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Income Tax Appellate Tribunal, AHMEDABAD “C” BENCH
Before: SHRI P. K. KEDIA & SHRI MAHAVIR PRASAD
PER MAHAVIR PRASAD, JUDICIAL MEMBER 1. This appeal by the Revenue is directed against the order of the Ld. CIT(A)-2, Ahmedabad dated 05.02.2015 pertaining to A.Y. 2009-10 and following grounds have been taken:
ITA No. 1355/Ahd/2015 2 . A.Y. 2009-10 1. The Ld.CU(A) has erred in law and on facts by admitting the additional evidences submitted by assessee during appellate proceedings, in violation of provisions of Rule 46(A) (1) of I.T. Rules. The assessee's case is not covered by any of the clause a,b,c or d of Rule 46A of the I.T. Rules. 2. The Ld.CIT(A) has erred in law and on facts in restricting the addition to Rs.3,49,97,890/- by reducing the amount of Rs.2,00,00,000/- even though the 3V had been passed on 31.03.2009 and the assessee could not furnish the details and satisfy the conditions specified u/s 68 of the I.T. Act for A.Y.2009-10. 3. On the facts and in the circumstances of the case, the Ld. CITCA) ought to , have upheld the order of the Assessing Officer. 4. It is, therefore, prayed that the order of the Ld. CIT(A) may be set aside and that of the Assessing Officer may be restored to the above extent.
Brief facts of the case as per assessment order following facts has been emerged: 4.1 Assessing Officer's findings:- The relevant extracts from the assessment order are reproduced here under:- "The assessee has claimed the following expense in its P. & L Account: 1. Administrative expenses Rs. 3,61,33,087/-
Direct expenses as under- (i) Freight and octroi expenses Rs. 2,05,44,260/- (ii) Packing material expenses Rs. 1,57,539/- (iii) Showroom expenses Rs.13,81,63,680/- (iv) Franchise commission Rs.16,12,70,127/- (v) Rent and maintenance exp. Rs.7,72,28,257/- (vi) Advt. and brand promotion Rs. 45.48.00,041/- Rs.49,09,33,128/- No details such as bills / vouchers and explanation justifying the commercial expediency of these expenses have been furnished by the assessee so as to verify the
ITA No. 1355/Ahd/2015 3 . A.Y. 2009-10 genuineness of the claim. Therefore, an amount of Rs.4,90,93,313/- @ 10% of the total claim is disallowed and added to the total income. (Addition Rs.4,90,93,313/-)
During the year, there is an increase in unsecured loan taken by the assessee as compared to last year. The increase in the loan comes to Rs.1,18,09,324/-. The assessee has not furnished any confirmation in respect of this increase in the loan. Therefore, the identity of depositors, the creditworthiness of the lenders and genuineness of the transactions have not been proved. Therefore, the amount of Rs. 1.18,09,324/- is treated as unaccounted cash credit u/s. 68 of the I. T. Act, 1961. (Addition Rs.1,18,09,324/-)
During the year, there is an increase of Rs.5,49,97,890/- in the paid up Share Capital of the assessee from Rs.9,08,00,000/- to last year of Rs.14,57.,97,890/-. No details of the above addition to the paid up share capital have been furnished by the assessee. Therefore, the genuineness of this increase in the share capital should not be verified. In view of the above, the said amount of Rs.5,49,97,890/-is treated as unexplained cash credit and is added to the total income of the assessee u/s. 68 of the I. T. Act, 1961. (Addition Rs.5,49,97,890/-)"
4.2 Appellant's submission :- The relevant extracts from the submission of the appellant are reproduced here under:- "(i) Disallowance of Rs.4,90,93,313/- out of various expenses - Reg. –
AO has made disallowance @ 10% of expenditure claimed against the income earned during the year. Details of expenditure in respect of which disallowance has been made (al 10% are as under: SL.No. Nature of expenses Amount (Rs.)
