VASUPUJYA ENTERPRISES PVT. LTD.,KOLKATA vs. ITO, WARD-5(4),KOLKATA, KOLKATA

PDF · subscribers
ITA 1881/KOL/2016Status: DisposedITAT Kolkata12 May 2017AY 2005-064 pages

In favour of the assessee: the assessee's appeal was allowed. From the AI summary of this appeal.

AI SummaryAllowed

What did the Tribunal hold?

The Tribunal held that Section 69 is attracted only if investments are not recorded in the books of account. Since the investment was recorded and made from disclosed bank accounts, and no tangible material suggested it was from undisclosed sources, the addition was not justified.

What were the facts?

The assessee company invested ₹15 lakh in shares of another company. The Assessing Officer treated this investment as unexplained and disallowed it under Section 69 of the Income Tax Act, 1961, as the assessee failed to furnish sufficient details about the source of funds.

What were the issues?

Whether an investment recorded in the books and made from disclosed bank accounts can be treated as unexplained investment under Section 69 when the assessee fails to provide detailed source explanation, especially when the AO relies on a statement from a third party.

Which sections of the Income-tax Act were involved?

Section 69,Section 147

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, KOLKATA BENCH “D” KOLKATA

Before: Shri Waseem Ahmed & Shri S.S.Viswanethra Ravi

आदेश /O R D E R PER Waseem Ahmed, Accountant Member:-

1.

This appeal by the assessee is directed against the order of Commissioner of Income Tax (Appeals)-2, Kolkata dated 20.07.2016. Assessment was framed by ITO Ward-5(4), Kolkata u/s 147 of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act’) vide his order dated 28.03.2013for assessment year 2005-06. Shri Manish Tiwari, Ld. Authorized Representative appeared on behalf of assessee and Shri S.M. Das, Ld. Departmental Representative represented on behalf of Revenue.

2.

First issue raised by assessee in this appeal is that Ld. CIT(A) erred in confirming the action of the Assessing Officer by sustaining the disallowance of ₹15 lakh u/s. 69 of the Act.

Vasupujya Enterprises Pvt. Ltd. Vs. ITO Wd-5(4) Kol. Page 2 3. Briefly stated facts are that assessee is a private limited company and engaged in the activities of investments. The assessee in the year under consideration acquired 3,000 shares of M/s Gambhir Tower Pvt. Ltd. (GTPL for short) located in Jaipur for ₹ 15 lakh. On question by the AO about the source of such investment in the aforesaid company, the assessee failed to furnish the necessary details in this regard. Therefore, the AO treated the aforesaid investment as unexplained investment u/s. 69 of the Act. Accordingly, the investment was disallowed and added to the total income of assessee.

4.

Aggrieved, assessee preferred an appeal before Ld. CIT(A). The assessee before Ld. CIT(A) submitted that the provision of Sec. 69 of the Act are attracted to those investments which have not been recorded in the books of account as well as either assessee fails to explain the nature and source of investment or the explanation offered by the assessee is not satisfactory. However, in the instant case, the shares are duly recorded in the financial statement which has been duly audited by the Chartered Accountant. It was also submitted that the impugned investment was made by the assessee by issuing Demand Draft out of the disclosed bank accounts, hence, the source of fund cannot be doubted. The assessee also submitted that there is no evidence suggesting that the amount of money invested by the assessee was returned to it in the form of cash. However, the Ld. CIT(A) disregarded the contention of the assessee by observing as under:- “I have considered the submissions of the authorized representative of the appellant as well as the assessment order framed in the light of the materials available on record before the assessing officer during the assessment proceedings. The AO has considered the issue in details while passing the assessment order. Keeping in view of above, the order of the AO is upheld and this ground of appeal is dismissed.”

Being aggrieved, assessee came in second appeal before on the following grounds:-

“1. That on the fact and in the circumstances of the case, the Ld. CIT(A) is wrong and unjustified in dismissing appellant’s ground on merit and thereby confirming the action of the Assessing Officer who considered investment in acquiring 3000 shares of Gambhir Tower Pvt. Ltd. at Rs.15,00,000- as unexplained u/s. 69 of Income Tax Act, 1961.”

5.

Before us Ld. AR reiterated the arguments that were made before Ld. CIT(A) whereas Ld. DR heavily relied on the order of Assessing Officer.

Vasupujya Enterprises Pvt. Ltd. Vs. ITO Wd-5(4) Kol. Page 3 6. We have heard rival contentions of both the parties and perused the materials available on record. In the instant case on hand, the proceedings were initiated u/s. 147 of the Act on the basis of information received from DCIT, Circle-3 Jaipur. A search was conducted dated 06.08.2008 on Sakun Group based in Jaipur involving two companies namely M/s SGM Real Estate Pvt. Ltd and M/s Gambhir Tower Pvt. Ltd. In the statement of Director of Sakun Group, it was admitted that the accommodation entry was taken from the assessee by paying cash to the assessee. Admittedly, assessee has made investment for ₹ 15 lakh by acquiring shares of M/s Gambhir Tower Pvt. Ltd. and shares were purchased by assessee after making the payment from Standard Chartered Bank of A/c No.33105100813 which was duly disclosed in the balance-sheet. The books of account of the assessee were audited and no defect whatsoever was reported by the Authorities Below as the payment had been made from the disclosed bank account of assessee. Therefore, it cannot be inferred that assessee has undisclosed investment as envisaged u/s. 69 of the Act. The Authorities Below has just relied in the statement recorded of the Director of M/s Gambhir Tower Pvt. Ltd. The Authorities Below have not brought any tangible material suggesting that impugned investment was made out of the undisclosed source of fund. Here, it is pertinent to note that the Assessing Officer has made the addition u/s 69 of the Act. A careful perusal of the provision divulges that in order to invoke this provision, it is sine qua non that the assessee must have made investments which are not recorded in the books of account. The factum of the assessee having made investment should be first proved by the AO, only then the burden shifts on the assessee to prove the source of investment. Such investment outside the books of account must be positively provided by the AO and not only inferred from the attending facts. If such an investment outside the books is not proved, the assessee cannot be called upon to prove the source of such a hypothetical investment. Adverting to the facts of the instant case, it is found that apart from relying on the statement given by the director of the company, the AO has not brought on record any other material to indicate that the assessee has made investments outside the books. In the absence of any documentary evidence, we are inclined to reverse the order of Authorities Below Vasupujya Enterprises Pvt. Ltd. Vs. ITO Wd-5(4) Kol. Page 4 7. With regard to ground No.2 no argument was advanced at the time of hearing, accordingly same is treated as not pressed and rejected as such.

More judgments on Section 69

All 9,011 judgments and leading authorities on Section 69 →

Recent GST High Court judgments

Search GST case law →