Bislery Investment Pvt. Ltd., Ahmedabad V. The ITO, Ward-1(1)(2), Ahmedabad

CO 62/AHD/2017

AI Insights

The case revolves around a dispute concerning the addition of Rs. 40 lakhs as unexplained investment by Bislery Investment P. Ltd. in shares of IC&RPL during the assessment year 2005-06. The Income Tax Officer (ITO) initiated reassessment proceedings under section 147 of the Income Tax Act, 1961, suspecting that the investment was not reflected in the assessee's balance sheet. The ITO made an addition under section 69 of the Act, which was upheld by the Commissioner of Income Tax (Appeals) but later contested by the assessee in the form of a Cross Objection after the Revenue's appeal was dismissed due to low tax effect. The Tribunal examined the evidences and submissions made during the appellate proceedings, including bank statements and confirmations of unsecured loans, and concluded that the source of investment was adequately explained, leading to the deletion of the addition.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 133510 (ITAT-AHMEDABAD)
• Duration Of Justice: 5 year(s) 5 month(s) 25 day(s)
• Appeal Type: Cross Objection
• Pronouncement Date: 10-01-2023
• Appeal Filed By: Assessee
• Order Result: PartlyAllowed
• Bench Allotted: B
• Next Hearing Date: 27-12-2022
• Assessment Year: 2005-2006
• Appeal Filed On: 16-07-2017
• Other Referred Cases: GKN Driveshaft (India) Ltd. vs. ITO 259 ITR 19 (SC), General Motors India (P.) Ltd. vs. Dy. CIT (2012) 210 Taxmann 20 (Mag.) (Guj)
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Unexplained investment; Principle of natural justice; Tax effect; Source of fund; Additional evidence; Corroborative evidences; Tax effect
• Section: 147; 68; 69; 133(6); 2(A)

Judgement Text

आयकर अपीलीय अिधकरण आयकर अपीलीय अिधकरणआयकर अपीलीय अिधकरण आयकर अपीलीय अिधकरण, अहमदाबाद 瀈यायपीठ अहमदाबाद 瀈यायपीठअहमदाबाद 瀈यायपीठ अहमदाबाद 瀈यायपीठ ‘B’ अहमदाबाद। अहमदाबाद।अहमदाबाद। अहमदाबाद। IN THE INCOME TAX APPELLATE TRIBUNAL “B” BENCH, AHMEDABAD BEFORE SMT.ANNAPURNA GUPTA, ACCOUNTANT MEMBER AND SHRI SIDDHARTHA NAUTIYAL, JUDICIAL MEMBER Cross Objection No.62/Ahd/2017 IN ITA No.822/Ahd/2017 Assessment Year : 2005-06 Bislery Investment P.Ltd. 9 th Floor, B.D. Patel House Naranpura Ahmedabad 380 013. PAN : AABCB 6852 D Vs. ITO, Ward-1(1)(2) Ahmedabad. Assessee by : Shri Aseem L. Thakkar, AR Revenue by : Shri Rakesh Jha, Sr.DR स ु नवाई क तार ख/D a t e o f H e a r i n g : 2 7 / 1 2 / 2 0 2 2 घोषणा क तार ख /D a t e o f P r o n o u n c e m e n t : 1 1 / 0 1 / 2 0 2 3 आदेश/O R D E R PER ANNAPURNA GUPTA, ACCOUNTANT MEMBER This Cross Objection has been filed by the assessee in the appeal of the Revenue in ITA No.822/Ahd/2017 against the order passed by the ld.Commissioner of Income Tax(Appeals)-10, Ahmedabad [hereinafter referred to as “Ld.CIT(A)”]dated 20.1.2017 under section 250(6) the Income Tax Act, 1961 ("the Act" for short) pertaining to the Asst.Year 2005-06. 2. It was pointed out to us that appeal of the Revenue was dismissed on account of low tax effect and only CO of the assessee survived. Hence, the present appeal before us. CO No.62/Ahd/2017 2 3. Drawing our attention to the facts of the case, it was pointed out that re-assessment proceedings were initiated on the assessee under section 147 of the Act on the basis of the information in the possession of the AO that the assessee had made investment of Rs.40 lakhs in the shares of Infocity Clubs & Resorts P. Ltd. (“IC&RPL” for short) which was not reflected in itsBalance Sheet. The assessee admitted to have acquired shares, but stated that theshares were not reflected in the Balance Sheet for the reason that they were sold off also during the year itself. The AO made independent inquires from the company, “IC&RPL”, who confirmed the fact of investment made by the assessee of Rs.40 lakhs in its shares. The AO, however, noticed that the financials of the assessee were too meager to justify investment of such huge amount in shares. Accordingly, he asked the assessee to explain the source of investment. The assessee furnished certain documents and facts before him. However, the AO was not convinced with the explanation of the assessee and accordingly made addition of unexplained investment under section 69 of the Act of Rs.40 lakhs invested in the shares of “IC&RPL” by the assessee. The AO further asked the assessee to establish the sale of the impugned investments as admitted by the assessee itself. But the assessee was unable to satisfy the AO with regard to the same also. The AO further noted from