ACIT, CIRCLE-2(1), CUTTACK vs. SRI SRINIBASH SAHOO, KEONJHAR

राजस्व की ओर से /Revenue by : Shri M.K.Gautam, CIT-DR ननधााररती की ओर से /Assessee by : Shri P.C.Sethi, Advocate सुनवाई की तारीख / Date of Hearing : 19/10/2022 घोषणा की तारीख/Date of Pronouncement : 19/10/2022 आदेश / O R D E R Per Bench : The revenue has filed this appeal in against the order of the ld. CIT(A), Cuttack, dated 31.03.2017, passed in I.T.Appeal No.0255/15-16, for the assessment year 2007-2008.

CO No.28/CTK/2018 3. The revenue in its appeal has challenged the action of ld. CIT(A) in deleting the addition of Rs.2,90,00,000/- representing investments by 15 Kolkata based companies in the shares of M/s Rohini Resorts Pvt. Ltd. It was submitted by the ld. CIT-DR that the assessee is an individual, who was subjected to a search and seizure operation on 15.03.2007. An assessment had originally been completed u/s.153A/143(3) of the Act on 23.12.2009. The said assessment order was the subject matter of an appeal before the ld. CIT(A), Cuttack, who had, vide his order dated 26.11.2010 in annulled the assessment on the ground that the AO was not competent in law to issue notice u/s.153A(a) of the Act in respect of assessment year 2007-2008, since the search in the case had taken place on 15.03.2007. It was the submission that as the assessment order had become a nullity, what remained was only return filed by the assessee and as the said return had not been processed. A notice u/s.148 of the Act had been issued on the assessee on 17.04.2012 after recording reasons and after getting the approval from the JCIT Range-1, Sambalpur. It was the submission that the facts in the case was that originally land of 1.01 acres at Satyanagar, Bhubaneswar had been allotted to one Shri Srikanta Mishra by the State Government on lease for 99 years in 1981. The said land had been specified for hotel business. On account of the litigation in respect of the said land with the neighbours, said Srikanta Mishra was unable to proceed with the business of hotel. However, this land was brought into the books of one company under the CO No.28/CTK/2018 name and style of „Rohini Resorts Pvt. Ltd.‟ It was the submission that the said land was sold by said Srikanta Mishra to the assessee herein for a sale consideration of Rs.75,75,760/- along with the registration charges of Rs.18,41,618/- and consent fee paid to the State Government of Rs.18,93,940/-. It was further submitted that the company namely Rohini Resorts Pvt. Ltd. came to be taken over by the assessee and 15 corporate parties from Kolkata. It was the submission that the consideration paid by the said Kolkata based corporate parties for the amount of Rs.2.90 crores is the issue in dispute in this appeal. It was the submission that the AO treated the corporate entities from Kolkata as the Benamis of the assessee herein and has brought to tax the amount of Rs.2,90,00,000/- paid by the said Kolkata based corporate parties for the acquisition of the shares of Rohini Resorts Pvt. Ltd. as the undisclosed income of the assessee. The ld. CIT-DR has filed his written submission as follows :- 1. The Deptt. appeal pertains to relief allowed by the Id. CIT (A), Cuttack on account of benami investment of Rs.2,90,00,000/- made by Shri Srinibash Sahoo. The brief facts of the case are: i) One Shri Srikanta Mishra was owner of a plot (C-5, New Capital) admeasuring 1.01 acres at Satya Nagar, Bhubaneswar. The state govt. had allotted this plot to Shri Srikanta Mishra on a lease of 99 years in 1981 and it was also specified that it will be used for hotel business. In light of above requirement, Shri Srikanta Mishra formed a company in the name and style as "Rohini Resorts Private limited" to conduct hotel business in the name of hotel Mayur. The interest in leasehold land was transferred in the name of Rohini Resorts Private limited in the year 1984 by deed of transfer dated 30.11.1984. After the construction of a boundary wall, some of the persons living in the vicinity of said plot raised objections as regards the ownership of a good portion of land. It took almost 17 years to settle the matter with various litigants and as per judgement of Civil CO No.28/CTK/2018 Judge (S.D.) Bhubaneswar dated 07.01.200.9 in the title suit no.90 of 1983, the claim of plaintiffs was dismissed. However due to financial constraints, Shri Srikanta Mishra vide letter dated 14.09.2005 .addressed to the Joint Secretary OS), G. A. Deptt., Govt. of Odisha submitted that he would not be able to construct the hotel and meet its day to day expenses and he requested that leasehold interest be transferred in the name of Shri Srinibash Sahoo, the present assessee. ii.) As per registered sale deed dated 18.04.2006, the sale consideration was fixed at Rs.75,75,760/- along with registration charges of Rs.18,41,618/- and consent fee of Rs.18,93,940 paid to the state govt. (25% of Rs.75,75,760/-). iii.) A search was carried out at the residential, office and factory premises of Shri Srinibash Sahoo and his group concern Crackers India Alloy Ltd. (CIAL) on 15.03.2007. During the search operations, Shri Srikanta Mishra was also covered and in his statement u/s.132(4) recorded on 15.03.2007, he admitted in reply to question nO.30 that he had initially intimated the assessee namely Shri Srinibash Sahoo that value of plot at Satya Nagar was around Rs.7 crore but his deal with Shri Srinibash Sahoo was finalized at RS.6 crores. He also confessed that some other persons had also approached him regarding this plot but they were not willing to give the entire money in white (through cheques). He also admitted in reply to question no.9 that he had received Rs.6 crores from Shri Srinibash Sahoo for sale of plot at Satya Nagar (paragraph-2 on page-6 of the assessment order). Both Shri Srikanta Mishra and his wife namel Smt. Kalyani Mishra, other director in Rohini Resorts Private limited admitted that they had received a sum of RsA.50 crores in their individual capacity (paragraph-5 on page-10 of assessment order). iv.) Smt. Kalyani. Mishra, wife of Shri Srikanta Mishra and also a director in Rohini Resorts Private limited, stated in her statement u/s.132(4) recorded on 03;04.2007 that Rohini Resorts Private Limited represented by Shri Srikanta Mishra was given Rs.75,75,760/- as per registered sale deed and also Rs.75,00,000/- as sale premium (Rs.74,24,240/- as per money receipt). This fact was also confirmed by the statement of Shri Srinibash Sahoo in his statement recorded by the DDIT(Inv.), Bhubaneswar (paragraph-Ion page-11 of the assessment order). v.) As per valuation report prepared by Manas Das & Co. (page-73 of SM-03) in respect of valuation of shares, the value of land was shown at Rs.4,11,00,000/-. The value of goodwill was computed at Rs.l,86,77,716/- on the basis of total future maintainable profits in 10 years.

