Income Tax Appellate Tribunal - Chandigarh
Acit, Cc-Ii, Ludhiana vs M/S Jai Bhole Steel Tubes (P) Ltd., ... on 7 September, 2018
IN THE INCOME TAX APPELLATE TRIBUNAL
DIVISION BENCH'A', CHANDIGARH
BEFORE SHRI. SANJAY GARG, JUDICIAL MEMBER AND
DR. B.R.R. KUMAR, ACCOUNTANT MEMBER
ITA No.1381/Chd/2017
Assessment Year: 2007-08
Asst. CI T Vs. M/s Jai Bhole Steel Tubes(P) Ltd.
Central Circle-II # 502, Over Lock Road, Miller
Ludhiana Ganj, Ludhiana
PAN No. AAI CS2298B
C.O. No. 63/Chd/2017
Assessment Year: 2007-08
(I n I TA No.1381/Chd/2017)
M/s Jai Bhole Steel Tubes (P) Ltd. Vs. The ACIT
# 502, Over Lock Road Central Circle-II
Miller Ganj, Ludhiana Ludhiana
ITA No.1382/Chd/2017
Assessment Year: 2009-10
Asst. CI T Vs. M/s Jai Bhole Steel Tubes(P) Ltd.
Central Circle-II # 502, Over Lock Road, Miller
Ludhiana Ganj, Ludhiana
ITA Nos. 1445/Chd/2017
Assessment Years: 2009-10
M/s Jai Bhole Steel Tubes (P) Ltd. Vs. The DCIT
# 502, Over Lock Road Central Circle-II
Miller Ganj, Ludhiana Ludhiana
ITA No.1502/Chd/2017
Assessment Year: 2011-12
Asst. CI T Vs. M/s Jai Bhole Steel Tubes(P) Ltd.
Central Circle-II # 502, Over Lock Road, Miller
Ludhiana Ganj, Ludhiana
C.O. No. 02/Chd/2018
Assessment Year: 2011-12
(I n I TA No.1502/Chd/2017)
M/s Jai Bhole Steel Tubes (P) Ltd. Vs. The ACIT
# 502, Over Lock Road Central Circle-II
Miller Ganj, Ludhiana Ludhiana
ITA No.1501/Chd/2017
Assessment Year: 2012-13
Asst. CI T Vs. M/s Jai Bhole Steel Tubes(P) Ltd.
Central Circle-II # 502, Over Lock Road, Miller
Ludhiana Ganj, Ludhiana
C.O. No. 01/Chd/2018
2
Assessment Year: 2012-13
(I n I TA No.1501/Chd/2017)
M/s Jai Bhole Steel Tubes (P) Ltd. Vs. The ACIT
# 502, Over Lock Road Central Circle-II
Miller Ganj, Ludhiana Ludhiana
ITA Nos. 1446/Chd/2017
Assessment Years: 2013-14
M/s Jai Bhole Steel Tubes (P) Ltd. Vs. The DCIT
# 502, Over Lock Road Central Circle-II
Miller Ganj, Ludhiana Ludhiana
(Appellant) (Respondent)
Assessee By : Shri. R.C. Rai (Advocate)
Revenue By : Shri. Sandeep Dahiya, CI T(DR)
Date of hearing : 30/07/2018
Date of Pronouncement : 07/09/2018
ORDER
PER DR. B.R.R. KUMAR, A.M:
1. ITA No. 1381/CHD/2017 alongwith C.O. 63/CHD/2017 for A.Y. 2007-08 Grounds raised in ITA No. 1381/CHD/2017 are as under:
1. Whether on the facts and in circumstances of the case, the Ld. CIT(A) is correct in deleting the addition of Rs. 84,00,000/- on account of bogus Share capital & Share Premium received by the company ignoring the fact that the assessee company has failed to establish the creditworthiness of the investor company during the assessment proceedings.
2. Whether on the facts and in circumstances of the case, the Ld CIT(A) is correct in ignoring the fact that the investor companies bought the Shares of M/s Jai Bhole Steel Tubes (P) Ltd. @ 40 per Share ( Face value @ Rs. 10 per share) during the year consideration and the same investor in turn sold the shares to the director of the investee company at Face value of Rs. 10 per share, thereby, incurring huge loss without any change in circumstance and market situation of the company.
Grounds raised in C.O. No. 63/Chd/2017 are as under:
1. On the facts and in the circumstances of the case as well as in law the Ld. Commissioner of Income Tax (Appeals) grossly erred in confirming the Assessment order framed U/s 153A of the Income Tax Act, 1961 inspite of the admitted fact that no incriminating material were found and seized during the course of search.
