Income Tax Officer, Ward-1, Sangareddy V. Classic Agro Foods, Sangareddy

ITA 1725/Hyd/2017

• Counselvise Citation: [2018] 126 COUNSELVISE.COM (IT) 2412 (ITAT-HYDERABAD)
• Duration Of Justice: 5 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-03-2018
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 16-05-2018
• Assessment Year: 2013-2014
• Appeal Filed On: 05-10-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: N SWAPNA
• Assessee Lawyers: A V RAGHURAM
• Keywords: Unexplained cash credit
• Section: 43B; 133(6); 68

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCHES B SMC BENCH: HYDERABAD BEFORE SHRI D. MANMOHAN, VICE PRESIDENT ITA. NO.1725/HYD/2017 ASSESSMENT YEAR: 2013 - 2014 INCOME TAX OFFICER, WARD - 1, SANGAREDDY. VS. M/S. CLASSIC AGRO FOODS, PLOT NO.63/64, IDA, PHASE - IV, PATANCHERU, SANGAREDDY DISTRICT. PAN: AAFFC 7884 B (APPELLANT) (RESPONDENT) FOR ASSESSEE: SHRI A.V. RAGHURAM FOR REVENUE : SMT. N. SWAPNA DATE OF HEARING : 20.03.2018 DATE OF PRONOUNCEMENT : 20.03.2018 ORDER PER D. MANMOHAN , VP. THIS APPEAL BY THE REVENUE IS DIRECTED AGAINST THE ORDER PASSED BY LD. CIT(A) - 2, HYDERABAD AND IT PERTAINS TO ASSESSMENT YEAR 2013 - 14. FOLLOWING GROUNDS WERE URGED BEFORE THE TRIBUNAL. (1) THE ORDER OF THE LD. CIT(A) IS ERRONEOUS AND CONTRAR Y TO THE FACTS OF THE CASE. (2) THE LD. CIT(A) ERRED IN ALLOWING THE BOGUS UNSECURED LOAN AMOUNT WHEN THE ASSESSEE FAILED TO PROVE THE MINIMUM REQUIREMENT OF THE LOAN CREDITORS IDENTITY, EITHER AT THE ASSESSMENT STAGE OR AT THE APPELLATE STAGE. (3) THE LD. CIT(A) ERRED IN HOLDING THAT THE LOAN IS CONTINUING FROM 01.07.2008 WHEN THE ASSESSEE COULD NOT PRODUCE EVIDENCE TO THAT EFFECT EITHER AT THE ASSESSMENT STAGE OR AT THE APPELLATE STAGE. (4) THE LD. CIT(A) ERRED IN DELETING THE DISALLOWANCE MADE U/S 36(1)(VA) ON EMPL OYEES CONTRIBUTION TO PF / ESI, ON THE GROUND THAT THE ASSESSEE REMITTED THE AMOUNTS BEFORE FILING OF RETURN, WHEN THERE IS NO SUCH SANCTION IN THE ACT. (5) THE LD. CIT(A) ERRED IN APPRECIATING THAT SECTION 36(1)(VA) PERTAINS TO EMPLOYEES CONTRIBUTION AND SE CTION 43B PERTAINS TO EMPLOYERS CONTRIBUTION AND THAT BOTH THE SECTIONS OPERATE INDEPENDENTLY AND THERE IS NO PROVISIONS IN THE ACT THAT PROVIDES FOR IMPORTING THE EXTENDED TIME PERIOD IN SECTION 43B TO LIMITED TIME PERIOD IN SECTION 36(1)(VA). 2. FACTS NECESSARY FOR THE DISPOSAL OF THE APPEAL ARE STATED IN BRIEF. THE ASSESSEE - FIRM IS ENGAGED IN THE BUSINESS OF MANUFACTURE AND SALE OF WHEAT PRODUCTS. FOR THE YEAR UNDER CONSIDERATION IT ADMITTED A TOTAL INCOME OF RS. 7,49,170/ - . DURING THE SCRUTIN Y PROCEEDINGS, THE A.O. NOTICED THAT THE ASSESSEE HAD TAKEN UNSECURED LOAN FROM M/S. VISHWAMITRA INDIA FINVEST SERVICES LTD. THOUGH ASSESSEE FURNISHED THE NAME AND ADDRESS OF THE CREDITOR, THE ASSESSEE COULD NOT FURNISH THE CONFIRMATION LETTERS WITH SUPPO RTING EVIDENCE. EVEN THE LETTER ADDRESSED TO THE ABOVE ADDRESS U/S 133(6) OF THE INCOME TAX ACT, 1961 WAS RETURNED UNSERVED. AT THAT STAGE, THE ASSESSEE HAS FURNISHED A DIFFERENT ADDRESS WHICH WAS ALSO FOUND TO BE NOT CORRECT. UNDER THESE CIRCUMSTANCE S, THE A.O. CONCLUDED THAT THE UNSECURED LOAN REFLECTED IN THE NAME OF M/S. VISHWAMITRA INDIA FINVEST SERVICES LTD., IS A BOGUS ONE, AS THE IDENTITY OF THE PERSON IS NOT PROVED. HE THEREFORE BROUGHT TO TAX THE SAID AMOUNT U/S 68 OF THE ACT. 2. SIMILARLY IT WAS NOTICED THAT THE ASSESSEE REMITTED PF AND ESI IN THE RESPECTIVE EMPLOYEES ACCOUNT AFTER THE DUE DATES. THEREFORE, THE A.O. DISALLOWED THE SAME ON THE GROUND THAT THEY ARE IN VIOLATION OF SECTION 36(1)(VA) OF THE ACT. 3. AGGRIEVED, ASSESSEE CONTEN DED BEFORE THE LD. CIT(A) THAT THE A.O. ERRED IN TREATING THE CASH CREDIT AS BOGUS , OVERLOOKING THE FACT THAT THERE IS NO BORROWAL IN THIS YEAR. IT WAS ALSO SUBMITTED THAT THE INTEREST WAS PAID ON THE SAID LOAN WHICH WAS ACCEPTED BY THE TAX AUTHORITIES FR OM YEAR TO YEAR SINCE THE LOAN WAS ORIGINALLY TAKEN DURING THE FINANCIAL YEAR 2011 - 12. 4. LD. CIT(A) OBSERVED THAT THE OUTSTANDING CREDIT IN THE NAME OF M/S. VISHWAMITRA INDIA FINVEST SERVICES LTD., TO THE TUNE OF RS. 9,92,861/ - COMPRISES INTEREST OF RS. 7,43,961/ - AND IT IS NOT THE LOAN AMOUNT. IT WAS FURTHER SUBMITTED THAT THE LOAN WAS TAKEN IN THE EARLIER YEAR WHICH WAS ACCEPTED BY THE TAX AUTHORITIES. 5. LD. CIT(A) VERIFIED THE LEDGER ACCOUNTS AND NOTICED THAT THE ASSESSEE OWES A SUM OF RS. 99,28,861 / - AS ON 31.03.2013 (THIS FIGURE IS WRONGLY BEEN TAKEN BY THE A.O. AS RS. 9,92,861/ - ) TO M/S. VISHWAMITRA INDIA FINVEST SERVICES LTD., AND THE INTEREST CREDITED IS RS. 7,43,961/ - . THE LEDGER ACCOUNTS CLEARLY DEPICT S THAT THE ASSESSEE HAS NOT BORROWED FUND S FROM M/S. VISHWAMITRA INDIA FINVEST SERVICES LTD., DURING THE YEAR UNDER CONSIDERATION AND HENCE THE ADDITION OF RS. 9,92,861/ - WAS DELETED BY THE LD. CIT(A). 6. WITH REGARD TO PAYMENT OF ESI / PF, THE LEARNED COUNSEL FOR THE ASSESSEE RELIED UPON THE D ECISION OF THE ITAT HYDERABAD A BENCH (ITA NO.143/HYD/2013) WHEREIN THE TRIBUNAL FOLLOWED THE JUDGMENT OF THE HONBLE SUPREME COURT IN THE CASE OF ALOM EXTRUSIONS LTD., [2009] (319 ITR 306) (SC) TO CONTEND THAT SO LONG AS THE PAYMENT WAS MADE BEFORE THE DUE DATE OF FILING OF RETURN U/S 139(1) OF THE ACT, THERE CANNOT BE ANY DISALLOWANCE ON THE GROUND THAT THE AMOUNT WAS NOT PAID WITHIN THE STIPULATED PERIOD PROVIDED U/S 36(1)(VA) OF THE ACT. LD. CIT(A) ACCEPTED THE CONTENTION OF THE ASSESSEE. 7. AGGRIEVED, REVENUE IS IN APPEAL BEFORE THE TRIBUNAL. 8. LEARNED DEPARTMENTAL REPRESENTATIVE SUBMITTED THAT THE LOAN IS BOGUS AND HENCE THE A.O. WAS JUSTIFIED IN DISALLOWING CASH CREDIT. 9. ON THE OTHER HAND, LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THA T NO LOAN WAS TAKEN IN THIS YEAR. WHEN CALLED UPON TO EXPLAIN AS TO WHETHER INTEREST COMPONENT WAS CLAIMED AS DEDUCTION IN THE EARLIER YEAR, LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE INTEREST COMPONENT WAS ALLOWED FROM YEAR TO YEAR AND THE CREDI T WAS DUE FROM 01.07.2008. THERE WERE ALSO REPAYMENT OF CREDITS AND IN THIS YEAR ONLY INTEREST COMPONENT OF RS. 7,43,961/ - WAS CREDITED AND THE SAME CANNOT BE TREATED AS UNEXPLAINED CREDIT. WHEN THE LOAN WAS TREATED AS UNEXPLAINED IN THE EARLIER YEARS, T HE INTEREST CREDITED CANNOT BE DISALLOWED IN THIS ASSESSMENT YEAR. 10. I HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSIONS AND PERUSED THE RECORD. IT APPEARS THAT THE ASSESSING OFFICER SOUGHT TO DISALLOW ONLY THE LOAN COMPONENT, U/ S 68 OF THE ACT, BUT THE FACT REMAINS THAT THE LOAN WAS TAKEN IN THE EARLIER YEARS. UNDER THESE CIRCUMSTANCES, I DO NOT FIND ANY INFIRMITY IN THE ORDER OF THE LD. CIT(A). IF THE LOAN IS FOUND TO BE BOGUS, HAVING REGARD TO THE FACT THAT THE ASSESSEE HAS NOT PROVED THE EXISTENCE O F THE PARTY, THE INTEREST COMPONENT WOULD HAVE BEEN DISALLOWED FROM YEAR TO YEAR BUT IT APPEARS THAT NO SUCH ACTION WAS TAKEN BY THE ASSESSING OFFICER. HOWEVER, SINCE THE ASSESSING OFFICER HAS NOT RESORTED TO ANY OTHER PROVISIONS FOR DISALLOWING INTEREST, THE DEPARTMENT HAVING NOT FURNISHED ANY MATERIAL TO HIGHLIGHT THAT THE ASSESSING OFFICER SOUGHT TO DISALLOW THE INTEREST COMPONENT, IT IS NOT NECESSARY FOR ME TO GO INTO THE OTHER ASPECTS. SUFFICE TO SAY THAT THE ADDITION MADE U/S 68 OF THE AC IS BAD IN LAW. 11. THE OTHER ISSUE INVOLVED IN THIS APPEAL IS WITH REGARD TO DISALLOWANCE U/S 36(1)(VA) OF THE ACT. AS RIGHTLY POINTED OUT BY THE LEARNED COUNSEL FOR THE ASSESSEE, THIS ISSUE IS COVERED BY THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE OF ALOM EXTRUSIONS (SUPRA) AND , THE ITAT HYDERABAD BENCH ES HAVING BEEN TAKEN THE SAME STAND IN SEVERAL CASES I.E., IN THE CASE OF VBC INDUSTRIES LTD., (ITA NO.143/HYD/2013) DATED 08.05.2015 THE BENCH HELD THAT SO LONG AS THE PAYMENT IS MADE BEFORE THE DUE DAT E OF FILING OF RETURN U/S 139(1) OF THE ACT, THE AMOUNT CANNOT BE DISALLOWED EITHER U/S 36(1)(VA) OR U/S 43B OF THE ACT. CONSISTENT WITH THE VIEW TAKEN THEREIN, I UPHOLD THE ORDER PASSED BY THE LD. CIT(A). 12. IN THE RESULT, APPEAL FILED BY THE REVENUE I S DISMISSED. SD/ - (D. MANMOHAN) VICE PRESIDENT HYDERABAD, DATED: 20 TH MARCH, 2018. OKK, SR.PS COPY TO 1. M/S. CLASSIC AGRO FOODS, PLOT NO.53 & 64, IDA, PHASE - IV, PATANCHERU, SANGAREDDY DISTRICT. 2. THE INCOME TAX OFFICER, WARD - 1, AAYAKAR BHAVAN, VEERABHADRA NAGAR, SANGAREDDY. 3. CIT (A) - 2, HYDERABAD. 4. PR. CIT - 2, HYDERABAD. 5. DR, ITAT, HYDERABAD. 6. GUARD FILE