M/s S.M.R.Cotton Mills (P) Ltd., Rasipuram V. ACIT, Salem

ITA 387/CHNY/2009

• Counselvise Citation: [2011] 134 COUNSELVISE.COM (IT) 4808 (ITAT-CHENNAI)
• Duration Of Justice: 2 year(s) 2 month(s) 30 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-06-2011
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 15-06-2011
• Assessment Year: 1995-1996
• Appeal Filed On: 25-03-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: N QUADIR HOSEYN
• Keywords: Unexplained cash credit
• Section: 68

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL BENCH A CHENNAI BEFORE SHRI ABRAHAM P. GEORGE, ACCOUNTANT MEMBER AN D SHRI GEORGE MATHAN, JUDICIAL MEMBER .. I.T.A. NO. 387/MDS/2009 ASSESSMENT YEAR : 1995-96 M/S. S.M.R. COTTON MILLS (P) LTD., 118, TRICHY MAIN ROAD, NAMAKKAL-637 001. V. THE ASSISTANT COMMISSIONER OF INCOME-TAX, COMPANY CIRCLE, SALEM. (PAN: AAECS6244A) A N D I.T.A. NO. 471/MDS/2009 ASSESSMENT YEAR 1995-96 THE DEPUTY COMMISSIONER OF V. M/S. S. M.R. COTTON MILLS INCOME-TAX , COMPANY CIRCLE, (P) LTD., 118 , TRICHY MAIN ROAD, SALEM. NAMAKKAL-637 001. (APPELLANTS) (RESPONDENTS) ASSESSEE BY : SHRI N. QUADIR HOSEYN DEPARTMENT BY : SHRI SHAJI P. JACOB O R D E R PER GEORGE MATHAN, JUDICIAL MEMBER : ITA NO. 387/MDS/2009 IS AN APPEAL FILED BY THE ASS ESSEE AND ITA NO. 471/MDS/2009 IS AN APPEAL FILED BY THE REVENUE AGAI NST THE ORDER OF THE LEARNED I.T.A. NO.387 & 471/MDS/2009 2 CIT(APPEALS), SALEM IN ITA NO. 68/98-99 DATED 7-1-2 009 FOR THE ASSESSMENT YEAR 1995-96. AS THE ISSUES IN BOTH THE APPEALS ARE INT ER-CONNECTED, THE SAME ARE BEING DISPOSED OF BY THIS COMMON ORDER. 2. SHRI N. QUADIR HOSEYN, ADVOCATE REPRESENTED ON B EHALF OF THE ASSESSEE AND SHRI SHAJI P. JACOB, LEARNED SR. DR REPRESENTED ON BEHALF OF THE REVENUE. 3. IT WAS SUBMITTED BY THE LEARNED AUTHORISED REPRE SENTATIVE THAT THE ASSESSEE IS A PRIVATE LIMITED COMPANY ENGAGED IN THE BUSINES S OF MANUFACTURE AND SALE OF STAPLE FIBRE YARN. IT WAS THE SUBMISSION THAT THE RETURN FILED BY THE ASSESSEE CAME TO BE PROCESSED AND IT WAS NOTICED THAT THE AS SESSEE HAD RECEIVED INTEREST- FREE UNSECURED LOANS FROM 21 PERSONS TOTALING TO ` 68,05,086/- IN CASH. THE ASSESSEE HAD BEEN ASKED TO PROVE THE LOAN CREDITORS . THE ASSESSEE HAD PRODUCED CONFIRMATION LETTERS FROM THE VARIOUS LOAN CREDITOR S. HOWEVER, THE ASSESSING OFFICER HAD DISBELIEVED THE CLAIM OF THE LOAN CRED ITORS AND HAD TREATED THE SAME AS THE UNEXPLAINED CASH CREDIT AND INVOKED THE PROV ISIONS OF SECTION 68 OF THE IT ACT, 1961 AND ADDED THE SAME TO THE TOTAL INCOME OF THE ASSESSEE. ON APPEAL, THE ASSESSEE HAD AGAIN FILED THE CONFIRMATION LETTE R. THE LEARNED CIT(A) HAD ALSO VERIFIED THE SAME AND OUT OF THE 21 CREDITORS, THE LEARNED CIT(A) HAD CONFIRMED THE