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2015 (4) TMI 544 - ITAT BANGALORE

2015 (4) TMI 544 - ITAT BANGALORE - TMI - Deemed dividend - whether source and nature of credit found adequate in the context of section 2(22)(e) cannot be treated as inadequate for purposes of section 68? - Held that:- After rejecting the technical objections raised by the assessee questioning CIT(A)'s power to invoke the provisions of the impugned order by discovery of a new source of income under Section 68 of the Act in place of deemed dividend u/s.2(22)(e) of the Act, the learned CIT (A .....

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aised or considered or addressed by him in remand proceedings. We also find that not all the issues raised by the assessee in the grounds raised in this appeal (supra) appear to have been raised before the learned CIT(A) or considered or addressed by the learned CIT(A) in the impugned order. In this factual and legal matrix of the matter, we are of the view that in the interest of equity and justice, the issue of the unsecured loan of ₹ 1.25 Crores taken by the assessee from M/s. Deccan Al .....

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(D.R). ORDER Per Shri Jason P. Boaz, A.M. : This appeal by the assessee is directed against the order of the Commissioner of Income Tax (Appeals)-I, Bangalore dt.12.8.2013 for Assessment Year 2009-10. 2. The facts of the case, briefly, are as under :- 2.1 The assessee, in the business of trading in rolled products, filed the return of income for Assessment Year 2009-10 on 26.9.2009 declaring income of ₹ 49,25,026. The return was processed under Section 143(1) of the Income Tax Act, 1961 ( .....

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d the assessee's appeal vide the impugned order dt.12.8.2013. 3.1 Aggrieved by the order of the CIT (Appeals) - I, Bangalore for Assessment Year 2009-10 dt.12.8.2013, the assessee has preferred this appeal before the Tribunal raising the following grounds :- 1. DISCOVERY OF NEW SOURCE OF INCOME BY CIT (APPEALS) Learned CIT (Appeals) ought to have noted that invoking section 68, after deleting the addition under Section 2(22)(e) with respect to the same time, amounted to discovery of new sour .....

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by the appellant and the nature and source of credit were not contradicted either by the learned A.O. or the learned CIT (Appeals). 2.3 The item was substantiated before the learned A.O. and the learned CIT (Appeals) with the original unpresented stale cheque and books and records of both the appellant and Deccan Alloys Pvt. Ltd. 2.4. There was no physical receipt of money by the appellant as the cheque was not encashed and remained unpresented, reflected in the bank reconciliation statements o .....

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, the cheque was not stale and could not have been reversed in the audited accounts / books. 3. UNPRESENTED CHEQUE APPERING IN BOOKS. 3.1 Conclusion of learned CIT (Appeals) that an unpresented cheque cannot be recorded in books of account is contrary to rules of accounting. 3.2 Learned CIT (Appeals) erred in stating that the appearance of the unpresented cheque in bank reconciliation statement is immaterial. 4. SECTION 68 Vs. Section 2(22)(e). Learned CIT (Appeals) having deleted the addition o .....

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nd forgo, any or all the grounds of appeal and adduce additional evidence before or at the time of the hearing. 6. For these grounds which are without prejudice to each other and other grounds which may be urged at the time of hearing, this appeal may be allowed and justice rendered. 3.2.1 From a perusal of the grounds raised, it is seen that all of them challenge the action of the CIT (Appeals) in invoking the provisions of section 68 of the Act with respect to the credit of ₹ 1.25 Crores .....

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he learned CIT (Appeals) was wrong in invoking section 68 of the Act with respect to the credit of ₹ 1.25 Crores appearing in the assessee's balance sheet as on 31.7.2009. The learned Authorised Representative contends that the identity and existence of the creditor i.e. M/s. Deccan Alloys Pvt. Ltd. is established by furnishing of name, address, PAN details, the details of cheques, books of account, etc which establish the nature and source of credit of the concerned sum of ₹ 1.2 .....

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tion of the source and nature of the credit of ₹ 1.25 Crores is satisfactory, then how can the very same explanation of the source and nature of the credit be found inadequate for the purposes of section 68 of the Act. It is prayed by the learned Authorised Representative that while the learned CIT (Appeals) has deleted the addition under Section 2(22)(e) of the Act, the addition by the learned CIT (Appeals) of ₹ 1.25 Crores as unexplained credit under Section 68 of the Act by invoki .....

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redit under Section 68 of the Act on the grounds that the power conferred on the appellate authority by Section 246 r.w.s. 250 of the Act indicates an amplitude and width which is co-terminus with that of the Assessing Officer. It is submitted that the appellate authority could substitute the order of the Assessing Officer by his own; and direct the Assessing Officer what to do; as has been held by the various judicial pronouncements cited at para 3.12 of the impugned order. 3.3.2 The learned De .....

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oned in the assessee's return of income, and was considered by the Assessing Officer in the order of assessment it cannot be considered as a new source of income and the learned CIT(A) has therefore correctly invoked his power of enhancement under Section 251(1) of the Act. It was submitted by the learned Departmental Representative that at the appellate stage, additional evidence may be taken and further enquiry can be made by the learned CIT(A). In view of the above, it is submitted that t .....

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eet as on 31.3.2009 filed along with the return of income, observed that the assessee has shown unsecured loans of ₹ 2,50,00,000. On examination of the details called for in this regard, it was noticed that the assessee is said to have received a sum of ₹ 1.25 Crores from its sister concern, M/s. Deccan Alloys Pvt. Ltd. in which it was a share holder to the extent of 58.8%. The Assessing Officer on further examination of the matter was of the view that since the assessee is having a .....

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learned CIT(A), the assessee came up with additional evidence and a new claim that the cheque of ₹ 1.25 Crores received from M/s. Deccan Alloys Pvt. Ltd. dt.27.12.2008 was not encashed and had become stale. In the remand report furnished in this regard, the Assessing Officer observed that if the submission of the assessee is to be taken at face value, then the assessee ought to explain the sources for this excess asset over liability to the extent of ₹ 1.25 Crores. Taking note of the .....

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ce of income under Section 68 of the Act in place of deemed dividend u/s.2(22)(e) of the Act, the learned CIT (Appeals) on the merits of the issue, at para 3.16 of the order, held that the addition of ₹ 1.25 Crores is to be made as unexplained cash credit u/s.68 of the Act instead of the addition as deemed dividend under Section 2(22)(e) of the Act which is extracted hereunder :- 3.16 The facts narrated above, it is apportionate to examine the merit of the issue as below :- i) The appellan .....

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n of funds 1.Fixed Asset: Gross Block Depreciation 5A 66,439.00 66,070.00 9,969.00 3,694.00 NET BLOCK 56,470.00 57,376.00 2. Investments 04 10,000.00 10,000.00 3. Current Assets, loans and advances a. Sundry Debtors 05 161,466,386.00 97,910,966.00 b.Cash & Bank Balances. 06 262,459.14 45,208,083.29 c.Loans & Advances 07 4,037,631.00 653,526.00 166,036,476.14 143,772,575.29 Less : Current liabilities & Provisions. 08 76,824,691.00 78,176,899.00 Net Current Assets 89,211,785.14 65,595, .....

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nsecured loan in the balance sheet as on 31.3.2009. Further, it is also stated that the said cheque has not been encashed even as on date and the amount appears in the Bank Reconciliation Statement of the aforesaid entities. iv) The contention of the AR of the appellant is that since the appellant has received cheque from M/s. DAPL and valid for six months even after expiry of relevant accounting year i.e. 31.3.2009, therefore shown as loan in the appellant s books, fallacious statement. It may .....

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liabilities and assets at the end of the year. The AR of the appellant furnished the reconciliation statement as under :- Balance as per Bank Book as on 31.3.2009 Rs.5,82,13,410. Less : Charges issued, but not presented for payment. Rs.20,15,22,369. Add : Cheques deposited but not yet claimed as on 31.3.2009. Rs.15,40,73,536 Balance as per pass sheet. Rs.1,07,64,576. vi) Cheque for ₹ 1,25,00,000 issued on 27.12.2008 and date of validity for encashment expired on 26.5.2009 whereas the appe .....

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