WHITEMOON TRADING CO. P.LTD, MUMBAI V. ITO 2(3)(4), MUMBAI

ITA 5470/MUM/2015

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 8649 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 2 month(s) 10 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 10-02-2017
• Appeal Filed By: Assessee
• Bench Allotted: SMC
• Assessment Year: 2005-2006
• Appeal Filed On: 30-11-2015
• Court: TRIBUNAL
• Department Lawyers: DR SANTOSH MANKOSHAR
• Assessee Lawyers: NEELKANT KHANDELW AL
• Keywords: Reopening of assessment; Question of law
• Section: 143(3); 142(1); 234B; 133(6); 131; 148; 139; 68

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH, MUMBAI BEFORE SHRI R.C SHARMA, AM & SHRI RAVISH SOOD, JM I.T.A. NO.5470/MUM/2015 (ASSESSMENT YEAR: 2005 - 06) ASSESSEEE BY : SHRI. NEELKANTKHANDELWAL RESPONDENTBY : DR. SANTOSH MANKOSHAR DATE OF HEARING : 07/11/2016 DATE OF PRONOUNCEMENT : 10 / 02 /2017 / O R D E R PER R.C.SHARMA (A. M): THIS IS AN APPEAL FILED BY THE ASSESSEE AGAINST THE ORDER OF CIT(A) - 6, MUMBAI DATED 19/10/2015 FOR THE ASSESSMENT YEAR 2005 - 06 IN THE MATTER OF ORDER PAS SED ULS.143(3) R.W.S. 147 & 254 OF THE IT ACT, 1961. 2. THE FOLLOWING GROUNDS HAVE BEEN TAKEN BY THE ASSESSEE. 1. THE COMMISSIONER OF INCOME - TAX (APPEALS) - 6, MUMBAI (HEREINAFTER REFERRED TO AS THE CIT(A)) ERRED IN CONFIRMING THE ACTION OF THE INCOME - TAX OFFICER 2(3) - 4, MUMBAI (HEREINAFTER REFERRED TO AS THE ASSESSING OFFICER) IN ISSUING NOTICE UNDER SECTION 148 OF THE ACT. THE APPELLANTS CONTEND THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE ISSUE OF NOTICE UNDER SECTION 148 IS BAD IN LAW AND NEEDS TO BE QUASHED. 2. THE CIT(A) ERRED IN CONFIRMING THE ACTION OF THE ASSESSING OFFICER IN MAKING AN ADDITION UNDER SECTION 68 OF RS 15,00,000, BEING AMOUNT RECEIVED ON ACCOUNT OF ALLOTMENT OF SHARE CAPITAL. M/S. WHITEMOON TRADING CO. PVT. LTD., C/O. 404 & 407,PROSPECT CHAMBERS, 317, D.N.ROAD, FORT, MU MBAI - 400001. VS. ITO - 2 (3) (4), MUMBAI PAN/GIR NO . AAACW5243L ( APPELLANT ) : ( RESPONDENT ) ITA NO. 5470/MUM/2015 M/S. WHITEMOON TRADING CO . PVT. LTD., 2 THE APPELLANTS CONTEND THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE CIT(A) OUGHT NOT TO HAVE CONFIRMED THE IMPUGNED ADDITION MADE BY THE ASSESSING OFFICER INASMUCH ALL DETAILS OF THE SHARE APPLICANTS HAVE BEEN FURNISHED AND ALSO THAT THE MONIES DO NOT BELONG TO THE APPELLANTS AND HENCE, THE IMPUGNED ADDITION REQUI RES TO BE DELETED. 