ITO, Ward-16(2), Hyderabad V. M/s, Pioneer Talafone Pvt. Ltd.(presently ICONIC Designs Pvt.Ltd), Hyderabad

ITA 378/HYD/2012

• Counselvise Citation: [2013] 120 COUNSELVISE.COM (IT) 2960 (ITAT-HYDERABAD)
• Duration Of Justice: 1 year(s) 2 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-05-2013
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2005-2006
• Appeal Filed On: 12-03-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: MPB REDDY
• Assessee Lawyers: T CHAITANYA KUMAR
• Keywords: Bogus Share capital
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCH A, HYDERABAD BEFORE SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER AND SMT. ASHA VIJAYARAGHAVAN, JUDICIAL MEMBER ITA NO. 378/HYD/2012 ASSESSMENT YEAR: 2005-06 INCOME-TAX OFFICER, APPELLANT WARD 16(2), HYDERABAD. VS. M/S PIONEER TALAFONE PVT. LTD., RESPONDENT (PRESENTLY KNOWN AS ICONIC DESIGNS PVT. LTD.) HYDERABAD. APPELLANT BY : SHRI M.P.B. REDDY RESPONDENT BY : SHRI T. CHAITANYA KUMAR DATE OF HEARING : 07/05/2013 DATE OF PRONOUNCEMENT : 23/05/ 2013 ORDER PER ASHA VIJAYARAGHAVAN, J.M.: THIS APPEAL PREFERRED BY THE REVENUE IS DIRECTED AG AINST THE ORDER OF CIT(A)-V, HYDERABAD, DATED 05/01/2012 FOR THE ASSESSMENT YEAR 2005-06. 2. BRIEFLY THE FACTS OF THE CASE ARE THAT THE ASSES SEE COMPANY FILED ITS RETURN OF INCOME FOR THE AY 2005-06 ON 08 /12/2005 ADMITTING NIL INCOME AND ALSO ADMITTED BOOK PROFITS OF RS. 85,25,894/-. 3. THE AO NOTICED THAT THE ASSESSEE HAD NOT FURNISH ED STATUTORY APPROVAL OF THE STPI, HIMACHAL PRADESH, W HICH IS MANDATORY FOR CLAIMING DEDUCTION U/S 80-IC OF THE A CT, AS 100% EOU ENGAGED IN THE BUSINESS OF INFORMATION TECHNOLO GY. 2 ITA NO. 378/HYD/2012 M/S PIONEER TALAFONE PVT. LTD. ACCORDINGLY, THE AO REOPENED THE ASSESSMENT AND COM PLETED THE ASSESSMENT U/S 143(3) R.W.S. 147 OF THE ACT DETERMI NING THE TOTAL INCOME OF THE ASSESSEE AT RS. 85,74,742/- BY MAKING THE FOLLOWING ADDITIONS: 1. DISALLOWANCE OF DEDUCTION U/S 80-IC OF RS. 81,7 4,742/- 2. UNEXPLAINED SHARE CAPITAL U/S 68 OF RS. 4,00,00 0/-. 4. AGGRIEVED THE ASSESSEE CARRIED THE MATTER IN APP EAL BEFORE THE CIT(A). 