Income Tax Appellate Tribunal - Delhi
Daisy Investment (P) Ltd., Ghaziabad vs Department Of Income Tax on 7 October, 2010
IN THE INCOME TAX APPELLATE TRIBUNAL
DELHI BENCH 'B', NEW DELHI
BEFORE SHRI A.D. JAIN, JUDICIAL MEMBER
&
SHRI T.S. KAPOOR, ACCOUNTANT MEMBER
ITA No. 37/Del/2011
Assessment Year: 2006-07
DCIT, Vs. Daisy Investment (P) Ltd.,
Circle-1, Modi Bhawan,
Ghaziabad. Modi Nagar, Ghaziabad.
AABCD1827E
(Appellant) (Respondent)
Appellant by : Dr. B.R.R. Kumar, Sr. DR
Respondent by : Sh. Pradeep Denodia, CA
ORDER
PER A.D. JAIN, J.M.
This is Department's appeal for A.Y. 2006-07 against the order dated 07.10.2010 passed by the ld. CIT(A)-Ghaziabad.
2. The only issue raised by the Department is against the action of the ld. CIT(A) in deleting the addition of Rs. 75,25,000/- made by the AO, representing loans received by the assessee during the year as follows: -
(i) M/s Ashoka Mercantile Ltd. Rs. 64,25,000/-
(ii) M/s Sunrise Soya Products Ltd. Rs. 11,00,000/-
Total Rs. 75,25,000/-
Both these loans were received by cheque.
3. The AO required the assessee to furnish bank statement and confirmations from the creditor parties. As per the assessment order, however, the assessee furnished neither the bank statements, nor the ITA No. 37/D/2011 Daisy Investment (P) Ltd. 2 confirmations from the parties and simply confirmed the transactions on its letter head. The AO observed that copies of returns filed by the creditor Companies had also been filed, but they were of no avail to the assessee, as they did not make transparent the creditworthiness of the creditor Companies and only showed the income earned by them. The AO observed that in the absence of confirmations from the parties and the bank statement of the assessee, the unsecured loans of Rs. 75,25,000/-
remained unexplained. It was, as such, that the AO added this amount to the income of the assessee Company u/s 68 of the I.T. Act, as unexplained credit.
4. The ld. CIT(A), by virtue of the impugned order, deleted the addition made by the AO.
5. Challenging the said action of the ld. CIT(A) before us, the ld. DR has argued that the ld. CIT(A) has erred in deleting the addition correctly made by the AO; that while doing so, the ld. CIT(A) failed to consider the fact that the assessee Company had failed to adduce any evidence in support of its claim of having raised two unsecured loans totaling to Rs. 75,25,000/-; that no such evidence had been produced by the assessee Company in the assessment proceedings, in spite of the fact that in the questionnaire dated 28.07.2008 issued by the AO to the assessee, the assessee was specifically asked, as per point nos. 7 and 14, to file the complete details of the unsecured loans, to furnish names, PANs, assessment status and evidence to prove the identity/capacity and genuineness of the loan creditors; that also, vide order sheet entry dated 30.12.2008, the assessee was asked to furnish confirmations from the creditor Companies who had advanced the unsecured loans to the assessee; that the ld. CIT(A) has erred in giving relief to the assessee Company, even though the assessee Company had miserably failed to discharge its onus to prove the identity, capacity and genuineness of the loan creditors during the assessment ITA No. 37/D/2011 Daisy Investment (P) Ltd. 3 proceedings, despite ample opportunity having been granted to the assessee for the purpose; and that the ld. CIT(A) has erred in taking into cognizance fresh evidence in violation of the provisions of Rule 46A of the I.T. Rules.
6. The ld. Counsel for the assessee, on the other hand, has placed strong reliance on the impugned order. It has been submitted that the ld. CIT(A) has not committed any error in deleting the addition which was wrongly made by the AO; that the creditor Companies had submitted their confirmations dated 20.02.2010 and 02.05.2009, respectively (copies at APB 65 & 66), which the assessee had filed before the CIT alongwith its written submission, on 26.03.2010; since the AO, in the assessment proceedings, had not required the assessee to file such confirmations and as such, there had been no occasion to file such confirmations before the AO in the assessment proceedings, that the CIT(A) had remanded the matter to the AO; that in the remand proceedings, the creditor companies had filed their confirmations alongwith complete details directly before the AO u/s 133(6) of the Act and satisfied therewith, the AO did not submit any remand report to the CIT(A); that it was therefore, that the CIT(A) correctly took them into consideration and deleted the addition on the basis thereof; and that therefore, there being no merit in the appeal of the Department, the same be dismissed.
