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Income Tax Appellate Tribunal, INDORE BENCH, INDORE
Before: SHRI KUL BHARAT & SHRI MANISH BORAD
Regal Iron & Steel Works ITA No.1357/Ind/2016
आयकर अपील�य अ�धकरण, इंदौर �यायपीठ, इंदौर IN THE INCOME TAX APPELLATE TRIBUNAL, INDORE BENCH, INDORE BEFORE SHRI KUL BHARAT, JUDICIAL MEMBER AND SHRI MANISH BORAD, ACCOUNTANT MEMBER
ITA No.1357/Ind/2016 Assessment Year: 2011-12 Assistant Commissioner of Regal Iron & Steel Works, Income Tax 5(1) Vs. 38, Kibe Compound, Indore Indore (Revenue) (Respondent ) PAN No.AADFR7119L Revenue by Shri Rajiv Jain, Sr.DR Assessee by Shri Manjit Sachdeva & Avinash Gaur, Advocates Date of Hearing 11.7.2018 Date of 26.7.2018 Pronouncement
O R D E R PER MANISH BORAD, AM.
This appeal filed by the revenue pertaining to the A.Y. 2011-
12 is directed against the order of ld. Commissioner of Income-tax
(Appeals)-II, Indore dated 13.09.2016 which is arising out of the
order u/s 143(3) of the Income Tax Act dated 25.3.2014 passed by
JCIT-Range-I, Indore.
Regal Iron & Steel Works ITA No.1357/Ind/2016 2. Briefly stated facts as culled out from the records are that the
assessee is primarily engaged in manufacturing, trading and
fabrication of corrugated sheets making machines. Income of
Rs.36,34,790/- declared in e-return filed on 15.10.2011 for the
assessment year 2011-12. The case was selected for scrutiny and
statutory notices u/s 143(2) and 143(1) of the ACT were duly served
upon the assessee. During the course of assessment proceedings
the Learned Assessing Officer( In Short Ld.A.O) observed that
unsecured loan have been taken from M/s. NF Farms (AOP) of
which partners of the assessee firm are members. The Ld.A.O also
observed that sum of Rs.1,10,50,000/- stands introduced by the
partners in the assesee firm out of which Rs.92,92,015/- was the
amount withdrawn by the partners from the AOP M/s. NF Farms
and the remaining amount of Rs.13,50,000/- which was introduced
by one of the assessee’s firms partner Mr. Iqbal Qamar was
pertaining to gift received from his sister who is a Non Resident
Indian. The Ld.Assessing Officer was not satisfied with the
submissions given by the assessee and treated Rs.92,15,000/- and
Rs.1,10,50,000/- as unexplained cash credit and unexplained
partners capital respectively and added the same u/s 68 of the Act. 2
Regal Iron & Steel Works ITA No.1357/Ind/2016
Minor disallowances were also made for car running expenses and
depreciation on car at Rs.41,365/- and Rs.1,03,777/- respectively.
Income assessed at Rs.2,40,44,930/-.
Aggrieved assessee filed an appeal before the CIT(A) and
succeeded in full. Now the revenue is in appeal before the Tribunal.
On the facts and in the circumstances of the case, Ld.CIT(A)II has errred in deleting: “Ground No.(1) :- The addition of Rs.92,15,000/- on the ground that the source of agriculture income from M/s. NF Farms (AOP) was found to be genuine for A.Y. 2008-09 and 2009-10 because the year under consideration is A.Y. 2011-12 and for the purpose of assessment, every assessment year is a different assessment year. “Ground No.(2): The assessee has failed to prove the creditworthiness of Firm M/s. N.F. Farms (AOP) as the said loan creditor failed to substantiate its claim of production of agricultural produce during F.Y 2010-11 relevant to A.Y 2011-12. “Ground No.(3): The Ld.CIT(A) has erred in deleting the addition of Rs.97,00,000/- on account of capital introduction by the partners of the firm on the ground that when the production of agricultural produce by the M/s. NF Farms (AOP) could not be proved during F.Y. 2010-11, the source of capital introduction by the partners of the assessee firm by way of
Regal Iron & Steel Works ITA No.1357/Ind/2016 withdrawal from M/s. NF Farms (AOP) is also not considered to be genuine.
