The ACIT,Corp Cir(1)(1), Kochi V. M/s.C&R Hotels Pvt. Ltd, Fort Kochi

ITA 512/COCH/2019

• Counselvise Citation: [2019] 112 COUNSELVISE.COM (IT) 0274 (ITAT-COCHIN)
• Duration Of Justice: 3 month(s) 14 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-12-2019
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: DB
• Next Hearing Date: 11-12-2019
• Assessment Year: 2013-2014
• Appeal Filed On: 02-09-2019
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: A S BINDHU
• Assessee Lawyers: K V JOSE
• Keywords: Unexplained cash credit; Unexplained investment; Set aside
• Section: 13; 68

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNAL COCHIN BENCH, COCHIN BEFOR E S/ SHRI CHANDRA POOJARI , AM & GEORGE GEORGE K., J M ITA NO . 512/ COC H/ 2019 ASSESSMENT YEAR: 2013 - 14 THE ASSISTANT COMMISSIONER OF INCOME - TAX, C ORPORATE CIRCLE - 1 (1) , KOCHI. VS. M/S. C & R HOTELS PVT. LTD., NO.18, C & R HOTELS & RESORTS, NEAR FORT KOCHI BUS TERMINAL, FORT KOCHI - 682 001. [PAN:AADCC 7824Q] ( REVEN UE - APPELLANT) (ASSESSEE - RESPONDENT) C.O. NO. 46/COCH/2019 (ARSG.OUT OF ITA NO.512/COCH/2019) ASSESSMENT YEAR: 2013 - 14 M/S. C & R HOTELS PVT. LTD., NO.18, C&R HOTELS & RESORTS, NEAR FORT KOCHI BUS T ERMINAL, FORT KOCHI - 682 001. [PAN:AADCC 7824Q] VS. THE ASSISTANT COMMISSIONER OF INCOME - TAX, CORPORATE CIRCLE - 1(1), KOCHI. (ASSESSEE - APPELLANT) (REVENUE - RESPONDENT) REVENUE BY SMT. A.S. BINDHU, SR. DR ASSESSEE BY SHRI K.V. JOSE, FCA D A TE OF HEARING 11 /1 2 /2019 DATE OF PRONOUNCEMENT 16 / 1 2 /201 9 I.T.A. NO . 512 / COC H/ 2019 & C.O. NO. 46/COCH/2019 2 O R D E R PER CHANDRA POOJARI, AM: TH IS APPEAL FILED BY THE REVENUE IS DIRECTED AGAINST THE ORDER OF THE CIT(A) - I, KOCHI DATED 26/06/2019 AND PERTAINS TO ASSESSMENT YEAR 2013 - 14. THE ASSESSEE HAS FILED CROSS OBJECTION IN C.O. NO. 46/COCH/2019 WHICH IS SUPPORTIVE OF THE ORDER OF THE CIT(A). 2. THE AS SESSEE HAS RAISED THE FOLLOWING GROUNDS IN THE CROSS OBJECTION IN C.O. NO. 46/COCH/2019: - 1. BECAUSE THE DEPARTMENT APPEAL IS BAD IN LAW AS WELL AS ON FACTS AND IS LIABLE TO BE DISMISSED. 2. BECAUSE THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) HAS CO NSIDERED THE FACTS THAT THE ASSESSING OFFICER HAD SATISFIED REGARDING THE SOURCE OF ROY VAYALAT AND DISPUTE WAS ONLY ABOUT THE FACT OF WITHDRAWAL OF MONEY AND DELAY OF 15 DAYS IN DEPOSIT OCCASIONALLY. 3. BECAUSE THE LEARNED ASSESSING OFFICER HAS NO STATU TORY BACKING/AUTHORITY TO SUPPORT THE VIEW OF THE ASSESSING AUTHORITY REGARDING THE DELAY OF 15 DAYS OR MORE AND HENCE THE CONFIRMATION OF ASSESSMENT OF THE ADDITION OF RS.1,88,87,779/ - IS WITHOUT THE AUTHORITY OF LAW AND HENCE ILLEGAL. 