THE ACIT, 5(1), Indore V. M/s. Sita Homes Pvt. Ltd., Indore

ITA 594/IND/2016

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 2160 (ITAT-INDORE)
• Duration Of Justice: 1 year(s) 6 month(s) 10 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-12-2017
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Next Hearing Date: 14-06-2017
• Assessment Year: 2010-2011
• Appeal Filed On: 02-06-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: K G GOYAL
• Assessee Lawyers: PIYUSH MANDOVRA
• Keywords: Source of fund
• Section: 68

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL INDORE BENCHE, INDORE BEFORE SHRI KUL BHARAT, JUDICIAL MEMBER AND SHRI MANISH BORAD, ACCOUNTANT MEMBER ITA NO.594/IND/2016 ASSESSMENT YEAR: 2010-11 ACIT, 5(1) INDORE, / VS. M/S. SITA HOMES PVT. LTD. 108, INDORE TRADE CENTRE, 3/2, SOUTH TUKOGANJ, INDORE ( REVENUE ) ( RESPONDENT ) P.A. NO. AAGCS5892K REVENUE BY SHRI K. G. GOYAL SR. DR RESPONDENT BY SHRI PIYUSH MANDOVRA, AR DATE OF HEARING: 05.12.2017 DATE OF PRONOUNCEMENT: 12.12.2017 / O R D E R PER KUL BHARAT, J.M: THIS APPEAL BY THE REVENUE IS DIRECTED AGAINST THE ORDER OF LD. COMMISSIONER OF INCOME TAX(APPEALS)-II, INDORE, (IN SHORT CIT(A)), DATED 31.03.2016 FOR THE A.Y. 2010-11. THE REVENUE HAS RAISED FOLLOWING GROUNDS OF APPEAL: 1. WHETHER THE LD. CIT(A) HAS ERRED IN LAW AND ON FACTS IN DELETING THE ADDITION OF RS.81,52,912/- MADE BY THE AO ON ACCOUNT OF UNEXPLAINED SHARE APPLICATION U/S 68 OF I.T. ACT 1961 BEING ALLEGED ROUTING OF OWN MONEY AND THEN CA RRYING OUT SITA HOMES PVT. LTD. 2 A CIRCULAR TRANSACTION WHEREIN SHARE APPLICANTS WER E USED AS A CONDUIT TO INCREASE APPELLANT COMPANYS CAPITAL. 2. WHETHER IN THE FACTS AND CIRCUMSTANCES OF THE CA SE THE LD. CIT(A) WAS RIGHT IN DELETING THE ADDITION OF RS.81, 52,912/- MADE ON ACCOUNT OF UNEXPLAINED SHARE APPLICATION MO NEY RECEIVED WITHOUT APPRECIATING THAT THE ASSESSEE FAI LED TO ESTABLISH THE IDENTITY, CREDITWORTHINESS AND GENUIN ENESS DURING THE ASSESSMENT STAGE. 2 . BRIEFLY STATED THE FACTS ARE THAT THE CASE OF TH E ASSESSEE WAS TAKEN FOR SCRUTINY ASSESSMENT AND ASSESSMENT U/S 14 3(3) OF THE INCOME TAX ACT, 1961( HEREINAFTER REFER TO AS THE ACT) WAS FRAMED VIDE ORDER DATED 26.03.2013. THE ASSESSEE IS ENGAGE D IN THE BUSINESS OF CIVIL CONSTRUCTION DURING THE COURSE OF ASSESSMENT. THE ASSESSING OFFICER OBSERVED THAT THE ASSESSEE HAD IN TRODUCED THE SHARE APPLICATION MONEY OF RS.90,00,000/- FROM 11 D IFFERENT PERSONS ON 11.01.2010. THE ASSESSING OFFICER WAS OF THE VIEW THAT THE ASSESSEE HAS ROUTED ITS OWN MONEY THROUGH CIRCU LAR TRANSACTION. THE AO THEREFORE, MADE ADDITION OF THE AMOUNT RECEIVED BY THE ASSESSEE AGAINST THIS THE ASSESSEE HAD PREFERRED AN APPEAL BEFORE THE LD. CIT(A) WHO AFTER CONSIDERING THE SUBMISSIONS ALLOWED THE APPEAL OF THE ASSESSEE. 