9911796707
TMI Blog2025 (3) TMI 1084X X X X Extracts X X X X X X X X Extracts X X X X ..... he assessee has invested 32.43% stake which in turn has invested 12.5 million USD in M/s. Ethiopotash B.V. company. The controlling of the raw material supply is key to any organization and assessee has invested to control the supply of raw material from Ethiopia. Therefore, the investment made by the assessee is directly linked to the business of the assessee. Therefore, we do not see any reason to disturb the findings of the ld. CIT (A) and accordingly, ground no.2 raised by the Revenue is dismissed. Rejection of books of account u/s 145(3) - AO relying on the variation in the GP recorded by the assessee in the past three years and in remand proceedings, the AO has accepted the various details submitted by the assessee and has not made any negative observations on the details furnished by the assessee - HELD THAT:-CIT (A) has elaborately discussed that AO has not made preliminary verification of the information submitted by the assessee and rejected the books of account and proceeded to estimate the income. After careful consideration of the findings of the CIT (A) and also remand proceedings submitted by the AO, we are inclined to agree with the findings of the ld. CIT (A). Ac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d that the genuineness of the transaction was already proved by the assessee. - Ground no.6 raised by the Revenue dismissed. X X X X Extracts X X X X X X X X Extracts X X X X ..... served that the issue under consideration is against the assessee based on the decision of Hon'ble Supreme Court in the case of Checkmate Services Pvt. Ltd. vs. CIT 143 taxmann.com 178. Accordingly, first ground of appeal raised by the Department is allowed. 4. With regard to Ground No.2 relating to disallowance of interest on unneeded loans, relevant facts are, in the assessment proceedings, Assessing Officer has observed that the assessee had invested Rs. 18,50,80,000/- in share of M/s. XLR Capital (Cyprus) Limited and he observed that assessee had not shown any profit or any receipts from the above company. One of the Directors of the assessee company is Kuldip Singh who owned 100% of M/s. XLR Capital (Cyprus) Limited. Since assessee has not earned any return from the investment made in M/s. XLR Capital (Cyprus) Limited, he observed that the assessee company is paying interest on unsecured loans from M/s. Global Minetec Ltd. @ 12% and interest to State Bank of Bikaner and Jaipur @ 12.75% per annum. With the above observation, AO disallowed the proportionate interest paid on unsecured loans and bank loan at the average rate of 12.75% on the investment made by the assessee in M/s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 01.2010 by virtue of same the Appellant Company indirectly purchase 18.59% stake in Ethiopotash Project. On perusal of the impugned order, it is quite evident that the AO has made proportionate disallowance of Interest amounted to Rs. 2,35,97,7001- purely on the basis of conjectures and without placing any corroborative material on record which could indicate that there is no element of commercial expediency in the advances given by the appellant to its subsidiary. It is pertinent to note that the AO while making the said proportionate disallowance amounting to Rs. 2,35,97,700/- couldn't point out any specific instance to show as to how the investment in its subsidiary company had not been incurred wholly and exclusively for the purpose of the business. The appellant has quoted the case of the Hon'ble Supreme Court in Madhav Prasad Jatia vs. CIT, AIR 1979 SC 1291: 118 ITR 200, 208, wherein it was held that the expression "for the purpose of business" occurring under the provision is wider in scope than the expression "for the purpose of earning income, profits or gains." 7.5. The judgment of M/s S. A. Builders Ltd. v CIT held that what is relevant is whether the amount wa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ley Area in Danakhil Depression, Ethiopia. Based on the joint venture, assessee has invested the share capital through a joint venture set up. It may not have earned benefit during the year but assessee will reap the benefit in the subsequent years and Potassium being the important raw material for the assessee controlling the inflow of material will be a huge benefit to the assessee company, therefore, he relied on the findings of the ld. CIT (A). 