M/s BCC Cargo Pvt. Ltd., Indore V. The Addl. CIT Range-3, Indore

ITSSA 108/IND/2011

• Counselvise Citation: [2016] 122 COUNSELVISE.COM (IT) 2378 (ITAT-INDORE)
• Duration Of Justice: 4 year(s) 9 month(s) 20 day(s)
• Appeal Type: Income Tax (Search & Seizure) Appeal
• Pronouncement Date: 17-08-2016
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: Not Allotted
• Next Hearing Date: 11-05-2016
• Assessment Year: 2005-2006
• Appeal Filed On: 28-10-2011
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: RAJEEV VARSHNEY; R A VERMA DRS
• Assessee Lawyers: ARPIT GAUR CAS
• Keywords: Bogus Share capital; Opportunity of being heard; Accommodation entries
• Section: 143(3); 142(1); 153A; 68

Judgement Text

BCC CARGO P. LTD. (SS)108/IND/2011 1 IN THE INCOME TAX APPELLATE TRIBUNAL INDORE BENCH, INDORE BEFORE SHRI D.T. GARASIA, JUDICIAL MEMBER AND SHRI B.C. MEENA, ACCOUNTANT MEMBER IT(SS)A NOS.108/IND/2011 A.YS. 2005-06 BCC CARGO P. LTD., INDORE PAN AAACB 6749 C :: ASSESSEE VS ADDL. CIT, RANGE-3, INDORE :: RESPONDENT ASSESSEE BY SHRI ANIL KAMAL GARG AND SHRI ARPIT GAUR, CAS RESPONDENT BY SHRI RAJEEV VARSHNEY AND SHRI R.A. VERMA, DRS DATE OF HEARING 18.5.2016 DATE OF PRONOUNCEMENT 18.5.2016 O R D E R PER SHRI D.T. GARASIA, JM THE ABOVE APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF LD. CIT(A)-I, INDORE, DATED 16.9.2011. 2. SHORT FACTS OF THE CASE ARE THAT THE ASSESSEE IS A CLOSELY HELD PUBLIC LIMITED COMPANY DULY INCORPORATED AND REGIST ERED UNDER THE COMPANIES ACT, 1956, ON 25-05-1995. IT IS ONE OF TH E VARIOUS COMPANIES OF WELL KNOWN BHATIA GROUP (ALSO KNOWN AS BCC G ROUP) OF INDORE. THE ASSESSEE COMPANY IS REGULARLY ASSESSED TO INCOM E-TAX SINCE ITS INCEPTION. THE ASSESSEE COMPANY FURNISHED ITS ORIGI NAL RETURN OF INCOME, PERTAINING TO THE ASSESSMENT YEAR UNDER CON SIDERATION, U/S. BCC CARGO P. LTD. (SS)108/IND/2011 2 139(1) OF THE INCOME-TAX ACT, 1961, ON 25-10-2005 W ITH THE THEN JCIT- 3, INDORE, DECLARING AN INCOME OF RS.3,22,400/-. A COPY OF THE ACKNOWLEDGEMENT OF THE ORIGINAL RETURN AND A COPY O F COMPUTATION OF TOTAL INCOME ARE PLACED AT PAGE NO. 2 & 3 OF THE PA PER BOOK. ALONG WITH THE RETURN OF INCOME, THE ASSESSEE FURNISHED ALL TH E NECESSARY DOCUMENTS SUCH AS COPY OF THE AUDITORS REPORT, COP Y OF THE AUDITED BALANCE-SHEET, AUDITED PROFIT & LOSS ACCOUNT AND SC HEDULES ETC. COPIES OF SUCH DOCUMENTS ARE PLACED AT PAGE NO. 6 T O 24 OF THE