ITO, Jaipur V. M/S BELLS PAPER BOARD PVT. LTD., Jaipur

ITA 575/JPR/2011

• Counselvise Citation: 57523114 RSA 2011
• Duration Of Justice: 3 year(s) 2 month(s) 18 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-08-2014
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 1989-1990
• Appeal Filed On: 09-06-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: D C SHARMA
• Assessee Lawyers: MADHUKAR GARG
• Keywords: Bogus Share capital; Onus to prove
• Section: 68

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNAL JAIPUR BENCH, JAIPUR (BEFORE SHRI R.P. TOLANI AND SHRI T.R. ME ENA) ITA NO. 575/JP/2011 ASSESSMENT YEARS : 1989-90 THE ITO VS. M/S. BELLS PAPER BOARD (P) LTD. WARD- 4(2) A-333, VKI AREA JAIPUR JAIPUR (APPELLANT) (RESPONDENT) DEPARTMENT BY: SHRI D.C. SHARMA ASSESSEE BY : SHRI MADHUKAR GARG DATE OF HEARING: 05-08-2014 DATE OF PRONOUNCEMENT: 28 -08-2014 ORDER PER R.P. TOLANI, JM THE REVENUE HAS FILED AN APPEAL AGAINST ORDER OF THE LD. CIT(A)-III, JAIPUR DATED 31-03-2011 FOR THE ASSESSMENT YEAR 19 89-90 WHEREIN THE REVENUE HAS RAISED FOLLOWING GROUNDS:- ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW THE LD. CIT(A) HAS ERRED IN :- (I) DELETING THE ADDITION OF RS. 1,20,000/- MADE BY THE AO UNDER THE HEAD INCOME OTHER SOURCES WHICH WAS CL AIMED BY THE ASSESSEE AS RECEIPT ON SALE OF MACHINERY WITHOU T APPRECIATING THE FACTS OF THE CASE. (II) DELETING THE ADDITION OF RS. 59,000/- OUT OF ADDITION OF RS. 69,000/- MADE BY THE AO U/S 68 OF T HE I.T. ACT WITHOUT APPRECIATING THE FACT THAT ALLEGED CASH CRE DITORS WERE 2 NEVER PRODUCED BEFORE THE AO AND IMMEDIATE SOURCE O F FUNDS WAS NOT EXPLAINED BY THE ASSESSEE. (III) DELETING THE ADDITION OF RS. 3,30,000/- MADE BY THE AO ON ACCOUNT OF UNEXPLAINED SHARE CAPITAL WIT HOUT APPRECIATING THE FACTS OF THE CASE. (IV) DELETING THE ADDITION OF RS. 1,18,927/-OUT OF ADDITION OF RS. 1,42,677/- MADE BY THE AO ON ACCOUN T OF UNRECORDED INVESTMENT / EXPENSES NOTICED IN SEIZED DOCUMENT WITHOUT APPRECIATING THE FACT THAT THE ASSESSEE COU LD NOT GIVE ANY SATISFACTORY EXPLANATION OF THESE DOCUMENTS. 2.1 APROPOS GROUND NO. 1, THE FACTS OF THE CASE ARE THAT THE ASSESSEE COMPANY SOLD SOME MACHINERY WHICH WAS HELD BY IT AS ITS ASSETS AMOUNTING TO RS. 1.20 LACS. THE SALE PROCEEDS WERE RECEIVED B Y CHEQUES. ACCORDING TO THE AO, THE EX-DIRECTOR OF THE COMPANY I.E. SHRI K. C. MITTAL COULD NOT RESPOND TO THE ENQUIRY PROPERLY. THE AO HELD THE SA LE OF MACHINERY AS BOGUS AND MADE THE ADDITION. 