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Income Tax Appellate Tribunal, “A” BENCH, PUNE
Before: SHRI ANIL CHATURVEDI, AM & SHRI PARTHA SARATHI CHAUDHURY, JM
आदेश / ORDER
PER PARTHA SARATHI CHAUDHURY, JM :
This appeal preferred by the assessee emanates from the order of the Ld. CIT(Appeals)-1, Aurangabad dated 27.02.2017 for the assessment year 2012-13 as per the following grounds of appeal on record:
“1. The learned AO and CIT(A) erred in making an addition of Rs.29,97,906/- towards excess stock found during survey without appreciating the facts and submission of the Appellant that the excess stock did not belong to the Appellant but belonged to some other parties who had recorded the same in their respective books of account.
2. The learned AO and CIT(A) erred in making disallowance of interest of Rs.5,56,842/- under section 14A of the Act against exempt agricultural income.
3. Any other ground that may be taken at the time of hearing with the leave of Hon’ble Bench.”
That with regard to the Ground No.1, the assessee is aggrieved with the action of the Assessing Officer as well as the Ld. CIT(Appeals) in making addition of Rs.29,97,906/- on account of excess stock.
3. That before the Ld. CIT(Appeals), the facts were narrated wherein it was stated that the assessee is engaged in the business of ginning and pressing of cotton. The assessee had filed return of income u/s.139 of the Income Tax Act, 1961 (hereinafter referred to as „the Act‟) electronically showing return income at Rs.1,81,34,290/- in original return of income. Thereafter, the assessee found some mistake and income was offered twice on account of cotton bales found during the survey action conducted during the year under consideration. Hence, the return of income was revised and the assessee finally filed return of income at Rs.1,54,98,950/- and agricultural income at Rs.5,28,972/-. As the case was taken up for scrutiny under CASS and assessment was completed u/s.143(3) of the Act in which assessed income was arrived at Rs.1,97,28,822/- and agricultural income at Rs.5,28,972/-. Thus, the Assessing Officer made additions of Rs.42,29,872/- to the total income. The Assessing Officer made an addition of Rs.29,97,906/- on account of excess stock found during the course of survey action.
4. The assessee contended that the amount of excess stock found was taken twice by the survey party and the same was unjustified, unwarranted and in any case excessive. The Ld. CIT(Appeals) observed that the assessee is engaged in the business of ginning & pressing of cotton under the name & style of M/s. Khadkeshwar Ginning & Pressing, Devmurti, Jalna. A survey action u/s.133A of the Act was conducted at the premises of the assessee on 02.02.2012. During the course of survey, the assessee had declared additional income of Rs.2,32,11,913/- for the year under reference which inter alia included excess stock of Rs.2,09,43,972/-. The original return of income was filed on 02.10.2012 declaring total income of Rs.1,81,34,290/-. The Assessing Officer has mentioned in Para 5 of the assessment order that additional income of Rs.2,31,69,342/- was incorporated in the books of account and excess stock of Rs.42,571/- had remained to be offered to tax. Thereafter, revised return of income declaring total income of Rs.1,54,98,950/- was filed on 30.03.2013. In the revised return of income, the assessee sought to exclude excess stock of Rs.26,35,350/- on account of duplication. When confronted, the assessee explained that he had filed original return of income incorporating excess stock of Rs.2,31,69,342/-. The above amount also included 216 cotton bales found at his factory premises. However, it was noticed that he had categorically stated during the course of survey that the said stock of 216 cotton bales did not belong to him. Out of above, 105 bales belonged to M/s. Bagdia Fibres Pvt. Ltd. and 111 bales belonged to M/s. S.G. Bagdia Ginning and Pressing Factory. It was alleged that the said stock was duly offered for taxation in the respective assessee's hands. After verification of statements, the assessee had revised his return of income by reversing the entry regarding 216 bales of cotton in his books of account. The Ld. CIT(Appeals) further observed that survey action u/s. 133A of the Act was conducted simultaneously at two different entities operating at different places i.e. M/s. Khadkeshwar Ginning & Pressing, Devmurti, Jalna which was the proprietary concern of the assessee and M/s. S.G. Bagdia Ginning & Pressing Factory at Badnapur, Distt. Ialna. These two places were about 30 km away from each other. The survey party made inventory of stock at M/s. Khadkeshwar Ginning & Pressing, Devmurti, Ialna and this included 216 bales of cotton approximately weighing 160 kg per bale. The statement of the assessee was recorded and he clarified that out of total 216 bales of cotton, 105 bales belonged to M/s. Bagdia Fibres Pvt. Ltd. and III bales belonged to M/s. S.G. Bagdia Ginning and Pressing Factory. On the same day, the other survey party also made inventory of stock at M/s. S.G. Bagdia Ginning & Pressing Factory, Badnapur, Jalna and 216 bales of cotton were physically found. The statement of the assessee i.e. Shri Manish Bagdia was recorded on oath and he admitted that 216 bales of cotton were unaccounted and he offered excess stock of Rs.26,35,350/- to tax. This amount was not included in the revised return of the income and had been retracted by the assessee. Thus, 216 bales of cotton had been inventorized at Khadkeshwar Ginning & Pressing and 216 bales of cotton had been inventorized at S.G. Bagdia Ginning & Pressing Factory totaling to 432 bales of cotton. However these two locations were different and far away from each other. The Assessing Officer had adopted weight of one bale at 160 kg and total quantity was worked out at 691.20 qtl. (432 X 160). Out of the above stock of 445.77 qtl. was recorded in the books of account of M/s. Bagdia Fibres Pvt. Ltd.- 172.15 qtl. and M/s. S.G Bagdia Ginning and pressing Factory ( proprietary concern of Shri Pannalal Bagdia )- 273.32 qtl. The Assessing Officer accordingly worked out the excess stock at 245.73 qtl and applying prevailing market rate of Rs.12,200/- per quintal, the excess stock was worked out at Rs.29,97,906/-. There is no infirmity in the action of the Assessing Officer while making impugned addition of Rs.29,97,906/- in the hands of the assessee. The Ld. CIT(Appeals) in his order has stated that the Ld. AR of the assessee contended that survey party had counted the stock of 216 bales of cotton twice. However, the Ld. CIT(Appeals) observed that no such discrepancy was pointed out during the course of survey action. If at all there was some mistake then nothing prevented the assessee from making rectification application to the concerned officer or filing an affidavit in this regard. The retraction made by the assessee is quite belated and same is also not supported by any cogent evidence.
