The ACIT,, Bhopal v. M/s Devshree Project Pvt. Ltd., Rajkot

ITA 387/IND/2009 | 2005-2006
Pronouncement Date: 30-03-2011 | Result: Dismissed

Appeal Details

RSA Number 38722714 RSA 2009
Bench Indore
Appeal Number ITA 387/IND/2009
Duration Of Justice 1 year(s) 8 month(s) 3 day(s)
Appellant The ACIT,, Bhopal
Respondent M/s Devshree Project Pvt. Ltd., Rajkot
Appeal Type Income Tax Appeal
Pronouncement Date 30-03-2011
Appeal Filed By Department
Order Result Dismissed
Bench Allotted DB
Tribunal Order Date 30-03-2011
Date Of Final Hearing 30-03-2011
Next Hearing Date 30-03-2011
Assessment Year 2005-2006
Appeal Filed On 27-07-2009
Judgment Text
1 IN THE INCOME TAX APPELLATE TRIBUNAL INDORE BENCH INDORE BEFORE SHRI JOGINDER SINGH JUDICIAL MEMBER AND SHRI R.C. SHARMA ACCOUNTANT MEMBER ITA NO.387/IND/2009 A.Y.2005-06 ASSTT. COMMISSIONER OF INCOME TAX 1(1) BHOPAL APPELLANT VS M/S DEVSHREE PROJECT PVT. LTD RAJKOT PAN AACCD-0961C RESPONDENT APPELLANT BY : SHRI KESHAV SAXENA CIT DR RESPONDENT BY : SHRI VINIT MATTHA CA O R D E R PER JOGINDER SINGH JUDICIAL MEMBER THIS IS AN APPEAL BY THE REVENUE AGAINST THE ORDER OF THE LEARNED CIT(A) DATED 7.5.2009 ON THE GROUND THAT THE LEARNE D COMMISSIONER OF INCOME TAX (APPEALS) WAS NOT JUSTIFIED IN DELETING THE ADDITION OF RS.90 50 000/- ON ACCOUNT OF UNEXPLAINED SHARE CAPI TAL AND RS. 75 42 904/- ON ACCOUNT OF UNEXPLAINED UNSECURED LOA N MADE BY THE ASSESSING OFFICER U/S 68 OT THE INCOME TAX ACT. 2. DURING HEARING WE HAVE HEARD SHRI KESHAV SAXENA LEARNED CIT DR AND SHRI VINEET MATTHA LD. COUNSEL FOR THE ASSE SSEE. THE CRUX OF 2 ARGUMENTS ON BEHALF OF THE REVENUE IS THAT THE PROJ ECT OF THE ASSESSEE FAILED AND DID NOT START CREDIT WORTHINESS OF THE CREDITORS WAS NOT PROVED CONFIRMATION LETTERS WERE NOT SIGNED BY THE CREDITO RS THERE WAS NO PROOF OF SOURCE OF INCOME AND IN INDIA THEY ARE HAVING ON LY INTEREST INCOME PERSONAL BALANCE-SHEET WAS NOT PRODUCED AND EVEN TH E CONFIRMATION LETTERS WERE SIGNED BY ONE PATEL. OUR SPECIFIC ATT ENTION WAS INVITED TO PAGES 140 184 AND 192 OF THE PAPER BOOK. ON THE OT HER HAND THE LD. COUNSEL FOR THE ASSESSEE STRONGLY DEFENDED THE IMPU GNED ORDER BY CONTENDING THAT EVEN THE REMAND REPORT WAS SOUGHT F ROM THE ASSESSING OFFICER AND THE COMMENTS OF THE ASSESSING OFFICER W ERE DULY ENTERTAINED. THE ASSESSING OFFICER WAS PERSONALLY CALLED BY THE LD. FIRST APPELLATE AUTHORITY. 3. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS OF LD. REPRESENTATIVES OF BOTH SIDES AND PERUSED THE MATERIAL AVAILABLE ON RE CORD. BRIEF FACTS ARE THAT THE ASSESSEE COMPANY WAS INCORPORATED ON 13.1. 