Suryabalaji Investments (P) Ltd., Coimbatore V. ITO, Coimbatore

ITA 2437/CHNY/2016

• Counselvise Citation: [2017] 130 COUNSELVISE.COM (IT) 7999 (ITAT-CHENNAI)
• Duration Of Justice: 5 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 03-02-2017
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 18-01-2017
• Assessment Year: 2012-2013
• Appeal Filed On: 22-08-2016
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: PATHLAVATH PEERYA
• Assessee Lawyers: K. RAGHU
• Section: 32; 147; 131; 68; 246; 69; 145; 27; 148; 54; 37; 6; 56; 263; 63; 132; 12; 28; 144; 10; 90; 154; 2; 11; 15; 271(1)(b); 139; 92

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH, CHENNAI [ CAMP: COIMBATORE ] . . . , ! .#$#%, ' !( BEFORE SHRI N.R.S. GANESAN, JUDICIAL MEMBER AND SHRI ABRAHAM P. GEORGE, ACCOUNTANT MEMBER ./ ITA NO.2437/MDS/2016 % *% / ASSESSMENT YEAR : 2012-13 M/S SURYABALAJI INVESTMENTS (P) LTD., 3C, III CROSS, LAKSHMIPURAM, GANAPATHY, COIMBATORE 641 006. PAN : AAMCS 8010 M V. THE INCOME TAX OFFICER, CORPORATE WARD 3, COIMBATORE 641 018. (,-/ APPELLANT) (./,-/ RESPONDENT) ,- 0 1 / APPELLANT BY : SHRI K. RAGHU, CA ./,- 0 1 / RESPONDENT BY : SH. PATHLAVATH PEERYA, CIT 2 0 3' / DATE OF HEARING : 18.01.02017 45* 0 3' / DATE OF PRONOUNCEMENT : 03.02.2017 / O R D E R PER BENCH: ASSESSEE IN THIS APPEAL IS AGGRIEVED ON AN ADDITI ON OF ` 25,58,68,579/- MADE BY THE ASSESSING OFFICER WHICH WAS CONFIRMED BY THE CIT(APPEALS) CONSIDERING CERTAIN INVESTMENTS MADE BY THE ASSESSEE FOR ACQUIRING SOME ASSETS, AS UNDISCLOSED. 2 I.T.A. NO.2437/MDS/16 GROUNDS TAKEN BY THE ASSESSEE IS REPRODUCED HEREU NDER:- (1) THE LEARNED CIT(A) -1, COIMBATORE, HAS GROSSLY ERRED IN HOLDING THAT THE APPELLANT HAS MADE INVEST MENTS, AS STATED BY THE A.O. AND SUSTAINING THE ADDITION T O THE EXTENT OF ` 25,58,68,579/-, AS INVESTMENT IN ACQUIRING ASSETS, WITHOUT A CORRESPONDING LIABILITY, AS UNDIS CLOSED INVESTMENT MADE BY THE APPELLANT, IN THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW. (2) THE LEARNED CIT(A) OUGHT TO HAVE HELD THAT THE APPELLANT DID NOT MAKE INVESTMENTS AND THE MERE ENT RIES IN THE BOOKS OF ACCOUNT DID NOT AMOUNT TO ANY INVES TMENT ACTUALLY MADE BY THE APPELLANT, WHEN NO PAYMENT WAS , IN FACT, RECEIVED, BY THE INVESTEE COMPANIES, IN THE F ACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW. (3) THE LEARNED CIT(A) OUGHT TO HAVE HELD THAT IN THE ABSENCE OF