ACIT, Salem v. M/s. Victory Spinning Mills Ltd., Namakkal

ITA 2098/CHNY/2010 | 2004-2005
Pronouncement Date: 16-09-2011 | Result: Dismissed

Appeal Details

RSA Number 209821714 RSA 2010
Assessee PAN AABCV7533K
Bench Chennai
Appeal Number ITA 2098/CHNY/2010
Duration Of Justice 9 month(s) 7 day(s)
Appellant ACIT, Salem
Respondent M/s. Victory Spinning Mills Ltd., Namakkal
Appeal Type Income Tax Appeal
Pronouncement Date 16-09-2011
Appeal Filed By Department
Order Result Dismissed
Bench Allotted B
Tribunal Order Date 16-09-2011
Assessment Year 2004-2005
Appeal Filed On 09-12-2010
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH CHENNAI BEFORE SHRI ABRAHAM P. GEORGE ACCOUNTANT MEMBER AN D SHRI GEORGE MATHAN JUDICIAL MEMBER .. I.T.A. NO. 2098/MDS/2010 ASSESSMENT YEAR : 2004-05 THE ASSISTANT COMMISSIONER OF INCOME-TAX CENTRAL CIRCLE SALEM. V. M/S. VICTORY SPINNING MILLS LTD. UPPUPALAYAM SANKARI MAIN ROAD TIRUCHENGODE NAMAKKAL DISTRICT. PAN : AABCV7533K (APPELLANT) (RESPONDENT) APPELLANT BY: SHRI K.E.B. RENGARAJAN JR. STANDING COUNSEL RESPONDENT BY : SH RI S. SRIDHAR ADVOCATE I.T.A. NO.1110/MDS/2010 ASSESSMENT YEAR : 2004-05 THE ASSISTANT COMMISSIONER V. SHRI R. THANG AVELU OF INCOME-TAX CENTRAL CIRCLE NO. 111 AYAKATTUR SALEM. CAUVERY RS. PALLIPALAYAM ERODE-638 007. PAN : ABHPT7483L (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI K.E.B. RENGARAJAN JR. STANDING COUNSEL RESPONDENT BY : SHRI G. BHASKAR AD VOCATE I.T.A. NOS. 2098 1110 & 1111/MDS/2010 2 A N D I.T.A. NO. 1111/MDS/2010 ASSESSMENT YEAR : 204-05 THE ASSISTANT COMMISSIONER V. SHRI P. S. SUNDARAM OF INCOME-TAX CENTRAL CIRCLE NO. 65 GANDHIPURAM SALEM. 6 TH CROSS PALLIPALAYAM ERODE-638 007. PAN : AWIPS8240C (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI K.E.B. RENGARAJAN JR. STANDING COUNSEL RESPONDENT BY : SHRI G. BHASKAR ADVOCATE DATE OF HEARING : 13-09-201 1 DATE OF PRONOUNCEMENT : 16-09-2011 O R D E R PER BENCH: ITA NO. 2098/MDS/2010 IS AN APPEAL FILED BY THE RE VENUE AGAINST THE ORDER OF THE LEARNED CIT(APPEALS) SALEM IN ITA NO. 72/08 -09 DATED 17-09-2010 FOR THE ASSESSMENT YEAR 2004-05 IN THE CASE OF M/S. VICTORY SPINNING MILLS LTD. ITA NO. 1110/MDS/2010 IS AN APPEAL FILED BY THE REVENUE AGA INST THE ORDER OF THE LEARNED CIT(APPEALS) SALEM IN ITA NO. 56/08-09 DATED 30-04 -2010 FOR THE ASSESSMENT YEAR 2004-05 IN THE CASE OF SHRI R. THANGAVELU AND ITA NO. 1111/MDS/2010 IS AN I.T.A. NOS. 2098 1110 & 1111/MDS/2010 3 APPEAL FILED BY THE REVENUE AGAINST THE ORDER OF TH E LEARNED CIT(APPEALS) SALEM IN ITA NO. 74/08-09 DATED 290-04-2010 FOR THE ASSES SMENT YEAR 2004-05 IN THE CASE OF SHRI P. S. SUNDARAM. AS THE ISSUES IN ALL THE THREE APPEALS ARE INTER- CONNECTED THE THREE APPEALS ARE DISPOSED OF BY THI S COMMON ORDER. 