ITO 8(3)(3), MUMBAI V. VHM APPARELS P. LTD, MUMBAI

ITA 3078/MUM/2017

• Counselvise Citation: [2019] 112 COUNSELVISE.COM (IT) 0249 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 4 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-09-2019
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: F
• Assessment Year: 2007-2008
• Appeal Filed On: 28-04-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: RAJEEV GUBGOTRA
• Keywords: Bogus Share capital; Accommodation entries
• Section: 143(3); 142(1); 133(6); 143(1); 143(2); 68; 148

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES F, MUMBAI BEFORE SHRI RAJESH KUMAR, ACCOUNTANT MEMBER & SHRI RAM LAL NEGI, JUDICIAL MEMBER ITA NO.3078/MUM/2017 ASSESSMENT YEAR : 2007-08 ITO 8(3)(3) MUMBAI. VS. VHM APPARELS P. LTD., MAHTA MANSION, ZAVERI BAZAR, NEAR MUMBADEVI TEMPLE, MUMBAI 400 002. PAN AAACV2187N (APPELLANT) (RESPONDENT) CO NO. 45/MUM/2019 (ARISING OUT OF ITA NO.3078/MUM/2017 FOR ASSESSMENT YEAR : 2007-08) VHM APPARELS P. LTD., MUMBAI 400 002. PAN AAACV2187N VS. ITO 8(3)(3) MUMBAI. (CROSS-OBJECTOR) (RESPONDENT) FOR THE REVENUE : SHRI RAJEEV GUBGOTRA FOR THE ASSESSEE : SHRI N R AGARWAL DATE OF HEARING : 06 .0 8 .201 9 DATE OF PRONOUNCEMENT : 09. 09.2019 O R D E R PER RAJESH KUMAR, ACCOUNTANT MEMBER THE REVENUE IS IN APPEAL AGAINST THE ORDER OF THE CIT(A) -9, MUMBAI, DATED 16.01.2017, FOR A.Y. 2007-09, WHICH IN TURN ARISES OUT OF THE ORDER OF ASSESSMENT PASSED U/S. 143(3) R.W.S. 147 OF THE INCOME TAX ACT , 1961. THE ASSESSEE IS ALSO BEFORE US WITH ITS CROSS-OBJECTIONS. ITA NO.3078/MUM/2017& CO 45/MUM/2019 VHM APPARELS P LTD. 2 2. WE SHALL FIRST TAKE UP THE APPEAL OF THE REVENUE , WHEREIN IT HAS CHALLENGED THE DELETION OF THE ADDITION OF RS. 2,10,00,000/- B Y THE CIT(A) AS MADE BY THE AO TOWARDS BOGUS SHARE APPLICATION MONEY AS UNEXPLAINE D CASH CREDIT U/S. 68 OF THE ACT. THE FACTS IN BRIEF ARE THAT THE ASSESSEE FILE D ITS RETURN OF INCOME ON 28.10.2007 DECLARING TOTAL INCOME AT NIL, WHICH WAS PROCESSE D U/S. 143(1) ON 26.03.2009. THEREAFTER, THE AO RECEIVED INFORMATION FROM DDIT ( INV)-III(2), MUMBAI, THAT THE ASSESSEE IS BENEFICIARY OF HAWALA ACCOMMODATION ENT RIES IN THE FORM OF SHARE APPLICATION MONEY, WHICH CAME TO THE NOTICE OF THE DEPARTMENT DURING THE SEARCH & SEIZURE ACTION ON SHRI PRAVEEN KUMAR JAIN AND ITS A SSOCIATE CONCERN ON 01.10.2013. ACCORDINGLY, THE AO, AFTER RECORDING THE REASONS, R EOPENED THE CASE OF THE ASSESSEE U/S. 147 OF THE ACT BY ISSUING NOTICE, DATED 26.03. 