M/s. Tirupati Sarees Pvt. Ltd., Surat V. The ACIT, Range-4, Surat

ITA 794/AHD/2016

• Counselvise Citation: [2021] 109 COUNSELVISE.COM (IT) 4461 (ITAT-SURAT)
• Duration Of Justice: 4 year(s) 9 month(s) 18 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-01-2021
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: DB
• Assessment Year: 2011-2012
• Appeal Filed On: 31-03-2016
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: ANUPAMA SINGLA
• Keywords: Unexplained cash credit; Bogus Share capital
• Section: 68

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL SURAT BENCH, SURAT BEFORE SHRI PAWAN SINGH, HON'BLE JUDICIAL MEMBER AND DR. ARJUN LAL SAINI, HON'BLE ACCOUNTANT MEMBER (VIRTUAL HEARING) . . ./ I.T.A NO.794/AHD/2016 [ [ / ASSESSMENT YEAR: 2011-12 M/S.TIRUPATI SAREES PVT. LTD., A-2007, LIFT NO. 19, UPPER GROUND FLOOR, RAGHUKUL TEXTILE MARKET, RING ROAD, SURAT 395002. [PAN: AADCT 3839 J] VS . THE ASST. COMMISSIONER OF INCOME TAX, RANGE -4, SURAT. / APPELLANT /RESPONDENT [ /ASSESSEE BY NONE. /REVENUE BY SMT. ANUPAMA SINGLA SR. DR / DATE OF HEARING: 1 9 . 01 .20 2 1 /PRONOUNCEMENT ON: 19 . 01 .20 2 1 /O R D E R PER PAWAN SINGH, JUDICIAL MEMBER: 1. THIS APPEAL BY ASSESSEE IS DIRECTED AGAINST THE ORDER OF LD.COMMISSIONER OF INCOME TAX(APPEALS)-II, SURAT DATED 02.02.2016 FOR ASSESSMENT YEAR (AY) 2011-12. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL: 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AS WELL AS LAW ON THE SUBJECT, THE LEARNED CIT(A) HAS ERRED IN CONFIRMING THE ACTION OF ASSESSING OFFICER IN MAKING ADDITION OF RS.80,00,000/- ON ACCOUNT OF BOGUS SHARE CAPITAL & SHARE PREMIUM U/S 68 OF THE I.T.ACT. TIRUPATI SAREES PVT. LTD. VS. ACIT, RANGE-4, SURAT/ ITA NO.794/AHD/2016 FOR A.Y. 2011-12 2 2. IT IS THEREFORE PRAYED ADDITION MADE BY ASSESSING OFFICER AND CONFIRMED BY LEARNED COMMISSION OF INCOME-TAX (APPEALS) MAY PLEASE BE DELETED. 3. APPELLANT CRAVES LEAVE TO ADD, ALTER OR DELETE ANY GROUND(S) EITHER BEFORE OR IN THE COURSE OF HEARING OF THE APPEAL. 2. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE IS A COMPANY ENGAGED IN BUSINESS OF TRADING OF ART SILK CLOTH INCLUDING PROCESSED AND MANUFACTURING ON JOB WORK BASIS OF VARIOUS PROCESSORS. THE ASSESSEE FILED ITS RETURN OF INCOME FOR ASSESSMENT YEAR 2011-12 ON20.09.2011 DECLARING INCOME OF RS.30,26,610/-. THE CASE WAS SELECTED FOR SCRUTINY. THE LD.ASSESSING OFFICER