Rahul Anil Ahuja, Gurgaon V. ITO WARD - 31(1), New Delhi

ITA 6028/DEL/2019

• Counselvise Citation: [2023] 100 COUNSELVISE.COM (IT) 4930 (ITAT-DELHI)
• Duration Of Justice: 4 year(s) 4 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-11-2023
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: F
• Next Hearing Date: 21-11-2023
• Assessment Year: 2013-2014
• Appeal Filed On: 14-07-2019
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Keywords: Bogus purchase; Unexplained cash credit; Depreciation; Additional evidence; Reasonable cause; Corroborative evidences; Retraction
• Section: 68; 69; 143(3); 133(6); 80G; 143(2); 69A; 13

Judgement Text

ITA Nos.- 6028 & 6029/Del/2019 Rahul Anil Ahuja Page 1 of 13 IN THE INCOME TAX APPELLATE TRIBUNAL (DELHI BENCH: ‘F’: NEW DELHI) BEFORE: SHRI M. BALAGANESH, ACCOUNTANT MEMBER AND MS. ASTHA CHANDRA, JUDICIAL MEMBER ITA No:- 6028 & 6029/Del/2019 ( Assessment Year: 2013-14 & 2014-15) Rahul Anil Ahuja, 1111, Ground Floor, DLF Phase- 4,Gurugram, Haryana-122002. Vs. Income Tax Officer, Ward 31(1), New Delhi. PAN No: AADPA6478K APPELLANT RESPONDENT Assessee by : None Revenue by : Shri P N Barnwal, CIT(DR) Date of Hearing : 22.11.2023 Date of Pronouncement : 30.11.2023 ORDER PER M. BALAGANESH, AM These appeals of the Assessee arises out of the orders of the Commissioner of Income Tax (Appeals)-11 and 31, New Delhi, [hereinafter referred to as [CIT(A)] in Appeal No. 46/16-17 and 84/17-18/231/2016-17, dated 08.03.2018 and 27.08.2018 against the order passed by ITO, Ward- 31,(1), New Delhi (hereinafter referred to as the ‘Ld. AO’) under section 143(3) ITA Nos.- 6028 & 6029/Del/2019 Rahul Anil Ahuja Page 2 of 13 of the Income Tax Act (hereinafter referred to as ‘the Act’) on 31.03.2016 for the Assessment Year 2013-14 and dated 31.12.2016 for Assessment Year 2014- 15. 3. At the outset, we find that these appeals were listed for hearing from 14.06.2022 and 13.06.2022 for the Assessment Years 2013-14 and 2014-15 respectively. Thereafter these appeals were listed on several occasions and in none of the occasion, there was any representation from the side of the assessee nor any adjournment application was filed. The notices were duly served on the assessee. We find that the assessee is not interested in prosecuting these appeals. Hence, we deem it fit to dispose of these appeals on the Ld. DR and based on materials available on record. 4. The assessee has raised the following grounds before us for Assessment Year 2013-14:- “1. On the facts and circumstances of the case, the order passed by the learned CIT(A)is bad both in the eyes of law and on facts. 2. The learned CIT(A) did not consider the facts and circumstances of the case that the Id AO has erred in law in disallowing the purchases of Rs 9.36,46,565/-, 5,66,91,800/- and 11,68,38,540/- made by the assessee from M's sunshine International, M/s Kumar Enterprises and Aar Pee Enterprises respectively during the year. 3. The learned CIT(A) did not consider the facts and circumstances of the case that the ld AO has incorrectly stated in the order that the assesee was unable to prove the genuineness of the purchases transactions though sales has been accepted by ld AO. ITA Nos.- 6028 & 6029/Del/2019 Rahul Anil Ahuja Page 3 of 13 4. The learned CIT(A) did not consider the facts and circumstances of the case that the Id AO has wrongly disallowed the interest paid of Rs. 1,38,389/- where as AO could not establish the fact that the advances were given for non business purpose. 5. The learned CIT(A) did not consider the facts and circumstances of the case that the Id AO has erred in law in disallowing the additions of Rs 1.24,84,533/. made to the capital by the assessee as unexplained cash credit. 6. The learned CIT(A) did not consider the facts and circumstances of the case that the id AO has accepted Sales for the year disallowing the purchases made by the assessee without bringing any adverse and cogent material on record and without explaining how sales could be effected by the assessee without making purchases. If AO has accepted sales transactions of the assessee then the Id AO ought to accept purchases made by the assessee in the interest of natural justice. 