AURA SOAPS P.LTD, MUMBAI V. ACIT WD 6(1), MUMBAI

ITA 3919/MUM/2012

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 0313 (ITAT-MUMBAI)
• Duration Of Justice: 5 year(s) 2 month(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-08-2017
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 16-08-2017
• Assessment Year: 2007-2008
• Appeal Filed On: 04-06-2012
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: RAJESH KUMAR YADAV
• Keywords: Unexplained cash credit; Bogus Share capital
• Section: 143(3); 133(6); 68

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH A, MUMBAI BEFORE SHRI G.S. PANNU, ACCOUNTANT MEMBER AND SHRI AMARJIT SINGH , JUDICIAL MEMBER ITA NO. 3919/MUM/2012 : A.Y : 2007 - 08 M/S. AURA SOAPS PRIVATE LIMITED 172, MMGS MARG, SHARDA CINEMA BUILDING, GROUND FLOOR, DADAR (E), MUMBAI 400 014 (APPELLANT) PAN : AAECA8476D VS. ACIT, WARD - 6(1), MUMBAI (RESPONDENT) APPELLANT BY : NONE RESPONDENT BY : SHRI RAJESH KUMAR YADAV DATE OF HEARING : 16/08/2017 DATE OF PRONOUNCEMENT : 16 /08/2017 O R D E R PER G.S. PANNU , AM : THE CAPTIONED APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF CIT(A) - 14, MUMBAI DATED 28.02.2012 PERTAINING TO THE ASSESSMENT YEAR 2007 - 08 , WHICH IN TURN HAS ARISEN FROM THE ORDER PASSED BY THE ASSESSING OFFICER DATED 24.12.2009 UNDER SECTION 143(3) OF THE INCOME TAX ACT, 1961 (IN SHORT THE ACT). 2. IN ITS APPEAL, ASSESSEE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL: - 2 M/S. AURA SOAPS PVT. LTD. ITA NO. 3919/MUM/2012 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, CIT(A) 14, MUMBAI, HAS ERRED IN CONFIRMING THE ADDITION OF RS. 1,35,00,000/ - BEING THE SHARE CAPITAL RECEIVED DURING THE YEAR U/S 68 OF THE INCOME TAX ACT. 2. THE LEARNED CIT(A) ERRED IN NOT APPRECIATING THE FACT THAT: A) THE ASSESSEE HAS FILED THE COMPLETE SET OF DOCUMENTS AND CONFIRMATIONS BEFORE THE AO, WHICH WAS CONFIRMED BY THE REMAND REPORT. B) ALL THE SHARE APPLICATIONS WERE RECEIVED BY WAY OF CROSSED ACCOUNT PAYEE CHEQUES. C) THE ASSESSEE HAS ALSO SUBMITTED SWORN AFFADIVITS FROM THE SHAREHOLDERS WHICH WERE CONFIRMED BY THE REMAND REPORT. D) THE ASSESSEE HAS GIVEN COMPLETE DETAILS OF THE SHAREHOLDERS AND THUS FULFILLED THE ONUS OF PROOF. E) THE ASSESSEE COULD NOT PRESENT THE SHAREHOLDERS DUE TO THE INCONVENIENC E DUE TO THE DISTANCE, WHICH WERE CONVEYED TO BOTH AO AND CIT(A) 3. THE APPELLANT THEREFORE PRAYS THAT THE THE ADDITION OF RS.1,35,00,000/ - BEING THE SHARE CAPITAL RECEIVED DURING THE YEAR U/S 68 OF THE INCOME TAX ACT BE DELETED. 3. IN THIS APPEAL, ALT HOUGH THE ASSESSEE HAS RAISED MULTIPLE GROUNDS OF APPEAL, BUT THE SOLITARY ISSUE IN DISPUTE IS WITH REGARD TO THE ACTION OF CIT(A) IN SUSTAINING THE ADDITION OF RS.1,35,00,000/ - U/S 68 OF THE ACT ON ACCOUNT OF UNEXPLAINED SHARE CAPITAL. 