TaxTMI 
TaxTMI 
2012 (4) TMI 744
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.... the addition made u/s 68 in respect of credits appearing In the name of (i}East end Management Tech Pvt. Ltd. (ii) Lunkad securities Ltd {iii} K. K.Patel Finance Ltd. (iv)Trimurti Finvest Ltd. in the books of the accounts of the assessee on the ground that primarily identity of the creditors have been established without appreciating the fact that the evidence available with the department in the form of documents impounded during the course of survey u/s 133A carried out in the Lunkad Group of Companies clearly indicates that this group had only provided accommodation entries and accordingly the transactions with them of the assessee were not genuine. (iii) The Ld. CIT(A)-I, Indore has erred in law and on facts in directing to cancel the disallowance of interest of Rs. 5,95,553/- on the loans which ultimately were considered as unexplained u/s 68 of the I. T. Act. (iv) The Ld. CIT(A) erred on facts & circumstances of the case in holding that the assessee was entitled for depreciation on the assets without appreciating the fact that the deduction on this account had already been claimed by virtue of exemption u/s 11 of the I. T. Act on application of receipts of ....
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....i) The Ld. CIT(A)-I, Indore has erred in law and on facts in directing to cancel the disallowance of interest of Rs. 4,59,543/-on the loans which ultimately were considered as unexplained u/s 68 of the I. T. Act. (iii) The Ld. CIT(A) erred on facts & circumstances of the case in holding that the assessee was entitled for depreciation on the assets without appreciating the fact that the deduction on this account had already been claimed by virtue of exemption u/s 11 of the I. T. Act on application of receipts of acquiring such assets and therefore this claim of deduction on account of depreciation tantamount to double deduction. (iv) The Ld. CIT(A) has erred on facts and circumstances of case in holding that the assessee was entitled for depreciation on the assets without appreciating the fact that the claiming depreciation over a period of years is nothing but the diminution of the value of assets which had already been claimed on account of exemption u/s 11 on application of receipts for acquiring such assets. (v) The ld. CIT(A) has erred on facts and circumstances of case in holding that the assessee was entitled for depreciation on the assets without a....
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.... 36,60,264 The additions u/s 68 as regards to the unsecured loan included the loan amounts from Lunkad group of companies 4. By observing that there was survey u/s 133A at the Lunkad Group on 2.5.2006, some incriminating documents were found, which indicate that Lunkad Group was involved in providing accommodation entries, the Assessing Officer made the addition on account of various loans received and outstanding in the account of Lunkad Group. The Assessing Officer also added a sum of Rs. 38 lakhs in respect of loan received from Shri Rakesh Singhvi. 5. By the impugned order, the ld. CIT(A) deleted the addition on account of unsecured loans by observing that addition has been made on substantive basis in the hands of Lunkad Group, therefore, no addition was warranted in the hands of the assessee trust. The ld. CIT(A) also observed that Lunkad Group had issued confirmatory letters to various beneficiaries in support of having income, genuine loan and share application money. As per ld. CIT(A), had the Lunkad Group accepted the modus operandi of providing only entries, then the required recourse would have been confirming the addition made in the hands of beneficiaries, ....
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....wed assessee 's claim of carry forward of excess amount of expenditure incurred in the earlier years on the object of the trust by relying on the decision of the Bombay High Court in the case of Institute of Banking Personnel Selection, 264 ITR 110. Precise conclusion of CIT(A) was as under :- "In all the judgments, the consistent view has been that expenditure incurred in earlier years towards the objects of the Trust can be allowed to be an application u/s. 11 as against the income of subsequent year. This would entitle the assessee's claim to carry forward the excess expenditure. Thus, in principal, the claim of the assessee to carry forward its excess expenditure (on the objects of the trust) to the subsequent year is allowed. But, what I find that in spite of the claim of expenses (on the objects of the trust) is more than the surplus, the assessee as well as AO provided for accumulation to the extent of 15%. This approach is not correct. The deduction on account of 15% permitted accumulation is not warranted. This will have a bearing onto the quantum of carried forward balance. The AO would re-compute and work out the correct amount of excess of expenditure by wa....
