ACIT, Lucknow V. M/s. Kansal Pumps (P) Ltd., Lucknow

ITA 29/LKW/2011

• Counselvise Citation: [2011] 134 COUNSELVISE.COM (IT) 9089 (ITAT-LUCKNOW)
• Duration Of Justice: 1 month(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 17-03-2011
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 17-03-2011
• Assessment Year: 2003-2004
• Appeal Filed On: 20-01-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: P K B AJAJ
• Keywords: Question of law
• Section: 147; 68

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, B - BENCH, LUCKNOW. BEFORE SHRI H.L.KARWA, HON'BLE VICE PRESIDENT AND SHRI N.K.SAINI, ACCOUNTANT MEMBER I.T.A.NO.29 (LKW.)/2011 A.Y. : 2003-04 THE ACIT, RANGE -IV, VS. M/S. KANSAL PUMPS (P.)LT D., LUCKNOW. FLAT NO.A-1,K.K.APARTMENT, 7, DALIBAGH, LUCKNOW. . PAN AAACK9031E (APPELLANT) (RESPONDENT) C.O.NO.3 (LKW.)/2011 (IN I.T.A.NO.29(LKW.)/2011) A.Y. : 2003-04 M/S. KANSAL PUMPS (P.) LTD., VS. THE ACIT, RANGE-IV , LUCKNOW. LUCKNOW. PAN AACK9031E (CROSS OBJECTOR) (RESPONDENT) REVENUE BY : SHRI P.K.BAJAJ, SR.D.R. ASSESSEE BY : SHRI RAKESH GARG, ADVOCATE O R D E R PER H.L.KARWA, VICE PRESIDENT THE APPEAL FILED BY THE REVENUE AND THE CROSS OBJE CTION BY THE ASSESSEE ARE DIRECTED AGAINST THE ORDER OF THE LD.C IT(A), MEERUT DATED 26.8.2010 RELATING TO THE ASSESSMENT YEAR 2003-04. 2. IN THIS APPEAL, THE REVENUE HAS RAISED THE FOLL OWING GROUNDS: 1. UNDER THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) 2 HAS ERRED IN DISMISSING THE APPEAL OF THE DEPARTME NT WITHOUT APPRECIATING THE FACTS OF THE CASE. 2. UNDER THE FACTS AND CIRCUMSTANCES OF THE CASE, T HE LD. CIT(A) HAS ERRED ON FACTS IN DELETING ADDITION ON SHARE CA PITAL CREDITORS OF RS.8,90,000/- EVEN THOUGH THE ASSESSEE HAD FAILED TO PROVE THE CREDIT WORTHINESS OF THE SUBSCRIBERS A ND THE GENUINENESS OF THE TRANSACTION. 3. UNDER THE FACTS AND CIRCUMSTANCES OF THE CASE, T HE LD. CIT(A) HAS APPLIED THE DECISION OF THE HON'BLE SUPREME COU RT IN THE CASE OF CIT VS. LOVELY EXPORTS (P) LTD. (2008), 21 6 CTR (SC) 195 MECHANICALLY. HE FAILED TO APPRECIATE THAT THE ASSESSEE COMPANY IS NOT A LISTED COMPANY IN WHICH THE PUBLIC ARE SUBSTANTIALLY INTERESTED. SINCE IT IS A CLOSELY HEL D PRIVATE COMPANY, MERELY ESTABLISHING THE IDENTITY OF THE SU BSCRIBERS WAS NOT SUFFICIENT. THEIR CREDIT WORTHINESS AND GEN UINENESS OF TRANSACTIONS WAS ALSO TO BE ESTABLISHED. HE HAS FAI LED TO APPRECIATE AND APPLY THE DECISION OF THE HON'BLE HI GH COURT DELHI IN THE CASE OF RAJEEV TANDON VS. ACIT, CIRCLE 31 DELHI, 2007 -(IT3 )-GJX-0364-DEL. 4. APPELLANT CRAVES LEAVE TO ADD OR AMEND ANYONE OR MORE OF THE GROUNDS OF APPEAL, AS STATED ABOVE, AS AND WHEN NEE D OF DOING SO ARISES WITH THE PRIOR PERMISSION OF THE HON'BLE COURT. 3. IN C.O.NO.3(LKW)/2011,THE ASSESSEE HAS TAKEN THE FOLLOWING GROUND: 1. BECAUSE THE LEARNED CIT(APPEALS) HAS ERRED IN LAW AND FACTS IN HOLDING THAT THE PROCEEDINGS U/S 147 WERE RIGHT LY INITIATED. 4. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE FI LED ITS RETURN SHOWING INCOME AT RS.1,83,070 ON 1.12.2003. ASSESSMENT WAS COMPLETED UNDER SECTION 147/143(3) OF THE INCOME-TAX ACT, 1961 (IN SHORT THE ACT) ON 30.12.2008 ON AN INCOME OF RS.11,67,332. ONE OF THE MAJOR ADDITION OF RS.8,90,000 WAS MADE ON ACCOUNT OF BOGUS SHARE CAPI TAL. FROM THE BALANCE 3 SHEET FILED BY THE ASSESSEE, THE AO NOTICED THAT DU RING THE YEAR, THE ASSESSEE-COMPANY HAS SHOWN INCREASE IN SHARE CAPITA L TO THE TUNE OF RS.10,40,000. FROM THE DETAILS CALLED FOR IN THIS R ESPECT, THE AO NOTICED THAT DURING THE YEAR THE ASSESSEE HAS CLAIMED TO HAVE TA KEN SHARE CAPITAL FROM THE FOLLOWING PERSONS: S.NO. NAME OF THE CLAIMED SHARE CAPITAL CREDITOR AMOUNT OF SHARE CAPITAL CLAIMED 1 SH.PANKAJ KANSAL RS.4,23,100 2 SH.HIMANSHU KANSAL RS.1,76,500 3 SMT.ANITA KANSAL RS.1,50,000 4 SMT.ANU KANSAL RS.1,40,000 5 SMT.CHARU VARSHNEY RS.1,50,000 ALL THE ABOVE SHARE CAPITAL CREDITORS ARE STATED T O BE DIRECTORS OF THE ASSESSEE-COMPANY. THE AO VIDE QUESTIONNAIRE DATED 4.11.2008 REQUIRED THE ASSESSEE TO FILE CONFIRMATIONS FROM THE AFORESA ID CAPITAL CREDITORS. THE AO ALSO REQUIRED THE ASSESSEE TO EXPLAIN SOURCES OF SHARE CAPITAL GIVEN BY THE SAID PERSONS WITH SUPPORTING DOCUMENTARY EVIDEN CES AND TO PROVE THE IDENTITY, GENUINENESS AND CREDITWORTHINESS OF THE SAID SHARE CAPITAL CREDITORS. THE AO ALSO REQUIRED THE ASSESSEE TO FIL E COPIES OF BANK STATEMENTS OF THE ABOVE CLAIMED SHARE CAPITAL CRE DITORS AND THEIR COPIES OF RETURNS WITH STATEMENTS OF INCOME FOR THE YEAR UND ER CONSIDERATION. HOWEVER, THE REQUISITE CONFIRMATIONS AND OTHER DO CUMENTS WERE NOT FILED ON THE DATE OF HEARING I.E. 10.11.2008 HENCE ON 10 .11.2008, THE AO AGAIN ASKED THE ASSESSEE TO FILE COPIES OF BANK STATEMENT S OF THE ABOVE CLAIMED SHARE CAPITAL CREDITORS AND THEIR COPIES OF RETURNS WITH STATEMENTS OF INCOME FOR THE YEAR UNDER CONSIDERATION AND TO PROVE THEI R IDENTITY, GENUINENESS AND CREDITWORTHINESS. ACCORDING TO THE AO, IN RESPONSE ON 27.11.2008, ONLY CONFIRMATIONS FROM THE ABOVE MENTIONED PERSONS WE RE FILED BUT IN THE FILED 4 CONFIRMATIONS, THE MODE OF GIVING CLAIMED SHARE AP PLICATION OR CHEQUE NUMBER ETC. OR DATES OF GIVING CLAIMED SHARE APPLI CATION WERE NOT MENTIONED NOR ANY SUPPORTING DOCUMENT WAS ENCLOSED /FILED. HENCE, THE AO AFFORDED ONE MORE OPPORTUNITY TO THE ASSESSEE FOR F ILING SUPPORTING DOCUMENTARY EVIDENCE TO PROVE THE IDENTITY, GENUINE NESS AND CREDITWORTHINESS OF THE SAID PERSONS AND TO EXPLAIN THE MODE AND DATE OF TAKING THE SHARE APPLICATION MONEY AND THE CASE WA S ADJOURNED TO 8.12.2008,BUT ON THE FIXED DATE, AGAIN, NO DOCUMENT S/DETAILS/EXPLANATION WERE FILED IN THIS RESPECT. HENCE, THE AO GAVE ONE MORE OPPORTUNITY ON 8.12.2008 TO FILE SUPPORTING DOCUMENTARY EVIDENCE T O PROVE THE IDENTITY, GENUINENESS AND CREDITWORTHINESS OF THE SAID PERSO NS AND TO EXPLAIN THE MODE AND DATE OF TAKING THE SHARE APPLICATION MONE Y AND THE