At the time of hearing, the Ld. AR of the assessee reiterated the submissions made before the Assessing Officer as well as the Ld. CIT(Appeals) and contended that there is mistake by the survey party in recording the inventory and 216 bales were doubly recorded.
Per contra, the Ld. DR placed strong reliance on the findings of the sub-ordinate Authorities.
We have perused the case record and heard the rival contentions. We have also analyzed the facts and circumstances in this case. We have also given considerable thought to the findings arrived at by the Ld. CIT(Appeals). The Ld. CIT(Appeals) has categorically analyzed and observed that the entire facts and circumstances relating to the issue, statement of the assessee which was recorded on oath and he has admitted that 216 bales of cotton were unaccounted and he offered excess stock of Rs.26,35,350/- to tax. This amount was not included in the revised return of the income and had been retracted by the assessee. The facts further demonstrate that the assessee retracted after almost 14 months. The retraction was not made immediately after the survey conducted and even in the original return of income filed on 02.10.2012, the excess stock of 216 bales of cotton had been offered to tax. The retraction made after 14 months is therefore, afterthought. The Ld. AR of the assessee argued that survey party had accounted these 216 bales of cotton twice. However, no such discrepancy was pointed out during the course of survey action.
In view of the matter, we do not find any infirmity with the findings of the Ld. CIT(Appeals) which is thereby upheld. Thus, ground No.1 raised in appeal by the assessee is dismissed.
Ground No.2 pertains to the disallowance of interest of Rs.5,56,842/- u/s.14A of the Act.
With regard to this issue, the Ld. AR of the assessee contended that the Assessing Officer disallowed interest expenses of Rs.5,56,842/- by applying section 14A r.w.r 8D. However, the assessee submitted that investment in agricultural income was out of the past savings and accruals. The assessee was having own capital at Rs.1,61,62,846/- as on 01.04.2011 and investment in agricultural land was at Rs.1,00,10,768/-. The copy of capital account and Balance Sheet were also placed on record. It was argued that the assessee has not earned any exempt income out of such investment and hence, section 14A of the Act was not applicable and addition made at Rs.5,56,842/- was unjustified. The Ld. CIT(Appeals) however upheld the action of the Assessing Officer in disallowing the said amount. The Ld. AR further submitted before us that as per the decision of the Hon‟ble Bombay High Court in the case of CIT-2, Mumbai Vs. HDFC Bank Ltd. (2014) 49 taxmann.com 335 (Bom.), it has been held that if the assessee has own funds and other non-interest bearing funds which are more than investments in tax free securities, then there cannot be any disallowance of interest payment u/s.14A of the Act. Similarly, reliance was also placed by the Ld. AR on the decision of the Pune Bench of the Tribunal in for assessment year 2012-13 decided on 27.06.2018 wherein the Tribunal has observed that when there is availability of adequate interest free funds and own funds which is more than the investments in interest free securities, it would have to be presumed that the investments made by the assessee was out of the interest free funds available with the assessee and therefore, there cannot be any disallowance u/s.14A of the Act.
Per contra, the Ld. DR placed strong reliance on the orders of the sub- ordinate Authorities.
We have perused the case records and heard the rival contentions. We have also analyzed the facts and circumstances in this case. Whether the assessee is having sufficient interest free funds on his own that has to be verified and for this issue, we set aside the order of the Ld. CIT(Appeals) and restore the matter back to his file since power of the Ld. CIT(Appeals) is co- terminus with the Assessing Officer, to verify in detail as per parameters given in the judgment of the Hon‟ble Bombay High Court (supra.) and adjudicate the issue after complying with the principles of natural justice. Thus, ground No.2 raised in appeal by the assessee is allowed for statistical purposes.
In the result, appeal of the assessee is partly allowed for statistical purposes.
Order pronounced on 8th day of January, 2020. Sd/- Sd/- ANIL CHATURVEDI PARTHA SARATHI CHAUDHURY ACCOUNTANT MEMBER JUDICIAL MEMBER ऩुणे / Pune; ददनाांक / Dated : 8th January, 2020. SB आदेश की प्रनिलऱपप अग्रेपषि / Copy of the Order forwarded to : अऩीऱाथी / The Appellant. 1. प्रत्यथी / The Respondent. 2.
The CIT(Appeals)-1, Aurangabad.