Income Tax Appellate Tribunal - Ahmedabad
Hiral Pharma Ltd.,, Ahmedabad vs Department Of Income Tax on 2 March, 2016
IN THE INCOME TAX APPELLATE TRIBUNAL
AHMEDABAD ''C" BENCH - AHMEDABAD
Before S/Shri Rajpal Yadav, JM, & Manish Borad, AM.
ITA No.103/Ahd/2012
Asst. Year: 1997-98
Income-tax Officer, Ward 4(3), Vs. Hiral Pharma Ltd., F/4,
Ahmedabad. Vishal Commercial
Centre, Nr. Dinesh Hall,
Off Ashram Road,
Ahmedabad.
Appellant Respondent
PAN AAACH 2878N
Appellant by Mrs. Anita Hardasani, Sr.DR
Respondent by Shri Anil Kshatriya, AR
Date of hearing: 16/12/2015
Date of pronouncement: 02/03/2016
ORDER
PER Manish Borad, Accountant Member.
This appeal of the Revenue is directed against the order of ld. CIT(A) -VIII, Ahmedabad, dated 24.10.2011. Assessment was framed u/s 143(3) read with section 254 of the I.T. Act., 1961 (in short the Act) on 30.12.2010 for Asst. Year 1997-98 by ITO, Wd-4(3), Ahmedabad. The following grounds have been raised by the Revenue :-
1. The Ld.CIT(A) has erred in law and on facts in deleting the addition made on account of cash credit in the name of M/s. Pappillion Export Ltd., without appreciating fact that the A.O. has established that the ITA No. 103/Ahd/2012 2 Asst. Year 1997-98 unexplained cash credit appearing in books of assessee is not genuine.
2. On the facts and in the circumstances of the case, the Ld. CIT(A) ought to have upheld the order of the Assessing Officer.
3. It is, therefore, prayed that the order of the Ld. CIT(A) may be set aside and that of the Assessing Officer may be restored to the above extent
2. Briefly stated facts as culled out from the records are that the assessee is a limited company which has filed its return of income for Asst. Year 1997-98 on 30.11.1997 declaring total loss of Rs.6,23,260/- and assessment was framed u/s 143(3) of the Act on 29.3.2000 determining taxable income at Rs.54,61,740/- after making addition of Rs.60,85,000/- as unexplained cash credit received from M/s Pappillion Exports Ltd.
3. Aggrieved, assessee went in appeal before ld. CIT(A) but it did not bring any relief to the assessee. Ld. CIT(A) upheld the addition vide his order dated 21.3.2001. Thereafter the assessee went in appeal before the Tribunal wherein the issue was examined and the co-ordinate bench set aside the issue to the file of Assessing Officer for verification of bank account of M/s Pappillion Exports Ltd. maintained with Shri Sarvodaya Co-op. Bank Ltd., vide its order dated 29.1.2010.
ITA No. 103/Ahd/2012 3Asst. Year 1997-98
4. Accordingly notice was issued on 26.5.2010 to the assessee asking various information but on enquiry, the Assessing Officer found that the bank is in liquidation since 15th April, 1999 and no further information was available through the liquidator and accordingly he added back Rs.60,85,000/- to the total income of assessee and framed assessment order u/s 143(3) r.w.s 254 of the Act assessing total income at Rs.54,61,740/-.
