TaxTMI 
TaxTMI 
TaxTMI 
2022 (1) TMI 641
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....41/- on account of notional gain arising out of the foreign exchange fluctuation relying on the decision of the Hon'ble Apex Court in the case CIT vs. Woodward Governor India Pvt Limited in 312 ITR 254 wherein the facts are not identical. 3) The Ld. CIT (A) has erred in upholding the order of the ld.AO who had made addition of Rs. 61,95,95,194/- by holding that the business of the assessee has not commenced operation accordingly the expense has to be capitalised. 4) The Ld. CIT (A) has erred in upholding the order of the ld.AO who had made additions towards interest charged U/s. 234A, B and C of the Act. 3. The assessee has also raised an additional ground in its appeal stating that" "The Ld. CIT (A)-8, Hyderabad has erred both in law and on facts in not condoning the delay in filing the appeal U/s. 249(3) of the Act." 4. Since, this is a legal ground raised by the assessee following the decision of the Hon'ble Apex Court in the case NTPC vs. CIT reported in 229 ITR 383, we hereby admit the ground raised by the assessee. 5. The Revenue has raised three grounds in its appeal however, the crux of the issue is that: "The Ld. CIT (A) has erred in adjudicating the appeal of t....
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....erved in the hands of the guard who was guarding the premises of the assessee on 26/04/2013 just before the closure of the factory premises. Therefore, there was no one in the factory premises to intimate the concerned person. Only during the month of August 2013, it came to the knowledge of the concerned officers of the assessee company about the order passed by the Ld.CIT(A) and thereafter immediately the appeal was preferred. Reliance was placed in the decision rendered by the Hon'ble Apex Court in the case Collector, Land Acquisition vs. MST. Katiji and Others reported in 167 ITR 471 (SC) and the decision rendered by the Hon'ble Karnataka High Court in the case KTK Forest Development Corporation vs. ACIT (TDS) reported in 196 Taxmann 445. Hence it was prayed that the delay in filing the appeal was due to reasonable cause which is beyond the control of the assessee and therefore the delay in filing the appeal may be condoned. However, the Ld. CIT (A) denied to condone the delay without appreciating the facts by stating that the assessee and its representatives failed to represent before the Ld. AO inspite of sufficient notice. The Ld. AR once again reiterated the submissions mad....
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....before law demands that all litigants, including the State as a litigant, are accorded the sae treatment and the law is administered in an even-handed manner. There is no warrant for according a step-motherly treatment when the State is the applicant praying for condonation of delay. "When substantial justice and technical considerations are pitted against each other, the cause of substantial justice deserves to be preferred, for other side cannot claim to have a vested right in injustice being done because of a non-deliberate delay." Hon'ble Karnataka High Court in the case Karnataka Forest Development Corporation vs. ACIT (TDS) reported in 196 Taxmann 445 has held as under: "The affidavit filed in support of the application for the condonation of delay disclosed that, after the order was passed by the Commissioner (Appeals), there was a change of managing director. Though the chartered accountant of the company opined that it was a fit case for appeal and prepared the requisite papers and even sent them to the managing director for signature, it was because of the change of the managing director, that the importance of the same was not noticed and as it was a Government comp....
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....er dated 29/12/2003 until it was confronted with auction notice in June, 2008 issued by competent authority immediately upon which the assessee filed appeal before the Hon'ble High Court." The Hon'ble Supreme Court in the case Improvement Trust vs, Ujagar Singh & Others (2010) reported in 6 SCC 786 it was held that: "Unless malafide intention exists in the conduct of the party then generally as a normal rule, delay should be condoned. In the legal arena an attention should always be made to allow the matter to be contested on merits rather than to throw it on such technicalities." The Hon'ble Madras High Court in the case of Vijayeswari Textiles Ltd vs. CIT reported in 256 ITR 560 held that: "6. We, therefore, hold that the Tribunal was in error in not condoning the delay and that it was also in error in holding that the additional bonus of three per cent could not be claimed as expenditure under section 37 of the Act. 7. Matters relating to condonation of delay are indeed discretionary and are normally left to the Tribunal and this court will not ordinarily interfere with the discretion. In this case, as we have already pointed out, the Tribunal did not stop with the order....
