THE Dy. CIT, CIRCLE - 2(1), Vijayawada V. M/s Sibar Dairy(P.) ltd., Vijayawada

ITSSA 1/VIZ/2013

• Counselvise Citation: [2014] 122 COUNSELVISE.COM (IT) 0078 (ITAT-VISAKHAPATNAM)
• Duration Of Justice: 1 year(s) 1 month(s) 5 day(s)
• Appeal Type: Income Tax (Search & Seizure) Appeal
• Pronouncement Date: 06-03-2014
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Assessment Year: misc
• Appeal Filed On: 01-02-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: K V N CHARYA
• Keywords: Gift; Loose papers; Block assessment
• Section: 69C; 142(1); 132

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL VISAKHAPATNAM BENCH, VISAKHAPATNAM BEFORE SHRI J.SUDHAKAR REDDY, AM AND SHRI SAKTIJIT DEY, JM IT(SS)A NO.05/VIZAG/2012 : BLOCK PERIOD ENDING 30. 01.2001 M/S.SIBAR DIARY (P) LIMITED H.NO.27-14-49, SIBAR TOWERS BESANT ROAD, VIJAYAWADA. PAN : AALCS0635B. VS. THE ASST.COMMISSIONER OF INCOME - TAX CENTRAL CIRCLE VIJAYAWADA. (APPELLANT) (RESPONDENT) IT(SS)A NO.01/VIZAG/2013 : BLOCK PERIOD ENDING 30. 01.2001 THE ASST.COMMISSIONER OF INCOME - TAX CENTRAL CIRCLE VIJAYAWADA. VS. M/S.SIBAR DIARY (P) LIMITED H.NO.27-14-49, SIBAR TOWERS BESANT ROAD, VIJAYAWADA. (APPELLANT) (RESPONDENT) REVENUE BY : SRI K.V.N.CHARYA, CIT ASSESSEE BY : SRI G.V.N.HARI DATE OF HEARING : 0 6 .03 .2014 DATE OF PRONOUNCEMENT : 0 6 .0 3 .2014 O R D E R PER J.SUDHAKAR REDDY (AM) : THESE ARE CROSS APPEAL SAND ARE DIRECTED AGAINST TH E ORDER OF THE COMMISSIONER OF INCOME-TAX (APPEALS), VIJAYAWADA, D ATED 01.11.2012, FOR THE BLOCK PERIOD ENDING ON 30.01.2001. 2. THE FACTS OF THE CASE BROUGHT OUT AT PARA 6 OF T HE CIT(A)S ORDER, WHICH ARE EXTRACTED FOR READY REFERENCE. 6. THE FACTS OF THE CASE ARE THAT THERE WAS A SEAR CH & SEIZURE OPERATION U/S 132 OF THE INCOME-TAX ACT, 19 61 ON 30/1/2001 IN THE SIBAR GROUP OF COMPANIES LOCATED A T SIBAR TOWERS, BESANT ROAD, VIJAYAWADA. DURING SEARCH, CAS H RECEIPTS ISSUED BY APPELLANT WERE FOUND AND SEIZED AS PER AN NEXURE NO.A/SMEPL/1. THESE CASH RECEIPTS WERE NOT ACCOUNTE D FOR IN THE BOOKS OF THE APPELLANT. THE A.O., THEREFORE ISS UED A NOTICE U/S.158BD R.W.S. 158BC AND SAME WAS SERVED ON 26/12 /2002. IN RESPONSE TO THIS NOTICE, APPELLANT FILED RETURN IN FORM NO.2B ON 6/1/2003 DISCLOSING UNDISCLOSED INCOME AT `NIL. TH E ASSESSMENT IT(SS)A NO.05 /VIZAG/2012 & 01/VIZAG/2013 M/S.SIBAR DAIRY (P) LIMITED. 2 PROCEEDINGS BEGAN WITH ISSUE AND SERVED OF NOTICE U /S 142(1) AND 143(2) AND APPELLANT FILED LETTER DT.4/3/2004 S TATING THAT THE BOOKS OF ACCOUNT WERE KEPT AT THE PREMISES OF M/S.P URNA DAIRY PRODUCTS (P) LTD. BUT WERE MISPLACED WITHOUT ANY CA RE AND THEREFORE, SUCH BOOKS CAN NOT BE PRODUCED. 6.1 DURING SEARCH, A SWORN STATEMENT OF MANAGING DI RECTOR SRI K.SRINIVASA REDDY WAS RECORDED WHEREIN HE ADMIT TED THAT THESE DEPOSITS WERE COLLECTED FROM AGENTS AND SAME WERE NOT ACCOUNTED FOR. APPELLANT FURTHER STATED VIDE LETTER DATED 21/2/2004 THE TOTAL DEPOSITS COLLECTED WERE OF RS.2 1,59,000/- AND THESE AMOUNTS WERE ADJUSTED AGAINST CASH SALE OF MI LK. THE APPELLANT WAS ALSO ASKED TO GIVE FULL AND COMPLETE ADDRESSES OF THESE AGENTS AND FURNISH COPY OF THEIR ACCOUNTS. TH E APPELLANT ADMITTED VIDE LETTER DATED 4/3/2004 THAT THESE CASH DEPOSITS WERE NOT PROPERLY ACCOUNTED FOR. THE APPELLANT WAS FURTH ER ASKED VIDE LETTER DATED 22/3/2004 TO PROVE THE IDENTITY OF THE SE DEPOSITORS. HOWEVER, THE APPELLANT FAILED TO PROVE THEIR IDENTI TY. IN A.Y.2001- 02, APPELLANT ISSUED NEW SHARE CAPITAL OF RS.27 LAK HS AND THEREFORE IT WAS ASKED TO GIVE NAMES AND ADDRESSES OF NEW SHARE HOLDERS WITH SHARE APPLICATION MONEY. THE APP ELLANT COULD NOT GIVE ANY DETAILS AND THEREFORE, THIS SHARE CAPI TAL WAS TREATED UNDISCLOSED INCOME. IN A.Y.2001-02, APPELLANT ALSO TOOK UNSECURED LOANS OF RS.39,62,070/-. DURING BLOCK ASS ESSMENT PROCEEDINGS, APPELLANT WAS ASKED TO PRODUCE SUPPORT ING EVIDENCES FOR SUCH UNSECURED LOANS BUT IT HAS FAILE D TO PROVE THE IDENTITY, CREDITWORTHINESS AND GENUINENESS OF SUCH UNSECURED LOANS. APPELLANT HAS ALSO PAID INTEREST OF RS.2,57, 040/- ON THESE UNSECURED LOANS. THESE UNSECURED LOANS HAVE NOT BEE N PROVED AND THEREFORE, THE CLAIM OF INTEREST WAS ALSO DISAL LOWED. 3. ON APPEAL, THE FIRST APPELLATE AUTHORITY GRANTED PART RELIEF. AGGRIEVED, BOTH THE REVENUE AND ASSESSEE ARE IN APPEAL. 4. WE FIRST TAKE UP THE ASSESSEES APPEAL IN IT(SS) A NO.05/VIZAG/2012. THE LEARNED COUNSEL FOR THE ASSESSEE, SRI G.V.N.HARI, S UBMITTED THAT THE ADDITION WAS MADE BECAUSE THE ASSESSEE COULD NOT SUBSTANTIATE IT S CLAIM THAT THE COLLECTIONS OF DEPOSITS IN QUESTION WERE IN FACT ADJUSTED AGAINST SUBSEQUENT SALES AND THUS ACCOUNTED FOR. HE ARGUED THAT ON THE LEGAL GROUND, THE ADDITION CANNOT BE SUSTAINED, FOR THE REASON THAT CASH DEPOSITS IN QUE STION LISTED IN ANNEXURE-VI, IT(SS)A NO.05 /VIZAG/2012 & 01/VIZAG/2013 M/S.SIBAR DAIRY (P) LIMITED. 3 WHICH IS AT PAGE 5 TO 7 OF THE PAPER BOOK, WERE REC ORDED IN THE BOOKS AS ON THE DATE OF SALE AND TREATED AS REVENUE RECEIPT AND UND ER THOSE CIRCUMSTANCES, NO ADDITION CAN BE MADE. 5. THE LEARNED DEPARTMENTAL REPRESENTATIVE, SRI K.V .N.CHARYA, CIT, OPPOSED THE CONTENTION AND SUBMITTED THAT THESE CASH DEPOSI TS WERE FOUND IN THE FORM OF LOOSE PAPERS DURING THE COURSE OF SEARCH AND IT IS AN ADMITTED FACT THAT THE ASSESSEE HAS NOT RECORDED THE SAME IN ITS BOOKS OF ACCOUNT. HE ARGUED THAT THE ADDITION IN QUESTION WAS MADE BASED ON SEIZED MATER IAL AND HENCE THE SAME SHOULD BE SUSTAINED. 