DCIT, Bangalore V. M/s Lumbini Gardens Limited, Bangalore

ITA 703/BANG/2014

• Counselvise Citation: 70321114 RSA 2014
• Duration Of Justice: 8 month(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-02-2015
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 2007-2008
• Appeal Filed On: 22-05-2014
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: P DHIVAHAR JT
• Keywords: Unexplained cash credit; Opportunity of being heard; Additional evidence
• Section: 68

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH : BANGALORE BEFORE SHRI N.V. VASUDEVAN, JUDICIAL MEMBER AND SHRI ABRAHAM P. GEORGE, ACCOUNTANT MEMBER ITA NO.703/BANG/2014 ASSESSMENT YEAR : 2007-08 THE DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE 11(5), BANGALORE. VS. M/S. LUMBINI GARDENS LTD., NAGAWARA LAKE, NAGAWARA RING ROAD, HEBBAL, BANGALORE 560 045. PAN : AAACL 9979L APPELLANT RESPONDENT APPELLANT BY : SHRI P. DHIVAHAR, JT. CIT(DR) RESPONDENT BY : SHRI ZAIN AHMED KHAN, C.A. DATE OF HEARING : 10.02.2015 DATE OF PRONOUNCEMENT : 20.02.2015 O R D E R PER N.V. VASUDEVAN, JUDICIAL MEMBER THIS IS AN APPEAL BY THE REVENUE AGAINST THE ORDE R DATED 30.1.2014 OF THE CIT(APPEALS)-I, BANGALORE RELATING TO ASSESS MENT YEAR 2007-08. 2. THE ONLY ISSUE RAISED IN THIS APPEAL IS AS TO W HETHER THE CIT(A) WAS JUSTIFIED IN DELETING THE ADDITION OF RS.2,40,00,00 0 MADE BY THE AO U/S. 68 ITA NO.703/BANG/2014 PAGE 2 OF 6 OF THE ACT TREATING THE RECEIPT OF SHARE APPLICATIO N MONEY BY THE ASSESSEE AS UNEXPLAINED CASH CREDIT. 3. THE FACTS IN THIS REGARD ARE THAT THE ASSESSEE I S A COMPANY AND IS ENGAGED IN THE BUSINESS OF DEVELOPMENT AND MAINTENA NCE OF GARDENS, BEAUTIFICATION OF LAKES, AMUSEMENTS AND ENTERTAINME NT. THE ASSESSEE WAS INCORPORATED IN JAN. 2004. DURING THE PREVIOUS YEA R, ASSESSEE RECEIVED SHARE APPLICATION MONEY OF RS.2.40 CRORES. THE AO CALLED UPON THE ASSESSEE TO FURNISH FULL DETAILS ABOUT SHARE APPLIC ATION MONEY BY PROVIDING IDENTITY, GENUINENESS AND CREDIT WORTHINESS OF THE SHAREHOLDERS. THE ASSESSEE SUBMITTED THAT THE SHAREHOLDERS ARE MORE T HAN 200 IN NUMBER AND ARE DIRECTLY OR INDIRECTLY RELATED TO THE DIREC TORS OF THE ASSESSEE. THE SHARE APPLICATION MONEY HAD BEEN PAID BY THE SHAREH OLDERS IN CASH. THE ASSESSEE DID NOT SUBMIT ANY EVIDENCE REGARDING SOUR CE OF INCOME OF THESE PERSONS. IN THESE CIRCUMSTANCES, THE AO TREATED TH E RECEIPT OF SHARE APPLICATION MONEY AS UNEXPLAINED AND ADDED THE SAME TO THE TOTAL INCOME U/S. 68. 