ITO, WD-5(2), KOLKATA, Kolkata V. M/s Palriwal Industries Pvt. Ltd., Kolkata

ITA 917/KOL/2015

• Counselvise Citation: [2019] 117 COUNSELVISE.COM (IT) 2114 (ITAT-KOLKATA)
• Duration Of Justice: 3 year(s) 11 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-06-2019
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2010-2011
• Appeal Filed On: 22-06-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: C J SINGH
• Keywords: Unexplained cash credit; Accommodation entries; Capital expenditure
• Section: 133(6); 250; 131; 68

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL KOLKATA A BENCH, KOLKATA (BEFORE SRI J. SUDHAKAR REDDY, ACCOUNTANT MEMBER & SRI S.S. GODARA, JUDICIAL MEMBER) I.T.A. NO. 917/KOL/2015 ASSESSMENT YEAR: 2010-11 INCOME TAX OFFICER, WARD-5(2), KOLKATA.............................................................APPELLANT M/S. PALRIWAL INDUSTRIES PVT. LTD................................................RESPONDENT P-36, INDIA EXCHANGE PLACE 4 TH FLOOR ROOM NO. 58C KOLKATA 700 071 [PAN : AABCP 8870 H] C.O. NO. 37/KOL/2015 ASSESSMENT YEAR: 2010-11 M/S. PALRIWAL INDUSTRIES PVT. LTD....................................................APPELLANT P-36, INDIA EXCHANGE PLACE 4 TH FLOOR ROOM NO. 58C KOLKATA 700 071 [PAN : AABCP 8870 H] INCOME TAX OFFICER, WARD-5(2), KOLKATA...........................................................RESPONDENT APPEARANCES BY: SHRI SUNIL SURANA, ADVOCATE, APPEARED ON BEHALF OF THE ASSESSEE. SHRI C.J. SINGH, JCIT, SR. DR. , APPEARING ON BEHALF OF THE REVENUE. DATE OF CONCLUDING THE HEARING : MAY 13 TH, 2019 DATE OF PRONOUNCING THE ORDER : JUNE 19 TH , 2019 ORDER PER J. SUDHAKAR REDDY, AM :- THIS APPEAL BY THE REVENUE AND CROSS-OBJECTION BY THE ASSESSEE ARE DIRECTED AGAINST THE ORDER OF THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) - 2, KOLKATA, (HEREINAFTER THE LD.CIT(A)), PASSED U/S. 250 OF THE INCOME TAX ACT, 1961 (THE ACT), DT. 27/02/2015, FOR THE ASSESSMENT YEAR 2010-11. 2. THE ASSESSEE IS A COMPANY AND IS IN THE BUSINESS OF MANUFACTURING OF COAL TAR PITCH, CREOSOTE OIL, CRUDE NAPHTHALENE ETC. THE ISSUE THAT ARISES FOR OUR CONSIDERATION IN THE REVENUES APPEAL IS THE DELETION BY THE LD. CIT(A) OF AN ADDITION OF RS.1,28,56,560/- MADE BY THE ASSESSING OFFICER U/S 68 OF THE ACT AS UNEXPLAINED CASH 2 I.T.A. NO. 917/KOL/2015 ASSESSMENT YEAR: 2010-11 C.O. NO. 37/KOL/2015 ASSESSMENT YEAR: 2010-11 M/S. PALRIWAL INDUSTRIES PVT. LTD CREDIT. THE ASSESSING OFFICER AT PAGE 2 OF HIS ORDER HAS LISTED OUT TEN COMPANIES AND MADE AN ADDITION OF THE