DCIT, Circle 1, Siliguri, Siliguri V. Global Mercantiles Pvt. Ltd., Darjeeling

ITA 1669/KOL/2009

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 5154 (ITAT-KOLKATA)
• Duration Of Justice: 6 year(s) 3 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-01-2016
• Appeal Filed By: Department
• Bench Allotted: C
• Assessment Year: 2006-2007
• Appeal Filed On: 24-09-2009
• Court: TRIBUNAL
• Department Lawyers: NONGOTHUNGS JUNGIE JCIT LD
• Assessee Lawyers: A K TULSIYAN FCA LD
• Keywords: Unexplained cash credit; Unexplained investment; Sale consideration of property below Jantri Value; Capital asset; Question of law; Cost of acquisition; Fair market value
• Section: 143(3); 50C; 56(2); 68

Judgement Text

ITA NO. 1669/KOL/2009-C-AM M/S. GLOBAL MERCANTILES PVT. LTD 1 IN THE INCOME TAX APPELLATE TRIBUNAL, C BENCH, K OLKATA BEFORE : SHRI M. BALAGANESH, ACCOUNTANT MEMBE R, AND SHRI S.S. VISWANETHRA RAVI, JUDICIAL MEMBER ITA NO. 1669/KOL/2009 ASST YEAR 2006-07 D.C.I.T CIRCLE-1, SILIGURI VS. M/S. GLOBAL M ERCANTILES PVT.LTD PAN: AACCG 1091J (APPELLANT) (RESPONDENT) FOR THE APPELLANT: SHRI NONGOTHUNGS JUNGIE , JCIT, LD.SR.DR FOR THE RESPONDENT: SHRI A.K TUL SIYAN, FCA, LD.AR DATE OF HEARING: 06-01-2016 DATE OF PRONOUNCEMENT: 13 -01-2 016 ORDER SHRI M.BALAGANESH, AM THIS APPEAL OF THE REVENUE ARISES OUT OF THE ORDE R OF THE LEARNED CIT(A), SILIGURI IN APPEAL NO. 90/CIT(A)/SLG/08-09 DATED 2 9-06-2009 FOR THE ASSESSMENT YEAR 2006-07 AGAINST THE ASSESSMENT ORDER PASSED BY TH E LEARNED AO U/S 143(3) OF THE INCOME TAX ACT, 1961 (HEREINAFTER REFERRED TO AS TH E ACT). 2. THE FIRST ISSUE TO BE DECIDED IN THIS APPEAL IS AS TO WHETHER AN ADDITION U/S 69B OF THE ACT COULD BE MADE IN THE SUM OF RS. 57,13,370/- BASED ON THE VALUE ADOPTED BY THE STAMP VALUATION AUTHORITY COULD BE MADE IN THE FACT S AND CIRCUMSTANCES OF THE CASE. 2.1. THE BRIEF FACTS OF THIS ISSUE IS THAT THE ASS ESSEE PURCHASED IMMOVABLE PROPERTIES ON 23.5.2005 FROM SRI SAMBHUNATH BOSE AND SRI BISHW ANATH BOSE FOR RS. 48,00,000/- AND DISCLOSED THE SAME IN ITS BALANCE SHEET. THE LEARNED AO OBSERVED THAT THE VALUE DETERMINED BY THE STAMP VALUATION AUTHORITY FOR THE SUBJECT MENTIONED PROPERTIES WERE RS. 1,05,13,370/- AND ACCORDINGLY TREATING THE SAME TO BE THE FAIR MARKET VALUE OF THE ITA NO. 1669/KOL/2009-C-AM M/S. GLOBAL MERCANTILES PVT. LTD 2 PROPERTIES, SOUGHT TO MAKE AN ADDITION OF RS. 57,13 ,370/- AS UNEXPLAINED INVESTMENT IN THE ASSESSMENT. ON FIRST APPEAL, THE LEARNED CITA HELD THAT THE ADOPTION OF FAIR MARKET VALUE AS DETERMINED BY STAMP VALUATION AUTHO RITY AS ACTUAL SALE CONSIDERATION OF THE PROPERTY IS NOT WARRANTED AS ADMITTEDLY THE ASSESSEE IS ONLY THE PURCHASER OF THE PROPERTY AND NOT THE SELLER AND ACCORDINGLY THE PRO VISIONS OF SECTION 50C OF THE ACT WOULD NOT BE APPLICABLE IN THE FACTS OF THE CASE. 2.2. THE LEARNED DR ARGUED THAT NO DEFECTS WERE PO INTED OUT BY THE ASSESSEE IN THE VALUATION DONE BY THE STAMP VALUATION AUTHORITY AND RELIED ON THE DECISION OF HONBLE RAJASTHAN HIGH COURT IN THE CASE OF SMT AMAR KUMARI SURANA REPORTED IN 226 ITR 344 (RAJ) AND VEHEMENTLY PLEADED FOR CONFIRMATION O F THE ORDER OF THE LEARNED AO. IN RESPONSE TO THIS, THE LEARNED AR VEHEMENTLY SUPPORT ED THE ORDER OF THE LEARNED CIT(A). 2.3. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUS ED THE MATERIALS AVAILABLE ON RECORD. THE FACTS STATED HEREINABOVE REMAIN UNDISP UTED ARE NOT REITERATED FOR THE SAKE OF BREVITY. WE FIND THAT IN THE CASE RELIED UPON B Y THE LEARNED DR IN 226 ITR 344 (RAJ) , IT WAS HELD THAT EVEN INSPITE OF SPECIFIC QUERY, THE ASSESSEE FAILED TO POINT OUT ANY MISTAKE / LACUNA IN ASCERTAINING THE VALUE OF T HE PLOT OF LAND BY THE VALUE. IN THESE CIRCUMSTANCES, THE ONLY REASONABLE INFERENCE THAT C AN BE DRAWN IS THAT THE ASSESSEE HAS SHOWN LESS AMOUNT IN THE ACCOUNT BOOKS AND SALE DEE D THAN THE ACTUAL CONSIDERATION PAID. CONSIDERING THE COMPARABLE CASES AND THE FAC TS OF THE CASE, WE FIND NO GROUND TO INTERFERE IN THE ADDITION MADE U/S 69B OF THE ACT. WE FIND THAT IN THE CASE BEFORE THE RAJASTHAN HIGH COURT RELIED UPON BY THE LEARNED AO, THE HIGHER COST OF ACQUISITION WAS TAKEN IN THE HANDS OF THE PURCHASER ON THE BASIS OF THE REPORT OF THE DEPARTMENT VALUATION OFFICER (DVO) ESTIMATING THE H IGHER FAIR MARKET VALUE OF PROPERTY AT THE TIME OF MAKING ASSESSMENT OF THE SE LLER. BUT IN THE INSTANT CASE, THE VALUATION WAS ADOPTED BY THE STAMP VALUATION AUTHOR ITY. WE FIND THAT THE ASSESSEE IN RESPONSE TO THE SHOW CAUSE NOTICE DATED 19.12.2008 ISSUED BY THE LEARNED AO ITA NO. 1669/KOL/2009-C-AM M/S. GLOBAL MERCANTILES PVT. LTD 3 PROPOSING TO MAKE THE ADDITION OF RS. 57,13,370/- U /S 69B OF THE ACT, HAD OBJECTED TO THE ADOPTION OF THE STAMP VALUATION AUTHORITYS VAL UE BY FILING NUMBER OF CASE LAWS GIVEN BY VARIOUS COURTS. THE ADDITION HAS BEEN MA DE BY THE LEARNED AO WITHOUT DISCUSSING ABOUT THE CASE LAWS QUOTED BY THE ASSESS EE. WE HOLD THAT IN ORDER TO INVOKE THE PROVISIONS OF SECTION 69B OF THE ACT, THE BURDE N IS ON THE REVENUE TO PROVE THAT THE ASSESSEE HAS INVESTED IN PROPERTY OVER AND ABOVE WH AT IS DISCLOSED IN ITS BALANCE SHEET. WE FIND THAT THERE IS NOTHING ON RECORD TO SHOW THA T THE ASSESSEE HAD MADE ANY ADDITIONAL INVESTMENT IN ADDITION TO WHAT HAS BEEN STATED IN THE BOOKS OF ACCOUNTS. WE HOLD THAT NO ADDITION COULD BE MADE IN THE HANDS OF THE PURCHASER ON THE BASIS OF STAMP DUTY CHARGED BY THE SUB-REGISTRAR. RELIANCE IN THI S REGARD IS PLACED ON THE DECISION OF ITO VS SATYA NARAYAN AGARWAL REPORTED IN (2007) 112 TTJ (JD) 717 DATED 30.11.2007, WHEREIN IT WAS HELD THAT : WE ARE AWARE THAT ONLY ON THE BASIS OF STAMP DUTY CHARGED BY THE SUB- REGISTRAR NO ADDITION CAN BE MADE ON ACCOUNT OF EST IMATED INVESTMENT MADE IN THE PURCHASE OF THE PROPERTY. IN THIS CASE , AO MADE ADDITION SIMPLY ON THE BASIS OF THE VALUATION TAKEN FOR STAM P DUTY BY THE SUB- REGISTRAR , EVEN AFTER MAKING FURTHER INQUIRIES , W HICH WERE NOT RELIED BY HIM. THEREFORE, BY RESPECTFULLY FOLLOWING THE ABOV ENOTED DECISION OF THE JODHPUR BENCH (79 TTJ 178) , WE CONFIRM THE IMPUGNE D FINDING AND DISMISS GROUND NO. 3 OF REVENUES APPEAL. 2.3.1. WE ALSO FIND THE VALUATION ADOPTED BY STAMP VALUATION AUTHORITY IS ONLY FOR THE PURPOSE OF CAPITAL GAIN AS PRESCRIBED U/S 50C OF TH E ACT WHICH HAS GOT VERY LIMITED SCOPE. THIS LEGAL FICTION HAS BEEN CREATED FOR COM PUTATION OF CAPITAL GAIN ONLY IN THE CASE OF SELLER OF ANY ASSET. WE HOLD THAT THE SAM E CANNOT BE EXTENDED IN THE CASE OF THE PURCHASER TO ESTIMATE THE UNDISCLOSED INVESTMEN T. RELIANCE IN THIS REGARD IS PLACED ON THE DECISION OF CHANDIGARH TRIBUNAL IN THE CASE OF ITO VS OPTEC DISC MANUFACTURING DATED 30.6.2008 REPORTED IN (2008) 11 DTR (CHD) (TRIB) 264 , WHEREIN IT WAS HELD : ITA NO. 1669/KOL/2009-C-AM M/S. GLOBAL MERCANTILES PVT. LTD 4 THE SECOND EVIDENCE WITH THE AO IS IN THE SHAPE OF DETERMINATION OF MARKET VALUE BY THE STATE REVENUE AUTHORITIES FO R THE PURPOSE OF COMPUTING PAYMENT OF STAMP DUTY. CLEARLY, ADOPTION OF SUCH MARKET VALUE CANNOT DISTRACT FROM THE CONSIDERATION STATED IN TH E SALE DEED. EVEN THE PROVISIONS OF S. 50C PRESSED INTO THE SERVICE BY TH E AO ARE OF NO AVAIL TO SUSTAIN THE INSTANT ADDITION. THE FICTION CREATED B Y S. 50C IS FOR THE LIMITED PURPOSE