DCIT 4(1)(1), MUMBAI V. DHANLAXMI COTEX LTD, MUMBAI

ITA 4597/MUM/2016

• Counselvise Citation: [2018] 125 COUNSELVISE.COM (IT) 1668 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 1 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-08-2018
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: Not Allotted
• Assessment Year: 2012-2013
• Appeal Filed On: 04-07-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: RAJAT MITTAL
• Keywords: Unexplained cash credit; Source of fund; Commercial expediency
• Section: 143(3); 131; 68

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL C , BENCH MUMBAI BEFORE SHRI R.C.SHARMA, AM & SHRI RAM LAL NEGI , JM ITA NO. 4597 / MUM/20 16 ( ASSESSMENT YEAR : 2012 - 13 ) DCIT 4(1)(1) ROOM NO.640, 6 TH FLOOR AAYAKAR BHAVAN M.K.ROAD, MUMBAI 400 020 VS. M/S. DHANLAXMI COTEX LTD., 282, 2DN FLOOR, PRINCESS STREET, CHATURBHUJ JIVANDAS HOUSE MUMBAI 400 002 PAN/GIR NO. AABCD2387H APPELLANT ) .. RESPONDENT ) REVENUE BY SHRI RAJAT MITTAL ASSESSEE BY SHRI VIJAY MEHTA DATE OF HEARING 31 /08 /201 8 DATE OF PRONOUNCEMENT 31 / 08 /201 8 / O R D E R PER R.C.SHARMA (A.M) : THIS IS AN APPEAL FILED BY THE REVENUE AGAINST THE ORDER OF CIT(A) - 4, MUMBAI DATED 24/09/2018 FOR A.Y.2012 - 13 IN THE MATTER OF ORDER PASSED U/S. 143(3) OF T HE IT ACT. 2. THE GRIEVANCE OF REVENUE RELATES TO DELETION OF ADDITION OF RS.6.68 CRORES MADE BY THE AO U/S.68 OF THE IT ACT. 3. FACTS IN BRIEF ARE THAT ASSESSEE IS ENGAGED IN THE BUSINESS OF TRADING AND INVESTING IN SHARES AND SECURITIES. ITA NO. 4597/MUM/2016 M/S. DHANLAXMI COTEX LTD., 2 4. DURING THE CO URSE OF SCRUTINY ASSESSMENT, THE AO OBSERVED THAT ASSESSEE HAS TAKEN UNSECURED LOANS OF RS.6.68 CRORES. THE ASSESSEE WAS ASKED TO ESTABLISH THE SOURCE OF THE SAME ALONGWITH THE GENUINENESS, CREDITWORTHINESS AND CAPACITY OF THE PARTIES FROM WHOM THESE LOANS WERE TAKEN . V IDE LETTER DATED 31/10/2014, THE ASSESSEE SUBMITTED THAT THE ENTIRE LOAN OF RS.6,68,00,000/ - HAS BEEN TAKEN FROM AMPL. THE ASSESSING OFFICER ALSO NOTICED THAT NO INTEREST HAS BEEN CHARGED BY AMPL ON LOANS GIVEN TO THE ASSESSEE. 'TO FURTHER IN VESTIGATE INTO THIS MATTER, A SUMMONS U/S 131 OF THE ACT DT. 15/12/2014 WAS ISSUED TO AMPL AND THEY WERE ASKED TO EXPLAIN THE SOURCE OF FUNDS GIVEN TO THE ASSESSEE, THEIR CONNECTION WITH THE ASSESSEE AND WHETHER WERE THE SHAREHOLDERS OF THE ASSESSEE. 5. AFTER HAVING CONSIDERED THE SUBMISSIONS AND DOCUMENTS FILED BY THE ASSESSEE AND AMPL AND THE STATEMENTS AS RECORDED OF THE PERSONS OF AMPL, THE ASSESSING OFFICER WAS OF THE VIEW THAT THE SAME WERE NOT ACCEPTABLE AND HAS PROVIDED HIS REASONS IN PARA 4.8 OF THE AS SESSMENT ORDER WHICH IS REPRODUCED AS UNDER: A. THE ASSESSEE AND AMPL HAVE FAILED TO EXPLAIN THEIR BUSINESS CONNECTI ON, THEY HAVE MERELY STATED THAT BUSINESS RELATION AND RUNNING ACCOUNT. FURTHER IT CAN BE SEEN