Income Tax Appellate Tribunal - Ahmedabad
Busy Bee Engineering Pvt. Ltd.,, ... vs Assessee on 18 October, 2016
IN THE INCOME TAX APPELLATE TRIBUNAL
AHMEDABAD "C" BENCH
(BEFORE SHRI N.K. BILLAIYA, ACCOUNTANT MEMBER
& SHRI MAHAVIR PRASAD, JUDICIAL MEMBER)
ITA. No: 852/AHD/2012
(Assessment Year: 1998-99)
Busy Bee Engineers Pvt. V/S Income Tax Officer, Ward-
Ltd. C/o. Mahesh S. 1 (2), Ahmedabad
Kamdar, A/601, Silicon
Valley Co. op. Hous. Socy.
Ltd. Besides Silicon Valley
Shopping Centre, Below
Fly Over, Shivranjni Cross
Road, Satellite Road,
Ahmedabad
(Appellant) (Respondent)
PAN: AABCB2108C
Appellant by : Shri J.P. Shah with Anil N. Shah, A.R.
Respondent by : Shri Prasoon Kabra, Sr. D.R.
(आदे श)/ORDER
Date of hearing : 06 -10-2016
Date of Pronouncement : 18 -10-2016
2 ITA No. 852/Ahd/2012
. A.Y. 1998-99
PER N.K. BILLAIYA, ACCOUNTANT MEMBER
1. With this appeal, the assessee has challenged the correctness of the order of the Ld. CIT(A)-6, Ahmedabad dated 08.02.2012 pertaining to A.Y. 1998-
99.
2. The grievance of the assessee is three fold.
(i) The assessee is aggrieved by the addition of Rs. 3,69,500/- as unexplained cash credits and the assessee is further aggrieved by the addition of Rs. 66,510/- as interest expenditure on the aforementioned cash credits.
(ii) (ii) The assessee is aggrieved by the disallowance of interest of Rs.
34,92,619/-.
(iii) (iii) The assessee is aggrieved by the addition of Rs. 61,29,000/- as unexplained cash credits which was received by the assessee-
company from the members of Co-op. Societies.
3. This is the second round of litigation. The first round of litigation emanated from the assessment order dated 28.03.2001 made u/s. 143(3) of the Act wherein the assessment was completed by making following additions to the returned loss of Rs. 4,15,862/-.
(i) Unexplained cash credits Rs. 1,24,29,697/-
(ii) Interest Exp. On unexplained cash credit Rs. 22,37,344/-
(iii) Interest Expenses Rs. 13,21,785/-
(iv) Unexplained cash credit Rs. 2,61,08,186/-
3 ITA No. 852/Ahd/2012
. A.Y. 1998-99
4. The litigation travelled up to the Tribunal and the Tribunal vide order dated 23.12.2009 in ITA Nos. 730 & 841/Ahd/2005 had given part relief to the assessee.
5. Insofar as the addition of Rs. 2,61,08,186/- is concerned, the ld. CIT(A) had confirmed the addition of Rs. 1,49,71,718/- and the Tribunal had set aside the issue to the files of the A.O. for deciding afresh as per the directions. The relevant finding of the Tribunal reads as under:-
10. We have considered the rival submissions and perused the material on record.
In our considered view the assessee has made out a prima facie case that money actually does not belong to him but belong to members but this does not really discharge the onus cast upon him to explain deposits/loans in reject of which assesses had only submitted partial details before the Assessing Officer and before the CIT(A) and other details are now submitted before us on which a prayer has been made for admitting additional evidences. We in the interest of justice admit the details and require the Assessing Officer to verify them. The additional' details furnished by the assessee are confirmation from respective members, copy of account, details of PAN, evidence from society such as allotment letter, certificate, NOC for loan, possession letter, share certificate, name of the member in the list of govt. audit report, resolution for admission of the member, share contribution, in the case of transfer, application of transfer/unit, copy of the bill, proof of death, copy of will, date entered in the transfer register of the society municipal tax bill, electricity bill etc. The assessee will submit copies of the paper books to the Assessing Officer along with this full chart containing 24 columns and information about all the 77 members/depositors. The Assessing Officer will examine them, if necessary carry out further enquiry including summoning original person depositing the money with the society, whether such deposits are declared in the IT returns, whether 4 ITA No. 852/Ahd/2012 . A.Y. 1998-99 transfer of money to the society/assessee is through banking channels. If identity of the depositor is established and he owns the money paid to the assessee then no further questioning is required to be done and such unsecured loan/deposit should be treated as explained. This view, we are taking on the basis of various judgments of the Courts as under:-
