ACIT, Muzaffarnagar V. M/s. Afgan Cane Crusher, Muzaffarnagar

ITA 4624/DEL/2011

• Counselvise Citation: [2011] 140 COUNSELVISE.COM (IT) 53364 (ITAT-DELHI)
• Duration Of Justice: 2 month(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-12-2011
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 20-12-2011
• Assessment Year: 2008-2009
• Appeal Filed On: 19-10-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: MRS ANUSHA KHURANA
• Keywords: Corroborative evidences

Judgement Text

ITA NO. 4624/DEL/2011 1 IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH A, NEW DELHI BEFORE SHRI I.P. BANSAL, JUDICIAL MEMBER AND SHRI SHAMIM YAHYA, ACCOUNTANT MEMBER I.T.A. NO. 4624/DEL/2011 A.Y. : 2008-09 ACIT, CIRCLE - 1, MUZAFFARNAGAR VS. M/S AFGAN CANE CRUSHER, VILLAGE AND POST BUTRADA, SHAMLI, MUZAFFARNAGAR (PAN/GIR NO. AAACFA8812G) (APPELLANT ) (APPELLANT ) (APPELLANT ) (APPELLANT ) (RESPONDENT ) (RESPONDENT ) (RESPONDENT ) (RESPONDENT ) ASSEESSEE BY : NONE DEPARTMENT BY : MRS. ANUSHA KHURANA, SR. D.R. ORDER ORDER ORDER ORDER PER SHAMIM YAHYA: AM PER SHAMIM YAHYA: AM PER SHAMIM YAHYA: AM PER SHAMIM YAHYA: AM THIS APPEAL BY THE REVENUE IS DIRECTED AGAINST TH E ORDER OF THE LD. COMMISSIONER OF INCOME TAX (APPEALS) DATED 20.7.2 011 PERTAINING TO ASSESSMENT YEAR 2008-09. 2. THE GROUNDS RAISED READ AS UNDER:- (I) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD. COMMISSIONER OF INCOME TAX (APPEALS) HAS ERRED IN LA W IN DELETING THE ADDITION OF ` 13,80,000/- MADE BY THE ASSESSING OFFICER ON ACCOUNT OF UNSECURED LOANS BY ACCEPTING UNSECURED LOAN AS GENUINE. THE DECISION OF THE LD. COMMISSIONER OF INCOME TAX (APPEALS) IS NOT ACCEP TABLE AS THE NEED FOR RAISING THE LOAN HAS NOT BEEN INVES TIGATED INTO. THE LD. COMMISSIONER OF INCOME TAX (APPEALS) H AS ITA NO. 4624/DEL/2011 2 NOT CONSIDERED THE FACT THAT ALL THE PARTIES WERE R ELATED TO ASSESSEE AND NOT INTEREST WAS PAID TO THEM. FURTHER THE LD. COMMISSIONER OF INCOME TAX (APPEALS) HAS NOT DISCUSS ED THE ISSUE OF RAISING THE LOAN WHEN THE COMPANY HAS TURNOVER OF ` 3,62,47,198/- AND WAS ALWAYS IN A POS ITION TO REPAY THE LOAN. HENCE, THE LD. COMMISSIONER OF INC OME TAX (APPEALS) HAS ERRED IN PRINCIPLE BY TREATING TH ESE LOANS AS GENUINE ONLY BECAUSE IT WERE ACCEPTED IN PAST YE ARS ALSO. (II) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE C ASE, AS THE LD. COMMISSIONER OF INCOME TAX (APPEALS) HAS ERRED IN LAW BY RESTRICTING THE SALE OF SCRAP TO ` 5,000/-. T HE ORDER OF THE LD. COMMISSIONER OF INCOME TAX (APPEALS) IS NOT ACCEPTABLE SINCE THE ASSESSEE IS FOLLOWING MERCANTIL E SYSTEM OF ACCOUNTING THE VALUES ARE TO BE REFLECTED IN BOOKS AND VALUE OF SCRAP IS GENUINE AT THE RATE OF 5% AS COMPARED TO 2% CALCULATED BY THE LD. COMMISSIONER OF INCOME TAX (APPEALS). (III) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, AS THE LD. COMMISSIONER OF INCOME TAX (APPEALS) HAS ERRED IN LAW BY RESTRICTING THE EXPENSES UNDER THE HEAD CHEMICA LS TO ` 1,00,000/- AS AGAINST ` 1,40,000/- MADE BY THE ASSES SING OFFICER. THE ACTION OF THE LD. COMMISSIONER OF IN COME TAX (APPEALS) IS NOT ACCEPTABLE IN PRINCIPLE BECAUSE AT THE TIME OF ASSESSMENT PROCEEDINGS, THE ASSESSEE FAILED TO PRODUCE COMPLETE