ITO, New Delhi V. M/s. IO Creations, New Delhi

ITA 2762/DEL/2015

• Counselvise Citation: [2018] 125 COUNSELVISE.COM (IT) 0811 (ITAT-DELHI)
• Duration Of Justice: 3 year(s) 4 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 14-09-2018
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Assessment Year: 2008-2009
• Appeal Filed On: 07-05-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: S L ANURAGI
• Keywords: Business income; Source of fund; Additional evidence
• Section: 56; 144

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH C NEW DELHI BEFORE SHRI N.K.BILLAIYA, ACCOUNTANT MEMBER AND SHRI SUDHANSHU SRIVASTAVA, JUDICIAL MEMBER ITA NO.2762/DEL/2015 ASSESSMENT YEAR: 2008-09 INCOME TAX OFFICER, WARD 54(2), ROOM NO. 1601, 16 TH FLOOR, CIVIC CENTRE, E-2 BLOCK, NEW DELHI. VS M/S I.O. CREATIONS, 198, JEEVAN NAGAR ASHRAM, NEW DELHI-110014 APPELLANT RESPONDENT DEPARTMENT BY: SHRI S.L. ANURAGI, SR. DR ASSESSEE BY : SHRI SANDEEP SAP RA, ADV. DATE OF HEARING : 18.06.2018 DATE OF PRONOUNCEMENT : 14.09.2018 O R D E R PER SUDHANSHU SRIVASTAVA, J.M. THIS APPEAL IS PREFERRED BY THE DEPARTMENT AGAINST THE ORDER DATED 27.02.2015 PASSED BY THE LD. COMMISSIONER OF INCOME TAX (APPEALS)-18, NEW DELHI FOR ASSESSMENT YEAR 2008-09 . 2. BRIEF FACTS OF THE CASE ARE THAT THE RETURN OF I NCOME WAS FILED DECLARING AN INCOME OF RS. 64,730/-. THE CASE WAS SELECTED FOR SCRUTINY UNDER CASS AND NOTICES WERE ISSUED TO THE ASSESSEE FROM TIME TO TIME ON NUMEROUS OCCASIONS BUT THE ASS ESSEE DID NOT FULLY COOPERATE IN THE ASSESSMENT PROCEEDINGS A ND, THEREFORE, ITA NO. 2762/DEL/2015 ASSESSMENT YEAR 2008-09 2 THE ASSESSING OFFICER PROCEEDED TO FRAME THE BEST J UDGMENT ASSESSMENT U/S 144 OF THE INCOME TAX ACT, 1961 (HER EINAFTER CALLED 'THE ACT') BY MAKING A DISALLOWANCE ON ACCOU NT OF EXPENSES RELATING TO SALARY, BROKERAGE AND COMMISSION AMOUNT ING TO RS. 7,07,939/- WHICH WERE DEBITED TO THE PROFIT & LOSS ACCOUNT. FURTHER, THE ASSESSING OFFICER ALSO MADE AN ADDITIO N OF RS. 61,46,490/- ON ACCOUNT OF DEPOSITS WHICH HAD BEEN M ADE BY THE ASSESSEE IN THE BANK ACCOUNT. A FURTHER ADDITION O F RS. 74,721/- WAS MADE TOWARDS UNEXPLAINED UNSECURED LOANS. THE ASSESSMENT WAS COMPLETED AT AN INCOME OF RS. 69,19, 163/-. 