Rhythm Polymers Pvt. Ltd., New Delhi V. ACIT, New Delhi

ITA 1869/DEL/2010

• Counselvise Citation: [2010] 136 COUNSELVISE.COM (IT) 3672 (ITAT-DELHI)
• Duration Of Justice: 2 month(s) 13 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-07-2010
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: F
• Next Hearing Date: 28-06-2010
• Assessment Year: 2006-2007
• Appeal Filed On: 26-04-2010
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: BANITA DEVI NAREOM
• Assessee Lawyers: PUNEET THUKRAL
• Keywords: Unexplained cash credit; Additional evidence
• Section: 143(1); 68; 144

Judgement Text

I.T.A. NO. 1869 /DEL/2010 1/6 IN THE INCOME TAX APPELLATE TRIBUNAL, NEW DELHI, BENCH F BEFORE SHRI C. L. SETHI, JUDICIAL MEMBER AND SHRI A K GARODIA, ACCOUTANT MEMBER ITA NO. 1869 /DEL/2010 (ASSESSMENT YEAR 2006-07) RHYTHM POLYMERS PVT. LTD., VS. ACIT, CIRCLE 15(1), C-8/6, GROUND FLOOR, NEW DELHI MIANWALI NAGAR, PASCHIM VIHAR, NEAR PEERAGARHI CHOWK, NEW DELHI-110 063 (APPELLANTS) (RESPONDENTS) PAN / GIR NO. AACCR7609D APPELLANT BY: SHRI PUNEET THUKRAL, CA RESPONDENT BY: SMT. BANITA DEVI NAREOM, SR. DR ORDER PER A. K. GARODIA, AM: 1. THIS APPEAL BY THE ASSESSEE HAS BEEN DIRECTED AGAIN ST THE ORDER OF LD. CIT(A) XVII, NEW DELHI DATED 15.03.2010 FOR THE ASSESSMENT YEAR 2006-07. THE GROUND NO.1 IS GENERA L IN NATURE. THE GROUNDS NOS. 2 & 3 ARE INTERCONNECTED A ND ARE REPRODUCED AS UNDER: 2)THAT RETURN WAS PROCESSED U/S 143(1) OF THE I. T . ACT, 1961 AT THE RETURNED LOSS ON 25.10.2007. 3) THAT THE CASE WAS SELECTED FOR SCRUTINY AND NOTI CE U/S143(2) OF THE I. T. ACT, 1961 WAS ISSUED TO THE APPELLANT. 2. IT WAS SUBMITTED BY THE LD. A.R. FOR THE ASSESSEE T HAT ADDITIONAL EVIDENCE WAS SUBMITTED BY THE ASSESSEE BEFORE THE P REDECESSOR I.T.A. NO. 1869 /DEL/2010 2/6 OF THE LD. CIT(A) WHO HAS PASSED THE IMPUGNED ORDER AND HIS PREDECESSOR HAS ALREADY FORWARDED THOSE EVIDENCES T O THE A.O. FOR HIS COMMENTS AND HENCE, LD .CIT(A) WAS NOT JUST IFIED IN NOT ADMITTING THE ADDITIONAL EVIDENCE. LD. D.R. SUPPOR TED THE ORDER OF LD. CIT(A). 3. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND HAVE G ONE THROUGH THE ORDERS OF AUTHORITIES BELOW. WE FIND T HAT ADMISSION OF ADDITIONAL EVIDENCE WAS DENIED BY LD. CIT(A) ON THE BASIS THAT THE ASSESSEE HAS NOT GIVEN ANY REASON WHATSOEV ER AS TO WHY THERE WAS NO COMPLIANCE TO THE NOTICES ISSUED BY TH E A.O. DURING THE ASSESSMENT PROCEEDINGS. BEFORE US ALSO, IT WAS SUBMITTED BY THE LD. A.R. THAT