TaxTMI 
TaxTMI 
2025 (3) TMI 1084
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....3-14, 2014-15 & 2016-17. The assessee has also filed cross objections in all the aforesaid assessment years under consideration 2. Since the issues are common and the appeals are connected, therefore, the same are heard together and being disposed off by this common order. First we take up ITA No.4164/Del/2018 for AY 2011-12 as the lead case and the Revenue has taken the following grounds of appeal in Assessment Year 2011-12 :- "1. On the facts and under the circumstances of the case, the Ld.CIT (A) is justified in allowing the appeal of the assessee on late deposit of employees' contribution to PF ignoring the CBDT circular No.22/2015 dated 17.12.2018. 2. On the facts and under the circumstances of the case, the Ld. CIT (A) is justified in allowing the interest of Rs. 2,35,97,700/- ignoring the fact that the assessee on one side had invested huge amounts of Rs. 18,50,80,000/- in the company (in which director of the assessee company is owner) at without any return, on the other hand the assessee company is having loans on which it is paying. 3. On the facts and under the circumstances of the case, the Ld. CIT (A) is justified in allowing the appea....
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....h who owned 100% of M/s. XLR Capital (Cyprus) Limited. Since assessee has not earned any return from the investment made in M/s. XLR Capital (Cyprus) Limited, he observed that the assessee company is paying interest on unsecured loans from M/s. Global Minetec Ltd. @ 12% and interest to State Bank of Bikaner and Jaipur @ 12.75% per annum. With the above observation, AO disallowed the proportionate interest paid on unsecured loans and bank loan at the average rate of 12.75% on the investment made by the assessee in M/s. XLR Capital (Cyprus) Limited and determined the proportionate interest of Rs. 2,35,97,700/- and disallowed the same. 5. He further observed that the assessee is manufacturing 'industrial explosives' and it has made investment in some other company which is not part and parcel of the business of the assessee and also there is no profit in the business of the assessee from said investment. 6. Aggrieved with the above order, assessee preferred an appeal before the ld. CIT(A) and ld. CIT (A) after considering the detailed submissions allowed the ground raised by the assessee with the following observations:- "7.3 I have carefully considered the assessment o....
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....ent in its subsidiary company had not been incurred wholly and exclusively for the purpose of the business. The appellant has quoted the case of the Hon'ble Supreme Court in Madhav Prasad Jatia vs. CIT, AIR 1979 SC 1291: 118 ITR 200, 208, wherein it was held that the expression "for the purpose of business" occurring under the provision is wider in scope than the expression "for the purpose of earning income, profits or gains." 7.5. The judgment of M/s S. A. Builders Ltd. v CIT held that what is relevant is whether the amount was advanced as a measure of commercial expediency. The judgment of the Hon'ble Delhi High Court in the case of CIT v Dalmia Cement Ltd. has held that it should be established that there was nexus between the expenditure and purpose of the business. 7.6. In state of Madras vs. Coelho (GJ), the Supreme Court has held that, in ordinary commercial practice, payment of interest is taken as a revenue expenditure. The money borrowed must be for the purposes of the appellant's business or profession that is carried on during the year of account. 7.7. The issue whether borrowed capital had been actually used for business is one r....
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....Limited and M/s. Ethiopotash B.V., Netherland based exploration company. We observed that as per the joint venture agreement, the cost of the project was estimated at 25 million USD and out of which, 50% of the total project cost was to be contributed by Yara Netherland B.V. and balance was to be contributed by M/s. XLR Capital (Cyprus) Ltd. M/s. XLR Capital (Cyprus) Ltd. has approached the assessee to invest 8.50 million USD in its equity for getting 32.43% stake in M/s. XLR Capital (Cyprus) Ltd.. Just because assessee has not earned any income during the year, the AO proceeded to disallow the proportionate interest relating to the above said investment. After careful consideration, we are of the view that assessee has invested in M/s. Ethiopotash B.V. for exploration of Potash Project in Musley Area in Danakhil Depression, Ethiopia. The assessee has invested 32.43% stake in M/s. XLR Capital (Cyprus) Ltd. which in turn has invested 12.5 million USD in M/s. Ethiopotash B.V. company. The controlling of the raw material supply is key to any organization and assessee has invested to control the supply of raw material from Ethiopia. Therefore, the investment made by the assessee is dir....
