The DCIT, 1(1), Indore V. M/s Agrawal Charitable Trust, Indore

ITA 236/IND/2011

• Counselvise Citation: 23622714 RSA 2011
• Duration Of Justice: 7 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-04-2012
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: DB
• Assessment Year: 2008-2009
• Appeal Filed On: 09-09-2011
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: KESHAV SAXENA
• Assessee Lawyers: SHRI; S N AGRAWAL
• Keywords: Unexplained cash credit; Capital asset; Depreciation; Charitable institution; Accommodation entries; Revenue expenditure; Capital expenditure
• Section: 143(3); 133A; 153A; 133(6); 12A; 32; 131; 68; 12; 28; 11

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL , INDORE BENCH, INDORE BEFORE SHRI JOGINDER SINGH, J.M. AND SHRI R.C.SHARM A, A.M. PAN NO. : AAATB8499B I.T.A.NO S . 236 & 237/IND/2011 A.Y S . : 2008 - 09 & 2007 - 08 DY. CIT, 1(1), M/S. AGRAWAL CHARITABLE TRUST, IN DORE. VS 5,AGRAWAL HOUSE, Y.N. ROAD, INDORE. APPELLANT RESPONDENT APPELLANT BY : SHRI KESHAV SAXENA, CIT DR RESPONDENT BY : SHRI S.N. AGRAWAL AND SHRI PANKAJ MOGRA, CAS DATE OF HEARING : 07 . 0 3 .201 2 DATE OF PRONOUNCEMENT : 25 . 0 4 .201 2 O R D E R PER R. C. SHARMA, A.M. THESE ARE THE APPEALS FILED BY THE REVENUE AGAINST THE ORDER OF CIT(A) FOR THE ASSESSMENT YEARS 2007-08 AN D 2008- 09. COMMON GROUNDS HAVE BEEN TAKEN BY THE REVENUE I N BOTH -: 2: - 2 THE YEARS. GROUND TAKEN IN ASSESSMENT YEAR 2007-08 READS AS UNDER :- (I) THE LD. CIT (A) HAS ERRED IN LAW AND ON FACTS IN DIRECTING TO DELETE THE ADDITION MADE U/S 68 OF THE I. T. ACT IN RESPECT OF CREDIT ENTRY APPEARING IN THE NAM E OF RAKESH SONGHAI MERELY ON THE GROUND THAT THE ASSESSEE HAD ESTABLISHED THE IDENTITY OF THE CREDIT OR WITHOUT APPRECIATING THE FACT THAT THE ENQUIRIES CONDUCTED BY THE A. O. CLEARLY ESTABLISHED THAT THE CREDITOR DID NOT HAVE THE CAPACITY TO ADVANCE THE L OAN. 1. (II) THE LD. CLT(A) ERRED IN LAW AND ON FACTS IN DIRECTI NG TO DELETE THE ADDITION MADE U/S 68 IN RESPECT OF CREDITS APPEARING IN THE NAME OF (I}EAST END MANAGEMENT TEC H PVT. LTD. (II) LUNKAD SECURITIES LTD {III} K. K.PAT EL FINANCE LTD. (IV)TRIMURTI FINVEST LTD. IN THE BOOKS OF THE ACCOUNTS OF THE ASSESSEE ON THE GROUND THAT PRIMARILY IDENTI TY OF THE CREDITORS HAVE BEEN ESTABLISHED WITHOUT APPRECI ATING THE FACT THAT THE EVIDENCE AVAILABLE WITH THE DEPAR TMENT IN THE FORM OF DOCUMENTS IMPOUNDED DURING THE COURS E OF SURVEY U/S 133A CARRIED OUT IN THE LUNKAD GROUP OF COMPANIES CLEARLY INDICATES THAT THIS GROUP HAD O NLY PROVIDED ACCOMMODATION ENTRIES AND ACCORDINGLY THE TRANSACTIONS WITH THEM OF THE ASSESSEE WERE NOT GENUINE . (III) THE LD. CIT(A)-I, INDORE HAS ERRED IN LAW AND ON FACTS IN DIRECTING TO CANCEL THE DISALLOWANCE OF INTEREST OF RS.5,95,553/- ON THE LOANS WHICH ULTIMATELY WERE CONSIDERED AS UNEXPLAINED U/S 68 OF THE I. T. ACT. (IV) THE LD. CIT(A) ERRED ON FACTS & CIRCUMSTANCES OF THE CASE IN HOLDING THAT THE ASSESSEE WAS ENTITLED FOR DEPRECIATION ON THE ASSETS WITHOUT APPRECIATING THE FACT THAT THE DEDUCTION ON THIS ACCOUNT HAD ALREADY BEEN CLAIMED BY VIRTUE OF EXEMPTION U/S 11 OF THE I. T. ACT ON APPLICATION OF RECEIPTS OF ACQUIRING SUCH AS SETS AND THEREFORE THIS CLAIM OF DEDUCTION ON ACCOUNT OF -: 3: - 3 DEPRECIATION TANTAMOUNT TO DOUBLE DEDUCTION. (V) THE LD. CLT(A) HAS ERRED ON FACTS AND CIRCUMSTA NCES OF CASE IN HOLDING THAT THE ASSESSEE WAS ENTITLED FOR DEPRECIATION ON THE ASSETS WITHOUT APPRECIATING THE FACT THAT THE CLAIMING DEPRECIATION OVER A PERIOD OF YEA RS IS NOTHING BUT THE DIMINUTION OF THE VALUE OF ASSETS W HICH HAD ALREADY BEEN CLAIMED ON ACCOUNT OF EXEMPTION U /S 11 ON APPLICATION OF RECEIPTS FOR ACQUIRING SUCH ASSET S. (VI) THE LD. CLT(A) HAS ERRED ON FACTS AND CIRCUMST ANCES OF CASE IN HOLDING THAT THE ASSESSEE WAS ENTITLED FOR DEPRECIATION ON THE ASSETS WITHOUT APPRECIATING THE FACT THAT THE LEGISLATURE HAS NOT PROVIDED ANY SCOPE FOR DOUB LE DEDUCTION IN THE CASES OF TRUST. (VII) THE LD. CLT(A) HAS ERRED ON FACTS AND CIRCUMSTANCES OF CASE IN HOLDING THAT THE ASSESSEE WAS ENTITLED FOR DEPRECIATION ON THE ASSETS WITHOUT APPRECIATING THE RATIO LAID DOWN BY THE HON'BLE SUPREME COURT IN THE CASE OF ESCORTS LTD. VS. CIT REPORTED IN 199 ITR 43 WHICH AFFIRMS THE LEGISLATURE'S INTENT THAT DOUBLE DEDUCTION TO AN ASSESSEE IS NOT PERMISSIBLE IN THE INCOME-TAX ACT. (VIII) THE LD. CIT (A) ERRED ON FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND LAW IN DIRECTING TO A LLOW THE ASSESSEE'S CLAIM OF EXCESS APPLICATION OF INCOM E TO BE CARRIED FORWARD WITHOUT APPRECIATING THAT NO SUC H PROVISION IS AVAILABLE IN THE INCOME-TAX ACT. (IX) THE LD. CIT (A) ERRED ON FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND LAW IN DIRECTING TO A LLOW THE ASSESSEE'S CLAIM OF EXCESS APPLICATION OF INCOM E TO BE CARRIED FORWARD WITHOUT APPRECIATING THE FACT TH AT AS PER SECTION 11(1)(A) OF THE INCOME-TAX, THE ASSE SSEE WAS ENTITLED FOR CLAIM OF APPLICATION OF INCOME ONL Y TO THE EXTENT OF INCOME AVAILABLE. 1. -: 4: - 4 2. GROUNDS TAKEN IN ASSESSMENT YEAR 2008-09 READ AS UNDER :- (I) THE LD. CIT(A) ERRED IN LAW AND ON FACTS IN DIRECTI NG TO DELETE THE ADDITION MADE U/S 68 IN RESPECT OF CREDITS APPEARING IN THE NAME OF M/S. TRIMURTY FINVEST LTD. RS. 32,00,000/- AND M/S. EAST WEST FINVEST INDIA LTD. IN THE BOOKS OF THE ACCOUNTS OF THE ASSESSEE ON THE GROUND THAT PRIMARILY IDENTITY OF THE CREDITORS HAVE BEEN ESTAB LISHED WITHOUT APPRECIATING THE FACT THAT THE ENQUIRIES CO NDUCTED REVEALED THAT THEY HAD MERELY PROVIDED ACCOMMODATIO N ENTRIES TO THE ASSESSEE. (II) THE LD. CIT(A)-I, INDORE HAS ERRED IN LAW AND ON FA CTS IN DIRECTING TO CANCEL THE DISALLOWANCE OF INTEREST OF RS. 4,59,543/- ON THE LOANS WHICH ULTIMATELY WERE CONSIDERED AS UNEXPLAINED U/S 68 OF THE I. T. ACT. (III) THE LD. CIT(A) ERRED ON FACTS & CIRCUMSTANCES OF THE CASE IN HOLDING THAT THE ASSESSEE WAS ENTITLED FOR DEPRECIA TION ON THE ASSETS WITHOUT APPRECIATING THE FACT THAT TH E DEDUCTION ON THIS ACCOUNT HAD ALREADY BEEN CLAIMED BY VIRTUE OF EXEMPTION U/S 11 OF THE I. T. ACT ON APPLICATION OF RECEIPTS OF ACQUIRING SUCH ASSETS AND THEREFORE THI S CLAIM OF DEDUCTION ON ACCOUNT OF DEPRECIATION TANTAMOUNT TO DOUBLE DEDUCTION. (IV) THE LD. CIT(A) HAS ERRED ON FACTS AND CIRCUMSTANCES OF CASE IN HOLDING THAT THE ASSESSEE WAS ENTITLED FOR DEPRECIATION ON THE ASSETS WITHOUT APPRECIATING THE FACT THAT THE CLAIMING DEPRECIATION OVER A PERIOD OF YEARS IS -: 5: - 5 NOTHING BUT THE DIMINUTION OF THE VALUE OF ASSETS W HICH HAD ALREADY BEEN CLAIMED ON ACCOUNT OF EXEMPTION U/S 11 ON APPLICATION OF RECEIPTS FOR ACQUIRING SUCH ASSETS. (V) THE LD. CIT(A) HAS ERRED ON FACTS AND CIRCUMSTANCES OF CASE IN HOLDING THAT THE ASSESSEE WAS ENTITLED FOR DEPRECIATION ON THE ASSETS WITHOUT APPRECIATING THE FACT THAT THE LEGISLATURE HAS NOT PROVIDED ANY SCOPE FOR DOUBLE DEDUCTION IN THE CASES OF TRUST. (VI) THE LD. CIT(A) HAS ERRED ON FACTS AND CIRCUMSTANCES OF CASE IN HOLDING THAT THE ASSESSEE WAS ENTITLED FOR DEPRECIATION ON THE ASSETS WITHOUT APPRECIATING TH E RATIO LAID DOWN BY THE HON'BLE SUPREME COURT IN THE CASE OF ESCORTS LTD. VS. CIT REPORTED IN 199 ITR 43 WHICH AFFIRMS THE LEGISLATURE'S INTENT THAT DOUBLE DEDUCTION TO AN ASSESSEE IS NOT PERMISSIBLE IN THE INCOME-TAX ACT. 1. (VII) THE LD. CIT (A) ERRED ON FACTS AND IN THE CIR CUMSTANCES OF THE CASE AND LAW IN DIRECTING TO ALLOW THE ASSESSE E'S CLAIM OF EXCESS APPLICATION OF INCOME TO BE CARRIED FORW ARD WITHOUT APPRECIATING THAT NO SUCH PROVISION IS AVA ILABLE IN THE INCOME-TAX ACT. (VIII) THE LD. CIT (A) ERRED ON FACTS AND IN THE CI RCUMSTANCES OF THE CASE AND LAW IN DIRECTING TO ALLOW THE ASSESSE E'S CLAIM OF EXCESS APPLICATION OF INCOME TO BE CARRIED FORW ARD WITHOUT APPRECIATING THE FACT THAT AS PER SECTION 11(L)(A) OF THE INCOME-TAX ACT, THE ASSESSEE WAS ENTITLED FOR CLAIM OF APPLICATION OF INCOME ONLY TO THE EXTENT OF INCOME AVAILABLE. 2. -: 6: - 6 3. RIVAL CONTENTIONS HAVE BEEN HEARD AND RECORDS PERUSED. THE FACTS OF THE CASE IN BRIEF ARE THAT TH E ASSESSEE IS A CHARITABLE TRUST REGISTERED U/S 12A OF THE INCOME TAX ACT AND RUNNING AGRAWAL PUBLIC SCHOOL AND CHAMELI DEVI PUBLIC SCHOOL. FOR THE A.Y. 07-08 THE ASSESSEE HAD FILED I TS ORIGINAL RETURN ON 31.10.2007 DECLARING NET LOSS OF RS (-) 1 1,03,985/-. THE ASSESSMENT WAS COMPLETED VIDE ORDER PASSED U/S 143(3) DATED 28.12.2010. THE A.O. HAS ADDED THE AMOUNT OF DEPRECIATION CLAIMED BY THE ASSESSEE TRUST OF RS. 4 2,58,029/- AND AMOUNT OF ALLEGED UNEXPLAINED CASH CREDIT OF RS . 1,88,00,000/- & INTEREST THEREON OF RS. 5,95,553/-. THE SIMILAR ADDITIONS WERE ALSO MADE IN THE ASSESSMENT YEAR 2008-09. SUMMARY OF ADDITIONS MADE IN THE ASSESSMENT YEARS 2007-08 AND 2008-09 ARE AS UNDER:- S. NO. NATURE OF ADDITION/ DISALLOWANCE 2007-08 2008-09 1 THE AMOUNT OF UNSECURED LOAN TAXED AS INCOME FROM OTHER SOURCES 1,88,00,000 45,00,000 2 INTEREST ON THE AMOUNT OF LOAN 5,95,553 4,59,543 -: 7: - 7 3 THE AMOUNT OF DEPRECIATION AS CLAIMED BY THE ASSESSEE WAS NOT ALLOWED BY HOLDING THAT ENTIRE COST OF ASSETS HAS ALREADY BEEN TREATED AS APPLICATION U/S 11 AND 12 OF THE INCOME TAX ACT. 26,91,866 36,60,264 THE ADDITIONS U/S 68 AS REGARDS TO THE UNSECURED LO AN INCLUDED THE LOAN AMOUNTS FROM LUNKAD GROUP OF COMPANIES 4. BY OBSERVING THAT THERE WAS SURVEY U/S 133A AT THE LUNKAD GROUP ON 2.5.2006, SOME INCRIMINATING DOCUMENTS WERE FOUND, WHICH INDICATE THAT LUNKAD GR OUP WAS INVOLVED IN PROVIDING ACCOMMODATION ENTRIES, TH E ASSESSING OFFICER MADE THE ADDITION ON ACCOUNT OF VARIOUS LOANS RECEIVED AND OUTSTANDING IN THE ACCOUNT OF LU NKAD GROUP. THE ASSESSING OFFICER ALSO ADDED A SUM OF RS . 38 LAKHS IN RESPECT OF LOAN RECEIVED FROM SHRI RAKESH SINGHV I. 5. BY THE IMPUGNED ORDER, THE LD. CIT(A) DELETED THE ADDITION ON ACCOUNT OF UNSECURED LOANS BY OBSERVING THAT ADDITION HAS BEEN MADE ON SUBSTANTIVE BASIS IN THE HANDS OF LUNKAD GROUP, THEREFORE, NO ADDITION WAS WARRANTED IN THE -: 8: - 8 HANDS OF THE ASSESSEE TRUST. THE LD. CIT(A) ALSO OB SERVED THAT LUNKAD GROUP HAD ISSUED CONFIRMATORY LETTERS TO VAR IOUS BENEFICIARIES IN SUPPORT OF HAVING INCOME, GENUINE LOAN AND SHARE APPLICATION MONEY. AS PER LD. CIT(A), HAD THE LUNKAD GROUP ACCEPTED THE MODUS OPERANDI OF PROVIDING ONLY ENTRIES, THEN THE REQUIRED RECOURSE WOULD HAVE BEEN CONFIRMI NG THE ADDITION MADE IN THE HANDS OF BENEFICIARIES, BUT SI NCE THIS HAS NOT BEEN DONE SO, RATHER THE LUNKAD GROUP HAS TRIED TO REINFORCE THE STAND OF BENEFICIARIES BY WAY OF ISSU ING CONFIRMATORY LETTERS TO THEM. ACCORDINGLY, THE ADDI TIONS MADE IN THE HANDS OF ASSESSEE TRUST WAS DELETED. 6. WITH REGARD TO THE LOAN TAKEN FROM RAKESH SINGHVI, THE OBSERVATION AND CONCLUSION OF THE CIT(A) WAS AS UNDER :- AS REGARD THE LOANS RECEIVED FROM SHRI RAKESH SINGHVI, THE ASSESSEE FILED COPY OF CONFIRMATION LE TTER, PAN CARD AND BANK ACCOUNT TO THE AO. ON PERUSAL OF THE BANK ACCOUNT IT IS ALSO NOTICED THAT CASH WAS N OT DEPOSITED PRIOR TO ISSUANCE OF CHEQUES TO THE ASSES SEE TRUST. THE CONFIRMATION LETTER CLEARLY SHOWS THAT T HE -: 9: - 9 AMOUNT OF LOAN WAS RECEIVED FOR FEW MONTHS ONLY. ON THE AMOUNT OF INTEREST, TDS WAS ALSO DEDUCTED. THE LD. COUNSEL OF THE ASSESSEE ARGUED THAT ONUS LYING ON THE ASSESSEE WAS PROPERLY DISCHARGED; THAT SUMMON ISSUED BY THE DCIT-3(3), MUMBAI WAS ALSO DULY SERVE D ON THE WIFE OF SHRI SINGHVI AND REPORT OF THE INSPE CTOR WAS RECEIVED. THE INSPECTOR IN HIS REPORT PROBABLY CONSIDERED THE AMOUNT OF LOAN OF RS. 38,00,000/- AS DONATION. THE DCIT MUMBAI & THE AO BASED THEIR INFERENCE ON THE INSPECTORS REPORT WHO GAVE HIS ADVERSE REPORT ON THE CREDITWORTHINESS OF THE CREDI TOR SHRI RAKESH SINGHVI PRIMARILY FOR THE REASONS THAT HE (SHRI SINGHVI) WAS RESIDING IN A SMALL HOUSE BEING TWO BED ROOM FLAT IN A REMOTE SUBURB OF MUMBAI AND RUNNING A PETTY BUSINESS. THE INSPECTOR HAD SUGGEST ED THAT THE SAID CREDITOR DID NOT HAVE CAPACITY TO GIV E DONATION OF RS. 38,00,000/- TO THE ASSESSEE. HOWEVE R, IN THE PRESENT CASE, THE ASSESSEE HAD RECEIVED LOAN OF -: 10: - 10 RS. 38,00,000/- FOR A VERY SHORT PERIOD AND THE SAM E WAS ALSO RETURNED. IDENTITY OF THE CREDITOR WAS ALS O BEYOND DOUBT. ACCORDINGLY, FOLLOWING THE DIRECT DECISION OF THE HONBLE JURISDICTIONAL HIGH COURT I N THE CASE OF METACHEM INDUSTRIES LIMITED REPORTED IN 245 ITR 160, THE ADDITION MADE AS REGARDS TO LOAN FROM MR RAKESH SINGHVI CANNOT BE SUSTAINED. I THEREFORE DIR ECT THE ASSESSING OFFICER TO TREAT THE AMOUNT OF LOAN RECEIVED FROM SHRI RAKESH SINGHVI AS GENUINE. ACCORDINGLY THE ADDITION OF RS. 38,00,000/- ON THIS ACCOUNT IS DELETED. 7. DISALLOWANCE OF DEPRECIATION WAS ALSO DELETED BY THE LD.CIT(A) AFTER FOLLOWING THE DECISION OF JURIS DICTIONAL HIGH COURT IN THE CASE OF SHRI GUJARATI SAMAJ (REGD.), I NDORE, ORDER DATED 8 TH JULY, 2011. 8. THE LD. CIT(A) ALSO ALLOWED ASSESSEE S CLAIM OF CARRY FORWARD OF EXCESS AMOUNT OF EXPENDITURE INCUR RED IN THE EARLIER YEARS ON THE OBJECT OF THE TRUST BY RELYING ON THE DECISION OF THE BOMBAY HIGH COURT IN THE CASE OF IN STITUTE OF -: 11: - 11 BANKING PERSONNEL SELECTION, 264 ITR 110. PRECISE C ONCLUSION OF CIT(A) WAS AS UNDER :- IN ALL THE JUDGMENTS, THE CONSISTENT VIEW HAS BEEN THAT EXPENDITURE INCURRED IN EARLIER YEARS TOWARDS THE OBJECTS OF THE TRUST CAN BE ALLOWED TO BE AN APPLICATION U/S. 11 AS AGAINST THE INCOME OF SUBSEQUENT YEAR. THIS WOULD ENTITLE THE ASSESSEE'S CLAIM TO CARRY FORWARD THE EXCESS EXPENDITURE. THUS, IN PRINCIPAL, THE CLAIM OF THE ASSESSEE TO CARRY FORWARD ITS EXCESS EXPENDITURE (ON THE OBJECTS OF THE TRUST) TO THE SUBSEQUENT YEAR IS ALLOWED. BUT, WHAT I FIND THAT IN SPITE OF THE CLAIM OF EXPENSES (ON THE OBJECTS OF THE TRUST) IS MORE THAN THE SURPLUS, THE ASSESSEE AS WELL AS AO PROVIDED FOR ACCUMULATION TO THE EXTENT OF 15%. THIS APPROACH IS NOT CORRECT. THE DEDUCTION ON ACCOUNT OF 15% PERMITTED ACCUMULATION IS NOT -: 12: - 12 WARRANTED. THIS WILL HAVE A BEARING ONTO THE QUANTUM OF CARRIED FORWARD BALANCE. THE AO WOULD RE-COMPUTE AND WORK OUT THE CORRECT AMOUNT OF EXCESS OF EXPENDITURE BY WAY OF APPLICATION U/S. 11 OUT OF THE SURPLUS FOR BEING CARRIED FORWARD AND ALLOWED TO BE CLAIMED AS APPLICATION AGAINST THE INCOME OF SUBSEQUENT YEARS. IT IS ALSO NOTED THAT THE ASSESSEE IN ITS RETURN OF INCOME CLAIMED 'CARRIED FORWARD' IN RESPECT OF EXPENSES INCURRED TOWARDS BUILDING ONLY AND NOT IN RESPECT OF EXPENSES INCURRED TOWARDS ENTIRE CAPITAL COST. THUS, CLAIM OF THE ASSESSEE BE RESTRICTED WITH REFERENCE TO THE CLAIM LODGED IN THE RETURN OF INCOME AND NOT AS REVISED DURING THE COURSE OF APPELLATE PROCEEDING. TO THAT EXTENT, THE DECISION IS GIVEN IN FAVOUR OF THE ASSESSEE. -: 13: - 13 9. AGGRIEVED BY THE ABOVE ORDER OF CIT(A), REVENUE IS IN APPEAL BEFORE US. 10. SHRI KESHAV SAXENA, CIT DR PLEADED ON BEHALF OF THE REVENUE AND CONTENDED THAT THE ASSESSEE IS NOT ELIGIBLE FOR CLAIM OF DEPRECIATION U/S 32 IN SO FAR AS INCOME OF THE ASSESSEE TRUST IS TO BE COMPUTED U/S 11, 12 & 13 AN D NOT U/S 28 TO 45D OF THE INCOME-TAX ACT, 1961. THE PRECISE CONTENTION OF THE LD. CIT DR WAS AS UNDER :- AS PER COMPUTATION OF INCOME IN BOTH THESE CASES THE SURPLUS OF INCOME OVER EXPENDITURE IS MORE THAN 15% WHICH AMOUNTS OF VIOLATION OF SECTION 11, BUT THAT IS REDUCED BY ASSESSEE BY CLAIMING THE DEDUCTION OF ADDITION IN FIXED ASSETS ON THE ONE HAND AND DEPRECIATION ON THE FIXED ASSETS ON THE OTHER HAND. WHEN ENTIRE COST OF FIXED ASSETS IS CLAIMED AS -: 14: - 14 DEDUCTION, THE CLAIM DEPRECIATION AMOUNT TO CLAIM OF DOUBLE DEDUCTION. IN THE CASE OF ESCORTS LTD. & ANS (1993) 199 ITR 43 (SC) APEX COURT HELD THAT ONCE THE DEDUCTION IS CLAIMED U/S 35 AND WAS ALLOWED, DEPRECIATION U/S 32 WAS NOT AVAILABLE EITHER IN THE SAME OR ANY OTHER PREVIOUS YEAR. HON'BLE APEX COURT HAVE FURTHER NOTED FOLLOWING IN PARA 13 THAT 'ALL MISCONCEPTION WILL VANISH AND ALL THE PROVISIONS WILL FALL INTO PLACE IF ONE BEARS IN MIND A FUNDAMENTAL THOUGH UNWRITTEN AXIOM THAT LEGISLATURE COULD HAVE AT ALL INTENDED A DOUBLE DEDUCTION IN REGARD TO THE SAME BUSINESS OUTGOING, AND IF IT IS INTENDED IT WILL BE CLEARLY EXPRESSED'. ASSESSEE HAS CLAIMED DEDUCTION U/S 11, 12 & 13 OF THE I.T. ACT AND IN THESE THREE SECTIONS THERE I S NO -: 15: - 15 PROVISIONS TO ALLOW DEPRECIATION. THE ENTIRE COST O F CAPITAL ASSETS IS ALLOWED TO ASSESSEE AS APPLICATIO N OF INCOME TOWARD CHARITABLE PURPOSES, IF SUCH PURCHASE IS AS PER THE OBJECT OF THE TRUST. THIS IS DONE AS PER THE PROVISIONS SECTION 11(1)(A) OF THE I.T. ACT WHICH EXEMPT SUCH INCOME OF A CHARITABLE TRUST WHICH IS APPLIED FOR THE OBJECT OF THE TRUST. WHEN THERE IS NO PROVISION TO ALLOW DEPRECIATION U/S 11,12 &13 OF THE I.T. ACT IT CANNOT BE ALLOWED TO ASSESSEE. THE COURTS HAVE POWER ONLY TO INTERPRETE A SECTION AND THEY HAVE NO POWER TO LEGISLATE AS HELD IN THE CASE OF PRAKASH NATH KHANNA (2004) 266 ITR 1(SC). MATTERS WHICH SHOULD HAVE BEEN PROVIDED BUT NOT PROVIDED FOR IN THE STATUTE CANNOT BE SUPPLIED BY THE COURTS (PRINCIPLE OF CASUS OMISUS) AS HELD IN FOLLOWING CASES BY THE JURISDICTIONAL HIGH COURT- -: 16: - 16 1) LAXAMANDAS PRANCHAND & ORS (MP) 234 ITR 261 2) R.J. TRIVEDI & SONS (MP) 183 ITR 420 SINCE THE PROVISIONS U/S 11,12 & 13 ARE GRANTING EXEMPTION, THEY REQUIRE STRICT CONSTRUCTION AS HELD IN THE CASE OF KOTA CORPORATIVE MARKETING SOCIETY LTD. (RAJ) 207 ITR 608 & RENUKA DATLA (AP.) 240 ITR 463. NOW COMING TO PROVISION OF SECTION 32, THE ACT ITSE LF DOES NOT PROVIDE PALPABILITY OF THIS SECTION TO ANY OTHER SOURCE OF INCOME EXCEPT TO THE INCOME FROM BUSINESS OR PROFESSION, BECAUSE THIS SECTION SAYS:- 32. (1) [ IN RESPECT OF DEPRECIATION OF (I) BUILDINGS, MACHINERY, PLANT OR FURNITURE, BEING TANGIBLE ASSETS; (II) KNOW-HOW, PATENTS, COPYRIGHTS, TRADE MARKS, LICENCES, FRANCHISES OR ANY OTHER BUSINESS OR -: 17: - 17 COMMERCIAL RIGHTS OF SIMILAR NATURE, BEING INTANGIB LE ASSETS ACQUIRED ON OR AFTER THE 1ST DAY OF APRIL, 1998, OWNED, WHOLLY OR PARTLY, BY THE ASSESSEE AND USED FOR THE PURPOSES OF THE BUSINESS OR PROFESSION , THE FOLLOWING DEDUCTIONS SHALL BE ALLOWED THEREFORE SECTION 32 HAS NO APPLICATION TO THE INCOME WHICH IS ASSESSED U/S 11 TO 13 OF THE I.T. ACT. THE HON'BLE JURISDICTIONAL HIGH COURT HAS ALLOWED THE DEPRECIATION IN CASE OF CHARITABLE TRUST NAMELY SHRI GUJRATI SAMAJ (2011) 18 ITJ 255 (MP) BY SIMPLY OBSERVING THAT DEPRECIATION IS NOTHING BUT DECREASE IN VALUE OF PROPERTY THROUGH WEAR, DETERIORATION OR OBSOLESCENCE AND ALLOWANCE IS MADE FOR THIS PURPOSE IN BOOK KEEPING, ACCOUNTANCY ETC. IT IS MOS T RESPECTFULLY SUBMITTED THAT WHEN THE ENTIRE COST OF CAPITAL ASSET IS ALREADY ALLOWED TO ASSESSEE AS -: 18: - 18 APPLICATION TOWARDS CHARITABLE OBJECTS, THE 100% COST IS ALLOWED IN ONE YEAR AND THEREFORE NO FURTHE R AMOUNT IS LEFT FROM THE COST OF CAPITAL ASSET TO BE ALLOWED AS DEPRECIATION. AS PER THE ACCOUNTANCY PRINCIPLE ALSO WHEN THE ENTIRE COST OF CAPITAL ASSE T IS ALLOWED TO ASSESSEE, IT CANNOT BE ALLOWED AGAIN IN A DIFFERENT TERMINOLOGY. THE THIRD AND THE MOST IMPORTANT ASPECT IS THAT THE HON'BLE HIGH COURT HAS NOT GONE INTO THE PROVISIONS OF SECTION 32 OF THE I .T. ACT WHICH ARE APPLICABLE ONLY TO THOSE ASSESSEES WHO ARE HAVING INCOME FROM BUSINESS OR PROFESSION AND SECTION 32 HAS NO APPLICATION WHATSOEVER TO THE ASSESSEE CLAIMING DEDUCTION U/S 11 TO 13 OF THE I.T . ACT. 11. FURTHER CONTENTION OF THE LD. CIT DR WAS AS UNDER :- -: 19: - 19 (1) THE WORD BUSINESS IS ONE OF WIDE IMPORT AND IT MEANS AN ACTIVITY CARRIED ON CONTINUOUSLY & SYSTEMATICALLY BY A PERSON BY THE APPLICATION OF HIS LABOUR AND SKILL WITH A VIEW TO EARNING AN INCOME. BARENDRA PRASAD RAY (SC) 129 ITR 295 IN PRESENT CASE LUNKAD GROUP IS HELD BY HONBLE MEMBERS TO BE PROVIDING ACCOMMODATION ENTRIES FOR LOANS/SHARE CAPITAL IN A.Y. 07-08, ON PAYMENT OF COMMISSION. LUNKAD GROUP IS DOING THIS BUSINESS OF PROVIDING ACCOMMODATION OF LOANS/SHARE CAPITAL, BY TAKING RISK OF COLLECTING CASH FROM BENEFICIARIE S, DEPOSIT OF SUCH HUGE CASH IN THEIR BANK ACCOUNTS, ROTATION OF SUCH AMOUNTS IN THEIR VARIOUS BANK ACCOUNTS AND THEREAFTER ISSUING OF CHEQUES IN FAVOUR OF BENEFICIARIES IN GUISE OF LOANS / SHARE CAPITAL. -: 20: - 20 THIS ACTIVITY OF ACCOMMODATION PROVIDER IS THE BUSINESS OF LUNKAD GROUP AND WILL APPLY TO ALL THE YEARS INVOLVED, IN ASSESSMENT ORDER. 2. A PARTY CANNOT ESCAPE THE CONSEQUENCE OF LAW MERELY BY DESCRIBING AN AGREEMENT IN A PARTICULAR FORM THOUGH IN ESSENCE AND IN SUBSTANCE, IT MAY BE A DIFFERENT TRANSACTION. PAN PAT WOOLLEN AND GENERAL MILLS CO. LTD. (SC) 103 ITR 66 IN PRESENT CASE, ASSESSEE GROUP HAS SHOWN RECEIPT OF VARIOUS LOANS FROM DIFFERENT GROUP CONCERNS OF LUNKAD GROUP, BUT IN REALITY IT IS ONLY ACCOMMODAT ION ENTRY OF LOAN/SHARE CAPITAL PROVIDED BY LUNKAD GRO UP, BECAUSE PROVIDING ACCOMMODATION OF LOANS/SHARE CAPITAL ON PAYMENT OF COMMISSION, IS THE BUSINESS O F LUNKAD GROUP. -: 21: - 21 3 COLOURABLE DEVICES ARE NOT PART OF TAX PLANNING. MCDOWELL AND CO. LTD. VS COMMERCIAL TAX OFFICER (SC) 154 ITR 148. IN PRESENT CASE, ASSESSEE CO. AND ENTIRE MITTAL GROUP USED THEIR OWN UNACCOUNTED CASH, USED THE SERVICES OF ACCOMMODATION ENTRY PROVIDER LUNKAD GROUP TO PLOUGH SUCH CASH BACK TO ITS BOOKS, WITHOUT PAYMENT OF ANY TAX, IN THE GUISE OF LOAN. THIS CANNOT BE CALLED TAX PLANNING, BUT IS TAX EVASION. 12. ON THE OTHER HAND, SHRI S. N. AGRAWAL, C.A., APPEARED ON BEHALF OF THE ASSESSEE AND CONTENDED TH AT THE ISSUE OF DEPRECIATION HAS BEEN DECIDED BY THE I.T.A .T., INDORE BENCH IN THE CASE OF GUJARATI SAMAJ AND THE SAME HA S BEEN CONFIRMED BY THE HON'BLE JURISDICTIONAL HIGH COURT IN ITS DECISION DATED 8 TH JULY, 2011, WHEREIN AFTER GIVING DETAILED REASONING THE ASSESSEES CLAIM FOR DEPRECIATION WAS HELD TO BE -: 22: - 22 ALLOWABLE EVEN IN THE CASE OF TRUST, WHOSE INCOME I S COMPUTED U/S 11 OF THE INCOME-TAX ACT, 1961. 13. THE PRECISE OBSERVATION OF THE HON'BLE HIGH COURT WAS AS UNDER :- 8. COMING TO THE NEXT QUESTION AS TO WHETHER THE ORDER OF THE TRIBUNAL HOLDING THAT THE ASSESSEE IS ENTITLED FOR CARRY FORWARD AND SET OFF EXCESS [OF EXPENDITURE INCURRED DURING THE YEAR OVER ITS INCOME. WE FIND THAT IN VIEW OF SECTION 11(1)(A) OF THE ACT, IT CANNOT BE SAID THAT THE EXPENDITURE INCURRED IN THE EARLIER YEAR CANNOT BE MET OUT OF THE INCOME OF THE SUBSEQUENT YEAR AND UTILIZATION OF SUCH INCOME FOR MEETING THE EXPENDITURE OF THE EARLIER YEAR WOULD NOT AMOUNT TO SUCH INCOME BEING APPLIED FOR CHARITABLE OR RELIGIOUS PURPOSES. HAVING REGARD TO SECTION 11(1)(A) OF THE ACT IN OUR VIEW WHEN THE -: 23: - 23 INCOME OF THE TRUST IS USED OR PUT TO USE TO MEET THE CHARITABLE OR RELIGIOUS PURPOSES IT IS APPLIED FOR CHARITABLE PURPOSE AND THE SAID APPLICATION OF THE INCOME FOR CHARITABLE OR RELIGIOUS PURPOSES TAKES PLACE IN THE YEAR IN WHICH THE INCOME IS ADJUSTED TO MEET THE EXPENSES INCURRED FOR CHARITABLE OR RELIGIOUS PURPOSES. THUS EVEN IF THE EXPENSES FOR CHARITABLE AND RELIGIOUS PURPOSES HAVE BEEN INCURRED IN THE EARLIER YEAR AND THE SAID EXPENSES ARE ADJUSTED AGAINST THE INCOME OF A SUBSEQUENT YEAR, THE INCOME OF THAT YEAR CAN BE SAID TO HAVE BEEN APPLIED FOR CHARITABLE AND RELIGIOUS PURPOSES IN THE YEAR IN WHICH EXPENSES INCURRED FOR CHARITABLE AND RELIGIOUS PURPOSES HAD BEEN ADJUSTED. THERE ARE NO WORDS OF LIMITATION IN SECTION 11(1)(A) OF THE -: 24: - 24 ACT EXPLAINING THAT THE INCOME SHOULD HAVE BEEN APPLIED FOR CHARITABLE OR RELIGIOUS PURPOSES ONLY IN THE YEAR IN WHICH THE INCOME HAD ARISEN. [SEE COMMISSIONER OF INCOME-TAX VS. MAHARANA OF MEWAR CHARITABLE FOUNDATION 1987 ITR (164) 439]. IN OUR CONSIDERED VIEW THE TRIBUNAL HAS RIGHTLY APPLIED THE RATIO OF THE JUDGMENT AND ORDER PASSED BY THE DIVISION BENCH OF RAJASTHAN HIGH COURT IN COMMISSIONER OF INCOME-TAX VS. MAHARANA OF MEWAR CHARITABLE FOUNDATION (SUPRA) AND HAS COMMITTED NO ERROR IN HOLDING THIS ISSUE IN FAVOUR OF THE ASSESSEE. 9. IN THE CIRCUMSTANCES, IN OUR CONSIDERED VIEW, NO CASE IS MADE OUT TO INTERFERE INTO THE ORDER PASSED BY THE TRIBUNAL. ACCORDINGLY, -: 25: - 25 THE APPEAL FAILS AND IS HEREBY DISMISSED. 14. WITH REGARD TO THE LOAN TAKEN FROM SHRI RAKESH SINGHVI, WHICH WAS DELETED BY THE LD.CIT(A), CONTEN TION OF THE LD. AUTHORIZED REPRESENTATIVE WAS AS UNDER :- 2.2.1] THE ASSESSING OFFICER ON PAGE NOS. 6 & 7 OF THE ASSESSMENT ORDER FOR A.Y. 2007-08 HAS DISCUSSED ABOUT THE LOAN RECEIVED FROM SHRI RAKESH SINGHVI OF RS. 38,00,000/-. 2.2.2] THE AO ISSUED LETTER U/S 133(6) ON 23-11-200 9 FIXING THE DATE OF HEARING ON 04-12-2009. HOWEVER, TILL DATE, NO REPLY WAS RECEIVED. THE AO THEN ASKED THE ASSESSEE TO SUBMIT THE DETAILS. THE ASSESSEE FILED CONFIRMATION LETTER WITH PAN CARD AND BANK STATEMENT [DISCUSSED BY THE AO IN HIS ORDER ON PAGE NO 6 IN THIRD PARA] 2.2.3] THAT ON THE REQUEST OF THE ASSESSEE, THE SAI D -: 26: - 26 CREDITOR ALSO FILED THESE DETAILS DIRECTLY WITH THE AO IN ORIGINAL [ACCEPTED BY THE AO IN HIS ORDER ON PAG E NO 6 IN THIRD PARA] 2.2.4] THE LETTER AS ISSUED U/S 133(6) WAS RECEIVED UNSERVED. HENCE, THE AO ISSUED COMMISSION TO HIS COUNTERPART AT MUMBAI U/S 131 (1)( D). 2.2.5] THE AO, SOUGHT COMMENTS ON REPORT AS SUBMITT ED BY THE DCIT 3(3) MUMBAI. IN THE SAID REPORT, INSPECTOR AS DEPUTED SUBMITTED THAT THE SAID LOAN CREDITOR IS NOT CAPABLE IN GIVING DONATION OF RS 38,00,000/- TO THE ASSESSEE TRUST. THAT CERTAINLY T HE OBSERVATION OF THE INSPECTOR WITH REFERENCE TO THE DONATION MAY BE CORRECT HOWEVER, IN THE CASE OF UNSECURED LOAN AS RECEIVED BY THE ASSESSEE, THE ASSESSEE HAD FILED COMPLETE DETAILS AS TO JUSTIFY T HE GENUINENESS OF THE LOANS BY PROVING THE IDENTITY, CAPACITY AND CREDITWORTHINESS OF THE LOAN CREDITORS . -: 27: - 27 HENCE THE SAID OBSERVATION OF INSPECTOR IN RESPECT OF LOAN ADVANCED BY SHRI RAKESH SINGHVI ARE NOT APPLICABLE. COPIES OF SAID PAPERS ARE ENCLOSED. 2.2.6] THAT IN THE PRESENT CASE, THE ASSESSEE HAD F ILED CONFIRMATION LETTER OF SHRI RAKESH SINGHVI DULY SIG NED BY HIM WITH COPY OF PAN CARD AND BANK STATEMENT. COPIES OF THE SAME ARE ALSO ENCLOSED FOR YOUR HONOU R'S KIND PERUSAL ON PG. 126,142 TO 146 OF THE COMPILATI ON. THE INSPECTOR OF THE DEPARTMENT ALSO PERSONALLY VIS ITED TO THE RESIDENCE OF SHRI RAKESH SINGHVI AND SUMMONS WERE SERVED AT HIS HOME. THAT ONCE THE IDENTITY OF THE LOAN CREDITOR STAND PROVED, FROM THE BANK STATEMENT LOAN TRANSACTION CAN ALSO BE VERIFIED. LOAN CREDITO R ALSO ACCEPTED THE AMOUNT OF LOANS ADVANCED BY HIM BY FIL ING THE CONFIRMATION LETTER. THUS, THE DCIT-3(3) MUMBAI HAS ANY DOUBT ABOUT THE GENUINENESS AND CREDITWORTHINES S OF THE LOAN, THE SAME SHOULD HAVE BEEN ADDED IN THE -: 28: - 28 HAND OF THAT PERSON BUT IN NO CASE THE SAME IS ADDE D TO THE INCOME OF THE ASSESSEE. 2.2.7] THE LD. CIT(A) HAS ACCEPTED THE SUBMISSIONS FILED BEFORE HIM REGARDING SUBSTANTIATING THE GENUINENESS OF LOAN RECEIVED FROM SHRI RAKESH SINGH VI OF RS. 38,00,000/- ON PAGE NOS 54 & 55 OF HIS ORDER AND HAS CORRESPONDINGLY DELETED THE SAID ADDITION MADE BY A.O. U/S 68. 1.2.8] THAT IN THE PRESENT CASE, THE ASSESSEE HAS PROPERLY DISCHARGED ONUS LYING ON IT BY FILING THE COMPLETE PAPERS AS TO JUSTIFY THE GENUINENESS OF TH E LOAN. IN VIEW OF THE ABOVE THE ADDITION MADE U/S 68 IN RESPECT OF LOANS RECEIVED IS CONTRARY TO THE PROVIS IONS OF LAW AND FACTS OF THE CASE. THUS THE HON'BLE BENCH I S REQUESTED TO ACCEPT THE AMOUNT OF UNSECURED LOAN TAKEN BY THE ASSESSEE AS GENUINE AND APPROVE THE ORDER PASSED U/S LD. CIT(A). -: 29: - 29 15. WITH REGARD TO LOAN TAKEN FROM LUNKAD GROUP, CONTENTION OF LD. AUTHORIZED REPRESENTATIVE WAS AS UNDER :- 2.3] LOANS RECEIVED FROM LUNKAD GROUP OF COMPANIES 2.3.1] THAT ON PERUSAL OF THE ASSESSMENT ORDERS FOR BOTH THE YEAR YOUR HONOUR WILL FIND THAT THE LD . ASSESSING OFFICER HAS MADE ADDITION U/S 68 IN THE CASE OF THE ASSESSEE IN RESPECT OF UNSECURED LOANS RECEIVED FROM LUNKAD GROUP OF COMPANIES AND THEIR ASSOCIATED ON THE BASIS OF INFORMATION AVAILABLE WITH HIM DUE TO SURVEY CONDUCTED BY THE DEPARTMENT ON 02-05-2006 ON THE BUSINESS PREMISES OF THE LUNKAD GROUP EVEN WHEN THE ASSESSEE HAD FILED COMPLETE DETAILS AS TO JUSTIFY THE AMOUNT OF LOANS RECEIVED FROM THESE LOAN CREDITORS. 2.3.2] THAT THE ASSESSING OFFICER WHILE MAKING THE -: 30: - 30 ADDITIONS/DISALLOWANCES U/S 68 HAS HELD THAT THE ASSESSEE HAS FAILED TO PROVE THE IDENTITY, GENUINENESS AND CREDITWORTHINESS OF THE LOAN CREDITORS. THE ASSESSING OFFICER ALSO REACHED TO TH E CONCLUSION THAT THE LOANS RECEIVED FROM THE ABOVE PARTIES ARE MERELY ACCOMMODATION ENTRIES. 2.3.3] THAT THE OBSERVATION OF THE ASSESSING OFFICER IS PURELY BASED ON HYPOTHETICAL STORY CREATED ON THE BASIS A SURVEY CONDUCTED AT THE PREMISES OF 'LUNKAD GROUP' EVEN WHEN, THERE WAS NO REFERENCE OF THE ASSESSEE'S NAME IN ANY OF THE DOCUMENTS FOUND FROM THE PREMISES OF LUNKAD GROUP. 2.3.4] THE ISSUE OF ADDITION OF LOANS TAKEN FROM LUNKAD GROUP HAS BEEN DISCUSSED BY THE ASSESSING OFFICER ON FOLLOWING PAGES OF ASSESSMENT ORDER. -: 31: - 31 2.3.5]THE ASSESSEE IN THE PRESENT CASE HAD FILED COMPLETE DETAILS OF LOAN RECEIVED AND ALSO FILED FOLLOWING PAPERS AS TO JUSTIFY THE IDENTITY, CAPAC ITY AND CREDITWORTHINESS OF THE LOAN CREDITORS:- (I) IDENTITY OF THE LOAN CREDITORS CONFIRMATIONS OF UNSECURED LOAN CREDITORS DULY SIGN ED WITH THEIR INCOME TAX DETAILS. (AVAILABLE ON PAGES 126 TO 130 OF PAPER BOOK FOR A.Y. 2007-08 AND PAGES 86 TO 88 OF PAPER BOOK FOR A.Y. 2008-09) DEPARTMENT HAS TAKEN ACTION U/S 133A OF THE INCOME TAX ACT AS MENTIONED BY THE ASSESSING OFFICER IN TH E ASSESSMENT ORDER ON LUNKAD GROUP OF CASES. SHRI SANJIV LUNKAD, SHRI GHANSHYAM JAGTAP, SHRI VIJA Y JAISWAL AND SHRI SHARAD KUMAR DARAK DIRECTORS! ASSESSMENT YEAR PAGE NO. OF ASST. ORDER 2007-08 7 TO 19 2008-09 2 TO 6 -: 32: - 32 REPRESENTATIVES OF THE ABOVE UNSECURED LOAN CREDITO RS COMPANIES HAVE ATTENDED BEFORE THE ASSESSING OFFICE R AND CATEGORICALLY ADMITTED THAT THEY HAVE GIVEN LOA N TO THE ASSESSEE COMPANY. COPIES OF STATEMENTS OF ABOVE PERSONS ARE AVAILABLE ON PAGE NOS. 131 TO 141 OF THE PAPER BOOK. THAT THE LOAN CREDITORS HAVE FURTHER CONFIRMED THE LOAN TRANSACTIONS BY SIGNING AND FILING THE CONFIRMATION LETTERS. (II) GENUINENESS OF THE TRANSACTION IS PROVED :_ THE AMOUNT OF LOAN TAKEN THROUGH AN ACCOUNT PAYEE CHEQUE THE APPELLANT HAS GIVEN INTEREST ON THE SAID AMOUNT OF LOAN. THE AMOUNT OF INTEREST WAS ALSO PAID THROUGH ACCOUN T PAYEE CHEQUES. TDS WAS ALSO DEDUCTED ON THE AMOUNT OF INTEREST AND DEPOSITED IN THE GOVERNMENT ACCOUNT (WHEREVER APPLICABLE) -: 33: - 33 (III) CREDITWORTHINESS OF THE TRANSACTION IS PROVED:- LOAN CREDITORS ARE DULY ASSESSED TO TAX FOR LAST SO MANY YEARS. COPIES OF ASSESSMENT ORDERS ARE ENCLOSE D (PAGE NOS. 270 TO 306 OF PAPER-BOOK FILED FOR THE A.Y. 2007-08 AND PAGE NOS. 112 TO 127 OF THE PAPER-BOOK FILED FOR A.Y. 2008-09.) - THE AMOUNT OF LOANS AS ADVANCED TO THE ASSESSEE DULY REFLECTED IN THE BALANCE SHEET OF THE LOAN CREDITORS. - THE LOAN CREDITORS HAVE CONFIRMED THE SAID LOAN TRANSACTIONS BY FILING CONFIRMATION LETTER. 2.3.6]. AS SUBMITTED ABOVE SHRI SANJIV LUNKAD, SHRI GHANSHYAM JAGTAP, SHRI VIJAY JAISWAL AND SHRI SHARAD KUMAR DARAK DIRECTORS/ REPRESENTATIVES OF THE ABOVE UNSECURED LOAN CREDITORS COMPANIES HAVE PERSONALLY ATTENDED BEFORE THE ASSESSING OFFICER THOUGH, THE ASSESSING OFFICER WITH HIS PRE- -: 34: - 34 NOTION NOT SATISFIED WITH THE EXPLANATION OFFERED B Y THEM. 2.3.7] THAT ALL THE ABOVE LOAN CREDITORS ARE DULY ASSESSED TO TAX AND THEIR INCOME TAX ASSESSMENTS WERE ALSO FRAMED U/S 143(3). THE COPIES OF ORDERS HAVE BEEN FILED ON PAGE NOS. 270 TO 306 OF PAPER- BOOK FILED FOR THE A.Y. 2007-08 AND PAGE NOS. 112 TO 127 OF THE PAPER-BOOK FILED FOR A.Y. 2008-09. 2.3.8] THAT COPIES OF BALANCE SHEET AS AVAILABLE ARE ALSO FILED. THE COPIES OF BALANCE SHEETS ARE AVAILABLE ON PAGE NOS. 147 TO 269 OF PAPER-BOOK FILED FOR THE A.Y. 2007-08 AND PAGE NOS. 89 TO 111 OF THE PAPER-BOOK FILED FOR A.Y. 2008-09. THAT FROM THE FIGURE OF BALANCE SHEETS AND SCHEDULE THEREOF I T IS CLEAR THAT ALL THE CREDITORS ARE HAVING SUFFICIE NT WORTH TO ADVANCE LOANS TO THE ASSESSEE. 2.3.9] THAT IN VIEW OF THE ABOVE FACTS, THE ASSESSE E -: 35: - 35 HAS PROPERLY DISCHARGED ONUS LYING ON HIM BY FILING THE COMPLETE DETAILS OF LOAN RECEIVED, CONFIRMATION AND THE BALANCE SHEET. THUS, THE ASSESSEE HAS PROPERLY DISCHARGED ONUS LYING ON HIM. 2.3.10] THE DECISIONS AS RELIED BY THE ASSESSEE ARE REPRODUCED ON INNER PAGE NO. 21 TO 27 FOR THE A.Y. 2007-08 OF THE CIT(A) ORDER WHEREIN IT HAS BEEN HELD BY THE VARIOUS TRIBUNALS, HIGH COURTS THAT ONCE THE IDENTITY, CAPACITY AND CREDITWORTHINESS OF THE LOAN CREDITORS HAVE BEEN ESTABLISHED THE ONUS OF ASSESSEE IS DISCHARGED. 2.3.11] THAT IN THE ONE OF THE LATEST DECISION THE HON'BLE THIRD MEMBER AGRA BENCH OF TRIBUNAL IN THE CASE OF UMESH ELECTRICALS VS ACIT REPORTED IN 141 TTJ 288 IN CONCLUDING PARA HAS HELD:- ' ASSESSEE HAVING FILED CONFIRMATION, ADDRESS, PAN AND COPIES OF BANK ACCOUNT AS WELL AS THE CASH BOOK -: 36: - 36 OF THE CREDITOR FROM WHOM IT HAS TAKEN LOAN THROUGH A BANK DRAFT, IT HAS DULY DISCHARGED ITS ONUS UNDER S . 68 AND THEREFORE, THE LOAN CANNOT BE TREATED AS NON - GENUINE SIMPLY BECAUSE THE LENDER HAD DEPOSITED EQUAL AMOUNT OF CASH IN ITS BANK ACCOUNT ON THE SAME DAY OUT OF WHICH DEMAND DRAFT WAS MADE IN FAVOUR OF THE ASSESSEE.' COPY OF SAID ORDER IS ENCLOSED. 2.3.12 THE LD. CIT(A) HAS DISCUSSED THE ENTIRE ISSU E IN DETAIL ON FOLLOWING PAGES OF HIS APPELLATE ORDER AN D SPECIFICALLY ON FOLLOWING PAGES OF HIS ORDER. ASSESSMENT YEAR DISCUSSED ON PAGES OF CIT (A) ORDER SPECIFIC FINDING ON PAGES 2007-08 PAGES 40 TO 54 PAGES 53-54, PARA 4.1.4 2008-09 PAGES 15 TO 29, 31 PAGE 31, PARA4.3 2.3.13] THE LD. CIT(A) HAS THEREFORE DELETED THE ADDITION MADE BY A.O. IN RESPECT OF UNSECURED LOANS -: 37: - 37 FROM LUNKAD AND THEIR ASSOCIATES AS GENUINE AS PER THE FINDINGS GIVEN THE ORDER. 2.4] THE HON'BLE BENCH IN THE CASE OF M/S NARMADA EXTRUSION LIMITED (IT(SS)A NOS. 3 TO 7/IND/2011 DT 30-12-2011 ) IN PARA 20 ON PAGE NOS. 51 TO 54) HAS DISCUSSED THE SAID ISSUE IN DETAIL AND HELD THAT CA SH BOOK AS FOUND FROM THE PREMISES OF LUNKAD IS FOR TH E MONTH OF APRIL AND MAY 2006 I.E, RELEVANT TO THE A. Y. 2007-08. THAT IN THE SAID ALLEGED CASH BOOK ALSO NAME OF THE ASSESSEE WAS NOT FOUND. HENCE ON THE FACTS OF THE PRESENT CASE, THE SAID ADDITION AS MAD E BY THE AO IN RESPECT OF LOANS TAKEN FROM LUNKAD GROUP AND ITS ASSOCIATE COMPANIES IS NOT JUSTIFIED. 2.5] MOREOVER THE HON'BLE BENCH VIDE ITS ORDER DT. 31.01.2012 IN THE CASE OF LUNKAD GROUP HAS ALSO CONFIRMED THE ADDITIONS MADE BY THE LD. A.O. U/S 68 IN ITS HANDS I.E. LUNKAD GROUP ITSELF. THUS THERE I S NO -: 38: - 38 REASON TO AGAIN ADD SAID AMOUNT IN THE HANDS OF ASSESSEE COMPANY BY CONSIDERING THE LOANS TAKEN FROM LUNKAD GROUP AS ACCOMMODATION ENTRIES WHEN THE ASSESSEE HAS DISCHARGED THE ONUS LYING UPON IT BY ESTABLISHING THE IDENTITY, CAPACITY AND CREDITWORTHINESS OF CREDITORS. 2.6 IN VIEW OF THE ABOVE THE ADDITION MADE U/S 68 IN RESPECT OF LOANS RECEIVED FROM LUNKAD GROUP AND ITS ASSOCIATES IS CONTRARY TO THE PROVISIONS OF LAW AND FACTS OF THE CASE. THUS THE HON'BLE BENCH IS REQUESTED TO ACCEPT THE AMOUNT OF UNSECURED LOANS TAKEN BY THE ASSESSEE AS GENUINE AND APPROVE THE ORDER PASSED U/S LD. CIT (A). 16. WITH REGARD TO DISALLOWANCE OF CLAIM OF DEPRECIATION, CONTENTION OF THE LD. AUTHORIZED REPR ESENTATIVE WAS AS UNDER :- -: 39: - 39 4.4.2 THAT HONBLE ITAT INDORE BENCH VIDE ITS ORDER DT. 31.01.2011 (ITA NO. 171 TO 173/IND/2010) IN THE CASE OF SHRI GUJRATI SAMAJ V/S ACIT 1(2), INDORE FOR THE A.Y. 2004-05 TO 2006-07 HAS DECIDED THE SAID ISSUE REGARDING CLAIM OF DEPRECIATION AS APPLICATION OF FUNDS. THUS IT HAS ALLOWED THE CLAIM OF ASSESSEE AND DISMISSED THE APPEAL FILED BY THE REVENUE. COPY OF SAID ORDER IS ENCLOSED. 4.4.3] THE ORDER OF ITAT HAS BEEN APPROVED BY THE HON'BLE JURISDICTIONAL HIGH COURT VIDE ITS ORDER DT. 08.07.2011. THE SAID DECISION HAS BEEN REPORTED IN 64 DTR 76. COPY OF SAID ORDER IS ALSO ENCLOSED FOR YOUR READY REFERENCE. -: 40: - 40 4.5.1] THE HON'BLE P&H HIGH COURT IN ITS RECENT JUDGMENT CIT V. DESH BHAGAT MEMORIAL TRUST (2011)37(I)ITCL 13 HP&H-HC) AFTER CONSIDERING THE SUPREME COURT JUDGMENT OF ESCORTS LTD HELD THAT DEPRECIATION CANNOT BE DISALLOWED TO A CHARITABLE TRUST WHOSE INCOME IS EXEMPT ON THE GROUND OF DOUBLE BENEFIT. THE OBJECT OF ALLOWING DEPRECIATION IS ONLY FOR THE PURPOSE OF DETERMINING PERCENTAGE OF FUNDS WHICH HAVE TO BE APPLIED FOR PURPOSES OF TRUST WHICH DOES NOT AMOUNT TO DOUBLE DEDUCTION. . RELIANCE IS ALSO PLACED ON FOLLOWING DECISIONS:- S.NO. NAME CITATION 01 ACIT, BHOPAL V/S M.P.MADHYAM & OTHERS, BHOPAL 13ITJ 103 (INDORE) 02 CIT VS. TINNY TONTS EDUCATION SOCIETY 330 ITR 21 (P&H) 03 CIT VS. MARKET COMMITTEE, PIPLI 45 DTR 381 -: 41: - 41 (P&H) 04 DIRECTOR OF INCOME TAX (EXEMPTION) V/S FRAMJEE CAWASJEE INSTITUTE 109 CTR 463 (BOMBAY) 05 CIT V/S SOCIETY OF THE SISTERS OF ST. ANNE 146 ITR 28 (KAR) 06 CIT V/S RAIPUR PALLOTTINE SOCIETY 180 ITR 579 (MP) 07 CIT V/S SHETH MANILAL RANCHHODDAS VISHRAM BHAVAN TRUST 198 ITR 598 (GUJ) 08 CIT V/S BHORUKA PUBLIC WELFARE TRUST 240 ITR 513 (CAL) 4.6] IT HAS BEEN REPEATEDLY HELD THAT FOR PURPOSE OF COMPUTATION OF APPLICATION OF INCOME IN THE YEAR IN WHICH THE ASSETS IS PURCHASED IS QUITE DIFFERENT FROM THE CLAIM OF DEPRECIATION ON THE COST OF ASSET S IN THE YEAR IN WHICH IT IS PUT TO USE FOR COMPUTING THE TAXABLE INCOME. 4.7] THAT IN VIEW OF THE ABOVE IT IS SUBMITTED THAT INCOME OF THE TRUST BE CALCULATED IN COMMERCIA L MANNER AND ACCORDINGLY DEPRECIATION AS CLAIMED -: 42: - 42 BY THE ASSESSEE TRUST IS LEGAL AND PROPER. THE SAME HAS RIGHTLY BEEN CLAIMED BY THE ASSESSEE. THUS THE HON'BLE BENCH IS REQUESTED TO APPROVE THE ORDER PASSED U/S LD. CIT(A) DT. 14.06.2011. 17. WITH REGARD TO THE ASSESSEES CLAIM FOR SET OFF OF CARRY FORWARD OF EXCESS EXPENDITURE, THE CONTENTION OF LD. AUTHORIZED REPRESENTATIVE WAS AS UNDER :- 5.1] THAT IN THE SAID GROUNDS THE DEPARTMENT HAS CHALLENGED THE ORDER PASSED BY CIT(A REGARDING ALLOWANCE OF ASSESSEE'S CLAIM IN RESPECT OF CARRY FORWARD OF EXCESS AMOUNT OF EXPENDITURE INCURRED ON OBJECTS OF THE TRUST FOR BEING CONSIDERED AS APPLICATION AGAINST INCOME OF SUBSEQUENT YEARS . 5. 2] THE SAID ISSUE HAS BEEN DEALT BY THE ASSESSING OFFICER ON FOLLOWING PAGES OF -: 43: - 43 ASSESSMENT ORDER ASSESSMENT YEAR PAGE NO. OF ASST. ORDER 2007-08 PAGE 2 TO 6 2008-09 PAGE 1 & 2 5.3.1] THE LD. CIT(A) HAS CONSIDERED THE SUBMISSIONS MADE BY THE ASSESSEE AND ALLOWED THE CLAIM OF ASSESSEE REGARDING CARRY FORWARD OF EXCESS AMOUNT OF EXPENDITURE INCURRED ON OBJECTS OF TRUST BUT WITH A DIRECTION TO THE A.O. FOR RE- COMPUTATION OF THE DEDUCTION. THE LD. CIT(A) HAS DISCUSSED THE ENTIRE ISSUE IN DETAIL ON FOLLOWING PAGES OF HIS APPELLATE ORDER AN D SPECIFICALLY ON FOLLOWING PAGES OF HIS ORDER. ASSESSMENT YEAR DISCUSSED ON PAGES OF CIT A ORDER SPECIFIC FINDING ON PAGES 2007-08 PAGES 28 TO 30, 56 TO 58 PAGES 56 TO 58, PARA 5.4 2008-09 PAGES 13 TO 15, 30 TO PAGES 30 & 31, PARA 4.2 -: 44: - 44 31 5.4.1] THAT HON'BLE ITAT INDORE BENCH VIDE ITS ORDE R DT. 31.01.2011 (ITA NO. 160, 171 TO 173/IND/2010) IN THE CASE OF SHRI GUJRATI SAMAJ] V/S ACIT 1(2), INDORE FOR THE A. Y. 2004-05 TO 2006 - 07 HAS DECIDED THE SAID ISSUE REGARDING CARRY FORWARD OF EXCESS AMOUNT OF EXPENDITURE INCURRED ON OBJECTS OF THE TRUST FOR BEING CONSIDERED APPLICATION AGAINST INCOME OF SUBSEQUENT YEARS. THUS IT HAS ALLOWED THE CLAIM ASSESSEE AND DISMISSED THE APPEAL FILED BY THE REVENUE. COPY OF SAID ORDER IS ENCLOSED. 5.4.2] THE ORDER OF ITAT HAS BEEN APPROVED BY THE HON'BLE JURISDICTIONAL HIGH COURT VIDE ITS ORDER DT . 08.07.2011. THE SAID DECISION HAS BEEN REPORTED IN 64 DTR 76. COPY OF SAID ORDER IS ENCLOSED FOR YOUR -: 45: - 45 READY REFERENCE. 5.5] THE ASSESSEE ALSO RELIED ON THE FOLLOWING DIRECT DECISIONS THAT WHEREIN IT HAS BEEN HELD THAT IF A TRUST/INSTITUTE HAS INCURRED DEFICIT DURING A PARTICULAR YEAR, THE SAME SHOULD BE CARRIED FORWARD AND THE SAME IS AVAILABLE FOR SET OFF AGAINST THE SURPLUS MADE BY IT IN A SUBSEQUENT YEAR. S.NO. NAME CITATION 1 CIT V/S MAHARANA OF MEWARA CHARITABLE FOUNDATION 164 ITR 439 (RAJASTHAN) 2 CIT V/S SHRI PLOT SWETAMBER MURTI PUJAK JAIN 211 ITR 293 (GUJRAT) 3 CIT V/S MATRISEVA TRUST 242 ITR 20 (MADRAS) 4 GOVINDU NAICKER ESTAE 248 ITR 368 (MADRAS) 5.6] IT IS WELL SETTLED POSITION OF LAW THAT ALL C APITAL EXPENDITURE LAID OUT IN FURTHERANCE OF THE OBJECTS AND PURPOSES OF THE TRUST WILL BE TREATED AS -: 46: - 46 APPLICATION OF THE INCOME, AS HELD BY THE SUPREME COURT IN THE CASE OF M.CT. M. TIRUPPANI TRUST V/S CIT REPORTED IN 230 ITR 636. THAT IN THE CASE OF TH E ASSESSEE THERE IS NO DISTINCTION BETWEEN CAPITAL OR REVENUE EXPENDITURE. AS PER CLEAR PROVISIONS AND SETTLED POSITION OF LAW CAPITAL EXPENDITURE HAS TO BE CONSIDERED AS APPLICATION OF INCOME. 5.7] THAT THE KARNATAKA HIGH COURT IN THE CASE OF CIT V/S JANMBHOOMI PRESS TRUST REPORTED IN 242 ITR 457 AND 242 ITR 703 HAS HELD THAT WHERE FUNDS WERE BORROWED FOR CONSTRUCTION OF BUILDING, THE REPAYMENT OF THE DEBT AS UTILIZED FOR CONSTRUCTION OF BUILDING, AMOUNTED TO APPLICATION OF INCOME FOR CHARITABLE PURPOSES. 5.8] THAT IN VIEW OF THE ABOVE IT IS SUBMITTED THA T THE LD. CIT(A) HAS RIGHTLY ALLOWED THE CLAIM OF ASSESSEE REGARDING CARRY FORWARD OF EXCESS -: 47: - 47 'EXPENDITURE INCURRED BY THE ASSESSEE TRUST TOWARDS OBJECT OF TRUST FOR BEING CONSIDERED AS APPLICATION AGAINST INCOME OF SUBSEQUENT YEARS. 18. RIVAL CONTENTIONS HAVE BEEN HEARD AND RECORDS PERUSED. THE ISSUE WITH REGARD TO LOAN TAKEN FROM M /S. TRIMURTI FINVEST AND EAST-WEST FINVEST INDIA LIMITE D, WHICH IS BELONGING TO THE LUNKAD GROUP, HAVE ALREADY BEEN DE CIDED BY THE TRIBUNAL IN ITS ORDER IN CASE OF MITTAL GROUP D ATED 30 TH DECEMBER, 2011. 19. IN THE ORDER DATED 30 TH DECEMBER, 2011, THE DELETION OF ADDITION MADE BY THE LD.CIT(A) WAS REV ERSED BY OBSERVING AS UNDER :- FROM THE ORDER OF THE CIT(A), IT IS CLEAR THAT H E HAS DELETED THE ADDITION IN THE HANDS OF THE ASSESSEE COMPANY ON THE PLEA THAT ADDITION IN THE HANDS OF CREDITOR COMPANY (LUNKAD GROUP) HAS BEEN CONFIRMED ON SUBSTANTIVE BASIS. AS PER CIT(A), IF HE CONFIRME D THE SAME ADDITION IN THE HANDS OF THE ASSESSEE COMPANY, IT WILL AMOUNT TO DOUBLE ADDITION IN RESPECT OF THE -: 48: - 48 SAME AMOUNT OF INCOME. WE FOUND THAT ADDITIONS HAVE BEEN MADE IN THE HANDS OF LUNKAD GROUP ON THE PLEA THAT THE SOURCE OF SHARE CAPITAL RECEIVED BY THEM C OULD NOT BE EXPLAINED. HOWEVER, ADDITION HAS BEEN MADE I N THE HANDS OF THE ASSESSEE COMPANY ON THE PLEA THAT GENUINENESS OF THE LOAN TRANSACTIONS HAS NOT BEEN ESTABLISHED IN VIEW OF THE INCRIMINATING DOCUMENTS FOUND DURING COURSE OF SURVEY AT LUNKAD GROUP. INCRIMINATING DOCUMENTS WAS FOUND PERTAINED TO THE MONTH OF APRIL, 2006, WHICH INDICATED THAT LUNKAD GROUP WAS IN RECEIPT OF CASH FROM VARIOUS BENEFICIARIES INCLUDING ASSESSEE AND WHICH HAS AGAI N BEEN GIVEN TO THE BENEFICIARIES THROUGH CHEQUES. TH ERE IS NO DISPUTE TO THE WELL SETTLED LEGAL PROPOSITION THAT IN CASE OF CASH CREDIT, ASSESSEE IS NOT ONLY REQUIR ED TO PROVE THE IDENTITY OF THE LOAN CREDITOR BUT ALSO TH E GENUINENESS OF TRANSACTION OF LOAN AS WELL AS CAPAC ITY OF THE LOAN CREDITOR TO ADVANCE THE SAID AMOUNT OF LOAN. IN THE INSTANT CASE, THERE IS NO DISPUTE TO T HE IDENTITY IN SO FAR AS LUNKAD GROUP IS ALSO ON -: 49: - 49 DEPARTMENTS RECORD AND A SURVEY HAS BEEN CARRIED OUT AT PREMISES OF LUNKAD GROUP. THE GENUINENESS OF TRANSACTION OF THE LOANS BECOME DOUBTFUL IN VIEW OF THE INCRIMINATING DOCUMENTS FOUND DURING SURVEY AT LUNKAD GROUP. EVEN THOUGH THE ASSESSEE HAS FILED LOAN CONFIRMATION ALONGWITH AFFIDAVIT OF DIRECTOR O F THE CREDITOR COMPANY (LUNKAD GROUP) BUT THEY COULD NOT PRODUCE THE DIRECTOR OF LUNKAD GROUP TO SUBSTANTIAT E THE CONTENTS OF AFFIDAVIT AS WELL AS CONFIRMATION S O FILED. THE CIT(A) HAS DELETED THE ADDITION ON THE P LEA OF DOUBLE ADDITION BY STATING THAT CONFIRMING ADDIT ION IN THE HANDS OF ASSESSEE COMPANY IN RESPECT OF LOAN S RECEIVED BY IT AMOUNTS TO DOUBLE ADDITION. IN THIS REGARD, THERE IS A DIRECT DECISION OF HONBLE SUPRE ME COURT IN THE CASE OF ITO VS. CH ATCHAIAH, 218 ITR 2 39, WHEREIN IT WAS OBSERVED THAT NO OPTION HAS BEEN GIV EN UNDER THE 1961 ACT, AND IT HAS BEEN SPECIFICALLY PROVIDED THAT TAX HAS TO BE LEVIED ON RIGHT PERSON NOTWITHSTANDING THE FACT THAT THE AMOUNT HAS ALREAD Y BEEN ADDED IN THE HANDS OF SOME OTHER PERSON. -: 50: - 50 MEANING THEREBY ADDITION SHOULD BE MADE IN THE HANDS OF THE RIGHT PERSON AND THE SAME CANNOT BE DELETED ONLY ON THE PLEA THAT THE SAME AMOUNT HAS BEEN ADDED IN THE HANDS OF SOME OTHER PERSON. IT WA S OBSERVED BY THE SUPREME COURT THAT THERE IS NO OPTI ON UNDER THE 1961 ACT, UNLIKE THE ONE GIVEN UNDER 1922 ACT AND THE AO MUST TAX THE RIGHT PERSON AND RIGHT PERSON ONLY. BY RIGHT PERSON IS MEANT THE PERSON, WHO IS LIABLE TO BE TAXED ACCORDING TO THE LAW WITH RESPECT TO A PARTICULAR INCOME. THE EXPRESSION WRO NG PERSON IS OBVIOUSLY USED AS OPPOSITE OF THE EXPRESSION RIGHT PERSON. MERELY BECAUSE A WRONG PERSON IS TAXED WITH RESPECT TO A PARTICULAR INCOME , THE AO IS NOT PRECLUDED FROM TAXING THE RIGHT PERSON WI TH RESPECT TO THAT INCOME. THIS IS SO IRRESPECTIVE OF THE FACT, WHICH COURSE IS MORE BENEFICIAL TO THE REVENU E. A PERSON LAWFULLY LIABLE TO BE TAXED CAN CLAIM NO IMMUNITY BECAUSE THE ASSESSING OFFICER HAS TAXED TH E SAID INCOME IN THE HANDS OF ANOTHER PERSON CONTRARY TO LAW. SIMILAR PROVISION HAS BEEN LAID DOWN BY THE -: 51: - 51 HON'BLE SUPREME COURT IN THE CASE OF SMT. TARADEVI, 88 ITR 323. THE PROPOSITION SO DISCUSSED ABOVE AS LAID DOWN BY THE HON'BLE SUPREME COURT HAS BEEN FOLLOWED BY THE I.T.A.T. SPECIAL BENCH IN THE CASE OF PRADEEP AGENCIES, 111 TTJ 346. APPLYING THE ABOVE PROPOSITION OF LAW TO THE FACTS OF THE INSTANT CASE, WE CAN SAFELY CONCLUDE THAT THE LD. CIT(A) WAS NOT JUSTIFIED IN DELETING THE ADDITION IN THE HANDS OF THE ASSESSEE COMPANY MERELY ON THE PLEA THAT THE S AME AMOUNT HAS BEEN ADDED IN THE HANDS OF THE CREDITOR COMPANY. WE FOUND THAT IN CASE OF LUNKAD GROUP ADDITION WAS MADE IN RESPECT OF CASH RECEIVED BY I T FROM PERSONS, WHOSE NAME, ADDRESS AND OTHER PARTICULARS COULD NOT BE FURNISHED BEFORE ASSESSING OFFICER. THIS AD DITION IS MOTHERING TO DO WITH THE GENUINENESS OF LOAN RECEI VED BY ASSESSEE FROM LUNKAD GROUP. BEFORE REACHING TO THE THIRD CRITERIA OF CREDITWORTHINESS, ASSESSEE HAVE TO CROSS THE BARRIER OF GENUINENESS OF LOAN TRANSACTI ON, WHICH HAS BECOME DOUBTFUL IN VIEW OF THE INCRIMINAT ING MATERIAL FOUND DURING COURSE OF SURVEY AT LUNKAD GR OUP -: 52: - 52 WITH REGARD TO RECEIPT OF CASH FROM THE ASSESSEE CO MPANY AND ISSUE OF CHEQUE AGAINST SUCH CASH IN FAVOUR OF THE ASSESSEE COMPANY. THUS, A LEGALLY WRONG VIEW HAS BE EN TAKEN BY THE LD.CIT(A), WHICH MADE THE DEPARTMENT ENTITLED TO FILE AN APPEAL AGAINST SUCH ORDER OF CI T(A). THUS, THERE IS NO MERIT IN THE ARGUMENT OF LD. AUTH ORIZED REPRESENTATIVE TO THE EFFECT THAT THE DEPARTMENT HA D WRONGLY COME IN APPEAL AGAINST THE ORDER OF CIT(A). 20. HOWEVER, THE ISSUE OF ADDITION ON ACCOUNT OF UNSECURED LOANS HAS ALSO BEEN DEALT ON MERIT IN THE CASE OF MITTAL GROUP (SUPRA) AND MATTER WAS RESTORED TO TH E ASSESSING OFFICER WITH THE FOLLOWING OBSERVATIONS : - 19. WE HAVE CONSIDERED THE RIVAL CONTENTIONS AND FOUND FROM RECORD THAT THE ASSESSEE COMPANY HAS TAKEN LOAN FROM LUNKAD GROUP SINCE ASSESSMENT YEAR 2002-03 ONWARDS. NOT ONLY LOAN WAS TAKEN BUT IT WAS ALSO REPAID EITHER DURING THE YEAR OR IN SUBSEQUENT YEAR. THE ASSESSEE HAS TAKEN LOAN THROUGH ACCOUNT PAYEE CHEQUES AS PER ITS BUSINESS REQUIREMENT, PAID INTEREST THEREON AND ALSO DEDUCTED TDS ON SUCH INTE REST -: 53: - 53 PAYMENT. IN ALL THESE YEARS, THE ASSESSEE HAD FILED LOAN CONFIRMATION LETTERS. THESE LOAN TRANSACTIONS HAVE BEEN ACCEPTED BY THE DEPARTMENT EITHER U/S 143(1) OR 143 (3) OF THE INCOME-TAX ACT, 1961. THE WHOLE PROBLEM AROS E DUE TO THE SURVEY AT BUSINESS PREMISES OF LUNKAD GROUP ON 2.5.2006, WHEREIN CERTAIN DOCUMENTS FOR TH E MONTH OF APRIL, 2006, WAS FOUND AND IMPOUNDED, WHIC H INDICATED THAT LUNKAD GROUP HAD RECEIVED CASH FROM VARIOUS PERSONS INCLUDING ASSESSEE. EVEN THOUGH FUL L NAME OF ASSESSEE WAS NOT MENTIONED ON THE PAPERS SO IMPOUNDED BUT THE ASSESSING OFFICER INFERRED THAT N AME OF NARMADA AS RELATING TO ASSESSEE COMPANY, NAMEL Y, NARMADA EXTRUSION LIMITED. THE LUNKAD GROUP WAS ASKED TO EXPLAIN THESE INCRIMINATING DOCUMENTS INDICATING RECEIPT OF CASH FROM VARIOUS PARTIES, BU T THE LUNKAD GROUP COULD NOT EXPLAIN THE SAME AND DISPUTE AROSE BETWEEN THE LUNKAD GROUP AND DEPARTMENT WITH REGARD TO SURVEY CONDUCTED AT LUNKAD GROUP. THE LUNKAD GROUP HAS ALSO FILED A WRIT PETITION IN THE M.P.HIGH COURT AGAINST THE DEPARTMENT FOR THE SURVE Y -: 54: - 54 SO CONDUCTED AND THE RECORDS SO IMPOUNDED. THIS WR IT PETITION IS STILL PENDING IN THE COURT. IT WAS ALSO BROUGHT TO OUR NOTICE THAT HIGH COURT HAS DIRECTED FOR ISSU E OF COPY OF DOCUMENTS SO IMPOUNDED ALONGWITH COPY OF BOOKS OF ACCOUNTS TO LUNKAD GROUP, BUT AS PER ASSERTION OF LUNKAD GROUP, THE SAME HAVE STILL NOT BEEN FURNISHED TO IT. WHEN THE ASSESSMENT OF THE ASSESSE E COMPANY WAS FRAMED WITH RESPECT OF THE SEARCH CONDUCTED AT BUSINESS PREMISES U/S 153A ON 5.10.2006, THE DEPARTMENT FOUND THAT THE ASSESSEE GROUP HAD ALSO TAKEN LOANS FROM LUNKAD GROUP. THE ASSESSEE WAS AGAIN ASKED DURING PROCEEDINGS U/S 153A TO SUBSTANTIATE THE LOAN TRANSACTION FOR WHICH THE ASSESSEE HAD FURNISHED CONFIRMATION LETTER AS WELL AS AFFIDAVITS OF CREDITORS. THE DEPARTMENT ALSO ASKED TO PRODUCE THE DIRECTOR OF LUNKAD GROUP BEFORE THEM. T HE ASSESSEE HAD PRODUCED LOAN CONFIRMATION LETTERS AND AFFIDAVIT OF LUNKAD GROUP TO SUBSTANTIATE THE LOAN TRANSACTION, BUT THE ASSESSEE FAILED TO PRODUCE THE DIRECTORS OF LUNKAD GROUP IN PERSON. UNDER THESE -: 55: - 55 CIRCUMSTANCES, THE DEPARTMENT HAS TAKEN A VIEW THAT ALL THE TRANSACTION OF LOAN STARTING FROM FINANCIAL YEAR 2001-02 TILL DATE OF SEARCH WERE NOT GENUINE AND IT WAS ASSESSEES OWN MONEY, WHICH HAS BEEN GIVEN BACK TO THE ASSESSEE IN THE FORM OF LOAN ENTRY. HERE THE CONTENTION OF THE LD. AUTHORIZED REPRESENTATIVE WA S THAT MR.LUNKAD HAD CHALLENGED THE SURVEY ACTION CONDUCTED BY INCOME TAX DEPARTMENT BEFORE THE HONBLE HIGH COURT. SINCE THE WRIT AS FILED BY LUNK AD GROUP IS PENDING BEFORE THE HONBLE HIGH COURT FOR THE REASONS HE HAS GRIEVANCE WITH THE INCOME TAX DEPARTMENT. DUE TO DISPUTE OF LUNKAD GROUP WITH DEPARTMENT AND PENDENCY OF WRIT PETITION IN THE HON 'BLE HIGH COURT, ASSESSEE COULD NOT PERSUADE THE LUNKAD GROUP TO APPEAR IN PERSON BEFORE THE DEPARTMENT. HI S FURTHER CONTENTION WAS THAT IMPOUNDED DOCUMENT FROM LUNKAD GROUP ONLY PERTAINED TO THE MONTH OF APRIL, 2006, AND THERE WAS NO INCRIMINATING MATERIAL FOR A NY PERIOD OTHER THAN MONTH OF APRIL, 2006, INDICATING THAT THE ASSESSEE HAS GIVEN ANY CASH TO LUNKAD GROUP FOR -: 56: - 56 TAKING LOAN ENTRY FROM 1.4.2001 TO 31.3.2007. HE FURTHER CONTENDED THAT AT THE MOST ADDITIONS COULD BE MADE ONLY WITH RESPECT TO THE ENTRIES IN THE IMPOUN DED DOCUMENTS, WHICH INDICATED ANY CASH BEING GIVEN BY THE ASSESSEE TO LUNKAD GROUP AND NOT BEYOND IT. HE FURTHER CONTENDED THAT ASSESSING OFFICER HAD NO WHE RE RELATED THE CASH ENTRIES ON THESE DOCUMENTS AS HAVI NG BEEN DEPOSITED IN BANK ACCOUNT FOR ISSUE OF CHEQUE TO ASSESSEE, NOR MADE ANY EFFORTS TO RELATE SUCH CASH DEPOSIT AS HAVING BEEN UTILIZED FOR ISSUE OF CHEQUE IN ASSESSEES FAVOUR NOR ANYTHING WAS BROUGHT ON RECOR D BY ASSESSING OFFICER SUGGESTING RETURN OF CASH TO ASSESSEE WHENEVER ASSESSEE HAD REPAID THE LOAN SO TAKEN FROM LUNKAD GROUP. ON THE OTHER HAND, CONTENTION OF THE LD. CIT DR WAS THAT INCRIMINATING DOCUMENTS AS MENTIONED BY ASSESSING OFFICER IN HIS ASSESSMENT ORDER EVEN THOUGH PERTAINED TO ONE MONTH , IT INDICATED THE MODUS OPERANDI OF LUNKAD GROUP FOR ADVANCING LOANS TO THE ASSESSEE , THEREFORE, THE DEPARTMENT HAS APPLIED THE SAME CONCLUSION EVEN WIT H -: 57: - 57 RESPECT TO THE LOANS, WHICH WERE TAKEN AND ALSO REP AID IN EARLIER YEARS FOR WHICH NO INCRIMINATING DOCUMEN T WAS FOUND EITHER AT THE BUSINESS PREMISES OF THE ASSESSEE OR AT LUNKAD GROUP. 