THE DCIT, 2(1), Indore V. M/s. DIVYA JYOTI INDUSTRIES LTD., Indore

ITA 791/IND/2016

• Counselvise Citation: [2019] 118 COUNSELVISE.COM (IT) 0110 (ITAT-INDORE)
• Duration Of Justice: 2 year(s) 8 month(s) 16 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 01-04-2019
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Next Hearing Date: 14-03-2019
• Assessment Year: 2011-2012
• Appeal Filed On: 15-07-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: R S AMBEDKAR
• Assessee Lawyers: THRIBHUVEN SACHDEVA
• Keywords: Unexplained cash credit
• Section: 143(3); 143(1); 131; 68

Judgement Text

DIVYA JYOTI INDUSTRIES LTD ITA NO. 791/IND/2016 1 , , IN THE INCOME TAX APPELLATE TRIBUNAL, INDORE BENCH, INDORE BEFORE HON'BLE KUL BHARAT, JUDICIAL MEMBER AND HON'BLE MANISH BORAD, ACCOUNTANT MEMBER ITA NO.791/IND/2016 ASSESSMENT YEAR 2011-12 REVENUE BY S HRI R.S.AMBEDKAR , SR.DR ASSESSEE BY SHRI THRIBHUVEN SACHDEVA, ADV DATE OF HEARING 14 .03 .2019 DATE OF PR ONOUNCEMENT 01 .0 4 .2019 O R D E R PER MANISH BORAD. THE ABOVE CAPTIONED APPEAL IS FILED AT THE INSTANC E OF REVENUE PERTAINING TO ASSESSMENT YEAR 2011-12 AND IS DIRE CTED AGAINST THE ORDERS OF LD. COMMISSIONER OF INCOME TAX (APPEALS)- I (IN SHORT LD.CIT(A)], INDORE DATED 30.03.2016 WHICH IS ARI SING OUT OF THE ORDER U/S 143(3) OF THE INCOME TAX ACT 1961(IN SHOR T THE ACT) DATED 31.03.2014 FRAMED BY JCIT RANGE-1, INDORE. DC IT - 2(1), INDORE VS. M/S. DIVYA JYOTI INDUSTRIES LTD, 92/3 SAPNA SANGEETA ROAD, INDORE ( REVENUE ) (RESPONDENT ) PAN AABCD0732C DIVYA JYOTI INDUSTRIES LTD ITA NO. 791/IND/2016 2 2. THE REVENUE HAS RAISED FOLLOWING GROUNDS OF APPE AL; 1. WHETHER IN THE FACTS AND IN THE CIRCUMSTANCES O F THE CASE THE LD. CIT(A) ERRED IN DELETING THE ADDITION OF RS.1,70,OO,OOO/- MADE BY THE AO U/S 68 OF THE IT ACT. 2.WHETHER IN THE FACTS AND CIRCUMSTANCES OF THE CAS E THE LD. CIT(A) ERRED IN LAW BY IGNORING THE FACT THAT THE CHEQUE BOOK WA S ISSUED BY THE BANK IN THE MONTH OF AUG'2011 THEN HOW IT COULD BE POSSIBLE THAT UNSECURED LOAN IN QUESTION OF RS.1,70,OO,OOO/- WAS RECEIVED THROUG H CHEQUE DATED 30.03.2011 AND 31.03.2011. 