Income Tax Appellate Tribunal - Delhi
Ito, New Delhi vs M/S Count Trade Links Pvt. Ltd., New ... on 4 January, 2018
In the Income-Tax Appellate Tribunal,
Delhi Bench 'B', New Delhi
Before : Shri H.S. Sidhu., Judicial Member And
Shri T.S. Kapoor, Accountant Member
ITA No. 5830/Del./2010
Assessment Year: 2006-07
Income-tax Officer, vs. Count Trade Link Pvt. Ltd.,
Ward 3(4), New Delhi. Z-45/3, Okhla Industrial Area,
Phase-II, New Delhi.
PAN -AAACC3157B
(Appellant) (Respondent)
Appellant by Ms. Ashima Neb Sr. DR
Respondent by Sh. M.K. Anand, CA
Date of Hearing 03.01.2018
Date of Pronouncement 04.01.2018
ORDER
Per T.S. Kapoor, A.M.:
This is an appeal filed by the Revenue against the order of ld. CIT(A) dated 21.10.2010. The Revenue has taken the following grounds of appeal :
"1. In the fact and circumstances of the case, the Ld. CIT(A) has erred in law and on facts in deleting addition of Rs. 28,31,621/- on account of interest on overdraft debited to P&L account ignoring the fact that such expense was not incurred for business purpose.
2. In the fact and circumstances of the case, the Ld. CIT(A) has erred in law and on facts in deleting addition of Rs. 6963,582/- made on account of commission received from M/s Bacardi Martini India Ltd and M/s Radico Khaitan Ltd ignoring that:
a) There is difference in gross receipt as per books of accounts of the assessee, TDS and service tax return provided by the assessee during the course of assessment proceedings.ITA No. 5830/Del./2010 2
b) That no documentary evidence with respect to the claim was submitted by the assessee during the course of assessment proceedings.
2. At the outset, the ld. DR submitted that the first ground of appeal regarding interest on overdraft debited to the profit and loss account is covered in favour of the assessee by the order of Hon'ble Tribunal for Assessment Year 2007-08 in the case of assessee itself. As regards ground No. 2, the ld. DR submitted that as per AIR information, the assessee had received commission income which was more than the income declared by the assessee and therefore, the Assessing Officer had rightly added back the difference in declared income and as per AIR information as undisclosed income of the assessee. It was submitted that the ld. CIT(A) has wrongly allowed relief to the assessee and therefore, it was prayed that the matter regarding this ground of appeal may be restored to Assessing Officer for re- verifying the details.
3. The learned AR, on the other hand, in respect of ground No. 1, submitted that the assessee had paid interest to Vijaya Bank, out of which part of the same was disallowed by the Assessing Officer by holding that huge amounts were given as advance to other for which no business prudence could be figured out. He submitted that the Assessing Officer had held that the interest ITA No. 5830/Del./2010 3 paid on cash credits was not wholly and exclusively for the purpose of business, whereas the ld. CIT(A) has deleted this disallowance by relying on his earlier order. It was submitted that as rightly admitted by the ld. DR, similar issue has been decided by Hon'ble Tribunal in assessment year 2007- 08 in the case of assessee itself.
4. As regards the second ground regarding difference in TDS as per AIR information and as declared by assessee, the ld. AR submitted that during those years, the online filing of TDS returns was introduced and there were number of problems and that is why there was difference in commission as per AIR information and as per TDS certificates. He submitted that complete reconciliation was filed before the Assessing Officer, but he ignored the reconciliation and made the addition on account of such difference. Our specific attention was invited to letter dated 22.09.2008 addressed to AO, placed in paper book page 64 to 66. Our attention was also invited to paper book page 31 to 33 where another letter dated 29.12.2008 addressed to Assessing Officer was placed & entire reconciliations were submitted. Our attention was also invited to copy of letter dated 16.02.2009 written by the assessee to the Assessing Officer explaining the details of TDS certificates. Our specific attention was invited to paper book page 4 to 12, where copy of letter ITA No. 5830/Del./2010 4 alongwith copy of TDS certificates was placed. The ld. AR submitted that confirmations from the deductors regarding actual amounts paid by them were also filed before the Assessing Officer and complete reconciliation with TDS certificates, tax returns and audited profit and loss account were filed, but the Assessing Officer preferred to ignore and formed his own basis for making addition. It was submitted that ld. CIT(A) after verifying the reconciliation and after understanding the facts of the case has rightly allowed relief to the assessee. Our attention was invited to the order of ld. CIT(A) at page 15 and 16 where ld. CIT(A) has recorded detailed findings.
