M/S M/S SHREE RADHEY INFRALOGISTICS INDIA PVT LTD, RAIPUR (CG) V. THE INCOME TAX OFFICER, WARD-4(1),RAIPUR, RAIPUR (CG)

ITA 51/BIL/2017

• Counselvise Citation: [2019] 117 COUNSELVISE.COM (IT) 6498 (ITAT-RAIPUR)
• Duration Of Justice: 2 year(s) 12 day(s)
• Appeal Type: TDS Appeal
• Pronouncement Date: 08-05-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Assessment Year: 2012-2013
• Appeal Filed On: 26-04-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: R K SINGH
• Assessee Lawyers: R B DOSHI
• Keywords: Unexplained cash credit; Retrospective amendment; Question of law; Set aside
• Section: 133(6); 68

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL RAIPUR BENCH, RAIPUR (BEFORE SHRI N.K. BILLAIYA, ACCOUNTANT MEMBER & SHRI RAM LAL NEGI, JUDICIAL MEMBER) ITA. NOS: 51, 52 & 56/RAIPUR/2017 (ASSESSMENT YEAR: 2012-13) SHREE RADHEY INFRALOGISTICS INDIA PVT. LTD. 39, IIND FLOOR, ASHIRWAD TOWER, G.E. ROAD, RAIPUR (C.G.) PAN NO. AAMCS1771M, BANKEBIHARI REAL TRADE (P.) LTD.7-8, PRAKASH SWIMMING POOL PALACE, TIKRAPARA, RAIPUR (C.G.) PAN NO. AADCB3302L AND VASUNDHRA AYURVEDIC ANUSANDHAN KENDRA PVT. LTD. 39, IIND FLOOR, ASHIRWAD TOWER, G.E. ROAD, RAIPUR (C.G.) PAN NO. AABCV9212B V/S INCOME TAX OFFICER-4(1), RAIPUR (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI R. B. DOSHI, C. A. RESPONDENT BY : SHRI R. K. SINGH, D.R. ( )/ ORDER DATE OF HEARING : 08 -03-201 8 DATE OF PRONOUNCEMENT : 16 -04-2018 ITA NOS. 51, 52 & 56/RAIPUR/2017 . A.Y. 2012-1 3 2 PER N.K. BILLAIYA, ACCOUNTANT MEMBER 1. THE CAPTIONED THREE APPEALS ARE BY THREE DIFFERENT APPELLANTS PREFERRED AGAINST THREE SEPARATE ORDERS OF THE LD. CIT(A), RAIPUR PER TAINING TO A.Y. 2012-13. 2. AS THE UNDERLYING FACTS ARE COMMON IN ALL THESE APP EALS, THEY WERE HEARD TOGETHER AND ARE DISPOSED OF BY THIS COMMON FOR THE SAKE OF CONVENIENCE AND BREVITY. 3. REPRESENTATIVES OF BOTH THE SIDES FAIRLY AGREED THA T SINCE THE UNDERLYING FACTS ARE IDENTICAL, THE APPEAL IN THE CASE OF BAKE BIHAR I REAL ESTATE TRADE PVT. LTD. IN ITA NO. 52/RAIPUR/2017 MAY BE TAKEN AS THE LEAD CASE AND ON SUCH CONCESSION, WE HEARD THE REPRESENTATIVES ON THE FAC TS OF ITA NO. 52/RAIPUR/2017. 4. THE BONE OF CONTENTION IS THE SHARE APPLICATION MON EY RECEIVED ALONG WITH THE SHARE PREMIUM FROM THREE SUBSCRIBERS COMPANIES. THE NAMES OF THE THREE SUBSCRIBERS COMPANIES ALONG WITH THEIR RESPECTIVE D IRECTORS AND THE DIRECTORS OF THE APPELLANT COMPANIES CAN BE UNDERSTOOD FROM THE FOLLOWING:- BANKEBIHARI REALTRADE (P) LTD. DIRECTORS- AJAV KAMAR JOSHI & RAJENDRA KUMAR VAISHNAV (PAGE NO . 