M/s. OFF SHORE FINVEST LTD., v. I. T.O. Wd-6(1), Kolkata,

ITA 1272/KOL/2009 | 2002-2003
Pronouncement Date: 09-04-2010

Appeal Details

RSA Number 127223514 RSA 2009
Assessee PAN AAACO4973H
Bench Kolkata
Appeal Number ITA 1272/KOL/2009
Duration Of Justice 8 month(s) 13 day(s)
Appellant M/s. OFF SHORE FINVEST LTD.,
Respondent I. T.O. Wd-6(1), Kolkata,
Appeal Type Income Tax Appeal
Pronouncement Date 09-04-2010
Appeal Filed By Assessee
Bench Allotted B
Tribunal Order Date 09-04-2010
Date Of Final Hearing 31-03-2010
Next Hearing Date 31-03-2010
Assessment Year 2002-2003
Appeal Filed On 27-07-2009
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH : KOLKATA [BEFORE HONBLE SRI D. K. TYAGI JM & HONBLE SRI C . D. RAO AM] I.T.A. NO. 1272/KOL/2009 ASSESSMENT YEAR :2002-03 M/S. OFFSHORE FINVEST LTD. -VS- INCOME-TAX OFFI CER WD-6(3) KOLKATA (PA NO. AAACO 4973 H) (APPELLANT) (RESPONDENT) APPELLANT BY : SRI S. M. SURANA RESPONDENT BY : SRI D. R. SINDHAL O R D E R PER D. K. TYAGI JM : THIS APPEAL PREFERRED BY THE ASSESSEE IS DIRECTED A GAINST THE ORDER OF THE LD. CIT(A) KOLKATA DATED 08.06.2009 FOR ASSESSMENT YEA R 2002-03 IN CONFIRMING THE ADDITION OF RS.1 67 50 000/- AS UNEXPLAINED CASH CR EDIT. 2. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE IS A COMPANY. FOR A.Y. 2002-03 THE A.O. COMPLETED THE ASSESSMENT U/S 143(3) ON TOTAL I NCOME OF RS.1 67 50 000/- WHICH HAS BEEN ASSESSED UNDER THE HEAD OTHER SOURCES. D URING THE F.Y. 2001-02 THE ASSESSEE HAD RECEIVED SHARE APPLICATION MONIES FROM OTHER BO DIES CORPORATE. IN THE COURSE OF ASSESSMENT THE A.O. REQUIRED THE ASSESSEE TO SUBMIT THE NAMES ADDRESSES AND INCOME TAX FILE NOS. OF THE SHARE APPLICANTS AND ALSO TO E XPLAIN THE MODE OF PAYMENT. IN COMPLIANCE THE ASSESSEE FURNISHED BEFORE THE A.O. T HE AFORESAID DETAILS INCLUDING COPIES OF THE SHARE APPLICATIONS. IN THE COURSE OF ASSESSM ENT THE A.O. ISSUED NOTICES U/S 133(6) OF THE I.T.ACT TO ALL THE SHARE APPLICANTS AND IN R ESPONSE THE SHARE APPLICANTS CONFIRMED THE FACT THAT SHARE APPLICATION MONIES WERE PAID BY EACH OF THEM. COPIES OF THEIR RESPECTIVE BANK STATEMENTS WERE ALSO SUBMITTED BEFO RE THE A.O. THE EVIDENCES IN SUPPORT OF THE SAID APPLICANTS BEING ASSESSED TO TA X SEPARATELY WERE ALSO SUBMITTED BEFORE THE A.O. AFTER INVESTIGATION IT WAS FOUND B Y THE AO THAT MOST OF THE SHARE APPLICATION MONEY WAS RECEIVED FROM DIFFERENT COMPA NIES SITUATED AT THE PREMISES 18 R. N. MUKHERJEE ROAD KOLKATA WHICH IS ALSO THE ADD RESS OF THE ASSESSEE COMPANY. THE DETAILS OF SHARE APPLICATION MONEY RECEIVED OF RS.1 67 50 000/- FROM 12 COMPANIES IS AS PER CHART VIDE ANNEXURE NO. 1 OF THIS ORDER (WHICH IS ANNEXURE 2 OF THE ASSESSMENT ORDER). AFTER MAKING VARIOUS ENQUIRIES THE AO MADE AN ADDITION OF RS.1 67 50 000/- BY OBSERVING AS UNDER : 2 10. BRIEFLY THE ISSUE OF SHARE APPLICATION MONEY C AN BE SUMMARIZED AS: 1. MOVEMENT