3. NOW, THE REVENUE IS IN FURTHER APPEAL, ONLY EFFE CTIVE GROUND AGAINST IN DELETING THE ADDITION MADE BY THE AO. AT THE VERY OUTSET, LD. DR SUPPORTED THE ASSESSMENT ORDER AND STATED TH AT HE HAS NOTHING MORE TO SUBMIT THAN TO SUPPORT TO ASSESSMEN T ORDER. ON THE CONTRARY, LD. AUTHORIZED REPRESENTATIVE (AR I N SHORT ) OF THE ASSESSEE SUPPORTED THE ORDER OF LD. CIT(A). SITA HOMES PVT. LTD. 3 4. WE HAVE HEARD THE RIVAL CONTENTIONS PERUSED THE MATERIAL AVAILABLE ON RECORD. THE ASSESSING OFFICER MADE ADD ITION BY OBSERVING AS UNDER: PARA 3. ASSESSEE HAS INTRODUCED THE SHARE APPLICAT ION MONEY OF RS.90,00,000/- DURING THE PREVIOUS YEAR 2009-10 FROM 11 DIFFERENT PERSONS ON 11.01.2010. A BANK ACCOUNT OF SYNDICATE BANK NUMBERED 78001250001145 HAS BEEN SUBMITTED FOR MONTH OF JANUARY FROM 01.01.2010 TO 31.01.2010. ASS ESSEE HAS CLEARLY ROUTED ITS OWN MONEY AND THEN CARRIED O UT A CIRCULAR TRANSACTION WHEREIN THE SHARE APPLICANTS WERE USED AS A CONDUIT TO INCREASE ITS CAPITAL. THE EXACT MODUS OP ERANDI WITH THE USE OF THESE 11 PERSONS WHO HAVE CONTRIBUTED TH E SHARE CAPITAL ARE WRITTEN AS BELOW: 3.1 SHRI OMPRAKASH VIJAYWARGIYA-RS.11,30,000/- THE BANK ACCOUNT OF ASSESSEE CLEARLY INDICATE THAT AMOUNT OF RS.4,32,457/- WAS TRANSFERRED FROM THE SYNDICATE BA NK TO THE ACCOUNT OF SHRI OMPRAKASH VIJAYWARGIYA NUMBERED 78002200042524 ON 04.01.2010. AND THEREAFTER AMOUNT OF RS.4,30,000/- HAS BEEN RECEIVED AS SHARE APPLICATIO N MONEY ON THE 01.01.2010 FROM THE SAME ACCOUNT NUMBER. IT IS A CLEARLY AS INSTANCE OF CIRCULAR TRANSACTION WHEREIN COMPANY HA S TRANSFERRED ITS OWN MONEY TO THE ACCOUNT OF SHARE A PPLICATION WHICH HAS BEEN DIRECTLY RECEIVED BACK. 3.2 SHRI SACHIN SAXENA- RS. 8,75,000/- THE BANK ACCOUNT OF ASSESSEE CLEARLY INDICATED THAT AMOUNT OF RS.7,81,419/- WAS TRANSFERRED FROM THE SYNDICATE BA NK TO THE ACCOUNT OF SHRI SACHIN SAXENA NUMBERED 780022000344 33 ON 04.01.2010. AND THEREAFTER AMOUNT OF RS.7,80,000/- & RS. 95,000/- HAS BEEN RECEIVED AS SHARE APPLICATION MON EY ON THE SAME DAY FROM THE SAME ACCOUNT NUMBER. IT IS A CLEA RLY AN INSTANCE OF CIRCULAR TRANSACTION WHEREIN COMPANY HA S TRANSFERRED ITS OWN MONEY TO THE ACCOUNT OF SHARE A PPLICANT WHICH HAS