INCOME TAX OFFICER 12(2)(2), MUMBAI V. M/S. EAST ASIATIC INFRASTRUCTURE CORP. PRIVATE LIMITED , MUMBAI

ITA 5884/MUM/2017

• Counselvise Citation: [2020] 111 COUNSELVISE.COM (IT) 4414 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 5 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-02-2020
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: E
• Assessment Year: 2012-2013
• Appeal Filed On: 15-09-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: AMIT PRATAP SINGH
• Keywords: Unexplained cash credit
• Section: 143(3); 133(6); 143(1); 195; 143(2); 119; 68; 6

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCH E, MUMBAI BEFORE SHRI RAJESH KUMAR, ACCOUNTANT MEMBER AND SHRI RAM LAL NEGI, JUDICIAL MEMBER ITA NO.5884/M/2017 ASSESSMENT YEAR: 2012-13 ITO 12(2)(2), 1 ST FLOOR, ROOM NO.146A, AAYAKAR BHAVAN, M.K. ROAD, MUMBAI - 400020 VS. M/S. EAST ASIATIC INFRASTRUCTURE CORP. PVT. LTD., D-205, VEENA NAGAR CHS LTD., CHINCHOLI, S.V. ROAD, MALAD (WEST), MUMBAI 400 064 PAN: ABAFS1010K (APPELLANT) (R ESPONDENT) PRESENT FOR: ASSESSEE BY : SHRI AMIT PRATAP SINGH, A.R. REVENUE BY : SHRI BHUPENDRA SHAH, D.R. DATE OF HEARING : 13.01.2020 DATE OF PRONOUNCEMENT : 18.02.2020 O R D E R PER RAJESH KUMAR, ACCOUNTANT MEMBER: THE PRESENT APPEAL HAS BEEN PREFERRED BY THE REVEN UE AGAINST THE ORDER DATED 28.04.2015 OF THE COMMISSIO NER OF INCOME TAX (APPEALS) [HEREINAFTER REFERRED TO AS TH E CIT(A)] RELEVANT TO ASSESSMENT YEAR 2012-13. 2. THE ONLY ISSUE RAISED BY THE REVENUE IS AGAINST THE ORDER OF LD. CIT(A) DELETING THE ADDITION MADE BY THE AO ON ACCOUNT OF SHARE APPLICATION AND SHARE PREMIUM OF RS.5 CRORE B Y TREATING THE SAME AS UNEXPLAINED CASH CREDIT UNDER SECTION 6 8 OF THE ACT. 3. THE FACTS IN BRIEF ARE THAT THE ASSESSEE FILED T HE RETURN OF INCOME ON 28.09.2012 DECLARING INCOME OF RS.1,390/- WHICH ITA NO.5884/M/2017 M/S. EAST ASIATIC INFRASTRUCTURE CORP. PVT. LTD. 2 WAS PROCESSED UNDER SECTION 143(1) OF THE ACT. THE CASE OF THE ASSESSEE WAS SELECTED FOR SCRUTINY AND NOTICES WERE ISSUED UNDER SECTION 143(2) OF THE ACT AND DULY SERVED. DU RING THE COURSE OF ASSESSMENT PROCEEDINGS THE AO OBSERVED TH AT ASSESSEE HAS ISSUED SHARES TO ASSOCIATE COMPANIES OF FACE VA LUE OF RS.10 AT A PREMIUM OF RS.240/- AND ACCORDINGLY CALLED UPO N THE ASSESSEE TO SUBMIT THE DETAILS OF SHARE APPLICATION MONEY RECEIVED AND ALSO THE FINANCIAL STATEMENTS TO THESE TWO COMPANIES ALONG WITH BANK STATEMENTS, BALANCE SHEET S, PROFIT AND LOSS ACCOUNTS ETC. THE ASSESSEE DULY FILED THE DETAILS AS RELIED UPON BY THE AO AND AO ON THE BASIS OF BANK S TATEMENT OF THE ASSESSEE OBSERVED THAT THE INVESTORS HAVE FREQU ENT TRANSACTIONS OF DEBIT AND CREDITS AND MINIMUM BALAN CE IS VERY MEAGER AND THUS THE AO ALSO OBSERVED THAT THESE COM PANIES WERE NOT HAVING ANY FINANCIAL STRENGTH AND ALSO NOT DOING ANY BUSINESS OPERATION AND THUS THERE IS NO REASON BY T HE HUGE AMOUNT OF PREMIUM SHOULD BE