ACIT-Circle -13(1), Hyderabad V. M/s Larsco Entertainment Pvt. Ltd., Hyderabad

ITA 249/HYD/2014

• Counselvise Citation: [2015] 121 COUNSELVISE.COM (IT) 0355 (ITAT-HYDERABAD)
• Duration Of Justice: 1 year(s) 2 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 17-04-2015
• Appeal Filed By: Department
• Bench Allotted: A
• Next Hearing Date: 13-04-2015
• Assessment Year: 2009-2010
• Appeal Filed On: 17-02-2014
• Court: TRIBUNAL
• Department Lawyers: G APARNA RAO
• Keywords: Unexplained cash credit; Depreciation; Source of fund
• Section: 68; 69

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCHES A, HYDERABAD BEFORE SHRI B. RAMAKOTAIAH, ACCOUNTANT MEMBER AND SHRI SAKTIJIT DEY, JUDICIAL MEMBER I.T.A. NO. 249/HYD/2014 ASSESSMENT YEAR: 2009-10 ASST. COMMISSIONER OF INCOME TAX, CIRCLE-13(1), HYDERABAD VS M/S.LARSCO ENTERTAINMENT PVT. LTD., JUBILEE HILLS, HYDERABAD [PAN: AABCL0476B] (APPELLANT) (RESPONDENT) FOR REVENUE : S MT. G. APARNA RAO, DR FOR A SSESSEE : SHRI K.C. DEVDAS, AR DATE OF HEARING : 13 - 0 4 - 201 5 DATE OF PRONOUNCEM ENT : 1 7 - 04 - 2015 O R D E R PER B. RAMAKOTAIAH, A.M. : THIS IS A REVENUE'S APPEAL FILED AGAINST THE ORDER OF THE COMMISSIONER OF INCOME TAX(APPEALS)-V, HYDERABAD DA TED 31-10-2013. 2. BRIEFLY STATED, ASSESSEE-COMPANY IS ENGAGED IN T HE BUSINESS OF PRODUCTION AND DISTRIBUTION OF FEATURE FILMS. IT F ILED ITS RETURN OF INCOME ADMITTING TOTAL INCOME OF RS.16,75,450/- BEFORE SET -OFF OF UNABSORBED LOSSES/DEPRECIATION. IN THE COURSE OF SCRUTINY PRO CEEDINGS, ASSESSING I.T.A. NO. 249/HYD/2014 M/S.LARSCO ENTERTAINMENT PVT. LTD., :- 2 -: OFFICER [AO] NOTICED THAT ASSESSEE HAS RECEIVED RS. 15 CRORES AS SHARE APPLICATION MONEY DURING THE YEAR. AO WRONGLY NOTE D THAT THIS AMOUNT WAS RECEIVED FROM M/S. LANCO INFRATECH PVT. LTD., W HEREAS THE AMOUNT WAS RECEIVED FROM ONE OF THE DIRECTORS SHRI L. SRID HAR. AO FURTHER NOTED THAT ASSESSEE-COMPANY HAS INVESTED THE SAME IN M/S. JUBILEE MEDIA COMMUNICATIONS (P) LTD. HE NOTICED THAT THE SAID C OMPANY HAS FURTHER INVESTED THE AMOUNT IN M/S. JAGATHI PUBLICATIONS LT D. HE ALSO STATES THAT A SIMILAR TRANSACTION WAS INVOLVED IN PREVIOUS YEAR RELEVANT TO AY.2008-09 WHEREIN RS.20 CRORES WAS RECEIVED FROM M /S. LANCO INFRATECH PVT. LTD., WHICH IN TURN WAS INVESTED AS SHARE APPLICATION MONEY IN M/S. JUBILEE MEDIA COMMUNICATIONS (P) LTD. HE FURTHER STATES THAT NEITHER M/S. JUBILEE MEDIA COMMUNICATIONS (P) LTD., ALLOTTED SHARES TO ASSESSEE-COMPANY NOR ASSESSEE-COMPANY ALL OTTED SHARES TO M/S. LANCO INFRATECH PVT. LTD., HE COMES TO THE CO NCLUSION THAT THE FUNDS THAT ORIGINATE FROM M/S. LANCO INFRATECH PVT. LTD., HAVE TRANSFERRED TO M/S. JAGATHI PUBLICATIONS LTD., THRO UGH INTERMEDIARIES AND SINCE CBI IS ENQUIRING THE INVESTMENTS MADE IN M/S. JUBILEE MEDIA COMMUNICATIONS (P) LTD., AO HELD THAT AMOUNT OF RS. 15 CRORES RECEIVED BY ASSESSEE IN THE GUISE OF SHARE APPLICATION MONEY AS ITS INCOME AND THE SAME WAS BROUGHT TO TAX. AO DID NOT MENTION UN DER WHICH SECTION OF THE INCOME TAX ACT, THE SHARE APPLICATION MONEY WAS CONSIDERED AS INCOME. 3. BEFORE THE LD.CIT(A), ASSESSEE CLAIMED THAT THE AMOUNT OF RS.15 CRORES WAS BORROWED BY MR.L. SRIDHAR, DIRECTOR OF M /S. LANCO GROUP LTD., AS UNSECURED LOAN. THIS AMOUNT WAS RECEIVED THROUGH RTGS FROM THE LENDER AND INTRODUCED IN ASSESSEE-COMPANY AS SH ARE APPLICATION MONEY FROM SHRI L. SRIDHAR. THIS AMOUNT WAS FINALL Y PAID BY SHRI L. SRIDHAR TO M/S. LANCO GROUP LTD., AND HENCE IN SUPP ORT OF INTRODUCTION OF CAPITAL INTO THE COMPANY, A CONFIRMATION FROM TH E LENDER WAS FILED. IT I.T.A. NO. 249/HYD/2014 M/S.LARSCO ENTERTAINMENT PVT. LTD., :- 3 -: WAS FURTHER SUBMITTED THAT SHARES WERE ALSO ALLOTTE D TO SHRI L. SRIDHAR SUBSEQUENTLY. IT WAS FURTHER SUBMITTED THAT ASSESS EE INVESTED A SIMILAR AMOUNT IN M/S. JUBILEE MEDIA COMMUNICATIONS (P) LTD ., AS SHARE APPLICATION MONEY AGAINST WHICH SHARES WERE ALLOTTE D TO THE COMPANY ON 01-03-2011. AS A PART OF COMPANY'S INVESTMENT STRA TEGY, IT WAS DECIDED TO ROUTE THE INVESTMENT THROUGH A COMPANY SO THAT A LL MEDIA RELATED INVESTMENTS CAN BE CHANNELED THROUGH ONE COMPANY SO AS TO HAVE FLEXIBILITY IN THE MATTER AT THE TIME OF DIS-INVEST MENT OR RESTRUCTURING OF THE INVESTMENTS MADE. FURTHER, IT WAS SUBMITTED TO THE CIT(A) THAT THERE IS NO CASE AGAINST M/S. JUBILEE MEDIA COMMUNI CATIONS (P) LTD. BY CBI AND FILED CERTAIN EVIDENCE IN SUPPORT. IT WAS FURTHER CONTENDED THAT AO HAS NOT BROUGHT ANYTHING ON RECORD TO SUBSTANTIA TE THAT UN- ACCOUNTED INCOME OF ASSESSEE WAS ROUTED. THERE WER E OTHER OBJECTIONS ALSO BY ASSESSEE ON THE ORDER OF THE AO WITH WHICH WE ARE NOT CONCERNED IN THIS APPEAL. LD.CIT(A) REMITTED THE MATTER TWIC E TO AO AND OBTAINED VARIOUS COMMENTS/OBJECTIONS FROM THE AO WITH REFERE NCE TO THE MERITS OF THE ADDITION, AO SIMPLY RELIED ON THE ASSESSMENT OR DER IN THE FIRST REMAND REPORT. NOT SATISFIED WITH THE FIRST REMAND REPORT, CIT CALLED FOR SECOND REMAND REPORT WHICH WAS EXTRACTED AT PARA 7. 4 OF THE ORDER. FINALLY, CONSIDERING THE OBJECTIONS FROM AO AND COM MENT FROM THE ASSESSEE, LD.CIT(A) DELETED THE AMOUNT BY STATING A S UNDER: 8. I HAVE CAREFULLY CONSIDERED THE SUBMISSIONS OF THE APPELLANT, REMAND REPORTS OF THE A.C. AND THE REMARKS OF THE CIT(APPEALS)- II, HYDERABAD ON THE REMAND REPORT OF THE A.C. AND THE ASSESSMENT ORDER. I AM OF THE CONSIDERED VIEW THAT THE ADDITION IS NOT CALLED FOR THE FOLLOWING REASONS: I) THE ASSESSING OFFICER HAS NOT DISBELIEVED THE INITI AL SOURCE OF LOAN OF RS.15 CRORES INCURRED BY SRI L SRIDHAR THRO UGH BANKING CHANNEL FROM LANCO GROUP LTD. APPELLANT HAD FILED NE CESSARY EVIDENCE IN THIS REGARD. THIS IS AN UNDISPUTED FACT ON RECORD AS THERE IS NO ADVERSE COMMENT OF THE ASSESSING OFFICE R IN THE ASSESSMENT ORDER. I.T.A. NO. 249/HYD/2014 M/S.LARSCO ENTERTAINMENT PVT. LTD., :- 4 -: II) ASSESSING OFFICER HAS NOT DOUBTED THE FACT THAT SAID AMOUNT OF RS.15 CRORES RECEIVED FROM LANCO GROUP LTD WAS INV ESTED IN APPELLANT COMPANY BY SRI SRIDHAR TOWARDS SHARE APP LICATION MONEY AND SHARES WERE ALLOTTED TO HIM. THIS IS AN UNDISPUTED FACT AS WOULD BE CLEAR FROM THE ASSESSMENT ORDER. THEREFORE THE SOURCE OF MONEY OF RS.15 CRORES INTRODUCED IN THE BOOKS OF APPELLANT COMPANY STOOD EXPLAINED. III) AS PER THE PROVISIONS OF SECTION 68, WHERE ANY SUM OF MONEY IS FOUND CREDITED IN THE BOOKS DURING A PREVIOUS YEAR AND THE ASSESSEE FAILS TO OFFER AN EXPLANATION ABOUT THE N ATURE AND SOURCE OF THEREOF OR THE EXPLANATION OF THE ASSESSEE IS F OUND NOT SATISFACTORY, THE ASSESSING OFFICER CAN TREAT THE AMOUNT AS UNEXPLAINED CASH CREDIT AND DEEM THE AMOUNT AS INC OME OF THE ASSESSEE FOR THE PREVIOUS YEAR. AS MENTIONED ABOVE , THE FLOW OF FUND HAS BEEN SATISFACTORILY EXPLAINED BY THE APPE LLANT AND ASSESSING OFFICER HAS NO ALLEGATION OR DOUBT ABOUT THE NATURE AND SOURCE OF THE SAID AMOUNT OF RS.15 CRORES. THERE I S NO WHISPER IN THE ASSESSMENT ORDER THAT THE APPELLANT-COMPANY H AS FAILED TO EXPLAIN THE SOURCES OF INVESTMENT ORIGINATING F ROM L. SRIDHAR. THEREFORE, THE PROVISION OF SECTION 68 IS NOT ATTRA CTED TO MAKE THE ADDITION MERELY BECAUSE THE AMOUNT WAS SUBSEQUENTL Y INVESTED IN JUBILEE MEDIA LTD, AN ENTITY WHICH WAS INVESTIG ATED BY INVESTIGATION AGENCY. IV) IT IS A LEGAL MANDATE THAT ASSESSING OFFICER I S REQUIRED TO MAKE HIS OWN