Metalrod Ltd., Delhi V. ITO, New Delhi

ITA 3580/DEL/2017

• Counselvise Citation: [2020] 111 COUNSELVISE.COM (IT) 8450 (ITAT-DELHI)
• Duration Of Justice: 2 year(s) 7 month(s) 10 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 15-01-2020
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: E
• Assessment Year: 2013-2014
• Appeal Filed On: 05-06-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Unexplained cash credit; Opportunity of being heard; Additional evidence
• Section: 143(3); 143(2); 68

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH: E, NEW DELHI BEFORE SHRI AMIT SHUKLA, JUDICIAL MEMBER AND SHRI O.P. KANT, ACCOUNTANT MEMBER ITA NO.3580/DEL/2017 ASSESSMENT YEAR: 2013-14 M/S. METALROD LTD., B-97, ALL HAVEN BUILDING, RING ROAD, WAZIRPUR INDL. AREA, DELHI VS. ITO, WARD-16(4), C.R. BUILDING, NEW DELHI. PAN :AAACM8295Q (APPELLANT) (RESPONDENT) ORDER PER O.P. KANT, AM: THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST T HE ORDER DATED 12.05.2017 PASSED BY THE LD. COMMISSIONER OF INCOME-TAX (APPEAL)-6, DELHI. [IN SHORT THE LD. CIT(A)] FOR ASSESSMENT YEAR 2013-14, RAISING FOLLOWING GROUNDS: 1. THE LEARNED CIT(A) HAS ERRED ON FACT AND IN LAW IN SUSTAINING THE ADDITION OF RS.13,31,867/- U/S 68 UNDER THE HEA D, ADVANCE FROM CUSTOMERS, BEING THE BALANCE OUTSTAN DING AS ON 31.03.2013 IN THE RUNNING ACCOUNT OF THE HOLDING CO MPANY RCI INDUSTRIES & TECHNOLOGY LTD. APPELLANT BY SHRI K.P. GARG, CA RESPONDENT BY MS. RAKHI VIMAL, SR.DR DATE OF HEARING 08.01.2020 DATE OF PRONOUNCEMENT 15.01.2020 2 ITA NO.3580/DEL/2017 2. THE APPELLANT CRAVES LEAVE AND SANCTION OF THE HON BLE ITAT TO FILE ADDITIONAL EVIDENCE, IF SO REQUIRED FOR PROPER PROSECUTION OF THE CASE. 3. THE APPELLANT CRAVES LEAVE TO AND PERMISSION OF THE HONBLE ITAT TO ADD TO OR ALTER ANY OF THE GROUNDS OF APPEA L AT ANY TIME UPTO THE FINAL DECISION OF THE APPEAL. 2. BRIEFLY STATED FACTS OF THE CASE ARE THAT THE ASSES SEE COMPANY WAS ENGAGED IN BUSINESS OF TRADING OF METAL S BUT DURING THE YEAR UNDER CONSIDERATION, NO TRADING ACTIVITY W AS CARRIED OUT. THE ASSESSEE FILED RETURN OF INCOME ON 25.09.2013, DECLARING NIL INCOME. THE CASE WAS SELECTED FOR SCRUTINY AND NOTI CE U/S 143(2) OF THE INCOME-TAX ACT, 1961 (IN SHORT THE ACT) WA S ISSUED AND COMPLIED WITH. THE SCRUTINY ASSESSMENTS U/S 143(3) OF THE ACT WAS COMPLETED ON 16.02.2016 AFTER MAKING CERTAIN ADDITION/DISALLOWANCES. 2.1 ON FURTHER APPEAL, THE LD. CIT(A) PARTLY ALLOWED T HE APPEAL OF THE ASSESSEE. AGGRIEVED WITH THE ADDITIONS SUSTAINE D, THE ASSESSES IS IN APPEAL BEFORE THE TRIBUNAL. 