ASST CIT 20(1), MUMBAI V. J & B INDUSTRIES, MUMBAI

ITA 7530/MUM/2013

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 4452 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 06-01-2016
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: J
• Next Hearing Date: 03-09-2015
• Assessment Year: 2009-2010
• Appeal Filed On: 24-12-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Unexplained cash credit
• Section: 133(6); 131; 68

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCH J MUMBAI. BEFORE SHRI AMIT SHUKLA, JUDICIAL MEMBER AND SHRI RAJESH KUMAR, ACCOUNTANT MEMBER ITA NO 7530/MUM/2013 ASSESSMENT YEAR: - 2009-10 ACIT-20(1), ROOM NO. 603, 6 TH FLOOR, PIRAMEL CHAMBER, PAREL, MUMBAI 400 012 VS.` M/S J & B INDUSTRIES 211, INIQUE HOUSE, CHAKALA ROAD, ANDHERI(E), MUMBAI-400093. PAN/GIR NO. AACFJ6383C APPELLANT RESPONDENT ORDER PER RAJESH KUMAR, ACCOUNTANT MEMBER THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER DATED 04.11.2013 OF COMMISSIONER OF INCOME TAX (APPEALS) {(HEREINAFTER REFERRED TO AS CIT(A)}IT (A) FOR A.Y. 2009-10. THE GROUNDS RAISED IN THE APPEAL READ AS UNDER:- 1. THE LD. CIT(A) ERRED IN DELETING THE AD-HOC/ESTIMAT ED DISALLOWANCE OF RS.6,02,595/- BEING 20% OF RS.30,12,975/- OUT OF LA BOUR CHARGES WITHOUT APPRECIATING THE REASONS OF DISALLOWANCE GIVEN BY T HE AO. 2. THE LD. CIT(A) ERRED IN DELETING THE ADDITION MADE BY THE AO ON ACCOUNT OF SUNDRY CREDITORS BALANCE OF RS.17,17,247 /- STATING THAT THE APPELLANT BY SHRI NAVEEN GUPTA RESPONDENT BY SHRI PARESH SHAPARIA DATE OF HEARING 03.09.2015 DATE OF PRONOUNCEMENT 06.01.2016 2 ITA NO 7530/MUM/2013 ASSESSMENT YEAR: - 2009-10 PAGE 2 OF 8 AOS CONCLUSION WAS SIMPLY BASED ON PARTIAL APPRECI ATION OF THE FACTS OF THE CASE WITHOUT APPRECIATING THE FULL FACTS GIVEN BY THE AO. 3. THE LD. CIT(A) ERRED IN DELETING THE ADDITION U/S.6 8 AS UNEXPLAINED CASH CREDITS FOR UNSECURED LOANS OF RS.22,70,086/- WITHO UT APPRECIATING THE FACTS THAT LOANS WERE NOT FULLY PROVED TO BE GENUIN E. 4. THE LD. CIT(A) ERRED IN DELETING THE ADDITION MADE ON ACCOUNT OF INTEREST PAID ON UNSERCURED LOAN OF RS.2,84,304/-. FOR REASONABLENESS STATING THAT THE AO DID NOT TAKE COGNIZANCE OF THE COMPLETE DETAILS AVAILABLE IN THE SHAPE OF LEDGER ACCOUNT OF INTERES T PAID AND THE DETAILS SUBMITTED AS AUDIT REPORT. 2. GROUND NO. 1 RELATES TO DELETION OF ADDITION OF RS. 6,02,995/- BEING 20% OF LABOUR CHARGES OF RS. 30,12,975/-. 2.1. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE FILED ITS RETURN OF INCOME ON 30.09.2009 DECLARING TOTAL INCOME OF RS. 43,79,734/ -. THE ASSESSEE FIRM IS ENGAGED IN THE MANUFACTURING OF P.P CAPS. DURING THE COURS E OF SCRUTINY PROCEEDINGS, THE AO NOTICED THAT THE ASSESSEE HAD CHARGED TO THE PRO FIT AND LOSS ACCOUNT RS. 30,12,975/- UNDER THE HEAD LABOUR & PROCESSING CHA RGES AND REQUIRED THE ASSESSEE TO FURNISH THE LABOUR REGISTER, NAME OF CO MPLETE ADDRESS OF THE