ASSISTANT COMMISSIONER OF INCOME TAX ,CENTRAL CIRCLE 3(4), HYDERABAD V. SV MULTI LOGITECH PRIVATE LIMITED , SECUNDERABAD

ITA 82/HYD/2021

AI Insights

The case involves appeals by the Revenue against the order of the CIT(A) which had deleted additions made by the Assessing Officer under section 68 of the Income Tax Act concerning investments received by S.V.Multi Logitech Pvt. Ltd. from Surbhi Mercantile Pvt. Ltd. The Revenue contended that the CIT(A) erred in deleting these additions, arguing that the assessee failed to prove the genuineness of the transactions and the creditworthiness of the investor. The Tribunal, after reviewing the evidence and the legal precedents cited, upheld the CIT(A)'s decision, emphasizing that the assessee had discharged the initial burden of proof regarding the transactions.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 39478 (ITAT-HYDERABAD)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-02-2025
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB-A
• Assessment Year: 2016-2017
• Other Referred Cases: Principal Commissioner of Income-Tax Vs.Abhisar Buildwell (P.) Ltd., CIT vs. Smt. K.C. Agnes, CIT, Salem vs. P.V. Kalyanasundaram, Commissioner of Income-Tax, Orissa vs Orissa Corporation (P) Ltd., DCIT Vs. Rohini Builders, PCIT Vs. NRA Iron and Steel Private Ltd.
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SRINATH SADANALA
• Assessee Lawyers: P. MURALI MOHAN RAO
• Keywords: Set aside; Unexplained cash credit; Fair market value; Document seized; Documents seized; Search and seizure; Bogus
• Section: 143(3); 143(1); 153A; 68; 69B; 139; 153C

Judgement Text

" आयकर अपीलीय अधिकरण, हैदराबाद पीठ IN THE INCOME TAX APPELLATE TRIBUNAL Hyderabad ‘A’ Bench, Hyderabad Before Shri Manjunatha G., Accountant Member and Shri K.Narasimha Chary, Judicial Member आ.अपी.सं /ITA No.81/Hyd/2021 & 82/Hyd/2021 (निर्धारण वर्ा/Assessment Year: 2015-16 & 2016-17) Asst.Commissioner of Income Tax Central Circle-3(4) Hyderabad Vs. S.V.Multi Logitech Private Ltd. Secunderabad [PAN :AASCS7131D] (Appellant) (Respondent) निर्धाररती द्वधरध/Assessee by: Shri P.Murali Mohan Rao,AR रधजस् व द्वधरध/Revenue by: Shri Srinath Sadanala, DR सुिवधई की तधरीख/Date of Hearing: 25/11/2024 घोर्णध की तधरीख/Date of Pronouncement: 18/02/2025 आदेश / ORDER PER. MANJUNATHA G., A.M: These appeals filed by the Revenue are directed against order dated 04.09.2020 of the Commissioner of Income Tax (Appeals) [“Ld.CIT(A)”]-11, Hyderabad pertaining to A.Y.2015-16, and 2016-17. Since, facts are identical and issues are common, for the sake of convenience, the appeals filed by the Revenue are being heard together and are being disposed off, by this common order. 2 ITA No.81 & 82/Hyd/2021 S.V.Multi Logitech Private Ltd. I.T.A.81/Hyd/2021, A.Y.2015-16 The Revenue has raised the following grounds of appeal : 3 ITA No.81 & 82/Hyd/2021 S.V.Multi Logitech Private Ltd. 3. The brief facts of the case are that the assessee company M/s S.V.Multi Logitech Pvt.Ltd., is engaged in the business of logistics parks and infrastructure projects, filed its return of income for the A.Y.2015-16 on 10.10.2015, declaring total income of Rs.Nil, which was processed u/s 143(1) of the Income Tax Act, 1961 (“the Act”). A search and seizure operation u/s 132 of the Act was conducted in the case of Ajaz Farooqi and his related concerns on 04.07.2017. During the course of search at the residential premises of Ajaz Farooqi, certain incriminating 4 ITA No.81 & 82/Hyd/2021 S.V.Multi Logitech Private Ltd. material was found and seized vide Annexure A/AF/01. During the course of search assessment proceedings in the case of Ajaz Farooqi, the seized material was verified and found that the material seized pertains to M/s S.V.Multi Logitech Pvt.Ltd. and has a bearing on the total income for the year under consideration and therefore, the Assessing Officer of the searched person has recorded satisfaction u/s 153A of the Income Tax Act, 1961 (“the Act”) and forwarded the same to the assessee to file return of income. The Assessing Officer issued notice u/s 153A of the Act and found that the assessee company has received advances / investments from M/s Surbhi Mercantile Pvt.Ltd., Delhi and accordingly, called upon the assessee to file return of income. In response to the notice issued u/s 153A of the Act, the assessee filed its return of income on 29.06.2018 by admitting total income of Rs.Nil/-. The assessment has been completed u/s 143(3) r.w.s. 153A and