DCIT Central Circle-31, New Delhi V. RSWM Ltd, Kharigram

ITA 1926/DEL/2020

• Counselvise Citation: [2022] 104 COUNSELVISE.COM (IT) 0522 (ITAT-DELHI)
• Duration Of Justice: 1 year(s) 10 month(s) 14 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 17-10-2022
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: F
• Next Hearing Date: 05-10-2022
• Assessment Year: 2011-2012
• Appeal Filed On: 03-12-2020
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Section: 153A; 73

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH “F” DELHI BEFORE SHRI KUL BHARAT, JUDICIAL MEMBER & SHRI PRADIP KUMAR KEDIA, ACCOUNTANT MEMBER I.T.A. No.1926/DEL/2020 Assessment Year 2011-12 DCIT, Central Circle-31, New Delhi. Vs. RSWM Ltd., Kharigram, Gulabpura, Karouli, Rajasthan. TAN/PAN: AAACR9700M (Appellant) (Respondent) Appellant by: None Respondent by: Shri R.K. Gupta, CIT-DR Date of hearing: 06 10 2022 Date of pronouncement: 18 10 2022 O R D E R PER PRADIP KUMAR KEDIA, A.M.: The captioned appeal has been filed by the Revenue against the order of the Commission of Income Tax (Appeals)-XXX, New Delhi [‘CIT(A) ’ in short] dated 17.09.2020 arising fro m the assessment order dated 29.12.2018 passed by the Assessing Officer ( AO) under Section 153A of the Income Tax Ac t, 1961 (the Act) concerning AY 2011-12. 2. Th e gr ou nd s of ap pea l rai se d b y t he Re ven ue r ead a s un der : “ 1 . T h a t o n t h e f a c t s a n d i n c i r c u m s t a n c e s o f t h e ca s e , t h e l d . C I T ( A ) h a s e r r e d i n l a w a n d o n f a c t s i n r e s t r i c t i n g t h e a d d i t i o n o f R s . 1 , 7 3 , 3 8 , 3 1 8 / - ( t o t h e e x t e n t o f d i v i d e n d i n c o m e ) a s a g a i n s t R s . 3 , 2 1 , 9 1 , 0 0 0 / - m a d e u / s . 1 4 A b y t h e A s s e s s i n g O f f ic e r , w i t h o u t a p p r e c i a t i n g t h e d e t a i l e d r e a s o n s g i v e n i n t h e a s s es s m e n t o r d e r . 2 . T h a t o n t h e f a c t s a n d i n c i r c u m s t a n c e s o f t h e c as e , t h e l d . C I T ( A ) h a s e r r e d i n l a w a n d o n f a c t s i n r e s t r i c t i n g t h e a d d i t i o n t o t h e e x t e n t o f G r o s s p r o f i t e a r n e d b y t h e a p p e l l a n t a s a g a i n s t o f I.T.A. No.1927/Del/2020 2 R s . 1 6 , 6 2 , 1 0 8 / - m a d e b y t h e A s s e s s i n g O f f i c e r , w i t h ou t a p p r e c i a t i n g t h e d e t a i l e d r e a s o n s g i v e n i n t h e a s s es s m e n t o r d e r a n d w i t h o u t a p p r e c i a t i n g t h e f a c t t h a t i n c r i m i n a t i ng d o c u m e n t s , s u p p o r t e d t h e b o g u s p u r c h a s e s m a d e b y t h e a s s e s s e e c o m p a n y . ” 3. W h en th e mat te r w as cal le d f or he ar in g, no ne ap pe are d f or th e ass es se e. T her ef or e , t he mat ter w as p r oce ed ed e x-p ar te . 