7. The learned CIT(A) did not consider the facts and circumstances of the case that the Id AO has never rejected the books of accounts before making any addition of purchases. 8.That the appellant reserves the right to add/amend/delete any grounds of appeal during the course of hearing." 5. We have heard the Ld. DR and perused the materials available on record. The assessee, a proprietor of M/s Mulitrade Overseas, is engaged in the business of export of fabrics, aluminium, brass, plastic bangles, cosmetics, ladies sweaters & dresses, leather goods and garments. The main export overseas customers of the assessee are located in Afghanistan. The assessee has also made some sale in local market in respect of fabrics. The major portion of the goods are purchased from Delhi and Rajasthan by the assessee and then exported. In the Assessment for the assessment year 2013-14, the Ld. AO made the following additions:- ITA Nos.- 6028 & 6029/Del/2019 Rahul Anil Ahuja Page 4 of 13 a) addition made on account of unverifiable sundry creditors “Sunshine International” – Rs. 9,26,46,565/- b) addition on account of unverifiable sundry creditors “Kumar Enterprises” – Rs. 5,66,91,800/- c) disallowance made on account of bogus purchase from M/s AAR PEE Enterprises – Rs. 11,68,38,540/- d) disallowance on interest of Rs. 1,38,389/- e) addition made on account of introduction on capital –Rs. 1,24,84,533/-. After making of the aforesaid additions, the Ld. AO completed the assessment for the Assessment Year 2013-14 u/s 143(3) on 31.03.2016 determining total income of Rs. 28,01,41,200/-. 6. The Ld. CIT(A) upheld the action of the Ld. AO by observing as under: 4. Ground nos. 1, 7 & 8 of the appeal are general in nature and do not need any separate comments. 5. Ground nos. 2, 3 and 4 of the appeal are related to the addition made by the AO on account of bogus purchases from various suppliers. 5.1 The brief facts of the case are that the appellant is engaged in the export and local trading of various goods like fabric, aluminum and brass items, cosmetics, leather goods etc. The appellant has filed return of income belatedly on 02.05.2014. The case was selected for scrutiny under CASS due to the reason of large amount of sundry creditors, mismatch of sales turnover reported in audit report and ITR. The AO had issued notices u/s 143(2) & 142(1) of the Act on various dates. These notices were sent through speed ITA Nos.- 6028 & 6029/Del/2019 Rahul Anil Ahuja Page 5 of 13 post as well as through e- mail. As there was no compliance to these notices, the AO also obtained two more addresses from the appellant's bank i.e. Oriental Bank of Commerce and issued notices at these addresses also. 5.2 The AO asked the appellant to furnish the complete details of sundry creditors/debtors and the parties from whom purchases have been made during the year. The AO issued notices u/s 133(6) of the Act to some of these creditors in order to verify the transactions with these parties. The AO had issued these notices to four parties and the result of these notices is discussed as under: 5.2.1 M/s Sunshine International The notice issued by the AO was returned undelivered with the remarks "not known". The appellant has shown to have made purchases of Rs. 9,26,46,565/- from this party, against which the appellant had made a payment of Rs. 30 lakhs only on 28.02.2013 and the balance amount of Rs. 8,96,46,565/- is shown as outstanding at the year end. The AO has considered that the appellant has failed to prove the genuineness of these purchases and has treated the same as bogus and has made the addition of Rs. 9,26,46,565/-. 5.2.2 Kumar Enterprises- The notice issued by the AO was returned undelivered with the remarks "lying vacant". The appellant has shown to have made purchases of Rs. 5,66,91,800/- from this party through 82 invoices. The AO has noted that all these invoices are numbered from 1 to 82 showing that M/s Kumar Enterprises has not made any sales to any other party. The entire amount of Rs. 5,66,91,800/- has been shown as outstanding at the year end. The AO has considered that the appellant has failed to prove the genuineness of these purchases and has treated the same as bogus and has made the addition of Rs. 5,66,91,800/-. 