Sri Laxmi Narasimha Prestressed Concrete Pipes Pvt Ltd, Hyderabad V. DCIT., Circle-1, Warangal

ITA 1411/HYD/2014

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 2543 (ITAT-HYDERABAD)
• Duration Of Justice: 3 year(s) 1 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-09-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 05-06-2017
• Assessment Year: 2005-2006
• Appeal Filed On: 22-08-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: N SWAPNA
• Assessee Lawyers: A V RAGHURAM
• Keywords: Opportunity of being heard; Additional evidence
• Section: 142(1); 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 NOS. 1411/HYD/2014 AND ITA NO. 470/HYD/2017 ASSESSMENT YEAR: 2005-06 M/S SRI LAXMI NARASIMHA PRESTRESSED CONCRETE PIPES PVT. LTD., WARANGAL. PAN AAACL 9977 E VS. DY. COMMISSIONER OF INCOME- TAX, WARANGAL. (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI A.V. RAGHURAM REVENUE BY : SMT. N. SWAPNA DATE OF HEARING : 22-09-2017 DATE OF PRONOUNCEMENT : 29-09-2017 O R D E R PER S. RIFAUR RAHMAN, A.M.: BOTH THESE APPEALS ARE BY THE ASSESSEE FOR AY 2005 -06. APPEAL IN ITA NO. 1411/HYD/2014 IS DIRECTED AGAINST THE OR DER OF THE LEARNED COMMISSIONER OF INCOME-TAX (A) - 18, MUMBAI DATED 24/03/2014. APPEAL IN ITA NO. 470/HYD/2017 IS DIRECTED AGAINST THE ORDER OF CIT(A) 3, HYDERABAD WHEREBY HE CONFIRMED THE PENA LTY LEVIED BY THE AO U/S 271(1)(C) OF THE ACT. ITA NO. 1411/HYD/2014 2. BRIEFLY THE FACTS OF THE CASE ARE, ASSESSEE FILE D ITS RETURN OF INCOME FOR THE AY 2005-06 ON 30/10/2005 DECLARING L OSS OF RS. 12,367,660/-. THE RETURN WAS PROCESSED U/S 143(1) O F THE INCOME-TAX ACT, 1961 ( IN SHORT THE ACT). THE CASE WAS SELEC TED FOR SCRUTINY AND 2 ITA NO. 1411/H/14 & 470/HYD/17 SRI LAXMI NARASIMHA PRESTRESSED CONCRETE PIPES LTD. NOTICES U/S 143(2) AND 142(1) WERE ISSUED. DURING T HE ASSESSMENT PROCEEDINGS, AO NOTICED THAT ASSESSEE HAD RECEIVED SHARE APPLICATION MONEY TO THE EXTENT OF RS. 79,00,000/- DURING THIS YEAR. ASSESSEE WAS ASKED TO PRODUCE DETAILS OF BREAK UP O F SHARE APPLICATION MONEY RECEIVED, NAMES AND ADDRESSES OF THE SHARE APPLICANTS, AMOUNTS INVESTED, CONFIRMATION LETTER E TC. FROM THE SHARE APPLICANTS. ASSESSEE HAD FURNISHED DETAILS OF SHAR E APPLICATION MONEY RECEIVED BUT DID NOT FILE ANY CONFIRMATION LE TTERS FROM THE PARTIES. THERE WERE 30 INVESTORS, FOR WHICH, AO SEN T LETTERS TO THE INDIVIDUAL INVESTORS FOR SEEKING THE DETAILS ABOVT INVESTMENT. SINCE NO INVESTOR HAD RESPONDED TO THE ABOVE LETTERS AND ALS O THERE WAS NO NO COMPLIANCE FROM THE ASSESSEE, AO CONFIRMED THE ADDI TION U/S 68 OF THE ACT. 3. AGGRIEVED WITH THE ABOVE ORDER, ASSESSEE PREFERR ED AN APPAL BEFORE CIT(A) AND THE CIT(A) REMANDED THE MATTER BA CK TO THE FILE OF THE AO FOR FRESH CONSIDERATION. AO HAD SUBMITTED HI S REPORT ON 28/01/2014, WHICH WAS REPRODUCED BELOW FOR THE SAKE OF CLARITY: 3) THE MATTER HAS BEEN EXAMINED AFRESH AND IT IS TO MENTION THAT NO FURTHER INFORMATION IS FORTHCOMING APART FR OM NAME AND CURRENT ADDRESS OF THE SHARE APPLICANTS. 