NIKITA SYNFAB PVT. LTD., MUMBAI V. I.T.O. - 4(3)(1), MUMBAI

ITA 7151/MUM/2018

• Counselvise Citation: [2021] 109 COUNSELVISE.COM (IT) 3698 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 2 month(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-02-2021
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Assessment Year: 2007-2008
• Appeal Filed On: 12-12-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SMITA VERMA
• Keywords: Unexplained cash credit; Search and seizure; Opportunity of being heard; Accommodation entries; Set aside
• Section: 133(6); 143(1); 13; 147; 68

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL SMC BENCH, MUMBAI BEFORE SHRI SAKTIJIT DEY, JUDICIAL MEMBER ITA NO. 7151 / MUM . /201 8 ( ASSESSMENT YEAR : 20 07 08 ) NIKITA SYNFAB PVT. LTD. UNIT NO.182, SANHAY BUILDING NO.5 B MITTAL INDUSTRIAL ESTATE, SAKI NAKA ANDHERI (E), MUMBAI 400 059 PAN AAACN1322M . APPELLANT V/S INCOME TAX OFFICER WARD 4(3)(1), MUMBAI . RESPONDENT ASSESSEE BY : SHRI ANIL THAKRAR REVENUE BY : MS. SMITA VERMA DATE OF HEARING 04 .02.2021 DATE OF ORDER 24.02.2021 O R D E R PER SAKTIJIT DEY. J.M. THE CAPTIONED APPEAL HA S BEEN FILED BY THE ASSESSEE CHALLENGING THE ORDER DATED 30 TH AUGUST 2018, PASSED BY THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) 2 , MUMBAI, FOR THE ASSESSMENT YEAR 20 07 08 . 2. THE ONLY COMMON DISPUTE IS CONFINED TO ADDITION OF ` 5 LAKH AS UNEXPLAINED CASH CREDIT UNDER SECTION 68 OF THE ACT. 2 NIKITA SYNFAB PVT. LTD. 3. BRIEF FACTS ARE , THE ASSESSEE IS A RESIDENT COMPANY. FOR THE ASSESSMENT YEAR UNDER DISPUTE, THE ASSESSEE FILED ITS RETURN OF INCOME ON 29 TH OCTOBER 2007, DECLARING TOTAL INCOME OF ` 3,15,831. THE RETURN OF INCOME FILED BY THE ASSESSEE WAS INITIALLY PROCESSED UNDER SECTION 143(1) OF THE ACT. SUBSEQUENTLY, THE ASSESSING OFFICER RECEIVED INFORMATION FROM THE INVESTIGATION WING THAT IN COURSE OF A SEARCH AND SEIZURE OPERATION CARRIED OUT IN CASE OF SHRI PRAVIN KUMAR JAIN GROUP ON 1 ST OCTOBER 2013, IT WAS FOUND THAT VARIOUS GRO UP ENTITIES CONTROLLED BY SHRI PRAVIN KUMAR JAIN PROVIDE ACCOMMODATION ENTRIES IN THE SHAPE OF BOGUS UNSECURED LOANS, SHARE APPLICATION MONEY, BOGUS SALES AND LONG TERM CAPITAL GAIN TO VARIOUS PERSONS. FROM THE INFORMATION COLLECTED , IT WAS FOUND THAT THE ASSESSEE IS ALSO A BENEFICIARY OF ACCOMMODATION ENTRIES BY WAY OF SHARE APPLICATION MONEY AMOUNTING TO ` 5 LAKH RECEIVED FROM JAVDA INDIA IMPEX LTD. , A ENTITY CONTROLLED AND OPERATED BY SHRI PRAVIN KUMAR JAIN. ON THE BASIS OF SUCH INFORMATION , THE ASSESSIN G OFFICER RE OPENED THE ASSESSMENT UNDER SECTION 