Gurmeet Singh Sethi, New Delhi V. ITO WARD - 45(2), New Delhi

ITA 334/DEL/2020

• Counselvise Citation: [2024] 101 COUNSELVISE.COM (IT) 7208 (ITAT-DELHI)
• Duration Of Justice: 4 year(s) 3 month(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 14-05-2024
• Appeal Filed By: Assessee
• Order Result: PartlyAllowed
• Bench Allotted: B
• Next Hearing Date: 06-05-2024
• Assessment Year: 2012-2013
• Appeal Filed On: 16-01-2020
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SANJAY TRIPATHI
• Keywords: Capital asset converted into stock in trade; Period of limitation; Reasonable cause; TDS
• Section: 43B; 143(3); 40(a)(ia); 133(6)

Judgement Text

Page 1 of 11 IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH ‘B’: NEW DELHI BEFORE SHRI C. N.PRASAD, JUDICIAL MEMBER AND SHRI A. K. MISHRA, ACCOUNTANT MEMBER ITA No.334/Del/2020, A.Y. 2012-13 Gurmeet Singh Sethi A-37, Rajouri Garden, New Delhi PAN: AAAPS4868G Income Tax Officer Ward-45(2), New Delhi (Appellant) (Respondent) Appellant by None Respondent by Sh. Sanjay Tripathi, Sr.DR Date of Hearing 07/05/2024 Date of Pronouncement 15/05/2024 ORDER PER AVDHESH KUMAR MISHRA, AM This appeal of the Assessment Year 2012-13, at the instance of appellant/assessee, challenges an order dated 14.08.2019, of the Commissioner of Income Tax (Appeals)-15, New Delhi [In short, the ‘CIT(A)’]. By the order under challenge, the CIT(A) upheld (i) the taxability of creditors of Rs.1,12,75,060/- as unexplained/cessation of liability, (ii) disallowance of commission expenses of Rs.16,52,720/- under section 40(a)(ia) of the Income Tax Act, 1961 [In short, the ‘Act’] and (iii) taxability ITA No.334/Del/2020 Page 2 of 11 of cash deposits aggregating to Rs.16,28,500/- in the bank account of the appellant/assessee. 2. The issues that we are tasked to decide here are that whether the CIT(A) was justified in upholding the taxability of creditors of Rs.1,12,75,060/-, disallowance of commission expenses of Rs.16,52,720/- and taxability of cash deposits aggregating to Rs.16,28,500/-. 3. The relevant facts for deciding this appeal, in brief, are that the appellant/assessee, proprietor of R.J. Traders, deals in mobile phones and electronic gadgets. The assessee filed its return of income,on 30.09.2012, declaring income of Rs.3,20,460/-. On scrutiny, the consequential assessment was completed under section 143(3) of the Act determining the income at Rs.1,59,31,470/-. During the assessment proceedings, the Assessing Officer [In short, the ‘AO’] called for the requisite details of creditors of Rs.1,12,75,060/- along with the genuineness of transactions and creditors identity & creditworthiness; however, the appellant/assessee complied partially by submitting some of the details of creditors of Rs.1,00,73,952/- out of creditors of Rs.1,12,75,060/- shown in the balance sheet. Further, the appellant/assessee failed to submit the details of creditors of Rs.12,01,108 (Rs.1,12,75,060/- minus Rs.1,00,73,952/-). Based on the ITA No.334/Del/2020 Page 3 of 11 details submitted by the appellant/assessee, the AO issued notice under section 133(6) of the Act to the creditors as detailed on page 2 of the assessment order, which remained uncomplied with except by G.G.Telecrest Pvt. Ltd. and Uttam Strips Pvt. Ltd. who categorically submitted that they had advanced loans to the appellant/assessee. However, the AO noticed that the appellant/assessee had categorized these twoas creditors instead of loans. Neither remaining three creditors, as detailed on page 2 of the assessment order, ensured any compliance to the notice under section 133(6) of the Act nor the appellant/assessee tried to explain these. Therefore, the AO taxed entire creditors holding that these liabilitieswere not genuine. The AO further opined that these liabilities were in nature of cessation of liabilities. 3.1 Besides the above-mentioned creditors, the AO also noticed that the appellant/assessee had not deducted tax (TDS) on payment of commission expenses debited in his Profit & Loss Account. Therefore, the AO show-cased the appellant/assessee to justifythe allowability of such expenses under section 40(a)(ia) of the Act. In response, the appellant/assessee submitted that the actual nature of commission expenses was rebate/discount given on sale of mobile phones and therefore, the same did not qualify for TDS. However, the appellant/assessee failed to substantiate his claim in this regard with any ITA No.334/Del/2020 Page 4 of 11 bill/voucher/corroboratory evidence. Hence, the AO