ACIT, Central Circle- 28, New Delhi V. Solitaire World Pvt. Ltd., New Delhi

ITA 9627/DEL/2019

AI Insights

The case involves the Revenue's appeal against the CIT(A)'s decision to delete substantial additions made by the Assessing Officer (AO) to the income of Solitaire World Pvt. Ltd. for the Assessment Year 2011-12. The additions were initially made on grounds of unexplained transactions and cash credits. The AO had reopened the assessment based on information suggesting that the transactions involved were not genuine and lacked proper documentation. However, the CIT(A) found that the assessee had provided sufficient evidence to substantiate the transactions, including bank statements and sales tax documents, which the AO had not adequately considered. The Tribunal agreed with the CIT(A)'s findings and dismissed the Revenue's appeal.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 113224 (ITAT-DELHI)
• Duration Of Justice: 3 year(s) 5 month(s) 22 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-06-2023
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: G
• Next Hearing Date: 04-04-2023
• Assessment Year: 2011-2012
• Appeal Filed On: 17-12-2019
• Other Referred Cases: Zazsons Export Ltd. vs. CIT, Raghubir Singh vs. DCIT, DCIT vs. Divine International, Bhagyanagar Oil Industries vs. ITO, ITO vs. Smt. Umadevi Shankarappa Thimmaiah
• Laws Referred To: Income Tax Act
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Unexplained cash credit; Unexplained expenditure; Additional evidence; Accommodation entries
• Section: 147; 68; 142(1); 143(2); 69A

Judgement Text

I.T.A. No. 9627/Del/2019 1 IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH “G” NEW DELHI BEFORE SHRI NARENDRA KUMAR BILLAIYA, ACCOUNTANT MEMBER AND SHRI CHALLA NAGENDRA PRASAD, JUDICIAL MEMBER आ .अ.स ं /.I.T.A No.9627/Del/2019 /Assessment Year:2011-12 ACIT Central Circle-28, New Delhi. ब म Vs. Solitaire World Pvt. Ltd. 2678/1, Diamond Mall Gurudwara Road, Karol Bagh, New Delhi. PAN No. AAOCS1369R अ Appellant /Respondent Revenue by Shri H.K. Choudhary, CIT-DR Assessee by Shri Hiren Mehta, CA स ु नवाईक तारीख/ Date of hearing: 13.04.2023 उ ोषणाक तारीख/Pronouncement on 09.06.2023 आदेश /O R D E R PER C.N. PRASAD, J.M. This appeal is filed by the Revenue against the order of the Ld. Commissioner of Income Tax(Appeals)-29, New Delhi dated 29.10.2019 for the AY 2011-12. The Revenue in its appeal raised the following grounds: - 1. “That on the facts and in the circumstances of the case, the Ld. CIT(A) has erred in law and on facts in deleting the addition of Rs. 5,65,88,512/- made by the AO on account of unexplained transaction without considering the fact the creditworthiness of I.T.A. No. 9627/Del/2019 2 alleged creditors were not established and genuineness of the transaction. 2. That on the facts and in the circumstances of the case, the Ld.CIT(A) has erred in law and on facts in deleting the addition of Rs. 25,84,23,427/-made by the AO u/s 68 of the Income Tax Act on account of unexplained cash credits, the eleven copies of confirmation from creditors submitted by assessee reveals that the signatures by Authorised Signatory for the assessee were all signed on the same date i.e. 01.04.2011 but none of these signatures matches another. These documents lack authenticity and credibility and are not genuine but bogus documents. 3. That on the facts and in the circumstances of the case, the Ld. CIT(A) has erred in law and on facts in deleting the addition of Rs. 1,25,00,000/- on account of cash deposits when the genuineness of cash sales as well as its correlation with cash deposits into banks was not established especially no names PAN nos and other details of the purchasers have been recorded on the invoices which therefore lack credibility as they appear to be bogus documents. 4. Whether the Ld.CIT(A) was right in deleting the additions without appreciating the facts that a search was conducted on Shree Raj Mahal Group of jewellers on 15.10.2013 the stock was found short in many of the group companies during search operation. M/s Solitaire World Pvt. Ltd. is associated with SRM Group of company. During the search the enquiry M/s Radha Jewellery House was found to be unable to furnish any explanation/ justification for passing entries with the associated group companies without having any real business activities. 5. Whether the Ld.CIT(A) was right in deleting the additions without appreciating the facts that the said company is associated to the SRM Group. The SRM group of company filed an application before the Hon'ble ITSC which had been rejected by the Hon'ble I.T.A. No. 9627/Del/2019 3 ITSC and it is held that the applicant group has not been able to substantiate its claim about full and true disclosure of income and also the applicant has not been able to substantiate the manner of earning additional income in different. 