ON PERUSAL OF BALANCE SHEET OF ASSESSEE NOTED THAT DURING THE YEAR, THE SHARE CAPITAL AND SHARE PREMIUM OF ASSESSEE HAS INCREASED FROM RS.51 LAKHS TO RS.3.27 CRORE COMPARATIVE TO LAST YEAR. THE ASSESSEE HAS SHOWN SHARE PREMIUM FROM VARIOUS FAMILY MEMBERS OF DIRECTORS AND OTHER PARTIES. ON FURTHER VERIFICATION, THE LD.ASSESSING OFFICER NOTED THAT OUT OF ALL SHAREHOLDERS, FOUR PARTIES ARE KOLKATA BASED FROM WHOM THE ASSESSEE HAS RECEIVED SHARE APPLICATION MONEY. THE LD.ASSESSING OFFICER IDENTIFIED THE FOLLOWING COMPANIES BASED ON KOLKATA: SR.NO. NAME & ADDRESS OF SHAREHOLDERS PAN AMOUNT OF SHARE CAPITAL SHARE PREMIUM 1 KUMKUM SUPPLIERS PVT. LTD, 127, N.S. ROAD, 1 ST FLOOR, AACCK5918Q 150000 2850000 TIRUPATI SAREES PVT. LTD. VS. ACIT, RANGE-4, SURAT/ ITA NO.794/AHD/2016 FOR A.Y. 2011-12 3 ROOMNO.8, KOLKATA 700 001. 2 GIRIGANGA SALES PVT. LTD, 127, N.S. ROAD, 1 ST FLOOR, ROOMNO.8, KOLKATA 700 001. AABCG0835D 100000 1900000 3 SANKAT MOCHAK MANAGEMENT PVT. LTD., 35, G.C. AVENUE, 2 ND FLOOR, KOLKATA 700 013. AAJCS4864J 75000 1425000 4 WELL WISHER VANIJYA PVT. LTD., 35, G.C. AVENUE, 2 ND FLOOR, KOLKATA 700 013. AAACW6156H 75000 1425000 TOTAL 4,00,000 76,00,000 3. IN ORDER TO VERIFY THE CREDITWORTHINESS OF THE PARTIES AND GENUINENESS OF TRANSACTION, THE LD.ASSESSING OFFICER ISSUED COMMISSION UNDER SECTION 131(1)(D) OF THE ACT TO INVESTIGATION WING OF DEPARTMENT AT KOLKATA VIDE ITS ORDER DATE 14.02.2014. THE DDIT, KOLKATA FURNISHED THE REPORT VIDE REPORT DATED 12.03.2014. IT WAS REPORTED IN THE REPORT THAT ENQUIRY WAS INITIATED AND SUMMONS WERE ISSUED TO KUMKUM SUPPLIERS PVT. LTD., GIRIGANGA SALES PVT. LTD., AT 127, N.S.ROAD, 1 ST FLOOR AND SANKAT MOCHAK MANGEMENT PVT. LTD., AT 35, G.C. AVENUE, 2 ND FLOOR, KOLKATA AND WELL WISHER VANIJYA PVT. LTD., 35, G.C. AVENUE, KOLKATA. SUMMONS COULD NOT BE SERVED AS THE INSPECTOR WHO WAS DEPUTED TO VERIFY THE EXISTENCE OF THE COMPANY COULD NOT FIND OUT THOSE COMPANIES AT THE GIVEN ADDRESS. THE REPORT OF DDIT INVESTIGATION, KOLKATA WAS CONFRONTED WITH THE ASSESSEE, THE ASSESSEE FILED ITS REPLY ON 18.03.2014 AND FURNISHED THE COPY OF MEMORANDUM OF ASSOCIATION, BALANCE SHEET, SHARE APPLICATION TIRUPATI SAREES PVT. LTD. VS. ACIT, RANGE-4, SURAT/ ITA NO.794/AHD/2016 FOR A.Y. 2011-12 4 FORMS, COPY OF BANK STATEMENT IN RESPECT OF ALL INVESTOR COMPANIES OF KOLKATA. ON FURTHER SHOW CAUSE AS TO WHY INVESTMENT MADE BY THESE COMPANIES SHOULD NOT BE TREATED AS UNEXPLAINED CASH CREDIT UNDER SECTION 68 OF THE ACT. THE ASSESSEE REITERATED THAT THEY HAVE ALREADY FURNISHED SUFFICIENT EVIDENCES AND THEY HAVE NO CONTROL OVER THE INTERNAL AFFAIRS OF INVESTOR COMPANY. THE EXPLANATIONS FURNISHED BY ASSESSEE WAS NOT ACCEPTED BY ASSESSING OFFICER. THE ASSESSING OFFICER ON THE BASIS OF REPORT FURNISHED BY DDIT, KOLKATA THAT ALL THESE FOUR INVESTORS HAVE NO REAL BUSINESS OR FIXED ASSET, CONCLUDED THAT ALL INVESTOR COMPANIES ARE NOT CREDITWORTHY AND THEIR SOURCE OF INVESTMENT REMAINED UNIDENTIFIED. THE ASSESSING OFFICER, ACCORDINGLY MADE ADDITION OF RS.80 LAKHS UNDER SECTION 68 OF THE ACT. 4. ON APPEAL BEFORE THE LD.CIT(A), THE ACTION OF LD.ASSESSING OFFICER WAS CONFIRMED. THUS, FURTHER AGGRIEVED, THE ASSESSEE WAS FILED PRESENT APPLICATION BEFORE THIS TRIBUNAL. 5. THIS APPEAL CAME UP HEARING ON 01.10.2020. SHRI RASESH SHAH CA APPEARED ON BEHALF OF THE ASSESSEE AND SUBMITTED IN WRITING THAT HE IS WITHDRAWING HIS AUTHORITY LETTER FROM THE CASE AND THAT HE HAS NO OBJECTION IF THE CASE IS CONDUCTED TIRUPATI SAREES PVT. LTD. VS. ACIT, RANGE-4, SURAT/ ITA NO.794/AHD/2016 FOR A.Y. 2011-12 5 SOME OTHER COUNSEL. ON THE STATEMENT OF SHRI RASESH SHAH- CA, WE DIRECTED HIM TO INFORM THE ASSESSEE IN WRITING ABOUT HIS WITHDRAWAL FROM THE PROCEEDINGS. SIMULTANEOUSLY, WE DIRECTED THE REGISTRY OF THE TRIBUNAL TO ISSUE NOTICE THROUGH REGISTERED POST AD FOR FIXING FOR HEARING ON APPEAL ON 23.11.2020. ON 23.11.2020, NONE APPEARED ON BEHALF OF THE ASSESSEE DESPITE SERVICE OF NOTICE THROUGH RPAD. WE AGAIN DIRECTED REGISTRY OF THE TRIBUNAL TO SERVE THE ASSESSEE FOR NOTICE OF HEARING ON 19.01.2021. THE NOTICE FOR HEARING FIXED ON 19.01.2021 WAS SENT THROUGH REGISTERED POST RPAD ON 03.12.2020, HOWEVER, DESPITE THE SERVICE OF NOTICE, NEITHER ANYONE FROM ASSESSEE COMPANY NOR ANY REPRESENTATIVE APPEARED NOR FILED ANY ADJOURNMENT APPLICATION. THEREFORE, WE LEFT NO OPTION EXCEPT TO DECIDE THE APPEAL AFTER HEARING THE SUBMISSION OF LD.DEPARTMETNAL REPRESENTATIVE FOR THE REVENUE AND ON THE BASIS OF MATERIAL AVAILABLE ON RECORD. 