ACIT, Meerut V. Krishna Prakashan Media (P) Ltd., Meerut

ITA 4939/DEL/2011

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 61745 (ITAT-DELHI)
• Duration Of Justice: 7 month(s) 21 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-06-2012
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: D
• Next Hearing Date: 24-05-2012
• Assessment Year: 2007-2008
• Appeal Filed On: 08-11-2011
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: PRADEEP KUMAR MEEL
• Assessee Lawyers: O P SAPRA

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL IN THE INCOME TAX APPELLATE TRIBUNAL IN THE INCOME TAX APPELLATE TRIBUNAL IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH : D NEW DELHI DELHI BENCH : D NEW DELHI DELHI BENCH : D NEW DELHI DELHI BENCH : D NEW DELHI BEFORE SHRI I.P. BANSAL, JUDICIAL MEMBER AND SHRI K.G. BANSAL, ACCOUNTANT MEMBER I.T.A NO. 4939/DEL/11 ASSTT. YEAR 2007-08 ACIT CIRCLE-1 MEERUT. VS. KRISHNA PRAKASHAN MEDIA (P) LTD. 11, SHIVAJI ROAD, MEERUT AAACK9668B (APPELLANT) (RESPONDENT) APPELLANT BY: SHRI PRADEEP KUMAR MEEL, SR. DR RESPONDENT BY: SHRI SANDEEP SAPRA & O.P. SAPRA, A DVOCATE DATE OF HEARING : 24-05-2012 DATE OF PRONOUNCEMENT : 29-06-2012 ORDER PER K.G. BANSAL, AM: THE REVENUE HAS TAKEN UP TWO GROUNDS IN THIS APPEAL . GROUND NO. 1 IS THAT LD. CIT(A) ERRED IN DELETING THE ADDITION O F ` 20,38,182/- IN RESPECT OF SUNDRY CREDITORS IGNORING THE FACT THAT THEY REM AIN UNPROVED EVEN DURING THE REMAND REPORT, THUS, THE BURDEN CAST ON THE ASSESSEE REMAINED TOTALLY UNDISCHARGED . GROUND NO. 2 IS THA T THE LD. CIT(A) ERRED IN DELETING THE ADDITION OF ` 75,000/- MADE BY THE AO IN RESPECT OF UNVOUCHED EXPENSES DEBITED UNDER VARIOUS HEADS, AL THOUGH THE EXPENSES REMAIN UNPROVED AND UNVERIFIABLE. ITA NO. 4939/DEL/11 ASSTT. YEAR 2007-08 2 2. THE FACTS STATED IN THE ASSESSMENT ORDER IN RESP ECT OF UNPROVED SUNDRY CREDITORS ARE THAT THE BALANCE SHEET SHOWED TOTAL OF SUCH CREDITORS FOR EXPENSES AT ` 1,66,30,225/-. THE ASSESSEE WAS R EQUIRED TO FURNISH CONFIRMED COPIES OF ACCOUNT WHERE EVER OUTSTANDING BALANCE EXCEEDED TO ` 1 LAC. THE ASSESSEE WAS NOT ABLE TO FURNISH SUCH CONFIRMED ACCOUNTS IN RESPECT OF 10 PARTIES INVOLVING AGGREGATE AMOUNT OF ` 29.87,399/- THIS AMOUNT WAS DEDUCTED FROM THE LOSS COMPUTED BY THE A SSESSEE. 