Shital Builders Vs ITO (ITAT Ahmedabad)
ITAT Ahmedabad held that all necessary details and evidences to establish genuineness of the unsecured loans duly furnished by the assessee, accordingly, addition towards the same unsustainable.
Facts- The assessee firm is engaged in the business of construction work as developer of buildings, commercial complex, residential complex, bungalows, road projects etc. During the year under consideration, the assessee had constructed a commercial complex “Shital Varsha-V” at Shivranjani Cross Road, Ahmedabad, and shown gross receipt of Rs.3.75 crores on which net profit declared, before remuneration to partners, was Rs.23,70,039/-. The total income returned to tax was Rs.9,18,841/-. During assessment proceedings several additions were made to the income of the assessee totaling in all to Rs.13,15,38,617/- which majorly included addition of Rs.11,86,87,480/- being current liabilities reflected in the books of the assessee, added for the reason that the genuineness of the credit balance remained unexplained. Minor additions made were on account of disallowance of building construction expenses & depreciation on motor cars amounting to Rs.59,10,574/-& Rs.14,79,549/- respectively.
The matter was carried in appeal before the ld.CIT(A) who deleted the entire addition made on account of unexplained credit balance of Rs.11.86 crores except for an amount of Rs.70,000/-.With respect to the disallowance made of building construction expenses the ld.CIT(A) deleted majority of the disallowance of Rs.50,46,501 and confirmed only the balance of Rs.8,64,073/-; so also, with respect to the disallowance of car depreciation the ld.CIT(A) deleted disallowance of Rs.8,63,961/- and upheld the balance of Rs.4,67,633/-. Aggrieved by this order of the ld.CIT(A) both the Revenue and the assessee have come up in appeal before the Tribunal.
Conclusion- We have noted that the ld.CIT(A) has deleted the addition with respect to the aforesaid unsecured loans finding that all necessary details and confirmation of the parties was filed by the assessee and nothing adverse was found by the AO. The ld.CIT(A) has also, we have noted, dealt with the remand report of the AO wherein he had noted no information, details or confirmations being filed with respect to the said parties, stating that the AO had incorrectly noted the said facts. The ld.DR was unable to controvert this factual finding of the ld.CIT(A) that the assessee had furnished all necessary details and evidences to establish genuineness of the unsecured loans relating to the aforesaid three parties with evidences. In view of the above, we see no reason to interfere in the well reasoned order of the ld.CIT(A), passed after appreciating all relevant facts relating to the issue. Ground no.2 raised by the Revenue is dismissed.
On going through the above, we find that the Ld.CIT(A) had confirmed the disallowance of depreciation on cars of Rs.4,67,633/-finding that the assessee was unable to establish with evidence that motor vehicle was wholly and exclusively usedforthe purpose of business of the assessee and also for the reason that the assessee had claimed depreciation at a higher rate of 50% on Toyota car which rate of depreciation is allowable only on commercial vehicles and the assessee unable to establish that the said vehicle was commercial vehicle. In view of the same we see no reason to interfere in the order of the Ld.CIT(A) upholding the disallowance of depreciation of Rs.4,67,633/- .The ground raised by the assessee in this regard is dismissed.
FULL TEXT OF THE ORDER OF ITAT AHMEDABAD
The above cross appeals by the Revenue and the assessee are against order of the ld.Commissioner of Income Tax (Appeals)-XV, Ahmedabad [hereinafter referred to as “ld.CIT(A)”] dated 14.3.2013 Fpassed under section 250(6)of the Income Tax Act, 1961 [hereinafter referred to as “the Act” for short] pertaining to Asst.Year 2009-10.