PAPER BOOK. IN RESPONSE TO THE RETURN OF INCOME, FURNISHE D BY THE ASSESSEE U/S. 139(1) OF THE INCOME-TAX ACT, 1961, NO ACTION WAS TAKEN BY THE ASSESSING OFFICER AND AS SUCH THE ASSESSMENT WAS DE EMED TO HAVE BEEN COMPLETED U/S. 143(1)(A) OF THE INCOME-TAX ACT , 1961. A SEARCH U/S. 132(1) OF THE INCOME-TAX ACT, 1961 WAS CARRIED OUT BY THE ASSISTANT DIRECTOR OF INCOME-TAX (INV.)-II, INDORE, ON 25-09- 2007, IN THE BUSINESS PREMISES OF THE ASSESSEE COMPANY AS ALSO IN THE RES IDENTIAL PREMISES OF ITS DIRECTORS. DURING THE COURSE OF THE SEARCH, THE BHATIA GROUP HAD ADMITTED ADDITIONAL INCOME AGGREGATING TO RS.26,15, 24,529/- AND AS AGAINST SUCH ADMITTED INCOME OF RS.26,15,24,529/-, THE GROUP, AS A WHOLE, HAD SHOWN AN ADDITIONAL INCOME OF RS.27,33,7 3,087/- IN THE RETURNS OF INCOME FURNISHED UNDER S.153A OF THE ACT . HOWEVER, THE ASSESSEE NEITHER ADMITTED NOR DECLARED ANY ADDITION AL INCOME IN ITS RETURN OF INCOME. SUCH FACTS ARE EVIDENT FROM THE F INDINGS GIVEN BY THE CIT(A) AT PARA 2 & 2.1 AT PAGE NO. 2 & 3 OF HIS ORD ER. DURING THE COURSE OF THE SEARCH, NO UNDISCLOSED OR UNEXPLAINED MONEY, BULLION, JEWELLERY, VALUABLE ARTICLES OR THINGS PERTAINING TO THE ASSES SEE WERE FOUND OR SEIZED FROM THE PREMISES OF ANY PERSON IN WHOSE CAS E SEARCH UNDER S.132 WAS INITIATED. SUBSEQUENTLY, A NOTICE DATED 0 3-03-2008 WAS ISSUED BY THE LEARNED ADDL. COMMISSIONER OF INCOME- TAX, RANGE-3, INDORE, U/S. 153A OF THE INCOME-TAX ACT, 1961. UNDE R SUCH NOTICE, THE BCC CARGO P. LTD. (SS)108/IND/2011 3 ASSESSEE WAS REQUIRED TO FURNISH ITS RETURN OF TOTA L INCOME PERTAINING TO THE ASSESSMENT YEAR UNDER REVIEW, WITHIN A PERIOD O F 15 DAYS FROM THE DATE OF SERVICE OF THE NOTICE. A COPY OF THE NOTICE UNDER S. 153A IS PLACED AT PAGE NO. 1 OF THE PAPER BOOK. IN RESPONS E TO THE NOTICE U/S. 153A, THE ASSESSEE, FURNISHED ITS RETURN OF TOTAL I NCOME ON 28-05-2008 VIDE ACK. NO. 0030100096 DECLARING THE SAME INCOME OF RS.3,22,400/- AS WAS DECLARED BY IT IN THE ORIGINAL RETURN FURNIS HED U/S. 139(1) (PB PAGE NO. 4 & 5). THE CASE OF THE ASSESSEE WAS SELEC TED FOR SCRUTINY AND NOTICES U/S. 143(2) & 142(1) ALONG WITH QUESTIO NNAIRES WERE ISSUED FROM TIME TO TIME. IN RESPONSE TO SUCH NOTICES, THE ASSESSEE COMPANY THROUGH ITS AUTHORIZED REPRESENTATIVE ATTENDED THE HEARINGS BEFORE THE LEARNED ASSESSING OFFICER FROM TIME TO TIME AND MAD E WRITTEN SUBMISSIONS ALONG WITH NECESSARY DOCUMENTARY EVIDEN