2. On the facts and in the circumstances of the case as well as in law the Ld. Commissioner of Income Tax (Appeals) grossly erred in confirming the action of Ld. Assessing Officer in disturbing the item of regular assessment without any incriminating material related to year/transactions found and seized in search and seizure action.3
3. On the facts and in the circumstances of the case as well as in law the Ld. Commissioner of Income Tax (Appeals) grossly erred in holding that the Assessment Order framed U/s 153A r.w.s. 143(3) of the Income Tax Act, 1961 without issue and service of valid notice U/s 143(2) of the Income Tax Act, 1961 within statutory time limit provided under the Act is valid in law, which is otherwise barred by limitations 1.1. Detailed facts of the case are that a search & seizure operation under section 132 of the Income Tax Act, 1961 (The Act), was conducted at the business premises of the assessee on 14/06/2012. The notice under section 153A of the Act was issued on 07/03/2013 and was duly served upon the assessee on 11/03/2013, in response to which the assessee filed return of income on 30/03/2013 declaring income at Rs. NIL. This return is the same as filed by the assessee under section 139 prior to the date of search. Notices under section 143(2) & 142(1) of the Act were issued by the Assessing Officer on 25/04/2014 along with questionnaire. Further notices under section 143(2) & 142(1) of the Act was issued on 14/11/2014, which were duly served upon the assessee on 17/11/2014.
1.2 During the assessment proceedings the Assessing Officer held that from the examination of balance sheet, it is noted that share capital of face value amounting to Rs. 16,80,000/- (i.e. 168000 shares @ Rs.10/- each) had been allotted/ issued at a huge share premium of Rs.67,20,000/- (i.e. 168000 shares @ Rs.40/- each). Further, it was noted that the business of the assessee company had not started and even than shares were allotted at four times of the face value. It was noted that these 168000 shares were issued to company M/s Jam Hire Purchase Pvt. Ltd.
1.3 At this juncture it is to be mentioned that the action of the Assessing Officer is based on the examination of the balance sheet but not from deciphering of any evidence from the seized material.
1.4 The Assessing Officer having found that the assessee has received Rs.
16,80,800/- as the face value of the shares and Rs. 30/- per share as the premium sought to obtain the relevant bank statements of M/s Jam Hire Purchase Pvt. Ltd from whom share premium has been received, their ITR's, PAN and jurisdiction where these are assessed to justify the credit worthiness and genuineness of the company. The assessee was also required to submit the complete set of balance sheets of the lenders showing the amount of corresponding investment in their balance sheets along with the supporting schedule/ annexure of investments to justify the investments made by them.
41.5 The assessee has submitted required document as requisitioned by the Assessing Officer during the assessment proceedings and also submitted that the said company invested in the shares of the assessee company looking at the bright future of the company and company's proposal to expand its business and come out with a public issue at a future date. The investor company intends to offload the shares of investee company at a profit on a future date when the company's shares will be listed at stock exchange.
1. 6 The Assessing Officer noted that all the companies holding shares transferred their shares on 30.09.2008 to the directors or to their family members at face value of Rs. 10/- per share, thereby leaving behind total the share premium as it is with the company. The AO held that no prudent investor invest in the shares at huge amount of premium and thereafter, sold those shares at face value of nominal amount only to directors of the investee company resulting in huge loss to the investor company and brought the amount of share capital received to tax on the grounds that this share premium is Assessee Company's own unaccounted money.
1.7 While making the addition the Assessing Officer held that although, the assessee produced Sh. Deepak Kumar Gupta, Director of M/s Jam Hire Purchases Pvt. Ltd., along with the documentary evidences, the creditworthiness of the Directors has not been proved and the genuinity of the transactions have not been discharged by the assessee.
1.8 The Assessing Officer relied on the judgment of Hon'ble High Court In the case of CIT vs. Nipun Builder & Developer, 350 ITR 407 (DEL) and in which the Hon'ble High Court has stated that the assessee cannot develop cold feet at the time of furnishing the details as called for by the Assessing Officer at the time of assessment proceedings. The court has further stated that continuing relationship exist between the share applicant as well as the assessee company who has received substantial amount of monies from these companies. The Assessing Officer relied on plethora of judgments namely Smt. Harjit Kaur vs. ACIT in ITA No.280 of 2013 dtd. 11.11.2013 (P&H), CIT vs. Durga Parsad More, 82 ITR 540 (SC), Mcdowell & Co Ltd, 154 ITR 148 (SC), and CIT vs. Durga Prasad More 82 ITR 540 (SC).
51.9 The Ld. CIT(A) deleted the addition on the grounds that the Director of the investor company Shri. Deepak Kumar Gupta confirmed the investments in shares of the assessee company.
1.10 Before us, the Ld. DR argued that the share capital have been bought back by the promoters at 1/4th of the price of the share capital issued. The companies which sold the shares have generated loss in their books which proves the fact that the contribution of the share capital to the assessee company is a mere entry provided by the contributing companies. And his arguments he relied on the ratio of the decisions cited by the Assessing Officer in the order which have been mentioned above.