disallowed this expenditure of Rs.16,52,720/- under section 40(a)(ia) of the Act. 3.2 Based on the AIR information, the AOshow-caused the appellant/assessee to explain the cash deposits of Rs. 22,00,000/- made during the relevant year in the bank account of United Fashion being proprietor of the same. The appellant/assessee submitted that the profit derived from United Fashion had been accounted for in the P & L account of R.J.Traders; hence, it is disclosed and explained. The AO, holding that the closing balance of the bank account of United Fashion did not find any mention in the balance sheet of R. J. Traders; hence, this bank account was undisclosed and taxed the cash deposit of Rs.22,00,000/-. 3.3 The AO also made disallowance of custom duty of Rs.4,83,233/- under section 43B of the Act. 3.4 Aggrieved, the appellant/assessee filed appeal before the CIT(A) and got relief with respect to custom duty and part relief of the cash deposit in the United Fashion. 4. There is a delay of 84 days in filing the appeal by the appellant/assessee. The application for condonation of the delay annexed with the appeal memo stated the reason for delay as the appellant/assessee fell ill and hospitalized for a week. It was further ITA No.334/Del/2020 Page 5 of 11 stated that there was none to look after his business; therefore, illness derailed the routine business work. Per contra, the Ld. DR submitted that the condonation application for delay of 84 days in filing the present did not reflect any reasonable cause on the part of the appellant/assessee. He accordingly opposed condoning the delay in filing the present appeal. 5. This appeal was scheduled for hearing nine times. However, non- attended from the appellant’s side except once seeking adjournment on 14.02.2024. On request of the Ld. AR, the case was adjourned to 7 th May, 2024; however, none attended from the appellant/assessee side on 7 th May, 2024. Hence, we have no option except to decide this appeal. 6. We have heard the Ld. DR. and perused the material available on record. There is no dispute and is an admitted fact that there has been a delay in filing the present appeal by 84 days. There is also no dispute that under section 253(5) of the Act, the Tribunal may admit an appeal filed beyond the period of limitation where it is satisfied that there exists a sufficient cause on the part of the appellant for not presenting the appeal within the prescribed time. We are of the considered view that there was no malafide or deliberate delay in filing the present appeal and in the interest of substantial justice, the delay in filing the present appeal may be condoned and the appeal be decided on merit. We do not see any prejudice which will be caused to the Revenue in deciding this appeal on ITA No.334/Del/2020 Page 6 of 11 merit.In case of HL Malhotra & Company Pvt. Ltd. Vs DCIT, Circle12, New Delhi (ITA No. 211/2020 & CM Appeals 32045-32047/2020 dated 22 nd December, 2020), theHon’ble Delhi High Courthad held that in absence of anything male fide or deliberate delay as a dilatory tactic, the Court should normally condone the delay as the intent is always to promote substantial justice following the Hon’ble Supreme Court decisions in the case of Collector, Land Acquisition, Anantnag & Anr. Vs MST Katiji and others (1987) 2 SCC 107 and N. Balakrishnan Vs M. Krishnamurthy 1998 (7) SCC 123. 7. The explanation of the appellant/assessee therefore becomes relevant to determine whether the same reflects sufficient and reasonable cause on his part in not presenting the present appeal within the prescribed time. In case of Collector, Land Acquisition vs MST Katiji (Supra), the Hon'ble Supreme Court has held that the expression ‘Sufficient Cause’ employed by the legislature is adequately elastic to enable the Courts to apply the law in a meaningful manner to sub-serves the ends of justice that being the life-purpose of the existence of the institution of Courts. It was further held by the Hon’ble Supreme Court that such liberal approach is adopted on one of the principles that refusing to condone delay can result in a meritorious matter being thrown out at the very threshold and cause of justice being defeated. As against ITA No.334/Del/2020 Page 7 of 11 this, when delay is condoned, the highest that can happen is that a cause would be decided on merits after hearing the parties. Another principle laid down by the Hon’ble Supreme Court is that when substantial justice and technical considerations are pitted against each