ITO 5(1)(1), MUMBAI V. AMBIKA METALCHEM IMPEX P LTD, MUMBAI

ITA 1676/MUM/2017

• Counselvise Citation: [2019] 117 COUNSELVISE.COM (IT) 5366 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 2 month(s) 22 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-05-2019
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2009-2010
• Appeal Filed On: 09-03-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: RAJESH KUMAR YADAVLD
• Assessee Lawyers: SURESH PATNI LD ARS
• Keywords: Unexplained cash credit; Bogus Share capital; Opportunity of cross examination; Source of fund; Third party statement; Accommodation entries; Reassessment proceedings
• Section: 143(3); 133(6); 131; 68; 148

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH, MUMBAI . . , , BEFORE HONBLE SHRI C.N. PRASAD, JM AND HONBLE SHRI MANOJ KUMAR AGGARWAL, AM ./ I.T.A. NO.1676/MUM/2017 ( / ASSESSMENT YEAR: 2009-10) INCOME TAX OFFICER - 5(1)(1) ROOM NO.570, 5 TH FLOOR AAYKAR BHAVAN, M.K. ROAD MUMBAI-400 020. / VS. AMBIKA METALCHEM IMPEX P .LTD. 23, SHREENATHJI BLDG., 1 ST FLOOR, 142 KIKA STREET, GULAL WADI,MUMBAI-400 004. ! ./ ./PAN/GIR NO. AADCA-9474-E ( !# /APPELLANT ) : ( $!# / RESPONDENT ) ASSESSEE BY : S/SHRI NEELKANTH KHANDELWAL & SURESH PATNI- LD. ARS REVENUE BY : SHRI RAJESH KUMAR YADAV - LD.DR / DATE OF HEARING : 24/04/2019 / DATE OF PRONOUNCEMENT : 31/05/2019 / O R D E R PER MANOJ KUMAR AGGARWAL (ACCOUNTANT MEMBER) 1. AFORESAID APPEAL BY REVENUE FOR ASSESSMENT YEAR [IN SHORT REFERRED TO AS AY] 2009-10 CONTEST THE ORDER OF LD. COMMIS SIONER OF INCOME- TAX (APPEALS)-10, MUMBAI, [IN SHORT REFERRED TO AS CIT(A)], APPEAL NO. CIT(A)-10/ITO-5(1)(1)/482/2015-16 D ATED 18/11/2016 ON FOLLOWING GROUNDS OF APPEAL :- 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW, THE LD CIT(A) HAS ERRED IN DELETING THE ADDITION OF RS. 84 LACS U /S 68 OF THE INCOME-TAX ACT ON ACCOUNT OF BOGUS SHARE CAPITAL AND SHARE PREMIUM . 2 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW THE LD CIT(A) FAILED TO APPRECIATE THE FACT ABOUT NON-PRODUCTION OF ANY SINGLE PARTY FOR EXAMINATION BY THE AO. 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW THE LD CIT(A) FAILED TO APPRECIATE THE FACT THAT SHRI PRAVIN KUMA R JAIN WAS INDULGED IN ISSUING BOGUS ACCOMMODATION ENTRIES IN DIFFERENT FO RMS INCLUDING SHARE CAPITAL AND SHARE PREMIUM. 2.1 FACTS IN BRIEF THAT THE ASSESSEE BEING A RESIDENT CORPORATE ASSESSEE STATED TO BE ENGAGED IN SHARE MARKET ACTIVITIES, WAS ASSESSED FOR IMPUGNED AY U/S 143(3) R.W.S. 147 ON 05/02/2016 WHEREIN THE INCOME WAS DETERMINED AT RS.76.37 LACS AFTER SOLE A DDITION OF UNEXPLAINED CASH CREDIT U/S 68 ON ACCOUNT OF SHARE CAPITAL / SHARE PREMIUM FOR RS.84 LACS AS AGAINST RETURNED LOSS OF RS.7.62 LACS E-FILED BY THE ASSESSEE ON 18/09/2009 WHICH WAS PROCESSED U /S 143(1). 