Narendra Jain, Delhi V. ITO, New Delhi

ITA 6006/DEL/2016

• Counselvise Citation: [2017] 130 COUNSELVISE.COM (IT) 6626 (ITAT-DELHI)
• Duration Of Justice: 3 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-02-2017
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: E
• Assessment Year: 2012-2013
• Appeal Filed On: 24-11-2016
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Keywords: Bogus purchase; Additional evidence; Reasonable cause
• Section: 143(3); 133(6)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH E, NEW DELHI BEFORE SMT. BEENA A. PILLAI, JUDICIAL MEMBER AND SH. PRASHANT MAHARISHI, ACCOUNTANT MEMBER I.T.A. NO. 6006/DEL/2016 (ASSESSMENT YEAR 2012-13) APPELLANT BY : SH. VED JAIN RESPONDENT BY : SH. RAJESH KUMAR, SR. DR. DATE OF HEARING : 20.02.2017 DATE OF PRONOUNCEMENT: 28.02.2017 ORDER PER BEENA A. PILLAI, JM: 1. THE PRESENT APPEAL HAS BEEN PREFERRED BY ASSESSEE AGAINST ORDER DATED 31.10.2016 PASSED BY LD. CIT AP PEAL 16, NEW DELHI FOR ASSESSMENT YEAR 2012-13 ON THE FOLLOW ING GROUNDS OF APPEAL: 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, TH E ORDER PASSED BY THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) [CIT(A)] IS BAD BOTH IN THE EYE OF LA W AND ON FACTS. 2(I) ON THE FACTS AND CIRCUMSTANCES OF THE CASE , THE LEARNED CIT(A) HAS ERRED BOTH ON FACTS AND IN LAW I N NARENDRA JAIN 3691/8, GUPTA TRACTOR MARKET MORI GATE, DELHI GIR/PAN: AAHPJ8569J VS. IT O , WARD -47(4) NEW DELHI (APPELLANT) (RESPONDENT) ITA NO. 6006/DEL/2016 (AY2012-13) PAGE 2 OF 9 CONFIRMING THE ADDITION OF RS.1,80,23,832/- MADE BY AO ON ACCOUNT OF SUNDRY CREDITORS. (II) ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LEARNED CIT(A) HAS ERRED BOTH ON FACTS AND IN LAW I N NOT ADMITTING THE ADDITIONAL EVIDENCES FILED BY THE ASSESSEE UNDER RULE 46A, DESPITE THE FACT THAT THE ASSESSEE HAD REASONABLE CAUSE FOR NOT FILING SUCH EVIDENCES BEFORE THE AO. 3(I) ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LEARNED CIT(A) HAS ERRED BOTH ON FACTS AND IN LAW I N CONFIRMING THE ABOVESAID ADDITION MADE BY AO INVOKING THE PROVISIONS OF SECTION 41(1) OF THE ACT , DESPITE THE FACT THAT THIS NOT BEING A CASE OF REMI SSION OR CESSATION OF LIABILITY, PROVISIONS OF SECTION 4 1(1) CANNOT BE APPLIED TO THE SAME. (II) THAT THE AMOUNTS PAYABLE HAVING APPEARING I N THE BOOKS OF THE ASSESSEE AS WELL AS THAT OF CREDIT ORS, IT DOES NOT AMOUNT TO CESSATION OR REMISSION OF LIABILITY. 4. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LEARNED CIT(A) HAS ERRED BOTH ON FACTS AND IN LAW I N CONFIRMING THE ADDITION ON ACCOUNT OF CREDITORS IGNORING THE EXPLANATION BROUGHT ON RECORD BY THE ASSESSEE INCLUDING REPLIES DIRECTLY FILED BY THE CREDITORS TO THE AO IN RESPONSE TO NOTICE UNDER SEC TION 133(6) OF THE ACT.. 5. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, T HE LEARNED CIT(A) HAS ERRED BOTH ON FACTS AND IN LAW I N CONFIRMING THE ACTION OF THE AO IN MAKING ADDITION OF RS.47,000/- ON ACCOUNT OF LESS HOUSEHOLD WITHDRAWALS. ITA NO. 6006/DEL/2016 (AY2012-13) PAGE 3 OF 9 6(I) ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LEARNED CIT(A) HAS ERRED BOTH ON FACTS AND IN LAW I N CONFIRMING THE DISALLOWANCE OF 1/6 TH OF THE FOLLOWING EXPENSES MADE BY AO ON ACCOUNT OF PERSONAL ELEMENT:- VEHICLE RUNNING & MAINTENANCE RS.1,98,293 /- CONVEYANCE EXPENSES RS. 59 ,290/- TRAVELLING EXPENSES RS.2 ,01,967/- ENTERTAINMENT EXPENSES RS. 54 ,945/- RS.5,60,140/- (II) THAT THE ADDITION HAS BEEN CONFIRMED DESPITE THE EXPENSES HAVING BEEN INCURRED WHOLLY AND EXCLUSIVELY FOR THE PURPOSES OF BUSINESS. 7. THE APPELLANT CRAVES LEAVE TO ADD, AMEND OR ALT ER ANY OF THE GROUNDS OF APPEAL. 2. THE BRIEF FACTS OF THE CASE ARE AS UNDER: ASSESSEE FILED ITS RETURN OF INCOME DECLARING A TOT AL INCOME OF RS.56,76,730/- ON 29.09.2012. THE CASE WA S SELECTED FOR SCRUTINY AND NOTICES UNDER SECTION 143 (1) ALONG WITH QUESTIONNAIRE UNDER SECTION 143(2) WERE ISSUED TO ASSESSEE. DURING ASSESSMENT PROCEEDINGS, LD. AO OBS ERVED THAT ASSESSEE IS RUNNING A PROPRIETORSHIP CONCERN W ITH NAME AND STYLE OF M/S MICKY AUTOMOBILES, WHICH IS ENGAGE D IN THE BUSINESS OF WHOLESALE TRADING OF TRACTOR PARTS. SUB SEQUENTLY LD. AO OBSERVED THAT, DURING THE YEAR UNDER CONSIDE RATION, ASSESSEE HAD A LARGE AMOUNT OF SUNDRY CREDITORS. LD . AO CALLED FOR THE LIST OF CREDITORS ALONG WITH THE DET AILS AND CONFIRMATIONS FROM THE CREDITORS. IT IS RECORDED BY LD. AO THAT ITA NO. 6006/DEL/2016 (AY2012-13) PAGE 4 OF 9 LISTS OF CREDITORS ALONG WITH THEIR ADDRESSES WERE FILED BY ASSESSEE BUT PAN MEMBERS AND CONFIRMATIONS WERE NOT PROVIDED. LD. AO COMPLETED THE ASSESSMENT UNDER SEC TION 143(3) BY MAKING FOLLOWING ADDITIONS: S.NO PARTICULARS AMOUNT 1. ADDITION U/S 41(1) OF INCOME TAX ACT RS.1,80,23,832/ - 2. ADDITION ON ACCOUNT OF LOW HOUSE-HOLD CLAIMING RS.47,000/- 3. ADHOC DISALLOWANCES OF VARIOUS EXPENSES RS.1,27,389/- TOTAL RS.1, 81,98,221/- 3. AGGRIEVED BY THE ORDER PASSED, THE ASSESSEE PREFER RED APPEAL BEFORE LD. CIT (A). 