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TMI Blog2022 (10) TMI 387X X X X Extracts X X X X X X X X Extracts X X X X ..... ons with the finding that these parties are regular parties, regularly supplying and servicing the assessee in the past as well as in the subsequent AY. The same parties were supplying the material as well as providing services to the assessee in earlier AY, none of the AO disallowed or found any discrepancies in these parties. Therefore, we are inclined to accept the findings of the CIT(A) and we do not find any reason to disturb the findings of the CIT(A). Appeals of the revenue are dismissed. X X X X Extracts X X X X X X X X Extracts X X X X ..... s etc., since no response from these parties Assessing Officer proceeded to make the disallowance of total purchases recorded by the assessee. 8. Aggrieved assessee preferred an appeal before the Ld.CIT(A) and assessee has filed grounds of appeal with objection to the additions made by the Assessing Officer relating to unsecured loans, interest and bogus purchases. After considering the same, he has deleted the addition made by the Assessing Officer, aggrieved revenue is in appeal before us. 9. Revenue has raised following grounds in its appeal: - "1. "Whether on the facts and circumstance of the case and in law the Ld. CIT(A) deleting was right in the addition made by the Assessing Officer on account unexplained cash credit of Rs.1,82,73,000/- as borrowed unsecured loan without appreciating the fact that the assessee failed to prove the creditworthiness of loan creditors with support of authentic documentary evidence to establish genuineness of loan taken?" 2. "Whether on the facts and circumstance of the case and in law, the Ld. CIT(A) was right in deleting the disallowance made by the Assessing officer on account of interest expenses on borrowed unsecured lo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd further alleged that the said 3 parties are not giving amount to appellant company from their own source but they themselves are receiving amount from other sources prior to amount been given to the appellant company which is unexplainable. In this regard we have to state that the appellant company has submitted loan confirmations of the parties during the assessment proceedings and has submitted the following details as additional evidences vide letter dated 13.06.2017. i) The copy of acknowledgements of the return of income filed by the lenders, ii) Ledger account of the lenders in the books of appellant company, iii) Relevant extract of the bank statements of the appellant company highlighting the loan receipts/repayments from/to the lenders, iv) Relevant extract of the bank statements of the lenders highlighting the loan given/received back to/from the appellant company. It is submitted that the PAN quoted and the acknowledgements of the returns filed by the lenders evidence their identity. As already submitted majority of these individuals are shareholders of the company. Further, the total income offered to tax in the return of income and their bank statements ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2016. The said confirmation was duly stamped and signed. The, ledger account of M/s. Nirmitee Constructions Pvt Ltd in books of the appellant company was submitted as additional evidence vide our letter dated 13.06.2017 which is erroneously considered by the ld. AO as a confirmation given by M/s. Nirmitee Constructions Pvt Ltd, as not stamped and signed. Thus, it is submitted that the ld. AO has wrongly stated that the confirmation of M/s Nirmitee Constructions Pvt Ltd is not duly stamped and signed. d) The confirmation of Sunil More, Chinmay More and Anil More does not contain PAN. In this regard we have to state that the confirmation of the above mentioned 3 lenders were submitted to the ld. AO during the assessment proceedings itself by the AR of the appellant vide letter dated 28.03.2016 and it is not the part of the additional evidences. Further, in the Tax Audit report under the clause 24(a), i.e. details of Loans/Deposits accepted u/s 269SS of the Act; the name, PAN and the loan transactions of the said parties are mentioned. Thus, it will be appreciated that the PAN of the above mentioned parties was available with the ld. AO during the assessment proceedings. Thus, i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s of the lenders and genuineness of the transaction is evident from these documents. The source of loan received by appellant is clearly proved and section 68 cannot be invoked in respect of these transactions. As regards the comment of AO in the remand report that the Confirmation of M/s Trident Mercantile Pvt Ltd is not stamped, it is submitted that what is given as additional evidence is the copy of ledger account. The Confirmation duly signed and confirmed by Director of M/s Trident Mercantile Pvt ltd was already submitted during assessment proceedings vide letter dated 28.03.2016, which is already available in the records of the AO. Similarly, it was submitted that the ledger account of M/s Nirmitee Constructions Pvt ltd has been erroneously considered by AO as confirmation letter, which was already submitted during assessment. proceedings. The partywise comments are made as under: 1. Loan form Trident Mercantile P. Ltd.: From the confirmation of the ledger account (Page 56 of paper book) it is seen that there was an opening balance of Rs. 10,687/- as on 01.04.2012. This opening balance of Rs. 10,687/- was repaid by cheque on 31.05.2012. The appellant Company had given l ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... statements of Sunil More (Page Nos. 150 to 156 of the Paper book). From the copy of acknowledgement of return of income filed by Sunil More for AY 2013-14, (page No. 134 of paper book) it is seen that he has declared gross total income of Rs.22,83,870/- and taxable total income of Rs.21,62,780/- for the year. The AO has in the remand report stated that the balance sheet and capital account of lenders are not submitted by the assessee. It has been submitted by the appellant that he, being an Individual and not having business income, is not required to and has not filed any balance sheet or capital account with the return of income. The above explanation is accepted on facts and therefore the addition u/s 68 is deleted. 2. Loan from Chinmai More : It is seen from the ledger account (Page No.57 of paper book) that there was an opening balance credit of Rs.34,22,064/- as on 01.04.2012 and there were 6 credit entries for receipt of loans and 3 debit entries for repayment of loans on different dates. The closing balance as on 31.01.2013 was Rs 32,40,790/-. Thus, there was net Repayment of Rs. 1,81,274/ out of the opening balance of loan. The maximum credit balance during the year ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... declared by him is Rs. 10,98,102/- and the taxable income of Rs.9,73,100/- for the said year. He also being an individual, not having business income, is not required to and has not filed balance sheet and capital account with his return of income. The above explanation is accepted on facts and therefore the addition u/s 68 is deleted. 5 Loan from M/s Nirmitee Constructions and Designs Pvt ltd: It is seen from the ledger account of the said party that there is an opening balance of Rs. 40,00,000/- as on 01.04.2012 and the same amount is closing balance as on 31.03.2013. Thus, there is no new loan received or credit during the year. The maximum outstanding balance during the year is thus Rs.40,00,000/- which has been reported in the Tax Audit Report, (which has been added by the AO u/s 68 even though no new loan hast been received during the year). From the copy of the acknowledgement of return of income - ITRV for AY 2013-14 (Page No. 190 of the paper book) it is seen that the said party has declared total income of Rs. 19,51,518/- for the said year. The appellant has stated that the loans from all these parties in AY 2012-13 have been held genuine and no addition was made ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... individuals and two entities to the extent of Rs.1.82 crores. He submitted that assessee has not submitted creditworthiness of these parties. Even in remand report the Assessing Officer has highlighted the insufficiency of the funds and Assessing Officer has brought to the notice of the Ld.CIT(A) the issue of creditworthiness of those parties and these parties has not filed any financial statement, Ld. DR objected to the deletion of the additions by the Ld.CIT(A). 17. On the other hand, Ld. AR submitted that all these unsecured loans are nothing but temporary loans taken from Directors and Shareholders and all these loans are taken through banking channels, Assessing Officer has added outstanding balances. Further, he brought to our notice in A.Y. 2012-13 which was assessed u/s. 143(3) of the Act in that assessment year similar loans were outstanding no addition was made u/s. 68 of the Act. He brought to our notice that the same loans were outstanding to the extent of Rs.3,17,82,778/- as unsecured loan from Shareholders, Directors and Corporate Bodies. 18. Considered the rival submissions and material placed on record, we observe that assessee has taken unsecured loans from Dire ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , Ld.CIT(A) observed that the opening balance outstanding is Rs.40,00,000/- as on 01.04.2012 and the same was continued as closing balance. There is no new loan taken by the assessee during this year, accordingly, Ld.CIT(A) deleted the same. Since the opening balance and no new loan received by the assessee, we do not find any reason to interfere with the finding of the Ld.CIT(A). Accordingly, the ground raised by the revenue in this regard is dismissed. 21. With regard to disallowance of interest expenses the Assessing Officer has disallowed the same considering the fact that he has disallowed the unsecured loans received by the assessee. Aggrieved assessee has filed detailed submissions before the Ld.CIT(A) in the appeal, for the sake of clarity, it is reproduced below: - "Ground of Appeal No. 2. Disallowance of interest expense of Rs. 9,43,040/-. 2.1 The appellant company has paid interest of Rs. 33,286/-, Rs. 1,98,805/-, Rs. 6,28,656/- and Rs.82,293/- to Trident Mercantile P. Ltd, Sunil More, Chinmai More and Anil More, respectively, after deducting the tax under section 194A of the Act during the relevant financial year in respect of loans taken from them. No interes ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Ld.CIT(A) deleted the same since he has already allowed the unsecured loans received by the assessee as genuine. 23. Aggrieved revenue is in appeal and before us, Ld. DR objected to the deletion of interest payment and Ld. AR relied on the findings of the Ld.CIT(A). 