Income Tax Appellate Tribunal - Hyderabad
Laxminarasimha Prestressed Concrete ... vs Acit, Circle-1, Warangal, Warangal on 29 September, 2017
IN THE INCOME TAX APPELLATE TRIBUNAL
HYDERABAD BENCH "B", HYDERABAD
BEFORE SMT. P. MADHAVI DEVI, JUDICIAL MEMBER
AND SHRI S. RIFAUR RAHMAN, ACCOUNTANT MEMBER
ITA Nos. 1411/Hyd/2014 and ITA No. 470/Hyd/2017
Assessment Year: 2005-06
M/s Sri Laxmi Narasimha Vs. Dy. Commissioner of Income-
Prestressed Concrete Pipes tax, Warangal.
Pvt. Ltd., Warangal.
PAN - AAACL 9977 E
(Appellant) (Respondent)
Assessee by : Shri A.V. Raghuram
Revenue by : Smt. N. Swapna
Date of hearing : 22-09-2017
Date of pronouncement : 29-09-2017
ORDER
PER S. RIFAUR RAHMAN, A.M.:
Both these appeals are by the assessee for AY 2005-06. Appeal in ITA No. 1411/Hyd/2014 is directed against the order of the learned Commissioner of Income-tax (A) - 18, Mumbai dated 24/03/2014. Appeal in ITA No. 470/Hyd/2017 is directed against the order of CIT(A) - 3, Hyderabad whereby he confirmed the penalty levied by the AO u/s 271(1)(c) of the Act.
ITA No. 1411/Hyd/20142. Briefly the facts of the case are, assessee filed its return of income for the AY 2005-06 on 30/10/2005 declaring loss of Rs. 12,367,660/-. The return was processed u/s 143(1) of the Income-tax Act, 1961 ( in short 'the Act'). The case was selected for scrutiny and 2 ITA No. 1411/H/14 & 470/Hyd/17 Sr i La xm i Naras imha Prestresse d C oncrete P ipes Ltd .
notices u/s 143(2) and 142(1) were issued. During the assessment proceedings, AO noticed that assessee had received share application money to the extent of Rs. 79,00,000/- during this year. Assessee was asked to produce details of break up of share application money received, names and addresses of the share applicants, amounts invested, confirmation letter etc. from the share applicants. Assessee had furnished details of share application money received but did not file any confirmation letters from the parties. There were 30 investors, for which, AO sent letters to the individual investors for seeking the details abovt investment. Since no investor had responded to the above letters and also there was no no compliance from the assessee, AO confirmed the addition u/s 68 of the Act.
3. Aggrieved with the above order, assessee preferred an appal before CIT(A) and the CIT(A) remanded the matter back to the file of the AO for fresh consideration. AO had submitted his report on 28/01/2014, which was reproduced below for the sake of clarity:
"3) The matter has been examined afresh and it is to mention that no further information is forthcoming apart from name and current address of the share applicants.
4) Out of the total 30 share applicants, the sworn statement of 16 applicants are available on the record as under:. A copy of the same is also enclosed herewith.
S.No. Name of share Investment AY S.No. in the list applicant Made of share applicants 1 A. Devender 2,00,000/- 2005-06 1 Reddy 2 A. Savitri 2,00,000/- 2005-06 4 3 T. Srimathi 2,00,000/- 2005-06 30 4 A. Sridhar Reddy 3,00,000/- 2005-06 5 5 A. Sunita 2,00,000/- 2005-06 6 6 C. Sujatha 4,00,000/- 2005-06 12 7 C. Sridhar Reddy 2,00,000/- 2005-06 14 8 D. Kishan Reddy 2,00,000/- 2005-06 15 9 D. Malla Reddy 4,00,000/- 2005-06 16 10 D. Rajsekhar 3,00,000/- 2005-06 17 Reddy 11 G. Shashikala 4,00,000/- 2005-06 18 3 ITA No. 1411/H/14 & 470/Hyd/17 Sr i La xm i Naras imha Prestresse d C oncrete P ipes Ltd .