ADDITION IN RESPECT OF 3 CREDITORS BEING SHRI P . RAMESH, SHRI V. MUTHUSAMY AND SHRI M. SHANMUGASUNDARAM. THE BALANCE C REDITORS WHO HAD APPEARED BEFORE THE ASSESSING OFFICER AND WHO HAD CONFIRMED THE TRANSACTION HAD BEEN ACCEPTED BY THE LEARNED CIT(A) AND THE ADDITION IN RESPECT OF THE 16 CREDITORS HAD I.T.A. NO.387 & 471/MDS/2009 3 BEEN DELETED. IT WAS THE SUBMISSION THAT IN RESPEC T OF THE DELETION OF THE ADDITION REPRESENTING 18 CREDITORS, THE REVENUE IS IN APPEAL AND IN RESPECT OF THE 3 CREDITORS WHOSE ADDITION HAD BEEN CONFIRMED BY THE LEARNED CIT(A) THE ASSESSEE IS IN APPEAL. 3. THE LEARNED AUTHORISED REPRESENTATIVE DREW OUR A TTENTION TO THE CONFIRMATION LETTERS AS HAD BEEN EXTRACTED IN THE ORDER OF THE L EARNED CIT(A) AS ALSO THE EXPLANATIONS GIVEN BEFORE THE LEARNED CIT(A). IT W AS THE SUBMISSION THAT IN ALL THE CASES THE CREDITORS HAD BASICALLY ADVANCED SHAR E APPLICATION MONEY AND TO WHOM THE SHARES HAD ALSO BEEN ALLOTTED DURING JANUA RY,1996 AND MAY,1998. IT WAS THE SUBMISSION THAT EVEN IN RESPECT OF THE 3 PE RSONS WHO HAD NOT APPEARED BEFORE THE ASSESSING OFFICER THE SHARES HAD BEEN AL LOTTED. IT WAS THE SUBMISSION THAT IN REGARD TO SHRI P. RAMESH, ADVANCES HAD ALSO BEEN GIVEN DURING THE YEAR ENDED 31.3.1992, 31.3.1993 AND 31.3.1994 AND THE SA ME HAD ALSO BEEN ACCEPTED BY THE REVENUE WHILE COMPLETING THE ASSESSMENT OF T HE ASSESSEE COMPANY DURING THOSE RELEVANT YEARS. IN REGARD TO SHRI V. MUTHUSA MY ADVANCES WERE RECEIVED DURING THE YEARS ENDED 31.3.1992, 31.3.1993 AND 31. 3.1994 AND HAD ALSO BEEN ACCEPTED BY THE DEPARTMENT WHILE COMPLETING THE ASS ESSMENT OF THE ASSESSEE COMPANY FOR THOSE ASSESSMENT YEARS. THE SAME IS AL SO IN THE CASE OF SHRI M. SHANMUGASUNDARAM. IT WAS THE FURTHER SUBMISSION TH AT IN ALL THE CASES THE SHARES HAD BEEN ALLOTTED AND CONSEDQUENTLY IN VIEW OF THE DECISION OF THE HON'BLE I.T.A. NO.387 & 471/MDS/2009 4 SUPREME COURT IN THE CASE OF CIT V. LOVELY EXPORTS P .LTD. REPORTED IN 319 ITR ST. 5, WHEREIN THE HON'BLE SUPREME COURT HAS HELD AS FO LLOWS : SHARE APPLICATION MONEYS RECEIVED BY COMPANY. 11-1-2008 : THEIR LORDSHIPS S.H. KAPADIA AND B. SUDERSHAN REDDY JJ. DISMISSED THE DEPARTMENTS SPECIA L LEAVE PETITION AGAINST THE JUDGMENT DATED NOVEMBER 16,2006 OF THE DELHI HIGH COURT IN ITA NO. 953 OF 20065 REPORT ED IN 299 ITR 268, WHEREBY THE HIGH COURT AFFIRMED THE DELETI ON BY THE TRIBUNAL OF ADDITIONS MADE ON ACCOUNT OF SUMS RECEI VED FROM DIRECTORS OF PROMOTERS AND ALSO BY WAY OF A PUBLIC ISSUE. THE COURT WHILE DISMISSING THE SPECIAL LEAVE PETITION H ELD AS FOLLOWS : CAN THE AMOUNT OF SHARE MONEY BE REGARDED AS UNDIS CLOSED INCOME UNDER SECTION68 OF THE INCOME-TAX ACT, 1961? WE FIND NO MERIT IN THIS SPECIAL LEAVE PETITION FOR THE SIM PLE REASON