ACIT, Madurai V. M/s. P.N.R.Spinning Mills (Pvt.) Ltd., Dindigul

ITA 1681/CHNY/2011

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 61085 (ITAT-CHENNAI)
• Duration Of Justice: 7 month(s) 6 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-05-2012
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 10-05-2012
• Assessment Year: 2001-2002
• Appeal Filed On: 12-10-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: DR S MOHRANA
• Assessee Lawyers: G BASKAR
• Section: 133(6); 68

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH, CHENNAI BEFORE SHRI ABRAHAM P. GEORGE, ACCOUNTANT MEMBER AND SHRI VIKAS AWASTHY, JUDICIAL MEMBER I.T.A. NO. 1681/MDS/2011 (ASSESSMENT YEAR : 2001-02) THE ASSISTANT COMMISSIONER OF INCOME TAX, CIRCLE III, MADURAI. (APPELLANT) V. M/S P.N.R. SPINNING MILLS (PVT.) LTD., 15, GOPAL NAGAR, DINDIGUL 624 001. PAN : AACCP0616J (RESPONDENT) APPELLANT BY : DR. S. MOHRANA, CIT-DR RESPONDENT BY : SHRI G. BASKAR, ADVOCATE DATE OF HEARING : 10.05.2012 DATE OF PRONOUNCEMENT : 18.05.2012 O R D E R PER ABRAHAM P. GEORGE, ACCOUNTANT MEMBER : IN THIS APPEAL FILED BY THE REVENUE, ITS GRIEVANC E IS THAT THE CIT(APPEALS) FOLLOWING THE DECISION OF HONBLE APEX COURT IN THE CASE OF CIT V. LOVELY EXPORTS (P) LTD. (2008) 216 CTR 19 5, HAD DELETED THE ADDITION MADE BY THE A.O. TREATING SHARE APPLIC ATION MONEY, AS UNEXPLAINED. I.T.A. NO. 1681/MDS/11 2 2. SHORT FACTS APROPOS ARE THAT ASSESSEE, ENGAGED I N MANUFACTURING AND SELLING OF YARN, HAD RETURNED AN INCOME OF ` 27,42,550/- FOR IMPUGNED ASSESSMENT YEAR. DURING T HE COURSE OF ASSESSMENT PROCEEDINGS, IT WAS NOTED BY THE A.O. TH AT ASSESSEE HAD SHOWN AS SUM OF ` 2,99,00,000/- AS SHARE APPLICATION MONEY PENDING ALLOTMENT. ASSESSEE WAS REQUIRED TO PRODUCE DETAIL S. FROM SUCH DETAILS, A.O. NOTED THAT THERE WERE FIFTY SHARE APP LICANTS AND NOTICES UNDER SECTION 133(6) OF INCOME-TAX ACT, 1961 (IN SH ORT 'THE ACT') WERE ISSUED TO SUCH PERSONS. REPLIES WERE FILED BY THE SHARE APPLICANTS. AS PER THE A.O., NONE OF THEM WERE HAVING PA NUMBER S, NOR WERE ASSESSED TO TAX. SHARE APPLICATION MONEY WAS GIVEN IN CASH AND SOURCE WAS EXPLAINED BY ALL OF THEM AS SAVINGS OR O UT OF AGRICULTURAL INCOME. AS PER THE A.O., THE REPLIES GIVEN BY ALL THE SHARE APPLICANTS WERE IN THE SAME FORMAT BUT FOR CHANGE IN THE AMOUN TS. THE A.O. THUS CAME TO A CONCLUSION THAT ASSESSEE WAS NOT ABL E TO EXPLAIN ` 2,99,00,000/- UNDER THE HEAD SHARE APPLICATION MON EY AND A DISALLOWANCE THEREOF WAS MADE UNDER SECTION 68 OF T HE ACT. 3. IN ITS APPEAL BEFORE CIT(APPEALS), ARGUMENT OF T HE ASSESSEE WAS THAT IT HAD DISCHARGED THE ONUS RESTING ON IT B Y SUBMITTING DETAILS OF EACH OF THE SHARE APPLICANTS. CIT(APPEALS) REQU IRED A REMAND REPORT FROM THE A.O. SINCE ASSESSING OFFICER HAD AD MITTED BEFORE HIM I.T.A. NO. 1681/MDS/11 3 THAT HE COULD NOT MAKE ADEQUATE ENQUIRIES DURING TH E ASSESSMENT PROCEEDING. IN THE REMAND REPORT SUBMITTED, PURSUA NT TO THE DIRECTION OF CIT(APPEALS), A.O. ADMITTED THAT DETAILS OF 33 P ERSONS, WHO HAD FILED RETURNS OF INCOME, WERE