DCIT, Patiala V. M/s Sangrur Agro Ltd., Sangrur

ITA 430/CHANDI/2016

• Counselvise Citation: [2018] 121 COUNSELVISE.COM (IT) 4911 (ITAT-CHANDIGARH)
• Duration Of Justice: 2 year(s) 1 month(s) 22 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-06-2018
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: Not Allotted
• Assessment Year: 2008-2009
• Appeal Filed On: 26-04-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: MANJIT SINGH
• Keywords: Share purchase agreement; Capital receipt; Onus to prove
• Section: 68; 27; 6; 2

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DIVISION BENCH, B CHANDIGARH BEFORE SHRI SANJAY GARG, JUDICIAL MEMBER AND MS. ANNAPURNA GUPTA, ACCOUNTANT MEMBER ITA NO. 429/CHD/2016 ASSESSMENT YEAS : 2008-09 THE DCIT, VS. M/S SANGRUR INDUSTRIAL CORPORATION CENTRAL CIRCLE, LTD, FOCAL POINT, SUNAM ROAD, PATIALA SANGRUR PAN NO. AAFCS994M & ITA NO. 430/CHD/2016 ASSESSMENT YEAS : 2008-09 THE DCIT, VS. M/S SANGRUR AGRO LTD., CENTRAL CIRCLE, VII. BHINDRAN, RURAL FOCAL POINT, PATIALA SANGRUR PAN NO. AADCS5089H (APPELLANT) (RESPONDENT) APPELLANT BY : SH. MANJIT SINGH, SR.DR RESPONDENT BY : SH. JASPAL SHARMA, ADVOCATE DATE OF HEARING : 22.05.2018 DATE OF PRONOUNCEMENT: .2018 ORDER PER SANJAY GARG, JUDICIAL MEMBER: THE PRESENT APPEALS HAVE BEEN PREFERRED BY THE REVE NUE AGAINST THE SEPARATE ORDERS DATED 05.02.2016 OF THE COMMISSIONER OF INCOME TAX(APPEALS)-5, LUDHIANA [HEREINAFTER REFERR ED TO AS CIT(A)] AGITATING THE ACTION OF CIT(A) IN DELETING THE PENA LTY LEVIED U/S 271(1)(C) OF THE INCOME-TAX ACT, 1961 (IN SHORT 'TH E ACT'). ITA NOS. 429 & 430-CHD-2016- SANGRUR INDUSTRIAL CORPN LTD & SANGRUR AGRO LTD, SA NGRUR 2 2. THE BRIEF FACTS RELATING TO THE ISSUE UNDER CONS IDERATION ARE THAT THE ASSESSING OFFICER DURING ASSESSMENT PROCEEDINGS NOTED THAT THERE WAS INCREASE IN THE SHARE CAPITAL OF THE ASSESSEE C OMPANY DURING THE YEAR BY A SUM OF RS. 47,65,600/-. FURTHER, THE SE CURITIES PREMIUM ACCOUNT HAD BEEN SHOWN AT RS. 6,67,18,400/- AGAINS T NIL AMOUNT DURING THE PRECEDING YEAR. HE, THEREFORE, ASKED THE ASSESSEE TO FURNISH DETAILS OF SHARE CAPITAL ACCOUNT AND THE SE CURITY PREMIUM ACCOUNT. THE ASSESSEE FURNISHED THE REQUIRED DETAIL S AND STATED THAT 476560 NUMBERS OF SHARES OF THE FACE VALUE OF RS. 1 0 EACH WERE ALLOTTED DURING THE YEAR UNDER CONSIDERATION AT A P REMIUM OF RS. 140/- PER SHARE. A LIST OF SHAREHOLDERS WITH OTHER DETAILS WAS ALSO FURNISHED. THE ASSESSING OFFICER CONSIDERED THE DETAILS SUBMIT TED BY THE ASSESSEE AND CONFIRMATIONS RECEIVED FROM THE SHAREH OLDERS AND ASKED TO ASSESSEE TO PRODUCE THE PERSONS INVOLVED. THE AS SESSEE PRODUCED SOME OF THE PERSONS ON RANDOM BASIS FROM WHOM CONFI RMATIONS WERE RECEIVED, AND THEIR STATEMENTS WERE RECORDED. DOCUM ENTARY EVIDENCE IN THE FORM OF IDENTITY CARDS, VOTER CARDS ETC. WER E ALSO PRODUCED. THE ASSESSING OFFICER, HOWEVER, NOTED THAT THOUGH T HE CONFIRMATIONS WERE RECEIVED IN MOST OF THE CASES, HOWEVER, NO REP LY WAS RECEIVED IN SOME OF THE CASES AS LISTED BY THE ASSESSING OFF ICER IN THE ASSESSMENT ORDER. ON BEING ASKED TO EXPLAIN WHY T HE ADDITION BE NOT MADE IN RESPECT OF THE PERSONS FROM WHOM THE CO NFIRMATIONS WERE NOT RECEIVED, THE ASSESSEE EXPLAINED AS UNDER:- IT IS SUBMITTED THAT IN RESPONSE TO YOUR SHOW-CAUSE REGARDING OUR ONUS TO PROVE IDENTITY, CAPACITY AND GENUINENESS OF SHARE CAPITAL, WE HEREBY SUBMITS THAT :- ITA NOS. 429 & 430-CHD-2016- SANGRUR INDUSTRIAL CORPN LTD & SANGRUR AGRO LTD, SA NGRUR 3 I) OUR COMPANY IS A PUBLIC LIMITED COMPANY DULY REGISTERED UNDER THE INDIAN COMPANIES ACT, 1956. II) THE CAPITAL BASE OF OUR COMPANY IS VERY WIDE. III) NO AMOUNT OF SHARES CAPITAL HAS RECEIVED IN CASH BUT ALL THE SHARE CAPITAL HAS BEEN RECEIVED BY ACCOUNT PAYEE BANK DRAFT. IV) THE COMPLETE LIST OF SHAREHOLDERS ALONGWITH THEIR NAME, FATHERS NAME & COMPLETE ADDRESS HAS ALREADY INTIMATED TO YOUR GOODSELF. SO, IN THIS WAY, ALL THE NECESSARY INGREDIENTS OF IDENTITY, CAPACITY & GENUINENESS HAS PROVED. FURTHER, HONBLE SUPREME CURT IN THE CASE OF LOVELY EXPORTS LTD. VS. UNION OF INDIA 216 CTR 196 HAS HELD THAT IF THE SHARE APPLICATION MONEY I S RECEIVED FROM ALLEGED BOGUS SHAREHOLDERS, WHOSE NAMES ARE GIVEN TO ASSESSING OFFICER, THEN DEPARTMENT IS FREE TO REOPEN THEIR INDIVIDUAL ASST. IN ACCORDANCE WITH LAW, BUT IT CANNOT BE REGARDED AS UNDISCLOSED INCOME OF THE ASSESSEE. SIMILARLY, IN THE CASE OF CIT VS. STELLER INVESTMENT LTD. (2000) 167 CTR (SC) 287 HAS HELD THAT EVEN IF THE SUBSCRIBERS TO BE INCREASED SHARE CAPITAL OF ASSESSEE COMPANY WERE IN GENUINE, THE AMOUNT COULD NOT BE REGARDED AS UNDISCLOSED INCOME OF THE ASSESSEE COMPANY. IN VIEW OF THE ABOVE FACTS, IT IS ABUNDANTLY CLEAR THAT WE HAVE DISCHARGE OUR PRELIMINARY ONUS REGARDING CAPACITY, GENUINENESS AND IDENTIFY OF THE SHAREHOLDERS HENCE IT IS REQUESTED THAT NO ADVERSE VIEW MAY KINDLY BE TAKEN TO THE MATTER . 3. THE ASSESSING OFFICER DID NOT AGREE WITH THE ABO VE SUBMISSIONS AND ADDED A SUM OF RS. 37,09,950/- ON ACCOUNT OF UN EXPLAINED SHARE CAPITAL U/S 68 OF THE I.T. ACT AND ALSO INITIATED PENALTY PROCEEDINGS U/S 271(1)(C) OF THE ACT AND LEVIED THE IMPUGNED PE NALTY. ITA NOS. 429 & 430-CHD-2016- SANGRUR INDUSTRIAL CORPN LTD & SANGRUR AGRO LTD, SA NGRUR 4 4. THE LD. CIT(A), HOWEVER, DELETED THE PENALTY S O LEVIED BY THE ASSESSING OFFICER, OBSERVING AS UNDER:- 4. THE FACTS OF THE CASE, THE BASIS OF PENALTY IM POSED BY THE A.O. AND THE ARGUMENTS OF THE AR DURING THE APPELLATE PROCEEDINGS HAVE BEEN CONSIDERED. THE AO HAS LEVIED THE PENALTY U/S 271(L)(C) ON ACCOUNT THAT AS SESSEE COMPANY HAS CONCEALED THE PARTICULARS OF ITS INCOME AND HAS FURNISHED INACCURATE PARTICULARS OF THE INCOME BECAUSE THE ASSESSEE COMPANY FAILED TO PROVE THE IDENTITY, GENUINENESS AND CREDIT WORTHINESS OF SOME OF THE PERSONS WHO HAD PURCHASED SHARES OF THE ASSESSEE COMPANY. ON THE OTHER HAND, THE AR CONTENDED THAT A S IS EVIDENT FROM THE ASSESSMENT ORDER ITSELF THE ADDITI ON HAS BEEN MADE ON THE BASIS OF PRESUMPTION AND ASSUMP TIONS BUT NO POSITIVE EVIDENCE HAS BEEN BROUGHT ON R ECORD TO PROVE OTHERWISE. IT IS A MATTER OF RECORD THAT A SEARCH OPERATION WAS CARRIED OUT AT THE PREMISES OF THE AS SESSEE COMPANY AND DURING SEARCH OPERATION NO DOCUMENTARY EVIDENCE IN THE FORM OF SHARE CERTIFICATE PERTAININ G TO THESE PERSONS HAVE BEEN FOUND TO SUGGEST THAT THESE SHARE MONEY PERTAINS TO THE ASSESSEE COMPANY. THE AR FURT HER ARGUED THAT AS STATED DURING ASSESSMENT PROCEEDINGS , THE ASSESSEE COMPANY IS A 'PUBLIC LIMITED COMPANY' AND MOST OF THE SHARE CAPITAL HAS BEEN RECEIVED BY ACCOUNT P AYEE BANK DRAFTS. THE DETAILS OF THE PARTICULARS OF THES E SHARE HOLDERS WERE PROVIDED TO THE LD. AO DURING ASSESSME NT PROCEEDINGS AND THE ASSESSEE'S ONUS WAS DISCHARGED. THERE IS A POSSIBILITY THAT SOME OF THE LETTERS MEA NT FOR THESE SHARE HOLDERS MIGHT NOT HAVE REACHED TO THEM BECAUSE OF NUMEROUS REASONS SUCH AS SHIFTING OF THE IR ESTABLISHMENT, NON AVAILABILITY DUE TO CERTAIN REAS ON AT THE GIVEN ADDRESS ETC. SINCE THE ASSESSEE HAS ALREADY DISCHARGED ITS ONUS AND AS SUCH THE ASSESSEE'S CASE IS COVERED BY THE DECISION OF THE HONORABLE SUPREME CO URT IN THE CASE OF LOVELY EXPORTS LIMITED VS UNION OF I NDIA 216 CTR196 AND PENALTY IS NOT ATTRACTED, 4.1 THE ASSESSEE COMPANY IS A PUBLIC LIMITED COMPAN Y WITH LARGE NUMBER OF SHAREHOLDERS AND THE SHARE CAP ITAL WAS RECEIVED THROUGH BANKING CHANNELS. THE ASSESSEE HAS GIVEN DOCUMENTS ABOUT THE IDENTITY OF THE SHARE HOL DERS, AS SUCH NO CASE OF CONCEALMENT OF INCOME IS MADE OU T SIMPLY BECAUSE ADDITION UNDER SECTION 68 HAS NOT BE EN ITA NOS. 429 & 430-CHD-2016- SANGRUR INDUSTRIAL CORPN LTD & SANGRUR AGRO LTD, SA NGRUR 5 CHALLENGED AND, THEREFORE, PENALTY UNDER SECTION 27 1(L)(C) IS NOT LEVIABLE. THUS CONSIDERING THE FACTS AND CIRCUMSTANCES OF THE CASE AND THE JUDICIAL PRONOUNCEMENTS REFERRED BY THE AR, THE PENALTY IMPO SED U/S 2711CC IN THIS CASE IS HELD TO BE UNJUSTIFIED AND IS THEREFORE, DIRECTED TO BE DELETED. 