ITO ward 18 (2), V. U.P. Bone Mills (India) Ltd,

ITA 2813/DEL/2007

• Counselvise Citation: [2009] 114 COUNSELVISE.COM (IT) 8055 (ITAT-DELHI)
• Duration Of Justice: 2 year(s) 22 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-06-2009
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: H
• Next Hearing Date: 15-06-2009
• Assessment Year: 2003-2004
• Appeal Filed On: 04-06-2007
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: M L MEENA
• Assessee Lawyers: V K TULSIAN
• Keywords: Unexplained cash credit; Corroborative evidences; Set aside
• Section: 133(6); 205; 195; 251; 68

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH : H : NEW DELHI BEFORE SHRI G.E. VEERABHADRAPPA, HONBLE VICE PRESI DENT AND SHRI I.P. BANSAL, JUDICIAL MEMBER ITA NO. 2813/DEL/2007 ASSESSMENT YEAR : 2003-04 INCOME TAX OFFICER, WARD 18(2), NEW DELHI. VS. M/S U.P. BONE MILLS (INDIA) LTD., B-5, TAGORE MARKET, KIRTI NAGAR, NEW DELHI. PAN: AAACU4893N (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI M.L. MEENA, SR. DR RESPONDENT BY : SHRI V.K. TULSIAN, CA O R D E R PER I.P. BANSAL, JUDICIAL MEMBER: THIS IS AN APPEAL FILED BY THE REVENUE. IT IS DIR ECTED AGAINST THE ORDER OF THE CIT (A) DATED 26 TH MARCH, 2007 FOR ASSESSMENT YEAR 2003-04. GROUND NO .1 READ AS UNDER:- 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE, THE LD. CIT (A) HAS ERRED IN DELETING THE ADDITION OF RS.99 ,18,000/- MADE BY THE ASSESSING OFFICER U/S 68 OF THE INCOME TAX ACT, 1961 ON ACCOUNT OF SHARE APPLICATION MONEY. 2. DURING THE YEAR THE ASSESSEE COMPANY DID NOT CAR RY ANY COMMERCIAL PRODUCTION AND IT WAS AT THE STAGE OF PRE-COMMENCEM ENT OF BUSINESS ACTIVITIES. IT RECEIVED SHARE APPLICATION MONEY AMOUNTING TO RS .99,18,000/- FROM 45 PERSONS LISTED AT PAGE 2 AND 3 OF THE ORDER OF THE CIT (A) WHICH ARE ALL INDIVIDUALS AND THE APPLICATION MONEY VARIED BETWEEN RS.18,000/ - AND RS.3 LAC. IT IS ITA NO.2813/DEL/2007 2 RECORDED BY THE CIT (A) IN HIS ORDER THAT THE ASSES SEE HAD FILED THE DETAILS BEFORE THE AO. THE AO ALSO ISSUED NOTICES U/S 133(6) TO T HE SHARE APPLICANTS AND IN SOME OF THOSE CASES NOTICES CAME BACK WITH THE REMA RK LEFT. THE AO ALSO MADE INDEPENDENT INQUIRIES FROM THE BANK AND BY DEP UTING THE INSPECTOR IN THE FOLLOWING CASES:- 1. SHRI MURARI LAL 2. SMT. SUDESH KUMARI 3. SHRI VIJAY SINGH 4. SHRI MUKESH KUMAR 5. SHRI VED PRAKASH 6. SHRI DAYA KISHAN 7. SHRI MADAN SINGH 8. SHRI RAJESH KUMAR 3. OBSERVING THAT THESE PERSONS WERE NOT FOUND AT T HE ADDRESS GIVEN, THE AO CONCLUDED THAT