PAID. ACCORDINGLY AO CA ME TO CONCLUSION THAT THE WHOLE TRANSACTIONS IS A COLOURA BLE DEVICE AND ACCORDINGLY ADDED THE ENTIRE AMOUNT AS UNEXPLAI NED CASH CREDIT BY FRAMING ASSESSMENT UNDER SECTION 143(3) O F THE ACT. 4. THE LD. CIT(A) DELETED THE DISALLOWANCE BY OBSER VING THAT CONCLUSION OF THE AO IS WRONG AND BASED ON THE WRON G FACTS. THE LD. CIT(A) OBSERVED THAT BOTH THE SHARE APPLICA NTS WERE DOING BUSINESS AND FILING THEIR RETURNS OF INCOME R EGULARLY. THE LD. CIT(A) ALSO NOTED THAT THE ASSESSEE HAS FILED T HE NECESSARY EVIDENCES BEFORE THE AO IN THE FORM OF PANS, BALANC E SHEETS, BANK STATEMENTS ETC. AND BOTH THESE ENTITIES WERE G ROUP COMPANIES AND AO HAS NOT CONDUCTED ANY FURTHER ENQU IRY EXCEPT MAKING THE ADDITION ON PRESUMPTION AND SURMI SES. THE ITA NO.5884/M/2017 M/S. EAST ASIATIC INFRASTRUCTURE CORP. PVT. LTD. 3 LD. CIT(A) RELIED ON THE DECISION OF HONBLE SUPREM E COURT IN THE CASE OF CIT VS. LOVELY EXPORTS PRIVATE LTD. (2008) 216 CTR 195 (SC). THE LD. A.R. ALSO RELIED ON THE DECISION OF OSIS HOSPITALITIES PVT. LTD. (2011) 333 ITR 119 (DEL. HC ) WHICH WAS PASSED AFTER CONSIDERING THE DECISION OF HONBLE SU PREME COURT IN THE CASE OF CIT VS. LOVELY EXPORTS PRIVATE LTD. (SUPRA). FINALLY, THE LD. CIT(A) OBSERVED AND HELD AS UNDER: 5.10 IN VIEW OF THE LEGAL POSITION EMANATING FROM LEGAL PRECEDENTS AND THE OBSERVATIONS OF HON'BLE DELHI HIGH COURT, IN THE CA SE OF GANGESHWARI METAL P. LTD. AS DISCUSSED ABOVE IT IS NOTED THAT WHEN REQUISITE DOCUMENTS SUCH AS PAN, BANK ACCOUNTS, BALANCE SHEET ETC, WERE AVAILABLE WITH TH E A.O., TO ESTABLISH THAT NO CASH TRANSACTIONS WERE INVOLVED IN THE BANK ACCOUNTS OF THE INVESTING COMPANIES THEN WITHOUT FURTHER PROBE TO PROVE CONTRARY THE ADDITIO N U/S 68 IN THE HAND OF THE ASSESSEE CANNOT BE MADE. IN VIEW OF THE ABOVE DISCU SSION ON THE FACTS OF THE CASE AND HAVING REGARD TO THE DECISIONS OF COURTS AND JU DICIAL PRECEDENTS AS NOTED ABOVE, THE ADDITION MADE BY THE A.O. OF THE SHARE C APITAL AND PREMIUM OF RS.5,00,00,000/- UNDER SECTION 68 OF THE INCOME ACT 1961 CANNOT BE SUSTAINED IN APPEAL AND IS DIRECTED TO BE DELETED. ACCORDINGLY T HESE GROUNDS OF APPEAL ARE ALLOWED. 5. THE LD. D.R. ,WHILE RELYING ON THE ORDER OF AO, SUBMITTED THAT IN THIS CASE THE ASSESSEE COMPANY WAS NOT DOIN G ANY BUSINESS AND HAS DECLARED AN INCOME OF RS.1,390/- A ND THUS HAS NO FINANCIAL STRENGTH WARRANTING THE ISSUE OF S HARES OF FACE VALUE OF RS.10/- EACH AT A PREMIUM OF RS.240/-. TH E LD. D.R. ALSO REFERRED TO THE BANK STATEMENTS WHICH ARE EXTR ACTED BY THE AO ON PAGE NO.3 OF THE ASSESSMENT ORDER AND ARGUED THAT THE DEBIT AND CREDIT ENTRIES ARE FREQUENTLY APPEARING W HICH CREATES SUSPICION ABOUT THE NATURE OF OPERATION CARRIED OUT BY THE ASSESSEE. THE LD. D.R. THEREFORE SUBMITTED THAT TH OUGH THE ASSESSEE HAS FILED THE NECESSARY DOCUMENTS THE CIRC UMSTANCES AND FACTS LEADS TO THE UNCONTROVERTED CONCLUSION TH AT THESE ARE COLOURABLE DEVICES