OF COMPUTING THE CAPITAL GAINS. IT ONLY SEE KS TO MAKE A SPECIAL PROVISION FOR DETERMINING THE FULL VALUE OF CONSIDE RATION IN CASES OF TRANSFER OF IMMOVABLE PROPERTIES FOR THE PURPOSE OF S. 48. THEREFORE, THE FICTIONAL REGIME OF S. 50C IS NOT AVAILABLE WITH TH E AO IN SUPPORT OF HIS CASE OF INVOKING S. 69B AGAINST THE PRESENT ASSESSE E. THE STAND OF THE AO IS THAT THE ACTUAL SALE CONSIDERATION PAID BY THE A SSESSEE FOR PURCHASE OF LAND IS RS. 95,46,451. THE CASE MADE OUT BY THE AO IS THAT RS. 46,50,000 HAS BEEN PAID BY THE ASSESSEE TO THE SELLERS IN QUE STION AND THE BALANCE OF RS. 48,96,451 HAS BEEN ACTUALLY PAID BY THE ASSESSE E TO THE MIDDLEMEN. IN FACT, FOR HAVING MADE THE PAYMENT OF RS. 48,96,451 TO THE MIDDLEMEN THERE IS NOT EVEN AN IOTA OF EVIDENCE ON RECORD EXCEPT TH E PRESUMPTION OUTLINED IN S. 50C. INSOFAR AS SUCH PRESUMPTION IS CONCERNED , THE SAME CANNOT BE INVOKED IN THE HANDS OF A BUYER FOR THE SECTION DEA LS WITH ONLY CASE OF COMPUTATION OF CAPITAL GAINS UNDER S. 48 WHICH IS A PPLICABLE ONLY IN THE CASE OF SELLER. IN ANY CASE, INSOFAR AS AMOUNT OF R S. 48,96,451 IS CONCERNED, EVEN THE STATEMENT OF THE SELLER DOES NO T ADMIT OF THE SAME. ALTHOUGH THE AO HAS REFERRED TO MODUS OPERANDI BY WAY OF WHICH MIDDLEMEN OBTAINED POWER OF ATTORNEY FROM THE ORIGI NAL OWNER TO EXECUTE THE SALE OF LAND SUBSEQUENTLY, AT HIGHER PRICES. HO WEVER, THE SAME IS ONLY A PRESUMPTION UNSUPPORTED BY ANY MATERIAL OR EVIDEN CE. IN FACT, ALTHOUGH THE AO HAS IDENTIFIED THE MIDDLEMEN, BUT NO EFFOR T HAS BEEN MADE TO EXAMINE THE SAID PERSONS. THEREFORE, THE ACTION OF THE AO TO THIS EXTENT IS PURELY BASED ON SURMISES AND CONJECTURES. NO ADDITI ON UNDER S. 69B IS WARRANTED IN THE PRESENT CASE SINCE THE AO HAS FAI LED TO DISCHARGE, THE ONUS OF PROOF CAST ON HIM TO ESTABLISH THAT THE ASS ESSEE HAS PAID CONSIDERATION HIGHER THAN THAT STATED IN THE SALE D EED. 2.3.2. RELIANCE IS ALSO PLACED ON THE DECISION OF HONBLE PUNJAB & HARYANA HIGH COURT IN THE CASE OF CIT VS CHANDNI BHUCHAR REPORTE D IN (2010) 323 ITR 510 (P&H) , WHEREIN IT WAS HELD THAT THE VALUATION DONE BY TH E STATE AGENCY FOR THE PURPOSE OF STAMP DUTY WOULD NOT IPSO FACTO SUBSTITU TE THE ACTUAL SALE CONSIDERATION AS BEING PASSED ON TO THE SELLER BY THE PURCHASER IN T HE ABSENCE OF ANY ADMISSIBLE EVIDENCE. ITA NO. 1669/KOL/2009-C-AM M/S. GLOBAL MERCANTILES PVT. LTD 5 2.3.3. RELIANCE IS ALSO PLACED ON THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE OF K.P.VARGHESE VS ITO REPORTED IN (1981) 131 ITR 597 (SC) , WHEREIN IT WAS HELD : THE ONUS OF ESTABLISHING THAT THE CONDITIONS OF TA XABILITY ARE FULFILLED, IS ALWAYS ON THE REVENUE. IT IS FOR THE REVENUE TO SH OW THAT THERE IS AN UNDERSTATEMENT OF THE CONSIDERATION. IT FURTHER LA ID DOWN THAT TO THROW THE BURDEN OF SHOWING THAT THERE IS NO UNDERSTATEMENT O F THE CONSIDERATION ON THE ASSESSEE, WOULD BE TO CAST AN ALMOST IMPOSSIBLE BURDEN UPON HIM TO ESTABLISH THE NEGATIVE. 2.4. PROVISIONS OF SECTION 50C NOT APPLICABLE TO BUYER WE FIND THAT SECTION 50C IS A DEEMING PROVISION, WH ICH IS APPLICABLE ONLY FOR THE PURPOSE OF SECTION 48. THE LATTER SECTION SPELLS OU T THE MODE OF COMPUTATION OF CAPITAL GAIN. TO PUT IT SIMPLY, THE SUBSTITUTION OF 'FULL V ALUE OF CONSIDERATION RECEIVED' WITH 'THE STAMP VALUE' IN TERMS OF SECTION 50C, IS APPLICABLE IN THE HANDS OF THE SELLER OF THE PROPERTY WHO HAS TO COMPUTE CAPITAL GAINS U/S 48 PU RSUANT TO THE TRANSFER OF A CAPITAL ASSET IN THE NATURE OF LAND OR BUILDING OR BOTH. ON THE CONTRARY, SECTION 69B, WHICH IS AGAIN A DEEMING PROVISION, GOVERNS THE CASES IN WHI CH INVESTMENT MADE BY THE ASSESSEE IS NOT