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Income Tax Appellate Tribunal, “G” BENCH, MUMBAI
Before: SHRI B.R.BASKARAN, AM & SHRI SANDEEP GOSAIN, JM
आदेश / O R D E R Per Sandeep Gosain, J. M.: The Present Appeal has been filed by the Revenue against the order of Commissioner of Income Tax (Appeals)- 6, dated 22.03.2011 for A.Y. 2005-06 on the following grounds of appeal.
(A.Y. 2005-06) ITO vs. M/s. William Jacks & Co. (I) Ltd. 1. “On the facts and in the circumstances of the case and in law, the Ld.
CIT(A) erred in deleting the addition on account of interest income amounting to Rs.48,84,624/-which had not been shown as income as per
Note No.21 to Final account attached with the Return of Income duly certified by a Director of the assessee company. 2. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in deleting the addition on account of unexplained cash credit when the genuineness of transaction and credit-worthiness of the party could not be satisfactorily proved during the assessment proceedings as well as remand report stage.”
The brief facts of the case are that the assesee is a Private Limited Company and is engaged in the business of Investment and Finance. The assessee company filed the return of income on 30/10/2005 declaring total loss of Rs.13,05,710 /-.
Later on the case was selected for scrutiny by CASS and in this respect the statutory notices were served upon the assessee. After considering the reply as well as the documents submitted by the assessee, the AO assessed the interest income of Rs.48,84,624/- on the ground that Notes to Accounts has certification of Chartered Accountant that company has not accounted the interest income and held the same to be “income from other sources”. In addition the AO disallowed the sum of (A.Y. 2005-06) ITO vs. M/s. William Jacks & Co. (I) Ltd. Rs.2,11,000/- being brokerage paid and added it back to the total income. The AO also held that the loan of Rs.1,31,22,734/- to be not genuine on the ground that the assesee has failed to furnish the ledger accounts and confirmation letter and in addition the AO also disallowed 10% of the expenses mentioned on account of administrative expenses, salary and wages on notional basis and passed the order of assessment.
Aggrieved by the order of the AO, assessee filed appeal before CIT(A) and the CIT(A) after considering the case of the assessee had partly allowed the appeal vide its order dated 22.03.11.
3.1 Aggrieved by the order of CIT(A) the revenue filed the present appeal before us on the grounds mentioned herein above.
Ground no. 1
This ground relates to deletion of addition on account of interest income amounting to Rs.48,84,624/-. In this context, Ld. DR appearing on behalf of revenue supported the orders passed by the AO and referred to pg. no. 2-3 of the AO’s order where detailed findings have been recorded by the AO while adding a sum of Rs. 48,84,624/- in the income while treating the same as income from (A.Y. 2005-06) ITO vs. M/s. William Jacks & Co. (I) Ltd. other sources. The CIT(A) while admitting additional evidence filed by the assessee during the course of appellate proceedings decided this ground in favour of assessee, the operative para of CIT(A) is reproduced below.
“I have considered the facts of the issue and the submissions made by the AR. A perusal of the original final accounts filed by the appellant containing notes to accounts indicates that the said accounts were only ‘certified true copy’ and were not signed by either the Auditors or the Directors at the appropriate place, to authenticate the same. It is further noted that the appellant did furnish before the AO the duly signed final accounts which were authenticated by the Auditors and which did not contain the impugned note regarding the non accounting of impugned interest income and interest expenses; but the same were rejected by the AO. The AR of the appellant has established that the final accounts approved by the Auditors, Board of Directors and Shareholders of the Company as well as the final accounts filed before the Registrar of Companies did not contain the impugned note. There is merit in the AR’s contention that the AO wrongly relied on the assessment order for A.Y.1997-98, in which year, the appellant had itself disclosed/added in the return the interest income accrued during the year. In that year, the only question raised
(A.Y. 2005-06) ITO vs. M/s. William Jacks & Co. (I) Ltd. by the appellant was regarding the allowability or otherwise of the expense relating to the earning of such income. The AR has further filed certificate from the Auditor certifying that they had not signed or certified any accounts for the years under consideration containing the impugned note. There is also merit in the AR’s contention that the impugned income could not be established to have accrued to the appellant and therefore there was no question of offering the same for taxation and that no tax could be imposed on artificial income. In view of the above discussion, the addition made by the AO is deleted and this ground is allowed.”
