ITO, Hyderabad v. M/s Vensa Laboratories Pvt. Ltd., Hyderabad

ITA 1117/HYD/2009 | 2005-2006
Pronouncement Date: 29-01-2010 | Result: Dismissed

Appeal Details

RSA Number 111722514 RSA 2009
Assessee PAN AABCV8175B
Bench Hyderabad
Appeal Number ITA 1117/HYD/2009
Duration Of Justice 2 month(s) 13 day(s)
Appellant ITO, Hyderabad
Respondent M/s Vensa Laboratories Pvt. Ltd., Hyderabad
Appeal Type Income Tax Appeal
Pronouncement Date 29-01-2010
Appeal Filed By Department
Order Result Dismissed
Bench Allotted A
Tribunal Order Date 29-01-2010
Date Of Final Hearing 18-01-2010
Next Hearing Date 18-01-2010
Assessment Year 2005-2006
Appeal Filed On 16-11-2009
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCH A HYDERABAD BEFORE SHRI G.C. GUPTA VICE PRESIDENT AND SHRI CHANDRA POOJARI ACCOUNTANT MEMBER ITA NO.1117/HYD/2009 : ASSTT. YEAR 2005-06 ITO WARD 3 (2) HYDERABAD M/S VENSA LABORATORIES (P) LTD. HYDERABAD (PAN AABCV 8175 B) (APPLICANT) (RESPONDENT) APPLICANT BY : SHRI PHANI RAJU DR RESPONDENT BY : SHRI Y.A. RAO O R D E R PER CHANDRA POOJARI ACCOUNTANT MEMBER THIS APPEAL PREFERRED BY THE REVENUE IS DIRECTED A GAINST THE ORDER PASSED BY THE OF CIT(A) TIRUPATHI DATED 20.8. 2009 AND PERTAINS TO THE ASSESSMENT YEAR 2005-06. 2. THE REVENUE RAISED THE FOLLOWING GROUNDS: (GROUND NO.2) THE CIT(A) OUGHT TO HAVE UPHELD THE ADDITION MADE B Y THE ASSESSING OFFICER U/S 68 OF THE INCOME TAX ACT 1961. 3. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSING OFFICER MADE AN ADDITION OF RS.50 90 000 CONTRIBUTED BY THE FOLLOWING PERSONS AS SHARE CAPITAL OF THE ASSESSEE COMPANY: 1. RAMALINGA RAJU RS.23 LAKHS 2. J. KRISHNA RAO RS.15.95 LAKHS 3. SMT. JEEVITHA MALA RS.7 LAKHS 4. SHRI SIVARAMA RAJU RS.5 LAKHS THE ADDITION WAS MADE ON THE GROUNDS THAT IDENTIT Y AND CREDITWORTHINESS OF THE INVESTORS IN THE SHARE CAPITAL APP LICATION MONEY IS NOT PROVED. ON APPEAL THE CIT(A) CALLED FOR RE MAND REPORT FROM THE 2 ASSESSING OFFICER AND WHEREIN THE REMAND REPORT THE ASS ESSING OFFICER FAILED TO POINT OUT ANY REASONS FOR REJECTING IDENTITY AS WELL AS CREDIT WORTHINESS OF THE SHARE APPLICANTS. ON THIS REASONS THE CI T(A) DELETED THE ADDITION. BEFORE US BOTH THE PARTIES CONCEDED THA T ALL THE ABOVE MENTIONED PARTIES ARE INCOME TAX ASSESSEES AND THE PARTICU LARS OF THEM ARE FURNISHED TO CIT(A). ALSO SUBMITTED THAT AS HELD I N THE CASE OF CIT VS. DIVINE LEASING & FINANCE LTD. (299 ITR 268) & ALSO LOVELY EXPORTS THE ADDITIONS CANNOT BE MADE IN THE HANDS OF THE ASSESSEE IF THE FOLLOWING FACTS ARE PROVED: THE IDENTITY OF