5.2.3 Asr Pee Enterprises- The notice issued by the AO was served but no reply was received by the AO. The appellant had filed a confirmation from Sh. Gurpreet Singh. The AO subsequently received a confirmation signed by Sh. Ravinder Pandey on 28.03.2016. The AO issued another notice u/s 133(6) of the Act at the address mentioned in this confirmation letter and deputed his inspector to verify the genuineness of the transaction and also of the confirmation received in dak. The inspector reported that the addresses mentioned in the confirmation letters are bogus ie. no party by the name of Aar Pee Enterprises existed at these addresses. The appellant has shown to have made purchases of Rs. 11,68,38,540/- from this party. The AO has ITA Nos.- 6028 & 6029/Del/2019 Rahul Anil Ahuja Page 6 of 13 considered that the appellant has failed to prove the genuineness of these purchases and has treated the same as bogus and made the addition of Rs. 11,68,38,540/-. 5.2.4 While making the above addition on account of bogus purchases, the AO had relied upon the decision of Hon'ble Allahabad High Court in the case of Ganesh Rice Mills vs. CIT ITR no. 84 of 1990. 5.3 During the course of appellate proceedings, the AR filed the copies of ledger accounts of the three parties in the books of the appellant and also submitted that sufficient opportunity had not given by the AO to produce these parties and requested that the matter may be remanded to the lower authorities. The AR also submitted that the appellant is ready to produce the three parties before the AO in respect of which the addition has been made on account of bogus purchases in order to prove the genuineness of these purchases. Accordingly, the AO was asked vide this office letter dated 18.07.2017 to give sufficient opportunity to the appellant to prove the genuineness of the purchases. The AO has submitted the remand report vide letter dated 05.02.2018. The AO has contended that the appellant can file additional evidence under Rule 46A only in the circumstances specified in the said Rule, and only if he is able to give a reasonable cause for not producing the additional evidence earlier before the AO (Bimal Kumar Anand Kumar vs. CIT(Allahabad) 288 ITR 278). It is to be noted that the appellant has not filed any application for additional evidence under Rule 46A, but has requested to give another opportunity to produce these parties before the AO. The AO has further stated that the appellant was given opportunity vide letters dated 02.08.2017, 31.10.2017 and 11.01.2018, but the appellant has failed to produce any party or any other evidence before the AO during the course of remand proceedings. The AO has further submitted that the case of the appellant for AY 2010-11 has also been reopened on the basis of information received from Investigation wing, but the appellant is not complying to the notices in those proceedings also. 5.4 After the receipt of remand report of the AO, the case was posted for hearing in order to give further opportunity to the appellant. However, there has been no response to this notice. 5.5 On perusal of the facts of the case and the material on record, it has become clear that the appellant has failed to prove the genuineness of the transactions undertaken by him with the three parties to whom the AO had ITA Nos.- 6028 & 6029/Del/2019 Rahul Anil Ahuja Page 7 of 13 issued notices u/s 133(6) of the Act. The appellant has failed to prove the genuineness of the purchases made from these three parties despite repeated opportunities given to him both at the time of assessment and during the course of appellate proceedings. The AO has made sincere efforts to serve the notices to the appellant at various addresses and also to make verifications at various addresses belonging to the three parties in question. It is also observed that the appellant has failed miserably to discharge his primary onus to prove the genuineness of the claim of purchases made in the ITR. In view of these facts, the addition made by the AO on account of bogus purchase from these three parties is upheld and the grounds of appeal are dismissed. 