ITO 6(3)(4), MUMBAI V. KWALITY DEVELOPERS P.LTD, MUMBAI

ITA 3586/MUM/2017

• Counselvise Citation: [2019] 118 COUNSELVISE.COM (IT) 8010 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 7 month(s) 16 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 02-01-2019
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: H
• Assessment Year: 2012-2013
• Appeal Filed On: 16-05-2017
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: MANOJ KUMAR SINGH LD
• Assessee Lawyers: B V JHAVERI LD
• Keywords: Unexplained cash credit; Opportunity of being heard; Principle of natural justice; Additional evidence
• Section: 68; 154; 143(3); 133(6)

Judgement Text

ITA NO.3586/MUM/2017 KWALITY DEVELOPERS PRIVATE LIMITED ASSESSMENT YEAR :2012-13 1 IN THE INCOME TAX APPELLATE TRIBUNAL H BENCH, MUMBAI , , BEFORE HONBLE SHRI PAWAN SINGH, JM AND HONBLE SHRI MANOJ KUMAR AGGARWAL, AM ./ I.T.A. NO.3586/MUM/2017 ( / ASSESSMENT YEAR: 2012-13) INCOME TAX OFFICER - 6(3)(4) ROOM NO.524, 5 TH FLOOR AAYKAR BHAVAN, M.K. ROAD, MUMBAI-400 020 / VS. KWALITY DEVELOPERS PVT.LTD. 221, VASANT UDHYOG BHAVAN SENAPATI BAPAT MARG LOWER PAREL, MUMBAI-400013. ./ ./PAN/GIR NO. AAACK-2442-F ( ' /APPELLANT ) : ( #$ ' / RESPONDENT ) ASSESSEE BY : B.V. JHAVERI- LD. AR REVENUE BY : MANOJ KUMAR SINGH - LD.DR / DATE OF HEARING : 15/11/2018 / DATE OF PRONOUNCEMENT : 02/01/2019 / O R D E R PER MANOJ KUMAR AGGARWAL (ACCOUNTANT MEMBER) 1. AFORESAID APPEAL BY REVENUE FOR ASSESSMENT YEAR [AY] 2012-13 CONTEST THE ORDER OF LD. COMMISSIONER OF INCOME-TAX (APPEALS)-12, MUMBAI, [CIT(A)], APPEAL NO. CIT(A)-12/ITO-6(3)(4)/99/15-16 DATED 23/03/2017ON FOLLOWING EFFECTIVE GROUNDS OF APPEAL: - ITA NO.3586/MUM/2017 KWALITY DEVELOPERS PRIVATE LIMITED ASSESSMENT YEAR :2012-13 2 '1.ON THE FACTS AND CIRCUMSTANCES OF CASE AND IN LA W, THE LD. CIT(A) ERRED IN DELETING THE ADDITION OF RS. 5,00,00,000/'- U/S. 68 OF THE ACT, ON ACCOUNT OF UNEXPLAINED SHARE PREMIUM.' 2.'ON THE FACTS AND CIRCUMSTANCES OF CASE AND IN LA W, THE LD. CIT(A) ERRED IN DELETING THE ADDITION OF RS. 5,00,00,000/- BEING TH E AMOUNT RECEIVED ON ACCOUNT OF SHARE APPLICATION MONEY/ SHARE CAPITAL AND SHARE PR EMIUM FROM M/S. HANURANG VINIMAY PVT. LTD. AND M/S. SELECT INFILEASE PVT. LT D. AND ITS DIRECTORS, WITHOUT APPRECIATING THE FACT THE GENUINENESS OF THE SHARE PREMIUM AMOUNT AND CREDITWORTHINESS OF THE COMPANIES HAS NOT BE ESTABL ISHED BY THE ASSESSEE COMPANY' 3.'ON THE FACTS AND CIRCUMSTANCES OF CASE AND IN LA W, THE LD, CIT(A) ERRED IN DELETING THE ADDITION OF RS. 5,00,00,000/-, WITHOUT APPRECIATING THE FACT THAT THE COMPANIES ENTITIES WHICH SUBSCRIBED TO THE SHARES O F THE ASSESSEE COMPANY HAD SEEN FORMED ON PAPER ONLY WITHOUT HAVING SUBSTANTIA L GENUINE ACTIVITY AND NOTICES ISSUED TO THESE COMPANIES U/S. 133(6) OF THE ACT WE RE RETURNED BACK BY THE POSTAL AUTHORITIES AND THE ASSESSEE ALSO FAILED TO PRODUCE THESE PARTIES.' 