M/S LOHAJIT FOUNDATIONS PVT.LTD.,CHENNAI vs. ACIT(OSD)CORPORATE WARD4(4), CHENNAI

3. The CIT(A) erred in not appreciating that the cash deposits in the bank considered in the assessment do not come under Section 68 of the IT Act.

4. The learned CIT(Appeals) erred in confirming the addition made by the learned Assessing Officer on a wrong, understanding of the settlement commission order in the case of one creditor.

5. The learned CIT(Appeals) erred in confirming the addition made by the learned Assessing Officer which is against the decision of the Madras High Court in the case of S. Kuppuswami Mudaliar vs Commissioner of Income Tax decided on 10th December, 1962 reported in 51 ITR 757 Mad.

6. The learned CIT(Appeals) erred in confirming the addition made by the learned Assessing Officer in wrongly considering the name of credit without appreciating that it is only the quantum of credit and not the nature of credit that is required to be proved.

7. The learned CIT(A) and the learned AO erred in no verifying that the creditors especially when the assessee furnished the confirmations from the creditors and also furnished their PA numbers. & 796/Chny/2020 - 3 - As is evident, the assessee challenges the validity of reassessment proceedings on legal grounds. The assessee also challenges quantum additions on merits.

2. The Registry has noted delay of 143 days in the appeals, the condonation of which has been sought by the assessee by pleading that it was Covid-19 delay. We find that impugned order has been passed on 09-03-2020 and time available to prefer the appeals against the same falls within the lockdown situation arising out of Covid-19 Pandemic. The period of delay stand excluded for limitation purposes in terms of directions of Hon'ble Supreme Court in the case of Suo Motu Writ Petition (C) No.3 of 2020 dated 10-01-2022. Considering same, we condone the delay in both the appeals and admit the appeals appeal for adjudication. Having heard rival submissions and upon perusal of case records, our adjudication would be as under. The assessee being resident corporate assessee is stated to be engaged in the business of building installation at construction site. Assessment Proceedings 3.1 The case was reopened since it transpired that the assessee made cash deposits of Rs.162.60 Lacs & Rs.191.12 Lacs in HDFC bank and Tamil Nadu Mercantile Bank respectively during the year. However, no return of income was filed by the assessee. A survey was conducted u/s.133A on 15-12-2018 at the residential premises of the Managing Director (MD) Mr. A. Muthu Palaniappan. It was found that Mr. A. Muthu Palaniappan was working in an office at monthly salary. No books of accounts of the assessee could be produced. In reply to question No.17 of recorded statement, the MD expressed inability to recollect the source for the cash deposit. Accordingly, the case was reopened and notice u/s & 796/Chny/2020 - 4 - 148 was issued on 28-03-2018 which was followed by statutory notices u/s 143(2) and 142(1). The assessee filed return of income on 30-04- 2018 admitting ‘nil’ income. The authorized representative appeared and filed certain details in support of cash deposit. 3.2 It was noted be Ld. AO that the assessee made aggregate deposits of Rs.867.80 Lacs in HDFC Bank through cash and bank transfers out of which the assessee could substantiate sources only to the extent of Rs.705.20 Lacs except for an amount of Rs.47 Lacs which was received from one Shri Yuvaraj for which the assessee could not furnish requisite details. Accordingly, the amount of Rs.47 Lacs was held to be unexplained cash credit and added to the income of the assessee u/s 68. 3.3 Out of cash deposit of Rs.162.60 Lacs, deposit to the extent of Rs.115 Lacs was stated to be received from one Shri V. Venkatachalam as share application money. As per ledger extracts, the same was received on various dates. The Ld. AO alleged that the assessee could not substantiate the same and the onus was on assessee to prove the credits introduced in the books of account with documentary evidences. The proviso to Sec.68 was applicable which creates a deeming fiction that the explanation offered by the assessee would not be satisfactory unless the person in whose name such credit is recorded also offers an explanation about the nature and source of such sum so credited. The assessee could not discharge the onus and therefore, the cash deposit of Rs.162.60 Lacs was also treated as unexplained cash credit u/s 68. 3.4 Finally, the income was assessed at Rs.209.60 Lacs i.e., amount of Rs.47 Lacs as received from Shri Yuvaraj and cash deposit of Rs.162.60 Lacs which remained unsubstantiated. & 796/Chny/2020 - 5 - Appellate proceedings 4.1 During appellate proceedings, the assessee filed settlement application of Shri V. Venkatachalam for AYs 2010-11 to 2016-17, computation of income tax and challans supporting payment of taxes by him. The assessee also filed confirmation letter from the said creditor. The assessee relied on various judicial pronouncements to assail the impugned additions. With respect to amount of Rs.47 Lacs, it was submitted that the amount was transferred through banking channel. The assessee also pleaded that statement taken during survey proceedings would not hold any evidentiary value as per the decision of jurisdictional High Court in CIT vs Khader Khan Sons (300 ITR 157) and confirmed by Hon’ble Supreme Court (352 ITR 480). 4.2 The Ld. CIT(A) perused the Income Tax Settlement Application of Shri V. Venkatachalam and concurred with the factum of settlement. However, Ld. CIT(A) was not convinced that the declaration made by that individual for Rs.471.44 Crores included the amount given to the assessee. This claim was vague and had no co-relation to the amount admitted before the settlement commission. Therefore, the claim that the impugned amount was sourced out of sums offered to Settlement Commission was not conclusively proved. No findings were rendered on other additions as made by Ld. AO. Finally, the appeal was dismissed against which the assessee is in further appeal before us.

