ITO, WD-4(1), KOLKATA, Kolkata V. M/s The Calcutta Jute Mfg. Co. Ltd., Kolkata

ITA 689/KOL/2014

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 9410 (ITAT-KOLKATA)
• Duration Of Justice: 2 year(s) 9 month(s) 16 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 03-02-2017
• Appeal Filed By: Department
• Bench Allotted: A
• Assessment Year: 2005-2006
• Appeal Filed On: 17-04-2014
• Court: TRIBUNAL
• Department Lawyers: A K PANDEY AD DL CITSR
• Assessee Lawyers: S M SURANA
• Keywords: Unexplained cash credit; Search and seizure; Opportunity of cross examination; Accommodation entries; Retraction
• Section: 143(3); 131; 68

Judgement Text

ITA NO.689/KOL/2014-M/S. THE CALCUTTA JUTE MFG. CO. LTD. A.Y.2005-06 1 IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH : KOLKATA [BEFORE HONBLE SRI N.V.VASUDEVAN, JM & SHRI WASE EM AHMED, AM ] I.T.A NO. 689/KOL/2014 ASSESSMENT YEAR : 200 5-06 I.T.O., WARD-4(1), -VS.- M/S. THE CALCUT TA JUTE MFG.CO.LTD. KOLKATA KOLKATA [PAN : AABCT0005G] (APPELLANT) (RESPONDENT) FOR THE APPELLANT : SHRI A.K.PANDEY, AD DL. CIT,SR.DR FOR THE RESPONDENT : SHRI S.M.SURANA, ADVOC ATE DATE OF HEARING : 18.01.2017. DATE OF PRONOUNCEMENT : 03.02.2017. ORDER PER N.V.VASUDEVAN, JM THIS IS AN APPEAL BY THE REVENUE AGAINST THE ORDER DATED 10.12.2013 OF CIT(A)-CENTRAL-I, KOLKATA RELATING TO A.Y.2005-06. 2. GROUNDS OF APPEAL RAISED BY THE REVENUE READS AS FOLLOWS :- THAT ON THE FACTS AND IN CIRCUMSTANCES OF THE CASE , THE CIT(A) ERRED IN HOLDING THAT ADDITION OF SHARE CAPITAL OF RS.35,00,000/- AS INCO ME OF THE ASSESSEE FROM UNDISCLOSED SOURCE, WAS NOT WARRANTED, IGNORING THE FACT THAT T HE IDENTITY, CREDITWORTHINESS AND GENUINENESS OF TRANSACTION IN RESPECT OF SHARE SUBS CRIBERS COULD NOT BE ESTABLISHED FROM WHOM SHARE CAPITAL CLAIMED TO HAVE BEEN RECEIVED BY THE ASSESSEE. 3. THE ASSESSEE IS A COMPANY. DURING THE COURSE OF ASSESSMENT PROCEEDINGS U/S 143(3) OF THE INCOME TAX ACT, 1961 (ACT) THE AO NOT ICED THAT DURING THE RELEVANT PREVIOUS YEAR THE PAID UP SHARE CAPITAL OF THE ASSE SSEE STOOD INCREASED BY RS.40,00,000/-. THE ASSESSEE GAVE A LIST OF SHARE SUBSCRIBERS WHO HAD SUBSCRIBED TO THE INCREASED SHARE CAPITAL OF RS.40 LACS. THERE W ERE 3 SUBSCRIBERS TO THE SHARE CAPITAL WHO WERE INDIVIDUALS AND FAMILY MEMBERS OF THE DIRE CTORS OF THE ASSESSEE. THERE WERE ALSO 8 OTHER SUBSCRIBERS WHO WERE ALL LIMITED COMPANIES WHO HAD SUBSCRIBED TO