4) OUT OF THE TOTAL 30 SHARE APPLICANTS, THE SWORN STATEMENT OF 16 APPLICANTS ARE AVAILABLE ON THE RECORD AS UNDER: . A COPY OF THE SAME IS ALSO ENCLOSED HEREWITH. S.NO. NAME OF SHARE APPLICANT INVESTMENT MADE AY S.NO. IN THE LIST OF SHARE APPLICANTS 1 A. DEVENDER REDDY 2,00,000/- 2005-06 1 2 A. SAVITRI 2,00,000/- 2005-06 4 3 T. SRIMATHI 2,00,000/- 2005-06 30 4 A. SRIDHAR REDDY 3,00,000/- 2005-06 5 5 A. SUNITA 2,00,000/- 2005-06 6 6 C. SUJATHA 4,00,000/- 2005-06 12 7 C. SRIDHAR REDDY 2,00,000/- 2005-06 14 8 D. KISHAN REDDY 2,00,000/- 2005-06 15 9 D. MALLA REDDY 4,00,000/- 2005-06 16 10 D. RAJSEKHAR REDDY 3,00,000/- 2005-06 17 11 G. SHASHIKALA 4,00,000/- 2005-06 18 3 ITA NO. 1411/H/14 & 470/HYD/17 SRI LAXMI NARASIMHA PRESTRESSED CONCRETE PIPES LTD. 12 G. SRILATHA 2,00,000/- 2005-06 19 13 G. SRINIVAS REDDY 2,50,000/- 2005-06 20 14 G. UMA 3,00,000/- 2005-06 21 15 G. VENUMADHAVA REDDY 3,00,000/- 2005-06 22 16 K. PUSHPALATHA 5,00,000/- 2005-06 23 45,50,000/- 5) FURTHER, IN THE FOLLOWING 11 CASES, CONFIRMATION S HAVE BEEN RECEIVED FROM THE RESPECTIVE AOS. A COPY OF THE SAM E IS ENCLOSED FOR REFERENCE: S. NO. NAME OF SHARE APPLICANT INVEST- MENT MADE MODE OF PAYM- ENT AY S.NO. IN THE LIST OF SHARE APPLICANTS 1 B. PRABHAKAR REDDY 3,00,000/- CHEQUE 05-06 10 2 B. SAVITHA 3,00,000/- CASH/ CHEQUE 05-06 13 1 LAKH CASH, 2 LAKHS CHEQUE 3 B. KAUSHALYA 3,40,000/- CASH 05-06 9 4 B. SWARNALATHA 60,000/- CASH 05-06 11 5 B. JAYPAL REDDY 5,50,000/- CASH/ CHEQUE 05-06 8 1.75LAKHS CASH, 3.75 LAKHS CHEQUE 6 A. SANDEEP REDDY 2,00,000/- CASH 05-06 3 7 A. MANOHAR REDDY 2,00,000/- * CASH 05-06 2 AO CONFIRMED FOR RS. 1 LAKH 8 K. VIDYA SAGAR REDDY 50,000/- CASH 05-06 25 9 K. SRILATHA 1,50,000/- CASH 05-06 24 10 M. SAMATHA REDDY 3,00,000/- CASH 05-06 27 11 ALETI SWAYAM PRABHA 2,00,000/- * CASH 05-06 11 AO CONFIRMED PARTIALLY (BASED ON RETURN FOR AY 06-07) TOTAL 26,50,000/ - 6) REGARDING REMAINING 3 APPLICANTS WHICH ARE MENTI ONED AS UNDER, NO SWORN STATEMENT OR CONFIRMATION FROM THE RESPECTIVE AOS ARE AVAILABLE ON RECORD. ON ENQUIRING WITH THE AR OF THE ASSESSEE, IT IS LEARNT THAT THESE PERSONS ARE PRESE NTLY STAYING ABROAD/UNAVAILABLE. IN ABSENCE OF ANY CONFIRMATION OR SWORN STATEMENT, THE INVESTMENT MADE BY THESE APPLICANTS ARE NOT VERIFIABLE. 4 ITA NO. 1411/H/14 & 470/HYD/17 SRI LAXMI NARASIMHA PRESTRESSED CONCRETE PIPES LTD. S. NO. NAME OF SHARE APPLICANT INVESTMENT MADE MODE OF PAYMEN T AY S.NO. IN THE LIST OF SHARE APPLICANTS 1 M. PADMA 1,50,000/- CASH 05-06 26 2 M. VAMSHIDHAR 1,50,000/- CASH 05-06 28 3 P. INDRASENA REDDY 4,00,000/- CASH 05-06 29 TOTAL 7,00,000/- 3.1 THE ABOVE REPORT ALSO FORWARDED TO ASSESSEE FOR HIS COMMENTS, FOR WHICH, ASSESSEE HAD REPLIED AS UNDER: 1. IN THE REMAND REPORT IN PARA 4 IT IS STATED THAT SWORN STATEMENT OF ONLY 16 APPLICANTS ARE AVAILABLE. NO C ONFIRMATIONS WERE RECEIVED FROM THE ASSESSING OFFICERS. 