ITO 9(2)(2), MUMBAI V. KAMVIT CHEMICALS P. LTD, MUMBAI

ITA 8642/MUM/2010

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 4059 (ITAT-MUMBAI)
• Duration Of Justice: 5 year(s) 4 month(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-04-2016
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 08-06-2015
• Assessment Year: 2006-2007
• Appeal Filed On: 10-12-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: RADHA KATYAL NARAN G
• Keywords: Unexplained cash credit; Income from undisclosed sources
• Section: 68

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES A, MUMBAI BEFORE SHRI G.S.PANNU (AM) AND SHRI RAM LAL NEGI (JM) ITA NO. 8642/MUM/2010 ASSESSMENT YEAR: 2006-07 THE ITO - 9(2)(2), ROOM NO. 225, AAYAKAR BHAVAN, M.K.ROAD, MUMBAI- 400020. VS. M/S. KAMVIT CHEMICALS PVT. LTD. 215, ANUGRAHAL RSCIB GORIA ROAD, BORIWALI (W), MUMBAI- 400098. PAN : AACCK4434F (APPELLANT) (RESPONDENT) APPELLANT BY : MS. RADHA KATYAL NARANG RESPONDENT BY : SHRI. NITESH JOSHI DATE OF HEARING: 1 2/04/2016 DATE OF PRONOUNCEMENT: 22/04/20 16 O R D E R PER RAM LAL NEGI, JM THIS APPEAL HAS BEEN PREFERRED BY THE REVENUE AGAIN ST THE IMPUGNED ORDER DATED 15/10/2010 PASSED BY THE LD. CIT(APPEAL S)-20, MUMBAI, FOR THE ASST. YEAR 2006-07. 2. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE B EING ENGAGED IN THE BUSINESS OF MANUFACTURE OF COBALT, NICKEL AND COPPER SULPHATE, FILED NIL RETURN FOR THE RELEVANT ASSESSMENT YEAR. AFTER SCRUTINY OF THE RET URN, THE AO ASSESSED THE TOTAL INCOME OF THE ASSESSEE AT RS. 94,84,500/-, BY MAKING ADDITION OF UNSECURED LOAN TO THE TUNE OF RS. 23,14,500/- AND S HARE CAPITAL CONTRIBUTION RECEIVED TO THE EXTENT OF RS. 71,70,000/-, TREATING THE SAID AMOUNTS AS UNEXPLAINED CASH CREDIT U/S 68 OF THE INCOME TAX AC T (IN SHORT THE ACT) ON THE 2 ITA NO. 8642/MUM/2010 ASSESSMENT YEAR: 2006-07 GROUND THAT THE ASSESSEE HAS FAILED TO DISCHARGE TH E ONUS OF FILING CONFIRMATION OF UNSECURED LOANS FROM THE CREDITORS AND TO PROVE GENUINENESS OF THE SHARE CAPITAL CONTRIBUTION RECEIVED. THE ASSESSEE CHALLEN GED THE ASSESSMENT ORDER BEFORE THE CIT(A). THE CIT(A) AFTER HEARING THE ASS ESSEE IN THE LIGHT OF THE MATERIAL PLACED BEFORE HIM ALLOWED THE APPEAL HOLDI NG THAT THE APPELLANT HAS ESTABLISHED THE IDENTITY OF THE CREDITORS, THEIR FI NANCIAL CAPACITY AND THE GENUINENESS OF THE TRANSACTIONS. AGGRIEVED BY THE S AID ORDER THE REVENUE HAS PREFERRED THE PRESENT APPEAL ON THE FOLLOWING EFFEC TIVE GROUNDS:- 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW, THE LD. CIT(A) ERRED IN DELETING THE AMOUNT OF RS. 23,14,50 0/- STATED TO BE UNSECURED LOANS RECEIVED FROM SHRI. VITTAL D. SHETT Y & SMT. KAMALA D. SHETTY, BUT ACTUALLY REPRESENTING UNEXPLAINED CASH CREDIT U/S 68 OF THE I.T.ACT, 1961 AS THE ASSESSEE WAS NOT ABLE TO ESTAB LISH THE IDENTITY OF THE LENDERS, THEIR FINANCIAL CAPACITY AND THE GENUINENE SS OF THE TRANSACTION INSPITE OF SUFFICIENT OPPORTUNITIES GIVEN. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW, THE LD. CIT(A) ERRED IN DELETING AGGREGATE AMOUNT OF RS. 41 ,70,000/- REPRESENTING SHARE APPLICATION MONEY RECEIVED FROM SHRI. HARISH SHETTY, SMT. BABITA SHETTY, SHRI. VIMAL D. SHETTY, SMT. KAMALA SHETTY, SHRI. K.S. MURLIDHARAN, SMT. HEMA KURUP & SHRI. RAJESH TAMBOLI, DISREGARDIN G THE FACT THAT THE ASSESSEE FAILED TO PROVE THE IDENTITY OF THE CREDIT ORS, THEIR FINANCIAL CAPACITY AND THE GENUINENESS OF THE TRANSACTIONS, A ND THAT THE ABOVE CREDITS CONSEQUENTLY REPRESENT UNEXPLAINED CASH CRE DITS WITHIN THE MEANING OF SECTION 68 OF THE I.T.ACT, 1961. 