M/s Rajat Capital Market Private Limited, Indore V. The ACIT 2(1), Indore

ITA 339/IND/2012

• Counselvise Citation: 33922714 RSA 2012
• Duration Of Justice: 1 year(s) 11 month(s) 14 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-05-2014
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: DB
• Assessment Year: 2005-2006
• Appeal Filed On: 07-06-2012
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: R A VERMA
• Section: 143(3); 68

Judgement Text

PAGE 1 OF 8 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. : AAACP9288C I.T.A.NO. 339/IND/2012 A.Y. : 2005-06 M/S. RAJAT CAPITAL MARKET PVT.LTD., 2/1, NORTH RAJMOHALLA, INDORE VS. ACIT, 2(1), INDORE. APPELLANT RESPONDENT APPELLANT BY : SHRI ANIL KAMAL GARG, CA RESPONDENT BY : SHRI R. A. VERMA, SR. DR DATE OF HEARING : 28 . 04.2014. DATE OF PRONOUNCEMENT : 21 . 0 5 .201 4 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 2005-06, IN THE MATTER OF ORDER PASSED U/S 143(3) O F THE INCOME-TAX ACT, 1961. RAJAT CAPITAL MARKET PVT.LTD.,INDORE. I.T.A.NO.339/IND/2012 A.Y. 2005-06 2 PAGE 2 OF 8 2. RIVAL CONTENTIONS HAVE BEEN HEARD AND RECORDS PERUSED. ONLY GRIEVANCE OF THE ASSESSEE RELATES TO ADDITION MADE U/S 68 BY ALLEGING RECEIPT OF SHARE CAPITAL AN D SHARE APPLICATION MONEY SHOWN BY THE ASSESSEE AS UNPROVED . 3. WE HAVE GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW AND FOUND THAT ADDITION WAS MADE AS PER THE D IRECTION OF CIT IN THE ORDER PASSED U/S 263. AGAINST THIS OR DER OF CIT U/S.263, ASSESSEE APPROACHED TO TRIBUNAL AND THE TR IBUNAL VIDE ITS ORDER DATED 24-11-2009 HAVE MODIFIED THE D IRECTION OF CIT AND DIRECTED THE ASSESSING OFFICER TO EXAMINE A ND INVESTIGATE THE CASE DE NOVO WITH REFERENCE TO THE SHARE CAPITAL AND SHARE PREMIUM AMOUNT IN THE LIGHT OF DE CISION OF HON'BLE SUPREME COURT IN THE CASE OF LOVELY EXPORTS PVT.LIMITED, REPORTED IN 216 CTR 195 IN ACCORDANCE WITH LAW. HOWEVER, WHILE GIVING EFFECT TO THE ORDER OF TRIBUN AL, THE ASSESSING OFFICER HAS NOT FOLLOWED THE PROPOSITION OF LAW LAID DOWN BY HON'BLE SUPREME COURT IN THE CASE OF LOVELY EXPORTS, WHEREIN IT HAS BEEN HELD THAT WHERE IDENTITY OF THE SHARE APPLICANTS ARE ESTABLISHED, ADDITION CAN BE MADE ON LY IN THE RAJAT CAPITAL MARKET PVT.LTD.,INDORE. I.T.A.NO.339/IND/2012 A.Y. 2005-06 3 PAGE 3 OF 8 HANDS OF SHAREHOLDERS AND NOT IN THE HANDS OF THE A SSESSEE COMPANY. THE LD. AUTHORIZED REPRESENTATIVE DREW OUR ATTENTION TO THE FINDINGS RECORDED BY THE ASSESSING OFFICER AT PARA 12 WITH REGARD TO THE IDENTITY OF THE SHARE AP PLICANTS WHICH WAS FOUND TO BE CLEARLY ESTABLISHED. THE ASSE SSING OFFICER HAS OBSERVED AS UNDER AT PAGE 12, WHICH REA DS AS UNDER :- CLEARLY, IN THIS CASE THOUGH THE IDENTITY HAD BEEN ESTABLISHED, THE RESPONSIBILITY OF PROVING THE SOUR CE AS GENUINE AND THE FINANCIAL STRENGTH OF THE SUBSCRIBERS BECOME SERIOUSLY SUSPECT. THE ASSESSING OFFICER WAS DUTY BOUND TO INVESTIGATED THE CREDITWORTHINESS OF THE SUBSCRIBER, THE GENUINENESS OF THE TRANSACTION AND THE FINANCIAL STRENGTH OF THE SUBSCRIBER. 