DCIT 9(1), MUMBAI V. CENTAUR MERCANTILE P.LTD, MUMBAI

ITA 2526/MUM/2010

• Counselvise Citation: 252619914 RSA 2010
• Duration Of Justice: 1 year(s) 2 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-05-2011
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Next Hearing Date: 18-05-2011
• Assessment Year: 2006-2007
• Appeal Filed On: 31-03-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: PAWAN VED
• Assessee Lawyers: VIJAY MEHTA
• Keywords: Sale consideration of property below Jantri Value; Additional evidence
• Section: 131; 68; 50C

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH C : MUMBAI BEFORE SHRI D.K. AGARWAL,(JM) AND SHRI RAJENDRA SI NGH,(AM) ITA NO. 2526/MUM/2010 ASSESSMENT YEAR : 2006-07 DY. COMMISSIONER OF INCOME TAX RANGE 9(1), ROOM NO.223 AAYAKAR BHAVAN, M.K. ROAD MUMBAI- 20. ..( APPELLANT ) VS. M/S. CENTAUR MERCANTILE PVT. LTD. P-2/11, CHALLENGE, THAKUR VILLAGE KANDIVILI (E) MUMBAI-400 101. ..( RESPONDENT ) P.A. NO. (AACCC 4199 F) APPELLANT BY : SHRI PAWAN VED RESPONDENT BY : SHRI V IJAY MEHTA O R D E R PER RAJENDRA SINGH (AM). THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER DATED 4.1.2010 OF CIT(A) FOR THE ASSESSMENT YEAR 2006-07. THE ASSESSEE IN THIS APPEAL HAS RAISED DISPUTE ON TWO DIFFERENT GROUNDS. 2. THE FIRST DISPUTE IS REGARDING ADDITION ON ACCOU NT OF SALE OF DEVELOPMENT RIGHTS TO M/S. KANAKIA CONSTRUCTION PVT . LTD. (KCPL). THE ASSESSING OFFICER DURING THE ASSESSMENT PROCEEDINGS NOTED THAT THE ASSESSEE VIDE DEVELOPMENT AGREEMENT DATED 20.3.2006 HAD GRAN TED DEVELOPMENT RIGHTS IN RESPECT OF 25,863 SQ.MTS. OF PROPERTY BEI NG PROPERTY SITUATED AT CTS NO.4, 4/1 TO 4/76, 15(PART), 16, 17, 18, 27(PART), 32(PART), 33, 34, 36 AND 40 (PART 5) AT SAKINAKA, ANDHERI (E), MUMBAI TO KPC L FOR A CONSIDERATION OF RS.18.00 CRORES. FURTHER, VIDE ANOTHER DEVELOPMENT AGREEMENT OF THE SAME DATE, THE ASSESSEE HAD GRANTED DEVELOPMENT RIGHTS O F PROPERTY SITUATED AT ITA NO.2526/MUM/10 A.Y:06-07 2 CTS 4/22 TO 4/36 AT SAKINAKA, ANDHERI (E) FOR A CON SIDERATION OF RS.1.00 CRORE. THE MARKET VALUES OF ABOVE PROPERTIES AS PE R STAMP DUTY VALUATION WERE RS.19,32,58,500/- AND RS.3,73,60,000/- RESPECT IVELY. THUS, THE ASSESSEE HAD TRANSFERRED THE DEVELOPMENT RIGHTS OF THE ABOVE TWO PROPERTIES FOR AN AGGREGATE SUM OF RS.19.00 CRORES AGAINST THE MARKET VALUE AS PER STAMP DUTY VALUATION OF RS.23,06,18,500/-. THE ASS ESSING OFFICER THEREFORE, ASKED THE ASSESSEE TO EXPLAIN AS TO WHY THE SALE CO NSIDERATION SHOULD NOT BE TAKEN AS MARKET VALUE AS PER STAMP DUTY VALUATION. 