2014, U/S. 148 OF THE ACT. THE ASSESSEE REPLIED TO THE NOTICE ON 22.07.2014 TO TRE AT THE ORIGINAL RETURN AS RETURN IN COMPLIANCE WITH THE NOTICE U/.S. 148 OF THE ACT. T HE AO, THEREAFTER ISSUED NOTICE U/S. 143(2) AND 142(1) DATED 18.08.2014 CALLING UPO N THE ASSESSEE TO FURNISH DETAILS OF SHARE APPLICATION MONEY. THE ASSESSEE R ESPONDED TO THE NOTICE ISSUED BY THE AO VIDE LETTER DATED 17.10.2013, OBJECTING TO T HE ADDITION BY WAY OF SHARE APPLICATION MONEY. THE AO SUBMITTED THAT ASSESSEE HAS, IN FACT, ALLOTTED SHARES TO VARIOUS ENTITIES AND FURNISHED COPIES OF BANK STATE MENTS, SHARE APPLICATION, MEMORANDUM OF ARTICLES OF ASSOCIATION OF THE INVEST ORS AS PER THE DETAILS BELOW: SR NO. NAME OF THE HAWALA ENTRY OPERATOR AMOUNT 1 ALKA DIAMOND INDUSTRIES LTD. 2000000 2 JAVDA INDIA IMPEX LTD. 2500000 3 NAKSHTRA BUSINESS P LTD. (HEMA TRADING CO. P LTD.) 3000000 4 KUSH HINDUSTAN ENTERTAINMENT LTD. 2500000 5 OLIVE OVERSEAS P LTD 2500000 ITA NO.3078/MUM/2017& CO 45/MUM/2019 VHM APPARELS P LTD. 3 6 LEXUZ INFOTECH LTD. 2500000 7 VANGUARD JEWELS LTD. 2500000 8 YASH V JEWELS LTD. 3500000 THE AO ON THE BASIS OF INFORMATION FURNISHED BY THE ASSESSEE IN THE FORM OF PAN, BANK STATEMENTS, BALANCE SHEET ETC., CAME TO THE CO NCLUSION THAT THE ASSESSEE HAS OBTAINED ACCOMMODATION ENTRIES BY WAY OF SHARE APPL ICATION MONEY FROM EIGHT PARTIES MENTIONED AT SR. NO. 1 TO 8. THE AO HELD T HAT THESE CONCERNS WERE OPERATED BY SHRI PRAVEEN KUMAR JAIN, WHO IS AN ALLE GED HAWALA OPERATOR PROVIDING ACCOMMODATION ENTRIES IN THE FORM OF SHARE APPLICAT ION MONEY, LONG TERM CAPITAL GAIN AND BOGUS UNSECURED LOANS, BOGUS SALES ETC., A ND, THEREFORE, SHOW CAUSE NOTICE WAS ISSUED TO THE ASSESSEE. FINALLY THE AO TREATED THE SHARE APPLICATION MONEY AMOUNTING TO RS 2,10,00,000/- RECEIVED FROM THE EIGHT PARTIES AS NON- GENUINE AND ADDED THE SAME AS UNEXPLAINED CASH CRED IT U/S. 68 OF THE ACT. 3. IN THE APPELLATE PROCEEDINGS, THE LEARNED CIT(A) ALLOWED THE APPEAL OF THE ASSESSEE BY HOLDING THAT THE ASSESSEE HAS FILED ALL NECESSARY EVIDENCES IN THE FORM OF COPIES OF CERTIFICATE OF INCORPORATION, MEMORAND UM AND ARTICLES OF ASSOCIATION, SHARE APPLICATION FORMS, BOARD RESOLUTION OF THE SU BSCRIBER COMPANIES, INCOME TAX RETURNS, AFFIDAVITS OF THE SHARE HOLDERS, ETC., WHI CH PROVE THE GENUINENESS AND CREDITWORTHINESS OF THE SUBSCRIBER COMPANIES. THE LEARNED CIT(A) FURTHER HELD THAT THE AO HAS NOT BOTHERED TO CARRY OUT ANY INVESTIGAT IONS DESPITE THE ASSESSEE HAVING FILED ALL NECESSARY DOCUMENTS OF THE INVESTORS. 4. THE LEARNED AR, AT THE OUTSET, SUBMITTED BEFORE THE BENCH THAT THE ISSUE INVOLVED IN THE PRESENT CASE OF SHARE APPLICATION M ONEY IS SQUARELY COVERED BY IN ITA NO.3078/MUM/2017& CO 45/MUM/2019 VHM APPARELS P LTD. 4 FAVOUR OF THE ASSESSEE BY THE DECISION OF THE CO-OR DINATE BENCH IN THE CASE OF AMBEE INVESTMENT & FINANCE PVT. LTD. VS. INCOME TAX OFFICER IN ITA NOS. 3899/MUM/2017 FOR A.Y. 2007-08 DATED 08.02.2019. H E FURTHER DREW OUR ATTENTION TO PARA NO.3 OF THE SAID