ASSISTANT COMMISSIONER OF INCOME TAX 25(3), MUMBAI V. SMITH BUILDCON, MUMBAI

ITA 4849/MUM/2017

• Counselvise Citation: [2018] 119 COUNSELVISE.COM (IT) 0422 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 4 month(s) 16 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-11-2018
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: G
• Assessment Year: 2012-2013
• Appeal Filed On: 11-07-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: CHAUDHARY ARUN KUMAR SINGH
• Keywords: Accommodation entries; Bogus loan
• Section: 143(3); 133(6); 68

Judgement Text

IN THE INCOME-TAX APPELLATE TRIBUNAL G B ENCH MUMBAI BEFORE SHRI PAWAN SINGH JUDICIAL MEMBER AND SHRI N.K. PRADHAN, ACCOUNTANT MEMBER ITA NO. 4849/MUM/2017 (ASSESSMENT YEAR 2012-13 ) ACIT-25(3) ROOM NO. 601, C-10, 6 TH FLOOR, PRATYAKSHAKAR BHAVAN, BANDRA KURLA COMPLEX, BANDRA (EAST), MUMBAI-400051. VS. M/S SMITH BUILDCON 504, PARSHWA KUNJ, MALVIYA ROAD, VILE PARLE (E), MUMBAI-400057. PAN: ABKFS2477G APPELLANT RESPONDE NT ITA NO. 4850/MUM/2017 (ASSESSMENT YEAR 2012-13 ) ACIT-25(3) ROOM NO. 601, C-10, 6 TH FLOOR, PRATYAKSHAKAR BHAVAN, BANDRA KURLA COMPLEX, BANDRA (EAST), MUMBAI-400051. VS. M/S SS ENTERPRISES GROUND FLOOR, CHANDRA VILLA, NEHRU ROAD, VILE PARLE(E), MUMBAI-400057 . PAN: AAGFV4334C APPELLANT RESPONDE NT APPELLANT BY : SHRI CHAUDHARY ARUN KUMAR SINGH (DR) RESPONDENT BY : SHRI VIJAY MEHTA (AR) DATE OF HEARING : 27.11.2018 DATE OF PRONOUNCEMEN T : 27.11.2018 ORDERUNDER SECTION 254(1)OF INCOME TAX ACT PER PAWAN SINGH, JUDICIAL MEMBER; ITA NO. 4849 & 4850 MUM 2017-M/S SMITH BUILDCON & ANR 2 1. THIS TWO APPEAL BY REVENUE ARE DIRECTED AGAINST THE SEPARATE ORDER OF LD. CIT(A)-37, MUMBAI DATED 05.04.2017 FOR ASSESSMENT Y EARS 2012-13. IN BOTH THE APPEALS, THE REVENUE HAS RAISED THE IDENTI CAL GROUNDS OF APPEAL, THEREFORE, BOTH THE APPEALS WERE CLUBBED, HEARD AND ARE DECIDED BY COMMON ORDER FOR THE SAKE OF CONVENIENCE. 2. WITH THE CONSENT OF PARTIES, THE ITA NO. 4850/MUM/2 017 IS TREATED AS LEAD CASE. THE REVENUE HAS RAISED THE FOLLOWING GRO UNDS OF APPEAL: L. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND I N LAW, THE LD. COMMISSIONER OF INCOME-TAX (APPEALS) HAS ERRED IN C OMPLETELY IGNORING THE FINDING MADE BY THE ASSESSING OFFICER IN HIS IMPUGN ED ORDER, IN WHICH HE HAS RELIED ON THE FINDINGS MADE DURING THE ASSESSME NT PROCEEDINGS OF M/S SAMIR ENTERPRISES WHEREIN, THE JURISDICTIONAL AO CO NFIRMED THAT M/S SAMIR ENTERPRISES DOES NOT CONDUCT ANY BUSINESS ACTIVITY AND WAS MERELY PASSING ACCOMMODATION ENTRIES. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW, THE LD COMMISSIONER OF INCOME-TAX (APPEALS) HAS ERRED IN T AKING THE VIEW THAT AO DID NOT MAKE ANY WORTHWHILE ENQUIRY TO VERIFY THE C REDIT WORTHINESS OF M/S SAMIR ENTERPRISES WHEREAS ASSESSMENT ORDER UNDER SE CTION 143(3) OF THE INCOME-TAX ACT, 1961 IN THE CASE OF M/S SAMIR ENTER PRISES DECLARING IT AS A BOGUS ENTITY WAS PASSED ONLY AFTER MAKING INVESTIGA TION BY AN ASSESSING OFFICER OF THE DEPARTMENT. 3. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND I N LAW, THE LD. COMMISSIONER OF INCOME-TAX (APPEALS) HAS ERRED IN A CCEPTING THE ENTIRE TRANSACTIONS TO BE GENUINE MERELY ON THE BASIS THAT THE TRANSACTIONS WERE THROUGH BANKING CHANNELS WHEREAS THE MERE FACT THAT TRANSACTIONS WERE CARRIED THROUGH BANKING CHANNELS DOES NOT IMPLICITL Y MAKE THEM SACROSANCT. ITA NO. 4849 & 4850 MUM 2017-M/S SMITH BUILDCON & ANR 3 4 'THE APPELLANT PRAYS THAT THE ORDER OF LD. CIT(A) ON THE ABOVE GROUNDS BE SET ASIDE AND THAT OF THE ASSESSING OFFICER BE REST ORED.' 3. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE FILED ITS RETURN OF INCOME FOR ASSESSMENT YEAR 2012-13 DECLARING TOTAL INCOME AT R S. 12.62 CRORE. THE RETURN OF INCOME WAS SELECTED FOR SCRUTINY. THE ASS ESSMENT WAS COMPLETED ON 30.03.2015 UNDER SECTION 143(3) OF THE ACT. DURING THE ASSESSMENT PROCEEDING, THE ASSESSING OFFICER NOTED THAT ASSESSEE HAS TAKEN LOAN AND ADVANCES OF RS. 6.21 CRORE FROM M/S SAMIR ENTERPRISES. THE ASSESSING OFFICER FURTHER NOTED THAT M/S SAMIR ENTERPRISES WAS NOT DOING ANY BUSINESS AND JUST PROVIDING ACCOMMODATION ENTRY BY WAY OF BOGUS LOANS. THE ASSESSING OFFICER ON HIS OBSERVATI ON THAT NO SATISFACTORY EXPLANATION IS GIVEN DISALLOWED RS. 6. 21 CRORE AND ADDED TO THE INCOME OF THE ASSESSEE ON PROTECTIVE BASIS . THE ASSESSING OFFICER FURTHER DISALLOWED INTEREST OF RS. 43,66,875/- AS LOAN WAS TREATED AS BOGUS. ON APPEAL BEFORE THE LD. CIT(A), THE ENTIRE ADDITION ON ACCOUNT OF PROTECTIVE BASIS AS WELL AS ADDITION ON INTEREST DI SALLOWANCE WAS DELETED. THE LD. CIT(A) DELETED THE ADDITION CONCLUDING THAT THE CREDIT/LOAN IS NOT RELATED TO THE ASSESSMENT YEAR UNDER CONSIDERATION. THE PROTECTIVE ASSESSMENT IS ALWAYS SUCCESSIVE TO THE SUBSTANTIVE ASSESSMENT. THERE MAY BE A SUBSTANTIVE ASSESSMENT WITHOUT ANY PROTECT IVE ASSESSMENT BUT THERE CANNOT BE PROTECTIVE ASSESSMENT WITHOUT THERE BEING SUBSTANTIVE ITA NO. 4849 & 4850 MUM 2017-M/S SMITH BUILDCON & ANR 4 ASSESSMENT. AS NO SUBSTANTIVE ASSESSMENT IS MADE A GAINST THE ASSESSEE, THEREFORE, THE PROTECTIVE ASSESSMENT IS DELETED. TH E LD. CIT(A) ALSO CONCLUDED THAT IT IS NOT CLEAR, WHETHER THE ADDITIO N IS MADE UNDER SECTION 68 OR UNDER SECTION 41(1) OF THE