2. IN THE REMAND REPORT IN PARA 5 IT IS STATED THAT FOR ANOTHER 11 APPLICANTS, CONFIRMATIONS WERE RECEIVED FROM THE AS SESSING OFFICERS. 3. IN THE REMAND REPORT IN PARA 6 IT IS STATED THAT REMAINING 3 APPLICANTS ARE STAYING ABROAD AND THEIR SWORN STATE MENTS OR CONFIRMATION FROM AO ARE NOT AVAILABLE ON RECORD. I. BEFORE THE COMMISSIONER OF INCOME TAX(APPEALS) W E FILED ADDITIONAL EVIDENCE, WHICH ARE NOTHING ELSE BUT, 1. AFFIDAVITS FROM THE APPLICANTS CONFIRMING THE INVESTMENT MADE AS SHARE APPLICATION MONEY, 2. THEIR INCOME TAX RETURNS, SHO WING THE INVESTMENT IN THE BALANCE SHEET, 3. REPLY TO THE LE TTER ORIGINALLY SENT BY THE ASSESSING OFFICER W.R.T. INVESTMENTS IN THE COMPANY, 4. EVIDENCE FOR SOURCE OF INVESTMENT ETC., II. APPLICANTS PERSONALLY APPEARED BEFORE THE ASSES SING OFFICER AND GAVE SWORN STATEMENTS, WHEREIN THEY HAVE ACCEPT ED THE INVESTMENT MADE BY THEM AND CONFIRMED THE SAME. III. EXCEPT 3 PERSONS, WHO ARE ABROAD, REST ALL GAV E THE DETAILS AND APPEARED BEFORE THE ASSESSING OFFICER. IV. DOCUMENTARY EVIDENCE WAS PLACED ON RECORD TO PR OVE THE IDENTITY OF ALL THE SHAREHOLDERS INCLUDING THEIR PA N/GIR NUMBERS AND COPIES OF THE INCOME TAX RETURNS FILED AND OTHE R DOCUMENTARY EVIDENCE WITH REGARD TO THE INVESTMENT. V. WE ALSO SUBMIT THAT THIS IS THE FIRST YEAR OF CO MPANY AND THE AMOUNT INVESTED BY SHARE HOLDERS WAS COLLECTED TO S TART THE COMPANY. IN THE FIRST YEAR THE COMPANY FILED ITS RE TURN OF INCOME DECLARING A LOSS OF RS.12,37,660/-. HAD THE COMPANY WAS IN EXISTENCE FOR QUITE A LONG TIME, IT CAN BE ASSUMED THAT THE INVESTMENTS ARE OUT OF UNEXPLAINED SOURCES, BUT HER E IT IS THE 5 ITA NO. 1411/H/14 & 470/HYD/17 SRI LAXMI NARASIMHA PRESTRESSED CONCRETE PIPES LTD. FIRST YEAR OF BUSINESS OF THE COMPANY AND THE INVES TMENT WAS MADE FOR ACQUIRING THE ASSETS. WE ALSO HEREUNDER GIVEN SOME CASE LAWS WITH SIMILAR ISSUES WHERE THE DECISIONS WERE GIVEN IN FAVOUR OF ASSESSE E. CIT VS. DIVINE LEASING & FINANCE (SUPREME COURT) 29 9 ITR 268 [ITA NO. 53/2005] COMMISSIONER OF INCOME TAX VS. LOVELY EXPORTS (P) LTD. (SUPREME COURT) (2008) 216 CTR 195 (SC) [ITA NO. 95 3/2006] COMMISSIONER OF INCOME TAX VS VICTOR ELECTRODES LTD (DELHI HIGH COURT) [ITA NO. 586/2010] OASIS HOSPITALITIES (PVT.) LTD. VS. CIT (DELHI HIGH COURT) (2011) 333 ITRL19 (DEL) (ITA NO. 2093 OF 2010] 3.2 HOWEVER, THE CIT(A) AFTER CONSIDERING THE REMAN D REPORT AND ASSESSEES REPLY, CONFIRMED THE ADDITION U/S 68 BY OBSERVING THAT AS PER THE PROVISIONS OF SECTION 68 OF THE ACT, THE ON US IS ALWAYS ON THE