M/s Pensol Industries Ltd., Indore V. The ACIT 1(2), Indore

ITA 295/IND/2012

• Counselvise Citation: 29522714 RSA 2012
• Duration Of Justice: 5 month(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-10-2012
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: DB
• Assessment Year: 2003-2004
• Appeal Filed On: 16-05-2012
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: R A VERMA
• Assessee Lawyers: S N AGARWAL
• Keywords: Bogus Share capital; Source of fund; Difference of opinion; Accommodation entries; Reason to believe; Change of opinion
• Section: 143(3); 148; 68

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL , INDORE BENCH, INDORE BEFORE SHRI JOGINDER SINGH, J.M. AND SHRI R.C.SHARM A, A.M. PAN NO. : AABCP2022M I.T.A.NO. 295 /IND/201 2 . A.Y. : 2003 - 04 PENSOL INDUSTRIES LIMITED, ACIT, 1(2), 307 , CLASSIC CENTRE, VS INDORE. 575, M.G. ROAD, INDORE. APPELLANT RESPONDENT APPELLANT BY : SHRI S.N. AGARWAL, C. A. RESPONDENT BY : SHRI R. A. VERMA, SR. DR DATE OF HEARING : 06 .0 9 .2012 DATE OF PRONOUNCEMENT : 25 . 10 .201 2 O R D E R PER R. C. SHARMA, A.M. THIS IS AN APPEAL FILED BY THE ASSESSEE AGAINST THE ORDER OF CIT(A) DATED 30 TH MARCH, 2012, FOR THE ASSESSMENT YEAR -: 2: - 2 2003-04, IN THE MATTER OF ORDER PASSED U/S 143(3)/1 48 OF THE INCOME-TAX ACT, 1961. 2. FOLLOWING GROUNDS HAVE BEEN TAKEN BY THE ASSESSEE : - 1.1 THAT ON THE FACTS AND IN THE CIRCUMSTANCES O F THE CASE, THE LD. CIT(A) ERRED IN APPROVING THE ISSUANCE OF NOTICE U/S 148 OF THE INCOME-TAX ACT, 1961. 1.2 THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) ALSO ERRED IN APPROVING THE ORDER AS PASSED U/S 148 OF THE INCOME-TAX ACT EVEN WHEN THE ASSESSEE HAS PROPERLY DISCLOSED ENTIRE FACTS OF THE CASE AT THE TIME OF PASSING OF THE ORIGINAL ASSESSMENT ORDER. 2. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) ALSO ERRED IN CONFIRMING THE ADDITION OF RS. 20,00,000/- MADE U/S 68 IN RESPECT OF SHARE APPLICATION MONEY/SHARE CAPITAL EVEN WHEN THE ASSESSEE HAS PROPERLY DISCHARGED ONUS LYING ON HIM. -: 3: - 3 3. RIVAL CONTENTIONS HAVE BEEN HEARD AND RECORDS PERUSED. FACTS IN BRIEF ARE THAT THE ASSESSEE IS A COMPANY ENGAGED IN MANUFACTURING OF AUTOMOBILE AND INDUSTRI AL OIL AND GREASE ETC. FOR THE RELEVANT ASSESSMENT YEAR UNDER CONSIDERATION, THE RETURN WAS FILED AT AN INCOME OF RS. 52.50 LAKHS ON 10.11.2003. THE ASSESSMENT WAS COMPLETED U /S 143(3) ON 23.3.2006. THEREAFTER, THE ASSESSING OFFI CER OBSERVED THAT DURING THE ASSESSMENT PROCEEDINGS FOR THE ASSESSMENT YEAR 2004-05, CERTAIN CORRESPONDENCES WE RE CARRIED OUT WITH THE COMPANIES FROM WHOM ASSESSEE H AS TAKEN UNSECURED LOANS. ON THE BASIS OF INQUIRY SO MADE, T HE ASSESSMENT FOR THE ASSESSMENT YEAR 2003-04 WAS REOP ENED AND THE ASSESSING OFFICER MADE ADDITION IN RESPECT OF THE SHARE APPLICATION MONEY TAKEN FROM SHREE VINAY FINV EST PVT. LIMITED AND M/S. TOP TEN AGENCIES PRIVATE LIMITED B Y OBSERVING THAT ASSESSEE COULD NOT DISCHARGE THE BUR DEN CASTED U/S 68 OF THE INCOME-TAX ACT, 1961. 