M/s. SCT Ltd., Ghaziabad V. JCIT, Ghaziabad

ITA 6959/DEL/2014

• Counselvise Citation: [2018] 119 COUNSELVISE.COM (IT) 2194 (ITAT-DELHI)
• Duration Of Justice: 3 year(s) 10 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-11-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: G
• Assessment Year: 2011-2012
• Appeal Filed On: 24-12-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: S S RANA
• Keywords: Onus to prove
• Section: 142(1); 37(1)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL (DELHI BENCH G : NEW DELHI) BEFORE SHRI H.S. SIDHU, JUDICIAL MEMBER AND SHRI N.K. BILLAIYA, ACCOUNTANT MEMBER ITA NO. 6959/DEL/2014 ASSESSMENT YEAR: 2011-12 M/S SCT LTD., VS. JCIT, RANGE-2, C-15, INDUSTRIAL AREA, GHAZIABAD MEERUT ROAD, GHAZIABAD (PAN: AACCS03654G) (APPELLANT) (RESPONDENT) ASSESSEE BY : SH. SANJIV SAPRA, ADV. REVENUE BY : SH. S.S. RANA, CIT(DR) ORDER PER H.S. SIDHU, JM:- THE ASSESSEE HAS FILED THE APPEAL AGAINST THE ORDE R DATED 08.11.2017 OF THE LD. CIT(A)-1, GURGAON PERTAINI NG TO ASSESSMENT YEAR 2010-11 ON THE FOLLOWING GROUNDS:- 1. THAT THE LD. CIT(A) HAS ERRED IN CONFIRMING THE ADDITION OF RS. 9,46,999/- MADE BY AO U/S. 40A(2)(B ). THE IMPUGNED ADDITION BEING ERRONEOUS AND UNTENABLE IN LAW AND LAW AND ON FACTS OF THE CASE BE KINDLY DELETED. 2. THAT THE ASSESSMENT HAVING BEEN MADE BY APPLYING NET PROFIT RATE RESULTING IN AN OVERALL ADDITION OF RS. 26,11,564/-, THE IMPUGNED SEPARATE SPECIFIC ADDITIO N OF RS. 9,46,999/- WHICH TANTAMOUNT TO DOUBLE ADDITI ON 2 IN PRINCIPLE BEING UNTENABLE IN LAW UNDER THE FACT S AND CIRCUMSTANCES OF THE CASE BE KINDLY DELETED. THE OBSERVATION AND FINDING OF THE LD. CIT(A) IN PA RA 4.1 THAT THE FACTS AND THE ISSUES INVOLVED ARE IDENTICAL. ARE MISCONCEIVED AND INCORRECT IN THIS CONTEXT. 3. THAT THE LD. CIT(A) IS NOT JUSTIFIED IN REJECTING T HE ASSESSEES GROUND OF APPEAL PERTAINING CHARGING OF PENAL INTEREST U/S. 234B/C UNDER THE FACTS OF THE C ASE. 2. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSE E IS A PRIVATE LIMITED COMPANY WHO IS ENGAGED IN THE BUSINESS OF MANUFACTU RING OF TRANSFORMERS WHICH IS MANUFACTURING INSTRUMENTS TRA NSFORMERS FOR POWER HOUSES OF VARIOUS ELECTRICITY BOARDS IN ALL OVER IN DIA AND A 100% GOVT. SUPPLY COMPANY. THE ASSESSEE FILED ITS E-RETURN OF INCOME ON 28.9.2011 DECLARING INCOME OF RS. 2,34,13,869/-. THE CASE OF THE ASSESSEE WAS SELECTED UNDER SCRUTINY THROUGH CASS A ND THE STATUTORY NOTICE U/S. 143(2) OF THE INCOME TAX ACT, 1961 (IN SHORT ACT) WAS ISSUED ON 18.9.2012 WHICH WAS DULY SERVED UPON THE ASSESSE E WITHIN STIPULATED