ALKA SECURITIES LTD, MUMBAI V. DCIT 4(1), MUMBAI

ITA 5395/MUM/2015

• Counselvise Citation: [2018] 121 COUNSELVISE.COM (IT) 6875 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 7 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-06-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: Not Allotted
• Assessment Year: 2007-2008
• Appeal Filed On: 19-11-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: N HEMALATHA
• Keywords: Bogus purchase; Unexplained cash credit; Search and seizure; Opportunity of being heard; Accommodation entries
• Section: 143(3); 147; 131; 68; 132

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH, MUMBAI BEFORE SHRI SAKTIJIT DEY , JUDICIAL MEMBER AND SHRI M ANOJ KUMAR AGGARWAL, ACCOUNTANT MEMBER ITA NO. 5395 / MUM/2015 ( ASSESSMENT YEAR : 20 07 08 ) ALKA SECURITIES LTD. MAITRI, PLOT O.10 NUTAN LAXMI CHS LTD. N.S. ROAD NO.10, JVPD VILE PARLE (W), MUMBAI 400 049 PAN AAACA4835E . APPELLANT V/S DY. COMMISSIONER OF INCOME TAX CIRCLE 4(1)(1), MUMBAI . RESPONDENT ASSESSEE BY : SHRI ADITYA MAHESHWARI REVENUE BY : MS. N. HEMALATHA DATE OF HEARING 22 .0 5 .2018 DATE OF ORDER 20.06.2018 O R D E R PER SAKTIJIT DEY, J.M. AFORESAID APPEAL BY THE ASSESSEE IS AGAINST ORDER DATED 21 ST AUGUST 2015 , PASSED BY THE L EARNED COMMISSIONER (APPEALS) 9 , MUMBAI, FOR THE ASSESSMENT YEAR 2 0 07 08 . 2 . T HE ASSESSEE HAS RAISED THE FOLLOWING EFFECTIVE GROUNDS: 1. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LEARNED COMMISSIONER (APPEALS) HAS ERRED IN CONFIRMING ADDITION OF ` 2 ALKA SECURITIES LTD. 69,00,000 TO THE TOTAL INCOME AS UNEXPLAINED CASH CREDITS U/S 68 OF THE ACT. 2. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LEARNED COMMISSIONER (APPEALS) HAS ERRED IN NOT CONSIDERING THE STATEMENT OF FACTS SUBMITTED BEFORE HIM IN TOTALITY. THE ADDITION MADE BY A.O. ON THE GROUNDS OF PURPORTED RECEIPT OF SHARE APPLIC ATION MONEY FROM COMPANIES BELONGING TO MR. PRAVEEN JAIN GROUP, WHICH IS FACTUALLY INCORRECT. IN FACT THE APPELLANT NEVER RECEIVED ANY SHARE APPLICATION MONEY FROM MR. PRAVEEN JAIN GROUP AND HOWEVER THE AMOUNT WAS RECEIVED ON THIRD PARTIES BEHALF IN THE BO OKS OF THE APPELLANT. 3 . THE ONLY DISPUTE IS WITH REGARD TO THE ADDITION OF AN AMOUNT OF ` 69 LAKH AS UNEXPLAINED CASH CREDIT UNDER SECTION 68 OF THE INCOME TAX ACT, 1961 (FOR SHORT THE ACT ). 