ITO 9(1)(4), MUMBAI V. FALGUNI INVESTMENT DISTRIBUTORS P.LTD, MUMBAI

ITA 7575/MUM/2012

• Counselvise Citation: 757519914 RSA 2012
• Duration Of Justice: 2 year(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-01-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: F
• Assessment Year: 2004-2005
• Appeal Filed On: 24-12-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: N PADMANABHAN
• Keywords: Unexplained cash credit
• Section: 68

Judgement Text

1 , Q QQ Q INCOME TAX APPELLATE TRIBUNAL,MUMBAI - F BENCH , , BEFORE S/SH. RAJENDRA,ACCOUNTANT MEMBER & S HRI SANJAY GARG, JUDICIAL MEMBER /. ITA NO.7575/MUM/2012, ! ! ! ! ' ' ' ' / ASSESSMENT YEAR-2004-05 ITO 9(1)(4), R.NO.224, 2ND FLOOR, AAYAKAR BHAVAN, M.K.MARG, MUMBAI-400020 ! VS. M/S FALGUNI INVESTMENT DISTRIBUTORS PVT. LTD.. 5/13, MALAD CHS PODAR ESTATE, MALAD(E), MUMBAI-400097 PAN:AAACF0734B ( $% / APPELLANT) ( &'$% / RESPONDENT) !() !() !() !() * * * * / ASSESSEE BY : NONE + * / REVENUE BY : SHRI N. PADMANABHAN ! ! ! ! + ++ + ), ), ), ), / DATE OF HEARING : 01 -01-2015 -.' + ), / DATE OF PRONOUNCEMENT : 09 -01-2015 ! ! ! ! , 1961 + ++ + 254(1) ) ) ) ) ) ) ) ) / / / / ORDER U/S.254(1)OF THE INCOME-TAX ACT,1961(ACT) PER RAJENDRA, A.M. ! : CHALLENGING THE ORDER DT.17.10.2012 OF THE CIT(A)-1 9,MUMBAI,ASSESSING OFFICER (AO)HAS RAISED FOLLOWING GROUNDS OF APPEAL 1.WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) WAS CORRECT IN DELETING THE ADDITION MADE U/S. 68 WITHOUT APPRE CIATING THE FACTS OF THE CASE. 2.WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) WAS CORRECT IN DELETING THE ADDITION MADE U/S. 68 EVEN THOUGH T HE ASSESSEE FAILED TO ESTABLISH THE CREDITWORTHINESS OF THE COMPANIES FROM WHOM SHARE A PPLICATION MONEY WAS CLAIMED TO HAVE BEEN RECEIVED. 3.THE APPELLANT PRAYS THAT ORDER OF THE CIT(A) ON T HE GROUNDS BE SET ASIDE AND THAT OF THE ASSESSING OFFICER BE RESTORED. 4.THE APPELLANT CRAVES LEAVE TO AMEND OR ALTER ANY GROUNDS OR ADD A NEW GROUND WHICH MAY BE NECESSARY. 2. ASSESSEE-COMPANY,ENGAGED IN THE BUSINESS OF DISTRIB UTION OF MUTUAL FUNDS,ETC.FILED ITS RETURN OF INCOME ON 29.10.2004,DECLARING TOTAL INCOME OF RS.6 1,650/-.THE AO FINALISED THE ASSESSMENT U/S.143(3) R.W.S.147OF THE ACT,ON 02.12.2011,DETERM INING THE TOTAL INCOME AT RS.10,61,650/-. EFFECTIVE GROUND OF APPEAL PERTAINS TO DISALLOWANCE OF SHARE APPLICATION MONEY,AMOUNTING TO RS.10,00,000/-.DURING THE ASSESSMENT PROCEEDINGS TH E AO FOUND THAT THE ASSESSEE HAD RECEIVED SHARE APPLICATION MONEY AMOUNTING TO RS.28,00,000/- ,THAT OUT OF THAT RS.5 LAKHS WERE RECEIVED FROM POONAM CORPOTATION & PROJECTS LTD.(PCPL)AS WEL L AS FROM SURYA DEEP REFINERY & CHEMICAL WORKS LTD.(SRCW).HE ISSUED NOTICES U/S.133 (6)OF THE ACT TO BOTH THE PARTIES,BUT WERE RECEIVED BACK AS THE PARTIES WERE NOT AVAILABLE ON THE GIVEN ADDRESSES.THE AO ASKED THE ASSESSEE ITA/7575/M UM/2012-AY.04-05 M/S FALGUNI INVESTMENT DISTRIBUTORS PVT. LTD 2 AS TO WHY THE AMOUNT RECEIVED FROM PCPL AND SRCW SH OULD NOT BE ADDED TO ITS TOTAL INCOME.AS PER THE AO THE ASSESSEE DID NOT PRODUCE ANY CORRESP ONDENCE OR EVIDENCE IN THIS REGARD,THOUGH SHARE ALLOTMENT LETTER,COPY OF BANK STATEMENT,COPY OF BALANCE SHEETS OF BOTH THE LENDERS.HE HELD THAT THE ASSESSEE HAD NOT PROVED THE CREDITWORTHINE SS OF THE PCPL AND SRCW,THAT THE SHARE APPLICATION MONEY RECEIVED FROM THEM WAS ASSESSEES OWN MONEY,THAT TRANSACTION WAS COVERED WITHIN THE MEANING OF UNEXPLAINED CASH CREDITS AS P ER THE PROVISIONS OF SECTION 68 OF THE ACT. FINALLY,HE ADDED RE.10 LAKHS TO THE INCOME OF THE A SSESSEE. 2.1. AGAINST THE ORDER OF THE AO ASSESSEE PREFERRED AN A PPEAL BEFORE THE FIRST APPEAL AUTHORITY (FAA).AT THE TIME OF APPELLATE PROCEEDINGS, THE ASS ESSEE FURNISHED THE DETAILS IN RESPECT OF BOTH THE CREDITORS ALONG WITH PAN AND THE WARD WHERE THE Y WERE ASSESSED.IT ALSO FILED THE COPY OF ACKNOWLEDGEMENT OF RETURN FILED BY THEM.THE FAA CAL LED FOR REMAND REPORT(RR)FROM THE AO. ON RECEIVING THE RR,SHE DIRECTED THE ASSESSEE TO FILE ITS COMMENTS.IT WAS ARGUED BY THE ASSESSEE THAT COPY OF THE PUBLISHED AUDITED ACCOUNTS OF THE COMPA NY ALONGWITH COPY OF BANK STATEMENTS WERE FILED,THAT THE WORTH OF SRCW WAS RS.8.30 CRORES THA T OF PCPL WAS RS.9.81 CRORES,THAT THERE WAS NOTHING ON RECORD WHICH PROVED THAT THE ASSESSE HAD INTRODUCED ITS OWN INCOME IN THE BOOKS OF ACCOUNTS IN THE GUISE OF SHARE CAPITAL,THAT THE A.O . WHILE SUBMITTING THE REMAND REPORT HAD TRIED TO ESCAPE HIS RESPONSIBILITIES OF VERIFYING THE RECORD S IN THE FORM OF AUDITED ACCOUNTS BANK STATEMENTS COMPUTATION OF INCOME ACKNOWLEDGEMENT OF RETURN OF INCOME LYING IN THE FILE WHICH WERE SUFFICIENT PROOF TO JUSTIFY THE CREDIT WORTHIN ESS OF BOTH THE COMPANIES,THAT THE COMPANIES HAD SHIFTED THEIR OFFICES TO KOLKATA AND BARODA,THAT TH E AO HAD ASKED FOR THE DETAILS THAT WERE EIGHT YEARS OLD. AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE A ND THE ASSESSMENT ORDER,SHE HELD THAT THE ASSESSMENT YEAR PERTAINS TO 2004-05 WHICH WAS 7 YEA RS OLD,THAT THE ONLY REASON TO MAKE ADDITION U/S.68 BY THE AO WAS NON APPEARANCE OF THE PARTIES IN RESPONSE TO THE SUMMONS ISSUED, THAT THE ASSESSEE HAD FURNISHED ALL DOCUMENTS IN HIS POSSESS ION TO PROVE THAT THE PARTIES HAD THE NECESSARY CREDITWORTHINESS TO SUBSCRIBE TO THE SHARES,THAT TH E AO HAD NOT TAKEN ANY EFFORTS TO VERIFY FROM THE ASSESSING OFFICERS OF THE LENDERS AS WHETHER THE AC COUNTS FILED BY THE ASSESSEE WAS NOT CORRECT,THAT HE HAD NOT BROUGHT OUT ANYTHING ON REC ORD TO PROVE THAT IT HAD UTILISED ITS OWN MONEY AND HAD INTRODUCED IN ITS BOOKS OF ACCOUNT IN THE G UISE OF SHARE CAPITAL,THAT AO COULD NOT EXPECT THE ASSESSEE COMPANY TO DO THE IMPOSSIBLE,IF THE PA RTY WAS NOT RESPONDING TO THE SUMMONS ISSUED BY THE AO THE ASSESSEE COULD DO NOTHING ABOUT IT,TH AT POWER LIED WITH THE AO IN FORM OF LEVY OF PENALTY,THE AO HAD NEITHER AT THE TIME OF ASSESSMEN T PROCEEDING NOR AT THE TIME OF REMAND PROCEEDING TAKEN ANY EFFORTS TO VERIFY THE CLAIM OF THE ASSESSEE,THAT THERE WAS NO EVIDENCE ON RECORD TO PROVE THAT THE CLAIM MADE BY