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....h income of a charitable trust which is applied for the object of the trust. When there is no provision to allow depreciation u/s 11,12 &13 of the I.T. Act it cannot be allowed to assessee. The Courts have power only to interprete a section and they have no power to legislate as held in the case of Prakash Nath Khanna (2004) 266 ITR 1(SC). Matters which should have been provided but not provided for in the statute cannot be supplied by the courts (Principle of Casus Omisus) as held in following cases by the Jurisdictional High Court-: 1) Laxamandas Pranchand & ors (MP) 234 ITR 261 2) R.J. Trivedi & Sons (MP) 183 ITR 420 Since the provisions u/s 11,12 & 13 are granting exemption, they require strict construction as held in the case of Kota Corporative Marketing Society Ltd. (Raj) 207 ITR 608 & Renuka Datla (Ap.) 240 ITR 463. Now coming to provision of section 32, the act itself does not provide palpability of this section to any other source of income except to the income from business or profession, because this section says:- 32. (1) [ In respect of depreciation of (i) buildings, machinery, plant or furniture, being tangible assets; (ii) know....
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.... This activity of "accommodation provider" is the "business" of Lunkad group and will apply to all the years involved, in assessment order. 2. A party cannot escape the consequence of law merely by describing an agreement in a particular form though in essence and in substance, it may be a different transaction. Pan pat woollen and General Mills Co. ltd. (SC) 103 ITR 66 In present case, assessee group has shown receipt of various loans from different group concerns of Lunkad group, but in reality it is only "accommodation entry" of loan/Share Capital provided by Lunkad group, because providing accommodation of loans/Share Capital on payment of commission, is the business of Lunkad group. 3 Colourable devices are not part of tax planning. Mcdowell and Co. Ltd. Vs Commercial Tax Officer (SC) 154 ITR 148. In present case, assessee co. and entire "Mittal Group" used their own unaccounted cash, used the services of "accommodation entry provider" Lunkad Group to plough such cash back to its books, without payment of any tax, in the guise of loan. This cannot be called tax planning, but is tax evasion. " 12. On the other hand, Shri S. N. Agrawal, C.A., appeared on behalf....
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....olding this issue in favour of the assessee. 9. In the circumstances, in our considered view, no case is made out to interfere into the order passed by the Tribunal. Accordingly, the appeal fails and is hereby dismissed." 14. With regard to the loan taken from Shri Rakesh Singhvi, which was deleted by the ld.CIT(A), contention of the ld. Authorized Representative was as under :- "2.2.1] The assessing officer on Page Nos. 6 & 7 of the Assessment order for A.Y. 2007-08 has discussed about the loan received from Shri Rakesh Singhvi of Rs. 38,00,000/-. 2.2.2] The AO issued letter u/s 133(6) on 23-11-2009 fixing the date of hearing on 04-12-2009. However, till date, no reply was received. The AO then asked the assessee to submit the details. The assessee filed confirmation letter with PAN card and Bank statement [Discussed by the AO in his order on Page No 6 in third para] 2.2.3] That on the request of the assessee, the said creditor also filed these details directly with the AO in original [Accepted by the AO in his order on Page No 6 in third para] 2.2.4] The letter as issued u/s 133(6) was received unserved. Hence, the AO issued commission to his counterpart a....
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....presentative was as under :- "2.3] Loans Received from Lunkad Group of Companies 2.3.1] That on perusal of the assessment orders for both the year your honour will find that the Ld. assessing officer has made addition U/s 68 in the case of the assessee in respect of Unsecured Loans received from Lunkad Group of Companies and their associated on the basis of information available with him due to survey conducted by the department on 02-05-2006 on the business premises of the Lunkad Group even when the assessee had filed complete details as to justify the amount of loans received from these loan creditors. 2.3.2] That the assessing officer while making the Additions/disallowances u/s 68 has held that the assessee has failed to prove the identity, genuineness and creditworthiness of the loan creditors. The assessing officer also reached to the conclusion that the loans received from the above parties are merely accommodation entries. 2.3.3] That the observation of the assessing officer is purely based on hypothetical story created on the basis a survey conducted at the premises of "LUNKAD GROUP" even when, there was no reference of the assessee's name in an....