2005 WAS ENGAGED IN BUSINESS OF CONSTRUCTION BUILDING ERECT ION AND DEVELOPMENT OF INFRA-STRUCTURE ROADS ETC. THE ASSESSEE COMPANY UNDERTOOK SUB- CONTRACT FOR LAYING OF ROAD IN BHOPAL/VIDISHA DISTR ICT OF MADHYA PRADESH FROM M/S BACKBONE ENTERPRISES LIMITED. HOWEVER NO COMMERCIAL ACTIVITY WAS STARTED CONSEQUENTLY NO REVENUE INCOME ACCRUED ACCORDINGLY NO PROFIT AND LOSS ACCOUNT WAS PREPARE D. THE ASSESSEE SHOWED NIL INCOME IN ITS RETURN FILED ON 30.10.2005 . THERE WERE FOUR 3 DIRECTORS NAMELY SHRI CHIRAG PATEL (CHAIRMAN) AND SHRI SANJAY JAIN SHRI MANOJ VYAS AND SHRI PRADEEP PATEL AS DIRECTORS . THE AUTHORIZED SHARE CAPITAL OF THE COMPANY WAS RS. 10 LACS EQUIT Y SHARES OF RS. 10/- EACH TOTALING TO RS. 1 CRORES. 5 PERSONS INCLUDING AFORESAID FOUR DIRECTORS SUBSCRIBED TO EQUITY SHARE CAPITAL AS PER MEMORANDU M OF ASSOCIATION ON 13.1.2005 AS UNDER :- NAME OF DIRECTOR NO. OF SHARES VALUE (IN RS.) SHRI CHIRAG PATEL 2500 25 000 SHRI PRADEEP PATEL 2500 25 000 SHRI SANJAY JAIN 2500 25 000 SHRI MANOJ VYAS 2500 25 000 SHRI SANTOSH KUMAR BADOLA 500 5 000 AS PER THE LEARNED CIT DR AS WELL AS THE ASSESSING OFFICER THE NOTICES SENT TO THE ASSESSEE WERE NOT COMPLIED WITH WHICH R ESULTED INTO EX-PARTE ORDER U/S 144 OF THE ACT. THE COMPANY CLOSED ITS B USINESS DUE TO MAJOR DIFFERENCES WITH ITS CONTRACT AWARDED BY M/S BACKBO NE ENTERPRISES LIMITED. THEIR TIES SEWERED WHICH RESULTED INTO HUG E LOSSES. AS THE ASSESSEE COMPANY INCURRED SUBSTANTIAL EXPENSES FROM THE INITIAL FUNDS CONTRIBUTED BY THE PROMOTER DIRECTOR NO FURTHER LI QUIDITY LEFT WITH THE 4 ASSESSEE COMPANY TO CARRY ON THE BUSINESS. THIS AL SO RESULTED IN SEVERANCE OF RELATIONS AMONGST THE PROMOTERS/DIRECT ORS OF THE COMPANY WHICH RESULTED INTO SUICIDE OF ONE OF THE DIRECTORS NAMELY SHRI SANTOSH KUMAR BADOLA AND CURRENTLY NO BUSINESS ACTIVITY IS CARRIED ON BY THE ASSESSEE COMPANY. SHRI SANJAY JAIN CEASED TO BE THE DIRECTOR OF THE ASSESSEE COMPANY WITH EFFECT FROM 11.7.2006 I.E. ON THE DATE BEFORE SERVICE OF NOTICE U/S 143(2) OF THE ACT. IN THE PR ESENT APPEAL THE LEARNED ASSESSING OFFICER HELD THAT ALL THE FOUR NO N-RESIDENTS HAVE CUMULATIVELY INVESTED RS. 1 CRORE IN THE ASSESSEE C OMPANY AND RS. 25 LACS IN THE FORM OF SHARE CAPITAL INVESTMENT AND BA LANCE RS. 75 LACS AS UNSECURED LOANS ALL THE NON-RESIDENTS BELONG TO TH E SAME KARA FAMILY AND HAVE FILED INCOMETAX RETURNS IN INDIA OF INTERE ST INCOME ONLY THEREFORE THEIR CAPACITY IS NOT PROVED. IT WAS ALS O HELD THAT ALL THE NON- RESIDENTS HAVE NOT FILED THEIR COPIES OF TAX RETURN S FILED OUTSIDE INDIA AND ALSO IN THE ABSENCE OF THEIR BANK ACCOUNTS MAINTAI NED ABROAD THE INVESTMENT OF RS. 1 CRORE FOR SHARE CAPITAL AND UNS ECURED LOANS THE CREDIT WORTHINESS AND GENUINENESS OF INVESTMENT REM AINED UNPROVED. THE SUFFICIENCY OF CREDIT WORTHINESS WAS DOUBTED. WE HAVE FOUND THAT IN SUPPORT OF ITS CLAIM IN THE CASE OF SHRI CHIRAG PAT EL FOR THE INVESTMENT OF RS.25 75 000/- IN EQUITY SHARE CAPITAL CONFIRMATIO N LETTER INCOME TAX RETURN FOR THE ASSESSMENT YEAR 2005-06 AUDITED FIN ANCIAL STATEMENTS OF M/S UNION CONSTRUCTION COMPANY GUJARAT FOR THE FI NANCIAL YEAR 2004- 5 05 WHERE HE WAS A PARTNER WITH 20% SHARE BANK ACCO UNTS OF M/S UNION CONSTRUCTION COMPANY FOR THE PERIOD 1.1.2005 TO 31. 