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Income Tax Appellate Tribunal, INDORE BENCH, INDORE
Before: SHRI MAHAVIR PRASAD & SHRI MANISH BORAD
PER MANISH BORAD, A.M: The above captioned cross appeals for Assessment Year 2013-14 are directed against the order of Ld. Commissioner of Income Tax(Appeals) (in short ‘Ld.CIT]-III, Indore dated 22.09.2020 which is arising out of the order u/s 143(3) of the Income Tax Act
Shri Sanjay Shukla, Indore
1961(In short the ‘Act’) dated 30.03.2016 framed by ACIT (Central)- 2, Indore.
Registry has informed that the departmental appeal is time- barred by 50 days. Ld. CIT-DR submitted that due to current pandemic covid-19, the delay occurred which may be condoned in view of guidelines of Govt. of India and Hon’ble Supreme Court. The Hon’ble Supreme Court in Suo Motu Writ Petition (Civil) No.3 of 2020 dated 08.3.2021 has issued directions that in computing the period of limitation for any suit/appeal, the period for 15.3.2020 till 14.3.2021 shall stand excluded. Considering the same, we condone the delay in filing the departmental appeal and admit the same for hearing.
Brief facts of the case as culled out from the records are that the assessee is an individual engaged in the business of transportation contractor, handling of steel materials. Return of income for A.Y. 2013-14 filed on 30.09.2013 declaring income of Rs.1,30,94,980/-. Case selected for scrutiny through CASS followed by serving of notices u/s 143(2) & 142(1) of the Act. Ld. Assessing Officer (in short Ld. AO) called for various informations including explanation for unsecured loans taken during the year. Detailed submissions were filed. Ld. AO also examined the issue of disallowance u/s 14A of the Act, delay in deposit of PF and ESIC and others expenses. After considering the submissions, Ld. AO assessed the income at Rs.6,50,37,768/- after making following additions of Rs. 51942788/-:
Shri Sanjay Shukla, Indore
Unexplained cash credit u/s 68 of the Act and interest thereon Rs. 4,74,82,575/- 2. Disallowance u/s 14A of the Act Rs. 3,57,623/- 3. Ad hoc disallowance @ 5% of the expenses Rs.21,33,556/- 4. Unexplained agricultural income Rs.6,80,640/- 5. Disallowance of depreciation for personal use of Motor Car at Rs.9,93,337/- 6. Disallowance of depreciation on other assets at Rs.14,414/- 7. Disallowance of contribution to PF & ESIC for delay in deposit Rs.2,80,643/-
Aggrieved assessee preferred an appeal before the Ld. CIT(A) and filed detailed submissions along with other documentary evidences. Ld. CIT(A) on going through the submissions and settled judicial precedence partly allowed the assessees appeal giving substantial relief.
Now both assessee and revenue are in appeal before this Tribunal raising following grounds:
The assessee has raised following grounds of appeal :
On the facts and circumstances of the case and in law the learned commissioner of Income tax (Appeals)-3, Indore ("CIT(A)") erred in confirming the addition made by Assessing Officer with regard to unsecured loan amounting to Rs.83,00,000 received from KCL Infra Projects Limited under Section 68 of the Act. The Appellant prays that the said addition is contrary to the evidences on record and made on the basis of conjectures and surmises be directed to be deleted. 2. On the facts and circumstances of the case and in law the learned CIT(A) erred in confirming the disallowance of interest paid on unsecured loan of KCL Infra Projects Limited amounting to Rs. 5,59,357 The Appellant prays that the said disallowance be directed to be deleted. 3. The Appellant craves leave to add to, alter and/or amend all or any of the foregoing grounds of appeal. The revenue has raised following grounds of appeal-
Shri Sanjay Shukla, Indore
