M/s. Shree Bankey Bihari Ispat Pvt. Ltd., Uttrakhand V. CIT, Haldwani

ITA 2000/DEL/2010

• Counselvise Citation: [2011] 140 COUNSELVISE.COM (IT) 52947 (ITAT-DELHI)
• Duration Of Justice: 1 year(s) 4 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-09-2011
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: G
• Next Hearing Date: 15-09-2011
• Assessment Year: 2005-2006
• Appeal Filed On: 03-05-2010
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: NIRANJAN KANTI
• Assessee Lawyers: S KRISHNAN
• Keywords: Question of law
• Section: 133(6); 263; 15

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH G DELHI BEFORE SHRI R.P. TOLANI AND SHRI K.G. BANSAL ITA NO. 2000(DEL)/2010 ASSESSMENT YEAR: 2005-06 M/S SHREE BANKEY BEHARI ISPAT C OMMISSIONER OF INCOME-TAX, (P) LTD., KICHHA, U.S. NAGAR, VS. HALDWANI. UTTRAKHAND. PAN-AAICS6286P (APPELLANT) (RESPON DENT) APPELLANT BY : SHRI S. KRISHNAN, ADVOCATE RESPONDENT BY: SHRI NIRANJAN KANTI, CIT, DR DATE OF HEARING : 15.09.2011 DATE OF PRONOUNCEMENT: 30.09.2011. ORDER PER K.G. BANSAL : AM THE ONLY GROUND TAKEN BY THE ASSESSEE IN THIS C ASE IS THAT THE ORDER PASSED BY THE COMMISSIONER OF INCOME-TAX (THE CIT FOR SHORT) U/S 263 OF THE INCOME-TAX ACT, 1961 (THE ACT FOR SHORT) IS MISCONCEIVED, ERRONEOUS, UNWARRANTED AND ILLEGAL AND, THEREFORE, IT MAY BE QUASHED. 2. THE FACTS OF THE CASE ARE THAT THE ASSESSEE- COMPANY FILED A NIL RETURN ON 31.10.2005. THE RETURN WAS PROCESSED U/S 143(1) ON 28.11.2005. SUBSEQUENTLY, THE RETURN WAS PICKED UP FOR SCRUTINY BY ISSUING NOTICE U/S 143(2) ON 20.04.2006. ITA NO. 2000(DEL)/2010 2 2.1 IN THE ASSESSMENT ORDER, IT IS MENTIONED THAT THE COMPANY WAS INCORPORATED ON 02.01.2004 WITH THE MAIN OBJECT OF SETTING OF AN INDUCTION FURNACE AND ROLLER MILL AT KISHANPUR. NO COMMERCIAL ACTIVITY HAD BEEN CARRIED OUT. THE EQUITY SHARE CAPITAL HAS BEEN RAISED THROUGH PRIVATE PLACEMENT. THE ASSESSEE HAS ALSO TAKEN SECURED AND UNSECURED LOANS. THE ASSESSEE WAS REQUIRED TO FURNISH DETAI LS OF CAPITAL, SECURED LOANS AND UNSECURED LOANS. THE ASSESSEE HAS FILED VARIO US DOCUMENTS. THEREAFTER, THE ASSESSMENT WAS COMPLETED AT NIL INCOME. 3. THE CIT, HALDWANI EXAMINED THE RECORDS AND CA ME TO A TENTATIVE CONCLUSION THAT THE ORDER PASSED BY THE AO IS ER RONEOUS AND PREJUDICIAL TO THE INTEREST OF REVENUE ON THE FOLLOWING GROUNDS: - (I) SHARE CAPITAL AND SHARE PREMIUM MONEY HAS NOT BEEN EXAMINED; (II) INVESTMENT IN PLANT AND MACHINERY HAS NOT BEEN EXA MINED PROPERLY AND THERE ARE SOME BILLS OF OLD MACHINER Y; AND (III) INVESTMENT IN LAND HAS NOT BEEN PROPERLY APPRECIA TED AS IT IS STATED TO BE OUT OF SHARE CAPITAL AND SHARE PREMIU M, WHICH HAVE NOT BEEN LOOKED INTO. ITA NO. 2000(DEL)/2010 3 3.1 THUS, THE ASSESSMENT WAS RESTORED TO THE FIL E OF THE AO TO MAKE PROPER ENQUIRIES INTO THE MATTER AND FRAME A FRES H ASSESSMENT. AGGRIEVED BY THIS ORDER, THE ASSESSEE IS IN APPEAL BEFORE US . 