Dy,CIT,Ichalkaranji, Ichalkaranji V. Splice Biotech Pvt.Ltd., Jaysingpur

ITA 448/PUN/2012

• Counselvise Citation: 44824514 RSA 2012
• Duration Of Justice: 1 year(s) 1 month(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-04-2013
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2005-2006
• Appeal Filed On: 02-03-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: S K SINGH
• Keywords: Unexplained cash credit
• Section: 10B; 68

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH B, PUNE BEFORE SHRI G.S.PANNU, ACCOUNTANT MEMBER, AND SHRI R.S.PADVEKAR, JUDICIAL MEMBER. ITA.NO.448/PN/2012 (ASSTT. YEAR : 2005-06) DCIT, ICHALKARANJI CIRCLE, ICHALKARANJI. .. APPELLANT VS. SPLICE BIOTECH PVT. LTD. 218, AZAD ROAD, JAYSINGPUR, TAL. SHIROL, KOLHAPUR. .. RESPONDENT PAN: AAHCS4671F ASSESSEE BY : SHRI KISHOR PHADKE DEPARTMENT BY : SHRI S.K.SINGH DATE OF HEARING : 23.04.2013 DATE OF PRONOUNCEMENT : 29.04.2013 ORDER PER G.S.PANNU, AM : THIS APPEAL BY THE REVENUE IS DIRECTED AGAINST THE ORDER OF THE CIT(A), KOLHAPUR, DATED 14.12.2011 WHICH, IN TURN, HAS ARISEN FROM THE ASSESSMENT ORDER DATED 17.12.2010 PASSED BY THE ASSESSING OFFICER U/S.143(3) R.W.S. 147 OF THE INCOME TAX ACT , 1961 (IN SHORT THE ACT) PERTAINING TO THE A.Y. 2005-06. 2. ALTHOUGH THE REVENUE HAS RAISED MULTIPLE GROUNDS OF APPEAL BUT THE SOLITARY GRIEVANCE IS WITH REGARD TO THE AC TION OF THE CIT(A) IN DELETING AN ADDITION OF RS.10,00,000/- REPRESENT ING LOAN FROM SHRI JUGAL KISHORE MANIYAR, WHICH HAS BEEN TREATED AS UNEXPLAINED CASH CREDIT U/S.68 OF THE ACT BY THE ASSESSING OFFI CER. 3. IN BRIEF, THE FACTS ARE THAT CONSEQUENT TO SEARC H ACTION IN THE CASE OF MALU GROUP AT JAYSINGPUR AND PUNE, IT WAS N OTICED THAT ASSESSEE HAD SHOWN UNSECURED LOANS FROM SHRI JUGAL KISHORE 2 MANIYAR FROM NAGPUR OF RS.10,00,000/- DURING THE YE AR UNDER CONSIDERATION. IT WAS ALSO NOTICED THAT SHRI JUGAL KISHORE MANIYAR IS SON-IN-LAW OF MALU FAMILY, WHO ARE THE DIRECTORS OF THE ASSESSEE COMPANY. IN THE SAID BACKGROUND, ASSESSEE WAS REQ UIRED TO EXPLAIN THE GENUINENESS OF THE LOAN TRANSACTION AND CREDITWORTHINESS OF THE LENDER. IN RESPONSE, ASSES SEE EXPLAINED THAT THE LOAN WAS RAISED FROM SHRI JUGAL KISHORE MANIYAR THOUGH ACCOUNT PAYEE CHEQUE AND THAT THE SAID CREDITOR WAS AN INCOME TAX ASSESSEE AND HAD ADEQUATE FINANCIAL CAPACITY TO ADV ANCE THE IMPUGNED AMOUNTS. ASSESSEE ALSO EXPLAINED THAT SHR I JUGAL KISHORE MANIYAR WAS A B.TECH BY QUALIFICATION AND W AS MANAGING DIRECTOR OF A STOCK EXCHANGE LISTED COMPANY NAMELY, HAR GOVIND INTERNATIONAL LTD., WHICH WAS ENGAGED IN MANUFACTUR ING ZIP FASTENERS. IT WAS ALSO EXPLAINED THAT THE CREDITOR WAS FROM A REPUTED