6. THE LD.DEARTMENTAL REPRESENTATIVE FOR THE REVENUE SUPPORTED THE ORDER OF LOWER AUTHORITIES. THE LD.DEPARTMENTAL REPRESENTATIVE FURTHER SUBMITS THAT DURING THE ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER NOTED THAT THE ASSESSEE HAS RECEIVED SHARE APPLICATION MONEY FROM CERTAIN COMPANIES TIRUPATI SAREES PVT. LTD. VS. ACIT, RANGE-4, SURAT/ ITA NO.794/AHD/2016 FOR A.Y. 2011-12 6 WHICH WERE BASED IN KOLKATA. THE LD.ASSESSING OFFICER, IN ORDER TO VERIFY THE TRANSACTION ISSUED COMMISSION UNDER SECTION 131(1)(D) OF THE ACT TO DDIT, KOLKATA. THE DDIT, KOLKATA CONDUCTED INVESTIGATION AND REPORTED THAT NO SUCH COMPANIES ARE AVAILABLE ON THE GIVEN ADDRESS. THE ASSESSEE WAS CONFRONTED WITH THE REPORT OF COMMISSION. THE ASSESSEE DURING THE ASSESSMENT COULD NOT SUBSTANTIATE THE GENUINENESS OF TRANSACTION AND CREDITWORTHINESS OF INVESTOR. THE LD.ASSESSING OFFICER, THUS MADE ADDITION UNDER SECTION 68 OF THE ACT. BEFORE LD.CIT(A), FURTHER THE ASSESSEE WAS FURTHER ASKED TO FURNISH THE WORKING OF VALUATION OF SHARES. THE ASSESSE IN ITS REPLY SUBMITTED THAT THERE WAS NOT MECHANISM PRESCRIBED FOR CALCULATION OF PREMIUM ON SHARE OF PRIVATE LIMITED COMPANIES DURING THE A.Y. 2011-12. IT WAS ENTIRELY A MATTER BETWEEN THE ASSESSEE AND SHARE SUBSCRIBER COMPANIES. THE SHARE PREMIUM WAS FIXED ON THE BASIS OF PAST PERFORMANCE AND GOODWILL OF THE ASSESSEE. THE EXPLANATION OF THE ASSESSEE WAS NOT ACCEPTED BY LD.CIT(A). THE LD.CIT(A) IN HIS ORDER CONFIRMED ACTION OF LD.ASSESSING OFFICER IN A VERY DETAILED AND REASONED ORDER. THE LD.DEPARTMENTAL REPRESENTATIVE, ACCORDINGLY PRAYED THAT ORDER OF THE LD.CIT(A) MAY BE CONFIRMED. TIRUPATI SAREES PVT. LTD. VS. ACIT, RANGE-4, SURAT/ ITA NO.794/AHD/2016 FOR A.Y. 2011-12 7 7. WE HAVE CONSIDERED THE SUBMISSION OF LD.DEPARTMENTAL REPRESENTATIVE FOR THE REVENUE AND PERUSED THE ORDER OF LOWER AUTHORITIES CAREFULLY. THE ASSESSING OFFICER MADE ADDITION BY TAKING VIEW THAT COMMISSION ISSUED BY HIM TO VERIFY THE CREDITWORTHINESS AND GENUINE OF TRANSACTION OF ASSESSEE WITH INVESTOR COMPANY. THE DDIT, INVESTIGATION KOLKATA FURNISHED THE REPORT AND REPORTED THAT AT THE GIVEN ADDRESS NO SUCH COMPANIES ARE AVAILABLE. THEREAFTER, THE ASSESSING OFFICER ISSUED DETAILED SHOW CAUSE NOTICE AS RECORDED IN PARA 4.4 OF THE ASSESSMENT ORDER. THE ASSESSEE WAS ASKED TO SUBSTANTIATE CREDIT WORTHINESS AND GENUINENESS OF TRANSACTION. THE ASSESSEE FILED ITS REPLY AS RECORDED IN PARA 4.5 OF THE ASSESSMENT ORDER. THE ASSESSEE IN ITS REPLY STATED THAT THEY HAVE DISCHARGED THEIR ONUS BY FURNISHING COPY OF MEMORANDUM OF ASSESSMENT, BALANCE SHEET, SHARE APPLICATION, COPY OF BANK STATEMENT REFLECTING THE TRANSACTION. IT WAS FURTHER STATED THAT ASSESSEE HAS NO CONTROL