5. BEFORE THE CIT(A), THE ASSESSEE SUBMITTED THAT D UE TO TIME CONSTRAINTS, THE ORIGINAL BILLS COULD NOT BE SUBMIT TED. ACCORDINGLY, BEFORE THE CIT(A) THE ASSESSEE GAVE DETAILED WRITTE N SUBMISSIONS AND PROVIDED THE RELEVANT BILLS ETC. WITH RESPECT T O THE MACHINERY IN QUESTION. THE CIT(A) SENT THE SAID DETAILS TO TH E AO, WHO GAVE REMAND REPORT IN THE MATTER AFTER VERIFYING ALL THE INVOICES DURING THE REMAND PROCEEDINGS. IN THE REMAND REPORT THE AO HELD AS FOLLOWS: IN THE ABOVE CASE, ON THE BASIS OF THE BILLS SUBMIT TED BY THE ASSESSEE DURING THE COURSE OF APPELLATE PROCEED INGS, LETTER HAS BEEN ADDRESSED TO ONE OF THE SUPPLIERS M /S ANIL COMPUTER LOCATED IN THE STATE OF HIMACHAL PRADESH. THE SUPPLIER REPLIED VIDE LETTER DATED 28/11/2011 IN WH ICH IT CONFIRMED THE PURCHASE OF COMPUTER AND RELEVANT EQUIPMENTS TO M/S PIONEER TALAFONE PVT. LTD. DURING THE FY 2004-05. THE SUPPLIER HAS ALSO CONFIRMED THE RECEIP T OF THE AMOUNTS AGAINST SALE OF ITEMS. THE BILLS MENTIONED IN THE LETTER HAVE BEEN VERIFIED WITH THAT OF COPIES FURNI SHED BY THE ASSESSEE BEFORE CIT(A)-V, HYDERABAD. THE ASSESSEE H AS NOT FURNISHED A BILL FOR RS. 9,750 DURING THE COURSE OF APPELLATE PROCEEDINGS HOWEVER THE SAME WAS CONFIRMED BY THE SUPPLIER HAVING SUPPLIED. THE ASSESSEE WAS ASKED TO RECONCILE THE ABOVE DISCREPANCY. THE AR HAS FILED A CCOUNT COPY OF THE SUPPLIER IN ITS BOOKS WHEREIN IT IS STA TED THAT ON 31/03/2005, THE PRINTER FOR RS. 9,750 PURCHASED ON 20/12/2004 HAS BEEN ACCOUNTED NOW. OUT OF THE TOTAL ASSETS OF RS. 27 LAKHS, THE ABOVE SUPPLIER ACCOUNTS FOR RS . 23 3 ITA NO. 378/HYD/2012 M/S PIONEER TALAFONE PVT. LTD. LAKHS. IN VIEW OF THE ABOVE, IT APPEARS THAT THE PU RCHASE OF THE EQUIPMENT BY THE ASSESSEE FOR RS. 23 LAKHS IS G ENUINE. 6. THE CIT(A) OBSERVED THAT THE MAIN CONTENTION OF THE AO IN THE IMPUGNED ORDER THAT THE ASSETS COULD HAVE BEEN USED EARLIER WAS NOT FOUND TO BE CORRECT DURING REMAND PROCEEDIN GS. FURTHER, HE OBSERVED THAT EVEN THOUGH SMALL AMOUNT OF BILLS RELATING TO SOME ELECTRICAL WIRES, WOOD WORK, ETC. COULD NOT BE VERIFIED, HOWEVER, THERE IS NO FINDING THAT THIS EXPENSES WER E BOGUS AND MOREOVER WIRES AND WOOD WORK CANNOT BE POSSIBLY REU SED. THEREFORE, THE CIT(A) HELD THAT THE MACHINERY IN QU ESTION WAS NOT FOUND TO BE USED EARLIER. ACCORDINGLY, THE CIT(A) H ELD THAT DEDUCTION U/S 80-IC WHICH WAS DENIED ON THIS ACCOUN T HAS TO BE ALLOWED. 7. THE CIT(A) ALSO NOTED THAT WITH RESPECT TO THE A DDITION OF RS. 4 LAKHS, THE ASSESSEE EXPLAINED THAT THE AMOUNT WAS CONTRIBUTED BY THE DIRECTOR OF ASSESSEE COMPANY IN THE FORM OF SHARE CAPITAL AND THE DIRECTOR HAD DULY PROVIDED TH E CONFIRMATION OF THE SAME. HE NOTED THAT THE CONTRIBUTION WAS REF LECTED IN THE PERSONAL BALANCE SHEET. THEREFORE, THE CIT(A) DELET ED THE ADDITION MADE IN THE HANDS OF THE ASSESSEE COMPANY. 