We have analysed the afore mentioned para of impugned order and we are of the considered view that the CIT(A) has decided the said issue after noticing that the final accounts filed by the assesee, was approved by Auditors, Board of Directors and Shareholders. The CIT(A) further took into consideration that the auditors have issued the separate certificate thereby confirming the stand taken by the ld. AR. Hence, we are of the view that the AO was not justified in placing reliance on financial statements which were not approved by shareholders. After appreciating the same the ld. CIT(A) has rightly held that AR of the assessee had established that the final accounts approved by the Auditors, Board of Directors
(A.Y. 2005-06) ITO vs. M/s. William Jacks & Co. (I) Ltd. and Shareholders of the Company as well as the final accounts filed before the Registrar of Companies did not contain the impugned note.
Therefore, the findings recorded by the CIT(A) are well reasoned and no material evidence has been brought before us to controvert or rebut the findings of CIT(A) and hence, we see no reason to interfere or deviate from the orders passed by the CIT(A) and therefore, we reject the ground of appeal filed by the assessee and uphold the order of the CIT(A).
Ground No.2
This ground relates to deletion of additions made by AO on account of unexplained cash credit of Rs.1,31,22,734/-. Ld. DR representing the revenue relied upon the orders passed by AO, it was submitted that even after availing sufficient opportunities, the assessee could not prove its claim on unsecured loans and in this respect no confirmation letter has been filed as assured by the assessee.
Therefore in those circumstances the AO has rightly held that the loan amount of Rs.1,31,22,734/- claim to have been received from one from M/s. Assam Company Ltd. was rightly held as not genuine.
(A.Y. 2005-06) ITO vs. M/s. William Jacks & Co. (I) Ltd. 7.1 Ld. CIT(A) has dealt with the ground of disallowance of Rs.1,31,22,734/- being unexplained cash credit representing the loan received from M/s. Assam Company India Ltd. The relevant para is reproduced below:
“I have considered the facts of the issue and the submissions made by the AR. The impugned addition was admittedly made on the ground that the confirmation from M/s. Assam Co. Ltd was not filed before the AO in respect of the impugned loan. The order also mentions that the AR of the appellant had submitted that the said addition could be made, subject to rectification, if the confirmation was not filed by a certain date. In the absence of the said confirmation, the AO proceeded to make the impugned addition. Now, that the said confirmation and other related evidence have been filed by the AR which have been duly examined by the AO in the remand proceedings, there is no warrant for sustaining the said addition. Hence, the addition made by the AO is deleted and this ground is allowed.”
We have analysed the orders passed by the CIT(A) and we noticed that the CIT(A) has correctly held that the AO proceeded to make the additions only on the ground that no confirmation was submitted by the assessee, but during the appellate proceeding, assessee submitted the confirmation before the CIT(A)which
(A.Y. 2005-06) ITO vs. M/s. William Jacks & Co. (I) Ltd. was duly verified and examined by the AO in the remand proceeding. Therefore considering those facts the CIT(A) has rightly came to the conclusion that the additions made by the AO in the absence of confirmation are not sustainable. We are of the considered opinion that the findings recorded by the CIT(A) are well reasoned and no material evidence has been brought before us to controvert or rebut the findings recorded by CIT(A) and hence, we see no reason to interfere or deviate from the orders passed by the CIT(A) and therefore, we reject the ground of appeal filed by the assesse and uphold the order of the CIT(A).
9. In the result, the Revenue’s appeal is dismissed. Order pronounced in the open court on 23rd March, 2016 Sd/- Sd/- (B.R. Baskaran) (Sandeep Gosain) लेखा सद�य / Accountant Member �या�यक सद�य / Judicial Member मुंबई Mumbai; �दनांक Dated : 23.03.2016 Ps. Ashwini आदेश क� ��त�ल�प अ�े�षत/Copy of the Order forwarded to : 1. अपीलाथ� / The Appellant 2. ��यथ� / The Respondent 3. आयकर आयु�त(अपील) / The CIT(A) 4. आयकर आयु�त / CIT - concerned 5. �वभागीय ��त�न�ध, आयकर अपील�य अ�धकरण, मुंबई / DR, ITAT, Mumbai 6. गाड� फाईल / Guard File