1. CIT vs. Divine Leasing and Finance Ltd. (2008) 299 ITR 268 (Del);
2. A One Housing Company Ltd. Vs. ITO (2008) 299 ITR (AT) 327 (Del);
3. CIT vs. Electropolychem Ltd. (2007) 294 ITR 661 (Mad)
4. CIT vs. Illac Investments (P) Ltd. (2006) 287 ITR 135 (Del)
5. Uma Polymers (P) Ltd. Vs. DCIT (2006) 284 ITR 001 (AT) Jodhpur
6. Shree Barkha Synthetics Ltd. Vs. ACIT (2006) 283 ITR 377 (Raj.)
7. CIT vs. Down Town Hospital (P) Ltd. (2004) 267 ITR 439 (Gauhati)
8. CIT vs. Sophia Finance Ltd. (2004) 205 ITR 98 (Del).
11. The Assessing Officer will also calculate pro-rate disallowance of interest in those cases where deposits are not owned up by any depositor or depositor is not found in existence. He will not disallow claim of interest in respect of those deposits/unsecured loan which are treated as explained on the basis of admission by the depositors and existence of depositors.
12. In respect of source of money not found explained in the hands of the depositor then department is free to take action in his hands.
13. Thus, we set aside the two appeals and restore the matter to the file of Assessing Officer for deciding afresh as per our direction above and as per law.
14. In the result, the appeal of assessee and that of Revenue both are allowed for statistical purposes.
6. In pursuance to the directions of the Tribunal, the A.O. completed the assessment and computed the assessed income as follows:-
Income as per statement of income Rs. -4,15,862
Add: Unexplained cash credits as discussed in Para no 5 Rs. 3,69,500
5 ITA No. 852/Ahd/2012
. A.Y. 1998-99
2, Interest expenditure on unexplained cash credits as Rs. 66,510
discussed in Para no 6
3. Interest expenses as discussed in Para no 7 Rs. 34,92,619
4. Unexplained cash credits as discussed in Para no 8 Rs. 61,29.000
Total Income Rs. 96,41,767
7. It is the say of the ld. counsel that while completing the assessment, the A.O. had made two additions which were not there in the first assessment order. Therefore, the assessment order to this extent is not as per the directions of the Tribunal and these two additions deserve to be deleted. Per contra, the ld. D.R. stated that since the directions of the Tribunal were to decide the issues afresh. Therefore, the A.O. was free to make other additions also.
8. We have given a thoughtful consideration to the submissions made by the representatives of both sides qua the first grievance mentioned elsewhere. We have mentioned hereinabove, the additions made in the first assessment order which litigation travelled up to the Tribunal. We have also mentioned the specific findings of the Tribunal qua the issue emanated from the first assessment order. A perusal of the directions of Tribunal (supra) clearly shows that the Tribunal had set aside the issue relating to the addition of Rs. 2,61,08,186/- out of which the ld. CIT(A) had confirmed the addition of Rs. 1,49,71,718/-. The A.O. has gone beyond the directions of the Tribunal and has made fresh additions.
6 ITA No. 852/Ahd/2012. A.Y. 1998-99 2.4 Binding Nature of Orders of Tribunal:
(1) The first Appellate Authority or the Assessing Officer is bound by the orders of the Tribunal. Even where the assessee or the department has pursued the matter in reference proceedings, it does not act as a kind of stay of operation of the order of the Tribunal.
(2) The Assessing Officer cannot ignore the decision taken by the Tribunal in favour of the assessee and take a contrary view - ITO vs. Siemens India Ltd. & Anr. 156 ITR 11 (Bom.), 28 STC 483 Sree Rajendra Mills Ltd. vs. CIT: 109 ITR 229 (CaL). Russell Properties Pvt. Ltd. vs. A. Chowdhury. Add/. CIT. West Bengal & Others.
(3) Union of India & Ors. vs. Kamlakashi Finanaee Corporation Ltd. AIR (1992) 711 (SC).
