SHRI NITIN SUDHAKAR ZAPARDE, Akola V. ITO, WARD- 3, Akola

ITA 159/NAG/2017

• Counselvise Citation: [2018] 125 COUNSELVISE.COM (IT) 5404 (ITAT-NAGPUR)
• Duration Of Justice: 1 year(s) 2 month(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 02-07-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Assessment Year: 2012-2013
• Appeal Filed On: 27-04-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: R K BARAL
• Section: 69C; 143(3); 234B; 69

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL NAGPUR BENCH, NAGPUR BEFORE SHRI SHAMIM YAHYA , ACCOUNTANT MEMBER AND SHRI RAM LAL NEGI , JUDICIAL MEMBER ITA NO. 159 /NAG. / 2017 ( ASSESSMENT YEAR : 2012 - 13 ) SHRI NITIN SUDHAKAR ZAPARDE PROP. OF ORBIT ENGINEERING, SHIVAJI NAGAR, AKOLA PAN AAFPZ 6571 Q APPELLANT V/S INCOME TAX OFFICER WARD - 3, AKOLA .... RESPONDENT A S SESSEE BY : SHRI K. P. DEWANI REVENUE BY : SHRI R. K. BARAL DATE OF HEARING 09.05.2018 DATE OF ORDER 02.07 .2018 O R D E R PER SHAMIM YAHYA , A .M. THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF THE LD. COMMISSIONER OF INCOME TAX (APPEALS) - 1, NAGPUR DATED 02.02.2017 AND PERTAINS TO THE ASSESSMENT YEAR 2012 - 13. 2. THE GROUNDS OF APPEAL READ AS UNDER: 1. THE HON'BLE CIT(A) ERRED IN CONFIRMING ADDITION AT RS.28,68,747/ - U/S41(1)OF IT. ACT 1961. 2. THE ADDITION MADE BY A.O. AT RS.28,68,747/ - AND CONFIRMED BY HON'BLE CIT(A) U/S 41(1) OF IT. ACT 1961 IS UN JUSTIFIED, UNWARRANTED AND EXCESSI VE. 3. THE HON'BLE CIT(A) ERRED IN CONFIRMING THE ADDITION AT RS.45,000/ - U/S 36(1)(III) OF IT. ACT 1961. 4. THE ADDITION MADE BY A.O. AT RS.45,000/ - AND CONFIRMED BY CIT(A) U/S 36(1)(III) IS UNJUSTIFIED, UNWARRANTED AND EXCESSIVE. 2 ITA NO. 159/NAG./2017 5. THE HON'BLE CIT(A) ER RED IN CONFIRMING THE ADDITION AT RS.16.050/ - U/S 69C OF IT. ACT 1961. 6. THE ADDITION MADE BY A.O. AT RS.16,050/ - AND CONFIRMED BY CIT(A) U/S 69C IS UNJUSTIFIED, UNWARRANTED AND EXCESSIVE. 7. THE ASSESSEE DENIES LIABILITY TO BE ASSESSED TO INTEREST U/S 23 4A, 234B & 234C OF INCOME TAX ACT 1961. WITHOUT PREJUDICE THE INTEREST LEVIED U/S 234A, 234B AND 234C IS UNJUSTIFIED AND UNWARRANTED. APROPOS GROUND RELATING TO ADDITION U/S. 41(1) OF THE ACT: 3. THE ASSESSEE IN THIS CASE IS AN ELECTRICAL AND MANPOWER CONTRACTOR. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER NOTED THAT THE ASSESSEE HAS OUTSTANDING SUNDRY CREDITOR S ( T RADE PAYABLE AT RS. 3 4,74,960/ - ). THE ASSESSING OFFICER OBTAINED CONFIRMATION FROM THESE PARTIES AND COMPA RED THE SAME WITH THE BOOKS OF THE ASSESSEE. HE FOUND FOLLOWING DISCREPANCIES : SR. NO. NAME OF PARTY (CREDITOR) LIABILITY AS PER ASSESSEES BOOK OF ACCOUNTS AS ON 31.03.2012 LIABILITY AS ASSESSEE AS ON 31.03.2012 AS PER CONFIRMATION LETTERS PRODUCED BY PARTY AT COL. NO. 2 DIFFERENCE (3 - 4) 1 2 3 4 5 1 RIDDHI SIDDHI CABLES, AMRAVAIT 171442 23278 148164 2 TIRUPATI PRESTRESS, KUHA 596251 297313 298938 3 SKIPPER INDUSTRIES, NASHIK 286650 0 286650 4 YASH STEEL ENTERPRISES, NAGPUR 11590920 0 1590920 5 TATKAL ELECTRICALS, NAGPUR 668428 200000 468428 6 SKIPPER ENGINEERS, AKOLA 22597 0 22597 7 ASHELSHA POWER CONTROLS P. LTD. 53050 0 53050 TOTAL 3389338 520591 2868747 4. THE ASSESSING OFFICER INVOKED THE PROVISIONS OF SECTION 41(1) OF THE ACT AND ADDED THE AFORE - SAID SUM OF RS. 2 8,68,747/ - . 5. UPON THE ASSESSEES APPEAL, THE LD. COMMISSIONER OF INCOME TAX (APPEALS) CONFIRMED THE ADDITION. 3 ITA NO. 159/NAG./2017 6. AGAINST THIS ORDER, THE ASSESSEE IS IN APPEAL BEFORE US. 7. WE HAVE HEARD BOTH THE COUNSELS AND PERUSED THE RECORDS. THE LD. COUNSEL OF THE ASSESSEE SUBMITTED THAT THE ASSESSING OFFICER HAS NOT RECORDED ANY FINDING AS TO ALLOWABILI T Y OF THE AFORE - SAID S UM IN ANY OF THE EARLIER YEAR AND REMISSION OF THE SAME DURING THE PREVIOUS YEAR IN ORDER TO MAKE ADDITION U/S . 41(1) OF THE ACT. HE FURTHER SUBMITTED THAT THE ASSESSING OFFICER HAS NOT DISPUTED THE PURCHASES. HE FURTHER SUBMITTED THAT IN CASE OF THE A SSESSEE FOR ASSESSMENT YEAR 2014 - 15, THE ASSESSMENT HAS BEEN COMPLETED U/S. 143(3) OF THE ACT, WHEREIN THE REPAYME NT MADE TO THE AFORESAID CREDITORS HAS BEEN ACCEPTED BY THE ASSESSING OFFICER. THE LD. COUNSEL OF THE ASSESSEE FURTHER SUBMITTED THAT THE NET PROFIT DECLARED DURING THE YEAR IS 5.41% AS AGAINST THAT ACCEPTED IN THE ASSESSEES OWN CASE IN EARLIER YEAR AT 4. 91% OF THE TURNOVER. . IT HAS BEEN FURTHER SUBMITTED THAT FOR ASSESSMENT YEAR 2014 - 15 IN ASSESSMENT FRAMED U/S. 143(3) OF THE ACT, THE INCOME IS ASSESSED AT RS.11,29,155/ - WHICH WORKS AT 6.58% OF THE TURNOVER. IT HAS BEEN FURTHER SUBMITTED THAT NO INFORMATI ON HAS BEEN OBTAINED BY THE ASSESSING OFFICER NOR ANY MATERIAL BROUGHT ON RECORD THAT ANY PAYMENT MADE BY THE ASSESSEE IS NOT ON RECORD. IT IS FURTHER BEEN SUBMITTED THAT IF THE IMPUGNED ADDITIONS ARE MADE, THE PROFIT WORKS OUT TO 29.64% OF THE TURNOVER WHICH IS INCONCEIVABLE. HENCE, IT HAS BEEN PRAYED THAT THE ADDITION MAY BE DELETED. 8. PER CONTRA, THE LD. DEPARTMENTAL REPRESENTATIVE RELIED UPON THE ORDERS OF THE AUTHORITIES BELOW. 9. UPON CAREFUL CONSIDERATION, WE NOTE THAT THE ADDITION HAS BEEN MADE U/S. 41(1) OF THE ACT ON ACCOUNT OF TRADE CREDITORS FOR PURCHASES MADE EARLIER. THIS HAS BEEN DONE ON 4 ITA NO. 159/NAG./2017 ACCOUNT OF CONFIRMATION OBTAINED BY THE ASSESSING OFFICER FROM THESE CREDITORS AND THE RE COMPARISON WITH THE ASSESSEES BOOKS. WE NOTE THAT IT IS THE SUBMISSION OF THE LD. COUNSEL OF THE ASSESSEE THAT THE BALANCES OF THESE CREDITORS WERE OUTSTANDING AND THERE IS NO CASE OF REMISSION. FOR SUPPORT OF THIS PROPOSITION , IT HAS BEEN SUBMITTED IN ASSESSMENT YEAR 20 14 - 15 IN ASSESSEES OWN CASE IN ASSESSMENT COMPLETED U/S. 143(3) REPAYMENT MADE TO THE AFORE - SAID CREDITORS HAS BEEN ACCEPTED BY THE ASSESSING OFFICER. WE FIND THAT THE REVENUE CANNOT TAKE CONTRADICTORY STANDS WH EN IT IS ACCEPTING THE REPAYMENT TO THESE CREDITORS . S UBSEQUENTLY , IT CANNOT HOLD THE SAME TO BE NO LONGER PAYABLE AND MAKE ADDITION U/S. 41(1) OF THE ACT. FURTHERMORE, NO MATERIAL HAS BEEN BROUGHT ON RECORD FOR THE INF ERENCE THAT ANY PAYMENT HAS BEEN MADE OUTSIDE THE BOOKS. THE PROPOSED ADDITION WOULD LEAD TO A PROFIT RATIO OF 29.64% WHICH HAS RIGHTLY BEEN POINTED OUT BY THE LD. COUNSEL OF THE ASSESSEE , IS INCONCEIVABLE AS IN ASSESSEES OWN CASE FOR THE EARLIER SEVERAL YEARS FOR THE PROFIT RANGED BETWEEN 5 TO 7% . IN THESE CIRCUMSTANCES, IN OUR CONSIDERED OPINION, THE ADDITION U/S. 41(1) OF THE ACT IS NOT JUSTIFIED. ACCORDINGLY, WE SET ASIDE THE ORDERS OF THE AUTHORITIES AND DELETE THE ADDITION. APROPOS ADDITION U/S. 36(1)(III) OF THE ACT 10. ON THIS ISSUE , THE ASSESSING OFFICER NOTED THAT THE CASH OF RS.6 LACS HAS BEEN CREDITED IN JIJAU COMMERCIAL CO - OP. BANK, AKOLA ON 18.07.2011 AS PER THE ASSESSEES CASH BOOK. HOWEVER, AS PER THE BANK STATEMENT FILED , THE CORRESPONDING ENTRY IN THE BANK IS REFLECTED ON 0 8.12.2011. HENCE, THE ASSESSING OFFICER INFERRED THAT THE ASSESSEE HAS UTILIZED THIS AMOUNT FOR NON BUSINESS PURPOSE FOR FIVE MONTHS. THE ASSESSING OFFICER DID NOT ACCEPT THE EXPLANATION THAT DUE TO CLERICAL MISTAKE ON THE PART OF THE ACCOUNTANT, THE DATE OF ENTRY REMAIN S TO BE CHANGED DUE TO OVERSIGHT. HOWEVER, THE ASSESSING OFFICER 5 ITA NO. 159/NAG./2017 WAS NOT CONVINCED. HE ADDED THE INTEREST @ 18% FOR FIVE MONTHS IN THIS REGARD AND DISALLOWED RS.45,000/ - U/S. 36(1)(III) OF THE ACT. 11. UPON THE ASSESSEES APPEAL, THE LD. CO MMISSIONER OF INCOME TAX (APPEALS) CONFIRMED THE ADDITION. 12. AGAINST THIS ORDER, THE ASSESSEE IS IN APPEAL BEFORE US. 13. WE HAVE HEARD BOTH THE COUNSELS AND PERUSED THE RECORDS. IN THIS REGARD, THE LD. COUNSEL OF THE ASSESSEE SUBMITTED THAT THE CAPIT AL OF PROPRIETOR IS RS.61.67 LACS . HE NCE, THERE IS NO SCOPE OF DISALLOWANCE U/S. 36(1)(III) OF THE ACT. IN THIS REGARD, THE LD. COUNSEL OF THE ASSESSEE PLACED RELIANCE UPON THE DECISION OF HON'BLE BOMBAY HIGH COURT IN THE CASE OF M/S. RELIANCE UTILITIES PV T. LTD . REPORTED AT 3 13 ITR 340. HENCE, THE LD. COUNSEL OF THE ASSESSEE SUBMITTED THAT THERE IS NO JUSTIFICATION OF ADDITION IN THIS REGARD. 14. PER CONTRA, THE LD. DEPARTMENTAL REPRESENTATIVE RELIED UPON THE ORDERS OF THE AUTHORITIES BELOW. 15. UPON C AREFUL CONSIDERATION, WE FIND THAT THE ADDITION MADE IN THIS REGARD IS BIZARRE TO SAY THE LEAST. THE CASH - IN - HAND OVER THE CERTAIN PERIOD OF TIME, BY NO STRETCH OF IMAGINATION , CAN LEAD TO DISALLOWANCE U/S. 36(1)(III) OF THE ACT UNLESS COGENT MATERIAL IS BROUGHT ON RECORD THAT THE SAME HAS BEEN UTILIZED BY THE ASSESSEE FOR UNDISCLOSED PURPOSE. MOREOVER, AS RIGHTLY POINTED OUT BY THE LD. COUNSEL OF THE ASSESSEE, THE CAPITAL OF THE PR OPRIETOR IS RS.61.17 LACS. HENCE, THE ASSESSEE IS HAVING SUFFICIENT INTEREST BEARING OWN FUNDS. HENCE, ON THE TOUCH STONE OF THE HON'BLE JURISDICTIONAL HIGH COURT DECISION IN THE CASE OF M/S. RELIANCE UTILITIES PVT. LTD (SUPRA), THE DISALLOWANCE U/S. 36(1) (III) OF THE 6 ITA NO. 159/NAG./2017 ACT FOR THE DIVERSION OF INTEREST BEARING FUNDS IS NOT AT ALL SUSTAINABLE IN THIS CASE. HENCE, WE SET ASIDE THE ORDERS OF THE AUTHORITIES BELOW AND DELETE THE ADDITION. APROPOS ADDITION U/S. 69C OF THE ACT 16. ON THIS ISSUE, THE ASSESSING OFF ICER COMPUTED NEGATIVE CASH BALANCE ON 01.04.2011 IN ASSESSEES BOOKS AT RS.16,050/ - . HE ADDED THE SAME U/S. 69 C OF THE ACT. 17. UPON THE ASSESSEES APPEAL, THE LD. COMMISSIONER OF INCOME TAX (APPEALS) CONFIRMED THE SAME. 18. IN THIS REGARD, THE ASSESS ING OFFICER HAS MADE THE FOLLOWING COMPUTATION: OPENING BALANCE AS ON 01.04.2011 RS.25,450/ - ADD: CASH RECEIVED ON 01.04.2011 RS.NIL TOTAL CASH AVAILABLE ON 01.04.2011 RS.25,450/ - LESS: CASH PAID ON 01.04.2011 RS.41,500/ - HENCE NEGATIVE/SHORT CASH AS ON 01.04.2011 RS.( - )16,050/ - 19. THE DETAILS OF RS.41,500/ - HAS BEEN SAID TO BE LABOUR CHARGES PAYMENT OF RS.19, 5 00/ - AND WITHDRAWAL BY ASSESSEE HIMSELF OF RS.22,000/ - . IN THIS REGARD, THE LD. COUNSEL OF THE ASSESSEES CONTENTION IS THAT THE ASSESSEE HAS NOT CLAIMED THE UTILIZATION OF SELF WITHDRAWAL ON 01.04.2011 FOR ANY INVESTMENT/EXPENDITURE. HENCE, IT HAS BEEN CLAIMED THAT THERE IS NO NEGATIVE OR SHORT CASH BALANCE. 20. UPON CAREFUL CONSIDERATION, WE NOTE THAT SINCE RS.22,000/ - WAS CLAIMED TO BE WIT HDRAWAL BY THE ASSESSEE HIMSELF AGAINST WHICH NO INVESTMENT/EXPENDITURE HAS BEEN CLAIMED, THE ASSESSEES CONTENTION IS ACCEPTABLE. AS THE ONLY OUTSTANDING PAYMENT FOR THAT DAY IS RS.20,500/ - WHICH CAN BE MADE FROM THE OPENING BALANCE OF RS.29,450/ - . ACCORD INGLY, WE SET ASIDE THE ORDERS OF THE AUTHORITIES BELOW AND DELETE THE ADDITION. 7 ITA NO. 159/NAG./2017 21. IN THE RESULT, THIS APPEAL BY THE ASSESSEE STANDS ALLOWED. O RDER PRONOUNCED BY LISTING THE RESULT ON THE NOTICE BOARD OF THE BENCH UNDER RULE 34(4) OF THE APPELLATE TRIBUNAL RULES, 1963. SD/ - RAM LAL NEGI JUDICIAL MEMBER SD/ - SHAMIM YAHYA ACCOUNTANT MEMBER DATED : 02.07.2018 COPY OF THE ORDER FORWARDED TO : (1) THE ASSESSEE; (2) THE REVENUE; (3) THE CIT(A); (4) THE CIT, NAGPUR CITY CONCERNED; (5) THE DR, ITAT, NAGPUR ; (6) GUARD FILE . // TRUE COPY // BY ORDER ROSHANI , SR. PS ( SR. P.S. / P.S. ) ITAT