Gabani Polyster Pvt. Ltd., Surat V. The Income tax Officer, Ward-1(1)(2), Surat

ITA 823/AHD/2017

• Counselvise Citation: [2021] 108 COUNSELVISE.COM (IT) 1568 (ITAT-SURAT)
• Duration Of Justice: 4 year(s) 2 month(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 14-06-2021
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: DB
• Assessment Year: 2004-2005
• Appeal Filed On: 04-04-2017
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: ANUPAMA SINGLA
• Section: 143(3); 208; 264; 68

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, SURAT BENCH, SURAT BEFORE SHRI PAWAN SINGH, JM & DR. A. L. SAINI, AM ./ITA NOS.823 & 824/AHD/2017 ( [ [ / ASSESSMENT YEARS: (2004-05 & 2005-06) (VIRTUAL COURT HEARING) GABANI POLYSTER PVT. LTD., A-11, PATEL INDUSTRIAL ESTATE, BAMBAWADI, KATARGAM, SURAT-395004. VS. THE ITO, WARD-1(1)(2), SURAT. ./ ./ PAN/GIR NO.: AAACG8686K (ASSESSEE) (RESPONDENT) ASSESSEE BY : SHRI HIREN VEPARI, CA REVENUE BY : MS ANUPAMA SINGLA, SR. DR / DATE OF HEARING : 25/05/2021 /DATE OF PRONOUNCEMENT : 14/06/2021 / O R D E R PER DR. A. L. SAINI, ACCOUNTANT MEMBER: CAPTIONED TWO APPEALS FILED BY THE ASSESSEE, PERTAINING TO ASSESSMENT YEARS (AY) 2004-05 AND 2005-06 RESPECTIVELY, ARE DIRECTED AGAINST THE SEPARATE ORDERS PASSED BY THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS), SURAT [IN SHORT THE LD. CIT(A)], WHICH IN TURN ARISE OUT OF SEPARATE ASSESSMENT ORDERS PASSED BY THE ASSESSING OFFICER UNDER SECTION 143(3) R.W.S 254 OF THE INCOME TAX ACT, 1961 [HEREINAFTER REFERRED TO AS THE ACT]. 2. THE GRIEVANCES RAISED BY THE ASSESSEE IN ITA NO.823/AHD/2017 FOR AY.2004-05 ARE AS FOLLOWS: (I) ADDITION U/S.68 OF THE ACT: ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND AS PER LAW, THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS) ERRED IN MAKING ADDITION OF RS.17,30,000 IN RESPECT OF 4 UNSECURED LOANS WHEN THE APPELLANT HAD FURNISHED ALL THE PARTICULARS LIKE CONFIRMATIONS, P.A. NO., CONTRA ACCOUNT ETC. AND THUS DISCHARGED ITS ONUS BY SATISFYING THE CRITERIA OF IDENTITY, CAPACITY AND GENUINENESS. [ PAGE | 2 ITA NOS.823 & 824/AHD/201 7 AYS.2004-05 &-2005- 06 GABANI POLYSTER PVT. LTD. (II) ADDITION U/S.68 OF THE ACT: THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS) ERRED IN CONFIRMING ADDITION OF RS.12,74,100 IN RESPECT OF SHARE APPLICATION MONEY AND SHARE PREMIUM IN RESPECT 4 UNSECURED LOANS WHEN THE APPELLANT HAD FURNISHED ALL THE PARTICULARS LIKE CONFIRMATIONS, P.A. NO., CONTRA ACCOUNT ETC. AND THUS DISCHARGED ITS ONUS BY SATISFYING THE CRITERIA OF IDENTITY, CAPACITY AND GENUINENESS. (III) MISCELLANEOUS: THE APPELLANT CRAVES LEAVE TO ADD, ALTER OR VARY ANY OF THE GROUNDS OF APPEAL. 