Ajay Gupta, Delhi V. DCIT, New Delhi

ITA 2632/DEL/2010

• Counselvise Citation: [2018] 124 COUNSELVISE.COM (IT) 9686 (ITAT-DELHI)
• Duration Of Justice: 8 year(s) 3 month(s) 22 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-09-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 10-07-2017
• Assessment Year: 2007-2008
• Appeal Filed On: 02-06-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ASHIMA NEB
• Keywords: Unexplained expenditure; Loose papers
• Section: 145; 69C; 133A

Judgement Text

ITA NO. 2632/DEL/2010 ASSESSMENT YEAR 2007-08 1 IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH A NEW DELHI BEFORE SHRI SUDHANSHU SRIVASTAVA, JUDICIAL MEMBER AND SHRI PRASHANT MAHARISHI, ACCOUNTANT MEMBER ITA NO. 2632/DEL/2010 ASSESSMENT YEAR: 2007-08 SMT. MANISHA GUPTA, VS ACIT, (LEGAL HEIR OF LATE SHRI AJAY GUPTA), CIRCLE 29(1 ), C/O SHRI ASHOK GUPTA, NEW DELHI. 4852/24, FIRST FLOOR, ANSARI ROAD, NEW DELHI-110002 (APPELLANT) (RESPONDENT) APPELLANT BY : S/SHRI R.S. SINGHVI, CA, SATYAJEET GOEL, CA RESPONDENT BY : MS ASHIMA NEB, SR. DR DATE OF HEARING: 26.06.2018 DATE OF PRONOUNCEMENT: 25.09.2018 O R D E R PER SUDHANSHU SRIVASTAVA, JUDICIAL MEMBER THIS APPEAL HAS BEEN PREFERRED BY THE ASSESSEE AGAI NST THE ORDER DATED 26.03.2010 PASSED BY THE LD. CIT (APPEA LS)-XXVIII, NEW DELHI FOR ASSESSMENT YEAR 2007-08. 2.0 BRIEF FACTS OF THE CASE ARE THAT DURING THE CAP TIONED YEAR THE ASSESSEE DERIVED INCOME FROM EXECUTION OF ELECTRICA L CONTRACTS AND FROM TRADING OF ELECTRICAL GOODS. THE E-RETURN WAS FILED ON 29.10.2007 DECLARING INCOME AT RS. 25,43,808/-. PR IOR TO THE FILING OF RETURN OF INCOME, THERE WAS A SEARCH U/S 133A OF THE ITA NO. 2632/DEL/2010 ASSESSMENT YEAR 2007-08 2 INCOME TAX ACT, 1961 (HEREINAFTER CALLED 'THE ACT') ON 11.12.2006 BY THE INVESTIGATION WING OF THE DEPARTMENT AND CER TAIN LOOSE PAPERS, CPU AND NOTEBOOKS WERE IMPOUNDED WHICH WERE MARKED AS ANNEXURE 1, 2, 3 AND 4. THE ASSESSEE MADE A DIS CLOSURE OF RS. 2,02,78,114/- FOR FINANCIAL YEARS 2003-04, 2004-05, 2005-06 AND 2006-07. OUT OF THE TOTAL DISCLOSURE, AN AMOUNT OF RS. 6,007,048/- PERTAINING TO DIFFERENCE IN STOCK AND E XPENDITURE IN SALARY OF NON-WORKING EMPLOYEES AMOUNTING TO RS. 4, 72,000/- PERTAINED TO FINANCIAL YEAR 2006-07 I.E. RELEVANT T O THE YEAR UNDER CONSIDERATION IN APPEAL BEFORE US. DURING THE COUR SE OF SEARCH OPERATION, THE STATEMENT OF THE ASSESSEE SHRI AJAY GUPTA WAS RECORDED AND IN RESPONSE TO QUESTION NO. 22, HE HAD STATED THAT HE WAS NOT IN A POSITION TO EXPLAIN THE DISCREPANCY IN PHYSICAL INVENTORY WHICH WAS RS. 12,041,744/- AS COMPARED TO THE BOOK STOCK WHICH WAS RS. 60,34,896/- AND, THEREFORE, THE ASSESSEE HAD AGREED TO OFFER THE DIFFERENTIAL AMOUNT OF RS. 60,0 7,048/- AS EXCESS UNACCOUNTED STOCK. SINCE THIS AMOUNT, AS SU RRENDERED BY THE ASSESSEE DURING