ITO Ward 3 (2), V. Capscan Computers Forms (P) Ltd,

ITA 76/DEL/2008

• Counselvise Citation: [2009] 115 COUNSELVISE.COM (IT) 1242 (ITAT-DELHI)
• Duration Of Justice: 1 year(s) 10 month(s) 18 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-11-2009
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: B
• Next Hearing Date: 12-11-2009
• Assessment Year: 2004-2005
• Appeal Filed On: 09-01-2008
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: N K CHAND
• Assessee Lawyers: S KRISHNAN
• Keywords: Notional interest

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH B : NEW DELHI BEFORE SHRI D.R.SINGH, JM AND SHRI R.C.SHARMA, AM ITA NO.76/DEL/2008 ASSESSMENT YEAR : 2004-05 INCOME TAX OFFICER, WARD-3(2), NEW DELHI. VS. M/S CAPSCAN COMPUTER FORMS PVT.LTD., A-2/177, SAFDARJUNG ENCLAVE, NEW DELHI. PAN NO.AABCC4977C. (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI N.K.CHAND, DR. RESPONDENT BY : SHRI S.KRISHNAN, ADVOCATE. ORDER PER R.C.SHARMA, AM : THIS IS AN APPEAL FILED BY THE REVENUE AGAINST THE ORDER OF CIT(A) DATED 26.10.2007 FOR THE AY 2004-05. 2. RIVAL CONTENTIONS HAVE BEEN HEARD AND RECORD PER USED. IN THE FIRST GROUND, THE REVENUE IS AGGRIEVED FOR VIOLATION OF RULE 46A OF THE IT RULES. FACTS IN BRIEF ARE THAT ASSESSMENT WAS COMPLETED U/S 144. DURING THE COURSE OF APPELLATE PROCEEDINGS, THE ASSESSEE HAD PLACED ON RECORD NEW EVIDENCE ALONGWITH APPLICATION UNDER RULE 46A. CONTENTION OF THE ASSE SSEE WAS THAT DURING THE PERIOD CASE WAS FIXED BEFORE THE AO I.E. JUNE 2006 TO DECE MBER 2006, THE WHOLE OF THE DELHI CITY SPECIALLY THE TRADERS COMMUNITY SUFFERED AN ATMOSPHERE OF VIOLENCE, LOCK OUT, BANDHS DUE TO THE ON-GOING MCD SEALING DR IVE AS ORDERED BY THE SUPREME COURT. THE ASSESSEE COMPANY WAS ALSO A VIC TIM OF THESE CIRCUMSTANCES. COPIES OF THE PRESS NOTE WERE FURNISHED TO PROVE TH AT THERE WAS A TOTAL DISTURBANCE IN THE CAPITAL AND DUE TO THIS REASON, THE ASSESSEE COULD NOT PRESENT THE REQUIRED DETAILS BEFORE THE AO. AFTER CONSIDERING ALL THESE EVIDENCES, THE CIT(A) OBSERVED ITA-76/D/2008 2 THAT THERE WAS DISTURBANCE IN DELHI DURING THESE DA YS WHICH PREVENTED THE ASSESSEE TO ATTEND THE ASSESSMENT PROCEEDINGS AND IN FILING THE EVIDENCES. ACCORDINGLY, PROVISIONS OF RULE 46A ARE CLEARLY ATTRACTED. THER EAFTER, BY SENDING ALL THESE DOCUMENTS TO THE AO, THE CIT(A) CALLED FOR THE REMA ND REPORT AND AFTER CONSIDERING THE SAME DECIDED THE ISSUE ON MERITS. IN VIEW OF THESE FACTS, WE DO NOT FIND ANY MERIT IN THE OBJECTION RAISED BY THE R EVENUE WITH REGARD TO VIOLATION OF RULE 46A OF THE ACT. 3. NEXT GRIEVANCE OF THE REVENUE RELATES TO DELETIO N OF ADDITION OF RS.1,01,86,777/- ON ACCOUNT OF SUNDRY CREDITORS. 