I.T.O., Ward-2(3), Kannauj V. Sh. Surendra Singh, Kannauj

ITA 66/AGR/2012

• Counselvise Citation: [2013] 120 COUNSELVISE.COM (IT) 0386 (ITAT-AGRA)
• Duration Of Justice: 1 year(s) 1 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-02-2013
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Next Hearing Date: 14-02-2013
• Assessment Year: 2008-2009
• Appeal Filed On: 21-02-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Section: 14A; 133(6)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, AGRA BENCH, AGRA BEFORE : SHRI BHAVNESH SAINI, JUDICIAL MEMBER AND SHRI A.L. GEHLOT, ACCOUNTANT MEMBER ITA NO. 66/AGRA/2012 ASSTT. YEAR : 2008-09 INCOME-TAX OFFICER, VS. SHRI SURENDRA SINGH, WARD 2(3), KANNAUJ. S/O SHRI NAUBAT SINGH, PROP. M/S. JAWAN OIL COMPANY MAKRAND NAGAR, DISTT.KANNAUJ. (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI WASEEM ARSHAD, SR. D.R. RESPONDENT BY : SHRI SAHIB P. SATSANGEE, C.A. DATE OF HEARING : 14.02.2013 DATE OF PRONOUNCEMENT OF ORDER : 22.02.2013 ORDER PER BHAVNESH SAINI, J.M.: THIS APPEAL BY THE REVENUE IS DIRECTED AGAINST THE ORDER OF LD. CIT(A), GHAZIABAD DATED 09.11.2011 FOR THE ASSESSMENT YEAR 2008-09. 2. WE HAVE HEARD THE LD. REPRESENTATIVES OF BOTH TH E PARTIES, PERUSED THE FINDINGS OF THE AUTHORITIES BELOW AND CONSIDERED TH E MATERIAL AVAILABLE ON RECORD. 3. ON GROUND NO. 1 TO 3, 7 & 8, THE REVENUE CHALLEN GED THE ORDER OF THE LD. CIT(A) IN GRANTING RELIEF OF RS.1,68,000/- BEING IN TEREST ON ADVANCE OF RS.14,00,000/- MADE WITH JASODA COLD STORAGE PVT. L TD., KANPUR. ITA NO. 66/AGRA/2012 2 4. THE ASSESSEE HAS GIVEN ADVANCE OF RS.14,00,000/- TO M/S. JASODA COLD STORAGE PVT. LTD., KANPUR AND THE ASSESSEE WAS REQU IRED TO FURNISH CONFIRMATION OF THE LOANS AND ADVANCES. HOWEVER, THE ASSESSEE DID N OT FURNISH ANY DOCUMENTARY EVIDENCE AND HAS STATED THAT THE AMOUNT OF ADVANCE WAS MADE TOWARDS SHARE APPLICATION MONEY. THE AO ISSUED A LETTER TO THIS P ARTY, BUT NOTHING WAS HEARD FROM M/S. JASODA COLD STORAGE PVT. LTD., KANPUR. TH E LETTER SENT THROUGH INSPECTOR ALSO REMAINED UN-SERVED, AS NO SUCH CONCERN WAS FOU ND AT THE GIVEN ADDRESS. THE AO DID NOT ACCEPT THE CONTENTION OF THE ASSESSEE TH AT ADVANCE WAS GIVEN FOR PURCHASE OF SHARES. THE AO FOUND THAT AS THE ASSESS EE IS PAYING INTEREST ON SECURED LOANS, HE SHOULD HAVE CHARGE INTEREST FROM THIS PAR TY TO WHOM LOAN / ADVANCE HAS BEEN GIVEN. BECAUSE THE ASSESSEE COULD NOT PROVE AN Y NECESSITY OF GIVING ADVANCE IN THE CONDUCT OF HIS