ITO 10(2)(3), MUMBAI V. AAJIVAN COMPUTERS P.LTD, MUMBAI

ITA 2160/MUM/2014

• Counselvise Citation: [2015] 134 COUNSELVISE.COM (IT) 3198 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 6 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-09-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: SMC
• Assessment Year: 2006-2007
• Appeal Filed On: 28-03-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: CHANDRA VIJAY
• Assessee Lawyers: DR P DANIEL
• Keywords: Search and seizure; Share purchase agreement; Opportunity of cross examination
• Section: 68

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI D BENCH, MUMBAI BEFORE SHRI SHAILENDRA KUMAR YADAV, JUDICIAL MEMBER, AND SHRI ASHWANI TANEJA, ACCOUNTANT MEMBER. ITA. NOS. 2117 & 2118/MUM/2014 (ASSESSMENT YEARS: 2006-07 & 2007-08) INCOME TAX OFFICER 10(2)(1), MUMBAI APPELLANT VS. M/S. DEEP DARSHAN PROPERTIES PVT. LTD., FLAT NO.401, SAI SIDDHI APARTMENT, 11 TH ROAD, CHEMBUR, MUMBAI - 400071 RESPONDEN T PAN: AABCD6978J & ITA. NO. 2160/MUM/2014 (ASSESSMENT YEAR: 2006-07) INCOME TAX OFFICER 10(2)(3), 431, 4 TH FLOOR, AAYKAR BHAVAN, MUMBAI - 400020 APPELLANT VS. AAJIVAN COMPUTERS PVT. LTD., 101, VALLABH VIHAR, M G ROAD, GHATKOPAR EAST MUMBAI -77 RESPONDENT PAN: AACCA6574C & ITA NOS. 2117, 2118, 2160, 2116, 2157 & 2119/MUM/14 PAGE 2 ITA. NO. 2116/MUM/2014 (ASSESSMENT YEAR: 2006-07) INCOME TAX OFFICER 10(2)(1), MUMBAI APPELLANT VS. M/S. KARAMVEER REAL ESTATE PVT. LTD., 101, VALLABH VIHAR, M G ROAD, GHATKOPAR (E), MUMBAI - 400077 RESPONDENT PAN: AABCK9237D & ITA. NO. 2157/MUM/2014 (ASSESSMENT YEAR: 2006-07) INCOME TAX OFFICER 10(2)(3), 431, 4 TH FLOOR, AAYKAR BHAVAN, MUMBAI - 400020 APPELLANT VS. DIGNITY SECURITIES TRADING PVT. LTD., 101, VALLABH VIHAR, M G ROAD, GHATKOPAR EAST MUMBAI - 77 RESPONDENT PAN: AAACD6519L & ITA. NO. 2119/MUM/2014 (ASSESSMENT YEAR: 2006-07) ITA NOS. 2117, 2118, 2160, 2116, 2157 & 2119/MUM/14 PAGE 3 INCOME TAX OFFICER 10(2)(1), MUMBAI APPELLANT VS. M/S. BLUE HILL PROPERTIES PVT. LTD., 101, VALLABH VIHAR, M G ROAD, GHATKOPAR (E), MUMBAI - 400077 RESPONDENT PAN: AACCB7551N / BY REVENUE : SHRI CHANDRA VIJAY, D.R. / BY ASSESSEE : DR. P. DANIEL, A.R. /DATE OF HEARING : 21.09.2015 /DATE OF PRONOUNCEMENT : 28.09.2015 ORDER PER BENCH : ALL THESE APPEALS PERTAIN TO DIFFERENT ASSESSEE OF SAME GROUP FILED BY REVENUE ARE ARISING OUT FROM THE RES PECTIVE ORDERS OF CIT(A)-21, MUMBAI, DATED 30.01.2014 FOR A LL APPEALS ON SIMILAR ISSUE. SO, THEY ARE BEING DISPOSED OF B Y WAY OF COMMON ORDER FOR THE SAKE OF CONVENIENCE. 