The Asstt.CIT Cir.1, Aurangabad, Aurangabad V. Laxmi Rikshaw Body Pvt.Ltd., Aurangabad

ITA 423/PUN/2012

• Counselvise Citation: [2013] 140 COUNSELVISE.COM (IT) 72140 (ITAT-PUNE)
• Duration Of Justice: 1 year(s) 6 month(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-09-2013
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 05-09-2013
• Assessment Year: 2006-2007
• Appeal Filed On: 01-03-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: Y K BHASKAR
• Keywords: Unexplained cash credit; Capital receipt
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCHES A, PUNE BEFORE SHRI SHAILENDRA KUMAR YADAV, JUDICIAL MEMBER AND SHRI G.S. PANNU, ACCOUNTANT MEMBER ITA NO.423/PN/2012 (ASSESSMENT YEAR: 2006-07) THE ASSTT. COMMISSIONER OF INCOME TAX CIRCLE 1, AURANGABAD. . APPELLANT VS. LAXMI RIKSHAW BODY PVT. LTD., E-38-1, MIDC, CHIKALTHANA, AURANGABAD PAN : AAACL5650Q . RESPONDENT DEPARTMENT BY : MR. Y. K. BHASKAR ASSESSEE BY : MR. NIKHIL PATHAK DATE OF HEARING : 05-09-2013 DATE OF PRONOUNCEMENT : 13-09-2013 ORDER PER G. S. PANNU, AM THIS APPEAL BY THE REVENUE IS DIRECTED AGAINST AN ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS), AURANGABAD DA TED 20.12.2011 WHICH, IN TURN, HAS ARISEN FROM AN ORDER DATED 31.12.2008 PASSED BY THE ASSESSING OFFICER, UNDER SECTION 143(3) OF THE INCOME-TAX ACT , 1961 (IN SHORT THE ACT), PERTAINING TO THE ASSESSMENT YEAR 2006-07. 2. IN THIS APPEAL, THE FIRST ISSUE RELATES TO AN AD DITION MADE BY THE ASSESSING OFFICER ON ACCOUNT OF DISALLOWANCE OF INT EREST EXPENDITURE OF RS.8,15,497/-, WHICH HAS SINCE BEEN DELETED BY THE CIT(A). IN BRIEF, THE FACTS ARE THAT THE RESPONDENT-ASSESSEE IS A COMPANY INCOR PORATED UNDER THE PROVISIONS OF THE COMPANIES ACT, 1956 AND IS INTER-ALIA , ENGAGED IN THE BUSINESS OF MANUFACTURING OF RIKSHAW BODY, AUTOMOBI LE PRESS AND FABRICATED PARTS AND WIND ELECTRICITY GENERATION. THE ASSESSIN G OFFICER NOTICED THAT ASSESSEE HAD MADE CERTAIN INTEREST-FREE ADVANCES TO ITS SISTER CONCERN M/S ITA NO.423/PN/2012 A.Y. 2006-07 LAXMI INDUSTRIES, (NASHIK). THE OPENING DEBIT BALAN CE OUTSTANDING FROM THE SAID SISTER CONCERN WAS RS.51,59,574/- AND DURING T HE YEAR ASSESSEE GAVE FURTHER INTEREST-FREE ADVANCE OF RS.11,50,000/- AND ACCORDINGLY THE TOTAL INTEREST-FREE ADVANCES AS AT THE END OF THE YEAR ST OOD AT RS.63,09,574/-. THE ASSESSING OFFICER ALSO NOTICED THAT DURING THE YEAR UNDER CONSIDERATION ASSESSEE HAD PAID INTEREST OF RS.15,89,298/- ON FUN DS BORROWED. THE ASSESSING OFFICER DISALLOWED THE PROPORTIONATE INTE REST ON INTEREST-FREE ADVANCES GIVEN TO THE SISTER CONCERN CALCULATED @ 1 5% WHICH AMOUNTED TO RS.8,50,497/- ON THE GROUND THAT PROPORTIONATE INTE REST BEARING FUNDS HAVE BEEN DIVERTED TO THE SISTER CONCERN. 