Income Tax Appellate Tribunal - Hyderabad
Suryavanshi Industries Limited,Hyd, ... vs Acit, Circle-3(2), Hyd, Hyderabad on 22 November, 2017
IN THE INCOME TAX APPELLATE TRIBUNAL
HYDERABAD BENCH "A", HYDERABAD
BEFORE SHRI D. MANMOHAN, VICE PRESIDENT
AND SHRI S. RIFAUR RAHMAN, ACCOUNTANT MEMBER
ITA No. 1269/Hyd/2016
Assessment Year: 2010-11
Suryavanshi Industries Ltd., Vs. Asst. Commissioner of
Secunderabad. Income-tax, Circle - 3(2),
Hyderabad.
PAN - AADCS 2204 C
(Appellant) (Respondent)
Assessee by : Shri V. Sivakumar
Revenue by : Shri Siri Kumar
Date of hearing : 31-10-2017
Date of pronouncement : 22-11-2017
ORDER
PER S. RIFAUR RAHMAN, A.M.:
This appeal filed by the assessee is directed against the order of the learned Commissioner of Income-tax (A) - 5, Hyderabad, dated 15-07-2016 for AY 2010-11.
2. Briefly the facts of the case are that the assessee company is engaged in the business of extraction of cotton lint, seed, seed cake and seed oil. It filed its return of income for the AY 2010-11 on 14/10/2010 declaring a total income of Rs. 48,57,479/-. The case was selected for scrutiny through CASS and notices u/s 143(2) and 142(1) were issued to the assessee, against which, required information was furnished by the assessee. The AO completed the assessment u/s 143(3) of the Act by determining the assessed income of the assessee at Rs. 7,46,25,660/- by making various additions including the addition of Rs. 44,00,000/- u/s 68 of the Act towards cash credits, which is the subject matter in this appeal.
2 ITA No. 1269/H/16Suryavanshi Industries Ltd., Sec 'bad.
3. The facts relating to this ground are that during the FY 2009-10, the assessee had received share application money of Rs. 44,00,000/- for which the company claimed to have received from M/s West End Developers Ltd., Kolkata. When the assessee was asked to prove the credit worthiness for the share application money invested as required u/s 68 of the Act, the assessee failed to furnish evidence before the AO. Since the assessee's failure to discharge its onus of proving the creditworthiness of the traders, the AO treated the said amount as unexplained cash credits u/s 68 of the Act and brought to tax as income from other sources.
4. Aggrieved by the order of AO, the assessee preferred an appeal before the CIT(A).
5. Before the CIT(A), the assessee submitted that Westend Developers Ltd. is assessed to tax with PAN AAACW2195B and Ward 10 3(1), Kolkata Jurisdiction. The assessee obtained confirmation letter from this party along with its bank account and balance sheet and it was argued that the share application money was received through banking channel.
6. The CIT(A) noted that the AO in his remand report stated that the assessee produced a copy of the return filed by M/s Westend Developers Ltd. and a copy of the bank account held by them with HDFC evidencing receipt of amount towards share application money. He further noted that the AO has neither discussed anything nor commented on it. The CIT(A) referring to the provisions of section 68 of the Act as well as referring to the decisions of Hon'ble Courts, held that mere furnishing of the particulars is not enough, but, it is for the assessee to prove the identity of the creditors, their creditworthiness and the genuineness of the transactions. Since, the assessee failed to prove all these ingredients, the CIT(A) confirmed the addition made by the AO.
3 ITA No. 1269/H/16Suryavanshi Industries Ltd., Sec 'bad.
7. Aggrieved by the order of CIT(A), the assessee is in appeal before us raising the following grounds of appeal:
" 1. The Order of the Commissioner of Income-tax (Appeals)- 5, Hyderabad dated 15.07.2016 is erroneous, contrary to law and facts of the case.
2. a) The Commissioner of Income Tax (Appeals) is not justified in confirming the addition of Rs.44,00,000/- made by the Assessing Officer on account of share application money received from Westend Developers Ltd stating that the details furnished do not prove the creditworthiness of the Kolkata based company, which contributed share subscription to the Appellant company.
b) The Commissioner of Income Tax (Appeals) ought to have seen that Westend Developers Ltd is assessed to Income Tax under PAN: AAACW2195B, before the Assessing Officer, Ward-
10(3), Kolkata and the confirmation letter, bank account copy, Annual accounts and income tax acknowledgment furnished by them establishes the identity / creditworthiness of the said company which had deposited the share application money with the Appellant.
