M/s Capricorn Projects (I) Ltd., Hyderabad V. Income Tax Officer, Ward-1(1), Hyderabad

ITA 602/HYD/2014

• Counselvise Citation: 60222514 RSA 2014
• Duration Of Justice: 8 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-12-2014
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Next Hearing Date: 16-12-2014
• Assessment Year: 2001-2002
• Appeal Filed On: 03-04-2014
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: RAJAT MITRA
• Assessee Lawyers: A V RAGHURAM

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCH B, HYDERABAD BEFORE SHRI J. SUDHAKAR REDDY, ACCOUNTANT MEMBER & SHRI SAKTIJIT DEY, JUDICIAL MEMBER ITA NO. 602/HYD/2014 ASSESSMENT YEAR : 2001-02 M/S.CAPRICORN PROJECTS (I) LTD., HYDERABAD [AABCC 6890 J] (APPELLANT) VS. THE INCOME TAX OFFICER, WARD-I(1), HYDERABAD (RESPONDENT) APPELLANT BY SHRI A.V.RAGHURAM, AR RESPONDENT BY SHRI RAJAT MITRA, DR DATE OF HEARING 16-12-2014 DATE OF PRONOUNCEMENT 19-12-2014 O R D E R PER SAKTIJIT DEY, J.M: THIS APPEAL OF THE ASSESSEE IS DIRECTED AGAINST TH E ORDER DATED 18-11-2013 PASSED BY THE COMMISSIONER OF INCO ME TAX(APPEALS)-V, HYDERABAD FOR THE ASSESSMENT YEAR ( AY) 2001- 02. 2. THERE IS A DELAY OF SIX DAYS IN FILING OF THE AP PEAL BY THE ASSESSEE. AFTER CONSIDERING THE CAUSE OF DELAY SHO WN BY THE ASSESSEE, WE ARE INCLINED TO CONDONE THE SAME AND A DMIT THE APPEAL FOR HEARING ON MERIT. 2 ITA NO. 602/HYD/2014 3. THE SOLITARY ISSUE WHICH ARISES FOR CONSIDERATIO N IN THE AFORESAID APPEAL OF THE ASSESSEE IS RELATING TO ADD ITION OF AN AMOUNT OF RS.25,80,000/- U/S.68 OF THE INCOME TAX A CT, 1961 (ACT) BY ASSESSING OFFICER AND CONFIRMED BY THE LD. CIT(APPEALS). 4. BRIEFLY THE FACTS ARE: THE ASSESSEE COMPANY IS ENGAGED IN THE BUSINESS OF EXECUTING WORKS CONTRACTS. FOR THE A.Y. UNDER CONS IDERATION, ASSESSEE FILED ITS RETURN OF INCOME ON 01-02-2001, DECLARING TOTAL INCOME OF RS.41,645/-. DURING THE ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER CALLED UPON THE ASSESSEE TO FURNISH THE DETAILS OF SHAREHOLDERS. IN RESPONSE T O THE QUERY MADE BY THE ASSESSING OFFICER, ASSESSEE FURNISHED N AMES AND ADDRESSES OF SHAREHOLDERS TOTALING TO 125 IN NUMBER . AS OBSERVED BY THE ASSESSING OFFICER IN THE ASSESSMENT ORDER, WHEN LETTERS WERE SENT TO THOSE SHAREHOLDERS TO VER IFY THE CORRECTNESS OF ASSESSEES CLAIM, ALMOST ALL THE LET TERS RETURNED UN-SERVED. HE ALSO NOTED THAT IN RESPECT OF LETTER S WHICH WERE DELIVERED, REPLIES WERE NOT RECEIVED IN MOST OF THE CASES. IN CASE OF FOUR SHAREHOLDERS, REPLIES CAME WHEREIN THE Y DENIED OF HAVING MADE ANY INVESTMENT IN THE SHARES OF THE ASS ESSEE- COMPANY. IN VIEW OF THE AFORE SAID FACTS, THE ASSE SSING OFFICER ISSUED A SHOW CAUSE NOTICE TO THE ASSESSEE PROPOSIN G TO TREAT THE INVESTMENTS MADE