ITO, Wd. 1(1), Aurangabad V. Zambad Construction House Pvt. Ltd., Aurangabad

ITA 27/PUN/2011

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 62734 (ITAT-PUNE)
• Duration Of Justice: 1 year(s) 4 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 14-05-2012
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 10-05-2012
• Assessment Year: 2004-2005
• Appeal Filed On: 06-01-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ANN KAPUTHAMA
• Assessee Lawyers: NILESH KHANDELWAL
• Keywords: Source of fund; Question of law

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH A, PUNE BEFORE SHRI SHAILENDRA KUMAR YADAV, JUDICIAL MEMBE R AND SHRI R.K.PANDA, ACCOUNTANT MEMBER ITA NO. 27/PN/2011 (ASSESSMENT YEAR: 2004-05) ITO, WARD 1(1), AURANGABAD .. APPELLANT VS. ZAMBAD CONSTRUCTION HOUSE PVT.LTD., .. RESPONDENT 2 ND FLOOR, TAPADIYA TERRACCES, AURANGABAD . PAN AAACZ0651M APPELLANT BY: MS.ANN KAPUTHA MA, DR RESPONDENT BY: MR.NILESH KHA NDELWAL DATE OF HEARING : 10/05/2012 DATE OF ORDER : 14 /05/2012 ORDER PER R.K.PANDA, AM : THIS APPEAL BY THE REVENUE IS DIRECTED AGAINST THE ORDER OF THE COMMISSIONER OF INCOME-TAX (APPEALS), AURANGABAD DA TED 25.10.2010 FOR THE ASSESSMENT YEAR 2004-05. 2. THE GROUNDS RAISED BY THE REVENUE, ARE AS UNDER: 1. THE LEARNED CIT(A), AURANGABAD ERRED IN RELYING UPO N THE DECISION IN THE CASE OF STELLER INVESTMENTS LIMITED 251 ITR 263 IN WHICH THE HONORABLE APEX COURT HAS NOT DECIDED T HE RATIO LAID DOWN NOR HAS ENTERED INTO THE QUESTION INVOLVED. IT WAS HELD THAT THE SAME ISSUED WAS QUESTION OF FACTS AND NOT THE QUESTION OF LAW, THEREFORE, THE SAME CANNOT BE A PRECEDENT. BECAUSE, THE PRECEDENCE BECOMES BINDING ONLY WHEN THE COURT DECIDES THE PARTICULAR QUESTION OF LAW OR LAYS DOWN THE RAT IO THROUGH CONSCIOUS ADJUDICATION. 2. SINCE THE HONORABLE SUPREME COURTS DECISION QUO TED IN THE CIT(A) ORDER DO NOT LAY ANY QUESTION ADJUDICATED NO R A PARTICULAR QUESTION OF LAW IS DEALT IN IT, THEREFORE, THE SAME CANNOT BE TREATED AS BINDING ONE AND CANNOT BE TAKEN AS A PRE CEDENCE IN THIS CASE. A RELIANCE IS ALSO PLACED ON THE DECIS ION OF HONORABLE CALCUTTA HIGH COURTS DECISION IN THE CASE OF HINDU STAN TRADING CO. LTD. (263 ITR 289). ITA NO. 27/PN/2011 (ASSESSMENT YEAR: 2004-05) ZAMBAD CONSTRUCTION HOUSE PVT.LTD., 3. FACTS OF THE CASE IN BRIEF ARE THAT DURING THE I MPUGNED ASSESSMENT YEAR THE ASSESSEE RECEIVED SHARE APPLICATION MONEY AND SHARE PREMIUM TO THE TUNE OF RS.1 CRORE. THE ASSESSEE FILED THE LIST OF PERSONS TO WHOM SHARES HAVE BEEN ALLOTTED ALONG WITH THE CONFIRMATIONS STATING THAT AMOUNTS HAVE