TaxTMI 
TaxTMI 
2016 (6) TMI 1295
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....in the business of coal trading and power generation. 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....
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.... be treated as Commission issued u/s 131(l)(d) of the Income Tax Act, 1961. The AO has then reproduced report furnished by DDIT, Kolkata, on page 8 of the assessment order: "Summon u/s 131 were issued to all the companies as mentioned 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....
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.... last three months only). Further during the enquiry conducted by inspectors, it was also noticed in other group cases chat Shri Ramchandra Kedia (who signed the confirmation produced by assessee on hearing dated 28.12.2010) M/s.Chamak Trexim P. Ltd., they claimed creditor in this case. 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 respe....
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....transactions of these six companies with the appellant appear to be genuine, however, they have expressed doubt about their creditworthiness on account of non-existence of such companies on the date of their visits. The Inspectors, however, in respect of three other three Pvt. Ltd. companies viz. M/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.Agarwa....
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....No.135 of 2009 and their identity was beyond any doubt relying on the order of Hon'ble High Court and the findings recorded in the said order. The appellant further in respect of six remaining companies also filed voluminous documents such as confirmation letters, Bank statements of such creditors along 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....
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.... the appellant is able to discharge his onus to establish the identity of the creditors , receipt of money through banking channel and existence and apparent financial worth of creditors as reflected from the audited accounts and IT. returns. It may be also observed that onus to establish all the three ingredients 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....
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....ement recorded by the Inspectors, has confirmed having advanced unsecured loans to the Appellant and also in response to the AO's notices u/s 133(6) the said lender company replied vide letter dated 09.12.2010 at page839 stating that it has advanced loans to the appellant and also filed copy of its ledger for the impugned 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....
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....elied and referred by appellant in the written submissions decided in the case of CIT Vs. Data Ware Pvt. Ltd. on 21st September, 2009, wherein Hon'ble Calcutta High Court categorically held - "After getting the PAN number and getting the information that the creditor is assessed under the Act, the Assessing officer should 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 a....
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....er on 10.12.2010 sent to the AO on 11.12.2010 which is at page 934, wherein the said company has accepted the fact of having advanced loans to the appellant giving details of cheques also balance confirmation filed relevant copies of its bank statements, balance sheet and ITR acknowledgement for this year. The ADIT (Inv) Unit II (3) Kolkata 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 ....
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....DDIT Kolkata on 07.12.2010/ 09.12.2010 were duly served as the said company has also filed its reply in compliance on 22.12.2010 duly acknowledged by the Of f ice of the DDIT at page 953 wherein the said lender company has filed copies of its balance sheet with schedules and ITR acknowledgements for FY 2005-06 to 2007-08, copy of relevant portion 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 Retu....
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.... force and merit in the contention of the appellant as the appellant has prima facie established the onus cast on it by giving necessary documents on record to establish the identity and credit worthiness of the creditor company and the amount having repaid in the next financial year after due deduction of TDS, the genuineness of the transaction 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. 5....
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....ng amount being invested in loans and advances. Further as per P&L A/ c such creditor company had turnover of Rs. 1.66 crores and the gross interest receipt at Rs, 32.54 lacs and the net prof it was arrived at Rs. 9.43 Lacs. The E-ITR acknowledgement for AY 2008-09 at page 270 of paper book B shows the total taxable income at Rs. 9.43 Lacs claiming a 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, 20....
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....was available and his statement was recorded. Bank account details and the bank statements of the said company were gathered and the copy of the tax audit reports, Directors Report etc for FY 2007-08 were also submitted. In the said company, one Shri Deepak Kumar Kalani was a director. Similarly, the enquiry was made in all the companies and copy of the Bank account, 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 thi....
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.... ITO finds that the alleged shareholders do not exist, then, in effect, it would mean that there is no valid issuance of share capital. Shares cannot be issued in the name of non-existing persons. The ld. Departmental Representative relied upon the decision of Hon'ble Kolkata High Court in CIT vs. Precision Finance, 208 ITR 465 (Kol) and various judgments as 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. ,....
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....tter dated 28.12.2010, submitted the details/ documents such as Confirmation letters alongwith PAN, Company Master details with the Registrar of Companies, Copy of income tax returns, Auditor's report of the creditor companies, Bank statements reflecting receipt and payment of the said loan amount and Form 16A issued on tax withheld on interest paid to establish the credibility of the transactions. The 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, sour....
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....reditor for the purposes of section 68 of the Act and, therefore, no addition was called for in light of legal principles laid down in the decision of the Supreme Court in the case of Orissa Corporation (supra). 14. The ld.Authorized Representative for the assessee submitted briefly regarding creditor companies in his written submission, which reads as under :- Aereo Dealcomm 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; 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....
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....r is, it is submitted, patently erroneous and legally unsustainable. Khatu Vanijay Pvt. Ltd. Panchanan Vanijya Pvt. Ltd. Kamalnayan Commercial Pvt. Ltd. Ranchhod Agencies Pvt. Ltd. Prathmesh Vanijya Pvt. Ltd. Lambodhar Barter Pvt. Ltd. The above six companies merged with M/s Middleton Good Pvt. Ltd. in April 2009, W.e.f. 01.04.2008 (Page 4 of the AO order and page 70 of CIT(A) order) . In respect of the aforesaid 6 companies following documents placed on record: 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; 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 t....
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....inued existence of the creditor. In the assessment, the assessing officer has simply referred to the report of inspector dated 10.12.2010 wherein it has been observed that identity of company is doubtful. In rebuttal, it is submitted that simply because nobody could identify the company when inspectors visited the premises cannot be the ground to doubt the transaction. The assessee had repaid the loan and hence was not aware of the change in address of the party. As a matter of fact, as per intimation for A.Y. 2009-10, there 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 1....
