DCIT, New Delhi V. M/s. Addagio Overseas, New Delhi

ITA 1781/DEL/2013

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 81549 (ITAT-DELHI)
• Duration Of Justice: 1 year(s) 4 month(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-08-2014
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 22-07-2014
• Assessment Year: 2009-2010
• Appeal Filed On: 26-03-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: A MISHRA
• Assessee Lawyers: S K CHATURVEDI
• Keywords: Unexplained cash credit
• Section: 40A(3); 142(1); 133A; 132; 6

Judgement Text

ITA NO. 1781/DEL/2013 1 IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH A, NEW DELHI BEFORE SHRI G.D. AGRAWAL, VICE PRESIDENT AND SHRI H.S. SIDHU, JUDICIAL MEMBER I.T.A. NO. 1781/DEL/2013 A.Y. : 2009-10 DCIT, CENTRAL CIRCLE-2, DELHI, ROOM NO. 323, 3 RD FLOOR, ARA CENTRE, JHANDEWALAN EXTN., NEW DELHI VS. M/S ADDAGIO OVERSEAS, 1/18-B, ASAF ALI ROAD, NEW DELHI (PAN:AAFFA4164Q) (APPELLANT) (APPELLANT) (APPELLANT) (APPELLANT) (RESPONDENT) (RESPONDENT) (RESPONDENT) (RESPONDENT) DEPARTMENT BY : S MT. A. MISHRA, CIT(DR) ASSESSEE BY : SH. S.K. CHATURVEDI, CA ORDER ORDER ORDER ORDER PER PER PER PER H.S. SIDHU H.S. SIDHU H.S. SIDHU H.S. SIDHU : : : : J JJ JM MM M THIS APPEAL BY THE REVENUE IS DIRECTED AGAINST THE ORDER OF THE LD. COMMISSIONER OF INCOME TAX (APPEALS-III), NEW D ELHI DATED 08.1.2013 PERTAINING TO ASSESSMENT YEAR 2009-10. 2. THE GROUNDS RAISED READ AS UNDER:- 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E, THE LD. CIT(A) HAS ERRED IN DELETING THE ADDITION OF RS. 5, 48,607/- MADE BY THE AO ON ACCOUNT OF DIFFERENCE IN INVENTOR Y OF STOCK FOUND DURING SURVEY AND THE VALUE OF STOCK A S PER BOOKS OF ACCOUNT. ITA NO. 1781/DEL/2013 2 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E, THE LD. CIT(A) AHS ERRED IN DELETING THE ADDITION OF RS. 6 ,97,500/- BEING MADE ON THE BASIS OF DETAILS CONTAINED ON PAG E NO. 104 OF ANNEXURE A-2, IMPOUNDED DURING THE COURSE OF SURVEY. 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E, THE CIT(A) HAS ERRED IN DELETING THE ADDITION OF RS. 26,39,041/- BEING MADE ON THE BASIS OF DETAILS OF PRINCIPAL AND INTEREST EARNED THEREON CONTAINED ON PAGE NO. 101 OF ANNEXURE A-2, IMPOUNDED DURING THE COUR SE OF SURVEY. 4. ON THE FACTS AND IN THE CIRCUMSTANCE OF THE CASE , THE LD. CIT(A) HAS ERRED IN DELETING THE ADDITION OF RS. 14,42,058/- BEING THE ADDITION MADE ON ACCOUNT OF S CRAP CALCULATED ON THE BASIS OF DETAILS CONTAINED ON PAG E NO. 95 OF ANNEXURE A-2, IMPOUNDED DURING THE COURSE OF SURVEY. 5. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E, THE LD. CIT(A) HAS ERRED IN DELETING THE DISALLOWANCE OF RS . 93,910/- MADE BY THE AO ON ACCOUNT OF LATE DEPOSIT OF EMPLOYEES CONTRIBUTION TOWARDS PDS AND ESI. ITA NO. 1781/DEL/2013 3 6. THE ORDER OF THE CIT(A) IS ERRONEOUS AND IS NOT TENABLE ON FACTS AND IN LAW. 7. THE APPELLANT CRAVES LEAVE TO ADD, ALTER OR AMEN D ANY / ALL OF THE GROUNDS OF APPEAL BEFORE OR DURING THE C OURSE OF THE HEARING OF THE APPEAL. 3. THE BRIEF FACTS OF THE CASE ARE THAT A SEARCH AN D SEIZURE OPERATION U/S. 132 OF THE I.T. ACT, 1961 WAS CARRIE D OUT BY THE INVESTIGATION WING ON 26.2.2008 AT SHRI RAM HARI RA M GROUP OF CASES. DURING THE COURSE OF SEARCH AND SURVEY IN THE GROUP CASES, AMONGST OTHER CASES, THE CASE OF SH. RAJAT GUPTA WA S AND THE CASE OF M/S MAJESTIC PROPERTIES LTD. WAS COVERED U/S. 13 2 / 133A OF THE I.T. ACT, 1961. DURING THE SURVEY, ON THE PREMISES OF M /S MAJESTIC PROPERTIES P LTD., IT HAS COME TO THE NOTICE THAT ONE CONCERN, NAMELY M/S ADDAGIO IS BEING MANAGED BY SH. RAJAT G UPTA AND ACCORDINGLY A SURVEY WAS ALSO CONDUCTED AT THE BUS INESS PREMISES OF THE SAME CONCERN AT ITS GURGAON OFFICE. E-RETU RN OF INCOME DECLARING INCOME OF RS. 7.30,940/- WAS FILED BY THE ASSESEE ON 30.9.2008. A NOTICE U/S. 142(1) OF THE I.T. ACT, 1 961 WAS ISSUED TO THE ASSESSEE ON 16.4.2010, REQUIRING IT TO FILE C OPY OF RETURN OF INCOME ON 23.4.2010 AND THE SAME WAS PROCESSED U/S. 143(1) OF THE I.T. ACT, 1961 AT THE RETURNED INCOME. ITA NO. 1781/DEL/2013 4 3.1 THE CASE WAS SELECTED FOR COMPULSORY SCRUTINY. NOTICE U/S. 143(2) OF THE I.T. ACT, 1961 WAS ISSUED TO THE ASSE SSEE ON 13.7.2010, WHICH WAS DULY SERVED UPON THE ASSESSEE. SUBSEQUENTLY, A QUESTIONNAIRE ALONG WITH NOTICE U/S . 142(1) OF THE I.T. ACT, 1961 WAS ISSUED TO THE ASSESSEE ON 23.8.2 010. DUE TO CHANGE OF INCUMBENCY, A NOTICE U/S. 143(2) OF THE I .T. ACT, 1961 WAS ISSUED TO THE ASSESSEE ON 30.10.2011 AND THE LD. CO UNSEL OF THE ASSESSEE FURNISHED THE DETAILS CALLED FOR. AFTER E LABORATELY CONSIDERATION, AO ASSESSED THE ASSESSEE AT AN INCO ME OF RS. 1,84,58,870/-, BY MAKING AMONG OTHERS, THE FOLLOWIN G ADDITIONS / DISALLOWANCES:- S.NO. S.NO. S.NO. S.NO. PARTICULARS PARTICULARS PARTICULARS PARTICULARS AMOUNT (IN RS.) AMOUNT (IN RS.) AMOUNT (IN RS.) AMOUNT (IN RS.) 1. UNRECORDED INVESTMENT IN STOCK 5,48,607 2. DISALLOWANCE OF EXPENDITURE UNDER SECTION 40A(3) 6,97,500 3. UNEXPLAINED CASH CREDIT AND INTEREST THEREON 26,39,041 4. UNACCOUNTED SALE OF SCRAP 14,42,058 5. LATE DEPOSIT OF PROVIDENT FUND 93,910 6. UNEXPLAINED CASH DEPOSIT IN BANK ACCOUNT 1,18,65,000 4. AGAINST THE ABOVE ORDER THE ASSESSEE APPEALED BE FORE THE LD. CIT(A). LD. CIT(A) ELABORATELY DISCUSSED THE ISSUES IN HIS ORDER AND ACCORDINGLY, DELETED THE ADDITIONS MADE BY THE AO . 