Kalra Forgings & alloys (P) Ltd., New Delhi V. ITO, New Delhi

ITA 499/DEL/2012

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 97585 (ITAT-DELHI)
• Duration Of Justice: 3 year(s) 8 month(s) 20 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-10-2015
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: D
• Next Hearing Date: 19-10-2015
• Assessment Year: 2006-2007
• Appeal Filed On: 01-02-2012
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: S K JAIN
• Keywords: Additional evidence
• Section: 131; 68

Judgement Text

1 ITA NO. 49 9/DEL/2012 IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH:D NEW DELHI BEFORE SHRI N.K. SAINI, ACCOUNTANT MEMBER & SMT. BEENA PILLAI, JUDICIAL MEMBER I.T.A .NO. 499/DEL /2012 (ASSESSMENT YEAR-2006- 07) KALRA FORGINGS & ALLOYS (P) LTD., 25/28, WEST PATEL NAGAR, NEW DELHI. AACCK4551B VS ITO, WARD 5(1), NEW DELHI. APPELLANT BY SHRI P.C. YADAV, ADV. RESPONDENT BY SHRI S.K. JAIN, SR. DR ORDER PER BEENA PILLAI, JUDICIAL MEMBER : 1. THIS IS AN APPEAL FILED BY THE ASSESSEE ARISING OUT OF THE CIT(A)S ORDER DATED 25/11/2011 FOR A.Y. 2006-07 ON THE FOLL OWING GROUNDS: 1. THAT THE LD. CIT(A) HAS ERRED IN LAW AND ON FACTS IN UPHOLDING THE ADDITIONS OF RS. 89,50,000/- MADE BY THE ASSESSING OFFICER ON ACCOUNT OF AMOUNTS RECEIVED TO WARDS SHARE CAPITAL/SHARE APPLICATION MONEY. DATE OF HEARING 19.10.2015 DATE OF PRONOUNCEMENT 21.10.2015 2 ITA NO. 49 9/DEL/2012 2. THAT THE LD. CIT(A) HAS NOT APPRECIATED THAT IN CAS E OF SHARE APPLICATION MONEY, THE SUPREME COURT HAS HELD THAT NO ADDITION CAN BE MADE IN THE HANDS OF THE RECIPIE NT COMPANY WHERE THE SHAREHOLDERS ARE IDENTIFIED. 3. THAT THE LD. CIT(A) HAS ERRED IN LAW AND ON FACTS I N OBSERVING THAT THE APPELLANT HAS NOT RESPONDED TO T HE REMAND REPORT. 4. THAT THE IMPUGNED APPELLATE ORDER IS ARBITRARY, ILL EGAL, BAD IN LAW AND IN VIOLATION OF RUDIMENTARY PRINCIPLES O F CONTEMPORARY JURISPRUDENCE. 5. THAT THE APPELLANT CRAVES LEAVE TO ADD/ALTER ANY/AL L GROUNDS OF APPEAL BEFORE OR AT THE TIME OF HEARING OF THE APPEAL. 2. BRIEF FACTS OF THE CASE AS RECORDED BY THE LD.AO , ARE AS BELOW: THE ASSESSEE HAD FILED ITS RETURN OF INCOME DECLARI NG THE TOTAL INCOME OF RS. 85,609/- AND A BOOK PROFIT OF RS. 6,1 2,715/- U/S 115JB. THE RETURN WAS PROCESSED U/S 143(1) AND THE CASE WAS SELECTED FOR SCRUTINY. THE ASSESSEE IS ENGAGED IN THE BUSINESS OF MANUFACTURING FORGED ROLLS AND BLANKS TO BE USED BY STEEL ROLLING MILLS. DURING THE YEAR THE TURNOVER WAS DECLARED A T RS. 2,94,84,078/- (NET OF EXCISE) YIELDING A G.P. RATIO OF 7.04% AS COMPARED TO TURNOVER OF RS. 22,10,720/- YIELDING A G.P. RATIO OF 7% IN THE IMMEDIATELY PRECEDING YEAR. THE BOOKS OF AC COUNTS PRODUCED BY THE ASSESSEE, AT THE ASSESSMENT PROCEEDINGS WERE TEST CHECKED. 