ITA NO. 3928/Del/2011
IN THE INCOME TAX APPELLATE TRIBUNAL
DELHI BENCH "F", NEW DELHI
BEFORE SHRI H.S. SIDHU, JUDICIAL MEMBER
AND
SHRI T.S. KAPOOR, ACCOUNTANT MEMBER
I.T.A. No. 3928/DEL/2011
A.Y. :2007-08
INCOME TAX VS. M/S RAJPUTANA
OFFICER, STORES (BOMBAY) (P)
WARD 15(2), LTD.,
ROOM NO. 213, CR 702, ANSAL BHAWAN,
BUILDINGS, 16, KASTURBA
GANDHI MARG,
I.P. ESTATE,
NEW DELHI
NEW DELHI (PAN: AAACR0855P)
(APPELLANT) (RESPONDENT)
Department by : Sh. Vikram Sahay, Sr. DR
Assessee by : Sh. V.K. Jain, CA
Date of Hearing : 12-1-2015
Date of Order : 12-1-2015
ORDER
PER H.S. SIDHU : JM
This appeal by the Revenue is directed against the order of
the Ld. Commissioner of Income Tax (Appeals)-XVIII, New Delhi
dated 02.5.2011 pertaining to assessment year 2007-08 on the
following grounds:-
1. That on the facts and circumstances of the case and in law, the
Ld. CIT(A) erred in deleting the addition of Rs. 26,02,839/-
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which is a difference between interest received and interest
paid by the assessee to sister concerns namely M/s Pearl
Beverages Ltd. and M/s Jaipur Beverages & Food Industries P
Ltd.
2. The Ld. CIT(A) failed to appreciate the fact that this was as
sham transaction and that there was no justification in taking
or giving loans to sister concerns.
3. The appellant craves to be allowed to add any fresh grounds of
appeal and or delete or amend any of the grounds of appeal.
2. The brief facts of the case are that the Return of income was
filed online in this case on 29.10.2007 declaring income at Rs. NIL.
The return was processed u/.s 143(1) of the I.T. Act and later on it
was selected for scrutiny under CASS. Notices u/s. 143(2) and
142(1) were issued and served upon the assessee and in
compliance thereto necessary details were filed. Books of account
were produced which were examined on test check basis. The AO
observed in his order that assesses has taken unsecured loan from
sister concern, M/s Pearl Beverages Ltd. on which it has paid interest
@10% which works out to Rs. 82,75,818/- for the year under
consideration. He further observed that assessee has also advanced
unsecured loan to another sister concern, M/s Jaipuria Beverages &
Food Industries Pvt. Ltd. on which it has earned interest @10%
which works out to Rs. 56,72,979/- for the year under consideration.
The AO has observed that there is no justification for the assesee in
paying the interest @10% and earning interest @10% without
deriving any profit in the transaction. The AO has also observed
that the asessee has only passed off loan received from one sister
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concern to another. The AO has accordingly held that the above
transaction to be sham and has rejected the books of accounts of
the assessee and has disallowed the difference between the
interest received and interest paid at Rs. 26,02,839/- and
accordingly completed the assessment on 7.12.2009 u/s. 143(3) of
the I.T. Act.
3. Against the aforesaid assessment order the assessee
appealed before Ld. CIT(A), who vide impugned order dated
02.5.2011 has deleted the addition.
4. Against the above order passed by the Ld. CIT(A), the
Revenue is in appeal before us.
5. Ld. DR drawn our Attention towards the assessment order
especially the Page 3 and stated that the AO has rightly made the
addition in dispute by declaring as sham transaction. He also draw
our attention towards the impugned order vide para 5.1 and 5.2 of
the impugned order at Pages 10-13 and stated that Ld. CIT(A) has
wrongly deleted the addition in dispute on the basis that no such
disallowance has been made in the previous as well as subsequent
years, which is totally wrong because the AO after thoroughly
examining all the evidences has declared the transaction in dispute
as sham. Therefore, the impugned order may be cancelled by
accepting the Appeal filed by the Department.
5.1 Ld. Counsel of the assessee has relied upon the order of the
Ld. CIT(A) and stated that the Revenue Authority has not made such
disallowance in the previous as well as in the subsequent years,
therefore, the Ld. CIT(A) has rightly deleted the addition in dispute.
