M/s. Shreem Packaging Products P. Ltd, Ahmedabad V. Income Tax Officer, Ward-4(1)(3), Ahmedabad

ITA 2280/AHD/2017

• Counselvise Citation: [2020] 111 COUNSELVISE.COM (IT) 3648 (ITAT-AHMEDABAD)
• Duration Of Justice: 2 year(s) 4 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 04-03-2020
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: C
• Next Hearing Date: 02-03-2020
• Assessment Year: 2007-2008
• Appeal Filed On: 12-10-2017
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: LALIT P JAINLD
• Assessee Lawyers: MAHESH CHHAJED LD
• Keywords: Reopening of assessment; Bogus Share capital; Validity of assessment; Accommodation entries; Retraction; Reason to believe; Reassessment proceedings
• Section: 143(3); 143(1); 143(2); 68; 148

Judgement Text

ITA NO.2280/AHD/2017 M/S SHREEM PACKAGING PRODUCTS PRIVATE LIMITED ASSESSMENT YEAR :2007-08 1 IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH, AHEMDABAD BEFORE HONBLE SHRI MAHAVIR PRASAD, JM AND HONBLE SHRI MANOJ KUMAR AGGARWAL, AM ./ I.T.A. NO.2280/AHD/2017 ( / ASSESSMENT YEAR: 2007-08) M/S. SHREEM PACKAGING PRODUCTS P . LT D. 5, VASUKANAN, 2 ND FLOOR H/H. NAV GUJARAT COLLEGE ASHRAM ROAD, AHMEDABAD-380009. / VS. ITO, WARD - 4(1) ( 3 ), 2ND FLOOR, B BLOCK PRATYAKSHKAR BHAWAN AMBAVATI, AHMEDABAD. ./ ./PAN/GIR NO. AACCK-9832-F ( /APPELLANT ) : ( / RESPONDENT ) ASSESSEE BY : SHRI MAHESH CHHAJED- LD. AR REVENUE BY : SHRI LALIT P. JAIN-LD.DR / DATE OF HEARING : 02/03/2020 / DATE OF PRONOUNCEMENT : 04/03/2020 / O R D E R MANOJ KUMAR AGGARWAL (ACCOUNTANT MEMBER) 1. AGGRIEVED BY CONFIRMATION OF ADDITION OF RS.75 L ACS U/S 68 FOR ASSESSMENT YEAR [IN SHORT REFERRED TO AS AY] 2007 -08 BY LD. COMMISSIONER OF INCOME-TAX (APPEALS)-8, AHMEDABAD, [IN SHORT REFERRED TO AS CIT(A)], APPEAL NO. CIT(A)-154/14-15 DATED 16/08/2017, THE ASSESSEE UNDER APPEAL BEFORE US WITH FOLLOWING GROUNDS: - 1. THE ORDER PASSED BY THE LEARNED CIT(A) IS AGAINS T LAW, EQUITY AND JUSTICE. 2. THE LD. AO HAS ERRED IN LAW AND /OR FACTS IN UPH OLDING VALIDITY OF ASSESSMENT WHEN NO ADDITION IS MADE IN REGARDS TO REASON FOR WHICH ASSESSMENT IS REOPENED. 3. THE LD. CIT(A) HAS ERRED IN LAW AND ON FACTS IN UPHOLDING ADDITION MADE BY THE LD. AO U/S.68 OF THE I.T. ACT OF RS.75,00,000/- ITA NO.2280/AHD/2017 M/S SHREEM PACKAGING PRODUCTS PRIVATE LIMITED ASSESSMENT YEAR :2007-08 2 THE ASSESSEE FILED AN APPLICATION FOR ADMISSION OF ADDITIONAL GROUNDS U/R 35A WHICH READ AS UNDER: - THE REASONS RECORDED FOR REOPENING OF ASSESSMENT DO ES NOT REFLECT THAT THE INCOME HAVING ESCAPED ASSESSMENT IS MORE THAN RUPEES ONE L AKH OR LIKELY TO BE MORE THAN RUPEES ONE LAKH AS LAID DOWN UNDER THE PROVISIONS O F S. 149(1)(B) OF THE ACT AS REOPENING IS MADE BEYOND FOUR YEARS HENCE REOPENING OF ASSESSMENT IS NOT VALID AND BAD IN LAW. SINCE ADDITIONAL GROUND IS MERELY A LEGAL GROUND AN D DO NOT REQUIRE APPRECIATION OF NEW FACTS, THE SAME IS ADMITTED AND TAKEN ON RECORD IN TERMS OF DECISION OF HONBLE APEX COURT RENDERED IN NATIONAL THERMAL POWER CORPORATION LTD. V/S. CIT. (229 ITR 383). 