6. That the grounds of appeal are without prejudice to each other.” 2. Briefly stated the facts are that the assessee company which is engaged in the business of trading in gold jewellery and gold diamond jewellery filed its return of income on 28.09.2011 declaring income of Rs.7,02,540/-. The return was processed u/s 143(1) of the Act on 20.01.2012. Subsequently, based on the information received from the office of the DCIT(Investigation), Unit 1(1), New Delhi the assessment was reopened by issue of notice u/s 148 of the Act. On perusal of the information received the Assessing Officer noticed that assessee company has made payment amounting to Rs.5,65,88,512/- to M/s Radha Jewellery House against purchases. The Assessing Officer also noticed that M/s Radha Jewellery House and related entities are alleged to have been in high value RTGS inward and outward for similar amounts which are not commensurate with the profile of the parties involved in such transactions. From the Investigation report the AO also observed that summons were issued to banks and the information gathered and the bank statement of M/s Radha Jewellery House the I.T.A. No. 9627/Del/2019 4 format received from various parties of SRM Group including the assessee company. The AO also observed that the firm deposited various amounts in its bank account through RTGS or through banking transactions and almost identical amounts were immediately transferred to different entities and most of the transactions were either in credit side or in debit side revealed that the transactions are made with the firms associated/sister concerns namely M/s Jinni Gold Ltd., M/s Gold Exim Pvt. Ltd., M/s Shri Raj Mahal Jewellery, M/s Goyal Impex Pvt. Ltd. and the assessee company. 3. The Assessing Officer in order to collect further information a letter was written to assessee company on 22.03.2018 to furnish the details with respect to the transactions made with M/s Radha Jewellery House. However, there was no reply received from the assessee and the sources of transaction made with M/s Radha Jewellery House remained unverifiable and unexplained. 4. On examination of the information received from DCIT (Inv.) and on perusal of the information on the ITBA/ITD System, the details available on the MCA website portal and as per the enquiries conducted in the case of the assessee the Assessing Officer believed that income of Rs.5,65,88,512/- which was chargeable to tax has I.T.A. No. 9627/Del/2019 5 escaped assessment for the AY 2011-12 within the meaning of Section 147 of the Act and after recording the reasons, notice u/s 148 was issued on 31.03.2018. Assessee filed its objections against the reasons recorded by challenging the proposed reassessment u/s 148/147 by letter dated 10.04.2018. 5. Notice u/s 142(1) of the Act dated 30.07.2018 was issued to the assessee company fixing the case for hearing on 03.08.2018 and in response the assessee furnished a copy of tax audit report and computation of income with acknowledgement of ITR. Thereafter the Assessing Officer issued notice u/s 142(1) of the Act along with specific questionnaire as well as notice u/s 143(2) of the Act on 10.09.2018 fixing the date of hearing on 17.09.2018. It appeared that no one has present on the date of hearing. Show-cause notice u/s 271(1)(b) of the Act was issued on 26.09.2018 for non- compliance to the notice u/s 142(1) dated 10.09.2018 for which there was no response from the assessee. Since there was no response from the assessee the Assessing Officer passed a penalty order u/s 271(1)(b) of the Act on 16.11.2018 levying penalty. 6. The AO therefore concluded that the transactions referred in the Investigation report are nothing but a trail of Shyam Company transactions and these entities are involved in providing I.T.A. No. 9627/Del/2019 6 accommodation entries to various parties and since the assessee did not furnish any details and chose to remain silent in spite of providing ample opportunities for furnishing requisite details with respect to the transactions entered into with M/s Radha Jewellery House and since the assessee has not discharged its onus to justify the sources of the transactions the AO concluded that the assessee company failed to discharge its onus. Since no details were furnished with regard to credit worthiness of the parties and genuineness of the transactions he concluded that the transactions remained unexplained and unverifiable and, accordingly, addition of Rs.5,65,88,512/- was added to the income of the assessee as an unexplained and unverifiable in nature. 