1.11 Ld. AR argued that 1,68,000 shares have been allotted at a cost of Rs. 16,80,000/- and with a premium of Rs. 67,20,000/- and the value of the shares depends on the factors like the ability to grow, expertise and executing the projects and future prospects. He argued that all the necessary ingredients like bank statement, balance sheet, ITR, have been duly furnished before the authorities. He argued that the contributors to the share capital had a net worth of Rs. 2,06,99,092/- as on 31/03/2007 hence at any cost it cannot be treated as a entry company in the general parlance. He further argued that Shri. Deepak Kumar Gupta, Director of the Company has been examined by the investigation wing and also during the assessment proceedings before the Assessing Officer and confirmed the transactions and no adverse view is warranted in this case.
1.12 We have gone through the facts on record and we find that the contributing company has discharged its onus regarding the identity, genuinity and credit worthiness of the share contributing companies. All the relevant documents have been produced before the authorities below. Required statements have been recorded by the investigation wing as well as by the Assessing Officer during the proceedings and no adverse evidences could be brought out by the Revenue. The Revenue did not bring about any adverse findings during the search or post search enquiries, or during assessment pertaining to the share purchase. The assessment of M/s JAM Hire Purchase Pvt. Ltd. for the A.Y. 2007-08 had been completed under section 143(3) by the Revenue vide order dt. 21/12/2009 of the ACIT Hoshiyarpur did not take any adverse view regarding the purchase of the shares. The statement of Shri. 6 Deepak Gupta, Director of the company was recorded which is reproduced below wherein he has confirmed the transactions and no adverse view has been taken by the Revenue.
Q.1 Please identify yourself along with your ID proof?
Ans. Myself Deepak Kumar Gupta S/o Late Sh. Raj Kumar Gupta R/o H.No.82-A, Rajguru Nagar, Ludhiana.
Q.2 What is your qualification and which language do you understand? Ans. I am Chartered Accountant and can understand Hindi, English & Punjabi. Q.3 Please state your PAN and provide a copy of your pan card and please tell where are you assessed Tax?
Ans. My PAN is AFKPG1489E and I am submitting a photocopy of my PAN card and I am assessed to tax at Range-VI, Rishi Nagar, Ludhiana. Sir, I am regular Income Tax Payer and God fearing man and I am filing my individual return at Range-VI, Rishi Nagar, Ludhiana and the PAN of M/s Jam Hire Purchases (P) Ltd, 527-R, City Tower, Model Town, Ludhiana is AAACJ3399Q and is being assessed to Income Tax at Circle -I, Hoshiarpur (Punjab) and is filing the ITR regularly. Further, M/s Insight Enterprises (P) Ltd., having corporate office at 527 - R, City Tower, Model Town, Ludhiana and Registered Office 1st Floor, Plot No. 115, Street No. 2, Village Daria, Chandigarh (Old Address being 1104-1105, Sector-22B, Chandigarh). The PAN of M/s Insight Enterprises (P) Ltd., is AAACB 6961G and is being assessed to Income Tax at Ward-lll(3), Chandigarh and is filing the ITR regularly.
Q. 4 What is your profession and what are your sources of income ? Ans. I am practicing Chartered Accountant and Director in M/s Insight Enterprises (P) Ltd 527-R City Tower, Model Town, Ludhiana (Old Address being 1104-1105, Sector-22 B , Chandigarh) and in M/s Jam Hire Purchase Pvt. Ltd. 527-R . City Tower, Model Town, Ludhiana. My annual income being Rs 5,92,820/- as per my personal ITR filed for the A. Y.2013- 14.
My sources of income are interest income from banks, salary from partnership firm, rental income, income from investment and share trading. Q.5 Do you know Sh. Sushil Kumar Maini, Director M/s Jai Bhole Steel Tubes (P) ltd. G.T. Road, Jugiana, Ludhiana?
Ans. Yes, I know Sh. Sushil Kumar Maini who is the Director M/s Jai Bhole Steel Tubes (P) Ltd., G.T. Road, Jugiana, Ludhiana. He was my client and had consulted me in various Income Tax matters.
Q.6 Have your company M/s Insight Enterprises (P) Ltd., and M/s Jam Hire Purchases (P) ltd., in which you are director as stated above invested in M/s Jai Bhole Steel Tubes (P) ltd., G.T. Road, Jugiana, Ludhiana, during the period 01.04.2007 to 31.03.2013?
Ans. Yes, M/s Insight Enterprises (P) Ltd. ,527-R, City Tower, Model Town ,Ludhiana in which I am director has invested Rs.50,00,000/-in financial year 2008-09 and the whole payment was made though cheque and no cash payments were made. Also Rs.73,00,000/-were invested in financial year 2010-11 and the whole payment was made though cheque and no cash payments were made. Further Rs. 88,50,000/-were invested in financial year 2011-12 and the whole payment was made througl cheque and no cash payments were made . I am submitting copy of bank account No. 21430200000309 of Bank of Baroda, Civil Lines, Pakhowal Road, Ludhiana.