BUSINESS FAMILY FROM NAGPUR WHICH WAS ENGAG ED IN THE BUSINESS OF MANUFACTURING PVC PIPES AND HFPE WOVEN SACKS, ETC. IT WAS ALSO EXPLAINED THAT THE UNSECURED LOAN ADVAN CED TO THE ASSESSEE WAS OUT OF EXPORT EARNINGS OF SHRI JUGAL K ISHORE MANIYAR FROM EXPORT OF SOFTWARE. THE ASSESSING OFFICER WAS NOT SATISFIED WITH THE EXPLANATION FURNISHED AND FOR THE REASONS DISCUSSED IN PARA 8 OF THE ASSESSMENT ORDER, THE EXPLANATION HAS BEEN REJECTED. INSTEAD AS PER THE ASSESSING OFFICER, THE CLAIM OF THE CREDITOR OF HAVING CARRIED OUT ACTIVITY OF SOFTWARE DEVELOPMENT AND EXPORT WAS INCORRECT AND WAS DOUBTFUL. THEREFORE, THE ASSESSI NG OFFICER HELD THAT THE ASSESSEE COMPANY HAD CIRCULATED ITS OWN FU NDS AND INTRODUCED THE SAME IN ACCOUNT BOOKS AS UNSECURED L OANS THROUGH SHRI JUGAL KISHORE MANIYAR. ACCORDINGLY, THE ADDIT ION OF RS.10,00,000/- WAS MADE TO THE TOTAL INCOME OF THE ASSESSEE ON A PROTECTIVE BASIS. 4. IN APPEAL, THE CIT(A) HAS DELETED THE ADDITION O N THE GROUND THAT INABILITY OF THE CREDITOR TO PROVE THAT THE LO AN WAS ADVANCED FROM THE BUSINESS OF EXPORT EARNINGS, WOULD NOT BE MATERIAL TO DOUBT HIS CREDITWORTHINESS. AS PER THE CIT(A) THE CREDITOR DID NOT 3 DENY THE ADVANCING OF MONEY AND ALSO THE MONEY ADVA NCED TO THE ASSESSEE REPRESENTED THE INCOME OF THE CREDITOR WHI CH HE HAS DECLARED IN ITS RETURN OF INCOME. AS PER THE CIT(A ) MERELY BECAUSE THE CLAIM OF THE CREDITOR FOR EXEMPTION U/S.10B OUT OF EXPORT EARNINGS HAS BEEN DENIED, IT WOULD NOT LEAD TO THE IMPUGNED ADDITION IN THE HANDS OF THE ASSESSEE. THE LD. CIT (A) NOTICED THAT THE DISALLOWANCE OF THE CREDITORS CLAIM FOR DEDUCT ION U/S.10B OF THE ACT WAS DUE TO THE FACT THAT HE COULD NOT PROVE THE GENUINENESS OF EXPORTS BUT AT THE SAME TIME THE ENTIRE INCOME WAS TAXED IN THE HANDS OF THE CREDITOR. AS PER THE CIT(A), ONCE THE INCOME HAS BEEN TAXED IN THE HANDS OF A PARTICULAR PERSON, IT FORMS A PART OF HIS CAPITAL AND ITS DISBURSEMENT AS A LOAN TO A THIRD P ARTY WOULD NOT MAKE SUCH LOAN AS UNEXPLAINED INCOME IN THE HANDS O F SUCH THIRD PARTY. THE FOLLOWING DISCUSSION IN THE ORDER OF TH E CIT(A) IS WORTHY OF NOTICE: 10. I FIND THAT THE REASONS GIVEN BY THE ASSESSING OFFICER ARE NOT CONCLUSIVE. THIS IS A CASE WHERE TH E SOURCE IS REGULARLY ASSESSED TO TAX AND AN INCOME-T AX RETURN HAS ALSO BEEN FILED. ALL RECEIPTS CAME THROU GH BANKING CHANNEL AND WAS THEREAFTER UTILIZED BY SHRI MANIYAR BY ADVANCING IT TO OTHER SISTER CONCERNS OR TO THE MALU FAMILY. THE ASSESSING OFFICER IS OF THE O PINION THAT SINCE SHRI MANIYAR HAD SHOWN BOGUS EXPORT INCOME, HE DID NOT HAVE THE CREDITWORTHINESS TO ADV ANCE LOANS TO THE APPELLANT. ANOTHER FACTOR WHICH BORE HEAVILY IN THE MIND OF THE ASSESSING OFFICER WAS TH AT THE LOAN WAS ADVANCED WITHOUT INTEREST. 11. I ALSO FIND THAT DURING THE RELEVANT PREVIOUS Y EAR, SHRI J H MANIYAR HAD ADVANCED A SUM OF 10 LAKHS ON 29/05/2004. DURING THIS YEAR, THE APPELLANT HAD AL SO REFUNDED AN AMOUNT OF 12 LAKHS ON 24/09/2004 AND 50 LAKHS ON 24/03/2005. THE NET EFFECT OF THESE TRANSACTIONS WHICH ARE DULY RECORDED IN THE BOOKS O F ACCOUNT OF BOTH SHRI J H MANIYAR AND THE APPELLANT IS THAT THE OPENING BALANCE OF 5.71 CRORES IS REDUCED TO 5.19 CRORES. ALL THE TRANSACTIONS HAVE BEEN EFFECT ED THROUGH BANKING CHANNEL AND THERE IS NOTHING ON REC ORD TO SUGGEST THAT THE SUM OF 10 LAKHS WAS THE APPELLANTS OWN MONEY ROUTED THROUGH SHRI J H MANIYAR. IN FACT, IF SUCH WAS THE CASE, THEN THERE WAS NO REASON FOR RETURNING 62 LAKHS TO SHRI J H MANIYAR 4 DURING THE RELEVANT PREVIOUS YEAR. SIMILARLY, THE REASONS GIVEN BY THE ASSESSING OFFICER FOR MAKING A N ADDITION OF THE SUM OF 10 LAKHS IS THE SAME WHICH HAS BEEN USED FOR MAKING ADDITIONS OF THE ENTIRE LOAN D URING THE PREVIOUS YEAR RELEVANT TO ASSESSMENT YEAR 2003- 04. VIDE MY APPELLATE ORDER NO.KOP/662/10-11 DATED 28/11/2011 IN RESPECT OF THE ABOVE YEAR, I HAVE ALR EADY HELD THAT THE CREDITWORTHINESS OF SHRI J H MANIYAR CANNOT BE DOUBTED AND A MERE FACT THAT DEDUCTION UN DER SECTION 10B WAS NOT ALLOWED TO J H MANIYAR IS OF NO CONSEQUENCE IN DECIDING THE ISSUE WHETHER THE MONIE S BELONGED TO THE APPELLANT OR TO SHRI J H MANIYAR AN D IS CONCLUSIVELY OF NO VALUE IN HOLDING THAT THE SAID M ONIES BELONGED TO THE APPELLANT. 12. IN MY OPINION, THERE SHOULD BE SOME MATERIAL ON RECORD TO SHOW THAT THE APPELLANTS OWN MONEY WAS ROUTED THROUGH SHRI MANIYAR AND THAT IT WAS NOT OFF ERED FOR TAX AT ANY STAGE OR WAS NOT SHOWN AS INCOME AT ANY STAGE BEFORE REACHING THE APPELLANT. SUCH EVIDENCE IS CONSPICUOUSLY ABSENT. THERE SHOULD BE SOME PROOF T HAT THE AMOUNT OF 10 LAKHS IS UNEXPLAINED CREDIT IN THE HANDS OF THE APPELLANT AND THAT SHRI MANIYAR WAS JU ST A CONDUIT. SUCH EVIDENCES ARE NOT PRESENT. SINCE SH RI MANIYAR IS NOT DENYING THAT THE SAID MONEY REPRESEN TS HIS INCOME AND HAS REFLECTED IT AS UNSECURED LOANS ADVANCED TO THE APPELLANT IN HIS BOOKS OF ACCOUNT, THERE IS NO SCOPE OF TAXING THE SAME AS UNEXPLAINED IN TH E HANDS OF THE APPELLANT. IT HAS NEVER BEEN DOUBTED THAT THE RECEIPTS GIVEN AS LOANS TO THE APPELLANT WERE RECEIVED BY SHRI MANIYAR AND WAS SHOWN BY SHRI MANIYAR AS HIS INCOME. HENCE, THE ADDITION MADE ON THIS COUNT IS DELETED AND THE APPEAL ON THIS GROUND IS ALLOWED. 5. AGAINST THE AFORESAID, THE REVENUE IS IN FURTHER APPEAL BEFORE US. THE LD. REPRESENTATIVE FOR THE RESPONDENT ASSE SSEE, AT THE OUTSET POINTED OUT THAT IN THE CASE OF THE CREDITOR SHRI JUGAL KISHORE MANIYAR, THE ISSUE RELATING TO THE DENIAL O F DEDUCTION U/S.10B ON THE EXPORT EARNINGS HAS SINCE BEEN ADJUD ICATED BY THE NAGPUR BENCH OF THE TRIBUNAL FOR A.YS. 2001-02, 200 2-03 AND 2003-04 VIDE ORDER IN ITA.NO.99, 100 AND 101/NAG/11 DATED 23.11.2012 AND ALSO FOR A.Y. 2004-05 VIDE ORDER IN ITA.NO.159/NAG/08 DATED 06.03.2009, COPIES OF THE S AID DECISIONS HAVE BEEN PLACED ON RECORD. THE LD. COUNSEL EMPHAS IZED THAT THE 5 TRIBUNAL WAS SATISFIED THAT THE CREDITOR IN QUESTIO N DULY ESTABLISHED THE GENUINENESS OF THE SOFTWARE EXPORTS AND WAS HEL D ENTITLED FOR THE BENEFITS OF SECTION 10B OF THE ACT. IT WAS, T HEREFORE, CONTENDED THAT HAVING REGARD TO THE DECISIONS OF THE TRIBUNAL IN THE CASE OF THE CREDITOR SHRI JUGAL KISHORE MANIYAR, DATED 06.03.20 09 (SUPRA) AND 23.11.2012 (SUPRA), THE SOURCES OF ADVANCING LOANS TO THE ASSESSEE STOOD ESTABLISHED AND, THEREFORE, THE IMPUGNED ADDI TION MADE BY THE ASSESSING OFFICER WAS UNSUSTAINABLE. 6. THE LD. DR APPEARING FOR THE REVENUE, HAS NOT DI SPUTED THE AFORESAID FACTUAL MATRIX BROUGHT OUT BY THE LD. REP RESENTATIVE FOR THE ASSESSEE BUT RELIED UPON THE STAND OF THE ASSES SING OFFICER TO SAY THAT THE CREDITWORTHINESS OF THE CREDITOR WAS D OUBTFUL AND THE GENUINENESS OF THE TRANSACTION WAS NOT ESTABLISHED IN VIEW OF THE DOUBTFUL NATURE OF EXPORT EARNINGS OF THE CREDITOR. 7. WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSIO NS. THE SUM AND SUBSTANCE OF THE DISPUTE LIES IN A SHORT COMPAS S IN AS MUCH AS THE ASSESSEE WAS FOUND TO HAVE RECEIVED UNSECURED L OANS DURING THE INSTANT YEAR TO THE TUNE OF RS.10,00,000/- FROM SHRI JUGAL KISHORE MANIYAR. THE ASSESSING OFFICER INVOKED SEC TION 68 OF THE ACT, WHICH REQUIRED THE ASSESSEE TO ESTABLISH THE I DENTITY, CREDITWORTHINESS OF THE CREDITOR TO ADVANCE MONIES TO THE ASSESSEE AND THE GENUINENESS OF THE TRANSACTION. THE ASSESS ING OFFICER WAS SATISFIED WITH THE IDENTITY OF THE CREDITOR BUT SO FAR AS THE CAPACITY OF THE PERSON TO ADVANCE LOAN AND THE GENUINENESS O F THE TRANSACTION WERE CONCERNED, THE SAME HAVE NOT FOUND TO BE SATISFACTORY BY THE ASSESSING OFFICER. THE PRIMARY REASON WEIGHING WITH THE ASSESSING OFFICER WAS TO THE EFFECT THAT T HE SAID CREDITOR CLAIMED TO HAVE ADVANCED MONIES OUT OF ITS EARNINGS FROM DEVELOPMENT AND EXPORT OF SOFTWARE WHICH WERE CLAIM ED AS EXEMPT U/S.10B OF THE ACT, AND SUCH A CLAIM WAS NOT FOUND TO BE GENUINE FOR THE REASONS DESCRIBED IN PARA 8 OF THE ASSESSME NT ORDER. THE ASSESSING OFFICER HAS ALSO REFERRED TO THE SURVEY A CTION IN THE CASE 6 OF THE CREDITOR WHO WAS PLACED AT NAGPUR. IN SUM AND SUBSTANCE, THE