independent inquiry conducted that these shares stood invested in the name of the assessee upto 23.3.2010 i.e.a date beyond the impugned year. He accordingly held the sale of shares reflected by the assessee in its books of accounts to tantamount to unexplained credit and added the same also to the income of the assessee. CO No.62/Ahd/2017 3 4. The matter was carried in appeal before the ld.CIT(A) who deleted the addition made on account of sale of shares as unexplained credit under section 68 of the Act, treating it to be double addition and also on finding that sufficient evidences proving the sale of shares had been filed by the assessee. As for the addition made of Rs.40 lakhs on account of unexplained investment, the same was upheld by the ld.CIT(A). Aggrieved by this order of the ld.CIT(A), the Revenue has come up in appeal before us and the assessee had filed CO in the same. The appeal of the Revenue was stated to be dismissed under low tax effect, and only CO of the assessee survived. Accordingly, the assessee through this CO has challenged the confirmation of addition of Rs.40 lakhs as unexplained investment under section 69 of the Act. The assessee has also raised legal ground before us to the effect that the ld.CIT(A) has not adjudicated the ground of the AO not affording opportunity to cross-examine the assessee. The grounds raised by the assessee read as under: “1. The Id. CIT(A) has erred in not adjudicating the Ground of Appeal No. 3 contending that since the AO has failed to pass a speaking order against the objections raised before him challenging the validity of notice u/s.148 of the Act and the consequent reassessment proceedings, the reassessment order passed was bad in law and cannot be sustained and thus requires to be quashed as held in the case of GKN Driveshaft (India) Ltd. vs. ITO 259 ITR 19 (SC), General Motors India (P.) Ltd. vs. Dy. CIT (2012) 210 Taxmann 20 (Mag.) (Guj.). The impugned reassessment order thus requires to be quashed as void-ab-initio. 2. The Id. CIT(A) has also failed to adjudicate or comment upon the appellant's Ground of Appeal No. 4 stating that the AO has failed to grant cross-examination of the persons/entities from whom the enquiries were gathered and used for drawing adverse inference against the appellant. The impugned reassessment order thus having been passed in violation of the principles of natural justice and equity ought to have been quashed on this ground itself. 3. The Id. CIT(A) erred in confirming the addition of Rs.40,00,000/- on account of unexplained investment u/s.69 of the Act made by the AO on the ground that the appellant has not submitted the copy of bank statement and hence the source of investment was not explained. The appellant states that CO No.62/Ahd/2017 4 the Id. CIT(A) has failed to consider and verify the exhaustive and comprehensive evidences furnished to the AO as well as CIT (A) in support of source of investment. Thus, keeping in view the facts and evidences available on record, the impugned addition of Rs.40,00,000/- requires to be deleted. 5. At the outset Ld.counsel for the assessee contended that ground no.1 and 2 are not being pressed by him. The same are therefore dismissed as not pressed. 6. With respect to ground no.3, ld.counsel for the assessee stated that this ground challenges confirmation of addition of Rs.40 lakhs by the ld.CIT(A) made on account of unexplained investment in the shares of “IC&RPL”. Ld.counsel for the assessee stated that the ld.CIT(A) had upheld the addition stating that the assesseehad failed to explain the source of investment made either during the assessment proceedings or even before him in the appellate proceedings. He drew our attention to para 6.6 of the CIT(A)’s order confirming the addition of Rs.40 lakhs for the above reasons as under: “6.6 Since both the grounds are inter related and pertain to the same issue, the same has been disposed off simultaneously. The first additions is made u/s. 69 of the Act of Rs. 40,00,000/- as elaborately discussed by the AO in Para No. 4.1 of the assessment order. The appellant company has made investment in 40,000 shares of the company namely Infocity Club & Resorts Pvt. Ltd. for which four different cheques were issued as per the Table given on page no. 12 of the assessment order. AO has issued notice u/s. 133(6) to the Infocity Club & Resorts Pvt. Ltd. In reply to the same, said company has submitted the status of the shares allotted to the appellant company. Accordingly, the appellant company has been entered