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....not satisfied about the correctness or completeness of the accounts of the appellant or where the method of accounting provided in sub-section (1) has not been regularly followed by him. Under such situation the AO may make an assessment in the manner provided u/s 144 of the Act. 8.6. In the present case, the rejection of the trading results on the basis of non- production of certain details I vouchers cannot lead to an inference that there are sales made outside the books and to draw an adverse inference against the appellant. If the AO has doubted the correctness or completeness of the account, some concrete evidence was required to be obtained. The fact of stoppage of production cannot be ignored once it was substantiated by the Ministry. 8.7. The Ld. AR has also relied on the judgements of Hon'ble Allahabad High Court in the case of Imran Ahmed vs. CIT (1982) Tax CR (NOC) III (A11) held that on account of new absence of vouchers to substantiate entry for accounts, accounts in total cannot be rejected. It is well settled that reasonableness of expenditure should be judged from the view point of the business carried on by the appellant and not from the view ....
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....ils to substantiate the decrease in Gross Profit Ratio. However, the Assessing Officer without appreciating the aforesaid rejected the books of accounts on flimsy grounds and without according proper reasons. Therefore, in light of the above, the Appellant Company submitted additional evidences before the CIT(A), which are as under: 1) Copy of VAT returns filed for year under assessment along with reconciliation of Sales as appearing in Profit & Loss account. 2) Copy of Stock Register for the month of April 2010 & March 2011 as per excise records along its reconciliation with opening and closing stock appearing in Balance Sheet. 3) Copy of permission dt. 20.12.2010 of Chief controller of Explosives Nagpur, Ministry of Commerce & Industry, Petroleum, and Explosives Safety Organization for sale of explosives lying in factory of appellant. 4) Party wise details of sales exceeding Rs. 5 Lacs with amount of sales. 5) Party wise details of purchase exceeding Rs. 5 Lacs with amount of purchase. It may be noted that the Chief controller of Explosives Nagpur, Ministry of Commerce & Industry, Petroleum, and Explosives Safety Orga....
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....ant Company has to incur the fixed cost of salaries. Similarly, Fixed cost of power & fuel (like monthly rental of electricity bills), water and stores & spares (to keep the machinery in running condition) has not been reduced proportionately to the turnover. The additional evidences submitted by the Appellant were sent to AO for remand by the CIT(A). The CIT(A) admitted the additional evidences after detailed discussion on AO's reply on remand report and rejoinder of Appellant on AO's reply. During the appellate proceedings, the Appellant Company demonstrated the errors made by the Assessing Officer as well as deficiency in the working of the yield by filing additional evidences as submitted above. The additional evidences were verified by the AO in the remand proceedings and no adverse inference is drawn and hence, the decision of the CIT(A) to delete the ad-hoc addition too ought to be sustained." 15. Considered the rival submissions and material available on record. We observed that the AO has rejected the books of account merely relying on the variation in the GP recorded by the assessee in the past three years and in remand proceedings, the AO has....
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....year under consideration also. Accordingly, ground no.4 raised by the Revenue is dismissed. 21. With regard to Ground No.5 regarding share application money, the relevant facts are, during assessment proceedings, AO observed that the assessee has received share application money of Rs. 2.66 crores which was introduced during the relevant assessment year and assessee was asked to submit the details of subscribers along with address and payment details. In response, assessee has submitted the relevant details. On the basis of list, the Assessing Officer issued summon u/s 131(1) of the Act to the relevant applicants to attend the office along with supporting documents and their identity, creditworthiness and genuineness of the transaction. In response, M/s. Maneesha Finlease Ltd. and Ms. Indu Solanki has submitted requisite details and in respect of M/s. Blastec (India) Pvt. Ltd. summon was returned with the remarks as left. Subsequently, assessee provided the required details as the said company is a sister concern. AO observed that since the abovesaid applicant has not attended the proceedings and only documents were filed which could not prove the genuineness of the transactions....
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....assessment proceedings along with letter dt. 26.12.2013 in response to query no. 7 raised vide questionnaire dt. 05.12.2013. * Letter dt. 15.02.2014, duly signed by Major Niranjan Singh Solanki, Director of M/s Blastec (India) Pvt. Ltd. was submitted in response to summons issued through authorized representatives of the Appellant' Company, Mr. Gaurav Panda, Chartered Accountant containing with complete Bank Statements for the F. Y. 10-11, Income Tax Return Acknowledgement, complete Balance Sheet as on 31.03.2011 and confirmation duly signed by above Director. 2. Applicant has not attended the proceedings and only documents were filed which could not proved their existence and genuineness of transaction with them. Mere confirmation and other documents in which even the signatures put in by the persons giving confirmation are not verifiable, cannot be relied upon in view of circumstances of the case. Summons issued to Maneesha Finlease Ltd. was duly complied by Authorized Representative of that company. Maneesha Finlease Ltd. is also sister concern of the Appellant company and the same is also evident from related party disclosure at Point no. 8 of the....
