ASST CIT CIR 1, KALYAN V. KRISHNA SHEET PROCESSORS P. LTD, MUMBAI

ITA 4003/MUM/2015

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 1061 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 10 month(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 05-05-2017
• Appeal Filed By: Department
• Bench Allotted: F
• Next Hearing Date: 27-04-2017
• Assessment Year: 2010-2011
• Appeal Filed On: 26-06-2015
• Court: TRIBUNAL
• Department Lawyers: B S BIST
• Assessee Lawyers: S M BANDI
• Keywords: Unexplained cash credit; Bogus Share capital; Accommodation entries; Capital receipt; Onus to prove
• Section: 68; 132

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL F BENCH, MUMBAI BEFORE S/ SHRI B.R. BASKARAN (AM) & SANDEEP GOSAIN (JM) I.T.A. NO. 4003 /MUM/20 15 (ASSESSMENT YEAR 20 10 - 11 ) ACIT CIRCLE 1 1 ST FLOOR, MOHAN PLAZA WAYALE NAGAR KHADAKPADA KALYAN WEST PIN - 421 301. VS . M/S. KRISHNA SHEET PROCESSORS PVT. LTD. 801, BUSINESS CLASSIC 8 TH FLOOR CHINCHOLI BUNDER ROAD, OFF S.V. ROAD MALAD WEST MUMBAI - 400 064. ( APPELLANT ) ( RESPONDENT ) PAN NO . AACK9040M ASSESSEE BY SHRI S.M. BANDI DEPARTMENT BY SHRI B.S. BIST DATE OF HEARING 2 7 . 4 . 201 7 DATE OF PRONOUNCEMENT 5 . 5 . 201 7 O R D E R PER B.R. BASKARAN (AM) : - THE REVENUE HAS FILED THIS APPEAL CHALLENGING THE ORDER DATED 28 - 03 - 2015 PASSED BY LD CIT(A) DELETING THE ADDITION OF RS.1.65 CRORES MADE BY THE ASSES SING OFFICER U/S 68 OF THE ACT IN ASSESSMENT YEAR 2010 - 11. 2. THE FACTS RELATING TO THE ISSUE ARE SET OUT IN BRIEF. THE ASSESSEE COMPANY IS ENGAGED IN THE BUSINESS OF DEALING IN STEEL AND IRON MATERIALS. DURING THE YEAR UNDER CONSIDERATION, IT DECL ARED A TURNOVER OF RS.202.99 CRORES AND NET PROFIT OF RS.5.91 CRORES. THE RETURN OF INCOME OF THE ASSESSEE WAS TAKEN UP FOR SCRUTINY. THE AO NOTICED THAT THE ASSESSEE HAS ISSUED 15,000 SHARES HAVING FACE VALUE OF RS.100/ - AT A PREMIUM OF RS.1000/ - AND TH US RECEIVED A SUM OF RS.1.65 CRORES BY WAY OF SHARE CAPITAL & PREMIUM. THE AO NOTICED THAT THE SHARES HAVE BEEN ISSUED TO A COMPANY NAMED M/S TALENT INFOWAY LTD, A M/S. KRISHNA SHEET PROCESSORS P. LTD. 2 COMPANY BELONGING TO MUKESH CHOKSHI GROUP. THE AO NOTICED THAT THE REVENUE HAD CONDUCTED S EARCH ACTION IN THE HANDS OF GROUP CONCERNS OF MR. MUKESH CHOKSI ON 25.11.2009 AND A STATEMENT OF MR. MUKESH CHOKSI WAS RECORDED ON 11.12.2009. IN THE SWORN STATEMENT, HE ADMITTED THAT HE AND HIS GROUP COMPANIES ARE ENGAGED IN THE BUSINESS OF PROVIDING AC COMMODATION ENTRIES TO GENERATE