ITO 10(3)(2), MUMBAI V. JINIT PROPERTIES P.LTD, NAVI MUMBAI

ITA 3989/MUM/2014

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 3269 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 9 month(s) 30 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-03-2016
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: J
• Assessment Year: 2007-2008
• Appeal Filed On: 30-05-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: RAHUL R SARDA
• Keywords: Search and seizure; Assessment record; Onus to prove
• Section: 68; 69

Judgement Text

INCOME TAX APPELLATE TRIBUNAL,MUMBAI- J,BENCH , , BEFORE S/SHJOGINDER SINGH,JUDICIAL MEMBER & RAJENDRA,ACCOUNTANT MEMBER ./ITA/3989/MUM/2014 , / ASSESSMENT YEARS: 2007-08 INCOME TAX OFFICER-10(3)2 ROOM NO.456,4 TH FLOOR AAYAKAR BHAVAN, M.K. ROAD MUMBAI-400 020. VS. JINIT PROPERTIES PVT. LTD. 301, BHAG CHS LTD. PLOT NO.29 SECTOR-14, NAVI MUMBAI-400 705. PAN:AABCJ 5056 F ( /APPELLANT ) ( / RESPONDENT ) REVENUE BY: SHRI ASHISH HELIWAL ASSESSEE BY: SHRI RAHUL R. SARDA / DATE OF HEARING: 29.03.2016 / DATE OF PRONOUNCEMENT: 29.03.2016 ,1961 254(1) ORDER U/S.254(1)OF THE INCOME-TAX ACT,1961(ACT) PER RAJENDRA A.M. - CHALLENGING THE ORDER,DTD.25/03/2014 OF THE CIT (A) -22,MUMBAI THE ASSESSING OFFICER(AO) HAS FILED THE PRESENT APPEAL.ASSESSEE-COMPANY FILED ITS RETURN OF INCOME ON 3/10/ 2007, DECLARING TOTAL INCOME AT RUPEES NIL.THE AO COMPLET ED THE ASSESSMENT,U/S.143(3) OF THE ACT, ON 30/12/2010, DETERMINING THE INCOME OF THE ASSESS EE AT RS. 54.99 LAKHS. 2. EFFECTIVE GROUND OF APPEAL IS ABOUT DELETING THE AD DITION OF RS. 55 LAKHS MADE BY THE AO, U/S. 68 OF THE ACT.DURING THE COURSE OF ASSESSMENT PROCEEDINGS,THE AO DIRECTED THE ASSESSEE TO FILE THE DETAILS OF SUBSCRIPTION OF SHARE CAPITA L RECEIVED DURING THE YEAR FROM REAL GOLD TRADING PRIVATE LIMITED(RGTPL),HEMA TRADING COMPANY PRIVATE LIMITED(HTCPL)AND YASH V JEWELS LTD.(YVJL).THE ASSESSEE FILED THE DET AILS ALONG WITH THE CONFIRMATIONS OF THE SHAREHOLDERS. WHILE SURFING THE INTERNET DATABASE, THE GOOGLE SEARCH ON ONE OF THE SHAREHOLDERS NAMELY M/S. KUSH HINDUSTANI LED THE AO TO A LINK OF SEBI SITE. THE SITE HAD LISTED AN ORDER OF SEBI PASSED IN THE CASE OF PYRAM ID SAMARAI LTD. HE FOUND THAT ONE NIRMAL KOTECHA(NK) WAS USING LARGE NUMBER OF FRONT COMPANI ES TO MANIPULATE THE SECURITY MARKET AND TO PROVE THE FUNDS TO SEVERAL LAYERS IN ORDER