The Income Tax Appellate Tribunal (ITAT) Mumbai bench deleted addition made under Section 69B of the Income Tax Act, 1961 towards inflated cost of crane in agreement merely to avail higher banking loan facility for financing of crane.
Assessee, KVR Infra is a partnership firm engaged in the business of hiring Cranes . Assessee had purchased a Crane i.e. Manitowoc 3900, the said Crane was purchased by the assessee from KGN Earthmovers. The cost of Crane as per agreement Rs. 1,40,62,500/-. Whereas, in books of the assessee, cost of Crane is shown as Rs. 90,37,625/.
In assessment proceedings, the Assessing Officer (AO) asked the assessee to explain the difference of Rs. 50,24,875/. The assessee claimed that although the true cost of the crane is Rs. 90,37,625 as shown in the books of account, the assessee inflated the cost of the crane in order to obtain additional banking loan financing.
The AO rejected the explanation furnished by the assessee and made addition of the difference between the agreement price and the amount shown in the books of assessee.
Aggrieved by the order, the assessee filed an appeal before the commissioner of Income Tax Appeal [CIT(A)], who dismissed the appeal and confirmed the addition. Thereafter the assessee filed another appeal before the tribunal.
During the appeal proceedings no one is appearing for assessee therefore as per the written submission assessee submitted that cost of the Crane was exaggerated by the assessee to secure higher banking loan facility.
Thus addition could not be made under section 69B where inflated statement was furnished to the Bank for availing a higher credit facility.
Prakash Kishinchandani, Counsel for the revenue, supported the decision of the lower authorities.
It was observed by the tribunal that no effort was made by the AO to cross verify submissions of the assessee. No summons or notice were ever issued by the AO to the vendor of the Crane to know the real cost of the Crane.
There is no finding by the AO that the assessee has claimed depreciation on Crane at higher value as per agreement, the tribunal further observed.
After considering the facts submitted by both parties, the two member bench of Vikas Awasthy (Accountant Member) and Padmavathy S (Judicial Member) held that no addition under Section 69B of the Income Tax Act can be made in the instant case as the assessee had inflated the cost of Crane in the agreement merely to avail higher banking loan facility for financing of the Crane.
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