2.2 IN THE FIRST APPEAL, THE LD. CIT(A) DELETED THE ADDITION BY OBSERVING AS UNDER:- 2.2 ON THE OTHER HAND, IT HAS BEEN CONTENDED BY THE LD. AR THAT NO ADDITION WAS REQUIRED TO BE MADE FOR THE SAID SUM OF RS. 1.20,000/- ON ACCOUNT OF THE FACT THAT SALE OF MACHINERY WAS DULY MADE WHICH WAS ALSO ADMITTED BY SHRI K.C. MITTAL AND ALSO BECAUSE THE MACHINERY HAD BEEN DISPATCHED TO THE PURCHASER, THOUGH M/S. SHEKHAWATI TRANSPORT COMPANY VIDE THEIR GR NO.1703 BY TRUCK NO. RJP 7211 AND GR NO.1704 BY TRUCK NO. RJV 655. COPIES OF THE GRS ARE ALSO PLACED ON RECORD BY THE APPELLANT AND IT WAS FURTHE R MENTIONED THAT THESE GRS BEAR THE STAMP OF MUNICIPAL COUNCIL, 3 KISHANGARH. THIS WOULD CONCLUSIVELY PROVE THAT THE MACHINERY WAS SOLD TO PARTIES AT KISHANGARH, WHO HAVE RECEIVE D THE SAME. AS THE SALES WERE GENUINE, THE LD. ASSESSING OFFICE R WAS NOT JUSTIFIED IN MAKING THE IMPUGNED ADDITION OF RS. 1, 20,000/- TO THE INCOME OF THE APPELLANT. 2.3 I HAVE CONSIDERED THE FACTS OF THE CASE AS WELL L AS THE EVIDENCE PLACED ON RECORD AND IN VIEW OF THE ST ATEMENT OF SHRI K.C. MITTAL, EX-DIRECTOR OF THE APPELLANT COMP ANY, THAT THE MACHINERY WAS SOLD TO THE PARTIES AND THE PAYMENT T HEREOF HAD BEEN RECEIVED, THERE SEEMS NO JUSTIFICATION ON THE PART OF THE LD. AO TO TREAT THE SUM OF RS. 1,20,000/- AS UNDISCLOSE D INCOME OF THE APPELLANT FROM OTHER SOURCES. THE IMPUGNED ADDI TION OF RS. 1,20,000/- MADE TO THE APPELLANTS INCOME IS THEREF ORE, DELETED. 3.1 APROPOS GROUND NO. 2, THE FINDINGS OF THE LD. C IT(A) IN PARA 4.3 OF HIS ORDER NARRATE ALL THE FACTS AND REASONS FOR GIV ING RELIEF WHICH IS AS UNDER:- 4.3. I HAVE CONSIDERED THE FACTS OF THE CASE, AS WELL AS, THE EVIDENCE PLACED ON RECORD. THE ASSESSING OF FICER HAS MENTIONED IN THE ORDER THAT CONFIRMATION HAS BEEN F ILED FROM ALL SUCH PERSONS AND THE APPELLANT HAS ALSO FILED COMPU TATION SHEETS, ACKNOWLEDGEMENT FOR FILING OF RETURNS ALONG WITH GI R NOS. FOR EIGHT PERSONS ALTHOUGH THE SAID CONFIRMATIONS ARE FOR ASS ESSMENT YEAR 1992-93. THIS SHOWS THAT THESE EIGHT PERSONS WERE A SSESSED TO TAX AND THEIR PARTICULARS AND ADDRESS WERE AVAILABLE TO THE DEPARTMENT. HOWEVER, THE LD.AO HAS NOT MADE ANY EFF ORTS TO FIND OUT THE REAL INVESTOR. THE JURISDICTIONAL HIGH COUR T IN THE CASE OF CIT VS. SHREE BARKHA SYNTHETICS LTD. HAS HELD THAT ONCE CONFIRMATION LETTER WAS RECEIVED AND IDENTITY AND E XISTENCE OF THE INVESTOR HAS NOT BEEN DISPUTED, THE INCREASE IN SHA RE CAPITAL ON ACCOUNT OF SHARE APPLICATION COULD NOT HAVE BEEN SU STAINED. THE EXISTENCE OF CREDITOR WAS ALSO ESTABLISHED AS THE S HARES WERE ISSUED IN HIS NAME. NO EFFORT WAS MADE TO FIND OUT THE REA L INVESTOR WHO HAS INVESTED IN THE NAME OF THE CREDITOR AND THEREF ORE, ADDITIONS OR 4 INCREASE IN SHARE CAPITAL ON ACCOUNT OF SHARE APPLI CATION COULD NOT BE