TaxTMI 
TaxTMI 
2016 (6) TMI 1295
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....eration. Return of income declaring total income was filed declaring total income of Rs. 43,92,06,790/-( Book profit u/s 115JB at Rs. 43,89,86,856/-). The AO has noted the details of issue of statutory notices and broad compliances made by the assessee on page 1 of the assessment order. The department has raised ground no. 2 to 4 which relate to addition of loan taken from 12 companies which are Kolkata based aggregating to Rs. 6,69,00,000/- and further disallowance of interest paid on these loans at Rs. 1,03,20,567/- as per details given below : S.No. Name and address of the parties Opening Balance Taken during the year Repaid during the year Interest paid 1. Aereo Dealcomm Pvt.Ltd. 98,73,663 3,26,00,000 42,93,663 33,04,583 2. Chamak Trexim Pvt.Ltd. 3,91,86,415 25,00,000 78,86,415 59,19,345 3. Panchanan Vanijya Pvt.Ltd. - 35,00,000 - 25,615 4. Kamalnayan Commercial Pvt.Ltd. - 15,.00,000 - 7,992 5. Reward Consultants Pvt.Ltd. 16,39,608 12,00,000 1,39,608 3,76,804 6. Khatu Vanijay Pvt.Ltd. - 50,00,000 - 34,631 7. Pushpak Trading & Consultancy Pvt.Ltd. - 50,00,000 - 2,41,803 8. Savera Distribution Pvt.Ltd. - 50,00,000 - 3,10,656 ....
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....ioned In Annexure "A' to "F" in the case of Keti Constructions (India) Limited, Agrawal Transport Corporations P Ltd, Admanum Finance Ltd, Eagle Fuel P Ltd, Agrawal Coal Corporation P. Ltd, Swastik Coal Corporation P Ltd for financial year 2007 -08 asking for. 1. Copy of Balance Sheet. 2. Tax Audit Report 3. Bank Statement. 4. Personal Appearance. and the case was fixed for hearing on 15.12.2010 in all of the cases. Out of them following companies has made partly compliance summon issued U/s 131 of the Income-tax Act, 1961,namely. 1. Middleton Goods Private Limited 2. Aereo Dealcom Private Limited 3. Chamak Trexim Private Limited 4. Paceman Traders Private Limited Further, following companies were merged with Middleton Goods P. Ltd, namely, 1. Lambodar Bartek P.Ltd. 2. Prathmesh Vanijay P Ltd. 3. Khantu Vanijya P Ltd. 4. Kamal Nayan Commerecial P Ltd. 5. PanchananVanijay P Ltd. 6. Ranchhod Agancies P Ltd Above companies (including merged companies) have submitted:- 1. Copy of Audited Annual Accounts. 2. Photocopy of bank Statements. 3. Confirmation of Account. None of the directors has made personal appearance; hence, identity as well as genuineness of all t....
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....ase. 2.6 The AO accordingly confronted the appellant with the facts collected to establish three ingredients as per requirement of section 68 for the aforesaid 12 Calcutta based companies and has reproduced the detailed reply submitted by appellant in para 2.14 running from page 10 to 24 of assessment order. 2.7 Thereafter the AO has discussed the legal aspects pertaining to discharge of onus u/s 68 under the heading ,; Department's side discussion of case laws" from page 24 to 35 and has finally summed up in para 3.18 as under: 3.18 Thus the above discussion related to facts of the case and related case laws together as made above from Para No. 2 to 3.18 unsecured loan in the books of the assessee company amounting to Rs. 6,69,00,000/-is found unexplained u/s 68 of the 'Act' and interest paid on these unsecured loan amounting to Rs. 1,03,20,567/- is disallowable expenditure respectively. Thus total Rs. 7,72,20,567/- added to total income of the assessee. Since inaccurate particulars of income furnished penalty proceedings u/s 271(1)(c) are initiated for which notice is being given separately. 3.19 This results in an addition of Rs. 7,72,20,567/-. 5. The matter ca....
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..../s. Reward Consultants Pvt. Ltd.,(in short Reward), M/s. Pushpak Trading & Consultancy P. Ltd. (in short Pushpak) and Paradise Garments P .Ltd. (in short Paradise) have reported that these companies did not exist on the given addresses. In respect of Paradise the Inspectors in their report have noted that some of the persons contacted nearby the addresses of the company stated that such company was in existence on that address about a year back and the location was locked at the time of their visit however certain people contacted by the Inspectors confirmed that the company was run by a sikh person. In respect of Reward Consultants Pvt. Ltd. also on detailed enquiry the Inspectors were told that the present occupant has acquired the said business premises from one Shri D.P. Agarwal who was the key person of M/s. Reward Consultants but the Inspectors were unable to contact Shri O.P.Agarwal. The Inspectors in the first enquiry report has thus concluded that transactions with all the companies as aforesaid which have merged with M/s. Middleton Goods Private Limited, Kolkata undertaken by the appellant appeared to be genuine. The relevant findings are reproduced hereunder :- "M/s. Ae....
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....g with Bank statement of appellant company, copy of audited final accounts of the said companies, copies of ITR acknowledgements etc. to establish that such loan transaction was reflected in the Balance sheets of such companies as loans and advances and certificate about continuous existence of such companies from the status report obtained from ROC, West Bengal and copies of Income-tax returns filed by them and TDS certificates issued by appellant company for TDS from interest payment made were also filed. 4.1.4 The appellant thereafter made a detailed submissions that in view of these facts the appellant had discharged the onus cast on it by provisions of section 68 relying on judicial decisions cited in written submissions. The appellant coming to the enquiries conducted by AO made detailed submissions in para 11 to 16 of its submissions explaining the position and advancing contentions that the existence of these companies have been proved by service of notice u/s 133(6) issued by the AO as well as by the DDIT (Inv.) at Calcutta. It was also contended before AO that merely because some of the companies could not be located by Inspectors during their short visit at the given ad....
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.... would vary from case to case identity is first ingredients, which can be established by giving complete address, physical existence of the person and IT. particulars i.e. PAN and details of filing of return etc. In a given case, where the transaction of say a smaller amount of Rs. 50000/-or 1 lakh is involved the credit worthiness of person involving nominal income in the same range may be acceptable, but can become suspicious and doubtful if the amount advanced runs in millions and crores, without there being other verifiable details and evidences of sources of such funds advanced. 4.2 In the above legal back drop firstly the issue of six companies viz. M/s PAMCHANAN VANIJYA PVT. LTD., KAMALNAYAN COMMERCIAL PVT. LTD., KHATU VANIJYA PVT. LTD., RANCHHOD AGENCIES PVT. LTD., ,PRATHMESH VANIJYA PVT. LTD. AND LAMBODHAR BARTER PVT. LTD. is taken up for consideration which as per facts available on record merged as per Hon'ble Calcutta High Court's order in another company M/s MIDDLETON GOODS PVT. LTD (MIDDLETON). The amount involved in all the six companies taken together is at Rs. 1.81 crores. The identity of these six companies cannot be doubted or disputed in view of the ord....
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....pugned year, copies of ITR acknowledgement along with computation for AYs 2006-07 to 2008-09 as was required by the AO. Before DDIT (Inv.), Kolkata also against issue of summons u/s 131 compliances were made by filing of copies of audited annual accounts, photo copy of Bank statement and confirmation letters. Thus, it cannot be said that Inspectors and DDIT(Inv.) have expressed any doubt about the existence of such company. The doubt expressed by Inspectors and DDIT (Inv.) both of them are apparently subjective and in case of DDIT's report is merely based upon nonappearance by the Directors of the said company. The copy of audited accounts of the said company, along with copy of bank statement, confirmation, ITR acknowledgement etc. are included in compilation by the appellant from page 160 to 200. The main source of the said company is from gross interest income of Rs. 47.83 lacs. The net profit of the company is reflected at a healthy figure of Rs. 11.29 lacs. The loan in the name of the appellant company including outstanding loan from earlier year is reflected in the head as Schedule-7 to Balance sheet under 'Loans and Advances'. Thus, it could not be said that the fina....