4. Bri ef l y sta te d, t he ass es see ha s ea rn ed d iv id en d in co m e of Rs .1, 73 ,3 8, 31 8/ - w hic h i s cl ai me d as exe mp t un de r Sec tio n 1 0( 34) of the A ct . Th e A sse ss in g Of f ice r c o mpu ted th e di sall ow anc e of Rs .3, 21 ,9 1, 00 0/ - in ter ms of Sec ti on 1 4A of t he Act r. w. Ru le 8 D of the I nc o me Ta x Rul es. 5. Ag gri ev ed , the a ss ess ee p ref er re d a p pea l bef or e th e CI T( A). The CI T( A) r est ri c ted t he di sal lo wa nc e to t he e xt ent of the i nco me and g ra nt ed re li ef t ow ard s di sa ll ow anc e i n ex ces s of e xe m pt in co me . The re le va nt op er a tiv e par ag ra ph of the C IT (A) i s rep r od uce d a s un der f or re ad y r ef ere nc e. “ G r o u n d N o . 1 o f t h e a p p e a l i s d i r e c t e d a g a i n s t d i sa l l o w a n c e o f R s . 3 , 2 1 , 9 1 , 0 0 0 / - u / s 1 4 A r . w . r . 8 D o f t h e I n c o m e T a x A c t , 1 9 6 1 . T h e a p p e l l a n t h a s d i s p u t e d t h e d i s a l l o w a n c e o n t h e g r o u n d o f n o n - r e c o r d i n g o f s a t i s f a c t i o n a s w e l l a s n o n s u s t a in a b i l i t y o f d i s a l l o w a n c e i n e x c e s s o f e x e m p t i n c o m e . I t h a s a l so b e e n c o n t e n d e d b y t h e a p p e l l a n t t h a t i n v e s t m e n t a p p e a r i ng i n t h e B a l a n c e s h e e t a r e s t r a t e g i c i n v e s t m e n t a n d a s s u c h t h e p r o v i s i o n s o f s e c t i o n 1 4 A a r e n o t a p p l i c a b l e . 8 . 1 T h e a s s e s s i n g o f f i c e r h a s c o m p u t e d t h e d i s a l l o wa n c e u n d e r R u l e 8 D ( 2 ) ( i i ) a n d 8 D (2 ) ( i i i ) o f t h e I T R u l e s , 1 9 6 2. I h a v e c o n s i d e r e d t h e s u b m i s s i o n s o f t h e a p p e l l a n t a n d h a ve p e r u s e d t h e a s s e s s m e n t o r d e r . I f i n d t h a t d u r i n g t h e y e a r u n d e r r e f e r e n c e , t h e a p p e l l a n t h a s e a r n e d e x e m p t i n c o m e i n t h e f o r m o f di v i d e n d o f R s . 1 , 4 8 , 5 2 , 6 8 2 / - . F u r t h e r , t h e a s s e s s i n g o f f i c e r ha s i n v o k e d p r o v i s i o n s o f s e c t i o n 1 4 A a f t e r d u l y r e c o r d i n g s a t is f a c t i o n i n t e r m s o f p r o v i s i o n s o f 1 4 A ( 2 ) w h i c h i s e v i d e n t f r o m t h e o b s e r v a t i o n r e c o r d e d a t P a g e 9 - 1 2 o f t h e a s s e s s m e n t o r d e r w h e r e i n t h e A O h a s d i s c u s s e d a b o u t t h e a p p l i c a b i l i ty o f s e c t i o n 1 4 A r . w . r 8 D i n t h e c a s e o f t h e a p p e l l a n t . T h u s , I d o n o t f i n d f o r c e i n t h e s u b m i s s i o n o f t h e a p p e l l a n t o n t h e i s su e o f s a t i s f a c t i o n . 8 . 2 H o w e v e r , I a l s o f a i l t o f i n d j u s t i f i c a t i o n b e hi n d t h e a c t i o n I.T.A. No.1927/Del/2020 3 o f t h e a s s e s s i n g o f f i c e r i n m a k i n g h u g e d i s a l l o w a n ce o f R s . 3 , 2 1 , 9 1 , 0 0 0 / - a g a i n s t e x e m p t d i v i d e n d i n c o m e o f R s . 