Income Tax Appellate Tribunal - Hyderabad
Snj Sugar And Products Limited, ... vs Acit, Circle-1(1), Tirupathi, ... on 30 May, 2018
IN THE INCOME TAX APPELLATE TRIBUNAL
HYDERABAD BENCHES
CIRCUIT BENCH "A", AT TIRUPATI
BEFORE SHRI D. MANMOHAN, VICE PRESIDENT
AND
SHRI B. RAMAKOTAIAH, ACCOUNTANT MEMBER
I.T.A. No. 855/HYD/2017
Assessment Year: 2012-13
M/s. SNJ Sugars and Products Asst. Commissioner of
Ltd., Vs Income Tax,
CHENNAI Circle-1(1),
[PAN: AAECS1680D] TIRUPATI
(Appellant) (Respondent)
For Assessee : Shri K.C. Devdas, AR
For Revenue : Shri Pathlevath Peerya, DR
Date of Hearing : 18-05-2018
Date of Pronouncement : 30-05-2018
ORDER
PER B. RAMAKOTAIAH, A.M. :
This is an appeal by assessee against the order of the Commissioner of Income Tax, Tirupati, U/s. 263 of the Income Tax Act [Act], dated 30-03-2017. Assessee is contesting the jurisdiction of invoking revisionary proceeding as well as merits of the directions given by the CIT.
2. Briefly stated, assessee is engaged in manufacturing of white crystal sugar, alcohol and generation of power. The case was selected for scrutiny under CASS to "Large Share application money received against un-allotted :- 2 -:
I.T.A. No. 855/Hyd/2017 shares, large increase of unsecured loans and low net profit or loss shown from large gross receipts". When the assessment proceedings were pending, there were search and seizure operations U/s. 132 of the Act on 15-05-2012. Consequently, the pending proceedings got abated under second proviso to Section 153A of the Act. AO issued notices U/s. 153A and completed the assessment proceedings vide order dt. 27-03- 2015 after making necessary enquiries and disallowing an amount U/s. 14A r.w. Rule 8D.
3. Ld. CIT, Tirupati on examination of record was of the view that the order of AO was erroneous on the following issues:
a) As seen from the Schedule Q, Notes to accounts, which contains the details of related party disclosures, assessee received Hire charges amounting to Rs. 26.68 lakhs, whereas in the P&L a/c, the income admitted towards 'Hire charges is of Rs. 21.37 lakhs only. Hence, there is short admission of Rs. 5.31 lakhs;
b) As seen from the schedules to form 3CD that the assessee has remitted employee share of PF of Rs.
5,39,149/- beyond the stipulated dates for its payments. Hence, the same attracts disallowance u/s. 43B of the Act;
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I.T.A. No. 855/Hyd/2017
c) As seen from the details of rent Annexure Q to form 3CD report, the amount of tax deducted on rent is shown as Nil. However, as seen from the P&L account that the assessee claimed expenditure towards rent of Rs.
18,71,796/-. It is also seen from the assessment record for 2013-14, the assessee has not deducted tax on profession fees amounting to Rs. 5,30,000/- during the AY 2012-13. Assessee claimed deduction for the same, Rs. 5,30,000/- after payment of TDS for AY. 2013-14. In vie of assessee's failure to deduct tax, the above two amounts are to be added back Us 40(a)(ia) of the Act;
d) As seen from the balance sheet, the investments shown as at 31-03-2011 is of Rs. 3,99,00,000/-, whereas as the balance as at 31-03-2012 is shown as '0' (Zero), which indicates that the assessee has sold the shares during the FY. However, no capital gain/loss is shown by the assessee;
e) (i) As seen from the depreciation statement the assessee company claimed depreciation on vehicles of Rs. 34,48,292/- @ 30%. But 30% is eligible only for vehicles run on hire. Hence, there is excess depreciation claim of Rs. 5,17,244/-;
(ii) It is also seen that on office equipment of Rs. 6,57,959/-, assessee claimed depreciation @ 15%. However, office equipment fall in the nature of furniture and fittings and hence, the depreciation is to be :- 4 -:
I.T.A. No. 855/Hyd/2017 restricted to 10%. Excess depreciation is worked out at Rs. 32,898/-;
f) On perusal of Balance sheet and Annexure-I, Part-A to Form 3CD, the following discrepancies have been noticed:
Description As per balance sheet (Rs. in Lakhs) As per Annexure Part-A to Form 3CD Unsecured Loans 2548.72 9326.29 Total of Balance sheet 19270.95 21805.41 As seen from the above, there is variation of Rs. 6777.57 lakhs and Rs. 2534.46 lakhs in the amounts of unsecured loans and in the total of Balance sheet respectively. However, no reconciliation of the above figures is available on record.
