ITO, New Delhi V. M/s. Rajputana Stores (Bombay) Pvt. Ltd., New Delhi

ITA 3928/DEL/2011

• Counselvise Citation: 392820114 RSA 2011
• Duration Of Justice: 3 year(s) 4 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-01-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: F
• Next Hearing Date: 12-01-2015
• Assessment Year: 2007-2008
• Appeal Filed On: 25-08-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: VIKRAM SAHAY
• Assessee Lawyers: V K JAIN
• Keywords: Rejection of books of accounts
• Section: 143(3); 142(1); 133(6)

Judgement Text

ITA NO. 3928/ DEL/ 2011 1 IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH F , NEW DELHI BEFORE SHRI H.S. SIDHU, JUDICIAL MEMBER AND SHRI T.S. KAPOOR, ACCOUNTANT MEMBER I.T.A. N O. 3928/DEL/2011 A.Y. : 2007 - 08 INCOME TAX OFFICER, WARD 15(2), ROOM NO. 213, CR BUILDINGS, I.P. ESTATE, NEW DELHI VS. M/S RAJPUTANA STORES (BOMBAY) (P) LTD., 702, ANSAL BHAWAN, 16, KASTURBA GANDHI MARG, NEW DELHI (PAN: AAACR0855P) (APPELLANT) (RESPONDENT) DEPARTMENT BY : SH. VIKRAM SAHAY, SR. DR ASSESSEE BY : SH. V.K. JAIN, CA DATE OF HEARING : 12 - 1 - 201 5 DATE OF ORDER : 12 - 1 - 201 5 ORDER PER H.S. SIDHU : J M TH IS APPEAL BY THE REVENUE IS DIRECTED AGAINST THE ORDER OF THE LD. COMMISSIONER OF INCOME TAX (APPEALS ) - X VIII , NEW DELHI DATED 02 . 5 .201 1 P ERTAINING TO ASSESSMENT YEAR 2007 - 08 ON THE FOLLOWING GROUNDS: - 1. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) ERRED IN DELETING THE ADDITION OF RS. 26,02,839/ - ITA NO. 3928/ DEL/ 2011 2 WHICH IS A DIFFERENCE BETWEEN INTEREST RECEIVED AND INTEREST PAID BY THE ASSESSEE TO SISTER CONCERNS NAMELY M/S PEARL BEVERAGES LTD. AND M/S JAIPUR BEVERAGES & FOOD INDUSTRIES P LTD. 2. THE LD. CIT(A) FAILED TO APPRECIATE THE FACT THAT THIS WAS AS SHAM TRANS ACTION AND THAT THERE WAS NO JUSTIFICATION IN TAKING OR GIVING LOANS TO SISTER CONCERNS. 3. THE APPELLANT CRAVES TO BE ALLOWED TO ADD ANY FRESH GROUNDS OF APPEAL AND OR DELETE OR AMEND ANY OF THE GROUNDS OF APPEAL. 2. THE BRIEF FACTS OF THE CASE ARE THAT THE RETURN OF INCOME WAS FILED ONLINE IN THIS CASE ON 29.10.2007 DECLARING INCOME AT RS. NIL. THE RETURN WAS PROCESSED U/.S 143(1) OF THE I.T. ACT AND LATER ON IT WAS SELECTED FOR SCRUTINY UNDER CASS. NOTICES U/S. 1 43(2) AND 142(1) WERE ISSUED AND SERVED UPON THE ASSESSEE AND IN COMPLIANCE THERETO NECESSARY DETAILS WERE FILED. BOOKS OF ACCOUNT WERE PRODUCED WHICH WERE EXAMINED ON TEST CHECK BASIS. THE AO OBSERVED IN HIS ORDER THAT ASSESSES HAS TAKEN UNSECURED LOA N FROM SISTER CONCERN, M/S PEARL BEVERAGES LTD. ON WHICH IT HAS PAID INTEREST @10% WHICH WORKS OUT TO RS. 82,75,818/ - FOR THE YEAR UNDER CONSIDERATION. HE FURTHER