3. THE ADDITIONAL GROUNDS RAISED BY THE ASSESSEE IN ITA NO.823/AHD/2017 FOR AY.2004-05 ARE AS FOLLOWS: ADDITIONAL GROUND OF APPEAL: CASH CREDIT ASSESSED U/S.68 OF VIMAL GABANI AMOUNTING TO RS.4,90,000 AND RS.12,74,100 (SHARE APPLICATION MONEY) HAVING BEEN ASSESSED ONCE IN THE HANDS OF THE CREDITOR IN A CASE OF FORMATION OF CAPITAL CANNOT BE ASSESSED AGAIN IN THE HANDS OF THE APPELLANT. 4. THE GRIEVANCES RAISED BY THE ASSESSEE IN ITA NO.824/AHD/2017, FOR AY.2005-06, ARE AS FOLLOWS: (IV) ADDITION U/S.68 OF THE ACT: ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND AS PER LAW, THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS) ERRED IN MAKING ADDITION OF RS. 7, 33,300 IN RESPECT OF 3 UNSECURED LOANS WHEN THE APPELLANT HAD FURNISHED ALL THE PARTICULARS LIKE CONFIRMATIONS, P.A. NO., CONTRA ACCOUNT ETC. AND THUS DISCHARGED ITS ONUS BY SATISFYING THE CRITERIA OF IDENTITY, CAPACITY AND GENUINENESS. (V) MISCELLANEOUS: THE APPELLANT CRAVES LEAVE TO ADD, ALTER OR VARY ANY OF THE GROUNDS OF APPEAL. 5. THE ADDITIONAL GROUNDS RAISED BY THE ASSESSEE IN ITA NO.824/AHD/2017, FOR AY.2005-06, ARE AS FOLLOWS: CASH CREDIT ASSESSED U/S 68 OF VIMAL GABANI AMOUNTING TO RS.6,07,000/- HAVING BEEN ASSESSED ONCE IN THE HANDS OF THE CREDITORS IN THE CASE OF FORMATION OF CAPITAL CANNOT BE ASSESSED AGAIN IN THE HANDS OF THE APPELLANT. 6. SINCE THESE TWO APPEALS FILED BY THE ASSESSEE, PERTAINING TO SAME ASSESSEE, IDENTICAL ISSUES ARE INVOLVED, THEREFORE, THESE HAVE BEEN CLUBBED AND HEARD [ PAGE | 3 ITA NOS.823 & 824/AHD/201 7 AYS.2004-05 &-2005- 06 GABANI POLYSTER PVT. LTD. TOGETHER AND A CONSOLIDATED ORDER IS BEING PASSED FOR THE SAKE OF CONVENIENCE AND BREVITY. THE FACTS AND THE GROUNDS OF APPEAL NARRATED IN ITA NO.823/AHD/2017, FOR A.Y. 2004-05, HAVE BEEN TAKEN INTO CONSIDERATION FOR DECIDING THE ABOVE APPEALS EN MASSE . 7. THE FACTS NECESSARY FOR DISPOSAL OF THESE TWO APPEALS ARE STATED IN BRIEF. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER NOTICED THAT ASSESSEE IS ENGAGED IN FRAUDULENT ACTIVITIES. THE AO NOTED THAT ASSESSEE IS A TYPICAL CASE OF 'CAPITAL CREATION' ROCKET PERPETRATED BY ONE SHRI PANKAJ DANAWALA, CA, BY INCREASING CAPITAL EVERY YEAR BY SHOWING FALSE ENTRIES AND THEN THIS CAPITAL ON PAPER IS USED IN GIVING ENTRIES OF LOANS AND SHARE PREMIUM TO OTHER PARTIES. STATEMENT OF SHRI PANKAJ DANAWALA, C.A. WAS