M/s STL Extrusion (p) Ltd, v. The Dy CIT 4 (1),

ITSSA 259/IND/2008 | 2000-2001
Pronouncement Date: 10-05-2010 | Result: Allowed

Appeal Details

RSA Number 25922716 RSA 2008
Bench Indore
Appeal Number ITSSA 259/IND/2008
Duration Of Justice 1 year(s) 4 month(s) 30 day(s)
Appellant M/s STL Extrusion (p) Ltd,
Respondent The Dy CIT 4 (1),
Appeal Type Income Tax (Search & Seizure) Appeal
Pronouncement Date 10-05-2010
Appeal Filed By Assessee
Order Result Allowed
Bench Allotted DB
Tribunal Order Date 10-05-2010
Date Of Final Hearing 06-05-2010
Next Hearing Date 06-05-2010
Assessment Year 2000-2001
Appeal Filed On 11-12-2008
Judgment Text
1 IN THE INCOME TAX APPELLATE TRIBUNAL INDORE BENCH INDORE BEFORE SHRI JOGINDER SINGH JUDICIAL MEMBER AND SHRI V.K. GUPTA ACCOUNTANT MEMBER IT(SS)A NO.259 AND 260/IND/08 A.YS. 2000-01 AND 2002-03 STL EXTRUSION (P) LIMITED INDORE PAN AAECS-3555M APPELLANT VS DY. COMMISSIONER OF INCOME TAX 4(1) INDORE RESPONDENT APPELLANT BY : SHRI PRAKASH JAIN RESPONDENT BY : SHRI K.K. SINGH O R D E R PER BENCH BOTH THESE APPEALS ARE BY THE ASSESSEES FOR DIFFERE NT ASSESSMENT YEARS AGAINST THE COMMON ORDER OF THE LEARNED CIT(A ) DATED 18.9.2008 WHEREIN FOLLOWING COMMON GROUNDS HAVE BEEN RAISED : - 1. THAT IMPUGNED ORDER PASSED BY THE LEARNED COMMISSIONER OF INCOME TAX (A) IS BAD IN LAW AS WEL L AS ON THE FACTS. IT IS BASED ON INCORRECT INTERPRE TATION OF LAW AND THE FACTS HAVE ALSO BEEN INCORRECTLY CONSTRUED. 2. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF TH E CASE THE LD. CIT(A) ERRED IN UPHOLDING THE A.O.S ACTION FOR 2 MAKING ADDITION OF RS.1 59 000/- AND RS. 15 31 200/ - RESPECTIVELY BEING AMOUNT OF SHARE APPLICATION MONE Y RECEIVED DURING THE YEAR BY ALLEGING THAT THE SAME IS BOGUS WITHOUT APPRECIATING THE FACTS OF THE CASE WITHOUT DISPROVING THE AFFIDAVITS FILED AND SUBMISS IONS MADE. 3. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF TH E CASE THE LD.CIT(A) ERRED IN UPHOLDING THE A.O.S ACTION FOR CHARGING INTEREST U/S 234B. IT IS SUBMITTED THAT T HE LD. A.O. BE DIRECTED TO CHARGE INTEREST AS PER PROVISIO NS OF SECTION 234B(3) OF THE INCOME TAX ACT. 2. DURING HEARING OF THESE APPEALS WE HAVE HEARD S HRI PRAKASH JAIN LD. COUNSEL FOR THE ASSESSEE AND SHRI K.K. SI NGH LEARNED CIT DR. THE ASSESSEE HAS ALSO FILED WRITTEN ARGUMENTS/SYNOP SIS. THE CRUX OF ARGUMENTS ON BEHALF OF THE ASSESSEE IS THAT DUE