M/s Primeslots Properties Pvt. Ltd, Panaji v. DCIT, Central Circle, Panaji

ITA 226/PAN/2013 | 2007-2008
Pronouncement Date: 25-10-2013 | Result: Allowed

Appeal Details

RSA Number 22624114 RSA 2013
Assessee PAN AADCP7631A
Bench Panaji
Appeal Number ITA 226/PAN/2013
Duration Of Justice 2 month(s) 25 day(s)
Appellant M/s Primeslots Properties Pvt. Ltd, Panaji
Respondent DCIT, Central Circle, Panaji
Appeal Type Income Tax Appeal
Pronouncement Date 25-10-2013
Appeal Filed By Assessee
Order Result Allowed
Bench Allotted DB
Tribunal Order Date 25-10-2013
Assessment Year 2007-2008
Appeal Filed On 31-07-2013
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL PANAJI BENCH PANAJI BEFORE SHRI P.K. BANSAL HONBLE ACCOUNTANT MEMBER AND SHRI D.T. GARASIA HONBLE JUDICIAL MEMBER ITA NO. 226/PNJ/2013 : (ASST. YEAR : 2007 - 08) M/S. PRIMESLOT S PROPERTIES PVT. LTD. 4 TH FLOOR SIDDARTH BANDODKAR BHAVAN OPP. MAHALAXMI TEMPLE PANAJI GOA 403 001 (APPELLANT) PAN : AADCP7631A VS. DY. COMMISSIONER OF INCOME TAX CENTRAL CIRCLE PANAJI GOA. (RESPONDENT) APPELLANT BY : V.Y. VAIDYA ADV. & S.C. AN VEKAR RESPONDENT BY : SMT. ASHA DESAI DR DATE OF HEARING : 1 2/0 9 /2013 DATE OF PRONOUNCEMENT : 25 / 1 0/2013 O R D E R PER P.K. BANSAL : 1. THIS APPEAL HAS BEEN FILED BY THE ASSESSEE AGAINST THE ORDER OF CIT(A) DT. 25.1.2012 FOR THE A.Y. 2007 - 08. THE ONLY GROUND INVOLVED IN THE VARIOUS GROUNDS TAKEN IN THIS APPEAL RELATES TO THE ADDITION OF RS.4.99 CRORES RECEIVED BY THE ASSESSEE COMPANY FROM MRS. N. SUNITHA. 2. THE BRIEF FACTS OF T HE CASE ARE THAT THERE WAS A SEARCH IN THE CASE OF MR. SADIQ SHEIKH. C ONSEQUEN T TO THE SEARCH CERTAIN EVIDENCES WERE FOUND. IN RESPONSE TO THE NOTICE U/S 153C THE ASSESSEE COMPANY FILED RETURN OF INCOME ON 12.8.2011 DECLARING LOSS OF RS.4 97 189/ - . TH ERE HAD BEEN A SEARCH AT THE 2 ITA NO. 226/PNJ/2013 (ASST. YEAR : 2007 - 08) RESIDENCE OF N. SURYANARAYANA WHEREIN EVIDENCE IN THE FORM OF LOOSE SHEETS RELATING TO CERTAIN PAYMENTS WAS SEIZED. OUT OF THE DETAILS THE AO NOTED AND AS EXPLAINED BY SHRI N. SURYANARAYANA THE CHEQUE FOR RS. 4.99 CRORES WAS MADE TO THE ASSESSEE COMPANY. SHRI N. SURYANARAYANA STATED THAT THE PAYMENT WAS MADE FOR THE PURPOSE OF CONVERSION OF THE LAND. THE SAID CHEQUE HAS BEEN CREDITED IN THE ACCOUNTS OF M/S. PRIMESLOT S PROPERTIES PVT. LTD. ON 29.5.2006 AND THE CHEQUE WAS PAI D OUT OF THE ACCOUNT OF MRS. N. SUNITHA. WHEN QUESTIONED IT WAS EXPLAINED THAT MRS. N. SUNITHA RECEIVED RS. 5 CRORES FROM M/S. ECRU BUILDERS PVT. LTD. IN MAY 2006 AN D OUT OF THIS A SUM OF RS. 4.99 CRORES WAS ADVANCED TO M/S. PRIMESLOT S PROPERTIES PVT. LTD. AS AN ADVANCE. THE ASSESSEE CLAIMED THAT THIS