Dy. Commissioner of Income Tax, Circle-3(2), Hyderabad V. Sri Lakshmi Kantha Spinners Limited, Hyderabad

ITA 1003/Hyd/2017

• Counselvise Citation: [2018] 125 COUNSELVISE.COM (IT) 0630 (ITAT-HYDERABAD)
• Duration Of Justice: 1 year(s) 3 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-09-2018
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 05-09-2018
• Assessment Year: 2012-2013
• Appeal Filed On: 12-06-2017
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: DIPAK RIPOTE
• Assessee Lawyers: N NARASIMHA RAO
• Keywords: Income from undisclosed sources
• Section: 143(3); 115JB; 68

Judgement Text

ITA NO 1003 OF 2017 SRI LAKSHMI KAN THA SPINNERS LTD HYDERABAD. PAGE 1 OF 5 IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD A BENCH, HYDERABAD BEFORE SMT. P. MADHAVI DEVI, JUDICIAL MEMBER AND SHRI S.RIFAUR RAHMAN, ACCOUNTANT MEMBER ITA NO.1003/HYD/2017 (ASSESSMENT YEAR: 2012-13) DY. COMMISSIONER OF INCOME TAX, CIRCLE 3(2) HYDERABAD VS M/S. SRI LAKSHMI KANTHA SPINNERS LTD HYDERABAD PAN: AAICS7409N (APPELLANT) (RESPONDENT) FOR REVENUE : SHRI DIPAK RIPOTE, DR FOR ASSESSEE : SHRI N. NARA SIMHA RAO O R D E R PER SMT. P. MADHAVI DEVI, J.M. THIS IS REVENUES APPEAL FOR THE A.Y 2012-13 AGAINS T THE ORDER OF THE CIT (A)-3, HYDERABAD, DATED 11.04. 2017. THE REVENUE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL: 1. THE LEARNED CIT (A) ERRED BOTH IN LAW AND ON FA CTS OF THE CASE. 2. THE LEARNED CIT (A) ERRED IN DELETING THE ADDITI ON OF RS.14,84,52,240/-. 3. THE LEARNED CIT (A) FAILED TO APPRECIATE THAT TH E NATURE OF EVIDENCE FURNISHED BY ASSESSEE DOES NOT SATISFY THE CONDITIONS LAID DOWN U/S 68 OF THE I.T. ACT, 1961. 4. THE LEARNED CIT (A) DID NOT GIVE PROPER FINDINGS FOR ALLOWING RELIEF. 5. ANY OTHER GROUND(S) THAT MAY BE URGED AT THE TIM E OF HEARING. DATE OF HEARING: 05.09 . 201 8 DATE OF PRONOUNCEMENT: 12.09.2018 ITA NO 1003 OF 2017 SRI LAKSHMI KAN THA SPINNERS LTD HYDERABAD. PAGE 2 OF 5 2. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE CO MPANY ENGAGED IN THE BUSINESS OF MANUFACTURING OF COTTON YARN, FILED ITS RETURN OF INCOME FOR THE A.Y 2012-13 ON 27.09.2012 DECLARING TOTAL INCOME OF RS.85,43,403/- UNDER THE NORMAL PRO VISIONS OF THE ACT AND A BOOK PROFIT OF RS.70,31,811 U/S 115JB OF THE I.T. ACT. DURING THE ASSESSMENT PROCEEDINGS U/S 143(3) OF THE ACT, THE AO OBSERVED THAT THERE IS AN INCREASE IN SHARE CAPITAL OF THE ASSESSEE BY RS.29,36,16,000 WHICH INCLUDES AN AMOUNT OF RS.4 ,47,68,760 WHICH WAS CONVERTED FROM THE BROUGHT FORWARD SHARE APPLICATION MONEY. THE BALANCE AMOUNT OF RS.24,58,47,240 WAS FO UND TO HAVE BEEN RECEIVED DURING THE YEAR AS FRESH SHARE C APITAL. THE ASSESSEE WAS, THEREFORE, ASKED TO FURNISH THE COMPL ETE DETAILS INCLUDING THE NAME, ADDRESS, PAN NOS. ETC., OF THE PERSONS WHO HAVE BEEN CONTRIBUTED FOR THE CAPITAL OF THE COMPAN Y. THE ASSESSEE