ASSESSEE TO SUBMIT COMPLETE EVIDENCE BEFORE THE AO, BUT, IN THE PRESENT CASE, NO EVIDENCE TO PROVE THE IDENTITY, CR EDITWORTHINESS AND GENUINENESS OF THE TRANSACTION, HAS BEEN FILED. HO WEVER, DURING THE REMAND PROCEEDINGS, SOME CONFIRMATIONS WERE FILED, WHICH WERE NOT ACCOMPANIED BY ANY DOCUMENTARY EVIDENCE I.E. COPY O F IT RETURN, BANK STATEMENT AND MODE OF PAYMENT ETC. ACCORDINGLY , CIT(A) HAD CONFIRMED THE ADDITION BY RELYING ON THE JUDGEMENT OF THE HONBLE SUPREME COURT IN THE CASE OF ROSHAN D. HATTI. 4. AGGRIEVED BY THE ORDER OF CIT(A), THE ASSESSEE I S IN APPEAL BEFORE US RAISING THE FOLLOWING GROUNDS OF APPEAL: 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS)-VI, HYD ERABAD, DISMISSING THE APPEAL IS ERRONEOUS AND UNSUSTAINABL E. THE CIT (A) OUGHT TO HAVE ALLOWED THE APPEAL. 2. THE COMMISSIONER (APPEALS) ERRED IN SUSTAINING T HE ADDITION OF RS.79,00,000/- MADE BY THE ASSESSING OFFICER. TH E COMMISSIONER (APPEALS) FAILED TO APPRECIATE THE FAC T THAT THE APPELLANT COMPANY HAD FILED ADDITIONAL EVIDENCE, CO NNECTED TO ALL THE SHARE HOLDERS, WHERE IN THE DETAILS OF THE ALL THE 6 ITA NO. 1411/H/14 & 470/HYD/17 SRI LAXMI NARASIMHA PRESTRESSED CONCRETE PIPES LTD. SHAREHOLDERS, THEIR INCOME TAX RETURNS, CONFIRMATIO N LETTERS AND AFFIDAVITS WITH REGARD TO THE INVESTMENTS MADE BY T HEM WERE GIVEN. THESE ARE CONNECTED TO THEIR IDENTITY, SOURC E OF INVESTMENT ETC. 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E, THE COMMISSIONER (APPEALS) OUGHT NOT HAVE REJECTED THE SUBMISSION OF THE APPELLANT. THE REPLIES GIVEN TO THE REMAND R EPORT WERE NOT PROPERLY TAKEN INTO CONSIDERATION BY THE COMMIS SIONER OF INCOME TAX(APPEALS) 4. FOR THESE AND OTHER GROUNDS THAT MAY BE URGED AT TIME OF HEARING. 5. GROUND NOS. 1 & 4 ARE GENERAL IN NATURE, HENCE, NEED OF NO ADJUDICATION AND GROUND NOS. 2 & 3 ARE RELATING TO ADDITION U/S 68 OF THE ACT. 6. LD. AR SUBMITTED THAT CIT(A) CALLED FOR REMAND R EPORT FROM THE AO AND AS PER THE REMAND REPORT, AO HAS SUBMITTED S WORN STATEMENT OF 16 SHARE-APPLICANTS AND THE SAME WAS FORWARDED T O CIT(A) AND FURTHER AO HAS RECEIVED CONFIRMATIONS FROM THE RESP ECTIVE AOS IN THE CASE OF 11 SHARE APPLICANTS. LD. AR FURTHER SUBMITT ED THAT ASSESSEE HAS ALSO SUBMITTED AFFIDAVITS, INCOME-TAX RETURNS A ND EVIDENCE FOR SOURCE OF INVESTMENT BEFORE CIT(A). HE CONTENDED TH AT THE CIT(A) HAS NOT CONSIDERED THE FINDINGS OF THE REMAND REPORT AS WELL AS PROOF SUBMITTED BY THE ASSESSEE. 7. LD. DR, ON THE OTHER HAND, RELIED ON THE ORDERS OF REVENUE AUTHORITIES. 8. CONSIDERED THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL FACTS ON RECORD. ON PERUSAL OF THE REMAND REPORT, WE FIND THAT AO HAS SUBMITTED SWORN STATEMENTS OF 16 SHARE APPLICANTS A LONG WITH COPIES OF THE SAME BEFORE THE CIT(A) BUT THE SAME WAS NOT CONSIDERED BY HIM. FURTHER, AO ALSO HAS RECEIVED CONFIRMATIONS F ROM RESPECTIVE AOS IN THE CASE OF 11 SHARE APPLICANTS. EVEN THIS E VIDENCE WAS ALSO NOT CONSIDERED BY THE CIT(A) WHILE ADJUDICATING THE ISSUE. HOWEVER, 7 ITA NO. 1411/H/14 & 470/HYD/17 SRI LAXMI NARASIMHA PRESTRESSED CONCRETE PIPES LTD. ASSESSEE ALSO SUBMITS THAT IT HAS FILED ALL THE REL EVANT INFORMATION BEFORE THE CIT(A), WHICH WAS ALSO NOT CONSIDERED BY THE CIT(A). IN OUR CONSIDERED VIEW, CONSIDERING THE SWORN STATEMEN T IN THE CASE OF 16 SHARE APPLICANTS AND CONFIRMATION FROM RESPECTIV E AOS IN THE CASE OF 11 SHARE APPLICANTS, THE TRANSACTION CAN BE CONS IDERED AS GENUINE TO THE EXTENT OF 27 SHARE APPLICANTS. EVEN THE ASSE SSEE HAS ALSO FILED COPIES OF THE CONFIRMATIONS FROM THE RESPECTIVE SHA RE APPLICANTS BEFORE THE AO, WHICH HAVE BEEN FILED ON RECORD. WI TH REGARD TO REMAINING 3 SHARE APPLICANTS TO THE EXTENT OF RS. 7 ,00,000/- AND THE CONFIRMATION RECEIVED FROM AOS IN THE CASE OF A. M ANOHAR REDDY, AO HAS CONFIRMED ONLY TO THE EXTENT OF RS. 1.00 LAK H. IN THE CASE OF ALETI SWAYAM PRABHA, THE AO HAS CONFIRMED PARTIALLY , HENCE, THE AMOUNT TO THE EXTENT OF RS. 7.00 LAKHS WHICH HAS NO CONFIRMATION AND ALONG WITH RS. 2 LAKHS IN THE ABOVE SAID CASES ALON E CAN BE CONSIDERED AS NOT GENUINE U/S 68 OF THE ACT. 8.1 IN VIEW OF THE ABOVE DISCUSSION, TO MEET THE EN DS OF JUSTICE, WE SET ASIDE THE ORDER OF THE CIT(A) AND REMIT THE MAT TER BACK TO THE FILE OF THE AO WITH A DIRECTION TO DECIDE THE ISSUE AFTE R CONSIDERING ALL THE DOCUMENTARY EVIDENCE ALONG WITH THE SWORN STATEMENT S AND CONFIRMATIONS FROM OTHER RESPECTIVE AOS THAT ARE A VAILABLE ON RECORD AND IN ACCORDANCE WITH LAW AFTER PROVIDING REASONAB LE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. 9. IN THE RESULT, APPEAL OF THE ASSESSEE IS TREATED AS ALLOWED FOR STATISTICAL PURPOSES. 10. AS REGARDS THE APPEAL IN ITA NO. 470/HYD/17, AS WE HAVE REMITTED THE MATTER BACK TO THE FILE OF THE AO IN T HE QUANTUM PROCEEDINGS, THE PENALTY APPEAL IS ALSO REMITTED TO THE FILE OF THE AO WITH A DIRECTION TO DECIDE THE PENALTY ON THE OUTCO ME OF THE QUANTUM ADDITION. 8 ITA NO. 1411/H/14 & 470/HYD/17 SRI LAXMI NARASIMHA PRESTRESSED CONCRETE PIPES LTD. 11. IN THE RESULT, BOTH THE APPEALS UNDER CONSIDERA TION ARE TREATED AS ALLOWED FOR STATISTICAL PURPOSES. PRONOUNCED IN THE OPEN COURT ON 29 TH SEPTEMBER, 2017. SD/- SD/- (P. MADHAVI DEVI) (S. RIFAUR RA HMAN) JUDICIAL MEMBER AC COUNTANT MEMBER HYDERABAD, DATED: 29 TH SEPTEMBER, 2017. KV COPY TO:- 1) SRI LAXMI NARASIMHA PRESTRESSED CONCRETE PIPES L TD., C/O S/SHRI K. VASANTKUMAR, AV RAGHURAM, P. VINO D & M. NEELIMA DEVI, ADVOCATES, 610 BABUKHAN ESTATE, BASHEERBAGH, HYDERABAD 500 001. 2) DCIT, CIRCLE 1, STATION ROAD, WARANGAL 3) CIT(A) 18, MUMBAI 4) CIT(A) 3, HYD. 4) CIT VI, HYD. 5) DR, ITAT, HYD. 6) GUARD FILE