2.1 IT WAS SUBMITTED BEFORE THE LD, CIT(A) THAT CON FIRMATION FROM 10 CREDITORS WERE NOT RECEIVED TILL COMPLETION OF ASSE SSMENT ORDER. DETAILED EXPLANATION WAS FURNISHED IN RESPECT OF EACH PARTY. THE LIABILITIES WERE IN RESPECT OF ONE BOOK BINDER AND 9 AUTHORS. IT WAS FU RTHER SUBMITTED THAT THE LIABILITIES IN RESPECT OF ROYALTY WAS INCURRED IN THIS YEAR AT `. 7,80,125/- OUT OF WHICH PAYMENT OF ` 6,78,795/- WAS MADE. A PA PER BOOK WAS ALSO FILED TO SUPPORT THESE SUBMISSIONS. THE SUBMISSIONS AND THE PAPER BOOK WERE FORWARDED TO THE AO FOR HER COMMENTS. IN ORDER TO VERIFY THE SUBMISSIONS OF THE ASSESSEE, SHE ISSUED LETTERS AN D SUMMONS TO VARIOUS PARTIES. SUCH NOTICES WERE SERVED ON ALL CREDITORS EXCEPT SHRI PRAMOD KUMAR AGGARWAL AND SHRI SHANTI SWAROOP. IN THE REMA ND REPORT DATED 21.7.2011, SHE ACCEPTED THE LIABILITIES IN RESPECT OF FIVE CREDITORS TO BE GENUINE. THESE ARE SMT. MANJULA SHARMA, SHRI SANJAY GUPTA, SHRI R.S. SHARMA, HUF, SHRI R.K. SHARMA, HUF AND SHRI C.K. SH ARMA HUF. THESE LIABILITIES AGGREGATED TO ` 9,49,217/-. HOWEVER, SH E WAS NOT FULLY CONVINCED ABOUT THE LIABILITY IN RESPECT OF M/S. D. K. BOOK BINDING WORKS, SHRI B.K. SHARMA AND SHRI ANKUR SHARMA. IT WAS STA TED THAT THE ISSUE MAY ITA NO. 4939/DEL/11 ASSTT. YEAR 2007-08 3 BE DECIDED ON MERIT IN RESPECT OF THESE PERSONS. IN RESPECT OF REMAINING FOUR PARTIES, IT WAS SUBMITTED THAT THE EXPLANATION DESERVES TO BE REJECTED. THE LD. CIT(A) OBTAINED THE COMMENTS OF T HE ASSESSEE ON THE REMAND REPORT. HE DELETED THE ADDITIONS IN RESPECT OF FIVE PERSONS, THE CREDITS IN RESPECT OF WHICH WERE ACCEPTED IN THE RE MAND REPORT. THE LIABILITY IN RESPECT OF M./S D.K. BOOK BINDING OF ` . 1,34,836/- WAS BROUGHT FORWARD FROM THE EARLIER YEAR TO WHICH THERE WAS NO ADDITION IN THIS YEAR. SINCE THERE WAS NO CESSATION OF LIABILITY, THIS ADD ITION WAS ALSO DELETED. THE LIABILITY IN RESPECT OF LATE SHRI B.K. SHARMA A ND HIS SON SHRI ANKUR SHARMA TOTALLING TO ` 5,58,041 WAS ACCEPTED BY SMT. MANJULA SHARMA, THE WIFE OF SHRI B.K. SHARMA, IN THE STATEMENT RECORDE D DURING REMAND PROCEEDINGS. HER SON SHRI ANKUR SHARMA WAS RESIDING IN THE USA AND THEREFORE HE COULD NOT ATTEND TO THE PROCEEDINGS . HIS LIABILITY WAS ALSO ACCEPTED BY SMT. MANJULA SHARMA. THESE LIABILITIES ACCRUED BY WAY OF ROYALTY IN RESPECT OF BOOKS WRITTEN BY THEM AND PU BLISHED AND MARKETED BY THE ASSESSEE. IT WAS HELD THAT LIABILITY IS A TR ADING LIABILITY, NOT COVERED U/S 68. THEREFORE, THIS AMOUNT WAS ALSO DELETED BY FURTHER MENTIONING THAT THERE IS NO EVIDENCE ON RECORD THAT THE AMOUNT PAYA BLE TO THEM AS ROYALTY IS BOGUS. 