4. BEFORE LD. CIT(A) ASSESSEE FILED CERTAIN DOCUMENTS UNDER RULE 46A BEING CONFIRMATIONS FROM THE PARTIES THAT WERE RECEIVED SUBSEQUENT TO ASSESSMENT PROCEEDINGS. IT WAS SUBMITTED BEFORE LD. CIT(A) THAT SAME CREDITORS WER E APPEARING IN THE SUCCEEDING ASSESSMENT YEARS (2013- 14) IN THE BOOKS OF ACCOUNTS OF ASSESSEE. LD. AO HAD ISSUE D SUMMONS UNDER SECTION 133(6) OF THE ACT TO THESE CR EDITORS FOR WHICH THE REPLIES WERE ALSO RECEIVED. HE HAD SU BMITTED THAT COPY OF LEDGER ACCOUNT OF M/S DATA METRICS TEC HNOLOGY LTD., BEING THE MAJOR CREDITOR, WAS FILED FOR ASSES SMENT YEAR 2012-13 ALONGWITH CONFIRMATION. LD. CIT(A) CALLED F OR A REMAND REPORT IN RESPECT OF THESE CONFIRMATIONS FRO M THE LD. AO. ITA NO. 6006/DEL/2016 (AY2012-13) PAGE 5 OF 9 5. LD. AO ON 08.07.2016 SUBMITTED REMAND REPORTS WHEREIN HE HAS ACCEPTED CONFIRMATIONS SUBMITTED BY M/S DATA METRICS TECHNOLOGY LTD., FOR ASSESSMENT YEAR 2 013-14. IT HAS FURTHER BEEN OBSERVED BY LD. AO THAT OPENING BALANCE IN CASE OF M/S DATA METRICS TECHNOLOGY LTD., WAS RS.10,33,81/-, WHICH HAS BEEN ADDED TO THE INCOME O F THE ASSESSEE IN ASSESSMENT YEAR 2012-13 AND SAME HAS BE EN REDUCED TO FINANCIAL YEAR RELEVANT TO ASSESSMENT YE AR 2013- 14 AT RS.9,98,89/-. LD. AO, THEREFORE, DID NOT MAKE ANY ADDITION FOR ASSESSMENT YEAR 2013-14 ON ACCOUNT OF CREDITORS, AS IT WAS ALREADY ADDED IN THE YEAR UNDE R CONSIDERATION. 6. LD. CIT(A) WITHOUT ADMITTING ADDITIONAL EVIDENCE, CONFIRMED ADDITIONS MADE BY ASSESSING OFFICER. 7. AGGRIEVED BY ORDER PASSED BY LD. CIT(A), ASSESSEE IS IN APPEAL BEFORE US NOW. 8. LD. AO SUBMITTED THAT AUTHORITIES BELOW HAD MADE ADDITION UNDER SECTION 41(1) OF THE ACT, BY INVOKIN G PROVISIONS OF SECTION 69C, WITHOUT THERE BEING ANY ALLEGATION OF BOGUS PURCHASE AND TRADING RESULTS HAVING BEEN A CCEPTED BY LD. AO. HE SUBMITTED THAT MAJOR CREDITOR THAT WA S OUTSTANDING WAS M/S DATA MATICS TECHNOLOGY LTD., AMOUNTING TO RS.1,44,10,910/-. HE SUBMITTED THAT AS CREDITOR RESPONDED TO THE SUMMONS ISSUED BY LD. AO FOR ASSESSMENT YEAR 2013-14, IT CANNOT BE SAID THAT ASS ESSEE HAS ITA NO. 6006/DEL/2016 (AY2012-13) PAGE 6 OF 9 FAILED TO ESTABLISH CREDITWORTHINESS AND GENUINENES S OF CREDITOR. HE EMPHASISED THAT EVIDENCES PRODUCED BY ASSESSEE BEFORE LD. CIT(A)S ARE VERY MUCH CRUCIAL FOR THE PU RPOSE OF DECIDING THIS ISSUE. LD. AR THUS REQUESTED FOR SET ASIDE IN ORDER TO CONSIDER THE ISSUE IN THE LIGHT OF THE DOC UMENTS FILED. 