CASE WAS ADJOURNED TO 22.12.2008 BUT AGAIN THERE WAS NO COM PLIANCE ON THE PART OF THE ASSESSEE IN THIS REGARD. HENCE, ON 22.12.2008, THE AO GAVE FINAL OPPORTUNITY TO THE ASSESSEE AND ALSO ASKED THE ASSE SSEE TO PRODUCE ALL THE FIVE CLAIMED SHARE CAPITAL CREDITORS FOR THEIR DE POSITION AND THE CASE WAS FIXED FOR 26.12.2008. HOWEVER, ON THE FIXED DATE, N ONE OF THE CLAIMED SHARE CAPITAL CREDITOR WAS PRODUCED AND COPY OF BANK STA TEMENT AND COPY OF ACKNOWLEDGEMENT OF RETURN AND BALANCE SHEET IN THE CASE OF SMT.CHARU VARSHNEY ONLY WAS FILED AND THESE DOCUMENTS WERE NO T FILED IN THE CASE OF OTHER FOUR PERSONS. THE AO ON 26.12.2008, ASKED TH E ASSESSEE TO EXPLAIN AND SHOW CAUSE AS TO WHY SHARE APPLICATION MONEY S HOWN IN THE NAMES OF SHRI PANKAJ KANSAL, SHRI HIMANSHU KANSAL, ANITA KA NSAL AND ANU KANSAL SHOULD NOT BE TREATED AS ASSESSEES OWN MONEY EARN ED FROM UNEXPLAINED SOURCES AND INCORPORATED IN THE COMPANY IN THE NAM E OF ABOVE PERSONS AS SHARE APPLICATION MONEY FOR ITS FAILURE TO PROVE T HE IDENTITY, GENUINENESS AND CREDITWORTHINESS OF THE SAID PERSONS THOUGH MAN Y OPPORTUNITIES WERE 5 GIVEN TO THE ASSESSEE IN THIS RESPECT AND THE CASE WAS FINALLY ADJOURNED TO 30.12.2008,BUT ON THIS DATE ALSO, NO EXPLANATION OR DOCUMENTS WERE FILED BY THE ASSESSEE. THE AO CONCLUDED THAT THE ASSESSEE FA ILED TO PROVE THE IDENTITY, GENUINENESS AND CREDITWORTHINESS OF THE SAID SHARE CAPITAL CREDITORS CLAIMED BY IT IN THE NAME OF SHRI PANKAJ KANSAL, SHRI HIMA NSHU KANSAL, ANITA KANSAL AND ANU KANSAL AND THE AO, THEREFORE, ADDED THE SUMS OF RS.,4,23,10, RS.1,76,500, RS.1,50,000 AND RS.1,40, 000 SHOWN IN THE NAME OF ABOVE PERSONS RESPECTIVELY TOTALLING TO RS.8,90 ,000 AS SHARE CAPITAL AND TREATED THE SAME AS ASSESSEES OWN MONEY EARNED FRO M UNDISCLOSED SOURCES AND ADDED THE SAME UNDER SECTION 68 OF THE ACT. 5. AGGRIEVED BY THE ORDER OF THE AO, THE ASSESSEE C ARRIED THE MATTER IN APPEAL BEFORE THE LD.CIT(A). BEFORE THE LD.CIT(A), THE ASSESSEE TOOK THE FOLLOWING LINE OF ARGUMENTS: (I) THAT THE AO HAS MADE ADDITION OF RS.8,90,000 O N ACCOUNT OF DEPOSIT OF SHARE CAPITAL MONEY BY THE FOLLOWING SHA RE HOLDERS/DIRECTORS OF THE ASSESSEE-COMPANY: 1 SHRI PANKAJ KANSAL RS.4,23,100 (DIRECTOR) 2 SHRI HIMANSHU KANSAL RS.1,76,500 (DIRECTOR) 3 SMT.ANITA KANSAL RS.1,50,000 4 SMT. ANU KANSAL RS.1,40,400 TOTAL RS.8,90 ,000 (II) THAT THE ASSESSEE HAS ALSO FILED A CHART SHOWING TH E DATE , THE AMOUNT AND DATES OF ALLOTMENT OF SHARES TO THE SHAR E HOLDERS: DATE OF ALLOTMENT NAME OF ALLOTTEE EQUITY SHARES AMOUNT (RS.) 27.3.2003 PANKAJ KANSAL 4231 423100 27.3.2003 HIMANSHU KANSAL 1765 176500 27.3.2003 ANITA KANSAL 1500 150000 27.3.2003 ANJU KANSAL 1404 140400 27.3.2003 CHARU KANSAL 1500 150000 6 (III) THAT ALL THE AFORESAID SHAREHOLDERS/DIRECTORS ARE A SSESSED TO TAX. (IV) THAT DURING THE COURSE OF ASSESSMENT PROCEEDINGS, C ONFIRMATORY LETTERS OF ALL THE SHAREHOLDERS/DIRECTORS CONFIRM ING THE AFORESAID DEPOSITS