DCIT CC-45, MUMBAI V. GUPTA STEEL CORPORATION P.LTD, MUMBAI

ITA 3080/MUM/2011

• Counselvise Citation: [2013] 140 COUNSELVISE.COM (IT) 71596 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 6 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-10-2013
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: G
• Next Hearing Date: 17-09-2013
• Assessment Year: 2005-2006
• Appeal Filed On: 19-04-2011
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: O P SINGH
• Keywords: Accommodation entries; Reassessment proceedings
• Section: 147; 68; 132

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCH G, MUMBAI BEFORE SHRI P.M. JAGTAP, ACCOUNTANT MEMBER AND DR. S.T.M. PAVALAN, JUDICIAL MEMBER ITA NO. 3080/MUM/2011 ASSESSMENT YEAR : 2005-06 JCIT (OSD) CC-45 ROOM NO. 659, 6 TH FLOOR, AAYAKAR BHAVAN, M.K. ROAD MUMBAI-20 VS. M/S. GUPTA STEEL CORPORATION PVT. LTD. 501-A, ELEGANT BUSINESS PARK, ANDHERI-KURLA ROAD, J.B. NAGAR, ANDHERI (E) MUMBAI- 400 059 PAN:AACCG 3024 H (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI VIJAY MEHTA REVENUE BY : SHRI O.P. SINGH DATE OF HEARING : 17.09.2013 DATE OF PRONOUNCEMENT : 23.10.2013 O R D E R PER DR. S.T.M. PAVALAN, JM: THIS APPEAL FILED BY THE REVENUE IS DIRECTED AGAINS T THE ORDER OF THE LD.CIT(A) -36, MUMBAI DATED 31.01.2011 FOR THE ASSE SSMENT YEAR 2005-06. 2. IN THIS APPEAL, THE REVENUE HAS RAISED THE FOLLO WING GROUNDS: ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN L AW, THE CIT(A) ERRED IN DELETING THE ADDITION OF RS.20,00,000/- MADE IN RES PECT OF ALLEGED SHARE APPLICATION MONEY MERELY RELYING ON THE FACT THAT T HE ALLEGED SHARE APPLICANTS WERE INCORPORATED AS COMPANIES AND THEREFORE THEIR IDENTITY COULD NOT BE DENIED BUT WITHOUT APPRECIATING THAT DURING THE SEA RCH IN SKS ISPAT GROUP IT WAS FOUND THAT THE ALLEGED SHARE APPLICANTS WERE IN DULGING IN ACCOMMODATION TRANSACTIONS AND WERE NEVER PRODUCED FOR VERIFICATI ON/EXAMINATION BEFORE THE ASSESSING OFFICER TO PROVE THEIR CREDITWORTHINESS A ND GENUINENESS OF THE TRANSACTIONS AS REQUIRED U/S 68. OF THE ACT. 3. BRIEFLY STATED THAT THERE WAS A SEARCH CONDUCTED U/S 132 OF THE INCOME TAX ACT IN THE CASE OF M/S SKS ISPAT GROUP LTD. INCLUDI NG THE DIRECTORS AND ASSOCIATES ITA NO. 3080/MUM/2011 M/S. GUPTA STEEL CORPORATION PVT. LTD. ASSESSMENT YEAR : 2005-06 2 COMPANY OF THE GROUP. BASED ON THE MATERIAL FOUND I N THE SEARCH, RESPECTIVE ASSESSMENTS WERE MADE IN THE GROUP. CONSEQUENTLY, T HE ASSESSMENT IN THE CASE OF ASSESSEE WAS REOPENED U/S. 147 OF THE ACT ON THE RE ASON THAT THE ASSESSEE COMPANY WAS INCORPORATED ON 24.03.2004 BUT NO RETUR N OF INCOME WAS FILED IN SPITE OF THE FACT THERE IS HUGE RECEIPT ON ACCOUNT OF SHA RE CAPITAL AND SHARE PREMIUM. DURING THE REASSESSMENT PROCEEDING THE AO NOTED THA T THE ASSESSEE HAD RECEIVED SHARE APPLICATION MONEY OF RS.12,43,20,000/-, SHARE CAPITAL OF RS.1,02,00,000/- AND