M/s. M.M. Industries, New Delhi V. ITO, Faridabad

ITA 1302/DEL/2016

• Counselvise Citation: [2017] 130 COUNSELVISE.COM (IT) 7126 (ITAT-DELHI)
• Duration Of Justice: 9 month(s) 25 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 03-01-2017
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: SMC 3
• Next Hearing Date: 08-11-2016
• Assessment Year: 2007-2008
• Appeal Filed On: 09-03-2016
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Keywords: Income from undisclosed sources; Notional interest
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH SMC-3, NEW DELHI BEFORE SHRI H.S. SIDHU, JUDICIAL MEMBER I.T.A. NO. 1302/DEL/2016 A.Y. : 2007-08 M/S M.M. INDUSTRIES, C/O RRA TAXINDIA, D-28, SOUTH EXTENSION, PART-I, NEW DELHI 110 049 (PAN: AALFM2320G) VS. ITO, WARD-II(4), FARIDABAD (APPELLANT) (RESPONDENT) ASSESSEE BY : SH. SOMIL AGGARWAL, ADV. & SH. DEEPESH DEPARTMENT BY : SH. ANIL KUMAR SHARMA, SR. DR ORDER ASSESSEE HAS FILED THIS APPEAL AGAINST THE IMPUGNE D ORDER DATED 28.1.2016 PASSED BY THE LD. CIT(A), FARIDABAD RELEVANT TO ASSESSMENT YEAR 2007-08 ON THE FOLLOWING GROUNDS :- 1. THAT HAVING REGARD TO THE FACTS AND CIRCUMSTANCES OF THE CASE, LD. CIT(A) HAS ERRED IN LAW AND ON FACTS IN UPHOLDING THE ACTION OF THE LD. A.O. IN MAKING AN AD DITION OF RS.57,498/- OUT OF THE TOTAL DISALLOWANCE MADE BY LD. A.O. OF RS. 2,28,000/- ON ACCOUNT OF INCOME FROM INTER EST ON LOANS AND ADVANCE. 2 2. THAT IN ANY CASE AND IN ANY VIEW OF THE MATTER, ACTI ON OF LD. CIT(A) IN CONFIRMING THE ACTION OFLD. AO IN MAKI NG AN ADDITION OF RS. 57,498/- IS BAD IN LAW AND AGAINST T HE FACTS AND CIRCUMSTANCES OF THE CASE. 3. THAT HAVING REGARD TO THE FACTS AND CIRCUMSTANCES O F THE CASE, LD. CIT(A) HAS ERRED IN LAW AND ON FACTS IN UPHOLDING THE ACTION OF THE LD. A.O. IN MAKING AN AD DITION OF RS.54,688/- OUT OF THE TOTAL DISALLOWANCE MADE BY LD. A.O. OF RS.2,73,438/- ON ACCOUNT OF ALLEGED EXPENSES CLAIMED. 4. THAT IN ANY CASE AND IN ANY VIEW OF THE MATTER, ACTI ON OF LD. CIT(A) IN CONFIRMING THE ACTION OF LD. AO IN MAK ING AN ADDITION OF RS. 54,688/- IS BAD IN LAW AND AGAINST T HE FACTS AND CIRCUMSTANCES OF THE CASE. 5. THAT HAVING REGARD TO THE FACTS AND CIRCUMSTANCES O F THE CASE, LD. CIT(A) HAS ERRED IN LAW AND ON FACTS IN UPHOLDING THE ACTION OF THE LD. A.O. IN TREATING AN AMOUNT OF RS. 8,400/- AS INCOME FROM UNDISCLOSED SOURCES BY STATING INCORRECT FACTS AND WITHOUT ANY BASIS 6. THAT HAVING REGARD TO THE FACTS AND CIRCUMSTANCE S OF THE CASE, LD. CIT(A) HAS ERRED IN LAW AND ON FACTS IN UPH OLDING THE ACTION OF THE LD. A.O. IN TREATING AN AMOUNT OF RS. 43,300/- AS INCOME FROM UNDISCLOSED SOURCES BY STAT ING INCORRECT FACTS AND WITHOUT ANY BASIS. 7. THAT IN ANY CASE AND IN ANY VIEW OF THE MATTER AC TION OF LD. CIT(A) IN CONFIRMING THE ACTION OF LD. A.O IN MA KING THE 3 IMPUGNED ADDITIONS ARE BAD IN LAW AND AGAINST THE F ACTS AND CIRCUMSTANCES OF THE CASE. 8. THAT THE APPELLANT CRAVES THE LEAVE TO ADD, ALTER OR AMEND THE GROUNDS OF APPEAL AT ANY STAGE AND ALL THE GROU NDS ARE WITHOUT PREJUDICE TO EACH OTHER. 2. THE BRIEF FACTS OF THE CASE ARE THAT ASSESSEE FI LED THE RETURN OF INCOME ON 30.10.2007 DECLARING INCOME OF R S. 1,40,030/-. THE CASE WAS PICKED UP FOR SCRUTINY AND N OTICE U/S. 143(2) WAS ISSUED AND SERVED UPON THE ASSESSEE ON 29.9.2008. THEREAFTER FRESH NOTICES U/S. 143(2) & 142( 1) ALONGWITH DETAILED QUESTIONNAIRE WERE ISSUED ON 13. 