9. Considered the rival submissions and material placed on record. We observed that the assessee has entered into joint venture agreement through M/s. XLR Capital (Cyprus) Limited and M/s. Ethiopotash B.V., Netherland based exploration company. We observed that as per the joint venture agreement, the cost of the project was estimated at 25 million USD and out of which, 50% of the total project cost was to be contributed by Yara Netherland B.V. and balance was to be contributed by M/s. XLR Capital (Cyprus) Ltd. M/s. XLR Capital (Cyprus) Ltd. has approached the assessee to invest 8.50 million USD in its equity for getting 32.43% stake in M/s. XLR Capital (Cyprus) Ltd.. Just because assessee has not earned any income during the year, the A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e remand proceedings when the details were filed by the appellant explaining the month-wise consumption, production as well as filing the VAT returns and stock register, there was no adverse comments by the AO except for stating that they should have been produced at assessment stage. The appellant has filed ledger copies of the purchases and sales have also filed the stock register and VAT returns in the paper book included in the additional evidence which was sent to the Assessing Officer. 8.5. The provisions of section 145(3) would be applicable only when the AO is able to demonstrate that he is not satisfied about the correctness or completeness of the accounts of the appellant or where the method of accounting provided in sub-section (1) has not been regularly followed by him. Under such situation the AO may make an assessment in the manner provided u/s 144 of the Act. 8.6. In the present case, the rejection of the trading results on the basis of non- production of certain details I vouchers cannot lead to an inference that there are sales made outside the books and to draw an adverse inference against the appellant. If the AO has doubted the correctness or completeness of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 010 to August 2010 due to which ratio of the company decreased substantially as compared to previous assessment years, but wages of the worker were paid for complete years. The Appellant also submitted party wise details of purchase and sales exceeding Rs. 5,00,000/- along with copy of account of respective party. The Appellant also submitted details of Salary & Wages paid and Quantity wise details of sale/purchase made. In view of above the appellant complied with all the details asked for and the Assessing Officer nowhere asked to further details to substantiate the decrease in Gross Profit Ratio. However, the Assessing Officer without appreciating the aforesaid rejected the books of accounts on flimsy grounds and without according proper reasons. Therefore, in light of the above, the Appellant Company submitted additional evidences before the CIT(A), which are as under: 1) Copy of VAT returns filed for year under assessment along with reconciliation of Sales as appearing in Profit & Loss account. 2) Copy of Stock Register for the month of April 2010 & March 2011 as per excise records along its reconciliation with opening and closing stock appearing in Balance Sheet. 3) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... roduction activities at their Dholpur plant w.e.f. 31110/2011. Moreover, the site location i.e. Dholpur is a remote area wherein the hiring of new qualified and trained staff will be very difficult, once the old staff retrenched. Moreover, any lay off plans will invite inherent problems like strikes, employees unrest etc. which may damage the machineries or prevent the new staff from coming to company and also bring bad name to the Company. Hence despite all the odds, the Appellant Company has to incur the fixed cost of salaries. Similarly, Fixed cost of power & fuel (like monthly rental of electricity bills), water and stores & spares (to keep the machinery in running condition) has not been reduced proportionately to the turnover. The additional evidences submitted by the Appellant were sent to AO for remand by the CIT(A). The CIT(A) admitted the additional evidences after detailed discussion on AO's reply on remand report and rejoinder of Appellant on AO's reply. During the appellate proceedings, the Appellant Company demonstrated the errors made by the Assessing Officer as well as deficiency in the working of the yield by filing additional evidences as submitted abo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... CIT (A). 