2. WE HAVE CAREFULLY HEARD THE LEGAL SUBMISSIONS MA DE BY LD. AR. WE HAVE ALSO HEARD THE ARGUMENTS ON MERITS. WE HAVE DELIBERATED ON JUDICIAL PRONOUNCEMENTS AS CITED BEFORE US. OUR ADJ UDICATION TO THE SUBJECT MATTER OF APPEAL WOULD BE AS GIVEN IN SUCCE EDING PARAGRAPHS. FROM THE RECORD, IT APPEARS THAT THE NAME OF THE AS SESSEE HAS UNDERGONE CHANGE FROM M/S KOTTENZ PERSONAL CARE PRODUCTS PVT. LTD. TO M/S. SHREEM PACKAGING PRODUCTS P. LTD. 3.1 FACTS ON RECORD WOULD REVEAL THAT THE ASSESSEE BEING RESIDENT CORPORATE ASSESSEE STATED TO BE ENGAGED IN MANUFACT URING OF CORRUGATED BOXES WAS SUBJECTED TO AN ASSESSMENT U/S 143(3) R.W .S. 147 ON 30/01/2015 WHEREIN THE ASSESSEE WAS SADDLED WITH AD DITION OF RS.75 LACS U/S 68. ITA NO.2280/AHD/2017 M/S SHREEM PACKAGING PRODUCTS PRIVATE LIMITED ASSESSMENT YEAR :2007-08 3 3.2 PURSUANT TO RECEIPT OF CERTAIN INFORMATION FROM DGIT (INVESTIGATION), MUMBAI, IT TRANSPIRED THAT THE ASSESSEE RECEIVED AC COMMODATION ENTRIES AGGREGATING TO RS.75 LACS FROM 3 ENTITIES OF SHRI P RAVEEN KUMAR JAIN. THESE ENTITIES WERE (I) KUSH HINDUSTAN ENTERTAINMEN T LTD.; (II) OLIVE OVERSEAS PRIVATE LIMITED; & (III) YASH-V-JEWELS LTD . ACCORDINGLY THE CASE WAS REOPENED AS PER DUE PROCESS OF LAW VIDE ISSUANC E OF NOTICE U/S 148 DATED 27/03/2014. IN RESPONSE, THE ASSESSEE FILED R ETURN OF INCOME ON 26/05/2014. THE ORIGINAL RETURN WAS FILED ON 29/10/ 2007 WHICH WAS PROCESSED U/S 143(1). THE NOTICES U/S 143(2) & 142( 1) WERE ISSUED IN DUE COURSE WHEREIN THE ASSESSEE WAS CALLED TO FILE REQUISITE INFORMATION / DOCUMENTARY EVIDENCES IN SUPPORT OF STATED TRANSA CTIONS. 3.3 IN DEFENSE, THE ASSESSEE FILED INCOME TAX ACKNO WLEDGEMENTS, BOARD RESOLUTION AND COPIES OF SHARE APPLICATION FO RM. IN LATER SUBMISSIONS, THE ASSESSEE SUBMITTED COPIES OF BALAN CE SHEET, CONFIRMATION, COUNTER-CONFIRMATION, BANK STATEMENTS , FORM NO.2-RETURN OF ALLOTMENT ETC. OF INVESTOR ENTITIES. A COPY OF A FFIDAVIT MADE BY SHRI PRAVEEN KUMAR JAIN DENYING ACCOMMODATION ENTRIES WI TH ASSESSEE WAS ALSO FILED. RELYING UPON VARIOUS JUDICIAL PRONOUNCE MENTS, IT WAS SUBMITTED THAT THE ONUS AS PLACED BY SEC. 68 WAS DI SCHARGED. THIS ONUS WAS TO PROVE THE IDENTITY OF THE INVESTOR ENTITIES, THEIR RESPECTIVE CREDITWORTHINESS AND GENUINENESS OF THE TRANSACTION S. THE ASSESSEE ALSO ASSAILED REOPENING BY SUBMITTING THAT IT WAS N OT BASED ON ANY MATERIAL ON RECORD. ITA NO.2280/AHD/2017 M/S SHREEM PACKAGING PRODUCTS PRIVATE LIMITED ASSESSMENT YEAR :2007-08 4 3.4 HOWEVER, THESE SUBMISSIONS COULD NOT CONVINCE L D.AO