6. Ground no. 5 of the appeal is related to the addition of Rs. 1,38,389/- made by the AO on account of disallowance of interest. 6.1 The AO noted that the appellant has claimed an interest of Rs. 1,38,389/- in the P&L account and has also given an interest free loan/advance of Rs. 3,05,94,000/-. The appellant was asked to show that the interest-bearing funds have not been diverted for non-business purposes for granting interest free loans. It was contended by the AR that a sum of Rs. 79,039/- has been paid as interest on car loan and the balance Rs. 59,350/- was paid for business loan. The AO was not satisfied with the reply of the appellant and has disallowed the interest of Rs. 1,38,389/- 6.2 During the course of appellate proceedings, the AR has reiterated the arguments taken before the AO and has submitted that the advance of Rs. 3.05 crores given without interest by the appellant related to the business. However, the appellant has failed to furnish any documentary evidence or fund flow statement to show that interest-bearing funds have not been diverted for making interest free advances and also to prove that these advances are related to the business. In view of this, the addition made by the AO is confirmed and the ground of appeal is dismissed. 7. Ground no. 6 of the appeal is related to the addition of Rs. 1,24,84,533/- made by the AO on account of unexplained cash credit u/s 68 of the Act. 7.1 The brief facts are that the appellant has shown an addition of Rs. 1,24,84,533/- to his capital and had submitted that he had received back a loan given earlier to M/s Kritivi Enterprises Pvt. Ltd. and submitted a confirmation letter from the said party. The AO observed from the balance sheet as on 31.03.2012 that an amount of Rs. 25,28,66,687/- was recoverable from M/s Kritivi Enterprises Pvt. Ltd. by the appellant and from the balance ITA Nos.- 6028 & 6029/Del/2019 Rahul Anil Ahuja Page 8 of 13 sheet as on 31.03.2013, the balance is shown as nil, meaning thereby that the appellant has received the complete amount of Rs. 25,28,66,687/-. As the figures did not reconcile, the AO has treated the addition of Rs. 1,24,84,533/- to the capital as unexplained cash credit and has made the addition u/s 68 of the Act. 7.2 During the course of appellate proceedings, the AR has reiterated the arguments taken before the AO and has submitted the copy of ledger account of M/s Kritivi Enterprises Pvt. Ltd. in its books of account. However, the appellant has failed to furnish any documentary evidence to show the genuineness of the transaction and to reconcile the figures reflected in the balance sheet as pointed out by the AO. It is observed that the appellant has failed to satisfactorily explain the source of the addition of Rs. 1,24,84,533/- made to his capital. In view of this, the addition made by the AO is confirmed and the ground of appeal is dismissed. 8. As a result, the appeal is dismissed. 7. No supporting evidences have been submitted by the assessee in support of the grounds of appeal raised and to controvert aforesaid findings of the Ld. CIT(A). Hence, we do not deem it fit to interfere in the aforesaid order of the Ld. CIT(A). Accordingly, the grounds raised by the assessee are dismissed. 8. In the result, appeal of the assessee for Assessment Year 2013-14 is dismissed. 9. The assessee has raised the following grounds of appeal for Assessment Year 2014-15. “1.. On the facts and circumstances of the case, the order passed by the learned CTT(A) is bad bet in the eyes of law and on facts. ITA Nos.- 6028 & 6029/Del/2019 Rahul Anil Ahuja Page 9 of 13 2. The learned CIT(A) did not consider the facts and circumstances of the case that the lid AO has made an addition of Rs. 33,03,94,263/- considering the loan amount as undisclosed income and brushed aside all the evidences produced in support of his claims. Even the confirmation and the supporting documents submitted by the loan provider directly to the AO had not been considered as genuine. 