4. THE LD. COUNSEL FOR THE ASSESSEE REFERRED TO T HE THREE ISSUES ON WHICH THE ASSESSMENT HAS BEEN RESTORED TO THE FIL E OF THE AO. IN REGARD TO RAISING OF THE CAPITAL, IT IS SUBMITTED THAT THE A SSESSEE HAD SUBMITTED PROOF OF IDENTITY OF ALL THE 11 COMPANIES WHICH SUBSCRI BED TO THE SHARE CAPITAL. COPIES OF CERTIFICATE OF INCORPORATION WERE ALSO FU RNISHED TO ESTABLISH THE IDENTITY. APART FROM THESE, COPIES OF AFFIDAVIT, I.T. RETURN, PAN AND BANK ACCOUNT WERE ALSO FURNISHED. THE LD. CIT DIRECTE D THE AO TO MAKE VERIFICATION BY ISSUING NOTICES U/S 133(6) ON 15 .10.2008. HOWEVER, IT IS MENTIONED THAT NO RESPONSE WAS RECEIVED. THIS FACT HAS NOT BEEN COMMUNICATED TO THE ASSESSEE. IN ANY CASE, THE DETAILS FILED BY THE ASSESSEE ESTABLISH NOT ONLY THE IDENTITY OF TH E CONTRIBUTORS BUT ALSO THEIR CAPACITY AND GENUINENESS OF TRANSACTIONS. SINCE THE IDENTITY HAS BEEN ESTABLISHED, NO FURTHER ACTION WAS REQUIRED IN VI EW OF THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF CIT VS. LO VELY EXPORTS (P) LTD., (2008) 216 CTR 195, IN WHICH IT IS HELD THAT I N CASE SHARE APPLICATION MONEY IS RECEIVED FROM ALLEGED BOGUS SHARE-HOLDE RS, WHOSE NAMES ARE ITA NO. 2000(DEL)/2010 4 GIVEN TO THE AO, THEN THE DEPARTMENT IS FREE TO PROCEED TO REOPEN THEIR ASSESSMENTS IN ACCORDANCE WITH LAW, BUT IT CANNOT B E REGARDED AS UNDISCLOSED INCOME OF THE ASSESSEE-COMPANY. IN THE LIGHT OF THE FACTS, IT CANNOT BE SAID THAT CUMULATIVE CONDITIONS OF THE ORDER BEING ERR ONEOUS AND PREJUDICIAL TO THE INTEREST OF REVENUE STAND SATISFIED, WITHOUT WHICH REVISIONARY POWER CANNOT BE EXERCISED, AS HELD BY HONBLE SUPREME COURT IN THE CASE OF MALABAR INDUSTRIAL CO. LTD. VS. CIT, (2000) 243 ITR 83. 4.1 IN REPLY, THE LD. DR STRESSED THAT WHEN REQU ISITE ENQUIRY IS NOT MADE BY THE AO, THE FAILURE TO DO SO RENDER THE ORDE R AS ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF REVENUE. IN THIS C ONNECTION, RELIANCE IS PLACED ON THE DECISION OF HONBLE MADHYA PRADESH HIGH COURT IN THE CASE OF CIT VS. DEEPAK KUMAR GARG, RENDERED ON 11.05.200 7, A COPY OF WHICH HAS BEEN PLACED ON RECORD. IT WAS MENTIONED T HAT THE CIT RECORDED A CATEGORICAL FINDING THAT THE ORDER OF THE AO WAS ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF REVENUE BECAUSE OF LACK OF ADEQUATE ENQUIRY. THEREFORE, THE ORDER WAS SET ASIDE TO THE FILE OF THE AO FO R MAKING FRESH ASSESSMENT ON MERITS AFTER FOLLOWING RULES OF NATURAL JUS TICE. RELYING ON THE DECISION IN THE CASE