12 G. Srilatha 2,00,000/- 2005-06 19 13 G. Srinivas Reddy 2,50,000/- 2005-06 20 14 G. Uma 3,00,000/- 2005-06 21 15 G. Venumadhava 3,00,000/- 2005-06 22Reddy 16 K. Pushpalatha 5,00,000/- 2005-06 23 45,50,000/-
5) Further, in the following 11 cases, confirmations have been received from the respective AOs. A copy of the same is enclosed for reference:
S. Name of share Invest- Mode of AY S.No. in No. applicant ment paym- the list of Made ent share applicants 1 B. Prabhakar 3,00,000/- Cheque 05-06 10 Reddy 2 B. Savitha 3,00,000/- Cash/ 05-06 13 1 lakh cash, cheque 2 lakhs cheque 3 B. Kaushalya 3,40,000/- Cash 05-06 9 4 B. 60,000/- Cash 05-06 11 Swarnalatha 5 B. Jaypal 5,50,000/- Cash/ 05-06 8 1.75lakhs Reddy cheque cash, 3.75 lakhs cheque 6 A. Sandeep 2,00,000/- Cash 05-06 3 Reddy 7 A. Manohar 2,00,000/- Cash 05-06 2 AO Reddy * confirmed for Rs. 1 lakh 8 K. Vidya 50,000/- Cash 05-06 25 Sagar Reddy 9 K. Srilatha 1,50,000/- Cash 05-06 24 10 M. Samatha 3,00,000/- Cash 05-06 27 Reddy 11 Aleti Swayam 2,00,000/- Cash 05-06 11 AO Prabha * confirmed partially (based on return for AY 06-07) Total 26,50,000/
-
6) Regarding remaining 3 applicants which are mentioned as under, no sworn statement or confirmation from the respective AOs are available on record. On enquiring with the AR of the assessee, it is learnt that these persons are presently staying abroad/unavailable. In absence of any confirmation or sworn statement, the investment made by these applicants are not verifiable.
4 ITA No. 1411/H/14 & 470/Hyd/17Sr i La xm i Naras imha Prestresse d C oncrete P ipes Ltd .
S. Name of share Investment Mode of AY S.No. in the
No. applicant Made paymen list of share
t applicants
1 M. Padma 1,50,000/- Cash 05-06 26
2 M. 1,50,000/- Cash 05-06 28
Vamshidhar
3 P. Indrasena 4,00,000/- Cash 05-06 29
Reddy
Total 7,00,000/-
3.1 The above report also forwarded to assessee for his comments, for which, assessee had replied as under:
" 1. In the Remand Report in para 4 it is stated that sworn statement of only 16 applicants are available. No confirmations were received from the Assessing officers.
2. In the remand report in para 5 it is stated that for another 11 applicants, confirmations were received from the Assessing officers.
3. In the Remand Report in para 6 it is stated that remaining 3 applicants are staying abroad and their sworn statements or confirmation from AO are not available on record.
I. Before the Commissioner of Income tax(Appeals) we filed additional evidence, which are nothing else but, 1. Affidavits from the applicants confirming the investment made as Share application money, 2. Their Income tax returns, showing the investment in the balance sheet, 3. Reply to the letter originally sent by the Assessing Officer w.r.t. investments in the company, 4. Evidence for source of investment etc., II. Applicants personally appeared before the Assessing officer and gave sworn statements, wherein they have accepted the investment made by them and confirmed the same.
III. Except 3 persons, who are abroad, rest all gave the details and appeared before the Assessing officer.
IV. Documentary evidence was placed on record to prove the identity of all the shareholders including their PAN/GIR numbers and copies of the Income tax returns filed and other documentary evidence with regard to the investment.
V. We also submit that this is the first year of company and the amount invested by share holders was collected to start the company. In the first year the company filed its return of income declaring a loss of Rs.12,37,660/-. Had the company was in existence for quite a long time, it can be assumed that the investments are out of unexplained sources, but here it is the 5 ITA No. 1411/H/14 & 470/Hyd/17 Sr i La xm i Naras imha Prestresse d C oncrete P ipes Ltd .
first year of business of the company and the investment was made for acquiring the assets.
We also hereunder given some case laws with similar issues where the decisions were given in favour of Assessee.
CIT vs. Divine Leasing & Finance (Supreme Court) 299 ITR 268 [ITA No. 53/2005] Commissioner of Income Tax vs. Lovely Exports (P) Ltd. (Supreme Court) (2008) 216 CTR 195 (SC) [ITA No. 953/2006] Commissioner of Income Tax Vs Victor Electrodes Ltd (Delhi High Court) [ITA No. 586/2010] Oasis Hospitalities (Pvt.) Ltd. Vs. CIT (Delhi High Court) (2011) 333 ITRl19 (Del) (ITA No. 2093 of 2010]"
3.2 However, the CIT(A) after considering the remand report and assessee's reply, confirmed the addition u/s 68 by observing that as per the provisions of section 68 of the Act, the onus is always on the assessee to submit complete evidence before the AO, but, in the present case, no evidence to prove the identity, creditworthiness and genuineness of the transaction, has been filed. However, during the remand proceedings, some confirmations were filed, which were not accompanied by any documentary evidence i.e. copy of IT return, bank statement and mode of payment etc. Accordingly, CIT(A) had confirmed the addition by relying on the judgement of the Hon'ble Supreme Court in the case of Roshan D. Hatti.