4. BY THE IMPUGNED ORDER, THE LD. CIT(A) CONFIRMED THE ACTION OF ASSESSING OFFICER BY OBSERVING AS UNDER : - -: 4: - 4 THUS, IN MY CONSIDERED VIEW EVEN IF REGULAR ASSESSMENT FOR A.Y.2003-04 WAS COMPLETED U/S.143(3), THE AO COULD HAVE GOT THE INQUIRIES MADE ON ANY ISSUE RELATED TO A.Y.2003-04, ATLEAST THE ISSUES ON WHICH NO VIEW WAS FORMED, BY ISSUING COMMISSION DURING THE ASSESSMENT PROCEEDINGS IN A.Y.2004-05. THIS IS WHAT HAS BEEN DONE. AFTER COMMISSION WAS ISSUED, THE REQUISITE INQUIRIES WERE MADE BY THE ACIT CIR.3, KOLKATA. THE INSPECTOR WAS DEPUTED TO MAKE SPOT VISIT. IT WAS FOUND THAT SHAREHOLDER'S COMPANIES DID NOT EXIST AT THE GIVEN ADDRESS. BASED ON THAT REPORT, THE AO HAD FORMED HIS 'REASON TO BELIEVE'. THIS HAS BEEN IN ACCORDANCE WITH THE LAW. THE CASE LAWS RELIED UPON BY THE ASSESSEE ARE NOT APPLICABLE AS THIS IS NOT A CASE OF MERE CHANGE OF OPINION AND FOR APPLICATION OF MIND ON THE INFORMATION -: 5: - 5 AVAILABLE WITH THE AO BEFORE FORMING HIS BELIEF. THUS, THE GROUND RAISED BY THE ASSESSEE DESERVES TO BE DISMISSED. 4.2.6 IN VIEW OF THE FACTS AS DISCUSSED IN PARA 4.2.2 TO 4.2.4 ABOVE AS REGARDS TO ALL OF THE TEN APPEALS, I FIND THAT THE CONCERNED ASSESSEES HAD BROUGHT IN THEIR OWN UNACCOUNTED MONEY IN THE GARB OF SHARE APPLICATION MONEY THROUGH THE VARIOUS ENTRY PROVIDERS. THE MODUS OPERANDI ADOPTED FOR THE PURPOSE IS VERY COMMON. THE COMPANIES INVOLVED IN THIS MODUS OPERANDI AS ENTRY PROVIDERS EXIST ONLY FOR THE PURPOSE OF PROVIDING ACCOMMODATION ENTRIES TO SUCH ASSESSEES AND FOR THAT THEY CHARGE NORMAL COMMISSIONS. THEY ARE DULY REGISTERED WITH ROC AND FILE THE RETURNS OF INCOME ALSO. THE BENEFICIAR Y AS ASSESSEES WOULD SUPPORT THEIR CLAIM BASED ON SUCH PAPER DOCUMENTATIONS. THIS IS WHAT HAS BEEN -: 6: - 6 DONE BY THE ASSESSEES IN ALL THESE TEN APPEALS. INSPITE OF THE SHOW CAUSE NOTICES AND SUFFICIENT OPPORTUNITIES, THESE ASSESSEES HAVE PREFERRED NOT TO PRODUCE THE DIRECTORS OF SUCH ENTRY GIVER COMPANIES EVEN AT APPEAL STAGE BEFORE THE UNDERSIGNED. THE AVOIDANCE HAS BEEN MADE WITH A SOLE PURPOSE TO PREVENT ME TO CARRY OUT THE DETAILE D INQUIRIES IN THE MANNER WHICH I HAD DONE IN THE CONTEXT OF HINDUSTAN CONTINENTAL LTD AND AGRAWAL ROAD CARRIERS LTD WHEREBY I COULD FIND VARIOUS PERSONS WHOM SIMILAR ENTRIES WERE GIVEN AND THE REMEDIAL ACTION COULD BE INITIATED BY THE CONCERNED ASSESSING OFFICERS. IN THE FACTS OF THE AFORESAID T EN APPEALS, THE