1 , 4 8 , 5 2 , 6 8 2 / - . I t i s t r i t e l a w , a s s e t t l e d b y J u r i sd i c t i o n a l H i g h C o u r t , t h a t d i s a l l o w a n c e u / s 1 4 A c a n n o t e x c e s s e x e mp t i n c o m e . T h i s l e g a l p o s i t i o n i s i n c o n s o n a n c e w i t h p r i n c i p l e t h a t p r o v i s i o n o f s e c t i o n 1 4 A i s n o t a p p l i c a b l e w h e r e t h e r e i s n o c l a i m o f e x e m p t i n c o m e . I n t h e s e c i r c u m s t a n c e s , I a m i n c l i n e d t o a gr e e w i t h a l t e r n a t e p l e a r a i s e d b y t h e A R t h a t d i s a l l o w a n c e u/ s 1 4 A s h o u l d b e r e s t r i c t e d t o t h e e x t e n t o f e x e m p t i n c o m e w h i c h i s s u p p o r t e d f r o m d e c i s i o n o f H o n ’ b l e D e l h i H i g h C o u r t i n t h e c as e o f J o i n t I n v e s t m e n t s P r i v a t e L i m i t e d v s . C I T [ 2 0 1 5] 3 7 2 I T R 6 9 4 ( D e l ) a n d P r . C I T v . C a r a f B u i l d e r s & C o n s t r u c t i o n s ( P . ) Lt d . [ 2 0 19] 4 1 4 I T R 1 2 2 ( D e l h i ) [ S L P d i s m i s s e d b y S C] 8 . 3 I n v i e w o f f i n d i n g r e c o r d e d i n a f o r e s a i d p a r a , I h e r e b y d i r e c t t h e a s s e s s i n g o f f i c e r t o r e s t r i c t t h e d i s a l l o w a n c e t o t h e e x t e n t o f d i v i d e n d i n c o m e o f R s . 1 , 4 8 , 5 2 , 6 8 2 / - a n d d e l e t e t h e r e m a i n i n g d i s a l l o w a n c e . T h e G r o u n d N o . 1 i s t h u s p a r t l y a l l o we d . ” 6. W e ha ve ca ref u ll y con si de re d t he o bj ect io ns ra ised o n b eha lf of th e R ev en ue on th e a ct io n of t he CI T( A). H ow ev er, we se e n ot mer it i n su ch o b jec ti on . Th e CI T( A) h as ri gh tl y a ppl ie d th e pri nc ip le s la id d o wn b y pl et ho ra of jud ici al pre ce de nt s. T hu s, t he act io n of the C I T( A) is f ou nd to be in c on so na nc e wit h t he jud g men ts re nd er ed in t hi s r eg ard w he reb y i t w as cons is t ent l y he ld tha t t he d isa ll ow an ce un der S ect io n 1 4A ca nn ot ex ceed the e xe mpt inc o me i ts elf . He nc e, w e s ee no re as on to i nt erf er e wit h t he o rd er of the CI T( A) on th e is su e i nv ol ve d. He nce , G ro un d No.1 of the Re ven ue i s di s mis s ed. 7. Gro u nd No. 2 c on cer ns di sa llo wa nc e on a cc ou nt of bo gu s pur ch as es . Th e Ass es si ng Of f icer ma de a n add it io n of Rs .1 6,6 2, 10 8/ - o n acc ou nt of pu rc has es ma de f r o m one p art y, na mel y, M/ s. J ag d a mbe C ot to n ho ld i ng t ha t th e pu rc ha se s ho wn i s onl y a n a cco m mo da tio n en tr y. 8. The CI T( A) in the f irst a pp ea l s cal e d do w n th e dis all o wa nce out of bo gu s p ur c has es of Rs .1 6, 62 , 10 8/- to be re com put ed to th e ext en t of gr os s pr o f it p er cen ta ge e arn ed b y t he a sses see in st ea d of I.T.A. No.1927/Del/2020 4 wh ole of the s o c al led bo gu s pu rc ha se s. T he C IT (A ) ha s dea lt wit h the i ss ue as u nd er : “ 9 . G r o u n d N o . 2 o f t h e a p p e a l i s d i r e c t e d a g a i n s t d i s a l l o w a n c e o f p u r c h a s e o f R s . 