SHARE APPLICATION MONEY RECEIVED BY THE ASSESSEE FROM ALL THE SHAREHOLDERS WAS UNDISCLOSED INCOME OF THE ASSESSEE AND HE ADDED THE SAME U/S 68 OF THE INCOME-TAX ACT. 4. BEFORE LD. CIT (A) IT WAS SUBMITTED THAT THE AO HIMSELF HAD OBTAINED COPIES OF BANK STATEMENT OF SOME OF THE SHARE APPLI CANTS. THOUGH THE COPIES OF BANK ACCOUNTS AS SUBMITTED BY SHARE APPLICANTS TO T HE ASSESSEE COMPANY DID NOT MATCH WITH THE BANK ENTRIES OF BANK STATEMENTS OBTAINED BY THE AO, BUT IT WAS VERY MUCH CLEAR FROM THE BANK STATEMENT AS OBT AINED BY THE AO DIRECTLY THAT THERE IS A DEBIT ENTRY IN SUPPORT OF DEMAND DR AFT PURCHASED BY THE SHARE APPLICANTS. IT WAS SUBMITTED THAT ADDITION HAS BEE N MADE ONLY ON THE BASIS OF PRESUMPTIONS WITHOUT MAKING ANY INVESTIGATION. THE ADDITION HAS BEEN MADE IN A SUMMARY MANNER BY OVERLOOKING THE FACT THAT INQUI RIES MADE SUPPORTS THE VERSION OF THE ASSESSEE COMPANY. THE DISCREPANCIES FOUND BY THE AO DID NOT HAVE ANY RELEVANCE TO DECIDE THE PRESENT ISSUE AND SHARE APPLICANTS HAVE NOT ITA NO.2813/DEL/2007 3 BEEN SHOWN TO BE BOGUS. IT WAS SUBMITTED THAT DEPO SITORS ARE GENUINE, IDENTIFIABLE, CREDIT WORTHY AND THE AMOUNTS WERE DE POSITED BY THEM WITH THE ASSESSEE AS SHARE APPLICATION MONEY EITHER BY ACCOU NT PAYEE DRAFTS OR CHEQUES. IT WAS SUBMITTED THAT ALL THE SHARE APPLICANTS ARE REGULARLY ASSESSED TO INCOME TAX FOR WHICH THE ASSESSEE HAS FILED COPIES OF INCO ME-TAX RETURN FOR ASSESSMENT YEARS 2003-04 AND 2005-06. THE SHARE APPLICANTS HA VE ALSO FILED AFFIDAVITS IN SUPPORT OF THESE DEPOSITS WHICH HAVE BEEN TOTALLY O VERLOOKED BY THE AO. THUS, IT WAS SUBMITTED THAT THE ADDITION IS LIABLE TO BE DEL ETED. REFERENCE WAS MADE TO SEVERAL DECISIONS TO CONTEND THAT IN VIEW OF EVIDEN CE FILED BY THE ASSESSEE, NO ADDITION COULD BE MADE U/S 68 OF THE ACT. 5. AFTER CONSIDERING THESE SUBMISSIONS, LD. CIT (A) KEEPING IN VIEW THE EVIDENCE FILED BY THE ASSESSEE WITH RESPECT TO ALL THE SHARE APPLICANTS HAS DELETED THE ADDITION FOLLOWING THE DECISION OF HON BLE DELHI HIGH COURT IN THE CASE OF CIT VS. SOPHIA FINANCE LTD. 205 ITR 98 AND ALSO THE DECISION OF HONBLE ALLAHABAD HIGH COURT IN THE CASE OF INDIA RICE MILL S VS. CIT 281 ITR 508 AND SURENDRA MAHAN SETH VS. CIT 221 ITR 239 TO SUPPORT THE CONCLUSION THAT WHERE THE ASSESSEE HAS NOT STARTED BUSINESS, SHARE APPLIC ATION MONEY COULD NOT BE ASSESSED AS INCOME OF THE ASSESSEE. IT IS AGAINST THESE FINDINGS OF THE LD. CIT (A) THE DEPARTMENT IS AGGRIEVED, HENCE, IN APPEAL. 