2. IN ITA NO. 2117/MUM/2014 FOR A.Y. 2006-07 IN CAS E OF M/S. DEEP DARSHAN PROPERTIES P. LTD., REVENUE HAS F ILED THE APPEAL ON THE FOLLOWING GROUNDS: '1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW, THE LD. CIT(A) ERRED IN DELETING THE ADDITI ON OF RS.35,00,000 / - MADE UNDER SECTION 68 OF THE I.T. ACT ITA NOS. 2117, 2118, 2160, 2116, 2157 & 2119/MUM/14 PAGE 4 IN RESPECT OF SHARE APPLICATION MONEY WITHOUT APPRECIATING THE FACT THAT ADDITION WAS BASES ON SPECIFIC INFORMATION PROVIDED BY THE INVESTIGATION WING OF INCOME TAX DEPARTMENT THAT INVESTOR COMPANIES HAD ISSUED CHEQUES TOWARDS THE ALLEGED SHARE APPLICATION MONEY IN RETURN OF CASH.' 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW, THE LD. CIT(A) ERRED IN NOT APPRECIATING TH E FACT THAT THE ASSESSEE HAS FAILED TO DISCHARGE THE ONUS CAST UPON IT TO PROVE THE CREDIT ENTRIES OF SH ARE APPLICATION MONEY AS REQUIRED UNDER THE STATUTE.' 3. THE APPELLANT CRAVES LEAVE TO ADD, AMEND, VARY, OMIT OR SUBSTITUTE ANY OF THE AFORESAID GROUNDS OF APPEAL A T ANY TIME BEFORE OR AT THE TIME OF HEARING OF APPEAL . 4. THE APPELLANT PRAYS THAT THE ORDER OF CIT(A) ON THE ABOVE GROUND BE SET ASIDE AND THAT OF THE ASSESSING OFFICER BE RESTORED. 3. THE FACTS OF THE CASE ARE THAT ASSESSEE IS ENGAG ED IN THE BUSINESS OF FINANCIAL SERVICES. ASSESSEE RECEIVED SHARE CAPITAL SUBSCRIPTION OF RS.35 LACS FROM M/S. SONAL COSMETIC S (EXPORT) LTD., M/S. GABRIEL INVESTMENT P. LTD., M/S. JAIHIND SYNTHETICS LTD., M/S. SONAL SILICHEM LTD. AND M/S. MIHIR AGENC IES P. LTD. THESE COMPANIES WERE FLOATED BY MR. MUKESH CHOKSI. HE ALONG WITH ALL RELATED CONCERN WAS SEARCHED BY INVE STIGATION WING. THE SAID MUKESH CHOKSI AND MR. JAYESH SAMPAT , ADMITTED BEFORE DIT(INV.) THAT COMPANIES HAVE RECEI VED CASH FROM THE CORPORATE ENTITY BY CHARGING A OMISSION OF 0.15% TO 1.25%, THEY HAVE ISSUED CHEQUES IN FAVOUR OF THE AS SESSEE. ON RECEIVING THE ABOVE INFORMATION, ASSESSING OFFICER ISSUED NOTICE U/S.148 AND ADDED RS.35 LACS U/S.68 FOR SHARE APPLI CATION ITA NOS. 2117, 2118, 2160, 2116, 2157 & 2119/MUM/14 PAGE 5 MONEY SUBSCRIBED BY MR. MUKESH CHOKSI WHO PROMOTED THE COMPANY. 