ACIT, New Delhi V. M/s. Tirupati Constwell Pvt. Ltd., New Delhi

ITA 6687/DEL/2016

• Counselvise Citation: [2021] 104 COUNSELVISE.COM (IT) 8270 (ITAT-DELHI)
• Duration Of Justice: 4 year(s) 10 month(s) 18 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-11-2021
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: G
• Assessment Year: 2013-2014
• Appeal Filed On: 28-12-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: PRAKASH DUBEY
• Section: 68; 143(3); 153A; 13

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH, ‘G’: NEW DELHI (Through Video Conferencing) BEFORE SHRI R.K. PANDA, ACCOUNTANT MEMBER AND MS. SUCHITRA KAMBLE, JUDICIAL MEMBER ITA No.6687/DEL/2016 [Assessment Year: 2013-14] ACIT, CC-18, Room No.102, ARA Centre, E-2, Jhandewalan Extn. New Delhi M/s Tirupati Constwell Pvt. Ltd. Plot No.3, Dwarka City Centre, Sector-10, Dwarka, New Delhi-110017 PAN-AACCT2478E Appellant Respondent Appellant by Shri Prakash Dubey, SR & Sh. H.K. Chaudhary CIT-DR Respondent by Sh. Mahavir Singh, Advocate Date of Hearing 08.09.2021 Date of Pronouncement .11.2021 ORDER PER R.K. PANDA, AM, This appeal filed by the Revenue is directed against the order dated 27.10.2016 of the Ld. CIT(A)-27, New Delhi, relating to Assessment Year 2013-14. 2. Facts of the case, in brief, are that the assessee company is engaged in the business of construction and building. It filed its return of income on 01.10.2013 declaring total loss of Rs.3,62,92,158/-. During the course of assessment proceedings, the AO observed from the balance sheet of the 2 ITA No.6687/Del/2016 assessee company that it has taken unsecured loans from the directors amounting to Rs.2,97,36,151/-. He, therefore, asked the assessee to furnish the details of unsecured loans taken during the year and evidences along with confirmation with copy of bank accounts. Since, the assessee did not produce the requisite details, the AO again asked the assessee regarding the details of the unsecured loans and to produce the balance sheets, P & L Accounts, bank statements and all the documents to prove the creditworthiness and identity of the parties involved and the genuineness of these transactions. The assessee filed submission along with copy of Income Tax Return of the directors. However, the AO noted that the income shown in the return by the parties is substantially less than loans which have been provided by them. He, therefore, held that the assessee company failed to prove the parameters of creditworthiness of the parties involved and genuineness of these transactions since no bank statements of these parties were provided by the assessee. In view of the above, the AO made addition of Rs.2,97,36,151/- to the total income of the assessee. 3. Similarly, from the balance sheet of the assessee company, the AO noted that the assessee company has sundry 3 ITA No.6687/Del/2016 creditors amounting to Rs.1,86,07,496/-. He, therefore, asked the assessee to furnish the details of sundry creditors and their confirmations along with copy of bank accounts. Since, the assessee did not furnish the same, the AO again asked the assessee to furnish the details. In absence of any documents filed by the assessee to prove the identity of the parties involved and the genuineness of the sundry creditors, the AO made addition of Rs.1,86,07,496/- to the total income of the assessee. 4. The AO noticed from the P & L account of the assessee company that it has claimed other expenses of Rs.2,44,20,111/-. He, therefore, asked the assessee to furnish the details of expenses exceeding Rs.1,00,000/-. Since, the assessee did not furnish the same, the AO again asked the assessee to furnish the complete details of the break up and justification of expenses in terms of turnover of the other expenses claimed. The assessee file a detailed submission. However, the AO was not satisfied on the ground that it is only a reproduction of the annexure of P & L account with ledger accounts and the assessee failed to submit any other document such as corresponding bills or vouchers and justification of these expenses. The AO, therefore, made addition of 4 ITA No.6687/Del/2016 Rs.2,44,20,111/- to the total income of the assessee. Thus, the AO determined the total income of the assessee at Rs.3,64,71,600/-. 