DCIT CC 7(4), MUMBAI V. WELL KNOWN POLYSTERS P.LTD, MUMBAI

MA 710/MUM/2018

• Counselvise Citation: [2021] 107 COUNSELVISE.COM (IT) 9678 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 7 month(s) 24 day(s)
• Appeal Type: Miscellaneous Application
• Pronouncement Date: 29-07-2021
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: G
• Assessment Year: 2008-2009
• Appeal Filed On: 05-12-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: MANPREET SINGH DUGGAL
• Keywords: Bogus purchase; Bogus Share capital; Capital asset; Depreciation; Rectification of order; Search and seizure; Capital expenditure
• Section: 143(3); 153A; 115JB; 13; 132

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL , G BENCH MUMBAI BEFORE : SHRI SHAMIM YAHYA , A CCOUNTANT MEMBER & SHRI PAVAN KUMAR GADALE , JUDICIAL MEMBER MA NO.710/MUM/2018 TO 712/MUM/2018 (ARISING OUT OF ITA NO S . 5496 / MUM/ 2016 TO 5498/MUM/20 16) ( ASSESSMENT YEAR S : 2008 - 09 TO 2010 - 11 ) MA NO.713/MUM/2018 TO 715/MUM/2018 (ARISING OUT OF ITA NOS.5848/MUM/2016 TO 5850/MUM/2016) ( ASSESSMENT YEAR : 2012 - 13 TO 2014 - 15 ) DCIT(CC) - 7(4) MUMBAI VS. M/S. WELLKNOWN POLYSTER LTD., 14 TH FLOOR, NIRMAL NARIMA N POINT MUMBAI 400 021 PAN/GIR NO. AAACW1018K (APPELLANT ) .. (RESPONDENT ) REVENUE BY SHRI MANPREET SINGH DUGG AL ASSESSEE BY SHRI RAKESH JOSHI DATE OF HEARING 16 /07 /2021 DATE OF PRONOUNCEMENT 29 / 07 /202 1 / O R D E R PE R SHRI SHAMIM YAHYA AM BY VIRTUE OF THESE MISCELLANEOUS APPLICATIONS, REVENUE HAS SOUGHT RECTIFICATION OF MISTAKE APPARENT FROM RECORD IN THE COMMON ORDER OF THIS TRIBUNAL IN ITA NOS. 5848/MUM/2016 TO 5850/MUM/2016 & 5496/MUM/2016 TO 5498/MUM/2016 VIDE ORDER DATED 13/06/2018 . TH E M A NO . 710 - 715/MUM/2018 M/S. WELLKNOWN POLYESTER LTD., 2 SUBMISSION S IN THESE MISCELLANEOUS APPLICATIONS ARE COMMON , THE Y READ AS UNDER: - ' 2. THE INTER - ALIA GROUNDS OF APPEAL IN THE AFORESAID APPEALS BEFORE THE ITAT, ON WHICH HONBLE TRIBUNAL HAS GIVEN THE DECISION, WHICH ARE NOW BEI NG REQUESTED FOR RECTIFICATION / AMENDMENT, WERE AS FOLLOWS: FOR A.Y.2008 - 09 TO 2010 - 11 (APPEAL BY THE REVENUE): ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE CIT(A) HAS ERRED IN DELETING THE DISALLOWANCE OF DEDUCTION ON ACCOUNT OF THE PROVISION MADE FOR REDEMPTION OF PREFERENCE SHARES ON THE GROUND THAT ADDITION/DISALLOWANCE WAS NOT BASED ON ANY INCRIMINATING MATERIAL WHILE COMPUTING THE BOOK PROFIT U/S 115JB OF THE ACT WITHOUT APPRECIATING THE FACT THAT THE DEPARTMENT HAS NOT ACCEPTED THE ORDER PASSE D BY THE HON'BLE HIGH COURT IN THE CASE OF AH CARGO LOGISTICS LTD., AND PREFERRED TO FILE SPECIAL LEAVE PETITION BEFORE THE HON'BLE SUPREME COURT.' FOR A.Y. 2012 - 13 TO 2014 - 15 (APPEAL BY THE ASSESSEE): 'ON THE FACTS AND CIRCUMSTANCES OF THE CASE AS WELL AS IN LAW, THE ID. CIT(A) HAS ERRED IN CONFIRMING THE ACTION OF LEARNED ASSESSING OFFICER IN MAKING DISALLOWANCE OF REDUCTION ON ACCOUNT OF THE PROVISION MADE FOR PREMIUM ON REDEMPTION OF PREFERENCE SHARES, WHILE COMPUTING THE BOOK PROFITS U/S 115JB OF TH E ACT, WITHOUT APPRECIATING THE FACT THAT IT IS AN ASCERTAINED LIABILITY AND HENCE LIABLE TO BE REDUCED WHILE COMPUTING BOOK PROFIT U/S 115JB OF THE ACT.' 3. WITH REGARD TO THE ABOVE, IT IS HUMBLY SUBMITTED THAT THIS DECISION GRANTING RELIEF TO THE ASSESS EE HAS ARISEN FROM A MISREPRESENTATION OF FACTS BY THE ASSESSEE BEFORE THE HON'BLE TRIBUNAL. THIS IS BROUGHT OUT BY FACTS ELUCIDATED IN THE FOLLOWING PARAGRAPHS A] A SEARCH AND SEIZURE ACTION WAS CONDUCTED IN THE CASE OF ASSESSEE AND ITS SISTER CONCERN S U/S 132 ON 23.05.2013. DURING THE COURSE OF SEARCH, STATEMENT U/S 132(4) WAS RECORDED ON 26.05.2013 FROM SHRI ANIL GUPTA, CMD OF M/S WELLKNOWN POLYESTERS LTD. IN WHICH HE ADMITTED TO DEBITING BOGUS PURCHASES TO THE TUNE OF RS. 177.85 CRS. IN THE BOOKS OF M/S WELLKNOWN POLYESTER LTD. AND OFFERED THE SAME TO TAX IN THE RESPECTIVE YEARS IN WHICH THE SAME HAVE BEEN BOOKED. SHRI ANIL GUPTA, CMD IN A STATEMENT RECORDED ON 22.07.2013 U/S 132(4) CONFIRMED THAT THE TOTAL AMOUNT OF BOGUS PURCHASES WAS RS. 188.38 CR AS AGAINST RS. 177.85 CR ADMITTED EARLIER. HE CONFIRMED THAT THESE ACCOMMODATION PURCHASES WERE BOOKED TO ROUTE SUCH MONEY BACK AS SHARE APPLICATION MONEY THROUGH VARIOUS SHELL COMPANIES IN THE FORM OF PREFERENCE SHARE CAPITAL. THE SHARE CAPITAL IS INTROD UCED THROUGH GROUP CONCERNS OF M/S M A NO . 710 - 715/MUM/2018 M/S. WELLKNOWN POLYESTER LTD., 3 WELLKNOWN POLYESTER LTD. INTO THE BOOKS OF ACCOUNT OF M/S WELLKNOWN POLYESTER LTD FROM F.Y. 2008 - 09 . F.Y. 2013 - 14. DURING F.Y. 2011 - 12 TO F.Y. 2013 - 14 FOLLOWING BOGUS SHARE APPLICATION MONEY WAS INTRODUCED: S . NO . F.Y . BOGUS SHARE APPLICATION MONEY (IN CR.) 1 . 2008 - 09 10.95 2. 2009 - 10 25.97 3. 2010 - 11 35.81 4. 2011 - 12 42.02 5. 2012 - 13 53.40 6. 2013 - 14 4.50 IT WAS ALSO ADMITTED BY THE PROVIDER OF BOGUS SHARE APPLICATION MONEY IN A STATEMENT R ECORDED FROM HIM I.E. SHRI MUKESH MANIKLAL CHOKSHI ON 23.05.2013, THAT HE PROVIDED ENTRIES FOR BOGUS SHARE CAPITAL TO M/S WELLKNOWN POLYESTER LTD. AS PER THE INSTRUCTIONS OF THE APPELLANT ASSESSEE COMPANY. MR. ANIL GUPTA, THE CMD OF WELLKNOWN GROUP ALSO AD MITTED IN STATEMENT U/S 132(4) ON 26.05.2013 THAT THERE WAS INTRODUCTION OF BOGUS PREFERENCE SHARE CAPITAL THROUGH THE FOLLOWING GROUP COMPANIES: 1. M/S. WELLKNOWN TEXTILES INDUSTRIES PVT. LTD. 2. M/S. WELLKNOWN TECHNOLOGIES P. LTD. 3. M/S. ASHTAVIN AYAK AGRO FARMS PVT. LTD. 4. M/S. BRADMA LOGISTICS PARTS LTD. 5. M/S. NISHITA INFRASTRUCTURE PVT. LTD. IT WAS ADMITTED THAT DURING THE F.Y.S 2008 - 09 TO 2013 - 14 RS. 177.85 CRORE WAS INTRODUCED AS BOGUS SHARE CAPITAL WHICH WAS LATER REVISED TO RS. 188.3 8 CRORE. B) BASED ON THE ABOVE EVIDENCES FOUND DURING THE COURSE OF SEARCH ACTION, THE ASSESSING OFFICER PASSED ASSESSMENT ORDERS U/S 143(3) R.W.S. 153A, FOR THE A.Y. 2008 - 09 TO 2013 - 14 AND FOR THE SEARCH A.Y. 2014 - 15 ORDER U/S 143(3) ON 01.04.2015. THERE FORE, THE ADDITIONS HAVE BEEN MADE BASED ON THE INCRIMINATING MATERIAL FOUND DURING THE COURSE OF SUCH SEARCH ACTION; ACCORDINGLY, THE RATIO OF JUDGEMENT OF HON'BLE BOMBAY HIGH COURT IN THE M A NO . 710 - 715/MUM/2018 M/S. WELLKNOWN POLYESTER LTD., 4 CASE OF CONTINENTAL WAREHOUSING CORPORATION (NHAVA SHEVA LTD.], 37 4 ITR 645 [BOM.], WILL NOT APPLY. C) THE AO DISALLOWED THE FOLLOWING ADJUSTMENT MADE BY WAY OF REDUCTION FROM BOOK PROFIT WHILE COMPUTING BOOK PROFIT U/S 115JB ON ACCOUNT OF PREFERENCE SHARE REDEMPTION RESERVE. SR. NO. A.Y. BOOK PROFIT U/S 115JB (IN R S.) DISALLOWANCE OF REDUCTION ON ACCOUNT OF THE PROVISION MADE FOR PREMIUM ON REDEMPTION OF PREFERENCE SHARES (IN RS.) 1. 2008 - 09 28,05,47,760 9,68,70,966 2. 2009 - 10 12,05,32,370 1,55,61,882 3. 2010 - 11 60,61,33,059 3,94,80,191 4. 2012 - 13 1,47,59,73,822 2,42,15,414 5. 2013 - 14 1,77,99,67,255 51,53,38,589 6. 2014 - 15 2,44,83,34,499 54,38,14,990 4. THUS, IT IS EVIDENT THAT THE ASSESSEE AGITATED THIS GROUND OF APPEAL BEFORE THE HO N'BLE TRIBUNAL BY NOT DISCLOSING THE ADMI SSION OF THE CMD SHRI ANIL GUPTA U/S 132(4) WITH RESPECT TO INTRODUCTION OF BOGUS SHARE CAPITAL. 5. THE ASSESSEE FILED AN APPEAL AGAINST THE ORDER OF LD. CIT(A) DATED 25.07.2016 VIDE ITA NO. 5848 TO 5850/M/16. PLEASE REFER TO FORM NO. 36 FILED BY ASSESS EE IN THIS REGARD. IT IS EVIDENT THAT THE APPELLANT ASSESSEE CONTINUED TO MAKE A CLAIM OF ADJUSTMENT OF ASCERTAINED LIABILITY OF REDEMPTION OF PREMIUM FROM SHARE CAPITAL RESERVE FOR COMPUTATION OF BOOK PROFIT U/S . 11 5JB, EVEN THOUGH IT HAD CATEGORICALLY ADM ITTED ON OATH U/S 132 [4) THAT THE SHARE CAPITAL WAS BOGUS, AS IT WAS RE - INTRODUCING MONEY WHICH WAS SIPHON E D OUT OF THE COMPANY BY WAY OF BOGUS PURCHASES. 6. WHILE FILING THE APPEAL, THE ASSESSEE DID NOT FILE THE ANNEXURES 1 AND 2 WHICH ARE PART OF THE ASSESSMENT ORDER. THESE ANNEXURE CLEARLY BRING OUT THE MODUS OPERAND! OF THE ASSESSEE IN MAKING BOGUS PURCHASES FOR CAPITAL ASSETS AND CLAIMING DEPRECIATION ON SUCH BOGUS ASSETS. THIS MONEY IS INTRODUCED THROUGH SISTER CONCERNS AS SHARE CAPITAL INTO THE A SSESSEE COMPANY. 7. WHILE PASSING THE ORDER, HON'BLE ITAT MERELY RELIED ON THE ORDER IN THE ASSESSEE'S OWN CASE M/S WELLKNOWN SYNTHETICS PVT. LTD. IN ITA NO. 2691/MUM/2016 FOR A.Y. 2010 - 11 AND WELLKNOWN POLYESTER LTD. IN ITA NO. M A NO . 710 - 715/MUM/2018 M/S. WELLKNOWN POLYESTER LTD., 5 2692/MUM/2016 FOR A.Y. 2 010 - 11 AND WITHOUT CONSIDERING THE DETAILED ARGUMENTS OF REVENUE DIFFERENTIATING THE FACTS. 8. THE SWORN STATEMENT U/S 132(4) RECORDED FROM SHRI ANIL GUPTA, CMD OF THE ASSESSEE APPELLANT COMPANY REVEALED THAT CAPITAL EXPENDITURE WAS INFLATED AND THESE F UNDS SIPHONED OUT WERE BROUGHT BACK THROUGH A LAYER OF SISTER CONCERNS INTO THE BOOKS OF THE ASSESSEE APPELLANT AS SHARE CAPITAL AND IT WAS THIS REDEMPTION OF BOGUS SHARE CAPITAL WHICH WAS CLAIMED AS ADJUSTMENT U/S 115JB. 9. A DETAILED READING OF THE OR DER UNDER CONSIDERATION SHOWS THAT THE ARGUMENT OF THE REVENUE/CIT(DR) WITH RESPECT TO THE BOGUS NATURE OF SHARE CAPITAL AND THE BOGUS NATURE OF REDEMPTION OF SHARE CAPITAL HAVE NOT BEEN REFERRED TO IN THE ORDER. HON'BLE TRIBUNAL HAS NOT REFERRED TO THE DE TAILED ARGUMENTS OF THE REVENUE/CIT(DR) ON THE FACT THAT THE APPEALS FOR M/S WELLKNOWN SYNTHETICS PVT LTD. IN ITA NO. 2691/MUM/2016 FOR A.Y. 2010 - 11 AND WELLKNOWN POLYESTER LTD. IN ITA NO. 2692/MUM/2016 FOR A.Y. 2010 - 11, ARE ON DIFFERENT SET OF FACTS AND I N SO FAR AS THESE APPEALS PERTAIN TO A REGULAR ASSESSMENT PASSED U/S 143(3) OF THE ACT WHEREAS THE APPEALS UNDER SUBJECT REFERENCE PERTAIN TO ASSESSMENT U/S 143(3) R.W.S 153A AND THE DECISION ON THE ADJUSTMENT U/S 115JB IN THE REGULAR ASSESSMENT WILL NOT A PPLY TO ADJUSTMENT MADE U/S 115JB FOR REDEMPTION OF BOGUS SHARE CAPITAL DECLARED IN THE STATEMENT RECORDED U/S 132(4) OF THE I.T. ACT. THERE IS NO REFERENCE TO SUBMISSIONS MADE THROUGH DETAILED PAPER BOOK FILE BY THE REVENUE DURING THE COURSE OF HEARING IN FEBRUARY AND MARCH, 2018 10 . DETAILED ARGUMENTS WERE ALSO MADE BY THE REVENUE ON THE MAT FIGURES AS PER THE RETURN OF INCOME AND THAT THE ADJUSTMENT CLAIM BY ASSESSEE WAS INCORRECT, HO WEVER, THESE ARGUMENTS HAVE NOT BEEN CONSIDERED BY THE HON'BLE TRIBUNA L IN THE FINAL ORDER. 2. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE RECORD. WE NOTE THAT AS REGARDS THE ORDER IN APPEAL BY THE REVENUE, THE ITAT HAS DULY CONSIDERED ALL ASPECTS AND HELD THAT THE ADDITION WAS NOT BASED ON ANY INCRIMINATING MATERIAL FOUND IN SEARCH . BY WAY OF THIS MISCELLANEOUS APPLICATION, THE CONTENTION OF THE REVENUE IS THAT THERE WAS INCRIMINATING MATERIAL IN AS MUCH AS THERE WAS ADMISSION OF C MD SHRI ANIL GUPTA U/S.132(4) WITH RESPECT TO INTRODUCTION OF BOGUS SHARE CAPITAL. WE NO TE THAT ITAT IN ITS AFORESAID ORDER HAS DULY TAKEN NOTE OF THESE ASPECTS AND THEREAFTER , IT HAS COME TO THE CONCLUSION THAT THE ISSUE IS COVERED BY THE HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF M A NO . 710 - 715/MUM/2018 M/S. WELLKNOWN POLYESTER LTD., 6 CONTINENTAL WAREHOUSING CORPORATION (NAVA SHEVA LTD.,) (SUPRA), IN AS MUCH AS THE ADDITION WAS NOT BASED UPON INCRIMINATING MATERIAL FOUND ON SEARCH. THE REVENUE IN THE GROUNDS OF APPEAL AT THAT TIME HAS DULY RAISED THE ISSUE THAT REVENUE HAS NOT ACCEPTED THE ORDER OF THE HONBLE BOMBAY HIGH COURT IN THE CASE OF AH CARGO LOGISTICS LTD AND HAD PREFERRED A SPECIAL LEAVE PETITION BEFORE THE HONBLE SUPREME COURT. FROM THE ABOVE, IT IS APPARENT THAT REVENUE WAS AWARE THAT ON THE SAME ISSUE, THERE I S A DECISION OF THE HONBLE BOMBAY HIGH COURT AGAINST THE REVENUE AND THAT FURTHER ITAT HAS TAKEN THE DECISION AFTER DULY TAKING NOTE ALL THE FACTS . NOW ON SAME FACTS THE ISSUE IS AGAIN REITERATED BY THE REVENUE IN MISCELLANEOUS APPLICATION . THUS THIS IS ADMITTEDLY AN APPLICATION FOR R EVIEW . IT IS SETTLED LAW THAT RECTI FICATION OF MISTAKE APPARENT FROM RECORD U/S.254(2) DOES NOT ENVISAGE REVIEW OF THE ORDER. FROM THE FACTS NARRATED ABOVE, IT IS AMPLY EVIDENT THAT THERE IS NO MISTAKE APPARENT FROM RECORD AND REVENUE SEEKS A REVIEW OF THE ORDER PASSED BY THE ITAT WHICH IS NOT PERMISSIBLE U/S.254(2) OF THE IT ACT. HENCE, THE MISCELLANEOUS APPLICATIONS FILED BY THE REVENUE AGAINST ITAT ORDER ARE LIABLE TO BE DISMISSED AND THEY ARE DISMISSED AS SUCH. 3. AS REGARDS THAT ASSESSEE APPEAL FOR A.YRS. 2012 - 13 TO 2014 - 15, THE ISSUE RAISED BY THE REVENUE IN MISCELLANEOUS APPLICATION IS THAT THE ISSUE RELATED TO U/S.115JB OF THE ACT IS BOTH A FACTUAL AND LEGAL ISSUE AND THEREFORE, IT IS CLAIMED TO BEING COVERED BY CERTAIN ORDER CANNOT BE TAKEN AS A DEFENSE BY THE ASSESSEE AND THAT TH E FIGURES O F COMPUTATION OF BOOK PROFIT W OULD HAVE TO BE DEMONSTRATED FOR ADJUDICATION O F THE APPEAL ON THE ADJUSTMENT U/S.115JB OF THE ACT ESPECIALLY WITH THE FACTS RELATED TO SEARCH AND CONSEQUENT ADMISSION BY THE APPELLANT ASSESSEE GROUP. IT HAS FURTHE R BEEN PLEADED THAT THE M A NO . 710 - 715/MUM/2018 M/S. WELLKNOWN POLYESTER LTD., 7 TRIBUNAL IS THE FINAL FACT FINDING AUTHORITY AND IT IS THE BOUNDEN DUTY OF THE ASSESSEE TO DISCLOSE FULLY AND TRULY ALL FACTS WITHIN ITS KNOWLEDGE. SINCE, THE ASSESSEE HAS NOT DISCLOSED THE FACTS RELEVANT FOR ADJUDICATING ON ITS GRO UNDS OF A P PEAL AND THE SAID DECISION OF THE ITAT WAS GIVEN IN THE ABSENCE OF THESE FACTS BEING BROUGHT TO ITS NOTICE, IT IS HUMBLY PRAYED THAT THE ORDER OF THE TRIBUNAL BE RECALLED, REHEARD AND AMENDED, KEEPING IN VIEW THE FACTS NUMERATED ABOVE. 3.1. FRO M THE ABOVE, IT IS APPARENT THAT REVENUE HAS NOT POINTED OUT ANY APPARENT MISTAKE IN THE ORDER OF THE TRIBUNAL. THE REVENUE SIMPLY SEEKS REVIEW OF THE ORDER AND THAT ALSO WITHOUT POINTING OUT ANY MISTAKE MUCH LESS APPARENT MISTAKE IN THE ORDER OF THE TRIB UNAL. IN THIS VIEW OF THE MATTER, THESE MISCELLANEOUS APPLICATIONS ARE LIABLE TO BE DISMISSED AND THEY ARE DISMISSED AS SUCH. 4. IN THE RESULT, MISCELLANEOUS APPLICATIONS OF THE REVENUE ARE DISMISSED. ORDER PRONOUNCED ON 29 / 07 /202 1 BY WAY OF PROPE R MENTIONING IN THE NOTICE BOARD. SD/ - ( PAVAN KUMAR GADALE ) SD/ - ( SHAMIM YAHYA ) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI ; DATED 29 / 07 / 2021 KARUNA , SR.PS M A NO . 710 - 715/MUM/2018 M/S. WELLKNOWN POLYESTER LTD., 8 COPY OF THE ORDER FORWARD ED TO : BY ORDER, ( ASSTT. REGISTRAR) ITAT, MUMBAI 1. THE APPELLANT 2. THE RESPONDENT. 3. THE CIT(A), MUMBAI. 4. CIT 5. DR, ITAT, MUMBAI 6. GUARD FILE. //TRUE COPY//