TMI Blog2019 (12) TMI 498X X X X Extracts X X X X X X X X Extracts X X X X ..... the reopening of assessment made by the AO u/s 147 of the Act. Accordingly, the grounds raised by the assessee on this issue are dismissed. Addition on account of unexplained loans and advances - segregation of interest income and assessing it as income from other sources and treating the income from trading in shares as speculation income. Therefore, the grounds raised by the assessee on these issues are dismissed. - ITA Nos. 623/Hyd/2015, ITA No. 628/Hyd/2015, ITA No. 633/Hyd/2015 - - - Dated:- 6-12-2019 - Shri A. Mohan Alankamony, Accountant Member And Shri V. Durga Rao, Judicial Member For the Assessee : Shri K.C. Devdas For the Revenue : Shri R.S. Arvindakshan ORDER PER V. DURGA RAO, J.M.: All these appeals filed by different assessees are directed against the orders of CIT(A) 12, Hyderabad for the AY 2005-06. As identical issues are involved in these appeals the same were clubbed and heard together and therefore, a common order is passed for the sake of convenience. ITA No. 623/Hyd/2015 in the case of Elem Investments Pvt. Ltd. 2. Brief facts of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e). What started as a marginal gap between actual operating profit and the one reflected in the books of accounts continued to grow over the years. It has attained unmanageable proportions as the size of the company operations grew significantly (annualized revenue run rate of ₹ 11,276 crore in the September quarter, 2008 and official reserves of ₹ 8.392 crore). The differential in the real profits and the one reflected in the books was further accentuated by the fact that the company had to carry additional resources and assets to justify higher level of operations - thereby significantly increasing the costs. 2.2 In fact, there is a prelude to the confession of the then Chairman of Mis SCSL. On December 18,2008, Shri Krishna Palepu, an independent Director on the board of SCSL, received an e-mail from one Shri Jose Abraham claiming to be an ex-employee of SCSL In his e-mail Shri Jose Abraham alleged that he found that Rajus were padding the gap between the actual numbers and quarterly results with fake billings to the companies set up by them in BVI, Dubai and routing the money through hawala there and getting the same paid through bogus companies. T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... here that the Chairman of M/s SCSL Shri B. Ramalinga Raju and his brother Sri B. Rama Raju, were fully conversant with the activities and functions of SCSL and other Investment companies, one of them being MIs Elem investments pvt Ltd. 2.5 These investment companies were used to offload the shares of M/s SCSL on behalf of the family members. The funds so generated were in turn routed through these front companies or as advances to some other inter-related concerns. The assessee company is one such investment company. It is further observed that monies have originated from the filmily members by way of sale of shares by this company and have been transferred in a circuitous and complex manner through the front companies with an intention to prevent the revenue and the regulator{ agencies to trace the antecedents and to mask the actual sources of money and the consequent generation of income from these transactions. The proceeds have thus found its way into investments and in creation of assets in the shape of large tracts of land. 2.6 There is further information that some of the funds advanced to M/s SCSL have not been recorded in the books of SCSL ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat there is an escapement of the income and issued notice u/s 148 of the Act on 2/08/2010 and assessment was completed accordingly u/s 143(3) rws 147 of the Act on 04/08/2011 determining the taxable income of the assessee at ₹ 33,28,90,875/- by making the following additions: 1. Unexplained advances ₹ 20,00,00,000 2. Deemed dividend u/s 2(22(e) ₹ 12,41,03,588 3. Disallowance u/s 14A ₹ 42,92,125 4. Aggrieved by the order of AO, the assessee preferred an appeal before the CIT(A). 5. The CIT(A) upheld the action of the AO in reopening the assessment u/s 147 of the Act by observing as under: 1. The statement dated 07/01/2009 of the Chairman/promoter of the iconic Company of Andhra Pradesh, M/s Sat yam Computers had created turmoil in all circles and opened a Pandora box. In this statement, apart from the doings in the Co, M/s sat yam Computers ltd, he had also mentioned about 33 specific companies that had given amounts to M/s sat yam computers ltd. A separate statement was also recorded on 21/2/2009 in the jail from him, wherein the statement dt 7/1/09 was confirmed by h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e sources for payment of this amount is what the AO should have seen. Neither the AO nor the appellant could quantify the exact amount and sources thereof. The addition was made because no details were furnished and it is the submission of the appellant that the details could not be furnished because the records were not available at that point of time. 8.1.3 In view of this impasse and also the fact that the AO made an addition of ₹ 60 crores (total amount of addition in the assessments of the three companies) as against a total advance of ₹ 20 crores, the following findings and directions are given: 8.1.4 In view of the forensic report, basically the AO had to see whether the company had sources to lend a portion of this Rs,20 crores. Since there were four cheques of ₹ 7.5 crores, 5 crores, 4.75 crores and 2.75 crores and three parties which gave these cheques, at most one company could have given two cheques and even if these cheques were the highest two value cheques namely ₹ 7.5 crores and ₹ 5 crores, the appellant company could have given ₹ 12.5 crores at most and not beyond that. Thus, at most we would hav ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the computation made by the appellant. 