RAMSRI INFRATECH PRIVATE LIMITED,HYDERABAD vs. INCOME TAX OFFICER, WARD-3(2), HYDERABAD

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCHES “B”: HYDERABAD

BEFORE SHRI V. DURGA RAO, JUDICIAL MEMBER AND SHRI D.S. SUNDER SINGH, ACCOUNTANT MEMBER

I.T.A. No. 2191/HYD/2017 Assessment Year: 2013-14 M/s.Ramsri Infratech Income Tax Officer, Private Limited, Vs Ward-3(2), HYDERABAD HYDERABAD [PAN: AADCR6513K] (Appellant) (Respondent)

For Assessee : Shri T. Rajendra Prasad, AR For Revenue : Smt. M. Narmada, DR Date of Hearing : 15-10-2019 Date of Pronouncement : 18-10-2019

O R D E R PER D.S. SUNDER SINGH, A.M. : This appeal filed by the assessee is directed against the order of the Commissioner of Income Tax(Appeals)-3, Hyderabad, dated 11-09-2017.

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Amount (Rs) 1. Addition u/s.68 of the Act 81,15,000 2. Difference in sub-contract payments 7,89,138 3. Difference in profit 1,88,500

2.1. Against the said order of assessment, the assessee preferred an appeal before the CIT(A). None appeared before the CIT(A). Therefore, the Ld.CIT(A) confirmed the order of AO.

2.2. Against the said order of the Ld.CIT(A), the assessee is in appeal before the Tribunal and has raised two Grounds.

3.1. During the appeal proceedings before us, Ld.AR argued that the Ld.CIT(A) has not given sufficient opportunity to the assessee and decided the appeal of the assessee ex-parte, without giving proper opportunity to the assessee. Therefore, he contended that the Ld.CIT(A) committed gross error violating the principles of natural justice and hence requested to set aside the order of the Ld.CIT(A).

3.2. Per contra, Ld.DR vehemently supported the order of Ld.CIT(A).

3.3. We have gone through the order of the Ld.CIT(A) and find that the Ld.CIT(A) posted the present case for hearing on two occasions. But, the assessee did not appear before the Ld.CIT(A) and there was no response from the assessee on

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both the occasions. On third occasion, the assessee has requested for adjournment. Subsequently, the assessee neither appeared personally nor made any written submissions. Hence the Ld.CIT(A) disposed-of the appeal on merits. Since the CIT(A) has given sufficient opportunity by posting the case for hearing on three occasions, we do not find any error in disposal of appeal by the Ld. CIT(A). Hence, we dismiss this Ground raised by the assessee.

5.1. As far as addition of Rs.74,75,000/-is concerned, the AO stated in the assessment order that during the assessment proceedings, the assessee-company has received the amount of Rs.74,75,000/- from old investors. Since the company has not furnished any confirmation letters along with Income Tax returns, company’s capital A/c and bank account statement etc., the AO treated that the assessee has not discharged the onus to prove the genuineness of the introduction of share

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capital and therefore, made the addition of Rs.74,75,000/- u/s.68 of the Act.

5.2. Against the said order, the assessee went on appeal before the CIT(A). Since there was no response from the assessee, the Ld.CIT(A) confirmed the addition made by the AO and dismissed the appeal of assessee.

5.3. Against the said order of Ld.CIT(A), the assessee is in appeal before us. During the appeal proceedings before us, Ld.AR submitted that there was no introduction of fresh share capital during the year under consideration except the sum of Rs.6,40,000/- which is also agitated in this appeal. Ld.AR further submitted that there was change in the shareholding pattern of company, but neither the fresh equity shares were issued nor bought back the shares from the shareholders. Referring to Pg.52 of the Paper Book, Ld.AR taken our attention to the Balance Sheet and stated that the outstanding share capital was Rs.97,45,000/- for the year ending 31-03- 2012 and the same remained for the year ending 31-03-2013. Referring to Pg.56 of the Paper Book, the assessee has shown the changes of shareholdings of various shareholders and demonstrated that shares of the company were acquired by some new shareholders from the existing shareholders and argued that there was change in the pattern of shareholding and submitted that neither the company has issued fresh share capital nor introduced any cash credits during the year under consideration. Therefore, submitted that there is no case for making the addition u/s.68 of the Act and hence

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requested to set aside the orders of the lower authorities and allow the appeal of assessee.

