DCIT CEN CIR 3, MUMBAI V. JALARAM ENTERPRISES CO P.LTD, MUMBAI

ITA 5060/MUM/2014

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 3717 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 8 month(s) 24 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-04-2016
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: J
• Assessment Year: 2010-2011
• Appeal Filed On: 04-08-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: AJAY
• Keywords: Unexplained cash credit; Principle of natural justice; Additional evidence; Onus to prove
• Section: 143(3); 131; 68; 11

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL J BE NCH, MUMBAI BEFORE SHRI C.N. PRASAD, JUDICIAL MEMBER AND SHRI ASHWANI TANEJA, ACCOUNTANT MEMBER / I .TA NO. 4289/MUM/2014 ( / ASSESSMENT YEAR: 2010-11 M/S. JALARAM ENTERPRISES CO. PVT. LTD., 7,PATHAI NIWAS, N.S. ROAD, MULUND (W), MUMBAI-400 080 / VS. THE DCIT, CENTRAL CIRCLE-2, OLD CGO BLDG., MUMBAI- 400 020 / I .TA NO. 5060/MUM/2014 ( / ASSESSMENT YEAR: 2010-11 THE DCIT, CENTRAL CIRCLE-2, OLD CGO BLDG., MUMBAI- 400 020 / VS. M/S. JALARAM ENTERPRISES CO. PVT. LTD., 7,PATHAI NIWAS, N.S. ROAD, MULUND (W), MUMBAI-400 080 ./ ./ PAN/GIR NO. AABCJ 6334N ( / APPELLANT ) .. ( / RESPONDENT ) / ASSESSEE BY: MS. RITIKA AGARWAL / REVENUE BY: SHRI AJAY / DATE OF HEARING :25.02.2016 ! / DATE OF PRONOUNCEMENT : 29.04.2016 / O R D E R PER C.N. PRASAD, JM: THESE ARE APPEALS BY THE ASSESSEE AND THE REVENUE AGAINST THE ORDERS OF THE LD. CIT(A)-36, MUMBAI DATED 2.5.2014 PERTAINING TO ITA NO. 4289 & 5060/M/2014 2 ASSESSMENT YEAR 2010-11. AS BOTH THESE APPEALS WERE HEARD TOGETHER THEY ARE DISPOSED OF BY THIS COMMON ORDER FOR THE S AKE OF CONVENIENCE. ITA NO. 4289/M/2014 ASSESSEES APPEAL 2. THE ASSESSEE IN ITS APPEAL RAISED FOLLOWING GRO UNDS: THE APPELLANT COMPANY IS AGGRIEVED BY THE ORDER PAS SED BY ID. CIT(A) - 36, MUMBAI AND IS IN APPEAL: 1. BECAUSE, ID. CIT(A) HAS ERRED IN LAW AND ON FACT S IN UPHOLDING THE VALIDITY OF THE IMPUGNED ASSESSMENT O RDER EVEN THOUGH THE SAME IS ILLEGAL, INVALID AND WHOLLY WITHOUT JURISDICTION. 2. BECAUSE, ID. CIT(A) HAS ERRED IN LAW AND ON FACT S IN UPHOLDING THE DISALLOWANCE OF INTEREST EXPENSE CLAI MED UNDER THE HEAD INCOME FROM HOUSE PROPERTY TO THE TU NE OF RS.4,10,218/- PAID ON BORROWED FUNDS. 3. BECAUSE, ID. CIT(A) HAS ERRED IN LAW AND ON FACT S IN UPHOLDING THE DISALLOWANCE OF INTEREST EXPENSE CLAI MED UNDER THE HEAD INCOME FROM HOUSE PROPERTY TO THE TU NE OF RS.2,29,690/- PAID TO APNA SAHAKARI BANK. 4. BECAUSE, ID. CIT(A) HAS ERRED IN LAW AND ON FACT S IN UPHOLDING THE DISALLOWANCE OF INTEREST EXPENSE CLAI MED UNDER THE HEAD INCOME FROM HOUSE PROPERTY TO THE TU NE OF RS.7,38,990/- PAID TO ICICI BANK 5. BECAUSE, ID. CIT(A) HAS ERRED IN LAW AND ON FACT S IN UPHOLDING THE DISALLOWANCE OF MUNICIPAL TAXES TO TH E TUNE OF RS.35,880/- UNDER THE HEAD INCOME FROM HOUSE PROPERTY. 