BEEN DIRECTLY RECEIVED BACK. 3.3 MS. SAKSHI VIJAYVARGIYA-RS.1,25,000/- THE BANK ACCOUNT OF ASSESSEE CLEARLY INDICATE THAT AMOUNT OF RS.1,25,000/- WAS TRANSFERRED FROM THE SYNDICATE BA NK BY CHEQUE NUMBER 13705 TO THE ACCOUNT OF SHRI PALLAV SITA HOMES PVT. LTD. 4 VIJAYWARGIYA OF COSMOS COOPERATIVE BANK NUMBERED ON 08.01.2010. AND THEREAFTER AMOUNT OF RS.1,25,000/- HAS BEEN RECEIVED AS SHARE APPLICATION MONEY ON THE 09.01.20 10 FROM THE SAME ACCOUNT NUMBER. IT IS A CLEARLY AS INSTANC E OF CIRCULAR TRANSACTION WHEREIN COMPANY HAS TRANSFERRED ITS OWN MONEY TO THE ACCOUNT OF SHARE APPLICANT WHICH HAS BEEN DIREC TLY RECEIVED BACK. 3.4. SHRI PALLAV VIJAYVARGIYA-RS.10,70,000/- THE BANK ACCOUNT OF ASSESSEE CLEARLY INDICATE THAT AMOUNT OF RS.10,22,875/- WAS TRANSFERRED FROM THE SYNDICATE B ANK BY CHEQUE NUMBER 13707 TO THE ACCOUNT OF SHRI PALLAV VIJAYWARGIYA OF COSMOS COOPERATIVE BANK NUMBERED ON 04.01.2010. AND THEREAFTER AMOUNT OF RS.10,70,000/- HAS BEEN RECEIVED AS SHARE APPLICATION MONEY ON THE 05.01.20 10 FROM THE SAME ACCOUNT NUMBER. IT IS A CLEARLY AN INSTANC E OF CIRCULAR TRANSACTION WHEREIN COMPANY HAS TRANSFERRED ITS OWN MONEY TO THE ACCOUNT OF SHARE APPLICANT WHICH HAS BEEN DIREC TLY RECEIVED BACK. 3.5 SHRI SANTOSH VIJAYWARGIYA-RS.17,00,000/- THE BANK ACCOUNT OF ASSESSEE CLEARLY INDICATE THAT AMOUNT OF RS.16,96,611/- WAS TRANSFERRED FROM THE SYNDICATE B ANK TO THE ACCOUNT OF SHRI SANTOSH VIJAYWARGIYA NUMBERED 78002200034448 ON 04.01.2010. AND THEREAFTER AMOUNT OF RS.15,10,000/- HAS BEEN RECEIVED AS SHARE APPLICATI ON MONEY & RS. 1,90,000/- WAS RECEIVED FROM THE SAME ACCOUNT NUMBER. IT IS A CLEARLY AN INSTANCE OF CIRCULAR TRANSACTION WHEREIN COMPANY HAS TRANSFERRED ITS OWN MONEY TO THE ACCOUN T OF SHARE APPLICANT WHICH HAS BEEN DIRECTLY RECEIVED BACK. 3.6. SHRI SHIVNARAYAN JANKILAL HUF- RS.7,25,000/- THE BANK ACCOUNT OF ASSESSEE CLEARLY INDICATE THAT AMOUNT OF RS.7,27,464/- WAS TRANSFERRED FROM THE SYNDICATE BA NK BY CHQUE NUMBER 13710 TO THE ACCOUNT OF SHRI SHIVNARAY AN JANKILAL HUF OF COSMOS COOPERATIVE BANK NUMBERED 031204301210121 ON 05.01.2010. AND THEREAFTER AMOUN T OF RS.7,25,000/- HAS BEEN RECEIVED AS SHARE APPLICATIO N MONEY ON THE 06.01.2010 FROM THE SAME ACCOUNT NUMBER. IT IS A CLEARLY AN INSTANCE OF CIRCULAR TRANSACTION WHEREIN COMPANY HAS TRANSFERRED ITS OWN MONEY TO THE ACCOUNT OF SHARE A PPLICANT WHICH HAS BEEN DIRECTLY RECEIVED BACK SITA HOMES PVT. LTD. 5 3.7. SHRI YUGAL KISHORE ANANDILAL- RS.5,60,000/- THE BANK ACCOUNT OF ASSESSEE