Assistant Commissioner of Income TAx Central Circle-2(3), Bangalore V. M/s Cauvery Aqua Pvt Ltd , Bangalore

ITA 67/BANG/2018

• Counselvise Citation: [2021] 107 COUNSELVISE.COM (IT) 3659 (ITAT-BANGALORE)
• Duration Of Justice: 3 year(s) 9 month(s) 6 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-10-2021
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 04-08-2021
• Assessment Year: 2011-2012
• Appeal Filed On: 05-01-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: V SRINIVASAN
• Keywords: Additional evidence; Deemed dividend
• Section: 143(3); 153A; 2(22)(e)

Judgement Text

ITA NOS.67 & 68/BANG/2018& CO 61 & 62/BANG/2018 M/S. CAUVERY AQUA PVT. LTD., BANGALORE IN THE INCOME TAX APPELLATE TRIBUNAL ABENCH: BANGALORE BEFORE SHRI N.V. VASUDEVAN, VICE PRESIDENT AND SHRI B.R. BASKARAN, ACCOUNTANT MEMBER ITA NOS.67 & 68/BANG/2018 ASSESSMENTYEAR:2011-12 & 2012-13 ACIT CENTRAL CIRCLE-2(3) BANGALORE VS. M/S. CAUVERY AQUA PVT. LTD. #5/1 & 5/2, 1 ST MAIN ROAD JAYAHMAHAL EXTENSION BANGALORE 560 046 PAN NO :AAACC7357B APPELLANT RESPONDENT C.O. NOS.61 & 62/BANG/2018 (ARISING OUT OF ITA NOS.67 & 68/BANG/2018) ASSESSMENTYEAR:2011-12 & 2012-13 M/S. CAUVERY AQUA PVT. LTD. #5/1 & 5/2, 1 ST MAIN ROAD JAYAHMAHAL EXTENSION BANGALORE 560 046 VS. ACIT CENTRAL CIRCLE-2(3) BANGALORE APPELLANT RESPONDENT APPELLANT BY : SHRI V. SRINIVASAN, A.R. RESPONDENT BY : MS. NEERA MALHOTRA, D.R. DATE OF HEARING : 04.08.2021 DATE OF PRONOUNCEMENT : 11.10.2021 ITA NOS.67 & 68/BANG/2018 & CO 61 & 62/BANG/2018 M/S. CAUVERY AQUA PVT. LTD., BANGALORE PAGE 2 OF 8 O R D E R PERB.R. BASKARAN, ACCOUNTANT MEMBER: THE APPEALS FILED BY THE REVENUE AND THE CROSS OBJE CTIONS FILED BY THE ASSESSEE ARE DIRECTED AGAINST THE ORDERS PAS SED BY LD. CIT(A)-11, BENGALURU AND THEY RELATE TO THE ASSESSM ENT YEARS 2011- 12 & 2012-13. ALL THESE APPEALS WERE HEARD TOGETHE R AND ARE BEING DISPOSED OF BY THIS COMMON ORDER, FOR THE SAKE OF C ONVENIENCE. 2. THE REVENUE IS CHALLENGING THE DECISION OF LD. C IT(A) IN DELETING THE UNDISCLOSED INCOME OF RS.1.74 CRORES A ND RS.2.51 CRORES ASSESSED BY THE A.O. RESPECTIVELY IN ASSESSM ENT YEARS 2011- 12 & 2012-13. IN THE CROSS OBJECTIONS, THE ASSESSE E IS CHALLENGING THE DECISION OF LD. CIT(A) IN UPHOLDING THE VALIDIT Y OF SEARCH CONDUCTED IN THE HANDS OF THE ASSESSEE U/S 132(1) O F THE INCOME- TAX ACT,1961 ['THE ACT' FOR SHORT]. 