1 Freight & Octroi expenses 2,05,44,260/- 2 Packing Material expenses 1,57,539/-
ITA No. 1355/Ahd/2015 4 . A.Y. 2009-10
3 Show room expenses 13,81,63,680/- 4 Franchisee Commission 16,12,70,127/- 5 Rent and Maintenance Expenses 7,72,28,257/- 6 Advertisement and Brand promotion 4,54,80,004/- expenses
Appellant have to submit that expenses, as above, are directly raised to the business of the company and books of accounts of the company are audited as per the provisions of Companies Act as well as Income Tax Act, 1961. Further, as per return of income for the year under consideration, appellant company have already disallowed Rs. 1,34,59,1567- out of brand promotion expenses. As per the books of accounts, appellant company have disclosed net profit of Rs. 115,024,318, before depreciation and income-tax provision, against total turnover of Rs.l,789,837,213.. Hence, net profit ratio, before depreciation and income-tax, has been disclosed @ 42% which is quite reasonable considering the nature of business. Considering the facts and circumstances of the case, nature of business and other relevant factors, your honour, is hereby requested to delete the disallowance of Rs.4,90,93,313/- out of expenses directly related to the business of the appellant company.
(ii) Addition of Rs.1,18,09,324/- on the ground of unexplained unsecured laon - Reg.
At the outset, appellant have to submit that "Unsecured Loans" in the books of accounts and audited balance sheet are in the nature of "Trade deposits" from franchisees of the appellant company to source the debt against possible default by the franchisee party.
ITA No. 1355/Ahd/2015 5 . A.Y. 2009-10 Appellant hereby submit the details of new deposit from its franchisee partners, along with details of payment received, its address, PAN (to the extent available) and trading account dues as at the end of the year against the sales made by the company to the respected party. Copies of trading accounts of respected franchisee partners, from whom trade deposits (unsecured loans) were received during the year, are also submitted herewith to substantiate the fact that all the unsecured loans are in fact trade deposits. Hence, no addition, was called for as identity, credit-worthiness and genuineness of the transactions are well explained.
During the course of assessment proceedings, appellant could not furnish he details due to bonafide reasons. Hence, it is requested to accept the evidence furnished herewith as per Rule 46A of the Act considering the quantum of additions and merits of the case.
Considering the fact that, unsecured loans increased during the year in-fact represents trade deposits received from "Franchisee Partners" with whom appellant company is having business dealings and same are debtors of the appellant company it can be inferred that identity and creditworthiness and genuineness of the transaction stands substantiated and addition made by the Assessing Officer is not sustainable and same is requested to .be deleted.
(ii) Addition of Rs.5,49,97,890/- on the ground of unexplained increase in Share Capital - Reg.
During the year under consideration, there was increase in share Capital by Rs..5,49.97,890/-, details of the same are as under:- Sr. Name & Address PAN No. of Amount Remarks of No. the Share Holder shares (Rs.)
ITA No. 1355/Ahd/2015 6 . A.Y. 2009-10
1 VAX Capfm AABCV5216D 834000 8340000 Confirmation &
Investment account Private
Limited submitted
herewith.
301, Simandar Estate,
Opp. Sakar - III, Off.
Ashram Road,
Ahmedabad- 380014
2 Kailash Gupta ABCPG8801A 834000 8334000 Confirmation
account
301, submitted Somnath
Cooperative herewith. Housing
Soc., Navrangpura,
Ahmedabad -
380009
3 Vijay Singh ADKPR5315C 560000 5600000 Confirmation Rathore
account
A- 1001 submitted Prestige
Tower, Nr. herewith. Judges
ITA No. 1355/Ahd/2015 7 . A.Y. 2009-10 Bungalows,
Bodakdev,
Ahmedabad.
4 Srikant Agrawal 560000 5600000
5 Raj Enterprise 711789 7117890
7, Haveli Apartment,
Panchvati Park Soc.,
Opp. White House,
Ambawadi,
Ahmedabad
6 Lakshya AABCL4447L 2000000 20000000 Amount is Level
Marketing Pvt. received in Ltd.
subsequent
financial year
i.e. F. Y.
2009-10
relevant to
assessment
year 2010-11.
Only J.V. has
been passed
for increase in
capital.
