M/s. Gopalpur Ports Limited, Cuttack V. ACIT, Cuttack

ITA 97/CTK/2015

• Counselvise Citation: [2019] 115 COUNSELVISE.COM (IT) 7761 (ITAT-CUTTACK)
• Duration Of Justice: 4 year(s) 7 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 14-10-2019
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: DB
• Assessment Year: 2009-2010
• Appeal Filed On: 11-03-2015
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Assessee Lawyers: J B SAHU
• Keywords: Unexplained cash credit
• Section: 201; 68

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL CUTTACK BENCH CUTTACK BEFORE SHRI C.M. GARG , J M & SHRI L.P. SAHU, A M . / ITA NO. 97 /CTK/201 5 ( / ASSESSMENT YEAR : 20 09 - 201 0 ) M/S GOPALPUR PORTS LIMITED, OSL T OWER, LINK ROAD, CUTTACK VS. ACIT, CIRCLE - (2), CUTTACK ./ PANNO. : A A CCG 6721 F ( / APPELLANT ) .. ( / RESPONDENT ) /ASSESSEE BY : SHRI J.B.SAHU , ADVOCATE /REVENUE BY : SHRI S.M.KESHKAMA T , CIT DR / DATE OF HEARING : 25 /09/2019 / DATE OF PRONOUNCEMENT : 14 / 10 /2019 / O R D E R PER L.P.SAHU , A M : TH IS IS AN APPEAL FILED BY THE ASSESSEE AGAINST THE ORDER OF CIT(A), CUTTACK , DATED 31.12.2014 FOR THE ASSESSMENT YEAR 20 09 - 201 0 ON THE FOLLOWING GROUNDS OF APPEAL : - 1. THAT THE ORDER DATED 31.12.2014 PASSED BY THE LD. CIT (APPEAL) IN IT APPEAL NO. 0622/2011 - 12 IS ILLEGAL, ARBITRARY AND UNSUSTAINABLE IN LAW. 2. THAT THE IMPUGNED ADDITION OF RS.4,31,15 ,000/ - REPRESENTING SHARE APPLICATION MONEY OF M/S ON TRACK TRADING LTD PURPORTEDLY UNDER SECTION 68 OF THE IT ACT IS ILLEGAL AND ARBITRARY. 3. THAT THE APPELLANT HAVING SUBMITTED RELEVANT EVIDENCES WITH REGARD TO THE AMOUNT INVESTED BY THE SAID INVESTI NG FOREIGN COMPANY, IT IS NOT LAWFUL AND PROPER TO CONFIRM ADDITION ON THE GROUND OF ITS WANT OF PROOF OF CREDIT WORTHINESS OF THE SAID INVESTING COMPANY WHICH IS ILLEGAL AND ARBITRARY. 4. THAT NON CONSIDERATION OF THE APPLICATION OF THE PROVISO TO SECT ION 68 OF THE IT ACT EFFECTIVE FROM 01.04.2013 RELIED UPON BY THE APPELLANT WAS NOT CONSIDERED BY LD. CIT (APPEAL) IS INCONSISTENT WITH THE RELEVANT STATUTORY PROVISIONS. ITA NO. 97 /CTK/201 5 2 5. THAT THE DECISION RENDERED BY THE HON'BLE APEX COURT RELIED BY THE LD. CIT (APPE AL) IN SUMATI DAYAL V/S - CIT 214 ITR 801 (SC) AND CIT V/S - DP MORE 82 ITR 540 (SC) IS NOT APPLICABLE TO THE APPELLANT BOTH IN FACTS AND IN LAW THEREFORE THE IMPUGNED ORDER IS UNSUSTAINABLE IN LAW. 6. THAT THE IMPUGNED LEVY OF INTEREST UNDER SECTION 234 B AND 234 D IS ILLEGAL AND ARBITRARY. 