The ITO, Ward-8(1), Ahmedabad V. Seven Star Aviation Services Pvt.Ltd., Ahmedabad

ITA 2258/AHD/2011

• Counselvise Citation: [2017] 130 COUNSELVISE.COM (IT) 9181 (ITAT-AHMEDABAD)
• Duration Of Justice: 5 year(s) 5 month(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 15-02-2017
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: SMC
• Next Hearing Date: 17-11-2016
• Assessment Year: 2008-2009
• Appeal Filed On: 06-09-2011
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Keywords: Unexplained cash credit; Income from undisclosed sources
• Section: 32; 147; 131; 68; 246; 69; 145; 27; 148; 54; 37; 6; 56; 263; 63; 132; 12; 28; 144; 10; 90; 154; 2; 11; 15; 271(1)(b); 139; 92

Judgement Text

ITA NO. 2258/AHD/ 11 ASSESSMENT YEAR 2008 - 09 PAGE 1 OF 7 IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCH, SMC , AHMEDABAD [CORAM: PRAMOD KUMAR AM] ITA NO . 2258/AHD/ 11 ASSESSMENT YEAR 2008 - 09 INCOME TAX OFFICER WARD 8(1), AHMEDABAD ..... .......... .APPELLANT VS. SEVEN STAR AVIATION SERVICES PV T LTD ................ RESPONDENT G/1 - 2, ARAMBH COMPLEX, OFF C G ROAD, GARDEN COLONY LANE, AHMEDABAD 380 009 [PAN: AAKCS 1 192A] APPEARANCES BY: A K BHARDWAJ FOR THE APPELLANT VARTI K CHOKSI FOR THE RESPONDENT D ATE OF CONCLUDING THE HEAR ING : 17.11 .201 6 DATE OF PRONOUNCING THE ORDER : 15 . 0 2 .2017 O R D E R 1. THIS APPEAL, FILED BY THE ASSESSING OFFICER, IS DIRECTED AGAINST THE ORDER DATED 25 TH JULY 2011 PASSED BY THE C I T(A) IN THE MATTER OF ASSESSMENT UNDER SECTION 143 (3) OF THE INCOME TAX ACT, 1961, FOR THE ASSESSMENT YEAR 2008 - 09. 2. IN THE FIRST GROUND OF APPEAL, THE APPELLANT HAS RAISED THE FOLLOWING GRIEVANCE: THE LEARNED CIT(A) HAS ERRED IN LAW AND ON FACTS IN DELETING THE ADDITIONS MADE ON ACCOUNT OF TREATMENT OF RS 23,43,537 OF SHARE APPLICATION MONEY AND UNSECURED LOAN OF RS 12,38,000 RECEIVED FROM DIRECTORS AS UNEXPLAINED UNDER SECTION 68 OF THE ACT. 3. THE RELEVANT MATERIAL FACTS ARE AS FOLLOWS. DURING THE COURSE OF SCRUTINY ASSESSMENT PROCEEDINGS, THE ASS ESSING OFFICER NOTICED THAT THE PAID UP SHARE CAPITAL OF THE ASSESSEE COMPANY HAS GONE UP FROM RS 15,00,000 TO RS 65,00,000 AND THE ASSESSEE COMPANY HAS ALSO ACCEPTED UNSECURED LOANS TO THE TUNE OF RS 1,05,52,529. IT WAS IN THIS BACKDROP THAT HE PROBED TH E MATTER FURTHER . HE FOUND THAT THE ASSESSEE COMPANY HAS RECEIVED SHARE CAPITAL APPLICATION MONEY OF RS 44,00,000 AND UNSECURED LOANS AGGREGATING TO RS 64,85,320 FROM SHRI NAILESH MASHRU, A DIRECTOR IN THE ASSESSEE ITA NO. 2258/AHD/ 11 ASSESSMENT