6. We have heard both the counsel and perused the records
available with us, we are of the considered view that the Ld. CIT(A)
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has given his finding in Para 5.1 and 5.2 at Pages 10 to 13 of his
impugned order. For the sake of convenience, we are reproducing
the aforesaid relevant paras as under:-
"5.1 I have carefully considered the assessment
order and the submission made by the Ld. AR. As
per the assessment order, the appellant has taken
unsecured loan from sister concern, M/s Pearl
Beverages Ltd. on which it has paid interest @ 10%
which works out to Rs. 82,75,818/- for the year
under consideration. The appellant has also
advanced unsecured loan to another sister concern,
M/s Jaipuria Beverages & Food Industries Pvt. Ltd.
on which it has earned interest @ 10% which works
out to Rs. 56,72,979/- for the year under
consideration. The AO has observed that there is no
justification for the appellant in paying interest @
10% and earning interest @ 10% without deriving
any profit in the transaction. The AO has also
observed that the appellant has only passed off loan
received from one sister concern to another. The AO
has accordingly held the above transaction to be
sham and has rejected the books of accounts of the
appellant and has disallowed the difference
between the interest received and interest paid at
Rs. 26,02,839/-.
5.2 During the appellate proceeding, it is argued by
the Id. AR that the loans raised by the appellant
have been used for acquiring fixed assets in earlier
years, to meet losses suffered in the past and to
partly give loans to sister concern at the same
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interest rate. It is argued that the appellant is
engaged in the business of trading in shares,
financing and investments. The loan transactions
have been carried out through account payee
cheques and the same have been duly recorded in
the books of accounts. The receipt and payment of
interest has also been recorded in the books of
accounts. The copy of loan accounts were duly
confirmed by the concerned parties and submitted
before the AO for verification during the assessment
proceeding. The said particulars were also
confirmed independently by M/s Pearl Beverages
Ltd. and M/s Jaipuria Beverages & Food Industries
Pvt. Ltd. in response to notice uls 133(6) issued by
the AO in the course of the assessment proceeding.
The above two companies have also find copy of
account of the appellant company in their books,
copy of bank statements, copy of audited Balance
Sheets and copy of Income Tax Returns before the
AO duly reflecting the above transactions. It is
accordingly argued that there is no basis for
rejecting the books of accounts and disallowing the
net interest expenditure. It is also argued that the
appellant is regularly engaged in the above
business and no such disallowance has been made
in any preceding or succeeding years by the AO.
The Id. AR has also filed a copy of scrutiny
assessment orders u/s 143(3) for A.Y. 2005-06,
2006-07 and 2008-09 in the case of the appellant
wherein no such disallowance has been made. On
careful examination of the matter, I find that the
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disallowance made by the AO is misconceived and
without any basis. The AO has also not given any
reason for rejecting the books of account and
holding the loan transactions to be sham. On the
other hand, the appellant has produced a plethora
of documents before the AO establishing the
genuineness and business purposes of the above
transaction. The same have also been confirmed by
independent enquiry made by the AO by issuing
notices u/s 133(6) to concerned parties. It is settled
law that how to run the business is the prerogative
of the businessman and the AO cannot step into his
shoes. Rejection of the books of account and
disallowance of expenses cannot be done
whimsically without proper basis. The impugned
disallowance of RS. 26,02,839/- therefore, cannot be
sustained either on facts or in law. The same is,
therefore, deleted."
6.1 After going through the order passed by the Revenue
Authorities especially the impugned order of which relevant praras
are reproduced as above, we are of the considered view that loan
transactions have been carried out through account payee cheques
and the same has been duly recorded in the books of account. The
receipt and the payment of interest has also been recorded in the
books of account. It is not disputed that the assesee is engaged in
the business in dispute from the last and subsequent years and for
that proof the assessee has filed the assessment order passed by
the AO under section 143(3) of the I.T. Act for the asstt. years 2005-
06, 2006-07 and 2008-09 in which no such disallowance has been
made by the Revenue Authorities. Even otherwise, the Revenue
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has not produced any documentary evidence establishing that the
business of the assessee is not genuine and the transactions is also
sham. Keeping in view of the facts and circumstances of the case as
explained above, we are of the considered view that Ld. CIT(A) has
passed a well reasoned order on the basis of the assessment orders
passed u/s. 143(3) of the Act for the previous as well as in the
subsequent assessment years, wherein no such disallowance has
been made by the Revenue Authorities. Therefore, no interference
is called for in the well reasoned order passed by the Ld. CIT(A),
hence, we uphold the same by dismissing the appeal of the
Revenue.
7. In the result, the Appeal filed by the Revenue stands
dismissed.
Order pronounced in the Open Court on 12/1/2015.
Sd/- Sd/-
[T.S. KAPOOR] [H.S. SIDHU]
ACCOUNTANT MEMBER JUDICIAL MEMBER
Date 12/1/2015
"SRBHATNAGAR"
Copy forwarded to: -
1. Appellant
2. Respondent
3. CIT
4. CIT (A)
5. DR, ITAT
TRUE COPY
By Order,
Assistant Registrar, ITAT, Delhi Benches
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