SWEET MARKETING (I) P.LTD ( NOW KNOWN AS GLB FINVEST P. LTD), MUMBAI V. DCIT CEN CIR 20, MUMBAI

ITA 4569/MUM/2013

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 0319 (ITAT-MUMBAI)
• Duration Of Justice: 3 year(s) 11 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 07-06-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: E
• Next Hearing Date: 07-04-2015
• Assessment Year: 2004-2005
• Appeal Filed On: 10-06-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ARVIND KUMAR LD
• Assessee Lawyers: MANI JAIN LD
• Keywords: Bogus Share capital; Gift; Income from undisclosed sources; Tangible material; Accommodation entries; Reassessment proceedings
• Section: 143(3); 133(6); 147; 68; 148; 132

Judgement Text

ITA NO.4569/MUM/2013 SWEET MARKETING (INDIA) PRIVATE LIMITED ASSESSMENT YEAR-2004-05 IN THE INCOME TAX APPELLATE TRIBUNAL E BENCH, MUMBAI , , BEFORE SHRI SAKTIJIT DEY, JM AND SHRI MANOJ KUMAR AGGARWAL, AM ./I.T.A. NO.4569/MUM/2013 ( / ASSESSMENT YEAR: 2004-05) GLB FINVEST PRIVATE LIMITED) (EARLIER KNOWN AS SWEET MARKETING (INDIA) PRIVATE LTD.) (CIN : U65923MH1990PTC057706) C/O 504, NAIN KRIPA 118/122, KAZI SAYED STREET MUMBAI 400 003 / VS. DEPUTY COMMISSIONER OF INCOME TAX CENTRAL CIRCLE 20 MUMBAI 400 020 !' ./ ./PAN/GIR NO. AAACS-6731-R ( '$ /APPELLANT ) : ( %&'$ / RESPONDENT ) ASSESSEE BY : MANI JAIN, LD. AR REVENUE BY : ARVIND KUMAR, LD. DR / DATE OF HEARING : 24/05/2017 / DATE OF PRONOUNCEMENT : 07/06/2017 ITA NO.4569/MUM/2013 SWEET MARKETING (INDIA) PRIVATE LIMITED ASSESSMENT YEAR-2004-05 2 / O R D E R PER MANOJ KUMAR AGGARWAL (ACCOUNTANT MEMBER) 1 THE CAPTIONED APPEAL BY ASSESSEE FOR ASSESSMENT Y EAR [AY] 2004- 05 ASSAILS THE ORDER OF LD. COMMISSIONER OF INCOME TAX (APPEALS)-39 [CIT(A)], MUMBAI DATED 30/01/2013 ON LEGAL GROUNDS AS WELL AS ON MERITS. 2. THE NAME OF THE ASSESSEE COMPANY HAS CHANGED FRO M SWEET MARKETING (INDIA) PRIVATE LIMITED TO GLB FINVEST PRIVATE LIMITED VIDE FRESH CERTIFICATE OF INCORPORATION CONSEQUENT UPON CHANGE OF NAME DATED 16/07/2009 ISSUED BY DEPUTY REGISTRAR OF COMPANIES, MAHARASHTRA AS PLACED BY LD. COUNSEL FOR ASSESSEE BEFORE US. THE S AME IS TAKEN ON RECORD. NOW, WE DEAL WITH THE ISSUES RAISED IN THE APPEAL IN SUCCEEDING PARAGRAPHS. 3. BRIEFLY STATED THE ASSESSEE, BEING RESIDENT CORPORATE ASSESSEE , WAS SUBJECTED TO AN ASSESSMENT U/S 143(3) READ WITH SECTION 147 OF THE INCOME TAX ACT, 1961 VIDE ASSESSING OFFICER [AO] OR DER DATED 30/12/2011 AT RS.38,50,730/- AFTER DISALLOWANCE OF RS.23.00 LACS U/S 68 ON ACCOUNT OF SHARE APPLICATION MONEY AS AGAINST RETURNED INCOME OF RS.15,50,732/- FILED BY ASSESSEE ON 28/10/2004. TH E ASSESSMENT WAS REOPENED BY ISSUANCE OF NOTICE U/S 148 DATED 31/03/ 2011 WHICH WAS DULY SERVED ON THE ASSESSEE. AS PER THE REASONS REC ORDED, THE REOPENING WAS TRIGGERED PURSUANT TO SEARCH OPERATIO N CONDUCTED U/S 132 ON 26/04/2007 ON A PERSON NAMELY GIRIRAJ VIJAYVARGIYA [G.V.] WHO ADMITTED TO HAVING PROVIDED ACCOMMODATION ENTRIES I N THE FORM OF GIFTS, ITA NO.4569/MUM/2013 SWEET MARKETING (INDIA) PRIVATE LIMITED ASSESSMENT YEAR-2004-05 3 LOANS AND SHARE APPLICATION MONEY FROM FINANCIAL YE AR 1999-2000 TO 2005-06 IN EXCHANGE OF CASH AGAINST COMMISSION OF 2 -3.5%. IT WAS SEEN THAT VARIOUS CONCERNS CONTROLLED BY VIKAS BERLIA INTRODUCED UNACCOUNTED MONEY IN THE FORM OF SHARES ALLOTTED TO GIRIRAJ VIJAYVARGIYA AND HIS FAMILY MEMBERS. ACCORDINGLY, AO HAD FORMED A BELIEF THAT T HE SHARE APPLICATION MONEY RECEIVED BY GROUP CONCERNS OF VIKAS BERLIA WERE INVOLVED IN INTRODUCING UNACCOUNTED MONEY IN THE FORM OF BOGUS SHARE CAPITAL AND CONSEQUENTLY INCOME ASSESSABLE TO TAX HAS ESCAPED A SSESSMENT. THE ASSESSEE, BEING PART OF GROUP COMPANIES OF VIKAS BERLIA, WAS ALSO SUBJECTED TO REASSESSMENT AS UPON PERUSAL OF ITS BA LANCE SHEET AS ON 31/03/2003 AND 31/03/2004, IT WAS OBSERVED THAT THE PAID UP CAPITAL AND RESERVES INCREASED BY RS.39,15,048/- WHICH LED THE AO TO BELIEVE THAT THE ASSESSEE INTRODUCED UNACCOUNTED INCOME IN THE B OOKS IN THE FORM OF BOGUS SHARE APPLICATION MONEY / SHARE CAPITAL. THE ASSESSEE OBJECTED TO REOPENING ON THE GROUND THAT NO APPLICATION MONE Y WAS EVER RECEIVED FROM THE SAID PERSONS / GROUP DURING IMPUGNED AY. F URTHER, THE ASSESSEE EXPLAINED THAT SHARE APPLICATION MONEY OF RS.23.00 LACS WAS RECEIVED FROM TWO APPLICANTS NAMELY B.P.CHOUDHARY AND SAROJ CHOUDHARY AND TO CONFIRM THE SAME, NOTICES U/S 133(6) WERE IS SUED TO THE TWO APPLICANTS AND CERTAIN DETAILS WERE CALLED FROM THE ASSESSEE ALSO. AFTER PERUSING THE REPLIES / SUBMISSIONS AND FACTUAL MATRIX, THE LD. AO CAME TO THE CONCLUSION THAT THE SAID AMOUNT OF R S.23.00 LACS WAS BOGUS TRANSACTION AND THEREFORE, ADDED TO THE INCOM E OF THE ASSESSEE U/S 68. ITA NO.4569/MUM/2013 SWEET MARKETING (INDIA) PRIVATE LIMITED ASSESSMENT YEAR-2004-05 4 4. AGGRIEVED, THE ASSESSEE CONTESTED THE SAME WITHO UT ANY SUCCESS BEFORE LD. CIT(A) VIDE IMPUGNED ORDER DATED 30/01/2 013 WHERE THE ASSESSEE COULD NOT SUBSTANTIATE ITS CLAIM. AGGRIEVE D, THE ASSESSEE IS IN APPEAL BEFORE US. 5. AT THE OUTSET, THE LD. COUNSEL FOR ASSESSEE [AR] HAS ASSAILED THE REOPENING ON LEGAL GROUND BY STATING THAT THE REOPE NING HAS BEEN DONE MERELY ON THE BASIS OF THE STATEMENT OF A THIRD PAR TY WHERE THE