4 . BRIEF FACTS ARE, THE ASSESSEE A COMPANY IS ENGAGED IN THE BUSI NESS OF STOCK AND SHARE BROKING. FOR THE ASSESSMENT YEAR UNDER DISPUTE, THE ASSESSEE FILED ITS RETURN OF INCOME ON 31 ST OCTOBER 2007, DECLARING TOTAL INCOME OF ` 26,04,570. ASSESSMENT IN CASE OF THE ASSESSEE WAS COMPLETED UNDER SECTION 143(3) OF THE ACT ON 23 RD DECEMBER 2009, DETERMINING THE TOTAL INCOME AT ` 40,93,180. SUBSEQUENTLY, ON THE BASIS OF A SEARCH AND SEIZURE OPERATION CONDUCTED UNDER SECTION 132 OF THE ACT IN CASE OF SHRI PRAVIN JAIN I T WAS REPORTED BY THE DDIT (INV.), MUMBAI, THAT SHRI PRAVIN JAIN , THROUGH NUMBER OF COMPANIES WAS PROVIDING ACCOMMODATION ENTRIES BY WAY OF BOGUS PURCHASES, SALES, UNSECURED LOANS, SHARE CAPITAL, ETC. IT WAS REPORTED THAT ASSESSEE IS ONE OF THE BENEFICIARIES OF SUCH 3 ALKA SECURITIES LTD. ACCOMMODATION ENTRIES. THUS, ON THE BASIS OF SUCH INFORMATION, THE ASSESSING OFFICER RE OPENED THE ASSESSMENT UNDER SECTION 147 OF THE ACT ON THE REASONING THAT THE SHARE APPLICATION MONEY OF ` 69 LAKH CREDITED TO ASSESSEES BOOKS OF ACCOUNT ARE MERELY ACCOMMODATION ENTRIES, HENCE, HAVE TO BE TREATED AS UNEXPLAINED CASH CREDIT UNDER SECTION 68 OF THE ACT. DURING THE RE ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER CONFRONTED THE AFORESAID FACT TO THE ASSESSEE. IN REPLY, T HE ASSESSEE SUBMITTED THAT IT HAS NOT RECEIVED ANY SHARE APPLICATION MONEY FROM THE C OMPANIES REFER RED TO BY THE ASSESSING OFFICER. H OWEVER, THE ASSESSING OFFICER WAS NOT CONVINCED WITH THE CLAIM OF THE ASSESSEE. REFERRING TO A STATEMENT RECORDED FROM ONE SHRI NILESH PARMAR, UNDER SECTION 131 OF THE ACT, PROPRIETOR OF M/S. M OHIT INTERNATIO NAL, WHO ALLEGEDLY WAS WORKING FOR SHRI PRAVIN JAIN, THE ASSESSING OFFICER ULTIMATELY CONCLUDED THAT THE ASSESSEE HAS FAILED TO PROVE THE GENUINENESS OF TRANSACTION RELATING TO SHARE APPLICATION MONEY OF ` 69 LAKH. HE ALSO OBSERVED THAT THE ASSESSEE FAILED TO PROVE THE CREDITWORTHINESS OF THE CONCERNED PARTIES. ACCORDINGLY, HE ADDED BACK THE AMOUNT OF ` 69 LAKH UNDER SECTION 68 OF THE ACT. THOUGH, THE ASSESSEE CHALLENGED THE ADDITION BEFORE LEARNED COMMISSIONER (APPEALS), HE ALSO SUSTAINED THE ADDITION. 5 . T HE LEARNED AUTHORISED REPRESENTATIVE SUBMITTED THAT NO SUCH APPLICATION MONEY AMOUNTING TO ` 69 LAKH APPEARS IN THE BOOKS OF 4 ALKA SECURITIES LTD. ACCOUNT OF THE ASSESSEE. IN THIS CONTEXT, HE DREW OUR ATTENTION TO THE AUDITED BALANCE SHEET OF THE ASSESSEE AS AT 31 ST MARCH 2007, A COPY OF WHICH IS AT PAGE 13 OF THE PAPER BOOK. HE SUBMITTED , WHEN NO SUCH SHARE APPLICATION MONEY HAS BEEN CREDITED IN ASSESSEES BOOKS , THERE IS NO QUESTION OF MAKING