The ACIT, Cent Circle-1(3), Ahmedabad v. M/S Manwar Hotels Ltd, Ahmedabad

ITA 2510/AHD/2002 | 1997-1998
Pronouncement Date: 12-01-2010 | Result: Dismissed

Appeal Details

RSA Number 251020514 RSA 2002
Bench Ahmedabad
Appeal Number ITA 2510/AHD/2002
Duration Of Justice 7 year(s) 5 month(s) 10 day(s)
Appellant The ACIT, Cent Circle-1(3), Ahmedabad
Respondent M/S Manwar Hotels Ltd, Ahmedabad
Appeal Type Income Tax Appeal
Pronouncement Date 12-01-2010
Appeal Filed By Department
Order Result Dismissed
Bench Allotted C
Tribunal Order Date 12-01-2010
Date Of Final Hearing 12-01-2010
Next Hearing Date 12-01-2010
Assessment Year 1997-1998
Appeal Filed On 02-08-2002
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCH C AHMEDABAD BEFORE SHRI MAHAVIR SINGH JUDICIAL MEMBER AND SHRI A.N.PAHUJA ACCOUNTANT MEMBER ITA NO.2510/AHD/2002 ASSESSMENT YEAR:1997-98 DATE OF HEARING:12.1.10 DRAFTED:15.1.10 ASSTT. COMMISSIONER OF INCOME-TAX CENTRAL CIRCLE-1(3) AHMEDABAD V/S. MARWAR HOTEL LTD. AIRPORT CROSS ROAD HANSOL AHMEDABAD PAN NO. NOT FOUND (APPELLANT) .. (RESPONDENT) ITA NO.2520/AHD/2002 ASSESSMENT YEAR:1997-98 ASSTT. COMMISSIONER OF INCOME-TAX CENTRAL CIRCLE-1(3) AHMEDABAD V/S. CHAMPAWAT INVESTMENTS & CONSULTANTS PVT. LTD. OPP. CHINUBHAI FARM HOUSE AIRPORT CROSS ROAD HANSOL AHMEDABAD PAN NO. NOT FOUND (APPELLANT) .. (RESPONDENT) ITA NO.2528/AHD/2002 ASSESSMENT YEAR:1997-98 ASSTT. COMMISSIONER OF INCOME-TAX CENTRAL CIRCLE-1(3) AHMEDABAD V/S. ELCON EXPORTS PVT. LTD. AIRPORT CROSS ROAD HANSOL AHMEDABAD PAN NO. NOT FOUND (APPELLANT) .. (RESPONDENT) ASSESSEE BY :- SHRISAURABH N SOPARKAR AR REVENUE BY:- SHRI SHELLEY JINDAL CIT DR ITA NO.2510 2520 & 2528/AHD/2002 A.Y 199 7-98 ACIT CC-1 ABD V. M/S.MARWAR HOTEL LTD C. INVST. & CONSULT ANTS P.LTD & ELCON EXPORTS PVT. LTD. PAGE 2 O R D E R PER MAHAVIR SINGH JUDICIAL MEMBER:- THESE THREE APPEALS BY REVENUE OF DIFFERENT ASSESS EE ARE ARISING OUT OF DIFFERENT ORDERS OF COMMISSIONER OF INCOME-TAX(APPE ALS)-I AHMEDABAD IN APPEAL NOS. CIT(A)-CC.1[3]/98 95 100/2000-01 BY DIFFEREN T DATE 07-05-2002 10-05-2002 AND 09-05-2002. THE ASSESSMENTS WERE FRAMED BY THE DCIT CENTRAL CIRCLE-1(3) AHMEDABAD U/S.143(3) OF THE INCOME-TAX ACT 1961 (H EREINAFTER REFERRED TO AS THE ACT) VIDE HIS DIFFERENT ORDERS DATED 31-03-2000 AN D 29-03-2000 FOR THE ASSESSMENT YEAR 1997-98 RESPECTIVELY. 