24. Considered the rival submissions and material placed on record, we observe that Assessing Officer has made the addition of unsecured loans based on his finding that assessee has not filed any document in support of the above unsecured loans. However, we observe that Ld.CIT(A) has deleted additions with the finding that assessee has filed all the relevant information and gave the finding that loans are from the Shareholders / Directors and related concerns. Therefore, the relevant interest payment on the above said loans are considered to be genuine as well. Therefore, we do not find any reason to interfere with the findings of the Ld.CIT(A). 25. With regard to disallowance of purchases made by the assessee of Rs.149.87 Lacs which was treated by the Assessing Officer as bogus purchases after verifying the same. Assessing Officer in order to verify the genuineness of the purchases issued notice u/s. 133(6) of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 57,914 includes sales made by the appellant of the fabrics purchased from Phifer. Further the appellant also receives commission income from Phifer if the orders are executed by the company directly in the western region. In the FY 2012-13 appellant had received such commission income of Rs. 1,78,747 and the same is reflected in the profit/loss account. The appellant has sent letter dated 17.06.2016 to Phifer India Put. ltd., Chennai to confirm whether they have received any notice u/s. 133(6) form the office of the Ld.AO 2(2)(3), Mumbai to confirm the transactions between them and the appellant company for the F.Y. 2012-13 and if yes to provide a copy of the replies filed(if any) by them in response to said notices. The said letter is enclosed as additional evidence at Sr. No. 3(a)(i) of the paper book. In response to the same, Phifer replied to the appellant that they received a notice 133(6) of the Act issued by the Income Tax Officer-2(2)(3), Mumbai and in response the same they had submitted reply to the Ld. AO together with a copy of ledger extract of the appellant in their books for the F.Y. 2012-13 alongwith the copies of the sample invoices. The copy of the said reply ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ur charges income amounting to Rs. 2,12,50,599 for providing the said manpower to carry out repairs and maintenance at various sites and as per the above table the same is reported as Revenue from operations/Sales in the profit/loss account of the year. The said sales is not doubted by the Ld. AO. Further we enclose herewith sample invoices of labour (purchase) by the appellant from both the above mentioned parties (enclosed as additional evidence at Sr. No. 3(b)(ii) of the paper book (index-II)) and the sales invoices raised by the appellant for the manpower provided to the various parties(enclosed as additional evidence at Sr. no. 3(b)(iv) of the paper book findex-II). On perusal of the said invoices, it will be appreciated that bills were raised by the parties as per the labour provided for particular sites. Further the appellant raised the sales invoices as per the manpower provided at different airports/sites. Thus, the appellant procured the labour from the two parties ie. Jay Engineering Works and J.J. Enterprises and provided the same to the vendors as and when required. In view of the above it will be appreciated that no labour services could have been provided by the appe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in law. In this regard attention is invited to the decision in the case of Commissioner of Income Tax v. Orissa Corp. Pvt. Ltd. [1986] 25 TAXMAN 80F (SC), wherein it was held that, "In this case the assessee had given the names and addresses of the alleged creditors. It was in the knowledge of the revenue that the said creditors were the income-tax assessees. Their index number was in the fde of the revenue. The revenue, apart from issuing notices under section 131 at the instance of the assessee, did not pursue the matter further. The revenue did not examine the source of income of the said alleged creditors to find out whether they were credit worthy or were such who could advance the alleged loans. There was no effort made to pursue the so-called alleged creditors. In those circumstances, the assessee could not do any further. In the premises, if the Tribunal came to the conclusion that the assessee has discharged the burden that lay on him then it could not be said that such a conclusion was unreasonable or perverse or based on no evidence. The High Court was, therefore, right in refusing to refer the questions sought for." 3.10 In view of the above facts and the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ment entries without establishing the genuinety and existence of purchase parties. In this regard we have to state that the appellant company vide its letter dated 13.06.2017, submitted the following details as additional evidence: (i) Ledger account of both the parties duly confirmed for the FY 2012-13, (ii) Sample of purchase invoices issued by both the parties in respect of labour services provided by them during the FY 2012-13, (iii) Sales invoices in respect of labour services provided by the appellant company corresponding to the said purchases, (iv) Copy of relevant bank statements of the appellant highlighting the payment made to the said parties. (v) TDS certificates issued by the appellant company to the parties for the AY 2013-14. It is submitted that the PAN of both the parties