Income Tax Appellate Tribunal - Kolkata
M/S. A One Infra Projects Pvt. Ltd., , ... vs Dcit, Central Circle - 4(3), , Kolkata on 15 November, 2019
I.T.(SS)A. Nos. 89 & 90/KOL/2018
Assessment Years: 2010-2011 & 2011-2012
M/s. A One Infra Projects Pvt. Limited
IN THE INCOME TAX APPELLATE TRIBUNAL,
KOLKATA 'A' BENCH, KOLKATA
Before Shri P.M. Jagtap, Vice-President
and Shri Satbeer Singh Godara, Judicial Member
I.T .(S.S.)A. Nos. 89 & 90/KOL/2018
Assessment Years: 2010-2011 & 2011-2012
M/s. A One Infra Pro jects Pvt. Limited,..... ....................................Appellant
A/67, By Lane Guru Tej Bahadu r Marg,
NSB Road, Sc hool Mo re, Raniganj,
West Bengal-713 347
[PAN: AAHCA 2642 N]
-Vs.-
Deputy Commissioner of Income Tax,............................................... .Respondent
Central Ci rcle-4 (3), Kolkata
Appearances by:
Shri Somnath Ghosh, Advocate, for the Appellant
Shri A.K. N ayak, CIT (D.R.), for the Respondent
Date of concluding th e hearing : September 25, 2019
Date of pronouncing the order : November 15, 2019
O R D E R
Per Shri P.M. Jagtap, Vice-President:-
These two appeals filed by the assessee are directed against two separate orders passed by the ld. Commissioner of Income Tax (Appeals)- 21, Kolkata, both dated 27.07.2018 for assessment years 2010-11 & 2011- 12 and since the issues involved therein are common, the same have been heard together and are being disposed of by a single consolidated order for the sake of convenience.
2. The solitary common issue involved in both these appeals relates to the addition made by the Assessing Officer and confirmed by the ld. CIT(Appeals) on account of share application money received by the assessee during the years under consideration by treating the same as unexplained cash credit under section 68 of the Income Tax Act, 1961.
1I.T.(SS)A. Nos. 89 & 90/KOL/2018 Assessment Years: 2010-2011 & 2011-2012 M/s. A One Infra Projects Pvt. Limited
2. The assessee in the present case is a Company, which belongs to Bhalotia Group. A search and seizure action under section 132 was conducted on 01.12.2015 in the cases belonging to Bhalotia Group including the case of the assessee. In pursuant to the said action, notices under section 153A were issued by the Assessing Officer, in response to which the returns of income for the years under consideration were filed by the assessee on 15.02.2017 declaring the same total income of 'NIL' as declared in the returns of income originally filed under section 139 of the Act. During the course of search and seizure action, certain Bank accounts were found which revealed that the assessee-company had received share application money of Rs.1,55,00,000/- and Rs.1,00,00,000/- during the years relevant to assessment years 2010-11 and 2011-12. During the course of assessment proceedings, the assessee was called upon by the Assessing Officer to prove the identity and capacity of the concerned share applicants as well as the genuineness of the relevant transactions. Notices under section 131 were also issued by the Assessing Officer to the share subscribers for cross examination. The said notices, however, either returned un-served or remained un-complied with. The assessee also could not produce the concerned share applicants for examination before the Assessing Officer when an opportunity in this regard was given to the assessee by the Assessing Officer. In the written submission made on 22.12.2017, it was stated by the assessee that the concerned share applicants could not appear before the Assessing Officer because of some inconvenience. It was also submitted that the transactions involving the payment of share application money were routed through banking channel and the copies of Bank statements of share applicants were produced before the Assessing Officer to support and substantiate the said submission. It was further submitted by the assessee that there was no incriminating material found during the course of search, which could show that the transactions involving receipt of share application money were not genuine. These submissions made by the assessee were not 2 I.T.(SS)A. Nos. 89 & 90/KOL/2018 Assessment Years: 2010-2011 & 2011-2012 M/s. A One Infra Projects Pvt. Limited found acceptable by the Assessing Officer for the following reasons given in his impugned order:-
"(i) Mere filing of document s that the t ransactions were routed through banking channels wo uld no t suffice to prove the genuineness of t he transactions. A t ransaction, prima facia, may appear genuine. But o ne should have to underst and the motive behind such transactions.
(ii) The assessee company h ad no business o r income generatio n activity in the year under consideratio n as well as th e preceding years.
(iii) No answer h as been given by the assessee to the question why the subscribers h ave paid mo ney for the equities of a closely held company th at had little income generatio n act ivit y and th at too at a premium of up to Rs.90/ - per sh are.
(iv) The sh are subscribers h ave also failed to reply why th ey had invested in the equities of the assessee company at a high premium of up to Rs.90/- per share.
(v) No prudent perso n would put his money at stake in the equities of a closel y held company which had little business activit y and from which he woul d get no return.
(vi) In such cases, t he agreement about real transactions takes place in secret and direct evidence about such direct transaction/agreement wo uld not be available to the depart ment in normal circumstances.
(vii) The result of th ese t ransactions are designed in a way that unaccounted mo ney or cash was brought in the books of the assessee company eith er in the form of equit ies or unsecured loan through multiple layers.
(viii] Every single credit entry in the bank account s of the share subscribers is followed by a corresponding debit entry of equivalent amount on the very same day. The assessee has contended that th is issue is irrelevant. But this issue is very much relevant . This issue coupled with th e fact that all the shareholder companies h ad meagre inco me, clearly pro ves that these companies were merely used as fro nts to route unacco unted money of the assessee in th e garb of equities through multiple layers,
(ix) Mere filing of copies of ITRs / bank st atement s/ account s of the subscribers woul d not absolve the assessee from the co mplicit y o f int roducing unaccounted mone y in his books in the garb of equities.
3I.T.(SS)A. Nos. 89 & 90/KOL/2018 Assessment Years: 2010-2011 & 2011-2012 M/s. A One Infra Projects Pvt. Limited
(x) The assessee was given reasonabl e and sufficient oppo rtunit ies to pro duce all the sh areh olders, which he failed to do . The assessee had failed to explain the inconvenience in producing the share a pplicant s fo r verificat ion of genuineness of t ransactions and creditwo rthiness of th e applicant s.
(xi) It is t rue that wh en transactions are t hrough cheques, it looks like real transactions. But one shoul d look behind the transactions and find out motive behind t ransactions, Mere receipt of sh are application money, th rough cheque do es not render a t ransaction genuine.
(xii) Th e assessee h as not explained the reasons for non- service of letters/summons to the sh areholding companies which were despatch ed at their registered office. It shows that these co mpanies only exist on paper and they h ave no business activity at all. It raised question mark over the genuineness of the transactions and credit worthiness of the shareholders,
(xiii) The assessee was given a reasonable and fair oppo rtunit y to pro duce the sh areholders, but he has failed to produce any of them citing inco nvenience. The asses see has not explained what inconvenience it woul d have in producing the sh are applicant s. The assessee h as th erefo re, failed to pro ve the genuineness of the transaction and creditwo rthiness of th e sh areholders.
(xiv) The sh are applicants/ sh are holders M/s BG S Credit Pvt. Lid., M/s. Subhrashi Dealco m Pvt . Lt d., M/s. Toplake Commercial Pvt . Ltd. and M/s. Yash Commosales Pvt . Lt d. have been identified us shell co mpanies by the Investigation Wing of the Department".
For the reasons given above, the Assessing Officer held that the share application money of Rs.1,55,00,000/- and Rs.1,00,00,000/- received during the years under consideration was not satisfactorily explained by the assessee in terms of section 68 and additions to that extent were made by him to the total income of the assessee by treating the share application money as unexplained cash credit in the assessments completed under section 153A/143(3) of the Act vide an order dated 27.12.2017.
4I.T.(SS)A. Nos. 89 & 90/KOL/2018 Assessment Years: 2010-2011 & 2011-2012 M/s. A One Infra Projects Pvt. Limited
3. Against the orders passed by the Assessing Officer under section 153A/143(3), appeals were filed by the assessee before the ld. CIT(Appeals) and since the submissions made by the assessee in support of its case that the additions made by the Assessing Officer under section 68 were not sustainable, were not found acceptable by the ld. CIT(Appeals), he proceeded to confirm the additions made by the assessing Officer under section 68, inter alia, for the following identical reasons given in his impugned orders:-
"I h ave carefully considered the actio n of t he Ld. AO in making an additio n of Rs.1,55,00,000/- (Rs.1,00,00,000/- fo r A.Y. 2011-12), as unexpl ained credit u/s 68 of the Inco me T ax Act, 1961. After an exhaustive discussion and elabo rating the factual and legal mat rix, I find that the Ld. AO has hel d th at the claim of the appellant of h aving raised share application monies was to be denied to the assessee-co mpany, and was to be assessed as unexplained cash credit u/s 68 of the I T Act. The Ld. AO h as placed on record the entire gamut of findings, and there is, in my considered view no furt her requirement for elaboration fro m this fo rum. In view of the fact s th ere are elaborate and direct evidence to clearl y indicate that at the entire t ransact ions undertaken by the appellant were merely accommodatio n ent ries t aken fo r the purpose of fiving a legal facade to the mo neys which were entering the appellant's books of accounts in the grab of Share application Money. I also agree with the Ld. AO th at the findings of the assessment were based on incriminating documents as the entire modus operandi of th e activities of th e assessee-co mpany was locat ed on the basis of the search action, and therefore the findings of the Ld. AO are al so based on incriminating details found during the course of the search operation. Therefo re none of the judicial precedents relied upon by the appellant in so far as stating th at no incriminating document s were found during the course of the search to warrant any additions come to the assistance of th e appellant. These arguments are acco rdingly rejected.
I also have to reco rd that th e factual mat rix of the case clearl y points out t hat the co ntributions received by the assessee-co mpany from the contributors of share capit al/sh are premium were fro m persons who did not h ave the means to be creditworthy, and could not establi sh their creditwo rthiness" .
Aggrieved by the orders of the ld. CIT(Appeals), the assessee has preferred these appeals before the Tribunal.5
I.T.(SS)A. Nos. 89 & 90/KOL/2018 Assessment Years: 2010-2011 & 2011-2012 M/s. A One Infra Projects Pvt. Limited
4. We have heard the arguments of both the sides and also perused the relevant material available on record. As agreed by the ld. Representatives of both the sides, a similar issue was involved in assessee's own case for assessment year 2012-13 and vide its order date d May 10, 2019 passed in IT(SS)A No. 91/KOL/2018, the Coordinate Bench of this Tribunal deleted the similar addition made by the Assessing Officer and confirmed by the ld. CIT(Appeals) by treating the share application money as unexplained cash credit under section 68 after discussing and deliberating upon the arguments raised by both the sides and the relevant case laws cited in support in paragraphs no. 5 to 7 of its order, which are extracted below:-
"5. The ld. D.R., on the other hand, cont ended t hat the Bank account s found during the course of search revealed th e share applicat ion mo ney received by the assessee during the year under consideration and since th e impugned addition by treat ing the share applicat ion money as unexpl ained cash credit under section 68 was made by the Assessing Officer on the basis of the said Bank accounts found during th e course of search, the same is very much within the scope of assessment made under section 153A. He contended th at the asse ssee coul d not establish the identit y and capacity of the conc erned applicants as well as also failed to est ablish the genuineness of the relevant transactions inspite of sufficient opport unit y afforded by th e Assessing Officer in this regard. He cont ended that the primary onus that lay on the assessee thus was not discharged and the addition made by the Assessing Officer by treat ing the share applicat ion money as unexpl ained cash credit under section 68 was rightly confirmed by the ld. CIT(Appeals).
6. In the rejoinder, t he ld. Counsel for the assessee submitted that the Bank account found during the course of search was duly disclosed in the books of account of the assessee and even the share application mo ney reflected in th e said account was dul y shown by the assessee in the balance- sheet filed along with the regular ret urn of income . He contended th at the said Bank account , therefo re, did not constitute any incriminating material and in the ab sence of any other incriminating material found during t he course of search, the addition made by the Assessing Officer and confirmed by the ld. C IT(Appeals) by t reating the sh are application mo ney as unexplained cash credit under section 68 is not sustainabl e.
7. We h ave co nsidered the rival submissions and also perused the relevant material avail able on reco rd. It is now 6 I.T.(SS)A. Nos. 89 & 90/KOL/2018 Assessment Years: 2010-2011 & 2011-2012 M/s. A One Infra Projects Pvt. Limited well settled that when the assessment o riginally completed for the relevant year has beco me final before the date of search, there is no abatement of the said assessment and the scope of assessment under section 153A which is made in pursuant to the search is limit ed t o assessing the undisclosed income of the assessee as fo und/ detected on the basis of incriminating material found during the course of search . In the case of Kerele Paper Mills Pvt. Limited (supra) cit ed by the ld. Counsel for the assessee, no incriminating evidence rel ated to share capit al issue was found during the course of search and keeping in view the same, th e addition made by the Assessing Officer by t reating th e sh are capital as unexplaine d cash credit under section 68 was held to be unsust ainable by the Hon'ble Delhi High Court. In t he case of Sal asar St ock Broking Limit ed (supra), it was held by the Hon'ble C alcutta High Court that incriminating material is pre-requisit e before powe r co uld h ave been exercised under sectio n 153A and t he Assessing Officer had no jurisdiction under section 153A to reopen the concluded cases when the search and seizure did not disclose any incriminating material".
5. As the common issue involved in both the years under consideration as well as all the material facts relevant thereto including the arguments raised by both the sides are similar to that of A.Y. 2012-13, we respectfully follow the order of the Tribunal for A.Y. 2012-13 and delete the additions made by the Assessing Officer and confirmed by the ld. CIT(Appeals) on account of share application money by treating the same as unexplained cash credit under section 68.
6. In the result, both the appeals of the assessee are allowed.
Order pronounced in the open Court on November 15, 2019.
Sd/- Sd/-
(Satbeer Singh Godara) (P.M. Jagtap)
Judicial Member Vice-President
Kolkata, the 15 t h day of November, 2019
Copies to : (1) M/s. A One Infra Pro jects Pvt. Limited,
A/67, By Lane Guru Tej Bahadu r Marg,
NSB Road, Sc hool Mo re, Raniganj, West B engal-713 347 (2) Deputy Commissioner of Income Tax, Central Ci rcle-4 (3), Kolkata 7 I.T.(SS)A. Nos. 89 & 90/KOL/2018 Assessment Years: 2010-2011 & 2011-2012 M/s. A One Infra Projects Pvt. Limited (3) Commissioner of Inco me T ax (Appeals)-21, Kolkata, (4) Commissio ner of Income Tax- , (5) The Depart ment al Represent ative (6) Guard File By order Assistant Registrar, Income Tax Appellate Tribunal, Kolkata Benches, Kolkata Laha/Sr. P.S. 8