Income Tax Appellate Tribunal - Delhi
Glorious Hospitality (P) Ltd., New ... vs Assessee on 6 February, 2012
IN THE INCOME TAX APPELLATE TRIBUNAL
(DELHI BENCH 'C' : NEW DELHI)
SHRI I.C. SUDHIR, JUDICIAL MEMBER
AND
BEFORE SHRI B.C. MEENA, ACCOUNTANT MEMEBR
ITA No.2124/Del./2012
(Assessment Year : 2008-09)
ACIT, Central Circle 21, vs. M/s. Glorious Hospitality Pvt. Ltd.,
New Delhi. F - 6/5, Ground Floor, Vasant Vihar,
New Delhi.
(PAN :AACCG5275C)
CO No.408/Del/2012
(in ITA No.2124/Del./2012)
(Assessment Year : 2008-09)
M/s. Glorious Hospitality Pvt. Ltd., vs. ACIT, Central Circle 21,
F - 6/5, Ground Floor, Vasant Vihar, New Delhi.
New Delhi.
(PAN :AACCG5275C)
(APPELLANT) (RESPONDENT)
Assessee by : Shri Anil Jain,
Revenue by : Shri R.I.S. Gill, CIT DR
ORDER
PER B.C. MEENA, ACCOUNTANT MEMBER
The appeal and cross objection filed by the revenue and the assessee respectively emanate from the order of the CIT (Appeals)-II, Delhi dated 06.02.2012. The grounds of revenue's appeal read as under :- 2 ITA No.2124/Del/2012 CO No.408/Del/2012
"1. That the Commissioner of Income Tax (Appeals) erred in law and on facts of the case in deleting the addition of Rs.40,83,460/- made by the Assessing Officer on account of unexplained purchases u/s 69C of the Income-tax Act, 1961.
2. That the Commissioner of Income Tax (Appeals) erred in law and on facts in accepting the transaction of sale and purchase made in cash as genuine.
3. That the Commissioner of Income Tax (Appeals) erred in law and on facts of the case in deleting the addition of Rs.75,867/- made by the Assessing Officer by way of 50% disallowance of expenditure claimed by the assessee.
4. That the Commissioner of Income Tax (Appeals) erred in law and on facts in holding that the statements of various person without being confronted to the assessee have no evidentiary value and they did not have any connection with the assessee, without properly appreciating the facts and circumstances of the case.
5. (a) The order of the CIT (A) is erroneous and not tenable in law and on facts.
(b) The appellant craves leave to add, alter or amend any/all of the grounds of appeal before or during the course of the hearing of the appeal."
The ground of assessee's cross objection read as under :-
"1. That in view of the facts & circumstances of the case and in law the CIT (A) has erred in not holding that the notice issued U/s 153C and the assessment order passed U/s 153C/143(3) are illegal, bad in law & without jurisdiction.
2. That admittedly, as recorded in the satisfaction note, no seized document related to the relevant assessment year was found and the seized paper referred in the said satisfaction note were duly reflected in the regular books of A/c and no incriminating material was found. Hence the notice issued U/s 153C is illegal, bad in law & without jurisdiction.
3. That in view of the facts & circumstances of the case the CIT (A) has erred on facts and in law in holding that the assessment has been framed in conformity with statutory provision of Section l53C r/w Section l53A of the Act.
4. That in view of the facts and circumstances of the case the CIT(A) has erred in facts and on law in upholding the validity of assessment particularly when the assessment had been made without complying with the law and the additions made are illegal, bad in law & without jurisdiction.3 ITA No.2124/Del/2012 CO No.408/Del/2012
5. That on the facts and circumstances of the case and the provisions of the law, the Ld CIT (A) has erred in not considering the fact that the assessment proceeding for the year under appeal was not pending on the date of the recording of satisfaction u/s 153C of the Act and accordingly the same did not abate for the purpose of initiation of proceedings u/s 153C and as such the assessment being bad in law deserves to be quashed.
6. That the respondent reserves the right to add/amend/alter the grounds of cross objection.
2. Assessee is a private limited company. At the relevant time, the paid up capital of company was Rs.10,37,500. The authorized capital was Rs.11,00,000/-. Reserve and surplus was Rs.9,37,500/- (Schedule A & B). As per Schedule 'D', assessee had made advances against property of Rs.2,29,37,140/-. The apparent source of this investment from the balance sheet appears to be share application money inward of Rs.2,12,20,000/- (Schedule 'E'). Total administrative and other expenses debited in P&L account are Rs.1,51,735/- (Schedule 'I'). The total purchases and sales as per P&L account are Rs.40,83,460/- and Rs.42,42,525/- respectively. There is no opening and closing stock as per accounts.