2.2 THUS REMAINED FOUR PARTIES, NAMELY SHRI GURDEEP RAJ, MADHU CHATWAL, P.K. AGGARWAL AND SHRI SHANTI SWARUP. THES E PERSONS HAD WRITTEN BOOKS, PUBLISHED BY THE ASSESSEE AND VARIOUS AMOUNT S WERE CREDITED TO THEIR ACCOUNTS, THE DETAILS OF WHICH HAD BEEN FURNI SHED. THE ACCOUNTS FILED BY THE ASSESSEE SHOWED THAT THERE WAS OPENING CREDI T BALANCE. THE AO ITA NO. 4939/DEL/11 ASSTT. YEAR 2007-08 4 HAD ADDED THE WHOLE AMOUNT WITHOUT CONSIDERING SUCH OPENING BALANCES. IT HAS BEEN HELD THAT THERE IS NO FINDING TO THE EF FECT THAT THE ROYALTY CREDITED IN THEIR ACCOUNTS WAS EITHER BOGUS OR IT C EASED TO EXIST IN THIS YEAR. THEREFORE, ADDITION OF THESE LIABILITIES WAS ALSO DELETED. 3. BEFORE US, THE LD. COUNSEL DREW OUR ATTENTION TO THE ACCOUNTS OF M/S. D K. BOOK BINDING. SHRI B.K. SHARMA, ANKUR SHARMA, GURDEEP RAJ, MADHU CHATWAL AND P K. AGGARWAL PLACED IN THE PAPER BOOK. HIS CASE IS THAT THESE ARE RUNNING ACCOUNTS IN WHICH LIABILITIES ARE INCURRED FROM YEAR TO YEAR. THEREFORE, THERE IS NO REASON TO DISALLOW THE LIABILITY OR TO ADD THE BALANCE AT THE END OF THE YEAR TO THE TOTAL INCOME OF ASSESSEE. IN REPLY THE LD. SR. DR RELIED ON THE ORDER OF THE AO. 4. WE HAVE CONSIDERED THE FACTS OF THE CASE AND SUB MISSIONS MADE BEFORE US. THE STATEMENT OF ACCOUNTS OF THESE PARTI ES AND IMPLICATIONS ARE DISCUSSED HEREUNDER :- (I) THE ACCOUNT OF D K BOOK BINDING WORKS SHOWS OPE NING BALANCE OF ` 1,34836/-.THERE IS NO ADDITION TO THE LIABILITY IN THIS YEAR. THIS LIABILITY HAS BEEN CARRIED OVER TO THE NEXT YEAR AND THERE ARE DEBITS AND CREDITS IN THE ACCOUNT IN FINANCE YEAR 2007-08, LEADING TO TOTAL LIABILITY OF ` 12,48 ,045/- AT THE END OF THE YEAR. THE FACT IS THAT NO ADDITION IS TH ERE TO THE LIABILITY IN THIS YEAR AND IT CANNOT BE SAID THAT T HE LIABILITY HAS CEASED TO EXIST AS THE AMOUNT HAS NOT BEEN CREDITED TO PROFIT ITA NO. 4939/DEL/11 ASSTT. YEAR 2007-08 5 AND LOSS ACCOUNT. THEREFORE, IT IS HELD THAT ADDITI ON IN RESPECT OF THIS ACCOUNT WAS NOT JUSTIFIED. (II) THE ACCOUNT OF SHRI B.K. SHARMA SHOWS OPENING BALANCE OF ` 1,44,359/- . ROYALTY OF ` 2,02,834/- AND A FURTHER AMOUNT OF ` 58,478/- HAVE BEEN CREDITED. A SUM OF ` 63846/- HAS BEEN PAID, LEADING CLOSING BALANCE OF ` 1,38,991/-. THE PAYMENT IS LESSER THAN THE ROYALTY CREDITED IN THIS ACCOUNT. T HIS IS ALSO A RUNNING ACCOUNT. THUS ADDITION IN RESPECT OF THIS A CCOUNT IS ALSO NOT JUSTIFIED. (III) ACCOUNT OF SHRI ANKUR SHARMA