DCIT, Trichy V. Sri Sakthiganesh Auto Financiers, Karur

ITA 387/CHNY/2015

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 9421 (ITAT-CHENNAI)
• Duration Of Justice: 1 year(s) 2 month(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-04-2016
• Appeal Filed By: Department
• Bench Allotted: B
• Next Hearing Date: 29-03-2016
• Assessment Year: 2010-2011
• Appeal Filed On: 23-02-2015
• Court: TRIBUNAL
• Department Lawyers: AJIT KUMAR VARMA
• Assessee Lawyers: S SRIDHAR

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH : CHENNAI . . . , . !' , # $ % [ BEFORE SHRI N.R.S. GANESAN, JUDICIAL MEMBER AND SHRI A. MOHAN ALANKAMONY, ACCOUNTANT MEMBER ] ./ I.T.A.NO. 386 & 387/MDS/2015 / ASSESSMENT YEARS : 2009-10 & 2010-11 THE DY. COMMISSIONER OF INCOME-TAX CENTRAL CIRCLE 2 TRICHY VS. M/S SRI SAKTHIGANESH AUTO FINANCIERS NO.128, VINITHA TOWERS II FLOOR, COVAI ROAD, KARUR [PAN ABAFS 8214 C ] ( &' / APPELLANT) ( ()&' /RESPONDENT) / APPELLANT BY : SHRI AJIT KUMAR, VARMA, CIT /RESPONDENT BY : SHRI S. S RIDHAR, ADVOCATE / DATE OF HEARING : 29 - 0 3 - 2016 ! / DATE OF PRONOUNCEMENT : 29 - 04 - 2016 / O R D E R PER N.R.S.GANESAN, JUDICIAL MEMBER THESE APPEALS OF THE REVENUE ARE DIRECTED AGAINS T THE COMMON ORDER OF THE COMMISSIONER OF INCOME-TAX (AP PEALS), TIRUCHIRAPALLI, DATED 3.11.2014, FOR ASSESSMENT YEA RS 2009-10 AND 2010-11. SINCE COMMON ISSUE ARISES FOR CONSIDERATIO N IN BOTH THE APPEALS, WE HEARD THEM TOGETHER AND DISPOSING OF TH E SAME BY THIS COMMON ORDER. ITA NO. 386 & 387/15 :- 2 -: 2. SHRI AJIT KUMAR VARMA, LD. DEPARTMENTAL REPRESENTAT IVE SUBMITTED THAT THERE WAS A SEARCH OPERATION IN THE CASE OF SHRI T. MUNIAPPAN, T. ELANGOVAN AND V.T. KUMARAVEL ON 11.11 .2010. DURING THE COURSE OF SEARCH OPERATION, THE BOOKS OF ACCOUN T AND OTHER DOCUMENTS RELATING TO THE ASSESSEE WERE FOUND. TH EREFORE, NOTICE WAS ISSUED U/S 153C TO THE ASSESSEE AND ASSESSME NT PROCEEDING WAS COMPLETED U/S 153C OF THE ACT. DURING THE COU RSE OF ASSESSMENT, THE ASSESSING OFFICER MADE ADDITION OF ` 3,08,25,303/- FOR ASSESSMENT YEAR 2009-10 AND ANOTHER SUM OF ` 3,03,90,091/- FOR ASSESSMENT YEAR 2010-11. ACCORDING TO THE LD. DR, THE CASH FLOW STATEMENT AND THE BALANCE SHEET FILED BEFORE THE ASSESSING OFFICER DI SCLOSES THE INVESTMENT IN VARIOUS LANDS. FOR THE ASSESSMENT YE AR 2009-10, THE ASSESSEE CLAIMED THAT IT BORROWED A LOAN OF ` 3,08,25,303/-. THE ASSESSEE FURTHER CLAIMS THAT THE LOAN WAS OBTAINED FROM VARIOUS INDIVIDUALS IN THE NAME OF THE INDIVIDUAL PARTNERS OF THE ASSESSEE-FIRM. THE ASSESSEE CLARIFIED BEFORE THE ASSESSING OFFICE R THAT THE LENDERS OF THE LOAN WERE MORE COMFORTABLE IN LENDING THE MONEY TO THE INDIVIDUALS SO THAT RECOVERY OF THE SAME MAY BE MOR E EASY. THE LD. DR FURTHER SUBMITTED THAT THE ASSESSING OFFICER FOU ND THAT THE GENUINENESS OF THE LOAN WAS NOT DOUBTED. HOWEVER, THE EXPLANATION OF