PERSONS TO WHOM THE PAYMENTS WERE MADE ALONG WITH BILLS AND VO UCHERS. THE ASSESSEE SUBMITTED ONLY LEDGER COPIES AND THE AO DISALLOWED 20% OF THE TOTAL LABOUR AND PROCESSING CHARGES AMOUNTING TO RS. 6,02,595/-. L D. CIT(A) DELETED THE ADDITION BY OBSERVING THAT THE ASSESSEE SUBMITTED LEDGER WIT H COPIES OF THE BILLS OF THE PARTIES TO WHOM THE LABOUR CHARGES WERE PAID. THE L D. CIT(A) ALSO OBSERVED THAT THE AO DID NOT MAKE ANY ENQUIRY REGARDING GENUINENE SS OF THE PAYMENTS. THE CIT(A) RECORDED THE FINDINGS THAT THE PAYMENTS WERE MADE TO 4 PARTIES AFTER DEDUCTION OF TDS AND THE QUARTERLY RETURNS WERE ALS O FILED AND THUS THE ASSESSEE PRODUCED ALL THE RELEVANT RECORD FROM WHICH THE VER IFICATION COULD HAVE BEEN MADE BY THE AO. 2.2 THE LD. DR SUBMITTED THAT THE CIT(A) HAD ERRED IN DELETING THE DISALLOWANCE OF RS. 6,02,595/- BEING 20% OF THE TOT AL LABOUR AND PROCESSING CHARGES AS ONLY LEDGER COPIES IN RESPECT OF THE SAI D EXPENDITURE WERE PRODUCED BY THE ASSESSEE AND IT WAS NOT POSSIBLE FOR THE REVENU E TO CARRY OUT FURTHER 3 ITA NO 7530/MUM/2013 ASSESSMENT YEAR: - 2009-10 PAGE 3 OF 8 VERIFICATION. THE LD. AR ON THE OTHER HAND SUBMITTE D THAT THE PAYMENTS ON ACCOUNT OF LABOUR CHARGES WERE MADE TO THE 3 PARTIES NAMELY , RAJ PRINT N PACK OF RS. 28,18,624/-, DSOUZA METAL CUTTING P. LTD. RS.1,10 ,062/-, AND JAIN PACKAGING P. LTD. RS. 84,287/-. THE PAYMENTS WERE MADE AFTER DED UCTION OF TDS AND THE NECESSARY RETURN OF TDS WERE ALSO FILED. ALL THESE PAYMENTS WERE MADE BY CHEQUES AND, THEREFORE, THE AO HAD GROSSLY ERRED IN MAKING DISALLOWANCE ON ADHOC BASIS WITHOUT GIVING ANY FINDINGS FOR DOING SO AND PRAYED THAT THE ORDER OF CIT(A) DELETING THE SAID ADDITIONS/DISALLOWANCE DESERVED T O BE AFFIRMED. THE AO IS DIRECTED ACCORDINGLY. 2.3. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND P ERUSED THE RELEVANT MATERIAL ON RECORD. WE FIND THAT THE PAYMENTS OF LABOUR CHAR GES WERE MADE TO THREE PARTIES AS SUBMITTED BY THE LD. AR OF THE ASSESSEE AFTER DE DUCTION OF TDS WHICH WERE ALSO VERIFIED BY THE LD. CIT(A), AND HE GAVE SPECIFIC FI NDINGS TO THIS EFFECT IN THE APPEAL ORDER. THE PAYMENTS OF THESE LABOUR AND PROC ESSING CHARGES WERE MADE BY ACCOUNT PAYEE CHEQUES. WE ALSO NOTE THAT THE ASSESS EE FURNISHED THE COPIES OF LEDGER ACCOUNTS WITH BILLS WHICH CONTAINED THE COMP LETE DETAILS AS TO THE RECIPIENT OF THE LABOUR AND PROCEESSING CHARGES , THEIR ADDR ESSES ETC AND THE OBSERVATIONS OF THE AO THAT VERIFICATION OF THESE COULD NOT BE POSS IBLE IS WRONG AND CONTRARY TO THE FACTS ON RECORDS. IN OUR OPINION ADHOC DISALLOWANCE CANNOT BE SUSTAINED AS IT WAS NOT SUPPORTED BY THE AO WITH SPECIFIC REASON/DEFECT S IN THE BOOKS OF ACCOUNT WHERE THE PAYMENTS WERE MADE BY ACCOUNTS PAYEE CHEQ UES AFTER DEDUCTION OF TDS AND ALSO THE RETURN OF TDS WERE FILED AND, THEREFOR E, WE UPHOLD THE ORDER OF CIT(A) ON THIS POINT BY DISMISSING THE APPEAL OF TH E REVENUE ON THIS POINT. THE AO IS DIRECTED ACCORDINGLY. 