ACIT, Muzaffarnagar V. M/s Shamli Papers Mills Ltd., Muzaffarnagar

ITA 5618/DEL/2010

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 58612 (ITAT-DELHI)
• Duration Of Justice: 1 year(s) 1 month(s) 21 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-01-2012
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: G
• Next Hearing Date: 24-01-2012
• Assessment Year: 2007-2008
• Appeal Filed On: 10-12-2010
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: MRS SRUJANI MOHANTY
• Keywords: Bogus Share capital; Onus to prove; Set aside
• Section: 133(6)

Judgement Text

ITA NO. 5618/DEL/2010 1 IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH G, NEW DELHI BEFORE SHRI RAJPAL YADAV, JUDICIAL MEMBER AND SHRI SHAMIM YAHYA, ACCOUNTANT MEMBER I.T.A. NO. 5618/DEL/2010 A.Y. : 2007-08 ACIT, CIRCLE - I, MUZAFFARNAGAR VS. M/S SHAMLI PAPER MILLS LTD., SUBHASH CHOWK, SHAMLI, MUZAFFARNAGAR (PAN/GIR NO. : AAECS 3641L) (APPELLANT ) (APPELLANT ) (APPELLANT ) (APPELLANT ) (RESPONDENT ) (RESPONDENT ) (RESPONDENT ) (RESPONDENT ) ASSESSEE BY : SH. ANIL JAIN, ADVOCATE DEPARTMENT BY : MRS. SRUJANI MOHANTY, SR. D.R. ORDER ORDER ORDER ORDER PER SHAMIM YAHYA: AM PER SHAMIM YAHYA: AM PER SHAMIM YAHYA: AM PER SHAMIM YAHYA: AM THIS APPEAL BY THE REVENUE IS DIRECTED AGAINST TH E ORDER OF THE LD. COMMISSIONER OF INCOME TAX (APPEALS) DATED 16.9.2 010 PERTAINING TO ASSESSMENT YEAR 2007-08. 2. THE GROUNDS RAISED IN THE APPEAL READ AS UNDER: - I) ON THE FACTS IN THE CIRCUMSTANCES OF THE CASE TH E LD. COMMISSIONER OF INCOME TAX (APPEALS) HAS ERRED IN LAW BY DELETING THE ADDITION OF ` 75,00,000/- MADE B Y THE ASSESSING OFFICER ON ACCOUNT OF SHARE APPLICAT ION MONEY WITHOUT APPRECIATING FULL FACT OF THE CASE. FURTHER IN THIS CASE WHEN IDENTITY OF THE SHARE APPLICANTS HAS BEEN AMPLY DISPROVED AS THE DEPARTMENTAL OFFICERS AT AGRA AND LUCKNOW HAD ITA NO. 5618/DEL/2010 2 INTIMATED THAT NO SUCH SHARE APPLICANTS EVER EXISTED AT THE GIVEN ADDRESSES, THE ORDER OF THE HONBLE SUPREME COURTS AS REPORTED IN C.I.T. VS. LOVELY EXP ORTS P LTD., TAXMAN VO. 172 PAGE 44 (208) (SUPRA) AS QUOTED BY THE LD. COMMISSIONER OF INCOME TAX (APPEALS) FOR ALLOWING THIS APPEAL IS NOT APPLICABL E IN THIS CASE. II) THE ORDER OF THE LD. COMMISSIONER OF INCOME TAX (APPEALS) BE SET ASIDE AND THAT OF ASSESSING OFFICE R BE RESTORED. 3. IN THIS CASE THE FACTS OF THE CASE ARE THAT THE ASSESSEE IS A LIMITED COMPANY ENGAGED IN THE BUSINESS OF MANUFACTURING AND SALE OF PAPER PRODUCTS. RETURN DECLARING NIL INCOME WAS E-FILED ON 29.10.2007. DURING THE COURSE OF ASSESSMENT PROCEEDINGS IT WAS N OTICED BY THE ASSESSING OFFICER THAT THERE WAS AN INCREASE IN SH ARE CAPITAL AT ` 75,00,000/-. IT WAS CONTENDED BY THE APPELLANT THA T DURING THE YEAR UNDER CONSIDERATION IT HAD RECEIVED SHARE