3. DURING THE YEAR THE LD.AO OBSERVED THAT, THE ASS ESSEE HAD INCREASED ITS PAID UP SHARE CAPITAL BY RS.44,75,000 /-, ISSUED AT A PREMIUM OF LIKE AMOUNT. THE TOTAL AMOUNT OF SHARE APPLICATION MONEY RECEIVED BY THE ASSESSEE IN THE PREVIOUS YEAR , AMOUNTED TO 3 ITA NO. 49 9/DEL/2012 RS. 89,50,000/-. DURING THE ASSESSMENT PROCEEDINGS , THE ASSESSEE WAS ASKED TO DISCHARGE THE ONUS U/S 68 OF THE INCOM E TAX ACT, 1961 FOR SHARE APPLICATION MONEY RECEIVED, IN TERMS OF G ENUINENESS OF THE TRANSACTIONS, IDENTITY OF THE PARTIES AND THEIR CRE DITWORTHINESS. 4. THE LD.AO OBSERVED THAT, DURING THE YEAR, THE S HARE APPLICATION MONEY ALONG WITH THE SHARE PREMIUM RECEIPT, WERE IS SUED TO 34 ALLOTTEES, AS PER FORM 2, FILED BY THE ASSESSEE, WI TH SHARE OF RS. 10 ISSUED AT A PREMIUM OF RS. 10/-. HE OBSERVED THAT M ANY OF THE ALLOTTEES/SHAREHOLDERS WERE REPEATED. THE LD.AO REC ORDS THAT DURING THE SCRUTINY PROCEEDINGS, THE ASSESSEE FILED PHOTOC OPIES OF 26 CONFIRMATIONS/SHARE APPLICATION FORMS, WHICH WERE N OT OF CURRENT PERIOD, AND THEY DID NOT MENTION THE DISTINCTIVE NU MBERS OF THE SHARE ALLOTTED. THE LD.AO RECORDS THAT ON 29/12/20 08, THE ASSESSEE HAD REQUESTED TO GRANT SOME MORE TIME TO S UBMIT THE COPY OF ITR, BALANCE SHEET AND BANK STATEMENT IN RESPECT OF SHARE APPLICANTS. DUE TO THE LIMITATION OF COMPLETING TH E ASSESSMENT, THE LD. AO, FINALIZED THE ASSESSMENT ORDER, AND MADE AN ADDITION U/S.68, AMOUNTING TO RS. 89,50,000/- ON THE GROUND THAT, THE SOURCE OF THE MONEY INTRODUCED AS SHARE APPLICATION MONEY HAS NOT BEEN SATISFACTORILY EXPLAINED 5. AGGRIEVED BY THE ORDER OF THE LD. AO, THE ASSESS EE WENT INTO APPEAL BEFORE THE LD. CIT(A) VIII. BEFORE THE LD. CIT(A) THE ASSESSEE FILED UNDER RULE 46A OF THE I.T. ACT, COPY OF THE A FFIDAVIT OF THE DIRECTOR OF THE ASSESSEE COMPANY, COPIES OF THE SHA RE APPLICATION 4 ITA NO. 49 9/DEL/2012 FORMS, CONFIRMATIONS OF THE SHARE APPLICANTS, COPY OF THE ITRS, COPY OF THE BALANCE SHEET, COPIES OF MEMORANDUM AND ARTI CLES OF ASSOCIATION AND AFFIDAVITS OF THE PRINCIPLE OFFICER S/DIRECTORS OF THE SHARE APPLICANT COMPANIES. IT WAS CONTENDED BEFORE THE LD. CIT(A) THAT THE LD. ASSESSING OFFICER DID NOT ALLOW PROPER OPPORTUNITY TO THE ASSESSEE WHEN THERE WAS A SPECIFIC REQUEST MADE BY THE LD. AR FOR THE ASSESSEE WHO APPEARED BEFORE THE LD.AO ON 29/12 /2008 WITH A REQUEST FOR FURTHER ADJOURNMENT TO FILE THE NECESSA RY DETAILS. IT WAS ARGUED BY THE ASSESSEE THAT SUFFICIENT OPPORTUNITY WAS NOT GRANTED BY THE LD. AO AT THE TIME OF ASSESSMENT PROCEEDINGS . 