ITO, New Delhi V. M/s. Rathi Ferrous Trading Pvt. Ltd., New Delhi

ITA 4866/DEL/2014

• Counselvise Citation: [2018] 126 COUNSELVISE.COM (IT) 3695 (ITAT-DELHI)
• Duration Of Justice: 3 year(s) 5 month(s) 2 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-02-2018
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: F
• Assessment Year: 2010-2011
• Appeal Filed On: 05-09-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ASHISH GOEL
• Section: 142(1); 68

Judgement Text

1 ITA NO. 4866/DEL/2014 IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH: F NEW DELHI BEFORE SHRI R. K. PANDA, ACCOUNTAN T MEMBER AND MS SUCHITRA KAMBLE, JUDICIAL MEMBER I.T.A .N O. 4866/DEL/2014 (ASSESSMENT Y EAR-2010-11) ITO WARD-15(3) NEW DELHI (APPELLANT) VS RATHI FERROUS TRADING PVT. LTD. 29, SADHANA ENCLAVE NEW DELHI AAACD0027D (RESPONDENT) APPELLANT BY SH. VED JAIN, ADV & SH. ASHISH GOEL, ADV RESPONDENT BY SH. ATIQ AHMAD, SR. DR ORDER PER SUCHITRA KAMBLE, JM THIS APPEAL HAS BEEN FILED BY THE REVENUE AGAINST T HE ORDER DATED 16/06/2014 PASSED BY CIT(A)- XVIII FOR ASSESSMENT YEAR 2010-11. 2. THE GROUNDS OF APPEAL ARE AS UNDER:- 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE , THE LD.CIT(A) HAS ERRED IN DELETING THE ADDITION OF RS.1,74,56,411/- MADE BY THE A.O U/S 68 OF THE ACT IGNORING THE FACT THAT THERE WAS HUGE DI FFERENCE IN THE ACTUAL CREDIT BALANCE IN THE PARTYS ACCOUNT WHILE REWORKE D DURING THE ASSESSMENT PROCEEDINGS. 3. THE ASSESSEE COMPANY WAS INCORPORATED ON 19/02/1 986. DURING THE DATE OF HEARING 28.12.2017 DATE OF PRONOUNCEMENT 08.02.2018 2 ITA NO. 4866/DEL/2014 FINANCIAL YEAR 2009-10 (ASSESSMENT YEAR 2010-11), T HE ASSESSEE COMPANY WAS ENGAGED IN TRADING OF IRON AND STEEL AND AS COM MISSION AGENT. RETURN OF INCOME DECLARING AN INCOME OF RS.13, 81,843/- WAS F ILED BY THE ASSESSEE COMPANY ON 23/09/2010. THE CASE WAS SELECTED FOR S CRUTINY AND NOTICE U/S 143(2) AND 142(1) ALONG WITH QUESTIONNAIRE WERE ISS UED BY THE ASSESSING OFFICER. IN RESPONSE, THE ASSESSEES REPRESENTATIV E ATTENDED THE ASSESSMENT PROCEEDINGS AND FILED THE REQUISITE DETAILS AND DOC UMENTS AS CALLED BY THE ASSESSING OFFICER. THE ASSESSING OFFICER OBSERVED THAT AS AGAINST THE CREDIT BALANCE OF RS.27,82,134/- IN RESPECT OF M/S RATHI S TEELS LTD. APPEARING IN THE ASSESSEES BALANCE SHEET AS ON 31/3/2010, THE A CTUAL CREDIT BALANCE WAS REWORKED AT RS.2,02,38,545/-. THEREFORE, THE DIFFE RENCE OF RS. 1,74,56,411/- WAS REPAID TO THE SUNDRY CREDITORS OUT OF INCOME FR OM UNEXPLAINED SOURCES AND ACCORDINGLY ADDED RS.1,74,56,411/- U/S 68 OF TH E INCOME TAX ACT, 1961. THE ASSESSING OFFICER FURTHER MADE ADDITION OF RS.5 0,46,878/- U/S 68 OF THE INCOME TAX ACT. 4. BEING