WHO, INTER- ALIA, OBSERVED THAT THE ASSESSEE FAILED TO PRODUCE ANY OF THE DIRECTORS OF THE STATED ENTITIES AND THEREFORE, A CONCLUSION WAS TO BE DRAWN THAT THESE ENTITIES WERE DUMMY ENTITIES BEING OPERATED B Y SHRI PRAVEEN KUMAR JAIN. RELIANCE WAS PLACED ON THE DECISION OF HONBLE APEX COURT IN DURGA PRASAD MORE 82 ITR 640 & SUMATI DAYAL 214 ITR 801 TO CONCLUDE THAT LOOKING AT SURROUNDING CIRCUMSTANCES, THE SHARE APPLICATION MONEY AGAINST ALLOTMENT OF PREFERENCE S HARE WAS NOT GENUINE TRANSACTIONS. THE RETRACTION AFFIDAVIT OF S HRI PRAVEEN KUMAR JAIN WAS TERMED AS MERE AFTER-THOUGHT. THEREFORE, IT WAS HELD THAT THE ASSESSEE FAILED TO DEMONSTRATE THE FULFILLMENT OF P RIMARY INGREDIENTS OF SEC. 68 AND THEREFORE, THE SAID AMOUNT OF RS.75 LAC S WAS ADDED TO THE INCOME OF THE ASSESSEE. 4. THE LD. CIT(A) DISMISSED THE LEGAL GROUNDS RAISE D BY THE ASSESSEE AND ALSO CONFIRMED THE QUANTUM ADDITIONS PRIMARILY BY RELYING UPON THE DECISION OF THIS TRIBUNAL RENDERED IN PAVANKUMAR M.SANGHVI V/S ITO 2017 81 TAXMAN.COM 308). AGGRIEVED THE ASSESSEE IS IN FURTHER APPEAL BEFORE US. ADJUDICATION ON LEGAL SUBMISSIONS: 5.1 AT THE OUTSIDE, WE DEEM IT FIT TO APPRECIATE TH E REASONS RECORDED BY LD. AO TO REOPEN THE ASSESSEES CASE, IN FOLLOWING MANNER: - THE ASSESSEE COMPANY HAS FILED ITS RETURN OF INCOME ELECTRONICALLY ON 29.10.2007 DECLARING TOTAL INCOME OF RS. NIL. THE CASE WAS PRO CESSED U/S 143(1) OF THE I. T. ACT ON 21 .03.2009. THE ASSESSEE IS ENGAGED IN THE PACK AGING MATERIALS. 2. THIS OFFICE HAS RECEIVED THE INFORMATION FROM TH E DGIT(INV.), UNIT-III(2), MUMBAI VIDE LETTER DATED 07.03.2014, IT IS INFORMED THAT A SEARCH AND SURVEY WAS CONDUCTED IN THE CASE OF SHRI PRAVINKUMAR JAIN & HIS GROUP ON 01.10.2013 AT THE VARIOUS ITA NO.2280/AHD/2017 M/S SHREEM PACKAGING PRODUCTS PRIVATE LIMITED ASSESSMENT YEAR :2007-08 5 BUSINESS PREMISES OF THE ASSESSEE. DURING THE COURS E OF SEARCH CONDUCTED, IT IS REVEALED THAT SHRI PRAVINKUMAR JAIN HIMSELF IS A DI RECTOR IN FEW CONCERNS. HOWEVER THROUGH DUMMY DIRECTORS/PROPRIETORS TO CONTROL, OPE RATES AND MANAGES A LARGE NUMBER OF CONCERNS. ALL SUCH CONCERNS ARE NOT CARRY ING OUT ANY GENUINE BUSINESS. ALL SUCH CONCERNS ARE INDULGED IN THE ACTIVITY OF P ROVIDING ENTRIES ONLY. SHRI PRAVINKUMAR JAIN IS ENGAGED IN PROVIDING ACCOMMODAT ION ENTRIES OF VARIOUS NATURE LIKE BOGUS UNSECURED LOANS, BOGUS SHARE APPLICATION AND BOGUS SALES ETC. 3. IN THE FOLLOWING COMPANIES, WHICH ARC CONTROLLED BY THE SHRI PRAVINKUMAR JAIN IN WHICH THE ASSESSEE COMPANY HAS INVESTED TOTAL RS.75 ,00,000/- DURING THE F.Y. 2006-07. THE DETAILS ARE AS UNDER: - (I) KUSH HINDUSTAN ENTERTAINMENT LTD. - RS, 25.00. 