ORDER AND SUBMITTED THAT T HE INVESTORS IN THE SAID CASE VIZ. OLIVE OVERSEAS PVT. LTD., NAKSHATRA BUISNESS PVT. L TD., JAVADA INDIA IMPEX LTD. AND LEXUS INFOTECH LTD. AND KUSH HINDUSTAN ENTERTAINMEN T LTD. ARE THE SAME WHO HAVE ALSO INVESTED IN THE ASSESSEE COMPANY. THE LEARNED AR FURTHER SUBMITTED THAT IN THE PRESENT CASE THE ASSESSEE HAS FILED ALL NECESSA RY EVIDENCES IN THE FORM OF COPIES OF CERTIFICATE OF INCORPORATION, MEMORANDUM AND ART ICLES OF ASSOCIATION, SHARE APPLICATION FORMS, BOARD RESOLUTIONS OF SUBSCRIBER COMPANIES MAKING INVESTMENTS, ACKNOWLEDGEMENT OF INCOME TAX RETURNS OF SUBSCRIBER COMPANIES ALONG WITH THEIR SWORN AFFIDAVITS, BANK ACCOUNT STATEMENTS, PAN, SHA RE ALLOTMENT FORMS ETC., TO PROVE THE CREDITWORTHINESS AND GENUINENESS OF THE I NVESTORS HOWEVER, THE AO HAS NOT BOTHERED TO ISSUE NOTICE U/S. 133(6) AND HAS ME RELY RELIED ON THE STATEMENT OF SHRI PRAVEEN KUMAR JAIN. THE LEARNED AR ALSO SUBMI TTED THAT SHRI PRAVEN KUMAR JAIN, WHOSE STATEMENT WAS PRIMARILY MADE THE BASIS FOR MAKING THE ADDITION WAS NEITHER THE SHARE HOLDER NOR THE DIRECTOR IN THE IN VESTOR COMPANIES. MOREOVER, THE STATEMENT BY SHRI PRAVEEN KUMAR JAIN HAS BEEN RETRA CTED AND, THUS, HAS NO EVIDENTIARY VALUE. THE LEARNED AR SUBMITTED THAT N O CROSS EXAMINATION OF SHRI PRAVEEN KUMAR JAIN WAS ALLOWED TO THE ASSESSEE DESP ITE BEING SPECIFICALLY REQUESTED. FINALLY, THE AR SUBMITTED THAT THE ISSU E BEING COVERED IN FAVOUR OF THE ASSESSEE THE APPEAL FILED BY THE REVENUE MAY KINDLY BE DISMISSED. ITA NO.3078/MUM/2017& CO 45/MUM/2019 VHM APPARELS P LTD. 5 5. THE LEARNED DR, ON THE OTHER HAND, HAS RELIED ON THE GROUNDS OF APPEAL AND THE ORDER OF THE AO. HE PRIMARILY RELIED ON THE FA CT THAT SHRI PRAVEEN KUMAR JAIN IS A HAWALA OPERATION AND ALONG WITH HIS ASSOCIATE CON CERN IS IN THE BUSINESS OF PROVIDING ACCOMMODATION ENTRIES AND THE ASSESSEE IS APPARENTLY A BENEFICIARY OF THESE ENTRIES AND THEREFORE, PRAYED BEFORE THE BENC H THAT THE ORDER PASSED BY THE AO HAS TO BE RESTORED. THE LEARNED DR RELIED ON TH E DECISION OF THE HONBLE DELHI HIGH COURT IN THE CASE OF CIT VS. JANSAMPARK ADVERT ISING & MARKETING (P) LTD. 56 TAXMANN.COM 286 (DEL). 6. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE M ATERIAL AVAILABLE ON RECORD. IN THIS CASE THE ASSESSEE HAS RECEIVED SHARE APPLIC ATION MONEY FROM EIGHT ENTITIES AGGREGATING TO RS 2,10,00,000/-. THE ASSESSEE HAS FILED NECESSARY EVIDENCES, AS STATED HEREINABOVE, QUA THE SAID SUBSCRIBERS/INVEST ORS. WE FURTHER NOTE THAT THE AO HAS NOT CARRIED OUT ANY FURTHER INVESTIGATIONS O R ENQUIRIES TO FIND OUT WHETHER THESE INVESTORS WERE GENUINE OR NOT. THE CIT(A) H AS NOTED SPECIFICALLY THAT THE ASSESSEE HAS DISCHARGED THE ONUS CAST UPON IT BY FI LING ALL NECESSARY EVIDENCES