Deputy Commissioner of Income Tax, Corporate Circler-1(1), Bhubaneswar, Bhubaneswar V. M/s.Land & Water Projects Pvt. Limited, Bhubaneswar

ITA 424/CTK/2018

• Counselvise Citation: [2021] 109 COUNSELVISE.COM (IT) 8377 (ITAT-CUTTACK)
• Duration Of Justice: 2 year(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 06-01-2021
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Assessment Year: 2013-2014
• Appeal Filed On: 21-12-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: P C SETHI
• Keywords: Unexplained cash credit; Depreciation; Deemed dividend; TDS

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL CUTTACK BENCH CUTTACK BEFORE SHRI S.S.GODARA, JM & SHRI L.P. SAHU, AM (THROUGH : VIRTUAL HEARING) . / ITA NO. 424 /CTK/201 8 ( / ASSESSMENT YEAR : 2013 - 2014 ) DCI T, CORPORATE CIRCLE - 1(1), BHUBANESWAR VS. M/S LAND & WATER PROJECTS PVT. LTD., PLOT NO.14(W), ASHOK NAGAR BHUBANESWAR - 751002 ./ PANNO. : A ABCL 6312 N ( / APPELLANT ) .. ( / RESPONDENT ) /REVENUE BY : SHRI SUBHENDU DUTTA, DR /ASSESSEE BY : SHRI P.C.SETHI, ADVOCATE / DATE OF HEARING : 03 / 1 2 /20 20 / DATE OF PRONOUNCEMENT : 06/01/2021 / O R D E R PER L.P.SAHU , A M : THIS IS AN APPEAL FILED BY THE R EVENUE AGAINST THE ORDER OF CIT(A) - 1 , BHUBANESWAR, DATED 28.09.2018 FOR ASSESSMENT YEAR 2013 - 2014 ON THE FOLLOWING GROUNDS : - 1. THE ORDER OF THE LD. CIT(A) IS ERRONEOUS BOTH ON FACTS AND IN LAW. 2. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) IS NOT JUSTIFIED IN DELETING THE ADDITION OF RS.1,91,07,057/ - MADE U/S. 68 ON ACCOUNT OF 'UNEXPLAINED SHARE APPLICATION MONEY' WHEN THE ASSESSEE FAILED TO PROVE THE GENUINENESS AND CREDITWORTHINESS OF SHRI SRINIBAS SAHOO, DIRECTOR OF THE COMP ANY. 3. THE APPELLANT CRAVES TO ALTER, AMEND OR ADD ANY OTHER GROUND THAT MAY BE CONSIDERED NECESSARY IN COURSE OF THE APPEAL PROCEEDINGS. 2. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE IS ENGAGED IN THE CIVIL WORKS AND FILED ITS RETURN OF INCOME EL ECTRONICALLY ON 10.10.2013 ITA NO. 424 /CTK/201 8 2 DECLARING TOTAL INCOME OF RS.31,14,370/ - , WHICH WAS PROCESSED U/S.143(1) OF THE ACT AND SELECTED FOR SCRUTINY UNDER CASS. THEREAFTER STATUTORY NOTICES WERE ISSUED TO THE ASSESSEE. DURING THE COURSE OF ASSESSMENT PROCEEDINGS AFTER VERIFICATION OF THE COMPUTATION OF STATEMENT AND SCHEDULE - BP OF THE RETURN FILED, THE AO FOUND THAT THE ASSESSEE SUO - MOTO ADDED SALES TAX OF RS.10,23,985/ - (NOT PAID), PROFESSIONAL TAX OF RS.10,050/ - (NOT PAID), EMPLOYER CONTRIBUTION TO EPF OF RS.1,82,494/ - (NOT PAID), DIRECTOR REMUNERATION OF RS.12,00,000/ - (TDS NOT DEPOSITED), AUDIT FEES OF