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TMI Blog2012 (8) TMI 183X X X X Extracts X X X X X X X X Extracts X X X X ..... – Held that:- Printer and Scanners are integral part of the computer and therefore claimed depreciation @ 60% - depreciation on Printers and Scanners is allowable @ 60% - In favor of assessee - IT Appeal Nos. 2936, 3256 & 3262 (Delhi) of 2011 - - - Dated:- 30-3-2012 - SMT. DIVA SINGH, A.N. PAHUJA, JJ. Niranjan Kouli for the Appellant. B.K. Anand and Deepak Kukreja for the Respondent. ORDER A.N. Pahuja, Accountant Member These three appeals - cross appeals for the AY 2007-08 filed on 3rd June, 2011 by the assessee and on 16th June, 2011 by the Revenue against an order dated 28th February, 2011 of the ld. CIT(A)-XII, New Delhi and appeal filed by the Revenue for the AY 2008-09 against an order dated 9th March, 2011 of the ld. CIT(A)-XII, New Delhi, raise the following grounds:- I.T.A. No. 3262/D/2011-Revenue [AY 2007-08] "1( a ) On the facts and circumstances of the case, the ld. CIT(A) erred in law and merit of the case in deleting the addition of Rs. 8,35,40,000/- out of total addition of Rs. 9,57,40,000/- made by the Assessing Officer on account of unexplained cash credits. ( b ) On the facts and circumstances of the case the ld. CIT(A) erred in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... relevant orders are that return declaring loss of Rs. 10,15,51,540/- filed on 14th November, 2007 by the assessee, engaged in the business of trading in Footwear, Apparel, accessories equipment and skin care products, after being processed on 14.08.2008 u/s 143(1) of the Income-tax Act, 1961 (hereinafter referred to as the Act) was selected for scrutiny with the service of a notice issued u/s 143(2) of the Act. During the course of assessment proceedings, the Assessing Officer (A.O. in short) noticed that the assessee raised substantial unsecured loans during the year. Accordingly, a notice dated 23rd January, 2009 u/s 142(1) of the Act was served upon the assessee by the AO, seeking details of all unsecured loans, confirmations and copies of the bank account of the said creditors. However, the assessee did not respond to this notice. Subsequently, on 10th September, 2009, the assessee was again requested to furnish complete details, evidence and genuineness of transactions in fresh unsecured loans and the case was adjourned to 22nd September, 2009. However, none appeared on the said date. Later, a letter dated 07.10.2009 was filed on 23rd November, 2009, wherein the assessee sub ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 3,00,000 9,173 8 Esha Mathur 12.02.07 2,00,000 2,00,000 3,945 9 Hooda Enterprises 27.06.06 2,00,000 22.09.06 3,00,000 5,00,000 18,559 10 Jyoti Kumar 14.08.06 12,40,000 12,40,000 1,10,446 11 Kanchana enterprises 30.09.06 3,50,000 3,50,000 26,250 12 Malhotra Enterprises 04.04.06 7,00,000 06.05.06 3,77,765 10.05.06 1,22,235 12,00,000 0 13 Oriental Eccentrics P. Ltd. 01.02.07 20,00,000 29.03.07 25,00,000 45,00,000 40,000 14 Rajesh Sehgal 12.07.06 1,00,00,000 04.09.06 3,00,00,000 4,00,00,000 37,81,643 15 Ridhi enterprises 10.04.06. 5,00,000 19.07.06 1,25,000 21.09.06 1,25,000 20.11.06 1,25,000 28.02.07 1,25,000 9,00,000 1,11,498 16 Roma Khanna 13.02.07 25,00,000 25,00,000 48,287 17 S.K. Trading 05.07.06 5,00,000 5,00,000 0 18 Sehgal Enterprises P. Ltd. 30.11.06 50,0 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Trade deposit 12,00,000 - Confirmation attached 13 Oriental Eccentrics P. Ltd. Trade deposit 45,00,000 40,000 Confirmation attached 14 Rajesh Seghal Unsecured loan 4,00,00,000 37,81,643 Confirmation attached 15 Ridhi Enterprises Trade deposit 9,00,000 1,11,498 Confirmation attached 16 Roma Khanna Unsecured loan 25,00,000 48,287 Confirmation attached Total 85240000 78,56,145 5.3 These were sent to the Assessing Officer for investigation and further comments vide office letter dated 13/01/2011. The Assessing Officer in reply to the remand report vide her letter dated 02/02/2011 has stated as follows: "In this case, the assessee has filed confirmation from 18 parties in respect of unsecured loans. I have gone through the confirmation filed by the assessee. The confirmation filed by the assessee are only photocopy of statement of account of various persons from whom unsecured loans were taken in the books of the accounts ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ddress 5,00,000 18.559 2 Malhotra Enterprises1 No address 12,00,000 - Total 17,00,000 18,559 5.7 Thus, out of the total confirmation filed by the appellant amounting to Rs. 8,52,40,000/- the confirmations which do not mention the PAN and address amounting to Rs. 17,00,000/- is being disallowed. Thus, the valid confirmation filed by the appellant comes to Rs. 8,35,40,0001- (8,52,40,000-17,00,000), the consequential interest payable on this comes to Rs. 78,37,586/- (78,56,145 -18,559). Hence the amount of credit balance which is treated as explained comes to Rs. 8,35,40,000/-and the amount of interest on this which comes to Rs. 78,37,586/- is regarded as genuine. 5.8 The Assessing Officer had made an addition of Rs. 9,57,40,000/ as 'Unexplained cash credit' and he made a further disallowance of Rs. 81,80,651/- on account of interest on it. As the assessee has given confirmations amounting to Rs. 8,35,40,000/-an addition of Rs. 1,22,00,000/- is confirmed on account of incomplete confirmation in some cases and absence of confirmation in other cases. The consequential disallowa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l against upholding of addition of Rs. 17,00,000/- and interest of 18,559/-. Despite various notices issued u/s 142(1) of the Act by the AO, asking the assessee to establish the genuineness of fresh creditors, the assessee did not furnish all the confirmations or any evidence in support of genuineness of the transactions with the aforesaid unsecured creditors. Even when the AO repeatedly asked the assessee to submit confirmations of the various persons, the assessee did not comply. As a result, addition of Rs. 9,57,40,000/- u/s 68 of the Act was made besides disallowance of interest of Rs. 81,80,651/-. On appeal, the ld. CIT(A) deleted the addition of Rs. 8,35,40,000/- and interest of Rs. 78,37,586/- only on the basis of confirmations from 14 parties, without recording any findings on the creditworthiness of these fourteen creditors or even genuineness of the transactions. The ld. CIT(A) also did not record any finings in respect of creditworthiness of the two creditors of Rs. 17 lacs and genuineness of the transactions with them while upholding the said addition. There is nothing to suggest that the ld. CIT(A) undertook any independent enquiries relating to the said 16 creditors i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... may be charged to income-tax as the income of the assessees of that previous year. The expression "the assessees offer no explanation" means where the assessees offer no proper, reasonable and acceptable explanation as regards the sums found credited in the books maintained by the assessees. It is true the opinion of the Assessing Officer for not accepting the explanation offered by the assessees as not satisfactory is required to be based on proper appreciation of material and other attending circumstances available on record. The opinion of the Assessing Officer is required to be formed objectively with reference to the material available on record. Application of mind is the sine qua non for forming the opinion." 6.1 Hon'ble jurisdictional High Court in Indus Valley Promoters Ltd. v. CIT [2008] 305 ITR 202/174 Taxman 516 (Delhi) held as under: "It is well-settled that the assessee must discharge the burden of proving the identity of the creditors and also to give the source of the deposits. In other words, the creditworthiness of the depositors must be established to the satisfaction of the Assessing Officer. Where there is an unexplained cash credit, it is open to th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . State of Punjab [1995] 1 SCC 760]. As is apparent, the impugned order of the ld. CIT(A) suffers from lack of reasoning and is not a speaking order. In view of the foregoing, we consider it fair and appropriate to set aside the order of the ld. CIT(A) and restore the matter to his file for deciding the issues raised in the ground no. 1 in the appeal of the Revenue and ground nos. 1 2 in the appeal of the assessee, afresh in accordance with law in the light of our aforesaid observations and various judicial pronouncements, including those referred to above and of course, after allowing sufficient opportunity to both the parties. Needless to say that