20. Considered the rival submissions and material available on record. We observed that the assessee has claimed depreciation for the whole year based on the concept of wear and tear and in the similar situation, assessee has given lay off for the plant in the AY 2000-01 and the coordinate Bench has decided the issue in favour of the assessee. Respectfully following the above decision, we are inclined to allow the claim of the assessee in the year under consideration also. Accordingly, ground no.4 raised by the Revenue is dismissed. 21. With regard to Ground No.5 regarding share application money, the relevant facts are, during assessment proceedings, AO observed that the assessee has received share application money of Rs. 2.66 crores which was introduced during the relevant assessment year and assessee was asked to submit the details of subscribers along with address and payment details. In response, assessee has submitted the relevant details. On the basis of list, the Assessing Officer issued summon u/s 131(1) of the Act to the relevant applicants to attend the office along with supporting documents and their identity, creditworthiness and genuineness of the transact ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Appellant. Therefore no adverse inference of same should be taken of return of summon in the light of following documents, which were submitted to prove the existence and genuineness of transaction: * Details of Share Application Money, ITR Acknowledgement, Bank Statement of M/s Blastec (India) Pvt. Ltd. and copy of A/c of M/s Blastec (India) Pvt. Ltd. as appearing in the books of appellant were submitted during assessment proceedings along with letter dt. 26.12.2013 in response to query no. 7 raised vide questionnaire dt. 05.12.2013. * Letter dt. 15.02.2014, duly signed by Major Niranjan Singh Solanki, Director of M/s Blastec (India) Pvt. Ltd. was submitted in response to summons issued through authorized representatives of the Appellant' Company, Mr. Gaurav Panda, Chartered Accountant containing with complete Bank Statements for the F. Y. 10-11, Income Tax Return Acknowledgement, complete Balance Sheet as on 31.03.2011 and confirmation duly signed by above Director. 2. Applicant has not attended the proceedings and only documents were filed which could not proved their existence and genuineness of transaction with them. Mere confirmation and other documents in which eve ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n could not prove in its case. The Ld. AO was not able to trace the payment of Rs. 96,00,000/- from the Bank Statement of M/s Maneesha Finlease Ltd. as the same was not paid from Bank A/c of M/s Maneesha Finlease Ltd. However the Ld. A.O. is ignored the explanations of the basis of applying for the shares of appellant company submitted with letter dt. 10.02.2014 as mentioned at Point 2, which clearly show that Rs. 96,00,000/- was paid to Appellant company as per details given below:- (i) Share Application Money As on 31st March, 2011 Maneesha Finlease Limited has given share application money Rs. 3,82,40,000/- as per the details (a) & (b) below:- (a) Share application money given to Rajasthan Explosive & Chemicals Ltd. Rs. 78,00,000/- (Bank statement enclosed) S.No. Particulars From Amount Date 1 Ch-092417 Bank of India Capt K.S. Solanki on behalf of Maneesha Finlease Ltd. 38,00,000/- 06/12/2010 2 Ch-092425 Bank of India Capt K.S. Solanki on behalf of Maneesha Finlease Ltd. 40,00,000/- 23/12/2010 (b) Share application money of Rs. 3,04,40,000/- transferred from the following companies on account of merger with Maneesha Finlease Limited S.No. Particulars ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ,40,000/- is mentioned as share application money given to appellant company. However, the same are enclosed at Page No. 362, wherein we have highlighted the related portion. Further note that these details of schedule (i.e. list / groupings) are part & parcels of Balance Sheet of M/s Maneesha Finlease Ltd. and are duly certified by their statutory auditors. On perusal of ITR of M/s Blastec (India) Pvt. Ltd. it was found that it is a loss making company and shown loss of Rs. 1,49,61,163/-. Therefore, creditworthiness of the applicant could not be proved. There is no bar on giving share application