Assistant Commissioner of Income-tax, V. Chaudhary Cars Pvt. Ltd., Jalgaon

ITA 956/PUN/2016

• Counselvise Citation: [2018] 119 COUNSELVISE.COM (IT) 5106 (ITAT-PUNE)
• Duration Of Justice: 2 year(s) 5 month(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-10-2018
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 03-04-2018
• Assessment Year: 2011-2012
• Appeal Filed On: 06-05-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: DR VIVEK AGARWAL
• Keywords: Search and seizure; Deemed dividend
• Section: 143(3); 153A; 194C; 131; 132; 139

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH, PUNE . , , , BEFORE SHRI D. KARUNAKARA RAO, AM AND SHRI VIKAS AWASTHY, JM . / ITA NO . 956 /P U N/201 6 / ASSESSMENT YEAR : 20 11 - 12 ASSISTANT COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE 2, NASHIK ....... / APPELLANT / V/S. CHAUDHARY CARS PVT. LTD., 11, SWED BINDU, SHANTI NAGAR, YAWAL ROAD, BHUSAWAL, JALGAON 425201 PAN : AADCC7960R / RESPONDENT ASSESSEE BY : S HRI NIKHIL PATHAK REVENUE BY : DR. VIVEK A G ARWAL / DATE OF HEARING : 25 - 07 - 201 8 / DATE OF PRONOUNCEMENT : 18 - 10 - 201 8 / ORDER PER VIKAS AWASTHY, JM : TH IS APPEAL BY THE REVENUE IS DIRECTED AGAINST THE ORDER OF COMMI SSIONER OF INCOME TAX (APPEALS) - 12, PUNE DATED 25 - 02 - 2016 FOR THE ASSESSMENT YEAR 20 11 - 12. 2 ITA NO . 956/PUN/2016, A.Y. 2011 - 12 2. THE BRIEF FACTS OF THE CASE AS EMANATING FROM RECORD S ARE : THE ASSESSEE IS A DEALER OF TOYOTA CARS. A SEARCH AND SEIZURE ACTION U/S. 132 O F THE INCOME TAX ACT, 1961 (HEREINAFTER REFERRED TO AS THE ACT ) WAS CARRIED OUT IN THE CASE OF CHAUDHARI GROUP, BHUSAWAL ON 04 - 10 - 2011. THE ASSESSEE COMPANY BELONGS TO CHAUDHARI GROUP. THE A SSESSEE HAD FILED RETURN OF INCOME FOR ASSESSMENT YEAR 2011 - 12 U/S. 139 OF THE ACT ON 30 - 09 - 2011 CLAIMING LOSS OF RS.1,14,19,255/ - . IN RESPONSE TO THE NOTICE U/S. 153A OF THE ACT , THE ASSESSEE VIDE COMMUNICATION DATED 09 - 10 - 2013 INTIMATED THE ASSESSING OF FICER TO TREAT THE RETURN FILED U/S. 139 AS RETURN FILED IN RESPONSE TO NOTICE ISSUED U/S. 153A OF THE ACT. IN ASSESSMENT PROCEEDINGS THE ASSESSING OFFICER MADE ADDITIONS ON ACCOUNT OF UNPROVED SUNDRY CREDITORS RS.83,62,502/ - AND DEEMED DIVIDEND RS.3,68,2 7,750/ - . AGGRIEVED BY THE ASSESSMENT ORDER DATED 19 - 03 - 2014 PASSED U/S. 143(3) R.W.S. 153A OF THE ACT, THE ASSESSEE FILED APPEAL BEFORE THE COMMISSIONER OF INCOME TAX (APPEALS). THE COMMISSIONER OF INCOME TAX (APPEALS) VIDE IMPUGNED ORDER DELETED BOTH THE ADDITIONS MADE BY ASSESSING OFFICER. AGAINST THE FINDINGS OF COMMISSIONER OF INCOME TAX (APPEALS) THE REVENUE IS IN APPEAL BEFORE THE TRIBUNAL BY RAISING FOLLOWING GROUNDS : A. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LD. CIT (A) IS JUSTIFIED IN DELETING THE ADDITION OF RS.83,62,502/ - MADE BY THE AO ON ACCOUNT OF UPROVEN CREDITORS. B. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, WHETHER THE LD. CIT (A) IS JUSTIFIED IN DELETING THE ADDITION AMOUNTING TO RS.3,68,27,750/ - MADE BY THE AO ON ACCOUN T OF SUPPRESSION OF DEEMED DIVIDEND U/S. 2(22)(E) OF THE ACT. C. ANY OTHER GROUND THAT MAY BE URGED AT THE TIME OF HEARING. 3 . DR. VIVEK AGARWAL REPRESENTING THE DEPARTMENT SUBMITTED THAT DURING THE COURSE OF ASSESSMENT PROCEEDINGS THE ASSESSING OFFICER ASKED THE ASSESSEE TO FURNISH CONFIRMATIONS FROM THE CREDITORS. THE ASSESSEE 3 ITA NO . 956/PUN/2016, A.Y. 2011 - 12 FAILED TO FURNISH THE CONFIRMATIONS, HENCE, THE ADD ITION OF RS. 83,62,502/ - WAS MADE BY THE ASSESSING OFFICER. DURING FIRST APPELLATE PROCEEDINGS THE ASSESSEE FILED CONFIRMATIONS BUT THE SAME WERE NOT SUBJECTED TO VERIFICATION BY THE ASSESSING OFFICER. MERE FURNISHING OF CONFIRMATIONS IS NOT SUFFICIENT UN LESS THEIR VERACITY IS VERIFIED. TO SUPPORT HIS SUBMISSIONS THE LD. DR PLACED RELIANCE ON THE FOLLOWING DECISIONS : I . COMMISSIONER OF INCOME TAX VS. JANSAMPARK ADVERTISING & MARKETING (P.) LTD., 375 ITR 373 (DELHI); II . SURESH KUMAR T. JAIN VS. INCOME TAX OFFIC ER, 136 TTJ 247 (BANGALORE). 3.1 IN RESPECT OF DEEMED DIVIDEND THE LD. DR SUBMITTED THAT IN THE BALANCE SHEET FOR THE YEAR ENDING 31 - 03 - 2011 THE ASSESSEE HAD SHOWN RS.3,68,27,750/ - AS LOAN TAKEN FROM ITS SISTER CONCERN M/S. B.N.C. POWER PROJECTS LTD. SHR I BHAGWAT NARAYAN CHAUDHARY IS THE COMMON AND SUBSTANTIAL SHAREHOLDER OF BOTH THE COMPANIES HAVING INTEREST TO THE EXTENT OF 98% IN M/S. B.N.C. POWER PROJECTS LTD. AND 28% IN ASSESSEE COMPANY. THE COMMISSIONER OF INCOME TAX (APPEALS) WHILE DELETING THE AD DITION HAS FAILED TO CONSIDER THIS VITAL FACT. THE LD. DR SUBMITTED THAT THE ORDER OF COMMISSIONER OF INCOME TAX (APPEALS) MAY BE SET ASIDE AND THE FINDINGS OF ASSESSING OFFICER SHOULD BE RESTORED. 4. ON THE OTHER HAND SHRI NIKHIL PATHAK APPEARING ON B EHALF OF THE ASSESSEE VEHEMENTLY DEFENDED THE FINDINGS OF COMMISSIONER OF INCOME TAX (APPEALS) AND PRAYED FOR DISMISSING THE APPEAL OF REVENUE. THE LD. AR REITERATED HIS SUBMISSIONS MADE BEFORE THE FIRST APPELLATE AUTHORITY. THE LD. AR POINTED THAT THE C ONFIRMATIONS FILED BY THE ASSESSEE BEFORE THE COMMISSIONER OF INCOME TAX (APPEALS) WERE REFERRED TO THE ASSESSING OFFICER FOR HIS COMMENTS AND FURTHER VERIFICATION BY THE COMMISSIONER OF 4 ITA NO . 