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TMI Blog2015 (2) TMI 1032X X X X Extracts X X X X X X X X Extracts X X X X ..... as under :- 1. M/s. Blue lagoon Investment Pvt. Ltd. Rs. 17,00,000/- 2. M/s. True Bell Holding & Impex Pvt. Ltd. Rs. 17,00,000/- 3. M/s. Mediterian Investment Pvt. Ltd. Rs. 17,20,000/- 2.1 Thus, the assessee has shown Rs. 51,20,000/- as outstanding as on 31/3/1997. The AO in the course of assessment proceedings for the assessment year 1997-98 conducted the enquiry to verify this fact and examined the assessment records of these three companies. The AO found that these companies do not show any amount receivable from the assessee. On further enquiry the AO found that these amounts have been received by these three companies during the FY 1992-93. Accordingly, the assessment for assessment year 1993-94 was re-opened by issuing notice under section 148 of the Income tax Act on 31/3/2000. In the course of re-assessment proceedings the assessee submitted that the business of the assessee was taken over by Nath Group of companies in the month of December'92 and accordingly the amount due to the said three companies were repaid by Nath Group of companies. The assessee furnished the details of cheque No., amount, date and bank on which the cheques were drawn for re-payment of said amo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... representative of the said company appeared before AO but could not explain either the nature of the advance given to the assessee nor as to how the account has been squared up. The AO asked the assessee to produce the remaining two parties but the assessee failed to produce these parties. Despite the various efforts of the AO it was recorded that he could not locate these two parties. Even the assessee itself was not able to locate these two parties or to produce these parties before the AO. Accordingly the AO repeated the addition of Rs. 51,20,000/- as made in the original assessment. Before the CIT(A) the assessee filed fresh evidence in the form of fresh confirmation from these three parties. The CIT(A) admitted the additional evidence and referred the same to the AO for verification and comments. The AO submitted its remand report dated 24/2/2010. The AO in the remand proceedings doubted the veracity of the confirmations produced by the assessee in view of the fact that despite the best efforts of the AO the summons could not be served on these two parties and the 3rd one did not appear during the set aside assessment proceeding despite service of summons for appearance before ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... before the authorities below. The ld. AR has further submitted that the summons issued by the AO to M/s. True Bell Holding & Impex Pvt. Ltd. was at wrong address as it is clear from the return of income of M/s. True Bell Holding & Impex Pvt. Ltd. for the assessment year 2003-04. Therefore, the same could not be served because it was issued at incorrect address. The ld. AR submitted that as per directions of this Tribunal the AO was to verify only one aspect, i.e., whether the payment of larger amount by Nath Pulp & Paper Ltd. to Blue Lagoon Ltd. and M/s. True Bell Holding & Impex Pvt. Ltd. includes the payment of Rs. 17.00 lacs each w.r.t. repayment of application money on behalf of the assessee. The assessee produced sufficient evidence to show that the said payments by Nath Pulp & Paper includes the payment of Rs. 17.00 lacs each to M/s. Blue Lagoon Investment Pvt. Ltd. and M/s. True Bell Holding & Impex Pvt. Ltd. However, the AO has failed to prove otherwise. He referred to the various documents produced during the remand proceedings and submitted that the confirmation from Nath Group as well as from all the three applicants were produced by the assessee to prove that the amount ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ers of authorities below. 4.1 We have considered the rival submissions as well as the relevant material on record. The controversy of repayment of application money of Rs. 51,20,000/- to three share applicants arose from the fact that these three share applicants have shown the refund of the application money received in the Financial Year 1992-93 whereas the assessee has been showing the said amount of Rs. 51,20,000/- outstanding payable to these three companies as under :- 1. M/s. Blue Lagoon Investment Pvt. Ltd. Rs. 17,00,000/- 2. M/s. True Bell Holding & Impex Pvt. Ltd. Rs. 17,00,000/- 3. M/s. Mediterian Investment Pvt. Ltd. Rs. 17,20,000/- 4.2 This fact was noted by the AO during the assessment proceedings of the assessment year 1997-98. Thus it is clear that in the books of account of the assessee the amount remained as unpaid and outstanding but at the same time the counter parties shown the receipt of refund of said application money in the FY 1992-93 itself. There is no dispute that these three parties received their money and squared all their accounts receivable from the assessee . The assessee has also not disputed that the application money was refunded to these t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nies. So far as the payment made by Nath Industrial Chemical Ltd. of Rs. 17,20,000/-; and by Nath Papers & Pulp Ltd. of Rs. 1.20 crores as well as Rs. 1.29 crores respectively to these three companies, the same is not disputed as the assessee has produced the relevant record consisting of the bank statement of Nath Group of companies and the respective companies have also accepted the said payment and it was also recorded in their books of account and in their bank account. The Tribunal set aside this issue for a limited purpose to verify whether the larger payment of Rs. 1.21crores and Rs. 1.29 crores by Nath Papers & Pulp Ltd. to M/s. Blue Lagoon Investment Pvt. Ltd. and True Bell Holding & Impex Pvt. Ltd. respectively includes payment of Rs. 17.00 lakhs each in respect of share application money. Thus the limited enquiry was directed to be conducted by the AO to find out whether the amount of share application money received by these three companies through these cheques of larger payment or by different mode of payment. During the set aside proceeding before the AO none of the parties gave any satisfactory reply or confirmation in this respect that the respective amount for sha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ndustrial Chemical Ltd. has paid by cheque No.2993 for Rs. 17,00,000/- and cheque No.2994 for Rs. 20,000/- both dated 17.10.1992 on Bank of Baroda, Nariman Point Branch to M/s. Mediterian Investment Pvt. Ltd. ii. Similarly M/s. Nath Paper and Pulp Mills Ltd., had issued cheque No.418085 dated 2.7.1992 for Rs. 1,29,00,000/- drawn on State Bank of India, Backbay Reclamation Branch, in favour of Blue Lagoon Investment Ltd., which included a sum of Rs. 17,00,000/- paid on behalf of Rama Techno Paper Industries Ltd. iii. M/s. Nath Paper and Pulp Mills Ltd., had also issued another cheque bearing No.418086 dated 2.7.1992 for Rs. 1,21,00,000/- drawn on State Bank of India, Backbay Reclamation Branch, in favour of M/s. True Bell Holding & Impex Pvt. Ltd., which included a sum of Rs. 17,00,000/- paid on behalf of Rama Techno Papers & allied Industries Ltd." 4.6 As we have discussed above that the payment of the above said larger amounts is not in dispute and the only aspect which was to be examined by the AO was whether the amounts of Rs. 17,20,000/- and Rs. 17.00 lacs and Rs. 17.00 lacs respectively refunded to these three companies were part of these larger payments. The assessee has f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aised a question about the takeover agreement to verify whether liability of repayment was part of the takeover agreement or not however, it is pertinent to note that when the assessee has produced the relevant record to establish that the payment was made by Nath Group of Companies then the takeover agreement will not change the fact of payment made by these companies. Accordingly, in the facts and circumstances of the case, we hold that the assessee has proved the fact that the repayment of application money of Rs. 51,20,000/- was made to these three companies through Nath Group of companies and therefore, addition made by the AO of this account is not sustainable and accordingly deleted. 4.8 Before parting with the issue we would like to consider the judgment relied upon by the ld. AR in the case of Salek Chand Agarwal (300 ITR 426)(All.) (supra). In the said case during the search of third party a document was seized which shows three credit entries in the name of the assessee. The assessee denied such advance or deposit with the said party. The Hon'ble High Court after taking note of the fact that no material was found which could link the advance/deposit of Rs. 2.20 lacs ..... X X X X Extracts X X X X X X X X Extracts X X X X
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