The DCIT, Circle-5, Ahmedabad V. Noorani Hotels Pvt.Ltd., Ahmedabad

ITA 211/AHD/2008

• Counselvise Citation: [2011] 134 COUNSELVISE.COM (IT) 6465 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 year(s) 4 month(s) 24 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 10-06-2011
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 02-06-2011
• Assessment Year: 2004-2005
• Appeal Filed On: 16-01-2008
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: G S SOORYAWANSHI
• Assessee Lawyers: M K PATEL
• Keywords: Unexplained cash credit; Depreciation; Capital receipt; Set aside
• Section: 142(1); 143(2); 68; 144

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCH 'A' BEFORE SHRI T K SHARMA,JM & SHRI A N PAHUJA,AM ITA NO.211/AHD/2008 (ASSESSMENT YEAR:-2004-05) DEPUTY COMMISSIONER OF INCOME-TAX, CIRCLE-5, 2 ND FLOOR, CU SHAH BUILDING, ASHRAM ROAD,AHMEDABAD V/S NOORANI HOTELS PVT. LTD., HOTEL NAEEKA NEAR SHAHIBAUG UNDER BRIDGE, AHMEDABAD-380004 PAN: AABCN 4119 K [APPELLANT] [RESPONDENT] REVENUE BY :- SHRI G S SOORYAWANSHI, DR ASSESSEE BY:- SHRI M K PATEL, AR O R D E R A N PAHUJA: THIS APPEAL BY THE REVENUE AGAINST AN ORDER DATED 23- 11-2007 OF THE LD. CIT(APPEALS)-XI, AHMEDABAD, FOR THE ASSESSMENT YEAR 2004-05, RAISES THE FOLLOWING GROUNDS:- [1] THE LD. COMMISSIONER OF INCOME-TAX (A)-XI, AHMEDABA D HAS ERRED IN LAW AND ON FACTS IN REDUCING THE ADDITION MADE U NDER SECTION 41(1) OF THE INCOME-TAX ACT, 1961 ON ACCOUNT OF WAI VER OF GSFC LOAN AND INTEREST FROM RS.5,60,204/- TO RS.6,006/-. [2] THE LD. COMMISSIONER OF INCOME-TAX (A)-XI, AHME DABAD HAS ERRED IN LAW AND ON FACTS IN DELETING THE ADDITION MADE O F RS.88,52,180/- UNDER SECTION 68 OF THE INCOME-TAX ACT, 1961 ON ACC OUNT OF UNEXPLAINED CASH CREDITS. [3] ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE, THE LD. COMMISSIONER OF INCOME-TAX (A)-XI, AHMEDABAD OUGHT TO HAVE UPHELD THE ORDER OF THE AO. [4] IT IS THEREFORE PRAYED THAT THE ORDER OF THE LD . COMMISSIONER OF INCOME-TAX (A)-XI, AHMEDABAD MAY BE SET ASIDE AND T HAT OF THE AO BE RESTORED. 2 ADVERTING FIRST TO GROUND NO.1 IN THE APPEAL, FAC TS, IN BRIEF, AS PER RELEVANT ORDERS ARE THAT RETURN DECLARING LOSS OF RS.20,96,247/- FILED ON 1-11-2004 BY THE ASSESSEE-COMPANY, WAS SEL ECTED FOR SCRUTINY WITH THE ISSUE OF A NOTICE U/S 143(2) OF THE INCOME-TAX ACT, 1961 [HEREINAFTER REFERRED TO AS THE ACT] ON 27-0 7-05. THE FATE OF 2 ITA NO.211/AHD/2008 2 THIS NOTICE IS NOT APPARENT FROM THE ASSESSMENT ORD ER. SUBSEQUENTLY, A NOTICE U/S 142(1) WAS ISSUED ON 28-07-2006 ALONG WITH A QUESTIONNAIRE FOR THE HEARING ON 10-08-2006. NONE R ESPONDED TO THIS NOTICE NOR ANY REQUEST FOR ADJOURNMENT WAS MADE. IN RESPONSE TO A LETTER ASKING THE ASSESSEE TO ATTEND ON 20-09-06, S HRI KALPESH V RATHOD, CHIEF ACCOUNTANT ATTENDED AND SOUGHT A COPY OF QUESTIONNAIRE. A FRESH COPY OF THE QUESTIONNAIRE DA TED 28-07-06 WAS HANDED OVER TO HIM WITH THE DIRECTIONS TO FURNISH R EPLY BY 14-11-06. THE ASSESSEE WAS ALSO CONTACTED TELEPHONICALLY ON THE M OBILE NUMBER MENTIONED. HOWEVER, THE ASSESSEE DID NOT REPLY. EVE N THE SHOWCAUSE NOTICE ISSUED ON 5-12-2006(REPRODUCED I N THE ASSESSMENT ORDER) PROPOSING TO DISALLOW DEPRECIATIO N AND OTHER EXPENSES BESIDES INVOKING PROVISIONS OF SEC. 41(1) OF THE ACT ,WENT UNRESPONDED . ACCORDINGLY, THE AO COMPLETED THE ASS ESSMENT U/S 144 OF THE ACT AND DISALLOWED DEPRECIATION OF RS.5, 75,799/-,IMPACT FEE OF RS. 4,90,933/-,SALES TAX-RS.24,700/-,15% OF THE LOAN AMOUNT OF GSFC, AMOUNTING TO RS. 5,60,204/- BESIDES ADDING AN AMOUNT OF RS.88.52,180/- U/S 68 OF THE ACT. 3. ON APPEAL, THE LEARNED CIT(A) REDUCED THE AFORES AID ADDITION OF RS. 5,60,204/- TO RS.6,006/- IN THE FOLLOWING T ERMS:- 9.1 DURING THE COURSE OF APPEAL PROCEEDINGS, THE A . R. OF THE APPELLANT COMPANY HAS FURNISHED GSFC LOAN LEDGER ACCOUNT, STA TEMENT OF GSFC PAYMENT RECEIPTS OF GSFC, SETTLEMENT LETTER AND A D ETAILED WORKING OF BIFURCATION OF WAIVED AMOUNT IN PRINCIPAL AND INTER EST. [PAGE NO. 71 TO 79 S. R. NO. 5 OF PAPER BOOK ] 9.1.2. IT IS ARGUED BY THE A.R. THAT THE SECTION 41 (1) IS APPLICABLE TO REMISSION OR CESSATION OF LOSS, EXPENDITURE OR TRAD ING LIABILITY INCURRED BY THE ASSESSEE. THIS REMISSION IS FOR TERM LOAN OF GS FC, WHICH IS CAPITAL RECEIPT, AND IS NOT FOR TRADING LIABILITY. HENCE SE CTION 41 (1) IS NOT APPLICABLE. IN SUPPORT OF THIS CONTENTION THE A. R. HAS ALSO RELIED UPON THE FOLLOWING JUDGMENTS, WHICH WERE STATED TO HAVE BEEN MENTIONED IN THE STATEMENT OF TOTAL INCOME WHILE FILING THE INCOME-T AX RETURN. CIT VS. PHOOL CHAND JIVAN RAM. (1981) 131 ITR 17 (D EL.) 3 ITA NO.211/AHD/2008 3 CIT VS. A.V.M.LTD. (1984) 146 ITR 355 (MAD) MAHENDRA & MAHENDRA LTD. VS. CIT (2003) 261 ITR 501 (BOM.) 9.2. THE SUBMISSIONS OF THE A. R. OF THE APPELLANT HAVE BEEN PERUSED. THE DECISIONS REFERRED AS ABOVE, WHICH ARE RELIED U PON BY THE A. R. OF THE APPELLANT AND THE OBSERVATIONS OF THE ASSESSING OFF ICER IN THE ASSESSMENT ORDER HAVE ALSO BEEN EXAMINED. 9.2.1. ON CAREFUL PERUSAL OF THE DETAILS PRODUCED B EFORE ME BY THE A. R. OF THE APPELLANT, PARTICULARLY GSFC STATEMENT AND WORK ING, IT IS SEEN THAT WAIVED AMOUNT IS TOWARDS PRINCIPAL AND RS.6,006/- I S TOWARDS INTEREST WAIVER OF ACCOUNT NO.C/9/693/50 OF GSFC. HOWEVER, I N THIS PARTICULAR ACCOUNT THERE IS AN INTEREST WAIVER OF RS.6,006/- T HEREFORE, THE ADDITION TO THE EXTENT OF THAT AMOUNT IS UPHELD AND BALANCE ADD ITION RS.5,54,254/- IS DELETED. IT IS PERTINENT TO NOTE THAT PAYMENT BY TH E APPELLANT IS ADJUSTED BY THE GSFC FIRST TOWARDS INTEREST DUES AND THEN TOWAR DS PRINCIPAL. 4. THE REVENUE IS NOW IN APPEAL BEFORE US AGAIN ST THE AFORESAID FINDINGS OF THE LEARNED CIT(A). THE LEARNED DR SUP PORTED THE ORDER OF THE AO .ON THE OTHER HAND, THE LEARNED AR ON BEH ALF OF THE ASSESSEE SUPPORTED THE FINDINGS OF THE LEARNED CIT( A) WHILE RELYING UPON THE DECISION OF THE HONBLE GUJARAT HIGH COURT IN THE CASE OF CIT VS. CHETAN CHEMICALS (P) LTD. (2004) 267 ITR 77 0 (GUJ) AND THE DECISION DATED 30-09-2010 OF THE ITAT AHMEDABAD BEN CH-A IN THE CASE OF DCIT VS. SHREE GAJANAN PAPER & BOARDS P. LT D. IN ITA NO.2817/AHD/2008. TO A QUERY BY THE BENCH, THE LD. AR REPLIED THAT THE ASSESSE IS NOT IN APPEAL BEFORE THE ITAT AGAINS T THE FINDINGS OF THE LD. CIT(A). 5. WE HAVE HEARD BOTH THE PARTIES AND GONE THROUGH THE FACTS OF THE CASE. INDISPUTABLY, THE ASSESSMENT WAS COMPLETE D U/S 144 OF THE ACT AND THE AO, INTER ALIA, DISALLOWED 15% OF THE LOAN AMOUNT DUE TO GSFC. ON APPEAL, THE LD. CIT(A) WHILE UPHOLDING THE COMPLETION OF ASSESSMENT U/S 144 OF THE ACT ,CONFIRMED THE ADD ITION TO THE EXTENT OF RS.6,006/- ON ACCOUNT OF WAIVER OF INTERE ST, INVOKING THE PROVISIONS OF SEC. 41(1) OF THE ACT. THE PROVISIONS OF SAID SEC. 41(1) OF THE ACT CAN BE INVOKED IF AN ALLOWANCE OR A DED UCTION HAS BEEN GRANTED DURING THE COURSE OF ASSESSMENT FOR ANY YEA R IN RESPECT OF 4 ITA NO.211/AHD/2008 4 LOSS, EXPENDITURE OR TRADING LIABILITY, WHICH IS IN CURRED BY THE ASSESSEE, AND SUBSEQUENTLY DURING ANY PREVIOUS YEAR THE ASSESSEE OBTAINS, WHETHER IN CASH OR IN ANY OTHER MANNER, AN Y AMOUNT IN RESPECT OF SUCH TRADING LIABILITY BY WAY OF REMISSI ON OR CESSATION OF SUCH LIABILITY. IN THAT EVENT, EITHER THE AMOUNT OB TAINED BY THE ASSESSEE OR THE VALUE OF THE BENEFIT ACCRUING TO TH E ASSESSEE IS DEEMED TO BE THE PROFITS AND GAINS OF A BUSINESS OR PROFESSION AND CAN BE BROUGHT TO TAX AS INCOME OF THE PREVIOUS YEA R IN WHICH SUCH AMOUNT OR BENEFIT IS OBTAINED. IN THE INSTANT CASE, IT IS AN ADMITTED POSITION THAT THERE HAD BEEN NO ALLOWANCE OR DEDUCT ION OF THE PRINCIPAL AMOUNT OF LOAN FROM GSFC IN ANY OF THE P RECEDING YEARS AND HENCE, THERE IS NO QUESTION OF APPLYING THE PRO VISION AS SUCH. AS REGARDS WAIVER OF INTEREST OF RS.6,006/- , THE A SSESSEE HAVING OBTAINED THE BENEFIT , PROVISIONS OF SEC. 41(1) WER E RIGHTLY INVOKED. IN VIEW THEREOF, WE DO NOT FIND ANY INFIRMITY IN THE APPROACH OF THE LD. CIT(A). MOREOVER, A SIMILAR VIEW HAS BEEN TAKEN BY THE HONBLE JURISDICTIONAL HIGH COURT IN CIT VS. CHETAN CHEMICA LS (P) LTD. (2004) 267 ITR 770 (GUJ) AND BY A CO-ORDINATE BENCH IN THE IR DECISION DATED 30-09-2010 IN THE CASE OF DCIT VS. SHREE GAJANAN PA PER & BOARDS P. LTD.IN ITA NO.2817/AHD/2008. IN THESE CIRCUMSTAN CES, WE HAVE NO ALTERNATIVE BUT TO UPHOLD THE FINDINGS OF THE LD. C IT(A).THUS, GROUND NO.1 IN THE APPEAL IS DISMISSED. 6. AS REGARDS ADDITION OF RS.88,52,810/- U/S 68 OF THE ACT, THE ASSESSEE POINTED OUT BEFORE THE LD. CIT(A) THAT TH E AMOUNT COMPRISED THE FOLLOWING :- SR.NO. NAME AMOUNT ------- --------------------- -------------- 1. JAIMIN INDUSTRIES PVT. LTD. 36,00,000 2. MOHAN B AGRAWAL 36,04,000 3. PRAVINBHAI B PATEL 11,36,000 4. PUSHPABEN D PATEL 11,86,000 5. AMITA M AGRAWAL 2,000 5 ITA NO.211/AHD/2008 5 6. S B AGRAWAL 2,000 7. PRAVINBHAI JAIN 35,000 8. JITENDRA S JAIN 2,00,000 9. MANISHBHAI JAIN 5,000 6.1. IT WAS EXPLAINED THAT JAINAM INDUSTRIES PVT. LTD. WAS A COMPANY IN WHICH SHREE PRAVINBHAI JAIN , SHREE MOHA N B. AGRAWAL PRAVINBHAI B. PATEL, PUSHPABEN D. PATEL, PRAVINBHAI JAIN AND MANISH JAIN ARE DIRECTORS. OTHER PARTIES ARE RELATI VES OF DIRECTORS AND ALSO SHAREHOLDERS OF THE COMPANY. THE ASSESSEE FILED CONFIRMATIONS OF PARTIES ALONG WITH A COPY OF THE L EDGER ACCOUNT, PAN CARD, INCOME TAX RETURN, STATEMENT OF TOTAL INC OME AND COPIES OF BANK PASSBOOK/STATEMENT FROM WHERE CHEQUE S ARE ISSUED TO THE ASSESSE. IN THE LIGHT OF THESE SUBMISSIONS A ND AFTER HAVING A REMAND REPORT FROM THE AO, THE LD. CIT(A) DELETED T HE ADDITION IN THE FOLLOWING TERMS: 10.2.1 ON CAREFUL PERUSAL OF THE DETAILS FILED BY THE A. R. OF THE APPELLANT, I FIND SUFFICIENT FORCE IN THE CONTE NTIONS PUT FORTH BY THE AUTHORIZED REPRESENTATIVE OF THE APPELLANT. ACCORDING TO SECTION 68 OF THE I. T. ACT, 1961 WHERE ANY SUM IS FOUND CREDITED IN THE BOOKS OF AN ASSESSES MAINTAINED FOR ANY PREV IOUS YEAR, AND THE ASSESSEE OFFERS NO EXPLANATION ABOUT THE NATURE AND SOURCE THEREOF OR THE EXPLANATION OFFERED BY HIM IS NOT, I N THE OPINION OF THE ASSESSING OFFICER, SATISFACTORY, THE SUM SO CRE DITED MAY BE CHARGED TO INCOME-TAX AS INCOME OF THE ASSESSEE OF THAT PREVIOUS YEAR. WHEREAS IN THE PRESENT CASE, IT IS FOUND THAT THE APPELLANT HAS DISCHARGED ITS INITIAL ONUS BY GIVING DETAILS L IKE BANK ACCOUNTS OF DEPOSITORS, BALANCE SHEETS AND COPIES O F RETURN OF INCOME OF THE DEPOSITORS ALONG WITH COPIES OF CONFI RMATION LETTERS, BANK STATEMENTS, ADDRESS OF THE PARTIES FR OM WHOM THE APPELLANT HAS RECEIVED ADVANCES/DEPOSITS FROM THE R ESPECTIVE PARTIES. THE ASSESSING OFFICER COULD HAVE CARRIED O UT DETAILED INQUIRIES IN THE PERSONAL ASSESSMENTS OF THE PARTIE S CONCERNED, THOUGH THEY ARE ASSESSED TO TAX REGULARLY. FURTHER, I FIND THAT THE ASSESSING OFFICER HAS NOT BROUGHT ON RECORD ANY MAT ERIAL EVIDENCE FOR SUCH ADDITIONS TO DISPROVE THE DEPOSIT S. IN THE CASE OF DEPUTY CIT VS. ROHINI BUILDERS REPORTED IN 256 I TR 360, THE 6 ITA NO.211/AHD/2008 6 HON'BLE GUJARAT HIGH COURT HAS HELD THAT ONCE THE A SSESSEE HAS DISCHARGED THE INITIAL ONUS BY PROVING THE IDENTITY OF CREDITORS BY GIVING THEIR COMPLETE ADDRESS, GIR/PANOS AND THE CO PIES OF BANK STATEMENTS AND AMOUNTS HAVE BEEN RECEIVED BY CHEQUE S, THE ADDITION IS NOT JUSTIFIED. FURTHER IN THE CASE OF O RISA CORPORATION REPORTED IN 159 ITR 79, THE HON'BLE SUP REME COURT HAS HELD THAT WHEN THE ASSESSEE FURNISHED NAMES AND ADDRESS OF THE ALLEGED CREDITORS AND THE GIR/PA NUMBERS, THE B URDEN SHIFTS TO THE DEPARTMENT TO ESTABLISH THE REVENUE'S CASE A ND IN ORDER TO SUSTAIN THE ADDITION THE REVENUE HAS TO PURSUE THE ENQUIRY AND TO ESTABLISH THE LACK OF CREDITWORTHINESS AND MERE NON -COMPLIANCE OF SUMMONS ISSUED BY THE ASSESSING OFFICER U/S.131, BY THE ALLEGED CREDITORS WILL NOT BE SUFFICIENT TO DRAW AN ADVERSE INFERENCE AGAINST THE ASSESSEE. 10.2.2. IN THE INSTANT CASE THE APPELLANT HAD DISCH ARGED ITS ONUS BY GIVING NAMES, ADDRESSES, AND BY FILING DOCUMENTS LIKE BANK ACCOUNTS, BALANCE SHEETS OF DEPOSITORS AND THEIR I. T RETURNS AND THEIR ASSESSMENT DETAILS. IT IS SEEN THAT EVEN THE REMAND REPORT RECEIVED FROM THE ASSESSING OFFICER, HAS NOT BROU GHT OUT ANY ADVERSE INFORMATION OR ANY INCRIMINATING EVIDENCE T O DISPROVE THE APPELLANT'S STAND. FURTHER, I AM OF THE VIEW TH AT WHEN THE DEPOSITORS ARE ASSESSED TO TAX, CONFIRMATION LETTER S AND COPY OF BANK STATEMENTS ARE FILED, THE GENUINENESS OF THE T RANSACTIONS SHOULD NOT BE DOUBTED UNLESS ON EXAMINATION THEY AR E FOUND TO BE UNTRUE. HAVING CONSIDERED THE FACTS OF THE CASE CAR EFULLY, SUBMISSIONS OF THE AUTHORIZED REPRESENTATIVE, OBSER VATIONS OF THE ASSESSING OFFICER IN THE ASSESSMENT ORDER AS WELL A S IN THE REMAND REPORT AND ALSO CONSIDERING THE DECISIONS, R EFERRED AS ABOVE, THE ADDITION MADE BY THE ASSESSING OFFICER O FFICE IS UNCALLED FOR AND NOT JUSTIFIABLE. IN THE LIGHT OF A BOVE DISCUSSIONS, I AM OF THE OPINION THAT THE ADDITION MADE BY THE A SSESSING OFFICER AT RS.88,52,180/-CAN NOT BE SUSTAINED. 7. THE REVENUE IS NOW IN APPEAL BEFORE US AGAI NST THE AFORESAID FINDINGS OF THE LEARNED CIT(A). THE LEARNED DR SUP PORTED THE ORDER OF THE AO .ON THE OTHER HAND, THE LEARNED AR ON BEH ALF OF THE ASSESSEE SUPPORTED THE FINDINGS OF THE LEARNED CIT( A). 7 ITA NO.211/AHD/2008 7 8. WE HAVE HEARD BOTH THE PARTIES AND GONE THROUGH THE FACTS OF THE CASE. AS IS APPARENT FROM THE AFORESAID FACTS, THE LD. CIT(A) AFTER HAVING A REMAND REPORT FROM THE AO CONCLUDED THAT SINCE THE ASSESSEE DISCHARGED ITS ONUS BY GIVING NAMES, ADDRE SSES, AND BY FILING DOCUMENTS LIKE BANK ACCOUNTS, BALANCE SHEETS OF DEPOSITORS AND THEIR I.T RETURNS AND OTHER ASSESSMENT DETAILS , THE ADDITION COULD NOT BE SUSTAINED. THE LD. DR DID NOT PLACE A NY MATERIAL BEFORE US SO AS TO ENABLE US TO TAKE A DIFFERENT VI EW IN THE MATTER. IN THE ABSENCE OF ANY BASIS , WE ARE NOT INCLINED TO I NTERFERE. THEREFORE, GROUND NO.2 IN THE APPEAL IS ALSO DISMIS SED. 9. GROUND NOS.3 AND 4 BEING MERE PRAYER NOR ANY SUB MISSIONS HAVING BEEN MADE ON THESE GROUNDS, DO NOT REQUIRE A NY SEPARATE ADJUDICATION AND ARE, THEREFORE, DISMISSED. 10. IN THE RESULT, APPEAL IS DISMISSED. ORDER PRONOUNCED IN THE COURT TODAY ON 10 -06-2011 SD/- SD/- (T K SHARMA) JUDICIAL MEMBER (A N PAHUJA) ACCOUNTANT MEMBER DATED : 10-06-2011 COPY OF THE ORDER FORWARDED TO: 1. NOORANI HOTELS PVT. LTD., HOTEL NAEEKA NR. SHA HIBAUG UNDER BRIDGE, AHMEDABAD-380004 2. DEPUTY COMMISSIONER OF INCOME-TAX, CIRCLE-5, AHMEDABAD 3. CIT CONCERNED 4. CIT(A)-XI, AHMEDABAD 5. DR, ITAT, AHMEDABAD BENCH-, AHMEDABAD 6. GUARD FILE BY ORDER DEPUTY REGISTRAR ASSISTANT REGISTRAR ITAT, AHMEDABAD