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....erits. Further, in none of the decisions cited by the Ld. DR it has been held that, if the appellate authority had decided the appeal on merits, even after refusing to condone the delay, then the findings of the appellate authority are non-est in the eye of law. Moreover, all the judgments cited by the Ld. DR are factually distinguishable from the facts of the case of the assessee and it has no application to the case of the assessee. 12. For the above stated reasons, we hereby condone the delay of 125 days in filing the appeal before the Ld. CIT (A) and proceed to adjudicate the grounds raised by the assessee on merits. Accordingly, the grounds raised by the Revenue are devoid of merits and therefore appeal of the Revenue does not survive. Consequently, the additional ground raised by the assessee is allowed. 13. The brief facts of the case are that the assessee is a Limited Company engaged in the business of manufacturing steel, filed its return of income for the AY 2010-11 on 31/11/2011 admitting total income of Rs. 1,08,92,060/-. Thereafter, the case was taken up under CASS and assessment was completed U/s. 144 of the Act vide order dated 22/3/2013 wherein the above-mentioned....
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.... No.1121; S.No. 403/1; Road No. 54, Jubilee Hills, Hyderabad. (iv) Lakshmi Aruna Oxygen Pvt. Ltd., Plot No. 1121, S.No. 403/1; Road No. 54, Jubilee Hills, Hyderabad-500 034. (v) Mudita Properties Pvt Ltd, Flat No.22; Parijatha Apartments, Race Course Road, Bangalore. (vi) Sri G. Janardhana Reddy, Shok Nagar, Havambhavi, Bellary - 583 101. (vii) Smt. G. Lakshmi Aruna, Ashok Nagar, Havambhavi, Bellary, 583101. (viii) M/s. GJR Holding International Ltd., 5; Athol Street, Douglas, Isle of Man. The Ld. AR shall also submit the above-mentioned particulars within a week before the Ld. DR. 2. The Ld. DR is hereby directed to verify the genuineness of the assessment order and details furnished by the Ld. AR and submit a report on the same from the Revenue before the Bench. The above information is called for because the Ld. AR has submitted before the Bench that all the above-mentioned companies' income were assessed to tax U/s. 143(3) of the Act and the source of funds received by the assessee-company are from the assessed income of those companies. 3. The Ld. DR is further directed to submit a report from the Revenue before the date of next hearing of the case, as to why t....
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....upto 31/3/2010 (Rs.) Amount received upto 31/3/2009 (Rs.) 1. M/s. Obulapuram Mining Co. Pvt. Ltd, No.6(4), Raghava Chari Road, Bellary 102,07,15,960 1020,07,15,960 479,52,00,000 2. M/s. Tubular Rivets (P) Ltd., Flat No.22; Parijatha Apartments, Race Course Road, Bangalore. 80,000 8,00,000 8,00,000 3 M/s. Kireeti Power Corporation Pvt Ltd., Plot No.1121; S.No. 403/1; Road No. 54, Jubilee Hills, Hyderabad. 9,24,20,000 92,42,00,000 8,00,000 4 Lakshmi Aruna Oxygen Pvt. Ltd., Plot No. 1121, S.No. 403/1; Road No. 54, Jubilee Hills, Hyderabad-500 034. 8,23,20,000 82,32,00,000 8,00,000 5 Mudita Properties Pvt Ltd, Flat No.22; Parijatha Apartments, Race Course Road, Bangalore. 80,000 8,00,000 8,00,000 6 Sri G. Janardhana Reddy, Shok Nagar, Havambhavi, Bellary - 583 101. 1,95,80,000 7,08,00,000 7,08,00,000 7 Smt. G. Lakshmi Aruna, Ashok Nagar, Havambhavi, Bellary, 583101. 2,50,80,000 25,08,00,000 12,58,00,000 8 M/s. GJR Holding International Ltd., 5; Athol Street, Douglas, Isle of Man. 4,89,09,836 48,90,98,360 NIL TOTAL 128,91,85,796 1289,18,57,960 499,50,00,000 As seen from the balance sheet for FY 2008-09, share application money pendi....
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....had received Rs. 311,88,97,970/- being share subscription during the year from various parties. The assessee was asked to prove the genuineness of the transactions along with creditworthiness of sources in the hands of the subscribers. However, there was no response from the assessee. The A.O. then issued letters to the share subscribers U/s. 131 of the IT Act to ascertain the genuineness of the transactions. All the letters were returned unserved except in the case of M/s. Obulapuram Mining Co. Pvt Ltd., which also did not respond to the summons. As the genuineness of the transaction was not proved, the same was added to the income returned u/s. 68 of the Act. ............. ............. 4. During the course of remand proceedings, the assessee had submitted the details as given below: (a) Issue of Share Capital: The assessee merely submitted the ledger extract of share capital a/c, share application money pending for allotment, bank ledger a/CIT(A), bank statement and Form-2. The assessee was asked to prove the genuineness of the transaction. No confirmation letters, bank statements of the share subscribers, Annual reports etc., which prove the creditworthiness had been su....
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....ng allotment as on 31.3.2009 (Rs.) (C) Total (D) = (A-B-C) (pages of Paper Book) 1 M/s Obulapuram Mining Co. (P) Ltd. 102,07,15,960 (151) 1020,71,59,600 (151) 479,52,00,000 296,80,61,640 244,38,97,960 2 M/s Kireeti Power Corporation (P) Ltd. 9,24,20,000 92,42,00,000 (209) 8,00,000 65,64,00,000 26,70,00,000 3 Lakshmi Aruna Oxygen (P) Ltd. 8,23,20,000 82,32,00,000 (228) 8,00,000 66,44,00,000 15,80,00,000 4 Sri G. Janard hana Reddy 1,95,80,000 19,58,00,000 7,08,00,000 ----- 12,50,00,000 (293) 5 Smt. G. Lakshmi Aruna 2,50,80,000 25,08,00,000 12,58,00,000 ----- 12,50,00,000 Total 124,01,15,960 1240,11,59,600 499,34,00,000 428,88,61,640 311,88,97,960 Accepted by the revenue Amount in dispute 6 It is thus submitted that each of the shareholder who has contributed capital in the instant year is also made such contribution in preceding year which stands accepted and not in dispute. Moreover the investment has been made by promoters and their companies. 7 The amount accepted and added in the order of assessment alongwith copies of return of income / balance sheet and orders of assessment as placed in pape....
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....dy Address: No. 8, Ashok Nagar, Havambhavi, Shriguppa Road, Bellary-583101 No. of shares: 19580000 PAN No. AFBPR9737D Ward: DCIT, Central Circle, 1(3), Bangalore 12,50,00,000 12,50,00,000 i) Copy of acknowledgment of return of income dated 13.10.2010 alongwith computation of income for the financial year 2009- 10 relevant to assessment year 2010-11 in the case of Shri G Janardhana Reddy (pages 289-290 of Paper Book) Copy of balance sheet for the financial year 2009-10 relevant to assessment year 2010-11 in the case of Shri G Janardhana Reddy (pages 291-294 of Paper Book) Copy of order of assessment dated 31.3.2013 u/s 153C/144 of the Act in the case of Shri Janardhana Reddy for Assessment year 2010-11 (pages 290-371 of Paper Book) Shivanand H Kalakeri, Deputy Commissioner of Income Tax, Central Cirlce- 1(3), Bangalore 5 Smt. G. Lakshmi Aruna Address: No. 8, Siruguppa Road, Havambhavi Bellary-583101 No. of shares: 25080000 PAN No. AFJPA5974P Ward: DCIT, Central Circle 1(3), Bangalore 12,50,00,000 12,50,00,000 i) Copy of acknowledgment of return of income dated 14.10.2010 alongwith computation of income for the financial year 2009- 10 relevant to assessment year 2010-11 in t....
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....n nature because there was no reasons stated by the Ld. CIT (A) for rejecting the first remand report. The Ld. AR further cited the paper book produced before us wherein the IT Acknowledgements, financial statements, PAN etc., of the investors were enclosed in order to substantiate the identity, creditworthiness of the investors and to prove the genuineness of the transactions. The Ld. AR also pointed out to the assessment orders passed U/s. 143(3) of the Act in the case of the investors. 21. At this juncture the ld. DR referred to the third remand report dated 31/08/2021 obtained from the Ld. AO on the direction of the Bench dated 11/6/2021 which was produced before the Bench. The relevant portion is extracted herein below for reference: F.No.DCIT-1(1)/ITAT Corres/Brahmani/2021-22, Date: 31.08.2021 To, The Commissioner of Income Tax (DR)-1, A-Bench, CGO Complex, Kavadiguda, H....
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.... to prove their identity, creditworthiness and genuineness of the transaction. As mentioned in the assessment order, all the letters / notices were returned unserved except in the case of M/s. Obulapuram Mining Co., Pvt. Ltd., which also did not respond to the summons. Therefore, the Assessing Officer had no other option but to resort to 144 of the IT Act based on the information available with him. The Assessing Officer provided an opportunity to the assessee to prove identity, creditworthiness of the parties and genuineness of the transaction along with source in the hands of the investors. The assessee failed to avail the opportunity, hence the Assessing Officer completed the assessment under section 144 of the Act dated 22-03-2013 on the basis of the material available on record by making the addition of the share application money to an extent of Rs. 311 ,88,97,970 /. 2) Aggrieved by the said order, the assessee preferred an appeal before the Ld.CIT(Appeal)-2, Hyderabad. The said case was notified to Ld.CIT(Appeal)-8, Hyderabad vide Pr.CCIT notification dated 30-8- 2016. The Ld.CIT(Appeal) ultimately passed the order in this case. Attention of the Hon'ble Bench is kind....
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....lakhs at. Page No. 151 of Paper book. The assessment order for A.Y.2010-11 would not reflect the issue regarding investment in the above assessee-company. The burden is on the assessee to establish identity and creditworthiness of the investor and genuineness of the transaction. The mere production of the accounts and assessment orders of the investor company, would not amount to discharge burden imposed on the assessee as held by the various High Courts and the Hon 'ble" Supreme Court. (ii) M/s. Tubular Rivest P Ltd., (PAN - AAACT0122B) : The assessee has not produced any material regarding its transaction of investing in shares of M/s.Brahmani Industries. Hence, it is very clear that the precondition for proving the transaction be as per law has not fulfilled. Therefore, the addition may kindly be sustained. (iii) M/s.Kireeti Power Corporation Private Limited (PAN - AADCK2296A): Though the balance sheet of the investor assessee reflects investment of Rs. 92,42,00,000/- at Page No.209 of Paper Book, it may please be noted that the assessment order was passed under section 143(3) rws 144 of the I.T. Act dated 31-03-2013 for the Assessment Year 2010-11. The burden is on ....
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.... AFJPA6974P) : The balance sheet reflects investments of Rs. 1,13,81,47,548/ -. Schedule 6 reflects investment in shares of Rs. 39,63,25,600/-. However the same would not reflect the investment in the above company. Assessment has been completed under section 153C rws 144 for Assessment Year 2010-11 dated 31/3/2013. The assessment order does not deal with investment in shares of the above assessee-company. It is submitted that burden is on the assessee to establish identity and creditworthiness of the investor and genuineness of the transaction, which was not discharged by the assessee during the assessment proceedings and appellate proceedings. The mere production of the accounts and assessment orders of the investor company would not amount to discharge of burden imposed on the assessee as held by the various High Courts and the Hon'ble Supreme Court establishing identity and creditworthiness of the investor and genuineness of the transaction. (viii) M/s. GJR Holding International Ltd: The assessee has not produced any material regarding its transaction of investing in shares of M/s. Brahmani Industries. Hence, it is very clear that the precondition for proving the transact....
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....ue Authorities which is also now placed before the Tribunal wherein the details of the share applicants who had infused funds in the assessee's company for allotment of shares, such as acknowledgement of the return of income filed, assessment orders u/s. 143(3) of the Act, PAN, Balance Sheet and statement of accounts etc. The Ld. AR argued that even at this stage the Ld. Revenue Authorities has not made any negative inference regarding the particulars filed in the paper book. It was therefore pleaded that based on the facts placed before the Tribunal which are already available with the Revenue, justice may be rendered. The Ld. DR on the other hand relied on the orders of the Ld. Revenue Authorities and prayed for confirming the same. 23. We have heard the rival submissions and carefully perused the materials on record. On examining the paper book filed by the assessee we observed the following particulars regarding the five entities who had infused funds aggregating to Rs. 311,88,97,960/- in the assessee company during the relevant assessment year for allotment of shares. 1. Obulapuram Mining Co. Pvt Ltd: (i) This company/entity has invested Rs. 1020,71,60,000/- (paper book p....
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....also made. The PAN of the assessee is stated as AADCK 2296 A in the assessment order. (v) Page No.222 consists of the CIN No. of the entity viz., U40102TG2007PTC053773. 3. Lakshmi Aruna Oxygen Private Limited: (i) This company has invested Rs. 82,32,00,000/- (Page No. 228 of the Paper Book) allotment of equity share in the assessee company hence, it is an associate concern of the assessee company. (ii) The Ld. AR's submission that the Directors of the associate company and the assessee company are the same is not disputed. (iii) Return of income was filed by the entity on 26/09/2010 declaring NIL income. (Page no. 372 of paper book) (iv) Page No. 223 to 234 of the paper book contains the audited balance sheet and statement of accounts from which it is evident that the entity has equity share capital to the extent of Rs. 75,12,50,000/-. (v) Page No. 372 to 376 consists of the assessment order U/s. 144 of the Act of the entity for the AY 2010-11 dated 20/03/2013 by the ITO, Ward-16(1), Hyderabad wherein it was observed by the Ld. AO that the entity had obtained loan to the extent of Rs. 8,23,40,000/- and since no explanation was given the same was treated as unexplained....
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....heet and statement of accounts from which it is evident that Smt. G. Lakshmi Aruna has capital of Rs. 121,79,36,516/- and in page no. 242 she has declared excess of income over expenditure of Rs. 26,78,56,375/-. Form 3CD is filed in page No. 254 to 261 certified by the auditor. (v) Smt. Lakshmi Aruna's proprietary concern M/s. Lakshmi Aruna Minerals statement of accounts are filed in paper book page no. 246 to 250 and the consolidated balance sheet and P & L Account are filed in paper book page No. 251 to 253. In the consolidated P & L Account Smt. G. Lakshmi Aruna has declared a profit of Rs. 31,32,38,610/- (Page No. 253). (vi) Page No. 263 to 288 consists of the assessment order passed U/s. 153C r.w.s 144 of the Act of Smt. G. Lakshmi Aruna for the AY 2010-11 dated 31/3/2013 by the DCIT, Central Circle-1(3), Bangalore wherein her returned income is accepted at Rs. 23,47,11,430/- and certain further additions are also made. 24. The above-mentioned facts could not be refuted by the Ld. DR. Further it is apparent that factually the all the entities were assessed to tax and additions were made on substantive basis with respect to certain entities. It is also apparent that all th....
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.... invited our attention to the proviso to section 68 of the Act, which was inserted by the Finance Act, 2012, putting further onus upon the assessees to substantiate the source of source of funds, where such funds are received by way of share capital or share application money. Having perused the same, we find merit in the submission of the Ld. AR of the assessee that, the proviso to section 68 of the Act, inserted by the Finance Act, 2012 was made effective by the Legislature from 01/04/2013 ie., AY 2013-14 and onwards; and thus it was not applicable in the relevant AY 2010-11. For this, reference is made to the Memorandum as well as the Notes to Clauses of the Finance Bill, 2012 which also makes it explicitly clear that the Legislature had introduced the proviso to section 68 of the Act prospectively and thus, the same was made applicable only from AY 2013-14 and onwards. One may also rely on this regard, to the judgment of the Full Bench of the Hon'ble Supreme Court in the case of CITR vs. Vatika Township Pvt. Ltd (367 ITR 466) where the Hon'ble Supreme Court categorically held that any legislation which imposes new obligation or new duties or a new levy shall have to be necessar....
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.... produced by the assessee. On examining the facts of the case it is apparent that the ld. AO had made scrutiny assessment in the case of all the share applicants under the relevant sections of the Act. In these circumstances, we are of the view that the revenue does not have anything to hold against the assessee in a constructive manner. As regards the Revenue's contention that there has been a violation of Rule 29 of the Appellate Tribunal Rules, 1963 by the assessee, we find the same to be baseless and factually misconceived. This Tribunal on 11-06-2021, in exercise of the powers conferred under Rule 29-31 of the Appellate Tribunal Rules, 1963, had directed the assessee to furnish the income-tax acknowledgments, financial statements and assessment orders of the shareholders. It was in compliance with the directions issued by us that the assessee had furnished a compilation of these documents in the form of paper book and a copy of the same was also submitted with the Revenue. Admittedly, these documents were forwarded to the Ld. AO for his comments and report. It was only after the receipt of remand report from the Ld. AO/ Ld.CIT that this Tribunal has taken these documents o....
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....PCIT vs. Hitech Residency Private Limited reported in 96 Taxmann.com 402, Hon'ble Bombay High Court in the case PCIT vs. Paradise India Shipping Pvt Ltd reported in 84 Taxmann.com 58, Hon'ble Madhya Pradesh High Court in the case CIT vs. Chain House International Private Limited reported in 98 Taxmann.com 47. 29. As noted from the judicial precedents cited above, where any sum is found credited in the books of an assessee then there is a duty casted upon the assessee to explain the nature and source of credit found in his books. In the instant case, the credit is in the form of receipt of share application money from share applicants. The nature of receipt towards share capital is seen from the entries passed in the respective balance sheets of the companies as share capital and investments. In respect of source of credit, the assessee has to prove the three necessary ingredients i.e. identity of share applicants, genuineness of transactions and creditworthiness of share applicants. For proving the identity of share applicants, the assessee furnished the name, address, PAN of share applicants together with the copies of balance sheets and Income Tax Returns. With regard to the cre....
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.... Ltd vs. CIT reported In 364 ITR 53:- in this case the entire share application money were brought in the form of cash deposits in the bank account of the share applicants on the same day from which pay order was obtained in favour of the assessee for issue of shares. (iv) Shri Chakra Cements Ltd vs. ITO reported in 221 Taxman 181: In this case, no documents were produced to prove the genuineness of the share applicants such as their statement of accounts, IT acknowledgements, bank statements. The source of the share applicants was also not established. (v) Gayathri Associates vs. ITO (221 Taxmann.com 143), Dr. D.S.S. Rao vs. ITO reported in 356 ITR 117, Vijay Kumar Talwar vs. CIT reported in 330 ITR 1: In these cases none of the creditors were traceable and in some instances cash deposits were found in their accounts. (vi) Dhingra Global Credence Pvt Ltd vs. ITO reported in 1 ITR(T) 529:- In this case the assessee had failed to prove even the basic identity of the shareholders and the letters sent to them were returned as 'unserved'. The shareholders were also not traceable. 31. The Ld. DR placed reliance in 19 decisions of various higher judiciary enclosed in paper book pa....