SUSTAINED. THUS, IN VIEW OF THE FACTS MENTIONED ABOVE AND THE BINDING DECISION OF JURISDICTIONAL HIGH COURT, THE IMPUGNED ADDITION TO THE EXTENT OF RS.59,000/- IS DELETED AND TO THE EXTENT OF RS. 10,000/- IS SUSTAINED, AS THE APPELLANT HAD NOT FILED ANY CONFI RMATION OR OTHER EVIDENCE FROM SMT. SANGEETA GUPTA, IN RESPECT OF TH E CREDIT OF RS.10,000/- SHOWN IN HER NAME. 4.1 APROPOS GROUND NO.3, THE FINDINGS OF THE LD. CI T(A) IN PARA 6.1 OF HIS ORDER NARRATE ALL THE FACTS AND REASONS FOR GIV ING RELIEF WHICH IS AS UNDER:- 6.1. FROM THE PERUSAL OF THE ASSESSMENT ORDER, IT IS NOTICED THAT THE ASSESSING OFFICER HAS NOT MENTIONE D FULL FACTS REGARDING THE SAID ADDITION AND IT HAS ONLY BEEN ME NTIONED THAT INSPECTOR'S ENQUIRY REVEALED ON NEW GIR NUMBER SUBM ITTED BY THE APPELLANT THAT ONLY THREE SHAREHOLDERS ARE GENU INE AND THEREFORE, RS.90,000/- I.E. RS.30,000/- EACH OUT OF RS.4,20,000/- IS BEING ALLOWED AND REST IS ADDED BACK TO THE COMP ANY'S INCOME. THE APPELLANT WAS ASKED TO EXPLAIN THE FULL FACTS IN THIS REGARD AND IT HAS BEEN POINTED OUT BY HIM THAT THE APPELLANT COMPANY HAS RECEIVED APPLICATION FROM 12 PERSONS FO R ALLOTTING SHARES OF THE COMPANY AND PHOTOSTAT COPIE S OF THE SHARE APPLICATION FORMS AS WELL AS CONFIRMATIONS FR OM ALL THE PARTIES ALONG WITH THEIR GIR NUMBERS AND WARDS WERE FURNISHED BEFORE THE ASSESSING OFFICER. THESE COPIE S ARE AGAIN ENCLOSED AND FROM THE PERUSAL OF THE SAME IT IS OBS ERVED THAT COMPLETE DETAILS REGARDING CHEQUE NUMBER, GIR NUMBE R, ADDRESS ETC. HAVE DULY BEEN GIVEN IN THE SAID FORMS . IT WAS, THEREFORE, MENTIONED THAT THE BURDEN PLACED ON THE APPELLANT COMPANY STOOD DISCHARGED AND NO ADDITION IS POSSIBL E IN THE HANDS OF THE COMPANY. THE APPELLANT HAS ALSO RELIED ON THE DECISIONS OF HON'BLE DELHI HIGH COURT IN THE CASE O F CIT VS. STELLER INVESTMENTS REPORTED IN 192 ITR 287.AS WELL AS DECISION OF HON'BLE BOMBAY HIGH COURT, REPORTED IN 113 ITR 5 89 AND 186 ITR 242. DURING THE COURSE OF APPELLATE PROCEED INGS, THE 5 APPELLANT HAD ALSO RELIED ON THE DECISION OF SHREE BARKHA SYNTHETICS LTD. 283 ITR 377(RAJ) AS WELL AS THE DEC ISION OF HON'BLE SUPREME COURT IN THE CASE OF CIT VS. LOVELY EXPORTS PVT. LTD., 319 ITR 5(JUR). IT WAS CONTENDED BY THE APPELLANT THAT IN VIEW OF THE DECISION OF THE HON'BLE RAJASTH AN HIGH COURT AS WELL AS THE HON'BLE SUPREME COURT, APPELLA NT'S BURDEN IS ONLY TO PROVE THE EXISTENCE OF PERSONS IN RESPEC T OF SHARE APPLICATION MONEY AND THERE IS NO FURTHER BURDEN TO PROVE WHETHER THAT PERSON HIMSELF HAS INVESTED OR INVESTE D ON HIS BEHALF. 