THE ACIT., CIRCLE-1, RAJAHMUNDRY., Rajahmundry V. M/s Sirus Overseas (P) Ltd.,

ITA 486/VIZ/2012

• Counselvise Citation: [2015] 134 COUNSELVISE.COM (IT) 0221 (ITAT-VISAKHAPATNAM)
• Duration Of Justice: 2 year(s) 10 month(s) 20 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 06-11-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Assessment Year: 2008-2009
• Appeal Filed On: 17-12-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: M K SETHI
• Keywords: Unexplained cash credit; Bogus Share capital
• Section: 194C; 68

Judgement Text

ITA NO.486/VIZAG/2012 M/S. SIRUS OVERSEAS (P) LTD., VELPUR 1 , , IN THE INCOME TAX APPELLATE TRIBUNAL, VISAKHAPATNAM BENCH, VISAKHAPATNAM . . . . , ,, , . . . . , , , , % % % % BEFORE SHRI V. DURGA RAO, JUDICIAL MEMBER & SHRI G. MANJUNATHA, ACCOUNTANT MEMBER . .. ./ // / I.T.A.NO.486/VIZAG/2012 ( / ASSESSMENT YEAR : 2008-09 ) ACIT CIRCLE - 1 RAJAHMUNDRY VS. M/S. SIRUS OVERSEAS (P) LTD. VELPUR [ PAN: AAFCS 5054C] (, , , , / APPELLANT) (-., -., -., -., / RESPONDENT ) , / / APPELLANT BY : SHRI M.K. SETHI, DR -., / / RESPONDENT BY : SHRI G.V.N. HARI, AR / 3 / DATE OF HEARING : 26.10.2015 / 3 / DATE OF PRONOUNCEMENT : 06.11.2015 / O R D E R PER G. MANJUNATHA, ACCOUNTANT MEMBER: THIS APPEAL FILED BY THE REVENUE IS DIRECTED AGAIN ST THE ORDER OF CIT(A), GUNTUR DATED 3.10.2010 FOR THE ASSESSMENT Y EAR 2008-09. 2. BRIEF FACTS OF THE CASE, ARE THAT THE ASSESSEE C OMPANY IS ENGAGED IN THE BUSINESS OF MANUFACTURING, PROCESSING AND TR ADING OF FOOD ITA NO.486/VIZAG/2012 M/S. SIRUS OVERSEAS (P) LTD., VELPUR 2 PRODUCTS AND AGRICULTURAL PRODUCTS. THE ASSESSEE H AS FILED ITS RETURN OF INCOME FOR THE ASSESSMENT YEAR 2008-09 ON 30.9.2008 DECLARING TOTAL INCOME OF RS.2,89,98,081/-. THE RETURN WAS PROCESS ED U/S 143(1) OF THE INCOME-TAX ACT, 1961 (HEREINAFTER CALLED ACT) ON 19.3.2010. SUBSEQUENTLY, THE CASE WAS SELECTED FOR SCRUTINY TH ROUGH CASS SYSTEM AND ACCORDINGLY NOTICES U/S 143(2) OF THE ACT WAS I SSUED. IN RESPONSE TO THE SAID NOTICE, THE ASSESSEES AUTHORISED REPRE SENTATIVE APPEARED FROM TIME TO TIME AND FURNISHED BOOKS OF ACCOUNTS, INFORMATION AND CLARIFICATIONS CALLED FOR. DURING THE COURSE OF AS SESSMENT PROCEEDINGS, THE ASSESSING OFFICER NOTICED THAT THE ASSESSEE IS HAVING A TOTAL PAID UP SHARE CAPITAL OF RS.6,61,50,000/- AND SHARE APPLICA TION MONEY OF RS.5,50,00,000/- AS ON 31.3.2008. ON VERIFICATION OF THE BOOKS OF ACCOUNTS, IT WAS FOUND THAT DURING THE FINANCIAL YE AR RELEVANT TO THE ASSESSMENT YEAR 2008-09 THE ASSESSE HAS RECEIVED SH ARE APPLICATION MONEY OF RS.90 LAKHS FROM 5 SHAREHOLDERS. DURING T HE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER ASKED THE ASSESSEE COMPANY TO FURNISH THE DETAILS OF INVESTMENTS ALONG WITH CONFIRMATIONS FROM THE ABOVE INVESTORS. IN RESPONSE, THE ASSESSE E COMPANY FURNISHED THE ADDRESSES OF THE COMPANIES, HOWEVER, NO