ITO, Ward-1(1), Kolkata, Kolkata V. M/s. Artlink Vintrade Pvt. Ltd., Mumbai

ITA 406/KOL/2017

• Counselvise Citation: [2018] 125 COUNSELVISE.COM (IT) 4554 (ITAT-KOLKATA)
• Duration Of Justice: 1 year(s) 5 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 01-08-2018
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2012-2013
• Appeal Filed On: 01-03-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Section: 143(3); 68

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH : KOLKATA [BEFORE HONBLE SHRI ABY. T. VARKEY, JM & SHRI M. BALAGANESH, AM ] I.T.A NO. 406/KOL/201 7 ASSESSMENT YEAR : 2012-1 3 ITO, WARD-1(1), KOLKATA -VS- M/S ARTLINK VIN TRADE PVT. LTD. [PAN: AACCA 1533 H ] (APPELLANT) (RESPONDENT) FOR THE APPELLANT : SHRI G. HANGSHING, CIT FOR THE RESPONDENT : SHRI MANOJ KATARUKA, ADV OCATE DATE OF HEARING : 02.07.2018 DATE OF PRONOUNCEMENT : 01.08.2018 ORDER PER M.BALAGANESH, AM 1. THIS APPEAL BY THE REVENUE ARISES OUT OF THE ORDER OF THE LEARNED COMMISSIONER OF INCOME TAX(APPEALS)-9, KOLKATA [IN SHORT THE LD CIT (A)] IN APPEAL NO. 235/CIT(A)- 9/WD-1(4)/2016-17/KOL DATED 26.12.2016 AGAINST THE ORDER PASSED BY THE ITO, WARD- 1(1), KOLKATA [ IN SHORT THE LD AO] UNDER SECTION 143(3) OF THE INCOME TAX ACT, 1961 (IN SHORT THE ACT) DATED 24.03.2014 FOR THE ASS ESSMENT YEAR 2012-13. 2. THE ONLY ISSUE TO BE DECIDED IN THIS APPEAL IS A S TO WHETHER THE LD CITA WAS JUSTIFIED IN DELETING THE ADDITION MADE TOWARDS LOANS RECEIVE D BY THE ASSESSEE IN THE SUM OF RS 64,04,20,000/- IN THE FACTS AND CIRCUMSTANCES OF TH E CASE. 2 ITA NO.406 /KOL/2017 M/S ARTLINK VINTRADE PVT. LTD. A.YR.2012-13 2 3. THE BRIEF FACTS OF THIS ISSUE ARE THAT THE ASSES SEE HAD FILED ITS RETURN OF INCOME FOR THE ASST YEAR 2012-13 ON 28.9.2012 DECLARING TOTAL LOSS OF RS 14,750/-. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE AUTHORIZED REPRESENT ATIVE OF THE ASSESSEE APPEARED AND PRODUCED THE BOOKS OF ACCOUNTS AND OTHER RELEVANT D ETAILS & DOCUMENTS AND THE SAME WERE TEST CHECKED BY THE LD AO. THE LD AO OBSERVED THAT IN THE BALANCE SHEET AS ON 31.3.2012, THE ASSESSEE HAD ADVANCED SHORT TERM LO ANS AND ADVANCES AND CALLED FOR THE DETAILS OF THE SAME, WHICH WERE FURNISHED BY THE AS SESSEE . FROM THE SAID DETAILS, THE LD AO OBSERVED THAT THE ASSESSEE HAD ACTUALLY RECEIVED A LOAN OF RS 13,27,20,000/- AND HAD NETTED OFF THE SAME WITH THE LOANS GIVEN BY IT IN THE BALANCE SHEET. THIS SUM OF RS 13,27,20,000/- WAS RECEIVED