2.1 THE ASSESSEE SUBMITTED THAT THE SALE CONSIDERAT ION WAS LOWER THAN THE MARKET VALUE DUE TO PENDING LITIGATIONS AND AS THE TRANSFER OF DEVELOPMENT RIGHTS WERE SUBJECT TO CHANGE OF WORKERS AND ILLEGA L ENCROACHMENTS. IT WAS EXPLAINED THAT THERE WAS AN AGREEMENT DATED 8.1.200 5 BETWEEN SHARE HOLDERS OF ASSESSEE COMPANY VIZ., MATOSHREE TRADING PVT. LTD., SAI SAMARTH PROPERTIES PVT. LTD., AJAY KUMAR NEOTIA, SUSHILADEV I PARASURAMPURIA AND M/S. KPCL AS PER WHICH THE SHAREHOLDERS WERE TO SEL L FULLY PAID EQUITY SHARE OF THE ASSESSEE COMPANY WHICH CONSTITUTED 100 % OF SUBSCRIBED CAPITAL FOR A CONSIDERATION OF 21.00 CRORES, CONSTI TUTING OF RS.3.00 CRORES AS PURCHASE PRICE OF SHARES AND BALANCE RS.18.00 CRORE S FOR REPAYING THE EXISTING SHAREHOLDER LOANS. HOWEVER SOME OF THE SHA REHOLDERS RAISED DISPUTES AND RESORTED TO COURT ACTION FOR STOPPING IMPLEMENTATION OF SHARE SALE AGREEMENT. M/S. SUCHETA EXPORTS PVT. LTD. WHI CH WAS OWNER OF 90% OF SHARES OF M/S. SAI SAMARTH PROPERTIES PVT. LTD. OBJ ECTED TO THE PROPOSED SALE OF SHARES TO M/S. KCPL AND THEIR SOLICITORS WROTE T O ASSESSEE COMPANY TO CANCEL THE ABOVE AGREEMENT. MEANWHILE, SHAREHOLDER OF MATOSHREE TRADING PVT. LTD. APPROACHED THE HIGH COURT OF CALCUTTA IN CIVIL SUIT 191 OF 2005, WHEREIN AN INTERIM DIRECTION WAS ISSUED TO M/S. KHA ITAN & COMPANY, THE ESCROW AGENT, NOT TO PART WITH THE ESCROW DOCUMENT S AND KEEP THEM IN SAFE CUSTODY. IN ANOTHER CIVIL SUIT NO.200 OF 2000 FILE D BY SHRI SAI SAMARTH PROPERTIES PVT. LTD. BEFORE BOMBAY HIGH COURT, THE S HARE HOLDERS OF ASSESSEE COMPANY WERE RESTRAINED FROM PARTING WITH AND/ OR H ANDING OVER THE ORIGINAL SHARE DOCUMENTS OF THE ASSESSEE COMPANY TO M/S. KCP L. AGGRIEVED BY THESE ITA NO.2526/MUM/10 A.Y:06-07 3 DEVELOPMENTS M/S. KCPL MOVED THE HONBLE BOMBAY HIGH COURT IN SUIT NO.2244 OF 2005 FOR SPECIFIC PERFORMANCE OF AGREEME NT OF SALE OF SHARES DATED 8/1/2005. THE HONBLE BOMBAY HIGH COURT PASSED AN INTERIM ORDER RESTRAINING THE EXISTING SHARE HOLDERS AND APPELLAN T COMPANY FROM ALTERING, ENCUMBERING OR CREATING THIRD PARTY RIGHTS IN RESPE CT OF SHARES AS WELL AS PROPERTY HELD BY THE APPELLANT COMPANY UNTIL FURTHE R ORDERS. ON 6/9/2005 M/S. KCPL MOVED A NOTICE OF LISPENDENSE ARISING OUT OF SUIT NO.2244 OF 2005 BEFORE THE HONBLE BOMBAY HIGH COURT FOR FULFILLING THE OBLIGATION AS SET OUT IN THE AGREEMENT DATED 8.1.2005 OR TO REFUND SUMS OF MONEY ALREADY PAID AS EARNEST MONEY TOGETHER WITH INTEREST AND ALSO T O REPAY FURTHER AMOUNTS AS COMPENSATION. THEREAFTER ON 20.3.2006 A DEVELOP MENT AGREEMENT WAS SIGNED BETWEEN SHARE HOLDERS, ASSESSEE COMPANY AND M/S. KCPL FOR TRANSFER TWO PROPERTIES FOR A TOTAL SUM RS.19.00 CORES. THE ASSESSEE SUBMITTED THAT IN VIEW OF THESE DEVELOPMENTS THE PROPERTY HAD TO B E SOLD AT LOWER PRICE THAN THE MARKET VALUE. 