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....d enquire from the Assessing Officer of the creditor as to the genuineness of the transaction and whether such transaction has been accepted by the Assessing officer of the creditor but instead of adopting such course, the Assessing officer himself could not enter into the return of the creditor and brand the same as unworthy of credence. So long it is not established that the return submitted by the creditor has been rejected by its Assessing Officer, the Assessing officer of the assessee is bound to accept the same as genuine when the identity of the creditor and the genuineness of transaction through account payee cheque has been established." 4.3.4 In view of above factual and legal position wherein even the sources of the funds of the creditor company have been found and verified by the concerned AO and the transactions duly getting reflected in the audited final accounts of the creditor company, the AO's action in doubting such loan transaction is absolutely without any merit and substance and accordingly the AO's action in treating such loan of Rs. 3.26 crores as unexplained is held to be unjustified. 4.4 Proceedings next to the loan of Rs. 25 lacs from CHAMAK TREX....
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....lkata also issued summons u/s 131 placed at page 935 the reply to which is at page 936 wherein in addition to the documents filed before the AO u/s 133(6) , balance sheets and ITR acknowledgements for FY 2006-07 to 2008-09 and bank statements for relevant two years were also f iled. The appellant, in the compilation has included audited final accounts and other documents such as the confirmation, ITR acknowledgement, bank statement etc. of the company at pages 662 to 712 whereby it is seen that appellant company has shareholders fund of Rs. 13.47 crores and the investment were made at Rs. 17.70 crores besides loans and advances of Rs. 91.27 lacs. Such company was found to be engaged in trading having turnover of Rs. 1.97 crore besides other income of Rs. 4.45 lacs and disclosing net prof it after incurring administrative expenses of Rs. 42.45 lacs at Rs. 11.15 lacs. The appellant has also included NBFC certificate issued by RBI dated 11.06.1998 for the said company besides intimation for Asstt Year 2009-10 issued by CPC, Bangalore to establish continued existence of the company on the record of the department. 4.5.1 Coming to non-availability of the appellant company at the given ....
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....rtion of the bank statement, copy of account and confirmation of the loan transactions with the appellant. It was also pointed out that since the said company complied that summons on 22.1.2.2010 and the DDIT Kolkata has prepared his report on 20.12.2010, which was received by the AO at Indore on 22.12.2010 stating no compliance by the afore said company cannot be construed as non existence of the said creditor . It was also pointed out that the letter of the AO u/s 133(6) dated 02.12.2010 was also served and was also complied with on 10.12.2010 filing all the relevant documents as called for by the AO. The relevant documents are included in compilation from page 949 to 955 and other documents are at 468 to 510 being Director's report, Auditor's report for Asstt. Year 2008- 09, copy of confirmation letter, acknowledgement of Income- tax Return for Asstt. Year 2007-08, Bank statement and master data of company with ROC. 4.6.1. Coming to the ITI's report, it was urged by the AR that the ITIs have not made any serious ef forts to locate the said creditor, as the summons issued by the DDIT as wel l as by the ADIT were served on the same address on which the AO's enquiry le....
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.... cannot be doubted and accordingly the said loan of Rs. 50 lacs is directed to be treated as explained. 4.7 The next loan from PARADISE GARMENTS of Rs. 25 lacs is taken up for consideration. The appellant has included a copy of acknowledgement of IT Return for Asstt. Year 2008-09, Bank statement, master data of company with ROC, confirmation letter, auditor's report for financial Year 2007-08 in compilation from page 246 to 263. Firstly, Paradise has declared taxable income at Rs. 18.50 lacs as per E ITR acknowledgement for the AY 2008-09, paid taxes of Rs. 6.31 lacs and claimed a refund of Rs. 6.53 lacs. Secondly, such creditor company has investible fund of Rs. 7.62 crores which was invested in inventories, loans and advances. Further as per P&L A/c the lender company has turnover of Rs. 1.14 crores beside gross interest income of Rs. 59.29 lacs and the loan amount was finally repaid in February,2011.The appellant has also included the assessment order in case of such company in another compilation at page 959 and 960 for Asstt. Year 2006-07 where the income returned at Rs. 14.32 lacs was accepted without variation and no adverse findings of any short were recorded in the assess....
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....refund of Rs. 3.73 lac and the E - ITR acknowledgement for AY 2007-08 at page 265 of paper book B shows these figure sat Rs. 6.13 lacs and Rs. 2.73 Lacs respectively. The intimation u/s 143(1) on page 939 of Paper book D for this year reveals that the returned income at Rs. 6.13 has been processed and refund of Rs. 3.04 including interest has been issued. The data obtained from the web site of Ministry of Corporate Affairs included in compilation at page 937 and 938 also reflected continuous existence and compliances by the creditor company before ROC. 4.8.1 The Inspectors report in the case of such company has already been noticed above that the present occupant of the premises has purchased it from the owners of Reward Consultant and as such amount was repaid by the appellant as per details filed at page 948 in September, 2010 even before the enquiry conducted by the AO. It was also pointed out that a much higher amount than the amount taken during the year stand accepted in the immediately preceding year. Thus on consideration of available facts on record and in particular considering the fact the company was in existence in earlier years, it is held that the appellant ha....
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....count, copy of the audit report of last three years, amount of loans given and mode of payments were verified by the inspector. The inspector noted that the identity, creditworthiness of the creditors could not be proved. The loan transaction was routed through Bank and all the money has been taken through Bank transactions. Some of the companies were merged into another company and source of the source was not proved. Moreover, the ld. Departmental Representative submitted that in all these cases the surrounding circumstances have to be seen. In all these cases, the assessee's Directors were not present. Therefore, the ld. Departmental Representative was of the view that creditworthiness and identity of the creditors could not be established by the assessee. Moreover, the ld. Departmental Representative submitted that in this case, the crucial judgement of various High Courts are in favour of the Department and also in favour of the assessee. Therefore, each case has to be decided on the facts of its own case. The ld. Departmental Representative submitted that the loan was received from 12 companies and the genuineness of the same could not be proved. Inspector was also deputed to....
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....s follows :- 1. M/s. Agrawal Coal Corpn. Pvt. Ltd., Indore vs. Addl. CIT, Range 5, Indore, 19 Taxman.com 209 (I.T.A.T. Indore). 2. CIT vs. Navodaya Castles Pvt.Ltd., 367 ITR 306 ( Del) . 3. CIT vs. Sophia Finance Limited, 205 ITR 98 (Del) 4. CIT(A) order M/s. Balaji Ltd., Indore 5. DCIT 1(1) VS. Balaji Coal P.Ltd. (I.T.A.T. Indore) 6. ACIT vs. Narmada Extrusions Ltd. and Others, 19 ITJ 202 (I.T.A.T. Indore) 7. Sumati Dayal vs. CIT, 214 ITR 801 ( S. C.) 8. Roshan Di Hatti vs. CIT, 107 ITR 938 ( S. C. ) 9. Shankar Industries vs. CIT, 114 ITR 689 (Cal) 10. CIT vs. Biju Patnaik, 160 ITR 674 ( S.C.) 11. CIT vs. Precision Finance Pvt.Ltd.,208 ITR 465 12. CIT vs. P.Mohankala & Ors., 291 ITR 625(SC) 13. CIT vs. Podar Cement (P) Ltd,226 ITR 625 (SC) 14. CIT vs. Gold Coin Health Food (P) Ltd. ,304 ITR 308 ( S.C.) 15. CIT vs. Nova Promoters & Finlease (P) Ltd., 342 ITR 169 (Del) 16. Ashok Mahindra & Sons ( HUF) VS. CIT, 173 Taxman 178 ( Del ) 17. Jt. CIT vs. Saheli Leasing & Industries Limited, 324 ITR 170(S.C.) 18. Vaibhav Cotton (P) Limited vs. ITO, 139 ITR 254 I.T.A.T., Indore Bench 19. CIT VS. Durga Prasad More, 82 ITR 540 (S.C.) 7. The ld. Departmental Representative ....
