M/s Modern Dairies Ltd., Chandigarh V. ACIT, Chandigarh

ITA 336/CHANDI/2013

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 5229 (ITAT-CHANDIGARH)
• Duration Of Justice: 4 year(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-04-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 25-07-2016
• Assessment Year: 2010-2011
• Appeal Filed On: 25-03-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Loose papers; Earning of tax free income
• Section: 69C; 14A

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNAL DIVISION BENCH, CHANDIGARH BEFORE SHRI SANJAY GARG, JUDICIAL MEMBER AND SHRI. B.R.R KUMAR, ACCOUNTANT MEMBER ITA NO. 335 & 336/CHD/2013 ASSESSMENT YEARS: 2009-10 & 2010-11 M/S MODERN DAIRIES LTD. VS. ACIT, CENTRAL CIRCLE -II SCO 98-99, SUB CITY CENTRE CHANDIGARH SECTOR 34, CHANDIGARH PAN NO. AABCM1240L (APPELLANT) (RESPONDENT) APPELLANT BY : SH. ASHOK GOYAL RESPONDENT BY : SH. SUSHIL KUMAR DATE OF HEARING : 11/04/2017 DATE OF PRONOUNCEMENT : 18/04/2017 ORDER PER B.R.R KUMAR, A.M BOTH THESE APPEALS FILED BY THE ASSESSEE ARE DIRECT ED AGAINST THE ORDERS OF LD. CIT(CENTRAL), GURGAON, DT. 21/01/2013 FOR AS SESSMENT YEARS 2009-10 AND 2010-11. SINCE THE GROUNDS RAISED AND ISSUES INVOLV ED ARE IDENTICAL THEREFORE THE APPEALS ARE BEING HEARD AND DISPOSED OFF BY THIS CO MMON ORDER FOR THE SAKE OF CONVENIENCE. 2. FIRST WE DEAL WITH ITA NO. 335/CHD/2013 FOR ASSE SSMENT YEAR 2009-10. THE ASSESSEE HAS FILED SIX GROUNDS IN THIS APPEAL OF WH ICH GROUND NUMBERS 1 TO 4 WERE LATER WITHDRAWN, AND GROUND NO. 6 IS GENERAL I N NATURE AND NEEDS NO ADJUDICATION. THE EFFECTIVE GROUND FOR ADJUDICATION IS GROUND NO. 5 WHICH IS GIVEN BELOW: 2 THAT THE LEARNED CIT(A) HAS ERRED IN UPHOLDING AD DITION OF RS. 1603000/- UNDER SECTION 69C WHEN THERE IS NO EVIDENCE THE PAYMENT H AS BEEN MADE AND THAT TOO IN THE SAID FINANCIAL YEAR RELEVANT TO ASSESSME NT YEAR IN THE APPEAL. HENCE RELIEF BE ALLOWED. 3. BRIEF FACTS OF THE CASE ARE THAT A SEARCH OPERAT ION UNDER SECTION 132(1) OF THE INCOME TAX ACT WAS CARRIED OUT AT THE RESIDENTI AL AND BUSINESS PREMISES OF MODERN GROUP OF CASES ON 17/03/2010. DURING SEARCH CERTAIN DOCUMENTS WERE FOUND AND SEIZED. THE DOCUMENTS WERE NUMBERED AS A- 5(PAGES 63 TO 71) [PARTY A-1]. IT WAS ALLEGED THAT THIS DOCUMENT CONTAINS DE TAILS OF SALARY PAID IN CASH TO THE PERSONS NAMELY SH. A.K. AGGARWAL, SH. P.K. JAIN AND SH. H.S. OBEROI, THE KEY EMPLOYEES OF MODERN DAIRIES LTD. OUTSIDE BOOKS OF A CCOUNTS. THE DOCUMENTS HAVE BEEN PERUSED IN DETAIL. 