2.2 THE ASSESSING OFFICER HOWEVER DID NOT ACCEPT TH E CONTENTION RAISED BY THE ASSESSEE. IT WAS OBSERVED BY HIM THAT THE ASSE SSEE COMPANY WAS OWNED AND HELD BY KANAKIA GROUP AND VIDE AGREEMEN T DATED 8.1.2005, THE KANAKIA GROUP HAD AGREED TO TAKE OVER THE ASSES SEE COMPANY WITH AN INTENTION TO ACQUIRE THE LAND FOR A TOTAL CONSIDERA TION OF RS. 21.00 CORES. AS REGARDS PLEA OF PENDING DISPUTES THE ASSESSING OFFI CER OBSERVED THAT THESE DISPUTES /LITIGATION WERE EXISTING AS ON 8.1.2005 A LSO WHEN THE ASSESSEE HAD AGREED TO TRANSFER THE PROPERTY FOR A SUM OF RS. 21 .00 CRORES. MOREOVER, THE DISPUTE WAS BETWEEN CERTAIN SHARE HOLDERS AND THOSE SHARE HOLDERS SUBSEQUENTLY CEASED TO BE SHARE HOLDERS. FURTHER, THE FILING OF CONSENT TERMS WITH THE HIGH COURT WAS FOR SETTLING THE DISPUTE B ETWEEN SHARE HOLDERS WHICH HAD NO IMPACT ON TRANSFER OF PROPERTY. THE PROPERT Y HAD BEEN SOLD FOR A VALUE LOWER THAN MARKET VALUE, PARTICULARLY WHEN TH E PROPERTY MARKET WAS ON THE RISE AND THERE WAS NO COMPULSION FOR THE ASSESS EE TO TRANSFER PROPERTY BELOW MARKET PRICE. THE ARRANGEMENT WAS A COLOURAB LE DEVICE TO PASS ON UNDUE BENEFIT TO THE RELATED PARTIES. THE ASSESSIN G OFFICER, THEREFORE, ITA NO.2526/MUM/10 A.Y:06-07 4 ADOPTED THE VALUE OF RS.23,06,18,500/- BEING THE SU M DUE ON VALUATION AS SALE CONSIDERATION IN CASE OF THE ASSESSEE AND COMP UTED THE PROFIT ACCORDINGLY. 3. THE ASSESSEE DISPUTED THE DECISION OF THE ASSESS ING OFFICER THAT THE ASSESSEE COMPANY WAS OWNED AND CONTROLLED BY KANAKI A GROUP EITHER ON THE DATE OF AGREEMENT OF SALE OF SHARES OR ON THE DATE OF TRANSFER OF DEVELOPMENT RIGHTS. THE ASSESSEE REITERATED THE SUBMISSIONS MA DE BEFORE THE ASSESSING OFFICER THAT A SUITE WAS FILED BY M/S. KCPL CLAIMIN G REPAYMENT OF A SUM OF RS .8.00 CRORES ALONG WITH INTEREST AT 18% PER ANNUM AS WELL AS TO PAY A SUM OF RS .5.00 CRORES BY WAY OF DAMAGES AND/ OR COMPENSATION IN LIEU OF SPECIFIC PERFORMANCE FOR SALE OF SHARES. IT WAS BE CAUSE OF THESE DEVELOPMENTS THAT THE ERSTWHILE SHARE HOLDERS WERE LEFT WITH NO OPTION BUT TO SELL THE DEVELOPMENT RIGHTS AT A VALUE WHICH WAS LE SS THAN THE MARKET VALUE. IT WAS ALSO SUBMITTED THAT THE PROPERTY UNDER CONSI DERATION WAS AN ITEM OF STOCK-IN-TRADE AND THEREFORE, VALUE AS PER STAMP DU TY VALUATION COULD NOT BE ADOPTED IN CASE OF THE ASSESSEE. THE CIT(A) ON PERU SAL OF RECORDS WAS SATISFIED THAT THERE WERE LITIGATIONS CONCERNING PR OPERTY IN THE FORM OF VARIOUS COURT CASES AND THERE WERE ILLEGAL ENCROACHMENTS, B ESIDES THERE BEING DISAGREEMENT AND DISSENT AMONG SHARE HOLDERS AS SOM E SHARE HOLDERS HAD APPROACHED COURTS FOR