I.T.O Wd - 3(2) , kolkata., Kolkata V. M/s Ashadeep Entertainment Pvt Ltd., Kolkata

ITA 268/KOL/2013

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 4717 (ITAT-KOLKATA)
• Duration Of Justice: 3 year(s) 4 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 15-06-2016
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: C
• Next Hearing Date: 09-05-2016
• Assessment Year: 2008-2009
• Appeal Filed On: 07-02-2013
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: P K CHAKRABORTY
• Assessee Lawyers: R R MODI
• Keywords: Unexplained cash credit
• Section: 131; 68

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL KOLKATA BENCH C, KOLKATA (BEFORE SHRI P. M. JAGTAP, A.M. & SHRI S.S.VISWANET HRA RAVI, J.M.) ITA NO.268/KOL/2013 : A SSESSMENT YEAR: 2008-09 I.T.O., WARD-3(2) KOLKATA VS M/S. ASHADEEP ENTERTAINMENT PVT. LTD. PAN: AAGCA 0020M (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI P.K.CHAKRABORTY, ADDL. CIT RESPONDENT BY : SHRI R.R.MODI, A.R. DATE OF HEARING : 09.05.2016 DATE OF PRONOUNCEMENT :15.06.2016 ORDER SHRI P.M.JAGTAP, A.M. THIS APPEAL IS PREFERRED BY THE REVENUE AGAINST THE ORDER OF LD. CIT(A)-I, KOLKATA DATED 19.11.2012 FOR THE ASSESSME NT YEAR 2008-09. 2. IN GROUND NO.1, THE REVENUE HAS CHALLENGED THE A CTION OF THE LD. CIT(A) IN DELETING THE ADDITION OF RS.68,05,690/- M ADE BY THE AO UNDER SECTION 68 ON THE GROUND THAT THE LD. CIT(A) HAS GIVEN RELIEF TO THE ASSESSEE ON THIS ISSUE BY RELYING ON FRESH EVID ENCE WITHOUT GIVING OPPORTUNITY TO THE AO TO VERIFY THE SAME AS PER RUL E 46A OF THE INCOME TAX RULES. 3. THE ASSESSEE IN THE PRESENT CASE IS A COMPANY WH ICH IS ENGAGED IN THE BUSINESS OF FILM MAKING. THE RETURN OF INCOME F OR THE YEAR UNDER CONSIDERATION WAS FILED BY IT ON 30.09.2008 DECLARI NG A TOTAL LOSS OF RS.39,25,744/-. DURING THE COURSE OF ASSESSMENT PRO CEEDINGS, IT WAS 2 ITA NO.268/KOL/2013 M/S.ASH ADEEP ENTERTAINMENT PVT. LTD. ASSESSMENT YEAR 2008-09 NOTICED BY THE AO THAT THE ASSESSEE COMPANY HAS REC EIVED SHARE APPLICATION MONEY AGGREGATING TO RS.68,05,690/- FRO M VARIOUS PARTIES. IN ORDER TO VERIFY THE SAME, LETTERS WERE ISSUED BY THE AO TO THE CONCERNED PARTIES BUT ALL OF THEM WERE RETURNED UNS ERVED. SUMMON ISSUED UNDER SECTION 131 IN THIS REGARD TO SHRI PRA DEEP BHARDWAJ, DIRECTOR OF THE ASSESSEE COMPANY ALSO REMAINED UN-C OMPLIED. THEREAFTER, SEVERAL OPPORTUNITIES WERE GIVEN BY THE AO TO THE ASSESSEE TO EXPLAIN THE AMOUNTS OF SHARE APPLICATION MONEY R EPRESENTING CASH CREDITS IN TERMS OF SECTION 68 OF THE I.T. ACT. THE ASSESSEE HOWEVER FAILED TO COMPLY WITH THE REQUIREMENTS OF THE AO. T HE AO, THEREFORE PROCEEDED TO TREAT AMOUNT OF RS.68,05,690/- RECEIVE D BY THE ASSESSEE TOWARDS SHARE APPLICATION MONEY AS UNEXPLAINED CASH CREDIT UNDER SECTION 68 AND THE SAME WAS ADDED BY HIM TO THE TOT AL INCOME OF THE ASSESSEE. 