On the facts and in the circumstances of the case, the Ld.CIT(A) has erred in law in deleting the addition of Rs. 3,86,23,218/- made by the Assessing officer on account of bogus unsecured loan and interest paid thereon. 2. On the facts and in the circumstances of the case, the Ld.CIT(A) has erred in law in deleting the addition of Rs. 3,57,623/- made by the Assessing officer on account of disallowance as per section 14A of the Income Tax, 1961 read with rule 8D. 3. On the facts and in the circumstances of the case, the Ld.CIT(A) has erred in law in deleting the addition of 21,33,556/- made by the Assessing officer on account of disallowance of various expenses. 4. On the facts and in the circumstances of the case, the Ld.CIT(A) has erred in law in deleting the addition of Rs. 6,80,640/- made by the Assessing officer on account of disallowance of agriculture income. 5. On the facts and in the circumstances of the case, the Ld.CIT(A) has erred in law in deleting the addition of Rs. 9,93,337/- made by the Assessing officer on account of disallowance of depreciation claimed on car. 6. On the facts and in the circumstances of the case, the Ld.CIT(A) has erred in law in deleting the addition of Rs. 14,414/- made by the Assessing officer on account of disallowance of depreciation claimed on camera. 7. On the facts and in the circumstances of the case, the Ld.CIT(A) has erred in law in deleting the addition of Rs. 280643/- made by the Assessing officer on account of disallowance of late payment of contribution of provident fund u/s 36(1)(va)of the Income Tax Act, 1961. 6. We will first take up assessee’s appeal wherein sole issue relates to addition for unexplained cash credit of Rs.83 lac received from M/s KCL Infra Projects Private Limited and disallowance of interest of Rs.5,59,357/- paid on said loans.
6.1 Ld. counsel for the assessee submitted that the alleged loan was taken from M/s KCL Infra Projects Private Limited which is a limited company incorporated on 21.07.1995 having turnover of Rs.5.11 crores during the F.Y. 2012-13. This company is a listed company and loan taken through banking channel and interest paid thereon, after deducting tax at source. He, therefore, stated
Shri Sanjay Shukla, Indore
that since all three limbs i.e. identity, creditworthiness and genuineness are proved with the documents filed placed on the record, Ld. CIT(A) erred in confirming action of the Ld. AO treating M/s KCL Infra Projects Private Limited as bogus and accommodation entry provider company. Reliance was placed on the judgment of Hon'ble Patna High court in the case of Addl. CIT v. Bahri Bros P. Ltd. 154 ITR 244.
Per contra ld. Departmental Representative vehemently argued supporting the finding of both the lower authorities
We have heard rival contentions and perused the records placed before us. The issue in dispute before us raised by the assessee is that Ld. CIT(A) erred in confirming the addition for unsecured loan of Rs.83 lacs taken from M/s KCL Infra Projects Private Limited and Ld. CIT(A) also erred in confirming the disallowance of interest paid on such unsecured loan at Rs. 5,59,357/-. We observe that the assessee is engaged in business of handling, storage and transportation of heavy goods and steel material and also is in contract with Steel Authority of India, Rashtriya Ispat Nigam, Essar Steel, Jindal Steel and Power and Vizag Steel and for this it owns cranes, dumpers, trailors trolleys and trucks. The books of account are audited and tax audit report has been filed. Assessee has taken unsecured loan from alleged cash creditor M/s KCL Infra Projects Private Limited during F.Y. 2012-13 on three occasions i.e. Rs.48 lakhs on 29th June 2012, Rs.10 lakhs on 3rd July 2012 and Rs. 25 lakhs on 3rd July 2012. Interest of Rs.5,59,357/- was credited in its
Shri Sanjay Shukla, Indore
account and paid after deduction of TDS. The alleged loan has been taken through banking channel. From the finding of Ld. AO making alleged addition we notice that Ld. AO observed that M/s KCL Infra Projects Private Limited has taken credit facility from bank @ 11.2% and this facility is used for giving loan to the assessee by charging interest @ 12% and if TDS component is deducted then the M/s KCL Infra Projects Private Limited will have net interest income of 10.8 % which is even lower than the interest paid by M/s KCL Infra Projects Private Limited to its bank. This is the only reason mentioned by the Ld. AO for doubting the genuineness of unsecured loans. We are surprised to note that Ld. AO on one hand is stating that M/s KCL Infra Projects Private Limited is a listed company at Bombay Stock Exchange and Delhi Stock Exchange and it has taken loan from bank and used that fund to give loan to assessee but on the other hand only for the reason of interest rate, made the addition u/s 68 of the Act and even Ld. CIT(A) has also confirmed this view.
However, we on going through the papers filed by Ld. counsel for the assessee in the paper book containing 66 pages notice that identity of the assessee company is not in dispute as it is a listed company. Creditworthiness is also not in dispute as Ld. AO has himself observed that the source of loan given to assessee is loan taken from the bank by M/s KCL Infra Projects Private Limited. Even on going through audited balance sheet of M/s KCL Infra Projects Private Limited placed at pages 8 to 14 of the paper book, we find that as on 31.03.2013 share capital of the company is Rs. 6
Shri Sanjay Shukla, Indore
5,26,62,000/-, accumulated reserves and surplus of Rs.12,45,26,849/- and cash and cash equivalents as on 31.03.2013 is Rs.46.99 lakhs. All the details are even available on the portal of Ministry of Corporate Affairs. As far as the genuineness of the transaction is concerned following documents filed by the assessee are more than sufficient to prove the genuineness of the transaction of loan given to assessee by M/s KCL Infra Projects Private Limited.
a) Confirmation of ledger accounts for the said period in the books of Appellant. b) Confirmation of ledger accounts for the said period in the books of lender. c) Bank statement of Lender Company where the said transaction is highlighted and clearly visible. Income Tax Return for relevant assessment year with computation d) of Lender company. Directors report and Audited Financial Statement of lender e) company for the relevant assessment year. f) Amended Certificate of Incorporation of KCL Infra Projects Ltd. Pursuant to change of name from Kadamb Construction Ltd to KCL Infra Project Ltd. g) Amended Certificate of Incorporation of KCL Infra Projects Ltd. Pursuant to change of name from Kadamb Construction Pvt Ltd to Kadamb Construction Ltd. h) Original Certificate of Kadamb Construction Private Limited. i) Memorandum of Association of KCL Infra Project Limited. Details of Interest paid to lender and TDS deducted by appellant. j) TDS Certificates, Details of TDS Deducted and paid and Form 16A k) and also details of TDS claimed by Lender Company. l) Statement recorded of Shri Mohan Jhawar (Director) during assessment proceedings of Shri Sanjay Shukla (Appellant) where he had confirmed the transaction, explained the source of loan advanced, furnished the details of projects completed. m) Submission of Documents and reply by KCL Infra Project Ltd in the case of the appellant. n) Articles of Association of KCL Infra Projects Ltd. o) Application to Assistant Commissioner (Income Tax) for change in registered office of lender company. Notice of situation or change of situation of registered office in p) compliance with Companies Act, 1956.
Shri Sanjay Shukla, Indore
Based on the above facts none of which have been rebutted by Ld. DR by placing any contrary material on record, we are of the considered view that the assessee has successfully proved the identity and creditworthiness of M/s KCL Infra Projects Private Limited and has also proved that the genuineness of the transaction of loan taken by the assessee for business purpose and there remains no scope for the Ld. AO to make any addition u/s 68 of the Act for the alleged cash credit, as well as disallowance of interest paid thereon. We thus reverse the finding of the Ld. CIT(A) and delete the addition made u/s 68 of the Act at Rs. 83 lakhs and also delete disallowance of interest paid on such unsecured loan of Rs.5,59,357/-. Ground no.1 & 2 raised by the assessee are allowed.
Ground no.3 raised by the assessee is general in nature which needs no adjudication.
Now we take up the Revenue’s appeal:
Ground no.1 relates to addition u/s 68 of the Act for unexplained unsecured loans and interest paid thereon at Rs. 3,86,23,218/- which has been deleted by Ld. CIT(A).
12.1 Ld. DR vehemently argued supporting the order of Ld. AO.
12.2. Per contra, Ld. counsel for the assessee referred the submissions filed before Ld. CIT(A) and also supported the finding of Ld. CIT(A).