4.THE APPELLANT PRAYS THAT THE ORDER OF THE CIT (AP PEALS) ON THE ABOVE GROUNDS BE SET ASIDE AND THAT OF THE AO BE RESTORED. THE ASSESSMENT FOR IMPUGNED AY WAS FRAMED BY LD. INCOME TAX OFFICER-6(3)(4), MUMBAI [AO] IN SCRUTINY ASSESSMENT U/S 143(3) ON 28/03/2015 WHEREIN THE INCOME OF THE ASSESSEE WAS A SSESSED AT RS.491.71 LACS AFTER CERTAIN ADDITION U/S 68 FOR RS .490 LACS IS AGAINST RETURNED INCOME OF RS.1.71 LACS FILED BY THE ASSESS EE ON 18/09/2012. DURING IMPUGNED AY, THE ASSESSEE BEING RESIDENT CORPORATE ENTITY WAS STATED TO BE ENGAGED IN THE BUSINESS OF REAL ESTATE. 2. DURING ASSESSMENT PROCEEDINGS, IT TRANSPIRED THA T THE ASSESSEE INTRODUCED A SUM OF RS.500 LACS ON ACCOUNT OF SHARE APPLICATION MONEY / SHARE CAPITAL AND SHARE PREMIUM STATED TO BE RECEIVED FROM FOLLOWING ENTITIES: - NO. PERSON / ENTITIES NO. OF SHARES ISSUED AMOUNT ( RS.) 1. HANURANG VINIMAY PVT. LTD. 6000 EQUITY SHARES RS .300 LACS 2. SELECT INFILEASE LTD 4000 EQUITY SHARES RS.200 LACS TOTAL RS.500 LACS THE FACE VALUE OF THE SHARES WAS REFLECTED TO BE RS .100/- PER SHARE ISSUED AT A PREMIUM OF RS.4,900/- PER SHARE. HOWEVE R, THE FINANCIALS OF ITA NO.3586/MUM/2017 KWALITY DEVELOPERS PRIVATE LIMITED ASSESSMENT YEAR :2012-13 3 THE ASSESSEE REVEALED THAT IT HAD NO SUBSTANTIAL BU SINESS OPERATIONS DURING IMPUGNED AY OR IN PRECEDING/SUCCEEDING YEARS . NOTICES SENT U/S 133(6) TO BOTH THESE ENTITIES TO CONFIRM THE TRANSA CTIONS WERE RETURNED BACK BY THE POSTAL AUTHORITY. THE AFORESAID FACTS W ERE CONFRONTED TO THE ASSESSEE AND THE ASSESSEE WAS SHOW-CAUSED AS TO WHY THE SAID SUM WAS NOT TO BE TREATED AS UNEXPLAINED CASH CREDIT U/S 68 OF THE ACT. ALTHOUGH THE ASSESSEE DEFENDED ITS STAND AND JUSTIF IED THE PREMIUM ON SHARES, HOWEVER, NOT CONVINCED, LD. AO RELYING UPON CERTAIN JUDICIAL PRONOUNCEMENTS, TREATED THE SAME AS UNEXPLAINED CAS H CREDIT U/S 68 AND ADDED THE SAME TO THE INCOME OF THE ASSESSEE. I N THE ORIGINAL ASSESSMENT ORDER DATED 28/03/2015, LD. AO MADE ADDI TION OF RS.490 LACS, BEING SHARE PREMIUM RECEIVED BY THE ASSESSEE. HOWEVER, THE ADDITION HAS BEEN REVISED TO RS.500 LACS BY WAY OF RECTIFICATION U/S 154 ON 31/03/2015 TO INCLUDE THE PORTION OF SHARE CAPITAL THEREIN. 3. AGGRIEVED, THE ASSESSEE CONTESTED THE SAME WITH SUCCESS BEFORE LD. CIT(A) VIDE IMPUGNED ORDER DATED 23/03/2017 WHE REIN THE ASSESSEE SUBMITTED ADDITIONAL EVIDENCES IN SUPPORT OF THE TR ANSACTIONS AS PER RULE 46A WHICH WERE DULY ADMITTED BY LD. CIT(A). THE LD. CIT(A), AFTER CONSIDERING THE SAME, REACHED A CONCLUSION THAT THE ASSESSEE SATISFIED THE THREE INGREDIENTS OF SECTION 68 AND DISCHARGED THE PRIMARY ONUS OF ESTABLISHING THE GENUINENESS OF THE TRANSACTIONS AN D THEREFORE, THE