ITO WD 2(3)(4), MUMBAI V. WILLIAM JACKS & CO (I) P. LTD, MUMBAI

ITA 4816/MUM/2011

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 3389 (ITAT-MUMBAI)
• Duration Of Justice: 4 year(s) 9 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-03-2016
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: G
• Next Hearing Date: 14-12-2015
• Assessment Year: 2005-2006
• Appeal Filed On: 15-06-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: KAILASH C KANOJIYA
• Keywords: Unexplained cash credit

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL G BENCH, MUM BAI BEFORE SHRI B.R.BASKARAN, AM AND SHRI SANDEEP GOSAI N, JM ./ I.T.A. NO. 4816/MUM/2011 ( / ASSESSMENT YEAR: 2005-06) THE INCOME TAX OFFICER 2(3)(4), ROOM NO. 555, 5 TH FLOOR, AAYAKAR BHAVAN,M.K. ROAD, MUMBAI-400 020. / VS. M/S. WILLIAM JACKS & CO. (I) LTD., GROUND FLOOR, PREM SAGAR BLDG,7-7-B, NESBIT ROAD, MAZGAON, MUMBAI-400 010. ./ ./PAN/GIR NO. AAACW 0049G ( /APPELLANT ) : ( / RESPONDENT ) / APPELLANT BY : SHRI KAILASH C. KANOJIYA / RESPONDENT BY : SHRI K. GOPAL / DATE OF HEARING : 17/12/2016 !'# / DATE OF PRONOUNCEMENT : 23/03/2016 $% / O R D E R PER SANDEEP GOSAIN, J. M.: THE PRESENT APPEAL HAS BEEN FILED BY THE REVENUE AG AINST THE ORDER OF COMMISSIONER OF INCOME TAX (APPEALS)- 6, DATED 22.0 3.2011 FOR A.Y. 2005-06 ON THE FOLLOWING GROUNDS OF APPEAL. 2 ITA NO. 4816/MUM/2011 (A.Y. 2005-06) ITO VS. M/S. WILLIAM JACKS & CO. (I) LTD. 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) ERRED IN DELETING THE ADDITION ON ACCOUNT OF INTEREST INCOME AMOUNTING TO RS.48,84,624/-WHICH HAD NOT BEEN SHOWN AS INCOME AS PER NOTE NO.21 TO FINAL ACCOUNT ATTACHED WITH THE RETUR N OF INCOME DULY CERTIFIED BY A DIRECTOR OF THE ASSESSEE COMPANY. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE A ND IN LAW, THE LD. CIT(A) ERRED IN DELETING THE ADDITION ON ACCOUNT OF UNEXPL AINED CASH CREDIT WHEN THE GENUINENESS OF TRANSACTION AND CREDIT-WORTHINES S OF THE PARTY COULD NOT BE SATISFACTORILY PROVED DURING THE ASSESSMENT PROC EEDINGS AS WELL AS REMAND REPORT STAGE. 2. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESEE IS A PRIVATE LIMITED COMPANY AND IS ENGAGED IN THE BUSINESS OF INVESTMENT AND FI NANCE. THE ASSESSEE COMPANY FILED THE RETURN OF INCOME ON 30/10/2005 DECLARING TOTAL LOSS OF RS.13,05,710 /-. LATER ON THE CASE WAS SELECTED FOR SCRUTINY BY CASS AND IN THIS RESPECT THE STATUTORY NOTICES WERE SERVED UPON THE ASSESSEE. AF TER CONSIDERING THE REPLY AS WELL AS THE DOCUMENTS SUBMITTED BY THE ASSESSEE, THE AO ASSESSED THE INTEREST INCOME OF RS.48,84,624/- ON THE GROUND THAT NOTES TO ACCOUNTS HAS CERTIFICATION OF CHARTERED ACCOUNTANT THAT COMPANY HAS NOT ACCOUNTED THE INTER EST INCOME AND