ACIT, CENTRAL CIRCLE-2,, HYDERABAD vs. M/S. DNA BIOTECH LIMITED, HYDERABAD

Facts leading to filing of the present appeal are that a search and seizure action has been conducted at the business premises of the assessee on 09/10/2007. Thereafter, notice u/s 153A of the Act was issued to the assessee on 26/06/2008, calling the assessee to file its return of income. Accordingly, the assessee filed its return of income for the impugned assessment year declaring Nil income. During the course of assessment proceedings, it has been observed by the Assessing Officer(AO) that the assessee has received share application money to the tune of Rs.4,90,42,941/- from three persons namely.

Accordingly, the AO asked the assessee about the details of share application money received from the above persons. However, the assessee could not file the details and hence, the Assessing Officer made the addition of Rs.2,83,18,560/- u/s 68 of the Act. Learned AO further observed that the assessee has not disclosed the receipt of share application money from Mr.Murghai in its balance sheet 5. Aggrieved by the order of the AO, the assessee filed an appeal before Ld.CIT(A) and contended that the AO has not framed the assessment in a judicious manner. The assessee has also filed certain additional evidences before Ld.CIT(A), on which the Ld.CIT(A) asked for the remand report from the Assessing Officer. It is relevant to observe here that the additional evidences were in fact the confirmation letters from the share subscribers who have applied for the shares of the assessee company. After considering the submissions of the assessee, evidences filed by the assessee and remand report, the Ld.CIT(A) has allowed the appeal of the assessee and observed as under: “4.5. I have gone through these four comments made by the Assessing Officer and called an explanation from the Ld.AR in this regard. It transpires that initially the share application money was sent by an NRI namely Mr.Vimal Kavuri and associates. Later, the confirmations were filed by Mr.Vimal Kavuri, Mr.Vijay and Mr.Ramaswamy, who are all NRIs. The contributions were through banking channels and all of them are assessed to tax. Another point raised by the Assessing Officer in remand report is investment made by Shri Murughai and as far as his investments are concerned, they were made by his companies namely, Malind Projects Pvt. Ltd and MVS Developers Pvt. Ltd. Thus, in light of what has been discussed herein above, in my considered opinion, the investments by the shareholders stands explained and as such no addition on this aspect is necessary and the Assessing Officer is directed accordingly for both the assessment years under challenge.”

Before us, the Ld. DR has argued at length that the Ld.CIT(A) has allowed the appeal of the assessee without following the mandatory procedure of Rule 46A and hence he prayed that at least, the matter may kindly be restored to the file of the Ld.CIT(A) for adjudicating afresh.

No one has appeared from the side of the assessee despite proper service of notice of hearing. After considering the submissions of the Ld. DR and perusing the material on record, we observe that the assessee company has received an amount of Rs.4,90,42,941/- as share application money during the year under consideration, out of which an amount of Rs.2,07,24,383/- has been received from the director of the assessee company and Rs.1,53,18,558/- has been received from Mr.Vimal Kumar and his Associates and the balance i.e.Rs.1,30,00,000/- has been received from Mr.Murghai. So far as the receipt of share application money from the Director, Mr.Ramachandra Reddy is concerned the Ld AO has accepted it as genuine, the learned AO has doubted the transactions of share application money received from Mr.Vimal Kumar and his Associations and Mr.Murghai. We observe that all these transactions were routed via banking channels and during the appellate proceedings before CIT(A), the assessee has filed confirmation letters from all the share subscribers. We further observe that the Ld.CIT(A) has duly called for remand report from the Assessing Officer vis-à-vis additional evidences filed by the assessee. Therefore, the contention of the Ld.DR that the Ld.CIT(A) has passed the order without calling for the remand report is factually incorrect. Be that as it may be, we observe that so far as the receipt of payment from Mr.Murghai, it has not been reflected by the assessee in the balance sheet, fact of the matter as noted by the CIT(A) is that the assessee that the assessee company has refunded the amount vide pay order No.274802 dated 15/12/2010 and hence could not disclose this amount in its return of income. Although the CIT(A) has accepted the submission of the assessee in respect of the application money received from Mr. Murgahai but he failed to reconcile this factum, which happened in A.Y 2011-12, with the observations of the AO, that assessee failed to show this amount in its balance sheet of the impugned year i.e. AY 2007-08. These facts need verification at the end of AO. Therefore, the observation of the AO that the assessee could not show this amount in its balance sheet remained unanswered. Similarly the DR also failed to rebut the observations of the CIT(A) with any material. Therefore, Considering the totality of the facts and circumstances, we principally agree with the order of the Ld. CIT(A). However, remit the matter to the file of the Assessing Officer for verification of the reversal of entries with Mr. Murghai by the assessee and to decide the issue in accordance with law.

In the result, appeal of the Revenue is allowed for statistical purpose in above terms. Order pronounced in the open court on this the 20th day of September, 2024.