956/PUN/2016, A.Y. 2011 - 12 INCOME TAX (APPEALS). THE ASSESSING OFFICER IN REMAND PROCEEDINGS WITHOUT CONDUCTING ANY ENQUIRY DISBELIEVE THE CONFIRMATIONS FILED BY THE ASSESSEE FROM THE CREDITORS. THE COMMISSIONER OF INCOME TAX (APPEALS) VIDE VERY REASONED ORDER ACCEPTED THE CONFIRMATIONS FILED BY THE ASSESSEE AND DELETED THE ADDITION. 4.1 IN RE SPECT OF GROUND NO. 2 RELATING TO ADDITION ON ACCOUNT OF DEEMED DIVIDEND U/S. 2(22)(E) OF THE ACT , THE LD. AR SUBMITTED THAT THE ASSESSEE HAD ENGAGED M/S. B.N.C. POWER PROJECTS LTD. FOR CONSTRUCTION OF SHOWROOMS AND SHEDS ETC. FOR ITS TOYOTA CARS DEALERSHI P. THE AMOUNT OF RS.3,68,27,750/ - WAS THE AMOUNT PAYABLE/PAID BY THE ASSESSEE TO M/S. B.N.C. POWER PROJECTS LTD. FOR CONSTRUCTION CONTRACT. THE ASSESSEE HAD DEDUCTED TDS UNDER THE PROVISIONS OF SECTION 194C ON SUCH PAYMENTS. THE ONLY MISTAKE COMMITTED B Y THE ASSESSEE AT THE TIME OF ASSESSMENT WAS THAT AN AMOUNT OF RS. 13,52,023/ - (BALANCE OUTSTANDING) WAS SHOWN AS UNSECURED LOANS INSTEAD OF OTHER CREDITORS. IN THE AUDITED BALANCE SHEET AND TAX AUDIT REPORT THE AMOUNT WAS SHOWN AS CREDITORS. THUS, THE AM OUNT OF RS.13,52,023/ - PAYABLE BY THE ASSESSEE TO M/S. B.N.C. POWER PROJECTS LTD. WAS ON ACCOUNT OF CONSTRUCTION CONTRACT BILLS. IT IS NOT A CASE WHERE THE ASSESSEE/APPELLANT HAS RECEIVED LOAN FROM M/S. B.N.C. POWER PROJECTS LTD. RATHER IT IS A CASE WHERE THE ASSESSEE HAD PAID MONEY TO M/S. B.N.C. POWER PROJECTS LTD. AGAINST THE INVOICES RAISED FOR CONSTRUCTION OF ITS SHOWROOM. 5. W E HAVE HEARD THE SUBMISSIONS MADE BY REPRESENTATIVES OF RIVAL SIDES AND HAVE PERUSED THE ORDERS OF AUTHORITIES BELOW . THE REVENUE IN APPEAL HAS RAISED TWO GROUNDS. THE GROUND NO. 1 IS WITH RESPECT TO DELETION OF ADDITION OF RS.83,62,502/ - MADE ON ACCOUNT OF UNPROVED CREDITORS. A PERUSAL OF THE DOCUMENTS ON RECORD SHOWS THAT THE ASSESSEE 5 ITA NO . 956/PUN/2016, A.Y. 2011 - 12 HAS FILED CONFIRMATIONS FROM THE CRED ITORS IN FIRST APPELLATE PROCEEDINGS. THE COMMISSIONER OF INCOME TAX (APPEALS) FORWARDED CONFIRMATIONS TO ASSESSING OFFICER FOR HIS COMMENTS AND FURTHER NECESSARY ENQUIRIES. HOWEVER, THE ASSESSING OFFICER WITHOUT CONDUCTING ANY ENQUIRY DISBELIEVE D THE CO NFIRMATIONS FILED BY THE ASSESSEE. WE ARE OF CONSIDERED VIEW THAT THE ASSESSING OFFICER HAS FAILED TO DISCHARGE HIS DUT Y IN CONDUCTING ENQUIRY