Krishna Sheet Processors P.Ltd, Mumbai vs Assessee

सव ी आय.पी. बंसल, या यक सद य एवं नरे कुमार ब लै या, लेखा सद य के सम

BEFORE SHRI I.P. BANSAL, JUDICIAL MEMBER AND

SHRI N.K. BILLAIYA, ACCOUNTANT MEMBER

आयकर अपील सं/ I.T.A. No.546/Mum/2013 ( नधारण वष / Assessment Year :2009-10 The ACIT, Circle 1, बनाम/ M/s. Krishna Sheet Mohan Plaza, Wayale Nagar Processors Pvt. Ltd., Vs. Khadakpada, 801, Business Classic, Kalyan(W) 8 t h Floor, Chincholi Bunder Road, Off. S.V. Road, Malad (W), Mumbai-400 064 आयकर अपील सं/ I.T.A. No.7465/Mum/2012 ( नधारण वष / Assessment Year :2009-10 M/s. Krishna Sheet बनाम/ The ACIT, Circle 1, Processors Pvt. Ltd., Mohan Plaza, Wayale Vs. 801, Business Clasic, Nagar th 8 Floor, Khadakpada, Chincholi Bunder Road, Kalyan(W) Off. S.V. Road, Malad (W), Mumbai-400 064 थायी ले खा सं . /जीआइआर सं . /PAN/GIR No. : AAACK 9040M (अपीलाथ /Appellant) .. ( यथ / Respondent) अपीलाथ ओर से/ Assessee by: Shri S.M. Bandi यथ क ओर से/Department by: Shri Asghar Zain

सन ु वाई क तार ख / Date of Hearing :24.06.2015 घोषणा क तार ख /Date of Pronouncement :30.06.2015 2 ITA. Nos.546/M/2013 & 7465/M/2012

आदे श / O R D E R

PER N.K. BILLAIYA, AM:

These are cross appeals by the Revenue and the assessee against the very same order of the Ld. CIT(A)-1, Thane dt. 28.9.2012 pertaining to assessment year 2009-10. As common issues are involved, both these appeals were heard together and are disposed of by this common order for the sake of convenience and brevity.

2. Facts of the case are that the assessee is a dealer in steel & iron. The return for the year under consideration was selected for scrutiny assessment and accordingly statutory notices were issued and served upon the assessee. While scrutinizing the accounts of the assessee, the Assessing Officer noticed that the assessee has issued new 92700 shares of face value of Rs. 100/- at a premium of Rs. 1000/-. Total shares issued amounted to Rs.10,19,70,000/-. Out of the total share capital issued Rs. 9,60,30,000/- i.e.( 87,300 shares X Rs. 1100) is to various companies and remaining Rs. 59,40,000/- i.e. (5400 X 1100) is to family members of the Directors. The details of the share capital subscribed by the company are as under:

S. No. Name Qty. Amount Introduced (in Rs) 1. M/s. Alliance Intermediateries 5900 64,90,000 & Network Pvt. Ltd., 2. M/s. Mahasagar Securities Pvt. 5900 64,90,000 Ltd., 3. M/s. Mihir Agencies Pvt. Ltd. 5000 55,00,000 4. M/s. Kaycee share Broking Pvt. 5900 64,90,000 Ltd. 5. M/s. Pranik Shipping & 6800 74,80,000 Services Ltd. 3 ITA. Nos.546/M/2013 & 7465/M/2012

6. M/s. Jasnil Finance & Trading 2250 24,75,000 Pvt. Ltd. 7. M/s. Nilpur Vanijya Pvt. Ltd. 2075 22,82,500 8. M/s. Keystone Stock Fin Pvt. 900 9,90,000 Ltd. 9. M/s. KKSS Builders Pvt. Ltd. 3625 39,87,500 10. M/s. WAH Foods Pvt. Ltd. 13625 1,49,87,500 11. M/s. Indo Con Core Pvt. Ltd. 14450 1,58,95,000 12. M/s. Premier Soya Ltd. 20875 2,29,62,500 Total 87300 9,60,30,000

2.1. The assessee was asked to prove the identity, credit worthiness and genuineness of the above companies. The assessee could file confirmations in respect of following companies:

1) M/s. Kaycee share Broking Pvt. Ltd.

