The ITO, Ward-4(2), Ahmedabad V. M/s. Komal Amin Exports Pvt.Ltd., Ahmedabad

ITA 74/AHD/2011

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 73127 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 year(s) 2 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-03-2014
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Next Hearing Date: 13-03-2014
• Assessment Year: 2006-2007
• Appeal Filed On: 11-01-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: J P JHANGID
• Assessee Lawyers: S N DIVETIA
• Keywords: Unexplained cash credit; Source of fund
• Section: 68

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH, AHMEDABAD BEFORE SHRI MUKUL KR. SHRAWAT, JUDICIAL MEMBER AND SHRI T.R. MEENA, ACCOUNTANT MEMBER ITA NO.74/AHD/2011 A.Y. 2006-07 ITO, WARD 4(2), AHMEDABAD. VS M/S. KOMAL AMIN EXPORTS PVT. LTD., 309-310, SHANTI ARCADE, NR. SAHJANAND COMPLEX, 132 FT. RING ROAD, NARANGPURA, AHMEDABAD. PAN: AACCK5343B (APPELLANT) (RESPONDENT) REVENUE BY : SHRI J.P. JHANGID, SR.D.R. ASSESSEE(S) BY : SHRI S.N. DIVETIA, A.R. / DATE OF HEARING : 13/03/2014 / DATE OF PRONOUNCEMENT: 27/03/2014 / O R D E R PER SHRI MUKUL KUMAR SHRAWAT, JUDICIAL MEMBER THIS IS AN APPEAL FILED BY THE REVENUE ARISING FROM THE ORDER OF LEARNED CIT(A)-XX, AHMEDABAD, DATED 19.10.2010 AND THE GROUND RAISED IS AS UNDER: THE LEARNED CIT(A)-XX, AHMEDABAD HAS ERRED IN LAW AND ON FACTS IN DELETING THE ADDITION OF RS.8,50,000/- MADE BY THE ASSESSING OFFICER ON ACCOUNT OF UNEXPLAINED CASH CREDITS U/S. 68 OF THE INCOME-TAX ACT, 1961. 1.2 IN DOING SO, THE LEARNED CIT(A) HAS ERRED IN LA W AND ON FACTS IN NOT APPRECIATING THAT THE ALLEGED SHARE APPLICANTS HAD NO MEANS TO ADVANCE HUGE AMOUNTS OF CASH STATED TO HAVE BEEN RECEIVED FROM T HEM BY THE ASSESSEE COMPANY AND THEREFORE, THE SAID ADDITION WAS RIGHTL Y MADE BY THE ASSESSING OFFICER AS THE CREDIT WORTHINESS OF THE SHARE APPLI CANTS AS WELL AS GENUINENESS OF THE TRANSACTIONS COULD NOT BE ESTABLISHED IN THI S CASE. ITA NO.74/AHD/2011 ITO WARD 4(2), AHMEDABAD VS. M/S. KOMAL AMIN EXPORT S PVT. LTD.. A.Y.2006-07 - 2 - 2. FACTS IN BRIEF AS EMERGED FROM THE CORRESPONDING ASSESSMENT ORDER PASSED U/S. 143(3), DATED 24.12.2008 WERE THAT THE ASSESSEE IS STATED TO BE ENGAGED IN THE BUSINESS AS A TRADER AND MERCHANT EX PORTER OF COTTON AND OTHER ITEMS. IT WAS NOTICED BY THE AO THAT THE ASSE SSEE HAD RECEIVED SHARE APPLICATION MONEY OF RS.10 LACS DURING THE YEAR UND ER ASSESSMENT. IT WAS ALSO OBSERVED BY THE AO THAT THE SHARE APPLICATION MONEY WAS RECEIVED THROUGH CASH. THE ASSESSEE WAS ASKED TO PRODUCE THO SE PERSONS WHO HAD APPLIED FOR SHARES IN THE COMPANY. THERE WERE NINE PERSONS WHO HAVE APPLIED FOR SHARES IN THE COMPANY AND PAID SAID SUM OF RS.10 LACS. NAMES AND ADDRESSES OF THOSE PERSONS HAVE BEEN MENT IONED BY THE AO. ADMITTEDLY, THE ASSESSEE HAD PRODUCED THOSE INDIVID UALS WHOSE STATEMENTS WERE RECORDED BY THE AO. THE AO HAS PROD UCED THE GIST OF THEIR RESPECTIVE STATEMENTS. OUT OF THOSE PERSONS O NLY AN INVESTMENT OF RS.1.50 LACS MADE BY SMT. ASHABEN V. PATEL WAS FOUN D GENUINE BY THE AO. IN RESPECT OF THE REMAINING SHARE APPLICATION M ONEY OF RS.8.5 LACS THE AO HAD CONCLUDED THAT THE CAPACITY WAS NOT PROV ED; HENCE, TAXED THE SAME BY INVOKING THE PROVISIONS OF SECTION 68 OF IT ACT. THE MATTER WAS CARRIED BEFORE THE FIRST APPELLATE AUTHORITY. 3. AFTER EXAMINING THE CASE LAWS, CERTAIN FACTS AND EVIDENCES, LEARNED CIT(A) HAS HELD AS UNDER: I HAVE GONE THROUGH THE ORDER OF THE AO AND THE SUB MISSIONS OF THE AR CAREFULLY. IT IS SEEN THAT THE SHARE APPLICATION MO NEY AMOUNTING TO RS.8,50,000/- HAS BEEN RECEIVED FROM 9 PERSONS. THE AO HAS BELIEVED THE GENUINENESS OF ONLY ONE PERSON I.E., MRS. ASHABEN V . PATEL. FROM THE DETAILS FILED BEFORE ME AND A PERUSAL OF THE ASSESSMENT ORD ER IT IS SEEN THAT ALL THE REMAINING 8 PERSONS WERE PRODUCED BEFORE THE AO. IN THE STATEMENTS RECORDED ALL THE PERSONS HAVE CONFIRMED HAVING MADE SHARE APPLICATIONS TO THE APPELLANT COMPANY. IT IS SEEN THAT THE FOLLOWIN G PERSONS ARE ASSESSED TO TAX: ROHIT KUMAR N PATEL DINESHBHAI B. PATEL ITA NO.74/AHD/2011 ITO WARD 4(2), AHMEDABAD VS. M/S. KOMAL AMIN EXPORT S PVT. LTD.. A.Y.2006-07 - 3 - BHARAT II. PATEL SANJAY KUMAR B. PATEL SAMIR K. PATEL ALL THE ABOVE PERSONS FILED RETURNS OF INCOME. THE DOCUMENTS EVIDENCING TO PROVE THE IDENTITY HAS ALSO BEEN FILED. AS FAR AS T HE OTHER THREE PERSONS I.E. MS. BINITA B. PATEL, SACHIN B. PATEL AND MAHENDRABH AI B. PATEL ARE CONCERNED, IT IS SEEN THAT ADEQUATE DOCUMENTS TO PR OVE THEIR IDENTITY WAS FILED BEFORE THE AO. 4.4 THE AO HAS MADE THE ADDITION OF RS.85,00,000/- ON THE GROUND THAT THE ABOVE PERSONS DID NOT HAVE THE CAPACITY TO HAVE ADVANCED THE MONEY IN CASH TO THE APPELLANT AS SHARE APPLICATION MONEY. I N THE CASE OF SHRI DINESHBHAI PATEL THE AO FOUND THAT SHRI DINESHBHAI PATEL REGULAR DOES OF THESE ONLY RS.61,900/- IN HIS CAPITAL ACCOUNT. HE H ENCE HELD THAT IT WAS IMPOSSIBLE FOR SHRI DINESHBHAI PATEL TO HAVE INVEST ED RS.1 LAKH AS SHARE APPLICATION MONEY IN THE APPELLANT. THE AO HAS HOWE VER FAILED TO NOTICE THAT THE INVESTMENT HAS BEEN SHOWN IN THE BALANCE SHEET FILED BY SHRI DINESHBHAI PATEL. THE HONBLE SUPREME COURT IN THE CASE OF CIT V. LOV ELY EXPORTS (P.) LTD. REPORTED IN 216 CTR (SC) 195 HAS HELD AS UNDER: CAN THE SHARE APPLICATION MONEY. ADDED AS UNDISCLO SED INCOME U/S.68 OF THE IT ACT 1961? WE FIND NO MERIT IN THIS SPECIAL LEAVE PETITION FOR THE SIMPLE REASON THAT IF THE SHARE AP PLICATION MONEY IS RECEIVED BY THE ASSESSEE COMPANY FROM ALLEGED BOGUS SHAREHOLDERS WHOSE NAMES ARE GIVEN TO THE AO, THEN THE DEPARTMEN T IS FREE TO PROCEED TO REOPEN THEIR INDIVIDUAL ASSESSMENTS IN A CCORDANCE WITH LAW. HENCE, WE FIND NO INFIRMITY WITH THE IMPUGNED JUDGMENT. 4.4(I). IN THE INSTANT CASE THE SHARE APPLICANTS A RE NOT BOGUS. THEIR IDENTITY HAS BEEN ESTABLISHED. IT IS ONLY THEIR CREDITWORTHI NESS AND SOURCES OF INCOME WHICH ARE DOUBTED BY THE AO. AS PER THE SUPREME COU RT DECISION IN THE CASE OF LOVELY EXPORTS (SUPRA) NO ADDITION U/S 68 COULD BE MADE IN THE HANDS OF THE APPELLANT COMPANY. IF THE AO DOUBTED THE CREDIT WORTHINESS OF THE SHARE APPLICANTS HE SHOULD HAVE PROCEEDED TO ASSESS THEM INDIVIDUALLY AND MAKES SUITABLE ADDITIONS IN THEIR CASES. 4. FROM THE SIDE OF THE REVENUE, LEARNED SR.D.R., M R. J.P. JHANGID APPEARED AND PLACED RELIANCE ON BLESSING CONSTRUCTI ON, 32 TAXMANN. COM 366 (GUJ.), NOVA PROMOTERS AND FINLEASE P. LTD., 18 TAXMANN. COM 217 (DELHI); GOLD LEAF CAPITAL CORPORATION, 18 TAXMANN. COM 166 (DELHI), PRAKASHCHANDRA SINGHVI (HUF), 16 TAXMANN.COM 96 (AH D). HE HAS ALSO ARGUED THAT THE PROVISIONS OF SECTION 68 HAVE ALSO BEEN AMENDED, ITA NO.74/AHD/2011 ITO WARD 4(2), AHMEDABAD VS. M/S. KOMAL AMIN EXPORT S PVT. LTD.. A.Y.2006-07 - 4 - ALTHOUGH W.E.F. 01.04.2013 ACCORDING TO WHICH WHERE THE ASSESSEE IS A COMPANY AND THE SUM SO CREDITED CONSISTS OF SHARE APPLICATION MONEY THEN THE ASSESSEE COMPANY SHALL BE RESPONSIBLE TO O FFER AN EXPLANATION ABOUT THE NATURE AND SOURCE OF SUCH SUM AND THAT EX PLANATION SHOULD BE TO THE SATISFACTION OF THE AO. ACCORDING TO HIM, TH E EXPLANATION OFFERED BY THE ASSESSEE WAS NOT SATISFACTORY; HENCE, THE LE ARNED CIT(A) HAS WRONGLY DELETED THE ADDITION. 