1 6 , 6 2 , 1 0 8 / - . T h e a s s e s s i n g o f f i c e r h a s c o n s i d e r e d t h e d i s a l l o w a n c e o n t h e b a s i s o f I n f o r m a t i o n r e c e i ve d f r o m D D I T ( i n v e s t i g a t i o n ) N e w D e l h i w h i c h c o n t a i n e d i n c r i m i n at i n g i n f o r m a t i o n a g a i n s t t h e b o o k i n g o f b o g u s p u r c h a s e s b y t h e a p p e l l a n t f r o m M / s . J a g d a m b e C o t t o n p r o p c o n c e r n o f S h . D i l i p K u m a r . 9 . 1 T h e a p p e l l a n t h a d d i s p u t e d t h e s a i d d i s a l l o w a n ce o n t h e g r o u n d t h a t p u r c h a s e s r e c o r d e d i n t h e b o o k s o f a c c ou n t i s g e n u i n e a n d s u p p o r t e d f r o m d o c u m e n t a r y e v i d e n c e . I t w a s a l so c o n t e n d e d t h a t p u r c h a s e s m a d e f r o m M / s . J a g d a m b e C o t t o n i s s up p o r t e d f r o m q u a n t i t a t i v e r e c o r d o f t h e a p p e l l a n t . 9 . 2 I h a v e c o n s i d e r e d t h e a s s e s s m e n t o r d e r a n d s u b mi s s i o n s o f t h e a p p e l l a n t . T h e i n f o r m a t i o n r e c e i v e d f r o m D D I T ( In v ), N e w D e l h i w a s c a t e g o r i c a l l y w h e r e i n a f t e r m a k i n g n e c e s sa r y i n v e s t i g a t i o n , i t w a s c o n c l u d e d t h a t M / s . J a g d a m b e C o t t o n w a s e n g a g e d i n b u s i n e s s o f p r o v i n g b o g u s b i l l i n g t o v a ri o u s a s s e s s e e . U n d i s p u t e d l y , t h e a p p e l l a n t c o m p a n y h a s a l s o m a d e pa y m e n t t o s a i d c o n c e r n a g a i n s t p u r c h a s e s o f R s . 1 6 , 6 2 , 1 0 8 / - re c o r d e d i n i t s b o o k s . I a l s o f i n d t h a t a p p e l l a n t h a s u n a b l e t o d i sc h a r g e t h e b u r d e n o f p r o v i n g g e n u i n e n e s s o f p u r c h a s e s m a d e f r om M / s . J a g d a m b e C o t t o n a n d h a s f a i l e d t o p r o d u c e t h e p r i n ci p l e o f f i c e r o f t h e s a i d c o n c e r n . T h e m e r e f a c t t h a t b o o k s o f a c c o un t a r e a u d i t e d w i l l n o t h e l p t h e c a s e o f t h e a p p e l l a n t p a r t i c u l a r ly w h e n s p e c i f i c i n f o r m a t i o n f r o m i n v e s t i g a t i o n w i n g i s t h e r e o n r e co r d . I n t h e s e c i r c u m s t a n c e s , t h e a l l e g a t i o n o f b o g u s p u r c h a s e s i s s o u n d f o o t e d . 9 . 3 H o w e v e r , i n t h e s a m e b r e a t h , I f i n d c o n s i d e r a b le m e r i t i n t h e a l t e r n a t e c o n t e n t i o n o f t h e a p p e l l a n t t h a t w i t h o u t t h e r e b e i n g a n y d i s p u t e w i t h r e g a r d t o q u a n t i t a t i v e d e t a i l s , t r a d i ng r e s u l t a n d c o r r e s p o n d i n g s a l e s , t h e d i s a l l o w a n c e o f e n t i r e p u rc h a s e o f R s . 