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Income Tax Appellate Tribunal, INDORE BENCH, INDORE
Before: MS. SUCHITRA KAMBLE & SHRI BHAGIRATH MAL BIYANI
PER SUCHITRA KAMBLE, JUDICIAL MEMBER :
This appeal is filed by the assessee against the order dated 13.07.2016 passed by the CIT(A)-I, Indore for the Assessment Year 2005-06.
2. The grounds of appeal raised by the assessee are as under :
“(1) That the Id. CIT (A)-I erred in law and facts of the case and confirmed the addition made by Assessing Officer under section 68. The addition made by the Assessing Officer and confirmed by the CIT(A) is totally wrong, arbitrary and illegal on the facts of the case.
(2) That the Learned CIT(A) erred in law and facts of the case made a addition u/s 68 on account of Share application from Hindustan Continental Ltd. amounting to Rs.6,00,000/- without appreciating, the facts and submission made by the assessee during the course of appellate proceeding. The addition made by the Assessing Officer and confirmed by the CIT(A) is totally wrong, arbitrary and illegal on the facts of the case,
(3) That the Learned CIT(A) erred in law and facts of the case made a addition u/s 68 on account of Share application from Optimates Textile Industries Ltd. at Rs.5,00,000/- without appreciating, the facts and Page 2 of 6 submission made by the assessee during the course of appellate proceeding. The addition made by the Assessing Officer and confirmed by the CIT(A) is totally wrong, arbitrary and illegal on the facts of the case.
(4) That the Learned CIT(A) erred in law and facts of the case made a addition u/s 68 on account of Share application from Neema Investment Pvt. Ltd. at Rs.5,00,000/- without appreciating, the facts and submission made by the assessee during the course of appellate proceeding. The addition made by the Assessing Officer and confirmed by the CIT(A) is totally wrong, arbitrary and illegal on the facts of the case.
(5) That the Learned CIT(A) erred in law and facts of the case made a addition u/s 68 on account of Share application from Himgiri Dynamics Ltd. at Rs.5,00,000/- without appreciating, the facts and submission made by the assessee during the course of appellate proceeding. The addition made by the Assessing Officer and confirmed by the CIT(A) is totally wrong, arbitrary and illegal on the facts of the case.”
3. The assessee company filed return of income for the Assessment Year (A.Y.) 2005-06 declaring total loss of Rs.25,73,432/- on 14.10.2005. The Assessing Officer observed that the assessee company accepted share application and allotted the shares to 15 persons, the total amounting to Rs.89,00,000/- i.e. Rs.82,00,000/- towards share capital with premium and Rs.7,00,000/- towards share application pending allotments. The Assessing Officer made addition under Section 68 in respect of 4 parties i.e. M/s. Hindustan Continental Limited, M/s. Optimates Textiles Industries Limited, Neema Investment Pvt. Ltd. & Himgiri Dynamics Limited. Thus, the total income assessed was Rs.(-) 4,73,432/-.
4. Being aggrieved by the assessment order, the assessee filed appeal before the CIT(A). The CIT(A) dismissed the appeal of the assessee.
The Ld. A.R. submitted that in respect of the parties to whom shares were issued by the assessee company and share application money, following documents and information were provided before the CIT(A) and before the Assessing Officer :-
“1. M/s. Hindustan Continental Limited:- Assessee company has furnished the copy of confirmation, copy of cheque, audited books of accounts and share application form which duly prove that the investment is genuine and also the creditworthiness is duly explained. Also the master data of company from the records of Registrar of Companies was submitted which establishes the identity once again. As there is change in name of the company from M/s Hindustan Continental Page 3 of 6 Limited to Azure Exim Services Limited. It is clear from the abstract that the company is active and its registered office at Mumbai. And, it is assessed to tax by Assessing Officer Ward 1(1), Indore.
M/s. Optimates Textiles Industries Limited :- Assessee company has furnished the copy of confirmation, copy of cheque, audited books of accounts and share application form, which duly prove that the investment is genuine and also the creditworthiness is duly explained. Also the master data of company from the records of Registrar of Companies was submitted which establishes the identity once again.
M/s. Neema Investment Pvt. Limited:- Assessee company has furnished the copy of confirmation, copy of cheque, audited books of accounts and share application form, which duly prove that the investment is genuine and also the creditworthiness is duly explained. Also the master data of company from the records of Registrar of Companies was submitted which establishes the identity once again. It is assessed to tax under Circle 5(1), Indore.
M/s. Himgiri Dynamics Limited :- Assessee company has furnished the copy of confirmation, copy of cheque, audited books of accounts and share application form, which duly prove that the investment is genuine and also the creditworthiness is duly explained. Also the master data of company from the records of Registrar of Companies was submitted which establishes the identity once again.”