2. Brief background relating to the present appeal is that the assessee firm is engaged in the business of construction work as developer of buildings, commercial complex, residential complex, bungalows, road projects etc. During the year under consideration, the assessee had constructed a commercial complex “Shital Varsha-V” at Shivranjani Cross Road, Ahmedabad, and shown gross receipt of Rs.3.75 crores on which net profit declared, before remuneration to partners,was Rs.23,70,039/- . The total income returned to tax was Rs.9,18,841/-. During assessment proceedings several additions were made to the income of the assessee totaling in all to Rs.13,15,38,617/- which majorly included addition of Rs.11,86,87,480/- being current liabilities reflected in the books of the assessee, added for the reason that the genuineness of the credit balance remained unexplained. Minor additions made were on account of disallowance of building construction expenses & depreciation on motor cars amounting toRs.59,10,574/-& Rs.14,79,549/- respectively. The matter was carried in appeal before the ld.CIT() who deleted the entire addition made on account of unexplained credit balance of Rs.11.86 crores except for an amount of Rs.70,000/-.With respect to the disallowance made of building construction expenses the ld.CIT(A) deleted majority of the disallowance of Rs.50,46,501 and confirmed only the balance of Rs.8,64,073/-; so also, with respect to the disallowance of car depreciation the ld.CIT(A) deleted disallowance of Rs.8,63,961/- and upheld the balance of Rs.4,67,633/-. Aggrieved by this order of the ld.CIT(A) both the Revenue and the assessee have come up in appeal before the Tribunal.
Since major grievance against order of the ld.CIT(A) is of the Revenue relating to the deletion of sundry credit balance of Rs.11,86,17,480/- it was agreed to first deal with the appeal of the Revenue.
ITA No.1853/Ahd/2013 :Asst.Year 2009-10 (Revenue’s appeal)
3. The ld.DR at the outset pointed out that the department had filed revised grounds of appeal on 2nd August, 2018 which be accordingly considered for the adjudication. The ld.AR fairly agreed with the same. Accordingly, revised grounds of the appeal are being dealt with by us, and the same are reproduced hereunder:
“1 (a) The Ld. CIT(A) has erred in law and on facts in deleting an amount of Rs.1,19,93,502/- ( being part of the total addition of Rs. 2,34,38,053/-made by A.O. as discussed in Annexure ‘A’ of CIT(A)’s order) ignoring the fact that the bills claimed to have been issued by different parties to the assessee concerning this amount were identical in pattern and had common handwriting and hence, were not reliable pieces of evidence for granting relief.
(b) The Ld. CIT(A) further erred in noticing the fact that the assessee at many instances had failed to furnish third party evidences before the AO even during the remand stage and had merely furnished the self serving copies of its ledger A/cs before the AO which were not acceptable pieces of evidences.
(c) The Ld. CIT(A) further erred in treating the bills pertaining to these ledger A/cs as genuine which were furnished only before him by the assessee after the remand stage and remained unverified by AO( instances summarized in Statement of Facts).
2 (a) The Ld. CIT( A) has erred in law and facts in deleting the additions of (i) Rs. 25,00,000 from Devendra C. Vaghela, (ii) Rs. 35,89,950/- from Leesa Security Pvt. Ltd, (iii) Rs. 55,00,000/- from Samir C. Nair made by A.O in respect of amounts claimed to have been received as unsecured loans without appreciating the fact that its genuineness could not be substantiated by the assessee.
(b) The Ld. CIT(A) has deleted these additions, forming part of Annexure ‘C’ of his order, despite the Assessing Officer’s stand in the remand report that no evidentiary documents like confirmations, PAN or addresses etc were furnished by the assessee in respect of these transactions, and even further, these were not squared-up in subsequent years nor these were found part of the opening balance.
3. The Ld. CIT(A) has erred in taking the opening balance at Rs.3,62,12,517/- in Annexure ‘C’ of his order, whereas on totaling, the actual opening balance comes to Rs. 3,10,87,717/- and thus granted excess relief amounting to Rs.51,25,800/-.
4. On the facts and in the circumstances of the case, the Ld. Commissioner of Income Tax(Appeals)-XV, Ahmedabad ought to have upheld the order of the Assessing Officer on above issues in accordance with above.”
