M/s. K.S. Foundries Pvt. Ltd., CHENNAI V. DCIT, Coimbatore

ITA 3058/CHNY/2016

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 6467 (ITAT-CHENNAI)
• Duration Of Justice: 9 month(s) 1 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 03-08-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 2012-2013
• Appeal Filed On: 01-11-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: TRIPURA SUNDARI JCIT
• Assessee Lawyers: G GIREESH
• Keywords: Unexplained cash credit; Opportunity of being heard

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH, CHENNAI ... , , # BEFORE SHRI N.R.S. GANESAN, JUDICIAL MEMBER AND SHRI S. JAYARAMAN, ACCOUNTANT MEMBER ./ I.T.A. NO. 3058/MDS/2016 / ASSESSMENT YEARS : 2012-13 M/S. K.S. FOUNDRIES PRIVATE LIMITED, SRI SUBAGANESH INDUSTRIAL ESTATE, S.NO. 43, KUPPEPALAYAM (POST). S.S. KULAM (VIA) COIMBATORE 641 107. [PAN: AAECK 1766A] VS. THE DEPUTY COMMISSIONER OF INCOME TAX, CORPORATE CIRCLE-1, COIMBATORE. ( / APPELLANT) ( / RESPONDENT) % & / APPELLANT BY : SHRI. G. GIREESH, CA )*% & / RESPONDENT BY : MS. TRIPURA SUNDARI, JCIT & /DATE OF HEARING : 23.05.2017 & /DATE OF PRONOUNCEMENT : 03.08.2017 /O R D E R PER S. JAYARAMAN, ACCOUNTANT MEMBER: THIS IS AN APPEAL FILED BY THE ASSESSEE AGAINST TH E ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS)-1, COIMBATORE, IN ITA NO. 70/15-16 DATED 15.07.2016. :-2-: I.T.A. N0. 3058/MDS/2016 2. IN THE ASSESSMENT MADE FOR ASSESSMENT YEAR 2012- 13, THE AO FOUND THAT THE ASSESSEE HAD RECEIVED RS. 1,18,70,00 0/- AS UNSECURED LOAN FROM RELATED PARTIES. THE ASSESSING OFFICER WAS SA TISFIED WITH CREDITWORTHINESS OF TWO PERSONS AND HENCE HE ADDED THE REMAINING SUM OF RS. 1,03,20,000/- U/S. 68. AGGRIEVED, THE ASSESSEE FILED AN APPEAL BEFORE THE CIT(A). THE CIT(A) DISMISSED THE APPEAL AND HELD, INTER ALIA, THAT THE ASSESSEE FILED RETURN OF INCOME ON 27.08.2012, WHIC H IS NEARLY 4 YEARS FROM THE DATE OF FILING OF RETURN AND THE ASSESSEE WAS N OT ABLE TO PRODUCE CONFIRMATION FROM ANY OF THE CREDITORS. THEREFORE, IT IS EVIDENT THAT THE CREDIT OF APPEARING IN THE NAMES OF THESE PERSONS ARE BOGU S. 3. AGGRIEVED, THE ASSESSEE FILED THIS APPEAL, PRIMA RILY PLEADING THAT IT WAS NOT GIVEN ADEQUATE OPPORTUNITY. IT IS SUBMI TTED THAT THE CASE CAME UP BEFORE THE CIT(A) ON 14.07.2006, THE APPELLANT SOUG HT ADJOURNMENT BY A COUPLE OF DAYS TO CAUSE THE THEN DIRECTORS, WHO HAD LEND MONEY, TO APPEAR AND PRODUCE THE DOCUMENTS CONFIRMING THEIR LENDING. THE ADJOURNMENT WAS REFUSED AND THE ORDER PASSED ON 15.07.2016 WAS SERV ED ON 03.09.2016. THE APPELLANT WAS READY WITH THE CONFIRMATION FROM UNSE CURED CREDITORS WHO WERE THE THEN DIRECTORS/SHAREHOLDERS OF THE COMPANY. SU BSEQUENTLY, SUBSTANTIAL PORTION OF LOAN WERE CONVERTED TO EQUITY SHARES AND THE BALANCE LOANS WERE SETTLED TO THE PARTIES DURING THE FINANCIAL YEAR 20 14-15. THEREFORE, WITHOUT CONSIDERING THE FACTS THE CIT(A) ERRED IN TREATING THE LOANS TAKEN AS :-3-: I.T.A. N0. 3058/MDS/2016 UNEXPLAINED CREDIT IN THE BOOKS OF THE COMPANY WHEN THE FACTS DEMONSTRATE THAT THE LOANS WERE OBTAINED FROM THE DIRECTORS/SHA REHOLDERS OF THE COMPANY. THUS, THE ASSESSEE PRIMARILY PLEADS THAT IT WAS NOT GIVEN ADEQUATE OPPORTUNITY OF BEING HEARD. PER CONTRA, THE DR REL IES ON THE ORDERS OF THE CIT(A) TO SAY THAT THE CIT(A) HAS GIVEN ADEQUATE OP PORTUNITY 4. WE HEARD THE RIVAL SUBMISSIONS. THE ASSESSEE CO MPANY WAS INCORPORATED ON 16.12.2010 AND IS ENGAGED IN THE MA NUFACTURING AND SELLING OF CASTING OF PRODUCTS. IT ALSO DOES JOB WORK OF C ASTING ITEMS. THUS, THIS ASSESSMENT YEAR HAPPENS TO BE FIRST YEAR OF ITS OPE RATION. THE ASSESSING OFFICER FOUND THAT THE ASSESSEE HAS RECEIVED UNSECU RED LOAN FROM SEVEN PERSONS RANGING FROM 3.5 LAKHS TO 37.3 LAKHS AND HE NCE, REQUIRED ALL OF THEM TO APPEAR UNDER SUMMONS. EXCEPT ONE PERSON, WHO WA S OUT OF THE COUNTRY, ALL OTHER MADE COMPLIANCE. THE AO REQUIRED TO PROD UCE THEIR RETURNS AND BANK STATEMENT. OUT OF WHICH, SHE WAS SATISFIED WI TH SOURCES OF TWO PERSONS. FOR THE REMAINING OF THEM, SHE FOUND THAT THE LOANS GIVEN BY THEM TO THE COMPANY WERE OUT OF THE CASH DEPOSIT MADE IN THEIR BANK ACCOUNTS ON THE PREVIOUS DAY OR ON THE SAME DAY. OTHER THAN THAT, THE ASSESSING OFFICER HAS NOT STATED ANYTHING ABOUT THE FINANCIAL STATUES, CA PACITY ETC ABOUT THE IMPUGNED CREDITORS. IT IS SEEN FROM THE CIT(A) ORDE R THAT THE CIT(A) POSTED THE CASE ON 06.06.2016, ON SEEKING ADJOURNMENT, FIN AL HEARING WAS FIXED ON 22.06.2016. THE AR APPEARED AND SOUGHT ADJOURNMENT FOR FILING THE :-4-: I.T.A. N0. 3058/MDS/2016 CONFIRMATION FROM CREDITORS AND HENCE THE CASE WAS ADJOURNED TO 14.07.2016. ON 14.07.2016, THE AR DID NOT APPEAR BUT FILED A LE TTER STATING THAT THE CONFIRMATION WILL BE FILED WITHIN 15 DAYS. IN THE IMPUGNED APPEAL ORDER PASSED ON 15.07.2016, THE CIT(A) OBSERVED THAT TILL 29.07.2016, I.E., ALMOST A FORTNIGHT AFTER PASSING THE IMPUGNED APPEAL ORDER, THE ASSESSEE DID NOT COMPLY. THUS, PRIMA FACIE, THE ASSESSEE WAS NOT GI VEN EFFECTIVE OPPORTUNITY OF BEING HEARD. 5. CONSIDERING THE ABOVE FACTS AND CIRCUMSTANCES, I NCLUDING THE INTEREST OF JUSTICE, WE ARE OF THE VIEW THAT THE AS SESSEE SHOULD BE GIVEN EFFECTIVE OPPORTUNITY OF BEING HEARD BEFORE DECIDIN G THE APPEAL. IN VIEW OF THAT, THE APPEAL ORDER IS SET ASIDE AND THE ISSUES ARE REMITTED BACK TO THE CIT(A) FOR DECIDING THE APPEAL AFRESH, ON MERIT, AF TER AFFORDING OPPORTUNITY TO THE ASSESSEE. THE ASSESSEE SHALL VIGOROUSLY PURSUE THE APPEAL BY COMPLYING WITH THE REQUIREMENT OF THE CIT(A) IN ACCORDANCE WI TH LAW. 6. IN THE RESULT, THE ASSESSEES APPEAL IS TREATED AS ALLOWED FOR STATISTICAL PURPOSE. ORDER PRONOUNCED ON THURSDAY, THE 03 RD DAY OF AUGUST, 2017 AT CHENNAI. :-5-: I.T.A. N0. 3058/MDS/2016 SD/- ( . . . ) (N.R.S. GANESAN) ! ' /JUDICIAL MEMBER SD/- ( ) (S. JAYARAMAN) ' /ACCOUNTANT MEMBER /CHENNAI, 0 /DATED: 03 RD AUGUST, 2017 JPV & )12 32 /COPY TO: 1. %/ APPELLANT 2. )*% /RESPONDENT 3. 4 ( )/CIT(A) 4. 4 /CIT 5. 2 ) /DR 6. 7 /GF