REP LY WAS FILED BY THE ASSESSEE TO THE QUERY RAISED BY THE LD. ASSESSING O FFICER ALONG WITH CONFIRMATION LETTERS OF CONCERNED SUBSCRIBERS TO TH E SHARE APPLICATION MONEY IN THE FORM OF AFFIDAVIT CONTAINING THE PARTI CULARS LIKE NAME AGE AND ADDRESS OF THE APPLICANT. THE NUMBER OF SHARE S FOR WHICH APPLICATION WAS MADE ALONG WITH THE AMOUNT AND SOUR CE OF INCOME WERE ALSO FURNISHED. IT WAS FURTHER CLAIMED THAT THE AS SESSEE PROVED THE IDENTITY AND SOURCE OF THE SUBSCRIBERS. IT WAS POIN TED OUT THAT THE SUBSCRIBERS EVEN WHILE AFFIRMING THE CONTENTS OF TH E AFFIDAVITS DULY APPEARED BEFORE THE NOTARY PUBLIC AND ENTERED THEIR SIGNATURES IN THE REGISTER MAINTAINED BY THE SAID NOTARY. THE ASSESS ING OFFICER NEVER CROSS EXAMINED THE SUBSCRIBERS THEREFORE THE FACT S MAINTAINED IN THE AFFIDAVIT ARE UNCHALLENGEABLE FOR WHICH RELIANCE WA S PLACED UPON THE 3 DECISION FROM THE HONBLE APEX COURT IN MEHTA PARIK H & COMPANY V. CIT; 30 ITR 181 (SC). ANOTHER ARGUMENT PREFERRED BY THE ASSESSEE IS THAT THE AMOUNT OF SHARE APPLICATION CANNOT BE REGA RDED AS UNDISCLOSED INCOME U/S 68 FOR WHICH RELIANCE WAS PLACED ON THE DECISION IN CIT V. LOVELY EXPORTS; 216 CTR 195 (SC); CIT V. DIVINE LEA SING & FINANCE LIMITED; 299 ITR 268 (DEL); CIT V. GP INTERNATIONAL LIMITED; 229 CTR (P&H) 86; CIT V. STELLAR INVESTMENT LIMITED; 192 IT R 287 (DEL) AND CIT V. SOPHIA FINANCE; 205 ITR 98 (DEL). 3. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS OF LD. REPRESENTATIVES OF BOTH SIDES AND PERUSED THE MATER IAL AVAILABLE ON RECORD. GROUND NO. 1 IS GENERAL IN NATURE THEREFOR E REQUIRES NO DELIBERATION FROM OUR SIDE. FOR GROUND NO. 2 THE BR IEF FACTS ARE THAT THE ASSESSEE COMPANY IS ENGAGED IN THE BUSINESS OF MANU FACTURING AND TRADING OF PVC RIGID PIPES ORIGINALLY FILED ITS RE TURN OF LOSS OF RS.22 91 022/- ON 30.11.2000. A SEARCH U/S 132 WAS CARRIED OUT AT THE PREMISES OF THE ASSESSEE COMPANY ON 8.10.2003. CON SEQUENT TO SEARCH A NOTICE U/S 153C READ WITH SECTION 153A WA S SERVED UPON THE ASSESSEE ON 3.6.2004 TO WHICH THE ASSESSEE AGAIN FI LED THE RETURN OF LOSS I.E. RS.22 91 022/- AS ORIGINALLY FILED. DURI NG ASSESSMENT PROCEEDINGS THE ASSESSEE WAS ASKED ABOUT THE DETAIL S OF INCREASE IN SHARE CAPITAL OF THE ASSESSEE TO WHICH THE ASSESSEE FILED A LIST CONTAINING NINE SHARE HOLDERS FROM WHOM THE SHARE C APITAL OF 4 RS.1 59 300/- AND RS. 15 31 200/- WAS RECEIVED. TH