The ACIT,1(1), V. M/s Dhanraj Jems Pvt. Ltd.,

ITA 342/IND/2008

• Counselvise Citation: [2009] 115 COUNSELVISE.COM (IT) 1533 (ITAT-INDORE)
• Duration Of Justice: 1 year(s) 2 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 05-10-2009
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Next Hearing Date: 05-10-2009
• Assessment Year: 2005-2006
• Appeal Filed On: 21-07-2008
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: APARNA KARAN
• Section: 205; 195; 192; 131; 68

Judgement Text

PAGE 1 OF 5 IN THE INCOME TAX APPELATE TRIBUNAL, INDORE BENCH, INDORE BEFORE SHRI JOGINDER SINGH, JM AND SHRI V.K. GUPTA, AM ITA NO.342/IND/2008 AY : 2005-06 ACIT-1(1), BHOPAL .....APPELLANT V/S. M/S. DHANRAJ GEMS PVT. LTD., 3 RD FLOOR, ARCHANA COMPLEX, ZONE-II, M.P. NAGAR, BHOPAL (PAN AAACD 5711 C) .....RESPONDENT DEPARTMENT BY : SMT. APARNA KARAN, ADDL. CIT, DR ASSESSEE BY : NONE ORDER PER JOGINDER SINGH, JM THIS APPEAL IS BY THE REVENUE AGAINST THE ORDER OF LD. CIT-(A)-I, BHOPAL, DATED 4.4.2008 ON THE GROUND THAT THE LD. FIRST APPELLATE AUTHORITY ERRED IN DELETING THE ADDITION OF RS.40 LAKHS MADE ON ACCOUNT OF UNEXPLAI NED INCREASE IN SHARE CAPITAL MONEY U/S 68 IGNORING THE FACT THAT THE ASSESSEE CO ULD NOT DISCHARGE HIS ONUS IN PROVING IDENTITY, GENUINENESS AND CREDITWORTHINESS OF CREDITOR SPECIALLY IN VIEW OF THE DECISION OF HONBLE KOLKATA HIGH COURT IN CIT VS. R UBY TRADERS & EXPORTERS (2003) 263 ITR 300. DURING HEARING OF THIS APPEAL, WE HAVE HEARD SMT. APARNA KARAN, LD. ADDL. CIT, DR AND NONE WAS PRESENT FOR THE ASSESSE E. MRS. KARAN ADVANCED HER PAGE 2 OF 5 ARGUMENTS WHICH IS IDENTICAL TO THE GROUND RAISED B Y SUPPORTING THE ASSESSMENT ORDER. 2. WE HAVE CONSIDERED THE SUBMISSIONS PUTFORTH BY T HE LD. SR. DR AND PERUSED THE MATERIAL AVAILABLE ON THE FILE. BRIEF FACTS ARE THAT THE ASSESSEE IS A PRIVATE LIMITED COMPANY, DECLARED INCOME OF RS.1039 IN ITS RETURN F ILED ON 24 TH OCTOBER, 2005. THE ASSESSEE RECEIVED SHARE CAPITAL OF RS.20 LAKHS EACH FROM TWO COMPANIES I.E. M/S. ANUDEEP TOWERS P. LTD. AND M/S. JYOTI VYAPAR P. LTD ., KOLKATA. THE ASSESSEE WAS ASKED TO PROVE THE GENUINENESS OF THE IMPUGNED CRED ITS. THE ASSESSEE THROUGH ITS REPLY DATED 5.12.2007 FILED THE COPY OF ACKNOWLEDGE MENT OF INCOME-TAX RETURN OF THE SUBSCRIBER COMPANY, HOWEVER, THE LD. AO ISSUED SUMMONS U/S 131 TO THE DIRECTOR OF THESE COMPANIES. THE STAND OF THE REVEN UE IS THAT THESE SUMMONS WERE NOT COMPLIED WITH, CONSEQUENTLY, THE LD. AO WAS OF THE VIEW THAT IDENTITY OF THE CREDITORS/SHARE MONEY SUBSCRIBERS WAS NOT SUFFICIEN TLY PROVED. HE FOLLOWED THE DECISION FROM THE HONBLE APEX COURT IN STELLER INV