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....tives of the above unsecured loan creditors companies have personally attended before the Assessing Officer though, the assessing officer with his pre-: notion not satisfied with the explanation offered by them. 2.3.7] That all the above loan creditors are duly assessed to tax and their Income Tax assessments were also framed u/s 143(3). The copies of orders have been filed on page nos. 270 to 306 of paperbook filed for the A.Y. 2007-08 and page nos. 112 to 127 of the paper-book filed for A.Y. 2008-09. 2.3.8] That copies of Balance sheet as available are also filed. The copies of Balance Sheets are available on page nos. 147 to 269 of paper-book filed for the A.Y. 2007-08 and page nos. 89 to 111 of the paper-book filed for A.Y. 2008-09. That from the figure of Balance sheets and schedule thereof it is clear that all the creditors are having sufficient worth to advance Loans to the assessee. 2.3.9] That in view of the above facts, the assessee has properly discharged onus lying on him by filing the complete details of loan received, confirmation and the Balance sheet. Thus, the assessee has properly discharged onus lying on him. 2.3.10] The decisions as relied by the ass....
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....commodation entries when the assessee has discharged the onus lying upon it by establishing the identity, capacity and creditworthiness of Creditors. 2.6 In view of the above the addition made u/s 68 in respect of Loans received from Lunkad Group and its associates is contrary to the provisions of law and facts of the case. Thus the Hon'ble Bench is requested to accept the amount of Unsecured Loans taken by the assessee as Genuine and approve the order passed u/s Ld. CIT (A)." 16. With regard to disallowance of claim of depreciation, contention of the ld. Authorized Representative was as under :- " 4.4.2 That Hon'ble ITAT Indore Bench vide its order dt. 31.01.2011 (ITA No. 171 to 173/Ind/2010) in the case of Shri Gujrati Samaj V/s ACIT 1(2), Indore for the A.Y. 2004-05 to 2006-07 has decided the said issue regarding claim of Depreciation as application of Funds. Thus it has allowed the claim of assessee and dismissed the appeal filed by the Revenue. Copy of Said order is enclosed. 4.4.3] The order of ITAT has been approved by the Hon'ble Jurisdictional High court vide its order dt. 08.07.2011. The said decision has been reported in 64 DTR 76. C....
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....sing officer on following pages of Assessment order Assessment Year Page No. of Asst. Order 2007-08 Page 2 to 6 2008-09 Page 1 & 2 5.3.1] The Ld. CIT(A) has considered the submissions made by the assessee and allowed the claim of assessee regarding Carry Forward of Excess amount of Expenditure incurred on objects of Trust but with a direction to the A.O. for recomputation of the deduction. The Ld. CIT(A) has discussed the entire issue in detail on following pages of his appellate order and specifically on following pages of his order. Assessment Year Discussed on Pages of CIT A order Specific Finding on Pages 2007-08 Pages 28 to 30, 56 to 58 Pages 56 to 58, Para 5.4 2008-09 Pages 13 to 15, 30 to 31 Pages 30 & 31,Para 4.2 5.4.1] That Hon'ble ITAT Indore Bench vide its order dt. 31.01.2011 (ITA No. 160, 171 to 173/IND/2010) in the case of Shri Gujrati Samaj] V/s ACIT 1(2), Indore for the A. Y. 2004-05 to 2006- 07 has decided the said issue regarding Carry Forward of excess amount of Expenditure incurred on objects of the Trust for being considered application against income of subsequent years. Thus it has al....
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....ated 30th December, 2011, the deletion of addition made by the ld.CIT(A) was reversed by observing as under :- "From the order of the CIT(A), it is clear that he has deleted the addition in the hands of the assessee company on the plea that addition in the hands of creditor company (Lunkad Group) has been confirmed on substantive basis. As per CIT(A), if he confirmed the same addition in the hands of the assessee company, it will amount to double addition in respect of the same amount of income. We found that additions have been made in the hands of Lunkad Group on the plea that the source of share capital received by them could not be explained. However, addition has been made in the hands of the assessee company on the plea that genuineness of the loan transactions has not been established in view of the incriminating documents found during course of survey at Lunkad Group. Incriminating documents was found pertained to the month of April, 2006, which indicated that Lunkad Group was in receipt of cash from various beneficiaries including assessee and which has again been given to the beneficiaries through cheques. There is no dispute to the well settled legal proposition....