REGARDING THE DATE O F HEARING FIXED BY THE A.O. ON 25.04.2008 AND ON 12.05.2008, THE LD. A.R. COULD NOT APPEAR BEFORE HIM BECAUSE HIS HEALTH POSITION WAS NOT GOOD AND IT IS THE SUBMISSION THAT TWO ADJO URNMENT LETTERS OF THE LD. A.R. FILED BY HIM BEFORE THE A.O . ARE AVAILABLE ON PAGES 74 & 75 OF THE PAPER BOOK. AGAINST SPECIF IC QUERY BY THE BENCH REGARDING REASON FOR NON-COMPLIANCE TO SU BSEQUENT NOTICES ISSUED IN THE MONTH OF JULY 2008 AND OCT 20 08, THE LD. A.R. COULD NOT GIVE ANY REASON FOR NON-APPEARANCE O N THESE DATES AND IT WAS HIS GENERAL SUBMISSION THAT IT WAS THE FAULT OF THE LD. A.R. AND HENCE THE ASSESSEE SHOULD NOT BE P ENALIZED. WE ARE NOT IN AGREEMENT WITH THE LD. A.R. OF THE AS SESSEE ON THIS ASPECT BECAUSE THE NOTICES ARE SERVED ON THE A SSESSEE AND HENCE, IT WAS THE DUTY OF THE ASSESSEE TO ENSURE TH AT THE NOTICES ARE BEING COMPLIED WITH. WE ALSO FIND THAT IN FACT PENALTY PROCEEDINGS U/S 271(1)(B) WERE ALSO INITIATED ON 07 .10.2008 AND ALONG WITH IT, THE A.O. ISSUED FRESH NOTICE U/S 143 (2) OF THE I. T. I.T.A. NO. 1869 /DEL/2010 3/6 ACT REQUIRING THE ASSESSEE TO ATTEND THE PROCEEDING S ON 14.10.2008 AND IN SPITE OF THIS, NONE APPEARED ON B EHALF OF THE ASSESSEE BEFORE THE A.O. ON THAT DATE ALSO. THIS G OES TO SHOW THAT THE ASSESSEE COULD NOT EXPLAIN THE REASON FOR NON- APPEARANCE BEFORE THE A.O. AND HENCE WE DO NOT FIND ANY REASON TO INTERFERE IN THE ORDER OF LD. CIT(A) WITH REGARD TO NON ADMISSION OF ADDITIONAL EVIDENCE BECAUSE IT IS RIGH TLY OBSERVED BY HIM THATS THE ASSESSEE IS NOT FULFILLING THE CO NDITIONS PRESCRIBED IN RULE 46A FOR ADMISSION OF ADDITIONAL EVIDENCE. GROUNDS NOS. 2 & 3 OF THE ASSESSEES APPEAL ARE REJ ECTED. 4. GROUNDS NOS. 4 & 5 READ AS UNDER: 4) THAT THE CASE WAS DECIDED U/S 144 OF THE I. T. ACT, 12961 AT A TOTAL INCOME OF RS.91,81,921/- IN THE FOLLOWING MAN NER:- A) THE ENTIRE EXPENSES IN THE RETURN OF INCOME AMOUNTING TO RS.78,29,273/- WERE DISALLOWED. B) TOTAL INCOME WAS TAKEN AS RS.65,66,921/-, BY ADDING ENTIRE SALES DURING THE YEAR RS.47,16,671/- PLUS CLOSING STOCK OF RS.18,50,250/-. C) ADDITIONS U/S 68 FOR UNEXPLAINED CASH CREDITS ON ACCOUNT OF THE FOLLOWING: 1. SHARE CAPITAL RS.3,50,000/- 2. UNSECURED LOANS RS.22,65,000/- 5) AGGRIEVED WITH THE ORDER OF THE A.O. APPELLANT FILE D AN APPEAL BEFORE THE LD. CIT(A) WHEREIN SOME FRESH EVI DENCE WERE ALSO FILED UNDER RULE 46 A(1), OF THE INCOME T AX RULES, 1962. 