TaxTMI 
TaxTMI 
2017 (1) TMI 1443
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....essing Officer on this basis, concluded that no prudent businessman shall omit to receive charges from his customers which have been incurred by him. The assessee challenged this addition before ld. CIT(Appeals) and it was submitted that assessee company has claimed jewellery making charges of Rs. 17,68,793/- in his trading account on the basis that same has not been charged in the sale bills. The Assessing Officer in the assessment order noted that assessee has converted gold bars into jewellery. Thus, it is but evident that this conversion could not take place without incurrence of making charges. Further, the assessee company has maintained Issue & Receipt Register on which the movement of stock inwards or outwards has been correctly recorded. TDS has been deducted on the jewellery making charges wherever applicable. Thus, there could be no doubt on genuineness of the expenses incurred. Further, the Assessing Officer has estimated income by applying GP rate by rejecting the books of account, however, in the present case, assessee's Gross Profit rate was accepted because assessee has shown more GP as against computed by the Assessing Officer. It was submitted that once GP is ....
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....the Act. The assessee has maintained proper records and movement of the stock and TDS has been deducted on jewellery making charges wherever applicable. Therefore, in such circumstances, the disallowance made by the Assessing Officer was highly unjustified which have been correctly deleted by the ld. CIT(Appeals). This ground of appeal of the revenue has no merit, same is accordingly dismissed. 5(i) In assessment year 2009-10, revenue has raised similar ground No. 1 challenging the deletion of addition of Rs. 58,09,670/-. It is noted in the impugned order that Assessing Officer has applied gross profit rate @ 6% of the total sales of jewellery items and gross profit rate of 3% on pure gold sales without recording any basis to adopt the same and without confronting assessee with the proposed addition of comparative gross profit rate. The Assessing Officer made this addition on account of low gross profit rate. The ld. CIT(Appeals) noted that it is a fact that same Assessing Officer has accepted the gross profit rate shown by the assessee on the basis of the books of account maintained by him for assessment year 2008-09. The fall in gross profit rate to 1.58% during the year under c....
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....ese circumstances, we do not find any infirmity in the order of the ld. CIT(Appeals) in deleting the addition. This ground of appeal of the revenue is also dismissed. 6(i) In the result, Issue No. 1 is decided against the revenue in both the assessment years under appeal. ISSUE NO. 2 7. In assessment year 2008-09, revenue on ground No. 2 challenged the deletion of addition of Rs. 14,790/- This addition pertains to disallowance of repair charges on old jewellery which have been disallowed by the Assessing Officer on the ground that they do not found mention in the sales bills. The assessee submitted before ld. CIT(Appeals) that repair charges are in-fact the net amount of repair charges paid by the assessee company on old jewellery got repaired from the job workers and repair charges claimed from customers against repair of jewellery belonging to the customers. These repair charges have been paid on assessee's own jewellery and also on jewellery received from customers for repair purposes. On receipt of jewellery from customers, a repair slip is prepared. Repair charges paid to job workers on its repair is written on the back of repair slip. Repair charges received from custo....
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...., identical as have been considered in assessment year 2008-09. This ground of appeal of the revenue is accordingly dismissed. 9(i) Issue No. 2 is, therefore, decided against the revenue. ISSUE NO. 3 10. On ground No. 3 in assessment year 2008-09, revenue challenged the deletion of addition of Rs. 11,17,80,000/-. On ground No. 4 in assessment year 2008-09, revenue challenged the deletion of addition of Rs. 1 lac. 11. In assessment year 2009-10, revenue on ground No. 3 challenged the deletion of addition of Rs. 6,37,20,000/- and on ground No. 4 revenue challenged the deletion of addition of Rs. 4,50,000/-. Ld. Representatives of both the parties submitted that issue is same in both the appeals of the revenue. Both the parties mainly argued on the basis of facts considered in assessment year 2008-09. Therefore, for the purpose of disposal of this issue, the facts are taken and considered from assessment year 2008-09. 11(i) The Assessing Officer made additions of Rs. 11,17,80,000/- and Rs. 1 lac on account of unexplained share premium. The Assessing Officer in this regard has observed in para 5 of the assessment order that assessee had issued 12,42,000 shares of Rs. 10/- each on ....
