Akik Tiles Pvt. Ltd., Mehsana V. The ACIT.,Mehsana Circle, Mehsana

ITA 2647/AHD/2015

• Counselvise Citation: [2017] 130 COUNSELVISE.COM (IT) 8927 (ITAT-AHMEDABAD)
• Duration Of Justice: 1 year(s) 6 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-03-2017
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: SMC
• Next Hearing Date: 02-02-2017
• Assessment Year: 2010-2011
• Appeal Filed On: 16-09-2015
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Keywords: Unexplained cash credit; Bogus Share capital; Principle of natural justice
• Section: 32; 147; 131; 68; 246; 69; 145; 27; 148; 54; 37; 6; 56; 263; 63; 132; 12; 28; 271(1)(c); 144; 10; 90; 154; 2; 11; 15; 271(1)(b); 139; 92; 201; 143(2); 13

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD I BENCH BEFORE: SHR I S. S. GODARA , JUDICIAL MEMBER AND SHRI AMARJIT SINGH, ACCOUNTANT MEMBER AKIK TILES PVT. LTD, SURVEY NO. 1071 - 74, PST - NANDASAN, NADASAN - MEHSANA HIGHWAY, MEHSANA - 382705, PAN: AACCA3201G (APPELLANT) VS THE ACIT, MEHSANA CIRCLE, MEHSANA (RESPONDENT) REVENUE BY : S H RI RICHA RASTOGI , SR. D . R. ASSESSEE BY: S H RI TUSHAR P. HEMANI , A.R. DATE OF HEARING : 02 - 02 - 2 017 DATE OF PRONOUNCEMENT : 23 - 03 - 2 017 / ORDER P ER : AMARJIT SINGH, ACCOUNTANT MEMB ER : - THIS ASSESSEE S APPEAL FOR A.Y. 2010 - 11 , AR IS ES FROM ORDER OF THE CIT(A), GANDHINAGAR, AHMEDABAD DATED 12 - 06 - 2015 IN APPEAL NO. CIT(A)/GNR/357/2014 - 15 , IN PROCEEDINGS UNDER SECT ION 271(1 ) (C) OF THE INCOME TAX ACT, 1961; IN SHORT THE ACT . I T A NO . 2647 / A HD/20 15 A SSES SMENT YEAR 2010 - 11 I.T.A NO. 26 47 /AHD/20 15 A.Y. 2010 - 11 PAGE NO AKIK TILES PVT. LTD. VS ACIT 2 2. THE ASSESSEE HAS RAIS ED FOLLOWING GROUNDS OF APPEAL: - 1. THE ID. CIT(A) HAS ERRED IN LAW AND ON THE FACTS OF THE CASE IN CONFIRMING THE ACTION OF ID. AO IN LEVYING PENALTY OF RS.11,89,650/ - U/S 271(1)(C) OF THE ACT, ON ADDITION OF 35,00,000/ - U/S 68 OF THE ACT ON ACCOUNT OF ALLEGED UNEXPLAINED SHARE CAPITAL; WHICH IS WHOLLY UNSUSTAINABLE IN LAW AND ON FACTS AND AS SUCH THE APPELLANT COULD NOT BE CHARGED WITH ANY GUILT OF FURNISHING INACCURATE PARTICULARS OF INCOME OR CONCEALING PARTICULARS OF INCOME WIT HIN MISCHIEF OF SECTION 271(1)(C) OF THE ACT. THE LEVY OF PENALTY BEING WITHOUT JURISDICTION AND TOTALLY UNCALLED FOR DESERVES TO BE QUASHED. 2. THE LEARNED CIT(A) HAS ERRED IN LAW AND ON THE FACTS OF THE CASE IN CONFIRMING THE ACTION OF LEARNED AO IN LEVYING PENALTY UNDER SECTION 271(1)(C) OF THE ACT ONLY ON THE BASIS OF ADDITION U/S 68 OF THE ACT WHICH CREATES A LEGAL FICTION ONLY FOR QUANTUM ADDITION AND THE SAME CANNOT BE EXTENDED TO PENALTY. 3. THE LEARNED CIT(A) HAS ERRED IN LAW AND ON FAC TS IN CONFIRMING THE ACTION OF AO IN INITIATING AND LEVYING PENALTY UNDER SECTION 271(1)(C) OF THE ACT WITHOUT RECORDING MANDATORY SATISFACTION AS CONTEMPLATED UNDER THE ACT AT THE TIME OF FRAMING THE ASSESSMENT ORDER. 4. IN ANY CASE, THE IMPUGN ED PENALTY ORDER IS BARRED BY LIMITATION AND THUS WITHOUT JURISDICTION AND ILLEGAL. 5. IN ANY CASE, QUANTIFICATION OF THE PENALTY IS ERRONEOUS AND EXCESSIVE. 6. BOTH THE LOWER AUTHORITIES HAVE PASSED THE ORDERS WITHOUT PROPERLY APPRECIATING THE F ACT AND THAT THEY FURTHER ERRED IN GROSSLY IGNORING VARIOUS SUBMISSIONS, EXPLANATIONS AND INFORMATION SUBMITTED BY THE APPELLANT FROM TIME TO TIME WHICH OUGHT TO HAVE BEEN CONSIDERED BEFORE PASSING THE IMPUGNED ORDER. THIS ACTION OF THE LOWER AUTHORITIES I S IN CLEAR BREACH OF LAW AND PRINCIPLES OF NATURAL JUSTICE AND THEREFORE DESERVES TO BE QUASHED. 