COMMISSIONER OF INCOME TAX vs. M/S RAMNIVAS PODDAR

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TAXC/10/2008HC ChhattisgarhCGHC01005074200818 February 2013Bench: HON'BLE THE CHIEF JUSTICE,HON'BLE SHRI JUSTICE PRITINKER DIWAKER5 pages
AI SummaryDismissed

What did the High Court hold?

The High Court held that the Income Tax Appellate Tribunal was justified in setting aside the order of the Commissioner of Income Tax. The Tribunal had considered the points raised by the CIT and the explanations and documents produced by the assessee. The Tribunal found that the explanations given by the assessee were proper and that the assessment order was not prejudicial to the interest of the revenue. The High Court noted that while the AO's order might not have been elaborate, the accounts, documents, and explanations were before the AO, who had examined the matter on eight different dates. The Court found no illegality in the Tribunal's finding that the explanations were genuine and that there was no substantial question of law arising from the appeal. Therefore, the appeal was dismissed.

What were the facts?

The assessee, M/s. Ramnivas Poddar, filed a return for assessment year 2003-04 showing a net income of ₹18,590. The Assessing Officer (AO) added ₹81,895 to the income, increasing the taxable income to ₹1,00,485. The Commissioner of Income Tax (CIT) initiated proceedings under Section 263(1) and cancelled the assessment order, directing the AO to recalculate based on four points: verification of unsecured loans and interest paid, examination of payment modes for purchases under Section 40A(3), verification of investment in capital assets, and inclusion of a refund from the Excise Department as income. The assessee appealed to the Income Tax Appellate Tribunal (ITAT), which allowed the appeal. The Revenue (CIT) then filed an appeal before the High Court.

What were the issues?

1. Whether, on the facts and in the circumstances of the case, the Income Tax Appellate Tribunal was justified in law in setting aside the order of the Commissioner of Income Tax passed in exercise of powers conferred under Section 263(1) of the Income Tax Act, 1961? Assessee's Contentions: (i) Unsecured Loans: All creditors are assessed to tax, possess creditworthiness, and confirmations along with copies of their income-tax return acknowledgements were furnished to the AO. (ii) Purchases: Payments for loader machine and tractor-mounted compressor were made by Demand Draft, not towards expenses but for acquiring assets, thus Section 40A(3) is not attracted. (iii) Investment: Investments in capital assets were duly examined by the AO, purchase vouchers were filed with the return, and assets were accounted for. (iv) Refund: The refund of ₹55,366 from the Excise Department was credited to the asset account (Bolero Car purchased in the preceding year) and is not a revenue receipt. Revenue's Contentions: The CIT believed the AO had failed to verify the credit-worthiness of unsecured loan creditors, failed to examine the mode of payment for purchases under Section 40A(3), failed to verify investments in capital assets, and failed to include the Excise Department refund as income.

Which sections of the Income-tax Act were involved?

Section 263(1),Section 40A(3)

AI-generated summary — verify with the full judgment below

BEFORE HQN1BLE HIGH COURT OF CHHATTISGARH ATBILASPUR Tax Case (IncomeTax Appeal) No. \ ° /2008 ADpellant / ^B .**• [.9-W i^ ^•^^^^ \^^ "^ R^ohdent ;bmmissioner of Income Tax, Bilaspur (C.G.) VERSUS ^-M/s. Ramnivas Poddar, Korba (C.G.) INCOIVIE TAX APPEAL U/S.260 A OFINCOWIE TAX ACT,1961

. 'r HIGH COURT OF CHHATTISGARH AT BILASPUR CORAM: HON'BLE SHRI YATINDRA SINGH, C.J. HON'BLE SHRI PRITINKER DIWAKER, J. Tax Case (Income Tax Appeal) No.10 of 2008 Appellant Commissioner of Income Tax VERSUS Respondent M/s Ramnivas Poddar Income Tax Aopeal U/s 260 A of Income Tax Act. 1961 Appearance: Shri Anand Dadariya, counsel for the appellant. Shri Anup Majumdar, counsel for the respondent. JUDGEMENT (19thFebruary, 2013) 1. Shri Ramnivas Poddar (the Assessee) filed a return showing the net income of ? 18,590/- for the assessment year 2003-04. This income is the net profit of 7.38% of the annual tun over against the last year's net profit of 8.24%. 2. The Assessing Officer (the AO) after hearing the matter on eight different dates, examining the account books and records, added a sum of ?81,895/- in the income, increasing the net taxable income to ?1,00,485/- by his order dated 24.01.2006. 3. The Commissioner, Income Tax (the CIT) initiated proceedings under Section 263(1) of the Income Tax Act (the Act). He .cancelled the assessment order on 09.05.2007 with a direction to the Assessing Officer to calculate the assessment afresh considering the four points mentioned in the order. 4. The Assessee filed an appeal before the Income Tax Appellate Tribunal, Circuit Bench, Bilaspur (the Tribunal). This appeal was allowed on 15.02.2008. hlence the present appeal. 5. We have heard counsel for the parties. E