E ASSESSEE ALSO FILED CONFIRMATION FROM THE SUBSCRIBERS THROUGH DUL Y NOTARIZED AFFIDAVIT CONTAINING THE DETAILS LIKE NAME ADDRESS AGE SOU RCE OF INCOME ANNUAL INCOME DATE OF PURCHASE OF APPLICATION OF SHARE TE NDERED NUMBER OF SHARES PURCHASED ALONG WITH THE AMOUNT GIVEN BY SUB SCRIBERS. ON RECEIPT OF THESE CONFIRMATIONS NEITHER ANYTHING WA S ASKED FROM THE ASSESSEE NOR ANY INQUIRY WAS MADE. THE ADDITION OF RS.1 59 300/- WAS MADE BY THE ASSESSING OFFICER BY OBSERVING AS UNDER : ON PERUSAL OF SUBMISSION MADE BY THE ASSESSEE IN RESPECT OF SHARE APPLICATION MONEY RECEIVED BY THE ASSESSEE DURING THE YEAR. IT IS SEEN THAT IN RESPE CT OF THE FOLLOWING PERSONS THE ASSESSEE HAS RECEIVED SHARE APPLICATION MONEY IN CASH. THESE PERSONS ARE NOT ASSESSED TO INCOME TAX AND PAN ARE NOT MENTIONED. ON PERUSAL OF AFFIDAVITS FILED IT IS SE EN THAT ALL THE AFFIDAVITS ARE IN THE HANDWRITING OF O NE PERSON. IT IS ALSO NOTICED THAT EVEN ON THE SAME P AGE THE SIGNATURES OF DEPONENT DIFFERS. IT IS QUITE UNL IKELY THAT WHEN A PERSON APPLYING HUGE AMOUNTS SUCH AS RS. 5 00 000/- ARE MORE IS NOT ASSESSED TO TAX. HENCE CONSIDERING THE ABOVE THE NAMES OF THE PERSONS ARE NOT GENUINE AND IT IS THE UNEXPLAINED MONEY OF THE ASSESSEE WHICH IS INTRODUCED BY THE ASSESSEE COMPANY UNDER THE NAME OF SHARE APPLICATION MONEY. THESE PERSONS APPEAR TO BE DUMY PERSONS AND HENCE THE ENTIRE AMOUNT OF THE SHARE APPLICATION MONEY IS CONSIDERED AS BOGUS SHARE APPLICATION MONEY. THE ASSESSEE COMPANY HAS NOT PROVED THE GENUINENESS OF SUCH PERSONA DNA SLO NOT PROVED THEIR CAPACITY TO APPLY FOR SUCH HUG E AMOUNT. THESE ARE DUMY AND THE ASSESSEE COMPANY HAS INTRODUCED ITS OWN MONEY AS SHARE APPLICATION MONEY. 5 4. ON APPEAL THE LD. FIRST APPELLATE AUTHORITY BY FOLLOWING THE DECISION OF THE HONBLE JURISDICTIONAL HIGH COURT IN THE CAS E OF CIT V. RATHI FINLEASE LIMITED; 215 CTR (MP) 429 TO THE EFFECT TH AT ONUS IS ON THE ASSESSEE TO ESTABLISH THE GENUINENESS OF THE CREDIT S AFFIRMED THE STAND OF THE ASSESSING OFFICER WHICH IS UNDER CHALLENGE B EFORE THE TRIBUNAL. WE HAVE FOUND THAT THE IMPUGNED ADDITION U/S 68 OF THE ACT HAS BEEN MADE BY THE LEARNED ASSESSING OFFICER BY SUSPECTING THAT THE SHARE APPLICATION MONEY IS BOGUS WITHOUT APPRECIATING THE FACT AND EVEN THE CONTENTS OF THE AFFIDAVIT HAVE NOT BEEN DISAPPROVED . THE UNDISPUTED FACT IS THAT THE ASSESSEE HAS PROVED THE IDENTITY