2.1 AGGRIEVED, THE ASSESSEE APPROACHED THE LD. COMM ISSIONER OF INCOME TAX(A) WHO ALLOWED THE ASSESSEES APPEAL BY DELETING ALL THREE ADDITIONS. NOW, THE DEPARTMENT IS IN APPEAL BEFORE THE ITAT CHALLENGING THE DELETION OF ADDITIONS/DISALLOW ANCES BY THE LD. COMMISSIONER OF INCOME TAX(A) AND HAS RAISED TH E FOLLOWING GROUNDS OF APPEAL:- (I) WHETHER THE CIT(A) HAS ACTED IN GROSS VIOLATI ON OF PROVISION U/S 250 I.T.ACT READ WITH RULE 46A(1) & (2) BY ADMITTING ADDITIONAL EVIDENCE CONTRARY TO PROVIS IONS THERETO. (II) WHETHER THE CIT(A) HAS FAILED TO APPRECIATE T HAT THERE IS NO CORRELATION BETWEEN THE EXPENSES INCURRED ON SALARY AND COMMISSION WITH RESPECT TO BUSINESS ACTIVITIES AS ITA NO. 2762/DEL/2015 ASSESSMENT YEAR 2008-09 3 ASSESSEE HAS RECEIVED ONLY INCOME FROM INTEREST OF RS. 12,24,000/- ON WHICH TDS U/S 194A HAS BEEN DEDUCTED . (III) WHETHER THE CIT(A) HAS FAILED TO APPRECIATE T HAT ASSESSEE WAS GIVEN NINETEEN OPPORTUNITY TO EXPLAIN THE DEPOSIT OF RS.2,17,500/- IN CASH AND RS.59,28,990/- BY TRANSFER IN HIS BANK ACCOUNT AND ASSESSEE FAILED TO EXPLAIN THE SOURCE OF DEPOSITS. (IV) WHETHER THE CIT(A) HAS ERRED IN DELETING THE A DDITION OF RS.74,721/- AS THE ASSESSEE HAS FAILED TO FILE CONFIRMATION OF UNSECURED LOAN DURING THE COURSE OF ASSESSMENT PROCEEDINGS. 3. THE LD. SR. DR SUBMITTED THAT THE ASSESSEE HAD M ADE NO COMPLIANCE TO THE VARIOUS NOTICES ISSUED BY THE DEP ARTMENT AND, THEREFORE, THE ASSESSING OFFICER HAD NO OPTION BUT TO DECIDE THE CASE ON MERITS BASED ON THE MATERIAL AVAILABLE ON R ECORD. THE LD. SR. DR ASSAILED THE FINDINGS OF THE LD. COMMISSIONE R OF INCOME TAX(A) AND VEHEMENTLY ARGUED THAT THE DISALLOWANCES /ADDITIONS HAD BEEN WRONGLY DELETED BY HIM. 4. IN RESPONSE, THE LD. AR PLACED EXTENSIVE RELIANC E ON THE FINDINGS OF THE LD. COMMISSIONER OF INCOME TAX(A) A ND SUBMITTED THAT THE LD. COMMISSIONER OF INCOME TAX(A) HAD DELE TED THE DISALLOWANCES ONLY AFTER OBTAINING THE REMAND REPOR T FROM THE ASSESSING OFFICER IN THIS REGARD AND FURTHER SUBMIT TED THAT THE ORDER OF THE LD. COMMISSIONER OF INCOME TAX(A) WAS BASED ON FACTS AND, THEREFORE, THE SAME SHOULD BE UPHELD. ITA NO. 2762/DEL/2015 ASSESSMENT YEAR 2008-09 4 5.0 WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD. ALTHOUGH THE DEPARTME NT HAS RAISED A GROUND THAT THE LD. COMMISSIONER OF INCOME TAX(A) HAS ACTED IN VIOLATION OF RULE 46A(1) & (2) OF THE INCOME TAX RU LES BY ADMITTING ADDITIONAL EVIDENCES CONTRARY TO THE PROV ISIONS, WE FIND THAT THIS GROUND DOES NOT HOLD ANY SUBSTANCE AS THE LD. COMMISSIONER OF INCOME TAX(A) HAS DULY CALLED FOR A REMAND REPORT FROM THE ASSESSING OFFICER AT THE TIME OF AD MITTING THE ADDITIONAL EVIDENCES AND THIS FACT IS DULY RECORDED BY THE LD. COMMISSIONER OF INCOME TAX(A) IN THE IMPUGNED ORDER . THEREFORE, THIS GROUND IS DISMISSED. 