DCIT, CHENNAI V. M/s. Aruna Hotels Ltd., CHENNAI

ITA 3108/CHNY/2016

• Counselvise Citation: [2017] 130 COUNSELVISE.COM (IT) 7374 (ITAT-CHENNAI)
• Duration Of Justice: 4 month(s) 13 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-03-2017
• Appeal Filed By: Department
• Bench Allotted: A
• Assessment Year: 2012-2013
• Appeal Filed On: 07-11-2016
• Court: TRIBUNAL
• Department Lawyers: SHIVA SRINIVAS
• Assessee Lawyers: A S SRIRAMAN
• Keywords: Unexplained cash credit; Bogus Share capital
• Section: 143(3); 68; 6

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH, CHENNAI . , . , ' # BEFORE SHRI A. MOHAN ALANKAMONY, ACCOUNTANT MEMBER AND SHRI G. PAVAN KUMAR, JUDICIAL MEMBER ./ I.T.A. NO. 3108/MDS/2016 / ASSESSMENT YEAR : 2012-13 DEPUTY COMMISSIONER OF INCOME TAX, CORPORATE CIRCLE -1(1), CHENNAI - 600 034. VS. M/S. A RUNA HOTELS LIMITED, 145 STERLING ROAD, NUNGAMBAKKAM CHENNAI - 600 034. [PAN: AAACA 3213A] ( / APPELLANT) ( / RESPONDENT) $% & / APPELLANT BY : SHRI SHIVA SRINIVAS, JCIT )*$% & / RESPONDENT BY : SHRI A.S. SRIRAMAN, ADVOCATE & + /DATE OF HEARING : 15.03.2017 & + /DATE OF PRONOUNCEMENT : 21.03.2017 /O R D E R PER G. PAVAN KUMAR, JUDICIAL MEMBER: THE REVENUE HAS FILED AN APPEAL AGAINST THE ORDER OF COMMISSIONER OF INCOME TAX (APPEALS)-1, CHENNAI IN ITA NO. 204/CIT(A)- 1/2015-16 DATED 04.08.2016. :-2-: I.T.A. NO. 3108/MDS/2016 2. THE REVENUE HAS RAISED THE FOLLOWING GROUNDS: 2.1 THE LD. CIT(A) ERRED IN DELETING THE ADDITION MADE U/S. 68 OF THE ACT, WITHOUT APPRECIATING THE FACT THAT NO EVIDENCE REGA RDING THE CREDITOR DETAILS OR CREDITWORTHINESS OF THE CREDITOR WAS FUR NISHED BEFORE THE ASSESSING OFFICER, BY THE ASSESSEE, THOUGH THE ONUS OF PROVING THE IDENTITY OF THE CREDITOR VESTS WITH THE ASSESSEE, A ND HAVING NOT FURNISHED, THE AO COULD NOT PROCEED FURTHER, RESULT ING IN THE DISALLOWANCE? 2.2 THE LD. CIT(A) ERRED IN ADMITTING FRESH EVIDENC E IN TERMS OF DETAILS OF THE CREDITORS, WITHOUT ADHERING TO THE PROVISIONS O F RULE 46A, AND ON THIS ACCOUNT ALSO THE ORDER OF THE CIT(A) IS BAD IN LAW? 2.3 THE LD. CIT(A) ERRED IN NOT CALLING FOR A REMAN D REPORT FROM THE ASSESSING OFFICER, AS MANDATED UNDER RULE 46A, SINC E FRESH EVIDENCE WAS FURNISHED BY THE ASSESSEE DURING THE COURSE OF APPELLATE PROCEEDINGS? 3. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSE E COMPANY IS IN THE HOTEL BUSINESS AND FILED THE RETURN OF INCOME ON 30 .09.2013. THE RETURN OF INCOME WAS PROCESSED U/S. 143(1) OF THE ACT. SUBSE QUENTLY, THE CASE WAS SELECTED FOR SCRUTINY UNDER CASS AND NOTICE U/S. 14 3(2) OF THE ACT WAS ISSUED. IN COMPLIANCE TO THE NOTICE, THE LD. AR OF THE ASSE SSEE APPEARED FROM TIME TO TIME AND FURNISHED THE DETAILS. THE ASSESSING OFFI CER ON VERIFICATION OF THE :-3-: I.T.A. NO. 3108/MDS/2016 DETAILS AND FINANCIAL TRANSACTIONS FOUND THAT THE A SSESSEE COMPANY HAS SHARE APPLICATION MONEY PENDING ALLOTMENT FOR RS. 7.73 CR ORES AND ISSUED SHOW CAUSE NOTICE. THE LD. AO ALSO REQUIRED THE PARTYWI SE BREAKUP OF THE SHARE ALLOTMENT MONEY AND CREDITWORTHINESS OF APPLICANTS. WHEREAS, THE ASSESSEE COULD NOT PROVE THE CREDITWORTHINESS AND IDENTITY O F THE TRANSACTIONS AND THE LD. AO TREATED THE CREDIT ENTRIES IN THE BOOKS OF A CCOUNT AS UNEXPLAINED CREDITS U/S. 68 OF THE ACT RS. 7.73 CRORES AND ASSE SSED INCOME OF RS. 6,33,15,522/- VIDE ORDER U/S. 143(3) OF THE ACT DAT ED 31.03.2015. 