4. MATTER WAS CARRIED BEFORE THE CIT(A), WHEREIN VA RIOUS CONTENTIONS WERE RAISED ON BEHALF OF ASSESSEE AND H AVING CONSIDERED THE SAME, CIT(A) UPHELD THE ORDER OF REO PENING WHICH IS NOT ISSUE BEFORE US. ON MERIT, CIT(A) ALL OWED THE APPEAL FOLLOWING VARIOUS CASE LAWS ON THE POINT. S AME HAS BEEN OPPOSED BEFORE US, INTER ALIA SUBMITTING THAT CIT(A) WAS NOT JUSTIFIED IN DELETING THE ADDITION OF RS.35 LAC S MADE U/S.68 OF INCOME TAX ACT IN RESPECT OF SHARE APPLICATION. WITHOUT APPRECIATING THE FACT THAT ADDITION WAS BASED ON SP ECIFIC INFORMATION PROVIDED BY THE INVESTIGATION WING OF I NCOME TAX THAT INVESTOR COMPANIES HAD ISSUED CHEQUES TOWARDS THE ALLEGED SHARE APPLICATION MONEY IN RETURN OF CASH. THUS, ASSESSEE FAILED TO DISCHARGE ONUS CAST UPON HIM TO ESTABLISH THE CREDIT ENTRIES OF SHARE APPLICATION MONEY AS RE QUIRED UNDER THE STATUTE. ACCORDINGLY, THE ORDER OF CIT(A) BE S ET ASIDE AND THAT OF ASSESSING OFFICER BE RESTORED. ON OTHER HA ND, LEARNED AUTHORIZED REPRESENTATIVE SUPPORTED THE ORDER OF CI T(A) AND SUBMITTED THAT THIS ISSUE IS COVERED IN FAVOUR OF A SSESSEE BY VARIOUS CASE LAWS INCLUDING ITAT, MUMBAI J BENCH IN CASE OF ITO VS. J. J. MULTITRADE PVT. LTD. IN ITA NOS. 2158 & 2159/MUM/2014 FOR A.YS. 2007-08 & 2008-09. ITAT, M UMBAI E BENCH IN CASE OF M/S. SDB ESTATE PVT. LTD. VS. ITO IN ITA NO.584/M/2015 FOR A.Y. 2008-09 AND ITAT, MUMBAI BEN CH IN CASE OF SMT. JYOTI D. SHAH VS. ITO IN ITA NO. 1843/ MUM/2012 ITA NOS. 2117, 2118, 2160, 2116, 2157 & 2119/MUM/14 PAGE 6 FOR A.Y. 2003-04. IN THIS BACKGROUND, LEARNED AUTH ORIZED REPRESENTATIVE SUBMITTED THAT ORDER OF CIT(A) BE UP HELD. 5. AFTER GOING THROUGH RIVAL SUBMISSIONS AND MATERI AL ON RECORD, WE FIND THAT ASSESSEE HAS RECEIVED SHARE AP PLICATION OF RS.35 LACS FROM FIVE COMPANIES, AS PER DETAILS GIVE N IN THE ASSESSMENT ORDER. THE INVESTIGATION WING HAD CONDU CTED SEARCH AND SEIZURE ON MR. MUKESH CHOKSI AND MR. JAY ESH SAMPAT AND COMPANIES. IN THEIR STATEMENT, THEY HAV E STATED THAT THEY WERE RECEIVING MONEY FROM VARIOUS CORPORA TE ENTITIES AFTER CHARGING COMMISSION OF 0.15% TO 1.25%, THEY H AVE ISSUED CHEQUES IN FAVOUR OF CORPORATE ENTITIES FOR SHARE A PPLICATION MONEY. ON RECEIVING THIS INFORMATION, ASSESSING OF FICER REOPENED THE ASSESSEES CASE U/S.148 AND ADDED THE SHARE APPLICATION MONEY U/S.68 OF THE INCOME TAX ACT. IN SIMILAR FACTS AND CIRCUMSTANCES, WHERE THESE SHAREHOLDERS H AVE INVESTED MONEY IN CORPORATE ENTITY AS SHARE APPLICA TION MONEY, THE ITAT, JAIPUR BENCH IN CASE OF CHARTI SYNTEX LTD . VS. DCIT IN ITA NOS. 172 & 173/JP/2010 HAS HELD IN PARA 24.4 AS UNDER: 24.4 IN THIS CASE ALSO NO CROSS EXAMINATION WAS ALLOWED TO THE ASSESSEE. THEREFORE, ADVERSE INFEREN CE CANNOT BE DRAWN ONLY ON THE STATEMENT OF SHRI MUKESH CHOKS I. WE FURTHER NOTED THAT ALL OTHER NECESSARY DETAILS HAVE BEEN FILED BEFORE AO. AMOUNTS WERE RECEIVED THROUGH ACCOUNT PA YEE CHEQUE. BOTH THE COMPANIES ARE ASSESSED TO TAX IN M UMBAI. CONFIRMATION ALONG WITH COPIES OF SHARE CERTIFICATE BANK STATEMENT MEMORANDUM OF ARTICLES COPY OF SHARE APPLICATION MONEY AUDITED BALANCE SHEET AND P&L A/ C OF THESE PARTIES WERE FILED. THESE ARE SIMILAR DETAILS AS WERE ITA NOS. 2117, 2118, 2160, 2116, 2157 & 2119/MUM/14 PAGE 7 FILED IN CASE OF THREE OTHER COMPANIES FOR ASST. YR . 