DCIT CC 45, MUMBAI V. H.N. TRADELINKS P.LTD, NAVI MUMBAI

ITA 2184/MUM/2011

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 59855 (ITAT-MUMBAI)
• Duration Of Justice: 11 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-02-2012
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: H
• Next Hearing Date: 22-02-2012
• Assessment Year: 2006-2007
• Appeal Filed On: 17-03-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: G SRINIVAS RAO
• Keywords: Accommodation entries
• Section: 68

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES H , MUMBAI BEFORE SHRI RAJENDRA SINGH, A.M. AND SHRI VIJAY PAL RAO, J.M. ITA NO. : 2183/MUM/2011 ASSESSMENT YEAR : 2005-06 ITA NO. : 2184/MUM/2011 ASSESSMENT YEAR : 2006-07 ITA NO. : 2185/MUM/2011 ASSESSMENT YEAR : 2007-08 DY. COMMISSIONER OF INCOME TAX CENTRAL CIRCLE-45, ROOM NO.659, 6 TH FLOOR, AAYAKAR BHAVAN MUMBAI-400 020 M/S. H.N. TRADELINKS P. LTD. S.S-4, GROUND FLOOR, SHOP NO.285, SECTOR -2, VASHI NAVI MUMBAI-400 703. PAN NO: AABCH 5492 D (APPELLANT) VS. (RESPONDENT) APPELLANT BY : NONE RESPONDENT BY : SRI G. SRINIVAS RAO DATE OF HEARING : 22.02.2012 DATE OF PRONOUNCEMENT : 24.02.2012 O R D E R PER RAJENDRA SINGH (AM) THESE APPEALS BY THE REVENUE ARE DIRECTED AGAINST DIFFE RENT ORDERS ALL DATED 31.12.2010 OF CIT(A) FOR THE ASSESSMENT YEARS 2005- 06 TO 2007-08. AS DISPUTES RAISED IN THESE APPEALS ARE I DENTICAL, THESE ARE BEING DISPOSED OF BY A SINGLE CONSOLIDATED ORDER FOR THE SAKE OF CONVENIENCE. THE DISPUTES RELATE TO ADDITION ON ACCOUNT OF SHARE CAPITAL SUBSCRIPTION AND ON ACCOUNT OF UNSECURED LOANS. ITA NO. 2183-85/M/11 A.Y.05-06 TO 07-08 2 2. THE FACTS IN BRIEF ARE THAT THE AO DURING THE ASSESSM ENT PROCEEDINGS FOR THE RELEVANT YEARS NOTED THAT THE HAD RECEIVED SHARE APPLICATION MONEY TOWARDS CAPITAL FROM DIFFERENT CONCERN S IN ASSESSMENT YEARS 2005-06 AND 2006-07. IN 2005-06, TOTAL SHARE APPLICATION MONEY RECEIVED WAS RS.4.25 CRORES FROM NINE COMPANIES AND IN 2006-07 SHARE APPLICATION MONEY OF RS .2.80 CRORES WAS RECEIVED FROM SIX COMPANIES. THE ASSESSEE FILED CONFIRMATIO NS FROM ALL COMPANIES GIVING THEIR NAME, ADDRESS AND P.A. NOS. THE ASSESSEE HAD ALSO SUBMITTED THE COPIES OF MEMORANDUM AND ARTICLES OF ASSOCIATION OF COMPANIES, COPIES OF SHARE APPLICATION FORMS AND COPY OF THEIR BANK ACCOUNT FROM WHICH INVESTMENTS HAD BEEN MADE. THE ASSESSEE HAD ALSO FILED COPY OF ACKNOWLEDGEMENT SLIPS OF THE RETURNS FILED BY THE