ACIT, New Delhi V. M/s Veekay General Industries, Delhi

ITA 170/DEL/2016

• Counselvise Citation: [2019] 118 COUNSELVISE.COM (IT) 0797 (ITAT-DELHI)
• Duration Of Justice: 3 year(s) 2 month(s) 14 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-03-2019
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: E
• Assessment Year: 2011-2012
• Appeal Filed On: 13-01-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: VP BANSAL
• Keywords: Additional evidence; Set aside

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCE E, NEW DELHI BEFORE SHRI R.K.PANDA, ACCOUNTANT MEMBER AND SHRI KULDIP SINGH, JUDICIAL MEMBER ITA NO.170 /DEL./2016 (ASSESSMENT YEAR : 2011-12) ASSISTANT COMMISSIONER OF INCOME TAX VS. VEEKAY GEN ERAL INDUSTRIES CIRCLE 55(1), B-46, JHILMIL INDUSTRIAL AREA, SHAHDARA NEW DELHI DELHI PAN : AAAFV1849E APPELLANT RESPONDENT ASSESSEE BY : SH. V.P.BANSAL, CA REVENUE BY : SMT. RINKU SINGH, SR.DR DATE OF HEARING : 12 .03.2019 DATE OF ORDER : 27.03.2019 O R D E R PER KULDIP SINGH, JUDICIAL MEMBER : THE APPELLANT ASSISTANT COMMISSIONER OF INCOME TAX, NEW DELHI (HEREINAFTER REFERRED TO AS 'THE REVENUE') BY FILING THE AFORESAID APPEAL, SOUGHT TO SET ASIDE THE IMPUGNED ORDER DATE D 27/10/2015 PASSED BY LD. COMMISSIONER OF INCOME TAX(APPEALS)-1 9, NEW DELHI QUA THE ASSESSMENT YEAR 2011-12 ON THE GROUNDS INT ER ALIA THAT : ITA NO. 170/DEL/2016 2 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE ORDER OF THE LD. CIT(A) IS BAD IN LAW AND NOT IN CONSONANCE WITH THE FACTS OF THE CASE. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E, THE LD. CIT(A) HAD ERRED IN ACCEPTING THE ADDITIONAL EVIDENCES UNDER RULE 46A AND THUS GRANTING RELIEF TO THE ASSESSEE. IN THIS CASE RELIA NCE IS PLACED ON THE CASE OF CIT VS. MANISH BUILDWELL PVT. LTD. OF THE HONBLE DELHI HIGH COURT. 3. THE LD. CIT(A) HAS ERRED IN LAW AND ALSO ON FACTS BY DELETING THE ADDITION OF RS. 1,37,16,403/- U/S 68 ON ACCOUNT OF UN-RECONCILED BALANCES. 4. THE CIT(A) HAS ERRED IN LAW AND ALSO ON FACTS BY DELETING THE ADDITION OF RS. 42,90,700/- ON ACCOUNT OF UNDER STATEMENT OF INCOME ACCRUED ON INTEREST. 5. THE LD. CIT(A) HAS ERRED IN LAW IN DELETING THE ADDITION MADE AT RS. 7,30,084/- ON ACCOUNT OF INTEREST EXPENSES ON BORROWED FUNDS USED FOR INVESTMENT IN MARGIN MONEY RELIANCE IS PLACED ON THE CASE OF ABHISHEK INDUSTRIES, 286 ITR 1 (P&H), HIGH COURT. 6. THE APPELLANT CRAVES LEAVE TO ADD, ALLOW OR AMEND ANY/ALL THE GROUNDS OF APPEAL BEFORE OR DURING THE COURSE OF HEARING OF THE APPEAL. 2. BRIEFLY STATED THAT FACTS NECESSARY FOR ADJUDICA TION OF THE CONTROVERSY AT HAND ARE : ASSESSEE IS ENGAGED IN T HE BUSINESS OF ITA NO. 170/DEL/2016 3 MANUFACTURING OF COPPER AND ALUMINIUM ALLOYS WIRES AND CONDUCTORS AND SUPPLIES ITS PRODUCTS TO INDIAN RAIL WAY OR TO THE PARTIES WHO ARE SUPPLIERS TO RAILWAYS. AO NOTICED B ALANCE OUTSTANDING IN THE ACCOUNT OF M/S. ECI ENGINEERING CONSTRUCTION COMPANY LTD. IS NOT MATCHING WITH BALA NCE OUTSTANDING IN L/C DISCOUNTED ACCOUNT WITH HDFC BAN K LTD. DECLINING THE EXPLANATION MADE BY THE ASSESSEE AO M ADE ADDITION OF RS. 1,37,16,403/-. AO ALSO NOTICED FROM THE LEDGER ACCOUNT OF M/S. ECI ENGINEERING THAT NO SUCH INTERE ST AMOUNT OF RS. 42,90,700/- WAS DEBITED IN THE PARTY LEDGER AND AS SUCH PROCEEDED TO HOLD THAT INCOME OF RS. 42,90,700/- WA S INTERNALLY SET-OFF IN A VEILED MANNER AND CONSEQUENTIALLY MADE ADDITION TO THE TOTAL INCOME OF THE ASSESSEE. AO ALSO MADE ADDI TION OF RS. 7,30,084/- OUT OF EXPENDITURE INCURRED BY THE ASSES SEE ON INTEREST PAID ON FUNDS BORROWED FOR THE PURPOSES OF BUSINESS . ON THE GROUND THAT THE ASSESSEE WAS ENGAGED IN THE PURCHAS E OF SALE OF COPPER FUTURES ON THE MULTI COMMODITY EXCHANGE. AO THEREBY ASSESSED THE TOTAL INCOME OF RS. 2,09,65,330/-. 