2. THE FIRST COMMON ISSUE IN ALL THREE APPEALS OF R EVENUE IS AS REGARDS TO THE ORDER OF CIT(A) IN DELETING THE ADDITION MADE BY TH E ASSESSING OFFICER ON ACCOUNT OF INVOKING OF SECTION 68 OF THE ACT BY TREATING THE S HARE APPLICATION MONEY AS UNEXPLAINED CREDIT AMOUNTING TO RS.1.40 CRORES RS. 60 LAKHS AND RS.20 LAKHS IN THE CASE OF MARWAR HOTEL LTD. CHAMPAWAT INVESTMENTS & CONSULTANTS PVT. LTD. AND ELCON EXPORTS PVT. LTD. RESPECTIVELY. THE FACTS AR E EXACTLY IDENTICAL IN ALL THE CASES HENCE WE WILL DISCUSS THE FACTS IN THE CASE OF MARWAR HOTEL LTD. 3. THE BRIEF FACTS LEADING TO THE ABOVE COMMON ISSU E ARE THAT THE ASSESSEE- COMPANY RECEIVED SHARE APPLICATION MONEY OF RS.1 55 95 000/- AND OUT OF WHICH A SUM OF RS.1.40 CRORES WAS RECEIVED FROM THE SISTER CONCERNS OF GROUP CASE. ACCORDING TO THE ASSESSING OFFICER ACTUALLY THERE I S NO MONEY WHICH HAS BEEN TRANSACTED BUT ONLY CHEQUES WERE TRANSFERRED FROM O NE CONCERN TO ANOTHER AND ACCORDINGLY THE AO CALLED FOR THE BANK ACCOUNT AND THE ASSESSEE FILED THE DETAILS. THE ASSESSEE NOTED THE FACTS FROM THE ORDERS OF THE LOWER AUTHORITIES ARE THAT THE:- 1. ELCON FINLEASE INDS. LTD. CURRENT ACCOUNT WITH M ARWAR HOTELS LTD. 2. ELCO FUINLEASE INDS. LTD. GAVE LOAN OF RS.80 LAC S TO 16 INDIVIDUALS (12+4) @ RS.5 LACS EACH ITA NO.2510 2520 & 2528/AHD/2002 A.Y 199 7-98 ACIT CC-1 ABD V. M/S.MARWAR HOTEL LTD C. INVST. & CONSULT ANTS P.LTD & ELCON EXPORTS PVT. LTD. PAGE 3 3. OUT OF 16 INDIVIDUALS 12 INDIVIDUALS APPLIED FO R SHARES IN CHAMPAVAT INVESTMENT & CONSULTANTS PVT. LTD. AND 4 INDIVIDUAL S APPLIED FOR SHARES IN ELCON EXPORTS PVT. LTD. EACH FOR RS.5 LACS. 4. THE TWO COMPANIES: CHAMPAVAT INVESTMENT & CONSUL TANTS PVT. LTD. AND ELCON EXPORTS PVT. LTD. GAVE THIS AMOUNT OF RS.80 L ACS TO MARWAR HOTELS LTD. AS SHARE APPLICATION MONEY. ELCON FINLEASE INDS. LT D. GAVE RS.60 LACS BY WAY OF SHARE APPLICATION MONEY TO MARWAR HOTELS LTD. 5. THIS AMOUNT OF RS.140 LACS RECEIVED BY THE MARWA R HOTELS LTD. BY WAY OF SHARE APPLICATION MONEY WAS GIVEN TO ELCON FINLEASE INDS. LTD. IN CURRENT ACCOUNT. THE ASSESSING OFFICER ALSO NOTED AFTER VERIFYING T HE BANK ACCOUNT AND THE DEBIT & CREDIT ENTRIES MADE ON THE SAME DATE THAT NEITHER ANY MONEY IS RECEIVED BY THE COMPANY NOR ANY PAYMENT MADE BY THE COMPANY TO THE OTHER CONCERNS AND ACCORDING TO HIM THERE IS NOTHING BUT PASSING OF T WO CHEQUES OF IDENTICAL AMOUNTS ON THE SAME DATE. 4. IN VIEW OF THE ABOVE TRANSACTIONS OR CHAIN OF TR ANSACTIONS THE ASSESSING OFFICER WAS OF THE VIEW THAT THIS IS A COLOURFUL D EVISE TO DEFRAUD THE REVENUE AND ACCORDINGLY HE APPLIED THE CASE LAW OF MCDOWELL AND CO. LTD. V. CIT (1985) 154 ITR 148 (SC). ACCORDINGLY HE MADE ADDITION BY GIVING FOLLOWING FINDING IN PAGE-11 AND 12 OF HIS APPELLATE ORDER:- AFTER TAKING INTO CONSIDERATION THE FACTS OF THE C HAMPAVAT INVESTMENT AND ELCON EXPORT SHARE APPLICATION MONEY SHOWN IN THE CASE OF THE ASSESSEE AS THE SAME ISSUE IS INVOLVED IN THIS CASE SHARE APPL ICATION MONEY IS TREATED AS NOT SATISFACTORILY EXPLAINED. OUT OF THE AMOUNT RS .1.40 CRORES RS.60 LACS IS TAXED IN THE CASE OF THE CHAMPAVAT INVESTMENT AND R S.20 LACS IS TAXED IN THE CASE OF ELCON EXPORT. SUBSEQUENTLY SO TO THAT EXTE NT THE AMOUNT IS TO TAXED PROTECTIVELY IN THE CASE OF COMPANY. SECONDLY AS TH E OTHER BENEFICIARY OF THE CHAIN OF THE TRANSACTION IS ELCON FINLEASE THIS TR ANSFER OF SHARES OF RS.60 LACS IS TAXED U/S.28(IV) OF THE I.T. ACT SECTION 28(IV) OF THE I.T. ACT IS AS UNDER:- THE VALUE OF ANY BENEFIT OR PERQUISITE WHETHER CO NVERTIBLE INTO MONEY OR NOT ARISING FROM BUSINESS OR THE EXERCISE OF A PROFESSION IS TAXABLE UNDER SEC. 8(IV) OF THE I.T. ACT. AS IN THE CASE OF ELCON FINLEASE DURING THE COURSE OF BUSINESS THEY HAVE RECEIVED THE BENEFIT OF RS.60 LACS SHARE BY TRANSFE R OF SHARES WITHOUT PAYMENT ITA NO.2510 2520 & 2528/AHD/2002 A.Y 199 7-98 ACIT CC-1 ABD V. M/S.MARWAR HOTEL LTD C. INVST. & CONSULT ANTS P.LTD & ELCON EXPORTS PVT. LTD. PAGE 4 OF A SINGLE RUPEE THIS INCOME IS TAXABLE IN THAT C ASE SUBSTANTIVELY AND RS.60 LACS IS TAXED PROTECTIVELY AND RS.60 LACS IS TAXED PROTECTIVELY IN THE CASE OF THE ASSESSEE. THEREFORE IN VIES OF THE ABOVE DISCUSSED FACTS SH ARE APPLICATION MONEY OF RS.1.40 CRORE IS PROTECTIVELY TAXED IN THE CASE OF THE ASSESSEE. AGGRIEVED THE ASSESSEE PREFERRED APPEAL BEFORE CIT (A) AND CIT(A) DELETED THE ADDITION BY GIVING FOLLOWING FINDING IN PAGE-21 AND 22 OF HIS APPELLATE ORDER:- I HAVE CAREFULLY CONSIDERED THE SUBMISSIONS MADE A ND I HAVE ALSO GONE THROUGH THE ASSESSMENT ORDER. I FIND THAT ALL THE T HREE APPLICANTS OF SHARES WERE EXISTING COMPANIES WHO WERE ASSESSED TO TAX WI TH THE SAME ASSESSING OFFICER. CHEQUES ISSUED BY THE APPLICANTS IN RESPEC T OF SHARE APPLICATION MONEY WERE DULY DEBITED TO THEIR BANK ACCOUNTS THU S IDENTITY CAPACITY AND GENUINENESS OF TRANSACTION IS ESTABLISHED AS HELD B Y DELHI HIGH COURT IN THE CASE OF CIT VS. SOPHIA FINANCE LTD. 205 ITR 98 (FB). IT IS ALSO SEEN THAT A SUM OF RS.140 LACS WAS ADVANCED TO M/S. ELCON FINLE ASE & INDS. LTD. ON WHICH INTEREST WAS RECEIVED BY THE APPELLANT WHICH HAS ALSO BEEN TAXED BY THE ASSESSING OFFICER. THUS THE ASSESSING OFFICER CANNOT DRAW ANY SUPPORT FROM SECTION 28(IV) OF THE ACT ALSO BECAUSE NO BENE FIT OR PERQUISITE HAS ARISEN FROM BUSINESS OR EXERCISE OF A PROFESSION IN A TAX PAYERS BUSINESS INCOME. THIS BECOMES ALL THE MORE IMPORTANT BECAUSE EVEN AS PER THE ASSESSING OFFICER NO BUSINESS HAS BEEN STARTED AND ENTIRE IN COME IS TAXED UNDER THE HEAD OTHER SOURCES. HENCE SECTION 28(IV) CANNOT HAVE ANY APPLICATION ON THE FACTS OF THE CASE. AS DISCUSSED EARLIER AS IDE NTITY OF THE DEPOSITOR OF SHARE APPLICATION MONEY HAS BEEN ESTABLISHED AND AS THOSE PERSONS ARE ASSESSED TO TAX WITH THE SAME ASSESSING OFFICER SECTION 68 OF THE ACT IS ALSO NOT ATTRACTED. THE ADDITION IS THEREFORE DELETED. AGGRIEVED THE REVENUE IS IN APPEAL BEFORE US. 5. AFTER HEARING THE RIVAL CONTENTIONS AND GOING TH ROUGH THE CASE RECORDS WE FIND THAT RS.1.40 CRORE IS RECEIVED FROM THE SISTER CONCERNS OF THE GROUP AND IT IS ALSO PROVED THAT ACTUALLY THE ASSESSEES MONEY WAS TRANS ACTED ONLY THOUGH CHEQUES WHICH WAS TRANSFERRED FROM ONE CONCERN TO ANOTHER. WE FIND THAT THE ASSESSING OFFICER WAS ALSO OF THE VIEW THAT THIS IS A CHAIN O F TRANSFER OF MONEY FROM ONE HAND TO THE OTHER HAND AND ACTUALLY THERE IS NO MONEY TRANS ACTED AND ONLY CHEQUES WERE TRANSFERRED TO ONE CONCERN TO ANOTHER AS REFERRED B Y THE LOWER AUTHORITIES THE BANK STATEMENT OF UNION BANK OF INDIA. THE ASSESSEE-COMP ANY HAS RECEIVED AN AMOUNT OF RS.1.40 CRORE AND AGAIN DEBITED ON THE SAME DATE TO AN AMOUNT REPAID / UTILIZED AS NARRATED ABOVE IN THE SEQUENCE OF EVENTS. WE ARE OF THE VIEW THAT THIS IS A MONEY TRANSFER FROM ONE HAND TO OTHER HAND OF THE COMPANY . THERE IS NO QUESTION OF ANY ITA NO.2510 2520 & 2528/AHD/2002 A.Y 199 7-98 ACIT CC-1 ABD V. M/S.MARWAR HOTEL LTD C. INVST. & CONSULT ANTS P.LTD & ELCON EXPORTS PVT. LTD. PAGE 5 INCOME EARNED BY THE ASSESSEE BY WAY OF THESE TRANS ACTIONS AS THE MONEY BELONGS TO ASSESSEE-COMPANY ONLY AND EVEN ASSUMING THE APPL ICATION OF THE PROVISION OF SECTION 68 OF THE ACT IN THIS CASE. THE CREDIT ENTR IES WERE RECEIVED THROUGH ACCOUNT PAYEE CHEQUES FROM SISTER CONCERN ON ACCOUNT OF SHA RE APPLICATION MONEY AND THE ASSESSEE HAS ESTABLISHED THE IDENTITY OF THE PAYEE THE CAPACITY OF PAYEE AND THE GENUINENESS OF THE TRANSACTIONS. EVEN WE FIND THAT IN THE CASE OF INDIVIDUAL THROUGH WHOM THE MONEY WAS ROTATED I.E. IN THE CASES OF SI XTEEN INDIVIDUAL ADDITIONS HAVE ALREADY BEEN DELETED. IN VIEW OF THE ABOVE FACTS A ND CIRCUMSTANCES WE FEEL THAT THIS IS NEITHER THE CASE OF INVOKING OF SECTION 68 OF TH E ACT NOR THE CASE OF ANY INCOME IN THE CASE OF ASSESSEE-COMPANY REASONS BEING THE MO NEY BELONGED TO THE ASSESSEE-COMPANY WHICH HAVE BEEN RECEIVED THROUGH INTERMEDIATES BACK TO THE ASSESSEE-COMPANY AND THE CHAIN OF TRANSACTIONS CLEA RLY SHOWS THAT THIS IS ONLY FOR THE INCREASE IN WEIGHT OF BALANCE-SHEET AND NOTHING ELSE. ACCORDINGLY WE CONFIRM THE ORDER OF CIT(A) DELETING THE ADDITION AND THE C OMMON ISSUES OF THE REVENUES APPEALS IN ITA NO.2520 & 2528/AHD/2002 IS DELETED. THIS COMMON ISSUE OF THE REVENUES APPEALS IS DISMISSED. 