Bodapati Control Systems Private Limited, Hyderabad V. Dy. Commissioner of Income Tax , Circle-1(2), Hyderabad

ITA 889/Hyd/2018

• Counselvise Citation: [2019] 117 COUNSELVISE.COM (IT) 9843 (ITAT-HYDERABAD)
• Duration Of Justice: 10 month(s) 25 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 03-04-2019
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: DB-A
• Next Hearing Date: 27-03-2019
• Assessment Year: 2014-2015
• Appeal Filed On: 08-05-2018
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: KIRAN KATTA
• Assessee Lawyers: A V RAGHURAM
• Keywords: Unexplained cash credit; Unexplained investment
• Section: 143(3); 115JB; 68

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCH A , HYDERABAD BEFORE SMT. P. MADHAVI DEVI, JUDICIAL MEMBER AND SHRI S. RIFAUR RAHMAN, ACCOUNTANT MEMBER ITA NO . 889 /HYD/ 2018 ASSESSMENT YEAR: 20 1 4 - 1 5 BODAPATI CONTROL SYSTEMS PRIVATE LIMITED, HYDERABAD. PAN: AAACB 9732 F VS. DCIT, CIRCLE - 1(2), HYDERABAD. (APPELLANT) (RESPONDENT) ASSESSEE BY: SRI A.V. RAGHURAM REVENUE BY: SRI KIRAN KATTA, DR DATE OF HEARING: 27 /03/2019 DATE OF PRONOUNCEMENT: 0 3 /0 4 /2019 ORDER PER SMT. P. MADHAVI DEVI, J.M.: THIS IS ASSESSEES APPEAL FOR THE ASSESSMENT YEAR 2014 - 15 FILED AGAINST THE ORDER OF THE CIT(A) - 1, HYDERABAD DATED 26/02/2018. 2. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE - COMPANY ENGAGED IN THE BUSINESS OF ERECTION, TESTING AND COMMISSIONING OF SUB - STATION S , FILED ITS RETURN OF INCOME FOR THE ASSESSMENT YEAR 2014 - 15 ON 30/11/2014 ADMITTING A LOSS OF RS. 43,60,205/ - UNDER NORMAL PROVISIONS AND RS.( - ) 54,85,379/ - UNDER THE PROVISIONS OF SECTION 115JB OF THE ACT. THE RETURN WAS TAKEN UP FOR SCRUTINY UNDER CASS. DURIN G THE ASSESSMENT PROCEEDINGS U/S 143(3) OF THE ACT, THE ASSESSING OFFICER 2 OBSERVED THAT THE ASSESSEE HAS RECEIVED UNSECURED LOANS TO THE EXTENT OF RS. 66,30,759/ - DURING THE RELEVANT ASSESSMENT YEAR. WHEN THE SHOW - CAUSE NOTICE WAS ISSUED TO THE ASSESSE E AS TO WHY THE SAME SHOULD NOT BE TREATED AS UNEXPLAINED CREDITS U/S 68 OF THE ACT, THE ASSESSEE FURNISHED CONFIRMATION LETTERS FROM THE LENDERS VIZ., (I) MR. B. SAMBA SIVA RAO FOR A LOAN OF RS. 31,69,659/ - AND (II) MR. P. VENKATA PAVAN KUMAR FOR AN AMOUN T OF RS. 26 LAKHS. THE ASSESSEE WAS ASKED TO FILE THE ITRS AND BANK ACCOUNT EXTRACTS OF SUCH LENDERS. BUT THE ASSESSEE EXPRESSED INABILITY TO FILE THE INFORMATION CALLED FOR. THE A.O. CONFIRMED FROM THE JURISDICTIONAL OFFICER OF THE RESPECTIVE CREDITORS AND OBSERVED THAT THE SAID PERSONS HAVE NOT FILED INCOME TAX RETURNS SINCE A.Y. 2011 - 12 AND THEREFORE, HE HELD THAT THE CREDITWORTHINESS OF THE CREDITORS IS NOT ESTABLISHED. HE ACCORDINGLY BROUGHT THE ENTIRE AMOUNT TO TAX U/S 68 OF THE ACT. 3. AGGRIEVED, ASSESSEE FILED AN APPEAL BEFORE THE CIT(A), ALONG WITH THE CONFIRMATION LETTERS, BANK ACCOUNT STATEMENTS OF THE RELEVANT PARTIES ETC. THE CIT(A), HOWEVER, CONFIRMED THE ORDER OF THE A.O. AND THE ASSESSEE IS IN SECOND APPEAL BEFORE US BY RAISING THE FOLLO WING GROUNDS OF APPEAL: 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE ORDER OF THE LD. CIT(A) DISMISSING THE APPEAL IS ERRONEOUS, ILLEGAL AND UNSUSTAINABLE IN LAW. 2. THE CIT(A) ERRED IN SUSTAINING THE ADDITION OF RS. 57,69,659/ - AS UNEXPLAINE D LOANS IN THE BOOKS OF THE APPELLANT COMPANY. THE CIT(A) FAILED TO APPRECIATE THAT THE APPELLANT HAS SATISFIED ALL THE 3 THREE ESSENTIAL REQUIREMENTS OF SECTION 68 OF THE INCOME TAX ACT, BY FURNISHING COMPLETE DETAILS OF THE LOANS RECEIVED. 3. THE FINDING OF THE CIT(A) THAT THE APPELLANT HAS NOT DEMONSTRATED THAT THE AMOUNTS ARE RECEIVED THROUGH BANKING CHANNELS IS FACTUALLY INCORRECT. THE CIT(A) FAILED TO APPRECIATE THE DOCUMENTS FILED BEFORE HER, AND RESORTED TO SURMISES AND CONJECTURES. 4. ON THE FACTS A ND IN THE CIRCUMSTANCES OF THE CASE, BOTH THE PERSONS WHO GAVE LOANS TO THE APPELLANT ARE MEN OF MEANS AND ARE ASSESSED TO INCOME TAX. THE CIT(A) FAILED TO PROPERLY APPRECIATE THE SUBSTANTIAL EVIDENCE SUBMITTED IN EVIDENCE OF RECEIPT OF MONEY FROM THE ABO VE PERSONS INCLUDING THE SOURCES FOR THE MONEY LENT. 5. WITHOUT PREJUDICE TO THE ABOVE GROUND, THE CIT(A) FAILED TO APPRECIATE THAT OUT OF TOTAL AMOUNT OF RS. 31,69,659/ - OUTSTANDING IN THE NAME OF SRI B. SAMBASIVA RAO IN THE PREVIOUS YEAR, AN AMOUNT OF RS . 29,90,459/ - WAS OPENING BALANCE AND ONLY THE BALANCE CAN BE SAID TO BE RECEIVED IN THE PREVIOUS YEAR RELEVANT TO ASST. YEAR UNDER CONSIDERATION. 4. LEARNED COUNSEL FOR THE ASSESSEE REITERATED THE SUBMISSIONS MADE BEFORE THE AUTHORITIES BELOW AND HAS DRAWN OUR ATTENTION TO THE BANK STATEMENTS OF THE CREDITORS AS WELL AS OF THE ASSESSEE TO DEMONSTRATE THEIR IDENTITY AND GENUINENESS OF THE TRANSACTION. HE SUBMITTED THAT SRI B. SAMBA SIVA RAO HAD THREE BANK ACCOUNTS THROUGH WHICH THE AMOUNTS WERE ADVANCED TO THE ASSESSEE. BOTH THE ASSESSING OFFICER AS WELL AS THE CIT(A) HAVE FAILED TO CONSIDER THE SAME TO SATISFY THEMSELVES ABOUT THE CREDITWORTHINESS O F SRI B. SAMBA SIVA RAO. HE SUBMITTED THAT SRI B. SAMBA SIVA RAO WAS THE EXECUTIVE DIRECTOR OF THE ASSESSEE - COMPANY AND THEREFORE, HE HAD ADVANCED THE SUMS FOR BUSINESS EXPEDIENCY / REQUIREMENTS OF THE COMPANY. WITH REGARD TO THE CREDITWORTHINESS OF SRI P .VENKATA PAVAN KUMAR IS CONCERNED, HE SUBMITTED THAT THE SAID CREDITOR HAD GIVEN A CONFIRMATION LETTER THAT THE SOURCE OF THE ADVANCE WAS THE SALE CONSIDERATION RECEIVED BY HIM ON 4 SALE OF A PROPERTY AND HE HAS ALSO FURNISHED THE COPY OF THE SALE DEED ALO NG WITH THE CONFIRMATION LETTER AND THE BANK STATEMENT. HE SUBMITTED THAT THE AUTHORITIES BELOW FAILED TO CONSIDER THESE DOCUMENTS ALSO AS AN EXPLANATION FOR THE INVESTMENT. HE THEREFORE PRAYED THAT THE ADDITIONS BE DELETED AS UNSUSTAINABLE. 5. LEARNED D EPARTMENTAL REPRESENTATIVE, ON THE OTHER HAND, SUPPORTED THE ORDERS OF THE AUTHORITIES BELOW. 6. HAVING REGARD TO THE RIVAL CONTENTIONS AND THE MATERIAL AVAILABLE ON RECORD, WE FIND THAT SRI P. VENKATA PAVAN KUMAR HAD ADVANCED A SUM OF RS. 26 LAKHS AND GE NUINENESS OF THE TRANSACTIONS AND THE IDENTITY OF THE CREDITOR IS NOT DISPUTED. IT IS ONLY THE CREDITWORTHINESS THAT IS DOUBTED BY THE ASSESSING OFFICER AND THE CIT(A) . WE FIND THAT IN THE CONFIRMATION LETTER, THE SAID CREDITOR HAD STATED THAT THE SOURCE IS SALE CONSIDERATION RECEIVED AND ADVANCE TO THE ASSESSEE IS ALSO THROUGH BANKING CHANNELS. THEREFORE, WE ARE SATISFIED ABOUT THE CREDITWORTHINESS OF THE SAID PERSON AND THE ADDITION OF UNEXPLAINED INVESTMENT OF RS. 26 LAKHS IS THEREFORE DELETED. 6.1. AS REGARDS THE CREDITWORTHINESS OF SRI B. SAMBA SIVA RAO IS CONCERNED, WE FIND THAT THE A.O. AND THE CIT(A) HAVE NOT VERIFIED THE BANK ACCOUNT DETAILS OF THE SAID PERSON. AS POINTED OUT BY THE LEARNED COUNSEL FOR THE ASSESSEE, SRI B. SAMBA SIVA RAO H OLDS THREE DIFFERENT BANK ACCOUNTS THROUGH WHICH HE HAS ADVANCED SUMS TO THE ASSESSEE. 5 THEREFORE, WE DEEM IT FIT AND PROPER TO REMIT THE ISSUE BACK TO THE FILE OF THE A.O. WITH A DIRECTION TO VERIFY THE CREDITWORTHINESS OF SRI B. SAMBA SIVA RAO ONLY AND I F THE TRANSACTION IS FOUND TO BE GENUINE AND SRI B. SAMBA SIVA RAO IS FOUND TO HAVE SOURCES FOR SUCH INVESTMENTS, NO ADDITION SHALL BE MADE. THEREFORE, THE GROUNDS OF APPEAL RELATING TO THIS ADDITION ARE SET - ASIDE TO THE FILE OF THE A.O. 7. IN THE RESULT, ASSESSEES APPEAL IS PARTLY ALLOWED. PRONOUNCED IN THE OPEN COURT ON 03 RD APRIL , 2019 . SD/ - SD/ - (S. RIFAUR RAHMAN) (P. MADHAVI DEVI) ACCOUNTANT MEMBER JUDICIAL MEMBER HYDERABAD, DATED: 03 RD APRIL , 2019 OKK COPY TO: - 1) K.VASANTKUMAR, A.V. RAGHURAM, P. VINOD & M. NEELIMA DEVI, ADVOCATES, 610, BABUKHAN ESTATE, BASHEERBAGH, HYDERABAD - 1. 2) DCIT,CIRCLE - 1(2), HYDERABAD. 3) THE CIT(A) - 1 , HYDERABAD 4) THE PR. CIT - 1 , HYDERABAD 5) THE DR, ITAT, HYDERABAD 6) GUARD FILE