ASSESSEE HAS LE FT THE ASSESSEE BY NONE REVENUE BY SHRI DEEPAK GARG DATE OF HEARING 17-03-2021 DATE OF PRONOUNCEMENT 17-03-2021 ITA NO.1633/PUN/2017 GOPAL EXTRUSIONS PVT. LTD., 2 ADDRESS AND THE NOTICES SENT THROUGH SPEED POST HAVE BEE N RETURNED BY THE POSTAL DEPARTMENT SEVERAL TIMES, WE ARE LEFT WITH NO OP TION BUT TO DISPOSE OF THE APPEAL EX PARTE QUA THE ASSESSEE, ON MERITS. 3. THE FIRST ISSUE RAISED IN THIS APPEAL THROUGH GROUND NOS . 1 AND 2 IS AGAINST THE INITIATION OF RE-ASSESSMENT PROCEEDINGS. BRIEF LY STATED, THE FACTS OF THE CASE ARE THAT THE AO INITIATED RE-ASSES SMENT PROCEEDINGS WITH THE FOLLOWING REMARKS AS REPRODUCED ON PAGES 2 AND 3 OF THE ASSESSMENT ORDER: THE INCOME TAX DEPARTMENT HAVE CARRIED OUT ENQUIRI ES AND INVESTIGATED IN THIS CASE, WHEREIN THE DCIT CIR-1, JALGAON AFTER OBTAINING PRIOR APPROVAL OF THE COMMISSIONER OF INC OME TAX-2, NASHIK HAVE ISSUED LETTERS U/S.133(6) TO THE INVESTORS WHI CH ARE 15 IN NOS AND POSTAL REMARKS ARE AS UNDER : S.NO. NAME OF THE PERSON MAKING INVESTMENT DATE OF ISSUE OF 133(6) LETTERS REMARKS 1 NICO SECURITIES PVT. LTD., JOGESHWARI (W), MUMBAI 21/11/2013 RETURN BACK LEFT 2 DOLDREM INVESTMENT & FINANCE PVT. LTD. DAHISAR (E), MUMBAI 21/11/2013 REFUSED 3 OCEAN INVESTMENT & FINANCE PVT. LTD. DAHISAR (E), MUMBAI 21/11/2013 REFUSED 4 VEENA CREDIT & HOLDING PVT. LTD., KOLKATA 21/11/2013 ADDRESS MOVED 5 SAUMITRA INVESTMENT & FINANCE PVT. LTD., DAHISAR (E), MUMBAI 21/11/2013 REFUSED 6 VDR CONSULTANTS PVT. LTD., KOLKATA 21/11/2013 ADDRESS MOVED ITA NO.1633/PUN/2017 GOPAL EXTRUSIONS PVT. LTD., 3 7 PINGLE COMMERCE PVT. LTD., KOLKATA 21/11/2013 ADDRESS CANNOT BE LOCATED 8 PENTIUM HI TECH PVT. LTD., GOREGAON (W), MUMBAI 21/11/2013 UNCLAIMED RETURN TO SENDER 9 AVANTI VYAPAR PVT. LTD., KOLKATA 21/11/2013 UNCLAIMED RETURN TO SENDER 10 VIVEK TRACOM PVT. LTD., KOLKATA 21/11/2013 NO REPLY RECEIVED 11 SUGREEV TRADERS PVT. LTD., KOLKATA 21/11/2013 NO REPLY RECEIVED 12 MALINATH TRADING PVT. LTD., KOLKATA 21/11/2013 NOT COMPLIED TILL 21/12/2013 13 NOVAFLEX CAB CASE SYSTEMS LTD., KOLKATA 21/11/2013 NO REPLY RECEIVED 14 SIGNET COMMERCIAL PVT. LTD., KOLKATA 21/11/2013 NO REPLY RECEIVED 15 SARTHAK TRADERS PVT. LTD., KOLKATA 21/11/2013 NO REPLY RECEIVED THESE INVESTORS HAVE INVESTED IN THE COMPANY GOPAL EXTRUSIONS (P) LTD., JALGAON BY PAYING SHARE PREMIUM. OUT OF 15 L ETTERS ISSUED U/S.133(6), 9 LETTERS HAVE BEEN RECEIVED BACK BY TH E POSTAL DEPARTMENT. IN 5 CASES, LETTERS HAVE BEEN SERVED BUT THERE IS N O RESPONSE/COMPLIANCE. THUS, IT IS CLEAR THAT THE SO CALLED INVESTORS, I.E . VENTURE CAPITAL COMPANIES EITHER DO NOT EXIST AT THE GIVEN ADDRESS OR ARE