D.C.I.T.-4(1), Agra V. M/s Sugandhi Cold Storge (P) Ltd., Agra

ITA 368/AGR/2010

• Counselvise Citation: [2012] 119 COUNSELVISE.COM (IT) 7696 (ITAT-AGRA)
• Duration Of Justice: 1 year(s) 8 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-04-2012
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Next Hearing Date: 18-04-2012
• Assessment Year: 2003-2004
• Appeal Filed On: 16-08-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: A K SHARMA
• Assessee Lawyers: R C TOMAR I T P
• Keywords: Unexplained cash credit; Business income; Capital receipt
• Section: 68; 2

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, AGRA BENCH, AGRA BEFORE : SHRI BHAVNESH SAINI, JUDICIAL MEMBER AND SHRI A.L. GEHLOT, ACCOUNTANT MEMBER ITA NO. 368/AGRA/2010 ASSTT. YEAR : 2003-04 D.C.I.T. 4, AGRA. VS. M/S. SUGANDHI COLD STORA GE (P) LTD., 33, SHIVP0URI, BALKESHWAR, AGRA. (PAN : AAGCS 9597 M) (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI A.K. SHARMA, JR. D.R. RESPONDENT BY : SHRI R.C. TOMAR, I.T.P. DATE OF HEARING : 18.04.2012 DATE OF PRONOUNCEMENT OF ORDER : 20.04.2012 ORDER PER BHAVNESH SAINI, J.M.: THIS APPEAL BY THE REVENUE IS DIRECTED AGAINST THE ORDER OF THE LD. CIT(A)-II, AGRA DATED 26.05.2010 FOR THE ASSESSMENT YEAR 2003- 04, CHALLENGING THE ORDER OF THE LD. CIT(A) IN DELETING THE ADDITION OF RS.48,00,000/- M ADE BY THE AO U/S. 68 OF THE IT ACT. 2. WE HAVE HEARD THE LD. REPRESENTATIVES OF BOTH TH E PARTIES, PERUSED THE FINDINGS OF THE AUTHORITIES BELOW AND CONSIDERED THE MATERIAL O N RECORD. 3. BRIEFLY, THE FACTS OF THE CASE ARE THAT THE ASSE SSEE CHALLENGED THE ADDITION OF RS.48,00,000/- MADE BY THE AO U/S. 68 OF THE IT ACT IN RESPECT OF SIX PARTIES, NAMELY; ITA NO. 368/AGRA/2010 2 S. NO. NAME OF LENDER AMOUNT (RS.) 1. PASKA CONSTRUCTION PVT. LTD. 500000 2. DEEPAK HOLDINGS PVT. LTD. 1000000 3. APTECH FINLEASE PVT. LTD. 300000 4. SHIVA HANDICRAFTS PVT. LTD. 1500000 5. AJAY ICE FACTORY PVT. LTD. 1000000 6. JINDAL CAPSEC PVT. LTD. 500000 TOTAL 4800000 4. THE AO NOTED THAT WHILE FINALIZING THE ASSESSMENT F OR SUBSEQUENT ASSESSMENT YEAR 2004-05, THE AO OBSERVED THAT THE ASSESSEE HAS RECEIVED LOANS OF RS.48,00,000/- FROM THE ABOVE PARTIES AND THAT THESE PARTIES/COMPA NIES ARE NOT CHARGING ANY INTEREST FROM THE ASSESSEE ON THE ABOVE LOANS. IT PROMPTED T HE AO TO NOTE THAT THE TRANSACTIONS ARE NOT GENUINE. THE ASSESSEE FURNISHED CONFIRMATIO N LETTERS FROM THE LENDERS ALONG