WERE SUBMITTED. CONFIRMATORY LE TTERS ALSO CONTAINED THEIR COMPLETE ADDRESS PERMANENT ACCOUNT NUMBERS AND RANGES AND WARDS WHERE THEY ARE ASSESSED. (V) THAT ALL THE AFORESAID SHAREHOLDERS/DIRECTORS ARE A SSESSED AT MEERUT WHERE ASSESSEES ASSESSMENT WAS MADE. (VI) THAT INCOME-TAX RETURNS OF ALL THE DEPOSITORS WERE FURNISHED TO THE AO IN CONFIRMATION OF WHICH A COPY OF ASSESSEE S EXPLANATION WAS SUBMITTED BEFORE THE AO DURING THE COURSE OF ASSESSMENT PROCEEDINGS. (VII) AFFIDAVITS OF ALL THE SHAREHOLDERS CONFIRMING THE AFORESAID PAYMENTS WERE ALSO SUBMITTED. IN SUPPORT OF THE ABOVE, THE ASSESSEE RELIED ON THE FOLLOWING DECISIONS: (1) CIT VS. LOVELY EXPORTS (P.)LTD. (2008) 216 CTR (SC) 195, (2) JAYA SECURITIES LTD. VS. CIT(2008) 166 TAXMAN 7(ALLD.), (3) CIT VS. AKJ GRANITES (P.) LTD. (2008) 301 ITR 298(RAJ.), 7 (4) CIT VS. VALUE CAPITAL SERVICES P. LTD. (2008) 3 07 ITR 334(DEL.), (5) CIT VS. STELLER INVESTMENT CO. LTD. (1991)192 I TR 287 (DEL.), (6) CIT VS. STELLER INVESTMENT CO. LTD. (2000) 165 CTR 287 : (2001) 251 ITR 263 (SC), (7) CIT VS. FIRST POINT FINANCE LTD. (2006) 286 ITR 477(RAJ.), (8) CIT VS. ELECTRO POLYCHEM LTD.(2007) 294 ITR 661(MAD.). (A) THAT IN THE FOLLOWING JUDGMENTS IT HAS BEEN HE LD THAT IF THE EXISTENCE OF THE SHAREHOLDER HAS BEEN PROVED, NO AD DITION CAN BE MADE IN THE HANDS OF THE COMPANY IN WHICH DEPOSI T IS MADE. (1) SHOWVEEN FINANCE AND INVESTMENT PVT. LTD. LUCKN OW VS. DY.CIT,2005 (6)MTC 951 (ITAT, LUCKNOW), (2) JCIT J(OSD) VS. YUVRAJ CONSTRUCTION AND LEASING INDIA LTD.,2007 [10] MTC 271 (ITAT, LKO), (3) UMA POLYMERS (P.)LTD. VS. DCIT (2006) 100 ITD 1(JODH.)(T.M.), (4) INDRADHAN AGRO PRODUCTS LTD. VS.DCIT (2004) 89 TTJ (DEL.) 1958, (5) DCIT VS. ARJUN COLD STORAGE AND GEN. MILLS LTD. , 2009 (13) MTC 1001 (ITAT, DEL.), (6) CIT VS. FIRST POINT FINANCE LTD., (2006) 286 IT R 477(RAJ.), (7) BARKHA SYNTHETICS LTD. VS. ACIT (2005) 197CTR ( RAJ.) 432, 8 (B) THAT THE ASSESSEE HAS ALREADY FURNISHED CONFIR MATORY LETTERS OF ALL THE CREDITORS ALONGWITH THEIR PANS, PLACE OF A SSESSMENT ETC. THUS, THE ASSESSEE HAS DISCHARGED THE ONUS THAT HA D LAID UPON IT. IN THIS REGARD, RELIANCE WAS PLACED ON THE FOLL OWING JUDGMENTS. (1) ARAVALI TRADING CO. VS. ITO (2010) 187 TAXMAN 338(RAJ.), (2) MURLIDHAR LAHORIMAL VS.CIT, (2006) 280 ITR 512 (GUJARAT), (C) THAT IN NUMBER OF JUDGMENTS IT HAS BEEN HELD TH AT IN THE CASES COVERED UNDER SECTION 68, THE ASSESSEE IS NOT REQUI RED TO PROVE THE SOURCE OF SOURCE. IN VIEW OF THE ABOVE, THE ASSESSEE SUBMITTED BEFOR E THE LD.CIT(A) THAT THE ADDITION OF RS.8,90,000 MAY BE DELETED. 6. THE LD.CIT(A) DELETED THE ADDITION RELYING ON TH E RATIO LAID DOWN BY THE HON'BLE SUPREME COURT IN THE CASE OF CIT VS. LOVELY EXPORTS(P.) LTD.