COMPANIES AS WELL AS COPY OF THEIR AUDITED ACCOUNTS. TH E ASSESSEE POINTED OUT THAT ALL THESE COMPANIES WERE IN EXISTENCE W ITH STATUS ACTIVE AS PER WEBSITE OF MINISTRY OF CORPORATE AFFAIR S. THE AO, HOWEVER, OBSERVED THAT SHRI KIRAN LAPASIYA DIRECTOR OF D. KUMAR TRADING CO. PVT. LTD. A COMPANY OF ISPAT GROUP HAD AD MITTED THAT SOME OF THE COMPANIES WERE MERELY PROVIDING ACCOMMODATI ON ENTRIES AND THEY DID NOT HAVE CAPACITY TO ADVANCE SUCH HUGE AMOU NTS. THE AO FURTHER HELD THAT IN CASE OF M/S. SKS ISPAT & POWER LIMITED AND OTHER GROUP CONCERNS, IT HAS BEEN HELD AFTER DETAILED E NQUIRIES THAT THESE COMPANIES WERE PROVIDING ACCOMMODATION ENTRIES DURI NG 2002- ITA NO. 2183-85/M/11 A.Y.05-06 TO 07-08 3 03 TO 2007-08. THE AO, THEREFORE, DID NOT ACCEPT THE SOURCE OF SHARE APPLICATION MONEY IN RESPECT OF THE FOLLOWING COMPANIES. ASSESSMENT YEAR 2005-06 SL.NO. NAME OF THE PARTY AMOUNT(RS.) 1. RUBICON PHAMACEUTICALS PRIVATE LIMITED 2,00,00,000 2. ODYSSEY CORPORATION LIMITED 4,00,000 TOTAL 2 ,04,00,000 ASSESSMENT YEAR 2007-08 SL.NO. NAME OF THE PARTY AMOUNT ( RS.) 1. HARBOLE TRADELINKS PVT. LTD. 50,00,000 2. JAS TRADING PRIVATE LTD. 25,00,000 3. M.T. TRADELINKS PVT. LTD. 50,00,000 4. R. KESHAVLAL TRADERS PVT. LTD. 30,00,000 TOTAL 1 ,55,00,000 2.1 SIMILARLY THE ASSESSEE HAD ALSO DECLARED UNSECURED LOAN S OF RS.3,67,60,000/- FROM SIX PARTIES IN ASSESSMENT YEAR 2006- 07 AND A SUM OF RS.4,21,10,000/- IN ASSESSMENT YEAR 2007-08 FROM EIGHT PARTIES. THE ASSESSEE DURING THE ASSESSMENT PROCEEDINGS SUBM ITTED DETAILS OF CREDITORS INCLUDING ADDRESS, P.A. NO. AND THE IR COPY OF ACCOUNT ALONG WITH CONFIRMATIONS. IT WAS ALSO SUBMITTED T HAT LOANS HAD BEEN RECEIVED BY CHEQUES. THE ASSESSEE PLACED RELIANCE ON THE JUDGMENT OF HON'BLE SUPREME COURT IN THE CASE OF CIT V S. ORISSA ITA NO. 2183-85/M/11 A.Y.05-06 TO 07-08 4 GROUP CORPORATION LIMITED (159 ITR 78). THE AO FOL LOWING THE SAID JUDGMENT ACCEPTED THE LOANS IN SOME CASES. HOWEVER, IN THE FOLLOWING CASES, THE LOANS WERE NOT ACCEPTED AND THESE AMOUNTS WERE ADDED TO THE TOTAL INCOME. ASSESSMENT YEAR 2006-07 SL.NO. NAME OF THE PARTY AMOUNT (IN RS.) I. ACCURATE MERCANTILE PVT. LIMITED 12,10,000 II. NIKETAN MERCANTILE PRIVATE LIMITED 31,00,000 III. NISHA ENTERPRISES 50,00,000 IV. THREE-A BROTHERS 49,00,000 V. ASPIRE MERCANTILE PVT. LTD. 75,00,000 TOTAL 2,17, 60,000 ASSESSMENT YEAR 2007-08 SL.NO. NAME OF PARTY AMOUNT (IN RS.) I. ACCURATE MERCANTILE PVT. LTD. 