ITO, New Delhi V. M/s. Kathuria Casting (P) Ltd., New Delhi

ITA 4313/DEL/2014

• Counselvise Citation: [2017] 130 COUNSELVISE.COM (IT) 7057 (ITAT-DELHI)
• Duration Of Justice: 2 year(s) 5 month(s) 2 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-01-2017
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: SMC 3
• Next Hearing Date: 07-11-2016
• Assessment Year: 2006-2007
• Appeal Filed On: 07-08-2014
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Keywords: Unexplained cash credit; Accommodation entries
• Section: 32; 147; 131; 68; 246; 69; 145; 27; 148; 54; 37; 6; 56; 263; 63; 132; 12; 28; 144; 10; 90; 154; 2; 11; 15; 271(1)(b); 139; 92

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL (DELHI BENCH SMC-3 : NEW DELHI) BEFORE SHRI H.S. SIDHU, JUDICIAL MEMBER ITA NO. 4313/DEL/2014 ASSESSMENT YEAR: 2006-07 ITO, WARD 5(2), VS. M/S KATHURIA CASTING (P) LTD. NEW DELHI B-9, MAYAPURI INDUSTRIAL AREA, ROOM NO. 308, CR BLDG., PHASE-1, NEW DELHI-64 NEW DELHI (PAN: AACCK3053C) (APPELLANT) (RESPONDENT) AND CROSS OBJECTION NO. 218/DEL/2016 (IN ITA NO. 4313/DEL/2014) ASSESSMENT YEAR: 2006-07 M/S KATHURIA CASTINGS (P) LTD., VS. ITO, WARD 5( 2), C/O SABHARWAL & PARTNERS, NEW DELHI 4819/24, ANSARI ROAD, DARYAGANJ, NEW DELHI 2 (APPELLANT) (RESPONDENT) DEPARTMENT BY : SH. ANIL KUMAR SHARMA, SR. DR RESPONDENT BY : SH. V.K. SABHARWAL, ADV. ORDER THE DEPARTMENT HAS FILED THE APPEAL AND ASSESSEE H AS FILED THE CROSS OBJECTION WHICH IS EMANATE FROM THE ORDER DATED 16.5.2014 OF THE LD. CIT(A)-VIII, NEW DELHI P ERTAINING TO ASSESSMENT YEAR 2006-07. THE GROUNDS RAISED IN THE REVENUES APPEAL READS AS UNDER:- 2 1. WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE C ASE AND IN LAW, THE LD. CIT(A) HAS ERRED IN DELETING TH E ADDITION OF RS. 50,00,000/- MADE BY THE AO U/S. 68 OF THE I.T. ACT, 1961 DESPITE OF HAVING INFORMATION FROM THE INVESTIGATION WING THAT THE ASSESSEE HAS RECEIVED ACCOMMODATION ENTRIES WORTH OF RS. 50,00,000/-? 2. THAT THE ORDER OF THE LD. CIT(A) IS ERRONEOUS AN D IS NOT TENABLE ON FACTS AND IN LAW. 3. THE GROUND OF APPEAL ARE WITHOUT PREJUDICE TO EA CH OTHER. 4. THAT THE APPELLANT CRAVES LEAVE TO ADD, ALTER, A MEND OR FORGO ANY GROUND(S) OF THE APPEAL RAISED ABOVE A T THE TIME OF HEARING. 2. THE GROUNDS RAISED BY THE ASSESSEE IN THE CROSS OBJECTION READS AS UNDER:- 1. THAT THE LD. CIT(A) FAILED TO APPRECIATE THAT THE ORDER PASSED BY THE AO U/S. 143(3)/147 OF THE I.T. ACT, 1961, ON 20.3.2014, PERVERSE TO THE LAW AND TO THE FACTS OF THE CASE, BECAUSE OF RELYING ONLY UPON THE BORROWED INFORMATION AS WITHOUT HAVING HIS OWN INDEPENDENT SATISFACTION THEREOF TO THE INFORMATION REFERRED TO HIM BY THE DI (INV.), DELHI. 2. THAT THE CIT(A) WAS FURTHER ERRED IN LAW TO ESTI MATE INTEREST @1% PER MONTH ON THE LOAN AMOUNT RECEIVED BY THE APPELLANT COMPANY WITHOUT THE SUPPORT OF ANY COGENT MATERIAL EITHER COLLECTED OR 3 PLACED UPON RECORDS, THOUGH IT WAS NOT BEFORE THE AO. 3. THAT THE RESPONDENT COMPANY ASSAILS THEIR RIGHT TO AMEND, ALTER OR CHANGE ANY GROUNDS OF APPEAL OF ANY TIME EVEN DURING THE COURSE OF HEARING OF INSTANT APPEAL. PRAYER:- IT IS THEREFORE, PRAYED THAT THE ORDER PASSED BY T HE AO MAY PLEASE BE QUASHED AND ALSO DELETE THE ESTIMATED ADDITIONS OF RS. 3.50 LACS AS CONFIRMED B Y THE LD. CIT(A). 3. THE BRIEF FACTS OF THE CASE ARE THAT THE AO HA D MADE THE ADDITION OF RS. 50 LACS U/S. 68 OF THE I.T. ACT, 19 61 AS UNEXPLAINED CASH CREDIT, TREATING IT AS BOGUS ACCOMMODATION ENT RY. IN THIS CASE A SEARCH/SURVEY OPERATION U/S. 132(133(A) WAS CONDU CTED IN THE BUSINESS/RESIDENTIAL PREMISE OF SH. ASEEM KUMAR GUP TA, CA ON 26.3.2010, WHERE HE HAD STATED THAT HE HAD GIVEN A CCOMMODATION ENTRY TO THE ASSESSEE COMPANY. IN THIS CASE THE INC OME OF ASSESSEE WAS ASSESSED AT RS. 34,84,168/- U/S 143(3)(II)/147 OF THE I.T. ACT, 1961 VIDE HIS ORDER DATED 20.3.2014. 4. AGGRIEVED WITH THE AFORESAID ORDER OF THE AO, TH E ASSESSEE FILED APPEAL BEFORE THE LD. CIT(A) WHO VIDE IMPUGNED ORDE R DATED 16.5.2014 DELETED THE ADDITION AND MADE THE ADDITIO N OF RS. 3,50,000/- ON ACCOUNT OF ESTIMATED INTEREST PAID A ND PARTLY ALLOWED THE APPEAL OF THE ASSESSEE. 4 5. AGAINST THE ORDER OF THE LEARNED CIT(A) THE REVE NUE IS IN APPEAL AND THE ASSESSEE HAS FILED THE CROSS OBJECTI ON BEFORE THE TRIBUNAL. 6. LD. DR RELIED UPON THE ORDER OF THE AO AND REITE RATED THE CONTENTIONS RAISED IN THE GROUNDS OF APPEAL. IT WAS SUBMITTED BY THE LEARNED SR. DR THAT THE AO HAS RIGHTLY ASSESSED THE INCOME AT RS.34,84,168/- AND RIGHTLY MADE THE ADDITION OF R S. 50,00,000/- U/S. 68 OF THE I.T. ACT. HE FURTHER STATED THAT TH E LD. CIT(A) HAS WRONGLY DELETED THE ADDITION OF RS.50 LACS, DESPITE OF HAVING INFORMATION FROM THE INVESTIGATION WING THAT THE AS SESSEE HAS RECEIVED ACCOMMODATION ENTRIES WORTH OF RS. 50 LACS . THEREFORE, HE REQUESTED THAT THE ORDER OF THE LD. CIT(A) MAY BE C ANCELLED ON THIS ADDITION AND APPEAL OF THE REVENUE MAY BE ALLOWED A CCORDINGLY. 7. ON THE CONTRARY, THE LD. COUNSEL OF THE ASSESSEE CONTENDED THAT THE ACTION OF THE AO WAS NOT JUSTIFIED. WITH REGARD TO DELETION OF ADDITION OF RS. 50 LACS HE STATED THAT LD. CIT(A) H AS RIGHTLY DELETED THE ADDITION WHICH DOES NOT NEED ANY INTERFERENCE O N MY PART. HOWEVER, WITH REGARD TO CROSS OBJECTION IS CONCERNE D, HE STATED THAT THE ADDITION OF RS. 3,50,000/- MADE BY THE LD. LD. CIT(A) IS WRONG AND THE SAME MAY BE DELETED. 