6. THE NEXT COMMON ISSUE IN THESE THREE APPEALS OF REVENUE IS AS REGARDS TO THE ORDER OF CIT(A) IN DELETING THE ADDITION MADE B Y THE ASSESSING OFFICER TREATING THE EXPENSE CLAIMED AS PRE-OPERATIVE EXPENSES. WE FIND FROM THE APPELLATE ORDER OF ALL THE THREE ASSESSEE THAT THE CIT(A) IN THE CASE OF MARWAR HOTELS LTD. HAS ALLOWED THE DEDUCTION OF RS.10 171/- OUT OF THE TOTAL CLAIM OF THE ASSESSEE AT RS.11 10 246/-. IN RESPECT OF CHAMPAVAT INVESTMENT & CONSULTANTS PV T. LTD. THE CIT(A) HAS NOT ALLOWED ANY CLAIM AND SIMILARLY IN THE CASE OF ELCO N EXPORTS PVT. LTD. THE CIT(A) HAS NOT ALLOWED ANY CLAIM OF EXPENDITURE CLAIMED AT RS. 13 76 835/-. WE FIND THAT CIT(A) IN THE CASE OF MARWAR HOTELS LTD. HAS GIVEN THE FIN DING IN PARA-2 AS UNDER:- 2. FIRST TWO GROUNDS OF APPEAL ARE AGAINST TAKING THE INCOME UNDER THE HEAD OTHER SOURCES AND AGAINST DISALLOWANCE OF EXPENDI TURE CLAIMED TO THE TUNE OF RS.13 76 835/-. THE REASONS GIVEN BY THE ASSESSI NG OFFICER FOR SUCH ACTION AND SUBMISSIONS OF THE LEARNED AUTHORIZED REPRESENT ATIVE ARE SIMILAR TO THOSE FOR ASSESSMENT YEAR 1996-97 WHERE A SIMILAR ACTION WAS TAKEN BY THE ASSESSING OFFICER. DURING THE COURSE OF HEARING A LETTER DATED 17/4/2002 WAS ALSO FILED WHICH WAS IDENTICAL TO THAT FOR ASSTT. Y EAR 1996-97 WHEREIN IT WAS STATED THAT INCOME MAY BE TAXED UNDER THE HEAD OTH ER SOURCES AND RELATABLE EXPENDITURE MAY BE ALLOWED. ITA NO.2510 2520 & 2528/AHD/2002 A.Y 199 7-98 ACIT CC-1 ABD V. M/S.MARWAR HOTEL LTD C. INVST. & CONSULT ANTS P.LTD & ELCON EXPORTS PVT. LTD. PAGE 6 I FIND THAT IDENTICAL ISSUE HAS BEEN DECIDED BY THE CIT(A) IN APPEAL NO. CIT(A)-I/CC.1(3)/69/99-2000 DATED 6/5/02 FOR ASSTT. YEAR 1996-97. AS POSITION OF ACCOUNTS AND CLAIM OF EXPENDITURE IS OF SIMILAR NATURE FOLLOWING THE SAID ORDER AND APPELLANTS LETTER DATED 17.4.2000 IT IS HELD THAT INCOME IS LIABLE TO BE TAXED AS INCOME FROM OTHER SOURCES AND INCOME FOR THE YEAR MAY BE TAKEN TO BE NIL AS NO PART OF EXPENSES COULD BE TRE ATED TO BE PRE-OPERATIVE IN NATURE. THESE TWO GROUNDS OF APPEAL ARE DISPOSED OF F ACCORDINGLY. WE FIND THAT THE CIT(A) IN ALL THE THREE APPEALS HA S NOT ALLOWED THE CLAIM OF THE ASSESSEE ACCORDINGLY WE ARE OF THE VIEW THAT THE GROUND RAISED BY THE REVENUE IS MISCONCEIVED AND REVENUE SHOULD NOT HAVE BEEN AGGRI EVED. ACCORDINGLY THIS COMMON ISSUE OF ALL THE THREE APPEALS OF REVENUE IS DISMISSED. 7. IN THE RESULT ALL THE THREE REVENUES APPEALS ARE DISMISSED. ORDER PRONOUNCED IN OPEN COURT ON 12/01/2010 SD/- SD/- (A.N.PAHUJA) (MAHAVIR SIN GH) (ACCOUNTANT MEMBER) (JUDICIAL MEMBER) AHMEDABAD DATED : 12/01/2010 *DKP COPY OF THE ORDER FORWARDED TO :- 1. THE APPELLANT. 2. THE RESPONDENT. 3. THE CIT(APPEALS)-I AHMEDABAD 4. THE CIT CONCERNS. 5. THE DR ITAT AHMEDABAD 6. GUARD FILE. BY ORDER /TRUE COPY/ DEPUTY / ASSTT.REGISTRAR ITAT AHMEDABAD