M/s Manglam Phosphate Ltd, V. ITO, Ahmednagar

ITA 1248/PUN/2013

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 88794 (ITAT-PUNE)
• Duration Of Justice: 1 year(s) 7 month(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-01-2015
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 20-11-2014
• Assessment Year: 2005-2006
• Appeal Filed On: 03-06-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: MAZHAR AKRAM
• Assessee Lawyers: S P JHANWAR P C PARWAL
• Keywords: Unexplained cash credit
• Section: 68

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH B , PUNE BEFORE: SHRI G.S. PANNU, ACCOUNTANT MEMBER AND SHRI R.S. PADVEKAR, JUDICIAL MEMBER ITA NO . 1248 /PN/20 1 3 ASSESSMENT YEAR : 200 5 - 06 M /S. MANGLAM PHOSPHATE LTD., HOUSE NO. 727/3, M.G. ROAD, AHMEDNAGAR VS. ITO, WARD 2, AHMEDNAGAR (APPELLANT) (RESPONDENT) PAN NO. AA CCM4175F REVENUE BY: SHRI MAZHAR AKRAM ASSESSEE BY: SHRI S.P. JHANWAR, P.C. PARWAL DATE OF HEARING : 20 - 11 - 2014 DATE OF PRONOUNCEMENT : 16 - 01 - 2 015 ORDER PER R.S . PADVEKAR , JM : - TH IS APPEAL IS FILED BY THE ASSESSEE CHALLENGING THE IMPUGNED ORDER OF THE LD. CIT(A) - I, PUNE DATED 01 - 04 - 2013 FOR THE A.Y. 200 5 - 06. THE ASSESSEE HAS TAKEN FOLLOWING GROUNDS IN THE APPEAL: 1. UNDER THE FACTS AND CIRCUMSTANCES OF THE CASE THE LEARNED ASSESSING OFFICER HAS ERRED IN MAKING ADDITION U/S. 68 OF INCOME TAX ACT, 1961 AND CONFIRMING BY CIT(A), PUNE FOR FOLLOWING CASH CREDIT: A. LOAN FROM SMT. RICHA SARDA RS.30,67,713/ - 2. UNDER THE FACTS AND CIRCUMSTANCES OF THE CASE THE LEARNED ASSESSING OFFICER HAS ERRED IN MAKING ADDITION OF OTHER LIABILITIES OF RS.77,557/ - AND CONFIRMING BY CIT(A), PUNE. 3. UNDER THE FACTS AND CIRCUMSTANCES OF THE CASE THE LEARNED ASSESSING OFFICER HAS ERRED IN MAKING DISALLOWANCE OUT OF REBATE CLAIM AND DISCOUNT OF RS.57,723/ - AND CONFIRMING BY CIT(A), PUNE. 2 ITA NO . 1248/PN/2013, M/S. MANGLAM PHOSPHATE LTD., AHMEDNAGAR 2. THE FACTS WHICH ARE REVEALED FORM THE RECORD AS UNDER. THE ASSESSEE IS A LIMITED COMPANY ENGAGED IN MANUFACTURING OF PHOSPHATIC FERTILIZERS I.E. SINGLE SUPER PHOSPHATE. AS OBSE RVED BY THE ASSESSING OFFICER , THE ASSESSEE HAD RAISED A LOAN FROM SMT. RICHA SARDA TO THE EXTENT OF RS.30,67,713/ - FOR WHICH ONLY CONFIRMATION LETTER WAS FILED. THE ASSESSING OFFICER HAS FURTHER OBSERVED THAT I T WAS FOUND