ACIT, Circle-2(2), Bhubaneswar, Bhubaneswar V. M/s. Neelachal Build Tech. & Resort Pvt. Ltd., Bhubaneswar

ITA 503/CTK/2013

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 8380 (ITAT-CUTTACK)
• Duration Of Justice: 2 year(s) 5 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-04-2016
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Next Hearing Date: 12-01-2016
• Assessment Year: 2010-2011
• Appeal Filed On: 13-11-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ASIT KUMAR MOHAPATRA
• Assessee Lawyers: MIHIR KUMAR SAHU
• Keywords: Bogus Share capital; Additional evidence
• Section: 40A(3); 143(3); 133A; 27; 28; 68

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL CUTTACK , BENCH CUTTACK BEFORE SHRI R.C.SHARMA , A M & SHRI PARTH A SARATHI CH A UDHURY , JM ./ ITA NO . 503 / CTK /20 1 3 ( [ [ / ASSESSMENT YEAR : 20 10 - 20 1 1 ) DCIT, CIRCLE - 2(2), BHUBANESWAR VS. NEELACHAL BUILDTECH & RESORTS PVT. LTD., 2271, BISWAL COMMERCIAL COMPLEX, 3 RD FLOOR,ROOM NO.19&20, CUTTACK ROAD, BHUBANESWAR - 751007 ./ ./ PAN/GIR NO. : A ABCN 3025 E ( / APPELLANT ) .. ( / RESPONDENT ) AND ./ ITA NO. 474 /CTK/2013 ( [ [ / ASSESSMENT YEAR : 2010 - 2011) NEELACHAL BUILDTECH & RESORTS PVT. LTD.,2271, BISWAL COMMERCIAL COMPLEX, 3 RD FLOOR, ROOM NO.19&20, CUTTACK ROAD, BHUBANESWAR - 751007 VS. A CIT, CIRCLE - 2(2), BHUBANESWAR ./ ./ PAN/GIR NO. : AABCN 3025 E ( / APPELLANT ) .. ( / RESPONDENT ) /REVENUE BY : SHRI ASIT KUMAR MOHAPATRA [ /ASSESSEE BY : SHRI MIHIR KUMAR SAHU / DATE OF HEARING : 12 / 01 / 201 6 / DATE OF PRONOUNCEMENT 25 /04 /2016 / O R D E R PER R.C.SHARMA (A.M) : TH ESE ARE THE CROSS APPEALS FILED BY THE REVENUE AND ASSESSEE AGAINST THE ORDER OF CIT(A) - II , BHUBANESWAR FOR THE ASSESS MENT YEAR 20 10 - 2011 , IN THE MATTER OF ORDER PASSED U/S.14 3(3) OF THE I.T.ACT. ITA NO. 503&474/13 2 2. THOUGH THE GROUNDS RAISED IN APPEAL OF THE REVENUE AND ASSESSEE ARE DIFFERENT TO EACH OTHER, HOWEVER, THE IMPUGNED ORDER UNDER CHALLENGE IS COMMON IN BOTH THE APPEALS, THEREFO RE, FOR THE SAKE OF CONVENIENCE, BOTH THE APPEALS ARE HEARD AND DISPOSED OFF TOGETHER. 3. NOW, WE SHALL TAKE APPEAL OF THE REVENUE I.E. ITA NO. 503/CTK/2013 , WHEREIN THE REVENUE HAS RAISED THE FOLLOWING GROUNDS: - 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) WAS NOT JUSTIFIED IN DELETING THE ADDITION OF RS.1,00,00,000/ - MADE BY THE AO ON ACCOUNT OF UNEXPLAINED SHARE CAPITAL WITHOUT PROPERLY APPRECIATING THE FACTS OF THE CASE. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) WAS NOT JUSTIFIED IN DELETING THE ADDITION OF RS.2,60,41,380 / - MADE BY THE A O ON ACCOUNT OF CORRECT REVENUE RECOGNITION IN REGARD TO THE BUSINESS OF THE ASSESSEE. 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) WAS NO T JUSTIFIED IN ACCEPTING THE CONTENTION OF THE ASSESSEE AND NOT ACCEPTING THE FINDINGS OF THE A O IN VIOLATION OF RULE 46A. ' 4. RIVAL CONTENTIONS HAVE BEEN HEARD AND RECORD PERUSED. FACTS IN BRIEF ARE THAT THE ASSESSEE IS A PRIVATE LIMITED COMPANY ENGAGE D IN THE BUSINESS OF REAL ESTATE. A SURVEY U/S 133A OF THE ACT WAS CONDUCTED ON THE ASSESSEES PREMISES ON 30.3.2010 AND 31.3.2010. THE ASSESSEE FILED RETURN OF INCOME FOR RS . 