5.1 COMING TO THE DELETION OF VARIOUS DISALLOWANCES AND ADDITIONS ON MERITS, IT IS SEEN THAT AS FAR AS THE DELETION OF ADDITION ON ACCOUNT OF SALARY, BROKERAGE AND COMMIS SION EXPENSES IS CONCERNED, IT IS SEEN THAT THIS AMOUNT HAS BEEN DISALLOWED BY THE ASSESSING OFFICER ON THE GROUND T HAT THERE WAS NO NEXUS BETWEEN EARNING OF INTEREST BY THE ASSESSE E FIRM AND INCURRING OF THESE EXPENSES. THE ASSESSING OFFICER WAS OF THE VIEW THAT SINCE THE FIRM HAD EARNED INTEREST FROM B UILDERS, THE SAME WAS IN THE NATURE OF INCOME FROM OTHER SOURCES AND, ACCORDINGLY, SALARY, BROKERAGE AND COMMISSION WERE NOT ITA NO. 2762/DEL/2015 ASSESSMENT YEAR 2008-09 5 ALLOWABLE EXPENSES AGAINST SUCH INCOME. HOWEVER, W HILE ALLOWING THE ASSESSEES APPEAL, THE LD. COMMISSIONE R OF INCOME TAX(A) HAS PLACED RELIANCE ON THE JUDGEMENT OF HON BLE DELHI HIGH COURT IN THE CASE OF SNAM PROGETTI S.P.A. VS A DDL.CIT REPORTED IN (1981) 132 ITR 70 (DELHI) WHEREIN THE H ON'BLE DELHI HIGH COURT HAS TAKEN A BROADER VIEW AND HAS CONSIDE RED INTEREST INCOME AS INCIDENTAL TO BUSINESS INCOME IN CASE WHE RE THE COMPANY WAS ESTABLISHED FOR CARRYING ON BUSINESS. IT IS UNDISPUTED THAT THE NATURE OF ASSESSEES BUSINESS I S SALE AND PURCHASE OF PROPERTIES AND, THUS, THE ASSESSEES MA IN SOURCE OF INCOME IS BUSINESS AND NOT FROM INCOME FROM OTHER S OURCES. THE HONBLE APEX COURT HAS HELD IN THE CASE OF C.I.T. V S GOVIDAA CHOUDHARY AND SONS REPORTED IN (1993) 203 ITR 881 ( SC) THAT SECTION 56 OF THE ACT RELATING TO INCOME FROM OTHER SOURCES IS A RESIDUARY ONE AND IT IS ONLY WHERE AN INCOME DOES N OT FALL UNDER ANY OF THE OTHER REGULAR SOURCES OF INCOME, THERE S HOULD BE NEED FOR INVOKING SECTION 56. THE HONBLE APEX COURT FU RTHER HELD THAT WHERE A PERSON HAS ONLY ONE SOURCE OF INCOME AND TH AT IS BUSINESS, THERE COULD HARDLY BE ANY OTHER INFERENCE . ON THE FACTS OF THE CASE, IT IS OUR CONSIDERED OPINION THAT THE INTEREST EARNED FROM THE BUILDERS BY THE ASSESSEE DURING THE YEAR U NDER ITA NO. 2762/DEL/2015 ASSESSMENT YEAR 2008-09 6 CONSIDERATION WAS ESSENTIALLY IN THE NATURE OF BUSI NESS INCOME AND, THEREFORE, IT WAS PATENTLY INCORRECT ON THE PA RT OF THE ASSESSING OFFICER TO HAVE TREATED IT AS INCOME FROM OTHER SOURCES AND CONSEQUENTLY DISALLOW SALARY, BROKERAGE AND COM MISSION EXPENSES. ACCORDINGLY, THE LD. COMMISSIONER OF INC OME TAX(A) WAS JUSTIFIED IN ALLOWING THE ASSESSEES CLAIM OF E XPENDITURE TOWARDS SALARY, BROKERAGE AND COMMISSION AND WE FIN D NO REASON TO INTERFERE WITH THE FINDINGS OF THE LD. COMMISSIO NER OF INCOME TAX(A) ON THIS ISSUE AND WE DISMISS THE GROUND RAIS ED BY THE DEPARTMENT. 