7. THAT, THE APPELLANT BEGS TO RESERVE FURTHER GROUNDS TO BE URGED AT THE TIME OF HEARING OF THE APPEAL. 2 . BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE COMPANY IS ENGAGED IN SEA - PORT SERVICES AND FILED ITS RETUR N OF INCOME ELECTRONICALLY ON 30.09.2009. THE RETURNED TOTAL LOSS IS RS.1,62,09,497/ - . THE RETURN WAS SELECTED FOR SCRUTINY ASSESSMENT UNDER CASS AND STATUTORY NOTICES WERE ISSUED TO THE ASSESSEE. D URING SCRUTINY THE A O FOUND THAT ONE FOREIGN COMPANY NAMEL Y M/S.ON TRACK TRADING LTD. HAS BEEN ALLOTTED BY THE ASSESSEE 43,11,500 SHARES @ RS.10/ - PER SHARE. AFTER DISCUSSION WITH THE ASSESSEE THE AO FURTHER FOUND THAT M/S, ON TRACK TRADING LTD. IS A FOREIGN COMPANY NOT BEING THE PROMOTER COMPANY LIKE OTHER THREE SHARE HOLDERS OF THIS PRIVATE COMPANY. THE ASSESSEE SUBMITTED THAT THE SHARE APPLICATION MONEY AMOUNTING TO RS.4,31,15,000/ - CAME THROUGH BANKING CHANNELS AND THERE IS NO IRREGULARITY IN ALLOTMENT OF SHARES TO THIS COMPANY. BUT TO SUPPORT THE SUBMISSION A ND TO SUBSTANTIATE THA T THE INVESTING COMPANY HAD ADEQUATE FUNDS, BALANCE SHEETS/ PROFI T & LOSS ACCOUNTS OF CURRENT OR PAST YEARS OF THIS COMPANY COULD NOT BE PRODUCED BEFORE THE AO. BEFORE THE AO THE ASSESSEE COULD NOT FURNISH ANY DETAILS EXCEPT FORM NO.2 WHICH PROVIDED DETAILS OF ALLOTMENT BUT ITA NO. 97 /CTK/201 5 3 NO DETAILS REGARDING FROM WHERE AND HOW INVESTMENT CAME. THE AO FOUND THAT FUNDS APPEARING IN THE NAME OF M/S.ON TRACK TRADING LTD. ARE NOT DETAILED BY THE ASSESSEE. THE AO DEDUCED THAT CREDITWORTHINESS OF THIS INVE STING COMPANY IS NOT SATISFACTORY AND THEREFORE HE DID NOT ACCEPT THE SAME. SINCE THE BENEFICIARY OF SUCH FUND FLOW IS NONE OTHER THAN THE ASSESSEE COMPANY, THE SUM OF RS.4,31,15,000/ - FOUND CREDITED IN THE BOOKS OF THE ASSESSEE IN THE IMPUGNED FINANCIAL Y EAR WAS TAKEN BY AO AS UNEXPLAINED INCOME AND IS CHARGED TO INCOME - TAX U/S.68 OF THE ACT. 3 . FEELING AGGRIEVED WITH THE ORDER OF AO, THE ASSESSEE APPEALED BEFORE THE CIT(A) AND THE CIT(A) AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE AND FINDINGS OF TH E AO DISMISSED THE APPEAL OF THE ASSESSEE OBSERVING THAT AS THE CREDITWORTHINESS OF THE FOREIGN INVESTOR COMPANY COULD NOT BE ESTABLISHED BY THE ASSESSEE FIRM AND ALSO THE REASONS FOR INVESTMENT IN THE ASSESSEE COMPANY COULD NOT BE SUBSTANTIATED, THEREFORE , THE CIT(A) AGREED WITH THE FINDING OF THE AO THAT THE AMOUNT SHOULD BE TREATED AS UNEXPLAINED CASH CREDIT OF THE APPELLANT COMPANY AND SHOULD BE ADDED TO THE TOTAL INCOME OF THE ASSESSEE. 