20 OF PB VOL. ILL) NAME OF INVESTOR COMPANY DIRECTORS SAMRAT DEALCOM PVT. LTD. R AJU SHUKLA, RAJ ENDRA KUMAR VAISHNAV (PAGE NO. 56 OF PB VOL.1) BREEZE MERCANTILE PVT. LTD. RAJU SHUKLA. RAJENDRA KUMAR VAISHNAV (PAGE NO. 113 OF PB VOL.1) ITA NOS. 51, 52 & 56/RAIPUR/2017 . A.Y. 2012-1 3 3 SHRISTI BARTER PVT. LTD. RAJU SHUKLA, RAJENDRA KUMAR VAISHNAV (PAGE NO. 173 OF PB VOL.1) RAJENDRA KUMAR VAISHNAV IS COMMON DIRECTOR VASUNDHARA AYURVEDIC ANUSANDHAN KENDRA (P) LTD. DIRECTORS- RAJENDRA KUMAR VAISHNAV & BISWASH AGRAWAL (PAGE NO. 19 OF PB VOL. ILL) NAME OF INVESTOR DIRECTORS INFINITY DEALERS PVT. LTD. RAJU SHUKLA, RAJENDRA KUMAR VAISHNA V (PAGE NO. 53 OF PB VOL.1) BREEZE MERCANTILE PVT. LTD. RAJU SHUKLA, RAJENDRA KUMAR VAISHNAV (PAGE NO. 96 OF PB VOL.1) FORTUNE COMMOTRADE PVT. LTD. RAJU SHUKLA, RAJENDRA KUMAR VAISHNAV (PAGE NO. 144 OF PB VOL.1) RAJENDRA KUMAR VAISHNAV IS COMMON DIRECTOR SHREE RADHEV INFRALOGISTICS INDIA (P) LTD. DIRECTORS- SHYAM SUNDER AGRAWAL & BISWASH AGRAWAL (PAGE NO. 25 OF PB VOL. ILL) NAME OF INVESTOR DIRECTORS BREEZE MERCANTILE PVT. LTD. RAJU SHUKLA, RAJENDRA KUMAR VAISHNAV (PAGE NO. 56 OF PB VOL.1) SHRISTI BARTER PVT. LTD. RAJU SHUKLA, RAJE NDRA KAMAR VAISHNAV (PAGE NO. L00 OF PB VOL.1) 5. FROM THE ABOVE, IT CAN BE SEEN THAT NOT ONLY THE DI RECTORS ARE COMMON BUT ALSO THE DIRECTOR OF THE APPELLANT COMPANY IS ALSO A DIR ECTOR OF THE SHARE APPLICANT COMPANIES. THEREFORE, IT CAN BE SAFELY CONCLUDED TH AT THE IMPUGNED TRANSACTION IS NOT BETWEEN STRANGERS. 6. DURING THE COURSE OF THE SCRUTINY ASSESSMENT PROCEE DINGS AND IN ORDER TO VERIFY THE IDENTITY, GENUINENESS OF TRANSACTION AND THE CA PACITY OF THE SUBSCRIBERS, THE A.O. ISSUED NOTICES U/S. 133(6) OF THE ACT TO THE S HARE APPLICANT COMPANIES ITA NOS. 51, 52 & 56/RAIPUR/2017 . A.Y. 2012-1 3 4 WHICH WERE RETURNED UNSERVED. THE A.O. FORMED A BEL IEF THAT THE SHARE APPLICANT COMPANIES ARE NON-EST. 7. WE FIND THAT THE ASSESSING OFFICER AND THE FIRST AP PELLATE AUTHORITY HAS COMPLETELY IGNORED THE DIRECT EVIDENCES WHICH JUSTI FY THE SHARE APPLICATION MONEY AND THE SHARE PREMIUM. THE DIRECT EVIDENCE AR E IN THE FORM OF CONFIRMATIONS BY THE SHARE APPLICANT COMPANIES, THE IR BANK ACCOUNTS, AND MOST