FRONT PERSONS TO INTRODUCE NON INCOME TAX PAID MONEY OF THE BENEF ICIARY COMPANY, I.E. GOPAL EXTRUSIONS (P) LTD., JALGAON. IN VIEW OF THE FACTS MENTIONED ABOVE, THERE IS EVID ENCE TO SHOW THAT THERE IS AN ESCAPEMENT OF INCOME TO THE TUNE OF RS. 6,98,41,500/- WITHIN THE MEANING OF SECTION 147(C) OF THE INCOME TAX ACT , 1961 FOR THE A.Y. 2008-09. SINCE THE ASSESSMENT FOR THE A.Y. 2008-09 EXCEEDS F OUR YEARS AND THERE IS NO ASSESSMENT U/S.143(3) COMPLETED, SANCTION FOR ISSUE OF NOTICE U/S.148 OF THE INCOME TAX ACT, 1961 OF THE HONBLE ADDL. COMMISSIONER OF INCOME TAX, RANGE-1, JALGAON FOR RE OPENING OF ITA NO.1633/PUN/2017 GOPAL EXTRUSIONS PVT. LTD., 4 PROCEEDINGS U/S.151 OF THE I T ACT, 1961 FOR THE A. Y. 2008-09 BY ISSUE OF NOTICE U/S.148 IS REQUESTED. HENCE, THE PROPOSA L. 4. IN RESPONSE TO THE NOTICE, THE ASSESSEE REQUESTED THAT TH E RETURN ORIGINALLY FILED ON 21-11-2008 MAY BE TREATED AS A RETURN FILE D IN RESPONSE TO THE NOTICE U/S 148 OF THE ACT. SIMULTANEOUSLY, THE ASSESSEE ALSO REQUESTED FOR SUPPLYING THE CERTIFIED COPY OF REASONS RECORDED FOR THE REOPENING. SUCH REASONS WERE SUPPLIED TO THE ASSESSEE. THE ASSESSEE RAISED OBJECTIONS. THE OBJECTIONS WERE DISPOSED OF AND THEREAFTER THE REASSESSMENT WAS TAKEN UP. THE ASSESSEE REMAINED UNSUCCESSFUL BEFORE THE LD. FIRST APPE LLATE AUTHORITY. 5. WE HAVE HEARD THE LD. DR THROUGH VIRTUAL COURT AND GONE THROUGH THE RELEVANT MATERIAL ON RECORD. IT CAN BE SEEN FR OM THE RECORD THAT THE ASSESSEE RECORDED IN ITS BOOKS OF ACCOUNT ISSUE OF SHARE CAPITAL AT FACE VALUE OF RS.10/- WITH PREMIUM OF RS.3 0/- PER SHARE. ALL THE INVESTOR COMPANIES CAME EITHER FROM KOLKATA OR MUMBAI FOR MAKING SUCH HUGE INVESTMENTS OF RS.8.40 CRO RE WITH THE ASSESSEE COMPANY. NOTICES U/S.133(6) WERE ISSUED TO SUCH 15 COMPANIES, OUT OF WHICH 9 WERE RETURNED BY THE POSTAL DEPA RTMENT. IN 5 CASES, NOTICES WERE SERVED BUT THERE WAS NO RESPO NSE. THIS LED ITA NO.1633/PUN/2017 GOPAL EXTRUSIONS PVT. LTD., 5 TO THE FORMATION OF BELIEF BY THE AO THAT THE INCOME ESCAPED ASSESSMENT. 6. AT THIS JUNCTURE IT IS PERTINENT TO NOTE THAT INSTANTLY WE ARE CONCERNED WITH THE STAGE OF ISSUANCE OF NOTICE OF REASSESS MENT. IN ORDER TO GET JURISDICTION, WHAT IS NECESSARY IS TO SEE THE EXISTE NCE OF REASON TO BELIEVE ABOUT THE ESCAPEMENT OF INCOME AND NOT ANY CONCLUSIVE EVIDENCE OF ESCAPEMENT, WHICH ASPECT ASSUMES SIGNIFICANCE ONLY WHEN THE REASSESSMENT PROCEEDINGS ARE TAK EN UP AFTER INITIATION. THE HONBLE SUPREME COURT IN RAYMOND WOOLEN MILLS VS. ITO (1999) 236 ITR 34 (SC) HAS HELD THAT THERE SHOULD BE REASON TO BELIEVE ABOUT THE ESCAPEMENT OF INCOME AT THE STAGE OF INITIATION OF REASSESSMENT PROCEEDINGS. SUFFICIENCY OR CORREC TNESS OF SUCH MATERIAL CANNOT BE CONSIDERED AT THAT STAGE. THE HON BLE APEX COURT HAS HELD IN ACIT VS. RAJESH JHAVERI STOCK BROKER (P) LTD. (2007) 291 ITR 500 (SC) THAT : `THE WORD 'REASON' IN THE PHRASE 'REASON TO BELIEVE' WOULD MEAN CAUSE OR JUSTIFICATIO N. IF THE AO HAS CAUSE OR JUSTIFICATION TO KNOW OR SUPPOSE THAT INCOME HAD ESCAPED ASSESSMENT, IT CAN BE SAID TO HAVE REASON TO BELIEV E THAT AN INCOME HAD ESCAPED ASSESSMENT. THE EXPRESSION CANNOT BE READ TO MEAN THAT THE AO SHOULD HAVE FINALLY ASCERTAINED THE FACT BY LEGA L EVIDENCE OR CONCLUSION . EXPLAINING THE POSITION FURTHER, IT LAID ITA NO.1633/PUN/2017 GOPAL EXTRUSIONS PVT. LTD., 6 DOWN THAT: `AT THE INITIATION STAGE, WHAT IS REQUIRED IS 'REASON TO BELIEVE', BUT NOT THE ESTABLISHED FACT OF ESCAPEMENT OF INCOM E. AT THE STAGE OF ISSUE OF NOTICE, THE ONLY QUESTION IS WHETHER THERE WAS RELEVANT MATERIAL ON WHICH A REASONABLE PERSON COULD HAVE FO RMED A REQUISITE BELIEF. WHETHER THE MATERIALS WOULD CONCLUSIVELY PROVE THE ESCAPEMENT IS NOT THE CONCERN AT THAT STAGE. THIS IS SO B ECAUSE THE FORMATION OF BELIEF BY THE AO IS WITHIN THE REALM OF SUBJEC TIVE SATISFACTION. 7. AT THIS STAGE, IT WOULD BE APT TO TAKE NOTE OF THE JUDGMENT OF THE HONBLE SUPREME COURT IN PHOOLCHAND BAJRANG LAL AND ANR VS. ITO AND ANR (1993) 203 ITR 456 (SC) , IN WHICH THE AOS JURISDICTION TO INITIATE REASSESSMENT WAS CHALLENGED. REPELLING THE ASSESSEES ARGUMENTS, THE HONBLE SUPREME COURT HELD THAT A N ITO ACQUIRES JURISDICTION TO REOPEN ASSESSMENT UNDER S. 147(A) R/W S. 148 ONLY IF ON THE BASIS OF SPECIFIC, RELIABLE AND RELEVANT INFOR MATION COMING TO HIS POSSESSION SUBSEQUENTLY, HE HAS REASONS WHIC H HE MUST RECORD, TO BELIEVE THAT BY REASON OF OMISSION OF FAILURE ON THE PART OF THE ASSESSEE TO MAKE A TRUE AND FULL DISCLOSURE OF ALL MATERIAL FACTS NECESSARY FOR HIS ASSESSMENT DURING THE CONCLUDED A SSESSMENT PROCEEDINGS, ANY PART OF HIS INCOME, PROFIT OR GAINS CHARG EABLE TO INCOME-TAX HAS ESCAPED ASSESSMENT. HE MAY START REASSESS MENT ITA NO.1633/PUN/2017 GOPAL EXTRUSIONS PVT. LTD., 7 PROCEEDINGS EITHER BECAUSE SOME FRESH FACTS COME TO LIGHT W HICH WERE NOT PREVIOUSLY DISCLOSED OR SOME INFORMATION WITH REGARD TO THE FACTS PREVIOUSLY DISCLOSED COMES INTO HIS POSSESSION WHIC H TENDS TO EXPOSE THE UNTRUTHFULNESS OF THOSE FACTS. IN THAT CASE, THE ITO WAS HELD TO HAVE RIGHTLY INITIATED THE REASSESSMENT PROCEEDINGS ON THE BASIS OF SUBSEQUENT INFORMATION, WHICH WAS SPECIFIC, RELEVAN T AND RELIABLE. AS SUCH, WE DO NOT FIND ANY INFIRMITY IN THE INITIATION O F REASSESSMENT PROCEEDINGS IN THE FACTS OF THE CASE UNDER CONSIDERATION. 