Sri. Arshad Ispat, Hospet V. DCIT, Bangalore

ITA 927/BANG/2015

• Counselvise Citation: [2021] 107 COUNSELVISE.COM (IT) 6753 (ITAT-BANGALORE)
• Duration Of Justice: 6 year(s) 2 month(s) 25 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 06-09-2021
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: C
• Next Hearing Date: 02-08-2021
• Assessment Year: 2011-2012
• Appeal Filed On: 12-06-2015
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: DILIP JUNIOR DEPT
• Assessee Lawyers: V SRINIVASAN
• Keywords: Unexplained investment; Document seized; Documents seized; Set aside
• Section: 201; 72

Judgement Text

ITA NO.927/BANG/2015 M/S. ARSHAD ISPAT, HOSPET IN THE INCOME TAX APPELLATE TRIBUNAL CBENCH: BANGALORE BEFORE SHRI N.V. VASUDEVAN, VICE PRESIDENT AND SHRI B.R. BASKARAN, ACCOUNTANT MEMBER ITA NO.927/BANG/2015 ASSESSMENT YEAR:2011-12 M/S. ARSHAD ISPAT KHAN BUILDING COLLEGE ROAD BEHIND HDFC BANK HOSPET 583 201 PAN NO :AAPFM8139B VS. DEPUTY COMMISSIONER OF INCOME-TAX CENTRAL CIRCLE-2(3) BANGALORE APPELLANT RESPONDENT APPELLANT BY : SHRI V. SRINIVASAN, A.R. RESPONDENT BY : SHRI DILIP, JUNIOR STANDING COUNSEL FOR DEPT. DATE OF HEARING : 02.08.2021 DATE OF PRONOUNCEMENT : 06.09.2021 O R D E R PER B.R. BASKARAN, ACCOUNTANT MEMBER: THE ASSESSEE HAS FILED THIS APPEAL CHALLENGING THE ORDER DATED 13.2.2015 PASSED BY LD. CIT(A)-11, BENGALURU AND IT RELATES TO ASSESSMENT YEAR 2011-12. 2. THOUGH THE ASSESSEE HAS RAISED AS MANY AS 10 GRO UNDS OF APPEAL, THE LD. A.R. PRESSED ONLY GROUND NOS.7 & 8, WHICH READ AS UNDER: 7. WITHOUT PREJUDICE TO THE ABOVE, THE LEARNED CIT (A) WAS NOT JUSTIFIED IN UPHOLDING THE ADDITION OF A SUM OF RS. 2,30,90,941/- ITA NO.927/BANG/2015 M/S. ARSHAD ISPAT, HOSPET PAGE 2 OF 5 MADE BY A.O. AS UNEXPLAINED INVESTMENT IN PLANT AND MACHINERY UNDER THE FACTS AND IN THE CIRCUMSTANCES OF THE APP ELLANTS CASE BY UNREASONABLY REJECTING THE TRUTHFUL AND CORRECT EXP LANATION AS AN AFTER-THOUGHT. 8. THE A.O. IS NOT JUSTIFIED IN ADDING A SUM OF RS. 18,76,610/- AS UNDISCLOSED CASH UNDER THE FACTS AND IN THE CIRC UMSTANCES OF THE APPELLANTS CASE BY UNREASONABLY REJECTING THE TRUT HFUL AND CORRECT EXPLANATION AS AN AFTER-THOUGHT. ACCORDINGLY, THE REMAINING GROUNDS ARE DISMISSED AS NOT PRESSED. 3. THE FACTS RELATING TO THE ABOVE SAID ISSUES ARE STATED IN BRIEF. THE ASSESSEE IS A PARTNERSHIP CONCERN. THE REVENUE CARRIED OUT A SEARCH & SEIZURE OPERATION IN THE HANDS OF SHRI B. NAGENDRA AND IN CONNECTION WITH THE SAME, THE PREMISES OF THE ASSES SEE WAS ALSO SUBJECTED TO SEARCH. DURING THE COURSE OF SEARCH P ROCEEDINGS, CERTAIN DOCUMENTS WERE SEIZED, WHICH DISCLOSED THAT THE ASSESSEE HAS PAID A SUM OF RS.21.28 CRORES FOR PURCHASE OF F IRST AND SECOND KILN ON 25.10.2010. HOWEVER, THE BALANCE SHEET AS ON 31.3.2010 SUBMITTED BY THE ASSESSEE DISCLOSED A SUM OF RS.18. 72 CRORES UNDER THE HEAD CAPITAL WORK IN PROGRESS. THE BAL ANCE SHEET PREPARED AS ON THE DATE OF SEARCH DISCLOSED CAPITAL WORK IN PROGRESS AT RS.18.89 CRORES. ACCORDINGLY, THE A.O. TOOK THE VIEW THAT THE DIFFERENCE BETWEEN AMOUNT SHOWN IN SEIZED DOCUMENTS AND THE BALANCE SHEET REPRESENTS PAYMENT MADE OUTSIDE THE B OOKS OF ACCOUNT. THE SAID DIFFERENCE WAS SPREAD INTO 2 DI FFERENT YEARS BY THE A.O., VIZ., RS.2.30 CRORES IN ASSESSMENT YEAR 2 010-11 & RS.8,49,561/- IN ASSESSMENT YEAR 2011-12. BEFORE T HE AO, THE ASSESSEE FURNISHED COPY OF BALANCE SHEET FINALIZED FOR THE YEAR ENDING ON 31.3.2010 AND ALSO 31.3.2011. IN 31.3.20 11 THE CAPITAL WORK IN PROGRESS WAS DISCLOSED AT RS.26.28 CRORES A ND ACCORDINGLY, IT WAS CONTENDED THAT THE TOTAL INVESTMENT MADE IN PURCHASE OF KILN IS MORE THAN THE AMOUNT FOUND IN THE SEIZED DOCUMEN T. THE A.O., ITA NO.927/BANG/2015 M/S. ARSHAD ISPAT, HOSPET PAGE 3 OF 5 HOWEVER, TOOK THE VIEW THAT THE BALANCE SHEET FURNI SHED BY THE ASSESSEE IS AN AFTERTHOUGHT AND ACCORDINGLY HE ADDE D THE SUM OF RS.8,49,561/- TO THE TOTAL INCOME OF THE ASSESSEE. 4. DURING THE COURSE OF SEARCH, THE REVENUE FOUND C ASH BALANCE OF RS.18,76,610/-, OUT OF WHICH A SUM OF RS.18,70,0 00/- WAS SEIZED. THE AO WANTED TO ASSESS THE ABOVE SAID CAS H BALANCE. THE ASSESSEE SUBMITTED THAT THE CASH BALANCE ACTUALLY R EPRESENTS CASH BALANCE OF TWO FIRMS NAMELY THE ASSESSEE HEREIN AND A SISTER CONCERN NAMED M/S. ARSHAD EXPORTS. IT WAS SUBMITTE D THAT THE CASH BALANCE AVAILABLE WITH THE ASSESSEE FIRM AS ON 31.3.2010 WAS RS.13.84 LAKHS. IT WAS ALSO SUBMITTED THAT A SUM O F RS.4 CRORES HAS BEEN SURRENDERED BY M/S. ARSHAD EXPORTS IN ORDE R TO TAKE CARE OF DEFICIENCIES AND HENCE THE ABOVE SAID CASH BALAN CE SHOULD BE TELESCOPED WITH THE DISCLOSURE. THE A.O. DID NOT A CCEPT THE EXPLANATIONS OF THE ASSESSEE AND ACCORDINGLY ADDED THE CASH BALANCE OF RS.18,76,610/- TO THE TOTAL INCOME OF TH E ASSESSEE. 5. THE LD. CIT(A) CONFIRMED BOTH THE ADDITIONS AND HENCE, THE ASSESSEE HAS FILED THIS APPEAL BEFORE US. 6. WE HEARD THE RIVAL CONTENTIONS AND PERUSED THE R ECORD. THE FIRST ADDITION RELATES TO UNDISCLOSED INVESTMENT MA DE IN THE PURCHASE OF KILN. WE NOTICE THAT THE A.O. HAS DRAW N INFERENCE ON UNDISCLOSED INVESTMENT ON THE BASIS OF CERTAIN SEIZ ED MATERIALS FOUND DURING THE COURSE OF SEARCH. THE SAID SEIZED MATERIAL DISCLOSED INVESTMENT OF RS.21.28 CRORES. HOWEVER, THE UNDISPUTED FACT REMAINS THAT THE BALANCE SHEET AS ON 31.3.2011 DISCLOSED AN INVESTMENT OF RS.26.28 CRORES, WHICH FIGURE IS MORE THAN THE AMOUNT SHOWN IN THE SEIZED DOCUMENT. WE NOTICE THA T THE A.O. HAS NOT EXAMINED THE ASPECT WHETHER THE ENTRIES FOUND I N THE SEIZED DOCUMENT WERE DULY ACCOUNTED FOR BY THE ASSESSEE IN THE BOOKS OF ITA NO.927/BANG/2015 M/S. ARSHAD ISPAT, HOSPET PAGE 4 OF 5 ACCOUNTS OR NOT. WITHOUT CARRYING SUCH EXAMINATION , THE A.O. HAS BRUSHED ASIDE THE BALANCE SHEET HOLDING IT AS AN AF TERTHOUGHT. IN OUR VIEW, IT IS NOT JUSTIFIED. THE AO SHOULD HAVE PINPOINTED THE DIFFERENCE, IF ANY, SHOULD HAVE SOUGHT EXPLANATIONS FROM THE ASSESSEE AND THEN SHOULD HAVE TAKEN A DECISION. I N THE ABSENCE OF SUCH AN EXERCISE, THE IMPUGNED ADDITION SHOULD BE C ONSIDERED AS HAVING BEEN MADE ON SURMISES AND CONJECTURES. ACCO RDINGLY, WE ARE OF THE VIEW THAT THE ADDITION OF RS.8,49,561/- MADE BY THE A.O. AS UNDISCLOSED INVESTMENT HAS NOT BEEN PROPERLY EST ABLISHED BY THE A.O. ACCORDINGLY, WE DO NOT FIND ANY MERIT IN THIS ADDITION. ACCORDINGLY, WE SET ASIDE THE ORDER PASSED BY LD. C IT(A) ON THIS ISSUE AND DIRECT THE A.O. TO DELETE THIS DISALLOWAN CE. 7. THE NEXT ISSUE RELATES TO ADDITION OF CASH FOUND DURING THE COURSE OF SEARCH. IT IS AN UNDISPUTED FACT THAT TH E ASSESSEE HAS SURRENDERED A SUM OF RS.4 CRORES AS UNEXPLAINED INC OME IN THE HANDS OF SISTER CONCERN M/S. ARSHAD EXPORTS. IT IS ALSO A FACT THAT THE ASSESSEE AND SISTER CONCERN ARE OPERATING IN TH E SAME PREMISES. HENCE, THE ASSESSEE HAS SUBMITTED THAT THE CASH BAL ANCE FOUND DURING THE COURSE OF SEARCH BELONG TO TWO FIRMS NAM ELY M/S. ARSHAD ISPAT AND M/S. ARSHAD EXPORTS. WE NOTICE TH AT THE A.O. HAS NOT PROVED THE ABOVE SAID SUBMISSIONS OF THE AS SESSEE TO BE WRONG. WHEN THE ASSESSEE MAKES AN ADHOC DISCLOSURE OF RS.4 CRORES TO TAKE CARE OF ALL DEFICIENCIES, THEN THERE IS MERIT IN THE PRAYER OF THE ASSESSEE THAT THE IMPUGNED CASH BALAN CE SHOULD BE TELESCOPED WITH THE SURRENDERED INCOME OF RS.4 CROR ES. ON THIS REASONING, WE ARE OF THE VIEW THAT THE IMPUGNED ADD ITION IS NOT CALLED FOR. ACCORDINGLY, WE SET ASIDE THE ORDER PA SSED BY LD. CIT(A) ON THIS ISSUE AND DIRECT THE A.O. TO DELETE THE DIS ALLOWANCE OF UNDISCLOSED CASH BALANCE. ITA NO.927/BANG/2015 M/S. ARSHAD ISPAT, HOSPET PAGE 5 OF 5 8. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 6 TH SEPT 2021. SD/- (N.V. VASUDEVAN) VICE PRESIDENT SD/- (B.R. BASKARAN) ACCOUNTANT MEMBER BANGALORE, DATED 6 TH SEPT, 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.