CES. FINALLY, THE LEARNED ASSESSING OFFICER FRAMED THE ASSESSMENT ON 29-12-2009, U/S. 153A READ WITH SECTION 143(3) OF THE INCOME-TAX ACT , 1961, DETERMINING THE TOTAL INCOME OF THE ASSESSEE AT RS.6,93,22,400/ - AS AGAINST THE RETURNED INCOME OF RS.3,22,400/- THEREBY MAKING ADD ITION OF RS.6,90,00,000/-. THE ENTIRE ADDITION OF RS.6,90,00 ,000/- HAS BEEN MADE BY THE LEARNED AO, UNDER THE PROVISIONS OF SECTION 68 OF THE INCOME-TAX ACT, 1961, BY HOLDING THAT THE SHARE APPLICATION MO NEY/ SHARE CAPITAL CLAIMED TO HAVE BEEN RECEIVED BY THE ASSESSEE COMPA NY ARE NOT GENUINE. GROUND NOS. 1.1 & 1.2 3. THESE GROUNDS ARE DIRECTED AGAINST THE AOS ACTI ON OF MAKING ADDITIONS U/S 153A OF THE ACT ON THOSE ISSUES IN RE SPECT OF WHICH NO INCRIMINATING MATERIAL WAS FOUND OR SEIZED DURING T HE COURSE OF SEARCH. BCC CARGO P. LTD. (SS)108/IND/2011 4 4. SHORT FACTS OF THE CASE ARE THAT THE AO HAS NOT GIVEN ANY SPECIFIC FINDING ON THE ISSUE. IN THE INSTANT CASE, THE AO H AS MADE ONLY ONE ADDITION OF RS.6,90,00,000/- ON ACCOUNT OF ALLEGED UNEXPLAINED SHARE CAPITAL. FOR MAKING THE ADDITION, THE AO HAS TAKEN THE LEAD FROM THE AUDITED BALANCE SHEET OF THE ASSESSEE COMPANY WHICH IS EVIDENT FROM THE FIRST PARA ON PAGE NO.5 OF THE ASSESSMENT ORDE R. 5. MATTER CARRIED TO LEARNED CIT(A), WHO DISMISSED THE APPEAL OF THE ASSESSEE BY UPHOLDING THE ADDITION MADE BY THE AO U NDER S. 68 OF THE INCOME-TAX ACT, 1961. THE CIT(A) IN HIS FINDINGS G IVEN AT PARA 5.1, P. 10 OF THE ORDER HAS HELD THAT ADDITIONS AND DISALLO WANCES IN RESPECT OF VARIOUS ITEMS DULY RECORDED IN THE REGULAR BOOKS OF ACCOUNT AND DULY DISCLOSED BEFORE THE DEPARTMENT CAN ALSO BE MADE EV EN WHEN NO INCRIMINATING DOCUMENT WAS FOUND OR SEIZED DURING T HE COURSE OF THE SEARCH. THE CIT(A) HAS RELIED UPON HIS OWN FINDINGS GIVEN WHILE ADJUDICATING THE APPEAL IN THE CASE OF ONE OF THE G ROUP ASSESSEES NAMELY, SHRI AMANDEEP SINGH BHATIA, FOR A.Y. 2002-0 3. 6. THE LD. AR FOR THE ASSESSEE HAS MADE ORAL AS WEL L AS WRITTEN SUBMISSION AS UNDER: IT IS SUBMITTED THAT FOR THESE GROUNDS, A DETAILED SUBMISSION HAS BEEN MADE IN THE CASE OF APPEAL OF ONE OTHER GROUP ASSESSEE N AMELY OF SHRI AMANDEEP SINGH BHATIA IN APPEAL NO. IT(SS)A-112/IND/2011 FOR A.Y. 2002-03 PENDING FOR ADJUDICATION BEFORE THIS HONBLE BENCH. SINCE, WHILE ADJUDICATING THE GROUNDS OF APPEAL RAISED BEFORE THE CIT(A), THE CIT (A) HAS RELIED UPON HIS OWN FINDINGS GIVEN IN THE AFORESAID CASE OF SHRI AM ANDEEP SINGH BHATIA, OUR SUBMISSIONS MADE BEFORE THIS HONBLE BENCH IN THE C ASE OF SHRI AMANDEEP SINGH BHATIA MAY KINDLY BE TAKEN INTO CONSIDERATION . 