M/s Indo Prosoya Foods Ltd., Kanpur V. Income Tax Officer-5(2), Kanpur

ITA 306/LKW/2014

• Counselvise Citation: 30623714 RSA 2014
• Duration Of Justice: 1 year(s) 7 month(s) 20 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-12-2015
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Next Hearing Date: 16-11-2015
• Assessment Year: 2003-2004
• Appeal Filed On: 21-04-2014
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Keywords: Unexplained cash credit; Depreciation; Commercial expediency
• Section: 5(2); 80IB; 133(6); 68

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL LUCKNOW BENCH A/B, LUCKNOW BEFORE SHRI SUNIL KUMAR YADAV, JUDICIAL MEMBER AND SHRI. A. K. GARODIA, ACCOUNTANT MEMBER ITA NO.306/LKW/2014 ASSESSMENT YEAR:2003-04 M/S INDO PROSOYA FOODS LTD. 54/10, NAYAGANJ KANPUR V. INCOME TAX OFFICER-5(2) KANPUR TAN/PAN:AAACI8129B (APPELLANT) (RESPONDENT) ITA NO.433/LKW/2014 ASSESSMENT YEAR:2003-04 INCOME TAX OFFICER-5(2) KANPUR V. M/S INDO PROSOYA FOODS LTD. 54/10, NAYAGANJ KANPUR TAN/PAN:AAACI8129B (APPELLANT) (RESPONDENT) ASSESSEE BY: SHRI. RAKESH GARG, ADVOCATE DEPARTMENT BY: SMT. ALKA SINGH, D.R. DATE OF HEARING: 17 11 2015 DATE OF PRONOUNCEMENT: 11 12 2015 O R D E R PER SUNIL KUMAR YADAV: THESE CROSS-APPEALS ARE PREFERRED BY THE ASSESSEE AS WELL AS THE REVENUE AGAINST THE ORDER OF THE LD. CIT(A) PERTAINING TO ASSESSMENT YEAR 2003-04. :- 2 -: 2. SINCE THESE APPEALS WERE HEARD TOGETHER, THESE ARE BEING DISPOSED OF THROUGH THIS CONSOLIDATED ORDER. WE, HOWEVER, PREFER TO ADJUDICATE THEM ONE AFTER THE OTHER. I.T.A. NO. 306/LKW/2014: 3. IN THIS APPEAL, THE ASSESSEE HAS ASSAILED THE ORDER OF THE LD. CIT(A), INTER ALIA, ON THE FOLLOWING GROUNDS:- 1. BECAUSE THE CIT (A) HAS ERRED ON FACTS AND IN LAW IN HOLDING THAT NO SEPARATE ACCOUNTS ARE MAINTAINED FOR THE TWO UNITS, WHICH IS PRIMA-FACIE INCORRECT AND THUS, THE CONCLUSION DRAWN BY THE CIT(A) AND UPHOLDING THE ADDITION OF RS.3,38,092/- UNDER DIFFERENT HEAD OF EXPENSES FROM UNIT-1 TO UNIT-2 IS TOTALLY MISCONCEIVED AND BE DELETED. 2. BECAUSE THE CIT(A) HAS ERRED ON FACTS AND IN LAW IN UPHOLDING THE DISALLOWANCES OF FOLLOWING EXPENSES: I) STAFF WELFARE RS. 5,554/- II) BUILDING REPAIRS & MAINTENANCE RS. 3,500/- III) PLANT REPAIRS & MAINTENANCE RS.23,769/- IV) EXPELLER REPAIRS & MAINTENANCE RS. 7,842/- V) PALLIATING REPAIRING & MAINTENANCE RS. 4,000/- VI) BUSINESS PROMOTION RS. 5,000/- VII) CONSULTATION CHARGES RS. 8,500/- VIII) GENERAL EXPENSES . RS. 11,600/- SPECIALLY, WHEN THE ASSESSEE IS A LIMITED COMPANY AND ALL THE EXPENSES HAVE BEEN INCURRED FOR THE PURPOSE OF BUSINESS, THERE BEING NO PERSONAL USER, THE ACCOUNTS BEING AUDITED, THE ADDITIONS SUSTAINED BE DELETED. :- 3 -: 3. BECAUSE THE CIT(A) HAS WRONGLY HELD, THAT THERE WAS AN ADMISSION ON PART OF THE ASSESSEE THAT THE EXPENSES AS NARRATED IN GROUNDS ABOVE, HAVE ALL BEEN INCURRED IN CASH AND ARE NOT FULLY VOUCHED AND VERIFIABLE, AS ALSO, THE ASSESSEE COMPANY FAILED TO PRODUCE THE BOOKS OF ACCOUNTS OR VOUCHERS BEFORE HIM, WHICH WERE NEVER DEMANDED BY THE CIT(A), TO BE EXAMINED. 4. BECAUSE THE CIT(A) HAS ERRED ON FACTS AND IN LAW IN UPHOLDING THE ADDITION OF RS.40,003/- OUT OF INTEREST ACCOUNT. MORE PRECISELY, RS.29,694/- FROM UNIT NO. 1 AND RS. 10,354/- FROM UNIT NO. 2, WHICH ADDITION MADE BY THE ASSESSING OFFICER AND UPHELD BY THE CIT(A) IS BOTH CONTRARY TO FACTS, BAD IN LAW AND BE DELETED. 5. BECAUSE THE CIT(A) HAS FAILED TO APPRECIATE, THAT ALL THE FUNDS HAVE BEEN BORROWED AND UTILIZED FOR THE PURPOSE OF BUSINESS, THERE WAS NO REASON TO DISALLOW PART OF THE INTEREST CLAIMED. 6. BECAUSE THE CIT(A) HAS ERRED ON FACTS AND IN LAW IN HOLDING THAT THE AMOUNTS ADVANCED TO M/S. ACI OIL MILLS PVT. LTD., A SISTER CONCERN OF THE ASSESSEE COMPANY, HAVE BEEN ADVANCED AT LOWER RATE OF INTEREST OR FOR THE PURPOSE OTHER THAN BUSINESS, AS SUCH, THE DISALLOWANCE MADE BY THE ASSESSING OFFICER AND UPHELD BY THE CIT(A) IS BAD IN LAW AND BE DELETED. 7. BECAUSE THE CIT(A) HAS ERRED ON FACTS AND IN LAW IN UPHOLDING THE DISALLOWANCE/RESTRICTING THE CLAIM OF DEPRECIATION OF RS.21,08,524/- AS AGAINST RS.26,00,19//- CLAIMED BY THE ASSESSEE COMPANY, WHICH ACTION OF THE CIT(A) IS CONTRARY TO FACTS, BAD IN LAW AND BE DELETED. 8. BECAUSE THE CIT(A) HAS ERRED ON FACTS AND IN LAW IN UPHOLDING THE DISALLOWANCE OF RS.43,45,433/- BEING DEDUCTION CLAIMED U/S 80IB OF THE I.T. ACT, 1961. :- 4 -: 9. BECAUSE ON A PROPER CONSIDERATION OF FACTS AND CIRCUMSTANCES OF THE CASE, IT CANNOT BE SAID NOR IT CAN BE CONCLUDED THAT THE ASSESSEE COMPANY IS NOT ELIGIBLE FOR DEDUCTION U/S 80IB, THE DENIAL OF DEDUCTION IS MISCONCEIVED. 10. BECAUSE THE CIT(A) HAS FAILED TO APPRECIATE, THAT ALL THE REQUISITE CONDITIONS HAVING BEEN FULFILLED, SPECIALLY THAT RELATING TO NUMBER OF WORKERS, HAS THEREBY WRONGLY DENIED THE DEDUCTION OF RS.43,45,433/-CLAIMED BY THE ASSESSEE U/S 80IB OF THE ACT. 11. BECAUSE THE CIT(A) IN HIS ORDER HAS PASSED CONTRARY STATEMENTS, IN AS MUCH AS, AT ONE PLACE, HE HAS MENTIONED THE ADDITION MADE IS, THEREFORE, SUSTAINED AND IN THE SAME BREATH, HE HAS HELD THAT THE APPEAL ON THIS GROUND IS, THEREFORE, DELETED. 