SNEHA HI-TECH PVT LTD, MUMBAI V. I.T.O. 4(3)(4), MUMBAI

ITA 1788/MUM/2011

• Counselvise Citation: [2014] 120 COUNSELVISE.COM (IT) 8049 (ITAT-MUMBAI)
• Duration Of Justice: 3 year(s) 7 month(s) 6 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 10-10-2014
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: H
• Next Hearing Date: 07-10-2014
• Assessment Year: 2006-2007
• Appeal Filed On: 04-03-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: VIJAY KUMAR BORA
• Assessee Lawyers: BEHARILAL
• Keywords: Gift; Opportunity of being heard

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCH H, MUMBAI BEFORE SHRI JOGINDER SINGH, JUDICIAL MEMBER AND SHRI N.K. BILLAIYA, ACCOUNTANT MEMBER ITA NO. 1788/MUM/2011 ASSESSMENT YEAR: 2006-07 M/S. SNEHA HI-TEC PVT. LTD. 18, GOVIND BUILDING, 140, PRINCESS STREET KALBADEVI, MUMBAI- 400 002 PAN:AAECS 6182 L VS. ITO-4(3)(4) AAYAKAR BHAVAN, M.K. ROAD MUMBAI (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI BEHARILAL REVENUE BY : SHRI VIJAY KUMAR BORA DATE OF HEARING : 07 .10 .2014 DATE OF PRONOUNCEMENT : 10.10.2014 O R D E R PER N.K. BILLAIYA, AM: THIS APPEAL FILED BY THE ASSESSEE IS PREFERRED AGA INST THE ORDER OF THE LD.CIT(A)-8, MUMBAI DATED 11.01.2011 PERTAINING TO A.Y. 2006-07. THE SOLE GRIEVANCE OF THE ASSESSEE IS THAT THE LD.CIT(A) HAS ERRED IN ADDING BENAMI TRANSACTION OF RS.3 LAC. 2. THE ASSESSEE IS A COMPANY, DURING THE YEAR UNDER CONSIDERATION THE MAIN BUSINESS OF THE ASSESSEE COMPANY WAS IN THE FIELD O F INVESTMENT AND FINANCE. DURING THE COURSE OF SCRUTINY ASSESSMENT PROCEEDINGS A LET TER NO. ITO (HQ)-24/BOGUS ENTRIES/2008-09/466 DATED 25.09.2008 OF ITO (HQ)-24 MUMBAI REGARDING BOGUS ENTRIES LOANS/GIFTS GIVEN BY MR. BHAGWAN H. PRAJAPA TI WAS FORWARDED BY ADDL. CIT, RANGE-24(1) MUMBAI WAS RECEIVED BY AO GIVING THE MO DUS OPERANDI OF BHAGWAN H. PRAJAPATI WHO WAS HAVING SAVINGS ACCOUNT WITH THE C ORPORATION BANK WHICH WAS OPERATED BY HIS FRIEND. IT WAS FURTHER MENTIONED TH AT BHAGWAN H. PRAJAPATI WAS NOT AWARE ABOUT ANY TRANSACTION IN THE SAID BANK ACCOUN T. ITA NO. 1788/MUM/2011 M/S. SNEHA HI-TEC PVT. LTD. ASSESSMENT YEAR: 2006-07 2 3. ON THE BASIS OF THIS INFORMATION A NOTICE WAS IS SUED TO THE ASSESSEE ASKING IT TO EXPLANATION THE TRANSACTION WITH BHAGWAN H. PRAJ APATI. THE AO ALSO EXAMINED BHAGWAN H. PRAJAPATI, THE RELEVANT EXTRACT OF THE S TATEMENT RECORDED IS AS UNDER:- Q. AS PER DETAILS AVAILABLE WITH THIS OFFICE IT IS SEEN THAT 30,000 SHARES OF M/S. LABH INTERNATIONAL P. LTD. HAVE BEEN PURCHASED BY YOU. KINDLY EXPLAIN THE SOURCES OF ACQUISITION AND THE RATIONALE BEHIND THE SAID INVESTMENT? ANS. I CONFIRM THAT 30,000 SHARES OF M/S. LABH INTE RNATIONAL P. LTD. WAS PURCHASED BY ME IN APRIL 2005. THE PAYMENT FOR THE SAME WAS MADE BY CHEQUE NO. 476757 DRAWN ON CORPORATION BANK, KALBAD EVI BRANCH, MUMBAI. I HAD INVESTED IN THE SHARES WITH THE HOPE OF HEARING DIVIDEND AND MAKING PROFITS ON ACCOUNT OF CAPITAL GAINS. Q. IS THE ACCOUNT IN CORPORATION BANK, KALBADEVI BR ANCH, THE SAME ACCOUNT WHICH WAS BEING OPERATED BY YOUR FRIEND AND FOR WHI CH YOU WERE PAID RS.25,000/- AS PER THE AFFIDAVIT