as the member of the company Infocity Club &' Resorts Pvt. Ltd. on 28/03/2005. Looking at the source of the said investment AO has observed on page no. 14 that the assessee company has not submitted the details relating to the copy of the bank statement, etc. and since the source of investment of Rs. 40,00,000/- in the shares of the said company was not explained, the same was considered as unexplained and added u/s. 69 of the Act. The observations of the AO in his remand report dated 17/11/2015 and 14/03/2016 have already been reproduced hereinabove. Therefore, it is clear that the source of investment has not been explained either during the course of assessment proceedings or in the assessment remand report proceedings and therefore, addition made by the AO of Rs.40,00,000/- as unexplained investment u/s. 69 of the Act is confirmed.” CO No.62/Ahd/2017 5 7. The ld.counsel for the assessee contended that the finding of the ld.CIT(A) that the assessee had not established source of investment, was blatantly incorrect on facts. He pointed that while in assessment proceedings, the assessee was unable to furnish any evidence to explain the source of investment, in the appellate proceedings the assessee had filed additional evidences explaining the source of investment which were admitted by the ld.CIT(A) and sent to the AO for his comments and even the comments of the assessee were taken on the remand report submitted by the AO. He pointed out that even theld.CIT(A) has referred to the remand report of the AO dated 17.11.2015 and 14.3.2016 in para 6.6 while confirming the addition made. The ld.counsel for the assessee contended that copy of the bank statement of the assessee reflecting investment made in “IC&RPL” had been filed as evidence of this fact. He drew our attention to remand report of the AO dated 17.11.2015, reproduced at page 14 of the CIT(A)’s order, admitting to the fact that the assessee had filed copy of its bank statement evidencing payment of Rs.40 lakhs for purchase of shares of “IC&RPL”. CO No.62/Ahd/2017 6 8. He pointed out that the AO did admit to the fact that the assessee had submitted copy of its bank statement showing payment made for purchase of shares through banking channel, but despite doing so, had dismissed explanation of the assessee, stating that its Balance Sheet did not reflect sufficient funds available with it for making the investment. The ld.counsel for the assessee contended that availability of funds for making investment was to be gauged from the bank statement and not from the financial statement as done by the AO. He also drew our attention to para-c of the said report where again the AO admitted to the copy of bank statement being submitted by the assessee. C) In respect of investment of shares of Rs.40,00,000/- 3) The assessee submitted the copy of bank statement reflecting for the entire period showing the details of the said investment. However, it does not prove from whom assessee had brought Rs.40,00,000/-. No source of fund explained. 4) Further in absence of Name, address, PAN No. assessee failed to prove the identity, creditworthiness and genuineness of the person who had sourced the investment. 9. He thereafter drew our attention to the rebuttal filed by the assessee to the above remand report pointing out again that it had filed all its bank statement to prove the investment of Rs.40 lakhs in shares of “IC&RPL”. Our attention was drawn to page no.17 of the CIT(A) where relevant portion of the assessee’s rebuttal was reproduced at para-02 and para-4 of the order as under: “2. In para 3 of the remand report under the heading "Reg. : Addition made u/s. 69 of the Act", the AO has again repeated the observation made during the assessment proceedings while referring the Balance Sheet as at CO No.62/Ahd/2017 7 31/03/2005 of the appellant company. That the assessee company was not in possession of sufficient reserve and surplus funds through which it could acquire these shares. The AO has not commented about the payment for acquiring the shares by account payee cheques which is duly reflecting in the bank statement submitted as additional evidences in the appellate proceedings. In view of the fact that the appellant company was having supporting evidences which were to be placed on AO's record, it is submitted that no adverse inference is required to be drawn in respect of comment of the AO regarding addition made u/s. 69 of the Act in absence of verification of the supporting evidences by the AO. . . . . 