5. We have heard the rival parties and have gone through the material placed on record. As regards first ground of appeal, we find that the ld. CIT(A) has allowed relief to the assessee by relying on his order dated 06.09.2010 in ITA No.287. We further find that Hon'ble ITAT in the case of assessee itself in assessment year 2007-08 has decided the similar issue in favour of assessee by holding as under :
"We have carefully considered the rival submissions in the light of the material placed before us. It has been demonstrated by the assessee that the interest free advances which are stated by the Assessing Officer to be made to aforementioned three concerns are not advances made to sister concerns. The advance made to M/s Blueline Mercantile Private Limited was an old advance which was stated to be made even prior to availing bank overdraft limit. The advance to M/s New Olympus Air Services was for the purpose of traveling requirement of the assessee and the advance ITA No. 5830/Del./2010 5 made to M/s Real Time Marketing Private Ltd. was also as per the business exigencies to acquire the new territories in Punjab and Haryana. No nexus has been established by the Assessing Officer with non-business advance out of borrowed funds. In the absence of any nexus between interest free advances having been made out of borrowed fund, we are of the opinion that learned CIT (A) has rightly deleted the addition. We decline to interfere."
We find that out of 5 parties, with respect to whom disallowance u/s. 36(1)(iii) has been made, to whom interest free advances have been made, were the same as in assessment year 2007-08. The common parties in the two years are New Olympus Air Services, Real Time Marketing (P) Ltd. and Blueline Mercantile (P) Ltd. Advances to these parties in assessment year 2007-08 has been held to be for business purposes as per the order of Hon'ble Tribunal. Therefore, in the present year also, the same advances are held to be for business purposes. As regards new advances of Rs.6,78,667/- of Aishwarya Capital & Rs.5.00 lacs of T & T Motors, we find that these are small amounts and aggregate amount is Rs.11.78 lacs which is quite insignificant when compared with non-interest bearing funds available to the assessee to the tune of Rs.2.45 crores. Hon'ble Supreme Court of India, in the case of Hero Cycles (P) Ltd. Vs. CIT in its decision dated 05.11.2015 has held that if the non- interest bearing funds are more than non-interest bearing loans, no disallowance u/s. 36(1)(ii) can be made. Similar decision has been made by various High Courts including Delhi High Court in the case of CIT vs. Jet Air (P) ITA No. 5830/Del./2010 6 Ltd. vide its decision dated 03.01.2011. Therefore, in view of the above, we do not find any infirmity in the order of ld. CIT(A) as regards ground No. 1 of appeal. Therefore, ground No. 1 of appeal is dismissed.
6. Now coming to ground No. 2, we find that the Assessing Officer had made addition on account of difference in gross receipts as per AIR information and as claimed by the assessee. The assessee during the assessment proceedings tried to explain the difference, as the same were wrongly mentioned by the tax deductors in their returns of TDS and had also filed clarificatory letters from deductors, as is apparent from page 11 of the assessment order. However, the Assessing Officer on the basis of ledger account of such deductors arrived at the conclusion that the assessee had understated the income. The ld. CIT(A) has deleted the addition by holding as under :
10. I shall now adjudicate Grounds of Appeal No 3, 7, 8 and 9. The Id.
AO, in a detailed order has referred to difference in receipt. He has referred to the AIR data received for credit of commission from M/s Bacardi Martini to the tune of Rs.4,74,61,977. When confronted, the assessee produced a confirmation from M/s Bacardi Martini that the amount of Rs.2,06,98,600 and Rs.2,41,29,100 should be read as Rs.2,06,986 and Rs.2,41,291. The AO dissatisfied with the confirmation and held that even if the letter from M/s Bacardi Martini was accepted, the commission and brokerage amount would come to Rs.57,16,831. To fortify his stand the AO has referred to the ledger account of the company in assessee books which reflects a figure of Rs.35,04,844/- It was also ITA No. 5830/Del./2010 7 observed by the Id. AO that the claim of TDS indicated that the gross amount of receipts on which TDS had been deducted worked out to a figure of Rs.1,51,56,660/-. He was of the belief that due to such a development, the assessee had not accounted for the total income paid/credited by M/s Bacardi Martini of Rs.56,16,831/-. He also referred to the ledger account wherein in his opinion the reimbursement of expenses came to Rs.5,48,653/-. Thus, the Id. AO was of the opinion that the assessee had understated the gross revenue by an amount of Rs.27,60,640/-. Assuming that tax had been deducted by M/s Bacardi Martini, he held that the difference in amount credited by them and income declared by the assessee came to a figure of Rs.26,11,987/-. The assessee was given an opportunity to reconcile. The AO was of the opinion that the accounts had not been properly disclosed and there was an absence of documentary evidence. He held that the difference of Rs.27,60,640/- deserve to be treated as income of the assessee.
11. The same was true for the account of M/s Radico Khaitan Ltd. Pointing out to the discrepancies, and the number of opportunities being given to them, the Id. AO eventually proceeded to make a total addition of Rs.69,63,582/-.
12. Sh. Manoj Anand, CA in his written submission has vehemently contested the additions and the assumptions made by the Id AO. Alluding to the addition on account of difference in receipts, it was submitted that the method of accounting followed by the assessee was consistent. The assessee received commission on sale of IMFL in Delhi. According to the policy of State Govt., the sale could not have taken place through intermediaries. When the commission is earned, TDS is deducted on commission and the receipts are duly cross-tallied with the TDS certificates. Service Tax was also payable on commission and cross-tallied with the Service Tax Return. Referring to AIR data, the Ld. AO has made an arithmetical error of applying the figure of Rs.57,16,831/- instead of Rs.30,82,554/- The basis was unknown.
