Sanket Industries Limited, Aurangabad V. Income-tax Officer, Ward - 2, Jalna

ITA 1958/PUN/2017

• Counselvise Citation: [2022] 105 COUNSELVISE.COM (IT) 7081 (ITAT-PUNE)
• Duration Of Justice: 4 year(s) 6 month(s) 24 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 10-03-2022
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2012-2013
• Appeal Filed On: 16-08-2017
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Keywords: Unexplained cash credit; Onus to prove; Condonation of delay
• Section: 131; 37; 133(6)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH, ‘A’ PUNE – VIRTUAL COURT BEFORE SHRI S.S.VISWANETHRA RAVI, JUDICIAL MEMBER AND SHRI DR. DIPAK P. RIPOTE, ACCOUNTANT MEMBER आयकर अपील सं. / ITA No.1958/PUN/2017 िनधाᭅरण वषᭅ / Assessment Year : 2012-13 Sanket Industries Limited, Flat No.101, Bhoomi Apartment, 1 st Floor, Nutan Laxmi CHS, Plot No.9, JVPD Scheme, Ville Parle (W), N.S. Road, No.8, Mumbai – 400056 PAN: AAFCS6118M Vs. The Income Tax Officer, Ward-2, Jalna. Appellant Respondent आदेश / ORDER PER DR. DIPAK P. RIPOTE, AM : This appeal by the Assessee is directed against the order of Ld.Commissioner of Income Tax (Appeals)-1[LD.CIT(A)], Aurangabad order dated 27.03.2017 for Assessment Year 2012-13. The history of notices by ITAT issued for hearing in this case is as under: Date of hearing Present / Absent 03.04.2020 None present on behalf of appellant 15.12.2021 None present on behalf of appellant 08.02.2022 None present on behalf of appellant 15.02.2022 None present for the appellant 2. Even on 15.02.2022, no one has appeared on behalf of the appellant. From the history of hearings mentioned above, it can be seen that sufficient opportunity has already been given to the appellant but appellant has failed to Assessee by None Revenue by Shri S.P. Walimbe Date of hearing 15-02-2022 Date of pronouncement 11-03-2022 ITA No.1958/PUN/2017 for A.Y. 2012-13 Sanket Industries Limited 2 avail the opportunity. Therefore, the appeal is being decided in the absence of representation from the appellant’s representative. 3. The ld. DR pointed out that the assessee filed the appeal beyond statutory time limit. It is also urged that the assessee’s appeal is delayed by 60 days. The Director of the appellant company Mr.Vinay Shah filed an affidavit along with condonation application. It is mentioned by the Director of the appellant company that the company has discontinued its business and there are no employees. The Ex Employee received the appellant order passed by Ld.CIT(A) and dropped into the office premises without communicating to any of the directors. During maintenance of the premises they found the order of the CIT(A). Hence there is delay. 4. The condonation application and affidavit has been considered. The reasons given by the appellant are valid and sufficient. We have gone through the condonation petition as well as the affidavit and have found that reasons specified therein are justified and that the delay cannot be attributed to the deliberate conduct of the assessee neither through intention nor through action. The reasons for delay in filing the appeal were beyond the control of the assessee. 5. The Hon’ble Supreme Court in the case of Collector Land Acquisition Vs. Mst. Katiji & Ors. Date of Judgment 19/02/1987 has observed as under : Quote “Ordinarily a litigant does not stand to benefit by lodging an appeal late. 2. Refusing to condone delay can result in a meritorious matter being thrown out at the very threshold and cause of justice being defeated. As against this when delay is con- doned the highest that can happen is that a cause would be decided on merits after hearing the parties. 3. “Every day’s delay must be explained” does not ITA No.1958/PUN/2017 for A.Y. 2012-13 Sanket Industries Limited 3 mean that a pedantic approach should be made. Why not every hour’s delay, every second’s delay? The doctrine must be applied in a rational common sense pragmatic manner. 4. When substantial justice and technical considerations are pitted against each other, cause of substantial justice deserves to be preferred for the other side cannot claim to have vested right in injustice being done because of a non- deliberate delay. 5. There is no presumption that delay is occasioned deliberately, or on account of culpable negligence, or on account of mala fides. A litigant does not stand to benefit by resorting to delay. In fact he runs a serious risk.” ....Unquote 6. The Hon’ble Supreme Court has observed in the case of SENIOR BHOSALE ESTATE(HUF) vs. ACIT, CIVIL APPEAL NOS.6677-6690 OF 2010 : Quote “Unless that fact was to be refuted, the question of disbelieving the stand taken by the appellant(s) on affidavit, cannot arise.....”Unquote. 7. The Hon’ble Supreme Court in the case of Ramnath Sao AIR2002 SC1201 has held that acceptance of explanation furnished seeking condonation of delay should be the rule and refusal an exception, more so when no negligence or inaction or want of bona fide can be imputed to the defaulting parties. Taking a pedantic and hyper-technical view of the matter, the explanation furnished should not be rejected when stakes are high and/or arguable points of facts and law are involved in the case, causing enormous loss and irreparable injury to the party. 8. Thus, substantial justice is important than mere technicality. In this case the facts mentioned by the Appellant have not been rebutted by the revenue. Therefore, there was reasonable and sufficient cause for delay in filling appeal. In view of the matter, we condone the delay and proceed to hear the appeal on merits. 9. Grounds of appeal raised by the assessee are as under : ITA No.1958/PUN/2017 for A.Y. 2012-13 Sanket Industries Limited 4 1. The Learned LD.CIT(A) has erred in Disallowing Rent of Rs.3,55,718 incurred for Office situated at Mumbai. 2. The Learned LD.CIT(A) has further erred in Disallowing Interest on Excise Rs.21,51,142/- 3. The Learned LD.CIT(A) further erred in Disallowing Interest on VAT/CST Rs.21,82,047/- 4. The Learned CIT(A) has erred in disallowing Interest on Unsecured loan of Rs.5,70,000/-paid to, Index Securities & Research Private Limited 5. The Learned LD.CIT(A) further erred in ,Making addition of Rs.3,05,00,000/- as Unsecured Loan from Sanket pan masala industries limited, Index Securities & Research Private Limited & Kasturi Ram Science Park Limited. 6. The Appellant craves leave to add to, alter or amend any ground before or at the time of hearing. 10. Brief Facts of the case : As per the submission made by the appellant before the CIT(A), the appellant company discontinued its business from March 2010. It was selling the products “Goa Gutkha” which was manufactured by its sister concern Sanket Food Products Pvt Ltd. 10.1 In this case, assessment order was passed ex-parte. However, the appellant was represented by a Chartered Accountant before the LD.CIT(A). The appellant filed additional evidences before the LD.CIT(A), who had called for remand report. The LD.CIT(A) had also issued Summons u/s 131 of the Income-tax Act, 1961 (hereinafter referred to as ‘the Act’). Based on material on record, the LD.CIT(A) passed order dated 27.03.2017. Against the said order, appellant filed appeal before this Tribunal. ITA No.1958/PUN/2017 for A.Y. 2012-13 Sanket Industries Limited 5 Ground No.1 - Disallowance of Rent of Rs.3,55,718/- 11. The LD.CIT(A) has discussed this issue on page 5, para 7 of his order. As per LD.CIT(A)’s order, the appellant has claimed to have paid rent of Rs.3,55,718/- to M/s.Vishal Beverage Pvt. Ltd., Indore and M/s. Kanti Beverage Pvt. Ltd., Indore for Solitaire Corporate Park, Second Floor, Unit No.232, Andheri (East), Mumbai. The LD.CIT(A) asked the appellant the nature of business being conducted from the said office and asked to establish that it was wholly and exclusively incurred for the purpose of business. The LD.CIT(A) concluded that the appellant failed to establish that the said rent has been paid wholly and exclusively for the purpose of business of appellant and therefore upheld the disallowance of Rs.3,55,718/-. 11.1 During the proceedings, the Ld. DR took us through the LD.CIT(A)’s order and assessment order. It is observed that the entire sales have been made to the vendors at Shirdi, Solapur, Nashik, Baramati, Nagpur, Delhi, Kolkata and Hubli, Haliyal & Bijapur in Karnataka. Thus, there was no sale from Mumbai office and appellant could not establish that the Mumbai office was used for the purpose of appellant. No documentary evidence has been submitted to establish that the appellant has actually taken the premises on rent. LD.CIT(A) has mentioned that appellant company had conceded that no business activity was undertaken during the year. Appellant has not rebutted this factual statement of LD.CIT(A). For any expenditure to be claimed u/s 37(1) of the Act, the appellant has to establish that it was incurred wholly and exclusively for the purpose of business. However, in this case, the appellant has not filed any document to establish that it was used for the purpose of ITA No.1958/PUN/2017 for A.Y. 2012-13 Sanket Industries Limited 6 business leave apart wholly and exclusively for the purpose of business. Therefore, based on the facts of the case, there is no material evidence to establish that rent has been paid wholly and exclusively for the purpose of business. 11.2 The necessary conditions for allowance under section 37 are : Such expenditure should not be covered under the specific section i.e. sections 30 to 36. Expenditure should not be of capital nature. The expenditure should be incurred during the previous year. The expenditure should not be of personal nature. The expenditure should have been incurred wholly & exclusively for the purpose of the business or profession. The business should be commenced. 11.3 Thus the fundamental principle in allowing expenditure under Section 37 is that it should full fill the conditions mentioned above. The expenditure should have been incurred wholly and exclusively for the purpose of business of the Appellant. In this case the appellant has not filed any documents to establish that the expenditure was incurred wholly and exclusively for the purpose of business of the appellant. The burden of proof is on appellant. Appellant failed to discharge the same. 11.4 Therefore, the LD.CIT(A)’s order on the issue of rent of Rs.3,55,718/- is upheld. The ground of appeal No.1 is thus, dismissed. Ground No.2 & 3 relates to Disallowance of Interest on Excise Rs.21,51,142/- and Interest on VAT/CST of Rs.21,82,047/- respectively: 12. The appellant has claimed Interest on Excise Duty of Rs.21,51,142/- and Interest on VAT/CST liability of Rs.21,82,047/-. The Ld.CIT(A) in para 7.1 observed that the order of the Excise Department/VAT Department for ITA No.1958/PUN/2017 for A.Y. 2012-13 Sanket Industries Limited 7 charging interest was in the name of M/s.Sankat Food Products Pvt. Ltd., engaged in the manufacturing business and not in the name of appellant company engaged in the trading business, and further held that this expenditure of both totaling to Rs.43,33,189/- [Rs.21,51,142/- + Rs.21,82,047/-] cannot be allowed in the hands of the appellant company. 12.1 The appellant has not rebutted the facts. No evidence has been filed by the appellant. Since the invoice was in the name of Sanket Food Products Pvt. Ltd., it is not an allowable expenditure for appellant. Appellant has not filed any evidence to prove that it was paid by appellant. Since the expenditure was not incurred wholly and exclusively for the purpose of the business of the appellant, it is not an allowable expenditure, hence, we upheld the order of Ld.CIT(A) on this issue. Thus, the assessee appeal in Ground No.2 & 3 are dismissed. Ground No.4 – Disallowance of Interest on Unsecured Loan of Rs.5,70,000/- 13. As regards Disallowance of Interest on Unsecured Loan, the LD.CIT(A) in his order on page no.7 para 7.1 has mentioned as under: “However, the appellant has paid interest of Rs.5,70,000/- to M/s.Index Securities & Research Pvt. Ltd. On loans of Rs.2,50,00,000/- received in the year under reference. In spite of repeated opportunity, the counsel of the appellant could not file confirmation from the said party. The undersigned also issued notice U/s 133(6) of the Act to the lender at the address furnished by the appellant company i.e. 401, Amber Tower, Naini Wala Bagh, Azadpur, New Delhi – 110033. However the same was returned un-served by the postal department. Therefore, the interest of Rs.5,70,000/- paid to said party is disallowed. ” 13.1 The appellant failed to make compliance to the notice issued under section133(6) of the Act regarding the confirmation from the said party, thus, the appellant failed to substantiate his claim. ITA No.1958/PUN/2017 for A.Y. 2012-13 Sanket Industries Limited 8 13.1 Repeated opportunities were given to the the assessee by CIT(A).The Appellant neither attended the hearing nor furnished any written submission to substantiate the confirmation from the said party and the said notice has returned “un-served”, the Ld.CIT(A), accordingly, disallowed the Interest on Unsecured Loan. 13.2 We find that the Ld.CIT(A) upheld the addition on Interest on Unsecured Loan as assessee was given ample opportunity as recorded in page 8 para 7.1 of order of Ld.CIT(A).The assessee neither attended the hearing nor furnished any written submission to substantiate this ground of appeal. We further find that the appellant has not rebutted the finding of the fact given by the LD.CIT(A) in the order.The Appellant has to prove that the loan was obtained for the purpose of the business and the interest has been paid wholly and exclusively for the purpose of the business of the appellant. The Appellant failed to prove it. Therefore, the order of the LD.CIT(A) is upheld on this issue. Accordingly, the ground number 4 is dismissed. Ground No.5 – Unsecured Loan of Rs.3,05,00,000/- 14. In this case the Assessing Officer had made addition of Rs.4,68,77,320/- u/s 68 of the Act. 14.1 As regards addition of Unsecured Loan of Rs.3,05,00,000/- i.e. from Sanket Pan Masala Industries of Rs.5,00,000/-, Kasturi Ram Science & Technology of Rs.50,00,000/- and Index Securities & Research Pvt. LTd., of Rs.2,50,00,000/- the Ld.CIT(A) in his order on page no.11 para 9 & 9.1 has mentioned as under: ITA No.1958/PUN/2017 for A.Y. 2012-13 Sanket Industries Limited 9 “iv.) The loan of Rs.5,00,000//- received from Sanket Pan Masala Industries Ltd. was brought forward from the earlier years. The loan of Rs.35,40,000/- received from Manoj D. Peety was also brought forward from the earlier years and in the year under reference, interest income of Rs.5,19,300/- had been credited. 9.1 However M/s. Index Securities & Research Private Limited, New Delhi had given loan of Rs.2,50,00000,/- to the appellant company and Kasturi Ram Science & Technology Park Ltd. Had given loan of Rs.50,00,000/- to the appellant company. In respect of both the creditors, the appellant failed to furnish any confirmations. Even the complete address of M/s.Kasturi Ram Science & Technology Park Ltd. was not provided. Further it was not known whether the above creditors were assessed to tax or not since their PANs were not provided. The undersigned also issued notice U/s 133(6) of the Income Tax Act, 1961 to M/s.Index Securities & Research Private Limited, New Delhi on the address furnished by the appellant company. However, the undersigned also issued a show-cause notice dated 14.03.2017 to the appellant company to provide the requisite loan confirmations along with documentary evidences in respect of Index Securities & Research Private Limited, New Delhi and M/s.Kasturi Ram Science & Technology Park Ltd. In response, Shri R.D.Jaiswal CA, appeared before the undersigned on 24.03.20147 and expressed his inability to furnish the confirmations, PANs of the creditors. bank statement & other details. It was further explained that direction of the appellant company had not responded to the calls made by him. It is obvious that despite repeated opportunities, the appellant company has failed to file the requisite confirmations from the alleged creditors.” 14.2 We find that the Assessing Officer made the addition on account of unexplained cash credits by taking view that the assessee failed to offer the explanation about the nature and source of unsecured loans. The Ld.CIT(A) held that despite repeated opportunities, the appellant company has failed to file the requisite confirmations from the alleged creditors and also failed to prove the genuineness of the transactions nor the creditworthiness of the creditors. The Ld.CIT(A) further held that in various decisions of Hon’ble High Courts stated that it is settled law that even filing confirmations will not be sufficient to discharge the burden that lies on the assessee. The assessee has to prove the financial capacity of the person to advance loan and ITA No.1958/PUN/2017 for A.Y. 2012-13 Sanket Industries Limited 10 genuineness of the transaction. The confirmation letters without explaining the sources of money do not have any evidentiary value. The Ld.CIT(A) heavily relied on the decision of Hon’ble Rajasthan High Court in Kamal Motrs (131 Taxman 155) held as “onus is on the assessee to show that creditor is a person of means”. Therefore, in the absence of basic details in the form of confirmations from the alleged creditors, the Ld.CIT(A) upheld the addition made by the AO. 14.3 In view of the aforesaid factual and legal position mentioned above, we find no infirmity in the order passed by ld CIT(A), which we affirm. No contrary facts or law is brought to our notice to take other view. However, there seems to be some typographical mistake in the Ground number 5. In the ground number 5, figure mentioned is of Rs.3,05,00,000/-, however, the Ld.CIT(A) has confirmed addition of only Rs.3,00,00000/- in para 9.1 page 13. Therefore, the addition of Rs,3,00,00000/- is confirmed. Thus ground number 5 is dismissed. 15. In the result, the appeal filed by the assessee is dismissed. Order pronounced on 11 th March, 2022 by placing the result on the notice board. Sd/- Sd/- (S.S. VISWANETHRA RAVI) (DR. DIPAK P. RIPOTE) JUDICIAL MEMBER ACCOUNTANT MEMBER पुणे Pune; िदनांक Dated : 11 th March, 2022 / SGR* आदेश की Ůितिलिप अŤेिषत/Copy of the Order is forwarded to: 1. अपीलाथŎ / The Appellant; 2. ŮȑथŎ / The Respondent; 3. The LD.CIT(A)-1, Aurangabad; 4. 5. 6. The Pr.CIT concerned; DR, ITAT, ‘A’ Bench, Pune; गाडŊ फाईल / Guard file. ITA No.1958/PUN/2017 for A.Y. 2012-13 Sanket Industries Limited 11 आदेशानुसार/ BY ORDER, // TRUE COPY // Senior Private Secretary आयकर अपीलीय अिधकरण ,पुणे / ITAT, Pune