4. APROPOS GROUNDS NO.1 TO 6, IT IS NOTICED THAT THE ASSESSEE- COMPANY HAS TWO UNITS UNIT NO.1 AND UNIT NO.2. THE ACCOUNTS OF BOTH THE UNITS ARE AUDITED. THE DETAILS OF EXPENSES WERE SOUGHT BY THE ASSESSING OFFICER AND FROM ITS PERUSAL, THE ASSESSING OFFICER HAS NOTICED THAT UNIT NO.2 STARTED ITS OPERATION DURING THE YEAR W.E.F. 12.10.2002. PRIOR TO THIS, UNIT NO.1 WAS IN OPERATION. DEDUCTION UNDER SECTION 80IB OF THE INCOME-TAX ACT, 1961 (HEREINAFTER CALLED IN SHORT THE ACT') WAS CLAIMED WITH RESPECT TO UNIT NO.2 AT 100% OF THE PROFIT AND GAIN DERIVED FROM SUCH INDUSTRIAL UNDERTAKING. THE ASSESSING OFFICER FURTHER NOTICED FROM THE DETAILS OF EXPENSES THAT MOST OF THE EXPENSES IN RESPECT OF BOTH THE UNITS WERE DEBITED IN THE BOOKS OF UNIT NO.1. ON 31.3.2003 PART OF EXPENSES IN DIFFERENT HEADS WERE ALSO TRANSFERRED TO THE BOOKS OF UNIT NO.2 IN THE RATIO OF SALE OR OTHERWISE. THE EXPENSES SO TRANSFERRED WERE IN THE NATURE OF BONUS, STAFF WELFARE, TRADE TAX, INSURANCE, TRAVELLING EXPENSES, CONVEYANCE EXPENSES, BROKERAGE ON PURCHASE AND SALE, REPAIR AND MAINTENANCE (OTHERS), ACCOUNTING CHARGES, BUSINESS :- 5 -: PROMOTION, GENERAL EXPENSES, LEGAL EXPENSES, PRINTING AND STATIONERY, TELEPHONE EXPENSES, BANK COMMISSION AND INTEREST AND PROCESSING CHARGES. ON VERIFICATION OF EXPENSES DEBITED IN THE BOOKS OF ACCOUNT, THE ASSESSING OFFICER NOTICED THAT THE EXPENSES DEBITED IN THESE UNITS ARE NOT FAIR AND THE EXPENDITURES TRANSFERRED TOWARDS UNIT NO.2 IS LESSER THAN IT SHOULD HAVE ACTUALLY BEEN. CERTAIN EXPENDITURES PERTAINING TO BOTH THE UNITS HAVE BEEN DEBITED IN THE BOOKS OF UNIT NO.1 ONLY; WHEREAS THE SAME SHOULD HAVE BEEN DEBITED IN BOTH THE UNITS IN A PROPER RATIO. IT HAS RESULTED A LESSER PROFIT OF UNIT NO.1 AND MORE PROFIT OF UNIT NO.2. THE ASSESSING OFFICER FURTHER OBSERVED THAT THE ASSESSEE HAS DONE IT DELIBERATELY FOR INCREASING THE PROFIT OF UNIT NO.2, AS DEDUCTION OF INCOME UNDER SECTION 80IB OF THE ACT HAS BEEN CLAIMED FOR THIS UNIT. THE ASSESSING OFFICER MADE DETAILED DISCUSSION OF EACH AND EVERY EXPENSES, WHICH WERE TRANSFERRED TO UNIT NO.1 IN PARAS 4, 5 AND 6 OF HIS ORDER. 5. THE ASSESSEE PREFERRED AN APPEAL BEFORE THE LD. CIT(A) WITH THE SUBMISSION THAT THESE EXPENDITURES WERE DULY APPORTIONED IN BOTH THE UNITS. BEING NOT CONVINCED WITH THE EXPLANATIONS OF THE ASSESSEE, THE LD. CIT(A) CONFIRMED THE DISALLOWANCE. 6. AGGRIEVED, THE ASSESSEE IS IN APPEAL BEFORE THE TRIBUNAL AND REITERATED ITS CONTENTIONS. THE LD. COUNSEL FOR THE ASSESSEE HAS FURTHER CONTENDED THAT THE ACCOUNTS OF THE ASSESSEE WERE DULY AUDITED BY THE CHARTERED ACCOUNTANT AND THE ASSESSEE HAS APPORTIONED THE EXPENSES AS PER TURNOVER OF BOTH THE UNITS. THEREFORE, THERE IS NO IRREGULARITY OR INFIRMITY IN THE APPORTIONMENT OF THE EXPENSES INCURRED FOR BOTH THE UNITS. 7. THE LD. D.R., ON THE OTHER HAND, HAS INVITED OUR ATTENTION TO THE PROFIT AND LOSS ACCOUNT AND BALANCE SHEET OF UNITS NO.1 AND 2 WITH :- 6 -: THE SUBMISSION THAT THE ASSESSEE HAS OBTAINED UNSECURED LOAN FOR ITS BUSINESS, BUT NONE OF THE LOAN WAS SHOWN IN UNIT NO.2; WHEREAS THE SECURED AND UNSECURED LOANS AT RS.1,99,03,847.88 WAS SHOWN AGAINST UNIT NO.1 AND THE FINANCIAL CHARGES WERE ALSO DEBITED TO UNIT NO.1 AT RS.85,02,070.22. THERE IS NO EVIDENCE ON RECORD TO ESTABLISH THAT THE BORROWED FUNDS WERE NOT UTILIZED IN UNIT NO.2. THEREFORE, APPORTIONMENT OF EXPENSES AMONG UNITS NO1 AND 2 IS NOT PROPER. HE HAS ALSO INVITED OUR ATTENTION ON OTHER COMMON EXPENSES, WITH THE SUBMISSION THAT THE ASSESSEE HAS INTENTIONALLY DEBITED LESSER EXPENSES IN UNIT NO.2 IN ORDER TO INCREASE ITS PROFIT AND TO CLAIM MORE DEDUCTION UNDER SECTION 80IB OF THE ACT. 8. HAVING CAREFULLY EXAMINED THE ORDERS OF THE LOWER AUTHORITIES IN THE LIGHT OF THE RIVAL SUBMISSIONS, WE FIND THAT CERTAIN EXPENSES ARE COMMON EXPENSES IN UNITS NO.1 AND 2 AND MOST OF THE EXPENSES WERE CLAIMED IN UNIT NO.1 AND NOT IN UNIT NO.2. MOREOVER, CERTAIN EXPENSES ARE NOT PROPERLY ALLOCATED. THE DETAILS OF EXPENSES OF BOTH THE UNITS ARE AVAILABLE AT PAGES 53 AND 60 OF THE COMPILATION OF THE ASSESSEE AND HAVING CAREFULLY EXAMINED THESE EXPENSES, WE ARE OF THE VIEW THAT THE ASSESSEE HAS NOT ALLOCATED EXPENDITURES PROPERLY AMONGST BOTH THE UNITS; WHEREAS THE ASSESSING OFFICER HAS ALLOCATED THE SAME PROPERLY AND WHILE ALLOCATING THE SAME, HE HAS ALSO TAKEN INTO ACCOUNT THE PERIOD FOR WHICH UNIT NO.2 WAS FUNCTIONAL. THE LD. CIT(A) HAS TAKEN INTO ACCOUNT ALL THESE FACTS WHILE CONFIRMING THE ADDITION. BEFORE US, THE LD. COUNSEL FOR THE ASSESSEE COULD NOT POINT OUT ANY UNREASONABLENESS IN THE ALLOCATION OF EXPENSES AMONGST BOTH THE UNITS. THEREFORE, WE FIND NO INFIRMITY IN THE ORDER OF THE LD. CIT(A) ON THIS ISSUE AND WE CONFIRM THE SAME. 9. APROPOS GROUND NO.7, IT IS NOTICED THAT THE ASSESSEE HAS CLAIMED DEPRECIATION ON PLANT AND MACHINERY AT 12.5% AND 25% BY :- 7 -: SPLITTING THE ADDITION IN TWO PARTS ADDITION UPTO 30.9.2002 AND ADDITION AFTER 30.9.2002 AND TOTAL DEPRECIATION WAS CLAIMED AT RS.22,54,896/- ON PLANT AND MACHINERY AND RS.3,45,301.55 ON BUILDING, TOTALING TO RS.26,00,197.55. THE ASSESSING OFFICER WAS NOT CONVINCED WITH THE CLAIM OF DEPRECIATION RAISED BY THE ASSESSEE AND HE HAS NOTICED THAT THE ASSESSEE-COMPANY HAS CAPITALIZED THE ADDITION OF ELECTRICAL FITTINGS IN THE BLOCK OF ASSETS OF PLANTS AND MACHINERY. AS PER APPENDIX-I OF THE INCOME TAX RULES, 1962, THE ELECTRICAL FITTINGS ARE TO BE INCLUDED IN THE BLOCK OF ASSETS FURNITURE AND FITTINGS. HE FURTHER OBSERVED THAT ELECTRICAL FITTINGS INCLUDE ELECTRICAL WIRING, SWITCHES, SOCKETS, OTHER FITTINGS AND FANS, ETC. AND SIMILAR ITEMS HAVE BEEN CAPITALIZED BY THE ASSESSEE UNDER THIS HEAD. FOR THE RELEVANT PREVIOUS YEAR, DEPRECIATION WAS TO BE ALLOWED AT 15% IN THE CASE OF FURNITURE AND FITTINGS AND 25% IN THE CASE OF PLANT AND MACHINERY. THE ASSESSEE-COMPANY HAS COMPUTED DEPRECIATION ON THE ITEMS OF ELECTRICAL FITTINGS BY ADOPTING EXCESS RATES. THEREFORE, THE ASSESSING OFFICER HAS DISALLOWED THE EXCESS CLAIM OF DEPRECIATION CLAIMED BY THE ASSESSEE. 