ITO WARD - 4(1), NEW DELHI V. B M GUPTA ESTATES PRIVATE LIMITED, NEW DELHI

ITA 1153/DEL/2020

AI Insights

The case involves the Income Tax Officer (ITO) appealing against the decision of the Commissioner of Income Tax (Appeals) - 3, Gurgaon, which had reversed the addition made by the Assessing Officer regarding the assessee, M/s. B.M. Gupta Estates Pvt. Ltd., for the Assessment Year 2015-16. The primary issue was the treatment of sundry creditors in the assessee's balance sheet, which the Assessing Officer initially considered as unsubstantiated liabilities. However, it was later clarified that these were part of a consignment stock transfer arrangement, where the assessee acted as a consignee and the creditors as consignors, with no direct purchase or sale transactions occurring between them.

• Counselvise Citation: [2024] 140 COUNSELVISE.COM (IT) 470323 (ITAT-DELHI)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-12-2024
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2015-2016
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: JAVED AKHTAR
• Assessee Lawyers: SATYEN SETHI
• Section: 143(3); 133(6)

Judgement Text

"Page 1 of 10 IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH ‘A’: NEW DELHI BEFORE, SHRI SATBEER SINGH, JUDICIAL MEMBER AND SHRI M. BALAGANESH, ACCOUNTANT MEMBER ITA No.1153/Del/2020 (ASSESSMENT YEAR 2015-16) ITO Ward- 4 (1) Delhi vs M/s. B.M. Gupta Estates Pvt. Ltd. 4948-5949, Basti Haphool Singh Sadar Thana Road, Delhi-110006 PAN No.AACCB7106P (Appellant) (Respondent) Appellant by Mr. Javed Akhtar, CIT (DR) Respondent by Sh. Satyen Sethi, Advocate, Sh. AT Panda, Advocate Date of Hearing 30/12/2024 Date of Pronouncement 30/12/2024 ITA No.1153/Del/2020 ITO Vs. BM Gupta Page 2 of 10 ORDER PER M. BALAGANESH, AM: This appeal of the Revenue arises out of the order of the Commissioner of Income Tax (Appeals)-3, Gurgaon [hereinafter referred to as ‘CITA(A)’] in Appeal No. 97/CIT(A)-3/GGN/2016-17 dated 04.11.2019 against the order passed by Assessing Officer, Gurgaon u/s 143(3) of the Income Tax Act, 1961 order (hereinafter referred to as ‘the Act’) the Assessment Year 2015-16. 2. The revenue has raised following grounds of appeal :- 3. We have heard the rival submissions and perused the material available on record. The return of income for A.Y.2015-16 was filed ITA No.1153/Del/2020 ITO Vs. BM Gupta Page 3 of 10 by the assessee company on 28.09.2015 declaring total income of Rs.1,01,10,190/-. This return was later revised on 30.09.2015 declaring total income of Rs.1,01,10,190/-. The learned AO during the course of assessment proceedings on perusal of the balance sheet observed that the assessee company has shown a huge amount as sundry creditors in the liability side of the balance sheet which was construed to be unreasonably high in comparison with earlier year as under :- 4. The learned AO observed that huge amount of sundry creditors has been shown on account of purchases made from the following parties :- i. Dwarkesh Alloys ii. Sriji Corporation iii. Charvak Trading iv. Kapsons Agencies 5. The assessee company submitted the consolidated summary of sundry creditors as well as unit wise details of sundry creditors ITA No.1153/Del/2020 ITO Vs. BM Gupta Page 4 of 10 which fact has been duly acknowledged by the learned AO in his assessment order. The learned AO observed that the only unit of the assessee company is BMG metals and there are discrepancies in the balance sheet of sundry creditors. Accordingly, the learned AO issued notice to sundry creditors namely Dwarkesh Alloys and Sriji Corporation under section 133(6) of the Act and sought for certain documents and explanations for examining the veracity of purchases made by the assessee from those parties. The details called for by the learned AO in the notice u/s.133(6) of the Act were duly furnished by the concerned suppliers directly before the learned AO. Further the assessee also furnished confirmation from M/s. Charvak Trading Pvt. Ltd. together with ledger account for consignment stock transfer to BMG Metals before the learned AO. Similarly the assessee submitted the requisite documents with regard to M/s. Kapsons Agencies. The assessee also gave detailed reply vide letter dated 19.12.2017 which fact is acknowledged by the learned AO in the assessment order itself. Despite all these documents placed on record, the learned AO proceeded to reiterate his earlier observations and observed that the assessee company has shown huge amount of sundry creditors and other liabilities in his balance sheet and proceeded to treat the total value of sundry creditors and other liabilities to the tune of Rs.15,11,56,715/- as income of the assessee on the ground that those creditors were not substantiated by the assessee. ITA No.1153/Del/2020 ITO Vs. BM Gupta Page 5 of 10 6. The assessee pleaded that there was no discrepancy in the balances of the major three sundry creditors of assessee company namely M/s. Dwarkesh Alloys Pvt. Ltd. and M/s. Sriji Corporation and Charvak Trading Pvt. Ltd.. In fact confirmation of balance was received directly from these parties by the learned AO through his Inspector. The assessee submitted before the learned CIT(A) as under : - ITA No.1153/Del/2020 ITO Vs. BM Gupta Page 6 of 10 7. The assessee also submitted that the learned AO while framing the order had alleged that purchases made from the above mentioned creditors do not match with the books of account of the assessee. It was submitted that assessee is a consignee and above creditors are consignors of non – ferrous metals. The assessee also placed on record the copy of consignment agreement with the said parties and the complete nature of transaction with those creditors were also explained before the learned AO vide letter dated 19.12.2017. As per consignment agreement, the assessee company received material from the consignor to be sold on their behalf at the price determined by the consignee and assessee would be entitled only for Consignment Agency Commission. The consignor would be making stock transfer and consignee is receiving the material as stock transfer instead of sale / purchase. The relationship between consignor and consignee is that of Principal - agent relationship. No sale or purchase takes place between them. The consignment agent only get commission on final sales made and does not get any profit or loss on sale of such consignment items. It was also submitted that consignment commission received ITA No.1153/Del/2020 ITO Vs. BM Gupta Page 7 of 10 by the assessee was duly subjected to deduction of tax at source. These details were also duly furnished by the assessee. 8. The learned CIT(A) on examination of the reconciliation of consignment purchases made by the assessee; details of debtor and trade receivable as on 31.03.2015; and copy of account with creditors for financial years ended 31.03.2015 and 31.03.2016 observed that the addition made by the learned AO on account of sundry creditors cannot be sustained by observing as under :- ITA No.1153/Del/2020 ITO Vs. BM Gupta Page 8 of 10 ITA No.1153/Del/2020 ITO Vs. BM Gupta Page 9 of 10 9. None of the factual findings given by the learned CIT(A) could be controverted by the revenue before us. 10. We find that entire details were duly placed on record before the learned AO and the addition has been made by the learned AO without understanding the business model of the assessee, modus operandi adopted by the assessee. These deficiencies had been rectified by the learned CIT(A) by duly appreciating the evidences on record. Hence, we do not find any infirmity in the order of the learned CIT(A) deleting the addition made by the learned AO. Accordingly, the grounds raised by the revenue are dismissed. 11. In the result, the appeal filed by the revenue is dismissed. Order pronounced in the open court on 30.12.2024 Sd/- Sd/- (SATBEER SINGH GODARA) (M. BALAGANESH) JUDICIAL MEMBER ACCOUNTANT MEMBER Dated: 30 /12/2024 Neha, Sr. P.S. Copy forwarded to: Appellant Respondent CIT CIT(Appeals) DR: ITAT ASSISTANT REGISTRAR ITAT, NEW DELHI "