Sheetal Refineries Ltd., Hyd, R.R.Dist V. DCIT., Circle-3(1), Hyderabad, Hyderabad

ITA 147/HYD/2015

• Counselvise Citation: [2016] 121 COUNSELVISE.COM (IT) 4419 (ITAT-HYDERABAD)
• Duration Of Justice: 1 year(s) 9 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-11-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 23-11-2016
• Assessment Year: 2010-2011
• Appeal Filed On: 12-02-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: U MINICHANDRAN
• Assessee Lawyers: ARUN KUMAR MALANI
• Section: 143(3); 133A; 131

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. 147/HYD/2015 ASSESSMENT YEAR: 2010-11 SHEETAL REFINERIES LTD., HYDERABAD. PAN AAECS 3658 M VS. DY. COMMISSIONER OF INCOME- TAX, CIRCLE 3(1), HYDERABAD. (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI ARUN KUMAR MALANI REVENUE BY : SMT. U. MINICHANDRAN DATE OF HEARING 23-11-2016 DATE OF PRONOUNCEMENT -11-2016 O R D E R PER S. RIFAUR RAHMAN, A.M.: THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AG AINST THE ORDER OF CIT(A) - IV, HYDERABAD, DATED 07/11/2014 FOR AY 2010-11. 2. BRIEFLY THE FACTS OF THE CASE ARE THAT THE ASSES SEE COMPANY IS ENGAGED IN THE BUSINESS OF TRADING IN EDIBLE OILS. THE COMPANY FILED ITS RETURN OF INCOME FOR THE AY 2010-11 ON 13/10/20 10 ADMITTING A TOTAL INCOME OF RS. 9,27,62,643/-. THE ASSESSMENT U /S 143(3) OF THE ACT WAS COMPLETED ON 20/03/2013 DETERMINING THE TOT AL INCOME AT RS. 10,91,52,643/- BY MAKING ADDITIONS ON ACCOUNT OF UN EXPLAINED SOURCE FOR PAYMENTS OF RS. 1,60,00,000/- AND ON ACCOUNT OF PAYMENT OF ROC FEES TO INCREASE THE AUTHORIZED SHARE CAPITAL OF RS . 3,90,000/- 2.1 A SURVEY U/S 133A WAS CONDUCTED IN THE CASE OF ASSESSEE ON 04/11/2011. DURING THE SURVEY, IT WAS NOTICED THAT THE ASSESSEE AND OTHER GROUP COMPANIES HAD RECEIVED A SUM OF RS. 1.6 CRORES FROM SHRI NAGENDRANATH CHANGANLA TOWARDS SHARE CAPITAL AND THIS AMOUNT 2 ITA NO. 147/H/15 SHEETAL REFINERIES LTD. HAD BEEN PAID BACK TO SHRI NAGENDRANATH CHANGANLA I N CASH. IN A STATEMENT U/S 131 DATED 05/03/2013, SHRI JITENDAR K UMAR AGARWAL, MANAGING DIRECTOR OF THE ASSESSEE COMPANY ACCEPTED TO HAVE PAID RS. 1.6 CRORES TO MR. NAGENDRANATH CHANGANLA FROM H IS PERSONAL SOURCE. HE REQUESTED THE DEPARTMENT NOT TO MAKE ADD ITION IN HIS HAND, INSTEAD, MAKE ADDITION IN THE HANDS OF ASSESS EE COMPANY IN AY 2010-11 FROM THE UNACCOUNTED PROFITS OF THE ASSESSE E COMPANY. ACCORDINGLY, THE AO BROUGHT THE SAID AMOUNT OF