3. THE FACTS RELATING TO THE CASE ARE STATED IN BRI EF. THE ASSESSEE COMPANY IS ENGAGED IN THE BUSINESS OF MANUFACTURING AND PROCESSING OF ANIMAL FEED SUPPLEMENTS IN FEEDS AND FARM DIVISION, MANUFACTURING & PROCESSING OF PACKAGED DRINKING WAT ER IN WATER DIVISION. BESIDES, THE ASSESSEE IS ALSO ENGAGED IN GENERATION OF POWER. THE ASSESSEE WAS SUBJECTED TO SEARCH ON 18. 12.2012 AND ACCORDINGLY THE PRESENT ASSESSMENTS WERE COMPLETED U/S 143(3) R.W.S. 153A OF THE ACT. 4. THE ISSUE URGED BY THE REVENUE RELATES TO THE UN DISCLOSED INCOME ASSESSED BY THE AO IN BOTH THE YEARS. THE F ACTS RELATING TO BOTH THE YEARS ARE IDENTICAL. THE A.O. NOTICED THA T THE ASSESSEE COMPANY HAS GIVEN ADVANCES TO ONE OF THE DIRECTORS NAMED SHRI PRAKASH LADHANI AND THE SAME HAS BEEN DEBITED TO I MPREST ITA NOS.67 & 68/BANG/2018 & CO 61 & 62/BANG/2018 M/S. CAUVERY AQUA PVT. LTD., BANGALORE PAGE 3 OF 8 ACCOUNT. THE AGGREGATE AMOUNT OF ADVANCES GIVEN W AS RS.1.74 CRORES AND RS.2.51 CRORES RESPECTIVELY IN THE YEARS RELEVANT TO ASSESSMENT YEAR 2011-12 & 2012-13. THE A.O. CONFRO NTED THE LEDGER PRINT OUT OF IMPREST ACCOUNT TO SHRI RAJIV SAXENA, FINANCIAL CONSULTANT TO THE ASSESSEE. IT WAS SUBMI TTED BY HIM THAT THE PAYMENTS WERE MADE TO THE DIRECTOR IN THE FORM OF IMPREST IN ORDER TO INCUR EXPENSES ON BEHALF OF THE COMPANY. HE ALSO SUBMITTED THAT THE DETAILS OF EXPENDITURE MAY BE FO UND IN THE FINAL TRIAL BALANCE OF THE HEAD OFFICE. HOWEVER, SHRI SA XENA WAS UNABLE TO PROVIDE DETAILS OF EXPENDITURE, IF ANY, INCURRED BY SHRI PRAKASH LADHANI ON BEHALF OF THE ASSESSEE COMPANY. THE A.O . ALSO CONFRONTED THE ABOVE SAID MATERIALS TO SHRI PRAKASH LADHANI AND HE ALSO STATED THAT THE DETAILS OF EXPENDITURE MAY BE AVAILABLE IN HEAD OFFICE. 5. THE A.O ISSUED QUESTIONNAIRES DATED 9.1.2015 AND 12.1.2015 TO THE ASSESSEE AND ASKED IT TO EXPLAIN HOW THE AMO UNTS ADVANCED WERE ACCOUNTED IN THE BOOKS OF THE COMPANY AND ALSO DIRECTED TO FURNISH THE DETAILS OF WITHDRAWALS MADE FROM BANKS. THE ASSESSEE SUBMITTED THAT IT HAS WITHDRAWN MONEY FROM UNITED B ANK OF INDIA AND THE SAME WAS DEPOSITED WITH BANK OF INDIA. IT WAS SUBMITTED THAT IT WAS NECESSITATED, SINCE IT HAS FULLY USED T HE LOAN GRANTED BY UNITED BANK OF INDIA. HENCE MONEY WAS WITHDRAWN FR OM UNITED BANK OF INDIA AND THE SAME WAS DEPOSITED INTO BANK OF INDIA, SO THAT IT CAN USE THE FUNDS AS PER ITS REQUIREMENTS. HOWEVER, WHILE WITHDRAWING FUNDS FROM UNITED BANK OF INDIA, THE IM PREST ACCOUNT OF PRAKASH LADHANI WAS DEBITED. WHEN DEPOSITING MO NEY WITH BANK OF INDIA, THE IMPREST ACCOUNT WAS CREDITED. I T WAS SUBMITTED THAT THE IMPREST ACCOUNT WAS USED FOR ACCOUNTING PU RPOSES ONLY IN ORDER TO EXERCISE CONTROL OVER THESE TRANSACTIONS. ACCORDINGLY, IT