M/s. Wild Rose Commercials (P) Ltd., New Delhi V. ITO, New Delhi

ITA 6320/DEL/2014

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 97310 (ITAT-DELHI)
• Duration Of Justice: 9 month(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 17-09-2015
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: H
• Next Hearing Date: 22-06-2015
• Assessment Year: 2010-2011
• Appeal Filed On: 19-11-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: J P CHANDREKAR
• Assessee Lawyers: DR RAKESH GUPTA; ASHWINI TANEJA FCAS
• Keywords: Principle of natural justice
• Section: 234B; 133(6); 68

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL (DELHI BENCH H NEW DELHI) BEFORE SHRI I.C. SUDHIR AND SHRI INTURI RAMA RAO ITA NO. 6320/DEL/2014 ASSESSMENT YEAR: 2010-11 M/S. WILD ROSE COMMERCIALS (P) LTD., VS. INCOME-TAX OFFICER, C-676 NEW FRIENDS COLONY, WARD 18(3), NEW DELHI-1100 65 NEW DELHI (PAN: AAACW0127H) (APPELLANT) (RESPONDENT) APPELLANT BY: DR. RAKESH GU PTA & SHRI ASHWINI TANEJA, FCAS RESPONDENT BY: SHRI J.P. CHANDR EKAR, SR. DR DATE OF HEARING : 22.06.2015 DATE OF PRONOUNCEMENT: 17 :09.2015 ORDER PER I.C. SUDHIR: JUDICIAL MEMBER THE ASSESSEE HAS QUESTIONED FIRST APPELLATE ORDER ON THE FOLLOWING GROUNDS: 1. THAT HAVING REGARD TO THE FACTS AND CIRCUMSTANC ES OF THE CASE, LEARNED CIT(APPEALS) HAS ERRED IN LAW AND ON FACTS IN CONFIRMING THE ACTION OF THE A.O. IN MAKING AGGREGATE ADDITION OF RS.1,39,04,000 ON ACCOUNT OF SECURITY DEPOSIT RECEIVED FROM SH. RAM L AKHAN, SH. LALLAN KUMAR AND SH. ASHOK SARAOGI BY TREATING IT AS INCOM E OF THE ASSESSEE U/S.68 OF INCOME-TAX ACT, 1961 AND HAS FURTHER ERRE D IN MAKING ADDITION OF RS.56,484 ON ACCOUNT OF INTEREST CREDIT ED ON THE SAID AMOUNT AND THAT TOO BY RECORDING INCORRECT FACTS AN D FINDINGS AND WITHOUT CONSIDERING THE SUBMISSIONS OF THE ASSESSEE AND IN VIOLATION 2 OF PRINCIPLES OF NATURAL JUSTICE AND WITHOUT PROVID ING OPPORTUNITY OF CROSS-EXAMINATION. 2. THAT IN ANY CASE AND IN ANY VIEW OF THE MATTER, ACTION OF LEARNED CIT(APPEALS) IN CONFIRMING THE ACTION OF TH E LD. A.O. IN MAKING AGGREGATE ADDITION OF RS.1,39,60,484 ON ACCO UNT OF SECURITY DEPOSIT AND INTEREST CREDITED THEREON U/S. 68 IS CO NTRARY TO LAW AND FACTS, VOID AB INITIO, AND WITHOUT GIVING ADEQUATE OPPORTUNITY OF HEARING, BY RECORDING INCORRECT FACTS AND FINDINGS AND THE SAME IS NOT SUSTAINABLE ON VARIOUS LEGAL AND FACTUAL GROUNDS. 3. THAT HAVING REGARD TO THE FACTS AND CIRCUMSTANCE S OF THE CASE, LEARNED CIT(APPEALS) HAS ERRED IN LAW AND ON FACTS IN NOT REVERSING THE ACTION OF THE LD. A.O. IN CHARGING INTEREST U/S . 234B OF THE INCOME-TAX ACT, 1961. 2. WE HAVE HEARD AND CONSIDERED THE ARGUMENTS ADVAN CED BY THE PARTIES IN VIEW OF ORDERS OF THE AUTHORITIES BELOW, MATERIA L AVAILABLE ON RECORD AND THE DECISIONS RELIED UPON. 3. GROUND NOS.1 AND 2 : THE ISSUE RAISED IN THIS GROUND IS THE VALIDITY O F ADDITION OF RS.1,39,00,400 MADE UNDER SEC. 68 OF TH E INCOME-TAX ACT, 1961 ON ACCOUNT OF SECURITY DEPOSIT RECEIVED FROM SHRI R AM LAKHAN, SHRI LALAN KUMAR AND SHRI ASHOK SAROGI AND FURTHER ADDITION OF RS.56,484 ON ACCOUNT 3 OF INTEREST CREDITED ON THE SAID AMOUNT SUSTAINED B Y THE LEARNED CIT(APPEALS). 