THE DY. CIT-1(1), RAIPUR (CG) V. M/S. ROSE MERCHANTS PVT. LTD., RAIPUR (CG)

ITSSA 29/BIL/2013

• Counselvise Citation: [2017] 122 COUNSELVISE.COM (IT) 3304 (ITAT-RAIPUR)
• Duration Of Justice: 3 year(s) 6 month(s) 4 day(s)
• Appeal Type: Income Tax (Search & Seizure) Appeal
• Pronouncement Date: 08-05-2017
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Assessment Year: 2008-2009
• Appeal Filed On: 04-11-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: R B DOSHI
• Keywords: Unexplained cash credit; Share purchase agreement; Additional evidence; Reasonable cause
• Section: 153A; 68

Judgement Text

IT(SS) NO. 29 RPR 2013 1 INCOME TAX APPELLATE TRIBUNAL RAIPUR BENCH RAIPUR BEFORE SHRI N.S. SAINI , ACCOUNTANT MEMBER AND SHRI GEORGE GEORGE K. , JUDICIAL MEMBER IT(SS) NO. 29 / RPR /201 3 ASSESSMENT YEAR: 20 08 - 09 M/S ROSE MERCHANTS PVT. LTD. VANDANA BUILDING, M.G. ROAD, RAIPUR PAN AA ECP 3594 P VS DCIT - 1(1), RAIPUR (RESPONDENT) (APPELLANT) SHRI R.K. SINGH , CIT, DR APPELLANT BY SHRI R.B. DOSHI, AR RESPONDENT BY 08 / 05 /201 7 DATE OF HEARING 08 . / 05 /201 7 DATE OF PRONOUNCEMENT O R D E R PER GEORGE GEORGE K, JM 1. THIS APPEAL AT THE INSTANCE OF ASSESSEE IS DIRECTED AGAINST THE CIT(A) S ORDER DATED 29.08.2013. THE RELEVANT ASSESSMENT YEAR IS 2008 - 09 . 2 . BRIEF FACTS OF THE CASE ARE AS FOLLOWS: THE ASSESSEE IS A COMPANY. THE ASSESSEE S CASE IS COVERED UNDER THE SEARCH ASSESSMENT PROCEEDINGS IN THE VANDANA GROUP OF CASES . FOR THE ASSESSMENT YEAR 2008 - 09, T HE RETURN OF INCOME WAS IT(SS) NO. 29 RPR 2013 2 FILED IN RESPONSE TO THE NOTICE U/S 153A OF THE INCOME TAX ACT, 1961 (FOR SHORT THE ACT) DISCLOSING INCOME OF RS.44, 166 / - . DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER NOTICE D THAT THE ASSESSEE COMPANY HAD THE BALANCE OF RS.25,54,35,000 / - STANDING TO ITS CREDIT. THE ASSESSING OFFICER SHOW CAUSED THE ASSESSEE TO EXPLAIN THE NATURE OF RECEIPT . I N REPLY , THE ASSESSEE STATED THAT THESE AMOUNTS WERE RECEIVED AS SHARE AP PLICATION MONEY. . THE NAME, ADDRESS AND OTHER RELEVANT DETAILS WERE GIVEN BY THE ASSESSEE. THE ASSESSING OFFICER DIRECTED THE ASSESSEE TO PROVE THE CREDITWORTHINESS OF THE CREDITORS . TH E ASSESSEE FILED DETAILED REPLY. THE ASSESSING OFFICER HELD THAT ASSESSEE COULD NOT PROVE THE GENUINENESS OF T HE TRANSACTIONS IN RESPECT OF 9 CREDI TORS AMOUNTING TO RS.6,40,85,000 AS UNDER: I ) ENERGY VYAPAR (P) LTD., : RS.1,12,00,000/ - II ) NAVRATAN COMMERCE (P) LTD. RS.1,03,00,000/ - III ) OLIVER VINCOM (P) LTD., RS. 67,00,000/ - IV ) QUICK VYAPAR (P) LTD., RS. 86,85,000/ - V ) KUSUM VANIJYA (P) LTD. RS. 22,00,000/ - VI ) EVERGREEN GOODS (P) LTD., RS. 25,00,000/ - VII ) MVS LEASING (P) LTD., RS. 73,00,000/ - VIII ) DHANTERASH BARTER (P ) LT D., RS. 72,00,000/ - IX ) GANGOUR AGENCIES (P) LTD. RS. 80,00,000/ - TOTAL: RS. 6,40,85,000/ - THE ASSESSING OFFICER BY INVOKING THE PROVISIONS OF SECTION 68 OF THE ACT , ADDED THE SUM OF RS.6,40,85,000/ - / - TO THE RETURN ED INCOME. 