3. THE AFORESAID DISALLOWANCE HAS SINCE BEEN DELETE D BY THE CIT(A) FOLLOWING THE RATIO OF THE JUDGEMENT OF THE HONBLE BOMBAY HIGH COURT IN THE CASE OF CIT VS. RELIANCE UTILITIES & POWER LTD., 31 3 ITR 340 (BOM). AS PER THE CIT(A), ASSESSEE WAS IN POSSESSION OF INTEREST-FREE FUNDS OF ITS OWN, WHICH WERE SUFFICIENT TO COVER THE IMPUGNED INTEREST-FREE ADVANCES TO THE SISTER CONCERN AND THEREFORE THE PRESUMPTION WAS THAT THE AMOUNTS ADVANCED TO THE SISTER CONCERN WERE MADE OUT OF INTEREST-FREE FUNDS AVAILABLE AND NO PART OF INTEREST EXPENDITURE CAN BE ATTRIBUTED TO SUCH ADVA NCES. AGAINST THE AFORESAID STAND OF THE CIT(A), REVENUE IS FURTHER IN APPEAL B EFORE US. 4. BEFORE US, THE LEARNED DEPARTMENTAL REPRESENTATI VE HAS MERELY POINTED OUT THAT THE AMOUNT OF RS.11,50,000/- ADVAN CED TO THE SISTER CONCERN DURING THE YEAR WAS OUT OF CASH-CREDIT ACCOUNT MAIN TAINED WITH BANK AND THEREFORE INTEREST-BEARING FUNDS WERE UTILIZED TO M AKE IMPUGNED INTEREST-FREE ADVANCES TO THE SISTER CONCERN. IT WAS, THEREFORE, CONTENDED THAT THE CIT(A) WAS NOT JUSTIFIED IN DELETING THE IMPUGNED ADDITION . 5. ON THE OTHER HAND, THE LEARNED COUNSEL FOR THE R ESPONDENT-ASSESSEE HAS REITERATED THE SUBMISSIONS MADE BEFORE THE CIT( A) WHICH HAVE BEEN NOTED BY THE CIT(A) IN PARA 4.1 OF HIS ORDER AND AR E NOT BEING REPEATED FOR THE ITA NO.423/PN/2012 A.Y. 2006-07 SAKE OF BREVITY. ACCORDING TO THE LEARNED COUNSEL, THE CIT(A) MADE NO MISTAKE IN DELETING THE ADDITION BY APPLYING THE PARITY OF REASONING LAID DOWN BY THE HONBLE BOMBAY HIGH COURT IN THE CASE OF RELIANCE U TILITIES & POWER LTD. (SUPRA). FURTHER, IT HAS BEEN SUBMITTED THAT THE PU NE BENCH OF THE TRIBUNAL IN THE ASSESSEES OWN CASE FOR ASSESSMENT YEAR 2001-02 VIDE ITA NO.1616/PN/2005 DATED 14.07.2006 HAS ALSO DELETED A SIMILAR ADDITION. IN THIS MANNER, THE ORDER OF THE CIT(A) HAS TO BE DEFENDED. 6. WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSIO NS. FACTUALLY SPEAKING, THE CIT(A) FOUND THAT ASSESSEE HAD EARNED CASH PROF ITS OF RS.2,18,81,955/-, RS.1,82,81,029/- AND RS.1,80,54,197/- IN THE FINANC IAL YEARS RELEVANT TO THE ASSESSMENT YEARS 2004-05, 2005-06 & 2006-07 RESPECT IVELY WHICH HAVE BEEN DEPOSITED IN THE CASH-CREDIT ACCOUNT MAINTAINED WIT H THE BANK. THE CIT(A) HAS FURTHER NOTED THAT OTHER INTEREST-FREE FUNDS WE RE ALSO AVAILABLE WITH THE ASSESSEE IN THE FORM OF SHARE CAPITAL AND RESERVES & SURPLUS. ON THIS BASIS, IT IS FACTUALLY ASSERTED BY THE CIT(A) THAT ASSESSE E POSSESSED SUFFICIENT INTEREST-FREE FUNDS OF ITS OWN, WHICH WERE GENERATE D IN THE COURSE OF THE INSTANT FINANCIAL YEAR APART FROM SUBSTANTIAL