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....unal has restore the order of the CIT(A) in deleting the disallowance made u/s 68. 16. For the reasons elaborately discussed supra, it was submitted that addition made by the assessing officer has rightly been deleted by the CIT(A). In view of the aforesaid, it was submitted that since the assessee has discharged the onus under section 68 of the Act, the addition of Rs. 6,69,00,000/- made by the assessing officer has rightly been deleted by the CIT(A). 17. As a necessary consequence, the CIT(A) has rightly deleted disallowance of interest of Rs. 1,03,20,567/- 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....
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....50,27,497 8. Panchnan Vanijya Pvt. Ltd. - 35,00,000 25,615 5,277 - 35,20,338 9. Kamal Nayan Commercial Pvt. Ltd. - 15,00,000 7,992 1,646 - 15,06,345 10. Ranchhod Agencies Pvt. Ltd. - 14,00,000 7,746 1,595 - 14,06,151 11. Prathmesh Vanijay Pvt Ltd. - 20,00,000 21,721 4,474 - 20,17,247 12. Lambodar Barter Pvt Ltd. - 47,00,000 37,909 7,809 - 47,30,100 TOTAL 6,69,00,000 1,03,20,567 22. During the assessment proceedings, the AO has tried to verify the aforesaid unsecured loan. Notices were issued u/s 133(6) to the lenders calling for documentary evidences in support of the amounts advanced. Secondly, the Income-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 lende....
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....ive for the assessee submitted that in assessment year 2007-08, the opening balance of the company was Rs. 98,73,663/- which has been accepted by the department as no addition was made in that year and this year interest was paid of Rs. 33,04,583/-. We find that the loan receipt from this company were repaid in February, 2010. The inspector has confirmed that the accountant of this company of whom statement was also recorded by the Inspector, has confirmed having advanced unsecured loan to the assessee. The DDIT has also issued summons u/s 131 and in response to that the Company has filed the copy of the audited annual account, photocopy of the bank statement and confirmation. Therefore, the Inspector and DDIT have confirmed the existence of such company. The assessee has also filed copy of the assessment 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 a....
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....other cases, namely, Reward Consultants Private Limited, Pushpak Trading & Consultancy (P) Limited, Savera Distribution Private Limited and Paradise Garments Private Limited, the assessee has filed documentary evidence like confirmations, bank statements, income tax returns, audited reports, TDS certificates, Master data of the Company with Registrar of Companies, Memorandum of Association. In the case of Reward Consultants Private Limited, on inquiry made by the Inspector, it was informed that the present occupant has purchased the office from one Shri O.P. Agrawal who was the key person of M/s. Reward Consultants Pvt. Limited. This lender company had turnover of Rs. 1.66 crores, gross interest of Rs. 32.54 lacs and net profit of Rs. 9.43 lacs in assessment year 2008-09. Opening balance from the said company 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 ....
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....o the Revenue. 28. We find that in the case of Orissa Corporation (P) Limited, 159 ITR 78, in the context of requirement of the assessee to discharge primary onus under section 68 of the Act, observed that the assessee having given the names and addresses of the creditor who were income-tax assessees, the mere fact that such creditors did not respond pursuant to notice under section 131 of the Act could not be used against the assessee. The Hon'ble Supreme Court observed as under: "In this case, the assessee had given the names and addresses of the alleged creditors. It was in the knowledge of the Revenue that the said creditors were income-tax assessees. Their index numbers were in the file of the Revenue. The Revenue, apart from issuing notices under section 131 at the instance of the assessee, did not pursue 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 t....
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....r to take appropriate action under section 69 of the Act against the person who has not been able to explain the investment. In the present case, there is the concurrent finding of both the Commissioner (Appeals) as well as of the Tribunal that the firm has satisfactorily explained the aforesaid entries." 30. We find that in the case of S. K. Bothra & Sons, HUF v. ITO: 347 ITR 347, the assessee took loan from two persons. During the course of assessment proceedings, the assessing officer issued notice under section 131 of the Act to such parties which were duly responded. The assessing officer, however, added these loan amounts as unexplained credit simply based on the report of the Inspector and held the same as not genuine. The appeal preferred by the assessee was dismissed by the CIT(A) as well as by the Tribunal. On further 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 u....
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.... relevant previous year was against the debt due from M/s. Yadav and Company. (c) Creditworthiness of the creditor by pointing out that the amount was received by way of cheques drawn on the bank account of M/s. Yadav and Company maintained with Union Bank of India, Moti Bagh Branch, New Delhi, which, despite denial by the Yadavs, was, as per bank records, found to be opened and operated by Sh. O.P. Yadav/Mohinder Singh Yadav. The initial burden thus discharged, it was for the revenue to establish that the transaction in question was bogus. This would be so even if there is a denial by the creditors that the credits were not genuine as held by the Supreme Court in CIT v. Orissa Corpn. (P.) Ltd. [1986] 159 ITR 78. Mere denial by Yadavs that account in question was not operated by them would not automatically lead to the inference that assessee 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 ....
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....h 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. We find that both the Commissioner of Income Tax(Appeal) and the Tribunal below followed the well-accepted principle which are required to be followed in considering the effect of Section 68 of the Act and we thus find no reason to interfere with the concurrent findings of fact recorded by both the authorities. The appeal is thus devoid of any substance and is summarily dismissed." 33. On going through the above case 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 necess....
