DCIT, CIRCLE-1(1), BHUBANESWAR, BHUBANESWAR vs. M/S. KALINGA POWER CORPORATION PVT. LTD., 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.250/CTK/2014 (�नधा�रण वष� / Assessment Year :2007-2008) DCIT, Cir-1(1), Bhubaneswar Vs. M/s Kalinga Power Corporation Pvt. Ltd., M-10, Samanta Vihar, NALCO Square, Near Kalinga Hospital, Bhubaneswar-751017 �थायी लेखा सं./जीआइआर सं./PAN/GIR No. : AAACK 7224 M (अपीलाथ� /Appellant) (��यथ� / Respondent) .. राज�व क� ओर से /Revenue by : Shri Kunal Singh,CITDR �नधा�रती क� ओर से /Assessee by : None सुनवाई क� तार�ख / Date of Hearing : 21/08/2017 घोषणा क� तार�ख/Date of Pronouncement 29/08/2017 आदेश / O R D E R Per Shri Pavan Kumar Gadale, JM: The revenue has filed an appeal against the order of CIT(A), Berhampur (Camp: Bhubaneswar), dated 21.03.2014, passed in I.T.Appeal No.0226/10-11(BBS), u/s.143(3)/147 of the Income Tax Act, 1961 for the assessment year 2007-2008, wherein the revenue has raised the following grounds :- 1. On the facts and in the circumstances of the case, the ld. CIT(A) was not justified in accepting the contention of the assessee and deleting the addition of Rs.7,14,20,259/- made by the AO on account of unexplained advance against share capital. 2. None appeared on behalf of the assessee when the matter was called for hearing, neither any adjournment application was placed on record by the assessee, therefore, the bench deem it fit dispose off the

2 ITA No.250/CTK/2014 appeal on the basis of material available on record and the submissions

of ld. DR.

establish a thermal power project in the State of Odisha and derives interest income dividend income and short term capital gains and filed the

return of income electronically for the assessment year 2008-09 on 30.11.2007 with total income of Rs.5,54,788/- and the return of income

was processed u/s.143(1) of the Act. Subsequently, the AO had reason to

believe that income has escapement assessment and issued notice

u/s.148 of the Act on 25.1.2010 and the reasons for re-opening were also

communicated to the assessee company. As per the AIR information, the

AO found that the assessee company has invested an aggregate amount

of Rs.23,00,000/- in purchase of units of mutual funds and hence

assessment was reopened. In compliance, ld. AR appeared from time to

time and submitted that the original return of income filed earlier be

treated as due compliance.

detailed information as per the questionnaire, referred at page 3 to 6 of

the order and the assessee filed submissions. In respect of disputed issue

the ld. AO found in the balance sheet advance against share capital of

Rs.7,14,20,259/- and the assessee has filed detailed reply dtd. 26.11.2010, referred at page 7 of the order. But the AO was no satisfied

with the explanations and maintenance of books of accounts and found

3 ITA No.250/CTK/2014 that the said advance was foreign remittance through State Bank of India

prior to year 1999-2000 and the same has been reflected in the balance

sheet of previous years. Since the assessee company could not produce

or furnished the details with valid information, the AO has doubted the

genuineness of the transaction as the amount disclosed is not proved in

the assessment proceedings and identity of remittance was not

established and finally with these observations the AO made addition as

unexplained cash credit u/s.68 of the Act of Rs.7,14,20,259/- and passed

the order u/s.143(3) of the Act, dated 24.12.2010.

CIT(A). In the appellate proceedings, ld. AR argued the grounds and

reiterated the submissions made before the CIT(A). The CIT(A)

considered the findings of AO and also the submissions of the assessee

and dealt on the disputed issue at page 12 para 6.1 of the order and

referred to the written submissions of the assessee at para 6.2 and finally

concluded at page 17 para 6.3 was of the opinion that the AO did not

bother to verify the factual position and as the assessee did not file any

evidence in support of his contention in assessment proceedings and the

AO has made addition. With this observation the CIT(A) finally deleted the

addition and partly allowed the appeal of the assessee observing at para

6.3 which reads as under :-

“6.3 I have carefully considered the matter and gone through the assessment records. During the scrutiny proceeding, the appellant stated before the AO that the share capital advance was received in financial year 1999-2000. The AO did not bother to verify the factual position and on the ground that the appellant did not file any evidence in support of his contention added the entire brought

4 ITA No.250/CTK/2014 forward share capital as income for the impugned assessment year without bringing anything on record that the share capital was received during the year. Now, during the appeal and remand proceeding, as per the details filed by the appellant and as verified by the AO, the advance in share capital definitely do not belong to the relevant assessment year. This advance as reported by the AO is appearing since 31.03.2000. I, therefore, see no reason to sustain the addition of Rs.7,14,20,259/- made by the AO. The same is, accordingly, deleted and the grounds No.6,7 and 8 are decided in favour of the appellant.

before the Tribunal. Before us, ld. DR of the revenue submitted that the

CIT(A) has erred in deleting the addition of Rs.7,14,20,259/- made by the

AO on account of unexplained advances and submitted that the CIT(A)

has not verified the facts and the genuineness of the transaction in

respect of advance amount received in the earlier years from abroad and

prayed for allowing the revenue’s appeal.

on record. Prima facie, the AO made addition u/s.68 of the Act is based

on the submissions of the assessee. But in appellate proceedings it was

explained that the amount has been received as advance against share

capital from two foreign companies prior to assessment year 2000-2001

through banking channel. Assessee has disclosed these facts from the

year 2000-01 onwards. Further, the amount has been carried forward

from earlier years. But Ld. DR’s contention that though the amount has

been routed through banking channel the assessee has not proved the

creditworthiness, genuineness of the transaction. We have considered the

findings and observations of CIT(A) in respect of allowing the claim. Prima

facie, the CIT(A) found that the AO over looked to verify that the said

5 ITA No.250/CTK/2014 amount was not received in current assessment year and is carried

forward balance from earlier assessment years. We also perused the

provisions of Section 68 of the Act which reads as under :-

Cash credits. 68. Where any sum is found credited in the books of an assessee maintained for any previous year, and the assessee offers no explanation about the nature and source thereof or the explanation offered by him is not, in the opinion of the Assessing Officer, satisfactory, the sum so credited may be charged to income-tax as the income of the assessee of that previous year : Provided that where the assessee is a company (not being a company in which the public are substantially interested), and the sum so credited consists of share application money, share capital, share premium or any such amount by whatever name called, any explanation offered by such assessee-company shall be deemed to be not satisfactory, unless— (a) the person, being a resident in whose name such credit is recorded in the books of such company also offers an explanation about the nature and source of such sum so credited; and (b) such explanation in the opinion of the Assessing Officer aforesaid has been found to be satisfactory: Provided further that nothing contained in the first proviso shall apply if the person, in whose name the sum referred to therein is recorded, is a venture capital fund or a venture capital company as referred to in clause (23FB) of section 10.

On understanding provisions the addition has to be made in respect of

credits of amount in books of accounts of previous years relating to

current assessment year but not on the opening balance. Further we also

found as per the submissions of assessee in the appellate proceedings

the said amount was received prior to year 1999-2000 through banking

channel which is not disputed. The ld. CIT(A) has dealt elaborately on

relevant findings that this amount was not received during the current

assessment year and on the query from the ld. DR explained that the

said facts were accepted by the department in the earlier assessment

6 ITA No.250/CTK/2014 years and only in this particular assessment year addition was made by the AO. We found that the CIT(A) has dealt elaborately on the provisions of section 68 of the Act and the facts in deleting the addition. Accordingly, in the interest of justice, we are not inclined to interfere with the order of CIT(A), who has directed the AO to delete the addition as the said advance amount is only a carry forward balance of the earlier years from the year 1999-2000 onwards and we confirm the action of CIT(A) and dismiss the grounds of appeal of the revenue. 8. In the result, appeal of the revenue is dismissed. Order pronounced in the open court on this 29/08/2017. Sd/- Sd/- (N. S. SAINI) (PAVAN KUMAR GADALE) लेखा सद�य / ACCOUNTANT MEMBER �या�यक सद�य / JUDICIAL MEMBER कटक Cuttack; �दनांक Dated 29/08/2017 �.कु.�म/PKM, Senior Private Secretary आदेश क� ��त�ल�प अ�े�षत/Copy of the Order forwarded to : अपीलाथ� / The Appellant- 1. DCIT, Cirlce-1(1), Bhubaneswar ��यथ� / The Respondent- 2. M/ s Kalinga P ow er Cor por at ion Pvt. Ltd., M- 1 0, Sam ant a Vih ar, NALCO Sq u ar e, Near K al ing a Hospit al, Bhu ban eswar -7 510 17 आयकर आयु�त(अपील) / The CIT(A), 3. आयकर आयु�त / CIT 4. �वभागीय ��त�न�ध, आयकर अपील�य अ�धकरण, कटक / DR, ITAT, Cuttack आदेशानुसार/ BY ORDER, 5. गाड� फाईल / Guard file. 6. स�या�पत ��त //True Copy// (Senior Private Secretary) आयकर अपील�य अ�धकरण, कटक / ITAT, Cuttack