ACIT, New Delhi V. M/s. The Installment Supply Ltd., New Delhi

ITA 2401/DEL/2012

• Counselvise Citation: [2017] 130 COUNSELVISE.COM (IT) 6428 (ITAT-DELHI)
• Duration Of Justice: 4 year(s) 10 month(s) 6 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-03-2017
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: D
• Next Hearing Date: 28-02-2017
• Assessment Year: 2007-2008
• Appeal Filed On: 18-05-2012
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: UMESH CHAND DUBEY
• Assessee Lawyers: BARUN KUMAR
• Keywords: Revised return

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH D, NEW DELHI BEFORE SH. R. K. PANDA, ACCOUNTANT MEMBER AND SMT. BEENA A. PILLAI, JUDICIAL MEMBER ITA NO. 2401/DEL/2012 (ASSESSMENT YEAR: 2007-08) ACIT CIRCLE-16(1) NEW DELHI VS. THE INSTALLMENT SUPPLY LTD. 46, JANPATH NEW DELHI PAN : AAACT0060G (APPELLANT) (RESPONDENT) REVENUE/DEPARTMENT BY : SH. UMESH CHAND DUBEY, SR.DR ASSESSEE BY : SH. BARUN KUMAR, CA DATE OF HEARING : 28.02.2017 DATE OF PRONOUNCEMENT : 24.03.2017 O R D E R PER BEENA A. PILLAI, J.M : 1. T HE PRESENT APPEAL HAS BEEN FILED BY REVENUE AGAINST ORDER DATED 29.02.2012 PASSED BY LD. CIT (A)-XII2, NEW DELHI FOR ASSESSMENT YEAR 2007-08 ON FOLLOWING GROUNDS OF APPEAL: 1. 'ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW THE LEARNED CIT (A) ERRED IN DELETING TH E ADDITION OF RS.83,85,200/- ON A/C OF COMMISSION RECEIVED, WITHOUT APPRECIATING THAT THE COMMISSION INCOME HAD A STEEP FALL BUT THE EXPENSES ON CARTAGE INWARD HAD INCREASED.' 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW THE LEARNED CIT (A) ERRED IN DELETING AN ADDITION OF RS.68,01,864/- AS ADVANCE RECEIVED FROM CUSTOMERS.' 2.1 'ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW THE LEARNED CIT (A) ERRED IN DELETI NG ADDITION OF RS.68,01,864/- WITHOUT APPRECIATING THA T 2 ITA NO. 2401/DEL/2012 THIS WAS IN THE NATURE OF PUBLIC DEPOSIT WHICH THE ASSESSEE WAS NOT ALLOWED TO TAKE AS PER RBI GUIDELINES AND AS PER THE ADVICE OF ITS OWN CHARTER ED ACCOUNTANT.' 3. 'ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW THE LEARNED CIT (A) ERRED IN DELETING AN ADDITION OF RS. 86,84,062/- MADE AS A DISALLOWANCE OUT OF VARIOUS EXPENSES WITHOUT APPRECIATING THAT THERE WAS NO ABNORMAL INCREASE IN THE CLAIM OF THE EXPENSES AND THAT THE ASSESSEE WAS NOT ABLE PROVE THAT THE INCREASE WAS FOR TIN-PURPOSE OF BUSINESS.' 4. 'THE APPELLANT CRAVES LEAVE FOR RESERVING THE RI GHT TO AMEND, MODIFY, ALTER, ADD OR FOREGO, ANY GROUND( S) OF APPEAL AT ANY TIME BEFORE OR DURING THE HEARING OF APPEAL.' 