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....per the facts available on record. 37. The entire addition under section 68 of the Act is, thus, without any basis and is legally unsustainable. 38. The view of the ld. CIT(A) that the loan taken by the assessee from twelve companies aggregating to Rs. 6,69,00,000/- was explained, is proper and does not require any interference and the addition was rightly deleted by the ld. CIT(A) and has also rightly deleted the disallowance of interest of Rs. 1,03,20,567/- on the above loans. Ground Nos. 2 to 4 of the Revenue are dismissed. 39. Ground No. 5 reads as under : " On the facts and in the circumstances of the case, the ld. CIA(A) erred, erred in deleting the addition of Rs. 1,55,00,000/- being share capital from three companies being part of Linked group of companies which were found to be accommodation entry provider during proceeding u/s 133A of the Incometax 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 Finve....
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....account of unsecured loans and not on account of share capital as alleged by the assessing officer in the present proceedings. It is further respectfully submitted that in A.Y 2003-04, the assessment proceedings were reopened in the assessee's case, purportedly on the basis of survey conducted on 'Lunkad Group of companies' on 02.05.2006. It was held that the assessee had received unsecured loans from the above three companies, alleged to be part of Lunkad group. In this regard, it is respectfully submitted that the above three share applicants, are not part of Lunkad Group of companies. The CIT(A) in assessee's own case for AY 2003-04 in IT No. 325/10-11/416 dated 31.01.2012, deleted similar addition made u/s 68 of the Act, though on account of unsecured loans and accepted the identity and the creditworthiness of Trimurti Finvest P. Ltd., Purvi Finvest P. Ltd. and East West Finvest (I) Ltd, and also genuineness of the transaction. It was 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....
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....asion by tax planning whereas in appellant's case these were plain and simple loan transactions. Thus it emerges that the AO has not properly appreciated the facts and details surrounding such transactions and has considered them to be in-genuine transactions without bringing any definite details and evidences on record. 4.2.2 In the course of appeal proceedings the appellant has brought necessary details and evidences to establish the basic and primary fact that all the three Companies were not related to Lunkad Group of Companies. In course of discussion, it was admitted by the AR present that these Companies may have some financial transactions with some of Lunkad Group but that in itself would not be sufficient to hold them and club them in the same category as Lunkad Group of Companies. It was further emphasized that once the primary onus was fully discharged by the appellant the onus totally shifted to the AO to bring necessary definite and 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 th....
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....ve been repaid in a span of 1 ½ years or so when the appellant is able to discharge his onus to establish the identity of the creditors, receipt of money through banking channel and existence and apparent financial worth of creditors as reflected from the audited accounts and I.T. returns. It may be also observed that onus to establish all the three ingredients would vary from case to case identity is first ingredients, which can be established by giving complete address, physical existence of the person and I.T. 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. 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 genuinen....
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....ve been accepted. This fact also confirms that these companies are not related to Lunkad Group. Further, regular assessment u/s 143(3) of the above three companies for assessment year 2008-09 were carried out at Bilaspur, which also establish the existence and creditworthiness of these companies. The list of Directors of the three companies, as available on the website of Ministry of Corporate Affairs, submitted by the assessee also substantiate that these companies are not managed by Lunkad group. 48. Referring to the assessment order passed u/s 143(3) in the cases of all the three companies, our attention was invited to the findings given in these assessment orders that the share capital and reserves and surplus of these companies were examined by the AO, which fact has been mentioned in their respective assessment orders. 49. Reference was also invited to the decision of the Indore Bench of the Tribunal in case of Narmada Extrusions Pvt. Ltd. and others: 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 f....
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....ises as relied upon by AO and also the assessee it has to be observed that it has been broadly a set t led preposition in law that whether in a given case identity credit worthiness and genuineness has been established is broadly a finding of facts which has to be arrived on appreciation of cumulative facts available on records. In the instant case the identity of the three Companies stood accepted in appeal order passed for assessment year 03-04 by CIT(A) and no material has come on record in any manner to warrant a different view in the present appeal proceedings. Secondly, the creditworthiness of such companies were accepted for substantial amount of loans as noted above in the appeal order for assessment year 2003-04 by the CIT(A) and since there is no adverse material available, the credit worthiness cannot also be doubted. The above decision leaves the only issue to be decided is genuineness of share application money received by Private Limited Company that too 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 ....
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....l consideration of the facts and circumstances of the case the addition made by the AO treating the share capital contribution as unexplained is not found to be at all justified more so when such contribution in the immediate preceding year stood undisturbed in scrutiny assessment completed u/s 143(3) . Therefore the addition of Rs. 1.55 crore is rightly deleted by the CIT(A). Ground no. 5 of the Revenue is dismissed. 55. Ground No. 6 reads as under : "On the facts and in the circumstances of the case, the ld. CIT(A) erred in deleting the addition of Rs. 20,34,246/- and Rs. 2,29,754/- made for interest on loan to companies being part of the Lunkad group of Companies other companies which were found to be bogus/ name lenders in earlier years. " 56. The brief facts of the case are that during the year under consideration, the assessing officer disallowed Rs. 22,64,000/- paid as interest on account of unsecured loans taken by the assessee in earlier years, which is tabulated 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-....
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....ti Finvest P. Ltd., Purvi Finvest P. Ltd. and East West Finvest (I) Ltd. referring to the assessment order in the case of Agarwal Coal Corporat ion for Asstt . Year 2003-04. In simultaneously decided appeals in the case of M/s Agarwal Coal Corporation, the findings arrived by the AO have been held to be not justified and it has been held that the appellant has discharged its onus cast u/s 68 in respect of such loans. Thus the very basis of disallowance of such interest do not survive in view of the appeal order in the connected case passed on even date. 4.1.2 Proceeding next to t i le interest disallowance aggregating at Rs. 4,20,000/ - in respect of loan from Unno Indus tries (P. ) Ltd. and M/s Siddhachal Developers , Mumbaithe genuineness of such loans were examined in the case of Shar i Karan Mittal , refer red by AO and as per appeal order passed by this office on 06.06.2011, it was held that the appellant has discharged the onus cast on him u/s 68 of IT Act . Thus in case of these two loans al so the very basis referred by AO for making disallowance do not survive any longer . 4.1.3 In case of other disallowance of interest the issues are being examined in other connecte....
