SMILAX PHARMACEUTICALS PVT. LTD., Jaipur V. ITO, Jaipur

ITA 208/JPR/2014

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 5362 (ITAT-JAIPUR)
• Duration Of Justice: 2 year(s) 1 month(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-04-2016
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Assessment Year: 2003-2004
• Appeal Filed On: 20-03-2014
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: RAJ MEHRA J DHK
• Assessee Lawyers: S L PODDAR
• Keywords: Unexplained cash credit; Principle of natural justice; Accommodation entries; Reason to believe
• Section: 68; 148; 6

Judgement Text

VK;DJ VIHYH; VF/KDJ.K] T;IQJ U;K;IHB] T;IQJ IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHES (SMC), JAIPUR JH VKJ-IH-RKSYKUH] U;KF;D LNL; DS LE{K BEFORE: SHRI R.P. TOLANI, JUDICIAL MEMBER VK;DJ VIHY LA-@ ITA NO. 208/JP/2014 FU/KZKJ.K O'K Z@ ASSESSMENT YEAR : 2003-04 M/S. SMILAX PHARMACEUTICALS LTD. 66, MATHUR VAISYA NAGAR, TONK ROAD JAIPUR CUKE VS. THE ITO WARD- 6(4) JAIPUR LFKK;H YS[KK LA-@THVKBZVKJ LA-@ PAN/GIR NO .: AACCS 2028 R VIHYKFKHZ@ APPELLANT IZR;FKHZ@ RESPONDENT JKTLO DH VKSJ LS@ ASSESSEE BY : SHRI S.L. PODDAR, ADVOCATE FU/KZKFJRH DH VKSJ LS@ REVENUE BY : SHRI RAJ MEHRA, JCIT-DR LQUOKBZ DH RKJH[K@ DATE OF HEARING : 01/02/2016 ?KKS'K .KK DH RKJH[K@ DATE OF PRONOUNCEMENT : 25/04/2016 VKNS'K@ ORDER PER R.P. TOLANI, JM THIS IS AN APPEAL FILED BY THE ASSESSEE AGAINST THE ORDER OF THE LD. CIT(A)-III, JAIPUR DATED 20-02-2014 FOR THE ASSESS MENT YEAR 2003-04 WHEREIN THE ASSESSEE HAS RAISED FOLLOWING GROUNDS:- 1 UNDER THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) HAS ERRED IN CONFIRMING THE ACTION OF THE A O IN ISSUING NOTICE U/S 148 WITHOUT APPLICATION OF MIND AND HAVING ANY REASON TO BELIEVE THAT THERE WAS ESCAPEM ENT OF INCOME. HENCE, THE ASSESSMENT SO COMPLETED IS AB IN ITO VOID. ITA NO.208/JP/2014 M/S. SM ILAX PHARMACEUTICALS (P) LTD., VS. ITO WARD- 6(4), JAIPUR . 2 2. UNDER THE FACTS AND CIRCUMSTANCES OF THE CASE TH E LD. CIT(A) HAS ERRED IN CONFIRMING THE ADDITION OF RS. 5,01,250/- TREATING THE SHARE CAPITAL SUBSCRIBED BY M/S. ENPOL (P) LTD. AMOUNTING TO RS. 5,01,250/- AS UNDIS CLOSED INCOME OF THE COMPANY. 2.1 DURING THE COURSE OF HEARING, THE LD. AR OF THE ASSESSEE HAS NOT PRESSED THE GROUND NO. 1. HENCE, THE SAME IS DISMIS SED BEING NOT PRESSED. 