BY THE ASSESSEE AS LOAN FROM M/S DATABASE SOFTWARE TECHNOLOGY PVT LTD. APART FROM THIS, THE LD AO OB SERVED THAT THE ASSESSEE HAD TAKEN LAON FROM ANOTHER PARTY M/S INDIGO EDUTAINMENT PVT LTD TO THE TUNE OF RS 50,77,00,000/-. HENCE THE SUBJECT MATTER OF VERIFI CATION OF LOANS RECEIVED WERE IN RESPECT OF DATABASE SOFTWARE TECHNOLOGY PVT LTD AND INDIGO EDUTAINMENT PVT LTD. THE LD AO OBSERVED THAT THE ASSESSEE FILED THE DETA ILS PARTLY SUCH AS LOAN CONFIRMATION ETC. HE LATER OBSERVED THAT THE ASSESSEE COMPANY H AD NOT PRODUCED THE FULL DETAILS AS WELL AS DIRECTORS OF THE ALLEGED LOAN CREDITORS COM PANIES TO SUBSTANTIATE THE IDENTITY AND CREDITWORTHINESS OF THE LOAN CREDITORS AND GENUINEN ESS OF THE LOAN TRANSACTIONS. ACCORDINGLY, HE CONCLUDED THAT THE UNSECURED LOANS RECEIVED FROM THESE TWO PARTIES REMAIN UNEXPLAINED AND HENCE TO BE TAXED U/S 68 OF THE ACT IN THE SUM OF RS 64,04,20,000/- BY HOLDING THAT THE SAID SUM IS NOTH ING BUT ASSESSEES OWN MONEY CONDUITED UNDER THE GARB OF UNSECURED LOANS INTO IT S BOOKS OF ACCOUNTS. 4. THE ASSESSEE PLEADED BEFORE THE LD CITA THAT BO TH THE LOAN CREDITOR COMPANIES SUPRA BELONG TO THE SAME GROUP TO WHICH THE ASSESSEE BELO NGS TO. THE DIRECTORS OF THE THREE COMPANIES DURING THE RELEVANT PERIOD ARE AS UNDER:- 3 ITA NO.406 /KOL/2017 M/S ARTLINK VINTRADE PVT. LTD. A.YR.2012-13 3 A) ARTLINK VINTRADE PVT LTD SHRI SUDHIR K KAMBALE MISS LOVELEEN BRAGANZA SHRI MAHENDAR KHIRODWALA B) INDIGO EDUTAINMENT PVT LTD SHRI SUDHIR K KAMBALE - RESIGNED ON 31.1.2012 SHRI VILAS R DARPE - RESIGNED ON 31.1.2012 SHRI ARUN K DALMIA - RESIGNED ON 31.1.2012 SHRI SATYANARAYAN R AGARWAL SMT RADHA KARSAN CHITRODA SHRI HEMANT NARENDRA SAMPAT - RESIGNED ON 24.9.201 2 C) DATABASE SOFTWARE TECHNOLOGY PVT LTD SHRI ARJUN LAL SAINI - RESIGNED ON 31.1.2012 SHRI MAHENDAR KHIRODWALA - RESIGNED ON 31.1.2012 SHRI KRISHNA SHRIPATI DESAI - APPOINTED ON 27.10. 2011 SHRI PANDURANG RAMCHANDRA NAVKHANE - APPOINTED ON 2 7.10.2011 4.1. IT WAS SUBMITTED THAT ALL THESE DIRECTORS ARE RESIDENTS OF MUMBAI. THE ASSESSEE STATED THAT IT HAD DISCHARGED ITS ONUS BY FURNISHIN G ITS BANK ACCOUNT AND THE LEDGER ACCOUNT OF THE CREDITORS IN ITS BOOKS OF ACCOUNTS T OGETHER WITH LETTER OF CONFIRMATION FROM THE CREDITORS CONFIRMING THE LOAN TRANSACTIONS . THE LOAN CREDITORS HAVE SUFFICIENT SOURCES IN THEIR KITTY TO ADVANCE LOANS TO THE ASSE SSEE AND HENCE THEIR CREDITWORTHINESS CANNOT BE DOUBTED. SINCE THE PARTIES HAD GIVEN