Chimanlal Suresh Kumar Textiles Private Limited, Hyderabad, Hyderabad V. ACIT, Circle-1(2), Hyderabad, Hyderabad

ITA 809/HYD/2017

• Counselvise Citation: [2019] 116 COUNSELVISE.COM (IT) 0501 (ITAT-HYDERABAD)
• Duration Of Justice: 2 year(s) 4 month(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-09-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB-B
• Next Hearing Date: 13-08-2019
• Assessment Year: 2008-2009
• Appeal Filed On: 08-05-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: NILANJAN DEY
• Assessee Lawyers: K A SAI PRASAD
• Keywords: Unexplained investment; Earning of tax free income; Proportionate interest
• Section: 143(3); 14A; 143(1); 69

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCH B - SMC, HYDERABAD BEFORE SMT. P. MADHAVI DEVI, JUDICIAL MEMBER ITA NO.809/HYD/2017 ASSESSMENT YEAR: 2008 - 09 M/S. CHIMANLAL SURESH KUMAR TEXTILES PRIVATE LIMITED, (CSK TEXTILES PRIVATE LIMITED), H.NO.21 - 1 - 182/1, R.J. MARKET, PATEL MARKET, RIKABGUNJ, HYDERABAD. PAN: AACCC 0289 J VS. ACIT, CIRCLE - 1(2), HYDERABAD. (APPELLANT) (RESPONDENT) ASSESSEE BY: SRI K.A. SAI PRASAD REVENUE BY: SRI NILANJAN DEY, DR DATE OF HEARING: 13/08/2019 DATE OF PRONOUNCEMENT: 13 /0 9 /2019 ORDER PER SMT. P. MADHAVI DEVI, J.M.: THIS IS ASSESSEES APPEAL FILED AGAINST THE ORDER OF THE LD. CIT(A) - 1, HYDERABAD DATED 27/01/2017 FOR THE ASSESSMENT YEAR 2008 - 09. 2. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE - COMPANY , ENGAGED IN THE BUSINESS OF WHOLESALE TRADING IN TEXTILES , FILED ITS RETURN OF INCOME FOR THE A.Y. 2008 - 09 DECLARING A LOSS OF RS. 38,95,260/ - . THE RETURN WAS INITIALLY PROCESSED U/S. 143(1) OF THE ACT ON 10/03/2010. THEREAFTER , THE CASE WAS SELECTED FOR SCRUTINY AND DURING THE 2 ASSESSMENT PROCEEDINGS U/S. 143(3) OF THE ACT, THE A.O. OBSERVED THAT DURING THE COURSE OF SEARCH IN THE CASE OF M/S. JANAPRIYA ENGINEERS SYNDICATE LIMITED , CERTAIN LOOSE SHEETS WERE FOUND AND SEIZED AND ONE SUCH DOCUMENT IS A RECEIPT DATED 21/04/2007 ACC ORDING TO WHICH THE ASSESSEE HAS PURCHASED ACRES 4.20 GUNTAS IN SURVEY NOS. 937 AND 1938 SITUATED AT NANDIGAM VILLAGE, SHADNAGAR MANDAL, MAHABOOBNAGAR DISTRICT FOR WHICH THE CONSIDERATION WAS RS. 1,40,00,000/ - AND THE ASSESSEE HAS ALREADY PAID RS. 75,00,00 0/ - AND OUT OF THE BALANCE AMOUNT OF RS. 65,00,000/ - , RS. 20 LAKHS WAS PAID BY THE ASSESSEE , M/S. CHIMANLAL SURESH KUMAR TEXTILES PVT LTD., REPRESENTED BY