9911796707
TMI Blog2013 (9) TMI 373X X X X Extracts X X X X X X X X Extracts X X X X ..... f CIT(A) the Revenue is now in appeal before us and has raised the following grounds:- 1. On the facts and circumstance of the case and in law, the Ld. CIT(A) has erred in deleting the addition of Rs.47,17,670/- made on account of disallowance u/s 2(22)(e) inspite of the fact that the balance sheets of both the companies shows that the loan was received by the assessee company, so it was naturally falling within the preview of Deemed Dividend u/s 2(22)(e). 2. On the facts and circumstance of the case and in law, the Ld. CIT(A) has erred by deleting the addition of Rs.35,77,706/- made on account of disallowance of wages @25% even though the assessee failed to substantiate its claim by submitting details of the workers. 3. On the facts and circumstance of the case and in law, the Ld. CIT(A) has erred in deleting the addition of Rs.1,25,81,224/- made on account of disallowance out of packing expenses without appreciating the fact that assessee failed to produce the party or any supporting documentary evidence to prove the party's identity and genuineness. 4. On the facts and circumstance of the case and in law, the Ld. CIT(A) has erred in deleting the addition of Rs.24,80,356/- ma ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... L and the amount of loan receipt of Rs. 4,92,24,000/-). Aggrieved by the action of Assessing Officer, Assessee carried the matter before CIT(A). CIT(A) after considering the submissions made by the Assessee deleted the addition by holding as under: 7.1 In the present case of the appellant, the following undisputed facts have been noticed :-. 1. The appellant hasj a Current running account of M/s Kejriwal Dyg & Ptg Mills Pvt Ltd ( KDPMPL) in its books. 2. In the books of accounts of appellant, there is opening debitbalance in the said account of Rs 1.48Crores. 3. The credit balance appears for the first time on 16.10.2008 and continues till 15.3.2009 i.e. for seven months, there was a debit balance of KDPMPL in the books of the appellant and the credit balance existed only for five months. 4. The peak debit balance in the books of the appellant was at Rs.6.58 Crores while peak credit balance was only Rs 1.87 Crores. 5. The opening reserve of KDPMPL was only Rs 3, 52,831/-while the closing reserve for the current year was Rs.47,17,670/-. 6. M/s KDPMPL was sanction a loan to the tune of Rs. 10. 75 Crores by the State Bank of India which included demand cash credit of Rs 1 Crore ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he learned D.R. further submitted that before Assessing Officer, no evidence was submitted with respect to the mortgage of Assessee's property as security for grant of loan by bank to KDPMPL. He further submitted that once the loan has been received and even though it has been repaid subsequently the amount continues has to be treated as deemed dividend. He thus submitted that CIT(A) has erred in deleting the addition made by the Assessing Officer. 6. The learned A.R. on the other hand submitted that KDPMPL had obtained various credit facilities from State Bank of India. As per the terms of sanction. Assessee was required to give corporate guarantee for the loan. The Assessee had therefore given corporate guarantee. Thus the transaction of giving corporate guarantee was in the course of business. Further the advance which was received by the Assessee was not a gratuitous loan or advance and therefore the loan would not come within the purview of Section 2(22)(e). He also placed reliance in the decision of Ahmedabad Tribunal in the case of Nimesh Chandra Vashi (ITA No. 1610/Ahd/2007 and 2358/Ahd/2007 order dated 12.02.2010). He also placed reliance on the decision in the case of Pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... least 20 per cent interest: (3) The payer company has accumulated profits on the date of any such payment and the payment is out of accumulated profits. (4) The payment of loan or advance is not in course of ordinary business activities. 9. In the present case, the Assessee satisifies conditions no 1 to 3. However with respect to condition no 4, it is stated that the loan was in granted in lieu of the the corporate guarantee given by the Assessee to the bankers of KDPML for advancing of various credit facilities to it and therefor the loan received by the Assessee is during the normal course of business and not a gratuitous loan and therefore it cannot be considered to be deemed dividend and in support of which reliance has been placed on the decision of Pradip kumar Malhotra (supra). However we find that in the case of Pradip Kumar Malhotra the fact was that the Assessee had permitted his property to be mortgaged to bank for enabling the company to take the benefit of loan. Later on inspite of the request of the Assessee, the company was unable to release the property from the mortgage. In such a situation it was held that the advance given was not a gratuitous advance to the s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ove, we are of the view that the amount received by the Assessee will have to be considered as deemed dividend but only to the extent of accumulated profits of KDPML as on the date of granting of loan/advance. It is seen that in the present case, the AO has not given any finding with respect to the accumulated profits of KDPML on the date of granting of loan/advance. We therefore remit the issue to the file of AO to determine the extent of deemed dividend u/s 2(22)(e) in the light of the aforesaid facts and the decisions cited above and decide the issue afresh as per law after giving a reasonable opportunity of hearing to the Assessee. Thus this ground of Revenue is allowed for statistical purposes. 2nd ground is with respect to disallowance of wages. 12. During the course of assessment proceedings, Assessee was asked to submit details about the wages paid in a particular format which included the name of the employee their, designations and addresses. The Assessee did not furnish the information called for in the required format. Assessing Officer thereafter noted that out of 197 employees, Assessee has deducted provident fund (PF) in the case of 53 employees only. He further no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... A.R. further submitted that P. F. was deducted in the cases where the deduction of P.F. was mandatory and applicable. He thus supported the order of CIT(A). 