The Income Tax Officer, Samba V. Sh. Ashok Kumar Sharma, Samba

ITA 475/ASR/2016

AI Insights

The case involves an appeal by the Income Tax Officer against the order of the Commissioner of Income Tax (Appeals), which had allowed certain deductions and deletions of additions made by the Assessing Officer under various sections of the Income Tax Act, 1961. The main issues revolved around the eligibility for deductions under section 80IB, the genuineness of unsecured loans, unexplained credits, and the application of section 40A(3) concerning cash payments. The tribunal examined the evidence, including bank statements, audit reports, and the specifics of the transactions in question, and largely upheld the CIT(A)'s decisions, emphasizing the need for substantial proof and the proper application of legal provisions.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 114998 (ITAT-AMRITSAR)
• Duration Of Justice: 6 year(s) 9 month(s) 24 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-07-2023
• Appeal Filed By: Department
• Order Result: PartlyAllowed
• Bench Allotted: DB
• Next Hearing Date: 14-06-2023
• Assessment Year: 2013-2014
• Appeal Filed On: 22-09-2016
• Other Referred Cases: CIT v/s Nagpur Hotel Owners Association, CIT v/s Contimeters Electric Pvt. Ltd., Kale Khan Mohammad Hanif v. CIT, Roshan Di Haiti v. CIT, P.L. Patel v/s ITO, M/s Kashmir Udyog Jammu vs The Addl.CIT Range 1 Jammu, ACIT Vs Datta Construction Ltd, DCIT Vs Shree Ganesh Developers, CIT v/s Orissa Corporation P. Ltd., CIT v/s Laul Transport Corporation
• Laws Referred To: Income Tax Act 1961
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Keywords: Unexplained cash credit; Unexplained investment; Depreciation; Onus to prove
• Section: 68; 145; 40A(3); 80C; 143(3); 40(a)(ia); 80IB; 133(6); 201; 44AB; 40a(ia); 13

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AMRITSAR BENCH, AMRITSAR. BEFORE DR. M. L. MEENA, ACCOUNTANT MEMBER AND SH. ANIKESH BANERJEE, JUDICIAL MEMBER I.T.A. No.475/Asr/2016 Assessment Year: 2013-14 Income Tax Officer, Ward 1(5), Samba. (Appellant) Vs. Sh. Ashok Kumar Sharma Prop. M/s Ashoka Trading Co. And M/s Ishita Food Products, Birpur Industrial Area, Bari Brahmana, Samba. [PAN: -APRPS1901C] (Respondent) Appellant by Sh. Pradeep Kumar, Sr. DR Respondent by Sh. Joginder Singh, CA Date of Hearing 15.06.2023 Date of Pronouncement 17.07.2023 ORDER Per:Anikesh Banerjee, JM: The instant appeal of the revenue was filed against the order of the ld. Commissioner of Income Tax (Appeals),Jammu,[in brevity ‘the CIT (A)’] order passed u/s 250(6) of the Income Tax Act 1961, [in brevity ‘the Act’] for A.Y. I.T.A. No.475/Asr/2016 Assessment Year: 2013-14 2 2013-14. The impugned order was emanated from the order of the ld. Income Tax Officer, Ward 2(5), Jammu, (in brevity the AO) order passed u/s 143(3) of the Act. 2. The revenue has taken the following grounds: 1.a. Whether the Ld. C1T(A) was right in law and fact in allowing deduction u/s 80IB to the assessee when the AO has found various discrepancies in Form 10CXB filed by the assessee and no mention of any manufacturing activity is found in Form 3CB or 3CD. b. Whether the Ld. C1T(A) was right in law and fact in allowing deduction u/s 80IB to the assessee when the assessee has mentioned profit and gains by the undertaking from eligible business for M/s Ashok Trading Co and not of M/s Ishita Food Products in respect of which deduction was claimed. c. Whether the Ld. CIT(A) was correct in law and fact in allowing deduction u/s 80IB tothe assessee when the assessee was unable to prove that the eligible units employed more than 10 employees during the assessment proceedings. d. Whether the Ld. CIT(A) was correct in allowing deduction u/s 80IB to the assessee when the assessee had failed to prove the genuineness of claim of power expenses nor was able to substantiate its claim for purchase of Plant and Machinery as I.T.A. No.475/Asr/2016 Assessment Year: 2013-14 3 number of discrepancies were noticed which have duly been reflected in the body of the assessment order. 2. Whether the Ld. C1T(A) was correct in deleting the addition of Rs 29,00,000/- on account 9J'unsecured loans from M/s Ayush Trading Co. when the assessee has failed to establish as to whether the deposits made in either accounts of M/s Ayush Trading Co. (which he claims to be his proprietorship concern) and M/s Ishita Food Products have been accounted for while computing the income or not, particularly when the assessee had failed to disclose the existence of the bank account of M/s Ayush Trading Co. in its accounts filed with the Department. 3. Whether the Ld. CIT(A) was right in law -to delete the addition amounting to Rs 8,96,41 1/- on account qf difference in transactions: and additions of Rs. 15,04,595/-and Rs.2,76,892/--made on account of unexplained credits despite the fact that the onus lies on the assessee to prove that the earlier accounts submitted by his authorized representative were corrupt. 4. Whether the Ld. CIT(A) was correct in-law in deleting the addition of Rs31.35,200/-on account of unexplained credits even though judgment of the Hon’ble Supreme in the case of case of Roshan Di Haiti v. CIT (1977) 107 ITR 938 (SC), Kale Khan Mohammad Hanif v. CIT (1963) 50 ITR 1 (SC) clearly I.T.A. No.475/Asr/2016 Assessment Year: 2013-14 4 lays down that the onus of providing the source of a sum of money found to have been received by an assessee, is on him. It had further held that where the nature and source of a receipt, whether it e of money or other property, cannot be satisfactorily explained by the assessee, it is open to the revenue to hold that it is the income of the assessee and no further burden lies on the revenue to show that the income is from any particular source. 5. Whether the Ld. CIT(A) was right in fact in deleting the addition of Rsl6,30,510/- u/s 40(A)(3) even though the AO had obtained confirmation from the bank authorities that the cheques which were issued were not account payees cheques but were presented at the counter of the bank for cash payment. 