58,64,338/ - ON 13.10.2010. THE ASSESSMENT WAS COMPLETED UNDER SECTION 143(3) OF T HE INCOME TAX ACT 1961 ASSESSING THE TOTAL INCOME AMOUNTING TO RS. 4,41,85,260/ - TH E ASSESSING OFFICER IN HIS ORDER STATED THAT THE ASSESSEE HAS ALLEGED TO HAVE MADE PAYMENTS IN EXCESS OF RS 20,000/ - OTHERWISE THAN BY ACCOUNT PAYEE CHEQUE OR AN ITA NO. 503&474/13 3 ACCOUNT PAYE E DEMAND DRAFT I.E. CASH PAYMENT BECAUSE OF WHICH TOTAL EXPENDITURE AMOUNTING TO RS 23,94,009/ - HAS BEEN ADDED BACK. THE AO HAS ALSO MADE ADDITION OF RS 1,00,00,000/ - U/S 68 OF THE ACT ALLEGING THAT THE QUANTUM OF PREMIUM IN SUPPORT OF CAPITAL OF THE INVES TORS IS UNJUSTIFIABLE . FURTHER THE AO MADE ADDITION OF RS 2,60,41,380/ - BEING THE DIFFERENCE BETWEEN THE REVENUE ON THE BASIS OF 40% PROJECT COMPLETION AS RECORDED IN SURVEY AND REVENUE RECOGNIZED ON THE BASIS OF 31% PROJECT COMPLETION AS DECLARED BY THE A SSESSEE. 5. BY THE IMPUGNED ORDER, THE CIT(A) DELETED THE ADDITIONS MADE ON ACCOUNT OF RECEIPT OF SHARE CAPITAL U/S 68 AND ESTIMATION OF REVENUE RECOGNITION @ 41% AFTER HAVING FOLLOWING OBSERVATIONS AT PAGE 21 TO 23 : - T HE SECOND ISSUE IS REGARDING CASH C REDIT. I HAVE CAREFULLY GONE THROUGH THE LEGAL AND FACTUAL SUBMISSION OF THE APPELLANT. FIRST OF ALL, I MAY APPRECIATE THE EFFORTS OF THE ASSESSING OFFICER WHO COMPLETED THE ORIGINAL ASSESSMENT. MUCH AS I WOULD HAVE BEEN INCLINED TO EXTEND MY SUPPORT TO HI S EFFORTS, JUDICIAL DISCIPLINE HAS PREVENTED ME FROM DOING SO. THE EXAMINATION OF CASH CREDIT UNDER THE SCANNER OF INCOMETAX ACT HAS ALWAYS BEEN DEBATABLE AND OF LATE, MUCH HAS BEEN SAID ON THE TESTS OF IDENTITY AND CREDIT WORTHINESS OF THE CREDITORS AND G ENUINENESS OF THE TRANSACTIONS. I HAD AN OCCASION TO DEAL WITH THE ISSUE OF THE CASH CREDITS EXTENSIVELY IN ONE OF MY OTHER APPEALS AND DURING THE COURSE, I HAVE COME ACROSS A LOT OF JUDICIAL DECISIONS WHICH ARE AFTER THE DECISION OF THE SUPREME COURT IN T HE CASE OF CIT VS LOVELY EXPORTS (P) LTD 216 CTR 195(SC). SINCE I HAVE MAINTAINED THE LIST FOR FUTURE USE, IN THE INTEREST OF JUSTICE, IT MAY BE WORTHWHILE TO REPRODUCE THOSE AS UNDER. TABLE - I INDEX OF CASE LA WS RELIED UPON [BESIDES CIT V. LOVELY EXPORT S (P) LTD [2008] 216 CTR 195 (SC)] 1. ACIT V. M/S. DILIP CONSTRUCTIONS (P.) LTD. 2013 - (ID1) - GJX - 0649 U(ITAT CUTTACK) 2. CIT V. OASIS HOSPITALITIES (PUT.) LTD. & ORS. [2011 - (198) - TAXMA N 3. 3 M/ S. CORPORATE ADV ISORY SERVICES LTD ., V. ACIT 20 11 - (ID2) - GJX - 2970 - (ITAT CUTTACK) 4. ACIT V. M/S. AMBIKA SHEETGRAH (P) LTD. (2011) - (ID2) - GJX - 6125 (ITAT AGRA) 5. ACIT V. KAMAL KUMAR S. AGRAWAL (INDL.) & ORS. [2012} 20 TAXMANN.COM 338 (NAG.) 2009 - (ID2) - GJX - 0746 - (ITAT NAGPUR) REEVANT EXCERPTS .' 6. DCIT V. SHA W AROMATICS PUT. LTD. 201O - (ID1) - GJX - 2078 (ITAT KOL) ITA NO. 503&474/13 4 7. ITO V. M/ S. DELHI EXTRUSION PUT. LTD. AND VICE VERSA 2011 - (ID2) - GJX - 2667 (ITAT DELHI) 8. ITO V. M/ S. GAURAU CONFIN P V T. LTD ., RESPONDENT & VICE VERSA. 