TMI Blog2022 (10) TMI 387X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee in the past as well as in the subsequent AY. The same parties were supplying the material as well as providing services to the assessee in earlier AY, none of the AO disallowed or found any discrepancies in these parties. Therefore, we are inclined to accept the findings of the CIT(A) and we do not find any reason to disturb the findings of the CIT(A). Appeals of the revenue are dismissed. - ITA NOs. 4150 & 4162/MUM/2018 - - - Dated:- 15-7-2022 - SHRI ABY T. VARKEY, HON'BLE JUDICIAL MEMBER AND SHRI S. RIFAUR RAHMAN, HON'BLE ACCOUNTANT MEMBER Assessee by: Shri Shailesh Shah Department by: Shri Ram Krishna Kedia ORDER PER S. RIFAUR RAHMAN (AM) 1. These appeals are filed by the Revenue against different orders of Learned Commissioner of Income Tax (Appeals)-5, Mumbai [hereinafter in short Ld.CIT(A) ] dated 28.03.2018 for the A.Y. 2013-14 2014-15. 2. Since the issues raised in both these appeals are identical, therefore, for the sake of convenience, these appeals are clubbed, heard and disposed off by this consolidated order. We are taking Appeal in ITA.No. 4150/MUM/2018 for Assessment Year 2013-14 as a lead appeal. 3. Brief fact ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e) Nirmiti Construction (@15.60 approxm.) 6,24,000 Total 15,67,040 7. Further, during the assessment proceedings, Assessing Officer observed that assessee has purchases with the J.J. Enterprises, Phifer India Pvt. Ltd., and Jay Engg. Works to the extent of Rs.149.87 lakhs. In order to verify the same, Assessing Officer issued notices u/s.133(6) of the Act to all the parties to submit the details of purchases along with ITR, bank statement, invoices etc., since no response from these parties Assessing Officer proceeded to make the disallowance of total purchases recorded by the assessee. 8. Aggrieved assessee preferred an appeal before the Ld.CIT(A) and assessee has filed grounds of appeal with objection to the additions made by the Assessing Officer relating to unsecured loans, interest and bogus purchases. After considering the same, he has deleted the addition made by the Assessing Officer, aggrieved revenue is in appeal before us. 9. Revenue has raised following grounds in its appeal: - 1. Whether on the facts and circumstance of the case and in law the Ld. CIT(A) deleting was right in the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ated 25.01.2018, for the sake of clarity it is reproduced below: - Reg. Ground of Appeal No. 182 Addition under section 68 of Rs. 1,82,73,000/ on account of loans taken and Disallowance of interest expense of Rs.9,43,040 a) The Ld. AO has stated that the Balance sheet and the Capital account of the said 5 parties are not submitted by the appellant. The bank statements of Anil More, Sunil More and Chinmai More are showing credits (deposits) from unknown sources just prior to the amount being advanced to assessee and further alleged that the said 3 parties are not giving amount to appellant company from their own source but they themselves are receiving amount from other sources prior to amount been given to the appellant company which is unexplainable. In this regard we have to state that the appellant company has submitted loan confirmations of the parties during the assessment proceedings and has submitted the following details as additional evidences vide letter dated 13.06.2017. i) The copy of acknowledgements of the return of income filed by the lenders, ii) Ledger account of the lenders in the books of appellant company, iii) Relevant extract of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent Mercantile Pvt Ltd not stamped. Thus, it is submitted that the confirmation of M/s.Trident Mercantile Pvt Ltd duly stamped and signed is already available in the records of the ld. AO, which is not an additional evidence. c) The confirmation of Nirmitee Constructions Pvt Ltd for AY 2013-14 is not stamped and signed. In this regard we have to state that the loan confirmation of M/s. Nirmitee Constructions Pvt Ltd was already submitted to the ld. AO during the assessment proceedings by the AR of the appellant vide its letter dated 28.03.2016. The said confirmation was duly stamped and signed. The, ledger account of M/s. Nirmitee Constructions Pvt Ltd in books of the appellant company was submitted as additional evidence vide our letter dated 13.06.2017 which is erroneously considered by the ld. AO as a confirmation given by M/s. Nirmitee Constructions Pvt Ltd, as not stamped and signed. Thus, it is submitted that the ld. AO has wrongly stated that the confirmation of M/s Nirmitee Constructions Pvt Ltd is not duly stamped and signed. d) The confirmation of Sunil More, Chinmay More and Anil More does not contain PAN. In this regard we have to state that the conf ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... any from their own source. The appellant has submitted the copies of acknowledgements of the return of income filed by these 3 shareholders, relevant bank a/c statements of the appellant and corresponding bank statements of the lenders, the Ledger account, etc. It is submitted that the total income offered to tax in the return of income and their bank statements prove their creditworthiness to provide loans to appellant Company of which they are shareholders. It is further submitted that three main ingredients of Section 68 ie. identity of the lenders, creditworthiness of the lenders and genuineness of the transaction is evident from these documents. The source