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....eferring to the assessment order in the case of Agarwal Coal Corporation for Asstt. Year 2003-04. In the preceding part of this order the findings arrived by the AO have been held to be not justified and it has been held that the assessee has discharged its onus cast u/s 68 in respect of such loans. Thus, the very basis of disallowance of such interest of Rs. 20,34,246/- do not survive in view of our finding given in respect of ground no 5 above. 62. Regarding interest disallowance of Rs. 2,29,754/- in respect of loan from Unno Industries (P. ) Ltd. and Norfiox Vincom Pvt. Ltd. , we find that the AO has disallowed only the interest paid to these companies by the assessee and the loan amount received in earlier years was not added u/s 68 in the scrutiny assessment of earlier years. We also find that in the case of M/s Agrawal Transport Pvt. Ltd. in ITA No. 201/Ind/2012 for assessment year 2008- 09 wherein standalone disallowance of interest paid to above referred companies was held to be not justified when no addition was made by the AO in respect of loans taken from such loan creditors. The finding recorded by CIT(A) to the effect that there is no addition on account of loan cre....
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....luding investment in overseas companies. 65. The matter carried to the ld. CIT(A) and the ld. CIT(A) partly allowed the ground by observing as under :- "7. Next ground No. 5.1 and 5.2 are di r e c ted against disallowance of interest u/s 14A as per amount worked out in accordance with provisions of Rule 8D of 1962. The AO has discussed this issue on page 37 to 42 of the assessment order and working of disallowable interest and proportionate other expenses in para 6.9 on page 42 as already extracted above. The AO has made such disallowance ignoring appellant 's objection that borrowed funds were not utilized for purposes of investment. He has arrived at this conclusion based on analysis of Balance sheet made in para 6.4 where he has identified investment in fixed and current assets at Rs. 55042.3 lacs against share capital reserve and surplus current liability and provision etc. aggregating at Rs. 39530.78 lacs. He has thus considered such investment at Rs. 463.38 lacs against unsecured and secured Loan obtained by the appellant Rs. 15974.90 lacs. The AR of the appellant apart from written submission firstly emphasized that the que s t ion of disallowance of interest u/s 1....
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....inted out by the AR that out of the total investment of Rs. 463.38 crore at the year end the amount of Rs .8 9.61 la c s was invested in equity shares of Overseas Associate Company, in the same business line, the dividend income from which as and when received could not be exempt in the hands of the appellant company and hence AO's act ion in considering such amount of investment in working out disallowance under Rule 8D was no way justified and was against the provisions of section 14A of the Act. 7.2 The appellant 's contention and carefully considered facts available on r e cord are found to carry sufficient force on merits. It has been clearly indicated in Schedule 8 of Balance sheet itself that Fixed deposits were pledged with Bank against letter of Credit (LC), Buyers' Line of Credit and Over draft loan facility. Thus this fixed deposit has an inextricable nexus and link with the business operation of the appellant and as stated by AR that such investment of fixed deposit was inevitable in the line of appellant's business where overseas purchases were involved. Thus there is sufficient merit in the content ion of the appellant whichever way the issue is examin....
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....wherein it has been held that where no portion of borrowed funds had been attributed to investments held as at the beginning of the relevant previous year, no part of the interest expenditure could be disallowed during the relevant year by reference to such investments: (i) CIT v. Sridev Enterprises: 192 ITR 165 (Kar.) (ii) CIT v. Givo Ltd.: ITA No. 941/2010 (Del) (iii) Punjab Woolcombers Ltd. v. ACIT: (2004) 1 SOT 114 (Chand) (iv) Motor and General Finance Ltd. v. DCIT: 90 ITD 449 (Del.) (v) Meenakshi Synthetics v. CIT: 84 ITD 563 (Lucknow) (vi) GR Agencies v. ITO; 79 TTJ 496 (Lucknow) (vii) Malwa Cotton Spinning Mills: 89 ITD 65 (Chd) (TM) (viii) Usha Martin Industries Ltd v. DCIT: 86 ITD 261(Cal.) Accordingly, disallowance under section 14A of the Act, in the present case, in respect of investments held relating to earlier years is unsustainable. 69. Regarding availability of surplus interest free funds, the ld. Authorized Representative submitted that the assessee had, during previous year relevant to the assessment year under consideration, made new investment in mutual funds amounting to Rs. 3.73 crores. Such investment in mutual funds was made o....
