ITO, Jaipur V. M/S ORCHID MEDICARE PVT. LTD., Jaipur

ITA 939/JPR/2011

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 62015 (ITAT-JAIPUR)
• Duration Of Justice: 6 month(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-05-2012
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2003-2004
• Appeal Filed On: 03-11-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: D K MEENA
• Assessee Lawyers: P C PARWAL CAAR
• Keywords: Additional evidence; Question of law; Onus to prove
• Section: 143(3); 133(6); 68; 263

Judgement Text

1 IN THE INCOME TAX APPELLATE T RIBUNAL JAIPUR BENCHE S A, JAIPUR BEFORE S/SHRI R.K. GUPTA, JM AND SANJAY ARORA, AM I.T.A NO. 939/JP/2011 ASSESSMENT YEAR: 2003-04 THE INCOME TAX OFFICER, WARD - 5 (2), JAIPUR VS ORCHID MEDICARE (P) LTD., A-1, SETHI COLONY, JAIPUR [PAN: AAACO 7047G] (REVENUE-APPELLANT) (ASSESSEE-RESPONDENT) I.T.A NO. 940/JP/2011 ASSESSMENT YEAR: 2003-04 THE INCOME TAX OFFICER, WARD - 5 (2), JAIPUR VS PACIFIC GLOBAL LTD. A-1, SETHI COLONY, JAIPUR [PAN: AABCP 1171H] (REVENUE-APPELLANT) (ASSESSEE-RESPONDENT) REVENUE BY SHRI D.K. MEENA, JR. DR ASSESSEE BY SHRI P.C. PARWAL, CA-AR DATE OF HEARING 14/05/2012 DATE OF PRONOUNCEMENT 16 /05/2012 O R D E R PER SANJAY ARORA, AM: THESE ARE A SET OF TWO APPEALS BY THE REVENUE, ARI SING OUT OF TWO SEPARATE ORDERS BY THE COMMISSIONER OF INCOME-TAX (APPEALS)-II, JAI PUR (CIT (A) FOR SHORT) OF EVEN DATE, I.E., 17-08-2011, ALLOWING THE ASSESSEE'S APP EALS CONTESTING THEIR RESPECTIVE ASSESSMENTS FRAMED U/S.147 READ WITH SECTION 143(3) OF THE INCOME TAX ACT, 1961 (THE ACT HEREINAFTER) FOR THE ASSESSMENT YEAR (A.Y.) 20 03-04. AS THE APPEALS RAISE A COMMON 2 ISSUE, EVEN AS CONCEDED TO BY BOTH THE PARTIES, THE Y WERE HEARD TOGETHER, AND ARE BEING DISPOSED OF VIDE A COMMON, CONSOLIDATED ORDER. WE S HALL, HOWEVER, FOR THE SAKE OF REFERENCE, MENTION THE FIGURES AS OBTAINING IN THE CASE OF M/S. ORCHID MEDICARE (P.) LTD. 2. WE HAVE HEARD THE PARTIES AND PERUSED THE MATERI AL ON RECORD, AS ALSO REVIEWED THE CASE LAW IN THE MATTER, INCLUDING THAT CITED BEFORE US. 2.1 THE ONLY ISSUE ARISING IN THESE APPEALS IS THE SUSTAINABILITY IN LAW OF THE ADDITION U/S. 68 OF THE ACT IN RESPECT OF THE SUMS RECEIVED BY THE ASSESSEES BY WAY OF SHARE APPLICATION MONEY FROM TWO OTHER COMPANIES; THE REV ENUES SOLE GROUND READING AS UNDER:- ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE A ND