WAS SUBMITTED THAT THE AMOUNT WAS NOT ACTUALLY PAID TO PRAKASH LADHANI. SINCE THE ASSESSEE HAS FAILED TO FURNISH RELEVANT DETAILS ITA NOS.67 & 68/BANG/2018 & CO 61 & 62/BANG/2018 M/S. CAUVERY AQUA PVT. LTD., BANGALORE PAGE 4 OF 8 FROM CASH BOOK, THE A.O. TOOK THE VIEW THAT THESE A MOUNTS HAVE BEEN ADVANCED TO PRAKASH LADHANI OUTSIDE THE BOOKS OF ACCOUNT. ACCORDINGLY, THE A.O. TREATED THE AMOUNT OF RS.1.74 CRORES AND RS.2.51 CRORES AS UNDISCLOSED INCOME OF THE ASSESSE E IN ASSESSMENT YEAR 2011-12 AND 2012-13 RESPECTIVELY. THE LD. CIT (A) DELETED THE ADDITIONS AND HENCE THE ASSESSEE HAS FILED THIS APP EAL BEFORE US. 6. WE HEARD THE PARTIES AND PERUSED THE RECORD. TH E LD. D.R. SUBMITTED THAT THE ASSESSEE HAS FAILED TO FURNISH T HE DETAILS AND HENCE THE A.O. WAS CONSTRAINED TO MAKE THE IMPUGNED ADDITIONS HOLDING THE SAME AS PAYMENTS MADE OUT OF UNDISCLOSE D SOURCES. HE FURTHER SUBMITTED THAT THE ASSESSEE HAS PRODUCED THE CASH BOOK BEFORE THE LD. CIT(A) WITHOUT CITING PROPER REASONS AND HE HAS ALSO ACCEPTED THE SAME IN VIOLATION OF RULE 46A. THE A. O. HAS POINTED OUT THE SAME TO LD. CIT(A) IN THE REMAND REPORT FUR NISHED TO HIM. HE FURTHER SUBMITTED THAT THE AMOUNT WAS GIVEN TO S HRI PRAKASH LADHANI AND IT WOULD ALSO FALL UNDER THE CATEGORY O F DEEMED DIVIDEND WITHIN THE MEANING OF SECTION 2(22)(E) OF THE ACT. 7. THE LD. A.R., HOWEVER, SUBMITTED THAT THE CASH B OOK WAS NOT A NEW EVIDENCE AND IT WAS FURNISHED BEFORE THE A.O. ALSO DURING THE COURSE OF ASSESSMENT PROCEEDINGS. ONLY AT THE FAG END OF THE ASSESSMENT PROCEEDING, THE A.O. ASKED FOR THE DETAI LS OF PAYMENTS MADE TO THE IMPREST ACCOUNT OF SHRI PRAKASH LADHANI AND ASSESSEE HAS ALSO EXPLAINED THE SAME. THE LD CIT(A) ALSO CO NFRONTED THE CASH BOOK WITH THE AO AND HENCE THERE IS NO VIOLATI ON OF RULE 46A. HE FURTHER SUBMITTED THAT THE IMPREST ACCOUNT IS FI NDING PLACE IN THE CASH BOOK AND LEDGER, WHICH MEANS THAT THESE TR ANSACTIONS ARE DULY RECORDED IN THE BOOKS OF ACCOUNT. HENCE, THE QUESTION OF TREATING IT AS UNDISCLOSED INCOME IN THE HANDS OF T HE ASSESSEE FIRM DOES NOT ARISE AT ALL. SINCE THE IMPREST ACCOUNT H AS BEEN CREATED ONLY TO HAVE THE CONTROL OVER THESE TRANSACTIONS AN D FURTHER SINCE ITA NOS.67 & 68/BANG/2018 & CO 61 & 62/BANG/2018 M/S. CAUVERY AQUA PVT. LTD., BANGALORE PAGE 5 OF 8 SHRI PRAKASH LADHANI WAS NOT GIVEN ANY AMOUNT FOR H IS PERSONAL USE, THE PROVISIONS OF SECTION 2(22)(E) OF THE ACT WILL ALSO NOT APPLY. THE LD. A.R. SUBMITTED THAT THE LD. CIT(A) HAS CORR ECTLY APPRECIATED THESE FACTS AND HENCE HIS ORDER DOES NOT CALL FOR A NY INTERFERENCE ON THIS ISSUE. 