3.2005 WHEREIN CHEQUES WERE ISSUED IN FAVOUR OF THE ASSESSEE COMPA NY ON BEHALF OF SHRI CHIRAG PATEL INCOME TAX RETURN OF UNION CONST RUCTION COMPANY FOR THE ASSESSMENT YEAR 2005-06 AND COPY OF LEDGER ACCO UNT OF SHRI CHIRAG PATEL IN THE BOOKS OF M/S UNION CONSTRUCTION COMPAN Y WERE FILED. THE ASSESSEE HAS ANNEXED THE COPIES OF ALL THESE DOCUME NTS IN THE PAPER BOOK. EVEN THE RECOVERY SUIT WAS FILED BY THE CREDI TORS (4 NRIS)/KARA FAMILY AGAINST M/S BACKBONE ENTERPRISES LIMITED AND THE ASSESSEE COMPANY (PAGES 193 TO 196 OF THE PAPER BOOK). IF A LL THESE DOCUMENTS ARE KEPT IN JUXTAPOSITION WITH THE FINDING OF THE L EARNED ASSESSING OFFICER AND THE CONCLUSION DRAWN IN THE IMPUGNED ORDER ARE ANALYSED WE FIND THAT SINCE SHRI CHIRAG PATEL WAS HAVING PERMANENT A CCOUNT NUMBER HIS IDENTITY CAPACITY AND GENUINENESS OF TRANSACTION IS PROVED. IDENTICAL IS THE SITUATION FOR INVESTMENT OF RS.6 25 000/- IN EQ UITY SHARE CAPITAL AND UNSECURED LOAN OF RS.18 75 000/- IN THE CASE OF SMT . DHRUTI PRATISHKARA AND FOR INVESTMENT OF RS.6 25 000/- IN EQUITY SHARE CAPITAL AND UNSECURED LOAN OF RS. 18 75 000/- IN THE CASE OF SH RI PRATISH M. KARA. IN THE CASE OF SMT. SHILPA D. KARA FOR INVESTMENT OF R S.6 25 000/- IN EQUITY SHARE CAPITAL AND UNSECURED LOAN OF RS. 18 75 000/- THE FOREIGN INWARD REMITTANCE CERTIFICATE ISSUED BY ICICI BANK WAS ALS O FILED ALONG WITH OTHERS. SIMILAR IS THE SITUATION IN THE CASE OF SH RI DEEPAK M. KARA FOR 6 IDENTICAL INVESTMENT. FOR INVESTMENT OF RS.4 LACS IN EQUITY SHARE CAPITAL IN THE CASE OF SHRI MANOJ VYAS CONFIRMATION LETTER INCOME TAX RETURN FOR THE ASSESSMENT YEAR 2005-06 AND BANK ACCOUNT DETAIL S FROM THE INVESTMENT WAS MADE WERE ALSO FILED. IDENTICAL IS THE SITUATION IN THE CASE OF SHRI SANJAY JAIN MR. SANTOSH BADOLA. ALL THE SHARE CAPITAL INVESTMENT IS DULY RECORDED IN THE REGISTRAR OF COM PANIES MINISTRY OF CORPORATE AFFAIRS GOVT. OF INDIA AND THE SAME IS E VIDENT FROM SEARCH REPORT. THE ASSESSEE COMPANY RECEIVED INVESTMENT IN SHARE CAPITAL AND UNSECURED LOANS THROUGH BANKING CHANNEL EXCEPT RS. 25 000/- FROM SHRI PRADEEP PATEL WHO HAS ALSO FURNISHED COMPLETE DETAI LS OF SHARE HOLDERS/INVESTORS. IT IS NOT THE CASE OF THE DEPAR TMENT THAT THERE WAS ANY EVIDENCE INDICATING THAT SUCH SHARE HOLDERS/UNS ECURED LOANS WERE BENAMIDARS OR FICTITIOUS PERSONS OR SUCH MONEY REPR ESENTED OWN MONEY OF THE ASSESSEE. IT IS ALSO NOT THE CASE THAT THE FRESH ADDITIONAL EVIDENCE FILED BY THE ASSESSEE BEFORE THE LEARNED COMMISSION ER OF INCOME TAX (APPEALS) WERE IN ANY WAY FABRICATED OR WERE MADE A S AN AFTER-THOUGHT SINCE THE ASSESSEE IS A COMPANY IT IS NOT EXPECTED TO EXPLAIN THE SOURCE OF MONEY OBTAINED BY SUBSCRIBERS AS SHARE CAPITAL/U NSECURED LOAN ESPECIALLY WHEN IT CAME THROUGH BANKING CHANNEL AND THEIR IDENTITY IS PROVED. IN SUCH A SITUATION WE FIND NO INFIRMITY IN THE CONCLUSION DRAWN BY THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) . THE STAND OF THE ASSESSEE IS FURTHER FORTIFIED BY THE DECISION FROM THE HONBLE APEX COURT 7 IN THE CASE OF LOVELY EXPORT; 216 CTR 195(SC) DIVI NE LEASING; 299 ITR 268 (DEL). THE HONBLE DELHI HIGH COURT WHILE COMI NG TO A PARTICULAR CONCLUSION PLACED RELIANCE UPON VARIOUS JUDICIAL PR ONOUNCEMENTS AS AVAILABLE AT PAGES 270 AND 271 OF THE ORDER. THE HO NBLE APEX COURT IN THE CASE OF LOVELY EXPORTS PRIVATE LIMITED (SUPRA) EVEN WENT TO THE EXTENT THAT IF THE SHARE APPLICATION MONEY RECEIVE D BY THE ASSESSEE COMPANY FROM ALLEGED BOGUS SHARE HOLDERS WHOSE NA MES ARE GIVEN TO THE ASSESSING OFFICER THEN THE DEPARTMENT IS FREE TO PROCEED TO REOPEN THEIR INDIVIDUAL ASSESSMENTS IN ACCORDANCE WITH LAW BUT THIS AMOUNT OF SHARE MONEY CANNOT BE REGARDED AS UNDISCLOSED INCOM E U/S 68 OF THE ACT OF THE ASSESSEE COMPANY. AS FAR AS THE ARGUMEN T OF THE LEARNED CIT DR THAT CONFIRMATION LETTERS WERE SIGNED BY ONE MR. PATEL AND NOT BY THE CREDITORS WE FIND THAT GENERAL POWER OF ATTORN EY (PAGES 179 TO 181 OF THE PAPER BOOK) WAS GIVEN BY THE CREDITORS IN T HE NAME OF SHRI PATEL AND THEIR INCOME TAX RETURNS WERE ALSO SIGNED BY MR . PRADEEP PATEL AND THE SAME WERE ALSO ACCEPTED BY THE DEPARTMENT AS IS EVIDENT FROM THE RECORD AVAILABLE IN THE PAPER BOOK THEREFORE THE DEPARTMENT IS NOT PERMITTED TO TAKE A U TURN FOR THIS PURPOSE. SINC E IN THE PRESENT APPEAL THE ASSESSEE HAD DISCHARGED ITS ONUS OF PROVING THE IDENTITY OF SHARE SUBSCRIBERS NO ADDITION IS WARRANTED IN THE CASE O F THE ASSESSEE. THE CASE OF THE ASSESSEE IS FURTHER FORTIFIED BECAUSE T HE GENUINENESS OF TRANSACTION AND CREDIT WORTHINESS OF THE SHARE HOLD ERS IS ALSO PROVED 8 THEREFORE NO ADDITION IS WARRANTED U/S 68 OF THE A CT CONSEQUENTLY WE FIND NO INFIRMITY IN THE CONCLUSION OF THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS). FINALLY THE APPEAL OF THE REVENUE IS DISMISSED. ORDER PRONOUNCED IN OPEN COURT IN THE PRESENCE OF LEARNED REPRESENTATIVES OF BOTH THE SIDES ON 30.3.2011. (R.C.SHARMA) (JOGINDER SINGH) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 30 TH MARCH 2011 COPY TO: APPELLANT RESPONDENT CIT CIT(A) DR G UARD FILE DN/- 9