OF CASH THROUGH THE MAZE OF DIFFERENT B ANK A/C. AND ULTIMATELY REACHING THE ASSESSEE CO. IN THE FORM OF SHARE APPLICATION M ONEY. 2. ENQUIRIES IN THE BANK REVEALED A WEB OF TRANSACT IONS AND SEVERAL CHEQUES HAVE BEEN ISSUED ON THE SAME DATE BETWEEN DIFFERENT COS. AND MONEY IS ROTATED THROUGH SEVERAL BANK A/CS. ONLY COVER UP THE TRAIL OF CASH DEPOSITS MADE IN ONE END RESULTING IN CHEQUE PAYMENT TOWARDS SHARE APPLICATION MONEY IN ASSESSEE CO. 3. ASSESSEE CO. FURNISHED CONFIRMATION LETTERS COPI ES OF SHARE APPLICATION FORMS AND CERTAIN OTHER DOCUMENTS OF THE INVESTING PARTIES TO EXPLAIN THE SHARE APPLICATION MONEY. 4. ASSESSEE CO. WAS REQUIRED TO PRODUCE IN PERSON T HE INDIVIDUALS RESPONSIBLE FOR ARRANGING THE SHARE APPLICATION MONEY SO THAT THE DOCUMENTS SUBMITTED ON THEIR BEHALF COULD BE AUTHENTICATED IN THE PRESENCE OF ASSESSING OFFICER AND THEY COULD BE CROSS EXAMINED IN RESPECT THEREOF. 5. DESPITE REPEATED OPPORTUNITIES THE ASSESSEE CO. AS WELL AS THE INVESTING PARTIES FAILED TO PRODUCE ANY PERSON BEFORE THE ASSESSING OFFICER. THE SUBSCRIBING PARTIES ALSO FAILED TO PRODUCE THEIR RESPECTIVE BOOKS OF A/C. 6. UNAUTHENTICATED DOCUMENTS FURNISHED BY THE ASSES SEE CO. IN RESPECT OF SHARE APPLICATION MONEY WERE THEREFORE REJECTED AND THE A MOUNT WAS TREATED AS UNEXPLAINED CASH CREDIT U/S 68 OF THE I. T. ACT 1961. 7. ENQUIRIES SHOW MOVEMENT OF MONEY THROUGH DIFFERE NT BANK A/CS. FROM CASH TO SHARE APPLICATION MONEY IN ASSESSEE CO. CONFIRMING THE N ON GENUINE NATURE OF THE SAME. IN THE LIGHT OF WHAT IS STATED ABOVE THE ENTIRE AM OUNT OF RS.1.67 50 000/- TREATING AS UNEXPLAINED CASH CREDIT IS ADDED WITH TOTAL INCOME . IN APPEAL THE LD. CIT(A) CONFIRMED THIS ACTION OF THE AO. AGGRIEVED BY THE SAID ORDER NOW THE ASSESSEE IS IN APPEAL BEFORE US. 3. AT THE TIME OF HEARING BEFORE US THE LD. COUNSE L FOR THE ASSESSEE CONTENDED THAT THE WHOLE APPROACH OF THE A.O. WAS BIASED AND BASED ON SURMISE CONJECTURE AND SUSPICION. THE COURTS HAVE HELD THAT U/S 68 OF THE I. T. ACT THE ASSESSEE IS ONLY REQUIRED TO PROVE THE SOURCE OF THE CASH CREDIT AND NOT THE SOURCE OF SOURCE OR THE ULTIMATE SOURCE. HE FURTHER SUBMITTED THAT THE FULL BENCH OF THE DEL HI HIGH COURT IN THE CASE OF SOPHIA FINANCE LTD. HAS HELD THAT IN CASE OF RECEIPT OF SH ARE APPLICATION MONEY THE ASSESSEE IS ONLY REQUIRED TO PROVE THE GENUINE EXISTENCE OF THE SHARE APPLICANT SO AS TO PROVE THAT THE SHARES WERE ALLOTTED TO AN EXISTING PERSON AND ONCE THE ASSESSEE PROVES THAT THE SHAREHOLDER EXISTS THEN THE ASSESSEE IS NOT REQUIRE D TO ANYTHING MORE. IN THE PRESENT CASE THE ASSESSEE HAD FILED ALL THE RELEVANT DOCUMENTARY EVIDENCES TO PROVE THE GENUINE EXISTENCE OF THE SHARE APPLICANTS AND ALSO THE EVID ENCES TO PROVE THAT THE AMOUNTS WERE 3 PAID BY EACH OF THEM FROM THEIR RESPECTIVE BANK ACC OUNTS. THE GAUHATI HIGH COURT HAS HELD THAT AS PER PROVISIONS OF