The DCIT, Central Circle-2(4), Ahmedabad V. M/s. GTC Oilfield Services Pvt. Ltd., Ahmedabad

ITSSA 116/AHD/2018

• Counselvise Citation: [2022] 104 COUNSELVISE.COM (IT) 4898 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 year(s) 11 month(s) 7 day(s)
• Appeal Type: Income Tax (Search & Seizure) Appeal
• Pronouncement Date: 30-03-2022
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2012-2013
• Appeal Filed On: 22-04-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Reopening of assessment; Unexplained cash credit; Income from undisclosed sources; Set aside
• Section: 68; 132; 69C; 143(3); 153A; 69A

Judgement Text

आयकर अपीलीय अिधकरण, अहमदाबाद ᭠यायपीठ IN THE INCOME TAX APPELLATE TRIBUNAL, ‘’ A’’ BENCH, AHMEDABAD (CONDUCTED THROUGH VIRTUAL COURT AT AHMEDABAD) BEFORE SHRI WASEEM AHMED, ACCOUNTANT MEMBER And Ms MADHUMITA ROY, JUDICIAL MEMBER आयकर अपील सं./IT(SS)A No.115-116/AHD/2018 िनधाᭅरण वषᭅ/Asstt. Years: 2011-12 & 2012-13 D.C.I.T., Central Circle-1(4), Ahmedabad. Vs. M/s. GTC Oilfield Services Pvt. Ltd., 61/62, New York Tower, A-Block, Thaltej Char Rasta, S.G. Highway, Ahmedabad. PAN: AACCG8684P (Applicant) (Respondent) Revenue by : Shri Vijaykumar Jaiswal, CIT.D.R Assessee by : Shri M.K. Patel, A.R सुनवाई कᳱ तारीख/Date of Hearing : 01/03/2022 घोषणा कᳱ तारीख /Date of Pronouncement: 31/03/2022 आदेश/O R D E R PER WASEEM AHMED, ACCOUNTANT MEMBER: The captioned two appeals have been filed at the instance of Revenue Assessee against the separate orders of the Learned Commissioner of Income Tax(Appeals)-12, Ahmedabad, of even dated 01/02/2018 arising in the matter of assessment order passed under s. 143(3) r.w.s. 153A of the Income Tax Act, 1961 (here-in-after referred to as "the Act") relevant to the Assessment Years 2011-12 & 2012-13. IT(SS)A nos.115 & 116/AHD/2018 A.Y.s 2011-12 & 2012-13 2 2. First, we take up IT(SS)A No. 115/Ahd/2018 corresponding to the assessment year 2011-12 being the lead year. 3. The Revenue has raised the following grounds of appeal: 1. Whether on the facts and circumstances of the case and in law, the Ld. CIT(A) erred in deleting the addition of Rs.2,06,00,0007- made in hands of assessee under section 68 of the IT. Act on account of receipt of share capital and premium without appreciating that assessment order had brought out the fact that the credits were from companies whose returns and balance sheet analysis proved, and whose directors and operators/brokers had admitted to the fact, that these were paper companies and when confronted with these facts, the main person of assessee-group, Basant Agarwal, during search and seizure operation had declined under oath to cross-examine these directors/operators, thereby establishing that these credits were not genuine. 2. Whether on the facts and circumstances of the case and in law, the Ld. CIT(A) erred in deleting the addition of Rs.2,06,00,OOQ/- on receipt of share capital and premium without appreciating that the assessment order had brought out the fact that decisions in the cases of Trinetra Commerce & Trade Pvt. Ltd. (2016) 75 taxmann.com 70 (Calcutta) and Jagmohan Ram Ramchandra (2004) 141 Taxman 574 (Allahabad) are applicable in case of assessee, and that addition in the hands of the lender u/s 69A does not absolve the onus of the recipient of money u/s 68 of the Act. 3. Whether on the facts and circumstances of the case and in law, the Ld. CIT(A) erred in deleting the addition of Rs.2,06,00,000/- made in hands of assessee on receipt of share capital and premium without appreciating that assessment order had brought out the fact that nexus had not been proven between the funds credited to assessee and the funds of the declarent under IDS. 4. Whether on the facts and circumstances of the case and in law, the Ld. CIT(A) erred in not appreciating that the assessee was excluded from the list of persons who could avail of the Income Declaration Scheme, 2016 by virtue of clause (e) of section 196 of Finance Act, 2016 and could not, therefore, avail of the benefit of the Scheme indirectly though declaration made by another person under the Scheme. 5. Whether on the facts and circumstances of the case and in law, the Ld. CIT(A) erred in deleting the addition of Rs.1,23,300/- made in hands of assessee on issue of unaccounted commission expenses u/s 69C on share capital and premium without appreciating that assessment order had brought out the fact that the credits of share capital & premium were from paper companies as in ground (1) to (4) above. 6. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) ought to have upheld the order of the A.O. 7. It is, therefore, prayed that the order of the Ld. CIT(A) be set aside and that of the A.O. be restored to the above extent. 4. The only interconnected issue raised by the Revenue is that the learned CIT(A) erred in deleting the addition made by the AO for Rs. 2,06,00,000/- on IT(SS)A nos.115 & 116/AHD/2018 A.Y.s 2011-12 & 2012-13 3 account of share capital and premium under section 68 of the Act and addition of Rs. 1,23,600/- being commission for accommodation entry under section 69C of the Act. 4.1 The assessee is a private company and engaged in providing services for oil exploration and drilling activities. The premises of the assessee company was subject to search under section 132 of the Act vide authorization dated 23 rd January 2015. Accordingly, the proceedings under section 153A of the Act were initiated against the assessee. 4.2 During assessment proceeding under section 153A of the Act it was found that the assessee has raised fund to tune of Rs. 2,06,00,000/- through share capital and share premium. In other word the assessee during the year under consideration has issued shares to two companies detailed as under: Share Applicant No. of share issued Share capital @ Rs. 10 per share Premium @ Rs. 490 per share Yamini Marketing Pvt Ltd. 34,400 Rs. 3,44,000/- Rs. 1,68,56,000/- Westwell Exports Pvt. Ltd. 68,000 Rs. 68,000/- Rs. 33,32,000/- Total 41,200 Rs. 4,12,000/- Rs. 2,06,00,000/- 4.3 The AO found that the investor companies were not having genuine business activity and consistently filing returns of income at loss and despite that these investor companies namely Yamini Marketing Pvt Ltd (here-in-after referred as YMPL) and Westwell Exports Pvt. Ltd (here-in-after referred as WEPL) have made investment of Rs. 15,00,94,000/- and Rs. 8,25,50,000/- respectively in assessee company in different assessment (A.Y. 2011-12 and 2012-13). Further, these IT(SS)A nos.115 & 116/AHD/2018 A.Y.s 2011-12 & 2012-13 4 investor companies also received money for investment from different companies (around 30 to 40 companies) which were controlled and managed by the entry providers in form of share capital and premium. The shares of these shareholder companies were held by the company namely M/s Bagh-baan Marketing Private Limited which was owned by Shri Ramswaroop S. Agarwal and his family member. Shri Ramswaroop S. Agarwal is one of the person of Assessee Company group i.e. Globe Group. Thus, the AO was of the view that the impugned credit of share capital and premium is unexplained credit in the manner as provided under section 68 of the Act being accommodation entry and added to the total income of the assessee. The AO also made addition of Rs. 1,23,600/- under section 69C of the Act on account of commission paid by the assessee for getting accommodation entry in guise of share capital and premium. 5. The aggrieved assessee carried the matter to the learned CIT (A). 6. The Assessee before the learned CIT(A) claimed that the investor companies namely YMPL and WEPL have offered undisclosed income under Income Declaration Scheme (IDS) 2016 representing the amount of money of unexplained cash credit under section 68 of the Act and also filed details of application of income which included investment made in the assessee company. The assessee in support of its claim furnished copy of Form-1 of IDS-2016, copy of Form-2 issued by PCIT (central) Ahmadabad, copy of IDS-2016 tax challan in Form-B and copy of certificate of declaration under section 183 of Finance Act 2016 issued by PCIT (central) Ahmadabad in From-4. Accordingly the assessee prayed that the addition under section 68 of the Act is not warranted in its hand as the amount has been already suffered to tax in the hand of the investors. 