ACIT CC-14, V. TVT India Ltd,

ITA 1909/DEL/2008

• Counselvise Citation: [2010] 136 COUNSELVISE.COM (IT) 3736 (ITAT-DELHI)
• Duration Of Justice: 2 year(s) 1 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-06-2010
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: H
• Next Hearing Date: 09-06-2010
• Assessment Year: 1998-1999
• Appeal Filed On: 15-05-2008
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Audit objection; Block assessment
• Section: 143(3); 80HHC; 143(1); 148

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH `H: NEW DELHI BEFORE SHRI C.L.SETHI, JM & SHRI B.C. MEENA, AM I.T. A. NO.1909/DEL OF 2008 ASSESSMENT YEAR: 1998-99 ACIT, CENTRAL CIRCLE 14, VS M/S TVT INDIA LTD., NEW DELHI. G-3/98, SECTOR 15, ROHINI. NEW DELHI. APPELLANT RESPONDENT APPELLANT BY: SHRI ANSHUMAN PATNAIK, SR. DR RESPONDENT BY: SHRI VED JAIN & MS RANO JAIN, CA ORDER PER C.L.SETHI, JM: THE REVENUE IS IN APPEAL AGAINST THE ORDER DATED 14 .3.2008 PASSED BY THE LEARNED CIT(A) IN THE MATTER OF AN ASSESSMENT M ADE U/S 143(3)/147 OF THE INCOME-TAX ACT, 1961 (THE ACT) OF THE AO FOR TH E ASSTT. YEAR 1998-99. 2. THE FIRST GROUND RAISED BY THE REVENUE IS DIRECT ED AGAINST LEARNED CIT(A)S ORDER IN DELETING THE ADDITION OF RS.86,33 ,742/- MADE BY THE AO ON ACCOUNT OF ALLEGED UNDISCLOSED SALES. 2 3. IN THIS CASE, THE ASSESSEE FILED ITS RETURN OF I NCOME ON 26.11.98 DECLARING TOTAL INCOME AT RS.3130/-. THE RETURN WAS PROCESSED U/S 143(1) VIDE ORDER DATED 18.5.99. THEREAFTER, A REGULAR ASS ESSMENT WAS COMPLETED U/S 143(3) OF THE ACT VIDE ORDER DATED 4.4.2000 AT TOTA L INCOME OF RS.4286/- AS AGAINST THE RETURNED INCOME OF RS.3130/-. THE AO T HEN REOPENED THE ASSESSMENT BY ISSUING A NOTICE U/S 148 DATED 5.6.20 02 IN THE LIGHT OF THE AUDIT OBJECTION RAISED VIDE AUDIT MEMO NO.1 DATED 2 .4.2002. IN THE COURSE OF RE-ASSESSMENT PROCEEDINGS, THE AO ISSUED SHOW CA USE NOTICE DATED 20.1.2004 TO EXPLAIN THE OBJECTION RAISED BY THE AU DIT PARTY AS WELL AS SOME OTHER QUERIES. THE ASSESSEE THEN SUBMITTED A REPLY AS UNDER: DURING THE ASSTT. YEAR 1997-98, COMPANY WAS ACTING AS COMMISSION AGENT OF OVERSEAS EXPORTERS. THE GOODS WERE TRANSACTED ON BEHALF OF PRINCIPAL AND COMMISSION EARNED ON THEM WAS DULY REFLECTED IN THE ACCOUNT BOOKS. FOR AY 1997-98, COMPANY EARNED COMMISSION OF RS.1,11,353/- AS REFLECTED IN SCHEDULE H. THE RESULT OF THIS COMMISSION RESULTED IN CERTAIN RECEIVABLE/PAYABLE FOR THE COMMISSION RECEIVED. THESE RECEIVABLE/PAYABLE WERE NOT THE PARTIES DEBTOR/CREDITOR AND ARE REFLECTED AS OTHERS IN TH E BALANCE SHEET UNDER THE HEAD SCHEDULE