It is also seen that the issue of increase in unsecured loans is one of the reasons for CASS selection, but the details of loan creditors, confirmation from them etc. appear to have not been obtained. The same requires thorough examination.
g) On perusal of balance sheet it is found that in addition to the share application money pending allotment as on 31.03.2011, an additional share application money of Rs.
75,29,73,245/- is received during the year and a total amount of Rs. 86,37,40,105/- is pending for allotment as at 31-03-2012. However, the details of the investors seem to have not been examined;
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I.T.A. No. 855/Hyd/2017 Accordingly, exercising revisionary jurisdiction a notice u/s 263 was issued to assessee on the above issues.
4. Assessee in reply has given detailed explanation which was extracted in para 4 of the order of CIT, which is as under:
(a) Short admission of Rs.5.31 lakhs with regard to Hire Charges Hire charges received as shown in Profit and Loss account for the year ended 31.03.2012 is exclusive of taxes, whereas, Hire charges shown with regard to related party transaction in the notes to accounts is inclusive of taxes. The difference is only due to taxes amount. Further to that, we are regularly maintaining our books of accounts based on Generally Accepted Accounting Principles in India (Indian GAAP) and accordingly we have passed the journal entry in our books of accounts for hire charges as follows:-
Party Account (Receivable) Dr. Rs.26.68Iakhs To Hire Charges received A/c Cr.Rs.21.38 lakhs To Service Tax Payable Account A/c Cr. Rs. 2.20 lakhs To VAT payable Cr. Rs. 3.10 lakhs (Being Vehicle Hire Charges receivable accounted) Further, we have paid all the collected VAT and service tax and herewith enclose copy of paid challan and VAT return filed copy along with sales tax assessment order copy for your kind perusal (Annex-I) From the above, it is clear that there is no short admission of hire charges of Rs.5.31 lakhs as mentioned in para 2(a).
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I.T.A. No. 855/Hyd/2017
(b) Disallowance u/s 43B for delay in payment of PF of Rs. 5,39, 149/-
With regard to above, we hereby submit that there was a slight delay in payment of EPF beyond the due date. However, it has been paid during the previous year 2011-12 itself. Further, it is paid on or before the due date of submission of return of income u/s 139(1) in respect of the previous year in which the liability to pay such sum was incurred. Hence, the disallowance u/s 43B of Income Tax Act, 1961 will not be applicable.
(c) Disallowance u/s 40(a)(ia) with regard to Rent and Professional Fees We have already added back to our income as inadmissible expenses u/s 40(a)(ia) of Rs.21,37,300/- for non-deduction of TDS on account of rent for Rs.18,04,727/- and on account of professional fee for Rs. 3,32,573/- in our memo of total income. Further, the Cane Divisional Office Rent paid for a sum of Rs. 67,069/- during the period is not applicable to deduct tax u/s 1941. We hereby enclosed the copy of Memo of Income for computation of total income and tax thereon for your ready reference. (Annex-II) The details disallowances of Rent and Professional fees for non- deduction of Tax under section 40(a)(ia) has been shown in Annexure- T of Form 3CD for the previous year and again enclose the same copy for your ready reference (Annex-III) Hence disallowance u/s 40(a)(ia) towards Rent and Professional fees has been duly added back to Income in the assessment year 2012-13 itself.
Further, we have claimed as admissible expenses of professional fees of Rs.3,32,537/- in the assessment year 2013- 14 in memo of Total Income, since TDS has been paid in the financial year 2012-13. Copy of memo of total income for the Asst. Year 2013-14 is enclosed for your ready reference (Annex- IV) We have not claimed any deduction for a sum of Rs. 5,30,000/- after payment of TDS for the AY 2013-14 and claimed deduction :- 7 -:
I.T.A. No. 855/Hyd/2017 only for a sum of Rs.3,32,573/- after payment of TDS in the financial year 2012-13.
Hence, again the question of disallowance u/s 40(a)(ia) of the Income Tax Act, 1961 will not arise.
(d) Capital gain on sales of Shares of Rs.3,99,00,000/-
We have shown income from capital gain in the memo of total income for the sales of immovable property. Profit on sale of shares has been duly accounted in our books of accounts and shown under the head of Other Income in Profit and Loss Account. However the Capital loss from the sale of shares has not been claimed in the income tax return.
We hereby again enclose the copy of memo of total income along with calculation of capital gains/loss for capital asset for your kind perusal (Annex-V) Therefore, we have computed Capital Gain and shown in the memo of total income and return of income.
(e) (i) Excess Depreciation claimed for Vehicles run on hire of Rs.5,17,244/-
We were having 22 trucks and these vehicles were running on hire and income from these vehicles has been accounted and shown as Hire Charges received in the Profit and Loss Account. Therefore, we have been claiming depreciation @ 30% for hire vehicles consistently from year to year and claimed depreciation @ 30% during the assessment year also as per Income Tax Act, 1961 and there is no excess claim of depreciation of Rs.5,17,244/- as mentioned in para e(i)
(ii) Excess Depreciation claim of Rs.32,898/- on Office Equipment Office equipment includes the electronic machine items like EPABX system, Air Conditioners, Telephone instrument, Fax machine, Network communication equipment etc., Hence we have been claiming depreciation @ 15% on office equipment consistently from year to year and claimed depreciation @ 15% :- 8 -:
I.T.A. No. 855/Hyd/2017 during the assessment year also as per the Income Tax Act, 1961. We herewith enclose the list of items grouped under Office Equipment for your kind perusal. (Annex-VI) Hence, there is no excess claim of depreciation of Rs. 32,898/- as mentioned in para e(ii).
(f) Reconciliation of figures shown in Balance Sheet and Form 3CD The balance sheet of the company has been prepared as per the Companies Act in the vertical form. The current liabilities and provisions will be shown under the head of Net current assets (i.e. (a) Current Assets + Loans and Advances - (b) Current Liabilities & Provisions). However, the total of balance sheet in Form 3CD is total of Share Capital, Revenue & Surplus, Deferred Tax Liabilities, Secured and Unsecured Loans and Current Liabilities & Provisions.
Hence, the difference is merely because of presentation / classification of figures under the difference heads in Balance Sheet as per Companies Act, and as per Form 3CD.
Therefore, the difference is on account of current liabilities & provision for a sum of Rs.2534.46 Lakhs is as given below:
Rs. In Lakhs Total of Balance Sheet - As per Balance Sheet 19270.95 Add: Current Liabilities & Provisions as Per Balance Sheet 2534.46 Total of Balance Sheet as per Part-B to Form 3CD 21805.41 Further, we herewith enclose the copy of Annex-I Part B of Form 3CD and Balance Sheet as on 31.03.2012 for your ready reference (Annex-VII) The unsecured loan is only sum of Rs.2548. 72 lakhs as shown in the balance sheet and the sum of Rs. 6777. 57 lakhs was :- 9 -:
I.T.A. No. 855/Hyd/2017 shown as share application money pending for allotment has been grouped under the unsecured loan in the Form 3CD. However, the total figure of balance sheet and form 3CD is the same which can be apparently seen from the balance sheet & Annex-I part B of 3CD.
