Income Tax Appellate Tribunal - Hyderabad
Samyu Glass P Ltd., Hyderabad, ... vs Ito, Ward-3(1), Hyd, Hyderabad on 26 April, 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 No. 1218/Hyd/2015
Assessment Year: 2011-12
M/s Samyu Glass (P) Ltd., Vs. Income-tax Officer,
Hyderabad. Ward - 3(1), Hyderabad.
PAN - AAMCS 1919D
(Appellant) (Respondent)
Assessee by : Shri P. Murali Mohan Rao
Revenue by : Shri K.J. Rao
Date of hearing : 04-04-2017
Date of pronouncement : 26-04-2017
ORDER
PER S. RIFAUR RAHMAN, A.M.:
This is an appeal of the assessee directed against the order of the learned Commissioner of Income-tax(A) - 3, Hyderabad, dated 31- 08-2015 for AY 2011-12.
2. Briefly the facts of the case are that assessee company is engaged in the business of manufacturing of glass containers. It filed its return of income for the AY 2011-12 on 30/09/2011 admitting a loss of Rs. 7,07,63,923/-. The return was processed u/s 143(1) of the Act on 07/01/2012 and the case was selected for scrutiny and notice u/s 143(2) was issued on 25/09/2012.
2.1 During the course of assessment proceedings, AO observed that as per the balance sheet, total paid up share capital is Rs. 21,70,70,941/-, whereas an amount of Rs. 3,38,16,000/- is appearing 2 ITA No. 1218/H/15 Samyu Glass (P) Ltd., Hyd.
as share application money pending allotment. Out of this, share capital of Rs. 9,74,28,000/- and share application money of Rs. 2,97,11,000/- was received during the current AY. The assessee was asked to prove the genuineness of the share capital and share application money appearing in balance sheet as on 31/03/2011. Assessee furnished details along with the confirmation letters and relevant documents. On verification of the information furnished, AO observed that assessee failed to prove genuineness of the amounts received from two individuals as below:
1. Smt. Rama Devi : stated to have invested an amount of Rs.
64,30,000/- during the year. In the confirmation letter she has stated that the amount was invested out of gift received from her brother. However, no documentary evidence to prove genuineness of such gift was furnished.
2.2 AO observed from her bank statement that the amounts were transferred to the account immediately before making the investment and the details of deposits and source for the same were not furnished. Hence, AO added the above investment as unexplained cash credit u/s 68 as the assessee failed to prove the creditworthiness of the investor.
2. Smt. S. Anuradha: stated to have invested an amount of Rs. 16 lakhs during the year. In her confirmation letter, she has confirmed that the investments were out of loans received from friends and relatives. However, no documentary evidence was furnished to prove such loans.
2.3 AO observed that in her bank statement the amounts were transferred into her account immediately before making investment. AO added the amount of Rs. 16 lakhs as unexplained credit u/s 68 by observing that creditworthiness of the investor was not established.
3. Aggrieved with the above order, the assessee preferred an appeal before the CIT(A). CIT(A) after considering the submissions of 3 ITA No. 1218/H/15 Samyu Glass (P) Ltd., Hyd.
the assessee as well as considering the relevant confirmation letters and bank statement submitted by the assessee, observed that one come to inevitable conclusion that both the persons Smt. M. Rama Devi and Smt. S. Anuradha do not have creditworthiness to subscribe towards capital of Rs. 64.30 lakhs and Rs. 16 lakhs respectively. He further observed that a careful analysis of the accounts reflect that, but, for the credit and debits of amounts equivalent to share subscription, there are no other transactions. Taking into account the totality of the facts and circumstances of the case, the CIT(A) held that these two subscribers only have lent their name, but, do not have creditworthiness to subscribe such huge amounts. He, therefore, confirmed the addition made by the AO of Rs. 80,30,000/- following the decisions of Hon'ble AP High court in the case of RB Mittal Vs. CIT, 246 ITR 283 and in the case of CIT Vs. Lanco Industries Ltd, 242 ITR 359.
4. Aggrieved with the above order, the assessee is in appeal before us raising the following grounds of appeal:
"1. The Ld. CIT (A) - 3, Hyderabad erred both in law and on facts in partly allowing the appeal.
2. The Ld. CIT(A) erred in sustaining the additions towards unexplained investment in share capital of Rs.80,30,000 u/s 68 of the Act, 1961.
3. The Ld. CIT(A) ought to have deleted the additions u/s 68 appreciating the fact that the appellant has submitted the confirmation letters with PAN from the parties and shown the genuineness of the transactions.
4. The Ld. CIT(A) failed to appreciate the fact that when the transactions are through account payee cheque, then no addition could be made u/s 68 of the Act, 1961.