OTHER D ETAILS ARE FURNISHED AS REQUIRED BY THE ASSESSING OFFICER. THE ASSESSIN G OFFICER TO VERIFY THE GENUINENESS OF THE TRANSACTIONS ISSUED A LETTER TO THE ADDL. DIRECTOR OF ITA NO.486/VIZAG/2012 M/S. SIRUS OVERSEAS (P) LTD., VELPUR 3 INCOME-TAX, UNIT-2(3), KOLKATA TO CONDUCT AN ENQUIR Y ABOUT THESE COMPANIES AND TO FURNISH THE REPORT. IN RESPONSE T O THE SAID LETTER, THE ADDL. DIRECTOR OF INCOME-TAX, UNIT-2(3), KOLKATA HA D ISSUED SUMMONS TO ALL THE COMPANIES TO THE ADDRESSED FURNISHED BY THE ASSESSEE. HOWEVER, NONE APPEARED FROM THESE COMPANIES BEFORE THE ADDL. DIRECTOR OF INCOME-TAX, UNIT-2(3), KOLKATA TO PRODU CE THE DETAILS CALLED FOR. SINCE NO INFORMATION IS FORTHCOMING, THE ADDL . DIRECTOR OF INCOME- TAX, UNIT-2(3), KOLKATA HAS FURNISHED THE REPORT ST ATING THAT THERE WAS NO COMPLIANCE FROM ANY OF THE COMPANIES FOR THE SUM MONS ISSUED. HENCE, IN THE ABSENCE OF ANY DETAILS FORTHCOMING, I T IS NOT POSSIBLE TO ISSUE REPORT ON THE GENUINENESS OF THE INVESTMENTS BY THESE COMPANIES. 3. THE ASSESSING OFFICER, DURING THE COURSE OF ASSE SSMENT PROCEEDINGS HAS CONFRONTED THE ABOVE FINDINGS OF TH E ADDL. DIRECTOR OF INCOME-TAX, UNIT-2(3), KOLKATA TO THE ASSESSEE. IN RESPONSE TO THE LETTER, THE ASSESSEE REPLIED THAT EXCEPT ROSE SECUR ITIES LTD. AND KEDIA BANIJYA UDYOG PVT. LTD, ALL OTHER COMPANIES HAVE SE NT THE AFFIDAVITS CONFIRMING THE INVESTMENT MADE BY THEM WITH THE ASS ESSEE COMPANY. HOWEVER, THE ASSESSING OFFICER DID NOT CONVINCED WI TH THE REPLIES FILED BY THE ASSESSEE WAS OF THE OPINION THAT THE ASSESSEE H AS FAILED TO DISCHARGE THE INITIAL ONUS LIES WITH THEM WITH IDEN TITY AND ITA NO.486/VIZAG/2012 M/S. SIRUS OVERSEAS (P) LTD., VELPUR 4 CREDITWORTHINESS OF THE CREDITORS. IN VIEW OF THE NON-COMPLIANCE OF THE ABOVE, THE A.O. TREATED THE ENTIRE SHARE APPLICATIO N MONEY OF RS.90 LAKHS AS UNEXPLAINED CASH CREDITS AND BROUGHT TO TA X U/S 68 OF THE ACT. 4. AGGRIEVED BY THE ASSESSMENT ORDER, THE ASSESSEE PREFERRED AN APPEAL BEFORE THE CIT(A). BEFORE THE CIT(A), THE A SSESSEE CONTENDED THAT THE INVESTMENTS MADE BY THE SHAREHOLDERS ARE T HE CORPORATE SHAREHOLDERS THEREFORE, THE QUESTION OF DOUBTING TH E GENUINENESS OF THE TRANSACTIONS WOULD NOT ARISE. HE FURTHER SUBMITTED THAT THE SUMMONS ISSUED BY THE DEPARTMENT TO THE ADDRESS MENTIONED B Y THE COMPANIES BASED ON THE INCOME TAX ACKNOWLEDGEMENTS/INTIMATION S U/S 143(1) OF THE ACT HENCE, THESE ADDRESS MAY NOT BE THE CORRECT ADDRESSES OF THE COMPANIES. THEREFORE, THE ASSESSEE REQUESTED TO GI VE ONE MORE OPPORTUNITY TO PRODUCE THE DETAILS CALLED FOR BY TH E ASSESSING OFFICER. THE ASSESSEE FURTHER CONTENDED THAT IT HAS FURNISHE D THE NAME AND ADDRESS OF THE INVESTORS ALONG WITH PAN NOS. AND AL SO FILED AFFIDAVIT FROM THE INVESTORS FOR HAVING CONFIRMED THE INVESTMENTS MADE BY THEM IN THE ASSESSEE COMPANY. IT IS FURTHER CONTENDED THAT THE APPELLANT