4. As regards the comment of the AO in para 4(A) and 4(8) of the remand report, the appellant would like to submit that since no effective hearing taken place before the AO, the supporting evidences available with the appellant company could not be furnished to the AO. The appellant company was having following supporting evidences / details in support of the investment In the shares of ICRPL as well as in respect of the sale of shares to M/s. Khyati Enterprise: i) Confirmation of the party namely BaldevbhaiDosabhal Cotton Co. (Prop. : B.D. Cotton Associates) with copy of return of income for AY 2005-06. ii) Confirmation of Beaty Investment Pvt. Ltd. with copy of return of income forAY 2005-06. iii) Confirmation of M/s. Khyati Enterprise to whom the share of ICRPL havebeen sold. vi) Copy of Bank statements of Current Bank Account No. 01832 of the appellant company for the FY 2004-05 relevant to AY 2005-06. Copy of share transfer form for the shares of ICRPL sold by the appellant company. 10. He thereafter pointed out that the AO again in his remand report dated 14.3.2016, reproduced at page no.16 of the CIT(A)’s order, again asked the copy of the bank statement for the entire period showing details of the said investment, to which the assessee responded that copy of the bank statement of the assessee for the entire year had been filed vide letter dated 16.1.2016 itself. The assessee’s reply reproduced at para 6.5 of the order in this regard. CO No.62/Ahd/2017 8 “In connection with the appellate proceedings for AY 2005-06, the appellant company has been provided the copy of the remand report of the AO (ITO, Ward 1(1)(2), Ahmedabad) dated 14/03/2016 along with the Notice of hearing dated 17/03/2016 and it has been asked to give explanation / comments on the said Remand Report. In this regards, the appellant has to submit as under: 1. That in the remand report proceedings, the AO issued a letter dated 02/03/2016 asking the appellant company to attend the office on 09/03/2016 along with the various details and documents. The same has been reproduced by the AO in the remand report in Para 2(A) and (B), 2. It may be noted that the additional / fresh evidences filed by the appellant company before your honour vide submission dated 16/01/2016 and which have been forwarded to the AO for his remand report, includes following details and documents: i) Confirmation of the party namely BaldevbhaiDosabhai Cotton Co. (Prop. : B. D. Cotton Associates) with copy of return of income for AY 2005- 06. ii) Confirmation of Beauty Investment Pvt. Ltd. with copy of return of income for AY 2005-06. iii) Confirmation of M/s. Khyati Enterprise to whom the share of ICRPL have been sold. iv) Copy of Bank statements of Current Bank Account No. 01832 of the appellant company for the FY2004-05 relevant to AY 2005-06. Copy of share transfer form for the shares of ICRPL sold by the appellant company. 3. Now, if the details and documents asked for by the AO in his letter dated 02/03/2016 are verified with the above details and documents already available with him with letter dated 16/01/2016 in remand report proceedings, following facts are worth to be taken note of: i) As regards copy of bank statement for the entire period showing the details of said investment, it is submitted that the copy of the bank statement of current bank Account No. 01832 for the F. Y. 2004-05 has a/ready been available on the record of AO. (Page No. 10 to 20 of submission dated 16/01/2016). ii) As regards the source of funds from which investment had been made, it is submitted that the copy of the confirmation of unsecured loan parties viz. Baldevbhai Dosabhai Cotton Co. (Prop, of B.D. Cotton Associates) and Beauty Investment Pvt. Ltd. for the F. Y. 2004-05 have a/ready been available with the AO in the remand report proceedings. The funds of these two unsecured loan parties have been utilized for making investment in the shares of Infocity Club & Resort P/t. Ltd.. Instead of verifying the relevant details already available on record, the AO has misrepresented while asking the same details again and not verifying the details already available on records” 11. He further drew our attention to the concluding para of the said reply reproduced at page no.22 of the order wherein it was pointed out that the despite filing of the evidences, the AO had failed to take note of the same and simply brushed aside them. CO No.62/Ahd/2017 9 In view of the above facts, details and submissions, the appellant company submits that the observations of the AO in the remand report are without verification of the additional evidences placed on the record to explain the source of the investment in the shares of the company Infocity Club & Reports Pvt. Ltd, as well as the genuineness of the transaction of sale of these shares by the appellant company to the party namely M/s. Khyati Enterprise, The confirmations of all these parties along with supporting like copy of acknowledgement of their return of income etc, have been simply brushed aside by the AO and no comments thereon has been given in the Remand Report. Therefore, it is submitted that no cognizance of the said remand report is required to be taken." 