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Income Tax Appellate Tribunal, “C” BENCH, MUMBAI
आयकर अपीलीय अधिकरण “C” न्यायपीठ म ुंबई में। IN THE INCOME TAX APPELLATE TRIBUNAL “C” BENCH, MUMBAI श्री महावीर स िंह, न्याययक दस्य एविं श्री मनोज कुमार अग्रवाल के मक्ष । BEFORE SRI MAHAVIR SINGH, JM AND SRI MANOJ KUMAR AGGARWAL, AM
Aayakr ApIla saM./ ITA No. 323/Mum/2016 (inaQa-arNa baYa- / Assessment Year 2011-12) Aayakr ApIla saM./ ITA No. 5051/Mum/2017 (inaQa-arNa baYa- / Assessment Year 2012-13) Prakash Jha The Jt. Commissioner of 201/ABCD, Abhishek, New Income Tax, Range 11(1), Link Road, Andheri (West), Mumbai, Room No. 432, Vs. Mumbai-400 053 Aayakar Bhavan, New Marine Lines, Mumbai-400 020 .. (p`%yaqaaI- / Respondent) (ApIlaaqaI- / Appellant) स्थायी लेखा िं./PAN No. AATPJ3208L अपीलाथी की ओर े / Appellant by : Shri Chetan Karia, AR प्रत्यथी की ओर े / Respondent by : Shri Abirama Karthikeyan, DR ुनवाई की तारीख / Date of hearing: 19.03.2019 घोषणा की तारीख / Date of pronouncement : 19.03.2019
AadoSa / O R D E R
महावीर स िंह, न्याययक दस्य/ PER MAHAVIR SINGH, JM:
These appeals filed by the assessee are arising out of the different orders of Commissioner of Income Tax (Appeals)-4, Mumbai [in short
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CIT(A)], Appeal No. CIT(A)-4/Tr-338/Appeal(3)/JCIT.11(1)/2014-15 & CIT(A)-4/IT-52/ACIT.16(1)/2014-15 vide order dated 23.10.2015 & 11.04.2017. The Assessments were framed by the Joint Commissioner of Income Tax, Circle-11(1), Mumbai (in short ‘JCIT/ITO/ AO’) for the A.Ys. 2011-12 & 2012-13 vide order dated 30.03.2014 & 27.02.1015 under section 143(3) of the Income Tax Act, 1961 (hereinafter ‘the Act’).
The only issue in this appeal of assessee in ITA No. 5051/Mum/2017 for AY 2012-13 is against the order of CIT(A) confirming the action of the AO by disallowing the depreciation and society charges. For this assessee has raised the following ground: -
“1. Taxing of the rental income from the offices as “income from house property” instead of as business income shown by the appellant. Accordingly, he has erred in disallowing depreciation of ₹ 11,37,686 and society charges of ₹ 2,44,772/-.”
The learned counsel for the assessee moved an application dated 19.03.2019 seeking withdrawal of this appeal which read as under: -
“the assessee above named submits that only issue in the present appeal relates to head under which income on letting out certain office premises is assessable. The assessee submits that though in initial few years, income computed under the head business income is less due to expense incurred and depreciation claimed, however, over a period of time, standard deduction of 30% of rent received under the head
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income from house property is more beneficial to the assessee
As the issue is litigated ever year and is tax neutral over a period of time, the assessee seeks resolve the contentions issue by withdrawing his appeal.”
As per the above, assessee seeks withdrawal of this appeal and the Departmental Representative has no objection for the same. Hence, this appeal of assessee is dismissed as withdrawn
The first issue in this appeal of assessee in ITA No. 323/Mum/2016 for AY 2011-12 is against the order of CIT(A) confirming the action of the AO in not allowing credit for TDS amounting to ₹ 89 lacs. For this assessee has raised the following ground No. 1: -
“1. Confirming the action of the learned Jt. CIT in not allowing credit for TDS of ₹ 89 lacs/- for the AY 2011-12, i.e. the year under appeal. The reasons given by him in this regard are incorrect, illegal and invalid."
