ITO, Ward - 10(2), Kolkata, Kolkata V. Roseberry Mercantile Pvt. Ltd., Kolkata

ITA 2119/KOL/2009

• Counselvise Citation: [2010] 136 COUNSELVISE.COM (IT) 2589 (ITAT-KOLKATA)
• Duration Of Justice: 5 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-05-2010
• Appeal Filed By: Department
• Bench Allotted: A
• Next Hearing Date: 30-04-2010
• Assessment Year: 2003-2004
• Appeal Filed On: 15-12-2009
• Court: TRIBUNAL
• Department Lawyers: PIJUSH KOLHE
• Assessee Lawyers: SOUMITRA CHOW DHURY; TAPAN CHAKRABORTY
• Keywords: Unexplained cash credit; Income from undisclosed sources
• Section: 6

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH : KOLKATA [BEFORE HONBLE SRI D. K. TYAGI, JM & HONBLE SRI B . C. MEENA , AM] I.T.A. NO.2119/KOL/2009 ASSESSMENT YEAR: 2003-04 INCOME-TAX OFFICER, WD-10(2), KOLKATA -VS- ROSEBER RY MERCANTILE (P) LTD. (PA NO.AABCR 3485 J) (APPELLANT) (RESPONDENT) APPELLANT BY : SRI PIJUSH KOLHE RESPONDENT BY : S/SRI SOUMITRA CHOWDHURY & TAPAN CHAKRABORTY O R D E R PER D. K. TYAGI, JM: THIS APPEAL PREFERRED BY THE REVENUE IS DIRECTED AG AINST THE ORDER OF THE LD. CIT(A), KOLKATA DATED 23.09.2009 FOR ASSESSMENT YEA R 2003-04 ON THE FOLLOWING SOLE GROUND : ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, LD. CIT(A) OUGHT TO HAVE UPHELD THE ASSESSMENT ORDER AS THE TRANSACTION ENTERED INT O BY THE ASSESSEE WAS A SCHEME FOR LAUNDERING BLACK MONEY INTO WHITE MONEY OR ACCOUNTE D MONEY AND THE LD. CIT(A) OUGHT TO HAVE HELD THAT THE ASSESSEE HAD NOT ESTABL ISHED THE GENUINENESS OF THE TRANSACTION. 2. BRIEF FACTS OF THE CASE ARE THAT THE AO IN THE A SSESSMENT PROCEEDINGS NOTICED THAT THE ASSESSEE COMPANY DURING THE YEAR UNDER CONSIDER ATION HAS BROUGHT IN RS.4,00,000/- AND RS.20,00,000/- TOWARDS SHARE CAPITAL AND SHARE PREMIUM RESPECTIVELY AMOUNTING TO RS.24,00,000/- FROM FOUR SHARE HOLDERS BEING PRIVAT E LIMITED COMPANIES. THE AO ON HIS PART CALLED FOR THE DETAILS FROM THE ASSESSEE AND A LSO FROM SHARE APPLICANTS AND ANALYXED THE FACTS. THE AO OBSERVED CERTAIN ABNORMAL/UNUSUAL FEATURES WHICH ARE MENTIONED IN THE ASSESSMENT ORDER. THE AO, THEREFORE, CONCLUDED THAT THE NATURE AND SOURCE OF SUCH MONEY IS QUESTIONABLE AND EXPLANATION/EVIDENCE PROD UCED IS UNSATISFACTORY. ACCORDINGLY, HE INVOKED THE PROVISIONS OF SECTION 6 8/69 OF THE I. T. ACT AND MADE THE ADDITION OF RS. 24,00,000/-. ON APPEAL, THE LD. CI T(A) FOLLOWING THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF CIT VS- M/S. LOVELY EXPORTS PVT. LTD. REPORTED IN (2008) 216 CTR 195 ALLOWED THE ASSESSEE S APPEAL BY HOLDING THAT THE SHARE CAPITAL/PREMIUM OF RS.24,00,000/- RECEIVED FROM INV ESTORS IS NOT LIABLE TO BE TREATED U/S. 2 68 AS UNEXPLAINED CREDITS AND TO BE TAXED IN THE HA NDS OF THE APPELLANT COMPANY. AGGRIEVED BY THE SAID ORDER, NOW THE REVENUE IS IN APPEAL BEFORE US. 3. AT THE TIME OF HEARING BEFORE US, THE LD. DR REL IED ON THE ORDER OF THE AO AND ON THE OTHER HAND, THE LD. COUNSEL FOR THE ASSESSEE RE LIED ON THE ORDER OF THE LD.CIT(A). 4. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD. WE FIND THAT THE LD. CIT(A) HAS GIVEN RELI EF TO THE ASSESSEE BY FOLLOWING THE DECISION OF CIT VS- LOVELY EXPORTS PVT. LTD. REPOR TED IN (2008) 216 CTR 195. FOR THE SAKE OF BREVITY, WE REPRODUCE THE RELEVANT PORTION OF HIS ORDER AS UNDER : AS SEEN FROM THE FACTS OF THE CASE, I AM OF THE VI EW THAT THE APPELLANT HAS FURNISHED ALL THE RELEVANT DETAILS IN RESPECT OF CREDITS RELATED TO SHARE CAPITAL/PREMIUM CONTRIBUTION. THUS IT DISCHARGED ITS ONUS. NOW THE BURDEN OF PROO F SHIFTED TO A.O TO PROVE CONTRARY. AS PER SECTION 68, WHERE ANY SUM IS FOUND CREDITED IN THE BOOKS OF AN ASSESSEE MAINTAINED FOR ANY PREVIOUS YEAR AND THE ASSESSEE O FFERS NO EXPLANATION ABOUT THE NATURE AND SOURCE THEREOF OR THE EXPLANATION OFFERE D BY HIM IS NOT, IN THE OPINION OF ASSESSING OFFICER, SATISFACTORY, THE SUM SO CREDIT MAY BE CHARGED TO INCOME TAX HAS THE INCOME OF THE ASSESSEE OF THAT PREVIOUS YEAR. IN T HE PRESENT CASE, THE APPELLANT OFFERED AN EXPLANATION ALONG WITH NECESSARY DOCUMENTARY EVI DENCES THEREBY THE ONUS NOW SHIFTED ON TO THE A.O TO DISPROVE SUCH EXPLANATION BY BRINGING IN MATERIAL EVIDENCE ON RECORD. THE A.Q MADE ENQUIRIES WITH REGARD TO THREE COMPANIES AND CAME TO A CONCLUSION THAT THESE ARE MERE NAME LENDERS. THE A. O ALSO ANALYSED THE FUND FLOW THROUGH BANKING CHANNELS AND CONCLUDED THAT THE COM PANIES INVOLVED ARE MERELY USED AS CONDUITS TO TRANSFER THE APPELLANTS OWN MONEY I N THE FORM OF SHARE CAPITAL CONTRIBUTION. BUT, THE A.O FAILED TO ESTABLISH A V ERY VITAL LINK I.E. FLOW OF FUNDS FROM APPELLANT COMPANY TO THE SHARE APPLICANT COMPANIES. IN THE ABSENCE OF SUCH A LINK OR NEXUS, IT IS NOT CORRECT TO CONCLUDE THAT THE SAID SHARE CAPITAL ACTUALLY BELONGED TO, OR WERE OWNED BY THE APPELLANT. AS SUCH TREATING SUCH SHARE CAPITAL AS INCOME DERIVED BY THE APPELLANT FROM UNDISCLOSED SOURCES IS NOT CORRE CT. EVEN OTHERWISE, THERE ARE JUDICIAL RULINGS INCLUDIN G SUPREME COURT DECISIONS THAT AMOUNTS RECEIVED TOWARDS SHARE CAPITAL ARE TOT ALLY OUTSIDE THE SCOPE OF ASSESSMENT U/S. 68, EVEN IF THEY ARE UNPROVED, ON THE GROUND T HAT THEY CANNOT BE TREATED AS CASH CREDIT FALLING WITHIN THE PURVIEW OF SECTION 68, FO LLOWING THE RATIO LAID DAWN BY HONBLE SUPREME COURT IN CIT VS. STELLAR INVESTMENT LTD (20 01) 251 ITR 263, THE HONBLE MADRAS HIGH COURT IN THE CASE OF CIT VS. ELECTROPOL YCHEM LTD. (2007) 294 661 HAS ADOPTED THE ABOVE VIEW. IN THE CASE OF JAYA SECURIT IES LTD VS. CIT (2008) 166 TAXMAN 7 THE HONBLE ALLAHABAD HIGH COURT HELD THAT NO ADDIT ION U/S 68 CAN BE MADE IN RESPECT OF INVESTMENT MADE BY DIFFERENT PERSONS IN THE SHAR E CAPITAL OF A COMPANY, LIMITED BY SHARES, WHETHER PUBLIC OR PRIVATE. THE LD. A.R OF T HE APPELLANT COMPANY SUBMITTED THAT THE HONBIE SUPREME COURT HAS HELD IN THE CASE OF CI T VS. M/S. LOVELY EXPORTS PVT. LTD. (2008) 216 CTR 195 THAT IF THE SHARE APPLICATION MO NEY IS RECEIVED BY THE ASSESSEE COMPANY FROM ALLEGED BOGUS SHARE HOLDERS, WHOSE NAM ES ARE GIVEN TO THE ASSESSING OFFICER, THE DEPARTMENT COULD PROCEED TO OPEN THEIR INDIVIDUAL ASSESSMENTS BUT IT COULD NOT BE REGARDED AS UNDISCLOSED INCOME OF THE ASSESS EE COMPANY. 