ENQUIRIES AND WHEN HE IS SATISFIED T HAT SOURCE OF ANY INVESTMENT IS NOT EXPLAINED BY THE ASSESSEE OR HE IS NOT SATISFIED ABOUT THE EXPLANATION, HE WOULD RE ACH HIS OWN FINDINGS AS REQUIRED UNDER LAW. THE ASSESSING OFF ICER HAS FAILED TO RECORD ANY SUCH FINDING. ON THE OTHER HAND, HE WAS SATISFIED WITH THE ORIGIN OF FUND WHICH WAS INVESTED IN THE APPEL LANT COMPANY. AO CANNOT ADD ANY AMOUNT MERELY ON THE GROUND THAT THE EXPLAINED AMOUNT WAS SUBSEQUENTLY INVESTED IN ANO THER COMPANY. V) IT WOULD BE RELEVANT TO MENTION HERE THAT IN THE A. Y.2008-09 AND A.Y.2010-11, SIMILAR TRANSACTION HAD BEEN ACCEP TED IN SCRUTINY ASSESSMENT AFTER NECESSARY VERIFICATION OF BOOKS AND BANK ACCOUNT. VI) EVEN THE CIT (APPEALS)-II, HYDERABAD, VIDE HER LETTER DATED 7-11-2012 ADDRESSED TO THE DCIT CIRCLE 3(1), HYDERABAD, COMMENTING ON HIS REMAND REPORT DATED 1- 11-2012 HAD HELD IN PARA.3 THAT AS OBSERVED FROM T HE I.T.A. NO. 249/HYD/2014 M/S.LARSCO ENTERTAINMENT PVT. LTD., :- 5 -: ASSESSMENT ORDER, THE ORDER WAS PASSED ON SURMISES WITHOUT ANY SUPPORTING CLARIFICATIONS BEFORE MAKIN G THE ADDITION OF RS. 15 CRORES. 8.1 IT IS AN ESTABLISHED POSITION OF LAW, AS STATED BY THE HON'BLE SUPREME COURT IN CHHATRASINHJI KESARISINHJI THAKORE V. COMMISSIONER OF INCOME-TAX [1966] 59 ITR 562 SC, THAT THE INCOME-TAX OFFICER IS, WITHIN THE LIMITS ASSIGNED T O HIM UNDER THE ACT, A TRIBUNAL OF EXCLUSIVE JURISDICTION FOR PURPO SES OF ASSESSMENT AND HE HAS, UNDER THE ACT, TO DECIDE WHETHER A PAR TICULAR RECEIPT IS 11 INCOME 11 OR NOT. IT IS EQUALLY BEYOND DOUBT THAT A STATUTOR Y AUTHORITY IS BOUND TO HOLD STATUTORY INQUIRY AND P ERFORM STATUTORY DUTIES AND SUCH AUTHORITIES COULD NEVER BE PRECLUDED FROM DISCHARGING STATUTORY FUNCTIONS. THEREFORE, H E SHOULD NOT HAVE BEEN INFLUENCED BY THE FACT THAT SOME ENQUIRY IS LAUNCHED BY SOME OTHER AUTHORITY, THE OUTCOME OF WHICH WAS NOT KNOWN. THE ASSESSING OFFICER IS NOT REQUIRED TO TRAVEL IN AN UNKNOWN TERRITORY WHICH HAS NO SANCTION IN LAW, IGNORING A STATUTORY PROVISION AND MAKE ADDITION WHEN HE WAS SATISFIED ABOUT THE SOURCE OF FUND INTRODUCED IN THE BOOKS OF THE APPE LLANT COMPANY. IT MAY BE NOTED THAT UTILISATION OF AN EX PLAINED FUND IS NOT MATERIAL TO MAKE ADDITION UNDER SECTION 68. 