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW, THE LD. CIT(A) ERRED IN DELETING THE ADDITIONS MADE U/S 68 ON THE GROUND THAT THE BUSINESS OF THE ASSESSEE HAS NOT COMMENCED AND THAT THE ASSESSEE HAS NO SOURCE OF INCOME, IGNORING THE FACT THAT ONCE TH E CREDITS IN THE BOOKS OF 3 ITA NO. 8642/MUM/2010 ASSESSMENT YEAR: 2006-07 ACCOUNTS HAS BEEN SHOWN TO BE UNEXPLAINED, THE ONLY PERMISSIBLE INFERENCE IS THAT THEY ARE UNEXPLAINED CASH CREDITS AND THAT THE REVENUE IS NOT REQUIRED TO IDENTIFY THE PRECISE SOURCE FROM WH ICH THE UNEXPLAINED CREDITS WERE DERIVED, HAVING ESTABLISHED THE ASSESS EES VERSION TO BE UNTENABLE. 3. BEFORE US, THE LD. DR RELYING ON THE ASSESSMENT ORDER SUBMITTED THAT SINCE THE ASSESSEE HAS FAILED TO DISCHARGE THE ONUS OF PR OVING IDENTITY, CREDITWORTHINESS AND CAPACITY OF THE CREDITORS/CONT RIBUTORS, THE ASSESSING OFFICER HAS RIGHTLY MADE THE ADDITIONS IN QUESTION. THE FINDINGS OF THE LD. CIT(A) IS NOT BASED ON THE EVIDENCE ON RECORD, THER EFORE, THE IMPUGNED ORDER PASSED BY THE LD. CIT(A) IS LIABLE TO SET ASIDE. O N THE OTHER HAND THE LD. AR SUBMITTED THAT THE CIT(A) HAS RIGHTLY DELETED THE A DDITION MADE BY THE AO. THE CREDITORS HAVE PRODUCED THE RELEVANT DOCUMENTS AS A SKED BY THE AO DURING ASSESSMENT PROCEEDINGS, TO PROVE THE GENUINENESS OF TRANSACTIONS IN QUESTION. THE ORDER PASSED BY THE LD. CIT(A) IS IN ACCORDANCE WITH THE LAW LAID DOWN BY THE HONBLE JURISDICTIONAL HIGH COURT IN CIT V. TANIA INVESTMENTS P. LTD.,322 ITR 394 (BOM.) AND THERE IS NO SCOPE FOR FURTHER INTERFERENCE. 4. WE HAVE HEARD THE RIVAL SUBMISSIONS AND ALSO PER USED THE MATERIAL PLACED ON RECORD INCLUDING THE ORDERS OF THE AUTHORITIES B ELOW IN THE LIGHT OF THE CONTENTIONS OF THE PARTIES. THE LD. CIT(A) HAS ALL OWED THE APPEAL OF THE ASSESSEE HOLDING AS UNDER:- 7. I HAVE CONSIDERED THE ISSUES. IN ALL THE CASE, THE CREDITORS ARE IDENTIFIED, THEY HAVE MADE PAYMENTS THROUGH BANKING CHANNELS. ALL ARE PAN HOLDERS. EXCEPT SHRI. VITTAL SHETTY AND SMT. KA MLA SHETTY, THE OTHERS ARE INCOME TAX ASSESSEES AND HAVE FILED RETURNS OF INCOME. ALL HAVE EXPLAINED SOURCE OF THEIR INVESTMENTS. IN OTHER WOR DS, THE APPELLANT HAS EXPLAINED SOURCE OF THEIR INVESTMENTS. IN OTHER WOR DS, THE APPELLANT HAS 4 ITA NO. 8642/MUM/2010 ASSESSMENT YEAR: 2006-07 EXPLAINED THE SOURCE OF SOURCE. IF THE AO HAD DOUBT THAT THE APPELLANT COMPANY HAD NOT PROVED THE CREDITWORTHINESS OF THE CREDITORS HAD DOUBT WITH REGARD TO THE CAPACITY OF THE CREDITORS, NO ON E PREVENTED HIM TO VERIFY THE CAPACITY OF THE CREDITORS. IN MY OPINION, IN VI EW OF THE FACTS DISCUSSED ABOVE THERE WAS NO FURTHER NEED ON THE PART OF THE APPELLANT TO PROVE THE CAPACITY OF THE CREDITORS (SEE CIT VS. TANIA INVEST MENTS P. LTD., 322 ITR 394 (BOM)). AN IMPORTANT FEATURE NOTED IN THIS CASE IS THAT THIS IS THE FIRST YEAR THAT THE APPELLANT HAS FILED RETURN OF INCOME. ADMITTEDLY, THE FACTORY HAS NOT BEEN SET UP AND THE BUSINESS HAS NOT COMMEN CED. THE APPELLANT HAS NO SOURCE OF INCOME. IN THESE CIRCUMSTANCES, IT CANNOT BE SUGGESTED THAT THE SHARE APPLICATION MONEY OR THE UNSECURED L OAN REPRESENTED UNDISCLOSED OR UNACCOUNTED INCOME OF THE APPELLANT. IN SUM, THE APPELLANT HAS ESTABLISHED THE IDENTITY OF THE CREDITORS, THEI R CAPACITY AND THE GENUINENESS OF THE TRANSACTIONS. THE ADDITIONS MADE OF RS. 71,70,000 AND RS. 23,14,500 AS UNEXPLAINED CREDITS ARE DELETED. 