4. THE ADDITION MADE BY THE AO UNDER SECTION 68 WAS CHALLENGED BY THE ASSESSEE IN THE APPEAL FILED BEFORE THE LD. CIT (A) AND AFTER CONSIDERING THE SUBMISSIONS MADE BY THE ASSESSEE AN D PERUSING THE RECORD, THE LD. CIT(A) DELETED THE SAID ADDITION FO R THE FOLLOWING REASONS GIVEN IN HIS IMPUGNED ORDER. AFTER CAREFUL CONSIDERATION OF ASSESSMENT ORDER AND WRITTEN SUBMISSION IT IS NOTICED THAT ASSESSEE-COMPANY WAS INCORPORATED ON 27.07.2006 AS CERTIFICATE OF INCORP ORATION ISSUED DY. REGISTRAR OF COMPANIES. IN THE FINANCIAL YEAR UNDER CONSIDERATION THE ASSESSEE- COMPANY HAD TAKEN OVER THE PROPRIETORSHIP CONCERN M/S ASHADEEP ENTERTAINME NT (PROP: SHRI PRADEEP KUMAR BHARDWAJ) W.E.F 01.04.200 7 AND ASSETS AND LIABILITIES WERE TAKEN OVER. SHRI PRADEE P KR. BHARDWAJ IS REGULARLY ASSESSED TO DCIT, CIRCLE-I, K OLKATA AND HAD FILED RETURN OF INCOME FOR RS.29,79,090/- F OR AY- 2007-08 AND 71841 SHARES AT FACE VALUE OF RS.10/- E ACH ALONGWITH SHARE PREMIUM OF RS.90/- PER SHARE WERE A LLOTTED TO SHRI PRADEEP KR. BHARDWAJ, MR.YUSAF KHAN AND FIV E PRIVATE LIMITED COMPANIES AS PER FORM NO.2 FILED WI TH ROC 3 ITA NO.268/KOL/2013 M/S.ASH ADEEP ENTERTAINMENT PVT. LTD. ASSESSMENT YEAR 2008-09 AND ALSO MENTIONED IN THE ASSESSMENT ORDER. THESE F IVE PVT. LTD. COMPANIES I.E. (I) M/S IDEAL GOODS & SERVICE P VT. LTD.,(II) M/S TOP GRAIN CONSULTANT PVT. LTD.,(III) M/S STRONG CONSTRUCTION PVT. LTD.,(IV) M/S TRANSSEEM COMMERCIA L PVT. LTD. AND (V) M/S RALLIWOLF DEALCOM PVT. LTD. HAD GI VEN UNSECURED LOANS TO THE PROPRIETOR CONCERN M/S ASHAD EEP ENTERTAINMENT IN EARLIER YEARS AND NO SHARE APPLICA TION MONEY WAS RECEIVED DURING THE CURRENT FINANCIAL YEA R AS SHARES WERE ALLOTTED FOR CONSIDERATION OTHER THAN C ASH. THE AO DID NOT PROPERLY APPRECIATE THE REPLY FURNISHED BY THE ASSESSEE ON 05.10.2010 BEFORE THE AO. KEEPING IN TH E VIEW THE ABOVE FACTS AND CIRCUMSTANCE THE ADDITION MADE BY THE AO U/S 68 IS DELETED. 