7. LD. DR DOES NOT OBJECT FOR THE SET ASIDE. 8. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS ADVANCED BY BOTH THE PARTIES IN THE LIGHT OF THE RECORDS PLACED BEFORE US. 9. FROM THE APPLICATION FILED BY ASSESSEE BEFORE LD. CIT(A) IT IS OBSERVED THAT, ASSESSEE HAD PRODUCED REQUISIT E MATERIAL, THOUGH FOR THE FIRST TIME, TO JUSTIFY THE CLAIM. LD . CIT(A) CALLED FOR REMAND REPORT FROM LD. AO, WHEREIN HE MAKES CER TAIN CATEGORICAL OBSERVATIONS IN RESPECT OF THE SAME CRE DITOR IN THE SUBSEQUENT ASSESSMENT YEARS. LD. AO ADMITS THAT, CR EDITOR UNDER CONSIDERATION BEFORE US HAS FILED CONFIRMATIO N IN RESPECT OF OUTSTANDING AMOUNT FOR ASSESSMENT YEAR 2 013-14. THIS MAKES IT AMPLY CLEAR THAT THE ASSESSING OFFICE R DO NOT DOUBT THE GENUINENESS AND CREDITWORTHINESS OF THE C REDITOR, AS HE HAS NOT MADE ANY ADDITION IN THE HANDS OF THE ASSESSEE IN THE SUBSEQUENT ASSESSMENT YEARS IN RESPECT OF T HIS CREDITOR. THEREFORE, TO OUR MIND THE ADDITIONAL EVI DENCE FILED WAS CRUCIAL TO THE DISPOSAL OF APPEAL, AND HAD A DI RECT BEARING ON THE CLAIM MADE BY THE ASSESSEE. ITA NO. 6006/DEL/2016 (AY2012-13) PAGE 7 OF 9 10. RULE 46A OF THE INCOME-TAX RULES, 1962, PERMITS TH IS TRIBUNAL TO ADMIT ADDITIONAL EVIDENCE, IF IT FINDS THAT CRUCIAL FOR DISPOSAL OF THE APPEAL. WE ARE ACCORDINGLY INC LINED TO ADMIT THE ADDITIONAL EVIDENCES FILED BY THE ASSESSE E AND SET ASIDE THIS ISSUE TO THE FILE OF LD. CIT(A), WHO WIL L NOW EXAMINE THIS ISSUE ON MERITS IN THE LIGHT OF THESE EVIDENCE S AS PER LAW. LD. CIT(A) IS DIRECTED TO GIVE A CLEAR FINDING IN R ESPECT OF IMPUGNED ADDITION. 11. AS WE ARE SETTING ASIDE THIS ISSUE IN GROUND NO. 3 & 4, RAISED BY THE ASSESSEE, GROUND NO.2 BEING INTERLINK ED, IS ALSO SET ASIDE TO LD. CIT (A). GROUND NO. 5 12. THIS GROUND HAS BEEN RAISED BY ASSESSEE IN RESPECT OF ADDITION MADE BY ASSESSING OFFICER ON ACCOUNT OF LE SS HOUSEHOLD WITHDRAWALS AMOUNTING TO RS. 47,000. 13 . LD. AR SUBMITS THAT ASSESSING OFFICER HAS ARBITRA RILY MADE ADDITION WITHOUT THERE BEING ANY JUSTIFIED REA SON. HE SUBMITTED THAT DURING ASSESSMENT PROCEEDINGS ASSESS ING OFFICER OBSERVED THAT ASSESSEE MADE CASH DRAWINGS O F RS.1,05,000, HIS SON MADE CASH DRAWINGS OF RS.1,48, 000/- AND HIS DAUGHTER WAS SELF DEPENDENT. LD. AR SUBMITS THAT ASSESSING OFFICER ESTIMATED HOUSEHOLD DRAWING OF RS . 