5. FROM THE SIDE OF THE RESPONDENT ASSESSEE, LEARNE D AR, MR. S.N. DIVETIA APPEARED AND INFORMED THAT THE ACCOUNTS OF THE ASSESSEE ARE DULY AUDITED AND AN INCOME OF RS.30,64,195/- WAS DISCLOS ED, MEANING THEREBY THE ASSESSEE IS SHOWING SUBSTANTIAL TAXABLE INCOME. ON THE PART OF THE ASSESSEE, PROPER EXPLANATION WAS OFFERED AND, THERE FORE, THE AO HAS ACCEPTED ONE OF THE DEPOSIT, NAMELY, SMT. ASHABEN B . PATEL WHO HAS INVESTED A SUM OF RS.1,50,000/- BUT REJECTED ALL TH E OTHER PERSONS DEPOSITS ALTHOUGH THE FACTS WERE IDENTICAL. IN RESP ECT OF SMT. ASHABEN VISHNUBHAI PATEL, THE AO HAD NOTED THE EXPLANATION OF THE ASSESSEE AS UNDER: MRS. ASHABEN VISHNUBHAI PATEL: MRS. ASHABEN V. PATEL PERSONALLY APPEARED BEFORE TH E UNDERSIGNED AND FURNISHED THE DETAILS. HER STATEMENT WAS ALSO RECOR DED. IN REPLY TO QUESTION NO.4, MRS. ASHABEN PATEL HAS CONFIRMED THAT SHE HAD SUBSCRIBED SHARES OF M/S. KOMAL AMIN EXPORTS PVT. LTD. AMOUNTING TO RS.1 .5 LAKHS IN CASH. AS REGARDS TO THE SOURCES OF INVESTMENT, MRS. PATEL HA S SUBMITTED THAT SHE HAD WITHDRAWN THE MONEY IN CASH FROM M/S. UMA DEVELOPER S AND DEPOSITED WITH THE ASSESSEE FOR SUBSCRIBING THE SHARES. MRS. PATEL HAS ALSO SUBMITTED COPY OF ACCOUNT FROM M/S. UMA DEVELOPERS IN SUPPORT OF THE SAME. CONSIDERING THE CORROBORATIVE EVIDENCE SUBMITTED BY THE ALLOTTEE FO R WITHDRAWAL OF CASH FROM THE FIRM, M/S. UMA DEVELOPERS, THE INVESTMENT MADE IN SHARE APPLICATION OF RS.1.5 LAKHS IS HEREBY TREATED AS GENUINE. 5.1 LEARNED AR HAS ALSO MENTIONED THAT IN RESPECT O F FIVE PARTIES, THE ASSESSEE HAS FURNISHED THE DETAILS OF THE RETURN FI LED, PAN, ADDRESS, ITA NO.74/AHD/2011 ITO WARD 4(2), AHMEDABAD VS. M/S. KOMAL AMIN EXPORT S PVT. LTD.. A.Y.2006-07 - 5 - CONFIRMATION LETTER, ETC. THEREFORE, LEARNED CIT(A) HAS GIVEN A CATEGORICAL FINDING THAT THOSE FIVE PERSONS WERE AS SESSED TO TAX; HENCE, NO ADDITION COULD BE MADE IN THE HANDS OF THE ASSESSEE -COMPANY. IN RESPECT OF REST OF THE THREE PARTIES, UNDISPUTEDLY THEY HAV E ALSO APPEARED AND INFORMED THEIR SOURCE OF INCOME AS WELL AS THEIR CR EDITWORTHINESS. ONCE, THEY HAVE ADMITTED ABOUT THE INVESTMENT IN SHARE AP PLICATION MONEY, THERE WAS NO QUESTION TO REJECT THE SAID EXPLANATIO N. LEARNED AR HAS PLACED RELIANCE ON THE FOLLOWING JUDGMENTS: 1. LOVELY EXPORTS (P.) LTD., 216 CTR 195 (SC) 2. CIT VS. NAMASTEY CHEMICALS (P.) LTD., 217 TAXMAN 25 (GUJ) 3. CIT VS. JAYDEE SECURITIES FINANCE LTD., 350 ITR 22 0. 4. VALUE CAPITAL SERVICES (P.) LTD., 307 ITR 334 5. OASIS HOSPITALITIES (P.) LTD., 333 ITR 119 (DELHI) 6. WE HAVE HEARD BOTH THE SIDES. WE HAVE PERUSED TH E MATERIAL PLACED BEFORE US. THE COMPILATION CONSISTS THE CONF IRMATION LETTER, RETURN OF INCOME, STATEMENT OF INCOME, DETAILS OF PAN CARD , SOURCE OF INVESTMENT, IN SOME CASES ELECTION CARD, PROOF OF R ESIDENCE, COPY OF LEDGER ACCOUNT, DRIVING LICENSE, TELEPHONE BILLS, E TC. IN RESPECT OF FIVE DEPOSITORS, THE FINDING HAS BEEN GIVEN THAT THEY WE RE INDEPENDENTLY ASSESSED TO TAX AND THE SOURCE OF DEPOSIT WAS ALSO ESTABLISHED. UNDER THE TOTALITY OF THE CIRCUMSTANCES AND THE EXPLANATION O FFERED, WE HEREBY AFFIRM THE FINDING OF LEARNED CIT(A) IN RESPECT OF THESE FIVE PERSONS. FURTHER, IN RESPECT OF SACHIN BOGHUBHAI PATEL, HE H AD APPEARED AND INFORMED THAT BEING AN EMPLOYEE AS AN ACCOUNTANT OF M/S. SRI J. TRADERS HE WAS IN A CAPACITY TO INVEST AN AMOUNT OF RS.1,50 ,000. HE HAS ALSO INFORMED THAT HE HAPPENED TO BE AN MBA. IN THE CASE OF MISS BINITA BIPINBHAI PATEL, SHE ALSO APPEARED AND INFORMED THA T A SUM OF RS.1 LAC WAS INVESTED OUT OF HER SAVINGS BEING EMPLOYED WITH M/S. V.V. PATEL AND COMPANY. THE THIRD NAME IS MAHENDRABHAI BHOGIBHAI P ATEL WHO HAS ITA NO.74/AHD/2011 ITO WARD 4(2), AHMEDABAD VS. M/S. KOMAL AMIN EXPORT S PVT. LTD.. A.Y.2006-07 - 6 - INVESTED A SUM OF RS.1 LAC AND STATED BEFORE THE AO THAT BEING AN EMPLOYEE WITH M/S. ADVANCE COMMERCIAL SERVICE, HE H AS HIS OWN SOURCES OF INCOME AND OUT OF THAT INCOME THE SAID S UM WAS DEPOSITED. CONSIDERING SUCH CIRCUMSTANCES AND THE SUPPORTING E VIDENCES, WE HEREBY HOLD THAT IN THE ABSENCE OF ANY CONTRARY MATERIAL P LACED FROM THE SIDE OF THE REVENUE, THE FINDING GIVEN BY LEARNED CIT(A) AP PEARS TO BE CORRECT. AT THIS STAGE OF APPEAL, WE ARE NOT INCLINED TO INT ERFERE WITH THOSE FINDINGS. ESPECIALLY, WHEN THE PERSONS IN QUESTION HAVE APPEARED BEFORE THE AO AND ADMITTED THEIR RESPECTIVE INVESTMENTS IN THE ASSESSEE COMPANY ALONG WITH THE PROOF OF SOURCE OF INVESTMEN T. WE FIND NO FORCE IN THIS GROUND OF THE REVENUE; HENCE DISMISS. 7. IN THE RESULT, THE APPEAL OF THE REVENUE IS DISM ISSED. SD/- SD/- (T.R. MEENA) (MUKUL KR. SHRAWAT) ACCOUNTANT MEMBER JUD ICIAL MEMBER AHMEDABAD; DATED 27/03/2014 PRABHAT KR. KESARWANI, SR. P.S. / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. / CONCERNED CIT 4. ( ) / THE CIT(A)-III, AHMEDABAD 5. , , / DR, ITAT, AHMEDABAD 6. / GUARD FILE. / BY ORDER, / ( DY./ASSTT.REGISTRAR) , / ITAT, AHMEDABAD