ACTUAL INVESTMENT HAVING BEEN MADE BY TH E APPELLANT, MERE BOOK ENTRIES DID NOT CONSTITUTE UNEXPLAINED INCOME HAVING ACCRUED TO THE APPELLANT, IN THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW. (4) THE LEARNED CIT(A) OUGHT TO HAVE HELD THAT NO REAL INVESTMENT WAS MADE BY THE APPELLANT, AS ALLEGED BY THE A.O., IN THE ABSENCE OF PROOF OF ACTUAL INVESTMENT OF THE APPELLANT AND RECEIPT OF SUCH AMOUNT OF MONEY FROM THE APPELLANT BY THE INVESTEE COMPANIES, IN THE FACTS A ND CIRCUMSTANCES OF THE CASE AND IN LAW. 2. FACTS APROPOS ARE THAT THE ASSESSEE, AN INVESTME NT COMPANY, HAD FILED RETURN FOR THE IMPUGNED ASSESSMENT YEAR D ECLARING INCOME OF ` 3,966/-. IN THE PROFIT & LOSS ACCOUNT FILED BY THE ASSESSEE ALONG WITH RETURN OF INCOME, THERE WERE NO DEBIT OF FINANCIAL CHARGES. A.O. NOTED 3 I.T.A. NO.2437/MDS/16 THAT THE BALANCE SHEET OF THE ASSESSEE AS ON 31.03. 2012 REFLECTED SUBSTANTIAL LOANS. SHE ISSUED A LETTER ON 23.01.20 15 TO M/S INDIAN OVERSEAS BANK, GANAPATHY BRANCH, WHICH WAS SHOWN BY THE ASSESSEE AS BANKER, FOR SUBMITTING THE DETAILS OF T HE LOAN TAKEN BY THE ASSESSEE. IT SEEMS THE SAID BANKER REPLIED THAT TH E ASSESSEE WAS NOT HAVING ANY LOAN ACCOUNT WITH IT. CLARIFICATIONS WE RE SOUGHT FROM THE ASSESSEE IN THIS REGARD. REPLY OF THE ASSESSEE WAS THAT THOUGH IT HAD ISSUED CHEQUES FOR INVESTING IN SHARES AND CHEQUES FOR ADVANCES TO VARIOUS GROUP UNITS, THESE CHEQUES WERE NOT PRESENT ED FOR PAYMENT. AS PER THE ASSESSEE, THOUGH ITS BALANCE SHEET REFLE CTED SUBSTANTIAL NON-CURRENT INVESTMENTS IN EXCESS OF ` 17,00,00,000/-, SUCH INVESTMENTS NEVER EXISTED. ASSESSEE HAS ALSO SUBMI TTED THE DETAILS OF EXISTING NON-CURRENT INVESTMENTS AS UNDER:- NON CURRENT INVESTMENTS INVESTMENTS IN EQUITY SRI PADMABALAJI STEELS P. LTD. UNIT I : ` 1,14,00,000 / - SRI PADMABALAJI STEELS P. LTD. UNIT II : ` 7,13,00,000/- SRI PADMABALAJI STEELS P. LTD. UNIT III : ` 2,99,50,000/ - SRI SURYABALAJI STEELS P. LTD. : ` 5,48,20,000/ - SBSRM : ` 55,00,000/ - ` 17,29,70,000/ - 4 I.T.A. NO.2437/MDS/16 3. ASSESSEE ALSO STATED THAT THE LOANS AND ADVANCE OF ` 24,17,62,914/- SHOWN IN ITS BALANCE SHEET WERE ALSO NOT REAL AMOUNTS. THE BREAK-UP OF THESE WERE SUBMITTED AS U NDER:- LOANS AND ADVANCES TO RELATED PARTIES UNSECURED, CONSIDERED GOOD SRI PADMABALAJI STEELS P. LTD. UNIT II : ` 55,00,000/ - SRI PADMABALAJI STEELS P. LTD. UNIT I : ` 10,00,000/ - SURYABALAJI STEELS P. LTD. : ` 