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....2014 as mentioned at Point 2, which clearly show that Rs. 96,00,000/- was paid to Appellant company as per details given below:- (i) Share Application Money As on 31st March, 2011 Maneesha Finlease Limited has given share application money Rs. 3,82,40,000/- as per the details (a) & (b) below:- (a) Share application money given to Rajasthan Explosive & Chemicals Ltd. Rs. 78,00,000/- (Bank statement enclosed) S.No. Particulars From Amount Date 1 Ch-092417 Bank of India Capt K.S. Solanki on behalf of Maneesha Finlease Ltd. 38,00,000/- 06/12/2010 2 Ch-092425 Bank of India Capt K.S. Solanki on behalf of Maneesha Finlease Ltd. 40,00,000/- 23/12/2010 (b) Share application money of Rs. 3,04,40,000/- transferred from the following companies on account of merger with Maneesha Finlease Limited S.No. Particulars From Opening Transfer 1 Opening as 01/04/2010 Harbour Commotrade (P) Ltd. 76,40,000/- 76,40,000/- 2 Opening as 01/04/2010 Adbhut Consultancy Services (P) Ltd. 15,00,000/- Ch-049093 09/10/2010 Adbhut Consultancy Services (P) Ltd. 9,00,00....
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....n. Further note that these details of schedule (i.e. list / groupings) are part & parcels of Balance Sheet of M/s Maneesha Finlease Ltd. and are duly certified by their statutory auditors. On perusal of ITR of M/s Blastec (India) Pvt. Ltd. it was found that it is a loss making company and shown loss of Rs. 1,49,61,163/-. Therefore, creditworthiness of the applicant could not be proved. There is no bar on giving share application money by a loss making company. We would like to draw your kind attention to Balance Sheet of M/s Blastec (India) Pvt. Ltd., which have share capital of Rs. 5,70,26,600/- and Reserves & Surplus of Rs. 1,79,73,260.85. The sum total of both figures comes to Rs. 7,49,99,860.85 which is quite more than the share application money given of Rs. 2,66,00,000/-. This figure also shows the credit worthiness of M/s Blastec (India) Pvt. Ltd. The Balance Sheet of n/s Blastec (India) Pvt. Ltd. is duly audited by their statutory auditors and there should not be any doubt in the mind of Ld. A. O. regarding Assets, Liabilities and Net Worth of M/s Blastec (India) Pvt. Ltd. 6. On perusal of bank statement of M/s Blastech India Pvt. Ltd. it....
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....or. 10.4. The reconciliation has also been filed. No adverse inference has been drawn by the AO with regard to the evidence filed. Merely on this ground i.e. non receipt of reply to notice, it cannot be held that the appellant has not discharged the onus of receipt of monies from these concerns. The Hon'ble Apex Court in the case of CIT vs. Orissa Corporation Ltd. reported in 159 ITR 78 held 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 assessee's. Their index number was 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 any further. In the premises, if the Tribunal came to the conclusion that the assessee had discharged the burden that lay on him....
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....concern of the Appellant Company, had share capital of Rs. 5,70,26,600/- and Reserves & Surplus of Rs. 1,79,73,260.85/-. The sum total of both figures comes to Rs. 7,49,99,860.85/- which is quite more than the share application money given ofRs.2,66,00,000/-. This figure also shows the credit worthiness of M/s Blastec (India) Pvt. Ltd. The Balance Sheet of M/s Blastec (India) Pvt. Ltd. is duly audited by their statutory auditors and there should not be any doubt in the mind of Ld. A.O. regarding Assets, Liabilities and Net Worth of M/s Blastec (India) Pvt. Ltd. Further, it is to be noted that the summons were issued to MIs Blastec (India) Pvt. Ltd on 18, First Floor, Satya Niketan, Opp. Shri Venkteshwar College, New Delhi on 30th January, 2014. The registered office of the company of Appellant was situated there till 1st August, 2013. The above notice may have returned due to misunderstanding by postal Department regarding change of Registered office of the Appellant as M/s Blastec (India) Pvt. Ltd was also sharing the same office premises with Appellant. The Assessing Officer was not able to trace the payment of Rs. 96,00,000/- from the Bank Statement of M/s Maneesha Finl....
