ACIT, New Delhi V. Sh. Rohit Bal, New Delhi

ITA 1067/DEL/2010

• Counselvise Citation: [2010] 136 COUNSELVISE.COM (IT) 3951 (ITAT-DELHI)
• Duration Of Justice: 2 month(s) 2 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-05-2010
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: F
• Next Hearing Date: 13-05-2010
• Assessment Year: 2006-2007
• Appeal Filed On: 11-03-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: RAJESH ARORA
• Assessee Lawyers: H K LAL
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH `F: NEW DELHI BEFORE SHRI C.L.SETHI, JM & SHRI K.G. BANSAL, AM I.T. A. NO.1067/DEL OF 2010 ASSESSMENT YEAR: 2006-07 ACIT, CENTRAL CIRCLE-2, VS SH. ROHIT BAL, NEW DELHI. A-7, AMIT NAGAR, SOUTH EXTN. NEW DELHI. APPELLANT RESPO NDENT APPELLANT BY: SHRI H.K. LAL DEPARTMENT BY: SHRI RAJESH ARORA ORDER PER C.L. SETHI, JM: THE REVENUE IS IN APPEAL AGAINST THE ORDER DATED 16 .12.2009 PASSED BY THE LEARNED CIT(A) IN THE MATTER OF AN ASSESSMENT U /S 143(3) OF THE INCOME- TAX ACT, 1961 (THE ACT) PERTAINING TO ASSTT. YEAR 2 006-07. 2. GROUND NO.1 RAISED BY THE REVENUE IS AS UNDER: WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE CIT(A) HAS ERRED IN LAW AND ON FACTS IN DELETING THE ADDITION OF RS.3,61,500/- AND RS.20,92,445/- MADE ON ACCOUNT OF OUTSTANDING SUNDRY CREDITORS IN THE BOOKS OF ACCOUNT OF ASSESSEE. 2 3. IN THE COURSE OF ASSESSMENT PROCEEDINGS, IT WAS NOTICED BY THE AO THAT THE ASSESSEE HAD SHOWN SUNDRY CREDITORS AMOUNTING T O RS.8,11,500/- AGAINST FOLLOWING PARTIES: (I) AMIT EMBROIDERY RS.1,51,500/- (II) M/S R.S. EMBROIDERY RS.2,10,00/- (III) M/S ROHIT BAL DESIGN P. LTD. RS.4,50,000/- (IV) M/S IRIS COMPANY RS.20,92,445/- THE ASSESSEE WAS ASKED TO FURNISH CONFIRMATION OF T HE ABOVE CREDITORS ALONG WITH THEIR COMPLETE ADDRESS AND INCOME-TAX PARTICUL ARS. IN REPLY THERETO, ASSESSEE FILED CONFIRMATION OF M/S ROHIT BAL DESIGN P. LTD., BUT REGARDING OTHER TWO CREDITORS, THE ASSESSEE HAS SUBMITTED THA T THE AMOUNT PAYABLE TO THE OTHER TWO PARTIES, NAMELY, M/S AMIT EMBROIDERY, M/S R.S. EMBROIDERY AGGREGATING TO RS.3,61,500/- WAS FOUND TO BE NO MOR E PAYABLE AS ON 31.3.2007, AND ADDED TO THE ASSESSEES TOTAL INCOME IN ASSTT. YEAR 2007-08. THE AO DID NOT ACCEPT THE ASSESSEES EXPLANATION IN RESPECT OF THE AFORESAID SUM OF RS.3,61,500/- PAYABLE TO TWO PARTIES, AND AD DED THE SAME TO THE ASSESSEES TOTAL INCOME IN THE CURRENT YEAR. 4. IT WAS FURTHER NOTICED BY THE AO THAT THE ASSESS EE HAD ALSO SHOWN SUNDRY CREDITORS OF RS.21,57,362/-. THE AFORESAID SUNDRY CREDITORS WERE SHOWN IN THE ASSESSEES