6. AFTER HEARING THE RIVAL CONTENTIONS, WE FIND THA T THE LEARNED CIT(A) HAS RECORDED THAT THE RECEIPT OF RS.21,29,000 IN THE FO RM OF CASH DEPOSITS FROM VARIOUS DEPOSITORS ON DIFFERENT DATES WERE NOT ACCOUNTED FO R IN THE BOOKS OF ACCOUNT OF THE ASSESSEE. THIS INFORMATION CAME TO LIGHT CONSEQUENT TO SEARCH AND CERTAIN SEIZED MATERIAL IN ANNEXURE NO.A/SMEPL/1 WERE FOUND. THUS THE CONTENTION OF THE ASSESSEE THAT THE ADDITION IS NOT MADE ON THE BASIS OF SEIZED MATERIAL IS FACTUALLY INCORRECT. FURTHER THE ASSESSEE HAS NOT BEEN ABLE T O DEMONSTRATE ITS CLAIM THAT THESE CASH DEPOSITS COLLECTED FROM VARIOUS PARTIES, WERE ULTIMATELY REFLECTED AS SALES CONSEQUENT TO SUPPLY OF MILK TO THOSE PARTIES . IN THE ABSENCE OF SUCH EVIDENCE, THE ORDER OF THE FIRST APPELLATE AUTHORIT Y IS SUSTAINED AND THE APPEAL IS DISMISSED. 7. WE NOW TAKE UP THE REVENUES APPEAL IN IT(SS)A NO.1/VIZAG/2013, WHICH IS ON THE FOLLOWING GROUNDS:- A. THE ORDER OF THE CIT(A) IS ERRONEOUS BOTH IN LA W AND FACTS OF THE CASE. B. THE LD. CIT(A) IGNORED PROVISIONS OF SUB SECTIO N (2) OF SECTION 158BB OF THE ACT WHEREIN IT IS STIPULATED T HAT IN COMPUTING THE UNDISCLOSED INCOME OF THE BLOCK PERIOD, THE PRO VISIONS OF IT(SS)A NO.05 /VIZAG/2012 & 01/VIZAG/2013 M/S.SIBAR DAIRY (P) LIMITED. 4 SECTION 68, 69, 69A, 69B AND 69C SHALL SO FAR AS MA Y BE, APPLY.. HENCE, THE ORDER OF LD.CIT(A) DIRECTING T O DELETE THE ADDITIONS OF RS.27 LAKHS, RS.39,62,070/- AND RS.2,5 7,040/- ON ACCOUNT OF SHARE CAPITAL, UNSECURED LOANS AND INTER EST ON UNSECURED LOANS RESPECTIVELY IS NOT CORRECT. C. THE LD.CIT(A) OUGHT TO HAVE CONFIRMED THE ADDIT ION AS THE ASSESSEE HAS FAILED TO PROVE THE GENUINENESS AND PR ODUCE THE EVIDENCES, EVEN AFTER SUFFICIENT OPPORTUNITIES WERE AFFORDED, FOR (I) THE SHARE CAPITAL WHICH IS INCREASED FROM RS.1 LAKH TO 27 LAKHS (II) UNSECURED LOANS OF RS.39,62,070/- AND (III) INTERES T ON UNSECURED LOANS OF RS.2,57,040/-, THE A.O. TREATED ALL THE AB OVE AS UNDISCLOSED INCOME OF THE ASSESSEE. D. THE LD.CIT(A) OUGHT TO HAVE CONSIDERED THE FACT THAT IT IS SETTLED LAW THAT CASH CREDITS CAN BE ASSESSED IN BL OCK ASSESSMENT MERE FACT THAT CREDITS ARE SHOWN IN TH E BOOKS OF ACCOUNTS DOES NOT PROHIBIT THE AO TO TAX THAT AMOUN T IN THE BLOCK ASSESSMENT IF THAT AMOUNT HAS NOT BEEN TAXED IN THE REGULAR ASSESSMENT: I. CIT VS. AJAY KUMAR SHARMA (RAJ.) 259 ITR 240 II. CIT VS. ELEGANT HOMES (P) LTD. (RAJ) 259 ITR 2 32 III. CA CARD FINANCE LTD. VS. ACIT (ITAT, TM, AHD) 84 ITD 1. E. RELIANCE IS ALSO PLACED ON THE FOLLOWING DECISI ONS OF VARIOUS HIGH COURTS: I. 270 ITR 368 (RAJ) CHAIN SUKH RATHI VS. CIT : IN THIS CASE IT WAS HELD THAT ASSESSEE HAVING FAILED TO ESTABLIS H THAT THE SOURCE OF CAPITAL IN HIS NAME ADDITION WHILE COMPUTING UND ISCLOSED INCOME IS SUSTAINED. II. 286 ITR 482 DR.TRIDIP KUMAR SARMA VS. CITS & O RS. : IT WAS HELD THAT UNDISCLOSED INCOME DISCERNIBLE FROM T HE BOOKS OF ACCOUNT OF THE HOSPITAL HAD ALREADY BEEN TAXED IN T HE HANDS OF THE HOSPITAL AND THUS FURTHER TAXATION OF THE SAME MONE Y WOULD AMOUNT TO DOUBLE TAXATION IS OF NO CONSEQUENCE. III. 311 ITR 339 JAI KUMAR JAIN VAS ACIT (P&H) : I T WAS HELD THAT AMOUNT OF ALLEGED GIFT WHICH HAS BEEN CREDITED IN THE CAPITAL ACCOUNT OF THE PROPRIETARY CONCERN OF THE ASSESSEE AND NOT SATISFACTORILY EXPLAINED HAS TO BE TREATED AS UNDIS CLOSED INCOME AND ADDITION CAN BE MADE EITHER U/S.68 OR 69. IT(SS)A NO.05 /VIZAG/2012 & 01/VIZAG/2013 M/S.SIBAR DAIRY (P) LIMITED. 5 8. THE LEARNED CIT(A) GAVE A FINDING THAT THE ADDIT IONS IN QUESTION TOWARDS SHARE CAPITAL AND UNSECURED LOANS HAVE ALREADY RECO RDED IN THE BOOKS OF ACCOUNT AND THAT NO MATERIAL FOUND DURING THE COURSE OF SEA RCH AND UNDER THOSE CIRCUMSTANCES THE ADDITION CANNOT BE MADE IN A BLOC K ASSESSMENT. 9. THE LEARNED DEPARTMENTAL REPRESENTATIVE SUBMITTE D THAT THE LIST OF CASH DEPOSITS, WHICH WERE NOT ACCOUNTED FOR, WERE FOUND DURING THE COURSE OF SEARCH AND HENCE ALL UNSECURED LOANS CAN BE INVESTIGATED A S THERE IS CERTAIN MATERIAL ON SIMILAR CREDITS FOUND DURING THE COURSE OF SEARCH. FOR THIS PROPOSITION, HE RELIED ON THE FOLLOWING CASE LAWS:- (I) CIT V. ELEGANT HOMES (P) LTD. [2003) 259 ITR 2 32 (RAJ.)] (II) CIT V. AJAY KUMAR SHARMA [259 ITR 240 (RAJ.)] (III) CAS CARD FINANCE LTD. V. ASSTT.CIT [(2003) 8 4 ITD 1 (AHD-TM)] 9.1 HENCE, HE ARGUED THAT THE FINDING OF THE LEARNE D CIT(A) HAS TO BE VACATED. ON MERITS, HE SUBMITTED THAT THE ASSESSEE COULD NOT SUBSTANTIATE THE CREDITWORTHINESS, GENUINENESS AS WELL AS IDENTITY O F THE SHAREHOLDERS AND CREDITORS. 10. THE LEARNED COUNSEL FOR THE ASSESSEE, ON THE OT HER HAND, SUBMITTED THAT THE LEARNED CIT(A), AFTER CALLING FOR REMAND REPORT FRO M THE ASSESSING OFFICER, CAME TO A CONCLUSION THAT THE ADDITIONS TOWARDS SHARE CAPIT AL AND UNSECURED LOANS AND INTEREST THEREON WERE NOT BASED ON ANY MATERIAL FOU ND DURING THE COURSE OF SEARCH AND THAT THEY WERE REFLECTED IN THE BOOKS OF ACCOUN T MAINTAINED BY THE ASSESSEE- COMPANY. HE SUBMITTED THAT THE LIST OF CASH DEPOSIT S FOR SUPPLY OF MILK ARE DIFFERENT CATEGORY AND THE ARGUMENT OF THE LEARNED DR IS FAUL TY. HE RELIED UP ON THE JUDGMENT OF THE JURISDICTIONAL HIGH COURT IN THE CA SE OF CIT V. B.SATYANARAYANA [(2013) 356 ITR 323 (AP)] AND SUPPORTED THE ORDER O F THE LEARNED CIT(A). 11. RIVAL CONTENTIONS HEARD. ON A CAREFUL CONSIDERA TION OF THE FACTS AND CIRCUMSTANCES OF THE CASE AND ON PERUSAL OF THE PAP ERS ON RECORD AND ORDERS OF THE AUTHORITIES BELOW, CASE LAWS CITED, WE HOLD AS FOLL OWS. IT(SS)A NO.05 /VIZAG/2012 & 01/VIZAG/2013 M/S.SIBAR DAIRY (P) LIMITED. 6 11.1 THE LEARNED CIT(A) EXTRACTED THE REPORT OF THE ASSESSING OFFICER AT PAGE 5. THE ASSESSING OFFICER ADMITTED THAT ALL THE TRANSAC TIONS WERE RECORDED IN THE BOOKS OF ACCOUNT BY THE TIME OF SEARCH OPERATIONS U/S 132 OF THE ACT. HE ALSO ADMITTED THAT THE INFORMATION IN QUESTION WAS TAKEN FROM THE RETURNS OF INCOME FILED BY THE ASSESSEE. AS ADMITTEDLY, THERE IS NO MATERIAL FOUND DURING THE COURSE OF SEARCH WITH REGARD TO THE ADDITION TOWARDS SHARE CAPITAL O R UNSECURED LOANS OR INTEREST THEREON, WE UPHOLD THE ORDER OF THE FIRST APPELLATE AUTHORITY BY APPLYING THE DECISION OF THE JURISDICTIONAL HIGH COURT IN THE CASE OF B.S ATYANARAYANA (SUPRA), WHEREIN IT IS HELD AS FOLLOWS:- UNDISCLOSED INCOME IS THAT INCOME WHICH HAS NOT BE EN DISCLOSED OR WOULD NOT HAVE BEEN DISCLOSED FOR THE PURPOSE OF THE ACT. IN CIT V. RAVI KANT JAIN (2001) 250 ITR 141 (DELHI), IT HAS BEEN HELD THAT I N A BLOCK ASSESSMENT, THE ADVERSE MATERIAL OUGHT TO HAVE BEEN UNEARTHED DURIN G THE SEARCH AND THAT THE ASSESSMENT FOR THE BLOCK PERIOD CAN BE MADE ONL Y ON THE BASIS OF THE EVIDENCE FOUND AS A RESULT OF THE SEARCH. THEREFORE , IT IS CLEAR THAT UNDISCLOSED INCOME IS NOT ONLY THAT INCOME WHICH WO ULD NOT HAVE BEEN DISCLOSED FOR THE PURPOSES OF THE ACT, BUT IT MUST BE UNEARTHED DURING THE SEARCH. CONVERSELY, IF THE INCOME HAS ALREADY BEEN DISCLOSED IN THE RETURN OF INCOME OR IS AVAILABLE IN THE BOOKS OF ACCOUNT, THEN IT DOES NOT FALL IN THE CATEGORY OF UNDISCLOSED INCOME OR INCOME UNEARTHED DURING THE SEARCH. 11.2 COMING TO THE DECISIONS RELIED UPON BY THE LEA RNED DEPARTMENTAL REPRESENTATIVE, WE FIND THAT THEY ARE NOT THE DECIS IONS OF THE JURISDICTIONAL HIGH COURT AND HENCE ARE NOT MUCH HELPFUL TO REVENUES C ASE, IGNORE THE SAME. 12. IN THE RESULT, BOTH THE APPEALS ARE DISMISSED. ORDER PRONOUNCED ON THIS 6 TH DAY OF MARCH, 2014. SD/- SD/- ( SAKTIJIT DEY ) (J.SUDHAKAR REDDY) JUDICIAL MEMBER ACCOUNTANT MEMBER VISAKHAPATNAM; DATED : 6 TH MARCH, 2014. DEVDAS* IT(SS)A NO.05 /VIZAG/2012 & 01/VIZAG/2013 M/S.SIBAR DAIRY (P) LIMITED. 7 COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT 2. THE RESPONDENT. 3. THE CIT, VIJAYAWADA . 4. CIT(A) VIJAYAWADA . 5. DR, ITAT, VISAKHAPATNAM. 6. GUARD FILE. BY ORDER, //TRUE COPY// (SENIOR PRIVATE SECRETARY) ITAT, VISAKHAPATNAM