RESTRAINT ORDERS FOR TRANSFER OF SHARES BY ASSESSEE COMPANY. CIT(A) DID NOT ACCEPT THE REASONING OF AS SESSING OFFICER THAT THERE WERE DISPUTES AND LITIGATIONS EVEN ON 8.1.2005. IT WAS OBSERVED BY HIM THAT THE DETAILS FILED CLEARLY SHOWED THAT SUBSEQUENT TO 8.1.2005, CASES HAD BEEN FILED BEFORE SEVERAL COURTS OF LAW AND THERE WERE R ESTRAINT ORDERS RESTRAINING THE APPELLANT COMPANY FROM PARTING WITH OR OTHERWIS E TRANSFER OR ENCUMBERING ANY OF ITS SHARE DOCUMENTS AND THE PROP ERTIES. AS REGARDS THE STAMP DUTY VALUATION, THE CIT(A) OBSERVED THAT STAM P DUTY VALUATION COULD BE ADOPTED ONLY AS PER PROVISIONS OF SECTION 50C WH ICH WERE NOT APPLICABLE IN THE CASE OF THE ASSESSEE AS SALE WAS OF AN ITEM OF STOCK-IN-TRADE AND NOT INVESTMENTS. THE DEEMED FICTION UNDER SECTION 50C WAS CONFINED TO COMPUTATION OF CAPITAL GAIN AND COULD NOT BE APPLIE D IN CASE OF TRADING ITA NO.2526/MUM/10 A.Y:06-07 5 TRANSACTIONS. CIT(A) ACCORDINGLY SET ASIDE THE ORD ER OF ASSESSING OFFICER AND DIRECTED HIM TO COMPUTE PROPERTY ON THE BASIS OF SA LE CONSIDERATION DECLARED BY ASSESSEE AS PER DEVELOPMENT AGREEMENT. AGGRIEVE D BY SAID DECISION THE REVENUE IS IN APPEAL. 4. BEFORE US THE LD. AR FOR THE ASSESSEE REITERATED THE SUBMISSIONS MADE BEFORE THE LOWER AUTHORITIES AND HIGHLIGHTED DISPUT ES/LITIGATIONS RAISED IN RELATION TO TRANSFER OF SHARES BY THE SHAREHOLDERS WHICH ULTIMATELY CULMINATED INTO SIGNING OF CONSENT TERMS BEFORE COURT AS PER W HICH PROPERTY WAS TRANSFERRED. IT WAS POINTED OUT THAT THE ASSESSING OFFICER WAS NOT CORRECT IN STATING THAT IN TERMS OF AGREEMENT DATED 8.1.2005, THE SALE CONSIDERATION OF PROPERTY HAD BEEN FIXED AT RS .21.00 CRORES. HE REFERRED TO AGREEMENT DATED 8.1.2005 COPY OF WHICH WAS PLACED AT PAGE-7 OF THE PAPER BOOK IN WHICH IT WAS CLEARLY MENTIONED THAT A SUM OF RS .21.00 CRORES WAS SALE PRICE OF SHARES AND NOT THE LAND. HE ALSO REFERRED TO COPIES OF ORD ERS OF HONBLE HIGH COURT OF CALCUTTA PLACED AT PAGE-48 TO 53 OF PAPER BOOK P ASSED IN RELATION TO DISPUTES RAISED BY SHARE HOLDERS. REFERENCE WAS AL SO MADE TO THE ORDER OF HONBLE HIGH COURT OF BOMBAY RESTRAINING THE ASSESSEE COMPANY FROM SALE OF SHARES AND THE PROPERTY. HE ALSO REFERRED TO CONSEN T TERMS ARRIVED AT BETWEEN THE PARTIES, COPY OF WHICH WAS PLACED AT PA GE-81 OF THE PAPER BOOK IN WHICH TRANSFER CONSIDERATIONS IN RESPECT OF TWO PROPERTIES WERE CLEARLY MENTIONED AT RS .19.00 CRORES( RS .18.00 + RS .1.00 CRORE). IT WAS ALSO SUBMITTED THAT THERE WAS NO MATERIAL BEFORE ASSESSI NG OFFICER THAT THE ASSESSEE HAD RECEIVED ANY EXTRA CONSIDERATION OR ON MONEY IN RELATION TO TRANSFER OF THE TWO PROPERTIES. IT WAS FURTHER ARG UED THAT PROVISIONS