20. AFTER ANALYZING ALL THE DOCUMENTS PLACED ON RECORD, WE FOUND THAT ADDITIONS HAVE BEEN MADE B Y ASSESSING OFFICER IN RESPECT OF ALL THE LOANS WHICH EVEN THOUGH TAKEN AND REPAID BY ASSESSEE IN EARLIER YEAR S STARTING FROM 1.4.2001. CONTENTION OF ASSESSING OFF ICER WAS THAT SINCE THE ASSESSEE COULD NOT PRODUCE THE CREDITOR IN PERSON, THEREFORE, THE CONFIRMATION AND THE AFFIDAVITS FILED BY THE CREDITORS CANNOT BE RELIED UPON. WE FOUND THAT ALL THE NECESSARY DOCUMENTARY EVIDENC E TO SUBSTANTIATE THE LOAN TRANSACTION HAVE BEEN FILE D BY THE ASSESSEE, WHICH INDICATED RECEIPT AND REPAYMENT OF LOAN, PAYMENT OF INTEREST THEREON AND DEDUCTION OF TAX AT SOURCE IN RESPECT OF THE INTEREST PAID THEREON. IT APPEARS THAT DUE TO THE DISPUTE BETWEEN THE DEPARTMENT AND THE LUNKAD GROUP AND THE WRIT PETITION FILED BY LUNKAD GROUP IN THE HIGH COURT, -: 58: - 58 ASSESSEE COULD NOT PERSUADE THE LUNKAD GROUP TO APPEAR IN PERSON BEFORE THE DEPARTMENT. IT IS ALSO NOT IN DISPUTE THAT NO INCRIMINATING DOCUMENT WAS FOUND BY DEPARTMENT IN ASSESSEES PREMISES EITHER DURING COURSE OF SEARCH OR ON SUBSEQUENT INQUIRY SUGGESTIN G ANY CASH GIVEN BY ASSESSEE TO LUNKAD GROUP IN CONSIDERATION OF LOANS SO TAKEN NOR RECEIPT OF ANY CASH WHENEVER THERE WAS REPAYMENT OF LOAN BY ASSESSEE TO LUNKAD GROUP. UNDER THESE CIRCUMSTANCES AND IN THE INTEREST OF JUSTICE, ONE MORE OPPORTUNITY SHOULD BE GIVEN TO ASSESSEE FOR PRODUCING THE LOAN CREDITOR FOR CONFIRMING THE CONTENTS OF CONFIRMATION AND AFFIDAV ITS SO FILED. KEEPING IN VIEW INCRIMINATING DOCUMENTS F OUND DURING THE COURSE OF SURVEY AT LUNKAD GROUP FOR THE PERIOD 1.4.2006 TO 1.5.2006 PERTAINING TO THE ASSESSMENT YEAR 2007-08, EVEN THOUGH RELATED TO ONE MONTH ONLY, THE DEPARTMENT WAS JUSTIFIED IN MAKING ADDITION IN THE HANDS OF THE ASSESSEE COMPANY IN TH E ASSESSMENT YEAR 2007-08 BY DISBELIEVING THE LOAN TRANSACTIONS. AS PER OUR CONSIDERED VIEW, ADDITION -: 59: - 59 SHOULD BE MADE WITH RESPECT TO THE AMOUNT OF CASH FOUND TO BE GIVEN BY THE ASSESSEE TO THE LUNKAD GRO UP AS PER INCRIMINATING DOCUMENTS SO FOUND AT LUNKAD GROUP DURING SURVEY AFTER GIVING OPPORTUNITY TO ASSESSEE FOR CROSS EXAMINATION. MERE PRESUMPTIONS WITHOUT ANY MATERIAL ON RECORD TO THE EFFECT THAT E VEN IN RESPECT OF ALL THE EARLIER YEARS, THE ASSESSEE MIGH T HAVE GIVEN CASH TO THE LUNKAD GROUP FOR GETTING UNSECURE D LOAN, IS NOT JUSTIFIED. ALL THE LOANS WERE RECEIVED BY ASSESSEE THROUGH ACCOUNT PAYEE CHEQUES AND ALSO REPAID THROUGH ACCOUNT PAYEE CHEQUES. ASSESSEE HAD ALSO FILED EVEN CONFIRMATION LETTERS AND AFFIDAVITS TO SUBSTANTIATE THE LOAN TRANSACTIONS. ONLY BECAUSE OF INCRIMINATING DOCUMENT PERTAINING TO PERIOD 1.4.200 6 TO 1.5.2006, THE DEPARTMENT DOUBTED THE GENUINENESS OF ALL THE LOAN TRANSACTIONS PERTAINING TO PERIOD STAR TING FROM 1.4.2001 TO 31.3.2007. BEFORE MAKING ADDITION OR DISALLOWING THE CASH CREDIT, ON THE PLEA OF GENUINE NESS, THE DEPARTMENT IS REQUIRED TO BRING ON RECORD SOME EVIDENCE TO INDICATE THAT THE ASSESSEE HAS PAID CAS H IN -: 60: - 60 CONSIDERATION OF THE CHEQUES SO ISSUED. WITHOUT ANY EVIDENCE, MUCH LESS A COGENT EVIDENCE, IT IS NOT LE GALLY JUSTIFIED TO DOUBT THE GENUINENESS OF LOAN TRANSACT ION OR MAKE ADDITION IN THE HANDS OF THE ASSESSEE COMPANY FOR WHICH NO MATERIAL MUCH LESS A COGENT MATERIAL I S IN POSSESSION OF DEPARTMENT. IN THE INTEREST OF JUSTIC E AND FAIR PLAY, WE RESTORE THE GROUNDS RAISED BY THE ASSESSEE IN THE CROSS OBJECTION TO THE FILE OF THE ASSESSING OFFICER FOR DECIDING AFRESH IN TERMS OF O UR ABOVE DISCUSSION AND AS PER LAW. 21. AS THE ISSUES RAISED BY THE REVENUE IN THE YEAR ARE COVERED BY THE ORDER OF THE TRIBUNAL IN THE CAS E OF MITTAL GROUP, RESPECTFULLY FOLLOWING THE SAME, WE R ESTORE THE MATTER TO THE FILE OF THE ASSESSING OFFICER FOR DECIDING THE SAME AFRESH IN TERMS OF OUR DIRECTIONS GIVEN IN THE ORDER OF MITTAL GROUP DATED 30 TH DECEMBER, 2011. 22. WITH REGARD TO ADDITION MADE IN RESPECT OF LOAN TAKEN FROM RAKESH SINGHVI, WE FOUND THAT CIT(A) HAS RECORDED CATEGORICAL FINDING TO THE EFFECT THAT THE ASSESSEE HAS FILED COPY OF CONFIRMATION LETTER, PAN CARD AND BANK ACCOUNT O F SHRI -: 61: - 61 RAKESH SINGHVI TO THE ASSESSING OFFICER. AS PER THE FINDING RECORDED BY THE LD.CIT(A), THE BANK CLEARLY INDICAT ED THAT CASH WAS NOT DEPOSITED PRIOR TO ISSUE OF CHEQUE TO THE A SSESSEE TRUST. THE CONFIRMATION LETTERS CLEARLY SHOW THAT T HE AMOUNT OF LOAN WAS RECEIVED FOR FEW MONTHS ONLY ON WHICH INTE REST WAS ALSO PAID AND TDS WAS ALSO DEDUCTED. THESE FINDINGS HAVE NOT BEEN CONTROVERTED BY THE DEPARTMENT BY BRINGING ANY POSITIVE MATERIAL ON RECORD. ACCORDINGLY, WE DO NOT FIND ANY REASON TO INTERFERE IN THE FINDINGS RECORDED BY THE LD.CIT(A) RESULTING INTO DELETION OF ADDITION MADE ON ACCOUNT OF LOAN TAKEN FROM RAKESH SINGHVI. 23. WITH REGARD TO ASSESSEES CLAIM OF DEPRECIATION, WE FOUND THAT ISSUE WAS COVERED BY THE ORDER OF THE I. T.A.T., INDORE, IN THE CASE OF GUJARATI SAMAJ ORDER DATED 3 1.1.2011. WE FOUND THAT THIS ORDER OF I.T.A.T. HAS BEEN FURTH ER APPROVED BY HON'BLE JURISDICTIONAL HIGH COURT VIDE ITS ORDER DATED 8.7.2011 REPORTED AT 64 DTR 76. THE ISSUE HAS ALSO BEEN DEALT BY HON'BLE PUNJAB AND HARYANA HIGH COURT IN THE CAS E OF DESH BHAGAT MEMORIAL TRUST (SUPRA), WHEREIN AFTER CONSIDERING THE DECISION OF HON'BLE SUPREME COURT I N THE CASE -: 62: - 62 OF ESCORTS LIMITED, WHEREIN IT WAS HELD THAT OBJECT OF ALLOWING DEPRECIATION IS ONLY FOR THE PURPOSE OF DETERMINING PERCENTAGE OF FUNDS WHICH HAVE TO BE APPLIED FOR THE PURPOSES OF TRUST, WHICH DOES NOT AMOUNT TO DOUBLE DEDUCTION. PRECISE OBSERVATION OF HON'BLE HIGH COURT WAS AT PARA 6 & 7 , WHICH READS AS UNDER :- '6. WE ARE OF THE VIEW THAT THE TRIBUNAL WAS JUSTIFIED IN ALLOWING DEPRECIATION AND JUDGMENT OF THE HON'BLE SUPREME COURT IN ESCORTS LTD'S CASE IS DISTINGUISHABLE. THE MATTER WAS CONSIDERED IN RECENT JUDGMENT OF THIS COURT DATED 5-7-2010 IN ITA. NO.535 OF 2009 THE CIT, KARNAL V. MARKET COMMITTEE, PIPLI [REPORTED IN (2010) 36 (I) ITCL 537 (P&H- HC)], WHEREIN AFTER CONSIDERING THE CASE LAW ON THE POINT, THE JUDGMENT IN ESCORT WAS DISTINGUISHED. IT WAS OBSERVED:- '9. IN THE PRESENT CASE, THE ASSESSEE IS NOT -: 63: - 63 CLAIMING DOUBLE DEDUCTION ON ACCOUNT OF DEPRECIATION AS HAS BEEN SUGGESTED BY LEARNED COUNSEL FOR THE REVENUE. THE INCOME OF THE ASSESSEE BEING EXEMPT, THE ASSESSEE IS ONLY CLAIMING THAT DEPRECIATION SHOULD BE REDUCED FROM THE INCOME FOR DETERMINING THE PERCENTAGE OF FUNDS WHICH HAVE TO BE APPLIED FOR THE PURPOSES OF THE TRUST. THERE IS NO DOUBLE DEDUCTION CLAIMED BY THE ASSESSEE AS CANVASSED BY THE REVENUE. JUDGMENT OF THE HON'BLE SUPREME COURT IN ESCORTS LTD. AND ANOTHER (SUPRA) IS DISTINGUISHABLE FOR THE ABOVE REASONS. IT CANNOT BE HELD THAT DOUBLE BENEFIT IS GIVEN IN ALLOWING CLAIM FOR DEPRECIATION FOR COMPUTING INCOME FOR PURPOSES OF SECTION 11. THE QUESTIONS PROPOSED HAVE, THUS, TO BE ANSWERED AGAINST -: 64: - 64 THE REVENUE AND IN FAVOUR OF THE ASSESSEE. ' 7. IN VIEW OF ABOVE, THE QUESTION PROPOSED ON BEHALF OF THE REVENUE IS ANSWERED AGAINST THE REVENUE AND IN FAVOUR OF THE ASSESSEE. 24. IN VIEW OF THE ABOVE JUDICIAL PRONOUNCEMENTS, WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF CIT(A) FO R ALLOWING ASSESSEES CLAIM OF DEPRECIATION. 25. WITH REGARD TO ASSESSEES CLAIM FOR SET OFF OF CARR Y FORWARD OF EXCESS EXPENDITURE, THE ISSUE HAS BEEN D ECIDED BY THE I.T.A.T., INDORE BENCH IN THE CASE OF GUJARATI SAMAJ (SUPRA) VIDE ITS ORDER DATED 31.1.2011 AND THE DECI SION OF THE TRIBUNAL HAS BEEN DULY APPROVED BY THE HON'BLE JURI SDICTIONAL HIGH COURT VIDE ITS ORDER DATED 8.7.2011 REPORTED A T 64 DTR 76, VARIOUS OTHER JUDICIAL PRONOUNCEMENTS OF RAJAST HAN HIGH COURT REPORTED AT 164 ITR 439, GUJARAT HIGH COURT 2 11 ITR 293, MADRAS HIGH COURT 242 ITR 20 AND 248 ITR 368 A LSO SUPPORT THE VIEW. -: 65: - 65 26. IN VIEW OF THE ABOVE JUDICIAL PRONOUNCEMENTS, WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF CIT(A) FO R ALLOWING SET OFF OF CARRY FORWARD OF EXCESS EXPENDITURE. 27. IN THE RESULT, BOTH THE APPEALS OF THE REVENUE ARE ALLOWED IN PART IN TERMS INDICATED HEREINABOVE. THIS ORDER HAS BEEN PRONOUNCED IN THE OPEN COURT ON 25 TH APRIL, 2012. (JOGINDER SINGH) ( R.C.SHARMA) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED : 25 TH APRIL, 2012. CPU* 234