ACIT, CHENNAI V. Shri V.Rajendran, CHENNAI

ITA 465/CHNY/2010

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 58010 (ITAT-CHENNAI)
• Duration Of Justice: 1 year(s) 11 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-03-2012
• Appeal Filed By: Department
• Bench Allotted: C
• Next Hearing Date: 12-03-2012
• Assessment Year: 1999-2000
• Appeal Filed On: 12-04-2010
• Court: TRIBUNAL
• Assessee Lawyers: G STANLY
• Keywords: Unexplained investment; Business income
• Section: 69

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH, CHENNAI BEFORE SHRI ABRAHAM P. GEORGE, ACCOUNTANT MEMBER AND SHRI VIKAS AWASTHY, JUDICIAL MEMBER I.T.A. NO. 465/MDS/2010 (ASSESSMENT YEAR : 1999-2000) THE ASSISTANT COMMISSIONER OF INCOME TAX, COMPANY CIRCLE IV(2), CHENNAI - 600 034 . (APPELLANT) V. SHRI V. RAJENDRAN, AJ-81, 3 RD CROSS STREET, 9 TH MAIN ROAD, ANNA NAGAR, CHENNAI - 600 040. PAN : ADCPV3747N (RESPONDENT) APPELLANT BY : SHRI M.N. MURTHY NAIK RESPONDENT BY : SHRI G. S TANLY DATE OF HEARING : 12.03.2012 DATE OF PRONOUNCEMENT : 12.03.2012 O R D E R PER ABRAHAM P. GEORGE, ACCOUNTANT MEMBER : IN THIS APPEAL FILED BY THE REVENUE, ITS GRIEVANC E IS THAT CIT(APPEALS)-V, CHENNAI, VIDE HIS ORDER DATED 29.1. 2010, DELETED ADDITIONS OF ` 266 LAKHS AND 109.50 LAKHS TOWARDS UNEXPLAINED INVESTMENTS, UNDER SECTION 69 OF INCOME-TAX ACT, 19 62 (IN SHORT 'THE ACT'). AS PER THE REVENUE, THE ISSUE REGARDING SUC H ADDITIONS WHICH WERE ALSO MADE IN THE CASE OF ONE M/S META FILMS (I NDIA) LTD. STOOD I.T.A. NO. 465/MDS/10 2 REMITTED BACK TO THE ASSESSING OFFICER BY THIS TRIB UNAL IN THE CASE OF ACIT V. M/S META FILMS (INDIA) LTD. (IN I.T.A. NO. 1425/MDS/2009 DATED 10 TH FEBRUARY, 2010). 2. HEARD BOTH COUNSELS. THE ADDITIONS MADE WERE FO R UNEXPLAINED INVESTMENTS ALLEGED TO HAVE BEEN MADE B Y THE ASSESSEE IN A COMPANY CALLED M/S META FILMS (INDIA) LTD. OF WHICH ASSESSEE WAS THE MANAGING DIRECTOR. AS ALREADY STATED IN TH E GROUNDS RAISED BY THE REVENUE, SIMILAR ADDITIONS WERE MADE IN THE HANDS OF M/S META FILMS (INDIA) LTD., AND LD. CIT(APPEALS) HAD, ON AN APPEAL FILED BY SAID M/S META FILMS (INDIA) LTD., DELETED SUCH A DDITIONS. THEREAFTER, REVENUE HAD MOVED IN APPEAL BEFORE THIS TRIBUNAL. THIS TRIBUNAL IN ITS ORDER DATED 10 TH FEBRUARY, 2010 IN M/S META FILMS (INDIA) LTD.S CASE (SUPRA) HELD AS UNDER:- 2. THE ASSESSEE COMPANY IS ENGAGED IN THE MANUFACT URE OF FLEXIBLE PACKAGING MATERIALS. IT RETURNED A LOSS O F RS.4,68,24,725/- FOR THE YEAR UNDER CONSIDERATION. IN THE COURSE OF ASSESSMENT PROCEEDINGS IT WAS NOTICED THA T THE SHAREHOLDERS FUND HAD INCREASED FROM RS.394.50 LAC S TO RS.770 LACS. THE INCREASE IN SHARE CAPITAL WAS TO THE EXT ENT OF RS.3,75,50,000/-. IT WAS EXPLAINED BY THE ASSESSEE THAT RS.266 LACS WERE BROUGHT IN AS UNSECURED LOANS AND SINCE I DBI INSISTED FOR THE INCREASE IN SHARE CAPITAL, THE SAME WAS CON VERTED INTO SHARE CAPITAL. DUE TO OVERSIGHT, INSTEAD OF TREATI NG THE AMOUNT AS SHARE APPLICATION MONEY, THE AUDITORS HAD SHOWN IT AS UNSECURED LOANS. AS REGARDS RS.109.50 LACS, THE SA ME WAS BROUGHT IN AS EQUITY CAPITAL DURING THE FINANCIAL Y EAR 1998-99. I.T.A. NO. 465/MDS/10 3 NO BOOKS OR OTHER