4. The ld.DR pointed out that Ground No.1(a) to (c) related to same issue i.e. deletion of credit balance pertaining to sundry creditors amounting in all to Rs.1,19,93,502/-.
ld.DR first drew our attention to the facts of the case from the assessment order (para 3.2) wherein he pointed out that the AO had noted from Schedule-10 of Audit Report that the assessee had shown current liabilities as follows:
Sundry creditors Rs.2,32,06,459/-
Deposit of Shivranjani Rs.9,16,81,021/-
Advance from Shivranjani Rs. 38,00,000/-
Total Rs.11,86,87,480/-
In the absence of any details submitted by the assessee to establish genuineness of these creditors, the entire amount of Rs.11,86,87,480/- was added back to the income of the assessee. The ld.DR thereafter pointed out that during appellate proceedings before the ld.CIT(A) the assessee submitted additional evidence to prove genuineness of these credit balances, which was admitted by the ld.CIT(A) and thereafter sent to the AO for his report thereon. The AO duly filed his remand report, on which the comments of the assessee were called for and after considering all of the above, the ld.CIT(A) deleted the entire addition except for an amount of Rs.70,000/- relating to sundry creditors.
5. DR stated that in ground No.1 the Revenue has challenged deletion of addition of credit balances pertaining to the sundry creditors as reflected in its current liabilities as noted by the AO of Rs.2.32 crores. He clarified that during appellate proceedings, the ld.CIT(A) examined all the details and evidences filed by the assessee and gave a finding of fact that the total outstanding sundry creditors of the assessee amounted to Rs.2,34,35,970/- as at the end of the year i.e. on 31-3-2009, while in four cases on account of debit of Rs.2,29,512/- net sundry creditors were of Rs.2,32,06,458/-; that accordingly the assessee had submitted details with respect to the sundry credit balance of Rs.2.34 crores which were examined during the appellate proceedings. He further clarified that out of the total addition made by the AO on account of credit balance of sundry creditors of Rs.2,34,38,053/-,the Revenue was contesting only the deletion of addition to the extent of Rs.1,19,93,502/-.
6. Having stated so, the ld.DR took us to the finding of the ld.CIT(A) holding that the assessee had established genuineness of sundry creditors of Rs.2.34 crores at page no.40 in para-5.2.2(p) as under:
“(p) In conclusion, out of the total addition of Rs.11,86,87,480/- as per para 5.2.2(h) the outstanding creditors ofRs.2,34,38,053/- were held to be genuine creditor for which AO was not justified in making addition u/s.68 of the Act.”…
7. The ld.DR pointed out that his specific finding on the various creditors being found genuine at para 5.2.2 (g) & (h) are as under:
“(g) The appellant during the appeal proceedings with the prayer to admit additional evidences submitted a list of all sundry creditors showing Name of the party, op. balance, purchases during previous year, payments during previous year, other debits and final balances in respect of sundry creditors of Rs.2,32,06,458.55/- which was subjected to remand report. The remand report and rejoinder report are already discussed. The details / evidences with this list was already examined by A.O. during remand proceedings. The further details and evidences as submitted by appellant with rejoinder to remand report were examined by me along with the details & evidences filed earlier in this regard and this Ann. A is prepared on above discussed parameter. It is evident from the list submitted earlier by appellant with submission dt. 09/07/12 and subjected to remand report (page 18-19) that there are sundry creditors of Rs. 2,34,35,970.55/- as on 31/03/09 while in 4 cases on account of debit of Rs. 2.29.512/-, the net sundry creditor were of Rs. 2,32,06,458.55/-. It is in this regard the Ann. A reflect the total amount of sundry creditor at Rs. 2,34,38,053/-. From this analysis of Annexure-A following discrepancies were culled out:
(i) Sr.no. 2 Shri Anand V. Dave whose bill for consultancy (solicitor and advocate) dt. 1G/OG/08 for Rs. 3,82,024/- is credited and remained outstanding. No. T.D.S deducted from Rs.3,82,024/- hence as per provisions of section 40(a)(ia) of the Act same has to be disallowed. But, it was found that A.O. in the asstt. order separately dealt with this issue. Therefore, addition made by A.O. of this amountunder unexplained sundry creditor is the duplicacy i.e. double addition.
