MELAILA RESORTS PRIVATE LIMITED, MUMBAI V. INCOME TAX OFFICER-WARD 2(2)(3), MUMBAI

ITA 4398/MUM/2017

• Counselvise Citation: [2018] 112 COUNSELVISE.COM (IT) 6032 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 6 month(s) 16 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-12-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: D
• Assessment Year: 2012-2013
• Appeal Filed On: 14-06-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: CHAITANYA ANJARIA
• Assessee Lawyers: DR P DANIEL
• Keywords: Unexplained cash credit; Valuation report; Set aside
• Section: 133(6); 201; 68

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCH D , MUMBAI BEFORE SHRI MAHAVIR SINGH , JUDICIAL MEMBER AND SHRI RAJESH KUMAR, ACCOUNTANT MEMBER ITA NO. 4398 /M/20 17 ASSESSMENT YEAR: 2012 - 13 M/S. MELAILA RESORTS PVT. LTD., BHARAT INSURANCE BUILDING, 3 RD FLOOR, 15 - A, HORNIMAN CIRCLE, FORT, MUMBAI 400 001 PAN: AAECM 9152E VS. INCOME TAX OFFICER - WD2(2)(3), R.NO.542, 5 TH FLOOR, AAYAKAR BHAVAN, M.K. ROAD, MUMBAI - 400020 (APPELLANT) (RESPONDENT) ITA NO. 4436 /M/2 0 17 ASSESSMENT YEAR: 2012 - 13 INCOME TAX OFFICER - WD2(2)(3), R.NO.542, 5 TH FLOOR, AAYAKAR BHAVAN, M.K. ROAD, MUMBAI - 400020 VS. M/S. MELAILA RESORTS PVT. LTD., BHARAT INSURANCE BUILDING, 3 RD FLOOR, 15 - A, HORNIMAN CIRCLE, FORT, MUMBAI 400 0 23 PAN: AAECM 9152E (APPELLANT) (RESPONDENT) PRESENT FOR: ASSESSEE BY : DR. P. DANIEL, A.R. REVENUE BY : SHRI CHAITANYA ANJARIA , D.R. DATE OF HEARING : 14.11 .201 8 DATE OF PRONOUNCEMENT : 31 .12 .2018 O R D E R PER RAJESH KUMAR , ACCOUNTANT MEMBER: THE PRESENT CROSS APPEALS ONE BY THE ASSESSEE AND THE OTHER BY THE REVENUE HAVE BEEN PREFERRED AGAINST THE ORDER DATED 09.03.2017 OF THE COMMISSIONER OF INCOME TAX (APPEALS) ITA NO.4398/M/2017 & ITA NO.4436/M /2017 M/S. MELAILA RESORTS PVT. LTD. 2 [HEREINAFTER REFERRED TO AS THE CIT(A)] RELEVAN T TO ASSESSMENT YEAR 2012 - 13. 2. THE ASSESSEE HAS CHALLENGED THE CONFIRMATION OF ADDITION TO THE TUNE OF RS.35,00,000/ - OUT OF THE TOTAL ADDITION OF RS.2,25,00,000/ - MADE BY THE AO UNDER SECTION 68 OF THE ACT. WHEREAS THE REVENUE HAS CHALLENGED THE DELE TION OF ADDITION OF RS.1,90,00,000/ - MADE OUT OF TOTAL ADDITION OF RS.2,25,00,000/ - AS STATED HEREINABOVE. 3. THE FACTS IN BRIEF ARE THAT DURING THE COURSE OF ASSESSMENT PROCEEDINGS , THE AO FOUND THAT THE ASSESSEE HAS RAISED SHARE CAPITAL DURING THE YEA R AND ACCORDINGLY THE AO ISSUED SHOW CAUSE NOTICE TO THE ASSESSEE CALLING UPON TO PROVE THE FOLLOWING: (I) IDENTITY OF THE PERSONS, CAPACITY AND CREDITWORTHINESS (II) PROOF OF TRANSACTION - WITH BANK STATEMENT OF BOTH PARTIES AND CONFIRMATION ( I II) SHARE APPLICATION FORM AND SHAREHOLDERS' REGISTER (IV) BASIS OF VALUATION WITH REPORT IF ANY (V) JUSTIFICATION FOR THE PREMIUM CHARGED VIS A VIS THE INTRINSIC VALUE OF THE SHARES (V I ) PRODUCTION OF THE DIRECTORS OF THE COMPANY FOR EXAMI NATION IN RESPONSE, THE ASSESSEE FURNISHED THE FOLLOWING INFORMATION: (I) ACKNOWLEDGMENT OF RETURN OF INCOME OF THE PERSONS NOT FILED. (II ) FILED P&L AND BALANCE SHEET IN RESPECT OF PERSONS IN SR.NO.L TO 6 (III) BANK STATEMENT OF PERSONS NOT FILED. (IV ) CONFIRMATION IN RESPECT O F PERSONS NOT FILED. (V) VALUATION REPORT NOT FILED. 