Trendy Attire (P) Ltd, New Delhi V. DCIT Central Circle-II, Gurgaon

ITA 7660/DEL/2019

• Counselvise Citation: [2022] 106 COUNSELVISE.COM (IT) 1260 (ITAT-DELHI)
• Duration Of Justice: 2 year(s) 9 month(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-06-2022
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: G
• Assessment Year: 2015-2016
• Appeal Filed On: 17-09-2019
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SURENDER PAL
• Keywords: Capital asset converted into stock in trade; Business income; Principle of natural justice; Set aside
• Section: 143(3); 153A; 234B; 145(3); 153C

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI (DELHI BENCH ‘H’ : NEW DELHI) BEFORE SH. G.S.PANNU, HON’BLE PRESIDENT AND SH. ANUBHAV SHARMA, JUDICIAL MEMBER ITA No.7659 & 7660/Del/2019 (Assessment Year : 2014-15 & 2015-16) Trendy Attire (P) Ltd. 284/13G, Brahaman Gali, Dungar Mohalla, Shahadra, Delhi-110032 PAN No. AAECT9742P Vs. DCIT, Central Circle-II Gurgaon (APPELLANT) (RESPONDENT) Assessee by Sh. Somil Aggarwal, and Sh. Deepesh Garg, Adv. Revenue by Sh. Surender Pal, CIT(DR) Date of hearing: 20.06.2022 Date of Pronouncement: 30 th .06.2022 ORDER PER ANUBHAV SHARMA, JM: These appeals have been preferred by the assessee against the appellate order dated 23.07.2019 for assessment year 2014-15 & 2015-16 passed by Commissioner of Income Tax(Appeals)-3,Gurgaon (hereinafter referred to as the First Appellate Authority in short ‘Ld. F.A.A.’) in regard to appeal before it against assessment order dated 26.12.2017 passed u/s 153C r.w.s 153A/ 143(3) of the Income Tax Act, 1961 (hereinafter referred to as ITA No. 7659 & 7660/Del/2019 M/s. Trendy Attire (P) Ltd. 2 “The Act”) by Dy. Commissioner of Income Tax, Central Circle-II, Gurgaon (hereinafter referred as the ‘AO’). Both the appeals raise similar grounds so to avoid contradictory findings are adjudicated by this common orde and for convenience the facts and grounds of AY 2014-15 are being taken on record. 2. The facts in brief are that a search was conducted 29.04.2015 at the various premises in the M/s. Orient Craft Group of Companies. Certain documents were seized from the premises of searched company which were found pertaining to the assessee. After recording necessary reasons in the case of searched company notice u/s 153C r.w.s. 153A of the Act was issued on the assessee. The Ld. AO concluded that the assessee is a paper entity operated by the owners of M/s. Orient Craft Ltd. for the purposes of evasion of taxes. The books of accounts of the company were rejected u/s 145(2). A substantive addition was made in the hands of M/s. Orient Craft Ltd. and a Protective Assessment was made in the hands of assessee. In appeal the Ld. CIT(A) had confirmed the addition on substantive basis but in the hands of assessee protective addition was deleted with observation that if substantive addition in case of M/s. Orient Craft Ltd. is deleted at any stage, the addition deleted here would revive. Further, the Ld. CIT(A) observed in para 7.3.2; “in view of the general practice as seen in the case of entry operators, the commission/brokerage paid to the appellant company is estimated at 5% and addition of Rs. 2,03,411/- to the business income of the appellant on account of the same was made by the AO in AY 2014-15 is sustained to that extent. Similarly, addition to the extent of 5% on the total sales booked in the name of M/s. Orient Craft Ltd. was also confirmed in the cases of following ITA No. 7659 & 7660/Del/2019 M/s. Trendy Attire (P) Ltd. 3 appellants under consideration in this appellate order on the grounds discussed in detail above :- 1. M/s. Trendy Attire Pvt. Ltd. AY 2014-15 5% of Rs. 35,75,585/- 1,78,779/- 2. M/s. Trendy Attire Pvt. Ltd. AY 2015-16 5% of Rs. 1,22,77,322/- 6,13,866/- 3. Now, before the Tribunal the Assessee has raised following grounds of appeal :- 1. “That having regard to the facts and circumstances of the case, Ld. CIT(A) has erred in law and on facts in confirming the action of Ld. AO in assuming jurisdiction u/s 153C and that too for this year and further erred in passing the impugned assessment order, more so when ‘satisfaction’ has not been recorded by AO of the searched person and when there was no incriminating document was found. 2. That in any case and in any view of the matter, action of Ld. CIT(A) in confirming the action of Ld. AO in assuming jurisdiction and framing the impugned assessment order u/s 153C, is bad in law and against the facts and circumstances of the case and the same is not sustainable on various legal and factual grounds. 