SUBMITTED BASIC DETAILS AND THE AO OBSERVE D THAT A SUM OF RS.24,58,47,240 WAS RECEIVED FROM 416 PERSONS OU T OF WHICH AN AMOUNT OF RS.9,73,95,000 WAS RECEIVED FROM THREE COMPANIES WHILE THE BALANCE WAS RECEIVED FROM 413 PERSONS ALL OF WHOM ARE ALLEGEDLY AGRICULTURISTS. THE AO THEREFORE, ASKED T HE ASSESSEE TO FURNISH DETAILS OF THE NAMES AND ADDRESSES, DATE AN D MODE OF PAYMENT, SOURCE OF INCOME, COPY OF THE RETURN OF IN COME, COPY OF THE BANK A/C STATEMENTS OF THE PERSONS WHO HAVE BEE N CONTRIBUTED FOR THE SHARE CAPITAL. IN REPLY, THE AS SESSEE HAS FILED CONFIRMATION LETTERS IN SOME CASES AND SUBMITTED TH AT MAJORITY OF THE SHAREHOLDERS ARE AGRICULTURISTS AND ARE NOT ASS ESSED TO INCOME TAX AND THEIR INVESTMENTS ARE MADE OUT OF TH E AGRICULTURAL INCOME AND SAVINGS. ITA NO 1003 OF 2017 SRI LAKSHMI KAN THA SPINNERS LTD HYDERABAD. PAGE 3 OF 5 3. THE AO VERIFIED THE CONFIRMATION LETTERS AND OBS ERVED THAT MOST OF THE SUBSCRIBERS HAVE STATED THAT THEY ARE OWNING AGRICULTURAL LAND, BUT DID NOT ADDUCE ANY PROOF OF THE OWNERSHIP OF THE AGRICULTURAL LANDS LIKE PATTADAR PASSBOOKS O R ANY CERTIFICATE FROM THE LOCAL REVENUE AUTHORITIES CONFIRMING THE Y IELD GENERATED OUT OF SUCH AGRICULTURAL LANDS AND HAVE ALSO NOT SP ECIFIED THE MODE OF PAYMENT I.E. WHETHER BY CHEQUE/CASH/D.D AND THE DATE OF INVESTMENTS. THE AO ALSO OBSERVED THAT THE PROOF OF IDENTITY OF THESE PERSONS WERE ALSO NOT FILED. HE ALSO FOUND CE RTAIN DISCREPANCIES IN THE SIGNATURES OF THE PARTIES. IN VIEW OF THE SAME, THE AO WAS OF THE OPINION THAT THE IDENTITY AND CRE DITWORTHINESS OF THE PARTIES IS NOT PROVED. THEREFORE, HE TREATED THE CREDITS OF RS.14,84,52,240 AS INCOME FROM UNDISCLOSED SOURCES OF INVESTMENTS AND BROUGHT IT TO TAX. AGGRIEVED, THE A SSESSEE PREFERRED AN APPEAL BEFORE THE CIT (A) AND SUBMITTE D THAT HE COULD NOT PRODUCE ADEQUATE EVIDENCE TO THE AO AS TH E MANAGING DIRECTOR OF THE COMPANY WAS SUFFERING FROM SEVERE S PONDYLITIS AND REQUESTED FOR ONE MORE OPPORTUNITY FOR SUBMISSION O F SOURCES OF THE SHARE CAPITAL. THE CIT (A), THEREFORE, ALLOWED THE ASSESSEE TO FURNISH THE INFORMATION AND CALLED FOR A REMAND REP ORT FROM THE AO. THE AO, IN HIS REMAND PROCEEDINGS, RANDOMLY PIC KED UP 10 PERSONS OUT OF 413 PERSONS AND ASKED THE ASSESSEE T O PRODUCE THOSE PERSONS TO EXAMINE THE GENUINENESS OF SHARE A PPLICATION MONEY ALLEGEDLY INVESTED BY THEM. THE SAID PERSONS AND OTHER SEVEN PERSONS WERE ALSO PRODUCED ALONG WITH THEIR I D PROOF, PATTADAR PASS BOOK AS PROOF OF OWNING AGRICULTURAL LAND. THE AO ALSO RECORDED THE STATEMENTS OF SUCH SHAREHOLDERS A ND SUBMITTED HIS REPORT ON 28.03.2017 RECORDING THAT THE CREDITW ORTHINESS OF THESE SHAREHOLDERS WAS SATISFACTORILY EXPLAINED. TA KING THE SAME ITA NO 1003 OF 2017 SRI LAKSHMI KAN THA SPINNERS LTD HYDERABAD. PAGE 4 OF 5 INTO CONSIDERATION, THE CIT (A) DELETED THE ADDITIO NS MADE BY THE AO