6. BECAUSE, ID. CIT(A) HAS ERRED IN LAW AND ON FACT S IN IGNORING THE FACT THAT DURING THE COURSE OF ASSESSM ENT PROCEEDINGS THE AO NEVER RAISED ANY QUERY IN RESPEC T OF ITA NO. 4289 & 5060/M/2014 3 ADDITIONS AT SL.NO. 2 TO 5 AS MENTIONED ABOVE AND T HUS VIOLATED THE PRINCIPAL OF NATURAL JUSTICE. 7. BECAUSE, ID. CIT(A) HAS ERRED IN LAW AND ON FACT S IN UPHOLDING THE ADDITIONS MENTIONED AT SL.NO. 2 TO 5 ABOVE ON THE GROUND THAT THE APPELLANT HAD FILED ADDITIONAL EVIDENCES ALTHOUGH ALL PRIMARY MATERIAL WAS ALREADY ON RECORD OF THE AO. 3. THE LD. COUNSEL FOR THE ASSESSEE AT THE OUTSET S UBMITS THAT GROUND NO. 1 & 3 ARE NOT PRESSED AND THEREFORE THEY ARE DISMISSED AS NOT PRESSED. 4. COMING TO GROUND NO. 2, 4 & 5, THE LD. COUNSEL F OR THE ASSESSEE SUBMITS THAT LD. CIT(A) DID NOT ADMIT ADDITIONAL EV IDENCES FILED BY THE ASSESSEE AND REJECTED THE ASSESSEES CONTENTI ONS WITHOUT CONSIDERING THE ADDITIONAL EVIDENCES. THE LD. COU NSEL SUBMITTED THAT THE MATTER MAY BE SENT BACK TO THE ASSESSING O FFICER FOR CONSIDERING THE EVIDENCES AND TO DECIDE AFRESH IN T HE INTEREST OF JUSTICE. 5. THE LD. DEPARTMENTAL REPRESENTATIVE SUBMITS THAT THE FINDING OF THE LD. CIT(A) IS THAT THE ASSESSEE HAS NOT FIL ED A PETITION UNDER RULE 46A AND SOUGHT PERMISSION OF THE LD. CIT(A) TO FILE THE ADDITIONAL EVIDENCES. THUS THE ADDITIONAL EVIDENCE S WERE REJECTED BY THE LD. CIT(A). 6. ON HEARING BOTH THE PARTIES, WE ARE OF THE VIEW THAT THE LD. CIT(A) SHOULD BE ADMITTED THE ADDITIONAL EVIDENCES FILED BY THE ASSESSEE. THE ADDITIONAL EVIDENCES WERE REJECTED O BSERVING THAT THEY WERE NOT FILED BEFORE THE ASSESSING OFFICER AND NO PETITION UNDER RULE 46A WAS FILED. IN OUR VIEW SINCE THE POWERS OF THE CIT(A) ARE CO- ITA NO. 4289 & 5060/M/2014 4 TERMINUS OF THE ASSESSING OFFICER, IT IS NOT JUST AND PROPER TO REJECT THE ADDITIONAL EVIDENCES ON TECHNICAL GROUNDS. T HUS, IN OUR VIEW THESE ISSUES HAVE TO BE EXAMINED AFRESH BY THE ASSE SSING OFFICER BY GIVING OPPORTUNITY TO THE ASSESSEE. THEREFORE, IN THE INTEREST OF JUSTICE, WE RESTORE THESE ISSUES TO THE FILE OF THE ASSESSING OFFICER WHO SHALL DECIDE THE SAME AFRESH IN ACCORDANCE WITH LAW AFTER PROVIDING ADEQUATE OPPORTUNITY TO THE ASSESSEE. 7. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS PARTLY ALLOWED FOR STATISTICAL PURPOSE. ITA NO. 5060/M/14 REVENUES APPEAL 8. THE ONLY ISSUE RAISED BY THE REVENUE IS THAT WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) WAS RIGHT IN DELETING THE ADDITION OF RS. 2,66,05,000/- ON ACCOU NT OF UNSECURED LOANS U/S. 68 OF THE ACT. 9. BRIEF FACTS OF THE CASE ARE THAT ASSESSEE IS A P RIVATE LIMITED COMPANY ENGAGED IN THE BUSINESS OF TRADING IN REAL ESTATE & GRAINS. THE ASSESSEE FILED ITS RETURN OF INCOME ON 14.10.20 10 DECLARING NIL INCOME. THE ASSESSMENT WAS COMPLETED U/S. 143(3) O N 25.3.2013 DETERMINING TOTAL INCOME OF THE ASSESSEE AT RS. 3,1 0,92,620/-. WHILE