4. THEREAFTER, THE AO ISSUED NOTICE S UNDER SECTION 133(6) OF THE ACT TO 10 PRIVATE COMPANIES WHICH WAS STATED TO BE GROUP COMPANIES OUT OF WHICH THE NOTICE S UNDER SECTION 133 (6) OF THE ACT WERE SERVED ON 9 PARTIES WHEREAS IN THE CASE OF RAJNISH GOODS P. LTD. THE NOTICE WAS RETURNED AS NOT KNOWN. FINALLY, ITA NO.4398/M/2017 & ITA NO.4436/M /2017 M/S. MELAILA RESORTS PVT. LTD. 3 THE AO , AFTER TAKING INTO CONSIDERATION THE SUBMISSIONS AND CONTENTIONS OF THE ASSESSEE, TREATED THE ENTIRE AMOUNT OF RS .2,25,00,000/ - AS UNEXPLAINED CASH CREDIT AND ADDED THE SAME TO THE INCOME OF THE ASSESSEE BY FRAMING THE ASSESSMENT VIDE ORDER DATED 28.03.2015. 5. IN THE APPELLATE PROCEEDINGS, THE LD. CIT (A) PARTLY ALLOWED THE APPEAL OF THE ASSESSEE DELETING THE ADDI TION TO THE TUNE OF RS.1,90,00,000/ - WHILE THE ADDITION TO THE EXTENT OF RS.35,00,000/ - WAS SUSTAINED BY OBSERVING AND HOLDING AS UNDER: 3. 3 I HAVE CONSIDERED THE APPELLANT'S SUBMISSIONS AND ALSO THE ASSESSMENT ORDER OF THE APPELLANT. AO NOTICED THAT APPE LLANT HAD ISSUED ISSUED 221500 SHARES OF FACE VALUE RS.10 EACH @ PREMIUM OF RS.90/ - PER SHARE IN F.Y. 2011 - 12 THEREBY SHOWING AN INCREASE OF RS.22,15,000 / - ON ISSUED S HARE CAPITAL AND RS.1,99,35,000/ - AS SHARE PREMIUM. AFTER CALLING THE DETAILS FROM THE AP PELLANT, AO WAS NOT SATISFIED WITH THE SUBMISSIONS OF THE APPELLANT AND TREATED RS. 2.25.00,000 / - AS UNEXPLAINED CASH CREDIT U/S 68 OF THE A CT. AC CORDING TO THE AO, APPELLANT HAD NOT PROVED THE IDENTITY, GENUINENESS AND CREDITWORTHINESS OF THE TRANSACTION , HENCE HE ADDED THE ABOVE AMOUNT UNDER UNEXPLAINED CASH CREDIT U/S 68 OF THE ACT . 6. THE LD. A.R. VEHEMENTLY ARGUED BEFORE THE BENCH THAT THE ASSESSEE HAS RAISED MONEY BY WAY OF SHARE CAPITAL FROM 10 PARTIES ALL OF WHOM WERE ASSESSABLE TO TAX AND THE ASSESSEE HAS FILED THE NECESSARY EVIDENCES WITH THE AO IN THE FORM OF COP IES OF IT RETURN S , P & L ACCOUNT S AND BALANCE SHEET S , BANK STATEMENT S , RETURN S OF ALLOTMENT IN FORM 2, SHARE APPLICATION FORMS, AND SHAREHOLDER S LIST AS ON 31.03.2012. THE LD. A.R. SUBMITTED THAT ALL THE APPLICANTS WERE FULLY IDENTIFIED AND HAVE CAPACITY AND CREDITWORTHINESS TO LEND THE SAID MONEY AS IS CLEAR FROM THE RESPECTIVE BALANCE SHEETS AND BANK STATEMENTS OF THE SUBSCRIBERS . MOREOVER, ALL THESE APPLICANTS WERE REGULARLY FILI NG THEIR RETURNS WITH THE REGISTRAR OF COMPANIES AND ALSO WITH THE ITA NO.4398/M/2017 & ITA NO.4436/M /2017 M/S. MELAILA RESORTS PVT. LTD. 4 INCOME TAX DEPARTMENTS . THE LD. A.R. FURTHER SUBMITTED THAT ALL THESE COMPANIES HAVE HUGE NET WORTH AND THE