5. Assessment Year 2014-15 Facts in AY 2014-15 are more or less similar. A similar assessment was framed u/s 143(3) r.w.s. 147 on 29-12-2018. Notice u/s 148 was issued in identical background on 28-03-2018. The assessee admitted loss of & 796/Chny/2020 - 6 - Rs.0.22 Lacs and filed various details as called for by Ld. AO. In this year, the assessee had deposited cash of Rs.473.12 Lacs in three bank accounts. Out of the same, an amount of Rs.417 Lacs was stated to be similarly sourced as Share application money from Shri V. Venkatachalam. However, Ld. AO held that the said amount was reflected in the Balance Sheet as cash loans and therefore, the assessee’s explanation was not to be accepted. Further, the assessee could not furnish any documents as submitted to the Registrar of Companies in respect of share premium transactions. The assessee, in the survey statement, accepted that it had not obtained any loan from banks or other parties. Finally, entire cash deposit of Rs.473.12 Lacs was added to assessee’s income u/s 68 of the Act. The adjudication of Ld. CIT(A) is on similar lines. Aggrieved, the assessee is in further appeal before us. Our findings and Adjudication 6. From the fact, it emerges that in AY 2013-14, the additions have been made for cash deposit of Rs.162.60 Lacs out of which an amount of Rs.115 Lacs has been received by the assessee from one of its major shareholder Shri V. Venkatachalam. The said sum is stated to be received as share application money which is an undisputed fact. In support of the receipt of the same, the assessee had furnished confirmation letter from the said creditor on 03.12.2018. The said creditor has made declaration before Income Tax Settlement Application for AYs 2010-11 to 2016-17. In support of sources, the assessee furnished assessment year-wise details of total income as admitted by Shri V. Venkatachalam before Income Tax Settlement Commission for AYs 2010-11 to 2016-17 along with proof of payment of taxes. Similar ITA No.795 & 796/Chny/2020 - 7 - documents were furnished for AY 2014-15. Before us, the income offered by Shri V. Venkatachalam before Income Tax Settlement Application has been tabulated year-wise and the supporting documents, in that regard, have been placed on page nos.19 to 30 of the paper book. It could be seen that the additional income declared therein is more than Rs.431 Crores. The settlement order has been placed on page nos. 33 to 81 of the paper book.

3. Subject to the above, Special Leave Petition is dismissed. The ratio of said decision has subsequently been followed by various judicial authorities in catena of judicial pronouncements. The said decision has been followed by Hon’ble Bombay High Court in the case of CIT Vs. Gagandeep Infrastructure Private Limited [80 Taxmann.com 272] & subsequently in CIT Vs. Orchid Industries Private Limited [88 Taxmann.com 502]. The Hon’ble Delhi High Court followed the said decision in Pr. CIT V/s Adamine Construction Pvt. Ltd. [107 Taxmann.com 84] against which revenue’s Special Leave petition was dismissed by Hon’ble Supreme Court which is reported at 107 Taxmann.com 85. Similar is the position of decision of Hon’ble Delhi High Court rendered in Pr. CIT V/s Himachal Fibers Ltd. [98 Taxmann.com 72] against which revenue’s Special Leave Petition was dismissed by Hon’ble Supreme Court which is reported at 98 Taxmann.com 173. Similar is the decision of Hon’ble High Court of ITA No.795 & 796/Chny/2020 - 9 - Madhya Pradesh in Pr. CIT V/s Chain House International Pvt. Ltd. [98 Taxmann.com 47] against which revenue’s Special Leave Petition has been dismissed by Hon’ble Supreme Court on 18/02/2019 which is reported at 103 Taxmann.com 435.

After careful consideration, the corresponding legal grounds stand disposed-off as under.