ENSO HOLDING AND FINANCE PVT LTD., MUMBAI V. DY CIT CC 2 (2), MUMBAI

ITA 7656/MUM/2019

• Counselvise Citation: [2020] 110 COUNSELVISE.COM (IT) 5133 (ITAT-MUMBAI)
• Duration Of Justice: 8 month(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-09-2020
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: E
• Assessment Year: 2010-2011
• Appeal Filed On: 12-12-2019
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: RAJEEV HARIT
• Keywords: Unexplained cash credit; Bogus Share capital; Share purchase agreement; Principle of natural justice; Opportunity of cross examination; Third party statement; Retraction; Reassessment proceedings; Set aside
• Section: 143(3); 142(1); 153A; 133(6); 143(1); 143(2); 68; 132

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCH A, MUMBAI BEFORE SHRI RAJESH KUMAR, ACCOUNTANT MEMBER AND SHRI RAM LAL NEGI, JUDICIAL MEMBER ITA NO.7656/MUM/2019 ASSESSMENT YEAR: 2010-11 M/S. ENSO HOLDING AND FINANCE PVT. LTD., 113, COMMERCE HOUSE, 140, N.M. ROAD, FORT, MUMBAI 400 023. PAN : AACCE1142L VS. DCIT 2(2), ROOM NO.806, 8 TH FLOOR, PRATISHTHA BHAVAN, OLD CGO ANNEXE, MAHARSHI KARVE ROAD, MUMBAI - 400020 (APPELLANT) (RESPONDENT) PRESENT FOR: ASSESSEE BY : SHRI VIMAL PUNAMIYA, A.R. REVENUE BY : SHRI RAJEEV HARIT, D.R. DATE OF HEARING : 10.07.2020 DATE OF PRONOUNCEMENT : 11.09.2020 O R D E R PER RAJESH KUMAR, ACCOUNTANT MEMBER: THE PRESENT APPEAL HAS BEEN PREFERRED BY THE ASSESSEE AGAINST THE ORDER DATED 31.10.2019 OF THE COMMISSIONER OF INCOME TAX (APPEALS) [HEREINAFTER REFERRED TO AS THE CIT(A)] RELEVANT TO ASSESSMENT YEAR 2010-11. 2. THE GROUNDS RAISED BY THE ASSESSEE ARE AS UNDER: 1. ADDITION U/S. 68. OF THE I.T. ACT OF RS. 7,80,00,000/- BY TREATING THE SHARE APPLICATION MONEY AS UNEXPLAINED CASH CREDIT JUST RELYING UPON THIRD PARTY STATEMENT EVEN THOUGH NO INCRIMINATING DOCUMENTS/MATERIALS WERE FOUND DURING THE COURSE OF SEARCH ACTION/PROCEEDINGS AND NOT EVEN RELYING UPON THE SEIZED MATERIALS. (A) ON THE FACTS AND THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED ASSESSING OFFICER HAS ERRED IN TREATING THE SHARE APPLICATION MONEY OF RS.7,80,00,000/- RECEIVED DURING THE YEAR AS UNEXPLAINED CASH CREDIT AND ADDED TO TOTAL INCOME UNDER SECTION 68 OF THE INCOME TAX ACT 1961 EVEN THOUGH NO INCRIMINATING ITA NO.7656/MUM/2019 M/S. ENSO HOLDING AND FINANCE PVT. LTD. 2 DOCUMENTS AND/OR MATERIAL OF ALLEGED CASH PAID TO THE SHARE APPLICANTS (INVESTOR COMPANIES) WERE FOUND DURING THE COURSE OF SEARCH ACTION/PROCEEDINGS. THE LEARNED ASSESSING OFFICER HAS JUST ACTED MECHANICALLY RELYING UPON THIRD PARTY STATEMENT AND REFERENCE MANY BY THE INVESTIGATION WING WITHOUT TAKING COGNIZANCE OF THE SEIZED MATERIAL IN HIS POSSESSION AND OTHER DETAILS AND DOCUMENTS SUBMITTED BY THE APPELLANT DURING THE ASSESSMENT PROCEEDING PERTAINING TO THE SHARE APPLICATION MONEY RECEIVED WHICH WERE SUFFICIENT ENOUGH TO ESTABLISH THE IDENTITY AND CAPACITY OF THE SHARE APPLICANTS AND GENUINENESS OF THE TRANSACTIONS. THE LEARNED ASSESSING OFFICER HAS ERRED IN REJECTING THE RETRACTION STATEMENT OF THE DIRECTOR OF THE GROUP MERELY ON THE GROUND THAT IT WAS SWORN AFTER 10 MONTHS OF THE ORIGINAL STATEMENT GIVEN BY HIM WITHOUT APPRECIATING THE REASONS FOR DELAY RECORDED IN THE AFFIDAVIT AND REACHED TO CONCLUSION JUST BECAUSE THE APPELLANT DID NOT PRODUCE THE DIRECTOR OF THE SHARE APPLICANT COMPANIES. (B)THE LEARNED CIT(APPEAL) HAS ERRED IN UPHOLDING THE ACTION OF THE AO IN MAKING ADDITION OF RS.7,80,00,000/- UNDER SECTION 68 OF THE INCOME TAX ACT, BEING THE SHARE APPLICATION MONEY RECEIVED EVEN WHEN THE IDENTITY, CREDIT WORTHINESS AND GENUINENESS OF THE TRANSACTION WERE EXPLAINED AND PROVED. (C) THE LEARNED ASSESSING OFFICER/CIT(APPEAL) ERRED IN LAW AND FACTS IN PASSING THE ASSESSMENT ORDERS SOLELY ON THE BASIS OF ASSUMPTION, PRESUMPTIONS, SURMISES AND CONJECTURES WITHOUT ANY COGENT MATERIAL OR EVIDENCE. THE REASON GIVEN ARE WRONG, CONTRARY TO THE FACTS OF THE CASE AND AGAINST THE PROVISIONS OF LAW, HENCE IT IS ILLEGAL AND CONTRARY TO THE PRINCIPAL OF NATURAL JUSTICE. IN VIEW OF THE FORGOING LAWS AND FACTS, THE ADDITION MADE IS UNWARRANTED AND NOT JUSTIFIED AND IT IS THEREFORE, PRAYED THAT THE SAME BE DELETED. 2. THE APPELLANT CRAVES LEAVE TO ADD, AMEND OR ALTER ALL OR ANY OF THE ABOVE GROUNDS OF APPEAL. 3. AT THE OUTSET, THE LD. COUNSEL OF THE ASSESSEE SUBMITTED THAT THE PRESENT CASE IS SQUARELY COVERED BY THE DECISION OF THE CO-ORDINATE BENCH OF THE TRIBUNAL IN ASSESSEES SISTER CONCERNS CASE IN I) DIWALI MERCANTILE (P) LTD. (FORMERLY KNOWN AS DIWALI CAPITAL AND FINANCE LTD.) ITA NO.2091/M/2018 AND ITA NO.3896/M/2017 A.Y. 2008-09 AND 2007-08 RESPECTIVELY VIDE ORDER DATED 10.01.2019. (II) ITO VS. DIWALI DEVELOPERS PVT. LTD. IN ITA NO.4723/M/2016 A.Y. 2012-13 ORDER DATED 13.04.2018 AND (III) DCIT VS. BLUE STOCK INVESTMENT PVT. LTD. ITA NO.3987/M/2017 AND ITA NO.2090/M/2018 FOR A.Y. 2007-08 AND 2008-09 DATED 10.01.2019 WHEREIN THE SIMILAR ISSUE HAS ITA NO.7656/MUM/2019 M/S. ENSO HOLDING AND FINANCE PVT. LTD. 3 BEEN DECIDED IN FAVOUR OF THE ASSESSEE ON MERITS. THE LD AR THEREFORE PRAYED THAT THE PRESENT APPEAL OF THE ASSESSEE MAY BE ALLOWED ON MERITS. ON THE LEGAL ISSUE THE LD AR SUBMITTED THAT THE ISSUE IS COVERED BY THE DECISIONS OF JURISDICTIONAL HIGH COURT IN FAVOUR OF THE ASSESSEE AS THERE IS NO INCRIMINATING MATERIALS FOUND DURING THE COURSE OF SEARCH AND IN CASE OF UNABATED ASSESSMENTS ON THE DATE OF SEARCH NO ADDITION CAN BE MADE UNLESS THE SAME IS BACKED BY MATERIALS/EVIDENCES FOUND AND SEIZED DURING THE COURSE OF SEARCH. 4. WE WOULD FIRST ADJUDICATE THE ISSUE ON MERITS WHICH IS CLAIMED TO BE COVERED BY THE DECISION OF THE COORDINATE BENCH IN ASSESSEES SISTER CONCERNS CASE. THE ISSUE RAISED IN GROUND NO.1B IS AGAINST THE CONFIRMATION OF ADDITION OF RS.7,80,00,000/- BY LD. CIT(A) AS MADE BY THE AO ON ACCOUNT OF SHARE APPLICATION MONEY BEING UNEXPLAINED CASH CREDIT BY RELYING UPON THE THIRD PARTY STATEMENT DESPITE THERE BEING NO INCRIMINATING DOCUMENT/MATERIAL FOUND IN THE COURSE OF SEARCH AND NOT REFERRED WHILE FRAMING THE ASSESSMENT. 5. THE FACTS IN BRIEF ARE THAT THE ASSESSEE IS A PRIVATE LIMITED COMPANY INCORPORATED ON 07.12.2009 REGISTERED WITH THE REGISTRAR OF THE COMPANIES, MUMBAI, MAHARASHTRA, UNDER THE COMPANIES ACT, 1956. THE ASSESSEE COMPANY IS ENGAGED IN THE BUSINESS OF INVESTMENT AND FINANCE AND ADVANCING OF LOANS, ADVANCES AND MAKING INVESTMENTS. THE ASSESSEE COMPANY HAD FILED ITS RETURN OF INCOME ON 21.09.2010 DECLARING TOTAL INCOME OF RS.81,985/-. THE RETURN WAS PROCESSED U/S 143(1) OF THE ACT 1961 ACCEPTING THE RETURNED INCOME. THE ASSESSEE COMPANYS CASE WAS THEN SELECTED FOR SCRUTINY PROCEEDINGS. DURING THE ITA NO.7656/MUM/2019 M/S. ENSO HOLDING AND FINANCE PVT. LTD. 4 COURSE OF THE ASSESSMENT PROCEEDINGS, THE ASSESSEE HAD FURNISHED ALL THE INFORMATION ASKED FOR BY THE LD. ASSESSING OFFICER FOR VERIFICATION OF SHARE APPLICATION MONEY RECEIVED DURING THE YEAR. THEN ASSESSMENT U/S 143(3) WAS COMPLTED ON 29.11.2012 DETERMINING INCOME AT RS.81,990/-. THEREAFTER, A SEARCH ACTION WAS CONDUCTED UNDER SECTION 132 OF THE ACT ON 05.11.2014 AT THE RESIDENTIAL AND BUSINESS PREMISES OF VARDHMAN GROUP. THE CASE WAS THEN CENTRALIZED WITH DCIT CC2(3), MUMBAI ON 26.08.2015 AND NOTICE UNDER SECTION 153A WAS ISSUED. IN RESPONSE TO NOTICE UNDER SECTION 153A OF THE ACT, THE ASSESSEE FILED RETURN OF INCOME AND NOTICE UNDER SECTION 143(2) OF THE ACT WAS ISSUED. SUBSEQUENTLY THE CASE WAS CENTRALIZED WITH DCIT CC2(2), MUMBAI. SINCE NOTICE UNDER SECTION 153A OF THE ACT WAS ISSUED PRIOR TO CENTRALIZATION, THE NOTICE WAS VOID AB INITIO WHICH WAS INTIMATED TO ASSESSEE THROUGH LETTER DATED 09.09.2016. THEREAFTER A FRESH NOTICE UNDER SECTION 153A OF THE ACT WAS ISSUED ON 09.09.2016 IN RESPONSE TO WHICH THE ASSESSEE FILED LETTER DATED 14.09.2016 REQUESTING THE AO TO TREAT THE RETURN FILED ON 09.10.2015 AS RETURN IN RESPONSE TO NOTICE UNDER SECTION 153A. A FRESH NOTICE DATED 14.09.2016 UNDER SECTION 143(2) WAS