ESTMENT LTD. (251 ITR 263) (SC), CIT VS. RUBY EXPORTERS (263 ITR 300) AND MADE THE I MPUGNED ADDITION OF RS.40 LAKHS U/S 68 OF THE ACT TO THE TOTAL INCOME OF THE ASSESSEE. THE STAND OF THE ASSESSEE BEFORE THE LD. CIT(A) WAS THAT THE WHOLE A DDITION IS BASED ON SURMISES/MISCONCEIVED. THE LD. FIRST APPELLATE AUTH ORITY DELETED THE IMPUGNED ADDITION WHICH IS UNDER CHALLENGE BEFORE THIS TRIBU NAL BY THE REVENUE. ADMITTEDLY, THE ASSESSEE FILED INCOME-TAX RETURNS OF THESE COMP ANIES/SUBSCRIBERS, THEREFORE, THE IDENTITY IS PROVED. WE ARE OF THE VIEW THAT NON-APP EARANCE BY THE SUBSCRIBERS CANNOT BE THE SOLE GROUND FOR MAKING THE ADDITION U /S 68. THIS VIEW IS SUPPORTED BY THE DECISION FROM THE HONBLE APEX COURT IN ANIS AH MED & SONS VS. CIT (2008) 297 ITR 441 (SC). AS FAR AS THE ADDITION U/S 68 OF THE ACT IS CONCERNED, WE ARE OF THE PAGE 3 OF 5 VIEW THAT NO ADVERSE INFERENCE IS JUSTIFIED IF THE SHAREHOLDERS FAIL TO RESPOND THE NOTICE OF THE AO. SINCE THE ASSESSEE COMPANY DULY F ILED THE COPY OF THE INCOME-TAX RETURNS OF THE SUBSCRIBING COMPANIES, THEREFORE, TH E IDENTITY OF SHAREHOLDERS IS PROVED, CONSEQUENTLY, THE ADDITION AS PART OF SHARE CAPITAL U/S 68 IS NOT JUSTIFIED BECAUSE THE ASSESSEE HAS DISCHARGED HIS ONUS BY PRO VING THE IDENTITY OF THE SHARE SUBSCRIBER. HAD ANY SUSPICION STILL REMAINS IN THE MIND OF THE AO, HE COULD HAVE INITIATED COERCIVE PROCESS BUT THIS ACTION WAS NO T ADOPTED BY HIM, CONSEQUENTLY, THE DELETION OF ADDITION BY THE LD. CIT(A) IS QUITE JUSTIFIED. THE HON'BLE APEX COURT IN THE CASE OF CIT VS. LOVELY EXPORTS PVT. LTD (2008) 216 CTR (SC) 195 : (2008) 6 DTR (SC) 308 CLEARLY COMES TO THE RESCUE OF THE ASSESSE E WHEREIN IT WAS HELD AS UNDER:- IF THE SHARE APPLICATION MONEY IS RECEIVED BY THE ASSESSEE COMPANY FROM ALLEGED BOGUS SHARE HOLDERS, WHOSE NAMES ARE GIVEN TO THE ASSESSING OFFICER, THE N THE DEPARTMENT IS FREE TO PROCEED TO REOPEN THEIR INDIVIDUAL ASSESSMENTS IN ACCORDANCE WITH LAW, BUT IT CANNOT BE REGARDED AS UNDISCLOSED INCOME OF THE ASSESSEE COMPANY. THE HON'BLE DELHI HIGH COURT IN THE CASE OF CIT VS DIVINE LEASING & FINANCE LTD (2008) 299 ITR 268 (DEL) ON THE EFFECT OF SECTION 6 8 IN THE CASE OF CASH CREDIT SHOWN AS SHARE CAPITAL HELD THAT THE ASSESSEE MUST PROVE THE IDENTITY OF SHARE HOLDERS AND GENUINENESS OF TRANSACTION. THE HONBL E APEX COURT IN LOVELY EXPORT PVT. LTD. (SUPRA) EVEN HAS GONE ONE STEP FURTHER TH AT EVEN THE ALLEGED SHAREHOLDERS ARE BOGUS STILL IT CANNOT BE REGARDED AS UNDISCLOSE D INCOME OF THE ASSESSEE. IN THE PRESENT APPEAL, THE ASSESSEE DULY PROVED THAT THE A MOUNTS WERE RECEIVED FROM SPECIFIC SHARE HOLDERS, THEIR INCOME-TAX