4. FROM THE RECORD, WE FOUND THAT THE AO MADE ADDIT ION OF RS.1,01,86,778/- TREATING THE TOTAL SUNDRY CREDITORS UNEXPLAINED AS THE ASSESSEE FAILED TO FILE THE DETAIL OF SUCH SUNDRY CREDITORS. FURTHER, THE AO I N HIS REMAND REPORT DATED 15.10.2007 STATED THAT SINCE NO DETAILS WERE PROVID ED, THE AO MADE ADDITION OF RS.1,01,86,778/- ON ACCOUNT OF UNEXPLAINED SUNDRY C REDITORS. 5. THE CIT(A) OBSERVED THAT THERE WERE TOTAL 14 PAR TIES, FOUR PARTIES WERE HAVING DEBIT BALANCE AND TEN PARTIES WERE HAVING CR EDIT BALANCE, NET CREDIT BALANCE WORKED OUT TO RS.1,01,86,777/-. THE CIT(A) OBSERVE D THAT AS PER THE LIST OF SUNDRY CREDITORS FURNISHED BEFORE HIM WHICH WERE AL SO SENT TO THE AO FOR HIS REMAND REPORT, ALL WERE PERTAINING TO THE BUSINESS TRANSACTION OF THE COMPANY. OUT OF SUCH SUNDRY CREDITORS, THERE WAS ONE MAJOR CREDI T BALANCE OF RS.1,14,39,171/- IN THE NAME OF M/S UNICORP. ON GOING THROUGH THE COPY OF ACCOUNT OF THAT PARTY, THE CIT(A) FOUND THAT IT WAS SHOWN AS OPENING BALANCE A S ON 1.4.2003. BY RECORDING HIS DETAILED FINDING AT PARA 2.2 & 2.3, THE CIT(A) DELETED THE ADDITION. THE FINDING SO RECORDED BY CIT(A) HAS NOT BEEN CONTROVE RTED BY THE LEARNED DR, KEEPING IN VIEW THE FACT THAT OUT OF THE TOTAL ADDI TION OF RS.1.01 CRORES ON ACCOUNT OF NET CREDIT BALANCE OF CREDITOR, EVEN A SINGLE CR EDITOR IN THE NAME OF M/S UNICORP WAS HAVING CREDIT BALANCE OF RS.1,14,39,171/-, WHIC H WAS SHOWN AS OPENING ITA-76/D/2008 3 BALANCE AS ON 1.4.2003. THUS, THERE WAS NO EFFECTI VE ADDITION IN THE CREDITORS DURING THE YEAR UNDER CONSIDERATION. IN THE INTERE ST OF JUSTICE WHILE DIRECTING THE DELETION OF ADDITION, THE CIT(A) HAS ALSO OBSERVED AS UNDER:- HOWEVER, THE AO IS AT LIBERTY TO EXAMINE THE GENUI NENESS OF SUNDRY CREDITORS AMOUNTING TO RS.11,14,39,171/- AS SHOWN A S OPENING BALANCE IN THIS YEAR IN THE NAME OF M/S UNICORP BY TAKING REMEDIAL MEASURES AS PER THE LAW IN THE YEAR OF ITS ORIGIN. ALTERNATIVELY, HE MAY LOOK INTO THE MATTER BY WAY OF SECESSION OF LIA BILITY. 6. IN VIEW OF THE ABOVE, WE DO NOT FIND ANY INFIRMI TY IN THE ORDER OF CIT(A) FOR DELETING THE ADDITION MADE ON ACCOUNT OF SUNDRY CREDITORS SUBJECT TO THE ABOVE DIRECTION. 