THE SHARE CAPITAL OF THE ASSESSEE TO THE EXTENT OF RS.35 LAKHS. THE DETAILS OF THESE COMPANIES AND THE AMOUNT SUBSCRIBED BY THEM WERE AS FOLLOWS : ITA NO.689/KOL/2014-M/S. THE CALCUTTA JUTE MFG. CO. LTD. A.Y.2005-06 2 1. MS/. CLARITY MERCANTILE (P)LTD. RS.3,00,000/- 2. M/S. ALLWORTH COMMODITIES (P)LTD. RS.4,00,000/- 3. M/S. SUGAM DISTRIBUTOR (P)LTD. RS.3,00,000/- 4. M/S. MAHIMA CREDIT (P)LTD. RS.5,00,000/- 5. M/S. JANITOR DISTRIBUTORS (P)LTD. RS.4,00,000/ - 6. M/S. ABBOTT MARKETING (P)LTD. RS.3,00,000/- 7. M/S. MULKRAJ VIMCOM (P)LTD. RS.3,00,000/- 8. M/S PRIME CAPITAL MARKET LTD. RS.10,00,000/- 4. THE AO NOTICED THAT ONE MR.AJAY SINGH WAS A D IRECTOR IN TWO OF THE AFORESAID 8 COMPANIES NAMELY M/S. CLARITY MERCANTILE (P)LTD AND M/S. ALLWORTH COMMODITIES (P)LTD WHO HAD INVESTED RS.3,00,000/- AND RS.4,00,0 00/- RESPECTIVELY IN THE SHARE CAPITAL OF THE ASSESSEE. ACCORDING TO THE AO SHRI AJAY SINGH WAS INVOLVED IN PROVIDING ACCOMMODATION ENTRIES TO VARIOUS COMPANIE S BASED AT MUMBAI. THE AO REFERRED TO THE FACT THAT IN A STATEMENT RECORDED U /S 131 OF THE INCOME TAX ACT, 1961 (ACT) ON 04.12.2006 SHRI AJAY SINGH ADMITTED ON OAT H THAT HE GOT CASH EQUIVALENT AMOUNT BEFORE ISSUING CHEQUES BY THE TWO COMPANIES M/S. CLARITY MERCANTILE (P)LTD AND M/S. ALLWORTH COMMODITIES (P)LTD. THE AO ALSO R EFERRED TO THE FACT THAT SHRI AJAY SINGH WAS CALLED BY HIM AND HIS STATEMENTS ARE RECORDED ON 26.12.2007 IN THE ASSESSMENT PROCEEDINGS OF THE ASSESSEE. IN HIS ST ATEMENT HE HAD ADMITTED THAT WHATEVER CASH WAS RECEIVED BY HIM WAS HANDED OVER T O ONE SHRI PRAMOD SHARMA, WHO WAS AN ENTRY OPERATOR AND WHO DEPOSITED THE MONEY B Y WAY OF CASH IN THE BANK ACCOUNT OF HIS PROPRIETORY CONCERNS. THE AO ALSO RE FERRED TO THE FACT THAT SHRI PRAMOD SHARMA MADE A DISCLOSURE TO DDIT(INVESTIGATION)ON 2 2.11.2005 DISCLOSING THAT HE HAD DEPOSITED A SUM OF RS.166.59 CRORE IN VARIOUS BANK ACCOUNTS OF PROPRIETORY CONCERNS AND MADE DISCLOSURE OF INCOME. THE AO WAS THEREFORE OF THE VIEW THAT THE RECEIPT OF SHARE CAPITAL FROM THE AFORESAID TWO COMPANIES WAS NOT SATISFACTORILY EXPLAINED BY THE ASSESSEE AND THEREFORE THE RECEIPT OF SHARE CAPITAL FROM THESE TWO COMPANIES HAD TO BE TREATED AS UNEXPLAINED CASH CREDIT AND ADDED TO THE TOTAL INCOME OF THE ASSESSEE U/S.68 OF THE INCOME TAX ACT, 1961 (ACT). 