4. AT THE TIME OF HEARING, IT WAS NOTED THAT NONE APPEARED ON BEHALF OF THE APPELLANT - ASSESSEE WHEREAS SHRI RAJESH KUMAR YADAV , LD. DR APPEARED ON BEHALF OF THE DEPARTMENT. THE RECORDS REVEAL THAT THE 3 M/S. AURA SOAPS PVT. LTD. ITA NO. 3919/MUM/2012 APPEAL HAD BEEN FIXED ON VARIOUS OCCASIONS AND , INSPITE OF ISSUANCE OF N OTICES BY REGISTERED POST, NONE HAS APPEARED ON BEHALF OF THE ASSESSEE. EVEN ON THE APPOINTED DATE OF HEARING, NO APPEARANCE HAS BEEN PUT ON BEHALF OF THE APPELLANT - ASSESSEE INSPITE OF NOTICE ISSUED THROUGH REGISTERED POST A.D, THEREFORE, FOLLOWING RULE 2 4 OF THE INCOME TAX (APPELLATE TRIBUNAL) RULES, 1963, THE APPEAL IS BEING DISPOSED OF EX PARTE QUA THE APPELLANT - ASSESSEE AFTER HEARING THE LD. DR ON MERITS. 5. ON THE BASIS OF THE ORDERS OF THE AUTHORITIES BELOW, THE FOLLOWING FACT - POSITION EMERGES. THE APPELLANT IS A COMPANY INCORPORATED UNDER THE PROVISIONS OF THE COMPANIES ACT, 1956 AND FOR THE ASSESSMENT YEAR UNDER CONSIDERATION, IT FILED A RETURN OF INCOME DECLARING TOTAL INCOME OF RS. ( - )2 ,21,12,280/ - , WHICH WAS SUBJECT TO A SCRUTINY ASSESSMENT. IN THE COURSE OF THE ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER NOTED THAT DURING THE YEAR UNDER CONSIDERATION, ASSESSEE HAD ISSUED SHARE CAPITAL TO 26 DIFFERENT CONCERNS (TABULATED IN PARA 4 OF THE ASSESSMENT ORDER) AMOUNTING TO RS.1,35,00,000/ - . THE ASSESSMENT ORDER REVEALS THAT THE ASSESSING OFFICER CARRIED OUT A VERIFICATION EXERCISE BY ISSUANCE OF NOTICES TO THE 26 CONCERNS U/S 133(6) OF THE ACT CALLING FOR VARIOUS DETAILS, VIZ. NATURE OF T RANSACTION WITH THE ASSESSEE, BANK STATEMENT, SOURCE OF INVESTMENT AND COPY OF RESPECTIVE FINANCIAL STATEMENTS AND INCOME TAX RETURNS. THE ASSESSING OFFICER RECORDS THAT THE NOTICES ISSUED U/S 133(6) OF THE ACT IN ALL THE CASES WERE RETURNED UNSERVED. TH E ASSESSMENT ORDER FURTHER RECORDS THAT ASSESSEE WAS CONFRONTED WITH THE SAID SITUATION. THE ASSESSING OFFICER FURTHER OBSERVES THAT THE ASSESSEE COULD NOT PRODUCE THE SHAREHOLDERS AND ALSO COULD NOT FILE ANY DOCUMENTARY EVIDENCE IN SUPPORT OF THE CLAIM M ADE IN THE RETURN OF 4 M/S. AURA SOAPS PVT. LTD. ITA NO. 3919/MUM/2012 INCOME. CONSIDERING SUCH FAILURE ON THE PART OF THE ASSESSEE , THE ASSESSING OFFICER CONCLUDED THAT ASSESSEE HAD FAILED TO PROVE THE IDENTITY, CREDIT - WORTHINESS OF THE 26 CONCERNS OR THE GENUINENESS OF THE TRANSACTIONS OF THE SHARE CAP ITAL OF RS.1,35,00,000/ - ; AND, A CCORDINGLY, HE ASSESSED THE SAID AMOUNT AS UNEXPLAINED CASH CREDIT U/S 68 OF THE ACT. THE ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE THE CIT(A). THE ORDER OF THE CIT(A) REVEALS THAT ASSESSEE MADE VARIED SUBMISSIONS AND, INTER - ALIA , CONTENDED THAT EVEN BEFORE THE ASSESSING OFFICER ASSESSEE HAD PRODUCED VARIOUS DOCUMENTS OBTAINED FROM THE SAID CONCERNS IN ORDER TO SUBSTANTIATE THE CREDIT OF RS.1,35,00,000/ - ON ACCOUNT OF SHARE CAPITAL. THE CIT(A) HAS MADE A DETAILED