Devi Enterprises, Alappuzha V. ITO, Alappuzha

ITA 5/COCH/2010

• Counselvise Citation: [2011] 140 COUNSELVISE.COM (IT) 52284 (ITAT-COCHIN)
• Duration Of Justice: 1 year(s) 10 month(s) 26 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-11-2011
• Appeal Filed By: Assessee
• Bench Allotted: DB
• Next Hearing Date: 13-10-2011
• Assessment Year: 2006-2007
• Appeal Filed On: 04-01-2010
• Court: TRIBUNAL
• Department Lawyers: S VIJAYAPRABHA
• Assessee Lawyers: R SREENIVASAN CAAR
• Keywords: Depreciation

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL COCHIN BENCH, COCHIN BEFORE S/SHRI N.R.S.GANESAN, JM AND SANJAY AROR A, AM I.T.A NO. 05/COCH/2010 ASSESSMENT YEAR:2006-07 DEVI ENTERPRISES, VADACKAL P.O., ALAPPUZHA. [PAN:AABFD 2824J] VS. THE INCOME TAX OFFICER, WARD-1, ALLEPPEY. (ASSESSEE-APPELLANT) (REVENUE- RESPONDENT) ASSESSEE BY SHRI R.SREENIVASAN, CA-AR REVENUE BY MS. S. VIJAYAPRABHA, JR.DR DATE OF HEARING 13/10/2011 DATE OF PRONOUNCEMENT 30/11/2011 O R D E R PER SANJAY ARORA, AM: THIS IS AN APPEAL BY THE ASSESSEE ARISING OUT O F THE ORDER BY THE COMMISSIONER OF INCOME-TAX (APPEALS)-IV, KOCHI (`CIT(A) FOR SHO RT) DATED 11.11.2009, AND THE ASSESSMENT YEAR (A.Y.) UNDER REFERENCE IS 2006-07. 2. THE APPEAL RAISES TWO ISSUES, EACH OF WHICH WE S HALL TAKE UP IN SERIATIM. THE FIRST, PRESSED VIDE GROUND NOS. 2 & 3 OF ITS APPEAL, IS TH E ADDITION U/S. 68 IN RESPECT OF THE LOAN IN THE SUM OF ` 2,45,000/-, ASSUMED BY THE ASSESSEE IN JANUARY, 200 6, AND THE INTEREST CLAIMED THEREON, AGGREGATING TO ` 2,56,462/-, AT WHICH SUM THE LIABILITY (TO THE CRED ITOR M/S. SUNDARAM FINANCE LTD.) FINDS REFLECTION IN THE ASSESSEES BALANCE-SHEET AS ON 31.3.2006. THE ASSESSEE CLAIMED IT TO BE A CREDIT A RISING OUT OF THE HIRE PURCHASE AGREEMENT (HPA) DATED 05.01.2006 IN RESPECT OF A VE HICLE, BEING SWARAJ PICK-UP VAN (REGISTRATION NO. KL-04-H-8930). HOWEVER, THE ASSES SEES BOOKS OF ACCOUNTS DID NOT REFLECT PURCHASE OR ACQUISITION OF ANY ASSET ON OR AFTER 01.4.2005. THE ONLY VAN APPEARING I.T.A. NO. 05/COCH/2010 DEVI ENTERPRISES V. ITO, ALLEPEY 2 IN THE ASSESSEES BOOKS, WAS ONE WHICH OUTSTANDS FR OM A PRIOR PERIOD, WITH A WRITTEN DOWN VALUE (WDV) OF ` 185234/- (31/3/2006). AS SUCH, THERE BEING NO CORRE SPONDING ASSET IN THE ASSESSEES BALANCE-SHEET, FOR WHICH LO AN STOOD ADMITTEDLY UTILIZED, THE LOAN WAS NOT PROVED. IN ANY CASE, IT COULD NOT BE CONSID ERED AS FOR A BUSINESS PURPOSE; THE RELEVANT ASSET (VAN) NOT FORMING PART OF ITS BUSINE SS ASSETS. ACCORDINGLY, THE ENTIRE CREDIT AS APPEARING IN THE ACCOUNTS IN RESPECT OF THE SAID CREDITOR ( ` 2,56,462/-), INCLUDING THE INTEREST CLAIMED THEREON, WAS ADDED TO THE ASSESSEE S INCOME. THE SAME STOOD CONFIRMED IN APPEAL BY THE LD. CIT(A) ON THE SAME BASIS. IN C ASE ANY ASSET HAD BEEN PURCHASED, IT WOULD BE BORNE OUT BY THE ASSET REGISTER, AS ALSO A PPEAR IN THE DEPRECIATION CHART. THE (FULL) COPY OF THE HP AGREEMENT HAD ALSO NOT BEEN F URNISHED BY THE ASSESSEE. AGGRIEVED, THE ASSESSEE IS IN SECOND APPEAL. 