5. AGAINST THE ABOVE ORDER THE REVENUE IS IN APPEAL BEFORE US. 6. WE HAVE HEARD BOTH THE COUNSEL AND PERUSED THE RECORDS. ITA NO. 1781/DEL/2013 5 7. WITH REGARD TO ADDITION OF RS. 5,48,607/-, WE FI ND THAT AO HAS TREATED THE EXCESS VALUE OF STOCK AMOUNTING TO RS. 5,48,607/- AS BEING ACQUIRED FROM SOURCES OUTSIDE THE BOOKS OF AC COUNTS. WE ALSO FIND THAT LD. CIT(A)S HAS OBSERVED FROM THE DETA ILS RELATING TO SURVEY ACTION THAT THE STOCK AS PER BOOKS OF ACCOUN T AS ON THE DATE OF SURVEY I.E. 26.2.2009 (IN THE ABSENCE OF STOCK REGISTER) WAS ARRIVED AT BY APPLYING THE GP RATE OF FINANCIAL YE AR 31.3.2008. IT IS ALSO FACT THAT NO INCRIMINATING DOCUMENTS RELATING TO PURCHASE AND SALES MADE OUT SIDE THE BOOKS WERE FOUND. IT WAS FU RTHER SEEN FROM THE LIST OF INVENTORY RECORDED ON THE DATE OF SURVE Y, THAT THE VALUE OF STOCK WAS TAKEN BY THE SURVEY TEAM WAS ON ADHOC BAS IS. LD. CIT(A) HAS FOUND THAT THE VALUE OF PHYSICAL INVENTORY FOUN D ON THE DATE OF SURVEY IS ARRIVED AT BY PREPARING A TRADING ACCOUNT , THAT TOO TAKING THE GROSS PROFIT OF PREVIOUS YEAR AS A BASE, AND CO NSIDERING THE FACT THAT NO INCRIMINATING DOCUMENTS WITH REGARD TO SALE S AND PURCHASES OUTSIDE THE BOOKS OF ACCOUNTS HAVE BEEN FOUND DURIN G THE SURVEY, IN THESE CIRCUMSTANCES, THE EXCESS STOCK OF RS. 5,4 8,607/- BEING DIFFERENCE IN THE VALUE OF PHYSICAL STOCK AS PER BO OK CANNOT BE SUSTAINED. IN VIEW OF THE ABOVE, WE FIND THAT LD. CIT(A) HAS RIGHTLY DELETED THE ADDITION OF RS. 5,48,607/-, WHICH DOES NOT NEED ANY INTERFERENCE ON OUR PART, HENCE, THE SAME IS UPHELD . 8. WITH REGARD TO ADDITION OF RS. 6,97,500/- UNDER SECTION 40A(3), WE FIND THAT ASSESSEE HAS EXPLAINED TO THE AO THAT THE NOTINGS WERE OF THE TAG PRICE OF ITEMS WHICH WERE SOLD VIDE IN VOICE NO. 82 DATED 23.9.2008. THE AO HOWEVER DID NOT ACCEPT THE ASSESS EES CONTENTION AND TREATED THAT THE NOTINGS ON THE SEIZ ED PAPER ARE THE EXPENDITURE INCURRED BY THE ASSESSEE AND SINCE THE EXPENDITURE WAS MORE THAN RS. 20,000/- CASH, THEREFORE, THE SAME IS DISALLOWABLE UNDER SECTION 40A(3). WE ALSO FIND THAT LD. HAS OB SERVED THAT ASSESSEE DISALLOWED THE EXPENDITURE BY INVOKING THE PROVISIONS OF ITA NO. 1781/DEL/2013 6 SECTION 40A(3) I.E. PAYMENT MADE IN EXCESS OF RS. 2 0,000/- IN CASH. AS PER CIT(A) THE DISALLOWANCE OF EXPENSES UNDER SE CTION 40A(3), CAN BE INVOKED PROVIDED THE SAID EXPENDITURE IS EN TERED IN THE BOOKS OF ACCOUNTS. THEREFORE, THE