BEING A PRIVATE COMPANY, AT THE TIME OF ACCEPTING SHARE CAP ITAL OBTAINED COPIES OF THE BOARD RESOLUTIONS PASSED AT THE MEETING OF T HE SAID COMPANIES CONFIRMING THE INVESTMENT, CERTIFICATE OF INCORPORA TION OF THE COMPANY, ITA NO.486/VIZAG/2012 M/S. SIRUS OVERSEAS (P) LTD., VELPUR 5 ETC. THE ASSESSEE STRONGLY CONTENDED THAT IT HAS F URNISHED CONFIRMATION LETTERS FROM THE INVESTORS, FILED BANK STATEMENTS A LONG WITH AFFIDAVITS OF THE INVESTORS CONFIRMING THE INVESTMENT AND ALSO PR OVED THAT THE TRANSACTIONS WERE MADE THROUGH ACCOUNT PAYEE CHEQUE S, THEREBY THE INITIAL BURDEN OF PROVING GENUINENESS, CREDITWORTHI NESS AND THEIR IDENTITY HAS BEEN DISCHARGED. 5. DURING THE COURSE OF APPELLATE PROCEEDINGS, THE CIT(A) HAS SENT THE DETAILS FILED BY THE ASSESSEE TO THE ASSESSING OFFICER FOR HIS COMMENTS. THE CIT(A) DIRECTED THE ASSESSING OFFICE R TO ISSUE SUMMONS TO THE SAID COMPANIES TO EXAMINE THE DETAILS FURNIS HED BY THE ASSESSEE AT THE TIME OF APPELLATE PROCEEDINGS. THE ASSESSIN G OFFICER VIDE HIS LETTER DATED 7.3.2012 INFORMED THE CIT(A) THAT THE STATEMENTS OF THE PERSONS WHO REPRESENT THE SAID COMPANIES WERE RECOR DED AS PER THE LINES INDICATED AND ALSO OBTAINED THE DOCUMENTS REG ARDING THE SOURCE FOR THE INVESTMENT, SUCH AS COPIES OF BANK STATEMEN T AND INCOME TAX RETURN COPIES, ETC. THE CIT(A) AFTER CONSIDERING T HE REMAND REPORT AND ALSO COPIES OF STATEMENTS RECORDED FROM THE REPRESE NTATIVE OF THE ABOVE COMPANIES, HELD THAT THE ASSESSEE HAS DISCHARGED TH E INITIAL BURDEN OF PROVING THE IDENTITY, CREDITWORTHINESS AND GENUINEN ESS OF THE TRANSACTIONS. WITH THESE OBSERVATIONS, THE CIT(A) D ELETED THE IMPUGNED ITA NO.486/VIZAG/2012 M/S. SIRUS OVERSEAS (P) LTD., VELPUR 6 ADDITIONS MADE BY THE ASSESSING OFFICER U/S 68 OF T HE ACT. AGGRIEVED BY THE CIT(A)S ORDER, THE REVENUE IS IN APPEAL BEFORE US. 6. THE LD. D.R. SUBMITTED THAT THE ASSESSEE HAS NOT PROVED THE IDENTITY, CREDITWORTHINESS AND GENUINENESS OF THE T RANSACTIONS BY FILING THE NECESSARY PROOF OF SHARE APPLICATION MONEY INVE STED BY THESE COMPANIES IN THE ASSESSEE COMPANY. THE LD. D.R. FU RTHER SUBMITTED THAT THE CIT(A) IS ERRED IN DELETING THE ADDITIONS BY RELYING UPON THE REMAND REPORT FURNISHED BY THE ASSESSING OFFICER. THE LD. D.R. FURTHER ARGUED THAT THE CIT IS FULLY RELIED UPON THE REMAND REPORT WITHOUT EXAMINING THE EVIDENCES INDEPENDENTLY, WHICH IS NOT CORRECT. IT IS FURTHER CONTENDED THAT THE SO CALLED INVESTORS, IN THE ASSESSMENT PROCEEDINGS HAVE GROSSLY FAILED TO APPEAR BEFORE TH E ASSESSING OFFICER AND ALSO NOT FURNISHED THE DETAILS OF SOURCE FOR TH E INVESTMENT. AT THE STAGE OF APPELLATE PROCEEDINGS IT IS HIGHLY IMPOSSI BLE TO COME WITH EVIDENCES SUCH AS INCOME-TAX RETURNS AND BANK STATE MENTS, WHEN THESE COMPANIES DO NOT EXIST AS PER THE DATABASE OF REGIS TRAR OF COMPANIES. THEREFORE, THE LD. D.R. ARGUED THAT THE ADDITIONS M ADE BY THE A.O. SHOULD BE UPHELD. 