ALTINA FINANCE P.LTD, MUMBAI V. DCIT 9(1), MUMBAI

ITA 2655/MUM/2011

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 78792 (ITAT-MUMBAI)
• Duration Of Justice: 3 year(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-04-2014
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 23-04-2014
• Assessment Year: 2002-2003
• Appeal Filed On: 06-04-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: MANISH KUMAR SINGH
• Keywords: Unexplained cash credit
• Section: 68

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL 'A' BENCH, MUMBAI BEFORE SHRI D. MANMOHAN, VICE PRESIDENT AND SHRI N.K. BILLAIYA, ACCOUNTANT MEMBER ITA NO. 2655/MUM/2011 (ASSESSMENT YEAR: 2002-03) M/S. ALTINA FINANCE PVT. LTD. D C I T - 9(1) 303, ANAND HOUSE, 13 TH ROAD KHAR (W), MUMBAI 400052 VS. AAYAKAR BHAVAN, M.K. ROAD MUMBAI 400020 PAN - AAACM5825C APPELLANT RESPONDENT APPELLANT BY: SHRI SANJAY PARIKH RESPONDENT BY: SHRI MANISH KUMAR SINGH DATE OF HEARING: 23.04.2014 DATE OF PRONOUNCEMENT: 30.04.2014 O R D E R PER D. MANMOHAN, V.P. THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER DATED 11.01.2011 PASSED BY THE CIT(A)-19, MUMBAI AND IT P ERTAINS TO A.Y. 2002-03. 2. ADDITION OF ` 1,00,000/- UPHELD BY THE CIT(A) UNDER SECTION 68 OF THE ACT IS SUBJECT MATTER OF DISPUTE BEFORE US. 3. FACTS NECESSARY FOR DISPOSAL OF THE APPEAL ARE STAT ED IN BRIEF. THE ASSESSEE COMPANY IS ENGAGED IN THE BUSINESS OF SHAR E TRADING. FOR THE YEAR UNDER CONSIDERATION IT HAD FILED ITS RETURN OF INCO ME DECLARING LOSS OF ` 12,37,966/-. DURING THE COURSE OF ASSESSMENT PROCEE DINGS THE AO NOTICED THAT THE BALANCE SHEET OF THE ASSESSEE REFLECTED SU NDRY CREDITORS OF ` 1,00,000/- IN THE NAME OF M/S. HATIMA TEXTILES LTD. THE ASSESSEE WAS ASKED TO EXPLAIN THE NATURE OF THE CREDIT ENTRY. IN RESPONSE THERETO IT WAS SUBMITTED THAT A SUM OF ` 1,00,000/- WAS RECEIVED FROM MR. ALFRED DSOUZA AND MS. NANDITA DSOUZA IN CONNECTION WITH PUBLIC I SSUE (PRIVATE PLACEMENT) OF HATIMA TEXTILES LTD. BUT THE TRANSACTIONS HAVING NOT BEEN MATERIALISED THE AMOUNT WAS SHOWN AS PAYABLE TO HATIMA TEXTILES LTD. 4. IT DESERVES TO BE NOTICED THAT IF THE AMOUNT IS PAI D BY MR. ALFRED DSOUZA AND MS. NANDITA DSOUZA TO HATIMA TEXTILES LTD., IT CAN AT BEST BE ITA NO. 2655/MUM/2011 M/S. ALTINA FINANCE PVT. LTD. 2 CONSIDERED AS CASH CREDIT IN THE HANDS OF HATIMA TE XTILES LTD. BUT THE ASSESSEE SHOWED HATIMA TEXTILES LTD. AS SUNDRY CRED ITOR. UNDER THESE CIRCUMSTANCES, THE EXPLANATION OF