Income Tax Appellate Tribunal - Chennai
P.S.Sundaram, Salem vs Department Of Income Tax on 13 September, 2011
IN THE INCOME TAX APPELLATE TRIBUNAL
'B' BENCH, CHENNAI
Before Shri Abraham P. George, Accountant Member and
Shri George Mathan, Judicial Member
.....
I.T.A. No. 2098/Mds/2010
Assessment Year : 2004-05
The Assistant Commissioner of M/s. Victory Spinning Mills Ltd.,
Income-tax, Central Circle, v. Uppupalayam,
Salem. Sankari Main Road,
Tiruchengode, Namakkal District.
PAN : AABCV7533K
(Appellant) (Respondent)
Appellant by: Shri K.E.B. Rengarajan,
Jr. Standing Counsel
Respondent by : Shri S. Sridhar, Advocate
I.T.A. No.1110/Mds/2010
Assessment year : 2004-05
The Assistant Commissioner v. Shri R. Thangavelu,
of Income-tax, Central Circle, No. 111, Ayakattur,
Salem. Cauvery RS., Pallipalayam,
Erode-638 007.
PAN : ABHPT7483L
(Appellant) (Respondent)
Appellant by : Shri K.E.B. Rengarajan,
Jr. Standing Counsel
Respondent by : Shri G. Bhaskar, Advocate
2
I.T.A. Nos. 2098, 1110 & 1111/Mds/2010
AND
I.T.A. No. 1111/Mds/2010
Assessment year : 204-05
The Assistant Commissioner v. Shri P. S. Sundaram,
of Income-tax, Central Circle, No. 65, Gandhipuram,
Salem. 6th Cross, Pallipalayam,
Erode-638 007.
PAN : AWIPS8240C
(Appellant) (Respondent)
Appellant by : Shri K.E.B. Rengarajan,
Jr. Standing Counsel
Respondent by : Shri G. Bhaskar, Advocate
Date of Hearing : 13-09-2011
Date of Pronouncement : 16-09-2011
ORDER
PER BENCH:
ITA No. 2098/Mds/2010 is an appeal filed by the Revenue against the order
of the learned CIT(Appeals), Salem in ITA No. 72/08-09 dated 17-09-2010 for the assessment year 2004-05 in the case of M/s. Victory Spinning Mills Ltd., ITA No. 1110/Mds/2010 is an appeal filed by the Revenue against the order of the learned CIT(Appeals), Salem in ITA No. 56/08-09 dated 30-04-2010 for the assessment year 2004-05 in the case of Shri R. Thangavelu and ITA No. 1111/Mds/2010 is an 3 I.T.A. Nos. 2098, 1110 & 1111/Mds/2010 appeal filed by the Revenue against the order of the learned CIT(Appeals), Salem in ITA No. 74/08-09 dated 290-04-2010 for the assessment year 2004-05 in the case of Shri P. S. Sundaram. As the issues in all the three appeals are inter- connected, the three appeals are disposed of by this common order.
2. Shri K.E.B. Rengarajan, Jr. Standing Counsel represented on behalf of the Revenue. Shri S. Sridhar, Advocate represented on behalf of the assessee, M/s. Victory Spinning Mills Ltd. and Shri G. Bhaskar, Advocate represented on behalf of the assessees, Sri R. Thangavelu and Sri P. S. Sundaram.
3. The facts that led to these appeals are that there was a search and seizure action in the cases of Shri R. Thangavelu and Shri P.S.Sundaram, the Managing Directors of M/s. Victory Spinning Mills Ltd. A survey under section 133A was conducted in the case of the assessee company, M/s. Victory Spinning Mills Ltd. on 27-09-2006. In the course of the survey operation certain irregularities were noticed regarding the investments in shares. In the course of the search in the case of Shri R. Thangavelu, a list of 84 persons captioned as "Directors Shareholders", viz. Sl. No. 54 to 66 vide Annexure M/B&D/L.S./S-2 was seized. Similar details were found in the course of search in the case of Shri P.S. Sundaram which were made as Sl. Nos. 1 to 13 vide Annexure JP/B&D/S-21. On the basis of these evidences, the Assessing Officer in the course of assessment of the company, M/s. Victory Spinning Mills Ltd. had treated the investment in the share capital of the assessee company by 181 share holders, whose names were 4 I.T.A. Nos. 2098, 1110 & 1111/Mds/2010 found in the two lists found during the course of the search of Shri R. Thangavelu and Shri P.S. Sundaram, as unexplained cash credit and assessed on a protective measure.
4. On appeal by the assessee company, M/s. Victory Spinning Mills Ltd., the learned CIT(A) had deleted the addition by relying on the decision of the Hon'ble Supreme Court in the case of CIT v. Lovely Exports Pvt. Ltd., reported in 216 CTR
195) wherein it had been categorically held that if the share application money is received by the assessee company from alleged bogus shareholders, whose names are given to the Assessing Officer, then the department is free to proceed to re-open the individual assessments in accordance with law and the same cannot be treated as the undisclosed income of the assessee company.