OF SECTION 50C ARE APPLICABLE TO ONLY COMPUTATION OF C APITAL GAIN AND WERE NOT APPLICABLE IN CASE OF THE ASSESSEE IN WHICH THE PRO PERTY WAS AN ITEM OF STOCK-IN-TRADE. IN VIEW OF THE VARIOUS FACTORS MEN TIONED ABOVE, IT WAS URGED BY THE LD. AR THAT THE SALE AS PER DEVELOPMENT AGRE EMENTS SHOULD BE ACCEPTED. THE LD. DR ON THE OTHER HAND SUPPORTED TH E ORDER OF ASSESSING OFFICER AND PLACED RELIANCE ON THE FINDINGS GIVEN I N THE ASSESSMENT ORDER. ITA NO.2526/MUM/10 A.Y:06-07 6 5. WE HAVE PERUSED THE RECORDS AND CONSIDERED THE R IVAL CONTENTIONS CAREFULLY. THE DISPUTE IS REGARDING THE SALE CONSI DERATIONS IN RESPECT OF TRANSFER OF TWO PROPERTIES OWNED BY THE ASSESSEE AS PER DEVELOPMENT AGREEMENT DATED 20.3.2006. PRIOR TO THE SIGNING OF DEVELOPMENT AGREEMENT, THERE WAS AN AGREEMENT BETWEEN THE SHARE HOLDERS OF ASSESSEE COMPANY AND M/S. KCPL DATED 8.1.2005 FOR TRANSFER OF ENTIRE SHARES OF THE COMPANY FOR A CONSIDERATION OF RS.21.00 CRORES. THE SAID A GREEMENT COULD NOT BE IMPLEMENTED AS SOME OF THE SHARE HOLDERS RAISED DIS PUTES AND APPROACHED COURTS FOR PASSING RESTRAINT ORDERS ON SELLING OF S HARES. THE COPIES OF VARIOUS COURT ORDERS PASSED IN THIS CONNECTION HAVE BEEN PL ACED ON RECORD. M/S. KCPL WHICH HAD ALREADY PAID ADVANCE OF RS.8.00 CROR ES FOR PURCHASE OF SHARES MOVED THE HONBLE HIGH COURT OF BOMBAY IN SUIT E NO.2254 OF 2005 FOR SPECIFIC PERFORMANCE OF AGREEMENT OF SALE OF SHARES DATED 8.1.2005. THE HONBLE HIGH COURT OF BOMBAY PASSED AN INTERIM ORDER RESTRAINING THE EXISTING SHARE HOLDERS AND APPELLANT COMPANY FROM A LTERING, ENCUMBERING OR CREATING THIRD PARTY RIGHTS IN RESPECT OF SHARES AS WELL AS PROPERTY HELD BY THE ASSESSEE COMPANY. M/S. KCPL ON 6.9.2005 MOVED NOTIC E OF LISPENDENSE ARISING OUT OF SUITE NO.2244 OF 2005 BEFORE HONBLE HIGH COURT OF BOMBAY FOR FULFILLING OBLIGATIONS AS SET OUT IN THE AGREEM ENT DATED 8.1.2005 OR TO REFUND SUM ALREADY PAID AS EARNEST MONEY TOGETHER W ITH INTEREST AND ALSO TO REPAY THE FURTHER SUM AS COMPENSATION. IT WAS UNDE R THESE CIRCUMSTANCES THAT CONCERNED PARTIES FILED CONSENT TERM BEFORE TH E HIGH COURT IN WHICH AGREEMENT WAS REACHED FOR TRANSFER OF TWO PROPERTIE S AT A CONSIDERATION OF RS.19.00 CRORES. 5.1 THE ASSESSING OFFICER IS NOT CORRECT IN STATING THAT THE RESTRAINT ORDERS WERE NOT IN RESPECT OF SALE OF SHARES. THE HONBLE HIGH COURT OF BOMBAY RESTRAINED THE EXISTING SHARE HOLDERS AS WELL AS TH E ASSESSEE COMPANY NOT ONLY FROM TRANSFER OF SHARES BUT ALSO THE PROPERTY. THUS ENTIRE MATTER INCLUDING TRANSFER OF PROPERTY WAS IN DISPUTE AND U NDER RESTRAINT. THE ASSESSING OFFICER WAS ALSO INCORRECT IN STATING THA T DISPUTES WERE PENDING EVEN ON 8.1.2005 AND THAT THE CONSIDERATION FOR SAL E OF PROPERTY HAD BEEN ITA NO.2526/MUM/10 A.Y:06-07 7 AGREED AT RS .21 CRORES. FIRSTLY, THE CONSIDERATION OF RS.21.00 CRORES IN TERMS OF AGREEMENT DATED 8.1.2005 WAS FOR SALE OF SHARES BY THE SHARE HOLDERS AND NOT FOR TRANSFER OF PROPERTY. SECONDLY, THE VARIOU S CASES WERE FILED BY SOME OF THE SHARE HOLDERS FOR STOPPING THE SALE OF SHARE S AFTER 8.1.2005 AND THE SUITE NO.2244 OF 2005 FILED BY M/S. KCPL WAS ALSO S UBSEQUENT DEVELOPMENT. THE ASSESSING OFFICER WAS ALSO NOT CORRECT IN STATI NG THAT THE ASSESSEE COMPANY WAS UNDER CONTROL OF M/S. KCPL. AS M/S. KC PL COULD NOT ACQUIRE SHARES IN TERMS OF AGREEMENT DATED 8.1.2005 THERE W AS NO QUESTION OF EXERCISING CONTROL OVER THE ASSESSEE COMPANY. MOREO VER THE LD. AR FOR THE ASSESSEE POINTED OUT THAT EVEN ON THE DATE OF DEVEL OPMENT AGREEMENT DATED 20.3.2006 M/S. KCPL DID NOT HOLD ANY SHARES IN THE ASSESSEE COMPANY. THESE CLAIMS HAVE NOT BEEN CONTROVERTED BEFORE US B Y THE REVENUE. THEREFORE, THE CASE OF COLOURABLE DEVISE BASED ON R ELATED PARTY TRANSACTION MADE BY THE ASSESSING OFFICER IS NOT SUPPORTED BY A NY EVIDENCE. CONSIDERING THE ENTIRE MATERIAL AND CIRCUMSTANCES OF THE CASE I T IS QUITE CLEAR THAT THE CONSENT TERMS AGREEMENT FOR TRANSFER OF THE PROPERT Y WERE BECAUSE OF VARIOUS DISPUTES PENDING AND THEREFORE IN SUCH A SC ENARIO THE ASSESSEE COMPANY COULD NOT BE EXPECTED TO RECEIVE THE FULL M ARKET VALUE. THE CONSIDERATION OF RS.19.00 CRORES SHOWN BY THE ASSES SEE IS AS PER DEVELOPMENT AGREEMENT SIGNED BETWEEN PARTIES IN PUR SUANCE OF CONSENT TERMS FILED BEFORE THE COURT. THERE IS NO MATERIAL PLACED BY REVENUE ON RECORD TO SHOW THAT THE ASSESSEE COMPANY HAD RECEIV ED ANY EXTRA OR UNACCOUNTED CONSIDERATION. WE ALSO AGREE WITH CIT(A ) THAT SECTION 50C AS PER WHICH STAMP DUTY VALUATION CAN BE ADOPTED FOR T HE ACTUAL SALE CONSIDERATION IS APPLICABLE ONLY IN CASE OF CAPITAL GAIN ON TRANSFER OF ASSET AND SAME CAN NOT BE APPLIED IN CASE OF TRADING TRAN SACTIONS. CONSIDERING THE ENTIRETY OF FACTS AND CIRCUMSTANCES AND IN VIEW OF FORGOING DISCUSSION WE SEE NO INFIRMITY IN THE ORDER OF THE CIT(A) IN HOLDING THAT CONSIDERATION AS PER DEVELOPMENT AGREEMENT DECLARED BY THE ASSESSEE IS T O BE ACCEPTED. THE ORDER OF THE CIT(A) IS ACCORDINGLY UPHELD. ITA NO.2526/MUM/10 A.Y:06-07 8 6. THE SECOND DISPUTE IS REGARDING ADDITION OF RS.1 ,35,00,000/- MADE BY ASSESSING OFFICER UNDER SECTION 68 OF THE INCOME TA X ACT ON ACCOUNT OF SUBSCRIPTION TO SHARE CAPITAL DURING THE YEAR. THE ASSESSING OFFICER ASKED THE ASSESSEE TO FURNISH DETAILS OF SUBSCRIPTION OF SHARE CAPITAL AMOUNTING TO RS .1.35 CRORES, NAME AND ADDRESS