COMPLETING THE ASSESSMENT, THE ASSESSING OFFICER MA DE ADDITION OF RS. 3,00,76,825/- AS UNEXPLAINED CASH CREDITS U/S. 68 OF THE ACT. THE ASSESSEE DURING THE PROCEEDINGS BEFORE THE LD. CIT( A) CONTENDED THAT THE TOTAL UNSECURED LOANS TAKEN BY IT ARE ONLY RS. 2,66,05,000/- AND NOT RS. 3,00,76,825/- AS ALLEGED BY THE ASSESSING O FFICER. IT WAS CONTENDED THAT OUT OF RS. 2,66,05,000/-, RS. 2,05,0 0,00/- WAS ITA NO. 4289 & 5060/M/2014 5 RECEIVED TOWARDS SHARE CAPITAL. IN THE COURSE OF A SSESSMENT PROCEEDINGS, ASSESSEE PROVIDED CERTAIN DETAILS IN R ESPECT OF UNSECURED LOANS VIZ., COPY OF RETURN, PAN CARD, COP Y OF BANK STATEMENT ETC. THE ASSESSING OFFICER EXAMINED ALL THESE DETAILS AND OBSERVED THAT ALL THESE PARTIES FROM WHOM THE ASSES SEE HAD TAKEN UNSECURED LOANS WAS SMALL AND MEAGER PARTIES WITH L OW INCOMES AND SEVERAL PARTIES HAVE WRITTEN LOSSES. THEIR BANK STA TEMENT SHOW THAT THEY DO NOT HAVE ANY REGULAR SOURCE OF INCOME. HUG E FUNDS ARE CREDITED TO BANK ACCOUNTS BY WAY OF CLEARING OF CA SH DEPOSITS AND THESE FUNDS ARE SUBSEQUENTLY ADVANCED AS LOANS TO S EVERAL PARTIES INCLUDING ASSESSEE. HE ALSO OBSERVED THAT FUNDS RE MAINED IN THE BANK ACCOUNTS FOR A VERY SHORT PERIOD OF A DAY OR T WO. THE ASSESSING OFFICER ISSUED SUMMONS TO ALL THE PARTIES AND REQUI RED PERSONAL ATTENDANCE OF THE CREDITORS. THE OBSERVATION OF TH E ASSESSING OFFICER WAS THAT IN RESPONSE TO SUMMONS, THE CREDITORS DID NOT APPEAR BUT INFORMATION LIKE BANK STATEMENT, PAN CARD, RETURN O F INCOME WERE SENT THROUGH POST. THE ASSESSING OFFICER CONCLUDED THE ASSESSMENT BY TREATING THESE UNSECURED LOAN CREDITORS AS BOGUS TRANSACTIONS AND MADE ADDITION OF RS. 2,66,05,000/- U/S. 68 OF THE A CT. 10. ON APPEAL, THE LD. CIT(A) FOLLOWING THE DECISIO N OF THE HONBLE BOMBAY HIGH COURT IN THE CASE OF CIT VS CREATIVE WO RLD TELEFILMS LTD., (15 TAXMANN.COM 183) DELETED THE ADDITION MAD E U/S. 68 OF THE ACT AGAINST WHICH THE REVENUE IS IN APPEAL BEFORE U S. 11. THE LD. DEPARTMENTAL REPRESENTATIVE SUBMITS THA T IN THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSING OFF ICER ISSUED SUMMONS TO ALL THE CREDITORS. THE CREDITORS DID N OT APPEAR BUT ITA NO. 4289 & 5060/M/2014 6 DETAILS WERE SUBMITTED THROUGH POST. THE LD. DEPAR TMENTAL REPRESENTATIVE SUBMITS THAT SINCE THE CREDITORS WER E NOT RESPONDED TO SUMMONS ISSUED U/S. 131 OF THE ACT BY NOT APPEAR ING, THE IDENTITY IS NOT PROVED. SINCE THE CREDITORS DEPOSITED THE A MOUNTS IN THEIR BANK ACCOUNTS JUST BEFORE ISSUING THE CHEQUE TO THE ASSESSEE, THE CREDIT WORTHINESS IS ALSO NOT PROVED. HE VEHEMENTL Y SUPPORTS THE ORDER OF THE ASSESSING OFFICER IN TREATING THE CRED ITORS AS NOT GENUINE THEREBY TREATING THE SAID CREDITORS AS UNEXPLAINED CASH CREDIT U/S. 68 OF THE ACT. 12. THE LD. COUNSEL FOR THE ASSESSEE REFERRING TO PAGE-6 OF THE LD. CIT(A) SUBMITS THAT THERE ARE 12 PARTIES IN ALL AND AMOUNT INVOLVED IS RS. 