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Income Tax Appellate Tribunal, KOLKATA BENCH “C” KOLKATA
Before: Shri J.Sudhakar Reddy & Shri S.S.Godara
Shri Shri J.M Thard, Advocate अपीलाथ� क� ओर से/By Appellant Shri Supriyo Pal, JCIT, Sr-DR ��यथ� क� ओर से/By Respondent 25-11-2019 सुनवाई क� तार�ख/Date of Hearing 02-01-2020 घोषणा क� तार�ख/Date of Pronouncement आदेश /O R D E R PER S.S.Godara, Judicial Member:- This assessee’s appeal for assessment year 2012-13 arises against the Commissioner of Income Tax (Appeals)-15, Kolkata’s order dated 17.10.2016 passed in case No.419/CIT(A)-15/15-16/Cir-10/R&T/Kol, involving proceedings 143(3) of the Income Tax Act, 1961; in short ‘the Act’. Heard both the parties. Case file(s) perused.
The assessee’s sole substantive grievance canvassed in the instant appeal challenges correctness of both the lower authorities’ action treating capital introduced on behalf of its 161 existing member(s) amounting to ₹1,61,00,000/- @ 1 lakh each as unexplained cash credits u/s 68 of the Act. Both the learned representatives invite Assessment Year 2011-12 M/s Savitri Devi, Amita Jaiswal & Ors. Vs DCIT, Cir-10 Kol. Page 2 our attention to the CIT(A)’s detailed discussion affirming the Assessing Officer’s action to this effect as under:- “3 Assessee is an AOP and is in the business of selling liquor. During the year, assessee has claimed to have received Rs. 1,00,000/- each from its 161 members. Thus Rs.1,61,00,000/- in aggregate, has been received. AO has taken various factors into account and has arrived at the conclusion that the source of Rs.1,61,00,000/- could not be satisfactorily explained by assessee. Hence, addition of Rs. 1,61,00,000/- has been made u/s. 68. In appeal proceedings assessee has submitted that nature of business requires that local people be made members of the AOP to carry on the business in rural areas. AO's insistence on producing all the members of the AOP was not possible because of logistical problems. But these members were claimed to be old members and identity proof, return receipts etc. were produced. It is further submitted that AO has not gone deep into documents submitted by the assessee, before arriving at an adverse conclusion. I have considered the facts of the case and submissions of the assessee Assessee's ground of appeal
are in fact, in the nature of elaborate written submission which has been duly considered while deciding this appeal. No doubt assessee has furnished the paper identities of all the 161 members But AO has pointed out several discrepancies and unusual circumstances, which assessee has not been able to explain. It cannot be a mere coincidence that all the members of the AOP, residing in different districts / states, have same income in three different assessment year Further, returned incomes of all these persons are below taxable limit. Still they have filed their returns. Returns are also filed from common addresses. Further, contributions to AOP has been made in cash by all these persons. Although there is no illegality in any of the actions above at individual level, but it does raise a doubt when same actions are replicated by a large number of unrelated persons, residing separately and working separately. Only one thing is common between these persons and i.e., they are all members of the same AOP, which has been created by Jayasawal family to promote their liquor business interests. It is apparent that somebody has made efforts to give a legal identity to these persons by filing their returns but this has been achieved at minimal cost, as no taxes are paid. Income is kept below the taxable limit. During appeal proceedings, appellant has submitted copies of acknowledgment of returns filed for AY 2009-10 & 20 10-11 of the following persons. Sl No. Name Address
1. Ajayu Pandey 406, Behind Sharda Talkies, Gorakhpur, Jabalpur, MP-482001
2. Ajay Prasad 101, Jawahar Nagar, Adhartal, Jablpur, MP- 482001
3. Ambika Gupta 564, Bldg. No. 2, Near Vegetable Market, Gorakhpur, Jabalpur, MP-482001 Assessment Year 2011-12 M/s Savitri Devi, Amita Jaiswal & Ors. Vs DCIT, Cir-10 Kol. Page
3. Perusal of the acknowledgments show that returns of 3 persons for AY 2009-10 has been filed by IP address 59:95:110:143 and for AY 2010-11 returns have been filed by IP address 117: 200: 147:25. Further, the addresses mentioned are not sufficient. Even Gorakhpur is shown as a locality of Jabalpur in MP. Even a look at addresses of other persons, as mentioned in the assessment order, shows that most of the addresses are incomplete. All these facts clearly point out that somebody, with vested interest, has created the legal identity of these persons. Concerned persons might not have even been aware of full consequences of all these documentations and they would not be bothered also, as it does not hurt their interests in any manner. Further, assessee has been claiming that the nature of business required that local persons in villages be associated with the business. But addresses show they are based in the cities of Allahabad, Gorakhpur and Jabalpur respectively. All these facts, as above, and those mentioned in assessment order, do raise issues about the real identities of these persons. Besides, credit worthiness of these persons also remains unverified. These persons have incomes below taxable limit. It is not clear how they had generated the surplus of Rs.1,00,000/- to be invested in business. Perusal of computation of the members shows that they received gross profit of Rs. 4767 (net profit Rs. 2,856/-) in AY 2009-10 and gross profit of Rs.4,862/- (net profit Rs.3,181/-) in AY 2010-11. So the net return on their investments have been less than 3% in the last two years. Any prudent person would not put his money in the third year in the same low yielding investments, when he has other safe options of investments, like Bank/PO FDs etc, which yield a higher income. Hence, taking a holistic view of the matter, contentions of assessee are not acceptable. AO has raised valid issues which have not been satisfactorily answered by the assessee. Under the facts & circumstances as above, addition of Rs. 1,61,00,000/- is confirmed.”