WITH THEIR COPY OF INCOME-TAX RETURNS, BANK ACCOUNTS IN RESPECT OF CONFIRMATION, BUT THE AO FOUND THAT THE ENTRIES HAVE BEEN CREDITED IN THE AC COUNTS OF THE CREDITORS AND OUT OF THAT, LOANS HAVE BEEN GIVEN TO THE ASSESSEE. THE AO AFTER DISCUSSING THE EVIDENCE ON RECORD FOUND THAT THE ASSESSEE-COMPANY DID NOT PROVE THE C REDITWORTHINESS OF THE CREDITORS AND ACCORDINGLY, MADE THE ADDITION. THE ADDITION WAS CH ALLENGED BEFORE THE LD. CIT(A) AND DETAILED WRITTEN SUBMISSION WAS FILED, WHICH IS REP RODUCED IN THE APPELLATE ORDER, IN WHICH THE ASSESSEE EXPLAINED THAT ALL THE LENDERS/C REDITORS ARE ASSESSED TO TAX AND ALSO FILED THEIR CONFIRMATIONS. ALL THE CREDITS HAVE BEE N RECEIVED THROUGH BANKING CHANNELS AND AMOUNTS HAVE ALSO BEEN RETURNED THROUGH BANKING CHANNELS. EVEN ONE OF THE DIRECTOR OF THE DEPOSITOR COMPANY WAS EXAMINED ON O ATH, WHO HAS CONFIRMED TO HAVE ITA NO. 368/AGRA/2010 3 GIVEN LOAN TO THE ASSESSEE. LATER ON, INTEREST WAS ALSO PAID AND DETAILS OF THE TDS WERE FURNISHED. THE LD. CIT(A) CONSIDERING THE FINDINGS OF THE AO AND THE MATERIAL ON RECORD, CONSIDERED EACH AND EVERY CREDITOR SEPARATE LY AND FOUND THAT THE CONFIRMATION OF ALL THE CREDITORS HAVE BEEN FILED. THE CREDITORS AR E ASSESSED TO TAX AND AMOUNTS HAVE BEEN RECEIVED THROUGH BANKING CHANNELS. COPIES OF T HE BANK ACCOUNT SUPPORT THE EXPLANATION OF THE ASSESSEE. THE DETAILS OF THE LOA NS RETURNED THROUGH BANKING CHANNEL HAVE ALSO BEEN FURNISHED. IN THE CASE OF M/S DEEPAK HOLDINGS PVT. LTD., THE DIRECTOR WAS ALSO EXAMINED ON OATH AND HE HAS CONFIRMED GIVI NG OF LOAN TO THE ASSESSEE. APART FROM IT, IN SOME OF THE CASES, THE AUTHORIZED CAPIT AL OF THE DEPOSITOR COMPANIES WAS FOUND MORE THAN RS.50 LACS. THE LD. CIT(A), CONSIDE RING THE EVIDENCES ON RECORD, HELD THAT THE ASSESSEE IS ABLE TO PROVE THE CREDITWORTHI NESS OF THE CREDITORS AND GENUINENESS OF THE TRANSACTIONS AND ACCORDINGLY, ADDITIONS WERE DELETED. 5. THE LD. DR RELIED UPON THE ORDER OF THE AO AND S UBMITTED THAT NO INTEREST WAS CHARGED ON THE LOANS. THEREFORE, THE ADDITION WAS R IGHTLY MADE BY THE AO. ON THE OTHER HAND, THE LD. COUNSEL FOR THE ASSESSEE REITERATED T HE SUBMISSIONS MADE BEFORE THE AUTHORITIES BELOW AND FILED DETAILED PAPER BOOK TO SHOW THAT ALL THE CONFIRMATIONS OF THE CREDITORS WERE FILED SUPPORTED BY BANK STATEMENTS A ND ALL THE CREDITORS ARE ASSESSED TO TAX. HE HAS, THEREFORE, SUBMITTED THAT THE ASSESSEE IS ABLE TO DISCHARGE