6. Aggrieved, assessee went in appeal before ld. CIT(A) against the order of ld. Assessing Officer and ld. CIT(A) allowed the appeal of assessee deleting the addition made by Assessing Officer by observing as under :-
6. I have carefully considered the submissions made by the appellant's counsel and have perused all the facts brought on the record before the AO as well as judicial decisions referred by the appellant's counsel. It is noticed that in the second round of assessment proceedings, in consequent to the orders dated 29.1.2010 passed by the Hon'ble ITAT, Ahmedabad 'D' Bench, the issue was set aside with the specific finding and directions, viz. (a) that the statement of Shri K.B. Sasidharan recorded by the ITO, Erode and his report would not be relevant in the matter in issue as well as cannot be read in evidence against the appellant because appellant was never allowed any cross-examination at the assessment stage, therefore, this statement of Shri Sasidharan and ITO's report to be excluded from consideration and (b) to re-decide the issue by verifying the bank account of M/s. Pappilion Export Ltd. maintained with Shri Sarvodaya Co-
Operative Bank Ltd., Ahmedabad with reference to the certificate issued by them on the matter. In nutshell, the AO was under judicial obligation to strictly follow the observation recorded by the highest fact finding authority, i.e. Hon'ble ITAT. Referring to para 17 of the Hon'ble Tribunal's order dated 29.1.2010, it was concluded by the ITAT that the appellant had been prima-facie able to prove the creditworthiness of the creditors in issuing the cheque in question in favour of the appellant company. According to the above findings, the identity, creditworthiness already stood accepted by the order of Hon'ble Tribunal itself.
ITA No. 103/Ahd/2012 4Asst. Year 1997-98
7. With regard to the second limb of the directions of the Hon'ble Tribunal in verifying the bank accounts of the creditor with the referred Bank, facts emerging from the records of the case are: The issue, essentially had been confined to the limited direction to cross verify the transaction. It is observed that the nature of credit in real terms was only a repayment/return of loan of Rs.73,50,000/- advanced by the appellant company and its associated concerns earlier and the appellant has submitted the contra entry of the associated concerns for advancement of money to the sister concern of Pappilon Export Ltd. for squaring up this advances. These contra entries contain PAN and Ward Circle where they are assessed. The A.Q. has never doubted this factual aspect of the matter as no comment is offered on this count. This further strengthens the appellant's contention that it was a re-payment of money advanced earlier by those concerns. Though the said payment did constitute a loan of the said amount in so far as the book of accounts of the appellant company was concerned. Even if the said amount of Rs.60,85,000/- was considered as a loan, the appellant company had discharged its onus of proving the identity of the party, the genuineness of the credit entry through banking channel and source of source. Since all the ingredients as required by law appear fully satisfied, the explanation submitted on record does not suffer from any apparent or factual error, so far as the ambit of Section 68 is concerned, which has been crux of the finding of the Hon'ble Tribunal only.
8. Further, during the course of appellate proceedings, the appellant's counsel has placed reliance on the following judicial pronouncements of Hon'ble Courts:
(i) Doulat Ram Rawatmal [1973] 89 ITR 349 (SC)
(ii) Precision Finance Ltd. [1994] 208 ITR 465 (Cal.)
(iii) Oriental Wire Ind. (P) Ltd. [1981] 131 ITR 688 (Cal.) It is observed that the Assessing Officer, instead of taking proper recourse in accordance with law, has once again made addition by treating the advance through banking channel as unexplained bank deposit. As noted in the foregoing paragraphs of this order, the appellant has categorically established identity of the creditor, genuineness of the transactions and capacity of the creditor.
Appellant's counsel has pointed out that recently, Hon'ble Gujarat High Court in the case of CIT Vs. Micro Melt (P) Ltd., reported in [2010] 327 ITR 70 (Guj) he/d as under :-
That the neness of the transaction and the identity of the depositors had been established and nothing had been brought on record to contradict the findings of fact recorded by the Commissioner (Appeals) as noted by the Tribunal. This was a pure question of fact. The deletion of the addition made u/s. 68 of the I.T. Act, 1961 was justified."
9 In view of the above discussion, I am of the view that identity and genuineness of the party and also creditworthiness has been proved and the ITA No. 103/Ahd/2012 5 Asst. Year 1997-98 transactions are through banking channel. The AO has overlooked vital facts without bringing any relevant, cogent and positive material on record. Thus, although the genuineness of the transactions and the identity of the creditor has been fully established and nothing has been brought on record to contradict the findings of the fact noted by the Hon'ble Tribunal as well. The assessment order passed by the AO in the course of second round, reveals that the AO has been guided primarily by the view taken by his predecessor, and had made addition in quite repetitive manner without bringing any cogent material on record. I am also inclined to accept the alternative contention of the appellant that if one goes by the final accounts furnished by the liquidator of Sarvodaya Co-Operative Bank Ltd. then according to it the said entry is a nullity though it is duly reflected in the bank statement of both the parties which is obtained by the A.O. from the liquidator leaving no scope of invoking section 68 of the Act. The AO is, therefore, directed to delete the addition of Rs. 60,85,0007- made on account of cash credit in the name of the aforesaid creditor.
