Rajshree Electricals & Associate Pvt. Ltd., Bhubaneswar V. ITO, Ward-1(3), Bhubaneswar

ITA 73/CTK/2018

• Counselvise Citation: [2018] 125 COUNSELVISE.COM (IT) 2254 (ITAT-CUTTACK)
• Duration Of Justice: 6 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-08-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Next Hearing Date: 28-08-2018
• Assessment Year: 2014-2015
• Appeal Filed On: 28-02-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: PURNA CHANDRA MISHRA
• Keywords: Bogus Share capital
• Section: 142(1)

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL CUTTACK BENCH CUTTACK BEFORE SHRI N.S.SAINI, AM & SHRI PA V AN KUMAR GADALE, JM . / ITA NO. 73 /CTK/201 8 ( [ [ / ASSESSMENT YEAR : 20 1 4 - 20 1 5 ) M/S RAJSHREE ELECTRICAL S & ASSOCIATE PRIVATE LIMITED, 1 ST FLOOR, DDL - 556, PHASE - II, DUMDUMA HOUSING BOARD COLONY, DUMDUMA, BHUBANESWAR - 751019 VS. ITO, WARD - 1(3), BHUBANESWAR ./ ./ PAN/GIR NO. : A A F CR 6010 B ( / APPELLANT ) .. ( / RESPONDEN T ) [ /AS SESSEE BY : SHRI PURNA CHANDRA MISHRA, AR /REVENUE BY : SHRI SUBHENDU DUTTA , CIT DR / DATE OF HEARING : 28 / 0 8 /201 8 / DATE OF PRONOUNCEMENT 31 / 0 8 /201 8 / O R D E R PER SHRI PA V AN KUMAR GADALE, JM : TH IS IS AN APPEAL FILED BY THE ASSESSEE AGAINST THE ORDER OF CIT(A) - 2 , BHUBANESWAR , DATED 10.11.2017 PASSED IN I.T.APPEAL NO. 0187 / 2016 - 17 FOR THE ASSESSMENT YEAR 2014 - 2015 . 2. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL : - 1. THAT THE LD. COMMISSIONER IN CO ME - TAX (APPEALS) - 2, BHUBANESWAR IS N O T JUSTIFIED IN C O NFIRMING THE ADDITI O N O F RS.18 ,00,00 0/ - MADE BY THE AO UNDER THE HEAD UNEXPL AINED SHARE CAPITAL ON THE FACTS AND CIRCUMSTANC ES O F THE CASE. 2. THAT THE LD. COMMISSIONER OF INC O ME - TAX (APPEALS ) - 2 BHUBANESWAR SHOULD HAVE CONSIDERED THE WRITTEN SUBMISSIO N DT.15.9.2917(PAGE - 9 T O 11) WHEREIN ALL DETAILS O F CREDIT O R - DIRECT O R, SMT. U RMILA TRIPATHY I.E. IDENTITY, GENUINE NE SS O F TRANSA CTION, CREDITWORTHINESS OF FINANCIAL STRENGTH AND DETA ILED ADDRESS WITH PERMANENT ACCO UNT NUMBER WERE GIVEN. 3. THAT THE LD. COMMISSIONER OF INC O ME - TAX (APPEALS ) - 2 BHUBANESWAR SHOULD HAVE CONSIDERED THE INVESTMENT OF RS.18,00,000/ - MADE BY THE DIRECTOR, S MT. URMILA TRIPATHY IN THE HANDS OF THE DIRECTOR INSTEAD OF IN THE HANDS OF ASSESSEE - COMPANY IN THE LIGHT OF SUPREME COURTS DECISION ITA NO. 73 /CTK/201 8 2 IN THE CASE OF CIT VRS. LOVELY EXPORTS PVT. LTD. (2009) 319 ITR (ST.) 5 (PARA - 4) REPORTED IN 216 ITR 195 (SC), IN THE CASE OF CIT VRS. ASK BROTHERS LTD.(2011) VIDE 333 ITR 111 (KARNATAKA), 319 ITR (ST.) 5 (SC) (PARA - 6) AND 215 ITR 23 (SC) (PARA - 6) AND OTHER VARIOUS HIGH COURTS DECISIONS AS ALL THE PARTICULARS OF CREDITOR WAS FURNISHED AT THE CIT APPEAL HEARING STAGE (VIDE WRI TTEN SUBMITTED AT PAGE - 11) 4. THAT THE ADDITION OF RS.18,00,000/ - CONFIRMED BY THE LD. CIT(APPEALS) - 2, BHUBANESWAR IS ILLEGAL, ARBITRARY AND BAD IN LAW. 5. THAT OTHER GROUND, IF ANY, WILL BE URGED AT THE TIME OF HEARING. 