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TMI Blog2019 (10) TMI 1228X X X X Extracts X X X X X X X X Extracts X X X X ..... tion, vide its order dated 13th October, 2006 in 1T(SS)A No. 127/Ahd/2005. 2. On the facts and in the circumstance of the case, the learned CIT(A) erred in upholding the addition of Rs. 84 lacs made by the Assessing Officer on the alleged ground that the aforesaid amount represents unaccounted investment made by the appellant-company in construction of factory building. 3. On the facts and in the circumstance of the case, the learned CIT(A) erred in upholding the addition of Rs. 7,59,000 made by the Assessing Officer on the alleged ground of unaccounted payment made by the appellant-company." 2. The appellant company is engaged in the manufacture of plastic containers of international standard having facility of totally automatic imported plant. The brief facts leading to this case is this that a search action u/s 132 of the Act was carried out on 22.01.2002 in the group case of the assessee company at the factory premises of the company as well as the residential premises of the resident Directors where certain papers were found and seized in which the piece of paper inventoried at page No.27 of annexure A-1 mentions a sum of Rs. 84 lacs being cash payment which was in q ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , I as a Director of the Co., M/s. Transatlantic Packaging P. Ltd. For and on behalf of the Board of Director and the Co. duly authorized as Principal Officer of the Co. admit undisclosed income of M/s. Transatlantic Packaging P. Ltd. To the tune of Rs. 84 lacs as unaccounted cash investment of Rs. 84 lacs as unaccounted cash investment of Rs. 84 lacs. This investment has no other liabilities/expenses as claimed by the Co/we the Board of Director. I am duly authorized signatory of for and on behalf of the Board of Director of M/s. Transatlantic Packaging Pvt. Ltd. Admit "Net undisclosed income of Rs. 84 lacs for the block period also promise to pay due taxes as per provisions of I.T. Act at the earliest." The A.O. observed that this statement was made by Shri. Rohit bhai Amin in individual capacity as well as for and on behalf of the Board of Directors of the assessee. This is also an undisputed fact that the assessee had started the commercial production from 22.11.2001. The slip was found on 22.01.2002 the slip does not contain any date when the payment was made by the assessee. Even the assessment order also do not state when THE PAYMENT was made Even no description against t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the matter of treating the source of investment which has not been satisfactorily explained by the assessee as the income of the assessee and the income tax officer is not obliged to treat such source of investment as income in every case where, ere explanation offered by the assessee is found, to be nosatisfactory. The question whether the source of die investment should be treated as income or not under section 69 has to be considered in the light of the facts of each case, in other words, a discretion has been conferred on the Income tax Officer under section 69 of the Act to treat the source of investment as the income of the assessee if the explanation offered by the assessee is not found satisfactory and the said discretion has to be exercised keeping in view the facts and circumstances of the particular case. Held, dismissing the appeal, that in the instant case, the Tribunal had held that the discretion had not been properly exercised by the Income tax Officer and the Appellate Assistant Commissioner taking into account the circumstances in which the assesses was placed and the Tribunal had found that the investments could not be treated as income of the assessee, The Hi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... un its commercial production. Even if this payment was made outside the books of account, it could be adjusted against capital expenditure and could not be taxed as undisclosed income of the assessee, it was contended by the assessee. Rejecting this contention, the assessing officer added this amount u/s 69B of the Act which was confirmed by the CIT(A). The ITAT wile deciding the issue, observed that the payment was admitted by Shri Rohitbhai Amin as unaccounted but his statement was given not only on behalf of the assessee company but also in his individual capacity and there is no authorization, on record that the Board of Directors had authorized Shri Rohitbhai Amin to make declaration on behalf of the company. It was also not clear whether the assessee company had started its commercial production when the payment was made. Section 69B uses the word "may" which denotes that it is not necessary that the assessing officer must treat the excess investment as income n each and every case. If the assessee had not started commercial production, it had to be looked into whether it would have earned income. The fact whether the excess investment was made by the director in his individu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... present. A company is a juristic person and it is always represented by its Director. Besides, without prejudice to this, even if it is assumed that such statement was made without any authorization, still the appellant has to prove that the explanation given in this statement was not correct and that these notings did not pertain to the unexplained investment made in the factory premises of the appellant. The appellant has not discharged this onus. Besides there are other evidences to establish that the noting were regarding investment made for construction of factory premises and such investment has not been recorded in the books of accounts. Hence taxability of this amount is required to be examined in the hands of the appellant itself. 4.3.2. So far as taxability of this amount is concerned, similar issue has been decided by ITAT Delhi Bench in its decision in the case of Haldiram Foods Ltd, 79 ITD 425 (Delhi). In this case, the assessee was found to have paid Rs. 22 lakhs as on money in cash for purchase of land. In the statement recorded u/s 132(4), the director of the company voluntarily surrendered amount of Rs. 25 lakhs out of which he claimed to have paid Rs. 22 lacs ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... factum of disclosure. Also, at no stage, the director was shown as a creditor for a sum of Rs. 22 lakhs. In such circumstances, disclosure made by the director qua the undisclosed assets of the company was non est. In the instant case, income was declared by the director whereas the amount of investment was made by the assessee-company. The assessee-company was a different entity from its directors. As such, the benefit of disclosure could not be extended to the assessee-company." 4.3.3. Besides, the decision of Hon'ble Supreme Court in the case of PK Noorjahan has also been discussed in detail by the Hon'ble Supreme Court in the case of P. Mohan Kala, 161 Taxmann 169 (SC). In this case, the Court as held that as follows:- "It is true that even after rejecting the explanation given by the assessees, if found unacceptable, the crucial aspect, whether on the facts and circumstances of the case, it should be inferred that the sums credited in the books of the assessees constituted income of the previous year, must receive the consideration of the authorities, provided that the assessees rebut the evidence and the inference drawn to reject the explanation offered as unsa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 6 has held as follows: "5.8 Now adverting to decision in P.K.Noorjahan(supra) relied upon by the Ld. AR , in that case facts were that the assessee a Muslim lady, aged about 20 years during the previous year relevant to the assessment year 1968-69 on November 15, 1967, purchased 16 cents of land in Ernakulam and the amount spent by her, inclusive of stamp and registration charges, for this purchase was Rs. 34,628. On November 27, 1968, she purchased another 12 cents of land at Ernakulam and the total investment for this purchase was Rs. 25,902. The explanation of the assessee regarding the source of the purchase money for these investments was that the same were financed out of the savings from the income of the properties which were left by her mother's first husband. The said explanation offered by the assessee was rejected except to the extent of Rs. 2,000 by the Income-tax Officer who made an addition of Rs. 32,628 as income from other sources in the assessment year 1968-69 and an addition of Rs. 25,902 in the assessment year 1969-70. The said orders were affirmed in appeal by the Appellate Assistant Commissioner. The Income-tax Appellate Tribunal, however, held that eve ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ereon. There is nothing to suggest that at any stage, this offer has been retracted. In these circumstances, we are of the opinion that the reliance on the aforesaid decision, rendered on altogether different facts, is totally misplaced." Thus, in all these decision it has been held that whether the source of investment should be treated income earned u/s 69 has to be considered in the lights of facts of each case. Since in the present case, the appellant has failed to file any explanation regarding the unexplained investment in its factory building, hence, it is held that AO has rightly held such amounts as its income u/s 69B of the Act. Hence, this ground of appeal is dismissed." 5. It appears from the records that the Learned Tribunal was pleased to specifically observed the undisputed fact that the assessee has started commercial production from 22.11.2001 and the slip which was found on 22.01.2002 i.e. within the 3 months from the date of commencement of commercial production does not contain any date when the payment was made by the assessee. Neither any description against the amount in question is mentioned in the particular slip. It is only in the answer to question n ..... X X X X Extracts X X X X X X X X Extracts X X X X
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