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Income Tax Appellate Tribunal, KOLKATA BENCH ‘A’, KOLKATA
Before: Shri P. M. Jagtap, A.M. & Shri S.S.Viswanethra Ravi, J.M.)
ORDER Per Shri S.S.Viswanethra Ravi, J.M. This appeal is filed by the assessee against the order dated 15.01.2013 passed by the CIT(Appeals)-XII, Kolkata for the assessment year 2003-04 framed under section 143(2)/254/251/143(3) of I.T.Act.
2. The assessee raised the following grounds before the Tribunal as under: “1. That the C.I.T.(A)-XII has erred, both on the facts and in law, in dismissing the ground No.1 of the appeal before him as to legality of assessment.
2. That the C.I.T.(A)-XII has further erred, like-wise, in dismissing the ground No.2 as to addition of Rs.18,02,000/- being share capital raised during the year.
3. That the appellant craves leave to add, to amend or withdraw any one or both the ground(s) of appeal on or before the hearing of the appeal by Hon’ble Bench.”
J. J. Development Pvt. Ltd. Assessment Year: 2003-04 3. The brief history of the case is that, the assessee is a real estate developer and is into development of properties. The assessee filed its return declaring total income of Rs.2,66,283/- on 28.11.2003 and on scrutiny, AO determined at Rs.1,30,10,370/- as total income of the assessee on 31.3.2006. On an appeal ld. CIT(A) allowed partly of the assessee’s appeal. Against which, the Revenue filed its appeal in ITA 2105/Kol/2006 and assessee filed its appeal in 126/Kol/2007 and C.O. 6/Kol/2007 before this Tribunal. The Tribunal in its consolidated order dated 16.11.2007 at page 10 of paper book partly allowed the Revenue’s appeal and dismissed the Cross Objection of the assessee. In respect of Revenue’s appeal in ITA 2105/Kol/2006, the ITAT, Kolkata bench while allowing the relief to the assessee to an extent of Rs.76,98,000/- out of Rs.95,00,000/- has observed at para 10 of its order as under: “10. So far as the balance share applicants to the extent of Rs.18,02,000/- the ld. CIT(A) has deleted the same observing that the A.O. has made the addition in haste without affording reasonable opportunity to the assessee. We, therefore, considering all the facts are of the opinion that the matter needs re-consideration by the A.O. and, therefore, we restore the Ground No.1 raised by the Revenue to the file of A.o. to decide genuineness of share applicants to the extent of Rs.18,02,000/-. Needless to say that the assessee should be given opportunity to explain its case before the A.O. The assessee should produce all the relevant details and documents in support of the genuineness of the above share applicants before the A.O. We hold accordingly and accept the ground of revenue partly for statistical purposes.”
4. From above, it is clear that the ITAT, Kolkata opined that in respect of addition of Rs.18,02,000/- needs reconsideration and accordingly, it directed the AO to decide genuineness of share applicants in respect of addition above and also directed the assessee J. J. Development Pvt. Ltd. Assessment Year: 2003-04 produce all the relevant details and documents in support of the genuineness of share applicants.
Thus, going by the above observation of ITAT, Kolkata, the issue to be decided as to whether the AO decided the genuineness of the share applicants in accordance with law by giving an opportunity to assessee and as to whether assessee availed the opportunity granted by the ITAT, Kolkata in producing the relevant details and documents in support of its case before the AO.
The AO has given effect to the order of ITAT supra on 27.12.2007 and as there was no compliance from assessee and issued a notice on 03.04.2009 under section 142(1) of the Act intimating the date of hearing 14.4.2009 to assessee. The AO issued another notice on 17.6.2010 under section 142(1) of the Act fixing the hearing date on 16.7.2010 and on an adjournment petition the case was adjourned to 06.8.2010. At last, after three adjournments the assessee filed details of share applicants along with photo copies of some documents. The AO observed that said documents were not certified by the assessee. The AO also issued summons under section 131 of the Act to M/s. Ramsay International Ltd. and M/s. Saroj Kumar Jhunjhunwala to produce certain documentary evidence referring share application amount of Rs.10,00,000/- and Rs.8,02,000/- respectively. To be clear and for better understanding of the procedure initiated by the AO in giving effect to the ITAT’s order supra and to verify the identity, creditworthiness and genuineness of the transaction under section 131 of the Act, the relevant portion of the AO’s order is reproduced herein below:
J. J. Development Pvt. Ltd. Assessment Year: 2003-04 “The following observations are made in this case: a) Several opportunities, as detailed above, have been provided to the assessee. When the actual verification process has started, the assessee tried to avoid the proceeding by raising a number of issues including validity of notice u/s 142(1). The assessee was also asked whether they think the Order passed on 27.12.2007 is final or not, but they remained silent on the said issue. It was also asked whether the demand raised in order dt. 27.12.2007 has been paid by them or not or whether they have filed any appeal against the said order or not, but they have preferred to remain silent. It has been seen from the record that this office did not pursue for the demand raised in order dt. 27.12.2007 and provided opportunity to the assessee by issuing notice u/s 142(1) in pursuance to order of the Hon'ble ITAT, Kolkata. It has been seen that the issue of share application money of Rs. 18,02,000/- is not subject matter of appeal before the Hon'ble High Court at Calcutta and the assessee was informed accordingly vide letter dt. 05.12.2011 that this office is not in receipt of any order other than order of the Hon'ble ITAT, Kolkata as referred above, on the issue mentioned in the notice u/s 142(1). But the assessee still raised the issue in its letter submitted on 12.12.2011 to avoid the proceeding involving the said issue. b) The assessee has been informed about the verification process started in respect of two claimed share applicants and they have been served with the gm Summons u/s 131 but they did not try to substantiate their claim by producing them. It has also been seen that M/s. Saroj Kumar Jhunjhunwala (HUF) is a related concern to the assessee and Sri Mrinal Kanti Goswami, who has claimed to be Authorized Representative of M/s. Saroj Kumar Jhunjhunwala (HUF), is also Authorized Representative of the assessee and submitted authorization in respect of the assessee. He failed to comply in the case of the assessee but tried to represent the case of M/s. Saroj Kumar Jhunjhunwala (HUF) without furnishing of authorization. c) In respect of M/s. Saroj Kumar Jhunjhunwala (HUF), the following requisitions were made:
"1. Personal attendance for recording statement.
J. J. Development Pvt. Ltd. Assessment Year: 2003-04 2. Computation, Profit & Loss account or Income, Balance Sheet including all schedules, I. T. filing receipt, Bank statement for A. Y. 2003-04 (F.Y. 2002-03) and A. Y. 2002- 03 (F. Y.2001-02),
3. Cash Flow statement/Cash Book for F. Y. 2001-02 and 2002-03.
4. To furnish details of share application/allotment made in M/s.J. J. Development Pvt. Ltd. during A. Y. 2002-03 and A. Y. 2003-04 along with proof of allotment/application.
5. To furnish source of such investment in M/s. J. J. Development Pvt. Ltd."
It is specifically mentioned in the Summons u/s 131 that personal attendance is required. But no personal attendance was made. The photocopies enclosed with the submission made have not been certified. No authorization has been submitted while furnishing the papers and letters, where the claim of the assessee is supported. Therefore, these cannot be treated as valid evidences. An extract of Cash Book has been submitted claiming that cash of Rs. 8,35,000/- was received from M/s. J. J. Development Corporation, a partnership firm during F. Y. 2002-03. For F. Y. 2001-02, it has been claimed that cash of Rs. 75,400/- was receipt from various sources, however, no such source has been specified. It is seen that the said HUF had income of Rs. 55,160/- only for A. Y. 2003-04. As no schedule is enclosed it is not known under which head of the Balance Sheet such transactions shown, It has been claimed that Karta of the HUF is out of station but it has not been specified where he is at present or his expected date of return. No documentary evidence has been submitted in support of his claim. The term "out of station" is commonly used by the persons to avoid the proceeding and in this case the Karta did the same job carefully for the purpose of avoidance of the proceeding, thinking that giving an explanation for such huge cash transactions would be difficult at the time of recording statement u/s 131. It is a very common reason for non-appearance and not acceptable. Therefore, it has not been established beyond doubt that there was creditworthiness and genuineness in the transactions claimed.
J. J. Development Pvt. Ltd. Assessment Year: 2003-04 d) In case of M/s. Ramsay International Ltd., the Inspector reported that the premises is a residential one. The following requisitions were made in Summons u/s 131:
"1. Personal attendance for recording statement.
Your PAN Card, Documentary evidence to prove your position in the company.
Computation, audited accounts, Tax Audit Report including all schedules, I. T. filing receipt, Bank statement for A. Y. 2003-04 (F. Y. 2002-03),
List of Directors as on 31.03.2003.
5. To furnish details of share application/allotment made in M/s. J. J. Development Pvt. Ltd. during A. Y. 2003-04 alongwith proof of allotment/application.
6. To furnish source of such investment in M/s. J. J. Development Pvt. Ltd."
It is specifically mentioned in the Summons u/s 131 that personal attendance is required. But no personal attendance was made. The photocopies enclosed with the submission made have not been certified. Therefore, these cannot be treated as valid evidences. However, in the said submission the claim of the assessee is supported. It has been claimed that share application money of Rs. 10,00000/- is reflected under Loans and Advance. It is seen from the Balance sheet that Loans and Advances constitute Loans of Rs. 20,05,533/-, including doubtful Loans of Rs. 90,000/- and Advances of Rs. 12,79,510/- (considered good) and Rs. 57,48,166/- (considered doubtful) but no schedule has been enclosed for such heads. Therefore, it is not known under which head it is shown. Also it is not known how application made for allotment of shares can be categorized under the head "Loans and Advances". In this case also, it has not been established beyond doubt that there was creditworthiness and genuineness of the transactions.”
At the outset, the AO observed that the assessee actually avoided to participate in the proceedings and failed to discharge its onus.
J. J. Development Pvt. Ltd. Assessment Year: 2003-04 Regarding the proceedings under section 131 of the Act, the AO felt that no personal attendance was made by any concerned representing the said two entities and the photo copies relating to some documents were not certified. Thereby, the AO added Rs.18,02,000/- to the income of the assessee as unexplained cash credit under section 68 of the Act.
Ld. CIT(A) in first appeal has observed that the assessee has not produced any details and required documents to substantiate the transaction and creditworthiness of said two entities above. Accordingly, confirmed the AO’s order in respect of addition of share application amount Rs.18,02,000/-.
In second appeal before us, that the Ld.AR submitted that the assessee is not prosecuting ground no.1 and prayed that it may be treated as not pressed and therefore it is dismissed as not pressed. Regarding no.2, the A.R. drew attention to the summons at page no.43 and reply to such summons at 44. The AR submitted that all the requisite details were placed before the AO wherein the assessee produced the details of two entities about their identity, creditworthiness and genuineness of transactions but, the AO did not consider the same in proper perspective and prayed to allow the appeal. In reply, the ld. DR submitted that the assessee did not properly explain the creditworthiness and genuineness of the transactions. Moreover, the entities who paid share capital money were not appeared before the AO under summons proceedings and they filed only documents which are not certified. Further, in spite of giving many opportunities the assessee failed to discharge its onus under section 68 of the Act and relied on the orders of the AO and CIT(A) and prayed to dismiss the appeal of the assessee.
J. J. Development Pvt. Ltd. Assessment Year: 2003-04 10. Heard both, perused the relevant material available on record and considered the submissions. It is seen from the record that it is a second round of litigation which started from 27.12.2007, where, under direction from ITAT, Kolkata, the AO initiated proceedings to decide the genuineness of the transaction involving Rs.18,02,000/- and it took almost four years to comply with the order of ITAT, Kolkata and the AO passed order on 26.12.11. We have also noted that the assessee has taken three years, i.e. on 97.12.2010 to produce the details of share applicants along with some documents which are stated to be photo copies as not certified. It appears from the record, as it was mentioned by the AO, that the assessee did not cooperate and avoided to participate in the assessment proceedings, is, indeed true . The ITAT, Kolkata has accorded an opportunity to the assessee to produce all the relevant materials in support of the genuineness of share applicants. Therefore, duty is cast upon the assessee to produce all details to substantiate its case. The assessee failed to discharge its duty under section 68 of the Act, except producing the photo copies of documents and details of share applicants i.e. M/s. Ramsay International Ltd. and M/s. Saroj Kumar Jhunjhunwala.
10.1 The concerned persons representing above said two entities failed to appear before the AO in person to proceed with the procedure contemplated in section 131 of the Act. We found from the record they too did not cooperate with the AO from 02.12.2011 being the first date of hearing except filing reply to summons placed at page no.44 where the details of Saroj Kumar Jhunjhunwala were filed through A.R. But, said person did not appear before the AO except stating that he is out of station.
J. J. Development Pvt. Ltd. Assessment Year: 2003-04 10.2 Section 68 of the Income Tax Act, which reads as follows:
“Where any sum is found credited in the books of an assessee maintained for any previous year and the assessee offers no explanation about the nature and sources thereof or the explanation offered by him is not in the option of the Assessing Office, satisfactory, the sum so credited may be charged to Income Tax as the income of the assessee of that previous year.”
10.3 It is to say, to establish the receipt of cash credit as required under section 68 the assessee must satisfy three important conditions namely, Identity of the creditor, Genuineness of the transaction, and financial capability of the person or persons as the case may be giving the cash credit to the assessee i.e the credit worthiness of the creditor. In the present case AO issued notices u/s. 131 for the examination of share applicants and for verification of their books of account and certain other documents, but, however, none of the two entities were present before the AO and even the address of M/s Ramsay International Ltd not traceable at the given addressee. We noticed in section 68 of the Act, authorises the Respondent Revenue to make inquiry into the sources of the creditors also and there is no limitations as such on the process of the A.O to conduct enquiries not only with the transactions but also with the person or any other concerns for that matter.
10.4 In the present case, the assessee discussed about above. The assessee filed details of share applicants on 07.12.2010 where it referred to share application money as it can be seen from the 4th para of AO’s order. The AO in order to verify the three ingredients of section 68 of the Act issued notices under section 131 of the Act to both the entities.
10.5 In response to such notice, the AR representing Saroj Kumar Jhunjhunwala filed reply to section 131 summons at page 44 of paper book where it is observed that the sources of income were shown in cash, where the computation of income at page 45 of paper book for assessment year 2003-04 shows the total gross income of J. J. Development Pvt. Ltd. Assessment Year: 2003-04 Rs.55,160/- and whereas the share application money for assessment year 2003-04 stated to have transferred as in page 44 of the paper book from R.S. Malani Pvt. Ltd. does not reflect in the computation of income for 2003-04. The balance sheet at page 46 of paper book shown as on 31.03.2003 relevant to 2003-04 shows Rs.14,01,496.27 as loans and advances. Bank statements at pages 48 and 49 does not support the contention of the said Saroj Kumar Jhunjhunwala being capable of payment referred as share application money. Therefore, the identity of Saroj Kumar Jhunjhunwala said to have been proved by filing documents from 44 to 64 in paper books, but whereas about two other ingredients i.e. creditworthiness and genuineness of transaction is very much doubtful. The AO at page 5 of his assessment order observed that “no personnel attendance was made and no valid documents regarding share application money were produced”. Thus, the AO is right in doubting the creditworthiness and genuineness of the transaction. The section 68 of the Act reads as when an explanation is given by the assessee and then it is for the respondent Revenue to be satisfied whether the said explanation is correct or not. All other documents filed in respect of Saroj Kumar Jhunjhunwala as discussed above supports the view of AO in drawing adverse inference against the assessee and this share applicant regarding creditworthiness of share applicants and the genuineness of transaction and it is justified.
10.6 The AO noted that the address of office premises provided by the assessee of M/s. Ramsay International Ltd. is a residential area and on enquiries from neighbours, no such office in the name of M/s. Ramsay International Ltd. is existed as on that address. According to AO on behalf of said Ramsay International Ltd. also filed some documents which are not certified by any person concerning said Ramay International Ltd. When the said documents were produced for an examination before the competent authority discharging duties in accordance with law, the documents relied on shall meet requisite qualification as prescribed by the law. In this present case, regarding M/s. Ramsay International, any sanctity cannot J. J. Development Pvt. Ltd. Assessment Year: 2003-04 be attached to the documents filed before the AO as on certified. The said Ramsay International Ltd. neither filed any valid documents before the 1st appellate authority nor before us in support of its contention. Therefore, we are of the view that the view expressed by the AO and CIT(A) about the creditworthiness and genuineness of transaction between assessee and M/s. Ramsay International Ltd. is justified. Thus, we hold that M/s. Ramsay International Ltd. has failed to prove its identity also as discussed above and we confirm the order of CIT(A) about creditworthiness and genuineness of transaction.
10.7 In pursuance of the Section 68 of the Income Tax Act, It is for the assessee to establish the identity of the subscribers and prove their credit worthiness. In the present case, on the basis of the material available on record the identity of the Saroj Kumar Jhunjhunwala was established and identity of the M/s Ramsay International Ltd was not established. Regarding proving their creditworthiness or the genuineness of the transaction as they were not availed an opportunity given by the ITAT, Kolkata and pursuant to which, the proceedings under Section 131 of the Act. In enquiry by his inspector, AO found that one of the share applicants not existed at the given address. That both the share applicants did not choose to appear before the AO and The details could not be established. The valid details of the two concerns were not produced for examinations. Therefore we are of the view that the assessee failed to substantiate its case and no merits in the ground no.1 and hence it is dismissed.
In the result, the appeal filed by the Assessee is dismissed.
Order Pronounced in the Open Court on 13th April, 2016.