assessed total income at Rs.3,05,82,500/- 4. The first issue that came up for our consideration is addition of Rs.1,00,00,000/- u/s 68 of the Act. During the course of assessment proceedings, the Assessing Officer noticed that Shri Ajaz Farooqi and his associated companies has received loans / advances / investments to the tune of Rs.65,57,75,000/- from various Delhi based companies during the F.Y.2010-11 to 2016-17, out of which investments to the tune of Rs.20,27,50,000/- was received from Surbhi Mercantile Pvt.Ltd. During the financial year, relevant to the assessment 5 ITA No.81 & 82/Hyd/2021 S.V.Multi Logitech Private Ltd. year 2015-16, the assessee company has received investment / advance of Rs.1,00,00,000/- into its State Bank of India account from M/s Surbhi Mercantile Pvt. Ltd. based in Delhi. In order to verify the amount of advance / investment received from Delhi based company, the Assessing Officer called upon the assessee to file relevant evidences and also prove identity, credit worthiness and genuineness of the transaction. In response, the assessee company filed copy of MOU between M/s Surbhi Mercantile Pvt. Ltd. and the assessee and claimed that the above company agreed to invest in development project and for this purpose remitted an amount of Rs.1,00,00,000/-. During the course of post search operation, enquiries were conducted at Delhi to verify the genuineness of claim of investment received from Delhi based companies and during search and enquiries, a statements of Mr.Sanjay Aggarwal and Sri Rajiv Aggarwal, directors of the company was recorded on oath. The Assessing Officer, based on the enquiries conducted on the investor companies, coupled with evidences filed by the assessee, called upon the assessee to file further evidences to justify the advances received from Surbhi Mercantile Pvt.Ltd. In response, the assessee has filed names and address of the investor company along with PAN and also filed confirmation letter along with relevant financial statements of the investor company. The Assessing Officer, after considering the relevant submissions of the assessee and also taking note of evidences collected during the course of search coupled with statements recorded from certain persons of investor companies, came to 6 ITA No.81 & 82/Hyd/2021 S.V.Multi Logitech Private Ltd. the conclusion that the assessee could not discharge the onus to prove the identity, genuineness of transactions and creditworthiness of the investor companies. Therefore, made additions of Rs.1,00,00,000/- u/s 68 of the Act as unexplained cash credit. 5. Being aggrieved by the assessment order, the assessee preferred an appeal before the CIT(A). Before the Ld.CIT(A), the assessee challenged the assessment order passed by the Assessing Officer u/s 153A of the, in light of satisfaction note u/s 153A by the Assessing Officer of the searched person and submitted that the Assessing Officer has assumed jurisdiction by issue of notice u/s 153A on the basis of incorrect satisfaction, which is not supported by incriminating material found as a result of search. The assessee also challenged the additions made by the Assessing Officer towards investment received from Surbhi Mercantile Pvt. Ltd u/s 68 of the Act by filing necessary evidences. 6. The Ld.CIT(A), after considering the relevant submissions of the assessee and also taking note of satisfaction note recorded by the Assessing Officer, for initiating proceedings u/s 153A of the Act, rejected legal ground taken by the assessee. The Ld.CIT(A) had also deleted the additions made by the Assessing Officer towards investment received from M/s Surbhi Mercantile Pvt.Ltd. u/s 68 of the Act, by holding that the assessee is able to prove the identity of the investor company 7 ITA No.81 & 82/Hyd/2021 S.V.Multi Logitech Private Ltd. and also proved genuineness of transactions and creditworthiness of the parties, by filing details like PAN, return of income filed for the relevant assessment year, financial statements along with confirmation letters. Further, since the investment is routed through proper banking channel, the Ld.CIT(A) observed that the Assessing Officer is erred in making additions towards investment u/s 68 of the Act, as unexplained money and therefore, deleted the additions made by the Assessing Officer. 7. Aggrieved by the order of the Ld.CIT(A), the Revenue is now in appeal before the Tribunal. 