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2015 (5) TMI 425 - ITAT DELHI

2015 (5) TMI 425 - ITAT DELHI - TMI - Interest payable by assessee - restriction u/s 43B - disallowance exceeding the amount debited to Profit and Loss account - Held that:- Considering contention raised by the assessee’s counsel in the light of the order of the ld CIT(A) in respect of another similar company like assesse namely Baghpat Co-operative Sugar Mills Ltd that Sahkkar Vishes Nidi and UP Cooperative Sugar Factories Federation Ltd. are UP State Govt. Institutions and are not covered in t .....

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ses.

Addition on difference in sales price of molasses - CIT(A) deleted addition - Held that:- Assessee maintains regular books of accounts and the same were duly audited and no discrepancies have been spelled out or could be pointed out by the AO in the books of accounts and the same were not rejected by the AO. In the absence of any adverse material on record to show that any transaction outside books of accounts has taken place and differential sale proceeds have been received no a .....

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eleted and we confirm the same - Decided in favour of assessee.

Addition on account of credit balance of creditors - CIT(A) deleted addition - Held that:- CIT(A) has rightly observed that the AO has proceeded in ad hoc manner to label all creditors outstanding for more than a year as non-genuine. He has neither specified the name of the creditors, nor has he discussed the nature of transactions due to which such credit has come into existence, nor has made an enquiry with regard to su .....

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oubted the genuineness of these creditors; And that no enquires were made by the AO and in a casual manner the credit balances were added to the income of the assessee. Thus firmity in the impugned order of the ld CIT(A), hence, we uphold the same - Decided against revenue. - ITA No. 2777/Del/2013, CO No. 191/Del2013 - Dated:- 28-4-2015 - Shri R. S. Syal And Shri A. T. Varkey,JJ. For the Appellant : Shri Vikram Sahay, Sr.DR For the Respondent : Shri P. S. Kashyap, F. C.A. ORDER Per A. T. Varkey, .....

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2010. Notice u/s. 142(1) dated 15.07.2011 were issued which were duly served upon the assessee. Books of accounts were produced which have been examined on test check basis by the AO and thereafter, after considering the detail furnished by the assessee, the AO has completed the assessment on the total income of ₹ 2,16,43,241/- by making various additions u/s. 143(3) of the Act. 3. Against the aforesaid order of the Assessing Officer, assessee appealed before the Ld. CIT(A), who vide his o .....

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financial institutions and (b) Interest was not claimed in the P&L a/c whereas the interest bearing loans were admittedly from state governments ( virtual financial institutions giving loans to assessee) and the assessee has debited entire interest of ₹ 5,42,30,719/- and claimed entire sum in its P& L A/c against which Ld. CIT(A) wrongly held that merely ₹ 15,24,100/- were claimed by the assessee in the P&L a/c. (2) Whether in the facts and circumstances of the case, the .....

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& Sons (SC) 63 ITR 411. (iv) Tahil Ram Vs. ITO (ITAT, Ahmedabad) 229 ITR (AT) 34 (3) Whether in the facts and circumstances of the case, the Ld. Commissioner of Income tax (Appeals) has erred in law in deleting the addition of ₹ 2,00764/- without appreciating the facts that the addition was made by the A.O. on alc of difference in sales prices of bagasse in view of comparable higher sale price shown by the another assessees of same trend. Reliance is further placed on the judgments ci .....

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ve the genuineness of credits. Onus to prove such credit was entirely upon the assessee which totally remained undischarged. Reliance is placed on the following judgments: (i) Basantipur Tea Co.(P) Ltd. Vs CIT 180 ITR 261(Cal) (ii) CIT Vs. La Medica (2001) 250 ITR -575 (Delhi) (iii) Sri Ganesh Rice Mills Vs. CIT (2007) 294 ITR 316 (Alld.) (iv) CIT Vs. United Commercial and Industrial Co.(199) 187 ITR 596 Cal. (v) CIT Vs Precision Finance Pvt. Ltd. (Cal) 208 ITR 465 (vi) CIT vs. Korlay Trading Co .....

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s Objection:- 1. That on the facts and in law making disallowing u/s. 43B to ₹ 15,24,100/- is totally wrong, unjustified and illegal. In assessment order the AO has treated various institutions of UP Government as financial institutions within the meaning of section 43B(d) and accordingly disallowed a sum of ₹ 1,72,93,001/- u/s. 43B(d) of the Act. The AO make disallowance not on the basis of the interest charged in profit and loss account i.e. ₹ 15,24,100/- but disallowed ͅ .....

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e same. 8. Ground No.1 of the revenue and the sole ground of the CO preferred by the assessee are in respect of restriction of addition of ₹ 1,72,93,100/- to an amount of ₹ 15,24,100/- being interest payable by assessee. 8.1 We find that during the assessment proceedings, the AO has noted that the assessee had shown interest accrued and due; but not paid to Shakkar Vishesh Nidhi & Govt. of U.P. to the tune of ₹ 15,24,100/- & ₹ 1,57,69,000/- respectively. The AO wa .....

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c financial institutions and also states that, in addition to such entities, the Central Government may by notification in the official Gazette, specify such other institutions as it may think fit to be a public financial institutions and so, UPSCMSL is not public Financial Institutions. However, the AO has remarked that the explanation given by the assessee was not found to be "convincing". According to the ld AR, the AO thereafter dwells on the intention of legislature and gives an o .....

