M/s. AP INDIA BIOTECH PVT. LTD., Bhopal V. The ACIT 3(1), Bhopal

ITSSA 194/IND/2014

• Counselvise Citation: [2024] 100 COUNSELVISE.COM (IT) 1179 (ITAT-INDORE)
• Duration Of Justice: 10 year(s) 1 month(s) 6 day(s)
• Appeal Type: Income Tax (Search & Seizure) Appeal
• Pronouncement Date: 03-07-2024
• Appeal Filed By: Assessee
• Order Result: PartlyAllowed
• Bench Allotted: DB
• Next Hearing Date: 14-05-2024
• Assessment Year: 2010-2011
• Appeal Filed On: 27-05-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: RAM KUMAR YADAV
• Keywords: Onus to prove
• Section: 68; 143(3); 153A; 195

Judgement Text

आयकर अपील य अ धकरण, इंदौर यायपीठ, इंदौर IN THE INCOME TAX APPELLATE TRIBUNAL INDORE BENCH, INDORE BEFORE SHRI VIJAY PAL RAO, JUDICIAL MEMBER AND SHRI B.M. BIYANI, ACCOUNTANT MEMBER IT(SS)A No.194/Ind/2014 (Assessment Year: 2010-11) M/s. AP India Biotech Pvt. Ltd. 188, Pul Bogda, Bhopal Vs. ACIT -3(1) Bhopal (Appellant / Assessee) (Respondent/ Revenue) PAN: AACCA9055A Assessee by Shri Sumit Nema, Sr. Adv. Shri Gagan Tiwari, Adv. Revenue by Shri Ram Kumar Yadav, CIT- DR Date of Hearing 15.05.2024 Date of Pronouncement 04 .07.2024 O R D E R Per Vijay Pal Rao, JM : This appeal by the assesse is directed against the order dated 19.03.2014 of the Commissioner of Income Tax (Appeal)-II, Bhopal for A.Y.2010-11. The assesse has raised following grounds of appeal: “01. On the facts and in the circumstances of the case, the Id. CIT(A) was not justified in confirming the addition of Rs. 1,00,00,000/- towards the application money received from IT(SS)ANo.194/Ind/2014 AP India Biotech Pvt. Ltd. Page 2 of 11 M/s. B. Roshanlal Chemicals (P) Ltd treating the same as unexplained as held by the assessing officer. 02. On the facts and in the circumstances of the case, the Id. CIT(A) was not justified in confirming the disallowance to the extent of 10% under the various heads of expenses like labour & staff, repairs & maintenance, freight, telephone and travelling exps. out of the total disallowance made by the assessing officer at Rs. 15,25,000/-.” 2. Ground no.1 is regarding addition made by the AO on account of unexplained share application money of Rs.1 cr. received from M/s B. Roshanlal Chemicals P. Ltd. The assesse filed its return of income for the year under consideration on 29.03.2011 declaring total income of Rs.200550/-. The case was selected under compulsory scrutiny. During the course of assessment proceedings the AO asked the assessee to provide details of addition to the share capital/share application money along with names, address, PAN, Bank account of the person from whom the share application money was received. The AO has stated in the assessment order that no details of any kind were provided of Rs.1,50,00,000/- out of which a sum of Rs.1 cr. has been contributed by M/s B. Roshanlal Chemicals P. Ltd. Accordingly the AO made an addition of Rs.1.5 crore on this account. The assesse challenged the action of the AO before the CIT(A) and submitted that the said amount was received through different cheques issued from their bank accounts with HDFC Bank, details of which were provided before the CIT(A). The assesse also submitted confirmation letter from M/s B. Roshanlal Chemicals P. Ltd. along with copy of account in the books of the assesse, copy of bank account of M/s B. Roshanlal Chemicals P. IT(SS)ANo.194/Ind/2014 AP India Biotech Pvt. Ltd. Page 3 of 11 Ltd. and bank account of assesse. The assesse further submitted that the balance amount of Rs.50,00,000/- has been contributed by Madhya Bharat towards share application money through different cheques, details of which were also provided. The CIT(A) after considering the relevant record has deleted the addition to the extent of Rs.50,00,000/- which was found to be refunded by the assessee to M/s B. Roshanlal Chemicals P. Ltd. and thereby sustained addition of Rs.1 cr on this account. 