DCIT, Circle - 3, Kolkata, Kolkata V. M/s. Adhunik Metaliks Ltd., Kolkata

ITA 733/KOL/2010

• Counselvise Citation: [2011] 140 COUNSELVISE.COM (IT) 48212 (ITAT-KOLKATA)
• Duration Of Justice: 1 year(s) 1 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 10-06-2011
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: C
• Assessment Year: 2006-2007
• Appeal Filed On: 13-04-2010
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: A K PRAMANICK
• Keywords: Reasonable cause
• Section: 234B; 115JB

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH: KOL KATA () BEFORE . . , ! '# '# '# '# /AND ' # , ! ) [BEFORE HONBLE SHRI S. V. MEHROTRA, AM & HONBLE S RI MAHAVIR SINGH, JM] #$ #$ #$ #$ / I.T.A NO. 733/KOL/2010 %& ''( %& ''( %& ''( %& ''(/ // / ASSESSMENT YEAR: 2006-07 DEPUTY COMMISSIONER OF INCOME-TAX, VS M/S. ADHUNIK METALIKS LTD. CIRCLE-3, KOLKATA. (PAN-AABCN 5676 P) ( *+ /APPELLANT ) (,-*+/ RESPONDENT ) *+ . / / FOR THE APPELLANT: SHRI A. K. PRAMANICK ,-*+ . / / FOR THE RESPONDENT: SHRI RAJEEVA KUMAR 0 / ORDER PER MAHAVIR SINGH, JM/ ' # ' # ' # ' # , ! ! ! ! : THIS APPEAL BY REVENUE IS ARISING OUT OF THE ORDER OF CIT(A)-I, KOLKATA IN APPEAL NO.241/CIT(A)-1/CIR-3/08-09/ VIDE DATED 19.01.2010. THE ASSESSMENT WAS FRAMED BY ADDL.CIT, RANGE-3, KOLKATA U/S.143(3) OF THE INCOME TAX ACT, 1961 (HEREINAFTER REFERRED TO AS THE ACT) FOR ASSESSMENT YEAR 2006-07 VIDE HIS ORD ER DATED 26.12.2008. 2. THE APPEAL OF THE REVENUE IS DELAYED BY 1 DAY AN D CONDONATION PETITION HAS BEEN FILED BY THE REVENUE, WHICH IS AVAILABLE IN FILE. AFTER HEARING BOTH THE SIDES, WE ARE OF THE VIEW THAT THERE IS REASONABLE CAUSE FOR FILING THE APPEAL DEL AYED. HENCE, WE CONDONE THE DELAY AND ADMIT THE APPEALS FOR HEARING. 3. THE FIRST ISSUE IN THIS APPEAL OF THE REVENUE IS AGAINST THE ORDER OF CIT(A) IN DELETING THE ADDITION MADE BY ASSESSING OFFICER U/S. 68 OF THE A CT ON ACCOUNT OF SHARE APPLICATION MONEY RECEIVED. FOR THIS, REVENUE HAS RAISED FOLLOWING G ROUND NOS. 1 AND 2: 1.THAT, ON THE FACTS AND IN THE CIRCUMSTANCES OF T HE CASE, THE CIT(A) ERRED IN DELETING THE ADDITION OF RS.60,49,800/- MADE BY THE ASSESSIN G OFFICER U/S. 68 OF THE ACT, AND FAILED TO APPRECIATE THE FACT THAT THERE WAS FAILURE BY TH E ASSESSEE TO DISPOSE OF ITS BURDEN OF ESTABLISHING THE IDENTITY OF THE PERSONS. 2. THAT, ON THE FACTS AND IN THE CIRCUMSTANCES OF T HE CASE, THE CIT(A) WAS WRONG IN HOLDING THAT THE ASSESEE HAD MET REQUIREMENTS OF PR OVISIONS OF SECTION 68 OF THE ACT, WHEN TWO PARTIES FROM WHOM SHARE APPLICATION WAS SH OWN RECEIVED, WAS NOT AVAILABLE AND NOT TRACEABLE AND THE ASSESSEE DID NOT OFFER AN Y TENABLE EXPLANATION. 