SPECULATION PROFITS, CAPITAL GAINS AND SHARE APPLICATION MONEY. MR. MUKESH CHOKSI ALSO REITERATED THE ABOVE SAID SUBMISSIONS IN ANOTHER STATEMENT RECORDED ON 04 - 08 - 2008 DURING THE COURSE OF ASSESSMENT PROCEEDINGS OF M/S GOL DSTAR FINVEST P LTD, ANOTHER GROUP COMPANY. THE AO ALSO NOTICED THAT THE TRIBUNAL HAS ALSO ACCEPTED THE FACT THAT SHRI MUKESH CHOKSI AND HIS GROUP COMPANIES WERE ACTING AS ENTRY PROVIDERS AND ACCORDINGLY DETERMINED THE COMMISSION INCOME AT 0.15% OF THE TO TAL AMOUNT PROVIDED BY WAY OF ENTRIES. ACCORDINGLY THE AO TOOK THE VIEW THAT THE AMOUNTS RECEIVED ON ISSUING OF SHARES ARE BOGUS AND FABRICATED ONE. 3. HENCE THE ASSESSING OFFICER GAVE AN OPPORTUNITY TO THE ASSESSEE TO EXPLAIN THE CASE. HE ALSO R ECORDED A STATEMENT FROM SHRI KAPIL KUMAR AGARWAL, ONE OF THE DIRECTORS OF THE ASSESSEE COMPANY ON 22.12.2013. THE AO ALSO APPRAISED HIM ABOUT THE STATEMENT GIVEN BY SHRI MUKESH CHOKSHI. HOWEVER, SHRI KAPIKUMAR AGARWAL REITERATED THE STAND THAT THE ASSES SEE COMPANY HAS RECEIVED THE SHARE CAPITAL AMOUNT BY WAY OF CHEQUES AND EXPRESSED HIS INABILITY TO COMMENT UPON THE STAND TAKEN BY SHRI MUKESH CHOKSHI. IN THE REPLY GIVEN TO Q. NO.12, THE DIRECTOR STATED THAT THE ASSESSEE COMPANY HAD ISSUED SHARES TO FOUR OTHER GROUP COMPANIES OF SHRI MUKESH CHOKSHI DURING THE FINANCIAL YEAR 2008 - 09 AND THEY WERE NOT BELIEVED BY THE AO AND HENCE THE AMOUNTS WERE ADDED. IN THE APPELLATE PROCEEDINGS, THE LD CIT(A) CALLED FOR A REMAND REPORT AND IN THE REMAND PROCEEDINGS, SH RI MUKESH CHOKSHI APPEARED AND CONFIRMED THE TRANSACTIONS. ACCORDINGLY HE SUBMITTED THAT THE ADDITION MADE BY THE AO M/S. KRISHNA SHEET PROCESSORS P. LTD. 3 WAS DELETED BY THE LD CIT(A) IN THAT YEAR. THE DIRECTOR ALSO OFFERED TO PRODUCE SHRI MUKESH CHOKSHI BEFORE THE AO, IF REQUIRED. THE AO T OOK THE VIEW THAT THE DECISION TAKEN IN THE EARLIER YEAR CANNOT BE APPLIED FOR THE YEAR UNDER CONSIDERATION. HE ALSO OBSERVED THAT THE ASSESSEE HAS NOT BEEN ABLE TO PRODUCE SHRI MUKESH CHOKSI AND NO FINANCIAL STATEMENT WAS SUBMITTED. ACCORDINGLY HE TOOK THE VIEW THAT THE SHARE CAPITAL OF RS.1.65 CRORES RECEIVED BY THE ASSESSEE WAS NOT GENUINE AND ACCORDINGLY ADDED THE SAME TO THE TOTAL INCOME OF THE ASSESSEE U/S 68 OF THE ACT. 4. IN THE APPELLATE PROCEEDINGS, THE LD CIT(A) DELETED THE ABOVE SAID ADD ITION AND HENCE THE REVENUE HAS FILED THIS APPEAL BEFORE US. 5. THE LD D.R STOOD BY THE ORDER PASSED BY THE AO. HE SUBMITTED THAT THE TRIBUNAL HAS ACCEPTED THE FACT THAT SHRI MUKESH CHOKSHI AND HIS GROUP