2) M/s. Mihir Agencies Pvt. Ltd.

3) M/s. Alliance Intermediateries & Network Pvt. Ltd.,

4) M/s. Mahasagar Securities Pvt. Ltd.,

2.2. No confirmation was filed by the assessee. The assessee could file only profit and loss account and balance sheet of these companies for the financial year 2008-09. The AO observed that in their respective balance sheet, no investment is shown in the name of Krishna Sheet Processors Pvt. Ltd (assessee). Proceeding further and on the basis of specific information received from the Dy. Director of Income Tax (Inv.) Unit-

1(4), Mumbai, the AO came to know that search action u/s. 132 of the I.T. Act was carried out in the case of M/s. Mahasagar Securities Pvt. Ltd. and its group concerns. The companies mentioned hereinabove are group concerns of this group which are floated by Shri Mukesh Choksi. The AO further found that M/s. Mahasagar Securities Pvt. Ltd., and its group 4 ITA. Nos.546/M/2013 & 7465/M/2012

concerns were engaged in fraudulent billing activities and in the business of providing bogus speculation profit/loss, short term/long term capital gain/loss, commodities profit/loss on commodity trading (through MCX) and bogus share capital introduction.

2.3. The AO further observed that during the course of search, the sworn statement of Shri Mukesh Choksi was recorded in the office of DDIT who had confirmed the clandestine activity referred to hereinabove. Statement of Shri Mukesh Choksi was once again recorded during the course of the assessment proceedings u/s. 131 of the Act wherein Shri Mukesh Choksi once again admitted the modus operandi. The AO was convinced that share subscription made by Shri Mukesh Choksi and his concerns are bogus and documents are fabricated therefore the investment of share made by the above four companies are not genuine.

2.4. The AO further proceeded by considering the share application made by:

(5)Pranik Shipping & Services Ltd., (6) M/s. Jasnil Finance & Trading Pvt. Ltd., (7)M/s. Nilpur Vanijya Pvt. Ltd (8)M/s. WAH Foods Pvt. Ltd (9) M/s. KKSS Builders Pvt. Ltd (10) M/s. Keystone Stock Finance Pvt. Ltd (11) M/s. Premier Soya Ltd (12) M/s. Indo Con Core Pvt. Ltd., 5 ITA. Nos.546/M/2013 & 7465/M/2012

2.5. The AO treated the share application money from these companies as unexplained income u/s. 68 of the Act and made an addition of Rs.

9,60,30,000/-.

3. Aggrieved, the assessee carried the matter before the Ld. CIT(A). The Ld. CIT(A) was convinced with the genuineness of the transaction, identity and credit worthiness of four companies belonging to Shri Mukesh Choksi viz.,

1) M/s. Kaycee share Broking Pvt. Ltd.

2) M/s. Mihir Agencies Pvt. Ltd.

3) M/s. Alliance Intermediateries & Network Pvt. Ltd.,

4) M/s. Mahasagar Securities Pvt. Ltd.,

3.1. The Ld. CIT(A) was also convinced with the genuineness of the transaction in respect of other two companies viz., (1)M/s. Premier Soya Ltd.,(2) M/s. Indo Con Core Pvt. Ltd., and confirmed the addition respect of other six companies.

4. Aggrieved by this both Revenue and the assessee are in appeal before us.

5. First we will take up Revenue's appeal in ITA No. 546/M/2013.

6. We have heard the rival submissions and given a thoughtful consideration to the orders of the authorities below and with the assistance of the Ld. Counsel, we have considered the relevant documentary evidences brought on record and referred to before us. The undisputed facts are that out of six companies viz., M/s. Kaycee share Broking Pvt. Ltd., M/s. Mihir Agencies Pvt. Ltd. M/s. Alliance Intermediateries & Network Pvt. Ltd.,M/s. Mahasagar Securities Pvt.