3 . AGGRIEVED BY THE ORDER OF THE ASSESSING OFFICER, ASSESSEE PREFERRED AN APPEAL TO THE FIRST APPELLATE AUTHORITY. THE CIT(A) ON APPLICATION UNDER RULE 46A OF THE INCOME TAX RULES ADMITTED ADDITIONAL EVIDENCE, NAMELY, BANK STATEMENT OF NINE CREDITORS AND CALL ED FOR THE IT(SS) NO. 29 RPR 2013 3 REMAND REPORT OF THE ASSESSING OFFICER. ON RECEIPT OF THE REMAND REPORT, THE CIT(A) DECIDED THE ISSUE IN FAVOUR OF THE ASSESSEE. 4 . THE REVENUE BEING AGGRIEVED IS IN APPEAL BEFORE US RAISING THE FOLLOWING EFFECTIVE GROUNDS: 1. WHETHER IN LAW AND ON FACTS & CIRCUMSTANCES OF THE CASE, THE CIT(A) WAS JUSTIFIED IN ADMITTING ADDITIONAL EVIDENCE IN VIOLATION OF RULE 46A OF INCOME TAX RULES, 1962. 2. WHETHER IN LAW AND ON THE FACTS & CIRCUMSTANCES OF THE CASE, THE CIT(A) HAS ERRED IN DELETING THE ADD ITION OF SHARE CAPITAL MONEY OF RS.6,40,85,000 / - MADE BY THE AO AS UNEXPLAINED CASH CREDITS U/S 68 OF THE INCOME TAX ACT, 1961. 5 . THE LD. DR STRONGLY RELIED ON THE ASSESSMENT ORDER, WHEREAS THE LD. REPRESENTATIVE OF THE ASSESSEE REITERATED THE SUBMISSIO N MADE BEFORE THE INCOME TAX AUTHORIT IES AND RELIED ON THE CONCLUSION/FINDING OF THE CIT(A). 6 . WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD. THE CIT(A) HAS ADMITTED THE ADDITIONAL EVIDENCE UNDER RULE 46A OF THE I.T. RU LES. THE ADDITIONAL EVIDENCE ADMITTED ARE THE BANK STATEMENT OF THE NINE CREDITORS . THE CIT(A) HAD OBSERVED THAT THE ASSESSEE WAS PREVENTED BY REASONABLE CA U SE IN PRODUCING THE SAME BEFORE THE ASSESSING OFFICER . THE CIT(A) FOR SUBSTANTIAL CAUSE AND JUSTICE ADMITTED THE SAME ON RECORD . A FTER ADMISSION OF THE SAME , T HE CIT(A) FORWARDED THE ADDITIONAL EVIDENCE TO THE ASSESSING OFFICER AND CALLED FOR A REMAND REPORT. ON RECEIPT OF THE REMAND REPORT , THE CIT(A) ADJUDICATED THE ISSUE IN FAVOUR OF THE ASSES SEE. HENCE , IT CANNOT BE STATED THERE IS ANY VIOLATION OF PROVISION OF RULE 46A OF I.T. RULES . THEREFORE, GROUND NO.1 OF THE REVENUE IS DISMISSED. IT(SS) NO. 29 RPR 2013 4 6 .1 NOW COMING TO THE MERIT, WE FIND THAT THE CIT(A) HAVE ELABORATELY CONSIDERED THE ISSUE AND HAD COME TO A CATEGORICAL FINDING THAT THE RELEVANT D ETAILS/CREDITWORTHINESS OF THE 9 CREDITORS , WHICH IS UNDER DISPUTE HAS BEEN ADEQUATELY PROVED BY THE ASSESSEE AND INVOCATION OF SECTION 68 OF THE ACT IS NOT WARRANTED. THE RELEVANT FINDING OF THE CIT(A) FOR READY RE FERENCE IS REPRODUCED BELOW: 6. I HAVE CAREFULLY GONE THROUGH THE ASSESSMENT ORDER AND WRITTEN SUBMISSIONS OF THE APPELLANT. IT IS AN UNDISPUTED FACT THAT THE NAMES, ADDRESSES, COPIES OF ITR AND AUDITED FINANCIAL STATEMENTS AND ASSESSMENT PARTICULARS OF THE INVESTOR COMPANIES HAD BEEN FURNISHED BY THE APPELLANT BEFORE THE AO DURING THE COURSE OF ASSESSMENT PROCEEDINGS. IT FIND THAT THE AO HAS MADE THE ADDITION MERELY DUE TO THE REASON THAT THE APPELLANT COULD NOT FURNISH THE BANK STATEMENT