KRISHNA CAPFIN LTD., Jaipur V. ITO, Jaipur

ITA 401/JPR/2011

• Counselvise Citation: [2011] 140 COUNSELVISE.COM (IT) 54174 (ITAT-JAIPUR)
• Duration Of Justice: 4 month(s) 20 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-09-2011
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 2000-2001
• Appeal Filed On: 03-05-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: D K MEENA
• Keywords: Unexplained cash credit; Gift; Additional evidence; Accommodation entries
• Section: 131; 68; 148

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNAL JAIPUR BENCH B JAIPUR (BEFORE SHRI R.K.GUPTA AND SHRI N.L.KALRA) ITA NO. 401/ JP/2011 ASSESSMENT YEAR 2000-01 PAN: AABCK 0319 A M/S. KRISHHNA CAPFIN LTD. VS. THE ITO 506, NEMI SAGAR COLONY WARD 3 (1) VAISHALI NAGAR, JAIPUR JAIPUR (APPELLANT ) (RESPONDENT) ASSESSEE BY: SHRI RAJEEV SOGANI DEPARTMENT BY : SHRI D.K. MEENA DATE OF HEARING: 16-09-2011 DATE OF PRONOUNCEMENT:23-09-2011 ORDER PER N.L. KALRA, AM:- THE ASSESSEE HAS FILED AN APPEAL AGAINST THE ORD ER OF THE LD. CIT(A)- 1, JAIPUR DATED 02-02-2011 FOR THE ASSESSMENT YEA R 2000-01. 2.1 THE SOLITARY GROUND OF THE ASSESSEE IS THAT THE LD. CIT(A) HAS ERRED IN CONFIRMING THE ACTION OF THE AO IN MAKING ADDITION OF RS. 8.50 LACS U/S 68 OF THE ACT AS UNEXPLAINED CREDIT. 2.2 THE ASSESSEE COMPANY IS IN BUSINESS OF PROVIDIN G FUNDS AS LOANS ETC. THE SEARCH OPERATION WAS CONDUCTED IN THE CASE OF M /S. B.C. PUROHIT & CO. ON 12-01-2005. DURING THE COURSE OF SEARCH, IT WAS NOTICED THAT THE GROUP IS 2 INVOLVED IN PROVIDING ACCOMMODATION ENTRIES OF GIFT S/ LOANS, SHARE APPLICATION MONEY TO THE INTEREST PERSONS. THE MODU S OPERANDI ADOPTED BY THE GROUP WAS THAT INTERESTED PERSONS USED TO GIVE THE CASH TO THESE ENTRY OPERATORS AND THE ENTRY OPERATORS USED TO DEPOSIT T HE CASH IN THE BANK ACCOUNT OF SOME INDIVIDUAL OR COMPANY CONTROLLED BY THE OPERATORS. THE MONEY IS ROUTED THROUGH CHEQUES IN ONE OR MORE BAN K ACCOUNTS AND FINALLY CHEQUES OR DRAFTS WERE BEING ISSUED IN THE NAME OF INTERESTING PARTY WHO HAS GIVEN THE CASH. DURING THE COURSE OF SEARCH, ENQUIR IES IN THE CASE OF M/S. B.C. GROUP, IT WAS FOUND THAT THE ASSESSEE COMPANY HAS TAKEN AN ACCOMMODATION ENTRY OF RS. 1.00 LAC FROM SHRI SUNIL VERMA. ON RECEIPT OF THE INFORMATION FROM INVESTIGATION WING, THE AO ISS UED THE