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TMI Blog2024 (12) TMI 979X X X X Extracts X X X X X X X X Extracts X X X X ..... hom the advance was refunded to the assessee were different (coupled with the fact that the parties from whom the refund was received was a known accommodation entry operator). This alone cannot be a ground for making addition in the hands of the assessee under section 68 of the Act, especially in light of the fact that the refund was received back through banking channels, the fact that advance was given to these parties in the earlier years through banking channels has not been disputed. In case the Department had any doubts regarding the details of party submitted by the assessee and/or with respect to the confirmations from the parties provided by the assessee to the Tax Department, the assessing officer could have issued summons and taken statement of these parties on record/carried out further verification/investigation from these parties. In our view, the assessee has discharged the primary onus under section 68 and taking into consideration the assessee s set of facts, in our view, it is not a fit case where the addition is liable to be confirmed in the hands of the assessee. As assessee had furnished complete details of the parties to whom advances had been given, along wi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... disallowance of claim of depreciation u/s 32 of the Act and the second appeal is against the penalty confirmed u/s 271(1)(c) of the Act relating to disallowance of claim of depreciation. Since common facts and issues for consideration are involved for both the years under consideration, both the appeals are being taken up together. 3. In the appeal relating to quantum additions in ITA No. 518/Ahd/2019, there are primarily two additions, which are the subject matter of appeal. The first addition relates to addition of a sum of ₹ 4, 23, 26, 800/- under section 68 of the Act: 4. The brief facts relating to this Ground of Appeal are that the assessee is engaged in the business of manufacturing of milk and milk products and trading thereof. A search was conducted on the Claris Group of cases on 04/08/2015 where the assessee company was also covered and various incriminating documents and materials were found and proceedings u/s 153A of the Act. M/s Claris Lifescience Ltd., a flagship company of the assessee Group was also covered which was engaged in business of Pharmaceuticals and specialized in injectable products. It was observed that this company and the other companies of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 23,26,800/-). However, the AO noted that though the advances were made to M R Traders, Changodar Steel Stores, Rajvir Trading Company, Sheosons India, Excel Enterprises and Batliwala Processing Engineering, the amounts received back were from different parties namely - Sahyog Corporation, Arihant Organisation, Dhanlaxmi, Shree Ram Enterprise etc - the entities controlled by Jalram Finvest Limited/Dahyalal Thakkar, an accommodation entry operator. The explanation of the assessee was not found to be acceptable to the AO as the receipts were from Jalram Finvest Limited/Dahyalal Thakkar and other benami concerns which are known entry providers and thus the assessee had failed to prove the genuineness of receipts being actually capital advance received back. The assessee furnished copy of ledger accounts of parties to whom capital advances were given and subsequently received back but name of the parties to whom advances were given did not match with the name of the parties from whom the amounts were received back in the books of the assessee. Accordingly, an addition of Rs. 4,23,26,800/- was made u/s 68 of the Act. 5. The assessee filed appeal before Ld. CIT(Appeals) against the order ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... they are on plain papers (not letter pads of the respective concerns) and the name of the signatories are not mentioned. The layout/formatting of all the confirmations are similar which makes the confirmations doubtful and being generated from same office/computer. No PAN, no ITR, no bank account of the parties have been furnished to support the claim. Ld. CIT(Appeals) noted that the language in the confirmation is almost comparable and the items mentioned are general and vague. Ld. CIT(Appeals) was of the view that the assessee failed to establish the capacity of the parties to supply those items. Most importantly, amounts refunded /returned by those parties / suppliers have actually been received in the bank account of the assessee from the concerns of Jalram Finvest Limited / Dahyalal Thakkar, who are well-known entry providers and the amounts have not been refunded by the parties to whom advances were given for supply of machinery. Ld. CIT(Appeals) was of the view that the assessee has failed to explain why the alleged refund has not been received from the parties to whom the advances were made and how the amounts were received from the concerns who are well-known entry provid ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... velopers (India) Ltd. - ITA 1226/Ahd/2018, where it was held that such amounts should not be considered as income under Section 68 of the Act. The Counsel for the assessee submitted that the AO failed to carry out independent inquiries to verify the documentary evidences submitted by the assessee. The AO was at liberty to issue summons under Section 131 or notices under Section 133(6) to the parties involved, but the Assessing Officer chose not to do so. The AO did not provide any concrete evidence to counter the assessee's claim that the funds in question were a refund of capital advances, and instead proceeded on the basis of mere suspicion, which is not an adequate foundation for making additions under Law. In response to the AO s allegation on the involvement of entities managed by Dahyalal Thakkar, the assessee contended that it is entirely plausible that the parties involved may have approached Dahyalal to transfer funds from those entities to the assessee in order to return the capital advances. The Counsel for the assessee submitted that had the AO taken the necessary steps, such as issuing summons or notices, these facts could have been confirmed. However, the AO chose ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on why the refund of advances made to the assessee was added in the hands of the assessee under section 68 of the Act was that the parties to whom advance had been given and party from whom the advance was refunded to the assessee were different (coupled with the fact that the parties from whom the refund was received was a known accommodation entry operator). However, this alone cannot be a ground for making addition in the hands of the assessee under section 68 of the Act, especially in light of the fact that the refund was received back through banking channels, the fact that advance was given to these parties in the earlier years through banking channels has not been disputed. In case the Department had any doubts regarding the details of party submitted by the assessee and/or with respect to the confirmations from the parties provided by the assessee to the Tax Department, the assessing officer could have issued summons and taken statement of these parties on record/carried out further verification/investigation from these parties. In our view, the assessee has discharged the primary onus under section 68 of the Act, and taking into consideration the assessee s set of facts, i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... this fact and Names and address of all such parties is available. Cancellation agreements have been entered into. No independent Sunderdeep Construction Pvt. Ltd enquiry was made by the Ld. A.O with the parties from whom the assessee claimed to have received the cash which are mostly farmers. Under these given facts the claim of the assessee that the alleged sum received in cash is refund of loans and advances given in preceding years cannot be doubted. The amounts so received is actually not a credit in the form of loans or credit or in the form of sundry creditors or any other liability, it is actually the refund of amount advanced in preceding years. It is merely a reduction in debit balance of loan and advance and a corresponding increase in debit balance of cash in hand. There is as such no fresh credit. 15. Similar type of issue came up before the Co-ordinate Bench of Delhi in the case of Decent Foods Private Limited (supra) ITA No.264 of 2011 dated 13.11.2013 wherein the amount advanced by the assessee to the supplier parties was refunded as the supplier failed to supply the goods and the Co-ordinate Bench held that Once they are not established to be creditors, operation of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... k. The relevant extract of the balance sheet is reproduced as under: Land Advance Group Summary 2-April-2010 to 31 March 2011 Opening Transactions Closing Balance Debit Credit Balance Kanjibhai 23,02,89,000.00 1,61,00,000.00 3,69,00,000.00 20,94,89,000.00 Bhemabhai Desai Dr Dr 11.2 It was pointed out by the learned AR before us that the amount received from the land aggregator namely Shri Kanjibhai Desai represents the own money of the assessee which was advanced on the earlier occasion and the same was returned in the year under consideration on account of non-execution of the land ITA no.1226/Ahd/2018 with Asstt. Year 2011- 12 deals. The learned DR before us has not brought any iota of evidence suggesting that money received by the assessee does not represent the money which was advanced by it on the earlier occasion. Thus it can be safely inferred that the amount received by the assessee represents its own money which was advanced in the earlier year and this fact was also accepted by the Revenue. Accordingly, we are of the view that there cannot be any question for attracting the provisions of section 68 of the Act in the hands of the assessee for receiving its own money as dis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ly reason why addition was sought to be confirmed by the tax department was only on the ground that the parties who had refunded this advance back to the assessee, were not the same parties to whom advances have been made in the previous assessment years. However, we observe that the assessee had furnished complete details of the parties to whom advances had been given, along with their confirmations and if the Assessing Officer had doubts regarding the genuineness of the refunds given by these parties, he could have carried out further investigation and taken the statements of these parties on record as well. However, no such exercise was done by the assessing officer. Accordingly, in light of these facts, we are of the view that the additions made by the assessing officer under section 68 of the Act, is liable to be deleted. 11. In the result, the addition of ₹ 4,23,2026,800/- under section 68 of the Act, is directed to be deleted. The second ground of appeal of the assessee relates to claim of depreciation of Rs. 18,92,228/- on capital assets: 12. The brief facts of the case are that the assessee claimed depreciation of Rs. 18,92,228/- on capital assets purchased from J S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and no address for J. S. Enterprise could be found. Based on this report, the AO issued a show-cause notice to the assessee, questioning the authenticity of the asset purchases and the depreciation claimed on those assets. The notice suggested that the depreciation might have been claimed in excess or was a non-genuine purchase from J. S. Enterprise, covering the assessment years 2013-14 to 2016-17. In response, the assessee had submitted a reply where the assessee affirmed that the purchase of capital goods from J. S. Enterprise was genuine and that these capital goods had been duly installed, commissioned, and put to use for the purposes of the business. The depreciable assets were recorded in the books of accounts, and the assets were owned by the assessee, having already been utilized for business activities. The assessee also submitted that the physical existence of the assets could be verified. The Counsel for the assessee refuted the allegations of the Assessing Officer that Claris Lifesciences Ltd. had admitted to engaging in non-genuine transactions in their application to the Settlement Commission, and submitted that that this claim had no relevance to their case. The Cou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... act that the assessee had installed, commissioned and put the asset to use. Accordingly, in light of the above facts, we are of the considered view that depreciation on the above aspects should not be denied to the assessee. 17. In the result, this ground of appeal of the assessee is allowed. 18. In the combined result, the appeal of the assessee is allowed 19. The next appeal of the assessee in ITA No. 13/Ahd/2022 relates to levy of penalty u/s 271(1)(c) of the Act with respect to addition on account of claim of depreciation amounting to Rs. 18,92,228/- confirmed by Ld. CIT(Appeals) in the hands of the assessee. 20. While dealing with the assessee s appeal in relation to addition of claim of depreciation in the hands of the assessee, we have allowed the appeal of the assessee on merits, in the preceding paragraphs. Accordingly, penalty levied in the hands of the assessee u/s 271(1)(c) of the Act with respect to the aforesaid addition is also directed to be deleted. 21. In the result, the appeal of the assessee is allowed in ITA No. 30/Ahd/2022. 22. In the combined result, both the appeals of the assessee are allowed. This Order is pronounced in the Open Court on 16/12/2024 - - ..... X X X X Extracts X X X X X X X X Extracts X X X X
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