6. REFERRING TO ASSESSMENT ORDER IT WAS PLEADED BY LD. DR THAT THE ASSESSEE DID NOT PRODUCE SUFFICIENT EVIDENCE TO PRO VE THE GENUINENESS OF SHARE APPLICATION MONEY RECEIVED BY IT. THE ASSESSEE AL SO DID NOT PRODUCE PERSONS WHO HAD PLACED SHARE APPLICATION MONEY WITH THE ASS ESSEE AND, THUS, THE AO WAS RIGHT IN ADDING THE SAME TO THE INCOME OF THE A SSESSEE. HE CONTENDED THAT THE ASSESSEE COULD NOT ESTABLISH THE IDENTITY OF TH E SHARE APPLICANTS AND THE CIT (A) HAS WRONGLY DELETED THE ADDITION. THE ORDER OF THE AO SHOULD BE RESTORED AND THAT OF THE CIT (A) SHOULD BE SET ASIDE. ITA NO.2813/DEL/2007 4 7. ON THE OTHER HAND, IT WAS SUBMITTED BY LD. AR TH AT IT WAS SUBMITTED TO AO THAT ALL THE PARTIES WHO HAD APPLIED FOR SHARES OF ASSESSEE COMPANY WERE ASSESSED TO TAX, THEIR ASSESSMENT DETAILS WERE OBTA INED AND PLACED ON RECORD DURING THE ASSESSMENT PROCEEDINGS. THE AO ALSO MAD E INVESTIGATION BY ISSUE OF LETTERS U/S 133(6) AND ALSO MADE INQUIRIES THROUGH INSPECTOR. THE BANK ACCOUNTS COLLECTED BY THE AO AS WELL AS SUBMITTED BY THE AS SESSEE OF THE SHARE APPLICANTS DID REVEAL THAT THE SHARE APPLICATION MO NEY WAS ADVANCED THROUGH THEIR BANK ACCOUNT. IT WAS SUBMITTED THAT THE ASSE SSEE HAS ALREADY ALLOTTED THE SHARES TO ALL THE SHARE APPLICANTS UNDER PROPER INT IMATION TO REGISTRAR OF COMPANIES AND SUPPORTING EVIDENCE WAS ALSO FILED. THUS, IT WAS SUBMITTED THAT ADDITION HAS RIGHTLY BEEN DELETED BY THE CIT (A). LD. AR HAS ALSO FILED WRITTEN SUBMISSIONS IN WHICH IT HAS BEEN STATED THAT THE SH ARES WERE ALLOTTED TO THE APPLICANTS AND FORM NO.2 WAS SUBMITTED TO REGISTRAR OF COMPANIES AS MENTIONED IN PAPER BOOK PAGE NOS.23 AND 24. THE DE TAILS OF SHARE APPLICATION MONEY WITH CONFIRMATION AS WELL AS THE BANK STATEME NT, COPY OF INCOME-TAX RETURN OF THE SHARE APPLICANTS/ AFFIDAVITS ARE FILE D AT PAGES 165 TO 362 OF THE PAPER BOOK. THUS, IT WAS PLEADED THAT THE ASSESSEE HAS NOT ONLY PROVED IDENTITY OF SHARE APPLICANTS, BUT ALSO PRODUCED THE OTHER DE TAILS. IT IS SUBMITTED THAT THE AO HAS NOT ALLEGED ANYWHERE THAT THE SHARE APPLICAT ION MONEY HAS FLOWN FROM THE ASESSEES OWN MONEY. REFERENCE IS MADE TO THE FOLLOWING DECISIONS TO CONTEND THAT THE CIT (A) WAS RIGHT IN DELETING THE ADDITION:- I) JAYA SECURITIES LTD. (2008) 166 TAXMAN 7 (ALL) I N WHICH FOLLOWING THE APEX COURT DECISION IN THE CASE OF ST ELLAR INVESTMENTS 251 ITR 263 IT WAS HELD THAT NO ADDITION U/S 68 COULD B E MADE IN THE HANDS OF THE ASSESSEE COMPANY. II) UMA POLYMERS 100 ITD 1 (JD) (TM) AND CIT VS. SH REE BARKHA SYNTHETICS LTD. (RAJ) TO CONTEND THAT