Kausar Ali, Howrah V. ITO, WD-46(2), KOLKATA, Kolkata

ITA 765/KOL/2016

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 9576 (ITAT-KOLKATA)
• Duration Of Justice: 8 month(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-01-2017
• Appeal Filed By: Assessee
• Bench Allotted: SMC
• Assessment Year: 2012-2013
• Appeal Filed On: 22-04-2016
• Court: TRIBUNAL
• Department Lawyers: SK Z H TANVEER
• Assessee Lawyers: ARYA DAS; ANIBARYA DAS S
• Section: 143(3); 133(6); 131

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL D, BENC H KOLKATA BEFORE SHRI S.S.VISWANETHRA RAVI, JM & DR. A.L.SAI NI, AM ./ ITA NO.765/KOL/2016 ( / ASSESSMENT YEAR:2012-2013) KAUSAR ALI, 69/1, NOOR MD. MUNSHI LANE HOWRAH -711101 VS. ITO, WARD-46(2), 3, GOVT. PLACE, KOLKATA-1 ./ ./PAN/GIR NO.: AGPPA 8968 G ( /APPELLANT ) .. ( / RESPONDENT ) ASSESSEE BY :ARYA DAS AND SHRI ANIBARYA DAS, ADV OCATES REVENUE BY : SK. Z.H.TANVEER, JCIT, SR. DR / DATE OF HEARING : 27/12/2016 /DATE OF PRONOUNCEMENT 20/01/2017 / O R D E R PER DR. ARJUN LAL SAINI, AM: THE CAPTIONED APPEAL FILED BY THE ASSESSEE, PERTAIN ING TO THE ASSESSMENT YEAR 2012-13, IS DIRECTED AGAINST THE OR DER PASSED BY LD. COMMISSIONER OF INCOME TAX (APPEALS)-14, KOLKATA, I N APPEAL NO.224/CIT(A)-14/CIR-46/2014-15, DATED 14.01.2016, WHICH IN TURN ARISES OUT OF AN ORDER PASSED BY THE ASSESSING OFFICER (AO ) UNDER SECTION 143(3) OF THE INCOME TAX ACT 1961, (IN SHORT THE A CT), DATED 09.02.2015. 2. BRIEF FACTS OF THE CASE QUA THE ASSESSEE ARE THA T THE ASSESSEE FILED ITS RETURN OF INCOME ELECTRONICALLY FOR THE ASSESSM ENT YEAR 2012-2013 ON 30.09.2012, DECLARING TOTAL INCOME OF RS.5,97,880/- . THE ASESSEES CASE WAS SELECTED FOR SCRUTINY U/S.143(3) OF THE ACT AND THE AO HAS COMPLETED THE ASSESSMENT U/S.143(3) OF THE ACT BY MAKING THE ADDITION OF RS.4,00,000/- ON ACCOUNT OF EXCESS LIABILITY SHOWN BY THE ASSESSEE OBSERVING THE FOLLOWINGS :- ITA NO.765/16 KAUSAR ALI 2 UNSECURED LOAN : THE ASSESSEE IN THE BALANCE SHEET SHOWED UNSECURED LOAN OF RS.6620000/-.DURING THE COURSE OF ASSESSMENT PROCEEDING, MR. S.K.DAS, AR OF THE ASSESSEE APPEARE D AND HE IS REQUESTED TO PRODUCE LIST OF UNSECURED LOAN. THE AR OF ASSESSEE PRODUCED THE LIST OF UNSECURED LOAN ON 22/10/2014. NOTICE U/S. 133(6) OF THE INCOME TAX ACT, 1961 WAS ISSUED TO TH E LOAN CREDITORS. LOAN CONFORMATION REPORTS WERE FURNISHED BY THE LOA N CREDITORS. BUT CREDITWORTHINESS OF THE LOAN CREDITORS HAD NOT BEEN