AGGRIEVED BY THE ASSESSMENT ORDER, THE ASS ESSEE FILED APPEAL BEFORE THE CIT (A). THE CIT (A) PARTLY ALLOWED THE APPEAL OF THE ASSESSEE. THE REVENUE IS IN APPEAL BEFORE US. 5. THE LD. DR SUBMITTED THAT THE ASSESSING OFFICER RIGHTLY ADDED THE AMOUNT OF RS.1,74,56,411/- U/S 68 OF THE ACT AND FU RTHER SUBMITTED THAT THE CIT(A) IGNORED THE FACT THAT THERE WAS HUGE DIFFERE NCE IN THE ACTUAL CREDIT BALANCE IN THE PARTIES ACCOUNT WHILE REWORKING DURI NG THE ASSESSMENT PROCEEDINGS. 6. THE LD. AR RELIED UPON THE ORDER OF THE CIT(A). 7. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE M ATERIAL AVAILABLE ON 3 ITA NO. 4866/DEL/2014 RECORD. THE CIT(A) HELD AS UNDER:- {5} I HAVE GONE THROUGH THE FINDINGS OF THE ASSESS ING OFFICER IN THE ASSESSMENT ORDER AND IN THE REMAND REPORT AND WRITT EN SUBMISSION FILED BY LEARNED AUTHORIZED REPRESENTATIVE OF THE APPELLA NT FROM TIME TO TIME AFTER CONSIDERING THE SAME GROUND-WISE ISSUES ARE D ECIDED HERE UNDER. {6} GROUND NO.1 IS OF GENERAL NATURE. {7} GROUND NO. 2 & 3 ARE INTERLINKED AND TAKEN AGAI NST ADDITION OF RS. 1,74,56,411/- U/S.68. IN THIS REGARD, AO HAS DISCUS SED IN THE BODY OF ORDER AS UNDER:- VIDE NOTE SHEET ENTRIES DATED 20-11-2012 AND 11-02- 2013 AND SHOW CAUSE NOTICE DATED 18-02-2013 THE ASSESSEE COMPANY WAS ASKED TO PROVIDE PARTY-WISE CONFIRMATIONS OF LIABILITY OF CU STOMER ADVANCES TRANSFERRED FROM M/S RATHI STEELS LTD. HOWEVER CONF IRMATIONS HAVE BEEN SUBMITTED IN RESPECT OF M/S AJAY ENTERPRISES PVT. L TD. (BALANCE IS INCORRECT), M/S HEERA STEEL SYNDICATE AND M/S STEEL BHANDAR ONLY. ON PERUSAL OF THE CONFIRMED LEDGER A/C SUBMITTED BY TH E AR, IT IS OBSERVED THAT APART FROM M/S HEERA STEEL SYNDICATE AND M/S S TEEL BHANDAR, ALL THE OTHERS ARE RUNNING ACCOUNTS OF THE ASSESSEE COM PANY AND IN NO WAY CAN BE HELD TO BE LIABILITY OF CUSTOMER ADVANCES TR ANSFERRED FROM M/S. RATHI STEELS LTD. DURING THE COURSE OF THE ASSESSMENT PROCEEDINGS THE AR OF THE ASSESSE COMPANY WAS ASKED TO SHOW CAUSE WHY THE DIFFERENCE OF RS.84,21,948/- (RS.1,22,55,979 LESS RS.38,34,031/-) SHOULD NOT BE ADDED BACK TO THEIR NET PROFIT. HOWEVER THE AR OFFERED NO COMMENTS. THE CREDIT BALANCE OF M/S RATHI STEELS LTD. BEING RE-WORKED OUT AS UNDER:- FRESH LOAN RECEIVED FROM RATHI STEELS LTD. RS. 6,40,58,310 LESS: 4 ITA NO. 4866/DEL/2014 RATHI STEELS LTD. DEBIT BALANCE (SHAHDARA) RS. 57,7 5,000 LIABILITY OF CREDITS TRANSFERRED RS. 3,42,10,734 LIABILITY OF CUSTOMER ADVANCES TRANSFERRED RS. 38,3 4,031 CREDIT BALANCE RS.2,02,38,545 AS AGAINST THE CREDIT BALANCE OF RS.27,82,134/- IN RESPECT OF M/S RATHI STEELS LTD. APPEARING IN THE ASSESSE COMPANYS BALA NCE SHEET AS ON 31.03.2010, THE ACTUAL CREDIT BALANCE HAS BEEN RE-W ORKED AT RS.2,02,38,545. THEREFORE, THE DIFFERENCE OF RS. 1,74,56,411 (RS.2, 02,38,545 LESS RS. 27,82,134) HAS BEEN REPAID TO THE SUNDRY CREDITORS OUT OF INCOME FROM UNEXPLAINED SOURCES. ACCORDINGLY RS.1,74,56,411 IS BEING ADDED BACK UNDER SEC.68 OF THE I. T.ACT, 1961. DURING THE COURSE OF THE APPELLATE PROCEEDINGS VARI OUS DETAILS WERE FILED WHICH WERE FORWARDED TO AO FOR SUBMITTING REM AND REPORT IN COMPLIANCE TO WHICH HE HAS SUBMITTED REMAND REPORT VIDE LETTER DATED 21.10.2013 WHEREIN AO HAS STICK TO HIS ORIGINAL STA ND TAKEN IN THE ASSESSMENT ORDER. THE COPY OF THE REMAND REPORT WAS GIVEN TO LEARNED AR OF THE APPELLANT IN COMPLIANCE TO WHICH HE HAS FILE D REJOINDER VIDE LETTER DATED 11.11.2013 WHICH IS AS UNDER:- THE ASSESSING OFFICER ENHANCED THE CREDIT BALANCE P AYABLE TO RATHI STEEL LIMITED AT RS.27,82,134/- TO RS.2,02,38,545/- WHILE FRAMING ASSESSMENT. THE ASSESSING OFFICER ADMITTED THAT AS PER THE DETAILS FILED BY THE ASSESSE WITH LETTER DATED 5.11.2012, THE CRE DIT BALANCE PAYABLE TO RATHI STEEL LTD SHOWN AT RS.27,82,134/- AFTER REDUC ING THE TRANSFERRED LIABILITIES. THIS CREDIT BALANCE PAYABLE TO RATHI S TEEL LTD BY THE APPELLANT ALSO CONFIRMED BY THE SAID COMPANY IN THE CONFIRMED STATEMENT OF A/CS FILED BY THE APPELLANT. THE SAID CREDIT BALANCE PAY ABLE BY THE APPELLANT IS 5 ITA NO. 4866/DEL/2014 NOW ALSO SUPPORTED BY CHARTERED ACCOUNTANTS CERTIFI CATES FILED IN THE COURSE OF HEARING OF APPEAL BEFORE YOUR HONOUR. IN VIEW OF THE SAID CONFIRMATION OF ACCOUNT DULY SUPPORTED BY C.AS CER TIFICATES, THERE IS NO JUSTIFICATION FOR ENHANCING THE AMOUNT PAYABLE TO R ATHI STEEL LTD FROM RS.27,82,134/- TO RS.2,02,38,545/- AND THEREBY MAKI NG AN ADDITION OF RS.1,74,56,411/- TO THE RETURNED INCOME. THUS THE A DDITION OF RS.1,74,56,411/- MADE BY THE AO DESERVES TO BE DELE TED IN VIEW OF THE CONFIRMATION BY THE BOTH THE PARTIES AS ALSO C.A. C ERTIFICATES PLACED ON RECORD. HOWEVER, WITHOUT PREJUDICE TO ABOVE SUBMISSION, IT IS RESPECTFULLY SUBMITTED AS UNDER:- A) ADDITION OF RS. 90,34,463/- OUT OF TRANSFERRED C REDIT LIABILITIES THE ASSESSING OFFICER REPRODUCED THE FIGURE FROM TH E ASSESSMENT ORDER PASSED BY HIS PREDECESSOR ASSESSING OFFICER. IT IS MENTIONED IN THE REMAND REPORT AS UNDER: FOLLOWING ARE B.F. BALANCES NITESH TRADING COMPANY RS. 86,12,962/-(B.F. BALANCE ) JITENDRA INDUSTRIES RS. 2,50,985/-(B.F. BALANCE) THE OBSERVATION OF THE THEN ASSESSING OFFICER IS AL SO MENTIONED IN THE REMAND REPORT. AS THE AFORESAID AMOUNTS ARE B.F. BA LANCE OF PREVIOUS YEAR, IT CANNOT BE MADE BASIS OF ENHANCEMENT OF CRE DIT BALANCE PAYABLE TO RATHI STEEL LTD. EVEN ON THE BASIS OF FINDING RECOR DED IN ASSESSMENT ORDER THAT THESE ARE B.F. BALANCE