3. The learned CIT(A) did not consider the facts and circumstances of the case that the lid AO has erred in treating the amount Rs. 3,01,42,000/- belonging to the assessee which was looted during the transit for deposit into bank. This amount was out of sale proceeds duly recorded in the books of accounts and substantiated with sale bills. This amount has already been declared as a part of gross revenue/sales by the assessee himself. 4. The learned CIT(A) did not consider the facts and circumstances of the case that the ld AO has not considered the debit note of accessories and car insurance amounting to Rs. 1,72,850/- even though the copy of the debit note of accessories and car insurance has been produced before the Id AO and disallowed depreciation thereon even though depreciation of car purchased of Rs. 14,53,137/- was allowed by AO. 5. That the appellant reserves the right to add/amend/delete any grounds of appeal during the course of hearing." 10. We have heard the Ld. DR and perused the materials available on record. In the assessment completed by the Ld. AO u/s 143(3) of the Act, dated 31.12.2016 for the Assessment Year 2014-15, the following additions were made:- a) addition on account of unsecured loans from M/s Kritvi Enterprises Pvt. Ltd. – Rs. 33,03,94,263/- b) addition made on account cash u/s 69A of the Act – Rs. 3,01,42,000/-, c) disallowance of depreciation on plant and machinery – Rs. 12,963/-, ITA Nos.- 6028 & 6029/Del/2019 Rahul Anil Ahuja Page 10 of 13 d) disallowance of deduction u/s 80G of the Act– Rs. 3000/- 11. The aforesaid additions were upheld by the Ld. CIT(A) by observing as under in respect of each of the additions:- Addition on account of unsecured loans U/s 68 of the Act 4.3 I have considered the findings recorded by the Id. AO as per the assessment order, the submission of the appellant, the position of the law and the facts of the case on record. In this case the appellant had shown to have taken an unsecured loan from one M/s Kritvi Enterprises Pvt. Ltd( herein after called Kritvi). During the year under consideration, after certain repayment the outstanding balance at the end of the year stood at Rs. 330394263/-. As per the assessment order, the Ld. AO gave number of opportunities to the appellant to establish the aforesaid cash credits in terms of the provision of the section 68 of the Act. The Ld. AO has recorded that as many as 16 opportunities were provided to the appellant in all an after the lapse of 4 months the address of the cash creditors was provided. In order to provide the genuineness of the cash credit a notice u/s 133(6) was issued to the creditor which was return by the postal authority with the remarks" incomplete address". The appellant was duly confronted by the AO with the above. In the meantime a confirmation was received by post by the AO from Kritvi furnishing a copy of the ledger accounts. In view of the facts and circumstances of the Ld. AO directed the assessee to produce Principal Officer of Kritvi for verification, he also directed his inspector to conduct spot inquiries and the later reported that the premise of Kritvi was closed since last one and a half years and no business activity is done on there. The Ld. AO also noted that no income of return was filed by Kritvi for the assessment under consideration that for the assessment year 2013-14 for which a return was filed only an income of Rs. 3,10,120/-. On going through the bank statement of Kritvi the Ld. AO observed that each time a loan was advanced to the appellant there was an immediate credit in the bank account of Kritvi Under these facts and circumstances, the Ld. AO did not filed a cash credit to be genuine and added back to the same to the total amount of the appellant income u/s 68. From the above, it is seen that various opportunities were given by the Ld. AO to the appellant to produce the creditor, however, the same was not complied with. Hence the identity of the appellant remains doubtful as records the creditor it is seen that no return of income for the assessment year under records was filed. In the return of the immediate preceding year only an income of Rs.310120/- was shown. It was also reported by the inspector after spot ITA Nos.