SOURCE OF INCOME OF THE CREDITOR WAS NOT ACCEPT ED AS GENUINE AND, THEREFORE, SECTION 68 OF THE ACT WAS INVOKED B Y THE ASSESSING OFFICER. WE FIND THAT THE CONCLUSION OF THE ASSESS ING OFFICER IN THE PRESENT CASE ALSO CORRESPONDED TO THE ASSESSMENTS F INALIZED BY THE ASSESSING OFFICER IN THE CASE OF THE CREDITOR SHRI JUGAL KISHORE MANIYAR FOR THE A.Y. 2002-03 AS WELL AS OTHER A.YS. 2001-02, 2002- 03 AND 2004-05. THE ASSESSING OFFICER IN THE CASE OF SHRI JUGAL KISHORE MANIYAR FOUND IT EXPEDIENT TO HOLD THAT THE RE WAS NO GENUINE EXPORT EARNINGS SO AS TO BE ELIGIBLE FOR DE DUCTION U/S.10B OF THE ACT. THE DISPUTE TRAVELLED TO THE TRIBUNAL WHEREIN FOR A.Y. 2004-05 VIDE ORDER DATED 06.03.2009 (SUPRA), AND IN A COMBINED ORDER FOR THE ASSESSMENT YEARS 2001-02, 2002-03 VID E ORDER DATED 23.11.2012 (SUPRA), THE TRIBUNAL HELD THAT THE CRED ITOR IN QUESTION HAD DULY ESTABLISHED THE GENUINENESS OF EXPORT OF S OFTWARE FOR THE RESPECTIVE YEARS AND WAS ALSO ELIGIBLE FOR THE CLAI M OF DEDUCTION U/S.10B OF THE ACT. THE SAID ORDERS OF THE TRIBUNA L ARE ON RECORD BEFORE US AND THERE IS NO MATERIAL OR EVEN AN ASSER TION BY THE REVENUE THAT THE AFORESAID DECISIONS OF THE TRIBUNA L HAVE BEEN ALTERED BY ANY HIGHER AUTHORITY. THEREFORE, HAVING REGARD TO THE AFORESAID DECISIONS OF OUR COORDINATE BENCH OF NAGP UR TRIBUNAL, WHICH CONTINUE TO HOLD THE FIELD, IT IS IMPERMISSIB LE FOR US TO AFFIRM THE STAND OF THE ASSESSING OFFICER TO THE EFFECT TH AT THE EXPORT EARNINGS OF THE CREDITOR ARE NOT GENUINE SO AS TO H OLD THAT THE IMPUGNED LOANS ADVANCED TO THE ASSESSEE OUT OF SUCH EARNINGS ARE UNEXPLAINED AS PER SECTION 68 OF THE ACT. SINCE TH E GENUINENESS OF THE EXPORT EARNINGS OF THE CREDIT HAS BEEN ACCEPTED BY THE TRIBUNAL IN ITS ORDERS DATED 06.03.2009 (SUPRA) AND 23.11.20 12 (SUPRA), THE OBJECTION OF THE ASSESSING OFFICER RAISED IN THE IN STANT CASE ARE UNSUSTAINABLE. 8. IN VIEW OF THE AFORESAID WE, THEREFORE, FIND NO JUSTIFICATION TO UPHOLD THE STAND OF THE ASSESSING OFFICER AND ACCOR DINGLY THE 7 ULTIMATE CONCLUSION OF THE CIT(APPEALS) IN DELETING THE ADDITION IS HEREBY AFFIRMED, ALBEIT ON A DIFFERENT GROUND AS D ISCUSSED ABOVE. 9. IN THE RESULT, APPEAL OF THE REVENUE IS DISMISSE D. PRONOUNCED IN THE OPEN COURT ON THIS THE 29 TH DAY OF APRIL, 2013. SD/- SD/- ( R.S.PADVEKAR ) ( G.S.PANNU ) JUDICIAL MEMBER ACCOUNTANT MEMBER GSPS PUNE, DATED THE 29 TH APRIL, 2013 COPY OF THE ORDER IS FORWARDED TO: 1. THE ASSESSEE 2. THE DCIT, ICHALKARANJI CIRCLE, ICHALKARANJI. 3. THE CIT(A), KOLHAPUR. 4. THE CIT, KOLHAPUR. 5. THE DR B BENCH, PUNE. 6. GUARD FILE. BY ORDER //TRUE COPY// PRIVATE SECRETARY, INCOME TAX APPELLATE TRIBUNAL, PUNE.