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....ection 68 of the Income Tax Act. The Assessing Officer also observed that M/s Puneet Fashion Pvt. Ltd. has subscribed 10000 shares @ Rs. 100/- per share including premium of Rs. 90/- per share. Since genuineness and credit worthiness of M/s Puneet Fashion Pvt. Ltd. could not be explained, therefore, it was also treated as unexplained and further addition of Rs. 1 lac was made under section 68 of the Act. 12. The assessee challenged both the additions before ld. CIT(Appeals) and submitted his arguments on these issues which are incorporated in the impugned order and read as under : "The Ld. A.O. has added Rs. 11,17,80,000/- received on account of Share premium, credited in the books, 'arbitrarily on the basis of surmises and conjectures, which is against justice and natural law of Justice. 5.1 Before going through further we want to reiterate the facts and Circumstances of the case in summary manner, regarding this issue before your honour, which are as under:- Assessee is engaged in the retail as well as whole sale business of jewellery. A search was conducted at the premises of the assessee on 14.03.2012. Assessment was made on 30.03.2014 under Section 153A r.w.s. 143 (3)....
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....t. 5.1(f) The Ld. A.O. on receiving the report of Ld. DDIT, Kolkata issued a letter dt. 20.03.2014 to assessee to explain the discrepancies as pointed out in the commission report received from Kolkata. In response to which assessee explained the each and every discrepancy vide his reply dt. 21.03.2014. 5.1(g] Thereafter in response to a letter dt. 27.03.2014 issued to Joint Director of Income Tax (Inv.) Ludhiana for their comments on the report of DDIT Kolkata, there reply received on 28.03.2014 also without any adverse interference, Certified copy enclosed at page no.62. 5.1(h) In our case on this issue not only proper explanations are on the record but also assessee have fully discharged his onus regarding identity of the subscribers, their credit worthiness' and genuineness of the Transactions and further enquiries made by Ld. A.O. also strengthen the issues regarding identity of the subscribers, their credit worthiness and genuineness of the transactions, directors produced before the authority, submitted their books of accounts, duly verified by the department officials regarding investment as well as the source of investment and no adverse inference are on record a....
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....n no's, amount received along with relevant details. Further information received in response to notices issued u/s 133 (6) of the Act. Ld. A.O. has not objected on the confirmations, documents attached with the confirmations, credit worthiness of the subscribers, genuineness of the transactions and source of investments explained by the subscribers in their respective reply. In response to further enquiries made by Ld. A.O. the report of DDIT Kolkata is self explanatory about the identity, credit worthiness, and genuineness of transactions and also in this report no adverse inference drawn except few discrepancies, which also have fully explained by the assessee and on record. No adverse inference drawn by the Joint Director of income Tax (Inv.)., Ludhiana in their comments on the report of DDIT, kolkata dated 28.03.2014 Reliance is being placed on i) Acron Finance (P) Ltd. V CIT (2011) 238 CTR (P&H) 344 ii) CIT Vs Kulwant Singh & Co. (2008) 299 ITR 53 (P&H) iii) CIT Vs HA Management Consultants P.Ltd. (2012) 82 CCH 138 Del High Court. (Held, Assessee has been able to prove identity and credit worthiness of the creditor and genuineness of the transaction -Addition co....
