IN INCOME TAX APPELLATE TRIBUNAL BENCH, MUMBAI BEFORE SHRI MAHAVIR SINGH, JUDICIAL MEMBER AND SHRI RAMIT KOCHAR, ACCOUNTANT MEMBER . I.T.A. No.7481 Mum 2013 ( [ [ Assessment Year : 2010-11) Alvi Tech Service s Pvt. Ltd., Dy. Commissioner of Shivam P alace, Income Tax Circle 1, v. G-3, Chinchp ada Road, Kalyan. Kalyan (East) 421 306. . PAN : AAFCA5622A ( Appellant) .. ( Respondent) Assessee by Dr. K. Shivaram Revenue by : Ms. Kusum Bansal Date of Hearing : 29-6-2016 Date of Pronouncement : 22-09-2016 O R D E R PER RAMIT KOCHAR, Accountant Member This appeal, filed by assessee company, being ITA No. 7481 Mum 2013, is directed against appellate order dated 25th September, 2013 passed by learned Commissioner of Income Tax (Appeals)- 1, Thane (hereinafter called CIT(A) ), for assessment year 2010-11, appellate proceedings before learned CIT(A) arising from assessment order dated 14th February, 2013 passed by learned Assessing Officer (hereinafter called AO ) u s 143(3) of Income Tax Act,1961 (Hereinafter called Act ). 2 ITA 7481 Mum 2013 2. grounds of appeal raised by assessee company in memo of appeal filed with Income Tax Appellate Tribunal, Mumbai (hereinafter called Tribunal ) read as under:- I. On facts and in circumstances of case, Ld. CIT(A) erred in confirming addition of Rs.3,19,35,000 - made u s 68 of Income Tax Act, 1961 without appreciating fact that no amount whatsoever has been received by assessee. 2. On facts and in circumstances of case, Ld. CIT(A) failed to appreciate that S.68 of Income-tax Act, 1961 is not applicable to facts of present case as provision presupposes actual receipt of amount sum. 3. appellant prays that addition made of Rs.3,19,35,000 - may be deleted. 3. brief facts of case are that assessee is in business of engineering, erection and commissioning and consultancy in Oil and Gas industry. assessee was asked to produce books of accounts by AO during course of assessment proceedings u s 143(3) read with Section 143(2) of Act which was produced by assessee along with bills before AO. A.O. during course of assessment proceedings u s 143(3) read with Section 143(2) of Act observed that there was increase in issued share capital of Rs. 70 lacs which was subscribed by Shri Krishnanand Trivedi (Rs. 42 lacs) and Shri Alok Krishnanand Trivedi (Rs. 28 lacs). Further it was observed by AO that there was increase in share application money amounting to Rs. 2,49,35,000 - which is wholly subscribed by Shri Krishnanand Trivedi. assessee was asked to explain regarding source of share subscription and share application money of Rs. 3,19,35,000 -. assessee in reply submitted that Shri Krishnanand Trivedi was one of Directors of assessee company who was earlier running proprietary concern namely M s Alvi Tech Services which was engaged in business of erection of Engineering and Electrical installation 3 ITA 7481 Mum 2013 etc. . It was submitted that shares subscribed of Rs. 70 lacs and share application shown at Rs. 2.49 crores represents machinery, tools , equipments etc. transferred from Alvi Tech Services which stands represented in capital balance of Shri Krishanand Trivedi, proprietor of M s Alvi Tech Services. In nutshell, A.O. observed that assessee has claimed that what has been transferred is accumulated capital balance of M s Alvi Tech Services along with personal capital of Shri Krihnanand Trivedi. assessee submitted capital account of Shri Krishnannand Trivedi which is as under:- Capital account of year ended 31.03.2006 To drawing 375,000.00 By balance B d 5,33,01,281.48 To balance c d 5,37,21,502.84 By Net Profit 668,366.36 By FDR Interest 126,855.00 . .. 