3. IN SUPPORT OF THE GROUNDS RAISED, THE LD. COUNSEL OF THE ASSESSEE FILED A PAPER-BOOK CONTAINING PAGES 1 -33 AND SUBMITTED THAT THE ASSESSEE HAS DISCHARGED ITS ONUS UNDER SEC TION 68 OF THE ACT AND, THUS, THE ADDITION OF RS.13,31,867/- SUSTA INED BY THE LD. CIT(A) IS NOT JUSTIFIED. THE LD. COUNSEL REFERRED T O PAGES 16 TO 18 OF THE PAPER-BOOK WITH DETAILED NARRATION OF THE TR ANSACTION OF MONEY RECEIVED AND PAID TO M/S. RCI INDUSTRIES AND TECHNOLOGIES. HE SUBMITTED THAT IN VIEW OF THE NATU RE AND SOURCE OF THE CREDIT EXPLAINED, NO ADDITION IS CALLED FOR. 4. THE LD. DR, ON THE OTHER HAND, RELIED ON THE ORDER OF THE LD. CIT(A) AND SUBMITTED BEFORE THE LOWER AUTHORITIES T HAT THE 3 ITA NO.3580/DEL/2017 ASSESSEE FAILED TO EXPLAIN THE NATURE OF THE CREDIT RECEIVED IN BOOKS OF ACCOUNT. SHE SUBMITTED THAT IN THE BANK AC COUNT OF THE RC INDUSTRY & TECHNOLOGY, THE DEPOSITS IMMEDIATELY BEFORE THE PAYMENT TO THE ASSESSEE NEED EXAMINATION. 5. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED TH E RELEVANT MATERIAL ON RECORD. THE ASSESSING OFFICER MADE DISALLOWANCE UNDER SECTION 68 OF THE ACT FOR THE CL OSING BALANCE OF THE CREDIT AMOUNTING TO RS.6,58,33,93/- UNDER THE H EAD ADVANCE FROM CUSTOMERS. THE DETAILS OF THE TRANSACTION UND ER THE HEAD ADVANCE FROM CUSTOMER REPRODUCED BY THE AO IS EXT RACTED AS UNDER: NAME OF CREDITOR OPENING BALANCE TRANSACTIONS - RECEIVED DURING THE YEAR AMOUNT PAID DURING THE YEAR CLOSING, BALANCE ACB MATRIX SOLUTIONS LTD, 2,04,66,044 0 0 2,04,66,044 BLOSSOM IMPEX RVL LTD. 1,21,29,714 1,21,29,714 KAY KAY EXIRN PVT. LTD, 2,80,90,068 2,80,90,068 RCI INDUSTRIES & TECHNOLOGIES LTD, - 2,34,086 1,15,66,850 (SIC) 1,00,00,000 (SIC) 13,31,867 S AGGARWAL & CO. 38,15,500 38,15,500 TOTAL 6,42,66,340 1,15,66,850 (SIC) 1,00,00,000 (SIC) 6,58,33,193 5.1 BEFORE THE LD. CIT(A), THE ASSESSEE CHALLENGED THA T EXCEPT IN THE CASE OF RCI INDUSTRIES & TECHNOLOGIES LTD., NO ADDITION TO THE CREDIT IS APPEARING AND ALL THE REMAINING AMOUNT AR E OPENING CAPITAL OF THE CREDITOR, FOR WHICH NO ADDITION COUL D HAVE BEEN MADE U/S 68 OF THE ACT. IN VIEW OF THE DETAILED SUB MISSIONS OF THE ASSESSEE, THE LD. CIT(A) SUSTAINED ADDITION OF CLOS ING BALANCE OF 4 ITA NO.3580/DEL/2017 RS.13,31,867/- AGAINST RCI INDUSTRIES & TECHNOLOGY OBSERVING AS UNDER:. 