ITO, CHENNAI V. Alfa Investments, CHENNAI

ITA 3439/CHNY/2016

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 6173 (ITAT-CHENNAI)
• Duration Of Justice: 8 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-09-2017
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Next Hearing Date: 08-08-2017
• Assessment Year: 2012-2013
• Appeal Filed On: 22-12-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SAILENDRA MAMIDI
• Assessee Lawyers: G BASKAR
• Keywords: Unexplained cash credit
• Section: 143(3); 153A; 68

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH, CHENNAI . . . , , # BEFORE SHRI N.R.S. GANESAN, JUDICIAL MEMBER AND SHRI S. JAYARAMAN, ACCOUNTANT MEMBER /. I.T.A. NO. 3439/MDS/2016 / ASSESSMENT YEAR : 2012-13 THE INCOME TAX OFFICER, NON-CORPORATE WARD -1(1), CHENNAI. VS. M/S. ALFA INVESTMENTS, 4 TH FLOOR, DOOR NO. 10 & 11, CHENNAI CITI CENTRE, DR.RADHAKRISHNAN SALAI, MYLAPORE, CHENNAI 600 004. [PAN: AATFA 1690D] ( / APPELLANT) ( / RESPONDENT) %& / APPELLANT BY : SHRI. SAILENDRA MAMIDI, CIT )*%& / RESPONDENT BY : SHRI. G. BASKAR, ADVOCATE & /DATE OF HEARING : 08.08.2017 & /DATE OF PRONOUNCEMENT : 18.09.2017 / O R D E R PER S. JAYARAMAN, ACCOUNTANT MEMBER: THE REVENUE FILED THIS APPEAL AGAINST THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS)-2, CHENNAI IN ITA NO. 119/CIT( A)-2/2015-16 DATED 13.10.2016. :-2-: I.T.A. N0. 3439/MDS/2016 2. IN THE ASSESSMENT MADE FOR ASSESSMENT YEAR 2012- 13, IN THE ABSENCE OF VERIFIABLE SOURCES FOR THE CAPITAL INTRO DUCED AT RS. 108,35,05,000/- BY A CREDIT TO THE CAPITAL ACCOUNT (CLAIMED TO BE T HE OPENING BALANCE AS ON 01.04.2011),THE AO MADE AN ADDITION OF RS. 108,35,0 5,000/- AS AN UNEXPLAINED CREDIT U/S. 68. THE AO HAS ALSO TREATE D THE STATUS OF THE ASSESSEE AS AN ASSOCIATION OF PERSONS (AOP) AGAINST ITS CLAIM OF FIRM. AGGRIEVED, THE ASSESSEE FILED AN APPEAL BEFORE THE CIT(A). THE CIT(A) HELD THAT SINCE, THERE WAS NO INTRODUCTION OF FRESH CAPI TAL IN ASSESSMENT YEAR 2012-13, THE AO WAS NOT JUSTIFIED IN DISALLOWING/AD DING BACK THE CAPITAL INTRODUCED AT RS. 108,35,05,000/- AS AN UNEXPLAINED CREDIT U/S. 68, HENCE THE ADDITION MADE IN THE HANDS OF THE FIRM IS UNWARRANT ED AND THEREFORE, THE CIT(A) DELETED THE ADDITION. SHE FURTHER HELD THAT SINCE THE CAPITAL WAS INTRODUCED IN THE COURSE OF EARLIER TWO FINANCIAL Y EARS, I.E., IN FINANCIAL YEARS 2009-10 AND 2010-11, THE AO COULD ONLY TAKE COGNIZA NCE OF THE MATTER BY WAY OF INITIATING SCRUTINY PROCEEDINGS FOR ASSESSME NT YEARS 2010-11 AND 2011-12. 3. THE CIT(A) FURTHER HELD THAT THE AO HAS GONE WRO NG IN TREATING THE ASSESSEE AS AN AOP FOR THE PURPOSE OF TAXATION. SHE HELD THAT THE STATUS OF THE ASSESSEE FOR ASSESSMENT YEAR 2012-13 IS A F IRM. AGGRIEVED, THE REVENUE FILED THIS APPEAL WITH A PLEA THAT THE CIT( A) FAILED TO APPRECIATE THAT NO RETURN OF INCOME WAS FILED BY THE FIRM, SINCE IN CEPTION AND THEREFORE, THERE :-3-: I.T.A. N0. 