The ACIT, Circle-2, Surat V. M/s. Mahavir Crimpers, Surat

ITA 2841/AHD/2013

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 5806 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 year(s) 5 month(s) 14 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-05-2017
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: D
• Next Hearing Date: 04-05-2017
• Assessment Year: 2009-2010
• Appeal Filed On: 04-12-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: VILAS V SHINDE
• Assessee Lawyers: RASHESH SHAH
• Keywords: Unexplained cash credit; Depreciation; Income from undisclosed sources; Additional depreciation; Accommodation entries; Assessment record
• Section: 32; 131; 68

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD D BENCH AHMEDABAD BEFORE, SHRI S. S. GODARA, JUDICIAL MEMBER AND SHRI PRADIP KUMAR KEDIA, ACCOUNTANT MEMBER ITA NO. 2841/AHD/2013 (ASSESSMENT YEAR: 2009-10) ASSTT. COMMISSIONER OF INCOME-TAX, CIRCLE-2, ROOM NO.110, AAYKAR BHAVAN, MAJURA GATE, SURAT - 395001 APPELLANT VS. M/S. MAHAVIR CRIMPERS, 159, PARKING PROJECT, SURAT TEXTILE MARKET, RING ROAD, SURAT 395002 RESPONDENT PAN: AAJFS6893E /BY REVENUE : SHRI VILAS V. SHINDE, SR. D.R. /BY ASSESSEE : SHRI RASHESH SHAH, A.R. /DATE OF HEARING : 04.05.2017 /DATE OF PRONOUNCEMENT : 18.05.2017 ORDER PER S. S. GODARA, JUDICIAL MEMBER THIS REVENUES APPEAL FOR ASSESSMENT YEAR 2009-10 A RISES AGAINST THE CIT(A)-II, SURATS ORDER DATED 17.09.2013, PASSED I N CASE NO. CAS- II/265/2011-12, REVERSING ASSESSING OFFICERS ACTIO N MAKING SECTION 68 ADDITION OF UNEXPLAINED CASH CREDITS AMOUNTING TO R S.1,00,00,000/- AND DISALLOWANCE OF ADDITIONAL DEPRECIATION OF RS.38,15 ,241/- IN ASSESSMENT ORDER ITA NO. 2841/AHD/2013 ( ACIT VS. M/S. MAHAVIR CRIM PERS) - 2 - DATED 29.12.2011, IN PROCEEDINGS U/S.143(3) OF THE INCOME TAX ACT, 1961, IN SHORT THE ACT. 2. WE COME TO THE FORMER ISSUE OF SECTION 68 ADDITI ON OF RS.1,00,00,000/- ADDED AS UNEXPLAINED CASH CREDITS IN COURSE OF THE IMPUGNED REGULAR ASSESSMENT AND DELETED IN THE LOWER APPELLA TE PROCEEDINGS. THIS ASSESSEE IS A FIRM. THE ASSESSING OFFICER NOTICED IT TO HAVE AVAILED UNSECURED LOANS OF RS.1CRORE FROM M/S. RAJ CAPITAL & FINANCE PVT. LTD. HE OBSERVED THAT ASSESSEES DETAILS SUBMITTED REVEALED AFTER VERIFICATION THAT THE SAME WERE IN THE NATURE OF ACCOMMODATION ENTRIES TA KEN FROM THE ABOVE ENTITY IN ORDER TO FACILITATE UNACCOUNTED INCOME IN BUSINESS. HE FURTHER TOOK NOTE OF THE FACT THAT THE ABOVE CREDITOR ENTITY HAD GOT DEPOSITED HUGE CASH AMOUNTS FROM FAMILY MEMBERS OF BHUTRA FAMILY LOCATE D IN SURAT. THE ASSESSING OFFICER THEN ISSUED SECTION 131 PROCESS T O THE SAID SIX DEPOSITORS/FAMILY MEMBERS OF ABOVE CREDITOR ENTITY S DIRECTOR. 3. THE INSTANT CASE FILE REVEALS THAT THE ASSESSING OFFICER THEN CONSIDERED THE ABOVE ENTITYS REGISTERED OFFICE AT KOLKATA WH EREAS ITS DIRECTORS/FAMILY MEMBERS STAYED AT SURAT, ITS ONLY SOURCE OF INCOME WAS INTEREST INCOME, IT HAD BEEN INCREASING ITS CAPITAL EVERY YEAR BY WAY O F NEW SHARES TO COMPANIES HAVING REGISTERED OFFICES AT KOLKATA, ALL DIRECTORS FAMILY MEMBERS HAS DEPOSITED CHEQUES IN COMPANYS BANK ACCOUNTS FROM T HEIR PERSONAL ACCOUNTS ETC. TO INVOKE THE IMPUGNED SECTION 68 ADDITION IN QUESTION AMOUNTING TO RS.1,00,00,000/- IN THE NATURE OF UNEXPLAINED CASH CREDITS. 4. THE CIT(A) REVERSES ASSESSING OFFICERS ACTION A S UNDER: 7.2 THE APPELLANT DURING THE COURSE OF APPELLATE P ROCEEDINGS, STATED THAT IT HAS DISCHARGED ITS ONUS UNDER SECTION 68 BY FURNISHING CONFIRMATIONS, ASSESSMENT PARTICULARS, PAN, COPY OF RETURN, AUDITED ACCOUNTS AND BANK STATEMENT OF M/S RAJ ITA NO. 2841/AHD/2013 ( ACIT VS. M/S. MAHAVIR CRIM PERS) - 3 - CAPITAL & FINANCE PVT LTD. THE RETURN OF INCOME PER TAINING TO ASSESSMENT YEAR 2009-10 OF M/S RAJ CAPITAL & FINANCE PVT LT D WAS ELECTRONICALLY FILED ON 20. 09. 2009. THE LOAN GIVEN TO THE APPELLANT IS REFLECTED IN THE SCHEDULE H OF THE AUDITED BALANCE SHEET OF M/S RAJ CAPITAL & FINA NCE PVT LTD. THE TOTAL SHARE CAPITAL OF THE COMPANY IS RS. 2.15 CRORES, WHILE 'R ESERVES AND SURPLUS' ARE OF RS 2. 5 CRORES WHICH BASICALLY CONSIST OF SHARE PREMIUM. APPARENTLY, THE SOURCE OF LOANS GIVEN TO THE APPELLANT IS FROM THE SHARE CAPI TAL AND THE SHARE PREMIUM OF M/S RAJ CAPITAL & FINANCE PVT LTD. THE APPELLANT IS HAVING REGULAR LOAN TRANSACTIONS WITH M/S RAJ CAPITAL & FINANCE PVT LTD YEAR AFTER YEAR. 7.3 IN FACT, OUT OF THE LOAN OF RS. 1,00,00,000 ADD ED IN THE ASSESSMENT YEAR 2009- 10, A SUM OF RS 75,00,000 HAS BEEN REPAID BY THE AP PELLANT, DURING THE ASSESSMENT YEAR 2010-11 .IN THE ASSESSMENT YEAR 2011-12, FURTH ER LOAN OF RS. 25,00,000 HAS BEEN TAKEN BY THE APPELLANT. THE INTEREST IN RESPEC T OF ALL THE LOAN TAKEN IS BEING PAID AND THE CORRESPONDING TDS IS ALSO BEING MADE. IN THIS BACKGROUND, THE APPELLANT SUBMITTED THAT NON-COMPLIANCE OF SUMMONS U/S 131 OF THE ASSESSING OFFICER BY THE LENDERS, DIRECTORS OR SHARE HOLDERS IS NOT A FAULT ON THE PART OF THE APPELLANT. 7.4 THE APPELLANT ALSO RELIED ON THE CASE LAWS OF ( I) DWARIKADHISH SUGAR INDUSTRIES V/S ITO DATED 07.05.2012 REPORTED IN 149 TTJ (LUCKNOW ) (T.M.) AND (II) JAIKISHAN DADLANI V/S ITO REPORTED IN 4 SOT 13 8 ( MUMBAI ), APART FROM A LARGE NUMBER OF OTHER CASE LAWS OF VARIOUS COURTS. THE RATIOS OF ABOVE TWO JUDGMENTS ARE REPRODUCED HEREIN UNDER :- (I) JAIKISHAN DADLANI V/S ITO REPORTED IN 4 SOT 13 8 ((MUMBAI) THE LAW IS VERY WELL SETTLED THAT WHILE EXAMINING APPLICABILITY OF SECTION 68, SOURCE OF SOURCE CANNOT BE INVESTIGATED , BUT THEN THIS IS PRECISELY WHAT THE CIT ( A) ENDED UP DOING. THE FAC TUM OF BORROWING CAN ALSO NOT BE IN DISPUTE AS THE ASSESSEE HAS BORROWED THE MONEY BY WAY OF AN ACCOUNT PAYEE CHEQUE. THE IDENTITY CANNOT BE SAID T O BE IN DOUBT EITHER. THE MEANS OF THE LENDER HAVE BEEN PROVED IN AS MUCH AS HE WAS CLEARLY IN POSSESSION OF THIS FUND, RECEIVED FROM THE SHAREHOL DERS. THE CIT (A) WAS, THEREFORE, CLEARLY IN ERROR IN CONFIRMING THE ADDIT ION UNDER SECTION 68. (II) DWARIKADHISH SUGAR INDUSTRIES V/S ITO 149 TTJ ( LUCKNOW ) 3 RD MEMBER . 'ADDITION U/S 68 IN RESPECT OF THE REMAINING AMOUNT S ON THE GROUND THAT IT IS ASSESSEES OWN INCOME ROUTED THROUGH THE BANK ACCOU NTS OF THE CREDITORS - NOT JUSTIFIED. .... CREDITORS HAVE EXPLAINED THE SOURCE OF DEPOSITS IN THEIR RESPECTIVE BANK ACCOUNTS. ITA NO. 2841/AHD/2013 ( ACIT VS. M/S. MAHAVIR CRIM PERS) - 4 - AO WAS NOT JUSTIFIED IN CALLING UPON THE ASSESSEE T O PROVE THE SOURCE OF SOURCE. ....... 7.5 SOME OF THE CASE LAWS RELIED UPON BY THE APPELL ANT ARE AS UNDER :- A. NABADWIP CHANDRA ROY V/S CIT (1962) 44 ITR 591 ( ASSAM ). B. TOLARAM DAGA V/S CIT ( 1966) 59 ITR 632 ( ASSAM). C. ANAND PRAKASH AGARWAL V/S ACIT ( 2008) 6 DTR (ALL) (TRIB) 191. D. RADHESHYAM V/S SAFIYABAI IBRAHIM AIR 1988 BOM 361 : 1987 MAH 725 : 1987 BANK J 552. E. ROHINI BUILDERS 182 CTR 373 (GUJ) F. ORISSA CORPORATION (P)LTD 159 ITR 78(SC) G. P.K. NOORJAHAN 273 ITR 570(SC) 8. DECISION :- 8.1 THE APPELLANT 'S CONTENTIONS AND THE RATIO OF V ARIOUS JUDGMENTS RELIED UPON BY THE APPELLANT HAVE BEEN EXAMINED. THE ONLY REASON F OR MAKING THIS ADDITION OF RS 1 CRORE IS NON -COMPLIANCE OF SUMMONS BY THE SHARE- HOLDERS / DIRECTORS OF LENDER AND THE REASON FOR THAT IS THAT THERE WERE CASH DEP OSITS IN THE BANK ACCOUNTS OF THE SHARE - HOLDERS, BEFORE ISSUE OF CHEQUE IN FAVOUR O F THE COMPANY FOR * SHARE CAPITAL / SHARE PREMIUM \ THIS AMOUNTS TO STRETCHIN G OF ONUS U/S 68 TOO FAR. IT IS NOT A CASE WHERE THE APPELLANT WAS ASKED TO ESTABLISH ' SOURCE OF SOURCE X RATHER IT IS A CASE WHERE THE APPELLANT HAS BEEN ASKED TO ESTABLIS H ' SOURCE OF SOURCE OF SOURCE 8.2 AS PER THE BALANCE SHEET OF M/S RAJ CAPITAL & F INANCE PVT LTD THE LOAN GIVEN TO THE APPELLANT IS EXPLAINED WITH THE SHARE CAPITAL AND SHARE PREMIUM. IF THE SHARE HOLDERS OF LENDER COMPANY HAVE DEPOSITED CASH IN THEIR RESPECTIVE BANK ACCOUNTS, BEFORE ISSUE OF CHEQUE IN FAVOUR OF LENDE R - COMPANY, THE CORRESPONDING ACTION LIES IN THE HANDS OF THOSE SHARE HOLDERS. IN SUCH A CASE, MAKING AN ADDITION EVEN IN CASE OF LENDER COMPANY MAY NOT BE JUSTIFIE D IN VIEW OF JUDGMENT OF THE HON'BLE SUPREME COURT OF INDIA IN THE CASE OF M/S L OVELY EXPORTS. MAKING THAT ADDITION IN THE HANDS OF BORROWER IS EVEN MORE UNJU STIFIED. 8.3 EVEN IF FACTS IN THE CASE OF M/S RAJ CAPITAL & FINANCE PVT LTD ARE FOUND DISTINGUISHABLE FROM THE FACTS OF THE CASE OF M/S L OVELY EXPORTS (SUPRA ), THE ADDITION CAN ONLY BE MADE IN THE CASE OF M/S RAJ CA PITAL & FINANCE PVT LTD. THERE IS NO EVIDENCE ON RECORD TO ESTABLISH THAT THERE WE RE COLLUSIVE TRANSACTIONS BETWEEN THE APPELLANT, M/S RAJ CAPITAL & FINANCE PV T LTD AND THE SHARE - HOLDERS / DIRECTORS OF M/S RAJ CAPITAL & FINANCE PVT LTD. I F THE SHARE - HOLDERS OF M/S RAJ CAPITAL & FINANCE LTD OR DIRECTORS OF THE SAID COMP ANY DID NOT COMPLY WITH THE SUMMONS ISSUED, THE ASSESSING OFFICER WAS VESTED WI TH THE STATUTORY POWERS TO ENFORCE COMPLIANCE. EVEN AFTER ENSURING COMPLIANCE, IF THOSE PERSONS HAD FAILED TO ESTABLISH THEIR SOURCE OF CASH DEPOSITS, THE CORRES PONDING ADDITION WOULD HAVE BEEN THERE IN THE HANDS OF THOSE PERSONS OR M/S RAJ CAPITAL & FINANCE PVT LTD AND NOT IN THE HANDS OF APPELLANT. 8.4 AS FAR AS THE APPELLANT IS CONCERNED, IT WAS RUNNING A LOAN ACCOUNT WITH M/S RAJ CAPITAL & FINANCE PVT LTD FROM WHICH, IT RE GULARLY BORROWED FUNDS AND ITA NO. 2841/AHD/2013 ( ACIT VS. M/S. MAHAVIR CRIM PERS) - 5 - PAID INTEREST AFTER DEDUCTION OF TDS. HOW M/S RAJ C APITAL & FINANCE PVT LTD ARRANGES FOR FUNDS FOR LOAN TO BE GIVEN TO THE APPE LLANT IS NOT THE CONCERN OF THE APPELLANT. CONSIDERING THE SAME AND THE RATIO OF TH E JUDGMENTS (SUPRA ) RELIED UPON BY THE APPELLANT THE ADDITION MADE BY THE ASSE SSING OFFICER IS DELETED AND THE GROUND NO. 1 OF THE APPELLANT IS ALLOWED. 5. WE HAVE HEARD BOTH THE PARTIES. THERE IS NO DIS PUTE SO FAR AS IDENTITY OF THE CREDITOR PARTY M/S. RAJ CAPITAL & FINANCE PV T. LTD. IS CONCERNED. THERE IS FURTHER NO QUARREL THAT THE ASSESSING OFFI CER DOES NOT DISPUTE THE FACT THAT THE ASSESSEE HAS NOT AVAILED ANY CASH LOAN FRO M THE SAID ENTITY. HIS ONLY CASE IS THAT THE ASSESSEE HAS NOT BEEN ABLE TO PROV E SOURCE ALONGWITH GENUINENESS AND CREDITWORTHINESS OF THE ABOVESTATED ENTITY. IT EMANATES FROM ABOVE EXTRACTED PORTION THAT THE ASSESSEE HAS FILED ALL RELEVANT DETAILS ALONGWITH ASSESSMENT RECORDS OF THE SAID ENTITY EX PLAINING SOURCE OF THE LOANS TO THE ABOVE ENTITYS BALANCE SHEET INDICATIN G SUFFICIENT RESERVES, SURPLUS AND SHARE PREMIUM AS FOLLOWED BY REPAYMENT IN SUCCEEDING ASSESSMENT YEAR. LEARNED DEPARTMENTAL REPRESENTATI VE FAILS TO REBUT CIT(A)S CONCLUSION THAT THE ASSESSEE HAS BEEN HAVI NG REGULAR LOAN TRANSACTIONS WITH THE SAID ENTITY. WE NOTICE IN THI S BACKDROP THAT HONBLE JURISDICTIONAL HIGH COURTS DECISION IN DCIT VS. RO HINI BUILDERS (2002) 256 ITR 360 (GUJ) UPHOLDING TRIBUNALS CONCLUSION DELET ING SECTION 68 ADDITION IN VIEW OF IDENTICAL DETAILS; SQUARELY APPLIES HERE . SO IS THEIR LORDSHIPS LATTER DECISION IN CIT VS. AYACHI CHANDRASHEKHAR NARSANGJI (2014) 42 TAXMANN.COM 251 (GUJ) CONFIRMING THIS TRIBUNALS AN OTHER DECISION REVERSING SECTION 68 ADDITION WHEREIN THE DEPARTMENT HEAD ACC EPTED REPAYMENT OF LOAN IN SUBSEQUENT YEAR TO BE CORRECT. WE TAKE INTO ACC OUNT ALL THESE FACTS AND JUDICIAL PRECEDENTS TO AFFIRM CIT(A)S FINDINGS UND ER CHALLENGE DELETING THE IMPUGNED ADDITION. THIS FIRST SUBSTANTIVE GROUND I S ACCORDINGLY DECLINED. 6. WE NOW COME TO REVENUES SECOND SUBSTANTIVE GROU ND SEEKING TO RESTORE ADDITIONAL DEPRECIATION DISALLOWANCE/ADDITI ON OF RS.38,15,241/-. THE ITA NO. 2841/AHD/2013 ( ACIT VS. M/S. MAHAVIR CRIM PERS) - 6 - ASSESSEE HAD CLAIMED THE SAME @20% ON MACHINERY USE D FOR CRIMPING OF YARN. THE ASSESSING OFFICER QUOTED SECTION 32 (1)( IIA) TO CONCLUDE THAT THE SAID ACTIVITY DID NOT AMOUNT TO MANUFACTURING OF AN Y NEW PRODUCT OR ARTICLE. HE THUS MADE THE IMPUGNED DISALLOWANCE. LEARNED CI T(A) CONCLUDES THAT HONBLE BOMBAY HIGH COURTS DECISION IN CIT VS. EMP TEE POLY-YARN (P) LTD. 218 CTR (BOM.) 657 TAKES NOTE OF CBDT CIRCULAR DATE D 22.11.1985 CLARIFYING THAT CRIMPING OF YARN ALSO AMOUNT TO A M ANUFACTURING ACTIVITY. HE THUS DELETES THE IMPUGNED DISALLOWANCE. LEARNED DE PARTMENTAL REPRESENTATIVE FAILS TO DISPUTE THE TRUE PURPORT OF THE ABOVESTATED CIRCULAR AS WELL AS HONBLE BOMBAY HIGH COURTS DECISION QUOTED HEREINABOVE. WE ACCORDINGLY AFFIRM CIT(A)S FINDING UNDER CHALLENGE QUA THIS LATTER ISSUE AS WELL. 7. THIS REVENUES APPEAL IS DISMISSED. [PRONOUNCED IN THE OPEN COURT ON THIS THE 18 TH DAY OF MAY, 2017.] SD/- SD/- ( PRADIP KUMAR KEDIA ) (S. S. GODARA) ACCOUNTANT MEMBER JUDICIAL MEMBER AHMEDABAD: DATED 18/05/2017 TRUE COPY S.K.SINHA / COPY OF ORDER FORWARDED TO:- / REVENUE 2 / ASSESSEE ! / CONCERNED CIT 4 !- / CIT (A) ( )*+ ,--. . /0 / DR, ITAT, AHMEDABAD 1 +23 / GUARD FILE. BY ORDER / . // . /0