IMPORTANTLY ONE OF THE DIRECTORS SHRI RAJESH AGARWA L ATTENDED THE PROCEEDINGS ON BEHALF OF THE INVESTOR COMPANIES. WE FIND THAT T HE A.O. HAS DISBELIEVED THE EXISTENCE OF THE SHARE APPLICANT COMPANIES ON THE B ASIS OF THE QUESTIONS ASKED TO SHRI RAJESH AGARWAL WHICH QUESTIONS IN OUR OPINI ON ARE IRRELEVANT. THE A.O. EMPHASIZED ON THE PRODUCTION OF RENT AGREEMENT WITH THE LANDLORD, MONTHLY RENT, ELECTRICITY BILLS, ELECTRICITY METERS ETC. SI NCE THESE DETAILS COULD NOT BE FURNISHED BY SHRI RAJESH AGARWAL THE SHARE APPLICA NT COMPANIES WERE TREATED AS NON-EST. 8. THE DIRECT EVIDENCES COMPLETELY IGNORED BY THE LOWE R AUTHORITIES RELATE TO THE MEMORANDUM OF ASSOCIATION AND ARTICLES OF ASSOCIATI ON OF THE SHARE APPLICANT COMPANIES ALONG WITH FORM 23AC FIELD WITH REGISTRAR OF COMPANIES AND MOST IMPORTANTLY, THE FACT THAT ALL THE SHARE APPLICANT COMPANIES WERE CONVERTED INTO LIMITED LIABILITY PARTNERSHIP (LLP) WHICH FACT HAS BEEN RECOGNIZED BY THE REGISTRAR OF COMPANIES. 9. WE HAVE ALSO GONE THROUGH THE BANK STATEMENTS OF TH E SHARE APPLICANT COMPANIES WHICH ARE EXHIBITED AT PAGES 31, 32, 84 & 141 OF THE PAPER BOOK. A PERUSAL OF THE BANK STATEMENTS OF THE SHARE APPLICA NT COMPANIES CLEARLY SHOWS THAT NO CASH WAS FOUND TO BE DEPOSITED PRIOR TO THE ISSUE OF CHEQUE. ITA NOS. 51, 52 & 56/RAIPUR/2017 . A.Y. 2012-1 3 5 10. THE ASSESSMENT YEAR UNDER CONSIDERATION IS A.Y. 201 2-13 AND THE SHARE APPLICATION MONEY WITH PREMIUM RECEIVED BY SHREE RA DHEY INFRALOGISTICS INDIA (P.) LTD. IN A.Y. 2014-15 & 2015-16 FROM THE VERY S AME SHARE APPLICANT COMPANIES HAS BEEN ACCEPTED IN SCRUTINY ASSESSMENT BY THE ASSESSING OFFICER. THE HONBLE HIGH COURT OF CHHATTISGARH WHICH IS THE JURISDICTIONAL HIGH COURT, IN THE CASE OF VENKATESHWAR ISPAT (P) LTD. H AS HELD THAT IN RESPECT OF SHARE APPLICATION MONEY, DEPARTMENT IS FREE TO PROC EED TO REOPEN SHAREHOLDERS INDIVIDUAL ASSESSMENTS IN ACCORDANCE WITH LAW, BUT IT CANNOT BE REGARDED AS UNDISCLOSED INCOME OF THE ASSESSEE COMPANY. THE HO NBLE HIGH COURT FURTHER FOUND THAT IN SUBSEQUENT YEAR, THE SHAREHOL DERS INVESTMENT WAS CONFIRMED DURING THE ASSESSMENT PROCEEDINGS. 