(2008) 216 CTR (S.C.) 195. THE DECISIONS AND TH E REASONS OF THE LD.CIT(A) READ AS UNDER : I HAVE GONE THROUGH THE ORDER OF THE A.O. AND CONS IDERED THE WRITTEN SUBMISSIONS AND ARGUMENTS OF THE A.R. CAREFULLY. I HAVE ALSO GONE THROUGH THE PLETHORA OF CASE LAWS REFERRED TO BY TH E AR. I FIND THAT THERE IS NO DOUBT ABOUT THE IDENTITY OF THE DEPOSIT ORS AS CONFIRMATION WAS FILED FOR THE SAME FROM ALL OF THEM. THIS FACT IS EVEN REFLECTED IN THE ORDER OF THE A.O. TAKING INTO CONSIDERATION THE FACTS THAT CONFIRMATORY LETTERS ALSO CONTAINED THEIR COMPLETE ADDRESSES, PERMANENT ACCOUNT NUMBERS AND RANGES AND WARDS WHER E THEY ARE 9 ASSESSED, IDENTITY AND GENUINENESS CANNOT BE CALLED INTO QUESTION. FURTHER IN THE COURSE OF ASSESSMENT PROCEEDINGS IT WAS INFORMED TO THE A.O. THAT ALL DEPOSITORS WERE INCOME TAX ASSESS EE AS EVIDENT FROM THE ASSESSMENT ORDER. GOING THROUGH THE JUDGEMENT O F HON'BLE SUPREME COURT IN THE CASE OF CIT V LOVELY EXPORTS ( P) LTD (2008) 216 CTR (SC) 195, WHEREIN IT WAS HELD THAT IF THE SHARE APPLICATION MONEY IS RECEIVED BY THE ASSESSEE-COMPANY FROM ALLEGED BO GUS SHAREHOLDERS, WHOSE NAMES ARE GIVEN TO THE AO, THEN THE DEPARTMEN T IS FREE TO PROCEED TO REOPEN THEIR INDIVIDUAL ASSESSMENTS IN A CCORDANCE WITH LAW BUT THIS AMOUNT OF SHARE MONEY CANNOT BE REGARD ED AS UNDISCLOSED INCOME UNDER SECTION 68 OF THE ASSESSEE COMPANY. TAKING INTO CONSIDERATION THE ABOVE CASE, THERE REMAINS NO DOUBT THAT THE AMOUNT OF RS.8,90,000/- RECEIVED FROM DIRECTORS/SHA REHOLDERS CANNOT BE TREATED AS INCOME FROM OTHER SOURCES U/S 68 OF T HE INCOME TAX ACT, 1968 OF THE APPELLANT. ALSO THE FACT THAT THE APPEL LANT IS NOT REQUIRED TO PROVE THE SOURCE OF SOURCE CANNOT BE IGNORED ON THE BASIS OF VARIOUS JUDGEMENTS OF HON'BLE SUPREME COURT AND HIG H COURT. IN VIEW OF THE ABOVE FACTS AND JUDGEMENT BY APEX COURT IN THE CASE OF CIT VS. LOVELY EXPORTS (P) LTD. (2008) 216 CTR (SC) 195, THE ADDITION OF RS.8,90,000/- MADE BY THE A.O. IS DELET ED. (RELIEF RS.8,90,000). 7. BEFORE US SHRI P.K.BAJAJ, LD.SR.D.R. STRONGLY S UPPORTED THE ORDER OF THE AO AND FURTHER SUBMITTED THAT THE ASSESSEE FAIL ED TO PROVE THE CREDITWORTHINESS OF THE SHAREHOLDERS AND GENUINENES S OF THE TRANSACTION. THEREFORE, THE ALLEGED SHARE APPLICATION MONEY HAS RIGHTLY BEEN ADDED BY THE AO UNDER SECTION 68 OF THE I.T.ACT. HE, THEREFORE, SUBMITTED THAT THE ORDER OF THE LD.CIT(A) MAY BE REVERSED AND RESTORE THAT O F THE AO. 8. SHRI RAKESH GARG, ADVOCATE, LD. COUNSEL FOR THE ASSESSEE, WHILE APPEARING FOR THE ASSESSEE, REITERATED THE SUBMISSI ONS MADE BEFORE THE AUTHORITIES AND FURTHER SUBMITTED THAT THE IN THE INSTANT CASE, THE ASSESSEE HAS PROVED THE IDENTITY OF THE SHAREHOLDERS, THEIR CREDITWORTHINESS AND ALSO 10 THE GENUINENESS OF THE TRANSACTIONS. HE FURTHER POI NTED OUT THAT DURING THE COURSE OF ASSESSMENT PROCEEDINGS CONFIRMATORY LETTE RS WERE FILED, WHICH CONTAINED COMPLETE ADDRESSES, PERMANENT ACCOUNT NUM BERS AND RANGES AND WARDS WHERE THEY ARE ASSESSED AND THEREFORE, THE ID ENTITY AND GENUINENESS CANNOT BE CALLED INTO QUESTION. HE FURTHER SUBMITTE D THAT ALL THE AFORESAID SHAREHOLDERS/DIRECTORS ARE ASSESSED AT MEERUT WHERE ASSESSEES