7. LD. DRS HAVE RELIED ON THE ORDERS OF THE REVENUE AUTHORITIES AND SUBMITTED THAT OUR ARGUMENTS ADVANCED IN THE CASE O F AMANDEEP SINGH BHATIA ON IDENTICAL FACTS MAY BE TAKEN INTO CONSIDE RATION. BCC CARGO P. LTD. (SS)108/IND/2011 5 8. WE HAVE HEARD RIVAL CONTENTIONS OF BOTH THE PART IES AND PERUSED MATERIAL AVAILABLE ON RECORD. THE CIT(A) HAS RELIED UPON HIS OWN FINDINGS GIVEN IN THE CASE OF SHRI AMANDEEP SINGH B HATIA. HOWEVER, WE FIND THAT SINCE THE ASSESSMENT FOR THE A.Y. 2005-06 IS ABATED, THE PRESENT ISSUE IN ASSESSEES APPEALS IT(SS)A NOS.108 /IND/2011 FOR THE A.Y. 2005-06 WAS NOT PRESSED BY THE LD. COUNSEL FOR THE ASSESSEE DURING THE COURSE OF HEARING, THEREFORE, SAME IS DI SMISSED FOR THE A.Y. 2005-06. GROUND NO. 2 9. THIS GROUND IS DIRECTED AGAINST THE CIT(A)S FIN DING OF UPHOLDING AOS ACTION OF PASSING THE ASSESSMENT ORDER ARBITRA RILY WITHOUT GIVING PROPER OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. THE CIT(A) HAS DEALT WITH THIS GROUND. ACCORDING TO THE CIT(A), THE ASSE SSEE WAS GIVEN DUE OPPORTUNITY BY THE AO. BEFORE US, LD. COUNSEL FOR T HE ASSESSEE DID NOT PRESS THIS GROUND. THEREFORE, SAME IS DISMISSED BEI NG NOT PRESSED. GROUND NO. 3 10. THIS GROUND OF APPEAL IS DIRECTED AGAINST UPHOL DING THE ADDITION MADE BY THE AO AT RS.6,90,00,000/- ON ACCOUNT OF SH ARE CAPITAL/SHARE APPLICATION/SHARE PREMIUM. 11. SHORT FACTS OF THE CASE ARE THAT THE AO HAS DEA LT WITH THIS ISSUE AT PAGE NO. 2 TO 110 OF HIS ORDER. THE AO, AT PAGE NO. 109 & 110 OF THE ORDER, HAS HELD THE CAPITAL INTRODUCED BY THE ASSES SEE COMPANY THROUGH PARTLY CONVERTIBLE SHARES WERE NOT GENUINE AS THE A SSESSEE COULD NOT ESTABLISH THE IDENTITY AND CREDITWORTHINESS OF THE SHARE APPLICANT COMPANIES. THE AO MADE THE ADDITION BY INVOKING PRO VISIONS OF SECTION 68 OF THE ACT. THE MAIN GROUNDS TAKEN BY THE AO WER E : (I) HUGE SHARE CAPITAL AND SHARE PREMIUM MONEY WERE RECEIVED BY TH E ASSESSEE AND BCC CARGO P. LTD. (SS)108/IND/2011 6 OTHER GROUP COMPANIES DURING THE PERIODS UNDER ASSE SSMENT; (II) IN RECENT YEARS, THE FIELD OFFICERS OF THE INCOME-TAX DEPARTMENT HAVE COME ACROSS TO A SITUATION IN WHICH CALCUTTA, MUMBAI AND SURAT BASED COMPANIES ARE PROVIDING ACCOMMODATION ENTRIES TO IN DORE BASED