Income Tax Appellate Tribunal - Chennai
B.R.Petrochem Pvt. Ltd., Chennai vs Department Of Income Tax on 24 September, 2008
IN THE INCOME TAX APPELLATE TRIBUNAL
BENCH 'A', CHENNAI
Before Shri U.B.S. Bedi, J.M. & Shri Abraham P. George, A.M.
I.TA. Nos.27 and 28/Mds/2009
Assessment Years: 2002-03 and 2003-04
The Assistant Commissioner of M/s. B.R. Petrochem Pvt. Ltd.,
Income Tax, Vs. No.4, 42nd street, 6th Avenue, Ashok
Company Circle II, Chennai. Nagar, Chennai 600 083.
[PAN:AABCB2960N]
(Appellant) (Respondent)
Revenue by : Shri Shaji P. Jacob
Assessee by : Shri S. Venugopalan
O R DE R
PER U.B.S. Bedi, J.M.
These two appeals of the Department are directed against the consolidated order passed by the ld. CIT(A) III, Chennai dated 24.09.2008 relevant to the assessment years 2002-03 and 03-04 respectively whereby the Department has challenged the action of the ld. CIT(A) in deleting the addition made under section 68 of the Income Tax Act towards unexplained share capital for both years.
2. As common points are involved in both these appeals and both were heard together, arise out of consolidated order, therefore being disposed of by this single order for the sake of convenience.
3. The assessee company was incorporated in March, 2000 started its business activities in July, 2000 and first financial year for the company is practically financial year 2000-01 corresponding to assessment year 2001-02. The assessee company is engaged in import and sale of petroleum products.
2 ITA Nos Nos.27 & 28/Mds/09 During the course of assessment proceedings, the Assessing Officer has noted that the assessee company has received share application monies in the assessment years 2001-02, 2002-03 and 2003-04 from different persons. The list of persons from whom the share application monies were received in these 3 assessment years has also been furnished before the Assessing Officer for all the three assessment years. The amounts received as share application money has been added to the returned income of the assessee as unexplained cash credit under section 68.
3.1 The Assessing Officer has added an amount of `.22,50,000/- and `.20 lakhs for the assessment years 2002-03 and 2003-04 respectively against which the assessee preferred appeals and the ld. CIT(A) deleted the additions by stating that the issue is fully covered by the Hon'ble High Court's decision as cited and while referring to various other decisions of different Hon'ble High Courts and different Benches of the Tribunal including CIT(A)'s decision in assessee's own case for the assessment year 2001-02 on identical point, appeals were allowed. .
4. Against such order of the ld. CIT(A), the Department has came up in appeal and it was strongly pleaded that in assessee's own case for the assessment year 2001-02, the ITAT has decided the issue in favour of the Revenue in its order in I.T.A. No. 2597/Mds/05 dated 27.04.2007(copy of which was filed) and the ld. CIT(A) has failed to note this decision, when such decision was already there and decided the appeals in favour of the assessee. Since binding decision in the case of the assessee by same Bench on same points for 3 ITA Nos Nos.27 & 28/Mds/09 the assessment year 2001-02 is already there, therefore, the order of the ld. CIT(A) is liable to be reversed and Assessing Officer's order requires to be restored. It was thus prayed for setting aside the order of the ld. CIT(A) and restoring that of the Assessing Officer.
5. The ld. Counsel for the assessee submitted that the assessee has already filed confirmation letters, evidence for allotment of shares, etc. the genuineness of the credits, existence of the persons, etc. Moreover, the Assessing Officer himself has made some enquiries and has found all the shareholders did exist at the addresses provided by the assessee and also filed confirmation letter. Otherwise also, once the creditworthiness of the persons is proved, it cannot be assessed as income of the assessee. As the persons have already confirmed the transaction, necessary share certificates were issued and lot of favourable decisions are already there so relying upon the decisions in the case of CIT v. Value Capital Services P. Ltd. 307 ITR 334(Delhi), CIT v. Ramneet Singh 306 ITR 267 (P&H), CIT v. S.D. Investment and Trading Company 306 ITR 31 (Bom), CIT v. Real Time Marketing P. Ltd. 306 ITR 35 (Delhi), Smt. Saraswati Devi Gehlot v. ITO 304 ITR (AT) 354 (Jodhpur), CIT v. AKJ Granites P. Ltd. 301 ITR 298 (Raj), CIT v. Divine Leasing and Finance Ltd. General Exports and Credits Ltd. Lovely Exports P. Ltd. 299 ITR 268 (Delhi), ACIT v. Venkateshwar Ispat P. Ltd. 319 ITR 393 (Chhattisgarh), CIT v. Glocom Impex Pvt. Ltd. 299 ITR 39 (Delhi), A One Housing Complex Ltd. v. ITO 299 ITR(AT) 327 (Delhi), it was pleaded for confirmation of the impugned order.
