ACIT, CHANDRAPUR CIRCLE, Chandrapur V. M/S CHADDA TRANSPORT, Chandrapur

ITA 262/NAG/2013

• Counselvise Citation: [2015] 134 COUNSELVISE.COM (IT) 1499 (ITAT-NAGPUR)
• Duration Of Justice: 2 year(s) 6 month(s) 22 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-12-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Assessment Year: 2009-2010
• Appeal Filed On: 06-06-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: NARENDRA KANE
• Keywords: Unexplained cash credit; Depreciation; Cost of acquisition
• Section: 143(3); 131; 68

Judgement Text

1 ITA NOS. 262, 263 & 264/NAG/2013 IN THE INCOME TAX APPELLATE TRIBUNAL, NAGPUR BENCH, NAGPUR BEFORE SHRI MUKUL K. SHRAWAT, JUDICIAL MEMBER AND SHRI SHAMIM YAHYA, ACCOUNTANT MEMBER. I.T.A. NO. 262/NAG/201 3 ASSESSMENT YEAR : 2009 - 10 ASSTT. COMMISSIONER OF INCOME - TAX, M/S CHADDA TRANSPORT, CHANDRAPUR CIRCLE, CHANDRAPUR. VS. CHANDRAPUR. PAN AAAFC8556F AP PELLANT. RESPONDENT. I.T.A. NO. 26 3 /NAG/201 3 ASSESSMENT YEAR : 2009 - 10 ASSTT. COMMISSIONER OF INCOME - TAX, M/S K.S.R. T RANSPORT COMPANY CHANDRAPUR CIRCLE, CHANDRAPUR. VS. CHANDRAPUR. PAN AABFK3222DF APPELLANT. RES PONDENT. I.T.A. NO. 26 4 /NAG/201 3 ASSESSMENT YEAR : 2009 - 10 ASSTT. COMMISSIONER OF INCOME - TAX, M/S SHREE CHADDA ROAD LINES CHANDRAPUR CIRCLE, CHANDRAPUR. VS. CHANDRAPUR. PAN ABLFS1063P. APPELLANT. RESPONDENT. APPELLANT BY : SHRI NARENDRA KANE. RESPONDE NT BY : SHRI MUKESH AGRAWAL. DATE OF HEARING : 26 - 10 - 2015 DATE OF PRONOUNCEMENT : 2 8 T H DEC., 2015 O R D E R PER MUKUL K. SHRAWAT, J.M. ALL THESE THREE APPEALS HAVE BEEN FILED BY THE REVENUE DEPARTMENT IN RESPECT OF THESE THREE TAX PAYERS ARISING FROM THREE SEPARATE ORDERS OF LEARNED 2 ITA NOS. 262, 263 & 264/NAG/2013 CIT(APPEALS) - II, NAGPUR RESPECTIVELY DATED 23 - 03 - 20 - 13 AND 28 - 03 - 2013. SINCE THE FACTS AS WELL AS THE REASONS FOR IMPUGNED ADDITIONS HAPPENED TO BE IDENTICAL, THEREFORE THESE APPEALS ARE CONSOLIDATED AND HEREBY DECIDED BY THIS COMMON ORDER. THERE IS ONE MORE COMMONALITY THAT THE REVENUE HAS REVISED THE GROUNDS IN ALL THESE CASES. THESE APPEALS ARE TO BE DECIDED IN THE LIGHT OF ALL THE GROUNDS REVISED. THE LEADING CASE IS M/S CHADDA ROA D LINES AND THE GROUNDS CONTESTED BEFORE US ARE AS UNDER : 1) WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) IS RIGHT IN DELETING THE ADDITION OF RS. 7 , 73 , 84,171 1 - , HELD AS UNEXPLAINED CREDIT U / S 68 OF THE LT . ACT , BY THE A . O. ON THE GROUND THAT THE ASSESSEE IS NOT LIABLE TO PAY ANY FINANCIAL LIABILITY TO THE THREE SISTER CONCERNS WITH REGARD TO VEHICLES PURCHASED FROM THEM. 2) WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CASE , THE LD. CIT(A) IS RIGHT IN HOLDING THE LIABILIT Y OF RS. 7 , 73,84 , 171 1 - AS GENUINE IN THE ABSENCE OF A TRIPARTITE AGREEMENT BETWEEN THE BANKERS , THE ASSESSEE AND THE SELLERS TO TRANSFER THE EXISTING AND FUTURE FINANCIAL LIABILITY RELATING TO THE VEH I CLES PURCHASED. 3) WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) IS RIGHT IN HOLDING THE CREDIT AS GENUINE INSPITE OF THE ABSENCE OF ANY SPECIFIC TIME LIMIT FOR RECOVERING THE FUNDS ! LIABILITY FROM THE SISTER CONCERN WHICH CASTS A SHADOW ON THE GENUINE NESS OF THE TRANSACTIONS AND THEREBY MAKE THEM SUSCEPTIBLE TO BE TREATED AS A COLOURABLE DEVICE B Y THE GROUP CONCERNS . 4) WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CASE , THE LD. CIT(A) IS RIGHT IN HOLDING THE CREDIT AS GENUINE WHILE THE RECORDS OF THE BANKERS ON ACCOUNT OF RETROSPECTIVE CHANGES IN THE LOAN ACCOUNT DIFFER WITH THE EXISTING STATEMENT OF ACCOUNTS FILED BY THE ASSESSEE BEFORE THE DEPARTMENT . 2. FACTS IN BRIEF AS EMERGED FROM THE ASSESSMENT ORDE R IN THE CASE OF M/S CHADDA ROAD LINES, FIRM, PASSED U/S 143(3) DATED 21 - 12 - 2011 WERE THAT THE ASSESSEE IS IN THE BUSINESS OF PLYING OF TRUCKS AND TRANSPORTATION OF GOODS. RETURN OF INCOME WAS FILED AT RS.47,72,551/ - . ON SCRUTINY OF THE ACCOUNTS IT WAS NOT ICED BY THE AO THAT THE ASSESSEE HAD PURCHASED 94 VEHICLES FROM ITS SISTER CONCERNS, NAMELY, M / S CHADDA TRANSSPORTS, M/S K.S.R. TRANSPORT COMPANY AND M/S SUTLUJ TRANSPORT COMPANY. THE AO HAS PERUSED THE SALE AGREEMENTS OF TRUCKS. THE AO HAS REPRODUCED A PORTION OF THE SALE AGREEMENT WHICH WAS STATED TO BE IDENTICAL IN RESPECT OF ALL THE CASES AS UNDER : 3 ITA NOS. 262, 263 & 264/NAG/2013 ' SALE AGREEMENT OF TRUCK: SELLER: M/S. CHADDA TRANSPORT ................... . PURCHASER: M/S. SHREE CHADDA ROAD LINES ...... ......... . THE TRUCK IS FREE FROM ANY FINANCIAL LIAB ILITY OF ANY BANK OR FINANCIAL COMPANY. ANY LIABILITY PERTAINING TO THE SAID TRUCK PRIOR TO THE SALE ON DATE SHALL BE THE RESPONSIBILITY OF PARTY NO. 'ONE' (SELLER) AND ANY LIABILITY INCURRED AFTER THIS SALE AGREEMENT SHALL BE THE RESPONSIBILITY OF PAR TY NO. 'TWO' (PURCHASER) ONLY ................................ . ' PERUSAL OF THESE AGREEMENT INDICATE THE FOLLOWING : - I) ON THE SPECIFIED DATE, THE PURCHASER HAS BECOME AN EXCLUSIVE (ABSOLUTE) OWNER; WITH NO TITLE RIGHT OR OWNERSHIP FOR SELLER FROM THAT DAY. II) THE VEHICLES SOLD ARE FREE FROM ANY FINANCIAL LIABILITY AS ON THE DATE OF SALE. III) THE LIABILITIES PERTAINING TO THE SALES PRIOR TO THE DATE OF SALE IS THE RESPONSIBILITY OF THE SELLER. ANY LIABILITY INCURRED AFTER THE SALE AGREEMENT SHALL BE THE RES PONSIBILITY OF THE PURCHASER. IV) THE PURCHASE COST RECEIVABLE BY THE SELLER WILL BE ADJUSTED AGAINST THE EXISTING LIABILITIES WHICH ARE DUE TO BE PAID BY THE PURCHASER TO SELLER. ON PERUSAL OF ACCOUNTS THE OBSERVATION OF THE AO WAS THAT M/S CHADDA TRANSPORT WAS SHOWN AS A CREDITOR FOR A SUM OF RS.5,50,85,000/ - STATED TO BE THE VALUE OF THE VEHICLES SOLD TO THE ASSESSEE. AS PER THE AO THE ACCOUNT OF M/S CHADDA TRANSSPORT WAS ALSO SHOWN AS DEBTOR FOR A SUM OF RS.8,83,25,488/ - . THE ACCOUNT WHIC H WAS SHOWN AS A DEBTOR WAS CLAIMED TO BE THE S U M TOTAL OF ALL THE FUTURE INSTALMENTS PAYABLE TO THE FINANCER RELATING TO THE VEHICLES PURCHASED BY THE ASSESSEE FROM M/S CHADDA TRANSPSORT. THE ALLEGATION OF THE AO WAS THAT IN OTHER WORDS THE ASSESSEE HAD CLEARED THE LIABILITY OF M/S CHADDA TRANSPORT PERTAINING TO THE FINANCERS. IT HAS ALSO BEEN MENTIONED BY THE AO, WHICH ACCORDING TO US IS A CONFUSED STATEMENT, THAT THE FACTS HAVE INDIC ATED THAT NO SUCH PAYMENT WAS MADE BY THE ASSESSEE TO THE FINANCERS. H OWEVER, IN COMPLIANCE OF QUERY THE ASSESSEES EXPLANATION WAS AS UNDER : IT WAS EXPLAINED BY THE ARS OF THE ASSESSEE THAT THERE WAS A MUTUAL AGREEMENT BETWEEN M/S CHADDA ROAD LINES (ASSESSEE) AND M/S CHADDA 4 ITA NOS. 262, 263 & 264/NAG/2013 TRANSPORT SO THAT M/S SHREE CHADDA ROAD LINES W OULD CLEAR THE LIABILITY OF M/S CHADDA TRANSPORT