ALSO ISSUED TO THE ASSESSEE. THEREAFTER, NOTICES UNDER SECTION 142(1) OF THE ACT WAS ISSUED AND IN COMPLIANCE THE AUTHORIZED REPRESENTATIVE ATTENDED THE PROCEEDINGS FROM TIME TO TIME AND SUBMITTED NECESSARY DETAILS AS REQUIRED BY THE AO. THE ASSESSEE FURTHER STATES THAT ALL RELEVANT DOCUMENTS RELATING TO SHARE APPLICATION MONEY WHICH WERE SEIZED DURING THE SEARCH ACTION WERE ALREADY IN THE POSSESSION OF THE LD. ASSESSING OFFICER. THE ASSESSEE THROUGH A COMMUNICATION HAD SUBMITTED TO THE LD. AO ALL ITA NO.7656/MUM/2019 M/S. ENSO HOLDING AND FINANCE PVT. LTD. 5 DOCUMENTS TO PROVE THE IDENTITY, CAPACITY AND CREDITWORTHINESS OF THE INVESTORS SUCH AS NAMES AND ADDRESSES OF THE SHARE APPLICANTS, PAN, COPIES OF BANK STATEMENTS OF THE ASSESSEE, COPIES OF AUDITED BALANCE SHEETS AND PROFIT & LOSS ACCOUNTS OF THE SHARE APPLICANTS, COPIES OF SHARE ALLOTMENT LETTERS, COPIES OF THE SHARE CERTIFICATES, COMPANY MASTER DATA, COPIES OF BANK STATEMENTS OF THE INVESTORS EVIDENCING THE PAYMENTS MADE TO THE ASSESSEE AND COPY OF FORM NO.2 FILED WITH ROC ETC. THE ASSESSMENT U/S. 143 (3) R.W.S 153A OF THE ACT WAS COMPLETED ON 22.12.2016 DETERMINING TOTAL INCOME AT RS.7,80,81,990/- AFTER MAKING THE ADDITION OF RS.7,80,00,000/- U/S. 68 OF THE INCOME TAX ACT, 1961, TOWARDS THE SHARE APPLICATION MONEY. DURING THE YEAR UNDER CONSIDERATION, THE ASSESSEE HAD RECEIVED EQUITY SHARE APPLICATION MONEY FROM THE FOLLOWING INVESTOR COMPANIES: SR. NO. NAME OF THE APPLICANT PAN NO. HO. OF SHARES ALLOTTED MODE OF RECEIPT TOTAL PAYMENT RECEIVED SHARE CAP @ RS. 10/- EACH SHARE PREM (A] RS. 290/- EACH SHARE CAPITAL OF INVESTOR COMPANIES 1 SIDH HOUSING DEVELOPMENT CO. LTD. AAKCS6606H 20,000 CHEQUE 6,000,000 200,000 5,800.000 99,999,700 2 OLYMPUS VISION PVT LTD AAACO3898H 20,000 CHEQUE 6,000,000 200,000 5,800,000 5,100,000 3 OSHIN INVESTMENTS& FINANCE PVT LTD AAACO9051G 30,000 CHEQUE 9,000,000 300,000 8.700,000 10,000,000 4 GYANESHWAR TRADING & FINANCE CO. LTD. AACCG7998L 30,000 CHEQUE 9,000,000 300,000 8,700,000 99,999,700 5 ARTILLEGENCE BIO-INNOVATIONS LTD. AAACI7359F 30,000 CHEQUE 9,000,000 300,000 8,700,000 73,232,100 6 STOCKNET INTERNATIONAL LTD AACCK3597 M 25,000 CHEQUE 7,500,000 250,000 7,250,000 55,003,500 7 ISPAT SHEETS LTD AAECS8494F 20,000 CHEQUE 6,000,000 200,000 5,800,000 35,000,000 8 NOVELTY TRADERS LTD AABCN8817E 20,000 CHEQUE 6,000,000 200,000 5,800,000 39,752,370 ITA NO.7656/MUM/2019 M/S. ENSO HOLDING AND FINANCE PVT. LTD. 6 9 SHAKTI ISPAT PRODUCTS PVT LTD AAGCS8347D 30,000 CHEQUE 9,000,000 300,000 8, 700, 000 21,000,000 10 SHIVLAXRNI EXPORT S LTD AADCS6058 E 20,000 CHEQUE 6,000,000 200,0000 5,800,000 6,450,000 1 1 V;MF,IUIR