HYSAFE INVESTMENTS PVT. LTD.,,AHMEDABAD vs. THE INCOME TAX OFFICER, WARD-2(1)(3),, AHMEDABAD

आयकर अपील�य अ�धकरण, अहमदाबाद �यायपीठ - अहमदाबाद । IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD – BENCH ‘SMC’ BEFORE SHRI RAJPAL YADAV, JUDICIAL MEMBER आयकर अपील सं./ ITA No.1171/Ahd/2016 �नधा�रण वष�/Asstt. Year: 2012-2013 Hysafe Investments P.Ltd. Vs. ITO, Ward-2(1)(3) 1st Floor, Maruti House Ahmedabad. Nr.Popular House Ashram Road, Ahmedabad. PAN : AAACH 3877 K

अपीलाथ�/ (Appellant) �त् यथ�/ (Respondent)

Assessee by : Shri S.V. Agrawal, AR Revenue by : Shri Virendra Singh, Sr.DR सुनवाई क� तार�ख/Date of Hearing : 04/03/2019 घोषणा क� तार�ख /Date of Pronouncement: 06 /03/2019 आदेश/O R D E R Assessee is in appeal before the Tribunal against order of the ld.CIT(A)-7, Ahmedabad dated 1.2.2016 passed for the Asstt.Year 2012-13.

ITA No.1171/Ahd/2016 2 Rs.22,955/-. The case of the assessee was selected for scrutiny assessment and notice under section 143(2) was issued and served upon the assessee. On scrutiny of the accounts it revealed to the AO that the assessee was maintaining a bank account bearing no.980439892 with Indian Bank, Ashram Road, Ahmedabad. It has deposited a sum of Rs.43,93,100/- in cash during the period 1.4.2011 to 22.12.2011. Bifurcation of this amount has been given in the submissions of the assessee, which has been reproduced by the ld.CIT(A) on page no.4. It contained date of deposits and exact amount deposited by the assessee. It also contained deposits in the names of depositors. In the first two transactions amounting to Rs.10,000/- and Rs.11,000/- it was disclosed that these amounts deposited out of the cash on hand. The rest were alleged to have been deposited after receiving from M.B. Investment and M.B. Corporation. The ld.AO directed the assessee to explain the nature of transaction and source of deposits. In response to the query of the AO, it was contended by the assessee that the company wanted to sell shares of Hynoop Food & Oil Industries to M.B. Investment and M.B. Corporation. They have paid cash of Rs.43,93,100/- in advance and the same was deposited in the bank account with Indian Bank. M/s. Hynoop Food & Oil Industries was a sick industry declared by BIFR, and therefore, it could not sell the shares. The amount was refunded to M.B. Investments and M.B. Corporation. The AO directed the assessee to submit accounts of M.B. Corporation and M.V. Investments; confirmation from these sources saying that they have sufficient cash balance, out of which such deposits were made. These evidences could not be submitted by the assessee, hence, the ld.AO treated the deposits in the bank account as

ITA No.1171/Ahd/2016 3 unexplained investment, and made addition under section 69 of the Act. Dissatisfied with the assessment order, the assessee carried the matter in appeal before the ld.First Appellate Authority. According to the assessee, it has raised additional grounds of appeal, vide which it has pleaded that sister concern, Hytisun Magnetics Ltd. (“HML” for short) sold property at a price below government jantri rate and difference of money was received in cash which was utilized by the company for depositing in its bank account. For buttressing this issue, the assessee company sought to file additional evidence under Rule 46A of the Income Tax Rules, 1962. Basically it sought to file computation of income made in the case of HML wherein sale consideration disclosed in the sale deed at Rs.2,50,00,000/- was recognized for the purpose of section 50C at Rs.7,58,79,556/-. The ld.CIT(A) has considered this issue, but did not find merit in the contentions of the assessee for admitting additional evidence as well as for entertaining new plea. The discussion made by the ld.CIT(A) reads as under: “5.2 During the appellate proceedings, the appellant submitted an application for admission of additional evidence under Rule 46A of I. T. Rules. It was submitted by the appellant that the impugned addition made on account of cash deposits in the appellant's account was from its sister concern Hytisun Magnetics Ltd. (HML) which had received cash on sale of land and building owned by it. It was submitted by the appellant that documents in respect of this transaction was not produced before the AO since HML had closed down in 1998 and the appellant could not procure copies of the same.