CLOSING BALANCES IN THEIR ACCOUNTS AS ON 31/03/2010 AS UNEXPLAINED CASH CREDIT. THIS AMOUNT OF RS.1,28,56,560/- CONSISTED OF RS.1,15,00,00/- OF CLOSING STOCK BALANCES IN THE ACCOUNTS OF FOUR COMPANIES I.E., M/S. CEICO SECURITIES PVT. LTD., M/S. FURPINE INTRADE PVT. LTD., M/S. RAJKOT FINANCE AND INVESTMENT PVT. LTD., AND M/S. VINEET RESOURCES PVT. LTD. THE BALANCE AMOUNT OF RS.13,56,560/-, WAS THE INTEREST PAYABLE ON THE LOANS TAKEN WHICH WAS ADDED U/S 68 OF THE ACT. THE ADDITION WAS MADE ON THE GROUND THAT THE CREDITWORTHINESS OF THESE COMPANIES COULD NOT BE EXAMINED ON OATH. REPORT OF THE INSPECTOR OF INCOME TAX WAS RELIED UPON FOR COMING TO A CONCLUSION THAT THESE LENDERS ARE NOT IN EXISTENCE AT THE ADDRESSES PROVIDED BY THE ASSESSEE. AT PAGE 3 OF THE ASSESSMENT ORDER, THE ASSESSING OFFICER CONCLUDED AS FOLLOWS:- ...IN VIEW OF THE ABOVE OBSERVATION, AN ENQUIRY WAS CARRIED OUT BY DEPUTING INSPECTOR FOR THE TEN LENDERS. THE INSPECTOR MADE DETAILED ENQUIRIES IN RESPECT OF SOME LENDERS TO ASCERTAIN THEIR NATURE OF BUSINESS AND ACTUAL EXISTENCE. THE SAID REPORT REVEALS THAT NONE OF THE LENDERS EXIST AT THEIR ADDRESS PROVIDED BY THE ASSESSEE. THE ACTUAL LENDERS ENCASED IN LENDING BUSINESS WILL HAVE THEIR OWN INFRASTRUCTURE, MARKET REPUTATION, SUFFICIENT FUND AVAILABLE WITH THEM AND KNOWN TO EVERYBODY IN THEIR LOCALITY. IN THIS INSTANT CASE, THE EXISTENCE OF LENDERS COULD NOT BE ASCERTAINED EVEN AFTER EXHAUSTIVE ENQUIRY. THEREFORE, IT IS HELD THAT THE ABOVE LENDERS ARE TYPICAL JAMA-KHARCHI COMPANIES ENGAGED IN THE ACTIVITIES OF PROVIDING ACCOMMODATION ENTRIES IN THE GUISE OF UNSECURED LOAN. HENCE, THE LOAN GIVEN BY THESE LENDERS TO THE ASSESSEE IS CONSIDERED AS ARRANGED, ACCORIIIRIODATION ENTRY AND BOGUS-IN- ABSENCE OF IDENTITY, OF IENDERS; AND THEIR CREDITWORTHINESS WHICH CAN BE ANALYZED FROM THEIR INCOME AS TABULATED ABOVE. IN VIEW OF THE ABOVE DISCUSSION, IT IS HELD THAT THE AGGREGATE SUM OF RS.1,28,56,560/- CREDITED TO ITS ACCOUNT IS UNEXPLAINED CASH CREDIT U/S 68 INTRODUCED BY THE ASSESSEE ITSELF IN CONNIVANCE TO THE ENTRY OPERATORS. THEREFORE, THE SUM OF RS.1,28,56,560/- IS DEEMED TO BE INCOME OF THE ASSESSEE U/S 68 AND IS ADDED TO THE TOTAL INCOME ACCORDINGLY. INITIATED PENALTY U/S 271 (1) (C) OF THE INCOME TAX ACT, 1961 ON THIS ISSUE. 2.1. AGGRIEVED THE ASSESSEE CARRIED THE MATTER IN APPEAL. THE LD. FIRST APPELLATE AUTHORITY GRANTED RELIEF FOR THE DETAILED REASONS GIVEN IN HIS ORDER. 