The ACIT, Circle-5, RAJKOT-GUJARAT V. M/s Qualitech Cast Pvt. Ltd., RAJKOT-GUJARAT

ITA 23/RJT/2010

• Counselvise Citation: [2018] 112 COUNSELVISE.COM (IT) 5689 (ITAT-RAJKOT)
• Duration Of Justice: 8 year(s) 10 month(s) 16 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-11-2018
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Assessment Year: 2005-2006
• Appeal Filed On: 12-01-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: MJ RANPURA
• Keywords: Unexplained cash credit; Retrospective amendment; Set aside
• Section: 143(3); 195; 68

Judgement Text

ITA NO.23/RJT/2010 A.Y. 2005-06 PAGE 1 OF 5 IN THE INCOME TAX APPELLATE TRIBUNAL RAJKOT BENCH, RAJKOT (CONDUCTED THROUGH E-COURT AT AHMEDABAD) BEFORE SHRI MAHAVIR PRASAD, JUDICIAL MEMBER AND SHRI WASEEM AHMED, ACCOUNTANT MEMBER ITA NO.23/RJT/2010 ASSESSMENT YEAR: 2005-06 A.C.I.T., VS. M/S. QUALITECH CAST PVT. LTD., CIRCLE 5, RAJKOT. N.H. 8-B, GONDAL ROAD, VERAVAL-SHAPAR, RAJKOT. [PAN AAACQ 1114 C] (APPELLANT) (RESPONDENT) APPELLANT BY : PRAVEEN VERMA, SR. D.R. RESPONDENT BY : M.J. RANPURA, A.R. DATE OF HEARING : 12.09.2018 DATE OF PRONOUNCEMENT : 29.11.2018 O R D E R PER MAHAVIR PRASAD, JUDICIAL MEMBER: THIS APPEAL HAS BEEN PREFERRED BY THE REVENUE AGAIN ST ORDER OF LD. CIT(A) DATED 07.10.2009. THE REVENUE HAS TAKEN FOLLOWING GROUNDS OF APPEAL :- 1. THE LD. CIT(A)-I, RAJKOT ERRED IN LAW AND ON FA CT IN DIRECTING TO DELETE THE ADDITION OF RS.8801000/- ON ACCOUNT OF U NSECURED LOANS AS WELL AS AMOUNT IN THE FORM OF SHARE CAPITAL FROM TH E VARIOUS PERSON U/S.68 OF THE I.T. ACT. 2. IT IS, THEREFORE, PRAYED THAT THE ORDER OF THE C IT(A)-I, RAJKOT MAY KINDLY BE SET ASIDE AND THAT OF THE ASSESSING OFFIC ER BE RESTORED BACK. 2. FACTS OF THE CASE ARE THAT THE ASSESSEE COMPANY FILED ITS RETURN OF INCOME SHOWING NIL INCOME, AS COMMERCIAL ACTIVITY HAD NOT STARTED. THE ASSESSING OFFICER NOTICED THAT THE ASSESSEE HAD ACQUIRED DEPOSITS AND SHARE APPLICATION MONEY FROM FOLLOWING PERSONS :- ITA NO.23/RJT/2010 A.Y. 2005-06 PAGE 2 OF 5 SL. NO. NAME OF THE PERSONS AMOUNT OF DEPOSIT AMOUNT OF SHARE CAPITAL REASON 1 HITESHBHAI A. MAKADIA 468000 232000 PAN GIVEN 2 HARESHBHAI MANILAL DAVE 500 150000 PAN GIVEN 3 RASHMITA H. MAKADIA 10000 165000 PAN GIVEN 4 HITESHBHAI A. MAKADIA (HUF) 50000 98000 PAN GIVEN 5 ANSUYABEN A. MAKADIA 33000 65000 PAN GIVEN 6 AMRUTLAL G. MAKADIA 33000 65000 PAN GIVEN 7 AMRUTLAL G. MAKADIA (HUF) 12500 36500 PAN GIVEN 8 MEENA M. DAVE 50000 32000 PAN GIVEN 9 HARESHBHAI MANILAL DAVE (HUF) 43000 6000 PAN GIVEN 10 RITA M. DAVE 50000 32000 PAN GIVEN 11 CHETNA M. DAVE 50000 32000 PAN GIVEN 12 NITESHBHAI MOHANBHAI BUTANI 521000 129000 PAN GIVEN 13 BHARTI N. BUTANI 25000 25000 PAN GIVEN 14 NITESHBHAI MOHANBHAI BUTANI (HUF) 0 98000 PAN GIVEN 15 KETANBHAI JERAMBHAI PATEL 22500 25000 PAN GIVEN 16 ANJANABEN K. PATEL 22500 25000 NO PAN 17 KETANBHAI JERAMBHAI PATEL JHUFL 7000 33000 NO PAN 18 JERAMBHAI N. PARVADIA 22500 25000 PAN GIVEN 19 JERAMBHAI N. PARVADIA (HUF) 7000 33000 NO PAN 20 BHARATBHAI J. PARVADIA 