Chaitanya Industries Pvt. Ltd., Jajpur V. ACIT, Circle-1(1), Cuttack, Cuttack

ITA 328/CTK/2014

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 3806 (ITAT-CUTTACK)
• Duration Of Justice: 2 year(s) 9 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-05-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Next Hearing Date: 26-04-2017
• Assessment Year: 2009-2010
• Appeal Filed On: 13-08-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: A TIGGA
• Assessee Lawyers: G NAYAK
• Keywords: Unexplained cash credit
• Section: 133(6); 68

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL ( CUTTACK BENCH, CUTTACK ) BEFORE SHRI N.S. SAINI, ACCOUNTANT MEMBER AND SHRI KULDIP SINGH , JUDICIAL MEMBER I TA N O . 32 8 / CTK/2014 (ASSESSMENT YEAR : 20 09 - 1 0 ) M/S. CHAITANYA INDUSTRIES PVT. LTD., VS. ACIT, CIRCLE 1 (1), CHORDA, JAJPUR ROAD, CUTTACK. DISTT. JAJPUR 755 019. ( PAN : AACCC7061L ) (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI G. NAYAK , AR REVENUE BY : SHRI A. TIGGA , DR D ATE OF HEARING : 2 6 . 0 4 .2017 DATE OF PRONOUNCEMENT : 29 . 0 5 .2017 O R D E R PER KULDIP SINGH , JUDICIAL MEMBER : THE APPELLANT, M/S. CHAITANYA INDUSTRIES PVT. LTD. (HEREINAFTER REFERRED TO AS THE ASSESSEE ) BY FILING THE AFORESAID APPEAL SOUGHT TO SET ASIDE THE ORDER DATED 13 .0 6 .201 4 PASSED BY THE COMMISSIONER OF INCOME - TAX ( APPEALS) , CUTTACK QUA THE ASSESSMENT YEAR 2009 - 10 ON THE GROUNDS INTER ALIA THAT : - 1. IN THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) IS NOT JUSTIFIED IN SUSTAINING THE ADDITION OF RS.60,00,000/ - MADE BY THE A.O. AS INCOME U/S. 68 OF THE I.T. ACT,1961. ITA NO . 328 / CTK ./2014 2 2. THE LD. CIT(A) WAS NOT JUSTIFIED TO IGNORE THE NATURE OF SHARE APPLICATION MONEY AND THE RELATIONSHIP OF SHAREHOLDER WITH THE COMPANY. 3. THE ASSESSEE COMPANY RECEIVED SHARE APPLICATION MONEY FROM THE FOLLOWING TWO COMPANIES: NAME PAN AMOUNT GUGNANI LHP AAACG5972C 30,00,000 PVT. LTD. GOPALKA MOTOR AAACG9534C 30,00,000 INVESTO PVT LTD TOTAL: 60,00,000 THE SHARE APPLICATION MONEY WAS RECEIVED THROUGH CHEQUE SUPPORTED BY APPLICATION FORM DULY FILLED & SIGNED, BOARD RESOLUTION, PAN CARD, ETC. SUBSEQUENTLY, ASSESSEE COMPANY ALSO ALLOTTED SHARES TO THE APPLICANTS AND THEIR NAMES ARE SHOWN IN THE SHAREHOLDERS LIST IN THE ANNUAL RETURN FILED WITH THE ROC. DURING THE COURSE OF HEARING, THE RELEV ANT DOCUMENTS WERE SUBMITTED TO PROVE THE GENUINENESS OF THE TRANSACTIONS AND THE IDENTITY OF THE PARTIES. BUT THE A.O. WITHOUT RELYING ON THE DOCUMENTARY EVIDENCES AND WITHOUT VERIFYING THE FACT AND WITHOUT EXAMINING THE DOCUMENTS, HAS DISBELIEVED THE R EAL TRANSACTION AND ADDED THE SHARE APPLICATION MONEY RECEIVED TO THE TOTAL INCOME OF THE ASSESSEE, BASING ON THE IMAGINATION, ASSUMPTIONS & PRESUMPTIONS AND WITHOUT RELYING AND VERIFYING THE DOCUMENTS. 