8. The Ld.Sr.AR, Shri Srinath Sadanala submitted that the Ld.CIT(A) erred in deleting the additions made by the Assessing Officer towards advances received from Delhi based companies, by holding that the assumption of jurisdiction by the Assessing Officer u/s 153A of the Act is invalid and further on merit, the Ld.CIT(A) erred in deleting the additions, by holding that the assessee has proved the identity, genuineness of transactions and creditworthiness of the parties. The Ld.DR further submitted that the Assessing Officer has brought out clear facts in the assessment order and proved that Shri Ajaz Farooqi and associated companies have received huge amount of investment / advances from Delhi based companies and failed to prove the genuineness of transactions, which is evident from post search operation enquiries conducted on Delhi based companies, 8 ITA No.81 & 82/Hyd/2021 S.V.Multi Logitech Private Ltd. where, few of the companies are not existent in the given address and further, so called directors of the above companies denied having any knowledge of investment in the assessee company. Therefore, merely for the reason of furnishing confirmation letter, along with financial statement, genuineness of transactions cannot be proved. The Ld.CIT(A), without considering the relevant facts, simply deleted the additions made by the Assessing Officer. Therefore, he submitted that the order of the Ld.CIT(A) should be set aside and additions made by the AO should be upheld. 9. The learned counsel for the assessee, supporting the order of the Ld.CIT(A) submitted that the Ld.CIT(A) has come to right conclusion, based on appraisal of relevant satisfaction note recorded by the Assessing Officer as required u/s 153C of the Act, where, the Assessing Officer referred to incriminating material, but the said material is nothing, but MOU and bank account particulars, which are already disclosed in the return of income filed u/s 139 of the Act. Further, the assessee had also filed relevant evidences, including name and address along with PAN of the investor company, confirmation letter and financial statements and also filed bank statements of investor company to prove that the amount has been received through banking channel. The Ld.CIT(A) after considering relevant facts has rightly deleted the additions made by the Assessing Officer. In this regard, relied on the decision of Hon’ble Supreme Court in 9 ITA No.81 & 82/Hyd/2021 S.V.Multi Logitech Private Ltd. the case of Principal Commissioner of Income-Tax Vs.Abhisar Buildwell (P.) Ltd. (2023) 149 taxmann.com 399 (SC). 10. We have heard both the parties, perused the material on record and gone through the orders of the authorities below. We have also carefully considered the relevant case laws referred to by both the parties, in support of their arguments. There is no dispute with regard to fact that the assessee has received investment from M/s Surbhi Mercantile Pvt. Ltd., a Delhi based company and to prove the credit, has filed various evidences, including, copy of MOU between the parties, name and address and PAN of the investor company, financial statements and bank account copy of the investor company and also confirmation letter from the investor company. The Assessing Officer made additions towards investment received from Delhi based company, only on the basis of post search enquiries conducted at Delhi on investor companies and certain statements recorded from few individuals and came to the conclusion that those companies are paper companies and does not have any credible business, to establish creditworthiness for investment made in the assessee company. The Assessing Officer had also taken support from enquiry report and came to the conclusion that few companies are non-existent in the given address and on further enquiry, it was noticed that no such company was functioning in the given address and carrying out any business. The Assessing Officer had also taken support from certain material found during the course of search in the 10 ITA No.81 & 82/Hyd/2021 S.V.Multi Logitech Private Ltd. case of Ajaz Farooqi and Jayanta Kumar Dutta, where, the department has found certain pen drive, which contained the details of certain entries in the name of Kapil and Mr.Rajiv Agarwal and observed that the assessee has routed its unaccounted money, by way of advances / investments from Delhi based companies and returned cash. Therefore, the Assessing Officer came to the conclusion that the assessee could not prove identity, genuineness