other, the cause of substantial justice deserves to be preferred for the other side cannot claim to have vested right in injustice being done because of a non-deliberate delay. It was also held by the Hon’ble Supreme Court that there is no presumption that delay is occasioned deliberately, or on account of culpable negligence, or on account of male fides. A litigant does not stand to benefit by resorting to delay. In fact, he runs a serious risk. In the instant case, applying the same principles, we find that there is no culpable negligence or malafide on the part of the assessee in delayed filing of the present appeal and it does not stand to benefit by resorting to such delay. Therefore, in the factual matrix of the present case, we find that there exists sufficient and reasonable cause for condoning the delay in filing the present appeal and as held by the Hon’ble Supreme Court, where substantial justice and technical considerations are pitted against each other, the cause of substantial justice deserved to be preferred. 8. In light of aforesaid discussions, in exercise of powers under section 253(5) of the Act, we hereby condone the delay in filing the present appeal as we are satisfied that there was sufficient cause for not ITA No.334/Del/2020 Page 8 of 11 presenting the appeal within the prescribed time and the appeal is hereby admitted for adjudication on merits. 9. We have heard the Ld. DR who submitted that the appellant/assessee had failed to bring any material on the record to contradict the finding of the Ld. CIT(A). Hence, he prayed the dismissal of the appeal. 10. The first issue is in respect of taxability of sundry creditor of Rs.1,12,75,060/- as a cessation of liability. As per Para 4 of the assessment order, it is evident that G.G.Telecrest Pvt. Ltd. and Uttam Strips Pvt. Ltd. has confirmed the said liabilities as loans/advances and not as creditors. In such facts and circumstances, the liabilities of G.G.Telecrest Pvt. Ltd. and Uttam Strips Pvt. Ltd. have to be disclosed in the balance sheet of the appellant/assessee as loan/advances. It cannot be ruled out that there may not be some error in the grouping of these liabilities under the head ‘creditors’ instead of ‘loans and advances’ as these liabilities are not appearing under the head ‘loans and advances’ in the balance sheet of the appellant/ assessee. In view of the above, we are of the considered opinion that the liabilities of the above mentioned two parties; G.G.Telecrest Pvt. Ltd. and Uttam Strips Pvt. Ltd., aggregating Rs. 95,00,000/- require further investigations/verifications. Therefore, in the interest of justice and considering all the afore-stated observations, we ITA No.334/Del/2020 Page 9 of 11 are of the considered view that, the appellant/assessee deserves reasonable one more opportunity to make good the defects/shortcomings. In view hereof, without offering our comment on merits of the case, we deem it appropriate set aside the issue of taxability of liabilities of G.G.Telecrest Pvt. Ltd. and Uttam Strips Pvt. Ltd.and remit the matter back to the file of the AO for de-nova consideration.We therefore, hereby remit back the issue of taxability of liabilities of G.G.Telecrest Pvt. Ltd. and Uttam Strips Pvt. Ltd.to the file of the AO for further verification and investigations and deciding this matter afresh as per law. 11. In respect of creditors other than those mentioned above in para 10, the appellant/assessee did not file any details or confirmation either before the AO or CIT(A). we therefore, have no option except to upheld the addition of Rs.17,75,060/-. 12. As far as the disallowance of Rs.16,52,720/- of commission expenses under section 40(a)(ia) of the Act and taxability of cash deposits aggregating to Rs.16,28,500/- in the bank account of the appellant/assessee are concerned, the appellant/assessee has failed to bring any material on the record to contradict the findings of the Ld. CIT(A) on these two issues. We, therefore, do not find fit to interfere in the findings of the CIT(A) in this regard; i.e. disallowance of Rs.16,52,720/- and taxability of cash deposits aggregating to Rs.16,28,500/-. ITA No.334/Del/2020 Page 10 of 11 13. In view of the above, the appeal of assessee is partly allowed. Order pronounced in open Court on 15 th May, 2024 Sd/- Sd/- (C.N.PRASAD) (A. K.MISHRA) JUDICIAL MEMBER ACCOUNTANT MEMBER Dated:15/05/2024 Binita, Sr. PS Copy forwarded to: 1. Appellant 2. Respondent 3. PCIT 4. CIT(Appeals) 5. DR: ITAT ASSISTANT REGISTRAR ITAT, NEW DELHI