ADDITION UNDER SECTION 68 OF THE ACT. THE LEARNED AUTHORISED REPRESENTATIVE SUBMITTED THAT IN COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSEE HAS SPECIFICALLY BROUGHT THIS FACT TO THE NOTICE OF THE ASSESSING OFFICER, HOWEVER, THE SUBMISSIONS MADE BY THE ASSESSEE WAS TOTALLY IGNORED BY THE ASSESSING OFFICER. FURTHER, LEARNED AUTHORISED REPRE SENTATIVE SUBMITTED , BEFORE LEARNED COMMISSIONER (APPEALS) , THOUGH , THE ASSESSEE SUBMITTED ALL THE MATERIAL TO DEMONSTRATE THAT NO SHARE APPLICATION MONEY OF ` 69 LAKH WAS CREDITED TO ASSESSEES BOOKS OF ACCOUNT , THE SUBMISSIONS OF THE ASSESSEE WAS TOTALLY IGNORED AND ADDITION WAS SUSTAINED. THE LEARNED AUTHORISED REPRESENTATIVE SUBMITTED , THE AMOUNT IN QUESTION WAS RECEIVED FOR AND ON BEHALF OF ONE SHRI HARS HV ARDHAN JAIN, AND IF AT ALL IT IS TO BE ASSESSED , IT HAS TO BE ASSESSED IN THE HANDS OF THE CONCERN ED INDIVIDUAL. THUS, IT WAS SUBMITTED THAT THE ADDITION MADE SHOULD BE DELETED. 6 . THE LEARNED DEPARTMENTAL REPRESENTATIVE RELIED UPON THE OBSERVATIONS OF THE LEARNED COMMISSIONER (APPEALS). 5 ALKA SECURITIES LTD. 7 . WE HAVE CONSIDERED RIVAL SUBMISSIONS AND PERUSED MATERIALS ON RECORD. IT IS EVIDENT, THE ASSESSING OFFICER HAS TREATED THE ALLEGED SHARE APPLICATION MONEY OF ` 69 LAKH AS UNEXPLAINED CASH CREDIT UNDER SECTION 68 OF THE ACT AT THE HANDS OF THE ASSESSEE RELY ING UPON CERTAIN INFORMATION OBTAINED IN COURSE OF SEARCH AND SEIZURE OPERATION CONDUCTED IN CASE OF SHRI PRAVIN KUMAR JAIN AND GROUP. ON A READI N G OF THE ASSESSMENT ORDER, IT IS NOTED THAT AS PER THE INFORMATION AVAILABLE WITH THE ASSESSING OFFICER , ASSES SEE HAS RECEIVED SHARE APPLICATION MONEY FROM EIGHT PARTIES TOTALING TO ` 69 LAKH. HOWEVER, IN COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSEE VIDE LETTER DATED 26 TH FEBRUARY 2016, HAD SUBMITTED THAT THE SAID AMOUNT OF ` 69 LAKH WAS RECEIVED FROM THREE PART IES ON BEHALF OF ONE SHRI HARSHV ARDHAN JAIN, TOWARDS SHARE TRANSACTIONS CARRIED OUT BY HIM THROUGH THE ASSESSEE AND AC CORDINGLY WAS CREDITED TO HARSHV ARDHAN JAINS CLIENT LEDGER ACCOUNT AND NOT TO THE CREDIT OF ASSESSEES ACCOUNT. FURTHER, IT IS NOTICED TH AT THOUGH THE ASSESSING OFFICER RELIED UPON THE STATEMENT OF ONE SHRI NILESH PARMAR, PROPRIETOR OF M/S. MOHIT INTERNATIONAL, HOWEVER, ON GOING THROUGH HIS STA TE MENT REPRODUCED IN THE ASSESSMENT ORDER, IT IS CLEAR THAT ASSESSEES NAME DOES NOT APPEAR IN THE LIST OF 33 PARTIES REFERRED TO BY HIM. FURTHER, BEFORE THE FIRST APPELLATE