RECORDED, WHEREIN HE CATEGORICALLY ADMITTED HIS 'MODUS OPERANDI' OF CREATING OF BOGUS CAPITAL FOR THE GABANI GROUP AND MR. VIMAL M. GABANI AS ONE OF THE MEMBERS OF THE GROUP. IT HAS BEEN ACCEPTED BY SHRI PANKAJ DANAWALA THAT HE USED TO PREPARE FICTITIOUS PAPERS AND FILED INCOME TAX RETURN OF SUCH DEPOSITORS AS MODUS OPERANDI. IT WAS ALSO DETECTED THAT IN THESE RETURNS FIELD, FROM YEAR TO YEAR, OPENING BALANCE IS ARTIFICIALLY INFLATED IN COMPARISON TO PRECEDING YEAR'S CLOSING BALANCE. THE LD. AO HAS DISCUSSED THIS MODUS OPERANDI AT LENGTH IN PARA 6(III) OF ASSESSMENT ORDER. AS DISCUSSED BY THE AO, IN HIS ASSESSMENT ORDER, THAT THE ASSESSEE SIMPLY FILED CONFIRMATION LETTER, COPY OF ACKNOWLEDGMENT OF RETURN FILED BY SHARDABEN G. SANDHANI AND FILED COPY OF LEDGER ACCOUNT OF SHRI MANOJBHAI BABUBHAI PATEL AND SHRI DHARMENDRA L. PATEL DULY CONFIRMED BY THEM FILED BUT THEY FAILED TO RESPOND TO SUMMONS ISSUED U/S131 OF THE ACT. ON VERIFICATION, IT WAS NOTICED BY THE AO THAT CASH WAS DEPOSITED BEFORE ISSUE OF CHEQUE TO THE ASSESSEE WHICH HAS NOT BEEN DENIED BY THE APPELLANT. IT IS FURTHER SEEN THAT IN THE BALANCE SHEET FILED PERTAINING TO SMT. SHARDABEN G. SANGHANI, THERE HAVE BEEN HUGE NUMBER OF 'LOANS' ALL BELOW RS.20,000/-. BESIDES THIS, IN THE RETURN OF SMT. SHARDABEN SANDENI, SHE HAS SHOWN INCOME FROM 'BHARAT GUNTHAN & BROKERAGE INCOME' AND THAT TOO TOTAL INCOME WAS ONLY RS.80,510/- FOR A.Y.2004-05. THEREFORE, AO HELD THAT THIS TYPE OF ACTIVITIES SHOWS TYPICAL CASE OF CAPITAL CREATION. NO BALANCE SHEET OR BANK ACCOUNT COPY HAVE BEEN FILED IN [ PAGE | 4 ITA NOS.823 & 824/AHD/201 7 AYS.2004-05 &-2005- 06 GABANI POLYSTER PVT. LTD. RESPECT OF SHRI MANOJBHAI B. PATEL, HOWEVER, IN CASE OF SHRI DHARMENDRABHAI LAXMANBHAI PATEL, COPY OF BALANCE SHEET FILED. THEREFORE, ON THE BASIS OF THESE FACTS ASSESSING OFFICER MADE ADDITION ON ACCOUNT OF UNSECURED LOAN (TREATED AS CASH CREDIT) OF RS.17,30,000/-. THE ASSESSING OFFICER ALSO MADE ADDITION OF RS.12,74,100/- ON ACCOUNT OF SHARE PREMIUM, TREATED AS CASH CREDIT UNDER SECTION 68 OF THE ACT. 8. ON APPEAL, LD CIT(A) HAS CONFIRMED THE ACTION OF THE ASSESSING OFFICER. AGGRIEVED, THE ASSESSEE IS IN APPEAL BEFORE US. 9. WE HAVE HEARD BOTH THE PARTIES AND CAREFULLY GONE THROUGH THE SUBMISSIONS PUT FORTH ON BEHALF OF THE ASSESSEE ALONG WITH THE DOCUMENTS FURNISHED AND THE CASE LAWS RELIED UPON, AND PERUSED THE FACTS OF THE CASE INCLUDING THE FINDINGS OF THE LD. CIT(A) AND OTHER MATERIAL BROUGHT ON RECORD.LEARNED DR FOR THE REVENUE