CO No.28/CTK/2018 vi.) During the course of search, a photocopy of draft dated 06.04.2006 for Rs.13 lakhs vide seized document (104 of SM-01) favouring Smt. Kalyani Mishra was found. On the back side of it, details of total payments of Rs.7,87,36,808/- were recorded. The contents of seized document (page-104 of SM-01) have been reproduced by the A.O. on page 6 & 7 of the assessment order. On perusal of seized document (104 of SM-01), two things are crystal clear i.e. a) Unaccounted cash of Rs.1,49,95,000/- was paid to Shri Srikanta Mishra b) receipts of Rs.2.90 crores were shown from 15 shell companies based at Kolkata vii.) It is pertinent to mention here that Smt. Kalyani Mishra in her reply to the questionnaire issued by the DDIT(Inv.), Bhubaneswar submitted that negotiation, arrangement of sale of shares of Rohini Resorts Private limited to Kolkata based companies was shouldered by Shri Srinibash Sahoo (paragraph-2 -last 6 lines on page-9 of the assessment order). It is also important to note that there is no apparent reason for the entities based in Kolkata to invest in Rohini Resorts Private limited which was not doing any business and had only a plot of land in its name. It should be noted that during the course of search, share allotment register of Crackers India Alloys Ltd. (CTAL) was found and it showed that crores of rupees were invested in the shares of CTAL (listed company) from 54 companies at Kolkata through Shri Srinibash Sahoo. The fifteen Kolkata based companies which had invested in Crackers India Alloys Ltd., had also invested Rs.2.90 crores in Rohini Resorts Private limited. Since Shri Srikanta Mishra was the owner of a retail wine shop at Bhubaneswar therefore had no knowledge of these companies at Kolkata. Though investment as share capital in Rohini Resorts Private Limited was made through DDs by fifteen Kolkata based companies but here was no doubt that these companies were merely acting as fronts for Shri Srinibash Sahoo. viii.) Kindly refer to page-14 of the assessment order. All the entries on back side of seized document (page-104 of SM-01) except cash payments of Rs.1,49,95,000/- have been found entered in the books of account and bank accounts of sellers/purchasers. The first entry relates to DDs of Rs.4,50,00,.000/- and out of that, an amount of Rs.l,60,01,250/- was paid by Shri Srinibash Sahoo and his family members for acquisition of shares of Rohini Resorts Private Limited. The balance amount of Rs.2,90,00,000/- was paid by way of DDs from 15 Kolkata based companies as mentioned above. In view of above facts, the A.O. held that amount of Rs.2.90 crores invested y Kolkata based shell companies in the shares of Rohini Resorts Private limited was benami investment of Shri Srinibash Sahoo.