4. THAT DURING THE COURSE OF HEARING THE ASSESSEE H AD SUBMITTED EVERY DETAILS AS DESIRED REGARDING THE SHARE APPLICATION MONEY RECEIVED. THE FOLLOWING DETAILS AND DOCUMENTS WERE SUBMITTED DURING THE COURSE OF HEARING BEFORE CIT(A) : (I) PRESENT POSTAL ADDRESS WHICH IS AS PER THE MCA SITE (II) AUDITED ACCOUNTS, RELEVANT BANK STATEMENT, COPY OF INCOME TAX ACKNOWLEDGEMENT, SHARE APPLICATION AND CERTIFICATE OF INCORPORATION OF GUGNANI LEASING & HIRE ITA NO . 328 / CTK ./2014 3 PURCHASE PVT LTD AND GOPALKA MOTOR INVESTO PVT LTD FOR THE FINANCIAL YEAR 2008 - 09. (III) COPY OF SHARE A LLOTMENT ALONG WITH BOARD RESOLUTION OF THE ASSESSEE COMPANY CHAITANYA INDUSTRIES PVT LTD. (IV) THE ABOVE FACTS/DOCUMENTS PROVES THAT THE AMOUNT RECEIVED FROM THE ABOVE TWO COMPANIES IS IN THE NATURE OF SHARE APPLICATION. HENCE, THE CONTENTION OF A.O. T HAT THE SHARE APPLICATION TO BE TREATED AS UNEXPLAINED CASH CREDIT U/S 68 OF THE INCOME TAX ACT IS NOT TENABLE. MOREOVER, IT IS NO'! JUSTIFIED TO TREAT THE EQUITY SHARE CAPITAL AS INCOME. THE REFERENCE MAY BE MADE TO THE FOLLOWING CASE DECISIONS: CIT V S. VALUE CAPITAL SERVICES PVT. LTD. [2008] 307 ITR 334 (DEL) CIT VS. K.C.FIBRES LTD. [2011] 33211TR 481 (DEL) CIT VS. OASIS HOSPITALITIES PVT. LTD. [2011]333 ITR 119 (DEL) HENCE, IT IS CONFIRMED THAT WHERE THE IDENTITY OF THE INVESTOR, GENUINENESS OF T HE TRANSACTION AND CREDIT WORTHINESS OF THE INVESTOR IS ESTABLISHED, SHARE APPLICATION MONEY RECEIVED CANNOT BE TREATED AS THE INCOME OF THE ASSESSEE AS UNEXPLAINED INCOME U/S 68 OF THE IT ACT. 5. THE ASSESSEE COMPANY HAS ALREADY ALLOTTED SHARES IN FAVOU R OF SHARE APPLICANTS AND THEIR NAMES ARE SHOWN IN THE REGISTER OF MEMBERS. 6. THE ORDER OF THE ASSESSMENT AS WELL AS THE APPELLANT ORDER IS AGAINST LAW, WEIGHT OF EVIDENCES AND PROBABILITIES OF THE CASE. 7. THAT THE LEARNED CIT(A) HAS ERRED IN LAW AND FACTS IN CONFIRMING THE ADDITIONS MADE BY THE A.O. AMOUNTING TO RS.60,00,000/ - REPRESENTING SHARE APPLICATION MONEY RECEIVED BY THE ASSESSEE. 8. FOR THESE OTHER REASONS TO BE ARGUED AT THE TIME OF THE HEARING THE ORDER OF ASSESSMENT SHALL BE SQUASHED TO MEET THE END OF THE JUSTICE. ITA NO . 