HAS PRIMARILY REITERATED THE STAND TAKEN BY THE ASSESSING OFFICER, WHICH WE HAVE ALREADY NOTED IN OUR EARLIER PARA AND IS NOT BEING REPEATED FOR THE SAKE OF BREVITY. ON THE OTHER HAND, LD COUNSEL FOR THE ASSESSEE HAS REITERATED THE SUBMISSIONS MADE BEFORE THE AUTHORITIES BELOW. WE NOTE THAT ASSESSEE COMPANY HAD FILED ITS RETURN OF INCOME FOR A.Y. 2004-05 ON 01.11.2004 DECLARING TOTAL LOSS OF RS.22,23,980/-. THE ASSESSMENT U/S.143(3) OF THE ACT WAS FRAMED BY THE AO ON 18.12.2006. HOWEVER, WHILE COMPLETING THE ASSESSMENT, THE AO MADE ADDITION OF RS.25,14,100/- ON ACCOUNT OF UNEXPLAINED UNSECURED LOANS AND SHARE APPLICATION MONEY. THE AO ALSO MADE ADDITION ON ACCOUNT OF SUPPRESSION OF SALE TO THE TUNE OF RS.11,665/-. BEING AGGRIEVED, THE ASSESSEE FILED APPEAL BEFORE THE CIT(A)-1, SURAT, WHO DISMISSED THE ASSESSEE`S APPEAL, VIDE HIS ORDER NO. CAS-L/241/2006-07, DATED 01.10.2007. THEREAFTER, THE ASSESSEE FILED APPEAL BEFORE THE ITAT, AHMEDABAD. THE ITAT, AHMEDABAD, VIDE ITS ORDER DATED 08.07.2013, IN ITA NOS.4505/AHD/2007 & 3924/AHD/2008, RESTORED THE MATTER BACK WITH RESPECT TO THE UNPROVED UNSECURED LOANS U/S.68 OF THE ACT TO THE FILE OF THE A.O. TO DECIDE THE ISSUE AFRESH AFTER GIVING SUFFICIENT OPPORTUNITIES TO THE DEPOSITORS SO AS TO EXAMINE THEIR CREDITWORTHINESS AND ALSO GENUINENESS OF THE TRANSACTIONS AS DEEMED FIT AS PER [ PAGE | 5 ITA NOS.823 & 824/AHD/201 7 AYS.2004-05 &-2005- 06 GABANI POLYSTER PVT. LTD. THE LAW. WITH RESPECT TO THE ADDITION OF RS.11,665/- ON ACCOUNT OF SUPPRESSION OF SALE, THE TRIBUNAL (ITAT) HAS DISMISSED THE APPEAL OF THE ASSESSEE. AS A RESULT OF DECISION OF THE ITAT, AHMEDABAD, THE ASSESSEE WAS ASKED TO SUBMIT THE DETAILS AND EVIDENCES IN DE NOVO ASSESSMENT PROCEEDINGS. THE ASSESSEE SUBMITTED THE SAME FABRICATED BALANCE SHEETS AND OTHER DOCUMENTS, AS HE SUBMITTED DURING THE ORIGINAL ASSESSMENT PROCEEDINGS, THEREFORE, ASSESSING OFFICER HAS AGAIN MADE ADDITION. ON APPEAL, LD CIT(A) CONFIRMED THE ADDITION MADE BY ASSESSING OFFICER. NOW, IN SECOND ROUND, THE ASSESSEE IS IN APPEAL BEFORE US. 10. IN SECOND ROUND, BEFORE US, THE ASSESSEE HAS NOT SUBMITTED ANY NEW DOCUMENTS OR ANY NEW EXPLANATION EXCEPT ADDITIONAL GROUNDS IN BOTH THE YEARS. WE HAVE GONE THROUGH THE ADDITIONAL GROUNDS RAISED BY THE ASESSEE IN BOTH ASSESSMENT YEARS AND NOTED THAT THESE ADDITIONAL GROUNDS ARE JUST TO MISLEAD THE FACTS. DURING THE COURSE OF HEARING, THE LD COUNSEL WAS ASKED TO EXPLAIN THE ADDITIONAL GROUND FOR ASSESSMENT YEAR 2004-05. IN RESPONSE, LD COUNSEL