DATED 29.05.2007 M ADE BY YOU? ANS. YES. Q. THIS IMPLIES THAT YOU HAVE NO CONTROL OVER THE S AID ACCOUNT ONLY YOU NAME HAS BEEN LENT TO OPERATE THIS ACCOUNT AND YOU HAVE NO CONTROL OVER THE DEPOSITS AND WITHDRAWALS IN THIS ACCOUNT? ANS. NO COMMENTS. Q. PLEASE EXPLAIN THE SOURCE DEPOSITS OF RS.2,23,92 5/- MADE IN THE AFORESAID BANK ACCOUNT ON 08.04.2005? ANS. I HAVE NO IDEA BECAUSE THE ACCOUNT WAS BEING O PERATED BY MY FRIEND. Q. CAN YOU CONFIRM THAT YOU ARE THE OWNER OF 30,000 SHARES OF M/S. LABH INTERNATIONAL PVT. LTD. ANS. I AM NOT SURE OF THE SAME AS IT IS BEING HANDL ED BY MY FRIED WHO HAS BEEN OPERATED THE BANK ACCOUNT. Q. PLEASE GIVE DETAILS OF THE IDENTITY OF YOUR FRIE ND? ANS. MY FRIEND UNFORTUNATELY LOST HIS LIFE IN THE B OMB BLAST IN JULY 2006. Q. THE EXPLANATIONS GIVEN BY YOU ARE VAGUE AND UNAC CEPTABLE. THE UNFORTUNATE JULY TRAIN BLAST ARE BEING USED BY YOU TO PROTECT THE IDENTITY OF THE PERSON WHO IS THE MASTERMIND BEHIND THE ENTIRE TRANSACTION. YOU HAVE NOT BEEN ABLE TO EXPLAIN THE SOURCE OR THE IDENTITY OF THE PERSON WHO HAVE ADVANCED YOU THE FUNDS DEPOSITED IN YOUR BANK ACCOU NT. DO YOU WISH TO CLARIFY THE POSITION? ANS. I HAVE STATED THE FACTS AS KNOWN TO ME. AS FAR AS THE IDENTIFY OF MY FRIEND IS CONCERNED, HE HAS TRULY EXPIRED IN THE BO MB BLAST AND I WOULD NOT LIKE HIS LEGAL HEIRS TO BE BOGGED DOWN IN INCOME TA X MATTERS. ADVERSE INFERENCE, IF ANY, SHOULD BE RESTRICTED ONLY IN MY INDIVIDUAL CASE AND IN THE CASE OF M/S. SNEHA HI-TECH P. LTD. Q. DO YOU HAVE ANYTHING FURTHER TO SAY? ANS. NO. ITA NO. 1788/MUM/2011 M/S. SNEHA HI-TEC PVT. LTD. ASSESSMENT YEAR: 2006-07 3 4. SUBSEQUENT TO RECORDING THE ABOVE MENTIONED STAT EMENT ASSESSEE WAS ASKED TO SUBMIT ITS EXPLANATION. THE ASSESSEE FILED THE F OLLOWING EXPLANATION:- 1. WE HAVE SOLD SHARES OF M/S. LABH INTERNATIONAL P. LTD TO M. BHAGWAN PRAJAPATI AS UNDER:- NO OF SHARES AM OUNT (RS.) 30000 3 ,00,000/- 2. WE HAVE RECEIVED A CONSIDERATION OF RS.3,00,000/ - VIDE CHEQUE NO. 476757 DATED 11.04.2005 DRAWN ON CORPORATION BANK, KALBADEVI BRANCH. 3. CONFIRMATIONS OF THE ABOVE ARE ALREADY PLACED ON PROCEEDING RECORDS DURING THE ASSESSMENT. 4. IN REGARD TO THE STATEMENT OF MR. BHAGWAN PRAJAP ATI RECORDED BY YOUR GOODSELF AND PRESENTED BEFORE US. THE SAID MR. PRAJ APATI HAS ALSO ACCEPTED THE ABOVE REFERRED FACTS THAT HE HAS PURCHASES SHAR ES OF LABH INTERNATIONAL P. LTD. AND OF HAVING PAID CONSIDERATION THEREOF. 5. AS REGARD TO OUR TRANSACTION WITH MR. BHAGWAN PR AJAPATI THE SAME WAS PURELY COMMERCIAL IN NATURE WE HAD PLACED PROPOSAL TO SELL THE SHARES OF LABH INTERNATIONAL P. LTD. TO HIM AND HE ACCEPTED T HE SAME AND PURCHASED THE SHARES BY PAYING US THE DUE CONSIDERATION. 6. ON OUR PART WE WERE IN NO POSITION AND NEITHER FELT IT NECESSARY TO INQUIRE ABOUT THE GENUINENESS AND CAPACITY OF MR. BHAGWAN P RAJAPATI. 7. IN VIEW OF THE ABOVE FACTS WE AGAIN PRAY TO YOUR GOODSELF TO CONSIDER THE ABOVE AND TAKE A VIEW OF THE MATTER. AFTER CONSIDERING THE EXPLANATION FILED BY THE ASSE SSEE THE AO WAS OF THE OPINION THAT THE IMPUGNED TRANSACTION IS NOTHING BUT A BENA MI TRANSACTION AND ACCORDINGLY TREATED THE AMOUNT OF RS. 3LAC AS INCOME OF THE ASS ESSEE AND ADDED BACK TO THE TOTAL INCOME OF THE ASSESSEE. 