OBSERVED THAT ASSESSEE HAS ALSO ADVANCED UNSECURED LOAN TO ANOTHER SISTER CONCERN, M/S J AIPURIA BEVERAGES & FOOD INDUSTRIES PVT. LTD. ON WHICH IT HAS EARNED INTEREST @10% WHICH WORKS OUT TO RS. 56,72,979/ - FOR THE YEAR UNDER CONSIDERATION. THE AO HAS OBSERVED THAT THERE IS NO JUSTIFICATION FOR THE ASSESEE IN PAYING THE INTEREST @10% AND EA RNING INTEREST @10% WITHOUT DERIVING ANY PROFIT IN THE TRANSACTION. THE AO HAS ALSO OBSERVED THAT THE ASESSEE HAS ONLY PASSED OFF LOAN RECEIVED FROM ONE SISTER ITA NO. 3928/ DEL/ 2011 3 CONCERN TO ANOTHER. THE AO HAS ACCORDINGLY HELD THAT THE ABOVE TRANSACTION TO BE SHAM AND HAS REJECTED THE BOOKS OF ACCOUNTS OF THE ASSESSEE AND HAS DISALLOWED THE DIFFERENCE BETWEEN THE INTEREST RECEIVED AND INTEREST PAID AT RS. 26,02,839/ - AND ACCORDINGLY COMPLETED THE ASSESSMENT ON 7.12.2009 U/S. 143(3) OF THE I.T. ACT. 3. AGAINST THE AFORESAID ASSESSMENT ORDER THE ASSESSEE APPEALED BEFORE LD. CIT(A), WHO VIDE IMPUGNED ORDER DATED 02.5.2011 HAS DELETED THE ADDITION. 4. AGAINST THE ABOVE ORDER PASSED BY THE LD. CIT(A), THE REVENUE IS IN APPEAL BEFORE US. 5. LD. DR DRAWN OUR A TTENTIO N TOWARDS THE ASSESSMENT ORDER ESPECIALLY THE PAGE 3 AND STATED THAT THE AO HAS RIGHTLY MADE THE ADDITION IN DISPUTE BY DECLARING AS SHAM TRANSACTION. HE ALSO DRAW OUR ATTENTION TOWARDS THE IMPUGNED ORDER VIDE PARA 5.1 AND 5.2 OF THE IMPUGNED ORDER AT PA GES 10 - 13 AND STATED THAT LD. CIT(A) HAS WRONGLY DELETED THE ADDITION IN DISPUTE ON THE BASIS THAT NO SUCH DISALLOWANCE HAS BEEN MADE IN THE PREVIOUS AS WELL AS SUBSEQUENT YEARS, WHICH IS TOTALLY WRONG BECAUSE THE AO AFTER THOROUGHL Y EXAMINING ALL THE EVID ENCES HAS DECLARED THE TRANSACTION IN DISPUTE AS SHAM. THEREFORE, THE IMPUGNED ORDER MAY BE CANCELLED BY ACCEPTING THE APPEAL FILED BY THE DEPARTMENT. 5.1 LD. COUNSEL OF THE ASSESSEE HAS RELIED UPON THE ORDER OF THE LD. CIT(A) AND STATED THAT THE RE VENUE AUTHORITY HAS NOT MADE SUCH DISALLOWANCE IN THE PREVIOUS AS WELL AS IN THE SUBSEQUENT YEAR S , THEREFORE, THE LD. CIT(A) HAS RIGHTLY DELETED THE ADDITION IN DISPUTE. 6. WE HAVE HEARD BOTH THE COUNSEL AND PERUSED THE RECORDS AVAILABLE WITH US, WE A RE OF THE CONSIDERED VIEW THAT THE LD. CIT(A) ITA NO. 3928/ DEL/ 2011 4 HAS GIVEN HIS FINDING IN PARA 5.1 AND 5.2 AT PAGES 10 TO 13 OF HIS IMPUGNED ORDER. FOR THE SAKE OF CONVENIENCE, WE ARE REPRODUCING THE AFORESAID RELEVANT PAR AS AS UNDER: - 5.1 I HAVE CAREFULLY CONSIDER ED THE ASSESSMENT ORDER AND THE SUBMI SSION MADE BY THE L D. AR. AS PER THE ASSESSMENT ORDER, THE APPELLANT HAS TAKEN UNSECURED LOAN FROM SISTER CONCERN, M / S PEARL BEVERAGES LTD. ON WHICH IT HAS PAID INTEREST @ 10% WHICH WORKS OUT TO RS. 82,75,818/ - FOR