Gujarat High Court
Pr. Commissioner Of Income Tax, ... vs Rsa Digi Prints on 12 March, 2018
Author: Akil Kureshi
Bench: Akil Kureshi, B.N. Karia
C/TAXAP/470/2017 ORDER
IN THE HIGH COURT OF GUJARAT AT AHMEDABAD
TAX APPEAL NO. 470 of 2017
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PR. COMMISSIONER OF INCOME TAX, VADODARA
Versus
RSA DIGI PRINTS
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Appearance:
MR KM PARIKH(575) for the PETITIONER(s) No. 1
MR.VARUN K.PATEL(3802) for the PETITIONER(s) No. 1
UMAIDSINGH BHATI(7973) for the RESPONDENT(s) No. 1
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CORAM: HONOURABLE MR.JUSTICE AKIL KURESHI
and
HONOURABLE MR.JUSTICE B.N. KARIA
Date : 12/03/2018
ORAL ORDER
(PER : HONOURABLE MR.JUSTICE AKIL KURESHI)
1. This appeal is filed by the department in which we had issued notice for final disposal. Following question of law is considered :
Whether the Income Tax Appellate Tribunal was right in law in deleting the disallowance of interest income of Rs.4,97,915/ for the assessment year 20102011 only on the ground that finding that the loan transaction itself was not genuine, came to be reversed by the Tribunal for the block period of assessment?
2. Brief facts are as under. The appeal concerns the assessment year 20102011. For such year, the assessee had filed the return of income on 27.9.2010 declaring total Page 1 of 5 C/TAXAP/470/2017 ORDER income of Rs.3,62,804/. The Assessing Officer took the return in scrutiny and passed the order of assessment under section 143(3) of the Act on 28.12.2011 determining the total income of assessee at Rs.73,96,722/. This included disallowance of interest payment of Rs.4,97,915/, unexplained cash credit of Rs.50,86,007/ and GP addition of Rs.14,49,996/. Assessing Officer made this disallowance on the ground that in his opinion loan transaction itself was not genuine.
3. To these additions, the assessee objected before CIT(Appeals). CIT(Appeals) granted partial relief under other two heads but confirmed the disallowance of interest expenditure of Rs.4,97,915/. He had called for remand report and confirmed the Assessing Officer's view that the loan transaction was not genuine and therefore, interest expenditure cannot be recognised.
4. We may record that the assessee was subjected to search operation which gave rise to the assessment proceedings under section 153A of the Act for the assessment years 20072008, 20082009 and 20092010. The assessment year 20102011 i.e the present one was outside of the purview of such proceedings. It was during the assessments for the said assessment years 20072008, 20082009 and 20092010 under section 153A of the Act that the Assessing Officer had the occasion to consider the nature of loan transaction. The Assessing Officer was of the opinion that such transaction was not genuine, a view the Commissioner (Appeals) confirmed. However, when the issue was carried in appeal before the Tribunal, the Page 2 of 5 C/TAXAP/470/2017 ORDER Tribunal formed a belief that the additions were made which had no connection with the material found during the search. On this ground, addition under section 68 of the Act relating to the loan transaction was deleted.
5. In context of the present assessment year 20102011 and the disallowance of interest expenditure made by the Assessing Officer and confirmed by the CIT(Appeals), the Tribunal reversed the view of the revenue authorities on the ground that the legality of the loan transactions was decided against the Revenue in the earlier assessment years. Thereupon the Revenue is in appeal before us.
6. Learned counsel Shri Varun Patel for the department contended that the Tribunal committed a serious error in ignoring the findings arrived at by the Assessing Officer and CIT(Appeals) which related to the present assessment year 20102011. The declaration by the Tribunal with respect to the legality of the loan transaction, for the earlier assessment years was based on the fact that no material was found during the search on the basis of which such addition could be made. This would vitiate the findings arrived at by the Assessing Officer and confirmed by CIT(Appeals) for the assessment year 20102011.
7. Learned counsel Shri Bhati for the assessee however opposed the appeal contending that the Tribunal has come to just conclusions. The assessee had discharged its full burden under section 68 of the Act. The assessee as per the well settled law, cannot be asked to prove the source of the source.
Page 3 of 5C/TAXAP/470/2017 ORDER
8. We find that the assessments for the assessment years i.e 20072008, 20082009 and 20092010 under section 153A of the Act would have entirely different purport and sweep. The Tribunal was justified in deleting the additions in those years which are not based on materials found during the search. Had the addition in the present year, which was outside of the assessment under section 153A of the Act, made by the Assessing Officer on the same basis, the Tribunal was perhaps right in deleting such additions also. However, the Assessing Officer in the present year had examined the nature of loan transaction and come to definite finding that the same was not genuine. CIT(Appeals) reexamined this issue who called for the remand report and again came to the same conclusion. While therefore, for the assessment year 20102011, the Assessing Officer and CIT(Appeals) had correctly come to the conclusion that loan transaction itself was not genuine, the question of recognising interest expenditure on such loan transaction would not arise. Had the Tribunal disturbed such findings and thereafter given the relief to the assessee, the issue would stand on a different footing. Instead the Tribunal merely proceeded on its declaration for the earlier assessment years that the addition under section 68 would not survive since it was not relatable to any material found during the search. The Tribunal's findings and conclusions for the earlier years concerning the assessments under section 153A of the Act were independent and severable from the exercise undertaken by the Assessing Officer for the current assessment year 20102011 during the course of scrutiny assessment under Page 4 of 5 C/TAXAP/470/2017 ORDER section 143(3) of the Act. The Assessing Officer had come to independent findings which were confirmed by CIT(Appeals). The Tribunal had not disturbed these findings. Deletion of disallowance of interest was therefore, not correct.
9. Question is answered against the assessee and in favour of Revenue. Judgment of the Tribunal is reversed to above extent. Tax Appeal is allowed and disposed of.
(AKIL KURESHI, J) (B.N. KARIA, J) raghu Page 5 of 5