MONEY WAS SHARE APPLICATION MONEY BUT DID NOT EXPLAIN THE NATURE OF THE TRANSACTION AND THE PRESENT STATUS OF THE ADVANCE PAID WITH DOCUMENTARY EVIDENCE. EVEN THERE HAD BEEN A SEARCH AT THE RESIDENCE OF MRS. N. SUNITHA BUT NO EVIDENCE IN SUPPORT OF THE CLAIM OF ADVANCE FOR THE PURCHASE OF THE LAND FOR RS. 4.99 CRORES WAS FOUND. THE ASSESSEE COMPANY STATED THAT THE SUM OF RS. 4.99 CRORES WAS RECEIVED TOWARDS SHARE APPLICATION MONEY FOR PURCHASE OF 50 000 SHARES OF FACE VALUE RS. 100/ - OF M/S. PRIMESLOT S PROPERTIES PVT. LTD. AT A PREMIUM OF RS. 1 950/ - PER SHARE. THE AO ON THE BASIS OF THE ANNUAL REPORT FOR F.Y. 2005 - 06 WAS OF THE VIEW THAT THE BALANCE SHEET DID NOT SUPPORT THE VALUE OF THE SHARES AT RS . 2 050/ - . THE AO TOOK THE VIEW THAT EVEN THOUGH THE AMOUNT HAS BEEN RECEIVED BY THE ASSESSEE COMPANY FROM MRS. N. SUNITHA THE AMOUNT HAS BEEN RECEIVED TOWARDS SOME INCOME. EVEN THE AO HAS MADE THE ADDITION BY OBSERVING AS UNDER : IT IS A FACT THAT M/ S. PRIMESLOTS PROPERTIES PVT. LTD. HAS RECEIVED THE AMOUNT OF RS.4.99 CR AS A RECEIPT TAKEN THE LOANS DEAL AND THE INTENTION WAS NEVER TO SHARE IT EITHER AS SHARE APPLICATION MONEY OR ADVANCE/LOAN ETC. IT NECESSARILY DOES TAKE THE CHARACTER OF UNDISCLOSED INCOME FROM OTHER SOURCES AND AS SUCH IS TAXED ACCORDINGLY. 3 ITA NO. 226/PNJ/2013 (ASST. YEAR : 2007 - 08) 8.5 ACCORDINGLY THE SAID SUM OF RS.4 99 00 000/ - IS HEREBY BROUGHT TO TAX AS INCOME FROM OTHER SOURCES. THE MATTER WENT BEFORE CIT(A) AND CIT(A) EVEN THOUGH ACCEPTED THAT THE MONEY HAS BEEN RECEIVED BY THE ASSESSEE AND THE ASSESSEE HAS ALLOTTED SHARES AND PART OF THE MON EY WAS REFUNDED BY THE ASSESSEE CONFIRMED THE FINDING OF THE AO THAT THE MONEY SHOULD BE TREATED AS INCOME FROM OTHER SOURCES BY OBSERVING AS UNDER : 11. I FIND THAT THE ASSESSING OFFICER HAS CLEARLY BROUGHT ON RECORD ALL RELEVANT FACTS TO SHOW THAT THE RECEIPT OF ` 4.99 CRORE BY THE APPELLANT COMPANY FROM MRS N SUNITHA CANNOT BE TREATED AS SHARE APPLICATION MONEY. THE FACTS NARRA TED ABOVE ARE FURTHER SUBSTANTIATED BY THE PETITION FILED BY MRS N SUNITHA BEFORE THE HON'BLE HIGH COURT OF MUMBAI IN CLAIMING BACK THE AMOUNT ADVANCED BY HER IN COMPANY PETITION NO. 17 OF 2009. 12. THE OBJECTION RAISED BY MRS N SUNITHA WAS LATER RESOLVED THROUGH CONSENT BETWEEN PARTIES DATED 21.04.2011 FOLLOWED BY WITHDRAWING OF THE PETITION AS ACCEPTED BY THE HON'BLE HIGH COURT BY DECREE DATED 29.11.2011. AS PER THE CONSENTING TERMS MRS N SUNITHA WAS MADE 25% SHARE HOLDER AS A RESULT OF WHICH SHE CAN CLAIM OWNERSHIP IN THE PROPERTIES BELONGING TO THE APPELLANT COMPANY AND ITS SISTER CONCERNS M/S PRIMESLOTS REAL ESTATE (P) LTD AND M/S PRIMESLOTS CONSTRUCTIONS PVT LTD ALSO. 13. THE CLAIM OF MRS N SUNITHA AS MENTIONED IN THE SAID PETITI ON NO.17 OF 2009 (AT PARA 8 & 9) SHOW THAT THESE MONIES WERE NOT ADVANCED FOR THE PURPOSE STATED TO BE SHARE APPLICATION MONEY. THE APPELLANT HAS STATED HOWEVER THAT: 'FIRST OF ALL THE PAYER OF THE MONEY SAYS THAT THE PAYMENT WAS FOR THE PURPOSE OF PURCH ASE OF LAND. THE PAYEE SAYS THAT IT WAS SHARE APPLICATION MONEY. ULTIMATELY BOTH GOES TO SHOW THAT THEY ARE CORRECT. THE PAYEE SAYS THAT IT WAS SHARE APPLICATION MONEY. BY PURCHASE OF THE SHARES THE PAYER BECOMES THE MAJORITY SHAREHOLDER AND ULTIMATELY POW ER OF TRANSFERRING THE LANDS ACQUIRED BY THE FIRM. IF THE PAYEE I.E. THE ASSESSEE WAS NOT CORRECT SHE WOULD NOT HAVE GONE TO THE EXTENT OF FILING OF VARIOUS CASES IN THE COURTS COMPANY LAW BOARD AND FINALLY AGREES FOR ALLOTMENT OF SHARES IN THE ASSESSEE COMPANY AS WELL AS GROUP COMPANIES AND AFFIRM BEFORE THE HON. HIGH COURT OF MUMBAI GOA BENCH AND ON THE BASIS OF THE AGREEMENTS A CONSENT DECREE WAS PASSED BY THE COURT.' 4 ITA NO. 226/PNJ/2013 (ASST. YEAR : 2007 - 08) THE CLAIM OF THE APPELLANT IS THAT SINCE BY THE ORDER OF THE HIGH COURT MRS N SUNI THA AND THE APPELLANT HAVE RESOLVED THE ISSUES BY BEING TREATED AS A SHARE HOLDER THE SAID AMOUNT SHOULD BE ACCEPTED AS SUCH. 14. THIS CLAIM OF THE APPELLANT CANNOT BE ACCEPTED AS FROM THE EVIDENCES ABOVE AND THE PETITION RAISED BY THE CREDITOR MRS N SUN ITHA IT IS CLEAR THAT THE AMOUNT ADVANCED WAS TOWARDS SOME OTHER PURPOSE AND NOT ALLOTMENT OF SHARES. WITH THE EVIDENCES ON RECORD IT IS CLEAR THAT THIS WAS NOT MEANT TO BE RETURNED BUT FOR EXECUTION OF A CONTRACT AN UNDERSTANDING WHICH REMAINED UNFULFI LLED AND RESULTED IN LITIGATION AND WAS LATER RESOLVED BY CONSENT. AS SUCH THIS RECEIPT OF ` 4.99 CRORE IN THE HANDS OF THE APPELLANT FOR THE A.Y. IN QUESTION CANNOT BE TREATED AS SHARE APPLICATION MONEY BUT INCOME FROM OTHER SOURCES WHICH HAS BEEN RIGHT LY BROUGHT TO TAX BY THE ASSESSING OFFICER. THE SAID ASSESSMENT IS UPHELD. THE APPEAL IS DISMISSED. 2.1 THE LD. AR SUBMITTED THE FOLLOWING WRITTEN SUBMISSION : 1. THE APPELLANT FIRM FILED ITS R/ I DATED 12.8.2011 PURSUANT TO THE NOTICES ISSUED U/ 153C OF 1.T. ACT 1961 RETURNING A TOTAL LOSS OF RS (4 97 189.00). 2. THE ASSESSMENT WAS COMPLETED BY HON A.O U/S 143 (3) OF I.T.ACT 1961 BY MAKING UNJUSTIFIED ADDITION TO THE TUNE OF RS4 99 00 000.00 ON ACCOUNT OF SHARE APPLICATION MONEY HOLDING IT AS INCOME FROM OTHER SOURCES AND THE SAME WAS CONFIRMED BY C.I.T ( A ). 3.I) M/S PRIME SLOTS PROPERTIES PVT. LTD HAD RECEIVED A SUM OF RS.4 99 00 000/ - FROM MRS. SUNITHA ON 26.5.2006 AS SHARE APPLICATION MONEY OUT OF WHICH RS 50 00 000/ - WAS REFUNDED TO HER ON 10.8.2006. THE BALANCE AMOUNT OF RS 4 49 00 000 / - WAS ALLOCATED TO W ARDS SHARE APPLICATION AS RS25 00 000/ - FOR SHARE CAPITAL SUBSCRIPTION AND BALANCE OF RS 4 24 00 000/ - TOWARDS SHARE PREMIUM FOR PURCHASE OF 500 00 SHARES OF RS 50/ ( PARTLY PAID UP ) AT A SHARE AT A PREMIUM OF RS848 FOR THE SAME. THE SAME WERE RIGHTLY RECORDED IN THE BOOKS OF ACCOUNTS OF THE COMPANY AS SHARE CAPITAL OF RS 25 00 000/ - AND SHARE PREMIUM OF RS 4 24 00 000/ - . THE BOOKS OF ACCOUNTS OF THE COMPANY ARE AUDITED UNDER PROVISIONS OF INDIAN COMPANIES ACT 1956. THE ACCOUNTS ARE ALSO SUBJECT TO TAX AUDIT U/S 44AB OF I.T.ACT 1961. THE AUDI T REPORT WITH THE FINANCIALS REPRESENTS THESE DETAILS AND THESE FACTS EXISTED MUCH BEFORE THE SEARCH ACTION TOOK PLACE ON THE COMPANY. MOREOVER SINCE THE COMPANY IS STATUTORY REQUIRED TO COMPLY WITH PROVISIONS OF INDIAN COMPANIES ACT 1956 WHICH REQUIRES FILING OF SPECIFIED RETURNS UNDER THE SAME STATUE THE COMPANY HAD ALREADY FILED ITS RETURN OF ALLOTMENT WITH THE REGISTRAR OF COMPANIES; THE COPIES OF THE SAME WERE ALSO SUBMITTED TO SUBSTANTIATE IT. THE 5 ITA NO. 226/PNJ/2013 (ASST. YEAR : 2007 - 08) STATUTORY COMPLIANCE AND FILINGS AS A PART OF STATUTORY COMPLIANCE HAS BEEN DONE INDEPENDENTLY WITH A SEPARATE DEPARTMENT OF COMPANY AFFAIRS WELL BEFORE THE SEA RCH TOOK PLACE AND THESE DOCUMENTS ARE IN NATURE OF PUBLIC DOMAIN DOCUMENTS WHICH CAN ALSO BE ALSO ACCESSED INDEPENDENTLY DIRECTLY ON THE OFFICIAL SITE OF THE MINISTRY OF COMPANY AFFAIRS. II) FORM 2 FOR THE RETURN ON SHARE ALLOTMENT FORM NO 20 B WHICH IS A ANNUAL RETURN OF THE COMPANY WHICH INDICATES THE SHARE CAPITAL STRUCTURE ALONG WITH THE OTHER FINANCIAL DETAILS FORM NO 23AC WHICH HAS THE BALANCE SHEET P/L ACCOUNT AS PER THE PROVISIONS O F COMPANIES ACT 1956 WERE ALSO FILED III) FORM NO 66 WAS FILED WITH REGISTRAR OF COMPANIES WHICH IS A COMPLIANCE CERTIFICATE ISSUED INDEPENDENTLY BY A PRACTICING CERTIFICATE HOLDER TO CERTIFY THE COMPLIANCE OF THE PROVISIONS OF THE COMPANIES ACT 1956. T HE SHARES WERE ALLOTTED TO MRS. SUNITHA ON 14.03.2007. THUS THE SHARES WERE PARTLY PAID UP AS ON THAT DATE. IV) ON 23.07.2007 CALL ON SHARES FOR UNPAID AMOUNT WAS MADE. HOWEVER THE UNPAID CALL AMOUNT WAS NOT RECEIVED. HENCE ON 1.03.2008 THE SHARES WERE DE TERMINED TO BE FORFEITED. 4.I) LT IS WELL SETTLED LEGAL POSITION THAT SHARE APPLICATION MONEY WHEN FORFEITED AND CREDITED TO CAPITAL RESERVE ACCOUNT IS A CAPITAL RECEIPT NOT CHARGEABLE TO TAX. HAD THE CALL MONEY BEEN RECEIVED BY THE ASSESSEE IT WOULD HAVE DEFINITELY GONE TO THE CAPITAL ACCOUNT OF THE ASSESSEE. RELIANCE IS PLACED ON FOLLOWING DECISIONS. I) D.C.I.T V BRIJLAXMI LEASING & FINANCE LTD 118 ITD 546 ( AHD ) WHEREIN IT WAS HELD THAT 'AS IN THE INSTANT CASE ISSUE OF SHARES WAS NOT BEING BUSINESS OF THE ASSESSEE THE AMOUNT CAN NOT BE TREATED AS RECEIPT IN NORMAL COURSE OF BUSINESS. WHETHER MOREOVER SINCE ASSESSEE HAD NOT CREDITED FORFEITED AMOUNT IN ITS PROFIT & LOSS ACCOUNT BUT IN CONTRADISTINCTION TO THAT IT HAD CREDITED SAME IN CAPITAL RESERVE ACCOUNT IMPUGNED ORDER OF COMMISSIONER (APPEALS) WAS TO BE CONFIRMED - HELD YES. II) IN THE CASE OF MORLEY ( INSPECTOR OF TAXES) V/S TALTER ( 1939 ) 7 ITR 316 ( CA ) IT HAS BEEN HELD THAT IF A PARTICULAR AMOUNT IS NOT RECEIVED AS A TRADING RECEIPT AT T HE FIRST INSTANCE IT WOULD NOT BE SUBSEQUENTLY RECORDED AS A TRADING RECEIPT DUE TO CHANGE OF CIRCUMSTANCES. II) HON'ABLE LAHORE HIGH COURT IN THE CASE OF MULTAN ELECTRIC SUPPLY CO LTD. IN RE ( 1945 ) 13 ITR 457 ( LAHORE ) HAS HELD THAT IF THE ASSESSEE CO MPANY FORFEITED THE 6 ITA NO. 226/PNJ/2013 (ASST. YEAR : 2007 - 08) SHARE OF DEBTORS FOR NONPAYMENT OF CALLS CALL MONEY CREDITED TO CAPITAL RESERVE ACCOUNT ON FORFEITURE OF SHARES IS A CAPITAL RECEIPT. III) HON'ABLE MUMBAI BENCH OF TRIBUNAL IN THE CASE OF PRISM CEMENT LTD V JCIT ( 2006 ) 103 TTJ ( MUMBAI) 63 HAS HELD THAT ADVANCE AMOUNT RECEIVED BY ASSESSEE ON ISSUE OF NON CONVERTIBLE DEBENTURE FOR RAISING CAPITAL FOR SETTING UP BUSINESS AND FORFEITURE OF CALL MONEY IS NOT CHARGEABLE TO TAX. IT IS SUBMITTED THAT M/S PRIMESLOTS PROPERTIES PVT LTD HAD RECEIVED THE AMOUNT AGAINST ISSUE OF SHARES AND ISSUE OF SHARES IS NOT THE BUSINESS OF M/S PRIMESLOTS PROPERTIES PVT LTD. THUS THE AMOUNT CAN NOT BE TREATED AS RECEIPT IN THE NORMAL COURSE OF BUSINESS. BASED ON THIS M/S PRIMESLOTS PROPERTIES PVT LTD HAS ALSO NOT CREDITED THE FORFEITED AMOUNT IN ITS P&L A/C BUT IT HAS CREDITED THE SAME IN CAPITAL RESERVE ACCOUNT ACCOUNT. BASED ON THE DECISION IN THE CASE OF PRISM CEMENT LTD V JCIT - 101 ITD 103 ( MUM ). WE RESPECTFULLY SUBMIT THAT SUCH RECEIPT CAN NOT BE BROUGHT TO TAX U/S 41 ( 1 ) OR U/S 28 OF THE ACT. IV) IT IS FURTHER SUBMITTED THAT IN THE CASE OF ASIATIC OXYGEN LTD V DCIT 49 ITD 355 ( C AL ) IT WAS HELD THAT AMOUNT FORFEI TED FROM SHAREHOLDERS IN DEFAULT OF PAYMENT OF CALL MONIES IS A CAPITAL RECEIPT. IT WAS ALSO HELD THAT AMOUNT RECEIVED ON REISSUE OF FORFEITED SHARES CREDITED TO SHARE PREMIUM ACCOUNT IS ALSO A CAPITAL RECEIPT. THUS IT IS SETTLED LEGAL POSITION THAT BY CH ARGING PROVISIONS OF SEC 4 & 5 THE GENERAL LIABILITY TO TAX IS IMPOSED UPON INCOME BUT THE I.T.ACT DOES NOT PROVIDE THAT WHATEVER IS RECEIVED BY THE PERSON MUST BE REGARDED AS INCOME CHARGEABLE TO TAX. IN CASES IN WHICH THE RECEIPT IS SOUGHT TO BE TAXED AS INCOME BURDEN LIES UPON THE DEPT. TO PROVE THAT IT IS WITHIN THE TAXING PROVISIONS IN VIEW OF THE JUDGMENT OF APEX COURT IN THE CASE OF PARIMISETTI SEETHARAMAMMA V/S CIT (1965) 57 ITR 532 (SC). THE AFORESAID PRINCIPLE WAS CONSIDERED IN THE CASE OF PRISM CEMENT LTD V/S JCIT - 101 ITD 103 (MUM ). 4. RELYING ON THE ABOVE AND FACTS OF OUR CASE WE RESPECTFULLY SUBMIT THAT THE AMOUNT FORFEITED BY M/S PRIMESLOTS PROPERTIES PVT. LTD FOR NON PAYMENT OF CALL MONEY AND CREDITED TO CAPITAL ACCOUNT IS NOT CHARGEABLE T O TAX. RELIANCE IS PLACED ON THE FOLLOWING. A) DCIT V/S BRIJLAXMI LEASING & FINANCE LTD 118 ITD 546 ( AHD ) B) PRISM CEMENT LIMITED V/S JCIT 101 ITD 103 ( MUM ) C) MULTAN ELECTRIC SUPPLY CO LTD IN RE 13 ITR 457 ( LAH ) D) ASIATIC OXYGEN LTD V/S DCIT 49 ITD 355 ( CAL) 5. FURTHER AS STATED ABOVE EVEN THOUGH 50 00 000/ - OUT OF THE ENTIRE RECEIPT OF RS4 99 00 000/ - WAS PAID BACK IS ALSO ADDED ERRONEOUSLY BY THE HON A.O. 7 ITA NO. 226/PNJ/2013 (ASST. YEAR : 2007 - 08) THERE IS NO FINDING THAT THE BENEFITS OF THESE AMOUNT S WERE RECEIVED BY THE DIRECTORS OF THE COMPANY AT ANY POINT OF TIME OR BY ANY OF THE ASSOCIATED PERSONS OF THE DIRECTORS AS CLAIMED VAGUELY IN THE IMPUGNED ASSESSMENT ORDER. IN REGARDS TO THE UTILIZATION OF THE FUNDS IT WAS ALREADY SUBMITTED AT THE ASSES SMENT PROCEEDINGS THAT THESE ALL ARE VAGUE ALLEGATIONS AND EACH AND EVERY ALLEGATION ON THE UTILIZATION WAS PROVED TO BE WRONG. HOWEVER IN RESPECT OF SHARE APPLICATION MONEY IT WAS CONTENDED BY MRS.N SUNITHA THAT THE AMOUNT WAS LOAN AND NOT GIVEN AS SHARE APPLICATION MONEY AND MRS.N.SUNITHA FILED A PETITION IN HIGH COURT FOR THE RECOVERY OF AMOUNT. AFTER THE PETITION WAS FILED THERE WAS A COMPROMISE ARRIVED AT BETWEEN THE PARTIES AND CONSENT TERMS WERE RECORDED AND APPROVED BY THE HIGH COURT. ACCORDING TO THE CONSENT TERM MRS N. SUNITHA WAS ALLOTTED SHARES IN PRIMESLOT REAL ESTATES PVT LTD TO THE EXTENT OF 25%. ALSO PETITION FILED BY MRS.N.SUNITHA WAS WITHDRAWN. BASED ON THIS WE RESPECTFULLY SUBMIT THAT THERE WAS A DIVERTION OF INCOME BY OVERRIDING TITLE. HENCE THE AMOUNT OF RS.4 49 00 000 / - CAN NOT CHARGEABLE TO TAX. RELIANCE IS PLACED ON THE DECISION IN THE CASE OF AMITABH BACCHAN V D.C.I.T 3 SOT 428 ( MUM ) FURTHER IN NONE OF THESE SUITS HAS THERE EMERGED A FACT THAT THIS DISPUTED 4.99CRS IS OF REVENUE NATURE HAD THAT BEEN THE REAL FACT THE COURT WOULD NOT HAVE ORDERED THE ALLOTMENT OF THE SHARES. THE HON A.O HAS FAILED TO DISTINGUISH THE PRIMARY CHARACTER OF THE SAID RECEIPT FROM CAPITAL AS CONTESTED BY THE APPELLANT WITH THE VAGUE PRESUMPTION HOLDING IT AS REVENUE RECEIPT. IT IS IN NO WAY ESTABLISHED BY THE HON A.O THAT IT IS A REVENUE RECEIPT. IN LIEU OF THIS THE CHARGING PROVISIONS UNDER SEC 56(1) AND 56(2) WILL FAIL TO OPERATE WITH A JOINT READING OF SEC 4 OF THE IT. ACT 1961 AND THE R ECEIPT IS NOT CHARGEABLE TO TAX AS INCOME IS DIVERTED AT SOURCE DUE TO PETITION BY MRS.N.SUNITHA AND ALLOTMENT OF SHARES TO HER. IN VIEW OF THE ABOVE WE RESPECTFULLY SUBMIT THAT - SHARE APPLICATION MONEY OF RS.4 49 00 000 / - WHICH WAS CREDITED TO CAPITAL RESERVE ACCOUNT IS A CAPITAL RECEIPT NOT CHARGEABLE TO TAX. 8 ITA NO. 226/PNJ/2013 (ASST. YEAR : 2007 - 08) WITHOUT PREJUDICE TO THE ABOVE THE RECEIPT IS NOT CHARGEABLE TO TAX AS MRS.N.SUNITHA WAS ALLOTTED 25% SHAREHOLDING CONSEQUENT TO PETITION FILED BY HER AND CONSENT TERMS AGREED THEREUPON AND THERE WAS A DIVERSION OF INCOME BY OVERRIDING TITLE. 2.2 THE LD. DR ON THE OTHER HAND RELIED ON THE ORDER OF THE TAX AUTHORITIES BELOW. 2.3 WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSION AND PERUSED THE MATTER ON RECORD. WE NOTED THAT IN THIS CASE IT HAS NOT BEEN DENIED BY THE REVENUE AUTHORITIES THAT THE MONEY HAS BEEN RECEIVED BY THE ASSESSEE COMPANY FROM MRS. N. SUNITHA BY CHEQUE ON 26.5.2006. THE CLAIM OF THE ASSESSEE IS THAT THE MO NEY HAS BEEN RECEIVED AS SHARE APPLICATION MONEY OUT OF WHICH RS. 50 LACS WAS REFUNDED TO HER ON 10.8.2006 AND BALANCE AMOUNT OF RS. 4.49 CRORES WAS ALLOCATED TOWARDS SHARE APPLICATION AS RS. 25 LACS FOR SHARE CAPITAL SUBSCRIPTION AND BALANCE OF RS. 424 LA CS TOWARDS SHARE PREMIUM FOR THE PURCHASE OF 50 000 SHARES OF RS. 50/ - (PARTLY PAID UP) AT A SHARE PREM IUM OF RS. 848/ - FOR THE SAME AND THE SAME HAS BEEN RECORDED IN THE BOOKS OF ACCOUNTS OF THE COMPANY AS SHARE CAPITAL OF RS. 25 LACS AND SHARE PREMIUM OF RS. 424 LACS. IT IS ALSO CLAIM OF THE ASSESSEE THAT THE ASSESSEE HAD DONE ALL STATUTORY COMPLIANCE AS ARE TO BE DONE UNDER THE COMPANIES ACT. EVEN THE RETURN OF ALLOTMENT IN FORM NO. 2 AND ANNUAL REPORT IN FORM 20B WERE DULY FILED. EVEN FORM 23AC WHICH HAS THE BALANCE SHEET AND PROFIT & LOSS ACCOUNT OF THE ASSESSEE COMPANY ALSO DEPICTS THESE FACTS. COPY OF THESE DOCUMENTS WAS ALSO FILED BEFORE US IN THE PAPER BOOK. IN FORM NO. 2 WE NOTED THAT THE DATE OF ALLOTMENT OF SHARE HAS BEEN SHOWN AS 14.3.2007 . SIMILA RLY IN FORM NO. 20B WE NOTED THAT THE DATE OF THE ANNUAL GENERAL MEETING OF THE COMPANY HAS BEEN SHOWN AS 29.9.2008. THESE SHARES WERE ALLOTTED AS PARTLY PAID. SUBSEQUENTLY THE COMPANY ON 1.3.2008 FORFEITED THE SHARES AS THE CALLS ON THE SHAR ES MADE ON 23.7.2007 REMAINED UNPAID. SUBSEQUENT TO THAT WE NOTED THAT MRS. N. SUNITHA FILED A PETITION BEFORE THE HON'BLE HIGH COURT OF MUMBAI AT GOA COPY OF WHICH IS ALSO 9 ITA NO. 226/PNJ/2013 (ASST. YEAR : 