M/s. RL Exports International, New Delhi V. ACIT, New Delhi

ITA 2365/DEL/2015

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 7033 (ITAT-DELHI)
• Duration Of Justice: 9 month(s) 25 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 17-02-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC 2
• Next Hearing Date: 16-02-2016
• Assessment Year: 2002-2003
• Appeal Filed On: 22-04-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ROBIN RAWAL SENIOR
• Assessee Lawyers: ADITYA KUMAR CAS
• Keywords: Depreciation; Search and seizure; Peak credit
• Section: 147

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL (DELHI BENCH SMC-I : NEW DELHI) BEFORE SHRI P.K. BANSAL, ACCOUNTANT MEMBER ITA NOS.2364 & 2365/DEL./2015 (ASSESSMENT YEARS : 2001-02 & 2002-03) M/S. RL EXPORTS INTERNATIONAL, VS. ACIT, CENTRAL CIRCLE 5, 118, ANSAL BHAWAN, K.G. MARG, NEW DELHI. NEW DELHI 110 001. (PAN : AAAFR7212B) (APPELLANT) (RESPONDENT) ASSESSEE BY : S/SHRI ASHWANI KUMAR & ADITYA KUMAR, CAS REVENUE BY : SHRI ROBIN RAWAL, SENIOR DR DATE OF HEARING : 16.02.2016 DATE OF PRONOUNCEMENT : 17.02.2016 O R D E R BOTH THESE APPEALS HAVE BEEN FILED BY THE ASSESSEE AGAINST THE ORDER OF THE CIT (APPEALS) DATED 16.03.2015. 2. IN THE ASSESSMENT YEAR 2001-02, SINCE THE ASSESS EE HAS NOT PRESSED GROUND NO.1 REGARDING THE VALIDITY OF THE NOTICE IS SUED U/S 148, THEREFORE, THE SAME STANDS DISMISSED AS NOT PRESSED. 3. GROUND NO.2 IN ASSESSMENT YEAR 2001-02 AND GROUN D NO.1 IN ASSESSMENT YEAR 2002-03 RELATE TO THE ADDITION OF R S.15,000/- AND RS.3,52,500/- ON THE BASIS OF CERTAIN ENTRIES FROM THE PEN DRIVE SEIZED FROM THE POSSESSION OF THE PARTNER OF THE ASSESSEE, SHRI CHETAN GUPTA BY THE PUNJAB VIGILANCE BUREAU, LUDHIANA AND HANDED OV ER TO THE INCOME-TAX ITA NOS.2364 & 2365/DEL./2015 2 DEPARTMENT. IN BOTH THE YEARS, ON THE BASIS OF THE ENTRIES IN THE PEN DRIVE, THE AO INITIATED THE PROCEEDINGS U/S 147 IN THE CAS E OF THE ASSESSEE AND ULTIMATELY COMPLETED THE ASSESSMENT IN THE RESPECTI VE YEAR MAKING THE ADDITION IN THE CASE OF THE ASSESSEE WHICH WERE CON FIRMED BY THE CIT (A). 4. I HAVE HEARD THE RIVAL SUBMISSIONS AND CAREFULLY CONSIDERED THE SAME ALONG WITH THE ORDERS OF THE TAX AUTHORITIES BELOW. I HAVE ALSO GONE THROUGH THE DECISION OF THE TRIBUNAL IN THE CASE OF CHETAN GUPTA VS. DCIT 144 ITD 344. I NOTED THAT BENCH B OF THIS TRIB UNAL IN THE CASE OF CHETAN GUPTA, IN WHOSE CASE THE ASSESSMENT HAS BEEN REOPENED ON THE BASIS OF SOME PEN DRIVE, ACCEPTED THE WORKING