SHARE HOLDERS FUNDS AND RESERVES & SURPLUS, WHICH WERE SUFFICIENT TO COVER THE IMPUG NED ADVANCES MADE TO THE SISTER CONCERN FREE OF INTEREST. UNDER THESE CIRCUM STANCES, THE CIT(A) INVOKED THE PROPOSITION LAID DOWN BY THE HONBLE BOMBAY HIG H COURT IN THE CASE OF RELIANCE UTILITIES & POWER LTD. (SUPRA) TO THE EFFE CT THAT WHERE ASSESSEE HAS BOTH INTEREST-BEARING AND INTEREST-FREE FUNDS, AND INTEREST-FREE FUNDS ARE SUFFICIENT TO COVER THE ADVANCES TO THE SISTER CONC ERN, THEN THE PRESUMPTION IS THAT SUCH ADVANCES ARE MADE OUT OF INTEREST-FREE FU NDS. FOLLOWING THE SAID PROPOSITION, WHICH WAS APPLICABLE IN THE CONTEXT OF THE FACTS FOUND BY HIM, THE CIT(A) DELETED THE DISALLOWANCE OF INTEREST OF RS.8 ,15,497/- MADE BY THE ASSESSING OFFICER. IN OUR CONSIDERED OPINION, THE F ACTUAL FINDINGS ARRIVED AT WITH THE CIT(A) IN THE CONTEXT OF THE PROPOSITION L AID DOWN BY THE HONBLE BOMBAY HIGH COURT HAS NOT BEEN ASSAILED BY THE REVE NUE BEFORE US. THERE IS NO MATERIAL OR EVIDENCE REFERRED BY THE REVENUE TO DISTRACT FROM THE FACTUAL ITA NO.423/PN/2012 A.Y. 2006-07 MATRIX BROUGHT OUT BY THE CIT(A). THEREFORE, IN THE LIGHT OF THE FACTS NOTED BY THE CIT(A) WHICH ARE ALSO BORNE OUT OF THE MATERIAL ON RECORD, IN THE SHAPE OF THE PAPER BOOK FILED BY THE ASSESSEE CONTAINING THE BALANCE SHEET AND PROFIT AND LOSS ACCOUNT, ETC., THE IMPUGNED ADDITION IS RI GHTLY DELETED BY HIM. ACCORDINGLY THE ORDER OF THE CIT(A) IS HEREBY AFFIR MED AND REVENUE FAILS ON THIS GROUND. 7. THE SECOND ISSUE IS WITH REGARD TO A DISALLOWANC E OF RS.68,364/- MADE BY THE ASSESSING OFFICER ON ACCOUNT OF DELAYED PAYM ENT OF EMPLOYEES CONTRIBUTION TO PROVIDENT FUND (PF) AND EMPLOYEE ST ATE INSURANCE CORPORATION (ESIC), WHICH HAS SINCE BEEN DELETED BY THE CIT(A). THE CIT(A) DELETED THE ADDITION BY NOTICING THAT THE DATE OF H ANDING OVER THE CHEQUE TO THE BANK WAS THE ACTUAL DATE OF PAYMENT AND NOT THE DATE OF REALIZATION OF CHEQUE. SECONDLY, IT IS NOTICED THAT THE PAYMENTS O F ESIC AND PF HAVE BEEN MADE PRIOR TO THE DUE DATE OF FILING OF RETURN AND HENCE THE DISALLOWANCE WAS NOT JUSTIFIED FOLLOWING THE DECISION OF THE HONBLE DELHI HIGH COURT IN THE CASE OF CIT VS. AIMIL LTD. & ORS. (2010) 321 ITR 508 (DE LHI). AGAINST THE AFORESAID REVENUE IS IN APPEAL BEFORE US. 8. BEFORE US, THE LEARNED DEPARTMENTAL REPRESENTATI VE HAS NOT CONTROVERTED ANY OF THE REASONING ADVANCED BY THE C IT(A) TO DELETE THE IMPUGNED ADDITION AND ACCORDINGLY WE HEREBY AFFIRM THE ACTION OF THE CIT(A) IN DELETING THE ADDITION OF RS.68,364/-. ACCORDINGLY, REVENUE FAILS ON THIS ASPECT ALSO. 9. THE LAST ISSUE IN THIS APPEAL IS WITH REGARD TO AN ADDITION OF RS.11,00,001/- REPRESENTING UNSECURED