8.2 IN COURSE OF APPEAL HEARING, THE AR PRODUCED BE FORE ME A PRESS CUTTING IN 'HINDU' DATED 24TH SEPTEMBER, 2013, THAT NO ACTION HAS BEEN SUGGESTED AGAINST JUBILEE MEDIA (P) LIMITED BY THE INVESTIGATION AGENCY AS NO CHARGE SHEET ALLEGING QU ID PRO QUO AGAINST IT WAS FILED. AN AFFIDAVIT HAS BEEN FILED CORROBORATING THE PRESS NOTE. BE THAT AS IT MAY, THE SOURCE OF FUND IN THE HANDS OF APPELLANT COMPANY (LARSCO ENTERTAINMENT), WHICH WA S INVESTED IN JUBILEE MEDIA, HAVING NOT BEEN DOUBTED, THE ADDITI ON OF RS.15 CRORE IS NOT CALLED FOR IN THE HANDS OF THE APPELL ANT COMPANY. 8.3 FOR THE FORE-GOING REASONS, I HOLD THAT THE A.D . WAS NOT JUSTIFIED IN MAKING ADDITION OF RS.15 CRORES TOWARDS SHARE A PPLICATION MONEY, PARTICULARLY WHEN THE SOURCE OF INVESTMENT WAS EXPLAINED AND NOT DOUBTED BY THE A.D. AND HENCE, DE LETE THE ADDITION. 4. AFTER CONSIDERING THE RIVAL CONTENTIONS AND PERU SING THE PAPER BOOK PLACED ON RECORD BY ASSESSEE, WE ARE OF THE OP INION THAT THERE IS NO MERIT IN THE REVENUE'S APPEAL. FIRST OF ALL, AO GI VES A FINDING THAT THE I.T.A. NO. 249/HYD/2014 M/S.LARSCO ENTERTAINMENT PVT. LTD., :- 6 -: MONEY WAS RECEIVED FROM ONE COMPANY AND IN TURN WAS INVESTED IN ANOTHER COMPANY. THERE IS NO FINDING THAT MONEY RE CEIVED WAS UN- EXPLAINED. INVOKING THE PROVISIONS OF SECTION 68 / 69 OF THE ACT REQUIRE A FINDING BY AO THAT THE CREDIT IS UN-EXPLAINED. THERE IS NO SUCH FINDING EITHER IN THE ASSESSMENT ORDER OR IN THE RE MAND REPORTS. MOREOVER, JUST BECAUSE ANOTHER GOVERNMENT AUTHORITY IS INVESTIGATING THE FUND FLOW, IT CANNOT BE CONCLUDE THAT THE FUNDS RECEIVED BY ASSESSEE- COMPANY ARE UN-EXPLAINED. THEREFORE, CONSIDERING T HE FACTS OF THE CASE AND THE FINDINGS BY THE CIT(A), WE DO NOT SEE ANY R EASON TO INTERFERE WITH THE ORDER. HOWEVER, THIS FINDING IS ONLY WITH REFE RENCE TO THE PROVISIONS OF THE ACT AND SHOULD NOT COME IN THE WAY OF CBI IN VESTIGATING THE VARIOUS SOURCES OF FUNDS AND REVENUE IS FREE TO TAK E NECESSARY ACTION IN CASE THE FUNDS ARE FOUND TO BE UN-EXPLAINED. 5. WITH THESE OBSERVATIONS, REVENUE'S APPEAL IS DIS MISSED. ORDER PRONOUNCED IN OPEN COURT ON 17 TH APRIL, 2015. SD/- SD/- (SAKTIJIT DEY) (B. RAMAKOTAIAH) JUDICIAL MEMBER ACCOUN TANT MEMBER HYDERABAD, DATED 17 TH APRIL, 2015 TNMM I.T.A. NO. 249/HYD/2014 M/S.LARSCO ENTERTAINMENT PVT. LTD., :- 7 -: COPY TO : 1. OFFICE OF THE ASST. COMMISSIONER OF INCOME TAX, CIR CLE - 13(1), 2 ND FLOOR, AAYAKAR BHAVAN, BASHEERBAGH, HYDERABAD. 2. M/S. LARSCO ENTERTAINMENT PVT. LTD., NO.822, ROA D NO.40, JUBILEE HILLS, HYDERABAD. 3. CIT(APPEALS)-V, HYDERABAD 4. CIT-I, HYDERABAD 5. D.R. ITAT, HYDERABAD