The ITO, Ward-1(2), Bhavnagar V. Bansidhar Cotfiber Industries Pvt.Ltd., Bhavnagar

ITA 928/AHD/2011

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 89455 (ITAT-AHMEDABAD)
• Duration Of Justice: 4 year(s) 1 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 15-05-2015
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: D
• Next Hearing Date: 22-04-2015
• Assessment Year: 2007-2008
• Appeal Filed On: 30-03-2011
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: BHARAT R POPAT
• Assessee Lawyers: SONIA KUMAR
• Keywords: Principle of natural justice; Opportunity of cross examination; Source of fund
• Section: 143(3); 131; 68

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH, AHMEDABAD (BEFORE SHRI SHAILENDRA KR. YADAV, J.M. & SHRI ANIL CHATURVEDI, A.M.) I.T. A. NOS.928 & 388/AHD/2011 (ASSESSMENT YEAR: 2007-08) THE I.T.O., WARD-1(2), BHAVNAGAR V/S BANSHIDHAR COTFIBER INDUSTRIES P. LTD. TALAJUA MAHUVA ROAD, TALAJA, DIST. BHAVNAGAR. (APPELLANT) (RESPONDENT) BANSHIDHAR COTFIBER INDUSTRIES P. LTD. TALAJUA MAHUVA ROAD, TALAJA, DIST. BHAVNAGAR. V/S THE I.T.O., WARD-1(2), BHAVNAGAR (APPELLANT) (RESPONDENT) PAN: AACCB9080A APPELLANT BY : SHRI BHARAT. R. POPAT, A.R . RESPONDENT BY : SMT. SONIA KUMAR, SR. D.R. ( )/ ORDER DATE OF HEARING : 27-04-2015 DATE OF PRONOUNCEMENT : 15 -05-2015 PER SHRI ANIL CHATURVEDI,A.M. 1. THESE 2 APPEALS, ONE FILED BY THE ASSESSEE AND THE OTHER ONE APPEAL FILED BY THE REVENUE ARE AGAINST THE ORDER OF CIT(A)-XX, AHM EDABAD DATED 15.12.2010 FOR A.Y. 2007-08. ITA NOS. 928 & 388/AHD/2011 . A.Y. 2007-08 2 2. THE RELEVANT FACTS AS CULLED OUT FROM THE MATERIAL ON RECORD ARE AS UNDER. 3. ASSESSEE IS A COMPANY STATED TO BE ENGAGED IN THE B USINESS OF COTTON GINNING AND PRESSING ACTIVITY. ASSESSEE ELECTRONIC ALLY FILED ITS RETURN OF INCOME FOR A.Y. 2007-08 ON 24.10.2007 DECLARING TOT AL INCOME AT RS. NIL. THE CASE WAS SELECTED FOR SCRUTINY AND THEREAFTER T HE ASSESSMENT WAS FRAMED UNDER SECTION 143(3) VIDE ORDER DATED 30.11.2009 AN D THE TOTAL INCOME WAS DETERMINED AT RS. 1,23,36,500/-. AGGRIEVED BY THE ORDER OF A.O., ASSESSEE CARRIED THE MATTER BEFORE LD. CIT(A) WHO VIDE ORDER DATED 15.12.2010 GRANTED PARTIAL RELIEF TO THE ASSESSEE. AGGRIEVED B Y THE AFORESAID ORDER OF LD. CIT(A), ASSESSEE AS WELL AS REVENUE ARE NOW IN APPE AL BEFORE US. THE GROUNDS RAISED BY THE ASSESSEE READS AS UNDER;- 1. CONFIRMING THE ADDITION OF RS. 54,47,500/- IN RESPE CT OF THE CASH CREDITS ACCEPTED BY THE APPELLANT, TREATING THE SAME AS UNEXPLAINED CAS H CREDIT U/S. 68. 