3. Before the tribunal Ld. Sr. counsel has submitted that the assesse has explained the source of the share application money received from these two entities which are sister concern and filed all documentary evidences and details of cheques as reflected in the bank account of the share applicants as well as the bank account of assessee. Further these amounts were also refunded to the share applicants as the shares were not allotted to them. The CIT(A) has passed the impugned order without confronting short-comings in the documents produced by the assessee. Ld. Sr. counsel has submitted that the assessee is ready to produce complete requisite documentary evidences to prove the genuineness of the claim. He has pointed out that even during the course of search and seizure action this fact was explained that the money was received but was also refunded after search and seizure action. Hence, he has submitted that the CIT(A) is not justified in sustaining the addition to the extent of Rs.1 cr. IT(SS)ANo.194/Ind/2014 AP India Biotech Pvt. Ltd. Page 4 of 11 4. On the other hand, ld. DR has submitted that despite sufficient opportunity the assessee failed to produce the valid evidence to discharge onus to prove identity, creditworthiness of the share applicants and genuineness of transactions. He has relied upon the orders of the authorities below. 5. We have considered the rival submissions as well as relevant material on record. The AO has made an addition of Rs.1,50,00,000/- on account of share application money in para 8 as under: “(8) UNEXPLAINED SHARE APPLICATION MONEY During the assessment proceedings the assessee was asked to provide details of additions to the share capital/share application money in the A.Y 2010-11 in a tabular form in which name, address. PAN, bank account of the persons applying for such shares. No details of any kind were provided for Rs.15000000/- taken as share application money by the assessee company. Accordingly as per provisions of section 68 of Income Tax Act, 1961 such additions are added to the total income of the assessee in following assessment years:- A.Y. Amount Rs. 2010-11 15000000 Penalty u/s271 (1)© is initiated separately.” IT(SS)ANo.194/Ind/2014 AP India Biotech Pvt. Ltd. Page 5 of 11 6. The AO has stated that the assesse was asked to provide the details regarding the share capital/share application money however, the AO has not stated which show cause notice was issued to the assessee for providing all these details whereas the AO in earlier part of the assessment order has stated that the assesse furnished the list of concern promoted by the same promoters of the assessee and reply of the assessee to the questionnaire issued u/s 142(1). Thus, it appears that the assessee was not given a proper opportunity to furnish the requisite details and supporting evidence during the course of assessment proceedings. Before the CIT(A) the assesse has explained the source of share application money and also produced relevant evidence which is referred by the CIT(A) in para 7.1 as under: “7.1 During the course of appeal proceedings, the appellant has submitted as under: "The Id. Assessing officer asked the appellant to file the details of addition in the share capital of Rs. 1,50,00,000/- and their name, address, PANo. and bank a/c of the persons, who contributed the share capital However, he treated the same as unexplainable and made the addition of Rs. 1,50,00,000/- in the hands of the appellant. In this connection, it is submitted that the above said share capital Rs. 1,50,00,000/- out of which Rs. 1,00,00,000/- has been contributed by M/s. B. Roshanlal Chemicals (P) Ltd to the appellant for share application money through different cheques issued on their bank a/c with HDFC Bank on different dates Le. Rs. 50,00,000/- on 22-03-2010 vide cheque No. 666786, Rs. 25,00,000/-on 27-03-2010 vide cheque No. 666456 and Rs. 25,00,000/- on 29-03-2010 vide cheque No. 6666461 in the financial year 2009- 10. Confirmation letter from B. Roshanlal IT(SS)ANo.194/Ind/2014 AP India Biotech Pvt. Ltd. Page 6 of 11 Chemicals (P) Ltd., copy of a/c of Mix. B. Roahsanlal Chemicals (P) Ltd. in the books of the appellant and copy of bank a/c of M/s. B. Roshanlal Chemicals (P) Ltd. and appellant are enclosed herewith The balance amount of Rs. 50,00,000/- has been contributed by M/s. Madhya Bharat Phosphate (P) Ltd. towards share application money through different cheques issued on their bank a/c with Bank of Baroda on different dates i.e. Rs. 15,00,000/-on 02-04- 2009 vide cheque No. 732768, Rs. 15,00,000/-on 30-06-2009 vide cheque No. 736638 and Rs. 3,00,000/- on 21-12-2009 vide cheque No. 742593, Rs. 3,00,000/- on 11-03- 2010 vide cheque No. 508850 and Rs. 14,00,000/- on 15-03-2010 vide cheque No. 509756 in the financial year 2009-10. Copy of a/c of M/s. Madhya Bharat Phosphate in the books of the appellant and copy of bank a/c of M/s. Madhya Bharat Phosphate and appellant are enclosed herewith. On the above facts, it is submitted that all the share capital contribution of Rs. 1,50,00,000/- is explainable. On the above facts, it may be seen that all the share capital has come through cheques and has been accepted by the share holders In view of the above, it may be seen that identity, capacity and genuineness of transaction with the share holder is proved in the light of the following court decisions. 1. CIT vs Peoples General Hospital Ltd (2013) 216 Taxman 320 M.P. 2. CIT vs Lovely Export (P) Ltd (2008) 216 CTR 195 S. C. 3. CIT vs Steller Investment Ltd. (251) ITR 263 S.C. 4. CIT vs Heeralal Chhagulal (257) ITR 281 Rajasthan 5. P.K. Sethi vs CIT (2006) 286 ITR 318 Gohati 6. Hindustan Tea Trading vs CIT (182) CTR 585 Cal. IT(SS)ANo.194/Ind/2014 AP India Biotech Pvt. Ltd. Page 7 of 11 7. Sharad Kumar Sanghi vs ACIT (2007) 8 ITJ 461 Indore. In view of the above, the share capital of Rs. 1,50,00,000/- be kindly treated as explained and the addition made be kindly directed to be removed." 7. The CIT(A) has partly accepted the explanation of the assesse and deleted addition of Rs.50,00,000/- and the balance amount of Rs.1 cr was confirmed as received from M/s B. Roshanlal Chemicals P. Ltd. The CIT(A) has recorded the fact that after search operation the said application money of Rs.1 cr was stated to be refunded to the share applicants but in absence of bank account statement or confirmation of the refund of the said amount the addition was confirmed. This point was not confronted with the assesse for submitting the relevant bank account statement and confirmation to show the refund of the said amount. Therefore, we find force and merit in the contention of the Ld. Sr. counsel that the CIT(A) had confirmed the addition without confronting the short coming in the documentary evidences produced before it. Accordingly in the facts and circumstances of the case and in the interest of justice the impugned order of the CIT(A) confirming the addition of Rs.1 cr is set aside and the matter is remanded to the record of the jurisdictional AO for fresh adjudication after considering the relevant documentary evidence, details and explanation to be furnished by the assessee. Needless to say the assessee be given an appropriate opportunity of hearing before passing fresh order IT(SS)ANo.194/Ind/2014 AP India Biotech Pvt. Ltd. Page 8 of 11 8. Ground no.2 is regarding the disallowance of expenditure. In the assessment proceeding the AO has made a lump sum disallowance of expenses under the head repairs and maintenance, telephone, travel, salary & wages, freight on sales etc of Rs.15,25,000/-. On appeal the CIT(A) has restricted the said disallowance to 10% of the expenses claimed. 9. Before the Tribunal Ld. Sr. counsel has submitted that the details of the expenses were also furnished before the AO as well as the CIT(A) and therefore, ad hoc disallowance made by the AO as well as the CIT(A) is not permissible. Ld. Sr. counsel has submitted that when the assesse has produced all the details and the expenditure is duly recorded in the books of account and not found to be abnormal or excessive but the same was incurred for the purpose of business of the assesse then the disallowance confirmed by the CIT(A) is not justified. 9.1 On the other hand, Ld. DR has submitted that the AO asked the assessee to provide bills in support of the expenses debited to the trading and profit & loss account however, the assesse failed to submit any supporting evidence and consequently the AO has made lump sum disallowance of expenditure on account of travel expenses, repair and maintenance, telephone, traveling, salary & wages, freight etc. He has relied upon the order of the AO. 10. We have considered the rival submissions as well as relevant material on record. AO has made a lump sum disallowance under the head of repaid and maintenance, telephone, travel, salary & IT(SS)ANo.194/Ind/2014 AP India Biotech Pvt. Ltd. Page 9 of 11 wages, freight on sales etc of Rs.15,25,000/-. The AO has not doubted the expenditure incurred for the business of the assesse but has made only lump sum disallowance of Rs.15,25,000/-. The CIT(A) has observed in para 5.3 & 5.4 as under: “5.3 There is no denying the fact that A.O. is empowered to compute/assess total income of the appellant in the proceedings initiated u/s 153A of the IT Act. But it is also a settled principle of law that this assessment is to be based on material brought on record justifying the additions so made by the A.O. In the appellant's case, A.O. has failed to do so completely. He has merely made reference of disallowance made earlier u/s 143(3) for 2-3 years and has stated that the appellant has failed to provide bills and vouchers etc in support of expenses debited to its Trading and P&L A/c. From perusal of records, it is seen that A.O. has raised specific query (Pt No.16) in the questionnaire asking the appellant to give details in comparative chart for expenses incurred more than Rs.1,00,000/- each during each of the assessment year under consideration and expenditure/turnover ratio for each of these expenses. In response, the appellant has submitted the required comparative chart of expenses exceeding Rs. 1,00,000/- for each of the year. A.O. has made estimated adhoc disallowance for each of the year on account of repairs and maintenance, telephone, travelling, wages and salary and freight on sales. The impugned addition has been found made for non production of bills/vouchers, personal use of company's assets, variation in these expenses for different years and by relying on earlier order passed u/s 143(3). However, no adverse evidence has been brought on record by the A.O. found either during the course of search operations (except few blank bill books of M/s Manmeet Roadways) or extensive post search investigations made or entire course of assessment proceedings to show that the appellant has claimed bogus expenses under all these heads. Even in respect of freight on sales, no adverse evidence been brought on record by making any third party enquiry for verification of these expenses claimed by the appellant. IT(SS)ANo.194/Ind/2014 AP India Biotech Pvt. Ltd. Page 10 of 11 The appellant's declared turnover and purchases in its financial statements and returns, and as mentioned in submission above, have been accepted by the A.O. Similarly, no defect or deficiency has been specified either by the A.O. or the auditor in the appellant's audited books of accounts for all the years under consideration except for A.Ys. 2004-05 and 2005-06 for which years the appellant has failed to produce its books of accounts even at appeal stage, being not traceable. Appellant's turnover has also increased from Rs.5,08,04,559/- to Rs. 8,89,60,184/- during the year 2004-05 to 2009-10 and is found to be fluctuating. There are similar variations in other expenses too but for which no adverse inference has been drawn by the A.O. himself. 5.4 Further, A.O. has also not specified the details, as asked for by him and not provided by the appellant. Nothing has been brought on record to show that these expenses have been found incurred for non-business purposes or that their payments made outside appellant's books of accounts or are unverifiable. The very concept of” 10.1 Thus, it was noted that the AO has made adhoc addition in respect of expenditure incurred under various heads. Once the assesse has shown turnover of more than Rs.8.89 cr. then the claim of traveling expenses cannot be held to be bogus or excessive. The CIT(A) has further observed that the AO has not specified the details as asked by him and not provided by the assesse and nothing has been brought on record to show that these expenses have been found incorrect for non-business purpose or that payment made outside the books of account or unverifiable. Despite these fact the CIT(A) has sustained the addition to extent of 10% of the total expenditure incurred under their heads. Therefore, sustaining the addition by the CIT(A) appears to be only for the IT(SS)ANo.194/Ind/2014 AP India Biotech Pvt. Ltd. Page 11 of 11 hack of addition without giving any reason or basis. Hence, in the facts and circumstances of the case when the claim of expenses is neither found excessive nor the correctness of the expenses is doubted then the adhoc disallowance made by the AO and sustained by the CIT(A) is not justified the same is deleted. 11. In the result, appeal of the assesse is partly allowed. Order pronounced in the open court on 04.07.2024. Sd/- Sd/- (B.M. BIYANI) (VIJAY PAL RAO) Accountant Member Judicial Member Indore,_ 04 .07.2024 Patel/Sr. PS Copies to: (1) The appellant (2) The respondent (3) CIT (4) CIT(A) (5) Departmental Representative (6) Guard File By order UE COPY Sr. Private Secretary Income Tax Appellate Tribunal Indore Bench, Indore