M/s. Nipro Glass India (P) Ltd., Meerut V. ACIT, Meerut

ITA 5646/DEL/2016

AI Insights

M/s. Nipro Glass India (P) Ltd. appealed against the order of the CIT(A)-Meerut, which sustained several additions made by the Assessing Officer (AO) under section 143(3) of the Income Tax Act, 1961. The additions included amounts related to unconfirmed balances of sundry creditors and share capital investments. The Tribunal found that the CIT(A) had not properly considered the electronic evidence provided and had not allowed the assessee to rectify technical lapses in evidence submission. The Tribunal's decision emphasized the need for a fair opportunity for the assessee to present its case and for the CIT(A) to consider all relevant evidence before making a decision.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 113799 (ITAT-DELHI)
• Duration Of Justice: 6 year(s) 7 month(s) 16 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-06-2023
• Appeal Filed By: Assessee
• Order Result: PartlyAllowed
• Bench Allotted: E
• Next Hearing Date: 08-05-2023
• Assessment Year: 2011-2012
• Appeal Filed On: 02-11-2016
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Additional evidence
• Section: 68; 143(3); 133(6); 13

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL (DELHI BENCH ‘E’ : NEW DELHI) BEFORE SH. ANIL CHATURVEDI, ACCOUNTANT MEMBER AND SH.ANUBHAV SHARMA, JUDICIAL MEMBER ITA No. 5646/Del/2016, A.Y. 2011-12 M/s. Nipro Glass India (P) Ltd. Plot No. 76, Fitkari Village Mawana Road, Meerut PAN : AADCN1869Q Vs. ACIT, Circle-2, Meerut Appellant Respondent Assessee by Sh. K. Sampath, Adv. Sh. Raj kumar, Adv. Revenue by Sh. Kirti Sankratyayan, Sr. DR Date of hearing: 09.05.2023 Date of Pronouncement: 20.06.2023 ORDER Per Anubhav Sharma, JM : The appeal is preferred by the Assessee against the order dated 02.09.2016 of CIT(A)-Meerut (hereinafter referred as Ld. First Appellate Authority or in short Ld. ‘FAA’) in appeal No. 17/2014-15 New Delhi arising out of an appeal before it against the assessment order dated 19.03.2014 passed u/s 143(3) of the Income Tax Act, 1961 (hereinafter referred as ‘the Act’) by the ACIT, Circle-2, Meerut (hereinafter referred as the Ld. AO). 2. The facts in brief are that the appellant is a private limited company which the appellant claims was incorporated in India with Japanese 5646/Del/2016 M/s. Nipro Glass India (P) Ltd. 2 collaboration as a JV for the manufacture of natural glass ampoules. The return of income was filed showing a loss of Rs.4.14 crores. However, the assessment order was passed on an income of RS.6.56 crores by making certain additions which were challenged before Ld.CIT(A) and where relief in part was given to the assessee/appellant. The appellant is now in appeal raising following grounds: - “1. That the Ld CIT (A) has erred in sustaining addition of Rs 4,97,491/- on account of M/S Allahabad Sand, holding it to be an unconfirmed balance as creditor which is against the facts, arbitrary and illegal. 2. That the Ld CIT (A) has erred in sustaining addition of Rs 3,65,140/- on account of M/S Prafull Chemicals Industries, holding it to be an unconfirmed balance as creditor which is against the facts, arbitrary and illegal. 3. That on the facts and in the circumstances of the case, the Ld CIT(A) has erred in sustaining addition of Rs 5,70,00,000/- on account of share capital invested by another company in the assessee company, sidelining the legal issue that share capital invested by an identified person cannot be added in the hands of the company. 4. On the facts and in the circumstances of the case, the Ld CIT(A) has erred in sustaining addition U/S 68 at Rs 5,70,00,000/-. Observations made, inferences drawn and findings recorded are grossly against the facts of the case and are more on a faulty understanding of law and evidence. 5. That the orders passed by the Lower authorities are arbitrary and illegal and deserve to be vacated.” 3. Heard and perused the record. The determination of issues ground wise is as follows. 4. Ground no. 1 and 2. These grounds are taken up together as they arise out of the additions on account of outstanding balances of two sundry creditors. First M/s Allahabad Sand to the extent of Rs.4,97,491/- and second M/s Praful Chemicals Industries to the extent of Rs.3,65,140/-. The Ld. Assessing Officer 5646/Del/2016 M/s. Nipro Glass India (P) Ltd. 3 had questioned total sundry creditors by issuing notices u/s 133(6) of the Act and out of 29 creditors 13 had not responded. As confirmations were not received to the satisfaction of Ld. AO an addition of Rs.18,68,230/- against the 11 parties was made for which Ld.CIT(A) had examined every item of addition and sustained against the aforesaid two. 5. Ld. DR has although supported the findings of Ld.CIT. However, as a matter of fact the Revenue is not in appeal against the deletion of additions against other items. 6. In regard to outstanding balance of Rs.4,97,491/- of M/s Allahabad Sand an email confirmation from M/s Allahabad Sand was filed before Ld.CIT(A) for which remand report was called and no comments were made by the Ld. AO except for reiterating the reasons made in the assessment order. Ld. CIT(A) declined to consider the email on the basis that the document is unsigned. 7. Ld. AR submits that the Ld.CIT(A) has fallen in error on two counts. First in not appreciating that it is an electronic generated communication which cannot be signed and the confirmation was by Rohit Varshney who was the concerned employee who had reconcile the account of M/s Allahabad Sand. It was also submitted that if Ld.CIT(A) was drawing adverse inference upon the evidence on the basis of its genuineness then opportunity should have been given to the assessee. The Bench finds force in the contention of Ld. AR that where a quasi judicial authority is drawing an inference upon the evidence before it, questioning its genuineness itself, then either the conclusion should be based on the basis of some independent enquiry to that effect or after seeking a response from the affected party. However, unilaterally drawing such a conclusion about the confirmation that same is not genuine or authentic cannot be justified. 