TMI Blog2015 (11) TMI 1764X X X X Extracts X X X X X X X X Extracts X X X X ..... y the ld. D.R., we find no justifiable reason to interfere with the impugned order of the ld. CIT(Appeals) deleting the addition - decided against revenue - I.T.A. No. 239/CTK/2007, 257/CTK/2007 - - - Dated:- 27-11-2015 - Shri P.M. Jagtap and Shri S.S. Viswanethra Ravi, JJ. Shri D.S. Damle, FCA , for the assessee. Shri Sudipta Guha, JCIT, Sr. D.R., for the Department ORDER Shri P.M. Jagtap, These two appeals, one filed by the assessee being ITA No. 239/CTK/2007 and other filed by the Revenue being ITA No. 257/CTK/2007, are cross appeals, which are directed against the order of ld. Commissioner of Income Tax (Appeals)-II, Bhubaneswar dated 28.05.2007. 2. First we take up the appeal of the assessee, which involves a solitary issue relating to the addition of ₹ 13,33,656/- made by the Assessing Officer and confirmed by the ld. CIT(Appeals) on account of deemed dividend under section 2(22)(e) of the Income Tax Act, 1961. 3. The assessee in the present case is a Company, which is engaged in the business of manufacture and sale of aluminium/alloys coil/rod. The return of income for the year under consideration was filed by it on 30.10.2014 declaring ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was always more than 50% of the gross revenue credited in the profit loss accounts. The percentage of interest income vis-a-vis total receipts credited in the profit and loss account was 66% in FY 2005-06. These facts conclusively proved that interest received represented dominant source of revenue for MBIPL. It also appeared that loans and advances on which interest was earned was the dominant income yielding asset as per the balance sheets of the MBIPL during the FYs 2001-02 to 2005-06. In the assessment orders of MBIPL interest received on loan was assessed as business income which established that in the income tax assessment proceedings MBIPL was considered to be engaged in the business of granting loans. 8.1. Sec. 2(22)(iii) provides that dividend does not include any advance or loan made to a shareholder by a company in the ordinary course of its business where lending of money is a substantial part of the business of the company. The analysis of profit loss account of MBIPL for the period 2001-02 to 2005-06 showed that granting of loan formed substantial part of its business as more than 50% of the revenue credited in the profit loss account was derived by way of i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... total sum of ₹ 2,00,00,000/- as share application money from twelve Companies. In order to verify these cash credits, letters under section 133(6) were issued by the Assessing Officer calling for the relevant information. Out of these letters, letters issued to eight Companies returned back undelivered with the postal remark that the Companies were non-existent at the stated addresses. Although the assessee produced the confirmation of these eight Companies as well as their share application forms, the Assessing Officer held that the same were not sufficient to explain the relevant cash credits in terms of section 68. Accordingly, the share application money stated to be received from the said eight Companies aggregating to ₹ 1,35,00,000/- was treated by the Assessing Officer as unexplained and the said amount was added by him to the total income of the assessee under section 68 of the Act. 8. The addition made by the Assessing Officer on account of share application money to the extent of ₹ 1,35,00,000/- under section 68 was challenged by the assessee in the appeal filed before the ld. CIT(Appeals) and after considering the submissions made by the assessee as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... verifiable from the members register of the Appellant company. The availability of the copies of the acknowledgement slips along with the copy of the share application form was duly explained to the AO and the Appellant' s case is that these were the photo copies of the original application forms on receipt and in fact the acknowledgements have been sent along with the money receipt on encashment of the cheques. As regards the difference in the signature s of authorized signatory in some of the case, I am convinced that this Is a regular feature and the authorized signatory may change over a period of time and may be different from the one who signed the share application. There may be different authorize d signatories for different purposes. As regards the AO's object ion that the applications as well as share application money from M/s. Singdha Trexim Pvt. Ltd, M/s. Umang Credit Capital Ltd. and M/s. Taral Vincom Pvt. Lt d was received in September 2004 where as the Appellant has accounted for It on 31.03.2004, I am of the view that not much can be made out of this objection in view of the fact that there was no flow of funds and It was merely a book entry as per the Acco ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... controverter nor disproved by the Assessing Officer, then no Interference Is called for. It may be noted that as point ed out by a full bench of this Court in CIT- Vs. Sophia Finance Ltd 205 if still in the opinion of the Assessing Officer it was necessary to enquire further then, it was for him to issue coercive process to see that the shareholders are before him and they are questioned about the investment. In the case of CIT Vs. Precision Finance (P) Ltd. 208 ITR 465, the High Court of Calcutta was required to examine the question from a different angle as in that case the enquiry of the Income Tax Officer revealed that either the assessee was not traceable or there was no such file and accordingly the first ingredient as to the identity of the creditors had not been established. In the instant case, when necessary materials have been produced before the assessing officer to establish the identity of the perso ns with their PAN/G IR numbers and other details, it was for the assessing officer to enquire further if he felt that it was necessary. Instead of doing so, after issuance of summons when these materials were produced before him, he thought that he is helpless and he passe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tions. In so far as taxability of the amount is concerned, the position is clear from the findings in the cases referred above. Under the circumstances, in view of the decisions referred above, and also in view of the factual position brought out In this order, I am convinced that there is no case for making the addition u/s.68 of the Act by the AO in the hands of the Appellant. Thus G round No.3 is decided In favour of the Appellant . 9. We have heard the arguments of both the sides and also perused the relevant material available on record. Although the ld. D.R. has relied on the order of the Assessing officer in support of the Revenue's case on this issue, the ld. Counsel for the assessee has pointed out that the total amount of ₹ 19.26 crores was raised towards shares by the assessee- Company as well as other group Companies including the amount in question during the assessment years 2001-02 to 2007-08. He has submitted that pursuant to the search conducted in the case of all these group Companies including the assessee-Company, the entire amount of share capital raised was verified by the Assessing Officer and the same was accepted and no addition under section ..... X X X X Extracts X X X X X X X X Extracts X X X X
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