6. Whether the Ld. CIT(A) was right in law and fact in deleting the additions of Rs. 33,00,000/- made on account of unexplained credits despite the fact that during the course of assessment proceedings when new facts came in light, the assessee tried to own-up such concerns being operated by him but he was unable to explain why such concerns have not been disclosed while filing his return of income. He could not even clarify as to whether all these transactions do find place in the books of account on the basis of which, the accounts have been prepared. I.T.A. No.475/Asr/2016 Assessment Year: 2013-14 5 7. Whether the Ld. C1T(A) was right in law and fact deleting the additions of Rs.11,37,300/- made on account of unexplained investment and disallowance of Rs.5,56,880/-out of depreciation allowance even though the assessee could not prove the genuineness of purchase of Plant and Machinery during the assessment proceedings. 8. Whether the Ld. CIT(A) was right in fact in deleting the additions of Rs8,38,000/- u/s 40(A)(3) in the case of M/s Ashoka Trading Co. in view of the fact that in respect of M/s Ishita Food Products, he had held that even if the addition u/s 40(A)(3) is sustained but still the assessee is liable to deduction u/s 80-1B of the Income Tax Act, 1961 whereas in the case under reference, the upholding of the addition would have resulted in payment of additional taxes. The appellant craves to amend or add any one or more grounds of appeal.” 3. Brief fact of the case is that the return of income in this case was filed through e-filing on 30.09 2013 declaring a net income of Rs. 3,31,920/- after claiming deductions of Rs.1,00,000 u/s. 80C and Rs.12,50,358/-u/s. 80IB of the Income tax Act. The case was selected for scrutiny and during the assessment proceedings, the AO asked the assessee to produce books of account and other relevant details. The assessee submitted the books of account in a computerized I.T.A. No.475/Asr/2016 Assessment Year: 2013-14 6 sheet and furnished other details, but it was noticed by the AO that there were number of “discrepancies/infirmities" in the details filed by the assessee and therefore, the counsel of the assessee was asked to prove the genuineness of the entries made in the details filed in the computerized sheet. The counsel for the assessee was sought adjournment. Subsequently, the assessee appeared and informed the AO that the counsel who had submitted the details was not authorized by the assessee to do so and requested the AO not to take cognizance of the details filed by him as the details filed by him were not the correct one. The assessee then wrote a letter to the AO dated 04.02.2016, which formed part of the assessment order and informed him that he has changed the counsel. In the same letter the assessee also offered to declare a sum of Rs.30,00,000 in addition to the income already declared by him in the return "to buy peace of mind and avoid further litigation." The AO then asked the assessee to give specific nature of offer so made and also asked him to clarify whether the said surrender has been made under duress. The assessee then retracted the earlier offer of surrender and withdrew his offer letter. During the course of the assessment proceedings, the assessee did produce the manual books of account, ledger etc., according to the AO the same was only part details and was not supported by the corroborative evidence. The assessee then I.T.A. No.475/Asr/2016 Assessment Year: 2013-14 7 approached the Addl.CIT, Range -1, Jammu by moving a petition u/s 144A of the Act seeking his intervention to direct the AO to consider and accept the manual ledgers and other details furnished by him and ignore the computerized books of account filed by the assesse's counsel in the beginning of the assessment proceedings. Thereafter seeking a report from the AO on the petition filed by the assessee stated as above the ld. Addl.CIT, Range -1, Jammu vide its letter no. Add I.CIT/R-1/15-16/1342 dated 28/29.03.2016 issued directions u/s 144A of the Act. The ld. AO then provided the assessee a final opportunity to produce documents/bills/vouchers/books of account on30.03.2016 in support of the expenses claimed in the return of income filed. In response to that the assessee submitted a letter on 30.03.2016 "that reply to the points 1-9 was already given on 11.03.2016 and requested the ld. AO to consider the same. The ld. AO then framed the assessment order in the light of directions issued by the ld. Addl. CIT, Range 1, Jammu and on the basis of the details available with him. Following additions were made by the AO: Additions made in the assessee’s business concern, M/s Ishita Food products; i) Disallowance of deduction u/s. 80IB amounting to Rs.12,50,358/-, ii) addition of 29 lakh on account of unsecured loan, iii) addition was made of Rs.896,411/- on account of difference of transaction and Rs. 15,04,595/- and Rs. 2,76,892/- on account of unexplained credit, iv) addition on I.T.A. No.475/Asr/2016 Assessment Year: 2013-14 8 account of unexplained credit amount to Rs. 31,35,200/-, v) addition on account 40A(3) amount to Rs 16,30,510/- vi) addition on account unexplained credit amount of Rs 33 lakh, vii) addition of unexplained investment amount to Rs. 11,37,300/- and Rs. 5,56,800/- out of depreciation allowance and viii) disallowance U/s 40A(3) amount to Rs. 8,38,000/-.Being aggrieved the assessee filed the appeal before the ld. CIT(A). The CIT(A) allowed the appeal of the assessee. Being aggrieved revenue filed an appeal before us. Ground No.1 4. In the ground no. 1 of the revenue, the DR vehemently argued and contended that the ld. CIT(A) in his finding clearly observed that most of the objections raised by the Ld. AO to deny the claim u/s 80IB are vague and have no bearing on the eligibility of claim u/s 80IB. The Ld. CIT(A) has given the example that the AO has treated the permanent registration certificate issued by the DIC as defective, but the has not stated as to how the mistakes in the certificate has affected the claim of deduction u/s 80IB of the Act. Further, the ld. CIT(A) has accepted the finding of the ld. AO on account of date of commencement of production still the appellant is eligible for deduction of 100% of profit of Industrial unit being 4th year. The ld. DR relied on the assessment order. I.T.A. No.475/Asr/2016 Assessment Year: 2013-14 9 4.1. The ld AR for assessee argued and placed that the ld. CIT(A) observed that mistakes in Form 10CCB are default on the part of the auditor and the appellant was not penalized for trivial errors made in the audit report filed by the qualified CA. Moreover, there is no adverse comment by the auditor in the Form 10CCCB which makes the assessee ineligible to get deduction. 