7. NEXT GRIEVANCE RELATES TO DELETION OF ADDITION O F UNEXPLAINED CASH DEPOSIT OF RS.73,46,300/-. CONTENTION OF THE ASSESSEE WAS THAT THESE AMOUNTS WERE RECEIVED OUT OF CASH SALE WHICH WAS DEPOSITED IN TH E BANK ACCOUNT. BY OBSERVING THAT ASSESSEE FAILED TO FURNISH EVIDENCE ABOUT THE SOURCE OF DEPOSIT OF SUCH CASH, THE AO TREATED THE SAID DEPOSIT AS UNEXPLAINED WHIC H WAS DELETED BY THE CIT(A) BY OBSERVING AS UNDER:- ON CAREFUL CONSIDERATION OF LD. ARS SUBMISSION AN D OBSERVATIONS OF THE AO AND ALSO ON PERUSAL OF REMAND REPORTS AND COPY OF CASH BOOK SUBMITTED BEFORE ME, I FIND THAT THE APPELLANT S BOOKS OF ACCOUNTS ARE AUDITED U/S 44AB OF THE INCOME TAX ACT . THE OPENING CASH BALANCE WAS SHOWN TO THE EXTENT OF RS.63,950/- AND CLOSING CASH BALANCE WAS SHOWN AT RS.78,700/-. I FURTHER F IND THAT THE APPELLANT HAS SHOWN THE RECEIPT BY WAY OF CASH SALE S IN THE CASH BOOK ON DIFFERENT DATES AND DEPOSITED SUCH CASH IN THE BANK ACCOUNT. THUS, THE RECEIPT BY WAY OF CASH SALES HAS BEEN SHO WN IN THE TURNOVER TOTALING TO RS.5,45,73,020/- IN THE TRADIN G ACCOUNT AND THE DEPOSITS WERE MADE IN THE BANK ACCOUNTS OUT OF SUCH SALE PROCEEDS. HENCE, THE DEPOSIT IN THE BANK ACCOUNTS CANNOT BE T REATED AS UNEXPLAINED DEPOSITS. THUS, THE ADDITION OF RS.73, 46,300/- IS DELETED. ITA-76/D/2008 4 8. IT WAS ARGUED BY LEARNED DR SHRI N.K.CHAND THAT ASSESSEE HAS NOT PRODUCED RESPECTIVE SALE BILL/INVOICE BEFORE THE AO TO VERIFY THE CORRECTNESS OF DATE OF CASH SALES ON WHICH SAME WAS CREDITED IN TH E CASH BOOK, ACCORDINGLY CLAIM OF THE ASSESSEE THAT RESPECTIVE CASH WAS DEPOSITED IN PARTICULAR DAY COULD NOT BE VERIFIED BY THE AO. 9. ON THE OTHER HAND, LEARNED AR REITERATED THE SUB MISSIONS MADE BEFORE THE CIT(A) AND THE FINDINGS RECORDED BY HIM. 10. WE HAVE CONSIDERED THE RIVAL CONTENTIONS AND FO UND THAT DEPOSIT IN THE BANK ACCOUNT WAS ARISING OUT OF THE CASH SALES AS RECORD ED IN THE CASH BOOK WHICH WAS PRODUCED BEFORE THE AO DURING THE COURSE OF ASSESSM ENT PROCEEDINGS. THE AMOUNT CREDITED ON ACCOUNT OF CASH SALES WAS ITSELF ACCOUNTED FOR AS INCOME, THEREFORE THERE DOES NOT APPEAR ANY JUSTIFICATION F OR ADDING THE SAME IN THE INCOME OF THE ASSESSEE WHICH AMOUNTS TO DOUBLE ADDITION. KEEPING IN VIEW THE OBJECTION OF LEARNED DR, WE DIRECT THE ASSESSEE TO PRODUCE TH E SALE BILL BEFORE THE AO SO THAT HE COULD VERIFY THE RESPECTIVE DATE OF CASH SALE WI TH REFERENCE TO ENTRIES MADE IN THE CASH BOOK AND AO IS DIRECTED TO DELETE THE SAME AFTER VERIFYING THE SALES BILL OF THE RESPECTIVE DATES AS PRODUCED BY THE ASSESSEE. WE DIRECT ACCORDINGLY. 