S.106 OF THE EVIDENC E ACT ONCE THE ASSESSEE PROVES THAT PAYMENT HAS BEEN RECEIVED FROM BANK ACCOUNT OF THE IDENTIFIABLE PAYER THE GENUINENESS AND THE CREDITWORTHINESS STANDS PROVED. IN THESE CI RCUMSTANCES THE ADDITION RS.1 67 50 000/- IS NOT JUSTIFIED. FURTHER THE EVID ENCES ON RECORD CLEARLY ESTABLISHED THAT EACH OF THE SHARE APPLICANT HAD DISCLOSED ASSETS AN D FUNDS IN THEIR ACCOUNTS SUBSTANTIALLY MORE THAN THE AMOUNT OF SHARE APPLICATION MONEY PAI D TO THE ASSESSEE AND THE SHARE APPLICATION MONEY WAS ONLY A SMALL PART OF THEIR BU SINESS FUNDS/ASSETS. THE ASSESSEE THEREFORE SUBMITS THAT THE ADDITION U/S 68 BEING MA DE ON SURMISE CONJECTURE AND SUSPICION THE SAME DESERVES TO BE DELETED. HE ALSO RELIED ON THE FOLLOWING CASE LAWS : I) CIT VS- LOVELY EXPORTS (P) LTD. (2008) 216 CTR 195 (SC) II) ITAT KOLKATA B BENCH DECISION IN THE CASE OF ITO VS- CHICHINGA FATIKA COLD STORAGE PVT. LTD. ITA NO. 1279/KOL/2008 AY 20 05-06 DATED 20.10.2008 III) ITAT CHENNAI BENCH DECISION IN THE CASE OF MID AS GOLDEN DISTILLERIES (P) LTD. VS- CIT (2009) 124 TTJ 25 IV) ITAT DELHI A BENCH DECISION IN THE CASE OF AQ UATECH INTERNATIONAL LTD. VS- ITO ITA NO. 4650/DEL/2007 AY 1997-98 DATED 29.8.200 8 V) ITAT KOLKATA B BENCH DECISION IN THE CASE OF ITO VS- SHRI DEVINDER SINGH SHANT ITA NO. 208/KOL/2009 AY 2005-06 DATED 17.4.2 009 VI) ITAT KOLKATA C BENCH DECISION IN THE CASE OF ACIT VS- P.H.U ENTERPRISE (P) LTD. BLOCK PERIOD 1996-97 TO 2001-02 AND 1.4.2 001 TO 4.1.2002 DATED 3.3.2009 VII) ITAT KOLKATA A BENCH DECISION IN THE CASE O F NORTH BENGAL FEED INDUSTRIES PVT. LTD. VS- ACIT ITA NO. 1989/K/2008 AND ACIT VS- M/S. NORTH BENGAL FEED INDUSTRIES PVT. LTD. ITA NO. 2085/KOL/2008 AY 2005-06 DATED 15.5.2009 VIII) ITAT KOLKATA B BENCH DECISION IN THE CASE OF ITO VS- M/S. YASHWI SECURITIES PVT. LTD. ITA NO. 1276/K/2008 AY 2005-06 DATED 16.10.2008 AND IX) ITAT KOLKATA C BENCH DECISION IN THE CASE OF ACIT VS- NEW MGM MINERALS (P) LTD. IT(SS)A NO.41/KOL/2008 BLOCK PER IOD 1996-97 TO 2001-02 AND 1.4.2001 TO 4.1.2002 DATED 24.4.2009. 4. ON THE OTHER HAND THE LD. DR HEAVILY RELIED ON THE ORDERS OF THE LOWER AUTHORITIES AND ALSO RELIED ON THE FOLLOWING DECISI ONS : I) CIT VX- KORLAY TRADING CO. LTD. (1998) 232 ITR 820 (CAL) II) CIT VS- PRECISION FINANCE PVT. LTD. (1994) 20 8 ITR 465 (CAL) III) CIT VS- UNITED COMMERCIAL & INDUSTRIAL CO. (P) LTD . (1991) 187 ITR 596 (CAL) IV) CIT VS- R. S. SIBAL (2004) 269 ITR 429 (DEL.) V) TIRTHA RAM GUPTA VS- CIT (2008) 304 ITR 145(P&H) VI) NEMI CHAND KOTHARI VS- CIT (2003) 264 ITR 254(GAU) VII) CIT VS- SOPHIA FINANCE LTD. (1994) 205 ITR 98 (DEL ) VIII) HINDUSTHAN TEA TRADING CO. LTD. VS- CIT (2003) 26 3 ITR 289 (KOL) 4 HE ALSO CONTENDED THAT THE CASE LAWS RELIED ON BY T HE LD. COUNSEL FOR THE ASSESSEE ARE DISTINGUISHABLE ON FACTS AND HENCE ARE NOT APPLIC ABLE TO THE FACTS OF THIS CASE. 5. WE HAVE HEARD BOTH