M/s Coastal Projects (P) Ltd, Bhubaneswar v. ACIT, Bhubaneswar

ITA 181/CTK/2009 | 2005-2006
Pronouncement Date: 27-07-2010

Appeal Details

RSA Number 18122114 RSA 2009
Assessee PAN AABCC1907E
Bench Cuttack
Appeal Number ITA 181/CTK/2009
Duration Of Justice 1 year(s) 2 month(s) 20 day(s)
Appellant M/s Coastal Projects (P) Ltd, Bhubaneswar
Respondent ACIT, Bhubaneswar
Appeal Type Income Tax Appeal
Pronouncement Date 27-07-2010
Appeal Filed By Assessee
Bench Allotted DB
Tribunal Order Date 27-07-2010
Date Of Final Hearing 04-02-2010
Next Hearing Date 04-02-2010
Assessment Year 2005-2006
Appeal Filed On 07-05-2009
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL CUTTACK BENCH CUTTACK BEFORE HONBLE SHRI D.K.TYAGI JUDICIAL MEMBER. /AND HONBLE SHRI K.K.GUPTA ACCOUNTANT MEMBER . / I.TA.NO . 181/CTK/2009 / ASSESSMENT YEAR 2005 - 06 M/S.COASTAL PROJECTS (P) LTD. 237 BAPUJI NAGAR BHUBANESWAR 751 009 AABCC 1907E - - - VERSUS - . ACIT CIRCLE 1(1) BHUBANESWAR / A PPELLANT RESPONDENT FOR THE APPELLANT : SHRI SUNIL MISHRA AR FOR THE RESPONDENT : SHRI A.K.GAUTAM DR / ORDER SHRI K.K.GUPTA ACCOUNTANT MEMBE R . THE ASSESSEE IS IN APPEAL RAISING THE FOLLOWING GROUNDS. 1. THAT THE ORDER OF THE LEARNED CIT (APPEALS) BY NOT ALLOWING THE APPEALS OF THE APPELLANT FULLY IS HIGHLY ILLEGAL ARBITRARY CONTRARY TO THE FACTS AND THE NATURE OF EVIDENCE ON RECORD AND THEREFORE IS LIABLE TO BE QUASHED AND/OR ANNULLED. 2. THAT THE LEARNED CIT (APPEALS) HAS ERRED IN LAW AND IN FACT BY NOT DELETING THE ADDITION OF RS.20 00 000/ - MADE ON ESTIMATE BASIS OUT OF STAFF WELFARE AND TRAVELLING EXPENSES. 3. THAT THE LEARNED CIT (APPEALS) HAS ERRED IN LAW AND IN FACTS BY NOT DELETING THE ADDITION OF RS.61 50 00/ - MADE UNDER SECTION 68 OF THE I.T. ACT AS UNEXPLAINED SHARE APPLICATION MONEY. 4. THAT THE LEARNED CIT (APPEALS) DID NOT CONSIDER THE ENTIRE FACTS SUBMITTED IN THE WRITTE N SUBMISSION OF THE APPELLANT AND EXPLANATION GIVEN DURING THE COURSE OF HEARING. 5. THAT THE APPELLANT CRAVES LEAVE TO ADD OR AMEND ANY GROUNDS OF APPEAL AT THE TIME OF HEARING. 2. THE BRIEF FACTS RELATING TO THE ISSUES IN DISPUTE ARE THAT THE ASSESSEE COMPANY EXECUTES CIVIL CONTRACT FILED ITS RETURN DECLARING INCOME AT RS.3 13 14 736 WHICH WAS CONSIDERED BY THE ASSESSING OFFICER UNDER THE PROVISIONS OF SECTION 143(3).HE PROCEEDED TO DISALLOW EXPENSES CLAIMED UNDER THE PROVISIONS OF SECTION 40(A)(IA) ON I.TA.NO . 181/CTK/2009 2 ACCOUNT OF TDS NOT MADE IN ACCORDANCE WITH SECTION 194. HE ALSO DISALLOWED EXPENSES CLAIMED UNDER THE HEADS STAFF WELFARE EXPENSES TRAVELLING EXPENSES AND MESS EXPENSES TOTALING ABOUT OF RS. 1 .27 CRORES ON ESTIMATE AT RS.20 LAKHS. HE ALSO VERIFIED THE ENHANCEMENT IN SHARE CAPITAL WHEN HE PROPOSED THE ENHANCED RS.2 87 50 000 SHARE CAPITAL INCLUDED A SUM OF RS. 61 50 000 INVESTED BY SHARE HOLDERS WHO DID NOT HAVE ANY CREDITWORTHINESS FIT FOR ADDITION U/S.68 OF THE INCOME - TAX ACT 1961 . 