5. The learned Jr. Standing Counsel placed before us detailed paper book consisting of 210 pages containing the paying-in-slips as also copies of the Manager's Cheques, Demand Drafts and Pay Orders in respect of the various share applications. It was the submission that all the applications submitted to the bank were filled and signed by the same person and the money remitted with the applications were of high denomination notes. The applications for the DDs/Pos were safely applied for amounts well below ` 50,000 to avoid mentioning of the Permanent Account Numbers. Consolidated remittances were made for the purchase of DDs/Pos in many cases. The applicants in most of the cases did not have account with the banks from where the DDs/Pos were obtained and 5 I.T.A. Nos. 2098, 1110 & 1111/Mds/2010 wherever the applicants had bank accounts, huge amounts of cash were deposited on a particular day and the withdrawals were done by cheques issued on the same day or next day and no more such major transactions were undertaken other than the transactions of application of shares in the case of the assessee company, M/s. Victory Spinning Mills Ltd. It was the submission that the whole transaction of share application was a bogus transaction and the same was liable to be treated as unexplained cash credit.
6. In reply, the learned authorised representative submitted that 129 share applicants had appeared before the Assessing Officer and they had confirmed the transactions. The share applicants having confirmed the transactions, no addition could be made in the hands of the assessee. He also relied on the decision of the Hon'ble Supreme Court in the case of CIT v. Lovely Exports Pvt. Ltd., referred to supra. He vehemently supported the order of the learned CIT(A).
7. We have considered the rival submissions. A perusal of the facts clearly shows that the lists of share application were found in the course of search in the cases of Shri R. Thangavelu and Shri P. S. Sundaram. Out of the 181 share applicants, 129 had appeared when summons were issued to them. In any case, the names and identity of the share applicants are clearly available. Once this is so, in view of the decision of the Hon'ble Supreme Court in the case of CIT v. Lovely Exports Pvt. Ltd., referred to supra, the share application money cannot be treated as the undisclosed income of the assessee and the Revenue is free to 6 I.T.A. Nos. 2098, 1110 & 1111/Mds/2010 proceed to re-open the individual assessments of the alleged share applicants in accordance with law. In the circumstances, the appeal of the Revenue in ITA No. 2098/Mds/2010 stands dismissed.
8. In regard to the appeals in the cases of Shri R. Thangavel and Shri P. S. Sundaram, it was the submitted by the learned Jr. Standing Counsel that the list of the share applicants was found in the course of the search of the two Managing Directors and the monies which have been invested by the share applicants were the monies of the said Managing Directors, Shri R. Thangavel and Shri P. S. Sundaram and since the creditworthiness of the share applicants having not proved, the investment was liable to be treated as the unexplained investment of the assessees, Shri R. Thangavel and Shri P. S. Sundaram.
9. In reply, the learned authorised representative vehemently supported the order of the learned CIT(A).
10. We have considered the rival submissions. At the outset it is noticed that all that has been found is the list of the share applicants/share holders. In the case of M/s.Victory Spinning Mills Ltd., one of the assessees herein, we have categorically held that in view of the decision of the Hon'ble Supreme Court in the case of Lovely Exports Pvt. Ltd., referred to supra, the share application money cannot be treated as the unexplained income of M/s. Victory Spinning Mills Ltd. and the Revenue is free to proceed against the alleged bogus share applicants in accordance with law. Once it is held so in the case of M/s. Victory Spinning Mills 7 I.T.A. Nos. 2098, 1110 & 1111/Mds/2010 Ltd. and once it is accepted that the share applicants are the same and they have also confirmed the transaction of share application, obviously it cannot be treated as the unexplained investment of the Managing Directors of the company, Shri R. Thangavel and Shri P. S. Sundaram. Here we may specifically mention that what has been found in the course of search is only the list of share holders. Nothing has been found to show that the assessees, Shri R. Thangavel and Shri P. S. Sundaram have advanced the monies to the alleged share applicants. In the circumstances, we are of the view that no addition on this count can be made in the hands of Shri R. Thangavel and Shri P. S. Sundaram. In the circumstances, we are of the view that the finding of the learned CIT(A) on this issue is on a right footing and does not call for any interference. In the circumstances, the appeals of the Revenue in ITA Nos. 1110, 1111 and 2098/Mds/2010 stand dismissed.
11. The order was pronounced in the court on 16/09/2011.
Sd/- Sd/-
(Abraham P. George) (George Mathan)
Accountant Member Judicial Member
Chennai,
Dated the 16th September, 2011.
H.
Copy to: Assessee/AO/CIT (A)/CIT/D.R./Guard file