2,66,05,000/- THE LD. COUNSEL SUBMITS THAT PA RTIES AT S. NO. 10 & 11 ARE SISTER CONCERNS OF THE ASSESSEE COMPANY AND THEY WERE ASSESSED IN THE SAME CIRCLE AND ASSESSING OFFICER W ITH WHOM THE ASSESSEE COMPANY IS ALSO ASSESSED AND HAD FREQUENT TRANSACTIONS. THE LD. COUNSEL REFERRING TO PAGE 7 OF THE LD. CIT( A)S ORDER SUBMITS THAT SL. NOS. 1 TO 9 ARE INFACT NOT THE LENDERS. T HEY ARE ALL CORPORATE WHO HAVE DEPOSITED SHARE APPLICATION MONEY AGAINST WHICH SHARES HAVE BEEN ALLOTTED ON 1.4.2010. IT IS SUBMITTED TH AT SL. NO. 12 IS ALSO A LENDOR WHICH IS A CORPORATE BODY AND IN THIS CASE ASSESSEE HAS PARTLY REPAID. THE LD. COUNSEL SUBMITS THAT THE NON APPEA RANCE OF THE PARTIES CANNOT BE A GROUND FOR MAKING ADDITION U/S. 68 IN THE HANDS OF THE ASSESSEE. PLACING RELIANCE ON THE DECISION OF THE JURISDICTIONAL HIGH COURT IN THE CASE OF CIT VS U.M. SHAH (90 ITR 396), THE LD. COUNSEL SUBMITS THAT IN THIS CASE THE HONBLE HIGH COURT HELD THAT CREDITORS HAVING RECEIVED THE SUMMONS DID NOT PRES ENT THEMSELVES BEFORE THE ASSESSING OFFICER BUT HAD SENT CONFIRMAT ORY LETTERS. THUS ITA NO. 4289 & 5060/M/2014 7 IT WAS HELD THAT THE ASSESSEE COULD NOT BE BLAMED. IT WAS FURTHER SUBMITTED THAT WHERE LENDERS ARE ASSESSED TO TAX, T HE ASSESSEE CAN BE SAID TO HAVE DISCHARGED ITS ONUS TO PROVE THE GENUI NENESS OF THE TRANSACTION BY FILING CONFIRMATION LETTERS AND PAN DETAILS. THE LD. COUNSEL ALSO PLACES RELIANCE ON THE DECISION OF DEL HI BENCH OF THE TRIBUNAL IN THE CASE OF ITO VS VARTMAN SECURITIE S & SERVICES PVT. LTD (2016) (67(2) ITCH 161) (DEL). A COPY OF WH ICH IS PLACED ON RECORD. PLACING RELIANCE ON THE SAID DECISION, THE LD. COUNSEL SUBMITS THAT THE DELHI TRIBUNAL ON SIMILAR CIRCUMSTANCES DE LETED THE SHARE APPLICATION MONEY RECEIVED BY THE ASSESSEE FOLLOWIN G THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE OF LOVELY EXP ORT (216 CTR 195) WHEREIN THE APEX COURT HELD THAT WHEN THE SHAR E APPLICATION IS RECEIVED BY THE ASSESSEE COMPANY FROM ALLEGED SHARE HOLDERS WHO NAMES ARE GIVEN TO THE ASSESSING OFFICER, THEN THE DEPARTMENT IS FREE TO PROCEED TO REOPEN THEIR INDIVIDUAL ASSESSMENTS O F RESPECTIVE SHARE HOLDERS IN ACCORDANCE WITH LAW. THE AMOUNT OF SHAR E APPLICATION MONEY CANNOT BE REGARDED OR CONSIDERED AS UNDISCLOS ED INCOME OF THE ASSESSEE U/S. 68 OF THE ACT. 13. WE HAVE HEARD THE RIVAL CONTENTIONS, PERUSED TH E MATERIALS ON RECORD AND THE CASE LAWS RELIED ON BY THE ASSESSEE. THE ASSESSING OFFICER MADE ADDITION U/S. 68 OF THE ACT IN RESPECT OF 12 PARTIES HOLDING THAT THE CREDITORS HAVE NOT APPEARED IN RES PONSE TO THE SUMMONS ISSUED U/S. 131 OF THE ACT AND HE ALSO HELD THAT THE GENUINENESS OF THE TRANSACTION AND CREDIT WORTHINES S OF THE CREDITORS IS NOT ESTABLISHED FOR THE REASON THAT ACCORDING TO THE ASSESSING OFFICER THE PARTIES WHO GAVE THE LOANS ARE DEPOSITE D THEIR AMOUNTS IN THE BANK ACCOUNTS JUST BEFORE ISSUE