o 6. This appeal was admitted on the following substantial question of law byorderdated 14.05.2009: "Whether on the facts and in the circumstances of the case, the Income Tax Appellate Tribunal was justified in law in setting aside the order of Commissioner of Income Tax passed in exercise of powers conferred under Section 263(1) of the Income Tax Act, 1961?" 7. The CIT had required the AO to reconsider the case on the following four points: (i) Details of unsecured loans given in the return indicates that a sum of ?12,17,543/- was taken as loan from six persons (principal). Interest to three persons on the unsecured loans were also paid amounting to ?34,712/-. The assessment record indicates that the AO had failed to verify the credit-worthiness of the creditors including the fact whether they were assessed to tax all. (ii) Purchases of ?52,000 and ?64,033/- have been made and the AO failed to verify/examine the mode of payment with reference to applicability of the provisions of Section 40A(3). (iii) Further examination of the accounts attached to the return revealed that there is an investment of ?23,18,051/- in the capital assets and this aspect has remained to be verified and inquired into by the Assessing Officer. (iv)As per the documents attached to the return there was a revenue receipt of ?55,366/- in form of refund from the Excise Department. The AO while scrutinizing the case had failed to include the same as income. 8. The Assessee had not only produced his accounts, but had also given detailed explanations before the Assessing Officer. Thereafter, he had also done the same before the CIT in proceedings under Section 263(1) oftheAct. \ 1 ''ltei

s y 9. The explanations given by it in respect of the four points raised by the CIT, as mentioned in the order, are as follows: (i) Unsecured Loans-lnterest paid: This issue was explained in detail during assessment proceedings. In reply to the query raised by the AO it has been submitted that all these creditors are assessed to tax and confirmations along with the copies of acknowledgement in token of having filed the income-tax returns have been furnished. It is further submitted that all the creditors are assessed to income-tax having source of income and credit worthiness. (ii) Purchases of ?52.000/-and ?64.033/- : It is submitted by the Ld.AR of the assessee that the details in this regard were filed before the AO in reply dated 13-12-2005. It is further submitted that purchase invoices were also filed along with the return which indicates purchase of one loader machine from M/s Sachdev Enterprises by making payment of ?52,000/- by DD and one trolley mounted tractor, compressbr purchased from M/s Rajat Enterprises for a sum of 764.933/- the payment of which was also made by DD. It is thus, pleaded that the provisions of Sec.40A(3) are not attracted for these purchases as the payments are not towards expenses but for acquiring assets. (iii) Investment of ?23.18.051/-: This aspectof investment has duly been examined by the AO on the written submission filed on 28-12-2005. The purchase vouchers were filed along with the return and the assets were acquired during the year only which have been accounted for in the accounts. (iv)Credit of ?55.266/-: In this regard it is submitted that the assessee purchased one Bolero Car in the immediately preceding year and this year there was a refund of ?55,366/- from the Excise Department and this amount has duly been credited in the assets account. As the receipt on account of refund from Excise Department is not a revenue receipt which has been included in the cost of the Car,^tb<"'irder of the AO on this issue is not erroneous. \

^ fy 4 10. The Tribunal considered the points raised by the CIT as well as the explanations and the documents produced by the Assessee. The Tribunal has recorded a finding that the explanations given by the Assessee were proper and it cannot be said that the order was prejudicial to the interest of revenue. It is on this base the Tribunal allowed the appeal of the Assessee. 11. It is correct that there is no elaborate mention in the order of the AO but the accounts, documents and explanations given by the Assessee were before the AO. The AO examined the matter on eight different dates and thereafter had passed the order. The Tribunal has recorded a finding that the explanation was genuine. No illegality has been pointed out. 12. In view of above, there is no justification to interfere with the order of the Tribunal. No substantial question of law arises in the appeal. 13. THe aDpeal has no merit. It is dismissed. Sd/- CHIEF JUSTICE Sd/- Pritinker Diwakar Judge

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