3. AGGRIEVED THE REVENUE IS IN APPEAL BEFORE US. 4. WE HAVE HEARD RIVAL CONTENTIONS. ON CAREFUL CONSIDERATION OF THE FACTS AND CIRCUMSTANCES OF THE CASE, PERUSAL OF THE PAPERS ON RECORD, ORDERS OF THE AUTHORITIES BELOW AS WELL AS CASE LAW CITED, WE HOLD AS FOLLOWS:- 3 I.T.A. NO. 917/KOL/2015 ASSESSMENT YEAR: 2010-11 C.O. NO. 37/KOL/2015 ASSESSMENT YEAR: 2010-11 M/S. PALRIWAL INDUSTRIES PVT. LTD 5. THE ENTIRE THRUST OF THE ARGUMENTS OF THE LD. D/R IS THAT THE IDENTITY OF THESE TEN PARTIES IS NOT PROVED AND THAT THEY HAVE NOT PROVED THEIR SOURCES OF SOURCE AND THAT THEIR PROFIT AND LOSS ACCOUNT DOES NOT SHOW LARGE INCOME THOUGH, THE BALANCE SHEET HAS GOOD AMOUNT OF FUNDS. THE LD. COUNSEL FOR THE ASSESSEE SUBMITS THAT ONLY CLOSING BALANCE OF UNPAID INTEREST IN FOUR ACCOUNTS WERE ADDED U/S 68 OF THE ACT, WHICH IS NOT PERMISSIBLE. HE SUBMITTED THAT IN ALL THE TEN CASES THERE WERE REPAYMENT OF LOANS AND THIS WAS ACCEPTED BY THE ASSESSING OFFICER. HE ARGUED THAT THE ASSESSING OFFICER REFUSED TO CONDUCT ENQUIRY BY ISSUE OF NOTICE U/S 131 OR U/S 133(6) OF THE ACT, IN RESPECT OF THESE PARTIES AND MAY BE, THIS IS FOR THE REASON THAT HE WOULD HAVE GOT EVIDENCE WHICH SUPPORTS THE CASE OF THE ASSESSEE. INSTEAD OF GIVING NOTICES U/S 131 OR 133(6) OF THE ACT, THE ASSESSING OFFICER DEPUTED THE INSPECTOR AND SUBMITTED THAT, WHEREVER THE INSPECTOR HAS FOUND THE EXISTENCE OF THE PARTIES AND REPORTED AS SUCH TO THE ASSESSING OFFICER, AND THAT AN ADDITION WAS MADE WITHOUT CONSIDERING THIS REPORT. IT WAS HIS SUBMISSION THAT ALL THE REQUIRED DETAILS WERE FURNISHED BEFORE THE ASSESSING OFFICER AND THAT HE DID NOT CONSIDER THE SAME AND THAT THE LD. CIT(A) HAD CONSIDERED ALL THE MATERIAL ON RECORD AND CAME TO A CONCLUSION THAT THE IDENTITY AND CREDITWORTHINESS AND CREDITORS WAS PROVED AND THAT THE GENUINENESS OF THE TRANSACTIONS WAS NEVER DOUBTED BY THE ASSESSING OFFICER AND HENCE THE ADDITIONS WERE DELETED. HE ALSO SUBMITTED THAT ADDITION OF INTEREST U/S 68 OF THE ACT, IS BAD IN LAW AND IT IS NOT CREDIT RECEIPT. HE RELIED ON THE ORDER OF THE LD. CIT(A). 5.1. WE FIND THAT THE ASSESSING OFFICER HAS VERY SUPERFICIALLY MADE THIS ADDITION WITHOUT ENQUIRY. CLOSING BALANCE IN THE ACCOUNT CANNOT BE ADDED U/S 68 OF THE ACT. INTEREST ACCRUED ON LOANS CANNOT BE ADDED U/S 68 OF THE ACT. THE ASSESSING OFFICER DID NOT TAX THE AMOUNT ON RECEIPT BASIS BUT HAS TAXED THE CLOSING BALANCE AFTER ACCEPTING REPAYMENT OF LOANS. 