It cannot be too vehemently emphasized that it is of utmost importance that in disposing of the quasi-judicial issues before them, revenue officers are bound by the decision of the appellate authorities. The order of the Appellate Collector is binding on the Assistant Collectors working within his jurisdiction and the order of the Tribunal is binding upon the Assistant Collectors and the Appellate Collectors who function under the jurisdiction of the Tribunal. The principles of judicial discipline require that the orders of the higher appellate authorities should be followed unreservedly by the subordinate authorities. The mere fact that the order of the appellate authority is not "acceptable" to the department - in itself an objectionable phrase - and is the subject matter of an appeal can furnish no ground for not following it unless its operation has been suspended by a competent court. If this healthy rule is not followed, the result will only be undue harassment to assessee and chaos in administration of tax laws. When an order is passed by a higher authority, the lower authority is bound thereby keeping in view the principles of judicial discipline. This aspect of the matter has been highlighted by this Court in Bhopal Sugar Industries vs. Income Tax Officer. Bhopal [AIR 1961 SC 182] in the following terms (Page 622):
7 ITA No. 852/Ahd/2012. A.Y. 1998-99
(a) "If a subordinate tribunal refuses to carry out directions given to it by a superior tribunal in the exercise of its appellate powers, the result will be chaos in the administration of justice and we have indeed found it very difficult to appreciate the process of reasoning by which the learned Judicial Commissioner while roundly condemning the respondent for refusing to carry out the directions of the superior Tribunal, yet held that no manifest injustice resulted from such refusal.
(b) It must be remembered that the order of the Tribunal dated April 22, 1954, was not under challenge before the Judicial Commissioner. That order had become final and binding on the parties, and the respondent could not question it in any way. As a matter of fact the Commissioner of Income-tax had made an application for a reference, which application was subsequently withdrawn. The Judicial Commissioner was not sitting in appeal over the Tribunal and we do not think that, in the circumstances of this case, it was open to him to say that the order of the Tribunal was wrong and, therefore there was no injustice in disregarding that order. As we have said earlier such a view is destructive of one of the basic principles of the administration of justice."
9. Considering the facts in totality, as stood at the time of original assessment stage qua the directions of the Tribunal qua the aforementioned judicial analysis, in our considered opinion and understanding of the law the present assessment order is in complete disregard to the orders of the appellate authorities. This would leave no choice but to quash such assessment order. Therefore, to this extent, the assessment order is quashed.
10.Additions of Rs. 3,69,500/- and 66,510/- are directed to be deleted. The first grievance mentioned hereinabove is allowed.
8 ITA No. 852/Ahd/2012. A.Y. 1998-99
11.The second grievance relates to the addition of Rs. 34,92,619/-. While scrutinizing the return of income, the A.O. noticed that the assessee has debited interest expenses of Rs. 35,59,129/-. In the first assessment order, the A.O. has disallowed the entire sum of Rs. 35,59,129/- as the assessee failed to establish that the interest free advances were for business purpose. In the present assessment order, the A.O. disallowed Rs. 34,92,619/- reducing the original disallowance of Rs. 35,59,129/- by Rs. 66,510/- as this amount has been separately disallowed by the A.O.
12.Assessee carried the matter before the ld. CIT(A) but without any success.
13.Before us, the ld. counsel for the assessee vehemently submitted that the alleged interest free advances were made out of interest free funds available with the assessee. Therefore, there is no reason why interest should be disallowed. The ld. counsel drew our attention to the balance sheet of the assessee and pointed out that the interest free funds available with the assessee were Rs. 7.29 crores whereas the alleged interest free advances were to the tune of Rs. 6.96 crores. The ld. counsel further stated that advances to Samarthkrupa Co-op. Housing Society was in fact nothing but advances for purchase of flats for facilitating the execution of scheme for which the company also entered into development agreement with the society. The ld. counsel further stated that similar is the nature of interest free advances of Rs. 3,75,33,041/- in the name of Silicon Valley Co-op. Housing Society and Swastik Co-op. Housing Society. The ld. counsel concluded by stating that not only the advances were made out of free 9 ITA No. 852/Ahd/2012 . A.Y. 1998-99 available fund with the assessee-company but also the advances were made purely for business purpose. Therefore, no disallowance of interest needs to be made. Per contra, the ld. D.R. strongly supported the findings of the revenue authorities.