8. WE HEARD THE RIVAL CONTENTIONS AND PERUSED THE R ECORD. THE DECISION RENDERED BY LD. CIT(A) ON THIS ISSUE ARE E XTRACTED BELOW FOR THE SAKE OF CONVENIENCE. 6.4 I HAVE CONSIDERED THE SUBMISSIONS MADE AND MAT ERIALS ON RECORD. IT IS SEEN THAT THERE WAS MATERIALS FOUND I N THE SEARCH IN THE SHAPE OF A LEDGER ACCOUNT SHOWING PAYMENTS IN CASH TO SRI PRAKASH LADHANI ON DIFFERENT DATES. IT HAS BEEN OBSERVED BY THE A.O. THAT IN SEARCH PROCEEDINGS, THE STATEMENT OF SRI.RAJEEV SAX ENA, FINANCIAL CONSULTANT TO THE APPELLANT WAS RECORDED. HE WAS AS KED TO EXPLAIN THE SEIZED LEDGERS FOUND AND HE STATED THAT THESE PAYME NTS TO THE DIRECTORS WERE MADE IN THE FORM OF IMPREST TO INCUR EXPENSES ON BEHALF OF THE COMPANY. ON BEING ASKED THAT THERE WERE NO DETAILS OF EXPENSES IN THE LEDGER ACCOUNT, SRI.RAJEEV SAXENA REPLIED THAT THE DETAILS OF THE EXPENDITURE MAY BE FOUND IN THE FINAL TRIAL BALANCE OF THE HEAD OFFICE. A.O. HAS ALSO OBSERVED THAT AT THE TIME OF SEARCH, SRI.PRAKASH LADHANI WAS ALSO EXAMINED AND NO DETAIL S OF THE EXPENDITURE INCURRED BY HIM FROM THE ABOVE MONEY AD VANCED WERE GIVEN. HE ALSO STATED THAT THE DETAILS OF THE EXPEN DITURE MAY BE AVAILABLE IN THE HEAD OFFICE. HENCE, THE A.O. REGAR DED THAT NO SATISFACTORY EXPLANATION OF EXPENSES INCURRED WERE GIVEN AT THE TIME OF SEARCH. 6.5 IN THE ASSESSMENT PROCEEDINGS, THE AO HAS ASKED THE APPELLANT ONCE AGAIN ABOUT THE SEIZED LEDGERS. THE A.O. ASKED THE APPELLANT TO ESTABLISH 2 THINGS FIRST HOW THE ADV ANCES GIVEN TO SRI.PRAKASH LADHANI HAVE BEEN ACCOUNTED AND SECONDL Y TO EXPLAIN THE SOURCE OF THE ADVANCES GIVEN. THE A.O. WANTED T HE APPELLANT TO EXPLAIN WHETHER ANY EXPENSES HAVE BEEN BOOKED IN RE LATION TO THE AMOUNT ADVANCED TO SRI PRAKASH LADHANI. THE CASH BO OK WAS ALSO REQUIRED TO BE PRODUCED AND POINT OUT THE RELEVANT ENTRIES IN THE NAME OF SRI PRAKASH LADHANI. IN REPLY, THE APPELLAN T STATED THAT THE CASH ADVANCED TO SRI PRAKASH LADHANI WAS DRAWN FROM UNITED BANK OF INDIA AND DEPOSITED IN BANK OF INDIA FOR EX PENSES. IT WAS EXPLAINED THAT THE APPELLANT GROUP HAD OVERDRAWING SITUATION AND ITA NOS.67 & 68/BANG/2018 & CO 61 & 62/BANG/2018 M/S. CAUVERY AQUA PVT. LTD., BANGALORE PAGE 6 OF 8 HENCE, CASH WAS WITHDRAWN AND DEPOSITED IN BANK OF INDIA WHERE THERE WERE NO CREDIT FACILITIES. IN SHORT, IT WAS T HE CLAIM THAT THIS CASH SHOWN IN THE SEIZED LEDGERS WERE NEVER USED BY SRI PRAKASH LADHANI AND ONLY FOR ACCOUNTING PURPOSE AND TO HAVE A CONTROL OVER THE EXTENT OF FUNDS DRAWN FROM UNITED BANK, TH E SEIZED LEDGERS WERE PREPARED. THIS EXPLANATION OF THE APPELLANT WA S NOT ACCEPTED BY THE A.O. SINCE THE CASH BOOK OF THE APPELLANT WA S NOT PRODUCED AND ALSO THE DETAILS OF THE EXPENSES INCURRED BY TH E APPELLANT FROM OUT OF THE FUNDS. 