5.2009. IN RESPONSE TO THE NOTICE, ASSESSEES A.R. ATTENDED THE PROCEEDINGS AND FILED THE REPLY FROM TIME TO TIME. THE ASSESSEE WAS ENGAGED IN THE BUSINESS OF MANUFACTURI NG ACTIVITIES OF ABRASIVE GOODS, MAINLY COATED ABRASIV E. VARIOUS DETAILS WERE CALLED WHICH WAS FURNISHED BY THE ASSE SSEE. THEREAFTER, THE AO VIDE HIS ORDER DATED 29.12.2009 PAS SED U/S. 143(3) OF THE I.T. ACT, 1961 HAS ASSESSED THE INCOME OF THE ASSESSEE AT RS. 17,43,860/- AND MADE VARIOUS ADDITIO NS. 4 3. AGAINST THE ORDER OF THE LD. AO, ASSESSEE APPEALE D BEFORE THE LD. CIT(A), WHO VIDE IMPUGNED ORDER DATE D 28.1.2016 HAS PARTLY ALLOWED THE APPEAL OF THE ASSES SEE. 4. AGGRIEVED WITH THE IMPUGNED ORDER DATED 28.1.201 6 PASSED BY THE LD. CIT(A), ASSESSEE IS IN APPEAL BEF ORE THE TRIBUNAL. 5. AT THE THRESHOLD, LD. COUNSEL OF THE ASSESSEE STA TED THAT HE IS NOT PRESSING THE GROUND NO. 5 & 6, HENCE, THE SA ME ARE DISMISSED AS NOT PRESSED. WITH REGARD TO OTHER ADDI TIONS, LD. COUNSEL OF THE ASSESSEE HAS STATED THAT THE ADDITI ONS IN DISPUTE ARE PURELY MADE ON ADHOC/ESTIMATION BASIS WHICH ARE NOT SUSTAINABLE IN THE EYES OF LAW. ACCORDINGLY, HE REQUESTED THAT THE ADDITIONS RESTRICTED BY THE LD. CIT(A) MAY BE DELETED. 6. ON THE OTHER HAND, LD. DR HAS HEAVILY RELIED UP ON THE ORDER OF THE AUTHORITIES BELOW. 7. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE RECORDS. AS REGARDS GROUND NO. 1 & 2 ARE CONCERNED RELATING TO CONFIRMATION OF ADDITION OF RS. 57,498/- ON ACCOUNT OF INCOME FROM INTEREST ON LOANS AND ADVANCE. THE ADDITION OF RS. 5 2,28,000/- MADE BY THE AO ON ACCOUNT OF INTEREST FRE E LOANS GIVEN TO M/S MM ABRASIVES. ON THIS ISSUE LD. CIT(A) HAS OBSERVED THAT AO HAS MADE THE ADDITIONS ON ACCOUNT OF NOTIONAL INTEREST. HOWEVER, THERE IS NO PROVISIONS U NDER THE INCOME TAX ACT WHEREIN THE NOTIONAL INTEREST CAN BE TAXED. THE ADDITION MADE BY THE AO AND FURTHER RESTRICTED BY T HE LD. CIT(A) IS ADHOC AND WITHOUT ANY BASIS WHICH IS NOT PERMISSIBLE UNDER THE LAW. HENCE, THE DISALLOWANCE RESTRICTED T O RS. 57,948/- BY THE LD. CIT(A) IS NOT SUSTAINABLE IN TH E EYES OF LAW, THEREFORE, THE SAME IS DELETED AND ACCORDINGLY, T HE GROUND NO. 1 & 2 ARE ALLOWED. 7.1 AS REGARDS GROUND NO. 3 & 4 ARE CONCERNED RELATI NG UPHOLDING OF ADDITION OF RS. 54,688/- ON ACCOUNT OF ALLEGED EXCESS ADMINISTRATIVE AND SELLING EXPENSES CLAIMED. THE AO MADE THIS ADHOC ADDITION IN THE ABSENCE OF ANY DET AILS BEING SUBMITTED BY THE ASSESSEE DURING THE COURSE OF ASSE SSMENT PROCEEDINGS AND SUBSEQUENTLY THE REQUIRED DETAILS W ERE SUBMITTED DURING THE COURSE OF APPELLATE PROCEEDING S. BUT DURING THE ASSESSMENT PROCEEDINGS, THE AO HAS NOT P OINTED OUT ANY DISCREPANCIES IN THE BOOKS OF ACCOUNTS, BILLS AN D VOUCHERS 6 AND MADE THE ADHOC DISALLOWANCE WHICH WAS FURTHER R ESTRICTED BY THE LD. CIT(A) TO RS. 54,688/- HAS NO BASIS AND IS ONLY BASED UPON ESTIMATE BASIS WHICH IS NOT SUSTAINABLE IN THE EYES OF LAW, THEREFORE, THE SAME IS DELETED AND ACCORDING LY, THE GROUND NO. 3 & 4 ARE ALLOWED. 8. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE STANDS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 03/1/2017. SD/- [H.S. SIDHU] JUDICIAL MEMBER DATE 03/1/2017 SRBHATNAGAR COPY FORWARDED TO: - 1. APPELLANT - 2. RESPONDENT - 3. CIT 4. CIT (A) 5. DR, ITAT ASSISTANT REGISTRAR, ITAT, DELHI BENCHES