DCIT, CHENNAI v. M/s. Rajgharana Housing Ltd., CHENNAI

IN THE INCOME-TAX APPELLATE TRIBUNAL CHENNAI C BENCH CHENNAI. BEFORE SHRI.U.B.S. BEDI J.M. & SHRI. ABRAHAM P. GEORGE A.M. I.T.A. NO.2049/MDS/2010 ASSESSMENT YEAR: 2006-07 THE DEPUTY COMMISSIONER OF INCOME TAX COMPANY CIRCLE V(3) FOURTH FLOOR MAIN BUILDING 121 N.H. ROAD NUNGAMBAKKAM CHENNAI 600 034. VS. M/S. RAJGHARANA HOUSING LTD. 21-23 THYAGARAYA ROAD CHENNAI 600 017. [PAN:AAACJ2674E] (APPELLANT) (RESPONDENT) REVENUE BY : SHRI TAPAS KUMAR DUTTA ASSESSEE BY : NONE ORDER PER U.B.S. BEDI J.M . THIS APPEAL OF THE DEPARTM ENT IS DIRECTED AGAINST T HE ORDER PASSED BY THE LD. CIT(A) V CHENNAI DATED 09.09.2010 RELEVANT TO THE ASSESSMENT YEAR 2006-07 WHEREBY THE DEPARTMENT HAS CHAL LENGED DELETION OF ADDITION OF ` .2 02 92 000/- (APPEARS TO HAVE BEEN WR ONGLY MENTIONED AS ` .4 02 92 000/- IN THE GROUNDS OF APPEAL) UNDER SECTION 68 ST ATED TO BE REPRESENTING S HARE APPLICATION MONEY RECEIVED BY THE ASSESSEE. 2. FACTS IN BRIEF ARE THAT THE ASSESSEE HAS FILED ITS RETURN OF INCOME FOR THE ASSESSMENT YEAR UNDER APPEAL ON 23/10/2006 ADMITTI NG A TOTAL INCOME OF ` . 2 77 610/- WHICH WAS REVISED BY HIM ON 28/11/06 DECLARING A TOTAL INCOME OF ` . NIL. THE ASSESSMENT WAS COMPLETED U/S 143 (3) ACT MAKING ABOVE NARRATED ADDITION ON ACCOUNT OF SHARE APPLICATIO N MONEY TO THE TUNE OF ` .2 02 92 000/- OUT OF THE TOTAL SHARE APPLICATION MONEY REPORTED TO HAVE BEEN RECEIVED DURING THE YEAR TO THE TUNE OF ` . 2 07 92 000/- AND ADOPTING ` .17 358/- AS RETURNED INCOME. THE TOTAL SHARE I.T.A. NO.2049/MDS/10 2 APPLICATION MONEY IS RECEIVED IN 97 SHARE APPLICATIONS. OUT OF THAT SEVEN PERSONS HAVE APPEARED COVERING NINE APPLICATIONS A ND THREE PERSONS HAVE RESPONDED TOTALLY COVERING TWELVE SHARE APPLICATIONS. IN THREE CASES THERE WAS AN ERROR IN AS MUCH AS THE FLAT BOOKING AMOUNT WAS CREDITED TO SHARE APP LICATION MONEY WHICH WAS CORRECTED IN SUBSEQUENT YEAR. 3. THE ASSESSEE TOOK UP THE MATTER IN APPEAL AND STATED BEF ORE THE LD. CIT(A) THAT FURTHERANCE TO THE GR OUNDS OF APPEAL IT IS SUBMITT ED BEFORE THE FIRST APPELLATE AUTHORITY THAT ONLY ONE ISSUE IS INVOLVED IN THE APPEAL AND THAT IS ADDITION OF ENTIRE SHARE APPLICATION MONEY TO THE TUNE OF ` .2 02 92 000/-. THIS INCLUDES CERTAIN APPLICANTS WHOSE APPLICATIONS HAVE BEEN REJECTED BY THE BOARD AND THE MONEY IS REFUNDED