Ashapura Protenis Pvt.Ltd.,, ... vs Assessee

Ashapura Proteins P. Ltd. Survey No. 325, Plot No.10, Garibsha Pir, Bhavnagar, Rajkot Highway, Sihor Appellant

Vs. The ITO, Ward - 1(3), Bhavnagar Respondent

PAN: AACCA4482D

ITA. No. 298/Ahd/2008 (Assessment Year:2001-02)

ACIT, Circle-1, Bhavnagar Appellant

Vs.

Ashapura Proteins P. Ltd. Survey No. 325, Plot No.10, Garibsha Pir, Bhavnagar, Rajkot Highway, Sihor Respondent

राजःव क ओर से / By Revenue :Shri Dinesh Singh, Sr. D.R. आवेदक क ओर से / By Assessee : Shri M. K. Patel, A.R. सुनवाई क तार ख/Date of Hearing :21.01.2015 घोषणा क तार ख/Date of Pronouncement : 30.01.2015 I . T. A . N o s . 2 15 & 2 98/ A h d/ 08 & 2 00/ A h d/ 1 0 f o r A. Y . 01-0 2 (As h ap u ra P ro te ins P. L t d. v s . I TO ) Page 2

ORDER

PER SHAILENDRA KUMAR YADAV, J.M:

These appeals of assessee and Revenue are arising out form the orders of CIT(A)-XX, Ahmedabad, dated 31.10.2007 for the assessment years 2001-02 on quantum and penalty. So, they are being disposed of by way of this common order for the sake of convenience.

2. In ITA No. 215/Ahd/2008 for A.Y. 2001-02 on quantum, assesseee has filed the appeal on the following grounds:

"(1) The learned Commissioner of Income-tax (Appeals)-

XX, Ahmedabad has grievously erred in confirming the addition made to the extent of Rs.2,03,000/- on account of investment in shares made by Maganbhai s. Makwana as referred in paragraph 4.3 of his order under appeal and has erred in confirming the addition in terms of the reasons recorded in paragraph 4.3 to 4.5 of the order under appeal. (2) Similarly, the learned CIT(Appeals) has grievously erred in confirming the addition made on account of unexplained loans/deposits amounting to Rs.2,40,000/-. Made by Bhavsanghbhai (96,000), Gagjibhai (48,000) and Dipsinghbhai (96,000). (3) The learned CIT (Appeals) ought to have allowed the appeal of the appellant as supported by voluminous evidence produced in the course of assessment as well as appellate proceedings."

2.1 In ITA No. 298/Ahd/2008 for A.Y. 2001-02 on quantum, Revenue has filed the appeal on the following grounds:

"1. The Ld. CIT(A) erred in law and on facts in directing to delete Rs.23,51,400/- out of total addition of Rs.25,91,400/- made by the A.O. on account of unexplained deposits.

2. The Ld. CIT(A) erred in law and on facts in directing to delete Rs.67,17,000/- out of total addition of I . T. A . N o s . 2 15 & 2 98/ A h d/ 08 & 2 00/ A h d/ 1 0 f o r A. Y . 01-0 2 (As h ap u ra P ro te ins P. L t d. v s . I TO ) Page 3

Rs.69,20,000/- made by the A.O. on account of unexplained investment in shares."

3. The back ground of case is that ITAT vide its appeal order No. ITA No.05/RJT/2005 of 1.09.05 has restored the matter to the file of Assessing Officer directing him to decide the same afresh after allowing proper opportunity to Assessee for explaining credits in respect of addition of Rs.25,91,400/- on account of loans taken and also in respect of share application money, of RS.69,20,000/-.

3.1 Accordingly, Assessing Officer asked the assessee to produce all depositors / shareholders for verification. Meanwhile Assessing Officer had also issued summons to depositors/shareholders directly, out of which seven persons had attended, and their statements were recorded. As mentioned in assessment order one Shri Dayabhai Nagjibhai agreed to have confirmed loan of Rs.3,30,900/- and produced evidence of agriculture land as 7/12, 8A etc., but Assessing Officer did not accept this loan as farmer had taken loan from Farmer's co, op. society and Land Development Bank. Hence, Assessing Officer had rejected this loan as non-genuine. Another party Shri Jodhabhai Ratansangbhai of village Lavarda Ta: Sihor appeared before the Assessing Officer and agreed to have invested in shares of Rs.4,50,000/- by installment through Pay Order. This investment in shares was not accepted by Assessing Officer as in fact payment was made in cash. Third Shri Hathising D Chauhan also appeared before Assessing Officer and accepted having given of loan of Rs.1,89,000/-, filed evidence of having Agriculture land I . T. A . N o s . 2 15 & 2 98/ A h d/ 08 & 2 00/ A h d/ 1 0 f o r A. Y . 01-0 2 (As h ap u ra P ro te ins P. L t d. v s . I TO ) Page 4

holding but Assessing Officer rejected this loan because the depositor / farmer had obtained loan from Farmer's Co. Op. society. Fourth Shri Manubhai Shambhubhai of village Sarkadia appeared before Assessing Officer but refused to have given loan Rs.3,19,500/-. Hence Assessing Officer had disallowed it as non-genuine. Remaining 3 Farmers (i) Gagjibhai Shambhubhai (ii) Dipsing Shambhubhai and (iii) Bhavsangbhai Sambhubhai had attended in response to summons u/s. 131(1) of 10.10.06 and 11.10.06 for loan of Rs.48,000/- in the name of Shri G.S.Gohil and Rs.96000/- each in Dipsing and Bhavsang, but they refused to have given any loan, and hence Assessing Officer treated this as not proved. Assessing Officer had further written letter to assessee company on 27.10.06 to produce all depositors / shareholders and had called for address of 12 depositors. However, same was not complied by the Assesses Company. It is plea of Assessing Officer that he had issued summons u/s. 131(1) twice on 20.09.06 and 6.11.06 to all creditors except 12 but nobody attended except seven. Hence Assessing Officer finalized assessment making addition of loan deposit of Rs.25,91,400/- and share application money of Rs.69,20,000/- to the income of assessee.

4. Matter was carried before the First Appellate Authority, wherein various contentions were raised on behalf of assessee. CIT(A) having called for remand report has deleted addition of Rs.23,51,400/- out of total addition of Rs.25,91,400/- made by Assessing officer on account of unexplained deposits and further directed Assessing officer to delete addition of I . T. A . N o s . 2 15 & 2 98/ A h d/ 08 & 2 00/ A h d/ 1 0 f o r A. Y . 01-0 2 (As h ap u ra P ro te ins P. L t d. v s . I TO ) Page 5

Rs.67,17,000/- out of total addition of Rs.69,20,000/- made by Assessing Officer on account of unexplained investment in shares. Both parties are in appeal by way of cross appeals, wherein Revenue has opposed the deletion of addition on both accounts while assessee is against sustaining addition on both accounts.

5. Both parties gave detailed submission in respect of their claims and having considered the same we find that two types of amounts have been added to the income of assessee u/s.68 of Income Tax Act,

(i) as unexplained loans/deposits of Rs.25,91,400/- and

(ii) as unexplained share application money of Rs.69,20,000/-. Assessing Officer as per directions of ITAT examined the matter afresh with detailed verification and scrutiny. Assessing Officer has issued summons to all 38 share holders and 20 loan depositors, out of which 29 share holders and 14 depositors appeared before Assessing Officer. Statements of all persons were recorded by Assessing Officer and copies of same have been sent with remand report. The remaining 6 depositors and 9 share holders who could not appear before Assessing Officer filed their affidavits. It was observed from the list that four shareholders are assessed to tax and most of other depositors and shareholders are agriculturists. As identity of persons has not been doubted by Assessing Officer. Affidavits of all the depositors and shareholders have been filed. Statements of all the persons who appeared before the Assessing Officer have been recorded. Therefore, identity of all the concerned persons was established.

I . T. A . N o s . 2 15 & 2 98/ A h d/ 08 & 2 00/ A h d/ 1 0 f o r A. Y . 01-0 2 (As h ap u ra P ro te ins P. L t d. v s . I TO ) Page 6

5.1 In remand report, Assessing Officer has given details of evidences filed by depositors and shareholders in tabular form regarding their land holding in form of 8A & 7/12, their source of income as outcome of his enquiry. Assessee has given names and address of depositors/shareholders, amount invested during the year and numbers of share certificates. It was observed that payments were made to assessee through demand drafts or pay orders and this has been confirmed by Assessing Officer with bank statement filed before him. Assessing Officer has forwarded these Bank statements with the remand report. In this background, CIT(A) observed that Assessing Officer has not objected to any of the statements or letters and has not drawn any adverse inference except in the following cases:

(i) Shri Maganbhai Shibabhai Makwana (S/32 -

Rs.2,03,000/-) - In this case, from details filed and report of Assessing Officer, it was seen that Assessing Officer has given his finding in respect of capacity of the person that he has no acceptable income. During the course of discussion with the Authorised Representative of assessee, it was noticed that in response to summons issued to Shri Maganbhai S. Makwana, by Assessing Officer he did not appear before the Assessing Officer and he filed only a written submission in compliance. According to Assessing Officer, which is not a full compliance. Further, it was seen that share amounts have been paid either by pay order or in cash being the amounts below Rs.20,000/-. He owns only 7 bighas of land with other co-owners as per details filed in Form No. 7/12 and 8A. He has no other I . T. A . N o s . 2 15 & 2 98/ A h d/ 08 & 2 00/ A h d/ 1 0 f o r A. Y . 01-0 2 (As h ap u ra P ro te ins P. L t d. v s . I TO ) Page 7

sources of income except agricultural income. In view of all the facts and considering the smallness of land holding and that there is no other income, his capability to invest in shares of Rs.2,03,000/- was not proved. Since, his creditworthiness has not been proved to establish a genuine transaction u/s.68, the claim of assessee that person invested to that extent for purchasing shares was not accepted. Therefore, findings of Assessing Officer in this regard were upheld by CIT(A) and addition made to the income of assessee of Rs.2,03,000/- was confirmed. Stand of assessee before us has been that Maganbhai S. Makwana is co-owners of 7 bighas of land as per Revenue's report. But there is no specific finding to the fact that what crops are grown on the said agricultural holding at relevant point of time. It is not clear from the discussion of authorities below whether said agricultural land of said creditor was irrigated one or not. So, in the interest of justice, we set aside the order of CIT(A) and restore the matter to him with direction to decide the matter as per relevant agricultural record and CIT(A) can also look into the fact that agricultural produce at relevant point of time has been sold. Accordingly, assessee's appeal is allowed for statistical purpose on this point.

5.2 Next issue in assessee's appeal is with regards to deposits made by the following persons:

(a) Shri Bhavsangbhai Shambhubhai Rs. 96,000/-

(b) Shri Gagjibhai Sambhubhai Rs. 48,000/-

(c) Shri Dipsinghbhai Shambhubhai Rs. 96,000/-

I . T. A . N o s . 2 15 & 2 98/ A h d/ 08 & 2 00/ A h d/ 1 0 f o r A. Y . 01-0 2 (As h ap u ra P ro te ins P. L t d. v s . I TO ) Page 8

All the above persons, in compliance of summons issued by Assessing Officer appeared before him on 10.10.2206 and 11.10.2006 but before Assessing Officer, in their statements, they refused of giving loan to assessee. During course of remand report proceeding, they were called but they did not attend in response to summons issued by the Assessing Officer. They have simply filed their confirmatory affidavits wherein they changed their opinion. It is seen that above mentioned 3 persons are brokers and they are agriculturists only. On perusal of affidavits and statements, it was observed that:

(i) Shri Bhavsangbhai Shambhubhai has in his statement stated that his family consists of 10 members and his income from agriculture is Rs. 1 lakh only.

(ii) Shri Gagjibhai Sambhubhai has stated in his statement that his family consists of 11 members and his total earning out of agricultural operation is Rs. 1 lakh only.

(iii) Like-wise person Shri Dipsinghbhai Shambhubhai in his statement stated that he has 4 family members and he earns Rs. 1 lakh from agricultural activities. Assessing Officer observed that all the above three persons were not capable to deposit the amounts (Rs.96,000/-, Rs.48,000/- & Rs.96,000/-) respectively with assessee. Summons were issued in their cases but they did not attend before Assessing Officer.

Therefore, their subsequent confirmation by affidavits was found to be only a change of mind which may be an outcome of tutored mind. Therefore, deposits of above 3 persons of Rs.96,000/-, Rs.46,000/- and Rs.96,000/- in the light of I . T. A . N o s . 2 15 & 2 98/ A h d/ 08 & 2 00/ A h d/ 1 0 f o r A. Y . 01-0 2 (As h ap u ra P ro te ins P. L t d. v s . I TO ) Page 9

above narration by Assessing Officer remained unexplained. Accordingly findings of Assessing Officer in this regard was upheld by CIT(A).

6.1 We find that above said persons have deposed by way of affidavits with regards to their deposits. The contents of affidavits cannot be rejected as such without confronting the content of affidavit, which has not been done in this case. So, in the interest of justice, the order of CIT(A) on the issue is set aside and matter is restored to him with direction to decide the issue at hand as per fact and law after providing due opportunity of hearing to assessee.

6.2 Summing up, we find that addition made by Assessing Officer for unexplained loans/deposits, addition to the extent of Rs.2,40,000/- was confirmed by CIT(A), which has been set aside by us as discussed above. Rest of deposits of Rs.23,51,400/- out of total addition of Rs.25,91,400/- made by Assessing Officer was deleted by CIT(A) on the basis of reasoned finding, wherein CIT(A) rightly found that deposits to the extent of Rs.23,51,400/- were well identified having creditworthiness and deposits were given to assessee by way of genuine transaction. So, the deletion of addition of Rs.23,51,400/- has been confirmed by us. Similarly with regards to addition made towards investment in shares by different persons addition to the extent of Rs.2,03,000/- was confirmed by CIT(A), which has been set aside by us as discussed above. Rest of amount of Rs.67,17,000/- out of total addition of Rs.69,20,000/- made by Assessing Officer was I . T. A . N o s . 2 15 & 2 98/ A h d/ 08 & 2 00/ A h d/ 1 0 f o r A. Y . 01-0 2 (As h ap u ra P ro te ins P. L t d. v s . I TO ) Page 10

deleted by CIT(A) by reasoned finding, wherein it was found that amount of investment in share to that extent was genuine which needs no interference from our side.

7. As a result, appeal filed by Revenue is dismissed and that of assessee is allowed for statistical purpose.

8. Coming to the penalty appeal in ITA No. 200/Ahd/2010 filed by assessee, wherein grounds are as under:

"(1) That the learned Commissioner of Income-tax (Appeals)-XX, Ahmadabad has grievously erred in law and on facts in confirming levy of penalty under section 271(1)(c) of the Act.

(2) That on facts and evidence on record it ought to have been held that no penalty is leviable under section 271(1)(c) of the Act in respect of additions made in quantum proceedings."

8.1 Assessing officer levied penalty u/s. 271(1)(c) to the extent of addition of Rs.2,03,000/- out of total addition of Rs.69,20,000/- and Rs.2,40,000/- out total addition of Rs.25,91,400/- was confirmed by CIT(A). As we have set aside the matter to CIT(A) on both accounts, so, the consequential penalty on above account is also set aside and matter is restored to CIT(A) with direction to decide the same as per final outcome in quantum appeal on these accounts.

8.2 As a result, assessee's appeal for penalty is allowed for statistical purpose.

I . T. A . N o s . 2 15 & 2 98/ A h d/ 08 & 2 00/ A h d/ 1 0 f o r A. Y . 01-0 2 (As h ap u ra P ro te ins P. L t d. v s . I TO ) Page 11

9. As a result, Revenue's appeal is dismissed while assessee's appeal on quantum as well as penalty is allowed for statistical purpose as discussed above.

Pronounced in the open Court on this the 30th day of January, 2015.

Sd/- Sd/- (N. S. SAINI) (SHAILENDRA KUMAR YADAV) ACCOUNTANT MEMBER JUDICIAL MEMBER True Copy S.K.SINHA

आदे श क ूितिल'प अमे'षत / Copy of Order Forwarded to:-

1. राजःव / Revenue

2. आवेदक / Assessee

3. संबिं धत आयकर आयु. / Concerned CIT

4. आयकर आयु.- अपील / CIT (A)

5. 'वभागीय ूितिनिध, आयकर अपीलीय अिधकरण, अहमदाबाद / DR, ITAT, Ahmedabad

6. गाड7 फाइल / Guard file.

By order/आदे श से,

उप/सहायक पंजीकार आयकर अपीलीय अिधकरण, अहमदाबाद ।