7. We have heard the parties and have perused the material on record. The AO made the addition by observing as follows: -
"The assessee vide questionnaire dated 28.07.2008 was required to furnish the bank statements. Vide order sheet entry dated 30.12.2008, the assessee was also required to furnish confirmation from the above mentioned two parties. But the assessee has neither furnished the bank statement nor the confirmations from the above mentioned two parties. The assessee company has simply confirmed the transaction on its letter head. Copy of e-returns filed by the above companies have also ITA No. 37/D/2011 Daisy Investment (P) Ltd. 4 been filed but the same are of no help as it does not make transparent the creditworthiness of these companies. It only shows the income earned by the said companies. In absence of confirmations from the parties who have advanced loans and the bank statement from the assessee, the unsecured loans raised during the year of Rs. 75,25,000/- remain unexplained and added to the income of the assessee company u/s 68 of the Income Tax Act, 1961 being unexplained credit."
8. It is, thus, apparent that the addition was made for the absence of confirmations from the creditor parties of the assessee.
9. Before the ld. Commissioner (Appeals), in the written submissions filed by the assessee, it was, inter-alia, contended as follows: -
"Further, without prejudice to what has been submitted herein-in-above, it is stated that as revealed from the impugned assessment order (last page of the order), the AO has observed in that order as under:
"...vide order sheet entry dated 30.12.2008, the assessee was also required to confirmation from the above mentioned two parties..."
It is submitted with due respect and humility that the assessee company vehemently denies the aforesaid observations of the Assessing Officer as the assessee company's representative did appear before the AO on 30.12.2008 with company's letter of even date pursuant to notice dated 26.12.2008 addressed to the Principal Officer of the company in connection with queries with respect of directors of the company and one firm. It is stated that had anything was not to the satisfaction of AO then he could have confronted the assessee company to enable it (assess-company) to file the details and information to his satisfaction. He did not ask for, to the best of our knowledge and belief, hence, could not be filed earlier.
The tenor of the AO's letter dated 04.11.2008 would reveal that after submission of information the matter ended. Had the AO needed any further information he could have informed the assessee about the same. He could have also summoned the creditors to verify these loans. Nothing was heard from the AO except though the ITA No. 37/D/2011 Daisy Investment (P) Ltd. 5 impugned assessment order. So far as the bank statement is concerned. It was filed before the AO as early as 04.11.2008.
Now the confirmation letters, copy of their bank statement(s)/their bank ledger(s) are also contained in the paper book from page 65-127 as detailed and referred to in the paper book.
Be that as it may, as we have filed the confirmations from the parties concerned and their bank statements/bank ledger(s) in their books which were obtained from them and request your honor to kindly delete the impugned additions and oblige."
10. From the above, it comes out that it is the stand of the assessee that the AO had never required the assessee to file the confirmations and it was therefore, that none were filed during the assessment proceedings. The CIT(A) remanded the matter to the AO. In the remand proceedings, the AO, invoking the provisions of section 133(6) of the Act, directly required the creditor Companies to furnish the particulars of their transactions with the assessee. The creditor Companies made full compliance, furnishing their confirmations and complete details before the AO and forwarded copies thereof to the assessee. The AO got satisfied with such compliance u/s 133(6) of the Act. As such, the AO did not submit any remand report to the CIT(A) despite reminders. The ld. CIT(A) deleted the addition on the basis of the confirmations and other supporting documents, explanations and copies of account, observing as follows: -
"From the perusal of documentary evidence and submissions filed during appellate proceedings, it is more than clear that proper confirmation letters along with supporting documents, explanations and also copies of accounts have been furnished in respect of the two impugned loans. Not only the two parties have confirmed to have given these loans but also have submitted their PAN and also the exact nature of these loan transactions.
In absence of any remand report, it is considered that nothing adverse has been noted by the Assessing Officer.ITA No. 37/D/2011 Daisy Investment (P) Ltd. 6
In view of proper confirmation and detailed convincing narration and explanation regarding the transactions, I consider the impugned loans to be genuine and explained. The addition of Rs. 7,25,000/- is, therefore, deleted."
11. Though the Department has contended that the ld. CIT(A) has violated the provisions of Rule 46A of the I.T. Rules in admitting and taking into consideration the aforesaid evidence, we find no force in such stand of the Department. This is so, because of the reason delineated herein below.