FULLY DISCLOSED. IN OTHER WORDS, SE CTION 69B APPLIES TO THE PURCHASER OF AN ASSET, IN CONTRADISTINCTION TO SEC. 50C, WHICH A PPLIES TO THE SELLER OF AN ASSET. THE POSITION ABOUT THE SUBSTITUTION OF 'STAMP VALUE' WI TH THE 'CONSIDERATION RECEIVED' IN CASE THE LATTER IS LOWER THAN THE FORMER, IN THE HANDS O F THE SELLER ONLY, LEAVING THE DIFFERENTIAL INVESTMENT MADE BY THE BUYER UNTAXED, APPEARS TO HAVE BEEN REALIZED BY THE PARLIAMENT. THAT IS WHY, THE LEGISLATURE IN ITS WISDOM HAS INSERTED CLAUSE (VII) TO SECTION 56(2) BY THE FINANCE (NO.2) ACT, 2009 W.E.F . 1.10.2009, INTER ALIA , PROVIDING THAT WHERE AN INDIVIDUAL OR A HINDU UNDIVIDED FAMILY REC EIVES, IN ANY PREVIOUS YEAR, FROM ANY PERSON OR PERSONS ON OR AFTER THE 1S T DAY OF OCTOBER, 2009, ITA NO. 1669/KOL/2009-C-AM M/S. GLOBAL MERCANTILES PVT. LTD 6 (B) ANY IMMOVABLE PROPERTY, - (I) WITHOUT CONSIDERA TION, THE STAMP DUTY VALUE OF WHICH EXCEEDS FIFTY THOUSAND RUPEES, THE S TAMP DUTY VALUE OF SUCH PROPERTY SHALL BE CONSIDERED AS INCOME UNDER THE HE AD 'INCOME FROM OTHER SOURCES' AND ; (II) FOR A CONSIDERATION WHICH IS LE SS THAN THE STAMP DUTY VALUE OF THE PROPERTY BY AN AMOUNT EXCEEDING FIFTY THOUSAND RUPEES, THE STAMP DUTY VALUE OF SUCH PROPERTY AS EXCEEDS SUCH C ONSIDERATION, SHALL BE CONSIDERED AS INCOME UNDER THE HEAD 'INCOME FROM OT HER SOURCES'. WE FIND FROM THE CONJOINT READING OF SECTIONS 50C A ND 56(2)(VII) MAKES IT VIVID THAT WHEREAS 'STAMP VALUE' HAS BEEN SUBSTITUTED WITH THE 'FULL VALUE OF CONSIDERATION' IN CASE THE LATTER IS LESS THAN THE FORMER IN THE HANDS OF THE SELLER BY VIRTUE OF SECTION 50C, THE SUBSTITUTION OF THE 'STAMP VALUE' WITH THE 'ACTUAL PURCHASE PRICE, IN EXCESS OF RS.50,000/-' HAS BEEN MADE EFFECTIVE IN THE HANDS O F THE BUYER ONLY WHERE ANY IMMOVABLE PROPERTY IS PURCHASED AFTER 1.10.2009. AS THE ASSESSEE BEFORE US IS A BUYER, NATURALLY, HIS CASE WILL NOT BE COVERED U/S 50C BUT WILL BE GOVERNED BY SECTION 56(2)(VII). SINCE SECTION 56(2)(VII) IS APPLICABLE ON CASES IN WHICH THE INDIVIDUAL OR HUF RECEIVES IMMOVABLE PROPERTY ON OR AFTER 1.10.20 09 AND WE ARE DEALING WITH A CASE IN WHICH THE PROPERTY HAS BEEN PURCHASED BY TH E ASSESSEE IN THE ASST YEAR 2006- 07, THE MANDATE OF SECTION 56(2)(VII) CANNOT APPLY RETROSPECTIVELY. ONCE THIS PROVISION IS NOT APPLICABLE, THE RATIO DECIDED IN THE CASE OF K.P. VARGHESE ( SUPRA ) AND SHIVAKAMI CO. (P.) LTD . ( SUPRA ) WOULD APPLY LEAVING NO SCOPE FOR MAKING ADDITION I N THE CIRCUMSTANCES AS ARE PREVAILING IN THE INSTANT CASE. 2.5. IN VIEW OF THE AFORESAID FINDINGS AND JUDICIA L PRECEDENTS RELIED UPON HEREINABOVE, WE HOLD THAT NO ADDITION COULD BE MADE IN THE HANDS OF THE ASSESSEE BUYER AND HENCE WE FIND NO INFIRMITY IN THE ORDER OF THE LEARNED CI T(A). ACCORDINGLY, THE GROUND NO.1 RAISED BY THE REVENUE IS DISMISSED. ITA NO. 1669/KOL/2009-C-AM M/S. GLOBAL MERCANTILES PVT. LTD 7 3. THE NEXT GROUND TO BE DECIDED IN THIS APPEAL IS AS TO WHETHER AN ADDITION IN THE SUM OF RS. 89,60,000/- TOWARDS SHARE CAPITAL COULD BE M ADE IN THE FACTS AND CIRCUMSTANCES OF THE CASE. 3.1. THE BRIEF FACTS OF THIS ISSUE IS THAT THE ASSE SSEE WAS IN RECEIPT OF THE FOLLOWING MONIES DURING THE ASST YEAR UNDER APPEAL TOWARDS SH ARE APPLICATION MONEY :- FROM BODY CORPORATE TRIMUDRA CREDIT (P) LTD 19,00,000 LONG VIEW TRADE & CREDIT (P) LTD 10,00,000 PANORAM FISCAL SERVICES (P) LTD 10,00,000 TROPEX SUPPLIERS (P) LTD 10,00,000 TRADE LINK CARRYING CO (P) LTD 10,00,000 BELFAST ENGINEERING (P) LTD 3,50,000 ----------------- 62,50,000 FROM DIRECTORS SHRI DILIP KUMAR AGARWAL 7,80,000 SHRI DINESH KUMAR AGARWAL 26,30,000 ----------------- 34,10,000 