ACIT, New Delhi V. M/s. P.P. Engineering, New Delhi

ITA 2587/DEL/2017

• Counselvise Citation: [2018] 126 COUNSELVISE.COM (IT) 3328 (ITAT-DELHI)
• Duration Of Justice: 10 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-03-2018
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: SMC
• Assessment Year: 2000-2001
• Appeal Filed On: 28-04-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: V K JIWANI
• Keywords: Reopening of assessment; Unexplained cash credit; Business income; Income from undisclosed sources
• Section: 68; 148

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, DELHI SMC BENCH, NEW DELHI BEFORE SHRI B.P. JAIN, ACCOUNTANT MEMBER ITA NO. 2587 /DEL/201 7 [A.Y. 20 0 0 - 0 1 ] THE A.C. I . T . VS. M/S P.P. ENGINEERING CIRCLE - 28(1) D 820, NEW FRIENDS CO LONY NEW DELHI N EW DELHI PAN : A AA F P 0094 P [ ASSESSEE ] [RESPONDENT] DATE OF HEARING : 2 1 . 0 2 .201 8 DATE OF PRONOUNCEMENT : 09 .0 3 .201 8 ASSESSE E BY : SHRI VED JAIN, ADV SHRI ASHISH CHADHA, CA REVENUE BY : SHRI V.K. JIWANI , SR. DR ORDER THIS IS AN APPEAL PREFERRED BY THE REVENUE AGAINST THE ORDER PASSED BY THE CIT(A) DATED 28 TH FEBRUARY, 2017 WHERE IN ADDITION MADE BY THE LD. AO OF RS.32,00,000/ - AS INCOME FROM UNDISCLOSED SOURCES UNDER SECTION 68 OF THE INCOME TAX ACT HAS BEEN DELETED. 2. THE BRIEF FACTS LEADING TO THE PRESENT APPEAL ARE THAT THE ASSESSEE IS A PARTNERSHIP FIRM ENGAGED IN THE BUSIN ESS OF MANUFACTURE AND SUPPLY OF MECHANICAL EQUIPMENT FROM THE STEEL ROLLING MILLS. FOR 2 ITA NO. 2587 /DEL/201 7 THE YEAR UNDER CONSIDERATION ASSESSEE FILED RETURN OF INCOME DECLARING TOTAL INCOME OF RS.1,96,292/ - ON 31.10.2000. THEREAFTER, ASSESSEE CASE WAS REOPENED UNDER SECTION 148 OF THE INCOME TAX ACT ON 12.2.2009 AND ADDITION OF RS.32,00,000/ - WAS MADE AS INCOME FROM UNDISCLOSED SOURCE BY INVOKING PROVISION OF SECTION 68 OF THE ACT IN RESPECT OF ADVANCE RECEIVED BY THE ASSESSEE FROM ONE M/S JORCONDE OVERSEAS PVT. LTD. 3. A GGRIEVED BY THE IMPUGNED ORDER OF LD. AO, ASSESSEE FILED AN APPEAL BEFORE CIT(A) AND THE CIT(A) ALLOWED THE APPEAL IN FAVOUR OF THE ASSESSEE VIDE ORDER DATED 22.10.2010 ON THE GROUND THAT THE REOPENING OF THE ASSESSMENT IS BAD IN LAW AS REASSESSMENT PROCEE DINGS HAVE BEEN INITIATED AFTER A LAPSE OF SEVEN YEARS AND IS TIME BARRED. THE CIT(A) DID NOT ADJUDICATE THE APPEAL ON MERIT SINCE REOPENING WAS HELD VOID AB INITIO. 4. AGGRIEVED BY THE ORDER OF THE CIT(A), REVENUE FILED APPEAL BEFORE THE ITAT AND THE IT AT VIDE ORDER DATED 11.08.2011 DISMISSED THE APPEAL OF THE REVENUE AND UPHELD THE ORDER OF THE CIT(A). 3 ITA NO. 2587 /DEL/201 7 5. AGGRIEVED BY THE ORDER OF THE ITAT REVENUE FILED APPEAL BEFORE THE HONBLE DELHI HIGH COURT AND HONBLE HIGH COURT VIDE ORDER DT. 31.07.2014 DECIDE D THE APPEAL IN FAVOUR OF THE REVENUE ON THE ISSUE OF REOPENING OF ASSESSMENT. SINCE THE ISSUE ON MERIT WAS NOT ADJUDICATED UPON BY THE CIT(A), THE HONBLE HIGH COURT SET ASIDED THE APPEAL ON MERIT TO THE CIT(A). 6. IN THE SECOND ROUND OF APPEAL BEFORE TH E CIT(A), THE CIT(A) EXAMINED THE DETAILS OF THE ADVANCE OF RS.32,00,000/ - RECEIVED FROM M/S JORCONDE OVERSEAS PVT. LTD. WHICH WERE ALREADY PRODUCED BEFORE THE AO TO JUSTIFY THE THREE INGREDIENTS OF SECTION 68 I.E IDENTITY, GENUINENESS AND CREDITWORTHINES S OF THE PARTY. 7. AFTER CONSIDERING THE SUBMISSION AND DOCUMENTS, THE CIT(A) HELD THAT THE ASSESSEE HAS DISCHARGED ITS ONUS UNDER SECTION 68 IN RESPECT OF THE CREDIT APPEARING IN THE NAME OF JORCONDE OVERSEAS PVT. LTD. AND DELETED THE ADDITION OF RS.32,0 0,000/ - MADE BY AO AS UNEXPLAINED CASH CREDIT UNDER SECTION 68 OF THE ACT. 8. AGGRIEVED BY THE ORDER OF THE CIT(A), THE REVENUE HAS FILED THIS APPEAL. IN THIS APPEAL, THE REVENUE HAS RAISED 6 GROUNDS OF APPEAL BUT 4 ITA NO. 2587 /DEL/201 7 THE ONLY ISSUE IN ALL THESE 6 GROUNDS OF APPEAL IS THE DELETION OF THE ADDITION OF RS. 32,00,000/ - BY THE CIT(A). 9. IT WAS SUBMITTED BY THE LD. DR THAT THE CIT(A) WAS NOT JUSTIFIED IN DELETING THE ADDITION MADE BY THE AO. THE ASSESSEE HAS RECEIVED THE ADVANCE FROM THE CREDITOR AND THE ONUS WA S UPON HIM TO SATISFY THE AO ABOUT THIS CREDIT. THE ASSESSEE HAVING FAILED TO SATISFY THE AO, THE ADDITION NEED TO BE UPHELD. 10. IN REPLY, IT WAS SUBMITTED BY THE LD. AR THAT THE AMOUNT OF RS. 32,00,000/ - WAS RECEIVED BY THE ASSESSEE DURING THE NORMAL C OURSE OF BUSINESS AS AN ADVANCE FROM M/S JOCONDE OVERSEAS PVT. LTD. FOR SETTING UP A ROLLING MILLS OF 10 TONES CAPACITY IN U.P. FOR WHICH ORDER WAS PLACED WITH THE APPELLANT FOR THE SAME OF RS. 1.28 CRORES INCLUDING SUPPLY OF MACHINERY AND THE AMOUNT OF RS .32,00,000/ - WAS GIVEN AN ADVANCE TO THE ASSESSEE FOR THE WHOLE TRANSACTION. IN THIS REGARD, THE LD. AR INVITED ATTENTION TO THE PB. PG. 46 - 70 WHICH IS THE ORDER RECEIVED AND THE CORRESPONDENCE WITH THE CREDITOR NAMELY JOCONDE OVERSEAS PVT. LTD. THE LD. A R FURTHER SUBMITTED THAT THE SAID EXPLANATION WAS CONFIRMED BY THE MANAGER OF THE ABOVE COMPANY WHO APPEARED BEFORE THE THEN CIT(A) SH. KRISHAN NARAYAN IN THE FIRST ROUND 5 ITA NO. 2587 /DEL/201 7 OF APPEAL. HE INVITED ATTENTION TO PB. PG. 71, WHICH IS A COPY OF STATEMENT RECORDED BY THE CIT(A) IN THE FIRST ROUND OF APPEAL. IN THIS STATEMENT, THE CREDITOR HAS CONFIRMED THAT THE AMOUNT OF RS.32,00,000/ - WAS PAID BY THEIR COMPANY TO THE ASSESSEE AGAINST THE ORDER OF RS.1.28 CRORES AND DUE TO SLUMP IN THE MARKET THE PROJECT COULD NOT BE COMPLETED AND ASSESSEE FORFEITED THE ADVANCE RECEIVED FROM THE ABOVE COMPANY. THIS AMOUNT OF RS.32.00 LACS HAS ALREADY BEEN OFFERED TO TAX BY THE ASSESSEE IN AY 2001 - 02 BY CREDITING THE SAME TO THE ACCOUNT OF SHORT & EXCESS AND THIS AMOUNT IS ALSO APPE ARING IN P& L ACCOUNT AT PB PG. 41 . THIS AMOUNT SINCE WAS FORFEITED IN THE NEXT YEAR AND ACCORDINGLY, IS CREDITED IN P& L ACCOUNT OF NEXT YEAR. THIS FACT WAS ALSO BEFORE THE AO. THE ADDITION OF THE SAME AMOUNT IN THE CURRENT YEAR WILL IN THE ALTERNATIVE WI LL AMOUNT TO DOUBLE TAXATION IN THE HANDS OF THE ASSESSEE. 11. IT WAS PURELY A BUSINESS TRANSACTION. THE PAYMENTS WERE RECEIVED THROUGH BANKING CHANNEL. ESSENCE OF PURCHASE TRANSACTION HAS NOT BEEN DOUBTED BY THE AO. THE CIT(A) HAS VERIFIED THE TRANSACTIO N FROM THE CREDITOR ITSELF IN THE FIRST ROUND AND AS SUCH THE ORDER OF THE CIT(A) NEED TO BE UPHELD. 6 ITA NO. 2587 /DEL/201 7 12. I HAVE CONSIDERED THE RIVAL SUBMISSIONS. THE SHORT ISSUE IS THE ADDITION OF RS. 32,00,000/ - AS UNEXPLAINED CREDIT. THE AO HAS ASSUMED THIS TO BE UNEX PLAINED CREDIT. AFTER GOING THROUGH THE FACTS AND THE EXPLANATION OF THE ASSESSEE, I NOTE THAT THIS WAS A TRADE ADVANCE RECEIVED FROM A COMPANY WHICH HAS PLACED AN ORDER FOR SETTING UP OF A MACHINE. THE ASSESSEE IS IN THIS LINE OF BUSINESS. THE ASSESSEE HA S RECEIVED AN ADVANCE OF 25% AGAINST THIS ORDER. THUS, THIS ADVANCE WAS IN THE NORMAL COURSE OF BUSINESS. SINCE, THE COMPANY WHICH PLACED THE ORDER ON THE ASSESSEE DID NOT TOOK THE DELIVERY, THE ORDER WAS CANCELLED IN THE SUBSEQUENT YEAR. THE AMOUNT SO FOR FEITED HAS BEEN SHOWN BY THE ASSESSEE AS ITS BUSINESS INCOME IN THE SUBSEQUENT YEAR. THIS IS AN UNDISPUTED FACT. THE ASSESSEE IN SUPPORT OF ITS CONTENTION HAS FILED ALL THE EVIDENCES WHICH INCLUDE: I. COPY OF PURCHASE ORDER II. DIRECT CONFIRMATION FROM S H. KRISHAN NARAYAN (MANAGER OF M/S M/S JOCONDE OVERSEAS PVT. LTD.) ABOUT THE NATURE AND GENUINENESS OF SUCH TRANSACTION (PB PG. III. COPY OF CONFIRMATION FROM THE PARTY WHEREIN DETAILS OF ADDRESS AND PAYMENT WERE MENTIONED. IV. COPY OF CERTIFICATE FROM C ORPORATION BANK OF THE ASSESSEE 7 ITA NO. 2587 /DEL/201 7 V. COPY OF LEDGER A/C OF PARTY IN THE BOOKS OF THE ASSESSEE. VI. LETTER SENT BY ASSESSEE TO THE PARTY IN RESPECT OF FORFEITURE OF THE ADVANCE. 13. THE CIT(A) IN THE FIRST ROUND HAS RECORDED THE STATEMENT OF THE MANAGER O F THE CREDITOR WHICH HAS EXPLAINED THE TRANSACTION AND CONFIRMED HAVING GIVEN THE ADVANCE TO THE ASSESSEE COMPANY. 14. CONSIDERING THE ABOVE FACTS AND EVIDENCES, I AM OF THE VIEW THAT THE ASSESSEE HAS NOT ONLY DISCHARGED ITS PRIMARY ONUS CAST UPON HIM UN DER SECTION 68 OF THE ACT BUT ALSO THE SAME STAND CONFIRMED IN THE VERIFICATION CARRIED OUT. IT WAS A PURELY BUSINESS TRANSACTION AND THE AMOUNT RECEIVED WAS ADVANCE AGAINST AN ORDER. THE ORDER GOT CANCELLED IN THE SUBSEQUENT YEAR AND THE AMOUNT SO RECEIVE D HAS BEEN SHOWN BY THE ASSESSEE AS ITS BUSINESS INCOME IN THE SUBSEQUENT ASSESSMENT YEAR. THUS, THERE WAS NO REASON ON THE PART OF THE AO TO DRAW ANY ADVERSE INFERENCE AGAINST ASSESSEE AND MAKE SUCH ADDITION. ACCORDINGLY, I UPHOLD THE ORDER PASSED BY THE CIT(A) AND THE GROUND OF APPEAL S RAISED BY THE REVENUE ARE DISMISSED. 8 ITA NO. 2587 /DEL/201 7 1 5 . IN THE RESULT, THE APPEAL OF THE REVENUE IN ITA NO. 2587/DEL/ 2017 IS DISMISSED. THE ORDER IS PRO NOUNCED IN THE OPEN COURT ON 09 . 0 3 .201 8 . SD/ - [B.P. JAIN ACCOUNTANT MEMBER DATED: 09 TH MARCH, 2018 VL/ COPY FORWARDED TO: 1 . ASSESSEE 2 . RESPONDENT 3 . CIT ASSISTANT REGISTRAR 4 . CIT(A) ITAT, NEW DELHI 5 . DR