3. For all of the above and such other grounds as may be urged at the time of hearing it is most respectfully prayed that the Hon'ble Tribunal be pleased to direct the Assessing Officer to delete the disallowance of Rs.44,00,000/- made in the Asst. Order u/s.68 in the interest of justice."
8. Ld. AR submitted that the assessee has substantiated the proof of receipt of the application money from M/s Westend Developers by submitting the confirmation letter along with PAN details and balance sheet in which the company has shown the remittance as investment. He submitted that the payments were received through banking channels, for which, the assessee has submitted bank statement and copy of leger of the company. He, therefore, submitted that it proves that the transaction is genuine. Credit worthiness is not in question and identity of the party has already been established by submitting PAN and confirmation letters.
4 ITA No. 1269/H/16Suryavanshi Industries Ltd., Sec 'bad.
9. The ld. DR, on the other hand filed written submissions wherein it was stated that while deciding the issue the ld. CIT(A) has relied on the following High Court decisions, which are relevant to the facts of the instance case, therefore, the same may be considered favourably:
1. CIT Vs. Nivedan Vanijya Niyojan Ltd., 130 Taxmn 153 (Cal.)
2. CIT Vs. Active Traders P. Ltd., [1993] 69 Taxman 282 (Cal.)
10. Considered the rival submissions and peruse the material facts on record as well as the decisions cited by ld. DR. The assessee has received share application money from Westend Developers Ltd. through HDFC Bank. Even though the assessee has filed confirmation letters and financial statements along with PAN details filed before the CIT(A) but not before the AO, the CIT(A) has not accepted the information filed on the belief that the company is closely held company and doubting the existence of the company, we have verified the details submitted by ld. AR, Viz., PAN details, Circle in which it is assessed and confirmation letters, this proves the identity of the investor. W ith regard to credit worthiness, assessee has filed financial statements, which is properly audited. The balance sheet shows it is running company, it satisfies the credit worthiness. W ith regard to genuineness, the assessee has filed the bank statement with the details of receipt. The assessee has utilized the funds in the regular business. AO has not found anything unusual in the books of the assessee with regard to receipt of the share application money and its utilisation in the business. Since, the assessee has established the genuineness, identity and credit worthiness of the investor, in our opinion, we cannot stretch our imagination further to doubt any further.
10.1 Coming to the submissions of ld. DR, he relied on two case law to justify the addition. On careful reading of these judgments, the facts in those cases are different. In the case of CIT Vs. Nivedan Vanijya Niyojan Ltd. (supra), the assessee has not filed any evidence 5 ITA No. 1269/H/16 Suryavanshi Industries Ltd., Sec 'bad.
to prove the identity, credit worthiness and genuineness. The Hon'ble Court held that assessee has to prove the three ingredients as per section 68 to establish the transaction as genuine. In the given case, the assessee has fulfilled all the basic ingredients as per section 68. Hence, the above case is not applicable to the case of the assessee. Coming to the CIT Vs. Active Traders P. Ltd. (supra), the AO has sent summons to the share holders directly. Some share holders addresses are not genuine, letters sent were returned 'unserved', some of the share holders instead of personal appearance, filed confirmation letters, these confirmation letters were found to be identical and scrips were also identical. Hence, Court has dismissed these are not genuine. In the given case, no such activities were initiated by AO even though the assessment circle details were submitted and address was also made available. Merely disbelieving the details submitted before them and disallowing u/s 68 is improper. Hence, addition made is deleted.
11. In the result, appeal of the assessee is allowed.
Pronounced in the open court on 22 nd November, 2017.
Sd/- Sd/-
(D. MANMOHAN) (S. RIFAUR RAHMAN)
VICE PRESIDENT ACCOUNTANT MEMBER
Hyderabad, Dated: 22 nd November, 2017.
Kv
Copy to:-
1) Suryavanshi Industries Ltd., 105, Surya Towers, SP Road, Secunderabad - 500 003.
2)ACIT, Circle - 3(2), Hyderabad.
3) CIT(A) - 5, Hyderabad 4 Pr. CIT - 3, Hyderabad
5) The Departmental Representative, I.T.A.T., Hyderabad.
6) Guard File