3.1 APROPOS GROUND NO. 2, BRIEF FACTS OF THE CASE A RE THAT INFORMATION INVESTIGATION WING, DELHI WAS RECEIVED THAT THE ASS ESSEE HAD RECEIVED SHARE APPLICATION MONEY FROM ONE SHRI DEEPAK GUPTA. THE ASSESSEE WAS CALLED ON TO PROVE THE INGREDIENTS OF SECTION 68 OF THE ACT IN THIS BEHALF. IN COMPLIANCE ASSESSEE FILED THE CONFIRMATION LETTE R FROM M/S. ENPOL (P) LTD. ALONG WITH THEIR PAN, BANK DETAILS, FULL NAME AND ADDRESS. THE AO CALLED FOR INDEPENDENT INFORMATION FROM M/S. ENPOL (P) LTD. BY A NOTICE U/S 136 WHICH ACCORDING TO HIM CAME BACK UNSERVED W ITH A NOTE NO SUCH FIRM. ACCORDING TO AO SHRI DEEPAK GUPTA HAD CLAIMED THAT HE WAS PROVIDING ACCOMMODATION ENTRIES. THE ASSESSEE A SKED FOR THE CROSS EXAMINATION OF SHRI DEEPAK GUPTA WHICH ACCORDING TO THE ASSESSEE WAS NEVER PROVIDED WHICH ASSESSEE CLAIMED TO BE VIOLATI ON OF PRINCIPLES OF NATURAL JUSTICE. DRAWING AN ADVERSE INFERENCE FROM THESE FACTS, LD. AO ITA NO.208/JP/2014 M/S. SM ILAX PHARMACEUTICALS (P) LTD., VS. ITO WARD- 6(4), JAIPUR . 3 ADDED THE AMOUNT AS UNEXPLAINED CASH CREDIT. IN FIR ST APPEAL, THE LD. CIT(A) CONFIRMED THE ADDITION BY FOLLOWING OBSERVAT IONS. 3.3 I HAVE CONSIDERED THE FACTS OF THE CASE, ASSE SSMENT ORDER AND APPELLANTS WRITTEN SUBMISSION. ASSESSING OFFICER M ADE ADDITION IN RESPECT OF SHARE CAPITAL OF RS. 5 LACS RECEIVED FR OM M/S. ENPOL (P) LTD. SINCE SHRI DEEPAK GUPTA IN HIS STATEMENT TO THE INV ESTIGATION WING ADMITTED THAT THIS COMPANY WAS USED TO ISSUE ACCOMM ODATION ENTRIES AGAINST PAYMENT OF UNACCOUNTED CASH. ASSESSING OFFI CER ISSUED NOTICE TO THE SAID COMPANY HOWEVER THE NOTICE COULD NOT BE SE RVED BY POSTAL AUTHORITIES ON THE GROUND THAT THIS FIRM IS NOT K NOWN. THEREFORE, THE FACT OF THE INVESTOR NOT EXISTING AT THE GIVEN ADDR ESS COUPLED WITH STATEMENT OF SHRI DEEPAK GUPTA TO THE INVESTIGATION WING THAT HE WAS PROVIDING ACCOMMODATION ENTRIES IN THE NAME OF SOME CONCERNS INCLUDING ENPOL (P) LTD. ARE SUFFICIENT TO HOLD AGAINST ASSES SEE. APPELLANT ONLY RELIED UPON THE FACT THAT IT RECEIVED MONEY BY CHEQ UE AND ENPOL (P) LTD. IS HAVING PAN AND THEREFORE, EXISTING APPELLANT ALS O ARGUED THAT CROSS EXAMINATION OF SHRI DEEPAK GUPTA WAS NOT PROVIDED. WHEN THE PERSON WHO HAS GIVEN CREDIT TO THE APPELLANT DOES NOT EXIS T AND IT IS ADMITTED BY THE ARRANGER OF THE FUND THAT HE WAS ONLY GIVING AC COMMODATION ENTRIES, APPELLANTS ARGUMENTS BECOME SECONDARY. WHEN ASSESS ING OFFICER DID NOT FIND THE PERSON IN WHOSE NAME CREDIT IS APPEARING, ONUS IS ON THE APPELLANT TO PROVE THE IDENTITY, CREDITWORTHINESS A ND GENUINENESS WHICH CANNOT BE PROVED BY SUBMITTING MERE CONFIRMATION WI TH PAN. ALL OTHER OBJECTIONS OF THE APPELLANT ARE NOT RELEVANT IN THE LIGHT OF THE FACT THAT THE CREDIT IN RESPECT OF SHARE CAPITAL IS DISCLOSED IN THE NAME OF ENPOL (P) LTD. WHICH DOES NOT EXIST AT THE GIVEN ADDRESS. CON SIDERING ALL THE FACTS OF THE CASE, IT IS CLEAR THAT APPELLANT INTRODUCED BOG US SHARE CAPITAL IN THE NAME OF ENPOLY (P) LTD. ACCORDINGLY, ADDITION MADE BY THE AO IS CONFIRMED. 