8. I HAVE HEARD BOTH THE PARTIES AND PERUSED THE RE LEVANT RECORDS AVAILABLE WITH ME ESPECIALLY THE ORDER OF THE LD. CIT(A). I FIND THAT THE LD. CIT(A) HAS ELABORATELY DISCUSSED THE ISSUE AND GAVE HIS 5 FINDING AT PAGE NO. 7 & 8 OF HIS IMPUGNED ORDER. FOR THE SAKE OF CONVENIENCE, THE RELEVANT FINDING OF THE LD. CIT(A) IS REPRODUCED BELOW:- I HAVE PERUSED THE ASSESSMENT ORDER, WRITTEN SUBMISSIONS AND DISCUSSED THE MATTER WITH THE ARS V ERY CAREFULLY. THE ARS VEHEMENTLY ARGUED THAT THERE IS NO ACCOMMODATION ENTRY GIVEN BY SH. ASEEM KUMAR GUPTA, CA TO THIS APPELLANT COMPANY IN THE PAST. THERE WAS ONLY ONE LOAN TAKEN BY APPELLANT ON FROM MODERATE CREDIT CROP LTD. BY CHEQUE NO. 743431 & 743430 DATED 18.08.2015 OF RS. 25 LACS EACH. THE LOAN WAS REPAID BY CHEQUE NO. 230415 DATED 28.04.2007 OF RS. 45 LACS A ND CHEQUE NO. 530345 DATED 03.05.2007 OF RS. 5 LACS. T HUS THE LOAN WAS REPAID 3 YEARS BEFORE THE DATE OF STAT EMENT TAKEN BY INVESTIGATION WING OF THE DEPARTMENT FROM THE CA SH. ASEEM KUMAR GUPTA IN 2010. THEREFORE, THE DEPARTMENT SHOULD NOT TAKE A WRONG VIEW OF GENUINE LOAN TAKEN BY THE PARTY FROM ANOTHER COMPANY M/S. MODERA TE CREDIT CORP. LTD. AND TREAT AS BOGUS ACCOMMODATION ENTRY. THE ARS ALSO FURTHER ARGUED THAT THERE IS NO CHEQUES. HENCE, IT CANNOT BE TREATED AS BOGUS ACCOMMODATION ENTRY. THEREFORE THE ADDITION MADE CA SH INTRODUCTION TO THE BANK ACCOUNT OF M/S. MODERATE C REDIT CORP. LTD. BEFORE ISSUING CHEQUE OR NO SUCH OTHER 6 TRANSACTION HOWEVER HAPPENED WITH THAT COMPANY. THE GENUINE TRANSACTION MADE BY THE APPELLANT COMPANY CANNOT BE TREATED AS A SHAM TRANSACTION. I HAVE DISCUSSED THE MATTER WITH THE ARS VERY CAREFULLY AF TER GOING THROUGH THE PAPER BOOK EVIDENCES AND RETURN C OPY. I AM OF THE OPINION THAT THIS IS A GENUINE LOAN TRA NSACTION WHICH HAS BEEN REPAID BY THE AO RS. 50 LACS STANDS DELETED. THE LOAN IS TAKEN FROM NON-RELATED PARTIES/COMPANY M/S. MODERATE CREDIT CORP. LTD. IT IS STRANGE TO BELIEVE THAT ANY NON-RELATED PARTY WILL GIVEN LOAN OF RS. 50 LAKH WITHOUT TAKING ANY INTEREST FRO M THE APPELLANT COMPANY. THE LOAN PERIOD 7 MONTHS IN THIS FY APPROXIMATELY. HENCE I ESTIMATE INTEREST @1% PER MONTH (I.E. 12% PER YEAR SIMPLE INTEREST RATE) FOR THE ABOVE 7 MONTHS ON PRINCIPAL AMOUNT OF RS. 50 LACS WHICH IN THIS FY 2005-06 COMES TO INTEREST = 50,00,000 X 7/12 X 12/100 = 50,00,000 X 7/12 X 12/100 = 3,50,000/- THUS I ADD THIS RS. 3,50,000/- AS ESTIMATED INTEREST PAID BY APPELLANT COMPANY WHICH WAS NOT SH OWN IN BOOKS OF A/CS, AND HENCE REDUCE THE RETURNED LOS S BY THIS AMOUNT. 7 THE NET ASSESSED LOSS AFTER GIVING EFFECT TO THIS ORDER WILL BE RS. (-) 15,15,832 + 3,50,000 = RS. 11,65,832/-). IN THE RESULT, THE APPEAL IS PARTLY ALLOWED. 9. AFTER PERUSING THE AFORESAID FINDING OF THE LD. CIT(A), I FIND THAT THERE WAS ONLY ONE LOAN TAKEN BY ASSESSEE FRO M MODERATE CREDIT CROP LTD. BY CHEQUE NO. 743431 & 743430 DATE D 18.08.2015 OF RS. 25 LACS EACH. THE LOAN WAS REPAID BY CHEQUE NO. 230415 DATED 28.04.2007 OF RS. 45 LACS AND CHEQUE NO. 530345 DAT ED 03.05.2007 OF RS. 5 LACS. THUS THE LOAN WAS REPAID 3 YEARS BEF ORE THE DATE OF STATEMENT TAKEN BY INVESTIGATION WING OF THE DEPART MENT FROM THE CA SH. ASEEM KUMAR GUPTA IN 2010. THEREFORE, THE DE PARTMENT SHOULD NOT TAKE A WRONG VIEW OF GENUINE LOAN TAKEN BY THE PARTY FROM ANOTHER COMPANY M/S. MODERATE CREDIT CORP. LTD . AND TREAT AS BOGUS ACCOMMODATION ENTRY. THEREFORE THE ADDITION M ADE CASH INTRODUCTION TO THE BANK ACCOUNT OF M/S. MODERATE C REDIT CORP. LTD. BEFORE ISSUING CHEQUE OR NO SUCH OTHER TRANSACTION HOWEVER HAPPENED WITH THAT COMPANY. HENCE, THE GENUINE TRAN SACTION MADE BY THE ASSESSEE COMPANY CANNOT BE TREATED AS A SHAM TRANSACTION. I AM OF THE OPINION THAT THIS IS A GENUINE LOAN TRANS ACTION WHICH HAS BEEN REPAID BY THE AO RS. 50 LACS WHICH WAS RIGHTLY BEEN DELETED BY THE LD. CIT(A) WHICH DOES NOT NEED ANY INTERFERENCE ON MY PART, HENCE, I UPHOLD THE ORDER OF THE LD. CIT(A) ON THI S ISSUE. I ALSO FIND THAT LD. CIT(A) FURTHER OBSERVED IN HIS IMPUGNED O RDER THAT THE LOAN 8 IS TAKEN FROM NON-RELATED PARTIES/COMPANY M/S. MODE RATE CREDIT CORP. LTD. HE FURTHER OBSERVED THAT IT IS STRANGE TO BELIEVE THAT ANY NON-RELATED PARTY WILL GIVEN LOAN OF RS.50 LAKH WIT HOUT TAKING ANY INTEREST FROM THE APPELLANT COMPANY. THE LOAN PERIO D 7 MONTHS IN THIS FY APPROXIMATELY. HENCE HE RIGHTLY ESTIMATED INTEREST @1% PER MONTH (I.E. 12% PER YEAR SIMPLE INTEREST RATE) FOR THE ABOVE 7 MONTHS ON PRINCIPAL AMOUNT OF RS. 50 LACS WHICH IN THIS FY 2005-06 COMES TO : INTEREST = 50,00,000 X 7/12 X 12/100 = 50,00,000 X 7/12 X 12/100 = 3,50,000/- THUS LD. CIT(A) HAD RIGHTLY ADD THIS RS. 3,50,000/- AS ESTIMATED INTEREST PAID BY ASSESSEE COMPANY WHICH W AS NOT SHOWN IN BOOKS OF A/CS, AND HENCE REDUCED THE RETURNED LO SS BY THIS AMOUNT. THEREFORE, THE OBSERVATION OF THE LD. CIT(A ) THAT THE NET ASSESSED LOSS AFTER GIVING EFFECT TO THIS ORDER WIL L BE RS. (-) 15,15,832 + 3,50,000 = RS. 11,65,832/-) IS QUITE GE NUINE AND THEREFORE, THE ADDITION MADE OF RS. 3,50,000/- BY T HE LD. CIT(A) IS REASONABLE, HENCE, I UPHELD THE SAME. IN VIEW OF T HE ABOVE, I AM OF THE VIEW THAT LD. CIT(A) HAS PASSED A WELL REASONED ORDER WHICH DOES NOT NEED ANY INTERFERENCE ON MY PART, HENCE, I UPHOLD THE SAME. ACCORDINGLY, THE APPEAL OF THE REVENUE AND TH E CROSS OBJECTION FILED BY THE ASSESSEE STAND DISMISSED. 9 10. IN THE RESULT, THE REVENUES APPEAL AND ASSESSE ES CROSS OBJECTION BOTH ARE DISMISSED IN THE AFORESAID MANNE R. ORDER PRONOUNCED IN OPEN COURT ON THIS 09-01-2017. SD/- (H.S. SIDHU) JUDICIAL MEMBER DATED : 09-01-2017 DRAGON NS SR BHATANGAR COPY FORWARDED TO: 1.APPELLANT 2.RESPONDENT 3.CIT 4.CIT(A), NEW DELHI. 5.CIT(ITAT), NEW DELHI. AR, ITAT NEW DELHI 10