3439/MDS/2016 WERE NO RECORD TO ESTABLISH THAT THE CAPITAL BALANC E WAS GENUINE. THE FIRM DID NOT HAVE A BANK ACCOUNT IN ITS NAME, THOUGH CLA USE 7 OF THE PARTNERSHIP DEED SPECIFICALLY REQUIRES, THE PARTNERSHIP FIRM SH OULD HAVE A SEPARATE BANK ACCOUNT. THE CIT(A) FAILED TO APPRECIATE THAT THE CLAIM OF CAPITAL BROUGHT IN, IN THE YEAR 2009 AND CREDITED IN THE BOOKS OF THE F IRM WAS NOT ESTABLISHED SINCE THE SUM WAS ACTUALLY CREDITED IN THE PERSONAL BANK ACCOUNT OF OTHER PARTNER AND INVESTMENTS MADE UTILISING THE CAPITAL WAS ACTUALLY MADE IN THE NAME OF THE ACCOUNT OF THE OTHER PARTNER, THAT NO E VIDENCE WAS FURNISHED TO ESTABLISH THE SUM CREDITED IN THE BANK ACCOUNT OF T HE OTHER PARTNER WAS ACTUAL CAPITAL BROUGHT IN THE FIRM AND REPRESENTED THE CAP ITAL BALANCE AS ON 31.03.2010. THE CIT(A) FAILED TO APPRECIATE THAT T HE ADDITION MADE U/S. 68 BY THE AO ON THE GROUND THAT THE SOURCE FOR THE CAP ITAL INTRODUCTION AS NOT GENUINE. THE CIT(A) ERRED IN NOT GIVING A FINDING WITH REGARD TO THE GENUINENESS OF THE CAPITAL BALANCE EXISTING AS ON 0 1.04.2011 WHICH WAS THE BASIS FOR ADDITION U/S. 68. THE CIT(A) FAILED TO A PPRECIATE THAT THE ASSESSEE HAS NOT COMPLIED THE PROVISIONS OF SECTION 184(2) R EQUIREMENT OF FILING OF A CERTIFIED COPY OF THE PARTNERSHIP DEED, RULE 12(2) STIPULATING NO ENCLOSURES ARE REQUIRED TO BE FILED ALONG WITH RETURN OF INCOM E CAN BE RELIED ONLY IN CASES WHERE THE RETURN OF INCOME IS FILED. THE CIT(A) FA ILED TO CONSIDER THAT THE ASSESSEE HAS NOT FILED THE RETURN OF INCOMESINCE IN CEPTION FOR THE AO TO DETERMINE ITS STATUS AND ERRED IN HOLDING THAT THE AOS DECISION TO TREAT THE STATUS OF THE FIRM AS AN AOP ETC. :-4-: I.T.A. N0. 3439/MDS/2016 4. THE DR ARGUED ON THE LINES OF THE GROUNDS OF AP PEAL VIS A VIS THE ORDER OF THE AO & THE CIT(A). PER CONTRA, THE AR RE LIED ON THE ORDER OF THE CIT(A). 5. WE HEARD THE RIVAL SUBMISSIONS AND GONE THROUGH RELEVANT MATERIAL. THE ASSESSEE-FIRM, CONSTITUTED VIDE PARTN ERSHIP DEED DT. 1.6.2009 IS ENTERED BETWEEN (A) MR.HAMEED SYED SALAHUDDIN, A N ON- RESIDENT INDIAN, BASED AT DUBAI, UAE AND (B) MR. AHAMED SHAKIR, RESI DING AT NUNGAMBAKKAM, CHENNAI. THE BUSINESS OF THE FIRM SHALL BE IN ALL K INDS OF COMMERCIAL AND TRADING ACTIVITY INCLUDING INVESTING, IN ACQUIRING AND HOLDING SHARES, STOCKS, BONDS AND OTHER SECURITIES. THE DEED ALSO STATES TH AT THE CAPITAL SHALL BE CONTRIBUTED FROM TIME TO TIME BY MR. SALAHUDDIN, TH E FIRST PARTNER, AND THAT HE HAS AGREED TO INVEST AN INITIAL SUM OF RS. 100 CROR ES. MR.HAMEED SYED SALAHUDDIN IS ASSESSED AT DCIT, CENTRAL CIRCLE-2(2) , BANGALORE AND