NKCM SPINNERS PVT LTD, ERODE V. ACIT, CIRCL-1, ERODE

ITA 3207/CHNY/2018

• Counselvise Citation: [2019] 117 COUNSELVISE.COM (IT) 9253 (ITAT-CHENNAI)
• Duration Of Justice: 4 month(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 01-04-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: D
• Assessment Year: 2014-2015
• Appeal Filed On: 26-11-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: M SUBASHRI
• Assessee Lawyers: S SRIDHAR
• Keywords: Set aside
• Section: 68

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH, CHENNAI . . . , ! ' # , % #& BEFORE SHRI N.R.S. GANESAN, JUDICIAL MEMBER AND SHRI INTURI RAMA RAO, ACCOUNTANT MEMBER ./ ITA NO.3207/CHNY/2018 ) *) / ASSESSMENT YEAR : 2014-15 M/S NKCM SPINNERS PVT. LTD., 43, ALAGIRI SINGH STREET, ERODE 638 001. PAN : AACCN 7095 D V. THE ASSISTANT COMMISSIONER OF INCOME TAX, CIRCLE -1, INCOME TAX OFFICE, GANDHI ROAD, ERODE 638 001. (,-/ APPELLANT) (./,-/ RESPONDENT) ,- 0 1 / APPELLANT BY : SHRI S. SRIDHAR, ADVOCATE ./,- 0 1 / RESPONDENT BY : MS. M. SUBASHRI, JCIT 2 0 3% / DATE OF HEARING : 04.03.2019 45* 0 3% / DATE OF PRONOUNCEMENT : 01.04.2019 / O R D E R PER N.R.S. GANESAN, JUDICIAL MEMBER : THIS APPEAL OF THE ASSESSEE IS DIRECTED AGAINST T HE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS) -3, COIMBATORE , DATED 09.11.2018 AND PERTAINS TO ASSESSMENT YEAR 2014-15. 2. THE ONLY ISSUE ARISES FOR CONSIDERATION IS WITH REGARD TO ADDITION MADE BY THE ASSESSING OFFICER UNDER SECTION 68 OF T HE INCOME-TAX ACT, 1961 (IN SHORT 'THE ACT') IN RESPECT OF UNSECURED L OAN RECEIVED FROM TWO COMPANIES AND INTEREST PAID THEREON. 2 I.T.A. NO.3207/CHNY/18 3. SHRI S. SRIDHAR, THE LD.COUNSEL FOR THE ASSESSEE , SUBMITTED THAT THE ASSESSEE HAS RECEIVED UNSECURED LOAN OF 70,00,000/- FROM M/S UMANG COMMO TRADE PVT. LTD. AND ANOTHER SUM OF 79,00,000/- FROM M/S TOPGRAIN VYAPAR PVT. LTD. ACCORDING TO THE LD . COUNSEL, THE ACCOUNTS OF THE ASSESSEE WERE AUDITED UNDER SECTION 44AB OF THE ACT. THE LOAN AMOUNTS WERE RECEIVED THROUGH BANKING CHAN NEL. ACCORDING TO THE LD. COUNSEL, IT IS NOT THE CASE OF THE REVENUE THAT THE ASSESSEE HAS PAID ANY MONEY TO THE ABOVE SAID COMPANIES WHICH WE RE ROUTED TO THE ASSESSEE AGAIN. ACCORDING TO THE LD. COUNSEL, THE ASSESSING OFFICER FOUND THAT UMANG COMMO TRADE PVT. LTD. AND M/S TOPG RAIN VYAPAR PVT. LTD. HAD SUFFICIENT CREDIT IN THEIR ACCOUNTS. REFE RRING TO THE