4.2. Regarding the finding of ld. AO that the amount eligible profit reflected in Form 10CCB is the consolidated amount of profit including profit of M/s Ashoka Trading, the ld. CIT(A) observed that clause 30 of the Form 10CCB the amount of eligible deduction u/s 80IB has been shown at Rs.12,50,358.46. The Ld. CIT(A) also placed reliance on Hon’ble Supreme Court of India CIT v/s Nagpur Hotel Owners Association 247 ITR 201 and Hon’ble High Court of Delhi in the case of CIT v/s Contimeters Electric Pvt. Ltd. 317 ITR 249 and held that the judicial authorities are of unanimous view that the intent of the legislature was to control any attempt or effort to abuse the benefit intended for new undertaking and not to deny benefit to genuine new industrial undertaking on the ground of some technical error. I.T.A. No.475/Asr/2016 Assessment Year: 2013-14 10 4.3. The ld. CIT(A) with regard to the number of employees engaged/ employed for industrial undertaking that during the course of assessment proceedings, the appellant has only filed photocopies of Salary register and not produced the original records for verification. During the appellate proceedings also the appellant has produced the salary register in original which has been verified by the ld. CIT(A) as confirmed in the order. The ld. CIT(A) held in his order that the appellant has not only produced the original salary register but also established beyond doubt that the salary paid to the employees were duly reflected in the books of account. With regard to non-deduction of ESI/ PF, the Ld. CIT(A) did not accept the finding of the AO that there is no mandatory requirement for such registration to claim deduction u/s 80IB and also placed his reliance on the judgement of the Hon’ble ITAT bench in the case of P.L. Patel v/s ITO- (2011) 142-TTJ -0057 / [2012] 19 taxmann.com 201 (ITAT-Mum.). 4.4. The ld AR further argued that the ld. CIT(A) on the finding of the ld. AO that the genuineness and correctness of the claim of power expenses remained unsubstantiated and could not be satisfactorily explained by the assessee, held that the valid power connection on the name of M/s Ishtia Food Products produced and further held that there is non-application of mind on the part of the AO to reach such an illogical conclusion. Even if the electricity was used for trading concern, I.T.A. No.475/Asr/2016 Assessment Year: 2013-14 11 then a part of electricity will be allocated to the said concern thereby decreasing the profit of trading concern and increasing the deduction u/s 80IB of industrial unit on such increased profit. Thus held that the allegations made by the AO are baseless and cannot be sustained. 4.5. The ld AR mentioned that after considering the assessment order and the submissions of the assessee held that since the assessee himself has admitted that the year under consideration i.e, 2013-14 is fourth assessment year and he is eligible for 100% deduction and even if the DIC certificate mentions the date of commencement as 09/2009 and the date of issue of certificate as 16/11/2009, in both the cases, the initial assessment year is computed as 2010-11 and as such, there is no dispute. Thus held that since the assessee has fulfilled all the conditions laid down u/s 80IB and there are no valid reasons for denying the claim of deduction u/s 80IB. 4.6. Detailed submissions made before the Ld. CIT(A) who has taken into account all the facts of the case and after considering the written submissions which were duly supported by the documentary evidence as well as case laws. The computation of income along with Audit report is furnished herewith marked as APB Page No.1 to 16. Further Form No.10CCB also filed Paper Book Page No.36to 42. The ld. AO on the basis of infirmities noted down in Form 10CCB I.T.A. No.475/Asr/2016 Assessment Year: 2013-14 12 with respect to DIC certificate. As per DIC certificate, placed on page No.59 of the Paper book, the date of permanent registration is 9/2009 whereas the auditor has taken the date of commencement in Form No.10CCB as 16.11.2009, which is the date of issuance of certificate. Further, the Form 10CCB contains the date and place as evident from the said form Page No.42 of APB,in both the cases, the initial assessment year is computed as 2010-11 and as such, there is no dispute. This cannot be ground to deny the deduction u/s 80IB. 4.7. The ld. AR placed that the ld. AO pointed out that in the declaration the name of M/s Ishita Food Products and M/s Ashoka Trading has mentioned. The assessee was Proprietor of both the above concerns, M/s Ashoka Trading Company is a trading concern and inadvertently, the auditor has mentioned the said concern in the undertaking. While reporting the sales of undertaking, the auditor has inadvertently mentioned sale of both the concerns but while reporting the profits and gains derived by the undertaking and deduction u/s 80IB has been correctly reported. This also cannot be a valid ground to deny 80IB of the Act as confirmed by the Ld. CIT(A). 