25,000 PER MONTH, WITHOUT ANY BASIS AND AFTER CONSIDERING THE ITA NO. 6006/DEL/2016 (AY2012-13) PAGE 8 OF 9 DRAWINGS ALREADY MADE BY ASSESSEE, ADDITION OF RS.4 7,000 HAS BEEN MADE. 14. LD. DR ON THE CONTRARY SUPPORTED THE ORDERS PASSED BY AUTHORITIES BELOW. 15. WE HAVE CONSIDERED THE SUBMISSIONS OF BOTH THE SID ES, IN THE LIGHT OF RECORDS PLACED BEFORE US. WE AGREE WITH LD. AR THAT ESTIMATION MADE BY ASSESSING OFFICER HAS NO BA SIS. IN OUR VIEW, IN ABSENCE OF ANY MATERIAL TO SUSPECT OR CONC LUDE THAT THOUGH HOUSEHOLD EXPENSES WERE HIGHER, A LESSER EXP ENSE WAS SHOWN. WE ARE ACCORDINGLY INCLINED TO DELETE TH E ADDITION MADE BY LD. AO. IN THE RESULT THE GROUND STANDS ALLOWED. GROUND NO. 6 16. THIS GROUND IS IN RESPECT OF AN AD HOC DISALLOWANC E OF 1/6 EXPENDITURE INCURRED BY ASSESSEE. LD. AO HAS DISALLOWED VARIOUS EXPENSES ON THE GROUND THAT THERE IS A POSS IBILITY OF PERSONAL ELEMENT EMBEDDED IN THESE EXPENDITURE. ON AN APPEAL, LD. CIT(A) DELETED THE INCLUSION OF DEPRECI ATION ON CAR, CAR INSURANCE PAID AND STAFF WELFARE EXPENSES BEING, PURELY OFFICIAL IN NATURE. HOWEVER, HE SUSTAINED AD DITION IN PART, AS IN RESPECT OF REMAINING EXPENDITURE INCURR ED BY ASSESSEE OF THEIR BEING A PERSONAL ELEMENT EMBEDDED CANNOT BE OVER LOOKED. ITA NO. 6006/DEL/2016 (AY2012-13) PAGE 9 OF 9 17. AGGRIEVED BY ORDER PASSED BY LD. CIT (A,) ASSESSEE IS IN APPEAL BEFORE US NOW. 18. LD. AR SUBMITTED THAT THE EXPENSES DISALLOWED BY ASSESSING OFFICER ARE ON AD HOC BASIS AND DESERVES TO BE DELETED. 19. ON THE CONTRARY LD. DR, RELIED UPON THE ORDERS PAS SED BY AUTHORITIES BELOW. 20. WE HAVE PERUSED THE SUBMISSIONS ADVANCED BY BOTH T HE SIDES IN THE LIGHT OF THE RECORDS PLACED BEFORE US. 21. THE EXPENSES THAT HAVE BEEN CONSIDERED FOR DISALLOW ANCE ARE INTEREST ON CAR, VEHICLE RUNNING MAINTENANCE, C ONVEYANCE EXPENSES TRAVELLING EXPENSES AND ENTERTAINMENT EXPE NSES. IT IS OBSERVED THAT ASSESSEE HAS NOT BEEN ABLE TO ESTABLI SH THAT THESE ARE INCURRED PURELY AND EXCLUSIVELY FOR THE PURPOSE S OF BUSINESS. WE THEREFORE, AGREE WITH LD. CIT(A) THAT A N ELEMENT OF PERSONAL NATURE CANNOT BE IGNORED. WE ARE, THEREFOR E, NOT INCLINED TO INTERFERE WITH THE FINDINGS OF LD. CIT(A ). IN THE RESULT THIS GROUND IS DISMISSED. IN THE RESULT APPEAL FILED BY THE ASSESSEE STANDS P ARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 28 TH FEBRUARY, 2017. SD/- SD/- ( PRASHANT MAHARISHI ) (BEENA A. PILLAI) ACCOUNTANT MEMBER JUDICIAL MEMBER DATE: 28.02.2017 @M!T