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....unsecured loan from M/s. Maneesha Finlease Ltd.. When the assessee was asked to submit the copy of ledger of the lender, copy of ITR of lender, copy of bank statement and confirmation etc., assessee has filed confirmation and copy of ITR of M/s. Maneesha Finlease Ltd. After perusing the Balance Sheet of M/s. Maneesha Finlease Ltd., the AO observed that nowhere name of the assessee company was appearing in loans and advances shown on asset side of the Balance Sheet. On perusal of the bank statement of M/s. Maneesha Finlease Ltd., the relevant amount of loan advanced is not verifiable. The assessee also not filed ledger account of M/s. Maneesha Finlease Ltd. and confirmation filed by the assessee does not mention the name of the person who confirmed the statement and observed that there were credit entries appearing just before and after the amount advanced to the assessee and, therefore, genuineness of the transaction could not be proved in this case and further observed that the name of the assessee is appearing as sundry creditors on liability side while the company has claimed it as obtained unsecured loan from M/s. Maneesha Finlease Ltd. With the above observation, the AO observ....
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....te deposit Rs. 1,42,00,000/- to Rajasthan during the year. The closing balance as on 31.3.2011 was Rs. 2,10,11,198/- Sr. No. Particulars From Amount Date 1 Opening as 01/04/2010 Maneesha Finlease Ltd. 52,00,000/- 01/04/2010 2 Ch-167117 Bank of India Maneesha Finlease Ltd. 40,00,000/- 09/08/2010 3 Ch-167134 Bank of India Maneesha Finlease Ltd. 1,02,00,000/- 06/12/2010 4 Interest F.Y. 2010-11 Maneesha Finlease Ltd. 16,11,198/- 31/03/2011 The Ld. AO has made various allegations while making the above addition. Our allegation wise reply is as under: 1. On perusal of the balance sheet of the M/s Maneesha Finlease Ltd. it was found that no where name of the appellant company was appearing in "Loan & Advances" shown on assets side of balance sheet. It seems that Ld. A.O. has ignored the details of schedule (i.e list/ groupings), wherein Rs. 2,10,11,198/- is mentioned as inter corporate deposit given to appellant company. However the same are enclosed herewith at Page No. 362, wherein we have highlighted the related portion. Further note that these details of schedule (i.e. list/ ....
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....nt itself, it is normal practice in the case of company to represent itself through a authorized Representative. In that case, a director representing the company is also authorized representative. Therefore on adverse inference of same should be taken in the light of following documents, which were submitted to prove the existence and genuineness of transaction: * Bank Statements, Income Tax Return Acknowledgement, complete Balance Sheet as on 31.03.2Ot1 and confirmation duly signed by above Director. * Explanation of Unsecured Loan given to Appellant Company as annexure 3. 5. On perusal of bank statement of M/s Maneesha Finlease Ltd it was found that there were credit entries appearing from the sister concerns of group just before and/or after the amount advanced to appellant company. Hence, genuineness of transaction could not be proved in this case. We are unable to understand the observation of Ld. A0. How appearance of credit entries from Sister concerns of group just before or after the advance make the transaction non genuine? 6. On perusal of Balance Sheet of M/s Maneesha Finlease Limited it is found that appellant company is ap....
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....d. DR of the Revenue brought to our notice relevant facts on record at para 4.1 of the assessment order and submitted that assessee has not proved the genuineness of the transaction and relied on the findings of the AO. 33. On the other hand, ld. AR of the assessee submitted as under :- "With respect to the issue relating to unsecured loans, in the assessment order, the Assessing Officer noted that the appellant company's name did not appear in 'Loan & Advances' of M/s Maneesha Finlease Ltd. and that the loan amount was not verifiable, and no ledger account was filed by the appellant. The confirmation provided did not mention the name of person confirming the statement. Additionally, the appellant appears as a sundry creditor, despite claiming an unsecured loan, further questioning the transaction's genuineness. It is pertinent to note that the Assessing Officer ignored the details of schedule (i.e., list/groupings), wherein Rs. 2,10,11,198/- is mentioned as inter corporate deposit given to appellant company. Ld. AO ignored the bank statement filed during assessment proceedings, wherein amount of unsecured loan paid of Rs. 1,42,00,000/- is clear....