OF TH E PEAK CREDIT AS COMPUTED BY THE ASSESSEE IN RESPECT OF THE TRANSACT ION BEING RECORDED IN THE PEN DRIVE. FOR THE ASSESSMENT YEAR 2002-03, A SUM OF RS.36,89,310/- WAS HELD TO BE THE UNDISCLOSED INCOME OF CHETAN GUP TA BUT I NOTED ASSESSMENT FOR ASSESSMENT YEAR 2001-02 WAS QUASHED DUE TO NON-SERVICE OF THE NOTICE ON THE ASSESSEE SINCE THE ASSESSMENT FOR ASSESSMENT YEAR 2001- 02 WAS QUASHED IN THE CASE OF CHETAN GUPTA. IN THA T DECISION, THEREFORE, I DO NOT AGREE WITH THE PLEA OF THE LD. COUNSEL THAT THE SAME ADDITION BASED ON THE PEN DRIVE HAS ALSO BEEN ADDED IN THE HANDS O F THE CHETAN GUPTA. I ACCORDINGLY DISMISS GROUND NO.2 TAKEN BY THE ASSESS EE IN ASSESSMENT YEAR 2001-02. 5. NOW, COMING TO THE ADDITION OF RS.3,52,500/- IN ASSESSMENT YEAR 2002-03, I NOTED THAT THE TRIBUNAL HAS GIVEN A FIND ING UNDER PARA 6.26 IN ITA NOS.2364 & 2365/DEL./2015 3 RESPECT OF THE WORKING OF THE PEAK CREDIT BY CHETAN GUPTA AT RS.36,89,310/- TO BE CORRECT AND TREATED THE SAME A S UNDISCLOSED INCOME FOR THE ASSESSMENT YEAR 2002-03. THE PEAK CREDIT H AS BEEN WORKED OUT AS OBSERVED IN THIS DECISION ON THE BASIS OF THE TRANS ACTION RECORDED IN THE ALLEGED PEN DRIVE. I, THEREFORE, AGREE WITH THE SU BMISSION OF LD. SENIOR COUNSEL THAT THERE CANNOT BE ANY DOUBLE ADDITION. ACCORDINGLY, I DELETE THE ADDITION OF RS.3,53,500/-, THUS GROUND NO.1 IN ASSESSMENT YEAR 2002-03 IS ALLOWED. 6. GROUND NO.2 IN ASSESSMENT YEAR 2002-03 RELATE TO THE DISALLOWANCE OF RS.2,82,804/-. 7. I HEARD THE RIVAL SUBMISSIONS IN THIS REGARD AND I NOTED THAT THE AO FOUND THAT THE ASSESSEE HAS CLAIMED DEDUCTION FOR A N EXPENDITURE OF RS.18,85,360/- TO HAVE BEEN INCURRED FOR THE PURPOS E OF THE BUSINESS BUT THE AO DISALLOWED 15% OF THIS EXPENDITURE AMOUNTING TO RS.2,82,804/-. THE AO DISALLOWED THIS EXPENSES MERELY ON AD HOC BA SIS BY OBSERVING THAT AS THE BOOKS OF ACCOUNTS COULD NOT BE PRODUCED THE EXPENSES CANNOT BE VERIFIED EVEN THOUGH HE DID NOT DISPUTE DETAILS OF VARIOUS EXPENSES AS DEMANDED BY HIM. IT IS NOT THE CASE THAT THE EXPEN SES HAVE NOT BEEN INCURRED WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF BUSINESS. THIS DISALLOWANCE HAS BEEN MADE JUST ON AD HOC BASIS @ 1 5% OF THE EXPENSES INCURRED. THE INCOME-TAX DOES NOT PERMIT THE AO TO DISALLOW THE ITA NOS.2364 & 2365/DEL./2015 4 EXPENDITURE ON AD HOC BASIS. ACCORDINGLY, I DELETE THIS DISALLOWANCE. THIS GROUND IS ALLOWED. 8. THE NEXT GROUND IS WITH REGARD TO THE DEPRECIATI ON AMOUNTING TO RS.48,255/-. 9. AFTER HEARING THE RIVAL SUBMISSIONS AND GOING TH ROUGH THE ORDER OF THE TAX AUTHORITIES BELOW, I NOTED THAT THE SAID DI SALLOWANCE IS MADE BY THE AO IN RESPECT OF A PROPERTY AT JALANDHAR. BY REJEC TING THE CLAIM OF THE ASSESSEE THAT ASSESSEE WAS DOING EXPORT BUSINESS FR OM DELHI AS WELL AS JALANDHAR. WHEN THE ASSESSEE WENT IN APPEAL BEFORE THE CIT (A) THE CIT (A) CONFIRMED THE DISALLOWANCE BY OBSERVING THAT TH E SAID PROPERTY IS A RESIDENTIAL PREMISES AND THE ONUS WAS ON THE ASSESS EE TO LEAD THE EVIDENCES BY WAY OF DOCUMENTARY EVIDENCES AND BY WAY OF ANY P ERMISSION FROM SALES-TAX OR OTHER AUTHORITIES REGISTRATION OF CERT IFICATE ETC. TO PROVE THAT THE SAID PREMISES WERE INDEED USED FOR BUSINESS PREMISE S. HE ALSO OBSERVED THAT THE ASSESSEE COULD HAVE PRODUCED THE ELECTRICA L OR TELEPHONE BILLS OR OTHER EVIDENCES WHICH COULD HAVE REFLECTED THAT THE PREMISES HAVE BEEN USED FOR THE BUSINESS PURPOSES. I NOTED THAT IN TH IS CASE, THE PROCEEDINGS U/S 147 HAS BEEN INITIATED ON THE BASIS OF REASONS RECORDED FOR THE ESCAPEMENT OF THE INCOME OF RS.3,53,500/- I.E. THE INCOME ON THE BASIS OF WHICH THE REASONS HAVE BEEN RECORDED. IT IS A CASE WHERE THE ORIGINAL ASSESSMENT HAS NOT BEEN COMPLETED U/S 143(3). THE PROVISIONS OF SECTION 147 EMPOWERS THE AO TO MAKE THE ADDITION IN RESPECT OF ANY OTHER INCOME ITA NOS.2364 & 2365/DEL./2015 5 WHICH ESCAPED THE ASSESSMENT PROVIDED ADDITION HAS BEEN MADE IN RESPECT OF THE INCOME FOR WHICH THE REASONS TO BELIEVE WERE RECORDED. THE PEN DRIVE HAS BEEN FOUND FROM CHETAN GUPTA DURING THE C OURSE OF SEARCH AND SEIZURE OPERATION CONDUCTED BY THE PUNJAB VIGILANCE BUREAU AT LUDHIANA PERTAINING TO THE LUDHIANA CITY CENTRE SCAM. IT IS PROVED THAT THE ASSESSEE WAS HAVING OFFICE IN PUNJAB. IN THE SUBSEQUENT ASS ESSMENT YEAR I.E. ASSESSMENT YEAR 2005-06, I NOTED THAT NO SUCH DISAL LOWANCE IN RESPECT OF THE DEPRECIATION WAS MADE BY THE AO WHILE COMPLETIN G THE ASSESSMENT. I, THEREFORE, SET ASIDE THE ORDER OF THE CIT (A) ON TH IS ISSUE AND DELETE THE DISALLOWANCE OF DEPRECIATION. GROUND NO.3 IS ALLOW ED. 10. IN THE RESULT, THE APPEAL FOR THE ASSESSMENT YE AR 2001-02 STANDS DISMISSED WHILE THE APPEAL FOR THE ASSESSMENT YEAR 2002-03 STANDS ALLOWED. ORDER PRONOUNCED IN OPEN COURT ON THIS 17 TH DAY OF FEBRUARY, 2016. SD/- (P.K. BANSAL) ACCOUNTANT MEMBER DATED THE 17 TH DAY OF FEBRUARY, 2016 TS COPY FORWARDED TO: ITA NOS.2364 & 2365/DEL./2015 6 1.APPELLANT 2.RESPONDENT 3.CIT 4.CIT(A)-3, NEW DELHI. 5.CIT(ITAT), NEW DELHI. AR, ITAT NEW DELHI.