money by a loss making company. We would like to draw your kind attention to Balance Sheet of M/s Blastec (India) Pvt. Ltd., which have share capital of Rs. 5,70,26,600/- and Reserves & Surplus of Rs. 1,79,73,260.85. The sum total of both figures comes to Rs. 7,49,99,860.85 which is quite more than the share application money given of Rs. 2,66,00,000/-. This figure also shows the credit worthiness of M/s Blastec (India) Pvt. Ltd. The Balance Sheet of n/s Blastec (India) Pvt. Ltd. is duly audited by their statutory auditors and there should not be any doubt in the mind of Ld. A. O. r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eturn Acknowledgement, complete Balance Sheet as on 31.03.2011 and confirmation duly signed by above director. 10.4. The reconciliation has also been filed. No adverse inference has been drawn by the AO with regard to the evidence filed. Merely on this ground i.e. non receipt of reply to notice, it cannot be held that the appellant has not discharged the onus of receipt of monies from these concerns. The Hon'ble Apex Court in the case of CIT vs. Orissa Corporation Ltd. reported in 159 ITR 78 held as under: "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 income-tax assessee's. Their index number was in the file 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 creditworthy 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 th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cer it is to be seen that M/s Blastec (India) Pvt. Ltd., a sister concern of the Appellant Company, had share capital of Rs. 5,70,26,600/- and Reserves & Surplus of Rs. 1,79,73,260.85/-. The sum total of both figures comes to Rs. 7,49,99,860.85/- which is quite more than the share application money given ofRs.2,66,00,000/-. This figure also shows the credit worthiness of M/s Blastec (India) Pvt. Ltd. The Balance Sheet of M/s Blastec (India) Pvt. Ltd. is duly audited by their statutory auditors and there should not be any doubt in the mind of Ld. A.O. regarding Assets, Liabilities and Net Worth of M/s Blastec (India) Pvt. Ltd. Further, it is to be noted that the summons were issued to MIs Blastec (India) Pvt. Ltd on 18, First Floor, Satya Niketan, Opp. Shri Venkteshwar College, New Delhi on 30th January, 2014. The registered office of the company of Appellant was situated there till 1st August, 2013. The above notice may have returned due to misunderstanding by postal Department regarding change of Registered office of the Appellant as M/s Blastec (India) Pvt. Ltd was also sharing the same office premises with Appellant. The Assessing Officer was not able to trace the payment of R ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the AO observed that the assessee has received unsecured loan from M/s. Maneesha Finlease Ltd.. When the assessee was asked to submit the copy of ledger of the lender, copy of ITR of lender, copy of bank statement and confirmation etc., assessee has filed confirmation and copy of ITR of M/s. Maneesha Finlease Ltd. After perusing the Balance Sheet of M/s. Maneesha Finlease Ltd., the AO observed that nowhere name of the assessee company was appearing in loans and advances shown on asset side of the Balance Sheet. On perusal of the bank statement of M/s. Maneesha Finlease Ltd., the relevant amount of loan advanced is not verifiable. The assessee also not filed ledger account of M/s. Maneesha Finlease Ltd. and confirmation filed by the assessee does not mention the name of the person who confirmed the statement and observed that there were credit entries appearing just before and after the amount advanced to the assessee and, therefore, genuineness of the transaction could not be proved in this case and further observed that the name of the assessee is appearing as sundry creditors on liability side while the company has claimed it as obtained unsecured loan from M/s. Maneesha Finleas ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ter corporate deposit Rs. 1,42,00,000/- to Rajasthan during the year. The closing balance as on 31.3.2011 was Rs. 2,10,11,198/- Sr. No. Particulars From Amount Date 1 Opening as 01/04/2010 Maneesha Finlease Ltd. 52,00,000/- 01/04/2010 2 Ch-167117 Bank of India Maneesha Finlease Ltd. 40,00,000/- 09/08/2010 3 Ch-167134 Bank of India Maneesha Finlease Ltd. 1,02,00,000/- 06/12/2010 4 Interest F.Y. 2010-11 Maneesha Finlease Ltd. 16,11,198/- 31/03/2011 The Ld. AO has made various allegations while