12. The ld.counsel for the assessee contended that the ld.CIT (A) also failed to take note of the evidence filed by the assessee as additional evidence and rebuttal filed to the AO during the assessment proceedings. He contended that besides filing the copy of the bank statement of the assessee evidencing source of investment in shares of “IC&RPL”, the assessee had also explained the source of investment as being unsecured loans from parties i.e. Baldevbhai Dosabhai Cotton Co. and Beauty Investment P.Ltd., the confirmation of the parties had also been filed during the remand proceedings. The ld.counsel contended, therefore, that order passed by the ld.CIT(A) confirming the addition under section 69 of the Act on account of investment in shares of “IC&RPL” of Rs.40 lakhs remaining unexplained was contrary to the facts on record and needed to be deleted. 13. The ld.DR, however, relied on the order of the ld.CIT(A). 14. We have carefully heard contentions of both the parties and have also gone through orders of the authorities below. The issue for adjudication before us is, the confirmation of addition by the ld.CIT(A) of investment made by the assessee of Rs.40 lakhs in M/s “IC&RPL”, which remained unexplained. The addition was upheld by the ld.CIT(A) finding that the assessee had failed to prove the CO No.62/Ahd/2017 10 source of the same despite several opportunities given to him. But we find that, as rightly pointed out by the ld.counsel for the assessee, the facts are to the contrary. The ld.CIT(A) referring to the remand report of the AO has stated that the assessee had been unable to file any evidence to explain the source of investment in these shares. But as pointed out by the ld.counsel for the assessee from the remand report of the AO dated 17.11.2015, the AO himself had admitted in the said report that the assessee did file copy of the bank statement as evidence of the source of investment in the shares of “IC&RPL”. Despite noting such facts, the AO went on to dismiss this explanation on the basis that financial of the assessee did not justify the source of investment. Be that as it may, the fact is the assessee did file copy of the bank statement and source of investment was to be gathered from the copy of the bank statement. It was repeatedly pointed to the AO that payment was made through account payee cheque. The assessee repeatedly, in remand proceedings, pointed out to the AO he was missing the vital fact that the assessee had submitted copy of the bank statements evidencing the source of investment. He had also explained the source of investment as being from two unsecured loans taken. Confirmation of these unsecured loans were also filed, but we find that the both the AO and the CIT(A) conveniently ignored this evidence and held the source of investment to be unexplained. In the light of the facts as noted by us above, we are unable to agree with the ld.CIT(A) that the source of investment of Rs.40 lacs remained unexplained. The banks statement, showing investment made by account payee cheque, the source of investment having been explained as from two unsecured loans taken by the assessee, confirmation of which being filed by the assessee also, we hold that the assessee had sufficiently substantiated and explained the source of investment made in the CO No.62/Ahd/2017 11 shares of “IC&RPL” to the tune of Rs.40 lakhs. There was no reason absolutely therefore to treat the same as unexplained investment. The addition of Rs.40 lakhs confirmed by the ld.CIT(A) under section 69 of the Act, is therefore, not sustainable, and directed to be deleted. Ground No.3 raised in the CO of the assessee is allowed. 15. In the result, CO of the assessee is partly allowed. Order pronounced in the Court on 11 th January, 2023 at Ahmedabad. Sd/- Sd/- (SIDDHARTHA NAUTIYAL) JUDICIAL MEMBER (ANNAPURNA GUPTA) ACCOUNTANT MEMBER Ahmedabad, dated 11/01/2023