DCIT, Circle-3(1), Hyderabad V. M/s.Rayapati Power Generation (P) Ltd., Hyderabad

ITA 1003/HYD/2012

• Counselvise Citation: [2016] 121 COUNSELVISE.COM (IT) 3023 (ITAT-HYDERABAD)
• Duration Of Justice: 3 year(s) 7 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 03-02-2016
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: B
• Next Hearing Date: 14-12-2015
• Assessment Year: 2007-2008
• Appeal Filed On: 22-06-2012
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: B KURMI NAIDU
• Assessee Lawyers: M L NARASIMHAN
• Keywords: Unexplained cash credit; Opportunity of being heard; Retrospective amendment; Additional evidence

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCH B, HYDERABAD BEFORE SHRI D.MANMOHAN, VICE PRESIDENT AND SHRI INTURI RAMA RAO, ACCOUNTANT MEMBER ITA NO.1003/HYD/2012 : ASSESSMENT YEARS 2007- 08 DY. COMMISSIONER OF INCOME - TAX CIRCLE 3(1), HYDERABAD V/S M/S. RAYAPATI POWER GENERATION (P) LTD., HYDERABAD (PAN - AACCR 6187 N ) (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI B. KURMI NAIDU DR RESPONDENT BY : SHRI M.L.NARASIMHAN DATE OF HEARING 17.12.2015 DATE OF PRONOUNCEMENT 03.02.2016 O R D E R PER INTURI RAMA RAO, ACCOUNTANT MEMBER : THIS APPEAL FILED BY THE REVENUE IS DIRECTED AGAI NST THE ORDER OF THE LEARNED COMMISSIONER OF INCOME-TAX(APP EALS) IV HYDERABAD DATED 2.3.2012 FOR THE ASSESSMENT YEAR 20 07-08. 2. REVENUE RAISED THE FOLLOWING GROUNDS OF APPEAL . 1. THE LEARNED CIT(A) ERRED BOTH IN LAW AND ON FAC TS OF THE CASE. 2. THE LEARNED CIT(A) OUGHT NOT TO HAVE DELETED THE ADDITION OF RS.1,49,08,454/- MERELY ON THE GROUND T HAT THE IDENTITIES OF THE PERSONS FROM WHOM THE MONEY W AS RECEIVED WAS ESTABLISHED. 3. THE LEARNED CIT(A) OUGHT NOT HAVE ADMITTED THE ADDITIONAL EVIDENCE PRODUCED BEFORE HIM ON THE BASI S OF WHICH, ADDITION OF RS.3,26,15,000/- MADE U/S. 68 WA S DELETED. 4. AN OTHER GROUND(S) THAT MAY BE URGED AT THE TIME OF HEARING. 3. BRIEFLY, FACTS OF THE CASE ARE THAT THE RESPOND ENT-ASSESSEE IS A COMPANY INCORPORATED UNDER THE PROVISIONS OF T HE COMPANIES ACT, 1956. IT IS ENGAGED IN THE BUSINESS OF GENERATION AND SALE OF POWER. ITA NO.1003/HYD/2013 M/S. RAYAPATI POWER GENERATION (P)LTD., HYDERABAD 2 RETURN OF INCOME FOR THE ASSESSMENT YEAR 2007-08 WA S FILED ON 5 TH MARCH, 2008, DISCLOSING NIL INCOME. AGAINST THE S AID RETURN OF INCOME, ASSESSMENT WAS COMPLETED BY THE LEARNED INCOME TAX OFFICER WARD 3(2) HYDERABAD ON A TOTAL INCOME OF RS.4,90,55,890 VIDE ORDER DATED 11 TH DECEMBER, 2009 PASSED UNDER S.144 OF THE INCOME TA X ACT,1961. WHILE THUS FRAMING THE ASSESSMENT , ASSESSING OFFIC ER MADE ADDITIONS ON ACCOUNT OF (A) SHARE CAPITAL RECEIVED OF RS.3,9 9,35,000 UNDER PROVISIONS OF S.68; (B) SHARE APPLICATION MONEY REC EIVED OF RS.75,88,454 TREATING IT AS UNEXPLAINED CREDIT; AND (C) ADDITION OF RS.15,32,432 AS UNEXPLAINED CURRENT LIABILITIES. 