3. GROUND NO. 2 RELATES TO DELETION OF ADDITION MAD E BY THE AO ON ACCOUNT OF SUNDRY CREDITORS OF RS. 17,17,247/-. BRIEF FACTS O F THE CASE ARE THAT THE ASSESSEES BALANCE-SHEET CONTAINED RS. 17,17,247/- AS SUNDRY C REDITOR OUTSTANDING AS ON 31.03.2009. THE AO ASKED THE ASSESSEE TO FURNISH TH E DETAILS OF NAMES, ADDRESSES, CONFIRMATIONS AND ANALYSIS OF THE SUNDRY CREDITORS. THE AO ADDED THE ENTIRE AMOUNT OF SUNDRY CREDITORS TO THE INCOME OF THE ASS ESSEE ON THE GROUND THAT ASSESSEE DID NOT FURNISH THE NAMES AND ADDRESSES AN D SUPPORTING BILLS OF THESE 4 ITA NO 7530/MUM/2013 ASSESSMENT YEAR: - 2009-10 PAGE 4 OF 8 CREDITORS TO THE INCOME OF THE ASSESSE AND, THEREFO RE, THE NECESSARY ENQUIRY U/S 133(6) OR SUMMON U/S 131 COULD NOT BE ISSUED. THE C IT(A) DELETED THE ADDITION OF RS. 17,17,247/- BY OBSERVING THAT THE BASIS OF AO T O ADD SUNDRY CREDITOR WAS INCORRECT AND AO FAILED TO CONSIDER THE SUBMISSIONS OF THE ASSESSEE FILED DURING THE ASSESSMENT PROCEEDINGS VIDE LETTER DATED 16.11.2011 WHICH WAS ALSO ACKNOWLEDGED BY THE AO AND REFERRED IN THE ASSESSMENT ORDER WHER EIN THE ASSESEE HAD DULY SUBMITTED THE AGE ANALYSIS OF SUNDRY CREDITORS VIDE PARAGRAPH NUMBER 4 OF THE SAID LETTER AND THE PARTY-WISE DETAILS OF PURCHASES MADE DURING THE YEAR WITH NAMES AND ADDRESSES, RS.50, 000 OR MORE WERE ALSO.. THE LD. CIT(A) OBSERVED THE CONTENTIONS OF AO THAT THE NECESSARY DETAILS WERE N OT WITH HIM AND NO NOTICE U/S.133(6)AND 131 OF THE ACT WERE UNFOUND. THE LD. CIT(A) FURTHER GAVE FINDINGS IN THE APPEAL ORDER THAT ALL THE CREDITORS WERE PAI D SUBSEQUENTLY ACCOUNTS OF THOSE CREDITORS FOR THE AY 2003-04 AND THEIR CONFIRMATION S. 3.1 THE LD. DR RELIED UPON THE ORDER OF AO AND SUB MITTED THAT THE ADDITIONS WERE RIGHTLY MADE BY THE AO ON ACCOUNT OF SUNDRY CR EDITORS. ASSESSEE DID NOT FURNISH THE NECESSARY DETAILS WITH THE AO FOLLOWING WHICH NECESSARY VERIFICATION COULD NOT BE CARRIED OUT. THE LD. AR, ON THE OTHER HAND, THAT THE ASSESEE SUBMITTED ALL THE NECESSARY INFORMATION REQUIRED BY AO VIDE L ETTER DATED 16.11.2011 WHICH WAS REFERRED TO BY THE AO IN THE ASSESSMENT ORDER. THUS, AO MADE THE DISALLOWANCE/ADDITIONS OF SUNDRY CREDITORS WITHOUT EXAMINING THE DETAILS AND PARTICULARS BEFORE HIM AS FILED BY THE ASSESSEE VID E LETTER DATED 16.11.2011. THE LD. AR FURTHER SUBMITTED THAT PARAGRAPH 4 & 5 CONTAINED THE NECESSARY DETAILS AS REQUIRED BY THE AO AND THEREFORE, IN ABSENCE OF ANY ADVERSE FACTUAL FINDINGS OF THE AO, ADDITION OF RS.17,17,244/- WAS RIGHTLY DELETED BY THE CIT(A) AND THE ORDER OF CIT(A) BE UPHELD ON THIS POINT. 3.4. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND P ERUSED THE MATERIAL ON RECORD. WE FIND THAT THE AO ADDED THE ENTIRE AMOUNT OF SUNDRY CREDITORS OF RS.17,17,244/-ON THE GROUND THAT THE ASSESSEE DID N OT FURNISH THE NAMES AND ADDRESSES OF THE SUNDRY CREDITORS AND, THEREFORE, T HE NECESSARY VERIFICATION COULD NOT BE CARRIED OUT. HOWEVER, THE LD. CIT(A) OBSERVE D THE NECESSARY DETAILS, HAD BEEN FILED BY THE ASSESSEE VIDE LETTER DATED 16.11. 2011 IN PARAGRAPH 4 & 5 WHEREBY 5 ITA NO 7530/MUM/2013 ASSESSMENT YEAR: - 2009-10 PAGE 5 OF 8 THE PARTY- WISE SUNDRY CREDITORS AND ALSO THE DETAI LS OF ALL THE PURCHASES ABOVE RS.50,000/- WERE FURNISHED WITH THE NAMES AND ADDRE SSES. THE LD. CIT(A) FURTHER OBSERVED THAT MOST OF THESE CREDITORS WERE PAID IN THE SUBSEQUENT YEARS ON THE BASIS OF CONFIRMATIONS AND COPIES OF ACCOUNTS FOR THE SUB SEQUENT YEARS AND THUS, DELETED THE ADDITION. FROM THE FACTS OF THE CASE AND ON THE BASIS OF RECORDS AND ARGUMENTS OF THE LD. COUNSEL, WE FIND THAT THE AO MADE AN ADD ITION WITHOUT EXAMINING THE DETAILS AND INFORMATION AVAILABLE BEFORE HIM AND MA DE THE ADDITION WITHOUT APPLICATION OF MIND TO THE FACTS AND INFORMATION BE FORE HIM. WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF CIT(A) ON THIS POINT AND UPHOLD THE SAME BY DISMISSING THE APPEAL OF THE REVENUE. THE AO IS DIRECTED ACCOR DINGLY. 4. THE GROUND NUMBER 3 &4 RELATES TO DELETING THE A DDITION U/S.68 OF THE ACT AS UNEXPLAINED CASH CREDITS FOR UNSECURED LOANS OF RS. 22,70,086/- AND INTEREST PAID ON UNSECURED LOAN OF RS.2,84,304/-. THE BRIEF FACTS AR E THAT THE ASSESSEE BORROWED RS.22,70,086/- FROM THE FRIENDS AND RELATIVES IN TH E EARLIER YEARS ON WHICH INTEREST OF RS. 2,84,304/- WAS PROVIDED FOR DURING THE YEAR . THE LD. AO TREATED THE ENTIRE AMOUNT OF UNSECURED LOAN OF RS. 22,70,086/- AS UNEX PLAINED CASH CREDIT U/S 68 OF THE ACT AND ALSO DISALLOWED THE INTEREST PAID ON TH ESE LOANS AMOUNTING TO RS. 2,84,304/- ON THE GROUND THAT THE ASSESSEE DID NOT FURNISH THE DETAILS OF THESE CREDITORS AND ALSO THE INTEREST WAS PAID TO THE FR IENDS AND RELATIVES WHICH WERE COVERED U/S 40A(2)(B). THE LD.CIT(A) DELETED THE DI SALLOWANCE BY OBSERVING IN PARAGRAPH NO. 7.3 PAGE NO. 13 OF THE CIT(A) ORDER THAT ALL THE SUNDRY CREDITORS AND LOANS RELATED TO EARLIER YEAR, AND ONLY INTERES T ON THESE LOANS WERE PROVIDED FOR RELATING TO THE CURRENT YEAR AFTER DEDUCTION OF APP LICABLE TDS. THE LD. CIT(A) FURTHER OBSERVED THAT ALL THESE INFORMATION WERE AV AILABLE BEFORE THE AO IN THE TAX AUDIT REPORT FORMING PART OF 3 CD WHICH WAS PAR T OF RETURN OF INCOME OF THE ASSESSEE. THE LD. CIT(A) REVERSED THE ORDER OF AO ON THE GROUND THAT THE ADDITION OF RS.22,70,086/- U/S 68 OF THE ACT COULD NOT BE MA DE AS ALL THESE AMOUNTS WERE BORROWED IN THE EARLIER YEARS AND NOT DURING THE YE AR UNDER CONSIDERATION AND THEREFORE THE PROVISIONS OF SECTION 68 OF THE ACT W ERE NOT APPLICABLE . 6 ITA NO 7530/MUM/2013 ASSESSMENT YEAR: - 2009-10 PAGE 6 OF 8 4.1. THE LD. DR RELIED ON THE ORDER OF AO AND SUBMI TTED THAT THE ASSESSEE DID NOT FURNISH THE NECESSARY DETAILS BEFORE THE AO AND THE REFORE, THE ORDER OF CIT BE SET ASIDE AND THAT OF THE AO TO BE RESTORED. THE LD. AR ON THE OTHER HAND SUBMITTED WITH ALL THE DETAILS REGARDING UNSECURED LOANS WERE ON RECORDS AVAILABLE BEFORE THE AO IN THE TAX AUDIT REPORT WHICH WAS PART OF THE IN COME TAX RETURN OF THE ASSESSEE, THE SAID REPORT CONTAINED THE DETAILED IN FORMATION AS TO OPENING BALANCE, AMOUNT BORROWED DURING THE YEAR, REPAID DURING THE YEAR AND MAXIMUM AMOUNT WAS OUTSTANDING AT THE YEAR END. THE LD. COUNSEL FU RTHER SUBMITTED THAT THE ADDITION U/S 68 OF THE ACT COULD ONLY BE MADE IF ANY SUM WAS FOUND TO BE CREDITED IN THE BOOKS OF ACCOUNTS DURING THE YEAR AND NOT IN RESPEC T OF EARLIER YEARS BY PLACING RELIANCE ON THE DECISION OF THE LD.CIT VS PRAMESHWA R BOHRA ) 301 ITR 404. THE LD. CIT(A) HAD RIGHTLY DELETED THE APPEAL AFTER EXA MINING THE NECESSARY CONFIRMATIONS AND TAX AUDIT REPORT OF THE ASSESSEE. AS REGARDS THE INTEREST OF RS. 2,84,304/- THE LD. COUNSEL SUBMITTED THAT ALL THESE DETAILS WERE FURNISHED TO THE AO AT THE TIME OF THE ASSESSMENT PROCEEDING. BESIDES T HERE WERE ALSO CONTAINED IN THE ANNEXURE TO THE AUDIT REPORT IN FORM NO.3 CD. THE R ATE OF INTEREST AT WHICH INTEREST WAS PAID TO THESE LOANS CREDITORS WAS AT T HE RATE OF 12% WHICH WAS VERY REASONABLE. IN VIEW OF PREVAILING MARKET RATE, THE AO HAS WRONGFULLY FOUND THE INTEREST TO BE UNREASONABLE U/S 40A (2)(B) OF THE A CT AND THEREFORE, THE CIT(A) HAD RIGHTLY DELETED THE ADDITION. 4.2. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND P ERUSED THE MATERIAL ON RECORD. WE NOTE THAT THE ASSESSEE HAD FILED THE TAX AUDIT IN THE FORM 3 CD WITH THE RETURNS OF INCOME WHICH CONTAINED COMPREHENSIVE DET AILS AS TO THE UN-SECURED LOANS WITH OPENING BALANCE, OUTSTANDING AT THE BEGI NNING OF THE YEAR, BORROWED DURING THE YEAR, CLOSING BALANCE. BESIDES INTEREST DETAILS TO THE PARTIES WERE ALSO GIVEN IN THE TAX AUDIT REPORT. WE ALSO FIND THAT ON PAGE NUMBER 13 OF THE CIT(A) HAD GIVEN A FINDINGS OF FACTS THAT THERE LOANS WERE TAKEN IN THE EARLIER YEARS. IN OUR CONSIDERED VIEW THE PROVISIONS OF SECTION 68 OF THE ACT CANNOT BE INVOKED THE LOANS WERE TAKEN IN THE EARLIER YEARS AND THEREFORE , THE CIT(A) WAS JUSTIFIED IN DELETING THE ADDITION MADE BY THE AO U/S 68. THE I NTEREST ON UNSECURED LOAN WAS PAID AT THE RATE OF 12% WHICH IS VERY REASONABLE AN D THEREFORE, THE CIT(A) HAD 7 ITA NO 7530/MUM/2013 ASSESSMENT YEAR: - 2009-10 PAGE 7 OF 8 RIGHTLY DELETED THE ADDITION ON THAT POINT. IN VIEW OF THIS THE APPEAL OF THE REVENUE IS DISMISSED ON THIS POINT. THE AO IS DIRECTED ACC ORDINGLY. IN THE RESULT, THE APPEAL OF THE REVENUE IS DISMISS ED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 6TH DAY OF JANUARY, 2016. SD/- SD/- (AMIT SHUKLA) (RAJESH KUMAR) (JUDICIAL MEMBER) (ACCOUNTANT MEMB ER) MUMBAI DATED 06-01-2016 SKS SR. P.S COPY TO: THE APPELLANT THE RESPONDENT THE CONCERNED CIT(A) THE CONCERNED CIT THE DR, A BENCH, ITAT, MUMBAI BY ORDER ASSISTANT REGISTRAR INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCHES, MUMBAI