TO ITS FINANCERS AND M/S CHADDA TRANSPORT WOULD REIMBURSE M/S CHADDA ROAD LINES, THE SAME. HOWEVER, THE FACT OF THE CASE INDICATE THAT M/S SHREE CHADDA ROAD LI9NES, HAD NOT PAID THE ENTIRE LIABILITY (RELATIN G TO CHADDA TRANSPORT TO ITS BANKERS). THERE WAS NO TRIPARTITE AGREEMENT BETWEEN THE BANKERS, THE ASSESSEE AND THE SELLER TO IMPLEMENT SUCH A SCHEME. THIS WOULD IMPLY THAT THE BOOKS OF ACCOUNT OF THE FINANCERS CONTINUE TO SHOW M/S CHADDA TRANSPORT AS THE D EBTOR WHILE THE BOOKS OF THE ASSESSEE GIVE A DIFFERENCE PICTURE, UN SUPPORTED BY ANY VALID DOCUMENTS. 2. 1 THE AO WAS NOT CONVINCED AND HELD THAT THE ENTIRE LIABILITY REMAINED UNEXPLAINED, HENCE TAXABLE U/S 68 OF I.T. ACT. THE A.O. HAS FINALLY HELD AS UNDER : FURTHER, AS PER THE BALANCE SHEET OF THE ASSESSEE AS ON 31 - 03 - 2009 THE LIABILITIES INCLUDE. THE LIST OF SECURED LOAN AND FINANCES AMOUNTING TO RS.12,54,14,884/ - . THIS WAS SHOWN UNDER THE HEAD SECURED LOANS. THESE AMOUNTS INCLUDE THE FINANCIAL CHARGES THAT ARE PAYAQBLE TOWARDS THE VEHICLES PURCHASED FROM M/S CHADDA TRANSPORT (RS. 6,96,96,741/ - ), M/S K.S.R. TRANSPORT (RS.44,28,032/ - ) AND M/S SUTLUJ TRANSPORT COMPANY (RS.32,59,388/ - ) AND OTHERS. HOWEVE3R, THE FACTS DISCUSSED A BOVE REVEA L THAT THE ASSESSEE IS NOT LIABLE TOWARDS TO FINANCERS SPECIFIED UNDER SECUR4ED LOANS. EVEN, THE SALE AGREEMENT COPIES WITH M/S K.S.R. TRANSPORT CO. AND M/S SUTLUJ TRANSSPORT CO. ALSO ARE IDENTICAL AS WITH THOSE OF M/S CHADDA TRANSPORT. THE ENTIRE LIABILIT Y UNDER THE HEAD SUNDRY CREDITORS WHICH IS ATTRIBUTABLE TO THE VEHICLES ACQUIRED FROM THESE CONCERNS THEREFORE REMAINS UNEXPLAINED IN THE LIGHT OF FACTS DISCUSSED A BOVE. ACCORDINGLY THIS UN EXPLAINED CREDIT ATTRACTS THE PROVISIONS U/S 68 OF THE I.T. ACT. THIS UN EXPLAINED CREDIT OF RS.7,73,84,171/ - (RS.6,96,96,751 + 32,59,388 + RS. 44,28,032 = RS. 7,73,84,171/ - ) IS ACCORDINGLY TREATED AS ASSESSEES INCOME. 3. WHEN THE MATTER WAS CARRIED BEFORE THE FIRST APPELLATE AUTHORITY, THE ASSESSEE HAS FURNISHED A DETAILED WRITTEN SUBMISSION AND A PORTION OF THE SAME IS AS UNDER : DURING THE RELEVANT PREVIOUS YEAR ASSESSEE HAS PURCHASED 94 TRUCKS FROM ITS SISTER CONCERNS NAMELY M/S. CHADDA TRANSPORT, M/S. K.S.R. TRANSPORT COMPANY & M/S. 5 ITA NOS. 262, 263 & 264/NAG/2013 SUTLUJ TRANSPORT COMPANY. MOST OF THE ABOVE TRUCKS WERE PURCHASED BY SELLER FIRMS BY TAKING LOANS FROM BANKS/FINANCE COMPANIES. TOTAL PURCHASE VALUE OF THE AFORESAID TRUCKS AND AMOUNT OUTSTANDING AS LOAN OF BANKS/FINANCE COMPANIES IN THE BOOKS OF SELLER FIRMS AS ON DATE O F TRANSFER OF TRUCKS IS AS UNDER NAME OF SELLER FIRM VALUE OF TRUCK SOLD (RS.) LOAN O/S ON SALE DATE (RS.) CHADDA TRASNPORT 5,50,85,000.00 8,83,25,488.00 K.S.R. TRANSPORT CO. 62,40,000.00 86,63,886.00 SUTLUJ TRANSPORT CO. 50,50,000.00 78,47,678.00 (DIFFERENCE BETWEEN SALE PRICE OF TRUCKS AND LOAN OUTSTANDING AGAINST THEM HAS BEEN ADDED IN THE ASSESSMENT OF SELLER FIRMS U/S 68 OF I T ACT FOR WHICH THEY ARE SEPARATELY IN APPEAL BEFORE YOUR HONOUR.) TOTAL OUTSTANDING LOAN PAYABLE TO BANKS/FINA NCE COMPANIES AS ON DATE OF TRANSFER OF TRUCKS WAS INCLUDING INTEREST PAYABLE ON FUTURE INSTALLMENTS. SINCE THE SELLER FIRMS HAD SOLD ALL THE TRUCKS, THEY HAD NO SOURCE OF INCOME/FUNDS TO REPAY LOANS OF BANKS/FINANCE COMPANIES, THEREFORE IT WAS MUTUALLY AG REED BETWEEN THE ASSESSEE AND THE SELLERS TO TRANSFER LOAN LIABILITIES OF BANK/FINANCE COMPANIES AS SHOWN ABOVE TO THE PURCHASER (ASSESSEE) AND EXCESS OF LOAN LIABILITY OVER SALE VALUE OF TRUCKS SHALL BE REIMBURSED BY SELLER TO THE PURCHASER (ASSESSEE) IN DUE COURSE OF TIME. ACCORDINGLY, ENTRIES WERE MADE IN BOOKS OF ACCOUNTS OF THE ASSESSEE AND THE SELLER. 