3. AGGRIEVED TH E ASSESSEE FILED APPEAL BEFORE THE FIRST APPELLATE AUTHORITY WHO DELETED THE DISALLOWANCE U/S.40(A)(IA) AND AFTER OBSERVING THE DISALLOWANCE OF EXPENSES ON ESTIMATE AMOUNTING TO RS.20 LAKHS HELD THE SAME AS REASONABLE BY RELYING ON THE DECISION OF HONBLE RAJSTHAN HIGH COURT IN THE CASE OF CIT V. NARENDRA MOHAN PA LIWAL [2004] 271 ITR 347 (RAJ) OBSERVING THAT WHEN THE BILLS AND VOUCHERS ARE NOT PRODUCED BEFORE THE ASSESSING OFFICER THE ONLY COURSE LEFT TO THE ASSESSING OFFICER IS TO ESTIMATE A DISALLOWANCE WHICH THE LEARNED CIT(A) CONSIDERED @ 2.81% OF THE TOTAL EXPENSES CLAIMED AMOUNTING TO RS.7.09 CRORES IN THE PROFIT & LOSS ACCOUNT . THE LEARNED CIT(A) ALSO CONFIRMED THE ADDITION U/S.68 AMOUNTING TO RS.61 50 000 BY NOTING THAT IN CATENA OF JUDGMENTS THE BURDEN O F THE ASSESSEE HA D NOT BEEN DISCHARGED TO EXPLAIN THE CREDITWORTHINESS OF THE SHARE HOLDERS TO BE HELD AGAINST THE ASSESSEE . 4. THE LEARNED COUNSEL OF THE ASSESSEE INITIATING HIS ARGUMENT SUBMITTED THAT THE LEARNED CIT (A) HAS CONFIRMED THE ADDITIO N OF RS.20 00 000 ON ESTIMATE BASIS REGARDING DISALLOWANCE OF EXPENDITURE ON STAFF WELFARE AND TRAVELLING EXPENSES WITHOUT HAVING ANY COGENT REASONS. THE LEARNED ASSESSING OFFICER DURING THE COURSE OF ASSESSMENT HA D DISPUTED THE EXPENDITURE OF RS. 2 05 98 603 ON ACCOUNT OF NON SUBMISSION OF BILLS AND VOUCHERS. SUBSEQUENTLY THE LEARNED ASSESSING OFFICER HAS RESTRICTED THE DISPUTE TO RS. 1 27 75 438 IGNORING THE MESS EXPENSES OF RS. 78 23 165/ - . FURTHER OUT OF RS. 19 25 350 STAFF WELFARE EXPENSES THE LEARNE D ASSESSING OFFICER HAS FOUND OUT DISCREPANCY OF RS.11 500 APPROXIMATELY WHICH IS 0.5% OF THE TOTAL EXPENDITURE CLAIMED UNDER THIS HEAD. THE LEARNED ASSESSING OFFICER WITHOUT CONSIDERING THE EXPENSES UNDER THE HEAD OF TRAVELLING AND CONVEYANCE OF AMOUNTIN G TO RS. 1 08 15 000 HAS ASKED FOR THE DETAIL BREAK UP ALONG WITH VOUCHERS I.TA.NO . 181/CTK/2009 3 WHICH COULD NOT BE PRODUCED DUE TO PAUCITY OF TIME. THEREAFTER THE LEARNED ASSESSING OFFICER HAS ESTIMATED THE DISALLOWANCE OF RS. 20 00 000 ON A WRONG PREMISES THAT THE APPELLANT HAS SHOWN LOWER NET PROFIT WHICH IS CONTRARY TO THE FACTS ON RECORD AS THE APPELLANT HAS DISCLOSED THE TOTAL INCOME EXCLUSIVE OF DEPRECIATION RS. 13 14 736 IN THE INITIAL PERIOD OF COMMENCEMENT. THE LEARNED ASSESSING OFFICER HAS NOT CITED ANY COMPARABLE CA SE TO JUSTIFY THAT THE APPELLANT HAS DISCLOSED LOWER PROFIT. THE LEARNED CIT (A) HAS NOT CONSIDERED THE ABOVE ASPECT BUT OBSERVED THAT THE EXPENDITURE DISALLOWED IS 2.81% OF THE TOTAL EXPENSES IS QUITE REASONABLE AND IS HEREBY CONFIRMED. ON THIS ACCOUNT TH E LEARNED CIT (A) HAS COMMITTED A SERIOUS ERROR BY TAKING INTO FIGURE OF TOTAL EXPENDITURE TO ABOUT RS.7 CRORES INSTEAD OF DISPUTED AMOUNT OF RS. 1 27 75 438 ON WHICH THE ESTIMATION OF DISALLOWANCE SHOULD HAVE BEEN RESTRICTED TO RS. 3 75 000 IF AT ALL THE ESTIMATION IS TO BE MADE REASONABLE AT THE RATE OF 2.81%. IN ANY CASE THE LEARNED CIT (A) HAS NOT CONSIDERED THAT THE APPELLANT HAS DISCLOSED SUBSTANTIAL INCOME WHICH IS IGNORED BY THE LEARNED ASSESSING OFFICER AND FOR THAT MATTER THE ENTIRE ADDITION UNDER THE IMPUGNED HEAD IS LIABLE TO BE DELETED BY THE HONBLE INCOME - TAX APPELLATE TRIBUNAL. ALTERNATIVELY THE ADDITION SHOULD HAVE BEEN RESTRICTED TO 2.81% ON THE DISPUTED AMOUNT OF RS. 1 27 75 438. THE LEARNED ASSESSING OFFICER HAS MADE AN ADDITION U/S 68 OF THE ACT REGARDING THE SHARE APPLICATION MONEY LYING WITH THE APPELLANT FOR THE PURPOSE OF PURCHASING SHARES FROM THE COMPANY EVEN THOUGH THE APPELLANT HAS GIVEN ENOUGH EVIDENCE REGARDING THE ACQUISITION OF THE SHARES BY THE PERSON AS EVIDENT FROM THE ASSE SSMENT ORDER VIS - - VIS APPELLATE ORDER AND NOWHERE THE IDENTITY GENUINENESS AND CREDITWORTHINESS ON ONUS DISCHARGED BY THE ASSESSEE HAS BEEN DISPROVED BY THE LEARNED ASSESSING OFFICER DURING THE COURSE OF ASSESSMENT. IN ANY CASE THE ADDITION ON ACCOUNT OF BOGUS SHARE HOLDER IS TO BE MADE IN THE HANDS OF THE SHARE HOLDERS AND NOT IN THE HANDS OF THE APPELLANT AS HELD BY THE HONBLE DELHI HIGH COURT IN THE CASE OF HONBLE COMMISSIONER OF INCOME - TAX V STELLER INVESTMENT LIMITED [192 ITR 287 (DELHI)] AND HAS BEEN CONFIRMED BY THE HONBLE SUPREME COURT AS REPORTED IN [251 ITR 263 (SC)]. IN VIEW OF THE LEGAL PROVISIONS THE ADDITION MADE IN THE HANDS OF THE APPELLANT U/S 68 OF THE ACT IS LIABLE TO BE DELETED. I.TA.NO . 181/CTK/2009 4 5. THE LEARNED DR SUPPORTED THE ORDER OF THE LEARNED CIT(A) FOR HIS PART SUBMISSIONS IN SO FAR AS THE VARIOUS CASE LAWS CITED BY THE LEARNED COUNSEL WERE ALSO AVAILABLE TO THE LEARNED CIT(A) TO BE APPLIED ON THE FACTS AS BROUGHT ON RECORD. 6. WE HAVE HEARD THE RIVAL CONTENTION AND PERUSED THE MATERIAL AVAILA BLE ON RECORD. ON OUR CAREFUL CONSIDERATION OF THE FACTS AND CIRCUMSTANCE WE ARE INCLINED TO HOLD THAT THE LEARNED CIT(A) ERRONEOUSLY CONSIDERED THE CONFIRMATION OF DISALLOWANCE FROM THE EXPENSES CLAIMED UNDER THE THREE HEADS TOTA L LING TO RS.1.27 CRORES A S AGAINST THE TOTAL EXPENSES CLAIMED BY THE ASSESSEE IN THE P & L ACCOUNT AT RS.7.07 CRORES. THIS LEAD TO HIS FIND ING THAT 2.81% DISALLOWANCE WAS REASONABLE REFLECTING ON THE DISALLOWANCE OF RS.20 LAKHS MADE BY THE ASSESSING OFFICER HAD TO BE LIMITED ON RS .1.27 CROES ONLY. AS RIGHTLY POINTED OUT BY THE LEARNED COUNSEL BEFORE US AND ON THE BASIS OF SUBMISSION S WE RESTRICT THE DISALLOWANCE ON ACCOUNT OF EXPENSES REMAINED UNVERIFIED BY THE ASSESSING OFFICER TOTALING RS.1.27 CRORES TO 10% THEREOF WHICH DIFFER ENCE FROM RS.20 LAKHS IS DIRECTED TO BE GIVEN RELIEF TO THE ASSESSEE. T HIS GROUND IS PARTLY ALLOWED. 