of the transaction and credit worthiness of the investment from M/s Surbhi Mercantile Pvt. Ltd. 11. We have given our careful consideration to the reasons given by the Assessing Officer to make additions towards advances / investment from M/s Surbhi Mercantile Pvt. Ltd. as unexplained cash credit u/s 68 of the Act, in light of various averments made by the Learned counsel for the assessee and we ourselves do not subscribe to the reasons given by the Assessing Officer for the simple reason that, the assessee had filed complete details of investor company and their identify, including name and address, PAN, financial statements, bank statements and also confirmation letter and proved identity of the investor company, genuineness of transactions and creditworthiness of the parties. Further, as per the evidences filed by the assessee, investment is sourced from the bank account to bank account and from the bank account statement of the investor company, there is no evidence of any cash deposited immediately before the date of transfer of the funds of 11 ITA No.81 & 82/Hyd/2021 S.V.Multi Logitech Private Ltd. the assessee company. Further, the investor companies have filed their financial statements and also established sources for investment made in the assessee company. Although the Assessing Officer refers to post search enquiry conducted on investor company at Delhi, to draw adverse inference against the investment, but on perusal of affidavit filed by the Directors, Mr.Rajiv Aggarwal and Mr.Sanjay Aggarwal, it is abundantly clear that they confirmed the investment in the assessee company and their statements were not conclusive proof of the adverse comments made by the Assessing Officer. Further, it is also noted that Mr.Ajaz Farooqi and Mrs.Asma Farooqi, both were directors of M/s Surbhi Mercantile Pvt. Ltd. from 2012 onwards and at the time of Assessing Officer passed the assessment order, both were directors in the investor company, however, the Assessing Officer failed to examine the directors and simply made a statement that the assessee failed to produce directors of investor company. We, further, noted that the assessee has filed status of M/s Surbhi Mercantile Pvt. Ltd. as per the ROC records and the company is in active status at the time of passing the assessment order. From the above, it is abundantly clear that, the assessee has proved the identity of the investor company and also proved the credit worthiness and genuineness of the transaction. Therefore, we are of the considered view that once, the initial onus is discharged by the assessee, then the onus shifts to the Assessing Officer, to prove otherwise, with relevant evidences and this fact is strengthened by the decision of Hon'ble Supreme Court in the case of CIT 12 ITA No.81 & 82/Hyd/2021 S.V.Multi Logitech Private Ltd. Vs.Lovely Exports (supra), where, it has been clearly held that, if the share application money is received by the assessee company from alleged bogus shareholders, whose names are given to the Assessing Officer, then the department is free to proceed to reopen their individual assessments, in accordance with law, but this amount of share application money cannot be regarded as undisclosed income u/s 68 of the Act. A similar view has been taken by the Hon'ble Supreme Court in the case of Pr. CIT vs. Chain House International (P) Ltd. (supra). Further, the Hon'ble Supreme Court in the case of Commissioner of Income-Tax, Orissa vs Orissa Corporation (P) L td. (supra) has considered similar issue and held that once, genuineness and creditworthiness and identity of investors are established, no additions can be made as cash credit, on the ground that investor company and directors have not responded to the notices issued by the Assessing Officer. Similar view has been taken by the Hon'ble Gujarat High Court in the case of DCIT Vs. Rohini Builders (2002) 256 ITR 360 (Guj). The sum and substance of the ratios laid down by the Hon'ble Supreme Court and other High Courts is that once, identity, genuineness of transactions and creditworthiness of the creditor is proved, then the sum received from the creditor cannot be treated as income of the assessee u/s 68 of the Act. Although the Assessing Officer referred to number of judicial precedents, including the decision of Hon'ble Supreme Court in the case of PCIT Vs. NRA Iron and Steel Private Ltd. (2019) 412 ITR 161, but facts remain that the facts of the present case are entirely 13 ITA No.81 & 82/Hyd/2021 S.V.Multi Logitech Private Ltd. different from various case laws referred by the Assessing Officer and therefore, in our considered view, the case laws relied upon by the Assessing Officer are considered to be not applicable to the case of the assessee. 