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.... assessee, thus, placed on record requisite documentary evidences, which clearly establishes beyond any reasonable doubt the identity and the source of the credit, including the existence and the creditworthiness of the creditors and also the genuineness of the loan transaction. Most importantly, the documents so furnished by the assessee were further corroborated by materials/evidences gathered during the course of ex-parte independent enquiries conducted by the assessing officer. In the assessment order, the assessing officer has also not been able to rebut any of the documentary evidences placed on record by the assessee. The aforesaid evidences, in the submission of the assessee, unequivocally proves/establishes all the ingredients of section 68 of the Act, viz. the identity, source, genuineness as well as the creditworthiness of the creditors. The ld.Authorized Representative for the assessee relied upon the following decisions :- (i) Orissa Corporation (P) Ltd., 159 ITR 78. (ii) CIT vs. Metachem Industries, 245 ITR 160 (iii) Ashok Pal Daga v. CIT: 220 ITR 452 (MP) (iv) CIT v. Khoobsurat Resorts (P.) Ltd.: 256 CTR 371(Del) (v) Orient Trading Co. Limited: 49 ITR 723 (Bom.)....
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....tement, income-tax return, audited accounts, TDS certificate, Master data of company with ROC, Memorandum of Association, have been placed on record; Existence of company accepted by Inspectors in report dated 10.12.2010 and its existence has also not been disputed by the AO; Statement of the accountant was recorded by the Inspector, wherein he confirmed the loan transaction with the assessee; In assessment for A.Y. 2002-03, source of funds of the creditor company were examined and verified by the AO of the creditor company u/s 143(3) Opening balance of loan from the said company stands accepted, since no addition was made in A.Y. 2007-08; Company had shown interest income of Rs. 47.83 lacs and profit of Rs. 11.29 lacs in A.Y. 2008-09, thus, reflecting a healthy financial position; Entire loan repaid in February, 2010; Company registered as NBFC; Creditor responded to notices issued under section 133(6) by the assessing officer and also in response to notice under section 131 of the Act issued by the DDIT(Inv.). Kolkata. Chamak Trexim Pvt. Ltd. Documentary evidences like confirmations, bank statement, income-tax return, audited accounts, TDS certificate, Master data of c....
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....idences like confirmations, bank statement, income-tax return, audited accounts, TDS certificate, Master data of company with ROC, Memorandum of Association, have been placed on record; Existence of company accepted by Inspectors in report dated 10.12.2010 and its existence has also not been disputed by the AO; Statement of brother of the merged entity was recorded by the Inspector, wherein he confirmed the loan transaction with the assessee; Inspectors in report dated 10.12.2010 also stated that the loan transactions are genuine; Creditors responded to notices issued under section 133(6) by the assessing officer and also in response to notice under section 131 of the Act issued by the DDIT(Inv.). Kolkata; The fact that the company merged pursuant to order of the Hon'ble High Court after all regulatory compliances, establishes the identity and existence of the erstwhile creditors; In the books of the merged entity, amount of loans advances to the assessee-company is duly reflected. No specific finding has been recorded by the assessing officer in respect of the above six creditors and therefore, additions in respect of amount received therefrom is legally unsustainable and r....
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....was subsequent change in the address of the creditor. In view of the above, addition made by the assessing officer is legally unsustainable and rightly deleted by the CIT(A). Savera Distribution Pvt. Ltd. Documentary evidences like confirmations, bank statement, income-tax return, audited accounts, TDS certificate, Master data of company with ROC, Memorandum of Association, have been placed on record; On enquiry, Inspectors could not locate the company at the given address; Entire loan repaid in July, 2008; Creditor responded to notices issued under section 133(6) by the assessing officer and also in response to notice under section 131 of the Act issued by the DDIT(Inv.). Kolkata; As per audited annual accounts of the company as on 31.03.2008, there were shareholders fund of Rs. 13.66 crores. Further the company showed turnover of Rs. 2.34 crores and interest income of Rs. 18.72 lacs, thus, reflecting a sound financial position. In the assessment, the assessing officer has simply referred to the report of inspector dated 23.12.2010 wherein it has been observed that identity of company is doubtful. In rebuttal, it is submitted that simply because nobody could identify the....
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.... on the above loans. 18. The Ld. Authorized Representative for the assessee also submitted that the facts of the assessee's own case for AY 2005-06, where the addition made u/s 68 was confirmed by the Tribunal in Agrawal Coal Corporation Pvt Ltd. Indore vs. Addl. CIT, Range 5, Indore, 19 Taxman.com 209 (ITAT Indore), are clearly distinguishable from the present case. In the case of AY 2005-06 the notices issued u/s 133(6) could not be served and the existence of the companies could not be established, therefore, the identity of the creditors became doubtful, whereas in the present case the identity of the creditors was very well established through various level of enquiries conducted by the AO himself. Further the creditors involved in assessment year 2005-06 were entirely different from the creditors involved in the present appeal of assessment year 2008-09. 19. The Ld. Authorized Representative for the assessee also submitted that the observation of the AO while issuing commission u/s 131D to the DDIT Investigation Kolkata were factually incorrect as the assessee has not received any share application money from Kolkata based parties but received only unsecured loans and the o....
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....come-tax Inspectors were deputed personally to visit and make enquiries. The Commission was also issued to DDIT, Kolkata u/s 131 of the Act and Income tax inspectors were again deputed to personally visit and make enquiries at Kolkata and lastly the assessee was directed to furnish documentary evidences in support of the unsecured loan. The AO has issued notices directly u/s 133(6) to lenders calling for documentary evidence in support of the amounts advanced. The lender companies, in return, filed the various documents in the form of confirmations, income tax returns, bank statements etc. Income Tax Inspectors were deputed by the AO to make enquiries at Kolkata, who vide report dated 10.12.2010 confirmed existence of most of the lenders. Thereafter, Commission was issued to DDIT, Inv., Kolkata under section 131 of the Act, who independently conducted investigation and sent his report dated 20.12.2010 and most of the parties appeared and filed documentary evidences as required by DDIT(Inv), Kolkata, thereby confirming the transaction with the assessee. The Income-tax Inspectors were again deputed to personally visit and make enquiries at Kolkata and collected certain information di....
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....sment order for assessment year 2002-03 of the said lender company, wherein the shareholder funds being shareholder capital and share premium account was examined and found to be verifiable. AO found that the said lender company had share capital of Rs. 47,75,000/- and it has received share premium of Rs. 4,29,75,000/- on account of share allotment. The AO of the lender company has also verified the shareholder on test check basis and shareholders' bank accounts were also verified. Therefore, we are of the view that the assessee has proved the identity, creditworthiness of this lender company and also the genuineness of the transaction with the said company with sufficient evidence. 25. In the case of Chamak Trexim Private Limited, the assessee has filed documentary evidence like confirmation, bank statement, income tax return, audited report, TDS certificate, Master data of the Company with Registrar of Companies, Memorandum of Association. The existence of the Company was inspected by the Inspector on 10.12.2010. The statement of the accountant of this company was recorded wherein, he confirmed the loan transaction of the assessee. In assessment year 2004-05, source of funds of....
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....y stands accepted, since no addition was made in the AY 2007-08. The entire loan was repaid in September, 2010. The said creditor company also responded to the notices issued u/s 133(6) by the AO. Similarly, in Pushpak Trading & Consultancy (P) Limited, it had shareholder's funds of Rs. 13.47 crores as on 31.3.2008. The entire loan was repaid in March, 2009. The said company is a registered NBFC. The said creditor company also responded to the notices issued u/s 133(6) by the AO and also in response to the notice issued u/s 131 by the DDIT (Inv) Kolkata. Similarly, in the case of Savera Distribution Private Limited, it had shareholders funds of Rs. 13.66 crores. Further, the company had shown the turnover of Rs. 2.34 crores and interest income was Rs. 18.72 lacs. The said creditor company also responded to the notices issued u/s 133(6) by the AO. Similarly, in the case of Paradise Garments Private Limited, it had shown the turnover of Rs. 1.14 crores, interest income at Rs. 59.29 lacs and its taxable income was Rs. 18.50 lacs in assessment year 2008-09. The company had shareholders fund of Rs. 7.62 crores as on 31.03.2008. The entire loan was repaid in February 2011. On enquiry, th....