BUSINESS, DISALLOWANCE WAS MA DE OF RS.1,68,000/- BEING INTEREST @ 12%. THE ASSESSEE SUBMITTED BEFORE THE L D. CIT(A) THAT THE ADDITION IS MADE ON PRESUMPTION AND ACCORDING TO THE REGISTRATI ON CERTIFICATE ISSUE BY THE REGISTRAR OF COMPANY, SUCH COMPANY EXISTS AND IT IS ALSO INCORRECT TO SAY THAT SUCH COMPANY HAS NOT SENT ANY CONFIRMATION. DUE TO CHANG E IN ADDRESS, THE COMPANY WAS NOT FOUND AT THE GIVEN ADDRESS. IT WAS REITERAT ED THAT THE MONEY WAS GIVEN AS ADVANCE FOR ISSUE OF THE SHARES. THE REMAND REPORT FROM THE AO WAS CALLED FOR IN WHICH THE AO REITERATED THE FACTS STATED IN THE ASS ESSMENT ORDER. THE LD. CIT(A) ON EXAMINATION OF THE RECORD AND FACTS FOUND THAT RS.1 4,00,000/- HAVE BEEN GIVEN TO ITA NO. 66/AGRA/2012 3 M/S. JASODA COLD STORAGE PVT. LTD. AS SHARE APPLICA TION MONEY. NOTICE U/S. 133(6) COULD NOT BE SERVED BECAUSE THERE WAS CHANGE IN ADD RESS. THE ASSESSEE HAS ALREADY FILED CONFIRMATION FROM M/S. JASODA COLD STORAGE PV T. LTD., CONFIRMING TO HAVE RECEIVED THE SHARE APPLICATION MONEY. THE LD. CIT(A ), THEREFORE, DELETED THE ADDITION OF RS.1,68,000/-. 5. THE LD. DR RELIED UPON THE ORDER OF THE AO AND S UBMITTED THAT THE NOTICE U/S. 133(6) COULD NOT BE SERVED UPON THE PARTY. THE ORDE R OF THE LD. CIT(A) IS NON- SPEAKING AND SECTION 14A CLEARLY APPLIES IN THE CAS E OF THE ASSESSEE. SINCE THE ASSESSEE PAID INTEREST, THEREFORE, THE ASSESSEE SHO ULD HAVE CHARGED THE INTEREST ALSO. ON THE OTHER HAND, THE LD. COUNSEL FOR THE ASSESSEE REITERATED THE SUBMISSIONS MADE BEFORE THE AUTHORITIES BELOW AND SUBMITTED THAT THE AO HAS NOT APPLIED THE PROVISIONS OF SECTION 14A AND MADE DISALLOWANCE ONL Y U/S. 36(1)(III) OF THE IT ACT. THE CONCERNED PARTY HAS FILED CONFIRMATION BEFORE T HE AO (PB-124) AND SINCE THE AMOUNT WAS ADVANCED ONLY ON 05.12.2007, THEREFORE, WHOLE ADDITION IS UNJUSTIFIED AND ONLY PROPORTIONATE ADDITION COULD HAVE BEEN MAD E. THE AO HAS FAILED TO PROVE ANY NEXUS OF ADVANCE WITH THE BORROWED FUNDS. THERE FORE, THE ADDITION IS UNJUSTIFIED. RECORD OF KANNAUJ WAS DESTROYED WHICH WAS ACCEPTED BY THE LD. CIT(A) IN THE APPELLATE ORDER IN PARA 7.2 OF THE IM PUGNED ORDER, WHICH IS NOT CHALLENGED BY THE REVENUE DEPARTMENT. THE BOOKS OF ACCOUNT WERE PRODUCED ITA NO. 66/AGRA/2012 4 BEFORE THE SALES TAX AUTHORITIES, WHICH IS EVIDENT FROM THEIR ORDER SHEET (P.B. 136). 