PRINCIPAL COMMISSIONER OF INCOME TAX,CUTTACK vs. SRINIVAS SAHOO

By way of this appeal, the appellant has challenged the order dated 08.07.2015 passed by learned Income Tax Appellate Tribunal, Cuttack Bench, Cuttack (hereinafter referred to as “the Tribunal”) in IT (SS) A No.2/CTK/2011.

The Tribunal, while allowing the aforesaid appeal, in paragraph nos.8.1, 8.2 & 10 of the impugned order observed as under:

“8.1 As is evident from reading of section 68 where it is clearly mentioned that where any sum is found credited in the books of the assessee maintained for any previous year, and the assessee offers no explanation or the same is not found satisfactory in the opinion of the AO, the sum so credited may be charged to income-tax as income of the assessee of that previous year. In the present case the sum has not been found credited in the books of the assessee, Sh. Srinibsh Sahoo but in the books of M/s CIAL and other group of companies. Therefore, at the outset no addition can be made in the hands of the assessee, Sh. Srinibass Sahoo because sum has not been found credited in the books of assessee. Therefore, the provisions of section 68 of the Act cannot be made applicable in the present case.

8.2 From reading of section 69 of the Act, it is evident that where in any financial year relevant to assessment year the assessee had made investments which are not recorded in the books of account and the assessee furnishes no explanation about the nature and source of investment or explanation offered is found not satisfactory to the opinion of the AO, the value of such investment may be deemed to I.T.A. No.65 of 2015

-2- be the income of the assessee of such financial year. In the present case the assessee, Shri Srinibash Sahoo has not been found to have invested any sum or money in any of the group of companies or in M/s CIAL or any other company. Therefore, at the outset there is no unexplained investment found in the books of the assessee. Therefore, no addition u/s 69 of the Act cannot be made in the hands of the assessee. In the present case names and addresses of the shareholders are on record. In fact, they are part of assessment order passed by the AO as also in the order of the ld. CIT (A). No enquiry has been made either by the AO or by the ld. CIT(A) from the said shareholders. Though the inspector while making enquiry in some cases had informed that the parties to whom notices u/s. 131 or letter of enquiry issued addresses are not available. The corporate veil can be lifted, but this power has to be used in exceptional cases, if it is used for tax evasion or to circumvent tax obligation or to perpetrate fraud has been held by the Hon’ble Supreme Court in the case of Juggilal Kamlapat vs. CIT reported in (1969) 73 ITR 702 (SC). But in the present case nothing has been brought on record that the assessee, Srinibash Sahoo has used the corporate entities for tax evasion or to circumvent tax obligation or to perpetrate fraud. No specific finding has been given with any material on record by any of the authorities below. Nothing has been brought on record by any of the authorities below that the money invested in M/s CIAL belongs to the assessee, Srinibash Sahoo. In the absence of any evidence or any material available on record such investments cannot be said to belonging to assessee, Srinibash Sahoo. In such circumstances and facts of the case, the AO is not justified in treating the investment as undisclosed investments in the hands of the assessee, Srinibash Sahoo and no addition on this account can be

-3- made. Thus, the addition so confirmed by the ld. CIT (A) is directed to be deleted. All the grounds of assessee’s appeal are allowed.

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We have gone through the impugned order. We are in complete agreement with the view taken by the Tribunal vide the impugned order. Hence, this I.T.A. stands dismissed.

Misc. Case(s)/I.A(s) connected to the appeal, if any, is are also dismissed.

SKG .…….......……………… ( K.S. Jhaveri ) Chief Justice

…………………..……… (K.R. Mohapatra) Judge