Divine Multimedia (India) Ltd., Vadodara V. The Dy.CIT, Circle-1(1), Vadodara

ITA 805/AHD/2016

• Counselvise Citation: [2022] 106 COUNSELVISE.COM (IT) 8848 (ITAT-AHMEDABAD)
• Duration Of Justice: 6 year(s) 5 month(s) 8 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-09-2022
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: C
• Assessment Year: 2011-2012
• Appeal Filed On: 31-03-2016
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Keywords: Additional evidence; Capital expenditure; Set aside
• Section: 68; 271(1)(c); 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD “C” BENCH Before: Shri Waseem Ahmed, Accountant Member And Shri T.R. Senthil Kumar, Judicial Member Divine Multimedia (India) Ltd., 102, Panorama Complex, R.C. Dutt Road, Vadodara-390007 PAN: AAACG7700L (Appellant) Vs Dy. Commissioner of Income-tax, Circle-1(1), Vadodara (Respondent) Appellant by : Shri M.K. Patel, A.R. Respondent by : Shri A.P. Singh, CIT/D.R. Date of hearing : 18-07-2022 Date of pronouncement : 09-09-2022 आदेश/ORDER PER : T.R. SENTHIL KUMAR, JUDICIAL MEMBER:- The present appeal has been filed by the Assessee against the order dated 19.01.2016 passed by the Commissioner of Income Tax (Appeals)-1, Vadodara, as against the Assessment order passed under section 143(3) of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act’) relating to the Assessment Year (A.Y) 2011- 12. ITA No. 805/Ahd/2016 Assessment Year 2011-12 I.T.A No. 805/Ahd/2016 A.Y. 2011-12 Page No Divine Multimedia (India) Ltd. vs. DCIT 2 2. The brief facts of the case is that the assessee is engaged in the business of Motion Picture Productions and Trading of Goods & Trading in Software. For the Assessment Year 2011-12, the assessee filed its Return of Income on 29.09.2011 declaring total income of Rs. 19,60,311/-. The case was taken up for scrutiny assessment and assessment was completed making various disallowances. 2.1. We are concerned only with the addition made u/s. 68 of the Act on the Share Capital of Rs.1,40,20,000/- and Share Premium thereon of Rs. 18,22,60,000/- The assessee was called vide questionnaire dated 20.12.2012 to furnish details of share allotment during the Assessment Year 2011-12 with regard to the name, address, PAN, Confirmation, Return of Income and Bank Statement of the share subscribers to whom shares were allotted. The assessee was asked to provide a copy of resolution sanctioning issue of shares at premium. The assessee company did not produce the details and sought repeated adjournments on 27.12.2013, 06.01.2014 and 10.01.2014. On 17.01.2014, the assessee submitted 44 names, address, number of shares allotted and total amount received from the subscribers but failed to furnish their PAN, confirmation, Return of Income and Bank Statement. The assessee was requested to produce the balance details. 2.2. On 19.03.2014, the assessee company filed its reply which contained consent letter of top ten subscribers. The consent letters also carrying the earlier name of the assessee’s company namely I.T.A No. 805/Ahd/2016 A.Y. 2011-12 Page No Divine Multimedia (India) Ltd. vs. DCIT 3 Kaleiodoscope Films Ltd. and the letters are dated 02.11.2010 and 30.11.2010. The assessee company however could not provide Identify Proof, copy of the Return of Income, Bank Statement through which the investment were being made by thedr shareholders. Therefore the last opportunity was given on 26.03.2014. On the request of the assessee, case was adjourned on 28.08.2014, wherein the assessee submitted Income Tax Return acknowledgement number relating to six shareholders only. As the assessee has not provided the details called for and failed to proof the identity of the creditor, capacity to invest the money and also genuineness of the transaction. Therefore A.O. added the sum of Rs. 19,62,80,000/- u/s.68 of the Act and demanded taxes thereon. 3. Aggrieved against this assessment order, assessee filed an appeal before the Ld. CIT(A)-4, Vadodara. The assessee made submission before the Ld. CIT(A) and the same was forwarded to the Assessing Officer for his comments. The A.O. submitted that the four conditions prescribed under Rule 46A does not arise in the present case. In spite of sufficient opportunities given to the assessee, the assessee only furnished incomplete details and thus the assessee failed to produce the details before the assessing officer. Therefore requested not to entertain the additional evidences, during the appellate proceedings. 