11. IN THE STATEMENT OF SHRI RAJESH AGARWAL WHICH WAS E XAMINED BY THE A.O. ON 20.03.2015 HE HAS GIVEN THE NEW ADDRESS OF THE SHAR E APPLICANT COMPANIES AND THE A.O. DID NOT MAKE ANY FURTHER ENQUIRY AND ASSUM ED THAT THE COMPANIES DO NOT EXIST AT THE NEW ADDRESS GIVEN DURING THE STATE MENT. THE CONCLUSIONS DRAWN BY THE A.O. ARE TOTALLY BASED ON EXTRANEOUS CONSIDE RATION AS MENTIONED ELSEWHERE. IT WAS BROUGHT TO THE NOTICE OF THE A.O. AND THE FIRST APPELLATE AUTHORITY THAT SAMRAT DEALCOM PVT. LTD. WAS CONVERT ED INTO LLP ON 25.07.2014, BREEZE MERCANTILE PVT. LTD. WAS CONVERT ED INTO LLP ON 24.03.2015 AND SHRISTI BARTER PVT. LTD. WAS CONVERTED INTO LLP ON 01.01.2015. MOREOVER, THE ATTENDANCE OF ONE OF THE DIRECTORS SHRI RAJESH AGARWAL HAS BEEN RECOGNIZED BY THE A.O., THEREFORE THE ALLEGATION THAT THE SHAR E APPLICANT COMPANIES DO NOT EXIST HOLDS NO WATER. 12. THE CHARGING OF THE SHARE PREMIUM IS JUSTIFIED BY T HE FACT THAT THE APPELLANT COMPANY LAUNCHED HOUSING PROJECT AT VIDHANSABHA ROA D, RAIPUR, A PRIME ITA NOS. 51, 52 & 56/RAIPUR/2017 . A.Y. 2012-1 3 6 LOCATION BETWEEN OLD RAIPUR AND NEW RAIPUR AND LOOK ING TOWARDS THE GROWTH IN THE STATE OF CHHATTISGARH IN THE REAL ESTATE MAR KET. THE CHARGING OF THE SHARE PREMIUM IS JUSTIFIED. 13. THE HONBLE HIGH COURT OF BOMBAY IN THE CASE OF GAG ANDEEP INFRASTRUCTURE PVT. LTD. 394 ITR 680 HAS CONSIDERED AND OBSERVED A S UNDER:- (E) WE FIND THAT THE PROVISO TO SECTION 68 OF THE A CT HAS BEEN INTRODUCED BY THE FINANCE ACT 2012 WITH EFFECT FROM 1 ST APRIL, 2013. THUS IT WOULD BE EFFECTIVE ONLY FROM THE ASSESSMENT YEAR 2013-14 ONWARDS AND NOT FOR THE SUBJECT ASSESSMENT YEAR. IN FACT, BEFORE THE TRIBUNAL, IT WAS NOT EVEN THE CASE OF THE REVENUE THAT SECTION 68 OF THE ACT AS I N FORCE DURING THE SUBJECT YEARS HAS TO BE READ/UNDERSTOOD AS THOUGH THE PROVISO ADDED SUBSEQU ENTLY EFFECTIVE ONLY FROM 1 ST APRIL, 2013 WAS ITS NORMAL MEANING. THE PARLIAMENT DID NOT INTR ODUCE TO PROVISO TO SECTION 68 OF THE ACT WITH RETROSPECTIVE EFFECT NOR DOES THE PROVISO SO INTROD UCED STATES THAT IT WAS INTRODUCED 'FOR REMOVAL OF DOUBTS' OR THAT IT IS 'DECLARATORY'. THEREFORE I T IS NOT OPEN TO GIVE IT RETROSPECTIVE EFFECT, BY PROCEEDING ON THE BASIS THAT THE ADDITION OF THE PR OVISO TO SECTION 68 OF THE ACT IS IMMATERIAL AND DOES NOT CHANGE THE INTERPRETATION OF SECTION 68 OF THE ACT BOTH BEFORE AND AFTER THE ADDING OF THE PROVISO. IN ANY VIEW OF THE MATTER THE THREE ES SENTIAL TESTS WHILE CONFIRMING THE PRE-PROVISO SECTION 68 OF THE ACT LAID DOWN BY THE COURTS NAMEL Y THE GENUINENESS OF THE TRANSACTION, IDENTITY AND THE CAPACITY OF THE INVESTOR HAVE ALL BEEN EXAMINED BY