Loading judgment…
No AI summary yet for this case.
Income Tax Appellate Tribunal, MUMBAI BENCH “G” MUMBAI
Before: SHRI ABY T VARKEY & SHRI OM PRAKASH KANT
The present appeal is filed by the Revenue against the order dated 08/04/2022 passed by the ld. Commissioner of Income Tax (Appeals) – 48, Mumbai [in short, ‘the Ld. CIT(A)’] for A.Y. 2008-09.
The grounds of appeal raised by the Revenue are reproduced as under :
M/s Zarco Realties Pvt. Ltd.. 2 ITA No. 1751/M/2022
Whether on the facts and circumstances of the case and in Whether on the facts and circumstances of the case and in Whether on the facts and circumstances of the case and in law, the Ld. CIT (A), is justified in deleting the addition of Rs. law, the Ld. CIT (A), is justified in deleting the addition of Rs. law, the Ld. CIT (A), is justified in deleting the addition of Rs. 1,99,75,000/ 1,99,75,000/- made ws 68 of the Income Tax Act, as made ws 68 of the Income Tax Act, as unexplained credit on accounts of sum credited in the books of unexplained credit on accounts of sum credited in the books of unexplained credit on accounts of sum credited in the books of accounts of the assessee who received share capital and accounts of the assessee who received share capital and accounts of the assessee who received share capital and share premium from Javcee Pvt Lid, without appreciating the share premium from Javcee Pvt Lid, without appreciating the share premium from Javcee Pvt Lid, without appreciating the fact that the entity did not have required creditworthiness. fact that the entity did not have required creditworthiness. fact that the entity did not have required creditworthiness.
Briefly, the facts of the case are that the assessee company facts of the case are that the assessee company facts of the case are that the assessee company had filed its return of income on 31.03.2006 declaring total income return of income on 31.03.2006 declaring total income return of income on 31.03.2006 declaring total income of Rs. 2,84,220/- for the year under consideration. The return was for the year under consideration. The return was for the year under consideration. The return was processed u/s. 143(1) of the Income Tax Act, 1961 [in short, “the processed u/s. 143(1) of the Income Tax Act, 1961 [in short, “the processed u/s. 143(1) of the Income Tax Act, 1961 [in short, “the Act”]. Later, the case of the assessee was reopened u/s. 147 of the Act”]. Later, the case of the assessee was reopened u/s. 147 of the Act”]. Later, the case of the assessee was reopened u/s. 147 of the Act and notice u/s. 148 of the Act was issued on 30.03.2015. In notice u/s. 148 of the Act was issued on 30.03.2015. In notice u/s. 148 of the Act was issued on 30.03.2015. In response to the same, the assessee filed a letter dated 27.04.2015 response to the same, the assessee filed a letter dated 27.04.2015 response to the same, the assessee filed a letter dated 27.04.2015 requesting to treat the original return of income filed for A.Y. 2008- requesting to treat the original return of income filed for A.Y. 2008 requesting to treat the original return of income filed for A.Y. 2008 09 as that filed u/s. 148 of the Act. Copy of the reasons recorded 09 as that filed u/s. 148 of the Act. Copy of the reason 09 as that filed u/s. 148 of the Act. Copy of the reason for reopening the assessment was supplied to the assessee and for reopening the assessment was supplied to the assessee and for reopening the assessment was supplied to the assessee and objections filed by the assessee were also disposed off by a speaking objections filed by the assessee were also disposed off by a speaking objections filed by the assessee were also disposed off by a speaking order dated 15.02.2016. Thereafter, statutory notice u/s. 143(2) order dated 15.02.2016. Thereafter, statutory notice u/s. 143(2) order dated 15.02.2016. Thereafter, statutory notice u/s. 143(2) was also issued to the assessee on 12.06.2015. I was also issued to the assessee on 12.06.2015. In the reassessment n the reassessment completed, the Assessi completed, the Assessing Officer made addition of Rs. ng Officer made addition of Rs.3,13,35,000/- being share capital and share premium received from eight parties being share capital and share premium received from eight parties being share capital and share premium received from eight parties u/s. 68 of the Act. Aggrieved by the addition made, the assessee . Aggrieved by the addition made, the assessee . Aggrieved by the addition made, the assessee preferred appeal before the ld. CIT(A) preferred appeal before the ld. CIT(A) who deleted the addition of who deleted the addition of Rs. 3,13,35,000/- on the premise that the tests prescribed u/s. 68 on the premise that the tests prescribed u/s. 68 on the premise that the tests prescribed u/s. 68
M/s Zarco Realties Pvt. Ltd.. 3 ITA No. 1751/M/2022 of the Act are satisfied by the assessee. Being aggrieved by the order of the Act are satisfied by the assessee. Being aggrieved by the order of the Act are satisfied by the assessee. Being aggrieved by the order passed by the ld. CIT(A), the passed by the ld. CIT(A), the Revenue is in appeal.