THAT IF THE SHARE APPLICATION MONEY IS RECEIVED BY THE A SSESSEE- COMPANY FROM ALLEGED BOGUS SHAREHOLDERS, WHOSE NAME S ARE GIVEN TO THE ASSESSING OFFICER, THEN THE DEPARTMENT IS FREE TO PROCEED TO REOPEN THEIR INDIVIDUAL ASSESSMENTS IN A CCORDANCE WITH LAW. HENCE, WE FIND NO INFIRMITY WITH THE IMP UGNED JUDGMENT. I.T.A. NO.387 & 471/MDS/2009 5 IT WAS SUBMITTED BY THE LEARNED AUTHORISED REPRESEN TATIVE THAT THE ADDITION AS CONFIRMED BY THE LEARNED CIT(A) IS LIABLE TO BE DEL ETED AND THE DELETION AS DIRECTED BY THE LEARNED CIT(A) IS LIABLE TO BE UPHE LD. 4. IN REPLY, THE LEARNED DR VEHEMENTLY SUPPORTED TH E ORDER OF THE ASSESSING OFFICER IN RESPECT OF THE REVENUES APPEAL. IN REG ARD TO THE ASSESSEES APPEAL, IT WAS THE SUBMISSION THAT THE THREE PERSONS HAD NOT A PPEARED BEFORE THE ASSESSING OFFICER. IT WAS THE SUBMISSION THAT THE ORDER OF T HE LEARNED CIT(A) IN REGARD TO THE CONFIRMATION OF THE ADDITION IN RESPECT OF THE THREE CREDITORS WAS LIABLE TO BE UPHELD. 5. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. A PER USAL OF THE ORDER OF THE LEARNED CIT(A) AS ALSO THAT OF THE ASSESSING OFFICE R CLEARLY SHOWS THAT OUT OF THE 21 SHARE APPLICANTS, 18 HAVE APPEARED BEFORE THE AS SESSING OFFICER. IT WAS ALSO NOTICED THAT THE 18 HAVE SPECIFICALLY ADMITTED THAT THEY HAVE GIVEN LOANS TO THE COMPANY. THE LOAN CREDITORS HAVING APPEARED BEFORE THE ASSESSING OFFICER AND HAVING CONFIRMED THAT THEY HAVE GIVEN THE LOANS, OB VIOUSLY, THE SAME CANNOT BE TREATED AS THE UNEXPLAINED INCOME OF THE ASSESSEE. IN REGARD TO THE BALANCE 3 CREDITORS, WHO HAD NOT APPEARED BEFORE THE ASSESSIN G OFFICER, IT IS NOTICED THAT THE SHARES HAVE ALSO BEEN ALLOTTED TO THE LOAN CRED ITORS. ONCE THE SHARES HAVE ALSO BEEN ALLOTTED TO THE LOAN CREDITORS, THEN IN V IEW OF THE PRINCIPLES LAID DOWN BY THE HON'BLE SUPREME COURT IN THE CASE OF LOVELY EXPO RTS P. LTD., REFERRED TO SUPRA, NO ADDITION CAN BE MADE IN THE HANDS OF THE ASSESSEE. IN THE I.T.A. NO.387 & 471/MDS/2009 6 CIRCUMSTANCES, RESPECTFULLY FOLLOWING THE DECISION OF THE HON'BLE SUPREME COURT IN THE CASE OF LOVELY EXPORTS P. LTD., REFERRED TO SUPR A, THE FINDING OF THE LEARNED CIT(A) IN REGARD TO THE DELETION OF THE ADDITION RE PRESENTING 18 CREDITORS STANDS CONFIRMED AND THE FINDING IN REGARD TO THE CONFIRMA TION OF THE ADDITION REPRESENTING THE 3 CREDITORS STANDS REVERSED. . IN THE CIRCUMSTANCES THE APPEAL OF THE ASSESSEE IN ITA NO. 387/MDS/2009 STANDS ALLOWED AND THE APPEAL OF THE REVENUE IN ITA NO. 471/MDS/2009 STANDS DISMISSED. 6. THE ORDER WAS PRONOUNCED IN THE COURT ON 24/06/2 011. SD/- SD/- (ABRAHAM P. GEORGE) (GEORGE MATHAN) ACCOUNTANT MEMBER JUDICIAL MEMBER CHENNAI, DATED THE 24 TH JUNE , 2011. H. COPY TO: ASSESSEE/AO/CIT (A)/CIT/D.R./GUARD FILE