YEAR 2008 - 09 PAGE 2 OF 7 COMPANY, AND RS 44,00,000 AS SHARE APPLI CATION MONEY FROM ANOTHER DIRECTOR SHRI MEDUL KAKKAD. OUT OF THESE RECEIPTS, THE ASSESSING OFFICER TREATED THE FOLLOWING AS UNEXPLAINED CREDIT AND BROUGHT THE SAME TO TAX UNDER SECTION 68: DETAILS OF SHARE APPLICATION MONEY IN THE CASE OF MR. NAILESH H. M ASHRU DATE MODE OF PAYMENT AMOUNT (IN RS.) REMARKS 31.5.2007 CHEQUE 100000 BEFORE ISSUE CHEQUE CASH DEPOSITED 2.6.2007 BANK TRANSFER 100000 BEFORE ISSUE CHEQUE CASH DEPOSITED 14.06.2007 BANK TRANSFER 200000 BEFORE ISSUE CHEQUE CASH DEPOSITE D 18.06.2007 CHEQUE 200000 BEFORE ISSUE CHEQUE CASH DEPOSITED 15.04.2007 CASH 127837 CASH DEPOSITED OF WHICH SOURCE COULD NOT EXPLAIN 20.04.2007 CASH 50000 CASH DEPOSITED OF WHICH SOURCE - COULD NOT EXPLAIN 16.06.2007 CASH 550000 CASH D EPOSITED OF WHICH SOURCE COULD NOT EXPLAIN 11.07.2007 CASH 115000 OUT OF CASH WITHDRAWN FROM HAUL - BUT BEFORE THAT CASH DEPOSITED 13.07.2007 CHEQUE & CASH 202000 RS.2,02,000/ - OUT OF UNEXPLAINED CASH, RS.1,12,000/ - OUT OF SALARY AND LOAN REPAYMENT ITA NO. 2258/AHD/ 11 ASSESSMENT YEAR 2008 - 09 PAGE 3 OF 7 22.07.2007 CHEQUE 23200 RS.57,000/ - FROM SALARY AND - EXPLAINED RS.23,200/ - OUT OF CASH ON HAND 22.07.2007 CASH 65000 CASH DEPOSITED OF WHICH SOURCE COULD NOT EXPLAIN 28.07.2007 CHEQUE 25000 CASH DEPOSITED OF WHICH SOURCE COULD NOT EXPLAIN 01.0 8.2007 CASH 75000 CASH DEPOSITED OF WHICH SOURCE COULD NOT EXPLAIN 14.08.2007 CASH 10000 CASH DEPOSITED OF WHICH SOURCE COULD NOT EXPLAIN 16.08.2007 CHEQUE 235000 CHEQUE FROM AXIS BANK BEFORE ISSUE CHEQUE CASH DEPOSITED, OF WHICH SOURCE CO ULD NOT EXPLAIN 16.08.2007 CASH 85000 CASH DEPOSITED OF WHICH SOURCE COULD NOT EXPLAIN 17.08.2007 CHEQUE 8000 CHEQUE FROM AXIS BANK BEFORE ISSUE CHEQUE CASH DEPOSITED. 22.08.2007 CHEQUE 24000 CHEQUE FROM AXIS BANK BEFORE ISSUE CHEQUE CAS H DEPOSITED 22.08.2007 CASH 10000 CASH DEPOSITED OF WHICH SOURCE COULD NOT EXPLAIN TOTAL 2205037 IN CASE OF MR. MEHUL KAKKAD: DATE MODE OF PAYMENT AMOUNT (RS.) SOURCE 02,8.2007 CHEQUE 100000 SOURCE NOT EXPLAINED ITA NO. 2258/AHD/ 11 ASSESSMENT YEAR 2008 - 09 PAGE 4 OF 7 04.8.2007 CASH 19500 SOURCE NOT EXPLAINED 10.12.2007 CASH 19000 SOURCE NOT EXPLAINED TOTAL 138500 FROM THE ABOVE TABLE, IT CAN BE SEEN THAT OUT OF THE TOTAL SHARE APPLICATION MONEY ACCEPTED OF RS.50,00,000/ - FROM BOTH THE DIRECTORS, THE ASSESSEE COMPANY HAS NOT BEEN ABLE TO PROVIDE ANY SOURCE FOR THE AMOUNT OF RS.23,43,537/ - (22,05,037 + 1,38,500) FOR ALLEGED SHARE APPLICATION. SIMILARLY FROM THE DETAILS PRODUCED