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....lanations filed rejected by the revenue or record their dissatisfaction or rebuttal of the same. Ld. A.O. had not pointed out any inherent weaknesses or short coming" in the information on record, whether provided by the assessee or collected by at his own. All the explanations as well as evidences on record are factual. There is no evidence to show that the transactions were sham. Hence addition made under section 68 is unjustifiable as well as against law of natural justice. Reliance is being placed on (i) Sree Lekha Banerjee vs CIT (1963) 49 ITR 112 (SC) (Held: Before the Department rejects such evidence it must either show an inherent weakness in the explanation or rebut it by putting to the assesses some information or evidence which it has in its possession. The Department cannot by merely rejecting unreasonably a good explanation, convert good proof into no proof. It is within the range of these principles that such cases have to be decided.) ii) Exoimp Resources (India) Ltd. Vs CIT (2005) 195 CTR (Cat) 226 (Income-Cash credit- Burden of proof vis-a-vis explanation of assessee-When s. 68 is invoked and, the assessee furnishes an explanation, it is incumbent upon ....
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....vidence- First appellate authority as well as the Tribunal have given a finding that there is no material on record to suggest that the transaction was sham- Concurrent findings are based on valid material and evidence- Therefore, the sum received on "amount of sale of jewellery cannot be charged to tax under s. 68- No substantial question of law arises) 5.3(c) Revenue had not disputed any of the facts of the case at any stage of assessment proceedings. Ld. A.O. had not confronted any disputed fact to stage of assessment proceedings on which difference of opinion exists. In the absence of the same this impugned addition is against facts of the case as well as against law. Reliance is being placed on : i) Murlidhar Lahorimal Vs CIT (2006) 280 ITR 512 (Guj) (Income-Cash credit-Genuineness of gift-Addition made by the AO by disbelieving the explanation of the assessee that the credit entry In the capital account represented gift from R-Not justified-R appeared before the AO and confirmed the fact of having made .the gift by way of bank draft-He produced evidence in support of the source from which the funds for making the gift were available with him-Revenue has not disputed....
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....ncies as pointed out in the commission report received from Kolkata. In response to which assessee explained the each and every discrepancy vide his reply dt. 21.03.2014. No adverse inference drawn from the same on record. Thereafter in response to a letter dt. 27.03.2014 issued to Joint Director of Income Tax (Inv.) Ludhiana for their comments on the report of DDIT Kolkata, there reply received on 28.03.2014. No adverse inference drawn from the same on record. When there is neither any adverse Inference on record in respect of whole enquiries nor any adverse materiel or evidences on record, then the addition made is fully unjustifiable and without any reasonable ground. 5.3(e) Revenue had not put any adverse material on record to justify the addition u/s 6E of the Act. There is no adverse material or evidences en record on the basis of which Ld. A.O. decided to made this addition. Hence it is clear that said addition u/s 68 is totally unrealistic and on the basis of suspicious, surmises and conjectures in spite of the fact that Ld. A.O. have also framed the assessment of this company as well as of the directors and other family member of the group for seven years i.e. A.Y. 2....
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.... of doubts, suspicion, surmises, conjectures, and acting unreasonably is net maintainable. Having regard all as above, this addition has been made purely on the basis of doubts, suspicion, surmises, conjectures and acting unreasonably Reliance is being placed on (i) Roshan di Hatti vs CIT (1977) 107 ITR 938 (SC) Conclusion arrived at that Tribunal having acted without material or in any event the finding of fact reached by the Tribunal being unreasonable or such that no person acting judicially and properly instructed as to the relevant law would come to such a finding, such findings of fact were liable to be interfered with. (ii) CIT vs Divine Leasing & Finance Ltd. (2008) 299 ITR 268(Del) (Income-Cash credit- Share application money- Burden of proof can seldom be discharged to the hilt by the assessee-If the AO harbours doubts of the legitimacy of any subscription he is empowered, nay dutybound, to carryout thorough investigations- But if the AO fails to unearth] any wrong or illegal dealings, he cannot obdurately adhere to his suspicions and treat the subscribed capital as the undisclosed income of the company) (iii) CIT vs Ujala Dyeing & Printing (P). Ltd. (2010) ....