- 6028 & 6029/Del/2019 Rahul Anil Ahuja Page 11 of 13 inquiry that no business inquiry was conducted by the creditor at the place of which the address was supplied by the appellant. Just- because that the amounts were transferred through banking channel does not make the entire transactions is genuine. In view of the aforesaid analysis, addition amounting to Rs. 33,03,94,263/- is hereby confirmed.” Addition on account of unexplained money u/s 69A of the Act 5.3 In this case a cash of Rs. 3,01,42,000/- was looted by the robbers from the staff of the appellant while a cash was in transit an FIR was filed by the appellant with the Police which reported the matter to the Investigation Wing. Subsequently a statement of the assessee was recorded by the DDIT (Inv) Unit 1(1) New Delhi wherein a appellant admitted the cash to have been generated out of his unaccounted trading of fabric. During the course of the statement he offered the said amount of Rs.3,01,42,000/- as additional income for the AY 2014-15 admitting that he had not mentioned any books of accounts or other details like names and purchase of the seller and the buyers etc. However, subsequently the appellant retracted from the declaration of additional income and took a stand that the aforesaid cash was out of the cash in hand which was accumulated for purchasing agricultural land. 5.4. During the assessment proceedings the Ld. AO found various discrepancies for example variation in the turnover in the return filed for VAT, Sale Bills submitted by the assessee did not bear the narne of the purchasers no stock register was submitted. The Ld. AO also observed that though the appellant had claimed that he was accumulating cash to purchase agricultural land however, there were constant cash deposits in the bank account which did not support the contention furthermore no evidence in support of the proposed deal to buy agricultural land at Bawa, Kotputli Road, Rajasthan was furnished. Under these circumstances rejecting the income the Ld. AO added back the said amount of Rs 3,01,42,000/- as income of the appellant u/s 69 A 5.5. As we can seen from the above the appellant immediate after the robbery the statement before the DDIT (Inv) surrendering the impugned amount of Rs 3,01,42,000/- lakhs as his income recorded income, he also admitting that the same was not recorded in the books of accounts and no details for the trading of the fabric names and buyers and sellers were available. However, subsequently the appellant retracted from the declaration. 5.6 I find that the retraction by the appellant is clearly an afterthought. The possession of unexplained money u/s 69A, as detailed above, stands established. As such, the addition of Rs.3,01,42,000/- u/s 69A stands confirmed.” ITA Nos.- 6028 & 6029/Del/2019 Rahul Anil Ahuja Page 12 of 13 12. No supporting evidences have been submitted by the assessee in support of the grounds of appeal raised and to controvert aforesaid findings of the Ld. CIT(A). Hence, we do not deem it fit to interfere in the aforesaid order of the Ld. CIT(A). Accordingly, the grounds raised by the assessee are dismissed. 13. Ground no. 4 raised by the assessee (supra) does not emanate out of the order of the Ld. CIT(A). Hence, the same is hereby dismissed. 14. In the result, the appeal of the assessee for Assessment Year 2014-15 is dismissed. 15. To sum up, both the appeals of the assessee are dismissed. Order pronounced in the open court on 30.11.2023. Sd Sd/- Sd/- (ASTHA CHANDRA) (M. BALAGANESH) JUDICIAL MEMBER ACCOUNTANT MEMBER Dated: 30 /11/2023 Pooja, Sr. P.S. Copy forwarded to: 1. Appellant 2. Respondent 3. CIT 4. CIT(Appeals) 5. DR: ITAT ITA Nos.- 6028 & 6029/Del/2019 Rahul Anil Ahuja Page 13 of 13 ASSISTANT REGISTRAR ITAT, NEW DELHI Draft dictated 23.11.23 Draft placed before author 29.11.23 Approved Draft comes to the Sr.PS/PS 30.11.23 Order signed and pronounced on File sent to the Bench Clerk Date on which file goes to the AR Date on which file goes to the Head Clerk. Date of dispatch of Order. Date of uploading on the website