3. BEFORE US, IT WAS CLARIFIED BY THE LD. AR DURING HEARING THAT WHAT THE ASSESSEE HAD ACTUALLY AVAILED OF IS A RE-FINANCE FACILITY AGAINS T AN EXISTING ASSET, BEING A SWARAJ PICK- UP VAN, AND TOWARD WHICH HE FURNISHED THE COPY OF T HE HP AGREEMENT DATED 05.01.2006 (CONTRACT NO. AK4696, WHICH IS IN RESPECT OF THE PI CK-UP VAN BEARING REGISTRATION NO. KL-04-H-8930). THE SAID VAN WAS PURCHASED ON 11.12. 2000 AT A COST OF ` 5.91 LAKHS. AS SUCH, EVEN THE EARLIER AGREEMENT IN RESPECT OF THE SAID VAN, I.E., THE ONE OBTAINING PRIOR TO THE CURRENT AGREEMENT, BEING HPA DATED 01.9.2003 (CONTRACT NO. VK 1164), WAS ALSO BY WAY OF A FINANCE FACILITY, I.E., AGAINST AN EXIS TING ASSET (VEHICLE). THE AUTHORITIES BELOW HAD CLEARLY MISUNDERSTOOD THE TRANSACTION. NO CASE FOR THE LOAN, WHICH IS FROM A REPUTED FINANCE COMPANY, TO BE TREATED AS EITHER UN PROVED OR NOT GENUINE, OBTAINS, AND THE IMPUGNED ADDITION IN ITS RESPECT BE DIRECTED FO R DELETION. THE LD. DR, ON THE OTHER HAND, RELIED ON THE ORDERS OF THE AUTHORITIES BELOW . 4. WE HAVE HEARD THE PARTIES, AND PERUSED THE MATER IAL ON RECORD. THE VAN UNDER REFERENCE WAS PURCHASED ON 11.12.2000 FROM M/S. MAX IM MOTORS, KOCHI VIDE THEIR INVOICE NO. MM/2000-01/059 FOR ` 591155/- (PB PG. 6 ). THE CUSTOMERS NAME IS SHOWN THEREIN AS SUNDARAM FINANCE LTD., ERNAKULAM, WITH THE ASSESSEES NAME, ACTING THROUGH ITS MANAGING PARTNER, SHRI R.SUNDER, MENTIONED AS T HE HIRER. THE HPAS EXECUTED ON I.T.A. NO. 05/COCH/2010 DEVI ENTERPRISES V. ITO, ALLEPEY 3 01.9.2003 AND 05.01.2006, BOTH BEARING THE REGISTRA TION NO. AND THE OTHER PARTICULARS OF THE VEHICLE, ARE IN RESPECT OF THE SAME VAN (VEHICL E). AS SUCH, THE SAME (TRANSACTION) APPEARS TO BE, AS IS ALSO THE ASSESSEES CASE, A CA SE OF REFINANCE, OBTAINED ON THE SECURITY OF THE VEHICLE (ALREADY REGISTERED IN THE NAME OF T HE FINANCE COMPANY), BY EXECUTING FRESH HP AGREEMENTS, I.E., ON THE DISCHARGE OF THE LIABIL ITY OUTSTANDING UNDER THE PREVIOUS ARRANGEMENT, BEING FOR A PERIOD OF 30 MONTHS AT A T IME; THE REPAYMENT SCHEDULE FOR THE LATEST AGREEMENT (DATED 05.01.2006) EXTENDING FROM 3.2.2006 TO 3.7.2008 (PB PG. 4) . THIS IS ALSO CORROBORATED BY THE FACT THAT THE AMOU NT FINANCED THEREIN IS ONLY ` 2.45 LAKHS, CORRESPOND AS IT DOES WITH THE DEPRECIATED/BOOK VAL UE OF THE VEHICLE. NO CASE FOR TREATING THE IMPUGNED LOAN AS NOT PROVEN OR AS NOT GENUINE, THUS, SHOULD OBTAIN. SO, HOWEVER, THE ASSESSEE PER ITS STATEM ENT OF CASE AND GROUNDS OF APPEAL BEFORE THE FIRST APPELLATE AUTHORITY, CLAIMS THAT T HE AMOUNT (OF LOAN) HAS BEEN UTILISED (ALONG WITH THE ASSESSEES OWN FUNDS) FOR THE ACQUI SITION OF THE ASSET (VEHICLE). HOW COULD THIS BE WHEN ADMITTEDLY NO NEW ASSET OR VEHIC LE HAS BEEN PURCHASED / ACQUIRED ? PER ITS GROUND NO. 2 BEFORE US, THE ASSESSEE AVERS THE LOAN TO HAVE BEEN DISBURSED DIRECTLY BY THE FINANCE COMPANY TO THE VEHICLE SUPPLIER. HOW, WE WONDER, IF THE LOAN IS BY WAY OF, AS BEING NOW CLAIMED, A RE-FINANCE FACILITY, AGAINST A VEHICLE ACQUIRED WAY BACK IN DECEMBER, 2000 ? THE LOAN AMOUNT, THOUGH SECURED AGAINST AN EXIST ING ASSET (VEHICLE), WOULD ONLY STAND TO BE DISBURSED TO THE ASSESSEE-FI RM, AND UTILISED BY IT FOR ITS (BUSINESS) PURPOSES. SECONDLY, AS PER THE REPAYMENT SCHEDULE ( SUPRA), THE FINANCE CHARGES ATTRIBUTABLE TO F.Y. 2005-06, THE RELEVANT PREVIOUS YEAR, IS ` 2756/-; THE TOTAL, TO BE PAID IN MONTHLY INSTALMENTS, UP TO JULY, 2008, BEING ` 41344/-. HOW DOES THE ASSESSEE CLAIM THE SAME AT ` 11462/- (256462 -245000), THE LOAN (FINANCE) AMOUNT BEING ADMITTEDLY AT ` 2,45,000/-, IS NOT CLEAR? IN FACT, THE ASSESSEE HA S CLAIMED ANOTHER ` 19,400/- BY WAY OF INTEREST ON THE SAID LOAN, WHICH STANDS DISALLOWED, AS ALSO CONFIRMED IN FIRST APPEAL. TO WHOM AND HOW HAS THIS INTEREST BEING PAID ? ALSO, THE LIABILITY OUTSTANDING AS ON 31.3.2006, AS PER THE REPAYMENT SCHEDULE (SUPRA), S HOULD BE ` 2,28,532/- (I.E., ` 245000 9684 - 9540 + 2756), I.E., ASSUMING PAYMENT OF INST ALMENTS FOR THE MONTH OF FEBRUARY AND MARCH, 2006 (WHICH AGGREGATE TO ` 19224/-), WHILE IT IS ACTUALLY AT ` 256462/-, I.E., AT I.T.A. NO. 05/COCH/2010 DEVI ENTERPRISES V. ITO, ALLEPEY 4 A DIFFERENCE OF ` 27930/-. ALL THESE MATTERS REQUIRE BEING LOOKED IN TO AND SUITABLY EXPLAINED. UNDER THE CIRCUMSTANCES, WE, THEREFOR E, ONLY CONSIDER IT FIT AND PROPER THAT THE MATTER BE RESTORED BACK TO THE FILE OF THE ASSESSIN G OFFICER (AO) FOR FRESH ADJUDICATION QUA THE ADDITION OF ` 256462/- AND INTEREST DISALLOWED AT ` 19,400/-, AND A DECISION ON MERITS IN ACCORDANCE WITH LAW AFTER ALLOWING THE AS SESSEE AN OPPORTUNITY OF HEARING. WE DECIDE ACCORDINGLY. 