M/S. B.R. GOYAL CONSTRUCTION PVT. LTD.,INDORE vs. THE ITO 5(1), INDORE

आदेश /O R D E R

PER SHRI D.T. GARASIA, JM

This appeal has been filed by the assessee against the

order of the learned CIT(A)-II, Indore, dated 31.10.2014.

B.R. Goyal ITA No. 81/Ind/2015

income was filed on 15.10.210 declaring total income of

Rs.6,26,700/-. The assessee is engaged in the business of

civil construction. During the course of assessment

proceedings it was found that the assessee company has

received share application money of Rs.35 lacs during the

year from M/s Debraj Vincom Pvt. Ltd. out of which a sum

of Rs.3,50,000/- is shown as share capital and a sum of

Rs. 31,50,000/- as security premium. The assessee

company was asked to establish the genuineness of share

application money and security premium received during

the year along with evidence in support of the capacity,

credit worthiness and genuineness of the transaction. The

assessee has submitted that the assessee company stated

that the company has entered into agreement for

construction of multi-storeyed building of 7200 sq. ft., the

land owned by two owners. 80% of the super built up area 2

B.R. Goyal ITA No. 81/Ind/2015

was to be retained by the assessee and 20% area was given

to land owner. The assessee company has applied for 7000

equity shares and the company has received share

application money. Rs. 10,000/- was paid by cheque, Rs.

25 lacs was paid by cheque of the said share application

money and the assessee company has allotted the shares.

The relevant ROC of the share was given, relevant

resolution of the Director was also given. M/s Debraj

Vincom Pvt. Ltd. is registered at Calcutta and copy of

affairs of the company was given and identity of the

company has been established. Therefore, the assessee has

proved the primary onus. However, the assessee company

has dispute with the share applicants. The assessee

company was taking suitable action but the company did

not cooperate. Therefore, the assessee has voluntarily

offered this amount solely to buy peace and harmony. The

learned CIT(A) did not accept the contention of the assessee 3

B.R. Goyal ITA No. 81/Ind/2015

and penalty for furnishing inaccurate particulars of income

of Rs. 15 lacs has been imposed. On appeal, the learned

CIT(A) confirmed the same.

the assessee company has allotted shares as partly paid up

equity shares to the said share applicant company at the

premium of Rs. 90/- per share. The relevant ROC in Form

No. 2 was also filed. The relevant board resolution was also

filed. The assessee has received the amount by cheque.

During the course of assessment proceedings the assessee

has submitted copy of the said application of M/s Debraj

Vincom Pvt. Ltd., copy of bank statement, Form No.2 with

ROC, copy of incorporation of certificate, copy of company

details, copy of balance sheet, etc. Therefore, as per the

settled law, primary and initial onus casts upon the

assessee was very well discharged by providing all available

details of share applicants. The assessee has dispute with 4

B.R. Goyal ITA No. 81/Ind/2015

M/s Debraj Vincom Pvt. Ltd., therefore, he has offered this

amount as additional income. The assessee was never

asked to establish the genuineness of share application

money nor it was required to produce the director during

the assessment proceedings. The penalty has been imposed

on the ground that the assessee could not prove the

genuineness of the transaction and, therefore, he has

surrendered the additional income. The assessee’s claim

that there was neither search nor any survey, the

surrender of income was voluntary, no inquiry was made.

All the material facts were disclosed in the books of

accounts. The Assessing Officer failed to record categorical

finding. Even the satisfaction that the assessee has

concealed true particulars of income is missing. The

learned counsel for the assessee relied upon the decision of

the Hon'ble Delhi High Court in the case of CIT vs. Oasis

Hospital; 333 ITR 199. The learned counsel for the 5

B.R. Goyal ITA No. 81/Ind/2015

assessee also relied upon the decision of Hon'ble

Chhattisgarh High Court in the case of CIT vs. Agrawal

Rolling Mills; 85 CCH 510.

this case the assessee has filed the return of income.

Thereafter, the scrutiny assessment was made and after

the department made inquiry, the assessee has come for

settlement of the issue. The assessee has made surrender

of additional income. The surrender of income to avoid

litigation is not recognised by the Income tax Act. The

learned DR submitted that the issue in controversy is

covered by the decision of the Hon'ble Supreme Court in

the case of Mak Data Pvt. Ltd. vs. CIT; 358ITR 593.

circumstances of the case, we find that during the year

under consideration the assessee company has received

share application money from one M/s Debraj Vincom Pvt. 6

B.R. Goyal ITA No. 81/Ind/2015

Ltd. for 70,000 equity shares of Rs.35 lacs out of which

Rs.10 lacs were received by cheque of State Bank of Patiala

and Rs. 25 lacs were received on 13.4.2009. In this case

the assessee company has allotted 70,000 shares as partly

paid up equity shares. The assessee has filed copy bof

share application money, copy of bank statement, Form No.