The ground of appeal of the The ground of appeal of the Revenue relates to the relates to the deletion of the addition of Rs. the addition of Rs.1,99,75,000/- made u/s. 68 of the Act as made u/s. 68 of the Act as unexplained cash credit on account of sum credited in the books of unexplained cash credit on account of sum credited in the books of unexplained cash credit on account of sum credited in the books of accounts of the assessee who received share capital and share accounts of the assessee who received share capital and share accounts of the assessee who received share capital and share premium from Jaycee Pvt. Ltd. without a premium from Jaycee Pvt. Ltd. without appreciating the fact that ppreciating the fact that the said entity did not have required creditworthiness. the said entity did not have required creditworthiness. the said entity did not have required creditworthiness.
5. Briefly, the facts qua the issue related to the share capital and Briefly, the facts qua the issue related to the share capital and Briefly, the facts qua the issue related to the share capital and premium received from M/s. Jaycee Pvt. Ltd. are that the assessee premium received from M/s. Jaycee Pvt. Ltd. are that the assessee premium received from M/s. Jaycee Pvt. Ltd. are that the assessee had received share application money of share application money of Rs.1,99,75,000/ 1,99,75,000/- from the said party in A.Y. 2007 said party in A.Y. 2007-08. The assessee had submitted complete 08. The assessee had submitted complete cheque wise details along with the bank statements of appellant cheque wise details along with the bank statements of appellant cheque wise details along with the bank statements of appellant company. The case of the assessee was selected for scrutiny u/s. case of the assessee was selected for scrutiny u/s. case of the assessee was selected for scrutiny u/s. 143(3) for A.Y. 2007 143(3) for A.Y. 2007-08 i.e. the year of receipt / transfer of share r of receipt / transfer of share application money wherein the assessee had submitted the relevant wherein the assessee had submitted the relevant wherein the assessee had submitted the relevant details in this regard before the Assessing Officer which was verified details in this regard before the Assessing Officer which was verified details in this regard before the Assessing Officer which was verified and accepted by the then Assessing Officer. Even the party namely and accepted by the then Assessing Officer. Even the party namely and accepted by the then Assessing Officer. Even the party namely M/s. Jaycee Industri M/s. Jaycee Industries Ltd. was summoned to which response was es Ltd. was summoned to which response was also made. During the course of reassessment proceedings for the also made. During the course of reassessment proceedings for the also made. During the course of reassessment proceedings for the year under consideration also, notice u/s. 133(6) of the Act was year under consideration also, notice u/s. 133(6) of the Act was year under consideration also, notice u/s. 133(6) of the Act was issued to the said party. In response the said party confirmed the issued to the said party. In response the said party confirmed the issued to the said party. In response the said party confirmed the investments being made in the assessee company on premium. g made in the assessee company on premium. g made in the assessee company on premium. However, the Assessing Officer doubted its creditworthiness based However, the Assessing Officer doubted its creditworthiness based However, the Assessing Officer doubted its creditworthiness based
M/s Zarco Realties Pvt. Ltd.. 4 ITA No. 1751/M/2022 on the analysis of its financials and accordingly, made the addition on the analysis of its financials and accordingly, made the addition on the analysis of its financials and accordingly, made the addition u/s. 68 of the Act. However, the ld. CIT(A) deleted the said addition. u/s. 68 of the Act. However, the ld. CIT(A) deleted the said addition. u/s. 68 of the Act. However, the ld. CIT(A) deleted the said addition.
The ld. Departmental Representative appearing for the revenue ld. Departmental Representative appearing for the revenue ld. Departmental Representative appearing for the revenue argued that action of the Assessing Officer in making the addition argued that action of the Assessing Officer in making the addition argued that action of the Assessing Officer in making the addition u/s. 68 of the Act in respect of the party namely M/s. Jaycee u/s. 68 of the Act in respect of the party namely M/s. Jaycee u/s. 68 of the Act in respect of the party namely M/s. Jaycee Industries Ltd. be upheld as it has no creditworthiness at all. He Industries Ltd. be upheld as it has no creditworthiness at all. He Industries Ltd. be upheld as it has no creditworthiness at all. He drew our attention to the financials of the said company and ew our attention to the financials of the said company and ew our attention to the financials of the said company and pointed out that it has carried minimal business despite huge pointed out that it has carried minimal business despite huge pointed out that it has carried minimal business despite huge capital/ share premium, it has earned minimal interest income only capital/ share premium, it has earned minimal interest income only capital/ share premium, it has earned minimal interest income only and even the bank statement has not been filed. He therefore and even the bank statement has not been filed. He therefore and even the bank statement has not been filed. He therefore vehemently submitted that since the creditworthiness of the share tly submitted that since the creditworthiness of the share tly submitted that since the creditworthiness of the share applicant itself is not proved, the assessee has not discharged its applicant itself is not proved, the assessee has not discharged its applicant itself is not proved, the assessee has not discharged its onus casted u/s. 68 of the Act and hence, the addition of Rs. onus casted u/s. 68 of the Act and hence, the addition of Rs. onus casted u/s. 68 of the Act and hence, the addition of Rs. 1,99,75,000/- be confirmed. be confirmed.
6.1 In rebuttal, the ld. Counsel of the In rebuttal, the ld. Counsel of the assessee explained that the assessee explained that the amount of share application money amounting to Rs. 1,99,75,000/- amount of share application money amounting to Rs. 1,99,75,000/ amount of share application money amounting to Rs. 1,99,75,000/ was received from M/s. Ja was received from M/s. Jaycee Industries Ltd. in F.Y. 2006 ycee Industries Ltd. in F.Y. 2006-07 relevant to A.Y. 2007 relevant to A.Y. 2007-08 and complete scrutiny u/s. 143(3) was 08 and complete scrutiny u/s. 143(3) was also carried out in respect of the re also carried out in respect of the receipt of the said funds by the ceipt of the said funds by the then Assessing Officer and no adverse inference was drawn. then Assessing Officer and no adverse inference was drawn. then Assessing Officer and no adverse inference was drawn. Further, even in the present reassessment proceedings, the said Further, even in the present reassessment proceedings, the said Further, even in the present reassessment proceedings, the said party had duly responded to the notice u/s. 133(6) of the Act party had duly responded to the notice u/s. 133(6) of the Act party had duly responded to the notice u/s. 133(6) of the Act confirming the transaction done with the confirming the transaction done with the assessee company. In the assessee company. In the year under consideration, the assessee has only allotted shares to year under consideration, the assessee has only allotted shares to year under consideration, the assessee has only allotted shares to M/s Zarco Realties Pvt. Ltd.. 5 ITA No. 1751/M/2022 the said party and no fresh amount is received from the said party the said party and no fresh amount is received from the said party the said party and no fresh amount is received from the said party and accordingly, no addition can be made u/s. 68 of the Act. and accordingly, no addition can be made u/s. 68 of the Act. and accordingly, no addition can be made u/s. 68 of the Act.
We have heard the rival We have heard the rival contentions of the parties and perused contentions of the parties and perused the material on record. The issue to be decided is whether the the material on record. The issue to be decided is whether the the material on record. The issue to be decided is whether the addition u/s. 68 of the Act can be made when the assessee has not addition u/s. 68 of the Act can be made when the assessee has not addition u/s. 68 of the Act can be made when the assessee has not received any amount from the alleged party in the year under received any amount from the alleged party in the year under received any amount from the alleged party in the year under consideration. In this rega consideration. In this regard, we agree with the findings of the ld. rd, we agree with the findings of the ld. CIT(A), the relevant extract of which is reproduced below: CIT(A), the relevant extract of which is reproduced below: CIT(A), the relevant extract of which is reproduced below:
“10.9 As far as Share Application Money 10.9 As far as Share Application 10.9 As far as Share Application Money Money of Rs. of of Rs. Rs. 1,99,75,000/ 1,99,75,000/- from from M/Jaycee M/Jaycee Indüstries Indüstries Limited Limited is is concerned, it is explained that the appellant had allotted concerned, it is explained that the appellant had allotted concerned, it is explained that the appellant had allotted 850. equity shares to Jaycee Industries Limited and 850. equity shares to Jaycee Industries Limited and 850. equity shares to Jaycee Industries Limited and received amounts aggregating to Rs. 1,99,75,000 towards received amounts aggregating to Rs. 1,99,75,000 towards received amounts aggregating to Rs. 1,99,75,000 towards the same. M/s Jaycee Industries had the same. M/s Jaycee Industries had applied for equity applied for equity shares in the FY 2006 shares in the FY 2006-2007. Complete cheque wise details 2007. Complete cheque wise details along with bank statements of Appel along with bank statements of Appellant Company were lant Company were duly submitted to the Learned AO. duly submitted to the Learned AO.
10.10 Appellant Company's return was processed under 10.10 Appellant Company's return was processed under 10.10 Appellant Company's return was processed under scrutiny assessment W/s. 14363) for the Assessment Year scrutiny assessment W/s. 14363) for the Assessment Year scrutiny assessment W/s. 14363) for the Assessment Year 2007 - 2008, i.e., year of receipt / transfer of share 2008, i.e., year of receipt / transfer of share 2008, i.e., year of receipt / transfer of share application money. The Appellant had dul application money. The Appellant had duly submitted all y submitted all the details before the AO, which was verified and accepted the details before the AO, which was verified and accepted the details before the AO, which was verified and accepted by then AO. Moreover, Jaycee Industries also responded to by then AO. Moreover, Jaycee Industries also responded to by then AO. Moreover, Jaycee Industries also responded to summons issued by the Learned AO. summons issued by the Learned AO.
M/s Zarco Realties Pvt. Ltd.. 6 ITA No. 1751/M/2022
10.11. In my considered view, once it is established that the 10.11. In my considered view, once it is established that the 10.11. In my considered view, once it is established that the amount towards share allotm amount towards share allotment were received in earlier ent were received in earlier assessment years and only allotment has been made in the assessment years and only allotment has been made in the assessment years and only allotment has been made in the Assessment Year under consideration, there is no question Assessment Year under consideration, there is no question Assessment Year under consideration, there is no question of any addition u/s 68 in the impugned AY. 2008 of any addition u/s 68 in the impugned AY. 2008 of any addition u/s 68 in the impugned AY. 2008-09. Hence, additions related to share monies and share Hence, additions related to share monies and share Hence, additions related to share monies and share premium, which were received in the form of loans in earlier which were received in the form of loans in earlier which were received in the form of loans in earlier assessment years i.e., in the cases of M/s Bandana assessment years i.e., in the cases of M/s Bandana assessment years i.e., in the cases of M/s Bandana Sangeet Paper Private Limited, M/s Bishnauth Tea Sangeet Paper Private Limited, M/s Bishnauth Tea Sangeet Paper Private Limited, M/s Bishnauth Tea Company Limited, M/s Bismarak Exim Private Limited, M/s Company Limited, M/s Bismarak Exim Private Limited, M/s Company Limited, M/s Bismarak Exim Private Limited, M/s MahacolTrexim Private Limited, M/s Brijdham Deve MahacolTrexim Private Limited, M/s Brijdham Deve MahacolTrexim Private Limited, M/s Brijdham Developers Private Private Private Limited, Limited, Limited, M/s M/s M/s Kilburn Kilburn Engineering Kilburn Engineering Engineering and and and M/s M/s M/s Naviplast commerce P.Ltd. will not survive. Naviplast commerce P.Ltd. will not survive.