IN LAW THE LD. CIT(A) HAS ERRED IN DELETING THE ADDITION OF RS. XXXXXX MADE BY THE AO ON ACCOUNT OF UNEXPLAINED SHARE APPLICATION MONEY WITHOUT APPRECIATING THE FACT THA T ONE OF THE DIRECTORS OF THE SHARE APPLICANT COMPANIES HIMSELF ADMITTED IN HIS STATEME NT THAT HE IS INDULGED IN PROVIDING ENTRIES THROUGH HIS VARIOUS COMPANIES/FIRMS AND CHA RGING COMMISSION FOR THIS. [ RS. 21,04,200/- (IN THE CASE OF M/S. ORCHID MEDICAR E (P.) LTD. ) AND RS. 17,53,125/- (IN THE CASE OF M/S. PACIFIC GLOBAL LTD. ) ] 2.2 THE ASSESSEE, DURING THE RELEVANT YEAR RECEI VED SHARE APPLICATION MONEY FROM TWO OTHER COMPANIES, AS UNDER, THE BALANCE DIFFERENCE O F RS. 4,200/- (RS. 3,125/-) REPRESENTING BANK COMMISSION ON BANK DRAFTS PER WHI CH THE IMPUGNED INVESTMENTS WERE MADE: SPARROW MARKETING (P.) LTD.: RS. 11 LACS SHRI NIWAS LEASING AND FINANCE LTD.: RS. 10 LACS 2.3 THE ASSESSEE'S CASE, QUA APPLICATION OF SEC. 68 IN RESPECT OF THESE RECEIPT S, IS THAT IT HAS FURNISHED RELEVANT DOCUMENTARY EVIDENCES IN DIS CHARGE OF THE INITIAL ONUS THAT LAY ON IT. THE SAME HAS NOT BEEN REBUTTED BY THE REVENUE I N ANY MANNER AND, AS SUCH, NO ADVERSE INFERENCE QUA THE GENUINENESS OF THE IMPUGNED CREDITS COULD BE D RAWN AGAINST IT. THE REVENUES CASE, ON THE OTHER HAND, RESTS ON THE ALLEGED STATEMENT BY SHRI VINOD 3 GARG, A DIRECTOR OF A SHARE-APPLICANT COMPANY BEFOR E THE INVESTIGATING AUTHORITY OF THE DEPARTMENT, ADMITTING TO BE ENGAGED IN PROVIDING AC COMMODATION ENTRIES FOR A COMMISSION, SO THAT THE SHARE INVESTMENTS ARE BOGUS . IN OTHER WORDS, THE INVESTMENTS UNDER REFERENCE DO NOT REPRESENT ANY REAL INVESTMEN T BY THE SHARE APPLICANT COMPANY/S, SO THAT IT IS A CASE OF NO INVESTMENT OR A BENAMI INVE STMENT. WITHOUT DOUBT, IF THE INVESTMENT UNDER REFERENCE IS SHOWN TO BE BOGUS, SO THAT THERE HAS BEEN NO ACTUAL INVESTMENT BY THE CREDITOR OR IT IS A BENAMI INVESTMENT, SECTION 68 W OULD DEFINITELY APPLY, EVEN AS CLARIFIED BY THE HON'BLE JURISDICTIONAL HIGH COURT IN THE CAS E OF, INTER ALIA , ARAWALI TRADING COMPANY VS. ITO , 220 CTR 622 (RAJ.). FURTHER, IN THE CONTEXT OF IN VESTMENT BY WAY OF SHARE CAPITAL/SHARE APPLICATION MONEY, IT HAS IN FA CT GONE ON TO SAY (IN CIT VS. SHREE BARKHA SYNTHETICS LTD ., 270 ITR 477 (RAJ.)) THAT THE ONUS ON THE REVENUE IS NOT ONLY TO SHOW THAT THE AMOUNT DID NOT BELONG TO THE CREDITOR /S BUT, FURTHER, THAT THE AMOUNT BELONGS TO THE ASSESSEE. THIS IS AS `BENAMI CANNOT BE A MA TTER OF PRESUMPTION, AND IS TO BE PROVED, PARTICULARLY WHERE CREDITORS WERE EXISTING PERSONS (REFER: CIT VS. FIRST POINT FINANCE LTD ., 286 ITR 477 (RAJ.)). WHERE THE CREDITORS, THOUGH EXISTING, WERE FOUND TO BE POOR FARMERS, WITH LITTLE OR NO CREDITWORTHINESS, T HE INFERENCE BY THE REVENUE OF THE TRANSACTIONS REPRESENTED BY SHARE CAPITAL AS BEING NOT GENUINE, SO THAT THERE WAS NO INVESTMENT BY THEM, WAS UPHELD BY THE HON'BLE COURT IN BHOLA SHANKAR COLD STORAGE (P.) LTD. VS. JT. CIT , 270 ITR 487 (CAL.), AS INDEED IT WAS BY ALL THE A UTHORITIES BELOW. 2.3 COMING TO THE FACTS OF THE PRESENT CASE, WE FIN D THAT THE WHILE THE ASSESSEE HAS DISCHARGED THE INITIAL ONUS ON IT BY ADDUCING THE R ELEVANT DOCUMENTS, THE REVENUE HAS NOT EVEN AS MUCH AS REFERRED TO THE STATEMENT BY SHRI V INOD GARG, STATED TO BE RECORDED BY THE ADDL. DIT (INVESTIGATION), DELHI, ON THE BASIS OF WHICH ITS SUSPECTS OR ALLEGES THE IMPUGNED TRANSACTIONS TO BE NOT GENUINE. THAT, RAT HER, OUGHT TO HAVE BEEN THE FULCRUM OF THE REVENUES CASE, BEING THE BASIS ON WHICH THE AS SESSMENTS FOR THE RELEVANT YEAR STOOD SUBJECT TO RE-ASSESSMENT PROCEEDINGS. AS POINTED OU T BY THE LD. AR, THERE IS EVEN NOT A WHISPER OF THE SAID STATEMENT IN THE ORDERS BY THE AUTHORITIES BELOW, LEAVE ALONE IT BEING CONFRONTED TO THE ASSESSEE AT ANY STAGE. THE LD. CI T(A) WE OBSERVE HAS IN FACT NOTED THE 4 LACK, NAY, ABSENCE OF PROPER ENQUIRY IN THE MATTER BY THE ASSESSING AUTHORITY. HOWEVER, RATHER THAN PROCEEDING TO COMPLETE THE ENQUIRY BY I NVOKING HIS COTERMINOUS POWERS, HE PROCEEDS TO DISCUSS THE LAW IN THE MATTER, WITH EAC H OF THE DECISIONS REFERRED TO BY HIM BEING RENDERED, AS WOULD BE APPARENT FROM A READING THEREOF, IN THE FACT-SETTING OF THE RESPECTIVE CASES, WITHOUT APPRECIATING THE REVENUE S CASE, WHICH IS PRIMARILY FACTUAL, AS INDEED THE APPLICATION OF SECTION 68 IS. (REFER PAR A 4.1 OF THE IMPUGNED ORDER). THE DECISION IN THE CASE OF CIT V. OASIS HOSPITALITIES (P.) LTD (2010-TIOL-HC-DEL), DISCUSSED AT PARA 4.2 OF HIS ORDER, AGAIN, CLARIFIE S THIS POINT ABUNDANTLY. THE REVENUE IN THE INSTANT CASE HAS NOT EVEN ADDUCED THE COPY OF T HE SAID STATEMENT (WITH A PRAYER FOR ADMISSION OF ADDITIONAL EVIDENCE) EVEN BEFORE US FO R IT TO PLEAD AS HAVING MADE OUT A PRIMA FACIE CASE. 2.4 TRUE, ADMISSION IS THE BEST FORM OF EVIDEN CE, AND THE DIRECTORS OF THE `INVESTOR COMPANIES WERE NOT