2005-06. WE HAVE ALREADY DISPOSED OF THE APPEAL FOR ASST. YR. 2005-06 WHEREBY WE HAVE HELD THAT THE ASSESSEE HAS DISCHARGED ITS ONUS BY FILING NECESSARY DETAILS AND FURTHER HAVE RELIED ON THE DECISIONS OF HON'BLE SUPREME COU RT AND HON'BLE DELHI HIGH COURT ALONG WITH VARIOUS OTHER D ECISIONS OF TRIBUNAL AND HAVE HELD THAT ADDITION CANNOT BE M ADE UNDER S.68 IN THE HANDS OF THE ASSESSEE COMPANY. THEREFORE, IN VIEW OF THE SAME REASONING, WE CANCEL THE ENTIRE ADDITION MADE AND CONFIRMED BY THE LOWER AUT HORITIES HERE ALSO. THE ABOVE DECISION OF ITAT, JAIPUR BENCH ALSO RELAT ED TO MR. MUKESH CHOKSIS CASE OF INVESTMENT IN SHARE APPLICA TION. THE RATIO OF CHARTI SYNTEX LTD. (SUPRA) MAKES IT CLEAR THAT IF A SHARE HOLDER HAS INVESTED THE MONEY AND IF ASSESSEE RECEI VES SUCH MONEY AS SHARE APPLICATION MONEY AND ASSESSEE DURIN G ASSESSMENT PROCEEDINGS PROVIDES THE DETAILS LIKE NA ME AND ADDRESS OF CORPORATE ENTITY, PAN NO., ROC NO., THEN THIS MAY BE REFERRED TO THE CONCERNED ASSESSING OFFICER FOR PROCEEDINGS AGAINST SUCH SHARE HOLDERS INSTEAD OF ADDING THE AM OUNT U/S.68 OF THE ACT IN THE HANDS OF ASSESSEE COMPANY. THIS VIEW HAS BEEN UPHELD BY HONBLE BOMBAY HIGH COURT IN CAS E OF CIT VS. CREATIVE WORLD TELEFILMS LTD. (2011) 333 ITR 10 0 (BOM) BY OBSERVING AS UNDER: IF THE SHARE APPLICATION MONEY IS RECEIVED BY THE ASSESSEE COMPANY FROM ALLEGED BOGUS SHAREHOLDERS, WHOSE NAME S ARE GIVEN TO THE ASSESSING OFFICER, THEN THE DEPART MENT CAN ALWAYS PROCEED AGAINST THEM AND IF NECESSARY REOPEN THEIR INDIVIDUAL ASSESSMENTS. HELD, DISMISSING THE APPEAL, THAT THERE WAS NO DISP UTE THAT THE ASSESSEE HAD GIVEN THE DETAILS OF NAMES AND ADD RESSES OF THE SHARE HOLDERS, THEIR PAN/GIR NUMBERS AND HAD ALSO ITA NOS. 2117, 2118, 2160, 2116, 2157 & 2119/MUM/14 PAGE 8 GIVEN THE CHEQUE NUMBERS, NAME OF THE BANKERS. THE ASSESSING OFFICER OUGHT TO HAVE FOUND OUT THEIR DET AILS THROUGH PAN CARDS, BANK ACCOUNTS DETAILS OR FROM TH EIR BANKERS SO AS TO REACH THE SHARE HOLDERS. THUS, TH E VIEW TAKEN BY THE TRIBUNAL COULD NOT BE FAULTED. FURTHER HONBLE SUPREME COURT IN THE CASE OF LOVELY EXPORTS 6 DTR 308 (SC) HAS HELD AS UNDER: IF THE SHARE APPLICATION MONEY IS RECEIVED BY THE ASSESSEE COMPANY FROM ALLEGED BOGUS SHARE HOLDERS WHOS NAME ARE GIVEN TO THE AO THEN THE DEPARTMENT IS FREE TO PROCEED TO REOPEN THEIR INDIVIDUAL ASSESSME NTS IN ACCORDANCE WITH LAW BUT IT CANNOT BE REGARDED AS UNDISCLOSED INCOME OF ASSESSEE COMPANY. 6. COMING BACK TO THE FACTS OF THE PRESENT CASE, IT IS SEEN THAT INVESTMENT IN THE CAPITAL SHARE OF THE ASSESSE E COMPANY WAS MADE BY FIVE COMPANIES. THESE COMPANIES EXIST ON THE RECORDS OF ROC. ALL THESE COMPANIES ARE ASSESSED W ITH THE INCOME TAX DEPARTMENT, THEREFORE, THESE EXIST ON TH E RECORD OF INCOME TAX DEPARTMENT. THE ASSESSEE COMPANY ALSO F ILED BEFORE THE AO FORM NO.5 AND 2 AND PAN NO. AND ADDRE SS OF ALL THESE SHARE HOLDERS, THEREBY ESTABLISHING IDENTITY AND ALL THESE COMPANIES. FURTHER PAYMENT WAS RECEIVED BY THE ASS ESSEE COMPANY THROUGH BANKING CHANNELS. THE INVESTMENT H AS BEEN REFLECTED BY THESE SHARE HOLDERS COMPANIES IN THE R ESPECTIVE BALANCE SHEETS. THUS, CREDITWORTHINESS OF THESE SH ARE HOLDERS WAS ALSO ESTABLISHED. IT IS NOTED FROM THE RECORD THAT FOLLOWING EVIDENCE HAVE BEEN FURNISHED BY THE ASSESSEE WITH R ESPECT TO EACH OF THE SHARE HOLDERS. -MEMORANDUM AND ARTICLE OF ASSOCIATION ITA NOS. 2117, 2118, 2160, 2116, 2157 & 2119/MUM/14 PAGE 9 -COPY OF ROC FORM NO.-2 (ALONGWITH DETAILS OF SHARE APPLICATION AND SHARE ALLOTMENT) -COPY OF AUDITED BALANCE SHEET FULL SET. -COPY OF THE CONFIRMATION LETTER -COPY OF PAN CARD AND -COPY OF IT ACKNOWLEDGMENT EVIDENCES FILING OF RETU RN -COPY OF BALANCE SHEET. IN OUR CONSIDERED VIEW, THE ASSESSEE HAS DISCHARGED ITS PRIMARY ONUS BY ESTABLISHING IDENTITY AND CREDITWOR THINESS OF THE SHARE HOLDERS. THE TRANSACTIONS STOOD CONFIRME D ALSO, ON THE BASIS OF CONFIRMATION LETTERS OF ALL THESE SHAR E HOLDERS. THE AO DOUBTED THE GENUINENESS BY RELYING UPON SOME STA TEMENTS WHICH WERE NOT RECORDED BY THE ASSESSING OFFICER. THE STATEMENTS RELIED BY LD. ASSESSING OFFICER WERE NOT TESTED IN THE ASSESSMENT PROCEEDINGS CONDUCTED BY THE ASSESSING O FFICER. NO OPPORTUNITY OF CROSS EXAMINATION WAS PROVIDED BY THE ASSESSING OFFICER TO THE ASSESSEE BEFORE USING THES E STATEMENTS AGAINST THE ASSESSING OFFICER. FOLLOWING SUBMISSION S HAVE BEEN MADE BEFORE US, IN SUPPORT OF THE CLAIM MADE BY THE ASSESSEE:- (I) THE SHARE APPLICATION FORM IS THE CONFIRMATION OF THE SHARE APPLICANT. THE SHARE ALLOTMENT IN COMPLIANCE OF COMPANIES ACT 1956 IN FORM NO.2 IS FACTUALLY EVIDEN T OF THE SHARE CAPITAL. (II) FUNDS OF THE SHARE CAPITAL SUBSCRIPTION ARE T HROUGH BANKING CHANNEL AND REFLECTED IN THE BANK STATEMENT . (III) THE ALLOTMENTS OF THE SHARES ARE RECORDED IN THE MINUTES ITA NOS. 2117, 2118, 2160, 2116, 2157 & 2119/MUM/14 PAGE 10 OF THE COMPANY WHICH ARE KEPT IN ACCORDANCE WITH TH E APPLICABLE PROVISIONS OF THE COMPANIES ACT 1956. (IV) ALL SHARES SUBSCRIPTION OF THE COMPANY ARE DU LY INCURRED BY CORPORATE ENTITIES HAVING INCOME TAX PERMANENT ACCOUNT NUMBER AND ARE FILING RETURNS OF INCOME AND ARE DULY ASSESSED AND THUS, IDENTITY OF THE SHAREHOLDERS IS ALSO ESTABLISHED. (V) APPLICANT'S NAME IS NOT MENTIONED IN ANY OF THE STATEMENT OF MR. C. CHOKSI GROUP RECORDED BY THE IT DEPARTMENT. IN VIEW OF THESE PECULIAR FACTS AND CIRCUMSTANCES, WE FIND THAT THE ASSESSEE DISCHARGED ITS ONUS AS PER LAW, AS STI PULATED SECTION 68 OF THE ACT. ON THE OTHER HAND, THE ASSE SSING OFFICER WAS NOT IN POSITION TO CONTROVERT THE FACTUAL MATER IAL AND DOCUMENTARY EVIDENCES PLACED BY THE ASSESSEE AND HE COULD NOT BRING ANYTHING CONTRARY ON RECORD TO NEGATE THE DOCUMENTARY EVIDENCES FURNISHED BY THE ASSESSEE. I N VIEW OF THE PECULIAR FACTS AND CIRCUMSTANCES OF THIS CASE, ORDER OF LD.CIT(A) IS UPHELD. APPEAL FILED BY THE REVENUE I S DISMISSED. 7. SIMILAR ISSUE AROSE IN OTHER REVENUES APPEALS. THE DETAILS OF SAME ARE AS UNDER: ITA NOS. IN CASE OF ADDITIONS 2118/AHD/2014 M/S. DEEP DARSHAN PROPERTIES PVT. LTD. RS.75,00,000/ - 2160/AHD/2014 AAJIVAN COMPUTERS PVT. LTD. RS.10,00,000/ - 2116/AHD/2014 M/S. KARAMVEER REAL ESTATE PVT. LTD. RS.50,00,000/ - 2157/AHD/2014 DIGNITY SECURITIES RS.50,00,000/ - ITA NOS. 2117, 2118, 2160, 2116, 2157 & 2119/MUM/14 PAGE 11 TRADING P VT. LTD. 2119/AHD/2014 M/S. BLUE HILL PROPERTIES PVT. LTD. RS.1,12,00,000/ - 8. THESE ADDITIONS MADE ON SIMILAR LINE HAVE BEEN D ELETED BY CONCERNED CIT(A) IN THEIR RESPECTIVE ORDERS WITH SI MILAR REASONING AS IN CASE OF M/S. DEEP DARSHAN PROPERTIE S PVT. LTD. (SUPRA). FACTS BEING SIMILAR, SO FOLLOWING SAME REA SONING, WE ARE NOT INCLINED TO INTERFERE IN THE ORDERS OF CIT( A) WHO HAS GRANTED RELIEF TO ALL THESE ASSESSEES WITH REASONED FINDINGS. SAME ARE UPHELD. 9. AS A RESULT, ALL APPEALS FILED BY REVENUE ARE DI SMISSED. PRONOUNCED IN THE OPEN COURT ON THIS THE 28 TH DAY OF SEPTEMBER, 2015. SD/- SD/- (ASHWANI TANEJA) (SHAILENDRA KUMAR YADAV) ACCOUNTANT MEMBER JUDICIAL MEMBE R MUMBAI: DATED 28/09/2015 TRUE COPY S.K.SINHA / COPY OF ORDER FORWARDED TO:- / REVENUE / ASSESSEE ! / CONCERNED CIT ' !#$%&' / CIT (A) ()*+& ,--. $%&' $./ / DR, ITAT, MUMBAI 0+1234' / GUARD FILE. BY ORDER / 5. 6%78 %& $%&' $./ 9