DETAILS WERE PRODUCED AND PERUSAL OF THE SHAREHOLDERS LIST SHOWN THAT 95% OF THE SHAREHOLDE RS HAD SHOWN THE SAME ADDRESS WHICH WAS THE RESIDENCE OF THE MAN AGING DIRECTOR OF THE ASSESSEE. THE SUM OF RS.109.50 LAC S WAS RECEIVED FROM 17 PERSONS. SUMMONS ISSUED TO THEM W ERE RETURNED IN SOME OF THE CASES AND SOME OF THE CREDI TORS APPEARED BEFORE THE ASSESSEE BUT WERE NOT FOUND TO BE CREDITWORTHY. IN VIEW OF THESE FACTS ADDITION OF RS.3,75,50,000/- WAS MADE UNDER SEC.68 OF THE ACT. 3. THE CIT (A) DELETED THE ADDITION OF RS.266 LACS BY OBSERVING THAT THE EXPLANATION OF THE ASSESSEE WITH REGARD TO THE CONVERSION OF LOAN INTO EQUITY WAS SATISFACTORY . HOWEVER, THE EXPLANATION WITH REGARD TO RS.109.50 LACS WAS NOT F OUND TO BE SATISFACTORY AND THE ADDITION WAS SUSTAINED. AT TH E SAME TIME, HE ACCEPTED THE CONTENTION OF THE ASSESSEE THAT RS. 109.50 LACS WOULD BEAR THE CHARACTER OF BUSINESS INCOME AND HEN CE THE SAME COULD BE SET OFF AGAINST THE BUSINESS INCOME. 4. THE CONTENTION OF THE LEARNED COUNSEL WAS THAT S EC.41(1) WAS NOT CONSIDERED EITHER BY THE ASSESSING OFFICER OR BY THE CIT(A) AND THE SAME HAS BEEN INVOKED FOR THE FIRST TIME BY THE DEPARTMENT BEFORE THE TRIBUNAL. WITH REGARD TO THE ADDITION OF RS.109.50 LACS, IT WAS CONTENDED THAT SINCE THE CIT (A) WAS ALLOWING THE SET OFF AGAINST BUSINESS INCOME, HE RE ALLY DID NOT GO INTO THE MERITS OF THE ADDITION. THEREFORE, IT IS ARGUED THAT THE ENTIRE MATTER SHOULD BE SET ASIDE FOR RECONSIDERATI ON. THE LD. D.R., THOUGH TRIED TO SUPPORT THE ORDERS OF THE LOW ER AUTHORITIES, HAD NO STRONG OBJECTION IF THE MATTER WAS SENT BACK FOR RECONSIDERATION. 5. ON CAREFUL CONSIDERATION OF THE MATTER, WE FIND FORCE IN THE CONTENTIONS OF THE LEARNED COUNSEL. IT IS NOT DENIED BY THE LD. D.R. THAT SEC.41(1) HAS BEEN INVOKED FOR THE FI RST TIME BEFORE THE TRIBUNAL. ON PERUSAL OF THE ORDER OF THE CIT(A ), IT IS ALSO EVIDENT THAT THE CIT(A) HAS NOT EXAMINED THE CREDI TS OF RS.109.50 LACS IN AS MUCH DETAIL AS HE EXAMINED THE OTHER ADDITIONS. THEREFORE, WE RESTORE THE MATTER TO THE FILE OF THE ASSESSING OFFICER WITH THE DIRECTION TO RECONSIDER THE ADDITION OF RS.109.50 LACS AND ALSO TO CONSIDER THE APPLICAB ILITY OF I.T.A. NO. 465/MDS/10 4 SEC.41(1) OF THE ACT. THE ASSESSEE SHALL BE AT LIB ERTY TO ADDUCE ANY EVIDENCE AS IT DEEMS FIT WITH REGARD TO BOTH TH E ADDITIONS. 3. SINCE THE ISSUES ARE INTERCONNECTED AND THE ISSU ES STAND ALREADY REMITTED BACK TO THE ASSESSING OFFICER IN T HE CASE OF M/S META FILMS (INDIA) LTD., WE ARE OF THE OPINION THAT IN THE INTEREST OF JUSTICE, THE ADDITIONS NOW DELETED BY LD. CIT(APPEA LS) IN ASSESSEES HAND ALSO REQUIRE A FRESH LOOK BY THE A.O. WE, THE REFORE, SET ASIDE THE ORDERS OF AUTHORITIES BELOW AND REMIT THE ISSUE BACK TO THE FILE OF A.O. FOR CONSIDERATION DE NOVO. 4. IN THE RESULT, APPEAL FILED BY THE REVENUE IS AL LOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT AFTER CONCLUSION OF HEARING ON 12 TH MARCH, 2012. SD/- SD/- (VIKAS AWASTHY) (ABRAHAM P. GEORGE) JUDICIAL MEMBER ACCOUNTANT MEMBER CHENNAI, DATED THE 12 TH MARCH, 2012. KRI. COPY TO: APPELLANT/RESPONDENT/CIT(A)-V, CHENNAI-34 / CIT, CHENNAI-III, CHENNAI/D.R./GUARD FILE