making the above addition. Our allegation wise reply is as under: 1. On perusal of the balance sheet of the M/s Maneesha Finlease Ltd. it was found that no where name of the appellant company was appearing in "Loan & Advances" shown on assets side of balance sheet. It seems that Ld. A.O. has ignored the details of schedule (i.e list/ groupings), wherein Rs. 2,10,11,198/- is mentioned as inter corporate deposit given to appellant company. However the same are enclosed herewith at Page No. 362, wherein we have highlighted the related portion. Further note that these details of schedule (i.e. list/ groupings) are part & parcels of Balance Sheet of M/s Maneesha Finl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... presenting the company is also authorized representative. Therefore on adverse inference of same should be taken in the light of following documents, which were submitted to prove the existence and genuineness of transaction: * Bank Statements, Income Tax Return Acknowledgement, complete Balance Sheet as on 31.03.2Ot1 and confirmation duly signed by above Director. * Explanation of Unsecured Loan given to Appellant Company as annexure 3. 5. On perusal of bank statement of M/s Maneesha Finlease Ltd it was found that there were credit entries appearing from the sister concerns of group just before and/or after the amount advanced to appellant company. Hence, genuineness of transaction could not be proved in this case. We are unable to understand the observation of Ld. A0. How appearance of credit entries from Sister concerns of group just before or after the advance make the transaction non genuine? 6. On perusal of Balance Sheet of M/s Maneesha Finlease Limited it is found that appellant company is appearing as sundry creditor on liability side while appellant company has claimed that it has obtained unsecured loan from M/s Maneesha Finlease Limited. Hence, genuineness of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the AO. 33. On the other hand, ld. AR of the assessee submitted as under :- "With respect to the issue relating to unsecured loans, in the assessment order, the Assessing Officer noted that the appellant company's name did not appear in 'Loan & Advances' of M/s Maneesha Finlease Ltd. and that the loan amount was not verifiable, and no ledger account was filed by the appellant. The confirmation provided did not mention the name of person confirming the statement. Additionally, the appellant appears as a sundry creditor, despite claiming an unsecured loan, further questioning the transaction's genuineness. It is pertinent to note that the Assessing Officer ignored the details of schedule (i.e., list/groupings), wherein Rs. 2,10,11,198/- is mentioned as inter corporate deposit given to appellant company. Ld. AO ignored the bank statement filed during assessment proceedings, wherein amount of unsecured loan paid of Rs. 1,42,00,000/- is clearly mentioned. Ld. A.O. also ignored the copy of cheques issued for making RTGS of Rs. 1,02,00,000/- and covering letter issued by M/s Maneesha Finlease Limited to bank for the same. M/s Maneesha Finlease Ltd. is also sister ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dismiss ground no.6 raised by the Revenue. 35. In the result, the appeal filed by the Revenue being ITA No.4166/Del/2017 for AY 2010-11 is partly allowed. 36. Ground No.1 of AYs 2012-13, 2013-14, 2014-15 & 2016-17 is decided by us in Ground No.2 of AY 2011-12 vide Paras 4 to 9 against the Department. Since the facts are exactly similar to AY 2011-12 our above findings in AY 2011-12 are applicable mutatis mutandis in AYs 2012-13, 2013-14, 2014-15 & 2016-17. Accordingly, Ground No.1 of AYs 2012- 13, 2013-14, 2014-15 & 2016-17 is dismissed. 37. Ground No.2 of AY 2014-15 is decided by us in Ground No.1 of AY 2011-12 vide Para 3 in favour of the Department. Since the facts are exactly similar to AY 2011-12 our above findings in AY 2011-12 are applicable mutatis mutandis in AY 2014-15. Accordingly, Ground No.2 of AY 2014-15 is allowed. 38. In the result, the appeals filed by the Revenue in AYs 2012-13, 2013-14, 2014-15 & 2016-17 are partly allowed. 39. Further, assessee has filed cross objections in the aforesaid assessment years to the extent of objections raised relating to appeals filed by the Revenue, since we have already adjudicated in favour of the assessee, the same are dis ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