T O HIDE THE SOURCE, THAT SEBI HAD IDENTIFIED A LIST OF 230 ENTITIES ALSO HAVING SIMILAR OPERATION, THAT THE SUBCRIBERS WERE IN THE LIST OF 230 ENTITIES.THE AO WAS OF THE OPINION THAT FINANCIAL C REDENTIALS OF THE THREE SHARE SUBSCRIBERS WERE OF DOUBTFUL NATURE. HE MADE ENQUIRIES WITH THE BANKS AND ISSUED SUMMONS TO THE AUTHORISED SIGNATORIES/DIRECTORS OF THE ABOVE REFER RED THREE COMPANIES. AS PER THE AO NONE ATTENDED BEFORE HIM IN RESPONSE TO THE SUMMONS. HOW EVER LETTERS WERE RECEIVED STATING THAT THE AUTHORISED SIGNATORIES COULD THIS IS ONLY THEIR LEGAL OBLIGATION IN THEIR PERSONAL CAPACITY, THAT THEY WERE NOT AUTHORISED BY THE COMPANIES TO D ISCHARGE LEGAL DUTIES, THAT THEY HAD NOT ENTERED INTO ANY TRANSACTION IN THEIR PERSONAL CAPA CITIES.THE AO ISSUED A NOTICE TO THE ASSESSEE AND INFORMED IT THAT CREDITWORTHINESS OF T HE SUBSCRIBERS OF SHARE MONEY AND GENUINENESS OF THE TRANSACTIONS WERE NOT PROVED.HE FURTHER INFORMED THE ASSESSEE THAT HE WANTED TO ADD BACK MONEY CREDITED AS SHARE APPLICAT ION MONEY AND PREMIUM WITH RESPECT TO ABOVE MENTIONED THREE PARTIES TO ITS TOTAL INCOME U /S.68 READ WITH SECTION 69 OF THE ACT.IN RESPONSE TO SHOW CAUSE NOTICE,THE ASSESSEE FILED LE TTER ON 29/12/2009. IN ITS LETTER THE ASSESSEE STATED THAT IT HAD FILED THE COMPLETE ADDRESS OF TH E PARTIES ALONG WITH PAN. IT ALSO ENCLOSED A COPY OF TAX RETURNS BALANCE SHEET CONFIRMATION AND THE AFFIDAVITS OF THE DIRECTORS OF THE SHARE- SUBSCRIBER COMPANIES.AFTER CONSIDERING THE SUBMISSI ON OF THE ASSESSEE, THE AO STATED THAT 3989/M/14-JINIT PROPERTIESPVT.LTD. 2 SEARCH AND SEIZURE ACTION IN THE CASES OF RAJAT PHARMACHEM GROUP AND SPANCO WERE CARRIED OUT BY THE DEPARTMENT, HAT DURING THE SEARCH PROCEE DINGS IT WAS FOUND THAT THE SUBSCRIBER GROUP WAS INDULGED IN PAPER TRANSACTION OF TRADING IN GOODS WHERE THERE WAS NO PHYSICAL MOVEMENT OF GOODS. THE AO FURTHER OBSERVED THAT MON EY HAD BEEN RECEIVED FROM SPECIMEN BANK ACCOUNT THROUGH PROPER BANKING CHANNELS, THAT THE IDENTITY OF THE SUBSCRIBER WAS NOT IN DISPUTE, THAT THE VIEW OF THE ADVERSE FINDING BY SE BI REGARDING THE CAPACITY OF THE SUBSCRIBER- COMPANIES WERE WAS AVAILABLE ON NET,THAT IT WAS THE DUTY OF THE ASSESSEE TO PROVE THAT MONEY RECEIVED BY IT WAS COMING OUT OF THE DISCLOSED AND ACCOUNTED SOURCE OF INCOME, THAT THE NATURE AND SOURCE OF CREDIT ENTRIES APPEARING IN TH E BOOKS OF ACCOUNTS IN