3. ASSESSEE CARRIED THE MATTER BEFORE LD. CIT(A) BY WAY OF FILING THE APPEAL WHO HAS DELETED THE ADDITION BY P ARTLY ALLOWING THE APPEAL. FEELING AGGRIEVED THE REVENUE HAS COME UP BEFORE THE TRIBUNAL BY WAY OF FILING THE PRESENT APPEAL. ITA NO. 170/DEL/2016 4 4. WE HAVE HEARD THE LD. DR FOR THE REVENUE AND GON E THROUGH THE ORDER PASSED BY THE LOWER REVENUE AUTHO RITIES. 5. LD. DR FOR THE REVENUE CHALLENGING THE IMPUGNED ORDER PASSED BY LD. CIT(A) RELIED UPON THE ASSESSMENT ORD ER. HOWEVER, ON THE OTHER HAND THE LD. AR FOR THE ASSES SEE RELIED UPON THE ORDER PASSED BY LD. CIT(A) AND CONTENDED T HAT ACCOUNTS HAVE BEEN DULY RECONCILED GROUND NO. 1 6. DURING THE COURSE OF APPELLANT PROCEEDINGS, ASSE SSEE HAS FILED BILL WISE DETAILS OF L/CS AND THEIR DISCOUNTI NG ON MATURITY AND TABULATED THE SAME AT PAGE 6. IT IS ALSO NOT IN DISPUTE THAT THE ASSESSEE HAD RECEIVED THE ADVANCE OF RS. 3 CROR E FROM M/S. ECI ENGINEERING CONSTRUCTION OUT OF WHICH RS. 1 CRO RE WAS PAID AND THE AMOUNT OF RS. 2 CRORE WAS BALANCE OUTS TANDING. IT IS ALSO EXPLAINED BY ASSESSEE THAT INVOICES DATED 1 1.03.2011 OF INTEREST AMOUNTING TO RS. 4,63,913/- AND BILL NO. 2 45 AMOUNTING TO RS. 65,68,138/- WHERE L/C WAS SHORT BY RS. 15,28,977/-. 7. ASSESSEE HAS BROUGHT ON RECORD BALANCE SHEET, P & L ACCOUNT, LIST OF DEBTORS AND CREDITORS, COPY OF ACC OUNT OF LC DISCOUNTED WITH HDFC BANK, COPY OF ACCOUNT OF ECI ITA NO. 170/DEL/2016 5 ENGINEERING AND CONSTRUCTION COMPANY. FROM THE LETT ER DATED 20.02.2014 WRITTEN TO AO AVAILABLE AT PAGE 22 TO 26 OF THE PAPER BOOK ALONG WITH RECONCILIATION STATEMENT AVAI LABLE AT PAGE 27 DULY EXPLAINS THE FACT BUT THE AO COULD NOT LOCATE THE DIFFERENCE AND VERIFY THAT THE DIFFERENCE OCCURRED BETWEEN TWO ACCOUNTS BECAUSE OF SECURITY DEPOSIT. 8. LD. CIT(A) HAS RIGHTLY REACHED THE CONCLUSION TH AT SINCE THE DIFFERENCE ON THE ACCOUNT OF INTEREST AND RECOV ERY OF THE SALE HAVE BEEN DULY ACCOUNTED IN THE BOOKS OF ACCOU NTS NOTHING LEFT TO SHOW ESCAPEMENT OF INCOME AND THERE BY DELETED THE ADDITION. THE LD. DR FOR THE REVENUE HAS NOT SP ECIFICALLY POINTED OUT IF THE RECONCILIATION MADE IN PARA 8 OF THE IMPUGNED ORDER PASSED BY LD. CIT(A) IS NOT TALLYING WITH BOOK OF ACCOUNTS OTHERWISE ACCEPTED BY THE AO. SO WE FIN D NO ILLEGALITY OR PERVERSITY IN DELETING THE ADDITION O F RS. 1,37,16,403/- BY LD. CIT(A), HENCE, GROUND NO. 1 DE TERMINED AGAINST THE REVENUE. GROUND NO. 2 8. AO NOTICED FROM THE LEDGER ACCOUNT OF THE ASSESS EE THAT THERE WAS AN AMOUNT OF INTEREST ACCRUED TO THE TUNE OF RS. 42,90,700/- WHICH HAS NOT BEEN DEBITED TO THE LEDGE R ACCOUNT OF M/S. ECI ENGINEERING CONSTRUCTION COMPANY LTD. A ND ITA NO. 170/DEL/2016 6 REACHED THE CONCLUSION THAT THE AMOUNT OF DEBTOR NA MELY M/S. ECI ENGINEERING CONSTRUCTION COMPANY WAS UNDERSTATE D AND AS SUCH INCOME OF THE ASSESSEE HAS BEEN INTERNALLY SET-OFF IN A VEILED MANNER TO THE TUNE OF RS. 42,90,700/-. 