AO HAS TO GIVE FIRST FINDING THAT THE NOTING MENTIONED ON PAGE 104 (SEIZED DURING THE SURVEY) ARE DULY REFLECTED IN THE REGULAR BOOKS OF ACCOUNTS A ND ONLY THAN HE CAN INVOKE THE PROVISIONS OF SECTION 40A(3) AND DI SALLOW THE PAYMENTS MADE IN CASH IN EXCESS OF RS. 20,000/-. LD . CIT(A) FOUND FROM THE ASSESSMENT ORDER THAT NO SUCH FINDINGS IS THERE ON THIS ASPECT, HENCE, NO DISALLOWANCE CAN BE MADE UNDER SE CTION 40A(3). WE FIND THAT LD. CIT(A) HAS RIGHTLY DELETED THE ADD ITION AND THE SAME DOES NEED ANY INTERFERENCE ON OUR PART. ACCORDINGLY , WE UPHOLD THE SAME. 9. WITH REGARD TO ADDITION OF RS. 26,39,041/- WE F IND THAT DURING THE COURSE OF ASSESSMENT PROCEEDINGS THE ASSESSEE E XPLAINED TO THE AO THAT THE ABOVE NOTINGS RELATE TO THE UNSECURED L OAN TAKEN BY THEM, AND THE SAME WAS DULY ACCOUNTED FOR IN THE BO OKS OF ACCOUNTS. BUT THIS SUBMISSION OF THE ASSESSEE WAS NOT ACCEPTED BY THE AO AND HENCE HE TREATED THE NOTHINGS MENTIONED ON THE SEIZED PAPER NO. 101 AS UNEXPLAINED CREDIT AND MADE THE A DDITION OF RS. 26,39,041/-. WE FIND THAT LD. CIT(A) HAS OBSERVED THAT FROM THE PERUSAL OF COPIES OF ACCOUNTS OF 2 PARTIES NAMELY G OLDSTONE FINANCIAL SERVICES P LTD. AND DEEAS COMPUTERADE P L KTD. AS APPEARING IN ASSESSEES BOOKS OF ACCOUNTS, IT IS VE RY IMPORTANT THAT THE ASSESSEE HAS RAISED A LOAN OF RS. 10,00,000/- A ND RS. 15,00,000/- RESPECTIVELY AT AN INTEREST RATE OF 10% AND THE ASSESSEEE HAS DEDUCTED THE TDS ALSO ON THE SAME. I N VIEW OF THESE CLEAR FACTS THAT ENTRIES ON SEIZED PAGE 101 ARE DU LY BEEN ACCOUNTED, HENCE, HE RIGHTLY DELETED THE ADDITION, WHICH DOES NOT NEED ANY INTERFERENCE ON OUR PART. ACCORDINGLY, WE UPHOLD THE SAME. ITA NO. 1781/DEL/2013 7 10. WITH REGARD TO ADDITION OF RS. 14,42,058/- WE F IND THAT LD. AO HAS OBSERVED THAT IN THE ASSESSEES BOOKS OF ACCOUN TS NO ENTRY OF SCARP SALE WAS REFLECTED, THE AO APPLIED 11.76% ON THE TOTAL YARN CONSUMED AND CALCULATED THE SCRAP VALUE AT RS. 14,4 2,058/- WHICH WOULD HAVE BEEN GENERATED AND TREATED THEM TO BE SO LD OUTSIDE THE BOOK OF ACCOUNTS. WE FIND THAT LD. AO HAS NOTED FR OM THE RECORDS AND EVIDENCE AVAILABLE DURING THE SURVEY NO SCRAP W AS FOUND BY THE DEPARTMENT AT THE ASSESSEES PREMISES. HE ALSO OBS ERVED FROM THE PERUSAL OF THE PAGE 95 THAT NO WHERE THERE IS A NOT ING TO SUGGEST THAT THE YARN OF 109.36 KG WHICH IS RETURNED BY KAN ODIA HOSIERY IS A SCRAP PER SE. THE NOTING MENTIONED ON PAGE 95 WER E READ IN TOTALITY ALONG WITH THE OTHER CORRESPONDENCE THE AS SESSEE HAD WITH KANODIA HOSIERY, CLEARLY SUGGESTS THAT THERE IS A D ISPUTE OVER ACCOUNTABILITY