ASSESSMENT ORDER, MORE PARTICULARLY PAGE 4, THE LD.COUNSEL SUB MITTED THAT THE ASSESSING OFFICER HIMSELF ADMITTED THAT M/S UMANG C OMMO TRADE PVT. LTD. RECEIVED MONEY FROM PORTRAIT VYAPAAR PVT. LTD. , COMPARE DEALERS PVT. LTD., RAMSON COMMERCIAL PVT. LTD. AND SURVI DE ALERS PVT. LTD. SIMILARLY, M/S TOPGRAIN VYAPAR PVT. LTD. RECEIVED M ONEY FROM TITANIC NETWORK MARKETING PVT. LTD. AND COMPARE DEALERS PVT . LTD. THE ASSESSING OFFICER DOUBTED THE GENUINENESS OF TRANSA CTIONS MERELY BECAUSE THE COMPANIES WERE LOCATED IN KOLKATA. ACC ORDING TO THE LD. COUNSEL, THE ASSESSEE BEING A COMPANY, NEEDS MONEY FOR RUNNING ITS BUSINESS. MERELY BECAUSE THE MONEY WAS RECEIVED FR OM KOLKATA COMPANIES, IT CANNOT BE SAID THAT THE TRANSACTIONS WERE NOT GENUINE. 3 I.T.A. NO.3207/CHNY/18 ACCORDING TO THE LD. COUNSEL, THE IDENTITY OF THE T WO COMPANIES IS NOT IN DISPUTE. THEY HAD SUFFICIENT BANK BALANCE FOR ADVA NCING MONEY TO THE ASSESSEE, THEREFORE, GENUINENESS OF TRANSACTIONS CA NNOT BE DOUBTED. THE CAPACITY OF CREDITORS TO GIVE MONEY TO THE ASSE SSEE WAS ALSO ESTABLISHED BEFORE THE LOWER AUTHORITIES. THEREFOR E, ACCORDING TO THE LD. COUNSEL, THE ADDITION MADE BY THE ASSESSING OFFICER WITH REGARD TO UNSECURED LOAN AND INTEREST PAID THEREON IS NOT CAL LED FOR. 3. SHRI S. SRIDHAR, THE LD.COUNSEL FOR THE ASSESSEE , FURTHER SUBMITTED THAT FOR THE ASSESSMENT YEAR 2009-10, A S IMILAR ADDITION WAS MADE IN RESPECT OF THE ADVANCE RECEIVED FROM THE VE RY SAME COMPANIES. THE CIT(APPEALS) ALLOWED THE APPEAL OF THE ASSESSEE BY HIS ORDER DATED 05.03.2013 AND ON APPEAL BY THE REVENUE BEFORE THIS TRIBUNAL, THIS TRIBUNAL CONFIRMED THE ORDER OF THE CIT(APPEALS) BY AN ORDER DATED 19.12.2014 IN I.T.A. NO.1259/MDS/2013, COPY OF WHIC H IS AVAILABLE AT PAGE 37 OF THE PAPER-BOOK. SIMILARLY, FOR ASSESSME NT YEAR 2010-11 ALSO, A SIMILAR ADDITION WAS MADE BY THE ASSESSING OFFICE R TOWARDS UNSECURED LOAN RECEIVED FROM THE VERY SAME COMPANIES, THE CIT (APPEALS) ALLOWED THE APPEAL OF THE ASSESSEE BY AN ORDER DATED 08.01. 2015 AND ON FURTHER APPEAL BY THE REVENUE BEFORE THIS TRIBUNAL, THIS TR IBUNAL CONFIRMED THE ORDER OF THE CIT(APPEALS) BY AN ORDER DATED 11.09.2 015 IN I.T.A. NO.974/MDS/2015, A COPY OF WHICH IS AVAILABLE AT PA GE 55 OF THE PAPER- BOOK. ACCORDING TO THE LD. COUNSEL, THE APPEAL FIL ED BY THE REVENUE 4 I.T.A. NO.3207/CHNY/18 BEFORE THE HIGH COURT IS PENDING FOR ADJUDICATION. IN THOSE FACTUAL CIRCUMSTANCES, ACCORDING TO THE LD. COUNSEL, THERE IS NO JUSTIFICATION ON THE PART OF THE AUTHORITIES BELOW TO DISALLOW THE C LAIM OF THE ASSESSEE. 