PUSHTI CONSULTANTS P.LTD, MUMBAI V. DCIT CIR 1(2), MUMBAI

ITA 4963/MUM/2012

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 101174 (ITAT-MUMBAI)
• Duration Of Justice: 3 year(s) 1 month(s) 21 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-09-2015
• Appeal Filed By: Assessee
• Bench Allotted: C
• Next Hearing Date: 09-02-2015
• Assessment Year: 2008-2009
• Appeal Filed On: 02-08-2012
• Court: TRIBUNAL
• Assessee Lawyers: A V SONDE
• Keywords: Valuation report
• Section: 143(3)

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL C , BENCH MUMBAI . . , , BEFORE SHRI R.C.SHARMA , A M & SHRI PAWAN SINGH , J M ./ ITA NO . 4963 / MUM/20 1 2 ( / ASSESSMENT YEAR : 20 0 8 - 20 0 9 ) M/S PUSHTI CONSTRUCTIONS PVT. LTD., 4, GROUND FLOOR, SHANTI BHAVAN, DR. A.B.MARG, PEDDAR ROAD, MUMBAI - 400026 VS. DCIT - 1(2), MUMBAI ./ ./ PAN/GIR NO. : A A D C P 8388 C ( / APPELLANT ) .. ( / RESPONDENT ) /ASSESSEE BY : SHRI A.V.SONDE /REVENUE BY : SHRI SATYA PAL KUMAR / DATE OF HEARING : 19 /0 8 / 2015 / DATE OF PRONOUNCEMENT 23/09/ 2015 / O R D E R PER R.C.SHARMA (A.M) : TH IS IS AN APPEAL FILED BY THE ASSESSEE AGAINST THE ORDER OF CIT(A), DATED 9 - 5 - 2012 FOR THE ASSESSMENT YEAR 200 8 - 0 9 IN THE MATTER OF ORDER PASSED UNDER SECTION 143(3) OF THE ACT. 2. IN THIS APPEAL THE ASS ESSEE IS AGGRIEVED FOR THE ADDITION OF RS.2.20 CRORES BY TREATING THE AMOUNT OF SHARE APPLICATION MONEY RECEIVED AS INCOME OF THE ASSESSEE. 3. RIVAL CONTENTIONS HAVE BEEN HEARD AND RECORD PERUSED. DURING THE COURSE OF SCRUTINY ASSESSMENT THE AO NOTICED TH AT THE ASSESSEE COMPANY HAS RECEIVED SHARE APPLICATION MONEY OF RS.2.20 CRORE DURING THE YEAR ITA NO. 4963 /1 2 2 UNDER ASSESSMENT. THE ASSESSEE COMPANY WAS ASKED TO SUBMIT/SUBSTANTIATE THE SAID SHARE APPLICATION MONEY RECEIPT. THE ASSESSEE HAS MADE SUBMISSION THAT M/S SPEED TRADE SECURITIES PVT. LTD. (STSPL) HAS GIVEN SHARE APPLICATION MONEY OF RS.2.20 CRORE. COPY OF THE BOARD RESOLUTION AND LETTER FROM STSPL WAS ALSO FURNISHED. THE SUMMON U/S.131 OF THE ACT WAS ISSUED TO DIRECTOR OF STSPL TO APPEAR IN PERSON AND EXAMINE HIM ON OATH ABOUT THE GENUINENESS OF THE TRANSACTION. HE WAS ALSO ASKED TO FURNISH DETAILS REGARDING BALANCE PAYMENT OF SHARE APPLICATION MONEY, SUBSEQUENT DATE OF ALLOTMENT, DETAILS OF SHARES APPLICATION MONEY GIVEN TO OTHER CONCERNS ETC. THE ASSESSEE COMPANY FILED DETAILS AS ASKED BY THE AO. THE AO DID NOT CONVINCE WITH THE SAME AND OBSERVED THAT SHARE APPLICANT HAS GIVEN BOARD RESOLUTION IN WHICH IT WAS MENTIONED THAT M/S SPEED TRADE SECURITIES PVT. LTD. (STSPL) WILL PAY RS.2.20CRORE BEING 50% OF THE SHARE A PPLICATION MONEY AND IF IT DOES NOT PAY BALANCE 50% OF SHARE APPLICATION MONEY, THE AMOUNT PAID AS SHARE APPLICATION MONEY WILL BE FORFEITED BY THE ASSESSEE COMPANY. SINCE THE STSPL COULD NOT PAY THE BALANCE OF 50%, THE ASSESSEE COMPANY HAS FORFEITED THE S HARE APPLICATION MONEY IN