M/s. C.R. Fashion Pvt. Ltd., New Delhi V. ACIT (OSD), New Delhi

ITA 2089/DEL/2012

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 4742 (ITAT-DELHI)
• Duration Of Justice: 5 year(s) 4 month(s) 10 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-09-2017
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Next Hearing Date: 21-06-2017
• Assessment Year: 1997-1998
• Appeal Filed On: 03-05-2012
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Keywords: Unexplained cash credit; Depreciation
• Section: 133(6); 68; 144

Judgement Text

INCOME TAX APPELLATE TRIBUNAL DELHI BENCH B : NEW DELHI BEFORE SHRI I.C.SUDHIR , JUDICIAL MEMBER AND SHRI PRASHANT MAHARISHI, ACCOUNTANT MEMBER ITA NO. 2089/DEL/2012 (ASSESSMENT YEAR: 1997 - 98 ) CR FASHIONS PVT. LTD, RZ - 4, JAIN PARK, MATIALA ROAD, UTTAM NAGER, NEW DELHI PAN:AACCC5422F VS. ACIT (OSD), WARD - 3(2), ROOM NO. 385A, CR BUILDING, IP ESTATE, NEW DELHI (APPELLANT) (RESPONDENT) ASSESSEE BY : NONE REVENUE BY: SHRI ANSHU PRAKASH, SR. DR DATE OF HEARING 07/09 / 2017 DATE OF PRONOUNCEMENT 13 / 09 / 2017 O R D E R PER PRASHANT MAHARISHI, A. M. 1. THIS IS AN APPEAL FILED BY THE ASSESSEE AGAINST THE ORDER OF THE LD CIT(A) - IV, NEW DELHI DATED 21.01.2011 FOR THE ASSESSMENT YEAR 1997 - 98. 2. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL: - 1. THAT UNDER THE GIVEN FACTS AND CIRCUMSTANCES AND IN LAW, THE IMPUGNED ASSESSMENT ORDER IS BASED ON NON APPRECIATION OF FACTS OF THE CASE AND LAW. 2. THAT UNDER THE GIVEN FACTS AND CIRCUMSTANCES AND IN LAW, LD. AO GROSSLY ERRED IN DISALLOWING 50% OF LABOUR AND WAGES EXPENSES AMOUNTING TO RS. 257800.00 THAT THE ADDITION OF INCOME IS MADE DUE TO NON CONFIRMATION OF LABOUR IN FINANCIAL YEAR DECEMBER 2007 F OR PERIOD OF OPERATION IN FINANCIAL YEAR 1996 - 97. THE AO HAS COMPLETELY IGNORED THE FACT THAT COMPANY PRODUCTION WAS ALREADY CLOSED BEFORE THE FINANCIAL YEAR 2007. THE LD. AO HAS DISALLOWED 50% OF LABOUR AND WAGES WHICH IS AN ASSUMED AND HYPOTHETICAL FIGURE. IN THE INCOME TAX ACT, NO SECTION SUPPORTS SUCH A WILD DECISION OF AO. HOWEVER, THE SECTION 44AF IF READ CAREFULLY, READS OUT THE PERCENTAGE ASSUMED FOR ALL EXPENSES INCLUDING DEPRECIATION TO BE 95% AND 5% OF THE SAL E TO BE INCOME OF THE ASSESSEE. THE LD. AO HAD NO INTENTION TO BRING THE MATTER OF ASSESSMENT ON A FAIR TRIAL OF THE ASSESSEE AND SO HE COMPLETELY IGNORED AND OVERLOOKED SECTION 44AF WHICH IS THE ONLY GUIDING SECTION IN THIS CASE. 3. THAT UNDER THE GIVEN F ACTS AND CIRCUMSTANCES AND IN LAW, LD. AO GROSSLY ERRED IN DISALLOWING 50% OF EMBROIDERY CHARGES AMOUNTING TO RS. 306233.00. THAT THE ADDITION OF INCOME IS MADE DUE TO NON CONFIRMATION OF JOB WORKERS PROVIDING EMBROIDERY WORK IN FINANCIAL YEAR DECEMBER 200 7 FOR PERIOD OF OPERATION IN FINANCIAL YEAR 1996 - 97. THE AO HAS COMPLETELY IGNORED THE FACT THAT COMPANY PRODUCTION WAS ALREADY