5.2.1 CBDT framed rule 46A in the Income tax Rules, 1962 w.e.f 1.4.1993. Under the said rule, CIT(A) was permitted to admit fresh evidence only under the following circumstances-

ITA No.1171/Ahd/2016 4 (a) where the Income-tax Officer has refused to admit evidence which ought to have been admitted; or

(b) where the appellant was prevented by sufficient cause from producing the evidence which he was called upon to produce by the Income-tax Officer; or

(c) where the appellant was prevented by sufficient cause from producing before the Income-tax Officer any evidence which is relevant to any ground of appeal;

(d) where the Income-tax Officer has made the order appealed against without giving sufficient opportunity to the appellant to adduce evidence relevant to any ground of appeal.

5.3 A perusal of the assessment order shows that the submissions that have been made now and that the explanation that is being given for the cash deposits are totally different from those given during the assessment proceedings. Not once during the assessment proceedings did the appellant submit that the amount of cash of Rs.43,93,100/- was received from HML. I am of the view that this is not additional evidence but is a completely new submission that the appellant is making now. The reason given .by the appellant for not furnishing this evidence to the AO during assessment proceedings, i.e. because HML had closed down, is also not acceptable, as firstly, it is for the first time during the appellate proceedings that the appellant has brought in a reference to HML. Secondly, HML is said to have closed down in 1998. If details of transaction made by that company can be produced at appellate stage, they could have been produced before the AO as well especially since the said company is a sister concern of the appellant

5.3.1 Considering all these facts, I am of the view that the submissions made by the appellant at appellate stage do not qualify for admission under Rule 46A. The request for admission of additional evidence is rejected.

ITA No.1171/Ahd/2016 5 appellant could not offer a satisfactory explanation for the deposit of this amount in its bank account. It was claimed by the appellant during the assessment proceedings that this amount had been received in cash from M.B. Investment and M.B. Corporation as advances received by the sale of shares of Hynoop Food & Oil Industries by the appellant It was submitted by the appellant then that this deal did not go through as Hynoop Food & Oil Industries went under the BIFR and therefore this amount was subsequently refunded to M.B. Investment and M.B. Corporation. The AO dismissed the explanation offered by the appellant for the following reasons:

[i] The appellant did not produce any evidence to prove that this amount had been received in fact from M.B. Investment and M.B. Corporation, [ii] No confirmation of these parties were submitted.

[iii] The appellant could not establish the identity and credit-worthiness of these parties; and (iv) Hynoop Food & Oil Industries was under B1FR since 2000 and was also a sister concern of the appellant, hence the explanation that the sale of shares fell through because of the fact that Hynoop Food & Oil Industries went under the BIFR was not logical or acceptable.

6.1 During the appellate proceedings, the appellant offered a completely different explanation for the amount deposited in its account. It was stated that the cash deposited in the bank account was out of cash receipts from sister concern HML , who received cash on sale of land & building owned by it. The sale was made by registered sale deed on 16/03/201.2. The sale price as per sale deed was Rs. 2,50,00,000 whereas, Government Jantri sale value was Rs. 7,58,77,500. HML received the difference of amount between sale price as per sale deed and Government Jantri value ie Rs. 5,08,77,500 in cash. The appellant company received cash from its sister concern HML which was deposited in its bank account without recording the same in its books of account except two entries dated 05/04/2011 [Rs. 10,000) and 06/04/2011 [Rs. 1,1000). The cash received from HML was deposited in the bank either in the name of M.B. Investment or in the name of M.B. Corporation. These were paper

ITA No.1171/Ahd/2016 6 companies and their names were only utilized for making cash deposits.