2 ITA 733/K/2010 ADHUNIK METALIKS LTD. A.Y.06-07 4. THE ASSESSING OFFICER DURING THE COURSE OF ASSES SMENT PROCEEDINGS OBSERVED THAT THE ASSESSEE HAD RAISED SHARE CAPITAL DURING THE YEAR A ND HAD RECEIVED SHARE APPLICATION MONEY AND ALSO SHARE PREMIUM DURING THE RELEVANT PREVIOUS YEA R. THE A.O. NOTED IN HIS ASSESSMENT ORDER THAT M/S. NIVEDAN SALES PVT. LTD. OF 52, WESTON STR EET, KOLKATA-12 AND M/S. TUBE FORGE VAPAR LTD., 25D, HARISH MUKHERJEE ROAD, KOLKATA-25, WHO I NVESTED A TOTAL SUM OF RS.60,49,800/-, ON ACCOUNT OF SHARE APPLICATION MONEY AND PREMIUM ON S HARES, COULD NOT BE FOUND AND THE LETTERS ADDRESSED TO THOSE PARTIES WERE RETURNED BACK AS UN SERVED. UNDER SUCH CIRCUMSTANCES, THE A.O. CONSIDERED THE INVESTMENTS MADE BY TWO PARTIES AS B OGUS AND ADDED THE SUM AS REPRESENTING THEIR INVESTMENTS. THE ASSESSEE BEFORE CIT(A) SUBM ITTED THAT THE AFORESAID PARTIES WERE AND STILL ARE ASSESSED TO TAX AND THEIR ADDRESSES WITH PAN NO. WAS ALSO FURNISHED DURING APPEAL. A PRINT OUT OF THE WEBSITE OF REGISTRAR OF COMPANIES, CONFIRMING THE EXISTENCE OF THE COMPANY AND ALSO INCOME TAX ACKNOWLEDGMENT FOR THE ASSESSME NT YEAR 2008-09 HAVE BEEN SUBMITTED. THE ASSESSEE SUBMITS THAT THE EXISTENCE OF THE APPL ICANTS THUS CANNOT BE DOUBTED. AGAIN, IT HAS BEEN SUBMITTED THAT THE SHARE APPLICATION MONEY WAS RECEIVED BY A/C PAYEE CHEQUE AND THUS THE QUESTION OF UNEXPLAINED DEPOSIT DOES NOT ARISE. IN APPEAL, CIT(A) DELETED THE ADDITION BY RELYING ON THE CASE LAW OF HONBLE APEX COURT IN TH E CASE OF CIT VS. LOVELY EXPORTS (P) LTD. (2008) 216 CTR 195 (SC) BY HOLDING AS UNDER: 6.2. IN VIEW OF THE TOTALITY OF THE ABOVE FACTS AN D THE LEGAL PROPOSITION AS LAID DOWN BY THE HONBLE APEX COURT IN THE CASE OF LOVELY EXP ORTS PVT. LTD. CITED SUPRA, WE ARE OF THE OPINION THAT THE ASSESSEE HAS DULY DISCHARGE D THE BURDEN OF PROVING THE SHARE CAPITAL RAISED DURING THE YEAR UNDER CONSIDERATION. ACCORDINGLY, WE UPHOLD THE ORDER OF THE CIT(A) SO FAR AS THE RELIEF ALLOWED BY HIM A T RS.61.51 LAKHS IS CONCERNED AND DELETE THE ADDITION OF RS.7 LAKHS SUSTAINED BY HIM . CONSIDERING THE FACTS OF THE CASE AND RESPECTFULLY FOLLOWING THE RATIO LAID DOWN IN THE AFORESAID JUDGMENTS THIS GROUND OF APPEAL OF THE AP PELLANT IS ALLOWED AND THE ADDITION OF RS.60,49,800/- IS DELETED. AGGRIEVED, NOW REVENUE IS IN APPEAL BEFORE US. 5. WE HAVE HEARD RIVAL CONTENTIONS AND GONE THROUGH FACTS AND CIRCUMSTANCES OF THE CASE. WE FIND THAT THE ISSUE IS COVERED BY HONBLE APEX C OURT IN THE CASE OF LOVELY EXPORTS (P) LTD. (SUPRA), WHEREIN THE COURT HAS HELD AS UNDER: IF THE SHARE APPLICATION MONEY IS RECEIVED BY THE A SSESSEE COMPANY FROM ALLEGED BOGUS SHAREHOLDERS, WHOSE NAMES ARE GI VEN TO THE AO, THEN THE DEPARTMENT IS FREE TO PROCEED TO REOPEN TH EIR INDIVIDUAL ASSESSMENTS IN ACCORDANCE WITH LAW, BUT IT CANNOT B E REGARDED AS UNDISCLOSED INCOME OF ASSESSEE COMPANY. 3 ITA 733/K/2010 ADHUNIK METALIKS LTD. A.Y.06-07 SINCE CIT(A) HAS GIVEN RELIEF TO THE ASSESSEE BY FO LLOWING THE JUDGMENT OF HONBLE APEX COURT IN THE CASE OF LOVELY EXPORTS (P) LTD. (SUPRA ), WE FIND NO INFIRMITY IN HIS ORDER AND THE SAME IS HEREBY UPHELD. THESE GROUNDS OF REVENUES APPEAL ARE DISMISSED. 