E, CURRENT ASSETS, LOAN & ADVANCES. THE SUM OF RS.94,15,543.72 REPRESENTS THE SAME. THE CLAIMS ARE ENCLOSED IN ANNEXURE-1 ATTACHED. THIS REPRESENT THE SAME/ THE CLAIMS ARE ENCLOSED IN ANNEXURE-1 ATTACHED. THIS ANNEXURE-1 REFLECTS THAT WE HAVE TO RECEIVE RS.1,20,56,595.74 AND 17,27,147.20 FROM S.K. METAL CORPORATION AND 3 R.S. METAL & CO. DURING THE SUBSEQUENT YEAR WE HAVE RECEIVED A SUM OF RS.37,50,000/- AND 14,00,000 FROM M/S S.K. METAL CORPORATION AND R.S. METAL AND CO. LEAVING DEBIT BALANCE OF RS.83,06,595.74 AND 3,27,147.20 FROM S.K. METAL CORPORATION AND R.S. METAL AND CO. IN THE AY 1998-99, THERE WAS NO SUCH COMMISSION BUSINESS, REFERENCE SCHEDULE H, THEREFORE, IT WAS DECIDED BY THE MANAGEMENT TO SHOW THE AMOUNT UNDER THE GROUP SUNDRY DEBTORS. THUS, YOU MAY PLEASE SEE THAT THESE ARE TWO OLD DEBITS OUTSTANDING AND DOES NOT REPRESENT ANY SUPPRESSION OF SALES. 4. THE AO WAS OF THE VIEW THAT THE REPLY OF THE ASS ESSEE WAS VAGUE NOT CLARIFYING THAT AGAINST COMMISSION INCOME OF RS.1,1 1,353/- IN ASSTT. YEAR 1997-98, THE RECEIVABLE AMOUNT WOULD BE RS.1.2 CROR ES AND RS.17.27 LACS. THE AO ALSO STATED THAT THERE WAS NO EVIDENCE WHETH ER THE ASSESSEE MADE ANY HUGE PAYMENTS. THE AO, THEREFORE, TREATED THE S UM OF RS.86,33,752/- AS UNDISCLOSED SALES AND ADDED THE SAME TO THE TOTAL I NCOME CHARGEABLE TO TAX. 5. BEING AGGRIEVED, THE ASSESSEE PREFERRED AN APPEA L BEFORE THE LEARNED CIT(A). 6. BEFORE THE LEARNED CIT(A), THE ASSESSEE SUBMITTE D THAT MERE OBSERVATION OF THE AUDIT PARTY THAT FIGURES OF DEBT OR APPEARING IN THE BALANCE SHEET DO NOT CORRESPOND TO THE FIGURES OF SALE FOR THE CONCERNED YEAR, AND, THEREFORE, THE SAME SHOULD BE TREATED AS UNDISCLOSE D SALES, IS WITHOUT ANY BASIS INASMUCH AS THE FIGURE OF RS.86,33,742.94 SHO WN AS DEBTORS IN THE 4 BALANCE SHEET WAS NOTHING BUT OUTSTANDING BALANCE B ROUGHT FORWARD FROM LAST YEAR. IN THIS RESPECT, THE ASSESSEE FURNISHED THE DETAILS OF OUTSTANDING AGAINST CREDIT BALANCES AND DEBIT BALANCES OF THE YEAR UNDE R CONSIDERATION AS WELL AS OF THE PAST YEAR AND EXPLAINED THAT THERE WERE NO U NDISCLOSED SALES AFFECTED BY THE ASSESSEE DURING THE YEAR UNDER CONSIDERATION . 7. AFTER EXAMINING THE VARIOUS DETAILS SUBMITTED BY THE ASSESSEE BEFORE THE AO AS WELL AS BEFORE CIT(A), THE LEARNED CIT(A) DELETED THE ADDITION BY OBSERVING AND CONCLUDING AS UNDER: I HAVE CONSIDERED THE SUBMISSIONS MADE BY THE LEARNED AR. AFTER GOING THROUGH THE ASSTT. ORDER, I AM OF THE CONSIDERED VIEW THAT THE AO HAS NOT JUSTIFIED THE ADDITIONS AND DISALLOWANCES SO MADE WITH ANY COGENT REASONING AND/OR THE JUSTIFIABLE