15000 25000 PAN GIVEN 21 MANJULABEN BHARATBHAI PARVADIA 22500 25000 PAN GIVEN 22 BHARATBHAI J. PARVADIA (HUF) 4000 36000 NO PAN 23 JYOTSANABEN J. PARVADIA 22500 25000 PAN GIVEN 24 SAMIR G. NANDI 55000 78750 PAN GIVEN ITA NO.23/RJT/2010 A.Y. 2005-06 PAGE 3 OF 5 25 MITA S. NANDI 70000 78750 PAN GIVEN 26 MUKESH M. NAKUM 25000 200000 PAN GIVEN 27 NAKUM LILAM MUKESH 260000 360000 PAN GIVEN 28 NAKUM MANEKBEN MANSING 0 200000 PAN GIVEN 29 MUKESH M. NAKUM (HUF) 200000 140000 PAN GIVEN 30 MANOJKUMAR M. FINAVA 200000 275000 PAN GIVEN 31 MRS. NIMISA M. FINAVA 0 200000 PAN GIVEN 32 SARANGI MANOJBHAI FINAVA 0 150000 NO PAN 33 YUVRAJ MANOJBHAI FINAVA 0 125000 PAN GIVEN 34 MANOJKUMAR M. FINAVA (HUF) 300000 100000 PAN GIVEN 35 KAMLESH M. FINAVA (HUF) 300000 25000 PAN GIVEN 36 MAGANBHAI UKABHAI FINAVA (HUF) 100000 25000 PAN GIVEN 37 NATWARLAL RANCHHODDAS MANVAR 50000 200000 PAN GIVEN 38 BABUBHAI MOHANBHAI MANVAR 350000 250000 PAN GIVEN 3. THE ASSESSING OFFICER ASKED THE ASSESSEE TO FURN ISH CONFIRMATION OF ALL SHARE HOLDERS ALONG WITH NECESSARY EVIDENCE REGARDING SOU RCE OF INVESTMENT. DETAILS WERE PROVIDED BY THE ASSESSEE, BUT THE SAME WAS NOT TO T HE SATISFACTION OF THE ASSESSING OFFICER AND FURTHER INFORMATION WAS CALLED FOR. AS SESSEE SUBMITTED DETAILS SUCH AS COPY OF PASS-BOOK FROM WHICH SHARE CAPITAL OR DEPOS IT WAS ROUTED THROUGH, AND THE ASSESSING OFFICER EXAMINED THE SAME IN A FEW CASES, NAMELY HITESH A. MAKADIA, RASHMITA H, MAKADIA, HITESH A. MAKADIA (HUF), ANSUY ABEN MAKADIA, AND HE NOTICED THAT IN THESE CASES CASH WAS DEPOSITED BEFO RE ISSUING CHEQUE TO THE ASSESSEE-COMPANY. SIMILAR WAS THE POSITION IN THE C ASE OF AMRUTLAL G. MAKADIA (HUF). IN VIEW OF THESE SAMPLE EXAMINATION OF CONFI RMATIONS FURNISHED, THE ASSESSING OFFICER WAS OF THE OPINION THAT THE PERSO NS WHO HAD MADE DEPOSITS WITH THE COMPANY EITHER IN THE FORM OF SHARE CAPITAL OR DEPOSITS HAD OPENED THEIR ACCOUNTS JUST TO MAKE PAYMENT TO THE ASSESSEE-COMPANY. THE ASSESSING OFFICER ALSO NOTICED THAT THEY WERE MOSTLY DISCLOSING INCOME BETWEEN RS. 1 LAKH TO RS.1.10 LAKH AND SOME ITA NO.23/RJT/2010 A.Y. 2005-06 PAGE 4 OF 5 OF THE SHARE HOLDERS HAD FURNISHED THEIR RETURNS FO R THE FIRST TIME. THE ASSESSING OFFICER, THEREFORE, WANTED THE ASSESSEE TO PROVE TH E CREDITWORTHINESS OF THESE PERSONS. BUT NO FURTHER PROOF, EXCEPT THE COPY OF P ASS-BOOK AND CONFIRMATIONS AS FILED EARLIER WERE PRODUCED. THE ASSESSING OFFICER, THEREFORE, TREATED THESE DEPOSITS AND SHARE APPLICATION MONEY AS UNEXPLAINED CREDIT U /S.68 OF THE ACT. 4. AGAINST THE ADDITION MADE BY THE ASSESSING OFFIC ER ASSESSEE PREFERRED FIRST STATUTORY APPEAL BEFORE THE LD. CIT(A) WHO GRANTED RELIEF TO THE ASSESSEE. NOW THE DEPARTMENT IS BEFORE US. 5. IN THIS CASE, THE ASSESSEE IS A PRIVATE LIMITED COMPANY AND ASSESSED TO TAX AND RETURN OF INCOME FOR AY. UNDER CONSIDERATION WA S FILED DECLARING TOTAL INCOME AT RS.NIL. COPY OF THE AUDITED ACCOUNT AND AUDIT REPO RT WERE FILED ALONG WITH RETURN OF INCOME. THE ASSESSING OFFICER VIDE ORDER UNDER SEC TION 143(3) OF THE ACT ASSESSED THE INCOME OF THE ASSESSEE TO THE TUNE OF RS.88,01, 000/- AND TREATED THE UNSECURED LOAN AND THE ENTIRE SHARES CAPITAL AS UNEXPLAINED C REDITS. 