5646/Del/2016 M/s. Nipro Glass India (P) Ltd. 4 8. In regard to addition on account of M/s Praful Chemical Industries it can be appreciated that Ld.CIT(A) sustained the addition on the basis that no details of bills, copies of such bills, no bank statement showing complete reconciliation of payments or confirmations of the party have been filed. The order of the Ld.CIT(A) however mentions that it was submitted before Ld.CIT(A) that this amount was outstanding against various bills which were cleared subsequently and the appellant has filed the copy of ledger account of the said party for this year and for succeeding years. Thus, it appears that Ld. CIT(A) has failed to take into account the fact that the transactions were squared up in the succeeding years. The Bench is considered opinion that without finding any deficiency in the evidence before it and by insisting on evidence which were not before the CIT(A) has fallen in error. 9. In regard to aforesaid two additions it can also be appreciated that the Ld.CIT(A) has fallen in error in not considering the fact that the transactions of the two parties have been accepted in assessment of succeeding years. Further when the trading account of the assessee has not been disputed then there is no reason to make addition on account of outstanding sundry creditors u/s 68 of the Act. Thus, grounds raised deserves to be sustained. 10. In regard to ground no. 3 & 4. It can be observed that Ld. AO has made the addition on his observation that the confirmation/documents are not filed. It will be relevant to mention certain facts in case of assessee in regard to these issues, as emanating from the record. A group located in Meerut with M/s. PRB Finance Company Private Ltd. as its financial base, entered into a Joint Venture Agreement (‘JVA’ in short) with a Japanese Company to promote and operate a undertaking at Meerut for the manufacture of glass ampoules. The Indian company promoted for the purpose was named Nipro Glass Private Ltd. The investment for the Meerut project was arranged through M/s. PRB Finance Company P. Ltd. The overseas investor was the Japanese company Nipro 5646/Del/2016 M/s. Nipro Glass India (P) Ltd. 5 Corporation Osaka, Japan. The agreement was that the Japanese company would invest 70% in the share capital and that the Indian group viz. M/s. PRB Finance Company P. Ltd. would invest 30% in the Meerut company. In terms of this understanding, as on 31.03.2010, the Japanese company had invested Rs. 70 lacs against M/s. PRB Finance Company P. Ltd. investing Rs. 30 lacs. All these investments have been accepted in the assessment of those back years. In the subject financial year 2010-11, the Japanese Company further invested Rs.23.80 crores and M/s. PRB Finance Company P. Ltd. invested Rs. 5.70 crores. All the investments were based on the JVA mentioned herein before with the applicable sanctions and approvals of Govt, authorities, RBI etc. having been duly obtained for the purpose. Many of such documents were placed on record of the Ld. CIT(A) to prove the local investment of Rs. 5.70 crores. The total investment made by the Japanese company was accepted in assessment by the AO. As far the Investment made by M/s. PRB Finance Company P. Ltd., as said earlier, the investment of Rs. 30 lacs made in the preceding year was accepted. Objection, however, has been raised to the investment of a further sum of Rs. 5.70 crores made in the subject year by PRB Finance Company P. Ltd. 11. The order of the Ld.CIT(A) shows that confirmation from M/s PRB was filed along with letter dated 28.01.2016 but the same was not taken into consideration as there was no separate application for admission of evidence under Rule 46A. The Bench is of the considered opinion that when Ld.CIT(A) was dealing with the issue and was having coterminous powers of the Assessing Officer then it was not justified to not take into consideration any piece of evidence on record by citing reason that separate application under Rule 46A has not been filed. The ends of justice required giving an opportunity to a litigant to fulfill technical latches if otherwise the evidences were relevant to the issue. Now before the Tribunal under Rule 29 an application has been moved for admission of 8 documents in connection with verification of the contribution 5646/Del/2016 M/s. Nipro Glass India (P) Ltd. 6 of M/s PRB Finance Company P. Ltd. to the share capital of the Company. The Bench is of the considered opinion that the ends of justice will be served by restoring the issue to the files of Ld.CIT(A) to consider the additional evidence of the assessee, by giving an opportunity to the assessee to file the additional evidence before Ld.CIT(A) in accordance with law. The Ld. CIT(A) shall admit the evidence when filed upon necessary compliances and decide the issue afresh on merits. Consequently, these grounds are allowed for statistical purposes. 12. As a consequence of above, the appeal is allowed partly. Order pronounced in the open court on 20 th June, 2023. Sd/- Sd/- (ANIL CHATURVEDI) (ANUBHAV SHARMA) ACCOUNTANT MEMBER JUDICIAL MEMBER Dated:- 20.06.2023 *Kavita Arora, Sr.PS Copy forwarded to: 1. Appellant 2. Respondent 3. CIT 4. CIT(Appeals) 5. DR: ITAT ASSISTANT REGISTRAR ITAT, NEW DELHI