ADDITIONS WERE NOT JUSTIFIED IN TERMS OF DECISION O F HONBLE BOMBAY HIGH COURT RENDERED IN CIT VS. GREEN INFRA LIMITED [ITA NO. 1162 OF 2014 DATED 16/01/2017]. AGGRIEVED, THE REVENUE IS IN FURTHER APPEAL BEFORE US. 4. THE LD. DEPARTMENTAL REPRESENTATIVE [DR], SHRI MANOJ KUMAR SINGH SUBMITTED THAT THE ASSESSEE MISERABLY FAILED TO PR OVE THE ITA NO.3586/MUM/2017 KWALITY DEVELOPERS PRIVATE LIMITED ASSESSMENT YEAR :2012-13 4 AFORESAID TRANSACTIONS DURING ASSESSMENT PROCEEDING S AND FILED ADDITIONAL EVIDENCES BEFORE FIRST APPELLATE AUTHORI TY. THESE EVIDENCES WERE NEVER CONFRONTED TO LD. AO WHICH WAS IN VIOLAT ION OF THE PRINCIPLE OF NATURAL JUSTICE. IT WAS FURTHER SUBMITTED THAT THE THREE INGREDIENTS AS ENVISAGED BY SECTION 68 REMAINED UNFULFILLED AND TH E ASSESSEE COULD NOT JUSTIFY THE HUGE SHARE PREMIUM IN CONTRAST TO THE F ACT THAT NO SUBSTANTIAL BUSINESS ACTIVITY WAS BEING CARRIED OUT BY THE ASSE SSEE DURING IMPUGNED AY AS WELL AS IN PRECEDING / SUCCEEDING YEARS. PER CONTRA, LD. AUTHORIZED REPRESENTATIVE FOR ASSESSEE [AR], SHRI B .V.JHAVERI, DRAWING OUR ATTENTION TO THE DOCUMENTS PLACED IN THE PAPER-BOOK AND BY WAY OF WRITTEN SUBMISSIONS , SUBMITTED THAT THE ASSESSEE HAD DISCHARGED THE INITIAL ONUS CASTED UPON HIM TO ESTABLISH THE GENUI NENESS OF THE TRANSACTIONS AND THEREFORE, THE STAND OF LD. CIT(A) WAS QUITE JUSTIFIED. ELABORATE WRITTEN SUBMISSIONS / PROPOSITIONS / JUDI CIAL PRONOUNCEMENTS HAVE BEEN PLACED BEFORE US TO FORTIFY THE ASSESSEE S DEFENSE. 5.1 WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSI ONS AND PERUSED RELEVANT MATERIAL ON RECORD INCLUDING DOCUMENTS PLA CED IN THE PAPER- BOOK & JUDICIAL PRONOUNCEMENTS AS CITED BEFORE US. UPON DUE CONSIDERATION, WE FIND THAT, IN THE OPINION OF LD. AO, THE ASSESSEE CONCLUSIVELY FAILED TO ESTABLISH THE GENUINENESS OF THE TRANSACTIONS WITH COGENT EVIDENCES DURING ASSESSMENT PROCEEDINGS. THE NOTICES SENT U/S 133(6) ISSUED TO THE SHARE APPLICANTS REMAINED UNSERVED. IT WAS NOTED THAT NO SUBSTANTIAL BUSINESS WAS BEING CARRIED OUT BY THE ASSESSEE DURING SEVERAL YEARS. THE THREE INGREDIENTS VIZ. ID ENTITY, CREDITWORTHINESS & GENUINENESS COULD NOT BE SATISFIED BY THE ASSESSE E BEFORE LD. AO WHICH RESULTED INTO IMPUGNED ADDITIONS IN THE HANDS OF THE ASSESSEE. ITA NO.3586/MUM/2017 KWALITY DEVELOPERS PRIVATE LIMITED ASSESSMENT YEAR :2012-13 5 HOWEVER, DURING APPELLATE PROCEEDINGS, THE ASSESSEE FILED ADDITIONAL EVIDENCES U/R 46A IN SUPPORT OF THE TRANSACTIONS AN D TO DEMONSTRATE THE SATISFACTION OF THREE INGREDIENTS OF SECTION 68. IT IS ALSO AN UNDISPUTED FACT THAT THESE EVIDENCES WERE NEVER CONFRONTED TO THE LD. AO WHICH WAS IN VIOLATION OF PRINCIPLE OF NATURAL JUSTICE. H OWEVER, AS PER THE SUBMISSIONS OF LD. AR, ALL THESE DOCUMENTS WERE ALR EADY PLACED BEFORE LD. AO. 