RETURNS WE RE FILED, WHEREIN NO DEFECT WAS POINTED OUT BY THE REVENUE, THEREFORE, THE IDENTITY WAS PROVED. IN VIEW OF THESE FACTS, THE DECISION FROM THE HON'BLE APEX COURT IN THE CASE OF LOVELY EXPORTS (SUPRA) PAGE 4 OF 5 CLEARLY SUPPORTS THE CASE OF THE ASSESSEE. WE ARE MAKING IT CLEAR THAT IF THE LEARNED ASSESSING OFFICER WAS NOT SATISFIED, NOTHING PREVEN TED HIM TO REOPEN THE CASES OF SUCH SHARE HOLDERS AS PER THE PROVISIONS OF THE ACT . THE HONBLE DELHI HIGH COURT IN THE CASE OF DIVINE LEASING & FINANCE LTD., GENERAL EXPORT AND CREDITS LIMITED, LOVELY EXPORT P. LTD. (2008) 299 ITR 268 (DEL) CONS IDERED HOST OF DECISIONS INCLUDING THE CASE OF CIT VS. RUBY TRADERS & EXPORT ERS (SUPRA), RELIED UPON BY THE AO/LD. DR AND HELD THAT THE ADDITION IS NOT JUSTIFI ED. THE DECISION OF HONBLE DELHI HIGH COURT WAS AFFIRMED BY THE HONBLE APEX COURT I N CIT VS. LOVELY EXPORTS PVT. LTD (2008) 216 CTR (SC) 195 : (2008) 6 DTR (SC) 308 . OUR VIEW IS FURTHER FORTIFIED BY THE DECISION OF DELHI HIGH COURT IN CIT VS. DOLP HIN CANPACK LTD. (283 ITR 190) (DEL) WHEREIN THE EXPLANATION REGARDING CREDITS WAS FOUND SATISFACTORY BY THE TRIBUNAL, CONSEQUENTLY, THE AMOUNT REPRESENTING CAS H CREDITS WAS HELD TO BE JUSTIFIED IN NOT INCLUDIBLE IN TOTAL INCOME OF THE ASSESSEE U/S 68 OF THE ACT. WHILE COMING TO THIS CONCLUSION, THE HONBLE HIGH COURT D ULY CONSIDERED THE DECISION IN CIT VS. SOPHIA FINANCE LTD., 205 ITR 98 (DEL)(FB) AND C IT VS. STELLER INVESTMENT LTD., 192 ITR 287 (DEL). THE RATIO LAID DOWN IN FOLLOWING DECISIONS FURTHER FORTIFIES THE CASE OF ASSESSEE: 1. CIT VS. KUNDAN INVESTMENT LTD. (263 ITR 626) (KOLKA TA) (PARA 17); 2. CIT VS. MAKHNI & TYAGI P. LTD. (267 ITR 433) (DEL) (PARAS 14 & 25); 3. CIT VS. NIVEDAN VANIJYA NIYOJAN LTD. (263 ITR 623)( KOLKATA) (PARA 17); 4. CIT VS. PRECISION FINANCE P. LTD. (208 ITR 465) (KO LKATA) (PARA 14); 5. CIT VS. SIBAL (RS) (269 ITR 429 (DEL) (PARA 14); 6. CIT VS. STELLER INVESTMENT LTD. (251 ITR 263) (SC) (PARAS 4, 23); 7. HINDUSTAN TEA TRADING CO. LTD. (263 ITR 289)(CAL)(P ARA 17); PAGE 5 OF 5 8. MUNICIPAL CORPORATION DELHI VS. GURNAM KAUR (1989) AIR 1989 SC 38 (PARA 5); 3. IN THE LIGHT OF SPECIFIC DECISION FROM HONBLE A PEX COURT IN THE CASE OF LOVELY EXPORTS (SUPRA) AND VARIOUS OTHER DECISIONS CITED A BOVE, WE HAVE NOT FOUND ANY INFIRMITY IN THE IMPUGNED ORDER, THEREFORE, THIS AP PEAL OF THE REVENUE IS HAVING NO MERIT, CONSEQUENTLY, DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT IN ON 5.10.2009. SD/- SD/- (V.K. GUPTA) (JOGINDER SINGH) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED:5.10.2009 {VYAS} COPY TO: APPELLANT/RESPONDENT/CIT/ CIT(A)/DR