12.3 We have heard rival contentions, perused the records placed before us. Through ground No.1 revenue has challenged the finding 8
Shri Sanjay Shukla, Indore
of Ld. CIT(A) deleting the addition of Rs. 3,86,23,218/- made for unexplained unsecured loan and interest paid thereon taken from following parties:
S. No. Name of Party Loan Received Interest paid on during the year the loan amount 1 Jayant Securities and Rs.1,25,00,000 Rs.8,79,041/- Finance Ltd. Vadodara 2 Jay Jyoti India Pvt. Ltd. Rs.1,25,00,000 Rs.8,69,794/- Mumbai 3 Manas Realtors Pvt. Ltd. New Rs.50,00,000 Rs.3,41,507/- Delhi 4 Shri Sushil Kumar Ratan Lal Rs.50,00,000 Rs.3,32,876/- Khowal, Akola 5 Chandumal Govindram, Rs.12,00,000 ---- Indore Total Rs.3,62,00,000 Rs.24,23,218/-
12.4 We find that Ld. CIT(A) has dealt with this issue elaborately taking note of all the relevant documents filed by the assessee and the settled judicial precedence on the issue of unexplained unsecured loan of Rs.445 laksh and interest paid thereon Rs.29,82,575/- and Ld. CIT(A) has partly allowed assessee’s ground by sustaining the addition only with regard to loan taken from M/s KCL Infra Projects Private Limited at Rs.83 laks and interest paid thereon at Rs.5,59,357/- and deleting the remaining addition as observed in the finding given in para 4 to 11 at page no.13 to 56 of the impugned order.
12.5. As regards the loan taken from Jayant Security and Finance Ltd. Badodara at Rs. 1.25 crores and interest paid thereon at Rs.8,79,041/-, we find that the alleged cash creditor is a limited
Shri Sanjay Shukla, Indore
company, Permanent Account No. and address has been provided. Loan taken through proper banking channel Confirmation of account is on record. Jayant Security and Finance Ltd. is a non- banking financial company having experience of 26 years. This company is regularly assessed to tax and has also been subjected to scrutiny assessment and the additions made thereon have traveled before Coordinate Bench Ahmedabad in the case of M/s. Jayant Security and Finance Ltd. in ITANo.753/Ahd/2012. We also find that the loan taken from alleged company has been treated as genuine and the additions made in the hands of other loan receivers have been deleted by this Tribunal in the case of M/s Tirupati Construction ITANo.533/Ind/2014 and M/s K.K. Patel Finance Ltd. ITANo.440/Ind/2010. We, therefore, find no reason to doubt the genuineness and creditworthiness of Jayant Security and Finance Ltd. and identity is well proved which has been rightly appreciated by Ld. CIT(A) in order to delete the addition made u/s 68 of the Act at Rs.1.25 cr and interest disallowance at Rs.8,79,041/-.
12.6. As regards the cash creditor namely M/s Jay Jyoti India Pvt. Ltd. Mumbai we find that this company was incorporated in 1999. As on 31.03.2013 it had share capital of Rs. 6,33,50,500/- and net reserves and surplus of Rs.1,08,62,25,646/-. Bank statement, confirmation of account, ledger statement, audited financial statement, Memorandum of Association and tax deducted at source certificate are placed on record which in totality are sufficient to prove identity of this company, genuineness of the transaction and creditworthiness of this company It is further proved with the fact 10
Shri Sanjay Shukla, Indore
that it had merely advanced 0.75% of the funds which it was capable of i.e. it had financial capacity of advancing 133 times more than the loan given to the assessee company. Thus, Ld. CIT(A) has rightly appreciated these facts for deleting addition for made u/s 68 of the Act as well as the interest disallowance.
12.7. As regards unsecured loan of Rs.50 lakhs taken from Manas Realtors Pvt. Ltd. and Rs. 50 lakhs Shri Sushil Kumar Ratanlal Khowal from perusal of the documentary evidences filed by the assessee, we notice that Manas Realtors Pvt. Ltd. is stated to be a Real Estate Consultant Company and genuine loan has been advanced to the assessee company. Similarly Shri Sushil Kumar Ratanlal Khowal is also regularly assessed to tax and has declared income of Rs.6.49 crores for the year under appeal which in itself is sufficient to explain the source of loan of Rs.50 lakhs given to assessee. Even the case of Shri Sushil Kumar Ratanlal Khowal has reached before the Coordinate Bench Nagpur in ITANo. 463/NAG/2013 dated 25.03.2019 wherein appeal of the revenue was dismissed. We therefore, find no infirmity in the finding of Ld. CIT(A) deleting addition made for loan taken from Manas Realtors Pvt. Ltd at Rs.50 lakhs and shri Sushil Kumar Ratanlal Khowal at Rs.50 lakhs and also deleting the disallowance of interest paid at Rs.7,41,507/- and Rs.3,32,876/- respectively.
