The ACIT, Bhopal V. M/s Mudra Om Securities Pvt. Ltd., Bhopal

ITA 432/IND/2009

• Counselvise Citation: [2011] 134 COUNSELVISE.COM (IT) 9604 (ITAT-INDORE)
• Duration Of Justice: 1 year(s) 6 month(s) 2 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-02-2011
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Next Hearing Date: 17-02-2011
• Assessment Year: 2006-2007
• Appeal Filed On: 20-08-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: KESHAV SAXENA
• Assessee Lawyers: H P VERMA
• Keywords: Unexplained cash credit
• Section: 131; 68

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, INDORE BENCH INDORE BEFORE SHRI JOGINDER SINGH, JUDICIAL MEMBER AND SHRI R.C. SHARMA, ACCOUNTANT MEMBER ITA NO.407/IND/2009 A.Y.2006-07 M/S MUDRA OM SECURITIES PVT. LTD. BHOPAL PAN- AADCM-7743A APPELLANT VS ASSTT. COMMISSIONER OF INCOME TAX 2(1), BHOPAL RESPONDENT ITA NO.432/IND/2009 A.Y.2006-07 ASSTT. COMMISSIONER OF INCOME TAX 2(1), BHOPAL APPELLANT VS. M/S MUDRA OM SECURITIES PVT. LTD. BHOPAL RESPONDENT ASSESSEE BY : SHRI H.P. VERMA AND SHRI ASHISH GOYAL DEPARTMENT BY : SHRI KESHAV SAXENA O R D E R PER JOGINDER SINGH, JUDICIAL MEMBER THESE ARE CROSS APPEALS BY THE ASSESSEE AND THE REV ENUE AGAINST THE ORDER OF THE LEARNED CIT(A) DATED 15.6.2009. THE ASSESSEE HAS CHALLENGED THE CONFIRMATION OF ADDITION OF RS.5,64, 000/- (RECEIVED FROM SURENDRA KUMAR) AND RS.1,23,300/- (FROM SHRI VISHNU KANT MISHRA) BEING SHARE CAPITAL RECEIVED FROM THESE PERSONS WHEREAS T HE REVENUE HAS CHALLENGED THE DELETION OF ADDITION OF RS.97,82,000 /- OUT OF THE TOTAL ADDITION OF RS.1,04,69,300/- MADE BY THE ASSESSING OFFICER ON ACCOUNT OF UNEXPLAINED CASH CREDIT U/S 68 OF THE ACT. 2. THE CRUX OF ARGUMENTS ON BEHALF OF THE ASSESSEE IS THAT THE ASSESSEE HAS ESTABLISHED THE IDENTITY OF THE INVEST ORS, GENUINENESS OF THE TRANSACTIONS AND CREDIT WORTHINESS OF THE INVE STORS AS REQUIRED U/S 68 OF THE ACT. ALL THE TRANSACTIONS BY THE SHARE HOLDERS WERE CLAIMED THROUGH BANKING CHANNEL FOR WHICH RELIANCE WAS PLAC ED UPON THE DECISION OF THE INDORE BENCH OF THE TRIBUNAL IN THE CASE OF SHRI KELA PRAKASHAN PRIVATE LIMITED (2010) 14 ITJ 539 AND CIT V. LOVELY EXPORTS (2008) 11 ITJ 357 (SC) FOR THE SHARE CAPITAL OF SHR I SURENDRAKUMAR AND SHRI VISHNUKANT MISHRA IT WAS CLAIMED THAT THE LEAR NED ASSESSING OFFICER COULD HAVE VERIFIED THE FACTS U/S 131 AS THE ASSESS EE HAS DISCHARGED ITS BURDEN AND THE ASSESSING OFFICER DID NOT BRING ANY EVIDENCE TO SUBSTANTIATE ITS CASE AGAINST THE VERSION OF THE AS SESSEE. OUR ATTENTION WAS SPECIFICALLY INVITED TO THE DETAILED ORDER OF T HE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) ESPECIALLY PAR AS 3.1, 4.4 AND 18. IT WAS ALSO CONTENDED THAT ONE OF THE DISPUTED SHARE SUBSCRIBERS IS HAVING PAN NUMBER. 