3.2 AGGRIEVED, THE ASSESSEE IS IN SECOND APPEAL. TH E LD. AR OF THE ASSESSEE CONTENDS THAT :- ITA NO.208/JP/2014 M/S. SM ILAX PHARMACEUTICALS (P) LTD., VS. ITO WARD- 6(4), JAIPUR . 4 (I) SHRI DEEPAK GUPTA IS CLAIMED BY THE DEPARTMENT TO EXIST AND OPERATE ENTRY ACCOMMODATION SYSTEM WHICH IS FURTHER CLEAR FROM INVESTIGATION WING REPORT. THE OBSERVATION OF THE LD. CIT(A) THAT CROSS EXAMINATIO N OF SHRI DEEPAK GUPTA WAS NOT PROVIDED AS IT BECOMES SECONDA RY AS SHRI DEEPAK GUPTA DOES NOT EXIST IS AN UNTENABLE AN D A SELF CONTRADICTORY OBSERVATION. IT GOES TO ROOT OF THE A DDITION AND MAKES IT UNSUSTAINABLE. (II) ON ONE HAND, THE INVESTIGATION WING CLAIMS THA T SHRI DEEPAK GUPTA EXIST AND ON THE OTHER HAND LD. CIT(A) HELD THAT SHRI DEEPAK GUPTA DOES NOT EXIST AND DENIED TH AT CROSS EXAMINATION TREATING IT IS MEANINGLESS. THUS THE AP PROACH ADOPTED AND ADVERSE INFERENCES DRAWN IN THIS BEHALF ARE SELF CONTRADICTORY AND MAKE THE ADDITION TOTALLY BASELES S. THESE UNJUST OBSERVATIONS MAKE THE ADDITION AND CONFIRMAT ION THEREOF BY LD. CIT(A) AS UNTENABLE. (III) THE ASSESSEE DISCHARGED ITS PRIMARY ONUS IN T ERMS OF SEC. 68 BY FURNISHING RELEVANT DOCUMENTS LIKE CONFI RMATION LETTER, PAN AND OTHER RELEVANT DETAILS TO ESTABLISH THAT SHARE APPLICATION MONEY TRANSACTION WAS EXPLAINED. (IV) IT IS SETTLED LAW THAT ANY ADDITION WITHOUT CR OSS EXAMINATION OF THE ALLEGED CREDITOR IS BASELESS. RE LIANCE IS PLACED OF ITAT MUMBAI IN THE CASE OF ITO VS. M/S. SUPERLINE CONSTRUCTION (P) LTD. ANOTHER (ITA NO. 3645/MUM/2014 FOR THE ASSESSMENT YEAR 2007-08 DATED 30 TH NOV. 2015) IN WHICH SIMILAR ADDITIONS IN BATCHES OF APPEALS HAVE BEEN DELETED. ITA NO.208/JP/2014 M/S. SM ILAX PHARMACEUTICALS (P) LTD., VS. ITO WARD- 6(4), JAIPUR . 5 (V) THE EXISTENCE OF THE SHARE APPLICANT COMPANY WA S FOUND ON THE WEBSITE OF MINISTRY OF CORPORATE AFFAI RS WHICH IS SIMILAR ASSESSEE'S CASE AND CROSS EXAMINATION OF SHARE MONEY APPLICANT WAS NOT PROVIDED. THE ITAT IN SUPPO RT OF IT RELIED ON FOLLOWING CASE LAWS. (1) ITO (10)(2)(3) VS. J MULTITRADE (P) LTD. IN IT A NO. 2158/MUM/2014, A.Y. 2007-08, J BENCH & ITA NO. 2159/MUM/2014, A.Y. 208-08-J BENCH (2) ITAT E BENCH IN M/S. SDB ESTATE (P) VS. ITO (5)(3)(2) IN ITA NO. 584/MUM/2015, ASSESSMENT YEAR 2008- 98 HAS DECIDED SIMILAR ISSUE (3) ITO 10(2)(1) VS. M/S. DEEP DARSHAN PROPERTIES (P) LTD. IN ITA NO. 217/MUM/2014 ,A.Y. 2006-07 AND ITA NO. 2118/MUM/2014, A.Y. 2007-08 (4) ITO 10(2)(3) VS. AAJIVAN COMPUTERS (P) LD IN ITA NO. 2160/MUM/2014, A.Y. 2006-07 (5) ITO 10(2)(3) VS. DIGNITY SECURITIES TRADING ( P) LTD. IN ITA NO. 2157/MUM/2014, A.Y. 2006-07 (6) ITO 10(2) VS M/S. BLUE HILL