SATISFIED, SO, NOTICE U/S.131 OF THE I.T.ACT, 1961 WAS ISSUED TO L OAN CREDITORS. IN RESPONSE OF NOTICE MR. BABULAL ADAK AUTHORIZED REPR ESENTATIVE OF SMT. SHABANA PARVIN PROP OF K.K.SWITCH GEAR CO. APP EARED AND HIS STATEMENT HAD BEEN RECORDED ON 17/12/2014. IN ANSWER TO QUESTION NO.6, MR. BABU ADAK STATED THAT 'NO LOAN W AS GIVEN TO MR. KAUSAR AII; SMT. SABANA PARVIN GAVE THE MONEY TO KA USAR AII FROM HER CAPITAL AS 'ADVANCE' FOR PURCHASE OF ELECTRIC M ATERIAL. 'IT IS CLEAR FROM THE STATEMENT OF MR. BABULAL ADAK AUTHORIZED R EPRESENTATIVE OF SMT. SHABANA PARVIN PROP OF K.KSWITCH GEAR CO THAT KKSWITCH GEAR CO DID NOT PROVIDED ANY LOAN TO KAUSA R AII, PROP OF M/S. HIGH VOLTAGE ELECTRICAL COMPANY. A SHO W CAUSE NOTICE WAS ISSUED TO KAUSAR AII ON 14/01/2015 ASKING FOR E XPLANATION THAT MR. BABULAL ADAK AUTHORIZED REPRESENTATIVE OF SMT. SHABANA PARVIN PROP OF K K SWLTCH GEAR CO STATED THAT NO LOAN PROV IDE BY K.K.SWITCH GEAR CO TO KAUSAR ALI, PLEASE EXPLAIN UN SECURED LOAN SHOWN AGAINST KK.SWITCH GEAR CO WHY IT SHOULD NOT BE ADDED BACK TO YOUR TOTAL INCOME. MR. S.K.DAS, AR OF THE ASSESSEE APPEARED ON 28/01/2015 IN RESPONSE OF SHOW CAUSE DA TED 14/01/2015 AND STATED THAT THERE IS NO EXPLANATION IN HIS PART ON THAT ISSUE. HENCE, UNSECURED LOAN SHOWN BY KAUSAR A LI, PROP OF M/S HIGH VOLTAGE ELECTRICAL COMPANY IN THE CASE OF K.K.SWITCH GEAR CO OF RS.400000/- IS BEING DISALLOWED AND ADDE D BACK TO THE TOTAL INCOME OF THE ASSESSEE AS EXCESS LIABILITY SH OWN BY THE ASSESSEE BY WAY OF UNSECURED LOAN. PENALTY, PROCEED ING U/S.271(1)(C) ARE SEPARATELY INITIATED FOR FURNISHI NG INACCURATE PARTICULARS OF INCOME. 3. AGGRIEVED FROM THE ORDER OF THE AO, ASSESSEE FIL ED AN APPEAL BEFORE THE CIT(A), WHO CONFIRMED THE ORDER PASSED B Y THE LD. AO OBSERVING THE FOLLOWINGS :- ON OBSERVATION OF THE DOCUMENTS PRODUCED DURING AS SESSMENT PROCEEDINGS, THE AO FOUND THAT IN THE BALANCE SHEET OF THE APPELLANT, UNSECURED LOANS WAS SHOWN AMOUNTING TO RS.6,620,000.00. THE ASSESSEE WAS ASKED TO EXPLAIN THESE TRANSACTIONS, IN RESPONSE TO WHICH HE FURNISHED LIS T OF THE LOAN CREDITORS. LOAN CONFIRMATIONS WERE ALSO SUBMITTED. THE AO HOWEVER DID NOT FIND THE CREDIT WORTHINESS OF THE LOAN CREDITORS SATISFACTORY SO NOTICES U/S 131 WERE ISSU ED TO THEM. IN ITA NO.765/16 KAUSAR ALI 3 RESPONSE TO THESE NOTICES, SHRI BABULAR ADAK, THE A IR OF SMT SHABANA PARVIN, PROPRIETOR OF M/S K. K. SWITCH GEAR CO., ONE OF THE LOAN CREDITORS, AS SHOWN BY THE