5.4. Per contra, the Ld.DR strongly supported the orders of the lower authorities.

5.5. We have heard both the parties and gone through the material placed on record. From the perusal of the Balance Sheet, we find that there is no change in the paid up share capital for the year ending 31-03-2012 or 31-03-2013. The paid up share capital remained at Rs.97,45,000/-. Thus, there is no infusion of fresh share capital in the company. For a query from the Bench, the Ld.AR replied that the original share capital was issued in AY.2006-07/2007-08 and thereafter, no fresh share capital was received by the company. The then existing shareholders have transferred the shares to new shareholders. Thus, there is no impact on the share capital of the company. We have gone through the Balance Sheet and also the list of shareholders and change in pattern of shareholding, furnished in the statement of facts and find that there is no fresh share capital introduced in the company for making addition u/s.68 of the Act. For the purpose of making addition u/s.68 of the Act, any credit found during the year, for which the source was not explained required to be considered for addition. In the instant case, there is no credit found to be credited in the books of account for which the source remained un-explained. Thus, there is no case for making the addition u/s.68 of the Act. Hence, we set aside the order of Ld.CIT(A)

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and delete the addition made by the AO. This Ground of appeal of the assessee is allowed.

6.1. Against the said order of Ld.CIT(A), the assessee is in appeal before the Tribunal.

6.2. During the appeal proceedings before us, the Ld.AR argued that the assessee submitted copies of the confirmation letter and bank account along with proof of identification and genuineness of the investment before the AO and the AO doubted the genuineness of the investment of the share capital in the company without making any further enquiries. Referring to Pg.65 of the Paper Book, the Ld.AR submitted that the assessee has furnished the confirmation letter with complete address, confirming the subscription towards share application money. The amount was paid through Bank cheque. At Pg.66 of the Paper Book, Ld.AR furnished copy of the bank account of Ramsri Infratech Private Limited, supporting the receipt of share application money through banking channels. At Pg.67 of the Paper Book, the assessee

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furnished a copy of the Aadhar Card, which contains the complete and clear address of share applicant Ms. Ch.Pushpavathi. Therefore, argued that the assessee has discharged the burden and there is no case for making the addition u/s.68 of the Act. Hence, requested to delete the addition made by the AO and to set aside the order of Ld.CIT(A).

6.3. The Ld.DR strongly supported the orders of the lower authorities.

6.4. We have heard both the parties and gone through the material placed before us. It is true that during the year under consideration, the amount of Rs.6,40,000/- was received as share application money in the account of assessee-company. The said share application money was received through cheque, which was established from the bank account copy. The same cheque was credited into bank account of assessee- company. In the confirmation letter though the assessee failed to furnish PAN details, complete address was given along with a copy of Aadhar card. In the Aadhar card also the complete address with door number etc., of the assessee was available. Therefore, the identity of the parties is established and the subscriber had confirmed the payment of share application money to the company. Hence, the assessee had discharged the onus with regard to the receipt of share application money from the subscriber. Though Ld.DR relied on the order of Hon'ble Delhi High Court in the case of Pr.CIT Vs. Bikram Singh, ITA No.55 of 2017, dt.25th August, 2017, the case relied

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upon by the Ld.DR is not of much help since in the said case, the AO conducted enquiries and came to the conclusion that the creditors have no creditworthiness and introduction of share capital was not genuine.

In the instant case, the AO neither conducted the enquiry nor disproved the identity of the creditors. Therefore, the case law relied upon by the Ld.DR is distinguishable on facts and not applicable in the instant case. Since the assessee has discharged its burden with regard to source of share application money and established the identity of parties and the money was received through cheque, we do not find any reason to doubt the genuineness of the introduction of share application money without bringing any evidence to controvert the submission made by the assessee. Therefore, we set aside the order of Ld.CIT(A) and delete the addition made by the AO. This Ground of appeal is allowed.

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S.No. Name of the Amount Paid Bill submitted Difference contractor (Rs) for the amount (Rs) 1 Ajay Mahajan 21,82,100 20,49,455 1,32,645 2 Bhagh Singh 41,61,702 41,61,702 0 3 Batt Hydro Power 1,10,38,280 1,03,81,787 6,56,493 4 Dildar Ali Bhatt 1,44,200 1,43,566 634 Total : 7,89,138

The AO came to the conclusion that the assessee had debited the sum of Rs.1,73,82,082/- against the liability incurred during the year at Rs.1,65,92,944/-. Thus, the difference of Rs.7,89,138/- was disallowed and added to the income of the assessee as ‘excess expenditure’.

7.1. Against the said order, the assessee went on appeal before the CIT(A), who confirmed the addition in the exparte order. Aggrieved, the assessee is in second appeal before the Tribunal.

7.2. During the appeal proceedings before us, the Ld.AR submitted that though the assessee has made the payment of Rs.1,73,82,082/-, the amount actually charged to P&L A/c was only Rs.1,65,92,944/- but not the sum of Rs.1,73,82,082/- as contended by the Ld.AO. Referring to Pg.60 of the Paper Book, the Ld.AR drawn our attention to the amounts debited to other civil and labour and site expenses and submitted that the amount debited was Rs.3,14,12,205/- towards civil and labour expenses. Referring to Pg.70 of the Paper Book, the Ld.AR submitted that out of the amounts debited under the head ‘Civil, Labour and site expenses’ of Rs.3,14,12,205/-, to civil contracts was Rs.1,86,85,757/-,

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from which the AO made the disallowance. Referring to Pg.87 of the Paper Book, the assessee submitted that out of the sum of Rs.1,86,85,757/- the assessee transferred to P&L A/c relating to the payments made to Ajay Mahajan, Batt Hydro Power & Constructions and Bhag Singh another to the extent of Rs.1,65,92,944/- and debited to the P&L A/c, thus, the Ld.AR submitted that no excess expenditure was charged to P&L A/c, hence, there is no case for making the addition u/s.68 of the Act on account of payment of sub-contracts. Accordingly requested to set aside the order of the lower authorities and allow the appeal of the assessee.

7.3. On the other hand, Ld.DR argued that the submissions made by the assessee were not coming out from the assessment order, hence, she submitted that the issue needs verification at the end of the AO and thus requested to remit the matter back to the file of AO for reconsideration .

7.4. We have heard both the parties and gone through the material placed before us. In the instant case, the AO is of the view that the amount debited to P&L A/c was of Rs.1,73,82,082/- against the bills raised by the sub- contractors to the tune of Rs.1,65,92,944/-. The contention of assessee is that the amount charged to P&L A/c was only Rs.1,65,92,944/- and some advance payments were also made to the sub-contractors, therefore, there is no case for making the addition. Going through the Paper Book and the particulars placed before us, shows that the amount charged to P&L A/c was Rs.1,65,92,944/- but not Rs.1,73,82,082/-.

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The Ld.CIT(A) decided the appeal ex-parte, without going into the facts of the case. The fact whether the amount charged to P&L A/c represented Rs.1,65,92,944/- or Rs.1,73,82,082/- was not clearly discussed in the assessment order. Therefore, in the interest of justice, we are of the considered view that the issue needs to be verified at the end of the AO. Hence, we remit the matter back to the file of AO and direct the AO to reconsider the issue and decide the same afresh on merits, after giving due opportunity of hearing to the assessee. This Ground raised by assessee is treated as allowed for statistical purposes.

8.1. During the appeal hearing, the Ld.AR submitted that the closing balance of stock was Rs.2,72,46,580/- in the immediately preceding assessment year which was sold for a

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consideration of Rs.2,94,99,600/-. The Ld.AR further submitted that there was expenditure incurred by the assessee during the year under consideration i.e., the administrative and marketing expenses and thus, there was reduction in the profit. The expenditure was duly accounted in the books of accounts which the AO did not consider. Hence, he argued that there is no case for making addition. Accordingly, he requested to delete the addition made by the AO.

8.2. On the other hand, Ld.DR supported the orders of lower authorities.

8.3. We have heard both the parties and gone through the material placed before us. It is true that there was a closing balance of Rs.2,72,46,580/-, relating to finished goods of flats. It was also true that the sale consideration of Rs.2,94,99,600/- was declared in the P&L A/c. The AO has simply taken the closing balance of the earlier year and sale consideration of the flats and brought the difference as income, which was incorrect. The AO also required to consider the expenditure incurred and accounted relating the marketing and distribution and administrative expenses to determine the profit. In the instant case, the assessee has maintained the books of account, which were duly audited by the qualified accountant u/s.44AB of the Act as well as the Companies Act. No defects were pointed out by the AO in spite of production of books of account during the assessment proceedings. Therefore, we find no reason to make the addition, without having considered the expenditure. Hence, we set aside the

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order of Ld.CIT(A) and delete the addition made by the AO. The Ground raised by assessee is allowed.

Order pronounced in the open court on 18th October, 2019

Sd/- Sd/- (V. DURGA RAO) (D.S. SUNDER SINGH) JUDICIAL MEMBER ACCOUNTANT MEMBER Hyderabad, Dated: 18-10-2019 TNMM

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Copy to :

2.The Income Tax Officer, Ward-3(2), Hyderabad.