3. IN THIS CASE, RETURN OF INCO ME DECLARING INCOME OF RS. 2,44 ,65,540/ - WAS FILED ON 11 TH OCTOBER, 2010. SUBSEQUENTLY, THE CASE OF THE ASSESSEE WAS SELECTED UNDER SCRUTINY BY ISSUING NOTICE U/S. 143(2) ON 17 TH NOVEMBER , 201 1. DURING THE COURSE OF I.T.A NO. 26 47 /AHD/20 15 A.Y. 2010 - 11 PAGE NO AKIK TILES PVT. LTD. VS ACIT 3 A SSESSMENT PROCEEDINGS, THE ASSESSING OFFICER NOTICED THAT SHARE CAPITAL OF THE ASSESSEE COMPANY HAD BEEN INCREASED BY AN AMOUNT OF RS. 3 CRORE. THE DETAILS OF PERS ONS TO WHOM SHARES WERE CLAIMED TO HAVE BEEN ISSUED, WERE CALLED FROM THE ASSESSEE. THEREAFTER, THE ASSESSING OFFICER ISSUED SUMMONS TO CROSS VERIFY AND OBTAIN REQUIRED CONFIRMATION FROM THE PARTIES . AFTER GOING THROUGH THE SUBMISSION MADE BY THE PARTIES , THE ASSESSING OFFICER NOTICED THAT ONE PARTY NAMELY DUG A R POL Y MER S PVT. LTD FROM WHOM THE ASSESSEE HAD CLAIMED TO HAVE RECEIVED AN AMOUNT OF RS. 35 LACS TOWARDS SHARE VALUE AND PREMIUM HAD DENIED TO HAVE MADE ANY SUCH TRANSACTION WITH THE ASSESSEE COMPA NY . THE RELEVANT PORTION OF THE REPLY RECEIVED FROM THE DUGAR POLYMERS LIMITED IN RESPONSE TO THE SUMMONS ISSUED 131 OF THE ACT IS REPRODUCED HEREUNDER: - ' ..WITH REFERENCE TO YOUR LETTER RECEIVED ON 12 TH JANUARY, 2013 HAVING REF NO: I TNS 25 DATED 02.01.2 013. I WOULD LIKE TO INFORM YOU THAT WE HAVE NO TRANSACTION HISTORY WITH REFERRED COMPANY IN YOUR LETTER NAMED M/S AKIK TILES PVT. LTD. I ENSURE YOU THAT WE HAVE NOT PURCHASED OR SOLD SHARES OF M/S AKIK TILES PVT. LTD. AT ANY POINT OF TIME TILL DATE. PLE ASE FIND ENCLOSED AUDITED BALANCE SHEET FOR F.Y. 2009 - 10 FOR YOUR READY REFERENCE' 4. DURING THE COURSE OF ASSESSMENT PROCEEDINGS THE STATEMENT OF DUGAR POLYMERS LIMITED WAS BROUGHT TO THE NOTICE OF THE ASSESSEE'S . T HE ASSESSING OFFICER STATED THAT NO SATISFACTORY EXPLANATION COULD BE FURNISHED BY THE ASSESSEE TO PROVE THE GENUINENESS OF AMOUNT OF RS.35 L ACS CREDITED TO THE BALANCE SHEET AS SHARE CAPITAL AND SHARE PREMIUM. THE ASSESSING OFFICER HAS ALSO STATED THAT TO PROVE THE GENUINENESS OF THE TRAN SACTION THE ASSESSEE HAS NOT DEMANDED ANY CROSS VERIFICATION AND CROSS EXAMINATION AGAINST THE NON - CONFORMING I.T.A NO. 26 47 /AHD/20 15 A.Y. 2010 - 11 PAGE NO AKIK TILES PVT. LTD. VS ACIT 4 PARTY I.E. DUGAR POLYMERS LTD. THE ASSESSING OFFICER HELD THAT THE CLAIM OF THE ASSESSEE FOUND TO BE FALSE AND NOT GENUINE , THEREFORE, AN ADDIT ION OF RS.35 LACS WAS MADE TO THE TOTAL INCOME OF THE ASSESSEE AS UNEXPLAINED CASH CREDITS AS PER THE PROVISIONS OF SECTION 68 OF THE IT ACT. THE ASSESSING OFFICER ALSO INITIATED PENALTY PROCEEDINGS U/S. 271(1)(C) OF THE ACT FOR FURNISHING INACCURATE PART ICULARS /CONCEALMENT OF INCOME. DURING THE COURSE OF PENALTY PROCEEDINGS AS MEN TIONED BELOW IN THE PENALTY ORDER T HE ASSESSING OFFICER HAS NOT ACCEPTED THE EXPLANATION OF THE ASSSSEE .HE STATED THAT ASSESSEE FAILED TO DISCHARGE ITS ONUS TO ESTABLISH THE GEN UINENESS AND CREDITWORTHINESS OF THE CREDIT ENTRY FOUND IN THE BOOKS OF ACCOUNTS AND HELD THAT IT WAS A CLEAR CASE OF CONCEALMENT OF INCOME, THEREFORE, HE LEVIED A PENALTY OF RS. 11,89,650/ - VIDE PENALTY ORDER U/S. 271(1)(C) OF THE ACT PASSED ON 10 TH FEBRU ARY, 2015. ASSESSING OFFICER IN THE P ENALTY ORDER WHILE IMPOSING THE PENALTY HAS DISCUSSED AS UNDER: - 2. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, ON VERIFICATION OF BALANCE SHEET OF THE ASSESSEE IT WAS NOTICED THAT THE SHARE CAPITAL HAS BEEN INCREASED BY AN AMOUNT OF RS.3 CRORE AND THE PREMIUM THEREON WAS ALSO CREDITED TO THE BALANCE SHEET. THE DETAILS OF PERSONS TO WHOM SHARES CLAIMED TO HAVE BEEN ISSUED, WERE CALLED FROM THE ASSESSEE. THE ASSESSEE HAD FURNISHED THE FOL LOWING DETAILS AND CLAIMED THAT THE SHARES WERE ISSUED TO THEM AND THE ASSESSEE HAD RECEIVED THE FACE VALUE OF SHARE AS WELL AS THE PREMIUM THEREON. INVESTMENT SHOWN IN THE AKIK TILES PVT LTD BY VARIOUS PARTIES AS DECLARED BY THE COMPANY IN THE BALANCE SHEET FOR F.Y. 2009 - 10. SR. NO. NAME OF THE PARTIES NO. OF SHARES TOTAL INVESTMENT 1. DUGGAL POLIMARS PVT LTD. 70000 3500000 I.T.A NO. 26 47 /AHD/20 15 A.Y. 2010 - 11 PAGE NO AKIK TILES PVT. LTD. VS ACIT 5 2. KRISHAV INFRASTRUCTURE PVT. LTD. 90000 4500000 3. SAHKAR BATTERY PVT. LTD. 140000 7000000 4. S.J. SECURITIES LTD. 100000 5000000 5. SUPER CREATIVE SPARES PVT. LTD. 60000 3000000 6. TRIPADA INFRASTRUCTURE PVT. LTD. 140000 7000000 DURING THE ASSESSMENT PROCEEDINGS, THE A.O. HAD OBTAINED THE NECESSARY DETAILS, CONFIRMATIONS IN THIS REGARD SO AS TO ESTABLI SH THE GE NUINENESS OF THE TRANSACTION. SUMMONS WERE ALSO ISSUED BY THE A.O. TO THE ABOVE PARTIES TO CROSS VERIFY AND OBT AIN REQUIRED CONFIRMATION FROM THE PAR TIES AS REGARDS THE INVESTMENT AND ALLO TMENT OF SHARES BY THE ASSESSEE COMPLY TO THEM. THE ABOVE PARTIES HAD MADE SUBMISSIONS IN COMPLIANCE TO THE SUMMONS ISSUED. ON GOING THROUGH THE SUBMISSIONS, IT WAS NOTICED THAT ONE OF - SUCH PERSON NAMELY DUGAR POLYMERS LTD. FROM WHOM THE ASSESSEE CLAIMED TO HAVE RECEIVED AN AMOUNT OF RS. 35 LAKHS TOWARDS SHARE VALUE AND PREMIUM THEREOF, HAD DENIED TO HAVE MADE ANY SUCH TRANSACTION WITH THE ASSESSEE COMPANY. THE RELEVANT PORTION OF THE REPLY RECEIVED FROM DUGAR POLYMERS LTD IN RESPONSE TO THE SUM MONS ISSUED U/S 131 OF THE ACT IS REPRODUCED HEREUNDER: - . WITH REFERENCE T O YOUR LETTER RECEIVED ON 12 TH JANUARY, 2013 HAVING REF NO: 1TNS 25 DATED 02.01.2013. I WOULD, LIKE TO INFORM YOU THAT WE HAVE NO TRANSACTION HISTORY WITH REFERRED COMPANY IN YOUR LETTER NAMED M/S AKIK TILES PVT. LTD. I ENSURE YOU THAT WE HAVE NOT PURC HASED OR SOLD SHARES OF M/S AKIK TIL ES PVT LTD. AT ANY POINT OF TIME TILL DATE. PLEASE FIND ENCLOSED AUDITED BALANCE SHEET FOR F.Y. '2009 - 10 FOR YOUR READY REFERENCE' FROM THE ABOVE CONTENTIONS AND CLARIFICATION, IT GOT CLEAR THAT THE ALLEGED SHARE VALUE AND PREMIUM THEREON AMOUNTING TO RS. 35 I.T.A NO. 26 47 /AHD/20 15 A.Y. 2010 - 11 PAGE NO AKIK TILES PVT. LTD. VS ACIT 6 LAKHS CANNOT BE HELD TO BE A GENUINE TRANSACTION IN THE LIGHTS OF ABOVE SUBMISSIONS OF THE AFORESAID PARTY . DURING THE ASSESSMENT PROCEEDINGS, THE ABOVE REPRODUCED STATEMENT OF DUGAR ' POLYMERS LTD WAS ALSO BROUGHT TO THE NOTICE OF THE AR OF THE ASSESSEE AND THE MATTER ' WAS DISCUSSED WITH HIM. HOWEVER, NEITHER ANY SATISFACTORY EXPLANATION COULD BE GIVEN BY THE ASSESSEE NOR COULD IT PRODUCE ANY CONTRARY EVIDENCE, TO OTHERWISE PROVE THE AMOUNT OF RS. 35 LAKHS CREDIT ED TO THE BALANCE SHEET AS GENUINE AND EXPLAINED. NO CROSS VERIFICATION OR - CROSS EXAMINATION WAS DEMANDED BY THE ASSESSEE AGAINST THE CONTENTIONS/STATEMENT