WHERE EXISTE NCE OF SHAREHOLDER HAS BEEN PROVED, THE ADDITION CANNOT BE MADE U/S 68 IN RESPECT OF SHARE APPLICATION MONEY RECEIVED BY THE ASSESSEE COMPANY. ITA NO.2813/DEL/2007 5 III) HONBLE DELHI HIGH COURT DECISION IN THE CASE OF STELLAR INVESTMENTS 251 ITR 263 TO CONTEND THAT EVEN IF THE SUBSCRIBER OF SHARE CAPITAL IS NOT GENUINE, SHARE CAPITAL CANNOT BE REG ARDED AS UNDISCLOSED INCOME. IV) THE DECISION OF HONBLE SUPREME COURT IN THE CA SE OF LOVELY EXPORTS PVT. LTD. 216 CTR 195 TO CONTEND THAT IF TH E NAME OF SHARE APPLICANT IS AVAILABLE, THEN AO CAN PROCEED FOR INQ UIRY IN RESPECT OF THAT INDIVIDUAL, BUT ADDITION COULD NOT BE MADE IN THE H ANDS OF THE COMPANY. 8. IT IS SUBMITTED THAT ALL THE NECESSARY DETAILS W ERE FILED WHICH ARE AVAILABLE IN THE PAPER BOOK. THE AO DID NOT ESTABLISH THAT S HARE HOLDINGS ARE FICTITIOUS. THEREFORE, KEEPING IN VIEW THE DECISION OF HONBLE DELHI HIGH COURT IN THE CASE OF DIVINE LEASING 299 ITR 268 THE ADDITION CANNOT BE U PHELD. THUS, IT WAS SUBMITTED BY LD. AR THAT ORDER OF THE CIT (A) ON TH IS ISSUE SHOULD BE UPHELD. 9. WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSIO NS IN THE LIGHT OF THE MATERIAL PLACED BEFORE US. THE NECESSARY DETAILS W ERE FILED BY THE ASSESSEE WITH THE AO TO SHOW THE IDENTITY OF THE PERSON WHO HAD A PPLIED FOR THE SHARES. THE SHARES HAVE ALSO BEEN ALLOTTED TO RESPECTIVE PERSON S IN RESPECT OF WHICH INTIMATION WAS GIVEN TO REGISTRAR OF COMPANIES AND NECESSARY EVIDENCE HAS ALSO BEEN PLACED ON RECORD IN THE PAPER BOOK WHICH FOUND PLACE AT PAGE 23 AND 24 OF THE PAPER BOOK. THE ASSESSEE HAD ALSO PLACED ON RE CORD THE EVIDENCE AS WELL AS COPY OF INCOME-TAX RETURNS OF THE SHARE APPLICAN TS. KEEPING IN VIEW ALL THESE EVIDENCES IT CANNOT BE HELD THAT THE ASSESSEE DID N OT ESTABLISH THE IDENTITY OF THE SHARE APPLICANTS. IF IT IS SO, THEN THE LAW AS PRO NOUNCED BY THE HONBLE SUPREME COURT IN THE CASE OF CIT VS. LOVELY EXPORTS PVT. LT D. (SUPRA) IS CLEAR THAT IF THE SHARE APPLICATION MONEY IS RECEIVED BY THE ASSESSEE COMPANY FROM ALLEGED BOGUS SHAREHOLDERS WHOSE NAMES ARE GIVEN TO THE AO, THEN THE DEPARTMENT IS FREE TO PROCEED TO REOPEN THEIR INDIVIDUAL ASSESSME NTS IN ACCORDANCE WITH LAW, BUT THE SAME CANNOT BE REGARDED AS UNDISCLOSED INCO ME OF THE ASSESSEE. IN THIS ITA NO.2813/DEL/2007 6 VIEW OF THE SITUATION, WE FIND NO INFIRMITY IN THE ORDER OF THE CIT (A) VIDE WHICH ADDITION MADE ON ACCOUNT OF SHARE APPLICATION MONEY HAS BEEN DELETED. 10. GROUND NO.2 READS AS UNDER:- 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE C ASE, THE LD. CIT (APPEALS) HAS ERRED IN DELETING THE ADDITION OF RS. 3,10,000/- MADE BY THE A.O. BY BEING UNEXPLAINED SUNDRY CREDITORS U /S 68 OF THE IT ACT. 11. IT IS MENTIONED BY THE AO IN THE ASSESSMENT ORD ER THAT THE ASSESSEE DID NOT FURNISH CONFIRMATION OF RS.3,10,000/- OF THE C REDIT OUTSTANDING IN THE NAME OF M/S AVON BRICK FIELD COMPANY, LANDHARA, DISTT. HARD WAR (UP). THE NOTICE ISSUED BY THE AO TO THE SAID COMPANY RETURNED BACK WITH THE REMARKS OF THE POSTAL AUTHORITY THAT THE ADDRESS IS NOT CORRECT. THE SAME WAS TREATED TO BE UNEXPLAINED CASH CREDIT IN THE BOOKS OF THE ASSESSE E. LD. CIT (A) HAS DEALT WITH THIS ISSUE IN PARA 3 TO 3.3. IT WAS SUBMITTED THA T THE SAID AMOUNT WAS FOR SUPPLY OF BRICKS FROM AVON BRICK FIELD COMPANY FOR WHICH T HE PAYMENT WAS MADE IN SUBSEQUENT YEAR AND, THEREFORE, NO DISALLOWANCE COU LD BE MADE. AFTER CONSIDERING THESE SUBMISSIONS, THE CIT (A) HAS HELD THAT SECTION 68 WAS NOT APPLICABLE AS THE SAME PERTAINS TO THE SUM CREDITED IN THE BOOKS OF ACCOUNT OF THE ASSESSEE AND, IN THE PRESENT CASE, THE CREDIT I S BECAUSE OF SUPPLY OF GOODS BY THIRD PARTY. THEREFORE, THE CIT (A) HAS DELETED THE ADDITION AGAINST WHICH THE DEPARTMENT IS IN APPEAL. 12. THE LD. DR RELYING ON THE ASSESSMENT ORDER PLE ADED THAT ADDITION WAS RIGHTLY MADE BY THE AO AND CIT (A) HAS WRONGLY DELE TED THE SAME. 13. AS AGAINST THAT LD. AR PLEADED THAT THE ASSESSE E COMPANY WAS IN THE STAGE OF SET UP OF ITS BUSINESS AND FOR CONSTRUCTIO N PURPOSES BRICKS WERE PURCHASED AGAINST WHICH THE PAYMENT WAS OUTSTANDING . THE BILL WAS PRODUCED AND PAYMENT WAS MADE IN THE SUBSEQUENT YEAR AND, TH US, THE CIT (A) WAS RIGHT IN DELETING THE ADDITION. ITA NO.2813/DEL/2007 7 14. WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSI ONS IN THE LIGHT OF MATERIAL PLACED BEFORE US. THE FACTS STATED BY THE ASSESSEE BEFORE THE CIT (A) THAT THE CREDIT PERTAINS TO PURCHASE OF BRICKS IS NOT CONTRO VERTED BY THE REVENUE. IF THAT IS SO, WE FIND NO INFIRMITY IN THE ORDER OF THE CIT (A ) VIDE WHICH THE PRESENT ADDITION HAS BEEN DELETED. WE DECLINE TO INTERFERE. THIS G ROUND OF THE REVENUE IS DISMISSED. 15. IN THE RESULT, THE APPEAL FILED BY THE REVENUE IS DISMISSED. . 16. THE ORDER PRONOUNCED IN THE OPEN COURT ON 26.06 .2009. [G.E. VEERABHADRAPPA] [I.P. BANSAL] VICE PRESIDENT JUDICIAL MEMBER DATED, 26.06. 2009. DK COPY FORWARDED TO: - 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR, ITAT TRUE COPY BY ORDER, DEPUTY REGISTRAR, ITAT, DELHI BENCHES