THE SIDED PERUSED THE MATERI AL AVAILABLE ON RECORD AND THE CASE LAWS CITED BY THE PARTIES. WE F IND THAT THE ISSUE OF THE SHARE CAPITAL HAS BEEN CONSIDERED BY THEIR LORDSHIP S OF APEX COURT IN THE CASE OF CIT VS-LOVELY EXPORTS (P) LTD. 216 CTR 195 (SC) WHEREIN THEIR LORDSHIPS HELD AS UNDER: IF THE SHARE APPLICATION MONEY IS RECEIVED BY THE A SSESSEE COMPANY FROM ALLEGED BOGUS SHAREHOLDERS WHOSE NAME S ARE GIVEN TO THE AO THEN THE DEPARTMENT IS FREE TO PROCEED T O REOPEN THEIR INDIVIDUAL ASSESSMENTS IN ACCORDANCE WITH LAW BUT IT CANNOT BE REGARDED AS UNDISCLOSED INCOME OF ASSESSEE COMPANY. WE FURTHER FIND THAT THE HONBLE CHATTISGARH HIGH C OURT IN THE CASE OF ACIT VS- VENKATESHWAR ISPAT PVT. LTD. IN I.T.APPEA L NO. 24 OF 2006 HAS HELD AS UNDER: IN THE MATTERS OF LOVELY EXPORTS (P) LTD. (SUPRA) THE QUESTION BEFORE THE HONBLE SUPREME COURT WAS WHETHER THE AMOUNT OF SHARE MONEY CAN BE REGARDED AS UNDISCLOSED INCOME U NDER SECTION 68 OF THE ACT? ANSWERING THE ABOVE QUESTION THE HO NBLE SUPREME COURT HAS HELD THAT IF THE SHARE APPLICATION MONEY IS RECEIVED BY THE ASSESSEE COMPANY FROM ALLEGED BOGUS SHAREHOLDER S WHOSE NAMES ARE GIVEN TO THE AO THEN THE DEPARTMENT IS F REE TO PROCEED TO REOPEN THEIR INDIVIDUAL ASSESSMENTS IN ACCORDANC E WITH LAW BUT IT CANNOT BE REGARDED AS UNDISCLOSED INCOME OF THE ASSESSEE COMPANY . NOW REVERTING BACK TO THE FACTS OF THE ASSESSEES C ASE WE FIND THAT THE ASSESSEE HAS NOT ONLY GIVEN THE NAME AND ADDRESS OF THE SHAREHOLDERS BUT HAD ALSO FILED RELEVANT DOCUMENTARY EVIDENCE TO PRO VE THE GENUINE EXISTENCE OF THE SHARE APPLICANTS AND ALSO THE EVID ENCE TO PROVE THAT THE AMOUNTS WERE PAID BY EACH OF THEM FROM THEIR RESPEC TIVE BANK ACCOUNTS. ON THE ABOVE FACTS THE DECISION OF THE HONBLE APE X COURT IN THE CASE OF LOVELY EXPORTS (P) LTD. ( SUPRA ) AS WELL AS THE DECISION OF THE HONBLE CHHATISGARH HIGH COURT IN THE CASE OF VENKATESHWAR ISPAT PVT. LTD. (SUPRA) WOULD BE SQUARELY APPLICABLE. WE ALSO FIND THAT THE LD. DR STATED THAT THE FACTS ARE DISTINGUISHABLE AS CITED BY THE LD. COUNSEL IN THIS CASE BUT DID NOT POINT OUT EVEN A SINGLE INSTANCE HOW THESE CASES AR E DISTINGUISHABLE FROM THE FACTS OF THE CASE. RESPECTFULLY FOLLOWING THE AFORESAID DECISION OF THE HONBLE APEX 5 COURT CITED SUPRA WE DELETE THE ADDITION SO MADE B Y THE AO AND SUSTAINED BY THE LD. CIT(A) U/S. 68 OF THE I. T. ACT. THEREFO RE THE APPEAL OF THE ASSESSEE IS ALLOWED. 6. IN THE RESULT THE APPEAL FILED BY THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 9.4.2010 SD/- SD/- (C. D. RAO) ( D. K. TYAGI) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED : 9TH APRIL 2010 COPY FORWARDED TO THE :- 1) M/S. OFFSHORE FINVEST LTD. 18 R. N. MUKHERJEE ROAD KOLKATA-1. 2) ITO WARD-6(3) KOLKATA. 3) CIT(A) KOLKATA 4) CIT KOLKATA. 5) D. R. ITAT KOLKATA. (TRUE COPY) BY ORDER DEPUTY REGISTRAR JD. (SR. P.S.) I.T.A.T. KOLKATA