328 / CTK ./2014 4 2. BRIEFLY STATED THE FACTS NECESSARY FOR ADJUDICATION OF THE CONTROVERSY AT HAND ARE : DURING THE SCRUTINY PROCEEDINGS, AO NOTICED FROM THE BALANCE SHEET AS ON 31.03.2009 THAT DURING THE YEAR UNDER ASSESSMENT, THE ASSESSEE RECEIVED SHARE APPLICATION MONEY AMOUNTING TO RS.1,10,01,492/ - . FROM THE PERUSAL OF THE RELEVANT DETAILS FURNISHED BY THE ASSESSEE, IT IS FOUND BY THE AO THAT APART FROM THE TWO DIRECTORS - CUM - SHAREHOLDERS, NAMELY, B.B. DEO AND P.S. DEO, SHARE APPLICATION MONEY WAS RECEIVED FROM TWO PRIVATE LIMITED COMPANIES, NAMELY, M/S. GUGNANI LHP PVT. LTD. AND GOPALKA MOTOR INVESTO PVT. LTD. TO THE EXTENT OF RS.30,00,000/ - EACH. ASSESSEE WAS CALLED UPON TO PROVE THE IDENTITY AND CREDITWORTHINESS OF THE PARTIES AND GENU INENESS OF TRANSACTIONS. THE AO, FROM THE PERUSAL OF DOCUMENTS FURNISHED BY THE ASSESSEE, NOTICED THAT ADDRESSES MENTIONED BY THE ASSESSEE COMPANY ARE NOT THE SAME AS HAS BEEN EXISTING IN PAN DATA BASE. ASSESSEE DESPITE REQUISITION HAS FAILED TO FURNISH BALANCE SHEET AND P&L ACCOUNT OF THE AFORESAID COMPANIES QUA RELEVANT YEARS. ON FAILURE OF THE ASSESSEE TO PROVE THE EXISTENCE, CREDITWORTHINESS AND GENUINENESS OF THE TRANSACTION WITH THE AFORESAID COMPANIES CONSIDERED THE AMOUNT OF RS.60,00,000/ - RECEIV ED FROM AFORESAID TWO COMPANIES (RS.30,00,000/ - EACH) AS UNEXPLAINED CASH CREDIT ITA NO . 328 / CTK ./2014 5 U/S 68 OF THE INCOME - TAX ACT , 1961 (FOR SHORT THE ACT) AND MADE ADDITION THEREOF TO THE TOTAL INCOME OF THE ASSESSEE. 3. ASSESSEE CARRIED THE MATTER BY WAY OF FILING AN APPE AL BEFORE THE LD. CIT (A) WHO HAS DISMISSED THE APPEAL . FEELING AGGRIEVED, THE ASSESSEE HAS COME UP BEFORE THE TRIBUNAL BY FILING THE PRESENT APPEAL. 4. WE HAVE HEARD THE LD. AUTHORIZED REPRESENTATIVES OF THE PARTIES TO THE APPEAL, GONE THROUGH THE DOCUME NTS RELIED UPON AND ORDERS PASSED BY THE REVENUE AUTHORITIES BELOW IN THE LIGHT OF THE FACTS AND CIRCUMSTANCES OF THE CASE. 5. FROM THE FACTS AND CIRCUMSTANCES OF THE CASE, GROUNDS OF APPEAL RAISED BY THE ASSESSEE AND ORDER PASSED BY THE REVENUES APPEAL, THE SOLE QUESTION ARISES FOR DETERMINATION IN THIS CASE IS : - AS TO WHETHER ASSESSEE COMPANY HAS PROVED THE IDENTITY, CREDITWORTHINESS AND GENUINENESS OF THE TRANSACTION OF RS.60,00,000/ - RECEIVED AS SHARE APPLICATION MONEY F R OM M/S. GUGNANI LHP PVT. LTD. AND GOPALKA MOTOR INVESTO PVT. LTD. (RS.30,00,000/ - EACH) AND LD. CIT (A) HAS ERRED IN SUSTAINING THE ADDITION OF RS.60,00,000/ - MADE BY THE AO AS INCOME U/S 68 OF THE ACT AS CONTENDED BY THE ASSESSEE. ITA NO . 