TIME AS PER LAW FIXING THE DATE FOR COMPLIANCE ON 2 7.9.2012. FURTHER NOTICE U/S. 142(1) OF THE ACT DATED 3.7.2013 ALONGWITH DET AILED QUESTIONNAIRE WAS ISSUED TO THE ASSESSEE FIXING THE CASE FOR 15.7.201 3. IN COMPLIANCE TO THESE NOTICES, THE AR OF THE ASSESSEE APPEARED FROM TIME TO TIME AND FILED NECESSARY DETAILS/ EXPLANATIONS AS CALLED FOR FROM TIME TO TIME VIDE ORDER SHEET ENTRIES. THE DETAILS HAVE BEEN EXAMINED. BOOK S OF ACCOUNTS, BILLS AND 3 VOUCHERS PRODUCED AND HAVE BEEN TEST CHECKED. THER EAFTER ASSESSMENT WAS COMPLETED VIDE ORDER DATED 9.1.2014 PASSED U/S 143 (3) OF THE ACT AT AN INCOME OF RS. 2,69,72,432/- BY MAKING AN ADDITION OF RS. 26,11,564/- ON ACCOUNT OF ENHANCED NET PROFIT RATE AND BY MAKING A FURTHER DISALLOWANCE OF RS. 9,46,999/- U/S. 40A(2)(B) OF THE I.T. ACT. A GAINST THE ASSESSMENT ORDER, THE ASSESSEE APPEALED BEFORE THE LD. CIT(A), WHO VIDE HIS IMPUGNED ORDER DATED 25.9.2014 HAS DISMISSED THE APPEAL OF THE ASSESSEE. AGGRIEVED WITH THE IMPUGNED ORDER, THE ASSESSEE IS IN APPEAL BEFORE THE TRIBUNAL. 3. LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE ISSUE IN DISPUTE IS SQUARELY COVERED IN FAVOUR OF THE ASSESSEE IN ITS OWN CASE DECIDED BY THE COORDINATE BENCH OF THE TRIBUNAL VIDE ORDER DATED 1 2.6.2018 FOR THE PRECEDING ASSESSMENT YEAR 2010-11 PASSED IN ITA NO . 3148 (DE) OF 2014. FOR READY REFERENCE, HE HAS FILED THE COPY OF THE SAID DECISION. HENCE, HE REQUESTED TO FOLLOW THE AFORESAID DECISION IN THE P RESENT CASE AND ADDITION IN DISPUTE MAY BE DELETED. 4. ON THE CONTRARY, LD. DR RELIED UPON THE ORDERS O F THE AUTHORITIES BELOW. 5. WE HAVE CAREFULLY CONSIDERED THE RIVAL CONTENTIO NS AND ALSO PERUSED THE ORDERS OF THE LOWER AUTHORITIES AND THE ORDER D ATED 12.6.2018 OF THE COORDINATE BENCH OF THE TRIBUNAL FOR THE PRECEDING ASSESSMENT YEAR 2010- 11 PASSED IN ITA NO. 3148 (DE) OF 2014 IN ASSESSEE S OWN CASE. FOR THE 4 SAKE OF CONVENIENCE, WE ARE REPRODUCING HEREWITH TH E RELEVANT FINDINGS OF THE TRIBUNAL AS UNDER:- 6. WE HAVE CAREFULLY CONSIDERED THE RIVAL CONTENTIO NS AND ALSO PERUSED THE ORDERS OF THE LOWER AUTHORITIES. ADMITTEDLY IN THE PRESENT CASE THE ASSESSEE HAS PAID THE SUMS OF ITS RELATED PARTY HAVING COMMON DIRECTORS. THE LEARNED ASSESSING OFFICER HAS INVOKED THE PROVISIONS OF SEC TION 40A(2)(B) OF THE ACT THERE CANNOT BE ANY QUARREL AB OUT THE INVOKING OF THE ABOVE PROVISION. HOWEVER, THE REV ENUE AUTHORITIES AFTER INVOKING SUCH PROVISION SHOULD HA VE SHOWN THAT HOW THE PAYMENT MADE BY THE ASSESSEE IS EXCESS IVE OR UNREASONABLE COMPARED TO THE MARKET RATES. THE