CLOSED BEFORE THE FINANCIAL YEAR 2007. PAGE 2 OF 5 THE LD. AO HAS DISALLOWED 50% OF EMBROIDERY CHARGES WHICH IS AN ASSUMED AND HYPOTHETICAL FIGURE. IN THE INCOME TAX ACT, NO SECTION SUPPORTS SUCH A WILD DECISION OF AO. HOWEVER, THE SECTION 44AF IF READ CAREFULLY, READS OUT THE PERCENTAGE ASSUMED FOR ALL EXPENSES INCLUDING DEPRECIATION TO BE 95% AND 5% OF THE SALE TO BE INCOME OF THE ASSESSEE. THE LD. AO HAD NO INTENTION TO BRING THE MATTER OF ASSESSMENT ON A FAIR TRIAL OF THE ASSESSEE AND SO HE COMPLETELY IGNORED AND OVERLOOKED SECTION 44AF WHICH IS THE ONLY GUIDING SECTION IN THIS CASE. 4. THAT UNDER THE GIVEN FACTS AND CIRCUMSTANCES AND IN LA W, LD. AO GROSSLY ERRED IN DISALLOWING 50% OF FABRICATION EXPENSES AMOUNTING TO RS. 438343.00 THAT THE ADDITION OF INCOME IS MADE DUE TO NON CONFIRMATION OF JOB WORKERS PROVIDING FABRICATION WORK IN FINANCIAL YEAR DECEMBER 2007 FOR PERIOD OF OPERATION IN F INANCIAL YEAR 1996 - 97. THE AO HAS COMPLETELY IGNORED THE FACT THAT COMPANY PRODUCTION WAS ALREADY CLOSED BEFORE THE FINANCIAL YEAR 2007. THE LD. AO HAS DISALLOWED 50% OF FABRICATION EXPENSE WHICH IS AN ASSUMED AND HYPOTHETICAL FIGURE. IN THE INCOME TAX ACT , NO SECTION SUPPORTS SUCH A WILD DECISION OF AO. HOWEVER, THE SECTION 44AF IF READ CAREFULLY, READS OUT THE PERCENTAGE ASSUMED FOR ALL EXPENSES INCLUDING DEPRECIATION TO BE 95% AND 5% OF THE SALE TO BE INCOME OF THE ASSESSEE. THE LD. AO HAD NO INTENTION T O BRING THE MATTER OF ASSESSMENT ON A FAIR TRIAL OF THE ASSESSEE AND SO HE COMPLETELY IGNORED AND OVERLOOKED SECTION 44AF WHICH IS THE ONLY GUIDING SECTION IN THIS CASE. 5. THAT UNDER THE GIVEN FACTS AND CIRCUMSTANCES AND IN LAW, LD. AO GROSSLY ERRED IN D ISALLOWING 50% OF FUEL AND POWER EXPENSES AMOUNTING TO RS. 51000.00 THE LD. AO HAS DISALLOWED 50% OF FUEL AND POWER EXPENSE WHICH IS AN ASSUMED AND HYPOTHETICAL FIGURE. IN THE INCOME TAX ACT, NO SECTION SUPPORTS SUCH A WILD DECISION OF AO. HOWEVER, THE SE CTION 44AF IF READ CAREFULLY, READS OUT THE PERCENTAGE ASSUMED FOR ALL EXPENSES INCLUDING DEPRECIATION TO BE 95% AND 5% OF THE SALE TO BE INCOME OF THE ASSESSEE. THE LD. AO HAD NO INTENTION TO BRING THE MATTER OF ASSESSMENT ON A FAIR TRIAL OF THE ASSESSEE AND SO HE COMPLETELY IGNORED AND OVERLOOKED SECTION 44AF WHICH IS THE ONLY GUIDING SECTION IN THIS CASE. 6. THAT UNDER THE GIVEN FACTS AND CIRCUMSTANCES AND IN LAW, LD. AO GROSSLY ERRED IN TREATING SUNDRY CREDITORS AMOUNTING TO RS. 377660.00 AS FICTITIOUS LIABILITY AND THEREBY ADDING THE SAME TO THE TAXABLE INCOME OF THE ASSESSEE. 