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....ACIT (2007) 291 ITR 178 (Mad) (Income-Cash credit-Gift from NRI-Donor is a wellsettled industrialist in UK-He has confirmed that he had made the gifts as a gratitude for the help rendered by one of the assessees to his father which enabled him to come up in life-All the gifts came through proper banking channel- Donor appeared before the Department and has given all the details-Thus, assessees have established the identity of the donor and his solvency-Reasons to reject the explanation of the assessees in each case in the realm of surmises, conjectures and suspicions-Thus, rejection of the explanation was an arbitrary and unreasonable exercise of power-Addition under s. 68 was not therefore sustainable) 5.3(h) Principles of natural justice have violated. The Ld. A.O. in whole year and in whole assessment proceedings have not shown any dissatisfaction on this issue. While on 29.03.2014 Ld. A.O. issued notice u/s 142 (1) to furnish the information/details called for and also mentioned that incase of your failure to furnish the above information or justify the reasonableness of share premium, you are requested to please show cause, why the amount of share premium received should....
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....oncern, which established in 1995t occupied an established showroom at prime location of the jewelers market, having a large numbers of premium customers, book value of shares comes to Rs. 410.90 on the basis of market value of the stocks. There is nothing in the assessment order as well as on the record, that these facts and figures are wrong or not satisfactory. Since there is no end or limits- in respect of suspicion, surmises or conjecture, so the glaring issues as noted down in the order are baseless and emerged from suspicion only. More ever the judgements relied upon by the revenue, is not applied in our case having regard to the facts and circumstances of the case. The decision of the Hon'ble Supreme Court in case of Sumati Dayal (214 ITR 801) conveys that if there is a prima facie evidence against assessee and if assesses fails to rebut the same, such unrebutted evidence can be used against him. In our case no such circumstances exist, further in case of Durga Prasad More (182 ITR 540) conveys that Unless Tribunal's conclusion is held to be perverse or is not supported by any evidence or is based on irrelevant evidence, the High Court had no jurisdiction to interfe....
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....he DDIT(inv.) Unit IV(l), Kolkata and documents enclosed with that report and reply of the assessee and hence no adverse inference was drawn on account of investment in shares. The copy of the report received from DDIT(Iny.) Unit-IV(l), Kolkata sent vide his office letter no.9725 dated 19.03.2014 is enclosed. It is further submitted that the discussion regarding the report of DDIT(Inv.) Unit-IV(l), Kolkata had been made in the office note of the assessment order in the case of the above stated assessee for the A.Y.s 2008-09 & 2009-10. The issues have been fully discussed in the assessment orders as well as in the office note. Copies of letter no.F.No.DCIT/CC-III/LDH/13-14/10114 dated 22.01.2014 written to CIT, Central, Ludhiana, reports of DDIT(Inv.), Unit IV-I, Kolkata, Addl. DIT(Inv.), Ludhiana and office note in the assessment years 2008-09 and 2009-10 are enclosed for ready reference." 14. Copy of the remand report of the Assessing Officer was submitted to the assessee and the assessee in reply thereof in rejoinder submitted that all the inquiries conducted by the Assessing Officer are part of his submissions on which no adverse inference was drawn by the revenue. It seems t....
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..... The report of the Assessing Officer as highlighted in the appellate order shows that after elaborate inquiries conducted by Investigation Wing at Kolkata, the identity, creditworthiness and genuineness of various share application companies could not be said to be doubtful so much so that no adverse inference from the same could be drawn. The ld. CIT(Appeals), therefore, noted that under these circumstances, the Assessing Officer had not mentioned the detailed proceedings in the assessment order therefore, nothing was found adverse against the assessee to show whether it was accommodation entry. The ld. CIT(Appeals), therefore, noted that there is no adverse material available against the assessee on record so as to make the addition. The ld. CIT(Appeals) relied upon several decisions in his findings in order to come to the finding that addition is wholly unjustified. The ld. CIT(Appeals), considering the totality of the facts and circumstances and report of DDIT (Investigation) Kolkata, deleted the entire addition. 17. The revenue is in appeal on ground No. 3 and 4 of the appeals. The ld. Pr.CIT(C),Ludhiana made a request for admission of the additional evidences which are file....
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....le Supreme Court in the case of Shri Tek Ram 262 CTR 118 and decision of the Hon'ble Punjab & Haryana High Court in the case of Mukta Metal Works 336 ITR 555. The ld. DR also relied upon judgement of Hon'ble Punjab & Haryana High Court in the case of Smt. Shakuntala Thukral vs CIT 52 Taxman.com 86 in which Hon'ble High Court deemed fit to admit additional evidence with a view to advance cause of justice. The ld. DR also relied upon decision of the Hon'ble Punjab & Haryana High Court in the case of Haryana State Road & Bridges Development Corporation Ltd. Vs CIT 75 Taxman.com 104 in which the assessee discovered later on that it had in-fact deducted the tax at source and paid the same to the Government Treasury. The assessee sought to rely upon the challans in this regard before the Tribunal but the Tribunal did not admit the same. In these circumstances, additional evidence was admitted and matter was remanded to the Assessing Officer for examining the challans and determining whether requisite tax has been deposited by assessee or not. 17(ii) The ld. DR also relied upon decision of Hon'ble Madras High Court in the case of Carburetors Ltd. Vs ACIT 69 Taxman.com....
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....ed by office of DIT (Investigation) Kolkata sought to be admitted as additional evidence, did not relate to the assessee company and confessional statements are made against third party. He has also submitted that some of the statements were recorded by DDIT (Investigation) Kolkata prior to passing of the assessment order and some of the statements sought to be admitted as additional evidences, have been recorded after passing of the assessment order. Therefore, none are relevant to the matter in issue and should not be admitted as additional evidence. 18. We have given are thoughtful consideration to the rival contentions. The additional evidence can be admitted by the Tribunal in order to enable it to pass order and for substantial cause. The additional evidences should be relevant and should go to the root of the matter in order to do justice between the parties. The ld. DR relied upon order of ITAT Chandigarh Bench in the case of M/s Lotus Integrated Taxpark Ltd. Vs DCIT (supra) in which the Tribunal admitted the additional evidence being relevant document to prove credit worthiness of the subscriber company as the same would go to the root of the matter. The Tribunal relied u....
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....to the matter in issue, is not explained. The contention of ld. DR is that in Kolkata, hawala operators are operating to provide bogus entries in the name of share application/share premium. It may be a general allegation, but how it is connected with the assessee company is not established through these additional evidences. The department is trying to make out a new case altogether at this stage by producing these fresh additional evidences. Since some of the statements were recorded prior to passing of the assessment order, it is not explained why the Revenue Department remained silent on these statements and why these statements were not forwarded to the Assessing Officer for completion of the assessment. Some of the subsequent statements recorded by DIT (Investigation) Kolkata after passing of the assessment orders are not relevant to the case of the assessee. Since the department is trying to make out a new case which was not considered by the authorities below particularly when none of the statements indicate anything against the assessee of receiving any bogus entry from the investors, these statements would not be relevant to the matter in issue before the Tribunal. It may....
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..... 22. The ld. DR relied upon order of the Assessing Officer and submitted that assessee company was incorporated on 22.01.2008 and large number of private companies based at Calcutta have made investments in the shares of the assessee company. It is not explained why the distant parties were interested in making investment in shares of the assessee company. The ld. DR submitted that addition was made on account of share premium considering it to be bogus. However, investments in shares have not been disputed by the Assessing Officer. Report by DDIT (Investigation) Kolkata was received on 26.03.2014, therefore, Assessing Officer did not have adequate time to consider the issue in detail because assessment order was passed on 30.03.2014. The investigation was not conducted to logical end. Therefore, it was the duty of the ld. CIT(Appeals) to correct all errors in the assessment order because ld. CIT(Appeals) has coterminous power to that of the Assessing Officer. He has also relieved upon decisions reported in CIT Vs Nirbheram Daluram 224 ITR 610 and Jute Corporation of India Vs CIT 187 ITR 688. The ld. DR in his written submission also reiterated the same facts and also submitted t....