5. THE AO ALSO FOUND THAT IN RESPECT OF ANOTHER SHARE SUBSCRIBER NAMELY M/S. SUGAM DISTRIBUTOR PVT.LTD ONE SHRI RAJESH KUMAR LATH WAS ONE OF THE RENOWNED ENTRY ITA NO.689/KOL/2014-M/S. THE CALCUTTA JUTE MFG. CO. LTD. A.Y.2005-06 3 OPERATOR IN KOLKATA. IN THE SEARCH AND SEIZURE OPER ATION CONDUCTED IN HIS CASE HE HAD ADMITTED 2% COMMISSION INCOME OF PROVIDING ACCOMMOD ATION ENTRIES. THE AO WAS OF THE VIEW THAT THE RECEIPT OF SHARE CAPITAL FROM THIS COMPANY WAS ALSO NOT SATISFACTORILY EXPLAINED BY THE ASSESSEE AND THEREF ORE THE RECEIPT OF SHARE CAPITAL FROM THESE TWO COMPANIES HAD TO BE TREATED AS UNEXPLAINE D CASH CREDIT AND ADDED TO THE TOTAL INCOME OF THE ASSESSEE U/S.68 OF THE INCOME T AX ACT, 1961 (ACT). 6. IN RESPECT OF THE REMAINING FIVE COMPANIES T HE AO DID NOT MAKE ANY REFERENCE TO ANY FACTS BUT CAME TO THE CONCLUSION THAT RECEIPT O F SHARE CAPITAL FROM THE OTHER FIVE COMPANIES WAS ALSO NOT PROPERLY EXPLAINED BY THE AS SESSEE AND THEREFORE THE RECEIPT OF SHARE CAPITAL FROM THESE TWO COMPANIES HAD TO BE TR EATED AS UNEXPLAINED CASH CREDIT AND ADDED TO THE TOTAL INCOME OF THE ASSESSEE U/S.6 8 OF THE INCOME TAX ACT, 1961 (ACT). 7. FOR ALL THE ABOVE REASONS THE AO TREATED THE RECEIPT OF SHARE CAPITAL TO THE EXTENT OF RS.35,00,000/- FROM THE AFORESAID EIGHT COMPANIE S AS UNEXPLAINED CASH CREDIT U/S 68 OF THE ACT AND ADDED THE SAME TO THE TOTAL INCOM E OF THE ASSESSEE. 8. BEFORE CIT(A) THE FIRST AND FOREMOST SUBMISS ION OF THE ASSESSEE WAS THAT IN RESPECT OF FIVE COMPANIES WHO HAD SUBSCRIBED TO THE SHARE CAPITAL OF THE ASSESSEE THE ASSESSEE HAD FURNISHED CONFIRMATION LETTER FROM THE SHARE EVIDENCING THAT THESE COMPANIES WERE ASSESSED TO INCOME TAX, COPY OF THE BANK STATEMENT AS WELL AS DETAILS OF THE CHEQUES THROUGH EACH APPLICATION FOR SHARES WERE MADE BY THESE COMPANIES. IT WAS CONTENDED THAT NO ADVERSE MATERIAL WAS BROUGHT BY THE AO IN RESPECT OF FIVE COMPANIES AND THEREFORE THE ADDITION MADE U/S 68 IN RESPECT OF THE AFORESAID FIVE COMPANIES CANNOT BE SUSTAINED. THE CIT(A) AGREED WI TH THE SUBMISSIONS OF THE ASSESSEE AND DELETED THE ADDITION MADE IN RESPECT O F FIVE COMPANIES. 9. SO FAR AS THE RECEIPT OF SHARE APPLICATION M ONEY FROM M/S. CLARITY MERCANTILE (P)LTD AND M/S. ALLWORTH COMMODITIES (P)LTD IS CONC ERNED THE ASSESSEE AGAIN ITA NO.689/KOL/2014-M/S. THE CALCUTTA JUTE MFG. CO. LTD. A.Y.2005-06 4 POINTED OUT THAT THE CONFIRMATION LETTERS FROM THES E COMPANIES ALONG WITH INCOME TAX PARTICULARS, BANK STATEMENTS ETC. HAD BEEN FURNISHE D BY THE ASSESSEE