12. Before the ld. CIT(A), as noted above, the assessee had filed written submissions, which are, inter alia, to the following effect: -
"Our submission with respect to the various grounds of appeal, in seriatim, are as under:
Ground No. 1 & 2: - These are general grounds and do arise out of the impugned assessment order. Ground Nos. 3 & 6: - This ground relates to addition of Rs. 75,25,000/- being loans received during the previous year relevant to the assessment year 2006-07 under reference, from the following two parties: -
(i) M/s Ashoka Mercantile Ltd. Delhi 64,25,000/-
(ii)Sunrise Soya Products Ltd., Delhi 11,00,000/-
75,25,000/-
Vide questionnaire dated 28.07.2008 (appearing at pages 1-5 of the paper book) the following query was raised by the AO: -
"7 complete details along with supporting evidences of the utilization of unsecured loans and secured loans raised during the year".
The assessee company furnished, vide its letter dated 10.10.2008 (appearing at pages 6-15 of the paper book), the complete details of utilization of unsecured loans taken by the company, as under: -
"7. Complete details of utilization of unsecured loans taken by the company are as under:
Name of party Address of party Amount of Utilization of Loan unsecured loan Ashoka Mercantile CR-234, Ground 60,00,000/- Use for Ltd. Floor, business Laxmi Nagar, Delhi- purpose ITA No. 37/D/2011 Daisy Investment (P) Ltd. 7 110092 Sunrise Soya CR-234, Ground 11,00,000/- Use for Products Ltd. Floor, Laxmi Nagar, business Delhi-110092 purpose Further, vide question no. 14 of the aforesaid questionnaire dated 28.07.2008 the following question was raised:
"14. Furnish the name, PAN and place of assessment of the person(s) from whom the unsecured loan(s)/share application money/share capital (if any) have been obtained during the year along with the evidence(s) to prove the identity (photocopy of PAN Card), capacity (copy of ITR) and genuineness (copy of bank statement showing the relevant transaction) of the depositor(s)"
The assessee company replied the question No. 14 under the impression that it was relating to share application money and therefore stated vide letter dated 10.10.2008, supra, as under:
"14. During the year company has not taken any share application money"
Later on, during the course of assessment proceedings, the AO asked for certain information and explanation in respect of 'Loans and advances' which were duly submitted before him vide letter dated 04.11.2008 (refer to pages 16-34 of the paper book) It was submitted by the assessee company vide letter dated 04.11.2008, supra, before the AO that it had obtained 'loans and advances' from time to time from M/s Ashoka Mercantile Ltd. and M/s Sunrise Soya Products Ltd. for the business purpose.
It, further, submitted before the AO the copies of accounts of the two parties in its books of accounts and also acknowledgement receipts of E-Returns of the said two parties i.e. M/s Ashoka Mercantile Ltd. and M/s Sunrise Soya Products Ltd. which provided PAN of the respective parties.
The assessee company also filed copy of its bank account with State Bank of Bikaner and Jaipur, New Delhi where the receipts of the amount from the parties concerned are duly reflected.
From the copy of the account of M/s Ashoka Mercantile Ltd. (refer to page 17 of the paper book) it would be evident that during previous year relevant to assessment ITA No. 37/D/2011 Daisy Investment (P) Ltd. 8 year in reference the outstanding loan was only Rs. 60 lacs and not Rs. 64.25 lacs as added by the AO. It would be observed from the statement that the amounts taken from it during the year itself leaving a balance of Rs. 60 lacs as outstanding at the end of the year. Therefore, the AO made addition of Rs. 64.25 lacs instead of Rs. 60 lacs in the impugned assessment order.
In the balance sheet also unsecured loans have been shown at Rs. 71,00,000/- which comprise of Rs.
60,00,000/- pertaining to M/s Ashoka Mercantile Ltd. and Rs. 11,00,000/- pertaining to M/s Soya Products Ltd. (for Balance Sheet etc. refer to pages 35-43 of the paper book).
It is worthwhile mentioning here that the interest paid amounting to Rs. 2,31,336/- (refer to page 44 of the paper book) on such loans from the two parties concerned has duly been allowed by the AO while computing the assessment as the net loss as returned by the assessee amounting to Rs. 1,70,200/- has been accepted as such. The details of interest paid of Rs. 2,31,336/- along with E-TDS return are appearing at pages 53 and 54-64 respectively of the paper book. In the view of the above facts and in the circumstances, of the case the additions made of Rs. 64,25,000/- and Rs. 11,00,000/- may kindly be directed to be deleted..." (the remaining relevant portion of the written submissions of the assessee, as filed before the ld. CIT(A) already stands reproduced hereinabove)
13. On receipt of the said written submissions of the assessee, the ld. CIT(A) remanded the matter to the AO. However, despite reminders, no remand report was furnished by the AO. In this regard, the ld. CIT(A) has observed as follows in para 5 of the order under appeal;
"the matter was remanded to the AO. However, no remand report received from the AO in spite of reminders. Therefore, the appeal is being decided on merits".
