TMI Blog2018 (2) TMI 860X X X X Extracts X X X X X X X X Extracts X X X X ..... on the issue have merit. First of all, assessee has disclosed the investment and enclosed the confirmations to the original return which was accepted. There was a direction by Addl. CIT, Range-12 to reopen the assessment. Another offer (whose jurisdiction is not examined) has issued the notices, even though assessee was assessed earlier. The reasons for reopening were not communicated violating the directions of Hon'ble Supreme Court in the case of GKN Drive Shaft, [2002 (11) TMI 7 - SUPREME Court]. The contentions extracted in assessee counsel’s submissions and the case law relied, support the conclusion that the reopening itself is bad in law. - Decided in favour of assessee - I.T.A. No. 1401/HYD/2012 - - - Dated:- 12-1-2018 - SHRI B. RAMAKOTAIAH, ACCOUNTANT MEMBER For The Assessee : Shri K.C. Devdas, AR For The Revenue : Shri K.J. Rao, DR ORDER This is an appeal by assessee against the order of the Commissioner of Income Tax (Appeals)-II, Hyderabad, dated 09-07-2012. 2. Assessee filed appeal on 10-09-2012 with 20 grounds which include submission and case law. Assessee filed revised Form 36 on 24-08-2017, revising some columns and grounds as well. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s in the returns filed originally along with confirmations and these returns were accepted without any scrutiny. In the proceedings before Ld.CIT(A), assessee filed fresh affidavits from the creditors in support of borrowals. Ld.CIT(A) in the detailed order (which was not extracted herein ) has negatived the assessee contentions and confirmed the additions, hence the present appeal. 5. Ld. Counsel explained that assessee along with other family members (whose appeals are separately dealt with) has invested in a company (M/s Sankhya Infotech Ltd, Bhubaneswar) promoted by them and the investment by assessee was to the tune of ₹ 22,30,000/-. The sources of the amounts were disclosed in the original return filed and the same were as under: Note: 1. During the year ending 31.3.1998 I have invested in Sankhya Infotech Limited ₹ 22.30 Lakhs Source: Rs. In Lakhs Savings Sale of Gold 8.80 Add: Loans from friends 13.50 Total 22.30 5.1. It was submitted that there was no enquiry ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ied on the earlier reports and completed the assessment. 5.4. Referring to the order of Ld.CIT(A), it was submitted that the fact is that the reasons for reopening were not communicated by AO and communicated only during the present appeal proceedings recently, that too in the form of paper book filed before this forum and referred to the letter of AO given to CIT(A) that no satisfaction was recorded. 5.5. On merits, referring to the order of Ld.CIT(A), Bhubaneswar in the company s appeal, it was submitted that there are no enquiries in the case of assessee (Shri N. Sridhar) and even in the enquiries conducted in the other cases, there was no denial of investment. Regarding the statement of Shri Kanakaiah [Para 6.5 of CIT(A)] relied on by Department, it was submitted that his statement was not subjected to cross-examination and his later affidavit filed before the Ld.CIT(A) has not been controverted. Regarding the statement of Shri G. Srinivas (Para 6.4), it was submitted that assessee had borrowed in FY. 1997-98 and the cyclone of 1999 has no effect on the fact of borrowals. The said statement in fact supports the assessee that there was prawn culture and the persons have so ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... orm of paper book filed), it was submitted that the enquiries were conducted and assessee is aware of all the proceedings and there was non-co-operation from assessee. He referred to various orders- that of Ld.CIT(A), Bhubaneswar, the order of AO and CIT(A)- to support the AO s action. 7. I have considered the rival contentions and perused the orders and documents placed on record and precedents relied. Before adverting to the adjudication of issues, the following facts are to be noted: A) Assessee filed the return of income on 27-11-1998 with the jurisdiction of Asst. Commissioner of Income Tax, Circle-4(2), admitting incomes and stating the sources of investment of ₹ 22,30,000/- in M/s. Sankya Infotech Ltd., and necessary confirmations were enclosed to the return. This was accepted u/s. 143(1) and no scrutiny was taken up; B) The company M/s. Sankya Infotech Ltd., was assessed at Bhubaneswar and enquiries were conducted in some promoters cases, but not in assessee case; C) In the company appeal, Ld.CIT(A), Bhubaneswar has deleted the addition with the following observations/findings: In this case, the AO has made certain enquiries through the DDTI (lnv.), ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nevertheless require further enquiry as only sixteen out of seventy five farmer-creditors, who have advanced loans to the four share holders have been examined. No enquiry has been conducted in respect of loans availed by the two promoter-directors; namely Shri N. Srinivas and Shri N. Sridhar. Therefore the AO or the concerned AOs can conduct further enquiries and if it is found that the loans given by the farmers were neither credible nor genuine; the additions could be made in the hands of the shareholders who have subscribed to the shares of the appellant-company. The sources of funds in such cases can be tackled by the AO in the hands of the subscribers to the equity shares who have availed the loans. Therefore, the AO is free to conduct further enquiries in the case of individual sharesholders as per the extant provisions of law and consider these amounts in their hands in view of the discussions in para 4.1 and 4.2 and the judicial decisions cited supra . D) Before the order of Ld.CIT(A), Bhubaneswar was passed, the JCIT has reported his findings to the officers at Hyderabad with a request to reopening the assessments for protecting the interest of Revenue. As per the p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... missioner of Income Tax (Appeals-II) Hyderabad, Sir, Sub: Appellate Proceedings in the case of Sri N. Sridhar A.Y.1998- 99 Submission of Report Reg. Ref: CIT(Appeals-II), Hyd, Letter No. 0079 0081/CIT-(A)-II/06-07 Dt: 26-11-2007 Kind Reference is invited to the above. I have gone through the written submissions filed by the assessee and the entire record, also the order sheet maintained for the year under consideration and found that no where in the order sheet(s) reasons for issuing notice(s) issued u/s. 148 is noted, though the assessee has requested reasons for initiating action u/s. 147(a) and re-opening the Assessment has not been recorded. No evidence of issuing any Notice(s) to the loan creditors or Postal covers returned un-served is available on record. No evidence is available on record asking the assessee to produce the loan creditors for crossexamination. The contents of affidavit tallies with the loan confirmation letters submitted during the course of hearing. The amount of loan taken as per record is ₹ 13.50 lakhs, but not ₹ 15.00 lakhs as stated in the assessment order dated 31.03.2006. Submitted Yo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nuineness of the transactions and complete creditworthiness of the farmers was not conclusively established. These matters nevertheless require further enquiry as only sixteen out of seventy five farmer-creditors, who have advanced loans to the four share holders have been examined. No enquiry has been conducted in respect of loans availed by the two promoterdirectors; namely Shri N. Srinivas and Shri N. Sridhar. Therefore, the AO or the concerned AOs can conduct further enquiries and if it is found that the loans given by the farmers were neither credible nor genuine; the additions could be made in the hands of the shareholders who have subscribed to the shares of the appellant-company. The sources of funds in such cases can be tackled by the AO in the hands of the subscribers to the equity shares who have availed the loans. Therefore, the AO is free to conduct further enquiries in the case of individual shareholders as per the extant provisions of law and consider these amounts in their hands in view of the discussions in para 4.1 and 4.2 and the judicial decisions cited supra . Thus, the observation of CIT(A) indeed does not state that the sources are totally bogus and AO w ..... X X X X Extracts X X X X X X X X Extracts X X X X
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