NOTICE U/S 148 AFTER GETTING THE APPROVAL OF ADDLL CIT, RANGE-3, J AIPUR . THE SHARE CAPITAL SO INTRODUCED BY SHRI SUNIL VERMA WAS TREATED AS UN EXPLAINED BY THE AO U/S 68 OF THE ACT. IN RESPECT OF FOLLOWING PERSONS WHO HAVE ALSO PAID THE AMOUNT OF RS. 1.00 LAC EACH TOWARDS SHARE CAPITAL AND SHAR E PREMIUM, THE AO TREATED THE DEPOSITS AS UNEXPLAINED BECAUSE THE ASS ESSEE HAS NOT BEEN ABLE TO ADDUCE THE EVIDENCE TO SHOW THE IDENTITY AND GENUIN ENESS OF THE TRANSACTIONS IN RESPECT OF THE FOLLOWING:- 1. SHRI VIJAY KUMAR MALA 2. SHRI AJAY KUMAR SINGH 3. SMT. LATA AGARWAL 3 2.3 A SUM OF RS. 1.00 LAC WAS PAID BY SHRI PRAVEEN KUMAR JHUNJHUNWALA AS SHARE PLUS PREMIUM. THE COPY OF THE ACKNOWLEDGEM ENT OF RETURN OF INCOME ALONGWITH COPY OF THE BALANCE SHEET AS ON 31 -03-2000 WAS FILED. ACCORDING TO THE AO, THE TOTAL INCOME OF THE ASSESS EE WAS RS. 55,510/- AND THE TOTAL WORTH AS PER BALANCE SHEET WAS RS. 3,18,7 90/-. THE AO THEREFORE, HELD THAT CREDITWORTHINESS IS NOT PROVED. 2.4 A SUM OF RS. 1.00 LAC WAS PAID BY SHRI RAJENDR A KUMAR GUPTA TOWARDS SHARE CAPITAL PLUS PREMIUM. THE COPY OF BAN K ACCOUNT OF THE PERSON WAS FILED BY THE ASSESSEE. BEFORE ISSUING CHEQUE ON 30 TH DEC. 1999, THERE WAS DEPOSITS OF CHEQUE ON 29-12-1999. IT WAS THEREF ORE, OBSERVED BY THE AO THAT THE TRANSACTION IS NOT GENUINE. 2.5 RS. 1.00 LAC WAS PAID BY SMT. PRABHA GUPTA TOWA RDS SHARE CAPITAL PLUS PREMIUM. HER COPY OF THE BANK ACCOUNT WAS FILED. BE FORE ISSUING CHEQUE, THERE WAS A DEPOSIT THROUGH CHEQUE IN HER BANK ACCO UNT. SMT. PRABHA GUPTA IS STATED TO BE A HOUSEWIFE. THE AO THEREFORE, HELD THAT DEPOSIT OF RS. 1.00 LAC IS UNDISCLOSED INCOME OF THE ASSESSEE U/S 68 OF THE ACT 2.6 RS1.50 LAC WAS PAID BY SMT. SUNITA GUPTA TOWARD S SHARE CAPITAL PLUS PREMIUM. THE COPY OF HER BANK ACCOUNT WAS FILED. IN THE BANK ACCOUNT, THE SUM THROUGH CHEQUE WAS DEPOSITED BEFORE CHEQUE WAS ISSUED IN THE NAME OF 4 THE ASSESSEE COMPANY. SMT. SUNITA GUPTA IS ALSO A H OUSEWIFE. THE AO TREATED THE SUM OF RS. 1.50 LACS AS UNDISCLOSED INC OME U/S 68 OF THE ACT. 2.7 DURING THE COURSE OF APPELLATE PROCEEDINGS BEFO RE THE LD. CIT(A), THE ASSESSEE FILED THE IDENTITY PROOF IN RESPECT OF FOU R PERSONS AND THESE ARE FORWARDED TO THE AO FOR VERIFICATION BY THE LD. CIT (A). THE AO IN HIS REMAND REPORT SUBMITTED THAT THESE FOUR