5. WE HAVE HEARD THE RIVAL CONTENTIONS. THE LD. COU NSEL FOR THE ASSESSEE BEFORE US HAS SUBMITTED THAT ASSESSEE HAD FURNISHED ALL THE DETAILS REGARDING THE SHARE CAPITAL RECEIPT WHICH W AS CROSS CHECKED BY THE ASSESSING OFFICER AND THE ASSESSEE HAD BEEN ABLE TO PROVE THE SOURCE OF DEPOSITS OF ABOUT 95% OF THE AMOUNT. THE ASSESSEE, HOWEVER, COULD NOT PROVIDE CONFIRMATION ONLY OF 5% OF THE SHARE ALLOCATION MONEY RECEIVED DURING THE YEAR. HE SUBM ITTED THAT THE ABOVE FACTS SHOW THAT THE ASSESSEE DISCHARGED THE P RIMARY BURDEN OF PROVING THE SOURCE OF DEPOSITS / SHARE APPLICATION MONEY. IT WAS ALSO EXPLAINED TO THE ASSESSING OFFICER THAT THE ASSESSE E WAS PUBLIC LIMITED COMPANY WITH LARGE NUMBER OF SHAREHOLDERS A ND THE SHARE CAPITAL WAS RECEIVED THROUGH BANKING CHANNELS. THER E WAS POSSIBILITY THAT SOME OF THE LETTERS SENT TO THESE PERSONS FOR CONFIRMATIONS MIGHT NOT HAVE REACHED TO THEM BECAUSE OF NUMEROUS REASON S SUCH AS SHIFTING OF THEIR ESTABLISHMENT, NON- AVAILABILITY ON A CERTAIN DATE ETC. AND THAT IT WAS NOT A CASE OF FURNISHING OF INACCUR ATE PARTICULARS OF INCOME OR CONCEALMENT OF INCOME BUT JUST A CASE OF INSUFFICIENCY OF EVIDENCE IN RESPECT OF SOME OF THE SHAREHOLDERS. WE FIND MERIT IN THE ABOVE CONTENTION RAISED BY THE LD. COUNSEL FOR THE ASSESSEE. WE DO NOT FIND ANY REASON TO INTERFERE IN THE ORDER OF THE CIT(A) ON THIS ISSUE. THE APPEAL OF THE REVENUE IS THEREFORE, DISMISSED. ITA NOS. 429 & 430-CHD-2016- SANGRUR INDUSTRIAL CORPN LTD & SANGRUR AGRO LTD, SA NGRUR 6 ITA NO. 430/CHD/2016 (ASSESSMENT YEAR: 2008-09) 6. BOTH THE LD. REPRESENTATIVES FOR THE PARTIES SUB MITTED THAT THE FACTS AND ISSUE INVOLVED IN BOTH THE APPEALS ARE ID ENTICAL IN NATURE AND THAT THE FINDINGS ARRIVED AT IN THE CASE OF DCI T VS. SANGRUR INDUSTRIAL CORPORATION LTD IN ITA NO. 429/CHD/2016, CAN WELL BE APPLIED IN THIS CASE ALSO. 7. IN VIEW OF OUR FINDINGS GIVEN ABOVE, THE ORDER O F CIT(A) IN THIS APPEAL IS ALSO UPHELD. IN THE RESULT, BOTH THE APPEALS OF THE REVENUE ARE HEREBY DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 18.06.2018. SD/- SD/- (ANNAPURNA GUPTA) (SANJAY GARG) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED : 18.06.2018 RKK COPY TO: THE APPELLANT THE RESPONDENT THE CIT THE CIT(A) THE DR