CO No.28/CTK/2018 2) The Id. CIT(A) has allowed the relief to the assessee as discussed in para-I1.3 to 11. 3.2 on pages-7 to 10 of the appellate order. The order of Id. CIT(A) is erroneous for following reasons: a) The CIT(A) was aggrieved with the fact that names of these 15 Kolkata based companies were not mentioned anywhere in the assessment order. He was also aggrieved with the fact that details of inquiries made by the Investigation Wing of Kolkata were not mentioned in the assessment order. He was further aggrieved with the fact that no attempt was made to locate these companies which were duly registered with the Registrar of Companies and might be filing their ITRs with the Income Tax Deptt. He held that these companies could not have vanished in thin air. At the outset, the names of these companies were mentioned by the A.D. on page-7 of the assessment order. As far as enquiries carried out by the ADIT(Inv.) are concerned, the Id. CIT(A) could have asked the A.D. to furnish such report. Without prejudice to the above, nothing stopped the Id. CIT(A) to call for a remand report from the A.O. or to direct him to conduct the requisite inquiries in this regard. Sub- section (4) of Section 250 provides that the Commissioner (Appeals) may, before disposing any appeal, make such further inquiry as he thinks fit, which is further enlarged by sub-rule-4 to Rule-46A. It states that nothing contained in this rule shall affect the powers of the Commissioner of income Tax (appeals) to direct the production of any document or the examination of any witness, for disposal of the appeal. Thus the CIT(A) can ask for any document which is necessary for disposal of appeal. b) The powers of the CIT(A) have been held to be co-terminus with that of the A.O., empowering him to do all that, what the A.O. could or also should have done for the purposes of making an assessment. Reliance is placed on the judgement of Hon'ble Supreme Court in the case of CIT vs. Kanpur Coal Syndicate (53 ITR 225) in which it was held that AAC had tremendous powers in disposing of any appeal; that the scope of his powers was co- terminus with that of the ITO; that he can do what the ITO can do and also direct him to do what he failed to do. Further nothing prevented the Id. CIT(A) from conducting inquiries on his own. c) The Id. CIT(A) has held that there was no evidence on record to show that Shri Srinibash Sahoo was involved with these companies and monies given by these companies was unaccounted money of Shri Srinibash Sahoo. By holding so, the Id. CIT(A) also failed to take cognizance of seized material, statement of Smt. Kalyani Mishra and other circumstantial evidences. The Hon'ble Mumbai High Court in the case of CIT vs. Premkumar Arjundas Luthra (HUF) (69 taxmann.com 407) has held that the CIT(A) is required to apply his mind to all the issues which arise from the impugned order, before him whether or not same have been raised by an assessee before him; and he is obliged to dispose of the appeal on merits.

CO No.28/CTK/2018 d) The Id. CIT(A) has allowed relief to the assessee by relying on the decision of Hon'ble Cuttack ITAT in case of Shri Srinibash Sahoo for AY 2005-06 and AY 2006-07 in IT(SS)A No.1 & 2/CTK/2011 dated 08.07.2015. However in these years, certain investments were made by Kolkata based companies by way of share capital in Crackers India Alloys Ltd. (CIAL). In these years, there was no evidence on record to show that Shri Srinibash Sahoo-had used these Kolkata based companies to bring his unaccounted monies in garb of share capital in CIAL. However in the present case, seized material (page-I04 of SM-01), statement of Smt. Kalyani Mishra and other circumstantial evidences do show that the assessee had used his unaccounted monies to be brought back in the form of share capital of Rohini Resorts Private Limited. Hence the facts of the present case are totally different. In view of above facts, the order of the A.O. be restored and appeal filed by the Deptt. be allowed.

CO No.28/CTK/2018 8. We have considered the rival submissions. The fact of the present case remains that the Kolkata based corporate entities have paid consideration to the shareholders of Rohini Rsorts Pvt. Ltd. for acquiring the shares held by them in Rohini Resorts Pvt. Ltd. Thus, if at all the entries are available in respect of funds movement from the corporate entities at Kolkata, it is in the books of the erstwhile shareholders of Rohini Resorts Pvt. Ltd. It must be understood that the original shareholding and the capital holding of Rohini Resorts Pvt. Ltd. remained proved and substantiated. The change that took place in the books of Rohini Resorts Pvt. Ltd. is only insofar as the shareholders register gets modified. This is not a case where the corporate entities have put the money into Rohini Resorts Pvt. Ltd. and the Rohini Resorts Pvt. Ltd. has in turn paid off their shareholders. Thus, the entries, if at all, are not in the books of the assessee herein nor in the books of any of the entities which are under the control of the assessee herein. Clearly when there are no entries in the books of the assessee, the assessee cannot be asked to explain the entries of other corporate entities in respect of whom no financial connection has been found even in the course of search on the assessee. This being so, it was for the AO to produce or investigate and find out some financial connection between the said Kolkata based corporate entities and the assessee herein. It must also be mentioned here that in the assessment order also though the AO refers to an investigation report by the Kolkata based Investigation Wing of the CO No.28/CTK/2018 department, what is conspicuous by its absence is the connection between the said corporate entities, which are Kolkata based and the assessee. In the circumstances, we are of the view that the ld. CIT(A) is right in deleting the addition representing the alleged benami transaction of the assessee through 15 Kolkata based corporate entities. It is also noticed that the AO has used the term “benami” but the AO has not been able to prove that the said 15 Kolkata based corporate entities are under the control of the assessee herein much less there is any financial connection. It is also noticed that the ld. CIT(A) has followed the judicial discipline in following the decision of the coordinate bench of the Tribunal in assessee‟s own case for A.Ys.2005-2006 & 2006-2007, referred to supra, for the purpose of deleting the impugned addition. This being so, we find no reason to interfere in the order of the ld. CIT(A) on this issue. Consequently, the appeal filed by the revenue is dismissed and the cross objection of the assessee is dismissed as withdrawn.