PERSONS WER E NOT PRODUCED BEFORE HIM IN SPITE OF PROVIDING OPPORTUNITIES TO THE ASSE SSEE. THE AO PROVIDED ONE MORE OPPORTUNITY TO THE ASSESSEE TO PRODUCE THE PAR TIES FOR VERIFICATION BUT THESE PARTIES HAVE NOT BEEN PRODUCED. THE LD. CIT(A ) THEREFORE, CONFIRMED THE ADDITION AFTER OBSERVING AS UNDER:- DURING THE ASSESSMENT PROCEEDINGS, NO PROOF FOR IDENTITY AND CREDITWORTHINESS OF THE CREDITORS WERE FILED. THE GENUINENESS OF THE TRANSACTIONS ALSO REMAINED UNPROVED. SOME PROOFS FOR IDENTITY OF 4 OF THE CEDI TORS OUT OF 7 WERE FILED DURING THE HEARING OF APPEAL BU T THE APPELLANT FAILED TO GET EVEN THOSE 4 IDENTITIES VER IFIED. SUFFICIENT OPPORTUNITY WAS PROVIDED TO THE . AR BUT THE APPELLANT FAILED TO GET THE ADDITIONAL EVIDENCES FI LED BY HIM VERIFIED. THUS, EVE IN RESPECT OF 4 CREDITORS, IDENTITY REMAINED UNVERIFIABLE. AS IN ALL THE 7 CREDITORS NE ITHER IDENTITY NOR CREDITWORTHINESS OF THE CREDITORS COUL D BE ESTABLISHED AND THE GENUINENESS OF THE TRANSACTIONS ALSO REMAINED TO BE VERIFIED, ADDITION MADE U/S 68 IS FU LLY 5 JUSTIFIED. ADDITION OF RS. 8,50,000/- MADE BY AO U/ S 68 IS THEREFORE, CONFIRMED. THE ONLY ADDITIONAL EVIDEN CES FILED DURING THE APPELLATE PROCEEDINGS WAS IDENTITY PROOF OF SVS. PRAVEEN KUMAR JHNUNJHUNWALA, RAJENDER KUMAR GUPTA, SMT. SUNITA GUPTA AND SMT. PRABHA GUPTA. ANOTHER EVIDENCES LIKE COPY OF INCOME TAX RETURN AND BANK STATEMENT WERE FILED IN SUPPORT OF THESE 4 PER SONS DURING THE ASSESSMENT PROCEEDINGS WHICH HAS BEEN DISCUSSED IN THE ASSESSMENT ORDER. THE AO HAS CLEAR LY MENTIONED THAT AS PER THE RETURNED INCOME, HIS INCO ME WAS ONY RS. 55510/- AND RS. 1 LAC INVESTED WAS NOT JUSTIFIED. IN CASE OF SHRI RAJENDER KUMAR GUPTA, JU ST TWO DAYS BEFORE ISSUING OF CHEQUE AN EQUAL AMOUNT WAS TRANSFERRED IN THE BANK ACCOUNT LEAVING BALANCE OF RS. 5000/- ONLY. THE CREDITWORTHINESS OF SHRI RAJENDER KUMAR GUPTA REMAINS TO BE PROVED. IN THE CASE OF SM T. PRABHA GUPTA, SIMILAR FACTS WERE NOTICED AS EQUAL A MOUNT AS TRANSFERRED IN THE BANK ACCOUNT JUST ONE DAY BEF ORE THE CHEQUE WAS ISSUED. SMT. PRANHA GUPTA IS A HOUSEWIFE AND HER CREDITWORTHINESS REMAINED TO BE PROVED. IN THE CASE OF SMT. SUNITA GUPTA ALSO AN EQUAL AMOUNT WAS TRANSFERRED IN THE BANK ACCOUNT ONE DAY PRIOR TO IS SUANCE OF CHEQUE. SHE IS ALSO A HOUSEWIFE AND HER CREDITWORTHINESS REMAINS TO BE PROVED. AS THE WRITT EN SUBMISSIONS FILED BY THE A.R. IS NOTHING BUT COPY O F THE LETTER ADDRESSED TO THE AO DURING ASSESSMENT PROCEE DINGS AND THE SAME HAS ALREADY BEEN CONSIDERED BY THE AO, ALL 6 THE CREDITORS TOTALING RS. 8,50,000/- REMAINS UNVER IFIABLE. THE ADDITION OF RS. 8,50,000/- MADE U/S 68 IS HERE BY CONFIRMED. 