LOAN FROM ONE MRS. VIJAYA D. KHIVANSARA, WHICH WAS CONSIDERED BY THE ASSESSING O FFICER AS UNEXPLAINED. IN BRIEF, THE FACTS ARE THAT THE ASSESSING OFFICER NOT ED FROM THE AUDIT REPORT THAT ASSESSEE HAD SHOWN A LOAN OF RS.11,00,001/- FROM MR S. VIJAYA D. KHIVANSARA OF NASHIK. IN THE COURSE OF ASSESSMENT PROCEEDINGS, A CONFIRMATION FROM THE ITA NO.423/PN/2012 A.Y. 2006-07 CREDITOR WAS ALSO FURNISHED CONFIRMING THE ADVANCIN G OF LOAN OF RS.11,00,001/- TO THE ASSESSEE. FURTHER, THE ASSESSING OFFICER NOT ICED DURING THE EXAMINATION OF THE ACCOUNT BOOKS THAT THERE WAS NO CORRESPONDIN G BANK ENTRY SHOWING RECEIPT OF RS.11,00,001/-. ASSESSEE EXPLAINED THAT THE SAID LOAN WAS OBTAINED FROM MRS. VIJAYA D. KHIVANSARA ON 02.05.2002 WHEREB Y THE PAYMENT WAS MADE BY MRS. VIJAYA D. KHIVANSARA ON BEHALF OF THE ASSESSEE FOR PURCHASE OF LAND AT NASHIK. THE PAYMENT WAS MADE DIRECTLY TO TH E OWNER OF THE LAND, AND ENTRY FOR THIS LOAN REMAINED TO BE TAKEN IN THE BOO KS OF ASSESSEE BY THE OVERSIGHT IN THE RESPECTIVE YEAR BUT WAS MADE IN TH E CURRENT YEAR. THE EXPLANATION OF THE ASSESSEE WAS REJECTED BY THE ASS ESSING OFFICER AND HE TREATED THE AMOUNT OF RS.11,00,001/- AS UNEXPLAINED CREDIT AND ADDED THE SAME TO THE TOTAL INCOME. 10. BEFORE THE CIT(A), ASSESSEE REITERATED THE SUBM ISSIONS AND THE CIT(A) FOUND MERIT IN THE SAME AND DELETED THE ADDITION BY MAKING THE FOLLOWING DISCUSSION :- THE APPLICANT COMPANY HAD OBTAINED UNSECURED LOAN OF RS.11,00,001/- FROM MRS. VIJAYA D. KHIVANSARA ON 02 .05.2002. THE SAID PAYMENT WAS MADE BY MRS. VIJAYA D. KHIVANSARA ON BE HALF OF THE APPELLANT FOR PURCHASE OF LAND AT NASHIK. THE PAYMENT WAS MAD E BY DD NO. 341885 DT. 02.05.2002, DRAWN ON NASHIK MERCHANTS CO-OP BANK LT D. AS THE PAYMENT WAS DIRECTLY MADE TO THE OWNER OF LAND, ENTRY FOR T HIS LOAN WAS REMAINED TO BE TAKEN IN THE BOOKS OF THE APPELLANT THROUGH OVERSIG HT AND COST OF LAND WAS ALSO UNDERSTATED IN BOOKS OF THE ASSESSEE. AS THIS WAS CAPITAL RECEIPT WHICH WAS UTILIZED FOR PURCHASE OF LAND, THE IMPACT OF TH E AMOUNT BEING NOT ENTERED IN THE BOOKS OF THE APPELLANT ON THE PROFIT OR LOSS OF THE APPELLANT IS NIL. HENCE THE ADDITION MADE BY THE ASSESSING OFFICER IS NOT J USTIFIED. 11. NOW, THE REVENUE IS IN APPEAL BEFORE US. THE L EARNED DEPARTMENTAL REPRESENTATIVE HAS REITERATED THE OBJECTIONS TAKEN BY THE ASSESSING OFFICER, WHICH WE HAVE ALREADY NARRATED IN PARA 9 ABOVE AND THE SAME ARE NOT BEING REPEATED FOR THE SAKE OF BREVITY, IN SUPPORT OF THE CASE OF THE REVENUE. ITA NO.423/PN/2012 A.Y. 2006-07 12. ON THE OTHER HAND, THE LEARNED COUNSEL FOR THE RESPONDENT-ASSESSEE POINTED OUT THAT IN TERMS OF A MOU DATED 31.01.2003 ASSESSEE HAD