BY CHEQUES. THIS ALSO INCLUDES THREE CHEQUES RECEIVED BY THE ASSESSEE TOWARDS BOOKING OF FLAT IN OUR PROJEC T WHICH WAS REFUNDED BY CHEQUE BECAUSE THE BOOKING DID NOT MATERIALIZE. CONFIRMATION LE TTER FROM THESE PARTIES ARE ENCLOSED HERE WITH. THESE RECEIPTS ARE ADVANCE FOR SA LES AND THEREFORE NOT COVERED BY THE PROVISIONS OF SEC. 68. OU R AUTHORIZED REPRESENTATIVE WAS INFORMED ORALLY BY THE AO THAT ALMOST ALL THE SUMMONS SENT BY HI M HAVE COME BACK UN SERVED WITHOUT GIVING THE DETAILS OF REASONS FOR NO SERVICE AND T HE PERSONS FROM WHOM IT HAS COME BACK. WE HAVE APPROACHED THE AO VIDE OUR LE TTER DATED 11/12/08 AND REQUESTED HIM TO PROVIDE THE DETAILS SO THAT WE CAN HELP THE DEPT AND GET THOSE APPLICANTS TO THE AO (A COPY OF OUR LETTER IS ENCLOSED HEREWITH FO R YOUR RECORD AND REFERENCE) BUT INSTEAD OF GIVING ANY DETAILS THE AO HAS PASSED THE ASSESSMENT ORDER ON 15/12/08 ITSELF ADDING THE SHARE APPLICATION MONEY U/S 68 AS UNEXPLAINED CASH CREDIT. IT WAS SUBMITTED BEFORE THE LD. CI T(A) THAT THE ASSESSMENT ORDER NARRATES THE DATE OF I.T.A. NO.2049/MDS/10 3 RETURN FILLING AS 06/12/06 BUT WE HAVE FILED ORIGINAL RETURN OF INCOME ON 23/10/2006 VIDE ACKNOWLEDGEMENT NO: 90021192 WHICH WA S REVISED ON 28/11/06 VIDE ACK. NO: 90179407. THIS IS NOT AFFECTI NG US MONETARILY HENCE IT IS NOT CONTESTED. COPIES OF BOTH THESE ACKNOWLEDGEMENTS ARE ENCLOS ED FOR YOUR REFERENCE AND RECORD. 3.1 THE AO HAS NOT ACCEPTED AS GENUI NE THE AMOUNT PAID BY THE APPLICANTS WHO HAVE APPEARED BEFORE HIM. THE OR DER OF THE AO IS GENERALLY AGAINST THE PRINCIPALS OF NATURAL JUSTICE AND SPECIFICALLY AGAINST TH E PRINCIPALS LAID DOWN BY THE HONBLE SUPREME COURT IN CIT VS. STELLAR INVES TMENTS LTD. (2001) 251 LTR 263 (SC) WHICH IS FOLLOWED BY THE HONBIE SUPREM E COURT IN THE CASE OF CIT VS. LOVELY EXPORTS PVT.LTD. (2008) 216 CTR (SC) 195 AND THE SAME IS FOLLOWED BY THE JURISDICTIONAL HONBLE HIGH COURT ALSO IN THE CASE OF CIT VS . ELECTRO POLYCHEM LTD. (2007) 294 ITR 661 (MAD). IN ALL THESE CASES THE COURTS HAVE CLEARLY GIVEN THE FINDING THAT EVEN IF THE SUBSCRIBERS TO THE SHARES ARE SUSPECTED TO BE NON GENUINE THE AMOUNT OF SUBSCRIPTION CANNOT BE ADDED TO THE INCOME OF THE COMPANY THE REVENUE SHOULD REOPEN THE PROCEEDINGS IN T HE CASES OF THE SHARE APPLICANTS AND TAKE NECESSARY ACTION. IN THE PRESENT CASE WE HAVE ALREADY FILED FOLLOWING DETAILS: 1. LIST OF APPLICANTS IT IS SUBM ITTED ONCE AGAIN FOR YOUR REFERENCE. 2. PAN OF THE APPLICANTS- IT IS SUBM ITTED ONCE AGAIN FOR YOUR REFERENCE. 3. ADDRESS OF ALL THE APPLICANTS - IT IS SUBMITTED ONCE AGAIN FOR YOUR REFERENCE 4. THE ENTIRE SHARE APPLIC ATION MONEY IS RECD. BY CHEQUES AND ALL CHEQUES ARE ISSUED FROM THE BANK ACCOUNT OF THE RESPECTIVE APP LICANT. CHEQUE NO: AND BANK NAMES DETAILS ARE ONCE AGAIN SUBMITTED FOR YOUR REFERENCE. I.T.A. NO.2049/MDS/10 4 5. THE ENTIRE SHARE APPLIC ATION MONEY IS COVERED BY PROPER SHARE APPLICATION FORMS. COPIES EACH OF THESE APPLICATIONS ARE ENCLOSED. 6. ALL THE APPLICANTS ARE ASSESSED TO INCO ME TAX AND HAVE FILED THEIR RETURN OF INCOME FOR THE RELEVANT ASSESSMENT YEAR ; A COPY OF THE INCOME TAX RETURN ACKNOWLEDGEMENT IS ENCLO SED IN ALL THE CASES. 7. ALL THE TRANSACTIONS INVOLVED HERE ARE GENUINE AND BONAFIDE. THE COMPANY HAS ALLOTTED SHARES AND TRANSFERRED A SUM OF ` . 1 25 06 000/- TO SHARE CAPITAL. THE REMAINING AMOUNT OF ` . 82 86 000/- IS DEALT IN THE SUBSEQUENT YEAR. IT WAS PLEADED BEFORE THE LD. CIT(A) TO DEL ETE THE ADDITION MADE BY THE ASSESSING OFFICER AMOUNTING TO ` 2 02 92 000/- AND DIRECT HIM TO ADOPT THE CORRECT FIGURE OF RETURNED INCOME OR TO PASS SUCH OTHER ORDER AS YOU MAY FEEL FIT TO RENDER JUSTICE IN THE CIRCUMSTANCES. 4. THE LD. CIT(A) WHILE NOTING ABOUT THE FINDINGS OF THE ASSESSING OFFICER IN PARA 4 HAS CONCLUDED TO DELETE THE IMPUGN ED ADDITION AS PER PARA 5 6 AND 7 OF THE ORDER AS UNDER: 5. I HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSIONS AND VERIFIED THE RELEVANT RECORDS. COPIES OF THE DETAILS/ EVIDENCES FURNISHED BY THE APPELLANT BEFORE THE AO ARE SUBMITTED BEFORE ME. IT IS A MATTER OF FACT THAT THE AO DID NOT AVAIL THE OFFER GIVEN BY TH APPEL LANT VIDE ITS LETTE R DATED 11/12/08 DURING THE COURSE OF ASSESSMENT PROCEEDINGS TO PRODUCE ALL THE SHAR E APPLICANTS ON GETTING THE DETAILS OF RETURNED SUMMONS. 6. ADMITTEDLY THE APPELLANT HAS FILED FOLLOWING DETA ILS BEFORE THE AO DURING THE COURSE OF ASSESSMENT PROCEEDINGS. IN MY OPINION THE APPELLANT HAS DISCHARGED THE PRIMA FACI E ONUS CASTED ON IT REGARDI NG THE GENUINENESS OF THE TRANSACTION AND CREDIT WORTHINE SS OF THE SHARE APPLICANTS: (1) THE NAMES OF PERSONS WHO HAVE PAID SHARE APPLICATION MONEY ALONG WITH AMOUNT. (2) THE ADDRESSES OF ALL THE