5. The Ld. CIT(A) ought to have deleted the additions u/s. 68 of the Act appreciating the decision of Apex Court in the case of CIT Vs Lovely Exports (P) Ltd (2008) 216 CTR 195 (SC).4 ITA No. 1218/H/15
Samyu Glass (P) Ltd., Hyd.
6. The appellant may, add or alter or amend or modify or substitute or delete and/ or rescind all or any of the grounds of appeal at any time before or at the time of hearing of the appeal."
5. Ld. AR submitted that assessee has submitted confirmation letters with PAN and bank statements before the CIT(A) and AO. He, therefore, submitted that assessee has discharged its onus by submitting the above documents and established the genuineness of the transaction and creditworthiness of the subscribers. He further submitted that all the transactions are through proper banking channels only and CIT(A) should have considered this aspect. Ld. AR submitted that the subscribers have received gifts from her brother in one case and loans from relatives in another case. He submitted that as long as the assessee has proved the source for the subscription, it need not have to substantiate the source of the source. He submitted that, in case, the department has issues with the creditworthiness of the investors, they can very well proceed to reopen individual assessments in the hands of investors rather than making addition in the hands of assessee. Ld. AR finally submitted that assessee company has already issued share capital to the investors, hence, it proved to be a genuine transaction. He relied on the decision in the case of CIT Vs. Lovely Exports (P) Ltd., [2008] 216 CTR 195 (SC). He further relied on the following cases:
1. CIT Vs. Orissa Corporation Pvt. Ltd., 159 ITR 78 (SC)
2. DCIT Vs. Rohono Builders, 127 Taxman 523 (Guj)
3. CIT Vs. Lanco Industries Ltd., 242 ITR 357.
6. The ld. DR, on the other hand, submitted that mere submission of confirmation letters and bank details are not enough as assessee has to prove creditworthiness of the individual investors and genuineness of the transactions. For this proposition, he relied on the following cases:
5 ITA No. 1218/H/15Samyu Glass (P) Ltd., Hyd.
1. CIT Vs. Nova Promoters & Finlease (P) Ltd., ITA No. 342 of 2011, order dated February, 15, 2012.
2. CIT Vs. N Tarika Properties Investment, ITA No. 2080 of 2010, order dated 28 th November, 2013.
7. Considered the rival submissions and perused the material facts on record as well as the decisions cited. The AO has made the addition on the ground that the assessee has not proved the genuineness of the transactions on account of investment in share capital by Smt. M. Rama Devi and Smt. S. Anuradha. Whereas ld. AR submitted that the assessee has submitted confirmation letters, and bank statements, of investors before the revenue authorities, therefore, the assessee has discharged the onus of proving genuineness of transaction and creditworthiness of the investors. Ld AR also submitted that the assessee has allotted share capital to the investors, which establishes that the transaction is genuine. He also submitted that the transactions were through banking channels. On the other hand, Ld. DR relied on the decision of Hon'ble Delhi High Court in the case of CIT Vs. N. Tarika Properties Investment (supra). In that case the assessee has submitted the PAN details, incorporation details along with fabricated bank statement. This fact was unearthed by the authorities and it was clearly established that the assessee has mislead the authorities. But in the present case, the bank statement submitted was proper and no such irregularities were noticed. Hence, the assessee has clearly established the genuineness of the transaction. Coming to the case of Nova Promoters (supra), the AO has established link between the entry providers and the assessee company and also provided the statements of entry providers who have accepted involving in such activities. But, in the present case, no such findings were established. The assessee has confirmed the investment by submitting the confirmation letters from the investors along with their bank statement. The AO is not happy with the sources of the investors but 6 ITA No. 1218/H/15 Samyu Glass (P) Ltd., Hyd.
direct source of investment is clearly established by the assessee. In our considered view, the assessee has clearly discharged its part of obligation to establish the genuineness of the transaction. Now, AO is not happy with the source of the source. The revenue is free to go behind the investors and reopen their cases as they have voluntarily and willingly confirmed the investment. In our considered view, the assessee need not have to prove the source of the source and hence, assessee has established the genuineness of the transaction and addition u/s 68 cannot be invoked. Accordingly, ground raised by the assessee in this regard is allowed.
8. In the result, appeal of the assessee is allowed.
Pronounced in the open court on 26 th April, 2017.
Sd/- Sd/-
(P. MADHAVI DEVI) (S. RIFAUR RAHMAN)
JUDICIAL MEMBER ACCOUNTANT MEMBER
Hyderabad, Dated: 26 th April, 2017.
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Copy to:-
1) M/s Samyu Glass (P) Ltd., C/o P. Murali & co., CAs, 6-3-655/2/3, 1 st Floor, Somajiguda, Hyderabad - 82..
2) IT), Ward - 3(1), Hyderabad.
3) CIT(A) - 2, Hyderabad 4 Pr. CIT - 3, Hyderabad
5) The Departmental Representative, I.T.A.T., Hyderabad.
6) Guard File