Income Tax Officer, Ward-16(3), Hyderabad V. Maithili Financials Private Limited, Hyderabad

ITA 1656/Hyd/2017

• Counselvise Citation: [2021] 107 COUNSELVISE.COM (IT) 6306 (ITAT-HYDERABAD)
• Duration Of Justice: 3 year(s) 9 month(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-07-2021
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: DB-B
• Next Hearing Date: 07-07-2021
• Assessment Year: 2013-2014
• Appeal Filed On: 28-09-2017
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Assessee Lawyers: A V RAGHURAM
• Keywords: Set aside
• Section: 143(3); 143(1); 195; 13; 119; 68

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCH B , HYDERABAD BEFORE SMT. P. MADHAVI DEVI, JUDICIAL MEMBER AND SHRI A. MOHAN ALANKAMONY, ACCOUNTANT MEMBER ITA NO .1656 /HYD/20 17 ASSESSMENT YEAR: 20 13 - 14 INCOME TAX OFFICER, WARD 16(3), HYDERABAD. VS. M/S. MAITHILI FINANCIALS PRIVATE LIMITED, HYDERABAD. PAN: AACCM 4074 H (APPELLANT) (RESPONDENT) ASSESSEE BY: SHRI A.V. RAGHURAM REVENUE BY: SHRI ROHIT MUJUMDAR, DR DATE OF HEARING: 07/07/2021 DATE OF PRONOUNCEMENT: 26 /07/2021 ORDER PER A. MOHAN ALANKAMONY, AM.: THIS APPEAL IS FILED BY THE REVENUE AGAINST THE ORDER OF THE LD. CIT (A) - 4, HYDERABAD IN APPEAL NO. 0136/16 - 17/ACIT, CIR.16(2)/CIT(A)/HYD/17 - 18 , DATED 3/07/2017 PASSED U/S. 143(3) R.W.S 250(6) OF THE ACT. 2. THE REVENUE HAS RAISED THREE GROUNDS IN ITS APPEAL HOWEVER, THE CRUX OF THE ISSUE IS THAT: THE LD. CIT (A) HAS ERRED IN DELETING THE ADDITION MADE BY THE LD. AO U/S. 68 OF THE ACT FOR RS. 1,86,00,000/ - ON 2 ACCOUNT OF UNEXPLAINED SHARE APPLICATION MONEY CREDITED TO THE BANK ACCOUNT OF THE ASSESSEE. 3. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE IS A FINANCING AND INVESTMENT PRIVATE LIMITED COMPANY FILES ITS RETURN OF INCOME ON 26/09/2013 DECLARING NIL TAXABLE INCOME. INITIALLY, THE RETURN WAS PROCESS U/S. 143(1) OF THE ACT AND THEREAFTER THE CASE WAS TAKEN UP FOR SCRUTINY AS PER THE NORMS OF CASS AND THE ASSESSMENT WAS COMPLETED U/S. 143(3) OF THE ACT ON 31/3/2016 WHEREIN ONE OF THE ADDITIONS MADE BY THE LD. AO WAS TOWARDS THE AMOUNT OF RS. 1,8 6 ,00,000/ - CREDITED TO THE BANK ACCOUNT OF THE AS SESSEE ON ACCOUNT OF SHARE APPLICATION MONEY THE SOURCE OF WHICH WAS NOT GENUINE. 