Further, M/s Jam Hire Purchases (P) Ltd., in which I am director has also invested Rs. 84,00,000/- in financial year 2006-07 and the whole payment was made through cheque and no cash payments were made. I am submitting copy of bank account No. 11760000005870 of Centurion Bank of Punjab, 112, Pakhowal Road, Ludhiana dated 01.05.2007.
7Q. 8 Please explain why did you invested such a huge amount in M/s Jai Bhole Steel Tube (P) Ltd., G.T. Road, Jugiana, Ludhiana?
Ans. M/s jai Bhole Steel Tubes (P) Ltd., G.T. Road, Jugiana, Ludhiana, had planned major expansion starting from financial year 2008-09 and was further desired to bring out the Initial Public Offer (IPO) to tap the equity market. Q.9 As per books of account of M/s Insight Enterprises (P) Ltd., there is investment of only 25000 shares of M/s Jai Bhole Steel Tubes (P) Ltd., as on 31.03.2010. But as per books of M/s Jai Bhole Steel Tubes (P) Ltd., the company M/s Insight enterprises (P) Ltd. is holding 299000 equity shares of M/s Jai Bhole Steel Tubes (P) Ltd., as on 31.03.2010. Please explain as to why is there no why is there no investment shown by M/s Insight Enterprises?
Ans. These shares have been duly reflected in the year 2010-11 and are shown as stock in trade in Annexure-ll (inventories) and the copy of the Balance sheet has been attached and since, the investment in 299000 equity shares were shown as, "Stock in Trade" therefore, the same were not included under the head investment.
Q.10 Again as on 31.03.2011 M/s Insight Enterprises (P) Ltd.. has shown NIL investment in M/s Jai Bhole Tubes (P) ltd.. However as per Balance Sheet of M/s Jai Bhole Steel Tubes (P) Ltd., as on 31.03.2011, M/s Insight Enterprises P. Ltd is holding 357400 equity shares of your company. These shares have been issued at a premium which is as high as Rs.115/-per share. Please explain the reason for NIL investment shown by M/s Insight Enterprises (P) Ltd., in his books of account? Ans. The company has invested 73,00,000/- for allotment of 58400 shares in the year 2010 -11 in M/s Jai Bhole Steel Tubes (P) Ltd., and the amount has been shown as share application money invested by M/s Insight Enterprises (P) Ltd., as on 31.03.2011 and the allotment of 58400 shares were booked on 01.04.2011. Thus the total equity shares comes to 357400 i.e. (299000+58400). Further, 299000 share were shown as part of "Stock in Trade" in the balance sheet of M/s Insight Enterprises (P) Ltd.. as on 31.03.2011. Therefore the same were not included under the head investment. Further, I am submitting copy of balance sheet showing 299000 shares as appearing in "Stock in Trade" for the period 01.04.2010 to 31.03.2011.
Q.11 As per details available in the Income Tax records as well as the details available with registrar of companies the registered office of this company is mentioned as 1104- 1105, Sector 22 -B, Chandigarh. However no such company by ihe name of M/s Insight Enterprises (P) Ltd is found to be existing at this address and therefore it appears that it is merely a suitcase company. Please explain? Ans. Yes, previously M/s Insight Enterprises (P) Ltd., was having its registered office at s. 1104-1105, Sector - 22B , Chandigarh. However, the company moved new premise and thus its address changed to 3283, Sector -15D, Chandigarh on 02.05.2011. That's why no one was available at the old address. We have also made relevant changes in Registrar of Company (ROC) and Income Tax record which can be verified by your good self. I am also submitting copy of form18 of M/s Insight Enterprises (P) Ltd., as updated in the data base of ROC is also being submitted.
Further, it is brought to your knowledge that after search was conducted at M/s Jai Bhole Steel Tubes (P) Ltd., we were served notice at the corporate office of M/s Insight Enterprise (P) Ltd , at 527-R , City Tower, Model Town, Ludhiana and my statement was recorded on 14.06.2012. Sir, at the time of recording of my statement I was asked the address of M/s Jam Hire Purchases (P) Ltd and I categorical stated that it was being operated from 2nd Floor, City Tower, model Town, Ludhiana which may also be verified from your record. Once again I was asked to appear before at the office of Assistant Director of Income Tax (Inv.), Ludhiana on 06.08.2012 and my statement was recorded and I was asked to produced the copy of account of M/s Jai bhole Steel Tubes (P) Ltd.
8,as appearing in the books of M/s Jam Hire Purchases (P) Ltd. and M/s Insight Enterprises (P) Ltd., for the last six years which were submitted subsequently. I was also asked to provide registered office of M/s Insight Enterprises (P)Ltd., and I told them that the present address of M/s Insight Enterprises (P)Ltd., 527-R, 2nd Floor, City Tower, Model Town, Ludhiana. I also told them that M/s Insight Enterprises (P) Ltd., has changed its address almost since one year. So, it cannot be considered that M/s Insight Enterprises (P) Ltd. is a Suitcase Company. Moreover, the Company is regularly working at its corporate office 527-R, City Tower, Model Town, Ludhiana and the registered office 3283, Sector -15D, Chandigarh which may be very well verified by you any time. ' Q.12 Please state whether your investment was in the nature of accommodation entry?