PROPRIETARY CONCERN UNDER T HE NAME AND STYLE OF M/S 3 IRIS COMPANY. THE ASSESSEE WAS ASKED TO FILE CONFI RMATIONS FROM SUNDRY CREDITORS. IN REPLY THERETO, ASSESSEE SUBMITTED TH AT THE AMOUNT OF RS.20,92,445/- PAYABLE TO THE SUNDRY CREDITORS IN T HE BOOKS OF M/S IRIS COMPANY HAS BEEN WRITTEN BACK IN PREVIOUS YEAR 2006 -07, WHEN IT WAS FOUND THAT THIS AMOUNT WAS NO MORE PAYABLE, AND OFF ERED THE SAME FOR TAX IN ASSTT. YEAR 2007-08. THE AO WAS NOT SATISFIED WITH THE ASSESSEES EXPLANATION, AND HOLD THAT THE CREDITORS WERE NO MO RE EXISTING AND, THEREFORE, THE AMOUNT WAS LIABLE TO BE ADDED AS INCOME IN THE CURRENT ASSESSMENT YEAR. THE AO, THEREFORE, MADE THE ADDITION OF RS.20,92,44 5/- ALSO. 5. ON AN APPEAL, CIT(A) HAS DELETED THE ADDITION BY CONCLUDING AS UNDER: ADVERTING BACK TO THE FACTS OF THE CASE, IT IS OBSERVED THAT THE LIABILITY WAS OUTSTANDING IN THE BOOKS OF ACCOUNTS FOR THE LAST MANY YEARS. THEREAFTER, THE APPELLANT HAS BEEN REGULARLY SHOWING THESE AMOUNTS AS OUTSTANDING IN THE BOOKS OF ACCOUNTS. THERE IS NO EVIDENCE ON THE RECORD WHICH SUGGESTED THAT THE LIABILITY WAS NOT IN EXISTENCE IN THIS YEAR. THE SUBSEQUENT CONDUCT OF THE APPELLANT IN ASSTT. YEAR 2007-08 WOULD NOT JUSTIFY THE ACTION OF THE AO IN TREATING THE OUTSTANDING LIABILITY AS TAXABLE IN THIS YEAR. IN VIEW OF THE TOTALITY OF FACTS AND CIRCUMSTANCES AND THE JUDICIAL PRECEDENTS AS DISCUSSED ABOVE, THE ADDITION MADE BY THE AO IS DELETED. 4 HENCE, THE DEPARTMENT IS IN APPEAL. 6. WE HAVE HEARD BOTH THE PARTIES AND CAREFULLY PER USED THE ORDERS OF THE AUTHORITIES BELOW. IT IS NOT IN DISPUTE THAT THE L IABILITY ON ACCOUNT OF THE CREDITORS WAS SHOWN AS OUTSTANDING IN THE BOOKS OF ACCOUNTS OF THE ASSESSEE AS ON 31.3.2006. IT IS ALSO NOT IN DISPUTE THAT TH E LIABILITY OF RS.20,92,445 AND RS.3,61,500/- WAS OUTSTANDING IN THE BOOKS OF A CCOUNT SINCE LAST MANY YEARS. THESE LIABILITIES HAVE NOT BEEN CREATED IN T HE YEAR UNDER CONSIDERATION. THERE IS NO EVIDENCE BROUGHT ON RECORD TO SHOW THAT THESE LIABILITIES HAVE BEEN CEASED, OR HAVE BEEN WAIVED BY THE CREDITORS I N THE YEAR UNDER CONSIDERATION. MERE BECAUSE THE ASSESSEE WROTE OFF THESE LIABILITIES BY CREDITING THE SAME IN THE PROFIT AND LOSS ACCOUNT I N SUBSEQUENT ASSESSMENT YEAR, THAT BY ITSELF, CANNOT BE A REASON TO HOLD TH AT THE LIABILITY HAS CEASED TO EXIST IN THE PRESENT ASSESSMENT YEAR. WE ARE, THER EFORE, INCLINED TO UPHOLD THE ORDER OF CIT(A) IN DELETING THE ADDITION OF RS. 20,92,445/- AND RS.3,61,500/-. THE ORDER OF CIT(A) ON THIS ISSUE IS , THUS, UPHELD. 