APPLICATI ON MONEY FROM TWO DIFFERENT INVESTORS VIZ. M/S ISHOM PHOTO COLOR LAB (P) LTD. AGRA AT ` 30 LAC AND M/S RITANSH DEVELOPER AND FINANCING PVT. LTD., NEW DELHI AT ` 45 LACS. THUS IN ORDER TO ASCERTAIN THE GENUINENES S OF TRANSACTIONS THE ASSESSING OFFICER ISSUED COMMISSION U/S 131(D) TO THE DEPARTMENTAL OFFICERS IN AGRA AND LUCKNOW AS WELL A S SOUGHT INFORMATION 133(6) OF THE ACT. THE LETTERS ISSUED B Y REGISTERED POST TO THE AFORESAID SHARE APPLICANT COMPANIES U/S. 133(6) REMAINED UNSERVED WHILE THE DEPARTMENTAL OFFICERS IN AGRA AN D NEW DELHI INFORMED THAT NO SUCH COMPANIES EXISTED AT THE GIVEN ADDRESS. THUS THE ASSESSING OFFICER REQUIRED THE ASSESSEE TO PRO DUCE M.D./C.E.O. TO ITA NO. 5618/DEL/2010 3 THESE COMPANIES FOR EXAMINATION. HOWEVER, THE ASSESS EE TRIED TO JUSTIFY THE GENUINENESS OF TRANSACTION OF SHARE APPL ICATION MONEY BUT NO SUCH PERSON RESPONSIBLE FOR INVESTMENT WAS PRODUC ED. THE ASSESSING OFFICER OBSERVED THAT THE COMPANY WAS NOT A PUBLIC LIMITED COMPANY HAVING AN IPO (INITIAL PUBLIC OFFER) RATHER I T WAS A CLOSELY HELD PRIVATE LIMITED COMPANY WHICH DIRECTLY ALLOTTED SHARE S IN THESE PERSONS. THUS IT WAS BEYOND REASON THAT THE MANAGE MENT OF THE ASSESSEE COMPANY COULD ONLY HAVE A LIMITED NUMBER OF M EMBERS. UNDER THESE CIRCUMSTANCES CONDITIONS, ONUS TO PROVE GENUINENESS OF SHARE CAPITAL TRANSACTIONS COMPLETELY LIED WITH THE ASSESSEE COMPANY. THE ASSESSING OFFICER HAS ALSO MADE REFERENCE OF TH E DECISION OF THE HONBLE DELHI HIGH COURT IN THE CASE OF C.I.T. VS. LOVELY EXPORTS PVT. LTD. DATED 16.11.2006 WHEREIN IT WAS HELD THAT THE SAME CRITERIA COULD NOT APPLIED TO LARGE SCALE SUBSCRIPTION OF SHARE OF A PUBLIC LIMITED COMPANY (WHERE THE COMPANY MAY HAVE NO MATERIAL OTHER THAN APPLICATION FORMS AND BANK TRANSACTION DETAILS TO GI VE SOME IDENTITY OF SUBSCRIBERS) AND TO A COMPANY WHICH WAS PRIVATE LIMI TED AND CLOSELY HELD AND THE SHARES WERE DIRECTLY ALLOTTED BY IT TO THE SUBSCRIBERS. IN LATER CASE, ACCORDING TO HONBLE HIGH COURT THE ONU S ALMOST ENTIRELY LIES WITH THE ASSESSEE TO PROVE GENUINENESS OF TRA NSACTIONS INVOLVING SHARE CAPITAL. THUS THE ASSESSING OFFICER MADE ADDITION OF SHARE APPLICATION MONEY AT ` 75,00,000/- U/S. 68 OF THE A CT TO THE INCOME OF THE ASSESSEE. 4. UPON ASSESSEES LD. COMMISSIONER OF INCOME TAX (AP PEALS) OBSERVED THAT DURING ASSESSMENT PROCEEDINGS ITSELF, THE ASSESSEE HAD FURNISHED ADEQUATE DETAILS TO SUBSTANTIATE INCREASE IN SHARE CAPITAL. HE OBSERVED THAT IT IS NOT DISPUTED THAT NAME, ADDR ESS, AMOUNT OF SHARE ALLOTMENT AS WELL AS COPIES OF SHARE APPLICAN T FORMS SIGNED BY ITA NO. 5618/DEL/2010 4 THESE PERSONS, THEIR INCOME TAX RETURNS, ETC. HAVE BEEN PLACED BEFORE THE ASSESSING OFFICER. LD. COMMISSIONER OF INCOME TAX (APPEALS) FURTHER OBSERVED THAT SUCH ALLOTTEES