THE YEAR UNDER CONSIDERATION. THE APPELLANT HAS ALSO ADVANCED UNSECURED LOAN TO ANOTHER SISTER CONCERN, M / S JAIPURIA BEVERAGES & FOOD INDUSTRIES PVT. LTD. ON WHICH IT HAS EARNED INTEREST @ 10% WHICH WORKS OUT TO RS. 56,72,979/ - FOR THE YEAR UNDER CONSIDERATION. THE A O HAS OBSERVED THAT THERE IS NO JUSTIFICATION FOR THE APPELLANT IN PAYIN G INTEREST @ 10% AND EARNING INTEREST @ 10% WITHOUT DERIVING ANY PROFIT IN THE TRANSACTION. THE A O HAS ALSO OBSERVED THAT THE APPELLANT HAS ONLY PASSED OFF LOAN REC EIVED FROM ONE SISTER CONCERN TO ANOTHER. THE A O HAS ACCORDINGLY HELD THE ABOVE TRANSACTION TO BE SHAM AND HAS REJECTED THE BOOKS OF ACCOUNTS OF THE APPELLANT AND HAS DISALLOWED THE DIFFERENCE BETWEEN THE INTEREST RECEIVED AND INTEREST PAID AT RS. 26,02,83 9/ - . 5.2 DURING THE APPELLATE PROCEEDING, IT IS ARGUED BY THE ID. AR THAT THE LOANS RAISED BY THE APPELLANT HAVE BEEN USED FOR ACQUIRING FIXED ASSETS IN EARLIER YEARS, TO MEET LOSSES SUFFERED IN THE PAST AND TO PARTLY GIVE LOANS TO SISTER CONCERN AT THE S AME ITA NO. 3928/ DEL/ 2011 5 INTEREST RATE. IT IS ARGUED THAT THE APPELLANT IS ENGAGED IN THE BUSINESS OF TRADING IN SHARES, FINANCING AND INVESTMENTS. THE LOAN TRANSACTIONS HAVE BEEN CARRIED OUT THROUGH ACCOUNT PAYEE CHEQUES AND THE SAME HAVE BEEN DULY RECORDED IN THE BOOKS OF AC COUNTS. THE RECEIPT AND PAYMENT OF INTEREST HAS ALSO BEEN RECORDED IN THE BOOKS OF ACCOUNTS. THE COPY OF LOAN ACCOUNTS WERE DULY CONFIRMED BY THE CONCERNED PARTIES AND SUBMITTED BEFORE THE AO FOR VERIFICATION DURING THE ASSESSMENT PROCEEDING. THE SAID PART ICULARS WERE ALSO CONFIRMED INDEPENDENTLY BY M / S PEARL BEVERAGES LTD. AND M / S JAIPURIA BEVERAGES & FOOD INDUSTRIES PVT. LTD. IN RESPONSE TO NOTICE ULS 133(6) ISSUED BY THE AO IN THE COURSE OF THE ASSESSMENT PROCEEDING. THE ABOVE TWO COMPANIES HAVE ALSO FIN D COPY OF ACCOUNT OF THE APPELLANT COMPANY IN THEIR BOOKS, COPY OF BANK STATEMENTS, COPY OF AUDITED BALANCE SHEETS AND COPY OF INCOME TAX RETURNS BEFORE THE AO DULY REFLECTING THE ABOVE TRANSACTIONS. IT IS ACCORDINGLY ARGUED THAT THERE IS NO BASIS FOR REJE CTING THE BOOKS OF ACCOUNTS AND DISALLOWING THE NET INTEREST EXPENDITURE. IT IS ALSO ARGUED THAT THE APPELLANT IS REGULARLY ENGAGED IN THE ABOVE BUSINESS AND NO SUCH DISALLOWANCE HAS BEEN MADE IN ANY PRECEDING OR SUCCEEDING YEARS BY THE AO. THE ID. AR HAS ALSO FILED A COPY OF SCRUT INY ASSESSMENT ORDERS U / S 143( 3 ) FOR A.Y. 2005 - 06, 2006 - 07 AND 2008 - 09 IN THE CASE OF THE APPELLANT WHEREIN NO SUCH DISALLOWANCE HAS BEEN MADE. ON CAREFUL EXAMINATION OF THE MATTER, I FIND THAT THE ITA NO. 3928/ DEL/ 2011 6 DISALLOWANCE MADE BY THE AO I S MISCONCEIVED AND WITHOUT ANY BASIS. THE AO HAS ALSO NOT GIVEN ANY REASON FOR REJECTING THE BOOKS OF ACCOUNT AND HOLDING THE LOAN TRANSACTIONS TO BE SHAM. ON THE OTHER HAND, THE APPELLANT HAS PRODUCED A PLETHORA OF DOCUMENTS BEFORE THE AO ESTABLISHING T HE GENUINENESS AND BUSINESS PURPOSES OF THE ABOVE TRANSACTION. THE SAME HAVE ALSO BEEN CONFIRMED BY INDEPENDENT ENQUIRY MADE BY THE AO BY ISSUING NOTICES U / S 133(6) TO CONCERNED PARTIES. IT IS SETTLED LAW THAT HOW TO RUN THE BUSINESS IS THE PREROGATIVE OF THE BUSINESSMAN AND THE AO CANNOT STEP INTO HIS SHOES. REJECTION OF THE BOOKS OF ACCOUNT AND DISALLOWANCE OF EXPENSES CANNOT BE DONE WHIMSICALLY WITHOUT PROPER BASIS. THE IMPUGNED DISALLOWANCE OF RS. 26,02,839/ - THEREFORE, CANNOT BE SUSTAINED EITHER ON FACTS OR IN LAW. THE SAME IS, THEREFORE, DELETED. 6.1 AFTER GOING THROUGH THE ORDER PASSED BY THE REVENUE AUTHORITIES ESPECIALLY THE IMPUGNED ORDER OF WHICH RELEVANT PRARAS ARE REPRODUCED AS ABOVE, WE ARE OF THE CONSIDERED VIEW THAT LOAN TRANSACTIONS HA VE BEEN CARRIED OUT THROUGH ACCOUNT PAYEE CHEQUES AND THE SAME HAS BEEN DULY RECORDED IN THE BOOKS OF ACCOUNT. THE RECEIPT AND THE PAYMENT OF INTEREST HAS ALSO BEEN RECORDED IN THE BOOKS OF ACCOUNT. IT IS NOT DISPUTED THAT THE ASSESEE IS ENGAGED IN THE BUSINESS IN DISPUTE FROM THE LAST AND SUBSEQUENT YEARS AND FOR THAT PROOF THE ASSESSEE HAS FILED THE ASSESSMENT ORDER PASSED BY THE AO UNDER SECTION 143(3) OF THE I.T. ACT FOR THE ASSTT. YEARS 2005 - 06, 2006 - 07 AND 2008 - 09 IN WHICH NO SUCH DISALLOWANCE HAS BEEN MADE BY THE REVENUE AUTHORITIES. EVEN OTHERWISE, THE REVENUE ITA NO. 3928/ DEL/ 2011 7 HAS NOT PRODUCED ANY DOCUMENTARY EVIDENCE ESTABLISHING THAT THE BUSINESS OF THE ASSESSEE IS NOT GENUINE AND THE TRANSACTIONS IS ALSO SHAM. KEEPING IN VIEW OF THE FACTS AND CIRCUMSTAN CES OF THE CASE AS EXPLAINED ABOVE, WE ARE OF THE CONSIDERED VIEW THAT LD. CIT(A) HAS PASSED A WELL REASONED ORDER ON THE BASIS OF THE ASSESSMENT ORDER S PASSED U/S. 143(3) OF THE ACT FOR THE PREVIOUS AS WELL AS IN THE SUBSEQUENT ASSESSMENT YEARS, WHEREI N NO SUCH DISALLOWANCE HAS BEEN MADE BY THE REVENUE AUTHORITIES. THEREFORE, NO INTERFERENCE IS CALLED FOR IN THE WELL REASONED ORDER PASSED BY THE LD. CIT(A), HENCE, WE UPHOLD THE SAME BY DISMISSING THE APPEAL OF THE REVENUE. 7. IN THE RESULT, THE APP EAL FILED BY THE REVENUE STANDS DISMISSED. ORDER PRONOUNCED IN THE O PEN C OURT ON 1 2 / 1 /20 1 5 . SD/ - SD/ - [ T.S. KAPOOR ] [ H.S. SIDHU ] ACCOUNTANT MEMBER JUDICIAL MEMBER DATE 1 2 / 1 /201 5 SRBHATNAGAR COPY FORWARDED TO: - 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT (A) 5. DR, ITAT TRUE COPY BY ORDER, ASSISTANT REGISTRAR, ITAT, DELHI BENCHES ITA NO. 3928/ DEL/ 2011 8