BY THE ASSESSEE, IN RESPECT UNSECURED LOANS THE CREDITWORTHINESS OF THE DEPOSITORS AND GENUINENESS OF THE TRANSACTIONS COULD NOT BE ESTABLISHED IN RESPECT FOLLOWING TRANSACTIONS: - IN CASE OF MR. N. H. MASHRU. DATE MODE OF PAYMENT AMOUNT (RS.) SOURCE 16.04.2007 CHEQUE 110000 NOT EXPLAINED 19.04.2007 TRANSFER 21000 NOT EXPLAINED 23.04.2007 T RF 50000 NOT EXPLAINED 14.05.2007 CHEQUE 12000 NOT EXPLAINED 21.05.2007 CHEQUE 45000 NOT EXPLAINED 21.05.2007 CHEQUE 40000 NOT EXPLAINED 29.05.2007 CHEQUE 95000 NOT EXPLAINED 30.05.2007 CHEQUE 90000 NOT EXPLAINED 04.06.2007 CHEQUE 100000 NOT EXPLAINE D 06.06.2007 TRF 42000 NOT EXPLAINED 08.06.2007 TRF 100000 NOT EXPLAINED 08.06.2007 CHEQUE 100000 NOT EXPLAINED 11.06.2007 TRF 85000 NOT EXPLAINED ITA NO. 2258/AHD/ 11 ASSESSMENT YEAR 2008 - 09 PAGE 5 OF 7 15.06.2007 CHEQUE 165000 NOT EXPLAINED 20.06.2007 CHEQUE 90000 NOT EXPLAINED 24.08.2007 CHEQUE 43000 N OT EXPLAINED 12.12.2007 CASH 20000 NOT EXPLAINED 27.12.2007 CHEQUE 30000 NOT EXPLAINED TOTAL 12,38,000 FROM THE ABOVE TABLE, IT CAN BE SEEN THAT THE ASSESSEE COMPANY HAD ACCEPTED UNSECURED LOAN OF RS.12,38,000/ - FROM MANAGING DIRECTOR MR. NAILESH H . MASHRU FOR WHICH THE ASSESSEE COMPANY AS WELL AS THE DEPOSITOR COULD NOT EXPLAIN ANY SOURCE THEREFORE, IT CAN BE CONCLUDED THAT IN RESPECT OF THE ABOVE ENTRIES OF DEPOSITS ACCEPTED FROM THE DIRECTOR SHRI N.H. MASHRU REMAINED UNEXPLAINED, AS THE ENTRIES WHERE CHEQUES HAVE BEEN ISSUED TO THE ASSESSEE COMPANY AFTER DEPOSITING CASH REMAINED UNEXPLAINED AND THE SOURCE OF THESE CASH DEPOSITS WAS NOT PROVED. THUS THERE IS NO POSITIVE EVIDENCE TO SHOW THAT THE DIRECTORS WORE IN A POSITION TO ADVANCE THE FUNDS T O THE EXTENT OF RS.23,43,537/ - IN FORM OF CASH TOWARDS SHARE CAPITAL AND THAT OF RS.12,38,000/ - IN FORM OF UNSECURED LOANS. IN VIEW OF THESE FACTS AND DISCUSSION MADE ABOVE IT IS CLEAR THAT THE AMOUNT INTRODUCED IN THE SHAPE OF SHARE CAPITAL AND UNSECURED LOANS IN THE NAME OF DIRECTORS OF THE COMPANY ARE NOTHING BUT UNACCOUNTED INCOME OF THE ASSESSEE COMPANY. RELIANCE IS ALSO PLACED ON BELOW CASE LAWS, WHICH SUPPORTS THE CONCLUSION OF THE DEPARTMENT 4. AGGRIEVED, ASSESSEE CARRIED THE MATTER IN APPEAL BEFO RE THE CIT(A) WHO DELETED THESE ADDITIONS, AND, WHILE DOING SO, OBSERVED AS FOLLOWS: I HAVE CAREFULLY CONSIDERED THE ASSESSMENT ORDER AND THE SUBMISSION MADE BY THE APPELLANT. THE A. O. HAS TREATED PART OF SHARE APPLICATION MONEY AND LOANS GIVEN BY THE DI RECTORS OF THE COMPANY NAMELY; SHRI NAILESH H. MASHRU AND SHRI MEHUL KAKKAD AS UNEXPLAINED