6. THE NEXT ISSUE IN THIS APPEAL OF THE REVENUE IS AGAINST THE ORDER OF CIT(A) IN DIRECTING THE ASSESSING OFFICER NOT TO CHARGE INTEREST U/S. 2 34B AND 234C IN RESPECT OF TAX LEVIED ON THE BOOK PROFIT U/S. 115JB OF THE ACT. FOR THIS, THE RE VENUE HAS RAISED THE FOLLOWING GROUND NO.3: THAT, ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE CIT(A) ERRED IN DIRECTING THE A.O NOT TO CHARGE INTEREST U/S. 234B AND 234C IN RE SPECT OF TAX LEVIED ON THE BOOK PROFIT AS COMPUTED U/S. 115JB OF THE ACT SPECIALLY IN VIEW OF THE DECISION OF THE ITAT THIRD MEMBER IN KANEL OIL AND EXPORT INDUSTRIES LIMITED R EPORTED AS 121 ITD 596 7. AT THE OUTSET, IT IS NOTICED THAT THE ISSUE IS N OW SQUARELY COVERED BY THE DECISION OF HONBLE APEX COURT IN THE CASE OF JCIT VS. ROLTA IN DIA LTD.(2011) 330 ITR 470, WHEREIN THE COURT HAS HELD AS UNDER: 9. THE QUESTION WHICH REMAINS TO BE CONSIDERED IS W HETHER THE ASSESSEE, WHICH IS A MAT COMPANY, WAS NOT IN A POSITION TO ESTIMATE ITS PROFITS OF THE CURRENT YEAR PRIOR TO THE END OF THE FINANCIAL YEAR ON 31ST MARCH. IN THI S CONNECTION THE ASSESSEE PLACED RELIANCE ON THE JUDGMENT OF THE KARNATAKA HIGH COUR T IN THE CASE OF KWALITY BISCUITS LTD. VS. CIT (SUPRA) AND, ACCORDING TO THE KARNATAK A HIGH COURT, THE PROFIT AS COMPUTED UNDER THE IT ACT, 1961 HAD TO BE PREPARED AND THEREAFTER THE BOOK PROFIT AS CONTEMPLATED UNDER S. 115J OF THE ACT HAD TO BE DET ERMINED AND THEN, THE LIABILITY OF THE ASSESSEE TO PAY TAX UNDER S. 115J OF THE ACT AROSE, ONLY IF THE TOTAL INCOME AS COMPUTED UNDER THE PROVISIONS OF THE ACT WAS LESS THAN 30 PE R CENT OF THE BOOK PROFIT. ACCORDING TO THE KARNATAKA HIGH COURT, THIS ENTIRE EXERCISE O F COMPUTING INCOME OR THE BOOK PROFITS OF THE COMPANY COULD BE DONE ONLY AT THE EN D OF THE FINANCIAL YEAR AND HENCE THE PROVISIONS OF SS. 207, 208, 209 AND 210 (PREDECESSO RS OF SS. 234B AND 234C) WERE NOT APPLICABLE UNTIL AND UNLESS THE ACCOUNTS STOOD AUDI TED AND THE BALANCE SHEET STOOD PREPARED, BECAUSE TILL THEN EVEN THE ASSESSEE MAY N OT KNOW WHETHER THE PROVISIONS OF S. 115J WOULD BE APPLIED OR NOT. THE COURT, THEREFORE, HELD THAT THE LIABILITY WOULD ARISE ONLY AFTER THE PROFIT IS DETERMINED IN ACCORDANCE W ITH THE PROVISIONS OF THE COMPANIES ACT, 1956 AND, THEREFORE, INTEREST UNDER SS. 234B A ND 234C IS NOT LEVIABLE IN CASES WHERE S. 115J APPLIED. THIS VIEW OF THE KARNATAKA H IGH COURT IN KWALITY BISCUITS LTD. (SUPRA) WAS NOT SHARED BY THE GAUHATI HIGH COURT IN ASSAM BENGAL CARRIERS LTD. VS. CIT (2000) 162 CTR (GAU) 170 : (1999) 239 ITR 862 ( GAU) AND MADHYA PRADESH HIGH COURT IN ITARSI OILS & FLOURS (P) LTD. VS. CIT (2001) 170 CTR (MP) 158 : (2001) 250 ITR 686 (MP) AS ALSO BY THE BOMBAY HIGH COURT I N THE CASE OF CIT VS. KOTAK MAHINDRA FINANCE LTD. (2003) 183 CTR (BORN) 491 : ( 2003) 130 TAXRNAN 730 (BORN) WHICH DECIDED THE ISSUE IN FAVOUR OF THE DEPARTMENT AND AGAINST THE ASSESSEE. IT