6. WE HAVE GONE THROUGH THE RELEVANT RECORDS AND TH E IMPUGNED ORDER. AS WE CAN SEE THAT BEFORE THE LOWER AUTHORITIES THE ASSES SEE FILED ALL THE DETAILS PERTAINING TO SHARE HOLDERS WHO DEPOSITED THE MONEY WITH THE C OMPANY AND THE SAME ARE CLEARLY IDENTIFIABLE AND MOST OF THEM ARE ASSESSED TO TAX AS WELL DURING THE APPELLATE PROCEEDINGS BEFORE THE LD. CIT(A) THE ASSESSEE AGAI N SUBMITTED ALL THE DETAILS AND THE LD. CIT(A) SOUGHT REMAND REPORT OF THE ASSESSIN G OFFICER BUT REPLY/REPORT WAS NOT SUBMITTED TO THE LD. CIT(A) DESPITE THE FACT THAT R EMINDERS WERE ALSO GIVEN TO THE ASSESSING OFFICER. IT SHOWS THAT THE ASSESSING OFF ICER DID NOT HAVE ANY CASE IN SUPPORT OF THE REVENUE. IN THE CASE OF CIT VS. LOV ELY EXPORTS P. LTD., 216 CTR 195 HONBLE SUPREME COURT HAS HELD THAT IN SUCH A SITUA TION NO ADDITION CAN BE MADE IN THE HANDS OF THE COMPANY AND THE DEPARTMENT IS FREE TO PROCEED TO REOPEN THE INDIVIDUAL ASSESSMENTS OF THOSE SHARE HOLDERS/DEPOS ITORS WHO HAVE INVESTED THE MONEY IN THE COMPANY. SIMILAR IS THE RATIO LAID DO WN BY THE HONBLE APEX COURT IN THE CASE OF CIT VS. DIVINE LEASING & FINANCE LTD. R EPORTED IN [2008] TIOL -118 SC IT. HONBLE BOMBAY HIGH COURT HAS HELD IN THE CA SE OF CIT VS. GANGADEEP INFRASTRUCTURE (P) LTD. AS UNDER : SECTION 68 OF THE INCOME-TAX ACT, 1961 - CASH CRED IT (SHARE CAPITAL) - ASSESSMENT YEAR 2008-09 - WHETHER PROVISO TO SECTIO N 68 INTRODUCED BY ITA NO.23/RJT/2010 A.Y. 2005-06 PAGE 5 OF 5 FINANCE ACT 2012 WITH EFFECT FROM 1-4-2013, WOULD N OT HAVE RETROSPECTIVE EFFECT - HELD, YES - WHETHER WHERE ASSESSEE-COMPANY HAD ESTABLISHED IDENTITY, GENUINENESS AND CAPACITY OF SHAREHOLDERS WHO HAD SUBSCRIBED TO ITS SHARES, ASSESSING OFFICER WAS NOT JUSTIFIED IN ADDING AMOUNT OF SHARE CAPITAL SUBSCRIPTION AS UNEXPLAINED CREDIT - HELD, YES - WHETHER WHERE REVENUE URGED THAT ASSESSEE HAD RECEIVED SHAR E APPLICATION MONEY FROM BOGUS SHAREHOLDERS, IT WAS FOR INCOME-TA X OFFICERS TO PROCEED BY REOPENING ASSESSMENT OF SUCH SHAREHOLDER S AND ASSESSING THEM TO TAX IN ACCORDANCE WITH LAW AND IT DID NOT E NTITLE REVENUE TO ADD SAME TO ASSESSEE'S INCOME AS UNEXPLAINED CASH CREDI T - HELD, YES [PARA 3] [IN FAVOUR OF ASSESSEE] 7. IN OUR CONSIDERED OPINION, THE ASSESSEE COMPANY HAS DISCHARGED ITS ONUS BY SUBMITTING ALL THE RELEVANT DETAILS. THEREFORE, WE ARE OF THE VIEW THAT THE ADDITION CANNOT BE MADE IN THIS CASE. 8. IN THE RESULT, APPEAL FILED BY THE REVENUE IS DI SMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 29 TH DAY OF NOVEMBER, 2018. SD/- SD/- (WASEEM AHMED) (MAHAVIR PRASAD) ACCOUNTANT MEMBER JUDICIAL MEMBER AHMEDABAD, THE 29 TH DAY OF NOVEMBER, 2018 PBN/* COPIES TO: (1) THE APPELLANT (2) THE RESPOND ENT (3) CIT (4) CIT(A) (5) DEPARTMENTAL REPRESENTATIVE (6) GUARD FILE BY ORDER UE COPY ASSISTANT REGISTRAR INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCHES, AHMEDABAD