2. SHRI K.E.B. RENGARAJAN JR. STANDING COUNSEL REPR ESENTED ON BEHALF OF THE REVENUE. SHRI S. SRIDHAR ADVOCATE REPRESENTED ON BEHALF OF THE ASSESSEE M/S. VICTORY SPINNING MILLS LTD. AND SHRI G. BHASKAR AD VOCATE REPRESENTED ON BEHALF OF THE ASSESSEES SRI R. THANGAVELU AND SRI P. S. SUND ARAM. 3. THE FACTS THAT LED TO THESE APPEALS ARE THAT THE RE WAS A SEARCH AND SEIZURE ACTION IN THE CASES OF SHRI R. THANGAVELU AND SHRI P.S.SUNDARAM THE MANAGING DIRECTORS OF M/S. VICTORY SPINNING MILLS LTD. A SU RVEY UNDER SECTION 133A WAS CONDUCTED IN THE CASE OF THE ASSESSEE COMPANY M/S. VICTORY SPINNING MILLS LTD. ON 27-09-2006. IN THE COURSE OF THE SURVEY OPERATI ON CERTAIN IRREGULARITIES WERE NOTICED REGARDING THE INVESTMENTS IN SHARES. IN TH E COURSE OF THE SEARCH IN THE CASE OF SHRI R. THANGAVELU A LIST OF 84 PERSONS CA PTIONED AS DIRECTORS SHAREHOLDERS VIZ. SL. NO. 54 TO 66 VIDE ANNEXURE M/B&D/L.S./S-2 WAS SEIZED. SIMILAR DETAILS WERE FOUND IN THE COURSE OF SEARCH IN THE CASE OF SHRI P.S. SUNDARAM WHICH WERE MADE AS SL. NOS. 1 TO 13 VIDE A NNEXURE JP/B&D/S-21. ON THE BASIS OF THESE EVIDENCES THE ASSESSING OFFICER IN THE COURSE OF ASSESSMENT OF THE COMPANY M/S. VICTORY SPINNING MILLS LTD. HAD T REATED THE INVESTMENT IN THE SHARE CAPITAL OF THE ASSESSEE COMPANY BY 181 SHARE HOLDERS WHOSE NAMES WERE I.T.A. NOS. 2098 1110 & 1111/MDS/2010 4 FOUND IN THE TWO LISTS FOUND DURING THE COURSE OF T HE SEARCH OF SHRI R. THANGAVELU AND SHRI P.S. SUNDARAM AS UNEXPLAINED CASH CREDIT AND ASSESSED ON A PROTECTIVE MEASURE. 4. ON APPEAL BY THE ASSESSEE COMPANY M/S. VICTORY SPINNING MILLS LTD. THE LEARNED CIT(A) HAD DELETED THE ADDITION BY RELYING ON THE DECISION OF THE HON'BLE SUPREME COURT IN THE CASE OF CIT V. LOVELY EXPORTS PVT. LTD. REPORTED IN 216 CTR 195) WHEREIN IT HAD BEEN CATEGORICALLY HELD THAT IF THE SHARE APPLICATION MONEY IS RECEIVED BY THE ASSESSEE COMPANY FROM ALLEGED BOGUS SHAREHOLDERS WHOSE NAMES ARE GIVEN TO THE ASSESSING OFFICER THEN THE DEPARTMENT IS FREE TO PROCEED TO RE-OPEN THE INDIVIDUAL ASSESSMENTS IN ACCORDANCE WITH LAW AND THE SAME CANNOT BE TREATED AS THE UNDISCLOSED INCOME OF THE ASSESSEE COMPANY. 