ASSESSEE WAS INCORRECT,THAT IT HAD PRODUCED ALL SUPPORTING DOCUMENTS TO PROVE ITS BONAFIDE.FAA REFERRED TO THE MATTER OF LOVELY EXPORTS(216 CTR 195),AND HELD THAT THE ASSESSEE HAD PROVED THE IDENTITY OF S HARE HOLDERS TO WHICH THE AO HAS ALSO AGREED,THAT THE AO HAD NOT BROUGHT OUT ANYTHING ON RECORD TO SHOW THAT THE SHAREHOLDERS PCPL AND SRCW WERE BOGUS,THAT THE ASSESSEE HAD PRODUCED THE ACCOUNTS OF THE SHAREHOLDER TO SHOW THEY POSSESSED THE CREDITWORTHINESS TO SUBSCRIBE TH E SHARE CAPITAL ISSUED BY THE ASSESSEE- COMPANY. FINALLY,THE FAA ALLOWED THE APPEAL FILED B Y THE ASSESSEE. ITA/7575/M UM/2012-AY.04-05 M/S FALGUNI INVESTMENT DISTRIBUTORS PVT. LTD 3 2.2. BEFORE US,DEPARTMENTAL REPRESENTATIVE (DR)SUPPORTED THE ORDER OF THE AO AND ARGUED THAT THE ASSESSEE HAD NOT PRODUCED THE PARTIES BEFORE TH E AO.NONE APPEARED ON BEHALF OF THE ASSESSEE. WE HAVE PERUSED THE MATERIAL AVAILABLE ON RECORD.WE FIND THAT THE AO HAD ADDED A SUM OF RS.10 LAKHS TO THE INCOME OF THE ASSESSEE AS THE NOTICES ISSUED BY HIM U/S.133(6) REMAINED UN-SERVED AND THE ASSESSEE DID NOT PRODUCE THE PARTIES IN PER SON,THAT THE FAA HAD CALLED FOR A RR,THAT IN THE REPORT ALSO THE AO STATED THE SAME FACTS,THAT WHILE SUBMITTING THE REPORT HE DID NOT COMMENT UPON ANY OF THE DOCUMENTS FURNISHED BY THE ASSESSEE,THAT BALANCE SHEETS AND BANK STATEMENTS WERE AVAILABLE ON THE FILE,THAT COPIES OF RETURNS OF INC OME FILED BY THE CREDITORS WERE ALSO NOT EXAMINED BY THE AO.IN OUR OPINION,FOR DECIDING THE CREDITWOR THINESS OF A LENDER THESE DOCUMENTS PLAY A VITAL ROLE.IF AO HAD SOME DOUBT ABOUT THE CAPACITY OF THE LENDERS HE COULD HAVE MADE INQUIRIES WITH THE AO.S CONCERNED WHO WERE ASSESSING THE CRED ITORS.BUT,HE DID NOT BOTHER TO FIND THE CREDITWORTHINESS OF THE LENDERS.ONCE THE ASSESSEE H AD PRODUCED ALL THE NECESSARY DOCUMENTS ABOUT THE SHARE APPLICATION MONEY,THE ONUS HAD SHIFTED TO THE AO TO DISPROVE THE CLAIM MADE BY THE ASSESSEE.THE AO,WITHOUT EXAMINING THE DOCUMENTARY E VIDENCES SUBMITTED BEFORE THE FAA,HAD FILED HIS REMAND REPORT.IN OUR OPINION THE FAA HAS EVALUATED ALL THE DOCUMENTS PROPERLY AND HAD REACHED AT A LOGICAL AND REASONABLE CONCLUSION.IN O UR OPINION HER ORDER DOES NOT SUFFER FROM ANY LEGAL INFIRMITY,AS IT IS BASED ON PROPER SCRUTINY O F THE EVIDENCES.THEREFORE,CONFIRMING THE SAME,WE DECIDE THE EFFECTIVE GROUND OF APPEAL AGAIN ST THE AO. AS A RESULT,AP PEAL FIELD BY THE AO STANDS DISMISSED. 0)1 !() VF/KDKJH 2 3 + UK 4 + ) 56 . ORDER PRONOUNCED IN THE OPEN COURT ON 9TH JANUARY, 2015. / + -.' 7 8! 9 TUOJH TUOJH TUOJH TUOJH , ,, , 201 5 . + = SD/- SD/- ( / SANJAY GARG) ( / RAJENDRA) / JUDICIAL MEMBER / ACCOUNTANT MEMBER / MUMBAI, 8! /DATE: 09.01.2015 SK / / / / + ++ + &)> &)> &)> &)> ?>') ?>') ?>') ?>') / COPY OF THE ORDER FORWARDED TO : 1. ASSESSEE / $% 2. RESPONDENT / &'$% 3. THE CONCERNED CIT(A)/ @ A , 4. THE CONCERNED CIT / @ A 5. DR F BENCH, ITAT, MUMBAI / >B &)! Q QQ Q , . . . 6. GUARD FILE/ 0 '>) &) //TRUE COPY// /! / BY ORDER, C / 5 DY./ASST. REGISTRAR , /ITAT, MUMBAI