6.2 The submissions made by the appellant during the appellate proceedings are also without any documentary evidences except a copy of return of income of HML and copy of the sale deed. It has already been held earlier that these evidences cannot be accepted at this stage since the appellant is taking a completely different stand from that taken during the assessment proceedings. Moreover, the appellant's claim that this amount was received by the appellant through M.B. Corporation & M.B, Investment from HML is also not established by the appellant by giving any kind of corroborative evidence in the form of bank statement, confirmations, etc. It has also been admitted by the appellant that all these transactions were outside the books of accounts of the appellant. Looking at all the facts and the submissions made by the appellant, I am of the view that the action of the Assessing Officer in making an addition of Rs.43,93,100/- u/s.69 of the I.T.Act was justified and the same is confirmed. Ground of appeal No.1 is accordingly dismissed.”

“Date : 18/06/2018 xxx xxx Dear Sir,

ITA No.1171/Ahd/2016 7 In this case, appellant company had deposited cash in its bank a/c. during A.Y. 2012-13. The source of cash deposit is receipt from its sister concern M/s. Hytaisun Magnetics Ltd. (HML). HML had sold its factory land and building and out of cash receipt it had given cash to appellant company, which in turn was deposited by appellant company in its bank a/c.

The assessment of HML for A.Y. 2012-13 was re-opened u/s. 147 and during assessment proceedings the statement of Chairman and MD (CMD) of HML was recorded u/s. 131 of Act by A.O. The CMD had confirmed the cash given to appellant company out of receipt on sale of factory land and building. Thereafter, the A.O. had completed the assessment by accepting the contentions of the assessee company -HML.

The additional evidences could not be filed before Hon. CIT(A) because the order of OT(A) in case of appellant (Hysafe Inv. Pvt Ltd.) was passed on 01.02.2016 whereas, the assessment of HML u/s. 147 was passed on 29.02.2016.

The additional evidences filed herewith as per Index are in connection with cash given by HML to appellant company and therefore, these additional evidences have direct nexus with the appeal of the appellant before Hon. SMC Bench in ITA No. stated above. Therefore, Hon. ITAT Bench SMC is prayed to admit the additional evidences and consider the same while deciding the appeal and oblige.

The Registry is requested to put up the additional evidences before Hon. SMC Bench.

Thanking you Yours faithfully Hysafe Investments Pvt. Ltd. Sd/- Director” 6. He submitted that additional evidence i.e. copy of statement of Shri Bharatbhai Atmaram Patel recorded on 21.1.2016 during the assessment proceedings of HML is an essential evidence for a

ITA No.1171/Ahd/2016 8 just decision of the appeal, and therefore, it be taken on record. He further submitted that the assessment order in the case of HML for the Asstt.Year 2012-13 is also an essential document, and for buttressing contentions of the assessee about the source of money, it should be taken on record. He pointed out that identical issue came up before the Hon’ble Bombay High Court in the case of Smt.Prabhavati S. Shah Vs. CIT, 231 ITR 51. He placed on record copy of this decision. He pointed out that in this case, though the assessee failed to fulfill the conditions enumerated in Rule 46A, but taken cognizance of residuary sub-rule (4) of Rule 46A. Hon’ble High Court has observed that in order to do complete justice between the parties, the ld.CIT(A) ought to have exercised his powers, which is co-terminus with the AO and ought to have taken relevant evidence on record. On the strength of this decision, he contended that even if the assessee failed to fulfill procedural requirements contemplated in sub-rule (1) to (3) of Rule 46A before the ld.CIT(A), then also the ld.CIT(A) ought to have entertained the evidence under sub-rule (4). He drew my attention to rule 29 of the Income Tax (Appellate Tribunal) Rules, 1963 which authorise the Tribunal take additional evidence on record and submitted that though this rule starts a non-obstante clause i.e. ‘notwithstanding’ and provide that parties have no right to submit additional evidence, but if the Tribunal requires for a just decision in any appeal, then it can direct that party to produce that evidence. He emphasised that the Tribunal should exercise this discretion in order to do complete justice between the parties. Thereafter, he took me through the statement of Shri Atmaram Patel dated 21.1.2016 which was recorded during the assessment proceedings on HML for the Asstt.Year 2012-13. He drew my