9. THE LD. CIT(A) DELETED THE ADDITION BY AFTER VER IFYING THE FACT THAT THE INTEREST RECEIVABLE HAS BEEN DULY SHO WN UNDER THE HEAD LOAN AND ADVANCES AS PER ACCOUNTING THE ENTR Y GIVEN BELOW :- INTEREST ACCRUED DEBIT 42,90,700/- TO INTEREST RECEIVED 42,90,700/- INTEREST RECEIVED ACCOUNT DEBIT 42,90,700/- TO P & L ACCOUNT 42,90,700/- SO, WHEN THE ENTIRE AMOUNT OF INTEREST HAS ALREADY BEEN OFFERED TO TAX, THERE IS NO QUESTION OF UNDERSTATING THE AM OUNT OF RS. 42,90,700/- BY THE ASSESSEE. SO, LD. CIT(A) HAS RIG HTLY DELETED THIS ADDITION, HENCE, GROUNDS NO. 2 IS ALSO DETERMI NED AGAINST THE ASSESSEE. GROUND NO. 3 10. ASSESSING OFFICER MADE ADDITION OF RS. 7,30,084 /- OUT OF EXPENDITURE INCURRED BY THE ASSESSEE ON INTEREST PA ID ON BORROWED FUNDS ON THE GROUND THAT THE SAME WERE USE D FOR ITA NO. 170/DEL/2016 7 FUTURE TRADING AS THE ASSESSEE IS FOUND TO HAVE PUR CHASED FUTURES TO THE TUNE OF RS. 52.00 LACS. HOWEVER, IT IS THE CASE OF THE ASSESSEE THAT SINCE COPPER WAS THE MAIN RAW MAT ERIAL AND TO SAFE GUARD PRICE FLUCTUATION FOR THE RAW MATERIAL H E WAS HEDGING IN THE FUTURE MARKET. 11. THE LD. CIT(A) HAS RIGHTLY REACHED THE CONCLUSI ON THAT SINCE THE ASSESSEE COMPANY IS A CASH RICH COMPANY W ITH SUBSTANTIAL BANK DEPOSIT AND THE ASSESSING OFFICER HAS FAILED TO BRING ON RECORD ANY NEXUS BETWEEN THE FUNDS BORROWE D AND INVESTMENT MADE IN THE MARGIN MONEY IN THE FUTURE M ARKET, THE BUSINESS EXPEDIENCY OF DISCOUNTING L/C BILLS IS PROVED WHEN SUFFICIENT WORKING CAPITAL IS THERE WITH THE A SSESSEE. THE AO IS NOT TO DECIDE THE BUSINESS EXPEDIENCY OF THE ASSESSEE QUA DISCOUNTING L/C BILLS, WHEN THERE WAS SUFFICIEN T WORKING CAPITAL. 12. SO THE VIEW TAKEN BY THE CIT(A) THAT HEDGE WAS CARRIED OUT TO SAFEGUARD THE FLUCTUATION IN THE PRICE OF CO PPER, WHICH IS CERTAINLY FOR THE PURPOSE OF BUSINESS AS THE COP PER WAS THE MAIN RAW MATERIAL IN THE BUSINESS OF THE ASSESSEE, IS SUSTAINABLE AND NEEDS NO INTERFERENCE. HENCE, LD. CIT(A) HAS RIGHTLY DELETED THE ADDITION, RESULTANTLY GROUND N O. 3 IS DETERMINED IN AGAINST THE ASSESSEE. ITA NO. 170/DEL/2016 8 12. IN VIEW OF WHAT HAS BEEN DISCUSSED ABOVE PRESE NT APPEAL FILED BY THE REVENUE IS HEREBY DISMISSED. ORDER PRONOUNCED IN OPEN COURT ON THIS 27 TH MARCH, 2019. SD/- SD/- (R.K.PANDA) ( KULDIP SINGH) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 27 TH /03/ 2019 BR COPY FORWARDED TO: 1.APPELLANT 2.RESPONDENT 3.CIT 4.CIT(A)-XXVI, NEW DELHI. 5.CIT(ITAT), NEW DELHI. AR, ITAT NEW DELHI DATE OF DICTATION 12.03.2019 DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE DICTATING MEMBER DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE OTHER MEMBER DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR. PS/PS DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE DICTATING MEMBER FOR PRONOUNCEMENT DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR. PS/PS DATE ON WHICH THE FINAL ORDER IS UPLOADED ON THE WEBSITE OF ITAT DATE ON WHICH THE FILE GOES TO THE BENCH CLERK DATE ON WHICH THE FILE GOES TO THE HEAD CLERK THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT REGISTRAR FOR SIGNATURE ON THE ORDER DATE OF DISPATCH OF THE ORDER ITA NO. 170/DEL/2016 9