4. BEING AGGRIEVED, AN APPEAL WAS FILED BEFORE TH E LEARNED COMMISSIONER(APPEALS) IV, HYDERABAD, WHO VIDE IMPU GNED ORDER DATED 2.3.2012, ALLOWED THE APPEAL, AFTER CALLING FOR THE REMAND REPORT FROM THE ASSESSING OFFICER. DURING THE COURS E OF REMAND PROCEEDINGS, THE ASSESSING OFFICER EXPRESSED HIS SA TISFACTION ABOUT THE EXPLANATION OFFERED IN RESPECT OF SHARE APPLICATION MONEY RECEIVED FROM (A) M/S. JAYALAKSHMI INDUSTRIES P. LTD. OF RS .2,00,25,000; (B) FROM SHRI RAYAPATI RANGA RAO OF RS.79,40,000; AND ( C) CASH DEPOSITS OF RS.46,50,000, WHEREAS IN RESPECT OF THE SHARE CA PITAL CLAIMED TO HAVE BEEN RECEIVED FROM ONE SHRI RAYANKI VIJAYA KRI SHNA OF RS.1,49,08,454, THE ASSESSING OFFICER HAD NOT ACCEP TED THE GENUINENESS OF THE TRANSACTION BY OBSERVING THAT TH E ASSESSEE HAD FAILED TO ESTABLISH DIRECT NEXUS BETWEEN THE MONEY RECEIVED BY THE DIRECTORS OF THE COMPANY THROUGH WHOM THE INVESTMEN T IS STATED TO HAVE BEEN ROUTED THROUGH AND RECEIPT OF MONEY BY TH E COMPANY, AND ALSO THAT NO ASSESSMENT PARTICULARS AND THE PARTIC ULARS OF SOURCES AND BANK STATEMENTS OF THE SHARE APPLICANT ARE FURNISHE D. HOWEVER, THE CIT(A) DELETED THIS ADDITION ALSO BY HOLDING THAT T HE RESPONDENT- ASSESSEE COMPANY ESTABLISHED IDENTITY OF SHRI RAYAN KI VIJAYA KRISHNA AND ALSO THAT SINCE THE AMOUNTS WERE RECEIVED FROM HIS BANK ACCOUNT ITA NO.1003/HYD/2013 M/S. RAYAPATI POWER GENERATION (P)LTD., HYDERABAD 3 AND THE AMOUNTS WERE FOUND TO BE CREDITED IN THE BO OKS OF ACCOUNT OF THE ASSESSEE COMPANY. 5. BEING AGGRIEVED BY THIS DIRECTION OF THE LEARNE D CIT(A), REVENUE IS IN APPEAL BEFORE US. 6. LEARNED DEPARTMENTAL REPRESENTATIVE VEHEMENTLY CONTENDED THAT GENUINENESS OF THE TRANSACTION AND C REDITWORTHINESS OF SHRI RAYANKI VIJAYA KRISHNA ARE NOT ESTABLISHED BY THE RESPONDENT- ASSESSEE. MERE RECEIPT OF MONEY THROUGH THIRD PART IES DOES NOT SATISFY THE REQUIREMENT OF S.68 OF THE ACT. HE ALSO RELIED ON THE DECISION OF SUBHLAKSHMI VANIJYA (P) LTD. V/S. CIT (2015) 043 IT R (TRIB) 48, TO CONTEND THAT THE PROVISO TO S.68 IS APPLICABLE WITH RETROSPECTIVE EFFECT. 7. LEARNED COUNSEL FOR THE RESPONDENT-ASSESSEE COM PANY SUBMITTED THAT IN THE CASE OF RECEIPT OF SHARE APPL ICATION MONEY, RIGOURS OF LAW UNDER S.68 ARE NOT STRICTLY APPLICAB LE AND IN THIS CONNECTION, HE PLACED RELIANCE ON THE FOLLOWING DEC ISIONS- (A) AHMEDABAD BENCH DECISION OF THE TRIBUNAL IN THE CA SE OF ITO V/S. PRAFUL (AGARWAL ART PRINTS P. LTD. (ITA L3568/ AHD/2007 DATED 12.2.2010 FOR ASSESSMENT YEAR 1998-99) (B) HYDERABAD BENCH B DECISION OF THE TRIBUNAL IN THE CASES OF ACIT V/S. M.S. AMR HOSPITALITY SERVICES LTD., HYDER ABAD AND ANR. (ITA NO.275 AND 276/HYD/2012 FOR ASSESSMENT YE AR 2009-10 DATED 22.2.2013) (C) CIT V/S. DIVINE LEASING AND FINANCE LTD., GENERAL E XPORTS AND CREDITS LTD., LOVELY EXPORTS (P) LTD.(299 ITR 268)- DEL. (D) CIT V/S. LOVELY EXPORTS (P). LTD. (216 CTR 195)-SC, ITA NO.1003/HYD/2013 M/S. RAYAPATI POWER GENERATION (P)LTD., HYDERABAD 4 8. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PE RUSED THE MATERIAL ON RECORD. IN THE PRESENT CASE, IT IS UND ISPUTED FACT THAT THE ACCOUNT OF SHRI RAYANKI VIJAYA KRISHNA IS CREDITED IN THE BOOKS OF THE RESPONDENT-COMPANY. THE CONFIRMATION LETTER FROM S AID RAYANKI VIJAYA KRISHNA WAS ALSO FILED. MERE FILING OF CONFI RMATION LETTER DOES NOT AMOUNT TO DISCHARGE OF INITIAL ONUS AS EXPECTED UND ER THE PROVISIONS OF SEC.68 OF THE ACT. THE ASSESSEE IS UNDER OBLIGATIO N TO PROVE OTHER TWO INGREDIENTS OF SEC.68 I.E. CREDITWORTHINESS OF THE CREDITOR/SHARE APPLICANT AND GENUINENESS OF THE TRANSACTION. IT I S NOT SUFFICIENT THAT THE IDENTITY OF THE SHARE APPLICANT IS ESTABLISHED TO DISCHARGE THE INITIAL ONUS THAT LIES UPON THE ASSESSEE IN TERMS OF S.68. THE ASSESSEE HAS TO FURTHER SATISFY THE REVENUE AS TO THE GENUINENES S OF THE TRANSACTION AS WELL AS THE CREDITWORTHINESS OF THE SHARE APPLIC ANT OR THE INDIVIDUAL, WHO IS ADVANCING THE MONEY. THE SHARE APPLICANT HAS TO SHOW THAT THE MONEY INVESTED IN HIS NAME ACTUALLY BELONGED TO HI M AND THE CIRCUMSTANCES UNDER WHICH THE MONEY WAS ROUTED THRO UGH THE DIRECTORS OF THE RESPONDENT-ASSESSEE COMPANY IS ALS O NEEDS TO BE EXPLAINED TO THE SATISFACTION OF THE ASSESSING OFFI CER. MERELY STATING THAT THE MONIES ARE ROUTED THROUGH THE DIRECTORS OF THE RESPONDENT ASSESSEE COMPANY FOR THE OPERATIONAL CONVENIENCE DO ES NOT ESTABLISH THE GENUINENESS OF THE TRANSACTION OR THE CREDIT-WO RTHINESS OF THE SHARE APPLICANT. THE MATERIAL ON RECORD DOES NOT DI SCLOSE ANYTHING IN SUPPORT OF SATISFYING THESE TWO INGREDIENTS, I.E. G ENUINENESS OF THE TRANSACTION AND CREDIT-WORTHINESS OF THE SHARE APPL ICANT. THEREFORE, WE ARE OF THE CONSIDERED OPINION THAT THE INTERESTS OF JUSTICE WOULD BE MET, IF THE MATTER SHOULD BE RESTORED TO THE FILE O F THE ASSESSING OFFICER FOR DE NOVO EXAMINATION OF THE ISSUE, AFTER GIVING REASONABLE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE-COMPANY. WE ALSO DIRECT THE ASSESSEE-COMPANY TO ESTABLISH THE GENUINENESS OF THE TRANSACTION AND THE CREDITWORTHINESS OF THE SHARE-APPLICANT, SH RI RAYANKI VIJAYA KRISHNA, DULY EXPLAINING THE CIRCUMSTANCES UNDER WH ICH THE SHARE ITA NO.1003/HYD/2013 M/S. RAYAPATI POWER GENERATION (P)LTD., HYDERABAD 5 APPLICATION MONEY WAS ROUTED THROUGH THE DIRECTORS OF THE ASSESSEE COMPANY. THUS THIS GROUND OF APPEAL OF THE REVENUE IS DISPOSED OF. 9. IN THE RESULT, APPEAL OF THE REVENUE IS PARTLY ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE COURT ON 3.2.2016 SD/- SD/- (D.MANMOHAN) (INTURI RAMA RAO) VICE PRESIDENT A CCOUNTANT MEMBER. DT/- 3 RD FEBRUARY, 2016 COPY FORWARDED TO: 1. M/S. RAYAPATI POWER GENERATION (P) LTD., 401 GEETHIKA TOWERS, BEGUMPET, HYDERABAD 2. DY. COMMISSIONER OF INCOME - TAX CIRCLE 3 ( 1 ), HYDERABAD 3. 4. COMMISSIONER OF INCOME - TAX(APPEALS ) IV , HYDERABAD PR. COMMISSIONER OF INCOME - TAX III , HYDERABAD 5. DEPARTMENTAL REPRESENTATIVE ITAT, HYDERABAD B.V.S.