Onkar Parivahan Finance Pvt. Ltd., , Kolkata V. DCIT, Circle - 9(2), Kolkata

ITA 2212/KOL/2018

• Counselvise Citation: [2019] 118 COUNSELVISE.COM (IT) 6266 (ITAT-KOLKATA)
• Duration Of Justice: 3 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-01-2019
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: C
• Assessment Year: 2012-2013
• Appeal Filed On: 22-10-2018
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: SAURABH KUMAR
• Keywords: Unexplained cash credit; Bogus Share capital; Business expenditure; Opportunity of being heard
• Section: 40A(3); 131; 68

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL KOLKATA BENCH (C), KOLKATA [BEFORE SHRI P.M. JAGTAP, VICE PRESIDENT & SHRI S.S. VISWANETHRA RAVI, JUDICIAL MEMBER] I.T.A. NO. 2212/KOL/2018 ASSESSMENT YEAR: 2012-13 M/S. ONKAR PARIVAHAN FINANCE PVT. LTD....................................APPELLANT C/O. SUBASH AGARWAL & ASSOCIATES, ADVOCATE, SIDDHA GBSOR, 1, GIBSON LANE, 2 ND FLOOR, KOLKATA 700 069. [PAN: AAACO 3517 D] DCIT, CIRCLE 9(2) KOLKATA..........................RESPONDENT P-7, CHOWRINGHEE SQUARE, KOLKATA 700 069. APPEARANCES BY: SHRI SUBASH AGARWAL, ADVOCATE APPEARING ON BEHALF OF THE ASSESSEE. SHRI SAURABH KUMAR, ADDL. CIT, DR APPEARING ON BEHALF OF THE REVENUE. DATE OF CONCLUDING THE HEARING : JANUARY 21, 2019 DATE OF PRONOUNCING THE ORDER : JANUARY 25, 2019 ORDER PER P.M. JAGTAP, VICE PRESIDENT THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF LD. CIT(A) 3, KOLKATA DATED 01.08.2018 AND THE GROUNDS RAISED BY THE ASSESSEE THEREIN READ AS UNDER: 1. FOR THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) GROSSLY ERRED IN CONFIRMING THE ADDITION OF RS. 10,63,993/- MADE BY THE A.O. ON ACCOUNT OF SERVICE AND MAINTENANCE CHARGES. 2. FOR THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) WAS NOT JUSTIFIED IN CONFIRMING THE ADDITION OF RS. 2,22,386/- MADE BY THE A.O. U/S 40A(3) IN RESPECT OF THE FOLLOWING BUSINESS EXPENSES INCURRED ON DIFFERENT DATES. (A) PURCHASE OF FRUITS AMOUNTING TO RS. 1,50,000/- (B) EXPENSES INCURRED FOR FASHION SHOW AT DELHI FOR RS. 72,386/- 3. FOR THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) GROSSLY ERRED IN CONFIRMING THE ADDITION OF RS. 3,91,50,000/- MADE BY THE A.O. U/S 68, ON ACCOUNT OF ALLEGED BOGUS SHARE CAPITAL (INCLUDING SHARE PREMIUM) RAISED BY THE ASSESSEE IN THE RELEVANT YEAR BY WRONGLY TREATING THE SAME AS UNDISCLOSED INCOME. 