6. THE DOCUMENTS FILED BY THE ASSESSEE UNDER RULE 4 6A WAS SENT TO THE LD. ASSESSING OFFICER FOR A REPORT. IN LIEU OF THE SAME THE LD. AO OBJECTED TO THE ADMISSION OF ADDITIONAL EVIDENCE . IN FURTHERANCE THE LD. AR ALSO FILED FRESH AFFIDAVITS IN RESPECT O F 16 COMPANIES, CONFIRMING THE FACT THAT, THEY HAD ACTUALLY MADE PA YMENTS OF SHARE APPLICATION MONEY TO THE ASSESSEE COMPANY. THE LD. CIT(A) DURING THE COURSE OF THE HEARING CALLED FOR THE DETAILS OF SHARES, IF ANY, BROUGHT BACK EITHER BY THE ASSESSEE COMPANY OR BY I TS DIRECTORS FROM THE SHAREHOLDERS, THE ASSESSEE WAS ALSO ASKED TO PRODUCE THE SHAREHOLDERS REGISTERED FOR VERIFICATION. ACCORDIN GLY, THE ASSESSEE FILED THE DETAILS BEFORE THE LD. CIT(A). THE LD.AO WAS DIRECTED TO MAKE FURTHER INVESTIGATION IN RESPECT OF THE DETAIL S FILED. ACCORDINGLY, THE LD. AO ISSUED SUMMONS U/S 131 OF THE ACT TO VER IFY. AS THERE WAS NO COMPLIANCE BY THE SUMMONED PERSONS, THE LD.A O IN HIS REPORT PRESUMED THAT THE ASSESSEE HAS NO EXPLANATIO N/MATERIAL IN 5 ITA NO. 49 9/DEL/2012 SUPPORT OF HIS CASE( PARAGRAPH 3.10 OF THE CIT(A) O RDER). THE LD. CIT(A) DISMISSED THE APPEAL OF THE ASSESSEE ON THE GROUND THAT THE ASSESSEE WAS NOT ABLE TO SATISFACTORILY EXPLAIN THE SOURCE OF THE SHARE APPLICATION MONEY IN QUESTION. 7. AGGRIEVED BY THE ORDER OF THE LD. CIT(A) THE ASS ESSEE IS IN APPEAL BEFORE US. 8. ON GOING THROUGH THE RECORDS PLACED BEFORE US AN D THE ORDERS PASSED BY THE AUTHORITIES BELOW, WE OBSERVE THAT TH E LD. AO HAS NOT INVESTIGATED UPON THE DETAILS SUBMITTED BY THE ASSE SSEE BEFORE THE LD. CIT(A). IT HAS BEEN RECORDED BY THE LD. AO IN ITS REMAND REPORT (PARA 3.10 OF CIT(A) ORDER), THAT ON ISSUANCE OF SU MMONS U/S 131, SOME OF THE SUMMONS HAVE BEEN RECEIVED BACK UN-SERV ED, AND A FEW HAVE NEITHER COMPLIED WITH NOR HAS BEEN RECEIVED BA CK. THE LD. AO HAS NOT TAKEN ANY FURTHER STEPS, TO ESTABLISH THAT THE DETAILS FILED BY THE ASSESSEE ARE INCORRECT. WE ALSO OBSERVE THAT T HERE HAS BEEN A LACK OF INVESTIGATION ON BEHALF OF THE LD. AO, EVEN AFTER THE DETAILS BEING FILED BY THE ASSESSEE AT THE TIME OF FIRST AP PELLATE PROCEEDINGS, WHEREIN THE REMAND REPORT WAS CALLED FOR. 9. RELIANCE HAS BEEN PLACED ON THE BOMBAY HIGH COUR T DECISION IN THE CASE OF CIT VS. CREATIVE WORLD TELEFILMS LTD . REPORTED IN (2011) 333 ITR 100 (BOM.). THE HONBLE HIGH COURT IN THIS CASE HAS HELD THAT; 6 ITA NO. 49 9/DEL/2012 ....... IN THE CASE IN HAND IT IS NOT DISPUTED TH AT THE ASSESSEE HAD GIVEN DETAILS