4. THE AO HAS RECORDED THE STATEMENT OF SH. A.K. AG GARWAL AND SH. P.K. JAIN DURING THE ASSESSMENT PROCEEDINGS. STATEMENT OF SHR I. K.K. GOEL WAS RECORDED UNDER SECTION 132(4) DURING THE SEARCH PROCEEDINGS. THE AO IN TOTAL MADE ADDITION OF RS. 19,63,000/- ON ACCOUNT OF THESE DOC UMENTS ALLEGEDLY BEING CASH PAYMENT MADE OUT OF BOOKS OF ACCOUNT TOWARDS THE SA LARY. 5. THE LD. CIT|(A) DURING THE APPELLATE PROCEEDING HAS CONFIRMED THE ADDITION TO THE TUNE OF RS. 16,03,000/- GIVING THE BENEFIT OF DUPLICATION OF THE AMOUNT ON THE DOCUMENTS. WHILE CONFIRMING THE LD. C IT HAS OBSERVED THAT THE SCANNED DOCUMENTS WERE RELATED TO SALARY DETAILS OF THE KEY EMPLOYEES OF THE ASSESSEE COMPANY. TWO OF THE PERSONS CONCERNED WERE PRODUCED AND STATEMENTS TAKEN AND THE CROSS EXAMINATION WAS ALSO DECLINED BY THE ASSESSEE. THE CONTENTION OF THE ASSESSEE THAT THESE WERE ROUG H CLAIMS/PROPOSALS WERE FOUND TO BE BASELESS AS THE SLIPS CLEARLY MENTIONED THE NAMES, THE PERIOD AS WELL AS THE FACT PERTAINING TO DIFFERENCE IN SALARY PAID / PAYABLE. 6. DURING THE HEARING BEFORE US THE ASSESSEE CONTEN DED THAT SOME OF THE AMOUNTS DID NOT PERTAINS TO RELEVANT ASSESSMENT YEA R AND ALSO CONTENDED THAT THESE WERE THE PROPOSALS GIVEN TO MANAGEMENTS FOR R ISE IN SALARY AND AS SUCH NO 3 AMOUNT WAS PAID IN CASH. THE ASSESSEE HAS ALSO PLAC ED RELIANCE IN THE CASE OF CIT VS. ATAM VALVES (P) LTD. WHEREIN THE PUNJAB & HARYANA HIGH COURT HAS OBSERVED THAT DOCUMENTS FOUND INCLUDING THE SLIP PA D CONTAINING PAYMENT OF WAGES TO VARIOUS PERSONS, IN THE ABSENCE OF ANY OTH ER MATERIAL THE LOOSE SHEET BY ITSELF WERE NOT ENOUGH TO MAKE ADDITION. SIMILAR LY IN THE CASE OF NIRMAL FASHIONS PVT. LTD. VS. DCIT IN ITA NO. 427/KOL/2008 IN WHICH ITAT KOLKATA BENCH HAS OBSERVED THAT NO ADDITION CAN BE MADE ON THE BA SIS OF LOOSE PAPERS BY MAKING CERTAIN PRESUMPTION WHICH ARE FOUND TO BE UN TENABLE, CONTRARY TO THE OTHER EVIDENCE ON RECORD. 7. LD. DR HAS ARGUED THAT THE PAYMENT OF CASH TOWAR DS THE PART SALARY IS GENERAL PRACTICE IN THE DAIRY INDUSTRIES WHERE THE GENERATION OF THE CASH IS EXPECTED OUT OF UNACCOUNTED SALES. HE PLACED RELIAN CE ON THE ORDER OF THE LD. CIT(A). 8. HAVING HEARD BOTH SIDES AND EXAMINED THE DECISIO N OF THE LD. CIT WHEREIN THE LD. CIT(A) DERIVED THE STRENGTH FROM TH E STATEMENTS RECORDED DURING THE ASSESSMENT PROCEEDING. THE LD. CIT(A) ALSO MENT IONED THAT THE ASSESSEE HAS DECLINED TO CROSS EXAMINE THE WITNESS. 9. WE HAVE PERUSED THE STATEMENTS GIVEN BY SH. K.K. GOEL DURING SEARCH PROCEEDING AND ALSO OF SHRI. A.K. AGGARWAL AND SHRI . P.K. JAIN DURING THE ASSESSMENT PROCEEDINGS. NOWHERE IN THE STATEMENTS T HE MATTER OF AMOUNT BEING RECEIVED IN CASH HAS BEEN ESTABLISHED BY THE REVENUE. IN ALL THE THREE STATEMENTS, IT WAS CATEGORICALLY SAID THAT THERE WE RE REQUEST FOR HIKE IN SALARY. UNDER THESE CIRCUMSTANCES THERE IS NO NEED FOR A CR OSS EXAMINATION BY THE ASSESSEE ALSO WHERE AS THE LD. CIT(A) HAS OBSERVED THAT CROSS EXAMINATION WAS DECLINED BY THE ASSESSEE. NOWHERE THE REVENUE COULD PROVE OR ESTABLISH THAT THIS AMOUNT REPRESENTS THE CASH PAID OR ANY EVIDENC E THAT THE AMOUNT HAVE BEEN RECEIVED BY THE RECIPIENTS. THE LD. CIT WAS AL SO NOT SURE WHERE THE AMOUNT 4 HAVE BEEN PAID OR PAYABLE. THE REVENUE HAS TO PROVE THAT THESE DOCUMENTS REPRESENTS UNACCOUNTED PAYMENTS BY EITHER DIRECT EV IDENCE OR CORROBORATIVE EVIDENCE WHICH WAS NOT SO IN THIS CASE. HENCE THE ADDITION IS HEREBY DELETED. THE ASSESSEE GETS RELIEF OF RS. 16,03,900/- FOR THE ASSESSMENT YEAR 2009-10 AND RS. 7,50,000/- FOR THE ASSESSMENT YEAR 2010-11. 