2.2 THE REASSESSMENT PROCEEDINGS GOT TRIGGERED PURS UANT TO RECEIPT OF CERTAIN INFORMATION FROM DIT(INVESTIGATION)-II, MUMBAI THAT THE ASSESSEE INDULGED IN CERTAIN BOGUS TRANSACTIONS WITH HAWALA ENTITIES. ACCORDINGLY, THE CASE WAS REOPENED BY ISSUANCE OF NOTICE U/S 148 ON 13/02/2015 WHICH WAS FOLLOWED BY STATUTORY NOTICES U/S 143(2) & 142(1). THE REASON RECORDED FOR REOPENING THE ASSESSMENT WERE DULY SUP PLIED IN DUE COURSE. 2.3 DURING REASSESSMENT PROCEEDINGS, IT TRANSPIRED THAT THE ASSESSEE RECEIVED SHARE APPLICATION MONEY ON 2.80 LACS SHARE S OF FACE VALUE OF RS.10/- EACH AT A PREMIUM OF RS.20/- PER SHARES. TH ESES SHARES WERE ISSUED TO FOUR ENTITIES. ACCORDINGLY, THE GROSS AMO UNT RECEIVED ON THIS ACCOUNT AGGREGATED TO RS.84 LACS. ACCORDINGLY, THE ASSESSEE WAS DIRECTED TO FILE REQUISITE DOCUMENTARY EVIDENCES IN SUPPORT OF IDENTITY OF THE INVESTOR, CREDITWORTHINESS OF THE INVESTORS & G ENUINENESS OF THE TRANSACTIONS AND ALSO JUSTIFY THE FINANCIAL WORTH O F THE INVESTORS. 3 2.4 IN RESPONSE, THE ASSESSEE FURNISHED ACKNOWLEDGE MENT OF RETURN OF INCOME, AUDITED FINANCIAL STATEMENTS & BANK STATEME NTS OF ALL THE FOUR ENTITIES. NOTICES WERE ISSUED U/S 133(6) TO CONFIRM THE TRANSACTIONS WHICH WERE DULY RESPONDED TO BY THREE ENTITIES WHEREAS ON E NOTICE WAS RETURNED BACK UNSERVED. THE ASSESSEE WAS DIRECTED T O PRODUCE THE SAID PARTIES FOR CONFIRMATION OF THE TRANSACTIONS. 2.5 THE ASSESSEE SUBMITTED THAT ALL THE COMPANIES W ERE REGULAR INCOME TAX ASSESSEE AND REFLECTED THE AFORESAID INV ESTMENT IN THEIR RESPECTIVE BALANCE SHEET. FORM NO.2 FILED WITH REGISTRAR OF COMPANIES WITH RESPECT TO ALLOTMENT OF SHARES WAS ALSO FILED TO SUPPORT THE SAME. IN THE ABOVE BACKGROUND, THE ASSESSEE CLAIMED TO HAVE FULFILLED AFORESAID PRIMARY INGREDIENTS AS DESIRED BY LD. AO. 2.6 HOWEVER, THE SAME COULD NOT FIND FAVOR WITH LD. AO WHO OBSERVED THAT ALL THE ABOVE ENTITIES WERE HAWALA OPERATOR ENTITIES OPERATED AND MANAGED BY PRAVIN KUMAR JAIN GROUP WHICH CAME TO LIGHT DURING SEARCH & PROCEEDINGS ON THE SAID GROUP. THE TOTALITY OF FA CTUAL MATRIX LED THE LD. AO TO BELIEVE THAT THE ASSESSEE FAILED TO PROVE THE IDENTITY OF THE INVESTORS, THEIR CAPACITY TO INVEST AND THE GENUINE NESS OF THE TRANSACTIONS. FINALLY, CITING VARIOUS JUDICIAL PRON OUNCEMENTS, THE AFORESAID TRANSACTIONS WERE TERMED AS PAPER TRANSAC TION AND THEREFORE, ADDED TO THE INCOME OF THE ASSESSEE AS UNEXPLAINED CASH CREDIT U/S 68. 