48,25,000 II. NISHA ENTERPRISES 58,65,000 III. T. SUBBA RAYUDU 8,20,000 IV. ASPIRE MERCANTILE PVT. LTD. 21,00,000 TOTAL 1,36, 20,000 2.2 THE ASSESSEE DISPUTED THE DECISION OF THE AO AND SUBM ITTED BEFORE CIT(A) THAT THE ASSESSEE HAD FILED CONFIRMATIONS A LONG WITH P.A. NO. AND ALSO GIVEN NECESSARY DETAILS AND THEREFORE ADDIT ION MADE UNDER SECTION 68 WAS NOT JUSTIFIED BOTH IN RESPECT OF SHAR E APPLICATION ITA NO. 2183-85/M/11 A.Y.05-06 TO 07-08 5 MONEY AND UNSECURED LOANS. IT WAS POINTED OUT THAT TH E ASSESSEE HAD FILED CONFIRMATIONS GIVING THE NAME AND ADDRESS AND P.A. NOS. AND HAD ALSO GIVEN ALL NECESSARY DETAILS. THE ADDITIONS HAD BEEN MADE ONLY ON THE BASIS OF STATEMENT OF DIRECTORS OF ISPAT GRO UP STATING THAT THE TRANSACTIONS WERE NOT GENUINE BUT THE AO DESPITE RE PEATED REQUEST HAD NOT GIVEN THE DETAILS OF THE CASE AND THE PROCEEDIN GS UNDER WHICH THE SAID STATEMENTS WERE MADE. MOREOVER, THE DIRECTORS HAD SUBSEQUENTLY RETRACTED THEIR STATEMENTS BY FILING AFFIDA VITS. THE STATEMENTS WERE THEREFORE, NOT RELEVANT TO THE FACTS OF THE CASE. CIT(A) WAS SATISFIED BY THE EXPLANATION GIVEN. IT WAS OBSERVED BY HIM THAT THE ASSESSEE HAD DISCHARGED THE BURDEN PLACED ON IT B Y FILING THE CONFIRMATION GIVING THE NAME, ADDRESS AND P.A. NOS. AND HAD ALSO GIVEN OTHER DETAILS INCLUDING THE BALANCE SHEET COPIES, COPY OF BANK STATEMENT AND SHARE ALLOTMENT DETAILS. ALL THE COMPANI ES EXCEPT ODYSSEY CORPORATION LTD. WERE ASSESSED IN THE SAME CHARGE. THE ODYSSEY CORPORATION LTD. WAS PUBLIC LIMITED COMPANY WHOSE ACCOUNTS WERE IN PUBLIC DOMAIN. MOREOVER, THERE WAS NO DISPUT E ABOUT IDENTITY OF THE COMPANIES AND THEREFORE, NO ADDITION COULD BE M ADE IN VIEW OF THE JUDGMENT OF THE HON'BLE SUPREME COURT IN CASE DIV INE LEASING & FINANCE LTD. (299 ITR 269) AND IN CASE OF LOVELY EXPO RTS PVT. LTD. (216 CTR 195). CIT(A) THEREFORE, DELETED THE ADDIT IONS IN RESPECT OF SHARE APPLICATION MONEY. ITA NO. 2183-85/M/11 A.Y.05-06 TO 07-08 6 2.3 IN RELATION TO UNSECURED LOANS CIT(A), NOTED THAT ACCURATE MERCANTILE PVT. LTD, NIKETAN MERCANTILE PVT. LTD. AND ASPIRE MERCANTILE PVT. WERE COMPANIES UNDER SAME MANAGEMENT AND THESE WER E ASSESSED TO TAX IN THE SAME CHARGE UNDER THE SAME RANGE IN WHICH THE ASSESSEE WAS BEING ASSESSED. THE ASSESSEE HAD PROVED THE IDENTI TY, CAPACITY AND GENUINENESS OF TRANSACTIONS. HE, THEREFORE OB SERVED THAT THERE WAS NO BASIS FOR ADDITION AND ACCORDINGLY THESE A DDITIONS WERE