5.2 COMING TO THE ADDITION OF DISALLOWANCE PERTAINI NG TO ALLEGED UNEXPLAINED BACK DEPOSITS, IT IS SEEN THAT THE LD. COMMISSIONER OF INCOME TAX(A) HAS DISCUSSED THE ISSUE AT LENGTH AND HAS GIVEN A CATEGORICAL FINDING THAT THE IMPUGNED AMOUNTS EIT HER PERTAINED TO AMOUNTS RECEIVED FROM THE SISTER CONCERN I.E. M/ S IK ONKAR INTERNATIONAL OR WERE DEPOSITED BY MR. R.S. WAHI AN D MRS. S.K. WAHI (BOTH PARTNERS OF THE ASSESSEE FIRM) FROM THEI R NRO ACCOUNTS. THE LD. COMMISSIONER OF INCOME TAX(A) HA S FURTHER NOTED THAT AN AMOUNT OF RS. 6,90,000/- WAS CONTRIBU TED BY ANOTHER PARTNER SHRI C.K. WAHI TOWARDS HIS CAPITAL ACCOUNT AND FURTHER AN AMOUNT OF RS. 33,63,990/- WAS RECEIVED F ROM M/S ITA NO. 2762/DEL/2015 ASSESSMENT YEAR 2008-09 7 PIDPL WHO WAS A BUILDER AND THIS AMOUNT WAS RECEIVE D AS REFUND FROM THE BUILDER WHICH HAD BEEN GIVEN EARLIER FOR T HE BOOKING OF FLATS. THE LD. SR. DR COULD NOT POINT OUT ANY FACT UAL INACCURACY IN THE FINDINGS OF THE LD. COMMISSIONER OF INCOME T AX(A) ON THIS ISSUE. ACCORDINGLY, WE FIND NO REASON TO INTERFERE ON THIS ISSUE ALSO AND DISMISS THE GROUNDS RAISED BY THE DEPARTME NT. 5.3 COMING TO THE LAST GROUND RAISED BY THE DEPARTM ENT WHICH CHALLENGES THE DELETION OF ADDITION OF RS. 74,721/- ON ACCOUNT OF UNEXPLAINED UNSECURED LOAN, IT IS SEEN THAT THE LD. COMMISSIONER OF INCOME TAX(A) HAS AGAIN RECORDED A CATEGORICAL F INDING THAT THIS LOAN WAS TAKEN FROM A SISTER CONCERN AS A TEMP ORARY LOAN WHICH WAS REPAID IN THE SUBSEQUENT YEARS. HERE ALS O, THE LD. SR. DR WAS UNABLE TO FIND ANY FACTUAL INACCURACY AS REC ORDED BY THE LD. COMMISSIONER OF INCOME TAX(A) ON THIS ISSUE. A CCORDINGLY, WE DISMISS THIS GROUND ALSO. 6. IN THE RESULT, THE APPEAL OF THE DEPARTMENT STAN DS DISMISSED. ITA NO. 2762/DEL/2015 ASSESSMENT YEAR 2008-09 8 ORDER PRONOUNCED IN THE OPEN COURT ON 14 TH SEPTEMBER, 2018. SD/- SD/- (N.K.BILLAIYA) (SUDHANSHU SRIVAS TAVA) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 14 TH SEPTEMBER, 2018 GS COPY FORWARDED TO: - 1) APPELLANT 2) RESPONDENT 3) CIT(A) 4) CIT 5) DR TRUE COPY BY ORDER ASSTT. REGISTRAR ITA NO. 2762/DEL/2015 ASSESSMENT YEAR 2008-09 9 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