Ans. No, this is not an accommodation entry. Sir, as explained above M/s Jai Bhole Steel Tubes (P) Ltd., G. T. Road, Jugiana, Ludhiana had planned major expansion starting from Financial year 2008-09 and was further desired to bring out the Initial public Offer (IPO) to tap the equity market. Q. 13 have you or any of your company i.e. M/s Insight Enterprises (P) Ltd., and M/s Jam Hire Purchases (P) Ltd., in which you are director have sold back or transferred the shares to M/s Jai Bhole Steei tubes (P) Ltd., or in the name of any director of that company?
Ans. No. Q.14 it is noticed from the balance sheet of M/s Jai Bhole Steel Tubes (P) Ltd ., that M/s Insight Enterprises (P) Ltd., was issued 50,000 shares and the company paid a premium of Rs. 90/- per share during the financial year 2008-09. And further it was noticed M/s Jai Bhole Steel Tubes(P) Ltd., again issued 58,400 fresh equity at face value of Rs. 10/- and paid a premium of Rs. 115/- per share during the financial year 2010-11.
Further, M/s Jai Bhole Steel tubes (P) Ltd., again issued 59000 fresh equity shares to M/s Insight Enterprises (P) Ltd., on 31.03.2012 i.e. during the F.Y. 2011-12 at a face value of Rs. 10/- and M/s Insight Enterprises (P) Ltd. paid a premium of Rs. 140/- per share.
Therefore please explain why M/s Insight Enterprises (P) Ltd., paid such a huge premium to M/s jai Bhole Steel tubes (P) Ltd., also explained your sources y investment which establish your creditworthiness?
Ans. M/s Jai Bhole Steel Tubes (P) Ltd., G.T. Road, Jugiana, Ludhiana had planned major expansion starting from Financial year 2008-09 and further desired to bring out the Initial public Offer (IPO) to tap the equity market. So, the company had paid the premium for shares allotted by M/s Jai Bhole Steel Tubes (P) Ltd., on premium, keeping in view, its business plan and future plans of expansion we thought that it is a good opportunity to invest in M/s Jai Bhole Steel Tubes (P) Ltd., Further, as per the balance sheet of the company i.e. M/s Insight Enterprises (P) Ltd., for the F.Y. 2008-09. The companies had investible funds in the tune of Rs. 2,70,00,800/- out of which the company had made an investment of Rs. 50,00,000/-in the year 2008-09. Copy of balance sheet of M/s Insight Enterprises (P) Ltd., as on 31.03.2009 is enclosed.
The company had invested an amount of Rs. 73,00,000/- in the shares of M/s jai Bhole Steel Tubes (P) Ltd., in the year 2010-11 and the capital and reserves of the company M/s Insight Enterprises (P) Ltd., in the year 2010-11 are Rs. 2,70,00,800/-. Thus, the company had sufficient funds to invest in the shares of M/s Jai Bhole Steel Tubes (P) Ltd., Copy of balance sheet of M/s Insight Enterprises (P) Ltd., as on 31.03.2011 is enclosed.
9The company has invested an amount of Rs. 88,50,000/- in the shares of M/s Jai Bhole Steel Tubes (P) Ltd., in the year 2011-12 and the capital and reserves of the company M/s Insight Enterprises (P) Ltd., in the year 2011-12 are Rs. 2,48,70,542/-. The company having sufficient funds to invest in the shares of M/s Jai Bhole Steel Tubes (P) Ltd., Copy of balance sheet of M/s Insight Enterprises (P) Ltd., as on 31.03.2011 is enclosed.
Whatever Stated Above is true and correct to the best of my knowledge and belief."
Hence, keeping in view the entire facts and circumstances since the Revenue has not brought any evidence regarding the fictitious nature of the company M/s JAM Hire Purchase Pvt. Ltd. and no material was brought regarding the bogus or doubtful character of the investing company and keeping in view the fact that the Director was examined twice by the authorities, we decline to interfere in the order of the Ld. CIT(A) in deleting the addition.
1.13 In view of the decision above the C.O. of the assessee doesn't require any adjudication.
2. ITA No.1382/CHD/2017 & 1445 /CHD/2017 for A.Y. 2009-10 Ground of ITA No. 1382/CHD/2017 are as under:
1. Whether on the facts and in circumstances of the case, the Ld. CIT(A) is correct in deleting the addition of Rs. 2,50,00,000/- on account of bogus Share capital & Share Premium received by the company ignoring the fact that the assessee company has failed to establish the creditworthiness of the investor company during the assessment proceedings.