OF COMMISSIONER OF INLAND REVENUE V S. SNEATH [1932] 17 TC 149 (CA) AND SHELL CO. OF AUSTRALIA LTD. VS. FEDERA L COMMISSIONER OF ITA NO. 2000(DEL)/2010 5 TAXATION [1931] AC 275, IT HAS BEEN HELD THAT THE VIEW TAKEN BY THE TRIBUNAL IS A POSSIBLE VIEW, WHICH IS BASED ON A PPRECIATION OF EVIDENCE. THEREFORE, NO QUESTION OF LAW ARISES. SIMILAR DE CISION HAS BEEN RENDERED BY HONBLE RAJASTHAN HIGH COURT IN THE CASE OF S MT. RENU GUPTA VS. CIT, (2008) 301 ITR 45. IN THIS CASE, THE CIT FOUND T HAT THE ASSESSEE DID NOT FURNISH DETAILS OF EXPENSES DEBITED TO INCOME A ND EXPENDITURE ACCOUNT UNDER VARIOUS HEADS. HE ALSO FOUND THAT THE ASSE SSEE DID NOT FURNISH THE DETAILS OF PROPERTY AND SOURCE OF INVESTMENT THER EIN. THEREFORE, HE SET ASIDE THE ORDER FOR MAKING PROPER ENQUIRIES AND DECIDE THE ISSUE AS PER LAW. THE HONBLE COURT UPHELD THE REVISIONARY OR DER. RELIANCE HAS ALSO BEEN PLACED ON THE DECISION IN THE CASE OF MALAB AR INDUSTRIAL CO. LTD.(SUPRA), TO WHICH WE HAVE ALREADY ADVERTED TO. 4.2 WE HAVE CONSIDERED THIS MATTER. THE FACTS ARE THAT THE ASSESSEE HAD FURNISHED VARIOUS DETAILS IN SUPPORT OF IDENTITY, C REDITWORTHINESS AND GENUINENESS OF SHARE CAPITAL INCLUDING PREMIUM REC EIVED ON SUBSCRIPTION TO THE SHARE OF THE ASSESSEE-COMPANY. ALL THE CONTR IBUTORS, WHICH ARE QUESTIONED BY THE LD. CIT, ARE JOINT STOCK COMP ANIES. THEIR REGISTRATION NUMBERS HAVE BEEN FURNISHED ALONG WITH A NUMBER OF OTHER EVIDENCES. IN VIEW OF THE DECISION OF THE HONBLE SUPREME CO URT IN THE CASE OF ITA NO. 2000(DEL)/2010 6 LOVELY EXPORTS (P) LTD. (SUPRA), THE JURISDICTION OF THE AO EXTENDED ONLY TO EXAMINE THE IDENTITY OF THE PARTIES. THE IDE NTITY STANDS PROVED BY FILING CERTIFICATES OF INCORPORATION. THEREAFT ER, THE ONLY THING WHICH COULD BE SEEN WAS WHETHER THESE COMPANIES CONTRIBUTED T O THE CAPITAL. FOR THIS RELEVANT BANK STATEMENTS HAVE BEEN FILED. IN THE COURSE OF REVISIONARY PROCEEDINGS, THE AO ISSUED NOTICES U/S 133(6) O N THE DIRECTIONS OF THE LD. CIT. THERE HAS BEEN NO RESPONSE TO THESE NOTICES . IN FACT, EIGHT OUT OF 11 NOTICES HAVE BEEN RETURNED BY THE POSTAL DEPART MENT WITH THE REMARKS NO SUCH OFFICE AT THE GIVEN ADDRESS. THIS HOWEVER DOES NOT MEAN THAT THE COMPANIES DO NOT EXIST BECAUSE THE IDENTITY DEPE NDS UPON THE CERTIFICATE OF INCORPORATION ISSUED BY THE REGISTRAR OF COM PANIES. THUS, WE ARE OF THE VIEW THAT THE IDENTITY HAD BEEN PROVED EVEN IN THE COURSE OF ASSESSMENT PROCEEDINGS AND NOTHING FURTHER COULD HAVE BEEN DON E BY THE AO AS PER LAW IN THE CASE OF THE ASSESSEE. THEREFORE, WE ARE OF THE VIEW THAT THE LD. CIT ERRED IN HOLDING THAT THE ORDER WAS ERRONEOUS AN D PREJUDICIAL TO THE INTEREST OF REVENUE IN SO FAR AS THESE 11 CONTR IBUTORS ARE CONCERNED. 