THEDCIT 1(1) , INDORE, INDORE vs. M/S AD-MANUM FINANCE LTD., INDORE

order u/s 143(3) r.w.s 147 of the Income Tax Act 1961(In short the ‘Act’) evenly dated 30.12.2016 framed by DCIT-1(1), Indore.

2.As the issues raised in these appeals and cross objections are common and both the assessees relate to same group, at the request of all the parties these appeals and cross objection were heard together and are being disposed of by this common order for sake of convenience and brevity.

3. We will fist take up revenue’s appeals in case of M/s. Ad-Manum Finance & M/s. Available Finance Limited. Perusal of grounds shows that the common issue has been raised in both these appeals wherein Ld. CIT(A) has deleted the addition which was made by the ld. AO u/s 68 of the Act treating the cash credit/share capital as Ad-Manum Finance & Anr & 03/Ind/2020 & C.O.No.01&02/Ind/2020 unexplained and also disallowing interest paid on the unsecured loans.

Ad-Manum Finance & Anr & 03/Ind/2020 & C.O.No.01&02/Ind/2020 sufficient to satisfy the Ld. Assessing Officer. Accordingly addition u/s 68 of the Act at Rs.3,31,87,500/- was made towards unexplained share capital received from ‘ADPL’ in the case of assessee namely M/s. Ad-Manum Finance Ltd. and addition for unexplained unsecured loan u/s 68 of the Act was made in the case of the assessee namely M/s. Available Finance Limited for unsecured loan of Rs.2,05,00,614/- from ADPL, Rs.5,72,43,488/- from CTPL & interest of Rs.14,44,102/- was made for the interest paid to above said parties was disallowed.

Ad-Manum Finance & Anr & 03/Ind/2020 & C.O.No.01&02/Ind/2020 CTPL.

Ad-Manum Finance Ltd A.Y. 2011-12

1. Whether on the facts and in the circumstances of the case and in the law, the Ld. CIT(A) was justified in deleting the addition made on account of unsecured loan amounting to Rs.3,31,87,500/- even when the assessee could not establish genuineness of transactions and creditworthiness of lender.

Available Finance Ltd A.Y. 2011-12

Ad-Manum Finance & Anr & 03/Ind/2020 & C.O.No.01&02/Ind/2020 documents filed to prove identity, genuineness and creditworthiness of the cash creditors namely ADPL & CTPL and also various decisions to support the finding of ld. CIT(A). It was also submitted that issues raised in both appeals of the revenue are squarely covered in favour of the assessee by recent decision of Hon’ble Indore Bench in the case of Agrawal Fuel Corporation Pvt. Ltd., Ad Manum Finance Ltd. & Available Finance Limited in ITANo.651/Ind/2019, ITANo.331/Ind/2018 & ITANo.985/Ind/2019 order dated 14.10.2020 pertaining to A.Y. 2010-11, 2009-10 & 2014-15 respectively.

Ad-Manum Finance & Anr & 03/Ind/2020 & C.O.No.01&02/Ind/2020 Dealcomm Private Limited, Rs.5,72,43,488/- received from M/s Chamak Trexim Private Limited and also deleting the disallowance of interest expenditure on the unsecured loan of Rs.7,77,44,102/- at Rs. 14,44,10/-.

Where any sum is found credited in the books of an assessee maintained for any previous year, and the assessee offers no explanation about the nature and source thereof or the explanation offered by him is not, in the opinion of the Assessing Officer, satisfactory, the sum so credited may be charged to income-tax as the income of the assessee of that previous year :

Provided that where the assessee is a company (not being a company in which the public are substantially interested), and the sum so credited consists of share application money, share capital, share premium or any such amount by whatever name called, any explanation offered by such assessee-company shall be deemed to be not satisfactory, unless—

(a) the person, being a resident in whose name such credit is recorded in the books of such company also offers an explanation about the nature and source of such sum so credited; and (b) such explanation in the opinion of the Assessing Officer aforesaid has been found to be satisfactory:

Provided further that nothing contained in the first proviso shall apply if the person, in whose name the sum referred to therein is Ad-Manum Finance & Anr & 03/Ind/2020 & C.O.No.01&02/Ind/2020 recorded, is a venture capital fund or a venture capital company as referred to in clause (23FB)of section 10.

13. We, further observe when the matter came up before Ld. CIT(A), he in the light of the various documentary evidences filed by the assessee, similar issue adjudicated in other group 9

Ad-Manum Finance & Anr & 03/Ind/2020 & C.O.No.01&02/Ind/2020 concerns and also the view taken by this Tribunal adjudicating this common issue for unexplained share capita/unsecured loan received from two lender companies M/s. Aereo Dealcomm Private Limited & M/s Chamak Trexim Private Limited. Ld. CIT(A) deleted the alleged addition made u/s 68 of the Act in case of both the assessees namely Ad-Manum Finance Ltd & Available Finance Limited. However for the sake of convenience we reproduced below the relevant finding of Ld. CIT(A) given in para 5.1 to 5.3 of the impugned order the case of Available Finance Limited:

“5. Ground Nos.5 to 11: These grounds of appeals have been raised against the addition of Rs.7,77,44,102/- made u/s 68 of the Income Tax Act, 1961 on account of loan received from two parties namely M/s Chamak Trexim Pvt. Ltd. from whom loan of Rs.5,72,43,488/- was received and M/s Aereo Dealcomm Pvt. Ltd. from whom loan of Rs.2,05,00,614/- was received by the appellant during the year under consideration and the consequential disallowance of interst of Rs.14,44,102/- incurred in respect of these loans. 5.1 The Assessing Officer has discussed these issues at para no.5.1 to 5.7 of the assessment order. The appellant was required to file copy of bank statement, ITR acknowledgement and tax audit report of the fresh loan depositors along with copy of account and was required to prove the identity, creditworthiness and to furnish the details of mode of transactions. The appellant was also required to explain as Ad-Manum Finance & Anr & 03/Ind/2020 & C.O.No.01&02/Ind/2020 whey the loan taken from M/s Chamak Trexim Pvt. Ltd. and M/s Aereo Dealcomm Pvt. Ltd. be not added back u/s 68 of the Income Tax Act, 1961. 5.2 The detailed written submissions have been found filed by the appellant in support of its contentions during assessment proceedings also. It is brought out in the assessment order that both the companies have provided loan entries not only to the appellant but also to other group companies of Agrawal Group. Further, the Assessing Officer has referred to the investigiation carried out by the Investigation Wing and drawing support from his detailed discussions made by the Assessing Officer while rejecting the objections raised by the appellant to the reopening of the assessment u/s 147 fo the Act. The Assessing Officer has also observed that both these companies were controlled and managed by the appellant group to bring its unaccounted funds to the books of accounts. The Assessing Officer, on the basis of these observations and also drawing support from the assessment orders passed u/s 143(3) r.w.s. 147 of the Income Tax Act 1961 in the cases of M/s Agrawal Fuel Corporation Pvt. Ltd. and M/s Admanum Finance Pvt. Ltd. for A.Y. 2009-10 and also the case of Agrawal Transport Corporation Pvt. Ltd. for A.Y. 2010-11 concluded that the appellant could not establish genuineness of transactions and creditworthiness of the lenders and added the impugned loan amounts u/s 68 of the Income Tax Act, 1961 and also disallowed the interest paid thereon. 5.3 I have gone through the assessment order as well as the written submissions filed by the appellant carefully and after taking into account the arguments of the appellant and reasons brought out by the Assessing Officer in the assessment order, the relevant grounds of appeal are adjudicated as follows. It is observed from page no.13 of the assessment order that the addition u/s 68 of the Income Tax Act and the consequential 11

Ad-Manum Finance & Anr & 03/Ind/2020 & C.O.No.01&02/Ind/2020 disallowance of interest made by the Assessing Officer in the present case are primarily influenced by the observations and information gatherd during the course of search and seizure operation u/s 132 of the Income Tax Act 1961 on Mittal Group of Indore and Mr. Deepak Kalani on 04.09.2015, wherein it was observed that his companied M/s Aereo Dealcomm Pvt. Ltd. and M/s Chamak Trexim Pvt. Ltd. were entry provider companies. 5.4 It is seen that similar additions were made on identical facts, in the case of M/s Agrawal Transport Corporation Pvt. Ltd. for A.Y. 2010-11 drawing similar adverse inferences from the search conducted on Mr. Deepak Kalani, director of both the lender companies i.e. M/s Chamak and M/s Aero were also covered. The Additions made in the M/s Agrawal Transport Corporation Pvt. Ltd. for A.Y. 2010-11, have also been deleted by this office in IT No.10553/17-18 dated 18.03.2019.

Ad-Manum Finance & Anr & 03/Ind/2020 & C.O.No.01&02/Ind/2020 18.03.2019 Ld. CIT(A) deleted the additions made u/s 68 of the Act for the sum received from these two lender companies. Ld. CIT(A) draw the conclusion in para 5.5 to 5.12 of the impugned order observing as follows:

5.5 It is also seen that similar additions were made on identical facts, in the appellant own case for A.Y. 2014-15 drawing similar adverse inferences from the search conducted on Mr. Deepak Kalani, director of both the lender companies i.e. M/s Chamak and M/s Aero. The Additions made in the appellant’s own case for A.Y. 2014-15, have also been deleted by this office in IT No.10980/16-17 dated 16.07.2019. 5.6 Tn the resent case also the observations of the A.O in the assessment order have been found to be sake, which were made in the assessment order of M/s Agrawal Transport Corporation Private Limited and addition is also made on the. similar lines on the basis of the information gathered and findings of the Investigation Wing in respect of the search proceedings conducted in the case of Mr. Deepak Kalani and Mittal Group wherein documents related to Aereo Dealcomm Pvt. Ltd and M /s Chamak Trexim Pvt.Ltd. were found and seized. It was the same finding of the Investigalion Wing that both these companies were being controlled and managed by Shri Deepak Kalani who was also director of these companies found intact from possession of Mr. Deepak Kalani and acquisition of these companies by him in FY 2007-08, change in directorship thereafter, change in the business profile and the investment patter, of both these two companies subsequent to the acquisition of these companies by Mr. Deepak Kalani, the issue of-handing over the cheques of Aereo to the staff of Agrawal group etc, on. the basis of which the AO doubted the creditworthiness of these two companies and also the 13

Ad-Manum Finance & Anr & 03/Ind/2020 & C.O.No.01&02/Ind/2020 genuineness of the transactions of the appellant with both these companies and the same were considered as doubtful and additions were made',

It is seen that in the present appeal also, the appellant has 5.7 cumulatively satisfied all the prerequisites of section 68 of .the Income Tax Act, 1961. The identity of both these companies stands established and is not even disputed by the AO. The appellant has successfully demonstrated the creditworthiness of both the companies through their financial accounts and also the income tax returns showing substantial gross revenues. Though both the companies have incurred asses in this particular year, yet it is seen that they have earned substantial profits in other years. Both these companies had sufficient net own funds and there were no borrowings in their balance sheets except for a nominal bank loan, of Rs. 34.73 lacs in the balance sheet of M/ s Aereo Dealccomm Pvt. Ltd. Which too was availed from HDFC Bank as overdraft facility. A part from this, there is no liability in the balance sheet of M/s Aereo Dealcomm Pvt. Ltd. also. Both, the companies have declared substantial taxable income in various years. The assessments of these companies were completed by the respective AOs for various years including that .of AY 2004-05 in the .case -of" M/ s Chamak Trexim Pvt. Ltd. and AY 2003-04 in the case of M/s_Aerro Dealcomm 'Pvt.Ltd. wherein the share capital raised by them were specifically examined and stand accepted as categorically mentioned in the respective assessment orders of both the companies passed '-I/s 143(3) of the Income Tax Act, 1961. It is al so important to note that, the cases of these lender companies were also reopened on the basis of the very search proceedings Conducted on Mr. Deepak Kalani and were completed after examining all the issues raised by the Investigation Wing as. discussed in. the assessment orders, 14

Ad-Manum Finance & Anr & 03/Ind/2020 & C.O.No.01&02/Ind/2020 without any adverse observations/findings in respect of the findings given by the Investigation Wing. The case of M/s Chamak Trexim Pvt. Ltd. for AY 2011-12 was specifically reopened citing the reason of verification of loans advanced by it to the appellant, however, no adverse view was taken by the AO of M/s Chamak Trexim Pvt. Ltd. and the assessment was completed accepting the loss returned by M/s Chamak Trexim Pvt, Ltd for this year. Thus, subsequent to the search on Mr. Deepak Kalani, When the assessments of the lender company for various years are completed taking cognizance of the findings of the search, there remains no Scope for making additions in the hand of the appellant taking an adverse view regarding the lenders companies on the basis of same set of facts.

5.8 During the regular assessment proceedings for AY 2014-15, the appellant produced Mr. Deepak Kalani, Whose statements have been found recorded by the then AO. Mr. Deepak Kalani explained and substantiated an the issues raised by the Investigation wing' through his two statements recorded by the then AO on 01.12.2016 and on 08.12.2016 and also filed detailed and elaborate written submissions further explaining the various issues. He had also produced the books of accounts of the companies and the bank statements since financial years 2009-10 to 2016-17 before the then AO, explaining the sources of funds advanced to the appellant and other group concerns. In other words he has also substantiate the source of the source. Thus, the requirements of the newly inserted proviso to section 68 of the Income Tax Act, 1961 has also been fulfilled in this case. The appellant, in this case has also filed the financials of the companies, along with the balance sheets, reflecting the et owned funds of both these companies and also the gross revenues and net profits earned by U1C 15

Ad-Manum Finance & Anr & 03/Ind/2020 & C.O.No.01&02/Ind/2020 companies, which conclusively established the creditworthiness.

5.9 Further, the appellant as well as Mr.Deepak Kalani have also established the source of the source by filing the bank statements and the ledger accounts, whereby it is conclusively brought out that the funds advanced to the appellant by both these companies during the year under consideration were sourced from repayment of earlier loans by the group concerns of the appellant. Mr. Deepak Kalani was produced before the then AO and his statements were recorded on various occasion. He produced the books of accounts of both the companies and also filed detailed and elaborate submissions along with documents to substantiate that the transactions of both the companies, with the appellant company arid its group concerns are proper. All these facts of the case has established the creditworthiness of both the companies as well as the genuineness of the transactions with the appellant. No defects whatsoever were pointed out by the then AO in the books of accounts of the lender companies or in the submissions made by Mr. Deepak Kalani. The detailed submissions filed by the appellant and document s placed on record before the AO with regard to substantiate the creditworthiness of the lenders and genuineness of the transaction have remained uncontroverted in the assessment order.

5.10 It has also been observed that various contentions raised by the Investigation Wing and also by the AO such as finding of original share certificates of both the companies intact from the possession of Mr. Deepak Kalani, change in business profile and the investment pattern of both these Ccompanies, handing over of cheques to the staff of Agrawal Group, M/s Aereo and Chamak while being based in Kolkata have mainly

Ad-Manum Finance & Anr & 03/Ind/2020 & C.O.No.01&02/Ind/2020 transacted with Agrawal group concerns based at Indore, losses incurred by both these lender companies' in this year; both these companies were controlled and managed by appellant group to channelize its unaccounted income into 'the books etc, on the basis of which the creditworthiness of these two companies and also the genuineness of the transactions of the appellant with both these companies were considered doubtful, have been conclusively rebutted and properly explained by the appellant, as already discussed above and also in the appeal orders passed by this office in the group cases.

5.11 In. the detailed appeal order passed in the case -of- group- company of the appellant i.e. M/s Agrawal Transport Corporation Pvt. Ltd. for AY 2010—11, the relevant portion of which is already reproduced as above, the issue of creditworthiness of both the lender companies has been discussed at length at para nos. 6 to 6.14 and 7 to 7.10 respectively in such order. Similarly, the issue of the genuineness of 'the' transactions has been discussed at para nos. 8 to 8.19 of the order. Similarly in the appeal order passed in the appellant's own case for AY 2014-15,' the issue of creditworthiness of both the lenders companies and also the genuineness of the transactions have been discussed at length at para nos. 5.4 to 5.9 in such order. Since the facts of these cases are identical, the observations made in the order of M/s Agrawal Transport Corporation Pvt. Ltd. for AY 2010-11 and also the observations made in the appellant's own case for AY 2014-15, while deleting the additions are squarely applicable' in this case also. It is further observed that the additions were also made on account of transactions with both these companies in other group cases in AY 2008-09 and AY 2009-10 17

Ad-Manum Finance & Anr & 03/Ind/2020 & C.O.No.01&02/Ind/2020 in the regular assessments orders passed in those cases, which stand deleted by the CIT(A) as well as by the Hon'ble ITAT Indore Bench, Indore, the relevant parts of findings have also been-reproduced in the above referred order of M/s Agrawal Transport Pvt. Ltd for AY 2010-11. In the said order, I have also referred and discussed the finding of my predecessor who confirmed the similar additions in other group concerns of the appellant and have also explained the reasons of taking a different view by me while deleting the similar additions in respect of identical issue.

5.12 In view of above discussion and keeping in view entirety of facts and circumstances, the identity and creditworthiness of the loan creditors having properly been established and substantiated and so also the genuineness of the transactions, it is held that the impugned loan transactions of both the companies with the appellant is genuine and proper and the AO was not justified in making of impugned additions u/s 68 of the Income Tax Act, 1961. Therefore, the additions made u/s 68 of the Income Tax Act, 1961 and also the consequential disallowance of interest are directed to be deleted. Therefore, these grounds of appeal are allowed.

15. We further note that this Tribunal in the case of M/s Agrawal Corporation Pvt. Ltd, Ad Manum Finance Ltd and Available Finance Ltd in 331/Ind/2018 and 985/Ind/2019 order dated 14.10.2020 has dealt with the very same issue raised by the Revenue challenging the finding of Ld. CIT(A) deleting the addition made by the Ld. AO u/s 68 of the Act for unexplained cash 18

Ad-Manum Finance & Anr & 03/Ind/2020 & C.O.No.01&02/Ind/2020 credit received from M/s. Aereo Dealcomm Private Limited, & M/s Chamak Trexim Private Limited this tribunal after being satisfied with the identity and creditworthiness of both the lender companies and genuineness of transaction of these lender companies with the assessee(s) held against the revenue and in favour of the assessee confirming the finding of Ld. CIT(A) deleting the addition for unexplained cash credit u/s 68 of the Act as well as deleting disallowance of interest expenditure disallowed at Rs. 61,58,897/- observing as follows:

21. From perusal of the above finding of Co-ordinate Bench in the case of another Group concern of assessee(s) namely Agarwal Coal Corporation Pvt. Ltd wherein also unsecured loan taken from M/s ADPL and M/s CTPL were in dispute. We find that Hon’ble Tribunal after considering all the relevant facts and material; on record decided in favour of the assessee thereby confirming the finding of Ld. CIT(A) holding that the assessee has duly proved the identity of the cash creditors, genuineness of the transaction and proved creditworthiness of the lender companies which thus do not call for any addition u/s 68 of the Act and the interest paid on such loans should be allowed.

22. We also find that assessment proceedings of the alleged lender companies namely M/s ADPL & M/s CTPL have been carried out for multiple assessment years u/s 143(3)/147 of the Act but no adverse inference or action has been taken by the revenue authorities and thus accepting that the business carried out by these companies are genuine and are not bogus companies indulged in providing accommodation

Ad-Manum Finance & Anr & 03/Ind/2020 & C.O.No.01&02/Ind/2020 entries. Detail of such assessments carried out in the case of two lender companies are summarised in the following chart:-

Assessment details of M/s Chamak Texim Pvt. Ltd S. AY Date of order Passed Income Page No. Remarks u/s assessed PB-B-I No 2004-05 31.05.06 143(3) 40,050 49-59 Last share capital and premium received is assessed and accepted 2009-10 30.12.16 148/147 11,67,510 61-65 Regular reopening on other issues 2010-11 29.12.16 148/147 17,40,714 51-55 Cases reopened 2011-12 29.12.16 148/147 Nil 56-60 on information of DDIT(Inv), 2011-12 05.12.18 143(3)/1 -7,44,953 66-70 Indore on the 47 basis of search 2012-13 16.12.18 143(3)/1 38,65,530 71-75 on Mr. Deepak 47 Kalani

Assessment details of M/s Aereo Dealcomm Pvt. Ltd S. AY Date of Passed u/s Income Page No. Remarks order assessed PB-B-I No 1 2003-04 28.06.07 147/143(3) 32,240 142-143 Last share capital assessed was accepted 2 2009-10 30.12.16 147/143(3) 18,42,160 144-148 Cases 3 2010-11 16.11.17 147 8,86,387 149 concluded after searching of DDIT(Inv), Indore and no adverse opinion was formed

23. It is also noteworthy that the loans taken by M/s Agrawal Coal Corporation Pvt. Ltd from two lender companies namely M/s ADCPL & M/s CTPL which were held to be genuine by the Co-ordinate Bench were repaid back and on the very same day of receiving the loan which repaid by M/s Agrawal Coal Corporation Pvt. Ltd the lender companies have used the same fund for advancing loan to M/s Agrawal Transport Corporation Pvt. Ltd. We have verified this fact and found that on 20

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23.02.2010 sum of Rs.2,68,40,000/- was repaid by M/s Agrawal Coal Corporation Pvt. Ltd to M/s Aereo Deal Com Pvt. Ltd. This sum was received in UCO Bank account in case of M/s Aereo Deal Com Pvt. Ltd and on the very same day, through Cheque No. 111017 sum of Rs.2,68,00,000/- was given as loan to M/s. Agrawal Transport Corporation Pvt. Ltd. Similarly in the case of M/s Chamak Traxim Pvt. Ltd loan of Rs.3,42,55,000/-was repaid by M/s Agrawal Coal Corporation Pvt. Ltd on 23.02.2010 which was also credited in UCO Bank account held by M/s CTPL and on the very same day through cheque No.679523 loan of Rs.3,42,00,000/- was given to M/s Agrawal Transport Corporation Pvt. Ltd. So the source of source of alleged loans taken from two lender companies is proved beyond doubt. It further strengthens the finding of Ld. CIT(A) that both the lender Non Banking Finance are genuine having regular business of finance and have sufficient funds for providing loans to various borrowers for earning interest and once the identity, genuineness and creditworthiness of the company for the transaction carried out by group companies is proved beyond doubt and duly accepted by the Tribunal there hardly remain any scope to question it again in the case of other concerns where such type of unsecured loans are received from the same lender companies. Thus the decision of the Co-ordinate Bench in the case of M/s Agrawal Coal Corporation Pvt. Ltd (supra) is squarely applicable on the facts of the instant case and thus we hold that the loan received from M/s Aereo Dealcomm Pvt. Ltd and M/s Chamak Trexim Pvt. Ltd by M/s Agrawal Transport Corporation Pvt. Ltd, Admanum Finance Ltd and Available Finance Ltd are genuine and duly explained by the assessee(s) and the interest paid thereon as provided in the chart in the preceding paras is genuine business expenditure and the assessee(s) have duly explained the transaction of loan taken and also proved the identity, genuineness and creditworthiness of the loan creditors. We thus are of the view that respective Assessing Officers of the three assessee(s) in appeal before us erred in treating the loans taken from 21

Ad-Manum Finance & Anr & 03/Ind/2020 & C.O.No.01&02/Ind/2020

M/s Aereo Dealcomm Pvt. Ltd and M/s. Chamak Trexim Pvt. Ltd has unexplained cash credit u/s 68 of the Act and further erred in disallowing the interest paid on said loans. We thus, confirm the finding of Ld. CIT(A) in the case of M/s. Agrawal Transport Corporation Pvt. Ltd deleting the addition u/s 68 of the Act at Rs. 6,10,00,000/- and also deleting the disallowance of interest at Rs. 8,39,425/-. We also confirm the finding of Ld. CIT(A) in the case of M/s Available Finance Ltd deleting the addition for unexplained cash credit u/s 68 of the Act at Rs. 69,00,000/- and deleting the disallowance of interest paid on such unsecured loans at Rs.51,93,162/-. We also set aside the finding of Ld. CIT(A) in the case of M/s Admanum Finance Ltd and delete the addition of unexplained cash credit u/s 68 of the Act for the unsecured loan taken from the above referred two lender companies totalling to Rs. 1,44,75,000/- and we also direct the revenue authorities to allow the claim of interest expenditure of Rs.61,58,897/-. We thus dismiss Ground No. 1 & 2 of Revenue’s Appeal in the case of M/s Agrawal Transport Corporation Pvt. Ltd for Assessment Year 2010-11 allow Ground No. 2 & 3 of the assessee’s appeal in case of M/s Admanum Finance Ltd for Assessment Year 2009-10 and dismiss Ground No.2 of Revenue’s appeal in the case of M/s Available Finance Ltd for Assessment Year 2014-15.

Ad-Manum Finance Ltd C.O.No.01/Ind/2020 A.Y. 2011-12 1. That the Learned CIT(A) erred holding that the reopening proceedings were properly and validly initiated u/s 147 of the Income Tax Act, 1961 and also erred in rejecting the various objections raised by the assessee in this regard by holding such objections as not acceptable. That on the facts and in the circumstances of the case & in law, the reopening proceedings initiated u/s 147 of the I.T. Act are invalid without jurisdiction and bad in law on various accounts. 23

Ad-Manum Finance & Anr & 03/Ind/2020 & C.O.No.01&02/Ind/2020

2. That on the facts and in the circumstances of the case & in law, the appellant is entitled to deduction of cess of Rs.4,67,053/- incurred during the year under consideration which is prayed to be now allowed.

3. The assessee craves leave to add, alter, modify, substitute and/or withdraw all or any of the grounds of appeal at any stage of the appellate proceedings.

Available Finance Ltd C.O.No.01/Ind/2020 A.Y. 2011-12 1. That the Learned CIT(A) erred holding that the reopening proceedings were properly and validly initiated u/s 147 of the Income Tax Act, 1961 and also erred in rejecting the various objections raised by the assessee in this regard by holding such objections as not acceptable. That on the facts and in the circumstances of the case & in law, the reopening proceedings initiated u/s 147 of the I.T. Act are invalid without jurisdiction and bad in law on various accounts.

18. At the outset, Ld. Counsel for the assessee requsted for not pressing the legal grounds raised for challenging the validity of reopening proceedings u/s 147 of the Act.

Ad-Manum Finance & Anr & 03/Ind/2020 & C.O.No.01&02/Ind/2020 Accordingly similar ground No.1 raised in C.O. No.1/Ind/2020 & CO.No.02/Ind/2020 are dismissed as not pressed.

19. Second common issue raised in both cross objections with regard to allowing the deduction of education cess of Rs. 4,67,053/- and Rs.36,804/- in the case of Ad-Manum Finance Ltd. & M/s. Available finance Ltd. respectively. At the outset, Ld. Counsel for the assessee submitted that this issue is squarely covered in favour of the assessee by the decision of this Tribunal in the case of M/s Agrawal Fuel Corporation Pvt. Ltd in and Ad-Manum Finance Ltd in ITANo.330/Ind/2018 & CONo.13/Ind/2019 order dated 13.11.2020.

20. Ld. Departmental Representative (DR) though supported the orders of lower authorities but could not controvert this fact that the issue raised in Cross Objection stands covered by the decision of this Tribunal and also could not bring any other judgement in its favour.

Ad-Manum Finance & Anr & 03/Ind/2020 & C.O.No.01&02/Ind/2020 placed before us. Common issue raised in the Cross Objections by both the assessees in appeal is with regard to allowing the deduction of education cess or expenditure. We find that similar issue was adjudicated by this Tribunal in the case of M/s.

Agrawal Fuel Corporation Pvt. & Ad-Manum Finance Ltd. ITANo.330/Ind/2018, & CONo.13/Ind/2019 order dated 13.11.2020 wherein observing as under:

Ad-Manum Finance & Anr & 03/Ind/2020 & C.O.No.01&02/Ind/2020

(i) Hon’ble High Court of judicature for Rajasthan Bench, Jaipur in the case of CIT, Kota V/s Chambal Fertilizers and Chemicals Ltd, Kota D.B. IT No.52/2018 order dated 31.7.2018 raised following substantial question of law:-

“3.Whether under the facts and circumstances of the case the Ld. ITAT has not erred in holding that the education cess is a disallowable expenditure u/s 40(a)(ii) of the Act?

“Regarding Question no.3, Mr. Jhanwar has taken us to the order of CIT(A) and tribunal and strongly relied upon the circular dt. 18.5.1967 which reads as under:-

CTR ENCYCLOPAEDIA ON INDIAN TAX LAWS CIRCULAR F.NO. 91/58/66-ITJ(19) DT. 18TH MAY, 1967

BUSINESS EXPENDITURE

SECTION 40(a)(ii)

Recently a case has come to the notice of the Board where the ITO has disallowed the ‘cess’ paid by the assessee on the ground that there has been no material change in the provisions of s. 10(4) of the old Act and s.40(a)(ii) of the new Act.

2.The view of the ITO is not correct. Clause 40(a)(ii) of the IT Bill, Ad-Manum Finance & Anr & 03/Ind/2020 & C.O.No.01&02/Ind/2020 1961 as introduced in the Parliament stood as under:

“(ii) any sum paid on account of any cess, rate or tax levied on the profits or gains of any business or profession or assessed at a proportion of, or otherwise on the basis of, any such profits or gains”. When the matter came up before the Select Committee, it was decided to omit the word ‘cess’ from the clause. The effect of the omission of the word ‘cess’ is that only taxes paid are to be disallowed in the assessments for the year 1962-63 and onwards.

3.The Board desire that the changed position may please be brought to the notice of all the ITOs so that further litigation on this account may be avoided.”

Reliance were placed by the Ld. Counsel for the assessee on the following judgments;

In Instalment Supply (P) Ltd & Ors Vs/ Union of India & Ors (1962) 2 SCR 644, it has been held as under:-

“19. There is another answer to the point of res judicata raised on behalf of the petitioners, relying upon the decision of the Punjab High Court in Installment Supply Ltd, New Delhi v State of Delhi MANU/PH/0068/1956. It is well settled that in matters of taxation there is no question of res judicata because such year’s assessment is final only for that year and does not govern later years, because it determines only the tax for a particular period. (See the decision in the House of Lords in Society of Medical Officers of Health v. Hope (Valuation Officer) (1960) A.C. 551 approving and following the decision of the privy Council in Broken Hill Proprietary Company Limited v Municipal Council of Broken Hill (1925) A.C. 94.

Ad-Manum Finance & Anr & 03/Ind/2020 & C.O.No.01&02/Ind/2020

In Godrej & Boyce Manufacturing Company Ltd vs. Dy. Commissioner of Income Tax & ors (2017) 247 Taxman 361 (SC), it has been held as under:-

“33.While answering the said question this Court considered the object of insertion of Section 14A in the Income Tax Act by Finance Act, 2001, details of which have already been noticed. Noticing the objects and reasons behind introduction of Section 14A of the Act this Court held that:

Expenses allowed can only be in respect of earning of taxable income.

In paragraph 17, this Court went on to observe that:

Therefore, one needs to read the words “expenditure incurred” in Section 14A in the context of the scheme of the Act and, if so read, it is clear that it disallows certain expenditure incurred to earn exempt income from being deducted from other income which is includible in the “total income” for the purpose of chargeability to tax.

The views expressed in Walfort Share and Stock Brokers P.Ltd (supra), in our considered opinion, year again militate against the plea urged on behalf of the assessee.

The Hon’ble High Court decided the issue holding that; “12. We have heard counsel for the parties. Ad-Manum Finance & Anr & 03/Ind/2020 & C.O.No.01&02/Ind/2020

Ad-Manum Finance & Anr & 03/Ind/2020 & C.O.No.01&02/Ind/2020

Limited respectively. Thus the additional grounds raised in and Ground No.1 of the C.O.No.13/Ind/2019 are allowed.

Ad-Manum Finance & Anr & 03/Ind/2020 & C.O.No.01&02/Ind/2020