2. Whether on the facts and in circumstances of the case, the Ld CIT(A) is correct in ignoring the fact that the investor companies having their address on different places, transferred their shares on 29-05-2010 i.e. on same day to one company M/s Insight Enterprises Pvt. Ltd. Which was already holding 50,000 shares. Therefore, it is clear that this share capital and share premium is Assessee Company's own unaccounted money.
Ground of ITA No. 1445/CHD/2017 are as under:
1. On the facts and in the circumstances of the case as well as in law the Ld. Commissioner of Income Tax (Appeals) grossly erred in confirming the Assessment order framed U/s 153A of the Income Tax Act, 1961 inspite of the admitted fact that no incriminating material were found and seized during the course of search.
2. On the facts and in the circumstances of the case as well as in law the Ld. Commissioner of Income Tax (Appeals) grossly erred in confirming the action of Ld. Assessing Officer in disturbing the item of regular assessment without any incriminating material related to year/transactions found and seized in search and seizure action.10
3. On the facts and in the circumstances of the case as well as in law the Ld. Commissioner of Income Tax (Appeals) grossly erred in holding that the Assessment Order framed U/s 153A r.w.s. 143(3) of the Income Tax Act, 1961 without issue and service of valid notice U/s 143(2) of the Income Tax Act, 1961 within statutory time limit provided under the Act is valid in law, which is otherwise barred by limitations
4. On the facts and in the circumstances of the case as well as in law the Ld. Commissioner of Income Tax (Appeals) grossly erred in confirming addition of 49,00,000/- made by Ld. Assessing Officer on account of share application money received from M/s Legal Enterprises Ltd.
5. On the facts and in the circumstances of the case as well as in law the Ld. Commissioner of Income Tax (Appeals) grossly erred in alleging that the appellant has not filed the various documents as were filed in respect of other investors.
2.1. The facts and circumstances in ITA No. 1382 are akin to the case dealt above in ITA No. 1381 above. The Directors of the contributing company Shri. R.K. Sharma and Shri. D.K. Gupta were also examined by the Revenue on oath and no adverse inferences were drawn by the Revenue in respect of the share capital receipt from various entities. Hence we decline to interfere in the order of the Ld. CIT(A) deleting the addition.
2.2 Apropos Ground No. 4 in the appeal of the assessee pertaining to the share capital received from Regal Enterprises Pvt. Ltd., the AR has submitted that the company is listed in Ahmedabad Stock Exchange and in MCX and hence, he argued that by any stretch of imagination it cannot be treated as bogus or fictitious. However, since the evidences are required to be examined by the Revenue which assessee could not produce earlier before the Ld. CIT(A) an opportunity is being given to produce the parties before the Ld. CIT(A) within three months from the date of this order.
2.3 The Ld. CIT(A) would examine the issue of identity, genuinity and credit worthiness of the shareholder and take a decision in accordance with law in force. Since the ground no.4 raised in his cross appeal has been set aside to file of the Ld. CIT(A), the other grounds taken by the assessee are not being dealt.
3. 1502/CHD/2017 alongwith C.O. No. 02/Chd/2018 for A.Y 2011-12 & 1501/CHD/2017 alongwith C.O. No. 01/CHD/2018 for A.Y. 2012-13 Grounds of ITA No. 1502/Chd/2017 are as under:
1. Whether on facts and in circumstances of the case, the Ld. CIT(A) is correct in deleting the addition of Rs. 73,00,000/- made on account of bogus Share capital & Share Premium received by the company ignoring the fact that the assessee 11 company has failed to establish the creditworthiness of the investor company during the assessment proceedings.
2. Whether on facts and in circumstances of the case, the Ld. CIT(A) is correct in ignoring the fact that the investor company i.e. M/s Insight Enterprises Pvt. Ltd., is merely a paper company for which the assessee failed to provide proper justification to prove its identity, genuineness and credit worthiness considering assessee only used for introducing the unaccounted monies into the assessee's company.
Ground of C.O. No. 02/CHD/2018 are as under:
1. On the facts and in the circumstances of the case as well as in law the Ld. Commissioner of Income Tax (Appeals) grossly erred in confirming the Assessment order framed U/s 153A of the Income Tax Act, 1961 inspite of the admitted fact that no incriminating material were found and seized during the course of search.
2. On the facts and in the circumstances of the case as well as in law the Ld. Commissioner of Income Tax (Appeals) grossly erred in confirming the action of Ld. Assessing Officer in disturbing the item of regular assessment without any incriminating material related to year/transactions found and seized in search and seizure action.
3. On the facts and in the circumstances of the case as well as in law the Ld. Commissioner of Income Tax (Appeals) grossly erred in holding that the Assessment Order framed U/s 153A r.w.s. 143(3) of the Income Tax Act, 1961 without issue and service of valid notice U/s 143(2) of the Income Tax Act, 1961 within statutory time limit provided under the Act is valid in law, which is otherwise barred by limitations
4. On the facts and in the circumstances of the case as well as in law the Ld. Commissioner of Income Tax (Appeals) grossly erred in ignoring the fact that the Ld. Assessing Officer did not provided the copy of material gathered at the back and behind of assessee nor the opportunity to cross examine the person whose statement was relied was provided, inspite of repeated request of the appellant.
