ACIT, Circle -17(1), Hyderabad, Hyderabad V. M/s East Coast Energy Private Limited, Hyderabad

ITA 95/HYD/2015

• Counselvise Citation: [2020] 110 COUNSELVISE.COM (IT) 2893 (ITAT-HYDERABAD)
• Duration Of Justice: 5 year(s) 9 month(s) 24 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-11-2020
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: DB-B
• Assessment Year: 2011-2012
• Appeal Filed On: 27-01-2015
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: Y V S T SAI
• Assessee Lawyers: S RAMA RAO
• Keywords: Accommodation entries

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCHES B : HYDERABAD (THROUGH VIDEO CONFERENCE) BEFORE SMT. P. MADHAVI DEVI, JUDICIAL MEMBER AND SHRI D.S. SUNDER SINGH, ACCOUNTANT MEMBER I.T.A. NO. 95/HYD/2015 ASSESSMENT YEAR: 2011-12 THE ASST. COMMISSIONER OF INCOME TAX, CIRCLE-17(1), HYDERABAD VS M/S.EAST COAST ENERGY PVT. LTD., HYDERABAD [PAN: AABCE7125N] (APPELLANT) (RESPONDENT) FOR REVENUE : SHRI Y.V.S.T.SAI, CIT-DR FOR ASSESSEE : SHRI S.RAMA RAO, AR DATE OF HEARING : 18-11-2020 DATE OF PRONOUNCEMENT : 20-11-2020 O R D E R PER SMT. P. MADHAVI DEVI, J.M. : THIS IS REVENUES APPEAL FOR THE AY.2011-12, DIRECTED AGAINST THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS)III, HYDERABAD, DATED 10-11-2014. 2. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE-COMPANY , ENGAGED IN THE BUSINESS OF POWER GENERATION, FILED ITS RETURN OF INCOME ON 27-09-2011 ADMITTING TOTAL INCOME OF RS.1,59,54,571/-. 3. DURING THE ASSESSMENT PROCEEDINGS U/S.143(3) OF TH E INCOME TAX ACT [ACT], THE ASSESSING OFFICER (AO) NOTICE D THAT THERE WAS A SURVEY OPERATION IN THE CASE OF ASSESSEES BUSINESS PREMISES ON 18-02-2014, WHEREIN IT WAS FOUND THAT THE ITA NO. 95/HYD/2015 :- 2 -: ASSESSEE-COMPANY HAS RECEIVED SHARE APPLICATION MON EY FROM M/S.COBALT POWER P LTD., WHICH IN TURN RECEIVED INVES TMENTS FROM VARIOUS ENTITIES. A SWORN STATEMENT WAS OBTAINED FR OM SHRI PRABHU MUDIGONDA, S/O.LATE M.VERABHADRA SHASTRY, DIRECTOR OF M/S.COBALT POWER P LTD., AND M/S. EAST COA ST ENERGY P LTD., ON 18-02-2014, WHEREIN HE CONFIRMED T HAT WITH REGARD TO SOME OF THE INVESTMENTS RECEIVED FROM M/S.CO BALT POWER P LTD., TO THE ASSESSEE-COMPANY, HE WAS NOT IN A POSITION TO ESTABLISH THE SOURCES OF THE COMPANIES WHICH HAVE INVESTED IN M/S.COBALT POWER P LTD., AND MOST OF THESE SOURCES WERE ARRANGED BY HIM IN HIS PERSONAL CAPACI TY AND THEREFORE REQUESTED TO CONSIDER THE UN-EXPLAINED INVESTM ENTS OF M/S.COBALT POWER P LTD., INTO THE ASSESSEE-COMPANY A S ADDITIONAL INCOME IN HIS INDIVIDUAL HANDS. 3.1. THE AO OBSERVED THAT THE SAID DIRECTOR DID NOT HAVE SOURCES FOR MAKING SUCH HUGE INVESTMENTS INTO M/S.COB ALT POWER P LTD., AND THEREFORE, HE DID NOT HAVE CREDITWOR THINESS TO MAKE SUCH PAYMENTS. THEREFORE, HE HELD THAT THE SAID UN- EXPLAINED INVESTMENTS CANNOT BE BROUGHT TO TAX IN HIS INDIVIDUAL HANDS. FURTHER, HE ALSO OBSERVED THAT THE COMPANIES WHICH HAVE ALLEGEDLY INVESTED IN M/S.COBAL T POWER P LTD., ARE MERE ENTRY PROVIDERS AND THEREFORE THEY ARE BOGUS COMPANIES. IN VIEW OF THE SAME, THE SUM OF RS.15.25 CRORES, WHICH IS THE SHARE APPLICATION MONEY RECEIVED BY M/S. COBALT POWER P LTD., BY FIVE COMPANIES AND WHICH IN TURN HAS BEEN INVESTED IN THE ASSESSEE-COMPANY IS TREATED AS UN-EXP LAINED INCOME OF THE COMPANY U/S.68 OF THE ACT AND BROUGHT IT TO TAX. ITA NO. 95/HYD/2015 :- 3 -: 4. AGGRIEVED, THE ASSESSEE FILED AN APPEAL BEFORE THE CIT(A), WHO ALLOWED THE APPEAL AND GRANTED RELIEF TO THE ASSESS EE AND DELETED THE ENTIRE ADDITION MADE U/S.68 OF THE ACT. 5. AGGRIEVED BY THE SAME, THE REVENUE IS IN APPEAL BE FORE US BY RAISING THE FOLLOWING GROUNDS: 1. THE ORDER OF THE C!T(A) IS ERRONEOUS BOTH IN LA W AND ON FACTS OF THE CASE 2. THE LD. CIT(A) ERRED IN ALLOWING THE ADDITION MA DE ULS. 68 OF THE I.T. ACT IN RESPECT OF THE AMOUNT RECEIVED TOWARDS SHARE CAPITAL FROM M/S. COBALT POWER PRIVATE LIMITED. 3. THE LD. CIT(A) ERRED IN NOT ACCEPTING THE SWORN STATEMENT OF ONE OF THE DIRECTORS WHO HAS ACCEPTED THAT THE SHARE APPLI CATION MONEY RECEIVED FROM M/S. COBALT POWER PRIVATE LIMITED IS BOGUS AND HE WAS UNABLE TO ESTABLISH IDENTITY, CREDITWORTHINESS AND GENUINENESS OF THE INVESTORS AND WAS READY TO DISCLOSE THE AMOUNT AS H IS INDIVIDUAL HANDS AS ADDITIONAL INCOME. 4. THE CIT(A) ERRED IN REJECTING THE FACT THAT THE NOMINEE DIRECTOR, WAS ONLY A MEDIATOR FOR ENTRY PROVIDERS FROM WHOM THE A SSESSEE COMPANY HAS RECEIVED SHARE APPLICATION MONEY. 5. ANY OTHER GROUND THAT MAY BE URGED AT THE TIME O F HEARING THE APPEAL. 6. THE CASE WAS TAKEN UP FOR HEARING ON 18-11-2020 THROUGH VIDEO CONFERENCING AND BOTH THE PARTIES WERE HE ARD. 7. LD.DR SUBMITTED THAT PURSUANT TO SURVEY ON THE ASSESSEE-COMPANY ON 18-02-2014, IT WAS FOUND THAT IT H AS RECEIVED A HUGE SUM OF SHARE APPLICATION MONEY I.E., RS.200,36,60,880/- FROM M/S.COBALT POWER P LTD., WHIC H IN TURN HAD RECEIVED THE SAME AS INVESTMENTS FROM VARIOUS OTHER COMPANIES. IT HAS ALSO FOUND DURING THE COURSE OF S CRUTINY THAT BOTH THE COMPANIES HAVE THE SAME ADDRESS AS THEIR REGISTERED OFFICES AND ALSO THAT THE DIRECTOR OF ASSESS EE- ITA NO. 95/HYD/2015 :- 4 -: COMPANY, M/S.COBALT POWER P LTD., WHOSE STATEMENT HAS BE EN RECORDED WAS ALSO THE DIRECTOR OF M/S.COBALT POWER P L TD. THEREFORE, ACCORDING TO HIM, THE STATEMENT OF THE DIRECTOR ASSUMES IMPORTANCE. HE SUBMITTED THAT THE FIVE COMPANIES I.E., - I) EMPOWER INDUSTRIES INDIA LTD., II) MAHAN I NDUSTRIES LTD., III) PRABHAV INDUSTRIES LIMITED, IV) SHRI GANES H SPINNERS LTD., AND V) XANTHU DEVELOPERS PVT. LTD., ARE SAID TO HAVE INVESTED RS.15.25 CRORES INTO M/S.COBALT POWER P LTD., WHICH IN TURN HAS BEEN INVESTED BY M/S.COBALT POWER P LTD., I NTO THE ASSESSEE-COMPANY, BUT NEITHER THE IDENTITY NOR THE CREDITWORTHINESS OF THESE FIVE COMPANIES WAS PROVED. THEREFORE, ACCORDING TO HIM, ALL THESE COMPANIES ARE DUMMY COMPANIES, PROVIDING ACCOMMODATION ENTRIES HENCE, THE AO HAS RIGHTLY BROUGHT IT TO TAX U/S.68 OF THE ACT. HE FURTHER SUBMITTED THAT BY ADMITTING INCOME, THE DIRECTOR OF BOTH THE COMPANIES, HAVE PREVENTED FURTHER PROBE INTO THE MATTER BY THE REVENUE AUTHORITIES BUT WHEN IT CAME TO FILING THE R ETURNS OF INCOME OF BOTH THE COMPANIES, THEY HAVE NOT OFFERED THE SAME TO TAX. HE SUBMITTED THAT NEITHER M/S.COBALT POWER P LTD., NOR THE DIRECTOR OF THE ASSESSEE-COMPANY HAVE OF FERED THE SAID INCOME TO TAX, THEREFORE, AO HAS RIGHTLY BROUGHT T HE SAME TO TAX, IN THE HANDS OF THE ASSESSEE-COMPANY, WHICH HAS RECEIVED THE SHARE APPLICATION MONEY. HE FURTHER SUBMI TTED THAT THE CIT(A), WITHOUT VERIFYING ANY OF THE FACTS SUBMI TTED BY THE ASSESSEE, HAS GRANTED RELIEF TO THE ASSESSEE-COMPAN Y. HE PRAYED THAT THE ASSESSMENT ORDER BE REVIVED BY SETTING ASIDE THE ORDER OF THE CIT(A). ITA NO. 95/HYD/2015 :- 5 -: 8. THE LD.COUNSEL FOR THE ASSESSEE, ON THE OTHER HAND SUBMITTED THAT THE ASSESSEE HAD PROVED THE IDENTITY AND CREDITWORTHINESS OF THE COMPANY I.E., M/S.COBALT POWER P LTD., BY PROVIDING INFORMATION WITH REGARD TO SOURCES OF IN VESTMENT FOR AROUND RS.200 CRORES AND THAT THE DEPARTMENT HAS ACCEPTED THE INVESTMENT BY M/S.COBALT POWER P LTD., TO THE EXTENT OF RS.185 CRORES AND DISBELIEVED THE INVESTMENT O F RS.15.25 CRORES ONLY. THEREFORE, ACCORDING TO HIM, M/S.COBALT POWER P LTD., CANNOT BE CONSIDERED AS DUMMY COMPANY . HE FURTHER SUBMITTED THAT ALL THE RELEVANT INFORMATION WITH REGARD TO SOURCES OF FUND INVESTED BY M/S.COBALT POWER P LTD. , HAS BEEN SUBMITTED BEFORE THE CIT(A), WHO HAS VERIFIED THE SAME AND GRANTED RELIEF TO THE ASSESSEE-COMPANY. HE SUBMI TTED THAT THE FIVE COMPANIES, WHOSE CREDITWORTHINESS IS NOT ACCE PTED BY THE AO, HAVE INVESTED IN M/S.COBALT POWER P LTD., WHICH IN TURN HAD GIVEN THE SAID AMOUNT TO M/S.NAVAYUGA ENGG. C O. LTD., AND AFTER SOME TIME, M/S.NAVAYUGA ENGG. CO., LTD. , HAD RETURNED THE MONEY TO M/S.COBALT POWER P LTD., WHICH HAS BEEN INVESTED IN ASSESSEES-COMPANY. HE SUBMITTED THAT ALL THE TRANSACTIONS HAVE BEEN DONE THROUGH BANKING CHANNE LS ONLY AND THEREFORE THE GENUINENESS OF THE TRANSACTION AN D THE IDENTITY AND CREDITWORTHINESS OF THE PARTNERS, WHO HAVE MADE SAID INVESTMENT HAVE BEEN PROVED BEYOND THE DOUBT BY T HE ASSESSEE. HE THEREFORE PRAYED FOR UPHOLDING OF THE OR DER OF CIT(A). 9. HAVING REGARD TO THE RIVAL CONTENTIONS AND MATERIAL ON RECORD, WE FIND THAT BEFORE THE SURVEY PARTY, THE DIREC TOR OF BOTH THE COMPANIES I.E., ASSESSEE BEFORE US AS WELL A S M/S.COBALT POWER P LTD., HAD ADMITTED THAT THE SOURCES O F ITA NO. 95/HYD/2015 :- 6 -: INVESTMENT TO THE TUNE OF RS.15.25 CRORES COULD NOT BE EXPLAINED. HE, IN FACT, HAD OFFERED TO TAX IT IN HIS INDIVIDUAL HANDS. HOWEVER, NEITHER THE ASSESSEE-COMPANY NOR M/S.COBALT POWER P LTD., HAVE OFFERED THE SAID INCOME TO TAX IN THEIR HANDS. BY ADMITTING THAT THE INCOME WOULD BE OFFE RED TO TAX IN THEIR HANDS, ASSESSEE AND ITS DIRECTOR HAVE PR EVENTED THE AO FROM MAKING FURTHER ENQUIRIES. THE ASSESSEE H AS FILED THE EVIDENCE SUCH AS BANK ACCOUNT STATEMENT ETC., ONLY B EFORE THE CIT(A). HOWEVER, WE FIND THAT THE CIT(A) HAD NEITHER CALLED- FOR A REMAND REPORT FROM THE AO NOR HE VERIFIED THE VE RACITY AND AUTHENTICITY OF THE EVIDENCE FILED BY THE ASSESSEE . THE POWERS OF CIT(A) ARE CO-TERMINUS TO THE POWERS OF AO AND THE CIT(A) CAN DO WHAT THE AO HAS FAILED TO DO, WE FIND TH AT IN THIS CASE, THE CIT(A) HAS FAILED TO DO WHAT HE WAS SUPPOSED TO DO I.E., VERIFYING THE DETAILS FILED BY THE ASSESSEE. HE OUGHT TO HAVE CALLED FOR REMAND REPORT FROM THE AO BEFORE ACCEPTIN G THE CONTENTIONS OF ASSESSEE. IN VIEW OF THE SAME, WE DEEM IT FIT AND PROPER TO REMAND THE ISSUE TO THE FILE OF AO WITH A DIR ECTION TO RE-CONSIDER THE SAME, AFTER GIVING A FAIR OPPORTUNITY OF HEARING TO THE ASSESSEE. THE ASSESSEE IS ALSO DIRECTED TO CO-OP ERATE WITH THE AO BY FILING ALL THE NECESSARY DETAILS AS CAL LED FOR BY THE AO. 10. IN THE RESULT, THE APPEAL OF REVENUE IS TREATED AS A LLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 20 TH NOVEMBER, 2020 SD/- SD/- (D.S. SUNDER SINGH) (P. MADHAVI DEVI) ACCOUNTANT MEMBER JUDICIAL M EMBER HYDERABAD, DATED: 20-11-2020 TNMM ITA NO. 95/HYD/2015 :- 7 -: COPY TO : 1.THE ASST.COMMISSIONER OF INCOME TAX, CIRCLE-17(1) , HYDERABAD. 2.M/S.EAST COAST ENERGY PVT. LTD., 7-1-24, ROXANA T OWERS, 5 TH FLOOR, GREENLANDS, BEGUMPET, HYDERABAD. 3.CIT(APPEALS)-III, HYDERABD. 4.CIT-II, HYDERABAD. 5.D.R. ITAT, HYDERABAD. 6.GUARD FILE.