000/- (II) OLIVE OVERSEAS P. LTD. - RS. 25,00,000/- (III)YASH -V- JEWELS LTD. - RS, 25,00,000/- 4. IN VIEW OF THE ABOVE, I HAVE REASON TO BELIEVE T HAT INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT BY REASON OF FAILURE ON THE PART OF THE ASSESS TO DISCLOSE FULLY AND TRULY ALL MATERIAL FACTS NECESSARY FOR HIS ASSE SSMENT FOR THE ASSESSMENT YEAR UNDER CONSIDERATION. THE LD. AR, BY WAY OF ADDITIONAL GROUND, ASSERTED T HAT THE STATED REASONS DOES NOT REFLECT THE FACT THAT INCOME HAVIN G ESCAPED ASSESSMENT IS MORE THAN RUPEES ONE LAKH OR LIKELY T O BE MORE THAN RUPEES ONE LAKH AS LAID DOWN UNDER THE PROVISIONS O F SEC.149(1)(B) OF THE ACT AS REOPENING WAS BEYOND FOUR YEARS AND THER EFORE, THE REOPENING WAS BAD IN LAW IN TERMS OF CERTAIN JUDICI AL PRONOUNCEMENTS. 5.2 UPON CAREFUL CONSIDERATION, THE PLEA RAISED BY LD. AR DO NOT CONVINCE US SINCE THE QUANTUM OF ESCAPEMENT OF INCO ME HAS ALREADY BEEN EXPLICITLY MENTIONED BY LD. AO IN PARA-3. NOT ONLY AGGREGATE AMOUNT BUT ENTITY WISE AMOUNT HAS BEEN INDICATED. T HEREFORE, SEPARATE RECORDING OF THAT FACT, IN OUR OPINION, WAS NOT NEC ESSARY. THE LD. AR HAS RELIED ON THE DECISION OF SMC BENCH OF THIS TRIBUNA L IN SUMER S.SANGHVI V/S ACIT (ITA NO.1424/AHD/2016 DATED 06/0 2/2020) IN SUPPORT OF THE SUBMISSIONS . HOWEVER, AFTER GOING THROUGH THE REASONS RECORDED IN THAT CASE, WHICH ARE EXTRACTED A PARA-7 OF THE ORDER, IT IS ITA NO.2280/AHD/2017 M/S SHREEM PACKAGING PRODUCTS PRIVATE LIMITED ASSESSMENT YEAR :2007-08 6 QUITE DISCERNIBLE THAT THE QUANTUM WAS NOWHERE MENT IONED IN THE REASONS AND THEREFORE, THE SAID DECISION IS CLEARLY DISTINGUISHABLE. THAT DECISION DRAW STRENGTH FROM THE DECISION OF HONBLE GUJARAT HIGH COURT RENDERED IN BAKULBHAI RAMANLAL PATEL V/S ITO (56 DTR 212 GUJ) WHICH HAS SIMILAR FACTUAL MATRIX AND THEREFORE, NOT APPLICABLE TO THE FACT OF THE PRESENT CASE. 5.3 ANOTHER PLEA RAISED BY LD. AR IS THE FACT THAT, AS STATED IN PARA 3 OF THE RECORDED REASONS, THE ASSESSEE HAS NOT INVESTED ANY AMOUNT IN ANY OF THE ENTITIES RATHER THE 3 ENTITIES MADE INVESTME NT IN THE ASSESSEE AND THEREFORE, FOR THE STATED REASON ALONE, THE ASSESSM ENT PROCEEDINGS ARE LIABLE TO BE QUASHED. HOWEVER, THE SAID PLEA ALSO D OES NOT CONVINCE US IN VIEW OF FACTUAL MATRIX AS CLEARLY BROUGHT DOWN O N RECORD BY LD. AO IN PARA-2. THEREFORE, QUASHING REASSESSMENT PROCEEDING S MERELY ON THAT REASON ALONE WOULD BE TOO TECHNICAL IN NATURE AND W E ARE NOT CONVINCED WITH THE SAME. 5.4 PROCEEDING FURTHER, WE FIND THAT ORIGINAL RETUR N WAS PROCESSED U/S 143(1) AND THE ONLY REQUIREMENT UNDER LAW TO INITIA TE REASSESSMENT PROCEEDING AGAINST THE ASSESSEE WAS THAT LD.AO HAD REASONS TO BELIEVE THAT CERTAIN INCOME HAD ESCAPED ASSESSMENT. WE FIND THAT LD.AO WAS CLINCHED WITH SPECIFIC INFORMATION WHILE FORMING SU CH REASONS WHICH SUGGESTED POSSIBLE ESCAPEMENT OF INCOME IN THE HAND S OF THE ASSESSEE. NOTHING MORE, IN OUR OPINION, WAS REQUIRED