ITO,Wd.1(2), Nashik V. Shri Yashwant Ramchandra Gajjar, Nashik

ITA 212/PUN/2010

• Counselvise Citation: 21224514 RSA 2010
• Duration Of Justice: 4 year(s) 9 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-11-2014
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: B
• Next Hearing Date: 02-08-2011
• Assessment Year: 2001-2002
• Appeal Filed On: 05-02-2010
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: P S NAIK
• Keywords: Opportunity of being heard; Source of fund
• Section: 143(3); 68

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH B, PUNE BEFORE SHRI G.S. PANNU, ACCOUNTANT MEMBER AND SHRI R.S. PADVEKAR, JUDICIAL MEMBER ITA NO.212/PN/2010 (ASSESSMENT YEAR : 2001-02) INCOME TAX OFFICER, WARD 1(2), NASHIK. . APPELLANT VS. SHRI YASHWANT RAMCHANDRA GAJJAR, VENICE B NEW PANDIT COLONY, SHARANPUR ROAD, NASHIK. PAN : AAUPG5067F . RESPONDENT DEPARTMENT BY : SHRI P. S. NAIK ASSESSEE BY : SHRI PRAMOD SHINGTE DATE OF HEARING : 10-11-2014 DATE OF PRONOUNCEMENT : 21-11-2014 ORDER PER G. S. PANNU, AM THE CAPTIONED APPEAL BY THE REVENUE IS DIRECTED AGA INST AN ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS)-I, NASHIK DATED 24.11.2009 WHICH, IN TURN, HAS ARISEN FROM AN ORDER DATED 29.12.2006 PASSED BY THE ASSESSING OFFICER U/S 143(3) R.W.S. 147 OF THE INCOME-TAX ACT , 1961 (IN SHORT THE ACT), PERTAINING TO THE ASSESSMENT YEAR 2001-02. 2. IN THIS APPEAL, ISSUE RELATES TO PURPORTED INVES TMENT MADE BY THE ASSESSEE IN THE SHARE CAPITAL OF M/S VEL SOFTWARE L TD.. IN THE CASE OF INVESTEE COMPANY I.E. M/S VEL SOFTWARE LTD., THE CONTRIBUTIO N TO THE SHARE CAPITAL WAS CONSIDERED AS UNEXPLAINED BY THE ASSESSING OFFICER WITHIN THE MEANING OF SECTION 68 OF THE ACT. CORRESPONDINGLY IN THE HAND S OF THE ASSESSEE SUCH PURPORTED CONTRIBUTION WAS ALSO ASSESSED AS UNEXPLA INED INVESTMENT, BUT ON A PROTECTIVE BASIS. THE CIT(A) HAS HELD THAT THE ASS ESSING OFFICER WAS NOT JUSTIFIED IN ASSESSING THE VALUE OF INVESTMENT IN S HARE CAPITAL OF RS.1,10,00,000/- IN THE HANDS OF THE ASSESSEE ON PR OTECTIVE BASIS. THE ITA NO.212/PN/2010 PRIMARY REASON WEIGHING WITH THE CIT(A) WAS THAT TH E SOURCE OF INVESTMENT IN THE SHARE CAPITAL OF M/S VEL SOFTWARE LTD. IS TO BE CONSIDERED IN THE HANDS OF ONE M/S PORTAL INDIA AND NOT IN THE HANDS OF THE AS SESSEE. AGAINST SUCH A DECISION OF THE CIT(A), REVENUE IS IN APPEAL BEFORE US. 3. AT THE TIME OF HEARING, IT WAS A COMMON POINT BE TWEEN THE PARTIES THAT SIMILAR ORDERS WERE PASSED BY THE ASSESSING OFFICER AS WELL AS THE CIT(A) IN THE CASE OF OTHER INDIVIDUAL ASSESSEES WHO HAD PURP ORTED TO HAVE INVESTED IN THE SHARE CAPITAL