8. AGGRIEVED BY THE ORDER OF THE CIT(A), THE REVENU E IS IN APPEAL BEFORE US AND HAS RAISED THE FOLLOWING GROUN DS OF APPEAL: I. THE ORDER OF THE CIT(A) IS ERRONEOUS IN LAW AND FACTS OF THE CASE. II. THE ORDER OF HONBLE CIT(A) IS NOT CORRECT IN D ELETING DEDUCTION U/S 80IC, AS THE ASSESSEE COULD NOT SUBST ANTIATE PURCHASES FROM THE OTHER SUPPLIERS. HENCE, THE DISA LLOWANCE MADE BY THE AO I.E. DENIAL OF DEDUCTION U/S 80-IC I S CORRECT. III. THE ORDER OF HONBLE CIT(A) IS NOT CORRECT IN DELETING UNEXPLAINED SHARE CAPITAL INTRODUCED. THE ASSESSEE COMPANY WAS UNABLE TO PROVE THE IDENTITY OF THE SHARE HOLDE R, 4 ITA NO. 378/HYD/2012 M/S PIONEER TALAFONE PVT. LTD. GENUINENESS OF THE TRANSACTION, CREDIT WORTHINESS O F THE SHARE HOLDER DURING THE COURSE OF ASSESSMENT PROCEE DING AND AS WELL AS AT THE TIME OF REMAND PROCEEDINGS. 9. THE LEARNED COUNSEL FOR THE ASSESSEE REITERATED THE SUBMISSIONS MADE BEFORE THE CIT(A). THE LEARNED DR, ON THE OTHER HAND, SUBMITTED THAT THE CIT(A) DID NOT GIVEN TIME AS SOUGHT BY THE AO IN THE REMAND REPORT BUT CONCLUDED THAT THE REMAINING BILLS WERE PERTAINING TO ELECTRICAL WIRES , WOOD WORKS ETC., WHICH ARE NOT AMENABLE FOR RE-USE AND DECIDED THE ISSUE IN FAVOUR OF THE ASSESSEE. 10. WE FIND THAT IN THE REMAND REPORT THE AO HAD AD MITTED THAT OUT OF THE TOTAL ASSETS OF RS. 27 LAKHS, THE SUPPLI ER HAD ACCOUNTED FOR RS. 23 LAKHS AND THE PURCHASE OF THE EQUIPMENT BY THE ASSESSEE FOR RS. 23 LAKH IS GENUINE. 11. WITH REGARD TO THE OTHER PURCHASES, THE AO IN H IS REMAND REPORT SUBMITTED THAT THE BILLS MOSTLY PERTAINS TO SUPPLY OF ELECTRICAL WIRES, WOODEN DOOR, CHAIRS, TABLES AND P EDESTRAL FANS ETC. THE VERIFICATION OF THE PURCHASES IN RESPECT O F M/S AURORA ENTERPRISES FOR 3 LAKHS, M/S LUXMI IRON TRADERS FOR RS. 56,784/-, M/S SHIVAM STEELS FOR RS. 33,889. M/S RIKHI RAM DHI MAN FOR RS. 17,800 IS PENDING COMPLETION. THE AO IN HIS REMAND REPORT REQUESTED FOR GRANT OF FURTHER TIME TO COMPLETE THE VERIFICATION OF THE REMAINING SUPPLIERS ALSO. 12. WE FIND THAT THE REASONING OF THE CIT(A) THAT T HE ELECTRICAL WIRES AND WOOD WORK CANNOT BE RE-USED IS CORRECT AN D THE MACHINERY IN QUESTION CANNOT BE SAID TO BE USED EAR LIER. THE AO HAS NOT PROVED AND HAS NOT BROUGHT ANYTHING ON RECO RD THAT THE EXPENSES WERE NOT PERTAINING TO ELECTRICAL WIRES AN D WOOD WORK 5 ITA NO. 378/HYD/2012 M/S PIONEER TALAFONE PVT. LTD. AND THE SAME ARE BOGUS. SINCE WE ARE ALSO OF THE OP INION THAT THE ELECTRICAL WIRES AND WOOD WORK CANNOT BE RE-USED AS HELD BY THE CIT(A), WE CONFIRM THE ORDER OF THE CIT(A) AND DISM ISS THE GROUND RAISED BY THE REVENUE ON THIS ISSUE. 13. WITH RESPECT TO THE ADDITION OF RS. 4.00 LAKHS, THE LEARNED DR VEHEMENTLY ARGUED THAT THE ASSESSEE NOT KNOWING THAT THE DIRECTOR HIMSELF CONTRIBUTED TO THE SHARE CAPITAL, IS PECULIAR AND ODD AND THE CIT(A) RELYING ON MERE CONFIRMATION FIL ED BY THE DIRECTOR IS INSUFFICIENT, THEREFORE, IT NEEDS TO BE CLARIFIED AS TO WHAT PREVENTED THE ASSESSEE FROM FURNISHING SUCH IN FORMATION IF IT IS TRUE AND GENUINE. HE CONTENDED THAT THE SUBMI SSION OF THE ASSESSEE AT THE APPELLATE STAGE APPEARS LIKE AN AFT ERTHOUGHT AND WARRANTS FURTHER CORROBORATION AND THE CIT(A) OUGHT TO HAVE ALLOWED THE AO TO MAKE NECESSARY VERIFICATION TO ES TABLISH THE GENUINENESS OF THE CONFIRMATION/OTHER MATERIAL SUBM ITTED DURING THE APPELLATE PROCEEDINGS. 14. WE HAVE GONE THROUGH THE RECORDS AND WE FIND TH AT THE AR OF THE ASSESSEE WAS NOT ABLE TO SUBMIT THE DETAILS BEFORE THE ASSESSING AUTHORITY DUE TO SHEER INADVERTENCE. THE CONFIRMATION HAS BEEN PROVIDED BY THE DIRECTOR AND THE SAME IS R EFLECTED IN THE PERSONAL BALANCE SHEET AND, THEREFORE, THE CONT RIBUTION OF THE AMOUNT OF RS. 4.00 LAKHS HAS BEEN EXPLAINED. HENCE, WE CONFIRM THE ORDER OF THE CIT(A) IN DELETING THE ADDITION OF RS. 4.00 LAKHS IN THE HANDS OF THE ASSESSEE COMPANY. ACCORDINGLY, WE DISMISS THE GROUND RAISED BY THE REVENUE ON THIS COUNT. 6 ITA NO. 378/HYD/2012 M/S PIONEER TALAFONE PVT. LTD. 15. IN THE RESULT, APPEAL OF THE REVENUE IS DISMISS ED. PRONOUNCED IN THE OPEN COURT ON 23/05/2013. SD/- SD/- (CHANDRA POOJARI) (ASHA VIJAYARAGH AVAN) ACCOUNTANT MEMBER JUDICIAL MEMBE R HYDERABAD, DATED: 23 RD MAY, 2013. KV COPY TO:- 1) ITO, WARD 16(2), ROOM NO. 615, 6 TH FLOOR, AAYAKAR BHAVAN, BASHEER BAAGH, HYDERABAD 500 004. 2) M/S PIONEER TALAFONE PVT. LTD., PLOT NO. 16, PIONEE R TOWERS SOFTWARE UNITS LAYOUT, MADHANPUR, HITECH-CIT Y, HYDERABAD 500 081. 3) CIT(A)-V, , HYDERABAD 4) CIT-IV, HYDERABAD 5) THE DEPARTMENTAL REPRESENTATIVE, I.T.A.T., HYDERABAD.