328 / CTK ./2014 6 5. UNDISPUTEDLY, THE ASSESSEE COMPANY HAD RECEIVED SHARE APPLICATION MONEY TO THE TUNE OF RS.1,10,01,492/ - OUT OF WHICH RS.30,00,000/ - EACH WERE RECEIVED FROM TWO PRIVATE LIMITED COMPANIES, NAMELY, M/S. GUGNANI LHP PVT. LTD. AND GOPALKA MOTOR INVESTO PVT. LTD.. DURING THE ASSESSMENT PROCEEDINGS, ASSESSEE FURNISHED COPY OF SHARE APPLICATION, PAN COPY, RBI REGISTRATION CERTIFICATE, BOARD RESOLUTION OF THE COMPANY FOR IN INVESTMENT AND DETAILS THAT SHARE APPLICATION MONEY HAVE BEEN RECEIVED FROM THE PARTIES THROUGH CHEQUES. HOWEVER, DURING ASSESSMENT PROCEED INGS, THE AO CAME TO KNOW THAT THE ADDRESS OF BOTH THE AFORESAID PRIVATE LIMITED COMPANIES FURNISHED BY THE ASSESSEE IS DIFFERENT FROM THE ADDRESS NOTED IN THE PAN. ASSESSEE HAS ALSO FAILED TO PROVE CREDITWORTHINESS OF THE AFORESAID TWO COMPANIES BY FURNI SHING COPY OF BALANCE SHEET AND P&L ACCOUNT FOR THE YEAR UNDER CONSIDERATION. 6. EVEN DURING THE APPELLATE PROCEEDINGS, THE AO WAS ASKED TO SUBMIT A REPORT U/S 250 (4) OF THE ACT AFTER MAKING ENQUIRY AND TRACING THE ORIGIN OF THE AFORESAID FUNDS OF RS.60,0 0,000/ - BY MAKING ENQUIRY AS TO THE CREDITWORTHINESS OF THE COMPANIES AND GENUINENESS OF THE TRANSACTION BY AFFORDING REASONABLE OPPORTUNITY TO THE ASSESSEE ALONG WITH CROSS - EXAMINATION TO EXPLAIN ITS CASE. DURING THE REMAND PROCEEDINGS, ASSESSEE FURNISHE D WRITTEN ITA NO . 328 / CTK ./2014 7 SUBMISSIONS. THEN, AO CALLED INFORMATION U/S 133(6) OF THE ACT FROM BOTH THE AFORESAID COMPANIES IN QUESTION TO PROVE IDENTITY, GENUINENESS AND CREDITWORTHINESS OF THE TRANSACTION OF THE SAID MONEY BUT BOTH THE LETTERS WERE RETURNED UNSERVED WITH POSTAL REMARK REFUSED AND INSUFFICIENT ADDRESS. ASSESSEE FILED REJOINDER TO THE REMAND REPORT BY FURNISHING THE POSTAL ADDRESS OF THE AFORESAID TWO COMPANIES AND SUBMITTED THE COPIES OF THE AUDITED ACCOUNTS ETC. OF BOTH THE COMPANIES AND COPY OF SHARE ALLOTMENT ALONG WITH BOARD RESOLUTION OF THE ASSESSEE COMPANY. 7. DURING THE APPELLAT E PROCEEDINGS, IT IS NOTICED BY LD. CIT (A) THAT WITHIN A PERIOD OF ONE YEAR, THE ASSESSEE PROVIDED FOUR SET OF ADDRESSES OF THE SHARE INVESTORS BUT THE LETTER SENT TO THE M RECEIVED BACK UNSERVED LEADING TO THE CONCLUSION THAT THE IDENTITY OF THE COMPANY HAS NOT BEEN ESTABLISHED. EVEN OTHERWISE, COMPAN IES INVESTING RS.30,00,000/ - EACH IN THE ASSESSEE COMPANY WHICH IS SITUATED IN AN INTERIOR ARE A OF THE COUNTRY WERE REQUIRE D TO RESPON D TO THE LETTERS ISSUED BY AO HAD THEY BEEN IN EXISTENCE DURING THAT PERIOD. 8. THE LD. AR FOR THE ASSESSEE BY RELYING UPON THE JUDGMENT RENDERED BY HONBLE APEX COURT IN CASE CITED AS CIT VS. LOVELY EXPORTS (P) LTD. (2009) 319 ITR 5 (SC) CONT ENDED THAT THE LD. CIT (A) HAS ERRED IN CONFIRMING THE ADDITION PARTICULARLY WHEN THE ITA NO . 