ACIT, New Delhi V. M/s. Harsh International (P) Ltd., New Delhi

ITA 458/DEL/2015

• Counselvise Citation: [2018] 126 COUNSELVISE.COM (IT) 2866 (ITAT-DELHI)
• Duration Of Justice: 3 year(s) 1 month(s) 24 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-03-2018
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Assessment Year: 2011-2012
• Appeal Filed On: 22-01-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: B R MISHRA
• Keywords: Unexplained cash credit; Unexplained investment; Depreciation; Business expenditure; Search and seizure; Bad and doubtful debts; Corroborative evidences; Assessment record; Revised return
• Section: 143(3); 142(1); 68; 69; 139

Judgement Text

1 ITA NO. 458/DEL/2015 IN THE INCOME TAX APPEL LATE TRIBUNAL DELHI BENCH: C NEW DELHI BEFORE SHRI G. D. AGRAWAL, PRESIDE NT AND MS SUCHITRA KAMBLE, JUDI CIAL MEMBER I.T.A .NO. 458/DEL/20 15 (A.Y 2011-12) ACIT CENTRAL CIRCLE-17, NEW DELHI (APPELLANT) VS HARSH INTERNATIONAL (P) LTD. 11/2A PUSA ROAD NEW DELHI AABCH1511K (RESPONDENT) APPELLANT BY SH. B. R. MISHRA, SR. DR RESPONDENT BY SH. PIYUSH KAUSHIK, ADV ORDER PER SUCHITRA KAMBLE, JM THIS APPEAL IS FILED BY THE REVENUE AGAINST THE ORD ER DATED 28/10/2014 PASSED BY CIT (A)-XXXII, NEW DELHI FOR ASSESSMENT YEAR 2011-12. 2. THE GROUNDS OF APPEAL ARE AS UNDER:- 1. THE LD. COMMISSIONER OF INCOME TAX (APPEALS) HAS E RRED IN LAW AND ON THE FACTS IN DELETING RS.5,58,147/- DISALLOWED BY T HE AO AND ADDED TO THE INCOME OF THE ASSESSEE ON ACCOUNT OF EXPENSES CLAIM ED BY P&L A/C. 2. THE LD. COMMISSIONER OF INCOME TAX (APPEALS) HAS E RRED IN LAW AND ON THE FACTS IN DELETING RS.21,43,872/- DISALLOWED BY THE AO AND ADDED TO THE INCOME OF THE ASSESSEE ON ACCOUNT OF OUTSTANDING SU NDRY DEBTORS. 3. THE LD. COMMISSIONER OF INCOME TAX (APPEALS) HAS E RRED IN LAW AND ON THE FACTS IN DELETING RS.91,80,169/- DISALLOWED BY THE AO AND ADDED TO THE DATE OF HEARING 15.03.2018 DATE OF PRONOUNCEMENT 16.03.2018 2 ITA NO. 458/DEL/2015 INCOME OF THE ASSESSEE ON ACCOUNT OF CURRENT LIABIL ITIES AND PROVISIONS. 4. THE LD. COMMISSIONER OF INCOME TAX (APPEALS) HAS E RRED IN LAW AND ON THE FACTS IN DELETING RS. 16,90,663/- DISALLOWED BY THE AO AND ADDED TO THE INCOME OF THE ASSESSEE ON ACCOUNT OF UNEXPLAINED CA SH CREDIT. 5. THE LD. COMMISSIONER OF INCOME TAX (APPEALS) HAS E RRED IN LAW AND ON THE FACTS IN DELETING RS. 12,74,140/- DISALLOWED BY THE AO AND ADDED TO THE INCOME OF THE ASSESSEE ON ACCOUNT OF UNEXPLAINED SH ARE APPLICATION MONEY. 