THE ASSESSEE WAS NOT ACCEPTED. SINCE NO CONFIRMATION HAS BEEN FILED BY THE ASSESSEE THAT IT HAS TO PAY TO M/S. HATIMA TEXTILES A SUM OF ` 1,00,000/-, IT WAS TREATED AS INCOME OF THE ASSESSEE ON ACCOUNT OF CESSATION/NON-EXISTENCE OF LIABILITY, PRESUMABLY BY INVOKING PROVISIONS OF SECTION 41(1) OF THE ACT. TH E ADDITION MADE BY THE AO WAS CHALLENGED UNSUCCESSFULLY BEFORE THE CIT(A). TH OUGH THE CIT(A) OBSERVED THAT THE AMOUNT IN QUESTION CANNOT BE TAXE D UNDER SECTION 41(1) OR 28(IV), THE DISALLOWANCE IS MAINTAINABLE AS UNEX PLAINED CASH CREDIT UNDER SECTION 68 OF THE ACT. ON A FURTHER APPEAL, THE ITA T SET ASIDE THE MATTER IN THE LIGHT OF CERTAIN FRESH FACTS, I.E. THE ASSESSEE OBTAINED AFFIDAVITS OF MR. ALFRED DSOUZA AND MS. NANDITA DSOUZA TO THE EFFEC T THAT THEY HAD GIVEN A SUM OF ` 50,000/- EACH TO THE ASSESSEE FOR INVESTING IN SHAR ES OF HATIMA TEXTILES LTD. IN OTHER WORDS, THE CASE OF THE ASSES SEE IS THAT ON BEHALF OF HATIMA TEXTILES LTD. THE ASSESSEE COLLECTED A SUM O F ` 1,00,000/- FROM THE AFOREMENTIONED PARTIES AND HENCE HATIMA TEXTILES LT D. WAS SHOWN AS CREDITOR. SINCE FRESH EVIDENCE WAS FILED BEFORE THE TRIBUNAL, THE MATTER WAS RESTORED TO THE FILE OF THE AO TO EXAMINE THE SAME AND TO DECIDE AFRESH. ACCORDINGLY THE AO ISSUED NOTICES UNDER SECTION 143 (2) OF THE ACT AND EXAMINED THE MATERIAL PLACED BEFORE HIM. THE CASE O F THE ASSESSEE WAS THAT THE ASSESSEE COLLECTED SIMILAR AMOUNTS FROM SEVERAL OTHER PERSONS ALSO APART FROM MR. ALFRED DSOUZA AND MS. NANDITA DSOUZA TOW ARDS SHARE APPLICATION MONEY. THE UNDERSTANDING WAS THAT HATIMA TEXTILED L TD. SHALL BE COMING OUT WITH PUBLIC ISSUE OF SHARES WHICH MAY RESULT IN SUBSTANTIAL GAINS TO INVESTORS. SUBSEQUENTLY HATIMA TEXTILES LTD. INFORM ED THE ASSESSEE THAT THEY HAD DROPPED THE PROPOSAL TO ISSUE SHARES TO TH E PUBLIC. THEREFORE, THE ASSESSEE HAD TO REFUND THE MONEY TO THE SUBSCRIBERS . OUT OF A TOTAL SUM OF ` 3,00,000/-, ` 2,00,000/- WAS REPAID TO 19 INVESTORS BETWEEN APRIL , 1998 AND FEBRUARY, 1999 AND THE BALANCE AMOUNT WAS REPAI D ON 31.03.2005. 5. THE AO OBSERVED THAT THE ASSESSEE COMPANY FAILED TO ESTABLISH THAT THE AMOUNT OF ` 1,00,000/- SHOWN AS LIABILITY IN THE BOOKS OF ACCOU NT RELATES TO TWO CREDITORS, I.E. MR. ALFRED DSOUZA AND MS. N ANDITA DSOUZA. HE, THEREFORE, ADDED A SUM OF ` 1,00,000/- PRESUMABLY UNDER SECTION 68 OF THE ITA NO. 2655/MUM/2011 M/S. ALTINA FINANCE PVT. LTD. 3 ACT SINCE THE ORDER PASSED BY THE CIT(A) IN THE FIR ST ROUND OF