5. Before the Ld. CIT(A), it was submitted that the AO made addition of Rs.2,97,36,151/- u/s 68 of the Act which includes opening balance of Rs.2,11,38,322/- appearing in the name of Mr. Subhash Dabas and another Rs.43,16,566/- appearing in the name of Mr. Suraj Mal Dabas. It was argued that the opening balance cannot be added u/s 68 of the Act. It was further argued that the assessee company has furnished the confirmations, ITR, PAN and address of the lender during the assessment proceedings. The assessee has discharged the primary onus cast upon it. It was argued that the assessee during the year under consideration has received only Rs.50 lakhs in form of unsecured loan from Mr. Subhash Dabas. It was further submitted that Mr. Subhash Dabas has provided cash of Rs.50 Lakhs to the assessee company out of income surrendered by him amounting to Rs.3 Crores in the earlier search conducted in year 2006. Relying on various decisions, it was argued that since the assessee company has provided all 5 ITA No.6687/Del/2016 requisite details/documents to discharge the primary onus cast upon it, the addition made by the AO is not sustainable. 6. So far as, the addition of Rs.1,86,07,496/- made by the AO on account of unexplained sundry creditors is concerned, it was argued that identity of these creditors is never in doubt since the assessee is dealing with these creditors since last so many years and their identity and genuineness have never been doubted by any of the predecessor of the AO . It was argued that balances with these creditors were duly examined and all details relating to these creditors were provided to the AO and were found satisfactory by them. The assessee company has already been assessed in past four consecutive years and no addition has been made in this regard in any of the preceding assessment years. The assessee further submitted that the sundry creditors are running accounts and the purchases and payments have been made from/to them in the next years as well. The assessee company also provided copy of bank statement through which payments have been made to these creditors. The various invoices issued to all these parties were also brought to the notice of the Ld. CIT(A) and it was accordingly argued that since the AO has accepted the purchases/sales/services 6 ITA No.6687/Del/2016 provided/received and trading results of the assessee company, therefore, the sundry creditors cannot be disallowed. Relying on various decisions, it was argued that addition on account of sundry creditors should be deleted. 7. So far as the disallowance on account of other expenses amounting to Rs.2,44,20,111/- is concerned, it was argued that the accounts of the assessee company are duly audited and the AO has not raised any question about the authenticity of the accounts of the company. The details of expenses for the year ending 31.03.2012 and 31.03.2013 were produced before the Ld. CIT(A) in tabular form, according to which, the expenses for the AY 2012-13 were 21.74% of the turnover whereas for the impugned assessment year such expenses are @ 16.07% of the total turnover. Further, in the preceding years, no such disallowance was made by the concerned AO in scrutiny assessment. It was accordingly argued that the addition made by the AO is purely based on surmises and presumption and no addition is called for. 8. Based on the arguments advanced by the ld. counsel for the assessee, the Ld. CIT(A) deleted all the three additions. 7 ITA No.6687/Del/2016 9. So far as, addition of Rs.2,97,36,151/- is concerned, the Ld. CIT(A) deleted the same by observing as under:- 6.3 I have considered the facts of the case, Assessment order, written submission of the appellant company filed during the course of appellate proceedings. I have also perused the case laws relied upon by the appellant company in support of its case. The impugned addition was made by the Assessing Officer on the ground that the appellant company has failed to prove credit worthiness, identity of the parties involved and genuineness of the unsecured loans. In the course of appellate proceedings, the appellant company has submitted that the addition made in this regard is not sustainable in the eyes of law as the appellant company has provided copy of confirmation, ITR return, PAN and address of the lender during the year under consideration. 6.3.1 I have perused from the documents that the assessing officer has taxed the opening balances of unsecured loan also. It is a settled law that opening balances which is already examined in the previous years is not liable to tax in the current year. The case law quoted by the appellant company ‘M/s Sooraj Leathers vs Income Tax Officer’ is directly related to the issue. Accordingly the addition made to the extent of opening balance is liable to be deleted. 6.3.2 Regarding remaining addition of Rs. 50,00,000/-, I have observed that the appellant company has provided copy of ITR, confirmation and address of the lender. The Appellant Company has discharged his primary onus of providing evidences. It is for the assessing officer to make further enquiry on the basis of documents provided by the appellant company. In the instant case, during the course of appeal proceedings, the relevant details filed by the appellant mentioned above would constitute an acceptable proof or an 8 ITA No.6687/Del/2016 acceptable explanation by the appellant that would prima facie satisfy the ingredients of section 68. It is a matter of fact that the assessing officer himself have jurisdiction of the lender. With necessary information on hand, the Assessing Officer was unjustified in making the addition by drawing an adverse inference. 6.3.3 From the Assessment order it is seen that the Assessing Officer did not acknowledge the confirmation alongwith the PAN and ITR of the appellant which are relevant regarding the identity, capacity and genuineness of the unsecured loans available on record. Without considering these documents, simply rejecting the same does not warrant an addition to the ground that the appellant did not submit details to satisfy the provisions laid down u/s 68 of the Act. Ground raised in appeal is allowed. 10. So far as the addition on account of sundry creditors amounting to Rs.1,86,07,496/- is concerned, the Ld. CIT(A) deleted the same by observing as under:- 7.3 I have considered the facts of the case, Assessment order, written submission of the appellant company filed during the course of appellate proceedings. I have also perused the case laws relied upon by the appellant company in support of its case. The impugned addition was made by the Assessing Officer on the ground that the appellant company did not prove the identity and genuineness of the sundry creditors. In the course of appellate proceedings, the appellant company has submitted that addition made in respect of the sundry creditors is not sustainable as the parties/creditors are the regular creditors and their genuineness and identities have already been assessed in 9 ITA No.6687/Del/2016 past. Further all the payments to these creditors have been made through account payee cheques and there is no element of cash involved. The AR of the Appellant Company has also produced sample copies of ledger account and invoices during the appellant proceedings. 7.3.1 I have perused all the facts and documents submitted by the appellant company and found no deficiency in their originality. Further I have noticed that the Assessing Officer has not mentioned any section or provisions of the Income Tax Act, 1961 under which he has made such additions. The Assessment order is vague in this regard. 7.3.2 I have also noticed that the Assessing Officer has not conducted any enquiry either from the bank or from the creditors before proceeding further. All the details such as address, registration number, etc are mentioned on the invoices. The Assessing Officer could dig out all other details required in this connection from the assessment records which is already in his possession. Further the assessing officer has not doubted the genuineness of the purchases of the appellant company. Once purchases are accepted by assessing officer, then there is no question of doubting the genuineness of the creditors. 7.3.3 Therefore, the addition made amounting to Rs. 1,86,07,496/- is not sustainable and hence the same is liable to be deleted. Ground raised in appeal is allowed. 11. Regarding the disallowance of Rs.2,44,20,111/- on account of other expenses, the Ld. CIT(A) deleted the same by observing as under:- 8.3 I have considered the facts of the case, Assessment Order, written submissions of the appellant filed during the appellant proceedings. I have also perused the case laws 10 ITA No.6687/Del/2016 relied upon by assessing officer and appellant in support of their views. The impugned addition was made by the Assessing Officer on the ground that the appellant company has failed to prove the justification of these expenses and substantiate the claim with any documentary evidences. The appellant company has submitted that it has provided ledger accounts, copies of bank statements through which these expenses has been paid, audited accounts and original invoices for verification during the assessment proceedings to the assessing officer. The Assessing Officer has alleged that complete details of breakup of the expenses has not been provided to him but I have noticed that the same has already been given in the audited profit & loss account of the appellant company. 