6. THE LD. COMMISSIONER OF INCOME TAX (APPEALS) HAS E RRED IN LAW AND ON THE FACTS IN DELETING RS. 13,00,894/- DISALLOWED BY THE AO AND ADDED TO THE INCOME OF THE ASSESSEE ON ACCOUNT OF UNEXPLAINED CA SH CREDIT IN THE BANK ACCOUNT. 7. (A)THE ORDER OF THE CIT (A) IS ERRONEOUS AND NOT TE NABLE IN LAW AND ON FACTS, (B)THE APPELLANT CRAVES LEAVE TO ADD, ALTER OR AMEN D ANY/ALL OF THE GROUNDS OF APPEAL BEFORE OR DURING THE COURSE OF THE HEARIN G OF THE APPEAL. 3. THE ASSESSEE IS A PRIVATE LIMITED COMPANY AND EN GAGED IN THE BUSINESS OF MANUFACTURING OF PAN MASALA. THE ASSESSEE FILED ITS RETURN OF INCOME U/S 139 OF THE INCOME TAX ACT, 1961 ON 28.09.2011 DECLARING NIL INCOME. THIS RETURN WAS SUBSEQUENTLY REVISED ON 12.09.2012 WHEREIN A LO SS OF RS.70,127/- WAS CLAIMED. THE CASE OF THE ASSESSEE WAS TAKEN UP FOR SCRUTINY AND A NOTICE U/S 143(2) WAS ISSUED AND SERVED UPON THE ASSESSEE. THE REAFTER, A NOTICE U/S 142(1) ALONG WITH THE QUESTIONNAIRE WAS ALSO ISSUED AND SERVED UPON THE ASSESSEE. IN RESPONSE TO THESE STATUTORY NOTICES, T HE AR OF THE ASSESSEE ATTENDED THE ASSESSMENT PROCEEDINGS AND FILED THE D ETAILS AND INFORMATION WHICH WERE EXAMINED AND CONSIDERED BY THE ASSESSING OFFICER. THE ASSESSMENT WAS COMPLETED AT A TOTAL INCOME OF RS.3,45,81,080/- AS AGAINST THE RETURN LOSS OF RS. 70,127/- WHEREIN THE ASSESSING OFFICER MADE THE FOLLOWING ADDITIONS: I) ADDITION ON ACCOUNT OF DISALLOWANCE OF EXPENSES RS. 5,58,147/- II) ADDITION ON ACCOUNT OF SUNDRY DEBTORS NON REPORTED AS INCOME RS. 21,43,872/- III) ADDITION ON ACCOUNT OF DISALLOWANCE OF CURRENT LIABILITIES AND PROVISIONS RS. 91,80,169/- 3 ITA NO. 458/DEL/2015 IV) ADDITION ON ACCOUNT OF UNEXPLAINED CREDITS IN THE BANK ACCOUNT RS. 16,90,663/- V) ADDITION ON ACCOUNT OF UNVERIFIED LOANS AND ADVANCES RS. 35,19,995/- VI) ADDITION U/S 69 ON ACCOUNT OF UNEXPLAINED INVESTMENTS IN THE FIXED ASSETS RS. 11,98,043/- VII) ADDITION U/S 69A ON ACCOUNT OF UNEXPLAINED SHARE APPLICATION MONEY RS.12,74,140/- VIII) ADDITION U/S 68 ON ACCOUNT OF UNEXPLAINED CASH CREDIT IN THE BANK ACCOUNT RS. 13,00,894/- IX) ADDITION ON ACCOUNT OF DISALLOWANCE OF ELECTRICITY EXPENSES RS. 1,00,060/- X) ADDITION ON ACCOUNT OF DISALLOWANCE OF LOSS CLAIMED IN THE REVISED RETURN RS. 7 0,127/- XI) ADDITION ON ACCOUNT OF DISALLOWANCE OF BF LOSSES RS.1,35,44,974/- | 4. AGGRIEVED BY THE IMPUGNED ORDER DATED 03.03.2014 , THE ASSESSEE FILED APPEAL BEFORE THE CIT(A). THE CIT(A) ALLOWED THE AP PEAL OF THE ASSESSEE. 