ACIT, CHENNAI v. M/s. Damdar Trade Links Pvt. Ltd, CHENNAI

IN THE INCOME TAX APPELLATE TRIBUNAL CHENNAI BENCH D BEFORE SHRI U.B.S BEDI JUDICIAL MEMBER AND SHRI B. RAMAKOTAIAH ACCOUNTA NT MEMBER I.T.A. NO. 2280/MDS/2008 [ASSESSMENT YEAR 2004-05] THE A.C.I.T COMPANY CIRCLE (I)4 CHENNAI VS. M/S DAMODAR TRADE LINKS PVT. LTD 6 1 ST CROSS STREET SLYVAN LODGE COLONY KILPAUK CHENNAI 600 010. PAN: AABCD 8364 L (APPELLANT) (RESPONDENT) DEPARTMENT BY : SHRI K.E.B. RENGARAJAN ASSESSEE BY : SHRI N. MUTHUKUMARAN O R D E R PER B. RAMAKOTAIAH A.M.:- THIS IS AN APPEAL FILED BY THE REVENUE DIRECTED AG AINST THE ORDER OF THE LD. CIT(A) VIII CHENNAI DATED 4.9.20 08 FOR ASSESSMENT YEAR 2004-05. ITA NO. 2280/MDS/2008 :- 2 -: 2. THE REVENUE HAS RAISED THE FOLLOWING GROUND: 2.1 THE LD. CIT(A) ERRED IN DELETING THE ADDITION M ADE TOWARDS UNEXPLAINED SHARE CAPITAL AND UNSECURED LOANS. 2.2. IT IS SUBMITTED THAT OUT OF THE SUM OF RS. 11 LAKHS CLAIMED TO HAVE BEEN OBTAINED FROM SHRI RAJEEV DUBEY ONLY RS. 50 000/- RELATES TO UNEXPLAINED SHARE CAPITAL AND THE BALANC E AMOUNT IS ONLY UNSECURED LOAN. 2.3 THE LD. CIT(A) OUGHT TO HAVE SEEN THAT THE UNSE CURED LOANS WAS ALLEGED PAID BY WAY OF 25 DEMAND DRAFTS TAKEN F OR RS. 40 000/- EACH ON 11.9.2003 [TO CIRCUMVENT BANK REQU IREMENT THAT DD ABOVE SUCH AN AMOUNT CANNOT BE TAKEN BY CASH]. THE DDS WERE TAKEN IN A BANK IN KANPUR 325 KMS. AWAY FROM T HE CREDITORS VILLAGE AND DEPOSITED IN THE ACCOUNT OF THE CREDITO R IN CHENNAI WITH TAMILNADU MERCANTILE BANK. NO EVIDENCE IN SUPPORT OF SOURCE WAS FILED. 2.4 THE LD. CIT(A) FAILED TO NOTE THAT IN A GENUINE TRANSACTION THE DEPOSITOR WHO IS ALSO CLAIMED TO BE ONE OF THE TWO SHAREHOLDERS OF ITA NO. 2280/MDS/2008 :- 3 -: THE COMPANY COULD HAVE SENT A CHEQUE FOR RS. 10 LAK HS INSTEAD OF 25 DEMAND DRAFTS. SHRI RAJEEV DUBEYS OCCUPATION W AS STATED TO BE BUSINESS LATER IT WAS CLAIMED THAT HE IS SUPERV ISOR IN SPINNING MILLS. HIS ADDRESS WAS ALSO CHANGED FROM THE INITI AL ONE GIVEN. 3. BRIEFLY STATED THE FACTS OF THE CASE ARE THAT T HE ASSESSEE COMPANY HAS SHOWN AN AMOUNT OF RS. 11 LAKHS AS CRED IT FROM ONE SHRI RAJEEV DUBEY TOWARDS SHARE CAPITAL AND LOAN. THE AMOUNT OF SHARE CAPITAL SHOWN WAS AT RS. 50 000/- AND THE AMO UNT OF RS. 10 50 000/- AS LOAN TOTALING RS. 11 LAKHS. THE AS SESSING OFFICER ENQUIRED ABOUT THE CREDIT OF RS. 11 LAKHS AND FOUND THAT THERE WERE NUMBER OF DEPOSITS IN THE FORM OF DEMAND DRAFT S TAKEN AT RS. 40 000/- EACH INTO THE ACCOUNT OF THE SAID SHRI RAJ EEV DUBEY WITH THE TAMILNADU MERCANTILE BANK CHENNAI FROM WHICH A MOUNT THE ADVANCES WERE MADE ON19.9.2003 19.9.2003 AND 22.9 .2003 RESPECTIVELY TOWARDS SHARE CAPITAL AND UNSECURED LO AN. AFTER ENQUIRY IT SEEMS SHRI RAJEEV DUBEY CLAIMING TO BE A SUPERVISOR IN THE U.P. STATE SPINNING MILLS POST BEHERI DIST BAREILLY SENT A LETTER DATED 28.11.2006 INFORMING THE PERMANENT ADD RESS AND CONFIRMING THAT HE HAD CONTRIBUTED RS. 50 000/- TOW ARDS SHARE ITA NO. 2280/MDS/2008 :- 4 -: CAPITAL AND RS. 10 LAKHS TOWARDS UNSECURED LOAN. T HE ASSESSING OFFICER DID NOT ACCEPT THE SAME AS THERE WERE SEVER AL DISCREPANCIES AS MENTIONED IN PARA 11 OF THE ASSESS MENT ORDER AND FURTHER THAT THE ADDRESS OF THE ABOVE PERSON WA S NOT FULL AND COMPLETE. WHILE OBSERVING THAT THERE WERE SEVERAL QUESTIONS WHICH REMAINED UNANSWERED THE ASSESSING OFFICER PU T THE ONUS ON THE ASSESSEE TO EXPLAIN THE CREDITS APPEARING IN THE BOOKS OF THE ASSESSEE AND ACCORDINGLY MADE ADDITION OF RS. 1 1 LAKHS U/S 68 OF THE ACT. 4. THE LD. CIT(A) RELYING ON THE DECISION OF THE HON'BLE SUPREME COURT IN THE CASE OF LOVELY EXPORTS (P) LIM ITED [2008] 216 CTR 195 [SC] DELETED THE ENTIRE ADDITION OF RS . 11 LAKHS BUT DIRECTED THE ASSESSING OFFICER TO ENQUIRE AND FIND OUT THE ASSESSING OFFICER OF SHRI RAJEEV DUBEY AS PER DETAI LS AVAILABLE WITH HIM AND TRANSMIT THE INFORMATION FOR FURTHER N ECESSARY ACTION. 5. THE REVENUE IS CONTESTING THAT THE LD. CIT(A) WA S WRONG IN DELETING THE ENTIRE AMOUNT OF RS. 11 LAKHS AS THE S HARE CAPITAL WAS ONLY RS. 50 000/- AND THE BALANCE AMOUNT WAS UNSECU RED LOAN AS ADMITTED AND THE PRINCIPLE ESTABLISHED BY THE HON'BL E SUPREME ITA NO. 2280/MDS/2008 :- 5 -: COURT IN THE CASE OF LOVELY EXPORTS (P) LTD [SUPRA] DOES NOT APPLY TO THE FACTS OF THE CASE. 6. THE LD. D.R. EXPLAINED THE FACTS AND RELIED ON T HE ORDER OF THE ASSESSING OFFICER AND THE GROUNDS OF APPEAL WHE REAS THE LD. A.R. SUBMITTED THAT EVEN THOUGH THE LD. CIT(A)S OR DER WAS WRONG TO THE EXTENT OF APPLICATION OF PRINCIPLES ESTABLIS HED BY THE HON'BLE SUPREME COURT TO THE ENTIRE AMOUNT IT WAS HIS SUBM ISSION THAT THE ASSESSEE HAS FURNISHED NECESSARY EVIDENCES PROVING THE GENUINENESS OF THE CREDIT. HOWEVER HE HAS NO OBJE CTION IF THE MATTER IS RESTORED TO THE FILE OF THE ASSESSING OFF ICER FOR PROPER EXAMINATION. 7. WE HAVE HEARD THE PARTIES AND CONSIDERED THE ISS UE. AS SEEN IN THE ORDER OF THE LD. CIT(A) HE RELIED ON T HE PRINCIPLE ESTABLISHED BY THE HON'BLE SUPREME COURT IN THE ABOV E REFERRED CASE TO THE ENTIRE AMOUNT OF RS. 11 LAKHS WAS ADDED U/S 68 OF THE I.T. ACT WHEREAS THE SAID PRINCIPLE CAN BE APPLICAB LE ONLY TO THE EXTENT OF SHARE CAPITAL WHICH IS RS. 50 000/- IN TH IS CASE. ACCORDINGLY THE ORDER OF THE LD. CIT(A) WAS WRONG TO THE EXTENT OF DELETING THE CREDIT OF THE RS. 10 50 000/- CONSIDER ED U/S 68 OF THE ITA NO. 2280/MDS/2008 :- 6 -: ACT. SINCE THE ASSESSING OFFICER HIMSELF MENTIONS THAT THERE ARE MANY QUESTIONS UNANSWERED AND AS SEEN FROM THE ORD ER OF THE ASSESSING OFFICER PROPER ENQUIRY/OPPORTUNITY WAS N OT GIVEN AT THE TIME OF ASSESSMENT IN THE INTEREST OF JUSTICE WE RESTORE THE ISSUE BACK TO THE FILE OF THE ASSESSING OFFICER TO MAKE P ROPER ENQUIRY AND CONFRONT THE EVIDENCES TO THE ASSESSEE COMPANY AND DECIDE THE ISSUE AFRESH ACCORDINGLY AFTER AFFORDING REASON ABLE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. GROUND NO. 2 IS AL LOWED. 8. IN THE RESULT THE APPEAL FILED BY THE REVENUE I S ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON THE CONCLUSIO N OF HEARING ON WEDNESDAY THE 2ND OF FEBRUARY 2011 AT CHENNAI. SD/- SD/- (U.B.S. BEDI) JUDICIAL MEMBER (B. RAMAKOTAIAH) ACCOUNTANT MEMBER CHENNAI : 2 ND FEBRUARY 2011 VL/- COPY TO:1. APPELLANT 2. RESPONDENT 3. CIT(A) 4. CIT 5. DR