M/s Shakti Industries, Ahmedgarh. V. ITO, Malerkotla

ITA 873/CHANDI/2016

• Counselvise Citation: [2017] 130 COUNSELVISE.COM (IT) 8333 (ITAT-CHANDIGARH)
• Duration Of Justice: 6 month(s) 1 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-01-2017
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: SMC
• Assessment Year: 2010-2011
• Appeal Filed On: 29-07-2016
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Assessee Lawyers: NAVNEET SEHGAL
• Keywords: Depreciation; Opportunity of being heard; Set aside
• Section: 32; 147; 131; 68; 246; 69; 145; 27; 148; 54; 37; 6; 56; 263; 63; 132; 12; 28; 144; 10; 90; 154; 2; 11; 15; 271(1)(b); 139; 143(3); 92

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL SMC BENCH, CHANDIGARH BEFORE SHRI BHAVNESH SAINI, JUDICIAL MEMBER ITA NO. 873/CHD/2016 ASSESSMENT YEAR: 2010-11 M/S SHAKTI INDUSTRIES, VS THE ITO, JAGERA ROAD, WARD IV(4), AHMEDGARH. MALERKOTLA. PAN: ABAFS2012H (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI NAVNEET SEHG AL RESPONDENT BY : SHRI S.K.MITTAL, DR DATE OF HEARING : 18.01.2017 DATE OF PRONOUNCEMENT : 30 .01.2017 O R D E R THIS APPEAL BY ASSESSEE HAS BEEN DIRECTED AGAINST T HE ORDER OF LD. CIT(APPEALS)-2 LUDHIANA DATED 30.05.20 16 FOR ASSESSMENT YEAR 2010-11. 2. I HAVE HEARD LD. REPRESENTATIVES OF BOTH THE PAR TIES AND PERUSED THE MATERIAL AVAILABLE ON RECORD. 3. THE ASSESSEE ON GROUND NOS. 1 TO 3 CHALLENGED TH E ADDITION OF RS. 18,99,015/- ON ACCOUNT OF UNSECURED LOANS. 4. THE ASSESSING OFFICER NOTED THAT ASSESSEE HAS SH OWN INCOME FROM MANUFACTURING AND SALES OF MUSTARD OIL, OIL CAKE AND CATTLE FEED. THE ASSESSEE HAS RECEIVED 14 NEW 2 UNSECURED LOANS IN THE ASSESSMENT YEAR UNDER APPEAL IN A SUM OF RS. 18,99,015/- , DETAILS OF THE SAME ARE NO TED IN PARA 3 OF THE ASSESSMENT ORDER. THE SOURCE OF THES E LOANS HAS BEEN EXPLAINED TO BE COMMODITY PROFITS IN THE H ANDS OF THE CREDITORS. IN THIS REGARD, THE ASSESSEE FILED THEIR COPIES OF ACCOUNTS, CONFIRMED COPY OF ACCOUNT, COPI ES OF BANK STATEMENTS OF THE CREDITORS FROM WHERE CHEQUES OF LOANS WERE ISSUED TO THE ASSESSEE COMPANY, COPIES O F INCOME TAX RETURNS OF THE CREDITORS ALONGWITH COPIE S OF STATEMENTS OF TAXABLE INCOME, THE STATEMENTS OF ACC OUNTS IN THE BOOKS OF BROKERS FROM WHOM COMMODITY PROFITS ARE SHOWN TO HAVE BEEN RECEIVED AND COPIES OF THE BILLS OF PURCHASES AND SALES OF COMMODITY RESULTING INTO SUC H PROFITS. THE ASSESSING OFFICER, IN THE BACKGROUND OF THESE FACTS NOTED THAT THERE WERE ONLY NOMINAL BALANCES A VAILABLE IN THE BANK ACCOUNTS OF THESE CREDITORS BUT PRIOR T O ISSUE OF THESE CHEQUES, CREDITORS DEPOSITED CHEQUES OF CO MMODITY PROFITS AND IT IS OUT OF THE BANK BALANCES SO ARISE N, THAT THESE CREDITORS ISSUED CHEQUES OF LOANS TO THE ASSE