Calcutta High Court
Commissioner Of Income Tax vs J J Development (P) Ltd on 16 June, 2016
ORDER SHEET
ITA 519/2008
IN THE HIGH COURT AT CALCUTTA
Special Jurisdiction(income tax)
ORIGINAL SIDE
COMMISSIONER OF INCOME TAX, KOLKATA-IV
Versus
J J DEVELOPMENT (P) LTD
BEFORE:
The Hon'ble JUSTICE GIRISH CHANDRA GUPTA
The Hon'ble JUSTICE ASHA ARORA Date : 16th June, 2016.
Ms. A. Quereshi, Adv. Appears.
Ms. A. Banerjee, Adv. Appears.
The Court : The appeal is directed against a judgment and order dated November 16, 2007, passed by the learned Income Tax Appellate Tribunal, "C" Bench, Kolkata, in ITA No.2105/Kol/2006 and ITA No.126/Kol/2006, both pertaining to the assessment year 2003-04. ITA No.2105/Kol/2006 was preferred by the assessee and ITA No.126/Kol/2006 was preferred by the revenue. The assessee also filed a cross objection which was numbered as C.O. No.6/Kol/2007, connected with ITA No.126/Kol/2006. The aggrieved revenue has come up in appeal.
At the time of admission of the appeal, the following questions were formulated:
(a) Whether on the facts and in the circumstances of the case, the Income Tax Appellate Tribunal was justified in holding that out of Rs.95,00,000/-, Rs.76,98,000/- constituted of old loans being converted into share application money and since there was no 2 fresh infusion of credit, section 68 of the Income Tax Act, 1961 is not applicable?
(b) Whether on the facts and in the circumstances of the case, the Income Tax Appellate Tribunal was justified in upholding the order of the Commissioner of Income Tax (Appeals) to the extent that the amount of Rs.76,98,000/- could not come under the purpose of section 68?
(c) Whether on the facts and in the circumstances of the case, the Income Tax Appellate Tribunal failed to consider that since the loan creditor has not given his consent to convert the unsecured loan to share application money treating the amount as cash credit under section 68 was justified?
In so far as questions nos.(a) and (b) are concerned, the views expressed by the learned Tribunal are as follows:
"So far as the first limb of argument by the Ld. Senior Counsel that conversion of unsecured loan into the share application money does not come under the purview of Section 68, we find substantial force in the argument advanced by the Ld. Counsel as in the present case, there is no fresh credit. So far as Rs.76,38,002/- is concerned, apart from the opening balance of Rs.60,000/-, since there are coming from the last year balance. Though M/s. R.S. Malani has refused to give its consent to convert its unsecured loan into share application money in the name of four persons, but the fact remains same that the above credit is appearing in the books of the assessee since previous year and, therefore, cannot be a subject matter of section 68. We, therefore, are of the opinion that the Ld. CIT(A) was justified in holding that the above amount to the extent of Rs.76,98,000/- could not come under the purview of Section 68 and, therefore, uphold his order to this extent."3
Ms. Quereshi, learned Advocate appearing for the revenue, was unable to point out any fault with the aforesaid finding recorded by the learned Tribunal. Section 68 of the I.T. Act, in so far as the same is material for our purpose, reads as follows:
"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."
It is not the case of the revenue that any sum was found credited in the books of the assessee maintained for the previous aware. We are, in this case, concerned with the financial year ending on March 31, 2003 which commenced on April 1, 2002. It is not the case of the revenue that during the period between April 1, 2002 and March 31, 2003, any sum was credited in the books of accounts of the assessee. The case of the revenue is that on April 1, 2002, the assessee owed a sum of Rs.76,98,000/- to four several creditors. The debt owed by the assessee to those creditors was converted into share applications money. It is as such not a case where money was introduced to the till of the assessee during the relevant previous year. The money had already found its way into the till of the assessee since prior to April 1, 2002. Only the nature of deposit had changed during the previous year. The money which was owed by the assessee by way of loan now became the capital of the assessee. We find that the views taken by the learned Tribunal are in conformity with section 68. Ms. Quereshi has also not been able to disclose any reason why any other view should be taken by us.
In that view of the matter, questions (a) and (b) are answered in the affirmative and against the revenue.
In so far as question (c) is concerned, Ms. Banerjee, learned Advocate appearing for the assessee, submitted that the revenue is not concerned nor can 4 the revenue raise the question as to whether consent was obtained from the creditors. That is a question strictly between the assessee and its creditors. She added that it is not also the fact that consent was not obtained. She drew our attention to paragraph 2 of the impugned judgment, wherein the learned Tribunal has recorded as follows:
"The A.O. sent notices under section 133(6) to the above persons and notices were served on the persons except M/s. Ramsay International and a letter sent by registered post to M/s. Ramsay International also returned unserved. All the other share applicants confirmed that they had applied for the shares of the company."
It is submitted that just because one of the applciants of the shares chose to go back on his commitment, the issuance of shares in his favour cannot become bad. But that, in any case, is a matter of dispute between the assessee and M/s. Ramsay International with which the revenue is not concerned.
We have considered the submissions advanced by Ms. Banerjee and are of the opinion that there is some force in her submission. In that view of the matter, we are of the opinion that question (c) is not germane for the purpose of deciding the applicability of section 68. We are not called upon to decide the matter between the assessee and Ramsay International. Any observation if passed by us may adversely affect Ramsay International who is not present before us. We therefore refrain from answering question (c).
In the result, the appeal fails and is dismissed.
(GIRISH CHANDRA GUPTA, J.) (ASHA ARORA, J.) tk