M/S GROWELL HIRE & PURCHASE FINANCE LTD.,CHENNAI vs. ACIT, CENTRAL CIRCLE-2(3), CHENNAI

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ITA 129/CHNY/2022Status: DisposedITAT Chennai25 November 2022AY 2013-146 pages

In favour of the Revenue: the assessee's appeal was dismissed. From the AI summary of this appeal.

AI SummaryDismissed

What did the Tribunal hold?

The Tribunal held that the assessees failed to produce any evidence to prove that the investments in shares were out of explained sources. Consequently, the additions made by the AO were confirmed.

What were the facts?

The assessees claimed to have made investments in share capital of SBQ Steels Ltd. and RKKR Steels Ltd. out of alleged sale proceeds of their own share investments. The Assessing Officer (AO) treated these investments as unexplained income, citing lack of proof for share capital, capacity to command premium, existence of investments, and untraceable directors.

What were the issues?

Whether the investments made in share capital can be treated as unexplained income under Section 68 of the Income Tax Act when the assessee fails to prove the genuineness and source of such investments.

Which sections of the Income-tax Act were involved?

Section 68,Section 132

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, ‘B’ BENCH, CHENNAI

Before: SHRI MAHAVIR SINGHAND SHRI MANOJ KUMAR AGGARWAL

Hearing: 15.11.2022Pronounced: 25.11.2022

आदेश /O R D E R PER MAHAVIR SINGH, VP: These 8 appeals by the 5 different assessees are arising out of different orders of the CIT(A)-18 / CIT(A)-19 / CIT(A)-15, Chennai - 3 - 128 & 129/Chny/2022 735 & 736/Chny/2020 & 3080/Chny/2019 of different dates. The assessments were framed by the ACIT, Central Circle 2(3), Chennai u/s.143(3) of the Income Tax Act, 1961, (hereinafter ‘the Act’) vide orders of different dates. Since the issue is common in all these appeals, they are heard together and are disposed off by this common order.

2.

At the outset, it is noticed that the appeal filed by the assessees in & ITA No.736/Chny/2020 are barred by limitation by 140 days. The orders of CIT(A) dated 30.01.2020 was received by assessees on 30.01.2020 as per Form 36. The appeals have to be filed on or before 01.04.2020 but were filed only on 20.08.2020. The ld. AR for the assessees stated that the delay was due to Covid-19 pandemic and nationwide lockdown imposed by the Central Government from 25.03.2020. We noted that the Hon’ble Supreme Court in Miscellaneous Application No.665 of 2021 vide order dated 23.03.2020 has given directions that the delay are to be condoned during this period 15.03.2020 to 14.03.2021 and they have condoned the delay up to 28.02.2022 in Miscellaneous Application No.21 of 2022 vide order dated 10.01.2022. In term of the directions of Hon’ble Supreme Court, we condone the delay in filing of these appeals by assessees and admit the appeals for adjudication.

1.

- 4 - 128 & 129/Chny/2022 735 & 736/Chny/2020 & 3080/Chny/2019 3. The only common issue in these appeals of assessees is that the assessees had challenged the addition of investment made in share capital of SBQ Steels Ltd., by AO as unexplained income u/s.68 of the Act:- Addition made by Assessment Assessee Appeal No. AO as unexplained year income u/s 68 70/CHNY/2022 2013-14 5,00,000/- Chandan Credits Ltd. 735/CHNY/2020 2014-15 1,30,000/- Gugnani Leasing & Hire 71/CHNY/2022 2013-14 10,00,000/- Purchase Pvt. Ltd. 736/CHNY/2020 2014-15 3,40,000/- Growell Hire & 128/CHNY/2022 2012-13 4,59,960/- Purchase Finance Ltd. 129/CHNY/2022 2013-14 10,00,000/- Shantananda Steels Pvt. 3080/CHNY/2019 2011-12 3,50,50,000/- Ltd. Ojasvi Motor Finance 72/CHNY/2022 2013-14 17,92,33,000/- Pvt. Ltd.

4.

We have heard rival contentions and gone through facts and circumstances of the case. We noted a search action u/s.132 of the Act was carried out in the case of assessees and its group companies, in connection with the search in the case of other concerns of Kolkata companies on 26.09.2012. The AO noted that the assessees have made investments in share capital of its group companies i.e., SBQ Steels Ltd., and RKKR Steels Ltd., out of the alleged claim of sale proceeds of its share investments. The AO after considering the enquiry conducted by the investigation wing and that these investments are out of sale proceeds of alleged share from - 5 - 128 & 129/Chny/2022 735 & 736/Chny/2020 & 3080/Chny/2019 shell companies of Kolkata, providing accommodation entries on commission basis, the AO noting the following facts confirmed the addition:- (i) The assessee did not have the share capital and share premium. Their existence was not proved beyond doubt. (ii) The assessee did not have the capacity to command share premium as it did not have any asset backing of any king and income of scale. (iii) The existence of share investments were not proved beyond doubt. Hence, the claimed sale proceeds are receipts originated from unknown sources. The only evidences were photo copies of self-made computer printed invoices whose genuineness was not proved. (iv) The erstwhile Directors were never produced before this office. No contact particulars, communication details were furnished. Hence, these so called Directors are only name lenders who could not be traced. (v) The assessee as well as its group companies did not explain how they came to know each other. Only vague replies were furnished. Hence, genuineness of the claimed business transactions, was not proved. (vi) Further No capital gains were ever offered. If these companies were really dealing in share investments, particularly as unquoted equities were not exempt from tax, the requisite evidences to prove the cost as well as sale price valuations must have been kept. Lack of them only point to the fact such activities were not carried out in reality. (vii) Complete financial documents for earlier years (beyond A.Y:2007-08) were not furnished to evidence the scale of the activities of the assessee and other similar companies. (viii) The alleged share holder companies as well as companies whose share investments were statedly held were all un-listed companies based at Kolkata and many share the same address.

Aggrieved, assessee preferred appeal before CIT(A). The CIT(A) also confirmed the action of the AO. Aggrieved, assessees came in appeal before the Tribunal.

- 6 - 128 & 129/Chny/2022 735 & 736/Chny/2020 & 3080/Chny/2019 5. Now before us, nothing was produced to prove that the investments in shares of SBQ Steels Ltd., by the assessees are out of the explained investment. Since the assessees could not produce anything before us, we dismiss this issue of the assessees and the orders of the lower authorities are confirmed.

6.

In the result, the appeals filed by the assessees in 71, 72, 128 & 129/CHNY/2022, ITA Nos. 735 & 736/CHNY/2020 and ITA No.3080/CHNY/2019 are dismissed.

Order pronounced in the open court on 25th November, 2022 at Chennai.

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