4. NOW COMING TO THE ORDER OF THE TRIBUNAL DATED 24.11.2009 PASSED IN THIS CASE ITSELF, THE TRIBUNAL HAVE DIRECTED THE ASSESSING OFFICER TO EXAMINE THE SHARE CAPITAL IN THE LIGHT OF THE DECISION OF HON'BLE SUPREME COURT IN THE CASE RAJAT CAPITAL MARKET PVT.LTD.,INDORE. I.T.A.NO.339/IND/2012 A.Y. 2005-06 4 PAGE 4 OF 8 OF LOVELY EXPORTS PRIVATE LIMITED. AGAINST THIS ORD ER OF THE TRIBUNAL, THE DEPARTMENT HAD FILED APPEAL BEFORE TH E HON'BLE HIGH COURT AND ALLEGED THE DIRECTION GIVEN BY THE T RIBUNAL FOR DECIDING THE ISSUE AS PER VERDICT OF HONBLE SUPREM E COURT IN CASE OF LOVELY EXPORTS. THE APPEAL FILED BY THE REV ENUE HAS BEEN DISMISSED BY THE HON'BLE HIGH COURT VIDE ORDER DATED 3.2.2011 AFTER HAVING FOLLOWING OBSERVATIONS :- ON GOING THROUGH THE IMPUGNED APPELLATE ORDER, WE FIND THAT THE TRIBUNAL HAS REMANDED THE MATTER MODIFYING THE ORDER PASSED BY THE COMMISSIONER OF INCOME TAX WITH FURTHER DIRECTION THAT THE ASSESSIN G OFFICER WILL EXAMINE AND INVESTIGATE THE CASE DE NO VO WITH REFERENCE TO THE SHARE CAPITAL AND SHARE PREMIUM AMOUNT IN THE LIGHT OF THE DECISION IN THE CASE OF LOVELY EXPORTS (P) LIMITED AND IN ACCORDANC E WITH LAW AFTER ANALYZING THE TRUE FACTS AND MATERIA L ON RECORD. THE TRIBUNAL AFFIRMED THE ORDER OF THE C IT WITH THE OBSERVATION MADE IN THE ORDER. RAJAT CAPITAL MARKET PVT.LTD.,INDORE. I.T.A.NO.339/IND/2012 A.Y. 2005-06 5 PAGE 5 OF 8 THE APPELLANTS CONTENTION THAT THE ASSESSING OFFI CER WILL HAVE TO TAKE DECISION ONLY IN THE LIGHT OF THE JUDGMENT PASSED BY THE SUPREME COURT IN THE CASE OF LOVELY EXPORTS (P) LIMITED (SUPRA) CANNOT BE SAID T O BE CORRECT BECAUSE THE TRIBUNAL HAS ALSO OBSERVED THAT THE DECISION BE TAKEN IN THE LIGHT OF THE LOVELY EX PORTS (P) LIMITED AND IN ACCORDANCE WITH LAW AFTER ANALYZ ING THE TRUE FACTS AND THE MATERIAL ON RECORD. IN THE CIRCUMSTANCE, IN OUR CONSIDERED VIEW NO CA SE IS MADE OUT IN THE AFORESAID REMAND ORDER. 5. IT IS CLEAR FROM THE ORDER OF THE HIGH COURT THAT A FTER CONSIDERING ALL THE FACTS, THE HON'BLE HIGH COURT D ID NOT FIND ANY INFIRMITY IN THE DIRECTIONS GIVEN BY THE TRIBUN AL. THUS, THE DIRECTION GIVEN BY THE TRIBUNAL TO THE EFFECT THAT ASSESSMENT IN THE CASE OF THE ASSESSEE BE FRAMED IN ACCORDANCE WI TH THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF LO VELY EXPORTS PRIVATE LIMITED AS WELL AS IN ACCORDANCE WI TH THE PROVISIONS OF THE LAW. HOWEVER, THE ASSESSING OFFIC ER WHILE PASSING THE ASSESSMENT ORDER HELD THAT THE DECISION OF THE RAJAT CAPITAL MARKET PVT.LTD.,INDORE. I.T.A.NO.339/IND/2012 A.Y. 2005-06 6 PAGE 6 OF 8 