ITO, New Delhi V. M/s Saigun Technologies Pvt. Ltd., New Delhi

ITA 2467/DEL/2010

• Counselvise Citation: [2010] 136 COUNSELVISE.COM (IT) 3469 (ITAT-DELHI)
• Duration Of Justice: 2 month(s) 6 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-07-2010
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: G
• Assessment Year: 2006-2007
• Appeal Filed On: 24-05-2010
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: A D MEHROTRA
• Assessee Lawyers: ANIL GOEL
• Keywords: Business expenditure; Income from undisclosed sources; Additional evidence
• Section: 37(1)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH : H, NEW DELHI BEFORE SHRI C.L. SETHI, JUDICIAL MEMBER AND SHRI B.C. MEENA, ACCOUNTANT MEMBER ITA NO.2467/DEL/2010 (ASSESSMENT YEAR : 2006-07) ITO, WARD 7 (2), VS. M/S. SAIGUN TECHNOLOGIES PVT . LTD., NEW DELHI. 161, NILGIRI APARTMENTS, ALAKANANDA, NEW DELHI 110 019. (PAN : AAFCS8475H) (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI ANIL GOEL, CA REVENUE BY : SHRI A.D. MEHROTRA, CIT DR O R D E R PER B.C. MEENA, ACCOUNTANT MEMBER : THE REVENUE HAS FILED THE APPEAL AGAINST THE ORDER OF CIT (A)-X, NEW DELHI DATED 23.2.2010 FOR THE ASSESSMENT YEAR 2006-07. T HE GROUNDS OF APPEAL READ AS UNDER : 1. LD. COMMISSIONER OF INCOME TAX (APPEALS) ERRED, IN LAW AND ON THE FACTS AND CIRCUMSTANCES OF THE CASE, IN DELE TING THE ADDITION OF RS.3,47,507/- MADE BY THE A.O. ON ACCOUNT OF TECHNI CAL CONSULTANCY FEE. 2. LD. COMMISSIONER OF INCOME TAX (APPEALS) ERRED, IN LAW AND ON THE FACTS AND CIRCUMSTANCES OF THE CASE, IN DELE TING THE ADDITION OF RS.8,71,805/- MADE BY THE A.O. ON ACCOUNT OF UNCONF IRMED SUNDRY CREDITORS. 3. THE APPELLANT CRAVES LEAVE TO AMEND, MODIFY, ALT ER, ADD OR FORGO ANY GROUND OF APPEAL AT ANY TIME BEFORE OR DU RING THE HEARING OF THIS APPEAL. ITA NO.2467/DEL/2010 2 2. GROUND NO.1 IN THE REVENUES APPEAL IS AGAINST T HE DELETION OF ADDITION OF RS.3,47,507/- PAID ON ACCOUNT OF TECHNICAL CONSULTA NCY FEE. WHILE PLEADING ON BEHALF OF THE REVENUE, THE LEARNED DR RELIED ON THE ORDER OF ASSESSING OFFICER. HE PLEADED THAT THE AMOUNT WAS NOT INCURRED WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF BUSINESS, HENCE THE CIT (A) WAS NOT JUSTIFIED IN DELETING THE ADDITION. 3. WHILE PLEADING ON BEHALF OF THE ASSESSEE, LEARNE D AR RELIED ON THE ORDER OF CIT (A) AND SUBMITTED THAT SHRI PEEYUSH JAIN TO WHO M THE TECHNICAL CONSULTANCY FEES WAS PAID WAS APPOINTED AS AN EMPLOYEE OF THE A SSESSEE COMPANY W.E.F. 21.5.2004. HE RESIGNED FROM THE SERVICE OF THE COM PANY ON 31.3.2005. DURING THE PERIOD RELEVANT TO ASSESSMENT YEAR UNDER CONSID ERATION, SHRI PEEYUSH JAIN WAS NOT AN EMPLOYEE OF THE ASSESSEE COMPANY. FOR THE Y EAR UNDER CONSIDERATION, THE ASSESSEE APPOINTED SHRI PEEYUSH JAIN AS A TECHNICAL CONSULTANT W.E.F. 1.4.2005 BY AN AGREEMENT DATED 1.4.2005. THE PAYMENT MADE AS P ER THE AGREEMENT, WHICH WAS CLAIMED AS LEGITIMATE BUSINESS EXPENDITURE OF THE A SSESSEE COMPANY ALLOWABLE U/S 37(1) OF THE INCOME-TAX ACT. HE SUBMITTED THAT THE ASSESSING OFFICER HAS NOT DOUBTED THE SERVICES RENDERED BY SHRI PEEYUSH JAIN TO THE ASSESSEE COMPANY. THEREFORE, THE CIT (A) WAS JUSTIFIED IN DELETING TH E ADDITION. 4. AFTER HEARING BOTH THE SIDES, WE HOLD THAT DURIN G THE RELEVANT PERIOD, SHRI PEEYUSH JAIN WAS NOT AN EMPLOYEE OF THE ASSESSEE CO MPANY. HE WAS AN EMPLOYEE OF THE COMPANY PRIOR TO FINANCIAL YEAR UNDER CONSID ERATION. THERE IS NO PROVISION IN THE LAW WHICH PREVENT TO TAKE THE TECHNICAL SERV ICES FROM AN EX-EMPLOYEE BY ITA NO.2467/DEL/2010 3 ENTERING INTO A CONTRACT. THE REVENUE HAS FAILED T O ESTABLISH THAT THE AMOUNT PAID TO SHRI PEEYUSH JAIN AS A TECHNICAL CONSULTANCY FEE WAS BOGUS OR IT WAS PAID FOR NOT RENDERING ANY SERVICE. IN VIEW OF THESE FACT S, WE SUSTAIN THE ORDER OF THE CIT (A) FOR DELETING THE ADDITION AND DISMISS THIS GROU ND OF REVENUES APPEAL. 5. GROUND NO.2 IN THE REVENUES APPEAL IS RELATED T O THE DELETION OF ADDITION OF RS.8,71,805/- MADE BY THE ASSESSING OFFICER ON ACCO UNT OF UNCONFIRMED SUNDRY CREDITORS. WHILE PLEADING ON BEHALF OF REVENUE THE LEARNED DR SUBMITTED THAT THE CIT (A) DELETED THE ADDITION BY ADMITTING THE ADDIT IONAL EVIDENCES, WHICH WERE SUBMITTED BEFORE HIM BY THE ASSESSEE. THE CIT (A) HAD VIOLATED RULE 46A OF INCOME-TAX RULES, WHICH ENVISAGED CERTAIN SITUATION S IN WHICH ADDITIONAL EVIDENCES CAN BE FILED. HE FURTHER PLEADED THAT TH E ASSESSING OFFICER PROVIDED ADEQUATE OPPORTUNITY TO THE ASSESSEE, WHICH IS CLEA R FROM THE ASSESSMENT ORDER ITSELF. HE PLEADED THAT THE CIT (A) DELETED THIS A DDITION BY NON-SPEAKING ORDER WITHOUT GIVING ANY SPECIFIC FINDING REGARDING THE G ENUINENESS OF THESE TRANSACTIONS. HE PLEADED TO SET ASIDE THE ORDER O F CIT (A). 6. ON THE OTHER HAND, THE LEARNED AR RELIED ON THE ORDER OF CIT (A). HE SUBMITTED THAT THE CIT (A) HAS CONSIDERED THE SUBMI SSIONS OF THE ASSESSEE ALONG WITH THE DOCUMENTS SUBMITTED BEFORE HIM AND DELETED THE ADDITION. HE SUBMITTED THAT THE ASSESSING OFFICER DID NOT ASK FOR CONFIRMA TION IN THE ASSESSMENT PROCEEDINGS, THEREFORE, THE REVENUE CANNOT TAKE A P LEA THAT THE ASSESSEE HAS NOT FILED THE DETAILS BEFORE THE ASSESSING OFFICER. HE NCE, THE ADDITIONAL EVIDENCES IN ITA NO.2467/DEL/2010 4 SUPPORT OF THE ASSESSEES PLEAS WAS ADMITTED BY THE CIT (A) UNDER RULE 46A OF THE INCOME-TAX RULES, 1962. 7. AFTER HEARING BOTH THE SIDES, WE FIND THAT THE A SSESSING OFFICER MADE AN ADDITION OF RS.8,71,805/- BY HOLDING THAT THESE SUN DRY CREDITORS WERE NOT GENUINE. THE ASSESSING OFFICER ASKED THE ASSESSEE COMPANY TO FILE THE CONFIRMATION FROM THESE SUNDRY CREDITORS VIDE QUESTIONNAIRE DATED 11. 10.2007 AND 22.2.2008. THE ASSESSEE COMPANY SUBMITTED ONLY THE COPY OF THE LED GER ACCOUNT OF SOME SUNDRY CREDITORS BEFORE THE ASSESSING OFFICER. THE ASSESS ING OFFICER HAS RECORDED IN PARA 11 OF HIS ORDER AS UNDER :- 11. VIDE QUESTIONNAIRES DATED 11.10.2007 AND 22.02 .2008 THE ASSESSEE COMPANY WAS REQUIRED TO PRODUCE CONFIRMATI ONS FROM SUNDRY CREDITORS (RS.8,71,805/-). THE AR HAS MEREL Y SUBMITTED LEDGER A/C OF A FEW OF THE SUNDRY CREDITORS. HENCE , IT IS APPARENT THAT THE ASSESSEE COMPANY HAS FABRICATED SUNDRY CRE DITORS SO THAT INCOME FROM UNDISCLOSED SOURCES SHOULD BE ACCOMMODA TED. THEREFORE, A SUM OF RS.8,71,805/- IS BEING ADDED BA CK TO THE NET PROFIT. THE ASSESSEES CLAIM THAT THE ASSESSING OFFICER DID NOT ASK FOR CONFIRMATION AND N VIEW OF THIS NON-FILING, CONFIRMATION CANNOT BE VIE WED ADVERSELY, WE WOULD LIKE TO HOLD THAT ASSESSEE HAD SHOWN NON-COOPERATIVE ATTITU DE IN THE ASSESSMENT PROCEEDINGS WHICH HAVE HALTED THE ASSESSING OFFICER FROM MAKING PROPER ENQUIRY INTO THE FACTS. THIS NON-COOPERATIVE ATTITUDE IS V ERY CLEAR AND EVIDENT FROM THE PARA 4 OF THE ASSESSMENT ORDER, WHICH IS REPRODUCED BELOW :- 4. ON 05.05.2008, THE ASSESSMENT PROCEEDINGS WAS A DJOURNED TO 16.05.2008 AND THIS WAS DULY ACKNOWLEDGED BY SHRI P AWAN KUMAR MISHRA, ADVOCATE AND AR OF THE ASSESSEE COMPANY. H OWEVER AS NONE APPEARED ON BEHALF OF THE ASSESSEE COMPANY THI S OFFICE WAS ITA NO.2467/DEL/2010 5 CONSTRAINED TO ISSUE A SHOW-CAUSE NOTICE DATED 30.0 7.2008 U/S 274 READ WITH SEC 271 OF THE INCOME TAX ACT, 1961. HOW EVER AGAIN AS NONE APPEARED ON BEHALF OF THE ASSESSEE COMPANY ON THE DATE FIXED FOR HEARING VIZ. 11.08.2008. SUBSEQUENTLY ANOTHER SHOW-CAUSE NOTICE DATED 14.10.2008 U/S 274 READ WITH SEC 271 O F THE INCOME TAX ACT, 1961 WAS ISSUED. IN RESPONSE THE AR APPEA RED ON 22.10.2008, HOWEVER NO REPLY TO THE ABOVE SHOW CAUS E NOTICES WERE FILED BY OR ON BEHALF OF THE ASSESSEE COMPANY. ASSESSEE HAD FAILED TO CONTROVERT THESE FINDINGS. IN FACT, THE ASSESSING OFFICER HAS EVEN STARTED THE PENALTY PROCEEDINGS FOR NON-COMPLI ANCE OF THE STATUTORY NOTICES. ALL THESE FACTS SUGGEST THAT THE ASSESSEE HAS NOT C OOPERATED IN THE ASSESSMENT PROCEEDINGS. RULE 46A ENVISAGED FOLLOWING SITUATIO N WHERE ADDITIONAL EVIDENCE CAN BE FILED IN APPELLATE PROCEEDINGS :- (I) WHERE AN A.O. HAS EITHER REFUSED TO ADMIT EVIDE NCE WHICH HE OUGHT TO HAVE ADMITTED; OR (II) WHERE THE APPELLANT WAS PREVENTED BY SUFFICIEN T CAUSE FROM PRODUCING THE EVIDENCE WHICH HE WAS CALLED UPON TO PRODUCE BY THE A.O.; OR (III) WHERE THE APPELLANT WAS PREVENTED BY SUFFICIE NT CAUSE FROM PRODUCING BEFORE THE A.O. ANY EVIDENCE WHICH IS REL EVANT TO ANY GROUND OF APPEAL; OR (IV) WHERE THE A.O. HAS MADE THE ORDER APPEALED AGA INST WITHOUT GIVING SUFFICIENT OPPORTUNITY TO ADDUCE EVIDENCE RE LEVANT TO ANY GROUND OF APPEAL. ASSESSEE HAD TO SHOW SUFFICIENT CAUSE WHY THESE EVI DENCES WERE NOT FILED BEFORE ASSESSING OFFICER AND CIT (A) HAD TO SATISFY THAT T HERE WAS SUFFICIENT CAUSE EXISTED. SUBMITTING THE ADDITIONAL DOCUMENTS BEFOR E THE CIT (A) AND GRANTING THE RELIEF WITHOUT PROVIDING OPPORTUNITY TO THE ASSESSI NG OFFICER IS UNJUSTIFIED AND ITA NO.2467/DEL/2010 6 AGAINST THE SETTLED PRINCIPLE OF LAW. ASSESSING OF FICER HAD NOT BEEN PROVIDED OPPORTUNITY TO EXAMINE THE VERACITY OF THESE DOCUME NTS. CIT (A) SHOULD HAVE PROVIDED OPPORTUNITY TO ASSESSING OFFICER TO EXAMIN E THESE ADDITIONAL DOCUMENTS. THEREFORE, IN THE INTEREST OF JUSTICE AND EQUITY, W E SET ASIDE THE ISSUE TO THE FILE OF THE ASSESSING OFFICER WITH A DIRECTION TO DECIDE DE NOVO AFTER PROVIDING AN OPPORTUNITY OF BEING HEARING TO THE ASSESSEE. 8. GROUND NO.3 IS GENERAL IN NATURE AND DOES NOT RE QUIRE ANY ADJUDICATION. 9. IN THE RESULT, THE APPEAL OF THE REVENUE IS PART LY ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN OPEN COURT ON THE 30 TH DAY OF JULY 2010. SD/- SD/- (C.L. SETHI) (B.C. MEENA) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED : THE 30 TH DAY OF JULY, 2010 TS COPY FORWARDED TO : 1. THE APPELLANT 2. THE RESPONDENT 3. CIT 4. CIT(A)-X, NEW DELHI. 5. DR, ITAT. ASSTT.REGISTRAR ITAT, NEW DELHI.