5. THE LEARNED JR. STANDING COUNSEL PLACED BEFORE U S DETAILED PAPER BOOK CONSISTING OF 210 PAGES CONTAINING THE PAYING-IN-SL IPS AS ALSO COPIES OF THE MANAGERS CHEQUES DEMAND DRAFTS AND PAY ORDERS IN RESPECT OF THE VARIOUS SHARE APPLICATIONS. IT WAS THE SUBMISSION THAT ALL THE APPLICATIONS SUBMITTED TO THE BANK WERE FILLED AND SIGNED BY THE SAME PERSON AND THE MONEY REMITTED WITH THE APPLICATIONS WERE OF HIGH DENOMINATION NOTES. THE APPLICATIONS FOR THE DDS/POS WERE SAFELY APPLIED FOR AMOUNTS WELL BELOW ` 50 000 TO AVOID MENTIONING OF THE PERMANENT ACCOUNT NUMBERS. CONSOLIDATED REM ITTANCES WERE MADE FOR THE PURCHASE OF DDS/POS IN MANY CASES. THE APPLICANTS IN MOST OF THE CASES DID NOT HAVE ACCOUNT WITH THE BANKS FROM WHERE THE DDS/POS WERE OBTAINED AND I.T.A. NOS. 2098 1110 & 1111/MDS/2010 5 WHEREVER THE APPLICANTS HAD BANK ACCOUNTS HUGE AMO UNTS OF CASH WERE DEPOSITED ON A PARTICULAR DAY AND THE WITHDRAWALS W ERE DONE BY CHEQUES ISSUED ON THE SAME DAY OR NEXT DAY AND NO MORE SUCH MAJOR TRANSACTIONS WERE UNDERTAKEN OTHER THAN THE TRANSACTIONS OF APPLICATI ON OF SHARES IN THE CASE OF THE ASSESSEE COMPANY M/S. VICTORY SPINNING MILLS LTD. IT WAS THE SUBMISSION THAT THE WHOLE TRANSACTION OF SHARE APPLICATION WAS A BOGUS TRANSACTION AND THE SAME WAS LIABLE TO BE TREATED AS UNEXPLAINED CASH CREDIT. 6. IN REPLY THE LEARNED AUTHORISED REPRESENTATIVE SUBMITTED THAT 129 SHARE APPLICANTS HAD APPEARED BEFORE THE ASSESSING OFFICE R AND THEY HAD CONFIRMED THE TRANSACTIONS. THE SHARE APPLICANTS HAVING CONFIRME D THE TRANSACTIONS NO ADDITION COULD BE MADE IN THE HANDS OF THE ASSESSEE. HE ALS O RELIED ON THE DECISION OF THE HON'BLE SUPREME COURT IN THE CASE OF CIT V. LOVELY EXPORTS PVT. LTD. REFERRED TO SUPRA. HE VEHEMENTLY SUPPORTED THE ORDER OF THE LE ARNED CIT(A). 7. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. A PER USAL OF THE FACTS CLEARLY SHOWS THAT THE LISTS OF SHARE APPLICATION WERE FOUN D IN THE COURSE OF SEARCH IN THE CASES OF SHRI R. THANGAVELU AND SHRI P. S. SUNDARAM . OUT OF THE 181 SHARE APPLICANTS 129 HAD APPEARED WHEN SUMMONS WERE ISSU ED TO THEM. IN ANY CASE THE NAMES AND IDENTITY OF THE SHARE APPLICANTS ARE CLEARLY AVAILABLE. ONCE THIS IS SO IN VIEW OF THE DECISION OF THE HON'BLE SUPREME COURT IN THE CASE OF CIT V. LOVELY EXPORTS PVT. LTD. REFERRED TO SUPRA THE SHA RE APPLICATION MONEY CANNOT BE TREATED AS THE UNDISCLOSED INCOME OF THE ASSESSEE A ND THE REVENUE IS FREE TO I.T.A. NOS. 2098 1110 & 1111/MDS/2010 6 PROCEED TO RE-OPEN THE INDIVIDUAL ASSESSMENTS OF TH E ALLEGED SHARE APPLICANTS IN ACCORDANCE WITH LAW. IN THE CIRCUMSTANCES THE APP EAL OF THE REVENUE IN ITA NO. 2098/MDS/2010 STANDS DISMISSED. 