3. FACTS OF THE CASE SHOWS THAT ASSESSEE IS A PRIVATE LIMITED COMPANY WHO FILED ITS RETURN OF INCOME ON 30/11/1997 AT A LOSS OF RS. 23,700/ - AND ASSESSMENT WAS MADE UNDER SECTION 144 OF THE INCOME TAX ACT ON THE INCOME OF RS. 1720006/ - ON 04/02/2000 WHICH WAS APPEAL BEFORE THE COORDINATE BENCH WHO WIDE ORDER DATED 23/06/2006 SET ASIDE THE ORDER TO THE FILE OF THE LD. AO AND THEREFORE A FRESH ASSESSMENT WAS MADE BY THE ASSESSING OFF ICER ON 31/12/2007 DETERMINING THE TOTAL INCOME OF THE ASSESSEE AT RS. 136 6636/ - . IN THE ASSESSMENT ORDER, THE LD. AO MADE 50% OF THE DISALLOWANCE OUT OF LABOUR WAGES EXPENSES, EMBROIDERY CHARGES, PAGE 3 OF 5 FABRICATION EXPENSES, AND POWER AND FUEL EXPENSES. AN ADDITION OF RS. 3 77660 / - CIT WAS ALSO MADE WITH RESPECT TO UNEXPLAINED CREDITS WITH RESPECT TO TWO PARTIES. 4. ASSESSEE PREFERRED AN APPEAL BEFORE THE LD. CIT(A, WHO VIDE ORDER DATED 21/01/2011 CONFIRMED THE ABOVE ADDITION. AGAINST WHICH ASSESS EE IS IN APPEAL BEFORE US. 5. DESPITE NOTICE, NONE APPEARED ON BEHALF OF ASSESSEE AND THEREFORE THE ISSUE IS DECIDED ON MERIT B ASED ON THE FACTS AVAILABLE ON RECORD. 6. LD. DEPARTMENTAL REPRESENTATIVE RELIED UPON THE ORDER OF THE LORD ASSESSING OFFICER. 7. WE HAVE CAREFULLY CONSIDERED THE CONTENTIONS OF THE LD. DEPARTMENTAL REPRESENTATIVE AS WELL AS THE ORDER OF THE LD. ASSESSING OFFICER. WE ALSO PERUSED THE REASONS RECORDED BY THE LD. CIT ( A) WHILE DELETING THE ABOVE ADDITION/DISALLOWANCES. 8. THE LD. ASSESSING OFFICER HAS DISALLOWED THIS SUM OF EMBROIDERY CHARGES BECAUSE OF FAILURE ON THE PART OF THE ASSESSEE TO SHOW THE DETAILS OF SERVICES RENDERED AND FURTHER ALL THE TRANSACTIONS OF PAYMENTS ARE IN CASH. THE NOTICES SENT BY THE LD. ASSESSING OFFICER WERE ALSO RECEIVED BACK AS ON SOUND. WITH RESPECT TO THE FABRICATION CHARGES, ALSO THE ASSESSEE FAILS TO SUBMIT DETAILS OF THE SERVICES RENDERED. BEFORE THE LD. CIT (A) , THE ASSESSEE HAS PRODUCED ITS BOOKS OF ACCOUNTS, WHICH WERE ALSO PRODUCED BEFORE THE LD. ASSESSI NG OFFICER, AS WELL AS SHOWN THE BILLS OF THOSE PARTIES. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, IT WAS NOTED BY THE LD. CIT(A) , ABOUT SUBMISSION OF THE CONFIRMATION OF INCOME TAX PARTICULARS OF SERVICE PROVIDERS. THEREFORE, HE CONFIRMED THE ABOVE DIS ALLOWANCE. 9. ON EXAMINATION OF THE ASSESSMENT ORDER IT IS APPARENT THAT ASSES SEE HAS SHOWN RECEIPT OF RS. 20 506611 / - . AGAINS T THIS THE EXPENDITURE OF RS. 5 15600 / - TOWARDS LABOUR AND WAGES, RS. 6 12466 / - AS EMBROIDERY CHARGES AND RS. 8 76685 / - AS FABRICATION CHARGES WERE SHOWN. THE ASSESSEE PRODUCED THE BOOKS OF ACCOUNTS, BEFORE THE LD. ASSESSING OFFICER AND SUBMITTED THE COPIES OF THE BILLS AND VOUCHERS. HOWEVER, THE LD. ASSESSING OFFICER DISALLOWED THE SAME AS THE ASSESSEE IN CASH PAID MOST O F THE AMOUNT . MANY TIMES THE ASSESSEE IS ALSO MADE PAYMENT THROUGH THIRD PARTIES. THE NOTICES ISSUED TO THE PARTIES UNDER SECTION 133(6) HAVE ALSO RETURNED AS UNSERVED. HOWEVER, THE BASIC FACT TO BE NOTED IS THAT THE ASSESSEE HAS CLOSED ITS BUSINESS IN DEC EMBER 2007 WHEN THE ASSESSMENT WAS FRAMED. FURTHER, THE LD. ASSESSING OFFICER HAS MADE THE DISALLOWANCES AT THE RATE OF 50% OF ALL THE