5. THE LD. DR RELIED UPON THE ORDER OF THE ASSESSIN G OFFICER AND SUBMITTED THAT THE CIT(A) ERRED IN DELETING ALL THE ADDITIONS MADE BY THE ASSESSING OFFICER. 6. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE M ATERIAL AVAILABLE ON RECORD. AS RELATES TO GROUND NO. 1 OF THE APPEAL, T HE CIT(A) IN PARA 11 HAS GIVEN ELABORATE FINDING. THE CIT(A) HELD AS UNDER: 11. I HAVE CONSIDERED THE FACTS OF THE CASE AND THE WRITTEN SUBMISSIONS OF THE APPELLANT. I HAVE ALSO PERUSED THE CASE LAWS RELIED UPON BY THE APPELLANT. THE ASSESSING OFFICER MADE THE IMPUGNED ADDITION ON THE GROUND THAT THE APPELLANT DID NOT CARRY OUT ANY BUSINESS A CTIVITY DURING THE ASSESSMENT YEAR UNDER CONSIDERATION AS IT HAD STOP ITS BUSINESS ACTIVITY SINCE JULY, 2007. THE MERE FACT THAT THE APPELLANT STOPPE D ITS MANUFACTURING 4 ITA NO. 458/DEL/2015 ACTIVITY SHOULD NOT LEAD TO AN INFERENCE THAT THE E XPENDITURE INCURRED BY THE APPELLANT DURING THE YEAR UNDER CONSIDERATION SUCH AS AUDIT FEES, BAD DEBTS WRITTEN OFF, INSURANCE, ELECTRICITY, BANK CHARGES A ND MOTOR CAR DEPRECIATION WERE NOT ALLOWABLE AS BUSINESS EXPENDITURE. IF A CO MPANY HAD DISCONTINUED ITS INCOME BUT INCURRED SOME EXPENDITURE FOR RETAIN ING THE STATUS OF THE COMPANY THEN SUCH EXPENDITURE IS ALLOWABLE. IN THE INSTANT CASE, ON PERUSAL OF THE DETAILS OF THE EXPENSES CLAIMED BY THE APPEL LANT, I FIND THAT THESE WERE BARE MINIMUM EXPENSES WHICH WERE ESSENTIAL TO MAINT AIN AND KEEP ALIVE THE ENTITY OF THE COMPANY. THE DISALLOWANCE CANNOT BE M ADE MERELY BECAUSE THERE WAS A LONG PERIOD OF INACTIVITY. THERE ARE SE VERAL EXPENSES WHICH A COMPANY IS COMPELLED TO INCUR EVEN WHILE THERE IS N O MANUFACTURING OR TRADING ACTIVITY. SUCH EXPENSES HAVE TO BE ALLOWED AS DEDUC TION. ON PERUSAL OF THE P & L ACCOUNT I FIND THAT DURING THE YEAR UNDER CONSI DERATION THE APPELLANT HAD INCOME FROM THE SALE OF TRADE MARK AMOUNTING TO RS. 5,00,000/-. I ALSO FIND THAT THERE WAS NO ADVERSE FINDING BY THE ASSESSING OFFICER IN THE ASSESSMENT ORDER WITH REGARD TO THE GENUINENESS OF THESE EXPEN SES. CONSIDERING ALL THESE FACTS, I SEE NO JUSTIFICATION FOR THE IMPUGNED ADDI TION MADE BY THE ASSESSING OFFICER. ACCORDINGLY, THE ADDITION OF RS. 5,58,147/ - MADE BY THE ASSESSING OFFICER IS DELETED. AS RELATES TO GROUND NO. 2 OF THE APPEAL, THE CIT(A ) IN PARA 14 HAS GIVEN ELABORATE FINDING. THE CIT(A) HELD AS UNDER: 14. I HAVE CONSIDERED THE FACTS OF THE CASE AN D THE WRITTEN SUBMISSIONS OF THE APPELLANT. THE ASSESSING OFFICER MADE THE IMPUG NED ADDITION