BILLS AND VOUCHERS AND THE ADDITION WAS MADE ON ACCOUNT OF NON PRODUCTION OF SUPPORTING EVIDENCES. ITA NO. 4624/DEL/2011 3 (IV) THE ORDER OF THE LD. COMMISSIONER OF INCOME TAX (APPEALS) BE SET ASIDE AND THAT OF ASSESSING OFFICER RESTORE D. 3. APROPOS ADDITION OF ` 13,80,000/-. IN THIS CASE ASSESSING OFFICER OBSERVED THAT DURIN G THE COURSE OF ASSESSMENT PROCEEDINGS, IT WAS REVEALED THAT ASSESS EE COMPANY HAS SHOWN UNSECURED LOANS OF ` 13,80,000/- FROM THE FOL LOWING PERSONS:- 1. RASHIDA KHATOON ` 10,000/- 2. RASHID KHAN ` 2,50,000/- 3. SANJIDA BEGUM ` 3,00,000/- 4. SATISH KUMAR ` 1,70,000/- 5. ANITA SHARMA ` 1,00,000/- 6. HARISH PRABHAKAR ` 1,50,000/- 7. SUDESH PRABHAKAR ` 1,50,000/- 8. VIMAL KUMAR & SONS ` 50,000/- 9. ANUP KR. PRABHAKAR & SONS ` 2,00,000/- ` 13,80,000/ ` 13,80,000/ ` 13,80,000/ ` 13,80,000/- -- - 3.1 ASSESSEE WAS ASKED TO EXPLAIN THESE LOANS AND A S TO WHY THESE SHOULD NOT BE ADDED TO THE INCOME OF THE ASSESSEE A S THESE UNSECURED LOANS ARE OUTSTANDING FOR MORE THAN 3 YEARS BUT NO I NTEREST ARE BEING PAID BY THE ASSESSEE COMPANY ON THE UNSECURED LOANS. ASSESSING OFFICER FORMED AN OPINION THAT THIS LOANS ARE INCO ME OF THE ASSESSEE AND PROFITS CHARGEABLE TO TAX U/S. 41(1) OF THE IT ACT. ACCORDINGLY, HE MADE THE ADDITION OF ` 13,80,000/- U/S 41(1) IT ACT. 4. UPON ASSESSEES APPEAL LD. COMMISSIONER OF INCOME TAX (APPEALS) NOTED THAT THE AFORESAID LOANS WERE DULY RECORDED IN THE ITA NO. 4624/DEL/2011 4 BOOKS OF ACCOUNTS AND CONFIRMATIONS OF LOANS WERE AL SO FILED BEFORE THE ASSESSING OFFICER WHEREIN THE DEPOSITORS ACCEPTED T O HAVE MADE INTEREST FREE LOANS TO THE ASSESSEE. LD. COMMISSIO NER OF INCOME TAX (APPEALS) FURTHER OBSERVED THAT THE UNSECURED LOANS HAVE BEEN RAISED BY THE ASSESSEE FROM RELATIVES AND FRIENDS IN THE FI NANCIAL YEAR 2004- 05 FOR OBTAINING CREDIT LIMIT FROM BANKS AND THE IMPUG NED SUMS DO NOT REPRESENT TRADING LIABILITY FOR INVOKING PROVISIONS OF SECTION 41(1) OF THE ACT. IN VIEW OF THE ABOVE FACTS LD. COMMISSIONER O F INCOME TAX (APPEALS) HELD THAT THE ASSESSING OFFICER WAS LEGA LLY AND FACTUALLY INCORRECT IN INVOKING PROVISIONS OF SECTION 41(1) O F THE ACT AND MADE DISALLOWANCE OF ` 13,80,000/-. 5. AGAINST THE ABOVE ORDER THE REVENUE IS IN APPE AL BEFORE US. 6. WE HAVE HEARD THE LD. DEPARTMENTAL REPRESENTATIV E. NONE APPEARED ON BEHALF OF THE ASSESSEE. UPON CAREFUL CONSIDERATION, WE FIND THAT THE MATTER CAN BE DISPOSED OF BY PERUSING THE RECORDS AND HEARING THE LD. DEPARTMENTAL REPRESENTATIVE. WE FIN D THAT THE ADDITION IN THIS CASE HAS BEEN MADE BY THE ASSESSIN G OFFICER ON THE GROUND THAT THE UNSECURED LOANS ARE MORE THAN 3 YEA RS OLD. MERE PASSAGE OF 3 YEARS WILL NOT MEAN THAT THESE LIABILIT IES ARE NO LONGER PAYABLE. MOREOVER, THE ASSESSEE HAS NOT WRITTEN OFF THESE SUMS. MOREOVER THESE LOANS DO NOT REPRESENT TRADING LIABI LITY. HENCE, SECTION 41(1) CANNOT BE INVOKED. THE PARTIES HAVE ALSO CONFIRMED THE SAME. UNDER THE CIRCUMSTANCES, THERE IS NO INFIRMITY IN THE ORDER OF ITA NO. 4624/DEL/2011 5 THE LD. COMMISSIONER OF INCOME TAX (APPEALS). HENCE , WE AFFIRM THE SAME IN THIS REGARD. 