5.2 PROCEEDING FURTHER, WE FIND THAT LD. AR, BY WAY OF WRITTEN SUBMISSIONS, HAS SUBMITTED AS MANY AS 8 PROPOSITION S TO CONTEND THAT THE ADDITIONS U/S 68 WERE NOT JUSTIFIED. WE FIND TH AT MOST OF THESE SUBMISSIONS HAVE NOT BEEN DEALT WITH EITHER OF THE LOWER AUTHORITIES AND MANY OF THE PROPOSITIONS REQUIRE APPRECIATION OF FA CTUAL MATRIX AS WELL AS DOCUMENTARY EVIDENCES & VERIFICATION AT THE LEVEL O F LD. AO. 5.3 UPON FURTHER PERUSAL OF WRITTEN SUBMISSION, IT ALSO APPEARS THAT THE ASSESSEE VIDE REPLIES DATED 01/07/2014, 18/12/2014, 27/10/2015 & 20/03/2015, FILED CERTAIN DOCUMENTARY EVIDENCES IN SUPPORT OF THE TRANSACTIONS AND IT APPEARS THAT THE SAME HAS NOT B EEN APPRECIATED IN THE PROPER PERSPECTIVE BY LD. AO. THERE IS NO DISCU SSION, WHATSOEVER, REGARDING THESE SUBMISSIONS AND EVIDENCES IN THE QU ANTUM ASSESSMENT ORDER. THE LD. AR HAS ALSO SUBMITTED THAT NOTICES U /S 133(6) WERE RETURNED UNDELIVERED SINCE THE SAME WERE SENT AT TH E WRONG ADDRESS. IT HAS FURTHER BEEN SUBMITTED THAT BOTH THE ENTITIES, UPON BEING INFORMED BY THE ASSESSEE ABOUT NOTICES U/S 133(6), CONFIRMED TH E TRANSACTIONS WITH SUPPORTING DOCUMENTARY EVIDENCES. THE ATTENTION HAS ALSO BEEN DRAWN TO THE FACT THAT VALUATION OF SHARES WAS JUSTIFIED BY FOLLOWING DISCOUNTED CASH FLOW METHOD WHICH WAS PLACED ON RECORD. SIMILAR OTHER ITA NO.3586/MUM/2017 KWALITY DEVELOPERS PRIVATE LIMITED ASSESSMENT YEAR :2012-13 6 SUBMISSIONS / PLEAS HAVE BEEN RAISED BEFORE US WHIC H LEAD US TO REACH A CONCLUSION THAT THE ISSUE REQUIRE REAPPRECIATION BY LOWER AUTHORITIES. 5.4 SIMILAR IS THE POSITION OF IMPUGNED ORDER WHERE WE FIND THAT THERE IS NO DISCUSSION AS TO HOW THE THREE INGREDIENTS OF SE CTION 68 WERE SATISFIED BY THE ASSESSEE WHICH LED THE LD. CIT(A) TO DELETE THE IMPUGNED ADDITION. 5.5 ON ABOVE FACTS AND CIRCUMSTANCES, WITHOUT DELVI NG MUCH DEEPER, WE SET ASIDE THE IMPUGNED ISSUE AND REMIT THE MATTE R BACK TO THE FILE OF LD. AO FOR RE-ADJUDICATION AFTER APPRECIATING THE D OCUMENTARY EVIDENCES FILED BY THE ASSESSEE & PLEAS RAISED BY LD. AR. THE ASSESSEE IS DIRECTED TO SUBSTANTIATE HIS STAND, IN THIS REGARD. NEEDLESS TO ADD THAT REASONABLE OPPORTUNITY OF BEING HEARD SHALL BE GRANTED TO THE ASSESSEE. 6. RESULTANTLY, THE REVENUES APPEAL STANDS ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 02 ND JANUARY, 2019. SD/- SD/- (PAWAN SINGH) (MA NOJ KUMAR AGGARWAL) / JUDICIAL MEMBER / ACCOUNTANT MEMBER MUMBAI; DATED : 02/01/2019 SR.PS, JAISY VARGHESE !'#$ # / COPY OF THE ORDER FORWARDED TO : 1. ' / THE APPELLANT 2. #$ ' / THE RESPONDENT ITA NO.3586/MUM/2017 KWALITY DEVELOPERS PRIVATE LIMITED ASSESSMENT YEAR :2012-13 7 3. + ( ) / THE CIT(A) 4. + / CIT CONCERNED 5. , -#&. , . , / DR, ITAT, MUMBAI 6. - /01 / GUARD FILE / BY ORDER, / (DY./ASSTT.REGISTRAR) , / ITAT, MUMBAI.