3 THE RATIO LAID DOWN BY THE HONBLE SUPREME COURT IN THE CASE OF M/S. LOVELY EXPORTS PVT. LTD WOULD BE SQUARELY APPLICABLE TO TH E CASE UNDER CONSIDERATION. IN THE PRESENT CASE, THE APPELLANT HAS FURNISHED ALL THE D ETAILS RELEVANT TO SHARE CAPITAL CONTRIBUTION BEFORE THE A.O AND ALSO BEFORE ME. THE A.O EXCEPT NOTICING CERTAIN UNUSUAL FEATURES IN FUND FLOW CHAIN COULD NOT ESTAB LISH THE LINK BETWEEN THE UNACCOUNTED INCOMES OF THE APPELLANT COMPANY AND SH ARE CAPITAL CONTRIBUTORS. EVEN OTHERWISE AS HELD BY THE APEX COURT SUCH AMOUNTS CA NNOT BE ADDED IN THE HANDS OF THE APPELLANT COMPANY. THE LD. A.R HAS ALSO RELIED ON C ERTAIN CASE LAWS WHICH ARE LISTED IN THE SUBMISSIONS. I FIND THE CASES LISTED ARE VERY M UCH RELEVANT TO THE ISSUE ON HAND. THE LD. A.R BROUGHT TO MY NOTICE THAT ON SIMILAR FACTS THE HONBLE ITAT, KOLKATA BENCH PASSED ORDERS IN FAVOUR OF THE ASSESSEE. HE ALSO FU RNISHED COPIES OF ITAT JUDGMENTS IN THE CASE OF DCIT VS. M/S. HOWRAH GASES LTD. (ITA NO . 270/KOL/2009 DT.. 23.4.09), ITO V. M/S. YASHURI SECURITIES PVT. LTD (ITA NO. 1276/K OL/2008 DI, 16.10.2008) AND BEAR BULL DISTRIBUTORS (P) LTD. VS. ITO (ITA NO. 1652/KO L/2008 DT, 24.12.2008). I FIND THAT FOLLOWING THE RATIO LAID DOWN BY APEX COURT IN LOVE LY EXPORTS PVT. LTD. (SUPRA), THE HONBLE ITAT, KOLKATA BENCH ALLOWED THE APPEALS IN FAVOUR OF THE ASSESSEE. HAVING REGARD TO THE FACTS AND CIRCUMSTANCES OF THE CASE AND RESPECTFULLY FOLLOWING HONBLE SUPREME COURT DECISION IN THE CAS E OF M/S. LOVELY EXPORTS PVT. LTD. AND KOLKATA TRIBUNALS DECISIONS I AM TO HOLD THAT THE SHARE CAPITAL/PREMIUM OF RS.24,00,000/- RECEIVED FROM INVESTORS IS NOT LIABL E TO BE TREATED U/S. 68 AS UNEXPLAINED CREDITS AND TO BE TAXED IN THE HANDS OF THE APPELLA NT COMPANY. THE APPELLANTS GROUND IS ALLOWED. IN VIEW OF THE ABOVE, AND FINDING NO CONTRARY DECIS IONS BROUGHT ON RECORD BY THE REVENUE AUTHORITIES, WE FIND NO INFIRMITY IN THE OR DER OF THE LD. CIT(A) AND THE SAME IS HEREBY UPHELD. THE APPEAL OF THE REVENUE IS, THERE FORE, DISMISSED. 5. IN THE RESULT, THE APPEAL OF THE REVENUE IS DIS MISSED. 5. THE ORDER IS PRONOUNCED IN THE OPEN COURT ON 18 .5.10 SD/- SD/- (B. C. MEENA) (D. K. TYAGI) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED : 18TH MAY, 2010 COPY TO : 1. ITO, WD-10(2), KOLKATA. 2. M/S. ROSEBERRY MERCANTILE (P) LTD., 44, CHAKRABERIA ROAD (SOUTH), KOLKATA-25. 3. CIT(A), KOLKATA 4. CIT, KOLKATA 5. D.R., ITAT, KOLKATA. TRUE COPY BY ORDER DEPUTY REGISTRAR JD.(SR.P.S.) I.T.AT., KOLKATA