20 11 - (ID 1 ) - GJX - 5394 (ITAT DELHI) 9 ITO V. M/S. SUNGROWTH SHARE & STOCKS LTD. 2011 - (ID2) - GJX - 3424 (ITAT KO L KATA) 10 M/S. KRISHHNA CAPFIN LTD. V. ITO 2011 - (ID1) - GJX - 0948U (ITATJAIPUR) 11 CIT V. ROCK FORT METAL & MINERALS LTD. (2011) 198 TAXMAN 497 (DEL) 12 CIT V GANGESHWARI METAL PVT. LTD. 2013 - (IT2) - GJX - 0017 DEL 13 CIT V. GANGOUR INVESTMENT LTD. (2009) 179 TAXMAN 1 (DEL); 2009 - (IT1) - GJX - 0095 - DEL 14 CIT V. JAY DEE SECURITIES AND FINANCE LTD (2013) 350 ITR 220 (ALL) 15 INCOME TAX OFFICER V. SOUTH EAST IMPEX (P.) LTD. AND VICE VERSA. (1 33 TTJ 201) 2010 - (ID2) GJX - 0285 - (TDEL) 16 CIT V. DHAWAN JEWELLERS PUT. 2010 - (ITL) - GJX - 0344 DEL 17 CIT V. KHUSHAGRA REAL ESTATE P. LTD. 2010 - (IT1) - GJX - 0225 DEL 18 CIT V_ VICTOR ELECTRODES LTD. [2010 - (329) - ITR - 0271 - DEL} 19 CIT V. WINSTRAL PETROC HEMICALS (P) LTD. [201 0 - (041) - DTR 0394 - DEL - 0139 - DEL} 201 0 - (IT1) - GJX 20 C IT V. ARUNANANDA TEXTILES P. LTD. [2011 - (333) - ITR - 0116 - KAR} 21 CIT V. CREATIVE WORLD TELEFILMS LTD. (FORMERLY KNOWN AS LINK INTERNATIONAL SERVICES P. LTD.).[20 11 - (333) - ITR - 01 00 BOM 22 CIT V. DERBY OVERSEAS P. LTD. 201 0 - (IT2) - GJX - 0498 DEL 23 CIT V. K. C. FIBRES LTD. [2010 - (187) - TAXMAN - 0053 - DEL) 24 ACIT V. VENKATESHWAR ISPAT P. LTD. [2009 - (319) - ITR - 0393 - CHH} 25 CIT V. SAMIR BIO - TECH. (PVT.) LTD. [2009 - (017) - DTR - 0224 - DEL} 2008 - (IT2) - GJX - . - 0750 DEL 26 SHALIMAR BUILDCON (P.) LTD. VS ITO [2011} 128 ITD 396 (ITAT JAIPUR) 27 ITO V. M/ S. PAYWELL SECURITIES P LTD. & VICE VERSA. 2011 - (ID2) - GJX - 3002 (ITAT DELHI) 28 ITO V. M/ S. FRANCOTYP POSTALIA INDIA PVT. LTD. 2011 - (ID1) - GJX - 0186 (ITAT DELHI) 29 ACIT V. POWER PACK INDUSTRIES (2010) 35 DTR 454 (ITAT BILASPUR]; (2009) - (ID1) - GJX - 780 - . (JTAT BILASPUR}. 30 CIT V. GP INTERNATIONAL LTD. [2010 - (186) - TAXMAN - 0229 - P&H] 31 ACIT V. M/S. KUBER SECURITIES LTD. 2011 - (ID1) - G JX - 0601 (ITAT DELHI) 32 CIT V. STL EXTRUSION P LTD. (2011) 11 TAXMANN.COM 125 (MP); (201 0) - (IT1) - GJX - 0830 (MP) 33 BHAV SHAKTI STEEL MINES (P.) LTD. V. CIT. (2009) 179 TAXMAN 25 (DEL); (2010) 320 ITR 619 (DEL) TABLE - II IN THE FOLLOWING CASES EVEN WIT HOUT REFERRING TO CIT V. LOVELY EXPORTS (P) LTD /2008) 216 CTR 195 (SE), THE ADDITIONS U/S.68 WERE DELETED! NOT SUSTAINED. 1. ABHIK JAIRI VS IT O /2013) 33 TAXMANN.COM 577 (ITAT DELHI) /2013) 33 TAXMANN.COM 577 (ITAT DELHI)//2012) 18 ITR(T) 497 (DELHI - TRIB.) 2. CIT VS. JAY ENTERPRISE/2012) 22 TAXMANN.COM 163 (GUJARAT)/{2012) 209 TAXMAN 17 (GUJARAT)(MAG.) 3. FORT PROJECTS (P) LTD. VS. DCIT /2013) 29 TAXMANN.COM 84 (ITAT KOLKATA)//2012) 145 TTJ 340 (ITAT KOLKATA) 4. CIT VS. RANCHHOD JIUABHAI NAKHAVA/2012) 21 TAXMANN .COM 159 (GUJARAT)/{2012) 208 TAXMAN 35 (GUJARAT) 5. CIT VS. ABDUL AZIZ/2012) 20 TAXMANN.COM. 137 (CHHATTI SGARH)/ /2012) 207 TAXMARI 62 (CHHATTISGARH)(MA G.) 6 IT O VS. ANANT SHELTERS (P) LTD./2012) 20 TAXMANN.COM 153 (ITAT MUMBAI)//2012) 51 SOT 234 (ITAT MUMBAI 7 SARJAN CORPORATION VS. ACIT /2012) 25 TAXMANN.COM 426 (ITAT AHMEDABAD) IN TABLE - I, THERE ARE 33 DECISIONS, THE LEAD ING CASE BE ING A RECENT DE CISION DATED 14.02.2013 OF THE ITAT CUTTACK BENCH CUTTACK IN ITA NO. 503&474/13 5 THE CA SE OF ACIT. VS M/S. DILIP CONSTRUCTION PVT. LTD. IN ITA NO. 213/CTK/2012 FOR