OF THE SUBSCRIBER, P AN, MODE OF RECEIPT ALONG WITH NECESSARY CONFIRMATION ETC. THE ASSESSE E HOWEVER COULD NOT FILE DETAILS ASKED BY THE ASSESSING OFFICER. THEREFORE T HE ASSESSING OFFICER TREATED THE SUM OF RS.1.35 CRORES AS INCOME OF THE ASSESSEE UNDER SECTION 68 OF THE I.T. ACT. IN APPEAL THE ASSESSEE SUBMITT ED BEFORE THE CIT(A) THAT DURING THE YEAR THE ASSESSEE HAD ALLOTTED 1,35,00 S HARES FOR A TOTAL CONSIDERATION OF RS.1.35 CRORES AND ASSESSEE HAD GI VEN DETAILS SUCH AS NAME, ADDRESS, NUMBER OF SHARES AND AMOUNT PAID ETC. BEFO RE THE ASSESSING OFFICER. SOME OF THE SHARES DURING THE YEAR HAD BEE N TRANSFERRED TO OTHER PARTIES, DETAILS OF WHICH WERE ALSO GIVEN BY THE AS SESSEE. HOWEVER, DUE TO CERTAIN COURT CASES FILED BY SHARE HOLDERS IN HIGH COURT, THE SHARE HOLDERS WERE NOT CO-OPERATING AND ASSESSEE COULD NOT OBTAIN THE CONFIRMATORY LETTERS. IT WAS ALSO SUBMITTED THAT THE ASSESSING OFFICER COULD HAVE SUMMONED THE SHARE HOLDERS USING HIS POWER UNDER SE CTION 131 AND THE ADDITION COULD NOT BE MADE ONLY ON THE GROUND THAT NO CONFIRMATIONS HAD BEEN FILED. THE ASSESSEE FILED COPIES OF CONFIRMAT ION LETTERS, SHARE APPLICATION FORMS, ALONGWITH COPIES OF BANK STATEME NT ETC., BEFORE CIT(A) IN THE FORM OF ADDITIONAL EVIDENCE WHICH WERE REMANDED TO ASSESSING OFFICER FOR SCRUTINY AND REPORT. THE ASSESSING OFFICER IN THE REMAND SUBMITTED THAT THE ASSESSEE HAD BEEN GIVEN SUFFICIENT OPPORTUNITY AT T HE TIME OF ASSESSMENT AND THE ASSESSEE WAS NOT PREVENTED BY SUFFICIENT CAUSE FROM PRODUCING THE FACTS. IT WAS ALSO MENTIONED IN THE REMAND REPORT THAT THE CREDITWORTHINESS OF THE PARTIES COULD NOT BE VERIFIED IN THE ABSENCE OF PRO OF OF FILING OF RETURNED INCOME, BALANCE SHEET OF THE SHARE HOLDERS ETC. CI T(A) AFTER CONSIDERING THE REMAND REPORT AND RECORDS OBSERVED THAT AT THE TIME OF ASSESSMENT THE ASSESSEE HAD FURNISHED THE NAME AND ADDRESS OF SHAR E HOLDERS, NUMBER OF SHARES HELD BY THEM, TOTAL VALUE OF EACH SHARE HELD BY THEM AND DATE OF ADDITION TO SHARE CAPITAL. THE ASSESSING OFFICER C OULD HAVE MADE ENQUIRIES ITA NO.2526/MUM/10 A.Y:06-07 9 FROM SHARE HOLDERS WHICH WAS NOT DONE. THEREFORE, A SSESSING OFFICER WAS NOT JUSTIFIED IN OBJECTING TO FRESH EVIDENCE FILED BEFO RE THE CIT(A). THE ASSESSEE HAD FILED CONFIRMATION LETTERS ON WHICH ASSESSING O FFICER HAD NOT DRAWN ANY ADVERSE REFERENCE. THE ONLY OBJECTION DRAWN WAS RE GARDING CREDIT WORTHINESS. THE CIT(A) OBSERVED THAT IN CASE ASSES SING OFFICER WANTED TO VERIFY SOURCE OF SOURCE, HE COULD HAVE CONDUCTED FU RTHER ENQUIRIES. THE ASSESSEE HAD GIVEN P.A. NUMBER AND IT HAD ALSO FILE D CONFIRMATIONS. THEREFORE, THE ASSESSEE HAD DISCHARGED THE ONUS OF PROVING THE IDENTITY, THE CAPACITY OF CREDITORS TO ADVANCE THE MONEY AND ALSO GENUINENESS OF THE TRANSACTIONS. HE THEREFORE, DELETED THE ADDITION MA DE BY THE ASSESSING OFFICER BY PLACING RELIANCE ON THE DECISION OF THE HONBLE DELHI HIGH COURT IN CIT VS. DIVINE LEASING & FINANCE LTD. (299 ITR 268) , AGGRIEVED BY THE SAID DECISION REVENUE IS IN APPEAL. 