MR.AHAMED SHAKIR IS ASSESSED AT COMPANY CIRCLE -2(1 ), CHENNAI. SHRI SALAHUDDIN IN FY 2009-10 TRANSFERRED RS. 75 CRORES, TO THE HSBC BANK ACCOUNT OF SHRI AHAMED SHAKIR. OUT OF WHICH, A NET SUM OF RS. 64 CRORES HAS BEEN INVESTED IN THE ASSESSEE-FIRM. DURING FY 2010- 11, SHRI SALAHUDDIN HAS FURTHER TRANSFERRED RS. 50 CRORES TO THE LVB ACCOU NT OF SHRI AHAMED SHAKIR. OUT OF WHICH, A NET SUM OF RS. 44,35,000/- WAS INVE STED IN THE ASSESSEE- FIRM. THE ASSESSEE HAD EXPLAINED THAT THE INVESTMEN TS MADE IN IT BY SHRI SALAHUDDIN, WERE OUT OF MONEY DRAWN BY HIM FROM M/S GREEN ORCHARD FARM :-5-: I.T.A. N0. 3439/MDS/2016 HOUSE (GOFH), BANGALORE, A PARTNERSHIP FIRM ENGAGED IN REAL ESTATE BUSINESS, IN WHICH SHRI SALAHUDDIN WAS A PARTNER. H E RETIRED FROM THE SAID PARTNERSHIP DURING FY 2010-11. ON HIS RETIREMENT, THERE WAS A REVALUATION OF THE PARTNERS' SHARE IN THE NET ASSETS OF THE PARTNE RSHIP. THE SHARE OF SHRI SALAHUDDIN WAS DETERMINED AT RS. 133.74 CRORES AND THE SAME WAS CREDITED TO HIS CAPITAL ACCOUNT. THE CLOSING BALANCE IN THE CAPITAL ACCOUNT OF THE ASSESSEE-FIRM, BOTH AS ON 31.3.2011 AND AS ON 31.3. 2012 WAS RS. 108.35 CRORES AND NO FRESH CAPITAL WAS INTRODUCED INTO THE ASSESSEE-FIRM DURING FY 2011-12(IE DURING THIS AY 2012-13) RELEVANT TO THIS APPEAL. BEFORE THE ASSESSING OFFICER, THE ASSESSEE-FIRM FILED A COPY O F THE CAPITAL ACCOUNT OF SHRI H.S. SALAHUDDIN AS APPEARING IN THE BOOKS OF M/S GO FH, BANGALORE, ALONG WITH A COPY OF THE RETURN AND THE ORDER U/S. 143(3) R.W.S. 153A DT. 12.3.2014 PERTAINING TO THE FIRM M/S GOFH FOR AY 2011-12 I.E. THE AY RELEVANT TO THE FY, WHEN THE VALUATION OF THE ASSETS WERE MADE. FURTHE R, IT SUBMITTED THAT GREEN ORCHARD FARM HOUSE (GOFH), ORIGINALLY COMPRISED OF FOUR PARTNERS. DURING FY 2010-11, TWO OF THE PARTNERS NAMELY SHRI ARIF B REH MAN AND SHRI HAMEED SYED SALAHUDDIN RETIRED. BEFORE THEIR RETIREMENT, A S PER THE MUTUAL CONSENT OF ALL THE PARTNERS OF GOFH, THE LAND IN THE BOOKS OF GOFH WHICH WAS ACQUIRED AT A COST OF RS.2,99,79,201/- WAS RE-VALUED AT RS. 356,65,65,941/- AS ON 19.7.2010. SHRI HAMEED SYED SALAHUDDIN'S SHARE OF T HE REVALUATION COMPONENT OF RS. 133.74 CRORES WAS CREDITED TO HIS CAPITAL ACCOUNT THROUGH A JOURNAL ENTRY PASSED IN THE BOOKS OF ACCOUNTS OF GO FH. THE ASSESSEE HAS ALSO :-6-: I.T.A. N0. 3439/MDS/2016 FILED THE RELEVANT STATEMENT OF ACCOUNT OF SHRI SAL AHUDDIN'S CAPITAL ACCOUNT IN THE BOOKS OF GOFH, FINANCIAL STATEMENTS OF GOFH AND THE ASSESSMENT ORDERS OF THE SAID FIRM FOR AYS 2011-12 & 2012-13 AND CLAR IFIED THAT THE ASSESSEE- FIRM HAS DULY EXPLAINED THE SOURCES FOR INTRODUCTIO N OF CAPITAL, OUT OF WHICH THE INVESTMENTS WERE MADE, BY PRODUCING THE FINANCI AL STATEMENTS OF THE PRECEDING TWO FYS, FROM WHICH IT COULD BE CLEARLY O BSERVED