ACIT, New Delhi V. Smt. Suman Jain, New Delhi

ITA 3008/DEL/2013

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 6244 (ITAT-DELHI)
• Duration Of Justice: 2 year(s) 10 month(s) 16 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-03-2016
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: G
• Next Hearing Date: 12-02-2016
• Assessment Year: 2009-2010
• Appeal Filed On: 14-05-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ANIMA BARNWAL SENIOR
• Assessee Lawyers: A K CHADHA
• Keywords: Bogus purchase; Business income; Additional evidence; Corroborative evidences
• Section: 133(6)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL (DELHI BENCH G : NEW DELHI) BEFORE SHRI G.D. AGRAWAL, VICE PRESIDENT AND SHRI KULDIP SINGH, JUDICIAL MEMBER ITA NO.3008/DEL./2013 (ASSESSMENT YEAR : 2009-10) ACIT, CIRCLE 19 (1), VS. SMT. SUMAN JAIN, NEW DELHI. PROP. SANDEEP ENTERPRISES, C 5, ASHOK VIHAR, PHASE I, NEW DELHI. (PAN : AAGPJ3316C) (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI A.K. CHADHA, CA REVENUE BY : SMT. ANIMA BARNWAL, SENIOR DR DATE OF HEARING : 12.02.2016 DATE OF ORDER : 30.03.2016 O R D E R PER KULDIP SINGH, JUDICIAL MEMBER : APPELLANT, ASSISTANT COMMISSIONER OF INCOME TAX, C IRCLE 19 (1), NEW DELHI (HEREINAFTER REFERRED TO AS THE REV ENUE), BY FILING THE PRESENT APPEAL SOUGHT TO SET ASIDE THE IMPUGNED ORDER DATED 24.12.2012 PASSED BY THE COMMISSIONER OF INCOME-TAX (APPEALS)- XXII, NEW DELHI QUA THE ASSESSMENT YEAR 2009-10 ON THE GROUNDS INTER ALIA THAT :- ITA NO.3008/DEL./2013 2 1. WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES O F THE CASE, THE LD. CIT(A) HAS ERRED IN DELETING THE ADDI TION ON ACCOUNT OF BOGUS PURCHASE OF RS.26,86,130/- WITHOUT APPRECIATING THE FACTS ON THE BASIS OF WHICH ADDITI ON WAS MADE BY THE AO. 2. WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) HAS ERRED IN DELETING THE ADDI TION ON ACCOUNT OF INTEREST PAID ON BORROWED CAPITAL AMOUNT ING TO RS.35,43,206/- WITHOUT APPRECIATING THE FACTS ON TH E BASIS OF WHICH ADDITION WAS MADE BY THE AO. 3. WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) HAS ERRED IN DELETING THE ADDI TION ON ACCOUNT OF INTEREST PAID ON BORROWED CAPITAL AMOUNT ING TO RS.35,43,206/- BY ADMITTING ADDITIONAL EVIDENCE WIT HOUT GIVING AN OPPORTUNITY TO THE AO TO EXAMINE THE SAME IN- CONTRAVENTION OF RULE 46A(3). 4. THE APPELLANT CRAVES LEAVE TO AMEND OR ALTER ALL OR ANY OF THE AFORESAID GROUNDS OF APPEAL AND AMEND, ALTER OR ADD ANY OTHER GROUND OF APPEAL. 2. BRIEFLY STATED THE FACTS OF THE CASE ARE : ON TH E BASIS OF SCRUTINY OF THE RETURN OF INCOME FILED BY THE ASSES SEE QUA THE ASSESSMENT YEAR 2009-10, NOTICES UNDER SECTION 143( 2) AND 142 (1) OF THE INCOME-TAX ACT, 1961 (HEREINAFTER THE ACT) WERE ISSUED AND CONSEQUENTLY, SHRI DEVI DAYAL GUPTA, CA ATTENDED TH E PROCEEDINGS, FILED NECESSARY DETAILS AND ALSO DISCU SSED THE CASE. THE ASSESSEE IS INTO THE BUSINESS OF IMPORTER, INTE NDER AND TRADER OF STEEL AND STEEL BARS AND HAS DECLARED GROSS PROFIT (GP) RATE OF 5.52% ON THE TOTAL SALES TURNOVER OF RS.37,70,07,57 0/- AS COMPARED TO IMMEDIATE PRECEDING YEARS GP RATE OF 4.68% ON T HE TOTAL SALES TURNOVER OF RS.31,72,37,116/-. CONSEQUENT UPON THE NOTICE ISSUED U/S 133 (6) OF THE ACT, M/S. SUMIT AGRICULTURE INDU STRIES, MANDI, ITA NO.3008/DEL./2013 3 GOBINDGARH, PUNJAB INTIMATED THAT NEITHER IN THE FI NANCIAL YEAR 2008-09 NOR SUBSEQUENTLY THEY HAD TRANSACTED ANY BU SINESS WITH THE ASSESSEE. PURSUANT TO THE SHOW-CAUSE NOTICE, T HE ASSESSEE SUBMITTED COPY OF M/S. SUMIT AGRICULTURE INDUSTRIES SHOWING SUNDRY CREDITOR BALANCE OF RS.18,88,028/- DATED 28. 12.2011 ON 30.12.2011, WHICH SHOWS THAT M/S. SUMIT AGRICULTURE INDUSTRIES HAS BEEN PRESSURIZED TO CHANGE ITS OWN REPLY DATED 19.12.2011 AFTER ISSUANCE OF SHOW-CAUSE NOTICE DATED 27.12.201 1 TO THE ASSESSEE. FINDING THE REPLY FILED BY THE ASSESSEE NOT TENABLE, THE AO TREATED THE TOTAL PURCHASE OF RS.26,86,130/- AS BOGUS PURCHASES AND MADE AN ADDITION OF RS.26,86,130/-. 3. IN THE PROFIT AND LOSS ACCOUNT, ASSESSEE CLAIMED PROFITS AND GAINS FROM THE BUSINESS AND PROFESSION TO THE TUNE OF RS.18,00,975/- AFTER DEDUCTING INTEREST ON PERSONAL CAPITAL. ON FAILURE OF THE ASSESSEE TO SUBSTANTIATE THE REASON FOR THE INTEREST PAID ON THE BORROWED CAPITAL INTRODUCED BY SMT. SUM AN JAIN AMOUNTING TO RS.35,42,206/- AND FAILURE TO PRODUCE THE EVIDENCES LIKE BANK STATEMENT, PERSONAL CAPITAL ACCOUNT, DETA IL OF INTEREST PAID, TDS RETURN AND PAYMENT CHALLAN, DISALLOWED TH E AMOUNT OF RS.35,43,206/- AND THEREBY MADE THE ADDITION OF RS. 35,43,206/-. ITA NO.3008/DEL./2013 4 4. ASSESSEE CARRIED THE MATTER BEFORE THE LD. CIT ( A) WHO HAS ALLOWED THE APPEAL. FEELING AGGRIEVED, THE REVENUE HAS COME UP BEFORE THE TRIBUNAL BY WAY OF FILING THE PRESENT AP PEAL. 5. WE HAVE HEARD THE LD. AUTHORIZED REPRESENTATIVES OF THE PARTIES TO THE APPEAL, GONE THROUGH THE DOCUMENTS R ELIED UPON AND ORDERS PASSED BY THE REVENUE AUTHORITIES BELOW IN T HE LIGHT OF THE FACTS AND CIRCUMSTANCES OF THE CASE. GROUND NO.1 6. FIRST ADDITION MADE BY THE AO AND DELETED BY THE LD. CIT (A) VIDE IMPUGNED ORDER IS ON ACCOUNT OF BOGUS PURCHASE TO THE TUNE OF RS.26,86,130/-. UNDISPUTEDLY, DURING THE ASSESSMEN T PROCEEDINGS, THE AO ISSUED NOTICE DATED 12.12.2011 U/S 133(6) OF THE ACT TO M/S. SUMIT AGRICULTURE INDUSTRIES, VISHAVKARMA NAGA R, MANDI, GOBINDGARH, PUNJAB SEEKING DETAIL OF HIS BUSINESS T RANSACTION WITH SMT. SUMAN JAIN INSTEAD OF M/S. SANDIP ENTERPRISES. COPY OF NOTICE DATED 12.12.2011 IS LYING AT PAGE 4 OF THE P APER BOOK. NO DOUBT, M/S. SUMIT AGRICULTURE INDUSTRIES DENIED TRA NSACTION WITH SMT. SUMAN JAIN VIDE LETTER DATED 19.12.2011 LYING AT PAGE 5 OF THE PAPER BOOK BUT, IN ANY CASE, THE INFORMATION REQUIR ED TO BE SOUGHT FOR WAS QUA M/S. SANDIP ENTERPRISES. HOWEVER, ON D ISCLOSING TRUE FACTS BY THE ASSESSEE, M/S. SUMIT AGRICULTURE INDUS TRIES CONFIRMED ITS BUSINESS TRANSACTION WITH M/S. SANDIP ENTERPRIS ES SHOWING ITA NO.3008/DEL./2013 5 RS.18,88,028/- RECOVERABLE AS ON 31.03.2009 VIDE LE TTER DATED 28.12.2011 LYING AT PAGE 6 OF THE PAPER BOOK. 7. DURING APPELLATE PROCEEDINGS, THE ASSESSEE HAS B ROUGHT ON RECORD COPIES OF ACCOUNTS IN THE BOOKS OF M/S. SAND IP ENTERPRISES, PROPRIETORSHIP CONCERN OF SMT. SUMAN JAIN SHOWING C OMPLETE DETAIL OF BUSINESS TRANSACTION WITH M/S. SUMIT AGRI CULTURE INDUSTRIES FOR THE FINANCIAL YEAR 2008-09 AND THE S AID DOCUMENTS ARE LYING AT PAGE 7 & 23 OF THE PAPER BOOK. ASSESS EE ALSO PRODUCED PURCHASE BILLS, STOCK REGISTER TO PROVE TH E DELIVERY, COPY OF BANK ACCOUNTS TO PROVE THE PAYMENT, LYING IN THE PAPER BOOK, WHICH HAVE NOT BEEN DISPUTED BY THE REVENUE. 8. SINCE THE AO HAS MERELY PROCEEDED TO MAKE AN ADD ITION OF RS.26,86,130/- ON THE BASIS OF LETTER DATED 19.12.2 011, WHEREIN M/S. SUMIT AGRICULTURE INDUSTRIES DENIED BUSINESS T RANSACTION WITH SMT. SUMAN JAIN, THE SAME IS NOT SUSTAINABLE IN THE EYES OF LAW BECAUSE SMT. SUMAN JAIN TRANSACTED WITH M/S. SUMIT AGRICULTURE INDUSTRIES ONLY AS PROPRIETOR OF M/S. SANDIP ENTERP RISES AND NOT IN HER INDIVIDUAL CAPACITY. THIS FACT HAS BEEN GOT RE CTIFIED BY THE ASSESSEE DURING THE APPELLATE PROCEEDINGS BY PRODUC ING THE ENTIRE RECORD OF M/S. SANDIP ENTERPRISES REFERRED HEREINBE FORE. IN THE GIVEN CIRCUMSTANCES, THERE IS NO QUESTION OF ISSUAN CE OF SECOND LETTER DATED 28.12.2011 BY M/S. SANDIP ENTERPRISES CONFIRMING ALL ITA NO.3008/DEL./2013 6 THE BUSINESS TRANSACTION WITH ASSESSEE UNDER PRESSU RE. HAD THE NOTICE U/S 133(6) OF THE ACT BEEN ISSUED TO M/S. SU MIT AGRICULTURE INDUSTRIES SEEKING COMPLETE BUSINESS TRANSACTION WI TH M/S. SANDIP ENTERPRISES, THE INCORRECT INFORMATION WOULD NOT HA VE BEEN FILED BY M/S. SUMIT AGRICULTURE INDUSTRIES. SO, WE FIND NO INFIRMITY OR IRREGULARITY IN THE FINDINGS RETURNED BY THE LD. CI T (A). HENCE, GROUND NO.1 IS DETERMINED AGAINST THE REVENUE. GROUNDS NO.2 & 3 9. BEFORE TAKING UP THE GROUNDS NO.2 & 3 FOR ADJUDI CATION, WE DEEM IT NECESSARY TO DISPOSE OF THE APPLICATION FIL ED BY THE ASSESSEE FOR LEADING ADDITIONAL EVIDENCE. APPLICANT/ASSESSE E, SMT. SUMAN JAIN BY MOVING AN APPLICATION UNDER RULE 29 OF THE INCOME TAX APPELLATE TRIBUNAL RULES, 1963 SOUGHT TO PROVE ON R ECORD BANK PROPOSAL AND SANCTION LETTER DATED 10.11.2006 OF BA NK OF INDIA BY WAY OF ADDITIONAL EVIDENCE IN ORDER TO PROVE THE FA CT THAT THE ASSESSEE HAS RAISED LOAN OF RS.3.30 CRORES AND RS.3 .31 CRORES HAVING BEEN INVESTED IN THE PROPRIETORSHIP CONCERN, NAMELY, M/S. SANDIP ENTERPRISES THROUGH CAPITAL ACCOUNT OF ASSES SEE WAS SANCTIONED AT LOWER RATE ON THE GROUND THAT THE ASS ESSEE HAS SUBSTANTIAL CAUSE TO PROVE THE DOCUMENTS IN ADDITIO NAL EVIDENCE. KEEPING IN VIEW THE FACT THAT THE DOCUMENT SOUGHT T O BE PROVED BY ITA NO.3008/DEL./2013 7 THE ASSESSEE IN ADDITIONAL EVIDENCE ARE NECESSARY F OR COMPLETE ADJUDICATION OF THE CONTROVERSY AT HAND, THE SAME A RE ALLOWED TO BE PROVED IN ADDITIONAL EVIDENCE WITHOUT PREJUDICE TO THE MERITS OF THE CASE. CONSEQUENTLY, THE APPLICATION FOR ADDITIONAL EVIDENCE IS HEREBY ALLOWED. 10. ASSESSEE IN THE PROFIT & LOSS ACCOUNT CLAIMED T HE INTEREST HAVING BEEN PAID TO THE TUNE OF RS.35,43,206/- WHIC H HAS BEEN DISALLOWED BY THE AO ON THE GROUND THAT THE ASSESSE E COULD NOT SUBSTANTIATE THE REASONS FOR THE INTEREST PAID ON A CCOUNT OF BORROWED PERSONAL CAPITAL INTRODUCED BY SMT. SUMAN JAIN NOR SHE HAS PRODUCED ANY SUPPORTING EVIDENCE I.E. BANK STAT EMENT, PERSONAL CAPITAL ACCOUNT AND DETAILS OF INTEREST PAID, TDS R ETURN AND PAYMENT CHALLAN. 11. ASSESSEE CLAIMED TO HAVE RAISED LOAN OF RS.3.33 CRORES AND RS.3.31 CRORES AND HAVE INVESTED THE SAME IN THE PR OPRIETORSHIP FIRM, M/S. SANDIP ENTERPRISES THROUGH CAPITAL ACCOU NT OF THE ASSESSEE ON 31.03.2008 AND 31.03.2009 RESPECTIVELY. DURING THE APPELLATE PROCEEDINGS, THE ASSESSEE SUMMARIZED THE CAPITAL ACCOUNT, PERSONAL ACCOUNT, INVESTMENT THROUGH CAPIT AL