ITA No. 1355/Ahd/2015 8 . A.Y. 2009-10 Out of the above parties in respect of which shares capital has been increased during the year, in the case of "Lakshya Level Marketing Pvt Ltd." amount of Rs.200,00,000 has been credited through J.V. on the last day of the financial year. Actual payment was received in the subsequent financial year i.e. Financial Year 2009-10 relevant to Assessment Year 2010-11. Hence, no addition is called for in respect of share application. money, through JV, in the case of "Lakshya Level Marketing Pvt. Ltd."
Further, in respect of (i) VAX Capfin & Investment Pvt. Ltd. (ii) Vijaysingh Rathore & (iii) Kailash Gupta, their PAN details and confirmation accounts are submitted herewith/Also, address of M/s. Raj Enterprise has also been submitted. Considering the facts and circumstances of the case, evidences and explanation furnished as above, your honour is hereby requested to delete the additions of Rs.5,49,97,890/-on the ground of unexplained increase in Share Capital."
Against the said order, assessee preferred first statutory appeal before the ld. CIT(A) who partly allowed the appeal of the assessee.
None appeared on behalf of the assessee and notice was sent through the department but same was not received by any one on behalf of the assessee. Therefore, official of the department affix the notice on the wall/door of the office premises of assessee and we have heard the ld. D.R and we would like to dispose of this matter on the basis of record available with us.
Now department is before us.
So far first ground of the department is concerned that additional evidence under Rule 46(A) should not have been accepted by the ld. CIT(A) concerned.
ITA No. 1355/Ahd/2015 9 . A.Y. 2009-10 In this case, assessee could not produce complete details before the ld. A.O. because of some problem and thereafter in appeal he filed certain documents in support of it contention before the ld. CIT(A) and ld. CIT(A) sought remand report from the ld. A.O. And ld., CIT(A) recorded his satisfaction at the time of admitting additional evidence starting that he has carefully considered the details filed by the appellant, the report of the A. O. and the counter comments filed by the appellant. Certain evidences could not be produced by the appellant before the A.O. Further, the evidence now being submitted is contemporary in nature. The evidence must have been available with the appellant but he could not produce as he was facing difficulty due to the circumstances. The A. O. has also been given due opportunity. He has examined the evidence and given his comments on the same after verification. Considering these facts and circumstances and the fact that the evidence which were produced before the ld. CIT(A) and therefore he admitted these evidences.
Rule 46(A)(2) no evidence shall be admitted under sub Rule(1) unless Deputy Commissioner appeal or as the case may be commissioner appeal record in writing in its admission and a remand report was called for from ld. A.O. and his comments were considered by the ld. CIT(A). Thus, this ground of appeal of the Department is dismissed.
So far next ground with regard to reducing the amount of Rs. 2 crores is concerned, assessee accepted share capital of Rs. 2 crores from Lakshya Level Marketing Private Limited. The AO has made an addition in this respect, which is included in the amount of Rs. 5.49 crores. The appellant has explained the money has been received during the year. The amount has been transferred through the Journal Entry on the last day of financial year, the actual amount
ITA No. 1355/Ahd/2015 10 . A.Y. 2009-10 was received in financial year 2009 - 10. The appellant has submitted that an addition of the same amount has been made for A. Y. 2010 - 11 in the case of the appellant itself. Since the amount has been received by the appellant in Financial Year 2009 - 10 no addition in respect of amount received and subsequent year can be made. The details filed by the appellant show that the cheque has been cleared on 19/05/2009 and the AO has also made an addition of the same amount tor A. Y. 2010 -11. Therefore, in our considered opinion, ld. CIT(A) has rightly directed to delete the addition of Rs. 2 crores.
Therefore, in our considered opinion, ld. CIT(A) has passed detailed and reasoned order and same does not require any kind of interference at our end.
In the result, appeal filed by the Revenue is dismissed.
Order pronounced in Open Court on 21 - 08- 2018
Sd/- Sd/- (P.K. KEDIA) (MAHAVIR PRASAD) ACCOUNTANT MEMBER True Copy JUDICIAL MEMBER Ahmedabad: Dated 21/08/2018 Rajesh Copy of the Order forwarded to:- 1. The Appellant. 2. The Respondent. 3. The CIT (Appeals) – 4. The CIT concerned. 5. The DR., ITAT, Ahmedabad. 6. Guard File. By ORDER
Deputy/Asstt.Registrar ITAT,Ahmedabad