TO THE AO. THE ASSESSEE BROUGHT TO THE NOTICE OF CIT(A) THAT IN TH E DEPOSITION RECORDED BY THE AO ON 26.12.2007 SHRI AJAY SINGH HAD NOT MADE ANY REFEREN CE TO THE NAME OF THE ASSESSEE COMPANY AS A PERSON WHO HAD GIVEN CASH AND THE ASSE SSEE BEING A BENEFICIARY OF ANY ACCOMMODATION ENTRIES. THE ASSESSEE THEREFORE CONTE NDED THAT THE RELIANCE BY THE AO ON THE DEPOSITION OF SHRI AJAY SINGH DATED 26.12.20 07 CANNOT HELP THE CASE OF THE REVENUE. THE ASSESSEE ALSO CONTENDED THAT THE STATE MENT OF SHRI AJAY SINGH WAS NEVER CONFRONTED TO THE ASSESSEE BY THE AO IN THE COURSE OF ASSESSMENT PROCEEDINGS. THE ASSESSEE DEMANDED A RIGHT OF CROSS EXAMINATION OF S HRI AJAY SINGH . SIMILAR SUBMISSIONS WERE MADE WITH REGARD TO SHRI AJAY SING HS STATEMENT RECORDED ON 04.12.2006 REFERRED TO BY THE AO IN THE ORDER OF AS SESSMENT. 10. ON THE ABOVE SUBMISSIONS OF THE ASSESSEE THE CIT(A) CALLED FOR A REMAND REPORT FROM AO AND DIRECTED THE AO TO PROVIDE OPPORTUNITY OF CROSS EXAMINATION OF SHRI AJAY SINGH TO THE ASSESSEE IN THE REMAND PROCEEDING S. 11. IN THE REMAND REPORT FILED BY THE AO, THE AO INFORMED CIT(A) THAT SHRI AJAY SINGH FILED AN AFFIDAVIT RETRACTING THE STATEMENT D ATED 04.12.2006 AS WELL AS THE STATEMENT DATED 26.12.2007. IN THE REMAND REPORT IT WAS ALSO SAID BY THE AO THAT IN THE AFFIDAVIT OF SHRI AJAY SINGH DATED 19.12.2007 HE HA D CLAIMED THAT HIS STATEMENT RECORDED ON 04.12.2006 WAS WRONG. THE AO ACCORDINGL Y REPORTED TO THE CIT(A) THAT THE STATEMENT AND AFFIDAVIT OF SHRI AJAY SINGH WERE CONTRADICTORY. IT WAS FURTHER REPORTED BY THE AO THAT HE WAS NOT ABLE TO SAY AS T O WHETHER THIS STATEMENT WAS USED IN THE ASSESSMENT OF M/S. ALLWORTH COMMODITIES (P)L TD., OF WHICH HE WAS THE DIRECTOR. 12. ON A CONSIDERATION OF THE ABOVE REMAND REPORT , THE CIT(A) WAS OF THE VIEW THAT THE STATEMENT OF SHRI AJAY SINGH DATED 04.12.2006 A ND 26.12.2007 HAD BEEN RETRACTED BY AN AFFIDAVIT DATED 19.12.2007 AND THEREFORE CANN OT BE RELIED UPON BY THE AO ITA NO.689/KOL/2014-M/S. THE CALCUTTA JUTE MFG. CO. LTD. A.Y.2005-06 5 WITHOUT CORROBORATION. THE CIT(A) WAS ALSO OF THE V IEW THAT EVEN OTHERWISE SHRI AJAY SINGH HAD NOT IN HIS STATEMENT IMPLICATED THE ASSESSEE NOR WAS ANY SPECIFIC QUESTION PUT TO SHRI AJAY SINGH MENTIONING THE NAME OF THE ASSESSE AS A RECIPIENT OF ANY ACCOMMODATION ENTRY. THE CIT(A) WAS THEREFORE O F THE VIEW THAT THE STATEMENT ON WHICH RELIANCE WAS PLACED BY THE AO IN THE ORDER OF ASSESSMENT WAS NOT SUFFICIENT TO CONCLUDE THAT THE RECEIPT OF SHARE CAPITAL FROM THE AFORESAID TWO COMPANIES WAS NOT GENUINE. THE CIT(A) WAS ALSO OF THE VIEW THAT IN T HE LIGHT OF THE STATEMENTS OF SHRI AJAY SINGH AND THE FACT THAT HE HAD NOT IMPLICATED THE NAME OF THE ASSESSEE IN HIS STATEMENT THERE WAS NO REQUIREMENT OF CROSS EXAMINA TION OF SHRI AJAY SINGH. FOR ALL THE ABOVE REASONS THE CIT(A) DELETED THE ADDITION M ADE IN RESPECT OF SHARE APPLICATION MONEY FROM M/S. CLARITY MERCANTILE (P)LTD AND M/S. ALLWORTH COMMODITIES (P)LTD. 13. SO FAR AS THE RECEIPT OF SHARE CAPITAL FROM M /S. SUGAM DISTRIBUTOR (P)LTD. IS CONCERNED THE SUBMISSION OF THE ASSESSEE WAS THAT W HEN THE CONFIRMATION AND OTHER RELEVANT EVIDENCE WERE FILED BY THE ASSESSEE THE AO WITHOUT FINDING ANY DEFECT IN THESE DOCUMENTS, THE AO CANNOT PLACE RELIANCE ON TH E FACT THAT ONE SHRI RAJESH KUMAR LATH WAS THE DIRECTOR OF THE SAID COMPANY AND HE H AD OFFERED INCOME ON ACCOUNT OF COMMISSION FOR PROVIDING ACCOMMODATION ENTRIES IN A SEARCH CONDUCTED IN HIS CASE. IT WAS SUBMITTED THAT THE DEPOSITION OF SHRI RAJESH KU MAR LATH WAS NOT BROUGHT ON RECORD AND AS TO WHETHER THE TRANSACTION OF RECEIPT OF SHARE CAPITAL BY THE ASSESSEE WAS ALSO ONE SUCH ACCOMMODATION ENTRY IS NOT BROUGHT ON RECORD BY THE AO. THE CIT(A) WAS OF THE VIEW THAT THERE WAS NO MATERIAL AGAINST THE ASSESSEE BROUGHT ON RECORD BY THE AO TO SUGGEST THAT CASH WAS PAID BY THE ASSESSE E IN LIEU OF THE SUBSCRIPTION OF M/S. SUGAM DISTRIBUTOR (P)LTD. THE CIT(A) HELD THAT FROM THE FACT THAT SHRI RAJESH KUMAR LATH WAS AN ENTRY OPERATOR AND HAD SURRENDERED 2% C OMMISSION FOR PROVIDING ACCOMMODATION ENTRIES CANNOT BE A CONCLUSIVE PROOF THAT SUBSCRIPTION RECEIVED BY THE ASSESSEE FROM M/S. SUGAM DISTRIBUTOR (P)LTD WAS ALS O AN ACCOMMODATION ENTRY WITHOUT CORROBORATING EVIDENCE. THE ADDITION MADE I N RESPECT OF THE SHARE APPLICANT M/S. SUGAM DISTRIBUTOR (P)LTD WAS ALSO DELETED BY C IT(A). ITA NO.689/KOL/2014-M/S. THE CALCUTTA JUTE MFG. CO. LTD. A.Y.2005-06 6 14. AGGRIEVED BY THE ORDER OF CIT(A) THE REVENUE HAS PREFERRED THE PRESENT APPEAL BEFORE THE TRIBUNAL. 15. THE LD. DR PLACED RELIANCE ON THE ORDER OF AO . THE LD. COUNSEL FOR THE ASSESSEE FILED BEFORE US A COPY OF THE REMAND REPORT OF THE AO FILED BEFORE CIT(A), COPY OF THE DEPOSITION OF SHRI AJAY SINGH DATED 04.12.2006 AND 26.12.2007 AS WELL AS THE RETRACTION AFFIDAVIT DATED 19.12.2007 OF SHRI AJAY SINGH. HE RELIED ON THE ORDER OF CIT(A). 