APPEARS THAT NONE OF THE ASSESSEES CHALLENGED THE D ECISIONS OF THE GAUHATI HIGH COURT, MADHYA PRADESH HIGH COURT AS WELL AS BOMBAY HIGH CO URT IN THE SUPREME COURT. HOWEVER, IT MAY BE NOTED THAT THE JUDGMENT OF THE K ARNATAKA HIGH COURT IN KWALITY BISCUITS LTD. (SUPRA) WAS CONFINED TO S. 115J OF TH E ACT. THE ORDER OF THE SUPREME COURT DISMISSING THE SPECIAL LEAVE PETITION IN LIMI NE FILED BY THE DEPARTMENT AGAINST KWALITY BISCUITS LTD. (SUPRA) IS REPORTED IN CIT VS . KWALITY BISCUITS LTD. (2006) 205 CTR (SC) 122 : (2006) 284 ITR 434 (SC). THUS, THE J UDGMENT OF KARNATAKA HIGH COURT IN KWALITY BISCUITS (SUPRA) STOOD AFFIRMED. HOWEVER , THE KARNATAKA HIGH COURT HAS THEREAFTER IN THE CASE OF JINDAL THERMAL POWER CO. LTD. VS. DY. CIT (2006) 203 CTR (KAR) 381 (2006) ,54 TAXMAN 547 (KAR) DISTINGUISHED ITS OWN DECISION IN CASE OF 4 ITA 733/K/2010 ADHUNIK METALIKS LTD. A.Y.06-07 KWALITY BISCUITS LTD. (SUPRA) AND HELD THAT S. 115J B, WITH WHICH WE ARE CONCERNED, IS A SELF-CONTAINED CODE PERTAINING TO MAT, WHICH IMPOSE D LIABILITY FOR PAYMENT OF ADVANCE TAX ON MAT COMPANIES AND, THEREFORE, WHERE SUCH COM PANIES DEFAULTED IN PAYMENT OF ADVANCE TAX IN RESPECT OF TAX PAYABLE UNDER S. 115J B, IT WAS LIABLE TO PAY INTEREST UNDER SS. 2346 AND 234C OF THE ACT. THUS, IT CAN BE CONCL UDED THAT INTEREST UNDER SS. 234B AND 234C SHALL BE PAYABLE ON FAILURE TO PAY ADVANCE TAX IN RESPECT OF TAX PAYABLE UNDER S. 115JA/115JB. FOR THE AFORESTATED REASONS, CIRCULAR NO. 13 OF 2001, DT. 9TH NOV., 2001 ISSUED BY CBDT REPORTED IN (2001) 171 CT R (ST) 45 : (2001) 252 ITR (ST) 50 HAS NO APPLICATION. MOREOVER, IN ANY EVENT, PARA 2 OF THAT CIRCULAR ITSELF INDICATES THAT A LARGE NUMBER OF COMPANIES LIABLE TO BE TAXED UNDER MAT PROVISIONS OF S. 115JB WERE NOT MAKING ADVANCE TAX PAYMENTS. IN THE SAID C IRCULAR, IT HAS BEEN CLARIFIED THAT S. 115JB IS A SELF- CONTAINED CODE AND THUS, ALL COMPA NIES WERE LIABLE FOR PAYMENT OF ADVANCE TAX UNDER S. 115JB AND CONSEQUENTLY PROVISI ONS OF SS. 234B AND 234C IMPOSING INTEREST ON DEFAULT IN PAYMENT OF ADVANCE TAX WERE ALSO APPLICABLE. RESPECTFULLY FOLLOWING THE AFORESAID DECISION, WE H OLD THAT INTEREST CHARGED IN THIS CASE IS HELD TO BE CHARGEABLE AND THE ORDER PASSED BY CIT(A) IN THIS REGARD IS HEREBY UPHELD. THIS GROUND OF APPEAL OF REVENUE IS ALLOWED. 8. IN THE RESULT, THE APPEAL OF THE REVENUE IS PART LY ALLOWED. 9. ORDER PRONOUNCED IN OPEN COURT ON 10.6.2011. SD/- SD/- . . ! ' '' ' # # # # , ! (S. V. MEHROTRA) (MAHAVIR SINGH) ACCOUNTANT MEMBER JUDICIAL MEMBER ( 1 1 1 1) )) ) DATED 10TH JUNE, 2011 '23 %45 6' JD.(SR.P.S.) 0 . ,7 87'9- COPY OF THE ORDER FORWARDED TO: 1 . *+ / APPELLANT DCIT, CIRCLE-3, KOLKATA. 2 ,-*+ / RESPONDENT, M/S. ADHUNIK METALIKS LTD., 14, N. S. ROAD, KOLKATA- 700 001. 3 . 0% ( )/ THE CIT(A), KOLKATA 4. 0% / CIT, KOLKATA 5 . '? ,% / DR, KOLKATA BENCHES, KOLKATA -7 ,/ TRUE COPY, 0%@/ BY ORDER, #5 /ASSTT. REGISTRAR .