4. ON THE OTHER HAND THE GROUNDS RAISED BY REVENUE REA DS AS UNDER:- 1. THE LD. CIT(A)XX, AHMEDABAD HAS ERRED IN LAW AND IN FACTS IN DELETING THE ADDITION OF RS.68,89,000/- U/S.68 OF THE IT ACT, REPRESENTING T HE VALUE OF SHARES ALLOTTED BY THE ASSESSEE TO VARIOUS DEPOSITORS. 2. THE LD. CIT(A)XX HAS ERRED IN DELETING THE SAID ADDITION WHILE CONFIRMING THE ADDITION OF RS.54,47,500/- U/S.68 OF THE I.T. ACT, BEING UNE XPLAINED DEPOSITS, BOTH THE ADDITIONS BEING BASED ON THE SAME SET OF FACTS AND SAME FINDI NGS. 2.1 THE LD. CIT(A)XX, WHILE CONFIRMING THE ADDITION OF RS.54,47,800/- BEING UNEXPLAINED DEPOSITS, HAS FULLY RELIED UPON THE DETAILED FINDIN GS OF THE ASSESSING OFFICER BOTH IN ASSESSMENT PROCEEDINGS AS ALSO IN REMAND PROCEEDING S, BUT HE HAS FAILED TO TAKE INTO CONSIDERATION THE FACT THAT THE ADDITION OF RS.68,8 9,000/- WHICH REPRESENTED DEPOSITS WHICH WERE UNEXPLAINED BUT WHICH WERE CONVERTED INT O SHARE CAPITAL BY THE ASSESSEE WITHOUT EITHER THE CONSENT OF THE DEPOSITORS OR WIT HOUT ANY SHARE APPLICATION, WAS ALSO BASED ON THE SAME FACTS AND FINDINGS OF THE ASSESSI NG OFFICER. 2.2 THE LD. CIT(A)XX HAS THUS ERRED IN LAW AND IN F ACTS BY DELETING THE ADDITION OF RS.68,89,000/- ON THE SOLE GROUND THAT IT REPRESENT ED SHARE APPLICATION MONEY WHEREAS, IN ESSENCE, IT REPRESENTED DEPOSITS WITH THE ASSESS EE, THE SOURCE OF WHICH WERE COMPLETELY UNEXPLAINED. 2.3 THE LD. CIT(A)XX HAS ERRED IN LAW AND IN FACTS IN DELETING THE ADDITION OF RS.68,89,000/- BY SIMPLY RELYING ON THE DECISION OF THE HON'BLE SUPREME COURT IN THE CASE OF CIT VS LOVELY EXPORTS (P) LTD. 216 ITR 195 (SC) AND THE CASE OF UMA POLYMERS ITA NOS. 928 & 388/AHD/2011 . A.Y. 2007-08 3 PVT. LTD. VS. DCIT (2006) 100 ITD-1 (JD)(TM) WITHOU T MAKING ANY ATTEMPT TO SHOW HOW THE RATIOS OF THESE CASES WERE APPLICABLE TO THE FA CTS OF THE ASSESSEE'S CASE. 5. BEFORE US, BOTH THE PARTIES SUBMITTED THAT THE ISSU ES RAISED BY THE ASSESSEE AND REVENUE ARE INTERCONNECTED. IN VIEW OF THE AFOR ESAID SUBMISSION, THE GROUNDS RAISED IN BOTH THE APPEALS ARE CONSIDERED T OGETHER. 6. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, A.O NO TICED THAT ASSESSEE HAD ACCEPTED SHARE CAPITAL OF RS. 96,60,000/- AND HAD A LSO SHOWN OUTSTANDING NEW UNSECURED LOAN OF RS. 49,21,500/- AT THE END OF THE FINANCIAL YEAR 2007. THE ASSESSEE WAS ASKED TO FILE THE DETAILS OF THE S HAREHOLDERS AND THE DEPOSITORS AND EXPLAINING THE SOURCE OF FUNDS. A.O RECORDED THE STATEMENTS OF SOME OF THE DEPOSITORS U/S. 131(1) OF THE ACT AN D BASED ON THE STATEMENTS SO RECORDED HE CONCLUDED THAT THE SOURCE OF FUND IN TRODUCED IN THE FORM OF SHARE CAPITAL AND UNSECURED LOANS WERE NOT FULLY EX PLAINED. HE THEREFORE