10.12 As far as addition in respect of M/s Jaycee 10.12 As far as addition in respect of M/s Jaycee 10.12 As far as addition in respect of M/s Jaycee Industries Limited, I find that M/s Jaycee Industries Industries Limited, I find that M/s Jaycee Industries Industries Limited, I find that M/s Jaycee Industries Limited has replied to the notice of the AO. The AO Limited has replied to the notice of the AO. The AO Limited has replied to the notice of the AO. The AO has not given any reason for non given any reason for non-acceptance of details provided by acceptance of details provided by the said company or detailed submissions made by the AO the said company or detailed submissions made by the AO the said company or detailed submissions made by the AO in in in the the the assessment assessment assessment proceedings. proceedings. proceedings. Once Once Once identity, identity, identity, creditworthiness and genuineness of transactions with M/s creditworthiness and genuineness of transactions with M/s creditworthiness and genuineness of transactions with M/s Jaycee Industries Limited are Jaycee Industries Limited are established, the onus shifts established, the onus shifts on the AO and he is required to make specific findings as to on the AO and he is required to make specific findings as to on the AO and he is required to make specific findings as to why share monies received from the said company should why share monies received from the said company should why share monies received from the said company should be treated as non be treated as non-genuine. There is no specific finding genuine. There is no specific finding related M/s Jaycee Industries. I find that similar sit related M/s Jaycee Industries. I find that similar sit related M/s Jaycee Industries. I find that similar situation exists for seven companies mentioned above. Considering exists for seven companies mentioned above. Considering exists for seven companies mentioned above. Considering the totality of the facts and umstance, in my considered the totality of the facts and umstance, in my considered the totality of the facts and umstance, in my considered view, entire addition of Rs. 3,13,35,000/ view, entire addition of Rs. 3,13,35,000/- under section 68 under section 68
M/s Zarco Realties Pvt. Ltd.. 7 ITA No. 1751/M/2022 of the IT. Act will not survive as per the tests prescribed by of the IT. Act will not survive as per the tests prescribed by of the IT. Act will not survive as per the tests prescribed by various judic various judicial authorities and deserved to be deleted. ial authorities and deserved to be deleted. Hence, grounds of appeal no. 2 and 3 are Allowed. Hence, grounds of appeal no. 2 and 3 are Allowed. Hence, grounds of appeal no. 2 and 3 are Allowed.”
7.1 Once the amount is not received in the year under Once the amount is not received in the year under Once the amount is not received in the year under consideration, there cannot be any sum found credited in the year consideration, there cannot be any sum found credited in the year consideration, there cannot be any sum found credited in the year under consideration as required for the p under consideration as required for the purpose of section 68 of the urpose of section 68 of the Act. Hence, the addition made by the Assessing Officer u/s. 68 of Act. Hence, the addition made by the Assessing Officer u/s. 68 of Act. Hence, the addition made by the Assessing Officer u/s. 68 of the Act in respect of M/s. Jaycee Industries Ltd. deserves to be the Act in respect of M/s. Jaycee Industries Ltd. deserves to be the Act in respect of M/s. Jaycee Industries Ltd. deserves to be deleted and accordingly, the deleted and accordingly, the ground of appeal of the revenu appeal of the revenue is dismissed.
In the result, the In the result, the appeal of the Revenue is dismissed. is dismissed.
Order pronounced under Rule 34(4) of the ITAT Rules, Order pronounced under Rule 34(4) of the ITAT Rules, Order pronounced under Rule 34(4) of the ITAT Rules, 1963 on 30/12/2022. 12/2022. Sd/- Sd/- Sd/ (ABY T VARKEY ABY T VARKEY) (OM PRAKASH KANT OM PRAKASH KANT) JUDICIAL MEMBER JUDICIAL MEMBER ACCOUNTANT MEMBER ACCOUNTANT MEMBER Mumbai; Dated: 30/12/2022 Rahul Sharma, Sr. P.S. Copy of the Order forwarded to forwarded to :