4. BEFORE THE CIT(A), THE ASSESSEE FILED A LETTER DATED 27.2.2012 SEEKING TO FILE CERTAIN ADDITIONAL EVIDENCE REGARDI NG THE SHAREHOLDERS WHO CONTRIBUTED SHARE APPLICATION MONEY. THE ADDITIONA L EVIDENCE WAS FORWARDED TO THE AO AND REMAND REPORT CALLED FOR FR OM HIM. DESPITE SUFFICIENT OPPORTUNITIES, THE AO DID NOT FILE ANY R EMAND REPORT. ITA NO.703/BANG/2014 PAGE 3 OF 6 5. BEFORE THE CIT(APPEALS), THE ASSESSEE SUBMITTED NAME AND ADDRESSES, AS ALSO COPIES OF SHARE APPLICATION FORM S, WHICH WERE PROVIDED TO THE AO FOR VERIFICATION. ACCORDING TO THE CIT(A ), THE AO HAS NOT CONDUCTED ANY ENQUIRY EVEN AFTER REPEATED REMINDERS . ON PERUSAL OF THE DETAILS FURNISHED BY THE ASSESSEE, HE FOUND THAT TH E ASSESSEE HAD RECEIVED SHARE APPLICATION MONEY AMOUNTING TO RS.2.40 CRORES FROM 313 PERSONS RANGING FROM RS.20,000 TO RS.10,00,000 AND ENTIRE S HARE APPLICATION MONEY WAS RECEIVED BY CASH ONLY. HE WAS OF THE VIE W THAT THE ASSESSEE HAS FURNISHED ADDRESSES OF ALL INVESTORS AND PAN IN FEW CASES AND BASED ON THE SAID INFORMATION THE AO COULD HAVE MADE ENQU IRY. IT WAS ALSO OBSERVED BY HIM THAT THE RELEVANT YEAR UNDER CONSID ERATION IS THE FIRST YEAR OF COMMENCEMENT OF ASSESSEES BUSINESS AND LOSS WAS INCURRED DURING THE YEAR. 6. THE CIT(A) THEREAFTER REFERRED TO THE DECISION OF THE HON'BLE DELHI HIGH COURT IN CIT V. DEWAN LEASING FINANCE LTD. (2007) 158 TAXMAN 440 (DEL) AND THE DECISION OF HON'BLE SUPREME COURT IN CIT V. LOVELY EXPORT PVT. LTD., 216 CTR 195 (SC) . THE PROPOSITION LAID DOWN IN THE AFORESAID DECISION IS THAT ONCE THE ASS ESSEE GIVES THE DETAILS OF THE ADDRESSES OF THE PERSONS WHO CONTRIBUTED TO SHARE APPLICATION MONEY, THEN IT IS FOR THE DEPARTMENT TO CONDUCT NEC ESSARY ENQUIRIES AND ESTABLISH THE CREDITWORTHINESS AND GENUINENESS OF T HE TRANSACTION BEFORE MAKING ADDITION U/S. 68. ACCORDING TO THE CIT(A), THE ASSESSEE HAD ITA NO.703/BANG/2014 PAGE 4 OF 6 FURNISHED IDENTITY AND CORRECT ADDRESSES OF THE CRE DITORS AND PAN DETAILS OF 20 CREDITORS. ACCORDING TO HIM, THIS WAS SUFFICIEN T DISCHARGE OF ONUS THAT LAY ON THE ASSESSEE. SINCE THE AO HAS NOT PROVED A NYTHING TO THE CONTRARY, HE WAS OF THE VIEW THAT ADDITION MADE SHO ULD BE DELETED. ACCORDINGLY THE ADDITION MADE BY THE AO WAS DELETED BY THE CIT(A). 7. AGGRIEVED BY THE ORDER OF CIT(A), THE REVENUE IS IN APPEAL BEFORE THE TRIBUNAL. 