(ii) Sr no. 9 M/s Bahubali Enterprise, Sr. no. 40 M/s KrupaliEntp., Sr. no. 41 M/s Laxmi Traders and Sr. no. 49 M/s Maruti Traders having outstanding balance of Rs. 2,51,100/-, Rs.10,07,050/-, Rs. 13,91,142/- and Rs.8,06,225/- except having ledger account and contention with detail that such outstanding were paid to respective party by appellant through account payee cheques, there is no other details viz. address of the party, PAN, confirmation or copy of Invoices. In the case of-M/s Bahubali Entp. (page 36 of P.B. dt. 09/07/12) for the various purchases of sand in the month of Sept. 2008 aggregating Rs. 2,51,0007- was paid by appellant vide cheque from his account with Axis Bank No. 0032010200033105, Vastrapur Branch, Ahmedabad on 13/11/09. Similarly in the case of KrupaliEntP. (page 89 of P.B. dt. 09/07/12) for the purchases of greet, kapchi& Brick for the month of September 2008, the total outstanding of Rs. 10,07,050/- was paid by appellant through cheque on 16/11/2009 from Axis Bank. In the case of Laxmi Traders (page 90 of P.B. dt. 09/07/12) for various purchases in the month of September 2008 for steel, the outstanding balance of RS. 13,91,142/- was paid through cheque of Rs. 6,50,0007-dt. 28/05/09 and Rs.7,41,000/- dt. 02/06/09. In the case of Maruti Traders (page 105 of P.B. dt. 09/07/12) as against the purchase of cement during month of September 2008, the total outstanding balance of Rs. 8,06,225/- was paid by appellant vide cheque of Rs. 5,00,000/- dt. 28/05/09, Rs.2,59,000/- dt. 02/06/2009 and Rs. 47,225/- dt. 07/11/2009. Therefore considering these fact one cannot held them as unexplained current liabilities.
(h) In all the other parties, there are sufficient evidences for confirming the balances as on 31/03/09. In view of the above facts, the disallowance and addition made in respect of these sundry creditors of Rs. 2,34,38,053/- are not justified and not sustainable.”
8. The ld.DR thereafter stated that on the earlier date of hearing the Bench had directed the Revenue to file a chart summarizing party wise the facts/basis of the addition made by AO, deleted by Ld.CIT(A) and the arguments of the Revenue against the order of the Ld.CIT(A).He stated that in accordance with the said direction the arguments against the deletion of addition by the Ld.CIT(A) had been summarized in a chart giving details of the basis on which the AO in his remand report had found these sundry creditors to be not genuine, the basis on which the ld.CIT(A) had held them to be genuine and also detailing his arguments against the finding of the ld.CIT(A). Copy of the chart was filed before us and is reproduced as under:
Chart giving all relevant details in respect of each and every Creditors which is in dispute – M/s Shital Builders PAN ABGFS5271G – AY 2009-10
Assessee has submitted name, address and payment is made through bank. There is sufficient evidence for confirming the balance as on 31.03.2009 and disallowance and addition made in respect of creditor is not justified and not sustainable.
9. DR stated that he relied on the said chart for his arguments, which briefly put were to the effect that while the ld.CIT(A) had held all the sundry creditors to be genuine, finding that the assessee had submitted all details as to names, addresses of the creditors, their copies of bills and also the fact that the payment was made through bank, the ld.CIT(A) had conveniently ignored the fact that the AO had noted the bills raised by these parties to be fabricated, being drawn in identical pattern with common hand-writing and also that no third party evidence to prove genuineness of the balances was furnished by the assessee.
10. The ld.AR countered by making several arguments, viz.
i) On the challenge of the Department to the finding of the ld.CIT(A) that the credit balance of sundry creditors were genuine, the ld.counsel for the assessee contended that the finding of the ld.CIT(A) at para 5.2.2 (g)(h) were very specific, given after examining all the documents furnished by the assessee to the effect that all necessary details of the sundry creditors had been filed by the assessee giving their names, address and copies of bills, and also submitting the fact that the payment was made through banking channel. He contended that the Revenue had not controverted any of the above facts except for stating that bills appeared to be manipulated/fabricated. He contended that this alone was not sufficient to hold the balance to be ingenuine, more particularly, when the creditors were shown to have been paid through banking channels. He further drew our attention to PB Page No.180 which was a detailed submission by the assessee to the ld.CIT(A) in response to the discrepancies noticed by the AO in the submissions of the assessee wit respect to these creditors during the remand proceedings. The same are reproduced as under:
1: Discrepancies noticed in Sundry Creditors for Goods & Exp.:
