ACIT, Madurai V. M/s. Susee Engineering & Automobiles P Limited, Tirunelveli

ITA 300/CHNY/2011

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 64146 (ITAT-CHENNAI)
• Duration Of Justice: 1 year(s) 6 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-08-2012
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 22-08-2012
• Assessment Year: 2005-2006
• Appeal Filed On: 21-02-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: K RAJAGOPAL
• Assessee Lawyers: G BASKAR
• Keywords: Unexplained investment; Assessment record

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH, CHENNAI BEFORE SHRI ABRAHAM P. GEORGE, ACCOUNTANT MEMBER AND SHRI CHALLA NAGENDRA PRASAD, JUDICIAL MEMBER I.T.A. NO. 300/MDS/2011 ASSESSMENT YEAR : 2005-06 THE ASSISTANT COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE III, MADURAI. (APPELLANT) V. M/S SUSEE ENGINEERING & AUTOMOBILES PVT. LTD., 184/2, TRIVANDRUM ROAD, VANNARPETTAI, TIRUNELVELI. PAN : AAHCS8802L (RESPONDENT) APPELLANT BY : SHRI K. RAJAGOPAL, JCIT RESPONDENT BY : SHRI G. BASKAR, ADVOCATE DATE OF HEARING : 22.08.2012 DATE OF PRONOUNCEMENT : 22.08.2012 O R D E R PER ABRAHAM P. GEORGE, ACCOUNTANT MEMBER : THIS IS A RECALLED MATTER. THE APPEAL HAS BEEN RE CALLED FOR THE LIMITED PURPOSE OF DISPOSING OF AN ADDITIONAL GROUN D FILED BY THE REVENUE, RELATING TO AN ADDITION MADE FOR UNEXPLAIN ED INVESTMENT OF ` 54,83,332/- IN SHARES BY THE ASSESSEE. 2. FACTS APROPOS ARE THAT ONE SHRI R. PURUSHOTHAMAN (HUF) WAS THE MAIN PARTNER OF A FIRM CALLED SUSEE AUTO (FIRM) HAV ING THREE DIVISIONS, 2 I.T.A. NO. 300/MDS/11 NAMELY, SUSEE MOTORS, SUSEE HYUNDAI AND BAJAJ TWO W HEELER. THESE THREE DIVISIONS WERE TAKEN OVER BY THREE SEPARATE C OMPANIES, NAMELY, SUSEE AUTO ZONE (P) LTD., SUSEE ENGINEERING AND AUT OMOBILES (P) LTD. AND SUSEE VEHICLE DEALERS (P) LTD. SUSEE AUTO ZONE (P) LTD. WAS INCORPORATED ON 16.4.2004, SUSEE ENGINEERING AND AU TOMOBILES (P) LTD. WAS INCORPORATED ON 9.10.2003 AND SUSEE VEHICLE DEA LERS (P) LTD. WAS INCORPORATED ON 22.10.2003. IN LIEU OF DIVISIONS T AKEN OVER, SHRI R. PURUSHOTHAMAN (HUF) WAS ALLOTTED SHARES IN THESE RE SPECTIVE COMPANIES. IN THE ASSESSMENT DONE ON SHRI R. PURUS HOTHAMAN AS WELL AS SHRI R. PURUSHOTHAMAN (HUF), THE SHARES ALLOTTED IN THESE THREE COMPANIES WERE CONSIDERED AS UNEXPLAINED INVESTMENT S AND ADDITIONS WERE MADE. PROTECTIVE ASSESSMENTS WERE ALSO DONE F OR THE SAME AMOUNTS IN THE HANDS OF THE COMPANIES EXCEPT FOR SU SEE AUTO ZONE (P) LTD. ASSESSEE HERE IS ONE AMONG THESE COMPANIES, N AMELY, SUSEE ENGINEERING & AUTOMOBILES (P) LTD. ASSESSING OFFIC ER WAS OF THE OPINION THAT ` 59,50,000/-, SHARE CAPITAL OF SHRI R. PURUSHOTHAMA N WAS NOT PROPERLY EXPLAINED AND THE SAID SHRI R. PURUSHO THAMAN HAD ONLY A SOURCE OF ` 13 TO 14 LAKHS AVAILABLE FOR SUCH INVESTMENTS. HE ACCEPTED THE EXPLANATION INSOFAR AS IT RELATED TO ` 4,66,668/- AND MADE AN ADDITION OF THE BALANCE AMOUNT OF ` 54,83,332/- IN ASSESSEES HANDS PROTECTIVELY. 3 I.T.A. NO. 300/MDS/11 3. IN ITS APPEAL BEFORE CIT(APPEALS), ASSESSEES EX PLANATION WAS THAT SHARES ISSUED TO SHRI R. PURUSHOTHAMAN WERE IN LIEU OF THE ASSETS TRANSFERRED BY THE FIRM TO THE ASSESSEE-COMPANY. C IT(APPEALS) NOTED THAT IN THE CASE OF SHRI R. PURUSHOTHAMAN, SUCH ADD ITIONS MADE FOR INVESTMENTS IN SHARE CAPITAL WAS DELETED, WITH A FI NDING THAT THERE WAS NO UNRECORDED INVESTMENT CALLING FOR ANY EXPLANATIO N OF SOURCE. THEREFORE, HE DELETED THE ADDITIONS PROTECTIVELY MA DE IN ASSESSEES HANDS ALSO. 4. WHEN THE MATTER CAME UP BEFORE US, LEARNED D.R. SUBMITTED THAT SIMILAR ADDITION MADE IN THE HANDS OF SUSEE VEHICLE DEALERS PVT. LTD., WHICH WAS ALSO DELETED BY THE CIT(APPEALS) IN THE A PPEAL OF THE SAID COMPANY, WAS AFFIRMED BY THIS TRIBUNAL VIDE ITS ORD ER DATED 13 TH JANUARY, 2012 IN I.T.A. NO. 303/MDS/2011. LEARNED A.R. PLAC ED A COPY OF THE SAID ORDER OF TRIBUNAL AS PART OF PAPER-BOOK AT PAG ES 39-43. 5. WE HAVE PERUSED THE ORDERS AND HEARD THE SUBMIS SIONS. AS AFOREMENTIONED, THE SHARES ISSUED TO SHRI R. PURUSH OTHAMAN, WHEREIN THREE COMPANIES, NAMELY, SUSEE AUTO ZONE (P) LTD., SUSEE ENGINEERING AND AUTOMOBILES (P) LTD. AND SUSEE VEHI CLE DEALERS (P) LTD. ASSESSMENT DONE CONSIDERING SUCH INVESTMENTS IN SHARES TO BE UNEXPLAINED IN THE HANDS OF SUSEE VEHICLE DEALERS ( P) LTD., WAS AN ISSUE WHICH CAME UP BEFORE THIS TRIBUNAL IN REVENUE S APPEAL IN I.T.A. 4 I.T.A. NO. 300/MDS/11 NO. 303/MDS/2011. THIS TRIBUNAL, IN ITS DECISION D ATED 13 TH JANUARY, 2012, HAD FOLLOWED ITS EARLIER DECISION IN THE CASE OF SHRI R. PURUSHOTHAMAN (HUF) IN I.T.A. NO. 1454 & 1455/MDS/2 010 DATED 17.10.2011 AND DELETED THE ADDITIONS. RELEVANT PAR AS 3 AND 4 OF THE ORDER OF THE TRIBUNAL IS REPRODUCED HEREUNDER:- 3. VIS--VIS THE SECOND ISSUE, WE FIND THAT THIS TRI BUNAL HAD ALREADY CONSIDERED A SIMILAR ADDITION MADE IN THE C ASE OF SHRI R. PURUSHOTHAMAN (HUF) FOR INVESTMENT MADE IN THE SHAR E CAPITAL OF SAME ASSESSEE IN I.T.A. NO. 1454 AND 1455/MDS/2010 DATED 17.10.2011. IT WAS HELD WITH REGARD TO THIS ISSUE ON U NEXPLAINED INVESTMENT IN SHARE CAPITAL, THAT THE CAPITAL INTRO DUCTION IN ASSESSEES COMPANY WAS OUT OF TRANSFER OF STOCK TRADING ON CRE DITORS, DEBTORS, CASH, BANK BALANCE. THERE IS A SPECIFIC FINDING TH AT THERE IS NO CASH FUND DIRECTLY INTRODUCED IN THESE COMPANIES. RELEV ANT PARA 6 OF THE ORDER OF TRIBUNAL MENTIONED SUPRA, IS REPRODUCED HE REUNDER FOR BREVITY:- 6. WE HAVE GONE THROUGH THE RECORDS AND HAVE FOUND T HAT THE ASSESSING OFFICER HAS SIMPLY CONSIDERED THE SPE CIAL AUDIT REPORT OBTAINED U/S 142(2A) AND HAS ALSO FAILED TO CON SIDER THE DISCONTINUATION OF BUSINESS OF THE FIRM IN WHIC H THE ENTIRE ASSETS BELONG TO THE ASSESSEE AND HIS WIFE AND SON AS STATED ABOVE. THE ASSESSING OFFICER HAS ALSO FAILED TO CONSIDER THE SPECIAL AUDIT REPORT WHICH EXPLAINED THE FACTUAL POS ITION OF THIS CASE. STOCKS OF THE FIRM WERE SOLD AND TRANSF ERRED TO THE ABOVE STATED THREE PRIVATE LIMITED COMPANIES. THE SUNDRY DEBTORS AND SUNDRY CREDITORS ALONGWITH THE A VAILABLE CASH AND BANK BALANCES WERE TRANSFERRED TO THE RESP ECTIVE PRIVATE LIMITED COMPANIES FROM THE RESPECTIVE DIVIS IONS. THE CAPITAL CONTRIBUTION IN THE PRIVATE LIMITED COMPANI ES IS ONLY BY WAY OF SALE OF VEHICLES AND TRANSFER OF DEBTORS, CR EDITORS AND CASH/BANK BALANCES. THE NECESSARY ENTRIES ARE RECO RDED IN THE BOOKS OF THE FIRM AS WELL AS THAT OF THE COMPAN IES AND NO DIRECT CASH/FUNDS ARE INTRODUCED BY THIS ASSESSEE I N THE SAID PRIVATE LIMITED COMPANIES. THE TRANSFER IS ONLY BY JOURNAL ENTRIES AND TRANSFER ENTRIES IN THE BOOKS OF THE FI RM AND IN 5 I.T.A. NO. 300/MDS/11 THE BOOKS OF THE COMPANIES. THESE FACTS WHICH ARE VERY RELEVANT AND IMPORTANT FOR THE DECISION OF THE IMPU GNED ISSUE WERE NOT AT ALL CONSIDERED PROPERLY BY THE ASSESSIN G OFFICER. ON THE CONTRARY, THESE EVIDENCE(S) HAVE BEEN CONSID ERED IN THEIR CORRECT PERSPECTIVE BY THE LD. CIT(A). THE D EPARTMENT COULD NOT DISPUTE THEE FACTS WHICH HAVE BEEN CULLED OUT BY US AND MENTIONED ABOVE. THE SPECIAL AUDITORS GAVE FIN DING IN THEIR REPORT. THE SPECIAL AUDIT WAS ORDERED BY THE ASSESSING OFFICER TO FIND OUT WHETHER THERE WAS ANY UNEXPLAINE D CASH OR FUNDS INTRODUCED BY THE ASSESSEE IN THE COMPANIES O R NOT. THERE WAS NO FUNDS TRANSFER AND THE CAPITALS INTROD UCED WERE ONLY BY JOURNAL ENTRIES. THE FACT THAT THE ASSESSE E IN HIS HUF CAPACITY WAS THE SHAREHOLDER IN THE THREE PRIVATE L IMITED COMPANIES AND NOT IN HIS INDIVIDUAL CAPACITY BECAUS E HE HAS CONSIDERED THESE INVESTMENTS IN THE ASSESSMENT OF ASSESSEE- HUF. THE SAME INVESTMENT WAS NOT CONSIDERED IN HIS INDIVIDUAL ASSESSMENT AND ADDITIONS WERE MADE. THIS IS SOMETH ING BEYOND THE SCOPE OF INCOME-TAX ACT, 1961 AS IT AMOUNT S TO DOUBLE TAXATION OF THE SAME INCOME. THE PERUSAL OF T HE RELEVANT PAGES OF PAPER BOOK FILED BY THE ASSESSEE AND THE OTHER RECORDS INCLUDING THE ASSESSMENT RECORDS IN T HE CASE OF COMPANIES AND ASSESSEE-HUF, AND THE PERUSAL OF SPEC IAL AUDIT REPORT, IT BECOMES CRYSTAL CLEAR THAT THERE IS NO D IRECT CASH OR FUNDS INTRODUCED BY THE ASSESSEE IN THESE THREE COMPANIES. WHATEVER MAY BE THE OTHER REASON OF DISCONTINUATION OF THE FIRM, BUT ON RECORD, AS PER THE EVIDENCE WHICH EVIN CE DISPUTE BETWEEN THE PARTNERS OF THE ERSTWHILE FIRM, IT IS P ROVED THAT THERE WAS SOME MISUNDERSTANDING OR QUARREL AMONGST THE PARTNERS OF THE FIRM AND THAT IS WHY THE BUSINESS O F THE FIRM COULD NOT BE CONTINUED. THUS, WE DO NOT FIND ANY E VIDENCE TO CONCLUDE THAT THIS ASSESSEE HAS INTRODUCED SHARE CA PITAL OF ` 2.05 CRORES IN THESE COMPANIES BY WAY OF CASH/FUNDS BELONGING TO HIM. BUT IT IS PROVED ON RECORD THAT T HE CAPITAL INTRODUCTION IN THE PRIVATE LIMITED COMPANIES WAS O UT OF TRANSFER OF STOCK, DEBTORS AND CREDITORS, CASH AND BANK BALANCES ONLY. THE SPECIAL AUDITORS REPORT ALSO SU PPORTS THE ASSESSEES VERSION AS IN THAT REPORT, THE AUDITORS HAVE CATEGORICALLY GIVEN A FINDING THAT NO SUCH CASH OR FUND BELONGING TO THE ASSESSEE WAS DIRECTLY INTRODUCED I N THESE COMPANIES. HENCE, HOW CAN IT BE CONCLUDED THAT THE UNEXPLAINED INCOME OF THE ASSESSEE WAS INTRODUCED AS CAPITAL 6 I.T.A. NO. 300/MDS/11 IN THESE COMPANIES. IN OUR CONSIDERED OPINION, THE DELETION OF THE IMPUGNED ADDITION IS CORRECT AND HAS TO BE APPR OVED. ACCORDINGLY, THE GROUNDS RAISED BY THE REVENUE FAIL . 4. THERE BEING NO FUND INTRODUCTION MADE BY THE ASSE SSEE, HERE ALSO IT CANNOT BE SAID THAT THERE WAS ANY UNEXPLAINE D INVESTMENTS. LD. CIT(APPEALS) RIGHTLY RELIED ON THE DECISION IN THE CASE OF SHRI R. PURUSHOTHAMAN (HUF) WHILE DELETING THE ADDITION REL ATING TO UNEXPLAINED INVESTMENT IN SHARE CAPITAL. THUS, EFFE CTIVELY WE DO NOT FIND ANY MERIT IN THE APPEAL FILED BY THE REVENUE. SINCE THE FACT SITUATION IS VERY SAME IN THE CASE O F PRESENT ASSESSEE ALSO, WE ARE OF THE OPINION THAT ADDITIONS WERE RIG HTLY DELETED BY THE CIT(APPEALS). WE DO NOT FIND ANY REASON TO INTERFE RE. 6. IN THE RESULT, APPEAL OF THE REVENUE INSOFAR AS THE ISSUE RECALLED IS CONCERNED, IS DISMISSED. THE ORDER WAS PRONOUNCED IN THE COURT ON WEDNESDAY, THE 22 ND OF AUGUST, 2012, AT CHENNAI. SD/- SD/- (CHALLA NAGENDRA PRASAD) (ABRAHAM P. GEORGE) JUDICIAL MEMBER ACCOUNTANT MEMBER CHENNAI, DATED THE 22 ND AUGUST, 2012. KRI. COPY TO: (1) APPELLANT (2) RESPONDENT (3) CIT(A)-II, MADURAI (4) CIT, CENTRAL RANGE, CHENNAI (5) D.R. (6) GUARD FILE