4. BECAUSE THE LE ARNED ASSESSING OFFICER HAS NOT CONSIDERED THE FACT THAT THERE WAS A RECEIPT OF MONEY IN BANK ACCOUNTS OF ROY J. VAYALAT AS A LOAN FROM MRS. CERTINA ROY, WIFE OF ROY J. VAYALAT AND MR. CLINT WILFRED, BROTHER - IN - LAW OF ROY J. VAYALAT OF RS.1,47,44,913/ - ON 08/09/2012 IN AXIS BANK AND RS.1,09,00,000/ - ON 25/06/2012 IN BANK OF BARODA RESPECTIVELY. I.T.A. NO . 512 / COC H/ 2019 & C.O. NO. 46/COCH/2019 3 3 . THE FACTS OF THE CASE ARE THAT THE ASSESSEE IS ENGAGED IN HOSPITALITY BUSINESS. DURING THE ASSESSMENT YEAR UNDER CONSIDERATION, THE ASSESSEE RECEIVED A SUM OF RS.1,88,87,779/ - AS SHARE CAPITAL FROM ONE OF ITS DIRECTORS, SHRI ROY J. VAYALAT. THE ASSESSEE STATED BEFORE THE LOWER AUTHORITIES THAT THIS AMOUNT WAS AVAILED BY SHRI ROY J. V AYALAT A S LOAN FROM MRS. CERTINA ROY , WIFE OF ROY J. VAYALAT AND MR. CLINT WIL FRED, BROTHER - IN - LAW OF ROY J. VAYALAT OF RS.1,47,44,913/ - ON 08/09/2012 IN AXIS BANK ACCOUNT AND RS.1,09,00,000/ - ON 25/06/2012 IN BANK OF BARODA ACCOUNT RESPECTIVELY. . THIS W AS DEPOSITED IN THE BANK ACCOUNT OF SHRI ROY J. VAYALAT ON VARIOUS DATES AND THIS WAS RETURNED BY HIM AND GIVEN TO THE ASSESSEE. HOWEVER, THERE WAS A TI M E GAP OF 15 DAYS BETWEEN THE WITHDRAWAL OF THE AMOU N T FROM THE BANK ACCOUNT OF SHRI ROY J. VAYALAT AND DEPOSIT ING IT INTO THE BANK ACCOUNT OF THE ASSESSEE. WHEN ASKED TO PRODUCE THE COPY OF THE RETURN FILED BY SHRI R OY J. VAYALAT FOR A.Y. 2013 - 14, THE ASSESSEE STATED THAT SHRI ROY J. VAYALAT HAD NOT FILED HIS RETURN OF INCOME FOR A.Y. 2013 - 14. HEN CE, THE ASSESSING OFFICER TREATED THE AMOUNT OF RS.1, 88 , 8 7,779/ - WHICH WAS INTRODUCED AS SHARE CAPITAL IN TO THE ASSESSEE COMPANY AS UNEXPLAINED CREDITS U/S. 68 OF THE ACT. 4 . BEFORE THE CIT(A) , THE ASSESSEE SUBMITTED THAT SHRI ROY J. VAYALAT WAS RUNNING A SEA FOOD BUSINESS UNDER NAME RR INTERNATIONAL AS A PROPRIETORSHIP. IT WAS SUB MITTED THAT CASH WITHDRAWAL FROM HIS PERSONAL BANK ACCOUNT HAD GONE TO HIS PROPRIETORSHIP BUSINESS AND AS AND WHEN FUND REQUIRED BY C & R HOTELS PVT. LTD., HE HAD TRANSFERRED MONEY FROM RR INTERNATIONAL TO C & R HOTELS PVT. LTD. THEREFORE, IT I.T.A. NO . 512 / COC H/ 2019 & C.O. NO. 46/COCH/2019 4 WAS SUBMITTED THAT THE DATE OF WITHDRAWAL FROM BANK AND CASH RECEIVED ON C & R HOTELS PVT. LTD. DIFFER IN SOME CASES. IT WAS SUBMITTED THAT SHRI ROY J. VAYALAT HAD FILED HIS RETURN OF INCOME FOR THE A.Y. 2013 - 14. A COPY OF ACKNOWLEDGMENT, AUDITED BALANCE SHEET AND PR OFIT AND LOSS ACCOUNT OF RR INTERNATIONAL WERE FILED BEFORE THE CIT(A). ACCORDING TO THE ASSESSEE, C & R HOTELS HAD ISSUED EQUITY SHARED IN THE COMPANY TOWARDS THE MONEY RECEIVED FROM SHRI ROY J. VAYALAT ON 29/05/2015 AND FROM NO. PAS - 3 RETURN OF ALLOTM ENT OF SHARES WAS FILED WITH ROC OF KERALA. AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE AND THE DOCUMENTS, THE CIT(A) WAS OF THE VIEW THAT SHARE