DCIT, CIRCLE - 10(1), NEW DELHI V. GOLDEN TEXO FABS PRIVATE LIMITED, NEW DELHI

ITA 4224/DEL/2024

AI Insights

The case involves an appeal by the Department of Revenue against the order of the CIT(A)/National Faceless Appeal Centre, which had favored Golden TexoFabs Pvt. Ltd. The primary issues revolved around the deletion of additions made by the Assessing Officer concerning unsecured loans, disallowance of expenses, and other financial transactions. The Tribunal examined the evidence and arguments presented by both parties, including the legitimacy of the financial transactions and the application of relevant tax laws. The Tribunal's decision emphasized the need for substantial evidence to support any additions to income and the proper application of tax provisions.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 23008 (ITAT-DELHI)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-02-2025
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2020-2021
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: RAJESH KUMAR DHANESTA
• Assessee Lawyers: ROHIT GOEL
• Keywords: Additional evidence; Business expenditure; Cost of acquisition; TDS; Source of fund
• Section: 143(1); 68; 69C

Judgement Text

" 1 ITA No. 4224/Del/2024 DCIT Vs. Golden TexoFabs Pvt. Ltd. IN THE INCOME TAX APPELLATE TRIBUNAL DELHI (DELHI BENCH ‘B’ NEW DELHI) BEFORE SHRI M. BALAGANESH, ACCOUNTANT MEMBER AND SH. YOGESH KUMAR U.S., JUDICIAL MEMBER ITA No. 4224/Del/2024 (A.Y. 2020-21) DCIT Circle-10(1) Room No. 389A, 3rd Floor, C. R. Building, IP Estate, New Delhi Vs. Golden TexoFabs Private Limited 671 Katra Neel, Chandni Chowk, Delhi PAN: AAACG5690D Appellant Respondent Assessee by Sh. Rohit Goel, CA Revenue by Sh. Rajesh Kumar Dhanesta, Sr.(DR) Date of Hearing 16/01/2025 Date of Pronouncement 12/02/2025 ORDER PER YOGESH KUMAR, U.S. JM: The present appeal is filed by the Department of Revenue against the order of the CIT (A)/National Faceless Appeal Centre (‘NFAC’ for short) Delhi dated 15/07/2024 for the Assessment Year 2020-21. 2. The Grounds of Appeal are as under:- “1. Whether on the facts and in the circumstances of the case and in law, the Id. CIT(A) has erred, in deleting the addition of Rs. 6,27,25,000/- on account of the addition made u/s 68 of the Act. In view of the fact that the assessee has failed to prove the creditworthiness of the creditor/party? 2 ITA No. 4224/Del/2024 DCIT Vs. Golden TexoFabs Pvt. Ltd. 2. Whether on the facts and in the circumstances of the case and in law. the 1 d. CIT(A) has erred in holding that the balance sheet was furnished along with the Return by the creditor whereas the AO has observed otherwise and 1 d. CITIAL has not remanded back the issue to the AO under rule 46A of the Income Tax Rule. 1962? Whether on the facts and in the circumstances of the case and in law, the Ld. CIT(A) has erred, in deleting the addition of Rs. 83,70.259/- on account of the disallowance of expenses u/s 69C of the Act, in view of the fact that the assessee has failed to furnish the substantive documents evidencing the actual purchases and transportation of goods and failed to establish the genuineness of the transaction? Whether on the facts and in the circumstances of the case and in law, the Ld. CIT(A) has erred, in deleting the disallowance of Rs. 2.78.48.066/- made u/s 37 of the Act ignoring the fact that the expenses claimed by the assessee were aimed to reduce the purchase cost of third parties which were not actual business expenses and resultantly reduced the taxable income of the assessee? That the department craves to add or amend the grounds of appeal before Hon'ble ITAT is finally heard or disposed of.” 3. Brief facts of the case are that, the Assessee filed return of income declaring total income at Rs. 15,63,09,040/- and the return of the Assessee was processed u/s 143(1) of the Income Tax Act, 1961 (‘Act’ for short) on 30/11/2021 at an income of Rs. 15,63,16,680/-. An assessment order came to be passed on 26/09/2022 by making an addition of Rs. 6,27,25,300/- onaccount of unsecured loansreceived from one Sh. Narain Dass, addition of Rs. 83,70,259/- u/s 69C of the Act and also disallowed of Rs. 2,78,48,066/- claimed by the Assessee on 3 ITA No. 4224/Del/2024 DCIT Vs. Golden TexoFabs Pvt. Ltd. account of rebate and discount given by the Assessee. Aggrieved by the assessment order dated 26/09/2022, the Assessee preferred an Appeal before the Ld. CIT(A). The Ld. CIT(A) vide order dated 15/07/2024, allowed the Appeal of the Assessee by deleting the disallowance/additions made by the A.O.Aggrieved by the order of the Ld. CIT(A) dated 15/07/2024, the Department of Revenue preferred the present Appeal on the grounds mentioned above. 