Income Tax Appellate Tribunal - Mumbai
Assistant Commissioner Of Income Tax ... vs Smith Buildcon, Mumbai on 27 November, 2018
IN THE INCOME-TAX APPELLATE TRIBUNAL "G" BENCH MUMBAI
BEFORE SHRI PAWAN SINGH JUDICIAL MEMBER AND
SHRI N.K. PRADHAN, ACCOUNTANT MEMBER
ITA No. 4849/Mum/2017 (Assessment Year 2012-13)
ACIT-25(3) M/s Smith Buildcon
Room No. 601, C-10, 504, Parshwa Kunj, Malviya
6th Floor, Pratyakshakar Road, Vile Parle (E),
Bhavan, Bandra Kurla Vs. Mumbai-400057.
Complex, Bandra (East), PAN: ABKFS2477G
Mumbai-400051.
Appellant Respondent
ITA No. 4850/Mum/2017 (Assessment Year 2012-13)
ACIT-25(3) M/s SS Enterprises
Room No. 601, C-10, Ground Floor, Chandra Villa,
6th Floor, Pratyakshakar Nehru Road, Vile Parle(E),
Bhavan, Bandra Kurla Vs. Mumbai-400057.
Complex, Bandra (East), PAN: AAGFV4334C
Mumbai-400051.
Appellant Respondent
Appellant by : Shri Chaudhary Arun Kumar Singh
(DR)
Respondent by : Shri Vijay Mehta (AR)
Date of Hearing : 27.11.2018
Date of Pronouncement : 27.11.2018
ORDERUNDER SECTION 254(1)OF INCOME TAX ACT
PER PAWAN SINGH, JUDICIAL MEMBER;
ITA No. 4849 & 4850 Mum 2017-M/s Smith Buildcon & Anr
1. This two appeal by revenue are directed against the separate order of ld. CIT(A)-37, Mumbai dated 05.04.2017 for Assessment Years 2012-13. In both the appeals, the Revenue has raised the identical grounds of appeal, therefore, both the appeals were clubbed, heard and are decided by common order for the sake of convenience.
2. With the consent of parties, the ITA No. 4850/Mum/2017 is treated as lead case. The Revenue has raised the following grounds of appeal:
l. On the facts and circumstances of the case and in law, the Ld. Commissioner of Income-tax (Appeals) has erred in completely ignoring the finding made by the Assessing Officer in his impugned order, in which he has relied on the findings made during the assessment proceedings of M/s Samir Enterprises wherein, the jurisdictional AO confirmed that M/s Samir Enterprises does not conduct any business activity and was merely passing accommodation entries.
2. On the facts and in the circumstances of the case and in law, the Ld Commissioner of Income-tax (Appeals) has erred in taking the view that AO did not make any worthwhile enquiry to verify the credit worthiness of M/s Samir Enterprises whereas assessment order under section 143(3) of the Income-tax Act, 1961 in the case of M/s Samir Enterprises declaring it as a bogus entity was passed only after making investigation by an Assessing Officer of the Department.
3. On the facts and circumstances of the case and in law, the Ld. Commissioner of Income-tax (Appeals) has erred in accepting the entire transactions to be genuine merely on the basis that the transactions were through banking channels whereas the mere fact that transactions were carried through banking channels does not implicitly make them sacrosanct.2
ITA No. 4849 & 4850 Mum 2017-M/s Smith Buildcon & Anr 4 "The appellant prays that the order of Ld. CIT(A) on the above grounds be set aside and that of the Assessing Officer be restored."