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....of borrowed funds with investments: 1. Gurdas Garg v. CIT: ITA No.413 of 2014 (P&H) 2. Bright Enterprises Pvt Ltd. v. CIT: ITA No. 224 of 2014 (P&H) 3. Lubi Submersibles Ltd.: ITA No.868 of 2010 (Guj.) 4. CIT v. K. Raheja Corporation Pvt. Ltd: Incometax Act, 1961No.1260 of 2009 (Bom.) 5. CIT v. Gujarat Power Corporation Ltd.: 352 ITR 583 (Guj) 6. Gujarat State Fertilizers and Chemicals Ltd : Tax Appeal No. 82 of 2013 (Guj HC). 7. CIT v. Torrent Power Ltd.: 363 ITR 474 (Guj) 8. CIT vs. Suzlon Energy Ltd.: 215 Taxman 272 (Guj) 9. CIT vs. UTI Bank Ltd: 215 Taxman 8 (Guj) (Mag.). 10. M/s.Agrovet Ltd. v. ACIT: ITA No. 1629/Mum/09 (Mum.) 11. Dy. CIT v. Eimco Elecon (India) Ltd.: 142 ITD (Ahd). 12. Dy.CIT v. Jammu & Kashmir Bank Ltd.: 142 ITD 553(Asr.) 13. Hero Honda Finlease Ltd vs. ACIT: ITA No. 3726/Del/2012 (Del) 14. ACIT vs. Champion Commercial Co Ltd: 152 TTJ 241 (Kol). 15. TML Drive Lines Ltd vs. ACIT : ITA No. 6064/Mum/2010 (Mum) 16. Kulgam Holdings Pvt. Ltd. vs. ACIT : ITA No. 1259/Ahd/2006 (Ahd) 17. Max India Limited vs. DCIT: ITA No. 103/2006 (Amr) Specific reliance is also placed on the following decisions: CIT v. Abhishek ....
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....TR 265 (P&H) CIT V. Holcim India (P) Limited: 272 CTR 282 (Del) ACB India Ltd. v. ACIT : 374 ITR 108 (Del.) REI Agro Ltd vs. DCIT: 144 ITD 141 (Kol. Trib.) For the aforesaid cumulative reasons, the CITA) rightly deleted the disallowance made under section 14A of the Act. 77. We have heard the rival contentions of both the parties. The Ld. Departmental Representative could not bring anything contrary to the findings of the Ld. CIT(A). Our interference is not called for. Ground Nos. 7 and 7.1 are rejected. 78. Ground no. 8 reads as under :- "On the facts and in the circumstances of the case, the ld. CIA(A) erred, the ld. CIT(A) erred in deleting the disallowance of Rs. 6,50,000/- out of colliery expenses and Rs. 2,00,000/- out of general expenses as the vouchers regarding colliery and general expenses were found not only self made but also unverifiable by the Assessing Officer." 79. The brief facts of the case are that during the year under consideration, the assessee had, inter-alia, claimed colliery expenses of Rs. 62,13,757/- and office general expenses of Rs. 19,92,429/-. Out of the above expenditure claimed, the assessing officer, however, made disallowan....
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....2003) SOT 393(Del.) Agarwal Trading Co. vs. ITO 108 TTJ 589 (Del.) Sterling Motors v. Addl. CIT: ITA No. 3217 to 3219/Mum/2009 (Mum.) Asstt. CIT v. Amrik Singh: ITA No. 987/2010 (Kol.) Rajni Combustion P. Ltd. v. DCIT: ITA No. 1779/Ahd./2009 (Ahd.) 84. The ld.Authorized Representative for the assessee concluded his arguments by submitting that the aforesaid disallowance has been rightly deleted by the CIT(A). 85. We have heard the rival contentions of both the parties. We find that the disal lowance made was dele ted ful ly in appeal order by the CIT(A) . We find that the Ld. CIT(A) has observed that while making the disallowance the AO has ignored the fact that there was nearly fivefold increase in net taxable income from Rs. 7.3 crores to Rs. 43.92 corers and also the fact that there was an overall increase of nearly two fold in the GP rate from 3.45% to 6.8% and therefore the AO should not have resorted to such unwarranted ad hoc disallowance of Rs. 8.5 Lacs when the assessee has over nearly fivefold increase in its taxable income. Such disallowances are not found to be justified and proper in the facts and circumstances of the case. We uphold the action of the....
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.... 148. That on the facts and in the circumstances of the case and as per law, the notice issued u/s 148 as well as the subsequent reassessment proceedings are unwarranted, invalid and void ab-initio. It is therefore prayed that these proceedings and the assessment order may kindly be quashed." 91. In respect of C.O., the ld.Authorized Representative for the assessee has filed the written submission, which reads as under :- "The assessee (Respondent herein) is a private limited company engaged, inter alia, in the business of coal trading and power generation. For the previous year, relevant to the assessment year 2003-04, the year under consideration, the assessee filed return of income, declaring income of Rs. 90,73,770. The return was processed under section 143(1) of the Income-tax Act, 1961("the Act"). Since no regular assessment under section 143(3) was undertaken, the return so filed by the assessee-company, duly processed under section 143(1) of the Act, stood accepted and attained finality. Subsequently, at the fag-end of limitation period of six years, notice dated 29.03.2010 was issued under section 148 for initiating assessment under section 147 of the Act. In respon....
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.... to as the relevant assessment year ) : " Section 147 of the Act empowers the assessing officer to initiate proceedings under that section to assess or reassess any income of the assessee that escaped assessment. The powers to initiate proceedings under section 147 of the Act are, however, not unfettered and unrestricted. In order to initiate proceedings under section 147, the assessing officer has to comply with the provisions of sections 148 to 153 of the Act. Under the scheme of the Act, the assessing officer can initiate proceedings under section 147 of the Act only if he has "reason to believe" that any income of the assessee has escaped assessment. Such belief has to be arrived at by the assessing officer on the basis of tangible/ reliable information in the possession of the assessing officer. In terms of section 148 of the Act, the assessing officer is required to record the reasons on the basis of which proceedings under section 147 of the Act are initiated. The reasons record application of mind by the assessing officer to come to the belief that any income of the assessee had escaped assessment and thus act as the stepping stone for the initiation of proceedings under....