10. AGGRIEVED, THE ASSESSEE PREFERRED AN APPEAL BEFORE THE LD. CIT(A), BUT DID NOT FIND FAVOUR WITH HIM. 11. NOW THE ASSESSEE IS IN APPEAL BEFORE US WITH THE SUBMISSION THAT ELECTRICAL FITTINGS ARE PART OF PLANT AND MACHINERY, THEREFORE, DEPRECIATION ON HIGHER RATE AT 25% IS TO BE ALLOWED. BUT HE HAS NOT PLACED ANY EVIDENCE OR ANY JUDICIAL PRONOUNCEMENT ON THIS ISSUE. HE HAS SIMPLY MADE ORAL SUBMISSION. 12. THE LD. D.R., ON THE OTHER HAND, HAS CONTENDED THAT ELECTRICAL FITTINGS INCLUDES ELECTRICAL WIRING, SWITCHES, SOCKETS, ETC. AND IT CANNOT BE CALLED TO BE PART OF PLANT AND MACHINERY, THEREFORE, HIGHER DEPRECIATION CANNOT BE ALLOWED. :- 8 -: 13. HAVING CAREFULLY EXAMINED THE ORDERS OF THE LOWER AUTHORITIES IN THE LIGHT OF THE RIVAL SUBMISSIONS, WE FIND THAT THE ASSESSEE HAS NOT FURNISHED ANY EVIDENCE ON RECORD TO ESTABLISH THAT ELECTRICAL FITTINGS, ON WHICH DEPRECIATION IS CLAIMED, ARE PART OF PLANT AND MACHINERY. IN THE ABSENCE OF ANY EVIDENCE OR ANY JUDICIAL PRONOUNCEMENTS IN THIS REGARD, WE ARE NOT ABLE TO ACCEPT THE CONTENTION OF THE ASSESSEE. ACCORDINGLY WE REJECT THIS GROUND AND CONFIRM THE ORDER OF THE LD. CIT(A). 14. APROPOS GROUNDS NO.8 TO 10, IT IS NOTICED THAT THE ASSESSEE HAS CLAIMED DEDUCTION UNDER SECTION 80IB OF THE ACT IN RESPECT OF UNIT NO.2, WHICH WAS DISALLOWED BY THE ASSESSING OFFICER ON THE GROUND THAT NUMBER OF WORKERS OF THE UNIT WAS LESS THAN 10; WHEREAS IN ORDER TO CLAIM DEDUCTION UNDER SECTION 80IB OF THE ACT IN RESPECT OF A UNIT OPERATING WITH POWER, SHOULD EMPLOY AT LEAST 10 WORKERS. 15. ASSESSEE PREFERRED AN APPEAL BEFORE THE LD. CIT(A) WITH THE SUBMISSION THAT ALL THE WORKERS IN THE INDUSTRIAL UNIT WOULD BE DEEMED TO BE EMPLOYED BY THE INDUSTRIAL UNIT. THE ASSESSEES UNIT WAS ENGAGED IN MANUFACTURING OF OIL AND ALL MANUFACTURING ACTIVITIES ARE CARRIED ON WITHIN THE PREMISES OF THE INDUSTRIAL UNIT. THE ASSESSEE HAS NOT ENGAGED ANY OUTSIDE AGENCY NOR GOT ANY WORK DONE FROM ANY AGENCY OUTSIDE THE INDUSTRIAL UNIT. SINCE THE ENTIRE MANUFACTURING TO THE POINT OF DISPATCH IS INSIDE THE INDUSTRIAL UNIT ONLY, THE ENTIRE WORK FORCE IS DEPLOYED BY THE ASSESSEE, AS ALL THE WORKERS INVOLVED IN THE PROCESS OF MANUFACTURING ARE EMPLOYED BY THE INDUSTRIAL UNIT. IT IS ONLY FOR THE SAKE OF CONVENIENCE THAT SOME WORKERS ARE PAID THROUGH THE CONTRACTORS WHO WORK INSIDE THE PREMISES FOR THE PURPOSE OF MANUFACTURE. IN ORDER TO GET OPTIMUM OUTPUT, THE WORKERS ARE PAID DIRECTLY AND SOME THROUGH THE CONTRACTORS FOR GETTING MAXIMUM WORK DONE. ALL DAY TO DAY SUPERVISION IN RESPECT OF ENTIRE MANUFACTURING PROCESS TILL DISPATCH OF :- 9 -: GOODS IS UNDER DIRECT SUPERVISION AND CONTROL OF THE MANAGEMENT. IT WAS FURTHER CONTENDED BEFORE THE LD. CIT(A) THAT IT WOULD NOT MAKE ANY DIFFERENCE WHETHER THE WORKERS ARE PAID DIRECTLY BY THE MANAGEMENT OR PAYMENT IS MADE THROUGH CONTRACTORS. IN CASE OF ANY MISHAPPENING, THERE WOULD ALWAYS BE LIABILITY AS A PRINCIPAL EMPLOYER OF THE MANAGEMENT. THE LD. CIT(A) WAS NOT CONVINCED WITH THE EXPLANATIONS OF THE ASSESSEE AND HE WAS OF THE VIEW THAT IT IS NOT VERIFIABLE THAT MORE THAN 10 WORKERS WERE EMPLOYED IN THE UNIT AS PER PROVISIONS OF SECTION 80IB OF THE ACT. HE ACCORDINGLY CONFIRMED THE DISALLOWANCE MADE BY THE ASSESSING OFFICER. 16. NOW THE ASSESSEE IS IN APPEAL BEFORE THE TRIBUNAL AND REITERATED ITS CONTENTIONS. BESIDES, IT WAS ALSO CONTENDED THAT SECTION 80IB OF THE ACT IS AN INCENTIVE GIVING SECTION INSERTED IN THE STATUTE TRADITIONALLY TO GIVE BENEFIT TO THE ASSESSEE. IT SHOULD BE CONSTRUED LIBERALLY. TOO MUCH TECHNICALITIES BE NOT ATTACHED. IF THERE IS SUBSTANTIAL COMPLIANCE, THE DEDUCTION SHOULD BE ALLOWED. IT WAS FURTHER CONTENDED THAT IN THE STATEMENT OF SHRI. HARSH VARDHAN, IT WAS MENTIONED THAT THERE WERE 12 WORKERS IN THE UNIT, BUT THE ASSESSING OFFICER HAS TAKEN 6 WORKERS INVOLVED IN MANUFACTURING PROCESS AND HE HAS IGNORED THE REMAINING 6 WORKERS. THE LD. COUNSEL FOR THE ASSESSEE HAS FURTHER INVITED OUR ATTENTION TO THE STATEMENT OF SHRI. HARSH VARDHAN AGARWAL, DIRECTOR OF THE ASSESSEE-COMPANY RECORDED BY THE ASSESSING OFFICER AND THE SAME WAS REPRODUCED IN HIS ORDER. IN THE STATEMENT, IT WAS STATED THAT IN UNIT NO.2 REGULAR EMPLOYEES WERE 12 AND WORKERS THROUGH CONTRACT WERE 40. STRENGTH OF WORKERS IN THE FACTORY WAS NOT DOUBTED BY THE ASSESSING OFFICER. HE HAS SIMPLY TAKEN A STAND THAT WORKERS THROUGH CONTRACTOR CANNOT BE CALLED TO BE WORKERS OF THE ASSESSEE FOR THE PURPOSE OF 80IB OF THE ACT WHILE DISALLOWING THE CLAIM OF DEDUCTION RAISED UNDER SECTION 80IB OF THE ACT. THE LD. COUNSEL FOR :- 10 -: THE ASSESSEE HAS FURTHER INVITED OUR ATTENTION TO THE JUDGMENT OF THE HON'BLE DELHI HIGH COURT IN THE CASE OF CIT VS. DELHI PRESS PATRA PRAKASHAN LTD. IN I.T.A. NO. 49-50/1996, COPY OF WHICH IS PLACED ON RECORD, IN WHICH IT HAS BEEN HELD THAT A PLAIN READING OF THE LANGUAGE OF SECTION 80IB (2)(IV) OF THE ACT INDICATES THAT THE QUALIFICATION OF EMPLOYING OF 10 OR MORE WORKERS IS NOT USED IN THE CONTEXT OF PERSONS EMPLOYED BY AN ASSESSEE BUT IN THE CONTEXT OF THE MANUFACTURING PROCESS. THIS CLEARLY MEANS THAT THE MANUFACTURING PROCESS, WHICH IS CARRIED ON BY AN INDUSTRIAL UNDERTAKING WITH THE AID OF POWER, MUST EMPLOY 10 OR MORE WORKERS TO CARRY ON THE MANUFACTURING PROCESS. THE WORD 'EMPLOYS' HAS NOT BEEN USED IN THE CONTEXT OF AN EMPLOYER AND EMPLOYEE RELATIONSHIP BETWEEN THE ASSESSEE AND THE WORKERS CARRYING ON THE MANUFACTURING PROCESS, BUT IN THE SENSE OF QUANTIFYING THE NUMBER OF PERSONS TO BE DEPLOYED IN THE MANUFACTURING PROCESS. THEIR LORDSHIPS OF THE HON'BLE DELHI HIGH COURT ACCORDINGLY HELD THAT THERE IS NO REASON TO LIMIT THE EXPRESSION 'WORKERS' AS OCCURRING IN SECTION 80- I(2)(IV) OF THE ACT TO ONLY MEAN SUCH WORKERS AS ARE EMPLOYED DIRECTLY BY THE ASSESSEE AND IGNORE THE WORKERS WHO ARE ENGAGED IN THE MANUFACTURING PROCESS CARRIED ON BY THE INDUSTRIAL UNDERTAKING ALBEIT EMPLOYED THROUGH ANOTHER AGENCY. BESIDES, HE HAS ALSO PLACED RELIANCE UPON THE JUDGEMENTS OF THE HON'BLE DELHI HIGH COURT IN THE CASE OF COMMISSIONER V. NANDA MINT AND PINE CHEMICALS LTD.: (2012) 345 ITR 60 (DEL) AND THE HON'BLE BOMBAY HIGH COURT IN THE CASE OF CIT V. JYOTI PLASTIC WORKS PVT. LTD.: (2011) 339 ITR 491 (BOM). COPIES OF THE JUDGMENTS ARE PLACED ON RECORD. 