OF LOANS TO THE CREDITORS AND THEY ITA NO. 4289 & 5060/M/2014 8 HAVE NOT APPEARED BEFORE HIM. THE LD. CIT(A) AFTER CONSIDERING THE AVERMENTS OF THE ASSESSING OFFICER AND THE DETAILS FURNISHED BEFORE HIM BY THE ASSESSEE DELETED THE ADDITION ACCEPTING THE CONTENTIONS OF THE ASSESSEE THAT SHARE APPLICATION MONEY CANNOT BE ASSESSED IN THE HANDS OF THE ASSESSEE IN VIEW OF THE FACT THAT ASSE SSEE HAS ALLOTTED SHARES TO 9 CREDITORS OUT OF 12 AND THE REMAINING 3 CREDITORS, TWO ARE SISTER CONCERNS AND THE ASSESSEE HAS REPAID PART OF THE LOANS TAKEN FROM THEM AND THEY ARE ASSESSED IN THE SAME RANGE W HERE THE ASSESSEE IS ALSO ASSESSED AND IN RESPECT OF THE OT HER CREDITOR ALL THE DETAILS WERE FURNISHED AND PART OF THE LOAN WAS ALS O REPAID BY THE ASSESSEE. IT IS THE FINDING OF THE LD. CIT(A) THA T THE ASSESSEE HAS PROVED IDENTITY, GENUINENESS OF THE TRANSACTION AN D THE CREDIT WORTHINESS OF THE LENDERS BY FURNISHING REQUISITE D ETAILS LIKE CONFIRMATIONS, PAN DETAILS, RETURN OF INCOME, BANK STATEMENTS ETC. IT IS THE FINDING OF THE LD. CIT(A) THAT ON PERUSAL OF THE BANK STATEMENTS, ALL THE LENDERS HAVE ADVANCED MONIES TO THE ASSESSE E OUT OF FUNDS OBTAINING THE BANK STATEMENTS OUT OF DEPOSITS THROU GH BANK TRANSFERS INTO THEIR ACCOUNTS. IT IS THE FINDING OF THE LD. CIT(A) THAT FIRST DEPOSITS ARE RECEIVED THROUGH BANK TRANSFERS FROM THE LENDERS ACCOUNTS AND THEREAFTER THEY WERE GIVEN TO THE ASSE SSEE COMPANY BY ACCOUNT PAYEE CHEQUE. IT IS THE FINDING OF THE LD. CIT(A) THAT ASSESSING OFFICER HAS NOT DISPUTED THE ABOVE FACTS NOR HAS BROUGHT ANY MATERIAL ON RECORD TO SUGGEST THAT THE SAID TRA NSFERS ARE NOT GENUINE TRANSFERS AND THE LENDERS ALSO CONFIRMED G IVING FUNDS TO THE ASSESSEE THROUGH ACCOUNT PAYEE CHEQUE AND SHARES W ERE ALSO ALLOTTED BY THE ASSESSEE COMPANY AGAINST SUCH FUNDS . THEREFORE, THE LD. CIT(A) CONCLUDED THAT ASSESSEE HAS ESTABLISHED NOT ONLY THE CREDIT WORTHINESS AND IDENTITY OF THE SAID CREDITORS BUT A LSO ESTABLISHED THE ITA NO. 4289 & 5060/M/2014 9 GENUINENESS OF THE TRANSACTION. NONE OF THE FINDIN G OF THE LD. CIT(A) HAS BEEN DISLODGED BY THE REVENUE WITH EVIDENCES. IN THE CIRCUMSTANCES, WE UPHOLD THE ORDER OF THE LD. CIT(A ) IN DELETING THE ADDITION MADE U/S. 68 OF THE ACT. THE GROUND RAISE D BY THE REVENUE IS DISMISSED. 14. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS PARTLY ALLOWED FOR STATISTICAL PURPOSE AND THE APPEAL FILED BY THE REVENUE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 29 TH APRIL, 2016. SD/- SD/- (ASHWANI TANEJA) (C.N. PRASAD ) ' / ACCOUNTANT MEMBER $ %' /JUDICIAL MEMBER MUMBAI; (' DATED : 29 TH APRIL, 2016 . % . ./ RJ , SR. PS !'#$#! / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. ) ( ) / THE CIT(A)- 4. ) / CIT 5. *+ ,%%-. , -.! , / DR, ITAT, MUMBAI 6. , /01 / GUARD FILE. / BY ORDER, *% //TRUE COPY// / (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI