BLUE PARK SEA FOODS PRIVATE LIMITED.,BHIMAVARAM vs. DY CIT, CENTRAL CIRCLE,, VIJAYAWADA

PER S. BALAKRISHNAN, Accountant Member :

3 of Rs. 80,570/- and again disallowance U/s. 40(a)(ia) of the Act amounting to Rs.58,333/-. After going through the material available on record and the submissions made by the assessee, the Ld. AO completed the assessment by determining the total income at Rs. 2,82,30,763/-. Aggrieved by the order of the Ld. AO, the assessee preferred an appeal before the Ld. CIT(A). Before the Ld. CIT(A), the assessee contested the issuance of notice U/s. 153A of the Act and also the additions made by the Ld. AO. The Ld. AR also submitted additional evidence in the form of confirmation letters from the share holders, sources of funds, balance sheet and proof of income for filing the return of income of the shareholders for the relevant assessment year. The Ld. CIT(A) admitted the additional evidence and referred the matter to the Ld. AO for remand report. The Ld. AO in his remand report observed that the assessee has not produced any concrete evidence regarding the sources and genuineness of share application money and the signature on the confirmation letters are not matching with the signature with the balance sheet filed with respect to the shareholders. Further, the Ld. AO also observed in his remand report that the assessee has not proved that the investors obtained loans and utilized the same for investment in shares of the assessee company. Further, the Ld. AO also observed in his remand report that the returns of income of the shareholders were filed on 3/2/2014 belatedly. The Ld. AO also observed that the investors have shown meager income ranging Rs. 2 to 2.5 lakhs and has paid a nominal amount of tax of Rs. 5,000/- approximately. The remand report was given to the assessee for rejoinder. In response, the assessee denied the allegations made by the Ld. AO stating that the Ld. AO has not given any specific observation. The Ld. CIT(A) after examining the remand report and the rejoinder of the assessee, rejected the submissions of the assessee and confirmed the additions made by the Ld. AO to the extent of Rs. 1,69,99,980/- both on legal as well as on merits. Aggrieved by the order of the Ld. CIT(A), the assessee is in appeal before us by raising the following grounds of appeal:

“1. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in law and facts in upholding the addition of Rs. 1,69,99,980/- towards unexplained share application money under section 68 of the Act.

2. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in law in confirming the addition under section 68 of the Act on mere admission during search operations, despite evidence having been filed in the first appellate proceedings, to disprove the admissions.

has not followed the binding judgments of the Hon’ble Supreme Court and Hon’ble Bombay High Court.

4. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in law in stating that the submission of the appellant before him that the impugned addition was not based on any incriminating material and thus becomes unsustainable as per section 153A was made for the first time before him and hence liable for rejection as being an afterthought by the appellant.

5. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in law in stating that the admission U/s. 132(4) during search was a best place of evidence and results in addition based on the same, despite your appellant having proved with material evidences before the Ld. CIT(A) the admission as erroneous even the judgments relied on by the Ld. CIT(A) support the proposition that the maker of an affidavit can lead evidence to disprove the incorrectness of the contents of an affidavit made by him.

7. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in law and on facts in upholding the addition based on certain doubts and surmises, though the identities of the share applicants, their financial capacity for investment and genuineness of the investments by them by reference to their returns of income filed before the search, wherein the investments were duly reflected were filed in the proceedings before him, were subjected to remand report and the satisfaction of the evidence was expressed by the Ld. CIT(A).

8. Your appellant craves leave to add or amend any of the above grounds of appeal.”

3. The assessee also filed a petition for additional ground which is legal in nature as follows:

6 “The issue of notice and consequential assessment completed U/s. 143(3) r.w.s 153A of the Act is contrary to the provisions of law as no search and seizure operations were conducted in the case of the assessee U/s. 132 of the Act. Such assessment being nullity in the eyes of law is liable to be quashed.”

6. The other grounds raised by the assessee relate to the addition made by the Ld. AO to an extent of Rs. 1.69 Crs which is adjudicated below.

The Ld.AR further submitted that an amount of Rs. 6.32 Crs from 27 shareholders has been accepted by the Revenue. However, the Revenue has rejected the confirmations provided by the 10 shareholders amounting to Rs. 2.03 Crs. The Ld. AR pleaded that the Ld. AO has partly allowed Rs. 34 lakhs and thereby

7 rejecting Rs. 1.69 Crs from seven investors. The Ld. AO also pleaded that the evidences for the sources of funds invested by the shareholders have been provided before the Ld. AO who has rejected the same. The Ld. AR further pleaded that the Ld. AO has merely relied on the statement recorded U/s. 132(4) of the Act given by the Managing Director of the company stating that there is no objection to add Rs. 1.69 Crs voluntarily. The Ld. AR also pleaded that the Ld. AO has not given any specific observations on the additional evidences in his remand report.

He therefore relied on the decision of the Hon’ble High Court of Rajasthan in the case of Hukum Chand Jain vs. ITO reported in [2011] 334 ITR 197 (Rajasthan) wherein it was held that the confession is not a conclusive evidence. Therefore, the Ld. AR pleaded that the addition made by the Ld. AO be deleted.

8 DR further submitted that from the summary submitted by the assessee it is seen that the assessee has withdrawn from the loan account and had invested in the assessee company wherein the duration between the withdrawal and the investment is significant. The Ld. DR further submitted that in some cases, the date of withdrawal is subsequent to the date of investment.

The Ld. DR therefore pleaded that there is no genuinity in the evidences produced by the assessee and hence the Ld. AO has rightly disallowed the same. The Ld. DR therefore pleaded that the orders of the Ld. Revenue Authorities be upheld.

Further, it is also an undisputed fact that the Managing Director of the company in his statement U/s. 132(4) of the Act has expressed his no objection to the addition of Rs. 1.69 Crs. It is also seen from the records that the assessee has taken an alternative plea subsequently that the investment should be taxed in the hands of the individual shareholders. In support of 9 his arguments, the assessee filed the bank statements, loan statements, Income Tax returns of the seven shareholders. It is also noticed that these shareholders filed belated returns for the impugned assessment year and have declared a meager income of Rs. 2 to 2.5 lakhs by paying a nominal tax approximately Rs. 5,000/-. On perusal of the loan statements provided by the assessee in the paper book, it is noticed that the assessee has taken loans for the purpose of his business and there is no trail showing the investment made in the assessee company. Further, it is also not clarified by the Ld. AR that why the assessee has invested in the share capital of the assessee company by way of cash when the funds are very much available in the bank accounts of the assessee. We also observed from the loan statements that it is a Kisan Credit Card [KCC] account wherein the investors have availed loan for the purpose of their business.

Even the savings bank account submitted by the Ld. AR of the shareholders does not indicate the investments made by the shareholders in the assessee company. Further, there is also merit in the observations of the Ld. AO that on verification of the confirmation letters and the balance sheet, the signatures are not matching. The primary onus is on the assessee to establish beyond doubt that investments made by the shareholders are 10 genuine in nature which in the instant case the Ld. AR has failed to do so. We also find that the evidences provided by the assessee could not be relied upon as it contained discrepancies as observed by the Ld. Revenue Authorities. We therefore are of the considered opinion that in the facts and circumstances of the case as discussed above, there is no merit in the arguments of the Ld. AR. We therefore do not want to interfere in the order of the Ld. CIT (A) as we find no infirmity in the decision of the Ld. CIT(A). Accordingly, the grounds raised by the assessee are dismissed.

Pronounced in the open Court on 29th February, 2024.