OF PREVIOUS YEAR AND AL SO SUPPORTED BY DOCUMENTARY EVIDENCE VIZ., CONFIRMATION OF A/C FILE D BY THE ASSESSEE, THERE IS NO MERIT ON THE BASIS OF ADDITION MADE BY THE ASSESSING OFFICER. AS REGARDS THE DIFFERENCE OF RS. 1,71,016/- (4,32,4 5,197 - 4,30,74,181) THE SAME HAS BEEN EXPLAINED TO THE ASSESSING OFFICE R AND IS ALSO 6 ITA NO. 4866/DEL/2014 REPRODUCED IN THE REMAND REPORT. THUS THE CORRECT A MOUNT COMES TO RS.4,30,74,181/- AS AGAINST RS.4,32,45,197/- TAKEN BY THE THEN ASSESSING OFFICER IN THE ASSESSMENT ORDER. B. ADDITION OF RS. 84,21,948/- OUT OF TRANSFERRED C USTOMER ADVANCES LIABILITY THE ASSESSING OFFICER HAS REPRODUCED THE DETAILS OF CUSTOMER ADVANCE LIABILITY TRANSFERRED BY RATHI STEEL LIMITED TO APP ELLANT A/C. THE ASSESSING OFFICER HAS ALSO ADMITTED ON GOING THROUGH THE RECO RD THAT THE SAID LIABILITIES WERE TRANSFERRED ON 31.3.2010 AS EVIDEN T FROM THE CONFIRMED COPY OF A/C FILED BY THE APPELLANT AND PLACED ON AS SESSMENT RECORDS DURING ASSESSMENT PROCEEDINGS. THE SAID LIABILITY I S RECOVERED BY THE APPELLANT FROM THE CREDIT BALANCE OF RATHI STEEL LT D AND ASSESSEE HAS NOT CLAIMED ANY DEDUCTION IN ITS ACCOUNTS. AS REGARDS T HE INCORRECT AMOUNT SHOWN IN THE ACCOUNT OF M/S AJAY ENTERPRISES PVT. L TD, THE APPELLANT HAS EXPLAINED THE SAID MISTAKE IN THE ACCOUNT AND ADMIT TED THE ERROR. THE APPELLANT HAS NOW CORRECTED THE ACCOUNTS AND CORREC T LIABILITIES OF THE SAID PARTY RS.4562/- AS PER THE BOOKS OF A/CS OF THE APP ELLANT. IT IS RESPECTFULLY SUBMITTED THAT THE APPELLANT HAS NOT CLAIMED ANY DEDUCTION IN RESPECT OF TRANSFERRED LIABILITY OF RS . 17456411/- (9034463 + 8421948) NEITHER IN ITS PROFIT & LOSS A/C NOR IN TH E RETURN OF INCOME FILED BY THE APPELLANT AS THE SAID LIABILITY DEDUCTED FRO M THE CREDIT BALANCE PAYABLE TO RATHI STEEL LTD. THIS FACTUAL ASPECT HAS ALSO BEEN ADMITTED BY THE PRESENT ASSESSING OFFICER AS EVIDENT FROM HIS R EMAND REPORT SUBMITTED TO YOUR HONOUR. IN VIEW OF THE ABOVE FACTUAL SUBMISSION AS ALSO CRE DIT BALANCE OF RS.2782135/- PAYABLE BY THE APPELLANT WHICH HAS BEE N CONFIRMED BY 7 ITA NO. 4866/DEL/2014 BOTH THE PARTIES AND ALSO CONFIRMED BY OA. CERTIFIC ATE. THERE IS NO JUSTIFICATION FOR ENHANCING THE CREDIT BALANCE PAYA BLE TO RATHI STEEL LTD TO RS.20238545/-. THUS THE ADDITION OF RS. 17456411/- DESERVE TO BE DELETED IN THE INTEREST OF JUSTICE. WE WOULD LIKE TO JUST MENTIONED THAT AS FOR YOUR AP PELLANT IS CONCERNED, THE CONFIRMATION FROM RATHI STEEL LTD REGARDING TRA NSFER OF THESE LIABILITIES IS SUFFICIENT EVIDENCE AS THESE LIABILITIES ARE NOT OF APPELLANT LIABILITIES DISCHARGED BY THE APPELLANT FROM ITS FUND NOR CLAIM ED AS DEDUCTION IN THE RETURN OF INCOME HAVING BEEN PROVED BY