G.M. Modi Hospitals Corporation Pvt. Ltd., New Delhi V. DCIT, New Delhi

ITA 6584/DEL/2013

• Counselvise Citation: [2015] 121 COUNSELVISE.COM (IT) 1767 (ITAT-DELHI)
• Duration Of Justice: 1 year(s) 11 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-11-2015
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: D
• Next Hearing Date: 04-11-2015
• Assessment Year: 2010-2011
• Appeal Filed On: 11-12-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: R S NEGI
• Assessee Lawyers: SANTOSH AGARWAL
• Keywords: Unexplained cash credit; Capital asset; Capital receipt
• Section: 143(3); 68

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH D , NEW DELHI BEFORE SHRI J. SUDHAKAR REDDY, ACCOUNTANT MEMBER AND SHRI KULDIP SINGH, JUDICIAL MEMBER ITA NO. 6584 /DEL/201 3 AY: 2010 - 11 G.M. MODI HOSPITALS CORPORATION PVT. LTD. VS. DCIT MANDIR MARG, CIRCLE - 37 (1) SAKET NEW DELHI. NEW DELHI 110 017 PAN AAACG3749B (APPELLAN T) (RESPONDENT) APPELLANT BY : SHRI SANTOSH AGARWAL, ADVOCATE RESPONDENT BY : SH. R.S. NEGI, SR. DR ORDER PER J.SUDHAKAR REDDY, A.M. THIS IS AN APPEAL FILED BY THE ASSESSEE DIRECTED AGAINST THE ORDER OF THE LD.COMMISSIONER OF INCOME TAX (APPEALS) - XXVIII, NEW DELHI DATED 17.10.2013 PERTAINING TO THE ASSESSMENT YEAR (A.Y.) 2010 - 11. 2. FACTS IN BRIEF: - THE FACTS ARE BROUGHT OUT AT PARAS 2 AND 3 OF THE ASSESSMENT ORDER WHICH ARE EXTRACTED FOR READY REFERENCE. THE ASSESSEE IS A MEDICAL AND OTHER EQUIPMENTS RENTING AND CHEMIST SHOP. THE ASSESSEE HAD FILED ITS RETURN OF INCOME DECLARING LOSS OF RS.73,92,457/ - ON 24.9.2010. IN THE AUDITED P&L A/C THOUGH THE ASSESS EE HAS SHOWN INCOME FROM CAPITAL ADVANCES WRITTEN BACK OF RS. 10,00,000 / - UNDER PROFIT BEFORE TAXES, BUT THE SAME HAS BEEN REDUCED WHILE COMPUTING THE TOTAL INCOME AS PER INCOME TAX ACT. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE AR OF THE ASSESSEE W AS ASKED TO FURNISH THE DETAILS OF CAPITAL ADVANCES WRITTEN BACK. THE AR VIDE ITS LETTER DATED 21.12.2012 SUBMITTED AS UNDER: - 2 'THE CAPITAL ADVANCES OF RS. 10 LACS WRITTEN BACK REPRESENTS WRITE BACK OF SHARE APPLICATION MONEY RECEIVED FROM CERTAIN PARTIES IN EARLIER YEARS WHICH ARE NOT TRACEABLE. SINCE, THE MONEY WAS RECEIVED FOR ISSUE OF SHARES AND IS A CAPITAL ACCOUN T TRANSACTION, THE WRITE BACK THEREOF IS ALSO A CAPITAL RECEIPT NOT LIABLE TO TAX WITHIN THE PURVIEW OF SECTION 41(1) OF THE ACT. HENCE, IN THE COMPUTATION OF INCOME SAME HAS BEEN EXCLUDED WHILE FILING THE RETURN OF INCOME . 3.2 SINCE, THE AMOUNT OF RS.1 0,00,000 / - HAS BEEN CREDITED IN THE BOOKS OF ACCOUNTS AND NEITHER THE ASSESSEE NOR HIS AR HAS FURNISHED ANY EXPLANATION / DETAILS ABOUT THE NA TURE AND SOURCE OF THE CAPITAL ADVANCES WRITTEN BACK, THE SUM SO CREDITED IS LIABLE TO BE CHARGED TO INCOME TAX AS THE INCOME OF THE ASSESSEE FOR F .Y. 2009 - 10. ACCORDINGLY, VIDE ORDER SHEET ENTRY DATED 1.12.2012, THE AR OF THE ASSESSEE WAS ASKED TO SHOW C AUSE WHY THE SHARE APPLICATION WRITTEN OFF AMOUNTING TO RS. 10,00,000 / - SHOULD NOT BE ADDED BACK TO THE TOTAL INCOME U/S. 68 OF THE ACT. THE AR VIDE ITS REPLY DATED 21.01.2013 SUBMITTED AS UNDER: 'THE CAPITAL ADVANCES WHICH HAVE BEEN WRITTEN OFF DURING THE YEAR UNDER CONSIDERATION WERE RECEIVED IN F.Y. 1997 - 98. SINCE, THESE BALANCES WERE OUTSTANDING FOR MORE THAN 10 YEARS THE SAME HAVE BEEN WRITTEN OFF IN THE BOOKS OF ACCOUNTS. ' 3.3 FROM THE ABOVE CONTENTIONS, IT IS CLEAR THAT THE ASSESSEE HAS NOTHING TO EXPLAIN ABOUT THE NATURE AND SOURCE FOR SHARES APPLICATIONS AMOUNTS WRITTEN OFF RS. 10,00,000 / - AND THUS, IN THIS BACKGROUND I AM OF THE OPINION THAT THE SUM CREDITED OF RS. 10,00,000 / - SHOULD BE CHARGED TO INCOME TAX AS INCOME OF THE ASSESSEE COMPANY FOR F.Y. 2009 - 10. THUS, RS. 10,00,000 / - - IS HEREBY ADDED BACK TO THE TOTAL INCOME OF THE ASSESSEE AS UNEXPLAINED CASH CREDITS U/S. 68 OF THE INCOME TAX ACT, 1961. (ADDITION OF RS. 10,00,000/ - ) 2.1 . THE A.O. COMPUTED THE TOTAL INCOME OF THE ASSESSEE AT RS.63,92,550/ - U/S 143(3) OF THE ACT AND ISSUED PENALTY PROCEEDINGS U/S 271(1)(C) OF THE ACT FOR FURNISHING INACCURATE PARTICULARS OF INCOME. 3 2.2. AGGRIEVED THE ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE THE FIRST APPELLATE AUTHORITY. THE LD.CIT(A) IN THE APPELLATE PROCEEDINGS HELD THAT S.68 OF THE ACT HAS NO APPLICATION. SHE APPLIED THE DECISION OF THE JURISDICTIONAL HIGH COURT IN THE CASE OF CIT VS. ICC INDIA P.LTD. IN ITA NO.396/2012 DT. 20.11.2012 AND HELD THAT THE WRITE OFF OF SHARE APPLICATION MO NEY RECEIVED, IS TAXABLE U/S 28(IV) OF THE ACT. 3. AGGRIEVED THE ASSESSEE IS IN APPEAL BEFORE US ON THE FOLLOWING GROUNDS. 1. THAT THE LEARNED CIT(A) HAS ERRED ON FACTS AND IN LAW IN UPHOLDING THE ORDER OF ASSESSMENT PASSED U/S 143(3) OF THE INCOME TAX A CT, 1961 BY THE ASSESSING OFFICER DETERMINING THE ASSESSABLE LOSS OF RS.63,92,547/ - AS AGAINST THE RETURNED LOSS OF RS.73,92,547/ - . 2 . THAT THE LEARNED CIT(A) HAS ERRED ON FACTS AND IN LAW IN UPHOLDING ADDITION OF RS.10,00,000 / - MADE BY THE ASSESSING OFFI CER UNDER THE PROVISIONS OF SECTION 68 OF THE INCOME TAX ACT, 1961 BEING THE UNCLAIMED CAPITAL ADVANCES WRITTEN BACK BY APPLYING THE PROVISIONS OF SECTION 28(IV) OF THE ACT. 3. THAT THE LEARNED CIT(A) HAS ERRED ON FACTS AND IN LAW IN APPLYING THE PROVISIO NS OF SECTION 28(IV) OF THE INCOME TAX ACT, 1961 WHILE CONFIRMING THE ADDITION OF RS.10,00,000 / - WITHOUT AFFORDING AN OPPORTUNITY TO THE APPELLANT REGARDING APPLICABILITY THEREOF. 4. THAT THE LEARNED CIT(A) HAS ERRED ON FACTS AND IN LAW IN UPHOLDING ADDITION OF RS.10,00,000 / - UNDER THE PROVISIONS OF SECTION 28(IV) OF THE INCOME TAX ACT, 1961 WITHOUT GIVING A CLEAR FINDING AS TO WHETHER THE SHARE APPLICATION MONEY RECEIVED WAS UTILIZED FOR ACQUISITION OF A CAPITAL ASSET OR UTILIZED FOR TRADING PURPOSES . 