2. BRIEF FACTS OF THE CASE ARE AS UNDER: THE ASSESSEE FILED ITS RETURN OF INCOME ON 15.11.20 07 DECLARING A TOTAL INCOME OF RUPEES NAIL. HOWEVER, I T HAS BEEN RECORDED IN THE ASSESSMENT ORDER THAT THE RETURN WA S NOT BASED ON THE AUDITED PROFIT AND LOSS ACCOUNT BECAUS E THE ACCOUNTS OF THE ASSESSEE WERE NOT AUDITED BEFORE FI LING OF RETURN OF INCOME. THEREAFTER, BOOKS OF ACCOUNTS WER E FINALIZED AND AUDIT REPORT WAS PREPARED AS ON 30.05.2008. SUBSEQUENTLY THE ASSESSEE FILED REVISED RETURN OF I NCOME ON 26.11.2008 AGAIN DECLARING NIL INCOME. HOWEVER, BEF ORE FILING REVISED RETURN OF INCOME THE CASE OF ASSESSEE WAS S ELECTED UNDER SCRUTINY AND STATUTORY NOTICE UNDER SECTION 1 43(2) OF THE ACT WAS ISSUED AND SERVED UPON. QUESTIONNAIRE A LONGWITH NOTICE UNDER SECTION 142 (1) OF THE ACT WAS SERVED, IN REPLY TO WHICH ASSESSEE FROM TIME TO TIME FURNISHED WRITTEN SUBMISSIONS, INCLUDING BOOKS OF ACCOUNTS, BILLS AND VOUCHERS, BANK STATEMENTS WHICH WERE PUT TO TEST CHECK AND DI SCUSSED BY LD. AO. 3 ITA NO. 2401/DEL/2012 3. DURING ASSESSMENT PROCEEDINGS LD. AO OBSERVED THAT ASSESSEE WAS ENGAGED IN BUSINESS OF HIRE PURCHASE, LEASING AT ITS HEAD OFFICE AT DELHI AND DEALERSHIP OF TATA COM MERCIAL VEHICLES AND ALSO OPERATING THE SERVICE CENTRE FOR COMMERCIAL VEHICLES FOR TATA MOTORS LTD., AT MEERUT AND SAHARA NPUR, UNDER NAME AND STYLE OF BAHADUR MOTORS. ASSESSING OFFICER COMPLETED ASSESSMENT BY MAKING AN ADDITION OF RS.3,27,20,562/- IN THE HANDS OF ASSESSEE. 4. AGGRIEVED BY ADDITIONS MADE ASSESSEE PREFERRED APP EAL BEFORE LD. CIT(A), WHO DELETED THE ADDITIONS AND GR ANTED SUBSTANTIAL RELIEF TO ASSESSEE. 5. AGGRIEVED BY ORDER OF LD. CIT(A), REVENUE IS IN AP PEAL BEFORE US NOW. HOWEVER, IT HAS BEEN SUBMITTED THAT IN TERMS OF ADDITIONS THAT HAS BEEN CONFIRMED BY LD. CIT(A) ASSESSEE IS NOT IN APPEAL. 6. AT THE OUTSET LD. DR HAS SUBMITTED THAT ASSESSEE H AS NOT SUBSTANTIATED WITH ANY BILLS AND VOUCHERS IN RE SPECT OF EXPENDITURE CLAIMED. LD. DR SUBMITTED THAT AUDIT RE PORT CONDUCTED BY INTERNAL AUDITORS, EXPRESSES VARIOUS IRREGULARITIES IN THE BOOKS OF ACCOUNTS MAINTAINED BY ASSESSEE. HE SUBMITTED THAT TURNOVER HAS DECREASED BUT CARRIAGE EXPENSES HAS INCREASED. LD. DR FURTHER SUB MITTED THAT THERE WAS NO DETAILS THAT WERE PRODUCED BEFORE INTERNAL AUDITORS REGARDING COMMISSION AND DISCOUNT RECEIVED FROM TATA MOTORS BY ASSESSEE. LD. DR SUBMITTED THAT ASSE SSING OFFICER HAS RIGHTLY ADDED DIFFERENCE IN THE COMMISS ION AND DISCOUNT AS COMPARED TO PREVIOUS YEAR TO INCOME OF ASSESSEE. IN RESPECT OF SUNDRY CREDITORS LD. DR SUBMITTED THA T ASSESSEE 4 ITA NO. 2401/DEL/2012 HAS NOT BEEN ABLE TO ESTABLISH THE CREDIT ENTRIES I N BOOKS OF ACCOUNTS AND HAS NOT GIVEN ANY DETAILS REGARDING CR EDITORS. HE SUBMITTED THAT ASSESSING OFFICER WAS RIGHT IN NOT C ONSIDERING SUCH ADVANCES AS REAL AND GENUINE AND CREDITWORTHY. HE SUBMITTED THAT ASSESSEE HAS SHOWN LIABILITY TOWARDS VEHICLE AMOUNTING TO RS.68,01,864/- BUT HAS NOT SUPPLIED VE HICLES AS ACCORDING TO HIM VEHICLES WERE AVAILABLE IN CLOSING STOCK OF ASSESSEE. 