OF YARN ISSUED BY THE ASSESSEE TO KA NODIA HOSIERY FOR KNITTING. WE ALSO FIND THAT LD. CIT(A) HAS OBSERV ED THAT THE SURVEY PARTY HAS NOT FOUND ANY SCRAP LYING AT THE ASSESSEE S PREMISES AND NO INCRIMINATING DOCUMENTS / EVIDENCES HAVE BEEN BR OUGHT ON RECORD BY THE AO TO SUGGEST THAT THE SCRAP IS BEING GENERATED AND SOLD OUTSIDE THE BOOKS OF ACCOUNTS AND ALSO WHEN TH E NOTING ON PAGE 95 WHERE THE ENTRY OF 109.36 KG IS RECORDED CL EARLY MENTIONS YARN RETURNED BY YOU AND IT DOES NOT SPECIFY THAT THE SAID YARN OF 109.36 KG IS SCARP., IN THESE CIRCUMSTANCES, LD. CI T(A) HAS RIGHTLY OBSERVED THAT THE ACTION OF THE AO IN APPLYING THE PERCENTAGE OF 11.76% ACROSS THE BOARD TO THE ENTIRE YARN CONSUME D BY THE ASSESSEE DURING THE YEAR AND THEREBY CALCULATING TH E GENERATION OF SCARP AND SALE OF THE SAME OUTSIDE THE BOOKS OF ACC OUNT, IS CORRECT AND DEFIES ALL COMMERCIAL LOGIC. WE FIND THAT LD. C IT(A) HAS RIGHTLY OBSEVED THAT AOS ACTION IS TOTALLY BASED ON SURMIS ES AND CONJECTURES, HENCE HE DELETED THE ADDITION OF RS. 1 4,42,058/-, WHICH DOES NOT NEED ANY INTERFERENCE ON OUR PART, ACCOR DINGLY, WE UPHOLD THE SAME. ITA NO. 1781/DEL/2013 8 11. WITH REGARD TO ADDITION OF RS. 93,910/- REGARDI NG THE NOT DEPOSITING THE EMPLOYEES CONTRIBUTION TO PROVIDENT FUND BEFORE THE DUE DATE. WE FIND THAT ASSESSEE SUBMITTED THAT TH E PAYMENTS WERE DEPOSITED BEFORE THE DATE OF FILING OF RETURN OF IN COME, THEREFORE, RELYING ON THE DECISION OF AIMIL VS. CIT (321 ITR 5 08) (DELHI), HENCE, THE AOS ACTION DESERVES TO BE CANCELLED. WE ALSO FIND THAT LD. CIT(A) WAS OF THE VIEW THAT THE JURISDICTIONAL HIGH COURT ON THIS ISSUE IN THE CASE OF AIMIL VS. CIT, THE ADDITION MADE BY THE AO DESERVES TO BE DELETED AS ALL THE DUES WERE DEPOSITED BEFORE THE DUE OF FILING OF RETURN OF INCOME. IN VIEW OF THE ABOVE, THE ORDE R OF THE CIT(A) DOES NOT NEED ANY INTERFERENCE ON THIS ISSUE, HENCE , THE SAME IS UPHELD. 12. IN THE RESULT, THE APPEAL OF THE REVENUE IS DIS MISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 08/8/2014. SD/- SD/- [ [[ [G.D. AGRAWAL G.D. AGRAWAL G.D. AGRAWAL G.D. AGRAWAL] ]] ] [ [[ [H.S. SIDHU H.S. SIDHU H.S. SIDHU H.S. SIDHU] ]] ] VICE PRESIDENT VICE PRESIDENT VICE PRESIDENT VICE PRESIDENT JUDICIAL JUDICIAL JUDICIAL JUDICIAL MEMBER MEMBER MEMBER MEMBER DATE 08/8/2014 SRBHATNAGAR SRBHATNAGAR SRBHATNAGAR SRBHATNAGAR COPY FORWARDED TO: COPY FORWARDED TO: COPY FORWARDED TO: COPY FORWARDED TO: - -- - 1. APPELLANT - 2. RESPONDENT - 3. CIT 4. CIT (A) 5. DR, ITAT TRUE COPY BY ORDER, ASSISTANT REGISTRAR, ITAT, DELHI BENCHES ITA NO. 1781/DEL/2013 9