APPELLANT, APPE ARED AND DEPOSED UNDER OATH THAT NO LOAN HAD BEEN GIVEN TO T HE ASSESSEE BY THE COMPANY BUT THAT THEY HAD GIVEN THE MONEY OU T OF THE CAPITAL AS ADVANCE TO PURCHASE ELECTRICAL MATERIALS. AS PER THE SHOW CAUSE NOTICE, ASSESSEE WAS ASKED TO EXPLAIN ABOUT THE UNSECURED LOAN SHOWN AGAINST MESSRS. K. K . SWITCH GEAR CO. IN COMPLIANCE THE ASSESSEE HAD NO EXPLANATION T O GIVE REGARDING THE SAME. THUS THE AMOUNT OF RS.4,00,000. 00 WAS ADDED TO THE INCOME OF THE APPELLANT. 4. NOT BEING SATISFIED WITH THE ORDER OF LD. CIT(A) , THE ASSESSEE IS IN APPEAL BEFORE US AND HAS TAKEN THE FOLLOWING GROUND S OF APPEAL :- 1. THAT THE ADDITION MADE BY THE LD. CIT(A) BAD IN LAW AS WELL AS FACT. 2. LD. A.O. IN SPITE OF SHOWING, ALL THE LOAN CONF IRMATION, BANK STATEMENT, AND BALANCE SHEET, AS WELL AS THE TRANSA CTIONS WERE MADE BY ACCOUNT PAYEE CHEQUE DID NOT WANT TO BELIEV E THAT THERE WAS A LOAN OF RS.4,00,000/- WHICH WAS TAKEN F ROM SMT. SHAVANA PARVIN, PROP OF M/S. K. K. SWITCH GEAR. AS A MATTER OF FACT, IN THE BALANCE SHEET OF M/S. K. K. SWITCH GEA R THE AMOUNT OF RS. 4,00,000/- IS SHOWN AS ADVANCE TO SUPPLIERS (M/S. HIGH VOLTAGE ELECTRICAL.CO.). FURTHER, WITHOUT GIVING THE PROPER OPPORTUNITY THE LD. A.O HAD MADE THE ADDITION BY QUOTING' IN THE CASE OF K. K. SWITCH GEAR CO OF RS.4,00,000/- IS BEING DISALLOWED AND ADDED B ACK TO THE TOTAL INCOME OF THE ASSESSEE AS EXCESS LIABILITY SH OWN BY THE ASSESSEE BY THE WAY UNSECURED LOAN. IN SPITE OF SHO WING ALL THE RELEVANT DOCUMENTS THE LD. CIT(APPEAL) DISALLOWED T HE SAME. 3. IF THERE ARE ANY OTHER GROUNDS, WILL BE PRODUCED AT THE TIME OF HEARING. 4.1. LD. AR FOR THE ASSESSEE HAS SUBMITTED BEFORE U S THAT THE ASSESSEE RUNS A BUSINESS IN THE NATURE OF MANUFACTURING OF E LECTRICAL OVERHEAD TRANSMISSION LINE MATERIAL EQUIPMENT UNDER THE NAME AND STYLE OF M/S HIGH VOLTAGE ELECTRICAL COMPANY. FOR THE PURPOSE OF CARRYING ON SUCH ACTIVITY THE ASSESSEE DURING THE YEAR UNDER APPEAL TOOK LOAN OF RS. ITA NO.765/16 KAUSAR ALI 4 66,20,000/- (ADDED FROM PREVIOUS YEAR ALSO) FROM VA RIOUS PARTIES AND RELATIVES. OUT OF THIS, ASSESSEE TOOK THE LOAN FROM M/S. K K SWITCHGEAR CO.( PROP- SMT SHABANA PARVIN). AT, AT T HE TIME OF SCRUTINY PROCEEDING, LD. A.O HAD ISSUED NOTICE U/S. 131 OF THE INCOME TAX ACT 1961, ON 17/12/2014. AFTER MAKING THE EXAMINATI ON THE ID A.O CAME TO A CONCLUSION THAT SMT. SHABANA PARVIN, (PROP OF M/S. K K SWITCH GEAR) DID NOT GIVE ANY LOAN TO KAUSAR ALI, (PROP- OF M/S. HIGH VOLTAGE ELECTRICAL COMPANY) BUT SHE GAVE IT OUT OF HER CAPITAL AS 'ADV ANCE' FOR PURCHASE OF ELECTRICAL MATERIALS. THE LD. AR FURTHER SUBMITTED THAT LD. A.O IN SPITE OF SHOWING ALL THE LOAN CONFIRMATION, BANK STATEMENT, AND BALANCE SHEET, DI D NOT WANT TO BELIEVE THAT THERE WAS A LOAN OF RS.4,00,000/- WHICH WAS TA KEN FROM SMT. SHABANA PARVIN, PROP OF M/S. K K SWITCH GEAR. LD AR DREW OUR ATTENTION TO THE FACT THAT, THE BALANCE SHEET OF M/S. K K SWI TCH GEAR, SHOWS THAT THE AMOUNT OF RS. 4,00,000/- IS GIVEN AS ADVANCE TO SUPLIERS ( M/S. HIGH VOLTAGE ELECTRICAL CO.). BUT WITHOUT GIVING TH E OPPORTUNITY THE LD. A.O HAD ADDED BACK THE AMOUNT WITHOUT ANY BASIS. LD. AR FURTHER SUBMITTED THAT THE ASSESSEE IS QUITE IN DARK THAT AFTER SIGNING THE LOAN CONFIRMATION, HOW CAN THE AUTHORIS ED REPRESENTATIVE OF SMT. SHABANA PARVIN DENY THE FACT THAT LOAN WAS NOT GIVEN TO YOUR ASSESSEE, MR. KAUSAR ALI. HENCE, THE BALANCE OF M/S . K K SWITCH GEAR SHOWS THAT SAME AMOUNT IS NOW REPAID AND REFER TO P .13 22. MOREOVER, THE ASSESSEE DOES NOT HAVE ANY BUSINESS TRANSACTION WITH M/S. K. K. ITA NO.765/16 KAUSAR ALI 5 SWITCH GEAR. THE ASSESSEE HAS JUST PAID CERTAIN AMO UNT AS REPAYMENT OF LOAN. FURTHER, THE LD. AR FOR THE ASSESSEE SUBMITTED THAT WITHOUT GIVING THE PROPER OPPORTUNITY, THE LD. A.O HAD MADE THE ADDITI ON BY QUOTING: IN THE CASE OF M/S K K. SWITCH GEAR CO OF RS. 4,00 ,000/- IS BEING DISALLOWED AND ADDED BACK TO THE TOTAL INCOME OF TH E ASSESSEE AS EXCESS LIABILITY SHOWN BY THE ASSESSEE BY THE WAY O F UNSECURED LOAN' LD. AR FURTHER SUBMITTED THAT IF IT IS ASSUMED BUT NOT ADMIT THE FACT THAT THE AMOUNT OF RS. 4,00,000/- WAS TAKEN AS ADVANCE F OR PURCHASING ELECTRICAL MATERIALS THEN IT WOULD ALSO BE INCLUDED IN THE CURRENT LIABILITY OF THE BALANCE SHEET. THEN HOW THE LD. A. O CAME TO THE CONCLUSION THAT EXCESS LIABILITY WAS SHOWN BY THE A SSESSEE BY SHOWING IT AS UNSECURED LOAN. MOREOVER SMT. SHABANA PARVIN HAS SINGED THE LOAN CO NFIRMATION CERTIFICATE WHICH WAS DULY PRODUCED BEFORE THE LD. A.O AT THE TIME OF SCRUTINY PROCEEDING AND WITHOUT THIS LOAN TRANSACTI ON THERE WAS NO BUSINESS TRANSACTION BETWEEN THESE COMPANIES EVER. IT IS WELL SETTLED THAT WAY IN WHICH THE ENTRIES AR E MADE BY M/S. K K SWITCH GEAR, IN THEIR BOOKS OF ACCOUNT IS NOT DETERMINATIV E OF THE QUESTION THAT WHETHER THE LOAN WAS TAKEN BY ASSESSEE OR NOT. M/S. KK SWITCH GEAR MADE ENTRIES WHICH ARE NOT IN CONFORMITY WITH THE F ACTS AND CIRCUMSTANCES OF THE PRESENT CASE OR PROPER ACCOUNTANCY PRINCIPLE S. ENTRIES MADE BY THEM THEREFORE CANNOT BE REGARDED AS CONCLUSIVE ONE WAY OR THE OTHER. THE TRUE NATURE OF THE TRANSACTION IN EACH CASE HAS TO BE DETERMINED ON A ITA NO.765/16 KAUSAR ALI 6 CONSIDERATION OF THE TOTALITY OF THE FACTS AND CIRC UMSTANCES OF THE CASE. IT IS THUS CLEAR THAT IN THIS INSTANT CASE THE AMOUNT IN QUESTION WAS RECEIVED BY THE ASSESSEE FROM M/S. K K SWITCH GEAR SHOULD BE TREATED AS LOAN. 4.2. ON THE OTHER HAND, LD. DR FOR THE REVENUE HAS REITERATED THE STAND TAKEN BY THE AO, WHICH WE HAVE ALREADY NOTED IN OUR EARLIER PARA AND IS NOT BEING REPEATED FOR THE SAKE OF BREVITY. 4.3 HAVING HEARD THE RIVAL SUBMISSIONS, PERUSED THE MATERIAL ON RECORD, WE ARE OF THE VIEW THAT THERE IS MERIT IN THE SUBMI SSIONS OF ASSESSEE, AS THE PROPOSITION CANVASSED BY LD. AR FOR THE ASSESSE E ARE SUPPORTED BY THE FACTS NARRATED BY HIM ABOVE. AS LD. AR FOR THE ASSESSEE SUBMITTED BEFORE US THAT ASSESSEE HAD SUBMITTED LOAN CONFIRMA TION, BANK STATEMENT, BALANCE SHEET. MOREOVER THE TRANSACTION WERE MADE B Y ACCOUNT PAYEE CHEQUE, THE ASSESSEE TOOK LOAN OF RS.4 LAKHS FROM S MT. SHABANA PARVIN, (PROP. OF M/S K.K.SWITCH GEAR.). IN THE BALANCE SHE ET OF M/S K.K.SWITCH GEAR THE AMOUNT OF RS.4 LAKHS IS SHOWN AS ADVANCE T O SUPPLIERS. THE ASSESSEE HAS SUBMITTED BEFORE US THE AMOUNT RECEIVE D AND PAID BY CHEQUE. HE ALSO SUBMITTED BEFORE US CONFIRMATION AN D BALANCE SHEET AND PROFIT AND LOSS ACCOUNT. IN THE BALANCE SHEET OF M/ S K.K.SWITCH GEAR CO. THE AMOUNT IS SHOWN AS ADVANCES. THEREFORE, THE IDE NTITY, CREDITWORTHINESS AND GENUINENESS OF THE TRANSACTION S HAVE BEEN PROVED BY THE ASSESSEE. CONSIDERING THE FACTUAL POSITION, WE ARE OF THE VIEW THAT ITA NO.765/16 KAUSAR ALI 7 THE ADDITION MADE BY THE AO AND CONFIRMED BY LD. CI T(A) NEEDS TO BE DELETED. ACCORDINGLY, WE DELETE THE SAME. 8. IN THE RESULT, APPEAL FILED BY THE ASSESSEE, IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 20/0 1/2017. SD/ - (S.S.VISWANETHRA RAVI) SD/ - (DR. A.L.SAINI) / JUDICIAL MEMBER / ACCOUNTANT MEMBER /KOLKATA ; ! DATED 20/01/2017 ' $%& /PRAKASH MISHRA , 0 . / PS / COPY OF THE ORDER FORWARDED TO : / BY ORDER, / ( ASSTT. REGISTRAR) % & , / ITAT, 1. / THE APPELLANT-KAUSAR ALI 2. / THE RESPONDENT.-ITO, WARD-46(2), KOLKATA 3. 1 ( ) / THE CIT(A), KOLKATA. 4. 1 / CIT 5. 23 4 0056 , 56 , / DR, ITAT, KOLKATA 6. 4 78 / GUARD FILE. 2 0 //TRUE COPY//