LOA N CONFIRMATION AND ARE REGULARLY ASSESSED TO INCOME TAX, THEIR IDENTITIES CANNOT BE IN QUESTION. THE TRANSACTIONS HAD BEEN ROUTED THROUGH REGULAR BANKING CHANNELS AND HENCE T HE GENUINENESS OF THE TRANSACTIONS CANNOT BE IN QUESTION. IT WAS ALSO ARGUED THAT TH E ASSESSEE CANNOT BE ASKED TO PROVE THE SOURCE OF CREDIT OR THE ORIGIN OF THE CREDIT AND TH AT IT IS NOT BOUND TO EXPLAIN WHETHER THE CREDITOR OF ITS CREDITOR HAD THE CAPACITY TO MAKE T HE ADVANCE OR NOT, NEITHER ANY SUCH INFORMATION IS EXPECTED TO BE IN ITS KNOWLEDGE. TH E ASSESSEE PLACED RELIANCE ON VARIOUS DECISIONS IN THIS REGARD. HENCE IT WAS ARGUED THAT THE LOAN CREDITORS HAVING RECEIVED 4 ITA NO.406 /KOL/2017 M/S ARTLINK VINTRADE PVT. LTD. A.YR.2012-13 4 ADVANCE BEFORE ADVANCING THE CREDIT TO THE ASSESSEE COMPANY IS OF NO CONSEQUENCE IN SO FAR AS THE CREDITS APPEARING IN THE BOOKS OF THE LA TTER COMPANY , THAT IS THE ASSESSEE, IS CONCERNED. THE ENTIRE DETAILS REGARDING THE INCOME TAX PARTICULARS OF THE LOAN CREDITOR COMPANIES WERE INDEED FILED BEFORE THE LD AO WHICH WAS NOT CONSIDERED AT ALL BY THE LD AO. THE LOAN TRANSACTIONS WERE DULY REFLECTED IN T HE BOOKS OF ACCOUNTS OF LOAN CREDITOR COMPANIES AND DULY AUDITED. IT WAS ALSO SUBMITTE D BEFORE THE LD CITA THAT THE SCRUTINY ASSESSMENTS FOR THE ASST YEAR 2012-13 WERE COMPLETED IN THE CASE OF M/S DATABASE SOFTWARE TECHNOLOGY PVT LTD AND M/S INDIGO EDUTAINMENT PVT LTD U/S 143(3) OF THE ACT DATED 31.3.2015 AND 23.3.2015 RESPECTIVE LY. IN THESE ASSESSMENT ORDERS, NO ADVERSE INFERENCE WAS DRAWN BY THE ASSESSING OFFICE R OF THOSE LOAN CREDITOR COMPANIES WITH REGARD TO THEIR CAPACITY TO ADVANCE LOANS TO T HE ASSESSEE COMPANY HEREIN. THE ONLY REASON WHICH THE LD AO HAD ADDUCED IN HIS ORDE R FOR DISBELIEVING THE LOANS IS FAILURE OF PRODUCING THE DIRECTORS BEFORE HIM. IN THIS REGARD, IT WAS SUBMITTED THAT THE DIRECTORS OF THE LOAN CREDITORS COMPANIES ARE SITUA TED AT MUMBAI AND NOT IN KOLKATA AND HENCE THEY COULD NOT BE PRODUCED BEFORE THE LD AO I N KOLKATA. MOREOVER, AT THAT RELEVANT POINT OF TIME, SINCE THE LOAN CREDITOR COM PANIES WERE ALSO UNDERGOING SCRUTINY ASSESSMENTS IN MUMBAI , THE DIRECTORS HAD TO BE PRE SENT IN MUMBAI AND ACCORDINGLY THEY COULD NOT BE PRODUCED BEFORE THE LD AO IN KOLK ATA. IT WAS ARGUED THAT THE LD AO HAD NOT SPELT OUT THE PURPOSE FOR WHICH HE WANTED T HESE DIRECTORS TO BE PRODUCED BEFORE HIM , NEITHER DID HE SPELL OUT THAT ANY ADDITIONAL DOCUMENTS ARE NEEDED TO BE PRODUCED TO ESTABLISH THE CREDITWORTHINESS IN ADDITION TO WH AT WAS ALREADY PRODUCED BEFORE HIM. IT WAS FINALLY ARGUED THAT IF THE LD AO HAD CONSIDE RED THAT THE PRODUCTION AND CONSEQUENTIAL EXAMINATION OF THE DIRECTORS ARE ABSO LUTELY COMPELLING, THEN HE OUGHT TO HAVE ISSUED COMMISSION TO HIS COUNTERPARTS IN MUMBA I TO DO THE NEEDFUL, WHICH WAS NOT DONE IN THE INSTANT CASE. 5. THE LD CITA GRANTED RELIEF TO THE ASSESSEE BY OB SERVING AS UNDER:- 5 ITA NO.406 /KOL/2017 M/S ARTLINK VINTRADE PVT. LTD. A.YR.2012-13 5 4. CONCLUSION : IT IS SEEN THAT THE ADDITION OF RS. 64,04,20,000/- MADE U/S 68 IS BECAUSE THE DIRECTORS OF LOAN CREDITOR COMPANIES DID NOT ATTEND BEFORE THE A O. HOWEVER, THE PAN AND OTHER DETAILS WERE FILED. THE LOAN CREDITOR COMPANIES ARE GROUP COMPANIES OF THE APPELLANT AND THEIR ASSESSMENTS FOR THE RELEVANT ASSESSMENT Y EARS HAVE BEEN COMPLETED U/S 143(3) BY THEIR AOS IN MUMBAI. THE AO IS DIRECTED TO DELET E THE ADDITION AND INFORM THE AOS OF LOAN CREDITOR COMPANIES AT MUMBAI FOR NECESSARY ACTION IN THEIR HANDS. 6. WE HAVE HEARD THE RIVAL SUBMISSIONS. WE FIND THA T THE ASSESSEE COMPANY IS ENGAGED IN THE BUSINESS OF TRADING IN SHARES AND SECURITIES . THE LD AO OBSERVED THAT THE LOANS RECEIVED BY THE ASSESSEE COMPANY FROM TWO CORPORATE S VIZ DATABASE SOFTWARE TECHNOLOGY PVT LTD IN THE SUM OF RS 13,27,20,000/- AND M/S INDIGO EDUTAINMENT PVT LTD TO THE TUNE OF RS 50,77,00,000/- WERE NOT GENUI NE AND ACCORDINGLY BROUGHT TO TAX U/S 68 OF THE ACT. HE FURTHER OBSERVED THAT MERE F ILING OF CONFIRMATION OF CREDITORS OF THE LOAN IS NOT ADEQUATE AND FAILURE OF THE ASSESSE E COMPANY TO PRODUCE THE DIRECTORS OF THE ALLEGED LOAN CREDITORS COMPANIES FOR EXAMINATIO N IS FATAL , THEREBY THE CREDITWORTHINESS OF THOSE LOAN CREDITORS COULD NOT BE ESTABLISHED AND CONSEQUENTLY THE GENUINENESS OF LOAN TRANSACTIONS REMAINED UNPROVED. THE ASSESSEE HAD SUBMITTED THAT BOTH DATABASE SOFTWARE TECHNOLOGY PVT LTD AND INDIG O EDUTAINMENT PVT LTD BELONG TO THE SAME GROUP OF THE ASSESSEE AND THIS FACT IS NOT DISPUTED BY THE REVENUE BEFORE US. THE ASSESSEE HAD SUBMITTED THAT ALL THESE DIRECTORS ARE RESIDENTS OF MUMBAI WHICH IS ALSO NOT IN DISPUTE BEFORE US. HENCE WE FIND THAT THE ASSESSEE HAD GIVEN REASONABLE EXPLANATION FOR NOT SECURING THE PRESENCE OF THOSE DIRECTORS WHO ARE STATIONED AT MUMBAI BEFORE THE LD AO IN KOLKATA. MOROEVER, IT I S NOT IN DISPUTE THAT THE SCRUTINY ASSESSMENT PROCEEDINGS FOR THE ASST YEAR 