COMMISSIONER OF INCOME TAX-I vs. M/S ARIHANT AVENUE & CREDIT LTD

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TAXAP/1038/2011HC GujaratGJHC24025566201121 June 2012Author: HONOURABLE MR. JUSTICE VIJAY MANOHAR SAHAI,HONOURABLE MR. JUSTICE N.V.ANJARIA4 pages

AI SummaryDismissed

What did the High Court hold?

The High Court held that the impugned order of the Tribunal was perfectly justified on facts and in law. The Court noted that in a previous Tax Appeal (No. 737 of 2010) concerning Shri Satyanarayan J. Kabra, this very court had considered the addition of those shares and dismissed the Revenue's appeal. In that prior case, the High Court held that the assessee had provided a sufficient explanation, the order of the authorities was based on cogent reasons, and the issue was factual. Applying this precedent, the High Court reasoned that if the substantive addition of the shares was considered unsustainable and its deletion upheld, then the protective addition of the same shares to the assessee company as unexplained investment could not sustain. The Tribunal's finding that the assessee company had no occasion to hold these shares and there was no material to hold that the investment was made by the assessee company, and that the ingredients of benami nature were not established, was upheld. Therefore, no substantial question of law arose for consideration.

What were the facts?

During a search, shares valued at Rs. 47,98,000 were seized. These shares were intended for transfer below face value to four individuals. The Assessing Officer (AO) treated the face value of the shares as Rs. 10 per share and concluded they belonged to Shri S.N. Kabra, in whose premises they were found. Consequently, the AO made a substantive addition of Rs. 45,58,000 in Shri S.N. Kabra's case and a protective addition of the same amount to the assessee, M/s Arihant Avenue & Credit Ltd. The AO determined that the assessee company had only transferred shares worth Rs. 2,40,000, and the remaining Rs. 45,58,000 were treated as unexplained investment and added on a protective basis to the assessee's income. The CIT(Appeals) deleted this addition, and the Income Tax Appellate Tribunal (ITAT) confirmed the deletion, leading to the present appeal by the Revenue.

What were the issues?

1. Whether the Appellate Tribunal is right in law and on facts in deleting the addition of Rs. 45,58,000 made on account of unexplained investment in shares on a protective basis? Assessee's Contention: The judgment does not record any specific contentions made by the assessee. However, the ITAT's reasoning, confirmed by the High Court, implies that the assessee argued that the shares were not held by the company and the ingredients of a benami nature were not established. The deletion was also based on the fact that the substantive addition in the hands of Shri S.N. Kabra was already considered on merits. Revenue's Contention: The Revenue argued that the addition of Rs. 45,58,000 made on a protective basis to the assessee company was justified as unexplained investment. The Revenue's appeal was based on challenging the deletion of this amount by the lower authorities.

Which sections of the Income-tax Act were involved?

Section 260A

AI-generated summary — verify with the full judgment below

Cause title — parties, addresses and appearances

TAXAP/1038/2011 1/4 JUDGMENT IN THE HIGH COURT OF GUJARAT AT AHMEDABAD TAX APPEAL No. 1038 of 2011 For Approval and Signature: HONOURABLE MR.JUSTICE V. M. SAHAI HONOURABLE MR.JUSTICE N.V. ANJARIA ========================================================= 1 Whether Reporters of Local Papers may be allowed to see the judgment? 2 To be referred to the Reporter or not? 3 Whether their Lordships wish to see the fair copy of the judgment? 4 Whether this case involves a substantial question of law as to the interpretation of the constitution of India, 1950 or any order made thereunder? 5 Whether it is to be circulated to the civil judge? ========================================================= COMMISSIONER OF INCOME TAX-I Versus M/S ARIHANT AVENUE & CREDIT LTD ========================================================= Appearance : MR MR BHATT SR STANDING COUNSEL FOR MRS MAUNA M BHATT for Appellant None for Opponent(s) : 1, ========================================================= CORAM : HONOURABLE MR.JUSTICE V. M. SAHAI and HONOURABLE MR.JUSTICE N.V. ANJARIA Date : 21/06/2012

ORAL JUDGMENT (Per : HONOURABLE MR.JUSTICE N.V. ANJARIA) The Revenue has brought the present appeal under Section 260A of the Incometax Act, 1961 (hereinafter referred to as 'the Act' for sake of brevity) against the order dated 21st January 2011 of the Income Tax Appellate Tribunal, Ahmedabad Bench 'B' in IT(SS) A No.104/Ahd/2007,

TAXAP/1038/2011 2/4 JUDGMENT raising a following question proposing the same as substantial question of law. “ Whether the Appellate Tribunal is right in law and on facts in deleting the addition of Rs.45,58,000/ made on account of unexplained investment in shares on protective basis?”

0 The relevant facts involved in the appeal are that the assessee company is closely held company of the Kabra group. During the search, shares of the value of Rs.47,98,000/ were seized. It was found that these shares were sought to be transferred below their face value in the name of four persons. The Assessing Officer treated face value of the shares at Rs.10/ per share and held that all those shares belonged to one Shri S. N. Kabra in whose premises they were located. The Assessing Officer, therefore, made substantive addition of Rs.45,58,000/ in case of Mr. S. N. Kabra whereas the protective addition of same amount was made in case of the assessee. The Assessing Officer also concluded that the assessee company had transferred shares of Rs.2,40,000/ only and the balance shares of Rs.45,58,000/ were not transferred. Consequently that amount was treated as unexplained investment and came to be added to the total income of the assessee on protective basis.

0 The CIT (Appeals) deleted the aforesaid addition holding that it was considered substantially on merits in case of the said individual Mr. Kabra. On a further appeal preferred by the Revenue, the Incometax Appellate Tribunal, Ahmedabad confirmed the view of the Commissioner (Appeals) and dismissed the appeal of the Revenue, which is the order under challenge in this appeal.

0 Mr. M. R. Bhatt, learned senior standing counsel for Mrs. Mauna Bhatt, learned counsel for the Income Tax Department candidly and fairly submitted that in case of Commissioner of Income Tax (Appeals)

TAXAP/1038/2011 3/4 JUDGMENT vs. Satyanarayan J. Kabra [Tax Appeal No.737 of 2010] the very question of addition of those shares was considered by this Court and the appeal was dismissed by order dated 18th July 2011. He produced a copy of the order passed in that Tax Appeal No.737 of 2010. 5.0 In Tax Appeal No.737 of 2010, the following question was posed consideration of the Court. “ Whether the Appellate Tribunal is right in law and on facts in confirming the order passed by the CIT(A) deleting the addition of Rs.47,98,000/ made on account of unaccounted investment in shares?”

0 The appeal of the Revenue came to be dismissed by this High Court by holding that the assessee had given sufficient explanation and in that view the order of the authorities was based on cogent reason and the issue was factual.

0 In the impugned order, the Tribunal while dismissing the appeal of the Revenue observed as under: “....The reasons are that at the time of search shares were found in the names of four persons as above. It is for them to explain the investment made therein. If explanation is not found satisfactory the addition can be made in their hands. SO far as the assessee company is concerned it has apparently no occasion to the holding of shares. There is no material to hold that investment was made by the assessee company in those shares even though they are standing in the names of four persons. Thus the ingredients of benami nature has not been established. This finding has been confirmed by the Tribunal and there is no reason to take a different view than what the Tribunal has taken. In absence of any material to the contrary we uphold the findings of the ld. CIT(A) and dismiss the appeal of the Revenue.”

TAXAP/1038/2011 4/4 JUDGMENT

0 The above findings are properly arrived at. As seen, in view of order in Tax Appeal No.737 of 2010, the substantive addition of the shares is considered unsustainable and its deletion is upheld. In the present case the holding of the same shares by the assessee on protective basis is treated as unexplained investment. The same, obviously, cannot sustain.

0 In above conspectus of facts, the impugned order of the Tribunal is perfectly justified on facts and in law. No substantial question of law arises for consideration of this Court in this Tax Appeal. Therefore, the present Tax Appeal cannot be entertained.

10.

0 Accordingly, this Tax Appeal is dismissed. [V. M. SAHAI, J.] [N. V. ANJARIA, J.] Amit

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