AYUSH MULTITRADE PVT LTD., MUMBAI V. ITO WARD 12(1)(2), MUMBAI

ITA 392/MUM/2020

• Counselvise Citation: [2022] 106 COUNSELVISE.COM (IT) 9570 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 5 month(s) 22 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 06-07-2022
• Appeal Filed By: Assessee
• Order Result: PartlyAllowed
• Bench Allotted: SMC
• Assessment Year: 2011-2012
• Appeal Filed On: 14-01-2020
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: RAJESH CHAMARIA
• Keywords: Reopening of assessment; Unexplained cash credit; Search and seizure; Accommodation entries
• Section: 147; 68; 143(2)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH “SMC”, MUMBAI BEFORE SHRI PAVAN KUMAR GADALE, JUDICIAL MEMBER AND SHRI GAGAN GOYAL, ACCOUNTANT MEMBER ITA No. 392/Mum/2020 (A.Y. 2011-12) Ayush Multitrade Pvt. Ltd. Mehta House, A/F-3, Cama Industrial Estate, Off Western Express Highway, Goregaon (E), Mumbai-400063 PAN: AAJCA0364M ...... Appellant Vs. The ITO, Ward-12(1)(2), Room No. 146A, 1 st Floor, Aayakar Bhavan, M.K. Road, Mumbai-400020. ..... Respondent Appellant by : Sh. Sanjiv M. Shah & Rajesh Chamaria Respondent by : Sh. Indira Adakil, CIT-DR Date of hearing : 13/04/2022 Date of pronouncement : 07/07/2022 ORDER PER GAGAN GOYAL, A.M: This appeal by the assessee is directed against the order of Ld. Commissioner of Income Tax (Appeals)-20, Mumbai [hereinafter referred to as ‘the CIT (A)’] dated 31.10.2019 for the Assessment Year (AY) 2011-12. The assessee has raised the following grounds of appeal: 2 ITA No. 392/Mum/2020-Ayush Multitrade Pvt. Ltd. “Being aggrieved by the order passed by the Ld. Commissioner of Income Tax (Appeals) - 20, Mumbai (hereafter referred as the 'Ld CIT (A)), appellant prefers this appeal on one or more of the following grounds which are independent and without prejudice to each other. (1) On the facts and in law, the Ld. CIT (A) erred in confirming re opening of assessment without appreciating the fact that the assessment was re-opened solely on the basis of information received from investigation wing and there was no corroborative evidence available with the AO form an opinion that income had escaped in the case of appellant company. (2) On the facts and in law, the Ld. CIT (A) erred in upholding addition of Rs. 3,50,000/- u/s 68 of the Act without appreciating the fact that appellant did not subscribed to shares of any of the alleged shell companies and there were no such cash credits found in the books of appellant company. (3) On the facts and in law, the Ld. CIT (A) erred in enhancing income by Rs. 9, 00,000/- as unexplained cash credit u/s 68 of the Act (being difference between Rs. 12, 50,000/- credited to account of Mr. Jignesh S. Mehta, Director and Rs. 3, 50,000/ added by the AO) without appreciating the fact that identity, genuineness and credit worthiness of Director was proved by submitting bank statements. (4) On the facts and in law, the Ld. CIT (A) erred in confirming overall addition of Rs. 12,50,000/- without appreciating the fact that appellant company did not subscribe to shares of alleged shell companies and addition of the alleged amount was already made in the case of group company, resulting into double taxation. (5) Appellant prays for leave to add, amend or delete any ground/s of appeal on or before the final date of hearing.” 2. Brief facts of the case are that the assessee has filed his return of income for AY 2011-12 on 26.03.2013 declaring total income at Rs. NIL. 3. Subsequently A.O. received information from the office of ADIT (Investigation) unit-6 Kolkata that in the course of search and seizures operations u/s 132 in the case of a group involved in providing entries in the form of bogus share capital and share premium and unsecured loan. As per the information, the 3 ITA No. 392/Mum/2020-Ayush Multitrade Pvt. Ltd. appellant was one of the beneficiaries of search accommodation entries during the financial year 2010-11 relevant to assessment year 2011-12 4. During the course of search a statement of Shri Subash kumar Bhartiya was recorded u/s 132(4) on 03-01-2018. In his statement Shri Bhartiya stated that m/s Chaturang commercials Pvt. Ltd. (CCPL) and Liberal Spinner Pvt. Ltd. (LSPL) are shell companies controlled and managed by him and appellant company was one of the beneficiaries from these two companies. 5. Based on above assessment was reopened u/s 147 of the act and notice u/s 148 dated. 30-03-2018 was issued. In response to this notice the appellant filed its return of income on 20-11-2018 declaring its total income at nil. In response to this returns notice u/s 143(2) was issued on 13-12-2018. 6. In response to the notice issued mentioned (supra) assessee filed its submission stating as under: “The assessee has not carried out any transactions with CCPL and LSPL. As there were neither any share issue to the above companies nor any unsecured loan is taken. There are no funds /cheques received from any of the companies.” A.O. was not convinced with the submissions of the appellant and made an addition of Rs 3.5 lacs on account of 1 lac from LSPL and 2.5 lacs from CCPL respectively. The same has been confirmed by the ld. CIT (A)-20, Mumbai. Both of them simply relied on the information received from ADIT (investigation unit-6, Kolkatta).” 