3. ON THE OTHER HAND, THE LEARNED CIT DR STRONGLY PLEADED THAT THE ASSESSEE IS SUPPOSED TO ESTABLISH THE THREE ASPECTS /INGREDIENTS REQUIRED U/S 68 OF THE ACT FOR WHICH RELIANCE WAS P LACED ON THE DECISION IN 205 ITR 98 (DEL), 62 TTJ 749 (MAD.), 205 ITR 98 (DEL). THE CRUX OF ARGUMENTS ON BEHALF OF THE REVENUE IS THAT EVEN THE IDENTITY OF THE REMAINING TWO PERSONS WAS NOT ESTABLISHED BY THE AS SESSEE. OUR ATTENTION WAS SPECIFICALLY INVITED TO PARA 14 AND 1 5 (PAGE 24 OF THE ASSESSMENT ORDER). 4. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS OF LD. REPRESENTATIVES OF BOTH SIDES AND PERUSED THE MATERIAL AVAILABLE ON RE CORD. BROADLY, THE ASSESSEE IS AGGRIEVED BY THE DECISION OF THE LEARNE D COMMISSIONER OF INCOME TAX (APPEALS) IN CONFIRMING THE ADDITION IN RESPECT OF SHRI SURENDRAKUMAR SINGH AND SHRI VISHNUKANT SHARMA WHER EAS THE REVENUE IS AGGRIEVED IN DELETING THE ADDITION FOR T HE REMAINING 16 PERSONS WHO INVESTED THEIR SHARE CAPITAL. BRIEF FA CTS ARE THAT THE ASSESSEE IS A PRIVATE LIMITED COMPANY INCORPORATED ON 24.12.2003. THE ASSESSEE AFTER INCORPORATION COULD NOT START ITS BU SINESS TILL 31.3.2006. THE ASSESSEE SHOWED LOSS OF RS.1,29,482/- FOR WHICH THE ASSESSMENT WAS COMPLETED ON THE INCOME OF RS.1,03,39,820/- BY MAKING ADDITION OF RS.1,04,69,300/-. DURING THE YEAR, THE ASSESSEE IS SUED SHARE CAPITAL OF RS. 1,40,000/- BEING SHARE MONEY RECEIVED FROM 18 S HARE HOLDERS. THE SHARE CONTRIBUTION MADE BY THESE 18 SHARE SUBSCRIBE RS IS SUMMARIZED AS DETAILED IN ANNEXURE-A ATTACHED HEREWITH. OUT OF THE AFORESAID 18 SHARE HOLDERS, THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) DELETED THE ADDITION FOR 16 AN D MAINTAINED FOR THE REMAINING TWO I.E. SHRI SURENDRAKUMAR AND SHRI VISH NUKANT MISHRA. WE HAVE PERUSED THE DETAILED ORDER FRAMED BY THE LEARN ED ASSESSING OFFICER AND ALSO OF THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS). IT IS SEEN THAT WHEREVER THE LEARNED COMMISSIONER OF INCO ME TAX (APPEALS) FOUND THAT THE ASSESSEE HAS DULY DISCHARGED ITS ONU S AS REQUIRED U/S 68 OF THE ACT, HE HAS DELETED THE ADDITION AND WHERE H E FOUND THAT THE ASSESSEE HAS NOT DISCHARGED ITS ONUS, CONFIRMED THE ADDITION FOR TWO PERSONS NAMELY, SHRI SURENDRAKUMAR SINGH AND VISHN UPRASAD MISHRA. THE RELEVANT SECTION 68 IS REPRODUCED HEREUNDER :- 68. 