The Ld. Departmental Counsel vehemently supported the findings of the Ld.A.O. On the other hand Ld. Counsel for the assessee submitted that from same issue of loan from N.F. Farms (AOP) came up before the Hon'ble Tribunal in the case of assessee for Assessment Year 2008-09 and the issued was remanded back to the Ld.A.O to examine the respective claims of agriculture income earned by M/s. N.F. Farms as well as the nature of amount involved therein in accordance with the law. He further submitted that in the set aside proceedings necessary verifications were made by the Ld.A.O and he was satisfied that M/s. NF Farms (AOP) is regularly engaged in earning agriculture income however he disallowed certain percentage of income which was added in the respective hands of the members who are also the partners of the assessee firm. It was also submitted that the genuineness of the income earned by M/s. NF Farm has been accepted by the revenue authorities in the set aside proceedings and therefore unsecured loan from N.R. Farms stands explained. Similarly, capital introduced by the partners also stands explained and the portion of income held to be non agriculture has already been added in the hands of the partners.
We have heard rival contentions and records placed before us. Revenue is in appeal against the order of Ld.CIT(A) deleting addition
Regal Iron & Steel Works ITA No.1357/Ind/2016 of Rs.92,15,000/- being the unsecured loan from NF Farms (AOP) and deletion of addition of Rs.97,00,000/- being the capital introduced by the partners in the assessee firm. The common thing in both the additions is the agriculture income earned by NF Farms (AOP). We find that the partners of the assessee firm are also the members of Association of M/s. NF Farms (AOP) which is engaged in earning agriculture income consistently for many years from sale of Baby corn. Genuineness of the agriculture income earned by M/s. NF Farms was doubted by the A.O and as a result of which addition were made for the unsecured loan received from M/s. NF Farms as well as capital withdrawals by the partners in the farm which was having its source from the withdrawals made by partners from M/s, NF Farms (AOP) as its members. So the pivotal issue is to examine the genuineness of the earning capacity of M/s. NF Farms (AOP) from agriculture operation.
During the course of hearing Ld. Counsel for the assessee appraised us about the decision of Tribunal dated 19.7.2012 in its own case dealing with same issue about the unexplained cash credit from M/s. N.F. Farms (AOP) of Rs.50,00,000/- remanded the issue back to the file of the Assessing Officer to examine the claim of M/s. NF Farms of earning agriculture income from sale of baby corn and the ground realities. We find that Ld.A.O carried out the set aside proceedings u/s 143(3) r.w.r.t Section 254 of the IT Act and framed order on 28.3.2014 thereby accepting the assessee’s genuine claim of loan of Rs.50,00,000/- of N.F. Farms and did not
Regal Iron & Steel Works ITA No.1357/Ind/2016 made any addition u/s 68 of the Act. During the set aside proceedings the Ld.A.O carried out detailed verification of the agriculture land owned by M/s. N.F. Farms through his Inspector, Crops grown there, cultivation and agriculture process carried out. The relevant extract of the Ld.A.O’s order are reproduced below;
