Loading judgment…
No AI summary yet for this case.
आदेश/Order
Per Sanjay Garg, Judicial Member:
The present appeal has been preferred by the Revenue against the order dated 10.4.2017 of the Commissioner of Income Tax-3, Ludhiana [hereinafter referred to as ‘CIT(A)’]
The Revenue in this appeal has taken following grounds of appeal:- -Chd.-2017 Shri Chander Kant Jain, Ludhiana 2
1. Whether upon the facts and circumstances of the case, the Ld. CIT(A) was justified in deleting the addition of Rs.2,21,671/- made under section 14A r.w. rule 8D of the Act without examining facts that for maintaining shares and mutual funds assessee has to made some expenses i.e. telephone for sale and purchase, uses of stationary, uses of vehicles and staff, but no expenses was shown in respect of Shares and mutual funds?
2. Whether upon the facts and circumstances of the case, the Ld. CIT(A) was justified in deleting the addition of Rs.70,00,000/- u/s 68 of the Income Tax Act, 1961 without examining facts on file and fact that assessee failed to prove the creditworthiness of the persons from whom credits have been claimed to receive in the from 'advance against property' and to prove the genuineness of transaction is on the assessee?.
3. Whether upon the facts and circumstances of the case, the Ld. CIT(A) was justified in deleting the addition of Rs.80,79,409/- on account of LTCG on sale of urban Land without examining the said land as Urban agriculture land in assessment proceedings for A.Y. 2013-14 which was duly reported to Ld. CIT(A) vide letter No. 62 dated 05.05.2016?
That the appellant craves leave to add or amend any ground of appeal before it is finally disposed off.
3. Ground No.1: The first ground is relating to the action of the CIT(A) in deleting the disallowance made by the Assessing Officer u/s 14A of the Income Tax Act, 1961 (in short 'the Act') read with rule 8D of the Income Tax Rules, 1962 in respect of the notional disallowance of expenditure incurred for earning of tax exempt income.
4. The Assessing Officer noticed that the assessee during the year had earned tax exempt dividend income of Rs. 51,988/-, however, no -Chd.-2017 Shri Chander Kant Jain, Ludhiana 3 disallowance of expenditure incurred for earning of tax exempt income was offered. He, further observed that the assessee had not claimed interest expenditure. He, accordingly calculated the disallowance of administrative expenses u/s 14A of the Act read with Rule 8D(2)(iii) of the I.T. Rules at the rate of 0.5% of the total investment at Rs. 2,21,671/-. In appeal, the Ld. CIT(A) deleted the disallowance observing that assessee had not claimed any expenditure which can be related to the investment activity of the assessee.
The Ld. Counsel for the assessee has submitted that the assessee himself has disallowed in the computation, the electricity expenses, fee and taxes, insurance, water and sewerage charges etc. That the expenses claimed by the assessee in the computation of income are audit fee of Rs. 16,854/-, bank charges of Rs. 16,391/-, legal expenses of Rs. 10,000/-. No other expenses have been claimed by the assessee in the computation of income. Further, that no interest expenditure has been claimed by the assessee. The total dividend income earned by the assessee is Rs. 51,988/- only, therefore, no disallowance u/s 8D(2)(iii) is attracted.
The Ld. DR, on the other hand, has relied on the findings of the Assessing Officer on this issue. -Chd.-2017 Shri Chander Kant Jain, Ludhiana 4 7. We have heard the rival contentions of the Ld. Authorized Representatives of both the parties. As noted above, the expenditure claimed by the assessee in the computation of income is the audit fee, legal fee, bank charges etc. which cannot be said to be related to investment activity of the assessee. Further, the assessee has not made any investment during the assessment year under consideration. All the investments were old investments. No interest expenditure has been claimed by the assessee. Hence, we do not find any infirmity in the order of the CIT(A) on this issue and the same is hereby upheld.