3. At the outset of the hearing, the ld. AR submitted that the issue raised in appeal of the revenue in ground nos.1 & 2 are covered in favour of the assessee by three decisions of coordinate Benches of ITAT, Delhi Benches. In those cases also, the order of Assessing Officer was of Central Circle 21. The CIT (A)-II was also the same. The Assessing Officer and the CIT (A) are same in assessee's case. In those cases, the additions were also made on account of same findings and 4 ITA No.2124/Del/2012 CO No.408/Del/2012 conclusions as arrived made by the Assessing Officer in assessee case. In all these cases, the trade was textile and books of account and registers filed were not rejected. Same is the case of the assessee. Ld. AR made available the copies of these three decisions of ITAT, Delhi Benches in the case of ACIT, Central Circle 21, New Delhi vs. Blue Luxury Impex Pvt. Ltd. in ITA Nos.5495 to 5500/Del/2011 dated 13.06.2012; ACIT, Central Circle 21, New Delhi vs. Anupama Links Pvt. Ltd. in ITA No.4135 to 4140/Del/2012 dated 12.10.2012 and ACIT, Central Circle 21, New Delhi vs. AA Testronics Solutions Pvt. Ltd. in ITA Nos.4223 to 4228/Del/2012 dated 12.10.2012. Further, ld. AR pleaded that in these cases, the relief has been granted by following the decision of Hon'ble jurisdictional High Court in the case of CIT vs. Radhika Creation reported in (2011) 10 Taxmann.com 138 (Delhi) wherein the Hon'ble High Court has held that there cannot be addition u/s 69-C for recorded expenses in the books. Ld. AR vehemently pleaded that appeals of the revenue be dismissed. He also pleaded that in all these cases, the addition has been deleted on merits. Ld. AR has not pressed the cross objection wherein the proceedings u/s 153-C has been challenged.
4. Ld. DR relied on the order of the Assessing Officer.
5. We have heard both the sides on the issue. Hon'ble Delhi High Court in the case of CIT vs. Radhika Creation, cited supra, has held that section 69-C refers to 5 ITA No.2124/Del/2012 CO No.408/Del/2012 the source of the expenditure and not to the expenditure itself and consequently, the Assessing Officer was clearly wrong in treating the said expenditure and unexplained expenditure u/s 69-C of the Act. The relevant paras of the order read as under :-
"2. Proposed questions 'a' to 'c', as would be apparent from a plain reading thereof, relate to the addition of Rs.44,38,997/- which has been held to be the unexplained expenditure of the assessee under Section 69C of the Income-tax Act, 1961 (hereinafter referred to as "the said Act"). The Assessing Officer had examined the details of the said expenditure and found that the same was not authenticated by any vouchers and consequently, made the addition of Rs.44,38,997/- as unexplained expenditure in terms of Section 69C of the said Act.
3. We may point out that during the search and seizure operations, as indicated in para 3.1 of the order passed by the Commissioner of Income-tax (Appeals), no evidence was found indicating that the assessee had any undisclosed income. However, the Assessing Officer had directed the assessee to get its accounts audited as per the provisions of Section 142(2A) of the said Act. It is on the basis of the audit report prepared under Section 142(2A) of the said Act that the addition appears to have been made by the Assessing Officer.
4. The case before us has two dimensions. The first being as to whether the Assessing Officer was right in treating the said sum of Rs.44,38,997/- as unexplained expenditure under Section 69C of the said Act. The second aspect is whether the said addition could legitimately have been made in the course of a block assessment.
5. Insofar as the first aspect of the matter is concerned, we find that Section 69C clearly stipulates that where, in any financial year, the assessee has incurred an expenditure and he offers no explanation about 'the source of such expenditure or part thereof', or the explanation, if it is offered by him, is not, in the opinion of the Assessing Officer, satisfactory, the amount covered by such expenditure or part thereof, as the case may be, may be deemed to be the income of the assessee for such financial year. Thus, the focus of Section 69C is on the "source" of such expenditure and not on the authenticity of the expenditure itself. It is an admitted position that the expenditure was shown by the assessee in its regular books of accounts and it is because of this reason that the Income-tax Appellate Tribunal had observed:-6 ITA No.2124/Del/2012 CO No.408/Del/2012
"As the expenditure was accounted in the regular books, the source is obviously explained. The provisions of Section 69C are not applicable as there was no unaccounted expenditure." [Emphasis supplied]"
6. What the Assessing officer attempted to do was to go into the authenticity of the expenditure and he returned a finding that the expenditure was not authenticated by vouchers and consequently, he added the said expenditure as unexplained expenditure under Section 69C. We are in agreement with the observations and findings of the Commissioner of Income-tax (Appeals) as well as that of the Income-tax Appellate Tribunal that this is not a case which falls under Section 69C. Clearly, Section 69C refers to the 'source of the expenditure' and not to the expenditure itself. Consequently, the Assessing Officer was clearly wrong in treating the said expenditure as unexplained expenditure under Section 69C of the said Act and the lower appellate authorities were right in their conclusions in deleting the said addition."