2012-13 WE RE BEING CARRIED OUT AT MUMBAI IN RESPECT OF THOSE TWO LOAN CREDITOR COMPANIES AT THE SAME TIME IN WHICH THE SCRUTINY ASSESSMENT WAS FRAMED IN THE CASE OF ASSESSEE HEREI N. HENCE THE PRESENCE OF THE DIRECTORS OF LOAN CREDITOR COMPANIES AT MUMBAI WOUL D BE IMPORTANT AND THE DIRECTORS HAD REMAINED IN MUMBAI FOR THE SAME. WE ARE INCLIN ED TO APPRECIATE THE CONTENTION OF THE LD AR THAT IN CASE IF THE PRESENCE OF THOSE DIR ECTORS ARE COMPELLING, THEN THE LD AO 6 ITA NO.406 /KOL/2017 M/S ARTLINK VINTRADE PVT. LTD. A.YR.2012-13 6 ASSESSING THE ASSESSEE COULD HAVE ISSUED COMMISSION TO HIS MUMBAI COUNTERPART (I.E MUMBAI IT OFFICE) TO MAKE NECESSARY VERIFICATION AN D INVESTIGATION AND SUBMIT THE REPORT TO HIM IN KOLKATA. THIS WAS ADMITTEDLY NOT D ONE IN THE INSTANT CASE. HENCE NO ADDITION COULD BE VALIDLY MADE MERELY FOR NON-PRODU CTION OF DIRECTORS OF LOAN CREDITORS WHO ARE STATIONED AT MUMBAI BEFORE THE LD AO IN KO LKATA. HENCE WE AGREE WITH THE CONTENTIONS OF THE LD AR THAT THE DIRECTORS STATION ED IN MUMBAI WERE PRE-OCCUPIED WITH THEIR RESPECTIVE COMPANIES (I.E THE LOAN CREDITOR C OMPANIES) SCRUTINY ASSESSMENTS FOR THE ASST YEAR 2012-13 HAPPENING IN MUMBAI AT THE VERY S AME TIME, WHICH ENABLED THEM NOT TO MAKE THEIR PRESENCE BEFORE THE LD AO IN KOLK ATA. 6.1. WE FIND THAT THE ASSESSEE HAD FURNISHED ITS BA NK ACCOUNT AND THE LEDGER ACCOUNTS OF THE LOAN CREDITORS AS APPEARING IN THE BOOKS OF ACC OUNTS TOGETHER WITH THE LETTER OF CONFIRMATION FROM THE CREDITORS HAVING DETAILS OF T HE TRANSACTION. WE FIND THAT BOTH THE LOAN CREDITORS COMPANIES ARE INCOME TAX ASSESSSEES, HAD GOT THEIR ACCOUNTS AUDITED AND HAD FILED ITS RETURN OF INCOME BEFORE THEIR JURISDI CTIONAL AOS. THE LD AR POINTED OUT THAT THE SCRUTINY ASSESSMENTS WERE INDEED FRAMED BY THE DEPARTMENT ON THE LOAN CREDITORS COMPANIES FOR THE ASST YEAR 2012-13 U/S 1 43(3) OF THE ACT DATED 31.3.2015 IN THE CASE OF DATABASE SOFTWARE TECHNOLOGY PVT LTD AN D 23.3.2015 IN THE CASE OF INDIGO EDUTAINMENT PVT LTD. THERE IS NO ADVERSE REMARKS MA DE BY THE AO OF THE CONCERNED LOAN CREDITORS IN THEIR ASSESSMENT ORDERS RESPECTIV ELY WITH REGARD TO THE CAPACITY OF THE LENDERS TO ADVANCE MONIES TO THE ASSESSEE COMPANY H EREIN. IN OTHER WORDS, NO ADDITIONS WERE MADE IN THE HANDS OF LOAN CREDITORS TOWARDS UN EXPLAINED INVESTMENT IN LOANS MADE IN THE ASSESSEE COMPANY IN THE SCRUTINY ASSESSMENTS OF THE LOAN CREDITORS. 