ITS M.D., SRI SURESH KUMAR AGARWAL S/O. SRI CHIMANLAL AGARWAL VIDE CHEQUE NO. 626688, DATED 21/04/200 7 DRAWN AT HDFC BANK, CHARMINAR BRANCH, HYDERABAD AND THE BALANCE OF RS. 45 LAKHS WAS STILL TO BE PAID TOWARDS SALE CONSIDERATION. THE A.O. OBSERVED THAT THIS RECEIPT WAS SIGNED BY SRI K. RAVINDER REDDY , IN THE CAPACITY OF MANAGING DIRECTOR OF SREE RAMACH ANDRA CEMENTS PVT LTD. WHEN CONFRONTED, THE ASSESSEE HOWEVER STATED THAT HE HAD ACTUALLY PAID RS. 60 LAKHS ONLY AND NOT RS. 1,40,00,000/ - . HOWEVER, THE ASSESSING OFFICER OBSERVED THAT THERE IS NO EVIDENCE WITH THE ASSESSEE T H AT THE ACTUAL SALE CONSIDERAT ION IS RS. 60 LAKHS ONLY AND NOT RS. 1,40,00,000/ - AND THAT T HE ASSESSEE COULD NOT JUSTIFY DURING THE COURSE OF ASSESSMENT PROCEEDINGS AS TO WHY A PERSON RECEIVING CASH WILL SHOW HIGHER AMOUNT WHEN HE IS ACTUALLY RECEIVING RS. 60 LAKHS . THE A.O. THEREFORE , REJECTED 3 THE EXPLANATION OFFERED BY THE ASSESSEE AND THE BALANCE OF RS. 80 LAKHS WAS CONSIDERED AS ASSESSEES UNEXPLAINED INVESTMENT AND BROUGHT TO TAX U/S. 69 OF THE ACT. 3. FURTHER, THE ASSESSING OFFICER ALSO OBSERVED THAT IN THE BALANCE SHEET UNDER L OAN FUNDS (SCHEDULE C & D), THE ASSESSEE HAS SHOWN SECURED / UNSECURED LOANS AMOUNTING TO RS. 32,34,35,805/ - AND ON PERUSAL OF THE BALANCE SHEET, HE FOUND THAT THE ASSESSEE HAS CLAIMED THAT HE HAS INVESTED AN AMOUNT OF RS. 1,21,68,825/ - IN LANDS. HE ALSO OBSERVED THAT THE ASSESSEE HAS CLAIMED INTEREST ON BORROWED FUNDS AT RS. 98,08,920/ - . OBSERVING THAT THE INVESTMENT IN LAND IS NOT RELATED TO THE ASSESSEES BUSINESS AND DOES NOT DERIVE ANY INCOME, THE A.O. DISALLOWED THE PROPORTIONATE INTEREST U/S. 14A OF THE ACT I.E., RS. 3,69,047/ - AND BROUGHT IT TO TAX. AGGRIEVED, ASSESSEE PREFERRED AN APPEAL BEFORE THE LD. CIT(A), WHO CONFIRMED THE ORDER OF THE A.O. AND THE ASSESSEE IS IN SECOND APPEAL BEFORE US BY RAISING THE FOLLOWING GROUNDS OF APPEAL: 1. TH E ORDER OF THE LD. CIT(A) IS NOT CORRECT EITHER IN LAW OR ON FACTS AND IN BOTH. 2. THE LD. CIT(A) IS NOT JUSTIFIED IN CONFIRMING THE ADDITION OF RS. 80,00,000/ - MADE BY ASSESSING OFFICER U/S. 69 OF THE ACT. 3. THE LD. FIRST APPELLATE AUTHORITY FAILED TO APPRECIATE THE FACT THAT THE ALLEGED PAYMENT OF RS. 80,00,000/ - IS NOT SUPPORTED BY ANY CORROBORATED EVIDENCE IN THE FORM OF RECEIPT SIGNED BY THE APPELLANT. 4. THE LD. CIT(A) IS NOT JUSTIFIED IN CONFIRMING THE ADDITION OF RS. 3,69,047/ - MADE U/S. 14A BY T HE ASSESSING OFFICER. 