COULD BE CROSS TALLIED FROM THE FORM NO. 2 WITH ROC AS WELL. IN THESE CIRCUMSTANCES , HE HELD THAT IT IS INFERRED THAT THE ASSESSEE WAS ABLE TO DISCHARGE ITS PRIMARY ONUS OF TABLING ALL THE RELEVANT DETAILS. LD. COMMISSIONER OF INCOME TAX (APPEALS) PROCEEDED TO SET ASIDE THE ORDER OF THE A SSESSING OFFICER AND DECIDE THE ISSUE IN FAVOUR OF THE ASSESSEE. HE HELD THAT SUFFICIENT EVIDENCE E.G. CONFIRMATION, IT RETURNS, BANK STATEME NTS HAVE BEEN FURNISHED, WHICH HAD SHIFTED THE ONUS FROM ASSESSEE ONTO ASSESSING OFFICER, BUT ASSESSING OFFICER HAS NOT DISCHAR GED HIS ONUS TO SHOW ANY DISCREPANCY /FALSITY IN SUCH EVIDENCES. ACCOR DINGLY, LD. COMMISSIONER OF INCOME TAX (APPEALS) DECIDE THE ISSU E IN FAVOUR OF THE ASSESSEE. 5. AGAINST THE ABOVE ORDER THE REVENUE IS IN APPEAL BEFORE US. 6. WE HAVE HEARD THE RIVAL CONTENTIONS IN LIGHT OF THE MATERIAL PRODUCED AND PRECEDENT RELIED UPON. AS PER THE A DMITTED FACTS OF THE CASE, IN THIS CASE, IN ORDER TO ASCERTAIN THE GEN UINENESS OF THE TRANSACTIONS, ASSESSING OFFICER ISSUED COMMISSION U/ S. 131(D) TO THE DEPARTMENTAL OFFICERS IN AGRA AND LUCKNOW AS WELL A S SOUGHT INFORMATION 133(6) OF THE ACT. THE LETTERS ISSUE D BY REGISTERED POST TO THE AFORESAID SHARE APPLICANT COMPANIES U/S. 133(6) REMAINED UNSERVED WHILE THE DEPARTMENTAL OFFICERS IN AGRA AN D NEW DELHI INFORMED THAT NO SUCH COMPANIES EXISTED AT THE GIVEN ADDRESS. IN THESE CIRCUMSTANCES, THE IDENTITY OF THE SHARE APP LICANT IS NOT EITHER PROVED. THE OTHER DOCUMENTS, WHICH LD. COMMISSIONE R OF INCOME TAX (APPEALS) HAS RELIED TO ESTABLISH THE CREDENTIALS OF THE ASSESSEE ITA NO. 5618/DEL/2010 5 COMPANY, WE FIND THAT THESE DOCUMENTS HAVE NOT BEEN PROPERLY EXAMINED. MOREOVER, WE FIND THAT SHARES HAVE BEEN I SSUED AT PREMIUM OF ` 25 PER SHARE, THIS ASPECT HAS NOT BEEN EXAMINED EITHER BY THE ASSESSING OFFICER OR BY THE LD. COMMISSIONER OF INCOME TAX (APPEALS). IN OUR CONSIDERED OPINION, INTEREST OF J USTICE WILL SERVED IF THE MATTER IS REMITTED TO THE FILE OF THE ASSESSING O FFICER TO CONSIDER THE ISSUE AFRESH. HENCE, THE MATTER STANDS REMITTE D TO THE FILE OF THE ASSESSING OFFICER TO CONSIDER THE ISSUE AFRESH. 7. IN THE RESULT, THE APPEAL FILED BY THE REVENUE S TANDS ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 31/1/2012. SD/- SD/- [ [[ [RAJPAL YADAV RAJPAL YADAV RAJPAL YADAV RAJPAL YADAV] ]] ] [SHAMIM YAHYA] [SHAMIM YAHYA] [SHAMIM YAHYA] [SHAMIM YAHYA] JUDICIAL MEMBER JUDICIAL MEMBER JUDICIAL MEMBER JUDICIAL MEMBER ACCOUNTANT MEMBER ACCOUNTANT MEMBER ACCOUNTANT MEMBER ACCOUNTANT MEMBER DATE 31/1/2012 SRB COPY FORWARDED TO: COPY FORWARDED TO: COPY FORWARDED TO: COPY FORWARDED TO: - -- - 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT (A) 5. DR, ITAT TRUE COPY BY ORDER, ASSISTANT REGISTRAR, ITAT, DELHI BENCHES