Income Tax Appellate Tribunal - Delhi
Dcit Circle-2, Muzaffarnagar vs Raghuveer Metal Industries Limited, ... on 22 December, 2022
IN THE INCOME TAX APPELLATE TRIBUNAL DELHI
(DELHI BENCH 'H' : NEW DELHI)
BEFORE SH. SHAMIM YAHYA, ACCOUNTANT MEMBER
AND
SH. ANUBHAV SHARMA, JUDICIAL MEMBER
ITA No.9379/Del/2019, A.Y. 2016-17
Deputy Commissioner of Income Vs. M/s. Raghuveer Metal Industries
Tax, Limited
Circle-2, Shop No. 4, Plot No. 45/46-West
Muzaffarnagar Guru Angad Nagar,
Opp.-Best Office, Laxmi Nagar,
Delhi-110092
(APPELLANT) (RESPONDENT)
Assessee by None
Revenue by Sh. Sunil Kumar Yadav, Sr. DR
Date of hearing: 15.12.2022
Date of Pronouncement: 22.12.2022
ORDER
PER ANUBHAV SHARMA, JM:
The appeal has been filed by the Revenue against order dated 09.09.2019 passed in appeal no. 10324/319/CIT(A)-7/Del/2018-19 for assessment year 2016-17, by the Commissioner of Income Tax (Appeals)-7, New Delhi (hereinafter referred to as the First Appellate Authority or in short 'Ld. F.A.A.') in regard to the appeal before it arising out of assessment order dated 18.12.2018 u/s 143(3) of the Income Tax Act, 1961 (hereinafter referred to as 'the Act') passed by Sh. Jai Pal Singh, Circle-3(2)1, MZR (hereinafter referred as Ld. Assessing officer or in short Ld. AO).
ITA No. 9379./Del/2019 Raghuveer Metal Industries Ltd. Delhi 2
2. The brief facts of the case are that assessee company had filed its Return of Income for assessment year 2016-17 on 07.09.2016 declaring income of Rs. 1,16,45,130/-. Later on, the case of the assessee company was selected for scrutiny and assessment was completed u/s 143(3) on 18.12.2018.
2.1 The case of Revenue is that during the course of assessment proceedings the assessee company was specifically asked to furnish confirmation of the trade payables above one lakh. Despite a long sequence of notices issued to the assessee company, the confirmations were not furnished by the assessee company even in respect of trade payables above on lakh. Since, the assessee had failed to produce confirmation of trade payables above on lakh, an addition of Rs. 3,41,56,172/- was made to the income of the assessee company. Further, during the course of assessment proceedings, the assessee company was required to furnish confirmation in respect of Advance from Customers above one lakh. However, the assessee failed to furnish the confirmation. Accordingly, and amount of Rs. 3,97,586/- was added to the income of the assessee company.
2.2 Being aggrieved with the assessment order of the AO, the assessee filed an appeal before CIT(A)-7, Delhi The CIT(A)-7, Delhi vide his order dated 09.09.2019 allowed the appeal of the assessee. The gist of relief allowed by the CIT(A) -7, Delhi is as under:-
(a) Regarding applicability of provisions of section 68, Ld. FAA observed that the appellant has brought substantial material on record to show that these are sundry creditor for purchases and that purchases from the very parties were already accepted by the Assessing Officer.
Evidently, the creditors were held to be bogus on the ground that all confirmations were not filed whereas as no enquiry letters under sec. 133(6) of the Act were issued which if received back unserved with the ITA No. 9379./Del/2019 Raghuveer Metal Industries Ltd. Delhi 3 remarks 'not known' leaving the Assessing Officer to conclude that the appellant has failed to discharge his onus of proving the capacity of the creditors and genuineness of the transactions. In opinion of Ld. FAA, the Assessing Officer has not appreciated the facts of the case in its entirety. This is a case, where the books are not out rightly rejected, there is no adverse inference drawn regarding quantum of purchases or sales and even the purchase accounts of the sundry creditors have not been disturbed. The fact that the assessee maintained regular books of account including stock register is also not negated. The Assessing Officer had not disallowed the purchases from those creditors nor were the trading results disturbed. Ld. FAA relied, CIT vs. Ritu Anurag Aggarwai-IT Appeal No. 325 of 2008 dated 22/07/2009, dealing with section 68 of the IT Act where in, the Hon'ble Delhi High Court observed "... Proceeding on the basis, that ITAT observed that the sales purchases as well as gross profits as disclosed by the assessee have been accepted by the Assessing Officer. Once this is accepted, we are of the opinion that the approach of the ITAT was correct inasmuch as the Assessing Officer did not consider this aspect while making additions of the sundry creditors under section 68 of the Income Tax Act. As there was no case for disallowance for responding purchases, no addition could be made under section 68 in as much as it is not in dispute that the creditors' outstanding related to purchases and the trading results were accepted by the Assessing Officer."