8.3.1 I have also noticed that the assessing officer has disallowed some of expenses such as Electricity charges, gas charges, etc for which no justification is required. Further from the comparison of the expenses incurred in the current year with that of previous year expenses, I have not found any major variance. It is surprising that these details are the part of audited balance sheet and profit & loss account which is on records of the assessing officer but he still overlooks the same without providing any specific findings. 8.3.2 As the accounts of the appellant company are audited accounts, the possibility of personal element in these expenses is overruled. As the expenditures are met through proper banking channels and no cash element is present in case in hand, therefore there is no iota of doubt regarding genuineness of these expenditures. There is no reason to disturb the operational results of the company especially when the corresponding income has been accepted by the assessing officer. 8.3.3 Accordingly, in the background of the aforesaid discussions and precedent and in the lack of any specific finding, I hold that the addition made on account of expenditure deserves to be deleted. Ground raised in appeal is allowed.” 12. Aggrieved with such order of the Ld. CIT(A), the Revenue is in appeal before the Tribunal by raising the following grounds of appeal:- 1. On the facts and in the circumstances of the case, the 11 ITA No.6687/Del/2016 Ld.CIT(A) has erred in law in deleting the addition of Rs.2,97,36,151/- on account of unsecured loans u/s 68 of the Act overlooking the provisions of section 106 and 114 of the Indian Evidence Act where the onus to prove the veracity and justification of the transaction and genuineness of the lenders lies on the assessee and the assessee company failed to prove the genuineness of the lenders by providing the balance sheet, P & L Accounts, ITRs, bank statements and all the documents of the parties involved. 2. On the facts arid in the circumstances of the case, the Ld.CIT(A) has erred iir law in deleting the addition of Rs.l,86,07,496/- on account of sundry creditors without proper appreciation of the provisions of section 106 and 114 of the Indian Evidence Act where the onus to prove the veracity and justification of the transaction and genuineness of the creditors lies on the assessee and the assessee company failed to prove the genuineness of the sundry creditors by providing the balance sheet, P & L Accounts, ITRs, bank statements and all the documents of the parties involved. 3. On the facts and in the circumstances of the case, the Ld.CIT(A) has erred in law in deleting the addition of Rs.2,44,20,111/- on account of disallowance of other expenses without proper appreciation of the provisions of section 106 and 114 of the Indian Evidence Act where the onus to prove the veracity and justification of the transaction and genuineness of the creditors lies on the assessee and assessee company failed to prove the justification of these expenses and substantiate its claim with any documentary evidences. 13. The ld. DR strongly challenged the order of the Ld. CIT(A) in deleting the additions made by the AO. He submitted that no remand report has been called for from the AO, therefore, he has no objection if the matter is restored to the file of the AO for fresh adjudication. 14. The ld. Counsel for the assessee, on the other hand, heavily relied on the order of the Ld. CIT(A) and submitted that 12 ITA No.6687/Del/2016 when the assessee has furnished all the details/documents or evidences, the AO was not justified in making the additions which is purely based on surmises and presumption. So far as the addition of Rs.2,97,36,151/- u/s 68 of the Act is concerned, he submitted that without verifying the opening balance, the AO simply made addition of the total amount outstanding in the balances. He submitted that the assessee during the year has received only Rs.50 lakhs from Sh. Subhash Dabas and Mr. Subhash Dabas was assessed to tax under the very same Assessing Officer for the same Assessment Year. The assessee has furnished the copy of ITR, PAN and address. Therefore, no addition should have been made by the AO on the opening balances. So far as, the amount received during the year is concerned, he submitted that in view of voluminous details filed before the AO, no addition was required to be made and the ld.CIT(A) has rightly deleted the addition. 