RAJSHREE ELECTRICALS & ASSOCIATE PVT. LTD.,BHUBANESWAR vs. ITO, WARD-1(3), BHUBANESWAR

आयकर अपील�य अ�धकरण, कटक �यायपीठ,कटक IN THE INCOME TAX APPELLATE TRIBUNAL CUTTACK BENCH CUTTACK BEFORE SHRI N.S.SAINI, AM & SHRI PAVAN KUMAR GADALE, JM आयकर अपील सं./ITA No.73/CTK/2018 (�नधा�रण वष� / Assessment Year :2014-2015) M/s Rajshree Electricals & Vs. ITO, Ward-1(3), Bhubaneswar Associate Private Limited, 1st Floor, DDL-556, Phase-II, Dumduma Housing Board Colony, Dumduma, Bhubaneswar-751019 �थायी लेखा सं./जीआइआर सं./PAN/GIR No. : AAFCR 6010 B (अपीलाथ� /Appellant) (��यथ� / Respondent) .. �नधा�रती क� ओर से /Assessee by : Shri Purna Chandra Mishra, AR राज�व क� ओर से /Revenue by : Shri Subhendu Dutta, CITDR सुनवाई क� तार�ख / Date of Hearing : 28/08/2018 घोषणा क� तार�ख/Date of Pronouncement 31/08/2018 आदेश / O R D E R Per Shri Pavan Kumar Gadale, JM: This is an appeal filed by the assessee against the order of CIT(A)- 2, Bhubaneswar, dated 10.11.2017 passed in I.T.Appeal No.0187/2016- 17 for the assessment year 2014-2015. 2. The assessee has raised the following grounds of appeal :- 1. That the Ld. Commissioner Income-tax (Appeals)-2, Bhubaneswar is not justified in confirming the addition of Rs.18,00,000/- made by the AO under the head unexplained share capital on the facts and circumstances of the case. 2. That the Ld. Commissioner of Income-tax (Appeals)-2 Bhubaneswar should have considered the written submission dt.15.9.2917(page -9 to 11) wherein all details of creditor-director, Smt.Urmila Tripathy i.e. identity, genuineness of transaction, creditworthiness of financial strength and detailed address with Permanent Account Number were given. 3. That the Ld. Commissioner of Income-tax (Appeals)-2 Bhubaneswar should have considered the investment of Rs.18,00,000/- made by the Director, Smt. Urmila Tripathy in the hands of the Director instead of in the hands of assessee-company in the light of Supreme Court’s decision

2 ITA No.73/CTK/2018 in the case of CIT Vrs. Lovely Exports Pvt. Ltd. (2009) 319 ITR (St.) 5 (para-4) reported in 216 ITr 195 (SC), in the case of CIT Vrs. ASK Brothers Ltd.(2011) vide 333 ITR 111 (Karnataka), 319 ITR (St.) 5 (SC) (Para-6) and 215 ITR 23 (SC) (Para-6) and other various High Courts decisions as all the particulars of creditor was furnished at the CIT appeal hearing stage (vide written submitted at page -11) 4. That the addition of Rs.18,00,000/- confirmed by the ld. CIT(Appeals)-2, Bhubaneswar is illegal, arbitrary and bad in law. 5. That other ground, if any, will be urged at the time of hearing. 3. Brief facts of the case are that the assessee is engaged in the

business of trading in electrical fittings and equipments and filed the

return of income electronically on 22.09.2014 for the A.Y.2014-2015

declaring total income of Rs.3,68,240/-. The return of income was

processed u/s.143(1) of the Act. Subsequently the case was selected for

scrutiny under CASS and notices u/s.143(2) & 142(1) of the Act along

with questionnaire were issued. In compliance of the same, ld. AR

appeared before the AO and case was discussed. Thereafter the AO

completed the assessment assessing total income at Rs.27,72,990/- and

passed order u/s.143(3) of the Act, dated 23.12.2016 making

disallowance on account of suppression of income, unexplained share

capital, disallowance of expenses towards late payment of interest and

freight inward expenses.

before the CIT(A). In the appellate proceedings ld. AR reiterated the

submissions made before the AO and the CIT(A) after considering the

findings of the AO and submission of the assessee, confirmed the

addition made on account of unexplained share capital and deleted the

3 ITA No.73/CTK/2018 additions made on account of suppression of income and expenses

towards late payment interest and of expenses of freight inward and partly

allowed the appeal of the assessee. 5. Aggrieved by the confirmation of addition made on account of

unexplained share capital by the CIT(A), the assessee has filed an appeal before the Tribunal.

share capital was contributed by two directors and the assessee in the

course of hearing proceedings could substantiate with evidence and proof

was submitted with respect to the sources of investments. Ld.AR

emphasized that the shares were allotted against the stocks, whereas ld.

AR submitted paper book along with balance sheet of the assessee

company to substantiate the shares allotment and prayed for allowing the

appeal.

highly objected to the submissions and mentioned that the new facts are

coming on record and whereas the assessee before the Assessing Officer

AO and in the appellate proceedings has been referring to the sources of

cash and now presently making submissions before the Tribunal that the

allotment was made in consideration of the stocks, which is totally

different issue and the assessee is changing his stand before the higher authorities and prayed for dismissal of the appeal.