1)IN THE ASSESSMENT ORDER U/S 143(3) THE LD A.O. HAS OBSERVED THAT IN THE SALE AGREEMENT BETWEEN SELLER AND THE ASSESSEE IT IS MENTIONED THAT ANY LIAB ILITY RELATING TO THESE TRUCKS PRIOR TO DATE OF SALE SHALL BE RESPONSIBILITY OF THE SELLER, HOWEVER THE BALANCE SHEET OF THE ASSESSEE AS ON 31.03.2009 SHOWS SECURED LOANS OF RS. 12,54,14,884/ - WHICH INCLUDES LOANS FROM BANKS IN RESPECT OF TRUCK PURCHASED BY THE ASSESSEE FROM M/S. CHADDA TRANSPORT, M/S. KSR TRANSPORT AND M/S. SUTLAJ TRANSPORT CO. AS PER DETAILS BELOW - NAME OF SELLER FIRM VALUE OF TRUCKS PURCHASED (RS.) LOAN O/S IN THE BOOKS OF ASSESSEE AS ON 31.03.2009 CHADDA TRASNPORT 5,50,85,000.00 6,96,96,751.00 K.S.R. TRANSPORT CO. 62,40,000.00 44,28,032.00 SUTLUJ TRANSPORT CO. 50,50,000.00 32,59,388.00 TOTAL RS . 7,73,84,171.00 6 ITA NOS. 262, 263 & 264/NAG/2013 THE LD A.O. ALSO OBSERVED THAT THERE IS NO TRIPARTITE AGREEMENT BETWEEN THE BANKERS, THE ASSESSEE AND THE SELLER TO IMPLEMENT SUCH A SCHEME. ACCORDING TO A.O, IT IMPLIED THAT THE BOOKS OF ACCOUNTS OF THE FINANCERS CONTINUE TO SHOW M/S. CHADDA TRANSPORT (SELLER) AS THE DEBTOR WHILE THE BOOKS OF THE ASSESSEE SHOWS THE BANKERS AS CREDITOR UNSUPPORTED BY ANY VALID DOCUMENT. WITHOUT FULLY APPRECIATING FACTS OF THE CASE THE LEARNED A.O. HELD THAT THE ABOVE LIABILITY OF RS. 7,73,84,171/ - WHICH IS ATTRIBUTABLE TO THE VEHICLES ACQUIRED FROM ABOVE NAMED CONCERNS, REMAINS UNEXPLAINED HENCE HE MADE ADDITION OF IT U/S. 68 OF I. T. AC T. 2.THE ASSESSEE FIRM HAS PURCHASED TRUCKS FROM ITS SISTER CONCERNS AT WRITTEN DOWN VALUE OF THE VEHICLES AS APPEARING IN THE BOOKS OF ACCOUNTS OF THE SELLER FIRMS. THE SELLER FIRMS NAMELY I) CHADDA TRANSPORT II) KSR TRANSPORT CO. AND III) SUTLEJ TRAN SPORT CO. HAVE NOT CLAIMED ANY DEPRECIATION ON TRUCKS SOLD, IN THE YEAR OF ITS SALE. IT IS THE PURCHASER, I.E. SHREE CHADDA ROADLINES, WHO HAS CLAIMED DEPRECIATION IN THE YEAR OF PURCHASE I.E. AY. 2009 - 10. 3)IT IS HUMBLY SUBMITTED THAT THE TRANSACTION OF PURCHASE OF TRUCKS FROM SISTER CONCERNS IS A GENUINE TRANSACTION SUPPORTED BY EXTERNAL EVIDENCES LIKE LOAN TRANSFER AGREEMENT FROM BANKS / FINANCE COMPANIES AND TRANSFER OF TRUCKS IN THE NAME OF PURCHASER BY REGIONAL TRANSPORT OFFICE, CHANDRAPUR. IT IS SU BMITTED THAT THE REASON BEHIND SALE OF TRUCKS BY SISTER CONCERNS TO ASSESSEE FIRM IS THAT, THE SELLER FIRMS CONSISTS OF PARTNERS WHO WERE GETTING OLD AND WERE NOT KEEPING GOOD HEALTH, SO THEY WANTED TO CLOSE DOWN BUSINESS BY SELLING TRUCKS TO ASSESSEE FIRM WHICH CONSISTS OF YOUNG PARTNERS. DETAILS OF PARTNERS OF ASSESSEE FIRM (PURCHASER) AND SELLER FIRM ARE ENCLOSED SEPARATELY. 4.THE ASSESSEE HUMBLY SUBMITS THAT THE LEARNED A.O. HAS MADE ADDITION OF RS. 7,73,84,171/ - UNDER WRONG PREMISE AND WITHOUT UNDERSTANDING FACTS OF THE CASE. FINDINGS GIVEN BY THE A.O. AS MENTIONED ABOVE ARE TOTALLY BASELESS AND INCORRECT. AFTER PURCHASE OF TRUCKS FROM THE ABOVE NAMED THREE CONCERNS, ASSESSEE GOT THEM TRANSFERRED IN ITS NAME FROM THE OFFICE OF REGIONAL TRANSPORT OFFICER. ASSESSEE ALSO GOT THE LOANS FROM BANK/FINANCE COMPANIES TRANSFERRED IN ITS NAME. LOANS WERE RESCHEDULED BY THE BANKS AND ASSESSEE ISSUED FRESH CHEQUES TO THE BANKERS FROM ITS BANK ACCOUNT. FRESH LOAN AGREEMENTS WERE EXECUTED BETWEEN THE ASSESSE E AND THE BANKERS. AS SUCH THE LIABILITY OF RS. 7,73,84,171/ - OUTSTANDING AS ON 31.03.2009 IS ASSESSEES LIABILITY WHICH IS SUPPORTED BY DOCUMENTS FROM BANKS AND UNDER NO STRETCH OF IMAGINATION IT CAN BE TERMED AS UNEXPLAINED CREDIT U/S. 68 OF I. T. ACT. 5)IN THE ASSESSMENT ORDER THE LD. AO HAS MADE SOME OBSERVATION FOR TREATING THE OUTSTANDING LOAN OF RS. 7,73,84,171/ - IN THE NAME OF ICICI BANK AND FINANCE CO. IN THE NAME OF SHREE CHADDA ROADLINES, AS UNEXPLAINED CREDIT U/S 68 WHICH ARE REPLIED BY ASSE SSEE AS UNDER - 7 ITA NOS. 262, 263 & 264/NAG/2013 OBSERVATION OF AO ASSESSEES REPLY THERE NEVER EXISTED ANY TRIPARTITE AGREEMENT BETWEEN SELLER, ITS BANKER AND THE PURCHASER SELLERS MADE A REQUEST TO BANKERS FOR TRANSFER OF LOAN LIABILITY IN THE NAME OF PURCHASER (ASSESSEE). BANKERS, UPON SUCH A REQUEST, EXECUTED A FRESH LOAN AGREEMENT WITH ASSESSEE. AS SUCH THERE WAS NO NECESSITY FOR EXECUTING TRIPARTITE AGREEMENT. IN THE EXISTING SCENARIO THE BOOKS OF ACCOUNTS OF THE BANKERS WOULD CONTINUE TO SHOW THE SELLERS AS DEBTOR THIS IS A PRESUMPTION CONTRARY TO ACTUAL EVIDENCE. BANK STATEMENT, SUBSEQUENT TO SALE OF TRUCKS, ARE SHOWING PURCHASER (ASSESSEE) AS DEBTOR OF THE BANK. THERE IS NO MATERIAL ON RECORD TO SHOW THAT THE ASSESSEE HAS IN FACT DISCHARGED THE ENTIRE LIABILITY OF THE SELLER TO ITS BANKERS SO THAT THE PURCHASER (ASSESSEE) MIGHT BECOME A CREDITOR TO THAT EXTENT. THIS IS AGAIN CONTRARY TO ACTUAL EVIDENCES SUCH AS LOAN AGREEMENT WITH BANKS TRANSFERRING LOAN IN THE NAME OF PURCHASER (ASSESSEE) AND BANK STATEMENT IN THE NAME OF ASSESSEE, WHO IS SHOWING LOAN LIABILITY OF BANK IN ITS BOOKS OF ACCOUNTS AND MAKING REPAYMENT OF LOAN FROM ITS BANK ACCOUNT. 3.1 AFTER CONSIDERING THE FACTS OF THE CASE LEARNED CIT(APPEALS) HAS HELD THAT THIS IS A CASE WHERE BUSINESS OF TH E FIRM WAS REORGANISED. THE REASON FOR THE SAID REORGANISATION WAS STATED TO BE THE OLD AGE OF THE PARTNERS. LEARNED CIT(APPEALS) HAS ALSO MENTIONED THAT THE AO IN THE REMAND PROCEEDING HAD RECORDED A STATEMENT U/S 131 OF ONE SHRI SATISH MOHAN, REGIONAL HEAD, ICICI BANK, NAGPUR. THE BANK OFFICER HAD STATED THAT THE BANK HAD ENTERED INTO A FRESH AGREEMENT WITH THE ASSESSEE IN RESPECT OF THE TRUCKS PURCHASED. LEARNED CIT(APPEALS) HAS REPRODUCED A PORTION OF THE STATEMENT RECORDED U/S 131. THE CONCLUSION DRA WN WAS THAT THE LOAN ACCOUNT STOOD TRANSFERRED IN THE NAME OF THE ASSESSEE BEING PURCHASER OF THE TRUCK INDICATING THEREBY THAT THE ASSESSEE WAS LIABLE TO PAY THE LOAN WHICH WAS SANCTIONED BY THE BANK. SINCE THE LIABILITY WAS 8 ITA NOS. 262, 263 & 264/NAG/2013 ASCERTAINED BY A THIRD PARTY I.E. BANK, THEREFORE, ACCORDING TO THE LEARNED CIT(APPEALS) , RELIANCE PLACED BY THE AO ON SECTION 68 WAS MISPLACED. RELIEF WAS GRANTED IN THE FOLLOWING MANNER : 6.2 THUS THE STATEMENT GIVEN BY THE REGIONAL HEAD ICICI BANK NAGPUR, CLEARLY EXPLAINS THE EN TIRE TRANSACTION. THE LOAN ACCOUNTS STOOD TRANSFERRED IN THE NAME OF THE APPELLANT INDICTING THEREBY THAT IT WAS THE APPELLANT WHO WAS LIABLE TO PAY THE LOAN WHICH WAS SANCTIONED BY THE BANKER. THE BANKS/FINANCE AL INSTITUTIONS ENTERED INTO A FRESH AGREEME NT FOR ASSESSING THE LOAN TO M/S. SHRI CHADDA ROAD LINES. IN VIEW OF THE ABOVE, THE RELIANCE OF THE APPELLANT ON SECTION 68 OF I.T. ACT FOR MAKING SUCH ADDITION IS MISPLACED. IN THE PRESENT CASE THE APPELLANT HAS DISCHARGED ITS ONUS BY PROVING THE IDENTITY AS CREDITS ARE IN THE NAME OF BANKS AND FINANCE COMPANIES (ICICI BANK, TATA MOTORS FINANCE & CITY BANK). SIMILARLY CAPACITY IS ESTABLISHED AS THEY ARE THE LEADING BANKS AND FINANCE COMPANY OF THE COUNTRY AND THEIR BALANCE SHEETS ARE IN PUBLIC DOMAIN. FURT HER GENUINENESS IS ALSO ESTABLISHED AS THE LOAN TRANSACTIONS ARE SUPPORTED BY PROPER LOAN AGREEMENTS, VEHICLES ARE HYPOTHECATED TO THEM, LENDERS BOOKS OF ACCOUNTS AND STATEMENT ARE SHOWING ASSESSEE AS DEBTOR. UNDER THE GIVEN FACTS AND CIRCUMSTANCES APPELL ANT HAS DISCHARGED ITS ONUS. THE LEARNED A.O. HAS NOT BROUGHT ANY EVIDENCE OR MATERIAL TO SHOW THAT THE CREDITS IN THE NAME OF BANK/FINANCE COMPANY) IS NOT GENUINE. ON THE CONTRARY, IN THE REMAND REPORT THE LEARNED A.O. HIMSELF HAS ADMITTED THAT THE LOANS ARE OUTSTANDING IN THE NAME OF APPELLANT AND THERE IS AN AGREEMENT BETWEEN BANKER AND ASSESSEE FOR TRANSFER OF LOAN. 6.3 ALSO THE LD. AOS REFERENCE TO SALE AGREEMENT BETWEEN PURCHASER AND SELLER THAT THE VEHICLES ARE FREE FROM LIABILITY IS ALSO MISPLACED. IN THE SALE AGREEMENT IT IS CLEARLY MENTIONED THAT ANY LIABILITY AFTER THE DATE OF SALE SHALL BE PURCHASERS RESPONSIBILITY. ASSESSEE, AFTER PURCHASE OF TRUCKS, HAS EXECUTED FRESH LOAN AGREEMENT WITH BANKS/FINANCE COMPANIES. AS SUCH THERE IS NO CONTRADICT ION IN SALE AGREEMENT AND ACTUAL EXECUTION OF THE DEAL. 6.4 IT IS CLEAR FROM THE ABOVE FACTS THAT PURCHASE OF TRUCKS BY THE APPELLANT HAVE BEEN APPROVED AND ACKNOWLEDGED BY RTO AND BANKERS, BANKERS HAVE EXECUTED FRESH LOAN AGREEMENT WITH THE APPELLANT AND APPELLANT HAS ISSUED INSTALMENT CHEQUES FROM ITS BANK A/C, L OAN OUTSTANDING IS THE LIABILITY OF THE ASSESSEE AND BANKERS ARE SHOWING ASSESSEE AS DEBTOR. UNDER SUCH CIRCUMSTANCES THE ADDITION OF 9 ITA NOS. 262, 263 & 264/NAG/2013 RS.7,73,84,171/ - MADE BY A.O. U/S 68 OF I T ACT IS UNJUSTIFIED AND IS THEREFORE DELETED. 4. FROM THE SIDE OF TH E REVENUE LEARNED D.R. MR. NARENDRA KANE APPEARED AND PLEADED THAT ALL THAT THE AO HAD INVOKED THE PROVISIONS OF SECTION 68 BUT THIS IS A CASE WHERE THE MANIPULATION WAS DONE B Y TRANSFERRING THE TRUCKS FROM ONE SISTER CONCERN TO ANOTHER TO REDUCE THE TAX B URDEN. HE HAS PLEADED THAT THE TRANSACTION IN QUESTION WAS VERY STRANGE THAT ON ONE HAND THE SELLER HAS SOLD THE TRUCK BUT RECEIVED NO AMOUNT AND ON TOP OF IT SADDLED WITH THE EXISTING LIABILITY ON THE TRUCKS. EVEN IF THE PLEA OF THE ASSESSEE IS TO BE CON SIDERED THEN THE LIABILITY WAS SHIFTED TO THE ACCOUNT OF THE PURCHASER, THEN IN SUCH SITUATION, THE LIABILITY CEASED TO EXIST IN THE HANDS OF THE SELLER. THEREFORE, THE AO WAS REQUIRED TO INVOKE THE PROVISIONS WHERE THE SELLER HAD TAKEN THE ADVANTAGE OF T HE LIABILITY IN THE PAST YEARS WHICH CEASED TO EXIST DUE TO SALE OF TRUCKS. HE HAS ALSO PLEADED THAT THE PURCHASER HAD PAID THE LIABILITY IN THE SUBSEQUENT YEARS. LEARNED D.R. HAS ALSO PLEADED THAT THE STATEMENT OF THE BANKER WAS A MOTIVATED STATEMENT BECA USE THE BANK IS ONE OF THE PARTY TO THE AGREEMENT. HENCE LEARNED CIT(APPEALS) COULD NOT HAVE GRANTED RELIEF SOLELY ON THE BASIS OF THE SAID STATEMENT. FINALLY LEARNED D.R. HAS MADE A PRAYER THAT THIS IS A CASE WHERE THE PROPER INVESTIGATION ON CORRECT LINE S HAVE NOT BEEN MADE BY THE AO. THEREFORE, THIS MATTER SHOULD GO BACK FOR FRESH INVESTIGATION. 5. FROM THE SIDE OF THE RESPONDENT ASSESSEE, LEARNED A.R,. MR. MUKSH AGRAWAL APPEARED AND OPENED HIS ARGUMENT BY MAKING A STATEMENT THAT THERE WAS NO MANIPULATI ON TO SAVE THE BURDEN OF TAX BUT IT WAS A SIMPLE CASE OF REORGANISATION OF THE BUSINESS OF THE ENTIRE GROUP. HE HAS INFORMED THAT THE PARTNERS OF THE SELLER FIRM WERE GETTING OLD, HENCE UNABLE TO HANDLE THE PLYING OPERATION OF 94 TRUCKS, THEREFORE, DECIDED TO SALE THE TRUCKS. THE ASSESSEE FIRM HAS PURCHASED THE TRUCKS FROM ITS SISTER CONCERNS ON WRITTEN DOWN VALUE. THE 10 ITA NOS. 262, 263 & 264/NAG/2013 TRANSACTION WAS THROUGH AN AGREEMENT WHICH WAS DULY ACCEPTED AND SUBMITTED TO THE BANK AUTHORITIES. THE TRUCKS WERE PURCHASED BY THE SELLE R AFTER TAKING LOAN FROM THE BANK OR FINANCE FROM THE COMPANIES. THE POSITION OF THE VALUE OF THE TRUCKS AND THE POSITION OF THE LOAN LIABILITY ON THE DATE OF TRANSFER OF THE TRUCKS IN THE RESPECTIVE SISTER CONCERNS WAS AS UNDER : NAME OF SELLER FIRM VALUE OF TRUCK SOLD (RS) LOAN O/S. ON SALE DATE (RS.) CHADDA TRANSPORT 5,50,85,000 8,83,25,488 K.S.R. TRANSPORT CO. 62,40,000 86,63,886 SUTLUJ TRANSPORT CO. 50,00,000 78,47,678 AS IT WAS A COMMON PRACTICE, THE SALE AGREEMENT HAS CLEARLY MENTIONED THAT THE LIABILITY RELATING TO THE TRUCKS PRIOR TO THE DATE OF SALE SHOULD BE THE RESPONSIBILITY OF THE SELLER. THERE WAS NOTHING UNUSUAL IN THE SAID ARRANGEMENT. THE ASSESSEE HAS PURCHASED THE TRUCKS FROM THE SAID SISTER CONCERNS AND OWNED THE F UTURE LIABILITY WHICH WAS SHOWN AS SECURED CREDITORS IN ITS BOOKS OF ACCOUNT AS UNDER : NAME OF SELLER FIRM VALUE OF TRUCKS PURCHASED (RS) LOAN O/S IN THE BOOKS OF ASSESSEE AS ON 31.03.2009 CHADDA TRANSPORT 5,50,85,000.00 6,96,96,751.00 K.S.R. TRANSPORT CO. 62,40,000.00 44,28,032.00 SUTLUJ TRANSPORT CO. 50,50,000.00 32,59,388.00 TOTAL RS. 7,73,84,171.00 BECAUSE OF THIS ARRANGEMENT ON ONE HAND THERE WAS THE VALUE OF THE TRUCKS WHICH WAS ASSESSED IN THE BOOKS OF ACCOUNTS OF THE ASSESSEE, SIDE BY SIDE, THERE WAS A LIABILITY OF BANK WHICH WAS SHOWN IN THE BOOKS OF THE ASSESSEE. HE HAS 11 ITA NOS. 262, 263 & 264/NAG/2013 PLEADED THAT WITHOUT APP RECIATING THIS FACT THE AO HAS WRONGLY INVOKED THE PROVISIONS OF SECTION 68 OF THE I.T. ACT. TO ESTABLISH THE CORRECTNESS OF THE DEAL FOR PURCHASE OF TRUCKS AND THE LOAN LIABILITY FROM THE BANK THE ASSESSEE HAS FURNISHED THE FOLLOWING DOCUMENTS, WHICH WERE ALSO BEFORE THE LOWER AUTHORITIES LISTED BELOW : I) DETAILS IF TRUCKS PURCHASED, DATE OF TRANSFER AS PER RECORD OF RTO AND DATE OF TRANSFER OF LOAN BY BANKS II) LETTER DATED 03.01.2013 FROM ICICI BANK STATING THAT THE LOANS HAVE BEEN TRANSFERRED IN THE NAME OF ASSESSEE III) BALANCE SHEET OF ASSESSEE WITH ALL ANNEXURES IV) DETAILS OF SECURED LOANS OF RS.7,73,84,171/ - V) CERTIFICATE REGISTRATION IN FORM NO. 23 ISSUED BY DY. REGIONAL TRANSPORT OFFICE, CHANDRAPUR TRANSFERRING TRUCK IN ASSESSEES NAME. VI) LEDGER OF TRUCK PURCHASE A/C. VII) SAMPLE LOAN AGREEMENT WITH ICICI BANK. LEARNED A.R. MR. MUKESH AGRAWAL HAS, THEREFORE, FINALLY