MADE BY THE NON - CONFIRMING PARTY I.E. DUGAR POLYMERS LTD IN VIEW OF .THE ABOVE A SHOW CAUSE NOTICE VIDE THIS OFFICE LETTER DATED 11.02.2013 WAS I SSUED TO THE ASSESSEE. IN RESPONSE TO THE SAME, THE ASSESSEE VIDE REPLY DATED 22.02,2013 HAD SUBMITTED AS UNDER: A S REG ARDS THE INVESTMENT IN OUR COMPANY BY DUGAR POLYMERS LT D . WHICH HE HAS UNFORTU NATELY DENIED IT IS SUBMITTED THAT FIRST THAT PA RTIES HAS BEEN IDENTIFIABLE AT THE PLACE OF WHICH ADDRESS WE SUBMITTED TO YOURSELF AND WE ARE ALSO ATTACHING THE COPY OF THE BANK STATEMENT WHICH WAS G IVEN BY HIM WHEN THE ALLOTMENT W AS MADE TO HI M AND T HE AM OUNT DEBITED INTO HIS BANK ACCOUNT IS REFLECTING IN OUR BOOKS OF ACCOUNT AS WELL AS IN OUR BANK ACCOUNT. WE ENCLOSING THE COPY OF THE BANK STATEMENT ALONG WITH COPY OF THE SHARE ALLOTTED TO HIM. IN THE ABOVE CIRCUMSTANCES THE IDENTITY OF THE PARTY IS P ROVED AND HE HAS REPLIED TO YOUR SUMMONS. THE BANK STATEMENT IS EVIDENCE OF HIS CREDIT WORTHINESS OF ISSUING THE CHEQUE. WE ARE ALSO ATTACHING THE XEROX COPY OF THE RESOLUTION PASSED B Y THE COMPANY FOR THE PURCHASE OF THE SHARE OF AKIK TILE PVT . LTD. HOWEVER, IF HE IS DENIED THE REASON S ARE BEST KNOWN TO HIM AND SINCE THE ABOVE DOCUMENT & EVIDENCES ARE SELF SPEAKING THAT HE HAS PURCHASED OUR SHARES AND IN THE ABOVE CIRCUMSTANCE INVESTMENT MADE BY ME PLEASE.BE ACCEPTED....' THE SUBMISSION OF THE ASSESS EE E WAS NOT FOUND ACCEPTABLE BY THE A.O. AS DISCUSSED EARLIER THE CORRECTNESS AND GENUINENESS OF SHARE VALUE ALONG WITH THE PREMIUM AMOUNTING TO RS. 35 LAKHS ALLEGEDLY CLAIMED BY THE ASSESSEE TO HAVE RECEIVED FROM DUGAR POLYMERS LTD COULD NOT BE ESTABLISH ED IN SO FAR THE VERY PERSON HAD DENIED HAVING MADE ANY TRANSACTION WITH THE ASSESSEE AND THE ASSESSEE COULD NOT PUT FORTH ANY EVIDENCE CONTRARY TO THE STATEMENT I.T.A NO. 26 47 /AHD/20 15 A.Y. 2010 - 11 PAGE NO AKIK TILES PVT. LTD. VS ACIT 7 GIVEN BY THE SO CAL LED SHARE HOLDER SO AS TO PROVE THE TRANSACTION GENUINE. UNDER THE CIRCUMST ANCES AND CONSIDERING THE FACTS OF THE CASE AND IN THE LIGHTS OF THE ABOVE OBSERVATION IT WAS HELD THAT THE CLAIM OF THE ASSESSEE ' THAT IT HAD ISSUED SHARES AND RECEIVED SHARE AMOUNT OF RS. 35 LAKHS WAS FOUND FALSE AND NON - GE NUINE AND HENCE, AN ADDITION O F RS. 35 LAKHS WAS MADE TO THE TOTAL INCOME CONSIDERING THE SAME AS UNEXPLAINED CASH CREDITS AS PER THE PROVISIONS OF SECTI ON 68 OF THE I. T. ACT. PENALTY PROCEEDINGS U/S 271(1 )(C) WERE INITIATED FOR FURNISHING INACCURATE PARTICULARS/ CONCEALMENT OF INCOME , BY ISSUING PENALTY NOTICE DATED 12.03.2013 WHICH WAS DULY SERVED UPON THE ASSESSEE ALONG WITH ASSESSMENT ORDER. 3. BEING AGGRIEVED, THE ASSESSEE PREFERRED .AN APPEAL BEFORE THE FIRST APPELATE AUTHORITY IN WHICH, THE LD. CIT(A) HAD DECIDED THE APPEAL VID E ITS ORDER IN APPEAL NO.CIT(A)/GNR/46/2013 - 14 DATED 23.07.2014. THE LD. CIT(A) HAD - DISMISSED THE APPEAL ON THE IMPUGNED ISSUE, CONFIRMING THE ADDITION MADE BY A.O. THE FINAL COMMENTS OF THE LD. CIT(A) ON THE ISSUE RE - PRODUCED AS UNDER: - 'HAVIN G GONE THROU GH ALL THE DETAILS, I AM OF THE VIEW THAT T HE ONUS WAS ON THE APPELLANT TO DISCHARGE COMPLETE LIABILITY TO ESTABLISH THAT THE GENUINENESS, CREDITWORTHINESS IF THE CREDIT ENTRY FOUND IN THE BOOKS OF ACCOUNTS. IN THE PRESENT CASE, WHE N THE DUGAR POLYMERS LTD ITSELF DENI E S OF MAKING AN INVESTMENT IN THE SHARES OF