7. Similarly in the course of assessment proceedings, on perusal of the audited balance sheet furnished by the assessee the Assessing Officer noticed that assessee has shown huge liabilities on account of sundry creditors (trade liabilities) and further he observed that no return of income was filed by the assessee for the immediately preceding assessment year. The Assessing Officer noticed that the trade liabilities shown in the balance sheet are created only during the year under consideration. He also noticed that the assessee company was incorporated on 27.04.2010 and in order to verify the I.T.A. No. 9627/Del/2019 7 trade liabilities noticed u/s 142(1) of the Act along with detailed questionnaire was issued to the assessee and served through mail and speed post and has given the date for compliance on 20.11.2018. The assessee neither furnished any details nor any explanation in response to the said notice. Therefore, the AO came to the conclusion that since the onus on the assessee company to prove the identity and credit worthiness of the parties and the genuineness of the transactions which the assessee failed to discharge the said trade liabilities created in the balance sheet to the tune of Rs.25,84,23,427/- has been treated as unexplained. Accordingly, the same was added u/s 68 of the Act. 8. The Assessing Officer further as per the information available on the record in ITBA, noticed that in the year under consideration assessee has deposited total cash amounting to Rs.1,25,00,000/- in its bank account on 07.03.2011, 08.03.2011 and 09.03.2011 by depositing Rs.25,00,000/-, 50,00,000/- and 50,00,000/- respectively. In order to verify these transactions a notice u/s 142(1) of the Act dated 16.11.2018 with a specific query was issued to the assessee and served through mail and speed post calling for the information and for compliance on 20.11.2018. However, no compliance was made by the assessee on the given date and the I.T.A. No. 9627/Del/2019 8 assessee did not obtain any adjournment also. Since the assessee has failed to substantiate the source of cash deposit amounting to Rs.1,25,00,000/- made during the year into its bank accounts the Assessing Officer treated the same as unexplained and as income of the assessee under the provisions of Section 69A of the Act. On appeal, the Ld.CIT(Appeals) deleted all the above three additions made by the Assessing Officer against which the Revenue is in appeal before us. 9. The Ld. DR submits that the assessee has not furnished any details called for in the course of assessment proceedings. The assessee has not responded to any of the notices issued by the Assessing Officer except for the notice u/s 142(1) of the Act dated 30.07.2018, wherein the assessee furnished copy of tax audit report and computation of income along with acknowledgement of ITR on 03.08.2018. The Ld. DR submits that since no explanations, no evidences were filed in spite of several opportunities given by the Assessing Officer the additions were rightly made. Ld. DR further submits that the assessee filed additional evidences and the Ld.CIT(A) after calling for remand report deleted the additions even though the assessee has not produced complete books of account and without considering the objections of the AO in the remand I.T.A. No. 9627/Del/2019 9 report. The Ld. DR strongly supported the orders of the Assessing Officer and requested for sustaining the additions made by the Assessing Officer in the assessment order. 10. On the other hand, the Ld. Counsel for the assessee submits that in fact the objections filed by the assessee challenging the reopening of assessment were not disposed off by the Assessing Officer and therefore on this ground alone the assessment has to be quashed as bad in law. The Ld. Counsel further submits that no proper opportunity was given by the Assessing Officer and the assessment was rushed as it was time barring. In so far as the ground no. 3 is concerned the Ld. AR submits that all sales are less than Rs.5,00,000/- made in cash and, therefore, there is no requirement of maintaining PAN and addresses of the purchasers. The Ld. Counsel for the assessee further submits that on an application by the assessee u/s 46A and the additional evidences furnished before the Ld.CIT(A), remand report was called for and after considering the remand report and the rejoinder submitted by the assessee and after examining the evidences furnished by the assessee, the Ld.CIT(A) has rightly deleted the additions. The Ld. Counsel strongly supported the order of the Ld.CIT(Appeals) and reiterated the submissions made before the Ld.CIT(Appeals). I.T.A. No. 9627/Del/2019 10 11. Heard rival submissions, perused the orders of the authorities below. We observe that the AO completed the assessment u/s 143(3) r.w.s. 147 