MADE ADDITION OF RS. 54,47,500/- ON ACCOUNT OF DEP OSITS ACCEPTED AND OF RS. 68,89,000/- ON ACCOUNT OF SHARE CAPITAL FUND AGGREG ATING TO RS. 1,23,36,500/- (THE DETAILS OF WHICH IS REPRODUCED AT PAGE 37 & 38 OF THE PAPER BOOK) U/S. 68 OF THE ACT. AGGRIEVED BY THE ORDER OF A.O., ASSE SSEE CARRIED THE MATTER BEFORE LD. CIT(A) WHO AFTER CONSIDERING THE SUBMISS IONS OF THE ASSESSEE, THE REMAND REPORT GRANTED PARTIAL RELIEF BY HOLDING AS UNDER:- 4.I HAVE GONE THROUGH THE ORDERS & REMAND REPORTS O F THE AO AND THE SUBMISSIONS FILED BY THE AR CAREFULLY. IT IS SEEN THAT THE AO HAS DEA LT WITH THE TWO ISSUE OF SHARE APPLICATION MONEY AS WELL DEPOSITS IN A SIMILAR MAN NER. HE HAS TREATED THE SHARE APPLICATION MONEY; TO BE THE SAME AS UNEXPLAINED CA SH CREDIT AND PROCEEDED TO MAKE THE ADDITION U/,68 OF THE IT ACT, 1961. 4.1 AS FAR AS THE ADDITION OF RS.68,89,000/- ON ACC OUNT OF SHARE APPLICATION MONEY IS CONCERNED, IT IS SEEN THAT THE APPELLANT HAD PRODUC ED THE SHARE APPLICANTS. THE AO HAS NOT QUESTIONED, THE IDENTITY OF THE SHARE APPLICANT S. 4.1(I) ONCE THE IDENTITY OF THE PERSONS MAKING THE SHARE APPLICATION MONEY HAS BEEN ESTABLISHED BY THE APPELLANT, THEN, NO ADDITION CAN BE MADE IN THE HANDS OF THE COMPANY UNLESS THERE IS SOME OTHER EVIDENCE AVAILABLE WITH THE DEPARTMENT TO SUGGEST OTHERWISE. ITA NOS. 928 & 388/AHD/2011 . A.Y. 2007-08 4 MERELY BECAUSE THE SHARE APPLICANTS DO NOT HAVE ADE QUATE SOURCES OF INCOME THE ADDITION IN THE HANDS OF THE COMPANY IS NOT JUSTIFI ED. IN THE CASE OF CIT VS. LOVELY EXPORTS (P) LTD. REP ORTED IN 216; CTR 195,(2006) 216 ITR 195(SC) THE HON'BLE SUPREME COURT HAS HELD AS UNDER: 'CAN THE AMOUNT OF SHARE MONEY BE REGARDED AS UNDIS CLOSED INCOME UNDER S.68 OF IT ACT, 1961? WE FIND NO MERIT IN THIS SPECIAL LEAVE PETITI ON FOR THE SIMPLE REASON THAT IF THE SHARE APPLICATION MONEY IS RECEIVED BY THE ASSESSEE COMPANY FROM ALLEGED BOGUS SHAREHOLDERS WHOSE NAMES ARE GIVEN TO THE AO, THEN THE DEPARTMENT IS FREE TO PROCEED TO REOPEN THEIR INDIVIDUAL ASSESSMENTS IN ACCORDANCE W ITH LAW. HENCE, WE FIND NO INFIRMITY WITH THE IMPUGNED JUDGMENT. ' 4.L(II) IT IS ALSO SEEN THAT IN THE CASE OF UMA POL YMERS (P) LTD. VS. DCIT REPORTED IN (2006) 100 ITD-L(JD) (TM) THE HON'BLE JODHPUR TRIBU NAL HAS ALSO HELD THAT ONCE THE IDENTITY OF THE SHARE HOLDER IS ESTABLISHED, THEN T HERE IS NO FURTHER; BURDEN ON THE ASSESSEE TO PROVE WHETHER THAT PERSON HIMSELF HAS INVESTED T HE MONEY OR SOME OTHER PERSON HAS MADE THE INVESTMENT IN HIS NAME. THE ITAT HAS ALSO HELD THAT THE DISTINCTION BETWEEN A PUBLIC COMPANY AND A PRIVATE COMPANY IS NOT VERY MA TERIAL FOR THIS PURPOSE. 