ACIT, Cuttack V. M/s. Dinabandhu Steel & Power Ltd., Cuttack

ITA 168/CTK/2015

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 3755 (ITAT-CUTTACK)
• Duration Of Justice: 2 year(s) 2 month(s) 20 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 05-07-2017
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: DB
• Next Hearing Date: 03-07-2017
• Assessment Year: 2009-2010
• Appeal Filed On: 15-04-2015
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: KUNAL SINGH
• Keywords: Additional evidence
• Section: 142(1); 153A

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL CUTTACK BENCH CUTTACK BEFORE SHRI N.S.SAINI, AM & SHRI PAV AN KUMAR GADALE, JM ./ ITA NO. 16 8 / CTK /20 1 5 ( / ASSESSMENT YEAR : 20 09 - 20 1 0 ) ACIT, CIRCLE - 2(1), CU TTACK VS. M/S DINABANDHU STEEL & POWER LTD., ARUNODAYA NAGAR, CUTTACK ./ ./ PAN/GIR NO. : A A BCD 9344 E ( / APPELLANT ) .. ( / RESPONDENT ) /REVENUE BY : SHRI KUNAL SINGH, DR /A S SESSEE BY : NONE / DATE OF HEARING : 03 / 0 7 /201 7 / DATE OF PRONOUNCEMENT 05 / 0 7 /201 7 / O R D E R PER SHRI PAV AN KUMAR GADALE, JM : TH E REVENUE HAS FILED THIS APPEAL AGAINST THE ORDER OF CIT(A) , CUTTACK , DATED 2 2 .01.2015 IN I.T. APPEAL NO. 0604 / 201 1 - 1 2 , WHEREIN THE REVENUE HAS RAISED THE GROUND S THAT THE LD. CIT(A) WAS NOT JUSTIFIED IN DELETING THE ADDITION OF RS.6,30,63,500/ - MADE BY THE AO U/S.68 OF THE ACT IN RESPECT OF SHARE APPLICATION MONEY AND THE ASSESSEE HAS FAILED TO PROVE THE CREDITWORTHINESS OF THE INVESTING COMPANIES . F URTHER LD. CIT(A) WAS NOT JUSTIFIED IN OBSERVING THAT THE INVESTING COMPANIES HAVE BEEN ASSESSED U/S.153A R.W.S143(3) WITH TOTAL INCOME NILL AND THE RETURN OF INCOME WAS ACCEPTED AND TH IS INFORMATION WAS NOT PRODUCED BEFORE THE AO AND FURTHER CIT(A) IS NOT JUSTIFIED IN ACCEPTING THE ADDITIONAL EVIDENCE IN COMPLETING THE PROCEEDINGS, WHICH IS IN VIOLATION OF RULE 46A OF THE I.T.RULES. ITA NO. 16 8 /201 5 2 2. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE IS E NGAGED IN THE B USINESS OF MANUFACTURING OF SPONGE IRON AND INGOTS AND GENERATION OF POWER AND FILED THE RETURN OF INCOME FOR THE ASSESSMENT YEAR 2009 - 10 DECLARING TOTAL LOSS OF RS.3,69,20,238/ - . SUBSEQUENTLY, THE CASE WAS SELECTED FOR SCRUTINY UNDER THE CA SS AND NOTICES U/S.143(2) & 142(1) OF THE ACT WERE ISSUED . I N COMPLIANCE , LD. AR OF THE ASSESSEE APPEARED FROM TIME TO TIME AND CASE WAS DISCUSSED. DURING THE SCRUTINY PROCEEDINGS, THE AO FOUND THAT RS.19,25,88,500/ - WAS SHOWN AS SHARE APPLICATION MONEY BY THE ASSESSEE FROM SEVEN CONCERNS DURING THE YEAR . THE LD. AO DEALT ON THE A NNUAL REPORT OF THE SE COMPANIES AND A UDIT ED STATEMENTS AND ALSO EXHAUSTIVELY PERUSED THE PROVISIONS OF NON - BANKING FINANCIAL COMPANIES AND CAME TO THE CONCLUSION THAT OUT OF THE TO TAL UNSECURED LOANS IN THE BOOKS OF ACCOUNTS OF THE PREVIOUS YEAR 2008 - 09, THE ASSESSEE COULD NOT GIVE THE INFORMATION TO THE SATISFACTION IN RESPECT OF THREE COMPANIES AND, T HEREFORE, THE LD. AO HAS MADE ADDITION TO THE EXTENT OF RS.6,30,63,500/ - ALONG WI TH OTHER ADDITIONS , ASSESSED THE INCOME AND PASSED ORDER U/S.143(3) OF THE ACT, DATED 20.12.2011. 3. AGGRIEVED BY THE ORDER OF AO, THE ASSESSEE PREFERRED AN APPEAL BEFORE THE CIT(A) . IN THE APPELLATE PROCEEDINGS, LD. AR ARGUED THE GROUNDS AND REITERATED TH E SUBMISSIONS. LD. CIT(A) ON PERUSAL OF THE FINDINGS OF AO AND CONTENTION S OF THE ASSESSEE REFERRED AT PAGE 3 OF THE ORDER ALONG WITH OTHER DETAILS FOUND THAT THE ASSESSEE HAS MADE SATISFACTORY EXPLANATION BEFORE THE AO AND ALSO GENUINENESS IS NOT ITA NO. 16 8 /201 5 3 DOUBTED AND HENCE DIRECTED THE AO TO DELETE THE ADDITIONS AND ALLOWED THE APPEAL OBSERVING AT PAGE 4 & 5 OF THE ORDER AS UNDER : - I HAVE CAREFULLY PERUSED THE ASSESSMENT ORDER DRAFTED BY THE AO AND THE SUBMISSIONS MADE BY THE APPELLANT. OUT OF THE INVESTMENT IN THE APPELLANT COMPANY AMOUNTING TO RS.19,25,88,500/ - BY SEVEN INVESTOR COMPANIES, THE AO HAD DISPUTED THE INVESTMENTS MADE BY TWO COMPANIES NAMELY M/S.M.N.G.TRADELINK (P) LTD. THE INVESTMENT BEING RS.3,81,63,500/ - AND M/S.S.B.TRADELINK (P) LTD. AMOUNTIN G TO RS.2,49,00,000/ - . THE AO HAD PRODUCED THE BALANCE SHEET OF BOTH THE COMPANIES. AS PER THE BALANCE SHEET OF BOTH THE COMPANIES THEY HAVE ENOUGH RESERVE AND SURPLUS TO COVER THE INVESTMENT IN THE APPELLANT COMPANY. HOWEVER THE AO HAD NOT GIVEN THE REASO NS FOR NON - ACCEPTANCE OF THE SOURCE OF INVESTMENT SHOWN BY THE ABOVE TWO COMPANIES. THE APPELLANT SUBMITTED THAT BOTH THE COMPANIES WHICH HAVE BEEN TREATED AS PAPER COMPANIES BY THE AO AND THE AO DECIDED THAT THEY HAD NO GENUINE BUSINESS ACTIVITY AND HAVE NO CREDITWORTHINESS AT ALL, HAVE BEEN ASSESSED U / S .143(3) R.W.S. 153A OF THE ACT BY THE ASST. COMMISSIONER OF INCOME TAX (CENTRAL CIRCLE - L(L), AHMEDABAD. IT APPEARS THAT ACTION U/S.132 OF THE ACT HAD BEEN TAKEN IN THE CASE OF SUCH COMPANIES AND THEIR INCOM E HAVE BEEN ASSESSED U / S .153A OF THE ACT. INCIDENTALLY IN THE ASSESSMENT ORDERS PASSED U/S.L43(3)/153A IN THE CASE OF M/S.S.V. TRADELINK (P) LTD. FOR THE AY 2009 - 10 (PERTAINING TO THE FY IN WHICH THE INVESTOR COMPANY HAD ADVANCED TO THE APPELLANT), THE ASS ESSED INCOME WAS TAKEN AS NIL THUS ACCEPTING THE TOTAL INCOME AS PER RETURN FILED BY THE INVESTOR COMPANIES. SIMILARLY IN THE CASE OF M/S.M.N.G. TRADELINK (P) LTD. WHERE AFTER THE OPERATION U/S.132, ASSESSMENT WAS MADE U/S.L43(3)/147 OF THE ACT FOR THE AY 2009 - 10 AT INCOME NIL THEREBY ACCEPTING THE RETURNED INCOME BY THE INVESTOR COMPANY. THE ARGUMENT OF THE APPELLANT IS THAT HAD THESE COMPANIES BEEN ONLY PAPER COMPANIES WITH NO GENUINENESS, IDENTITY AND NO CREDITWORTHINESS TO INVEST IN THE APPELLANT COMPAN Y, THEN THE SAME COULD HAVE BEEN IDENTIFIED THROUGH THE SEARCH OPERATION U/S.132 OF THE ACT AND THE CASH CREDITS COULD HAVE BEEN ADDED DURING THE ASSESSMENTS OF SUCH INVESTOR COMPANIES. I FIND SUBSTANCE IN THE SUBMISSION OF THE APPELLANT. AS CONSEQUENCE TO THE SEARCH OPERATION U/S.132 OF THE ACT THE ASSESSMENTS ARE MADE BY THE ACIT, CENTRAL CIRCLE - L(L),AHMEDABAD ACCEPTING THE RETURNS OF INCOME OF THE INVESTOR COMPANIES THEREBY ACCEPTING THE BALANCE SHEETS, PROFIT & LOSS ACCOUNTS AND FOR THAT MATTER ALL THE ACCOUNTS OF SUCH COMPANIES FOR THE AY 2009 - 10 IN WHICH THE IMPUGNED INVESTMENTS WERE MADE BY SUCH COMPANIES WITH THE APPELLANT COMPANY. CONSIDERING THE ABOVE THE AO IS DIRECTED TO DELETE THE ADDITION. 4 . AGGRIEVED BY THE ORDER OF THE CIT(A) THE REVENUE FI LED THE PRESENT APPEAL BEFORE THE TRIBUNAL. ITA NO. 16 8 /201 5 4 5 . BEFORE US, LD. D R ARGUED ON THE VIOLATION OF PROVISIONS OF RULE 46A OF THE I.T.RULES AS THE CIT(A) HAS NOT PROVIDED ANY OPPORTUNITY TO THE AO TO VERIFY THE ADDITION AL EVIDENCE FILED IN THE COURSE OF APPELLATE PROCEEDINGS AND CIT(A) ERRED IN DIRECTING TO DELETE THE ADDITION WITHOUT VERIFYING THE CREDITWORTHINESS OF THE COMPANIES AND PRAYED FOR SET ASIDE OF THE ORDER OF THE CIT(A) . 6. NONE APPEARED ON BEHALF OF THE ASSESSEE. 7. WE HEARD LD. DRS SUBMISSIONS AND PERUSED THE FINDING OF LOWER AUTHORITIES AND MATERIAL ON RECORD. THE L D. DRS CONTENTION THAT THE CIT(A) HAS MADE OBSERVATION S WITH REASONING THAT THE COMPANIES HAVE BEEN ASSESSED U/S.143(3) R.W.S. 153A OF THE ACT BY THE ACIT CC - 1(1), AHMEDABAD, WHERE INCOM E WAS CONSIDERED AS NIL. FURTHER, L D. DR VEHEMENTLY ARGUED THAT THIS INFORMATION WAS NOT SUBMITTED BEFORE THE AO BY THE ASSESSEE AND FOR THE FIRST TIME THESE EVIDENCES WERE BROUGHT IN APPELLATE PROCEEDINGS AND THE LD. CIT(A) HAS DIRECTLY RELIED ON THE ASSE SSMENT ORDER S ONLY WITHOUT VERIFYING AND CONSIDERING THE FINANCIAL STATEMENTS OF THE COMPANIES AND DIRECTED THE AO TO DELETE THE ADDITION S . WE PERUSED THE CIT(A)S ORDER AND FOUND AT PAGE 5 THE FACTS SUBMITTED BY LD. DR. W E ARE OF THE OPINION THAT THE CIT (A) SHOULD HAVE CALLED FOR THE REMAND REPORT FROM AO BEFORE DECIDING THE ISSUE, AND THE AO WAS DEPRIVED TO VERIFY THESE VITAL FACTS. I N THE INTEREST OF JUSTICE, WE SHALL PROVIDE AN OPPORTUNITY TO LD. AO TO VERIFY THE EVIDENCES FILED IN THE APPELLATE PROCEE DINGS AND CHECK THE GENUINENESS OF TRANSACTION . ACCORDINGLY, WE SET ASIDE THE ORDER OF CIT(A) AND REMIT THE ENTIRE DISPUTED ITA NO. 16 8 /201 5 5 ISSUE TO THE FILE OF THE AO TO VERIFY THE EVIDENCES FILED AND PASS THE ORDER ON MERITS AND IT IS NEVERTHELESS TO MENTION THAT THE AS SESSEE SHOULD BE PROVIDED ADEQUATE OPPORTUNITY OF HEARING BEFORE PASSING THE ORDER. 8 . IN THE RESULT, APPEAL OF THE REVENUE IS ALLOWED FOR STATISTICAL PURPOSES . O RDER PRONOUNCED IN THE OPEN COURT ON THIS 05 / 07/ 201 7 . SD/ - ( N. S. SAINI ) SD/ - ( PA V AN KUMAR GADALE ) / ACCOUNTANT MEMBER / JUDICIAL MEMBER CUTTACK ; DATED 05 / 0 7 /201 7 . . / PKM , SENIOR PRIVATE SECRETARY / COPY OF THE ORDER FORWARDED TO : / BY ORDER, ( SENIOR PRIVATE SECRETARY ) , / ITAT, CUTTACK 1. / THE APPELLANT - M/S DINABANDHU STEEL & POWER LTD., ARUNODAYA NAGAR, CUTTACK 2. / THE RESPONDENT - ACIT, CIRCLE - 2(1) CUTTACK 3. ( ) / THE CIT(A), 4. / CIT 5. , , / DR , ITAT, CUTTACK 6. / GUARD FILE. //TRUE COPY//