OF THE INVESTOR COMPANIES. I AM OF THE CONSIDERED OPINION THAT GENUINENESS OF THE TRANSACTION CAN BE VERIFIED FROM THE CIRCUMSTANTIAL EVIDENCES ALSO SUCH AS THE BANK STATEMENT OF THE APPELLANT, COPIES OF SHARE APPLICATION AND SHARE CERTIFICATES, THUS, WITHOUT POINTING OU T INFIRMITIES IN THE EVIDENCES FURNISHED BY THE APPELLANT, ADDITION CANNOT BE MADE MERELY ON FAILURE TO FURNISH BANK STATEMENT OF THE INVESTORS. EVEN OTHERWISE, THE APPELLANT HAS FURNISHED THE BANK STATEMENTS OF THE REMAINING INVESTORS WHICH COULD NOT BE F URNISHED BEFORE THE AO AS THE SAME COULD NOT BE COLLECTED FROM THE INVESTORS. I AM CONVINCED THAT THE APPELLANT WAS PREVENTED BY REASONABLE CAUSE AND THUS, THE BANK STATEMENT FURNISHED BY THE APPELLANT AS ADDITIONAL EVIDENCE UNDER RULE 46A ARE ADMITTED AS HAVING A BEARING ON THE OUTCOME OF THE PRESENT APPEAL. IT IS FURTHER OBSERVED THAT THE SHARE CAPITAL MONEY HAS BEEN RECEIVED BY WAY OF ACCOUNT PAYEE CHEQUES FROM THE INVESTOR COMPANIES AND IS DULY REFLECTED IN THE BANK ACCOU NT OF THE APPELLANT. I HAVE PERUSED THE BANK STATEMENTS OF THE INVESTOR COMPANIES, THEIR FINANCIAL STATEMENTS, WHICH CLEARLY ESTABLISHES THE FACTUM OF MAKING INVESTMENTS. THESE FACTS CLEARLY ESTABLISH THE IDENTITY OF THE INVESTOR COMPANIES AND THE GENUINEN ESS OF THE IMPUGNED TRANSACTIONS. IT IS OBSERVED FROM THE RECORD THAT FOR THE PURPOSE OF MAKING ADDITION AS UNEXPLAINED CASH CREDITS, THE AO HAS HEAVILY RELIED IT(SS) NO. 29 RPR 2013 5 UPON THE ONLY FACT THAT THE APPELLANT COULD NOT FURNISH THE BANK STATEMENTS OF THE INVESTORS. IT IS FURTHER OBSERVED THAT NO FURTHER ENQUIRY OR INVESTIGATION HAS BEEN CONDUCTED BY THE AO TO CORROBORATE OR SUPPORT THE CONCLUSIONS DRAWN IN THE ASSESSMENT ORDER SO AS TO ASSESS THE SHARE CAPITAL MONEY AS THE UNDISCLOSED INCOME OF THE APPELLANT COMPANY. I N MY CONSIDERED OPINION, APART FROM DRAWING PRESUMPTIONS, THE AO HAS NOT BROUGHT ANY CLINCHING MATERIAL OR EVIDENCE ON RECORD TO PROVE THAT THE SAID SHARE CAPITAL MONEY BELONGS TO THE APPELLANT SINCE NO NEXUS HAS BEEN ESTABLISHED THAT THE MONEY FOR AUGMENT ING THE INVESTMENT IN THE BUSINESS HAS FLOWN FROM APPELLANTS OWN MONEY WHICH IS AN ESSENTIAL PRE - REQUISITE FOR MAKING ADDITION IN SUCH CASES. IT IS FURTHER OBSERVED THAT THE AO HAS FAILED TO TAKE NOTE OF THE DECISIONS RENDERED BY THE HONBLE APEX COURT IN THE CASE OF THE CIT VS. LOVELY EXPORTS (P) LTD. REPORTED IN 216 CTR 195 AND THE JURISDICTIONAL HIGH COURT VIZ. THE CHHATISGRH HIGH COURT IN THE CASE OF THE ACIT VS. VENKATESHWAR ISPAT (P) LTD. REPORTED IN 319 ITR 393 NOR IT IS THE CASE OF THE AO THAT THE FACTS IN SAID CASES ARE ENTIRELY DIFFERENT FROM THE FACTS IN THE INSTANT CASE. HENCE, NO SUCH DIFFERENTIATION COULD BE EF F ECT IV ELY DEMONSTRATED AND BROUGHT ON TO THE RECORD BY THE AO. I FIND THAT THE INVESTMENTS MADE BY THE SHARE APPLICANTS WERE DULY REFLE CTED IN THE AUDITED FINANCIAL STATEMENTS OF THE CORPORATE