ACIT, ROURKELA CIRCLE, ROURKELA vs. PAWANJAY SPONGE IRON LTD., ROURKELA

The revenue has raised the following grounds of appeal: The revenue has raised the following grounds of appeal: The revenue has raised the following grounds of appeal:

“ 1. The Ld.CIT(A) was not justified to delete the addition of Rs. The Ld.CIT(A) was not justified to delete the addition of Rs. The Ld.CIT(A) was not justified to delete the addition of Rs. 7,70,00,000/ 7,70,00,000/- made by the Assessing Officer towards "Bogus Share made by the Assessing Officer towards "Bogus Share Capital", totally ignoring the findings of the Assessing Offic Capital", totally ignoring the findings of the Assessing Offic Capital", totally ignoring the findings of the Assessing Officer that the cheques paid towards share application money were not cleared cheques paid towards share application money were not cleared cheques paid towards share application money were not cleared during the year and the assessee failed to prove the identity, during the year and the assessee failed to prove the identity, during the year and the assessee failed to prove the identity, genuineness and creditworthiness of the creditor before the A.O. genuineness and creditworthiness of the creditor before the A.O. genuineness and creditworthiness of the creditor before the A.O.

On the facts and in the circumstances of the case, the CIT(Appeals) has violated the terms of Rule 46A of the IT Rules, 1962 in not granting an opportunity to the Assessing Officer to rebut the additional evidence relied upon by the CIT(Appeals) i.e. the purported bank statement produced by the assessee without the stamp of the bank authenticating the same and for the subsequent financial year i.e. F.Y. 2013-14 relevant to A. Y. 2014-15 [Annexure '1 to Statement of Facts] and, therefore, in the interest of justice, the case may be remitted back to the AO for fresh adjudication.”

The only issue agitated by the revenue in the grounds of appeal

Hence, the revenue is in appeal before the Tribunal.

Ld CIT DR supported the assessment order and further submitted that the assessee has failed to prove the identity, genuineness and creditworthiness of the creditor before the AO. He submitted that when in the cash flow statement, both the directors have confirmed receipt of payment in the previous year, the AO was justified in treating the same as bogus share capital. Ld CIT DR submitted that the ld CIT(A) has failed miserably to examine the audit report of M/s. Hytone Agency Pvt Ltd., He submitted that the investor company had shown the amount as “share application money” in its balance sheet as on 31.3.2013. On the other hand, the assessee company had issued and allotted 77,00,000 shares at face value of Rs.10/- each to m/s. Hytone Agency Pvt Ltd., as per cash flow statement and audit report. There is no apparent reason that once the shares had been allotted to M/s. Hytone Agency Pvt Ltd., then why it had P a g e 4 | 9 shown the amount as “share application money”. These aspects have not been considered by the ld CIT(A) while deleting the addition. Ld CIT DR further submitted that the bank statement of M/s. Hytone Agency Pvt Ltd., was never furnished before the AO, therefore, there arises the financial capacity of the investor company. Ld CIT DR submitted that the confirmation of the investor was neither filed before the AO nor before the ld CIT(A)

Ld CIT DR submitted that the ld CIT(A) has accepted the additional evidences from the assessee violating the terms of Rules 46A of the I.T.Rules, 1962 in not granting an opportunity to the AO to rebut the case. Ld CIT DR relied on the following judicial pronouncements:

Replying to above, ld A.R. supported the order of the ld CIT(A). he submitted that although the amount was received in the previous year but presented to the bank in the next previous year. Therefore, it cannot be treated as bogus liability and bogus share capital.

We have heard rival contentions. First of all, we deal with the legal ground i.e. violation of Rule 46A of I.T.Rules. On careful perusal of assessment order as well as the order of the ld CITA) especially operative para 3.2 (supra), we find that there was no new material produced by the assessee before the ld CIT(A), which violates the provisions of Rule 46A of I.T.Rules. Before the AO, the assessee had produced the balance sheet of the assessee as well as the balance sheet of M/s. Hytone Agency Pvt Ltd alongwith return of income, audit report and bank statement for the financial year 2012-13, which were not properly considered by the AO while making the addition. Similar documents were furnished by the assessee alongwith the written submissions before the ld CIT(A). On consideration of the same, ld CIT(A) deleted the addition made by the AO. Hence, we do not find any merit in the contention of ld CIT DR that the ld CIT(A) has admitted additional evidence in contravention of Rule 46A of I.T.Rules. Thus, benefit of the prepositions relied by ld CIT DR including order of ITAT Chandigarh Bench in the case of DCIT vs Genex Industries Ltd (supra) is P a g e 6 | 9 not available for the revenue in the instant case. Accordingly, the legal ground i.e. Ground No.4 of the revenue is dismissed.

Now we proceed to adjudicate the issue on merits taken in Ground Nos. 1 to 3. On a careful consideration of the facts and circumstances of the case, perusal of the papers on record, orders of the authorities below, we observe that it is not in dispute that the share applicant in the instant case before us is assessed to income tax. We are in complete agreement with the contention of ld CIT DR that the ld CIT(A) ought to have considered the fact that as to whether the assessee has successfully discharged its onus to establish genuineness of transaction, identity, capacity and creditworthiness of share application money investor before granting relief to assessee. But this is a peculiar situation of this case that the impugned amount was not credited to the bank account of the assessee during Financial year 2012-13 relevant to assessment year 2013- 14 but the same was credited to the bank account of the assessee during next financial year 2013-14 relevant to assessment year 2014-15. This factual position has not been controverted neither by the AO nor by ld CIT(DR), thus, it was not required by the ld CIT(A) to go further and examine that as to whether the assessee has discharged onus cast upon his shoulders u/s.68 of the Act. The only dispute raised by the assessee is that the money was not actually received during the relevant previous year 2012-13, thus cannot be disputed to bring into tax net u/s.68 of the Act in P a g e 7 | 9 F.Y. 2012-13 relevant to A.Y. 2013-14/ It is the contention of the assessee that cheques received from the investor towards share capital were not presented to the bank for payment during the previous year 2012-13 but presented in the next financial year 2013-14 relevant to assessment year 2014-15. Hence, it is proved that the money against the allotment of shares was not credited to the bank accounts of the assessee during the relevant previous year, hence provision of section 68 of the Act cannot be applicable in assessment year 2013-14. . It is not disputed that M/s. Hytone Agency Pvt Ltd., is an existing share holder and upto 31.3.2012, it was holding 20,000 nos of shares amounting to Rs.2.00 crores, as is evident from the balance sheet. On the basis of share application, the company allotted shares valuing Rs.7,70,00,000/-. These facts have not been controverted by AO or ld CIT DR during arguments.

In the present case at hand, the only dispute is that the cheques were not presented to the bank for payment during the previous year i.e. 2012-13 and presented to the bank in the subsequent year i.e. 2013-14 and monies were credited in the bank account of the assessee. On the basis of above facts, the ld CIT(A) has deleted the addition made in the assessment year under consideration.

In view of foregoing discussion, we find that the ld CIT(A) has rightly deleted the addition made by the AO and we do not find any flaw or any other valid reason to interfere with the order of the ld CIT(A). Accordingly, P a g e 8 | 9 we uphold the same and dismiss the grounds of appeal raised by the revenue.

In the result, appeal of the revenue is dismissed.