4. THE RELEVANT FACTS ARE THAT THE ASSESSEE HAD FIL ED RETURN OF INCOME AT RS.41,930. SUBSEQUENTLY, IT WAS TAKEN UP FOR SCRUTI NY. THE ASSESSEE CLAIMED TO BE IN THE BUSINESS OF TRADING OF CLOTHS. SHRI PR ADEEP SAROGI AND HIS WIFE SMT. AJANTA SAROGI ARE THE DIRECTORS OF THE COMPANY . THE ASSESSEE HAS A SISTER CONCERN IN THE NAME OF M/S. JUBINATION IN WH ICH SHRI MOHIT SAROGI S/O SHRI PRADEEP SAROGI IS THE PROPRIETOR. M/S. JUBINAT ION IS INVOLVED IN THE MANUFACTURING AND EXPORT OF GARMENTS LIKE SHIRTS AN D PAINTS ETC. AND THE FIRM GETS THE WORK OF STITCHING/TAILORING DONE THROUGH O UTSOURCING THROUGH VARIOUS TAILORS OR TAILOR MASTERS. THE TAILOR MASTE RS ARE SAID TO BE THE HEAD MASTERS AND GET THE WORK DONE THROUGH VARIOUS WORKE RS/TAILORS WORKING UNDER THE HEADMASTERS. THE ASSESSEE COMPANY HAS AN OTHER SISTER COMPANY IN THE NAME OF SAFE CONSULTANTS PVT. LTD. IN WHICH THE SAME SHRI PRADEEP SAROGI AND HIS WIFE SMT. AJANTA SAROGI ARE THE DIRE CTORS. 5. THE ASSESSEE CLAIMED TO HAVE RECEIVED SHARE CAPI TAL OF RS.10 LACS. IT ALSO CLAIMS TO HAVE RECEIVED THE UNSECURED LOANS OF RS.88,04,437 WHICH INCLUDED THE LOAN OF RS.87,08,068, OUT OF WHICH THE LOAN OF RS.43,18,114 4 CLAIMED TO BE FROM M/S. JMD SERVICES (PROPRIETOR SH RI LALAN KUMAR) AND THE BALANCE AMOUNT OF RS.43,89,954 WAS SAID TO BE F ROM M/S. OM SAI ENTERPRISES (PROPRIETOR SHRI RAM LAKHAN KAMAT) VIDE THE BALANCE SHEET AT PAGE NOS. 34, 35, 36, 36A AND 37 (ANNEXURES-A). THE ASSESSEE ALSO CLAIMED TO HAVE SUNDRY CREDITOR OF RS.52,46,767 IN THE NAME OF M/S. FASHION GARMENTS (PROPRIETOR SHRI ASHOK SAROGI). THE ASSESS EE CLAIMED THE SUNDRY DEBTOR OF RS.1,21,94,226 OUT OF WHICH THE AMOUNT OF RS.1,21,35,921 WAS SAID TO BE ADVANCED AS A LOAN TO ITS SISTER CONCERN M/S. JUBINATION. IT WAS INITIALLY CLAIMED THAT THE LIABILITY MONEY FROM M/S . FASHION GARMENTS WAS IN THE FORM OF TRADE CREDITOR BUT LATER ON IT WAS SUBM ITTED THAT THE SAME WAS A LOAN. 6. BEFORE THE ASSESSING OFFICER, THE ASSESSEE SUBMI TTED THAT THE ASSESSEE HAD RECEIVED THE LOAN AMOUNT FROM THE THREE TAILORI NG MASTERS/HEADMASTERS, NAMELY, SHRI LALAN KUMAR(M/S. JMD SERVICES), SHRI R AM LAKHAN KAMAT (M/S. OM SAI ENTERPRISES) AND SHRI ASHOK SAROGI (M/ S. FASHION GARMENTS). IT WAS SUBMITTED THAT THE SAID LOAN AMOUNT FROM THE ABOVE THREE TAILORING MASTERS/HEADMASTERS WERE IN THE FORM OF A SECURITY DEPOSITS BY THE ASSESSEE COMPANY AND THE AMOUNTS WERE TRANSFERRED AS A LOAN TO ITS SISTER CONCERN M/S. JUBINATION. IT WAS SUBMITTED THAT M/S. JUBINAT ION WAS GETTING THE 5 OUTSOURCING WORK OF STITCHING/TAILORING FROM THE AB OVE THREE TAILORING MASTERS AFTER SUPPLYING THE CLOTH TO THE TAILORING MASTERS. IT WAS SUBMITTED THAT THE SAID THREE TAILORING MASTERS HAD RECEIVED VARIOUS SMALL AMOUNTS AS LOAN OR SECURITY DEPOSITS FROM THEIR VARIOUS RESPEC TIVE WORKERS WHICH IN TURN HAD BEEN GIVEN TO THE ASSESSEE COMPANY AS A SECURIT Y DEPOSIT. 7. SHRI LALAN KUMAR (PROPRIETOR- M/S. JMD SERVICES) CLAIMED TO HAVE RECEIVED THE SECURITY DEPOSITS FROM 78 WORKERS OF R S.44,85,500 AND CLAIMED TO HAVE GIVEN THE SAME SECURITY DEPOSITS TO THE ASS ESSEE COMPANY OF RS.43,18,114 VIDE PROFIT AND LOSS ACCOUNT AND BALAN CE SHEET MADE AVAILABLE AT PAGE NO. 139, 140 AND 141 (ANNEXURES B). 8. SHRI RAM LAKHAN KAMAT (PROPRIETOR OM SAI ENTER PRISES ) CLAIMED TO HAVE RECEIVED THE SECURITY DEPOSITS FROM 79 WORK ERS OF RS.45,02,600 AND THE AMOUNTS WAS CLAIMED TO BE GIVEN AS SECURITY DEP OSIT TO THE ASSESSEE COMPANY TO THE EXTENT OF RS.43,89.954 VIDE PAGE NOS . 83, 84 AND 85 (ANNEXURES C ) OF THE PAPER BOOK. 9. SHRI ASHOK SAROGI (PROPRIETOR M/S. FASHION GAR MENTS ) CLAIMED TO HAVE GIVEN LOAN OF RS.52,58,850 TO THE ASSESSEE AND AT THE SAME TIME ALSO CLAIMED TO HAVE RECEIVED THE LOANS AND ADVANCES OF RS. 26,09,300 FROM 22 6 PARTIES/WORKERS INCLUDING RS.16,80,800 VIDE PAGE NO S. 176, 177 AND 178 (ANNEXURE D) WHICH IS SAID TO BE RECEIVED FROM SAFE CONSULTANTS PVT. LTD., A SISTER CONCERN OF THE ASSESSEE. THE ASSESSING OFFIC ER NOTED THAT THERE ARE COMMON DIRECTORS, NAMELY, SHRI PRADEEP SAROGI AND H IS WIFE SMT. AJANTA SAROGI IN THE ASSESSEE COMPANY AND IN THE SAFE CONS ULTANTS PVT. LTD. IN WHICH THERE WAS A SHARE CAPITAL OF RS.7,30,000 BUT IT CLAIMED TO HAVE RECEIVED THE SHARE PREMIUM OF RS.56,70,000 AND ALSO CLAIMED TO HAVE GIVEN THE ADVANCE OF RS.16,22,159 TO M/S. JUBINATION AND ANOTHER ADVANCE OF RS.16,80,800 TO M/S. FASHION GARMENTS (SHRI ASHOK S AROGI). THE ASSESSING OFFICER THUS OBSERVED THAT THERE IS CIRCUITOUS MOVE MENT OF MONEY IN THE SISTER CONCERN OF THE ASSESSEE COMPANY. HE OBSERVED THAT THE MAIN PURPOSE HAS BEEN TO COLLECT THE MONEY THROUGH THREE PERSONS , NAMELY, SHRI LALAN KUMAR, SHRI RAM LAKHAN KAMAT AND SHRI ASHOK SAROGI WHO ARE SAID TO HAVE COLLECTED THE MONEY FROM THE VARIOUS WORKERS A ND ROUTED THE MONEY THROUGH THE ASSESSEE COMPANY TO M/S. JUBINATION WHI CH IS A SISTER CONCERN OF THE ASSESSEE. THE ASSESSING OFFICER MADE VARIOUS IN QUIRIES DURING THE COURSE OF ASSESSMENT PROCEEDINGS AND RECORDED THE STATEMEN T OF ALL THE THREE PERSONS AND FOUND THAT ALL THE THREE PERSONS ARE NO T HAVING ANY REGULAR BUSINESS ACTIVITIES AND HAS NO CREDITWORTHINESS TO COLLECT SUCH HUGE AMOUNT FROM VARIOUS WORKERS AND GIVE THE SAME AS SECURITY DEPOSIT TO THE ASSESSEE 7 COMPANY. THE ASSESSING OFFICER THUS NOT BEING SATIS FIED WITH THE CREDITWORTHINESS AND THE GENUINENESS OF THE CLAIMED SECURITY DEPOSITS OR LOANS HAS DISALLOWED THE AMOUNT OF RS.1,39,04,000 ( RS.43 LACS OF SHRI LALAN KUMAR, RS.43,69,000 OF SHRI RAM LAKHAN KAMAT AND RS .52,55,000 OF SHRI ASHOK SARAOGI). THE ASSESSING OFFICER HAS ALSO DISA LLOWED THE INTEREST PAYMENT OF RS.56,484 (RS.20,127 OF SHRI LALAN KUMAR RS.23,282 OF SHRI RAM LAKHAN KAMAT AND RS.13,075 OF SHRI ASHOK SARAOG I ). THE LEARNED CIT(APPEALS) HAS UPHELD THE SAME, WHICH HAS BEEN QU ESTIONED BY THE ASSESSEE BEFORE THE ITAT. 10. IN SUPPORT OF THE GROUND, THE LEARNED AR SUBMIT TED THAT THE ASSESSEE COMPANY REGISTERED UNDER COMPANIES ACT IS A 99.7% S UBSIDIARY OF WILD ORCHID CLOTHING (P) LTD. AND IS ENGAGED IN THE BUSI NESS OF TRADING OF CLOTH AND ALSO ENGAGED IN ASSISTING ITS ASSOCIATE CONCERN S I.E. M/S. JUBINATION TO GET JOB WORK EXECUTED FROM VARIOUS JOB WORK CONTRAC TORS. DURING THE YEAR, THE ASSESSEE HAD RECEIVED SECURITY DEPOSITED FROM T HE FOLLOWING PARTIES: I) SHRI RAM LAKHAN RS.43,69,000 II) SHRI LALAN KUMAR RS.43,00,000 III) SHRI ASHOK SARAOGI RS.52,35,000 TOTAL: RS.1,39,04,000 8 11. THE ABOVE SECURITY DEPOSITS WERE RECEIVED BY TH E ABOVE NAMED CONTRACTORS AGAINST EXPENSIVE JOB WORK APPARELS FRO M SUB-CONTRACTORS AND HAD ADVANCED THE SAME TO THE ASSESSEE THROUGH BANKI NG CHANNEL. 12. DURING THE ASSESSMENT PROCEEDINGS, STATEMENT OF CONTRACTORS WAS RECORDED, WHEREIN THEY HAVE ADMITTED TO HAVE GIVEN THE SAID AMOUNT AS SECURITY DEPOSIT TO THE ASSESSEE COMPANY. THE LEARN ED AR SUBMITTED FURTHER THAT OUT OF THE ABOVE, TWO CONTRACTORS WERE CALLED TWICE BY ISSUING SUMMONS BY THE ASSESSING OFFICER UNDER SEC. 133(6) AND ON B OTH THE DATES, STATEMENTS HAVE BEEN RECORDED, WHEREIN THEY HAVE CONFIRMED THE TRANSACTIONS DONE WITH THE ASSESSEE COMPANY. 13. THE LEARNED AR SUBMITTED THAT THE ASSESSEE HAD FURNISHED FOLLOWING DETAILS AND EVIDENCES FOR SUBSTANTIATING ITS CLAIM OF RECEIVING SECURITY DEPOSITS: REGARDING SH. RAM LAKHAN KAMAT, PROP. OF M/S. OM SA I ENTERPRISES PB-16 IS THE STATEMENT RECORDED ON 19.11.2012. IN T HE STATEMENT CONTRACTOR HAD CONFIRMED THE FOLLOWING FACTS: THAT HE IS INTO THE BUSINESS OF TAILORING. 