THE LASER OF SHARE SUBSCRIBERS HAD NOT BEEN SATISFACTORILY EXPLAINED B Y THE ASSESSEE.FINALLY,HE HELD THAT MONEY RECEIVED AND ACCOUNTED AS SHARE APPLICATION MONEY A MOUNTING TO RS. 55 LAKHS WAS TO BE ADDED TO THE INCOME OF THE ASSESSEE U/S.68 OF THE A CT. 3. AGGRIEVED BY THE ORDER OF THE AO, THE ASSESSEE PREF ERRED AN APPEAL BEFORE THE FIRST APPELLATE AUTHORITY (FAA). BEFORE HIM THE ASSESSEE OBJECTED TO THE RELIANCE PLACED BY THE AO ON THE ORDER OF THE SEBI IN CASE OF NIRMAL KOTE CHA(NK),PROMOTOR OF M/S. PYRAMID SIAMIRA THEATRES LTD.(PSTL).IT WAS CONTENDED THAT T HE TRANSACTION CARRIED OUT IN THE STOCK MARKET IN THE ABOVE-MENTIONED CASE WAS ON 21 ST AND 22 ND OF DECEMBER, 2008, THAT THE ASSESSEE HAD RECEIVED THE SHARE APPLICATION MONEY I N FEBRUARY, 2007, THAT THE ISSUE INVOLVED WITH SEBI WAS IN CONNECTION WITH RIGGING OF PRICES OF SHARES OF PSTL, THAT IT HAD NOTHING TO DO WITH THE CREDITWORTHINESS OF THE SUBSCRIBERS AND THE GENUINENESS OF THE TRANSACTION, THAT THE TRANSACTION IN THE CASE OF THE ASSESSEE WAS IN CONNECTION WITH THE SHARE CAPITAL. THE ASSESSEE ALSO OBJECTED TO THE REFERENCE MADE BY THE AO TO CERTAIN SEARCH AND SEIZURE PROCEEDINGS.TO VERIFY THE FACTUAL POSITION,THE FAA REMANDED THE ISSUE TO THE AO AND DIRECTED HIM TO CONDUCT FURTHER INQUIRIES.THE AO FI LED HIS REMAND REPORT ON 3/2/2012. AFTER CONSIDERING THE REMAND REPORT AND THE SUBMISSION OF THE ASSESSEE, THE FAA HELD THAT THE AO HAD GIVEN A CATEGORICAL FINDING THAT NO DETAILS WER E AVAILABLE IN THE ASSESSMENT RECORD THAT CONNECTED THE RECEIPT OF CONTRIBUTION OF SHARE APPL ICATION MONEY BY THE ASSESSEE TO CERTAIN SEARCH AND SEIZURE ACTIONS CARRIED OUT BY THE INVES TIGATION WING.AS THE AO HAD NOT CONDUCTED ENQUIRIES AS DIRECTED BY THE FAA,HE ASKED THE AO TO GO THROUGH THE SUBMISSION OF THE ASSESSEE,DATED 9/3/2010, ALONG WITH THE PAPER BOOK AND TO GIVE FINDING ON THE VARIOUS OBJECTIONS RAISED BY THE ASSESSEE. HE ALSO GAVE CER TAIN PER THE DIRECTIONS TO THE AO AND FILE A FRESH REMAND REPORT. AFTER CONSIDERING THE SECOND R EMAND REPORT, THE FAA MENTIONED THAT THE ASSESSMENT ORDER WAS SILENT ABOUT THE CONFIRMATION LETTERS FILED BY THE SUBSCRIBING COMPANIES AND THE NOTARISED SWORN IN AFFIDAVIT FILED BY THE D IRECTORS,THAT THERE WAS NO WHISPER IN THE ORDER ABOUT THE EXISTENCE OF SUCH EVIDENCE FILED DU RING THE COURSE OF ASSESSMENT PROCEEDINGS, THAT THE AO HAD MISERABLY