of loan received by appellant is clearly proved and section 68 cannot be invoked in respect of these transactions. As regards the comment of AO in the remand report that the Confirmation of M/s Trident Mercantile Pvt Ltd is not stamped, it is submitted that what is given as additional evidence is the copy of ledger account. The Confirmation duly signed and confirmed by Director of M/s Trident Mercantile Pvt ltd was already submitted during assessment proceedings vide letter dated 28.03.2016, which is already available i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 3 was Rs.22,78,924/-. Thus, there was net addition of Rs. 22,78,924/- during the year. The maximum outstanding credit balance during the year was Rs.43,75,000/- which was reported in Tax Audit Report (which has been added by the AO u/s.68 of the Act). The appellant has credited interest for the year of Rs. 1,78,924/- (Gross Rs. 1,98,805/-less TDS of Rs. 19,881/-) on 31.03.2013 to the account of Mr. Sunil More. All these transactions are by cheque transfers / RTGS as seen from the bank statements of the appellant (Page Nos.137 to 149 of paper book) and the corresponding entries in the bank statements of Sunil More (Page Nos. 150 to 156 of the Paper book). From the copy of acknowledgement of return of income filed by Sunil More for AY 2013-14, (page No. 134 of paper book) it is seen that he has declared gross total income of Rs.22,83,870/- and taxable total income of Rs.21,62,780/- for the year. The AO has in the remand report stated that the balance sheet and capital account of lenders are not submitted by the assessee. It has been submitted by the appellant that he, being an Individual and not having business income, is not required to and has not filed any balance sheet or ca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ring the year amounted Rs.9,92,436/- only. The maximum outstanding balance during the year was Rs.25,00,000/- which was reported in Tax Audit Report (which has been added by the AO u/s.68. of the Act). All the receipts and repayments are by cheques / RTGS as can be seen from the relevant bank statements of appellant company (Page Nos.172 to 179 of the paper book) and corresponding bank statements of Anil kumar More (Page Nos. 180 to 188 of paper book). From the copy of acknowledgement of return of income filed by Anil More for AY 2013-14 (Page No. 170 of paper book), it is seen that the gross total income declared by him is Rs. 10,98,102/- and the taxable income of Rs.9,73,100/- for the said year. He also being an individual, not having business income, is not required to and has not filed balance sheet and capital account with his return of income. The above explanation is accepted on facts and therefore the addition u/s 68 is deleted. 5 Loan from M/s Nirmitee Constructions and Designs Pvt ltd: It is seen from the ledger account of the said party that there is an opening balance of Rs. 40,00,000/- as on 01.04.2012 and the same amount is closing balance as on 31 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ponse by such person cannot be held against the assessee. The judgments are applicable to the present case. In the present case the appellant has obtained from these parties the supporting evidences and submitted as additional evidences to prove that genuineness of the transactions. Considering the above facts and the submissions, the addition of Rs.1,82,73,000/- made by the AO on account of loans u/s 68 of the Act is not warranted and therefore the same is deleted and this ground of appeal is allowed. 16. Aggrieved Revenue is in appeal before us and at the time of hearing Ld. DR submitted that assessee has taken loan from three individuals and two entities to the extent of Rs.1.82 crores. He submitted that assessee has not submitted creditworthiness of these parties. Even in remand report the Assessing Officer has highlighted the insufficiency of the funds and Assessing Officer has brought to the notice of the Ld.CIT(A) the issue of creditworthiness of those parties and these parties has not filed any financial statement, Ld. DR objected to the deletion of the additions by the Ld.CIT(A). 17. On the other hand, Ld. AR submitted that all these unsecured loans are nothin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat maximum outstanding credit was Rs.7,20,000/-. However, Ld.CIT(A) observed that all these payments were received from banking channels and they have also filed corresponding bank statement along with ITR-V filed by them in which they have declared the income of Rs.11,23,040/- for this assessment year since Assessing Officer has not made any doubt of these documents in remand report the Ld.CIT(A) found it to be proper and accordingly, he deleted the same. We are inclined to accept the same and we do not find any reason to disturb the same finding of the Ld.CIT(A). 20. With regard to loan from M/s. Nirmitee Constructions and Designs Pvt. Ltd., Ld.CIT(A) observed that the opening balance outstanding is Rs.40,00,000/- as on 01.04.2012 and the same was continued as closing balance. There is no new loan taken by the assessee during this year, accordingly, Ld.CIT(A) deleted the same. Since the opening balance and no new loan received by the assessee, we do not find any reason to interfere with the finding of the Ld.CIT(A). Accordingly, the ground raised by the revenue in this regard is dismissed. 21. With regard to disallowance of interest expenses the Assessing Officer has disal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... therefore requested that the said addition of Rs. 15,67,040/- be deleted. 2.6 As no further details were asked from the appellant or no show cause notice was given for his intention to disallow the claim of interest, no opportunity was given by the learned A.O. during assessment proceedings. We submit the copy of TDS certificates issued by the appellant to the lenders for the captioned assessment year as additional evidence at Sr. No.2(a) of the paper book (Index-II). In view of the above the appellant prays that the disallowance of interest of Rs.9,43,040/- made by the learned A.O. be deleted. 22. After considering the submissions of the assessee, Ld.CIT(A) deleted the same since he has already allowed the unsecured loans received by the assessee as genuine. 23. Aggrieved revenue is in appeal and before us, Ld. DR objected to the deletion of interest payment and Ld. AR relied on the findings of the Ld.CIT(A). 24. Considered the rival submissions and material placed on record, we observe that Assessing Officer has made the addition of unsecured loans based on his finding that assessee has not filed any document in support of the above unsecured loans. However, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... above three parties as non genuine purchases and added to the total income, without asking the appellant any further details or without giving any show cause notice of his intention to make such additions. 3.2 It is submitted that the ld. AO neither informed the appellant regarding the issuance of notice u/s 133(6) nor intimated regarding non receipt of response from said parties. He did not give any opportunity to the appellant to represent his case by issuing show cause notice for his intention to make such huge addition to total income. These parties are regular suppliers/service providers of the appellant company in earlier and subsequent years also. All the invoices issued by these parties are available. All the payments have been made by It is submitted that the appellant is inter alia, the distributor of Phifer in Western region of India and it sells the fabrics purchased from Phifer. In the above table, the sales of Fabrics amounting to Rs. 2,05,57,914 includes sales made by the appellant of the fabrics purchased from Phifer. Further the appellant also receives commission income from Phifer if the orders are executed by the company directly in the western region. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... made in respect of purchases from Phifer amounting to Rs. 66.15 lakhs by treating it as bogus for the reason that the said party has not responded to the notices issued by him u/s 133(6) is baseless, wrong, devoid of merits and therefore needs to be deleted. Further, the appellant company provides labour manpower to Airport Authority of India to carry out repairs and maintenance at various airport sites Further the appellant also provides the manpower to various parties namely M/s. Godrej Eface Automation Robotics P. Ltd, M/s. vanderland Industries Put. Ltd., M/s. Glidepath Ltd., etc. to carry out repairs and maintenance services at various sites. For the said business activity appellant procures labour services from Jay Engineering works (Rs. 39,86,000 during the year) and J.J. Enterprises (Rs. 43,86,000 during the year) and provided the same to the various parties mentioned above as required by them at particular sites. During the year appellant company has earned labour charges income amounting to Rs. 2,12,50,599 for providing the said manpower to carry out repairs and maintenance at various sites and as per the above table the same is reported as Revenue from operations/S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of invoices issued to the appellant by the parties and the copies of TDS certificates issued by the appellant company to both the parties for the captioned assessment year are enclosed as additional evidence at Sr. No. 3(b)(ii) to 3(b)(v) of the paper book (index- II). On perusal of the ledger confirmations provided by the parties, relevant bank statements and the inovices it is evident that the labour services purchased by the appellant are genuine. Hence, it cannot be held that the said labour purchases are bogus purchases. 3.9 Otherwise also, if the Ld AO had doubt about the genuineness of the purchase transactions then the onus was on him to disprove the genuineness of the transactions. It is submitted that the name and address of the parties were available on record of the Ld. AO and he could have further examine whether the said purchases were genuine. However, the Ld AO apart from issuing notices under section 133(6) did not pursue the matter further which is wrong and bad in law. In this regard attention is invited to the decision in the case of Commissioner of Income Tax v. Orissa Corp. Pvt. Ltd. [1986] 25 TAXMAN 80F (SC), wherein it was held that, In this case ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... asked for the purchase invoices of the said purchase parties during the assessment proceedings, the same would have been submitted by the appellant company. Further we have to state that the appellant was under bona fide belief that Ld. AO was satisfied with the details already submitted by the appellant otherwise AO would have asked for the further details. It is submitted that the said parties are the regular suppliers to the appellant and there were no additions made in preceding or subsequent years with regards to purchases made form the said parties. Thus, in absence of any specific/further requirement by the ld. AO for the invoices from the said purchase parties, it is wrongly alleged by ld. AO that the invoices were not submitted during the assessment. b) Neither PAN is evident on the confirmation of Jay Engineering works and J.J. Enterprise nor ITR and profit and loss account of said parties for AY 2013-14 is evident. Assessee is contending to allow of purchases merely on payment entries without establishing the genuinety and existence of purchase parties. In this regard we have to state that the appellant company vide its letter dated 13.06.2017, submi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pt of good to it location which will appear in its stock register and after the sale of the same / consumption of the same shall stand reduced. The above comments of the AO in remand report is totally misplaced and without any context. It was never the requirement of the AO to give any such evidence by the Assessee which assessee could not produce. In this regard we have to state as under: 1) Reg.: Jay engineering works and JJ Enterprises: The appellant company provides labour manpower to Airport Authority of India to carry out repairs and maintenance at various airport sites. Further the appellant also provides the manpower to various parties namely M/s. Godrej Eface Automation Robotics P. Ltd, M/s. vanderlande Industries Pvt. Ltd., M/s. Glidepath Ltd., etc. to carry out repairs and maintenance services at various sites. For the said business activity appellant procures labour services from Jay Engineering works and J.J. Enterprises and provides the same to the various parties mentioned above as required by them at particular sites. Thus in view of the above, it will be appreciated that the nature of business of the appellant is to provide labour manp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ided by them to the appellant. (ii) Ledger account of M/s. Phifer India Pvt. Ltd in the books of appellant company for the F.Y. 2012-13, (iii) Relevant extract of the bank statements of the appellant company highlighting the payments made to Phifer India Pvt. Ltd. for the purchases made by the appellant company from them during the financial year 2012-13, (iv) Sample copies of sales invoices raised by the appellant company in respect of sales made of fabrics of Phifer India P. Ltd and credit notes for commission issued by Phifer India P. Ltd to appellant company. It will be appreciated that no sales(which has not been doubted by the ld. AO) could have been made by the appellant without the corresponding purchases made from Phifer and hence the said purchases from Phifer cannot be treated as bogus purchase. On perusal of the ledger account of the appellant in the books of Phifer, sample invoices issued/sent by Phifer, sample copies of credit notes for commission earned by the appellant on sales directly executed by Phifer in the western region and relevant extract of the bank statements of the appellant company highlighting the payments made to Phifer it is evide ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ved any response from these parties Assessing Officer treated the same as non-genuine. However, assessee has claimed that these parties are regular supplier s/service providers of the assessee company in earlier and also in subsequent years. All the purchases are supported with invoices and payments are made by account payee cheques /RTGS only. No such disallowance was ever made in any of the earlier years or subsequent years. The Ld.CIT(A) Further, observed as under: - M/s Phifer India Pvt ltd, based in chennai is a 100% subsidiary of US based multinational company and is a regular supplier of material to the appellant who acts as its distributor in western region of India. M/s Jay Engg. Works and J.J. Enterprises have provided labour personnel for the maintainence contracts undertaken at the Airport etc. by the appellant and have charged Service Tax in their bills. The appellant has duly deducted TDS from the labour charges paid. With regard to the addition, the AO in his remand report stated that notices sent to M/s. J. J. Enterprises and M/s. Jay Engg. Works were returned back whereas the Notice sent to M/s. Phifer India Pvt. Ltd. remained unreplied. AO in remand repo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the appellant has raised invoices as per the man power and maintenance services provided at different sites. Thus, the purchase of labour from these two parties and its corresponding sales/revenue are linked. Thus, the above evidence proves that the expenses are genuine. On examination of the ledger account of the appellant in the books of Phifer, the sample invoices issued by Phifer, sample copies of credit notes for commission earned by appellant on sales directly executed by Phifer in the Western region, relevant bank statements of appellant highlighting the payments made to Phifer, it is evident that the purchases made by the appellant from Phifer are genuine. Thus, it appears the AO has made additions merely on the reasoning that notices u/s. 133(6) were not replied by the lenders and the suppliers. The Appellant has relied on the decision of Hon'ble Supreme Court in the case of CIT v. Orissa Corporation Pvt. Ltd. 159 ITR 78 (SC) has held that if the AO has issued summons or notices u/s. 133(6), it is his duty to bring the process to a logical conclusion and non-response by such person cannot be held against the assessee. The AR also relied on the decision of Hon ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