At the outset, the learned Counsel for the assessee stated that this TDS credit has been allowed by AO and hence, the assessee is not pressing this ground and the same can be dismissed as not pressed. The Departmental Representative has not objected to the same, hence, the same is dismissed as not pressed.
The second issue in this appeal of assessee is against the order of CIT(A) confirming the action of the AO in making addition of unexplained
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cash credit amounting to ₹ 1.50 crores. For this assessee has raised the following ground No 2: -
“2. Confirming the addition of an amount of ₹ 1,50,000/- as unexplained cash credit. The reason given by him in this regard are purely based on presumptions, conjectures and surmises and are incorrect, illegal and invalid.”
Briefly noted facts by the AO are that the assessee has shown a liability of ₹ 1.5 crores in his individual account as an advanced against the sale of equity shares of Maurya Sugar Ltd. The AO noted that the advanced was claimed to have been received by assessee from one Kolkata based company Nopany & Sons Pvt. Ltd. The AO noted that there are inconsistencies in respect to various information received i.e. information received from Nopany & Sons Pvt. Ltd and agreement dated 01.09.2010 between the assessee and one Mr. Vimal Kumar Nopany representing Nopany & Sons Pvt. Ltd, the party who paid the said sum of ₹ 1.50 crores to the assessee. The AO noted as under: -
(a) Firstly the agreement was with the company Shree Hanuman Sugar & Industries Ltd. and not with Nopany & Sons Pvt. Ltd. However the payment of ₹ 1.5 crores made to the assessee is partly by Nopay & Sons Pvt Ltd. (₹ 1.25 crore) and partly by Nopany Investments Pvt. Ltd (₹ 25 lakhs)
(b) In the books of the assessee, there is no mention of Shree Hanuman Sugar & Industries
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Pvt. Ltd which his actually the only party to agreement.
(c) The source of advance to the extent of ₹ 25 lakhs in shown incorrect in the books as it was not from Nopany & Sons Pvt. Ltd but from (d) The letter of arrangement dated 01.09.2014 submitted by the assessee mentions that M/s Napony Sons Pvt Ltd would invest ₹ 3.51 crore in Shares of company Maurya Sugars Ltd. While the agreement submitted by NSPL shows that Shree Hanuman Sugar Industries Pvt. Ltd. would purchase entire shares of Maurya Sugars Ltd. for an amount of ₹ 15 crores.
(e) the agreement also states that the assessee would forfeit the initial payment made in case the further payments could not be made on schedule time. There was no mention of such a clause in the letter of arrangement.”
Further, according to AO on issuance of commission by ADIT (Investigation) Wing, Unit IV(3), Kolkata, Nopany & Sons Pvt. Ltd vide letter dated 18.03.2014 had mentioned that there is no agreement between the company and Mr. Prakash Jha, the assessee for purchase of shares. In view of the above, the AO concluded that none of these transactions are explained and reasonable due to the following reasons: -
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“(i) As seen from above discussion, the assessee and the other party Nopany & Sons Pvt. Ltd are constantly changing their stance with regard to this transaction. At one point, the agreement for this transaction was not there as per the assessee. Then, once the other party produces an agreement, suddenly the same agreement is produced suo moto by the assessee also. Later the other party again denies any agreement. Even this so called agreement' is contradictory to the 'letter of arrangement' produced by the assessee initially.
(ii) The agreement is with a third party (Shree Hanuman Sugar & Industries Ltd) and payments are from some other parties. Further, the amount for advance for shares in a company was not paid to the relevant company but paid to the assessee.
(iii) Till date there is no actual transfer of shares nor any further payments have been made although about four years have elapsed. Only a payment of Rs 1.5 crore was made four years back without any agreement or any consideration. This payment is lying as such with the assessee. The whole transaction is highly unlikely and beyond any reason.