OF THE SUBSCRIBERS WITH THE HELP OF AFFIDAVITS WHICH WERE NOT FOUND TO BE BOGUS OR FALSE. AN AFFIDAVIT IS NOT A MERE PIECE OF PAPER RATHER IT CARRIES ITS AUTHENTICITY AS THE CONTENTS OF THE SAME ARE DULY SWORN BEFORE THE A MA GISTRATE OR A NOTARY PUBLIC/OATH COMMISSIONER AS THE CASE MAY BE. DURIN G SIGNING OF THESE AFFIDAVITS THE DEPONENT APPEARS BEFORE THE PERSON BEFORE WHOM THEY ARE SWORN AND THEIR SIGNATURES ARE DULY TAKEN ON TH E REGISTER MAINTAINED BY SUCH NOTARY PUBLIC. IF THE ASSESSING OFFICER WAS APPREHENSIVE ON THE AUTHENTICITY OF SUCH AFFIDAVIT NOTHING PREVENTED H IM TO CROSS EXAMINE THE DEPONENTS AND TO VERIFY THE CONTENTS OF SUCH AF FIDAVIT BUT THAT WAS NOT DONE IN THE PRESENT APPEALS. THEREFORE IN VIEW OF A DECISION OF THE HONBLE APEX COURT IN THE CASE OF MEHTA PARIKH & CO MPANY V. CIT (SUPRA) THESE AFFIDAVITS BECOME UNCHALLENGEABLE. THE RATIO LAID DOWN 6 BY THE HONBLE DELHI HIGH COURT IN THE CASE OF CIT V. SHIV PRASAD AGRAWAL (306 ITR 324) (RELEVANT PAGE 326) FURTHER F ORTIFIES OUR VIEW. AS FAR AS THE RELIANCE OF THE REVENUE UPON THE DECISIO N FROM HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF CIT V. RAT HI FINLEASE LIMITED (SUPRA) TO THE EXTENT THAT THE ASSESSEE HAS TO ESTA BLISH THE GENUINENESS OF THE CREDITS WE ARE IN FULL AGREEMENT WITH THE A RGUMENT BUT IN THE PRESENT APPEAL THE ASSESSEE HAS DULY ESTABLISHED TH E IDENTITY SOURCE OF THE CREDITS. EVEN IT IS NOT THE CASE THAT THE SHAR ES HAVE BEEN ISSUED TO NON-EXISTING PERSONS. BROADLY WE ARE OF THE VIEW T HAT ONCE THE IDENTITY AND SOURCE OF THE SUBSCRIBERS IS ESTABLISHED FOR MA KING SHARE APPLICATION NO ADDITION CAN BE MADE U/S 68 OF THE ACT BECAUSE EVEN THE HONBLE APEX COURT IN THE CASE OF CIT V. LOVELY EXP ORTS PRIVATE LIMITED; 216 CTR (SC) 195 EVEN STEPPED AHEAD BY CONCLUDING A S UNDER :- IF THE SHARE APPLICATION MONEY IS RECEIVED BY THE ASSESSEE COMPANY FROM ALLEGED BOGUS SHAREHOLDERS WHOSE NAMES ARE GIVEN TO THE A.O. THEN THE DEPARTMENT IS FREE TO PROCEED TO REOPEN THEIR INDI VIDUAL ASSESSMENTS IN ACCORDANCE WITH LAW BUT IT CANNOT BE REGARDED AS UNDISCLOSED INCOME OF THE ASSESSEE COMPANY. OUR VIEW IF FURTHER FORTIFIED BY THE DECISION OF TH E HONBLE DELHI HIGH COURT IN CIT V. DIVINE LEASING & FINANCE LIMITED; GENERAL EXPORTS & CREDIT LIMITED AND LOVELY EXPORTS PRIVATE LIMITED ( 2008) 299 ITR 268 (DEL) WHEREIN IT WAS HELD THAT IT IS THE DUTY