DCIT, Circle-1(2), Hyderabad, Hyderabad V. Cauvery Iron & Steel India Limited, Secunderabad, Secunderabad

ITA 972/HYD/2017

• Counselvise Citation: [2018] 125 COUNSELVISE.COM (IT) 6538 (ITAT-HYDERABAD)
• Duration Of Justice: 1 year(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 05-07-2018
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 15-06-2018
• Assessment Year: 2013-2014
• Appeal Filed On: 06-06-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: K SRINIVAS REDDY
• Assessee Lawyers: P MURALI MOHAN RAO
• Keywords: Unexplained cash credit; Bogus Share capital; Income from undisclosed sources; Search and seizure; Principle of natural justice; Additional evidence; Accommodation entries
• Section: 143(3); 131; 68; 132

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCHES A, HYDERABAD BEFORE SHRI D. MANMOHAN, VICE PRESIDENT AND SHRI B. RAMAKOTAIAH, ACCOUNTANT MEMBER I.T.A. NO. 972/HYD/2017 ASSESSMENT YEAR: 2013-14 DY. COMMISSIONER OF INCOME TAX, CIRCLE-1(2), HYDERABAD VS CAUVERY IRON & STEEL INDIA LIMITED, SECUNDERABAD [PAN: AABCC3576F] (APPELLANT) (RESPONDENT) FOR REVENUE : SHRI K. SRINIVAS REDDY, DR FOR ASSESSEE : SHRI P. MURALI MOHAN RAO, AR DATE OF HEARING : 15-06-2018 DATE OF PRONOUNCEMENT : 05-07-2018 O R D E R PER B. RAMAKOTAIAH, A.M. : THIS IS AN APPEAL BY REVENUE AGAINST THE ORDER OF TH E COMMISSIONER OF INCOME TAX (APPEALS)-I, HYDERABAD, DATED 21-02-2017, ON THE ISSUE OF DELETION OF SHARE CAPITAL OF AN AMOUNT OF RS. 5 CRORES CONSIDERED BY AO AS UNEXPLAIN ED CASH CREDITS. 2. BRIEFLY STATED, ASSESSEE-COMPANY FILED ITS RETURN OF INCOME DECLARING LOSS OF RS. 15.68 CRORES UNDER THE NORMAL PROVISIONS AND BOOK PROFITS AT RS. 3.05 CRORES U/S. 1 15JB OF THE INCOME TAX ACT [ACT]. IN THE COURSE OF SCRUTINY AS SESSMENT, I.T.A. NO. 972/HYD/2017 :- 2 - : ASSESSING OFFICER (AO) NOTICED THAT ASSESSEE HAS RECE IVED SHARE APPLICATION MONEY FROM THE FOLLOWING: NAME OF THE COMPANY ADDRESS AMOUNT OF SHARE APPLICATION MONEY (RS) TEDIUM SALES PVT LTD 63, RADHA BAZAR STREET, KOLKAT A- 700 001 1,00,00,000 ROYALPET COMMODITIES PVT LTD 23A, NS ROAD, KOLKATA-700 001 2,00,00,000 TIME SOUND BARTER PVT LTD., 5, CLIVE ROW, KOLKATA-700 001 1,50,00,000 ROYALPET TRADERS PVT LTD 12/A, NS ROAD, KOLKATA-700 001 50,00,000 TOTAL: 5,00,00,000 2.1. TO VERIFY GENUINENESS OF THE SUBSCRIBERS, AO STA RTED ENQUIRY IN THE MONTH OF MARCH, 2016 AND REFERRED TO DDIT(INV.), KOLKATA ON 07-03-2016. BASING ON THE RE PORT OF DDIT(INV.), AO WAS OF THE OPINION THAT THE COMPANIES A RE NOT IN EXISTENCE AND MADE AN ADDITION OF RS. 5 CRORES U/S . 68 OF THE ACT. IT WAS ASSESSEES CONTENTION THAT ALL THE COMPANI ES WERE EXISTING COMPANIES, FILED THEIR RETURNS OF INCOME , HAD PAN NUMBERS AND FURNISHED VARIOUS DETAILS IN THE COU RSE OF ENQUIRY BEFORE THE AO. HOWEVER, AO REJECTED THE SAME AND RELIED ON THE REPORT OF DDIT AND MADE AN ADDITION OF RS. 5 CRORES. 3. ASSESSEE HAS CONTESTED THE SAME BEFORE THE LD.CI T(A) TO SUBMIT THAT SHARE APPLICATION MONEY WAS RECEIVED THROUGH BANKING CHANNELS, SHARES WERE ALLOTTED AND THOSE COMP ANIES WERE EXISTING COMPANIES AND REITERATED ON THE EVIDENC E FURNISHED BEFORE THE AO TO PROVE THE IDENTITY AND I.T.A. NO. 972/HYD/2017 :- 3 - : CREDITWORTHINESS OF THE COMPANY. LD.CIT(A) IN THE OR DER HAS LISTED THE EVIDENCES FURNISHED AND EXTRACTED THE COPIES OF THE PAN, ITRS AND STATEMENTS [THOUGH NOT LEGIBLE], TO COME TO A CONCLUSION THAT ASSESSEE HAS ESTABLISHED THE GENUINENE SS OF THE AMOUNT. THE CONCLUSIONS BY CIT(A) ARE AS UNDER: 6.1. THE ASSESSING OFFICER HAS CONCLUDED AN ADDITI ON ON THE BASIS OF THE FOLLOWING POINTS: A) CREDITWORTHINESS OF SUBSCRIBER COMPANIES HAS NOT PR OVED THROUGH FINANCIALS: BEFORE ME, THE APPELLANT SUBMITTED THE SUBSCRIBER C OMPANY FINANCIALS AND ALSO DETAILS OF SHARE APPLICATION MO NEY TO SHOW THAT THERE IS MONEY IN THEIR ACCOUNT. B) CONFESSION OF SHRI MANOHAR LAL NANGIA: BEFORE ME, CONFESSION OF SHRI MANOHAR LAL NANGIA WA S NOT CONFRONTED BY THE APPELLANT. C) BANK TRANSACTIONS IS NOT FULLY PROVED TO SHOW IT IS A GENUINE TRANSACTION: THE ASSESSING OFFICER HAS DENOUNCED BANKING TRANSAC TIONS, HOWEVER, THIS CANNOT BE PROVED AND CANNOT BE AN ISS UE OF RENOUNCED A TRANSACTION IS NULL AND VOID. 6.2. THE APPELLANT RELIED ON THE HON'BLE ITATS DECI SION IN THE CASE OF M/S. KOMAL AGROTECH PRIVATE LIMITED VS. ITO, WARD-2 (1), HYDERABAD IN ITA NO. 437/HYD/2016. THE TRIBUNAL TOOK SUPPORT ON THE FOLLOWING DECISIONS: 1. CIT VS. KAMDHENU STEEL & ALLOYS LTD., (2012) 248 IT R 33 2. CIT VS. GANGESHWARI METAL P. LTD IN ITA NO.597/2012 DATED 21.01.2013 I.T.A. NO. 972/HYD/2017 :- 4 - : 3. CIT VS. FAIR FINVEST LTD., (2013) 357 ITR 146 4. CIT VS. LOVELY EXPORTS (P) LTD (2008) 216 CTR 195 ( SC) THE HON'BLE ITAT CONCLUDED AS UNDER: 'A PLAIN READING OF THE ASSESSMENT ORDER DEMONSTRAT E THAT THE A.O. MERELY WENT BY THE INVESTIGATION DONE BY THE OFFIC ER OF D.G.I (INVESTIGATION), MUMBAI. NO ENQUIRIES OR INVESTIGAT ION WAS CARRIED OUT. NO EVIDENCE TO CONTROVERT THE CLAIMS OF THE ASSESSE E WAS BROUGHT ON RECORD BY THE A.O. EVEN THE STATEMENT OF MR. PRAVEE N KUMAR WAS SUPPLIED. NOTHING IS ON RECORD ABOUT THE RESULT IF INVESTIGATIONS DONE BY DGIT (INV.), MUMBAI. THE PAPERS FILED BY THE ASS ESSEE DO DEMONSTRATE, THE IDENTITY, CREDIT WORTHINESS AND GE NUINENESS OF THE TRANSACTION. THE ADDITION IS MADE MERELY ON SURMISE S AND CONJECTURES. 6.3 SIMILARLY IN THIS CASE ALSO, THE ASSESSING OFFI CER ON THE BASIS OF THE FINDINGS OF THE DDIT, KOLKATA DISALLOWED THE SH ARE APPLICATION MONEY RECEIVED FROM THE ABOVE SAID FOUR COMPANIES. THE APPELLANT HAS SUBMITTED DOCUMENTARY EVIDENCE REGARDING IDENTI TY. THERE IS NO DOUBT THAT THE PARTIES ARE EXISTING INCOME TAX ASSE SSEE'S, FILING RETURN OF INCOME, HAVING PAN IDENTITY. APPELLANT ALSO SUBM ITTED BANK ACCOUNT COPY TO SHOW INVESTMENT WORTHINESS. IT ONLY PROVES THAT THESE COMPANIES HAD MONEY TO INVEST. THE SHARE APPL ICATIONS WERE MADE THROUGH PROPER DOCUMENTATION AND PAYMENT WAS M ADE THROUGH BANKING CHANNELS. ON BASIS OF THE EVIDENCES SUBMITT ED, THERE IS NO DOUBT REGARDING THE GENUINENESS OF SHARE APPLICATIO N. IF THE ASSESSING OFFICER HAD TO PROVE OTHERWISE, THE ASSES SING OFFICER SHOULD HAVE GONE FEW STEPS MORE TO CONFIRM THAT THE STATEMENT MADE BY THE DIRECTOR OF THE COMPANY SHRI MANOHAR LAL NAN GIA IS NOT TRUE. MERE RELIANCE ON THE STATEMENT RECORDED CANNOT BE T AKEN AS FINAL CONCLUSION. IN ABSENCE OF SUCH ANALYSIS, MERE RELIA NCE OF STATEMENT WILL NOT STAND TEST OF APPEAL. FOLLOWING THE STAND TAKEN BY THE HYDERABAD TRIBUNAL IN THE CASE OF M/S. KOMAL AGROTECH PRIVATE LIMITED VS. ITO, HYDERA BAD IN ITA NO.437/HYD/2016 DATED 25.11.2016, I ALLOW THE APPEA L. ADDITION MADE BY THE ASSESSING OFFICER IS DISMISSED. I.T.A. NO. 972/HYD/2017 :- 5 - : 4. AGGRIEVED, REVENUE HAS RAISED THE FOLLOWING GROUN DS: (I) THE LEARNED CIT(APPEALS) ERRED IN DELETING THE ADDITION OF RS 5 CRORES MADE BY THE ASSESSING OFFICER U/S 68 OF THE IT ACT ON ACCOUNT OF UNEXPLAINED SHARE APPLICATION MONEY HOLD ING THAT THERE IS NO DOUBT REGARDING THE GENUINENESS OF SHARE APPLICA TION MONEY AND THE AMOUNTS WERE RECEIVED THROUGH BANKING CHANNELS. (II) THE LEARNED CIT(APPEALS) OUGHT TO HAVE CONSIDE RED THAT THE SUBSCRIBERS WHO ARE STATED TO HAVE SUBSCRIBED TO SH ARE APPLICATION MONEY ARE ONLY SHELL COMPANIES AND THESE COMPANIES ARE ONLY PROVIDING ACCOMMODATION ENTRIES THROUGH THEIR BANK ACCOUNTS AFTER RECEIVING CASH FROM BENEFICIARIES INCLUDING ASSESSE E. (III) THE LEARNED CIT(APPEALS) OUGHT TO HAVE FURTHE R APPRECIATED THAT THE ENTRY OPERATOR WHO CONTROLLED AND MANAGED SAID SHELL COMPANIES HAS ADMITTED ON OATH BEFORE THE DDIT(INV. ) KOLKATA THAT HE WAS PROVIDING ACCOMMODATION ENTRIES THROUGH SHELL C OMPANIES WHICH CLEARLY PROVES THAT THE UNDISCLOSED MONEY OF THE ASSESSEE WAS INTRODUCED AS SHARE APPLICATION MONEY IN THE NAME O F SUCH SHELL COMPANIES AND THROUGH ENTRY PROVIDERS. (IV) THE LEARNED CIT(APPEALS ) OUGHT TO HAVE ALSO A PPRECIATED THAT MERE PAYMENTS THROUGH BANKING CHANNELS DO NOT MAKE NON- GENUINE TRANSACTIONS GENUINE WHEN THE GENUINENESS O F THE TRANSACTIONS AND CREDIT WORTHINESS OF THE ALLEGED S UBSCRIBERS TO SHARE APPLICATION MONEY INTRODUCED DURING THE YEAR WAS NO T ESTABLISHED BY THE ASSESSEE AS THE SAID SUBSCRIBERS ARE ONLY NAME LENDERS. (V) THE LD.CIT(APPEALS) OUGHT TO HAVE PROVIDED AN O PPORTUNITY TO THE ASSESSING OFFICER AS REQUIRED UNDER RULE 46A OF IT RULES BEFORE ADMITTING ADDITIONAL EVIDENCE IN THE FORM OF FINANC IAL STATEMENTS AND BANK ACCOUNTS OF ALLEGED SUBSCRIBERS TO SHARE APPLI CATION MONEY. VI) THE APPELLANT CRABS LEAVE TO ADD, DELETE, SUBST ITUTE AND AMEND ANY GROUND OF APPEAL BEFORE AND / OR AT THE T IME OF HEARING OF THE APPEAL. (VII) FOR THESE AND OTHER GROUNDS THAT MAY BE URGED BEFORE FAT THE TIME OF HEARING OF THE APPEAL, IT IS PRAYED THA T THE ADDITION OF RS 5 CRORES MADE BY THE ASSESSING OFFICER U/S 68 OF THE INCOME TAX ACT BE RESTORED. I.T.A. NO. 972/HYD/2017 :- 6 - : 4.1. SINCE THE REVENUE HAS RAISED THE GROUNDS OF VIOL ATION OF RULE 46A, AO WAS ASKED TO SPECIFY WHICH OF THE DOCUME NTS HAVE NOT BEEN FURNISHED BEFORE THE AO. AO VIDE LETTER DT. 28- 05-2018 ADDRESSED TO CIT-DR HAS CERTIFIED THAT THE FORM OF APPLICATION FOR EQUITY SHARES, COPY OF PAN, COPY OF THE MINUTES OF THE MEETING AND COPIES OF THE ITRS WERE PLACED BEFO RE THE AO. HOWEVER, HE HAS GIVEN A COMMON FINDING THAT THER E ARE NO FINANCIALS AND BANK ACCOUNT STATEMENTS FILED BEFORE HIM. 4.2. IN REPLY, ASSESSEE HAS SUBMITTED THAT ASSESSEE HAS NOT FURNISHED ANY BANK STATEMENTS OF PARTIES EXCEPT THE BANK ACCOUNT OF ASSESSEE BEFORE THE AO AND ALL OTHER FINANC IALS ARE PART OF THE ITRS WHICH WERE FILED BEFORE THE AO AND CONFIRMATIONS OF THE AMOUNTS RECEIVED IN RESPECT OF THE PARTIES WERE ALSO FILED BEFORE THE AO. IT WAS ALSO STATED THAT NO ADDITIONAL EVIDENCE WAS FILED BEFORE LD. CIT(A). CON SIDERING THE ABOVE, WE ARE OF THE OPINION THAT THERE IS NO VIOLATIO N OF RULE 46A AND GROUND NO. 5 RAISED BY THE REVENUE IS INFRUC TUOUS. 5. COMING TO THE ADDITION OF RS. 5 CRORES, IT WAS THE SUBMISSION OF LD.DR THAT AO HAS ENQUIRED THROUGH DDIT (INV.), KOLKATA. ON THE BASIS OF THE FINDINGS OF DDIT(INV.), KOLKATA, HE HAS COME TO A CONCLUSION THAT THE ABOVE COMPANIES ARE BOGUS. IN SUPPORT OF THE SAME, LD.CIT-DR HAS PLACED ON RECO RD A PAPER BOOK CONTAINING 85 PAGES, OUT OF WHICH, PAGE N OS. 1 TO 11 ARE COPY OF THE ASSESSMENT ORDER. PAGE NOS. 12 T O 85 ARE - LETTERS AND STATEMENTS. THE INDEX OF WHICH, IS AS UND ER: I.T.A. NO. 972/HYD/2017 :- 7 - : SNO DESCRIPTION PAGE NO. 1 ASSESSMENT RDER UNDER SEC. 143(3) DT. 30.03.2016 1 2 LETTER FROM DDIT (INV) UNIT 1(3) KOLKATA DTD. 28. 3.2016 12 3 LETTER OF ASSESSING OFFICER TO DDIT (INV) UNIT 1( 3) KOLKATTA DTD. 7.3.2016 19 4 LETTER FROM THE ASSESSEE DTD. 5.3.2016 ALONG WITH ENCLOSURES 21 5 STATEMENT OF SHRI MANOHAR LAL NANGALIA DT. 14.11. 2014 RECORDED BY THE ADIT (INV) KOLKATA U/SEC. 131 OF TH E IT ACT 58 6 SUMMONS DT. 14.11.2014 TO SRI MANOHAR LAL NANGALI A ISSUED BY THE ADIT (INV) UNIT II(2) KOLKATA 66 7 STATEMENT OF SHRI MANOHAR LAL NANGALIA RECORDED U NDER SEC. 131 OF THE IT ACT ON 17.1.2014 69 8 STATEMENT OF SHRI MANOHAR LAL NANGALIA RECORDED U NDER SEC. 132(4) ON 09.04.2008 76 9 STATEMENT OF SHRI MANOHAR LAL NANGALIA RECORDED U NDER SEC. 132(4) OF THE IT ACT ON 15.2.2008 DURING THE SEARCH AND SEIZURE OPERATION U/S. 132 OF THE IT ACT 80 10 STATEMENT OF SHRI SANTOSH SHAH RECORDED UNDER SE C. 131 OF THE IT ACT ON 14.2.2008 84 11 STATEMENT OF SHRI MANOHAR LAL NANGALIA RECORDED UNDER SEC. 131 OF THE IT ACT ON 14.2.2008 85 IT WAS THE SUBMISSION THAT SHRI MONOHAR LAL NANGALIA IS IN THE HABIT OF FORMING VARIOUS COMPANIES FOR ADVANCING MON EYS IN SHARE CAPITAL FOR COMMISSION AND THESE COMPANIES ARE ALSO PART OF THE SAME. AS THE ENQUIRIES REVEALED BOGUS SHAR E CAPITAL THE SAME WAS ADDED AS INCOME. I.T.A. NO. 972/HYD/2017 :- 8 - : 6. LD.AR, HOWEVER, SUBMITTED THAT NONE OF THE INFORMATIO N PRESENTLY FILED BY THE DR WERE MADE AVAILABLE BY THE A O TO ASSESSEE EITHER DURING THE COURSE OF ASSESSMENT PROCE EDINGS OR DURING THE COURSE OF APPELLATE PROCEEDINGS AND HEN CE THE SAME IS IN THE NATURE OF ADDITIONAL EVIDENCE, FOR WHIC H THERE IS NO SEPARATE PRAYER MADE BY THE REVENUE. IT WAS FURTHER SUBMITTED THAT THE STATEMENTS OF SHRI MONOHAR LAL NANGIA HAS NO CORRELATION TO THE INVESTMENTS MADE BY THE COMPANIES AND ACCORDINGLY, THEY CANNOT BE RELIED UPON. LD. COUNSEL FURTHER SUBMITTED THAT ASSESSEE-COMPANY HAS RECEIVED MONEY IN T HE FORM OF SHARE CAPITAL AND SHARES WERE ALLOTTED. THEREF ORE, FOLLOWING THE PRINCIPLES LAID DOWN BY THE HON'BLE SUP REME COURT IN THE CASE OF CIT VS. LOVELY EXPORTS PVT. LTD., 216 CTR 195 (SC) THE DEPARTMENT CAN ONLY PROCEED AGAINST THE SHAREHOLDER COMPANIES AND CANNOT TREAT THE AMOUNT AS UNEXPLAINED CASH CREDIT IN THE HANDS OF ASSESSEE. HE FURTHER RELIED ON THE DECISION OF THE HON'BLE AP HIGH COURT IN THE CASE OF LANCO INDUSTRIES LTD., [242 ITR 357] (AP), THAT IN T HE ABSENCE OF A FINDING THAT PERSONS TO WHOM THE SHARE CE RTIFICATE ARE ISSUED WERE IN FACT THE DUMMIES OR STOOGES OF THE D IRECTORS OF THE ASSESSEE-COMPANY, THE SAME CANNOT BE TREATED AS UNACCOUNTED INCOME OF ASSESSEE. IT WAS SUBMITTED THAT THE INVESTMENT IS NOT A PRE-ARRANGED TRANSACTION AND FURTHER NEITHER THE ENQUIRIES NOR THE STATEMENTS OF THE SO CALLED PERSONS WERE CONFRONTED TO ASSESSEE AND NO CROSS EXAM INATION WAS PROVIDED. FOLLOWING THE PRINCIPLES LAID DOWN BY THE HON'BLE SUPREME COURT IN THE CASE OF CIT VS. SUNITA D HADDA I.T.A. NO. 972/HYD/2017 :- 9 - : IN SLP (CIVIL) DIARY NO. 9432/2018, THE PRESUMPTION U/S. 292C AGAINST ASSESSEE IS NOT AVAILABLE AND SINCE PRINCIPLES OF NATURAL JUSTICE ARE VIOLATED, THE SECON DARY EVIDENCE CANNOT BE RELIED UPON. IT WAS SUBMITTED THAT THE INVESTMENT WAS REFLECTED IN THE BOOKS OF ACCOUNT OF THE INVESTORS, THEY HAD SOURCE AS REFLECTED IN THEIR BALAN CE SHEETS AND THERE IS NO VIOLATION OF RULE 46A BY THE CIT(A). 7. WE HAVE CONSIDERED THE RIVAL CONTENTIONS AND PERUSE D THE EVIDENCE PLACED ON RECORD. THERE IS NO DISPUTE TH AT ASSESSEE HAS RECEIVED MONEYS FROM THE ABOVE COMPANIE S IN THE COURSE OF FINANCIAL YEAR 2012-13 AND ASSESSEE ALSO ALLOTTED SHARES TO THE RESPECTIVE PARTIES. THE ENQUIRY FROM THE DDIT(INV.) WAS INITIATED ON 07-03-2016 AND LETTER FROM DDIT UNIT-1(3), KOLKATA WAS DT. 28-03-2016. THE REPORT OF TH E DDIT IS AS UNDER: SUB: M/S. CAUVERY IRON & STEEL INDIA LTD [PAN: AABC C3576F] COMMISSION U/S. 131(1)(D) OF THE IT ACT, 1961 REQ UEST FOR ENQUIRIES REGARDING REF: DCIT-1(2)/AABCC3576F/2015-16 DATED 07.03.2016. ------------- WITH REFERENCE TO YOUR ABOVE QUOTED LETTER, THIS O FFICE HAS ISSUED NOTICE U/S. 131 TO THE FOLLOWING COMPANIES A S MENTIONED IN YOUR ABOVE QUOTED LETTER AND THEIR DIRECTORS FOR TH EIR PERSONAL APPEARANCE. BUT ALL THE NOTICES RETURNED UNSERVED BY THE POSTAL AUTHORITY. THE DETAILS IS AS UNDER: I.T.A. NO. 972/HYD/2017 :- 10 -: SL.NO. NAME OF PARTIES DETAILS OF SUBMISSION 1 M/S. TEDIUM SALES PVT. LTD., THIS COMPANY IS ALREADY IN THE DATABASE PREPARED BY DIRECTORATE OF INVESTIGATION, KOLKATA WHEREIN IT HAS BEEN STATED BY SHRI ANKIT TODI, DIRECTOR OF M/S. TEDIUM SALES PVT. LTD., IN HIS SWORN STATEMENT DATED 14.11.2014 THAT HE IS DUMMY DIRECTOR AND M/S. TEDIUM SALES PVT. LTD., IS A PAPER SHELL COMPANIES ENGAGED IN THE BUSINESS OF FACILITATING ACCOMMODATION ENTRIES IN FORM OF BOGUS SHARE CAPITAL SHARE PREMIUM/UNSECURED LOANS ETC., WHICH IS CONTROLLED AND MANAGED BY KNOWN ENTRY OPERATOR SHRI MANOHAR LAL NANGALIA. 2 M/S. ROYALPET COMMODITIES PVT. LTD., NOTICES RETURNED UNSERVED BY POSTAL AUTHORITY 3 M/S. TIME SOUND BARTER PVT. LTD., NOTICES RETURNED UNSERVED BY POSTAL AUTHORITY 4 M/S. ROYALPET TRADERS PVT. LTD., NOTICES RETURNED UNSERVED BY POSTAL AUTHORITY THEREAFTER, THE ENQUIRIES CONDUCTED THROUGH THE ITI IN RESPECT OF ALL THOSE NOTICES RETURNED UNSERVED BY POSTAL AUTHO RITY REVEALED ALL THOSE COMPANIES NEITHER EXISTS AT THEIR RESPECTIVE PRESENT ADDRESS NOR THE EXISTENCE OR NAME OF THOSE CONCERNS/ENTITIES WE RE KNOWN TO ANY PERSON IN THE LOCAL VICINITY. IN VIEW OF ABOVE, PRIMA FACIE IT APPEARS THAT THE A BOVE MENTIONED COMPANIES ARE MERELY PAPER SHELL ENTITIES WHO ARE UNABLE TO PROVE THEIR CREDITWORTHINESS. HENCE IT CAN BE C ONCLUDED THAT THE FORMATION OF THE ABOVE COMPANIES ARE ONLY FOR FUND ROTATION AND HAVING NO OTHER BUSINESS ACTIVITIES AND THE MODUS O PERANDI ADOPTED WITH THE SOLE MOTIVE TO GIVE A COLOR OF GENUINENESS TO OTHERWISE BOGUS TRANSACTIONS. I.T.A. NO. 972/HYD/2017 :- 11 -: IF ANY FURTHER INPUTS RELATED TO AFORESAID CASE REQ UIRE, LET ME KNOW SO THAT NECESSARY ACTION AT HIS END MAY BE TAK EN. 7.1. AS CAN BE SEEN FROM THE ABOVE LETTER, THE ENQUIRIE S CONDUCTED THROUGH ITI WERE NOT PART OF THE REPORT. WHAT THE REVENUE HAS PLACED ON RECORD NOW IN THE FORM OF PAPE R BOOK ARE STATED TO BE STATEMENTS OF SHRI MONOHAR LAL NANGALIA DT. 15-02-2008, 09-04-2008, 17-01-2014 AND 14-11-201 4, MUCH BEFORE THE PRESENT ENQUIRY HAS STARTED. IN WHAT CONNECTION THE ENQUIRIES WERE CONDUCTED WITH SHRI MONO HAR LAL NANGALIA IS NOT SPECIFIED IN THE REPORT OF DDIT. MOREOVER, THE DEPARTMENT ALSO PLACED ON RECORD THE STATEMENTS RECOR DED FROM SHRI MONOHAR LAL NANGALIA AS EARLY AS 09-04-2008 AND 14-02-2008 AND ALSO STATEMENT OF MR. SATISH SHAH DT. 14- 02- 2008. IT IS TO BE NOTED THAT THE COMPANIES BEING ENQUIRE D HAVE INVESTED IN ASSESSEE-COMPANY IN THE FINANCIAL Y EAR 2012-13 AND HOW THE STATEMENTS OF SHRI MONOHAR LAL NA NGALIA AND THE SO CALLED STATEMENT OF SHRI SATISH SHAH, DT. 14 -02- 2008 ARE RELEVANT HAS NOT BEEN EXPLAINED EITHER BY THE AO OR BY THE LD.CIT-DR. IN FACT AS SEEN FROM THE ASSESSMENT ORDER, EXCEPT RELYING ON THE REPORT RECEIVED FROM DDIT, THERE IS NO FURTHER EVIDENCE AVAILABLE WITH AO TO HOLD THAT SUCH COMPANIES ARE BOGUS. IT IS ALSO TRUE THAT THE REPORT FRO M DDIT WAS RECEIVED ON 28-03-2016 AND ASSESSMENT HAS BEEN COMPLETED ON 30-03-2016 AND THERE IS NO EVIDENCE PLA CED ON RECORD THAT ASSESSEE WAS CONFRONTED WITH THE ABOVE REPOR T, EVEN THOUGH PARA 4.5 OF THE ASSESSMENT ORDER INDICATES THAT I.T.A. NO. 972/HYD/2017 :- 12 -: ASSESSEE WAS GIVEN A FINAL SHOW CAUSE NOTICE. THE D ATE ON WHICH IT WAS GIVEN AND THE CONTENTS OF THE SAME WERE NOT PLACED ON RECORD IN THE PAPER BOOK. IT SEEMS THAT ASS ESSEE HAS APPEARED ON 30-03-2016 THE DATE ON WHICH ASSESSM ENT HAS BEEN FINALIZED, EXPLAINING ALL THE EVIDENCES. CO NSIDERING THAT THE SO CALLED ENQUIRY REPORT IS INCONCLUSIVE AND R ELIANCE ON THE SO CALLED STATEMENTS OF SHRI MONOHAR LAL NANGALI A TAKEN IN 2008 AND 2014 HAVE NOT BEEN LINKED WITH THE P RESENT INVESTMENTS OF THE ABOVE FIVE COMPANIES, WE ARE UNABLE TO RELY ON THE EVIDENCE NOW PLACED ON RECORD BY THE REVENUE I N THE FORM OF PAPER BOOK, THAT TOO WITHOUT ANY PRAYER FOR AD MISSION OF ADDITIONAL EVIDENCE. SURPRISINGLY, REVENUE HAS RA ISED A GROUND THAT LD. CIT(A) HAS VIOLATED RULE 46A, BUT WHEN IT CAME TO THEIR TURN REVENUE PLACED SOME UNCONNECTED STATEMENTS WHICH ARE NOT BEFORE AO OR CONFRONTED TO ASSES SEE AT ANY POINT OF TIME, BEFORE US TO JUSTIFY THE STAND OF AO . IT IS ALSO TO BE NOTED THAT THIS INFORMATION HAS NOT BEEN FUR NISHED TO ASSESSEE EITHER DURING THE ASSESSMENT PROCEEDINGS OR DURING THE APPELLATE PROCEEDINGS. THEREFORE, NO RELIA NCE CAN BE PLACED ON THAT. AS POINTED OUT BY THE LD. COUNSEL, THE PROVISIONS OF SECTION 292C DOES NOT HELP THE REVENUE A ND THE PRINCIPLES LAID DOWN BY THE HON'BLE SUPREME COURT IN THE CASE OF CIT VS. SUNITA DHADDA (SUPRA) WILL CERTAINLY APPL Y TO THE FACTS OF THE CASE. SINCE REVENUE HAS FAILED TO PLACE A NY EVIDENCE ON RECORD TO HOLD THAT THE COMPANIES WHO INVE STED IN ASSESSEE COMPANY ARE BOGUS, WE CANNOT DIFFER FROM TH E FINDINGS OR OBSERVATIONS OF THE CIT(A). LD CIT(A) RE LIED ON THE I.T.A. NO. 972/HYD/2017 :- 13 -: EVIDENCE PLACED ON RECORD BY ASSESSEE. CONSEQUENTLY, WE HAVE NO OPTION THAN TO CONFIRM THE ORDER OF LD.CIT(A). GROU NDS OF REVENUE ARE REJECTED. 8. IN THE RESULT, THE APPEAL OF REVENUE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 5 TH JULY, 2018 SD/- SD/- (D. MANMOHAN) (B. RAMAKOTAIAH) VICE PRESIDENT ACCOUNTANT MEMBER HYDERABAD, DATED 5 TH JULY, 2018 TNMM I.T.A. NO. 972/HYD/2017 :- 14 -: COPY TO : 1. DY. COMMISSIONER OF INCOME TAX, CIRCLE-1(2), HYD ERABAD. 2. M/S. CAUVERY IRON & STEEL INDIA LIMITED, 60/2, PAN BAZAR, RANIGUNJ, SECUNDERABAD. 3. CIT(APPEALS)-I, HYDERABAD. 4. PR.CIT-1, HYDERABAD. 5. D.R. ITAT, HYDERABAD. 6. GUARD FILE.