of the Act making the following additions for the reason that the assessee did not respond to the notices issued nor any explanations or evidences were furnished: 1. unexplained expenditure – Rs.5,65,88,512/- 2. unexplained cash credit – Rs.25,84,23,427/- 3. unexplained cash deposits – Rs.1,25,00,000/- 12. Before the Ld.CIT(A) the assessee has furnished various evidences along with application for admission of the evidences under Rule 46A of IT Rules. The Ld.CIT(A) called for remand report from the AO and the AO submitted his remand report on the addition made on account of unexplained expenditure of Rs.5,65,88,512/- stating that the assessee has been provided ample opportunities and the assessee did not respond and therefore no additional evidence is admissible under Rule 46A. In so far as the addition made on account of unexplained cash credit of Rs.25,88,23,427/- the AO in the remand report stated that the bank statements do not reflect the names of the creditors and therefore remained unverifiable, no books of accounts have been furnished, the documents filed by the assessee lack authenticity and credibility and are not genuine. With I.T.A. No. 9627/Del/2019 11 respect to the addition made on account of unexplained cash deposit of Rs.1,25,00,000/- the AO stated in the remand report that the evidences for cash sales may be rejected as no names, PAN numbers and other details of the purchasers have been recorded on the invoices. 13. The Ld.CIT(Appeals) considering the evidences placed by the assessee, the remand report of the AO and the rejoinder of the assessee deleted the above additions made by the AO. We observe that the Ld.CIT(A) while deleting the addition of Rs.5,65,88,512/- in respect of unexplained expenditure held as under: 5.3. I have considered the facts and circumstances of the case, submission/ rejoinder of the appellant and perused the remand report/asstt. order of the AO. I find that the appellant has filed a copy of ledger account of M/s Radha Jewellery House in the books of the appellant by which it was proved that the appellant had made sales to M/s Radha Jewellery house and the entire amount was paid by M/s Radha Jewellery House during the year and in the immediate succeeding year for which copy of bank statement was also filed for verification. Further, the appellant had also filed documents in support of sale/ purchases made by M/s Radha Jewellery House during the year under consideration as well as during the immediate succeeding year. M/s Radha Jewellery House had made total purchase/ sale of Rs. 23,91,31,437/- / Rs. 25,72,02,039/- during the F.Y. 2009-10, during the year under consideration of Rs. 94,90,35,492/- / Rs. 93,70,94,610/- and Rs. 70,25,28,855/- /Rs. 71,33,23,466/- during the F.Y. 2012- 13 respectively from the various entities including the appellant. The appellant by filing the documents proved that M/s Radha jewellery House was dealing in gold and I.T.A. No. 9627/Del/2019 12 diamond jewellery and the transactions of the jewellery was not only made with the appellant but also with other entities. The appellant has also filed the documents related to VAT/ sales tax and also copy of ITR of M/s Radha Jewellery House to prove the fact that M/s Radha Jewellery House was dealing with jewellery and the transactions the appellant had with it was genuine. 5.4. The appellant has also filed copy of ledger account, bank statement, copies of invoices in respect of sale/ purchases made and copy of stock register of M/s Radha jewellery House. It was also submitted that M/s Radha jewellery House is one of the group concerns of the appellant. It was further submitted that M/s Radha Jewellery House has shown its income for the year under consideration of Rs. 14,26,630/- and for the AYs 2010-11 and 2012-13 of Rs. 3,69,939/- and Rs. 14,64,774/- respectively. The entire payment with reference to sale made by the appellant to M/s Radha Jewellery House was received by the appellant through banking channel during the year and in the succeeding year. The details of sale/ purchases filed by the appellant in respect of M/s Radha Jewellery House prove the fact that M/s Radha Jewellery House was dealing in gold and diamond jewellery and these fact are verifiable from the stock register also. Out of the total sale of Rs. 5,65,88,512/- made by the appellant to M/s Radha Jewellery House, Rs.2,15,80,000/- was paid during the year under consideration and the balance amount of Rs. 3,50,08,512/- was received in the next financial year. These facts are verifiable from the bank statements. The documents in favour of VAT paid was also filed for verification. It was further submitted that all the sales/purchases were taken into account by M/s Radha Jewellery House while computing its total income. Party wise details of sales/ purchases were filed for the AYs 2010-11 to 2012-13. The Appellant has included the sales shown to have been made to M/s Radha Jewellery House while arriving at the figure of total sales made during the year. 5.5. On perusal of the documents/ details filed by the appellant as discussed above, I am of the view that the I.T.A. No. 9627/Del/2019 13 AO was not justified to make addition with reference to sale made by the appellant to M/s Radha Jewellery House. Under these circumstances, the AO is directed to delete the addition. 