THE CREDITOR/SUBSCRIBER THE GENUINENESS OF THE TRANSACTIONS NAMELY WHETHER IT HAS BEEN TRANSMITTED THROUGH THE BANKING OR OTHER UNDISPUTABLE CHANNELS THE CREDITWORTHINESS OR FINANCIAL STRENGTH OF THE CREDITOR/SUBSCRIBER IF RELEVANT DETAILS OF ADDRESS OR PAN IDENTITY OF THE CREDITOR/SUBSCRIBER ARE FURNISHED TO THE DEPARTMENT ALON G WITH COPY OF SHARE HOLDERS REGISTER APPLICATION FORMS ETC. IT WOULD CONSTITUTE ACCEPTABLE PROOF OR ACCEPTABLE EXPLANATION OF THE ASSESSEE. THE DEPARTMENT WOULD NOT BE JUSTIFIED IN DRAWING AN ADVERSE INFERENCE ONLY BECAUSE THE CREDITOR/SUBSCRIBER FAILS OR NEG LECTS TO RESPOND TO ITS NOTICES. THE ONUS WOULD NOT STAND DISCHARGED IF THE CREDITOR/SUBSCR IBER DENIES OR REPUDIATES THE TRANSACTION SET UP BY THE ASSESSE E NOR SHOULD THE ASSESSEE OFFICER TAKE SUCH REPUDIATION AT FACE VA LUE AND CONSTRUE IT WITHOUT MORE AGAINST THE ASSESSEE AND THE ASSESSING OFFICER IS DUTY BOUND TO INVESTIGATE THE CREDITWORTHINESS OF THE CREDITOR/SUBSCRIBER THE GENUINENE SS OF THE TRANSACTION AND THE VERACITY OF THE REPUDIATION. 3 4. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE MATERIAL ON RECORD. IN THE PRESENT CASE THE CIT(A) CALLED FOR REMA ND REPORT FROM THE ASSESSING OFFICER. THE ASSESSING OFFICER SENT THE REMAND REPORT VIDE REFERENCE NO.ITO.3(2)/RR/9/10 DATED AS FOLLOWS: I) AS SEEN FROM THE AFFIDAVIT FILED BY SHRI D. RAMAL INGA RAJU THE ENTIRE AMOUNT OF RS.23 00 000 HAS BEEN INVESTED IN THE COMPANY BY WAY OF TRANSFER FROM HIS BANK ACCOUNT. ON PERUSAL OF TH E SAID BANK ACCOUNT IT IS SEEN THAT THERE ARE INSTANCES OF CASH DEPOSIT S INTO HIS BANK ACCOUNT ON THE DAY THE TRANSFER WAS AFFECTED. SHRI D. R AMALINGA RAJU SUBMITTED THE DETAILS OF THE SOURCES FOR THE CHEQUES AND T HE CASH DEPOSITS IN THE BANK ACCOUNT WITH ICICI BANK SR NAGAR BRANCH HYDERABAD WHICH ARE ON RECORD. SHRI D. RAMALINGA RAJU HAS ALSO SUBMITTED CONFIRMATION LETTERS FROM THE PERSONS WHO HAVE PURPORTEDLY GIVEN HIM THE LOANS AND GIFTS. SHRI D. RAMALINGA RA JU HAS DEPOSED THAT HE OWNS 13 ACRES OF AGRICULTURAL LAND. COPIES OF THE PA TTADAR PASS BOOK HAVE ALSO BEEN FILED. II) AS SEEN FROM THE AFFIDAVITS FILED BY SRI J. KRISHNA RAO HE HAS INVESTED AN AMOUNT OF RS.15.90 LAKHS IN ALL. THE SOURCE S WERE STATED TO BE HIS OWN SALARY INCOME SAVINGS AND ALSO BORROWED FUNDS WHICH WERE DEPOSITED IN HIS BANK ACCOUNT. SHRI J. KRISHNA RAO HAS A LSO SUBMITTED COPIES OF CONFIRMATIONS/PATTADAR PASS BOOK IN SUPPORT OF HIS CLAIM FOR THE SOURCES OF THE INVESTMENT. III) SIMILARLY SMT. J. JEEVITHA MALA AND SRI V. S IVARAMA RAJU HAVE DEPOSED VIDE THEIR AFFIDAVITS THAT THEY HAVE INVESTED RS.7 00 000 AND RS.5 00 000/- RESPECTIVELY. THEY HAVE ALSO SUBMITTED CON FIRMATIONS FROM THE PERSONS WHO GAVE THEM LOANS/GIFTS. 