2 filed with ROC, allotment of shares, copy of incorporation

certificate and memorandum and articles of association,

copy of company details and copy of balance sheet of M/s

Debraj Vincom Pvt. Ltd. ending on 31.3.2010. It is the case

of the assessee that the assessee has some dispute with

the said company, therefore, the assessee company waas

not coming to cooperate with the assessee. Therefore, the

assessee has filed the revised computation of income and

additional income of Rs. 35 lacs was offered and the same

has been accepted by the Assessing Officer. This offer of

additional income was made without there being adverse 7

B.R. Goyal ITA No. 81/Ind/2015

on record and without there being any detection by the

department. In this case the assessee was required to

produce the director during the course of assessment

proceedings. We have also gone through the order sheet

submitted at page 1 to 3 of the departmental paper book.

Therefore, the assessee has voluntarily offered the

additional income. There was neither any search nor any

survey. The surrender of income was voluntary. No inquiry

was conducted by the Assessing Officer. Therefore, we are

of the view that that the authorities below are not justified

in confirming the penalty. Similar issue had come up

before the Hon'ble Chhattisgarh High Court in the case of

CIT vs. Agrawal Round Rolling Mills Ltd.; 85 CCH 0510

ChattHC wherein it was held as under :-

“Penalty – Penalty u/s 271(1)(c) – Concealment of

income – Addition of share application money –

Assessee, a company manufacturing iron and steel 8

B.R. Goyal ITA No. 81/Ind/2015

re-rolled products filed its return showing loss –

Subsequently, notice u/s 143(2) was issued and

query was asked regarding share application

money received by assessee – Assessee filed its

reply mentioning therein that it had received share

application money through cheques and drafts

which was cleared by banks – However, in case of

12 applicants for which detailed list was

separately enclosed, necessary documents were

not there and asa such a sum representing the

share application money of those 12 applicants

was surrendered with a request not to initiate any

penalty proceedings – A.O. passed an order u/s

143(3) adding the surrendered amount u/s 68 and

also ordered for initiation of penalty proceedings

and imposed penalty at 150% of tax sought to be

evaded by assessee – CIT(A) and ITAT both ruled 9

B.R. Goyal ITA No. 81/Ind/2015

in favour of assessee – Held it is not disputed by

the Department that the sum which was added u/s

68 was one which was surrendered by assessee

itself – Both the authorities below had recorded

finding that there was neither any detection nor

any information in the possession of Department

except for the amount surrendered by Assessee

and in these circumstances it cannot be said that

there was any concealment – This is a finding of

fact – There is no illegality in same – The tax case

has no merit and hence dismissed.”

We are also supported by the decision of the Hon'ble

Karnataka High Court in the case of CIT vs. M.M.

Gujamgadi; 290 ITR 168 wherein it was held as under :-

“Penalty under s. 271(1)(c), Expln. 1 – Concealment

– Unproved cash credits – Explanation of the assessee

that the impugned amount wasborrowed by him from 10

B.R. Goyal ITA No. 81/Ind/2015

various creditors – However, despite his best efforts,

assessee could not secure the attendance of the

creditors to substantiate his claim before the ITO –

Left with no other alternative, assessee voluntarily

agreed for addition of cash credits. It cannot be said

that the explanation of the assessee is not bona fide –

It is a case of bona fide failure on the part of the

assessee to substantiate his claim – Therefore,

penalty under s. 271(1)(c) r/w Expln. 1(B) is not

leviable and Tribunal was justified in setting aside the

penalty proceedings.”

We also get support from the decision of the Hon'ble Delhi

High Court in the case of Oasis Hospitality; 330 ITR 119

wherein it is held that the assessee has produced certain

documents to prove identity and creditworthiness of the

share applicants. Same could not be prove because of

substantial time gap and inability to produce those 11

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persons. Thus, though the assessee could not discharge his

onus u/s 68, it cannot be said that it is a case of

concealment of the assessee. Therefore, penalty u/s

271(1)(c) of the Act is not leviable. We respectfully following

the decision of the Hon'ble jurisdictional High Court in this

case, delete the penalty.

allowed.

The order has been pronounced in open Court on

19th January, 2017.

Sd/- sd/- (ओ.पी.मीना) (डी.ट�.गरा�सया) लेखा सद�य �या�यक सद�य (O.P.Meena) (D.T.Garasia) Accountant Member Judicial Member �दनांक /Dated : 19th January, 2017. Dn/

B.R. Goyal ITA No. 81/Ind/2015