Income Tax Appellate Tribunal - Delhi
Dcit, Bhiwani vs Sh. Amit Kumar Garg, Bhiwani on 10 August, 2020
IN THE INCOME TAX APPELLATE TRIBUNAL
DELHI BENCH 'A', NEW DELHI
Before Ms. Sushma Chowla, Vice President
Dr. B. R. R. Kumar, Accountant Member
(E-Court Module)
ITA No. 2448/Del/2017 : Asstt. Year : 2012-13
DCIT, Vs Amit Kumar Garg,
HUDA City Centre, Prop. M/s Amit Sales Corporation,
Bhiwani Plot No. 2, Near Over Bridge,
Circular Road, Bhiwani
(APPELLANT) (RESPONDENT)
PAN No. ADCPG3789K
CO No. 146/Del/2017 : Asstt. Year : 2012-13
Amit Kumar Garg, Vs DCIT,
Prop. M/s Amit Sales HUDA City Centre,
Corporation, Plot No. 2, Near Bhiwani
Over Bridge, Circular Road,
Bhiwani
(APPELLANT) (RESPONDENT)
PAN No. ADCPG3789K
Assessee by : Sh. Gautam Jain, Adv.
Revenue by : Sh. Jagdish Singh Dahiya, Sr. DR
Date of Hearing: 15.07.2020 Date of Pronouncement: 10.08.2020
ORDER
Per Dr. B. R. R. Kumar, Accountant Member:
The present appeal has been filed by the revenue against the order of the ld. CIT(A), Hisar dated 24.01.2017.
2. Following grounds have been raised by the revenue:
"1. On th e facts and in the circumstances of the case, the Ld. CIT (Appeal) has erred in deleting the addition made by the AO at Rs.2,22,16,9 52/- on acco unt of investment 2 ITA No. 2448/Del/2017 CO No. 146/Del/2017 Amit Kumar Garg from undisclo sed sou rce, USL, interest d isal lowance withou t appreciating the facts th at th e additions are made on the facts of the case and the documen tary stre ngth impoun ded during the survey u/s 133A.
2. On the facts and in the circumstan ces of the case, the Ld. CIT (Appeal) has erred in deleting the addition mad e by th e AO at Rs. 7,53,000/- on account of unsecured lo an received wi thout appreciating th e facts tha t the addition s are mad e on the facts of th e case that the creditworth iness/genuineness have not proved d uring the assessmen t p ro ceeding s which are not a business in come.
3. On the facts and in the circumstan ces of the case, the Ld. CIT (Appeal) has erred in deleting the addition made by the AO at Rs. 23,25,00 0/- on account of disal lowance of interest in proportion ate to non-business advances given out of i nterest bearings fund s and interest i s claimed as expenses wi thout appreciating the facts that such interest exp enses are claimed after estimatio n of Gross Profit.
4.On the facts an d in the circumstances of the case, the Ld. CIT (Appeal) has erred in deleting the addition mad e by the AO at Rs. 92,79 ,7 40/- on account of undisclosed investment made from und isclosed source and earn ed interest there upon withou t appreciating the facts th at the ad ditions are made on the strength of impounded do cuments.
5.On the facts an d in the circumstances of the case, the Ld. CIT (Appeal) has erred in deleting the addition made by the AO at Rs. 98,59 ,2 12/- on account of undisclosed investment withou t appreciating the facts th at the ad ditions are made on the strength of impounded do cuments."
3. In CO No.146/Del/2017, following grounds have been raised by the assessee:
"That ld . CIT (A) Rohtak has grossly erred both in law and on facts in not concluding that imp ugned order of assessmen t dated 3 1.03.20 15 u /s 1 43(3) of the Act was in excess of jurisdi ction since the addition made of Rs.11,13,29 6/- an d Rs.98 ,5 9,212 are beyond the scope of assessmen t i s otherwise to untenable and unsu stain able."3 ITA No. 2448/Del/2017 CO No. 146/Del/2017
Amit Kumar Garg
4. Brief facts of the case are that the assessee e-filed return of income declaring an income at Rs.2,41,147 on 12.09.2012, which was processed u/s 143(1) of the Income Tax Act, 1961. Later o n, the case was selected for scrutiny thro ugh CASS. A survey u/s 133A of the Act was carried out at the business premises of the assessee on 02.09.2014 . T he impounded material has been duly examined while completing the assessment proceedings. The AO has brought to tax, the alleged unexplained inve stments based on the impounded material. The ld. CIT (A) has deleted the addition which were based on such material on the grounds that no separate addition is warranted when the profits of the assessee are estimated taken into consideration the gross profit of the year. Aggrieved the revenue filed appeal before the Tribunal and the assessee has filed Cross Objection.
5. Ground No. 1: Inves tment from Undisc losed Source - Comprehe nsive, dealt in de tail in othe r grounds.
Ground No. 2: Unsecured Loans
6. The AO observed that the assessee has received the following loans during the year:
S. No. Nam e of the Amount broug ht to tax as income Party Principal Interest Total
1. Parveen K um ar 1,00 ,000 5,000 1 ,05,000 Bhard waj
2. Lalita Devi 1,00 ,000 - 1 ,00,000
3. Balkishan 1,00 ,000 1 ,00,000 Sugl a
4. H ukam Chand 4,00 ,000 48,000 4 ,48,000 Raj ender K um ar Total 7,00 ,000 53,000 7 ,53,000 4 ITA No. 2448/Del/2017 CO No. 146/Del/2017 Amit Kumar Garg
7. The assessee has filed copy of account of these perso ns and copy of ITR. In the case of Bhardwaj, the AO held that the assessee has not furnished the ID proof and bank statement. Similarly, in the case of Lalita Devi, the AO was not satisfied with the copy of the ITR acknowledgment. The AO held that in the case of Balkishan Sugla and Hukam Chand Rajender Kumar, the assessee has not filed the primary documents to prove the genuineness of the transactions.
8. The ld. CIT (A) deleted the addition on the grounds that the income of the assessee has been estimate d by calculating the GP, hence no separate addition is called for on account of unsecured loans.
9. Before us, the ld. DR taken up arguments in two folds,
1. That the decision of the ld. CIT (A) that no separate addition is called for on account of loans, once the inco me has been e stimated is to tally on a wrong interpretation of judgme nts and facts of the case.
2. It was argued that the assessee has failed to discharge the onus of identity, genuinity and creditworthiness of the four loan parties. It was further argued that the AO has clearly mentioned that the basic details to prove identity, genuinity and creditworthiness of the loan parties have not been provided.
10. Before us, the ld. AR reite rated the arguments taken before the ld. CIT (A).
11. Regarding the addition on account of loans receive d, it was argued that loans were received from identifiable parties and 5 ITA No. 2448/Del/2017 CO No. 146/Del/2017 Amit Kumar Garg through banking channel. It was, thus argued that burden of the assessee in respect of the loans received from various parties stands discharge d and therefore no addition is tenable. It was argued that once the amount has been received by account payee cheques and the cre ditors have duly confi rmed the transactions no adverse reference can be drawn. In addition, the ld. AR relied on the following judgments:
Addl. CIT vs Hanuman Agarwal 151 ITR 150 (Pat) Mather & Platt (India) Ltd vs CIT 168 ITR 493 (Cal) Addl. CIT Bihar vs Bahri Bros P. Ltd. 154 ITR 244 (Pat) Nemi Chand Kothari vs. CIT 136 Taxman 213 (Gau) Labh Chand Bohra vs. ITO 219 CTR 571 (Raj)
12. Heard the arguments of bo th the parties and perused the material available on record. We find that the de cision of the ld. CIT (A), that no separate addition on account of unse cured loans is warranted as the inco me of the assessee has been estimated fo r the year is found to be on incorrect inte rpretation of the ratio laid do wn by the Hon'ble Courts. The ld. CIT (A) misread the judgments and combined, transpolate d, bamboozled herself in considering the items of P&L account with that of balance sheet items interchangeable. The case laws referred pertains to purchases, disallowances u/s 40A(3) and on account of expe nses on trading account. Extrapolation of judgments rendered in connection with the items of trading account cannot be extended to the additio n of unsecured loans which is balance sheet item. The unsecured loans do not have impact on the estimation of gross profit as the y do not constitute a part of the trading account. Hence , the issue of unse cured loans has to be adjudicated independently on the merits of the case.
6 ITA No. 2448/Del/2017 CO No. 146/Del/2017Amit Kumar Garg
13. With regard to the loans from four people, while the ld. DR argued that even the co py o f the bank statement has not been furnished by the assessee thus failing to discharge the primary onus in the case of the loans received from various parties, we find from the paper book, the relevant documents pro ving identity, ge nuineness and creditworthiness of the loaners. We find that all the bank statements of the loan parties have been duly submitted before the AO. The revenue has not disputed the prese nce o f the primary documents before the ld. CIT (A) at this juncture. Hence, it can be held that the assessee has discharged the primary onus to prove the loans whe reas the revenue has not acte d upon such evide nces filed by the assessee to bring anything contra. The addition has been made without conducting any enquiry on the grounds that the assessee has not filed the primary documents necessary to prove the genuineness of the loans, the o bservation of which, we find contrary to the facts on record. Hence, the addition made on acco unt of the loans from the above parties is dire cted to be deleted.
Ground No. 3 : Disallowance of Interest
14. The AO held that the assessee has advanced Rs. Rs.1,99,35,720/- to various parties and no inte rest has been received. T he AO calculated inte rest @ 12% on these advance s and disallowed an amount of Rs.23,25,000/- and deducted the same fro m the interest expense s paid.
15. Before us, it was submitte d that perusal of the financial statements on re cord would show that the assessee had clai med 7 ITA No. 2448/Del/2017 CO No. 146/Del/2017 Amit Kumar Garg expenditure on interest of unsecured loan of Rs. 5,84,432/- and Rs. 24,56,648/- on interest on loan raised from the bank. Thus, aggregate interest on expenditure claimed is Rs. 30,41,080/-. It was submitted that the secured loan stood at Rs. 1,77,05,427/- at the end of the year, which is a CC limit rised from the bank against the hypothesis of the sto ck. It was submitted that the stock outstanding lying at the close of the year as per the balance sheet is Rs. 2,31,50,849/-. It was thus submitted that appare ntly, no disallowance could have bee n made in respect of interest pai d on secured loan received from the bank as the entire borrowed money stoo d represented by sto ck at the close of the year and the refore, disallowance made to this extent was absolutely untenable and there can be no ground for diversion of money raised from the bank for non business purposes. It was argued that the disallowance was made on assumption that advances have been made by the assessee for non business purposes and therefore, interest claimed as business expenditure has been disallowed on presumptive basis is absolutely uncalled for and therefore , untenable. It was submitted that as regards inte rest paid on unse cured loan of Rs. 5,84,432/-, the submission of the assessee was that such interest has been paid on unsecured loans aggregating to Rs.63,51,020/- from 25 parties. It was submitted that the aforesaid loan raised stood invested in the form of stock and advances paid to the supplie rs and sundry cre ditors and he nce, no disallowance was called for. It was submitted that out of the aforesaid loans of Rs. 63,51,020/- loan aggregating to Rs.52,51,020/- had been raised in the earlier years and a respect of which, interest has bee n paid in earlier year also and 8 ITA No. 2448/Del/2017 CO No. 146/Del/2017 Amit Kumar Garg stands allowed and no disallowance made in the preceding assessment year.
16. The facts are undisputed by both the parties. Hence, we proceed to adjudicate this issue on merits of the case. The total expenditure on account of interest claimed by the assessee was Rs.30,41,080/- out of which an amount of Rs.24,56,648/- has been paid to the bank on account of the CC limit rise d. The remaining amount of Rs.5,84,432/- has been paid nearly to 25 outstanding unsecured loan parties. Hence, it cannot be said that the amount debited on account of interest hasn't been utilized for business purpose. The notional inte rest calculated on the advances give n is without any legal basis and hence hereby di rected to be deleted.
Ground No. 4: Undisclosed Investment
17. During the survey operation, the revenue impounded document No. 78 wherein the following entries could be read:
Am ou nt P er iod Mon t h Ra t e Int er est a m o unt F r om To 90 , 58 ,00 0 Se p. 2 0 09 O ct . 2 01 1 25 @ 25 p s 5,6 6, 12 5/ - 50 , 58 ,00 0 N ov . 2 01 1 Au g. 2 0 13 22 @ 25 p s 2,7 8, 19 0/ -
18. On enquiry by the AO, the asse ssee explained that this page is a rough calculation of interest on the advance amount given to one M/s S.K. Traders Hansi. It was explained that due to the dispute between the parties, minimum interest was calculated to settle the dispute but the party did not agree and the assessee ultimately received the principle amount in the year 2013 -14. It was also stated that as o n 31.03.2012 an amo unt of Rs.65,23,720/- was shown in the balance sheet in 9 ITA No. 2448/Del/2017 CO No. 146/Del/2017 Amit Kumar Garg the schedule of loans and advances. The Assessing Officer brought the amount of Rs.90,58,000/- along with interest to tax.
19. Before us, it was submitted that this page pertains to old loan received from one M/s S.K. Traders which has been duly reflected i n the re gular books of accounts from the financial year 2008-09. The amount as it 31.03.2009 was Rs.85,23,720/- and as on September 2009, it was Rs.90,23,720/-. It was argued that an amount of Rs.65,23,720/- has been sho wn in the balance sheet of the assessee under the head "lo ans and advances" for the asse ssment year 2012-13. There is no dispute that this is a financial transaction involving receipt of money either on cash basis or mercantile basis.
20. Heard. Since, the advance of Rs.65,23,720/- has been duly reflected in the balance sheet, no addition on this account is required. That le aves us with the question whether the interest accrued on this amount can be brought to tax or not. We find that the assessee has bee n following mercantile system of accounting and the fact of advance given to M/s S.K. Traders is not in dispute. Hence, in tune with the accounting procedure and as per the impounded document, the interest @3% per annum stands accrued to the assessee on the advance of Rs.65,23,720/- which the assessee omitted to show as interest receipt. Hence , we confirm inte rest @ 3% on the principle amo unt of Rs.65,23,720/-. The principle amount of Rs.65,23,720/- stands reflected in the name of M/s S.K. Traders, in the regular books of acco unts of the assessee, hence, we hold that no addition of this amount is required.
10 ITA No. 2448/Del/2017 CO No. 146/Del/2017Amit Kumar Garg
21. Ground No.5 relates to addition on account of unexplained investment based on the impounded material. The relevant part of the assessment order is as under:
"8. The assessee was asked to explain th e entries on the p ages 89, 90 , 91 & 92 of impound ed do cument No. 82 . In response to same th e assessee rep lied that these pages may b elon g to his father Sh . Prem Kumar Garg , who is popularly known as Amit Ji/Amit Dharam Kanta wale.
Th ere is no fo rce in assessee's con tention these pages are inter related and on the top of pag e No . 92 "Amit Ji B hiwani" h as been written. This page is a ledger account of Amit in the books of same on e else. On the cred it side the o th er person has credited Amit (assessee) on 20 .11.201 1 by an amount of Rs.5 5,25,880 /- on acco unt of 40% share o f p lot at Rohtak Road. This is nothing but th e investment. Oth er entries also reflect in other dates. On 0 7.05.2011 the assessee h as p aid ad van ce against "Rohtak Ro ad Plo t" amoun ting to Rs.13,33 ,332/- other entries of investment are 10,00,0 00/- on 10 .07.2011 , Rs.10,00,00 0/- on 16.07.2011 , Rs.7,50,000 /- on 12 .11.2011 and Rs.2,50 ,000/- on 30 .0 3.2012. In this way the to tal investment comes to Rs.98,59 ,2 12/- (55,25,8 80 + 13 ,33,332 + 10 ,00,000 + 7,50,000 + 2,50,000). The assessee h as fail ed to explai n th e entries mentioned in this page whi ch is h is led ger acco unt an d si mply said that this paper may rela te to this page which is his ledger account and simply sai d that this paper may relate to hi s father. The assessee has not broug ht any eviden ces in this regard. Th ese entries showing investment has not b een shown by the assessee in his return of inco me and therefore, th e un expl ained investment of Rs.98 5921 2/- is added to the total in come of the assessee."11 ITA No. 2448/Del/2017 CO No. 146/Del/2017
Amit Kumar Garg
22. During the argument before us, the ld. AR argued that no addition is warranted for the reason that it do not show any investment made by the assessee during the year. It was vehemently argued that there is no such plot at Rohtak Road, and no purchase of plot was made. Even, the department could not prove the e xistence and purchase of the said plot. It was argued that at the most it can be considered as some financial transaction as there was narration such as "lene baaki". It was argued that there are entries on the left side of the paper and on the right side of the paper and the AO has mislead himself to treat one side of entries as the unexplained investment of the assessee. He was also argued that the document do not belong to the assessee hence no addition in the hands of the assessee is warrante d.
23. On the other hand, the ld. DR argued that the re gular flow of the accounts and the exactness of the figures will reveal that this is not a dumb document and that this document is a custodian of the business transactions and the investments of the assessee. It was argued that the onus is on the assessee to prove that the document which was found at the premises of the assessee doe sn't belong to them. It was argued that the noting of "Rohtak Road jagah" on the document proves the investment at Rohtak Road. Regarding the othe r entries, he argued that they also pertain to the purchase of property and the payments made on different dates for acquisition of such prope rty. He argued that the addition has been rightly made hence needs to be confirmed.
12 ITA No. 2448/Del/2017 CO No. 146/Del/2017Amit Kumar Garg
24. Heard the arguments of bo th the parties and perused the material available on reco rd.
13 ITA No. 2448/Del/2017 CO No. 146/Del/2017Amit Kumar Garg
25. We find that the amount o f Rs.55,72,043/- being the transactions on both sides o f the paper can certainly be an absolute financial transaction. This figure pertain to the financial year 2009-10 (AY 2010-11). However, we also find that the reve nue has not bro ught anything on record as to what are these transactions. While the assessee explains that there was no purchase of alleged plot at Rohtak Road, the revenue went o n making addition on account of purchase of a plot which have not been proved. The figures reflect as under:
Left Side Right Side
S. No. Date A mount Narration Date Am ount
1. 07.05.2011 13,33,332 Bayana 27 .05.2011 1,00,000
Rohtak R oad
Pl ot
2. 10.07.2011 10,00,000 Bayana Tukan 24 .08.2011 10,00,000
Mandi
3. 16.07.2011 10,00,000 No narration 05 .09.2011 10,00,000
4. 12.11.2011 7,50,000 Bayana 22 .03.2012 7,50,000
5. 30.03.2012 2,50,000 Jam aa
No narration 25 .03.2012 5,00,000
6. 14.06.2012 8,00,000 No narration 05 .04.2012 7,00,000
7. 23.04.2012 5,00,000 No narration 02 .03.2013 5,50,000
8. 01.07.2011 3,15,631 Amit Ji Purchi
9. 20.09.2013 4,98,600 Hisar Byaz
Total Rs.64,47,603/- Total Rs.64,47,603/-
26. We find that the total of the sides is Rs.64,47,603/-. The amo unts vary from assessment years 2012-13 to 2014-15. This at the most could be a comprehensi ve sheet containing the transactions of the assessee over a period of three years. In such circumstances, the revenue has to brought on record, the sum and substance of such transactions mentioned on the document. We have spe cifically asked the revenue as to the statement recorded on the date of survey and the reply of the 14 ITA No. 2448/Del/2017 CO No. 146/Del/2017 Amit Kumar Garg assessee pertaining to these transactions on the date of survey. We find no mention of statement recorded at the time of survey either on the assessment orde r or in the o rder of the ld. CIT (A). No statement recorded at the time of the survey has been produced even before us as to what the transactions pertain to. No enquiries have been co nducted by the revenue to substantiate to unexplained investments. The figures pertaining to three diffe rent years cannot be brought to taxation without proving as to what type of transactions the document signifies. Hence, in the absence of any primary, secondary or corroborative evidences, no addition can be made based on the impo unded document. T he revenue could not even prove with certainty to whom the document belongs nor tested the hand writing on the document eithe r by the way of statement o r by the way of forensics. Hence, keeping in view the entire gamut of events pe culiar to the facts of this case, we hereby hold that no addition is warranted in the hands of the assessee for the instant ye ar.
27. With regard to the Cross Objection of sustaining of Rs.11,13,298/- made by the AO on account o f estimation of GP, having heard the arguments and keeping in view the market ave rages, the GP is reduced to 25% from 35% on the sale of scrap and from 15% to 10% on the sale of other electronic goods. The AO is he reby directed to re-compute the taxable income taking into co nsideration the revised GP rate.
15 ITA No. 2448/Del/2017 CO No. 146/Del/2017Amit Kumar Garg
28. In the re sult, the appeal of the revenue is dismissed and Cross Objectio n by the assessed partly allowed. Order Pronounced in the Open Court on 10 /08/2020.
Sd/- Sd/-
(Sushma Chowla) (Dr. B. R. R. Kumar)
Vice President Accountant Member
Dated: 10/08/2020
*Subodh*
Copy forwarded to:
1. Appellant
2. Respondent
3. CIT
4. CIT(Appeals)
5. DR: ITAT
ASSISTANT REGISTRAR