PRODUCED BY THE ASSESSEE-COMPANY BEFORE THE ASSESSING OFFICER (AO). HOWEVER, IN OUR VIEW, THE INITIAL BURDEN THAT LAY ON THE ASSESSEE HAVING BEEN DISCHARGED BY IT THROUGH THE PRODUCTION OF THE RELE VANT DOCUMENTARY EVIDENCES, WHICH HAVE NOT BEEN REBUTTED BY THE REVENUE BY BRINGING S OME MATERIALS TO SHOW THAT, EVEN SO, THE TRANSACTION/S CANNOT BE REGARDED AS GENUINE, TH E SAME WOULD BE OF LITTLE MOMENT. WHY, WE WONDER, WAS THE STATEMENT OF SHRI VINOD GAR G, AND WHICH, AGAIN, AS IT APPEARS, IS ONLY IN RELATION TO ONE OF THE TWO INVESTOR COMP ANIES, NOT CONFRONTED TO THE ASSESSEE; THE SAME BEING A VITAL PIECE OF EVIDENCE ? WHY, AGAIN, EVEN AS THE LD. CIT(A) ALSO NOTES, THE AO DID NOT ISSUE COMMISSION IN FAVOUR OF SOME O FFICER AT DELHI OR CALL FOR INFORMATION THROUGH ISSUE OF NOTICES U/S. 133(6) ?. IN FACT, THE REPORT OF THE ADDL. DIT (INVESTIGAT ION), DELHI IS EXTREMELY IMPORTANT FOR THE PURPOSE, BUT I N THE FACTS AND CIRCUMSTANCES OF THE CASE, STANDS NEITHER REFERRED TO NOR PURSUED. IT WA S IMPORTANT FOR THE REVENUE TO HAVE BROUGHT SOME MATERIAL ON RECORD TO IMPUGN THE TRANS ACTION/S AS NOT GENUINE, I.E., TO SHOW THAT THERE WAS INDEED NO REAL INVESTMENT BY THE SHA RE APPLICANT-COMPANY/S, FOR THE ONUS TO SHIFT BACK TO THE ASSESSEE. THE DECISION IN THE CASE OF CIT VS. KAMDHENU STEEL & ALLOYS LTD . (2012) 68 DTR 38 (DEL.) IS, AGAIN, PRECISELY ON T HIS ASPECT OF THE MATTER, AND RIGHTLY 5 RELIED UPON BY THE ASSESSEE. IN FACT, THE NON-PROCE EDING BY THE REVENUE ALONG THESE LINES RAISES SERIOUS DOUBTS AS TO THE CREDIBILITY OF ITS CLAIMS PER ITS GROUND OF APPEAL, NO CASE IN TERMS OF WHICH STAND MADE OUT. HERE IT WOULD BE PER TINENT TO STATE THAT IT WAS ONLY ON THE FINDING OF LACK OR ABSENCE OF PROPER OR NECESSARY E NQUIRY BY THE ASSESSING AUTHORITY THAT THE TRIBUNALS ORDER, SETTING ASIDE THE ACTION OF T HE COMMISSIONER OF INCOME-TAX IN INVOKING SEC. 263 OF THE ACT, WAS AFFIRMED BY THE H ONBLE COURT AS GIVING RISE TO A SUBSTANTIAL QUESTION OF LAW, AFTER A REVIEW OF THE PRECEDENTS, INCLUDING ITS DECISION IN THE CASE OF CIT VS. STELLAR INVESTMENT LTD ., 192 ITR 287 (DEL.), BY THE HONBLE COURT IN CIT VS. SOPHIA FINANCE LTD ., 205 ITR 98 (DEL.) (FB), A CELEBRATED DECISION IN THE CONTEXT OF SECTION 68 OF THE ACT QUA SHARE CAPITAL/SHARE APPLICATION MONEY. 