APPELLANT COMPANY, IT IS CLEAR THAT THE SHARE CAPITAL OFRS.35,0 0,000/ - IS NOT EXPLAINED BY THE APPELLANT, EVEN WHEN IT IS CLEARLY ESTABLISHED THAT THE MONEY RECEIVED BY THE A PPELLANT TOWARDS SHARE CAPITAL HAS FLOWN FROM THE BANK ACCOUNT OF THE SAID DUGAR POLYMERS LTD. UNDER THE CIRCUMSTANCES, IT IS HELD THAT THE AO'S ACTION IN MAKING THE ADDITION OF RS.35,00,000/ - U/S.68 IS JUSTIFIED. THEREFORE, THE ADDITION OF RS.35,00,00 0/ - MAD E U/S.68 OF THE ACT BY THE AO IS CONFIRMED AND ACCORDINGLY THIS GROUND OF APPEAL IS DISMISSED.' 4. AS THE ISSUE HAS BEEN DECIDED IN FAVOUR OF REVENUE, ANOTHER NOTICE U/S.27 4 R.W.S. 271(1)(C) OF I.T. ACT WAS ISSUED ON 23.09.2014, A FRESH ASKING THE ASSESSEE TO SHOW CAUSE WHY AN ORDER IMPOSING PENALTY ON IT SHOULD NOT BE PASSED. IN RESPONSE, THE ASSESSEE HAS FURNISHED ITS SUBMISSION VIDE REPLY DATED 06.12.2014, RECEIVED IN DAK ON 10.12.2014. THE SUBMISSION OF ASSESSEE IS RE - PRODUCED AS UNDE R: I.T.A NO. 26 47 /AHD/20 15 A.Y. 2010 - 11 PAGE NO AKIK TILES PVT. LTD. VS ACIT 8 'WITH REFERENCE TO YOUR SHOW CAUSE NOT ICE UNDER ABOVE SECTION WE HAVE TO SUBMIT THAT THE ASSESSING OFFICER WHILE MAKING THE ASSESSMENT INITIATE THE PENALTY FOR CONCEALING THE INCOME FOR ADDITION OF RS. 35 LACS FOR THE INVESTMENT MADE BY THE DUGAR POLYM ERS LTD U/S.68 OF THE - INCOME TAX 'ACT, 1961. IN THIS REGARDS IT IS TO SUBMIT THAT DU RING ASSESSMENT PROCEEDINGS THE RESOLUTION PADDED BY THE DUGAR POLYMERS LTD, DETAILS OF ALLOTMENT OF SHARES WERE SUBMITTED AND EVEN THROUGH NOTICE U/S . 131 WAS RECEIVED BY THE DUGAR POLYMERS LTD AND APART FROM THIS IN OUR BALANCE SHEET IT WAS THE P ART OF SHARE HOLDERS LIST AND BALANCE SHEET WAS FILE D WITH THE RETURN OF INCOME AND THEREFORE THERE WAS NO ANY CONCEALMENT OF PARTICULARS WHILE FILIN G THE RETURN AND ONUS WAS DI SCHARGE BY THE ASSESSEE COMPANY AND MERELY HIS DENIAL OF THE FACT CANN OT BE TREATED AS CONCEALMENT OF PARTICULARS OF INCOME. IN VIEW OF THE ABOVE - FACTS AND CIRCUMSTANCES PENALTY INITIATED MAY PLE ASE BY DROPPED.' 5. THE ABOVE SUBMISSION OF THE ASSESSEE HAS BEEN CAREFULLY GONE THROUGH. THE SAME IS NOT FOUND TO' BE ACCEPTABLE. THE ASSESSEE'S ARGUMENTS ARE GENERAL IN NATURE. ONLY AFTER C ONSIDERING THESE ARGUMENTS, THE A. O. HAD MADE ADDITION WHICH HAS DULY BEEN CONFIRMED BY THE LD. CIT(A). 6. IN THE LIGHT OF ABOVE DISCUSSION, IT .IS CONCLUDED THAT THE ASSESSEE FAILED TO DISCHARGE ITS ONUS TO ESTABLISH THAT THE GENUINENESS AND CREDITWORTHINESS OF THE CREDIT ENTRY FOUND IN T HE BOOKS OF A/CS. AGAINST THIS, IN THE PRESENT CASE, DUGAR POLYMERS LTD ITSELF DENIED OF MAKING INVESTMENT IN THE SHARES OF ASSESSEE - COMPANY. ACCORDINGLY, IT IS CONCLUDED THAT IT IS A CLEAR CASE OF CONCEALMENT OF INCOME TO THE ABOVE EXTENT. 7. CONSIDER ING THE ABOVE, I AM SATISFIED THAT THIS IS A FIT CASE TO IMPOSE PENALTY U/ S. 271(1 )(C) OF THE I.T. ACT. ACCORDINGLY, I HEREBY LEVY A MINIMUM .PENALTY .OF RS. 11,89,650/ - U/S. 271(1 )(C) OF THE INCOME - TAX ACT, 1961 BEING 100 % OF TAX EVADED AS AGAINST THE MA XIMUM PENALTY LEVIABLE OF RS.35,68,950/ - @ 300 %. THIS ORDER IS PASSED AFTER TAKING PREVIOUS APPROVAL OF THE JT.CLT MEHSANA R ANGE, MEHSANA VIDE LETTER NO. MHN/JT. CIT/F.NO.20/PEN. APPR./2014 - 15 DATED 05.02.2015. I.T.A NO. 26 47 /AHD/20 15 A.Y. 2010 - 11 PAGE NO AKIK TILES PVT. LTD. VS ACIT 9 5. AGGRIEVED AGAINST THE IMPUGNED PENALTY LEVIED BY THE