KAINYA & ASSOCIATES P.LTD, MUMBAI V. DCIT CEN CIR 22, MUMBAI

ITA 6299/MUM/2014

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 100512 (ITAT-MUMBAI)
• Duration Of Justice: 10 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 10-08-2015
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Assessment Year: 2005-2006
• Appeal Filed On: 10-10-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Unexplained cash credit; Unexplained expenditure; Search and seizure; Accommodation entries; Onus to prove
• Section: 68; 132; 2; 153A

Judgement Text

, - IN THE INCOME TAX APPELLATE TRIBUNAL SMC BENCH, MUMBAI BEFORE S/SHRI B.R.BASKARAN (ACCOUNTANT MEMBER ) . . , ./ I.T.A. NO . 6299 / MUM/20 14 ( / ASSESSMENT YEAR : 20 05 - 06 ) KAINYA AND ASSOCIATES PVT.LTD., 201, BUSINESS PARK, 2 ND FLOOR, S V ROAD, NEAR BAJAJ HALL, MALAD (W), MUMBAI - 400064 / VS. DY. COMMISSIONER OF INCOME TAX CENTRAL CIRCLE - 22, MUMBAI ( / APPELLANT ) .. ( / RESPONDENT ) ./ ./PAN/GIR NO. : AAACK1478R / APPELLANT BY SHRI RAHUL R SARDA / RSPONDENT BY SHRI T SASI KUMAR / DATE OF HEARING : 10.8. 201 5 / DATE OF PRONOUNCEMENT : 10. 8. 201 5 / O R D E R PER B ENCH: THE ASSESSEE HAS FILED THIS APPEAL CHALLENGING THE ORDER DATED 22.8. 2014 PASSED BY LD CIT(A) - 39, MUMBAI FOR ASSESSMENT YEAR 20 05 - 06, WHEREIN HE HAS CONFI RMED THE ADDITION OF RS.10 LAKHS MADE UNDER SECTION 68 OF THE INCOME TAX ACT, 1961 AND ALSO CONFIRMED ANOTHER ADDITION OF RS.10,000/ - , BEING THE COMMISSION PAYMENT ESTIMATED BY THE AO. 2. I HEARD THE PARTIES AND PERUSED THE RECORD. THE ASSESSEE WAS SUBJECTED TO SEARCH AND SEIZURE OPERATIONS UNDER SECTION 132 OF THE ACT ON 18.1.2006. CONSEQUENTLY, THE PRESENT ASSESSMENT WAS FRAMED UNDER SECTION 153A OF THE ACT. THE AO NOTICED THAT THE ASSESSEE HAS RECEIVED ITA NO. 6299 / MUM/20 14 2 SHARE APPLICATION MONEY OF RS.10.00 LAKHS F ROM A COMPANY NAMED M/S D A KCON IMPEX PRIVATE LIMI TED . BEFORE THE AO, THE ASSESSEE FURNISHED DETAILS LIKE ADDRESSES OF THE PARTIES, COPY OF THE ACKNOWLEDGEMENT OF E - RETURN FILED BY IT, THE COPIES OF BANK STATEMENT AND COPY OF ACCOUNTS IN ORDER TO PROVE THE GENUINENESS OF THE SHARE APPLICATION MONEY RECEIVED BY IT. T HE AO , HOWEVER, ISSUED SUMMON TO THE A BOVE SAID COMPANY , BUT THE SAME WAS RETURNED B A CK UN - S ERVED . FURTHER, THE AO ALSO NOTICED THA T THE DEPARTMENT HAD C ONDUCT ED SURVEY ACTION UNDER SECTION 133 A OF THE ACT IN THE HANDS OF M/S D AK CON IMPEX PRIVATE L IMITED AND DURING THE COURSE OF SURVEY; THE DIRECTOR OF T HE COMPANY APPEARS TO HAVE STATED THAT HIS COMPANY HAS GIVEN