AND VERIFYING THE VERACITY OF CONFIRMATIONS. THE ASSESSING OFFICER IS EMPOWERED U/S. 131 TO SUMMON THE CREDITOR S. HOWEVER, HE FAILED TO EXERCISE THE SAME. THE ASSESSEE HAD DISCHARGED HIS PRIMARILY ONUS BY FILING THE CONFIRMATIONS . T HEREAFTER IT WAS INCUMBENT UPON THE ASSESSING OFFICER TO TEST THE GENUINENESS OF THE SAME. THE COMMISSIONER OF INCOME TAX (APPEALS) HAS OBSERVED THAT OUT OF TOTAL CREDITORS AMOUNTING TO RS.83,62,502/ - , THE CREDIT BALANCE OF RS.72,89,775/ - WAS IN RESPECT OF M/S. TOYOTA KIRLOSKAR MOTOR PVT. LTD. ALONE. SINCE, THE ASSESSEE IS A DEALER OF TOYOTA CARS , NO DOUBT CAN BE RAISED ON GENUINENES S OF SUCH CREDITORS. AS REGARDS THE OTHER CREDITORS I.E. M/S. DHANRAJ TRADERS, M/S. NIKHIL COMFORTS AND M/S. SHREE NIDHI TECHNOLOGIES , THE ASSESSEE HAD MADE PURCHASE S FROM THE AFORESAID PARTIES. THE ASSESSING OFFICER HAS NOT RAISED ANY DOUBT OVER THE PUR CHASES MADE. IT IS ONLY THE CLOSING BALANCE IN THE ACCOUNTS OF SAID PARTIES WHICH HAVE BEEN DOUBTED BY THE ASSESSING OFFICER. THE ASSESSING OFFICER IN THE REMAND PROCEEDINGS HAS SIMPLY REJECTED THE CONFIRMATIONS WITHOUT VERIFYING THE SAME. THE ASSESSEE CANNOT BE PENALIZED FOR ANY DERELICTION IN THE DUTY BY ASSESSING OFFICER . WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF COMMISSIONER OF INCOME TAX (APPEALS) IN DELETING THE ADDITION. ACCORDINGLY, GROUND NO. 1 RAISED BY THE REVENUE IS DISMISSED. 6. IN G ROUND NO. 2 THE ASSESSEE HAS ASSAILED DELETING THE ADDITION OF RS.3,68,27,750/ - U/S. 2(22)(E) OF THE ACT. THE ASSESSING OFFICER MADE 6 ITA NO . 956/PUN/2016, A.Y. 2011 - 12 ADDITION OF THE AFORESAID AMOUNT ON THE PRESUMPTION THAT THE ASSESSEE HAS RECEIVED LOAN OF RS.3,68,27,750/ - FROM ITS GROUP COMPANY M/S. B.N.C. POWER PROJECTS LTD. THE LD. AR HAS EXPLAINED THAT IT IS NOT A CASE WHERE THE ASSESSEE HAS TAKEN LOAN FROM ITS GROUP COMPANY RATHER THE ASSESSEE HAS PAID THE AMOUNT TO M/S. B.N.C. POWER PROJECTS LTD. FOR CARRYING OUT CONSTRUCTION OF TH E SHOWROOM AND SHED FOR ITS TOYOTA CARS DEALERSHIP. IT WAS FURTHER POINTED THAT ON THE PAYMENTS MADE TO M/S. B.N.C. POWER PROJECTS LTD. , THE ASSESSEE HAS DEDUCTED TAX AT SOURCE U/S. 194C OF THE ACT. THE PAYMENTS ARE MADE AGAINST THE INVOICES RAISED FOR C ONSTRUCTION ACTIVITIES CARRIED OUT BY M/S. B.N.C. POWER PROJECTS LTD. FOR THE ASSESSEE. WE FIND THAT THE COMMISSIONER OF INCOME TAX (APPEALS) HAS SOUGHT REMAND REPORT FROM THE ASSESSING OFFICER ON THIS FACTUAL ASPECT. THE ASSESSING OFFICER WITHOUT CONDUC TING ANY ENQUIRY OR EXAMINING THE