1 do not find any such finding in the asst. order as to what transactions the AO had identified as speculative transactions which were settled without actual delivery of share scrips. In the relevant asst. year 1 find that the AO computed business income on speculation on a profit of ₹ 6,89,795/- and had also set off the brought forward speculation losses of earlier years totalling ₹ 51,30,914/- Thus, by actually holding these as business income on speculation, the AO ended up setting off of brought forward speculation losses and making the current business income of ₹ 51.30 lakhs assessed by him as NIL. This is so because if he had treated the current year income as normal business income the earlier assessed losses from speculation business brought forward from AY 2003-04 and 2004-05 would have continued to be carried forward to next year to be set off against income from speculation business only. In absence of any such finding of specific speculative transactions, the computation so made is incorrect since the appellant co. was consistently stating that it is an investme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (ii) The learned CIT(A), erred in holding that the Assessing Officer had valid reasons to reopen the assessment of the Appellant company to examine the veracities and financial implication between the Appellant Company and M/s. Saty am Computers Services Ltd. (iii) The learned CIT(A), failed to note that an assessment made u/s.143(3) cannot be reopened u/s.148 beyond a period of four years as there is no failure on the part of the Appellant to disclose fully and truly all the material facts relevant for the assessment made originally and therefore ought to have quashed the reassessment proceedings. (iv) The learned CIT(A), failed to note that the Assessing Officer had no tangible material to come to the conclusion that there was escapement of income from the original assessment and therefore the issue of Notice u/s.148 and the assessment made thereon is invalid, without jurisdiction and therefore must be quashed. 3. The learned CIT(A), having failed to note that there was no application of mind by the Assessing Officer to the reasons recorded, ought to have noticed from the records that the entire reopening of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cer was incorrect and the entire exercise was unnecessary erred in giving the direction to recompute the income of the Appellant while giving effect to his Appellate Order. 9. The Learned CIT(A) ought to have clearly held that the interest income was assessable as business income and could not be assessed under the head Income from the other sources as held by the Assessing Officer. 10. The Learned C1T(A) ought to have given a clear finding that the Income from trading activity in shares was business income and not speculative in nature. 11. The Learned C1T(A) ought to have clearly held that the Income on Capital Gains at ₹ 53,29,598 ought to have ) been assessed under the head business income and not as income from Long Term Capital Gains . 12. The learned C1TlA) ought to have upheld the computation of total income as assessed in the original assessment passed uls 143(3) on 26.11.2007 at ₹ 98,24,760/- 13. The Appellant denies its liability to be assessed to the levy of interest uls 234B at ₹ 5,40,75,690/- 14. Any other ground or grounds that may be urged a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of change of opinion does not arise because the assessee has not expressed any opinion at all. Thus, we find that the AO has rightly reopened the assessment. So far as the judgement of the Hon ble Supreme Court in the case of Kelvinator of India Ltd. (supra) is concerned, on which the reliance placed by the ld. counsel for the assessee, is not of any help to the case of the assessee. We, therefore, uphold the reopening of assessment made by the AO u/s 147 of the Act. Accordingly, the grounds raised by the assessee on this issue are dismissed. 9.2 As regards ground nos. 6 to 12, we do not find any reason to interfere with the order of the CIT(A) as the CIT(A) has aptly given the directions to the AO with regard to addition of ₹ 20 crores on account of unexplained loans and advances and with regard to segregation of interest income and assessing it as income from other sources and treating the income from trading in shares as speculation income. Therefore, the grounds raised by the assessee on these issues are dismissed. 10. In the result, appeal of the assessee is dismissed. 11. In ITA No. 628/H/2015, similar grounds were raised as ..... X X X X Extracts X X X X X X X X Extracts X X X X
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