4. Aggrieved by the order of CIT(A), the assessee is in appeal before us raising the following grounds of appeal:
" 1. On the Facts and in the circumstances of the case the order of the Commissioner of Income Tax (Appeals)-VI, Hyderabad, dismissing the appeal is erroneous and unsustainable. The CIT (A) ought to have allowed the appeal.
2. The Commissioner (Appeals) erred in sustaining the addition of Rs.79,00,000/- made by the Assessing Officer. The Commissioner (Appeals) failed to appreciate the fact that the appellant company had filed additional evidence, connected to all the share holders, where in the details of the all the 6 ITA No. 1411/H/14 & 470/Hyd/17 Sr i La xm i Naras imha Prestresse d C oncrete P ipes Ltd .
shareholders, their Income tax returns, confirmation letters and Affidavits with regard to the investments made by them were given. These are connected to their Identity, source of investment etc.
3. On the facts and in the circumstances of the case, the commissioner (Appeals) ought not have rejected the submission of the appellant. The replies given to the remand report were not properly taken into consideration by the Commissioner of Income tax(Appeals)
4. For these and other grounds that may be urged at time of hearing."
5. Ground Nos. 1 & 4 are general in nature, hence, need of no adjudication and ground Nos. 2 & 3 are relating to addition u/s 68 of the Act.
6. Ld. AR submitted that CIT(A) called for remand report from the AO and as per the remand report, AO has submitted sworn statement of 16 share-applicants and the same was forwarded to CIT(A) and further AO has received confirmations from the respective AOs in the case of 11 share applicants. Ld. AR further submitted that assessee has also submitted affidavits, income-tax returns and evidence for source of investment before CIT(A). He contended that the CIT(A) has not considered the findings of the remand report as well as proof submitted by the assessee.
7. Ld. DR, on the other hand, relied on the orders of revenue authorities.
8. Considered the rival submissions and perused the material facts on record. On perusal of the remand report, we find that AO has submitted sworn statements of 16 share applicants along with copies of the same before the CIT(A) but the same was not considered by him. Further, AO also has received confirmations from respective AOs in the case of 11 share applicants. Even this evidence was also not considered by the CIT(A) while adjudicating the issue. However, 7 ITA No. 1411/H/14 & 470/Hyd/17 Sr i La xm i Naras imha Prestresse d C oncrete P ipes Ltd .
assessee also submits that it has filed all the relevant information before the CIT(A), which was also not considered by the CIT(A). In our considered view, considering the sworn statement in the case of 16 share applicants and confirmation from respective AOs in the case of 11 share applicants, the transaction can be considered as genuine to the extent of 27 share applicants. Even the assessee has also filed copies of the confirmations from the respective share applicants before the AO, which have been filed on record. W ith regard to remaining 3 share applicants to the extent of Rs. 7,00,000/- and the confirmation received from AOs' in the case of A. Manohar Reddy, AO has confirmed only to the extent of Rs. 1.00 lakh. In the case of Aleti Swayam Prabha, the AO has confirmed partially, Hence, the amount to the extent of Rs. 7.00 lakhs which has no confirmation and along with Rs. 2 lakhs in the above said cases alone can be considered as not genuine u/s 68 of the Act.
8.1 In view of the above discussion, to meet the ends of justice, we set aside the order of the CIT(A) and remit the matter back to the file of the AO with a direction to decide the issue after considering all the documentary evidence along with the sworn statements and confirmations from other respective AOs that are available on record and in accordance with law after providing reasonable opportunity of being heard to the assessee.
9. In the result, appeal of the assessee is treated as allowed for statistical purposes.
10. As regards the appeal in ITA No. 470/Hyd/17, as we have remitted the matter back to the file of the AO in the quantum proceedings, the penalty appeal is also remitted to the file of the AO with a direction to decide the penalty on the outcome of the quantum addition.
8 ITA No. 1411/H/14 & 470/Hyd/17Sr i La xm i Naras imha Prestresse d C oncrete P ipes Ltd .
11. In the result, both the appeals under consideration are treated as allowed for statistical purposes.
Pronounced in the open court on 29 th September, 2017.
Sd/- Sd/-
(P. MADHAVI DEVI) (S. RIFAUR RAHMAN)
JUDICIAL MEMBER ACCOUNTANT MEMBER
Hyderabad, Dated: 29 th September, 2017.
kv Copy to:-
1) Sri Laxmi Narasimha Prestressed Concrete Pipes Ltd., C/o S/Shri K. Vasantkumar, AV Raghuram, P. Vinod & M. Neelima Devi, Advocates, 610 Babukhan Estate, Basheerbagh, Hyderabad - 500 001.
2) DCIT, Circle - 1, Station Road, Warangal
3) CIT(A) - 18, Mumbai
4) CIT(A) - 3, Hyd.
4) CIT - VI, Hyd.
5) DR, ITAT, Hyd.
6) Guard File