CREDITWORTHINESS AND CAPACITY OF THE SHARE CAPITAL SUBSCRIBERS WERE NOT AT ALL I N DOUBT. THE LD. A.R. CONTENDED THAT LD. CIT(A) HAS FULLY VERIFIED THE FACTS IN RESPECT OF SEVEN COMPANIES AS STATED ON PAGE NO.42 OF THE APPELLATE ORDER WHEREAS WRONGLY CONFIRMED THE ADDITION IN RESPECT OF THREE COMPANIES NAMELY GOODFIELD COMMERCIAL P. L TD., LOKNATH VYAPAR P. LTD. & RAJNISH GOODS P. LTD. DESPITE THE FACT THAT THESE COMPANIES BEING GENUINE AND HAVE CAPACITY AND CREDITWORTHINESS TO INVEST IN THE ASSESSEES COMPANY. THE LD. A.R. REFERRED TO THE COPIES OF BANK STATEMENT, ANNUAL ACCOUNTS, IT RS AND CONFIRMATION ISSUED BY THE SAID PARTIES TO CORROBORATE HIS ARGUMENT S THAT THE ORDER OF LD. CIT(A) IS NOT CORRECT TO THE EXTENT OF CONFIRMATION OF ADDITION IN RESPECT OF GOODFIELD COMMERCIAL P. LTD. RS.15 LAKHS, LOKNATH VYAPAR P. LTD. RS.10 LAKHS & R AJNISH GOODS P. LTD. RS.10 LAKHS. THE LD. A.R. SUBMITTED THAT THE ASSESSEE HAS FILED THE PAN NUMBER OF THE ASSESSEE BESIDES OTHER DETAILS AND EVEN THE LETTER ISSUED UNDER SECTION 133(6) WERE DULY SERVED EXCEPT RAJNISH GOODS P. LTD. THEREAFTER, THE CORREC T ADDRESS WAS GIVEN TO THE AO VIDE LETTER DATED 18.02.2015 BESIDES SUPPLYING THE COPY OF BANK STATEMENT AS REQUIRED BY THE AO. THE LD. A.R. SUBMITTED THAT WHEN THE ASSESSEE HAS FILED NECESSARY EVIDENCES BEFORE THE AUTHORITIES BELOW THERE IS NO JUSTIFICATI ON ON THE PART OF THE LD. CIT(A) IN CONFIRMING THE ADDITION OF RS.35,00,000/ - UNDER SECTION 68 OF THE ACT WHIEL THE LD JUSTIFIED THE ORDER OF LD CIT(A) ON THE DELETIUON OF RS. 1,90,00,000/ - . F INALLY THE LD. A.R. SUBMITTED THAT THE ORDER OF LD. CIT(A) BE S ET ASIDE TO THE TUNE OF ITA NO.4398/M/2017 & ITA NO.4436/M /2017 M/S. MELAILA RESORTS PVT. LTD. 5 CONFIRMATION OF ADDITION OF RS.35,00,000/ - AND AO BE DIRECTED TO DELETE THE DISALLOWANCE. 7. PER CONTRA, THE LD. D.R. HEAVILY RELIED ON THE ORDER OF AO AND SUBMITTED THAT THE ORDER PASSED BY LD. CIT(A) DELETING THE ADDITION TO TH E EXTENT OF RS.1,90,00,000/ - WAS ALSO WRONG AND REQUIRED TO BE REVERSED AS THE AO COULD NOT CARRY OUT THE VERIFICATION IN RESPECT OF THESE PARTIES AS THE NECESSARY DOCUMENTS WERE NOT SUBMITTED BEFORE THE AO. DEFENDING THE CONFIRMATION OF ADDITIONS IN RESPE CT THREE SUBSCRIBERS THE LD DR SUBMITTED THAT CIT(A) HAS RIGHTLY CONFIRMED THE ADDITION OF RS. 35,00,000/ - AS THE ASSESSEE COULD NOT PROVE THE CREDENTIALS OF THE SUBSCRIBERS. 8. WE HAVE HEARD THE RIVAL SUBMISSIONS OF BOTH THE PARTIES AND PERUSED THE MATE RIAL ON RECORD INCLUDING THE IMPUGNED ORDER. DURING THE COURSE OF HEARING, WE SPECIFICALLY RAISED QUERY WITH RESPECT TO CREDITWORTHINESS AND CAPACITY OF THE INVESTORS IN THE ASSESSEE COMPANY AND ALSO VERIFIED THE SAME WITH REFERENCE TO BANK STATEMENTS, CO PY OF BALANCE SHEET S, CONFIRMATION S, SHARE APPLICATION FORM S AND SHARE ALLOTMENT RETURN S IN FORM 2 ETC. WE FIND THAT IN THE PRESENT CASE, THE AO HAS NOT GONE INTO THE MATTER