SMT. MEENA DEVI AGARWAL (WIFE OF SHRI DILIP KUMAR AGARWAL -DIRECTOR) 25,0 0,000 ----------------- TOTAL MONIES RECEIVED DURING THE YEAR 1,21,60,000 ----------------- THE MOVEMENT OF SHARE APPLICATION MONEY AND S HARE CAPITAL ACCOUNT DURING THE YEAR IS AS FOLLOWS:- FINANCIAL YEAR 2004-05 PARTICULARS AMOUNT (IN RUPEES SHARE APPLICATION MONEY (IN RUPE ES) SHARE CAPITAL (IN RUPEES) OPENING BALANCE AS ON 01.04.2004 NIL 1,60,000 SHARE APPLICATION MONEY RECEIVED DURING THE YEAR ITA NO. 1669/KOL/2009-C-AM M/S. GLOBAL MERCANTILES PVT. LTD 8 A. FROM INDIVIDUALS (OTHER THAN DIRECTORS B. FROM CORPORATE ASSESSEES C. FROM DIRECTORS 57,00,000 1,16,00,000 27,60,000 2,00,60,000 N.A SHARES ALLOTTED DURING THE YEAR N.A NIL CLOSING BALANCE AS ON 31.03.2005 2,00,60,000 1,60,000 FINANCIAL YEAR 2005-06 PARTICULARS AMOUNT (IN RUPEES SHARE APPLICATION MONEY (IN RUPEES) SHARE CAPITAL (IN RUPEES) OPENING BALANCE AS ON 01.04.2005 2,00,60,000 1,60,000 SHARE APPLICATION MONEY RECEIVED DURING THE YEAR A. FROM INDIVIDUALS (OTHER THAN DIRECTORS B. FROM CORPORATE ASSESSEES C. FROM DIRECTORS D. FROM MEENA DEVI AGARWAL (WIFE OF DILIP AGARWAL (DIRECTOR) NIL 62,50,000 34,10,0000 96,60,000 25,00,000 1,21,60,000 N.A 3,22,20,000 1,60,000 SHARES ALLOTTED DURING THE YEAR A. TO CORPORATE ASSESSEE (1,16,00,000+62,50,000) B. TO INDIVIDUALS ( OTHER THAN DIRECTORS OR THEIR RELATIVES C. TO DIRECTORS (27,60,000 +{34,10,000 7,00,000} 1,78,50,000 57,00,000 54,70,000 (-)2,90,20,000 (+)2,90,20,000 CLOSING BALANCE AS ON 31.03.2006 32,00,000 2,91,80,000 ITA NO. 1669/KOL/2009-C-AM M/S. GLOBAL MERCANTILES PVT. LTD 9 3.1.1. FROM THE CHART, IT COULD BE SEEN THAT DURIN G THE ASSESSMENT YEAR UNDER REVIEW , THE ASSESSEE WAS IN RECEIPT OF RS. 1,21,60,000/- TO WARDS SHARE APPLICATION MONEY. THE SHARES WERE ALLOTTED BY THE ASSESSEE TO VARIOUS PAR TIES TO THE TUNE OF RS. 2,90,20,000/- OUT OF MONIES LYING IN THE OPENING BALANCE OF SHARE APPLICATION MONEY (RS. 2,00,60,000/-) AND OUT OF MONIES RECEIVED DURING TH E YEAR (RS. 1,21,60,000) , LEAVING A BALANCE IN SHARE APPLICATION MONEY TO THE TUNE OF R S. 32,00,000/- AT THE END OF THE ASST YEAR UNDER APPEAL.THE ASSESSEE FILED COPIES OF BALA NCE SHEET OF 5 BODY CORPORATE EXCEPT BELFAST ENGINEERING (P) LTD (RS. 3,50,000/-) TO EXPLAIN THAT THE PARTIES HAD SUFFICIENT SOURCES IN THEIR BALANCE SHEET TO INVEST IN SHARES OF THE ASSESSEE COMPANY. 3.2. THE LEARNED AO DID NOT RAISE ANY QUERY REGARD ING SHARE APPLICATION MONEY RECEIVED FROM MEENA DEVI AGARWAL (WIFE OF SHRI DILI P KUMAR AGARWAL-DIRECTOR) TO THE TUNE OF RS. 25,00,000/-AND ACCEPTED THE SAME AS GENUINE. HE FOUND THAT THE BALANCE SHEETS OF 5 SHAREHOLDERS WERE FILED WHO HAD INVESTED RS. 64,00,000/- AND NO BANK STATEMENTS OF THOSE NEW SHAREHOLDERS WERE FILE D. THE LEARNED AO OBSERVED THAT REGARDING BALANCE SHARE CAPITAL OF RS. 25,60,000/-, NO DETAILS WERE FILED. HE ALSO OBSERVED THAT NONE OF THE SHAREHOLDERS WERE PRODUCE D BEFORE HIM. ACCORDINGLY HE HELD THAT THE IDENTITY AND CREDITWORTHINESS OF THE NEW SHAREHOLDERS COULD NOT BE VERIFIED AND ACCORDINGLY BROUGHT THE SHARE CAPITAL OF RS. 89,60,000/- AS UNEXPLAINED CASH CREDIT U/S 68 OF THE ACT. 3.3. ON FIRST APPEAL, THE LEARNED CITA OBSERVED TH AT DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSEE HAS FURNISHED THE NAME, A DDRESS, PA NO. DETAILS OF SHARE APPLICANTS, INCOME TAX RETURNS , BANK STATEMENTS OF THE ASSESSEE COMPANY,BALANCE SHEET OF SHARE APPLICANTS (EXCEPT BELFAST ENGINEERING (P) LTD) AND CONFIRMED THAT ALL THE PAYMENTS WERE RECEIVED THROUGH REGULAR BANKING CHAN NELS. HE ALSO FOUND THAT BOTH THE DIRECTOR SHARE APPLICANTS ARE ASSESSED TO TAX