7. APROPOS ISSUE OF SALE OF SCRAP ON THIS ISSUE ASSESSING OFFICER OBSERVED THAT ASS ESSEE FIRM HAS SHOWN EXPENSE OF ` 2,18,699/- UNDER THE REPAIR AND MAINTENANCE. HOWEVER, ASSESSING OFFICER NOTED THAT AGAINST REP AIR AND MAINTENANCE, NO SALE OF DISCARDED PARTS OF PLANT AND MACHINERY HAS BEEN SHOWN BY THE ASSESSEE FIRM. ASSESSEE IN THIS REGARD RESPONDED THAT WHATEVER SCRAP IS GENERATED FROM THE PLANT AND MACHINERY IS SHOWN AS SALES, WHENEVER THE SALES IS MADE. ASSESSI NG OFFICER PROCEEDED TO ESTIMATE THE SCRAP SALE AT 5% APPROXIMAT ELY AND AN AMOUNT OF ` 10,934/- WAS ADDED IN THIS REGARD. 8. UPON ASSESSEES APPEAL LD. COMMISSIONER OF INCOME TAX (APPEALS) CONSIDERED THE ISSUE AND HELD THAT THE A DDITION MADE BY THE ASSESSING OFFICER WAS UPHELD IN PRINCIPLE. HOWEVER , LOOKING TO THE EXTENT OF PLANT AND MACHINERY AT ` 1,88,700/- ONLY AND APPARENT COMPUTATION ERROR MADE BY THE ASSESSING OFFICER WHIL E ESTIMATING THE SCRAP, LD. COMMISSIONER OF INCOME TAX (APPEALS) OPIN ED THAT IT WOULD BE REASONABLE AND JUSTIFIED IF ADDITION ON ACCOUNT O F SCRAP SALE IS RESTRICTED AT ` 5,000/- ONLY. ITA NO. 4624/DEL/2011 6 9. AGAINST THE ABOVE ORDER THE REVENUE IS IN APPEAL BEFORE US. 10. WE HAVE CAREFULLY CONSIDERED THE ISSUE. WE FI ND THAT LD. COMMISSIONER OF INCOME TAX (APPEALS) HAS PASSED A RE ASONABLE ORDER WHICH DOES NOT NEED ANY INTERFERENCE ON OUR PART. ACCORDINGLY, WE UPHOLD THE SAME. 11. APROPOS EXPENDITURE UNDER THE HEAD CHEMICAL ON THIS ISSUE ASSESSING OFFICER OBSERVED THAT ON VERIFICATION OF BILLS AND VOUCHERS RELATING TO CHEMICAL, IT WAS FOU ND THAT SOME OF THE CHEMICAL BILLS ARE NOT FULLY VOUCHED AND VERIFIABL E. ASSESSING OFFICER MADE ESTIMATED ADDITION OF ` 1,40,000/- IN THIS REG ARD. 12. UPON ASSESSEES APPEAL LD. COMMISSIONER OF INCOME TAX (APPEALS) HELD THAT THE DISALLOWANCE IS UPHELD IN P RINCIPLE, BUT WAS ON HIGHER SIDE. HE FURTHER HELD THAT IT WOULD MEET BO TH THE ENDS OF JUSTICE IF THE AMOUNT OF THE DISALLOWANCE IS RESTRICT ED TO ` 70,000/- AS AGAINST ` 1,00,000/- MADE BY THE ASSESSING OFFICER. THUS, LD. COMMISSIONER OF INCOME TAX (APPEALS) OBSERVED THAT A SSESSEE GOT RELIEF OF ` 40,000/- ON THIS SCORE. 13. AGAINST THE ABOVE ORDER THE ASSESSEE IS IN APPE AL BEFORE US. 14. WE HAVE CAREFULLY CONSIDERED THE SUBMISSIONS. WE FIND THAT THERE IS SOME DISCREPANCY IN GROUND RAISED BY THE REVENUE . LD. ITA NO. 4624/DEL/2011 7 COMMISSIONER OF INCOME TAX (APPEALS) HAS INFACT REST RICTED THE ADDITION UNDER THE HEAD CHEMICAL FROM ` 1,00,000/- TO ` 60,000/-. IN OUR CONSIDERED OPINION, THE ORDER OF THE LD. COMMISS IONER OF INCOME TAX (APPEALS) IS REASONABLE AND DOES NOT NEED ANY I NTERFERENCE ON OUR PART. ACCORDINGLY, WE UPHELD THE SAME. 15. IN THE RESULT, THE APPEAL FILED BY THE REVENUE STANDS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 28/12/2011. SD/- SD/- [I.P. BANSAL] [I.P. BANSAL] [I.P. BANSAL] [I.P. BANSAL] [SHAMIM YAHYA] [SHAMIM YAHYA] [SHAMIM YAHYA] [SHAMIM YAHYA] JUDICIAL MEMBER JUDICIAL MEMBER JUDICIAL MEMBER JUDICIAL MEMBER ACCOUNTANT MEMBER ACCOUNTANT MEMBER ACCOUNTANT MEMBER ACCOUNTANT MEMBER DATE 28/12/2011 SRB COPY FORWARDED TO: COPY FORWARDED TO: COPY FORWARDED TO: COPY FORWARDED TO: - -- - 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT (A) 5. DR, ITAT TRUE COPY BY ORDER, ASSISTANT REGISTRAR, ITAT, DELHI BENCHES