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2016 (11) TMI 387 - ITAT MUMBAI

2016 (11) TMI 387 - ITAT MUMBAI - TMI - Unexplained cash credit u/s 68 - assessee unable to explain the sources of the introduction of fresh share capital/share application - Held that:- The assessee has admitted that these share capital/share application money raised by the assessee to the tune of ₹ 3,19,35,000/- were fictitious and bogus entries and in-fact no such share capital/share application money was ever raised by the assessee and the fictitious entries in the books of accounts ar .....

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s per authority of law. These additional evidences in our considered view goes to the root of the matter and needs to be admitted and adjudicated on merits in order to advance substantial justice and we admit these additional evidences filed by the assessee vide page 43-148/paper book-II . However, the contentions of the assessee and the additional evidences so filed by the assessee need verification by the authorities below and hence we are of the considered view that in order to identify and a .....

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nt Member This appeal, filed by the assessee company, being ITA No. 7481/Mum/2013, is directed against the appellate order dated 25th September, 2013 passed by learned Commissioner of Income Tax (Appeals)- 1, Thane (hereinafter called the CIT(A) ), for the assessment year 2010-11, the appellate proceedings before the learned CIT(A) arising from the assessment order dated 14th February, 2013 passed by the learned Assessing Officer (hereinafter called the AO ) u/s 143(3) of the Income Tax Act,1961 .....

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mstances of the case, the Ld. CIT(A) failed to appreciate that S.68 of the Income-tax Act, 1961 is not applicable to facts of the present case as the provision presupposes actual receipt of amount/sum. 3. The appellant prays that addition made of ₹ 3,19,35,000/- may be deleted. 3. The brief facts of the case are that assessee is in the business of engineering, erection and commissioning and consultancy in Oil and Gas industry. The assessee was asked to produce the books of accounts by the .....

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was an increase in share application money amounting to ₹ 2,49,35,000/- which is wholly subscribed by Shri Krishnanand Trivedi. The assessee was asked to explain regarding the source of share subscription and share application money of ₹ 3,19,35,000/-. The assessee in reply submitted that Shri Krishnanand Trivedi was one of the Directors of the assessee company who was earlier running a proprietary concern namely M/s Alvi Tech Services which was engaged in the business of erection o .....

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ch Services along with personal capital of Shri Krihnanand Trivedi. The assessee submitted the capital account of Shri Krishnannand Trivedi which is as under:- To drawing 375,000.00 By balance B/d 5,33,01,281.48 To balance c/d 5,37,21,502.84 By Net Profit 668,366.36 By FDR Interest 126,855.00 …………………. 54,096,502.84 ============ ……………….. 54,096,502.84 ============ The assessee claimed that the above is the .....

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009 the capital balance of ₹ 5,47,16,502/- represents following items: Flat at Ganesh Krupa ₹ 5,25,000.00 Immovable Property ₹ 10,02,545.00 Movable Assets ₹ 35,02,525.00 Investment in Alvi Tech Services Pvt. Ltd. ₹ 75,00,000.00 Loan to Alvi Tech Services Pvt. Ltd. Alok ₹ 50,00,000.00 Loan to Alvi Tech Services Pvt. Ltd. ₹ 51,78,000.00 Alvi Tech Services Pvt. Ltd. Share Application Money ₹ 31,500,000.00 ICICI Bank ₹ 7,049.69 TDS ₹ 301,50 .....

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eturned Income in Rs. 2001-02 50,000/- 2002-03 85,580/- 2003-04 1,47,524/- 2004-05 1,77,340/- 2005-06 4,02,090/- 2006-07 6,95,840/- 2007-08 2,00,000/- 2008-09 2,00,000/- 2009-10 4,97,500/- 2010-11 4,97,500/- 2011-12 4,97,500/- Further from the return of income filed by Shri Krishanand Trivedi, it was observed by the AO that capital balance shown by Shri Krishnanand Trivedi as Prop. of Alvi Tech Services are very less. Capital balance shown by Shri Krishanand Trivedi as prop of Alvi Tech Services .....

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the return of income by Shri Krishnanand Trivedi was ₹ 18,77,653/- while the assessee has claimed capital balance as on 31st March, 2006 of ₹ 5,37,21,502/-. The assessee was asked to file the details of capital balance of ₹ 5,37,21,502/- as on 31st March, 2006 along with the list of machineries, tools, equipments etc. transferred to the assessee company along with the bills, date of acquisition & bank statements to prove the source of acquisition of machineries. In response .....

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its and also the Gratuity, PF amount which was considerably a good amount to start business of his proprietary concern M/s Alvi Tech Services in the field of erection, commissioning and consultancy in the field of oil and gas industries. He stated that the share application money of ₹ 3.15 crores represents Tools, Equipments, Machinery etc. used by Alvi Tech Services , a proprietary concern which was merged with Alvi Tech Services Pvt. Ltd. He further stated that documentary proof of trans .....