SHARE PREMIUM OF RS.1,43,00,000/- FROM 22 PARTIES T OTALLY AMOUNTING TO RS.14,98,20,000/- DURING THE YEAR UNDER CONSIDERATI ON. BASED ON THE DETAILED ENQUIRIES CONDUCTED IN THE CASE OF THE GROUP CONCER NS OF M/S. SKS ISPAT & POWER LTD. IT HAS BEEN FOUND THAT THE ASSESSEE HAD RECEIV ED AN AMOUNT OF RS.20,00,000/- FROM M/S. RUBICON PHARMACEUTICALS PVT. LTD. AS THE AMOUNT RS.20,00,000/- RECEIVED FROM M/S. RUBICON PHARMACEUTICALS PVT. LTD ON ACCOU NT OF SHARE APPLICATION MONEY/SHARE CAPITAL/SHARE PREMIUM ARE MERELY ACCOMM ODATION ENTRIES AND THE TRANSACTION ARE ONLY ON PAPER, THE AO TREATED THE T RANSACTION AS BOGUS AND NOT GENUINE AND THEREBY ADDED THE IMPUGNED RECEIPT AS U NEXPLAINED U/S 68 OF THE ACT. ON APPEAL THE LD.CIT(A) DELETED THE IMPUGNED ADDITI ON BASED ON THE DECISION OF THE SUPREME COURT IN THE CASE OF CIT VS. LOVELY EXPORTS PVT. LTD. 216 CTR (SC) 195. ACCORDING TO THE LD.CIT(A) AS THE EXISTENCE OF SHAR E HOLDER IS NOT IN DOUBT NO FURTHER ACTION LIES AND THE AMOUNT OF SHARE CAPITAL CANNOT BE ASSESSED AS ASSESSEES INCOME CHARGEABLE TO TAX. AGGRIEVED BY THE IMPUGNED ORDER, THE REVENUE IS IN APPEAL BEFORE US. 4. BEFORE US, THE LD.DR HAS CONTENDED THAT THE AO I N THE ASSESSMENT ORDER HAS CLEARLY MENTIONED THAT THE ASSESSEE HAS FAILED TO P RODUCE THE PARTIES AND COULD NOT PROVE GENUINENESS OF THE TRANSACTION AND CREDITWORT HINESS OF THE SHARE APPLICANT AND THE ADDITION IS MADE ON THE BASIS OF STATEMENT RECORDED IN THE ASSESSMENT PROCEEDINGS IN SKS ISPAT POWER GROUP OF SHRI SURAJ PRAKASH JINDAL, DIRECTOR OF M/S. RUBICON PHARMACEUTICAL PVT. LTD. THE DIRECTOR HAS A DMITTED THAT THESE ARE MERELY ACCOMMODATION ENTRIES. THEREFORE THE LD.CIT(A) IS N OT CORRECT IN DELETING THE ADDITION MADE IN RESPECT OF ALLEGED SHARE APPLICATI ON MONEY MERELY RELYING ON THE FACT THAT THE ALLEGED SHARE APPLICANTS ARE INCORPOR ATED AS COMPANIES AND THEIR ITA NO. 3080/MUM/2011 M/S. GUPTA STEEL CORPORATION PVT. LTD. ASSESSMENT YEAR : 2005-06 3 IDENTITY CANNOT BE DENIED WITHOUT APPRECIATING THE FACT THAT THE ASSESSEE HAS FAILED TO PROVE THE CREDITWORTHINESS OF THE SHARE HOLDERS AND GENUINENESS OF THE TRANSACTION AS REQUIRED UNDER SECTION 68 OF THE ACT . ON THE OTHER HAND, THE LD.AR OF THE ASSESSEE HAS REITERATED THE SAME ARGUMENTS THAT HAS BEEN PLACED BEFORE THE LD.CIT(A) AND AO. 5. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE M ATERIAL ON RECORD. IT IS NOT DISPUTED THAT THE ASSESSEES COMPANY HAS RECEIVED S HARE APPLICATION MONEY/SHARE CAPITAL/SHARE PREMIUM AMOUNTING TO RS.20,00,000/- F ROM M/S. RUBICON PHARMACEUTICALS PVT. LTD. IT IS THE CASE OF THE REV ENUE THAT THE IMPUGNED ADDITION IS MADE ON THE BASIS THAT THE ASSESSEE HAS NOT PROVED THE GENUINENESS OF THE TRANSACTION AND CREDITWORTHINESS OF SHARE APPLICANT , THE CONCLUSION WHICH THE AO ARRIVED ON THE BASIS OF THE STATEMENT OF SHRI SURAJ PRAKASH JINDAL, DIRECTOR OF M/S. RUBICON PHARMACEUTICAL PVT. LTD RECORDED DURING THE SEARCH CONDUCTED IN THE CASE OF M/S SKS ISPAT GROUP LTD. HOWEVER, THE LD.AR OF THE ASSESSEE COUNTERED THE ARGUMENT OF THE REVENUE BY STATING THAT THE SAID ST ATEMENT OF SHRI SURAJ PRAKASH JINDAL DOES NOT HAVE ANY SPECIFIC REFERENCE TO THE ASSESSEE AND THE ASSESSEE, DURING THE REASSESSMENT PROCEEDINGS HAS FURNISHED FOR EACH AND EVERY SHARE APPLICANT THE NAME, ADDRESS, PAN NO. AND APPLICATION MONEY RECEIV ED, COPY OF THEIR MEMORANDUM OF ASSOCIATION AND ARTICLES OF ASSOCIATION, CONFIRM ATION LETTER RECEIVED FROM THEM CONFIRMING INVESTMENT MADE BY THE ASSESSEES COMPAN Y, COPY OF THE AUDITED BALANCE SHEET COPY OF THE BEING STATEMENT ETC. WHIC H CAN PROVE THE GENUINENESS OF THE TRANSACTION AND CREDITWORTHINESS OF THE SHARE H OLDERS. THE PERUSAL OF THE DOCUMENTS REFERRED BY THE LD.AR IN OUR VIEW, DOES N OT NEGATE THE FINDINGS OF THE AO THAT THE TRANSACTION IS MERELY ACCOMMODATION ENTRIE S AND NOT GENUINE. IT IS PERTINENT TO NOTE THAT WHILE DECIDING A SIMILAR ISS UE IN THE CASE OF A GROUP ASSESSEE M/S PRATIKSHA MERCANTILE PVT. LTD. IN ITA NO. 2096/ MUM/2011 FOR THE ASSESSMENT YEAR 2001-02, THE ITAT HAS ELABORATELY DISCUSSED AN IDENTICAL ISSUE IN WHICH IT HAS BEEN HELD THAT ONCE TRANSACTION ITSELF IS NOT GENUI NE THE CASH CREDIT CANNOT BE TAKEN AS EXPLAINED SATISFACTORILY AND THIS ASPECT WAS NOT BEFORE THE SUPREME COURT IN THE CASE OF LOVELY EXPORTS PVT. LTD. THUS, DESPITE THE IDENTITY OF THE PARTY BEING NOT IN DOUBT, THE CLAIM HAS NOT BEEN ACCEPTED BY THE AO AS GENUINE AND THEREBY ASSESSED ITA NO. 3080/MUM/2011 M/S. GUPTA STEEL CORPORATION PVT. LTD. ASSESSMENT YEAR : 2005-06 4 THE INCOME U/S 68 OF THE ACT. HOWEVER, THIS ASPECT IN THE LIGHT OF THE STATEMENT OF SHRI SURAJ PRAKASH JINDAL, DIRECTOR OF M/S. RUBICON PHARMACEUTICAL PVT. LTD HAS NOT BEEN DISCUSSED BY THE LD.CIT(A) WHILE DELETING THE IMPUGNED ADDITION MADE BY THE AO. IT IS THEREFORE, WE DO NOT AGREE WITH THE FINDI NG OF THE LD.CIT(A) THAT THE SHARE APPLICATION MONEY HAS TO BE ACCEPTED AS EXPLAINED S ATISFACTORILY DESPITE THE FACT THAT THERE IS MATERIAL TO SHOW THAT THE TRANSACTION IS N OT GENUINE AND ONLY AN ACCOMMODATION ENTRY. WE THEREFORE, SET ASIDE THE OR DER OF THE LD.CIT(A) AND RESTORE THE MATTER BACK TO HIM FOR PASSING A FRESH ORDER AFTER NECESSARY EXAMINATION IN THE LIGHT OF OBSERVATION MADE IN THIS ORDER AFTE R ALLOWING OPPORTUNITY OF HEARING TO THE ASSESSEE. 6. IN THE RESULT, THE APPEAL FILED BY THE REVENUE I S ALLOWED FOR STATISTICAL PURPOSE . ORDER PRONOUNCED IN THE OPEN COURT ON THIS 23 RD DAY OF OCTOBER, 2013. SD/- SD/- (P.M. JAGTAP) (DR. S.T.M. PAVALAN) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI, DATED: 23.10.2013. *SRIVASTAVA COPY TO: THE APPELLANT THE RESPONDENT THE CIT, CONCERNED, MUMBAI THE CIT(A) CONCERNED, MUMBAI THE DR G BENCH //TRUE COPY// BY ORDER DY/ASSTT. REGISTRAR, ITAT, MUMBAI.