The Action Of The Assessing Officer v. Rakesh

IN THE HIGH COURT OF JHARKHAND AT RANCHITax Appeal No. 09 of 2012 The Commissioner of Income Tax, Jamshedpur …..Appellant VersusM/s Prowess International Pvt. Ltd. ….Respondent----- Coram:HON’BLE MR. JUSTICE NARENDRA NATH TIWARI :HON'BLE MRS. JUSTICE JAYA ROY For the Appellant : Mr. Deepak Roshan, AdvocateFor the Respondent : Mr. Binod Poddar, Sr. Advocate----- 08/21.11.2012Two substantial questions of law are said to be involved in this appeal; (I)Whether learned ITAT was justified in deleting the addition of Rs.50 lakhs-representing the claim of share application money, received in cash, by brushing aside the evidences that the same was not explained ? And (II)Whether learned ITAT has ignored several glaring inconsistencies appearing in the cash flow statement submitted by the assessee, as well as shown in the balance sheet of the Directors. Having heard the parties at length, we find that those questions are of facts on which findings have been given by the ITAT after thorough discussion and consideration of the relevant facts and material on record. During the assessment year 2006-07 under consideration, the assessee company received Rs. 70 lakhs as share application money by issuing 7 lakhs equity shares of Rs.10/- each. Three persons were said to be the Directors cum Share holders. The names of those share holders are specifically mentioned in the orders. The Assessing Officer required the assessee to furnish the share application form, sources of investment and other details to substantiate the genuineness of the share application money of Rs.50 lakhs received by the assessee. From the details furnished by the assessee, the Assessing Officer found that the said persons are the Directors of the assessee-company. The Assessing Officer observed that sources of investment in share capital of the assessee-company could not be explained by the assessee company with corroborative evidence. The Assessing Officer also observed on perusing the balance sheet of the said persons namely Shri Manoj Kumar Jha and Shri Surjeet Singh as on 31.03.2005 and 31.03.2006 as well as their cash flow statements, that the opening as well as closing balances -2- and bank balances as per cash flow statement differ from the figures appearing in the balance sheet. The cash flow statement shows the major source of fund for investment in the assessee-company as decrease in business investment. But the same is not supported by the balance sheet of the Directors and the inflow of funds as per cash flow statement is shown from profit and interest from group concerns, which are usually received/credited at the end of the year. Being confronted the Assessee, company explained the source of investment. However, the Assessing Officer was not satisfied and was of the view that the source of share capital amounting to Rs.50 lakhs in the name of investment by the three Directors is unexplained. He also noted that the genuineness of the transaction has also not been established by the assessee-company. The Assessing Officer added Rs.50 lakhs under section 68 of the Income-tax Act, 1961 as unexplained cash credit. The order was challenged in appeal. The CIT(A) having considered the facts and material on record, observed that the assessee has prima facie failed to explain the source of the creditors of Rs.50 lakhs satisfactorily. Learned CIT(A), thus, upheld the action of the Assessing Officer. the action of the Assessing Officer. Aggrieved by the said order, the assessee filed appeal before the Income-tax Appellate Tribunal. Learned Tribunal heard the appeal and considered the facts and law as well as the judicial pronouncement on the issue. Learned Tribunal particularly referred to and relied on the decision of the Hon'ble Supreme Court in CIT Vs. Lovely Exports (P) Ltd. (2008) 216 CTR (SC) 195. In the said decision, it has been held that if the share application money is received by the assessee company from the alleged bogus share holders, whose names are given to the Assessing Officer, then the Department is free to proceed to reopen their individual assessment in accordance with law. It cannot be regarded as undisclosed income in the hands of the assessee under section 68 of the Income tax Act, 1961. Learned Tribunal, thus, came to the considered view that the addition under section 68 of the Income-tax Act, 1961 for unexplained cash credit can be made for the amount received during the financial year relevant to the assessment year and not for any amount received in earlier financial year. Learned Tribunal found that there was no material to show the exact date on which loan was received by the assessee-company and only for that limited purpose Rakesh/ -3- learned Tribunal has referred the said issue back to the file of the Assessing Officer for proper verification and adjudication afresh in accordance with law. Learned Tribunal, thus, set aside the orders of the authorities below and referred back the issue to the file for fresh adjudication. Having heard learned counsel for the parties, we find that the order of learned Tribunal is thoroughly discussed and well considered. We find no ground made out leading to any substantial question of law to be framed and decided by this Court in exercise of jurisdiction under section 260A of the Income Tax Act, 1961. This appeal is, accordingly, dismissed. ( Narendra Nath Tiwari, J) ( Jaya Roy, J) .