7. The learned CIT(A) after considering the assessment order, submission of assessee and comment of the AO during the remand proceedings found that both the investor companies have declared income under IDS-2016 and also filed detailed IT(SS)A nos.115 & 116/AHD/2018 A.Y.s 2011-12 & 2012-13 5 application of such income before the revenue authorities which was including the investment in shares of assessee company. All the details filed by the investor company in IDS-2016 have been accepted by the PCIT (central) Ahmadabad which can be verified from the certificate of declaration issued in Form-4. Thus the learned CIT(A) deleted the addition made by the AO under section 68 of the Act for Rs. 2,06,00,000/ and under section 69C of the Act for Rs. 1,23,600/- by observing as under: Thus, from the above, it is seen that identity of the creditors i.e. I Westwell and Yamini who have invested in share capital and share premium in the appellant company is established. Further, since both the investors have declared share capital and share premium invested in the appellant company as part of undisclosed income declared under IDS, 2016 and paid due taxes on the same, creditworthiness of the investors and genuineness of transactions is established. Hence, all the three ingredients of section 68 of the Act are satisfied i.e. identity and creditworthiness of investors and genuineness of transaction are established. Hence the AO was not justified in treating share capital and share premium of Rs. 2,06,00,000/- received from Westwell and Yamini as unexplained cash credit u/s 68 of the Act. Accordingly, addition of Rs. 2,06,00,000/- is deleted. This ground of appeal is allowed. xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx In Para 7.3 above, in respect of share capital and share premium of Rs.2,06,00,000/- it has been held that identity and creditworthiness of investors from whom the share capital and share premium has been received and genuineness of transaction are established. Accordingly/ addition on account of treating share capital and share premium of Rs.2,06,00,000/- as unexplained cash credit has been deleted. In view of this there is no justification for addition of Rs. 1/23,6007- on account of commission paid for taking accommodation entries for share capital and share premium of Rs.2,06,00,000/-. Accordingly, addition of Rs.1,23,600/- is deleted. This ground of appeal is allowed. 8. Being aggrieved by the order of the learned CIT(A) the Revenue is in appeal before us. 9. The Learned DR before us vehemently supported the order of the AO by reiterated the findings contained in the assessment order. 10. On the contrary the learned AR before us filed a paper book running from pages 1 to 125 and contended that the amount received by the assessee in the form of share capital and premium has already suffered to tax and therefore no further addition can be made in the hands of the assessee for the same amount. IT(SS)A nos.115 & 116/AHD/2018 A.Y.s 2011-12 & 2012-13 6 11. We have heard the rival contentions of both the parties and perused the materials available on record. Admittedly the assessee has received share capital and premium on share capital for Rs. 2,06,00,000/- from two companies namely AMPL and WEPL which has been held by the AO as bogus transaction and added to the total income under section 68 of the Act. However, the same was deleted by the learned CIT(A) by holding that all the three ingredients of section 68 of the Act being identity, genuineness of transaction and credit worthiness of the parties has been established by the fact that the investor companies have made declaration of huge undisclosed income under Income Declaration Scheme 2016 brought by the Finance Act 2016 and paid due taxes on such income. 11.1 The case of the Revenue before us is that the burden of the assesse under section 68 of the Act does not get absolved by the fact that the creditors have paid taxes on undisclosed income in their hands. It is the duty of the assessee to prove the identity, genuineness of the transaction and creditworthiness of the creditors/ parties. 