5. AGGRIEVED BY THIS THE ASSESSEE CARRIED THE MATTE R BEFORE THE LD.CIT(A) IT WAS STATED THAT THE IMPUGNED TRANSACTION OF RS.3 LAC IS THE SALE CONSIDERATION OF 30,000 SHARES OF LABH INTERNATIONAL PVT. LTD. WHICH WAS SO LD BY THE ASSESSEE TO BHAGWAN H. PRAJAPATI. 6. AFTER CONSIDERING THE FACTS AND SUBMISSIONS THE LD.CIT(A) WAS OF THE OPINION THAT BHAGWAN H. PRAJAPATI WAS A MAN OF MEAGER MEANS WHOSE INCOME IS BARELY SUFFICIENT FOR HIS OWN SURVIVAL. THE LD.CIT(A) WAS OF THE OPINION THAT THE AMOUNT OF RS.3 LAC BELONG TO THE ASSESSEE AND CONFIRMED THE F INDINGS OF THE AO. ITA NO. 1788/MUM/2011 M/S. SNEHA HI-TEC PVT. LTD. ASSESSMENT YEAR: 2006-07 4 7. AGGRIEVED BY THIS THE ASSESSEE IS BEFORE US. COU NSEL FOR THE ASSESSEE STATED THAT THE TRANSACTION OF THE SALE OF 30,000 SHARES O F LABH INTERNATIONAL PVT. LTD. IS DULY CONFIRMED BY BHAGWAN H. PRAJAPATI FURTHER THE CONSIDERATION HAS BEEN RECEIVED THROUGH AN ACCOUNT PAYEE CHEQUE NO. 476757 DRAWN ON CORPORATION BANK KALBADEVI BRANCH MUMBAI. IT IS THE SAY OF THE COUNSEL THAT TH IS GENUINE TRANSACTION OF SALE OF SHARES CANNOT BE TREATED AS BENAMI TRANSACTION. 8. PER CONTRA THE DR STRONGLY SUPPORTED THE FINDING S OF THE LOWER AUTHORITIES. 9. WE HAVE HEARD THE RIVAL SUBMISSIONS AND CAREFULL Y PERUSED THE ORDERS OF THE AUTHORITIES BELOW. THE ENTIRE DISPUTE REVOLVES AROU ND THE SALE OF 30,000 SHARES OF LABH INTERNATIONAL PVT. LTD. IN OUR OPINION PROPER ENQUIRY HAS NOT BEEN MADE BY THE AO BEFORE TREATING THE SAID TRANSACTION AS BENAMI. THEREFORE, IN THE INTEREST OF JUSTICE AND FAIR PLAY WE SET ASIDE THE ENTIRE ISSUE TO THE FILES OF THE AO. THE AO IS DIRECTED TO FIRST VERIFY THE TRANSACTION FROM M/S. LABH INTERNATIONAL PVT. LTD. KEEPING IN MIND THAT IT IS A PRIVATE LIMITED COMPANY AND AS PER THE PROVISIONS OF THE COMPANIES ACT SHARES OF A PRIVATE LIMITED COMPANY A RE NOT FREELY TRADABLE. THE AO HAS TO VERIFY WHETHER THE BOARD OF DIRECTORS OF THE SAID PRIVATE LIMITED COMPANY HAVE AUTHORIZED THE SAID TRANSACTION OR NOT. THE AO IS FURTHER DIRECTED TO VERIFY THE AUTHORIZED SIGNATORIES OF CORPORATION BANK ACCOUNT FROM THE BANK DIRECTLY AND TO KNOW WHO ARE AUTHORIZED TO OPERATE THE SAID BANK AC COUNT. 10. AFTER MAKING THE AFOREMENTIONED ENQUIRIES THE A O IS DIRECTED TO DECIDE THE ISSUE AFRESH AFTER GIVING A REASONABLE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. THE AO IS EXPECTED TO CONFRONT THE ASSESSEE WHATEVE R INFORMATION HE RECEIVE FROM THE SAID PRIVATE LIMITED COMPANY AND THE BANK. 11. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS TREATED AS ALLOWED FOR STATISTICAL PURPOSES . ORDER PRONOUNCED IN THE OPEN COURT ON THIS 10 TH DAY OF OCTOBER, 2014. SD/- SD/- (JOGINDER SINGH) (N.K. BILLAIYA) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI, DATED: 10.10.2014 *SRIVASTAVA ITA NO. 1788/MUM/2011 M/S. SNEHA HI-TEC PVT. LTD. ASSESSMENT YEAR: 2006-07 5 COPY TO: THE APPELLANT THE RESPONDENT THE CIT, CONCERNED, MUMBAI THE CIT(A) CONCERNED, MUMBAI THE DR H BENCH //TRUE COPY// BY ORDER DY/ASSTT. REGISTRAR, ITAT, MUMBAI.