4.1 IT WAS SUBMITTED BY THE LD. A.R. THAT THE A.O. HAS MADE ADDITION OF THE ENTIRE AMOUNT OF SHARE CAPITAL AND UNSECURED LOANS OUTSTANDING AS ON 31.03.2006 AS PER BALANCE SHEET O F THE ASSESSEE, WHICH IS APPEARING ON PAGE 50 OF THE PAPER BOOK. I T IS SUBMITTED BY HIM THAT FROM THE BALANCE SHEET ITSELF, IT CAN B E SEEN THAT THERE IS NO INCREASE IN SHARE CAPITAL DURING THIS YEAR AND R EGARDING I.T.A. NO. 1869 /DEL/2010 4/6 UNSECURED LOANS ALSO, IT WAS SUBMITTED THAT THE ASS ESSEE HAS TAKEN A FRESH LOAN OF RS.1.90 LACS FROM BRIJ BHJUSHAN BANSA L AND ADDITIONAL LOAN OF RS.1.50 LACS FROM ONE OF THE DIR ECTORS SHRI MANOJ GARG AND OTHER UNSECURED LOANS ARE OLD LOANS AND HENCE ADDITION MADE BY THE A.O. U/S 68 ON ACCOUNT OF SHAR E CAPITAL AND UNSECURED LOAN, IS NOT JUSTIFIED. REGARDING THE AD DITION MADE BY THE A.O. BY DISALLOWING THE EXPENSES OF THE ASSESSE E, IT WAS SUBMITTED THAT THE A.O. HAS DISALLOWED THE ENTIRE E XPENSES OF THE ASSESSEE INCLUDING OPENING STOCK AND HE HAS ASSESSE D THE INCOME OF THE ASSESSEE AT THE TURNOVER OF THE ASSESSEE OF RS. 47,16,671/- + CLOSING STOCK OF THE ASSESSEE OF RS.18,50,250/-, BO TH OF WHICH TOTALS TO RS.65,66,921/-. IT IS SUBMITTED THAT THE EXPENSES ARE COMPARABLE IN THE PRESENT YEAR IF THE INCREASE IN T URNOVER IS CONSIDERED AND HENCE THE BOOK RESULTS OF THE ASSESS EE SHOULD BE ACCEPTED. AS AGAINST THIS, LD. D.R. FOR THE REVENU E SUPPORTED THE ORDERS OF THE AUTHORITIES BELOW. 4.2 WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PERUSE D THE MATERIAL ON RECORD AND HAVE GONE THROUGH THE ORDERS OF AUTHO RITIES BELOW. WE FIND THAT THE A.O. WAS NOT JUSTIFIED IN MAKING A DDITION OF THE ENTIRE AMOUNT OF SHARE CAPITAL AND UNSECURED LOANS OUTSTANDING AS ON 31.03.2006 AS PER THE BALANCE SHEET OF THE ASSES SEE COMPANY FOR THE YEAR ENDED 31.03.2006. BECAUSE AS PER THE BALA NCE SHEETS ITSELF THERE IS NO INCREASE IN SHARE CAPITAL OF THE ASSESS EE COMPANY DURING THIS YEAR AND IN UNSECURED LOANS ALSO, THERE IS ONL Y ONE FRESH LOAN OF RS.1.90 LACS AND ONE ADDITIONAL LOAN OF RS.1.50 LAC S TOTALING TO RS.3.40 LACS. ADDITION U/S 68 CANNOT BE MADE ON AC COUNT OF SHARE CAPITAL, SHARE APPLICATION MONEY AND UNSECURED LOAN S RECEIVED IN THE EARLIER YEARS. I.T.A. NO. 1869 /DEL/2010 5/6 4.3 REGARDING THE FRESH LOAN OF RS.3.40 LACS RECEIVED B Y THE ASSESSEE DURING THIS YEAR, WE WILL EXAMINE THE ISSUE AT A LA TER STAGE. REGARDING THE INCOME OF THE ASSESSEE ASSESSED BY TH E A.O. AT RS.65.66 LACS AS AGAINST LOSS OF RS.12,62,352/- DEC LARED BY THE ASSESSEE IN ITS RETURN