The ACIT,(OSD)-I, Circle-4, Ahmedabad V. M/s. Liverpool Retail India Ltd., Ahmedabad

ITA 1355/AHD/2015

• Counselvise Citation: [2018] 125 COUNSELVISE.COM (IT) 2661 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 year(s) 3 month(s) 6 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-08-2018
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Assessment Year: 2009-2010
• Appeal Filed On: 15-05-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Unexplained cash credit; Depreciation; Additional evidence; Commercial expediency
• Section: 68

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD C BENCH (BEFORE SHRI P. K. KEDIA, ACCOUNTANT MEMBER & SHRI MAHAVIR PRASAD, JUDICIAL MEMBER) ITA. NO: 1355/AHD/2015 (ASSESSMENT YEAR: 2009-10) ASST. COMMISSIONER OF INCOME TAX, CIRCLE-2(1)(2), AHMEDABAD V/S M/S. LIVERPOOL RETAIL INDIA LTD. LIVERPOOL HOUSE, VIVA- IIK, NR. NAVRANGPURA CROSSING, AHMEDABAD- 380009 (APPELLANT) (RESPONDENT) PAN: AABCK9340F APPELLANT BY : SHRI JAMES KURIAN, AR RESPONDENT BY : NONE ( )/ ORDER DATE OF HEARING : 07 -08-201 8 DATE OF PRONOUNCEMENT : 21 -08-2018 PER MAHAVIR PRASAD, JUDICIAL MEMBER 1. THIS APPEAL BY THE REVENUE IS DIRECTED AGAINST THE ORDER OF THE LD. CIT(A)-2, AHMEDABAD DATED 05.02.2015 PERTAINING TO A.Y. 2009- 10 AND FOLLOWING GROUNDS HAVE BEEN TAKEN: ITA NO. 1355 /AHD/2015 . A.Y. 2009-1 0 2 1. THE LD.CU(A) HAS ERRED IN LAW AND ON FACTS BY AD MITTING THE ADDITIONAL EVIDENCES SUBMITTED BY ASSESSEE DURING APPELLATE PROCEEDINGS, IN VIOLATION OF PROVISIONS OF RULE 46(A) (1) OF I.T. RULES. THE ASSESSEE'S CASE IS NOT COVERED BY ANY OF THE CLAUSE A,B,C OR D OF RULE 46A OF THE I.T. RULES. 2. THE LD.CIT(A) HAS ERRED IN LAW AND ON FACTS IN R ESTRICTING THE ADDITION TO RS.3,49,97,890/- BY REDUCING THE AMOUNT OF RS.2,00,00,000/- EVEN THO UGH THE 3V HAD BEEN PASSED ON 31.03.2009 AND THE ASSESSEE COULD NOT FURNISH THE DETAILS AND SATISFY THE CONDITIONS SPECIFIED U/S 68 OF THE I.T. ACT FOR A.Y.2009-10. 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E, THE LD. CITCA) OUGHT TO , HAVE UPHELD THE ORDER OF THE ASSESSING OFFICER. 4. IT IS, THEREFORE, PRAYED THAT THE ORDER OF THE L D. CIT(A) MAY BE SET ASIDE AND THAT OF THE ASSESSING OFFICER MAY BE RESTORED TO THE ABOVE EXTEN T. 2. BRIEF FACTS OF THE CASE AS PER ASSESSMENT ORDER FOL LOWING FACTS HAS BEEN EMERGED: 4.1 ASSESSING OFFICER'S FINDINGS:- THE RELEVANT EXTRACTS FROM THE ASSESSMENT ORDER ARE REPRODUCED HERE UNDER:- 'THE ASSESSEE HAS CLAIMED THE FOLLOWING EXPENSE IN I TS P. & L ACCOUNT: 1. ADMINISTRATIVE EXPENSES RS. 3,61,33,087/- 2. DIRECT EXPENSES AS UNDER- (I) FREIGHT AND OCTROI EXPENSES RS. 2,05,44,260/- (II) PACKING MATERIAL EXPENSES RS. 1,57,539/- (III) SHOWROOM EXPENSES RS.13,81,63,680/- (IV) FRANCHISE COMMISSION RS.16,12,70,127/- (V) RENT AND MAINTENANCE