4.1(III) IN VIEW OF THE ABOVE DECISIONS AND CONSIDE RING THE FACT THAT THE APEX COURT HAS HELD THAT NO ADDITION COULD BE MADE IN THE HANDS OF THE APPELLANT COMPANY AFTER THE IDENTITY OF THE SHARE HOLDERS IS ESTABLISHED, THE A DDITION MADE ON ACCOUNT OF SHARE APPLICATION MONEY BY THE AO IS NOT JUSTIFIED. THE S AME IS DELETED. THE AO IS FREE TO TAKE ACTION AGAINST THE SHARE APPLICANTS IN THEIR CASES AS DIRECTED BY THE SUPREME COURT IF THEY DO NOT HAVE ADEQUATE SOURCES OF INCOME. 4.1(IV) AS FAR AS THE LOANS FROM THE VARIOUS PERSON S ARE CONCERNED, IT IS SEEN-THAT, THE AO HAS MADE EXTENSIVE ENQUIRIES AS MENTIONED IN THE AS SESSMENT ORDER TO PROVE THAT THE CONCERNED PERSONS DID NOT HAVE ADEQUATE SOURCES OF INCOME. AFTER FROM MAKING GENERAL STATEMENTS ABOUT THEIR CAPACITY TO HAVE ADVANCED LO ANS AND STATING THAT THE LAND RECORDS WERE NOT PROPERLY UPDATED, THE A.R. HAS NOT BEEN AB LE TO ESTABLISH THE .CREDIT-WORTHINESS OF THE CREDITORS. THE A.R WAS NOT ABLE TO SUBSTAN TIATE HIS SUBMISSION WITH ANY EVIDENCE. 4.1(V) DURING THE REMAND PROCEEDINGS, THE A.O HAS E XAMINED ALL THE EVIDENCES FURNISHED BY THE APPELLANT AND HAS EXTENSIVE EXAMINED THEM TO COME TO THE CONCLUSION THAT THE PERSONS DID NOT HAVE ADEQUATE CAPACITY TO HAVE ADVA NCED THE ALLEGED LOANS. 4.1(VI) I AGREE WITH THE FINDINGS OF THE A.O. HE HA S CONCLUSIVELY ESTABLISHED THE FACTS THAT THE PERSONS DO NOT HAVE ADEQUATE CAPACITY TO HAVE A DVANCED SUCH LOANS. IN VIEW OF THE ABOVE, THE ADDITION MADE BY THE A.O IN RESPECT OF THE DEPOSITS SHOWN FROM VARIOUS PERSONS IS JUSTIFIED. THE SAME I S HENCE CONFIRMED. 7. AGGRIEVED BY THE ORDER OF LD. CIT(A), ASSESSEE AND REVENUE ARE NOW IN APPEAL BEFORE US. 8. BEFORE US LD. A.R., REITERATED THE SUBMISSIONS MADE BEFORE A.O AND LD. CIT(A) AND FURTHER SUBMITTED THE PROMOTERS OF ASSES SEE ARE FARMERS AND ENGAGED IN THE AGRICULTURE/AGRO BASED BUSINESSES. H E FURTHER SUBMITTED THAT ITA NOS. 928 & 388/AHD/2011 . A.Y. 2007-08 5 THE ADDITION WAS PRIMARILY BASED ON THE BASIS OF ST ATEMENTS OF VARIOUS SHAREHOLDERS THAT WERE RECORDED ON OATH BY THE A.O U/S. 131 OF THE ACT. HE SUBMITTED THAT APART FROM THE STATEMENT, A.O HAD AL SO RELIED ON CERTAIN OTHER DOCUMENTS AND REPLIES GATHERED BY THE A.O AT THE BA CK OF ASSESSEE. THE LD. A.R. SUBMITTED THAT ASSESSEE WAS NOT GRANTED OPPORT UNITY TO CROSS EXAMINE THE SHAREHOLDERS NOR THE MATERIAL COLLECTED AT THE BACK OF THE ASSESSEE WAS CONFRONTED TO THE ASSESSEE AND AS SUCH IT WAS VIOLA TION OF PRINCIPLES OF NATURAL JUSTICE. WITH RESPECT TO THE OBSERVATION OF THE A.O THAT THERE WAS WIDE DIFFERENCE BETWEEN THE