HON'BLE SUPREME COURT IN THE CASE OF LOVELY EXPORTS PRIVATE LIMITED IS NOT APPLICABLE IN THE CASE OF THE ASSESS EE. WE DO NOT FIND ANY MERIT IN THE OBSERVATION OF THE ASSESSING OFFICER IN SO FAR AS THE ISSUE PERTAINING TO SHARE CAPITAL WAS TH E ISSUE BEFORE THE HONBLE SUPREME COURT AND THE VERDICT OF THE HON'BLE SUPREME COURT IS BINDING ON THE LOWER JUDIC IARY. IN THE CASE OF LOVELY EXPORTS, THE HON'BLE SUPREME COU RT HELD AS UNDER :- O NCE THE NAMES OF SHAREHOLDERS ARE FURNISHED BY AN ASSESSEE COMPANY TO ASSESSING OFFICER THEN EVEN IF SUCH SHAREHOLDERS ARE FOUND BOGUS, NO ADDITION IN THE HANDS OF THE ASSESSEE COMPANY CAN BE MADE AND, IN SUCH CASE DEPARTMENT IS FREE TO PROCEED TO REOPEN THEIR [SHAREHOLDERS] INDIVIDUAL ASSESSMENTS IN ACCORDANCE WITH LAW. DESPITE ABOVE HOLDING, THE ASSESSING OFFICER HAS NOT ONLY MISINTERPRETED THE RULING OF THE APEX COURT IN CASE OF LOVELY EXPORTS, BUT HAS GONE ONE STEP RAJAT CAPITAL MARKET PVT.LTD.,INDORE. I.T.A.NO.339/IND/2012 A.Y. 2005-06 7 PAGE 7 OF 8 FURTHER IN GIVING THE FINDING THAT THE DECISION IN THE CASE OF LOVELY EXPORTS IS NOT APPLICABLE IN THE APPELLANTS CASE. 6. IN THE INSTANT CASE, SINCE THE ASSESSING OFFICER HA S ALREADY ACCEPTED THE IDENTITY OF THE SHAREHOLDERS, IN VIEW OF THE DECISION OF THE HON'BLE SUPREME COURT, ADDITION CAN BE MADE ONLY IN THE HANDS OF SUBSCRIBER TO THE SHARE C APITAL AND NOT IN THE HANDS OF THE ASSESSEE COMPANY. OUT OF TH E VARIOUS SUBSCRIBER, WE FOUND THAT COORDINATE BENCH IN THE C ASE OF AGRAWAL COAL CORPORATION HAS HELD HINDUSTAN CONTINE NTALS LIMITED AND OPTIMATES TEXTILE INDUSTRIES LTD. ARE P APER COMPANY, THEREFORE, THE IDENTITY OF HINDUSTAN CONTI NENTALS AND OPTIMATES TEXTILE INDUSTRIES CANNOT BE SAID TO BE ESTABLISHED. IN RESPECT OF OTHER SHAREHOLDERS SINCE IDENTITY WAS FOUND BY THE AO TO ESTABLISH, NO ADDITION IS WARRAN TED IN ASSESSEES HANDS. ACCORDINGLY, WE CONFIRM THE ADDIT ION IN RESPECT OF SHARE CAPITAL RECEIVED FROM HINDUSTAN CO NTINENTALS LIMITED AND OPTIMATE TEXTILE INDUSTRIES AND DIRECT THE ASSESSING OFFICER TO DELETE ADDITION MADE IN RESPEC T OF OTHER RAJAT CAPITAL MARKET PVT.LTD.,INDORE. I.T.A.NO.339/IND/2012 A.Y. 2005-06 8 PAGE 8 OF 8 SHAREHOLDERS. HOWEVER, THE DEPARTMENT IS AT A LIBER TY TO PROCEED TO REOPEN INDIVIDUAL ASSESSMENT OF SHAREHOL DERS AS PER PROVISIONS OF THE ACT. 7. IN THE RESULT, THE APPEAL IS ALLOWED IN PART FOR STATISTICAL PURPOSES THIS ORDER HAS BEEN PRONOUNCED IN THE OPEN COURT ON 21 ST MAY, 2014. SD/- SD/- (JOGINDER SINGH) (R. C. SHARMA) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED :21 ST MAY, 2014. CPU* 125 COPY OF THE ORDER FORWARDED TO : BY ORDER, ( ASSTT. REGISTRAR) ITAT INDORE 1. / THE APPELLANT 2. THE RESPONDENT. 3. THE CIT(A), INDORE 4. CIT, INDORE 5. DR, ITAT, INDORE 6. GUARD FILE. //TRUE COPY//