I N CIRCLE -1, SILIGURI. INFACT ONE DIRECTOR, SHRI DINESH KUMAR AGARWAL EVEN APPEARED B EFORE THE LEARNED AO ITA NO. 1669/KOL/2009-C-AM M/S. GLOBAL MERCANTILES PVT. LTD 10 PERSONALLY BUT THE LEARNED AO CHOSE NOT TO RECORD A NY STATEMENT FROM HIM. THE LEARNED CITA OBSERVED THAT ALL THE SHARE APPLICANTS ARE REGULARLY ASSESSED TO INCOME TAX AND MADE THE INVESTMENT AFTER OBSERVING THE DUE FORMALITIES UNDER THE COMPANIES ACT, 1956 AND INVESTMENT IN ASSESSEE COMPANY HAVE B EEN DULY REFLECTED IN THEIR RESPECTIVE BALANCE SHEETS WHICH WERE DULY AUDITED. THE LEARNED CIT(A) DULY DISTINGUISHED EACH OF THE CASE LAWS RELIED UPON BY THE LEARNED AO IN HIS ASSESSMENT ORDER AS TO HOW THE SAME ARE NOT APPLICABLE TO THE FACTS OF THE ASSESSEE CASE. HE OBSERVED THAT THE ASSESSEE HAS RECEIVED SHARE APPLI CATION MONEY OF RS. 96,60,000/- (EXCLUDING MONEY RECEIVED FROM MEENA DEVI AGARWAL) FROM SIX COMPANIES AND TWO DIRECTORS OF THE ASSESSEE COMPANY. AGAINST THAT SH ARE APPLICATION MONEY, NO SHARES WERE ALLOTTED IN RESPECT OF RS. 7,00,000/- WHICH ME ANS THE ASSESSEE HAS ALLOTTED SHARES AGAINST SHARE APPLICATION MONEY OF RS. 89,60,000/-. OUT OF THE AFORESAID AMOUNT, THE APPLICATION MONEY PAID BY THE TWO DIRECTORS WAS RS. 34,10,000/-. BASED ON THIS, HE OBSERVED THAT IT IS DIFFICULT TO UNDERSTAND THE FIG URE OF RS. 64,00,000/- CALCULATED BY THE LEARNED AO FOR WHICH THE ASSESSEE COULD FURNISH THE BALANCE SHEET. HE OBSERVED THAT THOUGH THE LEARNED AO ASKED THE ASSESSEE TO PRODUCE THE SHARE APPLICANTS, BUT HE NEVER EXERCISED HIS AUTHORITY U/S 131 OF THE ACT TO FORCE THE COMPLIANCE. MOREOVER, WHEN THE DIRECTOR SHRI DINESH KUMAR AGARWAL WAS PER SONALLY PRESENT BEFORE THE LEARNED AO, THE AO CHOSE NOT TO RECORD ANY STATEMEN T FROM HIM. THE LEARNED CIT(A) FURTHER OBSERVED THAT IN VIEW OF THE COMPLET E DETAILS FILED BY THE ASSESSEE FROM ITS SIDE TO PROVE THE IDENTITY OF SHARE APPLICANTS, GENUINENESS OF TRANSACTION AND CREDITWORTHINESS OF SHARE APPLICANTS (EXCEPT BELFAS T ENGINEERING P LTD RS. 3,50,000/- ) , THE DECISION OF THE HONBLE APEX COURT IN THE CASE OF CIT VS LOVELY EX PORTS (P) LTD REPORTED IN (2008) 216 CTR 195 (SC) WOULD BE SQUARELY APPLICABLE TO THE FACTS OF THE INSTANT CASE AND ACCORDINGLY DELETED THE ADD ITION. AGGRIEVED , THE REVENUE IS IN APPEAL BEFORE US ON THE FOLLOWING GROUND:- 2. 2 ND LY THE ASSESSING OFFICER MADE AN ADDITION OF RS.89 ,60,000/- UNDER THE HEAD FRESH SHARE CAPITAL INTRODUCED DURIN G THE FINANCIAL YEAR TREATING IT AS UNEXPLAINED CASH CREDIT. THE LD .CIT(A) DELETED THE SAME ADDITION BASED ON THE CONDITION AS LAID DO WN BY THE APEX ITA NO. 1669/KOL/2009-C-AM M/S. GLOBAL MERCANTILES PVT. LTD 11 COURT IN THE CASE CIT VS. LOVELY EXPORTS (P) LTD (2 008) 216 ITR 195(SC). HOWEVER, THE LD. CIT DID NOT CONSIDER THE FACT THAT NONE OF THE NEW SHARE HOLDERS WERE PRODUCED BEFORE THE A O. 3.4. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUS ED THE MATERIALS AVAILABLE ON RECORD INCLUDING THE DETAILED PAPER BOOK FILED BY T HE ASSESSEE. THE FACTS STATED HEREINABOVE REMAIN UNDISPUTED ARE NOT REITERATED HE REIN FOR THE SAKE OF BREVITY. WE FIND THAT THE ASSESSEE HAD GIVEN THE COMPLETE DETAI LS ABOUT THE SHARE APPLICANTS CLEARLY ESTABLISHING THEIR IDENTITY , CREDITWORTHINESS AND GENUINENESS OF TRANSACTION PROVED BEYOND DOUBT AND HAD DULY DISCHARGED ITS ONUS IN FU LL. NOTHING PREVENTED THE LEARNED AO TO MAKE ENQUIRIES FROM THE ASSESSING OFF ICERS OF THE CONCERNED SHARE APPLICANTS FOR WHICH EVERY DETAILS WERE VERY MUCH M ADE AVAILABLE TO HIM BY THE ASSESSEE. WE FIND THAT THE RELIANCE PLACED BY THE LEARNED CITA ON THE DECISION OF THE HONBLE APEX COURT IN THE CASE OF CIT VS LOVELY EXP ORTS (P) LTD REPORTED IN (2008) 216 CTR 195 (SC) I S VERY WELL FOUNDED, WHEREIN, IT HAS BEEN VERY CLEA RLY HELD THAT THE ONLY OBLIGATION OF THE COMPANY RECEIVING THE SH ARE APPLICATION MONEY IS TO PROVE THE EXISTENCE OF THE SHAREHOLDERS AND FOR WHICH THE ASSESSEE HAD DISCHARGED THE ONUS OF PROVING THEIR EXISTENCE AND ALSO THE SOURCE OF SHAR E APPLICATION MONEY RECEIVED. 3.4.1. WE ALSO FIND THAT THE IMPUGNED ISSUE IS ALS O COVERED BY THE DECISION OF HONBLE CALCUTTA HIGH COURT IN THE CASE OF CIT VS ROSEBERRY MERCANTILE (P) LTD IN GA NO. 3296 OF 2010 ITAT NO. 241 OF 2010 DATED 10.1.2011 , WHEREIN THE QUESTIONS RAISED BEFORE THEIR LORDSHIPS AND DECISION RENDERED THEREO N IS AS UNDER:- ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, LD. CIT(A) OUGHT TO HAVE UPHELD THE ASSESSMENT ORDER AS THE TRANSACTION ENTERED INTO BY THE ASSESSEE WAS A SCHEME FOR LAUNDERING BLACK MONEY IN TO WHITE MONEY OR ACCOUNTED MONEY AND THE LD. CIT(A) OUGHT TO HAVE HE LD THAT THE ASSESSEE HAD NOT ESTABLISHED THE GENUINENESS OF THE TRANSACT ION. ITA NO. 1669/KOL/2009-C-AM M/S. GLOBAL MERCANTILES PVT. LTD 12 HELD AFTER HEARING THE LEARNED COUNSEL FOR THE APPELLANT AND AFTER GOING THROUGH THE DECISION OF THE SUPREME COURT IN THE CAES OF CI T VS M/S LOVELY EXPORTS PVT LTD, WE ARE AT ONE WITH THE TRIBUNAL BELOW THAT THE POINT INVOLVED IN THIS APPEAL IS COVERED BY THE SAID SUPREME COURT DECISIO N IN FAVOUR OF THE ASSESSEE AND THUS, NO SUBSTANTIAL QUESTION OF LAW I S INVOLVED IN THIS APPEAL. THE APPEAL IS DEVOID OF ANY SUBSTANCE AND IS DISMIS SED. 3.4.2. IN VIEW OF THE AFORESAID FINDINGS AND RESPE CTFULLY FOLLOWING THE DECISION OF THE APEX COURT (SUPRA) AND JURISDICTIONAL HIGH COURT (S UPRA) , WE FIND NO INFIRMITY IN THE ORDER OF THE LEARNED CIT(A) AND ACCORDINGLY, THE GR OUND NO.2 RAISED BY THE REVENUE IS DISMISSED. 4. THE LAST GROUND TO BE DECIDED IN THIS APPEAL OF THE REVENUE IS AS TO WHETHER THE LEARNED CIT(A) IS JUSTIFIED IN DELETING THE ADDITIO N U/S 68 OF THE ACT MADE IN RESPECT OF ALLOTMENT OF SHARES TO 20 INDIVIDUALS FOR AN AMO UNT OF RS. 57,00,000/- IN THE FACTS AND CIRCUMSTANCES OF THE CASE. 4.1. THE BRIEF FACT OF THIS ISSUE IS THAT THE ASSE SSEE HAD RECEIVED SHARE APPLICATION MONIES FROM 20 INDIVIDUALS IN THE EARLIER YEAR WHIC H WERE KEPT IN SHARE APPLICATION MONEY ACCOUNT. DURING THE ASST YEAR UNDER APPEAL, THE ASSESSEE ALLOTTED SHARES TO THESE 20 INDIVIDUALS OUT OF TRANSFERRING THE MONIES FROM SHARE APPLICATION MONEY ACCOUNT TO SHARE CAPITAL ACCOUNT. THE DETAILS OF 20 INDIVIDU ALS ARE REFLECTED IN PAGE 6 & 7 OF THE LEARNED CIT(A) ORDER. THE LEARNED AO ASKED THE ASSE SSEE TO PRODUCE THE SHAREHOLDERS BEFORE HIM. HE FOUND THAT THE ASSESSE E DID NOT DO SO BUT FURNISHED COPIES OF PAY ORDERS USED FOR PAYMENTS TO THE ASSESSEE COM PANY AND ALSO FURNISHED INCOME TAX PARTICULARS AND BALANCE SHEETS OF ALL THE SHARE HOLDERS. THE LEARNED AO ON ANALYZING ALL THE BALANCE SHEETS OBSERVED THAT THE SHAREHOLDERS HAVE PALTRY INCOME AND SMALL SAVINGS AND NONE OF THEM HAVE ANY BANK ACCOUN T AND HUGE CASH BALANCES WERE SHOWN IN THEIR HANDS OUT OF WHICH PAY ORDERS WERE O BTAINED. BASED ON THIS, THE LEARNED AO CONCLUDED THAT THESE SHAREHOLDERS DO NOT HAVE CREDITWORTHINESS TO INVEST ITA NO. 1669/KOL/2009-C-AM M/S. GLOBAL MERCANTILES PVT. LTD 13 IN THE ASSESSEE COMPANY AND BROUGHT THE ENTIRE SUM OF RS. 57,00,000/- TO TAX AS UNEXPLAINED CASH CREDIT U/S 68 OF THE ACT. 4.2. ON FIRST APPEAL, THE LEARNED CIT(A) OBSERVED THAT THE ENTIRE SHARE APPLICATION MONIES OF RS. 57,00,000/- WERE RECEIVED DURING THE PREVIOUS YEAR 2004-05 RELEVANT TO ASST YEAR 