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(iv) The credentials of the payer company itself are not sound. The information with regard to this company M/s Nopany & Sons Pvt. ltd as downloaded from the website of Ministry of Corporate Affairs (MCA) shows paid up share capital of this company at Rs 4 lakh; Date of Last AGM was 28/09/2007; and Company Status (for filing) is "Under the process of striking off". Significantly, the assessee has received this amount of Rs 1.5 crore in the year 2010-11. (v) Regarding source of investment made by NSPL, and Noparty investments Pvt Ltd: from the bank statement of Nopany Investments FM Ltd, it is seen cash deposit of 5 lakhs and transfer from sister concern of 20 lakhs was done immediately before withdrawal of Rs 25 lakhs from their bank account. Moreover, the return of income filed by the company M/s Nopany & Sons Pvt. Ltd has shown a total income of Rs 74370 only. it is highly unlikely that the company with an annual income of Rs 74370 would give an advance of Rs 1.5 crore to Sh Prakash Jha for purchase of shares of one of the company where he is a Director without any agreement.
(vi) There is a forfeiture clause in agreement and significantly the shares have not been ITAs No. 323/Mum/2016 & 5051/Mum/2017
transferred to till date in lieu of advances received and no further payments have been made to the assessee. Hence the whole transaction is in indeterminate state which neither party is able to explain.”
Accordingly, the AO treated the above said sum of ₹ 1.50 crores credited in the books of account of the assessee during the FY 2010-11 relevant to AY 2011-12 as unexplained cash credit under section 68 of the Act. Aggrieved, assessee preferred the appeal before CIT(A).
The CIT(A) confirmed the action of the AO vide para 4.5 to 4.10 as under: -
“4.5 I have circumspected the entire facts and circumstances of the case and have carefully considered the finding of the AD. as well as rival submission of the appellant. The appellant maintains two set of accounts one in his own name and the other in the name of P J. Productions. In individual balance-sheet, assessee has shown liability of Rs 30.07 17,524/- under the head 'Current Liabilities". In Schedule 3, it is seen that these current liabilities include advance against share capital of Maurya Sugar of Rs.1,50,00,000/-. Schedule 5 reveals the investment of Rs.14,10,43,071/- and Schedule 6 reveals the advances and deposits of Rs.31.61,62,311/-. During the course of assessment proceedings, when A.O.
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has asked the appellant to furnish details of shareholders, mode of receipt alongwith copy of agreement vide questionnaire dated 10.12.2013, assessee has submitted a letter dated 16.12.2013 stating that he is not a shareholder as well as Director of this company. hence, he is unable to provide the shareholding pattern of this company However, copy of letter of arrangement with this company alongwith mode of receipt is enclosed as per Annexure "C". It is important to mention that Ld. A.O '1de questionnaire dated 28 10.2013 has specifically asked the appellant to furnish documentary evidence of Rs,1.5 crore shown as advance against share capital of Maurya TV (assessee says that later on advance against sate of shares of Maurya Sugar Ltd) AO has also asked the exact nature of such advance. Appellant was also asked to explain as to who had paid the amount of Rs.1,50,00,000/- According tcthe letter dated 16.12.2013, MIs.Nopany & Sons Pvt. Ltd. would buy shares of Maurya 'Sugar Ltd. held as investment by the appellant for an amount of Rs.3.51 lakhs. Out of this as claimed, amount of Psi .50,00.000/- was received by the assessee. Thus, there is ambiguity in the accounts itself because as per the individual balance-sheet. advance has been received
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whereas as per Schedule 6 the advance with Maurya Sugar Ltd. is only of Rs.17.18,435/- and furthermore, it is not understood as to why such advance has been shown in the individual balance-sheet for allotment of share capital of another company. If assessee was to sell the shares of Maurya Sugar Ltd same could have been completed in this year itself but it is found from the evidences on received that nothing has happened though advance has been shown against the share of another company. Further, it is pertinent to mention that Ld A 0 has rightly unearthed the fact that no details of share transfer to such company namely. M/s.Nopany & Sons Pvt. Ltd has been filed with documentary evidences. When enquiry was made from M/s.Nopany & Sons Pvt. Ltd. this company had not given reply within expected time and had responded belatedly vide letter dated 27.02.2014 which was full of discrepancy hence A.O has rightly doubted the nature of advances and genuineness of the transactions It can be seen from the reply of M/s. Nopany & Sons Pvt. Ltd. that it has enclosed an agreement dated 01.09.2010 which is different from the letter of Arrangement furnished by the appellant vide his letter dated 16.12.2013. All these facts reveal that the transaction is dubious in nature. The Ld. A.O. has rightly held that only
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because of a concocted story a look has been reflected as if transaction is genuine whereas the embedded facts reveal the in genuineness of transaction. Vide letter dated 16.12.2013, assessee had submitted no such agreement and only a copy of letter of Arrangement" was submitted However, when enquiry was made from M/s Nopany & Sons Pvt Ltd. u/s.133(6) and one agreement dated 01 092010 was received later on 07.03.2014. assessee has submitted the copy of the same agreement in DAK/Tapal. Thus. I find merit in the finding of the A.O. that initially there was no such agreement and later on it was submitted when query was ra,sed and information was received. Obviously, there is something hidden which gives rise to the negative presumption. Assessee has produced this agreement only after the same was received through enquiry.
