Ssp Enterprises Private Limited v. Assistant Commissioner Of Income Tax

1 I.T.A. No.223 of 2017 HIGH COURT OF MADHYA PRADESH : BENCH AT INDORED.B.: Hon'ble Shri Pankaj Kumar JaiswalHon'ble Shri Sunil Kumar Awasthi, JJ. Income Tax Appeal No.223 of 2017 SSP Enterprises Private Limited Versus Assistant Commissioner of Income Tax*************** Shri Manoj Munshi, Advocate for the appellant. * * * * * O R D E R (Passed on this 07/ 05/2018) Per P.K. Jaiswal, J. Heard on the question of admission. 2.This appeal under Section 260-A of the Income Tax Act, 1961 (for short, “the Act of 1961”) has beenfiled by the assessee against the order dated 21.11.2016passed by the Income Tax Appellate Tribunal by whichthe order passed by the CIT with respect to addition ofshare capital of Rs.28 lakhs and unsecured loan ofRs.16,39,960/- has been affirmed. 3.The appellant is a Private Limited Companyengaged in the trading and consignment business of 2 I.T.A. No.223 of 2017 plastic granules and PP woven fabrics. The appellanthad filed its return of income and had disclosed theamount of Rs.40 lakhs received as share applicationmoney during the assessment year 2006-07 from 10shareholder companies and had also disclosed theunsecured loan of Rs.16,39,960/- from aproprietorship concern. 4.The case of the appellant was selected forscrutiny assessment. The Assessing Officer completedthe assessment under Section 143(3) of the Act of 1961and made the additional of Rs.40 lakhs being theamount received as share application money forallotment of shares of the company and also added theamount unsecured loan of Rs.16,39,960/- asunexplained income under Section 68 of the Act of1961. 5.The appellant being aggrieved by the additionsmade by the Assessing Officer filed an appeal beforethe Commissioner, Income Tax (Appeals). Theappellate authority partly allowed the appeal and as 3 I.T.A. No.223 of 2017 against addition of Rs.40 lakhs considering threeapplicants as genuine deleted the addition of Rs.12lakhs, however, in respect of balance applicationmoney of Rs.28 lakhs from rest of 7 applicantsmaintained the additions. Similarly the appellateauthority also maintained the addition of unsecuredloan of Rs.16,39,960/- as per the order of AssessingOfficer. 6.The assessee as well as the revenue partlyaggrieved by the order of the appellate authority,which had partly allowed the appeal has filed SecondAppeal in Income Tax Appellate Tribunal, Indore. Theassessee has taken the ground that the learned CIT(Appeals) was not justified in retaining the addition toRs.28 lakhs out of the addition of Rs.40 lakhs underSection 68 of the Act of 1961. In respect of the appealof the revenue regarding deletion of Rs.12 lakhs, theauthorities came to the conclusion that three partiesviz. M/s R.K. Skyline Construction Ltd., M/sRenovision Commece P. Ltd and Amarjyoti Vyapar 4 I.T.A. No.223 of 2017 Ltd. no cash was deposited and the learnedCIT(Appeal) has verified the bank accounts of theseparties and he has treated it as genuine and theaddition of Rs. 12 lacs was deleted. In respect ofaddition of Rs.28 lakhs made under Section 68 of theAct of 1961, the learned authorities have found that theassessee has made cash sales and the collection fromthe parties has been deposited in the bank. Out of totalsales, the assessee has cash sales of Rs.4,49,338/-. Theentire cash deposit is either from sale proceeds or fromthe collection against the book debt. As per section 68of the Act sum should be credited in the books but theassessee has credited the sale proceeds in its books ofaccounts which has been accepted by the AssessingOfficer. 7.The learned ITAT considered the aforesaid inparas 4 and 5 of the impugned order, which reads asunder:- “4. On appeal, the assessee carried the matter in appealand the learned CIT(A) has deleted the addition of Rs. 35.05 lacswhich was added in the hands of the assessee u/s 68 of the Act by 5 I.T.A. No.223 of 2017 7.The learned ITAT considered the aforesaid inparas 4 and 5 of the impugned order, which reads asunder:- “4. On appeal, the assessee carried the matter in appealand the learned CIT(A) has deleted the addition of Rs. 35.05 lacswhich was added in the hands of the assessee u/s 68 of the Act by 5 I.T.A. No.223 of 2017 observing as under :- "7. The first ground of appeal is against addition ofRs.35.05 lacs, which was added by A.O. in hands ofappellant u/s 68 of the Income Tax Act, for theamount of cash deposits seen by A.O. in Citi Bankaccount of the appellant. The appellant explainedthat such cash deposits of Rs. 35.05 lacs in the bankare out of cash sales of Rs. 44,93 lacs which areduly reflected as a part of total sales ofRs.85,11,415/-. Since the amount is alreadyreflected in sales account by appellant in the profitand loss account, the same cannot be added onceagain u/s 68 of the Income Tax Act. Hence, theaddition of Rs. 35.05 lacs made u/s 68 of theIncome Tax act is deleted. Ground no. 1 and 2 ofappeal are allowed." 5. We have considered the submissions of both the sides. Aftercareful perusal of record we find that the assessee has made cashsales and the collection from the parties has been deposited in thebank. The entire deposit to the bank account has been recorded inthe books of the assessee and the books were produced before theAssessing Officer. The total sales of the assessee were of Rs.8511415/-. Out of the total sales, the assessee has cash sales ofRs.449338/-. The entire cash deposit is either from sale proceedsor from the collection against the book debt. We find that as persection 68of the Act sum should be credited in the books but theassessee has credited the sale proceeds in its books of accountswhich has been accepted by the Assessing Officer. The AssessingOfficer has nowhere found the defect in the books of accounts,therefore, when the assessee has credit sale proceeds in cash inthe books of accounts and the same is deposited in bank, noaddition can be made u/s 68 of the Act. We also get support fromthe judgment in the case of CIT vs. Bhaichand H. Gandhji; 141ITR 67 and Sundarlal Jain vs. CIT; 117 ITR 316. Therefore, thelearned CIT(A) is justified in his action. This ground of the”revenue is dismissed. 8.In respect of deletion of Rs.12 lakhs, the Second Appellate Authority came to the conclusion that theassessee has received the amount of share applicationmoney from 10 companies based at Calcutta being Rs.4 lakhs received from each company because thesecompanies are at same place and only some are having 6 I.T.A. No.223 of 2017 addresses. The assessee filed copy of share applicationmoney and the copies of cheques issued. Only threecheques were deposited from share applicants whilethe assessee has claimed that there were 10 applicants.Besides this, the cheque was deposited on the sameday. Therefore, the Assessing Officer has to verify thegenuineness of the transaction and the assessee wasasked to submit the accounts of the share applicants toprove that there was no cash payment. 9.After examining the bank accounts, the learnedAuthorities came to the conclusion that only bankaccounts of three parties are genuine and the balanceof the share application money of Rs.28 lakhs fromrest of the 7 parties is treated as unexplained andconfirmed the addition of such amount under Section68 of the Act of 1961. 10.In respect of grounds relate to confirmation ofaddition of Rs.16,39,960/- made by the AssessingOfficer under Section 68 of the Act of 1961, the learnedTribunal gave the following findings in paras 14 to 16 7 9.After examining the bank accounts, the learnedAuthorities came to the conclusion that only bankaccounts of three parties are genuine and the balanceof the share application money of Rs.28 lakhs fromrest of the 7 parties is treated as unexplained andconfirmed the addition of such amount under Section68 of the Act of 1961. 10.In respect of grounds relate to confirmation ofaddition of Rs.16,39,960/- made by the AssessingOfficer under Section 68 of the Act of 1961, the learnedTribunal gave the following findings in paras 14 to 16 7 “14. The Assessing Officer added the amount ofRs.16,39,960/- u/s 68 of the Act for the unsecured loan taken bythe appellant from M/s Shree Shyam Polyers. The AssessingOfficer has added this amount because this depositor has shownmeagre income in his return, no interest is provided and appellanthas failed to prove identity and creditworthiness of this depositor.15. Felt aggrieved, the assessee went in appeal before theand the learned CIT(A) observed as under :- "12. Ground no. 4 of appeal