OF NAME AND ADDRESS OF THE SHAREH OLDERS, THEIR PAN/GIR NUMBER AND HAD ALSO GIVEN THE CHEQUE NUMBER , NAME OF THE BANK. IT WAS EXPECTED ON THE PART OF THE AS SESSING OFFICER TO MAKE PROPER INVESTIGATION AND REACH THE SHAREHOL DERS. THE AO DID NOTHING EXCEPT ISSUING SUMMONS WHICH WERE UL TIMATELY RETURNED BACK WITH AN ENDORSEMENT NOT TRACEABLE. IN OUR CONSIDERED VIEW THE ASSESSING OFFICER OUGHT TO HAVE FOUND OUT THEIR DETAILS THROUGH PAN CARDS, BANK ACCOUNT DETAI LS OR FROM THEIR BANKERS SO AS TO REACH THE SHAREHOLDERS SINCE ALL THE RELEVANT MATERIAL DETAILS AND PARTICULARS WERE GIVE N BY THE ASSESSEE TO THE AO. 10. FURTHER THE DECISION OF HONBLE DELHI HIGH COUR T IN THE CASE OF CIT VS. KAMDHENU STEEL AND ALLOYS LTD. AND OTHERS, REPORTED IN 248 CTR 33 THE HAS OBSERVED AS UNDER: SOMETHING MORE WHICH WAS NECESSARY AND REQUIRED TO BE DONE BY THE ASSESSING OFFICER WAS NOT DONE. THE ASSESSI NG OFFICER FAILED TO CARRY HIS SUSPICION TO LOGICAL CONCLUSION BY FURTHER INVESTIGATION. AFTER THE REGISTERED LETTERS SENT T O THE INVESTING COMPANY HAD BEEN RECEIVED BACK UNDELIVERED, THE ASS ESSING OFFICER PRESUMED THAT THESE COMPANIES DID NOT EXIST AT THE GIVEN ADDRESS. NO DOUBT, IF THE COMPANIES ARE NOT EXISTI NG I.E. THEY HAVE ONLY PAPER EXISTENCE, ONE CAN DRAW THE CONCLUS ION THAT THE ASSESSEE HAD NOT BEEN ABLE TO DISCLOSE THE SOURCE O F AMOUNT RECEIVED AND PRESUMPTION U/S 68 FOR THE PURPOSE OF ADDITION OF 7 ITA NO. 49 9/DEL/2012 AMOUNT AT THE HANDS OF THE ASSESSEE. BUT IT HAS NO T BEEN CONCLUSIVELY ESTABLISHED THAT THE COMPANY IS NON EX ISTENCE. 11. HONBLE SUPREME COURT WHILE DISMISSING THE SLP, REPORTED IN, CIT VS. LOVELY EXPORTS (P) LTD. (2008) 216 CTR (SC) 195 RECORDED SOME REASONS AS WELL ALBEIT IN BRIEF, WHICH ARE AS UNDER : '2. CAN THE AMOUNT OF SHARE MONEY BE REGARDED AS UN DISCLOSED INCOME UNDER S. 68 OF IT ACT, 1961 ? WE FIND NO MER IT IN THIS SPECIAL LEAVE PETITION FOR THE SIMPLE REASON THAT I F THE SHARE APPLICATION MONEY IS RECEIVED BY THE ASSESSEE COMPA NY FROM ALLEGED BOGUS SHAREHOLDERS, WHOSE NAMES ARE GIVEN T O THE AO, THEN THE DEPARTMENT IS FREE TO PROCEED TO REOPEN TH EIR INDIVIDUAL ASSESSMENTS IN ACCORDANCE WITH LAW. HENCE, WE FIND NO INFIRMITY WITH THE IMPUGNED JUDGMENT''''.' 12. IT IS CLEAR FROM THE ABOVE THAT THE INITIAL BUR DEN IS UPON THE ASSESSEE TO EXPLAIN THE NATURE AND SOURCE OF THE SH ARE APPLICATION MONEY RECEIVED BY THE ASSESSEE. IN ORDER TO DISCHAR GE THIS BURDEN, THE ASSESSEE IS REQUIRED TO PROVE: (A) IDENTITY OF SHAREHOLDER; (B) GENUINENESS OF TRANSACTION; AND (C) CREDITWORTHINESS OF SHAREHOLDERS. 