11,00,000/ - SHARE APPLICATION MONEY WITH SRI PADMABALAJI STEELS P. LTD. UNIT I : ` 6,95,00,000/ - SRI PADMABALAJI STEELS P. LTD. UNIT II : ` 13,80,92,215/ - SRI PADMABALAJI STEELS P. LTD. UNIT III : ` 5,00,000/ - SURYABALAJI STEELS P. LTD. : ` 2,60,50,000/ - ` 24,17,42,215/ - 4. HOWEVER, THE A.O. WENT THROUGH THE BALANCE SHEET OF M/S SRI PADMABALAJI STEELS PVT. LTD. AND M/S SURYABALAJI ST EELS PVT. LTD. AND FOUND THAT THEIR BALANCE SHEETS DID SHOW INVESTMENT S OF THE ASSESSEE IN THE SAID COMPANIES. AS PER THE LD. A.O., THE IN VESTMENTS REFLECTED IN THE BALANCE SHEETS OF THE SAID COMPANIES READ AS UNDER:- SRI PADMABALAJI STEELS PVT. LTD. NAME OF THE COMPANY SHARE CAPITAL AS ON 31.3.2012 SHARE CAPITAL ADVANCE AS ON 31.3.2012 TOTAL AS ON 31.3.2012 SURYABALAJI INVESTMENTS PVT. LTD. 9,81,50,000 21,39,17,130 32,07,42,215 5 I.T.A. NO.2437/MDS/16 SURYABALAJI STEELS PVT. LTD. NAME OF THE COMPANY SHARE CAPITAL AS ON 31.3.2012 SHARE CAPITAL ADVANCE AS ON 31.3.2012 TOTAL AS ON 31.3.2012 SURYABALAJI INVESTMENTS PVT. LTD. 5,83,20,000 2,25,50,000 8.08.70,000 THE A.O. FOUND THAT THE INVESTMENTS SHOWN AS MADE B Y THE ASSESSEE IN M/S SRI PADMABALAJI STEELS PVT. LTD. AND M/S SUR YABALAJI STEELS PVT. LTD. TALLIED WITH THE AMOUNTS REFLECTED IN THE BALA NCE SHEETS OF THE SAID COMPANIES. THUS, ACCORDING TO A.O., CONTENTION OF THE ASSESSEE THAT THESE WERE ONLY BOOK ENTRIES AND THERE WAS NO REAL INVESTMENT, COULD NOT BE ACCEPTED. THOUGH THE ASSESSEE STATED THAT T HE RECIPIENTS HAD NO CORRESPONDING CREDITS IN THEIR BANK ACCOUNTS, IT WAS NOT ACCEPTED BY THE ASSESSING OFFICER. ACCORDING TO THE A.O., T HE BALANCE SHEETS OF ALL THESE COMPANIES WERE AUDITED AND DULY CERTIFIED BY THE CHARTERED ACCOUNTANT ALONG WITH A REPORT UNDER COMPANIES (AUD ITORS REPORT) ORDER, 2003. SHE HELD THAT THE INVESTMENTS WERE CO RRECTLY SHOWN BY THE ASSESSEE BUT THERE BEING NO MATCHING LOANS, THE SOURCE OF SUCH INVESTMENTS WERE UNEXPLAINED. THE UNSECURED LOANS FROM BANK OF ` 25,58,68,579/- SHOWN BY THE ASSESSEE IN ITS BALANCE SHEET WAS CONSIDERED FOR ADDITION. 6 I.T.A. NO.2437/MDS/16 5. AGGRIEVED, ASSESSEE MOVED IN APPEAL BEFORE THE C IT(APPEALS). ARGUMENTS OF THE ASSESSEE ONCE AGAIN WERE THAT THE CHEQUES ISSUED WERE NEVER PRESENTED BY M/S SRI PADMABALAJI STEELS PVT. LTD. AND M/S SURYABALAJI STEELS PVT. LTD. AS PER THE ASSESSEE, THERE WERE NO REAL PAYMENTS TO THE SAID COMPANIES. THE ASSESSEE ALSO STATED THAT THERE WERE NO LOANS WHATSOEVER RAISED FROM ANY PERSON. C ONTENTION OF THE ASSESSEE WAS THAT WHEN THERE WAS NO INVESTMENT WHAT SOEVER IN M/S SRI PADMABALAJI STEELS PVT. LTD. AND M/S SURYABALAJ I STEELS PVT. LTD., THE QUESTION OF SOURCE OF SUCH INVESTMENTS DID NOT ARISE. THE ASSESSEE ONCE AGAIN RELIED ON CERTIFICATE ISSUED BY CHIEF MANAGER OF INDIAN OVERSEAS BANK, WHICH STATED THAT ASSESSEE HA D NO LOANS WITH THE SAID BANK. HOWEVER, THE CIT(APPEALS) WAS NOT I MPRESSED BY ABOVE ARGUMENTS. ACCORDING TO HIM, ASSESSEE HAD MA DE INVESTMENTS IN THE TWO COMPANIES WHICH WAS CLEAR FROM BALANCE S HEET OF THE RESPECTIVE COMPANIES. IT HAD NO SOURCE TO EXPLAIN SUCH INVESTMENTS. THUS, ACCORDING TO THE CIT(APPEALS), THE ADDITION W AS RIGHTLY MADE. HE CONFIRMED THE ADDITION. 6. NOW BEFORE US, THE LD. A.R. STRONGLY ASSAILING T HE ORDERS OF THE LOWER AUTHORITIES, SUBMITTED THAT THE BANKER OF THE ASSESSEE CLEARLY MENTIONED THAT THE ASSESSEE HAD NOT RAISED ANY LOAN . ACCORDING TO 7 I.T.A. NO.2437/MDS/16 LD. A.R., THERE WAS NO REAL INVESTMENT MADE BY THE ASSESSEE IN EITHER M/S SRI PADMABALAJI STEELS PVT. LTD. OR M/S SURYABA LAJI STEELS PVT. LTD. THE CHEQUES ISSUED BY THE ASSESSEE TO THE SAID COMP ANIES WERE NEVER PRESENTED BY THEM FOR PAYMENTS NOR WAS IT REA LISED FROM THE BANK ACCOUNTS OF THE ASSESSEE. WHEN THERE WAS NO A CTUAL INVESTMENT, AS PER THE LD. A.R., THE QUESTION OF SO URCE OF SUCH INVESTMENTS WAS IRRELEVANT. CONTENTION OF THE LD. A.R. WAS THAT LOWER AUTHORITIES HAD SIMPLY GONE BY THE BALANCE SHEETS O F THE ASSESSEE AND THAT OF M/S SRI PADMABALAJI STEELS PVT. LTD. AN D M/S SURYABALAJI STEELS PVT. LTD. IGNORING THE REAL SITUATION. CONT ENTION OF THE LD. A.R. WAS THAT ONLY REAL INCOME COULD BE TAXED AND NOT FI CTITIOUS INCOME. 7. PER CONTRA, LD. DEPARTMENTAL REPRESENTATIVE SUPP ORTED THE ORDER OF THE LOWER AUTHORITY. 8. WE HAVE PERUSED THE ORDERS AND HEARD THE RIVAL C ONTENTIONS. WHAT WE NOTICE IS THAT ASSESSEE IS A PRIVATE LIMITE D COMPANY. THE BALANCE SHEET OF THE ASSESSEE REFLECTED INVESTMENTS MADE BY THE ASSESSEE IN TWO COMPANIES, NAMELY, SRI PADMABALAJI STEELS PVT. LTD. AND SURYABALAJI STEELS PVT. LTD. THESE TWO COMPANI ES WERE AGAIN PRIVATE LIMITED COMPANIES. IT IS ALSO NOT DISPUTED THAT THE ASSESSEE AS 8 I.T.A. NO.2437/MDS/16 WELL AS THE SAID TWO COMPANIES WERE SUBJECT TO STAT UTORY AUDIT UNDER THE COMPANIES ACT. IN THE AUDITORS REPORTS OF THE ASSESSEE- COMPANY IT WAS CERTIFIED BY THE CHARTERED ACCOUNTAN T THAT THE BALANCE SHEET AND PROFIT & LOSS ACCOUNT WERE PREPARED AS PE R THE BOOKS OF ACCOUNT AND REFLECTED THE TRUE AND CORRECT WORKING OF ASSESSEE- COMPANY. 9. WHEN BOTH THE BALANCE SHEETS OF THE ASSESSEE-COM PANY AND BALANCE SHEETS OF THE COMPANIES IN WHICH THE ASSESS EE HAD INVESTED, REFLECTED THE AMOUNTS OF INVESTMENTS AND THESE CORR ECTLY TALLIED, WE CANNOT BRUSH ASIDE SUCH ACCOUNTS AND AUDITORS REPO RT. DOING SO WOULD BE GIVING A LICENCE TO ANY ASSESSEE-COMPANY T O PREPARE ANY BALANCE SHEET AND THEREAFTER GO BACK AND SAY ITSELF THAT THE BALANCE SHEET WAS NOT CORRECT. THE ASSESSEE CANNOT BE ALLO WED TO APPROBATE AND REPROBATE. ONCE ASSESSEE PREPARED ITS BOOKS OF ACCOUNT AND BALANCE SHEET WHICH WERE AUDITED BY A CHARTERED ACC OUNTANT APPOINTED UNDER THE COMPANIES ACT AS TRUE AND FAIR, AND WHERE THE AMOUNTS REFLECTED IN THE BALANCE SHEET ARE ALSO SHO WN IN THE BALANCE SHEETS OF THE COMPANIES WHERE ASSESSEE HAD PLACED T HE INVESTMENT, WE CANNOT DISREGARD SUCH BALANCE SHEETS. IT MAY BE TRUE THAT THE BANKER OF THE ASSESSEE DENIED GIVING ANY LOANS TO T HE ASSESSEE. 9 I.T.A. NO.2437/MDS/16 HOWEVER, IF THE SOURCE OF INVESTMENT WAS NOT OUT OF LOAN, THE QUESTION OF BANK GIVING ANY CONFIRMATION DOES NOT ARISE. TH E ADDITION WAS MADE, IN OUR OPINION, DUE TO FAILURE OF THE ASSESSE E TO GIVE PROPER SOURCE FOR INVESTMENT MADE BY THE ASSESSEE IN M/S S RI PADMABALAJI STEELS PVT. LTD. AND M/S SURYABALAJI STEELS PVT. LT D. ASSESSEES CLAIM THAT IT WAS ONLY BOOK ENTRY CANNOT BE ACCEPTED SINC E THE AMOUNTS WERE CORRECTLY REFLECTED IN THE BALANCE SHEET OF TH E ASSESSEE AS WELL AS THE BALANCE SHEETS OF M/S SRI PADMABALAJI STEELS PVT. LTD. AND M/S SURYABALAJI STEELS PVT. LTD. WE ARE OF THE OPINION THAT THE ADDITION WAS RIGHTLY MADE BY THE A.O. AND CONFIRMED BY THE C IT(APPEALS). WE DO NOT FIND ANY REASON TO INTERFERE WITH THE ORDER OF THE LOWER AUTHORITY AND ACCORDINGLY THE SAME IS CONFIRMED. 9. IN THE RESULT, THE APPEAL OF THE ASSESSEE STANDS DISMISSED. ORDER PRONOUNCED ON 3 RD FEBRUARY, 2017 AT CHENNAI. SD/- SD/- ( . . . ) ( ! .#$#% ) (N.R.S. GANESAN) (ABRAHAM P. GEORGE) /JUDICIAL MEMBER ' / ACCOUNTANT MEMBER /CHENNAI, 7 /DATED, THE 3 RD FEBRUARY, 2017. KRI. 10 I.T.A. NO.2437/MDS/16 0 .389 :9*3 /COPY TO: 1. ,- /APPELLANT 2. ./,- /RESPONDENT 3. 2 ;3 () /CIT(A) 4. 2 ;3 /CIT, 5. 9< .3 /DR 6. =% > /GF.