11.2 Now the controversy arises for our adjudication to see whether the assessee has furnished the necessary details with respect to the identity, creditworthiness of the parties and genuineness of the transactions in the given facts and circumstances. There is no ambiguity to the fact that companies namely YMPL and WEPL being the investor in the assessee company have opted Income Disclosure Scheme 2016. The company namely WMPL has disclosed an income of ₹ 39,05,00,000 under the Income Disclosure Scheme 2016 in different assessment years which is evident from page 20 of the paper book. Likewise, the company namely YMPL has also made the disclosure of the income under the income disclosure scheme 2016. As such the company namely YMPL has disclosed the investment in the shares of different companies as application of its income where the name of the assessee was also appearing. This fact can be verified from page IT(SS)A nos.115 & 116/AHD/2018 A.Y.s 2011-12 & 2012-13 7 23 of the paper book. The amount shown by the assessee as share capital in its books of account is duly matching with the application of the undisclosed income offered by YMPL. Identical facts are also there with respect to the other companies namely WEPL. 11.3 Thus the amount of share capital received by the assessee from the companies namely YMPL and WEPL and the brokerage income has suffered the tax in the hands of relevant companies. Accordingly, it is not advisable to hold that the amount of share capital received by the assessee company from these companies is bogus in the given facts and circumstances. It is for the reason that the assessee has discharged its onus imposed under the provisions of section 68 of the Act. In other words, the identity and the creditworthiness of the parties cannot be doubted due to the fact that the assessee has received share capital in the form of tax paid money. At the time of hearing, the learned DR could not controvert the finding of the learned CIT-A. 11.4 In view of the above, there is no ambiguity to the fact that the amount disclosed by the companies namely YMPL and WEPL in the Income Disclosure Scheme 2016 as income was duly accepted by the Revenue and the concern parties have also paid the taxes thereon. In the declaration made by these companies for the income, the application of such income was shown by way of investment in the form of shares in the assessee company which was also accepted by the revenue. Thus it can be inferred that the amount of money received by the assessee from the companies namely YMPL and WEPL has already suffered to tax. Thus, if any addition may is made in the hands of the company on account of unexplained cash credit under section 68 of the Act, would lead to the double addition which is unwanted under the provisions of law. In holding so we draw support and guidance from the judgment of Hon’ble Gujarat High Court in the case of M.R. Shah Logistrics Pvt. Ltd. Vs. DCIT reported in 97 Taxmann.com 211 wherein it was held as under: 11. We have also perused the scheme. Section 183 of the Finance Act, 2016 ("the Act of 2016" for short) pertains to declaration of undisclosed income. Sub-section(1) of section 183 IT(SS)A nos.115 & 116/AHD/2018 A.Y.s 2011-12 & 2012-13 8 envisages declaration to be made by any person within specified time, of any income chargeable to tax for which he had failed to furnish return or he had failed to disclose any return filed or which had escaped assessment by reason of his omission or failure to fully and truly disclose all material facts. Section 184 of the Act of 2016 is a charging provision providing for basic tax rate at the rate of thirty per cent and surcharge at the prescribed rate on the income so disclosed. Section 185 provides that notwithstanding anything contained in the Income-tax Act, the person making a declaration of undisclosed income would be liable to pay penalty at the rate of twenty-five per cent of such tax in addition to tax and surcharge. Section 186 prescribes the manner of declaration. Section 188 provides that amount of undisclosed income declared in accordance with section 183 shall not be included in the total income of the declarant for any assessment year under the Income-tax Act, if the declarant makes the payment of tax and surcharge referred to in section 184 and the penalty under section 185 by the specified date. Section 190 of the Act of 2016 provides that the provisions of the Benami Transactions (Prohibition) Act, 1988 shall not apply in respect of declaration of undisclosed income made in the form of investment in any asset, if the asset existing in the name of benamidar is transferred to the declarant within the prescribed period. Section 197 of the Act of 2016 is a clarificatory provision and inter- alia provides for removal of doubt. It is declared that where any declaration has been made under section 183 but no tax, surcharge or