DISCUSS ION AND HAS ALSO CALLED FOR REMAND REPORTS FROM THE ASSESSING OFFICER ON TWO OCCASIONS. ON THE BASIS OF THE SUBMISSIONS PUT FORTH BY THE ASSESSEE , THE ASSESSMENT ORDER AS WELL AS THE TWO REMAND REPORTS OBTAINED FROM THE ASSESSING OFFICER, HE HAS LISTED OUT THE FACT - SITUATION AS UNDER : - B) WHEN HE ENQUIRED ABOUT THE DETAILS OF THESE SHARE APPLICANTS/SHAREHOLDERS, THE APPELLANT FURNISHED A LIST CONTAINING THE NAMES AND ADDRESSES OF SUCH PARTIES (IN TOTAL 26 PARTIES). C) TO VERIFY THE GENUINENESS AND EXIST ENCE OF THESE PARTIES, THE AO ISSUED NOTICES UNDER SECTION 133(6) OF THE ACT TO ALL OF THEM. HOWEVER, IN ALL THE CASES, THE NOTICES RETURNED UN - SERVED . ALTHOUGH THE APPELLANT STATES THAT IT IS NOT CORRECT, HOWEVER IT HAS NOT POINTED OUT AS TO IN WHICH CASE , THE NOTICE UNDER SECTION 133(6) OF THE ACT WAS COMPLIED WITH AND BY WHICH PARTY. THIS MEANS THAT NOT EVEN A SINGLE ADDRESS GIVEN BY THE APPELLANT WAS CORRECT . D) THE AO CONFRONTED THIS FACT TO THE APPELLANT ON 03.12.2009. IT WAS THEREFORE OBVIOUS AND LO GICAL ON THE PART OF THE AO TO REQUIRE THE APPELLANT TO PRODUCE THESE PARTIES. HOWEVER, THE APPELLANT COULD NOT 5 M/S. AURA SOAPS PVT. LTD. ITA NO. 3919/MUM/2012 PRODUCE ANY OF THE PARTIES TILL THE DATE OF PASSING OF THE ASSESSMENT ORDER I.E. 24.12.2009. E) IT IS ALSO EVIDENT FROM THE RECORDS THAT IN THE MEANWHILE, THE APPELLANT, BEFORE THE DATE OF PASSING OF THE ASSESSMENT ORDER, HAD FILED DETAILS AND DOCUMENTS AS ENUMERATED IN PARA - 3 ABOVE IN RESPECT OF 12 PARTIES. SUCH DETAILS AND DOCUMENTS IN RESPECT OF THE REMAINING 14 PARTIES WERE, AS STATED FILED O N 29.12.2009 (I.E. AFTER THE PASSING OF THE ASSESSMENT ORDER). F) ALTHOUGH THE APPELLANT STATES THAT IT IS NOT CORRECT THAT IN ALL THE CASES, THE NOTICES RETURNED UN - SERVED, IT IS VERY CLEAR FROM THE ASSESSMENT ORDER THAT THE NOTICES IN ALL THE CASES HAD IN FACT BEEN RETURNED UN - SERVED. THIS HAS BEEN REITERATED BY THE AO IN BOTH THE REMAND REPORTS AS WELL. THE APPELLANT HAS NOT POINTED OUT AS TO IN WHICH CASE, THE NOTICE UNDER SECTION 133(6) OF THE ACT WAS COMPLIED WITH AND BY WHICH PARTY. G) SIMILARLY, THE APPELLANT STATES THAT IT HAD OFFERED TO PRODUCE SOME OF THE PARTIES ON A SAMPLE BASIS BUT THE OFFER OF THE APPELLANT WAS NOT ACCEPTED BY THE AO. HOWEVER, THE AO IN HER FIRST REMAND REPORT HAS STATED THAT THE APPELLANT VIDE ORDER SHEET NOTING DATED 10. 08.2011 WAS ASKED TO PRODUCE THE PARTIES INVESTING IN SHARES I.E. THE SHARE APPLICANTS. THE APPELLANT SOUGHT 3 WEEK'S TIME. THIS WAS ACCORDINGLY GRANTED. HOWEVER TILL THE DATE OF THE REMAND REPORT I.E. 27.09.2011 THERE HAS BEEN NO COMPLIANCE FROM THE APPEL LANT. IN THE SECOND REMAND REPORT, THE AO HAS EVEN MORE CATEGORICALLY STATED THAT THE APPELLANT WAS UNABLE TO PRODUCE EVEN A SINGLE SHARE APPLICANT ON A SAMPLE BASIS. H) IT IS SEEN THAT (COPIES OF) ALL THE