4 ITA Nos Nos.27 & 28/Mds/09
6. In order to counter the submissions of the ld. Counsel for the assessee, the ld. DR submitted that reliance placed by the ld. AR is not proper on these cases, as facts are distinguishable as compared to the facts in the present case because no confirmation could be got effected. The ld. CIT(A) in this case has written in his order at last page that while following Jurisdictional High Court's decision as also order of the CIT(A) VIII in assessee's own case in identical point for the assessment year 2001-02, he deleted the addition made by the Assessing Officer. Whereas, in assessee's own case for the assessment year 2001-02 similar type of addition has been confirmed by the Tribunal while reversing ld. CIT(A)'s order on 27.04.2007, so the order of the ld. CIT(A) is not correct and in all fairness, the matter should be set aside on the file of the ld. CIT(A) to re- decide the appeals afresh and to this plea of the ld. DR, the ld. Counsel for the assessee did not object and agreed that the matter should go to the file of the ld. CIT(A).
7. We have heard both the sides, considered the material on record and find that the ld. CIT(A) while deleting the additions made under section 68 on account of share application money has opined at last page of his order as under:
".........In fact, I find that the issue is fully covered by the High Court's order as discussed above. Hence, following the above judgment of the jurisdictional High Court and also the order of the CIT(A)-VIII in appellant's own case on identical point in A.Y. 2001- 02, I delete the addition made by the Assessing Officer u/s 68 in both the years."
7.1 As per Chennai 'A' Bench decision in I.T.A. No. 2597/M/2005 for the assessment year 2001-02 dated 27.04.2007, we find that the order of the ld.
5 ITA Nos Nos.27 & 28/Mds/09 CIT(A) has been reversed by the Tribunal by drawing the conclusion at para 7 of the order, which reads as under:
"7. After going through the above case laws and analyzing the facts, in the light of the above judgment, the assessment of unexplained share capital of the company, all the courts held that this is a question of fact. It would be quite unreasonable to hold that the tax authorities are precluded from going into the question of genuineness of the share holdings. In some judgment there are certain observations that in the case of a company, the share capital cannot be seen as a representing income that may be assessed in the hands of the company itself, such observation have been made as a matter of appreciation of evidence and not as a proposition of law. Because in the ultimate analysis of the Courts only held that what the Tribunal decided is a question of fact and not question of law arises. It is therefore clear, that in every case, where dispute arises about the genuineness of the share capital it would be necessary to examine the facts and circumstances of each case whether the dispute is confined to the financial capacity of the share applicants or there is material/evidence to call in question the genuineness of issuance of the share capital itself. In case where the facts and circumstances are justified, the findings that what has been credited as share capital of the company is actually not so, the provisions of sec.68 clearly permit the income tax authority to make enquiries and if necessary to assess the same as representing income of the company. The question arises that whether the apparent can be considered as real. As laid down by the Hon'ble Supreme Court, the apparent must be considered the real unit is shown that there is reason to believe that the apparent is not real and the taxing authorities entitled to look into the surrounding circumstances to find out the reality and the matter has to be considered by applying the test of human probability (Sumati Dayal v. CIT), Hon'ble Apex Court [241 ITR 801]. In the present case the surrounding circumstances discussed above in the previous paragraphs leads to one conclusion that the share application money is in respect of persons claimed by the assessee are not genuine. After considering the entire facts and circumstances of the case, we are of the opinion that the share application money shown by the assessee is not real, and only a made believe story. Hence, the Assessing Officer is justified in treating this as unexplained credits of the assessee.
Hence, we reverse the order of CIT(A) and restore the order of the Assessing Officer."
6 ITA Nos Nos.27 & 28/Mds/09 7.2 Since this vital aspect has been overlooked by the ld. CIT(A), therefore, in the interest of justice and to have fair play in the matter, we set aside the order of the ld. CIT(A) and restore the matter on his file with the direction to re-decide the appeals afresh and while doing so, he should consider all relevant up-to-date case law and decision of ITAT in assessee's own case for the assessment year 2001-02 after giving due opportunity to the assessee as well as the Assessing Officer. We hold and direct accordingly.
8. In the result, both the appeals of the Revenue are allowed for statistical purposes.
Order pronounced soon after the conclusion of hearing on 28.10.2010.
Sd/- Sd/- (ABRAHAM P. GEORGE) (U.B.S. BEDI) ACCOUNTANT MEMBER JUDICIAL MEMBER Chennai, Dated, the 28.10.2010. Vm/- Copy to : Appellant/Respondent/CIT(A)- /CIT, /DR