BEEN RECEIVED BY BANK CHEQUES. THE ASSESSING OFFICER AS KED THE ASSESSEE TO PRODUCE THE SHAREHOLDERS WHO ARE NOT ASSESSED TO TA X AND WHO HAVE INVESTED IN SHARES FOR CROSS VERIFICATION. SINCE THE ASSES SEE DID NOT COMPLY TO THE NOTICE, THE ASSESSING OFFICER ASKED THE ASSESSEE TO SHOW CAUSE AS TO WHY THE AMOUNT RECEIVED TOWARDS SHARE APPLICATION FROM THE PERSONS SHOULD NOT BE TREATED AS INCOME FROM UNDISCLOSED SOURCE U/S.68. IN RESPONSE TO THE SAME THE ASSESSEE SUBMITTED AS UNDER : WITH ABOVE REFERENCE SUBJECT, YOU HAVE REQUESTED T O PRODUCE 19 CREDITORS, WHICH ARE NOT ASSESSED TO TAX AS MENTION ED IN OUR LIST OF CONFIRMATION. LIST OF PERSONS FILED ALONGWITH CON FIRMATIONS. WE WOULD LIKE TO INTIMATE YOU THAT ALL THE PERSONS HAVE APPL IED FOR SHARES. THE AMOUNT IS RECEIVED BY CHEQUE FROM THESE PERSONS. FURTHER PLEASE NOTE THAT OUR COMPANY HAS DULY ALLOTTED SHARES TO A LL THESE PERSONS. SIMILARLY CONFIRMATIONS OF ALL THESE PERSONS HAD AL READY FILED. WITHOUT PREJUDICE ABOVE WE WOULD LIKE TO STATE THAT SOME OF THE PERSONS ARE ALREADY ASSESSED TO TAX EARLIER ALSO. DOCUMENTARY EVIDENCES OF SOME AVAILABLE PERSONS ARE ENCLOSED HE REWITH. FURTHER OUR KNOWLEDGE AND INFORMATION, THE INFORMAT ION REGARDING THE CREDITWORTHINESS ARE ENCLOSED. SIMILARLY WE WOULD INFORM YOU THAT THE PERSONS ARE RESIDING VARIOUS REMOTE AREAS. SOME O F THESE ARE LADIES. SOME PERSONS ARE LIVING AT BIDKIN, JALNA AND ANWA E TC. IT IS DIFFICULT TO PRODUCE FOR VERIFICATION. COPIES OF RETURN OF INC OME FOR A.Y.2006-07 FILED HEREWITH. WE HAVE CLEARLY SUBMITTED INFORMATION CALLED FOR. HENCE OUR ADDITION TO SHARE CAPITAL IS JUSTIFIABLE. THE ADDITION TO S HARE CAPITAL AND RESERVE IS SUPPORTED WITH DOCUMENTARY EVIDENCE FILED DURING THE COURSE OF ASSESSMENT PROCEEDINGS. 4. HOWEVER, THE ASSESSING OFFICER WAS NOT SATISFIED WITH THE ABOVE EXPLANATION. FROM THE DETAILS FURNISHED BY THE ASS ESSEE GIVING SOURCES OF THE PERSONS THE ASSESSING OFFICER DISBELIEVED THE CAPA CITY OF 8 PERSONS WHO WERE NOT PRODUCED BEFORE HIM AND FROM WHOM AN AMOUNT OF RS.9,75,000 HAS BEEN RECEIVED . THE ASSESSING OFFICER THEREFORE, ADDED AN AMOUNT O F RS.9,75,000/- U/S.68 OF THE ACT. ITA NO. 27/PN/2011 (ASSESSMENT YEAR: 2004-05) ZAMBAD CONSTRUCTION HOUSE PVT.LTD., 5. BEFORE THE CIT(A) THE ASSESSEE FURNISHED THE COP IES OF CONFIRMATIONS, ACKNOWLEDGMENT OF RETURNS ALONGWITH ENCLOSURES FILE D WITH THE RETURNS SUCH AS COMPUTATION OF INCOME, BALANCE SHEETS ETC. OF THE 8 PERSONS, I.E., SMT. PURNIMA THOLE, SMT. CHHAYA BRAHMNE, SMT. SARLA NAWA LE, SMT. KAVERIBAI KELA, SHRI MAKARAND DESHPANDE, SMT. BINDU