THE IMPUGNED ORDER OF THE TRIBUNAL AND ON FACTS IT WAS FOUND SATISFIED. FURTHER IT WAS A SUBMISSION ON BEHALF OF THE REVENUE THAT SUCH LARGE AMOUNT OF SHARE PREMIUM GIVES RISE TO SU SPICION ON THE GENUINENESS (IDENTITY) OF THE SHAREHOLDERS I.E. THEY ARE BOGUS. THE APEX COURT IN LOVELY EXPORTS (P) LTD. (SUPRA) IN THE CONTEXT TO THE PRE-AMENDED SECTION 68 OF THE ACT HAS HELD THAT WHERE THE REVENUE URGES THAT THE AMOUNT OF SHARE APPLICATION MONEY HAS BEEN RECEIVED FROM BOGU S SHAREHOLDERS THEN IT IS FOR THE INCOME TAX OFFICER TO PROCEED BY REOPENING THE ASSESSMENT OF S UCH SHAREHOLDERS AND ASSESSING THEM TO TAX IN ACCORDANCE WITH LAW. IT DOES NOT ENTITLE THE REVENU E TO ADD THE SAME TO THE ASSESSEE'S INCOME AS UNEXPLAINED CASH CREDIT. (F) IN THE ABOVE CIRCUMSTANCES AND PARTICULARLY IN VIEW OF THE CONCURRENT FINDING OF FACT ARRIVED AT BY THE CIT (A) AND THE TRIBUNAL, THE PROPOSED QUESTION OF LAW DOES NOT GIVE RISE TO ANY SUBSTANTIAL QUESTION OF LAW. THUS NOT ENTERTAINED. 14. THE HONBLE HIGH COURT OF BOMBAY IN THE CASE OF GRE EN INFRA LTD. HAS UPHELD THE FOLLOWING FINDINGS OF THE TRIBUNAL IN ITA NO. 7 762/MUM/2012:- ITA NOS. 51, 52 & 56/RAIPUR/2017 . A.Y. 2012-1 3 7 THE ENTIRE DISPUTE REVOLVED AROUND THE CHARGING OF SHARE PREMIUM OF RS. 490 PER SHARE ON A BOOK VALUE OF RS. 10 EACH. THIS DISPUTE WAS MORE, SO BEC AUSE OF THE FACT THAT THE ASSESSEE COMPANY WAS INCORPORATED DURING THE AY. THEREFORE, ACCORDIN G TO THE REVENUE AUTHORITIES, IT WAS BEYOND ANY LOGICAL REASONING THAT A COMPANY WITH ZERO BALA NCE SHEET COULD GARNER RS. 490 PER SHARE PREMIUM ITS SUBSCRIBERS. SUCH TRANSACTION MAY RAIS E EYEBROWS BUT CONSIDERING THE SUBSCRIBERS TO THE ASSESSEE COMPANY, THE TEST FOR THE GENUINENESS OF THE TRANSACTION GOES INTO OBLIVION. IT WAS AN UNDISPUTED FACT ADMITTED BY THE REVENUE AUTHORIT IES THAT 10,19,000 EQUITY SHARES HAS BEEN SUBSCRIBED AND ALLOTTED TO IDFC PE FUND-11 WHICH CO MPANY WAS A FRONT MANAGER OF IDFC LTD., IN WHICH COMPANY GOVERNMENT OF INDIA WAS HOLDING 18 PE RCENT OF SHARES. THE CONTRIBUTORS TO THE IDFC PE FUND-II WERE ALL PUBLIC SECTOR UNDERTAKINGS . THEREFORE, TO RAISE EYEBROWS TO A TRANSACTION WHERE THERE WAS SO MUCH OF INVOLVEMENT OF THE GOVER NMENT DIRECTLY OR INDIRECTLY DID NOT MAKE ANY SENSE. NO DOUBT A NON-EST COMPANY OR A ZERO BAL ANCE COMPANY ASKING FOR A SHARE PREMIUM OF RS. 490/- PER SHARE DEFIES ALL COMMERCIAL PRUDEN