3.1 AGGRIEVED, THE ASSESSEE AGITATED THE SAME WITH SUCCESS BEFORE LD. FIRST APPELLATE AUTHORITY VIDE IMPUGNED ORDER DATED 18/11/2016 WHEREIN, RELYING UPON THE DECISION OF HONBLE BOMBAY HIGH CO URT RENDERED IN VODAFONE INDIA SERVICES PVT. LTD. [368 ITR 1], IT WAS HELD THAT SHARE PREMIUM WAS CAPITAL IN NATURE AND COULD NOT BE BROU GHT TO TAX UNLESS EXPRESSLY PROVIDED. IT WAS ALSO NOTED THAT THE AMEN DMENT MADE BY 4 FINANCE ACT, 2012 TO SECTION 56(2)(VIIB) TO TREAT T HE EXCESS SHARE PREMIUM AS INCOME FROM OTHER SOURCES WAS APPLICABLE ONLY WITH EFFECT FROM AY 2013-14. RELIANCE WAS ALSO PLACED ON THE DE CISION OF THIS TRIBUNAL RENDERED IN GREEN INFRA LTD. 145 ITD 240 FOR THE ARGUMENT THAT IT WAS THE PREROGATIVE OF THE BOARD OF DIRECTORS OF A COMPANY TO DECIDE THE PREMIUM AMOUNT AND IT WAS THE WISDOM OF SHAREHO LDERS WHETHER THEY WANTED TO SUBSCRIBE TO SUCH A HEAVY PREMIUM OR NOT AND REVENUE AUTHORITIES COULD NOT QUESTION THE CHARGING OF HIGH PREMIUM WITHOUT ANY BAR FROM ANY LEGISLATED LAW OF THE LAND. 3.2 IN THE ABOVE BACKGROUND, IT WAS NOTED THAT THE ASSESSEE HAD PRODUCED THE FOLLOWING DOCUMENTARY EVIDENCES DURING ASSESSMENT PROCEEDINGS AS WELL AS DURING APPELLATE PROCEEDINGS IN SUPPORT OF THE IMPUGNED TRANSACTIONS: - 1. SHARE APPLICATION FORMS DULY SIGNED BY EACH OF T HE FOUR COMPANIES 2. RESOLUTION OF THE BOARD AUTHORIZING THE COMPANY TO INVEST IN SHARE CAPITAL OF THE APPELLANT COMPANY 3. COVERING LETTER OF INVESTMENT IN SHARE CAPITAL 4. CONFIRMATION OF INVESTMENT BY EACH OF THE FOUR C OMPANIES 5. FINANCIAL STATEMENTS OF THE INVESTING COMPANIES 6. THE COPIES OF ITR ACKNOWLEDGEMENTS OF THE FOUR C OMPANIES 7. THE COPIES OF THE BANK STATEMENT OF THE FOUR COM PANIES 8. THE COPY OF THE BANK STATEMENT OF THE APPELLANT COMPANY 9. THE COPY OF FORM NO. 2 FILED WITH ROC ABOUT ALLO TMENT OF SHARES AND INCREASE IN CAPITAL AFTER CONSIDERING THE SAME, LD. CIT(A) REACHED A CO NCLUSION THAT THERE COULD BE NO DOUBT WITH REGARD TO IDENTITY, GENUINEN ESS AND CREDITWORTHINESS OF THE INVESTORS SINCE THE INVESTO RS WERE REGULARLY FILING INCOME TAX RETURNS, THE TRANSACTIONS WERE THROUGH B ANKING CHANNELS AND THE ASSESSEE HAD FILED REQUISITE DETAILS WITH REGISTRAR OF COMPANIES AS TO ALLOTMENT OF SHARES. 5 3.3 REGARDING NON-SERVICE OF NOTICE ON ONE OF THE E NTITIES, IT WAS NOTED THAT THERE WAS CHANGE OF ADDRESS WHICH WAS PROVIDED TO LD. AO. HOWEVER, LD. AO DID NOT SEND ANY NOTICE AT THE NEW ADDRESS TO CONFIRM THE TRANSACTIONS. NEVERTHELESS, THE ASSESSEE HAD F ILED SIMILAR DOCUMENTS / DETAILS WITH RESPECT TO THIS ENTITY ALS O AND THEREFORE, THE TRANSACTIONS COULD NOT BE DISBELIEVED. 3.4 FINALLY, IT WAS CONCLUDED THAT LD. AO HEAVILY P ROCEEDED ON THE BASIS OF STATEMENTS GIVEN BY PRAVIN KUMAR JAIN WITHOUT PROVING THAT THE DOCUMENTS SUBMITTED BEFORE HIM WERE ENGINEERED DOCU MENTS AND IT WAS THE ASSESSEES OWN UNEXPLAINED MONEY WHICH WAS PUMP ED BACK IN THE SHAPE OF SHARE APPLICATION MONEY. THEREFORE, THE ST ATED ADDITION, IN THE OPINION OF LD. CIT (A), COULD NOT BE SUSTAINED. AGGRIEVED, THE REVENUE IS IN FURTHER APPEAL BEFORE US. 4. THE LD. DEPARTMENTAL REPRESENTATIVE [DR] RELYING UPON THE STAND OF LD. AO, SUBMITTED THAT THE ASSESSEE COULD NOT PR ODUCE ANY OF THE INVESTOR TO CONFIRM THE TRANSACTIONS. RELIANCE HAS BEEN PLACED ON THE RECENT DECISION OF HONBLE APEX COURT RENDERED IN PCIT VS. NRA IRON & STEEL PVT. LTD. [412 ITR 161]. THE LD. AUTHORIZED REPRESENTATIVE FOR ASSESSEE [AR] , SUPPORTING THE IMPUGNED ORDER, SUBMITTED THAT FULFILMENT OF PRIMAR Y INGREDIENTS OF SECTION 68 WAS DEMONSTRATED BY THE ASSESSEE WITH DO CUMENTARY EVIDENCES WHICH REMAIN UNREBUTTED BY THE REVENUE. T HE ATTENTION WAS DRAWN TO THE FACT THAT LD. AO HAD SUFFICIENT POWER U/S 131 TO SUMMON ANY OF THE INVESTOR COMPANY AND INQUIRE ABOUT THE S AME PARTICULARLY WHEN THE ASSESSEE HAS DULY DISCHARGED THE PRIMARY O NUS CASTED UPON HIM. IT WAS SUBMITTED THAT ADDITIONS COULD NOT BE M ADE MERELY ON THE 6 BASIS OF CONJECTURES, SURMISES OR DOUBTS RELYING UP ON THIRD PARTY STATEMENTS. 5.1 WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSI ONS AND PERUSED RELEVANT MATERIAL ON RECORD. THE PERUSAL OF BASIC F ACTS AS ENUMERATED BY US IN THE PRECEDING PARAGRAPHS WOULD REVEAL THAT TH E ASSESSEE HAD FILED PLETHORA OF DOCUMENTS AS MENTIONED IN PARA 3.2 TO PROVE THE IDENTITY OF THE INVESTOR, CREDITWORTHINESS OF THE INVESTOR AND GENUINENESS OF THE TRANSACTIONS. ALL THE FOUR ENTITIES WERE CORPORATE ENTITIES AND FILING THEIR RESPECTIVE RETURN OF INCOME UNDER UNIQUE PERMANENT ACCOUNT NUMBER . THE FINANCIAL STATEMENTS, ANNUAL REPORTS AS WELL AS BANK STATEMENTS OF THE ALL THE INVESTORS WAS MADE AVAILABLE TO LD. AO. NOTHING ON RECORD SUGGEST THAT ANY CASH WAS EXCHANGED / TRANSACTED BE TWEEN THE ASSESSEE AND THE INVESTOR ENTITIES. THE PERUSAL OF BANK STATEMENTS OF ALL THE FOUR ENTITIES, AS PLACED ON RECORD, REVEAL THAT THERE IS NO IMMEDIATE CASH DEPOSIT IN THE RESPECTIVE BANK ACCOUNTS WHICH HAS LATER BEEN TRANSMITTED TO THE ASSESSEE IN THE SHAPE OF SHARE APPLICATION MONEY. THE INVESTMENTS WERE DULY REFLECTED IN THE FINANCIA L STATEMENTS OF THE INVESTOR COMPANIES. THE FACTUM OF INVESTMENT WAS CO NFIRMED BY ALL THE FOUR ENTITIES. THE THREE PARTIES RESPONDED TO NOTIC E U/S 133(6) AND CONFIRMED THE TRANSACTIONS WHEREAS NEW ADDRESS WAS PROVIDED WITH RESPECT TO THE FOURTH ENTITY. HOWEVER, NO FURTHER I NQUIRY HAS BEEN MADE BY LD. AO SO AS TO CONFIRM THE TRANSACTIONS. 5.2 THE LD. DR HAS RELIED UPON THE JUDGEMENT OF HON BLE APEX COURT RENDERED IN PCIT VS. NRA IRON & STEEL PVT. LTD. [412 ITR 161] WHICH WE HAVE CAREFULLY STUDIED. UPON PERUSAL, WE NOTE CE RTAIN DISTINGUISHING FEATURES VIS--VIS FACTUAL MATRIX OF THE PRESENT CA SE. UPON PERUSAL OF PARA 3.7 & 3.8 OF THE SAID JUDGEMENT, IT IS NOTED T HAT LD. AO HAD ISSUED 7 SUMMONS TO AS MANY AS 19 INVESTOR ENTITIES BUT NOBO DY APPEARED ON BEHALF OF THE INVESTOR COMPANIES. THE SUBMISSIONS W ERE RECEIVED THROUGH DAK ONLY WHICH CREATED A DOUBT ABOUT THE ID ENTITY OF THE INVESTOR COMPANY. FURTHER, LD. AO INDEPENDENTLY GOT FIELD INQUIRIES CONDUCTED AT THE LOCATION OF INVESTOR COMPANIES, TH E RESULT OF WHICH HAS BEEN TABULATED IN THE SAID PARA. NOTICE WAS SERVED ON FEW ENTITIES BUT THE SAME WERE NOT REPLIED TO. IN FEW CASES, THE NOT ICES WERE RETURNED BACK. SUBMISSIONS WERE RECEIVED IN FEW CASES THOUGH DAK WHEREIN THE COMPANY ONLY PROVIDED THE MODE OF INVESTMENT BUT NO REASONS WERE SUPPLIED FOR PAYING A HUGE PREMIUM OF RS.190/- PER SHARE. ANOTHER STRIKING FEATURE WAS THAT MOST OF THE INVESTORS HAD REFLECTED MEAGRE INCOME DURING ASSESSMENT YEAR UNDER DISPUTE. THE TW O COMPANIES IN MUMBAI AS WELL AS GUWAHATI WERE FOUND TO BE NON-EXI STENT. WITH RESPECT TO KOLKATA COMPANIES, THE RESPONSE CAME THROUGH DAK ONLY AND NOBODY APPEARED. FURTHER, THE BANK STATEMENTS WERE NOT PRODUCED IN MOST OF THE CASES TO ESTABLISH THE SOURCE OF FUNDS FOR MAKING HUGE INVESTMENTS. 5.3 HOWEVER, THE FACTUAL MATRIX, BEFORE US, IN THE PRESENT CASE IS QUITE DIFFERENT. IN THE PRESENT CASE, WE FIND THAT THE AS SESSEE HAS DULY DISCHARGED THE INITIAL ONUS OF PROVING THE IDENTITY OF THE INVESTORS, CREDITWORTHINESS OF THE TRANSACTIONS AND GENUINENES S OF THE TRANSACTIONS. NOTICES ISSUED U/S 133(6) HAVE BEEN RESPONDED TO. I N SUCH A SCENARIO, THE ONUS TO DISLODGE THE ASSESSEES CLAIM, IN OUR O PINION, WAS SHIFTED BACK TO LD. AO AND HE WAS DUTY BOUND TO INVESTIGATE THE CASE FURTHER. HOWEVER, THE FACTS ON RECORD NOWHERE ESTABLISHES TH AT SUCH FURTHER INQUIRIES / INVESTIGATIONS HAVE SUBSEQUENTLY BEEN C ONDUCTED BY LD. AO IN THE PRESENT CASE. FOR THE SAID PROPOSITION, WE D RAW STRENGTH FROM THE 8 LAND MARK CASE OF KALE KHAN MOHAMMAD HANIF VS. CIT [50 ITR 1] AND ROSHAN DI HATTI VS. CIT [107 ITR 938] AS ALREADY CITED IN THE ABOVE DECISION OF HONBLE APEX COURT. SIMILAR IS TH E RATIO OF HONBLE APEX COURT RENDERED IN CIT VS. ORISSA CORPORATION [159 ITR 78]. IT IS TRITE LAW THAT ADDITIONS COULD NOT BE MADE MERELY O N THE BASIS OF DOUBTS, CONJECTURES OR SURMISES. 5.4 UPON DUE CONSIDERATION OF THE FACTUAL MATRIX, W E FIND THAT NO INFIRMITY COULD BE FOUND IN THE IMPUGNED ORDER. THE REFORE, BY CONFIRMING THE SAME, WE DISMISS THE APPEAL. 6. IN NUTSHELL, THE APPEAL STANDS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 31ST MAY, 201 9. SD/- SD/- (C.N. PRASAD) (MANOJ KUMAR AGGARWAL) / JUDICIAL MEMBER / ACCOUNTANT MEMBER MUMBAI; DATED : 31/05/2019 SR.PS, JAISY VARGHESE ! / COPY OF THE ORDER FORWARDED TO : 1. !# / THE APPELLANT 2. $!# / THE RESPONDENT 3. + ( ) / THE CIT(A) 4. + / CIT CONCERNED 5. ,- & . , . , / DR, ITAT, MUMBAI 6. -/0 / GUARD FILE / BY ORDER, / (DY./ASSTT.REGISTRAR) , / ITAT, MUMBAI.