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Income Tax Appellate Tribunal, Hyderabad ‘A’ Bench, Hyderabad
Before: Smt. P. MADHAVI DEVI & Shri D.S. SUNDER SINGH
ORDER Per Smt. P. Madhavi Devi, J.M. This is assessee’s appeal against the order dated 13.07.2017 of CIT(A)-1, Hyderabad for the A.Y. 2012-13.
Brief facts of the case are that the assessee company, engaged in the business of rolling cold rolled steel strips, e-filed its return of income on 24.09.2019 declaring total income of Rs.29,61,894/-. Pursuant to selection of the return for scrutiny under CASS, assessment proceedings u/s 143(3) of the I.T. Act, 1961 were taken up and the assessee furnished the information called for. The A.O. noticed from the balance sheet as at 31.12.2011, that the share capital of the assessee company increased from Rs.75 lakhs to Rs.1,50,00,000/- during the year and that the entire amount of the increase ./2017 AY 2012-13 M/s Bengal Cold Rollers Private Ltd., Hyd.
in share capital was received on 22.12.2011. The A.O. observed from the bank account maintained by assessee company with HDFC bank, Himayatnagar branch, that the opening balance as on 22.12.2011 stood at Rs.11,107/- after which assessee company received funds on transfer and the same funds were again given as loan to the other directors and in turn they again re-invested by way of share application and by following the ring entries of receipt of unsecured loans and again giving as loan to the share applicant and receiving it back a share capital has resulted in paid up capital of the company being increased from Rs.75 lakhs to Rs.1,50,00,000/- and the closing balance on 22/12/2011 again stood at Rs.11,107/-. Therefore, he came to the conclusion that there is no actual receipt of funds as share capital and also that the ring transactions which were arranged by promoter directors happened to be close family members. Therefore, the AO treated the sum of Rs.75 lakhs as unexplained cash and brought it to tax.
2.1. Further, the AO also noticed that the assessee has shown advances from others to the tune of Rs.1,61,36,001/- being amounts received from M/s M.S.Metals of Rs.11,99,192/- and from Sanjay Strips of Rs.1,50,13,816/-. Since the assessee company failed to give any information or confirmation with regard to the above advances, the AO treated the same as unexplained income of the assessee and brought it to tax.
2.2. Aggrieved, assessee preferred an appeal before the CIT(A) and also filed confirmation from the shareholders about their contribution to the share capital and also confirmation from the parties with regard to advances paid by them. The CIT(A) also confirmed the assessment order thereby dismissing assessee’s appeal, against which assessee is in second appeal before us by raising the following grounds of appeal.
1) The appellant submits that the learned Commissioner of Income Tax (Appeals) erred both in law and on facts in sustaining the assessment order in its entirety.
./2017 AY 2012-13 M/s Bengal Cold Rollers Private Ltd., Hyd.
2) The appellant submits that the learned commissioner should have recognized the fact that the additions were made by the AO without giving any opportunity to the appellant and should have accepted the confirmations filed. 3) The appellant submits that the first appellate authority should have appreciated the facts and confirmations relating to the share capital and erred in law and on facts of the case in sustaining the addition on account of share application money. 4) The appellant prays to submit that the learned first appellate authority erred in law and on facts of the case in sustaining the addition of advances from customers. 5) On the basis of the above grounds and any further grounds that may be permitted to be made in the course of the appellate proceedings the appellant prays that the addition of Rs.75,00,000/- and Rs.1,61,36,001/- made by the Assessing officer be directed to be deleted.
2.3. The appeal was taken up for hearing on 09.09.2020 through video conferencing and both parties were heard.
The Ld.Counsel for the assessee submitted that the assessee has filed confirmation from shareholders as well as bank statements and ledger accounts to demonstrate that the assessee had paid the unsecured creditors which in turn has been recontributed by them as their share capital in assessee company. He also submitted that the assessee had also filed confirmations and the relevant details in respect of advances from customers but the CIT(A) had not called for remand report nor has she verified the details but summarily rejected the same.
3.1. Ld.DR was also heard who supported the orders of authorities below.
Having regard to rival contentions and material placed on record, and papers filed by assessee before the CIT(A) with regard to introduction of share capital by the shareholders and also the confirmations of the customers in ./2017 AY 2012-13 M/s Bengal Cold Rollers Private Ltd., Hyd. respect of advances paid, we find that the assessee filed the relevant details which need verification by the authorities below. Since none of the authorities have verified the details but have disbelieved the contentions of the assessee and have made the additions, we deem it fit and proper to remand the issue to the file of the AO with a direction to verify the details filed by the assessee and complete the assessment in accordance with law. Needless to mention that the assessee shall be given a fair opportunity of hearing.
In the result, assessee’s appeal is treated as allowed for statistical purposes. Order pronounced on 11th September 2020.