NAIR, SMT . SINDHU NAIR AND SMT. ARTEE GANGWAL, WHO HAD INTRODUCED SHARE CAPITAL AMO UNTING TO RS.9,75,000/-. ON VERIFICATION OF DETAILS FILED, THE LD. CIT(A) NO TICED THAT THE ABOVE MENTIONED SHAREHOLDERS HAVE DISCLOSED THEIR SHARE CAPITAL WIT H THE ABOVE MENTIONED COMPANY IN THEIR RETURNS OF INCOME FILED. THE ASS ESSEE HAD ALSO FILED LIST OF SHAREHOLDERS WITH ADDRESSES AND PAN NUMBERS, COPY O F FORM NO.2, I.E. RETURN OF ALLOTMENTS OF SHARES SUBMITTED WITH REGISTRAR OF COMPANIES, COPY OF MINUTES OF BOARD MEETING DATED 17/07/2003 APPROVING THE ISSUE OF SHARES AND COPY OF MEETING OF BOARD OF DIRECTORS DATED 12/ 09/2003 APPROVING ALLOTMENT OF EQUITY SHARES. 6. THE LD.CIT(A) ASKED THE ASSESSING OFFICER TO SUB MIT THE REMAND REPORT AFTER CONDUCTING FOLLOWING INQUIRIES. I) CALL FOR A COPY OF BALANCE SHEET AND COPY OF BA NK ACCOUNT IN CASE OF ALL THE SHAREHOLDERS. II) VERIFY THE SOURCE OF FUNDS IN THE HAND OF SHARE APPLICANTS IN ALL SHAREHOLDERS. III) CALL FOR THE COPY OF SHARE APPLICATION AND VER IFY THE MODE OF PAYMENT. IV) IN CASE OF SHAREHOLDERS WHERE ADDITIONS WAS MAD E, EXAMINE THEM FOR SOURCE OF FUND. OBTAIN THE EXTRACTS OF BANK AC COUNTS AND EXAMINE THE SAME. 7. THE ASSESSING OFFICER ISSUED SUMMONS TO 42 SHARE HOLDERS OUT WHICH 13 ATTENDED AND THEIR STATEMENTS WERE RECORDED BY HIM. THE ASSESSING OFFICER IN THE REMAND REPORT STATED THAT THE INVESTORS HAVE NO SUBSTANTIAL INCOME AND HAVE RAISED UN SECURED LOANS FOR MAKING THE INVESTM ENT AND HENCE CREDIT- WORTHINESS OF THE INVESTORS IS DOUBTFUL. THE LD.C IT(A) CONFRONTED THE SAME TO THE ASSESSEE WHO SUBMITTED THAT THE REPORT OF TH E ASSESSING OFFICER IS BASED ON ASSUMPTIONS AND NOT ON THE FACT OF EACH CA SE AS MOST OF THE SHAREHOLDERS HAVE FILED RETURNS OF INCOME DECLARING THE INVESTMENT IN THE SHARES OF THE ASSESSEE COMPANY. ITA NO. 27/PN/2011 (ASSESSMENT YEAR: 2004-05) ZAMBAD CONSTRUCTION HOUSE PVT.LTD., 8. BASED ON THE ARGUMENTS ADVANCED BY THE ASSESSEE THE LD.CIT(A) DELETED THE ADDITION MADE BY THE ASSESSING OFFICER. WHILE DOING SO HE OBSERVED THAT THE ASSESSEE HAS FILED LIST OF SHAREH OLDERS ALONGWITH THEIR ADDRESSES AND PAN. THE AMOUNT HAS BEEN RECEIVED BY ACCOUNT PAYEE CHEQUES. THE ASSESSEE HAS ALSO FILED THE CONFIRMATI ON LETTERS, COPIES OF ACKNOWLEDGMENT OF RETURNS AND ENCLOSURES WITH RETUR NS SHOWING INVESTMENT IN SHARES. FURTHER, 13 SHAREHOLDERS WHO ATTENDED IN RESPONSE TO THE SUMMONS ISSUED BY THE ASSESSING OFFICER HAVE ALSO CONFIRMED THAT THEY HAVE INVESTED IN THE SHARE CAPITAL OF THE ASSESSEE COMPANY. HE, TH EREFORE, WAS OF THE OPINION THAT THE ASSESSEE HAS