Samyu Glass P Ltd., Hyderabad, Hyderabad V. ITO, Ward-3(1), Hyd, Hyderabad

ITA 1218/HYD/2015

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 2570 (ITAT-HYDERABAD)
• Duration Of Justice: 1 year(s) 6 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-04-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 04-04-2017
• Assessment Year: 2011-2012
• Appeal Filed On: 19-10-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: K J RAO
• Assessee Lawyers: P MURALI MOHAN RAO
• Keywords: Unexplained cash credit; Unexplained investment; Gift
• Section: 68

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCH B, HYDERABAD BEFORE SMT. P. MADHAVI DEVI, JUDICIAL MEMBER AND SHRI S. RIFAUR RAHMAN, ACCOUNTANT MEMBER ITA NO. 1218/HYD/2015 ASSESSMENT YEAR: 2011-12 M/S SAMYU GLASS (P) LTD., HYDERABAD. PAN AAMCS 1919D VS. INCOME-TAX OFFICER, WARD 3(1), HYDERABAD. (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI P. MURALI MOHAN RAO REVENUE BY : SHRI K.J. RAO DATE OF HEARING : 04-04-2017 DATE OF PRONOUNCEMENT : 26-04-2017 O R D E R PER S. RIFAUR RAHMAN, A.M.: THIS IS AN APPEAL OF THE ASSESSEE DIRECTED AGAINST THE ORDER OF THE LEARNED COMMISSIONER OF INCOME-TAX(A) - 3, HYDE RABAD, DATED 31- 08-2015 FOR AY 2011-12. 2. BRIEFLY THE FACTS OF THE CASE ARE THAT A SSESSEE COMPANY IS ENGAGED IN THE BUSINESS OF MANUFACTURING OF GLASS C ONTAINERS. IT FILED ITS RETURN OF INCOME FOR THE AY 2011-12 ON 30/09/20 11 ADMITTING A LOSS OF RS. 7,07,63,923/-. THE RETURN WAS PROCESSED U/S 143(1) OF THE ACT ON 07/01/2012 AND THE CASE WAS SELECTED FOR SCR UTINY AND NOTICE U/S 143(2) WAS ISSUED ON 25/09/2012. 2.1 DURING THE COURSE OF ASSESSMENT PROCEEDINGS, AO OBSERVED THAT AS PER THE BALANCE SHEET, TOTAL PAID UP SHARE CAPITAL IS RS. 21,70,70,941/-, WHEREAS AN AMOUNT OF RS. 3,38,16,00 0/- IS APPEARING 2 ITA NO. 1218/H/15 SAMYU GLASS (P) LTD., HYD. AS SHARE APPLICATION MONEY PENDING ALLOTMENT. OUT O F THIS, SHARE CAPITAL OF RS. 9,74,28,000/- AND SHARE APPLICATION MONEY OF RS. 2,97,11,000/- WAS RECEIVED DURING THE CURRENT AY. T HE ASSESSEE WAS ASKED TO PROVE THE GENUINENESS OF THE SHARE CAPITAL AND SHARE APPLICATION MONEY APPEARING IN BALANCE SHEET AS ON 31/03/2011. ASSESSEE FURNISHED DETAILS ALONG WITH THE CONFIRMAT ION LETTERS AND RELEVANT DOCUMENTS. ON VERIFICATION OF THE INFORMAT ION FURNISHED, AO OBSERVED THAT ASSESSEE FAILED TO PROVE GENUINENESS OF THE AMOUNTS RECEIVED FROM TWO INDIVIDUALS AS BELOW: 1. SMT. RAMA DEVI : STATED TO HAVE INVESTED AN AMOU NT OF RS. 64,30,000/- DURING THE YEAR. IN THE CONFIRMATION LE TTER SHE HAS STATED THAT THE AMOUNT WAS INVESTED OUT OF GIFT REC EIVED FROM HER BROTHER. HOWEVER, NO DOCUMENTARY EVIDENCE TO PR OVE GENUINENESS OF SUCH GIFT WAS FURNISHED. 2.2 AO OBSERVED FROM HER BANK STATEMENT THAT THE AM OUNTS WERE TRANSFERRED TO THE ACCOUNT IMMEDIATELY BEFORE MAKIN G THE INVESTMENT AND THE DETAILS OF DEPOSITS AND SOURCE FOR THE SAME WERE NOT FURNISHED. HENCE, AO ADDED THE ABOVE INVESTMENT AS UNEXPLAINED CASH CREDIT U/S 68 AS THE ASSESSEE FAILED TO PROVE THE CREDITWORTHINESS OF THE INVESTOR. 2. SMT. S. ANURADHA: STATED TO HAVE INVESTED AN AMO UNT OF RS. 16 LAKHS DURING THE YEAR. IN HER CONFIRMATION LETTE R, SHE HAS CONFIRMED THAT THE INVESTMENTS WERE OUT OF LOANS RE CEIVED FROM FRIENDS AND RELATIVES. HOWEVER, NO DOCUMENTARY EVID ENCE WAS FURNISHED TO PROVE SUCH LOANS. 2.3 AO OBSERVED THAT IN HER BANK STATEMENT THE AMOU NTS WERE TRANSFERRED INTO HER ACCOUNT IMMEDIATELY BEFORE MAK ING INVESTMENT. AO ADDED THE AMOUNT OF RS. 16 LAKHS AS UNEXPLAINED CREDIT U/S 68 BY OBSERVING THAT CREDITWORTHINESS OF THE INVESTOR WAS NOT ESTABLISHED. 3. AGGRIEVED WITH THE ABOVE ORDER, THE ASSESSEE PRE FERRED AN APPEAL BEFORE THE CIT(A). CIT(A) AFTER CONSIDERING THE SUBMISSIONS OF 3 ITA NO. 1218/H/15 SAMYU GLASS (P) LTD., HYD. THE ASSESSEE AS WELL AS CONSIDERING THE RELEVANT CO NFIRMATION LETTERS AND BANK STATEMENT SUBMITTED BY THE ASSESSEE, OBSER VED THAT ONE COME TO INEVITABLE CONCLUSION THAT BOTH THE PERSONS SMT. M. RAMA DEVI AND SMT. S. ANURADHA DO NOT HAVE CREDITWORTHIN ESS TO SUBSCRIBE TOWARDS CAPITAL OF RS. 64.30 LAKHS AND RS. 16 LAKHS RESPECTIVELY. HE FURTHER OBSERVED THAT A CAREFUL ANALYSIS OF THE ACC OUNTS REFLECT THAT, BUT, FOR THE CREDIT AND DEBITS OF AMOUNTS EQUIVALEN T TO SHARE SUBSCRIPTION, THERE ARE NO OTHER TRANSACTIONS. TAKI NG INTO ACCOUNT THE TOTALITY OF THE FACTS AND CIRCUMSTANCES OF THE CASE , THE CIT(A) HELD THAT THESE TWO SUBSCRIBERS ONLY HAVE LENT THEIR NAM E, BUT, DO NOT HAVE CREDITWORTHINESS TO SUBSCRIBE SUCH HUGE AMOUNTS. HE , THEREFORE, CONFIRMED THE ADDITION MADE BY THE AO OF RS. 80,30, 000/- FOLLOWING THE DECISIONS OF HONBLE AP HIGH COURT IN THE CASE OF RB MITTAL VS. CIT, 246 ITR 283 AND IN THE CASE OF CIT VS. LANCO I NDUSTRIES LTD, 242 ITR 359. 4. AGGRIEVED WITH THE ABOVE ORDER, THE ASSESSEE IS IN APPEAL BEFORE US RAISING THE FOLLOWING GROUNDS OF APPEAL: 1. THE LD. CIT (A) - 3, HYDERABAD ERRED BOTH IN LA W AND ON FACTS IN PARTLY ALLOWING THE APPEAL. 2. THE LD. CIT(A) ERRED IN SUSTAINING THE ADDITIONS TOWARDS UNEXPLAINED INVESTMENT IN SHARE CAPITAL OF RS.80,30 ,000 U/S 68 OF THE ACT, 1961. 3. THE LD. CIT(A) OUGHT TO HAVE DELETED THE ADDITIO NS U/S 68 APPRECIATING THE FACT THAT THE APPELLANT HAS SUBMIT TED THE CONFIRMATION LETTERS WITH PAN FROM THE PARTIES AND SHOWN THE GENUINENESS OF THE TRANSACTIONS. 4. THE LD. CIT(A) FAILED TO APPRECIATE THE FACT THA T WHEN THE TRANSACTIONS ARE THROUGH ACCOUNT PAYEE CHEQUE, THEN NO ADDITION COULD BE MADE U/S 68 OF THE ACT, 1961. 5. THE LD. CIT(A) OUGHT TO HAVE DELETED THE ADDITIO NS U/S. 68 OF THE ACT APPRECIATING THE DECISION OF APEX COURT IN THE CASE OF CIT VS LOVELY EXPORTS (P) LTD (2008) 216 CTR 195 (S C). 4 ITA NO. 1218/H/15 SAMYU GLASS (P) LTD., HYD. 6. THE APPELLANT MAY, ADD OR ALTER OR AMEND OR MODI FY OR SUBSTITUTE OR DELETE AND/ OR RESCIND ALL OR ANY OF THE GROUNDS OF APPEAL AT ANY TIME BEFORE OR AT THE TIME OF HEARING OF THE APPEAL. 5. LD. AR SUBMITTED THAT ASSESSEE HAS SUBMITTED CON FIRMATION LETTERS WITH PAN AND BANK STATEMENTS BEFORE THE CI T(A) AND AO. HE, THEREFORE, SUBMITTED THAT ASSESSEE HAS DISCHARGED I TS ONUS BY SUBMITTING THE ABOVE DOCUMENTS AND ESTABLISHED THE GENUINENESS OF THE TRANSACTION AND CREDITWORTHINESS OF THE SUBSCRI BERS. HE FURTHER SUBMITTED THAT ALL THE TRANSACTIONS ARE THROUGH PRO PER BANKING CHANNELS ONLY AND CIT(A) SHOULD HAVE CONSIDERED THI S ASPECT. LD. AR SUBMITTED THAT THE SUBSCRIBERS HAVE RECEIVED GIFTS FROM HER BROTHER IN ONE CASE AND LOANS FROM RELATIVES IN ANOTHER CASE. HE SUBMITTED THAT AS LONG AS THE ASSESSEE HAS PROVED THE SOURCE FOR T HE SUBSCRIPTION, IT NEED NOT HAVE TO SUBSTANTIATE THE SOURCE OF THE SOU RCE. HE SUBMITTED THAT, IN CASE, THE DEPARTMENT HAS ISSUES WITH THE C REDITWORTHINESS OF THE INVESTORS, THEY CAN VERY WELL PROCEED TO REOPEN INDIVIDUAL ASSESSMENTS IN THE HANDS OF INVESTORS RATHER THAN M AKING ADDITION IN THE HANDS OF ASSESSEE. LD. AR FINALLY SUBMITTED THA T ASSESSEE COMPANY HAS ALREADY ISSUED SHARE CAPITAL TO THE INV ESTORS, HENCE, IT PROVED TO BE A GENUINE TRANSACTION. HE RELIED ON TH E DECISION IN THE CASE OF CIT VS. LOVELY EXPORTS (P) LTD., [2008] 216 CTR 195 (SC). HE FURTHER RELIED ON THE FOLLOWING CASES: 1. CIT VS. ORISSA CORPORATION PVT. LTD., 159 ITR 7 8 (SC) 2. DCIT VS. ROHONO BUILDERS, 127 TAXMAN 523 (GUJ) 3. CIT VS. LANCO INDUSTRIES LTD., 242 ITR 357. 6. THE LD. DR, ON THE OTHER HAND, SUBMITTED THAT ME RE SUBMISSION OF CONFIRMATION LETTERS AND BANK DETAILS ARE NOT EN OUGH AS ASSESSEE HAS TO PROVE CREDITWORTHINESS OF THE INDIVIDUAL INV ESTORS AND GENUINENESS OF THE TRANSACTIONS. FOR THIS PROPOSITI ON, HE RELIED ON THE FOLLOWING CASES: 5 ITA NO. 1218/H/15 SAMYU GLASS (P) LTD., HYD. 1. CIT VS. NOVA PROMOTERS & FINLEASE (P) LTD., ITA NO. 342 OF 2011, ORDER DATED FEBRUARY, 15, 2012. 2. CIT VS. N TARIKA PROPERTIES INVESTMENT, ITA NO. 2080 OF 2010, ORDER DATED 28 TH NOVEMBER, 2013. 7. CONSIDERED THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL FACTS ON RECORD AS WELL AS THE DECISIONS CITED. THE AO HA S MADE THE ADDITION ON THE GROUND THAT THE ASSESSEE HAS NOT PR OVED THE GENUINENESS OF THE TRANSACTIONS ON ACCOUNT OF INVES TMENT IN SHARE CAPITAL BY SMT. M. RAMA DEVI AND SMT. S. ANURADHA. WHEREAS LD. AR SUBMITTED THAT THE ASSESSEE HAS SUBMITTED CONFIR MATION LETTERS, AND BANK STATEMENTS, OF INVESTORS BEFORE THE REVE NUE AUTHORITIES, THEREFORE, THE ASSESSEE HAS DISCHARGED THE ONUS OF PROVING GENUINENESS OF TRANSACTION AND CREDITWORTHINESS OF THE INVESTORS. LD AR ALSO SUBMITTED THAT THE ASSESSEE HAS ALLOTTED SH ARE CAPITAL TO THE INVESTORS, WHICH ESTABLISHES THAT THE TRANSACTION I S GENUINE. HE ALSO SUBMITTED THAT THE TRANSACTIONS WERE THROUGH BANKIN G CHANNELS. ON THE OTHER HAND, LD. DR RELIED ON THE DECISION OF HO NBLE DELHI HIGH COURT IN THE CASE OF CIT VS. N. TARIKA PROPERTIES I NVESTMENT (SUPRA). IN THAT CASE THE ASSESSEE HAS SUBMITTED THE PAN DET AILS, INCORPORATION DETAILS ALONG WITH FABRICATED BANK ST ATEMENT. THIS FACT WAS UNEARTHED BY THE AUTHORITIES AND IT WAS CLEARLY ESTABLISHED THAT THE ASSESSEE HAS MISLEAD THE AUTHORITIES. BUT IN TH E PRESENT CASE, THE BANK STATEMENT SUBMITTED WAS PROPER AND NO SUCH IRR EGULARITIES WERE NOTICED. HENCE, THE ASSESSEE HAS CLEARLY ESTABLISHE D THE GENUINENESS OF THE TRANSACTION. COMING TO THE CASE OF NOVA PROMOTERS (SUPRA), THE AO HAS ESTABLISHED LINK BETW EEN THE ENTRY PROVIDERS AND THE ASSESSEE COMPANY AND ALSO PROVIDE D THE STATEMENTS OF ENTRY PROVIDERS WHO HAVE ACCEPTED INV OLVING IN SUCH ACTIVITIES. BUT, IN THE PRESENT CASE, NO SUCH FINDI NGS WERE ESTABLISHED. THE ASSESSEE HAS CONFIRMED THE INVESTMENT BY SUBMIT TING THE CONFIRMATION LETTERS FROM THE INVESTORS ALONG WITH THEIR BANK STATEMENT. THE AO IS NOT HAPPY WITH THE SOURCES OF THE INVESTORS BUT 6 ITA NO. 1218/H/15 SAMYU GLASS (P) LTD., HYD. DIRECT SOURCE OF INVESTMENT IS CLEARLY ESTABLISHED BY THE ASSESSEE. IN OUR CONSIDERED VIEW, THE ASSESSEE HAS CLEARLY DISCH ARGED ITS PART OF OBLIGATION TO ESTABLISH THE GENUINENESS OF THE TRAN SACTION. NOW, AO IS NOT HAPPY WITH THE SOURCE OF THE SOURCE. THE REVENU E IS FREE TO GO BEHIND THE INVESTORS AND REOPEN THEIR CASES AS THEY HAVE VOLUNTARILY AND WILLINGLY CONFIRMED THE INVESTMENT. IN OUR CONS IDERED VIEW, THE ASSESSEE NEED NOT HAVE TO PROVE THE SOURCE OF THE S OURCE AND HENCE, ASSESSEE HAS ESTABLISHED THE GENUINENESS OF THE TRA NSACTION AND ADDITION U/S 68 CANNOT BE INVOKED. ACCORDINGLY, GRO UND RAISED BY THE ASSESSEE IN THIS REGARD IS ALLOWED. 8. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWED . PRONOUNCED IN THE OPEN COURT ON 26 TH APRIL, 2017. SD/- SD/- (P. MADHAVI DEVI) (S. RIFAUR RA HMAN) JUDICIAL MEMBER AC COUNTANT MEMBER HYDERABAD, DATED: 26 TH APRIL, 2017. KV COPY TO:- 1) M/S SAMYU GLASS (P) LTD., C/O P. MURALI & CO., C AS, 6-3-655/2/3, 1 ST FLOOR, SOMAJIGUDA, HYDERABAD 82.. 2) IT), WARD 3(1), HYDERABAD. 3) CIT(A) - 2, HYDERABAD 4 PR. CIT - 3, HYDERABAD 5) THE DEPARTMENTAL REPRESENTATIVE, I.T.A.T., HYDE RABAD. 6) GUARD FILE