Padma Electrical Agencies Pvt. Ltd., ... vs Department Of Income Tax

This is a Revenue appeal against the order of the Commissioner of Income Tax (Appeals)-4, Hyderabad dated 30-01-2015. In spite of issuing notices, none appeared on behalf of assessee. In view of this, appeal is considered ex-parte respondent-assessee after hearing the Ld. DR.

2. Briefly stated, assessee filed return of income on 27-09-2009 declaring income of Rs. 26,75,040/-. A survey was conducted on 16-06- 2011 and Assessing Officer (AO) noticed that no Books of Accounts were I.T.A. No. 406/Hyd/2015 :- 2 -: M/s. Padma Electricals Agencies Pvt. Ltd.,

found. Therefore, he issued notices u/s. 148 of the Income Tax Act [Act] after recording the reasons u/s. 147. The AO recorded in order that "As there is introduction of share application money, the turnover required to be verified with the Books of Accounts, the expenditure claimed excess. Hence, proceedings u/s. 147 were initiated by the issue of notice u/s. 148 dt. 26-08-2011". AO has in fact accepted the income returned in reassessment completed. There being no discrepancy with reference to either turnover or claim of expenditure in excess, the basic premise on which assessment was re-opened has not been satisfied. However, AO considered the amount of Rs. 42,54,037/- introduced as share application money as income of assessee. The basis for the above is that assessee's confirmations filed even though were on record, the letters addressed to the investors were not responded. In the absence of confirmation by the investors, AO treated the amount as not genuine and brought to tax.

3. Before the Ld.CIT(A) apart from raising grounds on the addition made by the AO, assessee also raised additional grounds stating that there are no valid reasons for initiation of proceedings u/s. 147. Ld.CIT(A) on examination of record noticed that the reasons recorded at the time of issuance of notice were entirely different from what was recorded in the assessment order. The reasons for reopening as recorded were stated in para 7 of the order which indicate that assessee- company has shown unsecured loans of Rs. 1.02 Crores during the Financial Year (FY) 2008-09 relevant to AY. 2009-10. The sources for above loan credits appear to be doubtful. On that reason, proceedings u/s. 147 were initiated. The Ld.CIT(A) held that reopening is bad in law holding as under:

"It is seen from the above that in the assessment order, there is mention of introduction of share application money, the turnover is I.T.A. No. 406/Hyd/2015 :- 3 -: M/s. Padma Electricals Agencies Pvt. Ltd.,

required to be verified and the expenditure claimed excess whereas in the notings in the assessment record the reason mentioned is that, the appellant has shown unsecured loan of Rs. 1.02 Cr. during the year which appear to be doubtful. On a careful perusal of the above indicate that, the reasons to believe that income has escaped assessment is only on the basis of suspicion and not on the basis of any material in possession of Assessing Officer. It is established position in law that the basis of reopening has to be sufficient material evidence and not just suspicion. Accordingly, the reopening of assessment proceedings is held to be invalid and accordingly, held to be void. The assessee's additional ground of appeal is allowed. Since the re-assessment proceedings are held to be invalid, the other grounds of appeal are not adjudicated".

4. The Revenue has raised the following ground:

"1. The Learned CIT(A) erred in holding that as there is no material evidence in possession of the Department, the reopening of assessment was invalid. The fact is that the assessment was reopened for the reason that during the course of Survey, no material evidence was found with regard to the infusion of Share Application Money during the year".

5. The Ld. DR vehemently argued that there are valid reasons for reopening, therefore, the order of the CIT(A) could not be sustained.

6. On appraising the DR's contentions and perusing the facts on record, we are of the opinion that order of CIT(A) requires to be upheld. Basically, the addition made ie. share application money has no relevance to the reasons recorded at the time of reopening of assessment. As noted by the CIT(A), the actual reasons recorded at the time of reopening was with reference to unsecured loans of Rs. 1.02 Crores which appeared to be doubtful. There is no mention of verification of unsecured loans in the course of assessment by the AO. Even the reasons recorded in the assessment order indicate that what is required to be verified in the reopened proceedings are with reference to turnover and expenditure claims. Even on this issue, the AO accepted I.T.A. No. 406/Hyd/2015 :- 4 -: M/s. Padma Electricals Agencies Pvt. Ltd.,

the income returned i.e., accepting the Books of Accounts and the claims made in. There is a finding that there are no Books of Accounts found in the course of survey which itself could not be accepted on the face the fact that assessee is a company and audited records could have been filed/available. There seems to be no application of mind by the AO either during the course of survey or during the course of reopening of assessment or completion of assessment. Even the grounds raised in this appeal also indicate that none of the officers are applying their mind to the facts involved in the appeal. Only finding given by AO in the order was that there are no books of account during survey. However, the results of assessee company were accepted. Even the details of share application were filed with confirmation letters. AO did not get any response to the letters issued to them. How this can be a basis for the ground raised as extracted above is not forth coming. This forum time and again is advising the officers of Revenue to apply their mind before preferring second appeal. There is no merit at all in the ground raised by the Revenue.

7. Accordingly, the Revenue appeal is rejected. There is no order as to costs.

Order pronounced in the open Court on 26th June, 2015.

Sd/- Sd/- (SAKTIJIT DEY) (B. RAMAKOTAIAH) JUDICIAL MEMBER ACCOUNTANT MEMBER

Hyderabad, Dated 26th June, 2015

TNMM I.T.A. No. 406/Hyd/2015 :- 5 -: M/s. Padma Electricals Agencies Pvt. Ltd.,

Copy to :

1. Income Tax Officer, Ward-16(2), Room No. 615, 6th Floor, Aayakar Bhavan, Basheerbagh, Hyderabad.

2. M/s. Padma Electricals Agencies Pvt. Ltd., 2-1-332/3GF/5- 5, Nallakunta, O.U. Road, Hyderabad.

3. CIT(Appeals)-4, Hyderabad.

4. CIT-IV, Hyderabad.

5. D.R. ITAT, Hyderabad.

6. Guard File.