OF INCOME, WE FIND THAT THE SAME IS ALSO NOT JUSTIFIED. THE A.O. HAS CONSIDERED THE TURNOVER OF THE ASSESSEE COMPANY AND ITS CLOSING STOCK AND THE TOTAL OF THES E TWO ITEMS HAS BEEN ASSESSED BY HIM AS INCOME OF THE ASSESSEE AND IN THE PROCESS, HE HAD DISALLOWED THE CLAIM OF THE ASSESSEE REGARDI NG OPENING STOCK AND TOTAL VARIOUS EXPENSES. THIS APPROACH OF THE A.O. IS NOT JUSTIFIED. EVEN WHEN NO DETAILS ARE FURNISHED BY TH E ASSESSEE, GROSS RECEIPT I.E. GROSS TURNOVER AND CLOSING STOCK CANNO T BE CONSIDERED AS INCOME OF THE ASSESSEE BECAUSE FOR EFFECTING SUC H TURNOVER AND CLOSING STOCK, THE EXPENSES ON ACCOUNT OF OPENING S TOCK, PURCHASES ETC HAS TO BE ALLOWED. AT THE SAME TIME, THE BOOK RESULTS OF THE ASSESSEE CANNOT BE ACCEPTED BECAUSE THE ASSESSEE HA S NOT APPEARED BEFORE THE A.O. AND HAS NOT PRODUCED THE BOOKS OF A CCOUNTS, BILLS AND VOUCHERS ETC BEFORE THE A.O. FOR VERIFICATION. CONSIDERING THE FACTS OF THE PRESENT CASE, WE FEEL THAT ASSESSING T HE INCOME OF THE ASSESSEE, AT 10% OF ITS TURNOVER WILL MEET THE ENDS OF JUSTICE AND HENCE, WE DIRECT THE A.O. THAT INCOME OF THE ASSESS EE SHOULD BE ASSESSED @ 10% OF ITS TURNOVER I.E. RS.47,16,671/- AND HENCE THE INCOME OF THE ASSESSEE SHOULD BE ASSESSED AT RS.4,7 1,667/- AS AGAINST RS.65,66,921/- ASSESSED BY THE A.O. EXCLUDI NG ADDITION MADE BY HIM U/S 68. 4.4 REGARDING THE ADDITION MADE BY THE A.O. U/S 68, WE HAVE ALREADY HELD THAT EXCEPT TWO FRESH/ADDITIONAL LOAN TOTALING TO RS.3.40 LACS ALL OTHER UNSECURED LOANS, SHARE CAPITAL AND SHARE APPLICATION I.T.A. NO. 1869 /DEL/2010 6/6 MONEY ARE OPENING BALANCES FOR WHICH NO ADDITION CA N BE MADE IN THE PRESENT YEAR U/S 68. REGARDING FRESH UNSECURED LOAN OF RS.3.40 LACS ALSO, WE FEEL THAT IN THE FACTS OF THE PRESENT CASE, NO SEPARATE ADDITION IS CALLED FOR IN VIEW OF THESE FACTS THAT WE HAVE ALREADY ASSESSED THE INCOME OF THE ASSESSEE AT RS.4.17 LACS AS AGAINST LOSS OF RS.12.62 LACS DECLARED BY THE ASSESSEE AND IT WI LL TAKE CARE OF THIS UNEXPLAINED CASH CREDIT OF RS.3.40 LACS ALSO. WE, THEREFORE, DELETE THE ENTIRE ADDITION MADE BY THE A.O. U/S 68 OF THE ACT. 5. IN THE RESULT, APPEAL OF THE ASSESSEE IS PARTLY ALL OWED. 6. THIS DECISION WAS PRONOUNCED IN THE OPEN COURT ON 0 9 TH JULY, 2010. SD./- SD./- (C. L. SETHI) (A K GARODIA) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 09 TH JULY, 2010 SP. COPY FORWARDED TO 1. APPELLANT 2. RESPONDENT 3. CIT TRUE COPY: BY ORDER 4. CIT(A) 5. DR DY. REGISTRAR, ITAT, NEW DELHI