The Ld. A.R. further submitted that the Assessing Officer has not doubted on the identity and genuineness of the companies and admitted all the documents, thus the additions made were baseless and without any specific observations.
The Ld. A.R. relied upon the following decisions:-
“1. Yamuna Synthetics Pvt. Ltd. vs. DCIT, 2004 (ITAT-Delhi) (91 TTJ 0069) 2. DCIT vs. Lattu Finance & Investment Limited, 2016 (ITAT-Delhi) (46 CCH 0076) 3. CIT vs. Oasis Hospitalities Pvt. Ltd. 2011 (High Court of Delhi) (333 ITR 0119) 4. CIT-I vs. Paramjit Singh, 2014 (High Court of Punjab & Haryana) (90 CCH 0499) 5. CIT vs. Samir Bio-Tech Pvt. Ltd., 2008 (High Court of Delhi) (325 ITR 0294) 6. CIT vs. Gangour Investment Limited, 2009 (High Court of Delhi) (335 ITR 0359)
Page 4 of 6 7. Barkha Synthetics Limited vs. ACIT, 2005 (High Court of Rajasthan) (283 ITR 0377) 8. CIT vs. Dolphin Canpack Limited, 2006 (High Court of Delhi) (283 ITR 0190) 9. CIT vs. Peoples General Hospital Limited, 2013 (High Court of MP) (356 ITR 0065)”
The Ld. A.R. further submitted that identity of share applicants were never doubted and the CIT(A) casted doubt only on the creditworthiness of the share applicants which was inserted in the Section 68 proviso amended by Finance Act, 2013 and thus comes into effect from 01.04.2013. Thus, the assessee’s case is not covered by the above amendment. Further, the Ld. A.R. submitted that there was no satisfaction recorded by the Assessing Officer as to why explanation offered by the assessee is not satisfactory in respect of sum credited.
The Ld. D.R. relied upon the Assessment Order and the order of CIT(A).
We have heard both the parties and perused all the relevant material available on record. In respect of M/s. Himgiri Dynamics Limited, there was no observation made by the Assessing Officer in the Assessment Order and simplicitor added the amount. Besides this in respect of other three parties i.e. M/s. Hindustan Continental Limited, M/s. Optimates Textile Industries Limited and M/s. Neema Investment Pvt. Limited, the assessee claims that for all the four parties the assessee has given confirmation copy, copy of cheque, audited books of account and share application form. But when we have seen these documents the investment which was not made by the assessee has not been properly explained before the Assessing Officer or before the CIT(A). In fact, the funds which were available to the assessee has not been properly explained before the Assessing Officer as well as before the CIT(A). If the assessee has not explained any details as regards to investment and its original fund to the related investment, it is impossible on the part of the Assessing Officer to make plausible reasons in accordance with law. To establish that Section 68 will not be applicable in the present case, the assessee has to give all the details relating to the explanation of investment which was a failure on the part of the assessee during the assessment proceedings. Therefore, in respect of M/s. Hindustan Continental Limited, M/s. Optimates Textile Industries Limited and M/s. Neema Investment Pvt. Limited the Assessing Officer has rightly made addition and the same was properly
Page 5 of 6 confirmed by the CIT(A). As regards M/s. Himgiri Dynamics Limited, after perusal of the records, it is seen that the assessee could not bring on record or explain as to how the investment was in co-relation with the available funds before the CIT(A). Thus, order of CIT(A) does not require any interference. As regards contention of the assessee that the identity & creditworthiness cast upon the assessee comes into picture w.e.f. 01.04.2013 and thus is not applicable in assessee’s case does not make Revenue’s case weak but in fact Section 68 has given mechanism to the Assessing Officer that the assessee should give explanation which is in satisfaction to the Assessing Officer. There is no necessity of setting out the satisfaction separately but the conduct of the assessee by not explaining the investment in co-relation with the funds available with the assessee shows that the explanation was not given properly to the Assessing Officer during the assessment proceedings. Thus, the contention of the Ld. A.R. is rejected. The decisions cited by the assessee prima facie takes the aspect of explanation given by the assessee in consonance with the documents presented before the Revenue authorities as well as before the Tribunal while deciding the issue therein. It appears that these case laws will not be applicable in assessee’s case as assessee’s case is factual centric and the explanation was not properly given by the assessee before the Revenue authorities and, therefore, the stand taken by the assessee does not sustain.
In the result, appeal of the assessee is dismissed.
Order pronounced in the open Court on this 30th day of May, 2022.