8. THAT APART, THE ASSESSEE HAS ALSO CHALLENGED THAT THE LD. ADDL. CIT ERRED IN ACCORDING APPROVAL TO THE REASONS RECORDED BY THE AO FOR REASSESSMENT. IN VIEW OF THE ELABORATE DISCUSSION AB OVE ABOUT THE FACTUAL PANORAMA PREVAILING IN THE EXTANT CASE, WE DO NOT CONCUR WITH THE SUBMISSION ADVANCED BY THE ASSESSEE. ANY PERSON PROPERLY INSTRUCTED IN LAW, WOULD NOT HESITATE, EVEN ONCE, IN ACCORDING HIS IMPRIMATUR TO PROPOSAL FOR RE-ASSESSMENT IN THE FACTS OF THE CASE AS ARE OBTAINING HEREIN. WE, THEREFORE, UPHOLD THE IMPUGNED ORDER AND DISMISS THE GROUNDS RAISED BY THE ASSESSEE. ITA NO.1633/PUN/2017 GOPAL EXTRUSIONS PVT. LTD., 8 9. NOW WE TAKE UP THE CONFIRMATION OF ADDITION OF RS.8,40,00,000/- MADE BY THE AO U/S.68 OF THE ACT ON AC COUNT OF SHARE CAPITAL AND SHARE PREMIUM ON MERITS. 10. AS DISCUSSED ABOVE, THE AO ISSUED NOTICE U/S.133(6) S EEKING CERTAIN DETAILS. ALL EXCEPT ONE DID NOT EITHER RECEIVE THE NOTIC E OR COMPLY WITH THE AOS REQUIREMENT. ONLY ONE COMPANY REPLIED IN RESPONSE TO NOTICE U/S.133(6) BY STATING THAT : IT HAD NOT CONTRIBUTED ANY SHARE CAPITAL CLAIMED BY THE ASSESSEE AS HAS BEEN RECORDED IN PARA 5 OF THE ASSESSMENT ORDER. THE AO, THEREAFTER, ISS UED SUMMONS U/S.131 TO SHRI SANJAY KUMAR TAPARIA, ONE OF THE DIRECTORS OF THE ASSESSEE COMPANY AND RECORDED HIS STATEM ENT. IN RESPONSE TO QUESTIONNO.2, HE ADMITTED THAT: THERE WAS NO BUSINESS ACTIVITY OF THE ASSESSEE COMPANY AND IT HAD CLOSED ITS BUSINESS OF PIPE FITTING SINCE 2007 . IN RESPONSE TO QUESTION NO.10 AS TO HOW THE ALLEGED INVESTOR COMPANIES FROM MUMBAI AND KOLKATA CAME TO KNOW ABOUT THE COMPANY, THE DIRECTOR OF THE ASSESSEE COM PANY SUBMITTED THAT HE AND CERTAIN OTHER FELLOW-DIRECTORS KNEW SOME PERSONS ENGAGED IN PRIVATE EQUITY PLACEMENT. IN ANSWER TO QUESTION NO.15 AS TO HOW MUCH PREMIUM WAS PAID AT THE TIME OF SUB SCRIPTION TO SHARE CAPITAL, IT WAS ANSWERED THAT PREMIUM OF RS.30/- PE R SHARE WAS PAID AS AGAINST ITS FACE VALUE OF RS.10/-. WHEN A SP ECIFIC QUERY ITA NO.1633/PUN/2017 GOPAL EXTRUSIONS PVT. LTD., 9 AS TO WHETHER THE ASSESSEE COMPANY HAD STARTED ANY BUSINESS/MANUFACTURING ACTIVITY IN F.Y. 2007-08, IT WAS RESPO NDED IN ANSWER TO QUESTION NO.17 THAT : THE COMPANY HAD CLOSED ITS BUSINESS OF MANUFACTURING OF PVC PIPE AND FITTING IN F.Y. 2006- 07 . A FURTHER QUESTION WAS ASKED WHETHER ANY DIVIDEND OR ANY RETURN ON THE INVESTMENTS WAS GIVEN BY THE ASSESSEE TO THESE SO CALLED SHAREHOLDER COMPANIES TILL DATE, THE ANSWER WAS AGAIN VAGUE SUBMITTING THAT HE DID NOT REMEMBER EXACTLY ABOUT IT. 11. SECTION 68 REQUIRES MAKING OF AN ADDITION WHEN THE IDENTITY OF THE CREDITOR, HIS CAPACITY OR GENUINENESS