17. THE LD. D.R., ON THE OTHER HAND, HAS PLACED RELIANCE UPON THE ORDER OF THE LD. CIT(A). 18. HAVING CAREFULLY EXAMINED THE ORDERS OF THE LOWER AUTHORITIES IN THE LIGHT OF THE RIVAL SUBMISSIONS, WE FIND THAT THE CLAIM OF DEDUCTION :- 11 -: UNDER SECTION 80IB OF THE ACT WAS DENIED SOLELY FOR THE REASON THAT EMPLOYED WORKERS OF THE ASSESSEE ARE LESS THAN 10. THE WORKERS EMPLOYED THROUGH CONTRACT WERE NOT TAKEN INTO ACCOUNT TO BE THE WORKERS OF THE ASSESSEE FOR THE PURPOSE OF SECTION 80IB OF THE ACT. WE HAVE CAREFULLY EXAMINED THE JUDGMENTS REFERRED TO BY THE ASSESSEE AND WE FIND THAT IN THE CASE OF CIT VS. DELHI PRESS PATRA PRAKASHAN LTD. (SUPRA), THE HON'BLE HIGH COURT HAS CATEGORICALLY HELD THAT THE EXPRESSION 'WORKERS' IS NOT DEFINED IN THE ACT AND THERE IS NO REASON TO LIMIT THE EXPRESSION 'WORKERS' AS OCCURRING IN SECTION 80-I(2)(IV) OF THE ACT TO ONLY MEAN SUCH WORKERS AS ARE EMPLOYED DIRECTLY BY THE ASSESSEE AND IGNORE THE WORKERS WHO ARE ENGAGED IN THE MANUFACTURING PROCESS CARRIED ON BY THE INDUSTRIAL UNDERTAKING ALBEIT EMPLOYED THROUGH ANOTHER AGENCY. THE RELEVANT OBSERVATIONS OF THE HON'BLE HIGH COURT ARE REPRODUCED HEREUNDER:- 35. THE CONDITION THAT AN INDUSTRIAL UNDERTAKING MUST EMPLOY 10 OR MORE WORKERS IN THE MANUFACTURING PROCESS CARRIED ON WITH THE POWER IS SPECIFIED IN SECTION 80-I(2)(IV) OF THE ACT. IN ORDER TO QUALIFY AS A NEW INDUSTRIAL UNDERTAKING IN RESPECT OF WHICH DEDUCTION IS AVAILABLE UNDER SECTION 80-I OF THE ACT, AN INDUSTRIAL UNDERTAKING MUST FULFILL THE CONDITION OF EMPLOYING '10 OR MORE WORKERS IN A MANUFACTURING PROCESS CARRIED ON WITH THE AID OF POWER'. 36. A PLAIN READING OF THE LANGUAGE OF SECTION 80-I (2)(IV) OF THE ACT INDICATES THAT THE QUALIFICATION OF EMPLOYING OF 10 OR MORE WORKERS IS NOT USED IN THE CONTEXT OF PERSONS EMPLOYED BY AN ASSESSEE BUT IN THE CONTEXT OF THE MANUFACTURING PROCESS. THIS CLEARLY MEANS THAT THE MANUFACTURING PROCESS, WHICH IS CARRIED ON BY AN INDUSTRIAL UNDERTAKING, WITH THE AID OF POWER, MUST EMPLOY 10 OR MORE WORKERS TO CARRY ON THE MANUFACTURING PROCESS. THE :- 12 -: WORD 'EMPLOYS' HAS NOT BEEN USED IN THE CONTEXT OF AN EMPLOYER AND EMPLOYEE RELATIONSHIP BETWEEN THE ASSESSEE AND THE WORKERS CARRYING ON THE MANUFACTURING PROCESS, BUT IN THE SENSE OF QUANTIFYING THE NUMBER OF PERSONS TO BE DEPLOYED IN THE MANUFACTURING PROCESS. 37. THE EXPRESSION 'WORKERS' IS NOT DEFINED IN THE ACT AND THERE IS NO REASON TO LIMIT THE EXPRESSION 'WORKERS' AS OCCURRING IN SECTION 80-I(2)(IV) OF THE ACT TO ONLY MEAN SUCH WORKERS AS ARE EMPLOYED DIRECTLY BY THE ASSESSEE AND IGNORE THE WORKERS WHO ARE ENGAGED IN THE MANUFACTURING PROCESS CARRIED ON BY THE INDUSTRIAL UNDERTAKING ALBEIT EMPLOYED THROUGH ANOTHER AGENCY. IN THE CASE OF COMMISSIONER V. NANDA MINT AND PINE CHEMICALS LTD.: (2012) 345 ITR 60 (DEL) THIS COURT HAS, WHILE CONSIDERING THE QUESTION OF QUALIFICATION AS TO THE NUMBER OF WORKERS TO BE EMPLOYED FOR AVAILING DEDUCTION UNDER SECTION 80-IB OF THE ACT, HELD THAT CASUAL AND CONTRACTUAL WORKERS ARE TO BE INCLUDED WHILE CALCULATING THE NUMBER OF EMPLOYEES WHO ARE ENGAGED IN AN INDUSTRIAL UNDERTAKING. WHILE DECIDING THE CONTROVERSY, THIS COURT ADOPTED THE REASONING OF THE BOMBAY HIGH COURT IN THE CASE OF CIT V. JYOTI PLASTIC WORKS PVT. LTD.: (2011) 339 ITR 491 (BOM) AND REPRODUCED THE FOLLOWING PASSAGE FROM THE SAID DECISION. 'THE EXPRESSION 'WORKER' IS NEITHER DEFINED UNDER SECTION 2 OF THE ACT NOR UNDER SECTION 80-IB(2)(IV) OF THE ACT. AS PER BLACK'S LAW DICTIONARY, THE EXPRESSION 'WORKER' MEANS A PERSON EMPLOYED TO DO WORK FOR ANOTHER. UNDER SECTION 2(L) OF THE FACTORIES ACT, 1948, THE EXPRESSION 'WORKER' MEANS A PERSON EMPLOYED DIRECTLY OR BY OR THROUGH ANY AGENCY (INCLUDING A CONTRACTOR) WITH OR WITHOUT THE KNOWLEDGE OF THE PRINCIPAL EMPLOYER, WHETHER FOR REMUNERATION OR NOT IN ANY MANUFACTURING PROCESS, OR IN ANY OTHER KIND OR WORK :- 13 -: INCIDENTAL TO OR CONNECTED WITH THE MANUFACTURING PROCESS. THEREFORE, IN THE ABSENCE OF THE EXPRESSION 'WORKER' DEFINED UNDER THE ACT, IT WOULD BE REASONABLE TO HOLD THAT THE EXPRESSION 'WORKER' IN SECTION 80-IB(2)(IV) OF THE ACT IS REFERABLE TO THE PERSONS EMPLOYED BY THE ASSESSEE DIRECTLY OR BY OR THROUGH ANY AGENCY (INCLUDING A CONTRACTOR) IN THE MANUFACTURING ACTIVITY CARRIED ON BY THE ASSESSEE. IN THE PRESENT CASE, THOUGH THE WORKERS EMPLOYED BY THE ASSESSEE DIRECTLY WERE LESS THAN TEN, IT IS NOT IN DISPUTE THAT THE TOTAL NUMBER OF WORKERS EMPLOYED BY THE ASSESSEE DIRECTLY OR HIRED THROUGH A CONTRACTOR FOR CARRYING ON THE MANUFACTURING ACTIVITY EXCEEDED TEN AND, THEREFORE, THE TRIBUNAL WAS JUSTIFIED IN HOLDING THAT THE ASSESSEE COMPLIED WITH THE CONDITION SET OUT IN SECTION 80-IB(2)(IV) OF THE ACT.' 38. IN THE CASE OF NANDA MINT AND PINE CHEMICALS (SUPRA), THIS COURT HAS HELD THAT AN UNDERTAKING EMPLOYS A WORKER WHEN IT HAS CONTROL OVER HIM NOT ONLY WITH REGARD TO THE WORK DONE BY HIM BUT ALSO OVER THE MANNER IN WHICH WORK IS PERFORMED. IN THE PRESENT CASE, IT IS AN ADMITTED POSITION THAT MORE THAN 10 WORKERS WERE PERMANENTLY INVOLVED IN CARRYING ON THE ACTIVITIES IN UNIT NOS. 2 & 3. WE ARE, THUS, UNABLE TO ACCEPT THE CONTENTION ON BEHALF OF THE REVENUE THAT UNIT NOS. 2 & 3 DID NOT FULFILL THE CRITERIA AS SET OUT IN SECTION 80-I(2)(IV) OF THE ACT MERELY BECAUSE THE PERSONS WHO WERE DEPLOYED IN CARRYING OUT THE ACTIVITIES OF UNIT NOS. 2 & 3 WERE ENGAGED THROUGH THE SISTER CONCERN OF THE ASSESSEE. 