4. ON THE CONTRARY, MS. M. SUBASHRI, THE LD. DEPART MENTAL REPRESENTATIVE, SUBMITTED THAT FOR THE ASSESSMENT Y EARS 2009-10 AND 2010-11, THE CIT(APPEALS) ALLOWED THE CLAIM OF THE ASSESSEE TOWARDS UNSECURED LOAN RECEIVED FROM THE VERY SAME COMPANIE S. THIS TRIBUNAL ALSO CONFIRMED THE ORDERS OF THE CIT(APPEALS). ADM ITTEDLY, ACCORDING TO THE LD. D.R., THE APPEAL FILED BY THE REVENUE BEFOR E THE HIGH COURT IS PENDING FOR ADJUDICATION, THEREFORE, THE ORDERS OF THIS TRIBUNAL FOR ASSESSMENT YEARS 2009-10 AND 2010-11 CANNOT BE RELI ED UPON. 5. THE LD. D.R. FURTHER SUBMITTED THAT M/S UMANG CO MMO TRADE PVT. LTD. AND M/S TOPGRAIN VYAPAR PVT. LTD. ARE PAP ER COMPANIES. ONE OF THE DIRECTORS WAS EXAMINED AND HE ADMITTED THAT HE IS AN EMPLOYEE OF SHRI DEEPAK PATWARI. SINCE BOTH THE COMPANIES ARE DUMMY COMPANIES, THE ASSESSING OFFICER DOUBTED THE VERY EXISTENCE OF THE SAME. THEREFORE, ACCORDING TO THE LD. D.R., THE IDENTITY OF THE COMPANIES, GENUINENESS OF TRANSACTIONS AND CREDITWORTHINESS OF THE COMPANIES WERE NOT ESTABLISHED BY THE ASSESSEE, HENCE, THE CIT(APP EALS) HAS RIGHTLY CONFIRMED THE ORDER OF THE ASSESSING OFFICER. 5 I.T.A. NO.3207/CHNY/18 6. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS ON EITH ER SIDE AND PERUSED THE RELEVANT MATERIAL AVAILABLE ON RECORD. FOR ESTABLISHING CASH CREDITS, THREE CORDIAL PRINCIPLES HAVE TO BE ESTABL ISHED BY THE ASSESSEE (I) THE IDENTITY OF THE CREDITORS, (II) CREDITWORTH INESS OF THE CREDITORS AND (III) GENUINENESS OF TRANSACTION. IN THIS CASE, THE ASSE SSEE ADMITTEDLY RECEIVED UNSECURED LOAN FROM M/S UMANG COMMO TRADE PVT. LTD. AND M/S TOPGRAIN VYAPAR PVT. LTD. THE REVENUE CLAIMS T HAT THESE TWO COMPANIES ARE DUMMY COMPANIES AND EXIST ONLY ON PAP ER. IT IS NOT KNOWN WHEN THE COMPANIES WERE REGISTERED BY THE REG ISTRAR OF COMPANIES, HOW THE INCOME-TAX DEPARTMENT CLAIMS THA T THESE ARE ONLY PAPER COMPANIES AND NOT IN EXISTENCE? THE FACT THA T M/S UMANG COMMO TRADE PVT. LTD. AND M/S TOPGRAIN VYAPAR PVT. LTD. RECEIVED MONEY FROM OTHER FIVE COMPANIES, NAMELY, PORTRAIT V YAPAAR PVT. LTD., COMPARE DEALERS PVT. LTD., RAMSON COMMERCIAL PVT. L TD., SURVI DEALERS PVT. LTD. AND TITANIC NETWORK MARKETING PVT. LTD. I S NOT IN DISPUTE. WHEN THE TWO