SUBMITTED THAT OUT OF UNSECURED LOAN OF RS.17,30,000/- AN AMOUNT OF RS. 4,90,000/- MAY BE DELETED AND BALANCE AMOUNT OF RS. 12,40,000/- MAY BE CONFIRMED. THE LD COUNSEL FAILED TO EXPLAIN THE BENCH THAT WHY AN AMOUNT OF RS. 4,90,000/- SHOULD BE DELETED. THE ASSESSEE HAS SHOWN SHARE PREMIUM AT RS. 12,74,100/-. THIS SHARE PREMIUM HAS BEEN PAID IN CASH. THE LD COUNSEL FAILED TO EXPLAIN THE SOURCE OF THE CASH. THUS, THESE ADDITIONAL GROUNDS RAISED BY THE ASSESSEE IN BOTH ASSESSMENT YEARS ARE JUST LIKE TO PUT THE OLD WINE IN NEW BOTTLES. 11. BESIDES, MR. PANKAJ DANAWALA HAS STATED THAT ASSESSEE HAS ENGAGED IN FABRICATING THE BALANCE SHEET AND OTHER DOCUMENTS AND HE DID NOT RETRACT FROM HIS STATEMENT. IN THE ASSESSMENT YEAR 2005-06, THE ADDITIONAL GROUND IS FOR RS.6,07,000/- WHEREAS IN ORIGINAL GROUND THE ADDITION WAS TO THE TUNE OF RS.7,33,300/-. THUS, IT DOES NOT SHOW THE CONFIDENCE IN THE FIGURES STATED IN THE GROUNDS OF APPEAL AND ARGUMENTS ADVANCED BY LD COUNSEL. [ PAGE | 6 ITA NOS.823 & 824/AHD/201 7 AYS.2004-05 &-2005- 06 GABANI POLYSTER PVT. LTD. 12. IT HAS BEEN OBSERVED BY LD CIT(A) FROM BANK STATEMENT THAT ALMOST EVERY TIME BEFORE ISSUE OF CHEQUE TO THE ASSESSEE FOR LOAN THERE IS EQUAL AMOUNT OF CASH DEPOSITED IN THE BANK ACCOUNT OF SHRI VIMAL GABANI. BUT FOR THESE TRANSACTIONS, OTHERWISE IN THE SAID BANK ACCOUNT THERE WAS A VERY MINIMAL BALANCE. AS OBSERVED BY THE AO IN PARA 6(III) & (IV) THAT SHRI VIMAL GABANI WAS ONE OF THE DIRECT BENEFICIARIES OF BOGUS CAPITAL CREATION, A 'MODUS OPERANDI' DEVISED BY ONE CHARTERED ACCOUNTANT, SHRI PANKAJ DANAWALA. NOT ONLY THAT PANKAJ DANAWALA, FATHER OF SHRI VIMAL GABANI, SHRI MULJIBHAI GABANI HAS ALSO ADMITTED BEFORE THE DEPARTMENT THAT BOGUS CAPITAL WAS CREATED IN THE NAME OF VARIOUS FAMILY MEMBERS. THUS, THIS PARTICULAR CASE DOES NOT FALL WITHIN THE AMBIT OF 'NORMAL CASE' BUT CASE OF FRAUD COMMITTED BY THE ASSESSEE IN CONNIVANCE WITH OTHER PERSONS TO HOODWINK THE DEPARTMENT. NOT ONLY THIS, THE ASSESSEE ALSO FAILED TO PROVIDE VARIOUS DETAILS ABOUT UNSECURED LOANS, ADVANCES GIVEN, CAPITAL, BALANCE ETC. FOR A.Y. 2004-05 TO A.Y. 2005-06, THOUGH SPECIFICALLY CALLED BY THE AO. IT IS SETTLED LEGAL POSITION THAT MERE FILING OF CONFIRMATION LETTER WILL NOT DISCHARGE THE ONUS OF THE ASSESSEE AS HELD BY THE HON'BLE SUPREME COURT IN THE CASE OF SHANKAR INDUSTRIES VS. CIT REPORTED IN 114 ITR 689 (CAL.). IT HAS ALSO BEEN HELD THAT THROUGH THE CONFIRMATORY LETTERS AS GENERALLY TREATED AS EVIDENCE BY THE AO, THE ONUS DOES NOT GET