DELETED. IN RELATION TO THE NON CORPORATE CREDITORS, CIT(A) OBSERVED THOUGH THE CREDITORS HAD CONFIRMED THE TRANSACTIONS, THE Y HAD NOT FILED SUPPORTING DOCUMENTS TO PROVE THE CAPACITY. EVEN IN TH E REMAND PROCEEDINGS, THE ASSESSEE HAD NOT PRODUCED THE NECESSARY DET AILS BEFORE THE AO. CIT(A), THEREFORE OBSERVED THAT CAPACI TY OF THOSE PARTIES WAS NOT SUBSTANTIATED IN THE ABSENCE OF BALANCE SHE ET AND AUDITED ACCOUNTS. HE THEREFORE, CONFIRMED THE ADDITION OF RS.50.00 LACS IN CASE OF NISHA ENTERPRISES AND RS.49,50,000/- IN CASE OF THREE-A BROTHERS IN ASSESSMENT YEAR 2006-07. IN ASSESSMENT YEAR 200 7-08 CIT(A) CONFIRMED THE ADDITION OF RS.8,65,000/- IN CAS E OF NISHA ENTERPRISES OUT OF TOTAL AMOUNT OF RS.58,65,000/- AS TH E BALANCE AMOUNT WAS COMING FROM THE EARLIER YEAR. IN CASE OF T . SUBBA RAYADU, THE ENTIRE LOAN OF RS.8,20,000/- WAS CONFIRMED . AGGRIEVED BY THE DECISION OF CIT(A), REVENUE IS IN APPEAL IN ALL TH E YEARS AGAINST DELETION OF ADDITION BY THE CIT(A). ITA NO. 2183-85/M/11 A.Y.05-06 TO 07-08 7 3. AT THE TIME OF HEARING OF THE APPEAL, NO ONE APPEARED ON BEHALF OF THE ASSESSEE TO REPRESENT THE CASE THOUGH NOTICE OF HE ARING WAS GIVEN WELL IN ADVANCE NOR ANY ADJOURNMENT APPLICATION WAS RECEIVED. WE, THEREFORE, PROCEED TO DECIDE THE APPEAL ON THE B ASIS OF MATERIAL AVAILABLE ON RECORD AND AFTER HEARING THE LD. DR WHO PLACED RELIANCE ON THE ORDERS OF AO. 4. WE HAVE PERUSED THE RECORDS AND CONSIDERED THE RI VAL CONTENTIONS CAREFULLY. THE DISPUTE IS REGARDING ADDITIO NS MADE BY AO ON ACCOUNT OF SHARE APPLICATION MONEY RECEIVED BY THE ASSE SSEE FROM DIFFERENT PRIVATE LIMITED COMPANIES AND ADDITION ON A CCOUNT OF UNSECURED LOANS RECEIVED FROM BOTH CORPORATE AND NON CORP ORATE CONCERNS. THERE IS NO DISPUTE THAT THE ASSESSEE HAD FILED CO NFIRMATIONS GIVING NAME, ADDRESS AND P.A. NOS. OF SHARE APPLICANTS COM PANIES AND LOAN CREDITORS. IN CASE OF THE SHARE APPLICATION MONEY, THE ASSESSEE HAD ALSO GIVEN COPIES OF MEMORANDUM AND ARTICLES OF ASSOCI ATION, COPIES OF SHARE APPLICATION FORMS FILLED UP BY THEM, COPI ES OF SHARE ALLOTMENT LETTERS, COPIES OF BANK ACCOUNT AND COPIES OF ACKNOWLEDGEMENT RECEIPT SHOWING INCOME TAX RETURN FILE D BY THEM. THE LD. ARS OF ALL THE COMPANIES HAD APPEARED BEFORE AO AND CONFIRMED THE SHARE APPLICATION MONEY. THE AO HAD MADE ADDITION ONLY ON THE BASIS OF THE STATEMENT OF KIRAN LAPASIYA OF ISPAT GROUP ITA NO. 2183-85/M/11 A.Y.05-06 TO 07-08 8 THAT