THE THEN ASS ESSING OFFICER, THUS THERE IS NO JUSTIFICATION FOR MAKING ADDITION IN TH E CASE OF THE APPELLANT. IN THIS CONNECTION, IT IS NOTEWORTHY TO MENTION THA T THE APPELLANT HAS NOT CLAIMED ANY DEDUCTION IN RESPECT OF TRANSFERRED LIA BILITY OF RS. 1,74,56,411/- (9034463 + 8421948) NEITHER IN PROFIT & LOSS A/C NOR IN THE RETURN OF INCOME AS THE SAID LIABILITY DEDUCTED FRO M THE CREDIT BALANCE PAYABLE TO RATHI STEEL LTD. THIS FACT HAS ALSO BEEN CONFIRMED BY THE AO IN THE REMAND REPORT DATED 21.10.2013 WHEREIN AT PAGE- 4 OF THE REPORT AO HAS CERTIFIED THAT ON PERUSAL OF THE RECORD HE HAS FOUND THAT THESE LIABILITIES WERE NOT CLAIMED AS DEDUCTION BY THE AS SESSE FURTHERMORE, THE APPELLANT HAS DEMONSTRATED THAT CREDIT BALANCE OF R S,27,82,135/- PAYABLE BY THE APPELLANT HAS BEEN CONFIRMED BY BOTH THE PAR TIES. AFTER CONSIDERING THE SUBMISSION, I FOUND THAT THERE IS NO CASE OF AS SESSING OFFICER TO MAKE ADDITION OF RS. 1,74,56,411/- U/S 68 OF THE INCOME TAX ACT AS APPELLANT HAS BEEN ABLE TO EXPLAIN THE BALANCES. IN VIEW OF THE ABOVE DISCUSSION, GROUND NOS.2 & 3 O F THE APPEALS DESERVES TO BE ALLOWED. FROM THE ABOVE EXTRACT OF THE ORDER OF THE CIT(A), IT CAN BE SEEN THAT THE CIT(A) HAS CATEGORICALLY GIVEN FINDING THAT THE ASS ESSEE HAS NOT CLAIMED ANY 8 ITA NO. 4866/DEL/2014 DEDUCTION IN RESPECT OF TRANSFERRED LIABILITY NEITH ER IN PROFIT OR LOSS ACCOUNT NOR IN THE RETURN OF INCOME AS THE SAID LIABILITY DEDUC TED FROM CREDIT BALANCE PAYABLE TO RATHI STEEL LTD. THE SAID FACT WAS CONFI RMED BY THE ASSESSING OFFICER IN HIS REMAND REPORT DATED 21/10/2013. THE ASSESSE E DEMONSTRATED THAT CREDIT BALANCE OF RS.27,82,135/- PAYABLE BY THE ASS ESSEE WAS CONFIRMED BY BOTH THE PARTIES. THUS, THE CIT(A) HAS RIGHTLY GIV EN THE FINDING THAT THERE IS NO CASE OF ASSESSING OFFICER TO MAKE ADDITION OF RS.1 ,74,56,411/- U/S 68 OF THE INCOME TAX ACT AS THE ASSESSEE EXPLAINED THE BALANC ES. THERE IS NO NEED TO INTERFERE WITH THE ORDER OF THE CIT(A). 8. IN THE RESULT, THE APPEAL OF THE REVENUE IS DISM ISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 08TH FEBRUA RY, 2018 . SD/- SD/- (R.K. PANDA) (SUCHITRA KAMBLE) ACCOUNTANT MEMBER JUDICIAL MEMB ER DATED: 08/02/2018 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. 4866/DEL/2014 DATE 1. DRAFT DICTATED ON 29/12/2017 PS 2. DRAFT PLACED BEFORE AUTHOR 29/12/2017 PS 3. DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER .201 8 JM/AM 4. DRAFT DISCUSSED/APPROVED BY SECOND MEMBER. JM/AM 5. APPROVED DRAFT COMES TO THE SR.PS/PS 8.02.2018 PS/PS 6. KEPT FOR PRONOUNCEMENT ON PS 7. FILE SENT TO THE BENCH CLERK 8 .0 2.201 8 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. 10 ITA NO. 4866/DEL/2014