OF M/S VEL SOFTWARE LTD.. SUCH A SSESSMENTS IN THE CASE OF INVESTEE COMPANY, M/S VEL SOFTWARE LTD. AS WELL AS OTHER SHAREHOLDERS, NAMELY, (I) SHRI NILKANTH D. AHER; (II) SHRI SANDIP ANI PUNDALIK BHOLE; (III) SHRI DNYANESHWAR BHIKAJI AHER; AND (IV) SHRI DEELIP R. T HOLE WERE A SUBJECT-MATTER OF CONSIDERATION BY THE TRIBUNAL IN ITA NO.216/PN/2 010 AND ITA NOS.211, 213, 214 & 215/PN/2010 RESPECTIVELY VIDE ORDERS DATED 25 .05.2012. IN THE CASE OF M/S VEL SOFTWARE LTD. (SUPRA) , THE ISSUE WAS REMAN DED BACK TO THE FILE OF THE CIT(A) WITH THE FOLLOWING DIRECTIONS :- 8. THE CIT(A) DELETED THE ADDITION BY NOTICING TH AT THE SHARE CAPITAL OF RS.9.30 CRORES WAS THE AMOUNT TRANSFERRE D FROM THE BANK ACCOUNT OF M/S. PORTAL INDIA TO THE SHARE HOLDERS ACCOUNT A ND FROM BANK ACCOUNT OF THE SHARE HOLDERS TO THE ASSESSEE COMPANY. AS PER THE CIT(A) THE SHARES OWNED BY THE SHARE HOLDERS HAVE BEEN PLEDGED BY THE SHARE HOLDERS IN FAVOUR OF M/S.PORTAL INDIA AND THE SAME ACCORDINGLY SHOWS THAT IT IS M/S PORTAL INDIA THAT HAS ACQUIRED SHARES OF RS.9,30,00,000/- OF THE ASSESSEE COMPANY; AND IN TURN IT HAD SOLD A SOFTWARE PORTAL TO THE ASSESS EE COMPANY FOR SUM OF RS.9,30,00,000/- . BE THAT AS IT MAY, THE CIT(A) HAS BEEN GUIDED BY THE FACT THAT THE IDENTITY OF M/S PORTAL INDIA STOOD ESTABLI SHED AS IT WAS FOUND TO BE MAINTAINING A BANK ACCOUNT AT THE RELEVANT TIME WIT H WESTERN CO-OP BANK LTD. IN ANDHERI, (E). SECONDLY, THE CIT(A) ALSO OBSERV ED THAT THE SHAREHOLDERS OF THE ASSESSEE COMPANY DID NOT CONTRIBUTE ANY AMOUNT WHICH WAS ENTIRELY LOANED TO THEM BY M/S PORTAL INDIA AND THE SOURCE OF FUNDS STOOD PROVED, NO ADDITION WAS WARRANTED U/S.68 OF THE ACT. 9. WE HAVE EXAMINED THE FINDINGS OF THE CIT(A) WITH RESPECT TO THREE INGREDIENTS WHICH ARE REQUIRED TO BE DISCHARG ED BY THE ASSESSEE WHEN FACED WITH AN INQUIRY U/S.68 OF THE ACT. THE SAID ONUS INVOLVES NOT ONLY PROVING THE IDENTITY AND CAPACITY OF THE SOURCE CRE DITORS BUT ALSO GENUINENESS OF THE TRANSACTION. IN THE PRESENT CASE THE ASSESS ING OFFICER HAD NOTED THAT THE ASSESSEE HAS CLAIMED TO HAVE PURCHASED A SOFTWA RE PORTAL FOR RS.9,30,00,000/- FROM M/S. PORTAL INDIA IN TERMS OF THE MEMORANDUM OF UNDERSTANDING; IN TURN, THE SAID SUM OF RS.9,30,00 ,000/- WAS ROUTED AS SHARE ITA NO.212/PN/2010 CAPITAL IN THE ASSESSEE COMPANY ALBEIT NOT IN THE N AME OF M/S. PORTAL INDIA BUT IN THE NAMES OF TEN SHARE HOLDERS. NOTABLY, THE PU RCHASE OF THE SOFTWARE PORTAL FROM M/S. PORTAL INDIA HAS BEEN FOUND TO BE INGENUINE BY THE ASSESSING OFFICER AS PER THE DISCUSSION CONTAINED IN SUB-PARA (C) OF PARA 12 OF THE ASSESSMENT ORDER. IN THIS MANNER, THE GENUINENESS O F THE TRANSACTION WHICH HAS RESULTED IN THE IMPUGNED CREDIT IN THE BOOKS OF ACCOUNT HAS NOT BEEN ACCEPTED BY THE ASSESSING OFFICER. QUITE CLEARLY, A PART FROM NOT BEING SATISFIED ON THE OTHER INGREDIENTS OF SECTION, THE ASSESSING OFFICER HAS TREATED THE SHARE CAPITAL CREDITED IN THE ACCOUNT BOOKS IN THE NAMES OF TEN SHAREHOLDERS AS UNEXPLAINED FOR THE FAILURE OF THE ASSESSEE TO E XPLAIN THE GENUINENESS OF THE TRANSACTION WITH M/S PORTAL INDIA. ON THE ASPEC T OF GENUINENESS OF THE TRANSACTION, THERE IS NO FINDING BY THE CIT(A), AND QUITE CLEARLY, THE SAME HAS NOT BEEN ADDRESSED BY ASSESSEE ALSO BEFORE THE CIT( A). THEREFORE, UNDER THESE CIRCUMSTANCES, IN OUR CONSIDERED OPINION THE CIT(A) ERRED IN STRAIGHTAWAY DELETING THE ADDITION WITHOUT BEING SA TISFIED ABOUT GENUINENESS OF THE TRANSACTION. THEREFORE, CONSIDERING THE EN TIRETY OF THE FACTS AND CIRCUMSTANCES OF THE CASE, WE DEEM IT FIT AND PROPE R THAT ORDER OF THE CIT(A) BE SET ASIDE AND THE MATTER BE EXAMINED AFRESH SO A S TO ESTABLISH THAT ALL INGREDIENTS REQUIRED FOR THE PURPOSE OF SECTION 68 OF THE ACT ARE FULFILLED OR NOT. ACCORDINGLY, WE SET ASIDE THE ORDER OF THE CIT(A) A ND RESTORE THE MATTER BACK TO HIS FILE TO BE ADJUDICATES AFRESH. NEEDLESS T O SAY, THE CIT(A) SHALL ALLOW A REASONABLE OPPORTUNITY OF BEING HEARD TO THE ASSESS EE AND THEREAFTER ADJUDICATE AS PER LAW. 4. ON THE STRENGTH OF THE AFORESAID ORDER IN THE CA SE OF M/S VEL SOFTWARE LTD. (SUPRA) WHEREIN ISSUE RELATED TO ADDITION MADE ON SUBSTANTIVE BASIS, THE TRIBUNAL IN THE CASE OF OTHER SHAREHOLDERS, NAMELY, (I) SHRI NILKANTH D. AHER; (II) SHRI SANDIPANI PUNDALIK BHOLE; (III) SHRI DNYA NESHWAR BHIKAJI AHER; AND (IV) SHRI DEELIP R. THOLE VIDE ORDER DATED 25.05.2012 (S UPRA) ALSO SET-ASIDE THE ORDER OF THE CIT(A) AND REMANDED THE MATTER BACK TO HIS FILE WITH THE FOLLOWING DIRECTIONS :- 4. WHILE DEALING WITH SUBSTANTIVE ADDITION IN THE HANDS OF THE INVESTEE COMPANY M/S VEL SOFTWARE LTD., WE HAVE REM ANDED THE MATTER BACK TO THE FILE OF THE CIT(A) VIDE OUR ORDER OF EVEN DA TE IN ITA NO.216/PN/2010 (SUPRA). AS ADDITION IN THE PRESENT CASES HAVE BEE N MADE ON PROTECTIVE BASIS, WE DEEM IT FIT AND PROPER TO RESTORE THESE A PPEALS ALSO TO THE FILE OF CIT(A) FOLLOWING OUR DECISION IN THE CASE OF M/S VE L SOFTWARE LTD. (SUPRA) WHICH INVOLVED ADDITION ON SUBSTANTIVE BASIS. THE CIT(A) SHALL DECIDE THE CAPTIONED APPEALS AFTER ADJUDICATING THE APPEAL IN THE CASE OF M/S VEL SOFTWARE LTD. (SUPRA) WITH REGARD TO THE IMPUGNED I SSUES, AND AS PER LAW. 5. IN THE AFORESAID BACKGROUND, IN THE PRESENT CASE ALSO THE MATTER IS REQUIRED TO BE SENT BACK TO THE FILE OF THE CIT(A) TO BE ADJUDICATED BY HIM AFTER ADJUDICATION IN THE CASE OF M/S VEL SOFTWARE LTD. ( SUPRA). THE ASSESSEE ITA NO.212/PN/2010 BEFORE US IS ALSO STATED TO A SHAREHOLDER M/S VEL S OFTWARE LTD., AS WAS THE SITUATION IN THE CASE OF SHRI NILKANTH D. AHER AND OTHERS (SUPRA). 6. AT THE TIME OF HEARING, THE LEARNED REPRESENTATI VE POINTED OUT THAT IN THE PRESENT CASE, STATEMENT OF THE ASSESSEE WAS REC ORDED BY THE ASSESSING OFFICER, WHEREIN ASSESSEE CONFIRMED THAT HE DID NOT KNOW AND WAS NOT CONCERNED WITH M/S VEL SOFTWARE LTD.. IN THIS MANN ER, THE LEARNED REPRESENTATIVE SOUGHT TO POINT OUT THAT THE PRESENT CASE IS DIFFERENT FROM THE CASES OF OTHER SHAREHOLDERS, NAMELY, SHRI NILKANTH D. AHER AND OTHERS, WHICH HAVE BEEN SET-ASIDE BY THE TRIBUNAL BACK TO THE FIL E OF THE CIT(A). 7. WE HAVE CONSIDERED THE PLEA OF THE ASSESSEE AND FIND NO REASONS TO DEVIATE FROM THE EARLIER DECISION OF THE TRIBUNAL R ENDERED IN THE CASE OF OTHER SET OF SHAREHOLDERS WHEREIN IDENTICAL MATTER HAS BE EN REMANDED BACK TO THE FILE OF THE CIT(A) FOR ADJUDICATION AFRESH. THE IS SUE RAISED BY THE LEARNED REPRESENTATIVE IS A MATTER TO BE APPRECIATED BY THE CIT(A) WHILE EVALUATING THE EVIDENCE AND MATERIAL ON RECORD. IT SHALL BE O PEN TO THE ASSESSEE TO PUT- FORTH THE AFORESAID AS WELL AS ANY OTHER PLEA, THAT HE MAY DEEM FIT TO RAISE IN ORDER TO RESIST THE ACTION OF THE INCOME-TAX AUTHOR ITIES. 8. IN CONCLUSION, WE THEREFORE RESTORE THE MATTER B ACK TO THE FILE OF THE CIT(A) FOLLOWING THE DECISION OF THE TRIBUNAL IN TH E CASE OF SHRI NILKANTH D. AHER AND OTHERS (SUPRA) WHEREIN THE ISSUE RELATED T O SIMILAR ADDITION MADE BY THE ASSESSING OFFICER ON PROTECTIVE BASIS. THE CIT (A) IS FURTHER DIRECTED TO DECIDE THE CAPTIONED APPEAL AFTER ADJUDICATING THE APPEAL OF M/S VEL SOFTWARE LTD. (SUPRA), WHICH HAS ALSO BEEN REMANDED BACK TO HIS FILE VIDE ORDER DATED 25.05.2012 (SUPRA). NEEDLESS TO MENTION, THE CIT(A ) SHALL ALLOW THE ASSESSEE A REASONABLE OPPORTUNITY OF BEING HEARD BEFORE PASS ING AN ORDER AFRESH IN ACCORDANCE WITH LAW. THUS, REVENUE PARTLY SUCCEEDS ON THIS ASPECT. ITA NO.212/PN/2010 9. IN THE RESULT, THE APPEAL OF THE REVENUE IS PART LY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 21 ST NOVEMBER, 2014. SD/- SD/- (R.S. PADVEKAR) (G.S. PANNU) JUDICIAL MEMBER ACCOUNTANT MEMBER PUNE, DATED: 21 ST NOVEMBER, 2014. SUJEET COPY OF THE ORDER IS FORWARDED TO : - 1) THE ASSESSEE; 2) THE DEPARTMENT; 3) THE CIT(A)-I, NASHIK; 4) THE CIT-I, NASHIK; 5) THE DR B BENCH, I.T.A.T., PUNE; 6) GUARD FILE. BY ORDER //TRUE COPY// ASSISTANT REGISTRAR I.T.A.T., PUNE