2.5 NOW, COMING TO THE DECISIONS IN THE CASE OF VIJAY KUMAR TALWAR VS. CIT (2011) 330 ITR 1 (SC) AND RAJSHREE SYNTHETICS (P.) LTD. VS. CIT , 256 ITR 331 (RAJ.), RELIED UPON BY THE REVENUE. THERE IS NO DISPUTING THE PROPOSITI ONS AS LAID DOWN IN THE SAID DECISIONS, BEING EVEN OTHERWISE BINDING ON US. BOTH THESE DECI SIONS ARE IN RELATION TO THE `BURDEN OF PROOF, AND IN THE CONTEXT OF SECTION 68 OF THE ACT , WHERE-UNDER, IT IS TRITE, THAT THE BURDEN TO PROVE A CREDIT ON THE PARAMETERS OF `IDENTITY A ND `CAPACITY OF THE CREDITOR, AND THE `GENUINENESS OF THE TRANSACTION, IS ON THE ASSESSE E-RECIPIENT. THE ASSESSEE HAS ADMITTEDLY FURNISHED THE PRIMARY DETAILS WITH REGARD TO THESE FACETS OF ITS CASE; NOTHING ADVERSE IN RESPECT OF WHICH HAS BEEN POINTED OUT BY THE REVENU E. NON-PRODUCTION OF THE DIRECTORS OF THE INVESTOR COMPANIES WOULD UNDER SUCH CIRCUMSTANC ES ASSUME SIGNIFICANCE ONLY ON THE ASSESSEE BEING CONFRONTED WITH THE ALLEGED STATEMEN T BY SHRI VINOD GARG, ALLOWING THE ASSESSEE AN OPPORTUNITY TO CROSS EXAMINE HIM, OR SO ME OTHER MATERIAL TO REBUT THE TRANSACTIONS AS NOT GENUINE, SO THAT THERE HAS BEEN IN FACT NO TRANSFER OF FUNDS FROM THE OSTENSIBLE CREDITOR-INVESTORS TO THE INVESTEE-COMPA NY, I.E., THE IMPUGNED TRANSACTIONS ARE PAPER TRANSACTIONS. IF, ON THE OTHER HAND, THE IMPU GNED `INVESTMENTS ARE CLAIMED TO REPRESENT BENAMI INVESTMENTS, THE ONUS ON THE REVEN UE, AS EXPLAINED BY THE HONBLE JURISDICTIONAL HIGH COURT, IS EVEN HIGHER, WHILE, A S STATED EARLIER, IT HAS NOT EVEN MADE OUT A PRIMA FACIE CASE IN SUPPORT OF ITS CLAIMS. BOTH THE DECISIONS CITED BY THE REVENUE ARE 6 NOT IN RELATION TO SHARE INVESTMENT, WHICH, AS IN T HE CASE OF BANK DEPOSITS, IS CHARACTERIZED BY A PRESUMPTION OF GENUINENESS, PARTICULARLY WHERE IN RELATION TO A PUBLIC OFFER, WHICH THUS NEEDS TO BE IMPUGNED BY THE REVENUE WHERE A PRIMA FACIE CASE IS MADE OUT BY THE ASSESSEE-INVESTEE. RELIANCE ON THE SAID CASE LAW, T HEREFORE, WOULD NOT BE OF MUCH ASSISTANCE TO THE REVENUE IN THE FACTS AND CIRCUMST ANCES OF THE CASE. 3. IN THE RESULT, THE APPEALS BY THE REVENUE A RE DISMISSED. SD/- SD/- (R.K. GUPTA) (SANJAY ARORA) JUDICIAL MEMBER ACCOUNTANT MEMBER PLACE: JAIPUR DATED: MAY 16 , 2012 *MISHRA COPY TO: 1. THE ITO, WARD - 5 (2), JAIPUR 2A. M/S. ORCHID MEDICARE (P) LTD., JAIPUR 2B. M/S. PACIFIC GLOBAL LTD., JAIPUR 3. THE CIT (APPEALS) - II, JAIPUR 4. THE CIT CONCERNED 5. THE D.R., I.T.A.T. 6. GUARD FILE (ITA NOS. 939 & 940/JP/2011) BY ORDER (ASSISTANT REGIST RAR) ITAT, JAIPUR BENCHES