5. IN OUR CONSIDERED VIEW THE FINDINGS OF THE LD. C IT(A) ARE BASED ON EVIDENCE ON RECORD. WE HAVE NOTICED THAT SHRI. HARISH SHETTY WHO IS ONE OF THE DIRECTORS OF THE COMPANY HAS FILED COPIES OF BANK PASS BOOK A ND COPY OF RETURN OF INCOME TO PROVE CONTRIBUTED RS. 15,00,000/- TOWARDS SHARE APPLICATION MONEY AND SOURCE THEREOF. SMT. BABITA SHETTY, WIFE OF SHRI. H ARISH SHETTY WHO HAS CONTRIBUTED RS. 9,33,000/- TOWARDS SHARE APPLICATIO N MONEY HAS PROVED THE SOURCE OF MONEY BY FILLING COPY OF BANK PASSBOOK, R ETURN OF INCOME AND OTHER RELATED DOCUMENTS. SMT. KAMLA SHETTY, MOTHER OF SH. HARISH SHETTY HAS STATED THAT SHE AND HER HUSBAND VITTAL SHETTY SOLD THEIR S HARES AND JEWELLERY TO PROVIDE ADDITIONAL FUNDS BY WAY OF LOANS AGGREGATIN G TO RS. 23,14,500/- DURING THE PERIOD FROM APRIL, 2005 TO OCTOBER 2005 IN ORDE R TO HELP THEIR SON. SINCE THEY DID NOT HAVE TAXABLE INCOME, THEY WERE NOT REQ UIRED TO FILE THEIR RETURN. HOWEVER, SHE PRODUCED COPIES OF STATEMENTS OF BANK ACCOUNTS AND STATEMENTS SHOWING PROFIT ON SALE ON JEWELLARY TO PROVE THE TR ANSACTIONS. SHRI. K.S. MURLIDHARAN AND SH. RAJESH TAMBOLI WHO HAVE CONTRIB UTED RS. 5 LAKH EACH 5 ITA NO. 8642/MUM/2010 ASSESSMENT YEAR: 2006-07 HAVE EXPLAINED THEIR SOURCES AND ALSO SUBMITTED THE RELEVANT DOCUMENTS TO PROVE THE TRANSACTIONS. AS POINTED OUT BY THE LD. C IT(A), M/S GLIDER HOLDINGS LTD., M/S. MANSI SECURITIES AND COMMERCIALS LTD., M /S KREZ HOTELS AND REALITY LTD. AND M/S SEATRANS DAM SHIPPING P. LTD HAVE ALSO PROVED THE CONTRIBUTIONS MADE BY THE SAID COMPANIES BY PRODUCING DOCUMENTARY EVIDENCE. 6. HENCE, WE ARE OF THE CONSIDERED VIEW THAT THE AS SESSEE HAS PROPERLY EXPLAINED THE SOURCES OF THE AMOUNT OF UNSECURED LO ANS AND SHARE CAPITAL INTRODUCED. THE ASSESSEE HAS DISCHARGED THE ONUS OF PROVING THE GENUINENESS OF THE TRANSACTIONS IN QUESTION AND THE AO HAS NOT COLLECTED ANY EVIDENCE TO REBUT THE SAME. THE DOCUMENTS ON RECORD ARE SUFFICI ENT TO CONCLUDE THAT THE TRANSACTIONS IN QUESTION ARE GENUINE. THERE IS NO L EGAL INFIRMITY IN THE ORDER PASSED BY THE LD. CIT(A) AND THE APPEAL OF THE ASSE SSEE HAS RIGHTLY BEEN ALLOWED. WE, THEREFORE, DISMISS ALL THE GROUNDS OF APPEAL FILED BY THE REVENUE BEING DEVOID OF MERIT AND CONFIRM ORDER DT.15/10/20 10 PASSED BY THE LD. CIT(A). 7. IN THE RESULT, APPEAL FILED BY THE REVENUE FOR T HE ASSESSMENT YEAR 2006-07 IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT 22 ND APRIL, 2016. SD/- SD/- ( G.S.PANNU ) (RAM LAL NEGI) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI; DATED: 22/04/2016 6 ITA NO. 8642/MUM/2010 ASSESSMENT YEAR: 2006-07 / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. ( ) / THE CIT(A)- 4. / CIT 5. !' , $ !'% , / DR, ITAT, MUMBAI 6. &' ( / GUARD FILE. / BY ORDER, ) //TRUE COPY// / (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI PRAMILA