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....ursue the matter further. The Revenue did not examine the source of income of the said alleged creditors to find out whether they were creditworthy or were such who could advance the alleged loans. There was no effort made to pursue the so-called alleged creditors. In those circumstances, the assessee could not do anything further. In the premises, if the Tribunal came to the conclusion that the assessee has discharged the burden that lay on him, then it could not be said that such a conclusion was unreasonable or perverse or based on no evidence. If the conclusion is based on some evidence on which a conclusion could be arrived at, no question of law as such arises." 29. Similarly, in the case of CIT vs. Metachem Industries, 245 ITR 160 (MP), Jurisdictional High Court has observed as under :- "3. We have heard the learned counsels for the parties. Section 68 of the Act says that where any sum is found credited in the books of an assessee maintained for any previous year, and the assessee offers no explanation about the nature and source thereof or the explanation offered by him is not, in the opinion of the ITO, satisfactory, the sum so credited may be charged to income-tax as t....
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....rther appeal before the High Court, while setting aside the matter to the assessing officer, the Court observed as under: "................. In such circumstances, we find substance in the contention of Mr. Khaitan that the order of assessment cannot be supported as the materials collected by the Assessing Officer through the Inspector which were relied upon were neither disclosed to the appellant nor was the appellant asked to explain the report submitted by the Inspector. It is now a settled law that while considering the question whether the alleged loan taken by the assessee was a genuine transaction, the initial onus is always upon the assessee and if no explanation is given or the explanation given by the appellant is not satisfactory, the Assessing Officer can disbelieve the alleged transaction of loan. But the law is equally settled that if the initial burden is discharged by the assessee by producing sufficient materials in support of the loan transaction, the onus shifts upon the Assessing Officer and after verification, he can call for further explanation from the assessee and in the process, the onus may again shift from the Assessing Officer to assessee. In the cas....
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....e deposited in the said account and, therefore, it became its unaccounted income. The CIT(A) as well as the ITAT have rightly pointed out that the necessary exercise which was to be undertaken by the Assessing Officer was not carried out. It was for the Assessing Officer to probe the matter further. He could not simply pass on the buck to the assessee asking him to produce Sh. O.P. Yadav or Sh. Mohinder Singh Yadav. It is the Department which had reopened the assessment on the basis of the statements of the Yadavs. The Department was relying upon the said statements. When the premises of M/s. Yadav and Company were searched by the Department in 2002 and the statements of aforesaid two persons were recorded, it is clear that Yadav and Company was very much in existence. More interestingly, M/s. Yadav and Company even assessed to Income-tax. In the case of assessee, the assessment was completed in December, 2003. In such a scenario, it would not have been difficult for the Assessing Officer to find the whereabouts of Yadavs particularly having regard to the statement of the assessee that it had no dealing with M/s. Yadav and Company after assessment year 2000- 01 and was thus unawar....
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....e laws and applying them on the facts of the assessee's case, we find that the same are squarely applicable to the assessee's case. We find that in the instant case the assessee had, during the course of assessment proceedings, filed all the relevant details/ documents/ information, required by the assessing officer, as were necessary to substantiate the identity and creditworthiness of the creditor companies and also the genuineness of transaction. 34. The AO has not been able to rebut, in any manner, voluminous documentary evidences placed on record. In fact, disregarding the documents placed on record, the assessing officer, proceeded to make addition under section 68 of the Act, simply by cherry picking certain parts of the reports of the Inspectors of Income Tax/ Investigation Wing, without appreciating that the reports considered along with ex-parte material/ documents collected/ received from creditors, established, beyond any doubt, the ingredients of section 68 of the Act. 35. Most pertinently, the AO has not specifically dealt with any of the voluminous material/ documents available on record. In the assessment order, the assessing officer has simply reproduced the repo....
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....Act, 1961." 40. The brief facts of the case are that during the year under consideration, the assessee issued shares of Rs. 10/- each at premium of Rs. 190/- per share (i.e. @ Rs. 200/- per share). The shares were subscribed by M/s. Trimurthi Finvest Pvt. Ltd., M/s Purvi Finvest Pvt. Ltd. and M/s. East West Finvest (I) Ltd. as under: - Amount (Rs.) S. No. Name of the company Total Share capital Old unsecured loan Fresh Share capital 1 Trimurthi Finvest P. Ltd. 1,17,00,000 72,00,000 45,00,000 2 Purvi Finvest P. Ltd. 1,12,00,000 62,00,000 50,00,000 3 East West Finvest (I) Ltd. 1,18,00,000 58,00,000 60,00,000 Total Fresh share capital 1,55,00,000 The assessing officer made addition of the aforesaid amount of Rs. 1.55 crores solely on the ground that the aforesaid companies were hit by rigors of section 68 of the Act in view of findings given in assessee's own case for A.Y 2003-04. 41. We observe that in assessment year 2003-04, the AO has made an addition of Rs. 70 lacs received by the assessee from the above referred three companies as unsecured loan. The said addition was deleted by the Ld CIT(A), against which the depa....
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.... also observed that the said companies do not appear to be part of Lunkad Group. The pertinent observations of the CIT(A) are reproduced hereunder for ease of reference : "4.2 Coming to ground No.2, the same is directed against addition of Rs. 70,00,000/- in respect of Unsecured loans taken from 3 companies viz. (1) M/s East West Finvest India Ltd., (2) Trimurthi Finvest P.Ltd., and (3) Purvi Finvest P.Ltd. all having common address as: Kamla Hari Vila, Besides Appollo Pharmacy, Main Road, Vidyanagar, Bilaspur. Before the A.O. the appellant filed all necessary documents in support of such loan transactions, i.e. Confirmation letters incorporating PAN details, acceptance of loan, postal address, their income-tax returns for the relevant assessment years and copies of final accounts wherein such loan transactions were reflected and not only this even copy of Bank statement and copies of annual returns filed with Registrar of Companies, Memorandum of Association of these companies were also filed. The interest payment made to them were subject to TDS and TDS certificates were also filed along with appellant's Bank statement wherein the loan transactions were reflected and copies of s....
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....nd creditable details and evidences on record to at least prima facie establish that the loan transactions entered into by the appellant were not genuine and these Companies were engaged in providing accommodation entries but nothing of that sort has been done. Rather on the other hand the senior functionary of the department the CIT-I, Indore has considered these three companies to be identifiable genuine cases whose request for transfer of their jurisdiction from Indore to Bilaspur was accepted. It was also stated that had these companies been closely connectcd with Lunkad Group of Companies or had large number of transaction with them, their request for transfer of their cases to Bilaspur would not have been accepted and this very order u/s 127 supports the appellant case that these Companies were not in the same class as that of other Lunkad Group of Companies. The AR further emphasized that in the recent year the order passed by AO at Bilaspur for Asstt. Year 2008-09 in the cases of all the three companies, there is categorical findings by AO about examination of Share capital reserve and finance of all these Companies and the returned Income has been accepted as declared with....
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....Further still, investment by the very same person or entity in Share Capital at premium in Pvt. Ltd. Companies, where neither any fixed return is assured nor are there exit options to get back the funds invested would render the genuineness of the transactions itself totally suspicious and so the credit worthiness to park huge funds in illiquid investment with no certainty about any return. Before concluding it has to be observed that such loans were repaid fully as per submissions filed by the appellant in the course of assessment proceedings before AO. The appellant has continued the financial transactions with three such Companies which were spread over 4-5 years from financial year 2001-02 onwards ,as per copy of Ledger Account filed in the compilation and it was emphasized through written submission and in the course of discussion that surprisingly additions were made only for the year under appeal and even for earlier /latter years in scrutiny assessments such loan transactions were accepted as proper and genuine and thus there was absolutely no reason for the AO to have adopted a different view for AY under consideration with the same set of companies. It was also finally s....