54,096,502.84 54,096,502.84 ============ ============ assessee claimed that above is personal capital balance of Shri Krishnanand Trivedi. assessee has further stated that capital 'balance of Shri Krishnanand Trivedi as on 31 03 2007, 31 03 2008, 31 03 03 2009 and 31 03 2010 after considering income of respective years are as under: i) As on 31 03 2007 Rs 5,38,21,502 - jj)As on 31 03 2008 Rs 5,39,21,502 - iii)As on 31 03 2009 Rs 5,43,19,002 - iv) As on 31 03 2010 Rs 5,47,16,502 - 4 ITA 7481 Mum 2013 In Balance Sheet of Shri Krishnanand Trivedi as on 31 03 2009 capital balance of Rs 5,47,16,502 - represents following items: Flat at Ganesh Krupa Rs. 5,25,000.00 Immovable Property Rs. 10,02,545.00 Movable Assets Rs. 35,02,525.00 Investment in Alvi Tech Rs. 75,00,000.00 Services Pvt. Ltd. Loan to Alvi Tech Services Pvt. Ltd. Alok Rs. 50,00,000.00 Loan to Alvi Tech Services Pvt. Ltd. Rs. 51,78,000.00 Alvi Tech Services Pvt. Ltd. Share Application Money Rs. 31,500,000.00 ICICI Bank Rs. 7,049.69 TDS Rs. 301,506.00 TDS 2008-09 Rs. 56,135.00 Cash Balance Rs. 143,742,15 Rs. 54,716,502.84 =============== It was observed by A.O. on verification that assessee has not shown figures mentioned in capital balance and balance sheet in return of income filed for respective years. On verification of return of income filed by Shri Krishnananad Trivedi, Proprietor of Alvi Tech Services, following incomes were shown during period assessment year 2001-02 to assessment year 2011-12:- 5 ITA 7481 Mum 2013 A.Y. Returned Income in Rs. 2001-02 50,000 - 2002-03 85,580 - 2003-04 1,47,524 - 2004-05 1,77,340 - 2005-06 4,02,090 - 2006-07 6,95,840 - 2007-08 2,00,000 - 2008-09 2,00,000 - 2009-10 4,97,500 - 2010-11 4,97,500 - 2011-12 4,97,500 - Further from return of income filed by Shri Krishanand Trivedi, it was observed by AO that capital balance shown by Shri Krishnanand Trivedi as Prop. of Alvi Tech Services are very less. Capital balance shown by Shri Krishanand Trivedi as prop of Alvi Tech Services is as under:- F.Y. A.Y. Opening Income of Drawing in Closing capital year in Rs. capital balance in Rs. balance in Rs. Rs. 2001-02 2002-03 1,08,970 - 85,571 - 50,875 - 1,43,666 - 2002-03 2003-04 1,93,666 - 1,48,149 - 71,196 - 2,70,619 - 2003-04 2004-05 2,70,619 - 1,79,077 - 1,18,403 - 3,31,293 - 2004-05 2005-06 3,71,293 - 4,06,349 - 2,41,159 - 5,36,983 - 2005-06 2006-07 14,36,983 - 7,95,710 - 3,54,551 - 18,77,653 - Thus, it was observed in nutshell that capital balance filed along with return of income by Shri Krishnanand Trivedi was Rs. 18,77,653 - while assessee has claimed capital balance as on 31st March, 2006 of Rs. 5,37,21,502 -. assessee was asked to file details of capital balance of Rs. 5,37,21,502 - as on 31st March, 2006 along with list of machineries, tools, equipments etc. transferred to assessee company along with bills, date of acquisition & bank statements to prove source of acquisition 6 ITA 7481 Mum 2013 of machineries. In response, assessee filed affidavit dated 12th October, 2012 whereby Sri Krishnanand Trivedi affirmed that he retired from Indian Navy on 31st March, 1994 whereby he got handsome amount of retirement benefits which he invested in his proprietary concern as capital. He stated that he was holding degree of Charter Engineer (India) and graduated in Electrical Engineering and had worked with various companies during period from 1996 and he got handsome salary plus perquisites and other benefits and also Gratuity, PF amount which was considerably good amount to start business of his proprietary concern M s Alvi Tech Services in field of erection, commissioning and consultancy in field of oil and gas industries. He stated that share application money of Rs.3.15 crores represents Tools, Equipments, Machinery etc. used by Alvi Tech Services , proprietary concern which was merged with Alvi Tech Services Pvt. Ltd. He further stated that documentary proof of transactions of M s Alvi Tech Services was destroyed by act of God in year 2005. Statement of Shri Krishnanad Trivedi was recorded on 26th November, 2012 by AO whereby he stated that at time of retirement from Indian Navy in year 1994, he had got nearly Rs. 15 lakhs and he was earning monthly salary of Rs. 30,000 - per month from companies during 1995 to 2000. It was stated by him that no documentary evidence to prove financial assistance received from family members is available. Thus, A.O. held that Shri Krishnanand Trivedi was not having enough salary to substantiate such capital balance and income disclosed in return of income by Shri Krishnanand Trivedi is very less as compared to capital balance. assessee was asked to explain as to how such huge capital has been built up and also asked to explain source of said capital. assessee, in reply has filed capital account for period 1990 to 2005 claiming to be personal capital account of Shri Krishnanand Trivedi whereby he has received Rs. 75 lakhs as share from family settlement in financial year ended 31- 03-2000 and also receipt of Rs. 18.75 lacs and Rs 31.87 lacs as capital 7 ITA 7481 Mum 2013 received from Sh. Alok K. Trivedi and Sh. Rajkumar K Trivedi. A.O. observed that assessee has not submitted any documentary proof in support of income credited to capital account. It was also observed that assessee has credited professional fees during year 1990 to 2000 while in fact during that time assessee was working with Indian till 1994 and thereafter with other companies. Similarly , no evidence was brought on record regarding receipt of family settlement nor there was evidence with regard to receipt of Rs 15 lacs at time of retirement from Indian Navy although amount stood credited in capital account is much higher at Rs.21,60,000 - . assessee filed revised capital account for period 01- 04-1990 to 31-03-2000. assessee showed capital balance as on 31-03- 2000 at Rs. 3,85,02,875 - for which no documentary evidences were submitted to substantiate credit in capital account. assessee credited huge figures as professional receipts, and Rs. 2,63,73,430 - as family settlement in year 1995, Rs. 25,00,000 - as gift from father in year 1990, against which again no documentary evidences were submitted by assessee before AO. Thus, it was observed by AO that assessee cooked up capital account to explain capital balance . It was observed that capital balance as at 31-02-2005 was Rs.1,79,60,974 - whereas opening capital as on 01-04-2005 was shown at Rs.5,33,01,281.48 and thus assessee has increased capital by Rs.3,53,40,307 - without any basis. A.O. relied on decision of Hon ble Supreme Court in case of Roshan D Hatti v. CIT 107 ITR 938 (SC) and Kale Khan Mohammad Hanif v. CIT, 50 ITR 1 (SC) wherein it was held that onus of proving source of sum of money found to have been received by assessee is on him. Thus, A.O. held that claim of assessee for such huge capital balance is therefore not supported by any documentary evidence. Thus, share subscribed of Rs.70,00,000 - and share application money of Rs.2,49,35,000 -, totaling to Rs. 3,19,35,000 - representing machinery value of Alvi Tech Services which in turn is claimed to be capital balance of Shri 8 ITA 7481 Mum 2013 Krishnanand Trivedi was found to be unexplained credits in hands of assessee company and same was brought to tax by A.O. in hands of assessee company as unexplained cash credit u s. 68 of Act vide assessment order dated 14.02.2013 passed by AO u s 143(3) of Act. 4. Aggrieved by assessment order dated 14.02.2013 passed by A.O. u s. 143(3) of Act , assessee filed first appeal before ld. CIT(A). 5. assessee during proceedings before learned CIT(A) submitted that while going through old records, Mr. Krishnanand Trivedi found details of some old agricultural land which he had inherited from his father which is around 10 hectare and value of land is Rs. 10 crores for which assessee filed land records before learned CIT(A). Thus, assessee contended before learned CIT(A) that addition to capital account of Mr Krishnanand Trivedi found stood explained. ld. CIT(A), however, rejected claim of assessee on ground that assessee was not able to substantiate claim of introduction of share capital share application money to tune of Rs.3,19,35,000 - during previous year relevant to assessment year whereby built up capital in capital account of Shri Krishnanand Trivedi has also been found to be factually incorrect as compared to return of income filed by assessee with Revenue. assessee failed to prove creditworthiness of Sh Krishnanand Trivedi , nor assessee was able to prove genuineness of transactions regarding addition of machinery , equipment, tool etc.. ld. CIT (A), therefore held that A.O. has rightly treated credits on account of share capital share application money to tune of Rs. 3,19,35,000 - in assessee s books of account as unexplained cash credits u s. 68 of Act and additions of Rs. 3,19,35,000 - made by A.O. 9 ITA 7481 Mum 2013 was confirmed by learned CIT(A) vide appellate orders dared 25.09.2013 passed by learned CIT(A). 6.Aggrieved by appellate order dated 25-09-2013 passed by ld. CIT(A), assessee is in appeal before Tribunal. 7. ld. Counsel for assessee at outset submitted that additions have been made u s 68 of Act as unexplained cash credit whereby amount of Rs. 3,19,35,000 - was added to income of assessee as assessee because assessee was not able to explain sources of built up of capital of Mr Krishnanand Trivedi, promoter-director of assessee company . ld. Counsel filed additional evidences before Tribunal wherein application dated 26.11.2015 was submitted requesting Tribunal for admission of additional evidences under Rule 29 of Income Tax (Appellate Tribunal) Rules, 1963 as these additional evidences are submitted for first time before Tribunal and they goes to root of matter and hence , it was prayed that these additional evidences should be admitted in substantial interest of justice. ld. Counsel submitted that assessee has not received any money towards share capital of Rs. 3,19,35,000 - during assessment year as is reflected in books of account. It is say of ld. Counsel that these are fictitious entries made by assessee in books of account which does not exist and same was undertaken with view to avail bank loan from Bank of Baroda in order to be eligible to get sufficient additional loans from Bank. It was also submitted that assessee has revised and re- casted accounts whereby all fictitious entries were deleted from books of account , which are now duly audited by auditors of company being qualified chartered accountants who have issued audit report dated 20-07-2015 along with re-casted audited financial statements which is part of additional evidences filed for first time before Tribunal . 10 ITA 7481 Mum 2013 ld. Counsel submitted affidavit of Shri K.N. Trivedi dated 21st November, 2015 which is placed on record as additional evidences vide paper book page No. 43 to 46 and further prayed that said additional evidence should be admitted and adjudicated on merits. There are additional evidences filed for first time before Tribunal which are part of paper book-II pages 43-148. ld. Counsel further requested that matter may be remanded back to CIT(A) for verification of all these additional evidences and claim of assessee may be adjudicated on merits. He submitted that addition u s 68 of Act is not sustainable as there are in-fact no cash credits to tune of Rs.3.15 crores which is supported by affidavit filed as additional evidence of Mr K.N.Trivedi along with re-casted audited financial statements. revised audited accounts are also duly filed with government authorities (which are placed in page No. 65 to 68 of paper book) i.e. Ministry of Corporate Affairs and receipted challans are enclosed as additional evidence filed before Tribunal. Resolution is also placed on record vide paper book-II page 69 to 72 enabling assessee to recast and revise its financial statements. 8. ld. D.R. relied on order of ld. CIT(A) and submitted that matter can be remanded to file of ld. CIT(A). 9. We have considered rival contentions and also perused material available on record. We have observed that assessee has raised share capital share application of Rs. 3,19,35,000 -, however, assessee was not able to explain sources of introduction of fresh share capital share application as per provisions of section 68 of Act and additions were made by A.O. u s 68 of Act as unexplained cash credit which were confirmed by ld. CIT(A). It is say of assessee that entries of raising of share capital and share application made in books of accounts to tune of Rs.3,15,00,000 - were bogus and fictitious entries 11 ITA 7481 Mum 2013 and was made in order to raise more loans from bank while fact of matter is that no such share capital was ever raised by assessee company and these entries to tune of Rs.3.15 crores were bogus entries . It is further say of assessee s counsel that allotment of Rs. 70 lacs of share capital during year is genuine which is supported by receipt of funds in immediately preceding year. It is further stated that manipulations in books of accounts as to introduction of fictitious share capital share application money to tune of Rs. 3.15 crores are now eliminated and accounts financial statements are recast and revised by assessee now which are duly audited by auditors of assessee company who are qualified chartered accountants and who have also issued audit report dated 20-07-2015 which is part of additional evidences filed by assessee for first time before Tribunal along with complete re-casted and revised financial statements for impugned previous year 2009-10. application dated 26.11.2015 for admission of additional evidences have been filed by assessee before Tribunal under Rule 29 of Income Tax (Appellate Tribunal) Rules, 1963 wherein additional evidences filed with Tribunal are placed at page no 43-148 paper book-II and it is prayed that said additional evidences be admitted and adjudicated on merits. said additional evidences consists of Affidavit of Shri K.N. Trivedi dated 21st November, 2015 which is placed on record as additional evidence before Tribunal vide paper book page No. 43 to 46 wherein he admitted of manipulating accounts and introducing of fictitious entries in books of accounts of assessee company. copies of revised and re-casted audited accounts for financial year 2009-10 are placed as additional evidences page 47-64 paper book-II. Copies of Resolutions along with forms filed with Ministry of Corporate affairs for filing revised and re-casted audited accounts for financial year 2009-10 along with paid challans are enclosed in paper book-II page 65-68. copy of notice of Extra-ordinary General Meeting(EGM) , Board Resolutions and Resolutions passed at EGM are also 12 ITA 7481 Mum 2013 filed as additional evidences before Tribunal. Sanction letters from Bank of Baroda is also filed as additional evidences to substantiate that loans limits were enhanced by bank in favour of assessee company which was made possible only because assessee manipulated its accounts to show higher share capital share application money to tune of Rs. 3.15 crores which was fictitious entry. It is also submitted that no such machinery, tools and equipments were held by proprietor of Alvi Tech Services which was introduced in assessee company and it was all bogus fictitious entries. assessee has admitted that these share capital share application money raised by assessee to tune of Rs.3,19,35,000 - were fictitious and bogus entries and in-fact no such share capital share application money was ever raised by assessee and fictitious entries in books of accounts are now removed eliminated to reflect true and fair state of affairs of assessee company which has now been audited by auditors of assessee company and same has been filed with Ministry of Corporate Affairs, Government of India O o Registrar of Companies and receipted challans are enclosed in paper book-II filed with Tribunal containing additional evidences . It is settled position of law that only real income can be brought to tax and mandate is to bring income to tax as per authority of law. These additional evidences in our considered view goes to root of matter and needs to be admitted and adjudicated on merits in order to advance substantial justice and we admit these additional evidences filed by assessee vide page 43-148 paper book-II . However, contentions of assessee and additional evidences so filed by assessee need verification by authorities below and hence we are of considered view that in order to identify and assess real income of assessee and to advance substantial justice, th matter issue under this appeal need to be set aside and restored to file of ld. CIT(A) for de-novo determination of issue on merits after considering and evaluating these evidences and explanations submitted by assessee during set aside proceedings . 13 ITA 7481 Mum 2013 Needless to say that proper and adequate opportunity of being heard shall be granted to assessee by learned CIT(A) in accordance with principles of natural justice in accordance with law. We order accordingly. 8. In result, appeal filed by assessee in ITA No. 7481 Mum 2013 for assessment year 2010-11 is allowed for statistical purpose. Order pronounced in open court on 22nd September, 2016. 22-09-2016 Sd - sd - (MAHAVIR SINGH) (RAMIT KOCHAR) JUDICIAL MEMBER ACCOUNTANT MEMBER Mumbai; Dated 22-09-2016R.K., Ex. Sr. PS Copy of Order forwarded to : 1. Appellant 2. Respondent. 3. CIT(A)- concerned, Mumbai 4. CIT- Concerned, Mumbai 5. , , DR, ITAT, Mumbai Bench 6. [ Guard file. BY ORDER, True Copy (Dy. Asstt. Registrar) , ITAT, Mumbai Alvi Tech Services Pvt. Ltd. v. Dy. Commissioner of Income-tax – Circle 1, Kalyan