PROPERTIES (P) LT D. IN ITA NO. 2119/MUM/2014, A.Y. 2006-07 (7) CIT VS. LOVELY EXPORTS (P) LTD. (2008) 216 CTR 195 (SC) 3.3 THE LD. COUNSEL FOR THE ASSESSEE CONTENDS THAT THE ASSESSEE HAVING DISCHARGED ITS BURDEN AND DEPARTMENT HAVING REFUSED TO CROSS-EXAMINE THE ALLEGED OPERATOR OF ACCOMMODATION ENTRY PROVIDE R, THERE IS NO JUSTIFICATION FOR ADDITION. RELIANCE IS PLACED ON:- ITA NO.208/JP/2014 M/S. SM ILAX PHARMACEUTICALS (P) LTD., VS. ITO WARD- 6(4), JAIPUR . 6 (1) SARTHAK SECURITIES (P) LTD. VS. ITO (2010) 329 ITR 110 (DEL) (2) SIGNATURE HOTELS (P) LTD. VS. ITO (2011) 338 ITR 51 . (3) CIT VS. SFIL STOCK BROKING LTD. (2010) 325 ITR 285 (4) KERLA GLUE FACTORY VS. SALES TAX TRIBUNAL 65 CTR 23 3 (SC) (5) VASANTLAL & CO. VS. CIT (1962) 45 ITR 206 (SC) (6) EASTERN COMMERCIAL ENTERPRISE (1994) 210 ITR 103 (C AL.) (7) GARGI DIN JWALA PRASAD VS. CIT (1974) 96 ITR 97 (ALL.) 3.4 THE LD. DR IS HEARD WHO RELIED ON THE ORDERS OF THE LOWER AUTHORITIES. 3.5 I HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIALS AVAILABLE ON RECORD. IT EMERGES FROM THE RECORD THA T INVESTIGATION WING REPORT IS BASED ENTIRELY ON THE FACT THAT ONE SHRI DEEPAK GUPTA WAS ENGAGED IN ACCOMMODATION ENTRY PROVIDER AND M/S. EN POL (P) LTD. WAS ONE OF THE BENAMI CONCERN. THE LD. CIT(A) HELD THAT SHRI DEEPAK GUPTA IS NON-EXISTENT. HIS FINDING ARE SELF-CONTRADICTORY AND CONTRARY TO INVESTIGATION WING. BESIDES NON-PROVIDING OF CROSS EXAMINATION OF THE KEY PERSON DEEPAK GUPTA AMOUNTS TO VIOLATION OF PRI NCIPLES OF NATURAL JUSTICE. FROM THE MATERIALS AVAILABLE ON RECORD, IT EMERGES THAT ASSESSEE DISCHARGED ITS PRIMARY ONUS IN TERMS OF SECTION 68 OF THE ACT. RELYING ON JUDGMENT OF ITAT MUMBAI BENCH IN THE CASE OF ITO VS . M/S. SUPERLINE CONSTRUCTION (P) LTD. AND ANOTHER (SUPRA) AND VARIO US OTHER JUDGMENTS CITED BY THE ASSESSEE, THE ADDITION IN QUESTION IS DELETED. THUS GROUND NO. 2 OF THE ASSESSEE IS ALLOWED. ITA NO.208/JP/2014 M/S. SM ILAX PHARMACEUTICALS (P) LTD., VS. ITO WARD- 6(4), JAIPUR . 7 4.0 IN THE RESULT, APPEAL OF THE ASSESSEE IS PARTY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 25/04/2016 . SD/- VKJ-IH-RKSYKUH (R.P.TOLANI) U;KF;D LNL;@ JUDICIAL MEMBER TK;IQJ@ JAIPUR FNUKAD@ DATED:- 25 /04/ 2016 *MISHRA VKNS'K DH IZFRFYFI VXZSF'KR@ COPY OF THE ORDER FORWARDED TO:- 1. VIHYKFKHZ@ THE APPELLANT-M/S.SMILAX PHARMACEUTICALS(P) LTD. JA IPUR 2. IZR;FKHZ@ THE RESPONDENT- THE ITO, WARD- 6(4), JAIPUR 3. VK;DJ VK;QDRVIHY@ CIT(A). 4. VK;DJ VK;QDR@ CIT, 5. FOHKKXH; IZFRFUF/K] VK;DJ VIHYH; VF/KDJ.K] T;IQJ@ DR, ITAT, JAIPUR 6. XKMZ QKBZY@ GUARD FILE (ITA NO.208/JP/2014 ) VKNS'KKUQLKJ@ BY ORDER, LGK;D IATHDKJ@ ASSISTANT. REGISTRAR