In the meantime, the Department filed appeal before the Hon'ble’ble ITAT, Indore who vide its order dated 19.07.2012 concluded that the decision of the learned CIT(A) could not be acceptable as the ultimate beneficiary was the assessee itself. However, the matter was restored back to the file of the Assessing Officer with the direction that fresh opportunity be provided and after examining the nature of amounts involved, the decide the issue afresh. The relevant portion is reproduced below: “If the reasoning and the facts mentioned in the assessment order observations made in the impugned order specifically in Para 4.1.2 and the assertion made by the learned respective counsel, are analyzed, the undisputed fact is that the members of the so called AOP (M/s NF Farms) and the partners of the assessee firm are the same persons. There is a categorical finding in the assessment order, impugned order and also in our view that the agricultural income of Rs.86,30,344/- is practically not possible to be grown out of 17.64 acres of land. The claim of M/s NF Farms and also of the assessee is that the agricultural produce (babycorn) were sold
Regal Iron & Steel Works ITA No.1357/Ind/2016 to hotels, restaurants and dhabas. However, no evidence in any manner of such sale was produced at any stage. It is not the case that cash sale was made to the passerby or the persons who are going there and there on the roads rather the sale was made to hotels, restaurants and dhabas, therefore, nothing prevented the assessee to produce the proof of such sales at any stage. The Ld.CIT(A) even in principle agreed with the conclusion of the learned Addl. CIT that the source of loan from M/s NF Farms is not genuine, however, deleted the addition by opining that the addition, if any, can be made in the hands of the AOP. We are not agreeing with this proposition because the ultimate beneficiaries of this colourable device is the assessee itself. As mentioned earlier, the members of the AOP and the partners of the assessee firm are the same persons, therefore, keeping in view the this appeal to the file of the learned Assessing Officer to examine the respective claims of M/s NF Farms and also of the assessee. The Assessing Officer while examining the nature of the amounts involved and then decide in accordance with law after seeing the ground realities. Needless to mention here that due opportunity of being heard be provided to the assessee. The appeal of the revenue is, therefore allowed for statistical purpose only.”
In view of the above, vide this office notice u/s 143(2) r.w.s 254 of the IT Act dated 24.02.2014 duly served upon the assessee, the authorized representative of the assessee CA Shri
Regal Iron & Steel Works ITA No.1357/Ind/2016 Pradeep Jain attended on behelf of the assessee. The LEARNED AR submitted that after a detailed inquiry in the A.Y. 2009-10, in case of the partners of the firm, it was concluded that 20% of Income shown by NF Farms was unexplained expenditure by partners and therefore 20% of agricultural income shown by partners (Mr. Iqbal Qamar, Mr. Maqsood Qamar and Mr. Kamaruddin H. Suleman) were offered as taxable, while the 20% of share profit other partner was below taxable limit. On the similar grounds reassessment under section 148 was completed for assessment years 2008-09 and where 30% of income shown by the partners was declared as nonagricultural income. However, CIT(A) directed the Assessing Officer of two partners to take estimate of 20% on the basis of inquiry completed for A.Y. 2009-10, on the ground that for ASSESSMENT YEAR 2008-09 Assessing Officer had not given any specific reason and profit was only estimated. LEARNED AR was asked to furnish copies of assessment order for both assessment years. On going through the assessment order, it was observed that there was a detailed field inquiry completed by the assessing officer of partners for the assessment year 2009-10 and information about the productivity of baby corn in NF Farms was obtained from various agencies. The copies of aforesaid assessment orders for A.Y. 2008-09 and 2009-10 and copies of order of CIT(A) in case of partners for A.Y. 2008-09 are enclosed with the office note of this order.