9 THAT HE IS PROP. OF M/S. OM SAI ENTERPRISES. THAT HE KNOWS VERY WELL TO SH. PRADEEP SARAOGI, DIR ECTOR OF THE ASSESSEE COMPANY. THAT HE HAS GIVEN AN AMOUNT OF RS.45,00,000 TO M/S. JUVINATION, THE SISTER CONCERN OF THE ASSESSEE COMPANY AS SECUR ITY DEPOSIT. THAT HE IS REGULARLY FILING THEIR INCOME-TAX RETURN . PAPER BOOK 7-11 IS THE STATEMENT RECORDED ON 06.02.2013. IN THE STATEMENT CONTRACTOR HAD CONFIRMED THE FOLLOWING FA CTS: THAT I TOOK THE SECURITY DEPOSIT FROM MY ACQUAINTAN CE AND DEPOSITED THE SAME WITH THE ASSESSEE COMPANY BECAUS E THE COMPANY GIVES EXPENSIVE CLOTH FOR STITCHING AND I H AVE TO COMPLETE THAT WORK WITHIN A PARTICULAR TIME PERIOD. THAT I HAVE INSTGALLED GHE MACHINES AT MY RESIDENCE ADDRESS 5- 84/245, SRINIWAS PURI AND I EXECUTE THE WORK FROM T HAT PLACE. PB-12 IS ACKNOWLEDGEMENT OF RETURN PB-13 IS COPY OF PAN WHEREIN ASSESSMENT JURISDICTION HAS ALSO BEEN MENTIONED. 10 P.B-14-35 IS COMPLETE RETURN FORM ALONG WITH COMPUTATION OF INCOME. P.B-36 IS CONFIRMATION FROM THE SAID CONTRACTOR WIT H THEIR PAN AND ASSESSMENT PARTICULARS. P.B-37-38 IS LEDGER ACCOUNT OF SAID CONTRACTOR IN THE BOOKS O F THE ASSESSEE COMPANY. P.B-39 IS BALANCE SHEET AND PROFIT & LOSS ACCOUNT P.B-40-41 IS DETAILS OF SECURITY DEPOSITS TAKEN BY THE CONTRA CTOR FROM THE VARIOUS SUB-CONTRACTORS. P.B 42-45 IS BANK STATEMENT OF THE CONTRACTOR. IT MAY KINDLY BE CLARIFIED FROM THE BANK STATEMENT THAT VARIOUS AMOU NTS WERE RECEIVED IN CASH FROM SUB-CONTRACTORS AND THEN GIVEN TO THE ASSESSEE BY WAY OF ACCOUNT PAYEE CHEQUE. REGARDING SH. LALLAN KUMAR, PROP. M/S. JMD SERVICES : P .B 46-60 IS THE STATEMENT RECORDED ON 22.11.2012. P .B. 61-65 IS THE STATEMENT RECORDED ON 05.02.2013. P.B-66 IS ACKNOWLEDGMENT OF RETURN. P.B.67 IS COPY OF PAN WHEREIN ASSESSMENT JURISDICTI ON HAS ALSO BEEN MENTIONED. 11 P.B 68-89 IS COMPLETE RETURN FORM ALONG WITH COMPUT ATION OF INCOME. P.B 90 IS CONFIRMATION FROM THE SAID CONTRACTOR WIT H THEIR PAN AND ASSESSMENT PARTICULARS. P.B 91 IS LEDGER ACCOUNT OF SAID CONTRACTOR IN THE BOOKS OF THE ASSESSEE COMPANY. P.B 92 IS BALANCE SHEET AND PROFIT & LOSS ACCOUNT. P.B 93-94 IS DETAILS OF SECURITY DEPOSITS TAKEN BY THE CONTRACTOR FROM VARIOUS SUB-CONTRACTORS. P.B 95-97 IS BANK STATEMENT OF THE CONTRACTOR. IT M AY KINDLY BE CLARIFIED FROM THE BANK STATEMENT VARIOUS AMOUNTS W ERE RECEIVED IN CASH FROM SUB-CONTRACTORS AND THEN GIVEN TO ASSESSE E BY WAY OF ACCOUNT PAYEE CHEQUE. REGARDING SH. ASHOK SARAOGI, PROP. M/S. FASHION GAR MENTS : P.B 98 IS ACKNOWLEDGEMENT OF RETURN. P.B 99-121 IS COMPLETE RETURN FORM ALONG WITH COMP UTATION OF INCOME. P.B.122 IS COPY OF PAN WRITTEN ASSESSMENT JURISDIC TION HAS ALSO BEEN MENTIONED. 12 P.B 123 IS CONFIRMATION FROM THE SAID CONTRACTOR W ITH THEIR PAN AND ASSESSMENT PARTICULARS. P.B 124-127 IS LEDGER ACCOUNT OF SAID CONTRACTOR IN THE BOOKS OF ASSESSEE COMPANY. P.B128-130 IS BALANCE SHEET AND PROFIT & LOSS ACCO UNT. P.B130A IS DETAILS OF SECURITY DEPOSITS TAKEN BY THE CONTRACTOR FROM THE VARIOUS SUB-CONTRACTORS. P.B 131-135 IS BANK STATEMENT OF THE CONTRACTOR. IT MAY KINDLY BE CLARIFIED FROM THE BANK STATEMENT VARIOUS AMOUNTS W ERE RECEIVED IN CASH FROM SUB-CONTRACTORS AND THEN GIVEN TO BE BY WAY OF ACCOUNT PAYEE CHEQUE. P.B.136 IS LEDGER DATED 28.02.2013 SUBMITTED TO A.O . BY M/S. SAFE CONSULTANTS (P) LTD., ANOTHER SISTER CONCERN O F THE ASSESSEE COMPANY, CONFIRMING THAT AN INTEREST FREE FUND OF R S.16,80,000 WAS GIVEN TO THE SAID CONTRACTOR. ALSO SUBMITTED ITS RE TURN OF INCOME ALONG WITH BALANCE SHEET AND PROFIT & LOSS ACCOUNT AND BA NK STATEMENT (REFER P.B 137-143) P.B 144-174 ARE DETAILED WRITTEN SUBMISSIONS FI LED BEFORE LEARNED CIT(APPEALS) ON THE SAID ISSUES MEETING WITH VARIOU S OBJECTIONS OF A.O. 13 14. THE LEARNED AR SUBMITTED THAT SEVERAL OBJECTION S HAVE BEEN RAISED BY THE ASSESSING OFFICER WHILE MAKING THE IMPUGNED ADD ITIONS UNDER SECTION 68 OF THE ACT ON ACCOUNT OF SECURITY DEPOSITS AND INTE REST CREDITED THEREON. ALL THESE OBJECTIONS WHICH ARE GENERAL IN NATURE HAVE B EEN MET OUT BY THE ASSESSEE IN THE SUBMISSIONS MADE BEFORE THE LEARNED CIT(APPEALS), WHICH HAVE BEEN DISCUSSED HEREINABOVE IN BRIEF. THESE OBJ ECTIONS ARE GENERAL IN NATURE AND HAVE NO LEGS TO STAND. THE LEARNED CIT(A PPEALS) HAS UPHELD THE ADDITION MADE BY THE ASSESSING OFFICER BY OBSERVING THAT THERE WAS NO GENUINE TRANSACTION AS THE REAL IDENTITY, CREDITWOR THINESS AND GENUINENESS OF THE SO-CALLED CREDITORS ARE NOT PROVED. HE SUBMITTE D THAT VOLUMINOUS DETAILS AND EVIDENCES WERE FILED BEFORE THE LEARNED CIT(APP EALS) PROVING THE IDENTITY OF THE CONTRACTORS, THEIR CREDITWORTHINESS AND GENUINENESS OF THE TRANSACTIONS, WHICH HAVE BEEN IGNORED BY THE LEARNE D CIT(APPEALS) WHILE UPHOLDING THE ADDITION MADE BY THE ASSESSING OFFICE R. THE LEARNED AR SUBMITTED FURTHER THAT THE LEARNED CIT(APPEALS) HAS ALSO OVERLOOKED THE STATEMENTS OF THE ABOVE NAMED CONTRACTORS WHEREIN T HEY HAVE CONFIRMED THE FACT OF GIVING SECURITY DEPOSIT TO THE ASSESSEE COM PANY. THE LEARNED AR ALSO REFERRED PAGE NOS. 1 TO 84 OF THE PAPER BOOK I .E. COPIES OF STATEMENT OF SHRI RAM LAKHAN KAMAT RECORDED ON DIFFERENT DATES, DOCUMENTS PROVING HIS IDENTITY AND CREDITWORTHINESS; HIS FINANCIAL STATEM ENT ALONG WITH BANK 14 STATEMENTS FOR THE ASSESSMENT YEAR 2010-11; STATEME NT OF SHRI LALAN KUMAR RECORDED ON DIFFERENT DATES; COPIES OF DOCUMENTS IN SUPPORT OF HIS IDENTITY AND CREDITWORTHINESS; HIS FINANCIAL STATEMENT ALONG WITH BANK STATEMENT FOR THE ASSESSMENT YEAR 2010-11; DOCUMENTS PROVING IDEN TITY AND CREDITWORTHINESS OF SHRI ASHOK SAROGI, DETAILS OF S ECURITY DEPOSITED BY SHRI ASHOK SAROGI, HIS FINANCIAL STATEMENT WITH BANK STA TEMENT; DETAILS FILED BY SAFE CONSULTANT PVT. LTD. FOR THE ASSESSMENT YEAR 2 010-11, AND WRITTEN SUBMISSIONS DATED 23.6.2014 AND 30.9.2014 ALONG WIT H ANNEXURES FILED BEFORE THE LEARNED CIT(APPEALS). THE LEARNED AR PLA CED RELIANCE ON THE FOLLOWING DECISIONS: I) CIT VS. METACHEM INDUSTRIES (2000) 245 ITR 16 0 (M.P); II) ARAVALI TRADING CO. VS. ITO (2008) 220 CTR ( RAJ.) 622; III) NEMI CHAND KOTHARI VS. CIT (2003) 264 ITR 2 54 (GAU.); IV ) CIT VS. M/S. DATAWARE PVT. LTD., ITA NO. 263/ 2011 (CALCUTTA- H.C); V ) MOONGIPA INVESTMENT LTD. ITA NO. 2605/DEL/20 07 (DELHI ITAT ); 15. REGARDING INTEREST CREDITED WITHOUT ANY INTENTI ON TO PAY, THE LEARNED AR SUBMITTED THAT THE ASSESSING OFFICER HAS FAILED TO PROVIDE ANY CONTRARY MATERIAL IN THIS REGARD AND HIS ALLEGATIONS ARE WIT HOUT ANY BASIS. ON THE 15 CONTRARY, THE INTEREST HAS DULY BEEN RECORDED IN TH E BOOKS OF ACCOUNT OF THE ASSESSEE AND CONTRACTORS AND IT HAS BEEN DISCLOSED IN THE RESPECTIVE RETURN ALSO AS IT IS EVIDENT FROM PAGE NOS. 19, 73 AND 104 OF THE PAPER BOOK. 16. THE LEARNED SENIOR DR ON THE OTHER HAND PLACED RELIANCE ON THE ORDERS OF THE AUTHORITIES BELOW. HE SUBMITTED THAT THE ASS ESSEE HAS THOROUGHLY FAILED TO ESTABLISH THE IDENTITY, CREDITWORTHINESS OF THE SO-CALLED CREDITOR AND THE GENUINENESS OF THE TRANSACTION. HE SUBMITTED T HAT SHRI RAM LAKHAN FROM WHOM UNSECURED LOAN OF RS.40,69,000 CLAIMED TO HAVE BEEN TAKEN RESIDES IN A JHUGGI BLOCK OF SRINIVASPURI, NEW DELHI AND ON HI S EXAMINATION ON OATH, HE HAS STATED THAT HE IS AN LITERATE PERSON AND CAN BARELY SIGN HIS NAME IN HINDI. HE DENIED TO HAVE GIVEN ANY MONEY TO THE ASS ESSEE RATHER MONEY WAS ADVANCED TO M/S. JUBINATION. THE LEARNED SENIOR DR CONTENDED FURTHER THAT THE BANKS STATEMENT REVEALS THAT CASH HAS BEEN DEP OSITED ON VARIOUS DATES BEFORE ISSUING CHEQUE TO THE ASSESSEE COMPANY. SIMI LAR POSITION WAS WITH SHRI LALAN KUMAR FROM WHOM ADVANCE OF RS.43 LACS CL AIMED TO HAVE BEEN TAKEN, IN HIS STATEMENT ON OATH HAS STATED THAT HE TOOK LOAN FROM HIS WORKERS. IN HIS CASE ALSO, IT APPEARS FROM HIS BANK ACCOUNT THAT CASH WAS DEPOSITED BETWEEN 09.02.2010 TO 31.3.2010 JUST BEFORE THE CHE QUES WERE ISSUED TO THE ASSESSEE COMPANY. THE BANK ACCOUNT OF SHRI ASHOK SA RAOGI, PROPRIETOR, M/S. 16 FASHION GARMENTS WHO SHARES THE BUSINESS ADDRESS WI TH THE ASSESSEE REVEALED THAT A SUM OF RS.26,09,300 HAS BEEN DEPOSI TED IN THE SHAPE OF PAY ORDERS RECEIVED FROM TWENTY TWO PARTIES CASH IN HIS BANK ACCOUNT DURING THE MONTH OF MARCH 2010 BESIDES A SUM OF RS.32,51,302 H AS BEEN RECEIVED THROUGH CHEQUES. LETTERS SEEKING INFORMATION UNDER SEC. 133(6) OF THE ACT WERE ADDRESSED TO ALL THE TWENTY TWO PARTIES FROM W HOM SUCH AMOUNT WAS SAID TO HAVE BEEN RECEIVED BUT NONE OF THEM REPLIED EXCEPT ONE I.E. SAFE CONSULTANT PVT. LTD. WHICH HAD FILED INCOMPLETE DE TAILS AND THEY HAD NOT SUFFICIENT FUNDS TO LEND TO SHRI ASHOK SARAOGI. THE CREDITWORTHINESS OF SHRI ASHOK SARAOGI IS DOUBT. CONSIDERING THESE MATERIAL FACTS, THE AUTHORITIES BELOW WERE JUSTIFIED IN MAKING THE ADDITION IN QUES TION. HE SUBMITTED FURTHER THE INTEREST CLAIMED TO HAVE BEEN PAYABLE H AS NOT ACTUALLY BEEN PAID. HE PLACED RELIANCE ON THE FOLLOWING DECISION CIT VS. N. TARIKA PROPERTIES INVESTMENT PVT. LTD. (2013) 40 TAXMAN.COM 525 (DE LHI) (SLP PREFERRED BY THE ASSESSEE HAS BEEN DISMISSED BY THE HON'BLE S UPREME COURT REPORTED IN (2014). 51 TAXMAN.COM 387 (S.C). 17. CONSIDERING THE ABOVE SUBMISSIONS, WE FIND THAT THE ASSESSEE COMPANY ENGAGED IN THE BUSINESS OF TRADING OF CLOTH AND ALSO ENGAGED IN ASSISTING ITS ASSOCIATES CONCERN, I.E. M/S. JUBINAT ION TO GET JOB WORK EXECUTED 17 FROM VARIOUS JOBS WORK CONTRACTORS HAD CLAIMED TO H AVE RECEIVED SECURITY DEPOSITS OF RS.1,39,04,000 FROM SHRI RAM LAKHAN (RS .43,69,000), SHRI LALAN KUMAR (RS.43 LACS) AND SHRI ASHOK SARAOGI (RS .52,35,000) DURING THE YEAR. THE ASSESSEE COMPANY IS A COMPANY REGISTERED UNDER THE COMPANIES ACT, 1956 AND IS A 99.7% SUBSIDIARY OF WILD ORCHID CLOTHING (P) LTD. THE ASSESSING OFFICER HAS MADE ADDITION OF RS.1,39,04,0 00 UNDER SEC. 68 OF THE ACT ON THE GROUND THAT ASSESSEE HAD FAILED TO PROVE IDENTITY, CREDITWORTHINESS AND GENUINENESS OF THE TRANSACTION. THE ASSESSING O FFICER FURTHER ADDED RS.56,484 ON ACCOUNT OF INTEREST CREDITED ON THE SA ID AMOUNT. THE LEARNED CIT(APPEALS) HAS UPHELD THE SAME. THUS, THE ISSUE I S AS TO WHETHER THE ABOVE ADDITIONS MADE AND CONFIRMED BY THE AUTHORITI ES BELOW ARE JUSTIFIED OR NOT? 18. THE EXPLANATION OF THE ASSESSEE REMAINED THAT T HE AMOUNT OF SECURITY DEPOSIT WAS RECEIVED BY THE ABOVE NAMED THREE CONTR ACTORS AGAINST EXTENSIVE JOB WORK APPRAISAL FROM SUB-CONTRACTOR IN CASH AND ADVANCED THE SAME TO THE ASSESSEE COMPANY THROUGH BANKING CHANNEL. THE FURTH ER SUBMISSION OF THE ASSESSEE REMAINED THAT THE DURING THE COURSE OF ASS ESSMENT PROCEEDINGS, THE STATEMENTS OF ABOVE NAMED THREE CONTRACTORS WERE RE CORDED BY THE ASSESSING OFFICER WHEREIN THEY HAVE ADMITTED TO HAVE GIVEN TH E SAID AMOUNT AS SECURITY DEPOSIT TO THE ASSESSEE COMPANY. IT WAS SU BMITTED THAT OUT OF THE 18 ABOVE, TWO CONTRACTORS WERE CALLED TWICE BY ISSUING SUMMONS BY THE ASSESSING OFFICER UNDER SEC. 133(6) OF THE ACT AND ON BOTH THE DATES, STATEMENTS HAVE BEEN RECORDED, WHEREIN THEY HAVE CO NFIRMED THE TRANSACTIONS DONE WITH THE ASSESSEE COMPANY. ON HAV ING GONE THROUGH THESE STATEMENTS MADE AVAILABLE ON RECORD, WE FIND THAT S HRI RAM LAKHAN KAMAT, PROP. M/S. OM SAI ENTERPRISES IN HIS STATEMENT RECO RDED ON 19.11.2012 HAS CONFIRMED THAT HE IS IN THE BUSINESS OF TAILORING, HE KNOWS VERY WELL SHRI PRADEEP SARAOGI , DIRECTOR OF THE ASSESSEE COMPANY, HE HAS GIVEN AN AMOUNT OF RS.45 LACS TO M/S. JUBINATION, THE SISTER CONCER N OF THE ASSESSEE COMPANY AS SECURITY DEPOSIT AND THAT HE IS REGULARLY FILING THEIR INCOME-TAX RETURNS. AGAIN IN HIS STATEMENT RECORDED ON 6.2.2013, HE HAS CONFIRMED THAT HE TOOK THE SECURITY DEPOSIT FROM HIS ACQUAINTANCE AND DEPO SITED THE SAME WITH THE ASSESSEE BECAUSE THE ASSESSEE GIVES EXPENSIVE CLOTH FOR STITCHING AND HE HAS TO COMPLETE THAT WORK WITHIN A PARTICULAR TIME PERI OD. HE HAS STATED FURTHER THAT HE HAD INSTALLED THE MACHINES AT HIS RESIDENCE AND EXECUTES THE WORK FROM THAT PLACE. THE DOCUMENTS IN RELATION TO SHRI RAM LAKHAN KAMT FURNISHED WERE ACKNOWLEDGEMENT OF RETURN, PAN, COMP LETE RETURN FORM ALONG WITH COMPUTATION OF INCOME, HIS CONFIRMATION, LEDGER ACCOUNT IN THE BOOKS OF THE ASSESSEE, HIS BALANCE SHEET AND PROFIT AND LOSS ACCOUNT, DETAILS OF SECURITY DEPOSITS TAKEN BY HIM FROM THE VARIOUS SUB-CONTRACTOR, HIS BANK 19 STATEMENT SHOWING THAT VARIOUS AMOUNTS WERE RECEIVE D IN CASH FROM SUB- CONTRACTORS AND THEN GIVEN TO THE ASSESSEE BY WAY O F ACCOUNT PAYEE CHEQUES. 19. REGARDING LALAN KUMAR, PROP. M/S. JMD SERVICES. THE DOCUMENTS FURNISHED WERE HIS ACKNOWLEDGEMENT OF RETURN, PAN, COMPLETE RETURN FORM ALONG WITH COMPUTATION OF INCOME, HIS CONFIRMATION, HIS LEDGER ACCOUNT IN THE BOOKS OF THE ASSESSEE, HIS BALANCE SHEET AND PR OFIT AND LOSS ACCOUNT, DETAILS OF SECURITY DEPOSITS TAKEN BY HIM FROM THE VARIOUS SUB-CONTRACTORS AND HIS BANK STATEMENTS SHOWING VARIOUS AMOUNTS WER E RECEIVED IN CASH FROM SUB-CONTRACTOR AND THEN GIVEN TO THE ASSESSEE BY WAY OF ACCOUNT PAYEE CHEQUES. HIS STATEMENTS WERE ALSO RECORDED BY THE A SSESSING OFFICER ON 22.11.2012 AND 05.12.2013 WHEREIN HE HAS CONFIRMED THE CLAIM OF THE ASSESSEE. 20. REGARDING SHRI ASHOK SARAOGI, PROP. M/S. FASHIO N GARMENTS, THE DOCUMENTS SUBMITTED WERE HIS ACKNOWLEDGMENT OF RETU RN, COMPLETE RETURN FORM ALONG WITH COMPUTATION OF INCOME, PAN, HIS CON FIRMATION, HIS LEDGER ACCOUNT IN THE BOOKS OF THE ASSESSEE COMPANY, HIS B ALANCE SHEET AND PROFIT AND LOSS ACCOUNT, DETAILS OF SECURITY DEPOSITS TAKE N BY HIM FROM THE VARIOUS SUB-CONTRACTORS AND HIS BANK STATEMENT SHOWING RECE IPT OF VARIOUS AMOUNTS 20 IN CASH FROM SUB-CONTRACTOR AND THEN GIVEN TO THE A SSESSEE BY WAY OF ACCOUNT PAYEE CHEQUES. VIDE LETTER DATED 28.2.2013, SUBMIT TED TO THE ASSESSING OFFICER BY SAFE CONSULTANT (P) LTD., ANOTHER SISTER CONCERN OF THE ASSESSEE COMPANY, IT HAS BEEN CONFIRMED THAT AN INTEREST FRE E FUND OF RS.16,80,000 WAS GIVEN TO THE SAID CONTRACTOR. IN SUPPORT, ITS R ETURN OF INCOME ALONG WITH BALANCE SHEET AND PROFIT AND LOSS ACCOUNT AS WELL A S BANK STATEMENT WERE ALSO FURNISHED. 21. IN VIEW OF FURNISHING OF THE ABOVE DOCUMENTS RE LATING TO THE CONTRACTORS AND THEIR STATEMENTS RECORDED BY THE AS SESSING OFFICER CONFIRMING THE CLAIMED RECEIPT OF SECURITY DEPOSITS BY THE ASSESSEE THROUGH ACCOUNT PAYEE CHEQUES, WHICH THE SAID CONTRACTORS H AD COLLECTED IN CASH FROM THEIR RESPECTIVE SUB-CONTRACTORS AS WELL AS LO OKING TO THE NATURE OF THE BUSINESS OF THE ASSESSEE, WE ARE OF THE VIEW THAT T HE ASSESSEE HAS BEEN ABLE TO DISCHARGE ITS PRIMARY ONUS TO ESTABLISH THE GENU INENESS OF THE CLAIMED SECURITY DEPOSIT FROM THE ABOVE NAMED THREE PERSONS . THE ONUS THEREAFTER WAS SHIFTED ON THE ASSESSING OFFICER TO REBUT THE S AME BUT THE ASSESSING OFFICER INSTEAD OF REBUTTING THE SAME HAS DOUBTED T HEIR CREDITWORTHINESS MERELY ON THE BASIS OF GENERAL OBSERVATION THAT THE ASSESSEE HAS FAILED TO ESTABLISH THEIR IDENTITY AND CREDITWORTHINESS AND G ENUINENESS OF THE 21 TRANSACTION. THE DECISION OF HON'BLE DELHI HIGH CO URT IN THE CASE OF CIT VS. N. TARIKA PROPERTIES INVESTMENT (P) LTD. (SUPRA), R ELIED UPON BY THE LEARNED SR. DR HAVING DISTINGUISHABLE FACTS IS NOT APPLICAB LE IN THE PRESENT CASE. IN THAT CASE, IT WAS INFORMED FROM INVESTIGATION WING THAT ASSESSEE WAS ONE OF THE BENEFICIARIES WHO HAD RECEIVED BOGUS TRANSACTIO N (SHARE APPLICATION MONEY). REASSESSMENT WAS INITIATED AND ON INQUIRY T HE ASSESSING OFFICER FOUND THAT THE SUBSCRIBER BANK ACCOUNT STATEMENTS W ERE FORGED AND FABRICATED AS THERE WERE CORRESPONDING CASH DEPOSIT S. IN BANK ACCOUNT BEFORE ISSUE OF THE SHARE APPLICATION, CHEQUES AND DEPOSIT S WERE THROUGH CASH OR TRANSFER OF ENTRY FROM SAME BANK OF ENTRY OPERATORS . ON THE OTHER HAND, IN THE PRESENT CASE, THE DOCUMENTS RELATING TO THE ABO VE NAMED THREE CONTRACTORS WHO HAD DEPOSITED THE SECURITY MONEY TH ROUGH CHEQUES WITH THE ASSESSEE AFTER COLLECTING THE SAME IN CASH FROM VAR IOUS SUB-CONTRACTORS, WERE NOT FOUND FALSE OR FABRICATED. THEY IN THEIR STATEM ENTS RECORDED BY THE ASSESSING OFFICER HAVE ALSO ADMITTED THE TRANSACTIO N. THEY ARE ASSESSED TO TAX. WE THUS ARE OF THE VIEW THAT THE ASSESSING OFF ICER WAS NOT JUSTIFIED IN DOUBTING THE GENUINENESS OF THE CLAIMED SECURITY DE POSIT OF RS.1,39,04,000 FROM THE ABOVE NAMED THREE CONTRACTORS AND MAKING T HE ADDITION THEREOF UNDER SEC. 68 OF THE ACT. WE THUS WHILE SETTING ASI DE ORDERS OF THE AUTHORITIES BELOW, DIRECT THE ASSESSING OFFICER TO DELETE THE A DDITION OF RS.1,39,04,000. 22 THE IMPUGNED ADDITION OF RS.56,484 ON ACCOUNT OF IN TEREST CREDITED ON THE ABOVE AMOUNT IS CONSEQUENTIAL IN NATURE AND IN VIEW OF THE DELETION OF THE ABOVE ADDITION, THIS ADDITION IS DIRECTED TO BE DEL ETED. THE GROUNDS ARE ACCORDINGLY ALLOWED. 22. IN RESULT, THE APPEAL IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 17 .09.2015 SD/- SD/- ( INTURI RAMA RAO ) ( I.C. SUDHIR ) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 17 /09/2015 MOHAN LAL COPY FORWARDED TO: 1) APPELLANT 2) RESPONDENT 3) CIT 4) CIT(APPEALS) 5) DR:ITAT ASSISTANT REGISTRAR 23 DATE DRAFT DICTATED ON COMPUTER 16.09.2015 DRAFT PLACED BEFORE AUTHOR 16.09.2015 DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER DRAFT DISCUSSED/APPROVED BY SECOND MEMBER. 17.09.20 15 APPROVED DRAFT COMES TO THE SR.PS/PS 24.09.2015 KEPT FOR PRONOUNCEMENT ON 17.09.2015 FILE SENT TO THE BENCH CLERK 24.09.2015 DATE ON WHICH FILE GOES TO THE AR DATE ON WHICH FILE GOES TO THE HEAD CLERK. DATE OF DISPATCH OF ORDER.