4 ITA No.73/CTK/2018 8. We have heard the rival submissions and perused the materials

available on record. The sole disputed issue with respect to the addition

made by the AO in respect of increase in the share capital to the extent of

Rs.18,00,000/-. The ld. AR’s contention before the AO that the investment

of shares of Rs.18 lakhs was by Director Smt. Urmila Tripathy and Rs.1

lakh by Shri Debashis Tripathy in cash. The AO has called for the

creditworthiness of the two directors and their income tax details, whereas

the AO having not satisfied with the availability of the sources of cash and

has observed that there is no liquidity in the hands of the investors.

Further the AO has not considered the submissions of the assessee in

respect of sources of share capital and the creditworthiness as the

assessee could not satisfied with the bank withdrawals. We find the

CIT(A) in his order has dealt on the elaborate submissions of the

assessee at page 4 of the order and explanations of the sources of the

investors-directors being out of the income accumulated over a period.

The CIT(A) was not satisfied with the explanation and made observation

at para 4.2 as under :-

“4.2 I have carefully examined the submission of the appellant. Smt. Urmila Tripathy stajs, in city of Bhubaneswar in which there are ample facilities for bank transactions. She as well as the appellant have bank account and she could have made investment in share capital of the appellant by cheque. The appellant has not explained the urgency and motivation for making investment in share capital in cash. According to the appellant, she has shown income of more than 50 lakhs in the earlier and 15 years and also she had debtors and fixed deposits in her propriety concern. Having shown income of Rs 50,00,000/- are in the last 15 years is not a sufficient proof of source of investment. The investor has to have liquid cash for making the investment which has not been demonstrated by the appellant. Similarly, the appellant has not given any evidence as to which sundry debtors or fixed deposits were liquidated. It is my considered view the appellant have not

5 ITA No.73/CTK/2018 explained the genuineness of transaction and creditworthiness of Smt. Urmila Tripathy. Accordingly, the addition of Rs 18,00,000/-is confirmed and the ground of appeal is dismissed.”

report and financial statements. On perusal of the balance sheet, we

found that there is increase in the share capital to the extent of Rs.19

lakhs and further in Schedule 1 and Note 1 to the balance sheet to the

financial statements as on 31.03.2014, we found that there is increase in

the share capital but there is nowhere specifically mentioned as required

as per the provisions of Companies Act that the shares were allotted for

consideration other than the cash as envisaged by the ld. AR. Ld. AR

vehemently argued that the AO by mistake considered the cash, but we

are not satisfied with the submissions of the AR in the assessment

proceedings at page 4 of the AO’s order at para 5, the AO has considered

the disputed issue and submissions and not satisfied with the availability

of sources of cash and made addition. The ld. AR in the hearing

proceedings before the Tribunal emphasized that the shares were allotted

in consideration other than the cash. We on comparing the assessee’s

submissions before the AO and appellate authorities with the submissions

on allotment of shares against stocks, the arguments of ld. AR are

contradictory. Ld.DR vehemently objected to the submissions of ld. AR in

respect of allotment of shares and the assessee never brought these facts

of allotment of shares other than the cash before the lower authorities and

for the first time these contentions were raised in the Tribunal. Therefore,

we considering the facts and findings of the lower authorities and

6 ITA No.73/CTK/2018 submissions made in the course of assessment proceedings and the appellate proceedings by the ld. AR and the assessee’s financial statements filed before us, we restore this issue to the file of AO to examine whether the share allotment was made without consideration of cash against the stocks as the ld AR vehemently emphasising before the Tribunal with the material papers. We make it clear that the assessee shall file documents in respect of allotment and give the clarity on allotment of shares based on the audited financial statements. Further the assessee shall cooperate in submitting the information before the AO and early disposal of the case. Accordingly, the disputed issue is restored to the file of AO and the grounds of appeal of the assessee are allowed for statistical purposes. 10. In the result, appeal of the assessee is allowed for statistical purposes. Order pronounced in the open court on this 31/08/ 2018. Sd/- Sd/- (N.S.SAINI) (PAVAN KUMAR GADALE) लेखा सद�य / ACCOUNTANT MEMBER �या�यक सद�य / JUDICIAL MEMBER कटक Cuttack; �दनांक Dated 31/08/2018 �.कु.�म/PKM, Senior Private Secretary आदेश क� ��त�ल�प अ�े�षत/Copy of the Order forwarded to : अपीलाथ� / The Appellant- 1. M/s Rajshree Electricals & Associate Private Limited, 1st Floor, DDL-556, Phase-II, Dumduma Housing Board Colony, Dumduma, Bhubaneswar-751019 ��यथ� / The Respondent- 2. ITO, Ward-1(3), Bhubaneswar आयकर आयु�त(अपील) / The CIT(A), 3. आदेशानुसार/ BY ORDER, आयकर आयु�त / CIT 4. �वभागीय ��त�न�ध, आयकर अपील�य अ�धकरण, कटक / DR, ITAT, Cuttack 5. (Senior Private Secretary) गाड� फाईल / Guard file. 6. आयकर अपील�य अ�धकरण, कटक / स�या�पत ��त //True Copy// ITAT, Cuttack