RS. 1.6 CRORES TO TAX AS INCOME OF THE ASSESSEE. THEREAFTER, THE AO INITI ATED PENALTY PROCEEDINGS U/S 271(1)(C) OF THE ACT. 3. IN THE COURSE OF PENALTY PROCEEDINGS, ASSESSEE S UBMITTED BEFORE THE AO THAT THERE WAS NO CONCEALMENT OF INCO ME BY THE ASSESSEE THAT THE ASSESSEE AND GROUP COMPANIES HAD RECEIVED AN INVESTMENT OF RS. 1.6 CRORES FROM SHRI NAGENDRANATH CHANGANLA, BUT, THE AMOUNT WAS RETURNED TO HIM IN CASH SINCE HE INS ISTED FOR REPAYMENT DUE TO PERSONAL URGENCY. WITH REGARD TO A CCEPTANCE OF THE ADDITIONS BEFORE THE INVESTIGATION WING, IT WAS SUB MITTED THAT THE ADDITIONS WERE ACCEPTED UNDER PRESSURE FROM DDIT (I NV.) CONCERNED UNDER THE THREAT OF DIRE CONSEQUENCES TO THE BUSINE SS. ON APPEAL, THE CIT(A) CONFIRMED THE PENALTY U/S 271(1)(C) BY THE A O. 4. AGGRIEVED, THE ASSESSEE IS IN APPEAL BEFORE US R AISING THE FOLLOWING GROUNDS OF APPEAL: 1. THE NOTICE U/S 143(2) FOR AY 2010-11 WAS GIVEN AFTER 30/09/2011. 2. THE AO AND THE DIT (INV.) NEVER GAVE A COPY OF S URVEY REPORT DT. 09/11/2011 TO THE ASSESSEE. 3. THE AO OR THE DIT (INV.) NEVER EXAMINED THE INVE STOR MR. NAGENDRA CHANGLA AS TO MANNER OF HIS INVESTMENTS AN D HOW THE AMOUNT WAS TREATED IN HIS TAX RETURNS IN HIS HANDS. 4. THE ASSESSEE HAS COOPERATED WITH THE AO EVEN WHE N THE NOTICE U/S 143(2) ISSUED WAS TIME BARRED. 5. THERE IS NO WILLFUL DEFAULT ON PART OF THE ASSES SEE. 3 ITA NO. 147/H/15 SHEETAL REFINERIES LTD. 6. DURING THE COURSE OF HEARING, WHEN THE BENCH AS KED THE AR OF THE ASSESSEE THAT IN THE CONCISE GROUNDS OF APPEAL FILED BY THE ASSESSEE, THERE IS NO GROUND RAISED BY THE ASSESSEE FOR THE SPECIFIC GRIEVANCE OUT OF CIT(A)S ORDER, AS THE GROUNDS RAI SED ARE ONLY ARGUMENTATIVE IN NATURE, THE AR SUBMITTED THAT IN T HE ORIGINAL GROUNDS OF APPEAL, THE GRIEVANCES WERE HIGHLIGHTED. HOWEVER , HE ADMITTED THAT THE ORIGINAL GROUNDS ARE ARGUMENTATIVE IN NATURE, H ENCE, THE ASSESSEE FILED CONCISE GROUNDS OF APPEAL. THE BENCH DECIDED TO ADJUDICATE THE MATTER. 6.1 AS PER THE GROUNDS, THE LD. AR OF THE ASSESSEE SUBMITTED THAT COPY OF THE SURVEY REPORT DATED 09/11/2011 WAS NOT GIVEN TO THE ASSESSEE. HE SUBMITTED THAT THERE IS NO CONCEALMENT OF INCOME AS FAR AS THE RETURN OF INCOME IS CONCERNED. HE FURTHER SU BMITTED THAT ASSESSEE HAS COOPERATED FULLY WITH THE DEPARTMENT A S FAR AS ASSESSMENT IS CONCERNED. 