COMPANIES; (III) SHARE APPLICANT COMPANIES ARE VERY SYSTEMATICALLY ISSUING HUGE AMOUNTS OF CHEQUES TO EACH OTHER WITHO UT ANY COMMERCIAL SENSE; (IV) SHARE APPLICANT COMPANIES WERE INDULGED IN MONEY LAUNDERING ACTIVITIES; (V) BALANCE SHEET OF SOME SH ARE APPLICANT COMPANIES WERE NOT AVAILABLE; (VI) IN THE BANK ACCO UNTS OF THE SHARE APPLICANT COMPANIES CALLED UNDER S.133(6) OF THE AC T, TRANSFER OF HUGE AMOUNT IN OTHER ACCOUNTS THROUGH CHEQUES WERE FOUND AND IN SOME CASES, CASH DEPOSITS WERE MADE IN THE ACCOUNT OF TH IRD PARTIES FROM WHOM CHEQUES WERE TAKEN; (VII) THE COPIES OF MEMORA NDUM & ARTICLES OF ASSOCIATION, CERTIFICATE OF INCORPORATION, BOARD RE SOLUTION OF THE SHARE APPLICANT COMPANIES WERE FOUND IN THE PREMISES OF T HE GROUP; (VIII) MOST OF THE NOTICES ISSUED UNDER S.133(6) RETURNED UNSER VED; AND (IX) THE SHARES WERE ULTIMATELY REPURCHASED FROM THE SHARE A PPLICANT COMPANIES BY THIRD PARTIES/ GROUP ASSESSEES AT THE NOMINAL PR ICE. 12. MATTER CARRIED TO LEARNED CIT(A), WHO HAS DEALT WITH THE ISSUE AT PARA 2.4.1, PAGE NO. 8 OF THE ORDER. THE CIT(A), A T PARA 2.4.1, HAS GIVEN A TABLE SHOWING VARIOUS GROUNDS RAISED BY THE ASSES SEE, THE ISSUE INVOLVED AND THE APPEAL OF THE ASSESSEE/GROUP ASSES SEE WHERE THE SUBJECT ISSUE HAS BEEN DISCUSSED BY HIM. ACCORDINGL Y, THE CIT(A) DISMISSED THE LEGAL GROUND RAISED BY THE ASSESSEE F OLLOWING HIS OWN FINDINGS GIVEN IN THE CASE OF M/S. BHATIA INTERNATI ONAL LTD. FOR THE A.Y. 2002-03 IN APPEAL NO. IT-262/09-10. 13. THE LD. AR FOR THE ASSESSEE HAS MADE ORAL AS WE LL AS WRITTEN SUBMISSION AS UNDER: BCC CARGO P. LTD. (SS)108/IND/2011 7 IT IS SUBMITTED THAT FOR THIS GROUND, A DETAILED S UBMISSION HAS BEEN MADE IN THE CASE OF APPEAL OF ONE OTHER GROUP ASSESSEE NAME LY OF M/S. BHATIA INTERNATIONAL LTD. IN APPEAL NO. IT(SS)A-104/IND/20 11 FOR A.Y. 2002-03 PENDING FOR ADJUDICATION BEFORE THIS HONBLE BENCH. SINCE, WHILE ADJUDICATING THE GROUND OF APPEAL RAISED BEFORE THE CIT(A), THE CIT(A) HAS RELIED UPON HIS OWN FINDINGS GIVEN IN THE AFORESAID CASE OF M/S. BH ATIA INTERNATIONAL LTD., OUR SUBMISSIONS MADE BEFORE THIS HONBLE BENCH IN THE C ASE OF M/S. BHATIA INTERNATIONAL LTD. MAY KINDLY BE TAKEN INTO CONSIDE RATION. RELEVANT DOCUMENTS FILED IN THE PAPER BOOK ON WHICH THE ASSESSEE IS PLACING RELIANCE FOR THESE GROUNDS PAGE NO. NATURE OF DOCUMENT FILED FOR THE PURPOSE OF FROM TO 34 35 LIST OF SHARE APPLICANT COMPANIES GIVING