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....s: IT(SS) Nos.3 to 7/Ind/2011 and CO Nos. 25 to 29/Ind/2011, wherein the aforesaid three companies do not appear in the list of Lunkad group of companies. 50. In view of the aforesaid and for the reasons discussed in the first appeal order of assessment year 2003-04 passed by the CIT(A), it was submitted that addition of Rs. 1.55 crores is untenable and has rightly been deleted by the CIT(A). 51. We have heard the rival contentions of both the parties. We find that the addition of Rs. 1.55 crores was made by the AO in assessment year 2008- 09 on the basis of the assessment order of assessment year 2003-04. The CIT(A) while deleting the addition made in AY 2003-04 has given elaborate finding, which were heavily relied upon by the Ld. Authorised Representative of the assessee and have been reproduced above. We find that the CIT(A) has noted that the jurisdiction of the above three companies was transferred from Indore to Bilaspur by CIT Indore u/s 127 and the scrutiny assessment of these three companies for assessment year 2008- 09 was made by their respective AO at Bilaspur. This fact substantiate the identity as well as creditworthiness of these companies. 52. We also find that ....
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....at substantial premium when the investment is apparently an illiquid investment. We observe that in other cases where share capital contribution was obtained from paper concerns /dummy companies that in cases of such companies, there were usually adverse findings by the concerned AO's. But, in the case of aforesaid three companies no adverse findings arrived, in the individual cases, has been bought on record either by the AO or by the Department. The second issue usually noticed was that such shares issued were acquired back by the individual entities connected with directors and there family members within a span of 1-2 years in particular before amendment of provision of section 56 with effect from 1.10.2009, where by acquisition of any movable property for a cons ide rat ion, which was less than fair market value of property exceeding Rs. 50000 was made specifically exgibile to tax as income from other sources. Thus the cycle of first getting unaccounted funds introduced in the garb of share capital contribution etc. at substantial premium without any financial justification of the same and reacquisition of such Shares by promoters / directors and their connected entities a....
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....ted as under:- S.No. Name of the creditor company Interest paid (Rs.) Name of the case in which addition was made 1 Trimurti Finvest P. Ltd. 7,62,842 Agrawal coal u/s 148 A.Y. 2003-04 2 Purvi Finvest P. Ltd. 6,49,829 Agrawal coal u/s 148 A.Y. 2003-04 3 East West Finvest (I) Ltd. 6,21,575 Agrawal coal u/s 148 A.Y. 2003-04 4 Unno Industries Ltd., Mumbai 2,25,000 Karan Mittal A.Y. 2007- 08 5 Norflox Vincon P. Ltd. 4,754 TOTAL 22,64,000 57. The matter carried to the ld. CIT(A) and the ld. CIT(A) deleted the addition by observing as under :- "6. Ground No. 4.1 and 4.2 are is directed against disallowance of interest of Rs . 2,03,42,461/ - and Rs . 2,29,754/- as per discussion made in para 5 of the assessment order. The AO has made addition of interest in the similar fashion as in another group case viz. Agrawal Transport Corporation for Asstt. Year 2008-09. This issue was examined in detail and the appeal was decided on 31 01 2012 . Th e same companies are involved and accordingly the relevant portion from the findings arrived are extracted hereunder: "4.1 Ground No.1 and 2 relates to disallowance of interest for which the find....
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....llowance do not survive any longer . 4.1.3 In case of other disallowance of interest the issues are being examined in other connected cases, but it will suffice to hold that AO's action in view of above discussion without establishing such loans to be unexplained and in genuine in appellant 's own case, in making disallowance of interest do not have sanctity and approval of law and accordingly total disallowance of interest made by AO at Rs. 7,50,000/- and Rs. 20,31,639/- is hereby directed to be deleted. 6.1 In view of the aforesaid findings the addition made by AO at Rs .22,64,000/ - for disallowance of interest is not found to be sustainable and accordingly corrected to be deleted. 58. The ld. Departmental Representative could not bring anything contrary to the finding of the ld. CIT(A) and relied on the order of the AO. 59. The ld. Authorized Representative for the assessee contended that insofar as disallowance at S. Nos.1 to 3 are concerned, the same have been made on the basis addition of unsecured loans of the said 3 companies in assessment year 2003-04. Therefore, the said disallowance is linked to addition made in assessment year 2003-04. Regarding interest pa....
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....n from such loan creditors. The finding recorded by CIT(A) to the effect that there is no addition on account of loan creditor, there is no justification for disallowance of interest on such loan was not controverted by the department by bringing any positive material on record. It will be suffice to hold that AO's action in view of above discussion without establishing such loans to be unexplained and ingenuine in assessee's own case, in making disallowance of interest do not have sanctity and approval of law and accordingly the disallowance of interest made by AO at Rs. 2,29,754/- is rightly deleted by the Ld. CIT(A). Our interference is not called for. Ground no. 6 of the Revenue is rejected. 63. Ground nos. 7 and 7.1 taken by the Revenue read as under :- "7 On the facts and in the circumstances of the case, the ld. CIT(A) erred, the ld. CIT(A) erred in deleting the disallowance u/s 14A even when the assessee failed to establish the nexus that interest bearing funds were used for purchase of FDRs. 7.1 While holding so, the ld. CIT(A) did not consider the decision of Hon'ble Supreme Court in the case of CIT vs. Dr. V.P. Gopinath, 248 ITR 449 in which it has been held t....
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....firstly emphasized that the que s t ion of disallowance of interest u/s 14A with reference to investment yielding exempt income can be considered only and if there is interest expenditure incurred by the appellant whereas in the case of the appellant there was net interest receipt of Rs. 922.25 Lac s and thus there was evidently no claim f or deduction of interest . He further invited at tent ion to the Schedule 8of the Balance sheet included in Paper Book 'A' on page 26 which is reproduced hereunder f or appreciation of fact. SCHEDULE -8 CASH & BANK BALANCES Cash in Hand 15,16,938 15,23,226 Balances with. Scheduled Banks A) In Cur rent Account s 0,58,87,157 1,42,32,493 B) In Fixed Depos it Account s (Uco Bank &SBI pledged with bark against L/C, Buyers Line of Credit & 278,07,94,799 178,11,31,933 C In Fixed Deposit accounts (Pledged with. Govt. Dept. as security 15,81,192 50,78,607 284,97,80,086 180,19,66,259 7.1 The AR emphasized that a mere glance of the Schedule revealed that a much larger amount than the aggregate of secured and unsecured loan of Rs .159.17 crore, the investment in Fixed Deposit alone yielding interest wa....
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....ichever way the issue is examined that by and large investment cannot be said to be made out of interest bearing borrowed funds in view of huge amount of shareholders fund exceeding Rs. 60 crore and in alternative there were no net interest deduction claimed was pressed by the appellant as deduction from which disallowance u/s 14A could be considered. 7 . 3 Further still there is apparent merit in appellant 's content ion in respect of investment in Overseas Associate Company at Rs .89 .61 lac s that such amount could not be considered for working out disallowance under Rule 8D of IT Rules , 1962 as the said investment is not an investment in respect of which the appellant will ever receive any exempt income . Thus in the peculiar fact s and circumstances of the case and the above discussion made by AR, the disallowance -u/ s 14A in respect of interest , worked out at Rs. 3,23,640/ - by the AO is directed to be deleted and the disallowance in respect of expenses worked out at Rs. 1,71,633/- @ .5% of the average investments is directed to be worked out after excluding investment made in Overseas Associate Company. The ground of appeal is accordingly partly allowed. 66. The ld.....
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....e out of the interest free funds available with the assessee, as is evident from the following. Sufficient interest free funds in the form of share capital amounting to Rs. 2.87 crores and reserves and surplus of Rs. 57.22 crores were available with the assessee as on 31.03.2008; Net cash from operating activities for the year under consideration amounted to Rs. 10.48 crores, which by itself is sufficient to cover the net fresh investments made during the year; 70. The ld.Authorized Representative for the assessee contended that the correct method to establish source of investment would be to consider the macro fund/ cash flow position during the year and if the assessee had sufficient surplus funds available, presumption should be drawn in favour of the assessee that surplus funds have been utilized for making investments. 71. Ld. Authorised Representative in this regard placed reliance on the following decisions, wherein it has been held that where assessee had sufficient funds/ deposits for advancing interest free loans or making investment in shares, etc., and there is nothing on record to show that borrowed funds have been directly utilized for such purpose, a presumption i....