EXPENDITURE, WHICH IS NOT ACCEPTABLE. IN VIEW OF THE FACT THAT ASSESSEE IS SHOWN A RECEIPT OF RS. 25 LACS AND OUT OF WHIC H ALL THESE EXPENDITURES HAVE BEEN INCURRED BY THE ASSESSEE. HAD THE ASSESSING OFFICER HAS ANY DOUBT ABOUT THE PAYMENT IN CASH, THEN SUCH DOUBTFUL EXPENDITURE SHOULD HAVE BEEN DISALLOWED AND NOT AD HOC PAGE 4 OF 5 EXPENDITURE SHOULD BE DISALLOWED. IT WAS ALSO NOT POIN TED OUT BY THE LD. ASSESSING OFFICER THAT WHETHER THERE WAS ANY VIOLATION OF THE PROVISIONS OF SECTION 40A (3) OF THE INCOME TAX ACT, THEN ALSO ONLY SUCH EXPENDITURE ARE DISALLOWABLE WHICH ARE HIT BY THAT PROVISION OTHERWISE THE CASE PAYMENTS ARE NOT PROHI BITED AS PER THE INCOME TAX ACT IF THEY ARE BELOW THE LIMIT SPECIFIED THEREIN. FURTHER, THE ASSESSEE HAS PROVIDED THE DETAILS ADDRESSES OF THOSE SERVICE PROVIDERS AS APPEARING ON THE PRINTED COPY OF THE BILLS RECEIVED BY THE ASSESSEE FROM THOSE EMBROIDERER S AND FABRICATORS. THERE CONFIRMATION WAS ALSO SUBMITTED AT THE TIME OF ORIGINAL ASSESSMENT. IT WAS ALSO NOT INFORMED TO THE ASSESSEE THAT SUCH PERSONS WERE ISSUED ANY NOTICES AND THEY HAVE NOT REMAINED PRESENT. IT IS ALSO REQUIRED TO LOOK THAT THE NATURE OF THE BUSINESS OF THE ASSESSEE, WHICH IS IN THE NATURE OF A VERY SMALL SCALE, AND THE ASSESSEE IS GETTING WORK DONE THROUGH THESE SMALL WORKMEN WHO DO NOT HAVE ANY PERMANENT PLACE OF RESIDENCE. IN VIEW OF THIS, WE DO NOT FIND ANY REASON TO DISALLOW AD HOC EXPENDITURE BY THE LD. ASSESSING OFFICER. IN THE RESULT GROUND NO. 2, 3, 4 AND 5 WITH RESPECT TO THE AD HOC DISALLOWANCES MADE BY THE LD. ASSESSING OFFICER ARE ALLOWED IN FAVOUR OF THE ASSESSEE. 10. WITH RESPECT TO GROUND NO. 6 REGARDING THE ADDITION OF RS. 3 77,600/ - WHEN CREDIT HAS BEEN PROVIDED TO ASSESSEE BY CREDITORS. THE ASSESSEE CREATED THE ABOVE LIABILITY BY PAYING THE LABOURERS OF JOB WORKS THROUGH THESE ENTITIES. IN ABSENCE OF ANY INFORMATION GIVEN BY THE ASSESSEE BEFORE THE ASSESSING OFFICER THE ABOVE ADDITION HAS BEEN MADE. THE LD . CIT(A) ALSO CONFIRMED THE SAME. AS ASSESSEE HAS FAILED TO DISCHARGE ITS INITIAL ONUS WITH RESPECT TO CREDIT OF THESE PARTIES WERE NOT TRADE CREDITORS BUT LENDERS TO THE ASSESSEE FOR PAYMENT OF SUMS TO THE OTHER LABOURERS, IN ABSENCE OF ANY CONFIRMATION, THE ADDITION HAS BEEN CORRECTLY MADE BY THE LD. ASSESSING OFFICER UNDER SECTION 68 OF THE INCOME TAX ACT. IN THE RESULT GROUND NO. 6 OF THE APPEAL OF THE ASSESSEE IS DISMISSED. 11. GROUND NO. 1 OF THE APPEAL IS GENERAL IN NATURE AND HENCE DISMISSED. 12. IN THE RESULT APPEAL OF THE ASSESSEE IS PARTLY ALLOWED. ORDER PRO NOUNCED IN THE OPEN COURT ON 1 3 / 0 9 / 2017 . - S D / - - S D / - (I. C. SUDHIR ) (PRASHANT MAHARISHI) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 1 3 / 0 9 / 2017 A K KEOT COPY FORWARDED TO 1. APPLICANT PAGE 5 OF 5 2. RESPONDENT 3. CIT 4. CIT (A) 5. DR:ITAT ASSISTANT REGISTRAR ITAT, NEW DELHI