328 / CTK ./2014 8 ASSESSEE HAS FURNISHED THE PAN, ACCOUNT STATEMENT ADDRESSES ETC. OF THE COMPANIES IN QUESTION. HOWEVER, WE ARE OF THE CONSIDERED VIEW THAT THE CASE OF CIT VS. LOVELY EXP ORTS (P) LTD. (SUPRA) IS NOT APPLICABLE TO THE FACTS AND CIRCUMSTANCES OF THE CASE BECAUSE CIT VS. LOVELY EXPORTS (P) LTD. (SUPRA) WAS A PUBLIC LIMITED COMPANY AND HAS ISSUED SHARE CAPITAL OF THE PUBLIC AT LARGE. IN SUCH CASES, THE COMPANY CANNOT BE EXPEC TED TO NOTE EACH AND EVERY DETAIL PERTAINING TO THE IDENTITY AND FINANCIAL WORTH OF THE SUBSCRIBER. 9. BUT, IN THE INSTANT CASE, THE ASSESSEE IS A PRIVATE LIMITED COMPANY AND SHARE APPLICANTS ARE SUPPOSED TO BE KNOWN TO THE ASSESSEE COMPANY. IN THIS CASE, ASSESSEE HAS RECEIVED SHARE APPLICATION MONEY FROM THE COMPAN IES WHO HAVE COME ALL THE WAY FROM KOLKATA AND CHENNAI TO INVEST THE HUGE AMOUNT IN THE ASSESSEE COMPANY. WHEN THIS FACT IS EXAMINED IN THE LIGHT OF THE FACT THAT THE LETTER SENT TO BOTH THE AF ORESAID COMPANIES IN QUESTION RECEIVED BACK UNDELIVERED WITH THE REMARKS REFUSED AND INSUFFICIENT ADDRESS , IT HAS BECOME APPARENTLY CLEAR THAT THE INVESTOR COMPANIES HAVE NO EXISTENCE RATHER ARE SHELL COMPAN IES AS HAS BEEN RIGHTLY HELD BY AO/CIT (A). 10 . SINCE THE ASSESSEE HAS FAILED TO BRING ON RECORD SUFFICIENT MATERIAL TO PROVE THAT THE TRANSACTIONS ARE GENUINE AND SHARE APPLICANTS WERE HAVING CREDITWORTHINESS AND WERE ACTUALLY EXISTED ITA NO . 328 / CTK ./2014 9 DURING THE RELEVANT PERIOD, THE LD. CIT (A) HAS RIGHTLY CONFIRMED THE ADDITION MADE BY THE AO TO THE TUNE OF RS.60,00,000/ - AS UNEXPLAINED CASH CREDIT U/S 68 OF THE ACT BY RELYING UPON THE CASE OF CIT VS. NOVA PROMOTERS AND FIN LEASE (P) LTD. ITA NO.342 OF 2011 . EVEN OTHERWISE, IT IS HIGHLY IMPROBABLE THAT THE AFORESA ID INVESTORS / COMPANIES PURPORTEDLY SITUATED AT KOLKATA / CHENNAI HAVE INVESTED HUGE AMOUNT OF RS.30,00,000/ - EACH PARTICULARLY WHEN THEIR PHYSICAL EXISTENCE IS NOT PROVED AND THEIR ADDRESS GIVEN BY THE ASSESSEE IS NOT MATCHED WITH THEIR PAN, HAVE INVESTE D IN THE ASSESSEE S PRIVATE LIMITED COMPANY SITUATED IN THE INTERIOR OF THE COUNTRY. 11. IN VIEW OF WHAT HAS BEEN DISCUSSED ABOVE , THE QUESTION FRAMED IS DETERMINED AGAINST THE ASSESSEE AND CONSEQUENTLY , FINDING NO ILLEGALITY OR PERVERSITY IN THE IMPUGNE D ORDER, THE PRESENT APPEAL FILED BY THE ASSESSEE IS HEREBY DISMISSED. ORDER PRONOUNCED IN OPEN COURT ON THIS 29 TH DAY OF MAY , 201 7 . SD/ - SD/ - ( N.S. SAINI ) ( KULDIP SINGH ) ACCOUNTANT MEMBER JUDICIAL MEMBER DAT ED THE 29 TH DAY OF MAY , 201 7 TS ITA NO . 328 / CTK ./2014 10 COPY OF THE ORDER FORWARDED TO: 1.APPELLANT - M/S. CHAITANYA INDUSTRIES PVT. LTD., CHORDA, JAJPUR ROAD, DISTT. JAJPUR 755 019. 2.RESPONDENT - ACIT, CIRCLE 1 (1), CUTTACK. . 3.CIT 4.CIT (A) , CUTTACK. 5.DR (ITAT), CUTTACK . 6. GUARD FILE //TRUE COPY// BY ORDER SR. PRIVATE SECRETARY , ITAT , CUTTACK