TMI Blog2017 (12) TMI 199X X X X Extracts X X X X X X X X Extracts X X X X ..... ase/expenses incurred through account payee cheques from the bank account and such payments have been shown as amount recoverable and no expenses including purchase have been debited to the profit & loss account, therefore, there is no effect on the profit of the assessee-company for assessment year 2007-08 qua this amount.Thus, we uphold the order of the ld. CIT (Appeals) in deleting the addition - Decided in favour of assessee Unexplained credit on account of share application money received from four entities - Held that:- As the assessee submitted that assessee would be in a position to produce these persons and in the interest of justice the matter should be restored back to the file of the Assessing Officer, because assessee has given all the relevant documents to prove all the three limbs of proving the nature and source of credit, i.e., identity; genuineness and creditworthiness. Simply because Directors or the authorized persons from the said company could not be produced, no adverse inference could have been drawn. Looking to the entire fats and circumstances of the case and on the basis of the plea taken by the ld. counsel for the assessee and in the interest of subst ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 537/- made by the Assessing Officer on account of unexplained investment in stock being the difference in the stock statement submitted to the bank as compared to the stock statement furnished to the Assessing Officer during the course of assessment proceedings. 3. The brief facts qua the issue raised are that the assessee-company has filed its return of income for assessment year 2007-08 on 25/10/2007 declaring its total taxable income at ₹ 47,85,298/-. Such return of income was subjected to scrutiny and assessment order under section 143(3) was passed vide order dated 31/12/2009 accepting the returned income. Thereafter, assessee s case has been reopened under section 147 by issuance of notice dated 28/3/2011 under section 148. The background and the reasons for reopening the case was that a search and seizure operation under section 132(1) was carried out on 8/11/2008 in the case of Nimitaya Group in which Ashwani Mahajan Group was also covered. The assesseecompany was also subjected to survey under section 133A, wherein it was revealed that the assessee-company has taken huge share application money. Based on this information, assessee s case has been reopened. Du ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r assessment year 2007-08; (iii) thirdly, reconciliation of stock statement is meant only for their bankers. There is no misuse of funds of the overdraft or cash credit account, because it was merely to enjoy credit facilities against the closing stock; (iv) fourthly, for the last several years, assessee has been regularly assessed and the trading results and gross profit of the assessee-company have always been accepted. There is no cash sale or cash purchase or any unaccounted sale of purchase found during the year which also supports that there is no difference in the closing stock as on 31/3/2007. 6. The ld. CIT(A), on perusal of the material placed on record and the financial statements, noted down the following reconciliation:- (a) Plants and machinery Rs.3,64,66,010 Schedule VIII of Balance sheet (b) Advances to suppliers Rs.1,45,64,347 Schedule XI of balance sheet Rs.5,10,30,357 7. Ld. CIT(A) further noted that assessee has disclosed to the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... value of stock to the bank at ₹ 10,08,30,357/- as against the value of closing stock shown in the books of account as on 31/3/2007 at ₹ 4.98 crores. We find that before the ld. CIT(A) as well as before the Assessing Officer, assessee has duly explained that difference amount of ₹ 5,10,30,357/-, which has been added by the Assessing Officer, was firstly, on account of plant machinery of ₹ 3,64,66,010/- which has been shown in Schedule VIII of the balance sheet; and secondly, advance to the suppliers shown at ₹ 1,45,64,347/- reflected in Schedule XI of the balance sheet. Thus, there is no such difference apparently in the value of closing stock. It is also an admitted fact that there is no difference in the quantum and in the actual value of the closing stock as appearing in the books of account and there is no cash element on such difference because the amount aggregating to ₹ 5,10,30,357/- is on account of payment given to the suppliers for purchase/expenses incurred through account payee cheques from the bank account and such payments have been shown as amount recoverable and no expenses including purchase have been debited to the profit los ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the prior satisfaction of Ld. CIT in terms of proviso to Sec. 151(1) of I.T. Act, 1961 which, as per records, was not followed. 5) That the said impugned additions of ₹ 90,00,000/- and the impugned assessment order are bad in law, illegal, unjustified, contrary to facts and law without giving adequate opportunity of hearing in violation of principles of natural justice and the same deserves to be quashed and the same are not sustainable on legal and factual grounds. 6) That having regards to the facts and circumstances of the case, Ld. A.O. has erred in law and facts in charging interest u/s 234A, 234B, 234C and 234D of Income Tax Act, 1961. 12. So far as legal ground, which has been raised in grounds No. 2 and 4, we find that the assessee has not taken these grounds either before the Assessing Officer or before the ld. CIT (A). These are purely legal and jurisdictional grounds challenging the validity of reopening under section 147 and also challenging the power of the authority for sanctioning notices under section 148 in terms of provisions of section 151(1). All these facts as raised in the legal grounds though does not need any investigation of new facts, but d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... .R. strongly opposing to assessee s submission on the issue of share application money, submitted that the Assessing Officer did give opportunity to the assessee to produce the Directors of four share applicant companies, however, the assessee failed to do so and even before the ld. CIT(A), assessee could not produce these persons. Therefore, the order of the ld. CIT (A) in confirming the said amount of ₹ 90 lakhs should be confirmed. 16. After considering the rival submissions and on perusal of the relevant material on record, we find from the perusal of the order sheet entry (copy of which was filed during the course of hearing before us), show cause notice have been issued to the assessee at the fag-end of limitation, therefore, apparently it seems that the time given to the assessee to produce the persons from the share applicant companies was less. Though this opportunity was given again by the ld. CIT (A), but it seems that assessee failed to produce the said share applicants. Now before us, the ld. counsel for the assessee submitted that assessee would be in a position to produce these persons and in the interest of justice the matter should be restored back to the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es made to suppliers whereas the stock statement as on 01.04.2008 shows ₹ 8,42,50,000/-. All the above value of plant machinery and advances made for purchases have been shown in the books of account of the assessee company. Copies of these accounts showing the difference of ₹ 4,13,83,468/- are enclosed herewith which justify that there is no difference in the value of stock. 