6.2. AFTER CONSIDERING THE RIVAL CONTENTIONS A ND EVIDENCE ON RECORD, IT IS CLEAR THAT THE APPELLANT HAS PLACED O N RECORD REQUEST LETTERS OF ALLOTMENT RECEIVED FROM 12 PERSO NS FOR ALLOTMENT OF EQUITY SHARES AND THE SAID LETTERS ALS O GIVE COMPLETE ADDRESS OF THE APPLICATIONS ALONGWITH DETA ILS OF CHEQUE NUMBER ETC. AS WELL AS THEIR GIR NUMBER. IT SEEMS THAT NO ENQUIRY HAS BEEN CONDUCTED BY THE ASSESSING OFFI CER FROM THE SAID PERSONS WHO HAVE INVESTED THE AMOUNTS AND THE ASSESSING OFFICER SIMPLY MADE ADDITIONS WITHOUT TRY ING TO FIND OUT THE EXISTENCE OF THE APPLICANTS FOR SHARES. REL YING ON THE DECISION OF HON'BLE RAJASTHAN HIGH COURT IN CIT VS . SHREE BARKHA SYNTEHTICS LTD. AS WELL AS DECISION OF HON'B LE DELHI HIGH COURT IN STELLER INVESTMENTS, WHICH HAS ALSO B EEN AFFIRMED BY THE HON'BLE SUPREME COURT IN 251 ITR 26 3, THE APPELLANT HAS DISCHARGED THE BURDEN PLACED UPON IT AND THEREFORE, THE ASSESSING OFFICER WAS NOT JUSTIFIED IN MAKING ADDITION OF RS.3,30,000/- TO THE INCOME OF THE APPE LLANT. THE ADDITION OF RS. 3,30,000/- IS THEREFORE, DELETED. T HE APPELLANT GETS A RELIEF OF RS. 3,30,000/- IN RESPECT OF THIS GROUND. 5.1 APROPOS GROUND NO.4, THE FINDINGS OF THE LD. CI T(A) IN PARA 7.3 OF HIS ORDER NARRATE ALL THE FACTS AND REASONS FOR GIV ING RELIEF WHICH IS AS UNDER:- 7.3 THE APPELLANT HAD PROVIDED COPIES OF PAPERS AT PAGE NO. 51,52, AND 53 AND FROM THE PERUSAL OF THE SAME, IT IS SEEN THAT PAGES NO. 51,52, AND 53 CONTAIN RATES FOR THE WORK TO 6 BE DONE AS WELL AS THE MATERIAL TO BE UTILIZED AND DO NOT CONTAIN ANY DATE NOR THERE IS ANY MENTION THAT ANY PAYMENT HAS BEEN MADE. PAGE NO. 54 IS IN RELATION TO PURCHASE OF 300 BAGS OF CEMENT FOR RS. 20,400/- ON 16-10-1987 AND PAGE NO. 55 PERTAIN TO PURCHASE OF CERTAIN ITEMS FOR RS. 3,350/-. NO EV IDENCE HAS BEEN FURNISHED BY THE APPELLANT TO SHOW THAT ANY AD VANCE WAS GIVEN TO SHRI MAHESH CHAND GUPTA FOR PURCHASE OF TH ESE ARTICLES AND THEREFORE, ADDITION OF RS. 20,400/- AN D RS. 3,350/- ON THE BASIS OF PAGES 54 AND 55 ARE CONFIRMED. THE ASSESSING OFFICER HAS NOT MENTIONED AS TO HOW SHE HAS ARRIVED AT A FIGURE OF RS. 1,42,677/- AND IN THE ABSENCE OF THE DETAILS AS WELL AS ON PERUSAL OF THE PAPERS, WHICH ARE SHOWING ONLY THE R ATES, THE BALANCE ADDITION OF RS. 1,18,927/-IS DELETED . 6.1 THE LD. DR RELIED ON THE ORDER OF THE AO AND CO NTENDED THAT THE RELIEF HAS BEEN GRANTED IN UNTENABLE MANNER. 