73 WHERE ANY SUM IS FOUND CREDITED IN THE BOOKS 74 OF AN ASSESSEE MAINTAINED FOR ANY PREVIOUS YEAR, AND THE ASSESSEE OFFERS NO EXPLANATION ABOUT THE NATURE AND SOURCE THEREOF OR THE EXPLANATION OFFERED BY HIM IS NOT, IN THE OPINION O F THE 75 [ASSESSING] OFFICER, SATISFACTORY, THE SUM SO CREDI TED MAY BE CHARGED TO INCOME-TAX AS THE INCOME OF THE ASSESSEE OF THAT PREVIOUS YEAR. 5. SECTION 68 DEALS WITH CASH CREDIT. A BA RE READING OF THE AFORESAID SECTION SUGGESTS THAT THERE HAS TO BE CRE DIT OF AMOUNTS IN THE BOOKS MAINTAINED BY THE ASSESSEE THAT SUCH CREDIT H AS TO BE OF A SUM DURING THE PREVIOUS YEAR, AND THAT THE ASSESSEE OFF ERS NO EXPLANATION ABOUT THE NATURE AND SOURCE OF SUCH CREDIT FOUND IN THE BOOKS OR THE EXPLANATION OFFERED BY THE ASSESSEE, IN THE OPINION OF THE ASSESSING OFFICER, IS NOT SATISFACTORY. IT IS ONLY THEN THE SUMS SO CREDITED MAY BE CHARGED TO INCOME TAX AS THE INCOME OF THE ASSESSEE OF THAT PREVIOUS YEAR. THE EXPRESSION THE ASSESSEE OFFERS NO EXPLA NATION MEANS WHERE THE ASSESSEE OFFERS NO PROPER, REASONABLE AND ACCEPTABLE EXPLANATION, AS REGARDS THE SUMS FOUND CREDITED IN THE BOOKS MAINTAINED BY THE ASSESSEE. IT IS TRUE THAT THE OPI NION OF THE ASSESSING OFFICER FOR NOT ACCEPTING THE EXPLANATION OFFERED B Y THE ASSESSEE AS NOT SATISFACTORY IS REQUIRED TO BE BASED ON PROPER APPR ECIATION OF MATERIAL AND OTHER ATTENDING CIRCUMSTANCES AVAILABLE ON RECO RD. THE OPINION OF THE ASSESSING OFFICER IS REQUIRED TO BE FORMED OBJE CTIVELY WITH REFERENCE TO THE MATERIAL AVAILABLE ON RECORD. APPLICATION OF MIND IS THE SINE QUA NON FOR FORMING THE OPINION. A CLOSE READING OF SE CTIONS 68 AND 69 MAKES IT CLEAR THAT IN THE CASE OF SECTION 68 THERE SHOULD BE A CREDIT ENTRY IN THE BOOKS OF ACCOUNTS WHEREAS IN THE CASE OF SECTION 69 THERE MAY BE AN ENTRY IN THE BOOKS OF ACCOUNTS. THIS IS THE FUNDAMENTAL DIFFERENCE BETWEEN THE TWO PROVISIONS. SECTION 68 I S A PROVISION OF GENERAL APPLICATION. THE LAW IS WELL SETTLED THAT THE ONUS OF PROVING THE SOURCE OF A SUM OF MONEY FOUND TO HAVE BEEN RECEIVE D BY AN ASSESSEE IS ON HIM. WHERE THE NATURE AND SOURCE OF A RECEIP T WHETHER IT BE OF MONEY OR OTHER PROPERTY CANNOT BE SATISFACTORILY EX PLAINED BY THE ASSESSEE IT IS OPEN TO THE REVENUE TO HOLD THAT IT IS THE INCOME OF THE ASSESSEE AND NO FURTHER BURDEN LIES ON THE REVENUE TO SHOW THAT THE INCOME IS FROM ANY PARTICULAR SOURCE BECAUSE IT IS THE ASSESSEE TO PROVE THAT EVEN IF THE CASH CREDIT REPRESENTS INCOME, IT IS INCOME FROM A SOURCE WHICH CAN BE EXPLAINED. THE CRUX OF THE DISCUSSION IS THAT THE ONUS IS ON THE ASSESSEE TO DISCHARGE ITS BURDEN FOR THE ENTRIE S MADE IN ITS BOOKS. 6. IF THE TOTALITY OF FACTS AS MENTIONED IN THE IMPUGNED ORDER/ASSESSMENT ORDER AND THE ASSERTION MADE BY TH E LEARNED RESPECTIVE COUNSELS IS KEPT IN JUXTAPOSITION, WE FI ND THAT THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) IN PARA 4 ONWA RDS HAS DEALT WITH ALMOST EACH AND EVERY SHARE SUBSCRIBER AND THE N REACHED TO A PARTICULAR CONCLUSION. AS FAR AS THE APPEAL OF THE ASSESSEE IS CONCERNED, THE ONLY DISPUTE PERTAINS TO SHRI SURENDRAKUMAR SIN GH AND SHRI VISHNUKANT