19. The Assessing Officer held that assessee s contention that difference on account of plant machinery and advances to the suppliers, which are duly reflected in the books of account, is not supported with any reliable documentary evidence and accordingly he made addition of difference amount of ₹ 4,13,83,468/- as unaccounted investment outside the books of account. Apart from that, Assessing Officer noted that such a difference in the value of stock as per books of account and as submitted to the bank authorities were for sums amounting to ₹ 2,61,20,464/- as on 30/9/2008; and ₹ 2,40,95,422/- as on 31/10/2008 and has added these amounts also, without even considering the fact that difference as on 31/3/2008 at ₹ 4,13,83,468/- was not for this financial year and n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ourse of remand proceedings by the ld. CIT (A). The ld. CIT (A) has categorically observed that the Assessing Officer could not point out any discrepancy in respect of stock as on 30/9/2008 vide his remand report dated 11/2/2013. However, in respect of advances made to the parties as on 31/10/2008, the Assessing Officer on enquiry in the remand proceedings pointed out the following discrepancies:- S. No. Particulars Amount Remarks 1. Jalpa Machinery (P) Ltd. 13,50,000 Party does not exists at A-41, Mayapuri, Phase-1, New Delhi 2. Sadashiv Marketing (P) Ltd. 45,15,000 Party not available 3. Punita Bharadwaj 5,00,000 Party were available but did not file the confirmation 4. North South Enterprise (P) Ltd. 14,50,000 Party were available but did not file the/ confirmation When this discrepancy was confronted to the asse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... me of the respective parties filed for various assessment years. Thus, the matter should be decided here on merits. 27. On consideration of entire factum and material discussed in the impugned order, we find that so far as the amount of advance given to the suppliers appearing in the books as on 30/9/2008, there seems to be no discrepancy pointed out by the Assessing Officer in respect of stock as on 30/9/2008 in the remand proceedings. Thus, the amount of ₹ 2,61,20,464/- which has been added by the Assessing Officer on account of difference in stock has rightly been deleted by the ld. CIT(A) which we confirm. 28. Now so far as the difference in stock on account of advances given to four parties as appearing in the books of account as on 31/10/2008, we find that in the case of three parties, assessee has filed confirmation, copy of account with their PAN details and photocopy of return of income. All the amounts in question has been paid through account payee cheques which has duly been reflected in the regular books of account of the assessee. Assessing Officer s case for making addition was that there is a difference of value of closing stock appearing in the books an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... /- on account of unaccounted advance given to AOne Machine Components (P.) Ltd. The Assessing Officer on this issue has noted the following facts in the assessment order:- 8. During the course of search at various business and residential premises of five Sub-Groups relating to the Nimitaya Group, incriminating documents/data stored in CPUs Laptops and Servers pertaining to other concerns were found and seized. During the course of post search proceedings and after examining documents found and seized, data stored in CPUs, Laptops and Servers found and seized/impounded and documents filed by the assessee, documents/information collected from banks, data taken from internet from the internet site of ROC, PAN data query, it has been noticed that following concerns are running their business activities from the same business premises of respective Sub-Group and are also managed and controlled by me same persons who have substantial interest in the Sub-Group. i. A-One Machined Components Pvt. Ltd. 27.12.04 AAFCA0530P Ward 19( ), New Delhi Machine Repairs and Cooler Parts Not Covered ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the ld. CIT(A), assessee submitted that necessary documents and confirmation were submitted during the course of assessment proceedings, but the Assessing Officer has completely ignored the same. Copy of said confirmation of ₹ 1,26,49,249/- from A-One Machine Components (P.) Ltd. was duly filed along with books of account and financial statement of the assessee for relevant period. The ld. CIT (A), on perusal of the entire material placed on record, held that assessee had filed confirmation and copy of account of the said company and mainly because of non-furnishing of bank account, the Assessing Officer cannot hold that assessee has failed to establish the genuineness of the transaction. However, during the course of appellate proceedings, assessee did filed bank statement, ledger account, vouchers, reconciliation statement, details of dealings between assessee as well as the said company, etc. However, the Assessing Officer had objected for admission of such additional evidence in his remand report. The ld. CIT (A) held that evidence, which has been filed by the assessee, are merely supportive documents and otherwise the transaction itself is proved from other evidences fi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ings of the ld. CIT (A) while confirming the said addition is as under:- 5.11. It is thus held that mere general and vague contention of the appellant that the seized documents are loose papers and the same are not in his handwriting cannot be a basis to negate the addition made in the order of assessment. 5.12. The page 6 of Annexure A-l is seized from the appellant's premises and the notings therein clearly spells in no uncertain terms that land is purchased and part component is paid by cheque and part in cash, and simply stating, that the same is not in appellant's handwriting, I am afraid, does not come to appellant's rescue, to rebut the onus cast upon by the provisions of section 132(4A) and section 292C. No explanation has been given by the appellant as to how the under what circumstances the said paper is found from his premises and how the entries on the said seized document does not relates to him. 5.13. Thus taking in totality of all the facts and circumstances and evidences on record and entries /notings on the seized documents, I hold that ₹ 62,00,000 have been paid by the appellant from its undisclosed sources in cash for the purc ..... X X X X Extracts X X X X X X X X Extracts X X X X
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