5. THAT THE LEARNED CIT(A) HAS ERRED ON FACTS AND IN LAW IN UPHOLDING ADDITION OF RS.10,00,000 / - UNDER THE PROVISIONS OF SECTION 28(IV) OF THE INCOME TAX ACT, 1961 ON THE BASIS OF HIS SURMISES AND CONJUNCTURES WITHOUT GIVING ANY CLEAR FINDING AS TO HOW THE PROVISIONS OF ABOVE SECTION ARE ATTRACTED IN THE CASE OF THE APPELLANT. THAT THE AFORESAID GROUNDS OF APPEAL ARE WITHOUT PREJUDICE TO EACH OTHER. 4 THAT THE APPELLANT CRAVES LEAVE TO ADD, ALTER, AMEND OR VARY FROM AFORESAID GROUNDS OF APPEAL AT OR BEFO RE THE TIME OF HEARING. 4. WE HAVE HEARD SHRI SANTOSH AGGARWAL, THE LD.COUNSEL FOR THE ASSESSEE AND SHRI R.S.NEGI, THE LD.SR.D.R. ON BEHALF OF THE REVENUE. 5. THE LD.COUNSEL FOR THE ASSESSEE WITHOUT PREJUDICE TO ALL HIS OTHER ARGUMENTS SUBMITTED TH AT THE LD.CIT(A) HAS NOT EXAMINED THE PURPOSE FOR WHICH THE AMOUNTS IN QUESTION RECEIVED. HE ARGUED THAT THE SHARE APPLICATION AMOUNTS WERE TREATED AS CAPITAL RECEIPT AND WERE UTILISED FOR PURCHASE OF CAPITAL ASSETS AND HENCE THE ADDITION SUSTAINED BY TH E LD.CIT(A) IS BAD IN LAW. TO DEMONSTRATE THAT THE AMOUNT WAS UTILISED FOR EXPENDITURE IN THE CAPITAL FIELD, HE FILED ANNUAL ACCOUNTS FOR THE F.Y. 1997 - 98, 1998 - 99 AND 2009 - 10. 6. THE LD.SR.D.R. ON THE OTHER HAND SUBMITTED THAT THESE ASPECTS REQUIRE VER IFICATION AND HAS TO BE REMANDED TO THE FILE OF THE LD.CIT(A). 7. ON A CAREFUL CONSIDERATION OF THE FACTS AND CIRCUMSTANCES OF THE CASE, PERUSAL OF MATERIAL ON RECORD, ORDERS OF LOWER AUTHORITIES, CASE LAWS CITED, WE HOLD AS FOLLOWS. 8. WE FIND THAT THE JURISDICTIONAL HIGH COURT IN THE CASE OF ICC INDIA P.LTD. (SUPRA) AT PARA 10 HAS HELD AS FOLLOWS. 10. IN THE PRESENT CASE THE AMOUNTS WERE NEVER RECEIVED TOWARDS TRADING PURPOSE. THE SHARE APPLICATION AMOUNT WAS TREATED AS A CAPITAL RECEIPT, AND LIKEW ISE THE AMOUNT OF RS. 45,41,542/ - WAS SHOWN AS LIABILITY TOWARDS PURCHASE OF CAPITAL ASSETS. HAVING REGARD TO THE LAW DECLARED IN HHEC, CONSEQUENTLY IT NEVER CHANGED ITS CHARACTER WHEN IT WAS EVENTUALLY TRANSFERRED TO THE CAPITAL RESERVE IN 2006 - 07 WHEN T HE CONVERSION TOOK PLACE 6 - 7 YEARS LATER. THE PERIOD OF TIME WHEN THE AMOUNTS WERE HELD BY THE ASSESSEE IN ITS BOOKS ALSO FACTUALLY ELIMINATED THE SUSPICION THAT THE AMOUNTS WERE GIVEN AS GRANTS OR AID. 5 8.1. THE ASSESSEE WHILE FILING THE ANNUAL ACCOUNTS BEFORE THE LD.CIT(A) DEMONSTRATED THAT THE SHARE APPLICATION MONEY RECEIVED WAS UTILISED FOR INCURRING EXPENDITURE IN THE CAPITAL FIELD. UNDER THESE CIRCUMSTANCES WE HAVE TO APPLY THE BINDING DECISION OF THE JURISDICTIONAL HIGH COURT IN THE CASE OF ICC INDIA P.LTD. (SUPRA) AND UPHOLD THE CONTENTIONS OF THE ASSESSEE AND DELETE THE ADDITION OF RS.10 LAKHS. WE ALLOW THE APPEAL OF THE ASSESSEE. 9. IN THE RESULT ASSESSEE S APPEAL IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 30 TH NOVEMBER ,2015. SD/ - SD/ - (KULDI P SINGH) (J.SUDHAKAR REDDY) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: THE 30 TH NOVEMBER, 2015 *MANGA COPY OF THE ORDER FORWARDED TO: 1. APPELLANT; 2.RESPONDENT; 3.CIT; 4.CIT(A); 5.DR; 6.GUARD FILE BY ORDER ASST. REGISTRAR