14.We have carefully considered the orders of the authorities below and with the assistance of the ld. counsel; we have gone through the relevant documentary evidences brought on record in the light Rule 18(6) of the Appellate Tribunal Rules. We find force in the contention of the ld. counsel. As mentioned elsewhere, the interest free funds available with the assessee are in excess of the interest free advances made by it. The ratio laid down by the Hon'ble High Court of Bombay in the case of Reliance Utilities and Power 313 ITR 340 squarely apply on the facts of the case wherein the Hon'ble High Court has held that where there is a mixture of own funds and loan funds, then the presumption is that the interest free advances have been made out of own funds. This decision of the Hon'ble Bombay High Court was subsequently followed by the Hon'ble Court in the case of HDFC Ltd. 366 ITR 505. We further find force in the contention of the ld. counsel that all the alleged advances were for business purposes and the same was explained to the A.O. during the course of the assessment proceedings itself. The relevant submission made before the A.O. read as under:-
6. Reference to balance Sheet shows that, the interest free advances of Rs.
3,15,41,406/- alleged to have made by the assessee Company to Samarthakrupa Co. Op. Housing Socy. Ltd. is in fact nothing but the sundry debtors and include the amount for purchase of flats for facilitating the execution of scheme for which 10 ITA No. 852/Ahd/2012 . A.Y. 1998-99 the Company also entered in to development agreement with the Society as stated hereinabove. Not only this, against the said amount of Rs. 3,15,41,406, the Company also credit balance of Rs.3,47,65,500 received from the Members of the said society on which the Company has not paid any interest. The grouping giving the details of the said credit is submitted herewith. It is clear from the order itself that, the amount of the loan, advances and the contribution received against booking of units from the members of said society on which society need not and did not paid any interest. Considering this aspect, in fact, Company did not advanced any non bearing non business purpose interest free advances Of Rs. 3,15,41,406 to Samarthkrupa Co.op. Housing Society but as against that-, it had a net credit amount of Rs.32,24,094 (Rs.3,47,65,500 Credit Less: Rs . 3,15,41,406 ). Hence, no interest is requires to be disallowed on this advance of Rs.3,15,41,406.
7. With regard to alleged interest free advances of Rs.3,75,33,041, we request to kindly refer page No. S-14 & S-15 of Paper Book -4,Part-I wherein the details of advances to 7 parties is given amounting to Rs.2,25,24,633 & advances to 6 parties amounting to Rs. 18,24,754 respectively. Details shows that, the Company had to receive Rs. 63,70,000 from Silicon Valley Co. Op. Housing Society Ltd. against which it had a credit balance of Rs. 3,39,28,187 from the Members of the said society. Both the advances as well as credit balance pertain to the same party and it's members for the development of the scheme undertaken by the Company and therefore no interest is disallowable on Rs.63,70,000 stated as above.
8. Reference to the details given on page S-14 also shows that, the purpose for which the amount was advanced. The amount include Rs. 1,34,90,633 paid for Swastik Co-Op. housing Society Ltd. Plot No. 85. As the Company can not directly purchase the plot in' it's name, with a view to develop a scheme, the Company purchased the said plot in the name of related persons to the director and paid advance for the same. This is clear from the Copy of Document/ Index-II submitted herewith. With regard to advance to other parties appearing on pg. No. 11 ITA No. 852/Ahd/2012 . A.Y. 1998-99 S-14 also, the same is related to the various schemes developed by the Assessee Company. Considering the nature of business of the Company and the amounts being given, out of business considerations no interest is chargeable. Prom this, facts, it is clear that, the advance is purely for the business purposes and no interest free advance for non business purposes is given and therefore, on this amount also no interest is required to be disallowed and we request for the same.
15.Considering the facts in totality in the light of the ratio laid down by the Hon'ble Bombay High Court and also considering the fact that the advances were made for business purposes. We set aside the findings of the ld. CIT(A) and direct the A.O. to delete the addition of Rs. 34,92,619/-. The second grievance of the assessee mentioned hereinabove is allowed.