6.2. WE FIND THAT THE ASSESSEE HAD DULY REPAID THE ENTIRE LOANS WERE REPAID TO M/S INDIGO EDUTAINMENT PVT LTD IN ASST YEAR 2015-16 AND 2016-1 7 EITHER BY PHYSICAL REPAYMENT OF MONEY OR BY ADJUSTMENT TOWARDS SALES MADE TO THE M, THE DETAILS OF WHICH ARE ENCLOSED IN PAGES 142 TO 145 OF THE PAPER BOOK. WI TH REGARD TO M/S DATABASE SOFTWARE 7 ITA NO.406 /KOL/2017 M/S ARTLINK VINTRADE PVT. LTD. A.YR.2012-13 7 TECHNOLOGY PVT LTD, THE ASSESSEE COMPANY HAD REPAID RS 40,00,000/- IN ASST YEAR 2013-14 ; RS 42,00,000/- IN ASST YEAR 2014-15 AND R S 20,00,000/- IN ASST YEAR 2015- 16. WE ALSO FIND FROM THE SCRUTINY ASSESSMENT ORDE RS OF THE LOAN CREDITORS FOR THE ASST YEAR 2014-15 COMPLETED U/S 143(3) OF THE ACT ON 13. 12.2016 IN THE CASE OF M/S DATABASE SOFTWARE TECHNOLOGY PVT LTD AND ON 20.12.2 016 IN THE CASE OF M/S INDIGO EDUTAINMENT PVT LTD THAT NO ADVERSE INFERENCES WERE DRAWN IN RESPECT OF THE SUBJECT MENTIONED LOAN TRANSACTIONS WITH THE ASSESSEE COMPA NY. 6.3. WE FIND THAT THE LD CITA HAD DELETED THE ADDIT ION MADE U/S 68 OF THE ACT IN THE HANDS OF THE ASSESSEE AND HAD ALSO SAFEGUARDED THE INTEREST OF THE REVENUE BY SUGGESTING THE LD AO TO INFORM THE ASSESSING OFFICER OF THE LO AN CREDITORS AT MUMBAI FOR NECESSARY ACTION AT THEIR END. THE REVENUE WAS NOT ABLE TO B RING ON RECORD ANY ADVERSE MATERIALS / DECISIONS TAKEN IN THE HANDS OF THE LENDER COMPANIE S PURSUANT TO SUCH DIRECTION OF THE LD CITA. 6.4. IN VIEW OF THE AFORESAID OBSERVATIONS IN THE F ACTS AND CIRCUMSTANCES OF THE CASE, WE HOLD THAT THE LD CITA HAD RIGHTLY DELETED THE ADDIT ION TOWARDS LOANS RECEIVED FROM THE COMPANIES IN THE SAME GROUP AND ACCORDINGLY THE ORD ER OF THE LD CITA DOES NOT CALL FOR ANY INTERFERENCE. ACCORDINGLY, THE GROUNDS RAISED BY THE REVENUE ARE DISMISSED. 7. IN THE RESULT, THE APPEAL OF THE REVENUE IS DISM ISSED. ORDER PRONOUNCED IN THE COURT ON 01.08. 2018 SD/- SD/- [A.T. VARKEY] [ M.BALAGANESH ] JUDICIAL MEMBER ACCOUNTANT MEMBER DATED : 01.08.2018 SB, SR. PS 8 ITA NO.406 /KOL/2017 M/S ARTLINK VINTRADE PVT. LTD. A.YR.2012-13 8 COPY OF THE ORDER FORWARDED TO: 1. ITO, WARD-1(1), KOLKATA, P-7, CHOWRINGHEE SQUARE , ROOM NO. 06, 7 TH FLOOR, KOLKATA-700069. 2. M/S ARTLINK VINTRADE PVT. LTD., 1010, MAKER CHAM BER-V, NARIMAN POINT, MUMBAI- 400021, (R/N-9, 1 ST FLOOR, 307, RABINDRA SARANI, KOLKATA-700006). 3. C.I.T(A)- 4. C.I.T.- KOLKATA. 5. CIT(DR), KOLKATA BENCHES, KOLKATA. TRUE COPY BY ORDER SENIOR PRIVAT E SECRETARY HEAD OF OFFICE/D.D.O., ITAT, KOLKATA BENCHE S