2.8 WE HAVE HEARD BOTH THE PARTIES. THE ASSESSEE VI DE LETTER DATED 4 TH DEC 2007 GAVE COMPLETE ADDRESSES OF THE PERSONS FROM WH OM SHARE CAPITAL HAS BEEN RECEIVED DURING THE PREVIOUS YEAR RELEVANT TO ASSESSMENT YEAR UNDER CONSIDERATION. THE SHARE CAPITAL INCLUDING THE PREM IUM TO THE EXTENT OF RS. 11.50 LACS WAS RECEIVED FROM 15 PERSONS. THE AO HAS ACCEPTED THE RECEIPT OF SHARE CAPITAL FROM SEVEN PERSONS. THE SHARE CAPITAL SHOWN IN THE NAME OF OTHER 08 PERSONS HAS NOT BEEN ACCEPTED BY THE AO AN D THE AO MADE THE ADDITION OF RS. 8.50 LACS U/S 68 OF THE ACT.. VIDE LETTER DATED 11 TH JAN. 2010, THE ASSESSEE FILED THE IDENTITY OF FOUR SHARE HOLDE RS AND ALSO FILED THE COPY OF PAN CARDS AND INCOME TAX RETURN. ALL THESE 08 PERSO NS IN WHOSE NAME SHARE CAPITAL HAS NOT BEEN ACCEPTED BY THE AO ARE H AVING PAN AND THEIR PANS WERE GIVEN TO THE AO. WE HAVE NOTICED THAT THE AO IN HIS ORDER HAS MENTIONED THE BANK ACCOUNT IN RESPECT OF FOLLOWING SHARE HOLDERS WERE CREDITED THROUGH CHEQUE BEFORE ISSUING CHEQUE TO TH E ASSESSEE COMPANY. THESE PERSONS ARE AS UNDER:- 1 SHRI RAJENDRA KUMAR GUPTA RS. 1.00 LAC 2. SMT. PRABHA GUPTA RS. 1.00 LAC 3. SMT. SUNITA GUPTA RS. 1.50 LACS 7 IT IS NOT THE CASE OF REVENUE THAT THERE HAS BEEN D EPOSIT IN CASH IN THE BANK ACCOUNT OF THE ABOVE REFERRED THREE SHAREHOLDERS. I F THE ASSESSEE HAS DISCHARGED THE ONUS OF PROVING THE IDENTITY NO CASH BEEN DEPOSITED IN THE BANK ACCOUNT OF THE CREDITOR THEN THE ONUS IS ON TH E AO TO ESTABLISH THE CREDITWORTHINESS OR GENUINENESS OF THE TRANSACTIONS BY ISSUING SUMMONS U/S 131 OF THE ACT. RELIANCE IS PLACED ON THE DECISION OF HON'BLE DELHI HIGH COURT IN THE CASE IN THE CASE OF MOD CREATION (P) L TD. VS ITO, 2011-TIOL- 560-HIGH COURT-DELHI-IT. THERE IS NO CASE OF MAKING ANY ADDITION U/S 68 OF THE ACT IN RESPECT OF SHARE CAPITAL PAID BY THESE T HREE PERSONS TO THE EXTENT OF RS. 350 LACS . IN THE CASE OF THE ASSESSEE, THE ASS ESSEE HAS FILED THE COPY OF ACKNOWLEDGMENT OF RETURN OF INCOME. THE COPY OF BAL ANCE SHEET HAS ALSO BEEN FILED. THE AO HAS NOT COLLECTED ANY MATERIAL T O SUGGEST THAT SHARE CAPITAL PAID BY THE THIS PERSON IS NOT GENUINE. MOR EOVER, THESE PERSONS ARE NOT RELATED TO M/S. B.C. PUROHIT & CO. AND SHARE CA PITAL IN THE NAME OF SHRI PRAVEEN JHUNJHUNWALA IS TO BE TREATED AS EXPLAINED. 