2007 - 08) AVAILABLE AT PG. 26 AND 27 OF THE PAPER BOOK. SUBSEQUENT TO THAT A CONSENT ORD ER WAS PASSED AND ON THE BASIS OF THAT THE ASSESSEE WAS MADE SHAREHOLDER FOR 25% OF THE SHARES OF THE COMPANY. THE REVENUE EVEN THOUGH ACCEPTED THAT THE MONEY HAS BEEN RECEIVED FROM MRS. N. SUNITHA AND DID NOT DOUBT ABOUT THE AMOUNT BEING RECEIVED FROM MRS. N. SUNITHA TREATED IT AS INCOME FROM OTHER SOURCES CHARGEABLE TO TAX AS IF THE MONEY HAS BEEN RECEIVED BY THE COMPANY FOR RENDERING ANY SERVICE TO MRS. N. SUNITHA. WHEN A QUERY WAS RAISED TO LD. DR FROM THE BENCH WHETHER ANY EVIDENCE IS FOUND OR IN POSSESSION OF THE REVENUE THAT THE MONEY HAS BEEN RECEIVED AGAINST RENDERING OF SERVICE BY THE COMPANY THE LD. DR WAS FAIR ENOUGH TO CONCEDE THAT THERE IS NO SUCH EVIDENCE AVAILABLE ON RECORD. WE NOTED THAT THERE HAD BEEN A SEARCH IN THE CASE OF MRS. N. SURYANARAYANA THE HUSBAND OF MRS. N. SUNITHA AND IN THE CASE OF MR. SADIQ SHEIKH BUT NO SUCH EVIDENCE WAS FOUND WHICH MAY PROVE THAT MRS. N. SUNITHA HAS PAID SUM OF RS. 4.99 CRORES FOR AVAILING OF ANY SERVICES FROM THE COMPANY SO THAT THE SAID AMOUNT MAY BECOME A REVENUE RECEIPT IN THE HANDS OF THE ASSESSEE COMPANY. U/S 4 OF THE INCOME TAX ACT INCOME TAX IS CHARGEABLE ON THE REAL INCOME. UNTIL AND UNLESS THE INCOME HAS NOT ACCRUED OR RECEIVED BY THE ASSESSEE THE AMOUNT RECEIVED CANNOT BE REGARDED TO BE THE INCOME. IT IS NOT THE CASE OF THE REVENUE THAT THE PROVISIONS OF SEC. 68 ARE APPLICABLE TO THIS SUM OF RS. 4.99 CRORES. THIS IS A SETTLED LAW IN VIEW OF THE DECISION OF HON'BLE SUPREME COURT IN PARIMISETTI SEETHARAMAMMA VS. CIT 57 ITR 532 IN WHICH IT WAS HELD THAT WHEN A RECEIPT IS SOUGHT TO BE TAXED AS INCOME THE BURDEN LIES UPON THE DEPARTMENT TO PROVE THAT IT IS WITHIN THE TAXING PROVISION. WHERE HOWEVER RECEIPT IS OF THE NATURE OF INCOME THE BURDEN OF PROVING THAT IT IS NOT TAXABLE BECAUSE IT FALLS WITHIN AN EXEMPTION PROVIDED BY THE ACT LIES UPON THE ASSESSEE. SINCE THERE IS NO EVIDENCE ON RECORD THAT THE AMOUNT HAS BEEN RECEIVED BY THE ASSESSEE TOWARDS RENDERING OF SERVICES THEREFORE IN OUR OPINION THE ASSESSEE IS BOUND TO SUCCEED. WE ACCORDINGLY SET ASIDE THE ORDER OF CIT(A) AND DELETE THE ADDITION OF RS. 4.99 CRORES. 10 ITA NO. 226/PNJ/2013 (ASST. YEAR : 2007 - 08) 3. IN THE RESULT THE APPEAL FILED BY THE ASSESSEE IS ALLOWED. 4. ORDER PRONOUNCED IN THE OPEN COURT ON 2 5 / 1 0/2013. S D / - (D.T.GARASIA) JUDICIAL MEMBER S D / - (P.K. BANSAL) ACCOUNTANT MEMBER PLACE : PANAJI / GOA DATED : 2 5 / 1 0/ 2013 *SSL* COPY TO : (1) APPELLANT (2) RESPONDENT (3) CIT PANAJI (4) CIT(A) PANAJI (5) D.R (6) GUARD FILE TRUE COPY BY ORDER SR. P RIVATE S ECRETARY ITAT PANAJI GOA