MAXIMAL FINANCE AND INVESTMENTS LIMITED.,HYDERABAD. vs. INCOME TAX OFFICER, WARD-16(1)., HYDERABAD.

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCHES “A” BENCH: HYDERABAD BEFORE SHRI D. MANMOHAN, VICE PRESIDENT AND SHRI B. RAMAKOTAIAH, ACCOUNTANT MEMBER ITA. No.1042/Hyd/2017 Assessment Year: 2011-12 Maximal Finance & vs. Income Tax Officer, Investments Ltd., Ward-16(1), Secunderabad. Hyderabad. PAN: AABCM 5480 E (Appellant) (Respondent) For Assessee: Shri Samuel Nagadesi For Revenue : Shri B. Suresh Babu, DR Date of Hearing : 08.05.2018 Date of Pronouncement : 08.05.2018 ORDER PER D. MANMOHAN, VP.

This appeal by the assessee-company is directed against the order passed by Ld. CIT(A)-4, Hyderabad and it pertains to assessment year 2011-12. Following grounds were urged before us: “1. On the facts and in the circumstances of the case, the order of the Ld. CIT(A) erroneous in law and facts of the case. 2. On the facts and in the circumstances of the case, the Ld. CIT(A) erred in law and facts of the case in confirming the addition of Rs. 50,00,000/- despite the same is clearly explained not only as to source but also as to the source of source and origin of origin. 3. On the facts and as per the order of the Ld. CIT(A) erred in law and facts of the case in not communicating the remand report sent by the Assessing Officer and not giving an opportunity to appellant of going through the contents and contentions and allowing him to offer his comments and a clear violation of principles of natural justice and fair hearing in appellate process.”

explained. Having regard to the circumstances, we condone the delay and proceed to dispose of the appeal on merits. 3. Assessee-company is engaged in the business of financing and investments. During the year under consideration, assessee received share capital, share application money and unsecured loan. In particular, Smt. R. Nandini applied shares worth Rs. 50 lakhs. Assessee filed income tax details in respect of Smt. Nandini. According to the Assessing Officer further details called for were not produced to prove the identity, genuineness and creditworthiness of the transaction and hence the share application money was treated as unexplained income in the hands of the assessee. 4. On an appeal filed by the assessee, it was contended that the assessee has already furnished details of investors, their income tax details and confirmations in respect of the amount received towards share capital / share application money whereas the A.O. observed that the assessee produced only part of the information called for and income tax returns in respect of Smt. Nandini were not furnished. Learned Counsel for the Assessee placed before the Ld. CIT(A) further details in the form of source of investment by stating that the amount was received towards share application money from Smt. Nandini vide cheque No.112786 dated 06.01.2011 drawn on Axis Bank and the said amount in turn was received by her from Samay Safe Lockers Private Limited vide cheque No.017569 dated 03.01.2011, which can be seen from the bank account statement. Assessee also furnished confirmation letter dated 17.02.2014 from Samay Safe Lockers Private Limited and in fact the same was placed on record of the Assessing Officer and the PAN of Smt. Nandini was also filed. 5. In the light of the details furnished before the Ld. CIT(A), the matter was forwarded to the A.O. for verification and submission of the

remand report. The A.O. in his remand report dated 13.02.2017 stated that Smt. Nandini had not filed any return of income for the A.Y. 2011- 12 and the return of income enclosed to the letter of the CIT (A) is only for the A.Y. 2012-13. It was also stated that a sum of Rs. 23 lakhs was repaid by Smt. Nandini to M/s. Samay Telecom Pvt Ltd., on 28.01.2011 and 26.02.2011 through Axis Bank account. He further stated that for the purpose of repayment of Rs. 23 lakhs, it was shown that Rs. 11 lakhs was received from Smt. R. Girija, R. Vignesh and Sri Ramamurthy Girija, all being related parties to Smt. Nandini and Directors in the assessee-company, M/s. Maximal Finance & Investments Pvt Ltd. Further amount of Rs. 13 lakhs was credited to her account on 24.02.2011 and out of the balance available, an amount of Rs. 12 lakhs was repaid to M/s. Samay Telecom Pvt Ltd. The balance of Rs. 27 lakhs was appearing as receivable in the Audited Balance Sheet of the said company. A.O. further observed that the return of income of M/s. Samay Telecom Pvt Ltd., was filed on 28.09.2011 and it requires further verification. Ld. CIT(A) claimed to have forwarded the remanded report of the Assessing Officer for the comments of the assessee and in the absence of any response, the explanation of the assessee was rejected by holding that the assessee did not prove creditworthiness of the creditors. Aggrieved by the order of the Ld. CIT(A), assessee is in appeal before the Tribunal by contending that the so called remand report was not even communicated to the assessee and thus the comments of the Ld. CIT(A) are in clear violation of principles of natural justice. 6. Though a specific ground was raised by the assessee, Learned Departmental Representative has not verified the record and at the instance of the Bench, the record of the Ld. CIT(A) was verified to notice that an attempt was made by the Commissioner to send a notice of hearing but the notice was not served. However, Learned Departmental Representative submits that the envelope, indicating that the letter was

not served, was only a proof to show that the notice was served. We are amused to notice the fallacy in the argument of the Learned Departmental Representative. If the envelop is returned unserved and the original is available on record how can Revenue raise a contention that notice was served upon the assessee. Under these circumstances, upon hearing the Learned Counsel for the Assessee, Shri Samuel Nagadesi, we are of the firm view that the Ld. CIT(A) has not followed the principles of natural justice while disposing of the appeal. In fact, in the remand report there is no indication that the source of investment is not proved; rather the Assessing Officer merely refers to the nature of the repayment made by Smt. Nandini with which we are not concerned. Though prima facie we are of the view that the identity, genuineness and creditworthiness are proved, we do not wish to take hasty decision at this stage since the Ld. CIT(A) has not even heard the Learned Counsel for the Assessee with regard to its stand on the issue. In the peculiar circumstances of the case, we set aside the order of the Ld. CIT(A) as well as the A.O. on this issue and direct the A.O. to reconsider the issue in accordance with law. 7. In the result, the appeal filed by the assessee-company is allowed for statistical purposes.

Sd/- Sd/- (B. RAMAKOTAIAH) (D. MANMOHAN) ACCOUNTANT MEMBER VICE PRESIDENT Hyderabad, Dated: 08th May, 2018.

OKK, Sr.PS

Copy to