ACT. IF THE ADDIT ION UNDER SECTION 41(1) FOR CESSATION OF LIABILITY THAN THE SAME SHOULD BE BROUGHT TO TAX SUBJECT TO THE REQUIREMENT OF SECTION 41(1). IT WAS ALSO CONCL UDED THAT THE ASSESSEE HAS SUBSEQUENTLY PAID THE LOAN IN ASSESSMENT YEAR 2 014-15. SINCE THE ADDITION OF RS. 6.21 CRORE WAS DELETED, CONSEQUENTL Y THE ADDITION ON ACCOUNT OF INTEREST DISALLOWANCE WAS ALSO DELETED. THUS, AGGRIEVED BY THE ORDER OF LD. CIT(A), THE REVENUE HAS FILED THE PRES ENT APPEAL BEFORE US. 4. THE FACTS IN ITA NO. 4849/MUM/2017 ARE ALMOST IDENT ICAL EXCEPT VARIATION OF FIGURE. 5. WE HAVE HEARD THE SUBMISSION OF LD. DEPARTMENTAL RE PRESENTATIVE (DR) FOR THE REVENUE AND LD. AUTHORIZED REPRESENTATIVE ( AR) OF THE ASSESSEE AND PERUSED THE MATERIAL AVAILABLE ON RECORD. THE L D. DR FOR THE REVENUE SUPPORTED THE ORDER OF ASSESSING OFFICER. THE LD. D R FOR THE REVENUE FURTHER SUBMITS THAT THE ASSESSING OFFICER HAS GIVE N CLEAR FINDING THAT NO SATISFACTORY EXPLANATION WAS OFFERED BY THE ASSESSE E ABOUT THE LOAN/ADVANCES BY M/S SAMIR ENTERPRISES. HENCE, THE LOAN AMOUNT OF RS. ITA NO. 4849 & 4850 MUM 2017-M/S SMITH BUILDCON & ANR 5 6.21 CRORE WAS DISALLOWED. CONSEQUENTLY THE INTERES T PAYMENT SHOWN BY ASSESSEE ON THE SAME AMOUNT WAS ALSO DISALLOWED. 6. ON THE CONTRARY, THE LD. AR OF THE ASSESSEE SUBMITS THAT THE FINDING OF ASSESSING OFFICER IN PARA 6.3 OF ASSESSMENT ORDER I S CONTRARY TO HIS OWN RECORDING IN PARA-6. IT WAS FURTHER SUBMITTED THAT DURING THE ASSESSMENT THE ASSESSEE VIDE ITS LETTER DATED 23.03.2015 CLEAR LY MENTIONED WHILE REPLYING THE QUARRIES OF THE ASSESSING OFFICER THAT THE LOAN FROM M/S SAMIR ENTERPRISES IS NOT TAKEN DURING THE YEAR UNDER CONS IDERATION. IN FACT NO FRESH LOAN WAS TAKEN BY ASSESSEE; ONLY AN ADDITION OF INTEREST ON LOAN WAS CREDITED TO THE OPENING BALANCE AS ON 01.04.2011. T HE LOAN WAS TAKEN IN EARLIER YEARS THROUGH ACCOUNT PAYEE CHEQUE, WHICH I S DULY REFLECTED IN THE LEDGER ACCOUNT OF M/S SAMIR ENTERPRISES, COPY OF WH ICH WAS ALSO FURNISHED. THE LD. AR OF THE ASSESSEE INVITED OUR A TTENTION ON PARA 6 OF THE ASSESSMENT ORDER, WHEREIN THIS FACT IS DULY REC ORDED BY ASSESSING OFFICER. THE LD. AR OF THE ASSESSEE FURTHER SUBMITS THAT THE ASSESSEE AVAILED THE LOAN FROM M/S SAMIR ENTERPRISES IN ASSE SSMENT YEAR 2009-10 AND NO FURTHER LOAN WAS TAKEN DURING THE YEAR, ONLY THE ADDITION TO THE OPENING BALANCE OF THE LOAN ACCOUNT IN THE FORM OF INTEREST BEING CREDITED TO THE SAID LOAN ACCOUNT. THE ASSESSEE HAS DULY PRO VED THE IDENTITY AND IDENTIFY AND CAPACITY OF THE CREDITOR, GENUINENESS OF TRANSACTION BY ITA NO. 4849 & 4850 MUM 2017-M/S SMITH BUILDCON & ANR 6 PROVIDING COMPLETE DETAILS. THE LD. AR OF THE ASSES SEE FURTHER SUBMITS THAT ASSESSMENT ORDER UNDER SECTION 143(3) WAS PASS ED FOR ASSESSMENT YEAR 2009-10, 2010-11 & 2011-12 AND NO DISCREPANCIE S WITH REGARD TO THE LOAN FROM M/S SAMIR ENTERPRISES WAS FOUND BY AS SESSING OFFICER. FURTHER, THE ASSESSING OFFICER MADE THE ASSESSMENT UNDER SECTION 143(3) R.W.S 147 FOR ASSESSMENT YEAR 2011-12 AND NO ADDITI ON WAS MADE IN THIS REGARD. THE LD. AR OF THE ASSESSEE SUBMITS THAT PRO TECTIVE ASSESSMENT CANNOT BE INDEPENDENT OF SUBSTANTIVE ASSESSMENT. TH E ASSESSING OFFICER HAS NOT MADE ANY SUBSTANTIVE ASSESSMENT IN THE HAND OF ASSESSEE OR ANY OTHER PERSON. 7. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS OF BOTH TH E PARTIES AND HAVE GONE THROUGH THE ORDERS OF AUTHORITIES BELOW. THE A SSESSING OFFICER DURING THE ASSESSMENT NOTED THAT ASSESSEE HAS RECEI VED LOAN AND ADVANCE AMOUNT OF RS. 6.21 CRORE FROM M/S SAMIR ENTERPRISES . THE ASSESSING OFFICER ISSUED SHOW-CAUSE NOTICE VIDE ORDER-SHEET N OTING DATED 19.03.2015 TO EXPLAIN AS TO WHY THE SAID LOAN SHOUL D NOT BE TREATED AS BOGUS. THE ASSESSEE FILED ITS REPLY DATED 23.03.201 5. IN THE REPLY, THE ASSESSEE HAS SPECIFICALLY CONTENDED THAT THE LOAN W AS NOT TAKEN FROM M/S SAMIR ENTERPRISES DURING THE YEAR UNDER CONSIDERATI ON. THERE IS ONLY ADDITION ON INTEREST ON LOAN CREDIT TO THE OPENING BALANCE AS ON ITA NO. 4849 & 4850 MUM 2017-M/S SMITH BUILDCON & ANR 7 01.04.2011. THE LOAN WAS TAKEN IN EARLIER YEARS. TH E ASSESSEE ALSO CONTENDED THAT A SEPARATE NOTICE WAS ISSUED TO M/S SAMIR ENTERPRISES UNDER SECTION 133(6) FROM THE PARTICULARS PROVIDED BY THE ASSESSEE. AND IN REPLY TO NOTICE UNDER SECTION 133(6) ALL RELEVAN T FINANCIAL STATEMENT FROM M/S SAMIR ENTERPRISES HAS BEEN BROUGHT ON RECO RD, BY WHICH IT IS DULY PROVED TO PROVE THE IDENTITY OF THE CREDITOR, CAPACITY OF THE CREDITOR AND GENUINENESS OF LOAN. THE CONTENTION OF ASSESSEE WAS NOT ACCEPTED BY ASSESSING OFFICER ON HIS OBSERVATION THAT M/S SAMIR ENTERPRISES IS NOT DOING ANY BUSINESS. THE ASSESSING OFFICER MADE THE ADDITION OF RS. 6.21 CRORE ON PROTECTIVE BASIS AND FURTHER ALLOWED THE I NTEREST PAID ON LOAN OF RS. 43,66,875/-. THE LD. CIT(A) AFTER CONSIDERING T HE CONTENTION OF ASSESSEE OBSERVED THAT ASSESSEE HAS PROVED THE IDEN TITY OF CREDITORS, GENUINENESS OF TRANSACTION IS ESTABLISHED FROM THE FACT THAT ACCEPTANCE OF THE RE-PAYMENT OF LOAN HAS BEEN THROUGH BANKING CHA NNEL. THE LD CIT(A) ALSO CONCLUDED THAT THE ASSESSING OFFICER HAS NOT D ISCUSSED THE SUBMISSION OF THE ASSESSEE AND BRUSHED ASIDE THE DE TAILS FILED BY ASSESSEE. THE LD. CIT(A) FURTHER