ON ACCOUNT OF ALL OTHER SHAREHOLDERS AS WELL. AG GRIEVED, THE REVENUE IS IN APPEAL BEFORE US. 4. THE LEARNED DR SUBMITTED THAT THOUGH THERE ARE 4 13 SHAREHOLDERS, THE AO HAS EXAMINED ONLY 10 PERSONS A ND HAS GIVEN REPORT THAT HE WAS SATISFIED ABOUT THE CREDIT WORTHINESS OF THESE TEN PERSONS ONLY AND THEREFORE, THE CIT (A) H AS ERRED IN HOLDING THAT THE ASSESSEE HAS EXPLAINED THE SOURCES AND ALSO THE GENUINENESS AND CREDITWORTHINESS OF ALL THE SHAREHO LDERS. HE SUBMITTED THAT THE ONUS WAS ON THE ASSESSEE TO PROV E THE CREDITWORTHINESS OF THE INVESTORS AND GENUINENESS O F THE TRANSACTION AND AS BROUGHT OUT BY THE AO, THE SIGNA TURES OF MOST OF THE PARTIES WERE SIMILAR AND THEIR IDENTITY AND CREDITWORTHINESS HAS NOT BEEN PROVED EVEN DURING THE REMAND PROCEEDI NGS. 5. THE LEARNED COUNSEL FOR THE ASSESSEE, ON THE OTH ER HAND, SUPPORTED THE ORDERS OF THE CIT (A). 6. HAVING REGARD TO THE RIVAL CONTENTIONS AND THE M ATERIAL ON RECORD, WE FIND THAT THE ASSESSEE HAS FILED CONF IRMATION LETTERS OF ALL THE 413 PERSONS AND DURING THE REMAND PROCEE DINGS ALSO, THE AO WAS DIRECTED TO VERIFY THE IDENTITY, CREDITW ORTHINESS AND GENUINENESS OF THE TRANSACTIONS. IT WAS THE DECISIO N OF THE AO TO PICK UP ONLY 10 PERSONS OUT OF 413 PERSONS AND THE ASSESSEE PRODUCED NOT ONLY THESE 10 PERSONS BUT ALSO PRODUCE D 7 MORE SHAREHOLDERS. AS SEEN FROM THE REMAND REPORT REPROD UCED BY THE CIT (A) IN PARA 3 OF HIS ORDER, THE AO WAS SATISFIE D ABOUT THE ITA NO 1003 OF 2017 SRI LAKSHMI KAN THA SPINNERS LTD HYDERABAD. PAGE 5 OF 5 CREDITWORTHINESS OF THESE SHAREHOLDERS FOR INVESTME NT IN THE ASSESSEES COMPANY. THOUGH THE AO HAS NOT MADE ANY ADVERSE COMMENTS ON THE ACCEPTANCE OR OTHERWISE OF OTHER 40 0 PEOPLE AS SHAREHOLDERS, WE FIND THAT THE AO HAS ALSO NOT GIVE N THE BREAKUP OF THE INVESTMENT MADE BY THE 10 PERSONS OR THE PER CENTAGE OF INVESTMENT WHICH HAS BEEN PROVED BY THE ASSESSEE TO ACCEPT THE ENTIRE INVESTMENT AS GENUINE. THEREFORE, WE ARE OF THE OPINION THAT DELETING THE ENTIRE ADDITIONS ON THE BASIS OF FEW SAMPLE SHAREHOLDERS IS NOT CORRECT. THEREFORE, WE DEEM IT FIT AND PROPER TO REMAND THE ISSUE TO THE FILE OF THE AO WITH A DIREC TION TO VERIFY THE INVESTMENTS ATLEAST TO THE TUNE OF 25% TO 50% AND F INDINGS ON SUCH MATERIAL MAY BE ADOPTED FOR COMING TO ANY CONC LUSION. 7. IN THE RESULT, REVENUES APPEAL IS TREATED AS AL LOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 12 TH SEPTEMBER, 2018. SD/- SD/- (S.RIFAUR RAHMAN) ACCOUNTANT MEMBER (P. MADHAVI DEVI) JUDICIAL MEMBER HYDERABAD, DATED 12 TH SEPTEMBER, 2018. VINODAN/SPS COPY TO: 1 DY. CIT, CIRCLE 3(2), 7 TH FLOOR, SIGNATURE TOWERS, KONDAPUR, HYDERABAD 2 M/S. SRI LAKSHMI KANTHA SPINNERS LTD, VILLA NO.18 6, INDU FORTUNE FIELDS, KPHB 13 TH PHASE, KUKATAPALLY, HYDERABAD 500072 3 CIT (A)-3 HYDERABAD 4 PR. CIT 3 HYDERABAD 5 THE DR, ITAT HYDERABAD 6 GUARD FILE BY ORDER