A/Y. 2008 - 09. I HAVE MADE EFFORTS TO GO THROUGH ALL THE 33 CASES WHERE THE CONCERNED AUTHORITIES HAVE USED THE RATIO OF THE SUPREME COURTS DECISION IN THE CASE OF M/S LOVELY EXP ORTS (P) LTD. S EPARATELY IN TABLE - IL, THERE ARE 7 CASE DECISIONS WHERE, INDEPENDENT OF THE CASE OF M/ S. LOVELY EXPORTS (P) LIMITED, HIGH COURTS HAVE PRONOUNCED SIMILAR VERDICTS. DUE TO THE PREDOMINANT LEGAL VIEW THAT WHEREVER THE IDENTITIES OF CREDITOR S ARE NOT ILL QUESTION AND FUNDS FLOW FROM THE CREDITORS TO THE ASSESSEE ARE GENUINE THROUGH BANKING CHANNEL AND ABOVE ALL WHERE THE ALLEGED CREDITORS UNEQUIVOCALLY CONFIRM THEIR CREDITS WITH THEIR FULL DETAILS AND INCOME TAX PARTICULARS, THE TAXING AUTHOR ITIES CANNOT PENALIZE THE BORROWER/ ASSESSEE ON THE GROUND OF CREDITWORTHINESS OF THE ALLEGED CREDITORS. IT IS WISER TO TAKE ON THE ALLEGED CREDITORS IF THERE IS DOUBT REGARDING THE GENUINENESS OF THEIR FUNDS OR SOURCES THEREOF. IN VIEW OF THE FACTS MARSH ALLED BY THE AO (WITHOUT MAKING ANY FURTHER EFFORTS FOR HIS INDEPENDENT VERIFICATION FROM THE CREDITORS) AND THE DETAILS SUPPLIED BY THE APPELLANT TO THE AO, WHEN I EXAMINED THOSE UNDER THE AFORESAID JUDICIAL PRESCRIPTION, I HAVE TO SAY THAT THE INCOME TAX DEPARTMENT HAS THE BURDEN TO EXAMINE THE SAID SHARE APPLICATION MONEY AND PREMIUM (BOTH SUSPECTED TO BE FICTITIOUS) SHOWN TO HAVE BEEN PAID TO THE APPELLANT, IN THE INDIVIDUAL ASSESSMENTS OF ALL THE 10 COMPANIES WHO HAVE SUBSCRIBED TO THE APPELLANT. AS SE EN, THESE ARE ALL IT ASSESSES. WHETHER OR NOT THE RAISING OF PREMIUM IS BELIEVABLE IN THE HANDS OF THOSE KOLKATA COMPANIES, WOULD NOT JEOPARDIZE THE APPELLANT'S CASE U / S 68 BECAUSE THE AO HAS NOT PROVED THE IDENTITIES OF THE CREDITORS AS WRONG NOR HAS HE S AID THAT THE FUNDS WHICH CAME THROUGH BANKING CHANNEL DID NOT CONSTITUTE GENUINE TRANSACTIONS. ACCORDINGLY I DIRECT THE AO TO DELETE THE ADDITION U/S 68 . I HAVE EXAMINED THE DETAILED SUBMISSION OF THE APPELLANT ON THE ISSUE OF REVENUE RECOGNITION. IN THE ORIGINAL ASSESSMENT AS WELL AS DURING THE REMAND PROCEEDINGS, THE AO HAS MERELY STATED THAT HE COULD NOT ACCEPT THE REPORT OF THE STRUCTURAL CONSULTANT BECAUSE THE STATEMENT RECORDED FROM THE DIRECTOR ON THE DATE OF SURVEY I.E. 3 1 .3.20 10 WOULD BE MORE AUT HENTIC AND CREDIBLE. THE AO HAS ALLEGED THAT THE OPINION OF THE STRUCTURAL CONSULTANT WAS NOT ACCOMPANIED BY ANY OTHER DOCUMENTS SHOWING THE BASIS OF SUCH OPINION. THE AO HAS HOWEVER IGNORED THE SHEET ANNEXED TO THE CERTIFICATE OF SHRI PITABASH PANDA WHICH IS SUPPOSED TO REFLECT THE STATEMENT OF PERCENTAGE OF PROJECT COMPLETION AS ON 31.3.2010. IN THIS STATEMENT, 17 DIFFERENT ITEMS HAVE BEEN GIVEN ALONGWITH THE ESTIMATED BOQ, RATE PER UNIT, TOTAL ESTIMATED EXPENDITURE, PROPORTIONATE BOQ COMPLETED TILL 3L.3. 