CE BUT AT THE SAME TIME WE COULD NOT IGNORE THE FACT THAT IT WAS A PREROGATIVE OF THE BOARD OF DIRECTORS OF A COMPANY TO DECIDE THE PREMIUM AMOUNT AND IT IS THE WISDOM OF THE SHARE HOLDERS WH ETHER THEY WANT TO SUBSCRIBE TO SUCH A HEAVY PREMIUM. THE REVENUE COULD NOT QUESTION THE CHARGIN G OF SUCH OF HUGE PREMIUM WITHOUT ANY BAR FROM ANY LEGISLATED LAW OF THE LAND. DETAILS OF SUB SCRIBERS WERE BEFORE THE REVENUE. THE AO HAS ALSO CONFIRMED THE TRANSACTION FROM THE SUBSCRIBERS BY ISSUING NOTICE U/S. 133(6). THE BOARD OF DIRECTORS CONTAINED PERSONS WHO WERE ASSOCIATED WIT H IDFC GROUP OF COMPANIES, THEREFORE THEIR INTEGRITY AND CREDIBILITY COULD NOT BE DOUBTED. REA DING OF SECTION 56(1) SHOWED THAT INCOME OF EVERY KIND WHICH WAS NOT TO BE EXCLUDED FROM THE TO TAL INCOME SHALL BE CHARGEABLE TO INCOME TAX. THE EMPHASIS WAS ON THAT INCOME OF EVERY KIND, THER EFORE, TO TAX ANY AMOUNT UNDER THIS SECTION, IT MUST HAVE SOME CHARACTER OF INCOME. CAPITAL RE CEIPTS', UNLESS SPECIFICALLY TAXED UNDER ANY PROVISIONS OF THE ACT , ARE EXCLUDED FROM INCOME. T HE SUPREME COURT HAD LAID DOWN THE RATIO THAT SHARE PREMIUM REALIZED FROM THE ISSUE OF SHARES IS OF CAPITAL IN NATURE AND FORMS PART OF THE SHARE CAPITAL OF THE COMPANY AND THEREFORE CANNOT BE TAXE D AS A REVENUE RECEIPT. THUS THE EXPENDITURE AND THE RECEIPTS DIRECTLY RELATING TO THE SHARE CAP ITAL OF A COMPANY ARE OF CAPITAL IN NATURE AND THEREFORE CANNOT BE TAXED U/S. 56(1). PUNJAB STATE INDUSTRIAL CORPORATION LTD. VS CIT 225 ITR 792 AND BROOKE BOND INDIA LTD. VS CIT, RELIED. 15. AFTER CONSIDERING THE FACTS IN TOTALITY IN THE LIGH T OF THE RELEVANT DOCUMENTARY EVIDENCES ON RECORD, WE DO NOT FIND ANY MERIT IN TH E ADDITIONS MADE BY THE A.O. AND CONFIRMED BY THE FIRST APPELLATE AUTHORITY . WE ACCORDINGLY SET ASIDE ITA NOS. 51, 52 & 56/RAIPUR/2017 . A.Y. 2012-1 3 8 THE FINDINGS OF THE LD. CIT(A) AND DIRECT THE A.O. TO DELETE THE IMPUGNED ADDITION FROM THE HANDS OF THE APPELLANT COMPANIES. 16. IN THE RESULT, THE APPEALS OF THE ASSESSEE ARE ALLO WED. ORDER PRONOUNCED IN OPEN COURT ON 16 - 04- 20 18 SD/- SD/- (RAM LAL NEGI) (N. K. BILLAIYA) JUDICIAL MEMBER TRUE COPY A CCOUNTANT MEMBER RAIPUR: DATED 16/04/2018 RAJESH COPY OF THE ORDER FORWARDED TO: - 1. THE APPELLANT. 2. THE RESPONDENT. 3. THE CIT (APPEALS) 4. THE CIT CONCERNED. 5. THE DR., ITAT, AHMEDABAD. 6. GUARD FILE. BY ORDER SR. P.S. ITAT ,RAIPUR