3.1. The assessee vide its rejoinder submitted that the shareholders were investors of the assessee company, no such details were collected by the assessee at the time of receipt of money. The I.T.A No. 805/Ahd/2016 A.Y. 2011-12 Page No Divine Multimedia (India) Ltd. vs. DCIT 4 assessee could obtain the copies of ITR in respect of six shareholders till the completion of assessment. The assessee also submitted copies of Board Resolutions and copy of cheques and addresses of the shareholders. Now the information submitted in the appellate proceedings are more of a clarificatory in nature, going to further substantiate the genuineness of the share application money received by the assessee and relied upon various case laws. The ld. CIT(A) rejected the above claim of the assessee and relying upon jurisdictional High Court judgment in the case of Fairdeal Filaments Ltd. vs. CIT 302 ITR 173. The Ld. CIT(A) held as follows: 5.5.4. The facts of the present case are identical to the fact of the mentioned decision in the case of Fairdeal Filaments Ltd. Accordingly, the additional evidences and explanations submitted by the appellant are not admitted. 5.5.5. Thus, the genuineness of these share application amounts can be determined only on the basis of evidences which were already before the AO during the course of the assessment proceedings. A perusal of the assessment order as discussed above shows that the appellant had only furnished names and address of the share applicants and by such details the appellant cannot be said to have been discharged the onus laid down by it by the provision of section 68 of the IT Act, 1961. Besides this, the only other detail furnished by the appellant was vide its letter dated 19.03.2014, vide which the appellant had submitted copies of consent letter of top 10 subscribers subscribing to its equity share to be issued on preferential basis during the year under consideration and had claimed that such letter covers full details of subscribers, copy of cheque etc. This list of top 10 subscribers has been reproduced above. As observed by the AO, along with this letter the appellant had not provided any identity proof, copy of return of income or bank statements through which the said money was received. On being show caused by the AO vide order sheet noting dated 19.03.2014, the appellant provided copies of acknowledgement of returns filed by six of the applicants which have been reproduced in sub Para 7 of Para 7 of the assessment order. Such details were also furnished on 28.3.2014 i.e. at the fag end of the assessment proceedings to preclude any further enquiry regarding these persons. A perusal of this list shows that the income of these persons was in the range of Rs. 1,65,764/- to Rs. 2,60,109/- only, whereas the amounts of share application money paid by such persons were ranging from Rs. 56 lakhs to Rs. 84 lakhs. Thus, evidently, the creditworthiness of these persons was not sufficient to subscribe to such high share capital in the appellant company. Besides these persons, in case of other 7 persons the appellant has provided only the copies of consent letter I.T.A No. 805/Ahd/2016 A.Y. 2011-12 Page No Divine Multimedia (India) Ltd. vs. DCIT 5 and cheques through which the payment had been made. Again, nothing was provided to prove the identity of these persons and the genuineness of the transactions made with them. So far as the balance alleged share subscribers are concerned, no detail except for their address and name was provided by the appellant before the AO. Thus, it is evident that the appellant has failed to prove the identity and creditworthiness of the share subscribers, and the genuineness of the transactions entered with them. 5.5.6. In the last submission made, it has been claimed by the appellant company that it is a widely held company and hence, confirmations were not obtained at the time of obtaining share application money. But, surprisingly, no confirmation has been obtained by the appellant during the course of the assessment proceedings or even after the completion of assessment proceedings. The consent letters are all dated before the period during which the assessment was going on. Hence, evidently the submissions made by the appellant are contradictory and incorrect. Moreover, the share issued by the appellant is on preferential basis and no evidence has been submitted to show that such shares were offered to public at large. The consent letter itself shows that these alleged share holders were contacted by the appellant company directly for the purposes of subscribing to such preferential shares. The study of the consent letters of 10 persons submitted before, the AO shows that several of them were not having any d-mat account though they have been shown to have subscribed to huge amounts of shares. The very fact that these shares were not issued by means of public offer shows that the promoters and the directors of the appellant company must know the alleged shares subscribers personally. Despite this, the appellant has failed to prove the identity and creditworthiness of such alleged share holders and the genuineness of transactions with them. Hence, the addition made by the AO as per the provisions of section 68 of the IT Act is correct. Accordingly, the addition made by the AO is upheld and this ground of appeal is dismissed. 