AT THAT STAGE TO REOPEN THE ASSESSEES CASE AND FORMATION OF A PRIMA-FACIE OPINION WAS SUFFICIENT TO TRIGGER THE REASSESSMENT PROCEEDINGS. ITA NO.2280/AHD/2017 M/S SHREEM PACKAGING PRODUCTS PRIVATE LIMITED ASSESSMENT YEAR :2007-08 7 5.5 THEREFORE, NOT CONVINCED WITH LEGAL GROUNDS / S UBMISSIONS MADE BY LD. AR, WE DISMISS THE SAME AND HOLD THAT REASSESSM ENT PROCEEDINGS WERE VALIDLY INITIATED AGAINST THE ASSESSEE. GROUND NOS. 1 TO 2 AS WELL AS ADDITIONAL GROUND STANDS DISMISSED. ADJUDICATION ON MERITS 6. SO FAR AS THE MERIT OF THE CASE ARE CONCERNED, W E FIND THAT THE ONUS TO DEMONSTRATE THE FULFILMENT OF PRIMARY INGREDIENT S OF SEC.68 WAS ON ASSESSEE. THIS ONUS WAS TO PROVE THE IDENTITY OF TH E INVESTOR ENTITIES, THEIR RESPECTIVE CREDITWORTHINESS AND GENUINENESS O F THE TRANSACTIONS. THIS ONUS WAS MORE IN THE FACTUAL MATRIX WHICH LED TO TRIGGER REASSESSMENT PROCEEDINGS AGAINST THE ASSESSEE. UPON PERUSAL OF DOCUMENTS ON RECORD, WE FIND THAT THE ASSESSEE HAD FURNISHED INCOME TAX ACKNOWLEDGEMENTS OF THE INVESTOR ENTITIES, BOAR D RESOLUTIONS PASSED BY THOSE ENTITIES TO MAKE INVESTMENT IN THE ASSESSEE ENTITY, COPIES OF SHARE APPLICATION FORM, AUDITED ANNUAL AC COUNTS AND THE BANK STATEMENTS OF INVESTOR ENTITIES. THERE ARE NO IMMED IATE CASH DEPOSITS IN THE BANK ACCOUNTS OF THESE ENTITIES BEFORE MAKING I NVESTMENT IN THE ASSESSEE ENTITY. THE ALLOTMENT WAS AUTHORIZED BY BO ARD RESOLUTION OF THE ASSESSEE AND RETURN OF ALLOTMENT IN FORM NO.2 W AS FILED WITH APPROPRIATE AUTHORITIES. UPON PERUSAL OF THESE DOCU MENTS, IT COULD BE SAID THAT THE ASSESSEE HAD DISCHARGED THE PRIMARY O NUS OF SEC.68 AND IT WAS INCUMBENT ON THE PART OF LD.AO TO REBUT ASSESSE ES CLAIM. HOWEVER, WE FIND THAT NO MATERIAL HAS BEEN BROUGHT ON RECORD TO SUGGEST THAT ANY CASH GOT EXCHANGED BETWEEN THE ASSESSEE AND THE INV ESTOR ENTITIES AND THE ASSESSEES UNACCOUNTED MONEY WAS CHANNELIZED IN THE BOOKS IN THE ITA NO.2280/AHD/2017 M/S SHREEM PACKAGING PRODUCTS PRIVATE LIMITED ASSESSMENT YEAR :2007-08 8 GARB OF SHARE APPLICATION. MERE NON-APPEARANCE OF D IRECTORS ALONE COULD NOT SUPPORT THE IMPUGNED ADDITIONS IN THE HANDS OF THE ASSESSEE. THEREFORE, CONCURRING WITH THE STAND OF LD.AR, IN T HIS REGARD, WE DELETE THE IMPUGNED ADDITIONS U/S 68. GROUND NO.3 STAND A LLOWED. 7. FINALLY, THE APPEAL STANDS PARTLY ALLOWED IN TER MS OF OUR ABOVE ORDER. ORDER PRONOUNCED IN THE OPEN COURT ON 04/03/2020 SD/- SD/- (MAHAVIR PRASAD) (MAN OJ KUMAR AGGARWAL) ! ' / JUDICIAL MEMBER ' / ACCOUNTANT MEMBER AHMEDABAD; D ATED :04/03/2020 SS, PS / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT 3. - ( ) / THE CIT(A) 4. - / CIT CONCERNED 5. ./ 0!!12 , 12 , 34' 5 ' / DR, ITAT, AHMEDABAD 6. 0 678 / GUARD FILE / BY ORDER, // TRUE COPY // / ! (DY./ASSTT.REGISTRAR) !'# , 4 5 / ITAT, AHMEDABAD.