10. Since all other grounds of appeals i.e. ground No. 1 to 6 are connected to this effective ground No.7 and I have already decided the same as aforesaid, they are not being adjudicated separately.
11. In the result, the appeal is allowed.
7. Aggrieved, the Revenue is now in appeal before the Tribunal.
8. The ld. DR relied on the order of Assessing Officer.
9. Whereas ld. AR of the assessee submitted that during the Asst. Year 1997-98 loan was taken by assessee from M/s Pappilion Export Ltd. through a/c payee cheque. All details supporting the genuineness and creditworthiness of M/s Pappilion Export Ltd. have been regularly filed before the lower authorities and Hon. Tribunal has categorically mentioned in its order to be satisfied about the identity, creditworthiness and genuineness of loan transaction of Rs.60,85,000/- received from M/s Pappilion Export Ltd. through bank account held with Shree Sarvodaya Co-op. Bank Ltd. Ld. AR further submitted that letter of Shree Sarvodaya Co-op. Bank Ltd. was filed ITA No. 103/Ahd/2012 6 Asst. Year 1997-98 before the lower authorities to prove that the account of M/s Pappilion Export Ltd. and Hiral Pharma Ltd. were being maintained with their bank and also submitted that copies of bank statements were duly filed showing the transactions of loan given by M/s Pappilion Export Ltd. through cheque no.133279 and the same being credited in the bank account of the assessee i.e. M/s Hiral Pharma Ltd. on 1st January, 1997 and therefore, ld. CIT(A) has rightly deleted the addition.
10. We have heard the rival contentions and perused the material on record. The only issue before us is to examine whether assessee has actually received loan of Rs.60,85,000/- from M/s Pappilion Export Ltd. through its bank account held with Sarbodaya Co-op. Bank Ltd. and the same being received in the bank account of assessee held with Sarbodaya Co-op. Bank Ltd.
11. We find that the issue about genuineness and creditworthiness of the unsecured loan taken from M/s Pappilion Export Ltd. have been duly adjudicated by the co-ordinate bench vide their order dated 29th January, 2010 in ITA No.1255/Ahd/2001 and the relevant portion of the decision is reproduced below for ready reference :-
16. We have considered rival submissions and perused the materials available on record. The Assessing Officer noted that assessee has obtained unsecured loan of Rs.60,85,000/- in the assessment year in question from M/s. Pappilon Exports Ltd.,Tirupur, Tamilnadu. Assessee was asked to file complete details alongwith confirmation from the above party. Commission was also issued to I.T.O. Erode, (Tamilnadu) to make the inquiry from the concern party regarding giving of the loan. One of the Director of this concern Shri K. B. Sasidharan was examined in which he has denied giving of any cheque of the amount in question to the assessee ITA No. 103/Ahd/2012 7 Asst. Year 1997-98 company. Any transaction with the assessee was also denied. No books of accounts are maintained. The said statement of Shri K. B. Sasidharan was never put to the assessee for the purpose of allowing any cross examination on behalf of the assessee. We may also note that his statement would also not be relevant because in his statement he has stated that he has no idea about the cheque issued on behalf of their company from Sarvodaya Co. Op. Bank Ltd. Ahmedabad. He has not disputed the confirmation letter filed by Shri Bhagwandas Premchandani.
