Seth Carbon and Alloys Private Limited Vs DCIT (ITAT Mumbai)
We find that assessee by furnishing all the aforesaid documents had duly explained the nature and source of credit in the form of share capital and share premium received from the aforesaid two shareholders. From the balance sheet of the shareholders, it could be seen that they are having sufficient creditworthiness to make investment in the assessee company.
Similarly all the shareholders are duly assessed to tax and had filed their income tax returns and ROC returns. This proves the identity of the shareholders. All the transactions are routed through account payee cheques in the regular banking channels. The justification for premium was also duly made by the assessee by giving explanation in writing. This clearly proves the genuineness of the transactions.
We find that the ld. AO after receiving all the information in the form of various documentary evidence remained silent. We find that the ld. AO did not resort to make any verification in any manner whatsoever either by issuing notice u/s.133(6) of the Act or issuing summons u/s.131 of the Act to the concerned shareholders in order to exmine the veracity of such documents. We find that the ld. AO without resorting to any sort of verification in the manner known to law, had simply proceeded to make addition in the hands of the assessee by treating the receipt of share capital and share premium as accommodation entries merely by relying on the statement recorded from Shri Shirish Chandrakant Shah and his key employess. In any case we also find that the statement of Shri Shirish Chandrakant Shah and his key employees were never furnished to the assessee for its rebuttal. Hence, the said statements cannot be relied upon as sole basis for framing addition in the hands of the assessee. We hold that the addition made u/s.68 of the Act in the case of the assessee is merely based on surmise and conjecture and absolutely without any basis and absolutely without any verification in the manner known to law. Accordingly, we have no hesitation in deleting the addiiton made u/s.68 of the Act in the case of the assessee.
FULL TEXT OF THE ORDER OF ITAT MUMBAI
These appeals in ITA No.2865/Mum/2019 & 2866/Mum/2019 for A.Yrs.2010-11 & 2012-13 arise out of the order by the ld. Commissioner of Income Tax (Appeals)-48, Mumbai in appeal Nos.CIT(A)-48/IT75/DCCC-2(3)/20 16-17 & CIT(A)-48/IT-75/DCCC-2(3)/2017- 18 dated 27/03/2019 & 28/02/2019 respectively (ld. CIT(A) in short) against the order of assessment passed u/s.143(3) r.w.s. 147 of the Income Tax Act, 1961 (hereinafter referred to as Act) dated 23/03/2016 & 25/10/2017` by the ld. Dy. Commissioner of Income Tax, Central Circle-2(3), Mumbai (hereinafter referred to as ld. AO).
ITA No.2868/Mum/2019 ( A.Y.2010-11)
This appeal in ITA No.2868/Mum/2019 for A.Y.2010-11 arises out of the order by the ld. Commissioner of Income Tax (Appeals)-48, Mumbai in appeal No. CIT(A)-48/IT-74/DCCC-2(3)/2017-18 dated 25/02/2015 respectively (ld. CIT(A) in short) against the order of assessment passed u/s.143(3) r.w.s. 147 of the Income Tax Act, 1961 (hereinafter referred to as Act) dated 24/10/2017 by the ld. Dy. Commissioner of Income Tax, Central Circle-2(3), Mumbai (hereinafter referred to as ld. AO).
ITA No.2864/Mum/2019 ( A.Y.2011-12)
This appeal in ITA No.2864/Mum/2019 for A.Y.2011-12 arises out of the order by the ld. Commissioner of Income Tax (Appeals)-48, Mumbai in appeal No. CIT(A)-48/IT-76/DCCC-2(3)/2017-18 dated 28/02/2019 (ld. CIT(A) in short) against the order of assessment passed u/s.143(3) r.w.s. 147 of the Income Tax Act, 1961 (hereinafter referred to as Act) dated 23/10/2017 by the ld. Dy. Commissioner of Income Tax, Central Circle-2(3), Mumbai (hereinafter referred to as ld. AO).
As identical issues are involved in all these appeals, they are taken up together and disposed of by this common order for the sake of convenience.
ITA No.2865/Mum/2019 (A.Y.2010-11)
2. The assessee has raised the following grounds of appeal:-
1. The Hon ble CIT(A) has erred in confirming the order of learned assessing officer in respect of the re-opening of the assessment while issuing notice u/s.148 of the Income Tax Act, 1961 inspite of the fact that original assessment was completed u/s. 143(3) of Income Tax Act, 1961. The assessment u/s.143 (3) r.w.s. 147 of the Income Tax Act, 1961 was completed merely on the basis of change of opinion. In view of the above, the said order passed should be squashed and necessary direction should be given in this regard.
2. Without prejudice to above, on the facts and circumstances of the case and in law, the Hon’ble CIT(A) has erred in confirming the addition of Rs.2,60,00,000/- u/s. 68 of the Income Tax Act, 1961The Hon’ble CIT(A) has erred in considering the share capital issued by the Appellant as unexplained cash credit for the year under consideration. It is submitted that Appellant has submitted relevant documents to prove the identity, genuineness of transactions and creditworthiness of the party. It is therefore prayed that addition made on account of unexplained cash credit shall be deleted and necessary direction shall be given in this regard.
3. Without prejudice to above, on the facts and circumstances of the case and in law, the Hon’ble CIT(A) has erred in confirming the addition of Rs.13, 00,000/- (1.5% of Rs.2, 60,00,000/-) being alleged unaccounted commission expenditure on the above share capital issued by the Appellant for the year under consideration. It is therefore prayed that above addition shall be deleted and necessary direction shall be given in this regard.
4. Your appellant craves to add, alter, or amend any of the grounds of appeal on or before the date of hearing of appeal.
3. The first issue to be decided in this appeal is as to whether the ld. CIT(A) was justified in upholding the validity of reopening of assessment in the facts and circumstances of the case.
3.1. We have heard rival submissions and perused the materials available on record. The assessee filed return of income for A.Y.2010-11 declaring income of Rs.9,40,910/- on 03.10.2010. The case was selected for scrutiny and the assessment u/s.143(3) of the Act was completed on 20.03.2013 determining the total income at Rs.9,40,910/-. Subsequently, the case was reopened by issuance of notice u/s.148 dated 27/03/2015, after recording the reason to believe that income has escaped assessment on account of non-disclosure of full and true material facts necessary for assessment. The ld. AO observed that he had received the information from the DGIT (Inv) Mumbai in the case of the assessee that the assessee was in receipt of funds in the form of share capital and share premium of Rs.2,60,00,000/- from M/s Avance Technologies Ltd., and M/s Prabhav Industries Ltd. Further, the statement of Devang Dinesh Chandra Master, Director of M/s. Empower India Ltd., has confirmed that M/s Avance Technologies Ltd., and M/s Prabhav Industries Ltd. are controlled and managed by Shirish Chandrakant Shah. Therefore, based on the information received from the DGIT (Inv.) Mumbai, the ld AO has made the addition of Rs.2,60,00,000/-.
3.2. The ld. AO observed that assessee had received share capital and share premium from the following parties during the year under consideration as under:-