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.... Officer disallowed an amount by holding that interest bearing funds had been used to earn tax free dividend, etc., but there was no tangible material to record his satisfaction, disallowance under section 14A r.w Rule 8D made was unjustified. T and T Motors Ltd. v. Addl. CIT -154 ITD 306 (Delhi)- Where assessee-company's share capital with reserves and surplus was far in excess of amount invested in securities fetching exempt income, interest could not be disallowed under section 14A of the Act. 73. In view of above, it was submitted that interest paid on borrowed funds had no nexus with the investment made in shares/ mutual funds and, therefore, no portion of the same was relatable to making investments for the purposes of disallowance under section 14A of the Act, much less by applying provision of Rule 8D of the Rules. The borrowed funds, it was submitted, were utilized by the assessee in carrying out other activities which cannot be apportioned for disallowance under section 14A in accordance with provisions of Sub-Rule (2)(ii) of Rule 8D of the Rules. 74. For the aforesaid reasons, considering that there were substantial interest free funds, no portion of the interest expen....
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....ce general expenses. While making such disallowance, the assessing officer referred to disproportionate increase in the above expenditure vis-à-vis turnover and alleged that these expenses were not properly supported by bills/voucher. The assessing officer, thus, made disallowance an ad-hoc rate of 10%. 80. The matter carried to the ld. CIT(A) and the ld. CIT(A) deleted the disallowance. 81. The ld. Departmental Representative relied on the order of the AO and could not bring anything contrary to the finding of the ld. CIT(A). 82. The ld.Authorized Representative for the assessee submitted that the action of the assessing officer is bad-inlaw and the disallowance calls for being deleted for the reasons stated hereunder: "The assessing officer failed to appreciate that the books of accounts maintained by the assessee are being duly audited, which has not been rejected by the assessing officer. With respect to the vouchers/bills produced for verification during the assessment proceedings, the assessing officer had simply made the bald allegation, without pointing out the specific defects, if any, relating to these vouchers/bills. The assessing officer failed to appreciate ....
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....ed. I.T.A.No. 202/Ind/2012 : A.Y. 2003-04 (Departmental Appeal : (Agrawal Coal Corporation Pvt. Ltd.): 87. The Revenue has taken following grounds of appeal :- 1. On the facts and in the circumstances of the case, the ld. CIA(A) erred, the order of the ld. CIT(A) is contrary to the facts and law. 2. On the facts and in the circumstances of the case, the ld. CIA(A) erred, the ld. CIT(A) has erred in deleting the addition of Rs. 70,00,000/- made by the AO u/s 68 of the Income-tax Act, 1961. On account of unsecured loan from three companies being part of the Lunkad group of companies which were found to be accommodation entry provider during the proceedings u/s 133A of the Income-tax Act, 1961. 2(i) While holding so, the ld. CIT(A) failed to appreciate that the said three companies, no where rebutted the survey findings and its close proximity with the Lunkad group of companies and further no material was brought on record to establish that the said companies did not take accommodation entries from the companies connected with Lunkad Group of companies. 88. This issue has already been considered by us while deciding ground no. 5 in ITA No. 294/Ind/2012 for the assessment year 200....
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....iled as return in pursuance to notice issued under section 148 of the Act. The said return, it is pertinent to mention, was filed under protest, challenging, inter alia, the assumption of jurisdiction under section 147/148 of the Act. The reasons recorded by the assessing officer for initiating assessment proceedings under section 147 of the Act were communicated as part of the order dated 24.09.2010 passed by the assessing officer rejecting the legal objections raised vide letter dated 27.04.2010 (which objections were merely preliminary in nature and raised without receiving reasons recorded. In the aforesaid facts, it is the respectful submission of the assessee that the proceedings initiated under section 147/148 of the Act are wholly without jurisdiction, illegal and bad in law. Proceedings under section 147 of the Act were initiated simply on the basis of incomplete/ insufficient material received from another authority, which could not have been the basis for forming reasonable belief of escapement of income; and, no fresh tangible material had come to the knowledge of the assessing officer which could form the basis for forming 'belief' that income has escaped assessment.....
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....asons recorded must, therefore, show application of mind by the assessing officer. If the reasons recorded are vague or ambiguous, the proceedings initiated under section 147 of the Act are liable to be held as invalid and bad in law. Your Honours kind attention in this regard is invited to the following decisions explaining the meaning of `reasons to believe': 1. Sheo Nath Singh vs. ACIT: 82 ITR 148, (S.C.). 2. Ganga Saran & Sons (P) Ltd vs. ITO: 130 ITR 1, 11. 3. Birla VXL vs. ACIT: 217 ITR 1 (Guj). 4. Multiscreen Media (P) Ltd. vs UOI: 324 ITR 54 (Bom). 5. ITO vs. Lakhmani Mewal Das: 103 ITR 437, 448 (SC) 6. Arjun Singh: 246 ITR 363, 405 (MP) 7. Bombay Pharma Products vs. ITO: 237 ITR 614 (MP) 8. Lokendra Singh Rathore vs. WTO: 155 ITR 629 (MP) 9. Seth Brothers vs. JCIT: 251 ITR 270 (Guj.) 10. United Electrical Co. (P) Limited vs. CIT: 258 ITR 317 (Del.). No "reason to believe" - Reasons based on mere presumption/suspicion It is respectfully submitted that in order to initiate proceedings under section 147 of the Act, it is incumbent on the part of the assessing officer to first possess some 'tangible material', on the basis of which prima facie case/ belie....
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....ed that certain report dated 15th February, 2007 was received from Addl. CIT, Range -3, Indore, revealing that the assessee is routing its money through the companies of the Lunkad Group. Based on the said incomplete/ insufficient information, it has been concluded that the assessee received Rs. 70 lacs as unsecured loan from the companies of the said Group, which has resulted in escapement of income. In this regard, it is, at the outset, respectfully submitted that despite request made by the assessee vide letter dated 13.12.2010 filed during the assessment proceedings (please refer page 45 to 49 of the paper book), copy of the so-called survey report and/or the report received from the Addl. CIT, Range-3, Indore, have not been made available to the assessee even till date. It is the respectful submission of the assessee that there was no reliable/ sufficient/ tangible information/ material available with the assessing officer to have come to a 'reasonable belief' that any income of the assessee escaped assessment. In this regard, it is of utmost importance to note that the assessee had received unsecured loans from the following three companies: Name of the creditor Amount (....
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....e consistently held that where an authority relies upon partly relevant and partly irrelevant/ incorrect facts, it is not possible to comprehend to what extent such irrelevant/ incorrect facts influenced the mind of the authority and consequently, the conclusion of the party would be vitiated in law. Reliance in this regard is placed on the following decisions: Daulat Ram Rawatmall: 87 ITR 349 (SC) Commissioner of Agricultural Income Tax vs. M.N. Moni: 291 ITR 387 (SC) Sagar Enterprises vs. ACIT: 257 ITR 335 (Guj). ACIT v. Sharia Construction Company: 328 ITR 515 (SC) CIT v. Kamdhenu Steel & Alloys Ltd. (2012) 248 CTR 33 (Del HC): Sarthak Securities Company P. Limited. Vs. ITO: 329 ITR 110 (Del HC): CIT v. SFIL Stock Broking Ltd. [2010] 325 ITR 285 (Del HC) United Electrical Co. P ltd vs. CIT: 258 ITR 317 (Del HC) Signature Hotels P. Ltd. vs. ITO: 338 ITR 51 (Del HC) CIT vs. Atul Jain and Vinita Jain: 299 ITR 383 (Del) - 148 is invalid when opened on basis of intra - departmental information about accommodation entry M/s. Initmate Jewels Pvt. Ltd. vs. ITO: ITA No. 4498/Del/2010 CIT vs. Viniyas Finance & Investment Pvt. Ltd : ITA No. 271/2012 (Del HC) CI....
