Lalitha Jewellery Mart P Ltd., CHENNAI V. DCIT, CHENNAI

ITA 2290/CHNY/2015

• Counselvise Citation: [2018] 125 COUNSELVISE.COM (IT) 3187 (ITAT-CHENNAI)
• Duration Of Justice: 2 year(s) 8 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-08-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 2007-2008
• Appeal Filed On: 21-12-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: MRS RU GEORGE IRS
• Assessee Lawyers: K MAHENDRAN S; N MURALI KUMARAN
• Keywords: Unexplained cash credit; Gift
• Section: 37(1)

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL, B BENCH : CHENNAI . , !' # $! # % . &' , ) + , [BEFORE SHRI ABRAHAM P. GEORGE, ACCOUNTANT MEMBE R AND SHRI DUVVURU RL REDDY , JUDICIAL MEMBER ] ./I.T.A. NO.2290/CHNY/2015. / ASSESSMENT YEAR : 2007-2008. LALITHA JEWELLERY MART P. LTD, NO.123, USMAN ROAD, T. NAGAR, CHENNAI 600 017. VS. THE ASSISTANT COMMISSIONER OF INCOME TAX, COMPANY CIRCLE II(4) CHENNAI. [PAN AAACL 1523A] ( -. / APPELLANT) ( /0-. /RESPONDENT) / APPELLANT BY : SHRI. N. MURALI KUMARAN AND SHRI. K. MAHENDRAN, ADVOCATES. /RESPONDENT BY : MRS. RUBY GEORGE, IRS, CIT. /DATE OF HEARING : 16-08-2018 ! /DATE OF PRONOUNCEMENT : 21-08-2018 1 / O R D E R PER ABRAHAM P. GEORGE, ACCOUNTANT MEMBER IN THIS APPEAL FILED BY THE ASSESSEE, IT ASSAILS AN ORDER DATED 01.09.2015 OF LD. COMMISSIONER OF INCOME TAX (APPEA LS)-8, CHENNAI, CONFIRMING THE PENALTY LEVIED ON IT U/S.271 (1) (C ) OF THE INCOME TAX ACT, 1961 (IN SHORT THE ACT). ITA NO.2290/2015 :- 2 -: 2. LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT PENALT Y WAS LEVIED ON AN ADDITION OF B21,96,60,000/- AND CERTAI N OTHER DISALLOWANCE MADE IN THE ASSESSMENT. AS PER THE LD . AUTHORISED REPRESENTATIVE, FORMER AMOUNT WAS THE SHARE CAPITAL ISSUED BY THE ASSESSEE DURING THE RELEVANT PREVIOUS YEAR, WHICH W AS DISBELIEVED BY THE LD. ASSESSING OFFICER, AND THE ADDITION WAS MAD E U/S.68 OF THE ACT. FURTHER, AS PER THE LD. AUTHORISED REPRESENTATIVE, THOUGH SUCH ADDITION MADE BY THE LD. ASSESSING OFFICER WAS CONF IRMED BY THE LD. COMMISSIONER OF INCOME TAX (APPEALS) AS WELL AS BY THIS TRIBUNAL, ASSESSEES FURTHER APPEAL BEFORE THE HONBLE JURIS DICTIONAL HIGH COURT IN TCA NOS.435 AND 436 OF 2013 WAS SUCCESSFUL. ACC ORDING TO THE LD. AUTHORISED REPRESENTATIVE, HONBLE JURISDICTIONAL H IGH COURT WHILE UPHOLDING THE DISALLOWANCE MADE BY THE LD. ASSESSI NG OFFICER ON EXPENSES INCURRED FOR GIFTS AND COMPLIMENTS HAD DE LETED THE ADDITION MADE FOR SHARE CAPITAL. AS PER THE LD. AUTHORISED REPRESENTATIVE, CONSIDERING THE JUDGMENT OF HONBLE JURISDICTIONAL HIGH COURT, THE LEVY OF PENALTY FOR THE IMPUGNED ASSESSMENT YEAR REQUIR ED A REVISIT BY THE LD. ASSESSING OFFICER. 3. LD. DEPARTMENTAL REPRESENTATIVE FAIRLY ADMITTED TH AT THE MATTER NEEDED TO BE LOOKED AFRESH BY THE LD. ASSE SSING OFFICER IN THE ITA NO.2290/2015 :- 3 -: LIGHT OF THE JUDGMENT DATED 11.08.2017 OF HONBLE J URISDICTIONAL HIGH COURT IN TCA NOS.435 AND 436 OF 2013. 4. WE HAVE CONSIDERED THE RIVAL CONTENTIONS AND PERUSE D THE ORDERS OF THE AUTHORITIES BELOW. THE PENALTY WAS L EVIED ON THE ASSESSEE MAINLY FOR ADDITIONS MADE DISBELIEVING THE ISSUE OF SHARES FOR THE RELEVANT PREVIOUS YEAR AND FOR CERTAIN DIS ALLOWANCE MADE FOR EXPENSES ON GIFTS AND COMPLIMENTS. WHEN THE MATTE R REACHED THE HONBLE JURISDICTIONAL HIGH COURT, THE QUESTIONS OF LAW FRAMED WERE AS UNDER: '(I) WHETHER THE APPELLATE TRIBUNAL IS CORRECT IN CONFIRMING THE ASSESSMENT OF SHARE CAPITAL CONTRIBUTIONS AS UNEXPLAINED CREDIT/ INVESTMENT WIT HIN THE SCOPE OF SECTION 68/69 OF THE ACT IN SPITE OF T HE MATERIAL EVIDENCE FILED BEFORE THEM AND THE LOWER AUTHORITIES ESTABLISHING CLEARLY/DISCHARGING OF INI TIAL BURDEN/ONUS STATUTORILY VESTED ON THE APPELLANT COMPANY TO PROVIDE THE SOURCE ? (II) WHETHER THE APPELLATE TRIBUNAL IS CORRECT IN L AW IN CONFIRMING THE ASSESSMENT OF SHARE CAPITAL CONTRIBUTIONS AS THE INCOME OF THE APPELLANT COMPAN Y EVEN THOUGH THERE WERE NO MATERIALS IN THEIR POSSESSION OF THE RESPONDENT/ASSESSING OFFICER ESTABLISHING SUCH FACTS APART FROM MERE SUSPICION A S WELL AS ESTABLISHING PERVERSITY BOTH ON FACTS AND I N LAW IN RENDERING THEIR DECISION ? AND (III) WHETHER THE APPELLATE TRIBUNAL IS CORRECT IN LAW IN SUSTAINING THE ASSESSMENT OF SHARE CAPITAL CONTRIBUTIONS AS THE INCOME OF THE APPELLANT COMPAN Y ON THE APPLICATION OF THE DEEMING PROVISIONS IN SEC TION 68/69 OF THE ACT EVEN THOUGH THERE WAS NO LEGAL MANDATE FOR THE APPELLANT COMPANY TO ESTABLISH/PROV E THE 'SOURCE FOR SOURCE' ?' ITA NO.2290/2015 :- 4 -: WHETHER THE APPELLATE TRIBUNAL IS CORRECT IN LAW IN CONFIRMING THE DISALLOWANCE OF EXPENSES INCURRED ON GIFTS AND COMPLIMENTS FOR THE PURPOSES OF BUSINESS WITHIN THE SCOPE OF SECTION 37(1) OF THE ACT FOR WA NT OF FURTHER EVIDENCE EVEN THOUGH SUCH EVIDENCE WERE AVAILABLE IN THE RECORDS OF THE RESPONDENT INDISPUTABLY IN VIEW OF THE IMPOUNDING ORDER PASSED EARLIER . WHAT WAS HELD BY THEIR LORDSHIPS AT PARAS 41 TO 43 OF THE JUDGMENT IS REPRODUCED HEREUNDER:- 41. HOWEVER, THE MAIN THEME, UPON WHICH, THE ASSESS ING OFFICER AS WELL AS THE TRIBUNAL PROCEEDED TO DISCRE DIT THE INVESTORS OF THE ASSESSEE IS COMPLETELY ERRONEOUS. THEY ARE BOTH LOOKING FOR PROOF BEYOND DOUBT. THEY ARE PROCE EDING ON AN ELEMENT OF SUSPICION THAT THE AMOUNTS OF INVE STMENTS ARE REALLY THOSE OF THE ASSESSEE, WHICH HAVE BEEN P LOUGHED BACK BY THE ASSESSEE, WHEREAS THE SETTLED PRINCIPLE OF LAW IS THAT ANY AMOUNT OF SUSPICION, HOWEVER STRONG IT MIG HT BE AS WELL, IS NO SUBSTITUTE FOR PROOF. SUSPICION IS N OT SUFFICIENT ENOUGH TO LEAD TO A CONCLUSION THAT THE INVESTMENTS RECEIVED BY THE ASSESSEE COMPANY ARE ALL MANIPULATE D RECEIPTS AND ON THAT BASIS, RECORDED A FINDING THAT THE EXPLANATION OF THE ASSESSEE IS NOT SATISFACTORY. 