ACCOUNT AND THE BANK LOANS RAISED AS UNDER :- STATEMENT OF CAPITAL ACCOUNT, PERSONAL LOANS INVES TED THROUGH CAPITAL ACCOUNT AND BANK LOANS RAISED IN THE PAST Y EARS ITA NO.3008/DEL./2013 8 IN ORDER TO GET THE LOAN SANCTIONED FROM UBI BANK, THE APPELLANT SHOWED NET WORTH OF SMT. SUMAN JAIN BY SHOWING THAT SMT. SUMAN JAIN HAD SUFFICIENT CAPITAL IN THE BALANCE SH EET OF M/S SANDEEP ENTERPRISES AND IT IS FOR THIS REASON THAT THE LOANS RAISED BY SMT. SUMAN JAIN IN THE PERSONAL SAVING BANK ACCO UNT WERE INVESTED THROUGH THE CAPITAL ACCOUNT OF SMT. SUMAN JAIN IN M/S. SANDEEP ENTERPRISES. 12. IN THE BACKDROP OF THE AFORESAID FACTS AND CIRC UMSTANCES, THE SOLE QUESTION ARISES FOR DETERMINATION IS, AS TO W HETHER INTEREST PAID ON CAPITAL BORROWED BY THE ASSESSEE IN INDIVID UAL CAPACITY, FOR THE PURPOSE OF BUSINESS IS ELIGIBLE FOR DEDUCTION? 13. UNDISPUTEDLY, ASSESSEE RAISED THE LOAN OF RS.3. 33 CRORES AND RS.3.31 CRORES. ASSESSEE CLAIMED DEDUCTION OF INTE REST OF RS.35,43,206/- ON HER INDIVIDUAL BORROWING AGAINST PROFIT OF RS.53,44,181/- OF THE PROPRIETORSHIP FIRM OF M/S. S ANDIP ENTERPRISES, A PROPRIETORSHIP CONCERN OF THE ASSESS EE. 14. UNDISPUTEDLY, DURING THE ASSESSMENT PROCEEDINGS , THE ASSESSEE PRODUCED HER CAPITAL ACCOUNT FOR FINANCIAL YEAR 2008-09, DATEWISE SAVING ACCOUNT FOR THE ASSESSMENT YEAR 200 8-09, CONFIRMATION FROM 32 LENDERS AS ON 31.03.2009 LYING AT PAGES 248, YEAR ENDED OWN FUNDS PERSONAL LOANS INVESTED THROUGH CAPITAL ACCOUNT TOTAL BANK LOAN RAISED FORM UBI (1) (2) (3) [(2)+(3)]=(4) (5) 31.03.2008 968,329.33 33,333,322.00 34,301,651.33 49,383,237.05 31.03.2009 6,988,927.64 33,163,018.25 40,151,945.89 83,082,048.34 ITA NO.3008/DEL./2013 9 63 65, 66 91, 31 62 OF THE PAPER BOOK RESPECT IVELY. ASSESSEE ALSO PRODUCED STATEMENT LYING AT PAGES 92 TO 94 OF THE PAPER BOOK SHOWING BORROWED AMOUNT HAVING BEEN DEPOSITED IN TH E SAVING BANK ACCOUNT NO.3966020108006327 INVESTED IN THE CA PITAL ACCOUNT OF SMT. SUMAN JAIN, PROPRIETOR OF M/S. SAND IP ENTERPRISES. ASSESSEE ALSO PRODUCED TDS RETURN SHOWING NAME OF T HE BORROWERS OF WHOM TDS HAS BEEN DEDUCTED (AMOUNTING TO RS.26,82,682/-) LYING AT PAGES 97 TO 108 OF THE PAP ER BOOK. DURING THE APPELLATE PROCEEDINGS, THE ASSESSEE ALSO PRODUC ED LOAN ACCOUNT OF BORROWERS FOR FINANCIAL YEAR 2008-09 LYING AT PA GES 121 TO 161 OF THE PAPER BOOK AND ALSO PRODUCED CONFIRMATION FR OM 10 LENDERS LYING AT PAGES 183 TO 197 OF THE PAPER BOOK. THE A FORESAID RELIED UPON DOCUMENTS HAVE BEEN DULY VERIFIED AND HAVE NEV ER BEEN DISPUTED BY THE AO ON ANY ACCOUNT WHATSOEVER WHO HA S MERELY MADE THE ADDITION BY RETURNING CRYPTIC FINDINGS THA T THE ASSESSEE HAS FAILED TO SUBSTANTIATE THE REASONS BY PRODUCING SUPPORTING EVIDENCE. 15. ASSESSEE BY WAY OF ADDITIONAL EVIDENCE BEFORE T HE TRIBUNAL ALLOWED VIDE ORDER OF THE EVEN DATE, BROUGHT ON REC ORD THE SANCTION LETTER DATED 14.01.2016 WHEREBY BANK LIMIT OF RS.5. 5 CRORES WAS SANCTIONED AT LOWER BANK INTEREST RATE LYING AT PAG E 1 TO 17 OF THE ADDITIONAL EVIDENCE. ITA NO.3008/DEL./2013 10 16. HONBLE APEX COURT HAS DECIDED THE IDENTICAL IS SUE IN THE JUDGMENT CITED AS INDIAN CEMENTS LTD. VS. 60 ITR 52 (SC) WHEREIN IT HAS BEEN HELD THAT WHEN THE ACT OF BORRO WING MONEY WAS INCIDENTAL TO CARRYING ON THE BUSINESS THE LOAN OBT AINED WAS NOT AN ASSET OR AN ADVANTAGE OF ENDURING NATURE, THE EXPEN DITURE WAS MADE FOR SECURING THE USE OF MONEY FOR A CERTAIN PERIOD AND IT WAS IRRELEVANT TO CONSIDER THE OBJECT WITH WHICH THE LO AN WAS TAKEN. 17. IN THE INSTANT CASE, WHEN FROM THE DOCUMENT PRO DUCED BEFORE THE AO, CIT (A) AS WELL AS IN THE ADDITIONAL EVIDEN CE BEFORE THE TRIBUNAL BY THE ASSESSEE, IT IS PROVED THAT THE LOA N AMOUNT BORROWED BY THE ASSESSEE IN INDIVIDUAL CAPACITY WAS UTILIZED FOR EARNING PROFIT FROM M/S. SANDIP ENTERPRISES, A PROP RIETORSHIP CONCERN OF THE ASSESSEE, A DIRECT LINK HAS BEEN EST ABLISHED AND AS SUCH, THE INTEREST COST INCURRED ON THE SAID PERSON AL BORROWING WAS INTEGRAL PART OF THE EARNING PROFIT IN THE SAID BUS INESS. 18. MOREOVER, WHEN ASSESSEE HAS PROVED THAT BORROWI NGS TAKEN IN INDIVIDUAL CAPACITY WAS ON LOWER BANK INTEREST O F 0.25% BPLR AS AGAINST REGULAR RATE OF 1.75% BPLR IT HAS CERTAI NLY ENHANCED THE PROFIT OF M/S. SANDIP ENTERPRISES ALSO AND IN SUCH CIRCUMSTANCES, THE INTEREST AMOUNT OF RS.35,43,206/- HAS BEEN RIGH TLY ALLOWED TO BE DEDUCTED BY THE CIT (A). SO WE FIND NO ILLEGALI TY OR INFIRMITY IN ITA NO.3008/DEL./2013 11 THE FINDING RETURNED BY THE CIT (A) AND CONSEQUENTL Y, GROUNDS NO.2 & 3 ARE ALSO DETERMINED AGAINST THE REVENUE. 19. IN VIEW OF WHAT HAS BEEN DISCUSSED ABOVE, THE A PPEAL OF THE REVENUE IS DISMISSED. ORDER PRONOUNCED IN OPEN COURT ON THIS 30 TH DAY OF MARCH, 2016. SD/- SD/- (G.D. AGRAWAL) (KULDIP SINGH) VICE PRESIDENT JUDICIAL ME MBER DATED THE 30 TH DAY OF MARCH, 2016 TS COPY FORWARDED TO: 1.APPELLANT 2.RESPONDENT 3.CIT 4.CIT(A), MEERUT. 5.CIT(ITAT), NEW DELHI. AR, ITAT NEW DELHI.