16.The third grievance relates to the addition of Rs. 61,29,000/-. As mentioned elsewhere, the Tribunal has restored this issue to the files of the A.O. with specific directions. The relevant findings of the A.O. read as under:-
"As per the direction of Hon'ble ITAT confirmation was called for by calling information u/s 133(6). This office has not received any confirmation in respect of the following persons arid"' the assessee has also been not able to submit fresh confirmations in compliance to the order of the Hon'ble ITAT, on its own. Therefore these amount which have not been confirmed as per the ITAT direction is taken as unexplained cash credit Sr.no Party Name Sr. No in Amount Remarks silicon valley member List 1 Ashok K Patel 7 400000 Not found/not served 2 Girish N Chawala 24 200000 Not found/not served 3 Indiraben Manubhai 33 230000 Not found/not served 12 ITA No. 852/Ahd/2012 . A.Y. 1998-99 4 Jayesh B Patel 34 400000 Not found/not served 5 Jayesh R Patel 35 270000 Not found/not served 6 Jayaram Patel 36 20000 Not found/not served 7 Jayant D Patel 40 430000 Not found/not served 8 Kiritbhai CTrivedi 42 300000 Not found/not served 9 Kaushik C Dave 43 50000 No confirmation received 10 Lalbhai Trivedi 44 50000 No confirmation received 11 Laldhar Udairaj 45 501000 Not found/not served 12 M.S.Patel 47 30000 No confirmation received 13 Manhar Sadrani 48 150000 No confirmation received 14 N.B.Jani 50 20000 No confirmation received 15 Nitaben N Shah 52 511000 Not found/not served 16 Priti.Purohit 56 125000 No confirmation received 17 Raman G Kher 59 151000 Not found/not served 18 Rameshbhai P Patel 61 101000 No confirmation received 19 Sandhyaben N Jaiswal 64 850000 Not found/not served 20 Shoe valley 69 850000 Not found/not served 21 Vakil Jayantital 75 490000 No confirmation received G(HUF) Total 6129000 As the assessee failed to furnish any explanation or details of receipt of Rs 61,29,000/- from Silicon Valley members during the year under consideration. The receipt of Rs. 61,29,000/- is treated as unexplained cash credits u/s 68 of the I.T. Act and same is added to the total income of the assessee."13 ITA No. 852/Ahd/2012
. A.Y. 1998-99
17.When the matter was agitated before the ld. CIT(A), the assessee failed to convince him.
18.Before us, the ld. counsel for the assessee vehemently stated that all the transactions were made by account payee cheques. The creditors were the allottees of the flat wherever the PAN details were available; the same was made available to the A.O. The ld. counsel further pointed out that in addition to the above details municipal tax bill from the Ahmedabad Municipal Corporation, wherein the name of the respective member appears and the details of the flat/shop on which municipal tax is assessed by the AMC, were also provided to the A.O. along with electricity bills, copy of sale deed and confirmations of the payments made by the members with booking details. It is the say of the ld. counsel that the assessee had proved the identities beyond all doubts. Therefore, there is no room for making the additions as unexplained cash credit. Per contra, the ld. D.R. strongly supported the findings of the revenue authorities.
19. We have given a thoughtful consideration to the orders of the authorities below qua the directions of the Tribunal in the first round of litigation qua the issue under consideration. In our understanding, if the transaction is done by account payee cheque then the identity of the payer goes into oblivion because the money has flown from one identified bank account to another identified bank account. We also find that wherever it was possible PAN details were made available to the A.O. No effort to verify from the allottees of the flats by making any physical verification thereof. In our 14 ITA No. 852/Ahd/2012 . A.Y. 1998-99 considered opinion, the assessee has successfully established the identities. The transaction is done by account payee cheque. Further the identities of the allottees are supported by municipal tax bills of AMC and electricity bills. Considering these facts in totality, we do not find any reason for making the impugned addition. We, accordingly, set aside the findings of the ld. CIT(A) and direct the A.O. to delete the addition of Rs. 61,29,000/-. The third grievance of the assessee mentioned hereinabove is allowed.
20.In the result, the appeal filed by the Assessee is allowed.
Order pronounced in Open Court on 18 - 10- 2016.
Sd/- Sd/-
(MAHAVIR PRASAD) (N. K. BILLAIYA)
JUDICIAL MEMBER ACCOUNTANT MEMBER
Ahmedabad: True Copy
Rajesh
Copy of the Order forwarded to:-
1. The Appellant.
2. The Respondent.
3. The CIT (Appeals) -
4. The CIT concerned.
5. The DR., ITAT, Ahmedabad.
6. Guard File.
By ORDER
Deputy/Asstt.Registrar
ITAT,Ahmedabad