SHARMA. THE FACTS OF BOTH THESE PERSONS HAVE BEEN DELIBERATED UPON IN PARAS 18 TO 19.4 OF THE IMPUGNE D ORDER. THE CLAIM OF THE ASSESSEE IS THAT SHRI SURENDRAKUMAR SINGH DERIV ES INCOME FROM TRADING IN SHARES AND ASSESSED TO TAX. IT IS PERTI NENT TO MENTION HERE THAT FOR THE ASSESSMENT YEAR 2006-07 NO RETURN WAS FILED BY HIM. THE CLAIM OF THE ASSESSEE IS THAT SINCE THE INCOME WAS BELOW TAXABLE LIMIT, NO RETURN WAS FILED. THE CONCLUSION DRAWN BY THE L EARNED COMMISSIONER OF INCOME TAX (APPEALS) IS THAT THE APPELLANT DID N OT SUFFICIENTLY DISCHARGE THE ONUS OF PROVING THE AMOUNT INVESTED B Y SHRI SURENDRA KUMAR SINGH AND THE IDENTITY, GENUINENESS OF THE TR ANSACTION AND CREDITWORTHINESS OF THE SHAREHOLDER IS CLEARLY NOT ESTABLISHED. HE FURTHER HELD THAT THE INVESTOR WAS ALSO NOT PRODUCED BEFORE THE ASSESSING OFFICER. IT IS PERTINENT TO MENTION HERE THAT OUT O F 18 INVESTORS, ONLY 16 WERE PRODUCED AND INSPITE OF SUFFICIENT OPPORTUNITY GIVEN TO THE ASSESSEE, TWO SHAREHOLDERS WERE NOT PRODUCED WHICH CAST A CLOUDY SHADOW OF TRANSACTION IN RESPECT OF THESE TWO PER SONS. EVEN BEFORE US, IT IS NOT THE CASE OF THE ASSESSEE THAT THESE T WO PERSONS CAN BE PRODUCED NOW, THEREFORE, THERE IS NO INFIRMITY IN T HE STAND OF THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS). ANOTHER POIN T PERTINENT TO MENTION HERE IS THAT THE LEARNED COMMISSIONER OF IN COME TAX (APPEALS) BLINDLY DELETED OR CONFIRMED THE ADDITION RATHER AN ELABORATE ATTEMPT HAS BEEN MADE IN COMING TO A PARTICULAR CONCLUSION. THE GENUINENESS OF THE TRANSACTION IN THE CASE OF SHRI SURENDRASINGH IS VE RY MUCH IN DOUBT, THEREFORE, WE FIND NO INFIRMITY IN THE CONCLUSION D RAWN IN THE IMPUGNED ORDER. AS FAR AS THE CASE OF SHRI VISHNUKANT MISHR A IS CONCERNED, IT WAS CLAIMED THAT HE WAS HAVING 25 ACRES OF LAND JOINTLY OWNED BY HIS BROTHERS. THE SIZE OF THE FAMILY WAS NOT MENTIONED RIGHT FROM THE ASSESSMENT STAGE UP TO THE TRIBUNAL STAGE. SHRI MI SHRA IS ALSO NOT ASSESSED TO TAX AND MERELY THE SHARE SUBSCRIPTION H AS BEEN CLAIMED FROM SAVINGS FROM AGRICULTURE. SINCE NO RETURN WAS FILED, SHRI MISHRA HAS NOT ESTABLISHED HIS CREDIT WORTHINESS, THEREFOR E, THERE IS NO INFIRMITY IN THE STAND OF THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS). 6. SINCE WE HAVE UPHELD THE ORDER OF THE LEARNED C OMMISSIONER OF INCOME TAX (APPEALS) QUA THE APPEAL OF THE ASSESSEE , THEREFORE, THE APPEAL OF THE REVENUE IS ALSO DISMISSED. FINALLY, THE APPEAL OF THE ASSESSEE AS WELL AS OF THE REVENUE ARE DISMISSED. ORDER PRONOUNCED IN OPEN COURT ON 22 ND FEBRUARY, 2011. (R.C.SHARMA) (JOGINDER SINGH) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 22 ND FEBRUARY, 2011 COPY TO: APPELLANT, RESPONDENT, CIT, CIT(A), DR, G UARD FILE DN/-