TMI Blog2012 (4) TMI 744X X X X Extracts X X X X X X X X Extracts X X X X ..... t 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 ₹ 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 acquiring such assets and therefore this claim of deduction on account of depreciation ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ,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 appreciating the fact that the legislature has not provided any scope for double deduction in the cases of trust. (vi) The ld. CIT(A) has ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion U/s 11 and 12 of the Income Tax Act. 26,91,866 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 ₹ 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 t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the case of Shri Gujarati Samaj (Regd.), Indore, order dated 8th July, 2011. 8. The ld. CIT(A) also allowed 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 fo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the trust. This is done as per the provisions section 11(1)(a) of the I.T. Act which exempt such 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng of cheques in favour of beneficiaries in guise of loans / Share capital. 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 eva ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ewar Charitable Foundation (supra) and has committed no error in holding 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 ₹ 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 receive ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... regard to loan taken from Lunkad Group, contention of ld. Authorized Representative 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 w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion letter. 2.3.6]. As Submitted above Shri Sanjiv Lunkad, Shri Ghanshyam Jagtap, Shri Vijay Jaiswal and Shri Sharad Kumar Darak Directors/ representatives 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... de its order dt. 31.01.2012 in the case of Lunkad Group has also confirmed the additions made by the Ld. A.O. u/s 68 in its hands i.e. Lunkad Group itself. Thus there is no reason to again add said amount in the hands of assessee company by considering the Loans taken from Lunkad Group as accommodation 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e has rightly been claimed by the assessee. Thus the Hon'ble Bench is requested to approve the order passed u/s Ld. CIT(A) dt. 14.06.2011. 17. With regard to the assessee s claim for set off of carry forward of excess expenditure, the contention of ld. Authorized Representative was as under :- 5.1] That in the said Grounds the Department has challenged the order passed by CIT(A regarding allowance of assessee's claim in respect of Carry Forward of excess amount of Expenditure incurred on objects of the Trust for being considered as application against income of subsequent years . 5. 2] The said issue has been dealt by the assessing 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... etween capital or revenue expenditure. As per clear provisions and settled position of law capital expenditure has to be considered as application of income. 5.7] That the Karnataka High Court in the case of CIT V/s Janmbhoomi Press Trust reported in 242 ITR 457 and 242 ITR 703 has held that where funds were borrowed for construction of building, the repayment of the debt as utilized for construction of building, amounted to application of income for charitable purposes. 5.8] That in view of the above it is submitted that the Ld. CIT(A) has rightly allowed the claim of assessee regarding carry forward of excess 'expenditure incurred by the assessee trust towards object of Trust for being considered as application against income of subsequent years. 18. Rival contentions have been heard and records perused. The issue with regard to loan taken from M/s. Trimurti Finvest and East-West Finvest India Limited, which is belonging to the Lunkad Group, have already been decided by the Tribunal in its order in case of Mittal Group dated 30th December, 2011. 19. In the order dated 30th December, 2011, the deletion of addition made by the ld.CIT(A) was reversed by observing as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... has already been added in the hands of some other person. Meaning thereby addition should be made in the hands of the right person and the same cannot be deleted only on the plea that the same amount has been added in the hands of some other person. It was observed by the Supreme Court that there is no option under the 1961 Act, unlike the one given under 1922 Act and the AO must tax the right person and right person only. By right person is meant the person, who is liable to be taxed according to the law with respect to a particular income. The expression Wrong Person is obviously used as opposite of the expression right person . Merely because a wrong person is taxed with respect to a particular income, the AO is not precluded from taxing the right person with respect to that income. This is so irrespective of the fact, which course is more beneficial to the Revenue. A person lawfully liable to be taxed can claim no immunity because the Assessing Officer has taxed the said income in the hands of another person contrary to law. Similar provision has been laid down by the Hon'ble Supreme Court in the case of Smt. Taradevi, 88 ITR 323. The proposition so discussed above as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed, which indicated that Lunkad Group had received cash from various persons including assessee. Even though full name of assessee was not mentioned on the papers so impounded but the Assessing Officer inferred that name of Narmada as relating to assessee company, namely, Narmada Extrusion Limited . The Lunkad Group was asked to explain these incriminating documents indicating receipt of cash from various parties, but the Lunkad Group could not explain the same and dispute arose between the Lunkad Group and Department with regard to survey conducted at Lunkad Group. The Lunkad Group has also filed a writ petition in the M.P.High Court against the Department for the survey so conducted and the records so impounded. This writ petition is still pending in the Court. It was also brought to our notice that High Court has directed for issue of copy of documents so impounded alongwith copy of books of accounts to Lunkad Group, but as per assertion of Lunkad Group, the same have still not been furnished to it. When the assessment of the assessee company was framed with respect of the search conducted at business premises u/s 153A on 5.10.2006, the Department found that the assessee grou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er even though pertained to one month, it indicated the modus operandi of Lunkad Group for advancing loans to the assessee , therefore, the Department has applied the same conclusion even with respect to the loans, which were taken and also repaid in earlier years for which no incriminating document was found either at the business premises of the assessee or at Lunkad Group. 20. After analyzing all the documents placed on record, we found that additions have been made by Assessing Officer in respect of all the loans which even though taken and repaid by assessee in earlier years starting from 1.4.2001. Contention of Assessing Officer was that since the assessee could not produce the creditor in person, therefore, the confirmation and the affidavits filed by the creditors cannot be relied upon. We found that all the necessary documentary evidence to substantiate the loan transaction have been filed by the assessee, which indicated receipt and repayment of loan, payment of interest thereon and deduction of tax at source in respect of the interest paid thereon. It appears that due to the dispute between the Department and the Lunkad Group and the writ petition filed by Lunkad Grou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sion of Department. In the interest of justice and fair play, we restore the grounds raised by the assessee in the cross objection to the file of the Assessing Officer for deciding afresh in terms of our above discussion and as per law. 21. As the issues raised by the Revenue in the year are covered by the order of the Tribunal in the case of Mittal Group, respectfully following the same, we restore the matter to the file of the Assessing Officer for deciding the same afresh in terms of our directions given in the order of Mittal Group dated 30th December, 2011. 22. With regard to addition made in respect of loan taken from Rakesh Singhvi, we found that CIT(A) has recorded categorical finding to the effect that the assessee has filed copy of confirmation letter, PAN Card and Bank account of Shri Rakesh Singhvi to the Assessing Officer. As per the finding recorded by the ld.CIT(A), the Bank clearly indicated that cash was not deposited prior to issue of cheque to the assessee trust. The confirmation letters clearly show that the amount of loan was received for few months only on which interest was also paid and TDS was also deducted. These findings have not been controverted ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... In view of above, the question proposed on behalf of the revenue is answered against the revenue and in favour of the assessee. 24. In view of the above judicial pronouncements, we do not find any infirmity in the order of CIT(A) for allowing assessee s claim of depreciation. 25. With regard to assessee s claim for set off of carry forward of excess expenditure, the issue has been decided by the I.T.A.T., Indore Bench in the case of Gujarati Samaj (supra) vide its order dated 31.1.2011 and the decision of the Tribunal has been duly approved by the Hon'ble Jurisdictional High Court vide its order dated 8.7.2011 reported at 64 DTR 76, various other judicial pronouncements of Rajasthan High Court reported at 164 ITR 439, Gujarat High Court 211 ITR 293, Madras High Court 242 ITR 20 and 248 ITR 368 also support the view. 26. In view of the above judicial pronouncements, we do not find any infirmity in the order of CIT(A) for allowing set off of carry forward of excess expenditure. 27. In the result, both the appeals of the Revenue are allowed in part in terms indicated hereinabove. This order has been pronounced in the open court on 25th April, 2012. - - TaxTMI ..... X X X X Extracts X X X X X X X X Extracts X X X X
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