EXP. RS.7,72,28,257/- (VI) ADVT. AND BRAND PROMOTION RS. 45.48.00,041/- RS.49,09,33,128/- NO DETAILS SUCH AS BILLS / VOUCHERS AND EXPLANATION JUSTIFYING THE COMMERCIAL EXPEDIENCY OF THESE EXPENSES HAVE BEEN FURNISHED BY THE ASSESSEE SO AS TO VERIFY THE ITA NO. 1355 /AHD/2015 . A.Y. 2009-1 0 3 GENUINENESS OF THE CLAIM. THEREFORE, AN AMOUNT OF R S.4,90,93,313/- @ 10% OF THE TOTAL CLAIM IS DISALLOWED AND ADDED TO THE TOTAL IN COME. (ADDITION RS.4,90,93,313/-) DURING THE YEAR, THERE IS AN INCREASE IN UNSECURED LOAN TAKEN BY THE ASSESSEE AS COMPARED TO LAST YEAR. THE INCREASE IN THE LOAN COM ES TO RS.1,18,09,324/-. THE ASSESSEE HAS NOT FURNISHED ANY CONFIRMATION IN RESP ECT OF THIS INCREASE IN THE LOAN. THEREFORE, THE IDENTITY OF DEPOSITORS, THE CREDITWO RTHINESS OF THE LENDERS AND GENUINENESS OF THE TRANSACTIONS HAVE NOT BEEN PROVE D. THEREFORE, THE AMOUNT OF RS. 1.18,09,324/- IS TREATED AS UNACCOUNTED CASH CREDIT U/S. 68 OF THE I. T. ACT, 1961. (ADDITION RS.1,18,09,324/-) DURING THE YEAR, THERE IS AN INCREASE OF RS.5,49,97 ,890/- IN THE PAID UP SHARE CAPITAL OF THE ASSESSEE FROM RS.9,08,00,000/- TO LAST YEAR OF RS.14,57.,97,890/-. NO DETAILS OF THE ABOVE ADDITION TO THE PAID UP SHARE CAPITAL HAV E BEEN FURNISHED BY THE ASSESSEE. THEREFORE, THE GENUINENESS OF THIS INCREASE IN THE SHARE CAPITAL SHOULD NOT BE VERIFIED. IN VIEW OF THE ABOVE, THE SAID AMOUNT OF RS.5,49,97 ,890/-IS TREATED AS UNEXPLAINED CASH CREDIT AND IS ADDED TO THE TOTAL INCOME OF THE ASSESSEE U/S. 68 OF THE I. T. ACT, 1961. (ADDITION RS.5,49,97,890/-)' 4.2 APPELLANT'S SUBMISSION :- THE RELEVANT EXTRACTS FROM THE SUBMISSION OF THE AP PELLANT ARE REPRODUCED HERE UNDER:- '(I) DISALLOWANCE OF RS.4,90,93,313/- OUT OF VARIOUS EXPENSES - REG. AO HAS MADE DISALLOWANCE @ 10% OF EXPENDITURE CLAIM ED AGAINST THE INCOME EARNED DURING THE YEAR. DETAILS OF EXPENDITURE IN R ESPECT OF WHICH DISALLOWANCE HAS BEEN MADE (AL 10% ARE AS UNDER: SL.NO. NATURE OF EXPENSES AMOUNT (RS.) 1 FREIGHT & OCTROI EXPENSES 2,05,44,260/- 2 PACKING MATERIAL EXPENSES 1,57,539/- ITA NO. 1355 /AHD/2015 . A.Y. 2009-1 0 4 3 SHOW ROOM EXPENSES 13,81,63,680/- 4 FRANCHISEE COMMISSION 16,12,70,127/- 5 RENT AND MAINTENANCE EXPENSES 7,72,28,257/- 6 ADVERTISEMENT AND BRAND PROMOTION EXPENSES 4,54,80,004/- APPELLANT HAVE TO SUBMIT THAT EXPENSES, AS ABOVE, A RE DIRECTLY RAISED TO THE BUSINESS OF THE COMPANY AND BOOKS OF ACCOUNTS OF TH E COMPANY ARE AUDITED AS PER THE PROVISIONS OF COMPANIES ACT AS WELL AS INCO ME TAX ACT, 1961. FURTHER, AS PER RETURN OF INCOME FOR THE YEAR UNDER CONSIDERATION, APPELLANT COMPANY HAVE ALREADY DISALLOWED RS. 1,34,59,1567- O UT OF BRAND PROMOTION EXPENSES. AS PER THE BOOKS OF ACCOUNTS, APPELLANT COMPANY HAV E DISCLOSED NET PROFIT OF RS. 115,024,318, BEFORE DEPRECIATION AND INCOME-TAX PRO VISION, AGAINST TOTAL TURNOVER OF RS.L,789,837,213.. HENCE, NET PROFIT RA TIO, BEFORE DEPRECIATION AND INCOME-TAX, HAS BEEN DISCLOSED @ 42% WHICH IS QUITE REASONABLE CONSIDERING THE NATURE OF BUSINESS. CONSIDERING THE FACTS AND CIRCUMSTANCES OF THE CASE , NATURE OF BUSINESS AND OTHER RELEVANT FACTORS, YOUR HONOUR, IS HEREBY REQUESTED TO DELETE THE DISALLOWANCE OF RS.4,90,93,313/- OUT OF EXPENSES DIRECTLY RELATED T O THE BUSINESS OF THE APPELLANT COMPANY. (II) ADDITION OF RS.1,18,09,324/- ON THE GROUND OF UNEXPLAINED UNSECURED LAON - REG. AT THE OUTSET, APPELLANT HAVE TO SUBMIT THAT 'UNSECU RED LOANS' IN THE BOOKS OF ACCOUNTS AND AUDITED BALANCE SHEET ARE IN THE NATUR E OF 'TRADE DEPOSITS' FROM FRANCHISEES OF THE APPELLANT COMPANY TO SOURCE THE DEBT AGAINST POSSIBLE DEFAULT BY THE FRANCHISEE PARTY. ITA NO. 1355 /AHD/2015 . A.Y. 2009-1 0 5 APPELLANT HEREBY SUBMIT THE DETAILS OF NEW DEPOSIT FROM ITS FRANCHISEE PARTNERS, ALONG WITH DETAILS OF PAYMENT RECEIVED, ITS ADDRESS , PAN (TO THE EXTENT AVAILABLE) AND TRADING ACCOUNT DUES AS AT THE END OF THE YEAR AGAINST THE SALES MADE BY THE COMPANY TO THE RESPECTED PARTY. COPIES OF TRADING A CCOUNTS OF RESPECTED FRANCHISEE PARTNERS, FROM WHOM TRADE DEPOSITS (UNSE CURED LOANS) WERE RECEIVED DURING THE YEAR, ARE ALSO SUBMITTED HEREWITH TO SUB STANTIATE THE FACT THAT ALL THE UNSECURED LOANS ARE IN FACT TRADE DEPOSITS. HENCE, NO ADDITION, WAS CALLED FOR AS IDENTITY, CREDIT-WORTHINESS AND GENUINENESS OF THE TRANSACTIONS ARE WELL EXPLAINED. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, APPELL ANT COULD NOT FURNISH HE DETAILS DUE TO BONAFIDE REASONS. HENCE, IT IS REQUE STED TO ACCEPT THE EVIDENCE FURNISHED HEREWITH AS PER RULE 46A OF THE ACT CONSI DERING THE QUANTUM OF ADDITIONS AND MERITS OF THE CASE. CONSIDERING THE FACT THAT, UNSECURED LOANS INCREASE D DURING THE YEAR IN-FACT REPRESENTS TRADE DEPOSITS RECEIVED FROM 'FRANCHISEE PARTNERS' WITH WHOM APPELLANT COMPANY IS HAVING BUSINESS DEALINGS AND S AME ARE DEBTORS OF THE APPELLANT COMPANY IT CAN BE INFERRED THAT IDENTITY AND CREDITWORTHINESS AND GENUINENESS OF THE TRANSACTION STANDS SUBSTANTIATED AND ADDITION MADE BY THE ASSESSING OFFICER IS NOT SUSTAINABLE AND SAME IS RE QUESTED TO .BE DELETED. (II) ADDITION OF RS.5,49,97,890/- ON THE GROUND OF UNEXPLAINED INCREASE IN SHARE CAPITAL - REG. DURING THE YEAR UNDER CONSIDERATION, THERE WAS INCR EASE IN SHARE CAPITAL BY RS..5,49.97,890/-, DETAILS OF THE SAME ARE AS UNDER :- SR. NAME & ADDRESS OF PAN NO. OF AMOUNT REMARKS NO. THE SHARE HOLDER SHARES (RS.) ITA NO. 1355 /AHD/2015 . A.Y. 2009-1 0 6 1 VAX CAPFM & AABCV5216D 834000 8340000 CONFIRMATION INVESTMENT PRIVATE ACCOUNT LIMITED SUBMITTED HEREWITH. 301, SIMANDAR ESTATE, OPP. SAKAR - III, OFF. ASHRAM ROAD, AHMEDABAD - 380014 2 KAILASH GUPTA ABCPG8801A 834000 8334000 CONFIRMATION ACCOUNT 301, SOMNATH SUBMITTED COOPERATIVE HOUSING HEREWITH. SOC., NAVRANGPURA, AHMEDABAD - 380009 3 VIJAY SINGH RATHORE ADKPR5315C 560000 5600000 CONFIRMATION ACCOUNT A - 1001 PRESTIGE SUBMITTED TOWER, NR. JUDGES HER EWITH. ITA NO. 1355 /AHD/2015 . A.Y. 2009-1 0 7 BUNGALOWS, BODAKDEV, AHMEDABAD. 4 SRIKANT AGRAWAL 560000 5600000 5 RAJ ENTERPRISE 711789 7117890 7, HAVELI APARTMENT, PANCHVATI PARK SOC., OPP. WHITE HOUSE, AMBAWADI, AHMEDABAD 6 LAKSHYA LEVEL AABCL4447L 2000000 20000000 AMOUNT IS MARKETING PVT. LTD. RECEIVED IN SUBSEQUENT FINANCIAL YEAR I.E. F. Y. 2009 - 10 RELEVANT TO ASSESSMENT YEAR 2010 - 11. ONLY J.V. HAS BEEN PASSED FOR INCREASE IN CAPITAL. ITA NO. 1355 /AHD/2015 . A.Y. 2009-1 0 8 OUT OF THE ABOVE PARTIES IN RESPECT OF WHICH SHARES CAPITAL HAS BEEN INCREASED DURING THE YEAR, IN THE CASE OF 'LAKSHYA LEVEL MARKE TING PVT LTD.' AMOUNT OF RS.200,00,000 HAS BEEN CREDITED THROUGH J.V. ON THE LAST DAY OF THE FINANCIAL YEAR. ACTUAL PAYMENT WAS RECEIVED IN THE SUBSEQUENT FINAN CIAL YEAR I.E. FINANCIAL YEAR 2009-10 RELEVANT TO ASSESSMENT YEAR 2010-11. HENCE, NO ADDITION IS CALLED FOR IN RESPECT OF SHARE APPLICATION. MONEY, THROUGH JV, IN THE CASE OF 'LAKSHYA LEVEL MARKETING PVT. LTD.' FURTHER, IN RESPECT OF (I) VAX CAPFIN & INVESTMENT PVT. LTD. (II) VIJAYSINGH RATHORE & (III) KAILASH GUPTA, THEIR PAN DETAILS AND CONFIR MATION ACCOUNTS ARE SUBMITTED HEREWITH/ALSO, ADDRESS OF M/S. RAJ ENTERPRISE HAS A LSO BEEN SUBMITTED. CONSIDERING THE FACTS AND CIRCUMSTANCES OF THE CASE , EVIDENCES AND EXPLANATION FURNISHED AS ABOVE, YOUR HONOUR IS HEREBY REQUESTED TO DELETE THE ADDITIONS OF RS.5,49,97,890/-ON THE GROUND OF UNEXPLAINED INCREA SE IN SHARE CAPITAL.' 3. AGAINST THE SAID ORDER, ASSESSEE PREFERRED FIRST ST ATUTORY APPEAL BEFORE THE LD. CIT(A) WHO PARTLY ALLOWED THE APPEAL OF THE ASSESSE E. 4. NONE APPEARED ON BEHALF OF THE ASSESSEE AND NOTICE WAS SENT THROUGH THE DEPARTMENT BUT SAME WAS NOT RECEIVED BY ANY ONE ON BEHALF OF THE ASSESSEE. THEREFORE, OFFICIAL OF THE DEPARTMENT AFFIX THE NOT ICE ON THE WALL/DOOR OF THE OFFICE PREMISES OF ASSESSEE AND WE HAVE HEARD THE L D. D.R AND WE WOULD LIKE TO DISPOSE OF THIS MATTER ON THE BASIS OF RECORD AVAIL ABLE WITH US. 5. NOW DEPARTMENT IS BEFORE US. 6. SO FAR FIRST GROUND OF THE DEPARTMENT IS CONCERNED THAT ADDITIONAL EVIDENCE UNDER RULE 46(A) SHOULD NOT HAVE BEEN ACCEPTED BY T HE LD. CIT(A) CONCERNED. ITA NO. 1355 /AHD/2015 . A.Y. 2009-1 0 9 IN THIS CASE, ASSESSEE COULD NOT PRODUCE COMPLETE D ETAILS BEFORE THE LD. A.O. BECAUSE OF SOME PROBLEM AND THEREAFTER IN APPEAL HE FILED CERTAIN DOCUMENTS IN SUPPORT OF IT CONTENTION BEFORE THE LD. CIT(A) AND LD. CIT(A) SOUGHT REMAND REPORT FROM THE LD. A.O. AND LD., CIT(A) RECORDED HIS SATISFACTION AT THE TIME OF ADMITTING ADDITIONAL EVIDENCE STARTING THAT HE H AS CAREFULLY CONSIDERED THE DETAILS FILED BY THE APPELLANT, THE REPORT OF THE A . O. AND THE COUNTER COMMENTS FILED BY THE APPELLANT. CERTAIN EVIDENCES COULD NOT BE PRODUCED BY THE APPELLANT BEFORE THE A.O. FURTHER, THE EVIDENCE NOW BEING SUB MITTED IS CONTEMPORARY IN NATURE. THE EVIDENCE MUST HAVE BEEN AVAILABLE WITH THE APPELLANT BUT HE COULD NOT PRODUCE AS HE WAS FACING DIFFICULTY DUE TO THE CIRCUMSTANCES. THE A. O. HAS ALSO BEEN GIVEN DUE OPPORTUNITY. HE HAS EXAMINED TH E EVIDENCE AND GIVEN HIS COMMENTS ON THE SAME AFTER VERIFICATION. CONSIDERIN G THESE FACTS AND CIRCUMSTANCES AND THE FACT THAT THE EVIDENCE WHICH WERE PRODUCED BEFORE THE LD. CIT(A) AND THEREFORE HE ADMITTED THESE EVIDENCE S. 7. RULE 46(A)(2) NO EVIDENCE SHALL BE ADMITTED UNDER S UB RULE(1) UNLESS DEPUTY COMMISSIONER APPEAL OR AS THE CASE MAY BE COMMISSIO NER APPEAL RECORD IN WRITING IN ITS ADMISSION AND A REMAND REPORT WAS CA LLED FOR FROM LD. A.O. AND HIS COMMENTS WERE CONSIDERED BY THE LD. CIT(A). THU S, THIS GROUND OF APPEAL OF THE DEPARTMENT IS DISMISSED. 8. SO FAR NEXT GROUND WITH REGARD TO REDUCING THE AMOU NT OF RS. 2 CRORES IS CONCERNED, ASSESSEE ACCEPTED SHARE CAPITAL OF RS. 2 CRORES FROM LAKSHYA LEVEL MARKETING PRIVATE LIMITED. THE AO HAS MADE AN ADDIT ION IN THIS RESPECT, WHICH IS INCLUDED IN THE AMOUNT OF RS. 5.49 CRORES. THE A PPELLANT HAS EXPLAINED THE MONEY HAS BEEN RECEIVED DURING THE YEAR. THE AMOUNT HAS BEEN TRANSFERRED THROUGH THE JOURNAL ENTRY ON THE LAST DAY OF FINANC IAL YEAR, THE ACTUAL AMOUNT ITA NO. 1355 /AHD/2015 . A.Y. 2009-1 0 10 WAS RECEIVED IN FINANCIAL YEAR 2009 - 10. THE APPEL LANT HAS SUBMITTED THAT AN ADDITION OF THE SAME AMOUNT HAS BEEN MADE FOR A. Y. 2010 - 11 IN THE CASE OF THE APPELLANT ITSELF. SINCE THE AMOUNT HAS BEEN REC EIVED BY THE APPELLANT IN FINANCIAL YEAR 2009 - 10 NO ADDITION IN RESPECT OF AMOUNT RECEIVED AND SUBSEQUENT YEAR CAN BE MADE. THE DETAILS FILED BY T HE APPELLANT SHOW THAT THE CHEQUE HAS BEEN CLEARED ON 19/05/2009 AND THE AO HA S ALSO MADE AN ADDITION OF THE SAME AMOUNT TOR A. Y. 2010 -11. THEREFORE, I N OUR CONSIDERED OPINION, LD. CIT(A) HAS RIGHTLY DIRECTED TO DELETE THE ADDIT ION OF RS. 2 CRORES. 9. THEREFORE, IN OUR CONSIDERED OPINION, LD. CIT(A) HA S PASSED DETAILED AND REASONED ORDER AND SAME DOES NOT REQUIRE ANY KIND O F INTERFERENCE AT OUR END. 10. IN THE RESULT, APPEAL FILED BY THE REVENUE IS DISMI SSED. ORDER PRONOUNCED IN OPEN COURT ON 21 - 08- 2018 SD/- SD/- (P.K. KEDIA) (MAHAVIR PRASAD) ACCOUNTANT MEMBER TRUE COPY JUDI CIAL MEMBER AHMEDABAD: DATED 21/08/2018 RAJESH COPY OF THE ORDER FORWARDED TO: - 1. THE APPELLANT. 2. THE RESPONDENT. 3. THE CIT (APPEALS) 4. THE CIT CONCERNED. 5. THE DR., ITAT, AHMEDABAD. 6. GUARD FILE. BY ORDER DEPUTY/ASSTT.REGISTRAR ITAT,AHME DABAD