APPLICATION MONEY RECEIVED HAD ALSO BEEN CONVERTED INTO EQUITY SHARES AND THEREFORE, THE SOURCE OF INVES TMENT OF SHRI ROY J. VAYALAT STOOD EXPLAINED. THUS, HE DELETED THE ENTIRE ADDITION MADE BY THE ASSESSING OFFICER U/S. 68 OF THE I . T. ACT. 5 . AGAINST THIS, THE REVENUE IS IN APPEAL BEFORE US WITH THE FOLLOWING GROUNDS OF APPEAL: A. THE ORDER OF THE ASS ISTANT COMMISSIONER OF INCOME TAX IS AGAINST LAW AND FACTS OF THE CASE. THE ORDER, IF ALLOWED TO STAND WOULD OCCASION A TRAVESTY OF JUSTICE AND CAUSE IRREPARABLE LOSS AND HARDSHIP TO THE APPELLANT. B. THE ASSESSING AUTHORITY WENT WRONG IN TREATING AN A MOUNT OF RS. 2,00,650 / - WHICH WAS INCL UDED IN THE TOTAL AMOUNT OF RS.1 ,88,87,779/ - , ASSESSED UNDER ANNEXURE - A ORDER. THE APPELLANT EXPLAINED THAT THE SAID AMOUNTS ARE NOT PAYMENTS MADE FROM THE ACCOUNT OF MR. ROY J. VAYALAT WHEREAS THE SAME REPRESENTS PAYM ENTS FROM VAYALAT ESTATE PVT. LTD. THE ASSESSMENT OF THE SAID AMOUNT OF RS .2 ,00,650 / - , TREATING THE SAME AS PAYMENT MADE FROM THE ACCOUNT I.T.A. NO . 512 / COC H/ 2019 & C.O. NO. 46/COCH/2019 5 OF MR. ROY J. VAYALAT IS CONTRARY TO THE ACTUAL STATE OF AFFAIRS AND HENCE ERRONEOUS. C. THE APPELLANT WOULD SUBMIT THAT THERE WAS NO OCCASION FOR ASSESSING AN AMOUNT OF RS. 1,88,87,779 / - , ALLEGING UNEXPLAINED INVESTMENT, SINCE THE APPELLANT SATISFACTORILY EXPLAINED THE NATURE AND SOURCE OF THE SAID AMOUNT. THE DIRECTOR OF THE APPELLANT, MR. ROY J. VAYALA T IS RUNNING A PROPRIETORSHIP CONCERN NAMELY, RR INTERNATIONAL, WHICH IS ENGAGED IN SEA FOOD EXPORT BUSINESS. THE AMOUNT OF RS,1,86,87,129 / - , INFACT REPRESENTS THE AMOUNTS WITHDRAWN FROM THE BANK ACCOUNT OF THE DIRECTOR, WHICH IS FIRST ACCOUNTED IN THE BOOKS OF ACCOUNTS OF RR INTERNATIONAL AND SUBSEQUENTLY TRANSFERRED TO THE ACCOUNT OF THE APPELLANT. THE ASSESSING AUTHORITY IN PAGE 2 OF THE ANNEXURE - A ORDER IS CONVINCED OF THE FACT THAT THE CASH WITHDRAWALS FROM THE PERSONAL ACCOUNT OF THE DIRECTOR AND THE DEPOSIT IN THE ACCOUNTS OF THE APPELLANT, AFTER PERUSING THE COPIES OF THE BANK ACCOUNT PRODUCED BY THE APPELLANT. WHEN THE APPELLANT WAS ABLE TO EXPLAIN THAT THERE IS NO CASE OF UNEXPLAINED INVESTMENTS AS ALLEGED BY THE ASSESSING AUTHORITY AND WHEN THE ASSESSING AUTHORI TY HIMSELF ADMITS THAT THE APPELLANT COULD EXPLAIN THE CHAIN OF TRANSACTION; THE ADDITION RS. 1,88,87,779 / - , IN ANNEXURE - A ORDER IS HIGHLY ILLEGAL AND LIABLE TO BE SET ASIDE, FURTHERMORE, THE ASSESSING AUTHORITY CANNOT APPROBATE AND REPROBATE AT THE SAME T IME. D. THE ASSESSING AUTHORITY IN ANNEXURE - A ORDER OBSERVES THAT THERE WAS A DELAY OF 15 DAYS FROM THE DATE OF WITHDRAWAL OF AMOUNT FROM THE BANK ACCOUNT OF MR. ROY J. VAYALAT (DIRECTOR), TILL THE DATE OF DEPOSIT IN THE ACCOUNT OF THE APPELLANT. THE CON FIRMATION OF ADDITION