RATIO OF THE DECISION OF HON'BLE SUPREME COURT AS GIVEN IN THE CASE OF LOVLEY EXPORTS P LTD DOES NOT APPLY. FOR THIS RELIANCE IS PLACED ON TO THE DECISION OF HON'BLE DELHI HIGH COURT IN THE CASE OF NOVA PROMOTERS & FINLEASE PVT LTD (SUPRA) ). THE OTHER CASE LAWS RELIED UPON BY THE ASSESSEES ARE ALSO NOT APPLICABLE TO THE FACTS -: 7: - 7 OF THEIR CASES, MORE SO IN VIEW OF THE RATIO/ PRINCIPLE LAID DOWN BY THE HON'BLE DELHI HIGH COURT IN THE CASE OF NOVA PROMOTERS & FINLEASE PVT LTD(SUPRA). IN THE FACTS & CIRCUMSTANCES OF THE CASES, I HAVE APPLIED THE TEST OF 'HUMAN PROBABILITIES'. IT IS NOTED THAT HON'BLE SUPREME COURT IN THE CELEBRATED DECISION IN THE CASE OF CIT VS DURGA PRASAD MORE, 82 ITR 540 (S.C.), ON PAGE 545 HAS CATEGORICALLY HELD THAT GENUINENESS OF TRANSACT IONS CANNOT BE DECIDED MERELY ON THE BASIS OF RECITALS I N DOCUMENTS AND SAME HAS TO BE EXAMINED IN THE LIGHT OF 'SURROUNDING CIRCUMSTANCES'. THE SAME ANALOGY WAS APPLIED LATER BY HON'BLE SUPREME COURT IN THE CASE OF SUMATI DAYAL VS. CIT, 214 ITR 801 (SC) AS ELABORATE D ON PAGE 808-809 OF THE REPORT THAT TEST OF HUMAN- PROBABILITIES' HAVE TO BE APPLIED TO JUDGE THE TRUE NATURE OF ANY TRANSACTION. THE SAME VIEW WAS AGAIN REITERATED BY HON'BLE SUPREME COURT, TAKING NOTICE OF THE AFORESAID TWO DECISION, IN THE CASE O F P. MOHAN KALA 291 ITR . 278 (S.C.) ON PAGES 288- -: 8: - 8 289 OF THE REPORT. FURTHER, THERE ARE TWO WELL KNOWN SAYINGS OR PROVERBS WHICH HAVE EVOLVED FROM THE EXAMINATION OF HUMAN NATURE AND CONDUCT OVER A PERIOD OF CENTURIES AND ARE THUS RECOGNIZED AS 'CONVENTIONAL WISDOM OF UNIVERSAL APPLICATION. SIMILAR PROVERBS EXIST IN MANY INDIAN LANGUAGES AND EVEN FOREIGN LANGUAGES. THE PROVERBS ARE ' A MAN IS KNOWN BY THE COMPANY HE KEEPS' AND 'BIRDS OF SAME FEATHER FLOCK TOGETHER'. IN HINDI, THE NEAR EQUIVALENT IS 'ADDAMI KI PEHCHAN SANGAT SE HOTI HAI IF THE TEST OF 'HUMAN PROBABILITIES' IS APPLIED IN THE LIGHT OF THE TWO PROVERB AND FURTHER TEST 'SURROUNDING CIRCUMSTANCES' IS APPLIED, THE ONLY LOGICAL CONCLUSION WITH EMERGES IS THAT SHARE APPLICATION MONEY BROUGHT IN BY ALL THESE ASSESSEES '1'. BEEN THEIR OWN UNACCOUNTED MONEY AND THE SAME HAS RIGHTLY BEEN TAXED BY THE AOS U/S. 68. -: 9: - 9 THUS KEEPING IN VIEW THE LEGISLATIVE INTENT AND CLARIFICATORY NATURE OF THE AMENDMENT BROUGHT IN VIDE FINANCE ACT 2012 BY WAY OF INSERTION OF THE PROVISO TO SECTION 68 AS DISCUSSED HEREIN ABOVE IN THIS PARA, IN THE FACTS OF THIS CASE, IT IS FURT HER HELD THAT ASSESSEE HAS FAILED TO EXPLAIN THE SOURCE OF FUNDS IN THE HANDS OF SHARE APPLICANT COMPANIES FOR ADVANCING SHARE APPLICATION MONEY/SHARE CAPITAL/SHARE PREMIUM TO THE ASSESSEE COMPANY EVEN WHEN ADEQUATE OPPORTUNITY WAS GIVEN BY ME