Income Tax Appellate Tribunal - Agra
Sugandhi Cold Storge (P) Ltd., Agra vs Department Of Income Tax on 18 April, 2012
IN THE INCOME TAX APPELLATE TRIBUNAL,
AGRA BENCH, AGRA
BEFORE : SHRI BHAVNESH SAINI, JUDICIAL MEMBER AND
SHRI A.L. GEHLOT, ACCOUNTANT MEMBER
ITA No. 368/Agra/2010
Asstt. Year : 2003-04
D.C.I.T. - 4, Agra. Vs. M/s. Sugandhi Cold Storage (P) Ltd.,
33, Shivp0uri, Balkeshwar, Agra.
(PAN : AAGCS 9597 M)
(Appellant) (Respondent)
Appellant by : Shri A.K. Sharma, Jr. D.R.
Respondent by : Shri R.C. Tomar, I.T.P.
Date of hearing : 18.04.2012
Date of pronouncement of order : 20.04.2012
ORDER
Per Bhavnesh Saini, J.M.:
This appeal by the Revenue is directed against the order of the ld. CIT(A)-II, Agra dated 26.05.2010 for the assessment year 2003-04, challenging the order of the ld. CIT(A) in deleting the addition of Rs.48,00,000/- made by the AO u/s. 68 of the IT Act.
2. We have heard the ld. representatives of both the parties, perused the findings of the authorities below and considered the material on record.
3. Briefly, the facts of the case are that the assessee challenged the addition of Rs.48,00,000/- made by the AO u/s. 68 of the IT Act in respect of six parties, namely; 2 ITA No. 368/Agra/2010
S. No. Name of Lender Amount (Rs.)
1. Paska Construction Pvt. Ltd. 500000
2. Deepak Holdings Pvt. Ltd. 1000000
3. Aptech Finlease Pvt. Ltd. 300000
4. Shiva Handicrafts Pvt. Ltd. 1500000
5. Ajay Ice Factory Pvt. Ltd. 1000000
6. Jindal Capsec Pvt. Ltd. 500000
TOTAL 4800000
4. The AO noted that while finalizing the assessment for subsequent assessment year 2004-05, the AO observed that the assessee has received loans of Rs.48,00,000/- from the above parties and that these parties/companies are not charging any interest from the assessee on the above loans. It prompted the AO to note that the transactions are not genuine. The assessee furnished confirmation letters from the lenders along with their copy of Income-tax Returns, bank accounts in respect of confirmation, but the AO found that the entries have been credited in the accounts of the creditors and out of that, loans have been given to the assessee. The AO after discussing the evidence on record found that the assessee-company did not prove the creditworthiness of the creditors and accordingly, made the addition. The addition was challenged before the ld. CIT(A) and detailed written submission was filed, which is reproduced in the appellate order, in which the assessee explained that all the lenders/creditors are assessed to tax and also filed their confirmations. All the credits have been received through banking channels and amounts have also been returned through banking channels. Even one of the director of the depositor company was examined on oath, who has confirmed to have 3 ITA No. 368/Agra/2010 given loan to the assessee. Later on, interest was also paid and details of the TDS were furnished. The ld. CIT(A) considering the findings of the AO and the material on record, considered each and every creditor separately and found that the confirmation of all the creditors have been filed. The creditors are assessed to tax and amounts have been received through banking channels. Copies of the bank account support the explanation of the assessee. The details of the loans returned through banking channel have also been furnished. In the case of M/s Deepak Holdings Pvt. Ltd., the Director was also examined on oath and he has confirmed giving of loan to the assessee. Apart from it, in some of the cases, the authorized capital of the depositor companies was found more than Rs.50 lacs. The ld. CIT(A), considering the evidences on record, held that the assessee is able to prove the creditworthiness of the creditors and genuineness of the transactions and accordingly, additions were deleted.