3 . BRIEF FACTS OF THE CASE ARE TH AT THE ASSESSEE IS ENGAGED IN THE BUSINESS OF TRADING IN ELECTRICAL FITTINGS AND EQUIPMENTS AND FILED THE RETURN OF INCOME ELECTRONICALLY ON 22.09.2014 FOR THE A.Y. 20 1 4 - 201 5 DECLARING TOTAL INCOME OF RS. 3,68,240/ - . THE RETURN OF INCOME WAS PROCESSED U/S.14 3(1) OF THE ACT. S UBSEQUENTLY THE CASE WAS SELECTED FOR SCRUTINY UNDER CASS AND NOTICES U/S.143(2) & 142(1) OF THE ACT ALONG WITH QUESTIONNAIRE WERE ISSUED. IN COMPLIANCE OF THE SAME, LD. AR APPEARED BEFORE THE AO AND CASE WAS DISCUSSED. THEREAFTER THE AO COMPLETED THE ASSESSMENT ASSESSING TOTAL INCOME AT RS. 27,72,990/ - AND PASSED ORDER U/S.143(3) OF THE ACT, DATED 23.12.2016 MAKING DISALLOWANCE ON ACCOUNT OF SUPPRESSION OF INCOME, UNEXPLAINED SHARE CAPITAL, DISALLOWANCE OF EXPENSES TOWARDS LATE PAYMENT OF INTEREST AND FREIGHT INWARD EXPENSES. 4 . AGGRIEVED BY THE ORDER OF AO, THE ASSESSEE PREFERRED AN APPEAL BEFORE THE CIT(A). IN THE APPELLATE PROCEEDINGS LD. AR REITERATED THE SUBMISSIONS MADE BEFORE THE AO AND THE CIT(A) AFTER CONSIDERING THE FINDINGS OF TH E AO AND SUBMISSION OF THE ASSESSEE , CONFIRMED THE ADDITION MADE ON ACCOUNT OF UNEXPLAINED SHARE CAPITAL AND DELETED THE ITA NO. 73 /CTK/201 8 3 ADDITION S MADE ON ACCOUNT OF SUPPRESSION OF INCOME AND EXPENSES TOWARDS LATE PAYMENT INTEREST AND OF EXPENSES OF FREIGHT INWARD AND PAR TLY ALLOWED THE APPEAL OF THE ASSESSEE. 5 . AGGRIEVED BY THE CONFIRMATION OF ADDITION MADE ON ACCOUNT OF UNEXPLAINED SHARE CAPITAL BY THE CIT(A) , THE ASSESSEE HAS FILED AN APPEAL BEFORE THE TRIBUNAL. 6 . BEFORE US, LD. AR SUBMITTED THAT THE SHARE S WERE ALLOT TED TO THE SHAREHOLDERS IN CONSIDERATION OF STOCKS . THE CONTENTION OF LD. AR THAT THE SHARE CAPITAL WAS CONTRIBUTED BY TWO DIRECTORS AND THE ASSESSEE IN THE COURSE OF HEARING PROCEEDINGS COULD SUBSTANTIATE WITH EVIDENCE AND PROOF WAS SUBMITTED WITH RESPECT TO THE SOURCE S OF INVESTMENTS. LD.AR EMPHASIZED THAT THE SHARES WERE ALLOTTED AGAINST THE STOCKS , WHEREAS LD. AR SUBMITTED PAPER BOOK ALONG WITH BALANCE SHEET OF THE ASSESSEE COMPANY TO SUBSTANTIATE THE SHARES ALLOTMENT AND PRAYED FOR ALLOWING THE APPEAL. 7. CONTRA, LD. DR RELIED ON THE ORDERS OF LOWER AUTHORITIES. LD. DR HIGHLY OBJECTED TO THE SUBMISSIONS AND MENTIONED THAT THE NEW FACTS ARE COMING ON RECORD AND WHEREAS THE ASSESSEE BEFORE THE ASSESSING OFFICER AO AND IN THE APPELLATE PROCEEDINGS HAS BEEN REFERRING TO THE SOURCES OF CASH AND NOW PRESENTLY MAKING SUBMISSION S BEFORE THE TRIBUNAL THAT THE ALLOTMENT WAS MADE IN CONSIDERATION OF THE STOCKS, WHICH IS TOTALLY DIFFERENT ISSUE AND THE ASSESSEE IS CHANGING HIS STAND BEFORE THE HIGHER AUT HORIT IES A ND PRAYED FOR DISMISSAL OF THE APPEAL. ITA NO. 73 /CTK/201 8 4 8. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIALS AVAILABLE ON RECORD. THE SOLE DISPUTED ISSUE WITH RESPECT TO THE ADDITION MADE BY THE AO IN RESPECT OF INCREASE IN THE SHARE CAPITAL TO THE EXTENT OF RS.1 8 ,00,000/ - . THE L D. ARS CONTENTION BEFORE THE AO THAT THE INVESTMENT OF SHARES OF RS.18 LAKHS WAS BY DIRECTOR SMT. URMILA TRIPATHY AND RS.1 LAKH BY SHRI DEBASHIS TRIPATHY IN CASH . T HE AO HAS CALLED FOR THE CREDITWORTHINESS OF THE TWO DIRECTO RS AND THEIR INCOME TAX DETAILS, WHEREAS THE AO H AVING NOT SATISFIED WITH THE AVAILAB I L ITY OF THE SOURCE S OF CASH AND HAS OBSERVED THAT THERE IS NO LIQUIDITY IN THE HANDS OF THE INVESTORS . FURTHER THE AO HAS NOT CONSIDERED THE SUBMISSIONS OF THE ASSESSEE IN RE SPECT OF SOURCE S OF SHARE CAPITAL AND THE CREDITWORTHINESS AS THE ASSESSEE COULD NOT SATISFIED WITH THE BANK WITHDRAWALS . WE FIND THE CIT(A) IN HIS ORDER HAS DEALT ON THE ELABORATE SUBMISSIONS OF THE ASSESSEE AT PAGE 4 OF THE ORDER AND EXPLANATION S OF THE SOURCES OF THE INVESTORS - DIRECTORS BEING OUT OF THE INCOME ACCUMULATED OVER A PERIOD. THE CIT(A) WAS NOT SATISFIED WITH THE EXPLANATION AND MADE OBSERVATION AT PARA 4.2 AS UNDER : - 4.2 I HAVE CAREFULLY EXAMINED THE SUBMISSION OF THE APPELLANT. SMT. URMILA TRIPATHY STAJS, IN CITY OF BHUBANESWAR IN WHICH THERE ARE AMPLE FACILITIES FOR BANK TRANSACTIONS. SHE AS WELL AS THE APPELLANT HAVE BANK ACCOUNT AND SHE COULD HAVE MADE INVESTMENT IN SHARE CAPITAL OF THE APPELLANT BY CHEQUE. THE APPELLANT HAS NOT EXPLAINE D THE URGENCY AND MOTIVATION FOR MAKING INVESTMENT IN SHARE CAPITAL IN CASH. ACCORDING TO THE APPELLANT, SHE HAS SHOWN INCOME OF MORE THAN 50 LAKHS IN THE EARLIER AND 15 YEARS AND ALSO SHE HAD DEBTORS AND FIXED DEPOSITS IN HER PROPRIETY CONCERN. HAVING SHO WN INCOME OF RS 50,00,000/ - ARE IN THE LAST 15 YEARS IS NOT A SUFFICIENT PROOF OF SOURCE OF INVESTMENT. THE INVESTOR HAS TO HAVE LIQUID CASH FOR MAKING THE INVESTMENT WHICH HAS NOT BEEN DEMONSTRATED BY THE APPELLANT. SIMILARLY, THE APPELLANT HAS NOT GIVEN ANY EVIDENCE AS TO WHICH SUNDRY DEBTORS OR FIXED DEPOSITS WERE LIQUIDATED. IT IS MY CONSIDERED VIEW THE APPELLANT HAVE NOT ITA NO. 73 /CTK/201 8 5 EXPLAINED THE GENUINENESS OF TRANSACTION AND CREDITWORTHINESS OF SMT. URMILA TRIPATHY. ACCORDINGLY, THE ADDITION OF RS 18,00,000/ - IS CONFIRMED AND THE GROUND OF APPEAL IS DISMISSED. 