SUBSEQUENT ASSESSMENT YEAR. THE AO FURTHER OBSERVED THAT AS PER THE BALANCE SHEET OF STSPL, IT HAS SUFFICIENT FUND AVAILABLE TO THE TUNE OF RS.14.33 CRORE ON 31 - 3 - 2009, IN SPITE OF HAVING SUCH HUGE FUNDS AT ITS DISPOSAL, IT HAS AL LOWED ITS INVESTMENT TO GO IN DRAIN AND CLAIMED LOSS IN ITS PROFIT AND LOSS ACCOUNT. THIS DEVICE WAS RESORTED WITH AN INTENT TO EVADE THE TAX. IN REPLY TO AOS SHOW CAUSE NOTICE, IT WAS SUBMITTED THAT SHARE APPLICATION MONEY CANNOT ITA NO. 4963 /1 2 3 BE TAXED AS INCOME EVEN IF SHAREHOLDERS ARE BOGUS BY RELYING ON THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF LOVELY EXPORTS PVT. LTD., 216 CTR 195. HOWEVER , IT WAS HELD BY THE AO THAT ASSESSEE COMPANY HAS HYPOTHETICALLY SHOWN SHARE APPLICATION MONEY AND MADE INVESTMENT BY WAY OF INTRODUCING ITS OWN FUND UNDER THE GRAB OF SAID SHARE APPLICATION MONEY. THE ADDITION SO MADE WAS CONFIRMED BY THE CIT(A), AGAINST WHICH THE ASSESSEE IS IN FURTHER APPEAL BEFORE US. 4 . IT WAS CONTENDED BY LD. AR THAT UNDER THE INDIAN CONTRACT ACT, 1872, SECTION 73 DEALS WITH THE COMPENSATION OF LOSS OR DAMAGE CAUSED BY BREACH OF CONTRACT AND SECTION 74 DEALS WITH COMPENSATION OF BREACH OF CONTRACT WHERE PENALTY STIPULATED FOR. IT WAS SUBMITTED THAT EVEN IF THE SAID SECTIONS APPLY, THEN TO THE BREAC H IS COMMITTED BY THE STSPL AND NOT BY THE ASSESSEE, AS THE ASSESSEE HAD SUFFERED ON ACCOUNT OF NON - PAYMENT OF BALANCE AMOUNT BY STSPL AND ASSESSEE IS NOT SOUGHT FOR ANY COMPENSATION OF LOSS OR DAMAGE OR PENALTY FROM STSPL ON ACCOUNT OF BREACH. FURTHER REL IANCE WAS PLACED BY LD. AR ON THE FOLLOWING JUDICIAL PRONOUNCEMENTS : - CIT VS. LOVELY EXPORTS (P) LTD. (DEL.HC) 299 ITR 268 16.11.2006 CIT VS. LOVELY EXPORTS (P) LTD.(SC) 216 CTR 195 11.01.2008 SUNITA GUPTA SHARE BROKERS LIMITED VS. ACIT(DEL.ITAT) ITA NO .4188/DEL/2009 07.12.2011 MORARJEE TEXTILES LTD. VA. ACIT (MUM.ITAT) ITA NO.1979/MUM/2009 10.05.2013 GRAVISS HOSPITALITY LTD. VS. DCIT (MUM.ITAT) ITA NO.3542/MUM/2013 21.11.2014 ITA NO. 4963 /1 2 4 5 . ON THE OTHER HAND, LD. DR RELIED ON THE ORDERS OF THE AUTHORITIES BELOW AND ALSO DECISION OF THE ITAT DELHI BENCH BUT THE SAME WAS AN EX - PARTE ORDER, HENCE, NOT APPLICABLE IN THE PRESENT CASE. 6 . RIVAL CONTENTIONS HAVE BEEN HEARD AND RECORD PERUSED. FROM THE RECORD WE FOUND THAT ASSESSEE COMPANY IS ENGAGED IN INVESTMENT IN SH ARES OF COMPANIES. DURING THE YEAR UNDER CONSIDERATION THE ASSESSEE HAS EARNED SHORT TERM CAPITAL GAINS THROUGH SALE OF SHARES AND DECLARED INCOME OF RS. 64,60,340/ - AND ALSO PAID TAXES ON THE SAID INCOME. DURING THE YEAR THE ASSESSEE COMPANY RECEIVED SHARE APPLICATION MONEY FROM M/S SPEED TRADE SECURITIES PVT. LTD. (STSPL) THROUGH PROPER BANKING CHANNEL AMOUNTING TO RS. 2.20 CRORES BEING 50% OF SUBSCRIBING 22 LAKHS EQUITY SHARES @20 PER EQUITY SHARE WHICH COMPRISES OF FACE VALUE OF RS.10/ - AND PREMIUM OF RS. 10/ - PER SHARE. THE BALANCE 50% WAS