4 . FURTHER FEELING AGGRIEVED, THE ASSESSEE IS IN APPEAL BEFORE THE INCOME TAX APPELLATE TRIBUNAL. ITA NO. 97 /CTK/201 5 4 5 . LD. AR SUBMITTED THAT THE ASSESSEE HAVING SUBMITTED RELEVANT EVIDENCES WITH REGARD TO THE AMOUNT INVESTED BY THE SAID INVESTING FOREIGN COMPANY, IT IS NOT LAWFUL AND PROPER TO CONFIRM ADDITION ON THE GROUND OF ITS WANT OF PROOF OF CREDIT WORTHINESS OF THE SAID INVESTING COMPANY WHICH IS ILLEGAL AND ARBITRARY. LD. AR FURTHER SUBMITTED THAT NON - CONSIDERATION OF THE APPLICATION OF THE PROVISO TO SECTION 68 OF THE IT ACT EFFECTIVE FROM 01.04.2013 RELIED UPON BY THE APPELLANT W AS NOT CONSIDERED BY LD. CIT (APPEAL) IS INCONSISTENT WITH THE RELEVANT STATUTORY PROVISIONS. FURTHER, LD. AR SUBMITTED THAT THE DECISION RENDERED BY THE HON'BLE APEX COURT RELIED BY THE LD. CIT (APPEAL) IN SUMATI DAYAL V/S - CIT 214 ITR 801 (SC) AND CIT V/ S - DP MORE 82 ITR 540 (SC) IS NOT APPLICABLE TO THE APPELLANT BOTH IN FACTS AND IN LAW THEREFORE THE IMPUGNED ORDER IS UNSUSTAINABLE IN LAW. 6 . ON THE OTHER HAND, LD.DR RELIED ON THE ORDERS OF AUTHORITIES BELOW. 7 . AFTER HEARING BOTH THE SIDES AND PERUSING THE ENTIRE MATERIAL AVAILABLE ON RECORD ALONG WITH THE ORDERS OF AUTHORITIES BELOW, WE FIND THAT DURING THE COURSE OF ASSESSMENT PROCEEDINGS THE ASSESSEE COULD NOT FURNISH ANY DETAILS EXCEPT FORM NO.2 WHICH PROVIDED DETAILS OF ALLOTMENT BUT NO DETAILS REG ARDING FROM WHERE AND HOW INVESTMENT CAME. THE AO FOUND THAT THE CREDITWORTHINESS OF THE INVESTING COMPANY IS NOT PROVED BY THE ASSESSEE, THEREFORE, HE TREATED THE SUM ITA NO. 97 /CTK/201 5 5 CREDITED IN THE BOOKS OF THE ASSESSEE AS UNEXPLAINED AND CHARGED THE SAME U/S.68 OF THE ACT. THE CIT(A) FROM THE VERIFICATION OF ALL THE DOCUMENTS PLACED BY THE ASSESSEE DURING THE APPELLATE PROCEEDINGS, FOUND THAT AMOUNT HAD COME IN FOREIGN CURRENCY THROUGH BANKING CHANNELS TO THE ASSESSEE COMPANY. SINCE THE INVESTING FOREIGN COMPANY HAS BEE N REGISTERED ETC. IT APPEARS THAT IT HAS AN IDENTITY. BUT THE MOST IMPORTANT EVIDENCE MISSING IN THE WHOLE TRANSACTION IS THE PROOF OF CREDITWORTHINESS OF THE INVESTING COMPANY. FURTHER THE CIT(A) OBSERVED THAT THE ASSESSEE DID NOT PRODUCE REASONS FOR INVE STMENT BY THE FOREIGN COMPANY WITH THE ASSESSEE EVEN THE ASSESSEE HAS NOT FILED ANY CONFIRMATION FROM THE FOREIGN INVESTING COMPANY OR THE DIRECTORS REGARDING SUCH INVESTMENT IN SHARES WITH THE ASSESSEE COMPANY. IN ABSENCE OF ABOVE EVIDENCE, THE CIT(A) WEN T WITH THE OPINION