15. So far as, the sundry creditors are concerned, he submitted these creditors are continuously dealing with the assessee company and purchases have not been doubted. Further, the payments have been made to these creditors in subsequent years through normal banking channels. Therefore, 13 ITA No.6687/Del/2016 the Ld. CIT(A) has properly decided the issue and deleted the addition. 16. So far as, the other expenses are concerned, the ld. Counsel for the assessee drew the attention of the Bench to the details of expenses for the preceding year as well as current year which is reproduced in page 12 and 13 of the order of CIT(A) and submitted that these are routine expenses and commensurate with the turnover of the assessee company. Further, such expenses as a percentage of the turnover is 16.07% for the current year as against 21.74% in the preceding year. He accordingly submitted that the Ld. CIT(A) has rightly deleted the additions. 17. We have considered the rival arguments made by both the sides, perused the orders of the Assessing Officer and the learned CIT(A) and the paper book filed on behalf of the assessee. We have also considered the various decisions relied on by both the sides. The first issue raised in the ground by the Revenue is regarding the deletion of addition of Rs.2,97,36,151/- on account of unsecured loan u/s 68 of the Act. We find the AO made the addition on the ground that the balance sheet of the company is showing unsecured loan from the director 14 ITA No.6687/Del/2016 amounting to Rs.2,97,36,151/- and the assessee filed only copy of ITR of the parties and the income shown in the return of income is much less than the amount of loan advanced. A perusal of the details filed before the Ld. CIT(A) shows that the assessee company has taken only an amount of Rs.50 lakhs from director Sh. Subhash Dabas whose confirmation and copy of ITR, PAN and address, etc were filed before the AO. The details of the opening balance and the amount received during the year are as under:- Name of the Director Opening Balance (in Rs.) Amount received during the year Amount repaid during the year Closing Balance (in Rs.) Mr. Subhash Dabas 2,11,38,322.00 50,00,000.00 7,18,737.00 2,54,19,585.00 Mr. Suraj Mal Dabas 43,16,566.00 0.00 0.00 43,16,566.00 18. A perusal of the above shows that the total outstanding of Rs.2,97,36,151/- includes the opening balance of Rs.2,54,54,888/-. In our opinion, the opening balance of Rs.2,11,38,322/- against the name of Mr. Subhash Dabas and Rs.43,16,566/- against the name of Mr. Suraj Mal Dabas could not have been added u/s 68 of the Act. So far as the amount of Rs.50 lakhs is concerned, as noted earlier, the assessee has filed the copy of confirmation, acknowledgment of income-tax return, 15 ITA No.6687/Del/2016 address, copy of PAN, etc. before the Assessing Officer. It is pertinent to mention here that the director Mr. Subhash Dabas is assessed under the very same Assessing Officer which is the Assessing Officer of the present assessee. It is also to be noted that Mr. Subash Dabas had surrendered Rs.3 Crores in cash during the search proceedings in his case during the year 2006 which when the first search took place. In view of the above and in view of the detailed reasoning given by the Ld. CIT(A) on this issue, we do not find any infirmity in the same. Accordingly, the first ground raised by the Revenue is dismissed. 