Jagdamba Power & Alloys Limited, RAIPUR (CG) V. Assistant Commissioner of Income Tax-1(2), RAIPUR (CG)

ITA 165/BIL/2011

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 94009 (ITAT-RAIPUR)
• Duration Of Justice: 3 year(s) 11 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-06-2015
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: DB
• Assessment Year: 2007-2008
• Appeal Filed On: 08-07-2011
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: S K MEENA
• Assessee Lawyers: S P RAO
• Keywords: Unexplained cash credit; Business income
• Section: 143(3); 68; 132

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, RAIPUR BENCH, RAIPUR BEFORE S/SHRI MUKUL K SHRAWAT, ( JM) AND SHAMIM YAHYA,(AM) I TA . NO . 164 AND 165 / BLPR / 201 1 (ASSESSMENT YEAR S : 200 4 - 05 AND 2007 - 08 ) JAGDAMBA POWER AND ALLOYS LTD, G - 14, HIRA ARCADE, NEAR BUS STAND, PANDRI, RAIPUR (CG) VS. ASSTT. COMMISSIONER OF INCOME TAX - 1( 2 ), RAIPUR (CG), APPELLANT .. RESPONDENT PAN/GIR NO. : AABCH2706E APPELLANT BY : SHRI S P RAO RESPONDENT BY : SHRI S K MEENA DATE OF HEARING : 1 2 .6.2015 DATE OF PRONOUNCEMENT : 19 . 6. 201 5 O R D E R PER MUKUL K SHRAWAT, ( JM) : TH ESE TWO APPEALS HAVE BEEN FILED BY THE ASSESSEE ARISING FROM THE ORDER OF COMMISSIONER OF INCOME TAX (A) DATED 3. 1 2 .2 01 0 F OR THE ASSESSMENT YEAR S 200 4 - 05 AND 200 7 - 08. 2. T HE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS FOR THE ASSESSMENT YEAR (2004 - 05) : 1. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA S E THE LD. CIT(A) ERRED IN CONFIRMING THE DISALLOWANCE OF RS.20,000/ - UNDER SECTION 68 MADE BY THE AO ALLEGING THAT THE SAME IS UNEXPLAINED CASH CREDIT, WHICH IS HIGH LY AR BITRARY AND UNWARRANTED AND UNJUSTIFIED ITA. NO. 164 AND 165/ BLPR/201 1 2 3. IN THIS CASE, THE ASSESSMENT U/S 153A(1) R.W. SECTION 143(3) WAS MADE ON 31.12.2008. ACCORDING TO WHICH T HE ASSESSEE WAS SUBJECTED TO THE ACTION UNDER SECTION 132 OF THE INCOME TAX ACT, 1961 (THE ACT) . THE AO HAS MADE OBSERVATIONS THAT INCOME TAX DEPARTMENT HAS CONDUCTED SEARCH ON HIRA GROUP OF CASES ON 17.11.2006 AND THE ASSESSEE IS CONNECTED WITH THE GROUP . THE AO HAS NOTED THAT THE AMOUNT OF RS.20,000 / - WAS NOT EXPLAINED, HENCE, INVOKED THE PROVISIONS OF SECTION 68 OF THE ACT AND TAXED AS UNDER : 5. ON CROSS VERIFICATION OF INVESTMENT MADE BY SHRI H ANUMAN PRASAD AGGRAWAL FROM HIS INDIVIDUAL FILE OF TH E CORRESPONDING ASSESSMENT YEAR , IT HAS BEEN FOUND THAT THE AMOUNT OF RS.20,000/ - IS NOT REFLECTING IN HIS BALANCE SHEET WHEREAS THE COMPANY HAS CREDITED THIS AMOUNT AGAINST IN HIS NAME AGAINST SHARE APPLICATION MONEY . AS THIS IS NOT VERIFIABLE FROM THE I NDIVIDUAL FILE OF SHRI HANUMAN PRASAD AGGRAWAL AS STATED ABOVE, IT IS BEING ADDED BACK U/S 68 OF THE INCOME TAX ACT, 1961 TREATING UNEXPLAINED CASH CREDIT. FOR THIS CONCEALMENT PENALTY PROCEEDINGS UNDER SECTION 271(1)(C) OF THE INCOME TAX ACT, 1961 AR E BEING INITIATED SEPARATELY (ADDITION OF RS.2 0 ,000/ - ) 4 . WHEN THE MATTER WAS CARRIED BEFORE THE FIRST APPELLATE AUTHORITY, THE FIRST APPELLATE AUTHORITY CONFIRMED THE ACTION OF THE AO AS UNDER : 3. THIS GROUND IS DIRECTED AGAINST ADDITION OF RS.20,000/ - MADE BY THE AO U/S 68 OF THE ACT. IT WAS STATED ON BEHALF OF THE APPELLANT THAT THE IMPUGNED SUM WAS RECEIVED FROM THE DIREC TOR HANUMAN PRASAD AGRAWAL AND THE SAME WAS RECORDED IN HIS BOOKS OF ACCO UNT AND HENCE THE ADDITION OF THE SAID SUM U/S 68 IN THE CASE OF THE APPELLANT COMPANY, WAS UNJUSTIFIED. IN SUPPORT OF THIS THEORETICAL ASSERTION, NO DOCUMENTARY EVIDENCE WAS FILED. RECORD EVIDENCES THE FACT THAT CROSS VERIFICATION OF INVESTMENT MADE BY HANUMAN PRASAD AGRAWAL FROM HIS INDIVIDUAL FILE OF THE CORRESPONDING ASSESSMENT YEAR, REVEALED THAT THE SAID SUM OF RS.20,000/ - WAS NOT REFLECTED IN HIS BALANCE SHEET, WHEREAS THE APPELLANT COMPANY HAD CREDITED THIS AMOUNT AGAINST HIS NAME AS SHARE APPLICA TION MONEY. THEN V ERIFICATION CARRIED OUT BY THE AO NEGATED THE ASSERTION OF THE APPELLANT IN THIS REGARD AS FALSE. IN THE GIVEN FACTS AND CIRCUMSTANCES OF THE CASE, THE IMPUGNED SUM WAS NOTHING BUT THE UNDISCLOSED INCOME OF THE APPELLANT COMPANY, INTROD UCED IN ITS BOOKS IN THIS FORM OF SHARE APPLICATION MONEY . ITA. NO. 164 AND 165/ BLPR/201 1 3 HENCE, THIS UNPROVED CREDIT WAS CORRECTLY BROUGHT WITHIN THE AMBIT OF SECTION 68 OF THE ACT. THE ADDITION IS THEREFORE , CONFIRMED . 5. HAVING HEARD BOTH THE SIDES, WE ARE OF THE VIEW THAT IN A S ITUATION WHEN THE IMPUGNED AMOUNT WAS NOT DISCLOSED IN THE BOOKS OF ACCOUNT OF THE INVESTOR THEN THE IMPUGNED SUM WAS NOTHING BUT THE UNDISCLOSED INCOME OF THE ASSESSEE INTRODUCED IN ITS BOOKS OF ACCOUNTS UNDER THE PRETEXT OF AN INVESTMENT IN THE NAME OF T HE PARTNER WHICH WAS NOT SUBST ANT IATED. WE, THEREFORE, CONFIRM THE FINDING OF THE LD.CIT(A) ON THIS GROUND. ACCORDINGLY , THE APPEAL OF THE ASSESSEE IS HEREBY DISMISSED. 6. RESULTANTLY, THE APPEAL OF T HE ASSESSEE STANDS DISMISSED. 7. THE ASSESSEE HAS R AISED THE FOLLOWING GROUNDS FOR THE ASSESSMENT YEAR (2007 - 08): 1. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE THE LD. CIT(A) ERRED IN CONFIRMING THE AO S DISALLOWANCE OF INTEREST OF RS.2,05,775/ - WHICH WAS CLAIMED ON WORKING CAPITAL LOAN, ALL EGED THAT THE ASSESSEE COMPANY HAS NOT CHARGED INTEREST ON ACCOUNT OF LOANS AND ADVANCES GIVEN TO OTHERS, WHICH IS HIGHLY ARBITRARY AND UNWARRANTED AND UNJUSTIFIED 8 . THE ORDER PASSED U/S 153A(1) DATED 31.12.2008 , WHEREIN IT WAS NOTED THAT THE ASSESSEE HAS CLAIMED INTEREST OF RS.2,05,775/ - ON THE WORKING CAPITAL LOAN . ACCORDING TO THE AO, THERE WAS A DEBIT BALANCE IN THE ACCOUNT OF M/S JAIN CARBIDE AND CHEMICALS LTD AND M/S GODAWARI POWER AND ISPAT LTD . THE ALLEGATION OF THE AO WAS THAT THE ASSESSEE HAD NOT CHARGED INTEREST ON THE SAID ADVANCES. THE PROPORTIONATE DISALLOWANCE OF INTEREST EXPENDITURE WAS MADE BY THE AO IN THE FOLLOWING MANNER: 2.1 FURTHER, THE ASSESSEE HAS CLAIMED IN TEREST OF RS.2,05,775 / - ON WORKING CAPITAL LOAN WHICH WAS AVAILED DU RING THE YEAR . ON GOING THROUGH THE AUDITED FINANCIAL STATEMENT, IT WAS FOUND THAT DURING THE YEAR , THE ASSESSEE HAS PURCHASED RAW MATERIAL O F RS.1,48,16,105/ - AND PURCHASED RS.1,96,39,674/ - AND FURTHER SHOWN TOTAL EXPENSES OF RS.6,63,930/ - . THE AGGREGATE D AMOUNT OF THESE EXPENSES ITEM ARE RS.3,51,19,709 / - . IN SCHEDULE K TO THE ITA. NO. 164 AND 165/ BLPR/201 1 4 BALANCE SHEET THE ASSESSEE HAS SHOWN SUNDRY CREDITORS FOR GOODS SERVICES AND EXPENSES AT RS.3,63,87,572/ - WHICH IS EXCESS OF TOTAL PURCHASES AND EXPENSES OF TRADING AND PROFIT AND LOSS ACCOUNT. THESE FACTS CLEARLY SHOWN THAT THE AMOUNT OF WORKING CAPITAL LOANS WERE NOT UTILIZED ON PURCHASE OF TRADING GOODS, CONSUMABLE GOODS OR EXPENSES BUT THE SAME WERE UTILIZED EITHER ON THE CAPITAL GOODS OR ELSEWHERE. IN SCHEDULE J THERE IS A MOUNT OF RS.2,03,71,083/ - UNDER THE HEAD ADVANCES RECOVERABLE IN KIND OR CASH FOR VALUE TO BE RECOVERED. THE TOTAL SALES OF THE ASSESSEE DURING THE YEAR WAS ONLY RS.47,11,938/ - ONLY . THESE FACTS INDICATED THAT SUBSTANTIAL AMOUNT OUT OF RS.2,03,71,083/ - W AS LOANS AND ADVANCES GIVEN TO OTHERS ALSO THERE WAS INVESTMENT IN SHARES OF RS.33,14,760/ - , THE DIVIDEND ON WHICH ARE EXEMPTED INCOME. ALSO THERE WAS OPENING DEBIT BALANCE OF RS.7,52,75,000 / - AS ON 1.4.2006 IN T HE ACCOUNT OF M/S JAIN CARBIDE AND CHEMICA LS LTD. AND M/S GODAWARI POWER AND ISPAT LTD. THE ASSESSEE HAS NOT CHARGED INTEREST ON ACCOUNT OF LOANS AND ADVANCES GIVEN. THEREFORE, PROPORTIONATELY THE INTEREST EXPENSES ARE DISALLOWABLE. KEEPING IN VIEW OF THE ABOVE DISCUSSIONS, THE AMOUNT OF INTERES T OF RS.2,05,775 / - CLAIMED ON WORKING CAPITAL LOAN DISALLOWED AND ADDED TO THE TOTAL INCOME OF THE ASSESSEE . 9 . WHEN THE MATTER WAS CARRIED BEFORE THE LD.CIT(A), THE ASSESSEE HAS EXPLAINED THAT THERE WAS SUFFICIENT RESERVES AND CAPITA L , HENCE PROPORTION ATE DISALLOWANCE WAS BAD IN LAW. IT HAS ALSO BEEN PLEADED THAT THE AMOUNT REPRESENTED THE BUSINESS TRANSACTION , THEREFORE NOT CHARGING OF INTEREST WAS THE BUSINESS DECISION WHICH SHOULD NOT HAVE BEEN DISTURBED BY THE AO THAT TOO MERELY ON PRESUMPTION. HO WEVER, THE LD. CIT(A) WAS NOT CONVINCED AND AFFIRMED THE ACTION OF THE AO. 10 . WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE RECORD AVAILABLE BEFORE US. WE NOTE THAT THE AO HAS EXAMINED THE AVAILABILITY OF FUNDS OF THE ASSESSEE AS WELL AS UTILIZATION OF FUNDS TOWARD S PURCHASE OF RAW MATERIAL ETC AS ALSO THE EXPENDITURE INCURRED. ON THE BASIS OF RELEVANT ACCOUNT, HE ARRIVED AT A CONCLUSION THAT THE SUBSTANTIAL AMOUNT WAS GIVEN AS LOAN ON WHICH NO INTEREST WAS CHARGED . ONCE, THE AO HAS DEMONSTRATED ON THE BASIS OF FIGURES THAT THE INTEREST FREE ADVANCE WAS GIVEN BY THE ASSESSEE TO M/S JAIN CARBIDE AND CHEMICALS LTD. AND M/S GODAWARI POWER AND ISPAT LTD, THEN IT WAS THE DUTY OF THE ASSESSEE TO ITA. NO. 164 AND 165/ BLPR/201 1 5 REBUT THOSE CHARGES. THE ASSESSEE HAS NOT DEMONSTRATED THAT THE INTEREST FREE FUNDS WERE UTILIZED TO GIVE LOAN TO THESE TWO CONCERNS. THE ONUS WAS ON THE ASSESSEE TO ESTABLISH THE NEXUS THAT THERE WERE SUFFICIENT INTEREST FREE FUNDS WHICH WERE ACTUALLY ADVANCED TO THESE TWO CONCERNS WITHOUT CHARGING THE INTEREST. WE HAVE PERUSED THE DECISION OF THE BILASPUR BENCH OF THE TRIBUNAL IN THE CASE OF ACIT V/S M/S MADHU FERTILIZERS LTD IN ITA NO.197/BLPR/2010 (AY - 2007 - 08) DATED 10.2.2012, WHEREIN THE ASSESSEE HAS DULY ESTABLISHED THAT IN VIEW OF SUFFICIENT INTEREST FR EE FUNDS , THE INTEREST FREE ADVANCES WERE GIVEN, THEREFORE, NO DISA LLO WANCE WAS CALLED FOR. RATHER THE FINDING OF FACTS WAS GIVEN THAT THE ASSESSEE HAS ESTABLISHED THAT THE INTEREST FREE ADVANCES WERE GIVEN TO TWO CONCERNS OUT OF AVAILABLE INTEREST FREE FU NDS. ON THE CONTRARY , IN THIS APPEAL, THE ASSESSEE HAS NOT PLACED ON RECORD ANY SUCH NEXUS TO ESTABLISH THAT THE INTEREST FREE ADVANCES WERE GIVEN OUT OF THE NON - INTEREST BEARING FUNDS AVAILABLE WITH THE ASSESSEE. WE HAVE NOTED THAT BOTH THE AUTHORITIES BELOW HAVE GIVEN CLEAR CUT FINDING THAT THERE WAS NO AVAILABILITY OF INTEREST FREE FUNDS WITH THE ASSESSEE, HENCE, THE ASSESSEE SHOULD HAVE CHARGED THE INTEREST FROM THE TWO CONCERNS WHEN THE ADVANCES WERE MADE FROM INTEREST BEARING FUNDS. LIKEWISE THE OTHER CASE LAW CITED BY THE ASSESSEE IN THE CASE OF JCIT V/S BEEKAY ENGINEERING CORPORATION (2010) 325 ITR 0384(CHHATTISGARH) IS OF NO HELP TO THE ASSESSEE BECAUSE, THE FINDING OF THE HOLNBLE HIGH COURT WAS BASED UPON THE CASE OF CIT V/S HOTEL SAVERA (1998) 148 CTR (MAD) 585 WHICH WAS ON THE POINT OF MIXED ACCOUNT OF OWN FUNDS AND BORROWED FUNDS. RESULTANTLY, WE HEREBY CONFIRM THE FINDINGS OF THE AUTHORITIES BELOW AND DISMISS THE GROUND OF THE ASSESSEE. 11. IN THE RESULT, THE APPEAL S OF THE ASSESS EE ARE DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 19 JUNE , 201 5 SD SD ( SHAMIM YAHYA ) ( MUKUL K SHRAWAT ) ACCOUNTANT MEMBER JUDICIAL MEMBER RAIPUR : 19TH JUNE,2015. ITA. NO. 164 AND 165/ BLPR/201 1 6 SRL , SR. PS COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT 2. THE RESPONDENT. 3. THE CIT(A) - CONCERNED 4. CIT CONCERNED 5. DR, IT AT, RAIPUR CONCERNED 6. GUARD FILE. BY ORDER, SENIOR PRIVATE SECRETARY /AR ,