OVER THE INTERNAL AFFAIRS OF THE INVESTING COMPANY. THE ASSESSING OFFICER DID NOT FIND FAVOUR IN THE REPLY OF ASSESSEE AND TREATED THE ENTIRE SHARE APPLICATION MONEY INVESTED BY FOUR KOLKATA BASED COMPANIES AS UNEXPLAINED CASH CREDIT AND ACCORDINGLY TIRUPATI SAREES PVT. LTD. VS. ACIT, RANGE-4, SURAT/ ITA NO.794/AHD/2016 FOR A.Y. 2011-12 8 MADE ADDITION UNDER SECTION 68 OF THE ACT. THE LD.CIT(A) AFTER DETAILED DISCUSSION CONCLUDED THAT THE LD.ASSESSING OFFICER MADE EFFORT TO FIND OUT THE SO-CALLED SHARE APPLICATION COMPANIES. THE ASSESSEE COULD ONLY FILED THE CONFIRMATION AND ACKNOWLEDGMENT OF RETURN OF INCOME. THE INVESTOR COMPANIES ARE ONLY PAPER COMPANIES. THE ASSESSEE ON THE BASIS OF MERE SOME DOCUMENT CANNOT CLAIM THAT SHARE CAPITAL IS EXPLAINED WITHIN THE MEANING OF SECTION 68 OF THE ACT. IT WAS FURTHER CONCLUDED THAT THE ASSESSING OFFICER HAS BROUGHT SUFFICIENT MATERIAL TO PROVE THAT SHARE CAPITAL RECEIVED BY ASSESSEE REPRESENT ACCOMMODATION ENTRY ONLY. 8. WE HAVE NOTED THAT THE LOWER AUTHORITIES HAVE MADE ADDITION AFTER MAKING PROPER ENQUIRES AND GIVING FULL OPPORTUNITY TO ASSESSEE TO PROVE THE GENUINENESS OF TRANSACTION AND CREDIT WORTHINESS OF INVESTOR COMPANY. THE ASSESSEE FAILED TO PROVE THAT THE TRANSACTIONS OF SHARE APPLICATION MONEY IS GENUINE AND THE CREDITWORTHINESS OF INVESTOR. FURTHER, WE HAVE NOTED THAT THE PRESENT APPEAL WAS FILED IN 2016, TILL DATE NOT A SINGLE PIECE OF EVIDENCE IS PLACED ON RECORD TO PROVE THE IDENTITY, GENUINENESS OF TRANSACTION OF TRANSACTION AND CREDITWORTHINESS OF THE INVESTOR COMPANY. THE ASSESSEE WAS GIVEN A NUMBER OF OPPORTUNITIES TO REPRESENT THEIR CASES, BUT TIRUPATI SAREES PVT. LTD. VS. ACIT, RANGE-4, SURAT/ ITA NO.794/AHD/2016 FOR A.Y. 2011-12 9 THE ASSESSEE FAILED TO RESPOND AND HONOUR THE NOTICES ISSUED BY THIS TRIBUNAL. IN VIEW OF THE AFORESAID DISCUSSION, WE DO NOT FIND ANY MERIT IN THE GROUNDS OF APPEAL RAISED OF THE ASSESSEE, ACCORDINGLY, GROUNDS OF APPEAL RAISED BY ASSESSEE ARE DISMISSED. 9. IN THE RESULT, APPEAL OF THE ASSESSEE IS DISMISSED. ORDER ANNOUNCED AT THE TIME OF HEARING OF APPEAL ON 19 TH JANUARY 2021 IN THE VIRTUAL COURT HEARING. SD/- SD/- (DR.ARJUN LAL SAINI) (PAWAN SINGH) ( /ACCOUNTANT MEMBER) ( /JUDICIAL MEMBER) / SURAT, DATED : 19 TH JAN 2021 / #SGR COPY OF ORDER SENT TO- ASSESSEE/AO/PR. CIT/ CIT (A)/ ITAT (DR)/GUARD FILE OF ITAT. BY ORDER / / TRUE COPY / / ASSISTANT REGISTRAR, SURAT