TO BE PAID BY STSPL ON OR BEFORE 30 - 9 - 2008, FAILING WHICH THE ASSESSEE SHALL FORFEIT THE SHARE APPLICATION MONEY. THE ASSESSEE HAS ALSO PASSED A BOARD RESOLUTION FOR THE SAID INVESTMENT, TRANSACTIONS AND TERMS AND CONDIT IONS THEREOF I.E. FORFEITURE OF SHARE APPLICATION MONEY ON NON - PAYMENT OF BALANCE AMOUNT AS PER LAW. VIDE LETTER DATED 10 - 7 - 2008 THE ASSESSEE COMPANY REQUESTED STSPL TO PAY BALANCE OF 50% ON 30 - 9 - 2008, WHICH IS THE DUE DATE AND ON THE RECEIPT OF THE SAID B ALANCE AMOUNT, IT WAS TO INCREASE ITS AUTHORIZED CAPITAL AND ALLOT 22 LAKHS EQUITY SHARES TO STSPL. HOWEVER, VIDE LETTER DATED 21 - 7 - 2008, THE STSPL SOUGHT FOR EXTENSION AND REQUESTED THE ASSESSEE TO EXTEND THE DUE DATE UPTO 31 - 10 - 2008 FOR PAYMENT OF BALANC E 50% . ITA NO. 4963 /1 2 5 7 . THE SECOND EXTENSION WAS SOUGHT BY STSPL UPTIL 31 - 12 - 2008. HOWEVER, NOTHING MATERIALIZED. THEREAFTER AGAIN ON 20 - 12 - 2008 STSPL SOUGHT FOR THIRD AND FINAL EXTENSION AND REQUESTED THE ASSESSEE TO EXTEND DATE UPTO 20 - 3 - 2009 FOR BALANCE PAYMENT OF 50 %, FAILING WHICH ASSESSEE CAN FORFEIT 50% AMOUNT ALREADY PAID. VIDE LETTER DATED 25 - 12 - 2008, ASSESSEE AGREED AND GRANTED 3 RD AND LAST EXTENSION UPTO 20 - 3 - 2009. HOWEVER, NOTHING MATERIALIZED EVEN UPTO 20 - 3 - 2009. AFTER PASSING OF THE LAST DATE, VIDE LETTER D ATED 31 - 3 - 2009, ASSESSEE INFORMED THAT THREE EXTENSIONS FOR A PERIOD OF MORE THAN SIX MONTHS HAVE ALREADY BEEN GRANTED AND INFORMED THAT STSPL HAD DEFAULTED AND NOT PAID THE BALANCE 50% AMOUNT AND, HENCE, ASSESSEE IS EXERCISING ITS RIGHT OF FORFEITING 50% SHARE APPLICATION MONEY IN ACCORDANCE WITH THE PROVISIONS OF COMPANIES ACT, 1956 AND ALSO AS PER TERMS MUTUALLY AGREED IN THE SUBSEQUENT ASSESSMENT YEAR 2009 - 2010. THUS, THE FORFEITURE WAS IN THE ASSESSMENT YEAR 2009 - 2010 AND NOT IN THE ASSESSMENT YEAR 200 8 - 09 UNDER CONSIDERATION. NOW, THE CRUCIAL POINT TO BE DECIDED IS AS TO WHETHER THE ASSESSEE DURING THE COURSE OF ASSESSMENT PROCEEDINGS HAVE PROVED THE SOURCE OF RECEIPT OF SHARE APPLICATION MONEY THROUGH NORMAL BANKING CHANNEL, DULY ESTABLISHED IDENTITY AND CAPACITY OF STSPL BY SUBMITTING BANK STATEMENT, LEDGER, AUDITED ANNUAL ACCOUNTS PAN NUMBERS ETC. FROM THE RECORD WE ALSO FOUND THAT ASSESSEE HAS FULFILLED ALL THESE CONDITIONS IN THE YEAR OF RECEIPT OF SHARE APPLICATION MONEY. EVEN IN RESPONSE TO SUMM ONS U/S.131, STSPL HAD FILED ITS BANK STATEMENT/AUDITED ANNUAL ACCOUNTS FOR FINANCIAL YEARS 2007 - 08 & 2008 - 09, ITA NO. 4963 /1 2 6 LEDGER CONFIRMATION, ACKNOWLEDGEMENT OF RETURN OF INCOME, ITS PAN NUMBER ETC. AND ALSO INFORMED TO THE AO THAT ITS INCOME TAX ASSESSMENT FOR THE ASSESSMENT YEAR 2008 - 09 & 2009 - 2010 HAS ALSO BEEN COMPLETED UNDER SCRUTINY ASSESSMENT PROCEEDINGS U/S.143(3). EVEN THE ASSESSEE HAS FURNISHED VALUATION REPORT/CERTIFICATE FROM THE CHARTERED ACCOUNTANT ON 25 - 7 - 2007 TO THE EFFECT THAT ITS SHARE