GROUNDS. IN PARA 2.1 OF THE IMPUGNED ASSESSMENT ORDER, THE AO STATED THAT: THE REPLY OF THE ASSESSEE IS VAGUE, NOT CLARIFYING HOW IN COMMISSION INCOME OF RS.1,11,353/- IN AY 97-98, THE RECEIVABLE CAN BE OF RS.1.2 CRORES AND RS.17.27 LACS. THERE IS NO EVIDENCE WHETHER THE ASSESSEE HAS MADE ANY SUCH HUGE PAYMENTS, THEREFORE, IN LIEU OF THESE FACTS, SALE OF RS.86,33,742/- ARE TREATED AS UNDISCLOSED SALES AND ASSESSED TO TAX. BASED ON THE AFORESAID, IT IS CLEAR THAT THE ADDITIONS MADE BY THE AO ON ACCOUNT OF UNDISCLOSED SALES ARE WITHOUT PROPER EXAMINATION OF FACTS AND CIRCUMSTANCES OF THE CASE. IF THE SALES AND THE RECEIVABLES SHOWN IN THE RETURN OF INCOME ARE RELATING TO THE PREVIOUS YEAR, THEN 5 THERE SHOULD NOT BE ANY CAUSE FOR THE AO TO TREAT THEM AS UNDISCLOSED SALES FOR THE YEAR UNDER CONSIDERATION. UNDER THESE CIRCUMSTANCES, IT IS DIFFICULT TO SUSTAIN THE ADDITIONS MADE BY THE AO. 8. HENCE, THE DEPARTMENT IS IN APPEAL. 9. THE LEARNED DR HAS MERELY SUPPORTED THE AOS ORD ER. 10. THE LEARNED COUNSEL FOR THE ASSESSEE HAS INVITE D OUR ATTENTION TO THE VARIOUS DETAILS OF THE DEBTORS AND CREDITORS OF LAS T YEAR AS WELL AS OF CURRENT YEAR AND HAS EXPLAINED THE FACT THAT HOW THE AMOUNT OF RS.85,33,752/- AS WAS APPEARING IN THE BALANCE SHEET AS SUNDRY DEBTOR S. HE FURTHER SUBMITTED THAT IN THE LIGHT OF VARIOUS DETAILS SUBMITTED BEFO RE THE AO, WHICH ARE PLACED IN THE PAPER BOOK, THE SUM OF RS.86,33,742/- IS AN OUTSTANDING BALANCE BROUGHT FORWARD FROM EARLIER YEAR. HE, THEREFORE, SUBMITTED THAT THE CIT(A) HAS RIGHTLY DELETED THE ADDITION MADE BY THE AO. 11. WE HAVE CONSIDERED RIVAL CONTENTIONS OF BOTH TH E PARTIES AND HAVE CAREFULLY PERUSED THE ORDERS OF THE AUTHORITIES BEL OW. WE HAVE CAREFULLY PERUSED THE VARIOUS PAPERS AND THE DETAILS OF DEBTO RS AND CREDITORS OF LAST YEAR AS WELL AS OF THE CURRENT YEAR. WE FIND THAT THE ASSESSEE SUBMITTED A REPLY DATED 4.2.2004 BEFORE THE AO, WHICH HAS BEEN REPRODUCED BY THE AO IN HIS ASSESSMENT ORDER AT PAGE 2. FROM THE SAID R EPLY AND AS VERIFIED BY US 6 FROM THE DETAILS OF SUNDRY CREDITORS AND DEBTORS OF LAST YEAR, IT IS SEEN THAT THE TOTAL DEBIT BALANCES IN THE LAST YEAR WAS RS.2, 72,43,319.20 AND THE TOTAL CREDIT BALANCES WAS OF RS.1,78,27,775.48 LEAVING A NET DEBIT BALANCE OF RS.94,15,543.72 (RS.2,72,43,319.20 MINUS RS.1,78,2 7,775.48). THIS DEBIT BALANCE OF RS.94,15,543.72 IS APPEARING IN THE BALA NCE SHEET OF THE LAST YEAR UNDER SCHEDULE E : CURRENT ASSETS, LOANS AND ADVA NCES, SUB HEAD (B) LOANS AND ADVANCES AND UNDER ITEM NO.