4. In Ground No. 1 of the Revenue, it has been contended by the Department that the Ld. CIT (A) has erred in deleting the addition of Rs. 6,27,25,000/- made u/s 68 of the Act.The Ld. Departmental Representative submitted that though the Assessee failed to prove the creditworthiness of the creditor party, the Ld. CIT(A) erroneously deleted the addition. The Department's Representative relying on the finding of the A.O. sought for allowing the Ground No. 1 of the Revenue. 5. Per contra, the Ld. Assessee's Representative submitted that the addition u/s 68 of the Act has been made by the A.O. on the basis of erroneous observation that the assets and liabilities,statements were not declared in the ITR by depositor. On the other hand, the A.O. never asked the Assessee to produce the assets and liabilities, statement of the depositor and the Ld. CIT(A) after considering the reply rightly 4 ITA No. 4224/Del/2024 DCIT Vs. Golden TexoFabs Pvt. Ltd. deleted the addition which requires no interference at the hands of the Tribunal. 6. We have heard both the parties and perused the material available on record. The Ld. A.O. while making the addition of Rs. 6,27,25,000/-, observed that the said Sh. Narain Dass from whom the Assessee has received the loan had declared an accumulative total income of only Rs. 2.26 crore during the last four Assessment Years and the accounts are not audited and assets and liabilities were not declared in the ITR and there is no official records are available on the capital balance of Sh. NarainDass as assets and liabilities were not declared to the Department. In addition to the same, the Ld. A.O. observed that there is no existence of other transaction like sale of assets during past four years to explain the source of funds to advance huge unsecured loan. The Ld. CIT(A) while deleting the addition held as under:- “4.2 During the appeal, the assessee submitted a copy of the ledger and explanation of source of the amounts lent during the year most of which was repaid by the assessee keeping the closing balance at Rs.2,17,25,000/-. As per the assessee's declaration, which was evidenced with other documentary evidences, it is seen that the said lender was a legitimate taxpayer. The loans were duly reflected in his return of income. Most unfortunately, the lender had died in April, 2020. The lender was a close relative of the Directors of the assesseed the assessee company and he had forwarded loans to other group entity too. It is seen from the ledger that at the beginning of the year, there was an outstanding credit balance of loan from the 5 ITA No. 4224/Del/2024 DCIT Vs. Golden TexoFabs Pvt. Ltd. lender Shri NarainDass for a sum of Rs.69,00,000/-. Such amount was repaid on 09.04.2019 for a sum of Rs.65,00,000/- and again on 18.10.2019, the balance sum of Rs.4,00,000/-. Thereafter, on 26th December, 2019 to 31st January, 2020, he further lent Rs.3,27,25,000/- to the assessee, the source of which was duly explained as out of refund of loan given by him to Golden Floor Furnishing Pvt. Ltd. and Golden International Pvt. Ltd., both of which were group entity of the assessee company. The assessee submitted the details of confirmation of loan as lent by the lender to these two entities and from where it is revealed that the sum which was invested as loan to the assessee had been earlier placed with these two group companies and the lending to the assessee was made out of repayment of such loans. Again on 05.02.2020, the assessee repaid a sum of Rs.3,00,00,000/- out of the said sum which was forwarded as loan to the Golden Floor Furnishing Pvt. Ltd. Finally, on 15.02.2020, the lender again got refund of Rs.3,00,00,000/-from the Golden Floor Furnishing Pvt. Ltd., which was forwarded to the assessee as loan. From 19th February, 2020 to 4th March, 2020, the assessee repaid further sum of Rs. 1,10,00,000/- to the lender making the final credit balance at Rs.2,17,25,000/-. It is also mentioned that on the sum received as loan from lender, a sum of Rs.5, 12,952/- was paid as interest and TDS was duly deducted on such interest payment. The assessee also submitted that the lender received interest income from Golden Floor Furnishing Pvt. Ltd. too for a sum of Rs.31,89,508/- and on such amount also tax was duly deducted at source. In the balance sheet furnished along with the return of Shri NarainDass, the loans forwarded to Golden Floor Furnishing Pvt. Ltd. and the assessee was clearly mentioned as assets. Therefore, on analysis of the submitted documents, I do not find merit in the decision of the Assessing Officer holding such loan as unexplained. The Assessing Officer has cumulated the total loans received by the assessee from the lender whereas he totally ignored the repayments and fresh receipt of loans from the lender and the period of lending which was found to be not for a very long period. Finally, on perusal of the documentary evidence, I find the addition of Rs.6,27,25,000/- to be excessive and uncalled for. Therefore, I direct the Assessing Officer to delete the addition of Rs.6,27,25,000/- and the ground of the assessee is allowed.” 6 ITA No. 4224/Del/2024 DCIT Vs. Golden TexoFabs Pvt. Ltd. 7. It is found from the order of the Ld. CIT(A),during the appellate proceedings the Assessee produced the copy of the ledger and explained the source of the amount lent during the year which was repaid by the Assessee by keeping the closing balance at Rs. 2,17,25,000/-. Based on the declaration of the Assessee coupled with the documentary evidence, the Ld. CIT(A) held that the lender was a legitimate tax payer and the loans were duly reflected in the return of income and the lender is a close relative of the Directors of the Assessee company and the said lender has also forwarded loan to other group entities too. The Ld. CIT(A) on going through the ledger found that there was an outstanding credit balance of loan from the ledger Sh. Narain Dass of sum of Rs. 69,00,000/- which has been repaid on 09/04/2019 and again on 18/10/2019 the balance of Rs. 4,00,000/- has been paid. The Ld. CIT(A) has also found that on 26/12/2019 to 31/01/2020, the said Narain Dass has further lent Rs. 3,27,25,000/- to the Assessee and the source of which was explained as out of refund of loan given by him to Golden Floor Furnishing Pvt. Ltd. and Golden International Pvt. Ltd. both of which were group entity of the Assessee Company. The Ld. CIT(A) finding that the Assessee has repaid the loan and also paid interest and TDS was duly deducted of such interest payment and further finding that the A.O. has considered the cumulative total loans 7 ITA No. 4224/Del/2024 DCIT Vs. Golden TexoFabs Pvt. Ltd. received by the Assessee from the ledger, however ignored the repayment and fresh receipt of loans from lender. Thus, we are of the opinion that the Ld. CIT(A) has rightly deleted the addition. Finding no merit, we dismiss the Ground No.1 of the Revenue. 8. In Ground No. 2, the department of Revenue contended that the Assessee erred in holding that the balance sheet was furnished along with the return by the creditor whereas the A.O. observed otherwise and the Ld. CIT(A) has not remanded back theissue to the A.O. under Rule 46A of the I. T. Rules, 1962. The Ld. Departmental Representative submitted that the Ld. CIT(A) has considered the additional evidence submitted by the Assessee such as complete details of every customers with its address, PAN, total sale amount and various discountsand debates without calling for the remandwhich is in violation of Rule 46A of the Income Tax Act Rules. Therefore, sought for allowing the Ground No. 2 of the Revenue. 9. Per contra, the Ld. Assessee's Representative submitted that the copy of the ITR was available with A.O. and during the appeal it was highlighted to the Ld. CIT(A) that assets and liabilities statement was filed by the depositor. Since the statement was available with the A.O. and also before the Ld. CIT(A), there was no requirement of sending the 8 ITA No. 4224/Del/2024 DCIT Vs. Golden TexoFabs Pvt. Ltd. matter to the A.O. for Remand Report by the Ld. CIT(A)moreso,when no application for additional evidence was field by the Assessee. Thus, the Ld. Assessee's Representative sought for dismissal of the Ground No. 2 of the Revenue. 10. We have heard both the parties and perused the material available on record. During the appeal proceedings, against specific query of the Ld. CIT(A), the Assessee submitted complete details of every customer with its address, PAN, total sell amount and various discounts or rebates allowed by the Assessee. Those documents were submitted as per a specific query raised by the Ld. CIT(A). Therefore, the Rule 46A of the Rules will not come in the way of the Assessee. Further considering the fact that the copy of the ITR etc. were available with the A.O. there was no requirement for the Ld. CIT(A) for calling for the Remand from the A.O. as there is no application for additional evidence was filed by the Assessee under Rule 46A of the Rules. Considering the above facts and circumstances, we find no merit in the Ground No. 2 of the Revenue. Accordingly, Ground No. 2 of the Revenue is dismissed. 11. In Ground No. 3, it has been contended by the department that the Ld. CIT(A) committed error in deleting the addition of Rs. 83,70,259/- made on account of disallowance of expenses u/s 69C of the Act. The 9 ITA No. 4224/Del/2024 DCIT Vs. Golden TexoFabs Pvt. Ltd. Ld. Departmental Representative submitted that the Assessee has failed to furnish the substantive documents evidencing the actual purchases and transportation of goods and failed to establish the genuineness of the transaction, thus submitted that the Ld. CIT(A) erroneously deleted the addition. 12. Per contra, the Ld. Assessee's Representative submitted that the Assessee Company has constructed new factory building at the cost of 15,06,99,308/- and purchased the sand and Bajri amounting to Rs. 83,70,259/- from Hardev Singh and the purchase of sand and Bajri from the said Hardev Singh was subjected to applicable GST at 5% and the payments made from term loans raised from the bank, thus sought for dismissing the Ground No. 3 of the Revenue. 13. Considering the fact that the Assessee Company has constructed new factory building of 15.06 crore and purchased the sand and Bajri amounting to Rs. 183,70,259/- from Hardev Singh and the said transactionwas subjected to applicable GST at 5% and also considering the fact that those payments have been made from term loan raised by the Assessee from the Bank, we find no reason to interfere with the findings and conclusion of the Ld. CIT(A) and we find no error or 10 ITA No. 4224/Del/2024 DCIT Vs. Golden TexoFabs Pvt. Ltd. infirmity in the order of the Ld. CIT(A) in deleting the addition. Accordingly, Ground No. 3 of the Revenue is dismissed. 14. In Ground No. 4, the Department of revenue contended that the Ld. CIT(A) erred in deleting the disallowance of Rs. 2,78,48,066/- made u/s 37 of the Act by ignoring the fact that the expenses claimed by the Assessee were aimed to reduce the purchase cost of third parties which were not accrual business expenses. The Ld. Departmental Representative relying on the orders of the Lower Authorities sought for allowing the Ground No. 4. 15. Per contra, the Ld. Assessee's Representative relying on the findings and conclusion of the Ld. CIT(A), sought for dismissal of Ground No. 4 of the Revenue. 16. We have heard both the parties and perused the material available on record. During the Financial Year 2019-20, the Assessee claimed certain discount as expenses amounting to Rs. 313,78,569/-. The said discounts have been offered for following reasons:- i) Compensating distributors for price fluctuations ii) Compensating distributors for market competition iii) Compensating for reduction in quality iv) To help recue purchase cost for the distributors 11 ITA No. 4224/Del/2024 DCIT Vs. Golden TexoFabs Pvt. Ltd. 17. The A.O. was of the opinion that in the transaction related to discount the nexus existents between the Assessee’s expenses and it is distributor’s income and not that all the Assessee, therefore, the same cannot be said to be made out of Assessee’s business. Further the A.O. opined that the Assessee had aimed at reducing the purchase price of the third parties who are independent entities cannot be said to be under the premises of business expediency. During the appellate proceedings, the said disallowance has been reversed by the Ld. CIT(A). It is found that the total rebate and discount allowed by the Assessee was less than 1% and all the rebates and discounts are well account for and while disallowing the expenses the Ld. A.O. has not rejected the books of account.Considering the above facts and circumstances, we find no reason to interfere in the order of the Ld. CIT(A) in deleting the above addition. Accordingly, we dismiss the Ground No. 4 of the Revenue. 18. In the result, Appeal filed by the Revenue is dismissed. Order pronounced in the open court on 12th February, 2025 Sd/- Sd/- (M. BALAGANESH) (YOGESH KUMAR U.S.) ACCOUNTANT MEMBER JUDICIAL MEMBER Date:- 12.02.2025 R.N, Sr.P.S* 12 ITA No. 4224/Del/2024 DCIT Vs. Golden TexoFabs Pvt. Ltd. Copy forwarded to: 1. Appellant 2. Respondent 3. CIT 4. CIT(Appeals) 5. DR: ITAT ASSISTANT REGISTRAR ITAT, NEW DELHI "