ASSESSING OFFICER, THE ASSESSEE PREFERRED APPEAL BEFORE THE CIT(A). THE LD. CIT(A) HAS CONFIRMED THE PENALTY LEVIED BY THE ASSESSING OFFICER STATING AS UNDER: - I HAVE CONSIDERED THE FACTS OF THE CASE, PENALTY ORDER, SUBMISSION MADE BY THE APPELLANT AND THE CASE LAWS RELIED UPON. THE FACTS LEADING TO THE IMPOSITION OF PENALTY BY THE AO IS THAT DUGAR POLYMERS LTD. FROM WHOM THE APPELLANT CLAIMED TO HAVE RECEIVED AN AMOUNT OF RS.35 LAKHS TOWARDS SHARE VALUE AND PREMIUM THEREOF, HAD DENIED TO H AVE MADE ANY SUCH TRANSACTION WITH THE APPELLANT WHICH HAS BEEN REPRODUCED BY THE AO IN THE ORDER. APPELLANT COULD NOT FURNISH ANY SATISFACTORY EXPLANATION NOR COULD PRODUCE ANY CONTRARY EVIDENCE TO PROVE THAT THE AMOUNT OF RS.35 LAKHS CREDITED TO THE BALA NCE SHEET AS GENUINE AND EXPLAINED. THE ADDITION MADE BY THE AO WAS CONTESTED BY THE APPELLANT BEFORE THE CIT(A) AND THE ISSUE WAS DECIDED AGAINST THE APPELLANT. IN SUCH FACTS AND CIRCUMSTANCES, AO CONCLUDED THAT APPELLANT FAI LED TO DISCHARGE ITS ONUS TO E STABLISH THAT THE GENUINENESS AND CREDITWORTHINESS OF THE CREDIT ENTRY FOUND IN THE BOOKS OF ACCOUNTS AND ACCORDING IMPOSED PENALTY OF RS.11,89,650/ - BEING 100% OF THE TAX SOUGHT TO BE EVADED. AGAINST THE ABOVE ACTION OF THE AO, APPELLANT HAS CONTENDED THA T THE EVIDENCES AS PLACED ON RECORD BY THE APPELLANT HAS NOT BEEN FOUND TO BE INCORRECT OR NON - GENUINE BY THE AO AND FURTHER CONTENDED THAT MERELY RELYING ON THE STATEMENT OF DUGAR POLYMER LTD., IT IS INAPPROPRIATE TO HOLD THAT THEY HAVE NOT MADE INVESTMEN T IN THE SHARES OF THE APPELLANT COMPANY. IN THIS REGARD APPELLANT HAS ALSO RELIED ON VARIOUS CASE LAWS AND URGED THAT THE EVIDENCES WOULD PREVAIL OVER THE SELF - EXPLANATORY STATEMENT AS MADE BY THE DUGAR POLYMERS LTD. IT IS ALSO THE CONTENTION OF THE APPEL LANT THAT IT HAD PROVED ALL THREE INGREDIENTS I.E. GENUINENESS, IDENTITY AND CREDITWORTHINESS BY PLACING ON RECORD THE ABOVE NOTED EVIDENCES, AND THEREFORE, ONCE THREE INGREDIENTS ARE PROVED BY THE APPELLANT, NO ADDITION U/S 68 OF THE ACT CAN BE MADE. IN C ASE OF SHARE CAPITAL ONLY THE IDENTITY OF THE SHARE APPLICANTS IS TO BE PROVED. ONCE IDENTITY IS PROVED, BURDEN OF THE APPELLANT CAN BE SAID TO HAVE BEEN DULY DISCHARGED. IN THE ENTIRETY OF FACTS AND CIRCUMSTANCES, AS NARRATED ABOVE, I FIND THAT AO HAS IMP OSED PENALTY RELYING ON THE DEPOSITION OF DUGAR I.T.A NO. 26 47 /AHD/20 15 A.Y. 2010 - 11 PAGE NO AKIK TILES PVT. LTD. VS ACIT 10 POLYMERS LTD WHO HAS DENIED TO HAVE APPLIED FOR THE SHARES AND INVESTMENT MADE. THIS ISSUE HAS BEEN DISCUSSED BY THE AO AND THE DEPOSITION MADE IS ALSO REPRODUCED. FURTHER, ALL THE DETAILS AND EVIDENCES MADE BEFORE THE UNDERSIGNED HAD ALREADY BEEN CONSIDERED BY THE AO BEFORE IMPOSITION OF PENALTY U/S 271(1 )(C). IT IS ALSO A POINTED NOTED THAT THE UNDERSIGNED HAD DECIDED THE QUANTUM APPEAL VIDE ORDER DATED 23/7/2014 AND THE ISSUE HAS BEEN ELABORATELY DISCUSSED. THE ISSUE HAS BEEN DECIDED IN THE FOLLOWING WORDS: HOWEVER, ON - GOING THROUGH THE ASSESSMENT ORDER, IT IS SEEN THAT IN PURSUANT TO NOTICE ISSUED U/S 131 OF THE ACT, THE RESPECTIVE PERSON OF THE DUGAR POLYMERS LTD HAS DENIED TO HAVE MADE INVESTMENT IN THE S HARES OF THE APPELLANT COMPANY. IN THIS CONNECTION, IT WAS SUBMITTED DURING THE COURSE OF APPELLANT PROCEEDINGS THAT IT IS POSSIBLE THAT DUGAR POLYMERS LTD MIGHT NOT HAVE RECORDED THE