TO PROVE IDENTITY , CREDITWORTHINESS OF THE INVESTORS AND GENUINENESS OF THE TRANSACTIONS. MOREOVER, THE PERUSAL OF THE FINANCI AL DATA OF THE INVESTORS WE OBSERVE THAT THE INVESTORS HAD SUFFICIENT RESOURCES TO INVEST IN THE ASSESSEE COMPANY AND, THEREFORE, WE DO NOT FIND ANY REASON T O INTERFERE IN THE ORDER OF THE CIT(A). THE CASE OF THE ASSESSEE IS ALSO SUPPORT ED BY THE DECISION OF THE CO- ORDINATE BENCH IN THE CASE OF AMBEE INVESTMENT & FI NANCE PVT. LTD. VS. INCOME TAX OFFICER (SUPRA), WHEREIN THE FIVE INVESTORS ARE CO MMON AS HAS BEEN STATED IN PARA NO.3 OF THE SAID ORDER. THE OPERATIVE PART OF THE SAID ORDER IS REPRODUCED BELOW: ITA NO.3078/MUM/2017& CO 45/MUM/2019 VHM APPARELS P LTD. 6 8. WE HAVE GONE THROUGH THE ASSESSMENT ORDER AND TH E ORDER OF CIT(A) AND NOTED THAT THE AO NOTICED FROM THE BANK ACCOUNT SUBMITTED BY THE ASSESSEE THAT THESE ARE NON-GENUINE TRANSACTIONS. T HE ENTIRE BASIS OF THE AO WAS ON THE INVESTIGATION DONE BY THE OFFICE OF D GIT INVESTIGATION, MUMBAI. FROM THE ABOVE ASSESSMENT ORDER, IT IS CLEA R THAT THE AO HAS NOT MADE ANY ENQUIRY OR INVESTIGATION AND NO EVIDEN CE TO CONTROVERT THE FACTUAL DETAILS SUBMITTED BY THE ASSESSEE WAS BROUG HT ON RECORD BY THE ASSESSING OFFICER. THE STATEMENT OF SHRI PRAVIN KUM AR WAS SUPPLIED AND NO CROSS-EXAMINATION WAS PROVIDED. THERE NOTHING ON RECORD ABOUT THE RESULT OF INVESTIGATION HAVING DONE BY THE DGIT (IN VESTIGATION), MUMBAI. THE PAPERS FILED BY THE ASSESSEE CLEARLY DEMONSTRAT E THAT THE IDENTITY, CREDITWORTHINESS AND GENUINENESS OF THE TRANSACTION IS PROVED. THE ASSESSEE HAS PRIMA FACIE DISCHARGED ITS ONUS AND AO HAS NOT CARRIED OUT ANY INQUIRY. IN VIEW OF THE ABOVE, WE CONFIRM THE O RDER OF CIT(A) AND THIS ISSUE OF REVENUE S APPEAL IS DISMISSED. THE FACTS OF THE CASE OF THE ASSESSEE ARE IDENTICAL TO THAT AS DECIDED BY THE CO- ORDINATE BENCH. THEREFORE, RESPECTFULLY FOLLOWING THE SAID DECISION, WE UPHOLD THE ORDER OF THE CIT(A) AND DISMISS THE APPEAL OF THE R EVENUE. 7. SINCE THE APPEAL OF THE REVENUE IS DISMISSED, TH E CROSS-OBJECTION FILED BY THE ASSESSEE CHALLENGING THE RE-OPENING IS NOT BEING AD JUDICATED AND IS BEING DISMISSED AS SUCH. 8. IN THE RESULT, THE APPEAL BY THE REVENUE AND THE CROSS-OBJECTION BY THE ASSESSEE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS DAY OF 0 9 TH SEPTEMBER, 2019. SD/- SD/- (RAM LAL NEGI) (RAJESH KUMAR) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI; DATED : 9 TH SEPTEMBER, 2019. SA ITA NO.3078/MUM/2017& CO 45/MUM/2019 VHM APPARELS P LTD. 7 COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT. 2. THE RESPONDENT. 3. THE CIT(A), MUMBAI. 4. THE CIT 5. THE DR, F BENCH, ITAT, MUMBAI BY ORDER, //TRUE COPY// (DY./ASSTT. REGISTRAR) INCOME TAX APPELLATE TRIBUNAL, MUMBAI