147 OF THE ACT. IN THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER CALLED UPON THE ASSESSEE TO EXPLAIN THE SOURCE OF THE SHARE CAPITAL AND SHARE P REMIUM RECEIVED FROM JAVDA INDIA IMPEX LTD. IN RE SPONSE TO THE QUERRY RAISED, THE ASSESSEE VIDE LETTER DATED 13 TH JANUARY 2015, FURNISHED THE DETAILS OF LOAN CONFIRMATION ALONG WI TH BANK STATEMENT OF JAVDA INDIA IMPEX LTD. TO INDEPENDENTLY VERIFY THE 3 NIKITA SYNFAB PVT. LTD. GENUINENESS OF SHARE CAPITAL AND SHARE PREMIUM ALLEGED TO HAVE BEEN RECEIVED BY THE ASSESSEE, THE ASSESSING OFFICER ISSUED NOTICE UNDER SECTION 133(6) OF THE ACT TO THE CONCERNED PARTY. FROM THE REPLY FURNISHED BY THE CONCERNED PARTY, THE ASSESSING OFFICER NOTICED THAT THE AMOUNT OF ` 5 LAKH WAS CREDITED TO T HE ASSESSEES ACCOUNT. THUS, ULTIMATELY THE ASSESSING OFFICER CONCLUDED THAT THE AMOUNT OF ` 5 LAKH RECEIVED BY THE ASSESSEE IS AN UNEXPLAINED CASH CREDIT UNDER SECTION 68 OF THE ACT AS THE IDENTITY, GENUINENESS AND CREDITWORTHINESS OF THE PERSON ADVANCING THE MONEY WERE NOT ESTABLISHED. ACCORDINGLY, HE ADDED BACK THE AMOUNT OF ` 5 LAKH TO THE IN COME OF THE ASSESSEE. 4. THOUGH, THE ASSESSEE CONTESTED THE AFORESAID ADDITION BEFORE THE LEARN ED COMMISSIONER (APPEALS), HOWEVER, THE ADDITION WAS SUSTAINED. 5. THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED , THE ASSESSEE HAS NOT RECEIVED ANY SHARE APPLICAT ION MONEY FROM JAVDA INDIA IMPEX LTD. HE SUBMITTED, ASSESSEE HAD RECEIVED AND REPAID A LOAN OF ` 5 LAKH FROM THE SAID PARTY DURING THE YEAR THROUGH BANKING CHANNEL . IN THIS CONTEXT, HE DREW ATTENTION TO THE RELEVANT ENTRIES IN THE BANK STATEMENT COPY FURNI SHED IN THE PAPER BOOK. FURTHER , DRAWING ATTENTION TO THE COPY OF THE RETUR N OF INCOME FILED BY JAVDA INDIA IMPEX LTD., THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED , THE LENDER HAS SUFFICIENT FUND TO ADVANCE THE MONEY. HE SUBMITTED , THE 4 NIKITA SYNFAB PVT. LTD. ASSESSEE HAVING P ROVED THE IDENTITY AND CREDITWORTHINESS OF THE CREDITOR AS WELL AS THE GENUINENESS OF THE TRANSACTION, THE LOAN RECEIVED CANNOT BE TREATED AS UNEXPLAINED CASH CREDIT. HE SUBMITTED , THE DEPARTMENTAL AUTHORITIES HAVE MADE THE ADDITION ON A WRONG NOTION THAT THE ASSESSEE HAS RECEIVED SHARE APPLICATION MONEY / SHARE PREMIUM , WHICH IS NOT THE FACT. HE SUBMITTED , THOUGH , DETAILED SUBMISSIONS WERE FILED BEFORE LEARNED COMMISSIONER (APPEALS) , HE HAS NOT AT ALL CONSIDERED THEM. THUS, HE SUBMITTED , THE ADDITION MADE SHOULD BE DELETED. IN SUPPORT OF HIS CONTENTION, LEARNED COUNSEL FOR THE ASSESSEE RELIED UPON THE FOLLOWING DECISIONS: I) DCIT V/S BAIRAGRA BUILDERS PVT. LTD., ITA NO.4691 & 4692/MUM./2015, DATED 14.09.2018; II) PAWAN KUMAR M. SANGHVI V/S ITO, ITA NO.2447/AHD./2016, DATED 17.05.2017. 6. THE LEARNED DEPARTMENTAL REPRESENTATIVE SUBMITTED , THE INFORMATION RECEIVED FROM THE SEARCH AND SEIZURE OPERATION CONDUCTED IN CASE OF BHANWARLAL JAIN GROUP CLEARLY REVEALED THAT THE ASSESSEE IS A BENEFICIARY OF ACCOM MODATION ENTRIES AVAILED FROM A ENTITY BELONGING TO THE SAID GROUP. HE SUBMITTED , THE ASSESSEE HAVING FAILED TO PROVE THE GENUINENESS OF TRANSACTION AND CREDITWORTHINESS OF THE ENTITY, THE AMOUNT RECEIVED TOWARDS LOAN HAS TO BE TREATED AS UNEXPLAINED CASH CREDIT. 5 NIKITA SYNFAB PVT. LTD. 7. I HAVE CONSIDERED THE SUBMISSIONS OF THE PARTIES IN THE LIGHT OF DECISIONS RELIED UPON AND PERUSED THE MATERIAL ON RECORD. ON A READING OF THE REASONS RECORDED FOR RE OPENING THE ASSESSMENT WHICH HAS BEEN REPRODUCED IN THE ASSESSMENT ORDER , IT IS SEEN THAT THE ASSESSING OFFICER WAS HAVING INFORMATION THAT THE ASSESSEE HAS RECEIVED SHARE APPLICATION MONEY OF ` 5 LAKH FROM JAVDA INDIA IMPEX LTD. FURTHER , IN PARA GRAPH 6 OF THE ASSESSMENT ORDER THE ASSESSING OFFICER HAS OBSERVED THAT FROM THE DETAILS O F RESERVES AND SURPLUS HE FOUND THAT DURING THE YEAR AN ADDITION OF ` 6,19,146, WAS MADE ON ACCOUNT OF SHARE PREMIUM AND SHARE CAPITAL. FURTHER , HE INFERRED THAT DURING THE YEAR THE ASSESSEE BY WAY OF SHARE CAPITAL AND SHARE PREMIUM HAS RECEIVED ` 5 LA KH FROM JAVDA INDIA IMPEX LTD. APPARENTLY, ON THE BELIEF THAT THE ASSESSEE HAS RECEIVED AN AMOUNT OF ` 5 LAKH TOWARDS SHARE CAPITAL AN D SHARE PREMIUM FROM JAVDA INDIA IMPEX LTD., THE ASSESSING OFFICER HAS PROCEEDED TO MAKE THE ADDITION UNDER SECTION 68 OF THE ACT. L EARNED COMMISSIONER (APPEALS) HAS ALSO ACCEPTED THE AFORESAID REASONING OF THE ASSESSING OFFICER. 8. HOWEVER, ON A PERUSAL OF THE BALANCE SHEET OF THE ASSESSEE ALONG WITH ITS SCHEDULE AS AT 31 ST MARCH 2007, WHICH ARE PLACED AT PAGE 9 AND 11 OF THE PAP ER BOOK, I FIND THAT THE RESERVE AND SURPLUS OF ` 6,19,146, COMPRISES OF BROUGHT FORWARD BALANCE OF ` 2,61,905 AND PROFIT DURING THE YEAR OF ` 3,57,241. THERE IS NO INCRESE TO THIS RESERVE 6 NIKITA SYNFAB PVT. LTD. AND SURPLUS ON ACCOUNT OF SHARE PREMIUM OR SHARE CAPITAL AS ALLEGED BY THE ASSESSING OFFICER. ON THE CONTRARY, IT IS THE CASE OF THE ASSESSEE THAT IT HAS RECEIVED LOAN OF ` 5 LAKH DURING THE YEAR FROM JAVDA INDIA IMPEX LTD. AND THE LOAN WAS ALSO REPAID DURING THE YEAR TO THE SAID PARTY. THIS CLAIM OF THE ASSESSEE APPEARS TO BE CORRECT FROM THE BANK STATEMENT AND OTHER DOCUMENT S PLACED IN THE PAPER BOOK FROM WHICH IT