SSEE. THE ASSESSING OFFICER, THEREFORE, NOTED THAT IT IS CLEAR THAT UNSECURED LOANS WERE GIVEN BY THE CREDITORS OUT OF COMMODITY PROFIT ONLY. THE ASSESSEE WAS DIRECTED T O PRODUCE THESE CREDITORS FOR EXAMINATION OF GENUINEN ESS OF THE COMMODITY PROFITS. THE ASSESSEE, HOWEVER, DID NOT PRODUCE BROKER AND THE CREDITORS BEFORE ASSESSING O FFICER FOR EXAMINATION. THE ASSESSING OFFICER, AFTER DISC USSING THE ISSUE, MADE ABOVE ADDITION ON ACCOUNT OF UNEXPL AINED CREDITS AND ALSO DISALLOWED INTEREST OF RS. 1 LAC B EING 3 INTEREST ON ABOVE UNSECURED CASH CREDITS. THE LD. CIT(APPEALS), CONFIRMED THE ADDITION AFTER CONSIDER ING SUBMISSIONS OF THE ASSESSEE. 5. AFTER CONSIDERING RIVAL SUBMISSIONS, I AM OF THE VIEW THE MATTER REQUIRES RE-CONSIDERATION AT THE LEVEL O F THE ASSESSING OFFICER. THE LD. COUNSEL FOR THE ASSESSE E REITERATED THE SUBMISSIONS MADE BEFORE AUTHORITIES BELOW AND SUBMITTED THAT MOST OF THE CREDITORS/LENDERS AR E EXISTING CREDITORS OF THE ASSESSEE AS ON 01.04.2009 AND ON THE SAME PATTERN, CASH CREDITS HAVE BEEN ACCEPTED I N EARLIER YEAR. HE HAS SUBMITTED THAT ASSESSEE RECEI VED FRESH CREDITS IN THE YEAR UNDER CONSIDERATION AND FILED A LL THE DOCUMENTARY EVIDENCES BEFORE ASSESSING OFFICER. HE HAS ADMITTED THAT THE CREDITORS ARE RELATED TO THE ASSE SSEE AND THAT ASSESSING OFFICER ISSUED A NOTICE TO THE ASSES SEE ON 18.03.2013 FOR PRODUCTION OF THE CREDITORS FOR EXAM INATION, HOWEVER, DUE TO PAUCITY OF TIME, SAME COULD NOT BE PRODUCED AND ASSESSING OFFICER PASSED THE ORDER ON 28.03.2013. THE LD. COUNSEL FOR THE ASSESSEE, THERE FORE, UNDERTOOK BEFORE ME THAT ASSESSEE WOULD PRODUCE MOS T OF THE CREDITORS BEFORE ASSESSING OFFICER FOR EXAMINAT ION. 6. CONSIDERING THE FACTS OF THE CASE IN THE LIGHT O F THE ABOVE UNDERTAKING GIVEN BY LD. COUNSEL FOR THE ASSE SSEE, I AM OF THE VIEW MATER REQUIRES RE-CONSIDERATION. TH E ASSESSEE PRODUCED SUFFICIENT DOCUMENTARY EVIDENCE B EFORE ASSESSING OFFICER TO EXPLAIN GENUINENESS OF THE CRE DIT IN THE MATTER. IT IS ALSO ADMITTED FACT THAT MOST OF THE 4 CREDITOR ARE EXISTING FROM LAST YEAR AND ACCORDING TO THE SUBMISSIONS OF THE ASSESSEE, NO ADVERSE INFERENCE H AVE BEEN DRAWN. THE LD. COUNSEL FOR THE ASSESSEE HAS GI VEN UNDERTAKING BEFORE ME THAT ASSESSEE WOULD PRODUCE M OST OF THE CREDITORS BEFORE ASSESSING OFFICER FOR EXAMINAT ION. SINCE ASSESSEE WAS DIRECTED TO PRODUCE THE CREDITOR S VIDE QUESTIONNAIRE DATED 18.03.2013 THEREFORE, TIME WAS NOT SUFFICIENT FOR THE ASSESSEE TO PRODUCE LARGE NUMBER OF CREDITORS BEFORE HIM. IN THIS VIEW OF THE MATTER, I SET ASIDE THE ORDERS OF AUTHORITIES BELOW AND RESTORE THIS IS SUE TO THE FILE OF ASSESSING OFFICER WITH DIRECTION TO RE- DECIDE THIS ISSUE IN ACCORDANCE WITH LAW BY GIVING SUFFICIENT OPPORTUNITY OF BEING HEARD TO THE ASSESSEE AND TO P RODUCE MOST OF THE CREDITORS BEFORE ASSESSING OFFICER FOR EXAMINATION AND FINALIZATION OF THE MATTER. THE AS SESSEE MAY ADDUCE ANY OTHER EVIDENCE BEFORE ASSESSING OFFI CER FOR EXPLAINING THE GENUINENESS OF THE CASH CREDIT IN TH E MATTER. 7. IN THE RESULT, THESE GROUNDS OF APPEAL OF THE AS SESSEE ARE ALLOWED FOR STATISTICAL PURPOSES. 8. ON GROUND NOS. 4 AND 5, ASSESSEE CHALLENGED DISALLOWANCE OF INTEREST OF RS. 1 LAC PAID ON THE A BOVE UNSECURED LOANS. THE AUTHORITIES BELOW DISALLOWED THE INTEREST ON UNSECURED LOANS BECAUSE ASSESSEE COULD NOT EXPLAIN GENUINENESS OF THE UNSECURED LOANS ON WHICH I HAVE RESTORED THE MATTER TO THE FILE OF ASSESSING O FFICER FOR RE-CONSIDERATION. ACCORDINGLY, ORDERS OF AUTHORITI ES BELOW 5 ON THESE GROUNDS ARE ALSO SET ASIDE AND RESTORED TO THE FILE OF ASSESSING OFFICER WITH DIRECTION TO RE-DECIDE TH ESE GROUNDS AFTER TAKING DECISION ON THE UNSECURED LOAN S BY GIVING REASONABLE SUFFICIENT OPPORTUNITY OF BEING H EARD TO THE ASSESSEE. THESE GROUNDS ARE ALLOWED FOR STATIS TICAL PURPOSES. 9. ON GROUND NO. 6, ASSESSEE CHALLENGED THE EXPENSE S OF RS. 1,46,338/-. THE ASSESSING OFFICER NOTED THAT A SSESSEE HAS CLAIMED FOLLOWING EXPENSES OUT OF WHICH ELEMENT OF EXPENSES OF PERSONAL NATURE IS NOT RULED OUT : I) CAR RUNNING EXPENSES RS. 2,21,934/- II) TRAVELING EXPENSES RS. 99,215/- III) TELEPHONE EXPENSES RS. 2,06,651/- IV) CAR DEPRECIATION RS. 2,03,889/- ------------------------ TOTAL : RS. 7,31,689/- ------------------------ 10. THE ASSESSING OFFICER AFTER CALLING EXPLANATION OF THE ASSESSEE, DISALLOWED 1/5 TH OF THESE EXPENSES AND MADE ADDITION OF RS. 1,46,338/-. THE LD. CIT(APPEALS) C ONFIRMED THE ADDITION. 11. THE LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT IN PRECEDING ASSESSMENT YEAR 2009-10, THE ASSESSING OF FICER PASSED THE ASSESSMENT ORDER UNDER SECTION 143(3) OF THE ACT DATED 23.12.2011, COPY OF WHICH IS FILED AT PAG E 122 OF 6 THE PAPER BOOK IN WHICH THE ASSESSING OFFICER ON ID ENTICAL ISSUE DISALLOWED 1/8 TH OF THE EXPENDITURE. 12. AFTER CONSIDERING RIVAL SUBMISSIONS, I AM OF TH E VIEW ADDITION IS EXCESSIVE IN NATURE. THE ASSESSING OFF ICER IN THE ASSESSMENT YEAR 2009-10, DISALLOWED 1/8 TH OF THESE EXPENSES ON ACCOUNT OF PERSONAL IN NATURE. ORDERS OF AUTHORITIES BELOW ARE, ACCORDINGLY, MODIFIED AND AS SESSING OFFICER IS DIRECTED TO DISALLOW 1/8 TH OF THESE EXPENSES AND RE-COMPUTE THE DISALLOWANCE. THIS GROUND IS PARTLY ALLOWED. 13. IN THE RESULT, APPEAL OF THE ASSESSEE IS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT. SD/- (BHAVNESH SAINI) JUDICIAL MEMBER DATED : 30 TH JANUARY,2017. POONAM COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT(A) 4. THE CIT,DR ASSISTANT REGISTRAR, ITAT CHANDIGARH