SHOWS OPENING BA LANCE OF ` 4,81,309/-. ROYALTY OF ` 1,63,933/- HAS BEEN CREDIT ED IN THIS ACCOUNT AND PAYMENT OF ` 2,26,193/- HAS BEEN MADE, LEAVING TO CLOSING BALANCE OF ` 4,19,049/-. THE AMOUNT IS S IMILAR TO THE ACCOUNT OF SHRI D.K. SHARMA. THE AMOUNT PAID IS MOR E THAN THE LIABILITY INCURRED. THUS, IT IS HELD THERE IS N O JUSTIFICATION FOR ADDING THE CLOSING BALANCE TO THE INCOME OF THE ASS ESSEE. (IV) THE ACCOUNT OF SHRI GURDEEP RAJ SHOWS OPENING BALANCE OF ` 3,28,636/-. THERE HAVE BEEN FURTHER ADDITION ON ACC OUNT OF RECEIPTS OF ` 1,76,574/- ON 1.4.2006, WHICH ARE STA TED TO BE ON ACCOUNT OF REVERSAL OF ENTRIES BECAUSE CHEQUES ISSU ED LAST YEAR TO THIS PERSON WERE NOT ENCASHED. TWO AMOUNTS OF ` 50,000/- WERE PAID, THE ENTRIES IN RESPECT OF WHIC H SEEMS TO HAVE BEEN REVERSED. BUT A SUM OF ` 1 LACS HAS BEEN PAID. ITA NO. 4939/DEL/11 ASSTT. YEAR 2007-08 6 ROYALTY OF ` 1,24,475/- HAS BEEN CREDITED IN THIS Y EAR. THE BALANCE IN THE ACCOUNT SHALL ` 5,29,686/- WHICH HAS BEEN CARRIED FORWARD TO NEXT YEAR. THE SUBMISSION OF THE ASSESSEE BEFORE THE LD. CIT(A) WAS THAT THIS PERSON IS RESID ING IN CANADA, THEREFORE, HE COULD NOT ATTEND THE REMAND PROCEEDINGS. SUMMONS HAD BEEN SERVED AT THE ADDRESS AT WHICH HE WAS LIVING IN INDIA EARLIER. A SUM OF ` 3, 54,704/- HAS BEEN PAID TO HIM IN SUBSEQUENT YEAR. HE HAS BEEN PA ID A SUM OF ` 1 LACS DURING THIS YEAR AGAINST THE ROYALTY OF ` 1,24,475/-. THUS THE ADDITION DESERVES TO BE DELETED. LOOKING T O THE FACT THAT THIS IS ALSO A RUNNING ACCOUNT, WE ARE OF THE VIEW THAT ADDITION OF CLOSING BALANCE WAS NOT JUSTIFIED. (V) THE ACCOUNT OF SMT. MADHU CHATWAL SHOWS OPENING BALANCE OF ` 3,28,636/-. IT HAS BEEN CREDITED BY TWO SUMS OF ` 1 LACS AND ` 76,574/- REPRESENTING THE REVERSAL OF ENTRIES IN RESPECT OF CHEQUES NOT DEPOSITED BY THE CREDITORS AND HER BANK . THREE PAYMENTS OF ` 50,000/- EACH HAVE BEEN MADE, OUT OF WHICH TWO ENTRIES OF ` 50,000/- EACH HAVE BEEN REVERSED. THE PROVISION IS MADE FOR PAYMENT AMOUNTING TO ` 1,24.4 75/-. THUS CLOSING BALANCE OF ` 5,79,686/- HAS BEEN CARRI ED FORWARD. IT IS SEEN FROM SUBSEQUENT ACCOUNT UP TO 31.3.2012 THAT THERE IS A CLOSING BALANCE OF ` 1024040/-. NO PAYMENT HA S BEEN MADE EXCEPT FOR TAX DEDUCTED AT SOURCE. IN THESE CIRCUMSTANCES, IT CAN BE SAID THAT THE ASSESSEE HAS NOT BEEN ITA NO. 4939/DEL/11 ASSTT. YEAR 2007-08 7 ABLE TO PROVE THAT THE LIABILITIES OF ROYALTY AMOUN TING TO ` 1,24,475/- WAS INCURRED IN