CLEARLY INDICATE THAT AMOUNT OF RS.5,61,640/- WAS TRANSFERRED FROM THE SYNDICATE BA NK BY CHQUE NUMBER 13711 TO THE ACCOUNT OF SHRI YUGAL KIS HORE ANANDILAL OF COSMOS COOPERATIVE BANK NUMBERED 031204301210106 ON 05.01.2010. AND THEREAFTER AMOUN T OF RS.5,60,000/- HAS BEEN RECEIVED AS SHARE APPLICATIO N MONEY ON THE 06.01.2010 FROM THE SAME ACCOUNT NUMBER. IT IS A CLEARLY AN INSTANCE OF CIRCULAR TRANSACTION WHEREIN COMPANY HAS TRANSFERRED ITS OWN MONEY TO THE ACCOUNT OF SHARE A PPLICANT WHICH HAS BEEN DIRECTLY RECEIVED BACK. 3.8. SMT. ANJANA SAXENA - RS.5,70,000/- THE BANK ACCOUNT OF ASSESSEE CLEARLY INDICATE THAT AMOUNT OF RS.5,70,760/- WAS TRANSFERRED FROM THE SYNDICATE BA NK TO THE ACCOUNT OF SMT. ANJANA SAXENA NUMBERED 780022000425 05 ON 04.01.2010. AND THEREAFTER AMOUNT OF RS.5,70,000/- HAS BEEN RECEIVED AS SHARE APPLICATION MONEY ON THE 05.01.20 10 FROM THE SAME ACCOUNT NUMBER. IT IS A CLEARLY AN INSTANC E OF CIRCULAR TRANSACTION WHEREIN COMPANY HAS TRANSFERRED ITS OWN MONEY TO THE ACCOUNT OF SHARE APPLICANT WHICH HAS BEEN DIREC TLY RECEIVED BACK 3.9. SMT. POONAM VIJAYWARGIYA - RS.5,55,000/- THE BANK ACCOUNT OF ASSESSEE CLEARLY INDICATE THAT AMOUNT OF RS.5,53,426/- WAS TRANSFERRED FROM THE SYNDICATE BA NK TO THE ACCOUNT OF SMT. POONAM VIJAYWARGIYA NUMBERED 78002200034467 ON 04.01.2010. AND THEREAFTER AMOUNT OF RS.5,55,000/- HAS BEEN RECEIVED AS SHARE APPLICATIO N MONEY ON THE 07.01.2010 FROM THE SAME ACCOUNT NUMBER. IT IS A CLEARLY AN INSTANCE OF CIRCULAR TRANSACTION WHEREIN COMPANY HAS TRANSFERRED ITS OWN MONEY TO THE ACCOUNT OF SHARE A PPLICANT WHICH HAS BEEN DIRECTLY RECEIVED BACK. 3.10. SMT. SANGEETA VIJAYWARGIYA - RS.1,85,000/- THE BANK ACCOUNT OF ASSESSEE CLEARLY INDICATE THAT AMOUNT OF RS.1,85,000/- WAS TRANSFERRED FROM THE SYNDICATE BA NK OF SMT. SANGEETA VIJAYWARGIYA TO THE ACCOUNT OF SITA HOMES PRIVATE LIMITED ON 04.01.2010. AND THEREAFTER AMOUNT OF RS. 1,87,325/- HAS BEEN REVERSED BACK INTO ACCOUNT OF SMT. SANGEET A VIJAYWARGIYA ON THE NEXT DAY 05.01.2010 FROM THE SA ME ACCOUNT NUMBER. IT IS A CLEARLY AN INSTANCE OF CIRC ULAR SITA HOMES PVT. LTD. 6 TRANSACTION WHEREIN COMPANY HAS FIRST RECEIVED THE SHARE APPLICATION MONEY FROM THE ACCOUNT OF SHARE APPLICA NT WHICH HAS THEN BEEN DIRECTLY TRANSFERRED OUT TO THE BANK ACCOUNT OF SHARE APPLICANT. 