12. In view of this matter and considering the facts of the present case and also by following the ratios of Hon'ble Supreme Court in the cases discussed herein above, we are of the considered view, that the Assessing Officer is erred in making additions towards advances / investment received from M/s Surbhi Mercantile Pvt. Ltd. u/s 68 of the Act as unexplained cash credit. The Ld.CIT(A), after considering relevant facts has rightly deleted the additions made by the Assessing Officer. Therefore, we are inclined to uphold the order of the Ld.CIT(A) and dismiss the appeal filed by the Revenue on this ground. 13. The next issue that came up for consideration from Ground No.14 of Revenue appeal is deletion of addition of Rs.1,19,87,500/- made u/s 69B of the Act towards unexplained investment in purchase of property. The Ld.DR, Shri Srinath Sadanala submitted that the Ld.CIT(A) erred in deleting the addition, holding that only part of the addition made on account of purchase of agricultural land is supported by the evidence, ignoring the other evidences / calculations viz. agreement values etc. as mentioned in such documents. The Ld.DR further referring to the facts on record submitted that the Assessing Officer has brought on record clear facts in respect of payment 14 ITA No.81 & 82/Hyd/2021 S.V.Multi Logitech Private Ltd. of consideration for purchase of agricultural land over and above stated consideration in the agreement and this has not been explained by the assessee with relevant evidences. The Ld.CIT(A) after considering the relevant facts, simply deleted the addition made by the Assessing Officer. 14. The learned counsel for the assessee, Shri P.Murali Mohan Rao, CA, on the other hand, supporting the order of the Ld.CIT(A), submitted that the assessee has purchased agricultural land at Shankarpally for establishing logistics park @6,00,000/- per acre, which is clearly mentioned in the registered document, however, the Assessing Officer allegedly claimed that the assessee has paid Rs.23,00,000/- per acre based on the dumb document available in the premises of J.K.Dutta, ignoring the fact that such document is not establishing the nature of payment, to whom the said payment has been made. Since the registered document clearly shows the value of the land, which is on par with fair market value as per stamp duty authorities, the Ld.CIT(A), after considering the relevant facts, has rightly deleted the additions made by the Assessing Officer and it is supported by the order of the assessee’s group case in ITA No.784/Hyd/2020. 15. We have heard both the parties, perused the material on record and gone through the orders of the authorities below. The Ld.CIT(A) had recorded a categorical finding in light of various evidences filed by the assessee, that there is evidence with the Assessing Officer to allege that the assessee has paid 15 ITA No.81 & 82/Hyd/2021 S.V.Multi Logitech Private Ltd. consideration of Rs.23,00,000/- per acre as against the registered sale deed, which shows Rs.6,00,000/- per acre. Further, as per seized documents, there is no evidence of payment of Rs.35,00,000/- to Mr.Mohd Abdul Gafoor and Rs.50,95,000/- to Mr.D.Jithender Reddy. For the balance addition made, there is no evidence as to payment by the assessee. The Assessing Officer, without conducting any independent enquiry has made additions only the basis of documents found in the premises of J.K.Dutta, which does not show any payment to the extent of Rs.1,19,87,500/-. The findings and facts recorded by the Ld.CIT(A) has not been controverted by the Revenue with any evidences, except stating that the Assessing Officer has made addition on the basis of material found from the premises of J.K.Dutta. On perusal of material relied upon by the Assessing Officer and findings given by the Ld.CIT(A), in our considered view, there is no error in the reasons given by the Ld.CIT(A) to delete the additions to the extent of Rs.1,19,87,500/- towards consideration paid for purchase of land. 16. In this regard, the assessee relied upon the decision of ITAT in the assessee’s own case in ITA No.784/Hyd/2020 for the A.Y.2015-16, where the Tribunal on identical set of