ITA No.1171/Ahd/2016 9 attention towards question and answer no.5 and submitted that CMD of HML has admitted that on sale of land cash was received. This cash was given to different companies. Therefore, source of cash in the hands of the assessee was from HML. He submitted that this evidence be taken on record, and thereafter issue be remitted to the AO for re-adjudication.

ITA No.1171/Ahd/2016 10 theory has been developed with an idea that; because in the case of HML there was no choice with the assessee except to compute capital gain on the basis of deemed sale consideration, hence that excess consideration should be disclosed in such a manner that would give some benefits in other sister concerns. So far as prayer of the admission of additional evidence is concerned, he contended that this was not case of the assessee before the AO. The alleged CMD, Shri Atmaram Patel happened to be director of the assessee-company. How, he was not aware about these facts, when assessment of this assessee was going on? At the first instance, this fact ought to have been disclosed. In this way, he prayed that order of the ld.CIT(A) be upheld.

ITA No.1171/Ahd/2016 11 receipt of cash. Copy of the assessment order in the case of HML is available on page no.8. I have gone through this order. It is pertinent to observe that section 50C of the Income Tax Act provides that if an assessee has sold land or building or both, and paid stamp duty, then value of the property determined for the purpose of charging stamp duty will be deemed as full sale consideration for the purpose of computing capital gain. Now the property was valued for the purpose of stamp duty at Rs.7,58,79,556/-. There was no choice with the HML except to recognize this amount as sale consideration for the purpose of LTG/STG. Now the question before me is, whether it was a bona fide error at the end of the assessee during the assessment proceedings for not disclosing this fact or it was under some strategy or modus operandi. It is to be kept in mind that the sale consideration of the land sold by the HML was enhanced under a deeming fiction and not necessary that equal amount should be available with HML in cash or in kind. It is also to be kept in mind that assessee as well as HML are companies. Asset belongs to the shareholders. Under what capacity HML agreed for receipt in cash? There is no explanation at the end of both the assessee. HML has not recognized in its assessment order that it has received any cash, rather, it took the amount under the deeming fiction provided under section 50C. As far as the veracity of the statement given by Shri Atmaram Patel is concerned he happened to be director of the assessee. What prohibited him to give confirmation at the first instance ? It is a statement given after realizing that there is no other way out except recognize sale consideration of the land equivalent to the amount on which stamp duty was paid. Thereafter, he gave this statement. To my

ITA No.1171/Ahd/2016 12 mind, even if the statement is taken on record for the purpose of evidence, and treated as gospel truth, it is not sufficient to explain the source of cash in the hands of the assessee. It is not sufficient to fulfill the ingredients of section 68 i.e. genuineness of the transactions, identity of creditors and credit-worthiness. The assessee has alleged that contribution was made by M.B. Investment and M.B. Corporation. If they are being replaced with HML then, how the transaction will be genuine ? How identity will be proved ? As far as judgment of Hon’ble Bombay High Court is concerned, it is not applicable on facts of the given case. I have looked into prima facie acceptability of the evidence sought to be produced as additional evidence. But even if this evidence is taken in record, it will not take the case of the assessee any further, therefore, I do not deem it necessary to admit this evidence on record and linger on the matter. Even if this evidence is taken as gospel truth, then it is not sufficient. Therefore, the facts in the case of Smt.Prabhavati S. Shah (supra) before the Hon’ble Bombay High Court are together different than the one before me.

Sd/- (RAJPAL YADAV) JUDICIAL MEMBER Ahmedabad; Dated 6/03/2019