Income Tax Appellate Tribunal - Mumbai
Gayak Trading Co. (P) Ltd. vs Jt. Cit on 21 March, 2006
Equivalent citations: (2006)102TTJ(MUM)110
ORDER
Rajpal Yadav, J.M.:
The assessee is in appeal before us against the order of learned Commissioner (Appeals) dated 2-12-2002 passed for assessment year 1997-98. The grievance of assessee relates to addition of Rs. 20 lakhs made under section 68 of the Act.
2. The brief facts of the case are that assessee has filed its return of income declaring loss of Rs. 71,94,580 on 27-11-1997. On scrutiny of the accounts it was found that assessee had received a sum of Rs. 2.70 crores as share application money from two parties. The assessee could not prove the genuineness of the share application money and therefore, in an assessment order passed under section 143(3) on 30-3-2000, an addition of Rs. 2.70 crores was made. The assessee carried the matter before learned Commissioner (Appeals). The learned Commissioner (Appeals) set aside the issue to the file of assessing officer. Again the assessing officer confirmed the addition while assessing the income under section 143(3) on 11-3-2002.
3. Dissatisfied with the addition assessee carried the matter in appeal before learned Commissioner (Appeals). Before learned Commissioner (Appeals), assessee raised number of arguments and ultimately learned Commissioner (Appeals) called for the remand report. In the remand proceedings, assessee was able to discharge its onus put upon it by section 68 of the Income Tax Act as regards share application money of Rs. 2.50 crores received from M/s Janhavi Investment (P) Ltd. and in this way learned Commissioner (Appeals) deleted the addition of Rs. 2. 50 crores.
4. As far as share application money of Rs. 20 lakhs received from M/s Appollonis Trading Investment Ltd. is concerned, the assessee could not produce any person from that concern and in the opinion of learned revenue authorities below, assessee failed to prove the transaction of Rs. 20 lakhs and thus learned first appellate authority confirmed the addition.
5. Before us, learned counsel for the assessee raised many fold submission. He pointed out that the transaction with the share applicant company was through banking channel. The assessee has submitted the bank statement as also details of cheques. M/s Appollonis Trading Investment (P) Ltd. Co. is duly registered under the Companies Act, hence assessee has established its identity by informing the registration number, etc. The assessee has also submitted copy of balance sheet of the investor company and also produced the copy of the acknowledgement of the return filed by M/s Appollonis Trading Investment Ltd. The investment company is a regular assessee, hence the proof of identity produced by the assessee could not be questioned. He further pointed out that the only ground for making the addition assigned by the learned revenue authorities is that assessee failed to produce any person from M/s Appollonis Investment Ltd. In support of his contention he relied upon the judgment of Hon'ble Delhi High Court rendered in the case of CIT v. Stellar Investment Ltd. (1991) 192 ITR 287 (Del) and emphasized that this judgment has been approved by Hon'ble Supreme Court. The decision of the Hon'ble Supreme Court is reported in CIT v. Stellar Investment Ltd. (2000) 251 ITR 263 (SC). On the strength of this decision, he submitted that in the case of a limited company if the identity is proved then no further enquiry is required to be made. For buttressing his very argument learned counsel for the assessee further put reliance on the decision reported in Allen Bradley India Ltd. v. Dy. CIT (2002) 80 ITD 43 (Del), Asstt. CIT v. Anima Investment Ltd. (2000) 73 ITD 125 (Del) and Dy. CIT v. Rohini Builders (2002) 256 ITR 360 (Guj).
6. On the other hand, learned Departmental Representative contended that decision of Hon'ble Delhi High Court and its alleged approval has been considered by the Hon'ble Calcutta High Court in the case of Hindustan Tea Trading Co. v. CIT (2003) 263 ITR 289 (Cal) and in that case while explaining the proposition propounded by the assessee that Hon'ble Supreme Court has approved the decision of Hon'ble Delhi High Court, it is held that the appeal is dismissed in limine and Hon'ble Supreme Court has not approved the ratio laid down by Hon'ble Delhi High Court as such, which is contrary to the Full Bench decision of Delhi High Court rendered in the case of CIT v. Sophia Finance Ltd. (1997) 205 ITR 98 (Del)(FB).
7. We have duly considered the rival contentions. The facts as submitted by Shri Vora are not as simple as propounded in the arguments. According to the requirement of section 68 assessee is supposed to fulfil three conditions for explaining any cash received during the accounting year and these conditions are that identity of the creditor, its creditworthiness and genuineness of the transaction required to be fulfilled. No doubt by producing the balance sheet, bank statement, etc. Assessee has demonstrated the two conditions i.e. creditworthiness of the creditors as well as genuineness of the transaction. But the third condition which is equally important, and which empowers the department to investigate the source of funds in the hands of the creditor is to pinpoint the identity of the creditor. In the present case for fulfilling this condition assessee has filed peripheral documents i.e., acknowledgement of the return filed with the department and the alleged registration of investor under the Companies Act. However, when on such addresses the assessing officer issued the summons then those summons received back unattended. Thus, the acknowledgement of return in itself is not sufficient to prove the identity of a person or to disclose a true address. Had in persuasion of the return some proceedings taken place with the department and that entity attended the proceedings, one can understand the identity and the proof of residence. Therefore, in our opinion the alleged documents filed by the assessee are not sufficient for disclosing the identity of the investor. However, simultaneously we find that assessing officer has just issued the summons to M/s Appollonis and not deputed any official from the department for investigation. There can be chances that creditor is avoiding investigation at the end of IT department as alleged by the assessee in its explanation before the assessing officer. For an assessee it is quite difficult to catch hold of anybody and bring him before the assessing officer. This exercise can be taken only by the Government agencies. Therefore, in our opinion, the ends of justice would meet if we set aside this issue to the file of assessing officer for fresh adjudication. The assessee will be at liberty to disclose all details and latest address of the creditor. Assessing officer shall investigate the issue in accordance with law, but merely not harp that assessee only would produce the creditor before him.
8. As far as the proposition and the case law relied upon by the learned counsel for the assessee and reply by learned Departmental Representative are concerned, we find that similar proposition was raised before the Hon'ble Calcutta High Court in the case of Hindustan Tea Trading Co. (supra) and the Hon'ble High Court has made extremely lucid enunciation of law on the subject and we cannot do better than to extract some of the observation made in the decision of Hon'ble court :
"The decision in CIT v. Stellar Investment Ltd. (1991) 192 ITR 287 (Del) cited by Mr. Pal is no longer good law in view of the decision in CIT v. Sophia Finance Ltd. (1994) 205 ITR 98 (Del)(FB). But Mr. Pal contended that Sophia Finance Ltd.'s case (supra) is no more a good law since Stellar Investment Ltd.'s case (supra) was affirmed by the Apex Court in CIT v. Stellar Investment Ltd. (2001) 251 ITR 263 (SC). But this view does not seem to be correct. In Stellar Investment Ltd.'s case (supra), the Apex Court had passed the following order :
"We have read the question which the High Court answered against the revenue. We are in agreement with the High Court. Plainly, the Tribunal came to a conclusion on facts and no interference is called for. The appeal is dismissed. No order as to costs.' From the above observation, it appears that the Supreme Court has not entered into the question involved or has not decided the ratio laid down. It had plainly held that it was a question of fact. The Supreme Court has not laid down any proposition with regard to the question. It was purely a question of fact with which the Apex Court had dealt with and was in agreement with the High Court on conclusion of facts, Therefore, it cannot be said that the Supreme Court answered the ratio laid down as sought to be propounded by the Delhi High Court in Stellar Investment Ltd.'s case (supra). A decision becomes binding as a precedent only when the court decides a particular question of law or lays down the ratio through conscious adjudication. Agreement with the finding of fact without adverting to the ratio laid down does not create a precedent. In order to support this view, we may refer to the decisions in Municipal Corporation of Delhi v. Gurnam Kaur AIR 1989 SC 38 (Para 11); Gangadharan v. Janardhana Mallan AIR 1996 SC 2127 (Para 9) and Director of Settlements v. M.R. Apparao (2002) 4 SCC 638, 650 (Para 7). We are, therefore, unable to agree with the contention of Mr. Pal that the decision in Sophia Finance Ltd.'s case (supra) is no longer good law."
In view of the decision of Hon'ble Calcutta High Court, we are of the view that assessee cannot draw any benefit from the decision of Hon'ble Delhi High Court.
9. In the result, the appeal of the assessee is allowed for statistical purpose.