5. IN REGARD TO THE CLAIM OF DEDUCTION U/S 80IC, IT IS SUBMITTED BY THE LD. COUNSEL THAT THE TOTAL INVESTMENT IN MACHINERY AND PLANT WAS SHOWN AT RS. 2,19,52,884/-. SOME OF THE MACHINERIES WERE OLD BUT THE TOTAL VALUE OF ITA NO. 2000(DEL)/2010 7 SUCH MACHINERY DID NOT EXCEED 20% OF THE COST OF MACHINERY AND PLANT. THEREFORE, THE ASSESSEE WAS ENTITLED TO DEDUCTION U/S 80IC. IN REPLY, THE LD. DR SUBMITTED THAT NO VERIFICATION WHATSOEVER H AS BEEN MADE REGARDING FULFILLMENT OF PRE-CONDITIONS FOR GRANT OF DEDUC TION U/S 80IC. IN FACT, THIS ISSUE HAS NOT EVEN BEEN TOUCHED IN THE ASSESSMEN T. 5.1 WE HAVE CONSIDERED THE FACTS OF THE CASE AND SUBMISSIONS MADE BEFORE US. WE FIND THAT ALTHOUGH THE BILLS OF P URCHASE OF MACHINERY WERE FILED, BUT THE ISSUE HAS NOT BEEN EXAMINED BY TH E AO WITH A VIEW TO FORM AN OPINION AS TO WHETHER THE ASSESSEE IS ENTITL ED TO THE DEDUCTION. WE ALSO FIND THAT WHILE THE AO MENTIONED THAT THE A SSESSEE HAS NOT CARRIED OUT ANY COMMERCIAL ACTIVITY, THE LD. CIT HAS RECORDE D A CATEGORICAL FINDING THAT THE ASSESSEE HAS CLAIMED DEDUCTION U/S 80I C. THEREFORE, THE FINDING OF THE AO IS INCORRECT. THEREFORE, THE ORDER IS ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF REVENUE FOR LACK OF ENQUIRY. ACC ORDINGLY, THE ORDER OF THE LD. CIT IS SUSTAINED ON THIS GROUND. 6. LASTLY, IN RESPECT OF INVESTMENT IN LAND, IT IS SUBMITTED THAT THE ASSESSEE-COMPANY PURCHASED THE LAND IN JANUARY, 2 004, FOR A SUM OF RS. 27,36,400/-. THE INVESTMENT WAS MADE OUT OF SHAR E APPLICATION MONEY. ITA NO. 2000(DEL)/2010 8 THE TITLE DEED WAS SUBMITTED TO THE AO AT THE TIME OF ASSESSMENT. THEREFORE, IT IS ARGUED THAT REQUISITE ENQUIRY HA D BEEN MADE AND, THUS, THE ORDER CANNOT BE SAID TO BE ERRONEOUS AND PREJUDI CIAL TO THE INTEREST OF REVENUE. NO PARTICULAR ARGUMENT HAS BEEN MADE BY THE LD. DR IN THIS MATTER. 6.1 WE FIND THAT THE ORDER OF THE LD. CIT IN THIS CONNECTION IS BASED ON HIS FINDING IN REGARD TO THE SHARE CAPITAL. WE HA VE HELD THAT NO ACTION CAN BE TAKEN IN THE CASE OF THE ASSESSEE IN REGARD TO T HIS ISSUE. THE MONEY RECEIVED FROM 11 COMPANIES IS SUFFICIENT TO COVER THE INVESTMENT IN LAND. THEREFORE, THERE IS NO REASON TO HOLD THE ORDER T O BE ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF REVENUE IN SO FAR AS THIS ISSUE IS CONCERNED. IT IS HELD ACCORDINGLY. 6. IN THE RESULT, THE APPEAL IS PARTLY ALLOWED. SD/- SD/- (R.P. TOLANI) (K.G.BANSAL) JUDICIAL MEMBER ACCOUNTANT MEMBER SP SATIA ITA NO. 2000(DEL)/2010 9 COPY OF THE ORDER FORWARDED TO:- M/S SHREE BANKEY BEHARI ISPAT (P) LTD., U.S. NAGAR, UTTRAKHAND. DCIT, HALDWANI CIT, HALDWANI. THE DR, ITAT, NEW DELHI. ASSISTANT REGISTRAR.