5. THE SECOND ISSUE ARISING IN APPEAL IS THE ADDITI ON U/S. 68 IN RESPECT OF FOUR CREDITS, AGGREGATING TO ` 1.60 LAKHS, APPEARING IN THE ASSESSEES BOOKS UNDER THE HEAD SUNDRY CREDITORS. THE ASSESSEE CLAIMED THE SAME TO BE TR ADE ADVANCES, SUBSEQUENTLY ADJUSTED THROUGH SUPPLY OF GOODS, I.E., IN MAY, 2006. THE AS SESSEE, HOWEVER, COULD NOT SUBSTANTIATE ITS CLAIMS WITH ANY MATERIAL, BEING UN ABLE TO FURNISH EVEN THE NAMES AND ADDRESSES OF THE SAID CREDITORS. ACCORDINGLY, THE SAME WERE ADDED, AND CONFIRMED AS INCOME U/S. 68 OF THE ACT. 6. BEFORE US, THE LD. AR WOULD SUBMIT THAT THE TRAN SACTIONS STAND SUITABLY EXPLAINED ADVERTING TO THE COPY OF THE LEDGER ACCOUNT PETTY CUSTOMERS SUNDRY CREDITORS, BEARING THE PAYMENT PARTICULARS, AND INVOICES (FOUR IN NUMB ER) DATED 5.5.2006 AND 6.5.2006 RAISED (AT ONE EACH) ON EACH OF THE FOUR CUSTOMERS ( PB PGS. 11 TO 15) . THE LD. DR, ON THE OTHER HAND, RELIED ON THE ORDERS OF THE AUTHORITIES BELOW. 7. WE HAVE HEARD THE PARTIES, AND PERUSED THE MATER IAL ON RECORD. WHILE THE ASSESSEE MAKES OUT A CASE OF THE (CREDIT) TRANSACTIONS BEING REGULAR ONES, THE SUMS BEING RECEIVED FROM SMALL CUSTOMERS, SO THAT THERE IS NO CASE FOR APPLICATION OF SEC. 68 OF THE ACT, WHICH STANDS INVOKED, THE REVENUES CASE IS THAT THE ASSE SSEE HAS COMPLETELY FAILED TO SUBSTANTIATE ITS CASE. BOTH THE AUTHORITIES BELOW HAVE ISSUED SPECIFIC FINDING/S AS TO NON- FURNISHING OF ANY EVIDENCE/MATERIAL, VIZ., THE NAME S AND ADDRESSES OF THE PARTIES; THE PAYMENT PARTICULARS; THE SUPPLIES MADE SUBSEQUENTLY , ETC. THE CLAIMS ARE CONTRADICTORY IN-AS-MUCH AS THE ASSESSEES PAPER-BOOK, CONTAINING EVIDENCES TO THAT EFFECT, IS STATED BY I.T.A. NO. 05/COCH/2010 DEVI ENTERPRISES V. ITO, ALLEPEY 5 THE LD. AR TO BE THE TRUE COPIES OF THOSE FURNISHED BEFORE THE AO. THE MATTER COULD ONLY BE RESOLVED BY REFERENCE TO THE FILE OF THE ASSESSI NG AUTHORITY. HOWEVER, THE ASSESSEE HAS NOT SPECIFICALLY CHALLENGED THESE FINDINGS BY THE A UTHORITIES BELOW. UNDER THE GIVEN FACTUAL MATRIX, WE HAVING ALREADY RESTORED THE MATT ER QUA THE FIRST ISSUE TO THE FILE OF THE AO, ONLY CONSIDER IT FIT AND PROPER TO, LIKEWISE, R ESTORE THIS ISSUE AS WELL TO THE FILE OF THE AO FOR FRESH DETERMINATION AFTER AFFORDING A REASON ABLE OPPORTUNITY OF PRESENTING ITS CASE TO THE ASSESSEE, BY TAKING ALL THE RELEVANT MATERIA L INTO ACCOUNT, PER A SPEAKING ORDER. WE DECIDE ACCORDINGLY. 8. IN THE RESULT, THE ASSESSEES APPEAL IS ALLOWED FOR STATISTICAL PURPOSES. SD/- SD/- (N.R.S.GANESAN) (SANJAY ARORA) JUDICIAL MEMBER ACCOUNTANT MEMBER PLACE: ERNAKULAM DATED: 30TH NOVEMBER, 2011 GJ COPY TO: 1. M/S. DEVI ENTERPRISES,VADACKAL P.O., ALAPPUZHA. 2. THE INCOME TAX OFFICER, WARD-1, ALLEPPEY. 3. THE COMMISSIONER OF INCOME-TAX (APPEALS)-IV,KOCH I 4. THE COMMISSIONER OF INCOME-TAX,KOTTAYAM. 5. D.R ., I.T.A.T., COCHIN BENCH, COCHIN. 6. GUARD FILE .