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....ntioned in the reasons recorded, much less indicting any basis of the said companies being linked to the socalled Lunkad Group. Even the fundamental finding/ documents found during the so-called survey leading to even prima facie conclusion that the said Group was engaged in giving accommodation entries, are not In the aforesaid circumstances, it is respectfully submitted that the assessing officer proceeded on factually incorrect/ irrelevant facts, which could not lead him to even form a prima facie opinion of escapement of income on the part of the assessee. It is submitted that the initiation of proceedings under section 147 of the Act is without jurisdiction, illegal and bad in law, without any "reason to believe" that any income of the assessee escaped assessment, inasmuch as: - the reasons recorded are vague, not even containing fundamental / basic information; the assessing officer proceeded on factually incorrect premise that the three companies from whom the assessee received loans are part of the Lunkad Group; there is nothing in the reasons to indicate how and on what basis even a prima facie belief could be arrived at that the three companies, from whom unsecured lo....
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....ust have a live link with the formation of the belief." To the same effect are the following decisions: Moser Baer India Ltd. v. DCIT: 212 Taxman 139 (Del) CIT v. Maruti Suzuki Ltd.: 215 Taxman 495 (Del) Nitin P. Shah vs. DCIT: 146 Taxman 536 (Guj.) PCIT vs Tupperware India Pvt. Ltd.: 236 Taxman 494; CIT vs. Chetan Gupta: Judgment dated 15.09.2015 in ITA no. 72 of 2014; CIT vs. Orient Craft Ltd: 354 ITR 536 (Del) Sarthak Securities Co. Pvt. Ltd. v. ITO: 329 ITR 110 (Del) CIT vs. Batra Bhatta Co: 321 ITR 526 (Del) SLP has been dismissed by the Supreme Court and is reported in 320 ITR (St.) 24. Reliance is placed in this regard on the decision of the Delhi High Court in the case of Haryana Acrylic Manufacturing Company vs. CIT: 308 ITR 38. In that case, the assessee had, by way of a writ petition, challenged the validity of proceedings initiated under section 147 of the Act. Quashing the proceedings, their Lordships, inter alia, held that if reasons are not served within the limitation period of six years, the proceedings initiated will be illegal. The pertinent observations of the court are reproduced hereunder: "Thirdly, it could be argued that the reasons supplied to the....
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...., after 31-3-2005. In whichever way we look at it, a notice under section 148 without the communication of the reasons therefore is meaningless inasmuch as the Assessing Officer is bound to furnish the reasons within a reasonable time. In a case, where the notice has been issued within the said period of six years, but the reasons have not been furnished within that period, in our view, any proceedings pursuant thereto would be hit by the bar of limitation inasmuch as the issuance of the notice and the communication and furnishing of reasons go hand-in-hand. The expression 'within a reasonable period of time' as used by the Supreme Court in GKN Driveshafts (India) Ltd.'s case cannot be stretched to such an extent that it extends even beyond the six years stipulated in section 149. For this reason also, even assuming that we overlook all that has happened between 11-5-2004, when the petitioner sought the reasons, and 5-11-2007, when the said form annexed to the counter-affidavit was filed in this court, the validity of the notices under section 148 issued on 29-3-2004 and any proceedings pursuant thereto cannot be upheld." (emphasis supplied) Following the aforesaid de....
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....ed. Moreover, this is also covered by the decision of Apex Court in the case ACIT vs. Rajesh Jhaveri Stock Brokers, 291 ITR 500 ( 2007), 93. We have heard the rival contentions of both the parties. The Facts on record are carefully taken into consideration. It is an admitted fact that the return filed by the assessee was simply processed and no regular assessment was made and notice in the case of the assessee was issued within six years from the end of relevant assessment year after obtaining necessary approval in accordance with law and reasons were recorded by AO leading to formation of belief relating to escapement of income. The AO has further followed the procedure laid down in this behalf, as per which the objection raised by the assessee have been disposed of by passing the speaking order. It is settled position of law that at the time of recording of reasons a prima facie case has to be established and the appellate authority and court cannot examine sufficiency or otherwise of the reasons recorded for issue of notice u/s 148. Reference can be made to the decision of Hon'ble Supreme Court in the case of CIT Raymond Woollen Mills Ltd. 236 ITR34 (SC). Where in it has be....
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....e has been made the subject of excessive relief under this Act; or excessive loss or depreciation allowance or any other allowance under this Act has been computed. The assessee's case falls under clause (b) above. 96. Though the assessee filed the return of income but no assessment was made. It has been held in Phool Chand Bajarang Lal v ITO [1993] 203 ITR 456(SC) that where transaction itself, on the basis of subsequent information, is found to be bogus transaction, mere disclosure of that transaction at the time of original assessment proceedings cannot be said to be a disclosure of the 'true' and 'full' facts in the case and ITO would have jurisdiction to reopen even concluded assessment in such a case. The case of the assessee is still weaker as no assessment has been made in his case. In CIT v Mohaliram Ramjidas [1940] 8 ITR 442(PC) it has been held that the ITO is not required to convey to the assessee or to intimate him the nature of the alleged escapement or to give him an opportunity of being heard, before he decides to operate the powers conferred. 97. Still further this issue was examined in great detail by ITAT, Indore Bench in the case of Swasti....
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....also well brought out by the statutory provisions as they stood at different points of time, prior to 1st April, 1989, u/s 143(1)(a), the AO had to pass an assessment order i f he decided to accept the return, but under the amended provisions, the requi rement of passing of an assessment order has to be dispensed with and instead of it an intimation is required to be sent . It was further elaborated that under the first proviso to the newly substituted Section 143(1) w.e.f. 1st June, 1999, except as provided in the provision itself, acknowledgement of the return shall be deemed to be intimation u/s 143(1) , where no sum is payable by the assessee or where no refund is due to him. It was categorical ly observed that acknowledgement is not done by the Assessing Of f icer, but by the ministerial staf f . Under these circumstances, it cannot be said that the assessment has been made by the ministerial staff. The intimation u/s 143(1)(a) is deemed to be a notice of demand u/s 156 fo r the apparent purpos e of making machine ry provision relat ing to recovery of tax appl icable. By such appl icat ion only re cove ry indicated to be payable in the int imat ion becomes permissible and noth....
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....n suffices, meaning thereby if the AO has reason to bel ieve that income has escaped assessment , it confers the valid jurisdiction to reopen the assessment. It is pertinent to mention here that both the conditions must be fulfilled the case within the ambit of proviso to Section 147. Thus , i f more than four years have be en passed af te r completion of assessment u/s 143(3) , no reopening can be made unless there is a failure on the part of the assessee to disclose ful ly and truly al l material facts in the return of income. It was concluded by the Hon'ble Supreme Court that so long as ingredients of Section 147 are ful f i l led, the AO is free to initiate proceedings u/s 147 and failure to take steps u/s 143(3) will not render the AO powerless to initiate reassessment proceedings even when intimation u/s 143(1) had been issued. 101. Therefore, the contention of the assessee that the AO had no definite material or information before invoking provisions of sect ion 147 is not tenable. It is an admit ted fact that the original return of the assessee was processed u/s 143(1)(a) only at ministerial staff level and no finding had be en o r e v en can be recorded, by the AO dur....
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....g the disallowance u/s 14A of the Act from Rs. 2,79,443/- to Rs. 19,770/- without considering the facts the assessee could not prove that the investment were not made out of interest bearing funds as such provision of rule 8D is clearly applicable to the case of the assessee. 5. On the facts and in the circumstances of the case, the CIT(A) has erred in deleting the disallowance of Rs. 1,00,000/- out of general expenses and RTO expenses, when the AO has found that the vouchers of these expenses were self-made and some of them not verifiable. 6. On the facts and in the circumstances of the case, the CIT(A) has erred in deleting the disallowance of Rs. 1,50,000/- out of commission and brokerage expenses when there was disproportionate increase in the expenses, reasons which could not explained. 105. In respect of Ground no. 2 regarding deletion by CIT(A) of addition of Rs. 6,08,94,415/- made by the AO u/s 68, we find that the addition was made in this case in respect of 9 Kolkata based companies on the identical facts, as it was made in the case of M/s Agrawal Coal Corporation Pvt. Ltd. for the same assessment year i.e. 2008-09. The loan creditors in the instant appeal are also the....
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....jection that he has not used borrowed funds for the purpose of investment in shares. Therefore, the AO has verified the chart given by the assessee and after verifying this, he has worked out the disallowance of Rs. 2,59,473/- by calculating as under :- Para of Rule D Particulars Values Disallowable 2(i) - - 2(ii) A Interest Paid (A) 3,49,39,521 A*B/C 2,59,473/- Investment on first day 27,30,272 Investment on last day 52,57,614 B Average of investment (B) 39,93,943 Assets on first day 49,38,46,384 Assets on last day 58,17,66,989 C Average of total assets (C) 53,78,06,687 2(iii) Investment on first day 27,30,272 0.5% of B 19,970 Investment on last day 52,57,614 B Average of investment (B) 39,93,943 Total 2,79,443/- 111. The matter carried to the ld. CIT(A) and the ld. CIT(A) has restricted the addition at Rs. 19,970/- by ....
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....The CIT(A) has deleted the disallowances observing that the disallowance was made without pointing out any defect in the claim of these expenses and that only observation made in the assessment order was that these expenses are not covered under FBT and also some payments are made in cash. The CIT(A) has held that the finding of the AO is not proper and since no defect was pointed out in the expenses incurred with respect to verification and admissibility, there was no valid case for sustaining the disallowance. 115. The Ld. Departmental Representative relied on the order of the AO. 116. We have heard the rival contentions of both the parties. The assessee has submitted the details of expenses and copy of RTO expenses and general expenses before the CIT(A). The ld. CIT(A) has deleted this disallowance on the ground that when defects are not pointed out in these expenses and when the assessee is a Public Limited Company, there is no reason to disallow the same expenses. Therefore, the ld. CIT(A) has deleted this disallowance. During the course of hearing, the ld. Authorized Representative for the assessee did not point out any contrary evidence against the finding of the CIT(A). T....
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....hers for some of the expenses were missing. ITA NO. 808/Ind/2014 (Admanum Finance Limited) A.Y. : 2011-12 : 118. The Revenue has raised the following grounds of appeal. On the facts and in the circumstances of the case, the CIT(A):- (i) erred in deleting the addition of Rs. 62,12,948/- made on account of disallowance of interest claimed to have been made to certain parties who were found to be non-existent / non-genuine in AY 2008- 09, which has been rightly done by the AO as the identity and genuineness of transaction were not established in AY 2008-09, and the aforesaid payment of interests were the extension of the same non-genuine transactions. (ii) erred in deleting the addition of Rs. 62,12,948/- made on account of disallowance of interest to certain parties whose identity was not established, while ignoring that the jurisdictional ITAT in the case of Agrawal Coal Corporation Ltd. in Appeal No. ITA - 151/Ind/2009 for the AY 05-06 held that the production of directors of the company from whom credits have been received shall be one of the important criteria for accepting the transaction and in the instant case directors of the company from whom credits were claimed were ....
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....ar 2008-09 and we direct accordingly. As a result, these grounds of appeal of the Revenue are dismissed. 123. Ground No. (iv) of the Revenue has been raised against the allowance of the claim made by the assessee during the course of assessment proceedings claiming deduction of Rs. 11,90,575/- on account of bad debts actually written off in its books of accounts. 124. The CIT(A) has discussed this issue in appeal in I.T.A.No. 807/Ind/2014 - A.Y. 2010-11, which reads as under: - "4. The second ground of appeal is against rejection of the claim made by the appellant during the course of assessment proceedings claiming deduction of Rs. 11,90,575/- on account of bad debts actually written off in its books of accounts in this year, which was adjusted against provision for non-performing Assets (NPA). 4.1 The appellant submitted that the company is engaged in the business of finance and being registered NBFC has to provide for non-performing assets (NPAs) and thus provisions for doubtful debts is made every year following the prudential norms and such provision is debited to the profit and loss account. However, such provisions are always disallowed by the appellant in the computatio....
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....lowing decisions: i) CIT vs. Ramco International (P&H) 332 ITR 306. ii) Chicago Pneumatic India Ltd. vs. DCIT 15 SOT 252 4.6 It was also submitted that the AO has not doubted the claim of bad debts but has not allowed the same only for the reason that the same was not claimed by filing a revised return. The AR pointed out that the said mistake of not claiming a part of the bad debts, came to notice only during the assessment proceedings when the AO had asked for the details of bad debts claimed, by which time the time limit for filing the revised return u/s 139(5) has already expired. Therefore, the assessee had no option but to claim the same during the assessment proceedings. The AR also submitted that through the appellant did not file any revised return, but has filed a revised computation of income during assessment proceedings which is placed at page 140 and 141 of the paper book. It was also clarified by the AR that similar mistake was noticed in the return of income filed for the subsequent assessment year i.e. 2011- 2012 has been completed u/s 143(3) and the similar claim made in the revised return has been accepted in that year. 4.7 I have gone through the submiss....
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....e treated debtors of Rs. 35,24,407/- as bad debts and actually written them off in the books of accounts. However since a provision for NPA of Rs. 11,90,575/- in respect of these debtors was already created earlier, the balance net amount of Rs. 23,33,832/- was only debited to profit and loss account as bad debts written off during the year. The amount of Rs. 11,90,575/- actually written off in the books in this year as bad debts and adjusted against provision for NPA created in earlier years, was also required to be allowed in this year, as the NPA provision created earlier was always disallowed and never claimed as deduction. However, the company inadvertently did not claim this amount separately in the computation at the time of filing of the return. The same was claimed through a revised computation of income was filed during the course of assessment proceedings bringing all the relevant facts to the notice of the AO that this figure of Rs. 11,90,575/- be allowed as deduction as bad debts actually written off in the books of accounts in this year. Details of bad debts actually written off, provision made and copies of ledger accounts of all the debtors reflecting the actual wri....
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....ord to rebut the findings of the CIT(A). 128. We have heard the rival contention of both the parties. Looking to the facts and circumstances of the case, we find that the assessee treated debtors of Rs. 35,24,407/- as bad debts and actually written them off in the books of accounts. However since a provision for NPA of Rs. 11,90,575/- in respect of these debtors was already created earlier, the balance net amount of Rs. 23,33,832/- was only debited to profit and loss account as bad debts written off during the year. The amount of Rs. 11,90,575/- actually written off in the books in this year as bad debts and was adjusted against provision for NPA created in earlier years, was also required to be allowed in this year, as the NPA provision created in earlier years was always disallowed and never claimed as deduction. However the company inadvertently did not claim this amount separately in the computation at the time of filing of the return. The same was claimed through a revised computation of income was filed during the course of assessment proceedings bringing all the relevant facts to the notice of the AO that this figure of Rs. 11,90,575/- be allowed as deduction as bad debts a....
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....d in the assessment proceedings for that year and also considering the legal position, we hold that the CIT(A) has rightly allowed the said claim of Rs. 11,90,575/-. 131. This ground of appeal of the Revenue fails. 132. Ground No. (v) in both the appeals of Revenue has been raised against the action of CIT(A) of restricting the ad hoc disallowance made by the AO on account of conveyance expenses and repair and maintenance expenses of Rs. 1,00,000/-, restricted by the CIT(A) to Rs. 25,000/- each. 133. We find from the assessment order that the AO has made lump sum disallowance of Rs. 1,00,000/- each under the head repairs and maintenance and under the head conveyance expenses stating that some of the vouchers were missing and that there were some instances of cash payment also. 134. The matter was carried to CIT(A), who noted that the disallowance was made without giving any specific instance where the expenses are not supported by vouchers / bills. However, CIT(A) has also observed that the assessee has not produced complete vouchers / bills before him to prove that the same were completely and properly maintained. Keeping in view the facts and circumstances and the written sub....