DURING THE ASSESSMENT PROCEEDING S THAT THE ABOVE AMOUNT WAS CREDITED IN HER ACCOUNT THROUGH DEMAND DRAFTS, SOURCES OF WHICH WERE NOT EXPLAINED PROPERLY. THEREFORE SAID LOAN AMOUNT WAS ADDED TO THE INCOME OF THE ASSESSEE AS UNEXPLAINED CASH CREDIT U/S. 68 OF THE ACT. THE ASSESSEE CHALLEN GED THE SAID ADDITION BEFORE THE LD. CIT(A) BUT WITHOUT SUCCESS AS LD. CIT(A) ENDORSED THE ADDITION MADE BY THE ASSESSING OFFICER. THE ASSESSEE IS IN APPEAL BEFORE US. 3. THE LD. AR FOR THE ASSESSEE SUBMITS THAT THE ASSESSEE DEALS IN AGRO BASED PRODUCTS/ FERTILIZERS. IT IS A SICK COMPANY AND ITS ACCOUNT S WITH BANK S HA VE BECOME NPA AND BANK HAS THEREFORE STOPPED OPERATIONS OF THOSE ACCOUNTS. HE SUBMITS THAT FOR MAKING DAY TO DAY PAYMENTS TO THE SUPPLIERS, THE ASSESSEE COMPANY HAS RAISED TEMPORARY LOAN FRO M SMT. RICHA SARDA, WIFE OF THE DIRECTOR OF THE ASSESSEE COMPANY. SMT. RICHA SARDA HAS DIRECTLY MADE PAYMENT S TO THE SUPPLIERS OF THE ASSESSEE COMPANY LIKE HINDUSTAN ZINC LTD., RSMM ETC. THROUGH CROSS DEMAND DRAFT MADE FROM HER BANK ACCOUNT AND THE SAID A MOUNT IS SHOWN IN THE BOOKS OF ACCOUNT OF THE ASSESSEE AS LOAN FROM SMT. RICHA SARDA. HE SUBMITS THAT TOTAL OF THE SAID AMOUNT DURING THE YEAR FROM SMT. RICHA SARDA IS TO THE EXTENT OF RS.30,67,713/ - . 3.1 HE SUBMITS THAT THERE IS NO DISPUTE ON THE FACT T HAT ALL THE TRANSACTIONS ARE ROUTED THROUGH BANK ACCOUNT, AND THE AMOUNT IN 3 ITA NO . 1248/PN/2013, M/S. MANGLAM PHOSPHATE LTD., AHMEDNAGAR QUESTION WHICH IS SHOWN IN THE ACCOUNT OF SMT. RICHA SARDA IS IN RESPECT OF DIRECT PAYMENT S MADE TO THIRD PARTIES. HE ARGUES THAT THE LAW IS WELL SETTLED THAT THERE IS A PRIMARY B URDEN U/S. 68 OF THE ACT ON THE ASSESSEE TO ESTABLISH THE IDENTITY AND THE GENUINENESS OF THE TRANSACTIONS AND THE ASSESSEE HAS DISCHARGED THE SAME. HE ARGUES THAT SO FAR AS THE CREDITWORTHINESS IS CONCERNED THE SAME IS ACCEPTED BY THE ASSESSING OFFICER I N THE REMAND REPORT BUT THE CIT(A) HAS NOT ACCEPTED THE SAME ON THE REASON THAT SHE HAS FILED THE RETURN OF INCOME DECLARING INCOME U/S. 44AE. 3.2 HE REFERRED TO PAGE NOS. 26 TO 33 OF P/B AND SUBMITS THAT FROM THE COPY OF THE BANK ACCOUNT OF SMT. RICHA SA RDA , IT IS EVIDENT THAT IN HER BANK ACCOUNT THERE IS CREDIT OF RS. 31,00,000/ - THROUGH TRANSFER AND DEPOSIT OF RS.4 LACS IN CASH BEFORE THE AMOUNT HAS BEEN PAID TO THE SUPPLIERS