3.2.3 THE FACTS OF THE CASE AND THE SUBMISSIONS OF THE APPELLANT HAVE BEEN CAREFULLY CONSIDERED. DURING TH E COURSE OF ASSESSMENT PROCEEDINGS, ASSESSING OFFICER NOTICED T HAT TOTAL LONG TERM LIABILITIES OF APPELLANT WAS RS.6,58,33,193/-/ -,. ASSESSING OFFICER ASKED APPELLANT TO SUBMIT DETAILS WITH COMP LETE POSTAL ADDRESS, PAN, OPENING BALANCE, AMOUNT RECEIVED DURI NG THE YEAR, AMOUNT REPAID DURING THE YEAR, BALANCE CONFIRMATION , PURPOSES OF SUCH ADVANCES, REASONS FOR NOT REFUNDING THE SAME W HEN NO BUSINESS CARRIED OUT DURING THE YEAR. APPELLANT SUB MITTED DETAILS AND ALSO FILED CONFIRMATION OF ONE PARTY, RCI INDUS TRIES & TECHNOLOGY LTD. SINCE APPELLANT WAS NOT CARRYING BU SINESS SINCE YEAR 2001, IT IS NOT HAVING ANY STOCK WITH IT AND N O MANUFACTURING ACTIVITY IS CARRIED ON, ONE THING CREATES DOUBT ON GENUINENESS OF TRANSACTION WHY CUSTOMERS HAVE GIVEN ADVANCE. FURTH ER, APPELLANT WAS UNABLE TO PRODUCE PURPOSE, TERMS & CONDITIONS O F ADVANCES, HENCE, ASSESSING OFFICER TREATED IT AS UNEXPLAINED CASH CREDITS UNDER THE GUISE OF ADVANCES FROM CUSTOMERS AND ADDE D RS. 6,58,33,193/-. APPELLANT SUBMITTED THAT TOTAL LONG TERM LIABILITIES AS ON 31-3-2013 WAS RS. 6,58,33,193/- AND SAME WAS RS. 6,45,01,327/- IN LAST YEAR, HENCE, ADDITION DURING THE YEAR WAS OF RS. 13,31,867/- ONLY. FURTHER, SAID CHANGE WAS IN B ALANCES OF RCI INDUSTRIES AND TECHNOLOGY LTD. FOR WHICH IT HAS FIL ED CONFIRMATION, THEREFORE, ADDITION MADE BY THE ASSESSING OFFICER I S NOT SUSTAINABLE. THE TOTAL LONG TERM LIABILITIES AS ON 31-3-2013 WAS RS. 6,58,33,193/- AND SAME WAS RS. 6,45,01,327/- IN LAS T YEAR, HENCE, ADDITION DURING THE YEAR WAS OF RS. 13,31,867/- ONL Y, THEREFORE, ADDITION OF RS. 6,58,33,193/- MADE BY THE ASSESSING OFFICER IS NOT SUSTAINABLE. THE PRIMARY REQUIREMENTS, WHICH SHOULD BE SATISFIED IN SUCH TYPE OF CASES IS, IDENTIFICATION OF LENDER, CR EDITWORTHINESS OF LENDER AND GENUINENESS OF THE TRANSACTIONS. THESE T HREE REQUIREMENTS HAVE TO BE TESTED NOT SUPERFICIALLY BU T IN DEPTH HAVING REGARD TO THE HUMAN PROBABILITIES AND NORMAL COURSE OF HUMAN CONDUCT. ON PERUSAL OF DETAILS FILED BY THE APPELLA NT DURING THE COURSE OF ASSESSMENT PROCEEDINGS, IT IS FOUND THAT SHAREHOLDING OF RCI INDUSTRIES AND TECHNOLOGY LTD. IN APPELLANT-COM PANY AS ON 31- 3-2012 AND 31-3-2013 WAS OF 58.76 PER CENT. BEING A RELATED PARTY, IT WAS NOT DIFFICULT FOR APPELLANT TO OBTAIN CONFIR MATION OF RCI INDUSTRIES AND TECHNOLOGY LTD. ON GOING THROUGH THE CONFIRMATION OF RCI INDUSTRIES AND TECHNOLOGY LTD. FILED BY APPELLA NT, IT BECOMES CLEAR THAT OPENING BALANCE OF SAID PARTY WAS OF (-) RS. 2,34,986.88/-. RECEIPTS