ON THE GROUND THAT THE OUTSTANDING DEBTORS AS SHOWN BY THE APPELLANT IN SCHEDULE 4 OF ITS BALANCE SHEET WERE NON-REPORTED, INCOME WHIC H WAS ALREADY RECEIVED BY THE APPELLANT. I AM AFRAID THAT THE ASSESSING OF FICER WHO HAD COMPLETED THE ASSESSMENTS OF THE APPELLANT U/S 143(3) RIGHT F ROM THE ASSESSMENT YEAR 2005-06 ONWARDS MADE THE ADDITION IN QUESTION ON SU CH AN ABSURD GROUND, WITHOUT CONSIDERING THE AUDITED BALANCE SHEETS OF T HE APPELLANT AND THE OTHER 5 ITA NO. 458/DEL/2015 DETAILS FILED DURING THE COURSE OF ASSESSMENT PROCE EDINGS. NO ADVERSE INFERENCE WAS DRAWN BY THE ASSESSING OFFICER IN RES PECT OF THE SUNDRY CREDITORS IN ANY OF THE ASSESSMENTS COMPLETED U/S 1 43(3) IN THE APPELLANTS CASE. THEREFORE, THE ADDITION OF THE ENTIRE AMOUNT OF SUNDRY DEBTORS SHOWN IN THE BALANCE SHEET ON A MERE UNFOUNDED ASSUMPTION AN D PRESUMPTION IS NOT CALLED FOR. THE ACTION OF THE ASSESSING OFFICER WAS THEREFORE NOT ONLY UNJUSTIFIED BUT ARBITRARY ALSO. ACCORDINGLY, THE AD DITION OF RS. 21,43,872/- MADE BY THE ASSESSING OFFICER IS DELETED. AS RELATES TO GROUND NO. 3 OF THE APPEAL, THE CIT(A ) IN PARA 17 HAS GIVEN ELABORATE FINDING. THE CIT(A) HELD AS UNDER: 17. I HAVE CONSIDERED THE FACTS OF THE CASE AND THE WRI TTEN SUBMISSIONS OF THE APPELLANT. THE ASSESSING OFFICER MADE THE IMPUG NED ADDITION ON THE GROUND THAT THE ABILITIES REMAINED UNVERIFIED IN TH E ABSENCE OF ANY SUPPORTING EVIDENCE BY THE APPELLANT. HOWEVER, ON PERUSAL OF T HE AUDITED BALANCE SHEET OF THE APPELLANT COMPANY I FIND THAT THE APPELLANT GAVE COMPARATIVE FIGURES OF CURRENT LIABILITIES AND PROVISIONS IN ITS BALANCE S HEET AS ON 31.03.2010 AND 31.03.2011 WHICH SHOWED THAT THE LIABILITIES AND PR OVISIONS TO THE EXTENT OF RS. 91,55,169/- PERTAINED TO THE OPENING BALANCE AN D THE ADDITION WHICH WAS SHOWN DURING THE YEAR UNDER CONSIDERATION WAS ON AC COUNT OF AUDIT FEE PAYABLE AMOUNTING TO RS.25,000/-. THUS, THERE WAS N O OTHER LIABILITY OR THE PROVISION WHICH PERTAINED TO THE ASSESSMENT YEAR UN DER CONSIDERATION. THE ASSESSMENTS OF THE APPELLANT FOR THE LAST SIX YEARS I.E. RIGHT FROM THE ASSESSMENT YEAR 2005-06 WERE COMPLETED BY THE SAME ASSESSING OFFICER U/S 143(3) AND NEVER ANY ADVERSE INFERENCE WAS DRAWN BY THE ASSESSING OFFICER IN RESPECT OF THE OLD LIABILITIES AND PROVISIONS IN ANY OF THE ASSESSMENTS MADE BY HIM. THEREFORE, CONSIDERING THESE FACTS OF THE C ASE AND THE MATERIAL AVAILABLE ON RECORD I SEE NO JUSTIFICATION FOR THE IMPUGNED ADDITION MADE BY THE ASSESSING OFFICER. ACCORDINGLY, THE ADDITION OF RS. 91,80,169/- MADE BY THE ASSESSING OFFICER IS DELETED. 