7. Ground no 1: Based on the facts mentioned above ground no 1 taken by appellant regarding reopening of assessment is dismissed. A.O. rightly exercised his jurisdictional powers based on information received from the investigation unit and verification with the shell companies was required to meet the end of justice and to check the evasion of tax. This ground of the appellant is rejected as 4 ITA No. 392/Mum/2020-Ayush Multitrade Pvt. Ltd. despite of very specific information about the assessee received by the A.O. nowhere in the assessment proceedings it was reflected that appellant challenged the action of the A.O. u/s 148. Further submissions made by the appellant were not very specific to the issue addressing the information received against the appellant. Appellant further failed to explain its own balance sheet with reference to transactions with its director Mr Jignesh S Mehta and so on. 8. During the course of hearing before the L.D. CIT (appeal) appellant submitted that the appellant didn’t have any bank account, all the transactions were made through journal entries. Appellant further submitted that it had purchased shares in Mehta Infocomm Pvt. Ltd (MIPL) from the above two companies through its director Mr Jignesh S. Mehta. During the course of hearing Ld. CIT (appeal) issued notice u/s 251(2) of the Act, i.e. notice for enhancement. It was found that during the year under consideration account of Mr. Jignesh S. Mehta was credited by sum of Rs 12.5 lacs against a journal entry by debiting share account of MIPL. This difference of Rs 9 lacs (12.5 lacs - 3.5 lacs) is further added to the income of the appellant u/s 68 of the Act. 9. Ground No 2, 3 and 4 are interrelated hence, disposed of by common findings. 10. We have gone through the order of the A.O., order of the Ld. CIT (appeal) and submissions made by the appellant along with factual and legal paper book. Before coming to the conclusion we have analysed the balance-sheet of the appellant. It reflects enhancement in share capital by Rs 12.5 lacs (shares issued to Mr Jignesh S Mehta) and consequent enhancement in the investments of shares (MIPL). There is no movement of funds in the appellant financials neither 5 ITA No. 392/Mum/2020-Ayush Multitrade Pvt. Ltd. in the form of inward nor outward (pg no 5 of factual paper book). We have further examined pg no 55-57 of factual paper book containing bank account of Mr Jignesh S Mehta with Bank of India. In this bank statement we found total 8 entries as under i) Payment to GFL Financial cheque No 357542 dated 01-06-2010 Rs 150000/- ii) Payment to Twin Star cheque No 357540 dated 01-06-2010 Rs 350000/- iii) Payment to Software cheque No 357539 dated 01-06-2010 Rs 1, 00,000/- iv) Payment to Pushkar cheque No 357538 dated 01-06-2010 Rs 1, 00,000/- v) Payment to Liberal cheque No 357537 dated 01-06-2010 Rs 1, 00,000/- vi) Payment to Kartick cheque No 357536 dated 01-06-2010 Rs 1,00,000/- vii) Payment to Eternal cheque No 357535 dated 01-06-2010 Rs 1, 00,000/- viii) Payment to Chaturang cheque No 357533 dated 01-06-2010 Rs 2,50,000/- 11. For tenability of addition u/s 68 department must show that monies actually to or came from coffers of appellant. There is no finding neither by A.O. nor by Ld. CIT (appeal) about the actual movement of funds. Assessee clearly explained its transactions under the head share capital account and consequently under the head investment in shares. 12. Delicate balance had to be maintained while applying the rigorous provision of section 68. On the one hand, no doubt such kind of dubious practices are rampant, on the other hand to make the assessee responsible there has to be proper evidence. The department is not remediless and is free to proceed to reopen the individual assessment of such alleged bogus shareholder in accordance with law. As in this case the director Mr Jitendra S Mehta before 6 ITA No. 392/Mum/2020-Ayush Multitrade Pvt. Ltd. issuing cheques to various entities as mentioned supra to buy shares on behalf of appellant, made cash deposit in his account on 29-05-2010 amounting to Rs 12.5 lacs. The same information of which we proceeded in this appeal were available to the authorities below also. 13. With the above facts we came to the conclusion that additions made by A.O. amounting to Rs 3.5 lacs and enhancement made by the Ld. CIT (appeal) amounting to Rs 9 lacs are without any basis and do not attract the provisions of section 68 in the case of appellant. It is hereby directed to delete the additions along with enhancement. Resultantly appellants ground no 2,3and 4 are allowed 14. In the result appeal of the assessee is partly allowed. Order pronounced in the open court on 7 th day of July, 2022. Sd/- Sd/- (PAVAN KUMAR GADALE) (GAGAN GOYAL) JUDICIAL MEMBER ACCOUNTANT MEMBER Mumbai, िदनांक/Dated: 07/07/2022 SK, Sr.PS Copy of the Order forwarded to: 1. अपीलाथŎ/The Appellant , 2. Ůितवादी/ The Respondent. 3. आयकर आयुƅ(अ)/ The CIT(A)- 4. आयकर आयुƅ CIT 5. िवभागीय Ůितिनिध, आय.अपी.अिध., मुबंई/DR, ITAT, Mumbai 6. गाडŊ फाइल/Guard file. BY ORDER, //True Copy// (Dy. /Asstt. Registrar) ITAT, Mumbai