12.8. Lastly as regards Rs.12 lakhs taken from Chandoomal Govindram Indore we find that it is a partnership firm and book profit for the relevant assessment year is Rs.14,31,429/-. This firm
Shri Sanjay Shukla, Indore
is regularly assessed to tax and in its own case the issue of addition made by the Ld. AO reached to this Tribunal in ITANo.862/Ind/1999 dated 24.04.2006 wherein this tribunal dismissed the revenue’s appeal. Thus, looking to the fact that this partnership firm regularly assessed to tax, bank statement has been filed, confirmation account duly signed leaves no room for Ld. AO for making addition u/s 68 of the Act and thus rightly deleted by the Ld. CIT(A).
12.9. We also find merit in the finding of Ld. CIT(A) referring to various decisions including decision of this Tribunal in the case of Sumati Kumar KasliwaL & OTHERS ITANo.181, 472/Ind/2017 and others. Judgment of Hon'ble jurisdictional High Court in the case of Pr. CIT vs. M/s Chain House International (P) Ltd. ITANo.111/2018 dated 07.08.2018 and also decision of this Tribunal in the case of M/s Tirupati Consturction (supra) and M/s K.K. Patel Finance Ltd. (supra) wherein similar issue and almost identical facts has been examined and decided in favour of the assessee and additions made u/s 68 of the Act were deleted. We, therefore, find no infirmity in the finding of Ld. CIT(A) deleting the addition for unexplained loan and interest paid thereon at Rs.3,86,23,218/-. Thus ground no.1 raised by the revenue is dismissed.
Apropos to ground no.2 which relates to deletion of addition of Rs. 3,57,623/- made u/s 14A of the Act, we find that the assessee has not earned any dividend income during the year. Therefore, Ld. CIT(A) has rightly deleted the addition in light of the judgment of
Shri Sanjay Shukla, Indore
Hon'ble Gujarat High Court in the case of CIT vs. Correcteh Energy 272 CTR 262 and another judgment of Hon'ble Gujarat High Court Pr. CIT vs. Adani Enterprises Ltd. (2017) 248 Taxman 449 (Guj.). Thus, we find no infirmity in finding of Ld. CIT(A) deleting disallowance u/s 14A of the Act at Rs. 3,57,623/-. Thus, ground no.2 raised by the revenue is dismissed.
Revenue’s Ground no.3 is towards deletion of adhoc disallowance of expenses of Rs. 21,33,556/-. We find that Ld. AO has made disallowance on ad hoc basis @ 5% of the expenses. No specific observation with regard to any irregularity in the records and Books of accounts has been pointed out by Ld. AO. Thus in the given facts where the assessee owns cranes, dumpers, trailors, trolleys and trucks etc., records regarding fuel expenses, daily allowance of drivers and toll tax paid are maintained, we find no justification in such ad hoc disallowance made by the Ld. AO ignoring the books of account and the tax audit report. Thus Ld. CIT(A) has rightly deleted the said disallowance. Ground no.3 raised by the revenue is dismissed.
Apropos ground no.4 for the disallowance of agricultural income at Rs. 6,80,640/-, we note that assessee has declared gross agricultural income at Rs.13,61,280/- against which expense of Rs.1,24,808/- has been claimed thereby showing net agricultural income of Rs.12,32,723/-. Ld. AO however, treated 50% has expenses which assessee would have incurred and thus, allowed the claim of agricultural income only at Rs. 6,80,640/- and making
Shri Sanjay Shukla, Indore
addition of Rs.6,8,640/- Ld. CIT(A) has though discussed the issue at page 59 of the impugned order but has not decided the issue.
