The Commissioner Of Income Tax – 10, Mumbai v. M/S.manoj Housing Finance Co. Limited

IN THE HIGH COURT OF JUDICATURE AT BOMBAYORDINARY ORIGINAL CIVIL JURISDICTION INCOME TAX APPEAL NO.2272 OF 2009 The Commissioner of Income Tax – 10, Mumbai ..Appellant. Versus M/s.Manoj Housing Finance Co. Limited ..Respondent. Mr.Suresh Kumar for the appellant.Mr.P. Jain i/by Mr.Prakash Panjabi for the respondent. CORAM : J.P. Devadhar & Mrs.Mridula Bhatkar, JJ. P.C. : DATE : 28[th] February, 2011. 1.Following substantial questions of law have been raised by the Revenue in this appeal : a)Whether on the facts and in the circumstances of the case and in law the Tribunal was right in confirming the orders of the CIT (A) that the increase in the share capital raised by the assessee through public offer can not be treated as unexplained cash credits u/s. 68 of the I.T. Act, 1961 even though there is a clear evidence on record to show that the share applications were fictitious and share application money received by the assessee company was from unaccounted sources.case and in law the Tribunal was right in confirming the orders of the CIT (A) that the increase in the share capital raised by the assessee through public offer can not be treated as unexplained cash credits u/s. 68 of the I.T. Act, 1961 even though there is a clear evidence on record to show that the share applications were fictitious and share application money received by the assessee company was from unaccounted sources. b)Whether on the facts and in the circumstances of the case and in law the Tribunal was right in upholding the order of the CIT (A) that the amount of Rs.21,42,009/- debited in the profit and loss account as expenses incurred proportionate to interest income of the assessee company cannot be treated as unexplained expenditure u/s. 69C of the Income-tax Act even though there is clear evidence on record to show that the said interest income of the assessee company pertains to bogus loans.case and in law the Tribunal was right in upholding the order of the CIT (A) that the amount of Rs.21,42,009/- debited in the profit and loss account as expenses incurred proportionate to interest income of the assessee company cannot be treated as unexplained expenditure u/s. 69C of the Income-tax Act even though there is clear evidence on record to show that the said interest income of the assessee company pertains to bogus loans. c)Whether on the facts and in the circumstances of the case and in law the Tribunal was right in upholding the order of the CIT (A) that amount of Rs.15,14,110/- credited to the profit and loss account cannot be treated as unexplained money under Section 69A of the Income-tax Act ?case and in law the Tribunal was right in upholding the order of the CIT (A) that amount of Rs.15,14,110/- credited to the profit and loss account cannot be treated as unexplained money under Section 69A of the Income-tax Act ? d)Whether on the facts and in the circumstances of the case and in law the Tribunal was right in upholding the orders of the CIT (A) that deduction under Section 36(1)(viii) cannot be disallowed by the assessee company unless the CBDT withdraws the approval granting the assessee the status of Housing Finance Company ?”case and in law the Tribunal was right in upholding the orders of the CIT (A) that deduction under Section 36(1)(viii) cannot be disallowed by the assessee company unless the CBDT withdraws the approval granting the assessee the status of Housing Finance Company ?” 2.As regards question (a) is concerned, learned Counsel for the Revenue states that similar question has already been answered in favour of the assessee and against the Revenue by the Apex Court in the case of CIT V/s. Lovely Exports (P.) Limited reported in [2008] 216 CTR 195 (SC)]. Accordingly, the first question is answered in favour of the assessee and against the Revenue. 3.As regards questions (b) and (c) are concerned, the Tribunal has in para 28 of its judgment observed thus : 2.As regards question (a) is concerned, learned Counsel for the Revenue states that similar question has already been answered in favour of the assessee and against the Revenue by the Apex Court in the case of CIT V/s. Lovely Exports (P.) Limited reported in [2008] 216 CTR 195 (SC)]. Accordingly, the first question is answered in favour of the assessee and against the Revenue. 3.As regards questions (b) and (c) are concerned, the Tribunal has in para 28 of its judgment observed thus : “28.We have considered the rival submissions and perused the material available on record. Apparently, it seems that the assessing officer has not doubted the genuineness of the loan transaction. The introduction of any person for opening an account in a bank by the Managing Director of the assessee company cannot give rise to suspect a loan transaction. The record also speaks and supports the factual flaw in the assessment order as pointed out by the learned counsel. When a loan is given, naturally the assessee has to account for the interest, irrespective of whether interest is received or not. Shri Nemichand Chheda has in fact confirmed the loan account vide his letter dated 16-09-1994 and the plaint of Civil Suit filed by the assessee against that person also adequately proves this. We also find merit in the contention of the assessee that whatever information collected by the assessing officer behind the back of the assessee should have been confronted to the assessee. It is also true that whether the parties to whom loans have been advanced have credited or not credited the assessee’s account does not make any ground for doubting the accuracy of the books of account maintained by the assessee. Equally there is no corroborative evidence with the assessing officer to come to a conclusion that the interest income shown by the assessee was bogus in the light of the genuineness of the loans flowing out of the available funds and the loans were made through account payee cheques. Further the finding of the assessing officer that the interest income was deliberately shown to substantiate the expenditure debited in the profit and loss account is absurd inasmuch as the expenditure were made out of the available funds with the assessee especially in the light of the fact that the interest income was only credited in the Accounts and not received. In this view of the matter we hold that the CIT (A) was justified in deleting the additions of Rs.15,14,110/- and Rs.21,42,009/- of the Act. The order of the CIT (A) on this issue is confirmed.” 4.The findings recorded by the Tribunal are findings of fact and hence no substantial questions of law arises from the order of the Tribunal. 5.As regards question (d) is concerned, the Tribunal has in para 29 of its judgment observed thus : 4.The findings recorded by the Tribunal are findings of fact and hence no substantial questions of law arises from the order of the Tribunal. 5.As regards question (d) is concerned, the Tribunal has in para 29 of its judgment observed thus : “29.The last ground in the appeals for assessment year 1996-97 pertains to disallowance u/s. 36(1)(viii) amounting to Rs.6,48,977/-. The sole basis for making this disallowance was that according to the assessing officer the assessee company has not advanced loans for housing purpose and money has been indirectly utilized for bringing in accounted capital, the claim has to be disallowed. The case of the assessee is that the assessing officer did not have jurisdiction to disallow the impugned expenditure in view of the CBDT notification dated 17-10-1993. The learned CIT (A) agreeing with the contention of the assessee found that the CBDT has approved the assessee has a housing finance company vide above notification and therefore basing on his own finding that the assessee has not advanced loans for housing purpose, the assessing officer cannot disallow the claim of the assessee. The assessee has fulfilled various conditions listed in provisions of section 36(1)(viii). It is not the case of the assessing officer that the assessee has violated any of the conditions ascribed to provisions of Section 36(1)(viii) of the Act. Upon hearing the rival contentions and perusing the orders of the authorities below, we do not find any reason to interfere with the order of the CIT (A) so as to arrive at a different conclusion than the one he arrived. His order on this issue is upheld.” 6.The findings recorded by the Tribunal are findings of fact and hence no substantial question of law arises from the order of Tribunal. 7.The appeal is accordingly disposed off. No costs. (Mrs.Mridula Bhatkar, J.) (J.P. Devadhar, J.)