INITIAL ONUS UPON IT TO PROVE THE CREDITWORTHINESS OF THE CREDITORS A ND GENUINENESS OF THE TRANSACTIONS IN THE MATTER. ON THE QUERY RAISED BY THE BENCH, BOTH THE LD. REPRESENTATIVES OF THE PARTIES ITA NO. 368/AGRA/2010 4 REFERRED TO PB-5, WHICH IS COPY OF ACKNOWLEDGEMENT OF INCOME-TAX RETURN FILED BY THE ASSESSEE FOR THE ASSESSMENT YEAR UNDER APPEAL, IN W HICH THE ASSESSEE HAS SHOWN NIL INCOME BECAUSE THE ASSESSEE WAS AT THE STAGE OF CON STRUCTION OF ITS BUSINESS PREMISES. BOTH THE LD. REPRESENTATIVES STATED THAT THE DATE O F INCORPORATION OF THE ASSESSEE- COMPANY IS 03.09.2002 AS IS MENTIONED IN THE ACKNOW LEDGEMENT OF FILING OF RETURN. THE LD. COUNSEL FOR THE ASSESSEE ALSO SUBMITTED THAT SI NCE NO BUSINESS WAS CARRIED ON IN THE ASSESSMENT YEAR UNDER APPEAL, THEREFORE, NO INCOME WAS OFFERED BY THE ASSESSEE AND ASSESSED BY THE AO. HE HAS RELIED UPON FOLLOWING DE CISIONS : (I). CIT VS. S. KAMALJEET SINGH, 147 TAXMAN 18 (AL L). (II). CIT VS. DIAMOND PRODUCTS LTD., 177 TAXMAN 33 1 (DEL.) (III). ARAVALI TRADING CO. VS. ITO, 8 DTR 199 (RAJ .) 6. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND THE MATERIAL ON RECORD AND WE DO NOT FIND ANY JUSTIFICATION TO INTERFERE WITH THE OR DER OF THE LD. CIT(A) IN DELETING THE ENTIRE ADDITION. IT IS ADMITTED FACT THAT ALL THE D EPOSITORS HAVE FILED THEIR CONFIRMATIONS ACCEPTING THEREIN THAT THEY HAVE GIVEN LOAN TO THE ASSESSEE THROUGH BANKING CHANNELS. THE COPIES OF THE BANK STATEMENTS ARE FILED, WHICH SUPPORT THE CONTENTION OF THE ASSESSEE THAT THE DEPOSITORS HAD SUFFICIENT BALANCE IN THEIR BANK ACCOUNTS TO GIVE LOANS TO THE ASSESSEE. ALL THE CREDITORS ARE ASSESSED TO TAX AND EVEN ONE OF THE DIRECTOR OF THE DEPOSITOR COMPANY WAS EXAMINED IN WHICH HE HAS CONF IRMED GIVING OF LOANS TO THE ASSESSEE. THE OVERWHELMING EVIDENCES ON RECORD CLEA RLY PROVE THAT THE INITIAL ONUS UPON THE ASSESSEE IS DISCHARGED BY PROVING IDENTITY OF T HE CREDITORS, THEIR CREDITWORTHINESS ITA NO. 368/AGRA/2010 5 AND GENUINENESS OF THE TRANSACTION IN THE MATTER. T HE ASSESSEE IS ABLE TO PROVE THE EXISTENCE OF THE CREDITORS. ON GOING THROUGH THE CO PIES OF BANK ACCOUNTS OF THE CREDITORS, WE DO NOT FIND IF ANY SUBSTANTIAL CASH I S DEPOSITED IN THEIR ACCOUNTS FOR GIVING ANY LOAN TO THE ASSESSEE. RATHER, THERE ARE TRANSFE R ENTRIES THROUGH BANKING CHANNELS TO PROVE THAT THEY HAVE SUFFICIENT FUNDS AVAILABLE WIT H THEM TO GIVE LOAN TO THE ASSESSEE. FURTHER, THE PARTIES HAVE STATED BEFORE US THAT THE ASSESSEE COMPANY WAS INCORPORATED ON 03.09.2002 RELEVANT TO ASSESSMENT YEAR UNDER APPEAL , I.E., A.Y. 2003-04 AND NO INCOME HAS BEEN SHOWN TO HAVE EARNED BY THE ASSESSEE. EVEN THE AO HAS NOT ASSESSED ANY BUSINESS INCOME AND ONLY ADDITION WAS MADE IN THE A SSESSMENT ORDER U/S. 68 OF THE IT ACT FOR UNEXPLAINED CASH CREDITS IN A SUM OF RS.48, 00,000/-. HONBLE SUPREME COURT IN THE CASE OF CIT VS. BHARAT ENGINEERING AND CONSTRUC TION CO., 83 ITR 187 HELD THE ASSESSEE, AN ENGINEERING-CONSTRUCTION COMPANY , COMMENCED ITS BUSINESS IN MAY, 1943. IN ITS ACCOUNTS THERE WE RE SEVERAL CASH CREDIT ENTRIES IN THE FIRST YEAR OF ITS BUSINESS TOTALING RS.2,50,000. THOUGH THE EXPLANATION REGARDING THE CASH CREDIT ENTRIES WAS F OUND TO BE FALSE, THE APPELLATE TRIBUNAL HELD THAT THESE CASH CREDITS COU LD NOT REPRESENT THE INCOME OR PROFITS OF THE ASSESSEE AS THEY WERE ALL MADE VERY SOON AFTER THE COMPANY COMMENCED ITS ACTIVITIES : HELD, THAT THE INFERENCE DRAWN FROM THE FACTS PROV ED WAS A QUESTION OF FACT AND THE TRIBUNALS FINDING ON THAT QUESTION WAS FINAL. A CONSTRUCTION COMPANY TOOK TIME TO EARN PROFITS AND IT COULD NOT HAVE EARNED A HUGE PROFIT WITHIN A FEW DAYS AFTER THE CO MMENCEMENT OF ITS BUSINESS. HENCE, IT WAS REASONABLE TO ASSUME THAT T HE CASH CREDIT ENTRIES REPRESENTED CAPITAL RECEIPTS THOUGH FOR ONE REASON OR ANOTHER THE ASSESSEE HAD NOT COME OUT WITH THE TRUE STORY AS REGARDS THE SOURCE OF THE RECEIPTS. ITA NO. 368/AGRA/2010 6 6.1 SINCE IT IS PROVED ON RECORD THAT NO BUSINESS A CTIVITIES WERE CARRIED OUT AND THE ASSESSEE WAS AT THE STAGE OF FORMATION AND COMPLETI ON OF THE COMPANY, THEREFORE, SUCH AN ADDITION IS UNJUSTIFIED IN VIEW OF THE ABOVE DEC ISION OF HONBLE SUPREME COURT. CONSIDERING THE TOTALITY OF FACTS AND CIRCUMSTANCES OF THE CASE AND EVIDENCE ON RECORD, NON-CHARGING OF INTEREST UNDER THE GIVEN SET OF FAC TS WOULD NOT BE RELEVANT TO MAKE ADDITION AND, THUS, WE DO NOT FIND ANY JUSTIFICATIO N TO INTERFERE WITH THE ORDER OF THE LD. CIT(A). WE CONFIRM HIS FINDINGS AND DISMISS THE DEP ARTMENTAL APPEAL. 7. IN THE RESULT, THE DEPARTMENTAL APPEAL IS DISMIS SED. ORDER PRONOUNCED IN THE OPEN COURT. SD/- SD/- (A.L. GEHLOT) (BHAVNESH SAINI) ACCOUNTANT MEMBER JUDICIAL MEMBER *AKS/- COPY OF THE ORDER FORWARDED TO : 1. APPELLANT 2. RESPONDENT 3. CIT(A), CONCERNED BY ORDER 4. CIT, CONCERNED 5. DR, ITAT, AGRA 6. GUARD FILE SR. PRIVATE SECRETARY TRUE COPY