OF RS. 1,88,87,779 / - IS ON THE BASIS OF THIS DELAY OF 15 DAYS AND MORE. THE APPELLANT WOULD SUBMIT THAT SUCH A POINT/ISSUE WAS NEVER RAISED IN THE NOTICE AND DURING THE PERSONAL HEARING, BUT WAS REFLECTED FOR THE FIRST TIME IN THE A SSE SSMENT ORDER. IT IS WELL SETTLED LEGAL POSITION THAT THE AUTHORITIES CANNOT BE PERMITTED TO GO BEYOND THE SHOW CAUSE NOTICE AND WHEREAS IN THE INSTANT CASE, THE ASSESSING AUTHORITY HAS TRAVELLED BEYOND THE SHOW CAUSE NOTICE, AS REGARDS ISSUE OF 15 DAYS DEL AY AS NOTED ABOVE. FURTHERMORE, THE APPELLANT WAS DEPRIVED OF AN EFFECTIVE OPPORTUNITY TO PROVIDE SATISFACTORY EXPLANATION TO THE SAID POINT RAISED BY THE ASSESSING AUTHORITY, IN THE ASSESSMENT ORDER. ABOVE ALL, THERE IS NO STATUTORY BACKING/AUTHORITY TO S UPPORT THE VIEW OF THE ASSESSING AUTHORITY REGARDING THE DELAY OF 15 DAYS OR MORE AND HENCE THE CONFIRMATION OF ASSESSMENT OF THE ADDITION OF RS. 1,88,87,779 / - , IS WITHOUT THE AUTHORITY OF LAW AND HENCE ILLEGAL. E. THE APPELLANT SUBMITTED ANNEXURE - B APPLICATION FOR RECTIFICATION BEFORE THE ASSESSING AUTHORITY, POINTED OUT THE ERROR APPARENT ON THE FACE OF THE RECORD WHICH HAS NOT BEEN CONSIDERED BY THE ASSESSING AUTHORITY TILL SO FAR. THE ASSESSING AUTHORITY, BEING A STATUTORY AUTHORITY HAS TO CONSIDER AND PASS I.T.A. NO . 512 / COC H/ 2019 & C.O. NO. 46/COCH/2019 6 APPROPRIATE ORDERS ON ANNEXURE - B APPLICATION. THE ASSESSING AUTHORITY CANNOT ON ONE HAND SIT , ON THE RECTIFICATION APPLICATION AND ON THE OTHER HAND PROCEED WITH THE PENAL PROCEEDINGS AND RECOVERY MEASURES, WHICH IS HIGHL Y ARBITRARY AND UNREASONABLE. F. THE APPELLANT WOULD SUBMIT THAT SINCE ANNEXURE - A ORDER IS ILLEGAL, ARBITRARY AND UNREASONABLE AND WITHOUT THE AUTHORITY OF LAW, ALL FURTHER PROCEEDINGS PURSUANT TO THE SAME WOULD BE AN ABUSE OF PROCESS OF LAW. FOR THES E AND OTHER GROUNDS AND DOCUMENTS TO BE SUBMITTED AT THE TIME OF HEARING, IT IS HUMBLY PRAYED THAT THE COMMISSIONER OF INCOME TAX (APPEALS) BE PLEASED TO ALLOW THE APPEAL, WITH CONSEQUENTIAL RELIEF TO THE APPELLANT. 6 . WE HAVE HEARD THE RIVAL SUBMISSIO NS AND PERUSED THE MATERIAL ON RECORD . IN THIS CASE, THE ASSESSEE COMPANY WAS FOUND TO HAVE RECEIVED RS.1,88,87,779/ - AS SHARE CAPITAL FROM SHRI ROY J. VAYALAT. THE ASSESSEE EXPLAINED THAT THE SAID AMOUNT WAS WITHDRAWN BY SHRI ROY J. VAYALAT FROM HIS BANK ACCOUNT AND BY WAY OF CASH WAS GIVEN TO THE ASSESSEE AND THE S AM E WAS DEPOSITED IN THE BANK ACCOUNT OF THE ASSESSEE. HOWEVER, THERE WAS A TIME GAP OF 15 DAYS BETWEEN WITHDRAWAL FROM OF THE AMOUNT FROM THE BANK ACCOUNT OF SHRI ROY J. VAYALAT AND DEPOSITIN G THE SAME INTO THE BANK ACCOUNT OF THE ASSESSEE. BEFORE THE ASSESSING OFFICER, THE ASSESSEE HAD NOT FILED THE COPY OF RETURN OF INCOME , BALANCE SHEET AND PROFIT AND LOSS ACCOUNT OF SHRI ROY J. VAYALAT . THIS PROVOKED THE ASSESSING OFFICER TO MA K E ADDITI ON OF RS.1,88,87,779/ - U/S. 68 OF THE I.T. ACT IN THE HANDS OF THE PRESENT ASSESSEE. HOWEVER, BEFORE THE CIT(A) THE ASSESSEE HAD FILED THE COPY OF RETURN OF INCOME FOR THE ASSESSMENT YEAR 2012 - 13 AND ALSO BALANCE SHEET AND PROFIT AND LOSS ACCOUNT OF RR I NTERNATIONAL 18/104, PALLURUTHY, KOCHI - 682 005 DATED I.T.A. NO . 