4. DURING THE COURSE OF SCRUTINY ASSESSMENT PROCEEDINGS, IT WAS OBSERVED BY THE LD. AO THAT THE ASSESSEE HAS RECEIVED AGGREGATE AMOUNT OF RS. 1,86,00,000/ - FROM 12 INDIVIDU ALS. ON QUERY IT WAS EXPLAINED BY THE ASSESSEE THAT THE AGGREGATE AMOUNT OF RS. 1,86,00,000/ - RECEIVED FROM THOSE TWELVE INDIVIDUALS WERE TOWARDS SHARE APPLICATION MONEY FOR SHARE PREMIUM OF RS. 90/ - AGAINST THE FACE VALUE OF THE SHARES RS. 10 PER SHARE. THE ASSESSEE ALSO FURNISHED CONFIRMATION STATEMENT FROM ALL THE 12 PARTIES. HOWEVER, THE LD. AO REJECTED THE SUBMISSION OF THE ASSESSEE BECAUSE OF THE FOLLOWING REASONS: (I) ALL THE CONFIRMATION STATEMENTS WERE STEREOTYPE. 3 (II) THE DATE AND PLACE WERE NOT MENTIONED IN THE CONFIRMATION STATEMENT. (III) THE SOURCE OF INVESTMENT OF ALL THE INVESTORS WERE FROM AGRICULTURAL OPERATIONS. (IV) THE ENTIRE TRANSACTIONS WERE COMPLETED WITHIN A WEEK'S TIME. (V) THE BANK ACCOUNT OF THE INVESTORS SHOWED MEAGRE AMOUNTS WITH RESPECT TO THE OPENING BALANCE AND CLOSING BALANCE. (VI) THUS, THERE WAS NO ACCUMULATED BALANCE IN THE BANK ACCOUNT OF THE INVESTORS. (VII) CASH WAS INTRODUCED IN THE BANK ACCOUNT OF THE INVESTORS JUST BEFORE IT WAS INVESTED TOWARDS SHARE AP PLICATION MONEY. (VIII) THIS MODUS OPERANDI OF CASH BEING INTRODUCED IN THE BANK ACCOUNT OF THE INVESTORS AND SUBSEQUENT WITHDRAWAL FOR THE PURPOSE OF INVESTING IN EQUITY SHARES OF THE ASSESSEE COMPANY WERE FOUND IN THE CASE OF ALL THE INVESTORS. 5. FROM THE ABOVE, THE LD. AO OPINED THAT THE CREDITWORTHINESS AND FINANCIAL STRENGTH OF THE INVESTORS IS NOT RELIABLE AND THEREFORE, HE WAS OF THE VIEW THAT THE ASSESSEE FAILED TO FURNISH SATISFACTORY EXPLANATION 4 WITH RESPECT TO THE TRANSACTION AND ACCORDINGLY T HE LD. AO TREATED THE AMOUNT OF RS. 1,86,00,000/ - AS THE UNEXPLAINED SHARE APPLICATION MONEY CREDITED TO THE BANK ACCOUNT OF THE ASSESSEE AND INVOKED THE PROVISIONS OF SECTION 68 OF THE ACT AND MADE ADDITION THEREON. 6. ON APPEAL, THE LD. CIT (A) BY RELYI NG ON THE DECISION RENDERED IN THE CASE CIT VS. LOVELY EXPORTS REPORTED IN 216 CTR 196 (SC), CIT VS. RELIANCE INTERNATIONAL CORPORATION PRIVATE LIMITED REPORTED IN 196 TAXMANN 387 (DEL.) AND CIT VS. CORPORATION PVT LTD., REPORTED IN 159 ITR 78 (SC) HELD A S UNDER: 6. I HAVE CAREFULLY CONSIDERED THE ASSESSMENT ORDER, FACTS OF THE CASE AND THE SUBMISSIONS OF THE APPELLANT. THE ASSESSING OFFICER TREATED THIS AMOUNT OF RS. 1,86,00,000/ - AS CASH CREDITS BY MENTIONING THAT NO RETURNS OF INCOME WERE FILED. DUR ING THE COURSE OF APPEAL PROCEEDINGS, THE APPELLANT HAS