OF AO IN MAKING ADDITION U/S.68 OF THE ACT ON ACCOUNT OF UNEXPLAINED CASH CREDIT. THE RELEVANT OBSERVATIONS OF THE CIT(A) READ AS UNDER : - I HAVE CAREFULLY PERUSED THE ASSESSMENT ORDER FRAMED BY THE AO AND ALL THE DOCUMENTS AND DETAILS SUBMITTED BY THE APPELLANT DURING APPEAL HEARING. THE DOCUMENTS MOSTLY INCLUDE THE INCORPORATION, MEMORANDUM OF ASSOCIATION, ARTICLES ETC. OF THE FOREIGN COMPANY M/S. ON TRACK TRADING LTD. AND THE DOCUMENTS REGARDING BANKING TRANSACTIONS OF SHARES AS CONTE NDED BY THE APPELLANT AND AS NOTED ABOVE. FROM THE VERIFICATION OF ALL THE DOCUMENTS IT IS EVIDENT THAT AMOUNT HAD COME IN FOREIGN CURRENCY THROUGH BANKING CHANNELS TO THE APPELLANT COMPANY. SINCE THE INVESTING FOREIGN COMPANY HAS BEEN REGISTERED ETC. IT A PPEARS THAT IT HAS AN IDENTITY. BUT THE MOST IMPORTANT EVIDENCE MISSING IN THE WHOLE TRANSACTION IS THE PROOF OF CREDITWORTHINESS OF THE INVESTING COMPANY. THE APPELLANT DURING APPEAL HEARING SUBMITTED STATEMENT OF ACCOUNTS OF THE INVESTING COMPANY FOR THE MONTH OF AUGUST,2008 ONLY. FROM THE PERUSAL OF SUCH DOCUMENTS IT IS FOUND THAT THERE HAS BEEN PAYMENT TO GOPALPUR PORTS LTD. ON 01.8.2008 AMOUNTING TO 5,00,000$ AND ON 25.8.2008 AMOUNTING TO 500000$. FROM ITA NO. 97 /CTK/201 5 6 THIS COPY OF ONE MONTH STATEMENT WHICH IS NEITHER AUTHENTICATED NOR SIGNED BY THE APPELLANT IT IS OBSERVED THAT THERE HAS BEEN MULTIPLE NUMBER OF TIME DEPOSITS IN USD IN THE ACCOUNT OF THE INVESTING FOREIGN COMPANY DURING THE MONTH OF OCTOBER,2008. IT ALSO APPEARS THAT DURING THE MONTH OF AUGUST,2008 THER E HAS BEEN NO MAJOR OUTGOING FROM THE INVESTOR FOREIGN COMPANY ACCOUNT EXCEPT FOR PAYMENT OF 1000000$ TO THE APPELLANT COMPANY. IT IS NOT EVIDENCED WHERE FROM THE INVESTOR COMPANY GOT THE AMOUNT TO PAY TO THE APPELLANT COMPANY. IT IS ALSO INTERESTING TO NO TE THAT IN A CLOSED PRIVATE LIMITED COMPANY AS THE APPELLANT IS THE OTHER THREE SHARE HOLDERS ARE PROMOTERS, ONE INDIAN COMPANY NAMELY M/S. SARA INTERNATIONAL LTD., AND AN INDIVIDUAL SRI TUSHAR SINGH AND THE OTHER MAJOR SHAREHOLDER IS M/S.ORISSA STEVEDORES LTD. BEING THE SISTER COMPANY. IT IS HIGHLY IMPROBABLE THAT A FOREIGN COMPANY WOULD INVEST IN SUCH PRIVATE CLOSED COMPANY. THE APPELLANT DID NOT PRODUCE THE REASONS FOR INVESTMENT BY THE FOREIGN INVESTOR COMPANY WITH THE APPELLANT. THERE HAS BEEN NO CONFI RMATION FROM THE FOREIGN INVESTING COMPANY OR THE DIRECTORS REGARDING SUCH INVESTMENT IN SHARES WITH THE APPELLANT COMPANY. THE AUDIT REPORT, THE BALANCE SHEET ETC OF