ASSESSMENT WAS MADE. HE ALSO SUBMITTED THAT INCOME-TAX RETURNS OF THE DEPOSITORS/SHAREHOLDERS WERE FURNISHED TO THE AO. I N ADDITION TO ABOVE, AFFIDAVITS OF ALL THE SHAREHOLDERS CONFIRMING THE A FORESAID PAYMENTS WERE ALSO FILED BEFORE THE LOWER AUTHORITIES. SHRI RAKES H GARG, LD. COUNSEL FOR THE ASSESSEE ALSO RELIED ON THE DECISION OF THE I.T.A. T., LUCKNOW BENCH A IN THE CASE OF ITO-6(1), KANPUR VS. M/S.G.R.C.TEX PVT . LTD., KANPUR IN ITA NO.311(LUC.)/2010 RELATING TO THE ASSESSMENT YEA 20 02-03. THE TRIBUNAL VIDE ITS ORDER DATED 30.9.2010 IN THE CASE OF M/S .G.R.C.TEX PVT. LTD.(SUPRA) RELYING ON THE RATIO LAID DOWN BY THE H ON'BLE SUPREME COURT IN THE CASE OF LOVELY EXPORTS (P.) LTD. (SUPRA) AND AL SO ON THE DECISION OF THE HON'BLE JURISDICTIONAL HIGH COURT IN THE CASE OF J AYA SECURITIES LTD. VS. CIT (2008) 166 TAXMAN 7(ALL.), CONFIRMED THE VIEW TAKEN BY THE LD. CIT(A). THE RELEVANT FINDINGS OF THE TRIBUNAL ARE AS UNDER : 7. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND CAREFUL LY GONE THROUGH THE MATERIAL AVAILABLE ON THE RECORD. IN THE INSTANT CASE, IT IS NOT IN DISPUTE THAT THE ASSESSEE RECEIVED `1,0 0,000/- AS SHARE CAPITAL AND A PREMIUM OF `3,00,000/- FROM EA CH OF THE COMPANIES NAMELY M/S TIWARI HOTELS LTD, M/S MADHAV SECU RITIES LTD. AND M/S LAXMI KATHA UDYOG LTD. THE ASSESSEE FILED THE ACKNOWLEDGEMENT OF INCOME-TAX RETURNS, BALANCE SHEET OF THE AFORESAID COMPANIES. THE AUTHENTICITY OF THOSE RETURN S AND THE BALANCE SHEET HAS NOT BEEN DOUBTED. IN THE BALANCE SHEET OF THE AFORESAID COMPANIES, THE AMOUNT IN QUESTION WAS DULY SHO WN AS INVESTMENT WITH THE ASSESSEE. THEREFORE, THE INVESTMENT MADE 11 BY THOSE COMPANIES WITH THE ASSESSEE WAS ESTABLISHED. ON A SIMILAR ISSUE, THE HON'BLE SUPREME COURT, WHILE DISMISSI NG THE SLP IN THE CASE OF CIT VS. LOVELY EXPORTS (P) LTD. RE PORTED AT 319 ITR (ST) 5 HAS HELD AS UNDER: CAN THE AMOUNT OR SHARE MONEY BE REGARDED AS UNDISCLOSED INCOME UNDER SECTION 68 OF INCOME-TAX ACT, 1961 ? WE FIND NO MERIT IN THIS SPECIAL LEAVE PETITION FOR THE SIMPLE REASON THAT IF THE SHARE APPLICATION MONEY IS RECEIVED BY THE ASSESSEE COMPANY FROM ALLEGED BOGUS SHAREHOLDERS, WHOSE NAMES ARE GIVEN TO THE ASSESSING OFFICER, THEN THE DEPARTMENT IS FREE TO PROCEED TO REOPEN THEIR INDIVIDUAL ASSESSMENTS IN ACCORDANCE WITH LAW. HENCE, WE FIND NO INFIRMITY WITH THE IMPUGNED JUDGMENT. 7.1 ON A SIMILAR ISSUE, THE HON'BLE JURISDICTIONAL HIGH COURT IN THE CASE OF JAYA SECURITIES LTD. VS. CIT [2008] 166 TA XMAN 7 (ALL), IN PARA 4 TO 8 OBSERVED AS UNDER: 4. LEARNED COUNSEL FOR THE APPELLANT SUBMITTED THAT NO ADDITION UNDER SECTION 68 COULD BE MADE IN RESPECT OF THE SUBSCRIPTION AMOUNT TOWARDS THE SHARE CAPITAL OF A COMPANY LIMITED BY SHARES WHETHER IT IS PRIVATE OR PUBLIC AND IN SUPPORT THEREOF A DIVISION BENCH DECISION OF THE DELHI HIGH COURT HAS BEEN REFERRED IN THE CASE OF CIT VS. STELLER INVESTMENT LTD [1991] 192 ITR 287 WHICH DECISION HAS BEEN UPHELD BY THE APEX COURT IN THE CASE OF CIT VS. STELLER INVESTMENT LTD [2001] 251 ITR 263. 