U/S. 68 OF THE ACT AND MADE THE ADDITION. THE DIRECTORS HAVE ADVANCED RS.50 LACS AS SHARE APPLICATION MONEY AND UNSECURED LOAN OF RS.64,85,320/ - . THE A. O. CONSIDE RED RS.23,43,537/ - OUT OF SHARE APPLICATION MONEY AND RS.12,38,000/ - OUT OF UNSECURED LOAN AS UNEXPLAINED U/S. 68 OF THE I.T. ACT AND MADE THE ADDITION. THE APPELLANT HAS SUBMITTED THAT HE DISCHARGED THE ONUS CAST UPON HIM AND, THEREFORE, THE SHARE APPLICA TION AND LOAN SHOULD BE TREATED AS GENUINE. I AM INCLINED TO ACCEPT THE SUBMISSION MADE BY THE APPELLANT. BOTH THE DIRECTORS ARE ASSESSED TO TAX SINCE LONG, THEIR PERMANENT ACCOUNT NO. HAS ALSO BEEN FURNISHED TO THE A. O. THE SCRUTINY ASSESSMENT FOR THE A . Y. UNDER CONSIDERATION I.E. 08 - 09 HAS ALSO BEEN COMPLETED IN THE CASE OF SHRI NILESH MASHRU. IT IS TO BE NOTED THAT NO ADDITION ON ACCOUNT OF THE DEPOSITS GIVEN BY SHRI NILESH MASHRU HAS BEEN MADE IN THE ASSESSMENT ORDER. THE OTHER DIRECTOR ITA NO. 2258/AHD/ 11 ASSESSMENT YEAR 2008 - 09 PAGE 6 OF 7 IS ALSO ASSES SED TO TAX AND HAS ACCEPTED THE FACT OF GIVING SHARE APPLICATION MONEY. BOTH THE DEPOSITORS HAVE CONFIRMED THE FACT OF GIVING LOAN. REGARDING THE ISSUE THAT CERTAIN AMOUNT WAS GIVEN BY WAY OF CASH, I AM OF THE OPINION THAT ONCE THE DEPOSITOR IS ASSESSED TO TAX AND IS CONFIRMING THE FACT AND QUANTUM OF THE DEPOSIT, THE RESPONSIBILITY OF THE APPELLANT ENDS AT THAT POINT, MORE SO WHEN THE DEPOSITORS ARE REGULAR TAX PAYERS ON THE RECORDS OF THE DEPARTMENT. THE A. O. HAS ACCEPTED PART OF THE DEPOSITS AS EXPLAINE D AND ACCEPTED THE CREDIT WORTHINESS TO THAT EXTENT. ONCE THE A. O. IS ACCEPTING THE CREDIT WORTHINESS OF THE DEPOSITOR, HE CANNOT DO IT FOR THE PART AMOUNT. AS HE IS ACCEPTING THAT THE DEPOSIT HAS BEEN GIVEN BY CERTAIN PERSON, THE SOURCE OF THE DEPOSIT HAS TO BE EXAMINED IN THE HANDS OF THE DEPOSITOR AND IN CASE HE FEELS THAT THE PART OF THE DEPOSIT IS UNEXPLAINED THE ACTION SHOULD BE TAKEN IN THE HANDS OF THE DEPOSITOR AS THE APPELLANT HAS SUFFICIENTLY DISCHARGED ITS ONUS. THEREFORE, CONSIDERING ALL THE SE FACTS AND CIRCUMSTANCES, THE ADDITION OF RS.35,81,537/ - ON ACCOUNT OF UNEXPLAINED CREDIT U/S. 68 IS DIRECTED TO BE DELETED AND THE GROUND OF APPEAL IS ALLOWED. 5. THE ASSESSING OFFICER IS AGGRIEVED OF THE RELIEF SO GRANTED BY THE CIT(A) AND IS IN APPEA L BEFORE ME. 6. I HAVE HEARD THE RIVAL CONTENTIONS, PERUSED THE MATERIAL ON RECORD AND DULY CONSIDERED FACTS OF THE CASE IN THE LIGHT OF THE APPLICABLE LEGAL POSITION. 