THIS YEAR. THERE IS NO A GREEMENT ON RECORD AND THERE IS NO SUBSEQUENT PAYMENT. THEREFOR E, IT IS HELD THAT THE AO COULD DISALLOW THE CLAIM OF EXPEND ITURE OF ` 1,24,475/- FOR WHICH LIABILITY IS STATED TO HAVE BE EN INCURRED IN THIS YEAR AND NOTHING. IT IS HELD ACCORDINGLY. (VI) IN THE CASE OF SHRI P.K. AGGARWAL, THE ACCOUN T SHOWS OPENING BALANCE OF ` 1,23,654/-. A SUM OF ` 7,274/- HAS BEE N CREDITED AS ROYALTY. THUS THE BALANCE OF ` 1,30,928/- HAS BE EN CARRIED FORWARD TO THE NEXT YEAR. IT IS FURTHER SEEN THAT A SUM ` 63,846/- HAS BEEN PAID IN FINANCIAL YEAR 2007-08, ` 30,000/- IN FINANCIAL YEAR 2008-09 LEAVING A BALANCE OF ` 71,58 4/-. THEREAFTER NO PAYMENT HAS BEEN MADE. THIS IS ALSO A RUNNING ACCOUNT IN WHICH PAYMENTS HAVE BEEN MADE TO THE CRE DITORS. THEREFORE, THE AO WAS NOT RIGHT IN ADDING THE CLOSI NG BALANCE TO THE TOTAL INCOME OF THE ASSESSEE. 4.1 THUS, GROUND NO. 1 IS PARTLY ALLOWED. 5. GROUND NO. 2 IS AGAINST THE DISALLOWANCE OF ` 75 ,000/- ON ACCOUNT OF UNVOUCHED EXPENSES DEBITED UNDER THE HEADS GENERAL EXPENSES, REPAIR AND MAINTENANCE, AND BINDING EXPENSES RESPECTIVELY. IN THE ASSESSMENT ORDER, IT IS MENTIONED THAT THE AFORESAID EXPENSES ARE NOT FULLY VOUCHED AS THE ASSESSEE FAILED TO FURNISH THE VOUCHERS. LD. CI T(A) MENTIONS THAT ADHOC DISALLOWANCE WAS MADE ON THE GROUND THAT EXPE NSES ARE NOT FULLY ITA NO. 4939/DEL/11 ASSTT. YEAR 2007-08 8 VOUCHED. THE ASSESSEE SUBMITTED BEFORE HIM THAT EVE N A SINGLE INSTANCE OF UNVOUCHED EXPENSE HAS NOT BEEN MENTIONED IN THE ASSESSMENT ORDER. THEREFORE, IT HAS BEEN HELD THAT THE ADHOC DISALLOW ANCE CANNOT BE SUSTAINED. 5.1. THE SUBMISSIONS OF THE LD. SR. DR BEFORE US IS THAT THE EXPENSES ARE NOT FULLY VOUCHED AND, THEREFORE, ADHOC DISALLOWANC E IS JUSTIFIED. THE CASE OF THE LD. COUNSEL IS THAT THE EXPENSES ARE FULLY V OUCHED AS THE AO HAS NOT MENTIONED EVEN A SINGLE MISSING VOUCHER. HAVING CONSIDERED SUBMISSIONS OF BOTH THE SIDES, WE ARE OF THE VIEW T HAT THE DISALLOWANCE IS ADHOC IN NATURE FOR WHICH ADEQUATE GROUNDS HAVE NOT BEEN MENTIONED IN THE ASSESSMENT ORDER. THEREFORE, NO INTERFERENCE IS CALLED FOR IN THE ORDER OF LD. CIT(A). ACCORDINGLY, THIS GROUND IS DISMISSE D. 6. IN THE RESULT, THE APPEAL IS PARTLY ALLOWED. SD/- SD/- [I.P. BANSAL] [K.G. BANSAL] JUDICIAL MEMBER ACCOUNTANT MEMBER VEENA COPY FORWARDED TO: - 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT (A) 5. DR, ITAT TRUE COPY BY ORDER, DEPUTY REGISTRAR, ITAT