4.6 Further, it is important to take notice of the fact that there is inconsistency of the facts initially revealed by the appellant and later on found by the A.O. Firstly, agreement dated 01 .09.2010 was with another company, namely. Shree Hanuman Sugar Industries Pvt. Ltd. and not with MIs. Nopany & Sons Pvt. Ltd. whereas the payment of Rs.1.50 lakhs has been shown by the assessee partly in the name of MIs
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Nopany & Sons FM. Ltd. i.e.Rs.1,25,00,000/- and partly in the name of MIS Nopany Investment Pvt. Ltd. of Rs 25,00,000/-. This fact reveals something else than projected by the appellant in his balance-sheet or accounts submitted to the Income-tax Department. In the books of accounts, as rightly observed by the A.O., there is no mention of role of Shree Hanuman Sugar Industries Pvt. Ltd. who is the only party to the said agreement. This fact clearly reveals that appellant has concealed the full and true information related to such transaction. Further, A.O. has rightly unearthed the fact that source of advances to the extent of Rs.25,00,000/- has been shown in the name of M/s.Nopany & Sons Pvt. Ltd. but as per the agreement and facts not properly disclosed by the appellant reveals that this amount was received from another company namely. Ms Nopany lnvesstment Pvt Ltd Similarly, an important point has also been unearthed by the A.O that the "Letter of Arrangement dated 01 .09.2015 says that M/s.Nopany & Sons Pvt. Ltd. would invest Rs.3.51 crores in the shares of another company, M/s.Maurya Sugars Ltd. whereas the agreement dated 01.09.2010 submitted by M/s.Nopany & Sons Pvt Ltd, Shree Human Sugar Industries Ltd. would purchase the entire shares of M/s.Maurya Sugars Ltd. for ITAs No. 323/Mum/2016 & 5051/Mum/2017
an amount of Rs. 15 crores. Further, an important point is to be taken into account that said agreement dated 01.09.2010 provides that assessee would forfeit the initial payment received by him in case further payment could not be made at the scheduled time. There was no mention of such clause in the 'Letter of Arrangement'. These facts clearly prove that an amount of Rs.1,50,00,000/- has been arranged in such a way that it can give colour of advances from a company which is dubious in nature and it has been provided in the agreement that in case of failure of further payments, such amount would be forfeited. This fact proves that this amount has been arranged because in case of forfeiture in subsequent year, it would be shown as capital receipt and not as revenue receipt, hence this fact gives clue that in reality this amount of Rs.1,50,00,000/- is not at all the actual advance from any such company. Such arrangement has been made to convert unaccounted money as white money and attempt has been made to introduce such unexplained money in the form of advances for share of another company hence initially full facts were not disclosed and there is round about narrations When genuineness of transaction was doubted by the AO and no convincing evidence was furnished except the ITAs No. 323/Mum/2016 & 5051/Mum/2017
'justificatory evidences' bound to be created or got credited of such arrangement, A.C. had issued commission to ADIT (Investigation) Unit IV(3), Kolkata. When enquiry was made, it was found that M/s. Nopany & Sons Pvt. Ltd could not explain the source shown in its bank accounts wherefrom cheque has been issued nor could give reply to the specific queries raised by the assessing officer during assessment proceedings. Further, it cannot lose sight that income of this company is not sufficient for giving such advances of Rs.1,50,00,000/-.