AND RIGHTLY ADDED UNDER SECTION 68 OF THE ACT, AND ACCORDINGLY PRAYED BEFORE THE BENCH TO SET ASID E THE ORDER OF LD. CIT(A) AND RESTORE THE ORDER OF AO. ITA NO.5884/M/2017 M/S. EAST ASIATIC INFRASTRUCTURE CORP. PVT. LTD. 4 6. THE LD. A.R., ON THE OTHER HAND, RELYING ON THE ORDER OF LD. CIT(A), SUBMITTED THAT IN THIS CASE THE ASSESSEE IS ENGAGED IN THE BUSINESS OF DEVELOPMENT OF INFRASTRUCTURE FACIL ITIES AND HAS RAISED SHARE CAPITAL DURING THE YEAR. THE SHARES W ERE ISSUED TO TWO SISTER CONCERNS NAMELY MANDAVI SALTS AND LOGIST ICS PVT. LTD. AND REHWA CORPORATION PVT. LTD. THESE SHARES WERE OF FACE VALUE OF RS.10/- EACH AND ISSUED AT A PREMIUM OF RS .240/-. THE LD. A.R. SUBMITTED THAT THIS IS THE INTER DECIS ION OF THE BOARD AND THE ASSESSEES BOARD OF DIRECTOR AS TO ON WHAT PREMIUM THE SHARE OUGHT TO BE ISSUED. THE LD. A.R. SUBMITTED THAT ASSESSEE HAS FILED ALL THE NECESSARY EVIDENCES BEFORE THE AO IN THE FORM OF PAN, BANK ACCOUNTS, BALANCE SHEETS A ND AO HAS NOT BOTHERED TO CONDUCT ANY FURTHER ENQUIRY AND ONL Y HARPED ON THE FACT THAT SHARES WERE ISSUED AT A HIGH PREMIUM AND THUS HELD TO BE A COLOURABLE DEVICE. THE LD. A.R. ALSO SUBMITTED THAT THE ADDITION AS MADE BY THE AO UNDER SECTION 68 CAN NOT BE MADE DURING THE YEAR UNDER CONSIDERATION AS THE AME NDMENT UNDER SECTION 68 BY THE FINANCE ACT, 2012 W.E.F. 01 .04.2013 AND WAS EFFECTIVE FROM ASSESSMENT YEAR 2013-14 WHER EAS THE ASSESSMENT YEAR UNDER CONSIDERATION IS 2012-13. TH E AO HAS NOT EVEN BOTHERED TO ISSUE SUMMONS OR NOTICES UNDER SECTION 133(6) TO THESE PARTIES. THE LD. A.R. RELIED HEAVI LY ON THE DECISION AS FOLLOWED BY THE LD. CIT(A) WHILE PASSIN G THE ORDER. THE LD. A.R. SPECIFICALLY REFERRED TO THE CIT VS. J IGNESH EXPORTS PVT. LTD. 216 CTR 195 SC AND CIT VS GUJARAT HEAVY C HEMICALS LTD. (2002) 256 ITR 795 SC AND ALSO THE INSTRUCTION NO.2/2015 F.NO.500/15/2014-APA-I DATED 29.01.2015. THE LD. A .R. THEREFORE PRAYED THAT THE ORDER PASSED BY LD. CIT(A ) IS A VERY DETAILED, REASONED AND SPEAKING ONE AND PASSED IN C ONSONANCE ITA NO.5884/M/2017 M/S. EAST ASIATIC INFRASTRUCTURE CORP. PVT. LTD. 5 WITH THE RATIO LAID DOWN BY THE VARIOUS COURTS AND APEX COURT AND ACCORDINGLY THE SAME MAY KINDLY BE AFFIRMED. 7. WE HAVE HEARD THE RIVAL SUBMISSIONS OF BOTH THE PARTIES AND PERUSED THE MATERIAL ON RECORD. IN THIS CASE, W E NOTE THAT THE ASSESSEE HAS ISSUED 20,000 SHARES TO TWO ASSOCI ATE CONCERNS EACH OF FACE VALUE OF RS.10/- AT A PREMIUM OF RS.24 0/-. THE AO MADE ADDITION AS UNEXPLAINED CASH CREDIT UNDER SECT ION 68 OF THE ACT ON THE GROUND THAT THE SAID SHARE APPLICATI ON MONEY RECEIVED BY THE ASSESSEE IS A SHAM AND IS A COLOURA BLE DEVICE WHICH WAS REVERSED BY LD. CIT(A) BY HOLDING THAT TH E SAID ADDITION CAN NOT BE MADE UNDER SECTION 68 OF THE AC T AND OBSERVED THAT THE AMENDMENT BY FINANCE ACT, 2012 WA S BROUGHT ABOUT W.E.F. 01.04.2013 MEANING THEREBY THAT THE SA ID AMENDMENT IS APPLICABLE FROM ASSESSMENT