SAID PARTY ADMITTED TO HAVE ENTERED INTO ACCOMMODATION ENTRIES BY WAY OF SHARE APPLICATION MONEY WITH THE ASSESSEE IN SHARP CONTRAST TO THE FACT THA T THE ASSESSEE NEVER RECEIVED ANY SHARE APPLICATION MONEY FROM THE SAID PARTY / GROUP IN THE IMPUGNED AY AND THEREFORE, THE VERY BASIS OF REOPENING STOOD VITIATED AND REFLECTS NON-APPLICATI ON OF MIND ON THE PART OF THE AO. OUR ATTENTION IS ALSO DRAWN TO THE FACT THAT ON SIMILAR FACTS AND CIRCUMSTANCES, REOPENING HAS BEEN QUASHED BY THE TR IBUNAL IN ASSESSEES OWN CASE FOR AY 2003-04, THE COPY OF WHI CH HAVE BEEN PLACED BEFORE US. 6. PER CONTRA, THE LD. DEPARTMENTAL REPRESENTATIVE PLACED RELIANCE ON THE STAND OF LOWER AUTHORITIES AND CONTENDED THAT T HE ORIGINAL RETURN WAS PROCESSED U/S 143(1) AND THEREFORE, ONLY ONE CONDIT ION VIZ. REASONS TO BELIEVE THAT THE INCOME HAS ESCAPED ASSESSMENT WAS REQUIRED TO BE FULFILLED BY THE AO TO INITIATE REASSESSMENT WHICH APPARENTLY HAS BEEN FULFILLED AND THEREFORE, THE REOPENING WAS PERFECTL Y VALID. OUR ATTENTION HAS BEEN DRAWN TO THE FACT THAT THE THIRD PARTY CAT EGORICALLY ADMITTED TO HAVING PROVIDED ACCOMMODATION ENTRIES IN THE FORM O F SHARE APPLICATION ITA NO.4569/MUM/2013 SWEET MARKETING (INDIA) PRIVATE LIMITED ASSESSMENT YEAR-2004-05 5 MONEY IN EXCHANGE OF CASH, WHICH IN ITSELF, WAS SUFFICIEN T TO REOPEN THE ASSESSMENT AT THAT STAGE. 7. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED RELEVANT MATERIAL ON RECORD. SO FAR AS THE CONDITION OF REOPENING IS CONCERNED, WE ARE IN AGREEMENT WITH THE LD. DR THAT SINCE ORIGINAL RETUR N WAS PROCESSED U/S 143(1), ONLY ONE CONDITIONS VIZ. REASONS TO BELIEVE THAT THE INCOME HAS ESCAPED ASSESSMENT WAS REQUIRED TO BE FULFILLED BY THE AO AND NOTHING MORE. HOWEVER, IT IS ALSO WELL SETTLED PRINCIPLE TH AT THE AO MUST BE IN POSSESSION OF SOME TANGIBLE MATERIAL SO AS TO JUSTI FY THE REOPENING AND THAT MATERIAL SHOULD LEAD TO FORMATION OF BELIEF ON THE PART OF THE AO THAT CERTAIN INCOME HAS ESCAPED ASSESSMENT AND ALSO THE MATERIAL SHOULD HAVE LIVE LINK WITH THE FORMATION OF THE BELIEF, WH ICH IN OUR OPINION IS MISSING IN THE INSTANT CASE. FROM THE MATERIAL ON R ECORD, IT IS CLEAR THAT THE ASSESSEE HAS NOT RECEIVED ANY SHARE APPLICATION MONEY FROM THE SAID GROUP RATHER IT HAS RECEIVED SHARE APPLICATION MONEY FROM TWO PERSONS NAMELY B.P.CHOUDHARY AND SAROJ CHOUDHARY . THE REVENUE COULD NOT BRING ON RECORD ANY LINKAGE OF THESE TWO PERSONS WITH G.V. AND HIS GROUP. THE ONLY BASIS OF INITIATING REASSESSMEN T PROCEEDINGS SEEMS TO BE THE STATEMENT MADE BY G.V. WHO ADMITTED TO HAVING ADVANCED ACCOMMODATION ENTRIES TO THE ASSESSEE