7. ON THE OTHER HAND, THE LD. A.R. STRONGLY SUPPORT ED THE ORDER OF THE CIT(A). THE A.R. FURTHER SUBMITTED THAT DURING THE COURSE OF ITA NO.486/VIZAG/2012 M/S. SIRUS OVERSEAS (P) LTD., VELPUR 7 REMAND PROCEEDINGS, THE ASSESSING OFFICER HAS ISSUE D SUMMONS TO ALL THE SHAREHOLDERS WITH REGARD TO THE ADDITION OF RS. 90 LAKHS. THE REPRESENTATIVE OF THE ABOVE COMPANIES HAVE APPEARED AND GIVEN A STATEMENT, STATING THAT THEY HAVE INVESTED IN THE S HARE CAPITAL AND ALSO FURNISHED THE SOURCE FOR THE INVESTMENT BY FILING B ANK STATEMENTS AND INCOME TAX RETURN COPIES. THE CIT(A), AFTER EXAMIN ING THE DETAILS FURNISHED BY THE ASSESSE GIVEN RELIEF ON THE ISSUE. THE LD. COUNSEL FOR THE ASSESSEE FURTHER CONTENDED THAT EVEN IF THE SHA RE APPLICATION MONEY RECEIVED BY THE ASSESSEE COMPANY FROM THE ALLEGED B OGUS SHAREHOLDERS CANNOT BE MADE ANY ADDITIONS IN THE ASSESSEE COMPAN Y HANDS, ONCE THE NAMES WERE GIVEN TO THE ASSESSING OFFICER. IN SUPP ORT OF HIS CONTENTION RELIED UPON THE HONBLE APEX COURT DECISION IN THE CASE OF CIT VS. LOVELY EXPORTS PVT. LTD. 216 CTR 195. HE ALSO RELIED UPON THE COORDINATE BENCH DECISION OF ITAT, VISAKHAPATNAM IN THE CASE O F CHEMICAL BIOTECH LTD. VS. ADDL. CIT IN ITA NO.505/VIZAG/2008. HE FU RTHER ARGUED THAT AS PER THE PROVISIONS OF SECTION 68 OF THE ACT STOOD A T THE TIME OF ASSESSMENT YEAR 2008-09, ANY CREDITS IN THE FORM OF SHARE CAPITAL OR SHARE APPLICATION MONEY FOUND IN THE BOOKS OF THE C OMPANY CANNOT BE BROUGHT TO TAX U/S 68 OF THE ACT. THIS VIEW WAS SU PPORTED BY THE AMENDMENTS BROUGHT TO SECTION 68 BY THE FINANCE ACT , 2012 W.E.F. ITA NO.486/VIZAG/2012 M/S. SIRUS OVERSEAS (P) LTD., VELPUR 8 ASSESSMENT YEAR 2013-14. THEREFORE, REQUESTED TO U PHELD CIT(A) ORDER AND DELETE THE ADDITIONS MADE BY ASSESSING OFFICER. 8. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE MA TERIALS AVAILABLE ON RECORD. THE A.O. MADE ADDITIONS OF RS .90 LAKHS AS UNEXPLAINED CREDIT U/S 68 OF THE ACT FOR THE REASON THAT THE ASSESSEE HAS FAILED TO PROVE THE DETAILS OF IDENTITY, CREDITWORT HINESS AND GENUINENESS OF THE TRANSACTIONS. THE A.O. WAS OF THE OPINION T HAT INSPITE OF ISSUING SUMMONS TO THE ABOVE SHAREHOLDERS, NONE APPEARED AN D FURNISHED DETAILS AT THE TIME OF ASSESSMENT PROCEEDINGS, THER EFORE, BURDEN CAST UPON THE ASSESSE IS NOT DISCHARGED. THE CIT(A) DUR ING THE COURSE OF APPELLATE PROCEEDINGS, OBTAINED A REMAND REPORT FRO M THE ASSESSING OFFICER WHEREIN, THE ASSESSING OFFICER STATED THAT THE REPRESENTATIVE OF THE ABOVE COMPANIES HAVE APPEARED BEFORE THE A.O. A ND FILED NECESSARY DETAILS REGARDING SOURCE OF INVESTMENTS. THE CIT(A ) AFTER CONSIDERING THE REMAND REPORT AND ALSO NECESSARY DETAILS FILED BY THE ASSESSEE DELETED THE ADDITION. WE HAVE GONE THROUGH THE ORD ERS OF LOWER AUTHORITIES AND FIND THAT INITIALLY THE ASSESSEE FA ILED TO