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Income Tax Appellate Tribunal, ‘A’ BENCH, CHENNAI [CAMP: COIMBATORE]
Before: SHRI N.R.S. GANESAN & SHRI ABRAHAM P. GEORGE
आदेश /O R D E R
PER BENCH:
Assessee in this appeal is aggrieved on an addition of `25,58,68,579/- made by the Assessing Officer which was confirmed by the CIT(Appeals) considering certain investments made by the assessee for acquiring some assets, as undisclosed.
Grounds taken by the assessee is reproduced hereunder:-
“(1) The learned CIT(A) -1, Coimbatore, has grossly erred in holding that the appellant has made investments, as stated by the A.O. and sustaining the addition to the extent of `25,58,68,579/-, as investment in acquiring assets, without a corresponding liability, as undisclosed investment made by the appellant, in the facts and circumstances of the case and in law.
(2) The learned CIT(A) ought to have held that the appellant did not make investments and the mere entries in the books of account did not amount to any investment actually made by the appellant, when no payment was, in fact, received, by the Investee Companies, in the facts and circumstances of the case and in law.
(3) The learned CIT(A) ought to have held that in the absence of actual investment having been made by the appellant, mere book entries did not constitute unexplained income having accrued to the appellant, in the facts and circumstances of the case and in law.
(4) The learned CIT(A) ought to have held that no real investment was made by the appellant, as alleged by the A.O., in the absence of proof of actual investment of the appellant and receipt of such amount of money from the appellant by the Investee Companies, in the facts and circumstances of the case and in law.”
Facts apropos are that the assessee, an investment company, had filed return for the impugned assessment year declaring income of `3,966/-. In the Profit & Loss account filed by the assessee along with return of income, there were no debit of financial charges. A.O. noted that the balance sheet of the assessee as on 31.03.2012 reflected substantial loans. She issued a letter on 23.01.2015 to M/s Indian Overseas Bank, Ganapathy Branch, which was shown by the assessee as banker, for submitting the details of the loan taken by the assessee. It seems the said banker replied that the assessee was not having any loan account with it. Clarifications were sought from the assessee in this regard. Reply of the assessee was that though it had issued cheques for investing in shares and cheques for advances to various group units, these cheques were not presented for payment.
As per the assessee, though its balance sheet reflected substantial non-current investments in excess of `17,00,00,000/-, such investments never existed. Assessee has also submitted the details of existing non-current investments as under:-
Non Current Investments
Investments in Equity Sri Padmabalaji Steels P. Ltd. – Unit I : ` 1,14,00,000/- Sri Padmabalaji Steels P. Ltd. – Unit II : ` 7,13,00,000/- Sri Padmabalaji Steels P. Ltd. – Unit III : ` 2,99,50,000/- Sri Suryabalaji Steels P. Ltd. : ` 5,48,20,000/- SBSRM : ` 55,00,000/- ` 17,29,70,000/-
Assessee also stated that the loans and advance of `24,17,62,914/- shown in its balance sheet were also not real amounts. The break-up of these were submitted as under:-
Loans and advances to related parties
Unsecured, Considered Good Sri Padmabalaji Steels P. Ltd. – Unit II : ` 55,00,000/- Sri Padmabalaji Steels P. Ltd. – Unit I : ` 10,00,000/- Suryabalaji Steels P. Ltd. : ` 11,00,000/-
Share Application Money with Sri Padmabalaji Steels P. Ltd. – Unit I : ` 6,95,00,000/- Sri Padmabalaji Steels P. Ltd. – Unit II : ` 13,80,92,215/- Sri Padmabalaji Steels P. Ltd. – Unit III : ` 5,00,000/- ` 2,60,50,000/- Suryabalaji Steels P. Ltd. : ` 24,17,42,215/-
However, the A.O. went through the balance sheet of M/s Sri Padmabalaji Steels Pvt. Ltd. and M/s Suryabalaji Steels Pvt. Ltd. and found that their balance sheets did show investments of the assessee in the said companies. As per the Ld. A.O., the investments reflected in the balance sheets of the said companies read as under:-
SRI PADMABALAJI STEELS PVT. LTD. Name of the Company Share Share capital Total as on Capital as on advance as on 31.3.2012 31.3.2012 31.3.2012 SURYABALAJI 9,81,50,000 21,39,17,130 32,07,42,215 INVESTMENTS PVT. LTD.
SURYABALAJI STEELS PVT. LTD. Name of the Company Share Share capital Total as on Capital as on advance as on 31.3.2012 31.3.2012 31.3.2012 SURYABALAJI 5,83,20,000 2,25,50,000 8.08.70,000 INVESTMENTS PVT. LTD.
The A.O. found that the investments shown as made by the assessee in M/s Sri Padmabalaji Steels Pvt. Ltd. and M/s Suryabalaji Steels Pvt. Ltd. tallied with the amounts reflected in the balance sheets of the said companies. Thus, according to A.O., contention of the assessee that these were only book entries and there was no real investment, could not be accepted. Though the assessee stated that the recipients had no corresponding credits in their bank accounts, it was not accepted by the Assessing Officer. According to the A.O., the balance sheets of all these companies were audited and duly certified by the Chartered Accountant along with a report under Companies (Auditor’s Report)
Order, 2003. She held that the investments were correctly shown by the assessee but there being no matching loans, the source of such investments were unexplained. The unsecured loans from bank of `25,58,68,579/- shown by the assessee in its balance sheet was considered for addition.
Aggrieved, assessee moved in appeal before the CIT(Appeals).
Arguments of the assessee once again were that the cheques issued were never presented by M/s Sri Padmabalaji Steels Pvt. Ltd. and M/s Suryabalaji Steels Pvt. Ltd. As per the assessee, there were no real payments to the said companies. The assessee also stated that there were no loans whatsoever raised from any person. Contention of the assessee was that when there was no investment whatsoever in M/s Sri Padmabalaji Steels Pvt. Ltd. and M/s Suryabalaji Steels Pvt. Ltd., the question of source of such investments did not arise. The assessee once again relied on certificate issued by Chief Manager of Indian Overseas Bank, which stated that assessee had no loans with the said bank. However, the CIT(Appeals) was not impressed by above arguments. According to him, assessee had made investments in the two companies which was clear from balance sheet of the respective companies. It had no source to explain such investments.
Thus, according to the CIT(Appeals), the addition was rightly made.
He confirmed the addition.
Now before us, the Ld. A.R. strongly assailing the orders of the lower authorities, submitted that the banker of the assessee clearly mentioned that the assessee had not raised any loan. According to Ld. A.R., there was no real investment made by the assessee in either M/s Sri Padmabalaji Steels Pvt. Ltd. or M/s Suryabalaji Steels Pvt. Ltd. The cheques issued by the assessee to the said companies were never presented by them for payments nor was it realised from the bank accounts of the assessee. When there was no actual investment, as per the Ld. A.R., the question of source of such investments was irrelevant. Contention of the Ld. A.R. was that lower authorities had simply gone by the balance sheets of the assessee and that of M/s Sri Padmabalaji Steels Pvt. Ltd. and M/s Suryabalaji Steels Pvt. Ltd. ignoring the real situation. Contention of the Ld. A.R. was that only real income could be taxed and not fictitious income.
Per contra, Ld. Departmental Representative supported the order of the lower authority.
We have perused the orders and heard the rival contentions.
What we notice is that assessee is a private limited company. The balance sheet of the assessee reflected investments made by the assessee in two companies, namely, Sri Padmabalaji Steels Pvt. Ltd. and Suryabalaji Steels Pvt. Ltd. These two companies were again private limited companies. It is also not disputed that the assessee as well as the said two companies were subject to statutory audit under the Companies Act. In the Auditor’s Reports of the assessee- company it was certified by the Chartered Accountant that the balance sheet and Profit & Loss account were prepared as per the books of account and reflected the true and correct working of assessee- company.
9. When both the balance sheets of the assessee-company and balance sheets of the companies in which the assessee had invested, reflected the amounts of investments and these correctly tallied, we cannot brush aside such accounts and auditor’s report. Doing so would be giving a licence to any assessee-company to prepare any balance sheet and thereafter go back and say itself that the balance sheet was not correct. The assessee cannot be allowed to approbate and reprobate. Once assessee prepared its books of account and balance sheet which were audited by a Chartered Accountant appointed under the Companies Act as true and fair, and where the amounts reflected in the balance sheet are also shown in the balance sheets of the companies where assessee had placed the investment, we cannot disregard such balance sheets. It may be true that the banker of the assessee denied giving any loans to the assessee.
However, if the source of investment was not out of loan, the question of bank giving any confirmation does not arise. The addition was made, in our opinion, due to failure of the assessee to give proper source for investment made by the assessee in M/s Sri Padmabalaji Steels Pvt. Ltd. and M/s Suryabalaji Steels Pvt. Ltd. Assessee’s claim that it was only book entry cannot be accepted since the amounts were correctly reflected in the balance sheet of the assessee as well as the balance sheets of M/s Sri Padmabalaji Steels Pvt. Ltd. and M/s Suryabalaji Steels Pvt. Ltd. We are of the opinion that the addition was rightly made by the A.O. and confirmed by the CIT(Appeals). We do not find any reason to interfere with the order of the lower authority and accordingly the same is confirmed.
In the result, the appeal of the assessee stands dismissed.