is against addition ofRs.16,39,960/- u/s 68 of the Income Tax Actfor theunsecured loan taken by appellant from M/s ShreeShyam Polymers. The Assessing Officer has addedthis amount because this depositor has shownmeagre income in his return, no interest is providedand appellant has failed to prove identity andcreditworthiness of this depositor. It is a fact thatthis depositor who is a director in appellantcompany has shown income of only Rs.1,49,301/-in its return and capital is only Rs. 9,27,309/- and inthese circumstances creditworthiness of depositor isnot proved for giving a credit of Rs. 16,39,960/-.Besides this huge cash deposits were seen in bankaccount of M/s Shree Shyam Polyers in Citi Bankaccount no.0- 000449-547 before making chequepayments to appellant which raises serious doubtson the genuineness of these transactions. As a result,addition u/s 68 of the Income Tax Actof Rs.16,39,960/- is hereby confirmed. Ground no. 4 ofappeal is dismissed." 16. We have heard both the sides. We find that it is a fact that thisdepositor who is a director in appellant company has shownincome of only Rs.1,49,301/- in its return and capital is only Rs.9,27,309/- and in these circumstances creditworthiness ofdepositor is not proved for giving a credit of Rs. 16,39,960/-. Wefurther find that huge cash deposit was seen in the bank accountbefore making the payment. Therefore, this transaction wasdoubtful. Hon'ble Gujarat High Court in the case of UmeshKrishnani vs. ITO; (2013) 35 taxmann.com 598 has categoricallyheld as under :- "19. As is very eloquent from the record itself,substantial amount of cash was deposited in thebank accounts of all the creditors shortly prior toissuance of cheques and insufficiency of the fundwith the creditors when could be easily establishedfrom the overall facts and circumstances of the caseand when it is further found as a m atter of fact thatthe assessee had no justification for borrowings suchamounts at high rate of interest, even withoutdisturbing the well established principle of not 8 I.T.A. No.223 of 2017 insisting on the assessee proving source of thesource, on the robust facts of the revenue authorities have rightly not concluded in favour of the assessee.All issues are essentially in the realm ofappreciation of facts." We, therefore, find no flaw in the order of the learned”CIT(A) and uphold the same. 8 I.T.A. No.223 of 2017 insisting on the assessee proving source of thesource, on the robust facts of the revenue authorities have rightly not concluded in favour of the assessee.All issues are essentially in the realm ofappreciation of facts." We, therefore, find no flaw in the order of the learned”CIT(A) and uphold the same. 11.Counsel for the appellant during the course ofarguments very categorically admitted that nodocument was produced before the Assessing Officerto establish the genuineness of the transaction. He hadsubmitted the documents was filed on 15.9.2009before the appellate authority to establish thegenuineness of the transactions. He had also filed allthe documents and evidences before the ITAT on4.11.2016. His contention is that the appellant hadsubmitted documents before the Appellate Authorityas well as before the ITAT for establishing thegenuineness of share application money of Rs.4 lakhseach received from 7 applicants and for establishingthe genuineness of unsecured loan of Rs.16.40 lakhsreceived from M/s. Shree Shyam Polymers. But thesedocuments were not considered by the learned 9 I.T.A. No.223 of 2017Appellate Authority while passing the impugned order. 12.He further submitted that the assessee is notliable to establish source of the source or the creditworthiness of the source of the source and prayed thatthe appeal be admitted on the substantial questions oflaw as framed in para 4 of the appeal. 13.We have gone through the records of the case andfindings recorded by the learned ITAT as well asCommissioner of Income Tax (Appeals). 14.Paras 7 and 8 of the order passed by the AppellateAuthority on 21.11.2016 are relevant, which reads asunder:- “7. The short facts of the case are that the assessee has receivedthe amount of share application money from 10 companies based atCalcutta being Rs. 4 lacs received from each company because thesecompanies are at same place and only some are having addresses. Theassessee filed copy of share application money and the copies ofcheques issued. The Assessing Officer observed that only three chequeswere deposited from share applicants while the assessee has claimedthat there were 10 applicants. Besides this, the cheque was deposited onthe same day. Therefore, the Assessing Officer has to verify thegenuineness of the transaction and the assessee was asked to submit theaccounts of the share applicants to prove that there was no cashpayment. In respect of three parties, M/s R.K. Skyline ConstructionLimited, M/s Renovision Commerce P. Ltd. and Amarjyoti VyaparLimited, no cash deposit was found. In respect of seven parties, theAssessing Officer did not believe the explanation of the assessee. Thematter travelled to the learned CIT(A) and the learned CIT(A) hasdeleted the addition of Rs. 12 lacs by observing as under :- "11. As a result while share application money ofRs.12 lakhs of three parties named above whosebank account were furnished by appellant aretreated as genuine and such addition of Rs. 12 lakhsis deleted, the balance of share application moneyRs.12 lakhs of three parties named above whosebank account were furnished by appellant aretreated as genuine and such addition of Rs. 12 lakhsis deleted, the balance of share application money 10 I.T.A. No.223 of 2017 of Rs.28 lakhs from rest of 7 parties is treated asunexplained and addition of such amount isconfirmed u/s 68 of Income Tax Act. As a result thisground no. 3 of appeal is partly allowed." "11. As a result while share application money ofRs.12 lakhs of three parties named above whosebank account were furnished by appellant aretreated as genuine and such addition of Rs. 12 lakhsis deleted, the balance of share application moneyRs.12 lakhs of three parties named above whosebank account were furnished by appellant aretreated as genuine and such addition of Rs. 12 lakhsis deleted, the balance of share application money 10 I.T.A. No.223 of 2017 of Rs.28 lakhs from rest of 7 parties is treated asunexplained and addition of such amount isconfirmed u/s 68 of Income Tax Act. As a result thisground no. 3 of appeal is partly allowed." 8. We have considered the submissions of both the sides.Looking to the facts and circumstances of the case,we find that incase of three parties the learned CIT(A) was of the view that threeparties, viz. M/s R.K. Skyline Construction Ltd., M/s RenovisionCommece P. Ltd and Amarjyoti Vyapar Ltd. no cash wasdeposited and the learned CIT(A) has verified the bank accountsof these parties and he has treated it as genuine and the additionof Rs. 12 lacs was deleted. Therefore, our interference is not”called for. 15.On going through the aforesaid so also the order passed by the learned ITAT on 21.11.2016 wherein thelearned ITAT has given a clear cut finding andaccordingly the ground relating to addition of Rs.28lakhs of the assessee has been dealt with while decidingRevenue's appeal, and deletion of Rs.12 lakhs wasconfirmed. 16.In respect of unsecured loan taken by the assesseefrom Shree Shyam Polymers, this depositor has shownmeagre income in his return, no interest is provided andappellant has failed to prove identity andcreditworthiness of this depositor. This depositor, whois a director in appellant company has shown income ofonly Rs.1,49,301/- in its return and capital is only Rs. pp 11 I.T.A. No.223 of 20179,27,309/- and in these circumstances creditworthinessof depositor is not proved for giving a credit of Rs.16,39,960/-. The learned Authorities also found thathuge cash deposits were seen in bank account of M/s.Shree Shyam Polyers in Citi Bank account No.0-000449-547 before making cheque payments toappellant - assessee which raises serious doubts on thegenuineness of these transactions. 17.On due consideration of the aforesaid and findingsrecorded by the learned Appellate Authority which isbased on appreciation of evidence on record anddocuments filed by the appellant, no case is made out tointerfere with the well reasoned order passed by theITAT. 18.No substantial question of law is arising in thisappeal. The appeal filed by the appellant—assessee hasno merit and is, accordingly, dismissed. (P.K. JAISWAL) JUDGE (S. K. AWASTHI) JUDGE