5.2. BE IT AS IT MAY, NOTICE U/S 131 OF THE ACT, WAS ISSUED ONLY TO FOUR PARTIES. THE ASSESSEE HAD PROVIDED ALL DOCUMENTARY EVIDENCES IN SUPPORT OF ITS CONTENTION THAT IDENTITY AND CREDITWORTHINESS OF THE CREDITORS IS PROVED AND THAT THE LOAN TRANSACTIONS IS GENUINE IN NATURE. THE ASSESSING OFFICER HAS MADE NO EFFORT WHATSOEVER, TO EXAMINE THESE DOCUMENTS. IT IS UNEXPLAINABLE AS TO WHY THE ASSESSING OFFICER DID NOT ISSUE NOTICE U/S 131 OR 133(6) OF THE ACT TO ALL THE PARTIES. THE CONTENTION OF THE LD. D/R 4 I.T.A. NO. 917/KOL/2015 ASSESSMENT YEAR: 2010-11 C.O. NO. 37/KOL/2015 ASSESSMENT YEAR: 2010-11 M/S. PALRIWAL INDUSTRIES PVT. LTD THAT THE IDENTITY OF THESE PARTIES HAS NOT BEEN PROVED IS AGAINST THE FACTS ON RECORD. THE ASSESSEE HAS PROVED THE IDENTITY OF ALL THE CASH CREDITORS. THE LD. CIT(A) ALSO EXAMINED THE CREDITWORTHINESS OF THESE PARTIES BASED ON THE STATEMENTS ON RECORD. ON THESE FACTS, WE UPHOLD THE FACTUAL FINDING OF THE LD. CIT(A) WHICH, IN OUR OPINION, COULD NOT BE CONTROVERTED BY THE LD. D/R. 5.3. THE LD. D/R REQUESTED THAT THE MATTER BE REMANDED BACK TO THE FILE OF THE ASSESSING OFFICER FOR FRESH ADJUDICATION. WE FIND NO REASON TO DO SO. COURTS HAVE HELD THAT NO SECOND CHANCE CAN BE GIVEN TO THE ASSESSING OFFICER, SO AS TO GIVE HIM AN OPPORTUNITY TO PATCH UP THE WEAKER PARTS OF THE ASSESSMENT. IN THIS CASE, DESPITE THE ASSESSEE FILING VOLUMINOUS EVIDENCE, THE ASSESSING OFFICER, FAILED TO CONDUCT ENQUIRIES AND HAS SUMMARILY REJECTED THE EVIDENCE. 5.4. BOTH THE PARTIES HAVE RELIED ON A NUMBER OF CASE LAW IN SUPPORT OF THEIR CONTENTIONS BUT AS THE FACTS IN THE CASE ON HAND ARE CLEAR, IN OUR VIEW REQUIRES NO REFERENCE TO THE CASE LAW. SUFFICE TO SAY THAT THE FACTUAL FINDINGS OF THE LD. CIT(A) HAVE NOT BEEN CONTROVERTED BY THE LD. D/R. HENCE, WE UPHOLD THE SAME AND DISMISS THIS APPEAL OF THE REVENUE. 6. THE CROSS-OBJECTION IS ON THE ISSUE OF ADDITION OF RS.89,907/- ON THE GROUND THAT THE SAME IS CAPITAL EXPENDITURE. THE LD. COUNSEL FOR THE ASSESSEE DID NOT PRESS FOR THE SAME. HENCE, THE SAME IS DISMISSED AS NOT PRESSED. 7. IN THE RESULT, BOTH THE APPEAL OF THE REVENUE AND THE CROSS-OBJECTION FILED BY THE ASSESSEE ARE DISMISSED. KOLKATA, THE 19 TH DAY OF JUNE, 2019. SD/- SD/- [S.S. GODARA] [J. SUDHAKAR REDDY] JUDICIAL MEMBER ACCOUNTANT MEMBER DATED : 19.06.2019 {SC SPS} 5 I.T.A. NO. 917/KOL/2015 ASSESSMENT YEAR: 2010-11 C.O. NO. 37/KOL/2015 ASSESSMENT YEAR: 2010-11 M/S. PALRIWAL INDUSTRIES PVT. LTD COPY OF THE ORDER FORWARDED TO: 1. M/S. PALRIWAL INDUSTRIES PVT. LTD P-36, INDIA EXCHANGE PLACE 4 TH FLOOR ROOM NO. 58C KOLKATA 700 071 2. INCOME TAX OFFICER, WARD-5(2), KOLKATA 3. CIT(A)- 4. CIT- , 5. CIT(DR), KOLKATA BENCHES, KOLKATA. TRUE COPY BY ORDER ASSISTANT REGISTRAR ITAT, KOLKATA BENCHES