In such circumstances, the verification of the bank account at Ahmedabad should have been made either by I.T.O. Erode or by Assessing Officer himself at Ahmedabad. The assessee admittedly filed confirmation letter signed by Shri Bhagwandas Premchandani one of the Director/Authorised signatory of M/s. Pappilon Exports Ltd. from whom amount was received in which he has admitted to have given the amount in question to the assessee company. Copy of the bank certificate is also filed, which is reproduced in the impugned order and copy of the same is also filed at PB-
12. The said bank certificate is issued by Shri Sarvodaya Co.op. Bank Ltd. to Shri Bhagwandas Premchandani Director of M/s. Pappilon Exports Ltd. and copy of the same was also given to the assessee in which bank has certified that cheque no.133279 dated 01.01.1997 of Rs.60,85,000/- has been issued in favour of M/s.Hiralal Pharma Ltd. i.e. the assessee's company. It was also certified that M/s. Pappilon Exports Ltd. maintained bank account with this bank and has been granted Temporary Overdraft facility. The confirmation filed by the assessee company have not been examined by the Assessing Officer, similarly Learned Commissioner of Income Tax (Appeals) did not examine the bank certificate or directed the Assessing Officer to file the remand report. The Assessing Officer also did not examine Shri Bhagwandas Premchandani in order to elicit the truth. The aforesaid bank account of M/s. Pappilon Export Ltd. is maintained at Ahmedabad Branch and the Assessing Officer also have its office at Ahmedabad, despite that fact, the Assessing Officer did not verify the facts at Ahmedabad and chose to get the issue examined at Tamilnadu through the I.T.O. Erode. The I.T.O. Erode also did not examine Shri Bhagwandas Premchandani and the bank account at Ahmedabad despite sufficient material available before him also. Further report of I.T.O. Erode, was confronted to the assessee vide letter dated 21.03.2000 by the Assessing Officer and the assessee vide letter dated 27.03.2000 (PB-11) again explained before him that M/s. Pappilon Exports Ltd. had advanced a sum of Rs.60,85,000/- through the above cheque no. of Sarvodaya Co.op. Bank Ltd. and again requested the Assessing Officer to issue notice to the banker and get the statement of account of M/s. Pappilon Exports Ltd. and verify the facts. It was also submitted that assessee has already filed bank ITA No. 103/Ahd/2012 8 Asst. Year 1997-98 statement and copy of the bank slip, therefore, it is the responsibility of the department to verify the correctness of the evidence from available sources. The assessee therefore requested to summon the bank for getting the matter verified. The Assessing Officer did not act upon on the request of the assessee and did not summon the banker to verify the above facts and also did not allow any cross examination to the statement of Shri K.B. Sasidharan and passed the assessment order within 2 days on 29.03.2000. The Cross examination of Shri K. B. Sasidharan on behalf of the assessee, examination of Shri Bhagwandas Premchandani and Bank account on the request of the assessee was necessary to bring the truth on record. The Assessing Officer however, instead of taking any proper recourse in accordance with law made the addition by treating the advance through banking channel as unexplained bank deposit. Hon'ble M. P. high Court in the case of CIT Vs. Rameshchandra Shukla [MAIT No.71/2003 decided on 1.04.2005] reported in 10 ITJ 286 held as under:-
"It is now well settled that where the assessee requests the Assessing Officer to issue summons, to enforce attendance of the creditors to establish the genuineness and capacity of the creditors, it is duty of the Assessing Officer to enforce attendance of creditors by issuing summons. If the Assessing Officer does not choose to issue summons and examine the creditors, he cannot subsequently treat the loans standing in the name of such creditors as non- genuine, nor add the amount thereof to the assessee's Income vide the decision of the Allahabad high Court in (1963 49 ITR 561 Nathu Ram Premchand vs. Commissioner of Income Tax U.P. and decision of this Court in 1971 Tax LR 355- R.S. Seth Gopikisan Agrawal Vs.Assistant Commissioner of S.T."
Hon'ble Delhi High Court in the case of CIT Vs. SMC Share Brokers Ltd. 288 ITR 345 held "there is no doubt that the statement of Manoj Agarwal had evidentiary value but weight could not be given to it in proceedings against the assessee without it being tested under cross examination. In the absence of the statement being tested, it cannot be said that it should be believed completely to the prejudice of the assessee."
