ACIT, CUTTACK vs. M/S. DINABANDHU STEEL & POWER LTD., CUTTACK

आयकर अपीऱीय अधिकरण, कटक न्यायपीठ,कटक IN THE INCOME TAX APPELLATE TRIBUNAL CUTTACK BENCH CUTTACK BEFORE SHRI N.S.SAINI, AM & SHRI PAVAN KUMAR GADALE, JM आयकर अऩीऱ सं./ITA No.168/CTK/2015 (नििाारण वषा / Assessment Year :2009-2010) ACIT, Circle-2(1), Cuttack Vs. M/s Dinabandhu Steel & Power Ltd., Arunodaya Nagar, Cuttack स्थायी लेखा सं./जीआइआर सं./ PAN/GIR No. : AABCD 9344 E (अऩीऱाथी /Appellant) (प्रत्यथी / Respondent) .. राजस्व की ओर से /Revenue by : Shri Kunal Singh, DR ननधााररती की ओर से /Assessee by : None सुनवाई की तारीख / Date of Hearing : 03/07/2017 घोषणा की तारीख/Date of Pronouncement 05/07/2017 आदेश / O R D E R Per Shri Pavan Kumar Gadale, JM: The revenue has filed this appeal against the order of CIT(A), Cuttack, dated 22.01.2015 in I.T.Appeal No.0604/2011-12, wherein the revenue has raised the grounds that the ld. CIT(A) was not justified in deleting the addition of Rs.6,30,63,500/- made by the AO u/s.68 of the Act in respect of share application money and the assessee has failed to prove the creditworthiness of the investing companies. Further ld. CIT(A) was not justified in observing that the investing companies have been assessed u/s.153A r.w.s143(3) with total income Nill and the return of income was accepted and this information was not produced before the AO and further CIT(A) is not justified in accepting the additional evidence in completing the proceedings, which is in violation of rule 46A of the I.T.Rules.

2 ITA No.168/2015 2. Brief facts of the case are that the assessee is engaged in the Business of manufacturing of sponge iron and ingots and generation of power and filed the return of income for the assessment year 2009-10 declaring total loss of Rs.3,69,20,238/-. Subsequently, the case was selected for scrutiny under the CASS and notices u/s.143(2) & 142(1) of the Act were issued. In compliance, ld. AR of the assessee appeared from time to time and case was discussed. During the scrutiny proceedings, the AO found that Rs.19,25,88,500/- was shown as share application money by the assessee from seven concerns during the year. The ld. AO dealt on the Annual report of these companies and Audited statements and also exhaustively perused the provisions of non-banking financial companies and came to the conclusion that out of the total unsecured loans in the books of accounts of the previous year 2008-09, the assessee could not give the information to the satisfaction in respect of three companies and, therefore, the ld. AO has made addition to the extent of Rs.6,30,63,500/- along with other additions, assessed the income and passed order u/s.143(3) of the Act, dated 20.12.2011. 3. Aggrieved by the order of AO, the assessee preferred an appeal before the CIT(A). In the appellate proceedings, ld. AR argued the grounds and reiterated the submissions. Ld. CIT(A) on perusal of the findings of AO and contentions of the assessee referred at page 3 of the order along with other details found that the assessee has made satisfactory explanation before the AO and also genuineness is not

3 ITA No.168/2015 doubted and hence directed the AO to delete the additions and allowed the appeal observing at page 4 & 5 of the order as under :- “I have carefully perused the assessment order drafted by the AO and the submissions made by the appellant. Out of the investment in the appellant company amounting to Rs.19,25,88,500/- by seven investor companies, the AO had disputed the investments made by two companies namely M/s.M.N.G.Tradelink (P) Ltd. the investment being Rs.3,81,63,500/- and M/s.S.B.Tradelink (P) Ltd. amounting to Rs.2,49,00,000/-. The AO had produced the Balance Sheet of both the companies. As per the Balance Sheet of both the companies they have enough reserve and surplus to cover the investment in the appellant company. However the AO had not given the reasons for non-acceptance of the source of investment shown by the above two companies. The appellant submitted that both the companies which have been treated as paper companies by the AO and the AO decided that they had no genuine business activity and have no creditworthiness at all, have been assessed U/S.143(3) r.w.s. 153A of the Act by the Asst. Commissioner of Income Tax (Central Circle- l(l), Ahmedabad. It appears that action u/s.132 of the Act had been taken in the case of such companies and their income have been assessed U/S.153A of the Act. Incidentally in the assessment orders passed u/s.l43(3)/153A in the case of M/s.S.V. Tradelink (P) Ltd. for the AY 2009-10 (pertaining to the FY in which the investor company had advanced to the appellant), the assessed income was taken as Nil thus accepting the total income as per return filed by the investor companies. Similarly in the case of M/s.M.N.G. Tradelink (P) Ltd. where after the operation u/s.132, assessment was made u/s.l43(3)/147 of the Act for the AY 2009-10 at income Nil thereby accepting the returned income by the investor company. The argument of the appellant is that had these companies been only paper companies with no genuineness, identity and no creditworthiness to invest in the appellant company, then the same could have been identified through the search operation u/s.132 of the Act and the cash credits could have been added during the assessments of such investor companies. I find substance in the submission of the appellant. As consequence to the search operation u/s.132 of the Act the assessments are made by the ACIT, Central Circle-l(l),Ahmedabad accepting the returns of income of the investor companies thereby accepting the Balance Sheets, Profit & Loss Accounts and for that matter all the accounts of such companies for the AY 2009-10 in which the impugned investments were made by such companies with the appellant company. Considering the above the AO is directed to delete the addition. 4. Aggrieved by the order of the CIT(A) the revenue filed the present appeal before the Tribunal.

4 ITA No.168/2015 5. Before us, ld. DR argued on the violation of provisions of rule 46A of the I.T.Rules as the CIT(A) has not provided any opportunity to the AO to verify the additional evidence filed in the course of appellate proceedings and CIT(A) erred in directing to delete the addition without verifying the creditworthiness of the companies and prayed for set aside of the order of the CIT(A). 6. None appeared on behalf of the assessee. 7. We heard ld. DR’s submissions and perused the finding of lower authorities and material on record. The ld. DR’s contention that the CIT(A) has made observations with reasoning that the companies have been assessed u/s.143(3) r.w.s.153A of the Act by the ACIT CC-1(1), Ahmedabad, where income was considered as Nil. Further, ld. DR vehemently argued that this information was not submitted before the AO by the assessee and for the first time these evidences were brought in appellate proceedings and the ld. CIT(A) has directly relied on the assessment orders only without verifying and considering the financial statements of the companies and directed the AO to delete the additions. We perused the CIT(A)’s order and found at page 5 the facts submitted by ld. Dr. We are of the opinion that the CIT(A) should have called for the remand report from AO before deciding the issue, and the AO was deprived to verify these vital facts. In the interest of justice, we shall provide an opportunity to ld. AO to verify the evidences filed in the appellate proceedings and check the genuineness of transaction. Accordingly, we set aside the order of CIT(A) and remit the entire disputed

5 ITA No.168/2015 issue to the file of the AO to verify the evidences filed and pass the order on merits and it is nevertheless to mention that the assessee should be provided adequate opportunity of hearing before passing the order. 8. In the result, appeal of the revenue is allowed for statistical purposes. Order pronounced in the open court on this 05/07/ 2017. Sd/- Sd/- (N. S. SAINI) (PAVAN KUMAR GADALE) ऱेखा सदस्य / ACCOUNTANT MEMBER न्यानयक सदस्य / JUDICIAL MEMBER कटक Cuttack; ददनांक Dated 05/07/2017 प्र.कु.मि/PKM, Senior Private Secretary आदेश की प्रनिलऱपप अग्रेपषि/Copy of the Order forwarded to : 1. अपीलाथी / The Appellant- M/s Dinabandhu Steel & Power Ltd., Arunodaya Nagar, Cuttack 2. प्रत्यथी / The Respondent-ACIT, Circle-2(1) Cuttack आयकर आयुक्त(अपील) / The CIT(A), 3. आयकर आयुक्त / CIT 4. विभागीय प्रविविवि, आयकर अपीलीय अविकरण, कटक / DR, ITAT, Cuttack 5. गार्ा पाईऱ / Guard file. 6. सत्यापऩत प्रनत //True Copy// आदेशािुसार/ BY ORDER,

(Senior Private Secretary) आयकर अपीऱीय अधिकरण, कटक / ITAT, Cuttack