FAILED TO CARRY OUT SPECI FIC DIRECTIONS ISSUED BY HIM U/S.250(4)OF THE ACT.HE FURTHER OBSERVED THAT THE PARTICULAR FOC US OF INVESTIGATION BY SEBI WAS TOWARDS RIGGING OF PRICES OF SHARES IN THE CASE OF PSTL,THA T THE ACTION OF SEBI WAS IN RESPECT OF TRANSACTION CARRIED OUT IN THE MONTH OF DECEMBER 20 08, THAT THE SHARES OF THE COMPANY WERE SUBSCRIBED IN THE MONTH OF FEBRUARY, 2007, THAT PRO MOTER OF PSTL HAD MANIPULATED THE SHARES IN THE STOCK MARKET BY RIGGING THE PRICES,TH AT AFTER THE INVESTIGATION THE SEBI HAD PASSED AN INTERIM EX PARTE ORDER WHEREIN AS MANY AS 230 ENTITIES WERE SUSPECTED TO HAVE BEEN INVOLVED IN PRICE RIGGING OF THE SHARES,THAT SEBI H AD NOT PASSED THE FINAL ORDER, THAT THE MANIPULATION IN SHARE MARKET BY WAY OF RIGGING THE PRICE HAD NOTHING TO DO WITH THE CREDITWORTHINESS OF THE SUBSCRIBER AND GENUINENESS OF THE TRANSACTION,THAT IT WAS A FACT THAT THREE SUBSCRIBERS WERE AMONG THE 230 ENTITIES ALLEG ED TO HAVE BEEN INVOLVED IN RIGGING PRICES OF SHARES,THAT UNLESS THE AO PROVED THAT ASSESSEE H AD ROUTED ITS OWN UNACCOUNTED MONEY IN FORM OF SHARE APPLICATION MONEY HE WAS NOT JUSTIFY IN INVOKING THE PROVISIONS OF SECTION 68 OF THE ACT, THAT DURING THE COURSE OF ASSESSMENT PROCE EDINGS THE ASSESSEE HAD FILED THE COMPLETE 3989/M/14-JINIT PROPERTIESPVT.LTD. 3 ADDRESSES ALONG WITH PAN FILED FOR ASSESSMENT YEAR 2007-08 ALONG WITH THE BALANCE SHEET AND PROFIT & LOSS ACCOUNT AND THE BANK STATEMENT OF ALL THE SUBSCRIBERS, THAT A SWORN IN AFFIDAVIT OF THE DIRECTORS OF THE SUBSCRIBER COMPANIES WERE ALSO FILED IN RESPONSE TO THE SHOW CAUSE NOTICE ISSUED BY THE AO,THAT THE REPLY FURTHER REVEALED T HAT THE NET WORTH OF ALL THE THREE SUBSCRIBING COMPANIES WAS MORE THAN RS.2 CRORES,THAT NO CASH HA D BEEN DEPOSITED IN THE BANK ACCOUNTS PRIOR TO THE ISSUE OF CHECK TO THE ASSESSEE COMPANY ,THAT THEY HAD OBTAINED SECURED LOAN FROM THE BANKS,THAT BY FILING ALL SUCH DETAILS THE ASSES SEE HAD PROVED THE IDENTITY OF THE SUBSCRIBERS AS WELL AS THE CREDITWORTHINESS AND GENUINENESS OF THE TRANSACTION,THAT THE AO HIMSELF HAD MENTIONED,IN THE ASSESSMENT ORDER,THAT THERE WAS NO DISPUTE WITH THE IDENTITY OF THE SHAREHOLDERS, THAT THE AO DID NOT CONTROVERT THE EV IDENCES FILED BEFORE HIM,THAT HE HAD NEVER MADE AN ATTEMPT TO CONDUCT ENQUIRIES WITH SUBSCRIBE R OF SHARE APPLICATION MONEY BY ISSUE OF SUMMONS U/S.131 OR NOTICE U/S.133(6)IN