GIVEN BY THE ASSESSEE . AS PER THE A.O., 17 PERSONS HAD NOT FILED ANY RETURN OF INCOME. BAS ED ON THE SUBMISSIONS AND RECORDS, THE A.O. CAME TO A CONCLUS ION THAT A SUM OF ` 1,70,14,780/- STOOD EXPLAINED OUT OF ` 2,99,00,000/- AND CREDIT APPEARING DOUBTFUL WAS ONLY ` 1,28,85,220. CIT(APPEALS) NOTED THAT ASSESSEE HAD SUBMITTED DETAILS OF 50 DEPOSITORS AND EACH ONE OF THEM CONFIRMED SUBSCRIPTION BY WAY OF SHARE APPLICA TION MONEY. EACH OF THE DEPOSITORS HAD RESPONDED TO THE NOTICE OF THE A.O. AND OUT OF 50, 34 WERE HAVING PA NUMBERS. RELYING ON T HE DECISION OF HONBLE APEX COURT IN THE CASE OF CIT V. LOVELY EXP ORTS (P) LTD. (2008) 216 CTR 195, CIT(APPEALS) HELD THAT EVEN IF THE SHAREHOLDERS WERE BOGUS, DEPARTMENT COULD NOT PROCEED AGAINST TH E ASSESSEE, BUT ONLY MAKE INDIVIDUAL ASSESSMENT OF SHARE APPLICANTS . IN THIS VIEW OF THE MATTER, HE DELETED THE ADDITION IN TOTO. 4. NOW BEFORE US, LEARNED D.R., ASSAILING THE ORDER OF CIT(APPEALS), SUBMITTED THAT THERE WAS NO PROPER EV IDENCE GIVEN BY THE SHARE APPLICANTS AT LEAST TO THE EXTENT OF ` 1,28,85,220/-. THE MONEY WAS RECEIVED IN CASH AND CIT(APPEALS) FELL IN ERROR IN RELYING I.T.A. NO. 1681/MDS/11 4 ON THE DECISION OF HONBLE APEX COURT IN THE CASE O F LOVELY EXPORTS (P) LTD. (SUPRA) FOR DELETING THE ADDITION IN TOTO. RELYING ON THE DECISION OF HONBLE DELHI HIGH COURT IN THE CASE OF CIT V. NOVA PROMOTERS & FINLEASE (P) LTD. IN ITA NO.342 OF 2011 DATED 15.2.2012, LEARNED D.R. SUBMITTED THAT WHEN CREDIT APPEARED IN THE BOOKS OF THE ASSESSEE ON WHICH IT COULD NOT OFFER S UFFICIENT EXPLANATION REGARDING THE NATURE AND SOURCE, AN ADD ITION COULD BE DONE. AS PER THE LEARNED D.R., HONBLE DELHI HIGH COURT HAD CONSIDERED THE DECISION OF HONBLE APEX COURT IN TH E CASE OF LOVELY EXPORTS (P) LTD. (SUPRA). IN THE CASE OF LOVELY EX PORTS (P) LTD., THE MONEY HAD COME TO THE CONCERNED COMPANY THROUGH BAN KING CHANNELS AND COMPLETE RECORDS WERE AVAILABLE. ACCO RDING TO HIM, HERE, THE ASSESSEE HAD NOT PROVED THE IDENTITY OF T HE CREDITORS NOR THE GENUINENESS OF THE TRANSACTION. HE, THEREFORE, REL YING ON THE DECISION OF HONBLE DELHI HIGH COURT IN THE CASE OF NOVA PRO MOTERS & FINLEASE (P) LTD. (SUPRA) SUBMITTED THAT CIT(APPEALS) OUGHT HAVE SUSTAINED THE ADDITION AT LEAST TO THE EXTENT OF ` 1,28,85,220/-. 5. PER CONTRA, A.R. SUPPORTING THE ORDER OF CIT(APP EALS), PLACED BEFORE US A COPY OF REMAND REPORT OF THE A.O. DATED 6.5.2009. HE SUBMITTED THAT A SUM OF ` 1,28,85,220/- WHICH WAS CONSIDERED AS UNEXPLAINED, WAS ACTUALLY FULLY EXPLAINED AND ALL O F THE CONCERNED I.T.A. NO. 1681/MDS/11 5 SHARE APPLICANTS HAD FILED THEIR RETURNS. ADDITION S WERE MADE IN THE HANDS OF CONCERNED INDIVIDUAL SHARE APPLICANTS AS W ELL. THEREFORE, ACCORDING TO HIM, CIT(APPEALS) WAS WELL JUSTIFIED I N DELETING THE ADDITION. 