Regal Iron & Steel Works ITA No.1357/Ind/2016 6. In the assessment order of partners in A.Y. 2009-10, which is the basis of final conclusion in their case for A.Y.2008-09, the issue of lesser expenses against the receipts was also discussed and it was found that a portion of expenses were unexplained, which was also admitted by the partner. Therefore it was concluded that only 80% income shown by NF Farms was actually the agricultural income and rest 20% income was offered as taxable 20% of the total income of NF Farms were actually out of unexplained expenditure and were added under section. Also the cases were reopened for A.Y. 2008-09. Now as per the direction of ITAT, decision is to be taken by the undersigned as per law. Now there are following issues are to be examined: i. Whether NF Farms is having some agricultural income ii. Whether the entire income shown was exempt as agricultural income entire income shown as agricultural income is genuine or not was concluded that NF Farms was having 80% income shown as exempt, as agricultural income and 20% income was non agricultural income on account of unexplained expenses in assessment year 2009-10. Therefore 20% of the income was held as taxable in hands of partners. Similar conclusion was drawn for assessment year 2008-09 after reopening their case. Once such conclusion is drawn, adding the unsecured loan received by assessee from NF Farms on the ground that source of income shown by NF Farms was not genuine and the amount should be added back in hand of assessee as ultimate beneficiary tantamount to having two
Regal Iron & Steel Works ITA No.1357/Ind/2016 opposite views on same issue in same assessment year and would amounts to adding the same amount, “a portion of which is declared as genuine and another portion declared as non genuine and already taxed in hands of partners of NF Farms. Now if we add the amount in hands of assessee, there are to be two fall out. 1. We have to withdraw the addition in hands of partners, in order to avoid double taxation same assessment year, which is not feasible. 2. A contradictory view against that of established view in case of partners that, 80% of the 80 lakh income shown by NF Farms is actually agricultural income, is not possible. Thus in view of the undersigned addition the unsecured loan of Rs.50 lakh in hands of amount of Rs.50 lakh is received from NF Farms. In case of partner, it is provided that NF Farm is having income of around 64 Lakh (80% of 80 lakh) as agriculture only, so source is explained, then again adding 50 lakh on account of unexplained source in hand of assessee is not possible. Also even it once we assumed that the unexplained amount is to be taxed in hands of assessee, we have to withdraw the addition of hands of partners, but it action amount to reducing their tax liability, hence action u/s 148 or 263 is not feasible also.”
Regal Iron & Steel Works ITA No.1357/Ind/2016 8. From the perusal of the findings of revenue authorities giving
detailed finding of the fact duly supported by field verification
we observe that the revenue authorities have accepted the
genuineness of agriculture income earned by M/s N.F. Farms
(AOP). As regards non accepting the agriculture income to the
extent of 20% shown by M/s. N.F. Farms by the Ld.A.O it is
evident that the amount received by members of AOP have
been offered for taxation in their Income tax returns and
assessed accordingly. It was pleaded by the Ld. Departmental
Representative that Assessment Year for the instant appeal is
different from the assessment year set aside proceedings
which were for A.Y. 2008-09 and 2009-10. We are unable to
support their pleading because the field verification were
carried out during the financial year 2013-14 and there is a
categorical finding by the Ld.A.O about the quantum and
genuineness of agriculture income earned by M/s. NF Farms,
the income disclosed by the members of the AOP and the
amount withdrawn from M/s. NF Farms.
Regal Iron & Steel Works ITA No.1357/Ind/2016 9. We therefore in the given facts and circumstances of the case
as well as findings of the revenue authorities in the set aside
proceedings for Assessment Year 2008-09 & 2009-10 are of
the considered view that the identity, genuineness and
creditworthiness of unsecured loan and partners withdrawal
from M/s. N.F. Farms has been established by the assessee
and no interference is called for in the findings of Ld.CIT(A)
and accordingly Ground No.1,2 & 3 of the appeal is dismissed.
In the result the appeal of the revenue is dismissed.
The order pronounced in the open Court on 26.7.2018.
Sd/- Sd/-
( KUL BHARAT) (MANISH BORAD) JUDICIAL MEMBER ACCOUNTANT MEMBER �दनांक /Dated : 26 July, 2018 /Dev
Copy to: The Appellant/Respondent/CIT concerned/CIT(A) concerned/ DR, ITAT, Indore/Guard file. By order Private Secretary/DDO, Indore
Regal Iron & Steel Works ITA No.1357/Ind/2016 1. Date of dictation : 23.7.2018 2. Date on which the typed draft is placed before the Dictating Member :24.7.2018 3. Date on which approved draft comes to the Sr.P.S./P.S: 24.7.18 4. Date on which the fair order is placed before the dictating Member for pronouncement: 24.7.2018 5. Date on which the fair order comes back to the Sr.P.S./P.S.:26.7.18 6. Date on which the file goes to the Bench Clerk: 7. Date on which the file goes to the Head Clerk: 8. The date on which the file goes to the Assisstant Registrar for signature of the order. 9. Date of Despatch of the Order: