Megawood Dongwon India Pvt. Ltd., New Delhi V. DCIT, New Delhi

ITA 2509/DEL/2013

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 6426 (ITAT-DELHI)
• Duration Of Justice: 2 year(s) 10 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 14-03-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: E
• Next Hearing Date: 21-12-2015
• Assessment Year: 2003-2004
• Appeal Filed On: 29-04-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: P DANKANUNJNA
• Assessee Lawyers: R K KAPOOR
• Keywords: Unexplained cash credit; Depreciation
• Section: 69; 148

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH E, NEW DELHI BEFORE SHRI J. SUDHAKAR REDDY, ACCOUNTANT MEMBER AND SH. SUDHANSHU SRIVASTAVA, JUDICIAL MEMBER ITA NO. 2509/DEL/2013 AY: 20 03-04 MEGAWOOD DONGWON INDIA PVT. LTD., VS DCIT, C-569, SARITA VIHAR, CIRCLE-6(1), NEW DELHI. NEW DELHI. (PAN: AAACP4377Q) (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI R.K. KAPOOR, CA RESPONDENT BY : SHRI P. DANKANUNJNA, SR. DR ORDER PER SUDHANSHU SRIVASTAVA, JUDICIAL MEMBER THIS IS AN APPEAL FILED BY THE ASSESSEE DIRECTED AG AINST THE ORDER DATED 23.01.2013 OF LD. CIT(A)-IX, NEW DELHI FOR ASSESSMENT YEAR 2003-04. 2. BRIEFLY STATED, THE FACTS OF THE CASE ARE THAT THE ASSESSEE IS A JOINT VENTURE COMPANY OF DONGWON METAL INDUSTRIES C O. LTD., KOREA (38%), DAEWOO MOTORS INDIA LTD. (30%) AND MEG AWOOD ESTATES LTD. (32%). IT WAS ENGAGED IN THE MANUFACTU RE, ASSEMBLY AND SALE OF AUTOMOTIVE EXHAUST SYSTEMS AND ACCESSOR IES. ITS MAIN SUPPLIES WERE ORIGINALLY TO DAEWOO MOTORS INDIA LTD ., WHO HAD INTRODUCED CIELO, NAXIA AND MATIZ IN INDIA. IT HAD ALSO BEEN SUPPLYING EXHAUST SYSTEMS TO GENERAL MOTORS (OPEL A STRA AND I.T.A. 2509/DEL/2013 ASSESSMENT YEAR: 2003-04 2 CORSA) AND HINDUSTAN MOTORS LTD. IT WAS SUBMITTED T HAT THE BUSINESS OF DAEWOO MOTORS SUFFERED HEAVY LOSSES AND SUPPLIES TO DAEWOO MOTORS WERE CLOSED DURING THE FINANCIAL YEAR 2002-03. THE BUSINESS WITH HINDUSTAN MOTORS AND GENERAL MOTO RS ALSO DECLINED DUE TO DECLINE IN THE SALE OF CONTESSA AND OPEL ASTRA/CORSA CARS. 3. WE WERE ALSO INFORMED THAT PRESENTLY, THE BUSINE SS OF THE ASSESSEE IS CLOSED. 4. THE ASSESSMENT WAS ORIGINALLY COMPLETED AT A LOS S OF RS.85,14,331/- VIDE ORDER DATED 30.12.2005. SUBSEQU ENTLY, AFTER COMPLETION OF THE ASSESSMENT, A QUERY WAS RAISED BY THE DY. COMMISSIONER OF INCOME-TAX, CIRCLE 6(1), NEW DELHI REGARDING VARIATION IN THE RAW-MATERIAL AND STORES CONSUMED A S PER PROFIT & LOSS A/C AND DETAILS OF RAW MATERIAL CONSUMED AS PE R NOTES TO ACCOUNTS. 5. IN RESPONSE TO THE SAID QUERY, THE ASSESSEE O N 7.9.2006 FURNISHED REVISED DETAILS OF CONSUMPTION OF RAW MAT ERIAL DULY CORRECTED AND VERIFIED BY THE AUDITORS. IT WAS SUBM ITTED THAT THERE WAS AN ERROR IN THE NOTES TO ACCOUNTS. THE AS SESSEE, HOWEVER, RECEIVED A NOTICE U/S 148 OF THE INCOME-TA X ACT, 1961 DATED 11.10.2010 ON THE GROUND THAT CONSUMPTION HAS BEEN I.T.A. 2509/DEL/2013 ASSESSMENT YEAR: 2003-04 3 DEBITED AT RS.45,92,797.68 TO THE PROFIT AND LOSS A /C WHEREAS AS PER SCHEDULE 16-B(6), THE CONSUMPTION OF RAW MATERI AL AND STORES HAS BEEN SHOWN AT RS.38,06,000; THUS, THERE HAS BEE N AN EXCESS CLAIM OF EXPENDITURE TO THE TUNE OF RS.7,86,797/-. SUBSEQUENTLY, THE ASSESSMENT WAS COMPLETED AT A LOSS OF RS.77,25, 534/- AFTER MAKING AN ADDITION OF RS. 7,86,797/- ON ACCOUNT OF UNEXPLAINED CASH CREDIT. 6. ON APPEAL, THE LD. CIT (A) CONFIRMED THE ADDI TION AND NOW THE ASSESSEE IS IN APPEAL BEFORE US. 7. IT WAS SUBMITTED THAT THE AO HAS INCORRECTLY MAD E AN ADDITION ON ACCOUNT OF UNEXPLAINED CASH CREDIT OF R S.7,86,797/-. IT WAS SUBMITTED THAT IT WAS ONLY A FACTUAL MISTAKE IN THE SCHEDULE OF THE RAW-MATERIAL CONSUMED AND, THEREFOR E, THE ADDITION AS UNEXPLAINED CASH CREDIT WAS UNCALLED FO R. THE LD. AR SUBMITTED THAT AT THE MOST, THE ASSESSING OFFICER C OULD HAVE INCREASED THE VALUE OF CLOSING STOCK BY RS.7,86,797 /-, AS HIS CONCLUSION WAS THAT THE RAW-MATERIAL CONSUMED WAS RS.38,06,000/- AND NOT RS.45,92,797/-, AS REFLECTED IN THE PROFIT & LOSS A/C., WHICH WOULD MEAN THAT THERE WAS MORE C LOSING STOCK OF RAW MATERIAL TO THAT EXTENT, IN THE ABSENC E OF ANY OTHER EVIDENCE TO MAKE OUT A CASE OF UNEXPLAINED CASH CRE DIT. OUR I.T.A. 2509/DEL/2013 ASSESSMENT YEAR: 2003-04 4 ATTENTION WAS ALSO DRAWN TO THE COPY OF STATEMENT O F TAXABLE INCOME FOR ASSESSMENT YEAR 2003-04, WHICH SHOWS LOS SES AND DEPRECIATION (UNABSORBED), WHICH TILL DATE COULD NO T BE ABSORBED AND MOST OF THE LOSSES COULD NOT BE SET OFF, BEING BARRED BY TIME. IN LIGHT OF THE FINANCIAL STATEMENTS AND THE INCOME TAX COMPUTATION STATEMENT, THE LD. AR REITERATED THAT T HE RAW- MATERIAL CONSUMED SHOWN AS CONSUMED IN THE SCHEDULE AT RS.38,06,000/- AS AGAINST RS.45,92,797/- WAS, IN FA CT, A FACTUAL ERROR, AND THE ASSESSEE DID NOT GAIN ANY MATERIAL T AX BENEFIT ON ACCOUNT OF ANY FACTUAL MISTAKE IN THE FIGURES. IT W AS ALSO SUBMITTED THAT THE MISTAKE HAD OCCURRED DUE TO A TY POGRAPHICAL ERROR IN THE NOTES TO ACCOUNTS AND THE CORRECT DETA ILS OF CONSUMPTION, DULY CERTIFIED BY THE AUDITORS, WAS AL SO SUBMITTED BEFORE THE AO . A COPY OF THE SAME IS PLACED AT PAG ES 4 AND 5 OF THE PAPER BOOK. HE, ACCORDINGLY, PRAYED FOR THE DEL ETION OF THE ADDITION. 8. THE LD. DR SUBMITTED THAT THE ASSESSEE HAS BEEN CHANGING ITS STAND REGARDING THE DISCREPANCY BEFORE THE DIFFEREN T AUTHORITIES AND AS SUCH THE EXPLANATIONS CANNOT BE ACCEPTED ON ITS FACE VALUE. HE SUBMITTED THAT THE ADDITION HAS BEEN RIGH TLY MADE AND THAT THE ORDER OF THE LD. CIT (A) SHOULD BE CONFIRM ED. I.T.A. 2509/DEL/2013 ASSESSMENT YEAR: 2003-04 5 9. WE HAVE HEARD THE RIVAL CONTENTIONS AND HAVE PER USED THE RECORDS. IT IS SEEN THAT THE AO HAD DISALLOWED THE EXPENDITURE ON RAW MATERIAL CONSUMPTION TO THE TUNE OF RS. 7,86,79 7/- BUT HAS ADDED IT BACK UNDER UNEXPLAINED CASH CREDITS. THE LD. CIT (A) WHILE UPHOLDING THE ADDITION HAS REJECTED THE EXPLA NATIONS OFFERED BY THE ASSESSEE IN A SUMMARY MANNER BY MERELY MENTI ONING THAT THE SAME IS BASELESS. THE ASSESSEES OBJECTION TO M AKING THE ADDITION UNDER UNEXPLAINED CASH CREDITS WAS ALSO BR USHED ASIDE BY THE LD. CIT (A) BY A SIMPLE REMARK THAT THE REFE RENCE TO CASH CREDITS MAY BE DELETED. HOWEVER, BOTH THE AUTHORITI ES HAVE NOT DEALT THE ISSUE AT HAND I.E. THE ADJUDICATION ON TH E ASPECT OF MISTAKE DUE TO TYPOGRAPHICAL ERROR. WE ARE OF THE O PINION THAT THE AO WAS NOT JUSTIFIED IN IGNORING THE EVIDENCES AND EXPLANATIONS WITH REGARD TO THE TYPING MISTAKE IN THE AUDIT REPO RT. THE ASSESSING OFFICER'S INVOKING PROVISIONS OF SECTION 69 IS ALSO NOT IN ACCORDANCE WITH LAW. IT IS ALSO SEEN THAT THE ENTIR E ADDITION IS BASED ON A TYPOGRAPHICAL ERROR THAT CREPT INTO WHIL E TYPING OUT THE CONSUMPTION FIGURES TO WHICH THE ASSESSEE HAS OFFERED AN EXPLANATION AND WHICH IS DULY SUPPORTED BY A CERTIF ICATE FROM THE AUDITORS. APART FROM THIS, THE AO HAD NO OTHER EVID ENCE BEFORE HIM WHICH COULD JUSTIFY THE ADDITION. IT IS CLEAR T HAT THIS CASE I.T.A. 2509/DEL/2013 ASSESSMENT YEAR: 2003-04 6 GIVES A STRONG INDICATION THAT THE ERROR COMMITTED BY THE ASSESSEES CHARTERED ACCOUNTANTS WAS GENUINE AND BO NA FIDE. THE ASSESSEE'S INCOME WAS ALREADY IN A LOSS EVEN WI THOUT CLAIMING EXCESS CONSUMPTION OF RAW MATERIAL. THEREF ORE, MAKING AN EXCESS CLAIM WAS NOT AT ALL ADVANTAGEOUS TO THE ASSESSEE AND AS SUCH THE EXCESS CLAIM WAS NOT A DEVICE, RATHER I T WAS AN INADVERTENT ERROR. IN THE LIGHT OF THESE FACTS AND CIRCUMSTANCES, WE SET ASIDE THE ORDER OF THE LD. CIT(A) AND DELETE THE ADDITION. 10 . IN THE RESULT, THE ASSESSEES APPEAL IS ALLOWED ORDER PRONOUNCED IN THE OPEN COURT ON 14 TH MARCH, 2016. SD/- SD/ (J. SUDHAKAR REDDY) (SUDHANSHU SRIVASTAVA) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: THE 14TH MARCH, 2016 GS COPY FORWARDED TO: - 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR, ITAT TRUE COPY BY ORDER ASSISTANT REGISTRAR