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....present case, proceedings under section 147 were initiated on the basis of the following reasons reproduced in the order dated 24.9.2010 rejecting the legal objections of the assessee : "During the course of a survey u/s 133A conducted by the department on 02.05.2006 in the Lunkad group of cases it had been noticed that the assessee through companies of Lunkad group bringing back its unaccounted income in the books of account by way of accommodation entries. During the year under consideration (AY 2003-04) assessee has received Rs. 70,00,000/- as unsecured loans from the companies of Lunkad group. A report dated 15.02.2007 of the said transactions has been received from the Addl. Commissioner of Income Tax, Range - 3 from which it is revealed that the assessee is routing its own money through the companies of Lunkad group. On the basis of above discussion, I have reason to believe that income chargeable to tax to the extent of Rs. 70,00,000/- for the AY 2003-04 has escaped assessment within the meaning of section 147 of the Income Tax Act. Accordingly notice u/s 148 of the Income Tax Act, 1961 is to be issued." On perusal of the aforesaid, it will kindly be noticed that proceedi....
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.... of the list of companies at page 88-89 of the case law paper book Volume B, it will kindly be noticed by the Hon'ble Tribunal that none of the aforesaid three companies referred by the assessing officer are part of the Lunkad Group. As a necessary corollary, it will kindly be appreciated that the assessing officer while recording reasons for initiating proceedings under section 147/148 of the Act proceeded on a factually incorrect premise that the aforesaid three companies from whom the assessee had received unsecured loans were part of the Lunkad Group. It will kindly be appreciated that the very foundation of reopening of assessment of the assessee was that the assessee had received unsecured accommodation entries in the form of unsecured loans from the companies of the Lunkad Group. However, as a matter of fact, none of the three companies are part of the said Group and, therefore, for this reason alone, the reopening of assessment by the assessing officer is without any tangible material and purely on conjectures/ surmises, being based on irrelevant/ incorrect facts. The so-called belief of the assessing officer was merely based on suspicions, surmises and irrelevant/ in....
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....of initial investigation to arrive at such satisfaction. Investigation, it has consistently been held, must precede recording of satisfaction and not the other way round. Reference, in this regard, may be made to the following decisions :- Chhugamal Rajpal vs. S.P. Chaliha: 79 ITR 603. Amity Hotels Pvt. Ltd. v. CIT: 272 ITR 75 (Del.). Smt. Maniben Galji Shah: 283 ITR 453 (Bom.). Bakulbhai Ramanlal Patel v. ITO: 56 DTR 212 (Guj). Chunnilal Surajmal V. CIT: 160 ITR 141 @ 148, 151 (Pat). ACIT V. Heera Lal: [2007] 14 SOT 4 (Jp.). RRB Securities Limited V. JCIT: 91 TTJ 883 (Del.) ACIT V. Star Ferro Alloys (P) Limited: 90 ITD 63 (Del.) (TM). CIT vs. Raymond Woolens Mills: 236 ITR 34 (SC) ACIT vs. Rajesh Jhaveri Stock Brokers Pvt. Ltd: 291 ITR 500 (SC). In rebuttal, it is respectfully submitted, that there is no dispute with the aforesaid settled proposition of law that at the stage of initiation, the assessing officer has to form prima facie belief/ opinion that any income of the assessee had escaped assessment. It will, however, kindly be appreciated that in the present case, the assessing....
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....at income of the assessee chargeable to tax has escaped assessment. In the absence of fresh information/ material coming to the possession of the assessing officer, reopening by reappraising the existing material on record is not permissible, being based on a mere change of opinion. Reference, in this regard, may be made to the decision of the Full Bench of this Hon'ble Court in the case of CIT v. Kelvinator of India Ltd.: 256 ITR 1 (FB) which has been affirmed by the apex Court in the case reported as CIT v. Kelvinator India Ltd.: 320 ITR 561 (SC). The relevant observations of the apex Court are as under: "Therefore, post-1st April, 1989, power to re-open is much wider. However, one needs to give a schematic interpretation to the words "reason to believe" failing which, we are afraid, Section 147 would give arbitrary powers to the Assessing Officer to re-open assessments on the basis of "mere change of opinion", which cannot be per se reason to re-open. We must also keep in mind the conceptual difference between power to review and power to re-assess. The Assessing Officer has no power to review; he has the power to re-assess. But re-assessment has to be based on fulfillment....
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....ts (India) Ltd.'s case afresh considering the reasons noted in the said form to be the actual reasons for the issuance of the notice under section 148. If we were to accept this argument, we would have to ignore the directions given by the Supreme Court in GKN Driveshafts (India) Ltd.'s case that the Assessing Officer is bound to furnish reasons within a reasonable time. The notice under section 148 was issued on 29-3-2004. The petitioner filed the return and sought reasons by its letter dated 11-5-2004. If the date of filing of the counter-affidavit in this writ petition is taken as the date of communication of the reasons which forms part of the said form, a copy of which is Annexure-A to the counter-affidavit, then the date of supply of reasons, based on this argument, would be 5-11-2007. This immediately makes it clear that the Assessing Officer, who was bound to furnish his reasons within a reasonable time, did not do so. The period which elapsed between 11-5-2004, when the petitioner made the request for communicating the reasons, and 5-11-2007, the date when the counter-affidavit was filed, can certainly not be regarded as a reasonable period of time. Apart from this....
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....t in the income tax proceeding alone. In any proceeding say, civil or criminal, if a summon is issued to the defendant /respondent, is not accompanied with the copy of plaint or complaint then it is to be construed that no valid service of notice has been effected upon the defendant or the respondents whichever may be the case. The notice could be served at any point of time before the expiry of 6 years, if AO has reasons to believe that income has escaped assessment but, such reasons are also to be communicated to the assessee before the expiry of the limitation otherwise validity of such notice could not be sustainable. Being a subordinate authority to the Hon'ble High Court, we are bound to follow the authoritative exposition of law at the end of Hon'ble High Court. In view of the above discussion, we allow ground No. 2 of the assessee wherein he has pleaded that notice u/s 148 has not been served within the period of limitation upon the assessee. The assessment is not sustainable. It is quashed." The aforesaid decision of the Delhi High Court and the Delhi Bench of the Tribunal are squarely applicable to the facts of the present case. 92. The ld. Departmental Representati....
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....lted in undervaluation of inventories and understatement of profits. This information was obtained by the Revenue in a subsequent year's assessment proceedings. The commencement of reassessment proceedings was valid." 94. The AO's action is further found to be justified in view of discussion made hereinafter. It may be, however, observed that what happened in other group cases is broadly is of no consequence as that was a subjective decision of the AO after being satisfied on the facts of the case wherefrom no addition was called for and that cannot be cited as a ground or reason to argue that the reassessment proceedings were not validly initiated in the case of the assessee. 95. It is an admitted fact that the return filed by the assessee was processed u/s 143(1)(a) and no assessment was made thereon. Action u/s 147 can be initiated in the case of escapement of income chargeable to tax. As per Explanation 2 to section 147, following cases shall be deemed to be cases where income chargeable to tax has escaped assessment. - where no return of income has been furnished by the assessee although his total income or the total income of any other person in respect of wh....
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....ion of faith and true disclosure of material facts by an assessee as contemplated in pre-amended section. 147(a) and the Assessing Officer can, under the amended provisions, legitimately re-open the assessment in respect of income which had escaped assessment. Viewed in that angle, power to re-assessment is much wider under the amended provisions and can be exercised even after assessee has disclosed fully and truly all material facts. Reasons which may weigh with the Assessing Off icer may be the result of his own. Investigation and may also come from any source that he considers rel iable. Forming of this bel ief is an administrative decision to be arrived at in judicial manner. The Assessing Officer is required to act fairly and judiciously. His belief must have substance and must not be a Shadow. There is no dispute to the wel l settled legal proposition that such belief should be bona fide and should not be based on vague, arbitrary and nonspecific information. 99. In the case of Rajesh Jhaveri (supra) , Hon'ble Supreme Court categorical ly dealt with reopening of assessment with regard to mode under which assessment has been done, either by way of the int imat ion u/s ....
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.... of income. In the instant case before us, the return was processed u/s 143(1) and no assessment was framed b y i s sue o f no t i c e u/ s 1 4 3 ( 2 ) . Und e r the s e f a c t s and circumstances, the proposition of law laid down by the Hon'ble Supreme Cour t in the cas e o f Raj e sh Jhav e r i i s c l e ar l y appl icable. It is pert inent to ment ion here that Sect ion 147 authorizes the AO to assess or reassess income chargeable to tax, when, he has reason to be l ie ve that income for any assessment year has escaped assessment. In the instant case, the observation of the AO to the ef fect that by claiming the returned income under wrong head, the assessee has claimed excess depreciation, which is not permissible in case of income is assessable under the head " Income from House property". This is sufficient reason to bel ieve that income of the assessee has escaped assessment, which is sufficient to empower the AO to reopen the assessment by issue of not ice u/s 148. Hon'ble Supreme Court in the case of Rajesh Jhaveri has further observed that under the earlier provisions of Section 147(a), two conditions were required to be satisfied, firstly, the AO must have reason to....
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....cannot draw any support from any of the various cases decision cited. 102. We found that the case of the assessee is covered by the decision of ACIT vs. Rajesh Jhaveri Stock Brokers Private Limited, 291 ITR 500. Therefore, we are of the view that the case relied upon by the assessee in that case the facts are different and when the facts are different, this judgment will not helpful to the assessee. In case of Hon'ble Delhi High Court in the case of Haryana Acrylic Mfg. Co. vs. CIT, 308 ITR 38, this judgment pertains to writ petition. Therefore, this will not helpful to the assessee. Similarly, Hon'ble Delhi High Court in the case of Amity Hotel, 272 ITR 75, has decided the appeal in the context of provisions of Section 158 BD, therefore, this will also not be helpful to the assessee. Moreover, if case has to be decided on its own facts, therefore, we are of the view that the judgment relied upon by the assessee will not be helpful to the assessee. 103. In the result, the cross objection filed by the assessee is dismissed. ITA NO. 389/Ind/2012 for Assessment Year 2008-09 (Admanum Finance Ltd. Indore) : 104. The revenue has taken following grounds of appeal. 1....
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....peal. Following the same reasoning, we hold that the CIT(A) has rightly deleted the addition of Rs. 6,08,94,415/- made by the AO in this case also. Accordingly, this ground of appeal of the departmental appeal is dismissed. 107. Ground no. 3 has been raised by the Revenue against the deletion by CIT(A) of disallowance of interest of Rs. 23,40,000/- made by the AO. In the similar fashion as made in Agrawal Coal Corporation Pvt. Ltd. in assessment year 2008-09. 108. This issue has already been considered by us while deciding ground nos. 2 to 4 in ITA No. 294/Ind/2012 for the assessment year 2008-09 in the case of M/s Agrawal Coal Corporation Pvt. Ltd., wherein we have dealt with this issue in detail. The disallowance made by the AO in respect of interest paid by the assessee was deleted by the Ld. CIT(A) holding that the stand alone disallowance of interest without establishing such loans to be unexplained and in-genuine in assessee own case, does not have sanctity and approval of law. We have upheld the decision of the Ld. CIT(A) and dismissed the said ground of Revenue in that appeal. Following the same reasoning, we hold that the CIT(A) has rightly deleted the disallowance o....