7. THE NEXT GROUND RAISED BY THE REVENUE IS DIRECTE D AGAINST THE ORDER OF CIT(A) IN DELETING THE ADDITION OF RS.78,752/- MADE BY THE AO ON ACCOUNT OF EXPENSES ON CONSUMABLES, FABRICS AND LABOUR CHAR GES. IN THIS CASE, AGAINST THE TOTAL EXPORT SALES OF RS.2,99,925/-, TH E ASSESSEE CLAIMED EXPENSES ON ACCOUNT OF CONSUMABLES AT RS.15,020/-, FABRICS A T RS.46,232/- AND LABOUR 5 CHARGES AT RS.17,500/-. ALL THESE EXPENSES WERE INC URRED IN CASH. AFTER EXAMINING THE FACTS OF THE CASE, THE AO HAD TAKEN A VIEW THAT THE ASSESSEE HAS NOT ACTUALLY MADE SALE OF RS.2,99,925/- BUT THE SALES HAVE BEEN SHOWN JUST ONLY TO WRITE OFF THE LIABILITY OF THE PRECEDI NG ASSESSMENT YEAR. THUS, THE EXPENSES CLAIMED TO THE EXTENT OF RS.78,752/- C ANNOT BE ALLOWED. THE AO, THEREFORE, TAKEN THE NET INCOME AT RS.2,99,925/ - WITHOUT REDUCING THE SAME BY RS.78,752/-, BEING THE EXPENSES. IN OTHER WORDS, THE AO MADE THE ADDITION OF RS.78,752/-. 8. ON AN APPEAL, THE CIT(A) DELETED THE ADDITION BY OBSERVING AS UNDER: 6. I HAVE CAREFULLY CONSIDERED THE FACTS OF THE CASE AND THE SUBMISSIONS MADE BY THE COUNSEL FOR THE APPELLANT. IT IS A MATTER OF RECORD THAT THE S ALES HAVE BEEN SHOWN AT RS.2,99,925/- WHEREAS THE EXPENDITURE ON CONSUMABLES IS BOOKED AT RS.78,752/- WHICH IS 27% OF THE SALES AMOUNT. THE APPELLANT HAS SHOWN PROFIT @ 73%. THE EXPENDITURE ON THE CONSUMABLES IS WITHIN THE REASONABLE LIMITS. THE AO HAS NOT BROUGHT ANY EVIDENCE ON RECORD TO DISALLOW THE GENUINE EXPENDITURE INCURRED ON FABRICS, LABOUR AND OTHER ACCESSORIES. KEEPING IN VIEW THE TOTALITY OF CIRCUMSTANCES, THE ADDITION MADE BY THE AO IS DELETED. 9. AFTER CONSIDERING THE FACTS AND CIRCUMSTANCES OF THE CASE AND HAVING FOUND THAT THE AO HIMSELF HAS ACCEPTED THE INCOME A T RS.2,99,925/- WITHOUT GIVING ANY DEDUCTION ON ACCOUNT OF EXPENSES, WE ARE OF THE CONSIDERED VIEW THAT THE CIT(A) HAS RIGHTLY DELETED THE ADDITION, I NASMUCH AS, THE GROSS 6 RECEIPTS CANNOT BE BROUGHT TO TAX, AND WHAT IS TO B E TAXED IS ONLY THE NET INCOME. THE EXPENSES HAS BEEN SHOWN ONLY OF RS.78, 752/- AGAINST THE RECEIPT OF RS.2,99,925/- WHICH, IN OUR CONSIDERED O PINION, IS QUITE REASONABLE. THEREFORE, THE ORDER OF CIT(A) IN DEL ETING THE ADDITION OF RS.78,752/- IS JUSTIFIED. 10. IN THE RESULT, THE APPEAL FILED BY THE REVENUE IS DISMISSED. 11. THIS DECISION WAS PRONOUNCED IN THE OPEN COURT ON 13 TH MAY, 2010 IMMEDIATELY AFTER THE HEARING WAS OVER. (K.G. BANSAL) (C.L . SETHI) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 13 TH MAY , 2010 VIJAY COPY TO: 1. APPELLANT. 2. RESPONDENT. 3. CIT 4. 5. CIT(A)-III, NEW DELHI 6. DR ASSISTANT REGISTRAR