8. IN REGARD TO THE APPEALS IN THE CASES OF SHRI R . THANGAVEL AND SHRI P. S. SUNDARAM IT WAS THE SUBMITTED BY THE LEARNED JR. S TANDING COUNSEL THAT THE LIST OF THE SHARE APPLICANTS WAS FOUND IN THE COURSE OF THE SEARCH OF THE TWO MANAGING DIRECTORS AND THE MONIES WHICH HAVE BEEN I NVESTED BY THE SHARE APPLICANTS WERE THE MONIES OF THE SAID MANAGING DIR ECTORS SHRI R. THANGAVEL AND SHRI P. S. SUNDARAM AND SINCE THE CREDITWORTHINESS OF THE SHARE APPLICANTS HAVING NOT PROVED THE INVESTMENT WAS LIABLE TO BE TREATED AS THE UNEXPLAINED INVESTMENT OF THE ASSESSEES SHRI R. THANGAVEL AND SHRI P. S. SUNDARAM. 9. IN REPLY THE LEARNED AUTHORISED REPRESENTATIVE VEHEMENTLY SUPPORTED THE ORDER OF THE LEARNED CIT(A). 10. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. AT T HE OUTSET IT IS NOTICED THAT ALL THAT HAS BEEN FOUND IS THE LIST OF THE SHARE APPLIC ANTS/SHARE HOLDERS. IN THE CASE OF M/S.VICTORY SPINNING MILLS LTD. ONE OF THE ASSE SSEES HEREIN WE HAVE CATEGORICALLY HELD THAT IN VIEW OF THE DECISION OF THE HON'BLE SUPREME COURT IN THE CASE OF LOVELY EXPORTS PVT. LTD. REFERRED TO SUPRA THE SHARE APPLICATION MONEY CANNOT BE TREATED AS THE UNEXPLAINED INCOME OF M/S. VICTORY SPINNING MILLS LTD. AND THE REVENUE IS FREE TO PROCEED AGAINST THE ALLE GED BOGUS SHARE APPLICANTS IN ACCORDANCE WITH LAW. ONCE IT IS HELD SO IN THE CAS E OF M/S. VICTORY SPINNING MILLS I.T.A. NOS. 2098 1110 & 1111/MDS/2010 7 LTD. AND ONCE IT IS ACCEPTED THAT THE SHARE APPLICA NTS ARE THE SAME AND THEY HAVE ALSO CONFIRMED THE TRANSACTION OF SHARE APPLICATION OBVIOUSLY IT CANNOT BE TREATED AS THE UNEXPLAINED INVESTMENT OF THE MANAGING DIREC TORS OF THE COMPANY SHRI R. THANGAVEL AND SHRI P. S. SUNDARAM. HERE WE MAY SPE CIFICALLY MENTION THAT WHAT HAS BEEN FOUND IN THE COURSE OF SEARCH IS ONLY THE LIST OF SHARE HOLDERS. NOTHING HAS BEEN FOUND TO SHOW THAT THE ASSESSEES SHRI R. THANGAVEL AND SHRI P. S. SUNDARAM HAVE ADVANCED THE MONIES TO THE ALLEGED SH ARE APPLICANTS. IN THE CIRCUMSTANCES WE ARE OF THE VIEW THAT NO ADDITION ON THIS COUNT CAN BE MADE IN THE HANDS OF SHRI R. THANGAVEL AND SHRI P. S. SUNDA RAM. IN THE CIRCUMSTANCES WE ARE OF THE VIEW THAT THE FINDING OF THE LEARNED CIT(A) ON THIS ISSUE IS ON A RIGHT FOOTING AND DOES NOT CALL FOR ANY INTERFERENCE. IN THE CIRCUMSTANCES THE APPEALS OF THE REVENUE IN ITA NOS. 1110 1111 AND 2098/MDS/ 2010 STAND DISMISSED. 11. THE ORDER WAS PRONOUNCED IN THE COURT ON 16/09/ 2011. SD/- SD/- (ABRAHAM P. GEORGE) (GEORGE MATHAN) ACCOUNTANT MEMBER JUDICIAL MEMBER CHENNAI DATED THE 16 TH SEPTEMBER 2011. H. COPY TO: ASSESSEE/AO/CIT (A)/CIT/D.R./GUARD FILE