THAT BOTH THEIR REGISTERED OFFICES ARE T HE SAME. IN CONTRA DICTION, MR.MAHAVIR JAIN, DIRECTOR OF AMPL HAS STATED THAT THEY HAVE 'N O _BUSINESS_CONNECTION' ONLY THEY ARE RESIDING IN THE SAME BUILDING FOR 15 YEARS. IT IS AMPLY CLEAR THAT THEY ARE TRYING TO HIDE FACTS WHICH THROWS A BIG DOUBT TO THE G ENUINENESS OF AMPL. B. THE INTENTIONS OF AMPL TO AVOID SUMMONS BY SENDING A JUNIOR ACCOUNTANT WHO WAS APPOINTED ONLY A MONTH BEFORE GOES ITA NO. 4597/MUM/2016 M/S. DHANLAXMI COTEX LTD., 3 ON TO PROVE THAT THE TRANSACTION BETWEEN AMPL AND THE ASSESSEE ARE NOT GENUINE AND HENCE AMPL TRIED TO AVOID THE SU MMONS C. DESPITE ISSUING VARIOUS NOTICES, THE ASSESSEE AND AMPL HIVE FAILED TO PROVE THE EXACT SOURCE OF THE AMOUNTS GIVEN AND TAKEN BETWE EN THEM. THEY HAVE MERELY FILED THE BANK STATEMENTS AND BANK BOOK OF AMPL WITHOUT ESTABLISHING A NEXUS OF THE SUMS ADVANCES AND REPAID. FURTHER, THE ASSESSEE ALSO HAS NOT EXPLAINED THE UTILIZATION OF THE FUNDS TAKEN OR NEITHER THE SOURCE OF THE SUMS REPAID TO AMPL. D. ON SUCH HUGE AMOUNTS ADVANCED BY AMPL THEY HAVE NOT CHARGED ANY INTEREST TO THE ASSESSEE, WHEREAS ON OTHER LOANS AND ADVANCES GIVEN THEY ARE CHARGING INTEREST @14 - 18% P.A. THE REASON GIVEN BY THE DIRECTOR OF AMPL W AS 'OUT OF FRIENDSHIP AND PERSONAL RELATIONSHIP' THE ASSESSING OFFICER ALSO RELIED UPON CERTAIN DECISIONS OF VARIOUS COURTS TO STATE THAT T HE ONUS OF ESTABLISHING GENUINENESS, CREDITWORTHINESS AND CAPACITY OF THE PARTIES IS ALWAYS OF THE ASSESSEE. ACCORDINGLY, THE ASSESSING OFFICER IN PARA 4.12 OF THE ASSESSMENT ORDER ADDED THE SUM OF RS. 6,68 , 00,000 / - AS INCOME FROM OTHER SOURCES . 6. BY THE IMPUGNED ORDER, CIT(A) DELETED THE ADDITION AFTER OBSERVING AS UNDER: - . 3.4. I HAVE CONSIDERED THE FACTS OF THE CASE, ASSESSMENT ORDER PASSED BY THE ASSESSING OFFICER AND THE SUBMISSION MADE BY THE APPELLANT, REMAND REPORT OF THE AO AS WELL AS APPELLANTS COMMENT THEREUPON. IT IS SEEN THAT THE APPELLANT COMPANY HAS TAKEN LOAN OF RS. 6,68,00,000/ - FROM AMPL IN THE PRESENT ASSESSMENT YEAR I.E. AY 2012 - 13. THERE IS CONSIDERABLE FORCE IN THE ARGUMENT OF THE APPELLANT THAT ALL THE DETAILS HAV E BEEN FILED BEFORE AO DURING THE ENTIRE PROCEEDINGS WHICH PROVE BEYOND DOUBT THE IDENTITY, CREDITWORTHINESS AND THE GENUINENESS OF THE TRANSACTIONS. THE ASSESSING OFFICER HAS ADDED THE SAID AMOUNT AS UNEXPLAINED CASH CREDIT ON SUSPICION AND NOT ON THE B ASIS OF ANY COGENT EVIDENCE TO SUGGEST THAT THE AMOUNT RECEIVED BY THE APPELLANT IS UNEXPLAINED. WITH RESPECT TO IDENTITY OF THE CREDITOR, THE SAID COMPANY IS A PUBLIC LIMITED COMPANY LISTED ON THE CALCUTTA STOCK EXCHANGE. THE APPELLANT H AS SUBMITTED DETAILS OF FAN, ITR ACKNOWLEDGMENT AS WELL AS ITA NO. 4597/MUM/2016 M/S. DHANLAXMI COTEX LTD., 4 LETTERS FILED BY AMPL IN RESPONSE TO THE SUMMONS ISSUED BY THE ASSESSING OFFICER TO SUBSTANTIATE ITS IDENTITY. FURTHER, THE DIRECTOR OF THE SAID COMPANY I.E. MR. MAHAVIR JAIN HAS ALSO APPEARED BEF ORE THE ASSESSING OFFICER AND CONFIRMED THE TRANSACTIONS ENTERED INTO BETWEEN THE APPELLANT AND THE SAID COMPANY. WITH RESPECT TO CREDITWORTHINESS, THE DIRECTOR OF AMPL HAS CATEGORICALLY STATED THAT THEY ARE IN THE BUSINESS OF PROVIDING LOANS TO VARIOUS COMPANIES. FURTHER, THE BANK STATEMENTS OF THE SAID COMPANY HAVE ALSO BEEN SUBMITTED TO PROVE THAT ADEQUATE FUNDS WERE AVAILABLE WITH THE COMPANY FOR ADVANCING THE SAME TO THE APPELLANT. THE ASSESSING OFFICER, WHILE RECORDING THE STATEMENT OF MR . MAHAVIR JAIN, DIRECTOR OF AMPL HAS RAISED VARIOUS QUERIES WITH RESPECT TO THE TRANSACTIONS BETWEEN THE APPELLANT AND AMPL. IN RESPONSE, MR. MAHAVIR JAIN HAS CATEGORICALLY CONFIRMED THE GRANTING OF LOAN TO THE APPELLANT. THE APPELLANT HAS ALSO ESTABLISHED THAT AMPL HAD SUFFICIENT FUNDS AT ITS DISPOSAL TO ADVANCE THE AMOUNT OF RS. 6.68 CRORES TO THE APPELLANT. WITH RESPECT TO GENUINENESS OF THE SAID TRANSACTION, THE APPELLANT HAS SUBMITTED VARIOUS EVIDENCES SUCH AS CONFIRMATION LETTERS, BANK STATEMENTS AND FINANCIAL STATEMENTS OF AMPL. THIS IS FURTHER CORROBORATED WITH THE STATEMENT RECORDED OF THE DIRECTOR OF AMPL. THUS, IT CAN BE CONCLUDED THAT THE APPELLANT HAS FULFILLED THE ONUS LAID UPON IT TO PROVE ALL THE THREE CONDITIONS LAID DOWN U/S. 68 OF THE ACT. I FIND THAT THE ASSESSING OFFICER HAS NOT BROUGHT ON RECORD ANY EVIDENCE TO DISPROVE THE STAND OF THE APPELLANT EITHER DURING THE ASSESSMENT PROCEEDINGS OR DURING THE REMAND PROCEEDINGS. THE ASSESSING OFFICER HAS RELIED ON THE FACT THAT NO INTEREST HAS BE EN CHARGED TO CONCLUDE THAT THE SAID LOANS ARE NOT GENUINE. I AM OF THE VIEW THAT THE LOAN TRANSACTION CANNOT BE DOUBTED MERELY BECAUSE NO INTEREST HAS BEEN CHARGED WHICH IS A MATTER OF COMMERCIAL EXPEDIENCY AND SUBJECT TO THE RELATIONSHIP BETWEEN THE TWO PARTIES. THE DIRECTOR OF AMPL HAS CONFIRMED THAT THE LOAN HAS BEEN GRANTED TO THE APPELLANT OUT OF PERSONAL RELATIONSHIP. THE COMPANY HAS TAKEN A CONSCIOUS DECISION NOT TO CHARGE INTEREST ON THE LOAN GRANTED TO THE APPELLANT AND THE ASSESSING OFFICER CANNO T PUT HIMSELF IN THE SHOES OF THE COMPANY TO DETERMINE WHAT ACCORDING TO HIM IS CORRECT. THE ASSESSING OFFICER IS BOUND TO EXAMINE THE GENUINENESS OF THE LOAN BASED ON THE PARAMETERS LAID DOWN U/S. 68 OF THE ACT. FROM THE FACTS EMANATING FROM THE ENTIRE PR OCEEDINGS DEMONSTRATE THAT THE APPELLANT HAS SUFFICIENTLY DISCHARGED ITS ONUS OF PROVING THE SAID TRANSACTION. THEREFORE, THE ADDITIONS MADE BY THE AO IN THE HANDS OF APPELLANT COMPANY WILL NOT STAND THE JUDICIAL SCRUTINY. IN THIS REGARD, IT WILL NOT BE OU T OF PLACE TO MENTION THAT THE ITA NO. 4597/MUM/2016 M/S. DHANLAXMI COTEX LTD., 5 APPELLANT COMPANY HAS BEEN ABLE TO EXPLAIN ITS SOURCE AND THE LENDER COMPANY HAS ALSO CONFIRMED THE TRANSACTIONS. ONCE THE SOURCE OF FUND IS PROVED, THE MATTER CAN BE PUT TO END THERE ITSELF AS PER VARIOUS JUDICIAL PRONOUNC EMENTS, AS REFERRED AND RELIED UPON BY THE LD.AR WHICH HAVE BEEN REPRODUCED IN THE EARLIER PARAGRAPHS AND FOR THE SAKE OF BREVITY, THE SAME IS NOT BEING REPRODUCED OR QUOTED HERE. KEEPING IN VIEW OF THE FACTS OF THE CASE AND APPLYING THE RATIO OF ABOVE REF ERRED JUDICIAL PRONOUNCEMENTS BY THE LD. AR, IT WILL BE DIFFICULT TO SUSTAIN THE ADDITIONS MADE BY THE AO. THEREFORE, THE AO IS DIRECTED TO DELETE THE AMOUNT OF RS 6,68,00,000/ - . IN THE RESULT, GROUND NO. 1, 2 & 3 ARE ALLOWED. 7. WE HAVE CONSIDERE D RIVAL CONTENTIONS AND CAREFULLY GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW. FROM THE RECORD, WE FOUND THAT CIT(A) HAS RECORDED A CLEAR FINDING TO THE EFFE CT THAT ASSESSEE HAS DISCHARGED ITS BURDEN U/S.68 BY ESTABLISHING IDENTITY, GENUINENESS AND CRED ITWORTHINESS OF LOAN TRAN SACTION. WE FOUND THAT LENDER I S ALSO CONTINUOUSLY ASSESSED TO TAX U/S.143(3). FURTHERMORE, THE TRANSACTION WITH LENDER WAS NOT AN ISOLATED TRANSACTION BUT ASSESSEE HAD INTEREST FREE RUNNING ACCOUNT WITH M/S AJAY MULTI PROJECTS LT D SINCE ASSESSMENT YEAR 2007 - 08 AND THE TRANSACTIONS WERE DULY AND CONSISTENTLY ACCEPTED BY THE DEPARTMENT BOTH IN THE CASE M/S AJAY MULTI PROJECTS LTD. 8. WE ALSO OBSERVE THAT THE ASSESSEE HAD INTEREST FREE RUNNING ACCOUNT WITH M/S AJAY MULTI PROJECTS LT D..AND IT'S CREDITWORTHINESS WAS DULY ESTABLISHED DURING ASSESSMENT PROCEEDINGS AS UNDER: ALL TRANSACTIONS WERE THROUGH BANKING CHANNEL. M/S AJAY MULTI PROJECTS LTD IS A LISTED COMPANY AND WAS MAINTAINING DULY AUDITED BOOKS OF ACCOUNTS. ITA NO. 4597/MUM/2016 M/S. DHANLAXMI COTEX LTD., 6 M/S AJAY MULTI P ROJECTS LTD WAS REGULARLY ASSESSED TO TAX IN WARD 4(1 )(3) IN THE SAME RANGE WHERE ASSESSEE IS ASSESSED TO TAX. MR. MAHAVIR JAIN, DIRECTOR OF M/S AJAY MULTI PROJECTS LTD PERSONALLY APPEARED BEFORE THE LEARNED ASSESSING OFFIC ER AND DULY CONFIRMED THE TRANSACTION. THE SOURCES OF FUNDS IN THE HANDS OF M/S AJAY MULTI PROJECTS LTD. WERE DULY ACCEPTED BY THE DEPARTMENT BY WAY OF SCRUTINY ASSESSMENT ORDER U/S 143(3) FOR ASSESSMENT YEAR 2012 - 13.(P.B. - 121) 9. THE DETAILED FINDING S O RECORDED BY CIT(A) AT PARA 5 HAS NOT BEEN CONTROVERTED BY LEARNED DR BY BRINGING ANY POSITIVE MATERIAL ON RECORD. ACCORDINGLY WE DO NOT FIND ANY REASON TO INTERFERE IN THE ORDER OF CIT(A). 10. IN THE RESULT, APPEAL OF THE REVENUE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 31 / 08 / 201 8 SD/ - ( RAM LAL NEGI ) SD/ - (R.C.SHARMA) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI ; DATED 31 / 08 / 201 8 KARUNA SR. PS COPY OF THE ORDER FORWARDED TO : BY ORDER, ( ASSTT. REGISTRAR) ITAT, MUMBAI 1. THE APPELLANT 2. THE RESPONDENT. 3. THE CIT(A), MUMBAI. 4. CIT 5. DR, ITAT, MUMBAI 6. GUARD FILE. //TRUE COPY//