CAUVERY IRON& STEEL INDIA LIMITED,SECUNDERABAD vs. DY. COMMISSIONER OF INCOME TAX , CIRCLE-1(2), HYDERABAD

For the A.Y 2014-15, brief facts of the case are that the assessee filed return of income declaring the total income of Rs. 1043 of 2018 and 118 of 2019 Cauvery Iron and Steel India Ltd Secunderabad “Nil” on 29.11.2014. The case was selected for scrutiny and the assessment was completed u/s 143(3) of the Act, on total income of Rs.16,98,38,110/-. In the assessment made u/s 143(3) of the Act, the AO made the addition of Rs.9,48,38,105/- u/s 68 of the Act representing unsecured loans received by the assessee from various companies/persons as under: S.No Name of entity Amount of unsecured loan (Rs.) 1 Monopoly Infrastructure P Ltd 4,00,000 2 Vijayapath Infra Pvt Ltd 10,00,000 3 Kingfisher Properties P Ltd 1,50,00,000 4 Rivergrow Finance Ltd 1,40,00,000 5 Moreison Traders Dev. P Ltd 1,48,76,563 6 Montree Nirman P Ltd 1,14,04,296 7 Tatashir Plazza P Ltd 1,13,80,921 8 Footlash Infra P Ltd 1,16,14,390 9 Mangalvanin Infrabuild P Ltd 1,15,61,935 TOTAL 9,48,38,105

Apart from the above, the AO also brought to tax the share application money amounting to Rs.7,50,00,000/- u/s 68 r.w.s. 115BBE of the Act. Thus, the AO made the addition of Rs. 16,98,38,110/- u/s 68 r.w.s 115BBE of the act.

Against the order of the AO the assessee went on appeal before the CIT (A) and the learned CIT (A) partly allowed the appeal of the assessee. The learned CIT (A) confirmed the addition of Rs.9,48,38,105/- and the disallowance of Rs.73,04,912/- representing the interest expenditure on loans and allowed the relief of Rs.7.50 crores relating to share application money received by the assessee. Therefore, both the Department and the assessee have filed cross appeals challenging the order of the Ld.CIT (A). 1043 of 2018 and 118 of 2019 Cauvery Iron and Steel India Ltd Secunderabad 5. During the appeal hearing, the learned AR submitted that the share application money as well as the unsecured loans were received by the assessee from genuine parties and filed all the information before the AO and the same was not verified. He further submitted that out of unsecured loan added by the AO of Rs.9,48,38,105/-, a sum of Rs.6,08,38,105/- pertains to the opening balance which cannot be added in the impugned assessment year. With regard to the balance amount of Rs.3,40,00,000/- the learned AR submitted that all the unsecured creditors are the local parties being assessed to Income Tax and in some cases with the same AO. Therefore, submitted that all parties are having creditworthiness and are genuine. Even though entire information was placed before the learned Ld.CIT (A), the same was not verified Hence, requested to remit the matter back to the file of the AO in the interest of justice.

With regard to the share application money, the learned AR relied on the orders of the CIT (A).

On the other hand, the learned DR submitted that the AO has given sufficient opportunities to the assessee, but the assessee failed to submit the details and establish the genuineness and the credit worthiness of the creditors during the assessment proceedings. Therefore, submitted that all the opportunities were given to the assessee. The companies from which the unsecured and share application monies were accepted are shell companies without having any means, creditworthiness and financial standing, and hence, argued to restore the assessment order. 1043 of 2018 and 118 of 2019 Cauvery Iron and Steel India Ltd Secunderabad 8. With regard to the assessment made u/s 115BBE of the I.T. Act, the learned AR submitted that for the assessment year 2014-15, the unsecured loans were received prior to 2016 and as per the Board Circular No.11 of 2009, the set off of loss is not allowable w.e.f. A.Y 2016-17 onwards but not for the earlier A.Ys. Since the assessment involved is 2014-15 as per the clarification given by the CBDT, the AO ought to have allowed set off of losses against the additions made u/s 68.

On the other hand, the learned DR supported the orders of the authorities below on the issue of taxing the sums u/s 115BBE..

We have heard both the parties and perused the material placed on record. In the instant case, the AO made addition of Rs.16.98 crores u/s 68 r.w.s. 115BBE of the IT Act. As per the learned AR, it includes the opening balance as on 1.4.2013 amounting to Rs.6.08 crores. Further, as discussed by the ld AR, all the parties are not shell companies. Some of the subscribes to the share capital as well as unsecured creditors are genuine creditors and their credit worthiness can be established, provided the opportunity is given to the assessee. It is also submitted by the assessee that some of the creditors are assessed in Hyderabad and filing the returns regularly. Though the entire facts were placed before the CIT (A), it seems that the learned CIT (A) did not consider the evidences placed before him. Therefore, we are of the considered view that the issues needs to be verified by the AO with regard to the genuineness and the creditworthiness of the creditors as well as the share applicants/share applications money received by the assessee.

In the result, appeals are allowed for statistical purposes. A.Y 2015-16

This appeal is filed by the assessee and the issue involved is with regard to the addition made u/s 68 r.w.s 115BBE of the I.T. Act. Since the facts are identical to that of A.Y.2014-15, we remit the matter back to the file of the AO to give opportunity to the assessee and to decide the issue afresh on merits. In this case also, the AO is directed to consider the issue with regard to set off losses u/s 115BBE in the light of the Circular No.11 of 2009.

In the result, appeal of the assessee is allowed for statistical purposes. Order pronounced in the Open Court on 4th September, 2020.