19. So far as, the second ground is concerned, the same relates to the order of the Ld. CIT(A) in deleting the addition of Rs.1,86,07,496/-on account of sundry creditors from various parties. We find the AO made the addition of the same on the ground that assessee company has shown sundry creditors amounting to Rs.1,86,07,496/- and the assessee did not furnish the requisite details such as P & L Account, bank statement, and balance sheet, etc. of those creditors for his examination. We find the Ld. CIT(A) deleted the addition, the reasons of which have already been reproduced in the preceding paragraph. It is the submission of the ld. Counsel for the assessee that these are 16 ITA No.6687/Del/2016 running accounts of the creditors with whom the assessee is dealing continuously and all the payments were made through banking channel. Further, sales have been accepted and therefore, no disallowance on account of sundry creditor is called for. We find merit in the above arguments of the ld. Counsel for the assessee. As rightly argued, the turnover/receipts has not been doubted by the Assessing Officer. The submission of the ld. Counsel for the assessee that the assessee is continuously dealing with these parties year after year and the payments so outstanding in the balance sheet have been made in subsequent years could not be controverted by the Ld. DR. In view of the above discussion and in view of the detailed reasoning given by the ld. CIT(A) on this issue, we do not find any infirmity in his order. Accordingly, the same is upheld. Ground no. 2 filed by the Revenue is dismissed. 20. So far as, the third ground of the Revenue is concerned, the same relates to the order of the Ld. CIT(A) in deleting the addition of Rs 2,44,20,111/- on account of other expenses. We find the AO made the addition on the ground that the assessee did not furnish the complete details of the break up and justification of expenses in terms of turnover of the “other 17 ITA No.6687/Del/2016 expenses” claimed. We find the Ld. CIT(A) deleted the addition, the reasons of which have already been reproduced in the preceding paragraph. We do not find any infirmity in the order of the Ld. CIT(A) on this issue. A perusal of the details of other expenses disallowed by the AO along with their corresponding figures incurred in the previous year which have been provided to the Ld. CIT(A) during the appeal proceeding and has been reproduced by him in the body of the appeal order at pages 11 and 12 of his order are as under:- Particulars of Expenses Expenditure for year ending 31 st March, 2013 (in Rs.) Expenditure for year ending 31 st March, 2012 (in Rs.) Advertisement Expenses 2,73,855.50 1,87,661.00 Audit Fees 1,12,360.00 1,65,000.00 Business Promotion - 21,044.00 Courier and Postage Exp 7,629.00 988.00 Franchise Charges 22,05,689.00 20,02,203.00 Gardening Charges - 19,800.00 Insurance Charges 3,01,267.00 2,15,373.00 Lab Testing Expenses 10,112.00 9,928.00 Other Admin Expenses 5,02,835.39 1,17,422.00 Monthly Common Expense 89,79,743.00 71,20,981.00 Printing and Stationery 3,69,874.00 4,31,838.00 Professional Charges 11,45,571.00 1,72,945.00 Telephone Expenses 2,40,303.00 1,42,122.00 Fees, Rates & Taxes - 10,04,629.00 Other Repair & Maintenance 16,05,226.00 1,04,153.00 Vehicle Running & Maint. 2,14,978.00 1,15,679.00 Repair & Maintenance 4,71,085.00 Security and Housekeeping Charges 10,77,277.00 7,73,642.00 Travelling and Conveyance 17,714.00 30,745.00 Washing Charges 11,299.00 - Freight & Cartage Expenses 3,95,199.50 - Coal Expenses 98,226.00 - Commission 2,663.00 - 18 ITA No.6687/Del/2016 Electricity Charges 20,94,255.00 - Gas Charqes 44,62,410.00 - Discount on sale 1,04,419.89 - Job Work 1,87,205.00 - Total 2,44,20,111.28 1,31,07,238.00 Revenue from Operations 15,19,19,835.82 6,02,74,199.00 % of Turnover 16.07% 21.74% 21. A perusal of the above expenses for the current year as well as preceding year, shows that these are routine expenses and such expenses are 16.07% of the total turnover for the current year as against 21.74% of the turnover of the preceding assessment year. In the preceding assessment year, the assessment was completed u/s 153A r.w.s. 143(3) of the Act and no such query was raised nor any disallowance was made. Since, the expenses incurred by the assessee are routine expenses and as a percentage of turnover is less than the preceding assessment year wherein the assessment was completed u/s 153A/143(3) of the Act and no addition or disallowance was made, therefore, we are of the considered opinion that there is no infirmity in the order of the Ld. CIT(A) deleting the addition made by the AO. We, therefore, uphold the same and the ground no. 3 of the Revenue is dismissed. 19 ITA No.6687/Del/2016 22. In the result, the appeal of the Revenue is dismissed. Order was pronounced in the open court on 17/11/2021. Sd/- Sd/- [SUCHITRA KAMBLE] [R.K.PANDA] JUDICIAL MEMBER ACCOUNTANT MEMBER Delhi; Dated: 17/11/2021. f{x~{tÜ? f{x~{tÜ?f{x~{tÜ? f{x~{tÜ? Copy forwarded to: 1. Appellant 2. Respondent 3. CIT 4. CIT(A) 5. DR Asst. Registrar, ITAT, New Delhi