THE DETAILS OF SHARE APPLICANT COMPANIES 174 1183 SHARE APPLICATION FORMS, MOA/AOA, INCORPORATION CERTIFICATE, BOARD RESOLUTION, AUDITED FINANCIAL STATEMENTS, ITR, BANK CERTIFICATE REGARDING VERIFICATION OF SIGNATURE OF DIRECTOR OF SHARE APPLICANTS, CONFIRMATION LETTERS, MASTER DATA OF SHARE APPLICANTS DOWNLOADED FROM OFFICIAL WEBSITE OF MCA, LIST OF DIRECTORS, PAN, TAN, BANK STATEMENTS, CERTIFICATE OF REGISTRATION GRANTED BY RBI FOR NBFC ESTABLISHING IDENTITY AND CREDITWORTHINESS OF SHARE APPLICANTS ALONG WITH GENUINENESS OF THE TRANSACTIONS 14. LD. DRS RELIED ON THE ORDERS OF THE REVENUE AUT HORITIES AND SUBMITTED THAT SUBMISSIONS MADE IN THE CASE OF M/S. BHATIA INTERNATIONAL LTD. MAY KINDLY BE TAKEN INTO CONSIDERATION IN THE PRESENT CASE TOO. 15. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS OF BOT H THE PARTIES AND GONE THROUGH THE MATERIAL AVAILABLE ON THE FILE. WE FIND THAT WHILE ADJUDICATING THE SAME ISSUE IN CASE OF ANOTHER GROU P ASSESSEE NAMELY, M/S. BHATIA INTERNATIONAL LTD. IN APPEAL NO. IT(SS) A NO.104/IND/2011 FOR A.Y. 2002-03, WE HAVE HELD THAT THE ASSESSEE COULD BE ABLE TO BCC CARGO P. LTD. (SS)108/IND/2011 8 DISCHARGE THE BURDEN OF PROVING THE CASH CREDIT AS CONTEMPLATED U/S 68 OF THE ACT AND HAVE DIRECTED TO DELETE THE ENTIRE A DDITION MADE BY THE ASSESSING OFFICER ON ACCOUNT OF SHARE CAPITAL/SHARE PREMIUM/ SHARE APPLICATION MONEY. WE FIND THAT THE FACTS AND CIRCU MSTANCES OF THE PRESENT APPEALS OF THE ASSESSEE ARE THE SAME WITH T HAT OF THE APPEAL FOR ASSESSMENT YEAR 2002-03 (SUPRA). THE ARGUMENT OF BO TH THE PARTIES ARE ALSO THE SAME AND THEREFORE, FOLLOWING OUR OWN FIND ING GIVEN IN THE CASE OF ANOTHER GROUP ASSESSEE FOR THE ASSESSMENT YEAR 2 002-03 (SUPRA), WE DIRECT TO DELETE THE ADDITION OF RS.6,90,00,000/- M ADE BY THE ASSESSING OFFICER ON ACCOUNT OF SHARE CAPITAL/SHARE PREMIUM/ SHARE APPLICATION MONEY AND ALLOW THE GROUND NO.3 OF THE PRESENT APPE AL OF THE ASSESSEE. GROUND NO. 4 16. THIS GROUND OF APPEAL IS DIRECTED AGAINST CHARG ING OF INTEREST UNDER S. 234A AND 234B. THIS GROUND IS CONSEQUENTIAL IN N ATURE, THEREFORE, DOES NOT REQUIRE ANY SEPARATE ADJUDICATION. 17. IN THE RESULT, THE APPEAL OF THE ASSESSEE PARTL Y ALLOWED. ORDER WAS PRONOUNCED IN THE OPEN COURT ON 18.5.201 6. SD/- (B.C. MEENA) ACCOUNTANT MEMBER SD/- ( D.T. GARASIA) JUDICIAL MEMBER DATED : 17.8.2016 COPY TO: ASSESSEE/RESPONDENT/CIT(A)/CIT/DR, INDORE