4 IV) COPIES OF THE BANK ACCOUNT STATEMENTS CONFIRMATION L ETTERS PATTADAR PASS BOOKS ETC. SUBMITTED BY THE ABOVE FOUR IN VESTORS ARE ON RECORD. 5. THE CIT(A) PLACED RELIANCE ON THE ABOVE REPORT AN D DELETED THE ADDITION. WE HAVE CAREFULLY GONE THROUGH THE ABOVE REMAND REPORT. 5.1. IN THE CASE OF CIT VS. STELLAR INVESTMENTS LTD. ( 251 ITR 263) (SC) WHEREIN IT WAS HELD THAT EVEN THE SHARE HO LDERS ARE NOT GENUINE SHARE CAPITAL CANNOT BE REGARDED AS UNDISCLOSED INCOME OF THE ASSESSEE. 5.2 IN THE CASE OF CIT VS. SOPHIA FINANCE LTD. (205 I TR 98) DELHI (FULL BENCH) WHEREIN IT WAS HELD THAT FOR THE OPERATION OF SECTION 68 IT WOULD BE IMMATERIAL WHETHER THE AMOUNT IS CRED ITED IN THE BOOKS IN THE SHARE APPLICATION MONEY ACCOUNT AND IT WAS HELD THAT S.68 IS APPLICABLE IN RESPECT OF SHARE APPLICATION MONEY. 5.3. IN THE CASE OF CIT VS. LOVELY EXPORTS (216 ITR 1 95) (SC) WHEREIN IT WAS HELD THAT EVEN IF THE SHARE APPLICATIO N MONEY IS RECEIVED BY THE ASSESSEE COMPANY FROM THE ALLEGED BOGUS SHARE HOLDE RS WHOSE NAMES ARE GIVEN TO THE ASSESSING OFFICER THEN THE DEPAR TMENT IS FREE TO PROCEED THEIR INDIVIDUAL ASSESSMENT IN ACCORDANCE WITH LAW BUT IT CANNOT BE REGARDED AS UNDISCLOSED INCOME OF THE ASSESSEE. 5.4. IN THE CASE OF VIT VS. VALUE CAPITAL SERVICES (P) LTD. (307 ITR 334) WHEREIN IT WAS HELD THAT CIT(A) HAVING ACCEP TED THE EXISTENCE OF SHARE APPLICANTS AND THE REVENUE HAVING NOT SHOWN THAT APPLICANT DID NOT HAVE THE MEANS TO MAKE THE INVESTMENT AND TH AT SUCH INVESTMENTS ACTUALLY NOT EMANATED FROM THE COPPERS OF TH E ASSESSEE COMPANY THE ADDITION COULD NOT BE MADE. 5 6. IN VIEW OF THE ABOVE JUDGEMENTS WE ARE OF THE OPINION THAT THE IMPUGNED ADDITION CANNOT BE MADE IN THE HANDS OF THE ASSESSEE. HOWEVER IF SO ADVISED THE SAME COULD BE CONSIDERED IN TH E HANDS OF THE RESPECTIVE INVESTORS AS UNEXPLAINED INVESTMENTS U/S 69 OF THE INCOME TAX ACT 1961. 7. IN THE RESULT THE APPEAL OF THE REVENUE STANDS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON:29.1.2010 SD/- SD/- G.C. GUPTA CHANDRA POOJARI VICE PRESIDENT ACCOUNTANT MEMBER DATED THE 29 TH JANUARY 2010. COPY FORWARDED TO: 1. M/S VENSA LABORATORIES LTD. 107 & 108 BHAVYAS SRE E ARCADE 8-3-166/6&7 ERRAGADDA HYDERABAD 2. ITO WARD NO.3(2) ROOM NO.726 7 TH FLOOR HYDERABAD-4. 3. CIT(A) TIRUPATHI. 4. CIT(A)-IV HYDERABAD & CIT HYDERABAD 5. THE D.R. ITAT HYDERABAD. NP