PRICE WAS RS. 20.83 BEFORE RECEIVING OF 50% OF SHARE APPLICATION MONEY ON 8 - 9 - 2007 FROM STSPL AND ON THE BASIS OF SUCH VALUATION OF EQUITY SHARES OF ASSESSEE, THE SHARES WERE ISSUED AT A PREMIUM OF RS.10/ - PER SHARE. LD. AR DREW OUR ATTENTION NOT ONLY TO THE SOURCE OF F UNDS BY STSPL BUT ALSO THE SOURCE OF SOURCE AND SO ON AND SO FORTH BY GIVING DETAILS/DOCUMENTS OF STSPL. WE ALSO FOUND THAT STSPL HAD PAID THE MONEY BY SELLING ITS OWN INVESTMENTS/SHARES IN THE STOCK EXCHANGE THROUGH ITS BROKER M/S SATCO SECURITIES AND FINA NCIAL LTD. AND RECEIVED THE MONEY FROM SATCO FOR SUCH SALE OF ITS INVESTMENT/SHARES. WE ALSO FOUND THAT THE SAID INVESTMENTS/SHARES WERE BOUGHT BY STSPL EARLIER FROM THE STOCK EXCHANGE AND SUCH SHARES/INVESTMENTS WERE LYING IN ITS DMAT ACCOUNT WITH CDSL ON ACCOUNT OF PURCHASE AND THE SAID INVESTMENTS /SHARES WERE TRANSFERRED FROM ITS DEMAT ACCOUNTS ON ACCOUNT OF SALE OF ITS OWN INVESTMENT/SHARES. THE ASSESSEE HAD ALSO FILED ITS BANK STATEMENT OF ICICI BANK FOR THE PERIOD OF 1 - 5 - 2007 TO 30 - 9 - 2007 REFLECTING T HE RECEIPT OF 4 CHEQUES ON 7 - 9 - 2007 & 10 - 9 - 2007 TOTAL AMOUNTING TO RS.2.22 CRORES FROM SATCO. THE STATEMENT OF BANK OF BARODA OF SATCO REFLECTING THE PAYMENT OF FOUR CHEQUES TO STSPL FOR SALE OF ITS OWN INVESTMENT/SHARES ITA NO. 4963 /1 2 7 OF STOCK EXCHANGE WAS ALSO FILED BE FORE THE LOWER AUTHORITIES. OUR ATTENTION WAS ALSO INVITED TO THE CONTRACT NOTE OF SATCO DATED 3 - 9 - 2007, 4 - 9 - 2007, 5 - 9 - 2007 & 7 - 9 - 2007 REFLECTING THE SALE OF SHARES/INVESTMENTS BY STSPL ON THE STOCK EXCHANGE WITH TRADE DATE AND ALSO THE ORDER NUMBER, ORDER TIME, TRADE NUMBER, TRADE TIME, NAME OF SHARES, QUANTITY, RATE, SERVICE TAX, STT CHARGES, TOTAL AMOUNT OF SETTLEMENT, SETTLEMENT PERIOD ETC. DEMAT ACCOUNT OF STSPL WITH SATCO - CDSL SHOWING DEBIT OF INVESTMENT/SHARES SOLD WAS ALSO PLACED ON THE RECORD. THE STSPL AUDITED ANNUAL ACCOUNTS, COMPUTATION OF INCOME, ASSESSMENT ORDER UNDER SECTION 143(3) FOR ASSESSMENT YEAR 2008 - 09 & 2009 - 2010 DULY REFLECTED AND THE AFORESAID AMOUNTS RECEIVED FROM SATCO AND PAID BY STSPL TOWARDS 50% SHARE APPLICATION MONEY WAS ALSO PLACED ON RECORD. 8 . IN VIEW OF THE ABOVE DOCUMENTARY EVIDENCE, WE DO NOT FIND ANY JUSTIFICATION IN THE ADDITION MADE BY THE AO IN RESPECT OF SHARE CAPITAL RECEIVED BY THE ASSES SEE FOR WHICH NOT ONLY IDENTITY BUT THE SOURCE AND GENUINENESS WAS DULY ESTABLISHED. 9 . IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWED . O RDER PRONOUNCED IN THE OPEN COURT ON THIS 23/09 / 201 5 . SD/ - SD/ - ( ) ( PAWAN SINGH ) ( . . ) ( R.C.SHARMA ) / JUDICIAL MEMBER / ACCOUNTANT MEMBER MUMBAI ; DATED 23/09 /201 5 . . /PKM , . / PS / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. ITA NO. 4963 /1 2 8 / BY ORDER, / ( ASSTT. REGISTRAR) , / ITAT, MUMBAI 3. ( ) / THE CIT(A), MUMBAI. 4. / CIT 5. , , / DR, ITAT, MUMBAI 6 . / GUARD FILE. //TRUE COPY//