THE FOREIGN INVE STING COMPANY WERE NOT PRODUCED. THE INCOME - TAX PARTICULARS OF THE FOREIG N INVESTING COMPANY WERE ALSO NOT PRODUCED FOR VERIFICATION. THE HON'BLE APEX COURT IN THE CASE OF SUMATI DAYAL V. CIT 214ITR 801 (SC) AND CIT V. D.P.MORE 82 ITR 540 (SC). STIPULATED THAT MERE ENTRIES IN BOOKS OF ACCOUNTS OF THE ASSESSEE WERE NOT ENOUGH TO JUSTIFY CASH CREDITS. IT IS LOGICALLY DEDUCED THAT THE ACTION OF THE APPELLANT IS HIGHLY IMPROBABLE TO HUMAN BEHAVIOR. THE APPELLANT DURING APPEAL HEARING SUBMITTED RATIOS OF CERTAIN CASES AND INSISTED THAT IF THE AO FEELS THAT THE SHARE APPLICATION MONE Y RECEIVED BY THE APPELLANT FROM UNEXPLAINED SOURCE OR BOGUS COMPANY, THE DEPARTMENT IS FREE TO PROCEED TO REOPEN THE INDIVIDUAL ASSESSMENT OF THE FOREIGN INVESTING COMPANY IN ACCORDANCE WITH LAW. THE APPELLANT REFERRED TO THE DECISION OF CIT V. LOVELY EXP ORTS PVT. LTD. (2010) 14 SSC 761 (SC). THE FACTS OF THE CASE ARE ENTIRELY DIFFERENT FROM THOSE OF THE CASE OF APPELLANT IN THE CASE OF LOVELY EXPORTS SUPRA THE HON'BLE SUPREME COURT FOUND THAT THE SHAREHOLDERS ARE NUMEROUS PERSONS OF INDIAN ORIGIN WHO HAVE SUBMITTED CONFIRMATION ALONG WITH OTHER DETAILS REGARDING THEIR INVESTMENTS. ON THE CONTRARY IN THE CASE OF THE APPELLANT COMPANY THE FOREIGN INVESTOR IS NOT AN INDIAN NATIONAL, HAS NOT PRODUCED ANY CONFIRMATION OR INCOME - TAX PAYMENT DETAILS, DID NOT PROV E ITS CREDITWORTHINESS FOR ADVANCING THE ABOVE AMOUNT OF SHARE APPLICATION MONEY AND MORE OVER IS NOT ASSESSABLE TO INCOME - TAX AS PER THE LAW OF THE LAND. THE APPELLANT HAD PRODUCED CASE CITATIONS WHICH ARE ALSO NOT APPLICABLE TO THE PRESENT ISSUE AND DIST INGUISHABLE FROM THE APPELLANT COMPANY AND THE FOREIGN INVESTOR COMPANY. AS THE CREDITWORTHINESS OF THE FOREIGN INVESTOR COMPANY COULD NOT BE ESTABLISHED BY THE APPELLANT FIRM AND ALSO THE REASONS FOR INVESTMENT IN. THE APPELLANT COMPANY COULD NOT BE SUBST ANTIATED, I AM INCLINED TO AGREE WITH THE FINDING OF THE AO THAT THE AMOUNT SHOULD BE TREATED AS UNEXPLAINED CASH CREDIT OF THE APPELLANT COMPANY AND SHOULD BE ADDED TO THE TOTAL INCOME OF THE COMPANY U/S.68 OF THE ACT. THE AOS ACTION THUS CONFIRMED. ITA NO. 97 /CTK/201 5 7 8 . FROM THE ABOVE OBSERVATIONS OF THE CIT(A) IT IS CLEAR THAT THE ASSESSEE HAS NOT PRODUCED ANY CONFIRMATION OR INCOME - TAX PAYMENT DETAILS . IT IS NOT IN DISPUTE THAT THE AMOUNT HAS BEEN RECEIVED THROUGH BANKING CHANNEL I.E. THERE IS GENUINENESS TRANSACTIONS. FURTHER IN REGARD TO IDENTITY OF THE SHARE APPLICANTS