(3) OTHERS. T HIS IS PLACED A PAGE 11 OF THE PAPER BOOK FILED BY THE ASSESSEE WHERE THE F IGURES OF LAST YEAR AS ON 31.3.97 ARE ALSO GIVEN. IN THE CURRENT YEAR ENDED ON 31 ST MARCH, 1998, THE TOTAL SUNDRY DEBTORS HAS BEEN SHOWN AT RS.1,58,96,7 42.94 CONSISTING OF THE FOLLOWING TWO ITEMS: (I) OUTSTANDING FOR A PERIOD EXCEEDING SIX MONTHS 8 6,33,742.94 (II) OTHER 72,63,000.00 1,58,96,742.94 THE DETAILS OF SUNDRY DEBTORS WERE ALSO DULY SUBMIT TED BEFORE THE AO AS APPEARING AT PAGE 36 OF THE PAPER BOOK AS UNDER: (I) ARINA + 72,63,000.00 (II) S.K. METAL CORPORATION 83,06,595.74 (III) R.S. METAL CO. 3,27,147.20 1,58,96,742.94 7 THE COPY OF ACCOUNT OF TWO DEBTORS, NAMELY, S.K. ME TAL CORPORATION AND R.S. METAL CO. ARE PLACED AT PAGES 70 & 71 OF THE P APER BOOK WHERE OPENING BALANCE HAS BEEN SHOW AS UNDER: (I) S.K. METAL CORPORATION RS.1,20,56,595.74 (II) R.S. METAL CO. RS. 17,27,147.20 RS.1,37,83,742.94 OUT OF THIS AFORESAID OPENING BALANCE, THE ASSESSEE RECEIVED RS.37,50,000/- FROM M/S S.K. METAL CORPORATION LEAVING A BALANCE O F RS.83,06,595.74 AND RECEIVED RS.14 LACS FROM M/S R.S. METAL CO. LEAVING A CLOSING BALANCE OF RS.3,27,147.20. THE OPENING BALANCE IN THE CASE O F S.K. METAL CORPORATION IS THE SAME AS SHOWN IN THE LIST OF OUTSTANDING AS ON 31.3.97. SIMILARLY, THE OPENING BALANCE IN THE ACCOUNT OF M/S R.S. METAL CO . HAS BEEN SHOWN AS BALANCE IN THE OUTSTANDING LIST AS ON 31.3.97. THE CLOSING BALANCE IN BOTH THE ACCOUNTS HAS BEEN SHOWN AS DEBTORS ON 31.3.98. IT IS, THUS, CLEAR THAT THE FIGURE OF RS.86,33,742.94 SHOWN AS DEBTORS IN THE C URRENT YEAR IS OUTSTANDING BALANCE BROUGHT FORWARD FROM LAST YEAR, AND CANNOT BY ANY STRETCH OF IMAGINATION BE REGARDED AS AN UNDISCLOSED SALES MAD E BY THE ASSESSEE DURING THE CURRENT YEAR. ALL THESE DETAILS WERE DULY AVAI LABLE BEFORE THE AO, BUT THE AO HAS FAILED TO APPLY HIS MIND TO THE DETAILS, AND HAS MADE THE ADDITION MERELY BY OBSERVING AS UNDER: 8 2.1 THE REPLY OF THE ASSESSEE IS VAGUE, NOT CLARIFYING HOW IN COMMISSION INCOME OF RS.1,11,353/- IN AY 97-98, THE RECEIVABLES CAN BE RS.1.2 CRORE AND RS.17.27 LACS. THERE IS NO EVIDENCE WHETHER THE ASSESSEE MADE ANY SUCH HUGE PAYMENTS, THEREFORE, IN VIEW OF THESE FACTS, SALES OF RS.86,33,742/- ARE TREATED AS UNDISCLOSED SALES AND ASSESSED TO TAX. 12. IN THE LIGHT OF THE ABOVE CLARIFICATION AND THE DETAILS, WE FIND THAT THE CIT(A) HAS RIGHTLY DELETED THE ADDITION MADE BY THE AO. THE ORDER OF THE CIT(A) ON THIS ISSUE IS, THUS, UPHELD, AND THIS ISS UE RAISED BY THE REVENUE IS DECIDED AGAINST IT. 13. GROUND NO.2 IS DIRECTED AGAINST THE CIT(A)S OR DER IN DIRECTING THE AO TO ALLOW DEDUCTION OF RS.5,70,695/- U/S 80HHC, A S CLAIMED BY THE ASSESSEE. 