7. BEFORE US THE LD. AR FOR THE ASSESSEE REITERATED THE SUBMISSIONS MADE BEFORE THE CIT(A). IT WAS ARGUED THAT THE ASSESSEE HAD GIVEN FULL DETAILS AND ALSO FILED CONFIRMATIONS GIVING P.A. NUMBERS AND TH EREFORE, NO ADDITION COULD BE MADE IN RESPECT OF SHARE CAPITAL IN CASE OF THE ASSESSEE. RELIANCE WAS PLACED ON THE JUDGMENT OF HONBLE DELHI HIGH COURT I N CIT VS. DIVINE LEASING & FINANCE LTD. (SUPRA) AND ALSO THE JUDGMENT IN THE CASE OF CIT VS. LOVELY EXPORTS 216 CTR 195. THE LD. DR PLACED RELIANCE ON THE ORDER OF THE ASSESSING OFFICER. 8. WE HAVE PERUSED THE RECORDS AND CONSIDERED THE MATTER CAREFULLY. THE DISPUTE IS REGARDING ADDITION OF RS.1.35 CRORES ON ACCOUNT OF SUBSCRIPTION TO SHARE CAPITAL DURING THE YEAR BY THE SHARE HOLDERS. THERE IS NO DISPUTE THAT THE ASSESSEE HAD GIVEN FULL DETAILS SUCH AS NAME, A DDRESS OF SHARE HOLDERS, COPY OF CONFIRMATION LETTERS, LETTERS OF ALLOTMENT, SHARE CAPITAL FORM, COPIES OF BANK STATEMENTS AS WELL AS CONFIRMATION FROM THEM W ITH THEIR P.A. NUMBERS. THUS THE SUBSCRIBERS WERE ASSESSED TO TAX AND HAD B EEN ALLOTTED P.A. NUMBERS. THE ASSESSEE HAD THEREFORE DISCHARGED THE ONUS PLACED ON IT TO EXPLAIN THE CREDITS IN THE BOOKS OF ACCOUNT ON ACCO UNT OF SHARE SUBSCRIPTION. THE ASSESSING OFFICER HAS PLACED NO MATERIAL ON REC ORD TO SHOW WHETHER ANY ITA NO.2526/MUM/10 A.Y:06-07 10 OF THE SHARE HOLDERS WERE BOGUS OR THAT THEY WERE N OT ASSESSED TO TAX OR THAT THE SOURCE OF SHARE SUBSCRIPTION SHOWN BY THEM IN T HEIR RETURN OF INCOME WAS BOGUS. THEREFORE IN OUR VIEW NO ADDITION CAN BE MAD E IN CASE OF THE ASSESSEE. THE CASE OF THE ASSESSEE IS ALSO COVERED BY THE JUDGMENT OF HONBLE DELHI HIGH COURT IN CIT VS. DIVINE LEASING & FINANCE LTD. (SUPRA) AND THE JUDGMENT OF HON'BLE SUPREME COURT IN THE CASE OF LOVELY EXPORTS (SUPRA). WE SEE NO INFIRMITY IN THE ORDER OF THE C IT(A) IN DELETING THE ADDITION AND THE SAME IS THEREFORE, UPHELD. 9. IN THE RESULT, APPEAL OF THE REVENUE IS DISMISSE D. ORDER PRONOUNCED IN THE OPEN COURT ON 31.5.2011. SD/- SD/- (D.K. AGARWAL) (RAJENDRA SINGH ) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI, DATED: 31.5.2011. JV. COPY TO: THE APPELLANT THE RESPONDENT THE CIT, CONCERNED, MUMBAI THE CIT(A) CONCERNED, MUMBAI THE DR BENCH TRUE COPY BY ORDER DY/ASSTT. REGISTRAR, ITAT, MUMBAI.