5. The ld. DR relied upon the order of the AO and submitted that no interest was charged on the loans. Therefore, the addition was rightly made by the AO. On the other hand, the ld. counsel for the assessee reiterated the submissions made before the authorities below and filed detailed paper book to show that all the confirmations of the creditors were filed supported by bank statements and all the creditors are assessed to tax. He has, therefore, submitted that the assessee is able to discharge initial onus upon it to prove the creditworthiness of the creditors and genuineness of the transactions in the matter. On the query raised by the Bench, both the ld. representatives of the parties 4 ITA No. 368/Agra/2010 referred to PB-5, which is copy of acknowledgement of income-tax return filed by the assessee for the assessment year under appeal, in which the assessee has shown nil income because the assessee was at the stage of construction of its business premises. Both the ld. representatives stated that the date of incorporation of the assessee- company is 03.09.2002 as is mentioned in the acknowledgement of filing of return. The ld. counsel for the assessee also submitted that since no business was carried on in the assessment year under appeal, therefore, no income was offered by the assessee and assessed by the AO. He has relied upon following decisions :
(i). CIT vs. S. Kamaljeet Singh, 147 Taxman 18 (All).
(ii). CIT vs. Diamond Products Ltd., 177 Taxman 331 (Del.)
(iii). Aravali Trading Co. vs. ITO, 8 DTR 199 (Raj.)
6. We have considered the rival submissions and the material on record and we do not find any justification to interfere with the order of the ld. CIT(A) in deleting the entire addition. It is admitted fact that all the depositors have filed their confirmations accepting therein that they have given loan to the assessee through banking channels. The copies of the bank statements are filed, which support the contention of the assessee that the depositors had sufficient balance in their bank accounts to give loans to the assessee. All the creditors are assessed to tax and even one of the director of the depositor company was examined in which he has confirmed giving of loans to the assessee. The overwhelming evidences on record clearly prove that the initial onus upon the assessee is discharged by proving identity of the creditors, their creditworthiness 5 ITA No. 368/Agra/2010 and genuineness of the transaction in the matter. The assessee is able to prove the existence of the creditors. On going through the copies of bank accounts of the creditors, we do not find if any substantial cash is deposited in their accounts for giving any loan to the assessee. Rather, there are transfer entries through banking channels to prove that they have sufficient funds available with them to give loan to the assessee. Further, the parties have stated before us that the assessee company was incorporated on 03.09.2002 relevant to assessment year under appeal, i.e., A.Y. 2003-04 and no income has been shown to have earned by the assessee. Even the AO has not assessed any business income and only addition was made in the assessment order u/s. 68 of the IT Act for unexplained cash credits in a sum of Rs.48,00,000/-. Hon'ble Supreme Court in the case of CIT vs. Bharat Engineering and Construction Co., 83 ITR 187 held -
"The assessee, an engineering-construction company, commenced its business in May, 1943. In its accounts there were several cash credit entries in the first year of its business totaling Rs.2,50,000. Though the explanation regarding the cash credit entries was found to be false, the Appellate Tribunal held that these cash credits could not represent the income or profits of the assessee as they were all made very soon after the company commenced its activities :
Held, that the inference drawn from the facts proved was a question of fact and the Tribunal's finding on that question was final. A construction company took time to earn profits and it could not have earned a huge profit within a few days after the commencement of its business. Hence, it was reasonable to assume that the cash credit entries represented capital receipts though for one reason or another the assessee had not come out with the true story as regards the source of the receipts."6 ITA No. 368/Agra/2010
6.1 Since it is proved on record that no business activities were carried out and the assessee was at the stage of formation and completion of the company, therefore, such an addition is unjustified in view of the above decision of Hon'ble Supreme Court. Considering the totality of facts and circumstances of the case and evidence on record, non-charging of interest under the given set of facts would not be relevant to make addition and, thus, we do not find any justification to interfere with the order of the ld. CIT(A). We confirm his findings and dismiss the departmental appeal.
7. In the result, the departmental appeal is dismissed.
Order pronounced in the open court.
Sd/- Sd/-
(A.L. GEHLOT) (BHAVNESH SAINI)
Accountant Member Judicial Member
*aks/-
Copy of the order forwarded to :
1. Appellant
2. Respondent
3. CIT(A), concerned By order
4. CIT, concerned
5. DR, ITAT, Agra
6. Guard file Sr. Private Secretary
True copy