9. WHEREAS IN THE HEARING PROCEEDINGS THE AR SUBMITTED COPY OF AUDIT REPORT AND FINANCIAL STATEMENTS . O N PERUSAL OF THE BALANCE SHEET, WE FOUND THAT THERE IS INCREASE IN THE SHARE CAPITAL TO THE EXTENT OF RS.19 LAKHS AND FURTHER IN SCHEDULE 1 AND NOTE 1 TO THE BALANCE SHEET TO THE FINANCIAL STATEMENTS AS ON 31.03.2014, WE FOUND THAT THERE IS INCREASE IN TH E SHARE CAPITAL BUT THERE IS NOWHERE SPECIFICALLY MENTIONED AS REQUIRED AS PER THE PROVISIONS OF COM PANIES ACT THAT THE SHARES WERE ALLOTTED FOR CONSIDERATION OTHER THAN THE CASH AS ENVISAGED BY THE LD. AR . LD. AR VEHEMENTLY ARGUED THAT THE AO BY MISTAKE CONSIDER ED THE CASH , BUT WE ARE NOT SATISFIED WITH THE SUBMISSIONS OF THE AR IN THE ASSESSMENT PROCEE DINGS AT PAGE 4 OF THE AOS ORDER AT PARA 5, THE AO HAS CONSIDERED THE DISPUTED ISSUE AND SUBMISSIONS AND NOT SATISFIED WITH THE AVAILABILITY OF SOURCES OF CASH AND MADE ADDITION. T HE LD. AR IN THE HEARING PROCEEDINGS BEFORE THE TRIBUNAL EMPHASIZED THAT TH E SHARES WERE ALLOTTED IN CONSIDERATION OTHER THAN THE CASH. WE O N COMPARING THE ASSESSEES SUBMISSIONS BEFORE THE AO AND APPELLATE AUTHORITIES WITH THE SUBMISSIONS ON ALLOTMENT OF SHARES AGAINST STOCKS, THE ARGUMENTS OF LD. AR ARE CONTRADICTORY. LD.DR VE HEMENTLY OBJECTED TO THE SUBMISSION S OF LD. AR IN RESPECT OF ALLOTMENT OF SHARES AND T HE ASSESSEE NEVER BROUGHT TH ESE FACTS OF ALLOTMENT OF SHARES OTHER THAN THE CASH BEFORE THE LOWER AUTHORITIES AND FOR THE FIRST TIME THESE CONTENTIONS WERE RAISED IN THE TRIBUNAL. T HEREFORE, WE CONSIDERING THE FACTS AND FINDINGS OF THE LOWER AUTHORITIES AND ITA NO. 73 /CTK/201 8 6 SUBMISSIONS MADE IN THE COURSE OF ASSESSMENT PROCEEDINGS AND THE APPELLATE PROCEEDINGS BY THE LD. AR AND THE ASSESSEES FINANCIAL STATEMENTS FILED BEFORE US , WE RESTORE THIS ISSUE TO THE FILE OF AO TO EXAMINE WHETHER THE SHARE ALLOTMENT WAS MADE WITHOUT CONSIDERATION OF CASH AGAINST THE STOCKS AS THE LD AR VEHEMENTLY EMPHASISING BEFORE THE TRIBUNAL WITH THE MATERIAL PAPER S . WE MAKE IT CLEAR THAT THE ASSESSEE SHALL F ILE DOCUMENTS IN RESPECT OF ALLOTMENT AND GIVE THE CLARITY ON ALLOTMENT OF SHARES BASED ON THE AUDITED FINANCIAL STATEMENTS. FURTHER T HE ASSESSEE SHALL COOPERATE IN SUBMITTING THE INFORMATION BEFORE THE AO AND EARLY DISPOSAL OF THE CASE. ACCORDINGLY, THE D ISPUTED ISSUE IS RESTORED TO THE FILE OF AO AND THE GROUNDS OF APPEAL OF THE ASSESSEE ARE ALLOWED FOR STATISTICAL PURPOSES. 10 . IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES. O RDER PRONOUNCED IN THE OPEN COURT ON THIS 31 / 0 8 / 201 8 . SD/ - ( N.S.SAINI ) SD/ - ( PAVAN KUMAR GADALE ) / ACCOUNTANT MEMBER / JUDICIAL MEMBER CUTTACK ; DATED 31 / 0 8 /201 8 . . / PKM , SENIOR PRIVATE SECRETARY / COPY OF T HE ORDER FORWARDED TO : / BY ORDER, ( SENIOR PRIVATE SECRETARY ) , / ITAT, CUTTACK 1. / THE APPELLANT - M/S RAJSHREE ELECTRICALS & ASSOCIATE PRIVATE LIMITED, 1 ST FLOOR, DDL - 556, PHASE - II, DUMDUMA HOUSING BOARD COLONY, DUMDUMA, BHUBANESWAR - 751019 2. / THE RESPONDENT - ITO, WARD - 1(3), BHUBANE SWAR 3. ( ) / THE CIT(A), 4. / CIT 5. , , / DR, ITAT, CUTTACK 6. [ / GUARD FILE. //TRUE COPY//