3. Learned authorized representative vehemently contended during the course of hearing that both the lower authorities have erred in law and on facts in drawing adverse inference against the assessee qua the impugned capital introduction coming from 161 member(s) of the AOP. He took pains to refer to assessment order from pages 4 to 8 indicating the 161 member(s) of the AOP to have been residing in Allahabad (Uttar Pradesh) and Jabalpur (Madhya Pradesh). His case is that the assessee had filed all the detailed supportive evidence of the said member(s) running into 1194 pages (forming part of record before us) at the first instance during scrutiny. And that although the said member(s) had been drawing salary and profits from the assessee’s AOP only, the lower authorities have wrongly rejected its Assessment Year 2011-12 M/s Savitri Devi, Amita Jaiswal & Ors. Vs DCIT, Cir-10 Kol. Page 4 explanation without even putting the said 161 member(s) for factual verification by way of appointing a commission at their respective places. The assessee’s last plea is that such a capital contribution coming from an AOP member(s) does not amount to unexplained cash credits as per hon'ble Gujarat high court’s decision in PCIT vs. Vaishnodevi Refoils & Solvex (2018) 89 taxmann.com 80 (Guj).
4. The Revenue has chosen to place a strong reliance on the CIT(A)’s foregoing detailed discussion affirming the impugned addition. It pleads that it was the assessee’s onus to prove identity, genuineness and creditworthiness of the impugned capital contribution from 161 member(s) in question and since it has failed to discharge the same, the impugned addition has been rightly made in his case.
5. We have given our thoughtful consideration to foregoing rival pleadings against and in support of the alleged capital contribution amounting to ₹161,00,000/- added as unexplained cash credits in both the lower proceedings. Three is hardly any dispute that this assessee is assessed as an AOP. Its sole explanation was that the impugned sum had come as capital contribution from 161 member(s) @ ₹ 1 lakh each. We notice from the corresponding assessment findings that all the alleged 161 member(s) have drawn identical income of ₹96,000/- each in assessment year 2009- 10, ₹1,32,000/- in case of first thirty-six of them based in Allahabad followed by ₹96,000/-, each in remaining cases in assessment year 2010-11 ₹1,08,000/- each in case of the said very thirty-six parties followed by identical sums of ₹1,20,000 in all other cases in assessment year 2011-12; respectively. Although the assessee had duly produced the said members’ details along with necessary documentary evidence in support, some of them could be put to necessary factual verification. Nor the Assessing Officer requisitioned commission to the twin locations to this effect. We observe in this backdrop of facts that the instant sole issue of the alleged capital contribution from assessee’s member(s) of the AOP requires a detailed factual verification for the purpose of identity, genuineness and creditworthiness of all 161 member(s). We make it clear that although the assessee had filed its voluminous documentary evidence from assessment to this tribunal, the onus of satisfying the Assessment Year 2011-12 M/s Savitri Devi, Amita Jaiswal & Ors. Vs DCIT, Cir-10 Kol. Page 5 basic parameters of identity, genuineness and creditworthiness of the impugned capital contribution remain to be discharged in view of the foregoing facts and circumstances. We accordingly restore the sole issue back to the Assessing Officer for de novo adjudication within three effective opportunities of hearing. He may also take recourse to appointment of commission as per law for the purpose of verifying the assessee’s detailed evidence. The assessee’s sole substantive ground raised in the instant appeal is remitted back to the Assessing Officer therefore.