(b) Further, the Ld FAA in his order observed that facts of the present case are similar those of the case of Vardhman Oversead Ltd. Therefore, it is abundantly clear that the provision of sec. 41 are not applicable. No addition could be made for remission or cessation of ITA No. 9379./Del/2019 Raghuveer Metal Industries Ltd. Delhi 4 trading liability as envisaged under section 41(1) of the Act for the assessment year under consideration.
( c) The Ld FAA vide para 4.7 of the order held that the sundry creditors of Rs. 3,41,56,172/- and trade payable of Rs. 3,97,586/- cannot be treated as bogus and cannot be added to the income of the appellant and deleted both the addtions made by the AO in his assessment order.
3. The Revenue has challenged the order of Ld. CIT(A) by raising following grounds :-
"1. The CIT(A) has erred in law and on facts by deleting the addition of Rs. 3,41,56,172/- made by the AO on account of trade payables by not appreciating the fact that though the assessee had provided a list of 46 parties with trade credit balances totaling Rs. 18,19,33,614/-, in 4 lots and has failed to file confirmations in respect of the balance 114 parties involving total credit balance of Rs. 3,17,04,143/- till the date of assessment order.
2. The CIT(A) has erred in law and on facts by deleting the addition of Rs. 3,97,586/- made by the AO on account of advance from customers by not appreciating the fact that the assessee did nto file any cross-confirmation at all from the 6 parties involved."
4. Heard and perused the record.
5. As the case was called for hearing on 15.12.2022, non-appeared for the assessee while earlier also on two occasions non-appeared for the assessee. The notices issued through the department have been received back with the report that "there is no such entity" at the given address. Accordingly, arguments of Ld. DR were heard who submitted that Ld. CIT(A) has fallen in error in setting aside well- reasoned order of ld. Assessing Officer.
6. Appreciating the matter on record it can be observed that primarily on the basis of no adverse observations on the purchases the Ld. CIT(A) had deleted ITA No. 9379./Del/2019 Raghuveer Metal Industries Ltd. Delhi 5 the additions at the same time perusal of the order of Ld. CIT(A) in para 4.2 reveals that Ld. CIT(A) took into consideration the fact that assessee had only submitted evidences of confirmation in regard to Rs. 6,59,88,237/- vide reply dated 03.12.2018 and Rs. 7,66,68,682/- vide reply dated 07.12.2018 out of total papers of Rs. 21,36,37,757/-. Bench is of opinion, if assessee was not having sufficient time for filing confirmations before Ld. AO, an attempt could have been made to file those before Ld. First Appellate Authority. However, Ld. CIT(A) instead of proceeding to make an inquiry on this own or to given opportunity to the assessee, deleted the additions made by the Ld. AO.
7. The Bench is of considered opinion that Ld. AO was proceeding with assessment on limited scrutiny as to mismatch in sale and large current liability in comparison to total assets, then only for the reason for not questioning purchases the opinion of Ld. AO could not have been interfered, when otherwise before Ld. CIT(A) there was no additional material or evidences. That being so, the grounds raised by revenue are sustained. The Appeal of Revenue is allowed and impugned order of Ld. CIT(A) is set aside and one of Ld. AO is restored.
Order pronounced in the open court on 22nd December, 2022.
Sd/- Sd/-
(SHAMIM YAHYA) (ANUBHAV SHARMA)
ACCOUNTANT MEMBER JUDICIAL MEMBER
Date:-22 .12.2022
*Binita, SR.P.S*
Copy forwarded to:
1. Appellant
2. Respondent
3. CIT
4. CIT(Appeals)
5. DR: ITAT
ASSISTANT REGISTRAR
ITAT, NEW DELHI