DURING THE YEAR WAS OF RS. 15,66,854/- WHI CH LED TO THE CLOSING BALANCE OF RS.13,31,867/- DURING THE YEAR W HICH HAS BEEN 5 ITA NO.3580/DEL/2017 SHOWN AS ADVANCED FROM CUSTOMERS WHEN THERE IS NO S UCH CORRESPONDENCE IN THIS REGARD. IT IS A SIMPLE RECEI PTS IN CURRENT ACCOUNT AND NOTHING TO DO WITH ADVANCE FROM CUSTOME RS. THIS FACTUM CREATES DOUBT ON GENUINENESS OF TRANSACTION OF ADVANCES FROM A CUSTOMER, NAMELY, RCI INDUSTRIES AND TECHNOL OGY LTD. APPELLANT ALSO COULD NOT FURNISH REASON WHY ADVANCE OF CRORE OF RUPEES MADE WHEN NO BUSINESS HAS BEEN CARRIED OUT S INCE 2001. THUS, ADDITION OF UNEXPLAINED CASH CREDIT IS RESTRI CTED TO RS. 13,31,867/-. IN THIS REGARD, RELIANCE IS PLACED ON FOLLOWING JUDICIAL DECISIONS: IN R.K. AUTO ENGINEERING PVT. LTD. VS. INCOME TAX O FFICER ITA NO. 305/DEL/2012 DT. 6-5-2015, IT WAS HELD THAT ADMITTE DLY, THE AMOUNT OF RS. 4,00,000/- WAS RECEIVED, RS. 2 LAKHS EACH FR OM M/S NISHANT FINVEST P. LTD. AND M/S PERFORMANCE TRADING & INVES TMENT BY ACCOUNT PAYEE CHEQUES AND THE CONFIRMATION LETTERS HAD BEEN FILED. BUT IT DID NOT MEAN THAT THE ASSESSING OFFICER WAS PREVENTED FROM PROBING THE MATTER FURTHER BASED ON THE INFORMATION FILED BY THE ASSESSEE. IT WAS NOTICED BY THE ASSESSING OFFICER T HAT THE TRANSACTIONS IN QUESTION WERE MERELY BOOK ENTRIES A ND THE ALLEGATION MADE AGAINST THE ASSESSEE COMPANY IS THAT THE ASSES SEE HAD PROVIDED CASH TO M/S NISHANT FINVEST P. LTD. AND M/ S PERFORMANCE TRADING & INVESTMENT, WHO AFTER DEPOSITING THE CASH IN THE BANK ACCOUNT HAD ISSUED CHEQUES IN FAVOUR OF THE ASSESSE E COMPANY WHICH MEANS THAT THE CASH DEPOSITED IN THE BANK ACC OUNT OF THOSE CONCERNS REALLY BELONGED TO THE ASSESSEE. THAT FACT WAS PROVED BY DEPOSIT OF CASH IN EQUIVALENT AMOUNT IN THE BANK AC COUNTS OF THOSE TWO CONCERNS PRECEDING THE ISSUE OF CHEQUES IN FAVO UR OF THE ASSESSEE. THE APPELLANT FAILED TO REBUT THAT ALLEGA TION. THE APPELLANT ALSO FAILED TO PRODUCE THE DIRECTORS OF THOSE CONCE RNS BEFORE THE ASSESSING OFFICER. IN OTHER WORDS, THE APPELLANT AL SO FAILED TO PROVE THE GENUINENESS OF THE TRANSACTIONS IN THE LIGHT OF THE FACT THAT THOSE CONCERNS WERE ALLEGED TO BE INDULGED IN PROVIDING B OOK ENTIRES. IT IS SETTLED PROPOSITION OF LAW THAT JUST BECAUSE CREDIT S WERE ACCEPTED BY ACCOUNT PAYEE CHEQUES AND CONFIRMATION LETTERS WERE FILED, THE TRANSACTIONS COULD NOT BE CALLED SACROSANCT. THE AS SESSEE HAD FAILED TO DISCHARGE HIS ONUS THAT WAS LYING UPON IT IN PRO VING THE CREDITS UNDER THE PROVISIONS OF SECTION 68 OF THE ACT AND T HEREFORE, ADDITION OF RS. 4 LAKHS WAS CONFIRMED. 