FURNISH THE DETAILS, EXCEPT FURNISHING THE NAME AND ADDRESS OF THE INVESTORS. THE ASSESSEE CONTENDED THAT IT HAS FURNISHED THE NAME A ND ADDRESS OF THE INVESTORS BASED ON THE ADDRESSES GIVEN BY THE SAID INVESTORS AT THE TIME ITA NO.486/VIZAG/2012 M/S. SIRUS OVERSEAS (P) LTD., VELPUR 9 OF ACCEPTING INVESTMENTS. IT IS QUITE POSSIBLE THA T MANY COMPANIES CHANGES THEIR ADDRESS AND NOT INFORMED TO ALL CONCE RNED. IT IS ALSO POSSIBLE THAT THESE COMPANIES MAY BE CHANGED THEIR ADDRESS THEREFORE, THE LETTERS ISSUED BY THE ASSESSING OFFICER RETURNE D UNSERVED HENCE, IT IS HIGHLY UNACCEPTABLE THAT IT HAS NOT PROVED IDENTITY AND GENUINENESS OF THE TRANSACTIONS. ALL THE INVESTORS ARE CORPORATE COMPANIES, APPEARED BEFORE THE ASSESSING OFFICER AND FILED THE NECESSAR Y DETAILS, THEREFORE, THE A.O. IS NOT CORRECT IN STATING THAT THE INITIAL BURDEN CAST UPON THE ASSESSEE IS NOT DISCHARGED. 9. SECTION 68 OF THE ACT APPLIES, WHERE ANY SOME FO UND CREDITED IN THE BOOKS OF THE AN ASSESSEE MAINTAINED FOR ANY PRE VIOUS YEAR AND THE ASSESSEE OFFERS NO EXPLANATIONS ABOUT THE NATURE AN D SOURCE OR THE EXPLANATIONS OFFERED BY THE ASSESSEE ARE NOT IN THE OPINION OF THE ASSESSING OFFICER SATISFACTORY, THEN THE SAME MAY B E CHARGED TO THE INCOME TAX AS INCOME OF THE ASSESSEE IN THAT PREVIO US YEAR. TO APPLY THE PROVISIONS OF SECTION 68 OF THE ACT, THE INITIA L BURDEN OF PROVING THE GENUINENESS OF THE TRANSACTIONS IS CAST UPON THE AS SESSEE. ONCE, THE ASSESSEE DISCHARGES THE INITIAL BURDEN OF PROVING T HE IDENTITY, CREDITWORTHINESS AND GENUINENESS OF THE TRANSACTION S, THEN THE ONUS SHIFTS TO THE ASSESSING OFFICER TO PROVE OTHERWISE. IN THE INSTANT CASE, ITA NO.486/VIZAG/2012 M/S. SIRUS OVERSEAS (P) LTD., VELPUR 10 THE ASSESSEE HAS FURNISHED THE DETAILS OF IDENTITY OF THE INVESTORS. IT HAS ALSO FILED THE NECESSARY DETAILS ABOUT GENUINENESS OF TRANSACTIONS AND THE SOURCE FOR THE INVESTMENT, BY FILING THE INCOME TAX RETURN COPIES, BANK STATEMENTS AND ALSO AFFIDAVIT SWORN BY THE COM PANIES BEFORE THE NOTARY PUBLIC. ONCE, THE INITIAL BURDEN IS PROVED AND ALSO GENUINENESS OF THE TRANSACTION IS PROVED, THE QUESTION OF MAKIN G ADDITIONS U/S 68 OF THE ACT DOES NOT ARISE. WE FURTHER OBSERVED THAT, IN VIEW OF THE JUDGMENT OF HONBLE SUPREME COURT IN THE CASE OF LO VELY EXPORTS PVT LTD 216 CTR 195, THE LAW STOOD AT THAT ASSESSMENT Y EAR WAS THAT EVEN, IN CASE THE SHARE APPLICATION MONEY FOUND TO BE BOG US, THEN THE ASSESSING OFFICER CANNOT MADE ANY ADDITION TO THE A LLEGED BOGUS SHARE APPLICATION MONEY IN THE HANDS OF THE COMPANY. THIS VIEW WAS SUPPORTED BY THE AMENDMENTS BROUGHT TO SECTION 68 B Y THE FINANCE ACT 2012 W.E.F. 1-4-2013. THE PROVISION OF SECTION 68 W AS AMENDED, SO AS TO BRING THE ALLEGED BOGUS SHARE APPLICATION MONEY TO THE TAX IN THE HANDS OF COMPANIES, IN CASE SHARE APPLICATION MONEY FOUND TO BE BOGUS. 