4. Aggrieved against the same, the assessee is in appeal before us raising the following Grounds of Appeal: 1. The learned Commissioner of Income Tax (Appeals) erred in law and on facts has confirmed the additions of Rs.14,28,490/- made on account of the stamp duty and registration fees treating the same as capital expenditure. 2. The learned Commissioner of Income Tax (Appeals) erred in law and on facts has confirmed the additions of Rs.19,62,80,000/- on account of the alleged non-genuine share application and share premium credited to books of account during the year under consideration made by the Assessing Officer by invoking the provisions of section 68 of the IT Act without appreciating the fact that the appellant is a widely held company and the money was received through proper banking channels. 3. The learned Commissioner of Income Tax (Appeals) erred in law and on facts has not adjudicated the ground relating to initiation of penalty proceedings under section I.T.A No. 805/Ahd/2016 A.Y. 2011-12 Page No Divine Multimedia (India) Ltd. vs. DCIT 6 271(l)(c) of the Income Tax Act, 1961 for the alleged concealment and/or furnishing of inaccurate particulars of income. 4. The learned Commissioner of Income Tax (Appeals) has erred in law and on facts in confirming the charging of interest under section 234B, 234C and 234D of the Income Tax Act, 1961. 5. The appellant craves leave to add to, alter, delete or modify any of the grounds of appeal either before or at the time of hearing of this appeal. 4.1. And also raising the Additional Ground of Appeal: 1. That on facts and in law, the learned CIT(A) has grievously erred in not admitting the additional evidence filed in terms of Rule 46A of the IT Rules, even after calling for a Remand Report from the AO. 2. That on facts, and in law, the learned CIT(A) has grievously erred in relying upon inapplicable case law, as the facts of appellant's case are totally different. 4.2. Ld. Counsel Shri M.K. Patel appearing for the assessee during the course of the hearing submitted that he is not pressing ground no. 1, hence ground no. 1 is dismissed. 4.3. Ground no. 2 is the addition made u/s. 68 and share application money and premium thereon and additional ground namely Ld. CIT(A) not admitting additional evidence while in term of Rule 46A of the I.T. Rules. Ld. Counsel filed two Paper Books running to 310 pages wherein reply filed by the assessee before the Assessing Officer and submissions filed before the Ld. CIT(A). The Ld. Counsel reiterating the same arguments submitted the assessee could not get the entire details before completion of assessment. Whatever details available with the assessee were submitted and remaining details collected from the shareholders were being filed as an additional documents invoking Rule 46A, which are liable to be admitted by the Ld. CIT(A). However the Ld. I.T.A No. 805/Ahd/2016 A.Y. 2011-12 Page No Divine Multimedia (India) Ltd. vs. DCIT 7 CIT(A) has not admitted the same. Therefore requested to set aside the matter to the file of the Assessing Officer for fresh consideration on the additional evidences. 5. Per contra, the Ld. CIT/DR Mr. A.P. Singh appearing for the Revenue supported the order of the lower authorities and submitted Rule 46A cannot invoked. Since Rule 46A can be invoked if (a) the assessing officer has refused to admit any evidence or (b) the assessee was prevented by sufficient cause from producing the evidence which was called upon to produce by the Assessing Officer. The assessee submitted piecemeal information which is not sufficient as requested by the Assessing Officer. The assessee also has not filed any evidence regarding the efforts made by it for the purpose of collection of such other details from the shareholders. The consent letter given by the shareholders is only giving details about the subscriber of number of shares and copies of cheques which are all dated November 2010, whereas the Assessing Officer issued the first questionnaire on 20.12.2012 and final opportunity given on 28.03.2014. However the assessee failed to provide details. Thus the assessee was not prevented from producing the details before the Assessing Officer. There is no explanation given by the assessee, why the above documents not produced before the Assessing Officer before passing the assessment order on 30.03.2014, in spite of seven opportunities given to the assessee. Further the case is squarely covered by Hon’ble Jurisdictional High Court in the case of Fairdeal Filaments Pvt. Ltd. (cited supra) there also the Hon’ble High Court has dealt I.T.A No. 805/Ahd/2016 A.Y. 2011-12 Page No Divine Multimedia (India) Ltd. vs. DCIT 8 with an addition made on account of unexplained share capital claimed by the assessee. Thus the Ld. CIT(A) has properly rejected the additional documents and therefore the finding of the lower authorities does not require any interference and the appeal filed by the assessee is liable to be dismissed. 