6 ITA. Nos.546/M/2013 & 7465/M/2012 Ltd., belong to Shri Mukesh Choksi group. The only reason for making the addition was that during the course of search operation Shri Mukesh Choksi admitted that he is a name lendor and arranging profits/loss/share application money to various persons. Except for this, there is nothing on record brought by the AO to justify the addition. It is also an undisputed fact that transactions with these companies have been done through account payee cheque, respective bank statement have been brought on record before us. Even if we consider the statement of Shri Mukesh Choksi recorded u/s. 132(4) of the Act and also subsequently u/s. 131 of the Act, we do not find any reference to the assessee company, nowhere Shri Mukesh Choksi has said that he has arranged share capital for the assessee company. Merely because Shri Mukesh Choksi is indulged in clandestine activities would not make the transactions with the assessee company non genuine. The transactions have been done through account payee cheque and it is not a case of the Revenue authorities that prior to issuing the cheques the applicants have deposited cash in their respective bank account. The Hon'ble Supreme Court in the case of Lovely Export Pvt. Ltd. 216 CTR 195 has held that if the share application money is received by the assessee company from alleged bogus shareholders, whose names are given to the AO, then the department is free to proceed to reopen their individual assessments in accordance with law, but it cannot be regarded as undisclosed income of the assessee company.

6.1. In respect of other two companies viz., (1)M/s. Premier Soya Ltd.,(2) M/s. Indo Con Core Pvt. Ltd., the AO at page-19 of his order has observed that on verification of the details submitted by the assessee it is seen that the money has been advanced by the assessee themselves which have been ploughed back as share capital in the books of the assessee. The transaction is therefore, appears to be not genuine.

7 ITA. Nos.546/M/2013 & 7465/M/2012 6.2. We have carefully perused the bank statement brought before us which are placed in the paper book. We do not find any strength in the allegation made by the AO. Allegations are baseless and without any supportive evidence. On the contrary, these two companies have paid share application money from their bank accounts through account payee cheque, therefore the transaction cannot be treated as bogus. Since the AO has not made any further enquiry, merely because of the false allegation, a genuine transaction cannot become non genuine transaction.

6.3. The First Appellate Authority has considered the facts in the light of the provisions of Sec. 68 of the Act and have deleted the additions in respect of these six companies. On the basis of same documentary evidences brought on record before us, we do not find any reason to interfere with the findings of the Ld. CIT(A).

6.4. In the result, the appeal filed by the Revenue is dismissed.

ITA No. 7465/M/2012 - Assessee's appeal 7. The grievance relates to the additions u/s. 68 in respect of the following share applicants:

1) M/s. Pranik Shipping & Services Ltd. - 74,80,000/-

2) M/s. Jasnil Finance & Trading Pvt. Ltd- 24,75,000/-

3) M/s.Nilpur Vanijya Pvt. Ltd., 22,82,500/-

4) M/s. Keystone Stock Fin. Pvt. Ltd., 9,90,000/-

5) M/s. KKSS Builders Pvt. Ltd. 39,87,500/- 6) M/s. WAH Foods Pvt. Ltd. 1,49,87,500/- 8 ITA. Nos.546/M/2013 & 7465/M/2012

8. We have given a thoughtful consideration to the orders of the authorities below. The additions have been made by the AO in respect of the above named companies for the following reasons:

i) Prior to issue of cheque to the assessee company these companies have received monies from their sister concerns and their sister concerns have deposited cash before giving cheque to these companies.

ii) The Director of the Company did not attend the proceedings.

All these companies were represented by their respective Chartered Accountants who have furnished the necessary details.

iii) In respect of one company viz., WAH Foods Pvt. Ltd., the address given by the assessee was found to be not correct.

8.1. The AO finally concluded by holding that the assessee has failed to establish the identity, genuineness of the transaction and credit worthiness.

8.2. When the matter was agitated before the Ld. CIT(A), the Ld. CIT(A) on the same set of reasoning as given by the AO confirmed the additions. The Ld. CIT(A) agreed with the AO that in place of Directors, Chartered Accountant of these companies have appeared who were not authorized to make any statement on behalf of these companies.

9. Before us, the Ld. Counsel for the assessee reiterated what has been submitted before the lower authorities. The ld. Counsel drew our attention to the relevant documents brought on record before us in the form of a paper book. Referring to order V Rule 1 of the Code of Civil 9 ITA. Nos.546/M/2013 & 7465/M/2012

procedure, the ld. Counsel pointed out that it has been provided that a defendant to whom a summons have been issued under Sub-Rule(1) may appear (a) in person or (b) by a pleader duly instructed and able to answer all material questions relating to the suit or (c) by a pleader accompanied by some person able to answer all such questions. It is the say of the Ld. Counsel that the Chartered Accountants was duly authorized by the respective companies to adduce evidences in support of the share application money given by the respective companies. Therefore, the Revenue authorities have grossly erred in rejecting their submissions made during the remand proceedings.

10. The Ld. DR strongly supported the assessment order and the order of the Ld. CIT(A).

11. The undisputed fact is that the additions have been made only because the Directors did not appear before the AO but the companies were represented by their respective Chartered Accountants. This cannot be a reason to treat a genuine company as a non-genuine company. Keeping in mind that a company is a legal person created by an Act of Parliament, the AO could have easily verified the genuineness or otherwise of these companies through the Registrar of companies, when the Chartered Accountants have supplied the certificate of incorporation of these companies.

11.1. Further the allegation that these companies have taken money from their sister concerns who have deposited cash before lending money to these companies is baseless. The assessee has to prove that the money has come from these companies. The assessee is not required to prove the source of these companies. If the AO doubted the source of the 10 ITA. Nos.546/M/2013 & 7465/M/2012

source, he should have proceeded against these companies in the light of the ratio laid down by the Hon'ble Suprement Court in the case of Lovely Exports(P) Ltd (supra). A perusal of the documentary evidences brought on record before us shows that the transactions have been done by account payee cheques, money has flown into the bank account of the assessee from the identified bank account of these companies, the transactions are duly reflected in the bank statements of the respective parties. The facts of the case are therefore squarely covered by the ratio laid down by the Hon'ble Supreme Court in the case of Lovely Export (supra). In our considered opinion, the assessee has successfully discharged the onus cast upon it by provisions of Sec. 68 of the Act, meaning thereby that the assessee has successfully established the genuineness of the transaction, the identity of the share applicants and by filing their bank statements, in respect of credit worthiness. After considering all these facts in totality, we set aside the findings of the Ld. CIT(A) and direct the AO to delete the addition made in respect of the above mentioned six companies.

12. In the result, the appeal filed by the assessee is allowed.

Order pronounced in the open court on 30th June, 2015

(I.P. BANSAL ) (N.K. BILLAIYA) या यक सद य/JUDICIAL MEMBER लेखा सद य / ACCOUNTANT MEMBER मंब ु ई Mumbai; दनांक Dated :30 June , 2015 th

व. न.स./ RJ , Sr. PS 11 ITA. Nos.546/M/2013 & 7465/M/2012

आदे श क त ल प अ े षत/Copy of the Order forwarded to :

1. अपीलाथ / The Appellant

2. यथ / The Respondent.

3. आयकर आयु त(अपील) / The CIT(A)-

4. आयकर आयु त / CIT

5. वभागीय त न ध, आयकर अपील य अ धकरण, मंब ु ई / DR, ITAT, Mumbai

6. गाड फाईल / Guard file.

आदे शानस ु ार/ BY ORDER, स या पत त //True Copy// उप/सहायक पंजीकार (Dy./Asstt. Registrar) आयकर अपील य अ धकरण, मंब ु ई / ITAT, Mumbai