THE COURSE OF SURVEY PROCEEDING S, WAS NOT DECLARED IN THE RETURN OF INCOME, THE ASSESSING OFF ICER PROCEEDED TO MAKE AN ADDITION OF THIS AMOUNT. FURTHER, THE A SSESSING OFFICER ALSO MADE AN ADDITION OF RS. 1,28,000/- BEI NG ITA NO. 2632/DEL/2010 ASSESSMENT YEAR 2007-08 3 UNEXPLAINED EXPENDITURE U/S 69C OF THE ACT WHICH WA S ALSO BASED ON THE ENTRIES ON PAGE 17 OF ANNEXURE A-4 IMP OUNDED DURING THE COURSE OF SEARCH OPERATIONS. THE ASSESS ING OFFICER ALSO MADE THE DISALLOWANCE OF RS. 2,88,000/- BEING SALARY PAID TO THE NON-WORKING EMPLOYEES. THIS WAS ALSO BASED ON THE STATEMENT OF THE ASSESSEE RECORDED DURING THE COURS E OF SURVEY WHEREIN THESE EXPENSES HAD BEEN SURRENDERED IN THE STATEMENT RECORDED ON 11.12.2006. THE ASSESSING OFFICER ALSO MADE SOME OTHER ADDITIONS AND THE ASSESSMENT WAS COMPLETED AT AN INCOME OF RS. 90,83,070/- . 2.1 THE ASSESSEES APPEAL AGAINST THE ADDITIONS WAS PARTLY ALLOWED BY THE LD. COMMISSIONER OF INCOME TAX (A). THE LD. COMMISSIONER OF INCOME TAX (A), HOWEVER, UPHELD THE ADDITION OF RS. 60,07,048/- ON ACCOUNT OF UNEXPLAINED STOCK, AD DITION OF RS. 1,28,000/- ON ACCOUNT OF UNEXPLAINED EXPENDITURE U/ S 69C OF THE ACT AND DISALLOWANCE OF SALARY AMOUNTING TO RS.2,88 ,000/-. 2.2 NOW, THE ASSESSEE IS BEFORE THE ITAT CHALLENGI NG THE ORDER OF THE LD. COMMISSIONER OF INCOME TAX (A) AND HAS R AISED THE FOLLOWING GROUNDS OF APPEAL:- 1. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS ) AND THE DEPUTY COMMISSIONER OF INCOME TAX HAVE ERRED IN MAKING ADDITION OF RS. 60,07,048/- AS UNEXPLAINED E XCESS STOCK. ITA NO. 2632/DEL/2010 ASSESSMENT YEAR 2007-08 4 2. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS ) AND THE LEARNED DEPUTY COMMISSIONER OF INCOME TAX HAVE ERRED IN TREATING RS. 1,28,000/- AS UNEXPLAINED EXPENDITURE U/S. 69C OF THE INCOME TAX ACT,1961. 3. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS ) AND THE LEARNED DEPUTY COMMISSIONER OF INCOME TAX HAVE ERRED IN DISALLOWING SALARIES OF RS. 2,88,000/-. 3.0 THE LD. AR SUBMITTED THAT THE ADDITION IN RESPE CT OF STOCK WAS MADE BY THE ASSESSING OFFICER BASED ON THE INVE NTORY PREPARED AT THE TIME OF SURVEY AND MAINLY ON THE GR OUND THAT THE ASSESSEE HAD ADMITTED TOWARDS HAVING EXCESS STOCK. LD. AR FURTHER SUBMITTED THAT THE ADDITION WAS MADE ENTIRE LY ON THE BASIS OF THE STATEMENT OF THE ASSESSEE RECORDED DUR ING THE COURSE OF SURVEY WHICH COULD NOT HAVE BEEN THE BASIS OF MA KING THE ADDITION IN VIEW OF THE JUDGMENT OF THE HONBLE APE X COURT IN THE CASE OF C.I.T. VS. KHADER KHAN REPORTED IN 79 DTC 1 84(SC) WHEREIN IT WAS HELD THAT THE ADDITION ON THE BASIS OF STATEMENT RECORDED DURING SURVEY U/S 133A DOES NOT EMPOWER AN Y INCOME TAX AUTHORITY TO EXAMINE ANY PERSON ON OATH AND, TH US, SUCH STATEMENT DOES NOT HAVE ANY EVIDENTIARY VALUE. THE LD. AR ALSO DREW OUR ATTENTION TO THE DETAILS OF STOCK INVENTOR Y PREPARED AT THE TIME OF SURVEY AND PLACED AT PAPER BOOK PAGES 1 03-109, THE CLOSING STOCK INVENTORY AS ON 31.3.2007 AND PLACED AT PAGES 93 TO ITA NO. 2632/DEL/2010 ASSESSMENT YEAR 2007-08 5 96 OF THE PAPER BOOK AS WELL AS THE RECONCILIATION OF STOCK PLACED AT PAPER BOOK PAGE 26. THE LD. AR SUBMITTED THAT T HE ASSESSEE WAS NOT MAINTAINING QUANTITATIVE STOCK RECORDS AND THE STOCK INVENTORY WAS PREPARED AT THE END OF ACCOUNTING YEA R ONLY. IT WAS FURTHER SUBMITTED THAT THE INVENTORY PREPARED BY TH E SURVEY TEAM WAS MERELY THE REPRODUCTION OF THE HYPOTHECATION ST ATEMENT PREPARED BY THE ASSESSEE AND SUBMITTED TO THE BANK REFLECTING INFLATED VALUE OF STOCK AND THE SAME WAS NOT CORROB ORATED FROM CORRESPONDING PURCHASES BILLS. IT WAS FURTHER SUBM ITTED THAT THE ADDITION WAS MADE ON THE ALLEGED DIFFERENCE IN VALU E OF INVENTORY AS ON 11.12.2006 AND THE STOCK AS ON 1.04.2006 I.E. THE OPENING STOCK WITHOUT TAKING INTO CONSIDERATION THE PURCHAS ES AND SALES MADE BETWEEN 1.4.2006 TO 11.12.2006 I.E. THE DATE O F SURVEY. IT WAS ALSO SUBMITTED THAT THE ASSESSING OFFICER HAS N OT DISPUTED THE VALUE OF OPENING STOCK. THE LD. AR ALSO SUBMIT TED THAT IF ANY ADDITION WAS CALLED FOR, THEN THE SAME HAD TO BE BA SED ON CLOSING STOCK INVENTORY AS ON 31.3.2007 IN WHICH THE ASSESS EE HAS HIMSELF DISCLOSED STOCK OF RS. 1,10,80,046/- AS AGA INST THE OPENING STOCK OF RS. 60,34,896/- AS ON 1.4.2006. T HE LD. AR ALSO SUBMITTED THAT THE BOOKS OF ACCOUNTS OF THE AS SESSEE WERE NOT REJECTED U/S 145 OF THE ACT AND FURTHER SUBMITT ED THAT THERE ITA NO. 2632/DEL/2010 ASSESSMENT YEAR 2007-08 6 WAS NO DISPUTE REGARDING THE CORRECTNESS OF PURCHAS E AND SALES AS PER THE BOOKS OF ACCOUNTS. IT WAS ALSO SUBMITTED THAT THE DEPARTMENT HAD NOT ALLEGED ANY UNRECORDED PURCHASE OR SALE. THE LD. AR ALSO HIGHLIGHTED THE FACT THAT THE ASSES SING OFFICER HAS NOT DISPUTED THE CORRECTNESS OF CLOSING STOCK ON 31 .3.2007 AND NOR HAS DISPUTED THE CORRECTNESS OF THE GP RATE AND THE NET PROFIT RATE. RELIANCE WAS PLACED ON THE JUDGMENT OF THE H ONBLE DELHI HIGH COURT IN THE CASE OF C.I.T. VS. PREM SINGH REP ORTED IN 163 ITR 434(DEL) WHEREIN THE HONBLE DELHI HIGH COURT H AD HELD THAT THE TRIBUNAL WAS RIGHT IN DELETING THE ADDITION WHI CH WAS BASED ON INFLATED LIST OF STOCK WHICH WAS FILED FOR THE P URPOSE OF GETTING THE LOAN. THE LD. AR ALSO SUBMITTED THAT THE ISSUE AT BEST MAY BE RESTORED TO THE FILE OF THE ASSESSING OFFICER FO R RE-EXAMINING THE CLAIM OF THE ASSESSEE IN THIS REGARD. 