OF THE TRANSACTION A RE NOT PROVED. HERE IS A CASE IN WHICH THOUGH THE IDENTITY IS PROV ED BECAUSE OF THE ALLEGED SHAREHOLDERS BEING COMPANIES, BUT THE GENUINENESS OF THE TRANSACTIONS IS WANTING. IN THE ABSENCE OF ANY BUSINESS ACTIVITY OF A COMPANY, WHICH WAS CLOSED SINCE 200 7, WE FAIL TO APPRECIATE AS TO HOW ALL THE CORPORATE INVESTORS COMING EXCLUSIVELY FROM MUMBAI AND KOLKATA WOULD JOIN AND INVEST IN THE SHARES OF SUCH A COMPANY, AND THAT TOO AT A PREMIUM OF 3 00% OF THE FACE VALUE, WHICH HAD NO RUNNING BUSINESS AND FURTHER THERE WERE NO RETURNS ON SUCH INVESTMENT. NONE OF THE ALLEGED INVESTOR S RESPONDED TO THE AOS NOTICES U/S.133(6) EXCEPT ONE COMP ANY WHICH ALSO DENIED TO HAVE ANY TRANSACTION WITH THE ASSESSEE ITA NO.1633/PUN/2017 GOPAL EXTRUSIONS PVT. LTD., 10 COMPANY. IT IS FURTHER WORTH MENTIONING THAT NO CORRESPOND ENCE TOOK PLACE BETWEEN THE ASSESSEE COMPANY AND THE ALLEGED IN VESTORS COMPANIES PRIOR TO MAKING OF HUGE INVESTMENT OR AFTER SUCH ACTIVITY AS HAS BEEN NOTED IN THE IMPUGNED ORDER. IN SUCH CIRCU MSTANCES, WE ARE SATISFIED THAT THE ASSESSEE MISERABLY FAILED TO PROVE THE GENUINENESS OF THE TRANSACTIONS. THE HONBLE BOMBAY HIGH COURT IN ROYAL RICH DEVELOPERS PVT. LTD. VS. PR. CIT (2020) 313 CTR 0478 (BOM) HAS UPHELD THE ADDITION MADE U/S 68 BY OBSERVING THAT NO RATIONAL PERSON WILL INVEST IN SHARES OF A SHELL/PAPER COMPA NY HAVING NO WORTHWHILE BUSINESS AT A PREMIUM OF RS.35. IN V IEW OF THE FOREGOING, WE UPHOLD THE IMPUGNED ORDER IN SUSTAININ G THE ADDITION OF RS.8.40 CRORE MADE U/S.68 OF THE ACT. 12. GROUND NO. 5 REGARDING LEVY OF INTEREST U/S.234B, BEIN G, CONSEQUENTIAL IS ACCORDINGLY DISPOSED OF. 13. IN THE RESULT, THE APPEAL IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 17 TH MARCH, 2021. SD/- SD/- ( S.S.VISWANETHRA RAVI ) (R.S.SYAL) JUDICIAL MEMBER VIC E PRESIDENT PUNE; DATED : 17 TH MARCH, 2021 ITA NO.1633/PUN/2017 GOPAL EXTRUSIONS PVT. LTD., 11 / COPY OF THE ORDER IS FORWARDED TO : 1. / THE APPELLANT; 2. / THE RESPONDENT; 3. 4. THE CIT(A)-2, NASHIK THE PR. CIT-2, NASHIK 5. 6. , , A / DR A, ITAT, PUNE; / GUARD FILE. / BY ORDER, // TRUE COPY // SENIOR P RIVATE SECRETARY , / ITAT, PUNE DATE 1. DRAFT DICTATED ON 17-03-2021 SR.PS 2. DRAFT PLACED BEFORE AUTHOR 17-03-2021 SR.PS 3. DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER JM 4. DRAFT DISCUSSED/APPROVED BY SECOND MEMBER. JM 5. APPROVED DRAFT COMES TO THE SR.PS/PS SR.PS 6. KEPT FOR PRONOUNCEMENT ON SR.PS 7. DATE OF UPLOADING ORDER SR.PS 8. FILE SENT TO THE BENCH CLERK SR.PS 9. DATE ON WHICH FILE GOES TO THE HEAD CLERK 10. DATE ON WHICH FILE GOES TO THE A.R. 11. DATE OF DISPATCH OF ORDER. *