BOOKS HAS REITERATED HIS STAND TAKEN DURING ASSESSMENT PROCEEDINGS. THE COMMISSIONER OF INCOME TAX (APPEALS) DELETED THE ADDITION BY OBSERVING AS UNDER : I HAVE CONSIDERED THE DETAILS FURNISHED BY THE APPELLANT AND FROM THE SAME IT IS OBVIOUS THAT NO AMOUNT WAS RECEIVED BY THE APPELLANT FROM M/S. BNCPPL BY WAY OF CHEQUE OR CASH WHICH CAN BE TREATED AS LOAN/ADVANCE. ON THE CONTRARY ALL THE PAYMENTS HAVE BEEN MADE BY THE APPELLANT WHICH HAS BEEN ADJUSTED AGAINST THE CONSTRU CTION INVOICE OF RS.3,68,27,750/ - RAISED BY M/S. BNCPPL. A JOURNAL ENTRY WAS PASSED DEBITING THE ASSET SHOWROOM CONSTRUCTION AND, CREDITING M/S. BNCPPL BY RS. 3,68,27, 750/ - . IN FACT APPELLANT HAS DEDUCTED TDS ON THE PAYMENTS MADE AGAINST THE CONSTRUCTION CONTRACT. APPELLANT HAD FURNISHED ALL THE RELEVANT DOCUMENT LIKE WORK CONTRACT ORDER ISSUED BY THE APPELLANT, COPY OF INVOICES RAISED BY M/S. BNCPPL, COPY OF RETURN OF INCOME AND 26AS FORM OF M/S. BNCPPL WHEREIN TDS DEDUCTED AND CONTRACTS AMOUNT PAID BY T HE APPELLANT WAS REFLECTED. IT IS ABSOLUTELY CLEAR THAT NO MONEY WAS RECEIVED BY THE APPELLANT FROM M/S. BNCPPL DURING THE YEAR UNDER CONSIDERATION, HENCE, QUESTION OF DEEMED DIVIDEND IN THE HAN DS OF THE APPELLANT DOES NOT ARISE. OTHER LEGAL ISSUE RAISED B Y THE APPELLANT AS TO WHETHER DEEMED DIVIDEND SHOULD BE TAXED IN THE HANDS OF CONCERN WHO IS NOT BENEFICIAL SHARE HOLDER IN THE LENDING COMPANY OR IN THE HANDS OF SHARE HOLDER HAVING SUBSTANTIAL INTEREST IN BOTH THE CONCERNS HAS BECOME INFRUCTUOUS. ADDITI ON MADE BY THE AO OF RS.3,68,27,750/ - U/S 2(22)(E) IS DELETED AND GROUND RAISED BY THE APPELLANT IS ALLOWED. 7 ITA NO . 956/PUN/2016, A.Y. 2011 - 12 7. THE LD. DR HAS FAILED TO CONTROVERT THE FINDINGS OF COMMISSIONER OF INCOME TAX (APPEALS). WE DO NOT FIND ANY REASON TO INTERFERE WITH THE W ELL REASONED FINDINGS OF THE FIRST APPELLATE AUTHORITY. THEREFORE, THE SAME ARE UPHELD AND GROUND NO. 2 RAISED IN THE APPEAL BY REVENUE IS DISMISSED. 8. IN THE RESULT, THE IMPUGNED ORDER IS UPHELD AND THE APPEAL OF REVENUE IS DISMISSED. ORDER PRONOUNCED ON THURSDAY, THE 18 TH DAY OF OCTOBER, 201 8 . SD/ - SD/ - ( . /D. KARUNAKARA RAO ) ( / VIKAS AWASTHY) / ACCOUNTANT MEMBER / JUDICIAL MEMBER / PUNE; / DATED : 18 TH OCTOBER, 2018 RK / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT. 2. / THE RESPONDENT. 3. ( ) / THE CIT(A) - 12, PUNE 4. THE PR. C IT (CENTRAL), NAGPUR 5. , , , / DR, ITAT, B BENCH, PUNE. 6. / GUARD FILE. / / // TRUE COPY// / BY ORDER, / PRIVATE SECRETARY, , / ITAT, PUNE