DOCUMENTS IN RESPECT OF THE SHAREHOLDERS/SHARE AP PLICANTS FOR THE PURPOSE OF VERIFICATION OF THE GENUINENESS OF THE SHARE CAPITAL INTRODUCED HAVE BEEN FURNISHED BY THE APPELLANT ONLY AND NONE OF THEM HAS COME FROM ANY OF THESE SHAREHOLDERS/SHARE APPLICANTS INDEPENDENTLY. THE ATTEMPTS BY THE AO TO OBTAIN INDEPENDENT EVIDENCE EITHER THROUGH NOTICE UNDER SECTION 133(6) OR THROUGH PRODUCTION OF ANY OF THE PARTIES (EVEN ON A SAMPLE 6 M/S. AURA SOAPS PVT. LTD. ITA NO. 3919/MUM/2012 BASIS) HAS NOT SUCCEEDED. THE APPELLANT COULD NOT PRODUCE ANY SHAREHOLDER/SHARE APPLICANT IN - SPITE OF BEING ASKED TO DO SO BY THE AO. I) IT IS ALSO SEEN FROM THE RECORDS OF THE FIRST REMAND PROCEEDINGS THAT THE APPELLANT ITSELF HAD SOUGHT 3 WEEK'S TIME FROM THE AO TO PRODUCE THE SHARE APPLICANTS/SHAREHOLDERS BUT EVEN AFTER THE TIME WAS GRANTED BY THE AO TO THE APPELLANT, THERE WAS N O COMPLIANCE EVEN IN RESPECT OF A SINGLE SHARE APPLICANT/SHAREHOLDER. J) IN THE LIGHT OF THESE FACTS, THE OBSERVATION OF THE AO THAT 'SHARE APPLICANTS HAVE INCOME RANGING FROM RS.300/ - TO 20,000/ - ONLY. ALSO IN ALL THE CASES, AGAINST THE NEGLIGIBLE RESERV E AND SURPLUS OF THE LAST YEAR, THE COMPANIES HAVE INFUSED FUNDS DURING THE YEAR, SOURCE OF WHICH HAS NOT BEEN DETAILED IN THE AUDITORS REPORT AND OTHER DETAILS FILED' BECOMES IMPORTANT. K) THE APPELLANT HAS BEEN GIVEN FULL OPPORTUNITY DURING THE APPELLA TE PROCEEDINGS IN SO MUCH SO THAT THE MATTER WAS REMANDED TO THE AO TWICE AND THE AO WAS DIRECTED TO EXAMINE THE DETAILS AND GIVE OPPORTUNITY TO THE APPELLANT, WHICH SHE HAS DONE. 6. ON THE BASIS OF THE AFORESAID FACT - SITUATION, THE CIT(A) DECIDED TO END ORSE THE FINDINGS OF THE ASSESSING OFFICER AND UPHELD THE ADDITION U/S 68 OF THE ACT BY ALLUDING TO THE FOLLOWING REASONING : - 13. FROM THE ABOVE IT IS EVIDENT THAT THE APPELLANT HAS NOT BEEN ABLE TO ESTABLISH THE IDENTITY OF ANY OF THESE SHAREHOLDERS/SHARE APPLICANTS. IT APPEARS VERY MUCH TO BE A CASE OF BOGUS CAPITAL FORMATION. TWO MOST GLARING FACTS OBSERVED ARE I) THAT IN ALL THE CASES THE NOTICES ISSUED BY THE AO UNDER SECTION 133(6) OF THE ACT RETURNED UN - SERVED AND II) THE APPELLANT COULD NOT PRODUCE EVEN A SINGLE SHARE APPLICANT/SHAREHOLDER, IN - SPITE OF THE FACT THAT THE APPELLANT ITSELF HAD SOUGHT 3 WEEK'S TIME FROM THE AO TO PRODUCE THE SHARE APPLICANTS/SHAREHOLDERS AND THE TIME WAS GRANTED BY THE AO. IN THE FACE OF THESE FACTS, TH EREFORE, THE COPIES OF SELF SERVING DOCUMENTS 7 M/S. AURA SOAPS PVT. LTD. ITA NO. 3919/MUM/2012 PRODUCED BY THE APPELLANT HAVE NO VALUE AS THEY BECOME DOUBTFUL. WHEN THE APPELLANT WAS HANDED OVER THE COPY OF THE SECOND REMAND REPORT OF THE AO, NO FURTHER COMMENTS WERE OFFERED BY THE LD. AR EXCEPT FOR THE CLAIM THAT THE APPELLANT'S CASE IS COVERED BY VARIOUS CASE LAWS CITED INCLUDING THE HON'BLE SUPREME COURT'S JUDGMENT IN THE CASE OF LOVELY EXPORTS