5. WE HAVE HEARD THE ARGUMENTS OF BOTH SIDES AND AL SO PERUSED THE RELEVANT MATERIAL AVAILABLE ON RECORD. THE LIMITED CONTENTIO N RAISED BY THE LD. DR IS THAT THE SUBMISSION MADE BY THE ASSESSEE BEFORE THE LD. CIT( A) THAT THE AMOUNT IN QUESTION TOWARDS SHARE APPLICATION MONEY WAS NOT RECEIVED DU RING THE YEAR UNDER CONSIDERATION AND IT WAS A CASE OF CONVERSION OF UN SECURED LOANS TAKEN FROM THE CONCERNED PARTIES BY THE PROPRIETARY CONCERN IN THE EARLIER YEAR INTO SHARE CAPITAL DURING THE YEAR UNDER CONSIDERATION WAS NOT MADE BE FORE THE AO DURING THE COURSE OF ASSESSMENT PROCEEDINGS AND THE SAME MADE FOR THE FIRST TIME BEFORE HIM WAS ACCEPTED AND RELIED UPON BY THE LD. CIT(A) TO GIVE RELIEF TO THE ASSESSEE WITHOUT GIVING ANY OPPORTUNITY TO THE AO TO VERIFY THE SAME . ALTHOUGH THE LD. COUNSEL FOR THE ASSESSEE HAS MADE AN ATTEMPT TO SUBMIT THAT THI S INFORMATION WAS FURNISHED BY THE ASSESSEE BEFORE THE AO VIDE LETTER DATED 5 TH OCTOBER, 2010, A PERUSAL OF THE SAID LETTER (COPY PLACED AT PAGE NOS. 34 AND 35 OF THE P APER BOOK) SHOWS THAT THE SUBMISSION MADE BY THE ASSESSEE BEFORE THE LD. CIT( A) ON THIS ISSUE WAS NOT THERE BEFORE THE AO, EVEN IN THE LETTER DATED 5 TH OCTOBER, 2010 FILED BY THE ASSESSEE. ON THE OTHER HAND, THERE WAS A COMPLETE NON-COMPLIANCE ON THE PART OF THE ASSESSEE DURING THE COURSE OF ASSESSMENT PROCEEDINGS AS POIN TED OUT BY THE AO IN THE ASSESSMENT ORDER AND KEEPING IN VIEW THE SAME, THE LD. CIT(A), IN OUR OPINION, OUGHT TO HAVE GIVEN AN OPPORTUNITY TO THE AO TO VER IFY THE SUBMISSION MADE BY THE ASSESSEE ON THIS ISSUE FOR THE FIRST TIME BEFORE HI M BEFORE GIVING RELIEF TO THE ASSESSEE 4 ITA NO.268/KOL/2013 M/S.ASH ADEEP ENTERTAINMENT PVT. LTD. ASSESSMENT YEAR 2008-09 BY RELYING ON THE SAME. WE, THEREFORE SET ASIDE THE IMPUGNED ORDER OF THE LD. CIT(A) ON THIS ISSUE AND RESTORE THE MATTER TO THE FILE OF THE AO FOR DECIDING THE SAME AFRESH AFTER VERIFYING THE SUBMISSION MADE BY THE ASSESSEE FOR THE FIRST TIME BEFORE THE LD. CIT(A) THAT THE AMOUNT IN QUESTION TOWARDS SHARE AP PLICATION MONEY WAS NOT RECEIVED IN THE YEAR UNDER CONSIDERATION AND IT WAS A CASE OF CONVERSION OF LOANS RECEIVED IN THE EARLIER YEAR INTO SHARE CAPITAL IN THE YEAR UNDER CONSIDERATION. GROUND NO.1 OF THE REVENUES APPEAL IS ACCORDINGLY TREATED AS ALLOWED FOR STATISTICAL PURPOSES. 6. IN GROUND NO.2, THE REVENUE HAS CHALLENGED THE A CTION OF THE LD. CIT(A) IN DELETING THE ADDITION OF RS.67,49,377/- MADE BY THE AO ON ACCOUNT OF DISALLOWANCE OF ASSESSEES CLAIM FOR OPENING WIP. 7. IN ITS PROFIT & LOSS ACCOUNT FILED ALONGWITH THE RETURN OF INCOME A SUM OF RS.67,49,377/- WAS SHOWN BY THE ASSESSEE AS OPENING WIP. THE AO, HOWEVER FOUND THAT THERE WAS NO