APPLICANTS. (3) PAN OF ALL THE APPLICANTS. I.T.A. NO.2049/MDS/10 5 (4) BANK ACCOUNT DETAILS OF A LL APPLICANTS ALONG WITH CHEQUE NO; (5) SHARE APPLICATIONS DULY SIGNED BY THE RESPECTIVE APPLICANT. (6) EVIDENCE TO SHOW THAT ALL APPLIC ANTS ARE ASSESSED TO INCOME TAX. 7. THE CASE IS ALSO SQUARELY COVER ED BY JUDGEMENTS OF THE HONBIE APEX COURT AND THE JURISDICTIONAL HIGH COURT T HE MADRAS HIGH COURT IN THE CASES OF: 1. CIT VS. STELLAR INVESTMENTS LTD. (2001) 251 ITR 263 (SC) 2. CIT VS. LOVELY EXPORTS PVT. LTD. (2008) 216 CTR (SC) 195 3. CIT VS. ELECTRO POLYCHEM LTD. (2007) 294 ITR 661 (MAD). 4. SWAGAT SYNTHETICS (P) LTD VS IT O (ITAT)(JODHP (JR) (2002) 77 TTJ 987 THE DECISION IN SWAGAT SYNTHETICS CASE IS EXTRACTED AS FOLLOWS. INCOME-CASH CREDIT SHARE APPLIC ATION MONEY-ASSESSEE-COMPANY NOT ONLY DISCLOSED THE IDENTITIES OF THE SHAR E APPLICANTS BUT ALSO PROVED THAT THE MONEY WAS INVESTED BY THEM- ONUS SHIFTED TO THE DEPARTMENT HAS NOT DISCHARGED THE ONUS CAST UPON IT AFTER INITIAL ONUS WAS DISCHARGED BY THE ASSESSEE BY FILING NECESSARY PARTICULAR S - ADDITION LIABLE TO BE DELETED HOWEVER THE AO IS FREE TO MAKE ENQUIRY AND TAKE NECESSARY ACTION IN THE HANDS OF INDIVIDUAL SHARE APPLICANTS. HELD THE APPELLANT HAS QUOTED GIR NOS./P AN WHEREVER ALLOTTED BY THE DEPARTMENT. ALL THE PERSONS ARE BEING ASSESSED TO TAX. THE PAYMENTS HAD BEEN RECEIVED THROUGH CHEQUES AND T HESE CHEQUES HAD ALREADY BEEN CREDITED IN BANK ACCOUNT OF THE APPELLANT. IN THE FIRS T THREE CASES CASH BOOKS HAVE ALSO BEEN PRODUCED. THEREFORE NO ADDITION CAN BE MADE ON ACCOUNT OF SHARE APPLICATION MONEY AS THE ASSESSEE HAS ESTABLISHED THE IDENTITY OF THE SHARE APPLICANTS AND ALSO PROVED THAT THE MONEY WAS INVESTED BY THEM. EVEN IF IT IS CONCEDED THAT THE PROVISIONS OF SECTION 68 ARE APPLICABLE IN THIS CASE EVEN THEN THE APPELLANT HAD DISCHARGED THE INITIAL ONUS CAST UPON IT. THE DEPARTMENT HAS NOT DISCHARGED THE ON US CAST UPON IT AFTER INITIAL ONUS HAVING BEEN DISCHARGED BY THE ASSESSEE BY FILING NECESSARY PARTICULARS. THE AO SHOULD HAVE RECORDED T HE STATEMENTS OF ALL THE PERSONS AND SHOULD HAVE GIVEN A SPECIFIC FINDING TO THE EFFECT THAT THEY HAD NO MEANS TO MA DEPOSIT OR THE MONEY BELONGED TO THE A PPELLANT IN THE ABSENCE OF SUCH A FINDING BY THE AO THE ADDITION MADE BY THE AO AND SU STAINED BY THE CIT(A) ON ACCOUNT OF UNEXPLAINED SHARE APP LICATION MONEY IS DELETED. HO WEVER THE AO IS FREE TO MAKE ENQUIRY AND TAKE NECESSARY ACTION IN THE HANDS OF THE SHARE APPLICANTS.