SPITE OF THE REPEATED DIRECTIONS ISSUED U/S.250(4), THAT THE BURDEN OF PROVING ALL THE THREE ELEMENTS HAD SH IFTED TO THE AO, THAT THE AO WAS DUTY BOUND TO INVESTIGATE THE CREDITWORTHINESS OF THE SU BSCRIBERS. THE FAA RELIED UPON THE CASES OF LOVELY EXPORTS (299 ITR 268) AND MAJOR METALS(35 9 ITR 450)AND HELD THAT IT WAS THE DUTY OF THE AO TO MAKE ENQUIRIES WITH THE SUBSCRIBERS,TH AT THE AO HAD PURELY GONE BY THE SEBI ORDER BASED ON ITS OWN INVESTIGATION,THAT HE DID NO T BRING ANY MATERIAL ON RECORD TO PROVE THAT ASSESSEE HAD GIVEN CASH WHICH IN TURN WAS ROUTED AN D GOT INVESTED AS SHARE APPLICATION MONEY,THAT IN ABSENCE OF ANY EVIDENCE GATHERED BY T HE AO,DURING THE COURSE OF ASSESSMENT PROCEEDINGS,NO ADDITION COULD BE MADE U/S.68 OF THE ACT. FINALLY,HE ALLOWED THE APPEAL FILED BY THE ASSESSEE. 4. BEFORE US,THE DEPARTMENTAL REPRESENTATIVE STATED TH AT ASSESSEE HAD NOT PRODUCED THE DIRECTORS OF THE COMPANY, THAT SEBI HAD MADE ENQUIR IES IN THE CASE OF RGTPL, HTCPL AND YVJL,THAT THEY WERE FOUND TO BE INDULGED IN PRICE R IGGING.THE AUTHORISED REPRESENTATIVE (AR) STATED THAT ASSESSEE HAD FILED ALL THE NECESSA RY DETAILS DURING THE ASSESSMENT PROCEEDING INCLUDING THE AFFIDAVITS OF THE DIRECTORS AND THE C ONFIRMATIONS, THAT AO HIMSELF HAD ADMITTED THAT THERE WAS NO MATERIAL RELATED WITH ANY SEARCH AND SEIZURE ACTION THAT COULD PROVE THAT SUBSCRIBER COMPANIES WERE ENGAGED IN BOGUS BILLING, THAT AO HAD NOT DOUBTED THE ENTITY OF SUBSCRIBERS. 5. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL BEFORE US.WE FIND THAT THE AO HAD MADE AN ADDITION OF RS.55.00 LAKHS INVOKING THE PROVISIONS OF SECTION 68 OF THE ACT, THAT RGTPL, HTCPL AND YVJL HAD SUBSCRIBED RS.20.000 LAKHS, RS.20.00 LAKHS AND RS. 15.00 LAKHS RESPECTIVELY AS SHARE SUBSCRIPTION MONE Y, THAT THE AO HAD NOT DOUBTED THE IDENTITY OF THE SUBSCRIBERS, THAT HE WAS OF THE OPI NION THAT GENUINENESS OF THE TRANSACTION AND CREDITWORTHINESS OF THE SUBSCRIBERS WAS NOT PROVED BY THE ASSESSEE, THAT HE REFERRED TO ORDER OF SEBI AND SEARCH AND SEIZURE ACTIONS CARRIED OUT BY THE INVESTIGATION WING OF THE DEPARTMENT FOR MAKING THE ADDITION, THAT THE SEBI H AD FOUND THAT ALL THE THREE SUBSCRIBERS WERE ENGAGED IN PRICE RIGGING OF SHARES OF PSTL,THA T THE FAA HAD DIRECTED THE AO TO CARRY OUT CERTAIN ENQUIRY AND FURNISH REMAND REPORT, THAT THE AO SUBMITTED TWO REMAND REPORTS, THAT HE DID NOT FOLLOW THE INSTRUCTIONS OF THE FAA ISSUE D AS PER PROVISIONS OF SECTION 250(4) OF THE ACT,THAT THE FAA HAD DIRECTED HIM TO VERIFY THE CLA IM MADE BY THE ASSESSEE ABOUT THE CREDIT WORTHINESS OF THE SUBSCRIBERS.WE FIND THAT THE ASSE SSEE HAD FILED COPIES OF INCOME TAX RETURNS, DIRECTORS REPORTS,CONFIRMATIONS AND AFFIDAVITS OF T HE DIRECTORS OF ALL THE THREE SUBSCRIBERS. THUS,IT HAD DISCHARGED THE BURDEN OF PROOF CAST UPO N IT.HOWEVER,THE AO IGNORED THESE EVIDENCES AND DID NOT MAKE ANY FURTHER ENQUIRIES.IT IS SURPRISING THAT IN SPITE OF CLEAR DIRECTION OF THE FAA,HE CHOSE NOT TO EXAMINE THE EV IDENCES PRODUCED BY THE ASSESSEE.THE FAA HAD GIVEN A CLEAR FINDING OF FACT THAT THERE WA S NO EVIDENCE OF DEPOSIT OF CASH IN THE BANK ACCOUNTS OF THE SUBSCRIBER AT THE TIME OF ISS UING CHEQUES TO THE ASSESSEE FOR ALLOTTING 3989/M/14-JINIT PROPERTIESPVT.LTD. 4 SHARES.THE AO HAS IGNORED THE FACT THAT THE NETWORT H OF ALL THE THREE SUBSCRIBERS WAS APPROXIMATELY RS.2.00 CRORES,THAT THE TRANSACTIONS WERE CARRIED OUT THROUGH BANKING CHANNELS. IT IS FOUND THAT THE AO DID NOT MAKE ANY ENQUIRIES WITH THE SUBSCRIBERS ABOUT THE INVESTMENTS MADE BY THEM.THE FAA HAS MENTIONED THAT THE INCIDEN CE OF PRICE RIGGING TOOK PLACE IN THE MONTH OF DECEMBER OF THE SUCCEEDING YEAR WHEREAS TH E SUBSCRIPTION WAS MADE IN EARLIER YEAR.THUS, IT COULD NOT BE SAID THAT ASSESSEE HAD R OUTED ITS UNACCOUNTED MONEY THROUGH THE SUBSCRIBERS.IN OUR OPINION,ASSESSEE HAD DISCHARGED ITS ONUS IN PROVING THE IDENTITY OF THE CREDITOR AS WELL AS CREDITWORTHINESS OF THE SUBSCRI BERS AND GENUINENESS OF THE TRANSACTIONS.IN THESE CIRCUMSTANCES,WE ARE OF THE OPINION THAT THE ORDER OF THE FAA DOES NOT SUFFER FROM ANY LEGAL OR FACTUAL INFIRMITY.THE AO HAD NOT MADE ANY ENQUIRIES TO SUBSTANTIATE HIS STAND. CONSIDERING THE ABOVE,WE UPHOLD THE ORDER OF THE FA A AND DECIDE THE EFFECTIVE GROUND OF APPEAL AGAINST THE AO. AS A RESULT APPEAL FILED BY THE AO STANDS DISMISSED . . ORDER PRONOUNCED IN THE OPEN COURT ON 29 TH ,MARCH, 2016. 29 , 2016 SD/- SD/ - ( /JOGINDER SINGH) ( / RAJENDRA) / JUDICIAL MEMBER / ACCOUNTANT MEMBER MUMBAI; DATED : 29.03.2016. JV.SR.PS. / COPY OF THE ORDER FORWARDED TO : 1. APPELLANT / 2. RESPONDENT / 3. THE CONCERNED CIT(A)/ , 4. THE CONCERNED CIT / 5. DR J BENCH, ITAT, MUMBAI / , , . . . 6. GUARD FILE/ //TRUE COPY// / BY ORDER, / DY./ASST. REGISTRAR , /ITAT, MUMBAI.