PRODUCTION OF CROPS AS PER LAND RECORD AND THE PRODUCTION AS STATED BY THE DEPOSITORS, HE SUBMITTE D THE REASON FOR DIFFERENCE TO BE ON ACCOUNT OF NON UPDATION OF THE LAND RECORD S BY THE REVENUE AUTHORITIES. HE FURTHER SUBMITTED THAT IF THE ASSES SEE IS GRANTED AN OPPORTUNITY, IT WOULD BE IN A POSITION TO RECONCILE THE DIFFERENCES THAT WERE NOTED BY THE A.O. THE LD. D.R. ON THE OTHER HAND SU PPORTED THE ORDER OF A.O AND SUBMITTED THAT LD. CIT(A) WAS NOT CORRECT IN DE LETING THE ADDITION MADE BY A.O. 9. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. THE ISSUE IN THE PRESENT CASE IS WITH RESPECT TO ADDITI ON U/S. 68. IT IS A.OS CONTENTION THAT THE ASSESSEE HAS NOT PROVED THE GEN UINENESS OF THE CREDITS AND FURTHER MANY OF THE DEPOSITORS HAD SUBMITTED TH E CROPS GROWN BY THEM WAS AT VARIANCE WITH THE RELEVANT LAND RECORDS OF T HE DEPOSITORS TO WHICH A.RS SUBMISSION IS THAT THE DISCREPANCY IS ON ACCO UNT OF NON-UPDATION OF RECORDS. IT IS ALSO LD. A.R.S SUBMISSION THAT THE STATEMENT OF VARIOUS SHAREHOLDERS WERE RECORDED AT THE BACK OF ASSESSEE. CONSIDERING THE AFORESAID FACTS, WE ARE OF THE VIEW THAT IN A CASE WHEN ANY MATERIAL IS USED AGAINST THE ASSESSEE, THE ASSESSEE SHOULD BE GRANTE D AN OPPORTUNITY TO ITA NOS. 928 & 388/AHD/2011 . A.Y. 2007-08 6 PRESENT ITS SIDE. IN THE PRESENT CASE, WE FIND THAT DUE OPPORTUNITY OF CROSS EXAMINATION WAS NOT MADE AVAILABLE TO ASSESSEE. IN SUCH CIRCUMSTANCE, WE ARE OF THE VIEW THAT ONE MORE OPPORTUNITY NEEDS TO BE GRANTED TO ASSESSEE TO JUSTIFY ITS STAND AND PLACE ALL THE NECESSARY MATER IAL BEFORE A.O. WE THEREFORE WITHOUT COMMENTING ON THE MERITS OF THE C ASE, REMIT THE ENTIRE ISSUE TO THE FILE OF A.O TO DECIDE THE ISSUE AFRESH IN ACCORDANCE WITH LAW. THE ASSESSEE IS DIRECTED TO PROMPTLY FURNISH ALL TH E REQUIRED DETAILS CALLED FOR BY THE A.O. IN CASE THE ASSESSEE FAILS TO FURNI SH THE DETAILS, THE A.O SHALL BE FREE TO PROCEED ON THE BASIS OF MATERIAL AVAILAB LE ON RECORD. NEEDLESS TO STATE THAT A.O SHALL GRANT ADEQUATE OPPORTUNITY OF HEARING TO THE ASSESSEE. THUS THE GROUNDS OF ASSESSEE AND REVENUE ARE DECIDE D AS PER DIRECTIONS CONTAINED HEREINABOVE. 10. IN THE RESULT, THE APPEAL OF ASSESSEE AND REVENUE A RE ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN OPEN COURT ON 15- 05 - 2015. SD/- SD/- (SHAILENDRA KR. YADAV) (ANIL CHATURVEDI) JUDICIAL MEMBER ACCOUNTANT MEMBER AHMEDABAD. TRUE COPY RAJESH COPY OF THE ORDER FORWARDED TO: - 1. THE APPELLANT. 2. THE RESPONDENT. 3. THE CIT (APPEALS) 4. THE CIT CONCERNED. 5. THE DR., ITAT, AHMEDABAD. 6. GUARD FILE. BY ORDER DEPUTY/ASSTT.REGISTRAR ITAT,AH MEDABAD