ALVI TECH SERVICES P.LTD,KALYAN vs. DCIT CIR 1, KALYAN

This appeal, filed by the assessee company, being 25th September, 2013 passed by learned Commissioner of Income Tax (Appeals)- 1, Thane (hereinafter called “the CIT(A)”), for the assessment year 2010-11, the appellate proceedings before the learned CIT(A) arising from the assessment order dated 14th February, 2013 passed by the learned Assessing Officer (hereinafter called “the AO”) u/s 143(3) of the Income Tax Act,1961 (Hereinafter called “the Act”).

The grounds of appeal raised by the assessee company in the memo of appeal filed with the Income Tax Appellate Tribunal, Mumbai (hereinafter called “the Tribunal”) read as under:-

The brief facts of the case are that assessee is in the business of engineering, erection and commissioning and consultancy in Oil and Gas industry. The assessee was asked to produce the books of accounts by the AO during the course of assessment proceedings u/s 143(3) read with Section 143(2) of the Act which was produced by the assessee along with the bills before the AO. The A.O. during the course of assessment proceedings u/s 143(3) read with Section 143(2) of the Act observed that there was an increase in issued share capital of Rs. 70 lacs which was subscribed by Shri Krishnanand Trivedi (Rs. 42 lacs) and Shri Alok Krishnanand Trivedi (Rs. 28 lacs). Further it was observed by the AO that there was an increase in share application money amounting to Rs. 2,49,35,000/- which is wholly subscribed by Shri Krishnanand Trivedi. The assessee was asked to explain regarding the source of share subscription and share application money of Rs. 3,19,35,000/-. The assessee in reply submitted that Shri Krishnanand Trivedi was one of the Directors of the assessee company who was earlier running a proprietary concern namely M/s Alvi Tech Services which was engaged in the business of erection of Engineering and Electrical installation ITA 7481/Mum/2013 3 etc. . It was submitted that the shares subscribed of Rs. 70 lacs and share application shown at Rs. 2.49 crores represents machinery, tools , equipments etc. transferred from Alvi Tech Services which stands represented in the capital balance of Shri Krishanand Trivedi, proprietor of M/s Alvi Tech Services. In nutshell, the A.O. observed that the assessee has claimed that what has been transferred is the accumulated capital balance of M/s Alvi Tech Services along with personal capital of Shri Krihnanand Trivedi. The assessee submitted the capital account of Shri Krishnannand Trivedi which is as under:-

Aggrieved by the assessment order dated 14.02.2013 passed by the A.O. u/s. 143(3) of the Act , the assessee filed first appeal before the ld. CIT(A).

The assessee during proceedings before learned CIT(A) submitted that while going through the old records, Mr. Krishnanand Trivedi found details of some old agricultural land which he had inherited from his father which is around 10 hectare and value of land is Rs. 10 crores for which the assessee filed land records before the learned CIT(A). Thus, the assessee contended before the learned CIT(A) that the addition to capital account of Mr Krishnanand Trivedi found stood explained.

The ld. Counsel for the assessee at the outset submitted that the additions have been made u/s 68 of the Act as unexplained cash credit whereby an amount of Rs. 3,19,35,000/- was added to the income of the assessee as the assessee because the assessee was not able to explain the sources of the built up of the capital of Mr Krishnanand Trivedi, the promoter-director of the assessee company . The ld. Counsel filed additional evidences before the Tribunal wherein application dated 26.11.2015 was submitted requesting the Tribunal for admission of the additional evidences under Rule 29 of Income Tax (Appellate Tribunal) Rules, 1963 as these additional evidences are submitted for the first time before the Tribunal and they goes to the root of the matter and hence , it was prayed that these additional evidences should be admitted in the substantial interest of justice. The ld. Counsel submitted that the assessee has not received any money towards share capital of Rs. 3,19,35,000/- during the assessment year as is reflected in the books of account. It is the say of the ld. Counsel that these are fictitious entries made by the assessee in the books of account which does not exist and the same was undertaken with a view to avail bank loan from Bank of Baroda in order to be eligible to get the sufficient additional loans from the Bank. It was also submitted that the assessee has revised and re- casted the accounts whereby all the fictitious entries were deleted from the books of account , which are now duly audited by the auditors of the company being qualified chartered accountants who have issued audit report dated 20-07-2015 along with re-casted audited financial statements which is part of additional evidences filed for the first time before the Tribunal . The ITA 7481/Mum/2013 10 ld. Counsel submitted an affidavit of Shri K.N. Trivedi dated 21st November, 2015 which is placed on record as additional evidences vide paper book page No. 43 to 46 and further prayed that the said additional evidence should be admitted and adjudicated on merits. There are additional evidences filed for the first time before the Tribunal which are part of the paper book-II/pages 43-148. The ld. Counsel further requested that the matter may be remanded back to the CIT(A) for verification of all these additional evidences and claim of the assessee may be adjudicated on merits. He submitted that the addition u/s 68 of the Act is not sustainable as there are in-fact no cash credits to the tune of Rs.3.15 crores which is supported by affidavit filed as additional evidence of Mr K.N.Trivedi along with re-casted audited financial statements. The revised audited accounts are also duly filed with the government authorities (which are placed in page No. 65 to 68 of the paper book) i.e. Ministry of Corporate Affairs and receipted challans are enclosed as additional evidence filed before the Tribunal. The Resolution is also placed on record vide paper book-II/ page 69 to 72 enabling the assessee to recast and revise its financial statements.

The ld. D.R. relied on the order of the ld. CIT(A) and submitted that the matter can be remanded to the file of the ld. CIT(A).

We have considered the rival contentions and also perused the material available on record. We have observed that the assessee has raised share capital/share application of Rs. 3,19,35,000/-, however, the assessee was not able to explain the sources of the introduction of fresh share capital/share application as per the provisions of section 68 of the Act and additions were made by the A.O. u/s 68 of the Act as unexplained cash credit which were confirmed by the ld. CIT(A). It is the say of the assessee that the entries of raising of share capital and share application made in the books of accounts to the tune of Rs.3,15,00,000/- were bogus and fictitious entries ITA 7481/Mum/2013 11 and was made in order to raise more loans from the bank while the fact of the matter is that no such share capital was ever raised by the assessee company and these entries to the tune of Rs.3.15 crores were bogus entries . It is further the say of the assessee’s counsel that allotment of Rs. 70 lacs of share capital during the year is genuine which is supported by receipt of funds in immediately preceding year. It is further stated that the manipulations in the books of accounts as to introduction of fictitious share capital/share application money to the tune of Rs. 3.15 crores are now eliminated and the accounts/financial statements are recast and revised by the assessee now which are duly audited by the auditors of the assessee company who are qualified chartered accountants and who have also issued audit report dated 20-07-2015 which is part of additional evidences filed by the assessee for the first time before the Tribunal along with complete re-casted and revised financial statements for the impugned previous year 2009-10. The application dated 26.11.2015 for admission of additional evidences have been filed by the assessee before the Tribunal under Rule 29 of the Income Tax (Appellate Tribunal) Rules, 1963 wherein additional evidences filed with the Tribunal are placed at page no 43-148/paper book-II and it is prayed that the said additional evidences be admitted and adjudicated on merits. The said additional evidences consists of Affidavit of Shri K.N. Trivedi dated 21st November, 2015 which is placed on record as additional evidence before the Tribunal vide paper book page No. 43 to 46 wherein he admitted of manipulating the accounts and introducing of fictitious entries in books of accounts of the assessee company. The copies of revised and re-casted audited accounts for the financial year 2009-10 are placed as additional evidences page 47-64/paper book-II. Copies of Resolutions along with forms filed with Ministry of Corporate affairs for filing revised and re-casted audited accounts for financial year 2009-10 along with paid challans are enclosed in paper book-II/page 65-68. The copy of notice of Extra-ordinary General Meeting(EGM) , Board Resolutions and Resolutions passed at EGM are also ITA 7481/Mum/2013 12 filed as additional evidences before the Tribunal. Sanction letters from Bank of Baroda is also filed as additional evidences to substantiate that the loans/limits were enhanced by the bank in favour of the assessee company which was made possible only because the assessee manipulated its accounts to show higher share capital/share application money to the tune of Rs. 3.15 crores which was fictitious entry. It is also submitted that no such machinery, tools and equipments were held by the proprietor of Alvi Tech Services which was introduced in the assessee company and it was all bogus/fictitious entries. The assessee has admitted that these share capital/share application money raised by the assessee to the tune of Rs.3,19,35,000/- were fictitious and bogus entries and in-fact no such share capital/share application money was ever raised by the assessee and the fictitious entries in the books of accounts are now removed/eliminated to reflect true and fair state of affairs of the assessee company which has now been audited by auditors of the assessee company and the same has been filed with Ministry of Corporate Affairs, Government of India O/o