6. We have given our thoughtful consideration and perused the materials available on record including the Paper Books filed by the assessee. As rightly pointed out by the Ld. CIT/DR, the first show cause notice on 20.12.2012 was issued by the A.O. asking for the details of name, address, PAN, Confirmation, Return of Income and Bank Statement of the share subscribers, to whom the assessee company shares were allotted. The assessee sought for adjournment on various occasions and produced a piecemeal, not the relevant information as called for by the Assessing Officer. In the first occasion, the assessee filed only the details of the shareholders name, address, number of shares and amount of investment, but without furnishing PAN number, copies of Return of Income, confirmation letters and bank statement of the share subscribers. In spite of seven opportunities given to the assessee, the assessee could not produce the details before the Assessing Officer. During the appellate proceedings, the assessee filed as additional documents namely the confirmation letters and cheque amount involved and PAN No. details. The confirmation letters are all dated November 2010. There is no details about the folio number of the shares allotted to the shareholders. Further study of the consent letters of 10 shareholders submitted before the A.O. I.T.A No. 805/Ahd/2016 A.Y. 2011-12 Page No Divine Multimedia (India) Ltd. vs. DCIT 9 shows that several of them were not having any d-mat account though they have been shown to have subscribed to huge amounts of shares. The very fact that these shares were not issued by means of public offer shows that the promoters and the directors of the assessee company must know the alleged shares subscribers personally. Despite thus the assessee failed to proof of identity, creditworthiness and genuineness of the transaction of the shareholders with the assesse company. Thus it clearly shows that the assessee has not produced the available documents with it before passing the assessment orders and the same is produced which is six years old before the Ld. CIT(A) as additional documents which cannot be entertained. Further perusal of the list of investors and their returned income was between the range of Rs. 1,65,764/- to Rs. 2,60,109/- but they invested ranging from Rs. 56 lakhs to Rs. 84 lakhs. Thus the creditworthiness of these investors are not proved beyond doubt. This view of ours is supported by the jurisdictional High Court in the case of Fairdeal Filaments Pvt. Ltd. relied by the ld. CIT(A) in his order as follows: Held that if both the appellate authorities had concurrently came to the conclusion that sufficient opportunities were granted to the assessee, it was not possible to go behind the said findings which were primarily based on appreciation of evidence on record. So far as admitting additional evidence under rule 29 of the Income-tax (Appellate Tribunal) Rules was concerned the Tribunal had come to the conclusion that the benefit under the said rule was not available to a person who was negligent, non-co-operative and recalcitrant; and the Tribunal was not required to give another chance or opportunity to a person to cover up its own lapses. Applying the tests mentioned above to the facts of the case, it was to be held that the Tribunal had approached the matter correctly and once the Tribunal had exercised discretion legally in accordance with law it was not possible to come to the conclusion that in the facts and circumstances of the case, such exercise of discretion was either coloured by irrelevant considerations or was capricious or arbitrary. I.T.A No. 805/Ahd/2016 A.Y. 2011-12 Page No Divine Multimedia (India) Ltd. vs. DCIT 10 7. Respectfully following the ratio of the above judgment, we have no hesitation in confirming the orders of the lower authorities and the ground no. 2 and additional ground raised by the assessee has no merits and the same are dismissed. 7.1. Ground Nos. 3 & 4 raised by the assessee are initiation of penalty proceedings u/s. 271(1)(c) and charging of interest u/s. 234B, 234C, 234D of the Act, the above grounds are in consequential in nature. As ground no. 2 and additional ground are already rejected, following the same, Ground Nos. 3 & 4 are also has no merits and the same is dismissed. 8. In the result, appeal filed by the assessee is hereby dismissed. Order pronounced in the open court on 09-09-2022 Sd/- Sd/- (WASEEM AHMED) (T.R. SENTHIL KUMAR) ACCOUNTANT MEMBER True Copy JUDICIAL MEMBER Ahmedabad : Dated 09/09/2022 आदेश कȧ ĤǓतͧलͪप अĒेͪषत / Copy of Order Forwarded to:- 1. Assessee 2. Revenue 3. Concerned CIT 4. CIT (A) 5. DR, ITAT, Ahmedabad 6. Guard file. By order/आदेश से, उप/सहायक पंजीकार आयकर अपीलȣय अͬधकरण, अहमदाबाद