AUTHORITY THE ASSESSEE HAS CONTENDED THAT THE AMOUNT OF ` 69 LAKH WAS R ECEIVED ON BEHALF OF SHRI HARSHV ARCHAN JAIN. FURTHER, IT 6 ALKA SECURITIES LTD. WAS SUBMITTED BY THE ASSESSEE THAT THE AMOUNT IN QUE STION WAS NEITHER SHOWN AS A CREDIT IN THE BOOKS OF ACCOUNT OF THE ASSESSEE NOR IN THE BALANCE SHEET AS SHARE APPLICATION MONEY. THE AFORESAID CONT ENT IONS OF THE ASSESSEE APPEAR TO HAVE NOT AT ALL BEEN EXAMINED OR GONE INTO EITHER BY THE ASSESSING OFFICER OR THE LEARNED COMMISSIONER (APPEALS). IN FACT, THE LEARNED COMMISSIONER (APPEALS) H AS DEALT WITH THE ISSUE IN A CRY PTIC AND SUMMARY MANNER WITHOUT PROPER REASO N ING IN SPITE OF THE FACT THAT THE ASSESSEE HAS STATED THAT THE AMOUNT IN QUESTION WAS RECEI VED ON BEHALF OF ONE SHRI HARSHV ARDHAN JAIN, AND IT HAS NOT BEEN SHOWN AS A CREDIT IN ASSESSEES BOOKS . WHEN THE ASSESSEE IN COURSE OF PROCEEDING BRINGS CERTAIN FACTS TO THE NOTICE OF THE ASSESSING OFFICER, IT IS THE DUTY OF THE ASSESSING OFFICER TO CONDUCT NECESSARY ENQUIRY TO ASCERTAIN THE VE RACITY OF ASSESSEE S CLAIM. IN THESE CIRCUMSTANCES WITHOUT COUNTERING ASSESSEES CONTENTION THAT THE AMOUNT IN QUESTION DOES NOT APPEAR AS A CREDIT IN THE BOOKS OF ACCOUNT , THE DEPARTMENTAL AUTHORITIES WERE NOT JUSTIFIED IN MAKING THE ADDITION AS UNEXPLAINED CASH CREDIT UNDER SECTION 68 OF THE ACT. SINCE , WE FIND THAT THE DEPARTMENTAL AUTHORITIES HAVE NOT PROPERLY ENQUIRED INTO ASSESSEES CLAIM ON THE ISSUE OF RECEIPT OF SHARE APPLICATION MONEY, WE ARE INCLI NED TO RESTORE THE ISSUE TO THE ASSESSING OFFICER FOR DE NOVO ADJUDICATION AFTER DUE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. IT IS MADE CLEAR, IN COURSE OF DE NOVO 7 ALKA SECURITIES LTD. PROCEEDINGS, IT IS OPEN TO THE ASSESSING OFFICER TO CONDUCT NECESSARY ENQUIRY TO VERIFY ASSESSEES CLAIM THAT THE DISPUTED AMOUNT BELONGS TO A THIRD PARTY AND IS NOT APPEARING AS A CREDIT IN ASSESSEES BOOKS OF ACCOUNT. WITH THE AFORESAID OBSERVATIONS, THE GROUNDS ARE ALLOWED FOR STATISTICAL PURPOSES. 8 . IN THE RESULT, ASSESSEES AP PEAL IS ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 20.06.2018 SD/ - MANOJ KUMAR AGGARWAL ACCOUNTANT MEMBER SD/ - SAKTIJIT DEY JUDICIAL MEMBER MUMBAI, DATED: 20.06.2018 COPY OF THE ORDER FORWARDED TO : ( 1 ) THE ASSESSEE; ( 2 ) THE REVENUE; ( 3 ) THE CIT(A); ( 4 ) THE CIT, MUMBAI CITY CONCERNED; ( 5 ) THE DR, ITAT, MUMBAI; ( 6 ) GUARD FILE . TRUE COPY BY ORDER PRADEEP J. CHOWDHURY SR. PRIVATE SECRETARY ( SR. PRIVATE SECRETARY ) ITAT, MUMBAI