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2019 (11) TMI 405

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..... ct of the purchases constitute only 7.95% of the purchases made during the year. Thus, it is a case where the genuineness of the sundry creditors cannot be doubted for the simple reason that either the outstanding balance is on account of opening balance or it is on account of purchases made during the year under consideration. Therefore, we hold that to the extent of ₹ 1,96,52,805.72, for which the confirmations were filed before the AO, the addition has been correctly deleted by the Ld. CIT (A) and we decline to interfere with such deletion. The assessee did not furnish confirmations of sundry creditors to the tune of ₹ 1,62,12,538.37 before the AO and to this extent the confirmations were submitted only before the Ld. CIT (A), we are of the opinion that it would be just and proper to restore this remaining addition to the extent of ₹ 1.62,12,538.37 to the file of AO with the direction that from the purchase bills to be submitted by the assessee it is to be verified that the amount outstanding is only on account of purchases and also to verify from the accounts of the assessee that the opening balance is the brought forward balance. If from such verification it .....

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..... ng addition of ₹ 2,21,25,000/- on account of non-submission of confirmation/s of unsecured loans, addition of ₹ 3,54,63,946/- on account of non-submission of confirmations of sundry creditors and addition of ₹ 4,28,550/- on account of disallowance of bank commission and interest on investment in Canara HSBC Life Insurance and on FDRs. 2.1 Aggrieved, the assessee had approached the Ld. First Appellate Authority who deleted all the three additions. Now, the department is before the Tribunal challenging the deletions by the Ld. CIT (A) and has raised the following grounds of appeal: 1. On the facts and in the circumstances of the case, the Ld. CIT(A) has erred in deleting the addition of ₹ 2,21,25,000/- on account of unsecured loans u/s 68 of the Act without appreciating the facts that the assessee has failed to prove the identity, genuineness and creditworthiness of the transaction during the course of assessment proceedings. Therefore, the Ld. CIT (A) is not justified in deleting the addition. 2. On the facts and in the circumstances of the case, the Ld. CIT(A) has erred in law in deleting the addition of ₹ 3,54,63,946/- on account of sundry creditors w .....

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..... .0 In response, with respect to ground no. 1, the Ld. Authorised Representative (AR) submitted that complete details of the unsecured loans were submitted and are also a part of the assessee s paper book at pages 137 and 138 of the paperbook. It was submitted that from the said details it is clear that out of a total sum of ₹ 2,21,25,000/- pertaining to outstanding unsecured loan as on 31-03-2016, the opening balance was to the tune of ₹ 1,16,25,000/- and during the year under consideration the amount received as loan was a sum of ₹ 1,05,00,000/-. Further, our attention was drawn to the copy of audit report for the year under consideration (at pages 22 to 38 of the paper-book and details of unsecured loans received during the year incorporated in column No. 24a at page 24). The Ld. AR drew our attention to the following chart in the audit report and containing the said details: 24 a Particulars of each loan or deposit in an amount exceeding the limit specified in section 269SS taken or accepted during the previous year: - Name of the lender or depositor Address of the lender or depositor PAN of the lender or depositor Amount of loan or deposit taken or accepted Wh .....

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..... hich were ignored by the AO, has rightly concluded that the addition made in respect of unsecured loans was uncalled for. 4.0.4 It was further submitted that as far as the opening balances are concerned, the same cannot be added in view of the judgment of Hon ble Delhi High Court in the case of CIT Vs. Usha Stud Agricultural Farms Ltd. [2008] 301 ITR 384 (Delhi) and our reference was specifically drawn to Para 8 of the said judgment. 4.1.0 Replying to the arguments of the Ld. Sr. DR with respect to Ground no. 2, the Ld. AR submitted that out of the total outstanding sundry creditors of ₹ 3,54,63,946/-, an amount of ₹ 1,05,70,246/- was the opening balance and the assessment for A.Y. 2012-13 (immediately preceding A.Y.) was framed vide order dated 27-03-2015 passed u/s 143(3) of the Act and, therefore, the addition to the extent of opening balance of ₹ 1,05,70,246/- is not maintainable. 4.1.1 It was further submitted that in so far as the remaining addition of ₹ 2,48,93,700/- (₹ 3,54,63,946/- less ₹ 1,05,70,246/-) is concerned, the same relates to the outstanding balance in respect of the purchases made during the year under consideration. It was s .....

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..... has rightly been deleted by Ld. CIT (A). 4.2.0 With respect to Ground No. 3, the Ld. AR placed reliance on the findings of the Ld. CIT (A). 5.0 We have heard the rival submissions and have also perused the records. We now take up the grounds one by one for adjudication. 5.1.1 As far as the addition pertaining to unsecured loans is concerned, it is seen that undisputedly, the assessment in respect of immediately preceding Assessment Year, i.e., A.Y. 2012-13 was framed u/s 143(3) of the Act vide order dated 27-03-2018. Copy of this order is placed at page 134 of the paper book. From the audit report and the details of unsecured loans filed at page 24 and pages 137 & 138 it is clear that fresh loans during the year under considerations were only to the extent of ₹ 1,05,00,000/-. It has also been brought on record that the assessee, during the course of assessment proceedings, had placed on record all the confirmations of the unsecured loans. The list of fresh unsecured loans has also been given in the audit report at page 24 and confirmations of all these unsecured loans were also filed along with reply dated 23-12-2015 (copy of which is placed at pages 49 to 70 and these co .....

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..... t evidences in respect of a sum of ₹ 1,96,52,805.72 was filed before the AO. We have also gone through these confirmations submitted by the assessee and found that the amount outstanding is on account of opening balance and purchases made during the year. 5.2.1 It is further seen that another set of confirmations for a sum of ₹ 1,62,12,538.37 (List at page 139 and confirmations at pages 140 to 172) were filed only before the Ld. CIT (A). This fact is evident from the index of the paper-book. We have also gone through these confirmations and found that in these confirmations also, the outstanding balance is on account of opening balance as well as purchases made during the year under consideration. 5.2.2 The law is well settled that opening balance pertaining to sundry creditors cannot be added to the income of the assessee more particularly when the assessment for the immediately preceding year was framed u/s 143(3) of the Act. In the present case, it has been found that the assessment for A.Y. 2012-13 was framed u/s 143(3) vide order dated 27-03-2018 (Copy at page 134). It is also well settled that the outstanding amount in respect of purchases made during the year als .....

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..... as directed above. With these directions the addition to the extent of ₹ 1,62,12,538.37 is restored to the file of AO and balance addition is deleted. This ground of the revenue is partly allowed for statistical purposes. 5.3.0 Coming to the third issue being agitated by the Department, it is seen that this addition relates to interest paid to bank on secured loans of ₹ 19,53,28,198/-. It was noticed by the AO that the assessee had invested a sum of ₹ 28,73,950/- in Canara HSBS, OBC Life Insurance and FDR amounting to ₹ 6,97,299/-. The total amount of ₹ 35,71,249/- was considered as being invested for non-business purposes and the interest at the rate of 12% amounting to ₹ 4,28,550/- was disallowed. The Ld. CIT (A) noted that the insurance scheme launched by the bank as a joint venture with other banks and investment was in the name of partners of the assessee s firm. The proceeds of the maturity were also deposited in the bank account of the firm and were utilized only for the purpose of business. Therefore, it has been held by the Ld. CIT (A) that such contribution was obligatory for the assessee in the course of availing loan facilities from .....

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