3.11. SMT. SITA DEVI VIJAYWARGIYA-RS. 15,05,000/- THE BANK ACCOUNT OF ASSESSEE CLEARLY INDICATE THAT AMOUNT OF RS.15,07,397/- WAS TRANSFERRED FROM THE SYNDICATE B ANK BY CHEQUE NUMBER 13716 TO THE ACCOUNT OF SMT. SITA DEV I VIJAYWARGIYA OF COSMOS COOPERATIVE BANK ON 04.01.20 10. AND THEREAFTER AMOUNT OF RS.15,05,000/- HAS BEEN RECEIV ED AS SHARE APPLICATION MONEY ON THE 05.01.2010 FROM THE SAME ACCOUNT NUMBER. IT IS A CLEARLY AN INSTANCE OF CIRC ULAR TRANSACTION WHEREIN COMPANY HAS TRANSFERRED ITS OWN MONEY TO THE ACCOUNT OF SHARE APPLICANT WHICH HAS BEEN DIREC TLY RECEIVED BACK. 5. HOWEVER, LD. CIT(A) DELETED THE ADDITION BY GIVI NG FINDING ON FACTS AS UNDER: 3.1 I HAVE GONE THROUGH THE ASSESSMENT ORDER AND A LSO SEEN THE REASONS BROUGHT OUT BY THE AO IN MAKING ADDITIO N ON ACCOUNT OF SHARES SUBSCRIPTION BY ABOVE MENTIONED 1 1 PERSONS. IT IS UNIFORMLY STATED BY THE AO THAT THE APPELLANT HAD TRANSFERRED THE PARTICULAR AMOUNT BY CHEQUES FROM I TS BANK ACCOUNT MAINTAINED WITH THE SYNDICATE BANK TO THE A CCOUNT OF THE DEPOSITORS/SUBSCRIBERS. THE ABOVE PERSONS SUBSE QUENTLY HAVE TRANSFERRED THE AMOUNT TO THE ACCOUNT OF COMPA NY BY CHEQUE FOR SUBSCRIBING FOR THE SHARES. BUT THE AO H AS SIMPLY REASONED THAT THE SAID TRANSFER OF FUNDS FROM ONE A CCOUNT TO ANOTHER WAS CIRCULAR TRANSACTION AND OWNED FUNDS WE RE ROUTED THROUGH VARIOUS ACCOUNTS. THE APPELLANT ON THE OTHE R HAND HAS FILED THE DETAILED WRITTEN SUBMISSIONS WHEREIN IT H AS CLEARLY BEEN BROUGHT OUT THAT ALL THE 11 PERSONS MENTIONED ABOVE WERE SHAREHOLDERS/RELATIVES OR FRIENDS OF THE DIRECTORS OF THE COMPANY WHO WERE THE UNSECURED CREDITORS OF THE APP ELLANT. DURING THE RELEVANT ASSESSMENT YEAR, THE APPELLANT HAD REPAID THE AMOUNTS OF LOAN TO THE ABOVE PERSONS AND WHO IN TURN HAD INVESTED IN THE SHARES OF THE COMPANY BY CHEQUE. TH EREFORE, IT SITA HOMES PVT. LTD. 7 WAS STATED THAT THE AO WAS NOT JUSTIFIED IN TREATIN G THE AMOUNT OF SHARES SUBSCRIPTION FROM UNEXPLAINED SOURCE OF A PPELLANT WHEN THE IDENTITY, GENUINENESS OF TRANSACTION AND CREDITWORTHINESS OF THE CREDITORS/SHARE SUBSCRIBERS WERE PROVED BEYOND DOUBT. THE SUBMISSIONS OF THE APPELLANT ALON GWITH THE RELEVANT DOCUMENTS WERE FORWARDED TO THE AO FOR THI S FURTHER CLARIFICATION AS HOW THE ADDITION WAS WARRANTED IN VIEW OF THE EXPLANATION AND SUBMISSION OF THE APPELLANT. THE AO HAS FILED HIS REPLY VIDE LETTER DATED 26.02.2016 WHICH IS REP RODUCED HEREUNDER: IN THE ABOVE CONTEXT, IT IS SUBMITTED THAT THE AS SESSEE COMPANY HAD TAKEN UNSECURED LOAN FROM 12 PERSONS WH O WERE SHAREHOLDERS/RELATIVES OR FRIENDS OF THE DIRECTORS OF THE COMPANY. THE COMPANY HAS RETURNED THE UNSECURED LOA N TO THOSE PERSONS IN F.Y. 09-10. THOSE LOAN CREDITORS H AVE SUBSCRIBED TO THE SHARE CAPITAL OF THE ASSESSEE COM PANY IN F.Y. 2009-10 FROM THE AMOUNT OF LOANS REPAID BY THE COMP ANY. THEREFORE, THE SOURCE OF FUNDS FOR SHARE APPLICATIO N MONEY STANDS EXPLAINABLE. HOWEVER, THE APPEAL OF THE ASSE SSEE COMPANY MAY BE DECIDED ON MERITS. 