FURNISHED CONFIRMATION LETTERS, SOURCES OF INVESTMENT AND TRANSACTIONS COMPLETED ALONG WITH DETAILS OF THE PERSONS, ADDRESS ETC . THE MODE OF RECEIPT WAS THROUGH BANK. FURTHER, THEY HAVE ALL THE CONF IRMATION LETTERS ALONG WITH CHEQUE NUMBERS ETC. THE SHARE CAPITAL ALSO ALLOTTED TO THESE PERSONS BY THE COMPANY. SINCE, ALL THESE DETAILS WERE AVAILABLE WITH THE ASSESSING OFFICER ALSO, BUT STILL NOT ACCEPTING THESE CREDITS IS NOT JUSTIFIABLE. THEREFORE, THE SUBMISSIONS OF THE APPELLANT ARE ACCEPTED AND AS SUBMITTED BY THE APPELLANT THE SUPREME COURTS DECISION IN THE CASE OF CIT S. LOVELY EXPORTS PVT LTD (2008) 216 CTR (SC) 195 , THE ADDITION NOT TO BE MADE IN COMPANY HANDS AND IF GENUINENESS IS DOUBTED, THEN ENQUIRY TO BE MADE IN INDIVIDUAL SHARE APPLICANTS HANDS AFTER VERIFYING THEIR SOURCES. THEREFORE, THE ADDITION MADE BY THE ASSESSING OFFICER DELETED. THE GROUNDS OF APPEAL ARE ALLOWED. 7. BEFORE US, THE LD. DR SUBMITTED PAPER BOOK CONSISTING OF REVENUE RECORDS OF THE INVESTORS TO ESTABLISH THE SMALL LAND HOLDINGS OF THE INVESTORS , BANK STATEMENT OF THE INVESTORS TO ESTABLISH THE FACT THAT THE CASH WAS INTRODUCED AND WITHDRAWN FROM THE BANK WITHIN A SPAN OF 7 5 TO 9 DAYS , CONFIRMATION STATEMENT OF THE INVESTORS WHICH WERE ALL STEREOTYPE IN NATURE AND IT ALSO REVEALED THAT THE SOURCE OF INVESTMENT OF ALL THE INVESTORS WERE FROM AGRICULTURAL OPERATIONS. THE LD. DR FURTHER POINTING OUT TO THE PAPER BOOK FILED BY THE R EVENUE VEHEMENTLY ARGUED STATING THAT THE INVESTORS WERE MEN OF POOR MEANS AND THEREFORE, IT COULD NOT BE CONSTRUED THAT THEY WOULD HAVE SOURCE TO MAKE SUCH INVESTMENT IN THE ASSESSEE COMPANY FOR PURCHASE OF ITS EQUITY SHARES. IT WAS THEREFORE PLEADED THAT THE ORDER OF THE LD. CIT (A) MAY BE SET ASIDE AND THE ORDER OF THE LD. AO MAY BE REINSTATED. THE LD. AR ON THE OTHER HAND FORCIBLY ARGUED IN SUPPORT OF THE ORDER OF THE LD. CIT (A). 8. WE HAVE HEARD THE RIVAL SUBMISSIONS AND CAREFULLY PERUSED THE MATERIA LS ON RECORD. ON CLOSELY EXAMINING THE PAPER BOOK FILED BY THE REVENUE AND THE ASSESSEE WE FIND ALL THE REASONS STATED BY THE LD. AO ARE JUSTIFIABLE. FROM TH E PAPER BOOK FILED BY THE REVENUE & ASSESSEE IT IS OBVIOUS THAT ALL THE CONFIRMATION STATEMENTS ARE STEREOTYPE, SUFFICIENT INFORMATION OF THE INVESTORS SUCH AS DATE & PLACE WHE N THEY SIGNED THE CONFIRMATION STATEMENT AND ADDRESS OF THE INVESTORS ARE NOT AVAILABLE . FURTHER