3. Brief facts of the case are that the assessee filed its return of income for Assessment Year 2012-13 declaring total income at Rs. 12.62 Crore. The return of income was selected for scrutiny. The assessment was completed on 30.03.2015 under section 143(3) of the Act. During the assessment proceeding, the Assessing Officer noted that assessee has taken loan and advances of Rs. 6.21 Crore from M/s Samir Enterprises. The Assessing Officer further noted that M/s Samir Enterprises was not doing any business and just providing accommodation entry by way of bogus loans. The Assessing Officer on his observation that no satisfactory explanation is given disallowed Rs. 6.21 Crore and added to the income of the assessee on protective basis. The Assessing Officer further disallowed interest of Rs. 43,66,875/- as loan was treated as bogus. On appeal before the ld. CIT(A), the entire addition on account of protective basis as well as addition on interest disallowance was deleted. The ld. CIT(A) deleted the addition concluding that the credit/loan is not related to the Assessment Year under consideration. The protective assessment is always successive to the substantive assessment. There may be a substantive assessment without any protective assessment but there cannot be protective assessment without there being substantive 3 ITA No. 4849 & 4850 Mum 2017-M/s Smith Buildcon & Anr assessment. As no substantive assessment is made against the assessee, therefore, the protective assessment is deleted. The ld. CIT(A) also concluded that it is not clear, whether the addition is made under section 68 or under section 41(1) of the Act. If the addition under section 41(1) for cessation of liability than the same should be brought to tax subject to the requirement of section 41(1). It was also concluded that the assessee has subsequently paid the loan in Assessment Year 2014-15. Since the addition of Rs. 6.21 Crore was deleted, consequently the addition on account of interest disallowance was also deleted. Thus, aggrieved by the order of ld. CIT(A), the Revenue has filed the present appeal before us.
4. The facts in ITA No. 4849/Mum/2017 are almost identical except variation of figure.
5. We have heard the submission of ld. Departmental Representative (DR) for the Revenue and ld. Authorized Representative (AR) of the assessee and perused the material available on record. The ld. DR for the Revenue supported the order of Assessing Officer. The ld. DR for the Revenue further submits that the Assessing Officer has given clear finding that no satisfactory explanation was offered by the assessee about the loan/advances by M/s Samir Enterprises. Hence, the loan amount of Rs. 4
ITA No. 4849 & 4850 Mum 2017-M/s Smith Buildcon & Anr 6.21 Crore was disallowed. Consequently the interest payment shown by assessee on the same amount was also disallowed.
6. On the contrary, the ld. AR of the assessee submits that the finding of Assessing Officer in para 6.3 of assessment order is contrary to his own recording in para-6. It was further submitted that during the assessment the assessee vide its letter dated 23.03.2015 clearly mentioned while replying the quarries of the assessing officer that the loan from M/s Samir Enterprises is not taken during the year under consideration. In fact no fresh loan was taken by assessee; only an addition of interest on loan was credited to the opening balance as on 01.04.2011. The loan was taken in earlier years through account payee cheque, which is duly reflected in the ledger account of M/s Samir Enterprises, copy of which was also furnished. The ld. AR of the assessee invited our attention on para 6 of the assessment order, wherein this fact is duly recorded by assessing officer. The ld. AR of the assessee further submits that the assessee availed the loan from M/s Samir Enterprises in Assessment Year 2009-10 and no further loan was taken during the year, only the addition to the opening balance of the loan account in the form of interest being credited to the said loan account. The assessee has duly proved the identity and identify and capacity of the creditor, genuineness of transaction by 5 ITA No. 4849 & 4850 Mum 2017-M/s Smith Buildcon & Anr providing complete details. The ld. AR of the assessee further submits that assessment order under section 143(3) was passed for Assessment Year 2009-10, 2010-11 & 2011-12 and no discrepancies with regard to the loan from M/s Samir Enterprises was found by Assessing Officer. Further, the Assessing Officer made the assessment under section 143(3) r.w.s 147 for Assessment Year 2011-12 and no addition was made in this regard. The ld. AR of the assessee submits that protective assessment cannot be independent of substantive assessment. The Assessing Officer has not made any substantive assessment in the hand of assessee or any other person.