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s available. Thus, the A.O. held that Shri Krishnanand Trivedi was not having enough salary to substantiate such a capital balance and the income disclosed in the return of income by Shri Krishnanand Trivedi is very less as compared to the capital balance. The assessee was asked to explain as to how such a huge capital has been built up and also asked to explain the source of the said capital. The assessee, in reply has filed capital account for the period 1990 to 2005 claiming to be personal ca .....

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the year 1990 to 2000 while in fact during that time the assessee was working with Indian till 1994 and thereafter with other companies. Similarly , no evidence was brought on record regarding the receipt of family settlement nor there was evidence with regard to receipt of ₹ 15 lacs at the time of retirement from Indian Navy although the amount stood credited in capital account is much higher at ₹ 21,60,000/- . The assessee filed revised capital account for the period 01- 04-1990 t .....

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that the assessee cooked up the capital account to explain the capital balance . It was observed that the capital balance as at 31-02-2005 was ₹ 1,79,60,974/- whereas the opening capital as on 01-04-2005 was shown at ₹ 5,33,01,281.48 and thus the assessee has increased the capital by ₹ 3,53,40,307/- without any basis. The A.O. relied on the decision of Hon ble Supreme Court in the case of Roshan D Hatti v. CIT 107 ITR 938 (SC) and Kale Khan Mohammad Hanif v. CIT, 50 ITR 1 (SC) .....

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ce of Shri Krishnanand Trivedi was found to be an unexplained credits in the hands of the assessee company and the same was brought to tax by the A.O. in the hands of the assessee company as unexplained cash credit u/s. 68 of the Act vide assessment order dated 14.02.2013 passed by the AO u/s 143(3) of the Act. 4. Aggrieved by the assessment order dated 14.02.2013 passed by the A.O. u/s. 143(3) of the Act , the assessee filed first appeal before the ld. CIT(A). 5. The assessee during proceedings .....

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m of the assessee on the ground that the assessee was not able to substantiate the claim of introduction of share capital/share application money to the tune of ₹ 3,19,35,000/- during the previous year relevant to the assessment year whereby the built up capital in the capital account of Shri Krishnanand Trivedi has also been found to be factually incorrect as compared to the return of income filed by the assessee with the Revenue. The assessee failed to prove the creditworthiness of Sh Kr .....

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te orders dared 25.09.2013 passed by learned CIT(A). 6. Aggrieved by the appellate order dated 25-09-2013 passed by the ld. CIT(A), the assessee is in appeal before the Tribunal. 7. The ld. Counsel for the assessee at the outset submitted that the additions have been made u/s 68 of the Act as unexplained cash credit whereby an amount of ₹ 3,19,35,000/- was added to the income of the assessee as the assessee because the assessee was not able to explain the sources of the built up of the cap .....

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s should be admitted in the substantial interest of justice. The ld. Counsel submitted that the assessee has not received any money towards share capital of ₹ 3,19,35,000/- during the assessment year as is reflected in the books of account. It is the say of the ld. Counsel that these are fictitious entries made by the assessee in the books of account which does not exist and the same was undertaken with a view to avail bank loan from Bank of Baroda in order to be eligible to get the suffic .....

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fidavit of Shri K.N. Trivedi dated 21st November, 2015 which is placed on record as additional evidences vide paper book page No. 43 to 46 and further prayed that the said additional evidence should be admitted and adjudicated on merits. There are additional evidences filed for the first time before the Tribunal which are part of the paper book-II/pages 43-148. The ld. Counsel further requested that the matter may be remanded back to the CIT(A) for verification of all these additional evidences .....

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and receipted challans are enclosed as additional evidence filed before the Tribunal. The Resolution is also placed on record vide paper book-II/ page 69 to 72 enabling the assessee to recast and revise its financial statements. 8. The ld. D.R. relied on the order of the ld. CIT(A) and submitted that the matter can be remanded to the file of the ld. CIT(A). 9. We have considered the rival contentions and also perused the material available on record. We have observed that the assessee has raised .....

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,00,000/- were bogus and fictitious entries and was made in order to raise more loans from the bank while the fact of the matter is that no such share capital was ever raised by the assessee company and these entries to the tune of ₹ 3.15 crores were bogus entries . It is further the say of the assessee s counsel that allotment of ₹ 70 lacs of share capital during the year is genuine which is supported by receipt of funds in immediately preceding year. It is further stated that the m .....

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along with complete re-casted and revised financial statements for the impugned previous year 2009-10. The application dated 26.11.2015 for admission of additional evidences have been filed by the assessee before the Tribunal under Rule 29 of the Income Tax (Appellate Tribunal) Rules, 1963 wherein additional evidences filed with the Tribunal are placed at page no 43-148/paper book-II and it is prayed that the said additional evidences be admitted and adjudicated on merits. The said additional e .....

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led with Ministry of Corporate affairs for filing revised and re-casted audited accounts for financial year 2009-10 along with paid challans are enclosed in paper book-II/page 65-68. The copy of notice of Extra-ordinary General Meeting(EGM) , Board Resolutions and Resolutions passed at EGM are also filed as additional evidences before the Tribunal. Sanction letters from Bank of Baroda is also filed as additional evidences to substantiate that the loans/limits were enhanced by the bank in favour .....

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