INVESTORS. IT IS A SETTLED PRINCIPLE OF LAW THAT REASON FOR SUSPICION, HOWEVER GRAVE IT MAY BE, CANNOT BE A BASIS FOR HOLDING ADVERSITY AGAINST APPELLANT. IN MY CONSIDERED OPINION, THE RATIO OF THE AFORESAID JUDGMENTS ARE CERTAINLY BINDING IN NATURE ON ALL THE REVENUE AUTHORITIES AND COURTS ETC. AND FURTHER, THE JUDGMENT OF THE JURISDICTIONAL HIGH COURT HAS BEEN RENDERED ON IDENTICAL FACTS. HENCE, IT IS IMPERMISSIBLE TO DEVIATE FROM THE RATIO LAID DO WN THEREIN AND AGAINST THE LAW OF JUDICIAL PRECEDENTS. THE DECISIONS RELIED UPON BY THE AO ARE CLEARLY DISTINGUISHABLE ON FACTS. I AM OF THE CONSIDERED OPINION THAT OUT OF AS MANY AS 37 SHAREHOLDERS, THE AO HAS ACCEPTED THE ADDITION T O SHARE CAPITAL IN THE CASE OF 28 SHAREHOLDERS, THE AO HAS ACCEPTED THE ADDITION T O SHARE CAPITAL IN THE CASE OF 28 SHAREHOLDERS AS GENUINE AND MADE TH E ADDITION ONLY IN RESPECT OF 9 SHAREHOLDERS ONLY FOR THE REASON THAT THE APPELLANT HAD FURNISHED THE COMMON SET OF DOCUMENTS T O DISCHARGE THE ONUS THAT LAY ON IT U/S 68 IN CASE OF ALL THE 37 INVESTORS EXCEPT FAILURE TO FURNISH BANK STATEMENT OF 9 INVESTORS. NOW THAT T HE BANK STATEMENT OF THE SAID 9 INVESTORS ARE ALSO AVAILABLE AND GENUINENESS OF 28 SHAREHOLDERS HAVING BEEN ACCEPT ED BY THE AO BASED ON SAME SET OF EVIDENCES, IT(SS) NO. 29 RPR 2013 6 THERE IS NO REASON TO TAKE A CONTRARY VIEW IN CASE OF THE SAID 10 INVESTORS. IN VIEW OF THE ABOVE AND RESPECTFULLY FOLLOWING THE RATIO OF THE BINDING JUDGMENTS, THE ADDITION OF SHARE CAPITAL MONEY OF RS.6,40,85, 000 / - AS UNEXPLAINED CASH CREDITS UNDER SECTION 68 IS UNCALLED FOR AND HENCE, DELETED. IN VIEW OF THE ABOVE DISCUSSION, THE APPEAL IS ALLOWED. 6.2 . THE ABOVE CATEGORICAL FINDING OF THE CIT(A) HAS NOT BEEN DISPELLED BY THE REVENUE BY PLACING ANY CONTRARY EVIDENCE BEFORE US. MOREOVER ON THE PERUSAL OF THE REMAND REPORT , WHICH IS PLACED AT PAGES 170 & 171 OF THE PAPER BOOK FILED BY THE ASSESSEE, WE FIND THAT THE ASSESSING OFFICER HAD CONCEDED THAT HAD THE ASSESSEE COMPANY SUBMITTED THESE ADDITIONAL EVIDENC ES DURING THE COURSE OF ASSESSMENT PROCEEDINGS THE UNDERSIGNED WOULD NOT HAVE MADE THIS ADDITION . . 6.3 . IN THE LIGHT OF THE ABOVE OBSERVATION OF THE AO IN THE REMAND REPORT, IT IS EVIDENT THAT THE ASSESSING OFFICER DOES NOT HAVE A CASE ON MERITS AFTER EXAMINATION OF ADDITIONAL EVIDENCE PRODUCED BEFORE THE CIT(A). THEREFORE, WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF THE CIT(A) AND, ACCORDINGLY, DISMISS THE GROUND S OF APPEAL OF THE REVENUE. 7 . IN THE RESULT, APPEAL FILED BY THE REVENUE STAND DISMISS ED. (ORDER WAS PRONOUNCED IN THE OPEN COURT ON 8. . 05.2017 ) SD/ - SD/ - ( N.S. SAINI ) ( GEORGE GEORGE K. ) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 8 / 05 /201 7 IT(SS) NO. 29 RPR 2013 7 COPY OF THE ORDER FORWARDED TO : COPY FORWARDED TO: 1 . APPELLANT 2 . RESPONDENT 3 . CIT 4 . CIT(A) 5 . DR, ITAT TRUE COPY BY ORDER, SR. PRIVATE SECRETARY