PLEADED THAT THE LEARNED CIT(APPEALS) HAS ELABORATELY DISCUSSED THE FACTS OF THE CASE AND THEREUPON GRANTED RELIEF AND REQUESTED TO CONFIRM THE SAME. 6. WE HAVE HEARD BOTH THE SIDES AT SOME LENGTH AND CAREFULLY PERUSED THE EVIDENCES PLACED ON RECORD IN THE LIGHT OF THE OBSERVATIONS MADE BY THE REVENUE AUTHORITIES. THE EXPLANATION OF THE ASSESSEE APPEARS TO BE CORRECT CONSIDERING THE NATURE OF THE BUSINES S, I.E. TRUCK PLYING AS WELL AS THE REASONS STATED SINCE INCEPTION THAT THE REORGANISATION IS THE BUSINESS NECESSITY CONSIDERING THE OLD AGE OF THE PARTNERS. AS FAR AS THE CORRECTNESS OF THE LIABILITY SHOWN IN THE BOOKS OF ACCOUNTS OF THE ASSESSEE, WE HA VE NO HESITATION TO HOLD THAT THE TRUCKS BEING FINANCED BY THE BANK, THEREFORE, THE LIABILITY EXISTED AS ON THE DATE OF TRANSFER WAS CORRECTLY UNDERTAKEN BY THE ASSESSEE, THE PURCHASER OF THE TRUCKS. THEREFORE, THIS IS NOT A CASE WHERE THE G ENUINENESS OF T HE CREDITORS HAS NOT BEEN ESTABLISHED BY THE ASSESSEE. BECAUSE OF THIS REASON OUR PRELIMINARY OBSERVATION IS THAT THE 12 ITA NOS. 262, 263 & 264/NAG/2013 AO HAS MISTAKENLY INVOKED THE PROVISIONS OF SECTION 68 OF THE I.T. ACT. WE HAVE ALSO PERUSED THE SALE AGREEMENT IN QUESTION BETWEEN THE S ELLER AND THE ASSESSEE. THERE WAS A CLAUSE THAT THE LIABILITY RELATING TO THE TRUCKS PRIOR TO THE DATE OF SALE SHOULD BE THE RESPONSIBILITY OF THE SELLER, HOWEVER, THE LIABILITY AFTER THE TRANSFER OF THE TRUCKS SHALL BE THE RESPONSIBILITY OF THE PURCHASER I.E. THE ASSESSEE. FROM THE CHARTS REPRODUCED ABOVE IT IS EVIDENT THAT THERE WAS A LIABILITY WHICH WAS SHOWN IN THE BOOKS OF ACCOUNTS OF THE ASSESSEE PERTAINING TO THE TRUCKS PURCHASED FROM THE SAID THREE SISTER CONCERNS. DURING THE COURSE OF HEARING WE WA NTED TO ASCERTAIN WHETHER IN FUTURE THE LIABILITY SO UNDERTAKEN BY THE ASSESSEE WAS SQUARED UP OR NOT. ON OUR DEMAND THE ASSESSEE HAS FURNISHED THE STATEMENT SHOWING THE PAYMENT OF LIABILITY EVIDENCED BY BANK STATEMENTS. THE ASSESSEE HAS FURNISHED VARIOUS DOCUMENTS TO AFFIRM THAT WHATEVER WERE THE TERMS AND CONDITIONS AS PER THE SALE AGREEMENT HAVE DULY BEEN COMPLIED WITH BY BOTH THE PARTIES. THEREFORE AFTER CAREFUL PERUSAL OF THE STATEMENT OF ACCOUNTS, STATEMENT OF BANK EMPLOYEE AND THE REASONS GIVEN BY LEARNED CIT(APPEALS), WE HEREBY HOLD T HAT THE RELIEF WAS PROPERLY GRANTED AT THE FIRST STAGE OF APPEAL. 6.1 UNDER THE TOTALITY OF THE FACTS AND CIRCUMSTANCES OF THE CASES, WE HEREBY DISMISS THE RESPECTIVE GROUNDS RAISED IN THE IDENTICAL MANNER IN ALL THE T HREE APPEALS FILED BY THE REVENUE DEPARTMENT. 7. AS A RESULT, THE APPEALS OF THE REVENUE DEPARTMENT ARE HEREBY DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 2 8 T H DAY OF DEC., 2015. S D / - S D / - ( SHAMIM YAHYA) (MUKUL K. SHRAWAT) ACCOUNTANT MEMBER. JUDICIAL MEMBER NAGPUR, DATED: 2 8 T H DEC., 2015. 13 ITA NOS. 262, 263 & 264/NAG/2013 COPY FORWARDED TO : 1. M/S CHADDA TRANSPORT, BYEPASS ROAD, BENGALI CAMP, CHANDRAPUR - 442401. 2. M/S KSR TRANSPORT, BYEPASS ROAD, BENGALI CAMP, CHANDRAPUR - 442401. 3. M/S SHREE CHADDA ROAD LINES KOSARA ROAD, PADOLI, CHANDRAPUR - 2442406 4. A.C.I.T., CHANDRAPUR CIRCLE, CHANDRAPUR. 5. C.I.T. - II, NAGPUR. 6. C.I.T. , NAGPUR. 7. D.R., ITAT, NAGPUR. 8. GUARD FILE TRUE COPY BY ORDER ASSISTANT REGISTRAR, INCOME TAX APPELLATE TRIBUNAL, NAGPUR BENCH, NAGPUR.