PRIMA-FACIE DISCHARGED THE ON US CAST ON IT. RELYING ON THE DECISION OF THE HONBLE SUPREME COURT IN THE CA SE OF CIT VS. LOVELY EXPORTS (P) LTD. REPORTED IN 216 CTR 195 (2008) AND DECISION IN THE CASE OF CIT VS. STELLER INVESTMENT LTD. (2001) 115 TAXMAN 9 9 (SC), AND THE DECISION OF THE TRIBUNAL IN THE CASE OF SWARG CLOTHING PVT.L TD. IN ITA NO.259/PN/2007 DATED 31/10/2008 FOR THE ASSESSMENT YEAR 1999-00 AN D VARIOUS OTHER DECISIONS THE LD. CIT(A), DELETED THE ADDITION. A GGRIEVED WITH THE ORDER OF THE CIT(A), THE REVENUE IS IN APPEAL BEFORE US. 9. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS MADE BY BOTH THE PARTIES, PERUSED THE ORDERS OF THE AO AND THE CIT(A) AND THE PAPERBOOK FILED BEFORE US. WE HAVE ALSO CONSIDERED THE VARIOUS DECISIONS C ITED BEFORE US. ADMITTEDLY THE ASSESSEE HAS FILED THE LIST OF THE SHARE HOLDER S AND THEIR PAN. THE ASSESSEE HAS ALSO FILED CONFIRMATION LETTERS, COPIE S OF ACKNOWLEDGMENT OF RETURNS ALONGWITH ENCLOSURES SHOWING INVESTMENT IN SHARES OF THE ASSESSEE COMPANY. THE AMOUNT HAS BEEN RECEIVED BY ACCOUNT PAYEE CHEQUES. THIRTEEN SHARE HOLDERS HAVE ATTENDED THE OFFICE OF THE ASSESSING OFFICER AND MADE STATEMENT THAT THEY HAVE INVESTED IN THE SHARE CAPITAL OF THE COMPANY. 10. WE FIND IN THE CASE OF LOVELY EXPORTS (P) LTD. (SUPRA) THE HONBLE APEX COURT HAS HELD THAT IF THE SHARE APPLICATION MONEY IS RECEIVED BY THE ASSESSEE COMPANY FROM ALLEGED BOGUS SHAREHOLDERS, WHOSE NAME S/ DETAILS ARE GIVEN TO THE A.O., THEN THE DEPARTMENT IS FREE TO PROCEED, TO RE-OPEN THEIR INDIVIDUAL ASSESSMENTS IN ACCORDANCE WITH LAW, BUT IT CANNOT B E REGARDED AS UNDISCLOSED INCOME OF THE ASSESSEE COMPANY. THE ASSESSEE IN TH E INSTANT CASE HAS GIVEN THE DETAILS OF ALL THE ALLEGED SHARE HOLDERS WHO AR E ASSESSED TO INCOME TAX. THEREFORE, THE ORDER OF THE LD CIT(A) BEING IN CONS ONANCE WITH THE RATIO LAID DOWN BY THE HONBLE APEX COURT, THE SAME, IN OUR OP INION, DOES NOT SUFFER ITA NO. 27/PN/2011 (ASSESSMENT YEAR: 2004-05) ZAMBAD CONSTRUCTION HOUSE PVT.LTD., FROM ANY INFIRMITY. ACCORDINGLY, THE SAME IS UPHEL D AND THE GROUNDS RAISED BY THE REVENUE ARE DISMISSED. 11. IN THE RESULT, THE APPEAL OF THE REVENUE IS DI SMISSED. ORDER PRONOUNCED IN THE COURT ON 14 TH MAY, 2012. SD/- SD/- (SHAILENDRA KUMAR YADAV) ( R.K.PANDA) JUDICIAL MEMBER ACCOUNTANT MEMBER PUNE, DATED : 14 TH MAY, 2012 ASHWINI COPY TO:- 1) ASSESSEE 2) ITO, WARD 1(1), AURANGABAD 3) THE CIT(A), AURANGABAD 4) THE CIT CONCERNED 5) THE DEPARTMENTAL REPRESENTATIVE, A BENCH, I.T .A.T., PUNE. 6) GUARD FILE BY ORDER //TRUE COPY// ASST. REGISTRAR, I.T.A.T., PUNE