Further, we hereby enclose the details of loan creditors, copy of confirmation letter from the loan creditors along with Income Tax Return filed Copy for the assessment year 2012-13 of loan creditors for the loan received during the previous year for your kind perusal. (Annex-VIII)
(g) Share application money pending for allotment of Rs. 75,29,73,245/-
We have received share application money of Rs.75,29,73,245/- from M/s. SNJ Distillers Private Limited (PAN AALCS9312F) during the financial year. During the course of assessment proceedings, we have submitted full details with regard to the share application money and the reasons for delay in allotment of shares vide our letter dated 05.03.2015. We hereby again enclose the copy of the same for your ready reference (Annex-IX) The shares has been allotted u/s 81(1) of Companies Act, 1956 to the existing shareholder after calling for a meeting and passing necessary resolutions. Thereafter, all the documents related to allotment of shares has also been filed with the Ministry of Corporate Affairs and compiled as per the provisions of Companies Act, 1956. The approval of allotment has also granted by the MCA and copies are enclosed for your ready reference (Annex-X) The Ministry of Corporate Affairs vide its notification dated 14.12.2011 (copy enclosed herewith Annex-XI) is applicable only for allotment of shares u/s 81(1A) of the Companies Act, 1956 and it is not applicable for allotment of shares u/s 81(1) of the Companies Act, 1956.
The investment was made by M/s. SNJ Distillers Private Limited which is also an Income Tax Assessee and regularly filing their income tax return and all the investment were made from the disclosed sources of income. Further, the investment was duly :- 10 -:
I.T.A. No. 855/Hyd/2017 accounted and disclosed in their Balance Sheet and Income Tax return and this company were also searched u/s 132 of the Income Tax Act, 1961 and all the assessments were also completed u/s 143(3) r.w.s. 153A of the Income Tax Act.
Further, we herewith enclose the copy of the confirmation letter from the investor M/s. SNJ Distillers Private Limited along with their Income Tax return, Balance Sheet and Profit & Loss Account for your ready reference (Annex-XII)"
5. Ld. CIT, however, has come to the conclusion by stating as under:
"6. In the above circumstances, I am of the opinion that the Assessing Officer has completed the assessment without proper enquiry/verification and overlooking the vital aspects which is erroneous in so far it is prejudicial to the interest of revenue. Hence, the AO is directed to examine the following issues with the books of account and other relevant information after giving an opportunity of being heard to the assessee:
(i) short admission of hire receipts,
(ii) delay in remittance of EPC, etc.,
(iii) non-deduction of tax at sources on rent & professional payments,
(iv) capital gain on sale of shares,
(v) excess depreciation claim on vehicles & office equipment,
(vi) variation of figures of current liabilities & provisions between the balance sheet and Form 3CD and
(vii) retaining share application without allotting shares for the entire year The AO is also directed to obtain prior approval of the Joint Commissioner of Income Tax as a search u/s. 132 was conducted in this case".
6. It was the contention of Ld. Counsel that AO has examined all the issues, which were the subject matter of revision by the CIT and referred to the Paper Book placed on record to submit that all the issues have been examined as :- 11 -:
I.T.A. No. 855/Hyd/2017 assessee's case was examined U/s. 153A, consequent to the search and seizure proceedings. It cannot be stated that AO has not enquired on the issues.
7. Coming to the merits of the directions of CIT, it was submitted that assessee has given detailed explanation on each of the issues and instead of dropping the proceedings, Ld.CIT set aside the assessment for examination of the issues which does not require any fresh examination. He relied on the following case law:
i. Virbhadra Singh (HUF) Vs. Pr.CIT (Himachal Pradesh) [400 ITR 530];
ii. M/s. Agasthiya Granie P. Ltd., Vs. ACIT (Madras), dated:
16/04/2018;
iii. CIT Vs. Kabul Chawla (Delhi) [300 ITR 573]; iv. Spectra Shares & Scrips Pvt. Ltd., Vs. CIT (Andhra Pradesh) [354 ITR 035];
v. CIT Vs. Anil Kumar Sharma (Delhi) [335 ITR 083]; vi. CIT Vs. Sakthi Charities (Madras) [244 ITR 226]; vii. CIT Vs. Greenworld Corporation (Supreme Court) [314 ITR 081];
viii. Mehta Parikh & Co., Vs. CIT (Supreme Court) [30 ITR 181];