YEAR 2013-1 4 AND NOT TO THE YEAR UNDER CONSIDERATION. WE FURTHER FIND T HAT THE AO HAS NOT DONE ANY INVESTIGATION OR FURTHER VERIFICAT ION TO VERIFY AND DIG OUT THE TRUTH BEHIND THE TRANSACTION, WHIL E THE ASSESSEE HAS DULY DISCHARGED ITS BURDEN BY FILING ALL THE NE CESSARY DOCUMENTS IN THE FORM OF COPIES OF PANS, BANK STATE MENTS AND AUDITED ANNUAL ACCOUNTS ETC. BEFORE THE AO. IN TH IS CASE, WE FIND THAT THE LD. CIT(A) HAS RECORDED A FINDING OF FACT THAT THESE TWO INVESTOR COMPANIES HAVE CONFIRMED AND THE ASSES SEE FILED THE COPIES OF PANS, BALANCE SHEETS, P&L ACCOUNTS, S HARE APPLICATION FORMS ETC. OF INVESTOR COMPANIES BEFORE THE AO. HOWEVER, THE AO HAS FAILED TO CONDUCT ANY ENQUIRY. MOREOVER, NO CASH TRANSACTIONS WERE INVOLVED. IN THE CASE OF CIT VS. LOVELY EXPORTS PRIVATE LTD. (2008) 216 CTR 195 (SC), THE H ONBLE SUPREME COURT HAS HELD THAT IF THE ASSESSEE HAS GIV EN THE NAMES AND ADDRESSES OF THE ALLEGED BOGUS SHAREHOLDE R THEN THE ITA NO.5884/M/2017 M/S. EAST ASIATIC INFRASTRUCTURE CORP. PVT. LTD. 6 DEPARTMENT IS FREE TO PROCEED TO OPEN THEIR ASSESSM ENTS IN ACCORDANCE WITH LAW BUT IT CAN NOT BE TREATED AS U NDISCLOSED INCOME OF THE ASSESSEE. SIMILARLY, IN THE CASE OF CIT VS. CREATIVE WORLD TELEFILMS LTD 333 ITR 100 THE HONBLE BOMBAY HIGH COURT HAS HELD THAT WHERE THE ASSESSEE HAS FILED THE DOCU MENTS LIKE PAN CARD, BANK DETAILS AND DETAILS FROM THE BANKERS BEFORE THE AO AND IT IS UP TO THE AO TO REACH THE SHAREHOLDERS TO ASCERTAIN THE FACTS. THE AO HAS TO MAKE THE FURTHER ENQUIRY WITH REGARD TO STATUS OF THE PARTIES TO BRING ON RECORD ANY ADV ERSE FINDING REGARDING THEIR CREDITWORTHINESS. IN THE INSTRUCTI ON NO.2/2015 DATED 29.01.2015 THE CBDT HAS CLARIFIED THAT THE BO ARD HAS ACCEPTED THE DECISION OF HONBLE BOMBAY HIGH COURT IN THE CASE OF VODAFONE INDIA SERVICES PVT. LTD. A.Y. 2009-10 W P NO.871 OF 2014 THAT THE SHARE PREMIUM ON SHARE ISSUED WAS ON ACCOUNT OF CAPITAL ACCOUNT AND DOES NOT GIVE RAISE TO INCOME A ND THE RATIO DECIDENDI IN THE SAID DECISION WAS ADVISED TO BE A DHERED TO BY THE FIELD OFFICER IN ALL THE CASES. IN VIEW OF THE ABOVE FACTS AND RATIO LAID DOWN BY THE APEX COURT IN THE CASE OF CI T VS. LOVELY EXPORTS PVT. LTD. & OTHERS AND OTHER DECISIONS AND ALSO THE FACT THAT THE AMENDMENT TO SECTION 68 OF THE ACT IS APPL ICABLE FROM A.Y. 2012-13 ,WE ARE INCLINED TO UPHOLD THE ORDER O F LD. CIT(A) BY DISMISSING THE APPEAL OF THE REVENUE. 8. IN THE RESULT, THE APPEAL OF THE REVENUE IS DISM ISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 18.02.2020. SD/- SD/- ( RAM LAL NEGI) (RAJESH KUMAR) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI, DATED: 18.02.2020. * KISHORE, SR. P.S. ITA NO.5884/M/2017 M/S. EAST ASIATIC INFRASTRUCTURE CORP. PVT. LTD. 7 COPY TO: THE APPELLANT THE RESPONDENT THE CIT, CONCERNED, MUMBAI THE CIT (A) CONCERNED, MUMBAI THE DR CONCERNED BENCH //TRUE COPY// [ BY ORDER DY/ASS TT. REGISTRAR, ITAT, MUMBAI.