ONLY ACCOMMODATION ENTRIES TO THE ASSESSEE COMPANY. ACCORDINGLY, THE AO ASSESSED THE SHARE APPLICATION MONEY OF RS.10 LAKHS AS UNEXPLAINED CASH CREDIT U/S 68 O F THE ACT. T HE AO ALSO PRESUMED THAT THE ASSESSEE WOULD HAVE PAID COMMISSION AT THE RA T E OF ONE PERCENT FOR GETTING THESE ACCOMMODATION ENTRIES AND ACCORDINGLY ASSESSE D A SUM OF RS .10,000/ - AS UNEXPLAINED EXPENDITURE IN THE HANDS OF THE ASSESSEE. 3 . BEFORE THE LD.CIT(A), THE ASSESSEE SUBMITTED THAT IT HAS NOT BEEN PROVIDED WITH A COPY OF STATEMENT RELIED UPON BY THE AO AND ACCORDINGLY REQUESTED THE LD CIT(A) TO FURNISH A COPY OF S TATEMENT GIVEN BY THE DI RECTOR OF M/S DAKCON IMPEX PRIVATE LIMITED (HEREIN AFTER SHARE APPLICANT COMPANY ) . ACCORDINGLY , THE LD. CIT(A) DIRECTED THE AO TO FURNISH A COPY OF THE STATEMENT , BUT THE AO REPLI ED THAT THE STATEMENT IS NOT AVAILABLE ON RECORD. THE ASSESSING OFFICER ADMITTED THAT T HERE IS A REFERENCE ABOUT THE STATEMENT IN THE APPRAISAL REPO R T , MEANING THEREBY THE AO HAS RELIED UPON THE OBSERVATION MADE IN THE APPRAISAL REPORT FOR MAKING THE ADDITION . HENCE , THE LD. CIT(A) HELD THAT THE IMPUGN ED ISSUE IS REQUIRED TO BE EXAMINED INDEPENDENTLY. ACCORDINGLY, THE LD.CIT(A) EXAMINED THE DOCUMENTS FURNISHED BY THE ASSESSEE AND NOTICED THAT THE ASSESSEE HAS ITA NO. 6299 / MUM/20 14 3 DECLARED A SUM OF RS.552/ - ONLY FOR ASSESSMENT YEAR 2006 - 07. FURTHER, HE ALSO NOTICED FROM T HE BANK ACCOUNT OF THE SHARE APPLICANT COMPANY THAT HEAVY DEPOSITS WERE MADE ON DAILY BASIS BEFORE ISSUING THE CHEQUE OF RS.10 LAKHS TO THE ASSESSEE. BASED ON THIS FACTS, THE LD. CIT(A) CAME TO THE CONCLUSION THA T THE ASSESSEE HAS ONLY AVAILED THE ACCOMMO DATION ENTRIES . HE ALSO HELD THAT THE ASSESSEE HAS ALSO FAILED TO PROVE CREDITWORTHINESS OF THE SHARE APPLICANT COMPANY . ACCORDINGLY, THE LD. CIT(A) CONFIRMED THE ADDITION OF RS.10 LAKHS AND ALSO THE ADDITION OF RS.10,000/ - RELATING TO ESTIMATED COMMISSIO N PAYMENT. AGGRIEVED, THE ASSESSEE HAS FILED THIS APPEAL BEFORE THIS TRIBUNAL. 4 . THE LD. AR SUBMITTED THAT THE ASSESSEE HAS FURNISHED ALL THE RELEVANT DETAILS TO PROVE THE SHARE APPLICATION MONEY OF RS.10.00 LAKHS RECEIVED BY IT FROM M/S DAKCON IMPEX PR IVATE LIMITED. THE AO , HOWEVER, MADE THE ADDITION ON THE STRENGTH OF ALLEGED STATEMENT GIVEN BY THE DIRECTOR OF THE SHARE APPLICANT COMPANY. HOWEVER, LATER IT WAS PROVED THAT THE AO DOES NOT POSSESS COPY OF THE ALLEGED STATEMENT. HE SUBMITTED THAT THE AS SESSEE HAS DISCHARGED THE INITIAL BURDEN PLACED UPON IT BY FILING ALL THE RELEVANT DETAILS , VIZ., NAMES AND