5. SHRI R. K. UPADHYAYA ON THE OTHER HAND SUBMITTED THAT THE DELHI HIGH COURT HAD ONLY DECLINED TO CALL FOR A REFERENCE ON THE GROUND THAT NO QUESTION OF LAW ARISES WHICH ORDER HAS BEEN UPHELD BY THE APEX COURT WHICH DOES NOT BENEFIT THE APPELLANT. 6. THE SUBMISSION OF SHRI R.K. UPADHYAYA IS NOT CORRECT. THE DELHI HIGH COURT WHILE DECLINING TO CA LL FOR REFERENCE HAD GIVEN THE FOLLOWING REASONS: 'IT IS EVIDENT THAT EVEN IF IT BE ASSUMED THAT THE SUBSCRIBERS TO THE INCREASED SHARE CAPITAL WERE NOT GENUINE, NEVERTHELESS, UNDER NO CIRCUMSTANCES, CAN THE AMOUNT OF SHARE CAPITAL 12 BE REGARDED AS UNDISCLOSED INCOME OF THE ASSESSEE. IT MAY BE THAT THERE ARE SOME BOGUS SHAREHOLDERS IN WHOSE NAME SHARES HAD BEEN ISSUED AND THE MONEY MAY HAVE BEEN PROVIDED BY SOME OTHER PERSONS. IF THE ASSESSMENT OF THE PERSONS WHO ARE ALLEGED TO HAVE REALLY ADVANCED THE MONEY IS SOUGHT TO BE REOPENED, THAT WOULD HAVE MADE SOME SENSE BUT WE FAIL TO UNDERSTAND AS TO HOW THIS AMOUNT OF INCREASED SHARE CAPITAL CAN BE ASSESSED IN THE HANDS OF THE COMPANY ITSELF. 7. THE MATTER WAS CARRIED BY THE REVENUE BEFORE THE APEX COURT IN CIVIL APPEAL NO. 7668 OF 1996. THE APEX COURT WHILE DISMISSING THE APPEAL HAD CLEARLY HELD THAT 'WE ARE IN AGREEMENT WITH THE HIGH COURT. IT CLEARLY MEANS THAT THE REASONING GIVEN BY THE DELHI HIGH COURT REPRODUCED ABOVE, STAND CONFIRMED BY THE APEX COURT AND, THEREFORE, THE PRINCIPLE WHICH EMERGES IS THAT NO ADDITION TO SECTION 68 CAN BE MADE IN THE INVESTMENT IN THE SHARE CAPITAL OF A COMPANY LIMITED BY SHARES WHETHER PUBLIC OR PRIVATE. 8. IT MAY BE MENTIONED HERE THAT THE APEX COURT HAD DECIDED THE CIVIL APPEAL AND HAD NOT PASSED THE ORDER WHILE CONSIDERING THE SPECIAL LEAVE PETITION. WHILE DECIDING THE SPECIAL LEAVE PETITION, IT MAY NOT HAVE AMOUNTED TO CONFIRMATION OF THE REASONING GIVEN BY THE DELHI HIGH COURT BUT AS THE APEX COURT HAS DECIDED THE CIVIL APPEAL EXPRESSING IN AGREE- MENT WITH THE REASONING GIVEN BY THE DELHI HIGH COURT, IT WOULD AMOUNT TO CONFIRMATION OF THE PRINCIPLES LAID DOWN BY THE DELHI HIGH COURT. 7.2 SIMILARLY THE HON'BLE DELHI HIGH COURT IN THE C ASE OF CIT VS. WINDSTRAL PETROCHEMICALS (P) LTD. [2010] 41 DTR (DEL) 139, HAS HELD AS UNDER: THE IDENTITY OF THE SHARE APPLICANTS WOULD BE ESTABLISHED IF DETAILS OF ADDRESS OR PAN CARD ARE 13 FURNISHED TO THE DEPARTMENT ALONG WITH THE COPIES OF SHAREHOLDERS' REGISTER, SHARE APPLICATION FORMS, SHARE TRANSFER REGISTER, ETC. IN THIS CASE, SHARE APPLICATION FORMS WERE DULY PRODUCED BEFORE THE AO AND THIS IS NOT THE CASE OF THE REVENUE THAT THE AO HAD ASKED THE ASSESSEE TO PRODUCE SHAREHOLDERS' REGISTER AND SHARE TRANSFER REGISTERS, BUT THE ASSESSEE COMPANY HAD FAILED TO DO SO, - CIT VS. DIVINE LEASING & FINANC E LTD. [2007] 207 CTR (DEL) 38: [2008] 299 ITR 268 (DEL) FOLLOWED. 