7.1 THE LD. AR CONTENDED THAT THE LD. CIT(A) HAS PA SSED THE DETAILED ORDER AND FOR EACH AND EVERY RELIEF APPROPRIATE FIN DINGS HAVE BEEN GIVEN WHICH HAVE NOT BEEN CONTROVERTED BY THE LD. DR . TH US THE ORDER OF THE LD. CIT(A) IS RELIED UPON. 8.1 WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIALS AVAILABLE ON RECORD. IT HAS NOT BEEN DISPUTED BY TH E LD. AR OF THE ASSESSEE THAT MACHINERY IN QUESTION WAS HELD AS AN ASSET BY THE COMPANY. THE ASSESSEE PRODUCED THE DETAILS OF M/S. SHEKHAWATI TR ANSPORT COMPANY WHEREIN THE GRS BEAR THE STAMP OF MUNICIPAL COUNCIL , KISHANGARH. THE LD. CIT(A) HAS GIVEN AN APPROPRIATE FINDINGS OF FACT TH AT THE MACHINERY WAS SOLD BY THE ASSESSEE. THEREFORE, IN VIEW OF THE FACTS A ND CIRCUMSTANCES OF THE 7 CASE, WE FIND NO INFIRMITY IN THE ORDER OF THE LD. CIT(A). HENCE, THE GROUND NO. 1 OF THE REVENUE IS DISMISSED. 9.1 APROPOS GROUND NO. 2, THE RELIEF OF RS. 59,000/ -IN RESPECT OF ADDITION U/S 68 OF THE ACT HAS BEEN GIVEN VERIFYING THE RETU RNS FILED BY THE CREDITORS AND BY RELYING ON THE JUDGEMNET OF HON'BLE RAJASTH AN HIGH COURT IN THE CASE SHREE BARKHA SYNTHETICS LTD. VS. ACIT , (2006) 283 ITR 377. THUS, IN VIEW OF THE FACTS AND CIRCUMSTANCES, WE FIND NO INF IRMITY IN THE ORDER OF THE LD. CIT(A) WHICH IS UPHELD. HENCE, THE GROUND NO. 2 OF THE REVENUE IS DISMISSED. 10.1 APROPOS GROUND NO. 3, THE ASSESSEE DISCHARGED ITS PRIMARY ONUS IN RESPECT OF ADDITION OF RS.3.30 LACS BY FILING THE COPIES OF SHARE APPLICATION FORMS, GIR NUMBERS AND WARDS OF THE SHARES SUBSCRIB ERS. THE LD. CIT(A) HAS RELIED ON THE DECISION OF HON'BLE RAJASTHAN HIGH C OURT IN THE CASE OF CIT VS. SHREE BARKHA SYNTHETICS LTD. AS WELL AS THE DEC ISION OF HON'BLE DELHI HIGH COURT IN THE CASE OF STELLER INVESTMENTS LTD. WHICH HAS ALSO BEEN AFFIRMED BY HON'BLE APEX COURT IN THE CASE OF CIT V S. STELLAR INVESTMENTS , 251 ITR 263. THUS, IN VIEW OF THE FACTS AND CIRCUM STANCES OF THE CASE, WE FIND NO INFIRMITY IN THE ORDER OF THE LD. CIT(A) WH ICH IS UPHELD. HENCE, THE GROUND NO. 3 OF THE REVENUE IS DISMISSED. 8 11.1 APROPOS GROUND NO. 4, THERE IS FINDING OF FACT GIVEN BY THE LD. CIT(A) THAT THE AO HAS NOT MENTIONED AS TO HOW THE FIGURE OF RS. 1,42,667/- WAS ARRIVED AT. SINCE NO REASONS ARE MENTIONED IN T HE ASSESSMENT ORDER THEREFORE, THE LD. DR COULD NOT CONTROVERT THE FIN DINGS OF THE LD. CIT(A). THUS, IN VIEW OF THE FACTS AND CIRCUMSTANCES AND CI RCUMSTANCES OF THE CASE, WE FIND NO INFIRMITY IN THE ORDER OF THE LD. CIT(A) WHICH IS UPHELD. HENCE, THE GROUND NO. 4 OF THE REVENUE IS DISMISSED. 12 IN THE RESULT, THE APPEAL OF THE REVENUE IS DI SMISSED. THE ORDER PRONOUNCED IN OPEN COURT ON 28 TH AUG, 2014 SD/- SD/- (T.R. MEENA) (R.P. TOLANI) ACCOUNTANT MEMBER JUDICIAL MEMBER JAIPUR DATED: 28 TH AUG, 2014 *MISHRA COPY FORWARDED TO:- 1. THE ITO, WARD- 4 (2) JAIPUR 2. M/S. BELLS PAPER BOARD (P) LTD. , JAIPUR 3. THE LD. CIT 4. THE LD. CIT(A), JAIPUR 5..THE LD. DR 6.THE GUARD FILE (IT NO. 575/JP/2011) BY ORDER AR ITAT, JAIPUR 9 10 11