SHARE APPLICATION MONIES WERE ACCOMMODATION ENTRIE S AND NOT GENUINE. CIT(A) HAS HOWEVER NOTED THAT THE DIRECTORS OF ISPAT GROUP WHO HAD MADE THE STATEMENT, SUBSEQUENTLY RETRACTED BY FILING A AFFIDAVIT. MOREOVER, THE IDENTITIES OF THE COMPANIES SUBSCRIBING TO SHARE CAPITAL WAS ESTABLISHED BEYOND DOUBT AND THEY WERE ASSESSED TO TAX AND NECESSARY DETAILS INCLUDING COPIES OF BALANCE SHEET AND BANK STATEMENT HAD BEEN FILED. THEREFORE, THE SHARE APPLICA TION MONEY COULD NOT BE ADDED. CIT(A) HAS ALSO REFERRED TO JUDGM ENTS OF HON'BLE SUPREME COURT IN THE CASE OF CIT VS. DIVINE LEASING & F INANCE LTD. (299 ITR 269) AND IN CASE OF CIT VS. LOVELY EXPORTS PV T. LTD. (216 CTR 195) IN WHICH IT HAS BEEN HELD THAT ONCE THE IDENTITY OF SHARE APPLICANTS ARE ESTABLISHED, NO ADDITION COULD BE MADE U NDER SECTION 68 ON ACCOUNT OF SHARE APPLICATION MONEY AND IN CASE TRANSACT IONS ARE NOT FOUND TO BE GENUINE, ACTION COULD BE INITIATED IN THOSE CASES. WE, THEREFORE SEE, NO INFIRMITY IN THE ORDER OF CIT(A) D ELETING THE ADDITION ON ACCOUNT OF SHARE CAPITAL SUBSCRIPTION. 4.1 IN CASE OF UNSECURED LOANS ALSO, WE FIND THAT CIT(A) HAS DELETED THE ADDITION IN RESPECT OF CORPORATE CREDITORS WHO HAD NOT ONLY FILED CONFIRMATION, GIVEN P.A. NOS., NAME AND ADDRESS BUT HAD ALSO GIVEN COPIES OF THEIR MEMORANDUM AND ASSOCIATION, COPIES OF BA NK ACCOUNT ETC. CIT(A) HAS ALSO NOTED THAT ALL THESE COMPANIES WER E ASSESSED IN ITA NO. 2183-85/M/11 A.Y.05-06 TO 07-08 9 THE SAME CHARGE UNDER THE SAME RANGE IN WHICH THE ASSESSEE WAS BEING ASSESSED AND, THEREFORE, SOURCE OF LOANS WERE ALSO VE RIFIABLE. THE AO HAS NOT PLACED ANY ADVERSE MATERIAL TO DISPROVE THE TRANSACTIONS. THE LOANS HAVE BEEN TAKEN BY CHEQUES. THE JUDGMENT OF THE HON'BLE SUPREME COURT IN THE CASE OF ORISSA CORPORAT ION P. LTD. (159 ITR 78) FULLY SUPPORTS THE CASE OF THE ASSESSEE. THER EFORE ALL INGREDIENTS OF CASH CREDIT I.E. IDENTITY CAPACITY, GENUI NENESS OF TRANSACTIONS ARE SATISFIED. THE ORDER OF CIT(A) DELETING THE ADDITIONS ON ACCOUNT OF UNSECURED LOANS ARE THEREFORE UPHELD. 5. IN THE RESULT, ALL APPEALS OF THE REVENUE ARE DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 24.2.2012. SD/- SD/- (VIJAY PAL RAO) JUDICIAL MEMBER (RAJENDRA SINGH) ACCOUNTANT MEMBER MUMBAI, DATED: 24.2.2012. JV. COPY TO: THE APPELLANT THE RESPONDENT THE CIT, CONCERNED, MUMBAI THE CIT(A) CONCERNED, MUMBAI THE DR BENCH TRUE COPY BY ORDER DY/ASSTT. REGISTRAR, ITAT, MUMBAI.