7. ON THE SECOND ISSUE WE HOWEVER FIND FORCE IN THE CONTENTION OF THE LEARNED COUNSEL IN SO FAR AS ONCE THE ASSESSING OFFICER HAS BEEN PROVIDED WITH THE N AMES OF THE SHARE HOLDERS IT WAS THE ASSESSING OFFICER WHO WAS TO PROCEED TO FIND THEIR CREDITWORTHINESS TO REOPEN THEIR INDIVIDUAL ASSESSMENT IN ACCORDANCE WITH LAW. THE LEARNED DR HAS PERUSED THE LIST OF SHARE HOLDERS WHICH IN HIS VIEW BEING AGRICULTURIS TS WERE HOLDING CASH TO BE MADE INVESTMENTS FOR APPLYING FOR SHARES OF THE ASSESSEE COMPANY. THEREFORE WE FIND FORCE IN THE SUBMISSION OF THE LEARNED COUNSEL IN VIEW OF THE DECISION OF HONBLE APEX COURT IN THE CASE OF CIT V. LOVELY EXPORTS (P) LTD . DT.1 1.1.2008 (UNREPORTED) COPY OF WHICH IS PLACED ON RECORD AND CIT V. STELLER INVESTMENT LTD. [2001] 251 ITR 263 (SC) HOLDING THAT IF IT BE ASSUMED THAT THE SUBSCRIBERS TO THE INCREASED SHARE CAPITAL WERE NOT GENUINE NEVERTHELESS UNDER NO CIRCUMSTANCES CA N THE AMOUNT OF SHARE CAPITAL BE REGARDED AS UNDISCLOSED INCOME OF THE ASSESSEE UNDER THE PROVISIONS OF SECTION 68. THERE MAY BE SOME BOGUS SHARES HOLDERS IN WHOSE NAMES SHARE HAD BEEN ISSUED AND THE MONEY MAY HAVE BEEN PROVIDED BY SOME OTHER PERSONS WHICH THE DEPARTMENT IS FREE TO RECONSIDER BY VERIFYING THEIR ASSESSMENT RECORDS. THE LEARNED COUNSEL BEFORE US HAS SUBMITTED THAT I.TA.NO . 181/CTK/2009 5 THE THREE INGREDIENTS OF THE SHARE HOLDERS IDENTITY GENUINENESS OF THE TRANSACTIONS AND CREDITWORTHINESS WERE PROVIDED TO THE AU THORITIES BELOW AND THEREFORE ONUS SHIFTED ON THE REVENUE TO REOPEN THEIR INDIVIDUAL CASES INSTEAD OF MAKING ADDITION IN THE HANDS OF THE ASSESSEE U/S.68. IN THIS VIEW OF THE MATTER THIS GROUND FILED BY THE ASSESSEE IS BOUND BE ALLOWED ISSUE BEING COVER ED BY THE DECISIONS OF HONBLE APEX COURT. THEREFORE THE IMPUGNED ADDITION OF RS.61 50 000 MADE U/S.68 IS DELETED. 8. IN THE RESULT THE APPEAL OF THE ASSESSEE IS CONSIDERED PARTLY ALLOWED. THIS ORDER IS PRONOUNCED IN OPEN COURT ON DT. 27. 07 .2010 SD/ - SD/ - ( ) D.K.TYAGI JUDICIAL MEMBER (K.K.GUPTA) ACCOUNTANT MEMBER. DATE: 27.07.2010 - COPY OF THE ORDER FORWARDED TO : / THE APPELLANT : M/S.COASTAL PROJECTS (P) LTD. 237 BAPUJI NAGAR BHUBANESWAR 751 009 / THE RESPONDENT : ACIT CIRCLE 1(1) BHUBANESWAR THE CIT THE CIT(A) DR CUTTACK BENCH GUARD FILE TRUE COPY BY ORDER [ ] SENIOR PRIVATE SECRETARY ( /) H.K.PADHEE SENIOR.PRIVATE SECRETARY. I.TA.NO . 181/CTK/2009 6