39. IN OUR VIEW, THE TRIBUNAL WAS CORRECT IN NOT ACCEPTING THE CONTENTION OF THE REVENUE THAT THE WORKERS IN AN INDUSTRIAL UNDERTAKING MUST BE ON THE ROLLS OF ASSESSEE FOR AVAILING THE BENEFIT UNDER SECTION 80-I OF THE ACT. :- 14 -: 19. SIMILAR VIEW WAS EXPRESSED BY THE HON'BLE DELHI HIGH COURT IN OTHER CASE OF COMMISSIONER V. NANDA MINT AND PINE CHEMICALS LTD. (SUPRA) AND THE HON'BLE BOMBAY HIGH COURT IN THE CASE OF CIT V. JYOTI PLASTIC WORKS PVT. LTD. (SUPRA). 20. TURNING TO THE FACTS OF THE CASE, WE FIND THAT UNDISPUTEDLY THE TOTAL NUMBER OF WORKERS ARE MORE THAN 10 IF THE WORKERS EMPLOYED THROUGH CONTRACTORS ARE TAKEN INTO ACCOUNT. THEREFORE, IN THE LIGHT OF THE AFORESAID JUDGMENTS, WE ARE OF THE VIEW THAT THE WORKERS EMPLOYED THROUGH CONTRACTORS ARE ALSO TO BE TAKEN INTO ACCOUNT, AS THE NUMBER OF WORKERS IS TO BE COUNTED, WHO ARE INVOLVED IN THE MANUFACTURING PROCESS OF THE ASSESSEES UNIT. SINCE THE WORKERS MORE THAN 40 ARE INVOLVED IN THE MANUFACTURING PROCESS, THE REQUISITE CONDITION OF WORKERS MORE THAN 10 ARE EMPLOYED IN THE MANUFACTURING PROCESS IS FULFILLED. THEREFORE, WE ARE OF THE VIEW THAT IN THE LIGHT OF THE AFORESAID JUDGMENTS, THE ASSESSEE IS ENTITLED FOR DEDUCTION UNDER SECTION 80IB OF THE ACT. WE ACCORDINGLY SET ASIDE THE ORDER OF THE LD. CIT(A) ON THIS ISSUE AND DELETE THE ADDITION. I.T.A. NO. 433/LKW/2014: 21. THIS IS THE APPEAL OF THE REVENUE, IN WHICH THE REVENUE HAS ASSAILED THE ORDER OF THE LD. CIT(A) MAINLY ON TWO ISSUES. WE, HOWEVER, FOR THE SAKE OF REFERENCE, EXTRACT THE GROUNDS OF APPEAL AS UNDER:- 1. THE CIT(A) HAS ERRED IN LAW AND ON FACTS IN DELETING THE ADDITIONS OF RS.17,00,000/- MADE U/S 68 OF THE INCOME TAX ACT WITHOUT APPRECIATING THAT THE ASSESSEE HAD CLASSIFIED AMOUNTS TOTALING RS.17,00,000/- AS 'LOANS' BUT IN INQUIRIES THE CREDITORS DENIED HAVING MADE SUCH LOANS. 2. THE CIT(A) HAS ERRED IN LAW AND ON FACTS IN ACCEPTING THE EXPLANATION THAT RS.17,00,000/- WAS 'SHARE APPLICATION MONEY' :- 15 -: AND NOT ' LOAN' WITHOUT APPRECIATING THAT HAD THIS BEEN TRUE, THERE WOULD BE NO QUESTION OF WRONG CLASSIFICATION OF 'SHARE APPLICATION MONEY' AS ' LOAN' BY A COMPANY WHOSE ACCOUNTS ARE REGULARLY AUDITED. 3. THE CIT(A) HAS ERRED IN LAW AND ON FACTS IN FAILING TO APPRECIATE THAT THE ENTIRE TRANSACTIONS OF RS.17,00,000/- WERE COLOURABLE TRANSACTIONS AIMED AT EVASION OF TAX AND THIS WAS CLEAR FROM THE EXPLANATIONS OF THE ASSESSEE AND INQUIRIES MADE BY THE AO AND HENCE DISALLOWANCE WAS CORRECT. 4. THE CIT(A) HAS ERRED IN LAW AND ON FACTS IN DIRECTING INQUIRIES ON POINTS MENTIONED IN PARA 11.2 OF THE ORDER OF CIT(A) WITHOUT APPRECIATING THAT ONUS OF PROVING GENUINENESS OF TRANSACTIONS RESTED SQUARELY ON THE ASSESSEE AND COULD NOT BE TRANSFERRED TO THE AO AS WAS THE RESULT OF SUCH DIRECTIONS. 5. THE CIT(A) HAS ERRED IN LAW AND ON FACTS IN DELETING THE DISALLOWANCE OF RS.1,85,136/- MADE U/S 40(A)(3) OF THE INCOME TAX ACT WITHOUT APPRECIATING THE FACT THAT EXEMPTION U/R 6DD IS LIMITED TO PAYMENTS TO GOVERNMENT WHICH AS PER RULES HAS TO BE MADE IN LEGAL TENDER WHEREAS IN THE INSTANT CASE PAYMENTS HAVE BEEN MADE NOT TO THE GOVERNMENT BUT TO A COMPANY AND NO SPECIFIC RULES FRAMED BY THE GOVERNMENT REGARDING PAYMENT IN CASH HAVE BEEN PLEADED BY THE ASSESSEE. 6. THE ORDER OF THE CIT (A), KANPUR BEING ERRONEOUS, UNJUST AND BAD IN LAW BE VACATED AND THE ORDER OF THE AO BE RESTORED. 22. APROPOS GROUNDS NO.1 TO 4, IT IS NOTICED THAT DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER HAS NOTED CREDIT ENTRIES OF UNSECURED LOANS AT RS.1,59,44,674/-. HE HAS MADE NECESSARY ENQUIRIES AND BEING NOT CONVINCED WITH THE EXPLANATIONS WITH REGARD TO SIX PERSONS OUT OF 21 PERSONS, HE MADE AN ADDITION OF RS.17 LAKHS :- 16 -: HAVING TREATED IT TO BE UNEXPLAINED CASH CREDIT UNDER SECTION 68 OF THE ACT. THE DETAILS OF UNEXPLAINED CASH CREDITS ARE AS UNDER:- AKIN VINCON PVT.LTD., KOLKATA RS.4,00,000.00 ENPEE FINALL SERVICES PVT. LTD., KOLKATA RS.2,00,000.00 SAMPURNA COMMODITY PVT. LTD.,KOLKATA RS. 1,00,000.00 NANDAN BAN COMMERCIAL PVT.LTD.,KOLKATA RS.5,00,000.00 GINNI VINMAY PVT. LTD., KOLKATA. RS.3,00,000.00 ZOREX EXIM & FINCON PVT. LTD., KOLKATA RS. 2,00,000.00 23. THE ASSESSEE PREFERRED AN APPEAL BEFORE THE LD. CIT(A) WITH THE SUBMISSION THAT THESE LOANS HAVE BEEN TAKEN FROM CORPORATE BODIES, WHO ARE ASSESSED TO TAX AND ALL THESE TRANSACTIONS ARE EFFECTED THROUGH ACCOUNT PAYEE CHEQUE. THE ASSESSEE HAS FILED COPY OF ACKNOWLEDGEMENT OF FILING OF RETURNS AND BALANCE SHEET WITH PAN OF THE CREDITORS. IT WAS ALSO CONTENDED THAT ALL THESE COMPANIES WERE REGISTERED WITH THE REGISTRAR OF THE COMPANIES AND ALL THESE CREDITS WERE DULY EXPLAINED AND IDENTITY OF THESE PARTIES WAS NOT IN DOUBT. THE LD. CIT(A) CALLED A REMAND REPORT FROM THE ASSESSING OFFICER WITH A DIRECTION TO VERIFY THE GENUINENESS OF LOANS AND AS PER REMAND REPORT, THE ASSESSING OFFICER HAS ACCEPTED THE GENUINENESS OF THE DEPOSITS. BEING CONVINCED WITH THE EXPLANATIONS OF THE ASSESSEE, THE LD. CIT(A) DELETED THE ADDITION. THE RELEVANT OBSERVATIONS OF THE LD. CIT(A) ARE AS UNDER:- EVIDENCE SUBMITTED BY THE ASSESSEE WERE CONFRONTED TO THE ASSESSEE BY MY PREDECESSOR AND REMAND REPORT WAS CALLED FOR, THIS WAS FOLLOWED UP AND THE A.O. IN THE REMAND REPORT HAS SUBMITTED AS UNDER: :- 17 -: IN THIS REGARD IT IS SUBMITTED THAT THE ID. COMMISSIONER OF INCOME TAX (APPEAL)-L, KANPUR VIDE HIS LETTER APPEAL NO. CIT(A)- II/331/ITO-5(2)/2006-07 DATED 01/02/2007 HAS DIRECTED TO MAKE- INQUIRIES REGARDING ADVANCE OF RS.17,00,000/- MADE BY THE FOLLOWING COMPANIES TO THE ASSESSEE-COMPANY. 1. ENPEE FINAIL SERVICES PVT. LTD., 2. ZONEX EXIM & FINCON PVT. LTD, 3. NANDAVAN COMMERCIAL PVT. LTD., 4. AKIN VICOM PVT. LTD., 5. SAMPUM COMMODITY PVT. LTD., AND 6. GINNI VINNIAY PVT. LTD. IT IS FURTHER SUBMITTED THAT, IN THE SAID LETTER, THE THEN LD. CIT (APPEAL)-I, KANPUR HAS DIRECTED TO MAKE ENQUIRIES EN THE FOLLOWING POINTS.:- A. THE DATE OF INCORPORATION OF COMPANIES. B. THE LIST OF PROMOTERS AND SHARE HOLDERS HAVING SUBSTANTIAL INTEREST IN THE COMPANY. C. SOURCE OF SHARE CAPITAL. D. WHETHER THE SHARE HOLDING PATTERNS HAS UNDERGONE ANY CHANGE IN THE INTERVENING PERIOD WITH A VIEW TO FIND OUT WHETHER HE APPELLANT COMPANY AND ITS DIRECTORS/FAMILY MEMBERS HAVE ANY INTEREST IN THESE COMPANIES. E. WHETHER THESE COMPANIES HAVE ADVANCED ANY OTHER LOANS TO ANY OTHER ASSESSES. IF SO, THE DETAILS OF SUCH LOANS TO THE EXTENT MAY BE OBTAINED? F. WHETHER THESE COMPANIES OR THEIR DIRECTORS ARE IN ANY WAY RELATED TO THE ASSESSEE COMPANY AND ITS DIRECTORS. :- 18 -: G. WHETHER THESE COMPANIES ARE FILING THEIR RETURN OF INCOME AND RETURNS WITH REGISTRAR OF COMPANIES. H. WHETHER ANY INTEREST INCOME IS BEING SHOWN BY THESE COMPANIES FROM THE LOANS GIVEN TO THE APPELLANT COMPANY 03. FROM THE ASSESSMENT ORDER, IT IS SEEN THAT ALL THE ABOVE COMPANIES FROM WHOM INQUIRIES ARE TO BE CONDUCTED, ARE BASED AT KOLKATA. THEREFORE, NOTICES U/S 133(6) OF THE I.T. ACT, 1961 DATED 05.08.2009 WERE ISSUED THROUGH REGISTERED POST TO ALL THE COMPANIES WHO HAVE ADVANCED LOAN OF RS.17,00,000 TO THE ASSESSEE COMPANY. 04. IN COMPLIANCE TO THE NOTICES ISSUED FROM THIS OFFICE, REPLIES FROM ALL THE COMPANIES HAVE BEEN RECEIVED. FROM THE REPLIES RECEIVED FROM ALL THE COMPANIES, IT TRANSPIRED THAT ALL THE COMPANIES HAD ITS REGISTERED OFFICE AT KOLKATA AND DULY REGISTERED WITH REGISTRAR OF COMPANIES AT KOLKATA BETWEEN 1992 TO 1996. FURTHER FROM THE DETAILS FURNISHED BY THE ABOVE COMPANIES, A DETAILED CHART HAS BEEN PREPARED MENTIONING THE DATE OF REGISTRATION, NUMBER OF THE COMPANY, NAMES OF THE DIRECTORS, PAN OF THE DIRECTORS, ASSESSING OFFICER OF THE COMPANY AND WHETHER ANY INTEREST HAS BEEN CHARGED BY THEM. THE SAID CHART IS ALSO ENCLOSED HEREWITH. ALL THE COMPANIES ARE FINANCE & INVESTMENT COMPANIES. THEY HAVE FILED THEIR INCOME TAX AS WELL AS ANNUAL RETURN TO THE REGISTRAR OF COMPANIES FOR THE YEAR UNDER CONSIDERATION. ALL THE COMPANIES IN THEIR REPLIES HAVE STATED THAT THE DIRECTORS OF THE COMPANIES HAVE NO RELATION WITH THE DIRECTORS OF M/S INDO PROSOYA FOODS (P) LTD. THEY HAVE FURTHER STATED THAT, THEY HAVE GIVEN LOAN TO M/S INDO PROSOYA FOODS (P) LTD. DURING THE PREVIOUS YEAR RELEVANT TO THE ASSESSMENT YEAR 2003-04 UNDER CONSIDERATION AND NO :- 19 -: INTEREST HAS BEEN CHARGED FROM M/S INDO PROSOYA FOODS (P) LD. ON THE SUBMISSION OF REMAND REPORT THROUGH THE JOINT COMMISSIONER ON 25.05.2010 THE ID. JCIT VIDE HIS LETTER DATED 21.06.2010 HAS DIRECTED TO THEN A.O. THAT HE HAS NOT MADE NECESSARY ENQUIRY ON THE FOLLOWING POINTS NO. (C), (D) & (E) MENTIONED IN THE LETTER DATED 01.02.2007 OF ID. CIT (A)- II, KANPUR: C. SOURCE OF SHARE CAPITAL. D. WHETHER THE SHARE HOLDING PATTERNS HAS UNDERGONE ANY CHANGE IN THE INTERVENING PERIOD WITH A VIEW TO FIND OUT WHETHER THE APPELLANT COMPANY AND ITS DIRECTORS/FAMILY MEMBERS HAVE ANY INTEREST IN THESE COMPANIES. E. WHETHER THESE COMPANIES HAVE ADVANCED ANY LOANS TO ANY OTHER ASSESSEES. IF SO, THE DETAILS OF SUCH LOANS TO THE EXTENT POSSIBLE MAY BE OBTAINED? HE HAS ALSO DIRECTED TO THEN A,0: TO ENQUIRE WHY THE INTEREST HAS NOT BEEN CHARGED WHILE ALL THE COMPANIES ARE FINANCE AND INVESTMENT COMPANIES. IN COMPLIANCE OF THE DIRECTION OF JCIT, THE ISSUE OF COMMISSION U/S 131(L)(D) HAS BEEN MADE VIDE LETTER DATED 16.06.2011 TO RESPECTIVE A.O.'S WHO ARE HAVING JURISDICTION OVER THE COMPANIES PLACED AT KOLKATA AND WHO HAVE ADVANCED THE MONEY TO ASSESSEE COMPANY: I. INCOME TAX OFFICER WARD 2(3), AAYKAR BHAWAN, P-7, CHOWRINGEE SQUARE, KOLKATA- 700069 II. INCOME TAX OFFICER WARD 4(3), AAYKAR BHAWAN, P-7, CHOWRINGHEE SQUARE, KOLKATA- 700069 HI. INCOME TAX OFFICER WARD 5(2), AAYKAR BHAWAN, P-7, CHOWRIRGHEE SQUARE, KOLKATA 7000S9 :- 20 -: IV. M. INCOME TAX OFFICER WARD 5(3), AAYKAR BHAWAN, P-7, CHOWRINGHEE SQUARE, KOLKATA- 700069 V. INCOME TAX OFFICER WARD 6(3), AAYKAR BHAWAN, P-7, CHOWRINGHEE SQUARE, KOLKATA- 700069 VI. INCOME TAX OFFICER WARD 9(2), AAYKAR BHAWAN, P-7, CHOWRINGHEE SQUARE, KOLKATA- 700069 THE INCOME TAX OFFICER WARD 2(3), KOLKATA HAS ISSUED LETTER TO ITO 1(4), KOLKATA ON 21.08.2012, BUT NO REPLY HAS BEEN RECEIVED FROM ITO WARD 1(4), KOLKATA. THE ITO WARD 4(3), KOLKATA HAS SUBMITTED THE REPLY RECEIVED, TO THE UNDERSIGNED VIDE HIS LETTER DATED 21.06.2012, IN HIS REPORT HE HAS SUBMITTED THAT THE AUTHORIZED REPRESENTATIVE OF THE ASSESSEE COMPANY SHRI N.K. BANKA APPEARED ON 13.07.2011 AND FURNISHED COPY OF THE BANK STATEMENT OF UNION BANK OF INDIA FOR THE F.Y. 2002-03. ON VERIFICATION OF THE XEROX COPIES OF THE BALANCE SHEET AND ITS ANNEXURES FURNISHED BEFORE THE UNDERSIGNED, IT WAS FOUND THAT AN INVESTMENT OF RS. 4,00,000/- WAS MADE BY THE M/S AKIN VINCOM PVT. LTD. TOWARDS THE PURCHASE OF UNQUOTED SHARES\OF M/S INDO PROSOYA FOODS PVT. LTD. DURING THE F. Y. 2002-03. THE COPY OF THE LETTER OF ITO 4(3) IS BEING ENCLOSED FOR KIND PERUSAL. THE ITO WARD 5(2), KOLKATA HAS SUBMITTED THE REPLY RECEIVED, TO THE UNDERSIGNED VIDE HIS LETTER DATED 19.09.2Q11, FROM SAMPURN COMMODITY PVT. LTD. HE HAS FORWARDED THE STATEMENT OF SRI MANOHAR LAI NAGALIA THEN DIRECTOR. THE DIRECTOR OF THE SAID COMPANY HAS REPORTED THAT NO LOAN HAS BEEN GIVEN TO M/S INDO PROSOYA FOOD PRIVATE LIMITED BUT THE COMPANY HAS INVESTED BY WAY OF SHARE APPLICATION MONEY RS. 3,00,000 IN M/S INDO PROSOYA FOOD PRIVATE LIMITED. THE COPY OF THE LETTER OF ITO 5(2) IS BEING ENCLOSED FOR KIND PERUSAL. :- 21 -: THE ITO WARD 5(3), KOLKATA HAS FORWARDED THE COPY OF HIS REPLY RECEIVED, TO THE UNDERSIGNED VIDE HIS LETTER DATED 12.08.2011, FROM ENPEE FINALL SERVICES PVT. LTD. ON PERUSAL OF THE SCHEDULE 'F' OF THE BALANCE SHEET AS ON 31.03.2003 THE COMPANY ADVANCED BY WAY OF SHARE APPLICATION MONEY OF RS.2,00,000 IN M/S INDO PROSOYA FOOD PRIVATE LIMITED. THE COPY OF THE LETTER OF ITO 5(3) IS BEING ENCLOSED FOR KIND PERUSAL. THE ITO WARD 6(3), KOLKATA HAS FORWARDED THE COPY OF HIS REPLY RECEIVED, TO THE UNDERSIGNED VIDE HIS LETTER DATED 07.09.2011, FROM NANDANVAN COMMERCIAL PRIVATE LIMITED. THE DIRECTOR OF THE SAID COMPANY HAS REPORTED NO LOAN HAS BEEN GIVEN TO M/S INDO PROSOYA FOOD PRIVATE LIMITED BUT THE COMPANY HAS INVESTED IN THE EQUITY SHARE CAPITAL OF M/S INDO PROSOYA FOOD PRIVATE LIMITED OF RS. 5,00,000. THE COPY OF THE LETTER OF ITO 6(3) IS BEING ENCLOSED FOR KIND PERUSAL. THE ITO WARD 9(2), KOLKATA SEND THE REPLY TO THE UNDERSIGNED VIDE HIS LETTER DATED 12.07.2011, IN HIS REPLY HE-STATED THAT DUE TO NON CO-OPERATION FROM THE ASSESSEE THE DESIRED REPORT COULD NOT BE SUBMITTED. THE COPY OF THE LETTER OF ITO 9(2) IS BEING ENCLOSED FOR KIND PERUSAL. 11.1.2 IN RESPONSE TO ABOVE REMAND REPORT, THE ASSESSEE HAS SUBMITTED AS UNDER: FROM THE ABOVE FACTS ITSELF IT IS VERY MUCH CLEAR THAT ALL THE TRANSACTIONS ARE GENUINE AND FROM THE GENUINE PARTIES AND WHO ARE REGISTERED COMPANIES WITH REGISTRAR OF COMPANIES AND ARE INCOME TAX ASSESSEES. THE ADDITIONS MADE BY THE LEARNED ASSESSING OFFICERS MAY KINDLY BE DELETED ON THE BASIS OF THE ABOVE REPORT. THE INCOME TAX OFFICER, WARD 4(3), KOLKATA, WARD 5(2), KOLKATA, WARD 5(3), KOLKATA AND WARD 6(3), KOLKATA HAVE CONFIRM THE TRANSACTION WITH A REPORT THAT THESE MONEY ARE :- 22 -: ADVANCE BY WAY OF SHARE APPLICATION MONEY, WHICH ALSO CONFIRMS THE GENUINITY OF THE TRANSACTIONS. THE INCOME TAX OFFICER, WARD 2(3), KOLKATA HAVE FORWARDED THE LETTER TO INCOME TAX OFFICER, WARD 1(4), KOLKATA WHO HAVE NOT SUBMITTED ANY REPLY, MEANS THERE IS NOTHING TO SAY ABOUT THE ASKING OF ASSESSING OFFICER, RANGE 5(1), KANPUR AND THE TRANSACTION WILL BE TREATED AS GENUINE TRANSACTION AS PER THE CONTENTS OF PARA 04, PAGE 3 OF REMAND REPORT. REGARDING NON COOPERATION OF ONE OF THE COMPANY AS WRITTEN BY CONCERN INCOME TAX OFFICER, WARD 9(2), KOLKATA ON 12.07.2011, THE CONCERN PARTIES HAVE ALREADY CONFIRMED THE TRANSACTIONS VIDE THEIR REPLY PREVIOUSLY AS MENTIONED IN REMAND REPORT PARA NO. 04, PAGE -3. THE CONCERN LEARNED I.TO., 9(2) HAVE NOT MENTIONED THAT WHICH TYPE OF NON COOPERATION HAS BEEN SHOWN BY THE RESPECTIVE COMPANY. A GAP OF ALMOST 9 YEARS FROM THE DATE OF TRANSACTIONS (F. Y. 2002-03 TO F. Y. 2011-12) CREATES THE REAL PROBLEM FOR ANY ASSESSEE TO RECONCILE / REPRODUCE THE ORIGINAL DOCUMENTS AS THE SAME ARE ALSO 'TIME BARRED' AS PER THE PROVISION OF LAW. AS INITIALLY THE ISSUE HAS BEEN LOANS BUT NOW IT CONVERTED TO SHARES. THE ASSESSING OFFICER HAS VERIFIED ON THE SAME AS UNDER IN REMAND REPORT THAT: A LETTER DATED 26.07.2013 HAS BEEN ISSUED TO THE PRINCIPAL OFFICER OF M/S INDO PROSOYA FOOD PRIVATE LIMITED FOR FILING NECESSARY DOCUMENTS REGARDING LOAN OF RS. 17,00,000 GIVEN TO VARIOUS COMPANIES. THE ASSESSEE COMPANY SUBMITTED REPLY ON 31.07.2013 IN HIS REPLY HE HAS REPORTED THAT HIS COMPANY HAS ALLOTTED SHARES TO THE VARIOUS COMPANIES ALONG WITH ALLOTMENT TO OTHER PARTIES ALSO. HE :- 23 -: HAS ALSO FILED COPY OF FORM NO. 2 FILED WITH THE REGISTRAR OF COMPANIES WITH DETAILS OF ALLOTMENT OF SHARES. IN VIEW OF THE REPORT OF THE REMAND REPORT SUBMITTED BY THE JURISDICTIONAL ASSESSING OFFICER AND THE REPORTS OF ASSESSING OFFICER KOLKATTA IN THE CASE OF VARIOUS INVESTORS OF INDO PROSOYA & ALSO REPORT OF THE ASSESSING OFFICER NOTHING ADVERSE HAS BEEN DETECTED IN THE CASE-1 THE AMOUNT OF RS.17,00,000 WHICH WAS ADDED AS UNEXPLAINED STANDS VERIFIED THOUGH JURISDICTIONAL ASSESSING OFFICER AND BY THE REPORTS OF ASSESSING OFFICERS OF KOLKATTA. IN THE ABSENCE OF REPORTING OF ANY ADVERSE FINDING THE ADDITION MADE ON THIS GROUND IS DELETED. 24. AGGRIEVED, THE REVENUE IS IN APPEAL BEFORE THE TRIBUNAL AND THE LD. D.R. HAS PLACED HEAVY RELIANCE UPON THE ORDER OF THE ASSESSING OFFICER. 25. THE LD. COUNSEL FOR THE ASSESSEE, ON THE OTHER HAND, HAS SUBMITTED THAT THE ASSESSEE HAS FURNISHED ALL THE RELEVANT EVIDENCE BEFORE THE LD. CIT(A) AND THE LD. CIT(A) HAS CALLED FOR REMAND REPORT FROM THE ASSESSING OFFICER AND IN THE REMAND REPORT, THE ASSESSING OFFICER HAS ACCEPTED THE GENUINENESS OF TRANSACTION. DURING THE COURSE OF REMAND PROCEEDINGS, A COMMISSION WAS ISSUED UNDER SECTION 131(D) OF THE ACT TO THE INCOME TAX OFFICER, KOLKOTA, AS THESE PARTIES ARE KOLKOTA BASED, TO MAKE NECESSARY ENQUIRIES. THE INCOME TAX OFFICER, KOLKOTA HAS MADE NECESSARY ENQUIRIES WITH REGARD TO THE FINANCIAL POSITIONS OF THESE COMPANIES AND THEIR IDENTITIES. ON ENQUIRY, THESE PARTIES HAVE FURNISHED THEIR BANK STATEMENT WITH A CATEGORICAL STATEMENT THAT THEY HAVE MADE INVESTMENT IN SHARES WITH THE ASSESSEE-COMPANY. :- 24 -: THE LD. CIT(A) HAS EXAMINED ALL THESE FACTS WHILE ADJUDICATING THE ISSUE. THEREFORE, NO INTERFERENCE IS CALLED FOR IN HIS ORDER. 