DISREGARDED MERELY BY SUCH CONFIRMATORY LETTERS - CIT VS. UNITED COMMERCIAL & INDUSTRIAL CO. PVT. LTD (1991) 187 ITR 596 (CAL). LIKEWISE, THE HON'BLE CALCUTTA HIGH COURT IN THE CASE OF CIT VS. PRECISION FINANCE (P) LTD. REPORTED IN (1994) 208 ITR 465 (CAL.) HAS HELD THAT MERE PAYMENT BY ACCOUNT PAYEE CHEQUE IS NOT SACROSANCT. THIS VIEW IS FURTHER UPHELD IN THE CASE OF NEMI CHAND KOTHARI VS. CIT (2003) 264 ITR 254 (GAU) WHEREIN IT WAS HELD THAT IT COULD NOT BE SAID THAT A TRANSACTION WHICH TAKES PLACE BY WAY OF CHEQUE IS INVARIABLY SACROSANCT. FURTHER, IN THE CASE OF CIT VS. KORIAY TRADING CO. LTD. REPORTED IN (1998) 232 ITR 820 (CAL.) HAS HELD THAT MERE MENTION OF INCOME-TAX NO. WILL NOT BE SUFFICIENT. CASE LAWS RELIED UPON BY THE LD COUNSEL ARE NOT RELEVANT TO THE FACTS OF THIS CASE BECAUSE PRESENT CASE IS TOTALLY DIFFERENT AND TYPICAL OF A 'REVENUE FRAUD' DONE BY THE ASSESSE IN CONNIVANCE WITH OTHER PROFESSIONAL BY DOING FABRICATED PAPER WORK TO SHOW THE TRANSACTION AS [ PAGE | 7 ITA NOS.823 & 824/AHD/201 7 AYS.2004-05 &-2005- 06 GABANI POLYSTER PVT. LTD. GENUINE. SO, THE EVIDENCES FILED LIKE, BALANCE SHEET, CAPITAL ACCOUNT, CONFIRMATION, AND PAYMENT BY ACCOUNT PAYEE CHEQUES ETC. HAVE NO EVIDENTIARY VALUE TO DECIDE THE ISSUE AT HAND IN FAVOUR OF ASSESSEE. HON'BLE SUPREME COURT IN THE CASE OF CIT VS. DURGA PRASAD MORE 82 ITR 540 (SC) HAS HELD THAT THE TAXING AUTHORITIES ARE NOT REQUIRED TO PUT BLINKERS WHILE LOOKING INTO THE SURROUNDING CIRCUMSTANCES TO FIND OUT THE REALITY OF THE RECITALS MADE IN THE DOCUMENTS. FOLLOWING THE RATIO OF HON'BLE SUPREME COURT, LD CIT(A) NOTED THAT DOCUMENTS / EVIDENCES, IF CONSIDERED IN SURROUNDING CIRCUMSTANCES ARE NOT AT ALL RELIABLE TO GRANT ANY RELIEF TO THE ASSESSEE. ALL THE ABOVE, PRECEDENTS MENTIONED BY US, WERE RELIED BY THE LD CIT(A). IN VIEW OF THE AFORESAID FACTS, WE ARE OF THE VIEW THAT THE ORDER OF CIT(A) IS JUST AND PROPER AND CALLS FOR NO INTERFERENCE. WE THEREFORE UPHOLD THE ORDER OF THE CIT(A) AND DISMISS THE APPEAL FILED BY THE ASSESSEE. 13. IN THE RESULT, APPEALS OF THE ASSESSEE IN ITA NOS.823 AND 824/AHD/2017 FOR AYS.2004-05 AND 2005-06 ARE DISMISSED. ORDER IS PRONOUNCED ON 14/06/2021 BY PLACING RESULT ON NOTICE BOARD. SD/- SD/- (PAWAN SINGH) (DR. A.L. SAINI) JUDICIAL MEMBER ACCOUNTANT MEMBER LWJR /SURAT / DATE: 14/06/2021 SAMANTA COPY OF THE ORDER FORWARDED TO 1. THE ASSESSEE 2. THE RESPONDENT 3. THE CIT(A) 4. CIT 5. DR/AR, ITAT, SURAT 6. GUARD FILE BY ORDER / / TRUE COPY / ASSISTANT REGISTRAR/SR. PS/PS ITAT, SURAT