THE S O U RCE OF INVESTMENT BY THE TWELVE INVESTORS IS STATED TO BE FRO M AGRICULTURAL OPERATIONS HOWEVER , THE IR LAND HOLDING IS NOT IN PARITY WITH THE AGRICULTURAL INCOME DISCLOSED BY THEM. FURTHER THE ENTIRE INVESTMENTS WERE MADE OUT OF THE CASH INTRODUCED IN THE BANK ACCOUNT OF THE ASSESSEE WHICH ARE WITHDRAWN WITHIN A SPAN OF 7 TO 9 DAYS. IN 6 THESE CIRCUMSTANCES WE ARE OF THE VIEW THAT THE EXPLANATION OFFERED BY THE ASSESSEE DOES NOT SEEMS TO BE RELIABLE CONSIDERING THE EVIDENCE PRODUCED BEFORE THE REVENUE TO SUBSTANTIATE ITS CLAIM. IT IS PERTINENT TO MENTION THAT THE DECISI ON RELIED BY THE LD.CIT(A) WHILE GRANTING RELIEF TO THE ASSESSEE ARE DISTINGUISHED IN THE CASE CIT VS. NIPUN BUILDERS AND DEVELOPERS PRIVATE LIMITED REPORTED IN 350 ITR 407 (DEL.), CIT VS. OASIS HOSPITALITIES PRIVATE LIMITED REPORTED IN 333 ITR 119 (DEL.) AND RAJMANDIR ESTATES PRIVATE LIMITED VS. PCIT REPORTED IN 386 ITR 162 (KAL.) WHEREIN IT WAS HELD THAT WHERE THE ASSESSEE HAS INVESTED IN PRIVATE LIMITED COMPANIES HIGHER BURDEN IS ON THE ASSESSEE TO EXPLAIN THE SOURCE OF THE ASSESSEES INVESTMENT . IN THE CASE OF THE ASSESSEE, IT IS ALSO NOT EXPLAINED AS TO WHY THE ASSESSEE HAS PAID THE SHARE PREMIUM TO THE EXTENT OF RS. 90/ - FOR THE FACE VALUE OF SHARE OF RS. 10/ - . FROM THE FACTS OF THE CASE, IT IS APPARENT THAT THE ASSESSEE HAS DISCLOSED NIL INCOME W HICH SHOWS THAT THERE IS NO REASON FOR THE INVESTORS TO INVEST IN THE ASSESSEES COMPANY FOR PURCHASE OF SHARE AT SUCH HIGH SHARE PREMIUM. THEREFORE, CONSIDERING THESE FACTS AND CIRCUMSTANCES OF THE CASE, WE DO NOT FIND MUCH STRENGTH IN THE ORDER OF THE LD . CIT (A) AND FURTHER WE ARE OF THE VIEW THAT THE FINDINGS OF THE LD. AO ARE MERITORIOUS. HENCE, WE HEREBY SET ASIDE THE ORDER OF THE LD. CIT (A) AND REINSTATE THE ORDER OF THE LD. AO IN THE CASE OF THE ASSESSEE. 9. IN THE RESULT, APPEAL OF THE REVENUE I S ALLOWED. 7 PRONOUNCED IN THE OPEN COURT ON THE 26 TH OF JULY, 2021 . SD/ - SD/ - (P. MADHAVI DEVI) ( A. MOHAN ALANKAMONY ) JUDICIAL MEMBER ACCOUNTANT MEMBER HYDERABAD, DATED: 26 TH JULY , 2021 OKK COPY TO: - 1) M/S. MAITHILI FINANCIALS PVT LTD., 3 - 4 - 729, OPP. SAIBABA TEMPLE, LINGAMPALLY, HYDERABAD. 2) INCOME TAX OFFICER, WARD - 16 - 3, R.NO. 123, 1 ST FLOOR, BLOCK - B, IT TOWERS, MASAB TANK, HYDERABAD. 3) THE CIT(A) - 4, HYDERABAD. 4) THE PR. CIT - 4, HYDERABAD. 5) THE DR, ITAT, HYDERABAD 6) GUARD FILE