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....e Hon'ble Supreme Court in the case of Smt. Taradevi, 88 ITR 323. The proposition so discussed above as laid down by the Hon'ble Supreme Court has been followed by the I.T.A.T. Special Bench in the case of Pradeep Agencies, 111 TTJ 346. Applying the above proposition of law to the facts of the instant case, we can safely conclude that the ld. CIT(A) was not justified in deleting the addition in the hands of the assessee company merely on the plea that the same amount has been added in the hands of the creditor company. We found that in case of Lunkad Group addition was made in respect of cash received by it from persons, whose name, address and other particulars could not be furnished before Assessing Officer. This addition is mothering to do with the genuineness of loan received by assessee from Lunkad Group. Before reaching to the third criteria of creditworthiness, assessee have to cross the barrier of genuineness of loan transaction, which has become doubtful in view of the incriminating material found during course of survey at Lunkad Group with regard to receipt of cash from the assessee company and issue of cheque against such cash in favour of the assessee compan....
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....t of the search conducted at business premises u/s 153A on 5.10.2006, the Department found that the assessee group had also taken loans from Lunkad Group. The assessee was again asked during proceedings u/s 153A to substantiate the loan transaction for which the assessee had furnished confirmation letter as well as affidavits of creditors. The Department also asked to produce the Director of Lunkad Group before them. The assessee had produced loan confirmation letters and affidavit of Lunkad Group to substantiate the loan transaction, but the assessee failed to produce the Directors of Lunkad Group in person. Under these circumstances, the Department has taken a view that all the transaction of loan starting from financial year 2001-02 till date of search were not genuine and it was assessee's own money, which has been given back to the assessee in the form of loan entry. Here the contention of the ld. Authorized Representative was that Mr.Lunkad had challenged the survey action conducted by Income Tax Department before the Hon'ble High Court. Since the writ as filed by Lunkad Group is pending before the Hon'ble High Court for the reasons he has grievance with the Income Tax Depart....
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.... appears that due to the dispute between the Department and the Lunkad Group and the writ petition filed by Lunkad Group in the High Court, assessee could not persuade the Lunkad Group to appear in person before the Department. It is also not in dispute that no incriminating document was found by Department in assessee's premises either during course of search or on subsequent inquiry suggesting any cash given by assessee to Lunkad Group in consideration of loans so taken nor receipt of any cash whenever there was repayment of loan by assessee to Lunkad Group. Under these circumstances and in the interest of justice, one more opportunity should be given to assessee for producing the loan creditor for confirming the contents of confirmation and affidavits so filed. Keeping in view incriminating documents found during the course of survey at Lunkad Group for the period 1.4.2006 to 1.5.2006 pertaining to the assessment year 2007-08, even though related to one month only, the Department was justified in making addition in the hands of the assessee company in the assessment year 2007-08 by disbelieving the loan transactions. As per our considered view, addition should be made with respe....
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....or few months only on which interest was also paid and TDS was also deducted. These findings have not been controverted by the Department by bringing any positive material on record. Accordingly, we do not find any reason to interfere in the findings recorded by the ld.CIT(A) resulting into deletion of addition made on account of loan taken from Rakesh Singhvi. 23. With regard to assessee's claim of depreciation, we found that issue was covered by the order of the I.T.A.T., Indore, in the case of Gujarati Samaj Order dated 31.1.2011. We found that this order of I.T.A.T. has been further approved by Hon'ble Jurisdictional High Court vide its order dated 8.7.2011 reported at 64 DTR 76. The issue has also been dealt by Hon'ble Punjab and Haryana High Court in the case of Desh Bhagat Memorial Trust (supra), wherein after considering the decision of Hon'ble Supreme Court in the case of Escorts Limited, wherein it was held that object of allowing depreciation is only for the purpose of determining percentage of funds which have to be applied for the purposes of trust, which does not amount to double deduction. Precise observation of Hon'ble High Court was at para 6 & 7....