7. LD. DR THUS SUBMITTED THAT ASSESSING OFFICER HAS R IGHTLY REJECTED BOOKS OF ACCOUNT AND ESTIMATED INCOME ON T HE BASIS OF THE GROSS PROFIT OF THE PREVIOUS YEAR. HE SUBMIT TED THAT AS THE INCOME, AS WELL AS THE EXPENDITURE, RECORDED BY ASSESSEE IN ITS BOOKS OF ACCOUNTS WAS NOT SUPPORTED BY PROPE R VOUCHERS, BILLS ASSESSING OFFICER HAS CONDUCTED COM PARATIVE STUDY OF PREVIOUS YEAR IN ASSESSEES CASE WITH THAT OF THE YEAR UNDER CONSIDERATION WHICH CANNOT BE FAULTED WITH. 8. ON THE CONTRARY LD. AR SUBMITTED THAT ADDITION MAD E BY LD. AO ON ACCOUNT OF COMMISSION AND DISCOUNT SHOULD BE DELETED AS LD. AO HAS COMPLETELY IGNORED TRADING AC COUNT OF BAHADUR MOTORS WHICH HAS BEEN REPRODUCED BY ASSESSI NG OFFICER AT PAGE 18 OF ASSESSMENT ORDER. IT HAS BEEN SUBMITTED THAT ASSESSEE HAD INCURRED LOSS IN PREVIOUS ASSESSM ENT YEAR WHEREAS FOR THE YEAR UNDER CONSIDERATION ASSESSEE H AS EARNED INCOME OF RS.96,19,960/-. FURTHER LD. AR SUBMITTED THAT ASSESSING OFFICER HAS MADE ADDITION WITHOUT ESTABLI SHING THAT ASSESSEE RECEIVED COMMISSION AND DISCOUNT MORE THAN RECORDED IN BOOKS. HE THUS PLACES RELIANCE UPON DEC ISION OF LD. CIT(A). 5 ITA NO. 2401/DEL/2012 9. WE HAVE PERUSED FINDINGS OF LD. CIT(A) IN THE LIGH T OF SUBMISSIONS ADVANCED BY BOTH SIDES AND RECORDS PLAC ED BEFORE US. 10. IT IS OBSERVED THAT ASSESSING OFFICER HAS MADE DISALLOWANCE BASED ON IRREGULARITIES POINTED OUT BY INTERNAL AUDITORS IN AUDIT REPORT. ON PERUSAL OF AUDIT REPOR T IT IS OBSERVED THAT ASSESSEE HAS NOT SUBSTANTIATED ANY OF ITS CLAIM, EXPENSES OR COMMISSION RECEIVED WITH PROPER BILLS, VOUCHERS OR ANY OTHER SUCH DOCUMENT. WE SHALL REPRODUCE HERE RELEVANT OBSERVATION BY INTERNAL AUDITORS, PERTAINING TO ISS UES RAISED BY REVENUE BEFORE US, MORE PARTICULARLY PLACED AT P AGES 72 TO 83 OF THE PAPER BOOK: 4.10 NO RECONCILIATION/ANALYSIS/CONFIRMATION OF BALANCES IN VARIOUS ACCOUNTS WITH TATA MOTORS SHOWING A NET DEBIT BALANCE OF RS.73.32 LACS WERE MADE AVAILABLE TO US. WE HAVE BEEN PROVIDED WITH LETTER DATED DECEMBER, 2007 FROM TATA MOTOR FINANCE WHERE TATA MOTORS HAVE STATED THAT FOR THE PERIOD APRIL, 206 TO SEPTEMBER, 2006, RS. 11.26 LAC S ARE DUE TO THEM. NEITHER STATEMENT FOR THE PERIOD OCTOBER 2006 TO MARCH, 2007 NOR ANY RECONCILIATION FOR THE AMOUNT CLAIMED BY TATA MOTORS WAS MADE AVAILABLE TO US. UNDER THESE CIRCUMSTANCES IT IS NO T POSSIBLE TO ASCERTAIN WHETHER THE COMMISSION INCOME DUE FROM TATA MOTORS HAS BEEN ACCOUNTED FOR DURING THE YEAR 2006-07. 4.13. THE INTERNAL AUDITORS OF THE COMPANY HAVE ALSO REPORTED IRREGULARITIES TOWARDS PAYMENTS AND ACCOUNTING FOR EXPENSES AT THE HEAD OFFICE AND THE MEERUT WORKSHOP AND AMONG OTHER THINGS, HAVE REPORTED THAT: A) AMOUNTS AGGREGATING TO RS.18.34 LACS HAD BEEN CHARGED UNDER VARIOUS WORKSHOP EXPENSES AT BAHADUR MOTORS MEERUT ON THE STRENGTH OF INVOICES / BILLS OF PARTIES GENERATED FROM WORKSHOPS OWN 6 ITA NO. 2401/DEL/2012 COMPUTER SYSTEM AT MEERUT DURING THE PERIOD APRIL, 2006 TO