CLAI M OF THE ASSESSEE WAS ALSO THAT BOTH THE RECIPIENT AS WELL A S THE PAYEE COMPANY ARE ASSESSED TO TAX AT SAME RATE AND, THER EFORE, IT CANNOT BE SAID THAT THE ABOVE PAYMENT MADE BY THE A SSESSEE COMPANY TO SISTER COMPANY IS AT UNREASONABLE RATES TO EVADE TAXES. SUCH AN ARGUMENT FIND SUPPORT FROM THE DECIS ION OF THE HONBLE GUJARAT HIGH COURT IN THE CASE OF ACIT VS. GUJARAT GAS FINANCIAL SERVICES LTD. 60 TAXMAN.COM 483 (GUJ. ) FURTHER THE LEARNED ASSESSING OFFICER ALSO DID NOT SHOW ANY MATERIAL SUCH AS COMPARABLE RATES ETC. TO COME TO CONCLUSION THAT EXCESSIVE PAYMENT WAS MADE TO SISTER CONCERN W HICH 5 WARRANTED DISALLOWANCE. IN VIEW OF THE ABOVE, WE AL SO DRAW SUPPORT FROM DECISION OF THE HONBLE GUJARAT HIG H COURT IN CIT VS. ENVIRO CONTROL ASSOCIATE PVT. LTD. 43 TA XMAN.COM 291 (GUJ) IN DELETING THE ABOVE ADDITION. FURTHER FOR MAKING A DISALLOWANCE UNDER SECTION 40A(2) OF THE ACT, TH E ONUS TO PROVE UN REASONABLENESS AND THEN TO DERIVE THAT TH E PAYMENT IS EXCESSIVE IS ON ASSESSING OFFICER. MERELY SA YING THAT THERE WERE COMMON DIRECTORS ETC. AND FURTHER RAISI NG DOUBTS MERELY ON THE DETAILS OF THE SERVICES, THE DISALLOW ANCE CANNOT BE SUSTAINED. AS THE LEARNED ASSESSING OFFICER HA S DISALLOWED THE PAYMENT INVOKING THE SECTION 40A(2)( B) NOW IT CANNOT BE SAID THAT NO SERVICES HAVE BEEN RENDERED BY THE ASSESSEE. IN THAT CASE THE WHOLE DISALLOWANCE SHOU LD HAVE BEEN MADE UNDER SECTION 37(1) OF THE ACT. WHEN THE ASSESSING OFFICER HAS INVOKED THE PROVISIONS OF SECTION 40A(2 )(B) IT NECESSARY IMPLIES THAT SUCH EXPENSES ARE OTHERWISE ALLOWABLE, BUT BECAUSE OF CERTAIN PAYMENT TO RELATED PARTIES T HE DISALLOWANCE IS MADE. IN VIEW OF THIS, WE DO NOT F IND ANY REASON TO SUSTAIN THE DISALLOWANCE OF RS. 96,59,518 /- . 5.1 AFTER PERUSING THE AFORESAID FINDING OF THE TR IBUNAL, WE ARE OF THE VIEW THAT SIMILAR AND IDENTICAL ISSUE HAS BEEN DEAL T BY THE TRIBUNAL AND DECIDED IN FAVOUR OF THE ASSESSEE, AS AFORESAID, HE NCE, THE ISSUE IN DISPUTE 6 IS SQUARELY COVERED BY THE AFORESAID DECISION. TH EREFORE, RESPECTFULLY FOLLOWING THE AFORESAID DECISION OF THE COORDINATE BENCH IN ASSESSEES OWN CASE IN THE PRECEDING ASSESSMENT YEAR 2010-11, WE DELETE THE ADDITION IN DISPUTE AND ALLOW THE GROUND RAISED BY THE ASS ESSEE. 6. IN THE RESULT, ASSESSEES APPEAL IS ALLOWED. ORDER PRONOUNCED ON 16-11-2018. SD/- SD/- (N.K. BILLAIYA) (H.S. SIDHU) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED : 16-11-2018 SR BHATANGAR COPY FORWARDED TO: 1.APPELLANT 2.RESPONDENT 3.CIT 4.CIT(A), NEW DELHI. 5.CIT(ITAT), NEW DELHI. AR, ITAT NEW DELHI.