13. IN CASES WHERE THE INVESTOR/SHAREHOLDER IS AN I NDIVIDUAL, SOME DOCUMENTS WILL HAVE TO BE FILED OR THE SAID SHAREHO LDER WILL HAVE TO BE PRODUCED BEFORE THE AO TO PROVE HIS IDENTITY. IF THE 8 ITA NO. 49 9/DEL/2012 CREDITOR/SUBSCRIBER IS A COMPANY, THEN THE DETAILS IN THE FORM OF REGISTERED ADDRESS OR PAN IDENTITY, ETC. CAN BE FUR NISHED. 14. AT THIS STAGE, WE WOULD LIKE TO REFER TO THE JU DGMENT OF THE BOMBAY HIGH COURT IN THE CASE OF CIT VS. CREATIVE W ORLD TELEFILMS LTD. (IN IT APPEAL NO. 2182 OF 2009, DECIDED ON 12T H OCT., 2009). THE RELEVANT PORTION OF THIS ORDER IS REPRODUCED BE LOW : 'IN THE CASE IN HAND, IT IS NOT DISPUTED THAT THE A SSESSEE HAD GIVEN THE DETAILS OF NAME AND ADDRESS OF THE SHAREH OLDER, THEIR PA/GIR NUMBER AND HAD ALSO GIVEN THE CHEQUE NUMBER, NAME OF THE BANK. IT WAS EXPECTED ON THE PART OF THE AO TO MAKE PROPER INVESTIGATION AND REACH THE SHAREHOLDERS. THE AO DI D NOTHING EXCEPT ISSUING SUMMONS WHICH WERE ULTIMATELY RETURN ED BACK WITH AN ENDORSEMENT 'NOT TRACEABLE'. IN OUR CONSIDE RED VIEW, THE AO OUGHT TO HAVE FOUND OUT THEIR DETAILS THROUGH PA N CARDS, BANK ACCOUNT DETAILS OR FROM THEIR BANKERS SO AS TO REACH THE SHAREHOLDERS SINCE ALL THE RELEVANT MATERIAL DETAIL S AND PARTICULARS WERE GIVEN BY THE ASSESSEE TO THE AO. 15. WE ARE, THEREFORE, OF THE CONSIDERED OPINION TH AT A PROPER INVESTIGATION HAS NOT BEEN CONDUCTED BY THE LD.AO I N RESPECT OF THE DETAILS FILED BY THE ASSESSEE. 16. WE, THEREFORE, SET ASIDE THE ISSUE TO THE FILE OF THE ASSESSING OFFICER TO VERIFY ALL THE DETAILS AND TO CONSIDER T HE SAME AFTER ISSUING PROPER NOTICE TO THE ASSESSEE. NEEDLESS TO SAY THAT OPPORTUNITY MAY BE GRANTED TO THE ASSESSEE TO REPRESENT ITS CASE. 9 ITA NO. 49 9/DEL/2012 17. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS THEREFORE, ALLOWED FOR STATISTICAL PURPOSES. THE ORDER IS PRONOUNCED IN THE OPEN COURT ON 21/10/ 2015 SD/- SD/- (N.K. SAINI) (BEENA PILLAI) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 21/10/2015 *KAVITA, P.S. COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(APPEALS) 5. DR: ITAT ASSISTANT REGISTRAR ITAT NEW DELHI 10 ITA NO. 4 99/DEL/2012 DATE 1. DRAFT DICTATED ON 19.10.2015 2. DRAFT PLACED BEFORE AUTHOR 20.10.15 3. DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER 20.10.15 4. DRAFT DISCUSSED/APPROVED BY SECOND MEMBER. 20.10.15 5. APPROVED DRAFT COMES TO THE SR.PS/PS 21.10.15 6. KEPT FOR PRONOUNCEMENT ON 21.10.15 7. FILE SENT TO THE BENCH CLERK 26.10.15 8. DATE ON WHICH FILE GOES TO THE AR 9. DATE ON WHICH FILE GOES TO THE HEAD CLERK. 10. DATE OF DISPATCH OF ORDER.