PURCHASED LAND FROM ONE SHRI CHHAMAN KHANDERAO MATALE AND THE TOTAL CONSIDERATION PAID INCLUDED A SUM OF RS.11,00,001/- PAID BY MRS. VIJAYA D. KHIVANSARA ON BEHALF OF THE ASSESSEE. IN SUPPORT OF THE SAME A RE FERENCE HAS BEEN MADE TO PAGES 22 TO 27 OF THE PAPER BOOK CONTAINING A COPY OF THE SAID MOU. A CONFIRMATION OF LOAN BY MRS. VIJAYA D. KHIVANSARA, AND A COPY OF BANK STATEMENT OF THE SAID CREDITOR HAS ALSO BEEN PLACED IN THE PAPER BOOK, WHICH SHOWS THE PARTICULARS OF THE PAYMENT MADE ON BEHALF OF THE ASSESSEE DIRECTLY TO SHRI CHHAMAN KHANDERAO MATALE FOR PURCHASE OF LA ND BY THE ASSESSEE. THE LEARNED COUNSEL EXPLAINED THAT THE SAID LOAN WA S RAISED BY THE ASSESSEE IN THE FINANCIAL YEAR 2002-03 BUT THE ENTRY REMAINE D TO BE PASSED IN THE BOOKS OF ACCOUNT. HOWEVER, DURING THE YEAR UNDER CONSIDER ATION, ASSESSEE PASSED A JOURNAL ENTRY BY CREDITING MRS. VIJAYA D. KHIVANSAR AS ACCOUNT AND DEBITING LAND COST ACCOUNT; IN ANY CASE, NO ACTUAL LOAN WAS RECEIVED DURING THE YEAR. ACCORDING TO THE LEARNED COUNSEL IN THE FACE OF THE CONFIRMATION FROM THE CREDITOR AND THE PURCHASE-DEED WHICH SHOWED THAT TH E CREDITOR PAID THE AMOUNT ON BEHALF OF THE ASSESSEE FOR PURCHASE OF TH E LAND IN THE YEAR 2002, THE IMPUGNED CASH CREDIT COULD NOT BE CONSIDERED AS UNEXPLAINED FOR THE YEAR UNDER CONSIDERATION. ACCORDING TO HIM, THE CIT(A) H AD RIGHTLY DELETED THE ADDITION. 13. WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSI ONS. IN OUR CONSIDERED OPINION, THE CIT(A) MADE NO MISTAKE IN DELETING THE ADDITION INASMUCH AS NO ACTUAL LOAN HAS BEEN RECEIVED DURING THE YEAR UNDER CONSIDERATION AND IN ANY CASE THE MATERIAL ON RECORD SATISFACTORILY EXPLAINS THE NATURE OF TRANSACTION OF RS.11,00,001/-, WHICH REFLECTED A PAYMENT MADE BY T HE MRS. VIJAYA D. KHIVANSARA IN THE FINANCIAL YEAR 2002-03 ON BEHALF OF THE ASSESSEE FOR PURCHASE OF LAND. THE SAID AMOUNT IS A PART OF THE TOTAL CONSIDERATION FOR PURCHASE OF LAND WHICH IS DULY REFLECTED BY THE PUR CHASE-DEED ON RECORD. CONSIDERING THE ENTIRETY OF CIRCUMSTANCES, IN OUR V IEW, THE CIT(A), HAS RIGHTLY ITA NO.423/PN/2012 A.Y. 2006-07 DELETED THE ADDITION WHICH WE HEREBY AFFIRM. THUS, ON THIS ASPECT, REVENUE FAILS. 14. IN THE RESULT, APPEAL OF THE REVENUE IS DISMISS ED. ORDER PRONOUNCED IN THE OPEN COURT ON 13 TH SEPTEMBER, 2013. SD/- SD/- (SHAILENDRA KUMAR YADAV) (G. S. PANNU) JUDICIAL MEMBER ACC OUNTANT MEMBER PUNE, DATED : 13 TH SEPTEMBER, 2013 SUJEET COPY OF THE ORDER IS FORWARDED TO : - 1) THE ASSESSEE; 2) THE DEPARTMENT; 3) THE CIT(A), AURANGABAD; 4) THE CIT, AURANGABAD; 5) THE DR, A BENCH, I.T.A.T., PUNE; 6) GUARD FILE. BY ORDER //TRUE COPY// SR. PRIVATE SECRETARY I.T.A.T., PUNE