5. THE LD. FIRST APPELLATE AUTHORITY FAILED TO APPRECIATE THE CONTENTIONS OF THE APPELLANT THAT THE FACTS AND CIRCUMSTANCES OF THE CASE THE 4 PROVISIONS OF SECTION 14A ARE NOT APPLICABLE AND THE DISALLOWANCE OF RS. 3,69,047/ - IS UNWARRANTED. 4. THE LEARNED CO UNSEL FOR THE ASSESSEE SUBMITTED THAT THE ENTIRE ADDITION OF RS. 80 LAKHS IS ONLY ON THE BASIS OF THE RECEIPT ALLEGED TO HAVE BEEN SIGNED BY SRI K. RAVINDER REDDY, MANAGING DIRECTOR OF SREE RAMACHANDRA CEMENTS PVT LTD WHICH WAS FOUND AND SEIZED DURING THE COURSE OF SEARCH IN THE CASE OF M/S. JANAPRIYA ENGINEERS SYNDICATE LTD. HE SUBMITTED THAT THIS RECEIPT IS NOT ISSUED BY THE ASSESSEE NOR DOES IT CONTAIN HI S SIGNATURE AND THEREFORE, AS FAR AS THE ASSESSEE IS CONCERNED , IT DOES NOT RELATE TO THE ASSESSEE E XCEPT FOR THE MENTION OF HIS NAME IN THE ALLEGED RECEIPT. HE FURTHER SUBMITTED THAT EVEN DURING THE COURSE OF ASSESSMENT PROCEEDINGS, SRI K. RAVINDER REDDY HAS DENIED THE RECEIPT OF RS. 1,40,00,000/ - AS MENTIONED IN THE ALLEGED RECEIPT. THEREFORE, HE SUB MITTED THAT THE ENTIRE ADDITION IS UNWARRANTED AND CANNOT BE SUSTAINED. 5. AS REGARDS THE DISALLOWANCE U/S. 14A IS CONCERNED, LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE LAND WAS HELD AS STOCK - IN - TRADE IN ASSESSEES BOOKS OF ACCOUNT AND THEREFORE , INTEREST PORTION CANNOT BE DISALLOWED U/S. 14A OF THE ACT. 6. THE LD. DR, ON THE OTHER HAND, SUBMITTED THAT THE DOCUMENT FOUND DURING THE COURSE OF SEARCH IS NOT A RECEIPT BUT IT IS ONLY AN ACKNOWLEDGEMENT OF A TRANSACTION AND SINCE IT IS FOUND DURING THE 5 COURSE OF SEARCH, IT HAS TO BE PRESUMED AS TRUE AND CORRECT BY VIRTUE OF PROVISIONS OF SECTION 132(4) OF THE ACT. HE SUBMITTED THAT NEITHER THE ASSESSEE NOT MR. K. RAVINDER REDDY , WHO HAS ISSUED THE RECEIPT , HAVE DENIED THE GENUINENESS OF THE DOCUMENT EXCEPT FOR THE QUANTUM MENTIONED IN THE DOCUMENT. HE SUBMITTED THE FACT THAT THE TRANSACTION WENT THROUGH SHOWS THAT THE DOCUMENT IS TRUE AND CORRECT AND THE CONTENTS THEREIN ARE TO BE RELIED UPON. 7. AS REGARDS THE DISALLOWANCE U/S. 14A OF THE AC, THE LD. DR RELIED UPON THE ORDERS OF THE AUTHORITIES BELOW. 8. HAVING REGARD TO THE RIVAL CONTENTIONS AND THE MATERIAL ON RECORD, I FIND THAT THE SEIZED DOCUMENT IS NOT FOUND FROM THE POSSESSION OF THE ASSESSEE BUT IT WAS FOUND FROM THE POSSESSION OF THE P ERSON WHO IS ALLEGED TO HAVE SIGNED RECEIPT. ON A QUERY FROM THE BENCH, THE LD. DR INFORMED THAT NO ADDITION OF RS. 80 LAKHS WAS MADE IN THE HANDS OF EITHER SRI K. RAVINDER REDDY OR SREE RAMACHANDRA CEMENTS PVT LTD . A TRANSACTION HAS TO BE EXAMINED FROM B OTH THE ANGLES I.E., IN THE HANDS OF THE PURCHASER AS WELL AS THE SELLER. SINCE THE DOCUMENT WAS FO U ND IN THE HANDS OF SRI K. RAVINDER REDDY , AND THE DEPARTMENT HAS NOT DEEMED IT FIT TO CONSIDER AND MAKE AN ADDITION IN THE HANDS OF SRI K. RAVINDER REDDY OR THE COMPANY I.E, SREE RA MACHANDRA CEMENTS LTD., ON RECEIPT BASIS, I AM OF THE OPINION THAT NO ADDITION CAN BE MADE IN THE HANDS OF THE ASSESSEE WITHOUT ANY SUBSTANTIAL EVIDENCE THAT THE 6 ASSESSEE HAD MADE THE PAYMENT AND THAT HE HAD THE RE SOURCES TO MAKE SUCH PAYMENT . P ARTICULARLY WHEN THE DOCUMENT DOES NOT CONTAIN OR BEAR THE SIGNATURE OF THE ASSESSEE AND THE VENDOR ALSO HAS DENIED HAVING RECEIVED SUCH PAYMENT AND THE SAME HAS BEEN ACCEPTED BY THE DEPARTMENT. THEREFORE, GROUNDS NO. 2 AND 3 RAISED BY THE ASSESSEE ARE ALLOWED. 9. AS REGARDS GROUNDS NO. 4 AND 5 AGAINST THE DISALLOWANCE U/S. 14A OF THE ACT, IT IS THE CASE OF THE ASSESSEE THAT THE LAND WAS HELD AS STOCK - IN - TRADE AND THEREFORE, 14A IS NOT APPLICABLE. WITHOUT PREJUDICE TO THIS ARGUMENT THE L EARNED COUNSEL FOR THE ASSESSEE ALSO SUBMITTED THAT THERE IS NO EXEMPT INCOME EARNED DURING THE YEAR. THEREFORE, WITHOUT GOING INTO THE FIRST ARGUMENT AND SINCE I FIND THAT THERE IS NO EXEMPT INCOME EARNED BY THE ASSESSEE DURING THE RELEVANT ASSESSMENT YE AR I HOLD THAT NO DISALLOWANCE U/S. 14A CAN BE MADE. THE HONBLE DELHI HIGH COURT IN THE CASE OF CHEMINVEST LIMITED VS. CIT (ITA NO.749/2014 DATED 02/09/2015) HAS HELD THAT SECTION 14A WILL NOT APPLY IF NO EXEMPT INCOME IS RECEIVED OR RECEIVABLE DURING TH E RELEVANT PREVIOUS YEAR. RESPECTFULLY FOLLOWING THE SAME, I DIRECT THE A.O. TO DELETE THE DISALLOWANCE MADE U/S. 14A OF THE ACT AND GROUNDS NO. 4 AND 5 RAISED BY THE ASSESSEE ARE ALLOWED. 10. IN THE RESULT, ASSESSEES APPEAL IS ALLOWED. 7 ORDER PRONOUNCED IN THE OPEN COURT ON 13 TH SEPTEMBER , 2019. SD/ - (P. MADHAVI DEVI) JUDICIAL MEMBER HYDERABAD, DATED: 13 TH SEPTEMBER , 2019 OKK COPY TO: - 1) C/O. CH. PARTHASARATHY & CO., 1 - 1 - 298/2/B/3, 1 ST FLOOR, SOWBHAGYA AVENUE, ST.NO.1, ASHOK NAGAR, HYDERABAD - 500020. 2) ACIT, CIRCLE - 1(2), I.T. TOWERS, MASAB TANK, A.C. GUARDS, HYDERABAD. 3) THE CIT(A) - 1, HYDERABAD 4) THE PR. CIT - 1, HYDERABAD 5) THE DR, ITAT, HY DERABAD 6) GUARD FILE