4. AGGRIEVED BY THE ORDER, THE ASSESSEE HAS FILED A N APPEAL WITH THE CIT(A). IN THE APPELLATE PROCEEDINGS THE LD. AR AR GUED THE GROUNDS AND SUBMITTED THE INFORMATION THE SHARE APPLICATION MON EY PENDING ALLOTMENT WAS CONTRIBUTED BY MR. KAMAL BABBAR WHOSE IS ASSESSED T O INCOME TAX WITH ACIT, NON-CORPORATE CIRCLE-2, CHENNAI. WHEREAS, AN AMOUN T OF RS. 1,39,84,478/- PERTAINS TO CURRENT FINANCIAL YEAR AND THE BALANCE REPRESENTS THE AMOUNT BROUGHT FORWARDED FROM THE EARLIER ASSESSMENT YEARS , THE LD. AR FILED COPY OF CONFIRMATION OF KAMAL BABBAR, AS A DIRECTOR OF THE ASSESSEE COMPANY AND THE ACCOUNTS COPIES DISCLOSING THE CREDITS ENTRIES. THE LD. CIT(A) CONSIDERED THE SUBMISSIONS AND FINDINGS OF THE ASSESSING OFFICER A ND WAS OF THE OPINION THAT THE AO MADE ADDITION OF SHARE APPLICATION MONEY PEN DING ALLOTMENT RS. 7.73 CRORES UNDER PROVISIONS OF SECTION 68 OF THE ACT. W HEREAS, ONLY CREDIT APPEARING IN THE CURRENT YEAR AS SHARE APPLICATIONS MONEY SHOULD ONLY BE :-4-: I.T.A. NO. 3108/MDS/2016 CONSIDERED FOR APPLYING THE PROVISIONS OF SECTION 6 8 OF THE ACT. THE LD. AO HAS NOT GIVEN SATISFACTORY NOTE ON ADDITION AND FUR THER THE LD. CIT(A) OBSERVED THAT THE ONUS OF PROVING THE SOURCE OF MON EY IS ON THE ASSESSEE COMPANY CLAIMING CREDIT WHICH WAS COMPLIED AND RELI ED ON OF JUDICIAL DECISIONS AND OBSERVED THAT THE AMOUNT OF SHARE APP LICATION MONEY PENDING ALLOTMENT CANNOT BE TAXED AS HELD, AT PAGE 3 AT PAR A 7 OF THE ORDER AS UNDER:- ' IT IS SETTLED IN LAW THAT THE ONUS OF PROVING T HE SOURCE OF A SUM OF MONEY RECEIVED WOULD BE UPON THE ASSESSEE CLAIMI NG THE CREDIT THEREOF. ONCE THIS PRIMARY ONUS HAS BEEN DISCHARGE THE ONUS WOULD SHIFT TO THE AO CONTESTING THE CLAIM. IN THE INSTA NT CASE THE PRIMARY ONUS REMAINS DISCHARGED BY THE APPELLANT AND HENCE THE RATIO IN KALE KHAN MOHAMMAD HANIF VS. CIT 50 ITR 1 (SC) AND ROSHA N DI HATTI VS CIT 107 ITR 938 WOULD APPLY. SIMILARLY, THE RATIO IN CIT VS. ORISSA CORPORATION LTD 159 ITR 78 (SC) WOULD APPLY. IN TH AT CASE IT WAS HELD BY THE APEX COURT THAT ONCE THE CREDIT WAS OWNED UP THE SAME COULD NOT BE BROUGHT TO TAX IN THE HANDS OF THE COMPANY A ND THE REVENUE WAS FREE TO PROCEED TO EXAMINE THE CREDITWORTHINESS OR OTHERWISE OF THE PERSON OWNING UP THE CREDIT. THE APPELLANT HA ALSO RELIED UPON THE RATIO IN THE CASE OF LOVELY EXPORTS (SUPRA) WHEREIN THE APEX COURT HAS HELD THAT IF SHARE APPLICATION MONEY IS RECEIVED BY THE ASSESSEE COMPANY FROM ALLEGED BOGUS SHARE HOLDERS WHOSE NAME S ARE GIVEN TO THE AO, THEN THE DEPARTMENT WAS FREE TO PROCEED TO TAKE REMEDIAL ACTION IN THEIR INDIVIDUAL ASSESSMENTS IN ACCORDANC E WITH LAW. IN THIS CASE KAMAL BABBAR, THE JOINT MANAGING DIRECTOR