14. We have heard the rival submissions and perused the material on record. It is an undisputed fact that the Assessee is engaged in the business of manufacturing of Texturised Yarn. It is also a fact that for the purpose of manufacturing the workers are also required for various activities. We find that Assessing Officer has disallowed the expenses mainly for the reason that the details of wages were not submitted in the format asked for, P.F was deducted only in cases of 53 employees though the Assessee had stated to have employed 197 employees. Further according to the Assessing Officer, there was no co-relation between wages and production figures. Before us the learned A.R. submitted that the wages in proportion to production for A.Y. 2008-09 was Rs.0.7265 per kg. whereas for the year under appeal it was Rs. 0.7297 per kg which is more or less comparable. The Assessee has further stated that the PF was deducted in the cases where it was applicable. Before us, the Revenue could not point out any instance where though the A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ank account without any evidence of return of money in cash to appellant, the assessing officer's action of making addition cannot be sustained. Not furnishing of books of account by M/s C.P.C. Trading CO. cannot be a ground for addition in the case of appellant. 10.2 The additional evidence is also admitted as at the assessment stage assessee had furnished the address of M/s. C.P.C. Trading Co. at the assessment stage and Assessing Officer made the addition without summoning him. 11 Therefore, the addition made of Rs. 1,25,81,224/- is deleted. 17. Aggrieved by the order of CIT(A) the Revenue is now in appeal before us. 18. Before us, the learned D.R. submitted that during the course of assessment proceedings , Assessing Officer had issued notice under Section 133(6) and summons under Section 131 and also directed the assessee to produce the supplier and prove the genuineness of the transaction. The Assessee could not neither produce the party nor satisfactorily explain the genuineness of transaction. The learned D.R. further submitted and pointed out to the remand report reproduced at page 25 of CIT(A) order. From the extract of remand report. He pointed out that proprietor of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was asked to produce the same. The supplier did not produce books of accounts even before CIT(A). On the other hand the reasons for deletion of the addition as stated by CIT(A) was that packing expenses have been increased in comparison to the preceding year, Assessing Officer had relied on the Inspector's report from making additions and at the remand stage proprietor of CPC Trading appeared and confirmed the transactions. Considering the aforesaid facts, we are unable to agree with the reasoning given by CIT(A) for deletion of the addition because the Assessee had not discharged the onus cast upon it either by producing the supplier along with the necessary details called for verification. Further even during the remand proceedings, the proprietor of CPC Trading though promised to produce the details called for by Assessing Officer, but did not produce the same though various opportunity was granted by the Assessing Officer. The non production of details is surprising more so in the light of the fact that Assessee could obtain the tax Audit report of CPC Trading for year ended 31.03.2009. Further just confirming the transaction without any supporting evidence cannot be said to d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Officer on the one handstates that sales are not genuine and on other hand adds 5% of the same which amounts to accepting sales as genuine. Moreover, non-reply by sales parties u/s 133(6) and not filing of confirmation of sales parties cannot be the reason for addition as no businessman can force its customers to reply to IT Department. It is not a case where purchases have been doubted. The appellant made sale transaction and has shown profit from it. It is not the case of Assessing Officer that purchases are bogus or inflated. Therefore, the addition made of Rs. 24,80,356/- has been made only on certain presumptions and therefore, deleted. 23. Aggrieved by the order of CIT(A) the Revenue is now in appeal before us. 24. Before us the learned D.R. submitted that the Assessee had entered into transaction of High Seas Sale of imported wood. The Assessee was asked to satisfactorily explain the transaction but the Assessee could not justify the transaction. The learned D.R. further pointed out that the sales proceeds from the transaction have been received quite late that is almost after one year through in the agreement entered by the Assessee with the parties. It was stated that t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... amount to be justified. We thus upheld his order on this ground. Thus this ground of the Revenue is allowed. 5th ground is with respect to brokerage expenses. 27. During the course of assessment proceedings, Assessee was asked to submit the details of brokerage in the form of bill and the calculation of brokerage. From the details submitted by the Assessee, Assessing Officer noticed that the rate of commission ranged between 0.75% to 1.5%. He further noticed that where the agent wise details were submitted there were no mobile number of the agent. He also noticed that in case of some of the sales bill, the name of the agent was different than that was provided in the details. He accordingly disallowed 25% of the brokerage expenses amounting to Rs. 33,84,946/-. Aggrieved by the order of Assessing Officer, Assessee carried the matter before CIT(A). CIT(A) after considering the submissions made by the Assessee and remand report received from Assessing Officer granted partial relief to the Assessee by holding as under: 14. The appellant also filed confirmation from brokers during appellate proceedings were sent to the Assessing Officer under rule 46A of the IT Rules. However, the A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... who are scattered and operate in an unorganized structure. The broker plays an important role in making sales to them, of colleting orders as well as assuring timely payment from them. The learned A.R. further submitted that the brokerage expenses was 0.8% of the turnover as compared to 0.87% of the turnover in the immediately preceding year. He thus submitted that the expense on account of commission and brokerage has reduced during the year. He thus supported the order of CIT(A). 30. We have heard the rival submissions and perused the material on record. CIT(A) noticed that certain details called for by the Assessing Officer were filed before him. From the details furnished and placed on record, it is seen that the rate of brokerage in most of the cases was 0.75% except in two cases. Assessee has also placed on record, the copy of confirmations received from the brokers which contains their PAN numbers and address. CIT(A) while deleting the addition has noted that though the remand report was called vide letter dated 21.03.2012 but was received on 13.07.2012 i.e. adequate time was available with the Assessing Officer for examining the evidence. In the time made available by CIT ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