16. AFTER CONSIDERING THE RIVAL SUBMISSIONS WE AR E OF THE VIEW THAT THE CONCLUSIONS DRAWN BY CIT(A) DO NOT CALL FOR ANY INTERFERENCE. A S RIGHTLY HELD BY CIT(A) THERE WAS NO ADVERSE MATERIAL IN RESPECT OF FIVE COMPANIES A ND M/S. CLARITY MERCANTILE (P)LTD, M/S. ALLWORTH COMMODITIES (P)LTD AND M/S. SUGAM DIS TRIBUTOR (P)LTD. BY FILING CONFIRMATION OF THE SHARE SUBSCRIBERS AND OTHER DET AILS, THE ASSESSEE HAS ESTABLISHED SATISFACTORILY THE RECEIPT OF SHARE CAPITAL FROM TH ESE FIVE COMPANIES. 17. AS FAR AS THE RECEIPT OF SHARE FROM M/S. CLAR ITY MERCANTILE (P)LTD AND M/S. ALLWORTH COMMODITIES (P)LTD IS CONCERNED, AS RIGHTL Y HELD BY CIT(A), THE ONLY BASIS OF AO TO MAKE THE ADDITION IS THE STATEMENT OF SHRI AJAY SINGH. THE TWO STATEMENTS REFERRED TO BY THE AO IN THE ORDER OF ASSESSMENT DI D NOT MAKE SPECIFIC REFERENCE TO THE ASSESSEE. BESIDES THE ABOVE THE STATEMENTS WERE RET RACTED BY SHRI AJAY SINGH. IN THESE CIRCUMSTANCES THE ADDITION MADE BY THE AO WAS RIGHT LY DELETED BY CIT(A). 18. AS FAR AS THE RECEIPT OF SHARE CAPITAL FROM M /S. SUGAM DISTRIBUTOR (P)LTD THE CONCLUSION DRAWN BY THE AO WERE PURELY BASED ON THE FACT THAT SHRI RAJESH KUMAR LATH, WHO WAS THE DIRECTOR OF THE SAID COMPANY HAD OFFERED 2% COMMISSION INCOME FOR PROVIDING ACCOMMODATION ENTRIES IN A SEARCH CON DUCTED IN HIS CASE. THERE IS NOT EVEN A REFERENCE TO THE FACT THAT THE ASSESSEE WAS ALSO A BENEFICIARY OF ACCOMMODATION ENTRY PROVIDED BY M/S. SUGAM DISTRIBUTOR (P)LTD. IN THESE CIRCUMSTANCES THE CIT(A) ITA NO.689/KOL/2014-M/S. THE CALCUTTA JUTE MFG. CO. LTD. A.Y.2005-06 7 WAS RIGHT IN CONCLUDING THAT THE ADDITION U/S 68 OF THE ACT MADE BY THE AO CANNOT BE SUSTAINED. 19. FOR THE REASONS GIVEN ABOVE WE FIND NO MERITS IN THE APPEAL BY THE REVENUE AND THE SAME IS DISMISSED. 20. IN THE RESULT THE APPEAL OF THE REVENUE IS D ISMISSED. ORDER PRONOUNCED IN THE COURT ON 03.02.2017. SD/- SD/- [WASEEM AHMED] [ N.V.VASUDEVAN ] ACCOUNTANT MEMBER JUDICIAL MEMBER DATED : 03.02.2017. [RG PS] COPY OF THE ORDER FORWARDED TO: 1. M/S. THE CALCUTTA JUTE MFG. CO.LTD., 20, OLD COU RT HOUSE STREET, KOLKATA-700001. 2. I.T.O., WARD-4(1), KOLKATA. 3. CIT(A)-CENTRAL-I, KOLKATA 4. CIT CENTRAL-I, KOLKATA. 5..CIT(DR), KOLKATA BENCHES, KOLKATA. TRUE COPY BY ORDE R ASSTT. REGISTRAR KOLKATA BENCHES ITA NO.689/KOL/2014-M/S. THE CALCUTTA JUTE MFG. CO. LTD. A.Y.2005-06 8