14. In the remand proceedings, it is seen, the AO directly required the creditor Companies, under section 133(6) of the Act, to furnish the particulars of their transactions with the assessee. It was in compliance of ITA No. 37/D/2011 Daisy Investment (P) Ltd. 9 this mandatory legal requirement that the creditor Companies filed before the AO, their respective confirmations and all the particulars, as follows:
ASHOKA MERCANTILE
a) Copy of Letter to DCIT, Ghaziabad
b) Copy of PAN CARD of Ashoka Mercantile Ltd.
c) Copy of Assessment Order of A.Y. 2006-07
d) Copy of Acknowledgement Receipt of E-Return
e) Copy of Annual Accounts for the year ended 31.03.2006
f) Confirmation of amount paid and receipt to Daisy
g) Copy of Bank Statements
h) Details of amount received from Daisy against loan paid
i) Details of Interest received on ICD as on 31.03.2006 SUNRISE SOYA PRODUCTS LTD.
a) Copy of Letter to DCIT, Ghaziabad
b) Copy of PAN CARD of Sunrise Soya Products Ltd.
c) Copy of Acknowledgement Receipt of E-Return
d) Copy of Annual Accounts for the year ended 31.03.2006
e) Confirmation of amount paid and receipt to Daisy
f) Copy Bank Statements
g) Copy of Assessment Order of A.Y. 2006-07
h) Copy of Ledger of Daisy Investment
i) Details of ICD as on 31.03.2006 Copies of all the above documents have also been filed before us and are placed at pages 128 to 185 of the assessee's Paper Book. In the Index to the Paper Book, in accordance with Rule 18(3) of the ITAT Rules, 1963, it has been certified that all the aforesaid documents were:
"Filed with AO by the creditors and copy to Assessee". This has nowhere been disputed by the Department. It, therefore, stands ITA No. 37/D/2011 Daisy Investment (P) Ltd. 10 established that in the remand proceedings, the AO, exercising power under section 133(6) of the Act, required the assessee's creditors directly to file the complete details of the transactions entered into by them with the assessee. The creditor Companies made full compliance and duly furnished before the AO, their confirmations, dated 25.06.2010 (copies at APB 128 to 129 and 151 to 152, respectively). The factum of these confirmations having been filed before the AO u/s 133(6) of the Act is available from the confirmations themselves, wherein, the addressee has been given as:
'The Deputy Commissioner of Income Tax Circle-1, Room No. 201, C.G.O. Complex, Ghaziabad.' (APB 128 and 151, respectively). Then, the Subject in the confirmations states as follows: 'Information u/s 133(6) of the Income Tax Act,1961 in the case of M/s Daisy Investment Pvt. Ltd. for F.Y. 2005-06' (APB 128 and 151, respectively) Alongwith their confirmations, the creditors also filed before the AO: ASHOKA MERCANTILE LTD:
i. Copy of PAN card on M/s Ashoka Mercantile Ltd. ii. Copy of assessment order for A.Y. 2006-07 iii. Copy of acknowledgement receipt of e-return iv. Copy of annual accounts for the year ended on 31.03.2006 v. Confirmation of amount paid and receipt to Daisy (the assessee) vi. Copy of bank statements vii. Details of amount received from Daisy against loan paid viii. Details of interest received on ICD as on 31.03.2006 SUNRISE SOYA PRODUCTS :
i. Copy of PAN card of Sunrise Soya Products Ltd. ii. Copy of acknowledgement receipt of e-return iii. Copy of annual accounts for the year ended on 31.03.2006 ITA No. 37/D/2011 Daisy Investment (P) Ltd. 11 iv. Confirmation of amount paid and receipt to Daisy (the assessee) v. Copy of bank statements vi. Copy of assessment order for A.Y. 2006-07 vii. Copy of ledger of Daisy (the assessee) viii. The details of ICD as on 31.03.2006
15. The receipt of both the confirmations alongwith annexures by the ITI on 25.6.2010 is available at APB 121 and 151, respectively.
16. In their aforesaid confirmations, both the creditor parties of the assessee have specifically stated as follows: -
"(e) Company had given the said loan to Daisy Investment Pvt. Ltd. on interest @ 10% per annum.
(f) Company has received back the said loan along with interest thereon from the above said party. Copy of statement & copy of Bank Statement of the company is enclosed.
(g) We hereby certify that we had paid the said loan from our own funds and we have already received back the same from M/s Daisy Investment Pvt. Ltd. along with interest thereon."