3. BRIEFLY STATED FACTS AS CULLED OUT FROM THE RECO RDS ARE THAT THE ASSESSEE IS A LIMITED COMPANY ENGAGED IN MANUFACTUR ING OF SOYA REFINED OIL, SOYA SOLVENT OIL AND DOC. E-RETURN OF INCOME FILED ON 5.9.2011 DECLARING LOSS OF RS.11,58,781/-. CASE SE LECTED FOR SCRUTINY FOLLOWED BY SERVING OF NOTICES U/S 143(1) AND 143(2) OF THE ACT. DURING THE COURSE OF ASSESSMENT PROCEEDINGS L D. A.O WHILE EXAMINING THE UNSECURED LOANS RECEIVED BY THE ASSES SEE OBSERVED THAT RS.1.70 CRORES IS RECEIVED FROM GAJANAND RAML AL AGRAWAL BY WAY OF TWO ACCOUNT PAYEE CHEQUES OF RS.90 LAKHS AND RS.80 LAKHS DATED 30.3.2011 AND 31.3.2011 RESPECTIVELY. INFORM ATION WAS CALLED U/S 131 OF THE ACT FROM GAJANAND RAMLAL AGRA WAL ALONG WITH OTHER DOCUMENTARY EVIDENCE. AFTER WHICH IT WAS REV EALED THAT THE DIVYA JYOTI INDUSTRIES LTD ITA NO. 791/IND/2016 3 TWO CHEQUES RECEIVED BY THE ASSESSEE DATED 30.3.201 1 AND 31.3.2011 WERE ISSUED THROUGH A CHEQUE BOOK RECEIVE D BY THE CASH CREDITOR FROM ITS BANK ON 28.6.2011 AND THESE TWO C HEQUES WERE ACTUALLY ISSUED THEREAFTER AND GOT CLEARED ON 6.8.2 011 AND 12.8.2011. ON THE BASIS OF THESE FACTS LD. A.O CAM E TO THE CONCLUSION THAT THE CHEQUES RECEIVED AS LOAN BY THE ASSESSEE WERE NOT AVAILABLE WITH IT BEFORE 28.6.2011 WHICH IMPLIE S THAT THE TRANSACTION UNDERTAKEN BY THE ASSESSEE ARE NON GENU INE AND BUILT UP STORY. IT WAS ALSO OBSERVED BY HIM THAT THERE WE RE THREE ENTRIES OF RS.58,41,853/-, RS.36,13,622/- AND RS.75,44,525/ - TOTALING TO RS.1.70 CRORES APPEARING IN THE LEDGER ACCOUNT OF G AJANAND RAMLAL AGRAWAL UNDER THE HEAD SUNDRY CREDITORS AND THEIR C ONNECTION TO LOAN OF RS. 1.70 CRORES WAS NOT PROPERLY EXPLAINED. LD. A.O ACCORDINGLY TREATED THE UNSECURED LOAN OF RS.1.70 C RORES AS UNEXPLAINED CREDIT U/S 68 OF THE ACT BEING NON GENU INE AND ADDED IT TO THE INCOME OF THE ASSESSEE. OTHER MINOR DISAL LOWANCES OF REFINERY EXPENSES AT RS.3,50,783/-, DISALLOWANCE OF REPAIRS AND MAINTENANCE AND STAFF WELFARE OF RS.5,00,000/- WERE ALSO MADE. THE INCOME ASSESSED AT RS.1,66,92,000/-. DIVYA JYOTI INDUSTRIES LTD ITA NO. 791/IND/2016 4 4. AGGRIEVED ASSESSEE PREFERRED APPEAL BEFORE LD. C IT(A) AGAINST ALL THE ADDITIONS MADE BY THE LD. A.O. LD. CIT(A) AFTER EXAMINING THE DETAILED SUBMISSION FILED BY THE ASSESSEE, DOCU MENTARY EVIDENCES, ORDER OF CIT(A)-II, INDORE DATED 31.12.2 015 IN THE CASE OF THE ALLEGED CASH CREDITOR GAJANAND RAMLAL AGRAWAL D ELETED ALL THE ADDITIONS MADE BY THE LD. A.O. 5. NOW THE REVENUE IS IN APPEAL BEFORE THE TRIBUNAL RAISING TWO GROUNDS BUT THE SOLE GRIEVANCE IS AGAINST THE FINDI NG OF LD. CIT(A) DELETING THE ADDITION OF RS.1,70,00,000/- MADE BY T HE LD. A.O U/S 68 OF THE ACT. 6. LD. DEPARTMENTAL REPRESENTATIVE VEHEMENTLY ARGUE D SUPPORTING THE ORDER OF LD. A.O. 7. PER CONTRA LD. COUNSEL FOR THE ASSESSEE REFERRIN G TO THE SUBMISSIONS MADE BEFORE LD. CIT(A) AND THE DOCUMENT S PLACED IN THE PAPER BOOK SUBMITTED THAT THE ALLEGED TWO CHEQU ES OF RS.90 LAKHS AND RS.80 LAKHS WERE ENTERED INTO THE BOOKS O N 30.3.2011 AND 31.3.2011 RESPECTIVELY ON THE DATES MENTIONED O N THESE CHEQUES. AT THAT POINT OF TIME THE VALIDITY OF CHE QUES WAS FOR 6 DIVYA JYOTI INDUSTRIES LTD ITA NO. 791/IND/2016 5 MONTHS. IT IS TRUE THAT THE CHEQUE BOOK CONTAINING THESE TWO CHEQUES WAS ISSUED BY THE BANK TO ITS CUSTOMER NAME LY GAJANAND RAMLAL AGRAWAL ON 28.6.2011 AND THE CHEQUES WERE IS SUED TO THE ASSESSEE IN AUGUST, 2011 AND THE SAME WERE CLEARED IN THE BANK ON 6.8.2011 AND 12.8.2011. HOWEVER AS THE CHEQUES ISS UED IN AUGUST, 2011 TO THE ASSESSEE WERE DATED 30.3.2011 A ND 31.3.2011 AND THE BOOKS OF ACCOUNTS WERE NOT CLOSED DUE TO TA X AUDIT UNDERGOING, THE ENTRY FOR TWO LOAN AMOUNT OF RS.90 LAKHS AND RS.80 LAKHS WERE ENTERED INTO THE BOOKS OF ACCOUNTS ON THE DATE MENTIONED ON THE CHEQUES. THESE CHEQUES WERE SHOWN TO BE IN HAND WITH THE ASSESSEE AT THE CLOSE OF THE YEAR AND HAVE BEEN TAKEN INTO CONSIDERATION IN THE BANK RECONCILIATION STATE MENT. AS THE ASSESSEE IS MAINTAINING THE ACCOUNTS ON MERCANTILE SYSTEM, THESE ENTRIES WERE MADE ON THE DATE MENTIONED ON THIS CHE QUES. APART FROM THIS MISTAKE, NO INCONSISTENCY HAS BEEN OBSERV ED BY THE LD. A.O ABOUT THE IDENTITY, GENUINENESS AND CREDITWORTH INESS OF THE TRANSACTIONS. EVEN THE SIMILAR AMOUNT OF ADDITION MADE IN THE HANDS OF GAJANAND RAMLAL AGRAWAL STANDS DELETED BY LD. CIT(A)-II, INDORE VIDE HIS ORDER DATED 31.12.2015 WHICH FURTHE R SUBSTANTIATE THE CONTENTION THAT THE ALLEGED LOAN OF RS.1.70 CRO RES SHOULD NOT BE DIVYA JYOTI INDUSTRIES LTD ITA NO. 791/IND/2016 6 TREATED AS UNEXPLAINED AND LD. CIT(A) HAS RIGHTLY D ELETED THE ADDITION. 8. WE HAVE HEARD RIVAL CONTENTIONS AND PERUSED THE RECORDS PLACED BEFORE US. THE SOLE GRIEVANCE OF THE REVENUE IS AGAINST THE DELETION AND ADDITION OF RS.1.70 CRORES BY LD. CIT( A) FOR THE ADDITION MADE U/S 68 OF THE ACT BY LD. A.O FOR TREA TING THE LOAN OF RS.90 LAKHS AND RS.80 LAKHS FROM GAJANAND RAMLAL AG RAWAL AS UNEXPLAINED CASH CREDIT U/S 68 OF THE ACT. WE OBSER VE THAT THE LD. CIT(A) DELETED THE ADDITION OF RS.1.70 CRORES OBSER VING AS FOLLOWS; 5. GROUND NOS. L(A) & L(B): THE ABOVE GROUNDS ARE DIRECTED AGAINST THE ADDITION OF RS.17000000/- U/S 68 OF THE ACT. THE DETAILED FACTS AS PER THE ASSESSMENT ORDER ARE REPRODUCED AT PARA NO. 2 ABOVE AND THE DETAILED SUBMISSIONS OF THE APPELLANT ARE REPRODUCED AT PARA NO. 3 ABOVE. 5.L THE ADDITION HAS BEEN MADE ON ACCOUNT OF UNSECURED LOAN FROM SHRI GAJANAND RAMLAL AGRAWAL BY WAY OF TW O CHEQUES DATED 30.3.2011 AND 31.3.2011 OF RS . 90000 00/- AND RS.8000000/- RESPECTIVELY. THE AO AS A RESULT OF ENQUIRY FOUND THAT THE CHEQUES COULD NOT HAVE BEEN DEPOSITED ON 30.3.2011 AS THE CHEQUE BOOK CONTAININ G THE SAID CHEQUES WAS ISSUED BY THE BANK ONLY ON 28.06.2 011. AO THEREFORE HELD THAT THE LOAN FROM SHRI GAJANAND AGRAWAL WAS NOT ESTABLISHED AND ADDED THE AMOUNT OF DIVYA JYOTI INDUSTRIES LTD ITA NO. 791/IND/2016 7 RS.17000000/-. 5.2 APPELLANT HAS EXPLAINED THAT LOAN HAS BEEN TAKEN FR OM SHRI GAJANAND AGRAWAL. THE CHEQUES WERE INADVERTENTL Y DATED 30/03/2011 & 31/03/2011 BUT WERE HANDED OVER TO THE APPELLANT COMPANY ONLY IN AUGUST, 2011 AND WERE DEPO SITED AND CLEARED IN AUGUST, 2011. HOWEVER AS THE CHEQUES WERE DATED 30/03/2011 & 31/03/2011 AND AS THE APPELLANT WAS FOLLOWING MERCANTILE SYSTEM OF ACCOUNTING AT THE TI ME OF FINALIZING THE ACCOUNTS THESE CHEQUES WERE TAKEN IN T HE BOOKS OF ACCOUNTS FOR THE YEAR UNDER CONSIDERATION. APPELL ANT HAS ALSO HIGHLIGHTED THE FACT THAT THE ADDITION MADE IN TH E HANDS OF SHRI GAJANAND RAM LAL AGRAWAL HAS ALSO BEEN DELETED BY THE CIT(A)-IL, INDORE VIDE HIS ORDER IN APPEAL NO. IT-1 21/14-15 DATED 31/12/2015. APPELLANT HAS ALSO EXPLAINED THAT AS A RESULT OF THE ABOVE NO CASH WAS INTRODUCED AND FILED THE BANK RECONCILIATION ALSO. CONSIDERING ALL THE MATERIAL PLA CED ON RECORD THE ADDITION OF RS.17000000/- IS DIRECTED TO BE DELETED IN APPEAL. THESE GROUNDS OF THE APPELLANT ARE THEREFOR E ALLOWED. RS.17000000/- DELETED. 9. ON PERUSAL OF THE FINDING OF LD. CIT(A) AND THE RECORDS PLACED BEFORE US WE OBSERVE THAT THE ASSESSEE HAS REGULAR BUSINESS TRANSACTION WITH GAJANAND RAMLAL AGRAWAL FOR PURCHA SE OF SOYA BEAN. LEDGER ACCOUNT OF THE BUSINESS TRANSACTION OF PURCHASE OF SOYA BEAN. AND THE PAYMENTS MADE AGAINST IT ARE SHO WN AT PAGE 23 & 24 OF THE PAPER BOOK AND AS ON 31.3.2011 THE CRE DIT BALANCE OF RS.28,49,306/- IS SHOWN IN THE NAME OF GAJANAND RA MLAL AGRAWAL DIVYA JYOTI INDUSTRIES LTD ITA NO. 791/IND/2016 8 (GOODS ACCOUNT) WHICH FORMS PART OF THE LIST OF SUN DRY CREDITORS APPEARING UNDER THE HEAD CURRENT LIABILITIES & PROV ISIONS OF THE AUDITED BALANCE SHEET DATED 12.8.2011 PLACED AT PAG E 20-21 OF THE PAPER BOOK. IN THIS LEDGER ACCOUNT FOLLOWING THREE ENTRIES ARE ALSO PART OF THE TOTAL TRANSACTIONS; DATE PARTICULARS AMOUNT (RS.) 28.3.2011 AMOUNT PAID AGAINST SEED PURCHASE 58,41,853/ - 29.3.2011 - DO - 36,13,622/ - 30.3.2011 - DO - 75,44,525 / - TOTAL 1,70,00,000/ - 10. THE ABOVE REFERRED THREE TRANSACTIONS WHICH WAS ONE OF THE BASIS ADOPTED BY LD. A.O FOR MAKING THE ADDITION AR E ACTUALLY AMOUNT PAID AGAINST THE GOODS PURCHASED FROM GAJANA ND RAMLAL AGRAWAL BY WAY OF THREE CHEQUES BEARING NO. 16732, 16733 AND 16734 ISSUED IN THE CLOSE OF FINANCIAL YEAR 2010-11 AND CLEARED IN AUGUST, 2011 IN THE SUBSEQUENT FINANCIAL YEAR. THI S FACT IS VERIFIABLE FROM THE BANK STATEMENT AND BANK RECONCI LIATION STATEMENT PLACED ON RECORD. THE CONFIRMATION FOR T HESE THREE TRANSACTIONS HAVE ALSO BEEN RECEIVED FROM GAJANAND RAMLAL AGRAWAL AND FURTHER THIS FACT HAS BEEN APPRECIATED BY LD. CIT(A) IN DIVYA JYOTI INDUSTRIES LTD ITA NO. 791/IND/2016 9 THE ORDER DATED 18.12.2015 PASSED IN THE CASE OF GA JANAND RAMLAL AGRAWAL ADJUDICATING THE VERY SAME ISSUE OF THE ABO VE REFERRED THREE TRANSACTIONS TOTALING RS.1.70 CRORES. IN THA T ORDER LD. CIT(A) HAS HELD THAT THE THREE CREDIT TRANSACTIONS ARE DUL Y REFLECTED IN THE BOOKS OF THE PARTY AND HAVE BEEN CARRIED OUT THROU GH PROPER BANKING CHANNEL AND LD. A.O HAS NOT FOUND ANY INFIR MITY IN THE TRANSACTION ENTERED IN THE ALLEGED COURSE OF THE BU SINESS. SO WE CAN SAFELY CONCLUDE THAT THE ALLEGED THREE ENTRIES OF TOTALING RS.1.70 CRORES HAVE NO RELATION WITH THE ALLEGED TRANSACTIO N OF RECEIVING LOAN OF RS.90 LAKHS AND RS. 80 LAKHS BY THE ASSESSEE FRO M GAJANAND RAMLAL AGRAWAL AND THEREFORE THE FIRST BASIS TAKEN BY LD. A.O OF LINKING THIS TRADE TRANSACTION WITH THE LOAN TRANSA CTION IS BASELESS. 11. NOW THE SECOND BASIS FOR MAKING ADDITION BY LD. A.O THAT THE LOAN AMOUNT OF RS.1.70 CRORES RECEIVED BY TWO CHEQU ES OF RS.90 LAKHS AND RS.80 LAKHS WERE ENTERED IN THE BOOKS ON3 0.3.2011 AND 31.3.2011. THE CHEQUE BOOKS THROUGH WHICH THESE CH EQUES WERE ISSUED WERE RECEIVED BY GAJANAND RAMLAL AGRAWAL FRO M THE BANK IN THE SUBSEQUENT FINANCIAL YEAR ON 28.6.2011 AND THE CHEQUES WERE PHYSICALLY GIVEN TO THE ASSESSEE IN AUGUST, 2011 BU T THE DATES WERE DIVYA JYOTI INDUSTRIES LTD ITA NO. 791/IND/2016 10 MENTIONED AS 30.3.2011 AND 31.3.2011. LD. A.O RAIS ED THE OBJECTION FOR THE ALLEGED ENTERING OF THE TRANSACTI ON IN MARCH, 2011 EVEN WHEN THE CHEQUES WERE NOT IN HAND WITH THE ASS ESSEE. IT IS A WELL ACCEPTED FACT THAT BEFORE THE FINALIZATION OF THE AUDIT AND FILING OF THE INCOME TAX RETURN CERTAIN ENTRIES RELATING T O THE YEAR OF AUDIT MAY BE JOURNAL OR OTHERS ARE ENTERED IN THE BOOKS B EFORE FINALIZING THE BALANCE