7. We have considered the rival submissions of both the parties and have gone through the orders of authorities below. The Assessing Officer during the assessment noted that assessee has received loan and advance amount of Rs. 6.21 Crore from M/s Samir Enterprises. The Assessing Officer issued show-cause notice vide order-sheet noting dated 19.03.2015 to explain as to why the said loan should not be treated as bogus. The assessee filed its reply dated 23.03.2015. In the reply, the assessee has specifically contended that the loan was not taken from M/s Samir Enterprises during the year under consideration. There is only addition on interest on loan credit to the opening balance as on 6 ITA No. 4849 & 4850 Mum 2017-M/s Smith Buildcon & Anr 01.04.2011. The loan was taken in earlier years. The assessee also contended that a separate notice was issued to M/s Samir Enterprises under section 133(6) from the particulars provided by the assessee. And in reply to notice under section 133(6) all relevant financial statement from M/s Samir Enterprises has been brought on record, by which it is duly proved to prove the identity of the creditor, capacity of the creditor and genuineness of loan. The contention of assessee was not accepted by Assessing Officer on his observation that M/s Samir Enterprises is not doing any business. The Assessing Officer made the addition of Rs. 6.21 Crore on protective basis and further allowed the interest paid on loan of Rs. 43,66,875/-. The ld. CIT(A) after considering the contention of assessee observed that assessee has proved the identity of creditors, genuineness of transaction is established from the fact that acceptance of the re-payment of loan has been through banking channel. The ld CIT(A) also concluded that the Assessing Officer has not discussed the submission of the assessee and brushed aside the details filed by assessee. The ld. CIT(A) further concluded that the credit in question is not related with the previous year relevant to Assessment Year 2012-13. The assessee has specifically contended that they have received during the year 2009-10, 2010-11 & 2011-12. The assessment was passed by the 7 ITA No. 4849 & 4850 Mum 2017-M/s Smith Buildcon & Anr Assessing Officer for all three previous Assessment Years and no discrepancies with regard to the loan from M/s Samir Enterprises were found. Further, the assessment for Assessment Year 2011-12 and no addition was made in this regard. The ld. CIT(A) also concluded that protective assessment is always successive to the substantive assessment and there cannot be any protective assessment without there being substantive assessment. The ld. CIT(A) also examined, if the addition can be brought under section 41(1) of the Act on the question of cessation of liability. And on his examination of the fact, the ld. CIT(A) concluded that the loan has been paid by banking channel in Assessment Year 2014-
15. Therefore, the provisions of section 41(1) are also not applicable. Since the ld. CIT(A) came to the conclusion that the loan transaction of Rs. 6.21 Crore has been stand explained, therefore, no addition is sustainable. Consequent upon the addition on account of disallowance of interest was also deleted. During the submission, the ld. DR for the Revenue failed to bring any contrary material or facts to controvert the fact that the alleged loan was not taken in Assessment Year 2009-10, 2020-11 & 2011-12 or how the protective assessment without being substantive assessment is sustainable. Therefore, we do not find any 8 ITA No. 4849 & 4850 Mum 2017-M/s Smith Buildcon & Anr illegality or infirmity in the order passed by ld. CIT(A) which we confirmed. Hence, dismissed.
ITA No. 4849/Mum/2017
8. The assessee has raised identical grounds of appeal. Facts of the case under consideration are identical except variation of figure of alleged loan and interest disallowance.
9. Considering the fact that we have already dismissed the appeal of the Revenue on identical facts and on identical grounds of appeal. Therefore, this appeal is also dismissed with similar finding
10.In the result, both the appeal of the Revenue is dismissed.
Order pronounced in the open court on 27/11/2018.
Sd/- Sd/-
N.K. PRADHAN PAWAN SINGH
ACCOUNTANT MEMBER JUDICIAL MEMBER
Mumbai, Date: 27.11.2018
SK
Copy of the Order forwarded to :
1. Assessee
2. Respondent
3. The concerned CIT(A)
4. The concerned CIT
5. DR "G" Bench, ITAT, Mumbai
6. Guard File
BY ORDER,
Dy./Asst. Registrar
ITAT, Mumbai
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