3. That having regard to the facts and circumstances of the case, Ld. CIT(A) has erred in law and on facts in exercising his jurisdiction in making addition of Rs. 1,78,779/- (i.e. 5% of Rs.35,75,585/-) on account of alleged commission/brokerage as business income and that too without giving show cause notice in this regard and impugned addition made by Ld. CIT(A) is bad in law as no incriminating material has been found as a result of search warranting such addition and by recording incorrect facts and findings and merely on the basis of surmises and conjectures and without giving the opportunity of being heard and without observing the principles of natural justice. 4. That in any case and in any view of the matter, action of ITA No. 7659 & 7660/Del/2019 M/s. Trendy Attire (P) Ltd. 4 Ld. CIT(A) in making addition of Rs. 1,78,779/- on account of alleged commission/brokerage as business income, is bad in law and against the facts and circumstances of the case and the same is outside the purview of the impugned proceedings u/s 153C of the Act. 5. That having regard to the facts and circumstances of the case, Ld. CIT(A) has erred in law and on facts in not reversing the action of Ld. AO in rejecting the books of accounts u/s 145(3) of the Act. 6. That in any case and in any view of the matter, addition made by Ld. CIT(A) in the impugned order are beyond jurisdiction and illegal also for the reason that these could not have been made since no incriminating material has been found as a result of search. 7. That having regard to the facts and circumstances of the case, Ld. CIT( A) has erred in law and on facts in confirming the action of Ld. AO in passing the impugned assessment order without there being requisite approval in terms of section 153D and in any case approval if any is mechanical without application of mind and is no approval in the eyes of law. 8. That having regard to the facts and circumstances of the case, Ld. CIT(A) has erred in law and on facts in not reversing the action of Ld. AO in charging interest u/s 234B of Income Tax Act, 1961. 9. That the appellant craves the leave to add, modify, amend or delete any of the grounds of appeal at the time of hearing and all the above grounds are without prejudice to each other.” 4. Heard and perused the record. 5. On behalf of the assessee it was submitted by the Ld. AR, that in the case of M/s. Orient Craft Ltd., the substantive addition have been deleted therefore, the additions in the hands of appellant cannot survive. Ld. DR however, submitted that as Ld. CIT(A) had observed that the additions in the ITA No. 7659 & 7660/Del/2019 M/s. Trendy Attire (P) Ltd. 5 hands of assessee are being deleted on protective basis and will revive in case, substantive addition is deleted, therefore, assessee cannot take advantage of the ITAT order in favour of M/s. M/s. Orient Craft Ltd.. 6. Appreciating the matter on record it can be observed that in ITAT order dated 24.09.2021 in ITA no. 3312/Del/2019 for assessment year 2015- 16 and ITA No. 3311/Del./2019 for assessment year 2014-15 the substantive additions in the hands of M/s. Orient Craft Ltd. have been deleted. It can be observed that in para no. 49 in ITA No. 3311/Del/2019 and para no. 21 of ITA no. 3312/Del/2019 it has been held that M/s. Orient Craft Ltd. has proved that the material was purchased from vendors involved and payments have been made through banking channel. It was further held that the voluminous documentary evidences filed by M/s. Orient Craft Ltd. clearly established the genuineness of purchase of fabric from the present assessee / appellant. 6.1 That being so there is no force in the contention of the Ld. DR that if substantive additions are deleted then as per orders of ld. CIT(A) the protective assessment in the hands of present assessee / appellant will still revive. In fact the findings arrived by the Tribunal in case of M/s. Orient Craft Ltd. are to the effect that the purchases made from the present assessee were genuine therefore, the Bench is of firm view that protective additions in the hands of the assessee/ appellant was never sustainable. 7. In the light of aforesaid facts and circumstances the order of Ld. CIT(A) making additions on account of alleged commission / brokerage as business income is not sustainable. Consequently, ground no. 3 and 4 are allowed while remaining grounds are disposed as not pressed. The appeals ITA No. 7659 & 7660/Del/2019 M/s. Trendy Attire (P) Ltd. 6 are allowed and the impugned order of Ld. CIT(A) making additions of Rs.1,78,779/- in the assessment year 2014-15 and Rs. 6,13,866/- in the assessment year 2015-16 are set aside. Order pronounced in the open court on 30 th June, 2022. Sd/- Sd/- (G.S.PANNU) (ANUBHAV SHARMA) PRESIDENT JUDICIAL MEMBER Date:- 30 th .06.2022 *Binita, SR.P.S* Copy forwarded to: 1. Appellant 2. Respondent 3. CIT 4. CIT(Appeals) 5. DR: ITAT ASSISTANT REGISTRAR ITAT, NEW DELHI