10. THE AUTHORIZED REPRESENTATIVE PLACED HIS RELIAN CE UPON THE HONBLE SUPREME COURT DECISION IN THE CASE OF CIT VS. LOVEL Y EXPORTS (P) LTD 216 CIT 195. WE HAVE CAREFULLY CONSIDERED THE FACTS OF T HE PRESENT CASE WITH THE JUDGEMENT RENDERED BY THE HONBLE APEX COURT IN THE CASE OF LOVELY ITA NO.486/VIZAG/2012 M/S. SIRUS OVERSEAS (P) LTD., VELPUR 11 EXPORTS PVT. LTD. (SUPRA). THE HONBLE SUPREME COU RT IN THE ABOVE SAID JUDGEMENT CATEGORICALLY HELD THAT IN THE CASE OF BO GUS SHARE HOLDER, THE ADDITION CANNOT BE MADE IN THE HANDS OF THE ASSESSE E COMPANY. WHATEVER ACTION IS REQUIRED TO BE TAKEN CAN BE TAKEN IN THE HANDS OF THE SHAREHOLDERS IN ACCORDANCE WITH LAW IN CASE THE ALL EGED SHAREHOLDERS FOUND TO BE BOGUS. THE RELEVANT PORTION READS AS U NDER: IF THE SHARE APPLICATION MONEY IS RECEIVED BY THE ASSESSEE COMPANY FROM ALLEGED BOGUS SHAREHOLDERS, W HOSE NAMES ARE GIVEN TO THE A.O., THEN THE DEPARTMENT IS FREE TO PROCEED TO REOPEN THEIR INDIVIDUAL ASSESSMENTS IN A CCORDANCE WITH LAW. BUT IT CANNOT BE RECORDED AS UNDISCLOSED INCOME OF THE ASSESSEE COMPANY. 11. AN IDENTICAL ISSUE CAME UP FOR CONSIDERATION BE FORE THE COORDINATE BENCH OF THIS TRIBUNAL IN THE CASE OF CH EMICAL BIOTECH LTD. VS. ADDL. CIT, RANGE-1 IN ITA NO.505/VIZAG/2008, WH EREIN THE TRIBUNAL WHILE DECIDING THE ISSUE IN FAVOUR OF THE ASSESSEE HELD AS UNDER: WE HAVE HEARD THE RIVAL SUBMISSIONS AND CAREFULLY PE RUSED ORDERS OF THE AUTHORITIES BELOW AND JUDGEMENT OF TH E APEX COURT IN THE CASE OF LOVELY EXPORTS (P) LTD. (SUPRA) AND WE FIND THAT THEIR LORDSHIP OF APEX COURT HAS CATEGORICALLY HELD THAT IN THE CASE OF BOGUS SHARE HOLDERS, THE ADDITION CANNOT BE MADE IN THE HANDS OF THE ASSESSEE COMPANY. THE ACTION CAN ONLY BE TAKEN IN THE HANDS OF THE SHAREHOLDERS IN ACCORDANCE WITH THE LAW. BUT I N THE INSTANT CASE, THE IDENTITY OF THE SHAREHOLDERS WAS PROVED. THE D ISPUTE WAS WITH REGARD TO THE CREDITWORTHINESS OF THE SHAREHOLDERS FOR WHICH THE ASSESSEE HAS AGREED FOR CERTAIN ADDITIONS. NOW IN THE LIGHT OF JUDGEMENT OF THE APEX COURT, THE ADDITION CANNOT BE SUSTAINED IN THE ITA NO.486/VIZAG/2012 M/S. SIRUS OVERSEAS (P) LTD., VELPUR 12 HANDS OF THE ASSESSEE COMPANY ON RECEIPT OF SHARE A PPLICATION MONEY, EVEN IF THE SHAREHOLDERS ARE PROVED TO BE BO GUS. THE ACTION CAN ONLY BE TAKEN IN ACCORDANCE WITH LAW IN THE HAN DS OF THE BOGUS SHAREHOLDERS AND NO ADDITION IS CALLED FOR IN THE H ANDS OF THE ASSESSEE COMPANY. WE THEREFORE, FOLLOWING THE JUDG EMENT OF THIS APEX COURT, SET ASIDE THE ORDER OF THE CIT(A) AND D IRECT THE A.O. TO ALLOW THE CLAIM OF THE ASSESSEES. REVENUE IS AT LI BERTY TO TAKE ACTION ON SHAREHOLDERS IN ACCORDANCE WITH THE LAW. BUT TH E IMPUGNED ADDITIONS CANNOT BE SUSTAINED IN THE HANDS OF THE A SSESSEE COMPANY. 12. THE CIT(A) AFTER CONSIDERING THE REMAND REPORT AND ALSO DETAILS FILED BY THE ASSESSE, DELETED THE ADDITIONS MADE BY THE A.O. IN OUR OPINION, THE CIT(A) HAS RIGHTLY DELETED THE ADDITIO NS AND HIS ORDER DOES NOT REQUIRE ANY INTERFERENCE. THEREFORE, CONSIDERI NG THE FACTS AND CIRCUMSTANCES OF THE CASE AND ALSO APPLYING THE RAT IOS OF THE DECISIONS MENTIONED ABOVE, WE ARE OF THE OPINION THAT ONCE, T HE IDENTITY OF THE ALLEGED SHAREHOLDERS IS PROVED THEN, THE A.O. IS RE QUIRED TO REOPEN THEIR INDIVIDUAL ASSESSMENTS AND PROCEED IN ACCORDANCE WI TH LAW. BUT, HE CANNOT MADE ANY ADDITIONS TO THE SHARE APPLICATION MONEY IN THE HANDS OF ASSESSE COMPANY AS UNDISCLOSED INCOME AND BROUGH T TO TAX U/S 68 OF THE INCOME TAX ACT. IN THE INSTANT CASE, IN ADDITI ON TO PROVING THE IDENTITY, THE ASSESSEE PROVED THE CREDITWORTHINESS AND ALSO GENUINENESS OF THE TRANSACTIONS BY FILING NECESSARY EVIDENCES. THEREFORE, WE ARE INCLINED TO UPHELD THE ORDER OF THE CIT(A) AND DELE TE THE ADDITION. ITA NO.486/VIZAG/2012 M/S. SIRUS OVERSEAS (P) LTD., VELPUR 13 13. THE NEXT ISSUE, CAME UP FOR OUR CONSIDERATION I S WHETHER THE A.O. IS RIGHT IN DISALLOWING A SUM OF RS.1,00,162/- BY I NVOKING THE PROVISIONS OF SECTION 40(A)(IA) OF THE ACT? THE BRIEF FACTS O F THE ISSUE IS THAT DURING THE FINANCIAL YEAR RELEVANT TO ASSESSMENT YEAR 2008 -09, THE ASSESSEE COMPANY HAS PAID RS.10,963/- TOWARDS PROCESSING CHA RGES WITHOUT DEDUCTING TAX AT SOURCE. THE ASSESSEE ALSO PAID AN AMOUNT OF RS.56,199/- TOWARDS WEIGHMENT CHARGES AND RS.33,000 /- TOWARDS PEST CONTROL CHARGES. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE A.O. NOTICED THAT THE ASSESSEE HAS MADE THESE PAYME NTS WITHOUT DEDUCTING TAX AT SOURCE UNDER THE RESPECTIVE PROVIS IONS OF THE ACT AND HENCE, MADE A DISALLOWANCE U/S 40(A)(IA) OF THE ACT . 14. AGGRIEVED BY THE ASSESSMENT ORDER, THE ASSESSEE PREFERRED AN APPEAL BEFORE THE CIT(A). THE CIT(A) DELETED THE A DDITIONS MADE BY THE ASSESSING OFFICER APPLYING THE RATIO OF ITAT SP ECIAL BENCH VISAKHAPATNAM DECISION IN THE CASE OF MERILYN SHIPP ING AND TRANSPORT IN ITA NO.477/VIZAG/2008. AGGRIEVED BY THE CIT(A)S O RDER, THE REVENUE IS IN APPEAL. 15. THE LD. D.R. SUBMITTED THAT THE CIT(A) IS ERRED IN DELETING THE ADDITIONS BY APPLYING THE RATIO OF SPECIAL BENCH CA SE OF VISAKHAPATNAM ITAT IN MERILYN SHIPPING AND TRANSPORTS (SUPRA), AS THE DEPARTMENT NOT ITA NO.486/VIZAG/2012 M/S. SIRUS OVERSEAS (P) LTD., VELPUR 14 ACCEPTED THE DECISION OF SPECIAL BENCH AND PREFERRE D AN APPEAL BEFORE THE HONBLE A.P. HIGH COURT AND IT IS PENDING FOR A DJUDICATION. THE LD. D.R. FURTHER SUBMITTED THAT IT IS NOT CORRECT TO SA Y THAT SECTION 40(A)(IA) OF THE ACT IS APPLICABLE ONLY TO THE AMOUNTS PAYABL E AT THE END OF THE FINANCIAL YEAR BUT, AS PER THE PROVISIONS OF SECTIO N 40(A)(IA) OF THE ACT, EVEN AMOUNTS ALREADY PAID ALSO COVERED UNDER THE PR OVISIONS OF THE SAID SECTION. THEREFORE, THE LD. D.R. URGED TO UPHELD T HE ORDER OF THE ASSESSING OFFICER. 16. ON THE OTHER HAND, THE A.R. OF THE ASSESSEE SUB MITTED THAT THE CIT(A) IS RIGHT IN GIVING RELIEF CONSIDERING THE FA CTS THAT ALL THESE EXPENSES WERE PAID DURING THE PREVIOUS YEAR. THE A .R. FURTHER SUBMITTED THAT WITH REGARD TO THE PROCESSING CHARGE S RS.10,963/- AND PEST CONTROL CHARGES OF RS.33,000/-, THE ASSESSEE H AS DEDUCTED TAX AT SOURCE AND PAID THE TDS AMOUNT BEFORE THE DUE DATE OF FILING THE RETURN OF INCOME U/S 139(1). THEREFORE, IN VIEW OF THE AME NDMENT TO SECTION 40(A)(IA) AND WHICH WAS MADE APPLICABLE RETROSPECTI VELY FROM THE A.Y. 2005-06, ADDITIONS CANNOT BE MADE FOR THE AMOUNT OF EXPENDITURE, WHERE TDS IS DEDUCTED AND REMITTED ON OR BEFORE DUE DATE OF FURNISHING RETURN OF INCOME U/S 139(1). HE FURTHER SUBMITTED THAT WITH REGARD TO THE WEIGHMENT CHARGES OF RS.56,191/-, THERE IS NO W RITTEN CONTRACT ITA NO.486/VIZAG/2012 M/S. SIRUS OVERSEAS (P) LTD., VELPUR 15 BETWEEN THE ASSESSEE AND THE SERVICE PROVIDER, HENC E, THE PROVISIONS OF SECTION 194C OF THE ACT CANNOT BE APPLIED. TO SUPP ORT HIS ARGUMENT, HE RELIED UPON THE ITAT SPECIAL BENCH DECISION IN THE CASE OF MERILYN SHIPPING AND TRANSPORTS (SUPRA) AND ALSO HONBLE GU JARAT HIGH COURT JUDGMENT IN THE CASE OF CIT VS. DMS PROJECTS PVT. L TD. (2014) 361 ITR 195 (GUJ.) 17. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE M ATERIALS AVAILABLE ON RECORD. AT THE TIME OF HEARING, BOTH THE PARTIES AGREED THAT THE ISSUE OF DISALLOWANCE OF EXPENDITURE U/S 40(A)( IA) OF THE ACT WAS SQUARELY COVERED BY THE SPECIAL BENCH DECISION OF I TAT, VISAKHAPATNAM IN THE CASE OF MERILYN SHIPPING & TRANSPORTS (SUPRA ). WE HAVE EXAMINED THE FACTS OF THE PRESENT CASE AND ALSO CON SIDERED THE ITAT SPECIAL BENCH DECISION IN MERILYN SHIPPING & TRANSP ORTS (SUPRA) AND FIND THAT THE ITAT SPECIAL BENCH HAS CATEGORICALLY HELD THAT DISALLOWANCE U/S 40(A)(IA) OF THE ACT CANNOT BE APPLIED TO THE AMOUN TS ALREADY PAID WITHIN THE FINANCIAL YEAR. THEREFORE, APPLYING THE RATIOS OF THE SPECIAL BENCH CASE MENTIONED (SUPRA), WE UPHELD THE CIT(A) S ORDER AND DELETE THE ADDITIONS MADE BY THE ASSESSING OFFICER. ITA NO.486/VIZAG/2012 M/S. SIRUS OVERSEAS (P) LTD., VELPUR 16 18. IN THE RESULT, THE REVENUES APPEAL IS DISMISSE D. THE ABOVE ORDER WAS PRONOUNCED IN THE OPEN COURT ON 6 TH NOV15. SD/- SD/- ( (( ( . .. . ) ) ) ) ( (( ( . . . . ) ) ) ) ( (( ( V. DURGA RAO ) )) ) ( (( ( G. MANJUNATHA) / // / JUDICIAL MEMBER / // / ACCOUNTANT MEMBER /VISAKHAPATNAM: 6 / DATED : 6.11.2015 VG/SPS / - 7 / COPY OF THE ORDER FORWARDED TO :8 1. , / THE APPELLANT THE ACIT, CIRCLE-1, RAJAHMUNDRY 2. -., / THE RESPONDENT M/S. SIRUS OVERSEAS (P) LTD., 2-153, RICE MILL STRE ET, VELPUR-534 222. 3. : / THE CIT, RAJAHMUNDRY 4. : / THE CIT, GUNTUR 5. : () / THE CIT(A), GUNTUR 6. -, , / // / DR, ITAT, VISAKHAPATNAM 7 . . . . / GUARD FILE / BY ORDER // TRUE COPY // @A ( SR.PRIVATE SECRETARY ) , / // / ITAT, VISAKHAPATNAM