6. ON CONSIDERATION OF THE RIVAL SUBMISSIONS, WE DO NOT FIND ANY MERIT IN THIS GROUND OF APPEAL OF THE REVENUE. HONBLE SUPREME CO URT IN THE CASE OF CIT VS. A. RAMAN & CO., 67 ITR 11, HELD THAT LAW DOES NOT OBLI GE A TRADER TO MAKE MAXIMUM PROFIT. HONBLE GAUHATI HIGH COURT IN THE CASE OF B . AND A. PLANTATION & INDUSTRIES LTD., 242 ITR 22 HELD THAT THERE IS NO PROVISION IN THE IT ACT EMPOWERING THE INCOME-TAX OFFICER TO INCLUDE IN THE INCOME OF THE ASSESSEE, INTEREST WHICH WERE NOT DUE OR COLLECTED. IN THIS CASE, THE ASSESSEE HA S ADMITTED GIVING OF ADVANCE TO M/S. JASODA COLD STORAGE PVT. LTD., BUT THE AO HAS FAILED TO PROVE THAT THE SAME HAVE ANY NEXUS WITH THE BORROWED FUNDS WITH THE ASS ESSEE. THE ASSESSEE EXPLAINED THAT THE AMOUNT IN QUESTION WAS GIVEN FOR ALLOTMENT OF SHARES, WHICH IS ALSO CONFIRMED BY THE AFORESAID FIRM IN THEIR CONFIRMATI ON FILED WITH THE AO (PB-124) IN WHICH ALSO, IT WAS CONFIRMED THAT THIS COMPANY I S ASSESSED TO TAX AND THE AMOUNT WAS TAKEN AGAINST THE ISSUE OF SHARES OF THE COMPAN Y. THUS, THERE WAS NO BASIS, WHATSOEVER, FOR DIRECTING THE ASSESSEE TO CHARGE IN TEREST ON THE ADVANCE GIVEN TO THE AFORESAID COMPANY. NO CASE HAS BEEN MADE OUT U/ S. 14A OF THE IT ACT BY THE AO AS WELL AS NO CASE IS MADE OF DISALLOWANCE OF IN TEREST U/S. 36(1)(III) OF THE IT ACT FOR DIVERSION OF BORROWED FUNDS FOR NON-BUSINES S PURPOSES. THE ASSESSEE ALSO SATISFIED THAT DUE TO CHANGE IN ADDRESS, NOTICE COU LD NOT BE SERVED UPON THE PARTY. ITA NO. 66/AGRA/2012 5 CONSIDERING THE ABOVE DISCUSSION, WE DO NOT FIND AN Y INFIRMITY IN THE ORDER OF THE LD. CIT(A) IN DELETING THE ADDITION FOR CHARGING OF THE INTEREST ON ADVANCE. THESE GROUNDS OF APPEAL OF THE REVENUE ARE, ACCORDINGLY, DISMISSED. 7. ON GROUND NO.4, THE REVENUE CHALLENGED THE DELET ION OF ADDITION OF RS.9,62,601/-. THE AO FOUND THAT AS REGARDS THE LIA BILITY OF RS.10,50,120/- IN JAWAN OIL COMPANY, TIRWA SET OF ACCOUNTS, IT WAS FO UND THAT THE AMOUNT OF RS.9,62,601/- HAS BEEN SHOWN AS ADVANCE TO CUSTOMER S. THE ASSESSEE WAS REQUIRED TO FILE COPIES OF ACCOUNTS WITH CONFIRMATION FROM T HE CUSTOMERS BUT THE ASSESSEE FILED ONLY COPIES OF ACCOUNT AND DID NOT FURNISH AN Y CONFIRMATION. THE LETTER ISSUED TO THE PARTY U/S. 133(6) WAS NOT COMPLIED WITH AND ACCORDINGLY, THE ADDITION OF RS.9,62,601/- WAS MADE. THE ASSESSEE SUBMITTED BEFO RE THE LD. CIT(A) THAT COMPLETE DETAILS OF OUTSTANDING BALANCES AND COPY O F ACCOUNTS WERE FILED. THE LETTER ISSUED BY THE AO TO THE PARTY WAS RECEIVED O N 22/23.12.2010 AND ASSESSMENT PROCEEDINGS WERE CONCLUDED ON 24.12.2010. THEREFORE , THE PARTIES COULD NOT SEND THEIR CONFIRMATIONS ON TIME. IT WAS SUBMITTED THAT THE ASSESSEE INCURRED GENUINE EXPENDITURE. THEREFORE, THE ADDITION IS WHOLLY UNJU STIFIED. THE AO IN THE REMAND REPORT REITERATED THE FACTS STATED IN THE ASSESSMEN T ORDER. THE LD. CIT(A) ON EXAMINATION OF THE MATERIAL ON RECORD FOUND THAT TH E ASSESSEE HAS FURNISHED COMPLETE LIST WHICH INCORPORATES SMALL AMOUNT OF BA LANCES FROM AS MANY AS 76 PARTIES AND THE ASSESSEE HAS NOW FURNISHED ALL THE CONFIRMATIONS WHICH WERE ITA NO. 66/AGRA/2012 6 REMANDED TO THE AO, BUT NOTHING ADVERSE HAS BEEN RE CEIVED FROM THE SIDE OF THE AO. IT WAS ALSO OBSERVED THAT MOST OF THESE BALANCE S INCLUDED OPENING BALANCE ALSO. THE CONTENTION OF THE ASSESSEE WAS ACCEPTED T HESE PARTIES ARE THOSE TO WHOM THE ASSESSEE MADE SUPPLY OF OIL AS PER LIST ISSUED BY THE DSO AND BALANCES HAVE BEEN SHOWN AGAINST THEM AND ACCORDINGLY, ADDITION W AS DELETED. 8. THE LD. DR RELIED UPON THE ORDER OF THE AO AND S UBMITTED THAT RULE 46A HAS BEEN VIOLATED AND MERE FILING OF CONFIRMATION IS NO T SUFFICIENT. ON THE OTHER HAND, THE LD. COUNSEL FOR THE ASSESSEE REITERATED THE SUB MISSIONS MADE BEFORE THE AUTHORITIES BELOW. 9. ON CONSIDERATION OF THE RIVAL SUBMISSIONS, WE DO NOT FIND ANY MERIT IN THIS GROUND OF APPEAL OF THE REVENUE. THE ADDITION WAS M ADE BY THE AO BECAUSE CONFIRMATION FROM THE PARTIES COULD NOT BE FILED. T HE ASSESSEE HAS, HOWEVER, FURNISHED COMPLETE LIST OF THE AMOUNT IN QUESTION F ROM 76 PARTIES AND THE REASONS FOR NON-FILING OF CONFIRMATION WAS THAT NOTICES WER E RECEIVED BY THESE PARTIES ONLY ON 22/23.12.2010 AND ASSESSMENT PROCEEDINGS WERE CO NCLUDED ON 24.12.2010. THEREFORE, NO FAULT COULD BE FOUND WITH THE ASSESSE E OR THE CONCERNED PARTIES OF NON-FILING OF CONFIRMATIONS. THE ASSESSEE AT THE AP PELLATE STAGE FILED ALL THE CONFIRMATIONS OF THE PARTIES, WHICH WERE REMANDED T O THE AO, BUT THE AO, INSTEAD OF EXAMINING THE SAME, DID NOT OFFER ANY ADVERSE CO MMENTS THEREON. THE LD. ITA NO. 66/AGRA/2012 7 CIT(A) FURTHER FOUND THAT THESE ARE THE PARTIES TO WHOM OIL HAS BEEN SUPPLIED AND THE AMOUNT INCLUDED OPENING BALANCES AS WELL. THERE FORE, THERE IS NO VIOLATION OF RULE 46A IN THE MATTER AND THE ASSESSEE EXPLAINED T HE ISSUE PROPERLY BEFORE THE LD. CIT(A). THEREFORE, THE LD. CIT(A) ON PROPER APPRECI ATION OF FACTS AND MATERIAL ON RECORD, RIGHTLY DELETED THE ADDITION. GROUND NO. 4 OF APPEAL OF THE REVENUE IS, THEREFORE, DISMISSED. 10. ON GROUND NO. 5, THE REVENUE CHALLENGED THE DEL ETION OF ADDITION OF RS.6,29,279/- ON ACCOUNT OF THE DUTY AND TAXES AND FREIGHT CHARGES ETC. THE AO ON PERUSAL OF THE PROFIT AND LOSS ACCOUNT FOUND THAT T HE ASSESSEE HAS DEBITED HEAVY EXPENSES UNDER THE HEAD DUTIES AND TAXES AND FREIGH T OF RS.18,03,737/- AND RS.7,13,380/- RESPECTIVELY. THE AO CONSIDERING THE EXPLANATION OF THE ASSESSEE WAS OF THE VIEW THAT SINCE THE ASSESSEE FAILED TO P RODUCE BOOKS OF ACCOUNT AND BILLS AND VOUCHERS, THEREFORE, SAME IS NOT SUBJECTED TO V ERIFICATION. THEREFORE, 25% OF THE EXPENSES WERE DISALLOWED. THE ASSESSEE CHALLENG ED THE ADDITION BEFORE THE LD. CIT(A) AND IT WAS CLAIMED THAT PART OF THE BOOKS WE RE NOT AVAILABLE, WHICH IS ACCEPTED BY THE LD. CIT(A). THE LD. CIT(A) FOUND TH E CLAIM OF THE ASSESSEE TO BE CORRECT BECAUSE THE EXPENSE LIKE TAXES AND DUTIES A RE VERIFIABLE AS ARE COLLECTED BY THE IOC ON BEHALF OF THE STATE GOVERNMENT AND FURTH ER, THE FREIGHT EXPENSES ARE PAID AS PER NOTIFICATION ISSUED BY THE DSO. THEREFO RE, THE SAME TALLIED WITH THE ITA NO. 66/AGRA/2012 8 CLAIM OF THE ASSESSEE. THE EXPENSES WERE, THEREFORE , VERIFIABLE AND ADDITION WAS ACCORDINGLY DELETED. 11. THE LD. DR RELIED UPON THE ORDER OF THE AO. ON THE OTHER HAND, THE LD. COUNSEL FOR THE ASSESSEE REITERATED THE SUBMISSIONS MADE BEFORE THE AUTHORITIES BELOW. 12. ON CONSIDERATION OF THE RIVAL SUBMISSIONS, WE D O NOT FIND ANY JUSTIFICATION TO INTERFERE WITH THE ORDER OF THE LD. CIT(A) IN DELET ING THE ADDITION. THE ASSESSEE CLAIMED THAT THE BOOKS OF ACCOUNT OF THE ASSESSEE A T KANNAUJ HAVE LOST AND POLICE REPORT WAS FILED AND THE CLAIM OF THE ASSESSEE HAS BEEN ACCEPTED. THE AO MADE DISALLOWANCE OF 25% OF THE EXPENSES BECAUSE THE BOO KS OF ACCOUNT AND BILLS / VOUCHERS HAVE NOT BEEN PRODUCED. HOWEVER, THE ASSES SEE PRODUCED SECONDARY EVIDENCES BEFORE THE LD. CIT(A) WHICH WERE SUBJECTE D TO VERIFICATION, AS THE TAXES WERE VERIFIABLE AS WERE COLLECTED BY THE IOC ON BEH ALF OF THE STATE GOVERNMENT. SINCE THE LD. CIT(A) TALLIED THE CLAIM OF THE ASSES SEE WITH THE RECORD OF IOC AND FREIGHT WAS PAID AS PER STANDARD RATES APPROVED BY THE DSO, THEREFORE, THE CLAIM OF ASSESSEE GOT TALLIED AND VERIFIED FOR INCURRING EXP ENSES FOR THE PURPOSE OF BUSINESS. THEREFORE, THERE IS NO REASON TO DISALLOW 25% OF TH E EXPENSES. THE LD. CIT(A) ON PROPER APPRECIATION OF FACTS AND MATERIAL ON RECOR D, RIGHTLY DELETED THE ADDITION. GROUND NO. 5 OF APPEAL OF THE REVENUE IS, ACCORDING LY, DISMISSED. ITA NO. 66/AGRA/2012 9 13. ON GROUND NO. 6, THE REVENUE CHALLENGED THE DEL ETION OF ADDITION OF RS.8,74,550/- ON ACCOUNT OF DIFFERENCE IN