1 6 , 6 2 , 1 0 8 / - i s i l l - f o u n d e d . I t i s w e l l k n o w n f a c t th a t a s s e s s e e o b t a i n s b o g u s b i l l s i n r e s p e c t o f t h o s e t r a n s a c t i o n w h e r e g o o d s a r e a c t u a l l y p r o c u r e d f r o m g r e y m a r k e t a t a d i s c o u n t e d p r i c e a n d b i l l s a r e o b t a i n e d f r o m e n t r y p r o v i d e r s s o a s t o r o u t e t he p u r c h a s e s i n t h e b o o k s o f a c c o u n t w i t h o u t d i s t u r b i n g t h e q u a n t i ta t i v e r e s u l t . 9 . 4 I n t h e p r e s e n t c a s e , t h e a s s e s s i n g o f f i c e r h a s n o t a d v e r s e l y c o m m e n t e d o n q u a n t i t a t i v e r e s u l t a n d e v e n t h e a p p e ll a n t i s h e a v i l y r e l y i n g u p o n t h e c o r r e c t n e s s o f t r a d i n g r e s u l t t o ju s t i f y t h e p u r c h a s e s . I n v i e w o f t h e s e f a c t s a n d k e e p i n g i n m in d t h e n a t u r e o f t r a n s a c t i o n , i t w o u l d b e a p p r o p r i a t e t o m a k e a d d i t io n t o t h e e x t e n t p r o f i t e a r n e d o n s u c h b o g u s p u r c h a s e w h i c h w i l l t a ke i n t o a c c o u n t t h e u n a c c o u n t e d p o r t i o n o f i n c o m e e a r n e d b y t h e a p pe l l a n t . T h i s i s i n c o n s o n a n c e w i t h p r i n c i p l e l a i d d o w n b y H o n ’ b l e Bo m b a y H i g h I.T.A. No.1927/Del/2020 5 C o u r t P C I T v s . M o h o m m a d H a j i A d a m ( B o m b a y H i g h C o u rt ) ( I T A 1 0 0 4 o f 2 0 1 6 d a t e d 1 1 / 0 2 / 2 0 1 9 ) a n d H o n ’ b l e G u j a r a t H i g h C o u r t i n t h e c a s e o f P C I T v . J a g d i s h H P a t e l [ 2 0 1 7 1 8 4 t ax m a n n . c o m 2 5 9 ( G u j a r a t ) . 9 . 5 A c c o r d i n g l y , I d i r e c t t h e A s s e s s i n g O f f i c e r t o r e s t r i c t t h e d i s a l l o w a n c e t o t h e e x t e n t o f G r o s s p r o f i t e a r n e d by t h e a p p e l l a n t a s m e n t i o n e d i n t a x a u d i t r e p o r t o f t h e a p p e l l a n t . T h e g r o u n d n o . 2 i s p a r t l y a l l o w e d . ” 9. W e ha ve c ar ef ull y con si de re d the o bj e cti on r ai sed o n be h alf of the Re ve nue on t h e act io n of th e CI T( A) t ow ard s r edu cti on of the dis al lo wa nc e on a cco un t of bog us pur ch as es . Th e C IT( A) h as res tr ict ed th e di sa ll ow anc e t ow ar ds b o gu s pu rc ha se s to th e ex te nt of gro ss p rof i t as a pp lic ab le o n su ch p u rch as es h av in g reg ard t o th e qua nt it at ive r es ul ts etc. t he ac ti on of t he CI T( A) a pp ea rs to be b as ed on ju st a nd p ro per app re ci ati on of f ac ts an d in c onso nan ce wi th t he jud ic ia l pre ce de nt s. 10. In t he ab sen ce of an y p er ve rs it y sh ow n, w e a re n ot in cli n ed t o int erf er e wi th t he a cti on of th e CIT (A ). He nc e, th e Gr ou nd N o.2 of the R ev en ue i s d is mi sse d. 11. In th e res ul t, t he ap pea l of th e Re ve nu e is d ismi ss ed . Order pronounced in the open Court on 18/10/2022. Sd/- Sd/- [KUL BHARAT] [PRADIP KUMAR KEDIA] JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: /10/2022 prabhat