ITO, New Delhi V. Shri Om Prakash Aggarwal, Delhi

ITA 5383/DEL/2016

AI Insights

The case involves appeals by the Revenue against the decisions of the CIT (A) which deleted a substantial addition to the assessee's income and the corresponding penalty. The primary issue was the addition of Rs.2,76,79,355 as unexplained cash credit under section 68 of the Income Tax Act, which the Assessing Officer (AO) had initially added due to alleged discrepancies between bank deposits and reported turnover. The CIT (A) found that the assessee had provided sufficient documentation and explanations regarding the nature of the deposits, which were primarily security deposits from franchisees and sales proceeds. The Tribunal agreed with the CIT (A)'s findings and dismissed the Revenue's appeals.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 113839 (ITAT-DELHI)
• Duration Of Justice: 6 year(s) 3 month(s) 24 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 06-02-2023
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: E
• Next Hearing Date: 24-01-2023
• Assessment Year: 2008-2009
• Appeal Filed On: 13-10-2016
• Other Referred Cases: CIT Vs. Reliance Petro Products (2010) 322 ITR 158
• Laws Referred To: Income-tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Section: 68; 271(1)(c); 80C

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL (DELHI BENCH ‘E’ : NEW DELHI) SHRI SHAMIM YAHYA, ACCOUNTANT MEMBER and SHRI ANUBHAV SHARMA, JUDICIAL MEMBER ITA No.5382/Del./2016 (ASSESSMENT YEAR : 2008-09) ITA No.5383/Del./2016 (ASSESSMENT YEAR : 2008-09) ITO, Ward 39 (4), vs. Shri Om Prakash Aggarwal, New Delhi. Prop. M/s. Osmoss Fashion, B-28, Sangam Apartment, Sector 9, Rohini, Delhi – 110 085. (PAN : AFAPA1785P) (APPELLANT) (RESPONDENT) ASSESSEE BY : Shri Ramesh Goel, Ca REVENUE BY : Shri Jitender Chand, Sr. DR Date of Hearing : 25.01.2023 Date of Order : 07.02.2023 ORDER PER SHAMIM YAHYA, ACCOUNTANT MEMBER : These appeals filed by the Revenue are directed against deletion of quantum addition and deletion of penalty under section 271(1)(c) of the Income-tax Act, 1961 (for short 'the Act'). ITA No.5382/Del/2016 2. The grounds of appeal taken by the Revenue read as under:- ITA Nos.5382 & 5383/Del./2016 2 “1. Whether on the facts and in the circumstances of the case and in the law, the Ld. CIT (A) erred in not appreciating the facts of the case properly. 2. Whether on the facts and in the circumstances of the case and in the law, the Ld. CIT (A) has erred in deleting the addition of Rs.2,76,79,355/- on account of addition made u/s 68 of the Income Tax Act.” 3. Brief facts of the case are Assessing Officer in this case passed an order u/s 144/143 (3) of the Act. He noted that there was no cooperation from the assessee. He proceeded to hold the difference between deposits in bank account and total turnover as unexplained cash credit. We may gainfully refer to the AO’s order in this regard as under :- “The Total Credit entries, therefore, in these two Bank A/cs are of Rs.6,30,69,353/-. It is seen from the ITR of A.Y.2008-09 that the Total turnover of the assessee is Rs.3,53,89,998/-. Therefore, even if to believe that the total turnover/sale of the assessee was deposited in his Bank a/c, still the difference of Rs.2,76,79,355/- ( Rs.6,30,69,353/- Minus Rs.3,53,89,998/-) is unexplained. No explanation or documentary evidence of this credit in Bank Account has been provided by the assessee. This amount, therefore, credited to his bank account is treated as unexplained credit within the meaning of section 68 of IT Act and is added back to the income of the assessee. It shows that the assessee is also having some other sources of income which are not disclosed to the Department.” 4. Against the above order, assessee went in appeal before the ld. CIT(A). Ld. CIT (A) asked for remand report. However, despite several requests, AO did not respond. Hence, ld. CIT (A) examined the documents and gave a finding that all details are available and the confirmations are also there, hence no infirmity is found in the documents and, therefore, the addition is required to be deleted. The order of ld. CIT(A) read as under :- ITA Nos.5382 & 5383/Del./2016 3 “At ground of appeal no.1, the appellant has objected to the addition of Rs.2,76,79,355/- on the grounds of unexplained credits in the appellant's two bank accounts. I have examined the audited accounts and the bank statements. The appellant has explained that he got goods manufactured on jobwork basis and made sales through various stores on franchisee basis. He received interest free security deposits from each franchisee, and dispatched goods to them for sale on credit basis for a specified period; out of each month's sale, the franchisees remitted a fixed proportion, as specified in written agreements, to M/s Osmoss Fashion, and the portion retained by them covered such expenses as shop rent, sales persons' salaries, etc. The appellant received a total amount of Rs.3,42,40,000/- by way of security deposits from a total of 69 parties, and the appellant has furnished the cheque-wise and datewise details of deposits received, photo-copies of the cheques, and addresses and telephone nos. of the franchisee stores. The appellant has furnished a datewise statement of its share of sale amounts received from the franchisees, of a total sum of Rs.1,86,99,787/- by cheque, and Rs.77,21,100/- in cash. The appellant has filed cash flow statement incorporating contra entries of withdrawals and deposits in his bank accounts. The appellant also produced the copies of the franchisee agreements, and the details of security deposits returned, partly in the current year of Rs.26,01,000/-, and partly in the subsequent year. It was submitted that on account of huge losses incurred, part of the security deposits were adjusted against the stock remaining with the franchisees. The appellant has also produced confirmations of settlement of the accounts with the franchisees in the FY 2008-09. Thus the total deposits in the appellant's bank accounts with Punjab National Bank, Centurion Bank of Punjab and Axis Bank, amounted to Rs.6,45,42,509/- out of which the deposits out of sales amounted to Rs.2,64,20,887/-. The total sales disclosed in the profit and loss account are of Rs.3,53,89,998/- which is the gross amount before deduction of franchisee establishment expenses. The larger portion of the deposits in the bank accounts are of the security deposits of Rs.3,42,40,000/- received during the year, and which are reflected in the balance sheet. After carefully considering all the evidences furnished before me, as well as before the AO in remand proceedings, the addition of Rs.2,76,79,355/- is hereby deleted.” ITA Nos.5382 & 5383/Del./2016 4 5. Against the above order, Revenue has come up before us. We have heard both the parties and perused the records. 6. Ld. DR for the Revenue submitted that assessee has not submitted necessary documents before AO but has chosen to file the same before the ld. CIT (A), hence he pleaded that the matter should be remanded to the file of AO. 7. Per contra ld. Counsel for the assessee strongly opposed this. He submitted that the additional documents which were furnished before the ld. CIT (A) were duly remanded to the AO but AO chose not to respond or examine those documents. He pleaded that ld. CIT (A) carefully examined the documents and given a factual finding of facts. Hence, he pleaded that ld. CIT (A)’s order should be upheld. 8. Upon careful consideration, we note that a perusal of the aforesaid order of ld. CIT (A) fairly shows that assessee has submitted the necessary details and ld. CIT (A) has passed a well-reasoned order giving factual findings. The Revenue has not been able to rebut any of the findings except submitting that these were not before the AO. For the sake of repetition, this argument is totally unsustainable as ld. CIT (A) has asked for remand report for additional documents but AO chose to ignore. In this regard, we do not find any infirmity in the order of ld. CIT(A) which is a well-reasoned order and uphold the same. ITA Nos.5382 & 5383/Del./2016 5 9. In the result, the appeal filed by the Revenue stands dismissed. ITA No.5383/Del/2016 10. This is an appeal against the deletion of penalty by the ld. CIT(A) under section 271(1)(c) of the Act vide his order dated 18.07.2016. 11. The grounds of appeal taken by the Revenue read as under :- “1. Whether on the facts and in the circumstances of the case and in the law, the Ld. CIT (Appeals) erred in not appreciating the facts of the case properly. 2. Whether on the facts and in the circumstances of the case and in the law, the Ld. CIT (A) has erred in deleting the penalty imposed u/s 271(1)(c) of Rs.94,91,236/- on account of addition made of Rs.2,76,79,355/- u/s 68 of the Income Tax Act.” 12. Ld. CIT (A) in this case consequent upon levy of penalty had deleted the same by noting that he has already deleted the addition of Rs.2,76,79,355/- in his order as above and for other items on which penalty was levied, he found that it did not come under the definition of concealment of income or furnishing of inaccurate particulars. The order of ld. CIT (A) may be gainfully referred to as under :- “The penalty has been levied on the additions made to the total income of Rs.2,79,24,664/- of which the major part of Rs.2,76,79,355/- pertaining to the credits in the bank accounts has been deleted vide my order of even date in the quantum appeal proceedings. Of the balance additions, Rs.38A01/- an account of payment to Reliance Infocomm, has been upheld as the appellant could not identify this payment in his books of account. Disallowance of Rs.41,000/- for deduction u/s 80C not supported by documents has been upheld. Disallowance of 10% of expenses debited to the P & L account for staff salaries, staff welfare, conveyance and other expenses, amounting to Rs.1,1l,908/- has been deleted. Hence, the penalty is leviable, if at all, only for an amount of additions of Rs.79,401/-. However, after careful consideration, it is held that the addition of the telephone expenses of Rs.38A01/- and of disallowance of deduction u/s 80C of Rs.41,000/- do not fall within the definition of concealment of income, or of furnishing of inaccurate particulars of income. The Apex ITA Nos.5382 & 5383/Del./2016 6 Court, in the case of CIT Vs. Reliance Petro Products (2010) 322 ITR 158, disapproved of the Revenue's contention that submitting an incorrect claim for expenditure would amount to furnishing inaccurate particulars of such income. It was observed that unless the case is strictly covered by the provisions of Sec. 271(l)(c) the penalty provision cannot be invoked. Accordingly, the levy of penalty u/s 271(l)(c) is deleted.” 13. A perusal of the above duly shows that the penalty made on the addition of Rs.2,76,79,355/- was already deleted by the ld. CIT (A) which we have also confirmed in our order herein above. As regards deletion of penalty on the balance amounts, we are in conformity with the reasoning of ld. CIT (A) that these additions do not warrant levy of penalty u/s 271(1)(c) of the Act on the touchstone of the decision of Hon’ble Apex Court in the case of CIT vs. Reliance Petro Products (2010) 322 ITR 158. Hence, we uphold the order of ld. CIT (A). 14. In the result, both the appeals filed by the Revenue are dismissed. Order pronounced in the open court on this 7 th day of February, 2023. Sd/- sd/- (ANUBHAV SHARMA) (SHAMIM YAHYA) JUDICIAL MEMBER ACCOUNTANT MEMBER Dated the 7 th day of February, 2023 TS Copy forwarded to: 1.Appellant 2.Respondent 3.CIT 4.CIT(A) 5.CIT(ITAT), New Delhi. AR, ITAT NEW DELHI.