OF TH E ASSESSING OFFICER TO INVESTIGATE THE CREDIT WORTHINESS OF THE SHARE HOLD ERS AND IN VIEW OF THE 7 FINDING THAT THE ASSESSEE PROVED GENUINENESS OF SHA REHOLDERS NO ADDITION CAN BE MADE U/S 68 OF THE ACT. IN THE PRES ENT APPEAL SINCE THE ASSESSEE HAS DISCHARGED ITS ONUS BY PROVING THE IDE NTITY OF SUBSCRIBERS AND EVEN OTHERWISE HAD ANY SUSPICION STILL REMAINED IN HIS MIND NOTHING PREVENTED HIM TO INITIATE ACTION AS PER THE PROVISI ONS OF THE ACT. THE EXISTENCE OF SUBSCRIBERS TO SHARE APPLICATION IS NO T IN DOUBT AS THE ASSESSEE DULY FURNISHED THEIR NAMES. AGE ADDRESS DATE OF FILING THE APPLICATION NUMBER OF SHARES FOR WHICH RESPECTIVE APPLICATIONS WERE MADE AMOUNT GIVEN AND THE SOURCE OF INCOME OF THE APPLICANT. IN VIEW OF THESE FACTS WE ARE OF THE CONSIDERED OPINION TH AT THAT THERE IS NO JUSTIFICATION FOR MAKING THE IMPUGNED ADDITION BECA USE ONCE THE EXISTENCE OF THE INVESTOR/SHARE SUBSCRIBERS IS PROV ED ONUS SHIFTS ON THE REVENUE TO ESTABLISH THAT EITHER THE SHARE APPLICAN TS ARE BOGUS OR THE IMPUGNED MONEY BELONGS TO THE ASSESSEE COMPANY ITSE LF. ONCE THE CONFIRMATION LETTERS ARE FILED NO ADDITION CAN BE MADE ON ACCOUNT OF SHARE APPLICATION MONEY IN THE HANDS OF THE COMPANY . OUR VIEW FINDS SUPPORT FROM THE DECISION IN SHRI BARKHA SYNTHETICS LIMITED V. ACIT; 155 TAXMAN 289 (RAJ). THE CASE LIKE CIT V. GP INTERNAT IONAL LIMITED; 229 CTR (P&H) 86 CIT V. STELLER INVESTMENT LIMITED; 19 2 ITR 287 AND SOPHIA FINANCE LIMITED; 205 ITR 98 (DEL) SUPPORTS T HE CASE OF THE ASSESSEE. 8 4. AS FAR AS CHARGING OF INTEREST U/S 234B IS CONC ERNED IT IS ARGUED TO BE CONSEQUENTIAL IN NATURE. WE HAVE FOUND THAT NO S PECIFIC SECTION HAS BEEN MENTIONED FOR CHARGING OF INTEREST AND MERELY IT HAS BEEN MENTIONED THAT CHARGE INTEREST IF ANY AS PER LAW. HOWEVER SINCE THE ISSUE OF SHARE APPLICATION HAS BEEN DECIDED IN FAVO UR OF THE ASSESSEE AND THE ADDITION MADE U/S 68 OF THE ACT HAS BEEN DE LETED THEREFORE CHARGING OF INTEREST IS CONSEQUENTIAL IN NATURE ME ANING THEREBY THAT IT IS NOT LEVIABLE/CHARGEABLE. 5. IN VIEW OF THESE FACTS AND JUDICIAL PRONOUNCEME NTS BOTH THESE APPEALS OF THE ASSESSEE ARE ALLOWED. FINALLY THE APPEALS OF THE ASSESSEE ARE ALLOWED. ORDER PRONOUNCED IN OPEN COURT ON 10 TH MAY 2010. SD SD (V.K. GUPTA) (JOGINDER SINGH) ACCOUNTANT MEMBER JUDICIAL MEMBER MAY 10 2010 COPY TO: APPELLANT RESPONDENT CIT CIT(A) DR G UARD FILE *DN/