RS.35,000/ - (TDS NOT DEPOSITED), EMPLOYEES CONTRIBUTION TO EPF OF RS.1,61,987/ - AND EMPLOYEE CONTRIBUTION OF ESIC OF RS.27,209/ - (NOT PAID) IN THE TOTAL INCOME. AFTER T EST CHECKED OF THE BILLS/VOUCHERS PRODUCED BY THE ASSESSEE AND ALSO VERIFYING THE DEPRECIATION CLAIMED BY THE ASSESSEE, COMPLETED THE ASSESSMENT MAKING FOLLOWING ADDITIONS I) DISALLOWANCE ON ACCOUNT OF UNEXPLAINED CASH CREDIT U/S.68 OF THE ACT : RS.1,91,0 7,057/ - ; II) DISALLOWANCE OF EXPENSES CLAIM TOWARDS INTEREST ON TDS OF RS.3,329/ - ; III) DISALLOWANCE OF MISCELLANEOUS EXPENSES OF RS.15,601/ - IV) DISALLOWANCE OF INTEREST CHARGES PAID TO SREI EQUIPMENT FINANCE LTD. (NBFC) U/S.40(A)(IA) OF THE ACT OF RS. 40,49,712/ - 3. AGGRIEVED FROM THE ASSESSMENT ORDER, THE ASSESSEE APPEALED BEFORE THE CIT(A) AND THE CIT(A) AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE AND FINDINGS OF THE AO , DELETED THE ADDITION MADE U/S.68 OF THE ACT ON ACCOUNT OF UNEXPLAINED CASH CREDIT AND PARTLY DELETED THE ITA NO. 424 /CTK/201 8 3 ADDITION MADE ON ACCOUNT OF DISALLOWANCE OF INTEREST CHARGES PAID TO SREI EQUIPMENT FINANCE LTD.(NBFC) U/S.40(A)(IA) OF THE ACT. FURTHER THE CIT(A) UPHELD REMAINING ADDITIONS MADE BY THE AO. 4. FURTHER FEELING AGGRIEVED FROM THE ORDER OF CIT(A) IN DELETING THE ADDITION MADE U/S.68 OF THE ACT , THE REVENUE IS NOW IN APPEAL BEFORE THE INCOME TAX APPELLATE TRIBUNAL. 5. BEFORE US, LD. DR RELIED ON THE ORDER OF ASSESSING OFFICER AND SUBMITTED THAT THE ASSESSEE FAILED TO PROVE THE GE NUINENESS AND CREDITWORTHINESS OF SHRI SRINIBAS SAHOO, DIRECTOR OF THE COMPANY. IT WAS ALSO SUBMITTED BY THE LD. DR THAT THE WAY THE WHOLE TRANSACTION WAS FRAMED AND PRODUCED DURING THE COURSE OF ASSESSMENT PROCEEDINGS WAS AFTERTHOUGHT AND TO COVER UP THE CASH CREDIT. ACCORDINGLY, THE LD. DR SUBMITTED THAT THE AO HAS RIGHTLY MADE THE ADDITION U/S.68 OF THE ACT TREATING THE SHARE APPLICATION MONEY SHOWN AGAINST SHREE SRINIBASH SAHOO AS UNEXPLAINED CASH CREDITS IN THE BOOKS OF THE ASSESSEE. THEREFORE, THE LD. DR SUBMITTED THAT THE APPEAL OF THE REVENUE DESERVES TO BE ALLOWED. 6. ON THE OTHER HAND, LD. AR RELIED ON THE ORDER OF CIT(A) AND SUBMITTED THAT THE AO HAD NEVER ASKED FOR SUBMISSION OF ANY EVIDENCE IN RESPECT OF THE BOOK ENTRY OF SHARE APPLICATION MONE Y IN THE NAME OF THE DIRECTOR SRI SRINIBAS SAHOO AND THE ASSESSEE HAS ALREADY PRODUCED ALL THE EVIDENCES IN SUPPORT OF THE BOOK ENTRY OF SHARE APPLICATION ITA NO. 424 /CTK/201 8 4 MONEY. FURTHER THE LD. AR OF THE ASSESSEE SUBMITTED THAT NO AMOUNT WAS RECEIVED FROM SRI SRINIBAS SAH OO TOWARDS SHA R E APPLICATION MONEY DURING THE PREVIOUS YEAR AND THE ENTRY MADE IN THAT RESPECT WAS ONLY A BOOK ENTRY. THIS FACT HAS ALSO BEEN CONSIDERED BY THE CIT(A) AND DELETED THE ADDITION , THEREFORE, THE REVENUE HAS NO CASE ON MERITS, WHICH DESERVES T O BE DISMISSED. 7. AFTER CONSIDERING THE SUBMISSIONS OF BOTH THE PARTIES AND PERUSING THE MATERIAL AVAILABLE ON RECORD, WE FIND THAT AS PER THE AO THE ASSESSEE COULD NOT PRODUCE ANY DETAILS TO SUBSTANTIATE ITS CLAIM. HOWEVER, THE CIT(A) AFTER RECEIPT OF TH E REMAND REPORT FROM THE AO, OBSERVED THAT NO AMOUNT WAS RECEIVED FROM SRI SRINIBAS SAHOO TOWARDS SHARE APPLICATION MONEY DURING THE PREVIOUS YEAR AND THE ENTRY MADE IN THAT RESPECT WAS ONLY A BOOK ENTRY. THE RELEVANT FINDINGS RECORDED BY THE CIT(A) IN THI S REGARD ARE AS UNDER : - 4.5 I HAVE CONSIDERED THE MATTER AND PERUSED THE FACTS ON RECORD. THE FACTS CONTAINED IN THE REPORT OF THE AO HAVE ALSO BEEN CONSIDERED. IN THE COURSE OF REMAND PROCEEDING, THE ASSESSEE HAS PRODUCED ALL THE RELEVANT DOCUM ENTS BEFORE THE AO WHICH SHOW THAT THE LONG TERM BORROWING FROM M/S. SREI EQUIPMENT FINANCE LTD. OUTSTANDING AS ON 31.3.2012 HAS BEEN RECHRISTENED AS SHARE APPLICATION MONEY PENDING ALLOTMENT IN THE NAME OF SRI SRINIBAS SAHOO AFTER BEING TAKEN OVER BY M/S. IPI STEELS LTD. ON BEHALF OF THE ASSESSEE COMPANY. IN THIS CONNECTION, THE ASSESSEE HAS FILED ITS AUDITED P&L ACCOUNT AND BALANCE SHEET FOR THE FY 2012 - 13, LEDGER ACCOUNT COPIES OF SRI SRINIBAS SAHOO, DIRECTOR BOTH IN THE BOOKS OF THE ASSESSEE COMPANY AND M/S. IPI STEELS LTD., LEDGER ACCOUNT COPY OF M/S. SREI EQUIPMENT FINANCE LTD. WITH M/S. IPI STEELS LTD. AND COPIES OF DOCUMENTS CONTAINING THE NAMES OF THE SHAREHOLDERS OF THE ASSESSEE - COMPANY, THE AMOUNTS RECEIVED FROM THEM AND THE DATES OF RECEIPTS. FRO M THE DOCUMENTS AND ACCOUNTS FILED BY THE ASSESSEE, IT IS CLEAR THAT NO AMOUNT WAS RECEIVED FROM SRI SRINIBAS SAHOO TOWARDS SHARE APPLICATION MONEY DURING THE PREVIOUS YEAR AND THE ENTRY MADE IN THAT RESPECT WAS ONLY A BOOK ENTRY. THE LOAN FROM M/S. SREI E QUIPMENT ITA NO. 424 /CTK/201 8 5 FINANCE LTD. OF RS.1,91,07,057/ - WAS OUTSTANDING IN THE BOOKS OF THE ASSESSEE AS ON 31.3.2012 AND THE SAME BEING TAKEN OVER BY M/S. IPI STEELS LTD., THE AMOUNT WAS SHOWN IN THE NAME OF SRI SRINIBAS SAHOO, DIRECTOR OF M/S IPI STEELS LTD. AS RECEIPT OF SHARE APPLICATION MONEY. NECESSARY ENTRY IS ALSO FOUND TO HAVE BEEN MADE IN THE BOOKS OF M/S. IPI STEELS LTD. IN THE NAME OF SRI SRINIBAS SAHOO BY MAKING A DEBIT ENTRY OF RS. 1,91,07,057/ - . KEEPING IN VIEW THE FACT THAT NO AMOUNT WAS RECEIVED FROM SRI SRINIBAS SAHOO TOWARDS SHARE APPLICATION MONEY DURING THE RELEVANT