SHEET. ASSESSEE IS HAVING REGULAR BUSI NESS TRANSACTIONS WITH GAJANAND RAMLAL AGRAWAL AS EVIDEN T FROM THE LEDGER ACCOUNT. FOR THE BUSINESS EXPEDIENCY ASSESS EE TOOK LOAN FROM GAJANAND RAMLAL AGRAWAL AND THE CHEQUES THROUG H WERE PHYSICALLY RECEIVED BY THE ASSESSEE IN AUGUST, 2011 AND WERE PRESENTED IN BANK FOR CLEARING IN AUGUST, 2011 AND SAME WERE CLEARED, BUT FOR SHOWING THE TRANSACTION IN THE BO OKS OF ACCOUNT FOR FINANCIAL YEAR 2010-11 BOTH THE CHEQUES WERE ISSUED WITH DATES 30.3.2011 AND 31.3.2011 AND THE ASSESSEE MAINTAININ G THE ACCOUNTS ON MERCANTILE BASIS OF ACCOUNTING ENTERED THE TRANSACTION ON THE DATE MENTIONED ON THE CHEQUES WHICH WERE FAL LING IN FINANCIAL YEAR 2010-11. THE LOAN AMOUNT IS DULY RE FLECTED UNDER THE LIST OF UNSECURED LOANS. THE ACCOUNT PAYEE CHE QUE HAVE BEEN CLEARED THROUGH PROPER BANKING CHANNEL IN AUGUST, 2 011. REVENUE DIVYA JYOTI INDUSTRIES LTD ITA NO. 791/IND/2016 11 AUTHORITIES HAVE NOT DISPUTED ABOUT THE CREDITWORTH INESS AND IDENTITY OF CASH CREDITOR GAJANAND RAMLAL AGRAWAL. EVEN THE GENUINENESS IS NOT IN DOUBT BECAUSE THE CHEQUES ARE ACTUALLY CLEARED IN THE BANK ACCOUNT. MERELY FOR ENTERING TH E TRANSACTION IN MARCH, 2011 AND THE CHEQUE GETTING CLEARED IN AUGUS T 2011 CANNOT BE A REASONABLE BASIS TO TREAT THE LOAN AMOUNT AS U NEXPLAINED U/S 68 OF THE ACT BECAUSE THE VALIDITY OF CHEQUE WAS FO R 6 MONTHS AT THAT POINT OF TIME. THE ALLEGED TRANSACTION IS DUL Y REFLECTED IN THE BOOKS OF BOTH THE PARTIES, DULY CONFIRMED BY THE CA SH CREDITOR GAJANAND RAMLAL AGRAWAL, BANK STATEMENTS AND BANK RECONCILIATION STATEMENTS CLEARLY SHOWS THE ALLEGED TRANSACTIONS AND FROM ALL FOUR CORNERS, WE CAN SAFELY CONCLUDE THAT THE ALLEGED TRANSACTIONS OF LOAN OF RS.1.70 CRORES IS DULY EXPL AINED AND IDENTITY, GENUINENESS AND CREDITWORTHINESS OF THE C ASH CREDITOR IS NOT DOUBTFUL. 12. WE THEREFORE IN THE GIVEN FACTS AND CIRCUMSTANC ES OF THE CASE WE FIND NO INCONSISTENCY IN THE FINDING OF LD. CIT( A) DELETING THE ADDITION OF RS.1,70,00,000/-, AND THUS WE UPHOLD TH E SAME AND DISMISS THE APPEAL OF THE REVENUE. DIVYA JYOTI INDUSTRIES LTD ITA NO. 791/IND/2016 12 13. IN THE RESULT BOTH THE GROUNDS OF THE REVENUES APPEAL ARE DISMISSED. THE ORDER PRONOUNCED IN THE OPEN COURT ON 01.04.20 19. SD/- SD/- ( KUL BHARAT) (MANISH BORAD) JUDICIAL MEMBER ACCOUNTANT MEMBER / DATED 01 ST APRIL, 2019 /DEV COPY TO: THE APPELLANT/RESPONDENT/CIT CONCERNED/CIT (A) CONCERNED/ DR, ITAT, INDORE/GUARD FILE. BY ORDER, ASSTT.REGISTRAR, I.T.A.T., INDORE