5. That the respondent craves leave to add, amend, modify, rescind, supplement or alter any of the grounds stated here-in-above either before or at the time of hearing of the appeal.
Grounds of ITA No. 1501/Chd/2017 are as under:
1. Whether on facts and in circumstances of the case, the Ld. CIT(A) is correct in deleting the addition of Rs. 80,50,000/- made on account of bogus Share capital & Share Premium received by the company ignoring the fact that the assessee company has failed to establish the creditworthiness of the investor company during the assessment proceedings.
2. Whether on facts and in circumstances of the case, the Ld. CIT(A) is correct in ignoring the fact that the investor company i.e. M/s Insight Enterprises Pvt. Ltd., is merely a paper company for which the assessee failed to provide proper justification to prove its identity, genuineness and credit worthiness considering assessee only used for introducing the unaccounted monies into the assessee's company.
Ground of C.O. No. 01/CHD/2018 are as under:
121. On the facts and in the circumstances of the case as well as in law the Ld. Commissioner of Income Tax (Appeals) grossly erred in confirming the Assessment order framed U/s 153A of the Income Tax Act, 1961 inspite of the admitted fact that no incriminating material were found and seized during the course of search.
2. On the facts and in the circumstances of the case as well as in law the Ld. Commissioner of Income Tax (Appeals) grossly erred in confirming the action of Ld. Assessing Officer in disturbing the item of regular assessment without any incriminating material related to year/transactions found and seized in search and seizure action.
3. On the facts and in the circumstances of the case as well as in law the Ld. Commissioner of Income Tax (Appeals) grossly erred in holding that the Assessment Order framed U/s 153A r.w.s. 143(3) of the Income Tax Act, 1961 without issue and service of valid notice U/s 143(2) of the Income Tax Act, 1961 within statutory time limit provided under the Act is valid in law, which is otherwise barred by limitations
4. On the facts and in the circumstances of the case as well as in law the Ld. Commissioner of Income Tax (Appeals) grossly erred in ignoring the fact that the Ld. Assessing Officer did not provided the copy of material gathered at the back and behind of assessee nor the opportunity to cross examine the person whose statement was relieved was provided, inspite of repeated request of the appellant.
3.1 The Revenue has taken appeal regarding the genuinity of the shares purchased by M/s Insight Enterprises Pvt. Ltd. The facts and circumstances of this appeal are akin to the case dealt above in ITA No. 1381. The Director of the contributing company Shri. D.K. Gupta was also examined by the Revenue on oath and no adverse inferences were drawn by the Revenue in respect of the share capital receipt from that entity. Hence we decline to interfere in the order of the Ld. CIT (A) deleting the addition.
3.2 In view of the decision above the C.O. of the assessee doesn't require any separate adjudication.
4. ITA No. 1446/CHD/2017 For A.Y. 2013-14 Grounds of ITA No. 1446/CHD/2017 are as under:
1. On the facts and in the circumstances of the case as well as in law the Ld. Commissioner of Income Tax (Appeals) grossly erred in holding that the Assessment Order framed U/s 153A r.w.s. 143(3) of the Income Tax Act, 1961 without issue and service of valid notice U/s 143(2) of the Income Tax Act, 1961 within statutory time limit provided under the Act is valid in law, which is otherwise barred by limitations
2. On the facts and in the circumstances of the case as well as in law the Ld. Commissioner of Income Tax (Appeals) grossly erred in confirming the addition of 26,50,000/- made by Ld. Assessing Officer on the basis of material seized from third party namely M/s Hansa Metallic Ltd.
3. On the facts and in the circumstances of the case as well as in law the Ld. Commissioner of Income Tax (Appeals) grossly erred in confirming the 13 addition of 26,50,000/- made by Ld. Assessing Officer inspite of admitted fact that the copy of adverse material seized from third party and used against the appellant was not provided.
4. On the facts and in the circumstances of the case as well as in law the Ld. Commissioner of Income Tax (Appeals) grossly erred in confirming the addition of 26,50,000/- made by Ld. Assessing Officer inspite of admitted fact that the opportunity to cross examine the third person whose statement was relied and used against the appellant was not provided even on request of the appellant.
5. On the facts and in the circumstances of the case as well as in law the Ld. CIT(A) grossly erred in confirming the addition of 1,31,840/- made by Ld. Assessing Officer.
4.1 Ground No. 2 pertains to addition of Rs. 26,50,000/- on account of cash payment to M/s Hansa Metalick Ltd. by the assessee.
4.2 The Assessing Officer made addition based on documents seized during the search under section 132 of Income tax Act 1961 on one Hansa Group of Companies wherein an amount of Rs. 26,50,000/- was mentioned. The Assessing Officer held that since the name M/s Jai Bhole was mentioned on the seized material and based on the statement of Shri Mangat Ram, Accountant of M/s Hansa Metallic Ltd. and brought this amount to tax in the hands of the assessee under section 69C.