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paid/payable to UP Sahakari Chini Mill Sangh Ltd, which the AO has considered as loan from UP Government. It was explained by the ld AR that the year in 2003, the U.P. Sahakari Chini Mills Sangh Ltd. (UPSCMSL) had granted loan to the assessee society but the said loan amount was disbursed to some other party instead of the assessee. During the year, under consideration, for the purposes of reconciliation, the assessee society passed a journal entry for the loan amount and interest thereon in th .....

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15,24,100/- as interest in its profit & loss account on loan from Shakkar Vishesh Nidhi as appearing in schedule 'P'; that as per AO a total sum of ₹ 1,72,93,100/- was remaining unpaid on U.P. Government institutions. He further submitted that the interest of ₹ 1,72,93,100/- was never debited to profit & loss account as observed by CIT(A) in his appeal order in para 2.2 and also submitted that section 43B(d) talks about interest payable on any loan & borrowing fr .....

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of the assessee, it has been held by CIT(A) that these institutions i.e. Sahkkar Vishesh Nidhi & U.P. Co-Operative. Sugar Factories Federation Ltd are U.P. State Government Institutions. According to him both the institutions of U.P. Government are not covered in the definition of public financial institutions as given in section 4A of the Company Act as provided in section 43B(d) of the Act, and so interest debited in profit & loss of ₹ 15,24,100/- on Shakkar Vishesh Nidhi is als .....

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s also been correctly held by the ld CIT(A). Therefore the ld CIT(A) has rightly held so in respect to UPSCMSL and has given the relief to the assessee. 8.2 We further find considerable force in the contention raised by the assessee s counsel in the light of the order of the ld CIT(A) in respect of another similar company like assesse namely Baghpat Co-operative Sugar Mills Ltd that Sahkkar Vishes Nidi and UP Cooperative Sugar Factories Federation Ltd. are UP State Govt. Institutions and are not .....

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ing heard. The AO shall decide the said issue untrammeled by any observation we have made above and decide the question on merits and in accordance to law. In view of the above, this ground raised by assessee is allowed for statistical purpose and the ground raised by the revenue is dismissed. 8.3 In the result, the ground no. 1 raised by the Revenue in its appeal is dismissed and the Ground no. 1 raised by the Assessee in its cross objection is allowed for statistical purpose, in the aforesaid .....

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der, the AO noted that the assessee was engaged in the business of production and trading of sugar. The assessee was asked to explain why the closing stock of products and the by products should not be taken at the value shown by another entity BCSML. The AO noted that this concern as well as the assessee are in the same business, and are situated in the similar area and are controlled by the U.P. Govt. In the assessment proceeding we take note that AO made a comparative study and has given a ch .....

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the assessee and BSCML. So the AO multiplied this difference to the quantity of molasses sold by the assessee and an addition of ₹ 1,36,04,397/- was made on this account to the total income of the assessee. During the appeal proceedings, it has been brought to the notice of the ld CIT(A) that the assessee is fully controlled by the U.P. Govt. and maintains regular books of accounts which are audited. And the products manufactured by the assessee particularly molasses are excisable items. T .....

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the profits and gains cannot be properly deduced from the books of accounts. As regards the case laws cited by the AO, it has been stated that the facts in these cases were very different from that of the instant case. In these cases, either the records of the assessee were not found to be appropriate or there was specific discrepancy found in the books of accounts. So, after appreciating the facts and submissions as stated above, the ld CIT(A) opined firstly, the fact that the assessee concern .....

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the rate per quintal of sugar as shown by the assessee is product of a concern throughout the year or was the rate variable and the AO has adopted an average rate. The ld CIT(A) rightly observed that the point which has not been appreciated by the AO is that any product could have variable rate of sales depending upon the quality of the product, the geographical area in which the product is marketed, the time when sales have been effected etc. Molasses can be put to diverse uses such as an inpu .....

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whether there is a case of under invoicing by examining the sale vouchers and conducting appropriate enquiries with regard to the purchasers. The ld CIT(A) has rightly held that it is not open for the AO to summarily adopt the sale price of another party in the same business, reject the books of account on this basis and estimate unaccounted sales of an assessee. We also taken note of the fact that the submissions made during the appeal proceedings before the ld CIT(A) had been forwarded to the .....

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en maintained and have also been audited. In fact, in the assessment order, the AO has stated that books of accounts were produced and were examined on test check basis. The ld CIT(A) has rightly relied on the decision of the Hon ble Supreme Court in the case of Calcutta Discount Co. (91 ITR 8) wherein it has been held that when one trader transfer its goods to another trader at a price less than the market price, the taxing authority cannot take into consideration the market price of those good .....

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e authorities have no right to substitute the market price or average price in place of the agreed price. 10. We find that the assessee maintains regular books of accounts and the same were duly audited and no discrepancies have been spelled out or could be pointed out by the AO in the books of accounts and the same were not rejected by the AO. In the absence of any adverse material on record to show that any transaction outside books of accounts has taken place and differential sale proceeds ha .....

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on made was rightly deleted and we confirm the same. We also find that AO has made similar addition of ₹ 2,00,764/- made on account of difference in the sale price of bagasse. For the same reasons stated above he rightly deleted this addition also. In the background of the aforesaid discussions, we do not find any infirmity in the well reasoned findings of the ld. CIT(A) with respect of ground no. 2 and 3, hence, we uphold the same. In the result, the ground No. 2 & 3 raised by the Rev .....

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