INVESTMENT MADE IN THE APPELLANT COMPANY, AND THEREFORE, TO AVOID ANY CO NSEQUENTIAL EFFECT IN THEIR HANDS REGARDING UNDISCLOSED INVESTMENT, DUGAR POLYMERS LTD WOULD HAVE STATED THAT THEY HAVE NOT MADE INVESTMENT IN THE APPELLANT COMPANY. IN OTHER WORDS, IT WAS THE SUBMISSION OF THE ARS OF THE APPELLANT THAT THE ABOVE EVIDENCES PLACED SHOULD BE TAKEN INTO CONSIDERATION AND NOT THE STATEMENT OF DUGAR POLYMERS LTD TO DECIDE THE ISSUE REGARDING GENUINE / NON - GENUINENESS OF THE SHARE CAPITAL. HAVING GONE THROUGH ALL THE DETAILS, I AM OF THE VIEW THAT THE ONUS WAS ON THE APPELLANT TO DISCHARGE COMPLETE LIABILITY TO ESTABLISH THAT THE GENUINENESS, CREDIT - WORTHINESS OF THE CREDIT ENTRY FOUND IN THE BOOKS OF ACCOUNTS. IN THE PRESENT CASE, WHEN THE DUGAR POLYMERS LTD ITSELF DENIES OF MAKING AN INVESTMENT IN THE SHARES OF APPELLANT COMPANY , IT IS CLEAR THAT THE SHARE CAPITAL OF RS.35,00,000/ - IS NOT EXPLAINED BY THE APPELLANT, EVEN WHEN IT IS CLEARLY ESTABLISHED THAT THE MONEY RECEIVED BY THE APPELLANT TOWARDS SHARE CAPITAL HAS FLOWN FROM THE BANK ACCOUNT OF THE SAID DUGAR POLYMERS LTD. UND ER THE CIRCUMSTANCES, IT IS HELD THAT THE AO'S ACTION IN MAKING THE ADDITION OF 35,00,000/ - U/S 68 IS JUSTIFIED. THEREFORE, THE ADDITION OF RS.35,00,000/ - MADE U/S 68 OF THE ACT BY THE AO IS CONFIRMED AND ACCORDINGLY THIS GROUND OF APPEAL IS DISMISSED.' IN THE QUANTUM PROCEEDINGS, THE ADDITION WAS CONFIRMED AS THE APPELLANT COULD DISCHARGE THE COMPLETE LIABILITY TO ESTABLISH THAT THE GENUINENESS, CREDITWORTHINESS OF THE CREDIT ENTRY AND ALSO THE I.T.A NO. 26 47 /AHD/20 15 A.Y. 2010 - 11 PAGE NO AKIK TILES PVT. LTD. VS ACIT 11 FACT THAT DUGAR POLYMERS LTD DENIED MAKING AN INVESTMENT IN TH E SHARES OF THE APPELLANT COMPANY. ALL THREE INGREDIENTS OF TRANSACTION IS PROVED BY THE APPELLANT ON THE BASIS OF STATEMENT OF DUGAR POLYMERS LTD AND THE COMPANY DUGAR POLYMERS LTD HAS DENIED TO HAVE MADE SUCH INVESTMENT WHICH LEAD TO INACCURATE PARTICULA RS OF INCOME AND CONCEALMENT BY THE APPELLANT. IN SUCH FACTS, IT WAS ESTABLISHED THAT THE AMOUNT OF RS.35 LAC WAS NON - GENUINE SHARE CAPITAL WHICH THE APPELLANT COULD NOT CONTROVERT. SINCE THE PENALTY HAS BEEN IMPOSED BY THE AO ON THIS ADDITION CONFIRMED BY THE UNDERSIGNED; THE PENALTY IMPOSED U /S 271(1 )(C) OF THE ACT OF RS. 11,89,650/ - IS HEREBY HELD JUSTIFIED AND IS CONFIRMED. THE RELEVANT GROUND OF APPEAL IS REJECTED. 6 . DURING THE COURSE OF APPELLATE PROCEEDINGS BEFORE US, THE LEARNED COUNSEL HAS FILE D PAPER BOOK CONTAINING INFORMATION RELATING TO SUBMISSION MADE BEFORE THE LD. CIT(A), COPY OF ASSESSMENT ORDER AND RELEVANT ORDER OF HON BLE ITAT, AHMEDABAD AND CONTENDED THAT THE LD . CIT(A) HAS ERRED IN SUS TAINING THE PENALTY . ON THE OTHER HAND THE LD. DR SUPPORTED THE ORDER OF THE LD. CIT(A). 7 . WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE MATERIAL ON RECORD. WE NOTICED THAT THE ASSESSEE SUBMITTED THE COPY OF BANK STATEMENT, SHARE A L LOT MENT LETTERS, RESOLUTION OF BOARD OF DIRECTORS PASSED BY THE S AID COMPANY TO ESTABLISH THE IDENTITY, CREDITWORTHINESS AND GENUINENESS OF THE TRANSACTION . WE FURTHER NOTICED THAT T HE ASSESSING OFFICER HAS ISSUED SUMMONS TO THE PARTIES AND ONE OF THE PARTY DUGAR POLYMERS LIMITED, IN THE STATEMENT MENTIONED THAT THEY H AVE NEITHER PURCHASED NOR SOLD SHARES IN THE ASSESSEE COMPANY. WE FIND THAT THE