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Kainya and Associates Pvt.Ltd., 201, Business Park, 2nd floor, S V Road, Near Bajaj Hall, Malad (W), Mumbai-400064 Vs. Dy. Commissioner of Income Tax Central Circle-22, Mumbai
August, 11th 2015
               ,   "-  " 
     IN THE INCOME TAX APPELLATE TRIBUNAL "SMC" BENCH, MUMBAI

            BEFORE S/SHRI B.R.BASKARAN (Accountant Member)
                    .. ,                       
                   ./I.T.A. No.6299/Mum/2014
                 (   / Assessment Year :2005-06)

 Kainya and Associates Pvt.Ltd.,   / Dy. Commissioner of Income Tax
 201, Business Park, 2nd floor,    Vs.
                                       Central Circle-22,
 S V Road, Near Bajaj Hall,            Mumbai
 Malad (W),
 Mumbai-400064
       ( /Appellant)               ..    (    / Respondent)


           . /   . /PAN/GIR No. :AAACK1478R

             / Appellant by             Shri Rahul R Sarda
               /Rspondent by            Shri T Sasi Kumar


              / Date of Hearing
                                             : 10.8.2015
             /Date of Pronouncement : 10.8.2015

                                 / O R D E R

PER BENCH:

        The assessee has filed this appeal challenging the order dated
22.8.2014 passed by ld CIT(A)-39, Mumbai for assessment year 2005-06,
wherein he has confirmed the addition of Rs.10 lakhs made under section
68 of the Income Tax Act, 1961 and also confirmed another addition of
Rs.10,000/-, being the commission payment estimated by the AO.


2.       I heard the parties and perused the record.       The assessee was
subjected to search and seizure operations under section 132 of the Act on
18.1.2006. Consequently, the present assessment was framed under
section 153A of the Act. The AO noticed that the assessee has received
                                    2                  I T A N o . 6 2 9 9 / Mu m / 2 0 1 4






share application money of Rs.10.00 lakhs from a company named M/s
Dakcon Impex Private Limited. Before the AO, the assessee furnished
details like addresses of the parties, copy of the acknowledgement of e-
return filed by it, the copies of bank statement and copy of accounts in
order to prove the genuineness of the share application money received by
it. The AO, however, issued summon to the above said company, but the
same was returned back un-served. Further, the AO also noticed that the
department had conducted survey action under section 133A of the Act in
the hands of M/s Dakcon Impex Private Limited and during the course of
survey; the Director of the Company appears to have stated that his
company has given only accommodation entries to the assessee company.
Accordingly, the AO assessed the share application money of Rs.10 lakhs
as unexplained cash credit u/s 68 of the Act. The AO also presumed that
the assessee would have paid commission at the rate of one percent for
getting these accommodation entries and accordingly assessed a sum of
Rs.10,000/- as unexplained expenditure in the hands of the assessee.


3.    Before the ld.CIT(A), the assessee submitted that it has not been
provided with a copy of statement relied upon by the AO and accordingly
requested the Ld CIT(A) to furnish a copy of      statement given by the
Director of M/s Dakcon Impex Private Limited (herein after `share applicant
company'). Accordingly, the ld. CIT(A) directed the AO to furnish a copy
of the statement, but the AO replied that the statement is not available on
record. The assessing officer admitted that there is a reference about the
statement in the appraisal report, meaning thereby the AO has relied upon
the observation made in the appraisal report for making the addition.
Hence, the ld. CIT(A) held that the impugned issue is required to be
examined   independently.   Accordingly,   the   ld.CIT(A)     examined              the
documents furnished by the assessee and noticed that the assessee has
                                      3                     I T A N o . 6 2 9 9 / Mu m / 2 0 1 4



declared a sum of Rs.552/- only for assessment year 2006-07.                     Further,
he also noticed from the bank account of the share applicant company that
heavy deposits were made on daily basis before issuing the cheque of
Rs.10 lakhs to the assessee. Based on this facts, the ld. CIT(A) came to
the conclusion that the assessee has only availed the accommodation
entries.      He also held that the assessee has also failed to prove
creditworthiness of the share applicant company. Accordingly, the ld.
CIT(A) confirmed the addition of Rs.10 lakhs and also the addition of
Rs.10,000/- relating to estimated commission payment.                Aggrieved, the
assessee has filed this appeal before this Tribunal.


4.    The ld. AR submitted that the assessee has furnished all the relevant
details to prove the share application money of Rs.10.00 lakhs received by
it from M/s Dakcon Impex private limited. The AO, however, made the
addition on the strength of alleged statement given by the Director of the
share applicant company. However, later it was proved that the AO does
not possess copy of the alleged statement. He submitted that the assessee
has discharged the initial burden placed upon it by filing all the relevant
details, viz., names and addresses of the parties, copy of the bank
statement, copy of financial statement etc.         Accordingly, the ld. AR
submitted that the assessee has proved the genuineness of share
application    money   by   establishing   the   identity      of      the       creditor,
creditworthiness of the parties and also genuineness of the transactions.
The ld. AR further submitted that the ld. CIT(A) has drawn adverse
conclusion by looking into the income tax return filed by the assessee.
However, balance-sheet, financial statement of share applicants furnished
by the assessee clearly shows that the share applicant company is having
enough resources for making investment of Rs.10 lakhs in the assessee's
                                     4                 I T A N o . 6 2 9 9 / Mu m / 2 0 1 4



company. The ld. AR further placed reliance on the following decisions in
support of his contentions that no addition is warranted:
a)    DCIT V/s Rohini Builders (2002) 256 ITR 360 (369, 370) (Guj)(HC)
b)    CIT V/s ABT Ltd (2015)370 ITR 159 (Mad) (HC)
c)    CIT V/s Lovely Exports P.Ltd (2008) 216 CTR 195(SC)
The ld.AR further submitted that the decision rendered by the Hon'ble
Supreme Court in the case of Lovely Exports P.Ltd (supra) was followed
by the Hon'ble Bombay High Court in the case of CIT V/s Creative World
Telefilms Ltd (2011)333 ITR 100 (Bom)


5.    On the contrary, the ld. DR placed reliance on the order passed by
the ld. CIT(A).


6.    We have heard the rival contentions and perused the record. From
the observations made by the tax authorities, I notice that the assessee
has furnished details to prove the identity of the share applicant company,
its credit worthiness and genuineness of the transactions.               As stated
earlier, the AO made the addition on the basis of a statement alleged to
have been given by the director of the share applicant company and the
same was found to be not available. Hence, the very basis on which the
impugned addition was made was proved to be wrong.               Hence the Ld
CIT(A) proceeded to examine the documents himself. However, he has
looked into the copy of income tax return filed by the Share applicant
company, instead of financial statements. He has also examined the bank
account of the share applicant company and found that there were
deposits on daily basis. Accordingly he drew adverse conclusions. In my
view, the documents examined by the Ld CIT(A) were not sufficient to
support the conclusions reached by Ld CIT(A).
                                      5                    I T A N o . 6 2 9 9 / Mu m / 2 0 1 4






7.    From the paper book furnished by the assessee, I notice that the
share applicant company has furnished following details before the
assessing   officer   on   09-12-2007,    i.e.,   before   the     completion              of
assessment:-
      (a) Bank statement
      (b) Memorandum and Articles of association of company
      (c) Audited Balance sheet for FY 2005-06.
      (d) Copy of Board resolution
      (e) Copy of income tax return.
Thereafter, the share applicant company has also filed another letter on
21-11-2008 before the Ld CIT(A), wherein it has confirmed the investment
made in the assessee company.


8.     The audited Balance Sheet filed for FY 2005-06 also contains the
details relating to FY 2004-05. A perusal of the same would show that the
share application money is shown under the head "Loans and Advances".
Further the share applicant company is possessing own funds to the tune
of Rs.8.89 crores. The above said documents and confirmation letter filed
by the share applicant company would show that the identity and credit
worthiness of the transactions stand proved. Since the impugned sum of
Rs.10.00 lakhs was received through banking channels, the genuineness of
the transactions also stand proved. Thus I notice that the assessee has
discharged the initial burden of proof placed upon it.


9.   As noticed earlier, the Ld CIT(A) has examined the copy of income tax
returns, which may not throw light about the credit worthiness. Further
the copy of bank statement also shows that there are continuous
transactions of deposits and withdrawals.           Hence, in my view, the
observations made by the Ld CIT(A) that there were heavy deposits before
                                       6                 I T A N o . 6 2 9 9 / Mu m / 2 0 1 4



issuing the cheque of Rs.10.00 lakhs to the assessee company also appear
to be misplaced one. Hence, in my view, the Ld CIT(A) has confirmed the
impugned addition without properly appreciating facts.


10.     Hence, I am unable to agree with the conclusions reached by Ld
CIT(A) in view of the foregoing discussions. Accordingly, I set aside the
order of Ld CIT(A) on the issue of Rs.10.00 lakhs and direct the assessing
officer to delete the same.       Consequently, the addition of Rs.10,000/-
relating to estimated commission income is also directed to be deleted.


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

       Pronounced accordingly on 10th August 2015.
                                     10th   August, 2015    

                                               sd
                                           (..  / B.R. BASKARAN)
                                          / ACCOUNTANT MEMBER
  Mumbai: 10th
                     Aug, 2015.

. ../ SRL , Sr. PS

        /Copy of the Order forwarded to :
1.  / The Appellant
2.      / The Respondent.
3.      () / The CIT(A)- concerned
4.       / CIT concerned
5.       ,     ,                  /
      DR, ITAT, Mumbai concerned
6.      / Guard file.

                                                            / BY ORDER,
        True copy
                                                      (Asstt. Registrar)
                                                ,  /ITAT, Mumbai

 
 
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