4. FOR THAT THE LD. CIT(A) OUGHT TO HAVE CONSIDERED THAT THE ADDITION ON ACCOUNT OF SHARE CAPITAL CANNOT BE MADE IN THE HANDS OF THE COMPANY 2 I.T.A. NO. 2212/KOL/2018 ASSESSMENT YEAR: 2012-13 M/S. ONKAR PARIVAHAN FINANCE PVT. LTD. RAISING THE CAPITAL IN VIEW OF THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE OF LOVELY EXPORTS (P) LTD. 299 ITR 268 (ST.) AND OTHER LEGAL PRECEDENTS. 2. APROPOS THE ISSUE RAISED IN GROUND NO. 1 RELATING TO THE ADDITION OF RS. 10,63,993/- MADE BY THE AO AND CONFIRMED BY THE LD. CIT(A) ON ACCOUNT OF SERVICE AND MAINTENANCE CHARGES, THE RELEVANT FACTS ARE THAT THE ASSESSEE IS A COMPANY WHICH IS ENGAGED IN THE BUSINESS OF CONSTRUCTION AND LETTING OUT PROPERTIES. IT ALSO CARRIES ON THE BUSINESS OF TRADING IN CLOTHES UNDER THE NAME AND STYLE OF ITS PROPRIETY CONCERN M/S. ONKAR. THE RETURN OF INCOME FOR THE YEAR UNDER CONSIDERATION WAS FILED BY THE ASSESSEE ON 27.02.2013 DECLARING A TOTAL INCOME OF RS. 72,31,744/-. IN THE SAID RETURN, INCOME EARNED BY THE ASSESSEE IN THE FORM OF RENT BY LETTING OUT THE PROPERTIES WAS DECLARED UNDER THE HEAD INCOME FROM HOUSE PROPERTY AND DEDUCTION U/S 24 OF THE ACT @ 30% AGAINST SUCH RENTAL INCOME WAS CLAIMED. THE ASSESSEE HAD ALSO CLAIMED SERVICE AND MAINTENANCE CHARGES AMOUNTING TO RS. 10,63,993/- UNDER THE HEAD PROFITS AND GAINS OR BUSINESS PROFESSION. KEEPING IN VIEW THE DEDUCTION CLAIMED BY THE ASSESSEE U/S 24 FOR REPAIRS, MAINTENANCE ETC. @ 30% OF RENTAL INCOME, THE AO HELD THAT THE ASSESSEE WAS NOT ENTITLED TO CLAIM SEPARATELY ANY DEDUCTION ON ACCOUNT OF SERVICE AND MAINTENANCE CHARGES AS BUSINESS EXPENDITURE. HE ACCORDINGLY DISALLOWED THE CLAIM OF THE ASSESSEE FOR DEDUCTION OF RS. 10,63,993/- ON ACCOUNT OF SERVICE AND MAINTENANCE CHARGES. ON APPEAL, THE LD. CIT(A) CONFIRMED THE SAID DISALLOWANCE. 3 I.T.A. NO. 2212/KOL/2018 ASSESSMENT YEAR: 2012-13 M/S. ONKAR PARIVAHAN FINANCE PVT. LTD. 3. WE HAVE HEARD THE ARGUMENTS OF BOTH THE SIDES ON THIS ISSUE AND ALSO PERUSED THE RELEVANT MATERIAL AVAILABLE ON RECORD. THE LEARNED COUNSEL FOR THE ASSESSEE HAS SUBMITTED THAT SOME OF THE PROPERTIES LET OUT BY THE ASSESSEE WERE HELD AS STOCK-IN-TRADE OF ITS BUSINESS AND THEREFORE, THE EXPENDITURE INCURRED ON SERVICE AND MAINTENANCE CHARGES OF THE SAID PROPERTIES WAS ELIGIBLE FOR DEDUCTION AS BUSINESS EXPENDITURE. AS RIGHTLY CONTENDED BY THE LEARNED DR, THE NATURE OF PROPERTY HOWEVER IS NOT RELEVANT TO DECIDE THIS ISSUE AND WHAT IS RELEVANT IS THE HEAD OF INCOME UNDER WHICH THE RENTAL INCOME WAS OFFERED BY THE ASSESSEE. SINCE THE ENTIRE RENTAL INCOME INCLUDING THE RENTAL INCOME FROM PROPERTIES HELD AS STOCK-IN-TRADE WAS OFFERED BY THE ASSESSEE UNDER THE HEAD INCOME FROM HOUSE PROPERTY AND DEDUCTION U/S 24 FOR REPAIRS, MAINTENANCE ETC. AT A FLAT RATE OF 30% WAS CLAIMED AGAINST THE RENTAL INCOME, THE ASSESSEE WAS NOT ENTITLED FOR ANY DEDUCTION SEPARATELY ON ACCOUNT OF SERVICE AND MAINTENANCE CHARGES AS BUSINESS EXPENDITURE AS THE SAME CLEARLY AMOUNTED TO CLAIMING OF DOUBLE DEDUCTION WHICH IS NOT PERMISSIBLE. WE, THEREFORE, FIND NO INFIRMITY IN THE IMPUGNED ORDER OF THE LD. CIT(A) CONFIRMING THE DISALLOWANCE OF RS. 10,63,993/- MADE BY THE AO ON ACCOUNT OF SERVICE AND MAINTENANCE CHARGES AND UPHOLDING THE SAME, WE DISMISS GROUND NO. 1 OF THE ASSESSEES APPEAL. 4. GROUND NO. 2 RAISED BY THE ASSESSEE IN THIS APPEAL IS NOT PRESSED BY THE LEARNED COUNSEL FOR THE ASSESSEE AT THE TIME OF HEARING BEFORE THE TRIBUNAL. THE SAME IS ACCORDINGLY DISMISSED AS NOT PRESSED. 4 I.T.A. NO. 2212/KOL/2018 ASSESSMENT YEAR: 2012-13 M/S. ONKAR PARIVAHAN FINANCE PVT. LTD. 5. AS REGARDS THE COMMON ISSUE INVOLVED IN GROUND NO. 3 AND 4 RELATING TO THE ADDITION OF RS. 3,91,50,000/- MADE BY THE AO U/S 68 AND CONFIRMED BY THE LD. CIT(A) ON ACCOUNT OF SHARE CAPITAL AND SHARE PREMIUM, IT IS OBSERVED THAT THE ASSESSEE-COMPANY DURING THE YEAR UNDER CONSIDERATION HAD RECEIVED SHARE CAPITAL AND SHARE PREMIUM AMOUNT AGGREGATING TO RS. 3,91,50,000/- FROM 17 SHARE SUBSCRIBERS. IN ORDER TO VERIFY THE CLAIM OF THE ASSESSEE IN TERMS OF SECTION 68, SUMMONS WERE ISSUED BY THE AO ON 27.02.2015 TO ALL THE 17 SUBSCRIBER COMPANIES. OUT OF THE 17 SUMMONS, 9 SUMMONS WERE RETURNED UNSERVED WHILE THERE WAS NO RESPONSE TO THE REMAINING 8 SUMMONS. ON 09.03.2015, SUMMONS U/S 131 WAS ISSUED BY THE AO TO THE PR. DIRECTOR OF THE ASSESSEE-COMPANY ASKING FOR THE RELEVANT DETAILS OF THE SHARE SUBSCRIBER COMPANIES AND REQUIRING THE PERSONAL APPEARANCE OF THE PR. DIRECTOR FOR DEPOSITION. ALTHOUGH THE RELEVANT DETAILS IN THE FORM OF BALANCE SHEETS, PROFIT AND LOSS ACCOUNTS AND COPIES OF BANK STATEMENTS OF ALL THE INVESTOR COMPANIES WERE FILED BY THE ASSESSEE IN RESPONSE TO SUMMONS U/S 131, THE PR. DIRECTOR OF THE ASSESSEE-COMPANY DID NOT APPEAR PERSONALLY BEFORE THE AO FOR EXAMINATION ON THE GROUND THAT HE WAS ON BUSINESS TOUR FOR SOME URGENT WORK OF THE COMPANY. ON EXAMINATION OF ALL THE DETAILS PERTAINING TO THE INVESTOR COMPANIES FURNISHED BY THE ASSESSEE, THE AO RECORDED HIS ADVERSE FINDINGS AS UNDER: A. THE INVESTOR COMPANIES DISCLOSE MEAGRE REVENUE FROM OPERATIONS. B. TOTAL INCOME IN ALL THE CASES ARE EITHER 0 OF IN A FEW THOUSANDS OF RUPEES. C. THEY ALL HAVE AN INVENTORY OF STOCK & SHARES COMPRISING ONLY OF PRIVATE LIMITED COMPANIES. D. THE BANKING TRANSACTIONS THROUGH WHICH MONEYS HAVE BEEN TRANSFERRED FROM THEIR BANK ACCOUNTS TO THE ASSESSEE COMPANY, FOR PURCHASE OF SHARES, 5 I.T.A. NO. 2212/KOL/2018 ASSESSMENT YEAR: 2012-13 M/S. ONKAR PARIVAHAN FINANCE PVT. LTD. IS ALWAYS PROCEEDED BY A SIMILAR INWARD TRANSFER FROM A PRIVATE LIMITED COMPANY, EITHER ON THE SAME DATE OR AT BEST, THE DAY BEFORE. E. ALL THE TRANSACTIONS, AS DETAILED IN THE PORTION OF THE BANK STATEMENTS PROVIDED BY THE ASSESSEE COMPANY, ARE AKIN INSOFAR AS EVERY DEPOSIT IS FOLLOWED BY A WITHDRAWAL OF SIMILAR AMOUNT AND BOTH THESE INWARD AND OUTWARD ENTRIES SHOWS RECEIPT FROM, AND TRANSFERS TO ONLY PRIVATE COMPANIES. F. THE DATE-WISE CLOSING BALANCES IN ALL THESE STATEMENTS ARE REPETITIVE AND ARE IN FEW THOUSANDS OF RUPEES. 6. KEEPING IN VIEW THE ABOVE ADVERSE FINDINGS RECORDED BY HIM AND THE FAILURE OF THE PR. DIRECTOR OF THE ASSESSEE-COMPANY TO APPEAR BEFORE HIM PERSONALLY FOR EXAMINATION, THE AO HELD THAT THE ONUS THAT LAY ON THE ASSESSEE TO EXPLAIN THE RELEVANT CASH CREDIT IN THE FORM OF SHARE CAPITAL AND SHARE PREMIUM BY ESTABLISHING THE IDENTITY AND CREDITWORTHINESS OF THE INVESTOR COMPANIES AS WELL AS TO PROVE THE GENUINENESS OF THE RELEVANT TRANSACTIONS WAS NOT DISCHARGED BY THE ASSESSEE IN TERMS OF SECTION 68. HE ACCORDINGLY TREATED THE ENTIRE SHARE CAPITAL AND SHARE PREMIUM AMOUNT AGGREGATING TO RS. 3,91,50,000/- AS UNEXPLAINED CASH CREDIT AND MADE AN ADDITION TO THAT EXTENT TO THE TOTAL INCOME OF THE ASSESSEE U/S 68. ON APPEAL, THE LD. CIT(A) CONFIRMED THE SAID ADDITION. 7. WE HAVE HEARD BOTH THE SIDES ON THIS ISSUE AND ALSO PERUSED THE RELEVANT MATERIAL AVAILABLE ON RECORD. THE LEARNED COUNSEL FOR THE ASSESSEE HAS SUBMITTED THAT THE ENQUIRY IN RESPECT OF SHARE CAPITAL AND SHARE PREMIUM AMOUNT IN QUESTION RECEIVED BY THE ASSESSEE WAS STARTED BY THE AO AT THE FAG END OF THE ASSESSMENT PROCEEDINGS AND PROPER AND SUFFICIENT OPPORTUNITY WAS NOT GIVEN BY HIM TO THE ASSESSEE TO ESTABLISH THE IDENTITY AND CREDITWORTHINESS OF THE 6 I.T.A. NO. 2212/KOL/2018 ASSESSMENT YEAR: 2012-13 M/S. ONKAR PARIVAHAN FINANCE PVT. LTD. CONCERNED INVESTOR COMPANIES AS WELL AS TO PROVE THE GENUINENESS OF THE RELEVANT TRANSACTIONS. HE HAS SUBMITTED THAT ALL THE RELEVANT DETAILS IN THE FORM OF BALANCE SHEETS, PROFIT AND LOSS ACCOUNTS AND COPIES OF BANK STATEMENTS OF ALL THE 17 INVESTOR COMPANIES WERE FILED BY THE ASSESSEE BEFORE THE ASSESSING OFFICER AND THE REASON FOR NON- APPEARANCE OF ITS PR. DIRECTOR IN THE MONTH OF MARCH, 2015 WAS ALSO EXPLAINED BY THE ASSESSEE. HE HAS CONTENDED THAT THE AO HOWEVER DID NOT GIVE ANY FURTHER OPPORTUNITY TO THE ASSESSEE AND ADDED THE ENTIRE SHARE CAPITAL AND SHARE PREMIUM AMOUNT U/S 68 BY TREATING THE SAME AS UNEXPLAINED CASH CREDIT WITHOUT GIVING PROPER AND SUFFICIENT OPPORTUNITY TO THE ASSESSEE TO EXPLAIN THE SAME IN TERMS OF SECTION 68. HE HAS CONTENDED THAT THIS ASPECT WAS SPECIFICALLY BROUGHT TO THE NOTICE OF THE LD. CIT(A) BY THE ASSESSEE BUT THE LD. CIT(A) PROCEEDED TO CONFIRM THE ADDITION MADE BY THE AO U/S 68 WITHOUT APPRECIATING THE SAME IN THE RIGHT PERSPECTIVE. HE HAS CONTENDED THAT THIS MATTER MAY THEREFORE BE SENT BACK TO THE ASSESSING OFFICER FOR GIVING THE ASSESSEE PROPER AND SUFFICIENT OPPORTUNITY TO EXPLAIN THE RELEVANT CASH CREDITS IN THE FORM OF SHARE CAPITAL AND SHARE PREMIUM IN TERMS OF SECTION 68. KEEPING IN VIEW ALL THE FACTS AND CIRCUMSTANCES OF THE CASE, WE FIND MERIT IN THE CONTENTION OF THE LEARNED COUNSEL FOR THE ASSESSEE. EVEN THE LEARNED DR HAS NOT RAISED ANY OBJECTION FOR SENDING THE MATTER BACK TO THE AO FOR GIVING ONE MORE OPPORTUNITY TO THE ASSESSEE. THE IMPUGNED ORDER OF THE LD. CIT(A), ON THIS ISSUE IS ACCORDINGLY SET ASIDE AND THE MATTER IS RESTORED TO THE FILE OF THE AO BY DECIDING THE SAME AFRESH AFTER GIVING THE ASSESSEE PROPER AND SUFFICIENT OPPORTUNITY OF BEING HEARD. GROUND NO. 3 AND 4 ARE ACCORDINGLY TREATED AS ALLOWED FOR STATISTICAL PURPOSE. 7 I.T.A. NO. 2212/KOL/2018 ASSESSMENT YEAR: 2012-13 M/S. ONKAR PARIVAHAN FINANCE PVT. LTD. 8. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS TREATED AS PARTLY ALLOWED FOR STATISTICAL PURPOSE. ORDER PRONOUNCED IN THE OPEN COURT ON 25 TH JANUARY, 2019. SD/- SD/- (S.S. VISWANETHRA RAVI) (P.M. JAGTAP) JUDICIAL MEMBER VICE PRESIDENT DATED: 25/01/2019 BISWAJIT, SR. PS COPY OF ORDER FORWARDED TO: 1. M/S. ONKAR PARIVAHAN FINANCE (P) LTD., C/O. SUBASH AGARWAL & ASSOCIATES, ADVOCATES, SIDDHA GIBSON, 1, GIBSON LANE, 2 ND FLOOR, SUITE-213, KOLKATA 700 069. 2. DCIT, CIRCLE 9(2), AAYAKAR BHAWAN, P-7, CHOWRINGHEE SQUARE, KOLKATA 700 069. 3. THE CIT(A) 4. THE CIT 5. DR TRUE COPY, BY ORDER, ASSISTANT REGISTRAR / H.O.O. ITAT, KOLKATA