14. The Ld.CIT(Appeals) while deleting the addition made on account of unexplained cash credits of Rs.25,84,23,427/- held as under: 6.3. I have considered the facts and circumstances of the case, submission/ rejoinder of the appellant and perused the remand report/asstt. order of the AO. I find that the appellant has submitted that provision of section 68 cannot be applied in case of trade creditors. In this regard, it relied upon the following case laws:- (i) Zazsons Export Ltd. vs. CIT 88 taxmann.com 617 (ii) Raghubir Singh vs. DCIT 83 taxmann.com 187 (iii) DCIT vs. Divine International 16 taxmann.com 262 (iv) Bhagyanagar Oil Industries vs. ITO ITA No. 1178/Hyd/2012 (v) ITO vs. Smt. Umadevi Shankarappa Thimmaiah 49 Taxmann.com 496 6.4. It was further submitted that there were 14 persons for whom liability was shown as on 31.03.2011 but all the payments were made in the subsequent assessment year through banking channel. The details of the same was given in the following table:- I.T.A. No. 9627/Del/2019 14 I.T.A. No. 9627/Del/2019 15 I.T.A. No. 9627/Del/2019 16 6.5. On perusal of the facts as discussed above, I find that there were trade liabilities shown by the appellant in the balance sheet as on 31.03.2011 but all the payments were made to the parties concerned in the immediate succeeding year, therefore, there was no cessation of any liability, under these circumstances, the AO was not justified to make addition u/s 68 of the IT Act, hence, the same is directed to be deleted.” 15. The Ld.CIT(A) while deleting the addition of Rs.1,25,00,000/- made on account of unexplained cash deposits held as under: “7.3 On perusal of the rejoinder (supra) of the appellant and the facts of the case as discussed above, I find that there was sale in cash made by the appellant during the year as well as in the subsequent assessment year which is verifiable from the copies of cash book filed by the appellant in this regard. The cash was available with the appellant to deposit the same into the bank account. The source of the cash available with the appellant as explained by it is reproduced as under:- "a) Opening balance of cash in hand as on 01.03.2011 was Rs.1,76,508/-. I.T.A. No. 9627/Del/2019 17 b) The assessee had made cash sales amounting to Rs. 13,23,675/- as on 03.03.2011 and Rs.13,54,529/- as on 05.03.2011. Out of the said amount cash of Rs.25,00,000/- was deposited in the bank account on 07.03.2011. Copy of the sale vouchers are enclosed at Page 91 to 92 of above referred letter. c) The assessee had made cash sales amounting to Rs.30,70,179/- as on 07.03.2011 and Rs.19,51,407/- as on 07.03.2011. Out of the said amount cash of Rs.50,00,000/- was deposited in the bank account on 08.03.2011. Copy enclosed at Page 93 to 94 of above referred letter. d) The assessee had made cash sales amounting to Rs.26,87,294/- as on 08.03.2011 and Rs.22,33,936/- as on 08.03.2011. Out of the said amount cash of Rs.50,00,000/- was deposited in the bank account on 09.03.2011. Copy enclosed at Page 95 to 96 of above referred letter." 7.4 Since, the appellant could substantiate the source of cash by filing necessary documents as discussed in the above paras, therefore, the AO is directed to delete the addition.” 16. None of the above observations of the Ld.CIT(Appeals) were controverted/rebutted by the Revenue before us. We observe that the Ld.CIT(A) deleted the additions on appreciation of the evidences furnished by the assessee, considering the remand report as well as the rejoinder of the assessee and, therefore, we do not see any valid reason to interfere with the findings of the Ld.CIT(A) in deleting the above additions. Thus, we sustain the order of the Ld.CIT(A) and I.T.A. No. 9627/Del/2019 18 reject the grounds raised by the Revenue in respect of all the above three additions. 17. In the result, appeal of the Revenue is dismissed. Order pronounced in the open court on 09.06.2023 Sd/- Sd/- (NARENDRA KUMAR BILLAIYA) (C.N. PRASAD) ACCOUNTANT MEMBER JUDICIAL MEMBER Dated: 09.06.2023 *Kavita Arora, Sr. P.S. Copy of order sent to- Assessee/AO/Pr. CIT/ CIT (A)/ ITAT (DR)/Guard file of ITAT. By order Assistant Registrar, ITAT: Delhi Benches-Delhi