THAT THE CAPITAL WAS BROUGHT IN BY THE PARTNERS AND THE INVESTMENTS AND LOANS AND ADVANCES WITH VARIOUS COMPANIES WERE MADE OUT OF THE SAID CA PITAL BROUGHT IN BY THE PARTNERS DURING THE FYS 2009-10 & 2010-11 AND NOT I N THE PERIOD RELEVANT TO THIS ASSESSMENT YEAR. 5.1 THE AO REFUSED TO ACCEPT THE ASSESSEES EXPLANA TION FOR THE REASONS, INTER ALIA, THAT THE ASSESSEE HAS NOT FILE D RETURNS DURING AYS 2010- 11& 2011-12 DECLARING THE CAPITAL INTRODUCTION AS T HE INVESTMENTS MADE OUT OF THESE SOURCES. DUE TO THIS, THE REVENUE HAD NO O PPORTUNITY TO TAKE COGNIZANCE/EXAMINE THE TRANSACTION PURPORTEDLY CLAI MED TO HAVE BEEN MADE BY THE ASSESSEE IN THESE YEARS. THERE IS NO MATERIA L ON HAND SUCH AS AUDITED BOOKS OF ACCOUNTS TO VERIFY THE AUTHENTICITY OF CAP ITAL INTRODUCED AND ITS WITHDRAWAL FOR THE PURPOSE OF INVESTMENT ACTIVITY. THE CAPITAL CONTRIBUTION OF MADE BY SHRI SYED SALAHUDDIN, AS CLAIMED BY THE ASS ESSEE, IS DEPOSITED IN THE BANK ACCOUNT OF ANOTHER PARTNER (SHRI. AHAMED SHAKI R) AND HENCE THE CAPITAL INTRODUCTION AND ITS WITHDRAWAL BY THE PARTNER(S) A RE NOT VERIFIABLE. :-7-: I.T.A. N0. 3439/MDS/2016 5.2 THE CIT (A) AFTER EXAMINING THE RIVAL CONTENTIO NS THROUGH REMAND REPORTS AND AFTER EXAMINING THE RELEVANT MATERIAL F OUND THAT NO FRESH CAPITAL , WHATSOEVER, WAS INTRODUCED DURING THIS THIS ASSESSM ENT YEAR AND THE IMPUGNED SUM OF RS. 108.35 CRORES REPRESENTED THE O PENING BALANCE OF THE CAPITAL IN THE BOOKS OF ACCOUNT AND HELD THAT SINCE , THERE WAS NO INTRODUCTION OF FRESH CAPITAL IN THIS ASSESSMENT YEAR IE IN A Y 2012-13, THE AO WAS NOT JUSTIFIED IN DISALLOWING/ADDING BACK THE CAPITAL IN TRODUCED AT RS. 108,35,05,000/- AS AN UNEXPLAINED CREDIT U/S. 68, T HE ADDITION MADE IN THE HANDS OF THE FIRM IS UNWARRANTED AND THEREFORE THE CIT(A) DELETED SUCH ADDITION. SHE HAS ALSO HELD THAT SINCE THE CAPITAL WAS INTRODUCED IN THE COURSE OF EARLIER TWO FINANCIAL YEARS, FINANCIAL YEARS 200 9-10 AND 2010-11, THE AO COULD ONLY TAKE COGNIZANCE OF THE MATTER BY WAY OF INITIATING SCRUTINY PROCEEDINGS FOR ASSESSMENT YEARS 2010-11 AND 2011-1 2. 5.3 THUS, THE UNDISPUTED FACT IS THAT THERE WAS NO FRESH INTRODUCTION OF CAPITAL DURING THIS ASSESSMENT Y EAR IE IN AY 2012-13 AND THE IMPUGNED SUM OF RS. 108.35 CRORES REPRESENTED THE O PENING BALANCE OF THE CAPITAL IN THE BOOKS OF ACCOUNT. ON SUCH FACTS, THE ADDITION MADE BY THE AO U/S 68 IN THIS ASSESSMENT YEAR IS RIGHTLY HELD AS UNJUSTIFIED AND HENCE, THE DELETION MADE BY THE CIT (A) DOES NOT REQUIRE ANY I NTERFERENCE. THE REVENUES GROUNDS FAIL ON THIS ISSUE. :-8-: I.T.A. N0. 3439/MDS/2016 6. THE NEXT ISSUE IS WHAT IS THE STATUS OF THE ASSE SSEE. THE ASSESSE HAS E-FILED ITS RETURN IN FORM ITR-5 FOR AY 2012-13, CL AIMING ITS STATUS AS A FIRM, ON 27.7.2013, WHICH WAS WITHIN THE TIME ALLOWED U/S . 