Ground No.2: The Revenue vide ground No.2 has contested the action of the CIT(A) in deleting the addition of Rs. 70 lacs made by the Assessing Officer u/s 68 of the Act on the ground that the assessee had failed to prove the creditworthiness of the persons from whom he allegedly received the aforesaid credits
The brief facts relating to the issue are that the Assessing Officer noticed that there were certain amounts shown as payable in the name of the following persons i) Shree Radhey Terra Private Limited Rs. 40,00,000/-; ii) Sh. Charanpreet Singh Rs. 20,00,000/-; and iii) Sh.
Inderjeet Singh Rs. 10,00,000/-(Total Rs. 70,00,000/-). The assessee submitted that all such amount payable as on 31.3.2012 were advances against the property. The Assessing Officer asked the assessee to -Chd.-2017 Shri Chander Kant Jain, Ludhiana 5 furnish the necessary confirmations from such persons with copies of the agreement, ITRs and balance sheets, copy of the relevant bank account from where, such advances had been received and further to prove the identity, credit worthiness and genuineness of transaction.
The assessee filed the confirmation in the above said cases with the PAN numbers of the payers, but no ITR return and other details were filed. It was requested to the Assessing Officer to call for the requisite information u/s 133 (6) or u/s 131 and accordingly, the Assessing Officer issued summons u/s 131 to the parties asking them to file the copy of the ITR returns, balance sheet, bank statements. In response to the said notices as mentioned, all parties furnished the relevant information as asked for by the Assessing Officer. The assessee also furnished confirmed copies of account of the parties in his books of accounts, but for the copy of the agreement, it was stated that no such written agreement was made and neither any details of property in respect of which, the advances have been claimed was furnished. The Ld. Assessing Officer doubted the sources of the parties concerned, because as on the date of advance made to the appellant, there were certain amounts by way of transfer entries in the bank account of such persons and, accordingly, the Assessing Officer held that the capacity to pay the amount has not been proved and also that the assessee could not furnish the details of the land in respect of which, the amount had been received and further no agreement for sale of land had been filed. Thus, -Chd.-2017 Shri Chander Kant Jain, Ludhiana 6 the Assessing Officer made the addition of Rs.70 lacs u/s 68 of the I.T.
Act into the income of the assessee.
The Ld. CIT(A), however, deleted the additions so made by the Assessing Officer, observing as under:-
“5.3 I have carefully considered the appellant's submission. The brief facts of the case are that during the year under consideration, the appellant had received a sum of Rs. 70,00,000/- from three parties and during the course of assessment proceedings, the necessary confirmations from the parties concerned mentioning their PAN Numbers and confirming that the amount had been advanced to them had been filed. It is also brought out in the assessment order that the Assessing Officer issued summons u/s 131 to those persons / parties and in response to that, sought some information with regard to ITRs, balance sheet and confirmation of such transactions as claimed by the assessee and in para 3.4 of the order, the Assessing Officer has mentioned as under:-
"All the above persons namely M/s Radhey Terra Private Limited, Shri Chanpreet Singh and Shri Inderjeet Singh have furnished the information. Perusal of information filed by these persons reveals that creditworthiness is proved to pay the amounts to the assessee"
5.4 All such persons with regard to certain enquiries made by the Assessing Officer filed the respective balance sheets, their copy of bank account, from where the amount has been advanced by cheque and the appellant also filed the confirmed copy of account. As regards the fact that there is no written agreement with the said parties, -Chd.-2017 Shri Chander Kant Jain, Ludhiana 7 it has been brought on record by the appellant that the appellant has stock-in-trade to the tune of Rs. 1,59,34,000/- plus the investment in properties to the tune of Rs. 5,11,18,184/- and this is a normal modus operandi in the property business is there, is proved from the fact that the appellant has received similar type of advance from M/s Delta Info System Pvt. Ltd., and the amount has come from the respective bank account of those parties, where there are no cash deposits and in the said bank account of the parties, there are other credits and debits and the Assessing Officer never asked those parties to appear before him. The oral agreements which has been entered between the assessee and those parties has clearly been demonstrated by the relevant bank account entries and their confirmations and the Assessing Officer has not established that amount as received for any other purpose. The amount has been reflected in the respective balance sheets of those parties and, thus the onus which lay upon the appellant stood discharged and it is not a case of the cash credits, but the transactions is only in terms of advances and, thus, nothing adverse have been brought on record by the Assessing Officer for making the addition and hence, the addition of Rs. 70,00,000/- as made by the Assessing Officer deserves to be deleted.”
Being aggrieved by the aforesaid order of the CIT(A), the Revenue has come in appeal before us.
The Ld. DR has submitted that though the assessee had pleaded that the aforesaid amount was received as advance against sale of property, however, the assessee could not produce any written -Chd.-2017 Shri Chander Kant Jain, Ludhiana 8 agreement for sale of the property with the aforesaid proposed purchasers. Further, that the assessee failed to prove the creditworthiness of the aforesaid creditors.
The Ld. counsel for the assessee, on the other hand, has submitted that identical additions were made into the income of the assessee by the Assessing Officer in the case of the assessee for assessment year 2011-12. However, the same stood deleted by the CIT(A) against which no appeal has been preferred by the Department.
On the other hand, the Ld. DR has submitted that the appeal for the assessment year 2011-12 was not filed due to low tax effect.
The Ld. AR of the assessee, however, has submitted that all the three creditors were summoned by the Assessing Officer, who filed their replies admitting the aforesaid transactions / credit to the assessee.
That the amounts were received through banking channel. Some transactions undertaken by the assessee with other parties have been accepted by the Assessing Officer and that there was no cash deposits by the said parties in the bank accounts. That even the concerned creditors have also explained their sources of the aforesaid funds. That even out of the aforesaid three parties, the advance received from Shri Inderjeet Singh and Shri Charanpreet Singh have been refunded as due to some dispute, the sale deed could not be executed. So far as advance from Shree Radhey Terra Private Limited was concerned, the company -Chd.-2017 Shri Chander Kant Jain, Ludhiana 9 has explained that the amount was paid out of the funds available with the company as advance against the purchase of the property. Further, that the requisite details of the company alongwith their PAN numbers, Income-tax returns, bank statements etc. were filed. Further, that the amount was still outstanding due to dispute with the party.
Considering the evidence furnished by the assessee, we do not find any infirmity in the order of the CIT(A). The order of the CIT(A) on this issue is upheld.
15. Ground No.3: Vide ground No.3, the assessee has agitated the action of the CIT(A) in deleting the addition of Rs. 80,79,409/- added by the Assessing Officer on account of Long Term Capital Gains on sale of land. The assessee during the year sold the agricultural land situated at village Birmi. The assessee claimed the same to be rural land situated beyond 8 KMs from the Municipal limit, hence, not falling under the capital assets exigible to Long Term Capital Gains. However, the Assessing Officer relied on the report of the Inspector obtained in relation to the sale of some part of land in financial year 2010-11 relating to assessment year 2011-12 and held that the said land was located at the distance of 7.95 Kms from the Octroi post as existed at that time. The Ld. CIT(A), however, noted that on the similar issue in the assessment year 2011-12, the additions were deleted by him while replying upon the report of the certificate of the Naib Tehsildar (Land -Chd.-2017 Shri Chander Kant Jain, Ludhiana 10 Revenue Officer) certifying the fact that the subject land was situated beyond 8KMs of the Municipal Limit. He, further observed that in his report, the Inspector did not mentioned any Khasra number, however, in the report of the Tehsildar, Khasra numbers of the land were mentioned and certificate was given as per the exact details. He observed that the report of the Naib Tehsildar was based on record and, hence, was much authentic, whereas, the report of the inspector was prepared on estimation basis. He, accordingly relying upon the certificate of the Naib Tehsildar held that the land was agricultural rural land not falling in the definition of the capital assets for the purpose of levy of capital gains tax.
After considering the rival submissions and going through the record, we do not find any infirmity in the order of the CIT(A) on this issue also.
Ground No.4 : Ground No.4 is general is nature and does not require any specific adjudication.
In view of the observations made above, there is no merit in the appeal of the Revenue and the same is accordingly dismissed.
Order pronounced in the Open Court on 27.01.2020.