3. THE CIT(A) ERRED IN CONFIRMING THE ACTION OF THE ASSESSING OFFICER IN CHARGING INTEREST OF RS 1,82,589 AND RS 4,56,258 UNDER SECTIONS 234B AND 220(2) OF THE ACT. THE APPELLANTS CONTEND THAT THE ASSESSING OFFICER OUGHT NOT TO HAVE CH ARGED INTEREST UNDER SECTIONS 234B AND 220(2) INASMUCH AS - (A) THE ASSESSING OFFICER HAS NOT GIVEN AN OPPORTUNITY TO THE APPELLANTS BEFORE CHARGING THE SAID INTEREST AS REQUIRED BY THE PRINCIPLES OF NATURE JUSTICE, (B) THE CHARGING OF INTEREST IS NOT IN ACCORDANCE WITH LAW. 3. RIVAL CONTENTION S HAVE BEEN HEARD AND RECORD PERUSED. GRIEVANCES OF ASSESSEE RELATE TO THE VALIDITY OF REOPENING UNDER SECTION 147 AND MERIT OF ADDITION MADE UNDER S ECTION 68 OF IT ACT AMOUNTING TO RS. 15,00, 000, IN RESPECT OF SHAR E APPLICATION MONEY RECEIVED FROM BHAGWAN KRISHAN INVESTMENT AND TRADING CO PVT LTD . 4. IT WAS CONTENDED BY LD. A.R THAT ORIGINAL ASSESSMENT WAS FRAMED UNDER SECTION 143(3) ON 31/12/2007, AND THE NOTICE FOR REOPENING OF ASSESSMENT WAS GIVEN ON 23/03/2012 WHICH IS MUCH BEYOND A PERIOD OF 4 YEARS FROM THE END OF RELEVANT ASSESSMENT YEAR. ACCORDINGLY REOPENING ASSESSMENT WAS INVALID, SINCE THE ORIGINAL ASSESSMENT WAS FRAMED U NDER S ECTION 143(3) AND THERE WAS NO FAILURE ON THE PART OF THE ASSESSEE TO FURNISH RETURN UNDER SECTION 139 OR IN RESPONSE TO NOTICE ISSUED UNDER SECTION 142(1) OR 148 OR TO DISCLOSE FULLY AND TRULY ALL MATERIAL FACTS NECESSARY FOR HIS ASSESSMENT. ITA NO. 5470/MUM/2015 M/S. WHITEMOON TRADING CO . PVT. LTD., 3 5. ON MERIT OF ADDITION IT WAS SUBMITTED THAT THE ASSESSEE HAS FURNISHED ALL THE PARTICULA RS WITH REG ARD TO SHARE APPLICATION MONEY S O RECEIVE D IN SUPPORT OF THE IDENTITY, GENUINENESS OF TRANSACTIONS OF SHARE APPLICATION MONEY. AS PAR LD. HEAR PAYMENT WAS RECEIVED BY ACCOUNT PAYEE CHEQUE . LEARNED AR FURTHER SUBMITTED THAT THEY REQUESTED THE AS SESSING OFFICER TO ISSUE SUMMONS UNDER THE POWERS VESTED IN HIM UNDER SECTION 131 OF THE ACT AND REQUIRED THEM TO FURNISH ALL THE NECESSARY DETAILS REQUIRED TO CONCLUDE THE GENUINENESS OF THE TRANSACTIONS AND TO FURNISH THE BANK STATEMENTS FROM WHERE THEY HAVE ISSUED THE CHEQUES TO THE APPELLANTS AND FURTHER REQUESTED TO MAKE THEM AVAILABLE FOR CROSS EXAMINATION INASMUCH AS THEY ARE WITNESSES OF THE ASSESSING OFFICER, BEFORE THE ADDITION IS MADE. 6. AS PER LD. A.R NEITHER ANY NOTICE SECTION 131 WAS ISSUED NOR ANY OPPORTUNITY TO CROSS EXAMINING THE WITNESS WAS GIVEN TO THE ASSESSEE. FURTHER, THE ASSESSING OFFICER HAS MERELY RELIED UPON THE STATEMENT OF MR . PRADEEP KUMAR WHO IS NOT EVEN A DIRECTOR OR SHAREHOLDER OF BHAGWAN KRISHAN INVESTMENT AND TRADING CO PV T . LTD AND HE HAS NOT EVEN BEEN ISSUED SUMMONS UNDER SECTION 131 OF THE ACT DURING THE COURSE OF ASSESSMENT PROCEEDINGS WHEN THE ALLEGATIONS MADE IN THE STATEMENTS HAVE BEEN CATEGORICALLY DENIED BY THE APPELLANT - COMPANY. THUS, WITHOUT CROSS EXAMINING AND V ERIFYING THE CONCERNED PERSONS(S), THE ASSESSING OFFICER COULD NOT HAVE COME TO CONCLUSION THAT THE SHARE APPLICATION MONEY RECEIVED IS APPELLANTS' OWN MONEY TO MAKE THE IMPUGNED ADDITION. 7. IN SUPPORT OF THE CONTENTION THAT WITHOUT ALLOWING CROSS EXAMINA TION, NO ADDITION CAN BE MADE. THE RELIANCE WAS PLACED ON THE FOLLOWING JUDICIAL PRONOUNCEMENTS: CIT V. SMC SHARES BROKERS LTD. 288 ITR 345(DEL) ITA NO. 5470/MUM/2015 M/S. WHITEMOON TRADING CO . PVT. LTD., 4 MAHESGULABRAI JOSHI V. CIT [2005] 95 ITD 300 (MUM)(SMC) YAMUNA SYNTHETICS P. LTD. V. DCIT [2004] 3 SOT 25 (DEL) 8. THE L D . AR HAS FURTHER RELIED ON THE DECISIONS IN THE FOLLOWING CASES I N SUPPORT OF THE PROPOSITION THAT NO ADDITION CAN BE MADE ON ACCOUNT SHARE CAPITAL WHEN IDENTITY OF SHAREHOLDERS HAS BEEN PROVED . 1) CIT V. DIVINE LEASING & FINANCE LTD. [ 299 ITR 268 - (DEL)] 2) CIT V. LOVELY EXPORTS P. LTD. [172 TAXMAN 44 (SC)] 3) CIT V. VALUE CAPITAL SERVICE P. LTD. (ORDER DATED 25/04/2008) 9. ON THE OTHER HAND, LD. DR CONTENDED THAT AS PAR STATEMENT OF SHRI. ASHOK KUMAR M/S BHAGWAN KRISHAN INVESTMENT & TRADING C OMPANY PVT. LTD. HAS ISSUED ACCOMMODATION CHEQUE, THEREFORE AO HAS CORRECTLY MADE ADDITION BY DECLINING SHARE CAPITAL SO RECEIVED BY THE ASSESSEE. 10. WE HAVE CONSIDERED REVIVAL CONTENTIONS AND GONE THROUGH THE ORDERS OF THE AUTHORITY BELOW AND ALSO DELIB ERATED ON THE JUDICIAL PRONOUNCEMENT REFERRED BY LOWER AUTHORITIES IN THEIR RESPECT IVE OF ORDERS AS WELL AS C ITED BY AR AND DR DURING THE ACROSS OF HEARING BEFORE US. FROM THE RECORD WE FOUND THAT IN THIS CASE, ASSESSMENT WAS COMPLETED U/S.143(3) ON 31.12. 2007 ASSESSING THE TOTAL INCOME OF THE ASSESSEE AT RS.1,94,06,630, AGAINST THE RETURNED INCOME OF 1,72,020. THEREAFTER, THE TOTAL INCOME WAS REVISED AT RS. 11,89,580 VIDE ORDER DATED 28.01.2011 GIVING EFFECT TO CIT(A)'S ORDER. SUBSEQUENTLY, THE ASSESSMENT WAS REOPENED BY ISSUING NOTICE UNDER SECTION 148 ON 21/03/2012. IN RESPONSE TO NOTICE, THE ASSESSEE VIDE LETTER DATED 24.03.2012 REQUESTED TO TREAT THE ORIGINAL RETURN FILED ON 31.10.2005 AS RETURN FILED IN RESPONSE TO NOTICE ITA NO. 5470/MUM/2015 M/S. WHITEMOON TRADING CO . PVT. LTD., 5 U/S.148 AND REQUESTED TO FURNI SH THE REASONS FOR REOPENING THE ASSESSMENT, AND ACCORDINGLY. 11. FROM THE RECORD WE FOUND THAT THE ASSESSEE IS A PRIVATE LIMITED COMPANY ENGAGED IN THE BUSINESS OF TRADING IN SHARES & SECURITIES, DURING THE YEAR, THE ASSESSEE COMPANY HAS RECEIVED RS. 15, 00,000 FROM BHAGWAN KRISHAN INVESTMENT &TRADING CO. (P) LTD. TOWARDS INVESTMENT IN PREFERENCE SHARES OF ASSESSEE COMPANY. 12. IN RESPECT OF THE SHARE APPLICATION MONEY RECEIVED FROM BHAGWAN KRISHAN INVESTMENT & TRADING CO PVT LTD, ASSESSEE HAD FURNISHED D ETAILS SUCH AS COPY OF SHARE APPLICATION FORM, CERTIFIED COPY OF MEMORANDUM & ARTICLES OF ASSOCIATION, CERTIFIED COPY OF BOARD RESOLUTION, CERTIFIED COPY OF THE AUDITORS' REPORT AND BALANCE SHEET AS ON 31ST MARCH, 2005 AND SO ON, IN SUPPORT OF THE GENUINEN ESS OF THE TRANSACTION OF SHARE APPLICATION MONEY. AO MADE ADDITION MERELY ON THE BASIS OF STATEMENT OF PRADEEP KUMAR. 13. THE STATEMENTS OF MR PRADEEP KUMAR (AS SUPPLIED TO THE ASSESSEE) ARE NOT CORRECT FOR THE REASON THAT THE ASSESSEE HAS RECEIVED SHARE APPLICATION MONEY BY CHEQUE AND NO CASH WAS GIVEN TO BHAGWAN KRISHAN INVESTMENT & TRADING CO PVT LTD. THE FACT THAT NO AMOUNT OF CASH WAS EVER GIVEN TO THE COMPANY WHICH IS PROVED BY THE FACT THAT THE BANK ACCOUNT OF THE INVESTOR - COMPANY PUNJAB NATIONAL B ANK, AZADPUR BRANCH, (WHICH WAS ALSO FURNISHED TO THE ASSESSING OFFICER - SHOWS THAT THERE IS NO SUCH CASH DEPOSIT IN THE BANK ACCOUNT OF THE SAID COMPANY AND THAT THE AMOUNT OF SHARE APPLICATION MONEY IS RECEIVED OUT OF SALE CONSIDERATION OF OLD INVESTMEN TS. ITA NO. 5470/MUM/2015 M/S. WHITEMOON TRADING CO . PVT. LTD., 6 14. WE ALSO FOUND THAT EVEN AFTER ASKING BY THE ASSESSEE THE ASSESSING OFFICER HAS NOT ISSUED ANY SUMMONS UNDER SECTION 131 OR NOTICE UNDER SECTION 133(6) TO THE DIRECTORS OF BHAGWAN KRISHAN INVESTMENT & TRADING CO PVT LTD. AND HAS CONCLUDED ONLY ON TH E BASIS OF THE STATEMENT OF MR PRADEEP KUMAR. WE ALSO FOUND THAT PRADEEP KUMAR ON WHOSE STATEMENT AO HAS RELIED WAS NOT A DIRECTOR OF M/S BHAGWAN KRISHAN INVESTMENT FROM WHOM ASSESSEE COMPANY RECEIVED SHARE APPLICATION MONEY. 15 . THE ASSESSING OFFICER IN THE ASSESSMENT ORDER HAS MERELY RELIED UPON THE STATEMENT OF A THIRD PARTY TO HOLD THAT CASH WAS GIVEN IN ORDER TO ISSUE CHEQUE DD OF THE EQUIVALENT AMOUNT FOR SUBSCRIBING TO THE SHARE APPLICATION OF THE ASSESSEE COMPANY WITHOUT PROVING THAT CASH WAS ACTU ALLY GIVEN TO THE INVESTOR - COMPANY BY EITHER PROVING FROM THEIR BANK STATEMENT OR OTHERWISE, EVEN THOUGH THE ASSESSEE HAS PROVED FROM THE BANK STATEMENT OF M/S. BHAGWAN KRISHAN INVESTMENT AND TRADING CO PVT LTD THAT THERE WA S NO SUCH CASH DEPOSIT MADE BY T HE I NVESTOR - COMPANY AND THE CHEQUE WA S ISSUED FROM THE BALANCE AVAILABLE IN THEIR BANK ACCOUNT. 16 . THE ASSESSING OFFICER HAS ALSO NOT ALLOWED CROSS EXAMINATION OF MR PRADEEP KUMAR , INSPITE OF SPECIFIC REQUEST BY ASSESSEE AND HENCE, HIS STATEMENT ON OATH HAS NO EVIDENTIARY VALUE AND HENCE REQUIRED TO BE IGNORED. 1 7 . WE FOUND THAT ASSESSEE COMPANY HAS RECEIVED APPLICATION FOR ALLOTMENT OF PREFERENCE SH ARES, WHICH HAVE BEEN ALLOTTED BY THE ASSESSEE C OMPANY AND IDENTITY OF SHARE APPLICANT HAS ALSO BEEN PROVE D BY THE ASSESSEE AND HENCE, THE SHARE APPLICATION MONEY ITA NO. 5470/MUM/2015 M/S. WHITEMOON TRADING CO . PVT. LTD., 7 COULD NOT BE ADDED AS INCOME IN THE HANDS OF THE ASSESSEE COMPANY. IN CIT V. STELLAR INVESTMENT LTD. (1991) 192 ITR 287, 288 (DEL) IT WAS HELD THAT 'IT IS EVIDENT THAT EVEN IF IT BE ASSUMED THAT THE SUBSCRIBERS TO THE INCREASED SHARE CAPITAL WERE NOT GENUINE, NEVERTHELESS, UNDER NO CIRCUMSTANCES, CAN THE AMOUNT OF SHARE CAPITAL BE REGARDED AS UNDISCLOSED INCOME OF THE ASSESSEE. IT MAY BE THAT THERE ARE SOME BOGUS SHAREHOLDERS IN WHOSE NAMES SHARES HA D BEEN ISSUED AND THE MONEY MAY HAVE BEEN PROVIDED BY SOME OTHER PERSONS. IF THE ASSESSMENT OF THE PERSONS WHO ARE ALLEGED TO HAVE REALLY ADVANCED THE MONEY IS SOUGHT TO BE REOPENED, THAT, WOULD HAVE MADE SOME SENSE BUT WE FAIL TO UNDERSTAND AS TO HOW THIS AMOUNT OF INCREASED SHARE CAPITAL CAN BE ASSESSED IN THE HANDS OF THE COMPANY ITSELF. THE APPEAL FILED BY THE REVENUE AGAINST THIS DECISION WAS DISMISSED BY THE SUPREME COURT IN CIT V. STELLER INVESTMENT LTD. (2001) 251 ITR 263 (SC) WHEREIN THE APPEAL FI LED AGAINST THE RULING OF THE HIGH COURT WAS DISMISSED BY REFUSING TO REFER THE QUESTION OF LAW. 18. IN VIEW OF THE ABOVE DISCUSSION WE DO NOT FI ND ANY MERIT IN THE ACTION OF AO MAKING ADDITION OF RS. 15,00,000. 19. IN THE RESULT APPEAL OF ASSESSEE IS AL LOWED. ORDER PRONOUNCED I N THE OPEN COURT ON THIS 10 / 02 /201 7 S D/ - SD/ - (RAVISH SOOD) (R.C. SHARMA) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI; DATED : 10 / 02 /20 17 KARUNA SR.PS ITA NO. 5470/MUM/2015 M/S. WHITEMOON TRADING CO . PVT. LTD., 8 C OPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT(A) 4. CIT - CONCERNED 5. DR, ITAT, MUMBAI 6. GUARD FILE BY ORDER, (DY./ASSTT.REGISTRAR) ITAT, MUMBAI