COMPANIES RECEIVED MONEY FROM OTHER FIVE CO MPANIES, THIS TRIBUNAL IS OF THE CONSIDERED OPINION THAT THE CRED ITWORTHINESS OF CREDITORS IS ESTABLISHED. MOREOVER, THE TWO COMPANIES ARE RE GISTERED AS COMPANIES BY THE REGISTRAR OF COMPANIES. THEREFORE , THE IDENTITY CANNOT BE DOUBTED. IN OTHER WORDS, THE IDENTITY OF THE SA ID COMPANIES IS ALSO ESTABLISHED BY THE ASSESSEE. 6 I.T.A. NO.3207/CHNY/18 7. NOW WHAT REMAINS IS GENUINENESS OF TRANSACTIONS. IT IS NOT IN DISPUTE THAT THE FUNDS WERE FLOWN FROM M/S UMANG CO MMO TRADE PVT. LTD. AND M/S TOPGRAIN VYAPAR PVT. LTD. IT IS NOT T HE CASE OF THE REVENUE THAT NO FUNDS WERE RECEIVED BY THE ASSESSEE FROM TH E ABOVE SAID TWO COMPANIES. IT IS ALSO NOT THE CASE OF THE REVENUE THAT THE ASSESSEES FUNDS WERE ROUTED THROUGH THE ABOVE SAID COMPANIES TO GIVE BACK TO THE ASSESSEE IN THE FORM OF UNSECURED LOAN. MERELY BEC AUSE ONE OF THE DIRECTORS WAS AN EMPLOYEE OF A PROMOTER OF THE COMP ANIES, THIS TRIBUNAL IS OF THE CONSIDERED OPINION THAT THE VERY EXISTENC E OF THE COMPANIES CANNOT BE DOUBTED. IN THE ABSENCE OF ANY MATERIAL TO INDICATE THAT THE ASSESSEES FUNDS WERE ROUTED THROUGH THE ABOVE SAID TWO COMPANIES, THE GENUINENESS OF THE TRANSACTIONS ALSO CANNOT BE DOUBTED. HENCE, THERE IS NO QUESTION OF ANY ADDITION UNDER SECTION 68 OF THE ACT. 8. MOREOVER, THIS TRIBUNAL IN THE ASSESSEE'S OWN CA SE FOR ASSESSMENT YEARS 2009-10 AND 2010-11, FOUND THAT TH E ABOVE SAID TWO COMPANIES WERE IN EXISTENCE AND THE ASSESSEE HAS RE CEIVED UNSECURED LOAN FOR THOSE ASSESSMENT YEARS. A MERE PENDENCY O F APPEAL BEFORE THE HIGH COURT AGAINST THE SAID ORDERS OF THE TRIBUNAL CANNOT BE A GROUND TO TAKE A DIFFERENT VIEW. THEREFORE, BY FOLLOWING THE ORDERS OF THE CO- ORDINATE BENCH OF THIS TRIBUNAL FOR ASSESSMENT YEAR S 2009-10 AND 2010- 11 AND FOR THE REASONS STATED THEREIN, THE ORDERS O F THE LOWER AUTHORITIES 7 I.T.A. NO.3207/CHNY/18 ARE SET ASIDE AND THE ADDITION MADE BY THE ASSESSIN G OFFICER AS CONFIRMED BY THE CIT(APPEALS) IS DELETED. 9. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN THE COURT ON 1 ST APRIL, 2019 AT CHENNAI. SD/- SD/- ( ! ' # ) ( . . . ) (INTURI RAMA RAO) (N.R.S. GANESAN) % / ACCOUNTANT MEMBER /JUDICIAL MEMBER /CHENNAI, 7 /DATED, THE 1 ST APRIL, 2019. KRI. 0 .389 :9*3 /COPY TO: 1. ,- /APPELLANT 2. ./,- /RESPONDENT 3. 2 ;3 () /CIT(A)-3, COIMBATORE 4. PRINCIPAL CIT- 2, COIMBATORE 5. 9< .3 /DR 6. ) = /GF.