LITIGATION WAS NOT CHALLENGED BY THE REVENUE. AGGRIEVED, ASSESSEE CONTENDED BEFORE THE FIRST APPELLATE AUTHORITY, VIDE ITS GROUNDS OF APPE AL, THAT THE AMOUNT SHOWN AS PAYABLE TO HATIMA TEXTILES LTD. WAS ACTUALLY PAY ABLE TO MR. ALFRED DSOUZA AND MS. NANDITA DSOUZA TOWARDS SHARE APPLI CATION MONEY AND HENCE THE ADDITION IN THE HANDS OF THE ASSESSEE IS NOT WARRANTED. WITHOUT PREJUDICE TO THE ABOVE, A SUM OF ` 1,00,000/- CANNOT BE TAXED IN THE YEAR UNDER CONSIDERATION AS THE AMOUNT HAD NEITHER BEEN RECEIVED DURING THE YEAR UNDER CONSIDERATION NOR THERE WAS CESSATION OF LIABILITY DURING THE YEAR UNDER CONSIDERATION. GROUND NO. 5 READS AS UNDER: - 5. WITHOUT PREJUDICE TO THE ABOVE, THE LEARNED AO FAILED TO APPRECIATE THAT THE SUM OF RS.1,00,000/- COULD NOT BE TAXED FO R THE YEAR UNDER CONSIDERATION AS THE AMOUNT HAD NEITHER BEEN RECEIVED DURING THE YEAR UNDER CONSIDERATION NOR WAS THERE A CESSATION OF LIABILITY DURING THE YEAR UNDER CONSIDERATION. THE LEARNED CIT(A), HOWEVER, OBSERVED THAT THE REFU ND OF THE AMOUNT TO MR. ALFRED DSOUZA AND MS. NANDITA DSOUZA WAS NOT PROV ED. HE, THEREFORE, CONFIRMED THE ACTION OF THE AO. 6. FURTHER AGGRIEVED, ASSESSEE IS IN APPEAL BEFORE US. THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT IN ORDER TO INVOKE PROVISIONS OF SECTION 41(1) OF THE ACT IT HAS TO BE SHOWN THAT TH E ASSESSEE GAINED BENEFIT/ CLAIMED DEDUCTION IN ANY OF THE EARLIER YEARS IN TH E FORM OF LIABILITY AND ONLY IN SUCH AN EVENT, IN THE YEAR OF REMISSION OF LIABI LITY IT CAN BE BROUGHT TO TAX. IN THE INSTANT CASE THE PLEA OF THE ASSESSEE THAT T HERE WAS NO SUCH BENEFIT OBTAINED IN THE EARLIER YEARS WAS ACCEPTED BY THE L EARNED CIT(A). THE AO HAVING NOT OBJECTED TO THE FINDINGS OF THE CIT(A), IT CANNOT NOW BE SAID THAT SECTION 41(1) IS APPLICABLE TO THE INSTANT CASE AND , THEREFORE, THE ISSUE HAS TO BE CONSIDERED ONLY UNDER SECTION 68 OF THE ACT, SINCE IT WAS TREATED AS UNEXPLAINED CASH CREDIT. IN THIS REGARD, THE LEARNE D COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE CREDIT, IF ANY, IS RECORDED IN T HE BOOKS OF ACCOUNT IN AN EARLIER YEAR SINCE THE AMOUNT WAS COLLECTED DURING 1998-99. SECTION 68 IS APPLICABLE IN RESPECT OF ANY CASH CREDIT RECORDED I N THE BOOKS OF THE ASSESSEE IN THE PREVIOUS YEAR RELEVANT TO THE ASSESSMENT YEA R UNDER CONSIDERATION WHEREAS IN THE INSTANT CASE THE CREDIT PERTAINS TO THE EARLIER YEAR AND HENCE NO ADDITION IS MAINTAINABLE IN THIS YEAR. HE ALSO R ELIED UPON THE