IN DETAILS AND FRAMED THE ASSESSMENT ORDER BY NOT EXAMINING THE FACTS IN CORRECT PERSPECTIVE WHICH IS APPARENT FROM THE FACT THAT EVEN THE SHARE ALLOTMENT S WHICH WERE DONE BY THE ASSESSEE IN THE EARLIER YEARS I.E. A.Y. 2009 - 10 AND 2010 - 11 TO SHREETEX INDUSTRIES WERE ADDED TO THE INCOME OF THE ASSESSEE UNDER SECTION 68 OF THE ACT WHICH IN OUR OPINION WAS TOTALLY WRONG AND ARBITRARY AND HAS RIGHTLY BEEN DELETED BY THE LD. ITA NO.4398/M/2017 & ITA NO.4436/M /2017 M/S. MELAILA RESORTS PVT. LTD. 6 CIT(A) TO THE TUNE OF RS. 69 LAKHS . A S REGARDS THE SIX PARTIES NAMELY STEEL CON INDIA P LTD., MRIDANG COMMERCE P LTD., SWADIST SWEET P. LTD., JINVANI TRADING & INVEST CO . P LTD., PADMAVATI CREDIT CAPITAL P LTD., SITARA FINCOM P LTD. T HE ADDITION HAS RIGHTLY BEEN DELETED BY THE LD CIT(A) TO THE TUNE OF RS.1,17, 5 0,000/ - AS THE SAME DOES NOT COME UNDER THE PURVIEW OF SECTION 68 OF THE ACT AS THE IDENTITY , GENUINENESS AND CR EDITWORTHINESS ARE PROVED . IN RESPECT OF THE REMAINING THREE PARTIES, WE HAVE VERIFIED THE TRANSACTION S IN DETAIL WITH REFERENCE TO THE BANK ACCOUNTS AND BALANCE SHEETS OF THE SAID PARTIES AND FOUND THAT THE SAID COMPANIES WERE REGULARLY FILING THEIR ITRS AND COMPANIES RETURNS WITH REGISTRAR OF COMPANIES REGULARLY. WE, THEREFORE, ARE NOT IN AGREEMENT WITH THE CONCLUSION DRAWN BY THE LD. CIT(A) THAT THE SAID THREE PARTIES NAMELY GOODFIELD COMMERCIAL P. LTD., LOKNATH VYAPAR P. LTD. & RAJNISH GOODS P. LTD. H AVE NOT PROVED THE IDENTITY, GENUINENESS AND CREDITWORTHINESS OF THE TRANSACTION, DESPITE THE FACT THAT THE ASSESSEE HAS FILED NECESSARY DETAILS WITH THE AUTHORITIES BELOW. NOW DURING THE HEARING WE SPECIFICALLY RAISED THE QUERY TO THE LD. A.R. TO SHOW US THE IDENTITY, CREDITWORTHINESS AND GENUINENESS OF THE TRANSACTION S QUA THESE PARTIES WHICH WAS DULY PROVED BY THE LD. A.R. BY REFERRING TO THE BANK STATEMENTS, COPY OF BALANCE SHEET S AND VARIOUS OTHER RECORDS WHICH ARE PART OF PAPER BOOK . THUS WE ARE NOT IN AGREEMENT WITH THE CONCLUSION OF THE LD CIT(A) ON THE CONFIRMATION OF ADDITIONS TO THE TUNE OF RS. 35,00,000/ - . WE, THEREFORE, ARE INCLINED TO SET ASIDE THE ORDER OF LD. CIT(A) ON THE ISSUE OF CONFIRMATION OF ADDITION OF RS.35,00,000/ - AND DIRECT THE A O TO DELETE THE ADDITION WHEREAS ITA NO.4398/M/2017 & ITA NO.4436/M /2017 M/S. MELAILA RESORTS PVT. LTD. 7 THE ORDER OF LD. CIT(A) IS CONFIRMED ON THE DELETION OF ADDITION OF RS.1,90,00,000/ - . 9. RESULTANTLY, THE APPEAL OF THE ASSESSEE IS ALLOWED AND THAT OF THE REVENUE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 31 .12 . 201 8 . SD/ - SD/ - ( MAHAVIR SINGH ) ( RAJESH KUMAR ) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI, DATED: 31 .12 . 201 8 . * KISHOR E , SR. P.S. COPY TO: THE APPELLANT THE RESPONDENT THE CIT, CONCERNED, MUMBAI THE CIT ( A) CONCERNED, MUMBAI THE DR CONCERNED BENCH //TRUE COPY// [ BY ORDER DY/ASSTT. REGISTRAR, ITAT, MUMBAI.