8. Ld. CIT DR, however, relied on the orders of Ld.CIT.
9. We have considered the rival contentions and perused the documents placed on record. We are surprised :- 12 -:
I.T.A. No. 855/Hyd/2017 to note that inspite of clear explanation given by assessee, in its reply to the show cause notice, Ld.CIT did not give any findings on the issues but held that AO has completed assessment without proper enquiry / verification and overlooking the vital aspects. We are unable to understand what 'vital aspects' have been overlooked by the AO. We have examined the contentions as far as the issues taken up by the CIT are considered.
9.1. On the issue of disallowance U/s. 43B, the amounts were already paid within the financial year and any amount paid on or before due date for submission of returns of income U/s. 139(1) is allowable as per the amended provisions of Section 43B of the Act, which was also held retrospective by various judicial pronouncements. In view of that, there is no merit in the disallowance proposed. AO having examined that the amounts were paid within the financial year has correctly allowed the amount.
9.2. With reference to disallowance of 40(a)(ia) with regard to rent and professional fee. Assessee has already explained that it has not claimed any amounts on which TDS was not made and claimed the amounts which are allowable u/s. 40(a)(ia) being disallowed in earlier years. There is no discussion on these aspects at all by the CIT while directing the AO to examine again.
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I.T.A. No. 855/Hyd/2017 9.3. With reference to capital gain on sale of shares also assessee has already accounted under the head 'other income' and capital loss has not been claimed, so there cannot be any prejudice to the Revenue on this issue.
9.4. With reference to excess claim of depreciation of hired vehicles, assessee has accounted for the lease charges.
Therefore, the claim is allowable.
9.5. With reference to office equipment, the claim is correctly made.
9.6. With reference to reconciliation of balance sheet, assessee has explained on account of presentation / classification of figures under different heads in balance sheet differences have come and these were reconciled. Not a single word has been mentioned by the CIT, whether the reconciliation is correct or not.
9.7. With reference to share application money also which was received from one of the sister concerns, who is also covered by the search and shares were also allotted, Ld.CIT having taken up examination of few issues which in his opinion AO has overlooked. Ld. CIT should have undertaken the exercise of giving findings on the submissions made by assessee in the proceedings u/s. 263 of the Act. Without doing so, he has simply set aside the assessment for examination, which in our view does not require at all. Since :- 14 -:
I.T.A. No. 855/Hyd/2017 assessee has given detailed explanation, which in our view does not require any further proceedings and since AO has completed the assessment proceedings after original scrutiny proceedings got abated and fresh proceedings u/s. 153A have been initiated, we cannot accept CIT's opinion that AO has not enquired these matters. It is incumbent on the CIT to clearly establish on which matters AO has erred. No such finding was given by the CIT in the impugned order.
10. Considering the principles laid down in various case law as relied upon by the Ld. Counsel, which we do not intend to discuss elaborately in this order, we are of the opinion that the order of AO is neither erroneous nor prejudicial to the interest of Revenue. Since the twin conditions are not satisfied and since CIT has not given any specific instance of overlooking 'the vital aspects', we cannot uphold the order U/s. 263. Accordingly, we set aside the order u/s 263 and restore the original assessment order u/s 143(3) dt. 27-03-2015.
11. In the result, the appeal of assessee is allowed.
Order pronounced in the open court on 30th May, 2018 Sd/- Sd/-
(D. MANMOHAN) (B. RAMAKOTAIAH)
VICE PRESIDENT ACCOUNTANT MEMBER
Hyderabad, Dated 30th May, 2018
TNMM
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I.T.A. No. 855/Hyd/2017
Copy to :
1. SNJ Sugars and Products Limited, 99, Canal Bank Road, CIT Nagar, Nandanam, Chennai.
2. Asst. Commissioner of Income Tax, Circle-1(1), Tirupati.
3. CIT-Tirupati.
4. D.R. ITAT, Hyderabad.
5. Guard File.