IN SHARE APPLICATION MONEY AS UN- EXPLAINED CASH CREDIT U/S.68 OF THE ACT. IN REPLY TO THE SAID SHOW CAUSE NOTICE, THOUGH THE ASSESSEE EXPLAINED TH AT THE INVESTMENTS MADE BY THE CONCERNED PERSONS TOWARDS S HARE APPLICATION MONEY CANNOT BE TREATED AS UN-EXPLAINED CASH CREDIT U/S.68, BUT THE ASSESSING OFFICER DID NOT FI ND MERIT IN THEM. THE ASSESSING OFFICER OBSERVED THAT WHILE VE RIFYING INVESTMENT OF RS.25 LAKHS ALLEGED TO HAVE BEEN MADE BY M/S. 3 ITA NO. 602/HYD/2014 PRIME AGENCIES, THE ASSESSEE ONLY FURNISHED THE NAM E AND ADDRESS. HOWEVER, WHEN THE INSPECTOR WENT TO MAKE ENQUIRIES, HE FOUND NO ONE OF THE SAID NAME IN THE GIVEN ADDRE SS. THOUGH SUBSEQUENTLY, THE ASSESSEE FURNISHED A CONFIRMATION LETTER FROM THE SAID SHARE APPLICANT I.E., M/S. PRIME AGENCIES GIVING HIS PAN AND ADDRESS BUT ON VERIFICATION OF HIS INCOME T AX RETURNS FOR THE A.Y.2001-02, THE ASSESSING OFFICER FOUND TH AT IN THE BALANCE SHEET SUBMITTED WITH THE RETURN OF INCOME T HE INVESTMENTS HAVE NOT BEEN SHOWN. ACCORDINGLY, THE ASSESSING OFFICER CONCLUDED THAT THE INVESTMENT CLAIMED IN TH E NAME OF M/S.PRIME AGENCIES CANNOT BE ACCEPTED. SIMILARLY, THE ASSESSING OFFICER ALSO TREATED AN AMOUNT OF RS.80,0 00/- AS UN-EXPLAINED CASH CREDIT AS THE FOUR PERSONS AGAINS T WHOSE NAME THESE INVESTMENT WERE SHOWN DENIED OF HAVING I NVESTED IN THE ASSESSEE-COMPANY. THE ASSESSING OFFICER ALSO T REATED THE BALANCE AMOUNT OF RS.43,63,700/- AS UN-EXPLAINED CA SH CREDIT AS THERE WAS NO CONFIRMATION FROM THE CONCERNED PER SONS. THUS, THE TOTAL ADDITION MADE BY THE ASSESSING OFFI CER WAS TO THE TUNE OF RS.69,43,700/-. BEING AGGRIEVED OF THE ADDITIONS SO MADE, ASSESSEE PREFERRED AN APPEAL BEFORE THE LD. CIT(APPEALS). 5. IN COURSE OF APPELLATE PROCEEDINGS BEFORE THE CI T(APPEALS), ASSESSEE FURNISHED CONFIRMATION LETTERS FROM NUMBER OF INVESTORS IN SHARE APPLICATION MONEY. ON THE BASIS OF THE SUBMISSIONS MADE AND CONFIRMATION LETTERS FILED, TH E LD. CIT(APPEALS) CALLED FOR A REMAND REPORT. ON THE BA SIS OF THE REMAND REPORT, THE LD. CIT(APPEALS) ACCEPTED INVEST MENT TO THE TUNE OF RS.43,63,700/- AND ACCORDINGLY DIRECTED THE ASSESSING OFFICER TO DELETE THE ADDITION TO THAT EXTENT. HOW EVER, AS FAR AS AMOUNTS OF RS.25 LAKHS AND RS.80,000/-, LD.CIT(APPE ALS) 4 ITA NO. 602/HYD/2014 AGREED WITH THE VIEW EXPRESSED BY ASSESSING OFFICER AND SUSTAINED THE ADDITIONS. 6. LD.AR CONTESTING THE ADDITIONS SUSTAINED BY LD. CIT(APPEALS) SUBMITTED BEFORE US THAT AS FAR AS THE AMOUNT OF RS.25 LAKHS IS CONCERNED, THERE IS NO DISPUTE TO TH E FACT THAT THE ASSESSEE HAS NOT ONLY IDENTIFIED THE INVESTOR B UT HAS ALSO FURNISHED THE CONFIRMATION LETTER CONFIRMING INVEST MENT MADE TOWARDS SHARE APPLICATION, THE ASSESSING OFFICER WA S NOT JUSTIFIED IN TREATING THE AMOUNT AS UN-EXPLAINED CA SH CREDIT AT THE HANDS OF THE ASSESSEE ONLY BECAUSE THE AMOUNT W AS NOT SHOWN IN THE BALANCE SHEET OF THE CONCERNED INVESTO R. IT WAS SUBMITTED, WHEN THE PARTY CONCERNED HAS CONFIRMED O F HAVING INVESTED IN SHARE APPLICATION MONEY, IT IS NOT MATE RIAL WHETHER THE AMOUNT HAS BEEN REFLECTED OR NOT IN THE BALANCE SHEET OF THE CONCERNED INVESTOR. IF IT IS NOT REFLECTED IN HIS BALANCE SHEET, THEN ADDITION IF ANY HAS TO BE CONSIDERED AT THE HANDS OF THE CONCERNED PERSON AND NOT AT THE HANDS OF THE AS SESSEE. IN SUPPORT OF SUCH CONTENTIONS, THE LD.AR RELIED UPON THE DECISION OF HONBLE A.P. HIGH COURT IN THE CASE OF CIT VS. L ANCO INDUSTRIES LTD., [242 ITR 357]. AS FAR AS THE AMOU NT OF RS.80,000/- IS CONCERNED, LD.AR SUBMITTED THAT THOU GH THE ASSESSING OFFICER OBTAINED INFORMATION FROM THE CON CERNED INVESTORS, WHO DENIED OF HAVING INVESTED IN SHARE A PPLICATION MONEY OF ASSESSEE-COMPANY BUT THE ASSESSEE WAS NEVE R GIVEN AN OPPORTUNITY TO COUNTER THOSE CHARGES BY CROSS-EX AMINING THE CONCERNED PERSONS. THUS, IT WAS SUBMITTED THAT IN SO FAR AS THE AMOUNT OF RS.80,000/- IS CONCERNED, THE ASSESSE E MAY BE GRANTED OPPORTUNITY TO ESTABLISH ITS CASE BEFORE TH E ASSESSING OFFICER. 5 ITA NO. 602/HYD/2014 7. THE LD.DR ON THE OTHER HAND REITERATED THE VIEW EXPRESSED BY THE ASSESSING OFFICER AS WELL AS THE L D. CIT(APPEALS). 8. WE HAVE HEARD THE PARTIES AND PERUSED THE ORDERS OF DEPARTMENTAL AUTHORITIES AS WELL AS OTHER MATERIAL ON RECORD. AS CAN BE SEEN, OUT OF THE TOTAL ADDITION OF RS.69, 43,700/- MADE U/S.68 OF THE ACT, ASSESSEE IS CONTESTING THE ADDITION OF RS.25 LAKHS AND RS.80,000/-. AS FAR AS THE ADDITIO N OF RS.25 LAKHS IS CONCERNED, UN-DISPUTEDLY, THE FACTS AND MA TERIAL ON RECORD SHOW THAT THE INVESTMENT WAS MADE TOWARDS SH ARE APPLICATION MONEY IN THE ASSESSEE-COMPANY BY M/S.PR IME AGENCIES. IT IS FURTHER EVIDENT FROM THE ASSESSMEN T ORDER THAT IN COURSE OF ASSESSMENT PROCEEDINGS, ASSESSEE HAS S UBMITTED CONFIRMATION FROM THE SAID PARTY INDICATING POSTAL ADDRESS AS WELL AS PAN NUMBER. ASSESSING OFFICER HIMSELF HAS M ENTIONED IN THE ASSESSMENT ORDER THAT BANK STATEMENT ENCLOSE D TO THE CONFIRMATION LETTER, SHOWS CREDIT OF RS.25 LAKHS ON 21-06-2000 AND CLEARING IN FAVOUR OF THE ASSESSEE-COMPANY ON 2 4-06-2000. HOWEVER, ONLY BECAUSE THE AMOUNT-IN-QUESTION WAS NO T REFLECTED IN THE BALANCE SHEET OF M/S.PRIME AGENCIE S, THE ASSESSING OFFICER HAS MADE THE ADDITION. IN OUR VI EW, SUCH ADDITION CANNOT BE MADE ONLY FOR THE REASON THAT TH E AMOUNT- IN-QUESTION WAS NOT SHOWN IN THE BALANCE SHEET OF M /S.PRIME AGENCIES OR ITS PROPRIETOR. WHEN THE INVESTOR HAS ADMITTED OF HAVING INVESTED IN ASSESSEE-COMPANY TOWARDS SHARE A PPLICATION MONEY AND THE BANK STATEMENT ALSO DEMONSTRATES THAT THE AMOUNT OF RS.25 LAKHS CAME FROM THE ACCOUNT OF M/S. PRIME AGENCIES. THE SAID AMOUNT CANNOT BE CONSIDERED TO BE UN- EXPLAINED CASH CREDIT. IF INVESTMENT MADE BY M/S.P RIME AGENCIES OR ITS PROPRIETOR IS NOT REFLECTED IN THEI R BALANCE SHEET, THEN ADDITION IF ANY CAN BE CONSIDERED AT THE HANDS OF THE INVESTORS IF THEY FAIL TO PROPERLY EXPLAIN THE SOUR CE. HOWEVER, 6 ITA NO. 602/HYD/2014 UNDER NO CIRCUMSTANCES, IT CAN BE TREATED AS UN-EXP LAINED CASH CREDIT AT THE HANDS OF THE ASSESSEE-COMPANY AS THE ASSESSEE HAS DISCHARGED ITS ONUS OF PROVING SOURCE OF SHARE APPLICATION MONEY. IN THIS CONTEXT, WE RELY ON THE DECISION OF THE JURISDICTIONAL HIGH COURT IN THE CASE OF CIT VS. LA NCO INDUSTRIES LTD., (SUPRA). IN THE AFORESAID VIEW OF THE MATTER, WE DIRECT THE ASSESSING OFFICER TO DELETE THE ADDITION OF RS.25 LAKHS. INSOFAR AS THE AMOUNT OF RS.80,000/- IS CO NCERNED, IT IS CLEARLY ESTABLISHED FROM THE FACTS AND MATERIALS ON RECORD THAT DURING THE ASSESSMENT PROCEEDINGS, THE ASSESSE E HAS SHOWN THE INVESTMENT OF RS.80,000/- TO HAVE BEEN MA DE BY FOUR PERSONS. HOWEVER, WHEN THE ASSESSING OFFICER WANTED TO VERIFY THE CORRECTNESS OF ASSESSEES CLAIM BY TAKIN G UP ENQUIRY WITH THESE PERSONS THEY SENT LETTERS TO THE ASSESSI NG OFFICER COMPLETELY DENYING THE FACT OF HAVING MADE ANY INVE STMENT TOWARDS SHARE APPLICATION MONEY IN THE ASSESSEE-COM PANY. AS IT APPEARS FROM THE ASSESSMENT ORDER, DURING THE AS SESSMENT PROCEEDINGS WHEN, THE ASSESSING OFFICER BROUGHT THI S FACT TO THE NOTICE OF THE DIRECTOR OF THE COMPANY, HE EXPRESSED HIS INABILITY TO SAY ANYTHING FURTHER IN THE MATTER. ACCORDINGLY , THE ADDITION OF RS.80,000/- WAS MADE AT THE HANDS OF THE ASSESSE E. IT IS FURTHER EVIDENT THAT IN COURSE OF PROCEEDINGS BEFOR E THE LD. CIT(APPEALS), THE SITUATION DID NOT IMPROVE. THE A SSESSEE NEITHER BROUGHT ANY EVIDENCE NOR COULD ESTABLISH TH AT THE AMOUNT OF RS.80,000/- WAS INVESTED IN SHARE APPLICA TION MONEY BY THE CONCERNED PERSONS. IN THESE CIRCUMSTANCES, ASSESSEES PLEA THAT OPPORTUNITY WAS NOT GIVEN TO HIM FOR EXPL AINING THE INVESTMENT, IN OUR VIEW, CANNOT BE ACCEPTED. ACCOR DINGLY, WE CONFIRM THE ADDITION OF RS.80,000/-. 7 ITA NO. 602/HYD/2014 IN THE RESULT, THE ASSESSEES APPEAL IS PARTLY ALL OWED. ORDER PRONOUNCED IN THE OPEN COURT ON 19 TH DECEMBER, 2014. SD/- SD/- (J. SUDHAKAR REDDY) (SAKTIJIT DEY) ACCOUNTANT MEMBER JUDICIAL MEMBER HYDERABAD, DATED: 19 TH DECEMBER, 2014 TNMM COPY TO:- 1) M/S. CAPRICORN PROJECTS (I) LTD., C/O. SHRI K.V ASANTKUMAR & SHRI A.V.RAGHURAM, ADVOCATES, 610, 6 TH FLOOR, BABUKHAN ESTATE, BASHEER BAGH, HYDERABAD-1. 2) THE INCOME TAX OFFICER, WARD-I(1), HYDERABAD. 3) CIT(A)-V, HYDERABAD 4)CIT-I, HYDERABAD 5) THE DEPARTMENTAL REPRESENTATIVE, I.T.A.T., HYDE RABAD.