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. NO DOUBT, DURING THE SURVEY, THE INVEST IGATION WING HAS FOUND THAT THERE IS A CASH PAYMENT TO SHRI NAGENDRA NATH CHANGANLA. IN FACT, THE PAYMENT WAS MADE BY THE DIRECTOR OF TH E ASSESSEE COMPANY, BUT, DURING THE SURVEY, HE REQUESTED THE D EPARTMENT TO MAKE THE ADDITION IN THE HANDS OF THE ASSESSEE. IT IS ALSO A FACT THAT THE DIRECTOR WITHDREW HIS SUBMISSIONS BEFORE DDIT ( INV.) AND SUBMITTED THAT UNDER THE PRESSURE AND COERCION FROM THE DEPARTMENT HE HAS ACCEPTED FOR SUCH ADDITION. SO, THERE IS NO CREDIBILITY IN THE STATEMENT OF THE MANAGING DIRECTOR. COMING TO THE F ACTS, NO DOUBT, INVESTMENT WAS MADE BY SHRI NAGENDRANATH CHANGANLA IN THE ASSESSEE COMPANY AND TWO OTHER COMPANIES TO THE EXT ENT OF RS. 1.6 CRORES. IT IS A FACT THAT ONCE SHARES ARE ISSUED TO THE SHAREHOLDER, THE 4 ITA NO. 147/H/15 SHEETAL REFINERIES LTD. RELATIONSHIP BETWEEN THE SHAREHOLDER AND THE ASSESS EE COMPANY ARE DISTINCT AS THE COMPANY AND THE SHAREHOLDER ARE TWO DIFFERENT ENTITIES. ANY PAYMENT TO THE SHAREHOLDER IS A DIFFERENT TRANS ACTION. THE PAYMENT WAS MADE OUTSIDE THE BOOKS OF THE ASSESSEE AND WE ARE NOT SURE OR NOTHING IS BROUGHT ON RECORD TO SHOW THAT T HE RESPECTIVE SHARES WERE BOUGHT BACK BY THE COMPANY OR BOUGHT BY ANY DIRECTOR OF THE COMPANY. SINCE NOTHING WAS INVESTIGATED FURTHER BY THE DEPARTMENT, SIMPLY RELYING ON THE STATEMENT OF THE MANAGING DIRECTOR OF THE COMPANY, ADDITION WAS MADE. THERE IS NO CONC RETE EVIDENCE TO SHOW THAT THE ASSESSEE HAS PAID BACK RS. 1.6 CRORES TO SHRI NAGENDRANATH CHANGANLA. WE ARE OF THE VIEW THAT SIN CE THE PENALTY PROCEEDINGS ARE INDEPENDENT PROCEEDINGS, THERE IS N O LINK FOR THE SETTLEMENT TO THE SHAREHOLDER BY CASH DIRECTLY BY T HE ASSESSEE COMPANY. THEREFORE, THE PENALTY LEVIED AGAINST THE ASSESSEE IS NOT PROPER AS THIS IS NOT A FIT CASE TO ATTRACT LEVY OF PENALTY U/S 271(1)(C) OF THE ACT. ACCORDINGLY, THE PENALTY LEVIED IN THIS CASE IS HEREBY CANCELLED AND THE APPEAL OF THE ASSESSEE IS ALLOWED . 9. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWED . PRONOUNCED IN THE OPEN COURT ON 30 TH NOVEMBER, 2016 SD/- SD/- (P. MADHAVI DEVI) (S. RIFAUR RAH MAN) JUDICIAL MEMBER A CCOUNTANT MEMBER HYDERABAD, DATED: 30 TH NOVEMBER, 2016 KV 5 ITA NO. 147/H/15 SHEETAL REFINERIES LTD. COPY TO:- 1) M/S SHEETAL REFINERIES LTD. SY. NO. 341, 7-4-1 35/1, GAGAN PAHAD, RR DIST., HYDERABAD. 2) DCIT, CIRCLE 3(1), HYDERABAD 3) CIT(A) - IV, HYDERABAD 4 CIT III, HYDERABAD 5) THE DEPARTMENTAL REPRESENTATIVE, I.T.A.T., HYDE RABAD. 6) GUARD FILE .