OF THE ASSESSEE COMPANY. HE POINTED OUT THAT THERE IS AN ERROR ON THE PART OF LD. CIT(A) TO MAKE THE OBSERVATION THAT THE MONEY RECEIVED BY SMT. RICHA SARDA IN HER BANK ACCOUNT IS IN CASH AS ADMITTEDLY THE AMOUNT S RECEIVED ARE THROUGH TRANSFER S . HE ALSO EXPLAINED THE DIFFERENT CREDIT ENTRIES IN THE BANK ACCOUNT OF SMT. RICHA SARDA . H E REFERRED TO PAGE NOS. 19 TO 34 OF P/B AND SUBMITS THAT AS PER THE ENTRIES , RS.7 LACS IS RECEIVED FROM ANITA/ARTI JHANWAR, RS.2,50,000/ - IS RECEIVED FROM NAVJOT JHANWAR (PAGE NOS. 19 & 35 OF THE P/B). HE REFERRED TO PAGE NOS. 19 & 36 - 39 OF P/B AND POI NTED OUT THAT RS.12,50,000/ - IS RECEIVED FROM GANESH BORING COMPANY WHICH IS A PROPRIETARY CONCERN OF BAHNWAR LAL JHANWAR. HE ALSO REFERRED TO ONE ENTRY OF RS.2,50,000/ - (PAGE NOS. 19 & 40 - 41 OF P/B) WHICH IS CLAIMED TO HAVE BEEN RECEIVED FROM SMT. KANTA JHANWAR. SO FAR AS THE CASH DEPOSIT OF RS.4 LACS IN HER BANK ACCOUNT IS CONCERNED, HE SUBMITS THAT THE SAME IS OUT OF HER CASH BALANCE. HE SUBMITS THAT THE AMOUNT RECEIVED 4 ITA NO . 1248/PN/2013, M/S. MANGLAM PHOSPHATE LTD., AHMEDNAGAR THROUGH THE DIFFERENT TRANSFERS ARE TO THE EXTENT OF RS.31,00,000/ - WHICH IS MORE THAN THE AMOUNT PAID BY SMT. RICHA SARDA TO THE SUPPLIERS OF THE ASSESSEE. HE, THEREFORE, PLEADED TO DELETE THE ADDITION. HE ALSO PLACED HIS RELIANCE ON THE FOLLOWING PRECEDENTS: I. CIT VS. JAI KUMAR BAKLIWAL 101 DTR 377 (RAJ.)(HC). II. DCIT VS. ROHINI BUILDERS 256 ITR 360 (GUJARAT) III. CIT VS. METACHEM INDUSTRIES 245 ITR 160 (M.P.) PER CONTRA, THE LD. DR SUPPORTED THE ORDERS OF THE AUTHORITIES BELOW. 4. THE LIMITED ISSUE BEFORE US IS THE AMOUNT SHOWN ON THE NAME OF SMT. RICHA SARDA AS LOAN CREDITOR IN THE BOOKS OF ACCOUNT OF THE ASSESSEE COMPANY. AS PER THE DOCUMENTARY EVIDENCE PLACED BEFORE US , IT IS SEEN THAT SMT. RICHA SARDA HAD MADE THE PAYMENT TO THE SUPPLIERS OF THE ASSESSEE COMPANY FROM HER BANK ACCOUNT THROUGH DEMAND DRAFT S AND THOSE AMOUNTS A RE SHOWN AS LOANS ON THE NAME OF SMT. RICHA SARDA. SMT. RICHA SARDA IS WIFE OF THE DIRECTOR OF THE ASSESSEE COMPANY. WE ALSO FIND THAT THE ASSESSEE HAS EXPLAINED THE SOURCE OF DEPOSIT IN THE BANK ACCOUNT OF SMT. RICHA SARDA FROM WHICH THE DEMAND DRAFTS ARE ISSUED TO THOSE SUPPLIERS OF THE ASSESSEE COMPANY. SEC. 68 , IT IS DE E MI NG PROVISION IN THE INCOME TAX ACT. AS RIGHTLY ARGUE D BY THE LD. AR , THE PRIMARY BURDEN IS ON THE ASSESSEE TO ESTABLISH THE IDENTITY AND GENUINENESS OF THE TRANSACTION . THE IDENT ITY IS REQUIRED FROM THE POINT OF VIEW FROM THE SOURCE AND GENUINENESS IS REQUIRED TO VERIFY WHETHER IN FACT THE MONEY HAS FLOWN FROM THE SAID PARTY TO THE ASSESSEE. IN THE PRESENT CASE AS PER THE IDENTITY , THE SOURCE OF THE CREDIT IS EXPLAINED . S O FAR A S GENUINENESS IS CONCERNED ADMITTEDLY ALL THE AMOUNTS ARE DIRECTLY PAID TO THE SUPPLIERS OF THE ASSESSEE COMPANY FOR THE REASON THAT AS THE BANK ACCOUNTS WERE MADE NPA , T HE ASSESSEE COMPANY WAS NOT ALLOWED 5 ITA NO . 1248/PN/2013, M/S. MANGLAM PHOSPHATE LTD., AHMEDNAGAR TO DO THE TRANSACTIONS BY THEIR BANKER AND HENCE, ULTIMATELY AS TO MEET THE BUSINESS NEEDS, THEY DECIDED TO R OUT THEIR TRANSACTION THROUGH SMT. RICHA SARDA TO MAINTAIN THE CREDI BILITY IN THE MARKET. WE ALSO FIND THE SOURCE OF DEPOSIT IN THE BANK ACCOUNT OF SMT. RICHA SARDA HAS BEEN WELL EXPLAINED. WE, T HEREFORE, FIND NO JUSTIFICATION TO SUSTAIN THE ADDITION OF RS.30,67,713/ - . WE, ACCORDINGLY, DELETE THE SAME AND GROUND NO. 1 IS ALLOWED. 5. THE NEXT ISSUE IS THE ADDITION OF RS.77,557/ - WHICH WAS MADE ON THE REASON OF UNEXPLAINED CASH CREDIT ONLY. IT WA S NOTICED BY THE ASSESSING OFFICER THAT THE ASSESSEE HAS SHOWN AN AMOUNT OF RS.4,58,041/ - IN THE BALANCE SHEET UNDER THE HEAD OTHER LIABILITIES. AS OBSERVED BY THE ASSESSING OFFICER DURING THE ASSESSMENT PROCEEDINGS NO SATISFACTORY EXPLANATION WAS GIVEN B Y THE ASSESSEE AND HENCE, THE AMOUNT WAS ADDED TO THE TOTAL INCOME OF THE ASSESSEE. THE ASSESSEE CHALLENGED THE SAID ADDITION BEFORE THE LD. CIT(A) AND EXPLAINED THAT THE OTHER LIABILITIES RELATED TO OUTSTANDING REMUNERATION, ELECTRICITY BILLS, TELEPHONE BILLS, PPF CONTRIBUTION ETC. HE SUBMITTED THAT THOSE PAYMENTS WERE OUTSTANDING BUT WERE PAID SUBSEQUENTLY AND ACCORDINGLY REFLECTED IN THE BALANCE SHEET OF THE RELEVANT NEXT YEAR. THE ASSESSEE ALSO FILED THE WRITTEN EXPLANATION GIVING THE BILLS OF THOSE LIABILITIES , S AVE RS.77,557/ - . THE LD. CIT(A) ACCEPTED THE PLEA OF THE ASSESSEE BUT SUSTAINED THE ADDITION TO THE EXTENT OF RS.77,557/ - . 6. WE HAVE HEARD THE PARTIES. THE LD. COUNSEL SUBMITS THAT RS.77,557/ - IS IN RESPECT OF FOLLOWING LIABILITIES: I. UNPAI D STAFF SALARY FOR THE MONTH OF MARCH RS.68,450/ - II. STAFF PERSONNEL HAVING CREDIT BALANCE RS.9,107/ - 6 ITA NO . 1248/PN/2013, M/S. MANGLAM PHOSPHATE LTD., AHMEDNAGAR THE LD. AR REFERRED TO PAGE NO. 42 OF P/B AND SUBMITS THAT THE PROOF OF PAYMENT OF ALL SAID EXPENDITURE IN THE SUBSEQUENT YEAR WAS PLACED BEFORE LD. CIT( A) . HE SUBMITS THAT THE EVIDENCE OF PAYMENT OF STAFF SALARY FOR THE MONTH OF MARCH RS.68,450/ - WAS IGNORED BY BOTH THE AUTHORITIES BELOW. HE REFERRED TO PAGE NO. 42B OF P/B AND SUBMITS THAT THE SAID PAYMENT IS REFLECTED ON 30 - 11 - 2005 BY WAY OF CREDIT OF RS.3,83,450/ - WHICH INCLUDES THE REMUNERATION AND STAFF SALARY ALSO OF RS.3,15,000/ - AND RS.68,450/ - RESPECTIVELY. HE SUBMITS THAT THE PAYMENT OF REMUNERATION OF RS.3,15,000/ - HAS BEEN ACCEPTED BUT SIMILAR PAYMENT OF STAFF SALARY OF RS.68,450/ - IS OVERLOO KED. HE PLEADED FOR DELETING THE ADDITION . I N RESPECT OF AMOUNT SHOWN ON NAME OF SHRI RATIBHAN PANDEY OF RS.9,107/ - HE SUBMIT S THAT THE SAID AMOUNT IS OUTSTANDING FROM 27 - 12 - 2003 (PAGE NO. 53 OF P/B) FROM A.Y. 2004 - 05 AND HENCE , IT IS ONLY THE BROUGHT FO RWARD BALANCE. WE HAVE ALSO HEARD THE LD. DR. 7. AS PER THE EVIDENCE FILED BEFORE US WE FIND THAT THE AMOUNT OF RS.68,450/ - PERTAINS TO THE STAFF SALARY FOR THE MONTH OF MARCH. IT IS ALSO SEEN THAT SO FAR AS THE LIABILITIES SHOWN ON THE NAME OF SHRI RAT IBHAN PANDEY RS.9,107 / - , IT IS BROUGHT FORWARD BALANCE FROM THE PRECEDING YEARS. BOTH THE AUTHORITIES BELOW HAVE NOT CONSIDERED THOSE ACCOUNTS IN A PROPER PERSPECTIVE . T HERE IS NO JUSTIFICATION TO SUSTAIN THE ADDITION. WE, ACCORDINGLY, DELETE THE SAME A ND GROUND NO. 2 IS ALLOWED. 8. THE NEXT AND LAST ISSUE IS DISALLOWANCE OF RS.57,723/ - OUT OF REBATE AND DISCOUNT. THE ASSESSING OFFICER HAS DISCUSSED THIS ISSUE IN PARA NO. 9 OF THE ASSESSMENT ORDER IN VERY CRYPTIC MANNER AND HAD MADE THE ORIGINAL DISALL OWANCE OF RS.15,00,000/ - WHICH WAS ON THE BASIS OF COMPARISON OF TURNOVER. THE ASSESSING OFFICER HAS ALSO GIVEN THE REASON 7 ITA NO . 1248/PN/2013, M/S. MANGLAM PHOSPHATE LTD., AHMEDNAGAR THAT THE SAID EXPENDITURE I.E. REBATE AND DISCOUNT IS EXCESSIVE AND NO PROOF OF PAYMENT WAS SUBMITTED. THE ASSESSEE CHALLENGED THE ADDITION MADE BY THE ASSESSING OFFICER BEFORE THE LD. CIT(A). THE LD. CIT(A) HAS DISCUSSED THIS ISSUE IN PARA NO. 6, 6.1, 6.2 AND 6.3 OF THE IMPUGNED ORDER . THE LD. CIT(A) HAS OBSERVED THAT THE ASSESSEE HAS PROVIDED INCENTIVES IN THE SHAPE OF EXTRA REBAT E AND DISCOUNT WHICH HAS RESULTED IN INCREASE IN SALES AND ULTIMATELY TURNOVER OF THE BUSINESS. THE LD. CIT(A) HAS FURTHER OBSERVED THAT THE INCREASE IS ALSO PARTLY EXPLAINED BY THE FREIGHT PAID AND CLAIMED SEPARATELY BY THE ASSESSEE IN A.Y. 2004 - 05 OF RS .5,34,529/ - . THE LD. CIT(A) HAS RESERVATION TO THE EXTENT OF PAYMENT OF RS.57,723/ - . HE, ACCORDINGLY, CONFIRMED THE SAME AND BALANCE ADDITION WAS DELETED. 9. WE HAVE HEARD THE PARTIES. LD. CIT(A) ASKED FOR THE REMAND REPORT ON THIS ISSUE , THE ASSESSING OFFICER HAS OBSERVED THAT THE ASSESSEE HAS NOT FILED CREDIT NOTES OF RS.56,735/ - AND RS.988/ - AGGREGATING TO RS.57,723/ - HENCE, THE LD. CIT(A) SUSTAINED THE ADDITION TO THAT EXTENT. THE LD. AR SUBMITS THAT REBATE OF RS.56,735/ - IS ALLOWED TO NIRMAL KUMAR MANGILAL JAIN WHICH IS CREDITED TO HIS ACCOUNT ON 31 - 12 - 2004 (PAGE NOS. 45 & 46 OF P/B). HE ALSO SUBMITS THAT COPY OF CREDIT NOTE FOR THE SAME IS PLACE AT PAGE NO. 54 OF P/B. HE SUBMITS THAT REBATE OF RS.988/ - IS ALLOWED TO BAJRANG LAL SURESH CHAND & BR OS. AND CREDIT NOTE FOR THE SAME IS PLACED AT PAGE NO. 55 OF THE P/B. HE SUBMITS THAT THE ASSESSING OFFICER IN THE REMAND PROCEEDINGS HAS NOT POINTED OUT THAT TH OSE TWO CREDIT NOTES ARE NOT AVAILABLE IN THE DETAILS FIELD BEFORE HIM. HE PLEADED FOR ALLOWI NG THE EXPENDITURE. WE HAVE ALSO HEARD THE LD. DR. 10. AS PER THE EVIDENCE FILED BEFORE US WE FIND THAT THE REBATE WAS GIVEN BY THE ASSESSEE. THE LD. CIT(A) HAS NOT ACCEPTED THE REASONS GIVEN 8 ITA NO . 1248/PN/2013, M/S. MANGLAM PHOSPHATE LTD., AHMEDNAGAR BY THE ASSESSING OFFICER FOR MAKING THE ORIGINAL DISALLOWANCE OF RS.15,00,000/ - . SO FAR AS THESE SMALL TWO ENTRIES ARE CONCERNED, IN OUR OPINION THE ASSESSEE HAS PROVED THAT IN FACT THE REBATE/DISCOUNT WAS ALLOWED. WE, ACCORDINGLY, DELETE THE ADDITION SUSTAINED BY THE LD. CIT(A) AND GROUND NO. 3 IS ALLOWED. 11. I N THE RESULT, THE ASSESSEES APPEAL IS ALLOWED. PRONOUNCED IN THE OPEN COURT ON 16 - 0 1 - 201 5 SD/ - SD/ - ( G . S . PAN NU ) ( R.S. PADVEKAR ) ACCOUNTANT MEMBER JUDICIAL MEMBER PUNE, DATED : 16 TH JANUARY, 2015 RK/PS COPY TO 1 ASSESSEE 2 DEPARTMENT 3 THE CIT(A) - I , PUNE 4 THE CIT - I, PUNE 5 6 THE DR, ITAT, B BENCH, PUNE. GUARD FILE. //TRUE COPY// BY ORDER ASSISTANT REGISTRAR , INCOME TAX APPELLATE TRIBUNAL , PUNE