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....ing Rs. 1215.31 lacs and in alternative there were no net interest deduction claimed was pressed by the appellant were no net interest deduction claimed was pressed by the appellant as deduction from which disallowance u/s 14A could be considered more so when the core business of appellant is moneylending. Thus, in the peculiar facts 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. 2,59,473/- by the AO is directed to be deleted and the disallowance in respect of expenses worked out at Rs. 19,970/- @ 0.5% of the average investments maintained." 112. We have heard the rival contentions of both the parties. From the order of CIT(A) we find that CIT(A) has held that the interest receipts in this case were much higher than interest paid and since the interest was mainly received on FDR which are required to be made for obtaining overdraft facility, the interest receipts are inextricably linked to interest payments and therefore interest received should be netted off against interest payments. The CIT(A) has given a finding that the investments made by the assessee were made out of own funds and no....
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....Rs. 84,56,250/- 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. 84,56,250/- 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 not produced / appeared. (iii) erred in deleting the addition of Rs. 3,32,954/- made u/s 14A and restricted to 0.5% of average investment at Rs. 18,696/- without appreciating the fact that the AO has made the calculation by applying the rule 8D and without considering th....
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....of rule 8D is clearly applicable to the case of the assessee. (iv) erred in deleting the disallowance of deduction of Rs. 11,90,575/- on account of bad debts where the assessee has not filed revised return but filed only revised computation and CIT(A) has not followed the settled law described by Apex Court in the case of Goetz India. (v) erred in deleting the addition made by the AO on account of conveyance expenses and repair and maintenance expenses of Rs. 1,00,000/- each and restricted the same to Rs. 25,000/- each, without considering that the AO has made addition on the basis of verification of books accounts and found that supporting bills / vouchers for some of the expenses were missing. 119. We find that in both the above appeals the revenue has raised the identical grounds except the change in figures. 120. Ground no. (i) and (ii) relate to deletion by CIT(A) of disallowance of interest made by the AO in respect of loan creditors which were held to be in-genuine in assessment year 2008-09. Since in assessment year 2008-09 the AO made the addition u/s 68 as a consequence he disallowed the interest paid by the assessee to these parties in assessment year 2010- 1....
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....arlier, 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 claimed this amount separately in the computation at the time of filing of the return. 4.3 It was submitted before me that as soon as the mistake became known to the assessee a revised computation of income was filed during the course of assessment proceedings bringing all the relevant facts to the notice of the AO and requesting 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 and be reduced from the income to arrive at correct taxable profit for the year and the return be treated as revised to this extent. Details of bad debts actually written off, provision made and copies of ledger accounts of all the debtors reflecting the ac....
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....cted the claim merely stating that since the claim was not made by filing a revised return u/s 139(5) in view of the decision of the Hon'ble Apex Court in the case of Goetze India the claim cannot be accepted. 4.8 When the bad debts are actually written off in the books of accounts as irrecoverable the said claim is allowable to the appellant u/s 36(1)(vii) read with section 36(2). Since the amount of Rs. 11,90,575/- actually written off from the debtors account in this year, the claim made by the appellant is a legitimate claim and is allowable. The AO is bound to assess the correct income and for this purpose the AO may grant relief suo-motu or on being pointed out by the assessee in the course of assessment proceedings. It has been time and again held by various courts that legitimate claims of the assessee should be allowed even if raised during the assessment proceedings. In the case of CIT vs. Ramco International in (2011) 332 ITR 306. The Hon'ble Punjab and Haryana High Court has held that:- "Deduction under section 80-IB-Allowability-Claim not made in return - Assessee having duly furnished the documents and submitted Form No. 10CCB during the assessme....
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.... return could only be entertained. He relied on the decision of the Hon'ble Supreme Court in the case of Goetze India Ltd. The CIT(A) observed that the AO rejected the claim merely stating that since the claim was not made by filing a revised return u/s 139(5) in view of the decision of the Hon'ble Apex Court in the case of Goetze India the claim cannot be accepted. The CIT(A) has also stated that when the bad debts are actually written off in the books of accounts as irrecoverable the said claim is allowable to the appellant u/s 36(1)(vii) read with section 36(2). Since the amount of Rs. 11,90,575/- actually written off from the debtors account in this year, the claim made by the appellant is a legitimate claim and is allowable. The AO is bound to assess the correct income and for this purpose the AO may grant relief suo-motu or on being pointed out by the assessee in the course of assessment proceedings. It has been time and again held by various courts that legitimate claims of the assessee should be allowed even if raised during the assessment proceedings. In the case of Commissioner of Income vs. Ramco International in (2011) 332 ITR 306. The Hon'ble Punjab and Haryana Hig....
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....rns of earlier years were also filed to substantiate that NPA provisions were disallowed by the assessee in the respective years. The AO rejected the same on the premise that claims made through a revised return could only be entertained. He relied on the decision of the Hon'ble Supreme Court in the case of Goetze India Ltd. The CIT(A) observed that the AO rejected the claim merely stating that since the claim was not made by filing a revised return u/s 139(5) in view of the decision of the Hon'ble Apex Court in the case of Goetze India the claim cannot be accepted. The CIT(A) has also stated that when the bad debts are actually written off in the books of accounts as irrecoverable the said claim is allowable to the appellant u/s 36(1)(vii) read with section 36(2). Since the amount of Rs. 11,90,575/- was actually written off from the debtors account in this year, the claim made by the appellant is a legitimate claim and is allowable. The AO is bound to assess the correct income and for this purpose the AO may grant relief suo-motu or on being pointed out by the assessee in the course of assessment proceedings. 129. We find that it has been time and again held by various courts t....