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....was difference in market value and book value of about Rs. 4.94 Cr and this was the reason that premium was charged on share investments. All queries by the Assessing Officer have been replied. Assessee gave PAN number of the shareholders and transactions were routed through banking channel on which no adverse inference have been drawn by the Assessing Officer. Since the Assessing Officer accepted share capital as genuinely invested by the same parties, therefore, Assessing Officer accepted the identity, creditworthiness and genuineness of the transaction of the share applicants. The investigation was conducted by many investigating agencies and no adverse inference have been drawn against the assessee. Since assessee was at the beginning of the business itself as assessee company was incorporated on 22.01.2008 therefore, assessee could not have earned this huge undisclosed income. Therefore, no addition should be made against newly established company. No evidence was found against the assessee during the course of search so as to make out a case of earning any undisclosed income. The ld. counsel for the assessee relied upon several decisions, copies of the same are filed in the P....
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....ssessee. 24(i) The Assessing Officer accepted the share capital introduced by the same parties in assessee company which would prove that the assessee established identity of the share applicants, their creditworthiness and genuineness of the transaction in the matter. Why for share premium, the same ingredients have been doubted by the Assessing Officer, have not been explained. The assessee explained before the authorities below that assessee company has taken over running business of proprietorship, which have not been disputed by the Assessing Officer. The assessee further explained that stock of the gold was taken at face value rather than market value. Therefore, this was the reason to explain that premium was charged from the share applicants. The assessee provided complete details of the share applicants on which the reports, as noted above under section 133(6) and commission report under section 131(1) of the Act have been brought on record verifying the identity of the share applicants, their creditworthiness and genuineness of the transaction in the matter. The remand report submitted by the Assessing Officer before ld. CIT(Appeals) admitting claim of assessee also supp....
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....rtment against this judgment: see [2016] 380 ITR (St.) 64-Ed.] 25(i) Hon'ble Delhi High Court in the case of CIT Vs Kamdhenu Steel & Alloys Ltd. 361 ITR 220 held as under : A delicate balance has to be maintained while applying sections 68 and 69 of the Income-tax Act, 1961. On the one hand, no doubt, such kinds of dubious practices are rampant ; on the other hand, merely because there is an acknowledgment of such practices that would not mean that in any of such cases, the court has to presume that the assessee in question has indulged in that practice. To make the assessee responsible, there has to be proper evidence. It is equally important that an innocent person is not fastened with liability without cogent evidence. The Department is not remediless and is free to proceed to reopen the individual assessment of such alleged bogus shareholders in accordance with law. The initial burden lies on the assessee to explain the nature and source of the share application money received by the assessee. The assessee has to satisfactorily establish the identity of the shareholders, the genuineness of the transaction and the creditworthiness of the shareholders. Once adequate evid....
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.... could be made under s. 68 in the absence of any positive material or evidence to indicate that the shareholders were benamidars or fictitious persons or' that any part of the share capital represented company's own income from undisclosed sources. 25(v) Hon'ble Madhya Pradesh High Court in the case of CIT Vs People's General Hospital Ltd. 356 ITR 65 held as under : "If identity of person providing share application money is established then burden was not on assessee to prove creditworthiness of said person and no addition can be made under section 68." 26. It may be noted here that the assessee company was incorporated on 22.01.2008 and the financial year closes on 31.03.2008 for assessment year 2008-09. Therefore, it is not explained as to how within a short span of period, the assessee would earn such a huge undisclosed income. We are fortified in our view by judgement of Hon'ble Supreme Court in the case of CIT Vs Bharat engineering & Construction Co. 83 ITR 187 in which it was held as under : "Unexplained cash credit entries in the first year of business of engineering construction company could not be its income." 26(i) On this ground itself, no additi....