139(4). SINCE IT DID NOT ENCLOSE A CERTIFIED COPY OF THE INSTRUMENT OF PARTN ERSHIP, DOES NOT HAVE BANK ACCOUNT OF ITS OWN AND IT HAS NOT FILED ITS RETURNS IN THE EARLIER 2 YEARS, THE AO TREATED THE STATUS OF THE ASSESSEE AS AN AOP. ON A N APPEAL , THE CIT(A) ALLOWED THE ASSESSEES APPEAL ON WHICH THE REVENUE IS ON APPEAL. WE HEARD THE RIVAL CONTENTIONS. THE RELEVANT PORTION OF THE ORDER OF THE CIT (A) IS EXTRACTED AS UNDER : THE E-RETURN OF THE APPELLANT WAS FILED IN FORM ITR -S, WHICH IS ONE OF THE FORMS CLEARLY MENTIONED IN RULE 12(2) OF THE IT RULES 1962. AT THE COST OF REPETITION, RULE 12(2) IS REPRODUCED BELOW: 'THE RETURN OF INCOME REQUIRED TO BE FURNISHED IN F ORM SAHAJ (ITR-L) OR FORM NO. ITR-2 OR FORM NO. ITR-3 O R FORM SUGAM (ITR-4S) OR FORM NO. ITR-4 OR FORM NO.ITR-5 O R FORM NO. ITR-6 [OR FORM NO. ITR-7] SHALL NOT BE ACC OMPANIED BY A STATEMENT SHOWING THE COMPUTATION OF THE TAX P AYABLE ON THE BASIS OF THE RETURN OR PROOF OF THE TAX, IF ANY, CLAIMED TO HAVE BEEN DEDUCTED OR COLLECTED AT SOURCE OR THE ADVANCE TAX OR TAX ON SELF-ASSESSMENT, IF ANY, CLAIMED TO H AVE BEEN PAID OR ANY DOCUMENT OR COPY OF ANY ACCOUNT OR FORM OR REPORT OF AUDIT REQUIRED TO BE ATTACHED WITH THE RE TURN OF INCOME UNDER ANY OF THE PROVISIONS OF THE ACT. ' IT IS THEREFORE, CLEAR THAT THE CONTENTION OF THE A PPELLANT THAT SINCE THE E- RETURN IS FILED IN FORM ITR-5, HE WAS NOT OB LIGED TO FILE THE VARIOUS ENCLOSURES SUCH AS PARTNERSHIP DEED, STATEMENT OF T OTAL INCOME, BALANCE SHEET, PROFIT & LOSS ACCOUNT ETC., ALONGWIT H THE E-RETURN, IS :-9-: I.T.A. N0. 3439/MDS/2016 CORRECT. IT IS CLEAR THAT RULE 12(2) APPLIES TO THE FACTS OF THE APPELLANT'S CASE. THE APPELLANT WAS THUS IN ORDER, IN NOT ENCLO SING THE PARTNERSHIP DEED AS A SCHEDULE/ANNEXURE TO THE E-RETURN, AS HIG HLIGHTED BY THE APPELLANT, WITHIN A WEEK OF ISSUE OF NOTICE BY THE ASSESSING OFFICER U/S. 143(2), THE APPELLANT HAS FILED THE PARTNERSHIP DEE D ALONGWITH VARIOUS OTHER DOCUMENTS, BEFORE THE ASSESSING OFFICER. THE ASSESSING OFFICER HAS THEREFORE GONE WRONG IN T REATING THE ASSESSEE AS AN AOP, FOR THE PURPOSE OF TAXATION. TH E STATUS OF THE APPELLANT, FOR AY 2012-13 IS HENCE HELD TO BE 'FIRM '. WE FIND MERIT IN THE REASONING AND THE CONCLUSION ARRIVED BY THE CIT(A) , SUPRA, AND HENCE WE UPHOLD THE SAME. THE R EVENUES GROUNDS FAIL ON THIS ISSUE. 7. IN THE RESULT, THE REVENUES APPEAL IS DISMISSE D. ORDER PRONOUNCED ON MONDAY, THE 18 TH DAY OF SEPTEMBER, 2017 AT CHENNAI. SD/- ( . . . ) (N.R.S. GANESAN) !' /JUDICIAL MEMBER SD/- ( ) (S. JAYARAMAN) ' /ACCOUNTANT MEMBER /CHENNAI, 0 /DATED: 18 TH SEPTEMBER, 2017 JPV &)1232 /COPY TO: 1. %/ APPELLANT 2. )*% /RESPONDENT 3. 4 ) (/CIT(A) 4. 4 /CIT 5. 2) /DR 6. 7 /GF