- CIT VS SOPHIA FINANCE LTD.(1993) II3CTR (DEL)(FB)472:(1993) 205 ITR 98 (DOL)(FB) CLTVS. STELLER IN VESTMENT LTD.(2000) 164 CTR (SC) 287: (2001) 251 ITR 263 (SC) CIT VS. OR ISSA CRPN. LTD. (1986) 52 CTR (SC) 138: (1986) 159 ITR 78 (SC) AND ADDI. CIT VS BAHR I BOROS. (P) LTD. (1 984)42 CTR (PAT) 66 (1985) 154 ITR 244 (PAT) RELIED ON. I.T.A. NO.2049/MDS/10 6 RESPECTFULLY FOLLOWING THE LAW AS EX PLAINED BY THE APEX COURT AND THE JURISDICTIONAL HIGH COURT THE APPEAL IS ALLOWED AND AO IS DIRECTED TO DELETE THE ADDITION OF `. 2 02 92 000/- MADE BY HIM ON ACCOUNT OF SHARE APPLICATION MONEY U/S 68 OF IT ACT. 5. AGGRIEVED BY THIS ORDER THE DEPA RTMENT HAS CAME IN APPEAL AND THE LD. DR WHILE RELYING UPON THE GROUNDS RAISED HAS FURTHER CONTENDED THAT OUT OF 97 SHARE APPLICANTS SUMMONS WERE S ENT TO THEM AND SUMMONS WITH RESPECT TO 90 PERSONS CAME BACK UNSERVED AND 7 PERSONS WHO CAME FORWARD ON THE SUMMONS ISSUED BY THE ASSESSING OFFICER HAVE NOT BEEN ABLE TO PR OVE THEIR CREDITWORTHINESS GENUNIETY ETC. THEREFORE THE ADDITION WAS CALLED FOR HAS RIGHTLY BEEN MADE BY THE ASSESSING OFFICER AND THE LD. CIT(A) IS NOT JUSTIFI ED IN DELETING THE IM PUGNED ADDITION AND IN SOME OF THE CASES VARIOUS CONFIRMATION LETTERS WERE ENCLOSED WITH THE SUBMISSIONS BEFORE THE LD. CIT(A) AND NEITHER ANY RE MAND REPORT HAS BEEN OBTAINED NOR THE ASSESSING OFFICER HAS BEEN ASSO CIATED WITH THE APPEAL PROC EEDINGS THEREFORE THE ACTION OF THE LD. CIT(A) IS NOT JUSTIFIED AN D THE ORDER OF THE LD . CIT(A) SHOULD BE SET ASIDE AND THAT OF THE ASSESSI NG OFFICER SHOULD BE RESTORED. 6. IN RESPONSE TO SERVICE OF NOTICE THE ASSESSEE SENT ONE APPLICATION STATING THEREIN THAT ITS AUTHOR IZED REPRESENTATIVE SHRI F.C. JAIN WILL BE OUT OF STATION AS PER HIS PRE-SCHEDULED PROGRAMME ON THE DAT E OF HEARING AND THE BENCH CLERK HAS REPORTED THAT AS PER RECORD THE ASSESSEE HAS NOT EXECUTED ANY POWER OF ATTORNEY IN FAVOUR OF ANY CHARTERED ACCOUNTANT OR ADVOCATE T HEREFORE THE PLEA OF THE ASSESSEE IS OF NO CONSEQUENCE WHICH CAME TO BE REJECTED AND WE PROCEEDED TO DECIDE THE APPEAL OF THE DEPAR TMENT AFTER CONSIDERING THE ARGUMENTS OF LD. DR AND MATERIAL ON RECORD. I.T.A. NO.2049/MDS/10 7 7. WE HAVE CONSIDERED