DURING THE APPELLATE PROCEEDINGS. THE ASSESSEE KEPT ON RELYING ONLY ONTO THE PAPER DOCUMENTATION AND DID NOT PRODUCE THE DIRECTORS OF THE SHARE APPLICANT COMPANIES TOGETHER WITH THEIR BOOKS OF ACCOUNT AND 'BANK STATEMENTS ON ONE OR OTHER PRETEXT TO PROVE THE GENUINENESS OF THE TRANSACTIONS MORE SO IN THE LIGHT OF THE MODUS OPERANDI OF ACCOMMODATION ENTRIES THROUGH ENTRY PROVIDERS AS WAS BRO THE NOTICE OF THE ASSESSEE -: 10: - 10 THROUGH THIS OFFICE SHOW CAUSE NOTICE (REFER PARA 4.2.3) 4.2.8 IN THIS VIEW OF THE MATTER, IN THE PRESENT CA SE OF THE ASSESSE [ I.E, PENSOL INDUSTRIES, IT-570/07-08, A.Y .2003- 04], I UPHOLD THE ADDITION OF RS. 20,OO,OOO/- ON A CCOUNT OF UNEXPLAINED SHARE CAPITAL/ SHARE APPLICATION MON EY. 1. 5. AGAINST THE ABOVE ORDER, THE ASSESSEE IS IN APPEAL BEFORE US. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND FOUND FROM RECORD THAT AFTER RECORDING VALID REASON S, THE ASSESSING OFFICER HAS RE-OPENED THE ASSESSMENT FRAM ED U/S 143(3). THE CIT(A) HAS ALSO RECORDED A FINDING THAT AFTER COMMISSION WAS ISSUED, THE REQUISITE INQUIRIES WERE MADE BY THE ACIT, CIRCLE 3, KOLKATA AND DURING INQUIRY, IT WAS FOUND THAT RELATED COMPANIES DID NOT EXIST AT THE GIVEN A DDRESS. BASED ON THAT REPORT, THE ASSESSING OFFICER HAD FOR MED HIS REASON TO BELIEF. THUS, WE DO NOT FIND ANY INFIRM ITY IN THE ORDER OF CIT(A) FOR CONFIRMING REOPENING OF ASSESSM ENT U/S 147. 6. WITH REGARD TO MERIT OF ADDITION, THE LD. CIT(A) HA S CATEGORICALLY RECORDED A FINDING THAT THE ASSESSEE EVEN COULD \ ' 1 -: 11: - 11 NOT ESTABLISH THE IDENTITY OF THE COMPANIES, WHO HA S GIVEN MONEY TO THE ASSESSEE. AFTER DEALING IN DETAIL, THE ENQUIRIES CONDUCTED BY THE DEPARTMENT AND AFTER APPLYING THE PROPOSITION OF LAW LAID DOWN BY COORDINATE BENCH IN THE CASE OF HINDUSTAN CONTINENTAL LIMITED AND M/S. GWALIOR CORPORATION ORDER DATED 31.10.2011 AND ALSO THE PRO POSITION LAID BY HON'BLE DELHI HIGH COURT IN THE CASE OF NOVA PROMOTERS & FINLEASE PVT LTD, 18 TAXMAN 217, CAME T O THE CONCLUSION THAT THE ASSESSEE WAS UNABLE TO ESTABLISH EVEN THE IDENTITY OF LOAN CREDITORS. THE DETAILED FINDINGS HAVE BEEN RECORDED BY THE LD.CIT(A) AT PARA 4, WHICH HAS NOT BEEN CONTROVERTE D BY LD. AUTHORIZED REPRESENTATIVE , BY BRINING ANY POSI TIVE MATERIAL ON RECORD. ACCORDINGLY, WE DO NOT FIND ANY REASON TO INTERFERE IN THE ORDER OF CIT(A) CONFIRMI NG THE ADDITION OF RS. 20 LAKHS U/S 68 OF THE INCOME-TAX A CT, 1961. -: 12: - 12 7. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS DISMIS SED. THIS ORDER HAS BEEN PRONOUNCED IN THE OPEN COURT ON 25 TH OCTOBER, 2012. SD/ - SD/ - (JOGINDER SINGH) (R. C. SHARMA) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED : 25 TH OCTOBER, 2012. CPU* 12156