PVT. LTD. (SUPRA). THE APPELLANT HAS NOT COME FORWARD TO DISPROVE THE AO'S OBSERVATIONS AT I) AND II) ABOVE. IN VIEW OF ABOVE FACTS, THEREFORE, WHEN THE APPELLANT HAS NOT EVEN ESTABLISHED THE IDENTITY OF ANY OF THESE SHARE APPLICANTS/ SHAREHOLDERS, VARIOUS CASE LAWS CITED BY THE APPELLANT IN THIS REGARD HAVE NO APPLICABILITY. HENCE IN MY OPINION, THE ADDITION OF RS.1,35,00,000/ - MADE BY THE AO U/S 68 OF THE ACT IS JUSTIFIED. SAME IS THEREFORE UPHELD' 7. NOT BEING SATISFIED WITH THE ORDER OF THE CIT(A), ASSESSEE IS IN FURTHER APPEAL BEFORE US. BEFORE US, IN THE ABSENCE OF ANY APPEARANCE BY THE ASSESSEE, THE STAN D OF THE ASSESSEE CAN ONLY BE GAUGED FROM THE GROUNDS OF APPEAL STATED ABOVE. NOTABLY, ASSESSEE HAS REITERATED THE SUBMISSIONS THAT WERE PUT FORTH BEFORE THE CIT(A). PERTINENTLY, THE POINT SOUGHT TO BE CANVASSED BY THE ASSESSEE IS THAT SINCE THE ENTIRE A MOUNTS HAVE BEEN RECEIVED BY WAY OF CROSSED ACCOUNT PAYEE CHEQUES, AND THAT THERE WAS CONFIRMATIONS FROM THE RESPECTIVE SHAREHOLDERS, THE AMOUNT COULD NOT BE ASSESSED AS UNEXPLAINED CASH CREDIT U/S 68 OF THE ACT. SO HOWEVER, IT IS QUITE OBVIOUS THAT THERE IS NO NEGATION TO THE ANALYSIS OF THE FACT - SITUATION DONE BY THE CIT(A) , AND WHICH WE HAVE ALREADY ADVERTED TO IN THE EARLIER PART OF THIS ORDER. SINCE THERE IS NO CONTROVERSION TO THE FACT - SITUATION BROUGHT OUT BY THE CIT(A), WHICH CLEARLY ESTABLISHES T HAT THERE IS A FAILURE ON THE PART OF THE ASSESSEE TO EVEN JUSTIFIABLY DEMONSTRATE THE IDENTITY OF THE CREDITORS, THE FINDINGS OF THE CIT(A) DESERVES TO BE AFFIRMED. IN OUR CONSIDERED OPINION, HAVING 8 M/S. AURA SOAPS PVT. LTD. ITA NO. 3919/MUM/2012 REGARD TO THE RESULT OF THE VERIFICATION EXERCISE CARRI ED OUT BY THE LOWER AUTHORITIES, IT IS QUITE EVIDENT THAT THE PARTIES WERE NOT FOUND AT THE ADDRESSES SUPPLIED BY THE ASSESSEE, AND WHEN ASKED TO PRODUCE THE PARTIES, ASSESSEE COULD NOT PRODUCE THEM AND THAT THERE IS NO OTHER MATERIAL OR EVIDENCE PRODUCED BY THE ASSESSEE WHICH COULD BE SUBJECT TO INDEPENDENT VERIFICATION. THEREFORE, CONSIDERING ALL THESE FACTS, WHICH HAVE NOT BEEN NEGATED BY THE ASSESSEE, WE FIND THAT THE CIT(A) MADE NO MISTAKE IN AFFIRMING THE ADDITION OF RS.1,35,00,000/ - MADE BY THE ASSE SSING OFFICER BY INVOKING SEC. 68 OF THE ACT. THE ORDER OF THE CIT(A) IS HEREBY AFFIRMED AND ACCORDINGLY, ASSESSEE FAILS IN ITS APPEAL. 8. IN THE RESULT, APPEAL FILED BY THE ASSESSEE IS DISMISSED. THE ABOVE DECISION WAS PRONOUNCED IN THE OPEN COURT I N THE PRESENCE OF THE LD. DR AT THE CONCLUSION OF HEARING ON 16 TH AUGUST, 2017. SD/ - SD/ - ( AMARJIT SINGH ) JUDICIAL MEMBER (G.S. PANNU) ACCOUNTANT MEMBER MUMBAI, DATE : 1 6 T H AUGUST , 201 7 *SSL* COPY TO : 1) THE APPELLANT 2) THE RESPONDENT 3) THE CIT(A) CONCERNED 4) THE CIT CONCERNED 5) THE D.R, A BENCH, MUMBAI 6) GUARD FILE BY ORDER DY./ASSTT. REGISTRAR I.T.A.T, MUMBAI