ASSESSEET HAS NO T SHOWN ANY WILLINGNESS TO CROSS EXAMINE THE PARTY WHO HAVE REFUSED OF MAKING ANY INVESTMENT IN THE SHARE CAPITAL OF THE COMPANY. WE HAVE ALSO I.T.A NO. 26 47 /AHD/20 15 A.Y. 2010 - 11 PAGE NO AKIK TILES PVT. LTD. VS ACIT 12 NOTICED THAT I N THE CASE LA WS QUOTED BY THE LEARNED CONSUL BEFORE THE LD.CIT(A) THE FACTS OF THOSE CASE LAWS ARE DISTINGUISHABLE FROM THE CASE OF THE ASSESSEE AS IN THE CASE OF THE ASSESSEE ONE OF THE PARTY DUGAR POLYMERS LIMITED HAD DENIED OF MAKING ANY SHARE CAPITA L AND SHARE PREMIUM AND THE ASSESSEE HAD NOT OPTED TO CROSS - EXAMINE THE NON - CONFIRMING PARTY. THE FACT THAT THE ASSESSEE COMPANY HAS NOT AGREED FOR THE CROSS - EXAMINATION INDICATE THAT THE ASSESSEE COMPANY HAS AVOIDED TO PROVE THE GENUINENESS OF THE TRANS ACTIONS . . THE ASSESSEE IS UNDER A BURDEN TO EXPLAIN NATURE AND SOURCE OF SHARE APPLICATION MONEY RECEIVED IN A GIVEN CASE, AND FOR DISCHARGING THIS, IT HAS TO ESTABLISH THE SHAREHOLDER'S IDENTITY GENUINENESS OF THE TRANSACTION AND THE CREDITWORTHINESS OF T HE SHAREHOLDERS. SO FAR AS THE SHARE APPLICANTS' CREDITWORTHINESS IS CONCERNED THE ASSESSING OFFICER HAS TO THEN EXAMINE THE MATERIALS TO PROBE THE MATTER FURTHER. HE CAN REJECT THESE DOCUMENTS, AND HOLD, FOR VALID REASONS, THAT THE TRANSACTION IS NOT GEN UINE. THE REASONS SHOULD BE BASED ON MATERIALS, AND NOT THE PRODUCT OF CONCLUSIONS BASED ON SUSPICION. IN THE CASE OF THE ASSESSEE WE FIND THAT THE ASSESSING OFFICER WENT INTO GREAT LENGTHS TO VERIFY THE GENUINENESS OF THESE TRANSACTIONS AND ISSUED SUMMO NS TO THE SHARE APPLICANTS AND HIS REASONS THAT TRANSACTION WAS NOT GENUINE BASED ON STATEMENT OF THE PARTY , AND NOT THE PRODUCT OF CONCLUSIONS BASED ON SUSPICION. WE OBSERVE THAT THE FACTS OF THE CASE INDICATE THE ONUS ON THE A SSESSEE TO DISCHARGE C OMPLETE LIABILITY TO ESTABLISH THAT THE GENUINENESS, CREDIT - WORTHINESS OF THE CREDIT ENTRY FOUND IN THE BOOKS OF ACCOUNTS. IN THE PRESENT CASE, WHEN THE DUGAR POLYMERS LTD ITSELF DENIE D OF I.T.A NO. 26 47 /AHD/20 15 A.Y. 2010 - 11 PAGE NO AKIK TILES PVT. LTD. VS ACIT 13 MAKING AN INVESTMENT IN THE SHARES OF ASSESSEE COMPANY AND ENCLOSE D THE AUDITED BALANCE SHEET F O R FINANCIAL YEARS 2009 2010 FOR READY REFERENCE THEN THE ASSESSEE SHOULD HAVE RESPONDED POSITIVELY TO PROCEED NEXT STEP FOR CROSS - VERIFICATION AND CROSS - EXAMINATION TO PROVE ITS POINT. IN VIEW OF THE ABOVE FACTS AND FINDI NGS WE CONSIDERED THAT OPPORTUNITIES WERE PROVIDED BY THE ASSESSING OFFICER T O THE ASSESSEE TO SUBSTANTIATE ITS CLAIM AND TO DISPROVE THE CONTENTION OF THE NON - CONFIRMING PARTY BUT THE ASSESSEE FAILED TO SHOW ANY INITIATIVE AS IT HAD NOT SHOWN ANY WILLING NESS FOR CROSS - VERIFICATION AND CROSS - EXAMINATION OF THE SAID PARTY . IN VIEW OF THE ABOVE MENTIONED FACTS AND REASONS, WE UPHOLD THE ORDER OF THE LD. CIT(A) VIDE WHICH PENALTY IMPOSED U/S. 271(1)(C) OF THE ACT WAS SUSTAINED AND JUSTIFIED . 8 . IN THE RESULT , THE APPEAL OF THE ASSESSEE IS DISMISSED. ORDER PR ONOUNCED IN THE OPEN C OURT ON 23 - 0 3 - 201 7 SD/ - SD/ - ( S.S. GODARA ) ( AMARJIT SINGH ) JUDICIAL MEMBER ACCOUNTANT MEMBER AHMEDABAD : DATED 23 /03 /2017 / COPY OF ORDER FORWARDED TO: - 1. ASSESSEE 2. REVENUE 3. CONCERNED CIT 4. CIT (A) 5. DR, ITAT, AHMEDABAD 6. GUARD FILE. I.T.A NO. 26 47 /AHD/20 15 A.Y. 2010 - 11 PAGE NO AKIK TILES PVT. LTD. VS ACIT 14 BY ORDER/ , / ,