COST OF K EROSENE OIL PURCHASED BY THE ASSESSEE. THE AO IN ORDER TO VERIFY THE PURCHASE OF KEROSENE OIL SHOWN AT RS.2,18,63,466/- IN THE ACCOUNTS MAINTAINED FOR KAN NAUJ SET OF ACCOUNTS, CALLED FOR INFORMATION U/S. 133(6) FROM IOC, KANPUR WHO HAVE I NFORMED THAT PURCHASE OF KEROSENE OIL OF 2688 KL COSTING RS.2,27,38,016/- HA S BEEN CONFIRMED. THE ASSESSEE WAS DIRECTED TO RECONCILE THE FIGURE. THE AO FOUND THAT THERE WAS DIFFERENCE IN THE COST OF THE PURCHASE OF KEROSENE OIL AND ASSESSEE COULD NOT RECONCILE THE FIGURE OF RS.8,74,550/- AND ACCORDING LY, ADDITION WAS MADE. THE ASSESSEE SUBMITTED BEFORE THE LD. CIT(A) THAT THERE IS NO DIFFERENCE IN THE PURCHASE AND FRESH CERTIFICATE AND STATEMENT OF ACCOUNT WAS FILED. FRESH CERTIFICATE OF IOC WAS REMANDED TO THE AO, BUT THE AO DESPITE REMINDER S, DID NOT FURNISH ANY ADVERSE COMMENTS AGAINST THE ASSESSEE. THE LD. CIT( A) ON THE BASIS OF FRESH CERTIFICATE FOUND THAT THERE IS NO DIFFERENCE IN TH E COST OF PURCHASE OF KEROSENE OIL AND ACCORDINGLY, ADDITION WAS DELETED. 14. THE LD. DR SUBMITTED THAT FRESH CERTIFICATE WAS FILED WHICH SHOULD HAVE BEEN CLARIFIED AT THE ASSESSMENT STAGE. ON THE OTHER HAN D, THE LD. COUNSEL FOR THE ASSESSEE REFERRED TO FRESH CERTIFICATE (PB-33) OF I OC, WHICH HAS CLARIFIED THAT THE ITA NO. 66/AGRA/2012 10 DISCREPANCY WAS DUE TO MISTAKE COMMITTED BY THE IOC BECAUSE OF THE REVISION OF THE VAT RATES AND ACCORDINGLY REVISED STATEMENT WAS ISSUED. 15. ON CONSIDERATION OF THE RIVAL SUBMISSIONS, WE A RE OF THE VIEW THAT NO INTERFERENCE IS CALLED FOR IN THE MATTER. DISCREPAN CY APPEARS ON ACCOUNT OF MISTAKE IN ORIGINAL CERTIFICATE ISSUED BY THE IOC, WHICH MI STAKE IS RECTIFIED BY THE IOC BY ISSUING THE FRESH CERTIFICATE WHICH WAS REMANDED TO THE AO FOR COMMENTS, BUT THE AO DID NOT OFFER ANY ADVERSE COMMENTS AGAINST THE A SSESSEE. THEREFORE, THE LD. CIT(A) ON EXAMINATION OF THE FACTS AND MATERIAL ON RECORD IN THE LIGHT OF THE CERTIFICATE OF THE IOC RECTIFYING THE MISTAKE THERE IN, CORRECTLY DELETED THE ADDITION. GROUND NO. 6 OF THE APPEAL OF THE REVENUE IS, ACCOR DINGLY, DISMISSED. NO OTHER POINT IS ARGUED OR PRESSED. 16. IN THE RESULT, THE DEPARTMENTAL APPEAL FAILS AN D IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT. SD/- SD/- (A.L. GEHLOT) (BHAVNESH SAINI) ACCOUNTANT MEMBER JUDICIAL MEMBER *AKS/- COPY OF THE ORDER FORWARDED TO : 1. APPELLANT 2. RESPONDENT 3. CIT(A), CONCERNED BY ORDER 4. CIT, CONCERNED 5. DR, ITAT, AGRA 6. GUARD FILE SR. PRIVATE SECRETARY TRUE COPY