2005-06 FROM 20 PERSONS AND THE SHARES WE RE ALLOTTED TO THEM DURING THE ASST YEAR UNDER APPEAL. HE OBSERVED THAT THE ASSES SEE HAD FURNISHED DETAILS OF THE SHARE APPLICANTS GIVING THE DATE WISE RECEIPTS, MOD E OF PAYMENT, AMOUNT, NAME, ADDRESS, INCOME TAX RETURNS, PA NO. OF SHARE APPLIC ANTS ALONG WITH THEIR BALANCE SHEET. THE LEARNED CITA ALSO OBSERVED THAT THE ASSESSEE IN ITS REPLY TO SHOW CAUSE NOTICE BEFORE THE LEARNED AO HAD REQUESTED HIM TO USE HIS POWER AND AUTHORITY FOR THE PHYSICAL APPEARANCE OF THE SHAREHOLDERS WHICH WAS N OT EXERCISED BY THE LEARNED AO. INSTEAD THE LEARNED AO CONTINUED TO INSIST ON THE A SSESSEE TO PRODUCE THE SHAREHOLDERS BEFORE HIM. HE ULTIMATELY CONCLUDED THAT THE ASSES SEE HAD DULY DISCHARGED ITS ONUS OF PROVIDING COMPLETE DETAILS OF THE SHAREHOLDERS AND IN ANY CASE, NO ADDITION COULD BE MADE U/S 68 OF THE ACT IN THE ASST YEAR UNDER APPEA L AS NO SHARE APPLICATION MONIES WERE RECEIVED DURING THE ASST YEAR UNDER APPEAL. A GGRIEVED, THE REVENUE IS IN APPEAL BEFORE US BY FILING THE FOLLOWING GROUND:- THAT IN THE FACTS AND CIRCUMSTANCES OF THE CASE, T HE LD. CIT(A) HAS ERRED IN DELETING THE ADDITION MADE U/S 68 IN RESPECT OF THE ALLOTMENT OF SHARES TO 20 NUMBERS OF INDIVIDUAL INVESTORS FOR AN AMOUNT OF RS. 57 LAKHS, WHERE GENUINENESS OF THE TRANSACTIONS AND CREDITWORTHINES S OF THE INVESTORS WERE NOT ESTABLISHED. 4.3. THE LEARNED DR PRAYED FOR ADMISSION OF THE ADD ITIONAL GROUND RAISED BEFORE US AND VEHEMENTLY SUPPORTED THE ORDER OF THE LEARNED A O. IN RESPONSE TO THIS, THE LEARNED AR FAIRLY CONCEDED TO ADMISSION OF THIS ADD ITIONAL GROUND AND VEHEMENTLY SUPPORTED THE ORDER OF THE LEARNED CIT(A). ITA NO. 1669/KOL/2009-C-AM M/S. GLOBAL MERCANTILES PVT. LTD 14 4.4. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUS ED THE MATERIALS AVAILABLE ON RECORD INCLUDING THE DETAILED PAPER BOOK FILED BY T HE ASSESSEE. WE FIND THAT THE ADDITIONAL GROUND RAISED BY THE ASSESSE SEPARATELY BEFORE US VIDE ITS COVERING LETTER DATED 9.12.2011 IS ADMITTED AS IT APPEARS TO BE A G ENUINE AND BONAFIDE ERROR OF OMISSION ON THE PART OF THE REVENUE FROM NOT RAISIN G THIS GROUND IN THE ORIGINAL GROUNDS OF APPEAL FILED ALONG WITH THE MEMORANDUM O F APPEAL. MOREOVER, IT DOES NOT REQUIRE ANY FRESH EXAMINATION OF FACTS. HENCE THE SAME IS ADMITTED HEREIN FOR THE SAKE OF ADJUDICATION. 4.4.1. WE FIND FROM THE DETAILS AVAILABLE ON RECOR D THAT THE SHARE APPLICATION MONIES FROM 20 INDIVIDUALS IN THE SUM OF RS. 57,00,000/- H AS BEEN RECEIVED BY THE ASSESSEE DURING THE FINANCIAL YEAR 2004-05 RELEVANT TO ASST YEAR 2005-06 AND ONLY THE SHARES WERE ALLOTTED TO THEM DURING THE ASST YEAR UNDER AP PEAL. ADMITTEDLY NO MONIES WERE RECEIVED DURING THE ASST YEAR UNDER APPEAL AND HENC E THERE IS NO SCOPE FOR INVOKING THE PROVISIONS OF SECTION 68 OF THE ACT . HENCE WE HOL D THAT THE ORDER PASSED BY THE LEARNED CITA IN THIS REGARD DOES NOT REQUIRE ANY IN TERFERENCE. ACCORDINGLY THE GROUND NO. 3 RAISED BY THE REVENUE IS DISMISSED. 5. IN THE RESULT, THE APPEAL OF THE REVENUE IS D ISMISSED. THIS ORDER IS PRONOUNCED IN OPEN COURT ON 13 -01-2016 SD/- ( S.S. VISWANETHRA RAVI, JUDICIAL MEMBER ) SD/- (M. BALAGANESH, ACCOUNTANT MEMBER) DATE 13 -01/2016 ITA NO. 1669/KOL/2009-C-AM M/S. GLOBAL MERCANTILES PVT. LTD 15 1.. THE APPELLANT: THE DCIT, CIR-1, SILIGURI AAYK AR BHAWAN, PARIBAHAN NAGAR, MATIGARA, SILIGURI PIN 734010. 2 THE RESPONDENT: M/S. GLOBAL MERCANTILES PVT. LT D, MANGAL PANDEY ROAD, SILIGURI, DARJEELING. 3 /THE CIT, 4.THE CIT(A ) 5. DR, KOLKATA BENCH 6. GUARD FILE. TRUE COPY, BY ORDER, ASSTT REGISTRAR **PRADIP SPS COPY OF THE ORDER FORWARDED TO:-