5.2 BEFORE US, THE LD. COUNSEL HAS FILED COPY OF LEDGE R ACCOUNT OF THE RCI INDUSTRIES & TECHNOLOGY IN BOOKS OF ACCOUNT S OF THE ASSESSEE ON PAGE 12 OF THE PAPER-BOOK, WHICH IS REP RODUCED AS UNDER: 6 ITA NO.3580/DEL/2017 7 ITA NO.3580/DEL/2017 5.3 THE ASSESSEE HAS ALSO FILED COPY OF THE LEDGER ACC OUNT OF ASSESSEE IN THE BOOKS OF ACCOUNT OF M/S. RCI INDUST RIES & TECHNOLOGY, WHICH IS NOT SIGNED BY THE PARTY. THE A SSESSEE HAS FILED DETAILS OF THE NATURE OF TRANSACTION AS UNDER : SR. NO. DATE AMOUNT ENTRY TYPE EXPLANATION 1. 12-APR-12 5,00,000/- RECEIPT AMOUNT RECEIVED TO GIVE DONATION TO ST. MONICA CHARITABLE & EDUCATIONAL TRUST 2. 20-APR-12 5,50,000/- RECEIPT AMOUNT RECEIVED TO PAY CONVERSION CHARGES OF THE LAND LOCATED AT WAZIRPUR, DELHI TO MCD (RECEIPT ATTACHED) 3. 25-APR-12 1,00,00,000/- PAYMENT THERE WAS TEMPORARY REQUIREMENT OF FUNDS IN RCI, HENCE AMOUNT WAS PAID BY BANK BY OVERDRAFTING THE ACCOUNT OF METALROD AND THE FUNDS WERE RECEIVED BACK AFTER 5DAYS. 4. 30-APR-12 1,00,00,000/- RECEIPT PLEASE REFER EXPLANATION 3 AS ABOVE 5. 30-APR-12 1,00,000/- RECEIPT AMOUNT RECEIVED FOR THE MONTHLY INTEREST DEBIT 6. 29-JUL-12 16,854/- RECEIPT AMOUNT PAID BY RCI ON BEHALF OF METALROD FOR THE VALUATION OF THE PROPERTY LOCATED AT WAZIRPUR DELHI (BILL ATTACHED) 7. 03-SEP-12 4,00,000/- RECEIPT AMOUNT RECEIVED TO PAY HOUSE TAX OF THE LAND & BUILDING LOCATED AT WAZIRPUR, DELHI TO MCD (RECEIPT ATTACHED) 5.4 THE LD. COUNSEL CLAIMED THAT DETAILS OF THE NATURE OF ENTRIES WERE EXPLAINED BEFORE THE ASSESSING OFFICER AND ALL DOCUMENTS SUPPORTING THE SAME WERE ALSO FILED BEFORE THE ASSE SSING OFFICER. HOWEVER, ON PERUSAL OF THE ORDER OF THE LOWER AUTHO RITIES, WE DO NOT FIND ANY REFERENCE OF ANY SUCH EXPLANATION. IN THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN THE INTEREST OF JU STICE, WE FEEL APPROPRIATE TO RESTORE THIS ISSUE TO THE FILE OF TH E ASSESSING OFFICER TO DECIDE AFRESH IN ACCORDANCE WITH LAW AFTER PROVI DING ADEQUATE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. ORDER A CCORDINGLY. 8 ITA NO.3580/DEL/2017 6. IN THE RESULT, THE APPEAL IS ALLOWED FOR STATISTIC AL PURPOSES. ORDER IS PRONOUNCED IN THE OPEN COURT ON 15 TH JANUARY, 2020. SD/- SD/- (AMIT SHUKLA) (O.P. KANT) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 15 TH JANUARY, 2020. RK/-(D.T.D.) COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR ASST. REGISTRAR, ITAT, NEW DELHI