8. THE SUBMISSION OF THE LD. DR BEFORE US WAS THAT THE POWERS OF THE CIT(A) ARE CO-TERMINUS WITH THAT OF THE ASSESSING O FFICER AND HE OUGHT TO HAVE EXAMINED THE CLAIM OF ASSESSEE REGARDING RECEI PT OF SHARE APPLICATION MONEY. HE OUGHT TO HAVE ALSO EXAMINED THE GENUINEN ESS OF THE TRANSACTION AND CREDITWORTHINESS OF THE CREDITORS. ACCORDING TO HIM, THE FACT THAT OUT OF 313 SHARE APPLICANTS, ONLY 20 PERSONS W ERE ASSESSED TO TAX AND THE FACT THAT THE PAYMENTS WERE MADE IN CASH TOWAR DS SHARE APPLICATION MONEY ARE ALL SUSPICIOUS CIRCUMSTANCES. ACCORDING TO HIM, THE CIT(A ) WITHOUT VERIFYING THE GENUINENESS OF THE TRANSACTIO NS AND CREDITWORTHINESS OF THE CREDITORS, OUGHT NOT TO HAVE DELETED THE ADD ITION MADE BY THE AO MERELY BECAUSE THE AO DID NOT FILE A REMAND REPORT BEFORE THE CIT(A). 9. THE LD. COUNSEL FOR THE ASSESSEE RELIED ON THE ORDER OF CIT(A). ITA NO.703/BANG/2014 PAGE 5 OF 6 10. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. AS RIGHTLY CONTENDED BY THE LD. DR, THE MERE PROOF OF IDENTITY OF THE CREDI TORS WOULD ALONE NOT BE SUFFICIENT TO DELETE THE ADDITION MADE U/S. 68 OF T HE ACT. IN THE PRESENT CASE, THERE WAS A COMPLETE FAILURE ON THE PART OF A SSESSEE TO FURNISH ANY DETAILS BEFORE THE AO. IT IS ONLY BEFORE THE CIT(A) THAT THE ASSESSEE FILED THE NECESSARY DETAILS. IT IS NO DOUBT TRUE THAT TH E AO DID NOT FILE ANY REMAND REPORT, DESPITE SEVERAL OPPORTUNITIES BY THE CIT(A). AS ALLEGED IN GROUND NO.3, THE AO COULD GET REPLIES ONLY FROM 49 SHARE APPLICANTS OUT OF 313 SHARE APPLICANTS. IN SUCH CIRCUMSTANCES, IT WA S DIFFICULT FOR THE AO TO HAVE GIVEN A REMAND REPORT. THE POWERS OF THE CIT( A) ARE CO-TERMINUS WITH THAT OF THE AO AND HE OUGHT TO HAVE EXAMINED T HE GENUINENESS OF THE TRANSACTION AND CREDITWORTHINESS OF THE CREDITORS. ABSENCE OF A REMAND REPORT CANNOT LEAD TO THE CONCLUSION THAT THE TRANS ACTIONS WERE GENUINE AND THAT CREDITWORTHINESS OF THE CREDITORS ARE ESTABLIS HED. IN THE GIVEN CIRCUMSTANCES, WE ARE OF THE VIEW THAT IT WOULD BE JUST AND APPROPRIATE TO SET ASIDE THE ORDER OF THE CIT(A) AND REMAND THE IS SUE WITH REGARD TO THE ADDITION U/S. 68 BACK TO THE AO FOR FRESH CONSIDERA TION. THE AO IN THE SET ASIDE PROCEEDINGS WILL EXAMINE THE THREE INGREDIENT S NECESSARY FOR SATISFACTORY EXPLANATION OF CREDIT U/S. 68 OF THE A CT. THE AO WILL AFFORD OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. ITA NO.703/BANG/2014 PAGE 6 OF 6 11. FOR STATISTICAL PURPOSES, THE APPEAL BY THE RE VENUE IS TREATED AS ALLOWED. PRONOUNCED IN THE OPEN COURT ON THIS 20 TH DAY OF FEBRUARY, 2015. SD/- SD/- ( ABRAHAM P. GEORGE ) ( N.V. VASU DEVAN ) ACCOUNTANT MEMBER JUDICIAL M EMBER BANGALORE, DATED, THE 20 TH FEBRUARY, 2015. /D S/ COPY TO: 1. APPELLANT 2. RESPONDENTS 3. CIT 4. CIT(A) 5. DR, ITAT, BANGALORE. 6. GUARD FILE BY ORDER ASSISTANT REGISTRAR / SENIOR PRIVATE SECRETARY ITAT, BANGALORE.