17. In both the confirmations, the names and addresses of the directors of the Companies stand also given.
18. The fact is that it was the creditor Companies who forwarded to the assessee, copies of all the above documents filed by them before the AO in the remand proceedings in compliance of the requirement of the provisions of section 133(6) of the Act, as stated by the assessee in the index to the Paper Book filed before us, as noted herein above.
19. It appears that, obviously, the AO was fully satisfied with the compliance made by the creditor Companies u/s 133(6) of the Act and it was hence, that no remand report was furnished, despite reminders by the CIT(A). After the compliance by the creditors, the AO was not left with anything further to say in the matter.
20. As such, there is no force in the contention on behalf of the Department that the ld. CIT(A) erred in admitting additional evidence in ITA No. 37/D/2011 Daisy Investment (P) Ltd. 12 violation of the provisions of Rule 46A of the Rules. It is worthy of note that whereas the confirmations filed by both the creditor Companies in compliance u/s 133(6) of the Act in the remand proceedings are dated 25.06.2010 and were also received by the ITI on 25.6.10 itself, the assessee Company's written submissions and application for additional evidence before the CIT(A) are of 26.3.10. This shows that it was after the filing of the application for additional evidence before the CIT(A), that the evidence was filed before and considered by the AO three months thereafter. Thus, the Department cannot have any grievance against the CIT(A) having entertained additional evidence at the back of the AO, particularly when the AO was duly supplied with the confirmations and all connected material and the AO, having considered the same, did not furnish any remand report before the CIT(A) inspite of reminders. In fact, by remaining thus tacit, the AO conveyed his satisfaction qua the evidence filed before him in the remand proceedings. The CIT(A) never entertained any additional evidence at all and deleted the addition on the basis of the aforesaid material filed with the AO in the remand proceedings.
21. As for the merits of the action of the ld. CIT(A), it is seen that the assessee had duly discharged its onus u/s 68 of the Act by filing complete details of the unsecured loans taken, the utilization thereof, the copies of account of the two creditor Companies in the books of account of the assessee Company, the acknowledgement receipts of their e-returns, providing their respective PANs, copy of the assessee's bank account with State Bank of Bikaner and Jaipur, New Delhi, wherein the receipts of the loans had been duly reflected. The ld. CIT(A) duly took into consideration that from the copy of the account of M/s Ashoka Mercantile Ltd., the outstanding loan was of only Rs. 60 lakhs, rather than that of Rs. 64.25 lakhs, as added by the AO. The ld. CIT(A) further took into consideration the fact that in the balance sheet, unsecured loans of Rs. 71 lakhs had ITA No. 37/D/2011 Daisy Investment (P) Ltd. 13 been shown, comprising of Rs. 60 lakhs pertaining to M/s Ashoka Mercantile Ltd. and Rs. 11 lakhs regarding M/s Soya Products Ltd. The ld. CIT(A) also took note of the fact that the interest of Rs. 2,31,336/-, paid on such loans stood duly allowed by the AO, since the net loss of Rs. 1,70,200/-, as returned by the assessee, had been accepted as such. The ld. CIT(A) also took into consideration the confirmations from the creditor parties.
22. It was on the above that the ld. CIT(A) observed that the assessee had duly furnished proper confirmation letters alongwith supporting documents, explanations and copies of account and that not only had the two creditor parties confirmed having given the loans, but they had also submitted their PANs and also the exact nature of these loan transactions, and that in the absence of any remand report from the AO, it was being considered that nothing adverse had been noted by the AO.
23. To reiterate, though the matter was remanded by the ld. CIT(A) to the AO on receipt of the assessee's written submissions (supra), despite reminders, no remand report was filed. The ld. CIT(A) took the entire evidence filed before the AO in remand proceedings into consideration. It was only thereafter, and, in our considered opinion, rightly so, that the ld. CIT(A) deleted the addition wrongly made by the AO.
24. Hence, finding no error whatsoever in the Order of the ld. Commissioner (Appeals), we hereby confirm the same. The grievance sought to be raised by the Department is found to be shorn of merit and it is rejected as such.
ITA No. 37/D/2011 Daisy Investment (P) Ltd. 1425. In the result, the appeal filed by the Department is dismissed.
Order was pronounced in the open court on 20.07.12 Sd/- Sd/-
(T.S. KAPOOR) (A.D. JAIN)
ACCOUNTANT MEMBER JUDICIAL MEMBER
Dated: 20.07.12
*Kavita
Copy forwarded to: -
1. Appellant
2. Respondent
3. CIT
4. CIT(A)
5. DR, ITAT
TRUE COPY
By Order,
DEPUTY REGISTRAR