Considering the above discussion, it is clear that the statement of Shri K. B. Sasidharan recorded by I.T.O. Erode and his report would not be relevant to the matter in issue as well as cannot be read in evidence against the assessee because assessee was never allowed any cross examination to such statement at the assessment stage. We therefore, exclude the statement of Shri K. B. Sasidharan and report of I.T.O. Erode from consideration in the present appeal.
17. The assessee in the written submission filed before Learned Commissioner of Income Tax (Appeals) (PB-17) explained that the ITA No. 103/Ahd/2012 9 Asst. Year 1997-98 assessee company and its sister companies gave loans and advances to Supreme Money Management Limited controlled by its Chairman and Director Shri Bhagwandas Premchandani. Despite several efforts by the assessee, the amount was not repaid by Shri Bhagwandas Premchandani and no effort was made by him to help the assessee. The assessee therefore, pressurised the Bhagwandas Premchandani for repayment of the amount and ultimately Shri Bhagwandas Premchandani Director of M/s. Pappilon Exports Ltd. issued cheque of Rs. 60,85,000/- in favour of the assessee after obtaining overdraft facility from Sarvodaya Co. Op. Bank Ltd. The above submissions of the assessee have not been properly appreciated by the Learned Commissioner of Income Tax (Appeals). The Learned Commissioner of Income Tax (Appeals) did not appreciate that assessee was concerned with the repayment of the amount in question which was given to the group concern through Shri Bhagwandas Premchandani. If another account is maintained by Shir Bhagwandas Premchandani on behalf of M/s. Pappilon Exports Ltd. with Sarvodaya Co. Op. Bank Ltd. Ahmedabad, as Chairman/Director and he has issued cheque in question in favour of assessee company for settlement of the dues, where is a fault of assessee. The assessee in the best interest of the business activity of its company was required to receive back the money. Similarly, if M/s. Pappilon Exports Ltd. did not maintained any books of account at the time of issue of the cheque in favour of the assessee, how assessee could be blamed because assessee has no control over the internal affairs of M/s. Pappilon Export Ltd. and two of its Directors. The assessee has explained the identity of M/s. Pappilon Exports Ltd. and complete address is also given before Assessing Officer. The ITO Erode also examined one of the Director of M/s. Pappilon Exports Ltd. and confirmed the identity and existence of M/s. Pappilon Exports Ltd. at Tamilnadu. Shri Bhagwandas Premchandani being one of the Director of M/s. Pappilon Exports Ltd. issued cheque in favour of the assessee company out of its bank account with Sarvodaya Co. Op. Bank Ltd. Ahmedabad. As noted above, the Assessing Officer did not examine Shri Bhagwandas Premchandani and the bank account of M/s. Pappilon Exports Ltd. with Sarvodaya Co. Op. Bank Ltd. at Ahmedabad. The details filed for the bank account had not been disputed by the Assessing Officer. The Bank certificate filed on record and reproduced in the impugned order proved that M/s. Pappilon Exports Ltd. maintained bank account with Sarvodaya Co. Op. Bank Ltd. Ahmedabad through its Director Shri Bhagwandas Premchandani. It is also not disputed that Shri Bhagwandas Premchandani was also one of the Director and Chairman of the creditor company. The transaction in question is therefore, not disputed. The source of issue of the cheque is explained to be overdraft facility granted to M/s. Pappilon Exports Ltd. by the Sarvodaya Co. Op. Bank Ltd. Thus, the ITA No. 103/Ahd/2012 10 Asst. Year 1997-98 assessee has been prima facie able to prove the creditworthiness of the creditor in issuing the cheque in question in favour of the assessee company.
18. However, we may also note here that the assessee despite making a request to the Assessing Officer to summon the banker for verification of the bank account of M/s. Pappilon Exports Ltd. with Sarvodaya Co.op. Bank Ltd. Ahmedabad vide letter dated 27.03.2000 (PB-11), did not file the bank certificate before the Assessing Officer. This fact is also recorded by Learned Commissioner of Income Tax (Appeals) in the impugned order at page 6, para-4, in which the submission of the assessee is recorded that the said bank certificate could not be furnished before the Assessing Officer before order was passed. Therefore, for the ends of justice, it would be relevant to restore the matter to the file of the Assessing Officer to make verification of the bank account and bank certificate issued by Sarvodaya Co. Op. Bank Ltd. Ahmedabad because the Assessing Officer did not have occasion to examine such bank certificate.
