×Latest Case Laws on Income Tax by various Income Tax Appellate Tribunals in India
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06-09-2019, Siva City Centre, Section 153A, 68, 132, Tribunal Visakhapatnam
Appeal No. - I.T.A.No.247/Viz/2019 and 248/Viz/2019
Asstt. Year - 2015-16 & 2016-17
PER : D.S.Sunder Singh
These appeals are filed by the revenue against the order of the Commissioner of Income Tax (Appeals) [CIT(A)]-3, Visakhapatnam dated 24.01.2019 for the Assessment Year (A.Y.)2015-16 and 2016-17 and the cross objections are filed by the assessee. Since the issues involved in these appeals are common, these appeals are clubbed, heard together and a common order is being passed for the sake of convenience as under.
2. The revenue has filed appeal in Form No.36 originally and subsequently filed revised form in the correct format which is applicable as per the amended rules.
3. A search u/s 132 was conducted on 21.12.2015 in the group cases of Sri Alla Siva Reddy, Guntur. During the course of search, certain incriminating material was available in the premises of the searched person, therefore, the Assessing Officer (AO) has issued the notice u/s 153C of the Act and completed the assessment u/s143(3) r.w.s. 153C vide order dated 27.09.2018.
4. For the A.Y. 2015-16, the revenue has filed as many as five grounds of appeal. We extract the grounds raised by the department for the sake of clarity and convenience as under :
1. The order of the Ld.CIT(A) is erroneous both on the facts and in law.
2a. The Ld.CIT(A) ought not have concluded that allotment of shares by way of conversion cannot be treated as unexplained cash credit u/s 68.
2b. The Ld.CIT(A) is not correct in deleting the addition made since as per the amended provisions of sec8 of the Act through Finance Act, 2012, (proviso to sec. 68 of I.T.Act) the nature and source of any sum credited as share capital in the books of account of a closely held company shall be treated as explained only if the sources of funds are also explained by the recipient assessee company in the hands of the resident share holder. In the instant case, the assessee-company could not explain the sources to the investment made by co-owners of land/directors to the extent of Rs2,38,17,377/ .
2c. The Ld.CIT(A) ought to have appreciated the fact that the assessee company is a Pvt. Ltd company and issued shares to its shareholders during the year under consideration, even though the investment in land and building was earlier, the said assets were transferred to the assessee company in lieu of shares allotted in the year of incorporation i.e. on 30.5.2014. Hence, the assessee company needs to explain the sources for the investment in the hands of the shareholders. Despite opportunities provided. 5 of the Directors neither appeared nor confirmed the source of investment of Rs.2,38,17,377/-,
2d. The Ld.CIT(A) ought to have appreciated that in the present case, the co-owners of the land jointly invested in the purchase of land and construction thereon and transferred to the assesseecompany in lieu of issue of shares so there is nexus between investment in the assets and transfer of assets in lieu of allotment of shares.
3a. The Ld CIT(A) is not correct in holding that the action of the AO relying on the valuation report received after 6 months from the end of the Month in which reference was made to the DVO, since the time has elapsed to the DVO for submitting report. The CIT (A) ought to have appreciated that the AO will get further time of 6 months from the date of receipt of Valuation report if the provisions of Sec 142A(7) and Explanation 1(v) to Section 153A are read harmoniously. The Valuation report has been received by the AO within the time available to him for completing the assessment.
3b. The CIT(A) ought to have appreciated that the time limit of 6 months is only an outer limit prescribed by the statute for submitting, the report and that the said provision does not disqualify the contents of the Valuation Report, if received beyond that date and therefore, the finding of the CIT(A) is not correct in treating the DVO's Valuation Report as non-est.
3c. The Ld.CIT(A) ought to have appreciated that the AO has not fully relied upon the DVO's Valuation report, but taken it as a guidance document, copy of which was sent to the assessee objections were called for and considered by the AO in the assessment order. The finding of the CIT(A) that the valuation report is non-est and the action of the AO thereon cannot be upheld is contrary to the law.
3d. The Ld.CIT(A) ought not to have allowed further allowance of 7.5% self-supervision since the DVO has already allowed 7.5% on account of self-supervision.