while redeciding the appeal, the learned CIT(A) shall pass a speaking order, bringing out clearly as to how creditworthiness of each of the sixteen creditors and genuineness of the transactions with them, is established. With these observations, ground no. 1 in the appeal of the Revenue and ground nos.1 2 in the appeal of the assessee are disposed of. 7. Ground no. 2 in the appeal of the Revenue for the AY 2007-08 and ground no. 1 in their appeal for the AY 2008-09 relate to disallowance u/s 40A(2)(a) of the Act. During the co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rate of interest. It is further seen that the appellant has paid a interest of 14.5% to the bank and this being an unsecured loan will certainly command a higher rate of interest thus', there is no justification in making a disallowance of Rs. 10,64,4611- u/s 40A(2)(b). The addition of Rs. 10,64,4611- is hereby deleted." 11. The Revenue is now in appeal before us against the aforesaid findings of the ld. CIT(A). The ld. DR supported the order of the AO while the ld. AR on behalf of the assessee supported the findings of the ld. CIT(A). 12. We have heard both the parties and gone through the facts of the case. As is apparent from the impugned order, we find that the AO did not bring any material on record for holding that the payment of interest @ 15% per annum to unsecured creditors was excessive and how interest @ 12% pa was reasonable or represented fair market value for the services and facilities. Before proceeding further, we may refer to the provisions of section 40A(2)(a) of the Act, the relevant portion of which reads as follows : "40A(2)(a). Where the assessee incurs any expenditure in respect of which payment has been or is to be made to any person referred to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rson referred to in clause (b), are allowable which are found to be not excessive and unreasonable and the excessive or unreasonable portion has to be disallowed. It is well settled that the provisions of section. 40A(2)(a) of the Act cannot have any application unless it is first concluded that the expenditure was excessive or unreasonable, as held in the case of Upper India Publishing House (P.) Ltd. v. CIT [1979] 117 ITR 569/1 Taxman 365 (SC). In the instant case, there is nothing to suggest that the AO found the payment of interest excessive having regard to either ( a ) fair market value of the services or facilities; or ( b ) the legitimate needs of the business of the assessee; or ( c ) the benefits derived by or accruing to the assessee on receipt of such services or facilities. Not a whisper has been made by the AO in respect of any of these three ingredients in his assessment orders. There is nothing to suggest that the AO ever brought any material on record on this aspect before concluding that interest @ 15% was excessive or unreasonable nor even cited any comparable instances in respect of the fair market value of the interest on unsecured loans. In view the forego ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ating a similar issue, held as under: "We are in agreement with the view of the Tribunal that computer accessories and peripherals such as, printers, scanners and server etc. form an integral part of the computer system. In fact, the computer accessories and peripherals cannot be used without the computer. Consequently, as they are the part of the computer system, they are entitled to depreciation at the higher rate of 60 per cent." 16.1 Earlier Kolkata Bench in the case of ITO v. Samiran Majumdar [2006] 98 ITD 119, held that the printer and scanner are integral part of the computer system and, therefore, entitled to higher rate of depreciation @ . 60 per cent. A similar view was taken by the Delhi Bench in their decision in the case of Container Corpn. of India Ltd. v. Asstt. CIT [2009] 30 SOT 284. In the light of view taken in the aforesaid decisions, especially when the Revenue have not placed before us any contrary decision nor any other material so as to enable us to take a different view in the matter, we have no hesitation in upholding the findings of the ld. CIT(A). Therefore, ground no. 2 in the appeal of the Revenue for the AY 2008-09 is dismissed. 17. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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