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M/s Suryabalaji Investments (P) Ltd. Versus The Income Tax Officer, Corporate Ward – 3, Coimbatore

2017 (2) TMI 1304 - ITAT CHENNAI

Unexplained investment - no source to explain such investments - Held that:- When both the balance sheets of the assessee-company and balance sheets of the companies in which the assessee had invested, reflected the amounts of investments and these correctly tallied, we cannot brush aside such accounts and auditor’s report. Doing so would be giving a licence to any assessee-company to prepare any balance sheet and thereafter go back and say itself that the balance sheet was not correct. The asse .....

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r, if the source of investment was not out of loan, the question of bank giving any confirmation does not arise. The addition was made, in our opinion, due to failure of the assessee to give proper source for investment made by the assessee in M/s Sri Padmabalaji Steels Pvt. Ltd. and M/s Suryabalaji Steels Pvt. Ltd. Assessee’s claim that it was only book entry cannot be accepted since the amounts were correctly reflected in the balance sheet of the assessee as well as the balance sheets of M/s S .....

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made by the Assessing Officer which was confirmed by the CIT(Appeals) considering certain investments made by the assessee for acquiring some assets, as undisclosed. Grounds taken by the assessee is reproduced hereunder:- (1) The learned CIT(A) -1, Coimbatore, has grossly erred in holding that the appellant has made investments, as stated by the A.O. and sustaining the addition to the extent of ₹ 25,58,68,579/-, as investment in acquiring assets, without a corresponding liability, as undi .....

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ving been made by the appellant, mere book entries did not constitute unexplained income having accrued to the appellant, in the facts and circumstances of the case and in law. (4) The learned CIT(A) ought to have held that no real investment was made by the appellant, as alleged by the A.O., in the absence of proof of actual investment of the appellant and receipt of such amount of money from the appellant by the Investee Companies, in the facts and circumstances of the case and in law. 2. Fact .....

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ing the details of the loan taken by the assessee. It seems the said banker replied that the assessee was not having any loan account with it. Clarifications were sought from the assessee in this regard. Reply of the assessee was that though it had issued cheques for investing in shares and cheques for advances to various group units, these cheques were not presented for payment. As per the assessee, though its balance sheet reflected substantial non-current investments in excess of ₹ 17,0 .....

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t the loans and advance of ₹ 24,17,62,914/- shown in its balance sheet were also not real amounts. The break-up of these were submitted as under:- Loans and advances to related parties Unsecured, Considered Good Sri Padmabalaji Steels P. Ltd. - Unit II : ₹ 55,00,000/- Sri Padmabalaji Steels P. Ltd. - Unit I : ₹ 10,00,000/- Suryabalaji Steels P. Ltd. : ₹ 11,00,000/- Share Application Money with Sri Padmabalaji Steels P. Ltd. - Unit I : ₹ 6,95,00,000/- Sri Padmabalaji .....

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ead as under:- SRI PADMABALAJI STEELS PVT. LTD. Name of the Company Share Capital as on 31.3.2012 Share capital advance as on 31.3.2012 Total as on 31.3.2012 SURYABALAJI INVESTMENTS PVT. LTD. 9,81,50,000 21,39,17,130 32,07,42,215 SURYABALAJI STEELS PVT. LTD. Name of the Company Share Capital as on 31.3.2012 Share capital advance as on 31.3.2012 Total as on 31.3.2012 SURYABALAJI INVESTMENTS PVT. LTD. 5,83,20,000 2,25,50,000 8.08.70,000 The A.O. found that the investments shown as made by the asse .....

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these companies were audited and duly certified by the Chartered Accountant along with a report under Companies (Auditor s Report) Order, 2003. She held that the investments were correctly shown by the assessee but there being no matching loans, the source of such investments were unexplained. The unsecured loans from bank of ₹ 25,58,68,579/- shown by the assessee in its balance sheet was considered for addition. 5. Aggrieved, assessee moved in appeal before the CIT(Appeals). Arguments of .....

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ents did not arise. The assessee once again relied on certificate issued by Chief Manager of Indian Overseas Bank, which stated that assessee had no loans with the said bank. However, the CIT(Appeals) was not impressed by above arguments. According to him, assessee had made investments in the two companies which was clear from balance sheet of the respective companies. It had no source to explain such investments. Thus, according to the CIT(Appeals), the addition was rightly made. He confirmed t .....

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of the assessee. When there was no actual investment, as per the Ld. A.R., the question of source of such investments was irrelevant. Contention of the Ld. A.R. was that lower authorities had simply gone by the balance sheets of the assessee and that of M/s Sri Padmabalaji Steels Pvt. Ltd. and M/s Suryabalaji Steels Pvt. Ltd. ignoring the real situation. Contention of the Ld. A.R. was that only real income could be taxed and not fictitious income. 7. Per contra, Ld. Departmental Representative .....

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dit under the Companies Act. In the Auditor s Reports of the assesseecompany it was certified by the Chartered Accountant that the balance sheet and Profit & Loss account were prepared as per the books of account and reflected the true and correct working of assessee-company. 9. When both the balance sheets of the assessee-company and balance sheets of the companies in which the assessee had invested, reflected the amounts of investments and these correctly tallied, we cannot brush aside suc .....

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