15.1 We, however in the interest of justice and to end the litigation, adjudicate this ground and find that the ownership of the agricultural land by the assessee is not in dispute and only estimation of income has been made by the Ld. AO. However looking to the fact that assessee has not filed complete details, also Ld. AO has made general remarks, therefore, being fair to both the parties we estimate the disallowance of agricultural income at Rs.1 lakh and partly allow revenue’s ground no.4 by confirming the deletion of addition at Rs.5,80,640/- and sustaining disallowance of agricultural income at Rs.1 lakhs. Thus ground no.4 of the revenue’s appeal is partly allowed.
Ground No. 5 & 6 relates to disallowance of depreciation of Rs.,9,93,337/- for personal use of motor car, disallowance of depreciation at Rs.14,414/- claimed on cameras. As far as disallowance of depreciation on camera is concerned we find no justification in the finding of Ld. AO as cameras are required for day to day business activities and disallowance for personal elements is not justified. However, as far as the disallowances of depreciation on motor cars are concerned we find that assessee is an individual and own ten motor cars. Undoubtedly looking to the nature of business assessee needs motor cars, however, one cannot ignore the personal element in use of the motor cars. But the action of the Ld. AO of disallowing the total depreciation claimed on Mercedes
Shri Sanjay Shukla, Indore
and fortuner car at Rs.9,93,337/- is not justified as it cannot be said that these two cars have not at all being used for business purpose. Thus in order to meet end to justice 10% of disallowance of depreciation claimed on these two motor cars is sustained i.e. Rs.93,578/- is disallowed. Accordingly out of the total disallowance of depreciation of Rs.9,93,337/- deleted by the ld. CIT(A), we confirm the disallowance only at Rs.93,578/- and partly allow ground no.5 and dismiss ground no.6 raised by the revenue.
Apropos to ground no.7 relating to disallowance of contribution to Provident Fund u/s 36(1)(va) of the Act at Rs. 2,80,643/- we find that Ld. CIT(A) has rightly deleted the said disallowance in light of the decisions of this Tribunal in case of DCIT vs. D & H Secheron Electrodes P. Ltd. (ITANo.172/Ind/2011), Som Distilleries & Breweries v. DCIT (ITANo.296 & 97/Ind/2009),ACIT vs. M.P. State Cooperative Oil Seed Growers Federation (ITANo.145/Ind/2013) &Indira Exports Pvt. Ltd. vs. ACIT (ITANo.66/Ind/2012 wherein it has been held that if there has been delay in deposit in contribution as per the dates prescribed under the PF and ESI Act but ultimately such payments for the said year is deposited with the concerned authority before the due date of filing return of income u/s 139(1) of the Act then in light of the provisions of section 43B of the Act disallowance u/s 36(1)(va) is uncalled for towards the delay in deposit of employees contribution. Recently Coordinate Bench Kolkata in the case of Lumino Industries Ltd. v. ACIT circle 5(1) Kolkata ITANo.365/Kol/2021 dated 17.11.2021 has held that the amendment brought in by the Finance Act 2021 w.e.f. 01.04.2021 15
Shri Sanjay Shukla, Indore
inserting explanation to section 36(1)(va) of the Act and section 43B of the Act are prospective in nature and shall be inforce from assessment 2021-22 and onwards and therefore, for the period before such amendment, if assessee has deposited the contribution of PF and ESI for the year concerned before the due date of filing return of income u/s 139(1) of the Act, which in the instant case is well proved by the finding of Ld. CIT(A) itself, no disallowance could be made u/s 36(1)(va) of the Act. Thus, no interference is called for in the finding of Ld. CIT(A) deleting the said disallowance. Ground no.7 raised by the revenue is dismissed.
In the result, appeal of the assessee in ITANo. 49/Ind/2021 is allowed and appeal of the Revenue in ITANo.333/Ind/2020 for A.Y. 2013-14 is partly allowed.
The order pronounced as per Rule 34 of ITAT Rules, 1963
on 15. 03.2022.
Sd/- Sd/- (MAHAVIR PRASAD) (MANISH BORAD) JUDICIAL MEMBER ACCOUNTANT MEMBER
�दनांक /Dated : 15.03.2022 Copy to: The Appellant/Respondent/CIT concerned/CIT(A) concerned/ DR, ITAT, Indore/Guard file. By Order, Sr. Private Secretary, I.T.A.T., Indore