4.8. The ld. AR argued that observation of the Ld. AO that Original salary register were not produced, the observation is factually incorrect, complete record with respect to salary and wages were submitted to the ld. AO and to the Ld. I.T.A. No.475/Asr/2016 Assessment Year: 2013-14 13 CIT(A). The Ld. CIT(A) has verified the salary register in original and same has been confirmed by the ld. CIT(A) in his order. The salary record is placed herewith and marked as page Nos.78 to 101 of APB. In respect of observation by ld. AO for non-registration with PF/ESI Act, as per the conditions laid down u/s 80IB there is no such requirement to register under that Act. The ld. CIT(A) placed reliance on the judgement of Hon’ble ITAT-Mumbai bench in the case of P.L. Patel(supra) in which it was held that there is no mandatory requirement for such registration to claim deduction u/s 80IB. The observation of the Ld.AO is not correct which has duly been verified by the Ld. CIT(A) with respect of Power bills Page Nos.115 to 118 of the APB. The Ld. CIT(A) also made observation that if the electricity used for trading concern is being allocated then, profit of the trading concern will be decreased and the deduction u/s 80IB will be increased by such amount. It is clearly held by the Ld. CIT(A) that the allegation made by the Ld. AO are baseless. Ground No. 2 5. In the ground no. 2, the addition of Rs.29 lacs on account of unsecured loans. The ld. DR vehemently argued and relied on the assessment order. 5.1. The AR for assessee argued that the ld. CIT(A) mentioned in the order that amount of Rs.29 lakhs which the Ld. AO has alleged to have been received from I.T.A. No.475/Asr/2016 Assessment Year: 2013-14 14 M/s Ayush Trading Company on different dates has been transferred from M/s Ishita Food Products itself and later on reversed on subsequent dates. It is established from the bank certificate that both the bank account belong to the assessee and it is also established that the amounts have been transferred from one account to another and later on transferred back to the same account. As such, no adverse inference can be drawn. M/s Ayush Trading Company is a proprietorship concern of the assessee as certified by the Bank authority. The certificate along with bank statement placed as Page No.119 to 122 of the APB. The funds were transferred from one account to another account and later transferred back to the same account. This fact has also been verified by the Ld. CIT(A) and he has verified all the transactions and prayer for deletion of the addition made by the ld. AO. Ground No.3. 6. The ld. DR vehemently argued and relied on the assessment order. 7. The ld. AR argued that in this ground another addition of Rs.8,96,411/- on account of difference in transactions Rs.15,04,595/- and Rs.2,76,892/- made on account of unexplained credits on the basis of corrupt computerised data. The ld. AR relied on the appeal order. The relevant paragraphs of page 94 of appeal order is reproduced as below:- I.T.A. No.475/Asr/2016 Assessment Year: 2013-14 15 “The Ground of appeal no 12 and Ground of appeal no 13-Both the grounds are taken up together as both pertain to the additions on account of unexplained credits amounting to Rs.15,04,595/- and Rs.2,76,892/-respectively. The AO has added all the credit entries to the total income of the assessee on the ground that the appellant has not established the identity of parties and the genuineness of the transactions made with them. The appellant, on the other hand has submitted that the AO has made these additions on the basis of corrupted data submitted in the beginning of the assessment proceedings by an unauthorized counsel and which was all along disputed by the appellant. The appellant has, further, submitted that the correct books of account including cash book, ledgers, subsidiary books etc., prepared manually were submitted by the assessee before the AO but the AO did not take cognizance of that and relied only on the corrupted accounts. The appellant has also given explanation against each entry in his written submission made before the undersigned and produced the relevant documents in the form of Paper Book which is placed on record. I have considered the assessment order and the submissions made by the appellant stated as above. It is found that the AO has made the additions in a predetermined manner. When the computerized sheets of accounts were disputed by the appellant and produced the manual books of account the AO should have considered that I.T.A. No.475/Asr/2016 Assessment Year: 2013-14 16 and if any specific defects were noticed by him, he should have rejected the books of account produced by the assessee by invoking the provisions of section 145 (3) of the Act. It appears from the record that the AO was determined not to consider or accept the books of accounts produced by the assessee during the entire assessment proceedings and did not give the appellant the opportunity to explain each and every entry with supporting documentary evidence. The action of the AO appears to be whimsical and is not acceptable in a quasi-judicial proceeding where assessment has to be made by giving due consideration to all documents/evidence produced by the assessee and if some specific defect is noticed the AO is free to take action as per law. Since, the AO has not given due consideration to the books of accounts prepared manually along with documents/evidence, the additions made by the AO cannot be sustained. Thus, all the additions made by the AO amounting to Rs.15,04,595/- and Rs.2,76,892/-respectively are deleted.” 7.1. The ld. AR further mentioned that the ld. CIT(A) after examining the issue observed that the AO has relied on the computerized corrupted data which was submitted before him in the beginning by the counsel who was not authorized and same was disputed by the assessee as corrupted data. The assessee has claimed that he had submitted all the details along with the ledger accounts of the parties and I.T.A. No.475/Asr/2016 Assessment Year: 2013-14 17 reconciled the balances shown in the ledger accounts. Copies of ledger account of these parties have been placed by the assessee in the paper book filed by him before CIT(A). Since the assessee has satisfactorily explained the difference, the addition made is therefore, uncalled for and thus has deleted the same. It was submitted before the Ld. AO that initially corrupted computerized data were furnished by the unauthorised counsel who don’t even have tax practitioner certificate and the assessee has submitted an affidavit for the same. Subsequently, all the details along with ledger accounts of the parties and reconciled each and every entry pointed out by the Ld. AO. The assessee has also reconciled all the accounts with the confirmation obtained u/s 133(6) by the ld. AO. All the ledger accounts were also submitted before the Ld. CIT(A) which is placed on the APB pages 155to 162. The ld AR prayed for deletion of the addition. Ground No. 4 8. The ld. DR vehemently argued and placed that in this ground no. 4, the addition of Rs.31,35,200/- on account of unexplained credits. The ld. DR relied on the assessment order. 9. The ld. AR argued that the ld. CIT(A) during appellate proceedings, observed that it is a settled position that in order to prove the genuineness of the credits, three conditions have to be fulfilled, i.e, identity of the party, its I.T.A. No.475/Asr/2016 Assessment Year: 2013-14 18 creditworthiness and genuineness of the transactions. In the present case, the assessee has produced identity of the parties by providing their addresses along with ITR and bank statements of all the persons from whom the amounts have been received to prove the genuineness of the transactions. The assessee has discharged his onus by providing the identity, genuineness and creditworthiness of the persons. It is also found that all the transactions have been made through banking channels and as such, the genuineness of the transactions is also not in doubt. 9.1. The ld. AR further argued that in the impugned assessment year, the assessee has accepted unsecured loans from the family members of which details are as under: - i)Smt. SandhyaKhajuria amounting to Rs.14,85,200/-. It was submitted before the ld. AO that an unsecured loan of Rs.14,85,200/- was received from Smt. SandhyaKhajuria D/o RameshwarDassKhajuria R/o 124/8 Greater Kailash Jammu who is teacher by profession working as Principal in Sunshine School Nagrotra. She has income from salary as well as rental income. The assessee had furnished copy of ITR, copy of bank statement computation of income etc. confirming the said loan, APB page No.171 to 184. It was submitted before the ld. AO that she had raised loan of Rs.7 lakhs from Canara Bank on 30.07.2012 and the said I.T.A. No.475/Asr/2016 Assessment Year: 2013-14 19 amount was transferred to her saving bank account 3146101000195 maintained with Canara Bank and subsequently, the amount was transferred to the Proprietorship concern M/s Ishita Food Products vide cheque No.844423 dated 01.08.2014 and the balance amount of loan was received on 02.07.2012 vide cheque No.27429 drawn on J&K Bank Ltd. to M/s Ishita Food Products after encashment of FDR proceeds. ii)The other loans were also received through banking channels, the bank statements of all the loanees were filed at APB page No.163 to 169 andthe assessee has proved the creditworthiness, identity and genuineness of the transactions which has been examined and verified by the ld. CIT(A) and deleted the additions. 9.2. The ld. AR has respectfully placed reliance on the judgement of Hon’ble Supreme Court in the case of CIT v/s Orissa Corporation P. Ltd. (1986) 159 ITR-0078, the Hon’ble High Court of Punjab & Haryana in the case of CIT v/s Laul Transport Corporation (2009) 180 Taxman 0185, Held “Section 68 of the Income-tax Act, 1961 - Cash credits - Assessment year 2000-01 - Assessee had taken loans from various persons - Assessing Officer made addition treating said loans as undisclosed income of assessee on ground that creditworthiness of creditors could not be established by assessee - On appeal, Tribunal found that assessee had placed on record affidavits of creditors and their I.T.A. No.475/Asr/2016 Assessment Year: 2013-14 20 bank statement confirmation, which clearly established trustworthiness, creditworthiness and identity of creditors - Tribunal, therefore, deleted addition holding that assessee had discharged its onus to prove genuineness of cash credit by placing on record sufficient material/evidence - Whether, in view of a pure finding of fact recorded by Tribunal with regard to identity, creditworthiness and capacity of creditors to advance money, impugned order was to be upheld - Held, yes” Ground No. 5 10. The ld. DR vehemently argued and submitted that in this ground no. 5, the addition of Rs.16,30,510/- was made u/s 40A(3) of the Act. 11. The ld. AR in argument placed that the Ld. CIT(A) during appellate proceedings held that out of disallowance of Rs.16,30,510/-, the assessee could not explain the payment of Rs.6,80,120/- and confirmed the addition to that extent and also held that I agree with the assessees alternative argument that M/s Ishtia Food Product an Industrial Unit is eligible for deduction u/s 80IB and any disallowance u/s 40A(3) will enhance the eligible business income thereby enhancing the deduction u/s 80IB. Thus even if the disallowance is made u/s 40A(3), the assessee would be entitled to get enhanced deduction u/s 80IB and thus no addition is made on this account. I.T.A. No.475/Asr/2016 Assessment Year: 2013-14 21 11.1. The ld. AR relied on appeal order. The relevant paragraphs from page 83 to 86 are reproduce as below: - “Ground of Appeal No 7 relates to addition ofRs.16,30,510/- in the income of M/s Ishita Food Products for various payments in violation u/s 40A(3) of the Act. The AO has made the addition on the ground that though, the assessee has declared in the Audit Report in Form No. 3CD u/s 44AB of the Act that he has not made any payment in cash, it is found from the bank accounts of M/s Ishita Food Products and M/s Ashoka Trading Company and the information received u/s 133 (6) of the Act that the assessee has made payments in cash in violation of section 40A(3) of the Act by issuing bearer cheques. The appellant, on the other hand, has given detailed explanations against each party and admitted to have issued bearer cheques in some cases due to business expediency but claimed to have been duly reflected in the books of account. The appellant has also claimed that any disallowances made under section 40A (3) will enhance the eligible business profits and thereby, enhance the deduction u/s 80IB of the Act. The appellant has placed reliance on the following judicial decisions- Jurisdictional ITAT Bench Amritsar in the case of M/s Kashmir Udyog Jammu vs The Addl.CIT Range 1 Jammu in ITA no 124/ASR/2011 in which the Hon'ble Bench while relying on the decision M/s Sun Pharmaceuticals in ITA No I.T.A. No.475/Asr/2016 Assessment Year: 2013-14 22 184/Asr/2011 dated 11.06.2010 for the assessment year 2005 -06 have held that deduction u/s 80IB of the Act, is allowable on the amount of enhanced income in view of the disallowance made u/s 40(a)(ia) of the Act and accordingly the AO was directed to allow deduction u/s 80IB of the Act being enhancement of income due to disallowance u/s 40(a)(ia) of the Act. Hon'ble ITAT Bench Hyderabad in the case of ACIT Vs Datta Construction Ltd ITA 2077/Hyd/2011 in which the Hon'ble Bench while relying on the decision of Hon'ble High Court of Himachal Pradesh held that the addition made u/s 40A(3) is assessed under the head business and profit and since the assessee is entitled to 100% deduction , the addition on account of such discrepancy will only result in enhancement of income which would be entitled for such deduction. Hon'ble ITAT Bench of Delhi in the case of DCIT Vs Shree Ganesh Developers ITA 3763/Del/2011 in which it was held that only dispute is with regard to deduction u/s 801B(10) on the amount disallowed u/s 40a(ia) of the Act. Indisputably, the assessee is deriving its income only from the eligible business of construction of flats in respect of which the assessee is entitled to deduction u/s 80IB(10) of the Act. There is nothing to suggest that the amount disallowed u/s 40a(ia) of the Act is not related to the business of the industrial undertaking. Any disallowance of expenditure of the eligible unit results in enhancement of I.T.A. No.475/Asr/2016 Assessment Year: 2013-14 23 deduction allowable under section 80IB(10) of the Act. In view of the foregoing and in the light of aforesaid decisions, including the aforesaid decision of the ITAT in the preceding year, we have no hesitation in upholding the findings of the Ld. CIT(A) that the assessee is entitled to deduction u/s 80IB( 10) of the Act on the amount disallowed u/s 40a(ia) of the Act while 8 ITA no.3763/Del./2011 working out the eligible profits of the industrial undertaking. I have considered the reasons given in the assessment order for the additions made u/s 40A (3) of the Act and the submissions made by the appellant. I have gone through the explanations given by the appellant against each payment. It is found from that explanation that out of disallowance of Rs.16,30,510/- by the AO the appellant could not explain the payment of Rs.6,80,120/-Thus, the addition to that extent is confirmed. However, I agree with the appellant's alternative argument that M/s Ishita Food Products, an industrial unit is eligible for deduction u/s 80IB of the Act and any disallowance u/s 40A(3) will enhance the eligible business income thereby enhancing the deduction u/s 80IB of the Act. Thus, even if the disallowance u/s 40A (3) is made, the appellant would be entitled to get enhanced deduction u/s 80 IB. Thus, no addition is made on this count and the appellant gets a relief of Rs 16,30,510/-.” I.T.A. No.475/Asr/2016 Assessment Year: 2013-14 24 11.2. The ld AR mentioned that the ld. CIT(A) after verifying the factual position has allowed relief of Rs.9,50,390/- and confirmed the addition to the extent of Rs.6,80,120/- but keeping in view the fact that the assessee is entitled to deduction u/s 80IB of the Income tax Act, 1961 held that assesse would be entitled to get the enhanced deduction u/s 80IB by the equivalent amount and hence no addition can be made. In view of these facts of the case, the order of the ld. CIT(A) is justified. While allowing the relief the ld. AR respectfully followed the judgement of the jurisdictional ITAT, Amritsar Bench in the case of M/s Kashmir Udyog Jammu v/s The Addl. CIT, Range-1, Jammu in ITA No.124/Asr/2011, date of pronouncement-21/08/2012. Ground No. 6 12. The ld. DR vehemently argued and placed that in this ground no. 6 the addition of Rs.33 lakhs on account of unexplained credits and he relied on the assessment order. 13. The ld. AR argued that theld. CIT(A) during appellate proceedings after due verification with reference to the relevant records observed that the additions have been made on the basis of entries in bank statement without making any enquiry either from the bank authorities or from the party making the payments. It was stated by the assessee that M/s Shalimar Spice Industries in which the assessee was I.T.A. No.475/Asr/2016 Assessment Year: 2013-14 25 carrying industrial activity earlier and one of the electric connections is still in the name of Shalimar Industries and is being used for operation of M/s Ishita Food Products. The assessee also produces bank certificate which clarifies that Current Account No.742 with J&K Bank Ltd. belongs to the assessee only. There is transfer ofRs.20 lakhs by way of two transfer entries of Rs.10 lakh each from M/s Ishtia Food Product to Shalimar Spice Industries on 30.03.2012 and subsequently transferred back the said amount. Similarly sum of Rs.5 lakhs each on 08.01.2013 and 05.03..2013 and Rs.3 lakhs received on 11.03.2013 through cheques from M/s Ram Kour Behari Lal KanakMandi, Jammu whereas in the bank statement only Ram Kour is mentioned. The Ld. CIT(A) in his finding has mentioned that I have gone through the respective bank statement, bank certificate and ledger account and bills of Ram Kour Behari Lal and it is found from the bank statement that amount have been transferred from Ishtia Food Products to Shalimar Spice Industries and the entries were reversed after four days. It is also found that transactions with M/s Ram Kour Behari Lal has been accounted for in the books of account and the payments have been received against the sales made through cheques and the said bank account is reflected in the books of the assessee. Accordingly, the additions were deleted as the same were made on wrong facts and without cross verification from the bank and concerned parties. I.T.A. No.475/Asr/2016 Assessment Year: 2013-14 26 13.1. The ld. AR read the relevant part of appeal order. The relevant paragraphs of page 86-89 of appeal order are reproduced as below: - “Ground of appeal no 8 relates to the addition ofRs.33,00,000/- on account of unexplained credits made in Bank A/c no. 0047020100000300 in J & K Bank. The AO has made these additions on the ground that though, the assessee has received payments from M/s Shalimar Industries amounting to Rs.20,00,000/- and Rs.13,00,000/- from Ram Kour and deposited in the said bank account but could not explain the genuineness of these payments. The appellant, on the other hand, has stated that the amount has been transferred from M/s Shalimar Spice Industry and not M/s Shalimar Industries. The appellant's counsel further stated that the appellant is also a proprietor of M/s Shalimar Spices Industry in which he was carrying out industrial activities earlier and one of the electric connections is still in the name of M/s Shalimar Spices Industries and is being used for operations of M/s Ishita Food Products. The appellant has produced a bank certificate which clarifies that the Current Account No CD 742 with Jammu & Kashmir Bank Ltd, Bari Brahmna, Jammu is in the name of M/s Shalimar Spices Industry belonging to the appellant only. The bank authorities to meet their annual targets transferred funds amounting to Rs 20 lakhs by way of two transfers of Rs 10 lakhs each from M/s Ishita Food Products to M/s Shalimar I.T.A. No.475/Asr/2016 Assessment Year: 2013-14 27 Spices Industry on 30.03.2012 and subsequently on 04.04.2012 transferred back the said amount of Rs 20 lakhs by bank transfer. The appellant has produced the documentary evidence in the form of bank statements and certificate from the bank to this effect. The appellant has also claimed that all these documents were produced before the AO during the assessment proceedings in support of his claim. Similarly, a sum of Rs.5.00 lacs received on 08.01.2013, another sum of Rs.5.00 lacs received on 05.03.2013 and a sum of Rs.3.00 lacs received on 11.03.2013 respectively through cheques from M/s Ram Kour Behari Lal, Kanak Mandi, Jammu, whereas in the bank statement only Ram Kour is mentioned. The appellant has argued that AO has wrongly mentioned Ram Kour instead of M/s Ram Kour Behari Lai. The appellant has claimed that the explanations along with documentary evidences were submitted before the AO during the assessment proceedings were brushed aside by the AO and a sum of Rs 13 lakhs was added to the total income of the assessee as unexplained credits. I have gone through the assessment order and the submission made by the appellant during appellate proceedings. I have also gone through the Bank statement, bank certificate and ledger accounts and bills of Ram Kour Behari Lal which the appellant produced before the undersigned in the form of Paper Book and available at page no from 221 to 248 of the PB. It is found from the bank I.T.A. No.475/Asr/2016 Assessment Year: 2013-14 28 statements that the amounts have been transferred from Ishita Food products to Shalimar Spice Industry and the entries were reversed>after four days in the same account. It is also found that the transaction with M/s Ram Kour Behari Lai has been accounted for in the books of accounts and the payments have been received against the sales made to M/s Ram Kour Behari lal through cheques and the said bank account is also reflected in the books of the appellant. It is observed that the AO has made the addition on the basis of entry in bank statement without making any enquiry either from bank authorities or from the party making the payments. The AO has not even bothered to verify the submissions and documents produced by the appellant. In my opinion, the additions have been made on the basis of wrong facts. In view of the above facts, it is clear that the appellant has discharged his onus by proving the identity of both the concerns, mode of payment and purpose of transactions along with its source. The addition is, therefore, deleted and the appellant gets a relief of Rs. 33,00,000/-.” 13.2. The ld. AR mentioned that the Ld. CIT(A) has given his comprehensive findings after due verification of all the facts of the case with reference to various documents placed on record. After going through the documents, it is clearly I.T.A. No.475/Asr/2016 Assessment Year: 2013-14 29 established from the bank statement that amount have been transferred from Ishtia Food Products to Shalimar Spice Industries both being the proprietorship concern of the assessee and the entries were reversed after four days.The ld. AR has drawn our attention in bank certificate for proprietorship of Shalimar Spices Industries, enclosed in APB Page Nos.221 to 223. It is also noticed that transactions with M/s Ram Kour Behari Lal has been accounted for in the books of account and the payments have been received against the sales made through cheques and the said bank account is duly reflected in the books of the assessee. The ledger accounts and bills of M/s Ram Kour Behari Lal are annexed in APB page nos.224 to 249. Accordingly, the additions were deleted as the same were made on wrong facts. Ground No.7 14. The ld. DR vehemently argued and placed thatin this ground no. 7 the addition Rs.11,37,300/- made on account of unexplained investment and disallowance of Rs.5,56,800/- out of depreciation allowance. The ld. DR fully relied on assessment order. 15. The ld. AR argued and placed that the ld. CIT(A) allowed the relief on account of unexplained investment in Plant & Machinery on the basis that the invoice was issued in the year under consideration after the approval was given by the assessee in respect of satisfactory working of the machinery. The copy of I.T.A. No.475/Asr/2016 Assessment Year: 2013-14 30 invoice is also produced for verification. During the course of appellate proceedings, the assessee submitted that he has not done any major construction at his residential house and the allegation of the Ld. AO is based on presumption. After going through all the records, it is found that the assessee has maintained proper records for building construction expenses and is fully recorded in the books of account and nothing adverse was found to show that the office building has not been constructed at the given address. It is therefore, held that the assessee is entitled to depreciation. 15.1. The ld. AR mentioned that the ground relates to the deletion of addition of Rs.11,37,300/- made by the ld.AO on account of unexplained investment and disallowance of Rs.5,56,880/- out of depreciation allowance. The addition were made on the ground that the assessee could not prove the genuineness of purchase of P&M from M/s M.K. Extrusions when it was stated before the ld. AO that the sum of Rs.11,37,300/- was paid in the preceding assessment year from regular books of account and the said amount is reflected in the opening balance of P&M in the fixed asset schedule of the year under consideration. All the relevant documents were produced before the ld. AO but he had failed to get the same verified. The Ld. CIT(A) after considering the submissions and after going through I.T.A. No.475/Asr/2016 Assessment Year: 2013-14 31 the relevant documents allowed the relief and held that the addition is uncalled for. The copy of the invoice is placed in the APB on page No.249. With regard to the disallowance of depreciation, the Ld. AO held that the expenditure claimed on building construction reflected in the books of account have been invested in the construction of residential house and not in the factory ignoring the fact that the complete ledger copy of building construction account along with bills for purchase of material and records for labour expenses were produced before him during the assessment proceedings. After due verification of the relevant documents, the ld. CIT(A) held that the assessee had maintained proper records for building construction expenses and are fully recorded in the books of account and nothing adverse was found to show that the office building has not been construction and thus held that the assessee is entitled to get depreciation on building. Details of building account are annexed in APB page no.250-252. Ground No. 8 16. The ld. DR vehemently argued and placed that in this ground no-8, the addition of Rs.8,38,000/- u/s 40A(3) in the case of M/s Ashoka Trading Co. The ld DR relied on the assessment order. I.T.A. No.475/Asr/2016 Assessment Year: 2013-14 32 17. The ld. AR argued and placed that the ld. CIT(A) in his order held that the assessee has proved beyond doubt that each payment has been duly reflected in the books of account even in those cases where bearer cheques have been issued due to business expediency and hence deleted the entire addition. 17.1. The ld. AR placed that the addition of Rs.8,38,000/- was made for the contravention of the provisions of section 40A(3) of the Act by holding that plausible explanation was offered except that the payments were made through bearer cheques. The ld. CIT(A) after due verification held that the assessee has proved beyond doubt that each payment has been duly reflected in the books of account even in those cases where bearer cheques have been issued due to business expediency and held that no addition is required to be made u/s 40A(3) and thus deleted the said addition. 18. We heard the rival submission and considered the documents available in the record. The entire issue of the appeal is fact base. By perusal of certificate U/s 80IB the Auditor had made the mistake and mentioned the date of issue. We respectfully relied on the order of Contimeters Electric Pvt. Ltd(supra). The assessee is eligible for deduction U/s 80IB of the Act. The asseesse is running the concern M/s Ishita Food Products, M/s Ashok Trading and M/s Shalimar Spice Industries. Related unsecured loan amount to Rs. 29 lakh the source, identity and I.T.A. No.475/Asr/2016 Assessment Year: 2013-14 33 transaction were established. On perusal of record unexplained credit amount to Rs. 15,04,595/- and Rs 2,76,892/- and difference in transaction amount to Rs. 8,96,411/- were reconciled by pursuing notice 133(6) and relevant documents were submitted before the assessment and appeal. The addition of unexplained credit amount of Rs. 31,35,200/- was duly clarified in both the stages. The reklevant evidence is placed before the bench. We respectfully relied on the case Laul Transport Corporation, (supra). Further, the addition of unexplained credit amount to Rs. 33 lakh is duly explained by assessee. Considering the addition Rs.11,37,300/- made on account of unexplained investment and disallowance of Rs.5,56,800/- out of depreciation allowance, the assessee placed the purchase invoice and relevant documents. The genuinity of purchase was duly verified by the ld. CIT(A). The issues were well delt by the ld. CIT(A). In the above- mentioned issues, we do not interfere in the appeal order. So, the grounds of the revenue are dismissed. 18.1. Related addition for contravening section 40A(3) the amount of Rs. 16,30,510/- and Rs. 8,38,000/- the ld. CIT(A) after verification of factual position allowed Rs. 9,50,390/- out of addition of Rs. 16,30,510/- and balance amount to Rs. 680,120/- was confirmed. But further the amount of Rs. 680,120/- was deleted on the ground of enhanced deduction U/s 80IB. The issue is covered by ITAT- I.T.A. No.475/Asr/2016 Assessment Year: 2013-14 34 Amritsar bench in the case of M/s Kashmir Udyog Jammu, (supra). We are not intervening in the appeal order. The additions are quashed. 18.2. Related addition amount of Rs. 8,38,000/- for contravening section 40A(3) the addition was deleted on the ground of business exigency. We are not accepting the issue related business exigency which is not covered U/R 6DD of the Income Tax Rule, 1962. So, we upheld the assessment order in this ground. 19. In the result, the appeal of the revenue in Ground nos. 1 to 7 are dismissed and the Ground no-8 of revenue is allowed. 20. In the result, the appeal of the revenue bearing I.T.A. No. 475/Asr/2016 is partly allowed. Order pronounced in the open court on 17.07.2023 Sd/- Sd/- (Dr. M. L. Meena) (ANIKESH BANERJEE ) Accountant Member Judicial Member AKV Copy of the order forwarded to: (1)The Appellant (2) The Respondent (3) The CIT (4) The CIT (Appeals) (5) The DR, I.T.A.T. True Copy By order