THE SUBMISSIONS OF LD. DR AND IN THE LIGHT OF MATERIAL AVAILABLE ON RECORD AND PRECEDENTS AS RELI ED UPON BY THE LD. DR AND FIND THAT IN ORDER TO VERIFY THE IDENTITY GENUINENESS OF THE TRANSACTION AND CREDITWORTHINESS SUMMONS UNDER SECTION 131 WERE ISSUED TO ALL THE SHARE APPLICANTS THOSE WERE 97 IN NUMBER AS PER THE LIST SUBMITT ED BY THE ASSESSEE DURING THE ASSESSMENT PROCEEDINGS FROM WHOM SHARE APPLICATIO N MONEY WAS RECEIVED AND OUT OF 97 SUMMONS IN 90 CASES ARE STATED TO HAV E BEEN RETURNED UNSERVED WITH THE REMARKS NOT KNOWN/NO SUCH PERSON BY POSTAL AUT HORITIES. THIS STAT E OF AFFAIR WAS COMMUNICATED TO THE ASSESSEE AND THE ASSE SSEE FILED CERTAIN REPLY STATING HONBLE MADRAS HIGH COURT AND HON BLE DELHI HIGH COURTS DEC ISIONS AND THE ASSESSING OFFICER OBSERVED THAT SINCE ALL THE SUMMONS UNDER SECTION 131 S ENT TO THE PERSON WHOSE LIST HAS BEEN GIVEN BY THE ASSESSE E WITH RPAD CAME BACK UNSERVED AND WITH REMARKS NOT KNOWN/NO SUCH PERSON SO IN VIEW OF THE ASSESSING OFFICER THE SHARE APPLICANTS ARE NOT ESTABL ISHED. SINCE EXISTENCE/IDENTITY OF THE APPLICANTS ARE NOT PROVED AND FEW OF THE PERSONS ON WHOM SUMMONS WERE SERVED WERE NOT ABLE TO PROVE THEIR CREDITWORTHINESS THE LD. CIT(A) HAS JUST TAKING S UPPORT FROM SOME HIGH COURTS DECISION DECIDED THE CASE AND CAME TO THE CONCLU SION THAT THE ADDITION IS NOT CALLED FOR UNDER SECTION 68 OF THE ACT IN VIEW OF THE FACTS AND CIRCUMSTANCES. 8. WE HAVE CAREFULLY CONSIDERED THE FINDINGS OF THE ASSESSING OFFICER AND LD. CIT(A) AND ARE OF THE OPINI ON THAT THE LD. CIT(A) HAS JUST DELETED THE ADDITION WITHOUT CONSIDERING RELEVANT FACTS AND CIRCUM STANCE IN THE LIGHT OF DECIDED CASES. THEREFORE IN THE INTEREST OF JUSTICE AND TO HAVE FAIR PLAY IN THE MATTER WE FIND JUST AND APPROPRIATE TO SET ASIDE THE ORDERS OF AUTHORITIES BELOW IN THIS REGARD AND I.T.A. NO.2049/MDS/10 8 RESTORE THE MATTER BACK ON THE FILE OF T HE ASSESSING OFFICER WIT H THE DIRECTION TO DECIDE THIS ISSUE AFRESH AFTER GIVING DUE OP PORTUNITY TO THE ASSESSEE. WE HOLD AND DIRECT ACCORDINGLY. 8. IN THE RESULT THE APPEAL OF THE DEPARTMENT IS ALLOW ED FOR STATISTICAL PURPOSE. ORDER PRONOUNCED SOON AFTER THE CONCLUSION OF HEARING ON 22.02.2011. SD/- SD/- (ABRAHAM P. GEORGE) ACCOUNTANT MEMBER (U.B.S. BEDI) JUDICIAL MEMBER CHENNAI DATED THE. 22.02.2011 VM/- TO:THE ASSESSEE//A.O./CIT(A)/CIT/D.R.