ADDRESSES OF THE PARTIES , COPY OF THE BANK STATEMENT, COPY OF FINANCIAL STATEMENT ETC. ACCORDINGLY , THE LD. AR SUBMITTED THA T THE ASSESSEE HAS PROV E D THE GENUINENESS OF SHARE APPLICATION MONEY BY ESTABLISHING THE IDENTITY OF THE CREDITOR, CREDITWORTHINESS OF THE PARTIES AND ALSO GENUINENESS OF THE TRANSACTIONS. THE LD. AR FURTHER SUBMITTED THAT THE LD. CIT(A) HAS DRAWN ADVERSE CONCLUSION BY LOOKING INTO THE INCOME TAX RE TURN FILED BY T HE ASSESSEE. HOWEVER , BALANCE - SHEET, FINANCIAL STATEMENT OF SHARE APPLICANTS FURNISH ED BY THE ASSESSEE CLEARLY SHOWS THAT THE SHARE APPLICANT COMPANY IS HAVING ENOUGH RESOURCES FOR MAKING INVESTMENT OF RS.10 LAK HS IN T HE ASSESSEE S ITA NO. 6299 / MUM/20 14 4 COMPANY. THE LD. AR FURTHER PLACED RELIANCE ON THE FOLLOWING DECISIONS IN SUPPORT OF HIS CONTENTIONS THAT NO ADDITION IS WARRANTED : A) DCIT V/S ROHI NI BUILDERS (2002) 256 ITR 360 (369, 370) (GUJ)(HC) B ) CIT V/S ABT LTD (2015)370 ITR 159 (MAD ) (HC) C ) CIT V/S LOVELY EXPORTS P.LTD (2008) 216 CTR 195(SC) THE LD.AR FURTHER SUBMITTED THAT THE DECISION RENDERED BY THE HONBLE SUPREME COURT IN THE CASE OF LOVELY EXPORTS P.LTD (SUPRA) WAS FOLLOWED BY THE HONBLE BOMBAY HIGH COURT IN THE CASE OF CIT V/S CREATIVE WORLD TELEFILMS LTD (2011)333 ITR 100 (BOM) 5 . ON THE CONTRARY, THE LD. DR PLACED RELIANCE ON THE ORDER PASSED BY TH E LD. CIT(A). 6. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE RECORD. FROM THE OBSERVATIONS MADE BY THE TAX AUT HORITIES, I NOTICE THAT THE ASSESSEE HAS FURNISHED DETAILS TO PROVE THE IDENTITY OF THE SHARE APPLICANT COMPANY, ITS CREDIT WORTHINESS AND GENUINENESS OF THE TRANSACTIONS. AS STATED EARLIER, THE AO MADE THE ADDITION ON THE BASIS OF A STATEMENT ALLEGED TO HAVE BEEN GIVEN BY THE DIRECTOR OF THE SHARE APPLICANT COMPANY AND THE SAME WAS FOUND TO BE NOT AVAILABLE. HENCE, THE VERY BASIS ON WHICH THE IMPUGNED ADDITION WAS MADE WAS PROVED TO BE WRONG. HENCE THE LD CIT(A) PROCEEDED TO EXAMINE THE DOCUMENTS HIMSEL F. HOWEVER, HE HAS LOOKED INTO THE COPY OF INCOME TAX RETURN FILED BY THE SHARE APPLICANT COMPANY, INSTEAD OF FINANCIAL STATEMENTS. HE HAS ALSO EXAMINED THE BANK ACCOUNT OF THE SHARE APPLICANT COMPANY AND FOUND THAT THERE WERE DEPOSITS ON DAILY BASIS. A CCORDINGLY HE DREW ADVERSE CONCLUSIONS. IN MY VIEW, THE DOCUMENTS EXAMINED BY THE LD CIT(A) WERE NOT SUFFICIENT TO SUPPORT THE CONCLUSIONS REACHED BY LD CIT(A). ITA NO. 6299 / MUM/20 14 5 7. FROM THE PAPER BOOK FURNISHED BY THE ASSESSEE, I NOTICE THAT THE SHARE APPLICANT COMP ANY HAS FURNISHED FOLLOWING DETAILS BEFORE THE ASSESSING OFFICER ON 09 - 12 - 2007, I.E., BEFORE THE COMPLETION OF ASSESSMENT: - (A) BANK STATEMENT (B) MEMORANDUM AND ARTICLES OF ASSOCIATION OF COMPANY (C) AUDITED BALANCE SHEET FOR FY 2005 - 06. (D) COP Y OF BOARD RESOLUTION (E) COPY OF INCOME TAX RETURN. THEREAFTER, THE SHARE APPLICANT COMPANY HAS ALSO FILED ANOTHER LETTER ON 21 - 11 - 2008 BEFORE THE LD CIT(A), WHEREIN IT HAS CONFIRMED THE INVESTMENT MADE IN THE ASSESSEE COMPANY. 8. THE AUDITED BAL ANCE SHEET FILED FOR FY 2005 - 06 ALSO CONTAINS THE DETAILS RELATING TO FY 2004 - 05. A PERUSAL OF THE SAME WOULD SHOW THAT THE SHARE APPLICATION MONEY IS SHOWN UNDER THE HEAD LOANS AND ADVANCES. FURTHER THE SHARE APPLICANT COMPANY IS POSSESSING OWN FUNDS TO THE TUNE OF RS.8.89 CRORES. THE ABOVE SAID DOCUMENTS AND CONFIRMATION LETTER FILED BY THE SHARE APPLICANT COMPANY WOULD SHOW THAT THE IDENTITY AND CREDIT WORTHINESS OF THE TRANSACTIONS STAND PROVED. SINCE THE IMPUGNED SUM OF RS.10.00 LAKHS WAS RECEIVED THROUGH BANKING CHANNELS, THE GENUINENESS OF THE TRANSACTIONS ALSO STAND PROVED. THUS I NOTICE THAT THE ASSESSEE HAS DISCHARGED THE INITIAL BURDEN OF PROOF PLACED UPON IT. 9. AS NOTICED EARLIER, THE LD CIT(A) HAS EXAMINED THE COPY OF INCOME TAX RETUR NS, WHICH MAY NOT THROW LIGHT ABOUT THE CREDIT WORTHINESS. FURTHER THE COPY OF BANK STATEMENT ALSO SHOWS THAT THERE ARE CONTINUOUS TRANSACTIONS OF DEPOSITS AND WITHDRAWALS. HENCE, IN MY VIEW, THE OBSERVATIONS MADE BY THE LD CIT(A) THAT THERE WERE HEAVY D EPOSITS BEFORE ITA NO. 6299 / MUM/20 14 6 ISSUING THE CHEQUE OF RS.10.00 LAKHS TO THE ASSESSEE COMPANY ALSO APPEAR TO BE MISPLACED ONE. HENCE, IN MY VIEW, THE LD CIT(A) HAS CONFIRMED THE IMPUGNED ADDITION WITHOUT PROPERLY APPRECIATING FACTS. 10. HENCE, I AM UNABLE TO AGREE W ITH THE CONCLUSIONS REACHED BY LD CIT(A) IN VIEW OF THE FOREGOING DISCUSSIONS. ACCORDINGLY, I SET ASIDE THE ORDER OF LD CIT(A) ON THE ISSUE OF RS.10.00 LAKHS AND DIRECT THE ASSESSING OFFICER TO DELETE THE SAME. CONSEQUENTLY, THE ADDITION OF RS.10,000/ - R ELATING TO ESTIMATED COMMISSION INCOME IS ALSO DIRECTED TO BE DELETED. 11. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS ALLOWED. PRONOUNCED ACCORDINGLY ON 10 TH AUGUST 2015. 10 TH AUGUST, 2 015 SD ( . . / B.R. BASKARAN) / ACCOUNTANT MEMBER MUMBAI: 10TH AUG , 2015 . . . ./ SRL , SR. PS / COPY OF THE ORDER FORWARDED TO : 1. / TH E APPELLANT 2. / THE RESPONDENT. 3. ( ) / THE CIT(A) - CONCERNED 4. / CIT CONCERNED 5. , , / DR, ITAT, MUMBAI CONCERNED 6. / GUARD FILE. / BY ORDE R, T RUE COPY (ASSTT. REGISTRAR) , /ITAT, MUMBAI