The assessee has relied on three cases of the coordinate Bench of ITAT Delhi Benches. The ITAT in the case of ACIT vs. Blue Luxury Impex Pvt. Ltd., cited supra, has held as under :-
"6. We have heard the learned DR and have gone through the facts of the case. Indisputably & as pointed out by the ld. CIT(A), the entire purchases added by the AO are accounted for in the books of account. The AO, without rejecting the books results added the entire purchases, source of which, according to learned CIT(A), was duly explained. Likewise, the learned CIT(A) found that sales had been made by account payee cheques and duly reflected in stock registers and supported by sales and purchase vouchers. The ld. CIT(A) also found that the AO in his remand report did not comment adversely on the submissions of the assessee in respect of purchases and sales. Accordingly, the ld. CIT(A) deleted the aforesaid additions in these six assessment years. While interpreting the provisions of sec. 69C of the Act, Hon'ble jurisdictional High Court in Radhika Creation(supra) held that the focus of section 69C is on the "source" of such expenditure and not on the authenticity of the expenditure itself. In that case also it was an admitted position that the expenditure was shown by the assessee in its regular books of account and it was because of this reason that the ITAT observed as under :-7 ITA No.2124/Del/2012 CO No.408/Del/2012
"As the expenditure was accounted in the regular books, the source is obviously explained. The provisions of section 69C are not applicable as there was no unaccounted expenditure." [Emphasis supplied]"
6.1 Hon'ble High Court, accordingly, held that section 69C refers to the 'source of the expenditure' and not to the expenditure itself. Consequently, the AO was clearly wrong in treating the said expenditure as unexplained expenditure under section 69C of the said Act and the lower appellate authorities were right in their conclusions in deleting the said addition, Hon'ble Court concluded.
6.2 In the instant case before us, indisputably, the purchases and sales are accounted for in the books of accounts. Thus, source of the expenditure incurred in purchases is obviously explained. In the light of view taken in the their aforesaid decision by the Hon'ble jurisdictional High Court ,especially when the Revenue did not place any material before us, controverting the aforesaid findings of facts recorded by the ld. CIT(A) so as to enable us to take a different view in the matter, we have no basis to interfere. In view thereof, ground nos.1 & 2 in the appeal are dismissed."
In another case, the ITAT in the case of ACIT vs. Anupama Links Pvt. Ltd., cited supra, has held as under :-
"8. Having considered the written submissions filed on behalf of the assessee and the contentions of the Ld. DR, it is seen that the matter is indeed covered in favour of the assessee by "Blue Luxury Impex Pvt. Ltd" (supra). The first and foremost, the survey in the case of the assessee is the same as that in "Blue Luxury Impex Pvt. Ltd". The Assessing Officer in the two cases is also the same. The trade of both the assessees is one and the same i.e., trade of textiles. Then, in both cases, books and stock register were filed and the Assessing Officer did not reject the same. The Ld. CIT (A) has, as noted hereinabove, taken into account the fact that all the sales made by the assessee stood recorded in the assessee's books of account, which included the sales and purchase vouchers and stock registers maintained by the assessee on a day-to-day basis. These 8 ITA No.2124/Del/2012 CO No.408/Del/2012 books of account were duly produced before the Assessing Officer and the Assessing Officer examined them, on examination, no negative observation thereagainst was recorded by the Assessing Officer. Complete names and addresses of the parties to whom the goods were sold were available with the Assessing Officer. Most of the customers were assessed to income-tax. Sales were made against the opening stock. The purchases made during the year and the sales were but conversion of stock. The profit therefrom had already been taxed. The Assessing Officer did not bring anything on record to indicate that the sale proceeds represented the assessee's income from undisclosed sources. The sale transactions with M/s Micron Textiles were got confirmed by the Assessing Officer on a test check basis. No more inquiries were made by the Assessing Officer thereafter. The assessee's books of account were audited books of account. The tax audit report was on record. The auditors had not made any negative observation therein. All these facts were duly taken into consideration by the Ld. CIT (A) and it was thereupon that the issue was decided in favour of the assessee.
9. So far as it regards "Blue Luxury Impex Pvt. Ltd.", (supra), under similar facts and circumstances, the Tribunal following "CIT vs. M/s. Radhika Creation", a judgment dated 30.04.2010, rendered by the Hon'ble Delhi High Court, held the provisions of Section 69-C of the Act to be not applicable. Further, the matter is also covered by 'Babulal C. Borana', 282 ITR 251 (Bom), which is on similar lines.