penalty has been paid within the prescribed time, the undisclosed income shall be chargeable to tax under the Income-tax Act in the previous year in which such declaration is made. 12. The Scheme thus makes detailed provisions for declaration of income which hitherto was either undisclosed or not charged to tax. Upon such declaration being accepted, declarant would pay tax at the prescribed rate with surcharge and penalty. Upon such amounts being paid, declarant would receive certain immunities. The income so declared would not be included in the total income of any assessment year. Even Benami transactions would not be targeted. The scheme thus appears to have been framed to encourage disclosures of unaccounted income. Upon acceptance of such disclosure, Revenue would collect tax, surcharge and penalty at the prescribed rates. In turn, the declarant would have peace of mind and certain immunities. 13. In the present case, same amount which the Assessing Officer wishes to tax in the hands of the petitioner company by resorting to reopening of assessment was declared by Garg Logistics Pvt. Ltd. under such declaration. Declaration was accepted by the competent authority pursuant to which Garg Logistics Pvt. Ltd. in three instalments also deposited the entire amount of tax with surcharge and penalty. Any attempt on part of the Assessing Officer to assess the same income in the hands of assessee would amount to charging the same income twice. 14. This Court in case of B. Nanji Enterprise Ltd. v. Dy. CIT [2017] 84 taxmann.com 155/249 Taxman 599 (Gujarat) noticed that cash was seized from the bank lockers of assessee company during search action. The Assessing Officer added such sum by way of undisclosed cash receipt of the assessee. Director of the company had filed settlement application owning up such amount as his undisclosed income and paid tax on such income. The Court held that the department should not levy tax from the company again. 15. In case of Pr. CIT v. Kanubhai Maganlal Patel [2017] 79 taxmann.com 257 (Gujarat), the Court noticed that certain income was taxed in case of a partnership firm, same therefore, could not be taxed in the hands of partner again. 16. We further notice that CBDT in its circulars has been clarifying various issues cropping up out of the scheme from time to time. In one such circular dated 1.9.2016, following question was addressed : IT(SS)A nos.115 & 116/AHD/2018 A.Y.s 2011-12 & 2012-13 9 "Question No. 10 : Where certain income has been charged to tax in the hands of two different persons or where it has been charged to tax in the case of same person in two different assessment year, one on substantive basis and the other on the protective basis, will the declarant or the other person get advantage in respect of additions made both substantively and protectively?" It was answered in the following manner : "Answer: The assessees are advised to make declarations in cases or for assessment years where the additions are made on substantive basis. The protective demand is not subjected to recovery unless it is finally upheld. Once the declaration in a substantive case or year is accepted, the tax arrear in protective case/year would not longer be valid and will be rectified by suitable orders in the normal course." 17. It can thus be seen that upon an assessee in whose hands the income is charged, files a declaration, the protective assessment in hands of another assessee would automatically abate, clearly indicating the intention of charging tax on the same income only once. 18. In the result, impugned notice is set aside. Petition is allowed and disposed of. 11.5 It is also important to note that the principles laid down by the Hon’ble High Court of Calcutta the case of CIT vs. Trinetra Commerce & Trade Pvt Ltd. reported in 75 taxmann.com 70 would not be applicable to the case on hand. It is for the reason that the facts are distinguishable from the case on hand. The question before the Hon’ble High Court of Calcutta was not in connection with the income offered under the Scheme i.e. Income Disclosure Scheme 2016 whereas the issue before us involves in relation to the income under Income Disclosure Scheme 2016. Thus, to our humble understanding, the principles laid down by the Hon’ble Calcutta High Court are not applicable in the given facts and circumstances. 11.6 In view of the above and after considering the facts in totality, we don’t find any infirmity in the order of the learned CIT(A). Thus, we direct the AO to delete the addition made by him. Hence, the ground of appeal of the Revenue is held by dismissed. 12. Coming to IT(ss)A No 116/Ahd/2018 corresponding to Assessment year 2012-13 13. The Revenue has raised the following grounds of appeal: IT(SS)A nos.115 & 116/AHD/2018 A.Y.s 2011-12 & 2012-13 10 1. Whether on the facts and circumstances of the case and in law, the Ld. CIT(A) erred in deleting the addition of Rs.21,00,44,5007- made in hands of assessee under section 68 of the l.T. Act on account of receipt of share capital and premium without appreciating that assessment order had brought out the fact that the credits were from companies whose returns and balance sheet analysis proved, and whose directors and operators/brokers had admitted to the fact, that these were paper companies and when confronted with these facts, the main person of assessee-group, Basant Agarwal, during search and seizure operation had declined under oath to cross-examine these directors/operators, thereby establishing that these credits were not genuine. 2. Whether on the facts and circumstances of the case and in law, the Ld. CIT(A) erred in deleting the addition of Rs.21,00,44,500/- on receipt of share capital and premium without appreciating that the assessment order had brought out the fact that decisions in the cases of Trinetra Commerce & Trade Pvt. Ltd. (2016) 75 taxmann.com 70 (Calcutta) and Jagmohan Ram Ramchandra (2004) 141 Taxman 574 (Allahabad) are applicable in case of assessee, and that addition in the hands of the lender u/s 69A does not absolve the onus of the recipient of money u/s 68 of the Act. 3. Whether on the facts and circumstances of the case and in law, the Ld. CIT(A) erred in deleting the addition of Rs.21,00,44,500/- made in hands of assessee on receipt of share capital and premium without appreciating that assessment order had brought out the fact that nexus had not been proven between the funds credited to assessee and the funds of the declarent under IDS, 4. Whether on the facts and circumstances of the case and in law, the Ld. C!T(A) erred in not appreciating that the assessee was excluded from the list of persons who could avail of the Income Declaration Scheme, 2016 by virtue of clause (e) of section 196 of Finance Act, 2016 and could not, therefore, avail of the benefit of the Scheme indirectly though declaration made by another person under the Scheme. 5. Whether on the facts and circumstances of the case and in law, the Ld. CIT(A) erred in deleting the addition of Rs.12,60,267/- made in hands of assessee on issue of unaccounted commission expenses u/s 69C on share capital and premium without appreciating that assessment order had brought out the fact that the credits of share capital & premium were from paper companies as in ground (1) to (4) above. 6. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) ought to have upheld the order of the A.O. 7. It is, therefore, prayed that the order of the Ld. CIT(A) be set aside and that of the A.O. be restored to the above extent. 14. At the outset we note that the issues raised by the Revenue in its ground of appeal for the A.Y 2012-13 are identical to the issues raised by the Revenue in IT(SS)A No. 115/AHD/2018 for the assessment year 2011-12. Therefore, the findings given in IT(SS)A No. 115/AHD/2018 shall also be applicable for the year under consideration i.e. AY 2012-13. The appeal of the Revenue for the assessment 2011-12 has been decided by us vide paragraph No. 11 of this order in favour of IT(SS)A nos.115 & 116/AHD/2018 A.Y.s 2011-12 & 2012-13 11 the Assessee and against Revenue. For, the detailed discussion, please refer the aforementioned paragraph. The learned AR and the DR also agreed that whatever will be the findings for the assessment year 2011-12 shall also be applied for the year under consideration i.e. A.Y 2012-13. Hence, the ground of appeal filed by the Revenue is dismissed. 15. In the combined result, both the appeals filed by the Revenue are dismissed. Order pronounced in the Court on 31/03/2022 at Ahmedabad. Sd/- Sd/- (MADHUMITA ROY) (WASEEM AHMED) JUDICIAL MEMBER ACCOUNTANT MEMBER (True Copy) Ahmedabad; Dated 31/03/2022 Manish