DCIT, New Delhi V. M/s. Ikea Trading (India) Pvt. Ltd., New Delhi

ITA 5877/DEL/2011

• Counselvise Citation: [2020] 110 COUNSELVISE.COM (IT) 9990 (ITAT-DELHI)
• Duration Of Justice: 8 year(s) 6 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-06-2020
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Next Hearing Date: 17-05-2017
• Assessment Year: 2004-2005
• Appeal Filed On: 30-12-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Search and seizure; Additional evidence; Corroborative evidences; Capital Gains; CHAPTER IV
• Section: 133(6); 13; 68; 11

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNAL, DELHI C BENCH, NEW DELHI (THROUGH VIDEO CONFERENCE) BEFORE MS. SUSHMA CHOWLA, VICE PRESIDENT AND SHRI N.K. BILLAIYA, ACCOUNTANT MEMBER ITA NO. 5568/DEL/2011 [ASSESSMENT YEAR: 2004-05] M/S IKEA TRADING (INDIA) PRIVATE LIMITED, VS. DCIT , CIRCLE 11(1), C-16, SECOND FLOOR, C-BLOCK MARKET, NEW DELHI PASHCHIMI MARG, VASANT VIHAR, NEW DELHI 110 057 (PAN : AAACI1483Q) [APPELLANT] [RESPONDENT] AND ITA NO. 5877/DEL/2011 [ASSESSMENT YEAR: 2004-05] DCIT, CIRCLE 11(1), ROOM NO. 312, VS. M/S IKEA TRA DING (INDIA) CR BUILDING, NEW DELHI PVT. LTD. C-16, SECOND FLOOR, C- BLOCK MARKET, PASHCHIMI MARG, VASANT VIHAR, NEW DELHI 110 057 (PAN : AAACI1483Q) [APPELLANT] [RESPONDENT] DATE OF HEARING : 24.06.2020 DATE OF PRONOUNCEMENT : 30.06.2020 ASSESSEE BY : SHRI SALIL KAPOOR, ADVOCATE REVENUE BY : MS. SUNITA SINGH, CIT(DR) ORDER PER N.K. BILLAIYA, ACCOUNTANT MEMBER, ITA NO. 5568/DEL/2011 & ITA NO. 5877/DEL/2011 ARE T HE CROSS APPEALS FILED BY THE ASSESSEE AND THE REVENU E RESPECTIVELY 2 AGAINST THE VERY SAME ORDER OF THE LD. CIT(A)-XXX, NEW DELHI DATED 10.10.2011 PERTAINING TO ASSESSMENT YEAR 2004 -05. BOTH THESE APPEALS WERE HEARD TOGETHER AND ARE BEING DIS POSED OF BY THIS COMMON ORDER FOR THE SAKE OF CONVENIENCE. 2. WE FIRST ADDRESS THE ASSESSEES APPEAL I.E. ITA NO. 5568/DEL/2011. THE SOLITARY GRIEVANCE OF THE ASSESS EE IS THAT LD. CIT(A) ERRED IN UPHOLDING THE DISALLOWANCE OF RS. 10,167,885/- MADE BY THE ASSESSING OFFICER ON ACCOUNT OF CONFIRM ATIONS NOT RECEIVED FROM CREDITORS. INCIDENTALLY, THE UNDERLIN E FACTS ARE IDENTICAL FOR GROUND NO. 2 RAISED IN REVENUES APPE AL AND THEREFORE, WE DEEM IT PROPER TO CONSIDER REVENUES GROUND NO . 2 ALONGWITH SOLITARY GRIEVANCE OF THE ASSESSEE TOGETHER FOR THE SAKE OF BREVITY. 3. FACTS EMANATING FROM THE ASSESSMENT ORDER SHOWS THAT DURING THE COURSE OF SCRUTINY ASSESSMENT PROCEEDINGS, THE AO ASKED THE ASSESSEE TO EXPLAIN THE SUNDRY CREDITORS OF RS. 48, 80,73,557/- APPEARING IN THE BALANCE SHEET AS ON 31.03.2004. T HE AO OBSERVED THAT THE ASSESSEE HAS MERELY SUBMITTED THE NAMES OF THE PARTIES ALONGWITH THE ADDRESSES. NOTICES U/S. 133(6) OF TH E I.T. ACT, 1961 WERE ISSUED, BUT MANY OF THE PARTIES ON THE BASIS O F THE ADDRESSES GIVEN, OUT OF WHICH MANY WERE NOT COMPLIED WITH. THIS HAS BEEN EXPLAINED IN THE TABLE FORM AS UNDER:- 3 AMOUNT AS PER BOOKS OF IKEA AMOUNT CONFIRMED / NOT REPLIED BALANCE TO BE ADDED M/S ANISA CARPETS LIMITED 4612608 4612608 APL DELHI 5765282 5765282 APL MUMBAI 4402603 4402603 ASIAN HANDLOOMS 20855076 20855076 ATLANTIC FABRICS 9375816 NIL BARANWAL CARPET MFG. CO. 3789345 1915116 1874229 CARPET INTERNATIONAL 62346423 62346423 CONTINENTAL HOME FURNISHINGS 20400551 20400551 CORONET PRODUCTS PVT. LTD. 3619691 CONFIRMED NIL COSCO INDIA LTD. 4560226 4560226 ACCENTS FOR LIVING 2092517 2092517 AL PAPER HOUSE 7633702 7633702 VALLABH FABRICS LTD. 8994889 CONFIRMED NIL JS GUPTA & SONS 4321965 4321965 DEVTARA RAG RUGS 8060311 8060311 TOTAL ADDITION 146925493 3.1 THE AO ACCORDINGLY MADE THE ADDITION OF RS. 146 925493/-. 4. BEFORE THE LD. CIT(A), THE ASSESEE FURNISHED CON FIRMATIONS AS ADDITIONAL EVIDENCES UNDER RULE 46A OF THE I.T. RUL ES. THE LD. CIT(A) CALLED FOR A REMAND REPORT. THE AO SUBMITTE D THE REMAND REPORT DATED 11.10.2010 WHEREIN HE HAS NOT CONSIDER ED THE 4 ADDITIONAL EVIDENCES. ONCE AGAIN THE LD. CIT(A) A SKED THE AO TO SUBMIT THE DETAILED REMAND REPORT AND THE SAME WAS SUBMITTED BY THE AO VIDE REMAND REPORT DATED 09.08.2011 WHEREIN THE AO HAD PLACED ON RECORD, THE SUMMARY OF VARIOUS CONFIRMAT IONS, LIST OF PARTIES TO WHOM THE NOTICES RETURNED UNSERVED, LIST OF PARTIES TO WHOM THE NOTICES WERE SERVED, BUT NO CONFIRMATION W AS RECEIVED ETC. AFTER CONSIDERING THE ADDITIONAL EVIDENCES A ND THE REMAND REPORT OF THE AO, THE LD. CIT(A) CONCLUDED AS UNDER :- IT WOULD BE IMPORTANT TO MENTION THAT THE BALANCES AMOUNTING TO RS. 12,47,30,552/- (RS. 9,92,62,868 AN D RS. 2,54,67,684/-) HAVE ALREADY BEEN CONFIRMED OUT OF THE TOTAL DISALLOWANCES OF RS. 14,69,25,483/-, WHIC H AMOUNTS TO NEARLY 85% OF THE TOTAL CONFORMATION. IT CAN BE INFERRED THAT THE CREDITORS ARE GENUINE AND NOT BOGUS. BASED ON EVIDENCE PLACED ON RECORD AND FOLLOWING T HE PREPONDERANCE OF PROBABILITY. I HEREBY HOLD THE CREDITORS TO BE GENUINE AND DELETE THE ENTIRE DISALLOWANCE EXCEPT IN THE FOLLOWING CASES AND REAS ONS THEREOF:- NAME OF CREDITOR AMOUNT OF DISALLOWANCE (IN RS.) REASON OF UPHOLDING THE DISALLOWANCE APL DELHI 57,65,282 THE APPELLANT HAD FAILED TO FURNISH THE 5 ACCOUNT DETAILS AND THE RELEVANT PAY-OUTS DETAILS FOR VERIFICATION AND NO CONFIRMATION APL MUMBAI 44,02 603/ - THE APPELLANT HAD FAILED TO FURNISH THE ACCOUNT DETAILS AND THE RELEVANT PAY-OUTS DETAILS FOR VERIFICATION AND NO CONFIRMATION. TOTAL 1,01, 67,885/ - THEREFORE THE AMOUNT OF DISALLOWANCE BEING UPHELD O F RS. 1,01,67,885/- (RS. 57,65,282 + 44,02,603_. THE APPE LLANTS GETS RELIEF OF RS. 13,67,57,609/-. 4.1 AGGRIEVED BY THE FINDING OF THE LD. CIT(A), BOT H THE ASSESSEE AND REVENUE ARE IN APPEALS BEFORE US. 5. LD. COUNSEL FOR THE ASSESSEE REITERATED WHAT HAS BEEN STATED BEFORE THE LOWER AUTHORITIES. IT IS A SAY OF THE CO UNSEL THAT THE AO HAS MADE THE ADDITIONS ON THE BALANCE OUTSTANDING A S ON 31 ST MARCH. IT IS A SAY OF THE LD. COUNSEL THAT THE EN TIRE OUTSTANDING IS IN RELATION TO PURCHASES MADE DURING THE YEAR UND ER CONSIDERATION AND NO ADVERSE INFERENCE HAS BEEN DRAWN SO AS TO PU RCHASES ARE CONCERNED. THE LD. COUNSEL VEHEMENTLY STATED THAT ONCE THE PURCHASES HAVE BEEN ACCEPTED AS GENUINE, THE BALANC E OUTSTANDING AS ON 31 ST MARCH OUT OF SUCH PURCHASES CANNOT BE ADDED U/S. 68 OF THE ACT. 6 5.1 THE LD. DR STRONGLY SUPPORTED THE FINDING OF TH E AO AND VEHEMENTLY STATED THAT BEFORE THE LD. CIT(A) BALANC E AMOUNTING TO RS. 12.47 CRORES WERE CONFIRMED OUT OF TOTAL DISALL OWANCE OF RS. 14.69 CRORES. IT IS A SAY OF THE LD. DR THAT LD. C IT(A) OUGHT TO HAVE CONFIRMED THE DIFFERENCE OF RS. 2.22 CRORES WH EREAS THE LD. CIT(A) HAS CONFIRMED ONLY RS. 1.01 CRORES. 6. WE HAVE GIVEN THE THOUGHTFUL CONSIDERATION OF TH E ORDERS OF THE AUTHORITIES BELOW. IT IS AN UNDISPUTED FACT THA T THE AO HAS SIMPLY ADDED THE BALANCE AS ON 31.3.2004 WITHOUT REALIZING THAT THE ENTIRE CREDIT BALANCE WERE THE OUTCOME OF THE PURCHASES MADE DURING THE YEAR. IT IS ALSO UNDISPUTED THAT IN THE IMMEDIATELY SUCCEEDING YEARS THE OUTSTANDING HAVE BEEN PAID BY THE ASSESEE. ONCE THE PURCHASES HAVE BEEN ACCEPTED AS GENUINE AN D NO ADVERSE INFERENCE HAS BEEN DRAWN, IN OUR CONSIDERED OPINIO N THE LOWER AUTHORITIES WERE NOT AT ALL JUSTIFIED IN MAKING THE ADDITION OF THE BALANCE OUTSTANDING AS ON 31.3.2004. OUR VIEW IS F ORTIFIED BY THE DECISION OF THE ITAT, DELHI BENCH A (SPECIAL BENC H) IN THE CASE OF MANOJ AGGARWAL VS. DY. CIT (DELHI) (SB)113 ITD 377 AND THE RELEVANT PART THEREOF READ AS UNDER:- 177. WE HAVE CAREFULLY CONSIDERED THE ARGUMENTS OF BOTH THE SIDES. WE ARE UNABLE TO SUBSCRIBE TO THE CONTEN TION OF MR. SUDERSHAN KAPOOR, THE LEARNED COUNSEL FOR ONE O F THE INTERVENERS THAT WHERE AN ENTRY HAS BEEN MADE IN TH E BOOKS 7 OF ACCOUNT OF THE ASSESSEE AS REQUIRED BY THE VDIS OF 1997, SECTION 68 CANNOT BE INVOKED WHEN THE DECLARED ASSE T IS SOLD LATER AND THE SALE PROCEEDS ARE CREDITED IN THE BOO KS OF ACCOUNT. SECTION 68 OF CHAPTER IV OF THE FINANCE AC T, 1997, WHICH PROVIDED FOR THE VOLUNTARY DISCLOSURE OF INCO ME SCHEME, 1997, SAYS THAT THE AMOUNT OF THE VOLUNTARY DISCLOSED INCOME WILL NOT BE INCLUDED IN THE TOTAL INCOME OF THE DECLARANT OF ANY ASSESSMENT YEAR IF CERTAIN CON DITIONS ARE SATISFIED. ONE SUCH CONDITION IS THAT THE DECLA RANT SHOULD HAVE CREDITED THE AMOUNT IN THE BOOKS OF ACCOUNT, I F ANY, MAINTAINED BY HIM FOR ANY SOURCE OF INCOME OR IN AN Y OTHER RECORD AND SHOULD HAVE INTIMATED THE CREDIT SO MADE TO THE ASSESSING OFFICER. THIS IS AN ENABLING PROVISION. I T ENABLES THE HITHERTO UNDISCLOSED INCOME TO BE BROUGHT INTO THE ACCOUNTS OF THE ASSESSEE AS DISCLOSED INCOME SINCE TAX THEREON HAS BEEN PAID UNDER THE VDIS. ONCE THE TAX IS PAID ON THE UNDISCLOSED INCOME, IT BECOMES DISCLOSED INC OME AND THEREAFTER THERE IS NO JUSTIFICATION FOR DENYING TH E ASSESSEE THE FACILITY OF BRINGING THE DECLARED INCOME INTO A CCOUNT. IN THE CASES OF THE INTERVENERS WHO ARE ALL DECLARANTS UNDER THE VDIS, 1997, THIS CONDITION HAS BEEN SATISFIED AND T HERE IS NO DISPUTE ABOUT THE SAME. THE IMMUNITY GIVEN BY SECTI ON 68 OF THE FINANCE ACT, 1997, IS LIMITED TO THIS, THAT THE DECLARED INCOME WILL NOT BE ASSESSED AGAIN AS THE INCOME OF THE DECLARANT FOR ANY ASSESSMENT YEAR UNDER THE INCOME- TAX ACT. OBVIOUSLY THE ONLY PROVISION, WHICH THE ASSESSING O FFICER CAN INVOKE FOR ASSESSING THE AMOUNT CREDITED IN THE BOOKS OF ACCOUNT, IS SECTION 68 OF THE INCOME-TAX ACT, BUT B Y VIRTUE OF SECTION 68 OF THE FINANCE ACT, 1997, THE APPLICABIL ITY OF 8 SECTION 68 OF THE INCOME-TAX ACT TO THE AMOUNT DECL ARED UNDER THE VDIS IS RULED OUT. BUT THE IMMUNITY STOPS THERE. WHEN THE ASSET REPRESENTING THE DECLARED INCOME OR ACQUIRED OUT OF THE DECLARED INCOME IS LATER SOLD, THE POWERS OF THE ASSESSING OFFICER TO EXAMINE THE QUESTION WH ETHER THERE HAS BEEN A REAL SALE OF THE ASSET IS NOT CURT AILED IN ANY MANNER BY ANY OF THE PROVISIONS OF THE VDIS, 1997. SUPPOSING, TO GIVE AN EXAMPLE, AN ASSESSEE FILES A DECLARATION UNDER THE VDIS THAT HE HAD ACQUIRED GOL D BARS FOR RS. 5 LAKHS OUT OF HIS UNDISCLOSED INCOME. HE I S REQUIRED TO CREDIT HIS BOOKS OF ACCOUNT WITH RS. 5 LAKHS AS REQUIRED BY SECTION 68 OF THE FINANCE ACT, 1997, IN ADDITION TO PAYING THE TAX THEREON AT CONCESSIONAL RATES UNDER THE VDI S. ONCE THE AMOUNT IS CREDITED THE SAME CANNOT BE TAXED AGA IN FOR ANY ASSESSMENT YEAR UNDER THE PROVISIONS OF THE INC OME-TAX ACT, 1961. SUPPOSING, THE ASSESSEE IN THE EXAMPLE C REDITS THE BOOKS OF ACCOUNT WITH THE AMOUNT OF RS. 5 LAKHS AS ON 31-12- 1997, THE ASSESSING OFFICER MAKING HIS ASSESSMENT F OR THE ASSESSMENT YEAR 1998-99 CANNOT INVOKE SECTION 68 OF THE INCOME-TAX ACT TO ASSESS THE AMOUNT AGAIN. HOWEVER, WHEN THE GOLD BARS ARE SOLD BY THE ASSESSEE AT ANY TIME LATER, SAY FOR RS. 8 LAKHS, AND THE AMOUNT OF RS. 8 LAKHS IS R ECEIVED BY THE ASSESSEE AND CREDITED BY HIM IN HIS BOOKS OF AC COUNT, THERE SEEMS TO BE NO BAR ON THE ASSESSING OFFICER F ROM EXAMINING THE QUESTION WHETHER THERE WAS REAL AND A CTUAL SALE OF THE GOLD BARS WHICH FETCHED RS. 8 LAKHS TO THE ASSESSEE. SUCH A POWER HAS NOT BEEN EITHER EXPRESSL Y OR BY IMPLICATION TAKEN AWAY FROM THE ASSESSING OFFICER. SUCH A POWER MAY BE EXERCISED BY THE ASSESSING OFFICER TO ENSURE 9 THAT THE PROVISIONS OF THE VDIS, 1997 HAVE NOT BEEN MISUSED BY AN ASSESSEE. IN THE EXAMPLE GIVEN EARLIER, SUPPO SE THAT THE ASSESSEE HAD FALSELY DECLARED UNDER THE VDIS TH AT HE HAD ACQUIRED GOLD BARS OUT OF HIS UNDISCLOSED INCOME OF RS. 5 LAKHS. HE PAYS TAX UNDER THE SCHEME AT CONCESSIONAL RATES, PAYS NO INTEREST OR PENALTY. THERE ARE ACTUALLY NO GOLD BARS IN EXISTENCE. AFTER THE VDIS COMES TO AN END, HE FA LSELY CLAIMS THAT HE HAS SOLD THE GOLD BARS FOR RS. 8 LAK HS AND BRINGS THE SAME TO ACCOUNT. HE MAY BE NO DOUBT PAYI NG CAPITAL GAINS TAX ON THE SURPLUS BUT BY DOING SO HE WILL BE