19. Considering the above discussion, we set aside the orders of authorities below and restore this issue to the file of the Assessing Officer to re-decide the issue by verifying the bank account of M/s. Pappilon Exports Ltd. maintained with Shri Sarvodaya Co. Op. Bank Ltd. Ahmedabad and the certificate issued by them on the matter in issue as is reproduced in the order of Learned Commissioner of Income Tax (Appeals) as well as page 7 of this order. The Assessing Officer shall re- decide the issue as per observation given in this order by giving reasonable sufficient opportunity of being heard to the assessee within the period of 6 months from the receipt of the order.
20. As a result, appeal of the assessee is allowed for statistical purposes.
12. From going through the above decision of the co-ordinate bench, we find that there is no doubt about the identity, genuineness and creditworthiness of loan taken from M/s Pappillion Exports Ltd. of Rs.60,85,000/-.. From going through the paper book at pages 83 to 85 wherein bank statement of Sarvodaya Co-op. Bank Ltd. in the name of M/s Pappillion Exports Ltd. a/c no.4479 as well as bank statement of M/s Hiral Pharma Ltd. are placed, we observe that in ITA No. 103/Ahd/2012 11 Asst. Year 1997-98 January, 1997 a cheque No.133279 has been issued by M/s Pappillion Exports Ltd. and on the very same day this amount has been transferred to the account of assessee and the entry of the same is reflected in the bank statement of assessee. This clearly shows that there was bank transaction through cheque no.133279 for Rs.60,85,000/- between M/s Pappillion Exports Ltd. and the assessee.
13. Further as regards non-availability of other details from Sarvodaya Co-op. Bank Ltd. due to it being in liquidation we find that records have been placed by assessee showing extract of financial statement of Sarvodaya Co-op. Bank Ltd. which is having a schedule of a/c wherein name of M/s Pappillion Exports Ltd. is appearing which shows that M/s Pappillion Exports Ltd. was having its banking transactions through Sarvodaya Co-op. Bank Ltd.
14. In view of our above discussion we are of the view that there occurred a bank transaction between the assessee and M/s Pappillion Exports Ltd. and assessee has duly received loan of Rs.60,85,000/- from M/s Pappillion Exports Ltd. through bank transfer. Therefore, ld. CIT(A) has made no error in deleting the addition made by the Assessing Officer. We uphold the order of ld. CIT(A). The ground raised by the Assessing Officer is dismissed.
15. Other grounds are of general nature, which need no adjudication.
ITA No. 103/Ahd/2012 12Asst. Year 1997-98
16. In the result, appeal of Revenue is dismissed.
Order pronounced in the open Court on 2nd March, 2016 Sd/- Sd/-
(Rajpal Yadav) (Manish Borad)
Judicial Member Accountant Member
Dated 2 /03/2016
Mahata/-
Copy of the order forwarded to:
1. The Appellant
2. The Respondent
3. The CIT concerned
4. The CIT(A) concerned
5. The DR, ITAT, Ahmedabad
6. Guard File
BY ORDER
Asst. Registrar, ITAT, Ahmedabad
1. Date of dictation:15/02/2016
2. Date on which the typed draft is placed before the Dictating Member: 24/02/2016 other Member:
3. Date on which approved draft comes to the Sr. P. S./P.S.:
4. Date on which the fair order is placed before the Dictating Member for pronouncement: __________
5. Date on which the fair order comes back to the Sr. P.S./P.S.:
6. Date on which the file goes to the Bench Clerk: 2/3/16
7. Date on which the file goes to the Head Clerk:
8. The date on which the file goes to the Assistant Registrar for signature on the order:
9. Date of Despatch of the Order: