Suchi Marketing Private Limited, Kolkata V. ITO, Ward - 12(2), Kolkata, Now Ward - 5(1), Kolkata, Kolkata

ITA 1404/KOL/2017

• Counselvise Citation: [2019] 117 COUNSELVISE.COM (IT) 2789 (ITAT-KOLKATA)
• Duration Of Justice: 1 year(s) 11 month(s) 25 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 07-06-2019
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: SMC
• Next Hearing Date: 02-04-2019
• Assessment Year: 1996-1997
• Appeal Filed On: 12-06-2017
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: P K MONDAL CIT SR D R RESPON
• Assessee Lawyers: P J BHIDE
• Keywords: Unexplained cash credit; Opportunity of being heard; Commercial expediency; Onus to prove; Set aside
• Section: 147; 68; 148

Judgement Text

I.T.A. NOS. 1402, 1403 & 1404/KOL/2017 (ASSESSMENT YEARS: 1994-95, 1995-96 & 1996-97) SUCHI MARKETING PVT. LIMIT ED 1 IN THE INCOME TAX APPELLATE TRIBUNAL, KOLKATA A(SMC) BENCH, KOLKATA BEFORE SHRI P.M. JAGTAP, VICE-PRESIDENT (KZ) I.T.A. NOS. 1402, 1403 & 1404/KOL/2017 ASSESSMENT YEARS: 1994-1995, 1995-1996 & 1996-1997 SUCHI MARKETING PVT. LIMITED,...................... ................................APPELLANT 77, NETAJI SUBHAS ROAD, KOLKATA-700 001 [PAN: AADCS 6743 G] -VS.- INCOME TAX OFFICER,................................ ..............................RESPONDENT WARD-12(2), KOLKATA, NOW WARD-5(1). AAYAKAR BHAWAN, P-7, CHOWRINGHEE SQUARE, KOLKATA-700 069 APPEARANCES BY: SHRI P.J. BHIDE, A.R., FOR THE APPELLANT SHRI P.K. MONDAL, ADDL. CIT, SR. D.R., FOR THE RESP ONDENT DATE OF CONCLUDING THE HEARING : APRIL 02, 2019 DATE OF PRONOUNCING THE ORDER : JUNE 07, 2019 O R D E R PER SHRI P.M. JAGTAP, VICE-PRESIDENT (KOLKATA ZONE) :- OUT OF THESE THREE APPEALS FILED BY THE ASSESSEE, TWO APPEALS BEING ITA NOS. 1402 & 1403/KOL/2017 ARE DIRECTED AGAINST A COMMON ORDER OF LD. COMMISSIONER OF INCOME TAX (APPEALS)-IV, KOLKAT A FOR ASSESSMENT YEARS 1994-95 AND 1995-96 WHILE THE THIRD APPEAL BE ING ITA NO.1404/KOL/2017 IS DIRECTED AGAINST THE ORDER OF L D. COMMISSIONER OF INCOME TAX (APPEALS)-IV, KOLKATA DATED 01.08.2001 F OR ASSESSMENT YEAR 1996-97. SINCE SOME OF THE ISSUES INVOLVED THEREIN ARE COMMON, THE SAME HAVE BEEN HEARD TOGETHER AND ARE BEING DISPOSED OF BY A SINGLE CONSOLIDATED ORDER FOR THE SAKE OF CONVENIENCE. 2. FIRST I SHALL TAKE UP THE APPEAL FOR A.Y. 1994-9 5 BEING ITA NO. 1402/KOL/2017 . I.T.A. NOS. 1402, 1403 & 1404/KOL/2017 (ASSESSMENT YEARS: 1994-95, 1995-96 & 1996-97) SUCHI MARKETING PVT. LIMIT ED 2 THE RELEVANT FACTS OF THE CASE GIVING RISE TO THIS APPEAL ARE THAT THE ASSESSEE IS A COMPANY, WHICH IS ENGAGED IN THE BUSI NESS OF TRADING AND INVESTMENT. THE RETURN OF INCOME FILED BY THE ASSES SEE-COMPANY ORIGINALLY ON 26.10.1995 FOR A.Y. 1994-95 DECLARING TOTAL INCOME OF RS.4,580/- WAS INITIALLY PROCESSED BY THE ASSESSING OFFICER UNDER SECTION 143(1)(A). THEREAFTER THE ASSESSMENT WAS REOPENED B Y THE ASSESSING OFFICER AND A NOTICE UNDER SECTION 148 WAS ISSUED B Y HIM, IN RESPONSE TO WHICH THE RETURN OF INCOME WAS FILED BY THE ASSESSE E ON 28.04.1999. IN THE PROFIT & LOSS ACCOUNT FILED ALONG WITH THE RETU RN OF INCOME, A SUM OF RS.2,44,715/- WAS DEBITED BY THE ASSESSEE ON ACCOUN T OF INTEREST EXPENDITURE. AS FOUND BY THE ASSESSING OFFICER, THE SAID INTEREST IN RESPECT OF 44 LOAN CREDITORS WAS NOT PAID BY THE AS SESSEE. THE ASSESSEE ALSO FAILED TO ESTABLISH THE COMMERCIAL EXPEDIENCY OF THE LOAN TRANSACTIONS AND ALSO FAILED TO ESTABLISH THE NEXUS BETWEEN THE INTEREST EXPENDITURE AND ITS BUSINESS. THE ASSESSING OFFICER , THEREFORE, DISALLOWED THE INTEREST EXPENDITURE CLAIMED BY THE ASSESSEE AN D MADE AN ADDITION OF RS.2,44,715/- TO THE TOTAL INCOME OF THE ASSESSEE I N THE ASSESSMENT COMPLETED UNDER SECTION 147/143(3) OF THE ACT VIDE AN ORDER DATED 23.03.2001. 3. AGAINST THE ORDER PASSED BY THE ASSESSING OFFICE R UNDER SECTION 147/143(3), AN APPEAL WAS FILED BY THE ASSESSEE BEF ORE THE LD. CIT(APPEALS) CHALLENGING THE VALIDITY OF THE ASSESS MENT MADE BY THE ASSESSING OFFICER AS WELL AS DISPUTING THE DISALLOW ANCE ON ACCOUNT OF INTEREST MADE THEREIN. THE LD. CIT(APPEALS) VIDE HI S APPELLATE ORDER DATED 01.08.2001 DISMISSED THE APPEAL OF THE ASSESSEE FOR A.Y. 1994-95 CONFIRMING THE DISALLOWANCE MADE BY THE ASSESSING O FFICER ON ACCOUNT OF INTEREST OBSERVING THAT THE NEXUS BETWEEN THE INTER EST EXPENDITURE INCURRED AND ITS BUSINESS WAS NOT DULY ESTABLISHED BY THE ASSESSEE. AGGRIEVED BY THE ORDER OF THE LD. CIT(APPEALS), THE ASSESSEE HAS PREFERRED THIS APPEAL BEFORE THE TRIBUNAL ON THE FOLLOWING GR OUNDS:- I.T.A. NOS. 1402, 1403 & 1404/KOL/2017 (ASSESSMENT YEARS: 1994-95, 1995-96 & 1996-97) SUCHI MARKETING PVT. LIMIT ED 3 (1) THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD. COMMISSIONER OF INCOME TAX ERRED IN DECIDING THE FOLLOWING FIRST GROUND RAISED BY THE APPELLANT BEFORE HIM VIDE APPEAL FORM NO. 35: FOR THAT THE INITIATION OF PROCEEDINGS U/S 147 IS INVALID AS THE REQUIREMENTS OF THE LAW IN THIS RESPECT WERE NOT SATISFIED IN THIS CASE. (2)THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF TH E CASE, THE LD. CIT ERRED IN CONFIRMING THE DISALLOWA NCE OF THE APPELLANTS CLAIM FOR DEDUCTION OF INTEREST OF RS.2,44,715/- PAID BY THE APPELLANT DURING THE RELE VANT PREVIOUS YEAR FOR THE MONEYS BORROWED AND UTILIZED FOR THE PURPOSE OF ITS BUSINESS. 4. I HAVE HEARD THE ARGUMENTS OF BOTH THE SIDES AND ALSO PERUSED THE RELEVANT MATERIAL AVAILABLE ON RECORD. AS REGARDS T HE GROUND NO. 1, THE LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE PRELIMI NARY ISSUE CHALLENGING THE ASSESSMENT ORDER PASSED BY THE ASSESSING OFFICE R UNDER SECTION 147/143(3) FOR A.Y. 1994-95 WAS SPECIFICALLY RAISED BY THE ASSESSEE- COMPANY IN GROUND NO. 1 OF ITS APPEAL FILED BEFORE THE LD. CIT(APPEALS), BUT THE LD. CIT(APPEALS) HAS NOT DECIDED THE SAME V IDE HIS IMPUGNED ORDER AND THIS POSITION CLEARLY EVIDENT FROM THE RE CORD IS NOT DISPUTED EVEN BY THE LD. D.R. I, THEREFORE, REMIT THE MATTER BACK TO THE LD. CIT(APPEALS) FOR DECIDING THIS PRELIMINARY ISSUE AS RAISED BY THE ASSESSEE IN GROUND NO. 1 OF ITS APPEAL. GROUND NO. 1 OF THE ASSESSEES APPEAL IS ACCORDINGLY TREATED AS ALLOWED FOR STATISTICAL PURP OSES. 5. AS REGARDS THE ISSUE INVOLVED IN GROUND NO. 2 RE LATING TO THE DISALLOWANCE ON ACCOUNT OF INTEREST, IT IS OBSERVED THAT THE SAID DISALLOWANCE WAS MADE BY THE ASSESSING OFFICER AND CONFIRMED BY THE LD. CIT(APPEALS) MAINLY ON THE GROUND THAT THE NEXUS BE TWEEN THE INTEREST EXPENDITURE AND ITS BUSINESS WAS NOT ESTABLISHED BY THE ASSESSEE. IN THIS REGARD, THE LD. COUNSEL FOR THE ASSESSEE HAS CONTEN DED THAT PROPER AND SUFFICIENT OPPORTUNITY WAS NOT AFFORDED EITHER BY T HE ASSESSING OFFICER OR BY THE LD. CIT(APPEALS) TO THE ASSESSEE TO ESTABLIS H SUCH NEXUS. HE HAS I.T.A. NOS. 1402, 1403 & 1404/KOL/2017 (ASSESSMENT YEARS: 1994-95, 1995-96 & 1996-97) SUCHI MARKETING PVT. LIMIT ED 4 URGED THAT THIS MATTER MAY ALSO BE SENT BACK TO THE LD. CIT(APPEALS) FOR GIVING ONE MORE OPPORTUNITY TO THE ASSESSEE TO ESTA BLISH SUCH NEXUS. KEEPING IN VIEW ALL THE FACTS AND CIRCUMSTANCES, I CONSIDER IT FAIR AND PROPER AND IN THE INTEREST OF JUSTICE TO GIVE ONE M ORE OPPORTUNITY TO THE ASSESSEE AS SOUGHT BY ITS LD. COUNSEL. THE IMPUGNED ORDER OF THE LD. CIT(APPEALS) ON THIS ISSUE IS ACCORDINGLY SET ASIDE AND THE MATTER IS REMITTED BACK TO HIM FOR DECIDING THE SAME AFRESH A FTER GIVING ONE MORE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE GROUND N O. 2 OF THE ASSESSEES APPEAL FOR A.Y. 1994-95 IS ACCORDINGLY TREATED AS A LLOWED FOR STATISTICAL PURPOSES. 6. NOW I TAKE UP THE ASSESSEES APPEAL FOR A.Y. 199 5-96 BEING ITA NO. 1403/KOL/2017 , WHEREIN THE FOLLOWING GROUNDS ARE RAISED:- (1) THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF T HE CASE, THE COMMISSIONER OF INCOME TAX ERRED IN DECID ING THE FOLLOWING FIRST GROUND RAISED BY THE APPELLANT BEFORE HIM VIDE APPEAL FORM NO. 35: FOR THAT THE INITIATION OF PROCEEDINGS U/S 147 IS INVALID AS THE REQUIREMENTS OF THE LAW IN THIS RESPECT WERE NOT SATISFIED IN THIS CASE. (2)THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF TH E CASE, THE LD. CIT ERRED IN CONFIRMING THE DISALLOWA NCE OF THE APPELLANTS CLAIM FOR DEDUCTION OF INTEREST OF RS.2,93,773/- PAID BY THE APPELLANT DURING THE RELE VANT PREVIOUS YEAR FOR THE MONEYS BORROWED AND UTILIZED FOR THE PURPOSE OF ITS BUSINESS. (3) THAT THE LD. CIT ERRED IN HOLDING THAT AO WAS JUSTIFIED IN ASSESSING A SUM OF RS.75,000/-, AS THE APPELLANTS INCOME UNDER SECTION 68 OF THE ACT. (4) THAT THE LD. CIT SHOULD HAVE HELD THAT CONSIDER ING THE EVIDENCES PRODUCED BY THE APPELLANT BEFORE THE AO, THE AFORESAID ADDITION OF RS.75,000/- WAS UNJUSTIFI ED. 7. I HAVE HEARD THE ARGUMENTS OF BOTH THE SIDES AND ALSO PERUSED THE RELEVANT MATERIAL AVAILABLE ON RECORD. AS REGARDS THE GROUNDS NO. 1 & 2 I.T.A. NOS. 1402, 1403 & 1404/KOL/2017 (ASSESSMENT YEARS: 1994-95, 1995-96 & 1996-97) SUCHI MARKETING PVT. LIMIT ED 5 OF THE ASSESSEES APPEAL FOR A.Y. 1995-96, IT IS OB SERVED THAT THE ISSUES INVOLVED THEREIN ARE SIMILAR TO THE ISSUES INVOLVED IN GROUNDS NO. 1 & 2 OF THE ASSESSEES APPEAL FOR A.Y. 1994-95, WHICH HAVE ALREADY BEEN DECIDED BY ME. FOLLOWING MY CONCLUSION DRAWN IN A.Y. 1994-9 5, I REMIT BOTH THE ISSUES INVOLVED IN GROUNDS NO. 1 & 2 TO THE LD. CIT (APPEALS) FOR DECIDING THE SAME AS PER THE SAME DIRECTION AS GIVEN IN A.Y. 1994-95. GROUNDS NO. 1 & 2 OF THE ASSESSEES APPEAL FOR A.Y. 1995-96 ARE ACCORDINGLY TREATED AS ALLOWED FOR STATISTICAL PURPOSES. 8. AS REGARDS THE COMMON ISSUE INVOLVED IN GROUNDS NO. 3 & 4 RELATING TO THE ADDITION OF RS.75,000/- MADE BY THE ASSESSIN G OFFICER AND CONFIRMED BY THE LD. CIT(APPEALS) UNDER SECTION 68, IT IS OBSERVED THAT THE ASSESSEE DURING THE YEAR UNDER CONSIDERATION, I .E. A.Y. 1995-96 HAD TAKEN FRESH LOANS OF RS.75,000/- FROM 11 PARTIES. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE SAID LOANS REPRESENTING CASH CREDITS WERE EXAMINED BY THE ASSESSING OFFICER AND ON SUCH EXAMI NATION, HE HELD THAT THE CREDITWORTHINESS OF THE CONCERNED CREDITORS AS WELL AS THE GENUINENESS OF THE RELEVANT LOAN TRANSACTIONS WAS N OT ESTABLISHED FOR THE FOLLOWING REASONS:- (I) THE PARTIES DO NOT SEEM TO HAVE FILED THEIR RET URNS FOR THE RELEVANT ASSESSMENT YEAR AND ALL OF THEM HA VE INCOME BELOW THE TAXABLE LIMIT WHICH WOULD MAKE VERIFICATION IMPOSSIBLE. (II) THE PARTIES HAVE STATED THAT THEIR SOURCES OF INVESTMENT ARE FROM REFUND OF SHARE APPLICATION MON EY. HOWEVER, MERE CHEQUE PAYMENT WOULD NOT MAKE THE TRANSACTION A GENUINE ONE AS THE SOURCE OF THE INVESTMENT IN THE PRIMARY STAGE IS NOT PROVED. (III) ALL THE PARTIES STATE THEIR INCOME IS FROM BR OKERAGE, COMMISSION AND INTEREST. SUCHI MARKETING PVT. LIMIT ED HAS NEVER PAID THE INTEREST ON LOAN TILL DATE AND I T IS NOT KNOWN HOW THE INCOME AND SUBSEQUENT DRAWINGS ARE SUBSTANTIATED. THESE PERSONS HAVE MEAGRE INCOME AND IT IS NOT KNOWN HOW THEY HAVE ADVANCED LOANS TO SUCHI MARKETING PVT. LTD. I.T.A. NOS. 1402, 1403 & 1404/KOL/2017 (ASSESSMENT YEARS: 1994-95, 1995-96 & 1996-97) SUCHI MARKETING PVT. LIMIT ED 6 FOR THE REASONS GIVEN ABOVE AS WELL AS THE OTHER AD VERSE FINDINGS RECORDED IN HIS ORDER, THE ASSESSING OFFICER TREATE D THE LOANS OF RS.75,000/- RECEIVED BY THE ASSESSEE DURING THE YEA R UNDER CONSIDERATION AS UNEXPLAINED CASH CREDIT AND ADDITION TO THAT EXT ENT WAS MADE BY HIM UNDER SECTION 68. ON APPEAL, THE LD. CIT(APPEALS) C ONFIRMED THE SAID ADDITION FOR THE SAME REASONS AS GIVEN BY THE ASSES SING OFFICER IN THE ASSESSMENT ORDER. 9. I HAVE HEARD THE ARGUMENTS OF BOTH THE SIDES ON THIS ISSUE AND ALSO PERUSED THE RELEVANT MATERIAL AVAILABLE ON RECORD. IT IS WELL SETTLED THAT THE PRIMARY ONUS TO PROVE THE LOANS TAKEN DURING TH E YEAR UNDER CONSIDERATION IN TERMS OF SECTION 68 BY PROVING THE IDENTITY AND CREDITWORTHINESS OF THE CONCERNED LOAN CREDITORS AS WELL AS GENUINENESS OF THE LOAN TRANSACTIONS IS ON THE ASSESSEE AND IN THE PRESENT CASE, THE SAME WAS NOT SATISFACTORILY DISCHARGED BY THE ASSES SEE EITHER BEFORE THE ASSESSING OFFICER DURING THE COURSE OF ASSESSMENT P ROCEEDINGS OR EVEN BEFORE THE LD. CIT(APPEALS) DURING THE COURSE OF AP PELLATE PROCEEDINGS. EVEN BEFORE THE TRIBUNAL, THE ASSESSEE HAS NOT BEEN ABLE TO BRING ANYTHING ON RECORD TO DISLODGE THE ADVERSE FINDINGS SPECIFICALLY RECORDED BY THE ASSESSING OFFICER IN THE ASSESSMENT ORDER TO COME TO THE CONCLUSION THAT THE GENUINENESS OF THE RELEVANT LOA N TRANSACTIONS AS WELL AS CREDITWORTHINESS OF THE CONCERNED LOAN CREDITORS WAS NOT ESTABLISHED BY THE ASSESSEE. I, THEREFORE, FIND NO JUSTIFIABLE REASON TO INTERFERE WITH THE IMPUGNED ORDER OF THE LD. CIT(APPEALS) CONFIRMI NG THE ADDITION OF RS.75,000/- MADE BY THE ASSESSING OFFICER BY TREATI NG THE LOAN RECEIVED BY THE ASSEESSEE DURING THE YEAR UNDER CONSIDERATIO N AS UNEXPLAINED CASH CREDIT AND UPHOLDING THE SAME, I DISMISS GROUNDS NO . 3 & 4 OF THE ASSESSEES APPEAL. 10. NOW I TAKE UP THE ASSESSEES APPEAL FOR A.Y. 19 96-97 BEING ITA NO. 1404/KOL/2017. THE FOLLOWING GROUNDS ARE RAISED BY THE ASSESSEE:- (1) THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF T HE CASE, T4HE LD. CIT ERRED IN CONFIRMING THE DISALLOWANCE O F THE I.T.A. NOS. 1402, 1403 & 1404/KOL/2017 (ASSESSMENT YEARS: 1994-95, 1995-96 & 1996-97) SUCHI MARKETING PVT. LIMIT ED 7 APPELLANTS CLAIM FOR THE LOSS OF RS.1,29,590/- SUF FERED ON SALE OF SHARES DURING THE RELEVANT PREVIOUS YEAR. (2)THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF TH E CASE, THE LD. CIT ERRED IN CONFIRMING THE DISALLOWA NCE OF THE APPELLANTS CLAIM FOR DEDUCTION OF INTEREST OF RS.2,91,963/- PAID BY THE APPELLANT DURING THE RELE VANT PREVIOUS YEAR FOR THE MONEYS BORROWED AND UTILIZED FOR THE PURPOSE OF ITS BUSINESS. 11. AT THE TIME OF HEARING BEFORE THE TRIBUNAL, THE LD. COUNSEL FOR THE ASSESSEE HAS NOT PRESSED GROUND NO. 1. THE SAME IS ACCORDINGLY DISMISSED AS NOT PRESSED. 12. AS REGARDS THE GROUND NO. 2 OF THE ASSESSEES A PPEAL FOR A.Y. 1996- 97, IT IS OBSERVED THAT THE ISSUE INVOLVED THEREIN RELATING TO THE DISALLOWANCE MADE BY THE ASSESSING OFFICER AND CONF IRMED BY THE LD. CIT(APPEALS) ON ACCOUNT OF INTEREST EXPENDITURE IS SIMILAR TO THE ONE INVOLVED IN ASSESSEES CASE FOR A.Y. 1994-95 & 1995 -96, WHICH HAS ALREADY BEEN DECIDED BY ME. FOLLOWING MY CONCLUSION DRAWN I N A.YS 1994-95 & 1995-96, I REMIT THIS ISSUE BACK TO THE LD. CIT(APP EALS) FOR DECIDING THE SAME AFRESH AS PER THE SAME DIRECTION AS GIVEN IN A .YS. 1994-95 & 1995- 96. GROUND NO. 2 OF THE ASSESSEES APPEAL FOR A.Y. 1996-97 IS ACCORDINGLY TREATED AS ALLOWED FOR STATISTICAL PURPOSES. 13. IN THE RESULT, THE APPEAL OF THE ASSESSEE FOR A .Y. 1994-95 IS TREATED AS ALLOWED FOR STATISTICAL PURPOSES, WHILE THE APPEALS OF THE ASSESSEE FOR A.YS. 1995-96 AND 1996-97 ARE TREATED AS PARTLY ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON JUNE 07, 2019 . SD/- (P.M. JAGTAP) VICE-PRESIDENT (KZ ) KOLKATA, THE 7 TH DAY OF JUNE, 2019 I.T.A. NOS. 1402, 1403 & 1404/KOL/2017 (ASSESSMENT YEARS: 1994-95, 1995-96 & 1996-97) SUCHI MARKETING PVT. LIMIT ED 8 COPIES TO : (1) SUCHI MARKETING PVT. LIMITED, 77, NETAJI SUBHAS ROAD, KOLKATA-700 001 (2) INCOME TAX OFFICER, WARD-12(2), KOLKATA, NOW WARD-5(1). AAYAKAR BHAWAN, P-7, CHOWRINGHEE SQUARE, KOLKATA-700 069 (3) COMMISSIONER OF INCOME TAX (APPEALS)-4, KOLKAT A, (4) COMMISSIONER OF INCOME TAX- , (5) THE DEPARTMENTAL REPRESENTATIVE (6) GUARD FILE BY ORDER ASSISTANT REGISTRAR, INCOME TAX APPELLATE TRIBUNAL, KOLKATA BENCHES, KOLKATA LAHA/SR. P.S.