10. In view of the above, we do not find any error in the orders passed by the Ld. CIT (A) and, accordingly, the same are confirmed. The grievance raised by the department by way of the grounds of appeal taken is, therefore, rejected."
The ITAT in the case of ACIT vs. AA Testronics Solutions Pvt. Ltd., cited supra, has held as under :-
"8. Having considered the written submissions filed on behalf of the assessee and the contentions of the Ld. DR, it is seen that the matter is indeed covered in favour of the assessee by "Anupama 9 ITA No.2124/Del/2012 CO No.408/Del/2012 Links Pvt. Ltd." (supra). The first and foremost, the search in the case of the assessee is the same as that in "Anupama Links Pvt. Ltd.". The Assessing Officer in the two cases is also the same. The trade of both the assessees is one and the same i.e., trade of textiles. Then, in both cases, books and stock register were filed and the Assessing Officer did not reject the same. The Ld. CIT (A) has, as noted hereinabove, taken into account the fact that all the sales made by the assessee stood recorded in the assessee's books of account, which included the sales and purchase vouchers and stock registers maintained by the assessee on a day-to-day basis. These books of account were duly produced before the Assessing Officer and the Assessing Officer examined them, on examination, no negative observation thereagainst was recorded by the Assessing Officer. Complete names and addresses of the parties to whom the goods were sold were available with the Assessing Officer. Most of the customers were assessed to income-tax. Sales were made against the opening stock. The purchases made during the year and the sales were but conversion of stock. The profit therefrom had already been taxed. The Assessing Officer did not bring anything on record to indicate that the sale proceeds represented the assessee's income from undisclosed sources. The sale transactions with M/s Micron Textiles were got confirmed by the Assessing Officer on a test check basis. No more inquiries were made by the Assessing Officer thereafter. The assessee's books of account were audited books of account. The tax audit report was on record. The auditors had not made any negative observation therein. All these facts were duly taken into consideration by the Ld. CIT (A) and it was thereupon that the issue was decided in favour of the assessee.
9. So far as it regards "Anupama Links Pvt. Ltd.", (supra), under similar facts and circumstances, the Tribunal following "CIT vs. M/s. Radhika Creation", a judgment dated 30.04.2010, rendered by the Hon'ble Delhi High Court, held the provisions of Section 69-C of the Act to be not applicable. Further, the matter is also covered by 'Babulal C. Borana', 282 ITR 251 (Bom), which is on similar lines. In view of the above, we do not find any error in the orders passed by the Ld. CIT (A) and, accordingly, the same are confirmed. The 10 ITA No.2124/Del/2012 CO No.408/Del/2012 grievance raised by the department by way of the grounds of appeal taken is, therefore, rejected."
Since the facts involve are similar, respectfully following the decision of Hon'ble jurisdictional High Court and also the decisions of coordinate Bench, we dismiss the revenue's appeal on this issue.
6. In the ground no.3 & 4, the issue involved is deleting the addition made by disallowing of 50% of the expenditure claimed by the assessee.
7. We have heard both the sides on the issue. First of all, we would like to state that there was a clerical mistake in respect of quantum of disallowance which has been rectified by the CIT (A). Further, the disallowance was made completely on ad hoc basis. No defect was pointed out in the expenditure claimed. The revenue has failed to establish that these expenditure were not incurred wholly and exclusively for the purpose of the business of the assessee. The CIT (A) has granted the relief by relying on various decisions of Hon'ble Delhi High Court. The Hon'ble Delhi High Court held that additions made on ad hoc basis are liable to be deleted. The Assessing Officer in this case has failed to pinpoint which expenditure was not verifiable and were not for business purposes of the assessee. Looking these facts in view, we dismiss these grounds of revenue's appeal. 11 ITA No.2124/Del/2012 CO No.408/Del/2012
7. Since we have dismissed the revenue's appeal and the ld. AR has not pressed the cross objection, therefore, the same also stands dismissed.
8. In the result, the appeal of the revenue as well as the cross objection of the assessee stand dismissed.
Order pronounced in open court on this 31st day of October, 2012.
Sd/- sd/-
(I.C. SUDHIR) (B.C. MEENA)
JUDICIAL MEMBER ACCOUNTANT MEMBER
Dated the 31st day of October, 2012
TS
Copy forwarded to:
1.Appellant
2.Respondent
3.CIT
4.CIT(A)-II, New Delhi.
5.CIT(ITAT), New Delhi. AR/ITAT
NEW DELHI