Income Tax Appellate Tribunal - Chennai
Susee Engineering & Automobiles P ... vs Department Of Income Tax on 22 August, 2012
IN THE INCOME TAX APPELLATE TRIBUNAL
'B' BENCH, CHENNAI
BEFORE SHRI ABRAHAM P. GEORGE, ACCOUNTANT MEMBER
AND SHRI CHALLA NAGENDRA PRASAD, JUDICIAL MEMBER
I.T.A. No. 300/Mds/2011
Assessment Year : 2005-06
The Assistant Commissioner of M/s Susee Engineering &
Income Tax, Automobiles Pvt. Ltd.,
Central Circle III, v. 184/2, Trivandrum Road,
Madurai. Vannarpettai, Tirunelveli.
PAN : AAHCS8802L
(Appellant) (Respondent)
Appellant by : Shri K. Rajagopal, JCIT
Respondent by : Shri G. Baskar, Advocate
Date of Hearing : 22.08.2012
Date of Pronouncement : 22.08.2012
O R D E R
PER ABRAHAM P. GEORGE, ACCOUNTANT MEMBER :
This is a recalled matter. The appeal has been recalled for the limited purpose of disposing of an additional ground filed by the Revenue, relating to an addition made for unexplained investment of ` 54,83,332/- in shares by the assessee.
2. Facts apropos are that one Shri R. Purushothaman (HUF) was the main partner of a firm called Susee Auto (Firm) having three divisions, 2 I.T.A. No. 300/Mds/11 namely, Susee Motors, Susee Hyundai and Bajaj Two Wheeler. These three divisions were taken over by three separate companies, namely, Susee Auto Zone (P) Ltd., Susee Engineering And Automobiles (P) Ltd. and Susee Vehicle Dealers (P) Ltd. Susee Auto Zone (P) Ltd. was incorporated on 16.4.2004, Susee Engineering And Automobiles (P) Ltd. was incorporated on 9.10.2003 and Susee Vehicle Dealers (P) Ltd. was incorporated on 22.10.2003. In lieu of divisions taken over, Shri R. Purushothaman (HUF) was allotted shares in these respective companies. In the assessment done on Shri R. Purushothaman as well as Shri R. Purushothaman (HUF), the shares allotted in these three companies were considered as unexplained investments and additions were made. Protective assessments were also done for the same amounts in the hands of the companies except for Susee Auto Zone (P) Ltd. Assessee here is one among these companies, namely, Susee Engineering & Automobiles (P) Ltd. Assessing Officer was of the opinion that ` 59,50,000/-, share capital of Shri R. Purushothaman was not properly explained and the said Shri R. Purushothaman had only a source of ` 13 to 14 lakhs available for such investments. He accepted the explanation insofar as it related to ` 4,66,668/- and made an addition of the balance amount of ` 54,83,332/- in assessee's hands protectively.
3 I.T.A. No. 300/Mds/11
3. In its appeal before CIT(Appeals), assessee's explanation was that shares issued to Shri R. Purushothaman were in lieu of the assets transferred by the firm to the assessee-company. CIT(Appeals) noted that in the case of Shri R. Purushothaman, such additions made for investments in share capital was deleted, with a finding that there was no unrecorded investment calling for any explanation of source. Therefore, he deleted the additions protectively made in assessee's hands also.
4. When the matter came up before us, learned D.R. submitted that similar addition made in the hands of Susee Vehicle Dealers Pvt. Ltd., which was also deleted by the CIT(Appeals) in the appeal of the said company, was affirmed by this Tribunal vide its order dated 13th January, 2012 in I.T.A. No. 303/Mds/2011. Learned A.R. placed a copy of the said order of Tribunal as part of paper-book at pages 39-43.