4.7 Further, an important point also deserves special attention that after parting with such amount of Rs. 1,50,00,000/-, M/s. Nopany & Sons Pvt Ltd. has forgotten it and hence no share was transferred to that company, hence the observation of the A.O. deserves approval that investing company has no means to advance such huge sum and then allow it to be forgotten till that date. At one point of time, it was stated that there was no agreement for such transaction but once that party has submitted a so-called agreement, then instantly assessee has also produced a copy of the same and submitted in the dak silently. This so called agreement is obviously contradicting the facts
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mentioned in the 'letter of arrangement' submitted by the appellant. Further, at the cost of repetition, it has to be mentioned that the agreement dated 01.09.2010 is with another party namely, Shree Hanuman Sugar Industries Ltd. whereas such advance is from another party. This has not been reflected in Schedule 3 of Notes to Accounts or anywhere in the accounts submitted to the Department. Only while clarifying or submitting the reply, appellant has shown such facts. It is also very important to reiterate that till the date the assessment order was passed, there was no actual transfer of shares nor was any further payment made though 4 years had already elapsed. It is not understood as to how one company can advance such a huge amount of Rs 1,50,00,000/- without any consideration hence it is found beyond doubt that this amount of Rs.1,50,00,000/- is not properly explained. Only arrangement has been made by utilizing this floated company namely. M/s. Nopany & Sons Pvt. Ltd. U. A.O. has rightly mentioned at page no.10 of the assessment order that credentials of this company itself is doubtful.
4.8 The information downloaded from the website of Ministry of Corporate Affairs, as observed by A.O., shows the paid-up share
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capital is of only Rs.4,00,000/- and last date of ACM was 28.09.2007 Further A.O. has rightly noted the current status of this company from the website (for e-filing) ac "Under the process of striking off" whereas assessee has shown to have received an amount of Rs.1,50,00,000/- in F.Y.2010-11. This fact proves beyond doubt that this company namely, M/s. Nopany & Sons Pvt. Ltd. has been utilized as conduit. A.O has rightly noted that there is a forfeiture clause in agreement and no such share has been transferred either by M/s.Maurva Sugar Ltd. or by any other companies on behalf of the appellant in lieu of such advances and further, there is no repayment to the investing company, hence it is a case where attempt has been made to give white colour to the unexplained' money. It is not out of place to state in many such cases it has been found by the Department and also widely known and of common knowledge that cash is given to the various agents or intermediaries and cheques or DDs are received for utilizing own money after giving white colour with the help of "justificatory evidences." Therefore, the various observations, narration of facts and various evidences embedded to such justificatory evidences reveals that an amount of Rs.1.50 crores is not at all from a genuine company doing any sort of ITAs No. 323/Mum/2016 & 5051/Mum/2017
actual business and really in existence. It appears that some persons are there who used to take benefit of created justificatory evidences and involve in such bogus transactions. It has been found out by the Department and other investigating agencies that there are a huge number of bogus companies floated by hawala entry operators and utilized their name for giving such entries or advances, loans or share application money The facts of this case as highlighted hereinabove is not different to such companies who are involved in hawala transactions or accommodation entry providing business. Therefore, while considering such a case and going to the depth of the matter, one has to also take into account the facts and circumstances of the case alongwith documentary evidences. In the case of CIT vs Nivend Vanijya Co. Niyojan Ltd. (2003) 263 ITR 623 (Cal), it was held that an assessee has to establish not only the identity of the creditor and real creditworthiness but has also to establish the genuineness of the transactions. Merely by filing copy of I.T. return is not sufficient.
4.9. It is also important to point out that vide letter NO. DCIT. 11(1)/Prakash Jha/ 2013-14 dated 19.03.2014. the Learned A.O. vide question no.2, has very specifically pointed out
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the various discrepancies ambiguity and also the fact extracted from the website of Ministry of Corporate Affairs revealing that M/s.Nopany & Sons Pvt. Ltd. was under the process of striking off" from the