HAD OWNED UP THE ENTIRE AMOUNT OF RS. 7.73 CRORES AND ACCORDINGLY TH E AO COULD NOT HAVE BROUGHT TO TAX THE SAME IN THE HANDS OF THE APPELLA NT AS HAS BEEN DONE IN THIS CASE. TAKING THE SUM TOTALITY OF FACTS BEF ORE ME INTO ACCOUNT, I :-5-: I.T.A. NO. 3108/MDS/2016 AM OF THE CONSIDERED OPINION THAT THE ADDITION MADE BY THE AO U/S. 68 OF THE ACT IS UNTENABLE IN LAW AND ON FACTS. THE A O IS DIRECTED TO DELETE THE ADDITION MADE U/S. 68. THIS GROUND OF APPEAL I S ALLOWED.' 5. AGGRIEVED BY THE CIT(A) ORDER, REVENUE HAS FILED AN APPEAL BEFORE THE TRIBUNAL. BEFORE US, THE LD. DR ARGUED THAT THE LD . CIT(A) ERRED IN DELETING THE ADDITION WITHOUT CONSIDERING THE FACTS THAT THE ASSESSEE HAS NOT PROVIDED ANY EVIDENCE OR DETAILS OF CREDIT OR IDENTITY AND C REDITWORTHINESS BEFORE THE ASSESSING OFFICER. THE LD. CIT(A) ERRED IN ADMITTI NG THE EVIDENCE AND ALSO VIOLATION OF RULE 46A OF THE IT RULES AS THE AO WAS NOT PROVIDED AN OPPORTUNITY TO VERIFY THE CLAIMS. FURTHER, LD. CIT (A) HAS NOT CALLED FOR REMAND REPORT OR COMMENTS ON THE MATERIAL FILED BY THE ASSESSEE COMPANY IN THE APPELLATE PROCEEDINGS AND PRAYED FOR SET ASI DE OF THE CIT(A) ORDER AND ALLOW THE REVENUE APPEAL. CONTRA, THE LD. AR RELIE D ON THE ORDERS OF CIT(A) AND OPPOSED THE REVENUE GROUNDS. 6. WE HEARD THE RIVAL SUBMISSIONS, PERUSED THE MATE RIAL ON RECORD AND JUDICIAL DECISIONS. THE LD. DR CONTENTION THAT THE CIT(A) HAS ERRED IN DELETING THE ADDITION WITHOUT CONSIDERING THE FACTS THAT THE ASSESSEE HAS NOT FURNISHED THE EVIDENCE BEFORE THE ASSESSING OFFICER IN THE AS SESSMENT PROCEEDINGS. WE FOUND THE ASSESSEE COMPANY IN THE APPELLATE PROCEED INGS HAS FILED THE DETAILS REFERRED AT PARA 5 OF THE CIT(A) ORDER AND BASED ON THE MATERIAL SUBMISSIONS :-6-: I.T.A. NO. 3108/MDS/2016 AND THE JUDICIAL DECISIONS. THE LD. CIT(A) HAS ALL OWED THE APPEAL IN FAVOUR OF THE ASSESSEE. PRIMA FACIE, THE LD. CIT(A) RELIED O N THE CONFIRMATION AFFIDAVIT OF THE APPLICANT AND COPY OF ACCOUNTS WITH CREDIT E NTRIES FILED BY THE ASSESSEE. WE ARE OF THE OPINION, THAT THE LD. CIT(A) HAS ACCE PTED THE EVIDENCE BUT HAS NOT CALLED FOR REMAND REPORT FROM THE ASSESSING OFF ICER AND THERE IS VIOLATION OF PROVISIONS OF RULE 46A OF IT RULES. AS ASSESSIN G OFFICER WAS DEPRIVED AN OPPORTUNITY TO VERIFY AND EXAMINE THE DOCUMENTS FIL ED. IN THE INTEREST OF THE JUSTICE, WE REMIT THE DISPUTED ISSUE TO THE FILE OF THE AO TO EXAMINE THE EVIDENCE AND OTHER DETAILS FILED AND THE AO SHALL P ROVIDE ADEQUATE OPPORTUNITY OF HEARING TO THE ASSESSEE COMPANY BEFO RE PASSING THE ORDER ON MERITS. THE GROUNDS OF REVENUE ARE ALLOWED FOR STA TISTICAL PURPOSES. 7. IN THE RESULT, REVENUE APPEAL IS ALLOWED FOR STA TISTICAL PURPOSES. ORDER PRONOUNCED ON TUESDAY, THE 21ST DAY OF MARCH, 2017 AT CHENNAI. SD/ - ( . ) ( A. MOHAN ALANKAMONY ) # / ACCOUNTANT MEMBER SD/ - ( . ) (G. PAVAN KUMAR) ) # /JUDICIAL MEMBER /CHENNAI, 0 /DATED: 21ST MARCH, 2017 JPV & )'+23 43-+ /COPY TO: 1. $%/ APPELLANT 2. )*$% /RESPONDENT 3. ! 5+ ( )/CIT(A) 4. ! 5+ /CIT 5. 367 )'+' /DR 6. 789 /GF