7. I MAY AT THE OUTSET MENTION THAT LEARNED DEPARTMENTAL REPRESENTATIVE HAS FILED RATH ER EXHAUSTIVE NOTES, TITLED AS SOP - SHARE PREMIUM WHICH ARE RATHER GENERAL IN NATURE AND NOT CASE SPECIFIC. ANYWAY, THESE NOTES ARE TAKEN TO RECORD BUT NOTHING TURNS ON THE SAME IN AS MUCH AS SO FAR AS THE PRESENT CASE IS CONCERNED, AS LEARNED CIT(A) RIG HTLY NOTES, THE AMOUNTS PAID BY SHRI NILESH MASHRU, DIRECTOR, ARE DULY ACCEPTED IN HIS PERSONAL ASSESSMENT. WHEN THE DEPOSITORS ARE REGULAR TAX PAYERS AND THE ADVANCES MADE BY SUCH DEPOSITORS AS ALSO SHARE APPLICATION MONIES PAID BY SUCH SHAREHOLDERS ARE D ULY ACCEPTED IN THEIR PERSONAL ASSESSMENTS, THERE CANNOT BE ANY OCCASION TO HOLD THAT THESE AMOUNTS ARE UNEXPLAINED IN THE HANDS OF THE COMPANY. THE CREDIT WORTHINESS OR IDENTITY CANNOT BE AN ISSUE IN SUCH A SITUATION. THE FACT THAT THERE ARE DOUBTS ABOUT SOURCES OF THESE MONIES IN THE HANDS OF THE DEPOSITOR OR SHAREHOLDER CANNOT BE AN ISSUE EITHER. IN ANY EVENT, WHEN CREDIT WORTHINESS IS ACCEPTED FOR A PART OF THE AMOUNT, AS THE CIT(A) RIGHTLY HOLDS, CREDIT WORTHINESS CANNOT BE DECLINED FOR ANOTHER PART OF THE SAME AMOUNT - AND THAT TOO WITHOUT ANY COGENT MATERIAL AT ALL. IN THE CASE OF A DIRECTOR, THE IDENTITY ALSO STANDS ACCEPTED ANYWAY. IN THE LIGHT OF THESE DISCUSSIONS, AS ALSO BEARING IN MIND ENTIRETY OF THE CASE, I APPROVE THE WELL REASONED CONCLUSIONS ARRIVED AT BY THE LEARNED CIT(A) AND DECLINE TO INTERFERE IN THE MATTER. 8. GROUND NO. 1 IS THUS DISMISSED. 9. IN GROUND NO. 2, THE ASSESSING OFFICER IS AGGRIEVED THAT THE CIT(A) HAS ERRED IN LAW AND ON FACTS IN DELETING THE ADDITIONS MADE ON ACCOUNT O F DISALLOWANCE OF EMPLOYEES CONTRIBUTION TO PF AND ESI UNDER SECTION 36(1)(VA) OF THE ACT . HOWEVER, WHEN IT WAS POINTED OUT TO THE LEARNED DR THAT THE CIT(A) HAS GIVEN A CATEGORICAL FINDING ITA NO. 2258/AHD/ 11 ASSESSMENT YEAR 2008 - 09 PAGE 7 OF 7 THAT THE AMOUNTS WELL WITHIN THE GRACE PERIOD, AND THERE IS NOTH ING TO CONTROVERT THE SAME, LEARNED DR DID NOT SAY ANYTHING BEYOND PLACING RELIANCE ON THE ORDER OF THE ASSESSING OFFICER. WE, THEREFORE, SEE NO REASONS TO DISTURB THE CONCLUSIONS ARRIVED AT BY THE CIT(A) AND TO INTERFERE IN THE MATTER. 10. GROUND NO, 2 I S THUS DISMISSED. 11. IN THE RESULT, THE APPEAL IS DISMISSED. PRONOUNCED IN THE OPEN COURT TODAY ON 15 TH D AY OF FEBRUARY, 2017. SD/ - PRAMOD KUMAR (ACCOUNTANT ME MBER) DATED: THE 15 TH DAY OF FEBRUARY , 2017 . COPIES TO: (1) THE APPELLANT (2) THE RESPONDENT (3) CIT (4) CIT(A) (5) DR (6) GUARD FILE BY ORDER ASSISTANT REGISTRAR INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCHES, AHMEDABAD