M/S. B.R. GOYAL CONSTRUCTION PVT. LTD., Indore V. THE ITO 5(1), Indore

ITA 81/IND/2015

• Counselvise Citation: [2017] 130 COUNSELVISE.COM (IT) 5963 (ITAT-INDORE)
• Duration Of Justice: 1 year(s) 11 month(s) 10 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-01-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Assessment Year: 2010-2011
• Appeal Filed On: 09-02-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: MOHD JAVED
• Keywords: Bogus Share capital; Initiation of penalty proceedings
• Section: 143(3); 68

Judgement Text

B.R. GOYAL ITA NO. 81/IND/2015 1 , , IN THE INCOME TAX APPELLATE TRIBUNAL, INDORE BENCH, INDORE . . , . . , ' # BEFORE SHRI D.T. GARASIA, JUDICIAL MEMBER AND SHRI O.P. MEENA, ACCOUNTANT MEMBER $$%$& I.T.A. NO.81/IND/2015 ' ()'& ASSESSMENT YEAR: 2010-11 B.R. GOYAL CONSTRUCTION PVT. LTD INDORE PAN AACCB 8928K :: *& APPELLANT VS ITO 5(1) INDORE :: +,*& RESPONDENT '- . / ASSESSEE BY SHRI AJAY TULSIYAN /( . / REVENUE BY SHRI MOHD. JAVED 0 (1 . ' DATE OF HEARING 12.1.2017 2345) . ' DATE OF PRONOUNCEMENT 1 9 .1.2017 / O R D E R PER SHRI D.T. GARASIA, JM THIS APPEAL HAS BEEN FILED BY THE ASSESSEE AGAINST THE ORDER OF THE LEARNED CIT(A)-II, INDORE, DATED 31.10. 2014. B.R. GOYAL ITA NO. 81/IND/2015 2 2. THE SHORT FACTS OF THE CASE ARE THAT THE RETURN OF INCOME WAS FILED ON 15.10.210 DECLARING TOTAL INCOME O F RS.6,26,700/-. THE ASSESSEE IS ENGAGED IN THE BUSINE SS OF CIVIL CONSTRUCTION. DURING THE COURSE OF ASSESSMENT PROCEEDINGS IT WAS FOUND THAT THE ASSESSEE COMPANY HAS RECEIVED SHARE APPLICATION MONEY OF RS.35 LACS DURING THE YEAR FROM M/S DEBRAJ VINCOM PVT. LTD. OUT OF WHICH A SUM OF RS.3,50,000/- IS SHOWN AS SHARE CAPITAL AND A SUM OF RS. 31,50,000/- AS SECURITY PREMIUM. THE ASSESSEE COMPANY WAS ASKED TO ESTABLISH THE GENUINENESS OF SHARE APPLICATION MONEY AND SECURITY PREMIUM RECEIVED DURING THE YEAR ALONG WITH EVIDENCE IN SUPPORT OF THE CAPACITY , CREDIT WORTHINESS AND GENUINENESS OF THE TRANSACTION. THE ASSESSEE HAS SUBMITTED THAT THE ASSESSEE COMPANY STATED THAT THE COMPANY HAS ENTERED INTO AGREEMENT FOR CONSTRUCTION OF MULTI-STOREYED BUILDING OF 7200 SQ. FT., THE LAND OWNED BY TWO OWNERS. 80% OF THE SUPER BUILT UP AREA B.R. GOYAL ITA NO. 81/IND/2015 3 WAS TO BE RETAINED BY THE ASSESSEE AND 20% AREA WAS GIVEN TO LAND OWNER. THE ASSESSEE COMPANY HAS APPLIED FOR 70 00 EQUITY SHARES AND THE COMPANY HAS RECEIVED SHARE APPLICATION MONEY. RS. 10,000/- WAS PAID BY CHEQUE, RS. 25 LACS WAS PAID BY CHEQUE OF THE SAID SHARE APPLICATION MONEY AND THE ASSESSEE COMPANY HAS ALLOTTED THE SHARES. THE RELEVANT ROC OF THE SHARE WAS GIVEN, RELEVANT RESOLUTION OF THE DIRECTOR WAS ALSO GIVEN. M/S DEBRAJ VINCOM PVT. LTD. IS REGISTERED AT CALCUTTA AND COPY OF AFFAIRS OF THE COMPANY WAS GIVEN AND IDENTITY OF THE COMPANY HAS BEEN ESTABLISHED. THEREFORE, THE ASSESSEE H AS PROVED THE PRIMARY ONUS. HOWEVER, THE ASSESSEE COMPAN Y HAS DISPUTE WITH THE SHARE APPLICANTS. THE ASSESSEE COMPANY WAS TAKING SUITABLE ACTION BUT THE COMPANY DID NOT COOPERATE. THEREFORE, THE ASSESSEE HAS VOLUNTARILY OFFERED THIS AMOUNT SOLELY TO BUY PEACE AND HARMONY. TH E LEARNED CIT(A) DID NOT ACCEPT THE CONTENTION OF THE AS SESSEE B.R. GOYAL ITA NO. 81/IND/2015 4 AND PENALTY FOR FURNISHING INACCURATE PARTICULARS OF INC OME OF RS. 15 LACS HAS BEEN IMPOSED. ON APPEAL, THE LEARNED CIT(A) CONFIRMED THE SAME. 3. THE LEARNED COUNSEL FOR THE ASSESSEE HAS ARGUED THA T THE ASSESSEE COMPANY HAS ALLOTTED SHARES AS PARTLY PAID UP EQUITY SHARES TO THE SAID SHARE APPLICANT COMPANY AT THE PREMIUM OF RS. 90/- PER SHARE. THE RELEVANT ROC IN FO RM NO. 2 WAS ALSO FILED. THE RELEVANT BOARD RESOLUTION WAS ALSO FILED. THE ASSESSEE HAS RECEIVED THE AMOUNT BY CHEQUE. DURING THE COURSE OF ASSESSMENT PROCEEDINGS THE ASSES SEE HAS SUBMITTED COPY OF THE SAID APPLICATION OF M/S DEBRA J VINCOM PVT. LTD., COPY OF BANK STATEMENT, FORM NO.2 W ITH ROC, COPY OF INCORPORATION OF CERTIFICATE, COPY OF CO MPANY DETAILS, COPY OF BALANCE SHEET, ETC. THEREFORE, AS PER THE SETTLED LAW, PRIMARY AND INITIAL ONUS CASTS UPON THE ASSESSEE WAS VERY WELL DISCHARGED BY PROVIDING ALL AVAILAB LE DETAILS OF SHARE APPLICANTS. THE ASSESSEE HAS DISPUTE W ITH B.R. GOYAL ITA NO. 81/IND/2015 5 M/S DEBRAJ VINCOM PVT. LTD., THEREFORE, HE HAS OFFER ED THIS AMOUNT AS ADDITIONAL INCOME. THE ASSESSEE WAS NEVER ASKED TO ESTABLISH THE GENUINENESS OF SHARE APPLICATION MONEY NOR IT WAS REQUIRED TO PRODUCE THE DIRECTOR DUR ING THE ASSESSMENT PROCEEDINGS. THE PENALTY HAS BEEN IMPOS ED ON THE GROUND THAT THE ASSESSEE COULD NOT PROVE THE GENUINENESS OF THE TRANSACTION AND, THEREFORE, HE HAS SURRENDERED THE ADDITIONAL INCOME. THE ASSESSEES CLAI M THAT THERE WAS NEITHER SEARCH NOR ANY SURVEY, THE SURRENDER OF INCOME WAS VOLUNTARY, NO INQUIRY WAS MADE. ALL THE MATERIAL FACTS WERE DISCLOSED IN THE BOOKS OF ACCOUNTS. THE ASSESSING OFFICER FAILED TO RECORD CATE GORICAL FINDING. EVEN THE SATISFACTION THAT THE ASSESSEE HAS CONCEALED TRUE PARTICULARS OF INCOME IS MISSING. THE LEARNED COUNSEL FOR THE ASSESSEE RELIED UPON THE DECI SION OF THE HON'BLE DELHI HIGH COURT IN THE CASE OF CIT VS. OASIS HOSPITAL; 333 ITR 199. THE LEARNED COUNSEL FOR THE B.R. GOYAL ITA NO. 81/IND/2015 6 ASSESSEE ALSO RELIED UPON THE DECISION OF HON'BLE CHHATTISGARH HIGH COURT IN THE CASE OF CIT VS. AGRAWAL ROLLING MILLS; 85 CCH 510. 4. ON THE OTHER HAND, THE LEARNED DR SUBMITTED THAT IN THIS CASE THE ASSESSEE HAS FILED THE RETURN OF INCOME. THEREAFTER, THE SCRUTINY ASSESSMENT WAS MADE AND AFTER THE DEPARTMENT MADE INQUIRY, THE ASSESSEE HAS COME FOR SETTLEMENT OF THE ISSUE. THE ASSESSEE HAS MADE SURREND ER OF ADDITIONAL INCOME. THE SURRENDER OF INCOME TO AVOID LITIGATION IS NOT RECOGNISED BY THE INCOME TAX ACT. THE LEARNED DR SUBMITTED THAT THE ISSUE IN CONTROVERSY IS COVERED BY THE DECISION OF THE HON'BLE SUPREME COUR T IN THE CASE OF MAK DATA PVT. LTD. VS. CIT; 358ITR 593. 5. WE HAVE HEARD BOTH THE SIDES. LOOKING TO THE FAC TS AND CIRCUMSTANCES OF THE CASE, WE FIND THAT DURING THE YEA R UNDER CONSIDERATION THE ASSESSEE COMPANY HAS RECEIVED SHARE APPLICATION MONEY FROM ONE M/S DEBRAJ VINCOM PVT . B.R. GOYAL ITA NO. 81/IND/2015 7 LTD. FOR 70,000 EQUITY SHARES OF RS.35 LACS OUT OF WHI CH RS.10 LACS WERE RECEIVED BY CHEQUE OF STATE BANK OF PATI ALA AND RS. 25 LACS WERE RECEIVED ON 13.4.2009. IN THIS C ASE THE ASSESSEE COMPANY HAS ALLOTTED 70,000 SHARES AS PARTLY PAID UP EQUITY SHARES. THE ASSESSEE HAS FILED COPY BOF SHARE APPLICATION MONEY, COPY OF BANK STATEMENT, FORM NO . 2 FILED WITH ROC, ALLOTMENT OF SHARES, COPY OF INCORP ORATION CERTIFICATE AND MEMORANDUM AND ARTICLES OF ASSOCIATION, COPY OF COMPANY DETAILS AND COPY OF BALANCE SHEET OF M/ S DEBRAJ VINCOM PVT. LTD. ENDING ON 31.3.2010. IT IS THE CASE OF THE ASSESSEE THAT THE ASSESSEE HAS SOME DISPUTE WITH THE SAID COMPANY, THEREFORE, THE ASSESSEE COMPANY WAAS NOT COMING TO COOPERATE WITH THE ASSESSEE. THEREFORE, THE ASSESSEE HAS FILED THE REVISED COMPUTATION OF INCOME AN D ADDITIONAL INCOME OF RS. 35 LACS WAS OFFERED AND THE SAME HAS BEEN ACCEPTED BY THE ASSESSING OFFICER. THIS OFFE R OF ADDITIONAL INCOME WAS MADE WITHOUT THERE BEING ADVERSE B.R. GOYAL ITA NO. 81/IND/2015 8 ON RECORD AND WITHOUT THERE BEING ANY DETECTION BY TH E DEPARTMENT. IN THIS CASE THE ASSESSEE WAS REQUIRED TO PRODUCE THE DIRECTOR DURING THE COURSE OF ASSESSMENT PROCEEDINGS. WE HAVE ALSO GONE THROUGH THE ORDER SHE ET SUBMITTED AT PAGE 1 TO 3 OF THE DEPARTMENTAL PAPER BOOK. THEREFORE, THE ASSESSEE HAS VOLUNTARILY OFFERED THE ADDITIONAL INCOME. THERE WAS NEITHER ANY SEARCH NOR ANY SURVEY. THE SURRENDER OF INCOME WAS VOLUNTARY. NO INQU IRY WAS CONDUCTED BY THE ASSESSING OFFICER. THEREFORE, W E ARE OF THE VIEW THAT THAT THE AUTHORITIES BELOW ARE NOT JU STIFIED IN CONFIRMING THE PENALTY. SIMILAR ISSUE HAD COME UP BEFORE THE HON'BLE CHHATTISGARH HIGH COURT IN THE CASE OF CIT VS. AGRAWAL ROUND ROLLING MILLS LTD.; 85 CCH 051 0 CHATTHC WHEREIN IT WAS HELD AS UNDER :- PENALTY PENALTY U/S 271(1)(C) CONCEALMENT OF INCOME ADDITION OF SHARE APPLICATION MONEY ASSESSEE, A COMPANY MANUFACTURING IRON AND STEEL B.R. GOYAL ITA NO. 81/IND/2015 9 RE-ROLLED PRODUCTS FILED ITS RETURN SHOWING LOSS SUBSEQUENTLY, NOTICE U/S 143(2) WAS ISSUED AND QUERY WAS ASKED REGARDING SHARE APPLICATION MONEY RECEIVED BY ASSESSEE ASSESSEE FILED ITS REPLY MENTIONING THEREIN THAT IT HAD RECEIVED SHARE APPLICATION MONEY THROUGH CHEQUES AND DRAFTS WHICH WAS CLEARED BY BANKS HOWEVER, IN CASE OF 12 APPLICANTS FOR WHICH DETAILED LIST WAS SEPARATELY ENCLOSED, NECESSARY DOCUMENTS WERE NOT THERE AND ASA SUCH A SUM REPRESENTING THE SHARE APPLICATION MONEY OF THOSE 12 APPLICANTS WAS SURRENDERED WITH A REQUEST NOT TO INITIATE ANY PENALTY PROCEEDINGS A.O. PASSED AN ORDER U/S 143(3) ADDING THE SURRENDERED AMOUNT U/S 68 AND ALSO ORDERED FOR INITIATION OF PENALTY PROCEEDINGS AND IMPOSED PENALTY AT 150% OF TAX SOUGHT TO BE EVADED BY ASSESSEE CIT(A) AND ITAT BOTH RULED B.R. GOYAL ITA NO. 81/IND/2015 10 IN FAVOUR OF ASSESSEE HELD IT IS NOT DISPUTED BY THE DEPARTMENT THAT THE SUM WHICH WAS ADDED U/S 68 WAS ONE WHICH WAS SURRENDERED BY ASSESSEE ITSELF BOTH THE AUTHORITIES BELOW HAD RECORDED FINDING THAT THERE WAS NEITHER ANY DETECTION NOR ANY INFORMATION IN THE POSSESSION OF DEPARTMENT EXCEPT FOR THE AMOUNT SURRENDERED BY ASSESSEE AND IN THESE CIRCUMSTANCES IT CANNOT BE SAID THAT THERE WAS ANY CONCEALMENT THIS IS A FINDING OF FACT THERE IS NO ILLEGALITY IN SAME THE TAX CAS E HAS NO MERIT AND HENCE DISMISSED. WE ARE ALSO SUPPORTED BY THE DECISION OF THE HON'BLE KARNATAKA HIGH COURT IN THE CASE OF CIT VS. M.M. GUJAMGADI; 290 ITR 168 WHEREIN IT WAS HELD AS UNDER :- PENALTY UNDER S. 271(1)(C), EXPLN. 1 CONCEALMENT UNPROVED CASH CREDITS EXPLANATION OF THE ASSESS EE THAT THE IMPUGNED AMOUNT WASBORROWED BY HIM FROM B.R. GOYAL ITA NO. 81/IND/2015 11 VARIOUS CREDITORS HOWEVER, DESPITE HIS BEST EFFO RTS, ASSESSEE COULD NOT SECURE THE ATTENDANCE OF THE CREDITORS TO SUBSTANTIATE HIS CLAIM BEFORE THE ITO LEFT WITH NO OTHER ALTERNATIVE, ASSESSEE VOLUNTARILY AGREED FOR ADDITION OF CASH CREDITS. IT CANNOT BE S AID THAT THE EXPLANATION OF THE ASSESSEE IS NOT BONA FI DE IT IS A CASE OF BONA FIDE FAILURE ON THE PART OF TH E ASSESSEE TO SUBSTANTIATE HIS CLAIM THEREFORE, PENALTY UNDER S. 271(1)(C) R/W EXPLN. 1(B) IS NOT LEVIABLE AND TRIBUNAL WAS JUSTIFIED IN SETTING ASID E THE PENALTY PROCEEDINGS. WE ALSO GET SUPPORT FROM THE DECISION OF THE HON'BLE DELHI HIGH COURT IN THE CASE OF OASIS HOSPITALITY; 330 ITR 1 19 WHEREIN IT IS HELD THAT THE ASSESSEE HAS PRODUCED CERT AIN DOCUMENTS TO PROVE IDENTITY AND CREDITWORTHINESS OF THE SHARE APPLICANTS. SAME COULD NOT BE PROVE BECAUSE OF SUBSTANTIAL TIME GAP AND INABILITY TO PRODUCE THOSE B.R. GOYAL ITA NO. 81/IND/2015 12 PERSONS. THUS, THOUGH THE ASSESSEE COULD NOT DISCHARG E HIS ONUS U/S 68, IT CANNOT BE SAID THAT IT IS A CASE OF CONCEALMENT OF THE ASSESSEE. THEREFORE, PENALTY U/S 271(1)(C) OF THE ACT IS NOT LEVIABLE. WE RESPECTFUL LY FOLLOWING THE DECISION OF THE HON'BLE JURISDICTIONAL HIGH COUR T IN THIS CASE, DELETE THE PENALTY. 6. IN THE RESULT, THE APPEAL OF THE ASSESSEE STANDS ALLOWED. THE ORDER HAS BEEN PRONOUNCED IN OPEN COURT ON 19 TH JANUARY, 2017. SD/- SD/- ( . . ) ( . . ) ' (O.P.MEENA) (D.T.GARASIA) ACCOUNTANT MEMBER JUDIC IAL MEMBER 6 % / DATED : 19 TH JANUARY, 2017. DN/ B.R. GOYAL ITA NO. 81/IND/2015 13