HELD THE SAME TO BE INCOME FROM OTHER SOURCES. IN ADDITION THE AO DISALLOWED THE SUM OF 3 ITA NO. 4816/MUM/2011 (A.Y. 2005-06) ITO VS. M/S. WILLIAM JACKS & CO. (I) LTD. RS.2,11,000/- BEING BROKERAGE PAID AND ADDED IT BAC K TO THE TOTAL INCOME. THE AO ALSO HELD THAT THE LOAN OF RS.1,31,22,734/- TO BE N OT GENUINE ON THE GROUND THAT THE ASSESEE HAS FAILED TO FURNISH THE LEDGER ACCOUNTS A ND CONFIRMATION LETTER AND IN ADDITION THE AO ALSO DISALLOWED 10% OF THE EXPENSES MENTIONED ON ACCOUNT OF ADMINISTRATIVE EXPENSES, SALARY AND WAGES ON NOTION AL BASIS AND PASSED THE ORDER OF ASSESSMENT. 3. AGGRIEVED BY THE ORDER OF THE AO, ASSESSEE FILED APPEAL BEFORE CIT(A) AND THE CIT(A) AFTER CONSIDERING THE CASE OF THE ASSESS EE HAD PARTLY ALLOWED THE APPEAL VIDE ITS ORDER DATED 22.03.11. 3.1 AGGRIEVED BY THE ORDER OF CIT(A) THE REVENUE FI LED THE PRESENT APPEAL BEFORE US ON THE GROUNDS MENTIONED HEREIN ABOVE. GROUND NO. 1 4. THIS GROUND RELATES TO DELETION OF ADDITION ON A CCOUNT OF INTEREST INCOME AMOUNTING TO RS.48,84,624/-. IN THIS CONTEXT, LD. D R APPEARING ON BEHALF OF REVENUE SUPPORTED THE ORDERS PASSED BY THE AO AND R EFERRED TO PG. NO. 2-3 OF THE AOS ORDER WHERE DETAILED FINDINGS HAVE BEEN RECORD ED BY THE AO WHILE ADDING A SUM OF RS. 48,84,624/- IN THE INCOME WHILE TREATIN G THE SAME AS INCOME FROM 4 ITA NO. 4816/MUM/2011 (A.Y. 2005-06) ITO VS. M/S. WILLIAM JACKS & CO. (I) LTD. OTHER SOURCES. THE CIT(A) WHILE ADMITTING ADDITIONA L EVIDENCE FILED BY THE ASSESSEE DURING THE COURSE OF APPELLATE PROCEEDINGS DECIDED THIS GROUND IN FAVOUR OF ASSESSEE, THE OPERATIVE PARA OF CIT(A) IS REPROD UCED BELOW. I HAVE CONSIDERED THE FACTS OF THE ISSUE AND THE S UBMISSIONS MADE BY THE AR. A PERUSAL OF THE ORIGINAL FINAL ACCOUNTS FI LED BY THE APPELLANT CONTAINING NOTES TO ACCOUNTS INDICATES THAT THE SAI D ACCOUNTS WERE ONLY CERTIFIED TRUE COPY AND WERE NOT SIGNED BY E ITHER THE AUDITORS OR THE DIRECTORS AT THE APPROPRIATE PLACE, TO AUTHE NTICATE THE SAME. IT IS FURTHER NOTED THAT THE APPELLANT DID FURNISH BEF ORE THE AO THE DULY SIGNED FINAL ACCOUNTS WHICH WERE AUTHENTICATED BY T HE AUDITORS AND WHICH DID NOT CONTAIN THE IMPUGNED NOTE REGARDING T HE NON ACCOUNTING OF IMPUGNED INTEREST INCOME AND INTEREST EXPENSES; BUT THE SAME WERE REJECTED BY THE AO. THE AR OF THE APPELLA NT HAS ESTABLISHED THAT THE FINAL ACCOUNTS APPROVED BY THE AUDITORS, BOARD OF DIRECTORS AND SHAREHOLDERS OF THE COMPANY AS WELL A S THE FINAL ACCOUNTS FILED BEFORE THE REGISTRAR OF COMPANIES DI D NOT CONTAIN THE IMPUGNED NOTE. THERE IS MERIT IN THE ARS CONTENTIO N THAT THE AO WRONGLY RELIED ON THE ASSESSMENT ORDER FOR A.Y.1997 -98, IN WHICH YEAR, THE APPELLANT HAD ITSELF DISCLOSED/ADDED IN T HE RETURN THE INTEREST INCOME ACCRUED DURING THE YEAR. IN THAT YEAR, THE O NLY QUESTION RAISED 5 ITA NO. 4816/MUM/2011 (A.Y. 2005-06) ITO VS. M/S. WILLIAM JACKS & CO. (I) LTD. BY THE APPELLANT WAS REGARDING THE ALLOWABILITY OR OTHERWISE OF THE EXPENSE RELATING TO THE EARNING OF SUCH INCOME. THE AR HAS FURTHER FILED CERTIFICATE FROM THE AUDITOR CERTIFYING THAT THEY HAD NOT SIGNED OR CERTIFIED ANY ACCOUNTS FOR THE YEARS UNDER CONSIDER ATION CONTAINING THE IMPUGNED NOTE. THERE IS ALSO MERIT IN THE ARS CONTENTION THAT THE IMPUGNED INCOME COULD NOT BE ESTABLISHED TO HAVE AC CRUED TO THE APPELLANT AND THEREFORE THERE WAS NO QUESTION OF OF FERING THE SAME FOR TAXATION AND THAT NO TAX COULD BE IMPOSED ON ARTIFI CIAL INCOME. IN VIEW OF THE ABOVE DISCUSSION, THE ADDITION MADE BY THE AO IS DELETED AND THIS GROUND IS ALLOWED. 5. WE HAVE ANALYSED THE AFORE MENTIONED PARA OF IMP UGNED ORDER AND WE ARE OF THE CONSIDERED VIEW THAT THE CIT(A) HAS DECIDED THE SAID ISSUE AFTER NOTICING THAT THE FINAL ACCOUNTS FILED BY THE ASSESEE, WAS APPROV ED BY AUDITORS, BOARD OF DIRECTORS AND SHAREHOLDERS. THE CIT(A) FURTHER TOOK INTO CONSIDERATION THAT THE AUDITORS HAVE ISSUED THE SEPARATE CERTIFICATE THERE BY CONFIRMING THE STAND TAKEN BY THE LD. AR. HENCE, WE ARE OF THE VIEW THAT THE AO W AS NOT JUSTIFIED IN PLACING RELIANCE ON FINANCIAL STATEMENTS WHICH WERE NOT APP ROVED BY SHAREHOLDERS. AFTER APPRECIATING THE SAME THE LD. CIT(A) HAS RIGHTLY HE LD THAT AR OF THE ASSESSEE HAD ESTABLISHED THAT THE FINAL ACCOUNTS APPROVED BY THE AUDITORS, BOARD OF DIRECTORS 6 ITA NO. 4816/MUM/2011 (A.Y. 2005-06) ITO VS. M/S. WILLIAM JACKS & CO. (I) LTD. AND SHAREHOLDERS OF THE COMPANY AS WELL AS THE FINA L ACCOUNTS FILED BEFORE THE REGISTRAR OF COMPANIES DID NOT CONTAIN THE IMPUGNED NOTE. 6. THEREFORE, THE FINDINGS RECORDED BY THE CIT(A) A RE WELL REASONED AND NO MATERIAL EVIDENCE HAS BEEN BROUGHT BEFORE US TO CON TROVERT OR REBUT THE FINDINGS OF CIT(A) AND HENCE, WE SEE NO REASON TO INTERFERE OR DEVIATE FROM THE ORDERS PASSED BY THE CIT(A) AND THEREFORE, WE REJECT THE GROUND OF APPEAL FILED BY THE ASSESSEE AND UPHOLD THE ORDER OF THE CIT(A). GROUND NO.2 7. THIS GROUND RELATES TO DELETION OF ADDITIONS MAD E BY AO ON ACCOUNT OF UNEXPLAINED CASH CREDIT OF RS.1,31,22,734/-. LD. DR REPRESENTING THE REVENUE RELIED UPON THE ORDERS PASSED BY AO, IT WAS SUBMITT ED THAT EVEN AFTER AVAILING SUFFICIENT OPPORTUNITIES, THE ASSESSEE COULD NOT PR OVE ITS CLAIM ON UNSECURED LOANS AND IN THIS RESPECT NO CONFIRMATION LETTER HAS BEEN FILED AS ASSURED BY THE ASSESSEE. THEREFORE IN THOSE CIRCUMSTANCES THE AO HAS RIGHTLY HELD THAT THE LOAN AMOUNT OF RS.1,31,22,734/- CLAIM TO HAVE BEEN RECEIVED FROM O NE FROM M/S. ASSAM COMPANY LTD. WAS RIGHTLY HELD AS NOT GENUINE. 