OF COMPANIES ARE ENTRY PROVIDERS, I.E., THEY WER E ENGAGED IN THE BUSINESS OF PROVIDING ACCOMMODATION BILLS. ACCORDINGLY THE TRIBUNAL HAS ESTIMATED THE INCOME AT 0.15% OF THE TURNOVER OF THE ABOVE SAID PARTIES. ACCORDINGLY HE SUBMITTED THAT THE LD CIT(A) SHOULD NOT HAVE ACCEPTED THE SHARE TRANSACTIONS AS GENUINE ONE. 6. ON THE CONTRARY, THE LD A.R SUBMITTED THAT THE ASSESSEE HAD ISSUED SHARES TO M/S TALENT INFOWAY LTD BY RECEIVING ACCOUNT PAYEE CHEQUES. HE SUBMITTED THAT THE DIRECTOR OF THE ASSESSEE COMPANY HAD OFFERED TO PRODUCE SHRI MUKESH CHOKS HI, SINCE SHRI MUKESH CHOKSHI HAD APPEARED AND CONFIRMED THE SHARE TRANSACTIONS ENTERED IN THE IMMEDIATELY PRECEDING YEAR WITH FOUR OF HIS GROUP COMPANIES. DESPITE THE OFFER, THE AO HAS NOT ASKED THE ASSESSEE TO PRODUCE SHRI MUKESH CHOKSHI. HE FURTHER SU BMITTED THAT THE ASSESSEE HAS SUBMITTED FINANCIAL STATEMENTS OF M/S TALENT INFOWAY LTD FOR THE FINANCIAL YEAR ENDING 31.3.2009 TO PROVE THE CREDIT WORTHINESS OF THE INVESTOR. FURTHER THE ASSESSEE M/S. KRISHNA SHEET PROCESSORS P. LTD. 4 ALSO FURNISHED A CONFIRMATION LETTER OBTAINED FROM M/S TALE NT INFOWAY LTD (PAGE 78 OF THE PAPER BOOK) CONFIRMING THE INVESTMENT MADE BY IT. HE SUBMITTED THAT THE PAYMENTS WERE RECEIVED IN THE MONTHS OF JUNE AUGUST 2009 AND HENCE THE ASSESSEE FURNISHED FINANCIAL STATEMENTS OF M/S TALENT INFOWAY LTD PERTAINING TO FY 2008 - 09. HE SUBMITTED THAT THE ABOVE SAID COMPANY HAD SUFFICIENT FUNDS TO MAKE THE IMPUGNED INVESTMENT. ACCORDINGLY HE SUBMITTED THAT THE OBSERVATIONS MADE BY THE AO WERE AGAINST THE FACTS AVAILABLE ON RECORD. HE SUBMITTED THAT THE STAND TAKEN BY SHRI MUKESH CHOKSHI THAT HE HAD PROVIDED ACCOMMODATION ENTRIES WAS RELATED TO ASSESSMENT YEARS 2005 - 06 AND OTHER YEARS. FURTHER THE STAND TAKEN BY HIM CANNOT OVERRIDE THE FACTUAL ASPECTS AND THE DOCUMENTS FURNISHED TO SUPPORT THE CASE OF THE ASSESSEE. THE LD A.R SUBMITTED THAT THE ASSESSEE HAS DISCHARGED THE INITIAL BURDEN OF PROOF PLACED UPON IT BY PROVING THE IDENTITY AND CREDITWORTHINESS OF THE INVESTOR AND GENUINENESS OF THE TRANSACTIONS. ACCORDINGLY HE SUBMITTED THAT THE AO WAS NOT JUSTIFIED IN ASSESSING THE SHARE CAPITAL RECEIPTS AS UNEXPLAINED CASH CREDIT WITHOUT DISPROVING THE BURDEN DISCHARGED BY THE ASSESSEE. THE LD A.R PLACED RELIANCE ON THE FOLLOWING CASE LAW AND SUBMITTED THAT THE LD CIT(A) WAS JUSTIFIED IN DELETING THE ADDITIONS. (A) CIT VS. LO VELY EXPORTS (P) LTD (2008)(216 CTR (SC) 195) (B) CIT VS. STELLER INVESTMENT LTD (251 ITR 263)(SC) (C) CIT VS. KAMDHENU STEEL & ALLOYS LTD (2012)(248 CTR (DEL) 33) (D) CIT VS. STL EXTRUSION P LTD (2011)(333 ITR 269)(MP) (E) CIT VS. ARUNANANDA TEXTI LES P LTD (2011)(333 ITR 116)(KAR) (F) CIT VS. DWARKADHISH INVESTMENT P LTD (2011)(330 ITR 298)(DELHI) (G) ITO VS. NEELKANTH FINBUILD LTD (ITA NO.2821/DEL/2009 DT 1.4.15) 7. WE HAVE HEARD RIVAL CONTENTIONS AND PERUSED THE RECORD. WE NOTICE THAT T HE LD CIT(A) HAS TAKEN NOTE OF THE FACT THAT IDENTICAL ADDITION MADE IN AY 2009 - M/S. KRISHNA SHEET PROCESSORS P. LTD. 5 10 HAS BEEN DELETED BY HIS PREDECESSOR. HE ALSO NOTICED THAT THE ASSESSEE HAS DISCHARGED THE BURDEN PLACED UPON IT U/S 68 OF THE ACT BY FURNISHING NECESSARY DOCUMENTS/EVIDENCE S. THE DOCUMENTS FURNISHED BY THE ASSESSEE HAS BEEN LISTED OUT BY THE LD CIT(A) IN PAGE 9 OF HIS ORDER AS UNDER: - (A) IDENTITY OF SHAREHOLDER; (B) GENUINENESS OF TRANSACTION; AND (C) CREDITWORTHINESS OF SHAREHOLDERS. ( V ) THE APPELLANT COMPANY SUBMITTED THE FOLLOWING DOCUMENTS TO PROVE THE IDENTITY, CREDITWORTHINESS AND THE GENUINENESS OF THE TRANSACTIONS: (A) COPIES OF THE SHARE APPLICATION FORMS DULY FILED BY THE AUTHORIZED SIGNATORIES FOR APPLYING THE SHARES OF THE APPELLANT COMPANY; (B) COPIES OF THE RESOLUTION FOR SUBSCRI BING TO THE SHARES BY TALENT INFOWAY LTD.; (C ) C OPIES OF THE PAN CARD; (D) COPY OF CONFIRMATION OF INVESTMENT BY M/S. TALENT INFOWAY LTD, IN THE APPELLANT CO. (E) COPY OF THE BANK STATEMENT OF M/S, TALENT INFOWAY LTD; (F) COPY OF MEMORANDUM & ARTICLES OF ASSOCIATI ON WITH CERTIFICATE OF INCORPORATION; (G) COPIES OF BALANCE SHEET WITH P&L A/C AND ITS SCHEDULES. (H) C OPY OF THE TOP 100 SHAREHOLDERS OF M/S. TALENT INFOWAY LTD. (I) COPY OF THE ANNUAL RETURNS OF M/S. TALENT INFOWAY LTD. THE LD CIT(A) ALSO NOTICED THE FACT THAT THE DIRECTOR OF THE ASSESSEE COMPANY HAS OFFERED TO PRODUCE SHRI MUKESH CHOKSHI, BUT THE AO DID NOT DIRECT TO PRODUCE HIM. INSTEAD THE AO HAS SIMPLY PLACED RELIANCE ON THE STATEMENTS GIVEN BY SHRI MUKESH CHOKSHI U/S 132(4) OF THE ACT DURING THE COURSE OF SEA RCH PROCEEDINGS CONDUCTED IN HIS HANDS BY IGNORING VARIOUS EVIDENCES FURNISHED BY THE ASSESSEE. THE LD CIT(A) HAS NOTED THE FACT THAT SHRI MUKESH CHOKSHI APPEARED BEFORE THE AO IN THE REMAND PROCEEDINGS OF THE PRECEDING YEAR AND CONFIRMED THE TRANSACTIONS . M/S. KRISHNA SHEET PROCESSORS P. LTD. 6 8. WE NOTICE THAT THE LD CIT(A) HAS EXPRESSED THE VIEW THAT THE AO CANNOT DRAW ADVERSE INFERENCE WITHOUT REBUTTING THE EVIDENCES FURNISHED BY THE ASSESSEE. IN OUR VIEW, THE LD CIT(A) HAS RIGHTLY