3.1 WITH RESPECT TO GROUND NO. 2 CHALLENGING THE AD DITION OF RS. 1,28,000/- U/S 69C OF THE ACT, IT WAS SUBMITTED THA T THE ANNEXURE-4 HAD NO REFERENCE TO ANY YEAR OR PERIOD T O WHICH IT PERTAINED AND FURTHER THE NATURE OF NOTING ALSO DID NOT INDICATE WHETHER THE SAME RELATED TO ANY INCOME OR EXPENDITU RE. IT WAS SUBMITTED THAT THESE WERE MERELY ROUGH NOTING AND F URTHER THE NATURE OF NOTING ALSO DID NOT INDICATE WHETHER THE SAME RELATED TO ITA NO. 2632/DEL/2010 ASSESSMENT YEAR 2007-08 7 ANY INCOME OR EXPENDITURE. IT WAS SUBMITTED THAT S INCE THESE WERE ROUGH NOTING, IN ABSENCE OF ANY CORROBORATION WITH UNRECORDED EXPENSES OR UNDISCLOSED INCOME, THERE WA S NO CASE FOR ADDITION. HE DREW OUR ATTENTION TO PROVISIONS OF SECTION 292C OF THE ACT WHEREIN IT IS SPECIFIED THAT THE ASSESSI NG OFFICER HAS TO ESTABLISH BEFORE ADDITION THAT THE AMOUNT REPRESENT ED UNDISCLOSED INCOME OR EXPENSES RELATING TO THE YEAR UNDER CONSIDERATION. 3.2 WITH RESPECT TO GROUND NO. 3, IT WAS SUBMITTED THAT THE ISSUE OF SALARY WAS SQUARELY COVERED BY THE ORDER O F THE ITAT IN THE ASSESSEES OWN CASE FOR ASSESSMENT YEAR 2005-06 BECAUSE IN THE YEAR UNDER CONSIDERATION ALSO, THE EMPLOYEES WE RE THE SAME. HE DREW OUR ATTENTION TO PAGES 7 AND 9 OF THE ITAT S ORDER WHEREIN THE ITAT HAD UPHELD THE ACTION OF THE LD. C OMMISSIONER OF INCOME TAX (A) IN DELETING THE ADDITION MADE ON THIS ACCOUNT. 4. IN RESPONSE, THE LD. SR. DR PLACED EXTENSIVE REL IANCE ON THE ORDER OF THE LOWER AUTHORITIES AND VEHEMENTLY ARGUE D THAT THE ADDITIONS/DISALLOWANCES HAD BEEN RIGHTLY MADE. HOW EVER, SHE HAD NO OBJECTION TO THE ISSUE OF VALUATION OF CLOSI NG STOCK BEING RESTORED TO THE FILE OF THE ASSESSING OFFICER FOR R E-EXAMINATION. ITA NO. 2632/DEL/2010 ASSESSMENT YEAR 2007-08 8 5. WE HAVE HEARD THE RIVAL SUBMISSIONS AND HAVE PER USED THE MATERIAL AVAILABLE ON RECORD. AS FAR AS THE FIRST I SSUE IS CONCERNED WHICH PERTAINS TO ADDITION OF RS. 60,07,048/- ON AC COUNT OF ALLEGED UNEXPLAINED STOCK, SINCE BOTH THE PARTIES H AVE AGREED THAT THE ISSUE BE RESTORED TO THE FILE OF THE ASSESSING OFFICER, WE RESTORE THE ISSUE TO THE FILE OF THE ASSESSING OFFI CER WITH THE DIRECTION TO DECIDE THE ISSUE AFRESH AFTER DULY CON SIDERING THE EXPLANATION OF THE ASSESSEE IN THIS REGARD AFTER GI VING PROPER OPPORTUNITY TO THE ASSESSEE TO PRESENT HIS CASE. A CCORDINGLY, GROUND NO. 1 STANDS ALLOWED FOR STATISTICAL PURPOSE S. 5.1 COMING TO GROUND NO. 2 WHICH CHALLENGES THE UPH OLDING OF UNEXPLAINED EXPENDITURE OF RS. 1,28,000/- MADE U/S 69C OF THE ACT, WE HAVE GONE THROUGH THE IMPUGNED ANNEXURE A-4 WHICH IS PLACED AT PAGE 54 OF THE PAPER BOOK AND WE ARE IN A GREEMENT WITH THE AVERMENTS OF THE LD. AR THAT THE SAME DOES NOT CONTAIN ANY REFERENCE TO ANY YEAR OR PERIOD AND FURTHER IT ALSO DOES NOT INDICATE WHETHER THE SAME PERTAINS TO ITEM OF INCOM E OR EXPENDITURE. WE ALSO NOTE THAT MOST OF THE ENTRIES AGAINST WHICH AMOUNTS HAVE BEEN MENTIONED HAVE ALSO BEEN CROSSED OUT. IN SUCH A SITUATION, WE ARE OF THE CONSIDERED OPINION THAT ADDITION COULD NOT HAVE BEEN MADE ON THE BASIS OF THIS DOCUM ENT ITA NO. 2632/DEL/2010 ASSESSMENT YEAR 2007-08 9 PARTICULARLY WHEN NOTHING CONCLUSIVE IS INDICATED O N THE SAID DOCUMENT. ACCORDINGLY, WE SET ASIDE THE ORDER OF T HE LD. COMMISSIONER OF INCOME TAX (A) ON THIS ISSUE AND DI RECT THE ASSESSING OFFICER TO DELETE THIS ADDITION. 