26. HAVING CAREFULLY EXAMINED THE ORDERS OF THE LOWER AUTHORITIES AND THE DOCUMENTS AVAILABLE ON RECORD IN THE LIGHT OF THE RIVAL SUBMISSIONS, WE FIND THAT THE ASSESSING OFFICER HAS NOT DISCUSSED IN DETAIL IN HIS ORDER AS TO WHY HE HAS MADE DISALLOWANCE OF RS.17 LAKHS AFTER TREATING IT TO BE UNEXPLAINED CASH CREDIT UNDER SECTION 68 OF THE ACT. HE HAS SIMPLY STATED IN HIS ORDER THAT TOTAL UNSECURED LOAN WAS INTRODUCED AT RS.1,59,44,674.36 APPEARING AS IN THE BALANCE SHEET, OUT OF WHICH CASH CREDIT OF RS.17 LAKHS WAS NOT PROPERLY EXPLAINED AND HE ACCORDINGLY MADE ADDITION OF THE SAME UNDER SECTION 68 OF THE ACT. BEFORE THE LD. CIT(A), THE ASSESSEE HAS COME OUT WITH THE NAME OF SPECIFIC CREDITORS ALONG WITH AMOUNTS INTRODUCED BY THEM WITH THE SUBMISSION THAT THESE AMOUNTS WERE RECEIVED AGAINST SHARE APPLICATION MONEY FROM THESE PARTIES. THE DETAILED EXPLANATIONS FURNISHED BY THE ASSESSEE ALONG WITH EVIDENCE WERE SENT TO THE ASSESSING OFFICER TO SUBMIT THE REMAND REPORT AFTER MAKING NECESSARY ENQUIRIES. DURING THE COURSE OF ENQUIRY, THE ASSESSING OFFICER HAS ISSUED COMMISSION TO INCOME TAX OFFICER, KOLKOTA TO MAKE NECESSARY ENQUIRIES WITH REGARD TO THE FINANCIAL POSITIONS OF THESE PARTIES AND THEIR IDENTITY. THE ASSESSING OFFICER ISSUED NOTICES TO THEM WHICH WERE DULY RESPONDED BY THESE PARTIES AND IN REPLY THEY HAVE STATED THAT THEY HAVE MADE INVESTMENT IN SHARES WITH THE ASSESSEE. THEY HAVE ALSO FILED STATEMENT WITH BANK TO JUSTIFY THEIR STAND. 27. HAVING CAREFULLY EXAMINED THE REPLY FURNISHED BY THESE PARTIES, THE ASSESSING OFFICER HAS ALSO ACCEPTED THE GENUINENESS OF THE DEPOSITS. THE ENTIRE EVIDENCE COLLECTED BY THE ASSESSING OFFICER WAS FURNISHED BEFORE THE LD. CIT(A) ALONG WITH REMAND REPORT AND THE LD. CIT(A) HAS TAKEN INTO ACCOUNT THE SAME BEFORE ACCEPTING THE CLAIM OF THE ASSESSEE. :- 25 -: EXCEPT PLACING RELIANCE UPON THE ASSESSMENT ORDER, THE LD. D.R. COULD NOT PLACE ANY EVIDENCE ON RECORD TO CONTROVERT THE FINDINGS OF THE LD. CIT(A). THE LD. CIT(A) HAS ACCEPTED THE CLAIM OF THE ASSESSEE ON THE BASIS OF THE REMAND REPORT AND ENQUIRY CONDUCTED BY THE INCOME TAX OFFICER, KOLKOTA. SINCE THE ASSESSEE HAS PLACED ALL THE RELEVANT EVIDENCE TO PROVE THE GENUINENESS OF THE TRANSACTIONS AND IDENTITY & CREDITWORTHINESS OF THE CREDITORS, NO DISALLOWANCE IS CALLED FOR IN THIS REGARD. ACCORDINGLY, WE SUBSCRIBE THE VIEW OF THE LD. CIT(A), WHO HAS RIGHTLY ADJUDICATED THE ISSUE. 28. APROPOS GROUND NO.5 RELATES TO THE DISALLOWANCE OF RS.1,85,136/- UNDER SECTION 40(A)(3) OF THE ACT. IN THIS REGARD, IT WAS CONTENDED ON BEHALF OF THE ASSESSEE BEFORE THE LD. CIT(A) THAT A SUM OF RS.7,70,180/- HAS BEEN PAID IN CASH ON DIFFERENT DATES AS PER DETAILS ON PAGE 8 OF THE ASSESSMENT ORDER RELATING TO UNIT NO.1 AND RS.1,55,000/- RELATING TO UNIT NO.2 TO U.P. POWER CORPORATION LTD. AGAINST ELECTRICITY BILLS. THE ASSESSING OFFICER HAS HELD THAT SINCE THE PAYMENTS HAVE BEEN MADE IN CASH EXCEEDING RS.20,000/- AT A TIME, 20% OF THE SAME IS DISALLOWED. THE ASSESSEE SUBMITTED BEFORE THE LD. CIT(A) THAT THE SAME IS DISALLOWED WITHOUT TAKING INTO ACCOUNT THE FACT THAT ASSESSEE IS AN INDUSTRIAL UNIT SITUATED AT AKRAMPUR, UNNAO AND OFFICE OF U.P. POWER CORPORATION LTD. IS SITUATED IN UNNAO PROPER, AT A DISTANCE OF 8 TO 10 KM FROM THE UNIT. IT WAS FURTHER CONTENDED THAT THE ASSESSEE DID NOT HAVE ANY BANK ACCOUNT AT UNNAO AND OUTSTATION CHEQUES ARE NOT ACCEPTED BY THE U.P. POWER CORPORATION LTD. SINCE THEY HAVE INSISTED EITHER TO MAKE PAYMENT IN CASH OR LOCAL CHEQUE, ASSESSEE WAS FORCED TO MAKE PAYMENT IN CASH TO U.P. POWER CORPORATION LTD. WHICH IS 100% STATE OWNED BODY. THEREFORE, PAYMENT IS COVERED UNDER THE PROVISIONS OF RULE 6DD OF THE INCOME-TAX RULES. BEING CONVINCED WITH THE EXPLANATIONS OF THE ASSESSEE, THE LD. CIT(A) DELETED THE DISALLOWANCE. :- 26 -: 29. NOW THE REVENUE IS IN APPEAL BEFORE THE TRIBUNAL AND PLACED HEAVY RELIANCE UPON THE ORDER OF THE ASSESSING OFFICER; WHEREAS THE LD. COUNSEL FOR THE ASSESSEE HAS CONTENDED THAT SINCE THE ASSESSEE HAS MADE PAYMENT IN CASH AT THE INSTANCE OF U.P. POWER CORPORATION LTD., AS THEY WERE NOT HAVING ANY BANK ACCOUNT AT UNNAO, THEREFORE, PAYMENTS WERE MADE ON COMMERCIAL EXPEDIENCY. THEREFORE, NO DISALLOWANCE IS CALLED FOR. 30. HAVING CAREFULLY EXAMINED THE ORDERS OF THE LOWER AUTHORITIES IN THE LIGHT OF THE RIVAL SUBMISSIONS, WE FIND THAT THE REVENUE HAS NOT BROUGHT OUT ANYTHING ON RECORD TO ESTABLISH THAT THE ASSESSEE HAS BANK ACCOUNT AT UNNAO WHERE THE PAYMENTS OF ELECTRICITY TARIFF IS TO BE MADE TO U.P. POWER CORPORATION LTD. SINCE THE PAYMENTS WERE MADE FOR COMMERCIAL EXPEDIENCY AND AT THAT STATE ASSESSEE DID NOT HAVE BANK ACCOUNT, THE SAME SHOULD NOT BE DISALLOWED HAVING INVOKED THE PROVISIONS OF SECTION 40(A)(3) OF THE ACT. WE, THEREFORE, FIND NO INFIRMITY IN THE ORDER OF THE LD. CIT(A) AND ACCORDINGLY WE CONFIRM THE SAME. 31. IN THE RESULT, APPEAL OF THE ASSESSEE IS PARTLY ALLOWED AND THAT OF THE REVENUE IS DISMISSED. ORDER WAS PRONOUNCED IN THE OPEN COURT ON THE DATE MENTIONED ON THE CAPTIONED PAGE. SD/- SD/- [A. K. GARODIA] [SUNIL KUMAR YADAV] ACCOUNTANT MEMBER JUDICIAL MEMBER DATED:11 TH DECEMBER, 2015 JJ:18-1911 :- 27 -: COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT(A) 4. CIT 5. DR ASSISTANT REGISTRAR