3.2 I HAVE GONE THROUGH THE CONTENTS OF WRITTEN SUB MISSION, THE COPIES OF ROI OF THE CREDITORS/SHARE SUBSCRIBERS AN D LEDGER ACCOUNTS OF THE SUBSCRIBERS WHILE AS CREDITORS. I H AVE ALSO GONE THROUGH THE BRIEF REMAND REPORT FURNISHED BY THE AO . AFTER TAKING INTO ACCOUNT THE TOTALITY OF THE FACTS AND C IRCUMSTANCES AND SPECIFIC REPORT OF AO, I AM OF THE OPINION THAT THE AO WAS NOT JUSTIFIED IN MAKING ADDITION OF RS.81,52,912/- ON ACCOUNT OF SUBSCRIPTION OF SHARES BY 11 PERSONS BECAUSE THE AO HAS NOT DISPUTED THE IDENTITY, GENUINENESS OF TRANSACTION A ND CREDITWORTHINESS OF SUBSCRIBERS. THEREFORE, THE ADD ITION IS DIRECTED TO BE DELETED. HOWEVER, ONGOING THROUGH TH E LEDGER ACCOUNTS OF THE ERSTWHILE CREDITORS, IT HAS BEEN OB SERVED THAT IN CASE OF SOME OF THE PARTIES MAJOR PART OF LOAN HAS BEEN RAISED BY THE APPELLANT COMPANY DURING THE RELEVANT ASSESS MENT YEAR, THE GENUINENESS OF WHICH HAS NEITHER BEEN DISCUSSED BY THE AO DURING THE COURSE OF ASSESSMENT NOR DURING THE COUR SE OF REMAND PROCEEDINGS. THEREFORE, AO SHALL BE AT LIBER TY TO EXAMINE THE SOURCE OF INVESTMENT OF THE SUBSCRIBERS IN THEIR HANDS AFTER TAKING INTO ACCOUNT RELEVANT SOURCE OF INCOME ETC. SITA HOMES PVT. LTD. 8 MEANWHILE, IN THE HANDS OF THE APPELLANT COMPANY, T HE AO IS DIRECTED TO DELETE THE ADDITION FOR THE DETAILED RE ASON BROUGHT OUT ABOVE AND SPECIFIC REPORT OF THE AO ACCEPTING T HE SOURCE OF FUNDS BY THE SUBSCRIBERS. ALL THE GROUNDS OF APPEAL ARE ALLOWED. 6. THE ABOVE FINDINGS ON FACT IS NOT CONTROVERTED B Y THE REVENUE AS THE SOURCE OF FUND IS ADMITTED BY THE SUBSCRIBER AN D THE LD. CIT(A) HAS GIVEN LIBERTY TO THE ASSESSING OFFICER TO EXAMI NE THE SOURCE OF INVESTMENT BY THE SUBSCRIBER IN THEIR HANDS, WE THE REFORE DO NOT SEE ANY REASON TO INTERFERE INTO THE FINDING OF LD. CIT(A), SAME IS HEREBY AFFIRMED. THE GROUNDS RAISED IN THE APPEAL A RE DISMISSED. 7 . IN THE RESULT, THE APPEAL OF THE REVENUE IS DISMIS SED. ORDER WAS PRONOUNCED IN THE OPEN COURT ON 12.12. 2017. SD/- (MANISH BORAD) SD/- (KUL BHARAT) /ACCOUNTANT MEMBER / JUDICIALMEMBER INDORE; DATED : 12/ 12/2017 CTX? P.S/. . . COPY TO: ASSESSEE/AO/PR. CIT/ CIT (A)/ITAT (DR)/GUA RD FILE. BY ORDER PRIVATE SECRETARY/DDO, INDORE