4.3 The Ld. CIT(A) confirmed the addition on the grounds that in the books of M/s. Hansa Metallic Ltd. this amount of Rs. 26,50,000/- have not been reflected and hence treated this amount as unexplained expenditure of the assessee.
4.4 Before us, the Ld. AR argued that no addition can be made in the hands of the assessee based on documents found in the search conducted on a third party. He argued that no addition can be made in the hands of the assessee based on the scribblings found on a loose sheet in the premises of unrelated party. He further argued that the cross examination of Shri Mangat Ram was not afforded to the assessee based on which the addition has been made. It was argued that Shri. Mangat Ram was nowhere related to the assessee company and no other corroboratory material pertaining to the noting as to why and how the amounts have been received if at all from the assessee and no details have been brought by the Revenue as to what were the services provided by the other company to the assessee. He argued that the addition was made on surmises simply because the name happens to be similar to that of the assessee.
4.5 On the other hand the Ld. DR relied on the order of the Ld. CIT(A) and argued that the Ld. AR has not stated anything much on the merit of the 14 addition. Rebutting the arguments of the Ld. AR, Ld. AR argued that since the paper doesn't belonged to him and since no cross examination has been afforded the assessee could not be expected to give a reply on a matter / document which is totally unrelated to him.
4.6 We have heard both the arguments. The addition was made under Section 69C which states as under:
69C: "Where in any financial year an assessee has incurred any expenditure and he offers no explanation about the source of such expenditure or part thereof or the explanation, if any, offered by him is not in the opinion of the Assessing Officer, satisfactory, the amount covered by such expenditure or part thereof, as the case may be, may be deemed to be the income of the assessee for such financial year."
4.7 We find that the addition was solely based on the name written in the document which was found and seized from the premises of a third person in a different search action. The statement of the Accountant of searched entity was not confronted to the assessee. Further no corroborative documents or evidence was brought by the Revenue to prove as to what was that unexplained expenditure. The factum of spending money for any particular purpose has not been proved by the Revenue. Reliance is also placed on the judgment of Hon'ble Supreme Court in case of Kishinchand Chellaram Vs. CIT, Bombay wherein it was held that the burden was on the Revenue to show that the amount have been remitted from the assessee to the other company. In the instant case also the Revenue has not brought anything on record to prove even primarily that the amounts have been sent from the assessee to M/s Hansa Metallic Ltd. The Ld. CIT(A)'s conclusion that the addition needs to be confirmed in the hands of the assessee on the grounds that M/s Hansa Metallic Ltd has not entered this amount in their regular books of accounts cannot be accepted as no material was brought by the Revenue to prove that the transactions indeed pertains to the assessee.
4.8 Hence, keeping in view the overall facts and circumstances of the case as the addition was made without bringing any evidence or corroborative material on record , we hereby order the same be deleted.
4.9 Ground No. 5 pertains to addition of Rs. 1,31,840/- on account of excess stock found during the course of search. As per the order of the Ld. CIT(A), the Assessing Officer has mentioned that the stock discrepancies found at the factory premises were confronted to the assessee and in reply the assessee 15 submitted that the stock under one head was wrongly noted under other head and ultimately there was only a difference of 3.296MT. The assessee submitted that this difference due to stock taking was only minor and may be ignored.
However, the Assessing Officer did not accept the explanation of the assessee as the excess stock found was not explained. Accordingly by applying the rate of 40 per kg the value of excess stock of 3.296MT was calculated at Rs. 1,31,840/- and added to the income of the assessee.
4.10 Before us, the Ld. AR argued that it was a minor discrepancy and the assessee is registered with Excise and Sale Tax Department and both the agencies accepted the stock of the assessee as correct. The Stock Records, Purchase Bill, Sale Bills etc have been maintained on real time basis and the net excess stock arrived at 3.296MT could be due to difference of weighing owing to the total stock of 994MT. He argued that difference of 3.2 MT out of 994 MT can as well be an acceptable weighing error and no addition on that account is called for.
4.11 We find from the inventory of the stock tabulated by the Assessing Officer there has been differences of physical stocks in tube and pipe, scrap, CR Coil & Strips. In the peculiar facts and circumstances specific to the business of the assessee, a difference of 0.30% in weighing process can be taken as acceptable and hence no addition on this discrepancy is warranted. Therefore, the appeal of the assessee on this ground is allowed.
5. As a result the appeal of the Revenue are dismissed for statistical purposes and that of the Assessee are allowed.
Order pronounced in the Open Court.
Sd/- Sd/- (SANJAY GARG) (DR. B.R.R. KUMAR) JUDICIAL MEMBER ACCOUNTANT MEMBER Dated : 07/09/2018 AG Copy to:
1. The Appellant, 2.The Respondent, 3.The CIT,4.The CIT(A), 5.The DR