AFFIDAVITS OF ITA NO. 2655/MUM/2011 M/S. ALTINA FINANCE PVT. LTD. 4 MR. ALFRED DSOUZA AND MS. NANDITA DSOUZA IN SUPPO RT OF THE CLAIM OF THE ASSESSEE COMPANY THAT THE ASSESSEE RECEIVED THE AMO UNT FROM THEM, WHICH IN TURN HAS TO BE GIVEN TO HATIMA TEXTILES LTD. BUT THE COMPANY HAVING DROPPED THE IDEA OF PRIVATE PLACEMENT OF ITS SHARES , THE ASSESSEE SHOWED HATIMA TEXTILES LTD. AS CREDITOR. AT ANY RATE, EVEN IF THERE IS A DISPUTE AS TO WHO SHOULD BE TREATED AS CREDITOR, THE UNDISPUTED F ACT IS THAT IT IS NOT A FRESH CASH CREDIT AND HENCE THE ADDITION IS NOT MAI NTAINABLE IN THIS YEAR. 7. ON THE OTHER HAND, THE LEARNED D.R. STRONGLY RELIED UPON THE ORDERS PASSED BY THE TAX AUTHORITIES. HE MAINLY SUBMITTED THAT THERE IS NO PROOF OF PAYMENT MADE TO MR. ALFRED DSOUZA AND MS. NANDITA DSOUZA IN THE YEAR 2005. AT ANY RATE, THE ASSESSEE HAD SHOWN HATIMA TE XTILES LTD. AS CREDITOR BUT THE EXISTENCE OF SUCH A COMPANY COULD NOT BE PR OVED. HE THUS STRONGLY SUPPORTED THE ORDERS PASSED BY THE TAX AUTHORITIES. 8. WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSIONS AND PERUSED THE RECORD. IT IS NOT IN DISPUTE THAT IN THE FIRST ROUN D OF LITIGATION THE LEARNED CIT(A) OBSERVED THAT PROVISIONS OF SECTION 41(1) CA NNOT BE APPLIED TO THE INSTANT CASE AND THE ADDITION, IF ANY, CAN BE MADE UNDER SECTION 68 OF THE ACT AS UNEXPLAINED CASH CREDIT. SINCE THE VIEW TAKEN BY THE CIT(A) HAVING NOT BEEN CHALLENGED BY THE REVENUE, THE SAME ATTAINED F INALITY. THEREFORE, THE CASE OF THE REVENUE DESERVES TO BE CONSIDERED ONLY IN THE BACKDROP OF SECTION 68 OF THE ACT. IT IS NOT IN DISPUTE THAT THE PLEA O F THE ASSESSEE THAT NO FRESH CASH CREDIT WAS TAKEN IN THE PREVIOUS YEAR RELEVANT TO A.Y. 2002-03 WAS NOT DISPUTED BY THE TAX AUTHORITIES. WHETHER THE CREDIT OR IS HATIMA TEXTILES LTD. OR DSOUZAS, THE FACT REMAINS THAT THERE IS NO FRES H CASH CREDIT IN THE YEAR UNDER CONSIDERATION IN WHICH EVENT, IN OUR CONSIDER ED OPINION, ADDITION CANNOT BE MADE UNDER SECTION 68 OF THE ACT IN THIS YEAR. WE HOLD ACCORDINGLY. 9. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 30 TH APRIL, 2014. SD/- SD/- (N.K. BILLAIYA) (D. MANMOHAN) ACCOUNTANT MEMBER VICE PRESIDENT MUMBAI, DATED: 30 TH APRIL, 2014 ITA NO. 2655/MUM/2011 M/S. ALTINA FINANCE PVT. LTD. 5 COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT(A) 19, MUMBAI 4. THE CIT 9, MUMBAI CITY 5. THE DR, A BENCH, ITAT, MUMBAI BY ORDER //TRUE COPY// ASSISTANT REGISTRAR ITAT, MUMBAI BENCHES, MUMBAI N.P.