5. We have perused the orders and heard the submissions. As aforementioned, the shares issued to Shri R. Purushothaman, wherein three companies, namely, Susee Auto Zone (P) Ltd., Susee Engineering And Automobiles (P) Ltd. and Susee Vehicle Dealers (P) Ltd. Assessment done considering such investments in shares to be unexplained in the hands of Susee Vehicle Dealers (P) Ltd., was an issue which came up before this Tribunal in Revenue's appeal in I.T.A. 4 I.T.A. No. 300/Mds/11 No. 303/Mds/2011. This Tribunal, in its decision dated 13th January, 2012, had followed its earlier decision in the case of Shri R. Purushothaman (HUF) in I.T.A. No. 1454 & 1455/Mds/2010 dated 17.10.2011 and deleted the additions. Relevant paras 3 and 4 of the order of the Tribunal is reproduced hereunder:-
"3. Vis-à-vis the second issue, we find that this Tribunal had already considered a similar addition made in the case of Shri R. Purushothaman (HUF) for investment made in the share capital of same assessee in I.T.A. No. 1454 and 1455/Mds/2010 dated 17.10.2011. It was held with regard to this issue on unexplained investment in share capital, that the capital introduction in assessee's company was out of transfer of stock trading on creditors, debtors, cash, bank balance. There is a specific finding that there is no cash fund directly introduced in these companies. Relevant para 6 of the order of Tribunal mentioned supra, is reproduced hereunder for brevity:-
"6. We have gone through the records and have found that the Assessing Officer has simply considered the Special Audit Report obtained u/s 142(2A) and has also failed to consider the discontinuation of business of the firm in which the entire assets belong to the assessee and his wife and son as stated above. The Assessing Officer has also failed to consider the Special Audit Report which explained the factual position of this case. Stocks of the firm were sold and transferred to the above stated three Private Limited Companies. The sundry debtors and sundry creditors alongwith the available cash and bank balances were transferred to the respective Private Limited Companies from the respective Divisions. The capital contribution in the Private Limited Companies is only by way of sale of vehicles and transfer of debtors, creditors and cash/bank balances. The necessary entries are recorded in the books of the firm as well as that of the companies and no direct cash/funds are introduced by this assessee in the said Private Limited Companies. The transfer is only by journal entries and transfer entries in the books of the firm and in 5 I.T.A. No. 300/Mds/11 the books of the companies. These facts which are very relevant and important for the decision of the impugned issue were not at all considered properly by the Assessing Officer. On the contrary, these evidence(s) have been considered in their correct perspective by the ld. CIT(A). The Department could not dispute thee facts which have been culled out by us and mentioned above. The Special Auditors gave finding in their report. The Special Audit was ordered by the Assessing Officer to find out whether there was any unexplained cash or funds introduced by the assessee in the companies or not. There was no funds transfer and the capitals introduced were only by journal entries. The fact that the assessee in his HUF capacity was the shareholder in the three Private Limited Companies and not in his individual capacity because he has considered these investments in the assessment of assessee- HUF. The same investment was not considered in his individual assessment and additions were made. This is something beyond the scope of Income-tax Act, 1961 as it amounts to double taxation of the same income. The perusal of the relevant pages of paper book filed by the assessee and the other records including the assessment records in the case of companies and assessee-HUF, and the perusal of Special Audit Report, it becomes crystal clear that there is no direct cash or funds introduced by the assessee in these three companies. Whatever may be the other reason of discontinuation of the firm, but on record, as per the evidence which evince dispute between the partners of the erstwhile firm, it is proved that there was some misunderstanding or quarrel amongst the partners of the firm and that is why the business of the firm could not be continued. Thus, we do not find any evidence to conclude that this assessee has introduced share capital of ` 2.05 crores in these companies by way of cash/funds belonging to him. But it is proved on record that the capital introduction in the Private Limited companies was out of transfer of stock, debtors and creditors, cash and bank balances only. The Special Auditors Report also supports the assessee's version as in that report, the Auditors have categorically given a finding that no such cash or fund belonging to the assessee was directly introduced in these companies. Hence, how can it be concluded that the unexplained income of the assessee was introduced as capital 6 I.T.A. No. 300/Mds/11 in these companies. In our considered opinion, the deletion of the impugned addition is correct and has to be approved. Accordingly, the grounds raised by the Revenue fail."
4. There being no fund introduction made by the assessee, here also it cannot be said that there was any unexplained investments. Ld. CIT(Appeals) rightly relied on the decision in the case of Shri R. Purushothaman (HUF) while deleting the addition relating to unexplained investment in share capital. Thus, effectively we do not find any merit in the appeal filed by the Revenue."
Since the fact situation is very same in the case of present assessee also, we are of the opinion that additions were rightly deleted by the CIT(Appeals). We do not find any reason to interfere.
6. In the result, appeal of the Revenue insofar as the issue recalled is concerned, is dismissed.
The order was pronounced in the Court on Wednesday, the 22nd of August, 2012, at Chennai.
sd/- sd/-
(Challa Nagendra Prasad) (Abraham P. George)
Judicial Member Accountant Member
Chennai,
Dated the 22nd August, 2012.
Kri.
Copy to: (1) Appellant
(2) Respondent
(3) CIT(A)-II, Madurai
(4) CIT, Central Range, Chennai
(5) D.R.
(6) Guard file