facts, delete the additions made by the Assessing Officer towards consideration paid for purchase of agricultural land over and above the stated consideration as per the registered sale deed. Relevant findings of the Tribunal are as under : 16 ITA No.81 & 82/Hyd/2021 S.V.Multi Logitech Private Ltd. “…In the case of the assessee the purchase of the property is concluded by a way of a Registered Sale Deed stating that the sale consideration is Rs. 19,40,75,000/- which were paid by Demand Draft. In a similar circumstance the Hon’ble Apex Court in the case K.P. Varghese vs. ITO [1981] reported in 131 ITR 597 had categorically held that no addition can be made on the plea of understatement of sale consideration unless it is established that physically money has been received over and above the declared consideration. Further, the Hon’ble High Court of Kerala in the case CIT vs. Smt. K.C. Agnes [2003] reported in 262 ITR 354 vide judgment dated 22/01/2003 had held that “when a document shows a fixed price, there would be a presumption that it is the correct price agreed upon by the parties. It is true that on the basis of the agreement the sale deed is executed. But it is not necessary that the price stated in the agreement will be price shown in the sale deed”. Further, the Hon’ble Apex Court in the case CIT, Salem vs. P.V. Kalyanasundaram vide judgment dated 14/09/2007 reported in 294 ITR 49 it was held that “the fact as to the actual sale price of the property, the implication of the contrary statements made by the vendor or whether reliance could be placed on the loose sheets recovered in the course of the raid were all question of fact. Therefore, there was no infirmity in the order of the High Court for having dismissed the Revenue’s appeal. Considering the facts and circumstances of the case before us and the decisions cited herein above, we cannot conclusively agree on the finding of the Ld. Revenue Authorities that the assessee has paid on-money of Rs. 14,09,25,00/- to the sellers of the property because the two evidence relied by the Ld. Revenue Authorities viz., the data retrieved from the Pen-drive and the admission by the vendors of the property though may have a persuasive value but will not have much substantive evidentiary value in order to make additions in the hands of the assessee. Therefore, in the interest of justice, we hereby direct the Ld. AO to delete the addition made for Rs. 14,09,25,000/- in the hands of the assessee towards on-money paid for the purchase of the residential property”. 17. In view of this matter and considering the facts and circumstances of the case and also by following the decision of 17 ITA No.81 & 82/Hyd/2021 S.V.Multi Logitech Private Ltd. coordinate Bench of ITAT, in assessee’s appeal for the A.Y.2015- 16, we are of the considered view that there is no error in the reasons given by the Ld.CIT(A) to delete the addition to the extent of Rs.1,19,87,500/-, towards consideration paid for purchase of agricultural land. Thus, we are inclined to uphold the findings of the Ld.CIT(A) and reject the grounds taken by the Revenue. 18. In the result, appeal filed by the Revenue is dismissed. ITA No.82/Hyd/2021,A.Y.2016-17 19. The Revenue has raised more or less common grounds of appeal for the assessment year 2016-17. The facts and issues involved in this appeal are identical to the facts and issue, which, we had considered in ITA No.81/Hyd/2021 for the A.Y.2015-16. But for figures, the facts and issues are identical. The reasons given by us in the preceding paragraph No.10 to 17 shall mutatis mutandis apply to this appeal, as well. Therefore, for similar reasons, we are inclined to uphold the order of the Ld.CIT(A) and dismiss the appeals filed by the Revenue. 20. In the result, appeal filed by the Revenue for the A.Y.2016- 17 is also dismissed. 18 ITA No.81 & 82/Hyd/2021 S.V.Multi Logitech Private Ltd. 21. As a result, appeals filed by Revenue for the assessment years, 2015-16 and 2016-17 are dismissed. Order pronounced in the Open Court on 18th February, 2025. Sd/- Sd/- (K.NARSIMHA CHARY) JUDICIAL MEMBER (MANJUNATHA G.) ACCOUNTANT MEMBER Hyderabad, Dated 18th February, 2025 L.Rama, SPS Copy to: S.No Addresses 1 The Deputy Commissioner of Income Tax, Central Circle- 3(4), Hyderabad 2 M/s S.V.Multi Logitech Pvt. Ltd., 12-05-34-35/1, 1st Floor, Vijaypuri, South Lallaguda, Secunderabad 3 The Pr.CIT (Central), Hyderabad 4 The DR, ITAT Hyderabad Benches 5 Guard File By Order "