THE ASSESSEE THAT THE FIRM USED THE LOAN BORROW ED BY THE PARTNERS FOR PURCHASING THE LANDS WAS NOT PROVED BEYOND DOUB T. THEREFORE, THE ITA NO. 386 & 387/15 :- 3 -: ASSESSING OFFICER ADDED THE LOAN OUTSTANDING IN THE BOOKS OF ACCOUNT AS ON 31.3.2009 AS INCOME OF THE ASSESSEE. ACCORD ING TO THE LD. DR, IN THE ABSENCE OF ANY EVIDENCE TO SHOW THAT THE LOA N AVAILED BY THE INDIVIDUAL PARTNERS WAS USED FOR INVESTMENT IN LA NDS BY THE ASSESSEE-FIRM, THE ADDITION MADE BY THE ASSESSING O FFICER OUGHT NOT TO HAVE BEEN DELETED BY THE CIT(A). 3. ON THE CONTRARY, SHRI S. SRIDHAR, LD. COUNSEL FOR T HE ASSESSEE SUBMITTED THAT THE ASSESSMENT WAS FRAMED U/S 153C OF THE ACT CONSEQUENT TO THE SEARCH CARRIED ON IN THE CASE OF SHRI T. MUNIAPPAN, T. ELANGOVAN AND V.T. KUMARAVEL ON 11.11.2010. ACC ORDING TO THE LD. COUNSEL, NO MATERIAL WAS FOUND RELATING TO THE ASS ESSEE-FIRM DURING THE COURSE OF SEARCH OPERATION. THE SO CALLED BOOK S OF ACCOUNT SAID TO BE FOUND DURING THE COURSE OF SEARCH OPERATION WAS MAINTAINED BY THE ASSESSEE-FIRM IN THE REGULAR COURSE OF BUSINESS AND NO ADDITION WAS MADE ON THE BASIS OF THE BOOKS OF ACCOUNT AND OTHER MATERIALS FOUND DURING THE COURSE OF SEARCH OPERATION. THE LD. COU NSEL FURTHER CLARIFIED THAT THE ASSESSEE INVESTED FUNDS IN THE LANDS. TH E SOURCE FOR MAKING INVESTMENT IN THE LANDS IS THE LOAN BORROWED BY THE INDIVIDUAL PARTNERS OF THE ASSESSEE-FIRM. REFERRING TO THE ORDER OF T HE ASSESSING OFFICER, THE LD. COUNSEL SUBMITTED THAT THE ASSESSING OFFICE R IN CATEGORICAL TERMS ADMITS THAT GENUINENESS OF THE LOAN WAS NOT I N DOUBT AND WHAT WAS DOUBTED IS THE INVESTMENT OF FUNDS IN THE LAND S FROM THE LOAN ITA NO. 386 & 387/15 :- 4 -: BORROWED BY THE INDIVIDUAL PARTNERS. REFERRING T O THE ASSESSMENT ORDER, THE LD. COUNSEL FURTHER SUBMITTED THAT THE A SSESSEE HAS PRODUCED THE ACCOUNTS COPIES FROM THE LENDERS TO PR OVE THE LOAN. ACCORDING TO THE LD. COUNSEL, NO MATERIAL WAS FOUND DURING THE COURSE OF SEARCH OPERATION THAT THE INVESTMENT MADE BY THE PARTNERSHIP FIRM IS NOT FROM THE LOAN BORROWED BY THE INDIVIDUAL PAR TNERS. ACCORDING TO THE LD. COUNSEL, THE PARTNERSHIP FIRM IS NOT A LEGA L ENTITY UNDER THE COMMON LAW, THEREFORE, NATURALLY THE INDIVIDUAL PAR TNERS HAVE TO BORROW LOAN TO CARRY OUT THE BUSINESS OF THE PARTNE RSHIP FIRM. WHEN THE INDIVIDUAL PARTNERS OF THE PARTNERSHIP FIRM BOR ROWED THE LOAN AND THE SAME WAS UTILIZED BY THE PARTNERSHIP FIRM, ACCO RDING TO THE LD. COUNSEL, IT AMOUNTS TO BORROWAL BY THE PARTNERSHIP FIRM, HENCE, THE INVESTMENT MADE HAS TO BE CONSTRUED FROM THE BORROW ED FUNDS. NO MATERIAL IS AVAILABLE ON RECORD TO SUGGEST THAT THE PARTNERSHIP FIRM HAS INTRODUCED ITS OWN MONEY FOR MAKING INVESTMENT IN T HE LANDED PROPERTIES. THE ASSESSING OFFICER EXPECTED THE AS SESSEE TO PROVE A NEGATIVE ONE. ACCORDING TO THE LD. COUNSEL, IN THE ABSENCE OF ANY MATERIAL, THE ASSESSING OFFICER CANNOT SAY THAT LOA N BORROWED BY THE INDIVIDUAL PARTNERS FOR PURCHASE OF LANDS BY THE PA RTNERSHIP FIRM WAS IN DOUBT. ACCORDING TO THE LD. COUNSEL, THE LOAN BORR OWED BY THE INDIVIDUAL PARTNERS WAS TREATED AS FUND OF THE ASS ESSEE-FIRM AND THE SAME WAS REFLECTED AS OUTSTANDING LOAN AS ON 31.3.2 009 AND ITA NO. 386 & 387/15 :- 5 -: 31.3.2010 IN THE BALANCE SHEET OF THE ASSESSEE-FIR M. THEREFORE, THE ASSESSING OFFICER IS NOT JUSTIFIED IN MAKING ANY AD DITION. THE CIT(A), AFTER CONSIDERING THE FACTS OF THE CASE, FOUND THAT THE ASSESSEE HAS FILED THE CONFIRMATION LETTER FROM THE LENDERS, THE PAN AND ADDRESS OF THE LENDERS BEFORE THE ASSESSING OFFICER. THE ASS ESSEE HAS ESTABLISHED THE IDENTITY OF THE CREDITORS, GENUINEN ESS OF THE TRANSACTION AND CREDITWORTHINESS OF THE CREDITORS. ONCE THE BO RROWAL OF THE FUNDS WAS ESTABLISHED BEYOND DOUBT, ACCORDING TO THE LD. COUNSEL, THE ASSESSING OFFICER CANNOT DOUBT THE INVESTMENT MADE BY THE PARTNERSHIP FIRM IN THE LANDS. 4. THE LD. COUNSEL FOR THE ASSESSEE FURTHER SUBMITTED THAT IT IS COMMON PRACTICE FOR A PARTNERSHIP FIRM TO RAISE FUN DS THROUGH ITS PARTNERS. THE ASSESSEE-FIRM EXPLAINED BEFORE THE ASSESSING OFFICER THAT THE PARTNERS BEING MORE SOLVENT AND THE LENDER S WERE COMFORTABLE TO LEND THE MONEY IN THE NAME OF THE PARTNERS, THE MONEY WAS BORROWED BY THE INDIVIDUAL PARTNERS. AS SUBMITTED B Y THE LD. COUNSEL EARLIER, THE PARTNERSHIP FIRM HAS NO LEGAL EXISTENC E, HENCE, NATURALLY THE INDIVIDUAL PARTNERS HAVE TO ACT UPON TO BORROW THE LOAN ON BEHALF OF THE ASSESSEE-FIRM. THE LD. COUNSEL FURTHER SUB MITTED THAT ALL THE TRANSACTIONS WERE CARRIED OUT THROUGH BANKING CHANN EL. THE SEIZED MATERIAL DISCLOSES THE PAYMENT OF INTEREST BY THE P ARTNERSHIP FIRM TO THE LENDERS OF THE LOAN. THE ASSESSING OFFICER HAS CONVENIENTLY ITA NO. 386 & 387/15 :- 6 -: OMITTED TO CONSIDER THIS MATERIAL FOUND DURING THE COURSE OF SEARCH OPERATION. WHEN THE LOAN WAS BORROWED BY THE INDIV IDUAL PARTNERS AND USED BY THE PARTNERSHIP FIRM FOR PURCHASE OF LA NDS AND THE INTEREST WAS PAID BY THE PARTNERSHIP FIRM WHICH WAS EVIDENCE D BY THE SEIZED MATERIAL FOUND DURING THE COURSE OF SEARCH OPERATIO N, ACCORDING TO THE LD. COUNSEL, THE CIT(A) HAS RIGHTLY DELETED THE ADD ITION. THEREFORE, THE CONTENTION OF THE REVENUE THAT THE USAGE OF THE BOR ROWED FUNDS BY THE PARTNERSHIP FIRM WAS NOT PROVED IS NOT CORRECT. 5. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS ON EITHER SIDE AND ALSO PERUSED THE MATERIAL AVAILABLE ON RECORD. FROM THE MATERIAL AVAILABLE ON RECORD IT APPEARS THAT THE ASSESSEE EN GAGED ITSELF IN THE BUSINESS OF MONEY LENDING. THE ASSESSEE FILED CA SH FLOW STATEMENT AND BALANCE SHEET BEFORE THE ASSESSING OFFICER WHIC H DISCLOSE THE INVESTMENT MADE IN VARIOUS LANDS. THE ASSESSING OF FICER FOUND THAT THE SOURCE FOR MAKING INVESTMENT IN LANDS WAS NOT P ROVED BEYOND DOUBT, THEREFORE, THE OUTSTANDING LOAN AS ON 31.3.2 009 AND 31.3.2010 WAS TAKEN AS INCOME OF THE ASSESSEE. AS RIGHTLY S UBMITTED BY THE LD. COUNSEL FOR THE ASSESSEE, THE ASSESSING OFFICER OBS ERVED IN THE ASSESSMENT ORDER THAT THE GENUINENESS OF THE LOAN M AY NOT BE DOUBTED AND WHAT WAS DOUBTED BY THE ASSESSING OFFIC ER IS THE EXPLANATION OF THE ASSESSEE THAT THE LOAN BORROWED BY THE INDIVIDUAL PARTNERS WAS USED FOR PURCHASE OF THE LAND BY THE P ARTNERSHIP FIRM. AS ITA NO. 386 & 387/15 :- 7 -: SUBMITTED BY THE LD. COUNSEL FOR THE ASSESSEE THE P ARTNERSHIP FIRM HAS NO STATUTORY EXISTENCE AND IT HAS TO ACT ONLY THROU GH THE INDIVIDUAL PARTNERS, THEREFORE, UNDER THE COMMON LAW ONLY THE INDIVIDUAL PARTNERS HAS TO BORROW LOAN FOR USAGE OF THE PARTNERSHIP FIR M. THE FACT THAT THE INDIVIDUAL PARTNERS BORROWED LOAN WAS NOT DOUBTED B Y THE ASSESSING OFFICER IN THE ASSESSMENT ORDER. IN THE COURSE OF SEARCH OPERATION, THE MATERIAL FOUND DISCLOSES PAYMENT OF INTEREST BY THE PARTNERSHIP FIRM TO THE LENDERS OF THE MONEY TO THE INDIVIDUAL PARTNERS . MOREOVER, THE LOAN TRANSACTION WAS CARRIED THROUGH THE BANKING CHANNEL S. IN THOSE CIRCUMSTANCES, THIS TRIBUNAL IS OF THE CONSIDERED OPINION THAT THERE IS NO REASON TO DOUBT THE INVESTMENT OF THE LOAN BORRO WED BY THE INDIVIDUAL PARTNERS BY THE PARTNERSHIP FIRM IN THE LANDS. AS RIGHTLY SUBMITTED BY THE LD. COUNSEL FOR THE ASSESSEE, IT I S COMMON PRACTICE IN THE BUSINESS THAT INDIVIDUAL PARTNERS TO BORROW LOA NS AND USE THE SAME FOR THE PURPOSE OF BUSINESS OF THE PARTNERSHIP FIRM . THOUGH THE PARTNERSHIP FIRM IS A SEPARATE ASSESSABLE UNIT UNDE R THE INCOME-TAX ACT, 1961, THE TRANSACTION UNDER THE COMMON LAW AND THE TREATMENT OF THE PARTNERSHIP FIRM UNDER THE COMMON LAW CANNOT BE IGNORED WHILE DECIDING THE LOAN BORROWED BY THE INDIVIDUAL PARTNE RS. IN THOSE CIRCUMSTANCES, THIS TRIBUNAL IS OF THE CONSIDERED OPINION THAT THE LOAN BORROWED BY THE INDIVIDUAL PARTNERS FOR BOTH THE AS SESSMENT YEARS WAS USED BY THE ASSESSEE-FIRM FOR INVESTMENT IN VARIOU S LANDS. THEREFORE, ITA NO. 386 & 387/15 :- 8 -: THE LOAN OUTSTANDING AS ON 31.3.2009 AND 31.3.2010 IS NOTHING BUT THE LOAN BORROWED BY THE INDIVIDUAL PARTNERS FOR THE BU SINESS OF THE ASSESSEE-FIRM. THEREFORE, THE CIT(A) HAS RIGHTLY D ELETED THE ADDITION MADE BY THE ASSESSING OFFICER. THIS TRIBUNAL DO NO T FIND ANY REASON TO INTERFERE WITH THE ORDER OF THE CIT(A). ACCORDINGL Y, THE SAME IS CONFIRMED. 6. IN THE RESULT, BOTH THE APPEALS OF THE REVENUE STAN D DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 29 TH APRIL, 2016, AT CHENNAI. SD/- SD/- ( . !' ) (A. MOHAN ALANKAMONY) # / ACCOUNTANT MEMBER ( . . . ' ) (N.R.S. GANESAN) / JUDICIAL MEMBER #$ / CHENNAI %& / DATED: 29 TH APRIL, 2016 RD &' ()*) / COPY TO: 1 . / APPELLANT 4. + / CIT 2. / RESPONDENT 5. ),- . / DR 3. +/' / CIT(A) 6. -01 / GF