MARCH, 2007. B) AN EXPENDITURE OF RS.10.80 LACS HAS BEEN ACCOUNTED FOR RELATING TO REPAIRS OF NEW VEHICLES A ND SUPPORTING DOCUMENTS WERE SIMILAR TO SELF GENERATED INVOICE / BILLS MENTIONED IN (A) ABOVE IN MOST OF T HE CASES. C) THERE WERE IRREGULARITIES IN PAYMENT OF DISCOUNT TO CUSTOMERS AMOUNTING TO RS.12.21 LACS RESULTING IN LOSS TO THE COMPANY. D) SIPHONING OF INCOME IN THE ABSENCE OF INTERNAL CONTROLS SPECIALLY RELATING TO JOB CARDS F OR REPAIR WORK. E) DESTRUCTION OF CERTAIN RECORDS PERTAINING TO PAYMENTS TO TEMPORARY WORKERS. F) CAMOUFLAGING LEADING TO FALSIFICATION BY ACCOUNTING FOR PAYMENTS TO TEMPORARY WORKERS AND BOOKING THE EXPENSES UNDER OTHER HEADS OF ACCOUNTS. 11 . IT HAS BEEN ARGUED BY LD.AR THAT ONCE BOOKS OF AC COUNTS ARE REJECTED AND GROSS PROFIT HAS BEEN CALCULATED, NO SEPARATE ADDITION SHOULD BE MADE. HE PLACED IS RELIANCE UPON DECISION OF HONBLE ANDHRA PRADESH HIGH COURT IN THE CASE OF MADI SUNDARAM MILLS CO LTD VS. CIT REPORTED IN 32 ITR 369. HE SUBMITTED THAT ONCE THE GROSS PROFIT HAS BEEN ESTIM ATED BY ASSESSING OFFICER BASED ON TOTAL TURNOVER, THEN ASS ESSING OFFICER CANNOT RELY UPON REJECTED BOOKS OF ACCOUNTS IN TERMS OF CASH CREDITS FOR MAKING FURTHER ADDITION. WE AGREE WITH CONTENTION OF LD. AR THAT BY MAKING ADDITION IN RES PECT OF CASH CREDITS, AFTER REJECTING BOOKS OF ACCOUNTS, WO ULD AMOUNT TO DOUBLE TAXATION OF CERTAIN ITEMS. HOWEVER, ASSES SING OFFICER HAS REJECTED BOOKS OF ACCOUNT BASED ON IRREGULARITI ES AND INFIRMITIES RECORDED BY INTERNAL AUDITORS IN AUDIT REPORT. 7 ITA NO. 2401/DEL/2012 FURTHER IT IS OBSERVED FROM ORDER OF LD. CIT(A) THA T EVEN LD. CIT(A) HAS NOT HIMSELF VERIFIED ANY OF CREDIT ENTRI ES UNDER HEAD SUNDRY CREDITORS AMOUNTING TO RS.68,01,864/-, ALLEGED COMMISSION INCOME EARNED AND DISCOUNT RECEIVED AMOU NTING TO RS.83,85,200/- AND EXPENSES UNDER HEAD OTHER EXP ENSES AMOUNTING TO RS.86,84,062/-. WE ARE, THEREFORE, INC LINED TO SET ASIDE THIS ISSUE IS BACK TO FILE OF LD. AO FOR A SUO MOTU VERIFICATION OF THESE ENTRIES IN BOOKS OF ACCOUNTS. LD. AO SHALL TAKE INTO CONSIDERATION ALL DOCUMENTS THAT MAY BE F ILED BY ASSESSEE TO ESTABLISH ITS CLAIM AND MAY VERIFY TO H IS SATISFACTION AS PER LAW REGARDING THE IDENTITY, CREDITWORTHINESS, AND GENUINENESS OF THE TRANSACTIO N IN RESPECT OF CREDIT ENTRIES. ASSESSEE IS DIRECTED TO FURNISH ALL THE NECESSARY DETAILS LIKE BILLS/VOUCHERS/DISCOUNT COUP ONS ETC., BEFORE LD. AO FOR PURPOSES OF ADJUDICATION OF THESE GROUNDS. NEEDLESS TO SAY THAT LD. AO SHALL GIVE PROPER OPPOR TUNITY TO ASSESSEE AS PER LAW. ACCORDINGLY THE GROUNDS RAISED BY REVENUE STANDS ALLOWED FOR STATISTICAL PURPOSES. IN THE RESULT APPEAL FILED BY THE REVENUE STANDS AL LOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 24 TH MARCH, 2017. SD/- SD/- (R. K.PANDA) (BEENA A. PILLAI) ACCOUNTANT MEMBER JUDICIAL MEMBER DATE:24.03.2017 @M!T