2010, EXPENDITURE INCURRED TILL 3L.3.20L0 AND PERCENTAGE COMPLETION. THIS MATRIX PREPARED BY THE ITA NO. 503&474/13 6 TECHNICALLY QUALIFIED STRUCTURAL CONSULTANT APPEARED TO ME TO BE CLOSER TO A REALISTIC TECHNICAL CALCULATION FOR THE DETERMINATION OF PERCENTAGE FOR THE PURPOS E OF INCOME COMPUTATION ON PERCENTAGE COMPLETION METHOD. EVEN ON THE DATE OF SURVEY, THE DIRECTOR SEEMS TO BE ROUGHLY AWARE OF THE PROGRESS OF BALAJI COMPLEX UP TO 31.3.2010. IT IS OBVIOUS THAT HE DID NOT TAKE THE FIGURE EITHER AT 10% OR AT 80%. HIS UTTERA NCE OF 40% UNDER THE CIRCUMSTANCE OF SURVEY SPREAD OVER TWO DAYS CAN AT BEST BE AN APPROXIMATION AND IT WAS NOT BASED ON EXACT CALCULATIONS LIKE WHAT WAS DONE BY THE STRUCTURAL CONSULTANT WHILE GIVING HIS CERTIFICATE ON 5.4.2010. THE DIRECTOR OBVIOUSLY DID NOT HAVE CONCRETE CALCULATIONS WITH HIM DURING THE STATEMENT AND FOR THIS REASON, IT MAY BE RATHER UNFAIR TO PENALIZE THE APPELLANT COMPANY WHICH COULD OTHERWISE FURNISH TECHNICAL DETAILS FROM THE EXPERT. THEREFORE, ON FACTS AND IN THE CIRCUMSTANCES OF TH E CASE, WITHOUT GATHERING FURTHER CORROBORATING EVIDENCE TO SAY THAT THE FIGURE OF 31 % WAS INCORRECT AND TO CLAIM THE FIGURE OF 40% WAS ABSOLUTELY CORRECT, IT IS NOT PROPER FOR THE AO TO ACCEPT OF THE FIGURE OF 40% ONLY ON THE BASIS OF THE STATEMENT RECOR DED ON THE DATE OF SURVEY FROM A DIRECTOR. ACCORDINGLY, I FEEL, IT WILL SERVE THE INTEREST OF JUSTICE IF THE COMPUTATION OF THE STRUCTURAL CONSULTANT AT 31% IS ACCEPTED. ACCORDINGLY I DIRECT THE AO TO DELETE THE DIFFERENTIAL ADDITION OF RS.2,60,41,380/ - . H ERE I CAN ONLY OBSERVE THAT THE ENTIRE PROFITS ARISING OUT OF 'BALAJI COMPLEX' IN ANY CASE WILL SUFFER TAXATION AND IN THIS REGARD THE VIEWS OF AO WILL NOT BE DIFFERENT FROM THE VIEWS OF THE APPELLANT. THE ISSUE IS WHAT PERCENTAGE IN WHICH YEAR. THE AFORES AID AMOUNT OF RS.2,60,41,380/ - THEREFORE COMES UP FOR CONSIDERATION IN SUBSEQUENT ASSESSMENT YEAR. IN THE RESULT THE APPEAL IS PARTLY ALLOWED. AGAINST THE AFORESAID ORDER OF CIT(A), THE REVENUE IS IN APPEAL BEFORE US. 6. LD. DR CONTENDED THAT THE ASSE SSEE HAS NOT EXPLAINED IN REGARD TO CASH CREDIT OF RS.1 CRORES BEFORE THE AO, THEREFORE THE SAME DEEMED TO BE THE INCOME OF THE ASSESSEE. RELIANCE WAS PLACED ON THE DECISION OF COORDINATE BENCH REPORTED AT (2015) 60 TAXMAN.COM 60, DELHI HIGH COURT IN CASE OF N.R.PORTFOLIO 222 TAXMAN 157, NAVODAYA CASTLES (P) LTD. 367 ITR 306. IN REGARD TO THE DIFFERENTIAL AMOUNT, LD. DR SUBMITTED THAT THE OPINION OF STRUCTURAL CONSULTANT CANNOT BE ACCEPTED . THEREFORE, THE ADDITIONS DELETED BY THE CIT(A) IS REVERSIBLE AND THE SAME SHOULD BE ADDED IN THE INCOME OF THE ASSESSEE. ITA NO. 503&474/13 7 7. ON THE OTHER HAND, LD. AR RELIED ON THE ORDER OF CIT(A) TO THE EXTENT OF DELETION OF ADDITIONS AND SUBMITTED THAT THE A SSESSEE HAS PAID ALL THE AMOUNTS IN CASH TO MORE THAN ONE PERSON AND THE SAID PAYMENTS WERE NOT EXCEEDED RS 20,000/ - IN ANY CASE. LD. AR FURTHER SUBMITTED THAT A S THE ASSESSEE IS IN THE BUSINESS OF CONSTRUCTION AND CONTRACT BUSINESS, CONSIDERABLE AMOUNT IS REQUIRED TO BE PAID TO LABOURERS. THIS LUM P SUM AMOUNT IS RECORDED IN THE ROUG H CASH BOOK MAINTAINED IN THE HEAD OFFICE AGAINST A MAJOR HEAD OF PAYMENT FOR WHICH ADVANCE IS GIVEN FOR IDENTIFICATION PURPOSE BUT THIS DOES NOT MEAN THAT THE ACTUAL PAYMENT IS MADE AT THAT AMOUNT. THESE EMPLOYEES AND SUPERVISORS MAKE ULTIMATE PAYMENT TO DIFFERENT PARTIES IN THE SITE AND RENDER ACCOUNTS, VOUCHERS AND MONEY RECEIPTS AFTER THE SAME IS EFFECTED THEN ACCORDINGLY THOSE TRANSACTIONS ARE FINALLY RECORDED IN THE BOOKS AND THE PREVIOUS ENTRY IS REVERSED IN THE BOOK OF ACCOUNTS. THE AFORESAID ADVA NCES ARE RECORDED IN THE SITE IMPREST CASH BOOK. IT WAS ALSO THE SUBMISSION OF THE LD. AR THAT A T THE TIME OF FINALIZATION OF BOOKS OF ACCOUNTS THESE ACTUAL PAYMENTS ARE INCORPORATED IN THE FINAL BOOKS OF ACCOUNTS (LEDGERS) WHICH ARE PAID TO SEVERAL PARTIE S AND BELOW RS 20,000/ - . 