IN EXCHANGE F OR CASH AGAINST COMMISSION. BUT, WE FIND NO NEXUS BETWEEN THE STATE MENTS OF THE G.V. VIS--VIS ASSESSEES SHARE APPLICANTS. THEREFORE, PRIMA FACIE THE PRIMARY CONDITION OF INITIATING REASSESSMENT PROCEEDINGS IN THE INSTANT CASE IS NOT FULFILLED. OUR VIEW IS FURTHER FORTIFIED BY THE DEC ISION OF CO-ORDINATE BENCH OF THIS TRIBUNAL IN ASSESSEES OWN CASE FOR AY 2003 -04 ITA NO.4569/MUM/2013 SWEET MARKETING (INDIA) PRIVATE LIMITED ASSESSMENT YEAR-2004-05 6 VIDE ITA NO. 1159,1160,1161/MUM/2013 ORDER DATED 31 /12/2014 WHERE THE TRIBUNAL, IN SIMILAR CIRCUMSTANCES, AT PAGE NO. 11 HAS MADE THE FOLLOWING OBSERVATIONS:- THUS IT IS CLEAR THAT THOUGH THE SUFFICIENCY OF EVI DENCE OR MATERIAL FOR FORMING THE BELIEF IS NOT OPEN TO SCRUTINY BUT THE EXISTENCE OF BELIEF IS MUST FOR A VALID EXERCISE OF POWER. IF IT IMPOSSIBLE FOR ANY PRUDENT PERSON TO F ORM A BELIEF ON THE BASIS OF MATERIAL OR EVIDENCE THAT THE INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT AND REASON WHICH HAS BEEN RECORDED WOULD NOT LEAD T O A PRUDENT PERSON TO FORM AN OPINION THAT THE INCOME HAS ESCAPED ASSESSMENT WITH IN THE MEANING OF SECTION 147 THEN THE ACTION OF THE ASSESSING OFFICER IN REOPENI NG THE ASSESSMENT U/S 147/148 IS CONTRARY TO THE POWERS PERMITTED UNDER THE SAID PRO VISIONS OF THE ACT. IN THE CASE IN HAND, THE REASONS RECORDED BY THE ASSESSING OFFICER DO NOT INDICATE EVEN A REMOTE NEXUS BETWEEN THE APPLICATION MONEY RECEIVED BY THE ASSESSEE WITH THE ALLEGED ACCOMMODATION ENTRIES PROVIDED BY SHRI GIRIRAJ VIJA YVARGIYA OR THE ALLEGED BENEFICIARY OF THE ACCOMMODATION ENTRIES. ACCORDIN GLY, IN THE FACTS AND CIRCUMSTANCES OF THE CASE, WE HOLD THAT THE REOPENI NG IN THESE CASES ARE NOTVALID AND CONSEQUENTLY THE SAME IS QUASHED. THEREFORE, FOLLOWING JUDICIAL PRECEDENT AND EVEN ON FACTUAL MATRIX, WE SET ASIDE THE ASSESSMENT ORDER, BEING DEVOID OF VALID J URISDICTION. 8. SINCE WE HAVE QUASHED REASSESSMENT PROCEEDINGS, THE OTHER GROUNDS RAISED IN THE APPEAL BECOME INFRUCTUOUS. 9. RESULTANTLY, THE ASSESSEES APPEAL STAND ALLOWED IN TERMS OF OUR ABOVE ORDER. ORDER PRONOUNCED IN THE OPEN COURT ON 07 TH JUNE, 2017. SD/- SD/- (SAKTIJIT DEY) (MANOJ KUMAR AGGARWAL) / JUDICIAL MEMBER / ACCOUNTANT MEMBER MUMBAI; DATED : 07. 06.2017 SR.PS:- THIRUMALESH ITA NO.4569/MUM/2013 SWEET MARKETING (INDIA) PRIVATE LIMITED ASSESSMENT YEAR-2004-05 7 ! / COPY OF THE ORDER FORWARDED TO : 1. '$ / THE APPELLANT 2. %&'$ / THE RESPONDENT 3. ( ) / THE CIT(A) 4. / CIT CONCERNED 5. %. , . , / DR, ITAT, MUMBAI 6. /0 / GUARD FILE / BY ORDER, / (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI