Income Tax Appellate Tribunal - Indore
Bhandari Hospital & Research Centre P. ... vs The Addl. Cit, Range-2, Indore on 28 February, 2018
आयकर अपील
य अ धकरण, इ दौर यायपीठ, इ दौर
IN THE INCOME TAX APPELLATE TRIBUNAL
INDORE BENCH, INDORE
BEFORE SHRI KUL BHARAT, JUDICIAL MEMBER
AND
SHRI MANISH BORAD, ACCOUNTANT MEMBER
ITA No.420/Ind/2012
Assessment Year: 2004-05
Bhandari Hospital & ACIT, Range-2
Research Centre P. Ltd. बनाम/ Ayakar Bhawan
181, Clerk Colony, Indore
Vs.
Indore (M.P.)
Indore
(Revenue) (Respondent )
P.A. No.AAACB7024Q
Appellant by Shri Ashish Goyal & Shri N.D. Patva,
Advs.
Respondent by Shri V.J. Boricha Sr. DR
Date of Hearing: 06.02.2018
Date of Pronouncement: 28 .02.2018
आदे श / O R D E R
PER KUL BHARAT, J.M:
This appeal by the Assessee is directed against the order of Ld. Commissioner of Income Tax(Appeals)-II, Indore, (in short 'CIT(A)'), dated 06.04.2010 pertaining to A.Y. 2004-05. The assessee has raised following grounds of appeal:
"On the facts & circumstances of the case-
Bhandari Hospital & Research Centre P. Ltd.
1. The Ld. CIT(A) was not justified in not holding that the assessment order is bad in law as it is contrary to the facts on record and it is against the provision of law, being unreasonable, unjustified & without jurisdiction.
2. In upholding the addition to income of Rs.2,00,000/- received as contribution towards share capital.
3. In upholding addition to income of Rs.16,50,000/- received as share premium amount.
4. In sustaining total addition of Rs.18,50,000/- inspite of the fact that the appellant discharged its onwu in full as provided u/s 68.
5. In holding that the transactions with SLFL defied logic and are against all human probabilities and it is merely an accommodation entry by arranging the affairs and by collusive agreement.
6. In not questing the charging the interest u/s 234A, 234B & 234C.
7. In not quashing the initiation of penalty u/s 271(1)(c)."
2. Briefly stated facts are that case of the assessee picked up for scrutiny assessment and the assessment u/s 143(3) of the Act (hereinafter referred to as the 'Act') was framed vide order dated 27.03.2016. While framing the assessment, the AO observed that the assessee company had introduced share capital of Rs.2,00,000/- and share premium of Rs.16,50,000/-. During the course of assessment proceedings the assessee was asked to explain introduction of share capital and share premium. In response thereto, the assessee company stated that the company has allotted 2000 equity share as Rs.100/- per share on premium of Rs.825/- per share to Shreshtha Leasing and Finance Ltd. (herein referred in short as SLFL).The AO did not accept the explanation as offered by the assessee and proceeded to make 2 Bhandari Hospital & Research Centre P. Ltd.
addition of this amount by invoking provision of section 68 of the Act.
Aggrieved by the this the assessee preferred an appeal before the ld. CIT(A) who also sustained this addition.
3. Ground No. 1 of the assessee's appeal reads as under:
The Ld. CIT(A) was not justified in not holding that the assessment order is bad in law as it is contrary to the facts on record and it is against the provision of law, being unreasonable, unjustified & without jurisdiction.
At the time of hearing ground no.1 was not pressed, therefore, this ground is dismissed as not pressed.
4. Ground Nos. 2 to 5 are interconnected and against confirmations of addition of Rs.18,50,000/-.
The Ld. counsel for the assessee reiterated the submissions as made in the gist of arguments. The submissions of the assessee are reproduced as under for the sake of clarity.
Nature and Source of Credit
1. Identity of Investor Company
(a) I-T Return - PB 143/ III. PAN of SLFL - AADCS3850Q. PB 144/III.
(b) Assessment Order for A.Y. 2004-05 u/s. 147 dated 24.12.2007. PB 61-62/ II
(c) Assessment Order for A.Y. 2004-05 u/s. 153C/ 143(3) dated 30.12.2011. PB 63-65/ II. [Based on search in case of Bhatia Group]
(d) Ld AO pg. 6, top 3rd line -Identity of SLFL stands proved.
2. Genuineness
(a) Confirmation. PB 145-146/ III 3 Bhandari Hospital & Research Centre P. Ltd.
(b) Details of investment by cheque. PB 145/ I.
(c) Bank account reflecting payment of by investor company. PB 147-156/ III (d) Share Application Form. PB 157-167/111
(e) Final Accounts for A.Y. 2004-05
3. Credit-worthiness
(a) Investor had sufficient bank balance before investment in assessee-company. PB 147-156/ III
(b) Final Accounts of SLFL. (Annexure B 1-2 to CIT(A) Order). Share capital and Reserves on 31.03.2004 Rs. 15,22,l1,96 Share capital and Reserves on 31.3.2003 Rs.15,22,67,042
(c) Investments by SLFL 31.03.2004 Rs. 22,75,56,530 31.03.2003 Rs.10,50,76,OOO Investment in assessee-company was not even 1% of the investments done by them. (d) Survey u/s. 133A was conducted on them on 02.02.2007. Findings in survey at Annexure A to CIT(A) is important especially page 4 thereof. SLFL gave source of their funds. Their source was doubted; and "appropriate action" was directed in investor company. Thereafter, their assessment u/s. 147 was completed on 24.12.2007. [PB 61-62/ II]. No addition was made. Also, based on search in the case of Bhatia Group, action u/s. 153C/ 143(3) was taken in their case. However, no addition was made. [PB 63-65/11]
4. Reason for huge share premium
(a) Intrinsic value per share of assessee was Rs. 1,110.96/-. [PB 37/ I]. They invested at Rs. 925/- per share [i.e. Rs. 100 face value and Rs. 825 premium].
(b) Cash profit of assessee-company was 50.89% of capital. [PB 38/ I). This showed a good potential of further future investments and income.
(c) Although there was good hostels in Indore, but for nurses of Indore Institute of Medical Sciences. It is a reputed institution. BASIS OF LD AO/CIT(A)
(a) Suspicion - no one will invest at such huge premium. Suspicion cannot take form of evidence. Assessee has given evidences to prove identity, creditworthiness and genuineness and further reason for such premium.
(b) General finding - share capital used for money laundering. Its 4 Bhandari Hospital & Research Centre P. Ltd.
a general finding; may raise a suspicion, but no evidence to prove the same.
(c) Inquiries in case of investor-company and addition in other in vestee-companies. On basis of inquiry in investor-company, no finding of accommodation; or their source of capital not disregarded in their assessment.
Addition in other Investee-companies deleted. Order of Anant Steel [PB 66-142/ II on record]. Specific PB 73-74, 102 (last but s" line).
Directly Covered cases for same investor
(a) Rank Shipping Agency [ITAT Mumbai, ITA 5805/ Mum/ 2008 Order dated 21.11.2012]. Case law compilation CL PB # 1-12.
(b) Anant Steel [ITAT Indore, Order dated 18.11.2015]. PB 66- 142/ II. Case relates to common investigation by department in case of assessee and their case.
On the contrary Ld. DR opposed the submissions and supported the orders of authorities below.
5. We have heard the contentions and perused material available on record and gone through the orders of the authorities below. The AO made addition on the basis that the contention that the premium was paid on the basis of profitability is not correct as in fact, no worthwhile profit has been shown in part which may attract any investor's attention. It is recorded by the AO that from the perusal of copy of return filed with the additional Commissioner of Income-tax, Range-4, Surat it is seen that the alleged investor company has filed return of income for A.Y. 2004-05 declaring total income of Rs.2,25,450/- only. The AO suspected the genuinity of investment company on the ground that M/s. Shreshtha Leasing and Finance ltd. has shown share premium of Rs.10 crores under the head reserves and surplus. The receipt of share premium of Rs.10 crore by M/s. Shreshtha Leasing and Finance Ltd. clearly indicates that this company is nothing but a conduit company for 5 Bhandari Hospital & Research Centre P. Ltd.
facilitating accommodation entry to receive and pay share premium and give transactions somehow the color of genuine transaction. Further, the AO observed that no bank statement was furnished belonging to M/s. Shreshtha Leasing and Finance Ltd. The submission of the assessee is that investment in assessee company was not even 1% of the investment made. We are of the view that the question here is that whether the transaction so executed is genuine or otherwise a colorable device. It is not the quantum of investment but the genuinity of investment is material. In the case in hand, the AO has sufficient material to suspect the transaction. It is upon the assessee to prove the genuineness of such transaction. No material is placed to prove that the purchase made is in conformity with prevalent market as no comparable transaction by other third party is produced. Hence, we do not see any reason to interfere into the finding of the authorities below. The ground nos. 2 to 5 in this appeal are dismissed.
6. Ground No.6 relates to charging of interest u/s 234A, 234B & 234C of the Act.
The charging of interest being consequential in nature, we hold accordingly.
7. Ground no.7 is against initiation of penalty proceedings. This ground is premature hence dismissed.
6Bhandari Hospital & Research Centre P. Ltd.
8. As a result, appeal of the assessee in ITANo.420/Ind/2012 is dismissed.
Order was pronounced in the open court on 28.02.2018.
Sd/- Sd/-
(MANISH BORAD) (KUL BHARAT)
CCOUNTANT MEMBER JUDICIALMEMBER
Indore; दनांक Dated : 28 /02/2018
ctàxÄ? P.S/. न.स.
Copy to: Assessee/AO/Pr. CIT/ CIT (A)/ITAT (DR)/Guard file.
By order Private Secretary/DDO, Indore 7