PREVIOUS YEAR, THERE IS NO WARRANT FO R MAKING ANY ADDITION U/S.68. THE AO IN HIS REPORT HAS OBSERVED TOWARDS THE END THAT THE ASSESSEE HAS FAILED TO SUBSTANTIATE AS TO WHY THE CONSEQUENTIAL SHARE APPLICATION MONEY HAS BEEN SHOWN IN THE NAME OF SRI SAHOO WHEN THE LOAN AMOUNT IN QUESTION WAS TAKEN OVER BY M/S. IPI STEELS LTD. I FIND THAT THE ASSESSEE HAS ALREADY EXPLAINED THIS POINT BEFORE THE AO. SRI SAHOO IS THE MANAGING DIRECTOR OF THE ASSE SSEE COMPANY AND ALSO A DIRECTOR OF M/S. IPI STEELS LTD. TO PROJECT A BETTER PICTURE OF THE FINANCIAL AFFAIRS OF BOTH THE COMPANIES, THE BOOK ENTRIES AS MENTIONED ABOVE HAVE BEEN PASSED. HOWEVER, NO ADVERSE INFERENCE IN RESPECT OF GENUINENESS OF THE ENTRY CAN BE DRAWN BECAUSE INSTEAD OF M/S. IPI STEELS LTD., THE NAME OF SRI SAHOO APPEARED IN THE BOOKS OF THE ASSESSEE COMPANY. KEEPING IN VIEW THE ABOVE DISCUSSION, THE ADDITION OF RS.1,91,07,057/ - MADE U/S.68 IS DELETED. 8. WE ALSO OBSERVE THAT M/S IPI STEEL S LTD. HAD TAKEN LOAN FROM SREI EQUIPMENT FINANCE LTD. DURING THE FINANCIAL YEAR 2010 - 2011 OF RS.4,09,29,292/ - , WHICH WAS REDUCED TO RS.1,89,21,391/ - AS ON 31.03.2012 AND THE LOAN AMOUNT WAS PAID BY M./S IPI STEELS LTD. BUT THE SHARES WERE ALLOTTED IN THE NAME OF DIRECTORS. THE AO SHOULD HAVE TAKEN ACTION IN THE HANDS OF THE DIRECTORS AS A DEEMED DIVIDEND WHEREAS THE AO ADDED THE ENTIRE AMOUNT OF SHARE APPLICATION MONEY IN THE HANDS OF THE ASSESSEE. IT WAS A BOOK ADJUSTMENT ENTRY AND WE ALSO OBSERVE THAT TH E AMOUNTS WERE NOT RECEIVED DURING THE YEAR. HAD THE ENTIRE TRANSACTIONS BEEN MADE IN THE IMPUGNED ASSESSMENT, THERE WOULD HAVE BEEN DIFFERENT PICTURE, HOWEVER THE LOAN AMOUNT WAS TAKEN IN THE FINANCIAL YEAR 2010 - 2011 BY THE IPI STEELS LTD,. LD. DR COULD N OT ITA NO. 424 /CTK/201 8 6 CONTROVERT THE FINDINGS RECORDED BY THE CIT(A) IN THIS REGARD. ACCORDINGLY, WE DO NOT SEE ANY GOOD REASON TO INTERFERE WITH THE OBSERVATIONS MADE BY THE CIT(A) AND WE UPHOLD THE SAME AND DISMISS THE GROUND RAISED BY THE REVENUE. 9 . IN THE RESULT, APPEAL OF THE REVENUE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 06 / 01 /20 20 . SD/ - ( S.S.GODARA ) SD/ - (L.P.SAHU) / JUDICIAL MEMBER / ACCOUNTANT MEMBER CUTTACK; DATED 06/01 /20 2 1 PRAKASH KUMAR MISHRA, SR.P.S. / COPY OF THE ORDER FORWARDED TO : / BY ORDER, ( SENIOR PRIVATE SECRETARY ) ITAT CUTTACK BENCH, CUTTACK 1. / THE APPELLANT - DCIT, CORPORATE CIRC LE - 1(1), BHUBANESWAR 2. / THE RESPONDENT - M/S LAND & WATER PROJECTS PVT. LTD., PLOT NO.14(W), ASHOK NAGAR BHUBANESWAR - 751002 3. ( ) / THE CIT(A), 4. / CIT 5. , , / DR, ITAT , CUTTACK 6. / GUARD FILE. //TRUE COPY//