42. ON THE OTHER HAND, THE LEGAL PRINCIPLE ENUNCIAT ED BY THE SUPREME COURT, AS NOTICED SUPRA BY US, IS THAT SO L ONG AS THE PROOF AND IDENTITY OF THE INVESTOR AND THE PAYM ENT RECEIVED FROM HIM IS THROUGH A DOUBTLESS CHANNEL LI KE THAT OF A BANKING CHANNEL, THE RECEIPT IN THE HANDS OF T HE ASSESSEE TOWARDS SHARE CAPITAL OR SHARE PREMIUM DOE S NOT CHANGE ITS COLOUR. THE MONEY SO INVESTED IN THE ASS ESSEE COMPANY WOULD STILL BE THE MONEY AVAILABLE AND BELO NGING ITA NO.2290/2015 :- 5 -: TO THE INVESTORS. THE CONSISTENT PRINCIPLE FOLLOWED IS THAT THE INVESTORS SOURCES AND CREDIT WORTHINESS CANNOT BE EXPLAINED BY THE ASSESSEE. IF THE DEPARTMENT HAS A DOUBT ABOUT THE GENUINENESS OF THE INVESTORS CAPACITY, IT IS OPEN TO IT TO PROCEED AGAINST THOSE INVESTORS. WITHOUT T AKING SUCH A COURSE OF ACTION, THE ASSESSING OFFICER AND THE T RIBUNAL ARE PROCEEDING ON CONJECTURES THAT THE ASSESSEE HAS , IN FACT, PLOUGHED BACK THE MONEY. THE VERY APPROACH OF THE ASSESSING OFFICER AND THE TRIBUNAL ARE COMPLETELY O PPOSED TO SETTLED LEGAL PRINCIPLES ENUNCIATED AND THEY HAV E ARRIVED AT CONCLUSIONS CONTRARY TO THE LEGAL PRINCIPLES ON THE SUBJECT. FURTHER, THEY ARE FINDING FAULT WITH THE A SSESSEE FOR THE ALLEGED FAILURE OF IT'S INVESTORS IN PROVING BE YOND DOUBT THAT THEY HAVE THE CAPACITY TO INVEST AT THE MOMENT THEY DID IN THE ASSESSEE COMPANY. THAT IS CLEARLY A PERV ERSE VIEW, AS THE ASSESSING OFFICER IS NOT EXPECTED TO P ERFORM A NEAR IMPOSSIBILITY. THE ASSESSEE CANNOT CALL UPON ITS INVESTORS TO DISCLOSE ALL SUCH BUSINESS TRANSACTION S THEY CARRIED ON IN THE IMMEDIATE PAST AND AS TO HOW MUCH THEY MADE FROM THEIR RESPECTIVE BUSINESS ENTERPRISES. TH E ASSESSEE CANNOT ALSO CALL UPON ITS INVESTORS TO PRO VE THEIR GOOD BUSINESS SENSE IN INVESTING IN THE ASSESSEE CO MPANY, AS SUCH INVESTORS CANNOT GAIN ANY CONTROLLING STAKE . 43. IN THE RESULT, THE QUESTIONS OF LAW FRAMED IN TCA.NO.435 OF 2013 ARE ANSWERED IN FAVOUR OF THE AS SESSEE AND AGAINST THE REVENUE. HENCE, TCA.NO.435 OF 2013 IS ALLOWED. CONSEQUENTLY, MP.NO.1 OF 2014 IS CLOSED. IN THE LIGHT OF THE ABOVE JUDGMENT, WE ARE OF THE O PINION THAT THE QUESTION WHETHER ANY PENALTY IS TO BE LEVIED ON THE ASSESSEE U/S.271(1) ( C) OF THE ACT AND IF SO, ON WHAT AMOUN T, REQUIRES A FRESH LOOK BY THE LD. ASSESSING OFFICER. WE THEREFORE SE T ASIDE THE ORDERS OF THE LOWER AUTHORITIES AND REMIT THE ISSUE BACK TO T HE FILE OF THE ASSESSING OFFICER FOR CONSIDERATION AFRESH IN ACCOR DANCE WITH LAW. ITA NO.2290/2015 :- 6 -: 5. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALLOWE D FOR STATISTICAL PURPOSE. ORDER PRONOUNCED ON TUESDAY, THE 21ST DAY OF AUG UST, 2018, AT CHENNAI. SD/- SD/- ( # $! # % . &' ) ( DUVVURU RL REDDY ) ) / JUDICIAL MEMBER ( . ) (ABRAHAM P. GEORGE) / ACCOUNTANT MEMBER '# / CHENNAI $% / DATED:21ST AUGUST, 2018. KV %& '()( / COPY TO: 1 . / APPELLANT 3. *+, / CIT(A) 5. (-. / / DR 2. / RESPONDENT 4. * / CIT 6. .01 / GF