6.6 BEFORE ME THE APPELLANT HAS PRODUCED THE CASH B OOK AND THE A.O. WAS ALSO CALLED UPON TO EXAMINE THE SAME A ND GIVE HIS REPORT. THE A.O. -HAS OBJECTED THE ADMISSION OF THE CASH BOOK UNDER RULE 46A ON THE GROUND THAT THERE WAS SUFFICI ENT OPPORTUNITY WAS GIVEN TO THE APPELLANT IN THE ASSES SMENT PROCEEDINGS TO PRODUCE THE SAME AND THE REASONS STA TED FOR THE FAILURE OF THE APPELLANT TO PRODUCE THE CASH BOOK C ANNOT BE ACCEPTED. I HAVE EXAMINED THE REASONS STATED BY THE APPELLANT AND THE OBJECTIONS OF THE A.O. IT IS THE CASE OF THE AP PELLANT THAT THE CASH BOOK PRODUCED IS STRICTLY NOT ADDITIONAL EVIDE NCE SINCE IT WAS PRODUCED IN COURSE OF THE ASSESSMENT PROCEEDINGS IN NORMAL COURSE. HOWEVER, AFTER FURNISHING THE EXPLANATION A BOUT THE SOURCE OF THE CASH PAYMENTS BY LETTER DATED 16/03/2015, TH E APPELLANT HAS NOT PRODUCED THE CASH BOOK BEFORE THE A.O. TO SUBST ANTIATE ITS EXPLANATION. THE SUBMISSION OF THE APPELLANT THAT S EVERAL ASSESSMENT PROCEEDINGS OF THE ENTIRE GROUP WERE BEI NG TAKEN UP TOGETHER AND THERE WAS A BONAFIDE OVERSIGHT IN PROD UCING THE CASH BOOK APPEARS TO BE A REASONABLE EXPLANATION. HENCE, I HOLD THAT THE ADDITIONAL EVIDENCE TENDERED BY THE APPELLANT REQUI RES TO BE ADMITTED TO SERVE THE ENDS OF JUSTICE. NO PREJUDICE WILL BE CAUSED BY ADMITTING THE ADDITIONAL EVIDENCE AS THE A.O. HAS A LSO BEEN GIVEN THE OPPORTUNITY TO EXAMINE THE SAME AND FURNISH HIS COMMENTS. 6.7 I FIND FROM THE EXAMINATION OF THE CASH BOOK TH AT THE CASH PAYMENTS MADE TO SRI PRAKASH LADHANI ARE PROPERLY R ECORDED THEREIN AS PER THE SEIZED LEDGER ACCOUNT. THE APPEL LANT HAS ALSO FILED THE LEDGER ACCOUNT OF UNITED BANK OF INDIA TO SHOW THAT THE CASH WITHDRAWAL FROM THE SAID BANK ACCOUNT HAS BEEN INCORPORATED IN THE CASH BOOK OF THE APPELLANT. THE SOURCE OF THE CASH PAYMENTS AS PER THE SEIZED LEDGER STANDS ESTAB LISHED WITH REGARD TO THE CASH WITHDRAWALS MADE FROM UNITED BAN K OF INDIA AND DULY RECORDED IN THE CASH BOOK OF THE APPELLANT . THE MAJOR OBJECTION OF THE A.O. IN THE ASSESSMENT ORDER IS TH AT THE APPELLANT HAD FAILED TO PRODUCE THE CASH BOOK AND EXPLAIN THE SOURCE OF THE CASH PAYMENTS AS PER THE SEIZED LEDGERS. THE APPELL ANT HAS NOW FURNISHED THE CASH BOOK AND THE LEDGER ACCOUNT IN U NITED BANK OF INDIA AND BANK OF INDIA TO SUBSTANTIATE ITS EXPLANA TION AND STAND BEFORE THE A.O. THE OBSERVATIONS OF THE A.O. IN THE REMAND REPORT ITA NOS.67 & 68/BANG/2018 & CO 61 & 62/BANG/2018 M/S. CAUVERY AQUA PVT. LTD., BANGALORE PAGE 7 OF 8 THAT THE APPELLANT HAS NOT ESTABLISHED THE END TO E ND CASH FLOW WITH REGARD TO THE EXPENSES INCURRED IS NOT MATERIA L SINCE THE ISSUE UNDER CONSIDERATION RELATES TO THE SOURCE OF THE CASH PAYMENTS MADE AS PER THE SEIZED MATERIALS. HENCE, T HE ADDITION MADE BY THE A.O. CONSIDERING THE SAID CASH PAYMENTS AS UNDISCLOSED INCOME OF THE APPELLANT IS DELETED. 9. ON A PERUSAL OF THE ORDER PASSED BY LD. CIT(A), WE NOTICE THAT THE TRANSACTIONS RELATING TO IMPREST ACCOUNT, WITHD RAWAL FROM UNITED BANK OF INDIA AND DEPOSIT INTO BANK OF INDIA HAVE BEEN ROUTED THROUGH THE BOOKS OF ACCOUNT. AS SUBMITTED BY ASSESSEE, THE IMPREST ACCOUNT WAS FASTENED BETWEEN CASH WITHD RAWAL FROM UNITED BANK OF INDIA AND DEPOSIT INTO BANK OF INDIA IN ORDER TO HAVE CONTROL OVER THESE TRANSACTIONS. WE NOTICE TH AT THE IMPREST ACCOUNT IS CREATED AS CONDUIT BETWEEN THE BANK TRAN SACTIONS. WE NOTICE THAT THE LD. CIT(A) HAS EXAMINED THE BOOKS O F ACCOUNT WHICH HAS ALSO BEEN CONFRONTED BEFORE THE A.O. FURTHER, THE LD. CIT(A) HAS ALSO RECORDED A FINDING THAT ALL THE TRANSACTIO NS ARE DULY RECORDED IN THE BOOKS OF ACCOUNT. WHEN ALL THE TRA NSACTIONS HAVE BEEN ROUTED THROUGH THE BOOKS OF ACCOUNTS, THE QUES TION OF UNDISCLOSED INCOME WILL NOT ARISE. HENCE WE ARE OF THE VIEW THAT THE AO HAS MADE THE IMPUGNED ADDITION ON SURMISES AND C ONJECTURES ONLY AND ACCORDINGLY, IN THE FACTS AND CIRCUMSTANCE S OF THE CASE, WE DO NOT FIND ANY INFIRMITY IN THE DECISION RENDER ED BY LD. CIT(A) IN DELETING THIS ADDITION IN BOTH THE YEARS. 10. IN THE C.O., THE ASSESSEE IS CHALLENGING THE DE CISION OF LD. CIT(A) IN UPHOLDING THE VALIDITY OF SUCH PROCEEDING S U/S 132(1) OF THE ACT. AT THE TIME OF HEARING, THE LD. A.R. DID NOT PRESS THE C.O. FILED BY THE ASSESSEE FOR BOTH THE YEARS. ITA NOS.67 & 68/BANG/2018 & CO 61 & 62/BANG/2018 M/S. CAUVERY AQUA PVT. LTD., BANGALORE PAGE 8 OF 8 11. IN THE RESULT, BOTH THE APPEALS FILED BY THE RE VENUE AS WELL AS BOTH CROSS OBJECTIONS FILED BY THE ASSESSEE ARE DIS MISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 11 TH OCT, 2021. SD/- (N.V. VASUDEVAN) VICE PRESIDENT SD/- (B.R. BASKARAN) ACCOUNTANT MEMBER BANGALORE, DATED 11 TH OCT, 2021. VG/SPS COPY TO: 1. THE APPLICANT 2. THE RESPONDENT 3. THE CIT 4. THE CIT(A) 5. THE DR, ITAT, BANGALORE. 6. GUARD FILE BY ORDER ASST. REGISTRAR, ITAT, BANGALORE.