are mentioned on the copies of their invoices submitted to your goodself as additional evidence. Further, it submitted that tax can be deducted at source only when the party has a PAN. The appellant has deducted TDS from the payment to labour. charges to both M/s. Jay Engg. Works and J.J. Enterprises. Thus, it will be appreciated that the said parties are genuine and were in existen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... particular sites. Thus in view of the above, it will be appreciated that the nature of business of the appellant is to provide labour manpower services to carry out repairs and maintenance at various sites by procuring the labour services from the said 2 parties and hence the question of delivery proof of transportation to show the movement of goods does not arise. Further, it is submitted that during the relevant assessment year, the appellant company has earned labour charges income amounting to Rs.2,12,50,599/- for providing the said manpower to carry out repairs and maintenance at various sites. The same is reported as Revenue from operations/Sales in the profit/loss account of the year. The said sales is not doubted by the ld. AO. Also, on perusal of the additional evidences submitted to your goodself as described briefly in point 2.2(b) above, it will be appreciated that bills were raised by the parties as per the labour provided for particular sites. Further the appellant raised the sales invoices as per the manpower provided at different airports/sites. Thus it will be appreciated that the purchases of labour from the said 2 parties and its corresponding sales are al ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... extract of the bank statements of the appellant company highlighting the payments made to Phifer it is evident that purchases made by the appellant from Phifer is genuine. The ld. AO has made additions merely on the reasoning that notices u/s. 133(6) were not replied by the lenders. Reliance is placed on Hon'ble Supreme Court's judgement in the case of CIT V. Orissa Corporation Pvt. Ltd. (1986) 159 ITR 78 (SC) for the proposition that if the AO has issued summons or notices u/s. 133(6) it is his duty to bring the process to a logical conclusion and non-response by such person cannot be held against the assessee. The judgement is squarely applicable to the case of this assessee. Conservently the assessee has again produced the supporting evidences. Reliance is also placed on the decision in the case of Continental Carbon India Ltd. V.ITO (Delhi Tribunal (ITA No. 5269, 5270 & 5271/Del/2010). It is submitted that the additional evidences provided to your goodself is evident enough to prove the genuineness of transactions and the details of linking of purchases right from placing the order from the supplier, receipt of goods to its location, appearance of the same in the st ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hereas the Notice sent to M/s. Phifer India Pvt. Ltd. remained unreplied. AO in remand report has stated that till the conclusion of proceedings, the assessee did not submit any evidence. The Appellant has stated that the AO had vide notice dated 27.10.2015 only asked the appellant to submit the details of purchases and sales which were duly submitted on 28.01.2016. Further, the appellant vide letter dated 08.02.2016 submitted party wise details of purchases including labour charges alongwith addresses of all the parties. Thereafter, the A.O. has never asked for any other requirements with regard to purchases made during the year, thus, in the absence of any further requirements, the AO has wrongly alleged that the assessee did not submit any evidence. The AO in the remand report has stated that neither PAN is evident on the confirmation of Jay Engineering Works and J. J. Enterprises nor ITR and Profit and Loss Account is evident and that the assessee is contending to allow purchases merely on payment entries without establishing the genuineity and existence of purchases. In the appellant's rejoinder to the remand report, it has submitted that PAN of both the parties are me ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nnot be held against the assessee. The AR also relied on the decision of Hon'ble Bombay High Court in the case of Nikunj Eximp. 35 Taxman.com 384 wherein it is held that merely because the purchases did not appear before the AO, it could not be concluded that purchases were not done by the appellant. These judgement squarely applies to the present case. In the present case, the appellant has obtained supporting evidences from these parties and submitted as additional evidences to prove the genuineness of the transactions. In view of the above, the disallowance of purchases from Phifer India Pvt. Ltd. and Labour charges to M/s. Jay Engineering Works and J.J. Enterprises aggregating Rs.1,49,87,000/- is deleted and this ground of appeal is allowed. 28. Aggrieved revenue is in appeal before us and Ld.DR submitted that all these purchases/expenses are bogus and assessee has not proved anything before the Assessing Officer and he relied on the findings of the Assessing Officer in this regard. 29. On the other hand, Ld. AR submitted that all these parties are regular suppliers and they are multinational companies, Assessing Officer has issued notice u/s. 133(6) of the Act to the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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