512 / COC H/ 2019 & C.O. NO. 46/COCH/2019 7 29/09/2012 FOR THE YEAR ENDING ON 31/03/2012 (FY 2011 - 12) ON THE BASIS OF WHICH T HE CIT(A) OBSERVED THAT SHRI ROY J. VAYALAT HAD THE CAPACITY TO INTRODUCE THIS AMOUNT INTO THE ASSESSEE COMPANY AS SHARE C APITAL. IT WAS STATED BY THE ASSESSEE THAT IT HAD AVAILED LOAN F ROM MRS. CERTINA ROY, WIFE OF ROY J. VAYALAT AND MR. CLINT WILFRED, BROTHER - IN - LAW OF ROY J. VAYALAT OF RS.1,47,44,913/ - ON 08/09/2012 IN AXIS BANK A ND RS.1,09,00,000/ - ON 25/06/2012 IN BANK OF BARODA RESPECTIVELY. IN VIEW OF THESE FACTS, IN OUR OPINION, IT IS APPROPRIATE TO REMIT TH E ISSUE IN DISPUTE TO THE FILE OF THE ASSESSING OFFICER WITH THE DIRECTION TO THE ASSESSEE TO PROVE THE CAPACITY OF SHRI ROY J. VAYALAT TO INTRODUCE SUCH AMOUNT WITH THE ASSESSEES COMPANY. FURTHER, THE ASSESSING OFFICER HAS TO EXAMINE WHETHER THE SAID INVESTMENT BY SHRI ROY J. VAYALAT WAS REFLECTED IN HIS BOOKS OF ACCOUNTS AND BALANCE SHEET FILED BEFORE THE DEPARTMENT. IF IT IS DULY REFLECTED IN THE HANDS OF S HRI ROY J. VAYALAT, THE ADDITION MADE IN THE HANDS OF THE ASSESSEE ON THIS COUNT IS TO BE DELETED. WITH THIS OBSERVATION, WE REMIT THE ISSUE IN DISPUTE TO THE FILE OF THE ASSESSING OFFICER OR FRESH CONSIDERATION. THUS, THIS GROUND OF APPEAL OF THE REVENU E IS PARTLY ALLOWED FOR STATISTICAL PURPOSES. I.T.A. NO . 512 / COC H/ 2019 & C.O. NO. 46/COCH/2019 8 7 . SINCE WE HAVE REMITTED THE APPEAL OF THE REVENUE TO THE FILE OF THE ASSESSING OFFICER FOR FRESH CONSIDERATION, THE CROSS OBJECTION FILED BY THE ASSESSEE IN C.O. NO.46/COCH/2019 HAS BECOME INFRUCTUOUS AND IS DISMISSED AS SAME. 8 . IN THE RESULT, THE APPEAL OF THE REVENUE IS PARTLY ALLOWED FOR STATISTICAL PURPOSES AND THE CROSS OBJECTION OF THE ASSESSEE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 16 TH DECEMBER , 2019. SD/ - SD/ - (GEORGE GEORGE K.) (CHANDRA POOJARI) JUDICIAL MEMBER ACCOUNTANT MEMBER PLACE: KOCHI DATED: 16 TH DECEMBER , 2019 GJ COPY TO: 1 . M/S. C & R HOTELS PVT. LTD., NO.18, C & R HOTELS & RESORTS, NEAR FORT KOCHI BUS TERMINAL, FORT KOCHI - 682 001. THE ASSISTANT COMMISSIONER OF INCOME - TAX, C ORPORATE CIRCLE - 1 (1) , KOCHI. 3. THE COMMISSIONER OF INCOME - TAX(APPEALS) - I, KOCHI 4 . THE PR. COMMISSIONER OF INCOME - TAX, KO CHI. 5 . D. R., I.T.A.T., COCHIN BENCH, COCHIN. 6 . GUARD FILE. BY ORDER (ASSISTANT REGISTRAR) I.T.A.T., COCHIN