6. WE HAVE PERUSED THE ORDERS AND HEARD THE RIVAL S UBMISSIONS. OUT OF TOTAL AMOUNT OF ` 2,99,00,000/-, A SUM OF ` 1,70,14,780/- STOOD EXPLAINED AND THIS HAS BEEN ACCEPTED BY THE ASSESSI NG OFFICER HIMSELF IN THE REMAND REPORT DATED 6.5.2009. THE D ISPUTE IS ONLY REGARDING BALANCE AMOUNT OF ` 1,28,85,220/-. ENTIRE NUMBER OF 50 PERSONS, WHO WERE SHARE APPLICANTS, WERE COVERED IN THE ANNEXURES I AND II OF THE REMAND REPORT OF THE A.O. IN THE CAS E OF 15 PERSONS, A.O. HAS ACCEPTED THAT RETURNS WERE FILED BY THE CO NCERNED PERSONS, BUT, ORDERS WERE TO BE STILL ISSUED BY THE CONCERNE D ASSESSING OFFICERS. IN THE CASE OF 4 PERSONS, THE A.O. HAS A CCEPTED THAT THEY HAD FILED THEIR RETURNS AND ENTIRE APPLICATION MONE Y STOOD TAXED. IN THE CASE OF 3 PERSONS, IT IS NOTED BY THE A.O. THAT THEY HAD RETURNED INCOME ACCEPTING SOURCE FOR 60% OF THE SHARE APPLIC ATION MONEY AND 40% WAS TAXED IN THEIR HANDS AS AN ADDITION. IN TH E CASE OF 11 PERSONS, RETURNS WERE ACCEPTED BY THE CONCERNED A.O S. IN THE CASE OF 17 PERSONS, THE AMOUNTS WERE ACCEPTED BY THE ASS ESSING OFFICER HIMSELF EXCEPT FOR A SUM OF ` 2,94,000/- WHICH WAS CONSIDERED TO BE I.T.A. NO. 1681/MDS/11 6 DOUBTFUL. THUS, IN EVERYONE OF THE CASE, THE CONCE RNED SHARE APPLICATION MONEYS WERE RETURNED BY THE INDIVIDUAL SHARE APPLICANT. SOME OF THE RETURNS WERE STILL TO BE PROCESSED, SOM E WERE ACCEPTED AND SOME WERE ACCEPTED WITH ADDITIONS. THE ONLY AM OUNT WHICH HAS BEEN CONSIDERED AS DOUBTFUL WAS ` 2,94,000/- AND HERE ALSO, THIS WAS THE PART OF A LARGER SUM. THEREFORE, WITHOUT DOUBT , ASSESSEE HAD GIVEN FULL DETAILS OF EACH OF THE SHARE APPLICANTS INCLUDING DETAILS OF THEIR INCOME-TAX RETURNS AND PA NUMBERS. IT IS NOT A CASE WHERE ASSESSEE HAD FAILED TO ADDUCE EVIDENCE IN RESPECT O F ITS SHARE APPLICATION MONEY. IT HAD PROVED THE GENUINENESS O F THE TRANSACTION BY PRODUCING DETAILS OF THE SHARE APPLICANTS AND TH E LATTER HAD DIRECTLY REPLIED TO THE ASSESSING OFFICER ON THE QUERIES RAI SED BY HIM. WE ARE OF THE OPINION THAT THE CIT(APPEALS) WAS JUSTIFIED IN RELYING ON THE DECISION OF HONBLE APEX COURT IN THE CASE OF LOVEL Y EXPORTS (P) LTD. (SUPRA). 7. AS FOR THE DECISION OF HONBLE DELHI HIGH COURT IN THE CASE OF NOVA PROMOTERS & FINLEASE (P) LTD. (SUPRA), RELIED ON BY THE LEARNED D.R., FACTS OF THAT CASE SHOW THAT MATERIALS WERE S CRUTINIZED BY THE INVESTIGATION WING OF THE DEPARTMENT WHICH SHOWED T HAT THE CLAIM OF SHARE APPLICATION MONEY WAS NOT GENUINE. THERE WAS A MODUS OPERANDI WHEREBY ENTRY PROVIDERS WERE GIVING CREDIT SOURCE TO THE I.T.A. NO. 1681/MDS/11 7 ASSESSEE AND THE APPLICANTS FOR THE SHARES WERE ALL COMPANIES INCORPORATED UNDER COMPANIES ACT. HERE, ON THE OTH ER HAND, THESE ARE ALL INDIVIDUAL SHARE APPLICANTS AND THERE IS NO CASE FOR THE REVENUE THAT THESE PERSONS WERE MERE ENTRY PROVIDER S. WE ARE, THEREFORE, OF THE OPINION THAT THE DECISION OF DELH I HIGH COURT WILL NOT BE ANY HELP TO THE REVENUE. 8. IN THE RESULT, APPEAL FILED BY THE REVENUE STAND S DISMISSED. THE ORDER WAS PRONOUNCED IN THE COURT ON FRIDAY, TH E 18 TH OF MAY, 2012, AT CHENNAI. SD/- SD/- (VIKAS AWASTHY) (ABRAHAM P. GEORGE) JUDICIAL MEMBER ACCOUNTANT MEMBER CHENNAI, DATED THE 18 TH MAY, 2012. KRI. COPY TO: (1) APPELLANT (2) RESPONDENT (3) CIT(A)-II, MADURAI (4) CIT-II, MADURAI (5) D.R. (6) GUARD FILE