14. IN THE RE-ASSESSMENT, THE DEDUCTION CLAIMED BY THE ASSESSEE U/S 80 HHC HAS BEEN DISALLOWED BY THE AO ON PROTECTIVE BAS IS IN THE LIGHT OF HIS ALLEGED FINDINGS GIVEN IN THE BLOCK ASSESSMENT. ON AN APPEAL, THE CIT(A) DELETED THE ADDITION BY OBSERVING AS UNDER: WITH REGARD TO THE SECOND ADDITION MADE BY THE AO AMOUNTING TO RS.5,70,695/-, THE AO HAS GIVEN THE BASIS OF HER BLOCK ASSESSMENT ORDER PASSED U/S 158BC WHEREIN EXPORT OF BICYCLE PARTS WAS NOT CONSIDERED AS GENUINE EXPORT ON THE BASIS OF INVESTIGATION MADE BY THE THIRD AGENCY. THE AO HAS FAILED TO CAUSE ANY ENQUIRIES HERSELF IN SUPPORT OF HER CONTENTIONS. THE ASSESSMENT HAS 9 BEEN COMPLETED ON PROTECTIVE BASIS WHEREAS THE ADDITIONS ON SUBSTANTIVE BASIS HAS BEEN MADE IN THE BLOCK ASSESSMENT ORDER (AS MENTIONED IN PARA 6 OF THE ASSESSMENT ORDER) BUT IN DOING SO, THE AO HAS FAILED TO REALIZE THAT IT IS AN ESTABLISHED LAW NOW THAT THE ANY ADDITION ON THE BASIS OF SEARCH CANNOT BE MADE IN THE REGULAR ASSESSMENT PROCEEDINGS AND THE SAME HAS TO BE CONSIDERED IN AN ASSESSMENT RELATING TO THE BLOCK ASSESSMENT. THEREFORE, I DIRECT THE AO TO DELETE THE ADDITION MADE ON THE BASIS OF SEARCH CONDUCTED ON RASTOGI GROUP OF CASES. THE ADDITION/DISALLOWANCES MADE ARE PURELY ON SURMISES AND CONJECTURES AND I HAVE NO HESITATION IN TERMING THE ADDITIONS AS ADHOC ADDITIONS WHICH IS DEVOID OF ANY REASONING AND/OR INVESTIGATION. ACCORDINGLY, THE AO IS DIRECTED TO DELETE THE ADDITION MADE ON ACCOUNT OF UNDISCLOSED SALES AND ALSO BY DISALLOWING THE DEDUCTION CLAIMED U/S 80HHC OF THE ACT. 15. WE HAVE HEARD BOTH THE PARTIES AND CAREFULLY GO NE THROUGH THE ORDERS OF THE AUTHORITIES BELOW. 16. AFTER CONSIDERING THE TOTALITY OF THE FACTS AND CIRCUMSTANCES OF THE CASE, WE ARE OF THE CONSIDERED VIEW THAT THE CIT(A) HAS RIGHTLY DELETED THE ADDITION OF DISALLOWANCE OF DEDUCTION U/S 80HHC INA SMUCH AS THE SAME IS BASED MERELY ON SURMISES, AND WITHOUT BEING BASED O N ANY MATERIAL. EVEN OTHERWISE, IF ANY DISALLOWANCE IS CALLED FOR THAT C OULD BE ONLY A SUBJECT MATTER OF BLOCK ASSESSMENT MADE BY THE AO U/S 158BC IN PURSUANCE TO THE 10 ALLEGED SEARCH CONDUCTED AGAINST THE ASSESSEE, IF A NY. THE ORDER OF CIT(A) ON THIS ISSUE IS ALSO UPHELD. 17. IN THE RESULT, THE APPEAL FILED BY THE REVENUE IS DISMISSED. 18. THIS DECISION WAS PRONOUNCED IN THE OPEN COURT ON 18 TH JUNE, 2010. (B.C. MEENA) (C.L. SETHI) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 18 TH JUNE, 2010 VIJAY COPY TO: 1. APPELLANT. 2. RESPONDENT. 3. CIT 4. CIT(A)-XIII, NEW DELHI 5. DR ASSISTANT REGISTRAR