ITA No. 5830/Del./2010 8
13. The Id. AR made a reference to para F.1 and suggested that the ld. AO was predetermined to make addition. It was advanced that the total receipts as per AIR data was Rs.56,16,831/- whereas the P&L Account declared the same at Rs.1,40,41,608/-. He even ignored the reconciliation of AIR data and as per TDS certificate. He referred to certain un- understandable expenses in para F.4.1. It was further stated that even the contents of F.5 were arithmetically in error. This was in the account that the ITO concluded that the handling charges were Rs.1,21,28,663/- without specifying the figures mentioned in the ledger, wherein it was shown at Rs,1,09,31,504/-. Similar errors were pointed out vide para F.6, F.8 and F.9. It was submitted that the bank statements had been given to the assessee and the assessee had followed the system of accounting as provided for in the accounting standards issued by ICAI.
14. The remand report submitted on 16.03.2010 clearly states that as per the AIR information the assessee was in receipt of information of Rs.4,74,61,977 from M/s Bacardi Martini India Ltd. Referring to the confirmation filed by the assessee. It was mentioned that the total amount of commission received by the assessee came to a figure of Rs.26,34,277/-. Referring to the ledger account of M/s Bacardi Martini submitted by counsel, it was mentioned that the total debit made during the year was Rs.35,04,844/- and since there was a difference in receipts as per ledger account, after deducting the expenses, the same came to Rs.29,56,191/-. It was concluded that the assessee had understated the gross revenue by an amount of Rs.27,60,640/-. Similarly there was a discrepancy viz a viz the accounts of M/s Radico Khaitan Ltd. and the commission received from them. The Id. AO reiterated that the amount of Rs.42,02,942 was to be added back from the receipts of M/s Radico Khaitan. In the rejoinder filed, the assessee has given a reconciliation. It was reiterated that the basis of conclusion drawn by the AO for addition of Rs.26,34,277/- against M/s Bacardi Martini was baseless. It was submitted that the commission paid through reconciliation had been ignored. The basis is unknown. Insofar M/s Radico Khaitan Ltd. was concerned, the Id. AO had adopted a pick and choose policy to pick up the figures from the ledger account as suited to him to make an addition of Rs.42,02,942/-. During the assessment ITA No. 5830/Del./2010 9 proceedings all receipts from Bacardi and Radico were duly correlated/reconciled with the TDS certificates, service tax returns and audited profit and loss account which he had preferred to ignore and formed his own basis for making additions,
15. I have considered the order of the Id. AO and the submissions made by the Id. AR of the assessee. There is no doubt that the business of the assessee is extremely regulated in as much as it is regulated by M/s DSIDC. The assessee is not the owner of the stocks. The owners are M/s Bacardi Martini and M/s Radico Khaitan. It is also undisputed that the accounts of the assessee have been followed consistently as per the accounting standards. Once the accounts have been accepted earlier, the same cannot be deviated unless the assessee himself changes the method of accounting. This is in accordance with the principle/rule of consistency as highlighted vigorously in Radhasoami Satsang v CIT (1992) 193 ITR 321. The ld. AO has not contested that the method of accounting had changed. Nor is any evidence in that regard.
16. After a reconciliation of the figures as mentioned in the TDS certificates, along with the audited accounts, it is difficult to appreciate that how the Id AO has come to a conclusion as he has. The Id. AR of the assessee has explained me each and every transactions which has casted a doubt in the eyes of the Id. AO. If at all, addition has to be made, due to discrepancy in receipts or even inflation of expenses, the same has to be based on cogent evidence which may have to go beyond the assessee. The only such investigation carried out is a confirmation on the AIR data from M/s Bacardi Martini. In such circumstance, the addition cannot be sustained. The assessee succeeds in grounds of appeal No. 3, 7, 8 and 9."
7. We find that the ld. CIT(A) has passed a detailed and speaking order, wherein each and every transaction has been examined. We also find that the assessee had filed complete copies of TDS certificates alongwith clarificatory ITA No. 5830/Del./2010 10 letter dated 16.02.2009. We further find that vide letter dated 22.09.2008 placed at paper book page 64 to 66, the assessee had filed complete reconciliation with regard to the commission income from two deductors. Such reconciliation with respect to TDS certificates placed at paper book page 5 to 12 indicates same amount of TDS and therefore, the ld. CIT(A) has rightly appreciated the facts of the case and has rightly deleted the addition and therefore, we do not find any infirmity in the order of the ld.CIT(A). In view of the above, the ground No. 2 is also dismissed.
8. In nutshell, the appeal of the Revenue is dismissed.
Order pronounced in the open court on 4th January, 2018.
Sd/- Sd/-
(H.S. Sidhu) (T.S. Kapoor)
Judicial member Accountant Member
Dated: 4th Jan., 2018
*aks*
Copy of order forwarded to:
(1) The appellant (2) The respondent
(3) Commissioner (4) CIT(A)
(5) Departmental Representative (6) Guard File
By order
Assistant Registrar
Income Tax Appellate Tribunal
Delhi Benches, New Delhi