BRINGING INTO ACCOUNT A SUM OF RS. 3 LAKHS WHICH AR E HIS OWN UNDISCLOSED MONIES. THIS WOULD BE ABUSE OF THE VDIS , 1997. IT IS TO PREVENT THIS THAT THE ASSESSING OFFICER EX AMINING THE CASE OF THE ASSESSEE IN THE YEAR OF SALE OF THE GOL D BARS SHOULD BE GIVEN THE POWER TO PROBE WHETHER THE GOLD BARS WERE REALLY SOLD. IT IS TRUE THAT THE EXISTENCE OF THE GOLD BARS WITH THE ASSESSEE CANNOT BE QUESTIONED BECAUSE OF T HE ACCEPTANCE OF THE DECLARATION MADE UNDER THE VDIS A ND ISSUE OF A CERTIFICATE BY THE CIT. BUT IT IS CERTAI NLY OPEN TO THE INCOME-TAX AUTHORITIES TO REQUIRE THE ASSESSEE TO PROVE THAT THE GOLD BARS WERE ACTUALLY SOLD. SUCH PROOF M AY INCLUDE DETAILS OF THE PURCHASER, HIS CREDENTIALS, EVIDENCE IN THE FORM OF BILLS, ETC. IT IS ALSO OPEN TO THE INCO ME-TAX AUTHORITIES TO EXAMINE SUCH PROOF IN THE MANNER AUT HORIZED BY LAW AND COME TO THE CONCLUSION WHETHER THE SALE IS GENUINE OR NOT. WHILE DOING SO, THE ASSESSING OFFIC ER MAY RELY ON SECTION 68 OF THE INCOME-TAX ACT. 178. MR. AJAY VOHRA, LEARNED COUNSEL FOR ONE OF THE INTERVENERS CONTESTED THE AFORESAID POSITION BY SUB MITTING 10 THAT THE SALE PROCEEDS CREDITED IN THE BOOKS CANNOT BE TREATED AS CASH CREDIT SIMPLICITOR SO AS TO ENABLE THE ASSESSING OFFICER TO INVOKE SECTION 68. HE SAYS THA T THE SALE PROCEEDS HAVE BEEN SHOWN AS INCOME IN THE SENSE THA T AFTER DEDUCING THE COST OF THE ASSET FROM THE SALE PROCEE DS, THE BALANCE HAS BEEN DECLARED AS CAPITAL GAINS AND THER EFORE THE SALE PROCEEDS CANNOT BE PROBED UNDER SECTION 68 AND THE ASSESSEE CANNOT BE ASKED TO PROVE THE NATURE AND SO URCE OF THE MONIES. HIS FURTHER SUBMISSION IS THAT IN THE C ASES BEFORE US, IT IS THE DEPARTMENT WHICH SAYS THAT THE SALE P ROCEEDS ARE IN TRUTH UNDISCLOSED INCOME OF THE ASSESSEE AND THE Y HAVE MOVED FROM THE ASSESSEE AND HAVE BEEN BROUGHT BACK AS SALE PROCEEDS AND, THEREFORE, IT IS FOR THE ASSESSING OF FICER TO ADDUCE EVIDENCE TO SHOW THAT THE MONIES HAVE EMANAT ED FROM THE ASSESSEE. HE CONTENDS THAT THE APPARENT SH OULD BE TAKEN AS THE REAL STATE OF AFFAIRS AND IF THE DEPAR TMENT QUESTIONS THE SAME IT IS FOR THEM TO PROVE THAT THE APPARENT IS NOT THE REAL. THOUGH PRIMA FACIE THE ARGUMENT SEEMS TO BE ATTRACTIVE, WE ARE AFRAID THAT IT CANNOT BEAR CLOSE R SCRUTINY. SECTION 68 OF THE INCOME-TAX ACT ONLY GIVES STATUTO RY RECOGNITION TO THE WELL-SETTLED POSITION THAT ANY M ONIES FOUND CREDITED IN THE ACCOUNTS OF THE ASSESSEE HAVE TO BE PROVED BY THE ASSESSEE IN RELATION TO THEIR NATURE AND SOURCE. IT DOES NOT ENACT ANY NEW PRINCIPLE. EVEN LONG PRIO R TO THE INTRODUCTION OF THE SECTION, COURTS HAD HELD THAT A NY AMOUNTS FOUND CREDITED IN THE BOOKS OF THE ASSESSEE AND THE ASSESSEE OFFERED NO EXPLANATION ABOUT THE NATURE AND SOURCE THEREOF OR THE EXPLANATION OFFERED WAS NOT SATISFACTORY, TH E AMOUNTS 11 SO CREDITED COULD BE CHARGED TO INCOME-TAX AS INCOM E OF THE ASSESSEE.. 6.1 CONSIDERING THE TOTALITY OF THE FACTS IN LIGHT OF THE DECISION OF THE ITAT, DELHI, SPECIAL BENCH (SUPRA), WE DO NOT FIND ANY MERIT IN THE ADDITION SUSTAINED BY THE LD. CIT(A), HENCE, TH E ENTIRE ADDITION MADE BY THE AO IS DIRECTED TO BE DELETED. ACCORDI NGLY, THE ASSESSEES APPEAL IS ALLOWED AND GROUND NO. 2 RAISE D IN REVENUES APPEAL IS DISMISSED. 7. IN THE RESULT, THE ASSESSEES APPEAL IS ALLOWED. 8. WE WILL NOW DEAL WITH THE REVENUES APPEAL NO. 5877/DEL/2011. THE GROUND NO. 1 RELATES TO THE ADD ITION OF RS. 20.15 CRORES MADE ON ACCOUNT OF FAILURE ON THE PART OF ASSESSEE IN SUBMITTING CONFIRMATIONS REGARDING THE REIMBURSEMEN T OF DUTY DRAW BACK. FACTS ON RECORD SHOWS THAT WHILE SCRUTINIZIN G THE RETURN OF INCOME, THE ASSESSEE WAS ASKED TO EXPLAIN THE DUTY DRAW BACK OF RS. 20.15 CRORES WHICH IT CLAIMED AS REIMBURSED / REIMBURSABLE TO THE SUPPLIERS. IN ITS REPLY THE ASSESSEE SUBMITTE D THAT THE ENTIRE DUTY DRAW BACK RECEIVED BY THE ASSESSEE HAS BEEN CO MPLETELY PASSED BY IT TO SUPPORTING MANUFACTURERS. THE ASSES SEE ALSO SUBMITTED SAMPLE COPY OF VOUCHERS. THE EXPLANATION OF THE ASSESSEE DID NOT FIND ANY FAVOUR WITH THE AO WHO WAS OF THE FIRM BELIEF THAT THE ASSESSEE HAS NOT FURNISHED EVIDENCES IN RESPECT OF THE 12 REIMBURSEMENT OF ENTIRE DUTY DRAW BACK TO ITS SUPPL IERS. THE AO FURTHER OBSERVED THAT THE ASSESSEE HAS FAILED TO GI VE ON RECORD THAT SUCH DUTY DRAW BACK WERE ACTUALLY PASSED ON TO ITS SUPPORTING MANUFACTURERS WHICH IS A PRIMARY REQUIREMENT TO JU STIFY ITS CLAIM. THE AO ACCORDINGLY, MADE THE ADDITION OF RS. 20,15, 27,543/-. 9. BEFORE THE LD. CIT(A), THE ASSESSEE STRONGLY CON TENDED THAT THE AO NEVER ASKED FOR THE COMPLETE DETAILS AND TH E ASSESSEE CONSIDERING THE VOLUMINOUS DETAILS FILED ONLY SAMP LE COPIES OF DUTY DRAW BACK / REIMBURSEMENT. BEFORE THE LD. CIT(A), ASSESSEE FURNISHED THE COMPLETE DETAILS ALONGWITH SUPPORTING EVIDENCES AND DEMONSTRATE THAT THE DUTY DRAW BACK HAS BEEN REIMB URSED THROUGH THE ACCOUNT PAYEE CHEQUES TO THE SUPPORTING MANUFACTURERS OF THE EQUIVALENT AMOUNT AS SOON AS ITS ACCOUNT WAS CREDITED BY THE ELECTRONIC DUTY TRANSFER. LD. CIT(A) CONSIDERED TH E EVIDENCES ALONGWITH THE REMAND REPORT AND OBSERVED THAT THE A O HAS SENT THE NOTICES U/S. 133(6) OF THE ACT TO THE PARTIES WHO WERE NOT AT ALL IN THE LIST OF DUTY DRAW BACK. LD. CIT(A) FURT HER OBSERVED THAT OUT OF THE LIST OF 21 PARTIES IN RESPECT OF WHOM T HE DISALLOWANCE OF DUTY DRAW BACK WAS MADE, NOTICES WERE CORRECTLY SEN T ONLY TO 02 PARTIES. SINCE THE NOTICES NOT ISSUED TO THE CORRE CT PARTIES IN RESPECT OF WHOM THE DISALLOWANCE HAVE BEEN MADE. THE LD. CIT(A) FOUND THAT THE CLAIM OF THE ASSESSSEE WAS CORRECT ON PERUSING THE 13 COMPLETE DETAILS FURNISHED BY THE ASSESSEE AND ACCO RDINGLY DELETED THE DISALLOWANCE OF RS. 20,15,27,543/-. 10. BEFORE US THE LD. DR STRONGLY OBJECTED TO THE A DMISSION OF ADDITIONAL EVIDENCES. IT IS A SAY OF THE LD. DR THA T BY WAY OF ADDITIONAL GROUND, THE REVENUE HAS CHALLENGED THE A DMISSION OF ADDITIONAL EVIDENCES WHICH IS IN VIOLATION OF RULE 46A OF THE IT RULES. IT IS A SAY OF THE LD. DR THAT LD. CIT(A) OUGHT NOT TO HAVE CONSIDERED THE ADDITIONAL EVIDENCES FOR DELETING TH E DISALLOWANCE. STRONG RELIANCE WAS PLACED ON THE ASSESSMENT ORDER. 10.1 PER CONTRA, THE LD. COUNSEL REITERATED WHAT HA S BEEN STATED BEFORE THE LOWER AUTHORITIES AND DREW OUR ATTENTION TO THE PAPER BOOK CONTAINING DUTY DRAW BACK VOUCHERS OF ALL THE PARTIES WHICH RUNS INTO 422 PAGES. IT IS A SAY OF THE COUNSEL THA T AFTER EXAMINING THE COMPLETE DETAILS FURNISHED BY THE ASSESSEE, THE LD. CIT(A) HAS RIGHTLY DELETED THE ADDITION. 11. WE HAVE CAREFULLY GONE THROUGH THE ORDERS OF TH E AUTHORITIES BELOW. IT IS TRUE THAT DURING THE ASSESSMENT PROCEE DINGS, THE ASSESSEE FURNISHED SAMPLE COPIES OF VOUCHERS. IT IS EQUALLY TRUE THAT AO DID NOT ASK THE ASSESSEE TO FURNISH THE COMPLETE DETAILS. WE FIND THAT BEFORE THE LD. CIT(A), THE ASSESSEE HAS FURNIS HED THE COMPLETE DETAILS SUPPORTED BY VOUCHERS AND THE SAME ARE ALSO PLACED BEFORE US AS MENTIONED IN THE PAPER BOOK WHICH RUNS INTO 422 PAGES. WE 14 FIND THAT THE DUTY DRAW BACK HAS BEEN REIMBURSED BY THE ASSESSEE TO SUPPORTING MANUFACTURERS THROUGH ACCOUNT PAYEE CHEQUES. WE ALSO FIND THAT DURING THE ASSESSMENT PROCEEDINGS, T HE AO HAD ISSUED THE NOTICES U/S 133(6) OF THE I.T. ACT TO THE PERS ONS WHOSE NAMES WERE NOT THEREIN IN THE LIST OF DUTY DRAW BACK. THE REFORE, THERE WAS NO QUESTION OF THEM CONFIRMING THE TRANSACTIONS. T HE NOTICES TO 02 PARTIES WERE SENT CORRECTLY. THE CONFIRMATIONS AND THE TRANSACTION CONSIDERING THE FACTS IN HAND IN TOTALITY AND IN L IGHT OF VOLUMINOUS DOCUMENTARY EVIDENCES, WE DO NOT FIND ANY ERROR OR INFIRMITY IN THE FINDING OF THE LD. CIT(A), HENCE, WE DECLINE TO INT ERFERE WITH THE FINDING OF THE LD. CIT(A). ACCORDINGLY, THE GROUND NO. 1 RAISED BY THE REVENUE IS DISMISSED. 12. GROUND NO. 2 HAS ALREADY BEEN ADJUDICATED BY US IN ASSESSEES APPEAL, AS AFORESAID, THEREFORE, NO NEED FOR SEPAR ATE ADJUDICATION. 13. GROUND NO. 3 RELATES TO THE DELETION OF ADDITIO N OF RS. 56,00,000/- MADE ON ACCOUNT OF EXCESSIVE PAYMEN T OF SALARY TO DIRECTOR COVERED UNDER SECTION 40(A)(2)(B) OF THE I .T. ACT. 14. DURING THE COURSE OF SCRUTINY ASSESSMENT PROCEE DINGS, THE AO ASKED THE ASSESSEE TO EXPLAIN THE PAYMENT OF RS. 10 ,636,420/- MADE TO 02 PERSONS COVERED U/S. 40(A)(2)(B) OF THE ACT. THE ASSESSEE FURNISHED THE DETAILS OF REMUNERATION PAID TO DIRECTOR AND CLAIMED THE SAME AS PER INDUSTRY NORMS AND IS NOT I N EXCESS OF 15 EITHER LIMITS PRESCRIBED UNDER THE ACT OR THE INDUS TRY NORMS FOR THE PARTICULAR CLASS OF INDUSTRY. THE AO WAS OF THE OP INION THAT THE ASSESSEE HAS FAILED TO JUSTIFY THE NATURE OF SERVIC ES RENDERED BY THE DIRECTORS SO AS TO COMMAND SUCH A HUGE REMUNERATION . THE AO ACCORDINGLY, RESTRICTED THE REMUNERATION TO RS. 50 LACS AND TREATED THE BALANCE OF RS. 56 LACS TO THE INCOME OF THE ASS ESSEE. 15. ASSESSEE STRONGLY AGITATED THE MATTER BEFORE TH E LD. CIT(A) AND VEHEMENTLY CONTENDED THAT THE AO HAS NOT COME T O ANY LOGICAL CONCLUSION NOR HAS GIVEN ANY COGENT REASONS TO JUST IFY THE DISALLOWANCE. IT WAS BROUGHT TO THE NOTICE OF THE L D. CIT(A) THAT THE AO HAS GROSSLY FAILED TO SHOW THAT SUCH EXPENDITURE IS EXCESSIVE AND OR UNREASONABLE. 16. AFTER CONSIDERING THE FACTS AND SUBMISSIONS, TH E LD. CIT(A) OBSERVED THAT IN THE CASE IN HAND, THE EMPLOYEES A RE NOT THE INTERESTED PARTIES RATHER THEY ARE PROFESSIONALLY Q UALIFIED EMPLOYEES. THE LD. CIT(A) FURTHER OBSERVED THAT THE AO HAD FAILED TO BRING ON RECORD OR SUBSTANTIATE THAT HOW SUCH SALARY PAYMENTS WERE ACTUALLY EXCESSIVE. LD. CIT(A) ACCOR DINGLY DELETED THE ADDITION. 17. BEFORE US, THE LD. DR STRONGLY SUPPORTED THE F INDINGS OF THE AO. PER CONTRA, THE LD. COUNSEL FOR THE ASSESSEE REITERATED WHAT HAS BEEN STATED BEFORE THE LOWER AUTHORITIES. 16 18. WE HAVE CAREFULLY CONSIDERED THE ORDERS OF THE AUTHORITIES BELOW. THE UNDISPUTED FACT IS THAT THE AO HAS NOT BROUGHT ANY COMPARABLE CASE TO DEMONSTRATE THAT THE PAYMENTS MA DE BY THE ASSESSEE WERE EXCESSIVE/ UNREASONABLE. A PLAIN RE ADING OF SECTION 40A(2)(B) SHOW THAT ONUS HAS BEEN CAST UPON THE AO TO BRING ON RECORD COMPARABLE CASES TO DEMONSTRATE THAT THE TRA NSACTIONS MADE BY THE ASSESSEE WITH THE RELATED PARTIES ARE UNREAS ONABLE AND EXCESSIVE. THE AO HAS FAILED TO BRING SUCH COMPARA BLE CASE ON RECORD. 18.1 WE FURTHER FIND THAT THE PAYEES ARE ALSO ASSES SED TO TAX AT THE SAME RATE OF TAX. THE CBDT CIRCULAR NO. 6-P DATED 06.07.1968 STATES THAT NO DISALLOWANCE IS TO BE MADE U/S. 40A( 2) IN RESPECT OF THE PAYMENTS MADE TO THE RELATIVES AND SISTER CONCE RNS WHERE THERE IS NO ATTEMPT TO EVADE TAX. THIS CIRCULAR HAS BEEN CONSIDERED BY THE HONBLE BOMBAY HIGH COURT IN THE CASE OF CIT VS. IN DO SAUDI SERVICES (TRAVEL) P. LTD. 310 ITR 306. CONSIDERING THE TOTALITY OF THE FACTS IN LIGHT OF THE CBDT CIRCULAR (SUPRA), WE DO NOT FIND ANY REASON TO INTERFERE WITH THE FINDINGS OF THE LD. CI T(A). ACCORDINGLY, THE GROUND NO. 3 RAISED BY THE REVENUE IS DISMISSED . 19. BEFORE CLOSING BY WAY OF ADDITIONAL GROUND THE REVENUE HAS CHALLENGED THE ADMISSION OF ADDITIONAL EVIDENCES BY THE LD. CIT(A) WHICH IS IN VIOLATION OF RULE 46A OF THE IT RULES. WE DO NOT FIND ANY 17 MERIT IN THIS CHALLENGE OF THE REVENUE. SINCE THE A DDITIONAL EVIDENCES WERE TRANSMITTED TO THE AO AND THE AO RES PONDED THE SAME BY SUBMITTING 02 REMAND REPORTS, THEREFORE, IT CANNOT BE SAID THAT AO WAS NOT GIVEN ANY OPPORTUNITY OF BEING HEAR D. 20. IN THE RESULT, THE REVENUES APPEAL IS DISMISSE D. 21. IN THE RESULT, THE ASSESSEES APPEAL IS ALLOWED AND REVENUES APPEAL IS DISMISSED. THE ORDER IS PRONOUNCED IN THE OPEN COURT ON 30.06 .2020. SD/- SD/- [SUSHMA CHOWLA] [N.K. BILLAIYA] VICE PRESIDENT ACCOUNTANT MEMBER DATED: 30 TH JUNE, 2020 SRB COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR ASST. REGISTRAR, ITAT, NEW DELHI