CLOSING WIP SHOWN BY THE ASSESSEE IN THE ACCOUNTS OF THE IMMEDIATELY PRECEDING YEAR. SINCE NO EXPLANATION IN THIS REGARD WAS OFFERED BY THE ASSESSEE DESPITE SEVERAL OPPORTUNITIES GIVEN BY THE AO, THE AO MADE AN ADDITION OF RS.67,49,377/- TO THE TOTAL INCOME OF THE ASSESSEE BY DISALLOWING ITS CLAIM FOR OPENING WIP. ON APPEAL, THE LD. CIT(A) DELETED THE ADDITION MADE BY THE AO ON THIS ISSUE AFTER HAVING FOUND THAT THE CLOSING WIP OF RS.67,49,377/- WAS DULY REFLECTED IN THE P&L ACCOUNT AND BALANCE-SHEET OF T HE ERSTWHILE PROPRIETARY CONCERN AS ON 31.03.2007 WHICH WAS TAKEN OVER AND MERGED WI TH THE ASSESSEE COMPANY AS ON 01.04.2007. 8. WE HAVE HEARD THE ARGUMENTS OF BOTH SIDES AND AL SO PERUSED THE RELEVANT RECORD. IT IS OBSERVED THAT THE PROPRIETARY CONCERN M/S. ASHADEEP ENTERTAINMENT WAS TAKEN OVER AND MERGED WITH THE ASSESSEE COMPANY AS ON 01.04.2007 AND AFTER HAVING FOUND THAT THE CLOSING WIP OF RS.67,49,377/- WAS DU LY REFLECTED IN THE P&L ACCOUNT 5 ITA NO.268/KOL/2013 M/S.ASH ADEEP ENTERTAINMENT PVT. LTD. ASSESSMENT YEAR 2008-09 AND BALANCE-SHEET OF THE SAID PROPRIETARY CONCERN A S ON 31.03.2007, THE LD. CIT(A) ACCEPTED THE CLAIM OF THE ASSESSEE COMPANY FOR OPEN ING WIP OF RS.67,49,377/-. IT IS ALSO OBSERVED THAT EVEN IN THE LETTER DATED 5 TH OCTOBER, 2010 FILED DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE AMOUNT IN QUESTION O N ACCOUNT OF CLOSING WIP WAS CLEARLY INDICATED BY THE ASSESSEE IN THE ASSETS AND LIABILITIES OF THE PROPRIETARY CONCERN WHICH HAD BEEN TAKEN OVER ON MERGER. HAVING REGARD TO ALL THESE FACTS OF THE CASE, WE ARE OF THE VIEW THAT THE ADDITION OF RS.67 ,49,377/- MADE BY THE AO BY DISALLOWING THE CLAIM OF THE ASSESSEE FOR OPENING W IP WAS NOT SUSTAINABLE AND THE LD. CIT(A) IS FULLY JUSTIFIED IN DELETING THE SAME. WE, THEREFORE UPHOLD THE IMPUGNED ORDER OF THE LD. CIT(A) ON THIS ISSUE AND DISMISS. GROUND NO.2 OF THE REVENUES APPEAL. 9. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS TREATED AS PARTLY ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 15 TH JUNE,2016. SD/- SD/- (S.S.VISWANETHRA RAVI) ( P.M.JAGTAP) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 15/06/2016 TALUKDAR/SR.PS COPY OF ORDER FORWARDED TO: 1 M/S. ASHADEEP ENTERTAINMENT PVT. LTD., 18/10, DOVER LANE, KOLKATA 700 029 2 I.T.O. WARD-3(2), KOLKATA-700 069 3 THE CIT(A), 4 5 CIT, 5. D.R. TRUE COPY, BY ORDER, ASSTT. REGISTRAR , ITAT, KOLKATA 6 ITA NO.268/KOL/2013 M/S.ASH ADEEP ENTERTAINMENT PVT. LTD. ASSESSMENT YEAR 2008-09