7 ITA NO. 4816/MUM/2011 (A.Y. 2005-06) ITO VS. M/S. WILLIAM JACKS & CO. (I) LTD. 7.1 LD. CIT(A) HAS DEALT WITH THE GROUND OF DISALLO WANCE OF RS.1,31,22,734/- BEING UNEXPLAINED CASH CREDIT REPRESENTING THE LOAN RECEIVED FROM M/S. ASSAM COMPANY INDIA LTD. THE RELEVANT PARA IS REPRODUCED BELOW: I HAVE CONSIDERED THE FACTS OF THE ISSUE AND THE S UBMISSIONS MADE BY THE AR. THE IMPUGNED ADDITION WAS ADMITTEDLY MADE O N THE GROUND THAT THE CONFIRMATION FROM M/S. ASSAM CO. LTD WAS N OT FILED BEFORE THE AO IN RESPECT OF THE IMPUGNED LOAN. THE ORDER A LSO MENTIONS THAT THE AR OF THE APPELLANT HAD SUBMITTED THAT THE SAID ADDITION COULD BE MADE, SUBJECT TO RECTIFICATION, IF THE CONFIRMATION WAS NOT FILED BY A CERTAIN DATE. IN THE ABSENCE OF THE SAID CONFIRMATI ON, THE AO PROCEEDED TO MAKE THE IMPUGNED ADDITION. NOW, THAT THE SAID CONFIRMATION AND OTHER RELATED EVIDENCE HAVE BEEN F ILED BY THE AR WHICH HAVE BEEN DULY EXAMINED BY THE AO IN THE REMA ND PROCEEDINGS, THERE IS NO WARRANT FOR SUSTAINING THE SAID ADDITIO N. HENCE, THE ADDITION MADE BY THE AO IS DELETED AND THIS GROUND IS ALLOWED. 8. WE HAVE ANALYSED THE ORDERS PASSED BY THE CIT(A) AND WE NOTICED THAT THE CIT(A) HAS CORRECTLY HELD THAT THE AO PROCEEDED TO MAKE THE ADDITIONS ONLY ON THE GROUND THAT NO CONFIRMATION WAS SUBMITTED BY THE AS SESSEE, BUT DURING THE APPELLATE PROCEEDING, ASSESSEE SUBMITTED THE CONFIR MATION BEFORE THE CIT(A)WHICH 8 ITA NO. 4816/MUM/2011 (A.Y. 2005-06) ITO VS. M/S. WILLIAM JACKS & CO. (I) LTD. WAS DULY VERIFIED AND EXAMINED BY THE AO IN THE REM AND PROCEEDING. THEREFORE CONSIDERING THOSE FACTS THE CIT(A) HAS RIGHTLY CAME TO THE CONCLUSION THAT THE ADDITIONS MADE BY THE AO IN THE ABSENCE OF CONFIRMA TION ARE NOT SUSTAINABLE. WE ARE OF THE CONSIDERED OPINION THAT THE FINDINGS REC ORDED BY THE CIT(A) ARE WELL REASONED AND NO MATERIAL EVIDENCE HAS BEEN BROUGHT BEFORE US TO CONTROVERT OR REBUT THE FINDINGS RECORDED BY CIT(A) AND HENCE, WE SEE NO REASON TO INTERFERE OR DEVIATE FROM THE ORDERS PASSED BY THE CIT(A) AND T HEREFORE, WE REJECT THE GROUND OF APPEAL FILED BY THE ASSESSE AND UPHOLD THE ORDER OF THE CIT(A). 9. IN THE RESULT, THE REVENUES APPEAL IS DISMISSED . ORDER PRONOUNCED IN THE OPEN COURT ON 23RD MARC H, 2016 SD/- SD/- (B.R. BASKARAN) (SANDEEP GOSAIN) $ / ACCOUNTANT MEMBER &' $ / JUDICIAL MEMBER ( ) MUMBAI; *$ DATED : 23.03.2016 PS. ASHWINI / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT 3. + ( ) / THE CIT(A) 4. + / CIT - CONCERNED 5. ./0 ''12 , 12# , ( ) / DR, ITAT, MUMBAI 6. 045 6 / GUARD FILE 9 ITA NO. 4816/MUM/2011 (A.Y. 2005-06) ITO VS. M/S. WILLIAM JACKS & CO. (I) LTD. / BY ORDER, / !'# (DY./ASSTT. REGISTRAR) #$ %, ( ) / ITAT, MUMBAI