11. NEXT GRIEVANCE OF THE REVENUE RELATES TO DELETI ON OF ADDITION OF RS.2,36,480/- ON ACCOUNT OF ACCRUED INTEREST. IN T HIS REGARD, WE FOUND THAT ADDITION WAS MADE BY THE AO BY ESTIMATING INTEREST ON THE ADVANCE OF RS.1.31 CRORES. CONTENTION OF THE ASSESSEE WAS THAT THERE WERE OLD BALANCES APPEARING AS O N 1.4.2003 IN THE PREVIOUS ASSESSMENT YEAR ALSO AND NO ADDITION WAS MADE EVEN THOUGH ASSESSMENT WAS FRAMED U/S 143(3). BY THE IM PUGNED ORDER, THE CIT(A) DELETED THE ADDITION BY RECORDING A FINDING THAT LO ANS AND ADVANCES TO DIRECTORS AND COMPANIES UNDER THE SAME MANAGEMENT AS AT THE E ND OF THE YEAR WAS RS.13,13,782/- AS AGAINST LAST YEAR BALANCE AT RS.2 5,54,378/-. THUS, THE ADVANCE HAD DECREASED DURING THE YEAR UNDER CONSIDERATION. COPIES OF ALL THESE ACCOUNTS ITA-76/D/2008 5 WERE FILED BEFORE THE CIT(A) WHICH WERE SENT BY HIM TO AO FOR HIS EXAMINATION DURING REMAND PROCEEDINGS. IN VIEW OF ALL THESE FA CTS, THE CIT(A) CONCLUDED THAT THERE WAS NO BASIS FOR DISALLOWANCE OF PROPORTIONAT E INTEREST BY CHARGING NOTIONAL INTEREST AGAINST LOANS AND ADVANCES WHICH HAVE SUBS TANTIALLY REDUCED DURING THE YEAR UNDER CONSIDERATION, SINCE DURING THE YEAR THE RE WAS NO INCREASE IN THE LOANS, AS AGAINST THE SAME THERE WAS A SUBSTANTIAL DECREAS E IN THE LOAN LIABILITY. WE DO NOT FIND ANY INFIRMITY IN THE CIT(A)S ORDER. 12. LAST GRIEVANCE OF THE REVENUE RELATES TO DELETI ON OF DISALLOWANCE OF RS.2,15,000/- MADE BY THE AO UNDER THE HEAD SALARY . 13. FROM THE RECORD, WE FOUND THAT DURING THE YEAR, THE ASSESSEE HAS CLAIMED SALARY OF RS.7,28,895/-, OUT OF WHICH AO DISALLOWED 30% WHICH WORKS OUT TO RS.2,15,000/-. BY OBSERVING THAT SALARY WAS PERTAI NING TO THE REGULAR EMPLOYEES OF THE COMPANY, THE CIT(A) DELETED THE DISALLOWANCE. WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF CIT(A) WHEREIN HE HAS CATEGORICALLY OBSERVED THAT EVEN IN CASE OF FALL IN TURNOVER THERE MAY NOT BE PROPORTIONATE DEC REASE IN THE SALARY AS THE REGULAR EMPLOYEES CANNOT BE REDUCED FREQUENTLY. SINCE THE SALARY IS IN THE NATURE OF OVERHEADS, WE DO NOT FIND ANY MERIT IN THE ACTION O F THE AO FOR DISALLOWING 30% OF THE SALARY ON THE PLEA THAT THERE WAS REDUCTION IN THE TURNOVER. 14. IN THE RESULT, THE APPEAL OF THE REVENUE IS ALL OWED IN PART FOR STATISTICAL PURPOSES AS INDICATED HEREINABOVE. DECISION PRONOUNCED IN THE OPEN COURT ON 27 TH NOVEMBER, 2009. SD/- SD/- (D.R.SINGH) (R.C.SHARMA) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED : 27.11.2009. VK. ITA-76/D/2008 6 COPY FORWARDED TO: - 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR, ITAT DEPUTY REGISTRAR