CONCLUDED THAT THE CREDIT IN QUESTION IS NOT RELATED WITH THE PREVIOUS YEAR RELEVANT TO ASSESSMENT YEAR 2012-13. THE ASSESSEE HAS SPECIFICALLY CONTENDED THAT THEY HAVE RECEIVED DURING THE YEAR 2009-10, 2010-11 & 2011-12. THE ASSESSMENT WAS PASSED BY THE ITA NO. 4849 & 4850 MUM 2017-M/S SMITH BUILDCON & ANR 8 ASSESSING OFFICER FOR ALL THREE PREVIOUS ASSESSMENT YEARS AND NO DISCREPANCIES WITH REGARD TO THE LOAN FROM M/S SAMI R ENTERPRISES WERE FOUND. FURTHER, THE ASSESSMENT FOR ASSESSMENT YEAR 2011-12 AND NO ADDITION WAS MADE IN THIS REGARD. THE LD. CIT(A) AL SO CONCLUDED THAT PROTECTIVE ASSESSMENT IS ALWAYS SUCCESSIVE TO THE S UBSTANTIVE ASSESSMENT AND THERE CANNOT BE ANY PROTECTIVE ASSESSMENT WITHO UT THERE BEING SUBSTANTIVE ASSESSMENT. THE LD. CIT(A) ALSO EXAMINE D, IF THE ADDITION CAN BE BROUGHT UNDER SECTION 41(1) OF THE ACT ON THE QU ESTION OF CESSATION OF LIABILITY. AND ON HIS EXAMINATION OF THE FACT, THE LD. CIT(A) CONCLUDED THAT THE LOAN HAS BEEN PAID BY BANKING CHANNEL IN A SSESSMENT YEAR 2014- 15. THEREFORE, THE PROVISIONS OF SECTION 41(1) ARE ALSO NOT APPLICABLE. SINCE THE LD. CIT(A) CAME TO THE CONCLUSION THAT TH E LOAN TRANSACTION OF RS. 6.21 CRORE HAS BEEN STAND EXPLAINED, THEREFORE, NO ADDITION IS SUSTAINABLE. CONSEQUENT UPON THE ADDITION ON ACCOUN T OF DISALLOWANCE OF INTEREST WAS ALSO DELETED. DURING THE SUBMISSION, T HE LD. DR FOR THE REVENUE FAILED TO BRING ANY CONTRARY MATERIAL OR FA CTS TO CONTROVERT THE FACT THAT THE ALLEGED LOAN WAS NOT TAKEN IN ASSESSM ENT YEAR 2009-10, 2020-11 & 2011-12 OR HOW THE PROTECTIVE ASSESSMENT WITHOUT BEING SUBSTANTIVE ASSESSMENT IS SUSTAINABLE. THEREFORE, W E DO NOT FIND ANY ITA NO. 4849 & 4850 MUM 2017-M/S SMITH BUILDCON & ANR 9 ILLEGALITY OR INFIRMITY IN THE ORDER PASSED BY LD. CIT(A) WHICH WE CONFIRMED. HENCE, DISMISSED. ITA NO. 4849/MUM/2017 8. THE ASSESSEE HAS RAISED IDENTICAL GROUNDS OF APPEAL . FACTS OF THE CASE UNDER CONSIDERATION ARE IDENTICAL EXCEPT VARIATION OF FIGURE OF ALLEGED LOAN AND INTEREST DISALLOWANCE. 9. CONSIDERING THE FACT THAT WE HAVE ALREADY DISMISSED THE APPEAL OF THE REVENUE ON IDENTICAL FACTS AND ON IDENTICAL GROUNDS OF APPEAL. THEREFORE, THIS APPEAL IS ALSO DISMISSED WITH SIMILAR FINDING 10. IN THE RESULT, BOTH THE APPEAL OF THE REVENUE IS DI SMISSED. ORDER PRONOUNCED IN THE OPEN COURT O N 27/11/2018. SD/- SD/- N.K. PRADHAN PAWAN SINGH ACCOUNTANT MEMBER J UDICIAL MEMBER MUMBAI, DATE: 27.11.2018 SK COPY OF THE ORDER FORWARDED TO : 1. ASSESSEE 2. RESPONDENT 3. THE CONCERNED CIT(A) 4. THE CONCERNED CIT 5. DR G BENCH, ITAT, MUMBAI 6. GUARD FILE BY ORDER, DY./ASST. REGISTRAR ITAT, MUMBAI