IS CLEARLY REVEALED THAT THE AMOUNT OF ` 5 LAKH WAS RECEIVED IN T RANCHES OF ` 2 LAKH AND ` 3 LAKH AND IT WAS ALSO REPAID TO THE SAID PARTY DURING THE YEAR. THUS, FROM THE AFORESAID FACT, IT IS VERY MUCH CLEAR THAT THE ASSESSEE HAD NOT RECEIVED ANY MONEY TOWARDS SHARE PREMIUM OR SHARE CAPITAL , AS ALLEGED BY THE DEPARTMENTAL AUTHORITIES. FURTHER , TO PROVE THE GENUINENESS OF THE LOAN TAKEN FROM JAVDA INDIA IMPEX LTD. , THE ASSESSEE HAD FURNISHED COPY OF THE RETURN OF INCOME OF THE LENDER ALONG WITH BANK STATEMENT TO PROVE NOT ONLY THE IDENTITY BUT ALSO THE CREDITWORTHINESS OF THE LENDER AS WELL AS THE GENUINENESS OF THE TRANSACTION. AS IT APPEARS, THE FACTS AND EV IDENCES BROUGHT ON RECORD BY THE ASSESSEE HAVE NOT AT ALL BEEN EXAMINED AND VERIFIED EITHER BY THE ASSESSING OFFICER OR BY LEARNED COMMISSIONER (APPEALS) . IGNORING THE FACTS AND EVIDENCES BROUGHT ON RECORD THE DEPARTMENTAL AUTHORITIES HAVE PROCEEDED ON A W HOLLY WRONG CONCEPTION THAT THE ASSESSEE HAS RECEIVED SHARE APPLICATION MONEY AND SHARE PREMIUM RESULTING IN INCREASE IN RESERVE AND SURPLUS. THEREFORE, THE REASONS ON 7 NIKITA SYNFAB PVT. LTD. THE BASIS OF WHICH THE ADDITION OF ` 5 LAKH UNDER SECTION 68 OF THE ACT HAS BEEN MADE BY THE ASSESSING OFFICER AND SUSTAINED BY LEARNED COMMISSIONER (APPEALS) CANNOT BE UPHELD. HOWEVER, THE ASSESSEES CLAIM OF GENUINENESS OF THE LOAN TRANSACTION RELATING TO THE RECEIPT OF ` 5 LAKH NEEDS FRESH EXAMINATION AS THE DEPARTMENTAL AUTHORITIES HAVE N EVER EXAMINED THE ISSUE FROM THE PERSPECTIVE OF ADVANCEMENT OF LOAN BUT HAVE MISCONSTRUE D IT AS SHARE APPLICATION MONEY/ SHARE PREMIUM. THE ASSESSING , IN THE CONTEXT OF FACTS AND MATERIAL BROUGHT ON RECORD , HAS TO VERIFY AND COME TO CONCLUSION WHETHER THE I NGREDIENTS OF SECTION 68 OF THE ACT ARE FULFILLED IN CASE OF THE SUBJECT LOAN TRANSACTION. IN VIEW OF THE AFORESAID, I AM INCLINED TO SET ASIDE THE ORDER OF LEARNED COMMISSIONER (APPEALS) AND RESTORE THE ISSUE TO THE FILE OF THE ASSESSING OFFICER FOR DE NO VO ADJUDICATION AFTER PROVIDING DUE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. GROUNDS ARE ALLOWED FOR STATISTICAL PURPOSES. 9. IN THE RESULT, APPEAL IS ALLOWED FOR STATISTICAL PURPOSES . ORDER PRONOUNCED IN THE OPEN COURT ON 24.02.2021 SD/ - SAKTIJIT DEY JUDICIAL MEMBER MUMB AI, DATED: 24.02.2021 8 NIKITA SYNFAB PVT. LTD. COPY OF THE ORDER FORWARDED TO : (1) THE ASSESSEE; (2) THE REVENUE; (3) THE CIT(A); (4) THE CIT, MUMBAI CITY CONCERNED; (5) THE DR, ITAT, MUMBAI; (6) GUARD FILE . TRUE COPY BY ORDER PRADEEP J. CHOWDHURY SR. PRIVATE SECRETARY ASSISTANT REGISTRAR ITAT, MUMBAI