2.9 VIDE LETTER DATED 2-2-2011 ADDRESSED TO THE LD. CIT(A), THE ASSESSEE STATED THAT PROOF OF GENUINENESS OF SHAREHOLDERS HA S ALREADY BEEN SUBMITTED AND IF THE LD. CIT(A) MAY THINK FINE TO PRODUCE THE SHAREHOLDERS THEN THE ASSESSEE WILL PRODUCE SHAREHOLDERS FOR EXA MINATION. IN RESPECT OF 8 OTHER SHAREHOLDERS, THE ASSESSEE HAS FILED COMPLETE DETAILS OF NAMES AND ADDRESSES. IN RESPECT OF SHARE CAPITAL, THE ADDITIO N CANNOT BE MADE IN THE HANDS OF THE COMPANY IN CASE IDENTITY OF THE SHAREH OLDER IS PROVE. RELIANCE IS PLACED ON THE FOLLOWING DECISIONS. 1. CIT VS LOVELY EXPORTS (P) LTD. 216 CTR 195 (SC) 2. CIT VS STELLAR INVESTMENT LTD., 251 ITR 463 (SC) 3. CIT VS SOPHIA FINANCE LTD., 205 ITR 98 (DEL) 4. SHARLIMAR BUILDCON (P) LTD. VS ITO 136 TTJ 701 (JAI PUR) 5. CIT VS ARUNANDA TEXTILES (P) LTD. , 333 ITR 116 6. BARKHA SYNTHETICS LTD. VS ACIT, 283 ITR 377 (RAJ.) 7. CIT VS STL EXTRUSION (P) LTD. 333 ITR 269 (MP) 8. UMA POLYMER (P) LTD. , 101 TTJ 124, JODHPUR 9. CIT VS UNITED BIOTECH (P) LTD. 2010-TIOL-533-HC-DEL 10. HOTEL GAUDAVAN (P) LTD. (ITA NO.1162 /JP/2008 AND 1137/JP/08 DATED 22-05-2009) 11. A.L. LALPURIA (ITA NO.905/JP/2008 DTD 31-03-2010) 12. ANIL LODHA VS ITO (ITA NO650/JP/2008 DATED 31-07-08 ) 2.10 LOOKING TO THE LEGAL FINDINGS ON THE ISSUE OF NOT ADDING THE SHARE CAPITAL U/S 68 OF THE ACT IN THE HANDS OF THE COMPA NY WHEN IDENTITY OF SHARE CAPITAL IS ESTABLISHED, WE HOLD THAT THE LD. CIT(A) WAS NOT JUSTIFIED IN 9 CONFIRMING THE ADDITION OF RS. 8.50 LACS. THUS THE SOLITARY GROUND OF THE ASSESSEE IS ALLOWED. 3. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALL OWED. THE ORDER IS PRONOUNCED IN THE OPEN COURT ON 23-09 -2011 SD/- SD/- (R.K. GUPTA) (N.L. KALRA) JUDICIAL MEMBER ACCOUNTANT MEMBER JAIPUR DATED; 23 /09/2011 *MISHRA COPY FORWARDED TO :- 1. M/S. KRISHNA CAPFIN LTD. , JAIPUR 2. THE ITO . WARD 3(1), JAIPUR 3. THE LD. CIT BY ORDER 4. THE LD. CIT(A) 5. THE LD.DR 6. THE GUARD FILE (ITA NO.401/JP /11) A.R, ITAT, JAIPUR 10 11