10. GROUND NO. 5 IS ALLOWED FOR STATISTICAL PURPOSE S. 11. NOW WE TAKE UP APPEAL NO. 336/CHD/2013 FOR ASSE SSMENT YEAR 2010-11. THE GROUNDS RAISED BY THE ASSESSEE ARE AS UNDER: 2. THAT THE LEARNED CIT(A) HAS ERRED IN UPHOLDING THE ADDITION THAT NO DETAILS WERE FILED IN RESPONSE TO QUERY WHY NO DISALLOWANCE HAS BEEN MADE UNDER SECTION 14A, WHEN NO SUCH SPECIFIC QUERY WAS RAISED BY A.O. & THIS WAS BROUGHT TO THE KNOWLEDGE OF CIT(A) IN THE WRITTEN SUBMISSIO N ALSO & DETAILS WERE FILED BEFORE CIT(A). 3. THAT THE LEANED CIT(A) HAS ERRED IN UPHOLDING TH E ADDITION ON ACCOUNT OF INTEREST AS PER RULE 8D WITHOUT ANY SATISFACTION OF THE A.O./CIT(A) ABOUT THE CORRECTNESS OF CLAIM OF THE APPELLATE AS PER SEC. 1 4A(2) OF THE I.T. ACT. WHEN THE COMPLETE DETAIL A WELL AS THE WORKING HAVE BEEN SUB MITTED THAT NO INTEREST BEARING FUNDS HAVE BEEN UTILIZED FOR PURPOSE OF INV ESTMENT AND THERE WERE SUFFICIENT PROFIT AVAILABLE FOR THE INVESTMENT MADE , HENCE DISALLOWANCE ON THE BASIS OF RULE 8D NOT CALLED FOR, HENCE RELIEF BE AL LOWED. 4. THAT THE LEARNED CIT(A) HAS ERRED IN UPHOLDING T HE ADDITION OF RS. 18305/- AS ADM. EXPENSES AS PER RULE 8D WHEN THE SAME IS NO T APPLICABLE, FURTHER WITHOUT POINTING EXPENSES ACTUALLY BEEN INCURRED AND FURTHE R WHEN NO NEXUS OF EXPENSES HAVE BEEN PROVED BY A.O/CIT(A), EVEN WHEN RS. 1338/ - INCURRED ON D-MAT ACCOUNT ALREADY ADDED IN THE COMPUTATION OF INCOME. IT WAS BROUGHT TO THE NOTICE BY THE LD. AR AS PER R ECORD FOR THE ASSESSMENT YEAR 2009-10, THE ADDITION MADE ON ACCOUNT OF SECTION 14 A R.W. RULE 8D HAS BEEN DELETED BY THE LD. CIT(A) AND THE SIMILAR DELETION WAS CONFIRMED FOR THE ASSESSMENT YEAR 2010-11. THE LD. AR FURTHER SUBMIT TED THAT THERE ARE NO NEW INVESTMENT MADE DURING THE CURRENT YEAR. HENCE NO A DDITION IS WARRANTED AS THERE IS NO ADDITION / CHANGE OF INVESTMENT IN THE CURRENT YEAR COMPARE TO THE A.Y. 2009-10. 12. THE LD. DR ARGUED THAT THE INVESTMENT FOR EARNI NG EXEMPT INCOME WERE MADE FROM MIXED FUNDS HENCE DISALLOWANCE UNDER SECT ION 14A HAS BEEN MADE AS PER RULE 8D. ON PERUSAL OF THE RECORDS IT WAS FO UND THAT NO STATEMENT HAS BEEN OBTAINED BY THE AO TO PROVE WHETHER THE AMOUNT ARE MIXED FUNDS OR NOT 5 AND ALSO KEEPING IN VIEW THE FACT THAT LD. CIT HAS DELETED THE ADDITION IN THE EARLIER YEAR AND NO NEW INVESTMENT HAS BEEN MADE, H ENCE, NO DISALLOWANCE IS WARRANTED FOR THE ASSESSMENT YEAR 2010.11. 13. IN THE RESULT BOTH THE APPEALS FILED BY THE ASS ESSEE ARE ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT. SD/- SD/- (SANJAY GARG) (B.R.R.KUMAR) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED : 18/04/2017 AG COPY TO: THE APPELLANT, THE RESPONDENT, THE CIT, TH E CIT(A), THE DR