6 ITA NO. 458/DEL/2015 AS RELATES TO GROUND NO. 4 OF THE APPEAL, THE CIT(A ) IN PARA 20 HAS GIVEN ELABORATE FINDING. THE CIT(A) HELD AS UNDER: 20. I HAVE CONSIDERED THE FACTS OF THE CASE AND THE WRI TTEN SUBMISSIONS OF THE APPELLANT. THE ASSESSING OFFICER MADE THE IMPUG NED ADDITION ON THE GROUND THAT THE APPELLANT NEITHER FILED ANY EXPLANA TION WITH REGARD TO THE CASH BALANCE NOR FURNISHED ANY EVIDENCE WITH RESPEC T TO THE SOURCE OF CREDIT ENTRIES IN THE BANK STATEMENT. THE DETAILS OF CASH IN HAND AND BANK BALANCE AS PER SCHEDULE-5 OF THE BALANCE SHEET ARE AS UNDER : SCHEDULE-5 CASH AND BANK BALANCES AS AT 31.03.2011 (RS. )AS AT 31.03.2010 (RS.) CASH IN HAND 10,00,198 5,00,198 BANK BALANCE 6.90.465 2.71.373 TOTAL 16.90.663 7.71.571 THUS, AS FAR AS THE CASH IN HAND IS CONCERNED THERE WAS AN INCREASE OF RS. 5,00,000/- DURING THE YEAR UNDER CONSIDERATION. ON PERUSAL OF THE ASSESSMENT RECORD, I FIND THAT VIDE LETTER DATED 20 .11.2013, THE APPELLANT FILED THE COPY OF THE BANK ACCOUNT GIVING A COMPLET E NARRATION OF THE BANK ENTRIES AND ALSO EXPLAINING THE SOURCE OF INCREASE IN CASH IN HAND, WHICH WAS STATED TO BE OUT OF THE AMOUNT WITHDRAWN ON 28.06.2 010 FROM THE BANK ACCOUNT ITSELF. THE ASSESSING OFFICER MADE THE IMPU GNED ADDITION WITHOUT CONSIDERING THE SUBMISSIONS OF THE APPELLANT DATED 20.11.2013. THEREFORE, CONSIDERING THESE FACTS I SEE NO JUSTIFICATION FOR THE IMPUGNED ADDITION MADE U/S 68 OF THE I T ACT, 1961. ACCORDINGLY, THE ADDIT ION OF RS. 16,90,663/- IS DELETED. 7 ITA NO. 458/DEL/2015 AS RELATES TO GROUND NO. 5 OF THE APPEAL, THE CIT(A ) IN PARA 23 HAS GIVEN ELABORATE FINDING. THE CIT(A) HELD AS UNDER: 23. I HAVE CONSIDERED THE FACTS OF THE CASE AND THE WRITT EN SUBMISSIONS OF THE APPELLANT. ON PERUSAL OF THE BALANCE SHEET I FI ND THAT THERE WAS NO FRESH SHARE APPLICATION MONEY RECEIVED BY THE APPELLANT D URING THE YEAR UNDER CONSIDERATION BUT IT WAS ONLY THE AMOUNT OF SHARE A PPLICATION MONEY WHICH WAS PENDING ALLOTMENT AND WAS THE OPENING BALANCE A S ON 1.4.2010 WAS REFLECTED IN THE BALANCE SHEET OF THE APPELLANT. TH IS AMOUNT OF SHARE APPLICATION MONEY WAS CONSIDERED IN THE RELEVANT AS SESSMENT OF THE APPELLANT U/S 143(3) AND NO ADVERSE INFERENCE WAS D RAWN IN RESPECT OF THIS SHARE APPLICATION MONEY. EVEN THE INVOKING OF THE P ROVISION OF SECTION 69A TO MAKE THE ADDITION ON ACCOUNT OF SHARE APPLICATION M ONEY PENDING ALLOTMENT