Pr. Commissioner Of Income Tax- Udaipur, Udaipur v. M/S Saileela Synthetics Pvt. Ltd., 147, New Cloth Market,Bhilwara

HIGH COURT OF JUDICATURE FOR RAJASTHAN ATJODHPUR D.B. Income Tax Appeal No. 12/2021 Pr. Commissioner Of Income Tax- Udaipur, Udaipur. ----Appellant Versus M/s Saileela Synthetics Pvt. Ltd., 147, New Cloth Market,Bhilwara. ----Respondent For Appellant(s): Mr. K.K. Bissa HON'BLE DR. JUSTICE PUSHPENDRA SINGH BHATI HON'BLE MR. JUSTICE MADAN GOPAL VYAS Order 04/03/2024 1.This appeal under Section 260A of the Income Tax Act, 1961(hereinafter referred as Act of 1961) has been preferred by theappellant-Income Tax Department claiming the following reliefs: “It is, therefore, prayed that this appeal may kindly beallowed. By an appropriate order or direction, the impugnedorder dated 21.12.2020 passed by the Tribunal may kindlybe set aside and the order of AO may kindly be restored andupheld. Any other order which may be considered just andproper in the facts and circumstances of the case maykindly be passed in favour of the appellant. Cost of theappeal be awarded in favour of the appellant.” 2.The respondent-Company (assessee) is engaged in themanufacturing & trading of synthetic fabric and filed its e-returnon 28.09.2015 declaring its total income as Rs.1,14,56,120/-.Thereafter, the case was selected for scrutiny through CASS and a notice under Section 143 (2) of the Act of 1961 was issued on27.07.2016 to the respondent-Company, and subsequently,another notice under section 142 (1) of the Act of 1961 wasissued, which was duly was served to the respondent-Company,while fixing the date of hearing. 2.1The respondent Company, during the Assessment Year 2015-16, raised its share capital by allotment of equity shares; firstly itissued 1,81,816 number of equity shares and later issued3,40,665 number of equity shares, in total 5,22,481 numbers ofequity shares each having face value of Rs. 10/- and sharepremium of Rs. 45/- and Rs. 50/- were issued to total 11companies. The respondent-Company accordingly, received a sumof Rs.3,04,39,780/- on allotment of total 5,22,481 paid up shares. 2.2As per the appellant, the details furnished by the respondent -Company regarding the said 11 companies was not found to beproper, and therefore the Income Tax Department issuedAssessment Order (AO) dated 29.12.2017, assessing the totalincome of the respondent-Company as Rs. 4,20,76,100/- includinglump-sum addition, employees contribution towards ESI, and onaccount of unsecured loan of Rs.25 lacs and interest on unsecuredloan Rs. 24,658/- under Section 143 (3) of the Act of 1961 andtax and interest was charged as per ITNS-150, and the penaltyproceedings under Section 271 (1) (c) of the Act of 1961 wereinitiated. 2.3Being aggrieved by the aforesaid assessment order dated29.12.2017, the respondent-Company preferred an appeal (AppealNo. 557/2017-2018) before the Commissioner of Income-Tax (Appeals), Ajmer (in short, ‘CIT’); the learned CIT vide orderdated 13.03.2018 partly allowed the appeal, while quashing theassessment order dated 29.12.2017, accordingly, deleted theaddition of Rs.25 lacs made by the Assessing Officer under Section68 of the Act of 1961 and disallowance of the interest ofRs.24,658/-. 2.4. Being aggrieved by the order dated 13.03.2018 passed bythe learned CIT, the appellant preferred an appeal (I.T.A. No. 279/Jodh/2018) before the learned Income Tax Appellate Tribunal,Jodhpur Bench, (in short, ‘Appellate Tribunal’). The learnedAppellate Tribunal vide the impugned order dated 21.12.2020dismissed the said appeal. The copy of the said order was receivedon 10.02.2021. Thus, being aggrieved of the said order, thepresent appeal has been preferred claiming the afore-quotedreliefs. 2.4. Being aggrieved by the order dated 13.03.2018 passed bythe learned CIT, the appellant preferred an appeal (I.T.A. No. 279/Jodh/2018) before the learned Income Tax Appellate Tribunal,Jodhpur Bench, (in short, ‘Appellate Tribunal’). The learnedAppellate Tribunal vide the impugned order dated 21.12.2020dismissed the said appeal. The copy of the said order was receivedon 10.02.2021. Thus, being aggrieved of the said order, thepresent appeal has been preferred claiming the afore-quotedreliefs. 3.Learned counsel for the appellant-Department submits thatduring the assessment proceedings, the Assessing Officer hadmade enquiry under Section 133 (6) of the Act of 1961 regardingthose 11 Companies stated by the respondent-Company, whereinnone of the Companies filed a reply to the notice and even the fivenotices have been returned by the postal authority with theremark “Left”. 3.1. Learned counsel further submits that the details ofshareholders/investors Companies of the assessee was furnishedon 15.12.2017 and thereafter on 28.12.2017, new addresses ofinvestor companies were provided, which is clearly at the end ofthe year, and the same was done to avoid and evade verification of such addresses, and that, the source of investment alsoremained unexplained, and therefore, the impugned order is notjustified in law. 3.2. Learned counsel also submits that the respondent-Companydid not explain the allotment of total 5,22,481 paid up shares, butthe learned CIT has deleted the addition made by the AssessingOfficer without appreciating the facts of the case and the samewas also upheld by the Appellate Tribunal vide the impugnedorder, and therefore, the present appeal has been preferredraising the substantial questions of law. 4.Heard the counsel for the appellant-Department as well asperused the record of the case. 5.This Court observes that the respondent-Company filed its e-return on 28.09.2015 declaring a total income of Rs.1,14,56,120/-. Thereafter, the case was selected for scrutinythrough CASS and notices were issued. The respondent-Companyraised its share capital by allotment of equity shares; firstly, itissued 1,81,816 number of equity shares, and later, issued3,40,665 number of equity shares, in total 5,22,481 number ofequity shares each having face value of Rs. 10/- and sharepremium of Rs. 45/- and Rs. 50/- were issued to total 11companies; the respondent-Company received a sum of Rs.3,04,39,780/- on allotment of total 5,22,481 shares. 5.1. Thereafter, the appellant-Department issued the Assessment Order (AO) dated 29.12.2017, assessing the respondent-Company’s total income as Rs. 4,20,76,100/-, and accordingly, thepenalty proceedings under Section 271 (1) (c) of the Act of 1961 were initiated. Aggrieved by the same, the respondent-Companypreferred an appeal before the learned CIT, and the learned CITvide order dated 13.03.2018 has partly allowed the appeal, whilequashing the assessing order dated 29.12.2017; aggrievedthereby, the appellant-Department preferred an appeal beforeAppellate Tribunal, but the same was dismissed vide the impugnedorder. 6.This Court further observes that subject to the remarks, ascontained in the assessment order dated 29.12.2017, theassessee’s total income was computed as indicated in thefollowing table, as mentioned in the said order: Income as per Return of Income filed by theRs.1,14,56,120/-assessee Add:- (i) As discussedRs.3,04,39,780/-in Para-3 above u/s.68of the I.T. Act.(ii) Lump-sum additionRs.1,50,000/-as discussed in Para-4(iii)Employees’Rs.5,540/-contribution towardsESI (Para 5)(iv) On account ofUnsecured Loan ofRs.25,00,000/-Rs.25.00 lakhs andInterest on unsecuredRs.24,658/-loan Rs.24,658/- asdiscussed in Para 6Rs.3,06,19,978/-Total Income Rs.4,20,76,098/-Round off u/s.288 A Rs.4,20,76,100/- 6.This Court further observes that subject to the remarks, ascontained in the assessment order dated 29.12.2017, theassessee’s total income was computed as indicated in thefollowing table, as mentioned in the said order: Income as per Return of Income filed by theRs.1,14,56,120/-assessee Add:- (i) As discussedRs.3,04,39,780/-in Para-3 above u/s.68of the I.T. Act.(ii) Lump-sum additionRs.1,50,000/-as discussed in Para-4(iii)Employees’Rs.5,540/-contribution towardsESI (Para 5)(iv) On account ofUnsecured Loan ofRs.25,00,000/-Rs.25.00 lakhs andInterest on unsecuredRs.24,658/-loan Rs.24,658/- asdiscussed in Para 6Rs.3,06,19,978/-Total Income Rs.4,20,76,098/-Round off u/s.288 A Rs.4,20,76,100/- 7.This Court also observes that the grounds of appeal as raisedby the present respondent-Company before the learned CIT are reproduced as hereunder: “1. The learned assessing officer has grossly erred in lawand on the facts of the case on ad-hoc addition i.r.o.consideration received on allotment of new shares amounting to Rs.30439780. The Ld Assessing Officer hasinvoked and initiated section 68 of the act (i.e. unexplainedcredit) without considering the facts provision of the act andreasoning of the various judgments. 2. Ld AO grossly erred in disallowing Rs.150000 out ofvarious expenses without appreciating that all theexpenditure are supported by details, voucher and fullyexplained and considering the volume of business of theassessee. 3. The Ld AO grossly erred in disallowing Rs. 5540 ofEmployees Contribution to ESI without appreciating the factthat all the contributions are deposited on or before the duedate of filing the return by the assessee. 4. The learned assessing officer has grossly erred in law andon the facts of the case on making addition of Rs.25,00,000on account of unsecured loan obtained from theshareholders and Rs.24,658 which is interest on the same.” 7.1. This Court further observes that the respondent-Companyfurnished each and every necessary and requisite documents toprove the identity and creditworthiness of the persons from whomthe respondent-Company received share application(s) and thesame was recorded in the order dated 13.03.2018 of the learned CIT; relevant portion whereof is reproduced hereunder:- “4.4 The appellant has furnished, in respect of eachperson following documentary evidences to prove theidentity and creditworthiness of the persons from whomthe appellant has received share application money andgenuineness of the transactions:person following documentary evidences to prove theidentity and creditworthiness of the persons from whomthe appellant has received share application money andgenuineness of the transactions: ➢Copy of the share applications ➢Copy of Bank statement of shareholder showingthat it had sufficient balance in its accounts to enable it tosubscribe to the share capitalthat it had sufficient balance in its accounts to enable it tosubscribe to the share capital ➢Acknowledgement copy of Income Tax Return ofshareholdershareholder ➢Copy of PAN card to verify the identity ➢Copy of Balance sheet alongwith audit report of theabove share applicants confirming complete details ofSources of funds and Investments made. ➢Copy of balance confirmation cum affidavit to verify the genuineness ➢Copy of memorandum and copy of resolution. ➢Details of the immediate sources of the funds invested by the share applicants ➢Copy of Bank statement of the company ➢ROC Share allotment form alongwith complete annexures ➢Ledger copy of share application money, Sharecapital and share premium”capital and share premium” ➢Acknowledgement copy of Income Tax Return ofshareholdershareholder ➢Copy of PAN card to verify the identity ➢Copy of Balance sheet alongwith audit report of theabove share applicants confirming complete details ofSources of funds and Investments made. ➢Copy of balance confirmation cum affidavit to verify the genuineness ➢Copy of memorandum and copy of resolution. ➢Details of the immediate sources of the funds invested by the share applicants ➢Copy of Bank statement of the company ➢ROC Share allotment form alongwith complete annexures ➢Ledger copy of share application money, Sharecapital and share premium”capital and share premium” 7.2. This Court also observes that once the respondent-Companyfurnished all the relevant and requisite documents, and in theassessment order, there is nothing which could show that therespondent-Company introduced its own income from undisclosedsources in the form of shares; the assessment order was passedonly on the basis of suspicion and doubt, which is not permissibleunder the law, as has rightly been held by the learned CIT in itsorder, which in turn has rightly been upheld by the learnedAppellate Tribunal vide the impugned order. 7.3. This Court further observes that the learned CIT as well aslearned Appellate Tribunal have rightly ordered deletion of theabove-said amounts, because the respondent-Company hadfurnished all the required the details, and further held that itcannot be said to be an unexplained credit under Section 68 of theAct of 1961. Therefore, the impugned order passed by the learnedAppellate Tribunal is justified in law. 8.This Court also observes that in the Assessment Order thereis a disallowance of Rs. 1,50000/- out of various expenses, andthe said disallowing is on a higher side and the same wasconsidered by the learned CIT, and that the disallowance wasrestricted to Rs.75,000/- and the respondent-Company got therelief of Rs. 75,000/-, which is completely justified in law. 9.This Court further observes that there is another aspectregarding the Assessment Order to the effect that there isdisallowance of Rs.5540/- of employees contribution to ESI, and inthis regard, the learned CIT directed the Assessment Officer toverify the contention of the respondent-Company that theemployees’ contribution towards PF and ESI was deposited on orbefore the due date of filing the return under Section 139 (1) ofthe act of 1961; the same was upheld by the learned AppellateTribunal. Therefore, now the same does not require anyreconsideration by this Court. 10.This Court further observes that there are concurrentfindings arrived at by the learned CIT as well as learned AppellateTribunal, which are well reasoned and have been arrived at aftertaking into due consideration the overall facts and circumstancesof the case and upon duly analyzing the material available onrecord before them. 11.Thus, in light of the aforesaid observations and looking intothe factual matrix of the present case, this Court does not find it afit case so as to grant any relief to the appellant in the presentappeal. 12.Consequently, the present appeal is dismissed. All pending applications stand disposed of. (MADAN GOPAL VYAS),J(DR.PUSHPENDRA SINGH BHATI),J 68-SKant/-