THAT THE ASSESSEE HAD SUBMITTED COPY OF MEMORANDUM OF ASSOCIATION, REGISTRATION CERTIFICATE OF THE COMPANY WHICH ARE PLACED IN THE PAPER BOOK. THAT MEANS, IT PROVES THE IDENTITY OF THE COMPANY. AFTER EXAMINING ALL THE DOCUMENTS, PRODUCED BEFORE US, WE NOTICE THAT THE ASSESSEE WAS UNABLE TO PROVE THE THIRD INGREDIENT CONTAINED IN THE PROVISIONS OF SECTION 68 OF THE ACT REGARDING CREDITWORTHINESS OF THE SHARE APPLICANTS. THE ASSESSEE HAS ALSO NOT PRODUCE D ANY CREDI BLE EVIDENCE SO THAT THE CREDITWORTHINESS OF THE SHARE APPLICANTS CAN BE PROVED. IN VIEW OF THIS, WE ARE OF THE OPINION, THAT THE ASSESSEE COULD NOT SATISFY THE ONE OF THE INGREDIENTS AS ENVISAGED IN SECTION 68 OF THE ACT FOR DISCHARGING HIS LIABI LITY. EVEN BEFORE US ALSO THE ASSESSEE COULD NOT BRING ANY COGENT MATERIAL THAT THE ASSESSEE HAS FULFILLED THE INGREDIENTS OF THE PROVISIONS OF SECTION 68 OF THE ACT. THE OTHER CONTENTION OF LD. AR OF THE ASSESSEE IS WITH REGARD TO APPLICABILITY OF PROVIS O TO SECTION 68 OF THE ACT EFFECTIVE FROM 01.04.2013. ON CAREFUL PERUSAL OF BOTH THE ASSESSMENT AND APPELLATE ORDER, WE DO NOT FIND THAT ANY OF THE AUTHORITIES BELOW HAVE QUESTIONED ABOUT THE SOURCE OF SOURCE TO THE ASSESSEE SO AS TO APPLY THE PROVISO TO ITA NO. 97 /CTK/201 5 8 S ECTION 68 OF THE ACT. WHEN THE ASSESSEE ITSELF UNABLE TO PRODUCE ANY DOCUMENTS VIZ. BALANCE SHEETS, PROFIT AND LOSS ACCOUNT, ETC. DURING THE ASSESSMENT PROCEEDINGS, THE AO HAS LEFT NO OPTION BUT TO HOLD THAT THE CREDITWORTHINESS OF THE INVESTING COMPANY N AMELY M/S ON TRACK TRADING LTD. IS NOT PROVED BY THE ASSESSEE RESULTING INTO ADDING THE SAME U/S.68 OF THE ACT, TO WHICH THE CIT(A) HAS UPHELD THE SAME. IN THE TOTALITY OF FACTS AND CIRCUMSTANCES OF THE CASE, WE DO FIND ANY INFIRMITY IN THE ORDER OF CIT(A) IN CONFIRMING THE ADDITION MADE BY THE AO U/S.68 OF THE ACT AND ACCORDINGLY, WE UPHOLD THE SAME AND DISMISS THE GROUNDS OF APPEAL OF THE ASSESSEE. 9 . IN THE RESULT, APPEAL OF THE ASSESSEE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 14 / 10 / 201 9 . S D/ - ( C.M.GARG ) SD/ - ( L.P.SAHU ) / JUDICIAL MEMBER / ACCOUNTANT MEMBER CUTTACK ; DATED 14 / 10 /201 9 PRAKASH KUMAR MISHRA, SR.P.S. / COPY OF THE ORDER FORWARDED TO : / BY ORDER, ( SENIOR PRIVATE SECRETARY ) , / ITAT, CUTTACK 1. / THE APPELLANT - M/S GOPALPUR PORT S LIMITED, OSL TOWER, LINK ROAD, CUTTACK 2. / THE RESPONDENT - ACIT, CIRCLE - (2), CUTTACK 3. ( ) / THE CIT(A), 4. / CIT 5. , , / DR, ITAT, CUTTACK 6. / GUARD FILE . //TRUE COPY//