OBSERVED SO. FURTHER THE LD CIT(A) HAS ALSO TAKEN NO TE OF THE DECISIONS RENDERED IN THE CASE OF CIT VS. ANTARTICA INVESTMENTS P LTD (2003)(262 ITR 493)(DELHI) AND CIT VS. ACTUAL INVESTMENTS LTD (269 ITR 211)(DELHI), WHEREIN THE COURT HAS DECIDED NOT TO INTERFERE, SINCE THE ASSESSEE HS PRODUCED THE SHARE APP LICATION FORMS ALONG WITH CONFIRMATION LETTERS, COPIES OF THEIR ACCOUNTS, COPIES OF BANK ACCOUNTS EVIDENCING CHEQUE PAYMENTS, AUDITORS REPORT ETC. 9. ACCORDINGLY THE LD CIT(A) HAS COME TO THE FOLLOWING CONCLUSION ON THIS MATTER: - (IX) KEEPING IN VI EW ALL THE FACTS AND CIRCUMSTANCES EXPLAINED ABOVE, IT CAN BE CONCLUDED THAT THE APPELLANT COMPANY HAS DISCHARGED THE ONUS CAST UPON THEM AS PER THE PROVISIONS OF SECTION 68. THE ADDITION MADE BY THE AO IS SIMPLY ON THE BASIS OF STATEMENT RECORDED U/S 132 (4) OF THE ACT, DURING THE SEARCH AND NOWHERE THE NAME OF THE APPELLANT COMPANY HAS BEEN SPECIFICALLY MENTIONED (AS) HAVING RECEIVED ANY BOGUS SHARE SUBSCRIPTION FROM MR. MUKESH CHOKSHI CONTROLLED COMPANIES. IN VIEW OF THE ABOVE STATED, THE ADDITION MADE OF RS.1,65,00,000/ - BY THE AO AS UNEXPLAINED SHARE CAPITAL IS DELETED AND THE APPEAL OF THE APPELLANT ON THIS GROUND IS ALLOWED. 10 . WE HAVE EXAMINED THE ORDER PASSED BY LD CIT(A) VIS - - VIS THE CONTENTIONS OF THE PARTIES URGED BEFORE US. WE HAVE ALSO DI SCUSSED THE REASONING GIVEN BY LD CIT(A) TO DELETE THE IMPUGNED ADDITION. WE NOTICE THAT THE LD CIT(A) HAS ANALYSED THE ISSUE IN A PROPER PERSPECTIVE IN ACCORDANCE WITH THE LAW BY DRAWING SUPPORT FROM THE DECISIONS RENDERED BY HONBLE HIGH COURTS. THE LD CIT(A) HAS SPECIFICALLY OBSERVED THAT THE ASSESSEE HAS DISCHARGED THE BURDEN OF PROOF PLACED UPON IT U/S 68 OF THE ACT, WHERE AS THE ASSESSING OFFICER HAS FAILED TO REBUT THE SAME. EVEN THOUGH THE ASSESSEE HAS OFFERED TO PRODUCE M/S. KRISHNA SHEET PROCESSORS P. LTD. 7 MR. MUKESH CHOKSHI BEFORE THE AO, YET THE AO DID NOT ORDER FOR PRODUCTION. UNDER THESE SET OF FACTS, WE ARE OF THE VIEW THAT NO INTERFERENCE IS CALLED FOR IN THE DECISION RENDERED BY LD CIT(A) ON THIS ISSUE. ACCORDINGLY WE AFFIRM THE SAME. 11. IN THE RESULT, THE APPEAL FILED BY THE REVENUE IS DISMISSED. ORDER HAS BE E N PRONOUNCED IN THE COURT ON 5 . 5 .201 7. SD/ - SD/ - (SANDEEP GOSAIN ) (B.R.BASKARAN) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI ; DATED : 5 / 5 / 20 1 7 COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT(A) 4. CIT 5. DR, ITAT, MUMBAI 6. GUARD FILE. BY ORDER, //TRUE COPY// ( DY./ASSTT. REGISTRAR) PS ITAT, MUMBAI