WAS ITSELF NOT JUSTIFIED. THEREFORE, CONSIDERING AL L THESE FACTS, I SEE NO JUSTIFICATION FOR THE IMPUGNED ADDITION MADE BY THE ASSESSING OFFICER. ACCORDINGLY, THE ADDITION OF RS. 12,74,140/- IS DELETED. AS RELATES TO GROUND NO. 6 OF THE APPEAL, THE CIT(A ) IN PARA 26 HAS GIVEN ELABORATE FINDING. THE CIT(A) HELD AS UNDER: 26. I HAVE CONSIDERED THE FACTS OF THE CASE AND T HE WRITTEN SUBMISSIONS OF THE APPELLANT. I HAVE ALSO CALLED FOR AND PERUSED T HE ASSESSMENT RECORD OF THE APPELLANT. ON PERUSAL OF THE SAME, I FIND THAT VIDE LETTER DATED 17.06.2013, THE APPELLANT FILED COPY OF ITS BANK BOOK CONTAININ G THE DETAILS OF CREDIT AND DEBIT ENTRIES WITH NARRATIONS THEREOF. I ALSO FIND THAT WHILE MAKING THE IMPUGNED ADDITION THE ASSESSING OFFICER EVEN ADDED THE OPENING BALANCE OF RS. 2,62,469/-. SINCE THE COPY OF THE BANK BOOK FIL ED BY THE APPELLANT CONTAINED THE NARRATIONS WHICH WERE SELF EXPLANATOR Y AS TO THE CREDIT AND DEBIT ENTRIES, THERE WAS NO JUSTIFICATION FOR THE A SSESSING OFFICER TO MAKE THE IMPUGNED ADDITION U/S 68 OF THE I.T ACT, 1961. ACC ORDINGLY, THE ADDITION OF RS.13,00,894/- MADE BY THE ASSESSING OFFICER IS DE LETED. 8 ITA NO. 458/DEL/2015 SINCE THE CIT(A) HAS ALREADY GIVEN A DETAILED FINDI NG FOR EACH AND EVERY GROUND AGITATED BY THE DEPARTMENT AFTER VERIFYING A LL THE DOCUMENTS GIVEN BY THE ASSESSEE AT THE TIME OF ASSESSMENT PROCEEDINGS AND ALSO AT THE TIME OF APPELLATE PROCEEDINGS. IN FACT, THE ASSESSING OFFIC ER WITHOUT GIVING PROPER FINDING AND THE OBSERVATIONS HAS SIMPLY MADE THE AD DITIONS WHICH WAS RIGHTLY DELETED BY THE CIT(A). THERE IS NO NEED TO INTERFER E WITH THE ORDER OF THE CIT(A), WE UPHOLD THE ORDER OF THE CIT(A). 6. IN RESULT, THE APPEAL OF THE REVENUE IS DISMISSE D. ORDER PRONOUNCED IN THE OPEN COURT ON 16TH MARCH, 2018 . SD/- SD/- (G. D. AGRAWAL) (SUCHITRA KAMBLE) PRESIDENT J UDICIAL MEMBER DATED: 16/03/2018 R. NAHEED * COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(APPEALS) 5. DR: ITAT ASSISTANT REGISTRAR ITAT NEW DELHI 9 ITA NO. 458/DEL/2015 DATE 1. DRAFT DICTATED ON 15/03/2018 PS 2. DRAFT PLACED BEFORE AUTHOR 15/03/2018 PS 3. DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER .2018 JM/AM 4. DRAFT DISCUSSED/APPROVED BY SECOND MEMBER. JM/AM 5. APPROVED DRAFT COMES TO THE SR.PS/PS 16.03.2018 PS/PS 6. KEPT FOR PRONOUNCEMENT ON PS 7. FILE SENT TO THE BENCH CLERK 16.03.2018 PS 8. DATE ON WHICH FILE GOES TO THE AR 9. DATE ON WHICH FILE GOES TO THE HEAD CLERK. 10. DATE OF DISPATCH OF ORDER.