SPECIAL BLASTS LIMITED,RAIPUR V. .DCIT/ACIT CENTRAL -1, RAIPUR

ITA 475/RPR/2024

AI Insights

The case involves Special Blast Limited, which appealed against the order of the Commissioner of Income Tax (Appeals) sustaining an addition of Rs. 30,02,500 as unexplained cash credit under section 68 of the Income Tax Act. The addition was initially made by the Assistant Commissioner of Income Tax following a reassessment under section 147/148, based on allegations that the company had taken accommodation entries. The Tribunal examined whether the additions were justified, considering the transactions involved the transfer of shares between companies and whether any money was actually received by Special Blast Limited from the alleged shell companies. The Tribunal concluded that the assessee had not received any money or made any transactions with the shell companies, leading to the allowance of the appeal.

• Counselvise Citation: [2024] 140 COUNSELVISE.COM (IT) 106813 (ITAT-RAIPUR)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-12-2024
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Assessment Year: 2013-2014
• Other Referred Cases: Ashok Commercial Enterprises (2023) 459 ITR 100 (Bom.), BVG India Ltd. in ITA no. I l to 16/PUN/2023 dated 19.10.2023
• Laws Referred To: Income Tax Act
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: PRIYANKA PATEL
• Assessee Lawyers: R. B. DOSHI
• Keywords: Set aside; Business income; Reassessment proceedings; Unexplained cash credit; Principle of natural justice; Accommodation entries; Bogus
• Section: 147; 148; 192; 132; 153A; 68; 22; 191

Judgement Text

"आयकर अपीलीय अिधकरण, रायपुर Ɋायपीठ, रायपुर IN THE INCOME TAX APPELLATE TRIBUNAL RAIPUR BENCH, RAIPUR ŵी रिवश सूद, Ɋाियक सद˟ एवं ŵी अŜण खोड़िपया, लेखा सद˟ क े समƗ । BEFORE SHRI RAVISH SOOD, JM & SHRI ARUN KHODPIA, AM आयकर अपील सं. / ITA No: 475/RPR/2024 (िनधा[रण वष[ Assessment Year: 2013-14) Special Blast Limited, G-5, Wallfort Ozone, Fafadih Chowk, Raipur (C.G.)-492001 V s DCIT / ACIT Central Circle-1, Raipur, CG PAN: AADCS2831D (अपीलाथŎ/Appellant) . . (ŮȑथŎ / Respondent) िनधाŊįरती की ओर से /Assessee by : Shri R. B. Doshi, CA राजˢ की ओर से /Revenue by : Dr. Priyanka Patel, Sr. DR सुनवाई की तारीख / Date of Hearing : 13.12.2024 घोषणा की तारीख/Date of Pronouncement : 18.12.2024 आदेश / O R D E R Per Arun Khodpia, AM: The captioned appeal is filed by the assessee against the order of Commissioner of Income Tax (Appeal)-3, Bhopal [in short “Ld. CIT(A)-3”], u/s 250 of the Income Tax Act (in short “The Act”) dated 29.08.2024 for the Assessment Year 2013-14, which has been resulted on account of appeal against the order of Asstt. Commissioner of Income Tax, Central Circle-1, Raipur (in short “Ld. AO”), u/s 147 of the Act dated 30.03.2022. 2. The grounds of appeal raised by the assessee are as under: 2 ITA No. 475/RPR/2024 Special Blast Limited vs DCIT/ACIT, Central circle-1, Raipur 1. Ld. CIT (Appeals) has erred in sustaining addition of Rs 30,02,500 /-as unexplained cash credit in books of accounts and confirming addition under section 68 of the Act. 2. The impugned addition made by the Ld. A.O. is bad in law, illegal, unjustified, contrary to facts & law and based upon recording of incorrect facts and finding, in violation of principles of natural justice and the same should have been quashed by the Ld. CIT (Appeals). 3. The appellant reserves the right to amend, modify or add any of the ground/s of appeal. 3. Certain additional grounds are also submitted by the Ld. AR, through an application dated 12.11.2024, the same is extracted as under: 3 ITA No. 475/RPR/2024 Special Blast Limited vs DCIT/ACIT, Central circle-1, Raipur 4 ITA No. 475/RPR/2024 Special Blast Limited vs DCIT/ACIT, Central circle-1, Raipur 4. Briefly stated, that the assessee company had derived income from manufacturing and trading of industrial explosive, minding trading of powder, assessee has filed its return of income for the year u/s on 12.03.2014, declaring total income of Rs. 3,51,64,250/-. A search & seizure action u/s 132 of the Act, 1961 was conducted on 10.01.2014 at various premises of Raghuveer Group. Assessment proceedings u/s 153A was completed on 16.03.2016 for the AY 5 ITA No. 475/RPR/2024 Special Blast Limited vs DCIT/ACIT, Central circle-1, Raipur 2008-09 to 2014-15. The case of the assessee was reopened u/s 147 of the Act, on the basis of information available on record that the assessee company at taken accommodation entries to the tune of Rs.30,02,500/- (25,02,500+5,00,000) in the form of share capital provided by Shri Suresh Agrawal through Krishankali Distributors Pvt. Ltd and Prayas Securities Pvt. Ltd. These two companies are marked as shell / jamakharchi company managed and controlled by Shri Suresh Agrawal. Proceedings u/s 148 are initiated and in response, the assessee filed its return of income for Rs.3,51,64,250/-. Further, the reopening assessment proceedings u/s 147/148 are completed with the observation by Ld. AO that during the year under consideration assessee has received Rs.25,02,500 from M/s Krishnakali Distributors Pvt. Ltd and Rs.5,00,000/- from M/s Prayas Industries Pvt Ltd in aggregating Rs. 30,02,500/-, whose creditworthiness is doubtful, these companies are involved in fake transaction giving cash in payment on cheque and are not having substantial business income, further Shri Suresh Agrawal had accepted in his statement that these two companies have been used for providing of accommodation entries, therefore, the Ld. AO confronted the assessee company to explain about transactions with these two companies. In response, it was the submission by assessee company that both the parties have become shareholder of assessee company on account of purchase of share from existing shareholders i.e., M/s Chhattisgarh Steel & Power Limited (CGSPL), the assessee company has not entered into any financial transaction with the 6 ITA No. 475/RPR/2024 Special Blast Limited vs DCIT/ACIT, Central circle-1, Raipur aforesaid share holder companies. The reply of assessee was not found satisfactory by the Ld. AO, thus, the same has not been accepted. Accordingly, an addition u/s 68 was made, stating that the assessee has failed to furnish necessary evidence to substantiate its claim, therefore, the amount of Rs. 30,02,500/- is liable to be treated as unexplained cash credit u/s 68 of the Act. 5. Being aggrieved with the aforesaid order by the Ld. AO, assessee preferred an appeal before the Ld. CIT(A), wherein the assessment order was discussed and deliberated at length and Ld. CIT(A) had dismissed the appeal of assessee with the following observations. 3.1.2 I have perused the ground of appeal, the assessment order and the submission made by the appellant before me and facts and circumstances of the case. The appellant in his submission is claiming that it is a public limited company and what has happened is the shareholding of its shares have been transferred from its existing share holder M/s Chhatisgarh steel and power ltd to M/s Krishnakali Distributer pvt. Ltd. and M/s Prayash securities p ltd. Accordingly the appellant claims that there is no direct transfer of any consideration to the appellant for change of the name of shareholder and there is no payment in the books of the appellant to be seen as receipt on account of this transfer. I find that the background of the case where in one of the search and seizure action in RKTC group statement of one entry operator Shri Suresh 7 ITA No. 475/RPR/2024 Special Blast Limited vs DCIT/ACIT, Central circle-1, Raipur Agrawal had been recorded. In that statement he had admitted to have provided entries to the beneficiaries through bogus share capital, premium and unsecured loans in lieu of commission through various companies managed and controlled by him. It was learnt that the assessee company had taken accommodation entries to the tune of Rs 3002500/- in the form of share capital provided by Shri Suresh Agrawal through Krsihnakali distributors Pvt, Ltd and Prayash Securities Pvt. Ltd which are jamakharchi company managed and controlled by him during the FY 2012-13. The appellant company when confronted with the issue had submitted a similar reply as has been furnished before me. 3.1.3. I find that though both the companies - M/S Krishnakali Distributer p ltd and M/S Prayash securities p ltd have not directly invested but acquired the shareholding of the appellant company by purchasing share holding by taking over the shares of pre existing shareholder, i.e. M/S Chattisgarh steel and power ltd. M/S Chattisgarh steel and power ltd must have already paid for the share capital its held of the appellant company. It is agreed that there is no direct payment of money from these two companies to the appellant company but by virtue of paying money to Chattisgarh Steel and power ltd it acquires the share and shareholder rights of the appellant company from Chattisgarh steel and power ltd. So, in such case the transaction is indirect but the benefit is direct. So, these payments by these two companies are going indirectly to appellant company only. The appellant has also relied upon certain case citations. However, on perusal the facts of the case citations are different from the instant case in consideration. 8 ITA No. 475/RPR/2024 Special Blast Limited vs DCIT/ACIT, Central circle-1, Raipur Accordingly, the ground of appeal is dismissed and the addition made by the AO is sustained. 6. Being aggrieved with the order of Ld. CIT(A), assessee carried the matter before this tribunal, which is under consideration in the present appeal. 7. At the outset, Ld. AR on behalf of the assessee have submitted that the transactions of Rs. 30,02,500/- pertains to transfer of shares between the investor company and the existing shareholding company, who are the shareholders in the assessee company. It is submitted that the subject shares were originally allotted to M/s CGSPL, which were purchased by the so-called two shell companies Krishnakali Distributors Pvt. Ltd (KDPL) and Prayas Securities Pvt Ltd. (PSPL). The transaction of purchase was undertaken by transfer of shares from CGSPL to the impugned two companies, and the money for transfer of shares was paid by these two companies to M/s CGSPL. 8. It was further explained by the Ld. AR, that during the year under consideration, there was an increase in the share capital of the assessee company by Rs.1.50 Crores, however, such increase was on account of fresh issuance / allotment of shares during the year to investors other than the impugned two companies to substantiate such facts. Ld. AR drew our attention 9 ITA No. 475/RPR/2024 Special Blast Limited vs DCIT/ACIT, Central circle-1, Raipur to page no. 37 of the APB comprising of Audited Balance Sheet of the assessee, page no. 74 showing ledger account and name of investors to whom the fresh allotment of share capital was made. Ld. AR further argued that, there was no issuance of shares out of the fresh share capital of Rs.1.5 Crores allotted during the year to the alleged Kolkata based investor companies. It is the submissions that the assessee company had furnished its bank account before the Ld. AO, from which it is evident that there was no credit for receipt of money on account of transfer of shares by the CGSPL to the alleged shareholders companies, therefore, there was no basis for making an addition in the hands of assessee company, triggering the provisions of section 68. 9. Ld. AR also furnished before us written submission, alleging the issue in the present case on merits as well as certain additional grounds as extracted (supra). The written submission so furnished is extracted as under: Special Blasts Ltd., Raipur AY 2013/14 ITA no. 475/RPR/2024 (Assessee) Ground no. 1 & 2 Submission of assessee 1. No credit in books of assessee i. No money received by assessee from two companies. Shares allotted originally to Chhattisgarh Steel & Power Ltd., which were purchased 10 ITA No. 475/RPR/2024 Special Blast Limited vs DCIT/ACIT, Central circle-1, Raipur from them by 2 companies of Kolkata, paying money to Chhattisgarh Steel & Power Ltd. ii. Balance sheet of assessee at PN 37 of PB. Increase in share capital of Rs. 1.50 crore. Ledger account showing name of parties at PN 74 of P B. Other details of parties at PN 75 of PB. Parties from whom Rs. 1.50 crore received were totally different from the 2 Kolkata based companies. iii. Resolution for share allotment at PN 76 of P B. Name of Kolkata companies not there. iv. Bank a/c filed before AO, PN 93 to 97 of PB (objections), relevant PN 94 of PB, para no. I. No credit for amount received from two Kolkata companies. 2. Shares allotted to Kolkata companies on transfer by other entity I. Details of shares transferred during the year at PN 78 of P B, shows transfer from Chhattisgarh Steel & Power Ltd. to 2 Kolkata companies. Filed with ROC with annual return. II. Money was thus paid by Kolkata companies to Chhattisgarh Steel & Power Ltd. No monetary transaction with assessee. 3. Burden discharged by assessee to show that (i) no money received by assessee; (ii) shares not allotted by assessee to 2 Kolkata companies; (iii) Shares acquired by 2 Kolkata companies from Chhattisgarh Steel & Power Ltd. 4. Fact of no transaction of assessee with 2 Kolkata companies & shares acquired by them from other entity stated before AO. Reiterated before CIT(A), PN 3 of P B, para no. 3 & 5, repeated at PN 12 of PB, para no. 5. 5. Nothing brought on record by AO to the contrary or to prove that assessee received any money or allotted any shares to 2 Kolkata companies. Additional ground no. 1 (About DIN) 1. No DIN in CIT(A) order. Order passed on 29.08.2024, DIN separately intimated vide letter dated 04.09.2024 at PN 110 of PB. 2. Appellate order invalid, liable to be set aside. Reliance on Ashok Commercial Enterprises (2023) 459 ITR 100 (Bom.), at PN 164 to 191 of PB, relevant findings on PN 178 of PB, para no. (c) and BVG India Ltd. in ITA no. I l to 11 ITA No. 475/RPR/2024 Special Blast Limited vs DCIT/ACIT, Central circle-1, Raipur 16/PUN/2023 dated 19.10.2023, on PN 192 to 230 of PB, relevant findings on PN 205, para no. 25. Additional ground no. 2 (Approval u/s 151 not provided) 1. Return in response to notice u/s 148 dated 23.02.2021 filed on 31.05.2021 [page 2, para no. 3, (3 rd to 5 th line) of assessment order]. Request for providing copy of reasons and of the approval u/s 151 submitted before AO on 02.07.2021, copy at PN 90 ofPB. 2. Reasons only provided (PN 91 & 92 of PB) on 31.07.2021. In objections raised, fact of not providing approval u/s 151 mentioned (PN 93 to 97 of PB, relevant PN 94, para no. Ill). Request made again, not considered. 3. Not providing approval u/s 151 goes to the root of the matter and renders initiation of reassessment to be illegal. If approval u/s 151 is not provided, consequent reassessment proceedings rendered illegal. Reliance on: - i) Saraswati Garewal vs ITO, ITA No. 166/RPR/2022 dc. 25.10.2023, PN 111 to 1 17 of P B, relevant finding on PN 1 16-1 17, para no. 10. ii) Haryana Acrylic Manufacturing Co. 308 ITR 38 (Del.). iii) ACIT vs Bharti Axa Life Insurance co. Ltd. (2021) 189 450 (Mum.), PN 130 to 155 of PB, relevant findings on PN 143 of PB, para no.4.9.2. iv) ITO vs IDM Agro Bio Tech Ltd. (2017) 51 CCH 525 (Mum.), in ITA no. 5805/Mum/2017 dated 04.12.2017, para 22 & 27. 10. Per contra, Dr. Priyanka Patel, Ld. Sr. DR have vehemently supported the orders of revenue authorities. 11. We considered the rival submissions, perused the material available on record and case laws relied upon by the parties. 12 ITA No. 475/RPR/2024 Special Blast Limited vs DCIT/ACIT, Central circle-1, Raipur 12. To examine the applicability of the provisions of section 68 in the present case, we find it appropriate to cull out the provisions of section 68: Cash credits. 68. Where any sum is found credited in the books of an assessee maintained for any previous year, and the assessee offers no explanation about the nature and source thereof or the explanation offered by him is not, in the opinion of the [Assessing] Officer, satisfactory, the sum so credited may be charged to income-tax as the income of the assessee of that previous year : The following provisos shall be inserted in section 68 by the Finance Act, 2012, w.e.f. 1-4-2013 : Provided that where the assessee is a company, (not being a company in which the public are substantially interested) and the sum so credited consists of share application money, share capital, share premium or any such amount by whatever name called, any explanation offered by such assessee-company shall be deemed to be not satisfactory, unless— (a) the person, being a resident in whose name such credit is recorded in the books of such company also offers an explanation about the nature and source of such sum so credited; and (b) such explanation in the opinion of the Assessing Officer aforesaid has been found to be satisfactory: Provided further that nothing contained in the first proviso shall apply if the person, in whose name the sum referred to therein is recorded, is a venture capital fund or a venture capital company as referred to in clause (23FB) of section 10. 13. According to the provisions of section 68 of the Act, for making an addition, there should be a credit in the books of account of the assessee during the year under consideration for which assessee is unable to offer any explanation about the nature and source thereto or the explanation offered by 13 ITA No. 475/RPR/2024 Special Blast Limited vs DCIT/ACIT, Central circle-1, Raipur him is not in the opinion of the Assessing Officer satisfactory. If such facts and circumstances prevail, the credit so found may be charged to tax under the provisions of Section 68. In the present case, there was no evidence to show that any sum has been credited in the books of assessee company for transfer of shares from M/s CGSPL to KDPL and PSPL, therefore, the basis for making an addition u/s 68, itself is missing. In the absence of any credit entry in the books of the assessee, for which the explanation was sought only based on external information received by the Ld. AO in the form of statement by third party, invoking of provisions u/s 68 on said premature information is not permissible under the law. In view of said facts and circumstances, we find merits in the contention raised by the assessee that there was no credit / money received by the assessee company from the alleged Kolkata Based shell companies. The transfer of shares of the assessee company was a transaction between the CGSPL and the alleged shell companies, therefore the assessee company is not obtained any financials benefit from the transaction of investment in its shares by the said Kolkata based investor companies. Accordingly, there was no plausible reason to make an addition u/s 68. Referring to the observation, the Ld. CIT(A) wherein he observed that the is no direct payment of money from these two companies from the appellant company by virtue of paying money to CGSPL, for which the investors have acquired the shares and shareholders rights of the appellant company, in such 14 ITA No. 475/RPR/2024 Special Blast Limited vs DCIT/ACIT, Central circle-1, Raipur cases, the transaction is indirect, but the benefit is direct. We cannot concur with such vague and ambiguous observation by the Ld. CIT(A), wherein he presumed that there are certain benefits attained by the assessee, but there was no whisper of any such benefit moreover, nothing could be brought on record by the revenue to substantiate the same. 14. After giving a thoughtful consideration to the facts and circumstances of the present case, we are unable to persuade ourselves with the decision of Ld. CIT(A), thus, do not find any substance in the said decision, on the other hand we find merits in the contention raised by the assessee, therefore, we are inclined to hold that the addition u/s 68 made by the Ld. AO and confirmed by the Ld. CIT(A) are not in accordance with the mandate of law, therefore, the same is liable to be deleted, we, therefore, direct the revenue authorities to do so by setting aside the order of Ld. CIT(A). 15. Since, we have deleted the entire addition of Rs.3002500/- made u/s 68 by the Ld. AO, in terms of our aforesaid observations, we refrain ourselves to deal with the other grounds of the present appeal including the additional ground raised by the Ld. AR on behalf of the assessee, therefore, the same are left open. 15 ITA No. 475/RPR/2024 Special Blast Limited vs DCIT/ACIT, Central circle-1, Raipur 16. In result, the appeal of the assessee is allowed, in terms of our aforesaid observations. Order pronounced in the open court on 18/12/2024. Sd/- (RAVISH SOOD) Sd/- (ARUN KHODPIA) Ɋाियक सद˟ / JUDICIAL MEMBER लेखा सद˟ / ACCOUNTANT MEMBER रायपुर/Raipur; िदनांक Dated 18/12/2024 Vaibhav Shrivastav आदेश की Ůितिलिप अŤेिषत/Copy of the Order forwarded to : आदेशानुसार/ BY ORDER, (Senior Private Secretary) आयकर अपीलीय अिधकरण, रायपुर/ITAT, Raipur 1. अपीलाथŎ / The Appellant- Special Blast Limited, Raipur 2. ŮȑथŎ / The Respondent- DCIT/ACIT, Central Circle-1, Raipur 3. आयकर आयुƅ(अपील) / The CIT(A), 4. The Pr. CIT, Raipur (C.G.) 5. िवभागीय Ůितिनिध, आयकर अपीलीय अिधकरण, रायपुर/ DR, ITAT, Raipur 6. गाडŊ फाईल / Guard file. // स×याǒपत Ĥित True copy // "