7.1 IN REGARD TO CASH CREDIT, LD. AR SUBMITTED THAT THE ASSESSEE IS ONLY REQUIRED TO PROVE THE IDENTITY OF THE SHAREHOLDERS AND RECEIPT OF MONEY THROUGH PROPER BANKING CHANNEL. MOREOVER ASSESSEE IS NOT REQUIRED TO PROVIDE ANY MATE RIAL FOR CREDITWORTHINESS OF THE INVESTORS AND IF THEY ARE BOGUS INVESTORS OR THEIR INCOME IS LESS THAN THE AMOUNT INVESTED THEN THE REMEDY TO THE AO IS TO OPEN THE ASSESSMENT OF THE RESPECTIVE INVESTORS ITA NO. 503&474/13 8 AND CANNOT ADD THE CREDIT IN THE HANDS OF THE ASSESS EE AS UNDISCLOSED INCOME IN ANY CIRCUMSTANCES. IN THE PRESENT CASE ALSO ASSESSEE HAS PROVED THE IDENTITY OF ALL THE INVESTORS BY SUBMITTING THE COPY OF ITR ACK, ANNUAL REPORT, LEDGER ACCOUNT OF STOCK, BANK STATEMENT OF THE PARTIES. THIS FACT IS ALSO STATED IN THE ASSESSMENT ORDER AT PAGE NO. 3. THEREFORE ASSESSEE HAS FULFILLED ITS ONUS CAST UPON HIM TO PROVE THE IDENTITY OF SHAREHOLDERS AND GENUINENESS . 8. WE HAVE CONSIDERED RIVAL CONTENTIONS AND PERUSED THE RECORD CAREFULLY. WE HAD ALSO DELIBERATED ON THE JUDICIAL PRONOUNCEMENTS CITED BY LD. AR AND DR DURING THE COURSE OF HEARING BEFORE US, AS WELL AS DECISIONS CONSIDERED BY LOWER AUTHORITIES IN THEIR RESPECTIVE ORDERS. FROM THE RECORD W E FOUND THAT THE CIT(A) WHILE DELETING THE ADDITION SO MADE BY THE AO U /S.68 OF THE ACT, HAS CONSIDERED THE PLETHORA OF JUDICIAL PRONOUNCEMENTS AND HELD THAT WHEN THE IDENTITIES OF SHARE APPLICANTS ARE NOT I N QUESTION AND FUNDS FLOW FROM THE ACCOUNT OF SHAREHOLDERS TO THE ASSESSEE ARE GENUINE THROUGH BANKING CHANNEL AND ABOVE ALL WHERE ALL THE SHAREHOLDERS HAD UNEQUIVOCALLY CONFIRM ED THEIR CREDITS WITH THEIR FULL DETAILS AND INCOME TAX P ARTICULARS, THE TAXING AUTHORITIES CANNOT PENALIZE THE ASSESSEE ON THE GROUND OF CREDITWORTHINESS OF THE ALLEGED SHAREHOLDERS . THE CIT(A) FURT HER EXAMINED THE SAID SHARE APPLICATION MONEY AND PREMIUM SHOWN TO HAVE BEEN PAID TO THE ASSESSEE , IN THE INDIVIDUAL ASSESSMENTS OF ALL THE 10 COMPANIES , WHO HAVE SUBSCRIBED TO THE ASSESSEE, AND FOUND THAT THOSE CREDITORS ARE ALL ASSESSED TO INCOME TAX . TH E CIT(A) HAD GIVEN DETAILED FINDING AFTER CONSIDERING THE REMAND ITA NO. 503&474/13 9 REPORT, AT PAGE 18 TO 22 OF HIS APPELLATE ORDER, WHICH HAS NOT BEEN CONTROVERTED. HENCE, WE DO NOT FIND ANY REASON TO INTERFERE IN THE FINDINGS GIVEN BY THIS CIT(A) IN THIS REGARD AND WE CONF IRM THE SAME . 9. IN R E GARD TO DIFFERENTIAL ADDITION MADE BY THE AO, THE CIT(A) OBSERVED THAT I N THE ORIGINAL ASSESSMENT AS WELL AS DURING THE REMAND PROCEEDINGS, THE AO HAS MERELY STATED THAT HE COULD NOT ACCEPT THE REPORT OF THE STRUCTURAL CONSULTANT BEC AUSE THE STATEMENT RECORDED FROM THE DIRECTOR ON THE DATE OF SURVEY I.E. 31.3.20 10 WOULD BE MORE AUTHENTIC AND CREDIBLE. THE AO HAS ALLEGED THAT THE OPINION OF THE STRUCTURAL CONSULTANT WAS NOT ACCOMPANIED BY ANY OTHER DOCUMENTS SHOWING THE BASIS OF SUCH O PINION , IGNORING THE SHEET ANNEXED TO THE CERTIFICATE OF SHRI PITABASH PANDA , WHICH IS SUPPOSED TO REFLECT THE STATEMENT OF PERCENTAGE OF PROJECT COMPLETION AS ON 31.3.2010. IN THIS STATEMENT, 17 DIFFERENT ITEMS HAVE BEEN GIVEN ALONGWITH THE ESTIMATED BOQ, RATE PER UNIT, TOTAL ESTIMATED EXPENDITURE, PROPORTIONATE BOQ COMPLETED TILL 3L.3.2010, EXPENDITURE INCURRED TILL 3 1 .3.20 1 0 AND PERCENTAGE COMPLETION. THIS MATRIX PREPARED BY THE TECHNICALLY QUALIFIED STRUCTURAL CONSULTANT APPEARED TO BE CLOSER TO A REALI STIC TECHNICAL CALCULATION FOR THE DETERMINATION OF PERCENTAGE FOR THE PURPOSE OF INCOME COMPUTATION ON PERCENTAGE COMPLETION METHOD. EVEN ON THE DATE OF SURVEY, THE DIRECTOR SEEMS TO BE ROUGHLY AWARE OF THE PROGRESS OF BALAJI COMPLEX UP TO 31.3.2010. IT I S OBVIOUS THAT HE DID NOT TAKE THE FIGURE EITHER AT 10% OR AT 80%. HIS UTTERANCE OF 40% UNDER THE CIRCUMSTANCE OF SURVEY SPREAD OVER TWO DAYS CAN AT BEST BE AN APPROXIMATION AND IT WAS NOT BASED ON EXACT ITA NO. 503&474/13 10 CALCULATIONS LIKE WHAT WAS DONE BY THE STRUCTURAL CO NSULTANT WHILE GIVING HIS CERTIFICATE ON 5.4.2010. THE DIRECTOR OBVIOUSLY DID NOT HAVE CONCRETE CALCULATIONS WITH HIM DURING THE STATEMENT AND FOR THIS REASON, IT MAY BE RATHER UNFAIR TO PENALIZE THE ASSESSEE COMPANY WHICH COULD OTHERWISE FURNISH TECHNICAL DETAILS FROM THE EXPERT AND AFTER GIVING A DETAILED FINDING, THE CIT(A) DELETED THE ADDITION SO MADE BY THE AO . ACCORDINGLY, WE DO NOT FIND ANY REASON TO DEVIATE US FROM THE FINDINGS OF THE CIT(A) IN THIS REGARD AND, T HEREFORE, WE CONFIRM THE SAME. 10. AS THE CIT(A) HAD DECIDED BOTH ISSUE AFTER CALLING A REMAND REPORT, THE GROUND NO.3 TAKEN BY REVENUE WITH REGARD TO VIOLATION OF RULE 46A HAS NO LEGS TO STAND. 1 1 . ACCORDINGLY, WE DISMISS THE APPEAL OF THE REVENUE. 12 . THE ASSESSEE IN ITS APPEAL I.E. ITA NO. 474/CTK/2013 IS AGGRIEVED FOR DISALLOWANCE OF CASH EXPENSES BY INVOKING PROVISIONS OF SECTION 40A(3) OF THE ACT. 1 3 . LD. AR SUBMITTED BEFORE US THAT IT IS THE NORMAL PRACTICE OF EVERY BUILDER WHERE ADVANCES ARE GIVEN TO SUPERVISOR OR EMPLOYEE OF THE COMPAN Y WHO PAY THE BILLS IN PARTS TO THE PAYEE DEPENDING UPON THE TIME AND SITUATIONS. SOMETIMES PAYMENTS ARE ALSO REQUIRED TO BE MADE AFTER THE OFFICE HOURS. NEVERTHELESS THE SUPERVISORS OR EMPLOYEES ARE GIVEN ADVANCES AND THEY MAKE SMALL PAYMENTS AND KEEP REC ORDS. INSTANTLY THE ENTRIES WERE RECORDED AS CONSOLIDATED PAYMENTS. WHILE FINALIZING THE ACCOUNTS AND AT THE TIME OF ADJUSTMENT OF ADVANCES, SITE VOUCHERS ARE CALLED FOR AND ACTUAL ENTRIES ARE BOOKED IN THE FINAL BOOKS OF ACCOUNTS ITA NO. 503&474/13 11 WHICH ARE ACTUALLY LESS T HAN RS.20,000/ - . RELIANCE WAS PLACED ON THE DECISION IN THE CASE OF GIRIDHARLAL GOENKA VS. CIT [179 ITR 122 (CAL.)], WHEREIN THE HONBLE HIGH COURT HELD THAT THE OBJECT OF THE PROVISION OF SECTION 40A(3) IS TO CHECK EVASION OF TAXES SO THAT PAYMENT IS MADE FROM THE DISCLOSED SOURCES AND BOTH THE PAYER AND PAYEE WOULD BE SHOWING IN THE RESPECTIVE ACCOUNT THE PAYMENTS MADE AND RECEIVED AND THE TRANSACTION SHOULD BE GENUINE TRANSACTION. IN THIS CASE, THE ASSESSING OFFICER DID NOT LOOK INTO THE SURROUNDING CIRC UMSTANCES AND CONSIDERATION OF BUSINESS EXPEDIENCY, EXCEPTIONAL AND UNAVOIDABLE CIRCUMSTANCES WHILE MAKING CASH PAYMENTS BY THE ASSESSEE AT THE INSISTENCE OF THE PAYEE. WHILE HOLDING THAT THE PAYEE AND THE PAYER ARE IDENTIFIED AND GENUINENESS OF PAYMENTS W ERE ESTABLISHED, THE AMOUNT PAID IN CASH COULD NOT BE DISALLOWED. THE PUNJAB AND HARYANA HIGH COURT IN THE CASE OF CIT V. AVTAR SINGH AND SONS [1992] 194 ITR 80 HELD THAT WHERE THE IDENTITY OF THE PARTY TO WHOM PAYMENTS WERE MADE WAS KNOWN AND THE PAYMENTS WERE FOUND TO BE GENUINE, THE PAYMENTS COULD NOT BE DISALLOWED ON THE GROUND THAT THE PAYMENTS WERE MADE BY CASH. LD. AR ALSO DREW OUR ATTENTION TO THE FOLLOWING ADDITIONAL EVIDENCES WHICH WERE PARTLY PRODUCED BEFORE THE AO : - 1. LEDGER COPIES OF THE EXPE NDITURE MADE IN DIFFERENT DATES TO DIFFERENT PERSONS. 2. CASH BOOK MAINTAINED BY THE OFFICE WHERE ALL THE ABOVE EXPENSES ARE RECORDED. 3. CASH BOOK MAINTAINED AT SITE RECORDED BY THE EMPLOYEE WHO RECEIVES AMOUNT AND ULTIMATELY PAY TO DIFFERENT PERSONS. AS PER LD. AR , THE ADDITION MADE BY THE AO AND CONFIRMED BY THE CIT(A) DESERVES TO BE DELETED. ITA NO. 503&474/13 12 1 4 . ON THE OTHER HAND, LD. DR RELIED ON THE ORDER OF LOWER AUTHORITIES. 1 5 . WE HAVE CONSIDERED RIVAL CONTENTIONS AND PERUSED THE RECORD. FROM THE FACTS IT IS CLEA R THAT T HE ASSESSING OFFICER APPLIED THE PROVISIONS OF SECTION 40A(3) AND DISALLOWED THE CASH PAYMENT IN EXCESS OF RS.20,000/ - MADE BY THE ASSESSEE TO ITS ASSOCIATE CONCERN . THE C IT(A) SUSTAINED THE DISALLOWANCE ON THE GROUND THAT THE ASSESSEE HAS NOT ESTA BLISHED THE EXCEPTIONAL AND UNAVOIDABLE CIRCUMSTANCE S ON WHICH THE PAYMENTS IN CASH WERE MADE EXCEEDING RS .20,000/ - . THE ADDITIONAL DOCUMENTS WERE PLACED ON RECORD IN THE FORM OF COPIES OF EXPENDITURE MADE IN DIFFERENT DATES TO DIFFERENT PERSONS, CASH BOOK MAINTAINED AT SITE, RECORDS BY EMPLOYEE WHO RECEIVES AMOUNT AND ULTIMATELY PAY TO DIFFERENT PERSONS, GOES TO THE ROOT OF THE ISSUE FOR DECIDING IF A PAYMENT IN A DATE EXCEEDED RS.20,000/ - . THEREFORE, IN THE INTEREST OF JUSTICE, WE GRANT ONE MORE OPPORTUNI TY TO THE ASSESSEE TO PRODUCE THE ADDITIONAL DOCUMENTS BEFORE THE AO FOR EXAMINATION AND FOR DECIDING AFRESH AS PER LAW , CONSIDERING THE CIRCUMSTANCES WHICH COMPELLED THE ASSESSEE TO MAKE CASH PAYMENT . ACCORDINGLY, WE SET ASIDE THE ISSUE TO THE FILE OF THE A O FOR DECIDING THE SAME AFRESH AFTER CONSIDERING THE EVIDENCES SO PRODUCED BY THE ASSESSEE. 1 6 . IN THE RESULT, APPEAL OF THE REVENUE IS DISMISSED, WHEREAS APPEAL OF THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES. O RDER PRONOUNCED IN THE OPEN COURT ON THIS 25 / 04 / 201 6 . SD/ - S/D/ - ( PARTH A SARATHI CH A UDHURY ) ( R.C.SHARMA ) / JUDICIAL MEMBER / ACCOUNTANT MEMBER CUTTACK ; DATED 25 / 04 /201 6 . . /PKM , . / PS ITA NO. 503&474/13 13 / COPY OF THE ORDER FORWARDED TO : / BY ORDER, ( SENIOR PRIVATE SECRETARY ) , / ITAT, CUTTACK 1. / THE APPELLANT 2. / THE RESPONDENT. 3. ( ) / THE CIT(A), 4. / CIT 5. , , / DR, ITAT, CUTTACK 6. [ / GUARD FILE. //TRUE COPY//