7.3 IT HAS FURTHER BEEN HELD AS UNDER: THE AO WAS NOT JUSTIFIED IN ADDING THE AMOUNT OF SHARE APPLICATION MONEY TO THE INCOME OF THE ASSESSEE, MERELY BECAUSE THE APPLICANTS DID NOT RESPOND TO THE NOTICES SENT TO THEM. IF THE AO SO WANTED, HE COULD HAVE FOUND OUT THE CURRENT ADDRESS OF THOSE APPLICANTS, WHO, ACCORDING TO THE REPORT OF THE INSPECTOR, WERE NOT FOUND FUNCTIONING AT THE ADDRESS GIVEN TO THE AO, BY SUMMONING THE DIRECTORS, ETC. OF THOSE COMPANIES AND ASKING THEM TO FURNISH THE CURRENT ADDRESS OF THE COMPANY. THE NAMES AND ADDRESSES OF DIRECTORS, IF NOT AVAILABLE WITH THE ASSESSEE, COULD HAVE BEEN OBTAINED FROM THE OFFICE OF ROC OR FROM THE BANKS ON WHICH THE CHEQUES WERE DRAWN. NO SUCH ATTEMPT, HOWEVER, WAS MADE BY THE AO. IN THESE CIRCUMSTANCES, THERE IS NO REASON FOUND TO DISTURB THE FINDING OF FACT RECORDED BY THE TRIBUNAL. - CIT VS. LOVELY EXPORTS (P) LTD. (2008) 216 CTR (SC) 195 : (2008) 6 DTR (SC) 308 RELIED ON. 8. WE, THEREFORE, CONSIDERING THE JUDICIAL PRONOUNCE MENTS IN THE AFORESAID REFERRED TO CASE, ARE OF THE CONFIRMED VIEW THAT THE LEARNED CIT (A) WAS FULLY JUSTIFIED IN DELETING THE ADDITION MADE BY THE ASSESSING OFFICER. 9. CONSIDERING THE ENTIRE FACTS AND THE CIRCUMSTANC ES OF THE PRESENT CASE, WE AGREE WITH THIS OBSERVATION OF THE LD.CIT(A) TH AT IN THE INSTANT CASE, THE ASSESSEE HAS PROVED THE IDENTITY OF THE SHAREHOLDER S, THEIR CREDITWORTHINESS 14 AND ALSO THE GENUINENESS OF THE TRANSACTION. IT IS SEEN THAT SHRI PANKAJ KANSAL AND SHRI HIMANSHU KANSAL ARE THE DIRECTORS OF THE C OMPANY. THEY ARE SEPARATELY ASSESSED TO TAX. THE THIRD SHAREHOLDER SMT.ANITA KANSAL IS WIFE OF SHRI PANKAJ KANSAL, DIRECTOR OF THE COMPANY. SIM ILARLY, SMT.ANU KANSAL IS WIFE OF ANOTHER DIRECTOR SHRI HIMANSHU KANSAL. S MT.ANITA KANSAL AND SMT.ANU KANSAL ARE SEPARATELY ASSESSED TO INCOME-TA X. ALL THE AFORESAID SHAREHOLDERS ARE ASSESSED AT MEERUT WHERE ASSESSEE S ASSESSMENT WAS MADE. THUS, IN VIEW OF THE RATIO LAID DOWN BY THE HON'BLE SUPREME COURT IN THE CASE OF LOVELY EXPORTS (P.) LTD.(SUPRA), THE AMOUNT IN QUESTION CANNOT BE REGARDED AS UNDISCLOSED INCOME OF THE ASSESSEE UNDE R SECTION 68 OF THE ACT. ACCORDINGLY, WE HOLD THAT THE APPEAL FILED BY THE R EVENUE IS DEVOID OF ANY MERIT AND DESERVES TO BE DISMISSED. WE ORDER ACCORD INGLY. 10. SINCE WE HAVE CONFIRMED THE ORDER OF THE LD.CIT (A) IN DELETING THE ADDITION OF RS.8,90,000, WE, THEREFORE, DO NOT THIN K IT NECESSARY TO ADJUDICATE THE LEGAL GROUND RAISED BY THE ASSESSEE IN THE CROS S OBJECTION. EVEN OTHERWISE ALSO, SHRI RAKESH GARG, LD. COUNSEL FOR T HE ASSESSEE DID NOT PRESS FOR THE GROUND RAISED IN THE CROSS OBJECTION. 11. IN THE RESULT, THE APPEAL OF THE REVENUE AND TH E CROSS OBJECTION BY THE ASSESSEE ARE DISMISSED. THE ORDER PRONOUNCED IN THE OPEN COURT ON 17.3.201 1. SD. SD. (N.K.SAINI) (H.L.KARWA) ACCOUNTANT MEMBER VICE PRESIDENT MARCH 17TH ,2011. 15 COPY TO THE : 1. APPELLANT 2. RESPONDENT 3. CIT(A) (4) CIT 5.DR. A.R.,ITAT, LUCKNOW. SRIVASTAVA.