Shridham Sugar Pvt. Ltd., Jabalpur V. Asst.Commissioner of Income Tax,

ITSSA 43/JAB/2013

• Counselvise Citation: [2019] 117 COUNSELVISE.COM (IT) 8020 (ITAT-JABALPUR)
• Duration Of Justice: 5 year(s) 11 month(s) 4 day(s)
• Appeal Type: Income Tax (Search & Seizure) Appeal
• Pronouncement Date: 03-04-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Assessment Year: 2009-2010
• Appeal Filed On: 29-04-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: P D CHOUGALE
• Section: 131; 68

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL JABALPUR BENCH , JABALPUR BEFORE SHRI A. D. JAIN, VICE PRESIDENT AND SHRI T. S. KAPOOR, ACCOUNTANT MEMBER IT (SS) A NO. 43/JAB/2013 ASSESSMENT YEAR: 2009 - 10 SHRIDHAM SUGAR PVT. LTD. D - 7, SHAKTI VIHAR APARTMENT WRI GHT TOWN JABALPUR V. ACIT CIRCLE 1(1) JABALPUR T AN /PAN : AAKCS0515R (APP ELL ANT) (RESPONDENT) APPELLANT BY: SHRI RAHUL BARDIA, C.A. RESPONDENT BY: SHRI P. D. CHOUGALE, D.R. DATE OF HEARING: 02 04 201 9 DATE OF PRONOUNCEMENT: 03 04 201 9 O R D E R P ER A. D. JAIN, V.P . : THIS IS ASSESSEES APPEAL AGAINST THE ORDER OF THE LD. CIT(A), JABALPUR, DATED 15/2/2013, FOR ASSESSMENT YEAR 2009 - 10, TAKING THE FOLLOWING GROUNDS: THAT THE LD. C IT (APPEALS) IS NOT JUSTIFIED IN SUSTAINING THE ADDITION OF RS. 1,10,000 / - ON PROTECTIVE BASIS ON ACCOUNT OF SHARE CAPITAL OF THE COMPANY REJECTING THE CONTENTIONS OF THE APPEL L ANT T H AT : - I) EXPLANATION OF BLANK SHARE APPLIC ATION FORMS FOUND DURING SEARCH WERE EXTRA COPIES SINGLE CERTIFICATES ISSUED TO EACH I I) WITHOUT VERIFYI NG LOGICALLY AND INDIVIDUALLY THE LIST OF 20 SHAREHOLDERS HAVING PAN NUMBERS PROVING SOURCE OF EARNING THEIR STATUS, ACCEPTANCE OF INVESTMENTS BY THEM IN THEIR SWORN STATEMENT RECORDED U/S 131 EXCEPTING SAGAR SHRIVASTAVA IT(SS)A NO.43/JAB/2013 PAGE 2 OF 8 III) WITHOUT VERIFYING THE LIST OF 12 SHAREHOLDERS WHO FILED CIVIL SUIT AGAINST THE DIRECTOR , SUBODH JAIN FOR REFUND OF THEIR MONEY , COMPLIANT LODGED BEFORE THE ROC - GWALIOR IV) THE DIRECTIONS ISSUED BY THE LD. JCIT U/S 153D - ASSTT ALREADY FINALIZED FOR THE SEARCH PERIOD IN F.Y. 2009 - 10 - BO OKS OF ACCOUNTS ACCEPTED THUS THE RETURNED INCOME ACCEPTED 2. THAT LD. CIT(APPEALS) ERRED IN LAW IN MIS - APPLYING THE JUDGMENT RELIED ON (UNDER GROUND NO. 3) - LOVELY EXPORTS PVT. LTD (2008) 11 ITJ 357 (SC) - ALLEGING THAT SHARE CAPITAL RECEIVED THROUGH PUBL IC ISSUE - WRONGLY APPLYING AMENDED SECTION 68 W.E.F. 1.4.2013 RETROSPECTIVELY WHILE UPHOLDING THE ADDITION OF SHARE CAPITAL PROTECTIVELY. 3. THAT THE LD. CIT(APPEALS) ERRED IN NOT ADJUDICATING PARTLY T HE GROUND NO. 3 REGARDING THE APPLICABILITY OF - METACHEM INDUSTRIES 245 ITR 160 (M.P. H. COURT) - WHICH LAID DOWN THE PRINCIPLE THAT IF PERSON OWNS THE ENTRY THE BURDEN STANDS DISCHARGED AND THE A.O. IS FREE TO TAKE ACTION AS PER LAW AGAINST HIM , WHILE SUSTAINING THE SHARE CAPITAL ADDITION PROTECTI VELY. 4. THE LD. CIT(APPEALS) ERRED IN NOT CONSIDERING THE ITAT JUDGMENT - ACIT VS. HITKARNI PRAKASHAN LTD (2010) 14 ITJ 689 (ITAT JABALPUR),M.P. , FOLLOWED THE ABOVE S.C. JUDGMENT. 5. UNDER THE FACTS AND CIRCUMSTANCES OF THE CASE THE LD. CIT(APPEALS) IS N OT JUSTIFIED IN SUSTAINING THE ADDITION OF RS.4,83,374/ - AS UNEXPLAINED CASH ON SUBSTANTIVE BASIS AND ON PROTECTIVE BASIS IN THE HANDS OF SUBODH KUMAR JAIN, FOUND DURING SEARCH WITH SHRI SUBODH KUMAR JAIN, DIRECTOR WITHOUT PROVING OTHERWISE THAT THE SAID C ASH CLAIM ED TO BE OF RADIANCE AS PER BOOKS OF ACCOUNTS DULLY ACCEPTED BY THE A.O. AND CIT(APPEALS) DOES NOT BELONG AS SUCH. 2 . THE FIRST ISSUE IS THE ADDITION OF RS.1.10 LAKHS, MADE ON PROTECTIVE BASIS IN THE HANDS OF THE ASSESSEE, ON ACCOUNT OF SHARE IT(SS)A NO.43/JAB/2013 PAGE 3 OF 8 CAPITA L OF THE COMPANY. THE A.O. ASKED THE ASSESSEE TO PROVE THE SOURCE AND GENUINENESS OF THE SHARE CAPITAL OF RS.1.10 LAKHS INTRODUCED IN THE COMPANY DURING THE YEAR. AS PER THE A.O., HOWEVER, THE ASSESSEE FAILED TO SUBSTANTIATE THE SAME. IT WAS SO, THAT TH E ADDITION WAS MADE. 3 . THE LD. CIT(A) CONFIRMED THE ADDITION. HE HELD AS FOLLOWS: I HAVE CONSIDERED FACTS AND CIRCUMSTANCES OF THE CASE, ASSESSMENT ORDER AND REMAND REPORT OF THE A.O. AND SUBMISSIONS AND CONTENTIONS MADE BY THE ASSESSEE DISTINGUISH LOVELY EXPORTS. AN AMOUNT OF RS.1,10,000 / - HAS BEEN DEPOSITED TOWARDS SHARE CAPITAL, IN CASH BY ONE SHRI SAGAR SHRIVASTAVA. NO DETAILS REGARDING SOURCE OF RS.1,10,000 - OR CREDITWORTHINESS OF THE PERSON AND HIS IDENTITIES COULD BE FILED BY THE ASSESSEE EITHER IN T HE COURSE OF ASSESSMENT PROCEEDINGS OR DURING THE REMAND PROCEEDINGS BEFORE THE A.O. FURTHER, THIS PERSON COULD NOT BE PRODUCED BY THE ASSESSEE FOR EXAMINATION BEFORE THE A.O. IT WAS ALSO FOUND DURING THE COURSE OF SEARCH THAT BLANK SHARE APPLICATIONS DULY SIGNED BY THESE PERSONS WERE LYING WITH SHRI SUBODH KUMAR JAIN, DIRECTOR IN THE COMPANY AND MAIN PERSON OF THE GROUP DURING THE COURSE OF SEARCH. IT WAS ALSO FOUND THAT SHAR E CERTIFICATES IN THE NAME OF THESE PERSONS WERE FOUND TO BE IN POSSESSION OF SHRI SUBODH KUMAR JAIN, DURING THE COURSE OF SEARCH. THERE ARE SERIOUS DOUBTS ABOUT THE FINANCIAL CAPACITY AND CREDITWORTHINESS OF THIS PERSON BECAUSE HE HAD RAISED, SMALL - SMALL LOANS FROM THE BANK FOR HIS DAY - TO - DAY AFFAIRS AND CHANCES OF ANY SURPLUS INCOME WITH HIM FOR INVESTMENT IN SHARES IS VERY REMOTE. DURING THE COURSE OF APP E LLATE PROCEEDINGS ALSO THE ASSESSEE HAS NOT PRODUCED ANY CONCRETE EVIDENCE IN SUPPORT OF ITS CLAIM THAT THE ABOVE SHARE CAPITAL WAS GENUINE, FACT THE ONUS IN THIS REGARD IS SQUARELY UPON THE ASSESSEE TO PROVE IT TO THE SATISFACTION OF THE A.O. THAT SHARE CAPITAL INTRODUCED WAS GENUINE. THE SITUATION IS ENTIRELY CHANGED AFTER THE AMENDMENT OF SECTION 68 BY WHICH ONUS HAS BEEN NOW CASTED UPON THE ASSESSEE TO IT(SS)A NO.43/JAB/2013 PAGE 4 OF 8 PROVE THAT THE CREDITS ARE GENUINE, TO THE SATISFACTION OF THE A.O. THE ASSESSEE HAS RELIED UPON THE DECISION O F HON'BLE APEX COURT IN CASE OF LOV ELY EXPO RTS. HOWEVER THAT JUDGEMENT WAS APPARENTLY RENDERED IN RESPECT OF SHARE CAPITAL RECEIVED THROUGH PUBLIC ISSUE, WHERE THERE IS A L ARGE NUMBER OF INVESTORS AND RECIPIENT COMPANY IS NOT SUPPOSED TO KNOW EACH AND EVERY SHARE APPLICANT. HOWEVER, SITUATION IS DIFFERENT, WHEN SHARES ARE ISSUED THROUGH PRIVATE PLACEMENT IN A CLOSELY HELD COMPANY. IN SUCH SITUATION THE ASSESSEE OR ITS DIRECT ORS ARE SUPPOSED TO KNOW THE INVESTORS/APPLICANTS. THE ONUS IS MORE IN SUCH CASES, WHEN THE ASSESSEE SHOULD PROVE IDENTITY OF INVESTORS, THEIR CREDITWORTHINESS AND GENUINENESS OF TRANSACTION, WHICH HAS APPARENTLY NOT BEEN DONE. FURTHER SECTION 68 HAS BEEN AMENDED AND AMENDED PROVISIONS READ AS UNDER: '68. WHERE ANY SUM IS FOUND CREDITED IN THE BOOKS OF AN ASSESSEE MAINTAINED FOR ANY PREVIOUS YEAR, AND THE ASSESSEE OFFERS NO EXPLANATION ABOUT THE NATURE AND SOURCE THEREOF OR THE EXPLANATION OFFERED BY HIM IS NOT, IN THE OPINION OF THE ASSESSING OFFICER, SATISFACTORY, THE SUM SO CREDITED MAY BE CHARGED TO INCOME TAX AS THE INCOME OF THE ASSESSEE OF THAT PREVIOUS YEAR: THE FOLLOWING PROVISIONS SHALL BE INSERTED IN SECTION 68 BY THE FINANCE ACT, 2012, W.E.F. 1.4 .2013. PROVIDED THAT WHERE THE ASSESSEE IS A COMPANY (NOT BEING A COMPANY IN WHICH THE PUBLIC ARE SUBSTANTIALLY INTERESTED,) AND THE SUM SO CREDITED CONSISTS OF SHARE APPLICATION MONEY, SHARE CAPITAL, SHARE PREMIUM OR ANY SUCH AMOUNT BY WHATEVER NAME CALLE D, ANY EXPLANATION OFFERED BY SUCH ASSESSEE - COMPANY SHALL BE DEEMED TO BE NOT SATISFACTORY, UNLESS A . THE PERSON, BEING A RESIDENT IN WHOSE NAME SUCH CREDIT IS RECORDED IN THE BOOKS OF SUCH COMPANY ALSO OFFERS AND EXPLANATION ABOUT THE NATURE AND SOURCE OF S UCH S UM SO CREDITED; AND IT(SS)A NO.43/JAB/2013 PAGE 5 OF 8 B. SUCH EXPLANATION IN THE OPINION OF THE ASSESSING OFFICER AFORESAID HAS BEEN FO UND TO BE SATISFACTORY. PROVIDED FURTHER THAT NOTHING CONTAINED IN THE FIRST PROVISO SHALL APPLY IF THE PERSON, IN WHOSE NAME THE SUM REFERRED TO THER EIN IS RECORDED, IS A VENTURE CAPITAL FUND OR A VENTURE CAPITAL COMPANY AS REFERRED TO IN CLAUSE (23FB) OF SECTION 10.' FROM THE AMENDED PROVISIONS, IT IS CLEAR THAT THE ASSESSEE COMPANY HAS TO PROVE THE NATURE AND SOURCE OF SUCH SHARE CAPITAL CREDITED IN THE BOOKS TO THE SATISFACTION OF A.O., WHICH HAS NOT BEEN DONE BY THE ASSESSEE IN THE PRESENT CASE. CONSIDERING THE FACTS IN TOTALITY, I REJECT THE CONTENTION OF THE ASSESSEE AND UPHOLD THE ADDITION OF RS. 1,10,000 / - MADE BY THE A.O. IN THIS REGARD. THEREFO RE, THIS GROUND OF APPEAL OF THE ASSESSEE IS REJECTED. 4 . AT THE OUTSET, THE LD. A.R. OF THE ASSESSEE HAS PLACED RELIANCE ON THE ORDER DATED 21/6/2018, PASSED BY THE JABALAPUR BENCH OF THE TRIBUNAL ( COPY PLACED AT APB: 7 TO 11 ), IN ITA NOS. 79 TO 81/JAB/2013 , FOR ASSESSMENT YEARS 2007 - 08 TO 2009 - 10, IN THE CASE OF SHRI SUBODH KUMAR JAIN, DIRECTOR IN THE COMPANY WHICH IS THE ASSESSEE BEFORE US. IT IS THE CONTENTION OF THE ASSESSEE THAT THE ADDITION PRESENTLY UNDER CONSIDERATION WAS MADE ON PROTECTIVE BASIS IN THE HANDS OF THE ASSESSEE COMPANY; THAT THE SUBSTANTIVE ADDITION WAS MADE IN THE HANDS OF SHRI SUBODH KUMAR JAIN; THAT THAT SUBSTANTIVE ADDITION IN THE CASE OF SHRI SUBODH KUMAR JAIN HAS BEEN DELETED BY THE TRIBUNAL. 5 . THE LD. D.R., ON THE OTHER HAND, HAS P LACED STRONG RELIANCE ON THE IMPUGNED ORDER. 6 . THE CONTENTION RAISED BEFORE US ON BEHALF OF THE ASSESSEE IS FOUND TO BE CORRECT. THE TRIBUNAL, VIDE ITS ORDER (SUPRA), DATED 21/6/2018, HAS DELETED THE ADDITION MADE IN THE HANDS OF SHRI SUBODH KUMAR JAIN , IN WHOSE HANDS THE ADDITION MADE WAS MADE ON IT(SS)A NO.43/JAB/2013 PAGE 6 OF 8 SUBSTANTIVE BASIS, AS AGAINST THE PROTECTIVE ADDITION CORRESPONDINGLY MADE TO THE INCOME OF THE PRESENT ASSESSEE COMPANY. THE LD. CIT(A) HAD OBSERVED THAT THE ADDITION OF RS.1.10 LAKHS IN THE HANDS OF SHRI SUBODH KUMAR JAIN SHOULD BE IN THE ASSESSMENT YEAR 2008 - 09 AND NOT IN THE ASSESSMENT YEAR 2009 - 10, SINCE THE SHARE APPLICATION MONEY WAS RECEIVED IN THE ASSESSMENT YEAR 2008 - 09 AND NOT IN THE ASSESSMENT YEAR 2009 - 10. THIS FINDING OF THE LD. CIT(A) HAS NOT BEEN D ISTURBED BY THE TRIBUNAL. 7 . IN VIEW OF THE ABOVE, THE GRIEVANCE OF THE ASSESSEE IN THIS REGARD IS FOUND TO BE JUSTIFIED. IT IS ACCEPTED AS SUCH. THE ADDITION OF RS.1.10 LAKHS, MADE IN THE HANDS OF THE ASSESSEE COMPANY ON PROTECTIVE BASIS IS , ACCORDINGLY, D ELETED. 8 . THE SECOND ISSUE IS WITH REGARD TO THE ADDITION OF RS.4,83,374/ - MADE ON SUBSTANTIVE BASIS IN THE HANDS OF THE ASSESSEE COMPANY. THIS ADDITION, REPRESENTING UNEXPLAINED CASH, WAS CONFIRMED BY THE LD. CIT(A). THE PROTECTIVE ADDITION WAS MADE IN TH E HANDS OF SHRI SUBODH KUMAR JAIN, DIRECTOR. 9 . AT THE TIME OF SEARCH, SHRI SUBODH KUMAR JAIN, DIRECTOR , HAD STATED THAT THE CASH BELONGED TO THE ASSESSEE COMPANY. FROM THIS FACT, THE LD. CIT(A) CONCLUDED THAT THE OWNERSHIP OF THE CASH WAS EVIDENT AS THAT OF THE ASSESSEE COMPANY. THE LD. CIT(A) OBSERVED THAT THE ASSESSEES CONTENTION THAT CASH OF RS.34,66,075/ - WAS APPEARING IN THE BOOKS OF M/S RADIANCE AS ON THE DATE OF SEARCH, WAS NOT ACCEPTABLE, SINCE NO SUCH BOOK S WERE FOUND AT THE TIME OF SEARCH AND THE BOOKS PRODUCED LATER , AT THE TIME OF ASSESSMENT, WERE FOUND TO BE UNACCEPTABLE BY THE A.O. 10 . THE LD. A.R. OF THE ASSESSEE HAS PLACED RELIANCE ON THE TRIBUNALS ORDER DATED 17/11/2017, PASSED BY THE JABALPUR BENCH OF THE TRIBUNAL IN ITA NO.45&46/JAB/2013, FO R THE ASSESSMENT YEARS 2008 - 09 IT(SS)A NO.43/JAB/2013 PAGE 7 OF 8 AND 2009 - 10, IN THE CASE OF M/S RADIANCE, JABALPUR. THE RELEVANT OBSERVATION S OF THE TRIBUNAL ARE AS FOLLOWS: 21. WE HAVE PERUSED THE CASE RECORDS AND THE ORDERS OF THE AUTHORITIES BELOW AND OTHER MATERIAL PLACED ON RECORD. WE FIND THAT THE ADDITION OF RS.34,66,075/ - TOWARDS UNEXPLAINED CASH BY THE A.O. HAS BEEN RIGHTLY BEEN DELETED BY THE LD. CIT(A) FOR THE REASONS RECORDED AS SUMMARIZED IN PARA 17 ABOVE. THE LD. CIT(A) HAS TAKEN COGNIZANCE OF THE OBSERVATION OF THE JT . C IT PASSED UNDER S.153D AND ALSO THE FACTS A N D CIRCUMSTANCES O F THE CASE. IT IS OS TENSIBLE THAT ONCE THE CAS H FOUND IN THE COURSE OF SEARCH IS ALSO FOUND TO BE RECORDED IN THE FEE REGIS TER AT THE TIME OF SEARCH WHICH ULTIMATELY HAS BEEN TRANSFERRED IN THE REG ULAR BOOKS OF ACCOUNTS. THE CASH FOUND CANNOT BE ASSESSED SEPARATELY. THIS WILL TANTAMOUNT TO DOUBLE TAXATION. WITHOUT REPEATING THE VARIOUS OBSERVATIONS MADE BY THE CIT(A), WE FIND NO INFIRM ITY I N THE ORDER OF THE CIT(A). 11 . FROM THE ABOVE ORDER OF THE TRIBUNAL, IT IS SEEN THAT THE ACTION OF THE LD. CIT(A) IN DELETING THE ADDITION OF RS.34,66,075/ - TOWARDS UNEXPLAINED CASH IN THE HANDS OF M/S RADIANCE, HAS BEEN CONFIRMED BY THE TRIBUNAL. THE TRIBUNAL HAS OBSERVED THAT THE CASH F O UND IN THE SEARCH WAS AL SO FOUND TO BE RECORDED IN THE FEE REGISTER, WHICH ULTIMATELY STOOD TRANSFERRED TO THE REGULAR BOOKS OF ACCOUNT . THUS, CASH BALANCE AS ON 29/5/2008, AS PER THE BOOKS OF ACCOUNT OF M/S RADIANCE WAS ACCEPTED, AS UPHELD BY THE LD. CIT(A), AND WAS CONFIRMED B Y THE TRIBUNAL , THE BOOKS OF ACCOUNT HAVING NOT BEEN REJECTED. THESE BEING THE FACTS, THE OBSERVATION OF THE LD. CIT(A), IN THE CASE OF THE PRESENT ASSESSEE, TO THE CONTRARY, REJECTING THE CASH OF RS.34,66,075/ - TO BE APPEARING IN THE BOOKS OF M/S RADIANC E, STAND EFFACED AND, ACCORDINGLY, THIS ADDITION IN THE HANDS OF THE PRESENT ASSESSEE IS DELETED, FOLLOWING IT(SS)A NO.43/JAB/2013 PAGE 8 OF 8 THE AFORESAID TRIBUNAL ORDER DATED 17/11/2017, IN THE CASE OF M/S RADIANCE, JABALPUR. 12 . THUS, IN VIEW OF THE ABOVE DISCUSSION, BOTH THE ADDITIONS, I.E . OF RS.1.10 LAKHS AND OF RS.4,83,374/ - , ARE DELETED. 13 . IN THE RESULT, THE APPEAL IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 03 / 0 4 /201 9 . SD/ - SD/ - [ T. S. KAPOOR ] [ A. D. JAIN ] ACCOUNTANT MEMBER VICE PRESIDENT DATED: 03 /0 4 / 201 9 JJ: 0204 COPY FORW ARDED TO: 1 . APPELLANT 2 . RESPONDENT 3 . CIT(A) 4 . CIT 5 . DR