5.2 COMING TO GROUND NO. 3 OF THE ASSESSEES APPEAL WHICH CHALLENGES THE DISALLOWANCE OF SALARY OF RS. 2,88,0 00/-, WE AGREE WITH THE CONTENTION OF THE LD. AR THAT THIS GROUND IS COVERED IN FAVOUR OF THE ASSESSEE IN ASSESSEES OWN CASE FOR A SSESSMENT YEARS 2005-06 IN ITA NO. 725/DEL/2012 WHEREIN VIDE ORDER DATED 10.05.2013, THE COORDINATE BENCH OF THE ITAT HAS HE LD THAT IN CASE OF ALL THE EMPLOYEES, PROVIDENT FUND HAS BEEN DULY DEDUCTED AND PAID AND FURTHER THE ASSESSING OFFICER HAS NOT RECORDED ANY FINDING THAT THE EMPLOYEES HAVE NOT RENDERED ANY SE RVICE OR THAT THE CLAIM OF THE SALARY WAS NOT GENUINE. THE ITAT HAS ALSO REFERRED TO THE ORDER OF THE LD. COMMISSIONER OF IN COME TAX (A) WHEREIN THE LD. COMMISSIONER OF INCOME TAX (A) HAD GIVEN A CATEGORICAL FINDING THAT THESE EMPLOYEES WERE WITH THE ASSESSEE FOR THE LAST 4-5 YEARS AND EVEN TAX AND PROVIDENT F UND WAS DEDUCTED. IT IS ALSO UNDISPUTED THAT THESE EMPLOYE ES ON WHOSE ACCOUNT THIS IMPUGNED DISALLOWANCE HAS BEEN MADE WE RE THE SAME EMPLOYEES AGAINST WHOSE DISALLOWANCE OF SALARY , THE ITAT ITA NO. 2632/DEL/2010 ASSESSMENT YEAR 2007-08 10 HAD HELD IN FAVOUR OF THE ASSESSEE. ACCORDINGLY, W E FIND THAT THERE IS NO REASON FOR SUSTAINING THIS DISALLOWANCE IN THE CAPTIONED YEAR ALSO. ACCORDINGLY, RESPECTFULLY FOL LOWING THE DECISION OF THE COORDINATE BENCH IN ASSESSMENT YEAR 2005-06 IN ASSESSEES OWN CASE, WE SET ASIDE THE ORDER OF THE LD. COMMISSIONER OF INCOME TAX (A) ON THIS ISSUE ALSO A ND DIRECT THE ASSESSING OFFICER TO DELETE THIS DISALLOWANCE. 6. IN THE RESULT THE APPEAL OF THE ASSESSEE STANDS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 25 TH SEPTEMBER, 2018. SD/- SD/- (PRASHANT MAHARISHI) (SUDHA NSHU SRIVASTAVA) ACCOUNTANT MEMBER JUDICIAL MEMBER DT. 25 TH SEPTEMBER, 2018 GS COPY FORWARDED TO:- 1. APPELLANT 2. RESPONDENT 3. CIT(A) 4. CIT 5. DR BY ORDER ASSTT. REGISTRAR ITA NO. 2632/DEL/2010 ASSESSMENT YEAR 2007-08 11 DATE OF DICTATION DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE DICTATING MEMBER DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE OTHER MEMBER DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR.PS /PS DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE DICTATING MEMBER FOR PRONOUNCEMENT DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR.P S/PS DATE ON WHICH THE FINAL ORDER IS UPLOADED ON THE WE BSITE OF ITAT DATE ON WHICH THE FILE GOES TO THE BENCH CLERK DATE ON WHICH THE FILE GOES TO THE HEAD CLERK THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT REGISTRAR FOR SIGNATURE ON THE ORDER DATE OF DISPATCH OF THE ORDER