Income Tax Appellate Tribunal - Delhi
Hisaria Impex Pvt. Ltd.,, New Delhi vs Department Of Income Tax on 27 June, 2014
IN THE INCOME TAX APPELLATE TRIBUNAL
DELHI BENCH 'C', NEW DELHI
BEFORE SHRI G. D. AGARWAL, VICE PRESIDENT
&
SHRI H.S.SIDHU, JUDICIAL MEMBER
ITA No. 3847/Del/12
Assessment Year: 2007-08
ITO Vs. Hisaria Impex P. Ltd.,
Ward- 12(4), Room No. 331 WZ-9, Street No. 13,
C.R.Building I.P.Estate Gurunanak Nagar
Near CRPF Camp
(Appellant) (Respondent)
Revenue by : Shri Satpal Singh, Sr. DR
Assessee by : Shri Rajiv Jain, CA
ORDER
PER H.S.Sidhu, J.M :
The revenue has filed the present appeal against the impugned order dated 11/05/2012 passed by CIT(A), New Delhi, Assessment Year 2007-
08.
2. The facts relating to the issue in dispute are that the assessee filed the return of income electronically for the Assessment Year 2007-08 on 31/10/2007 declaring an income of Rs. 4,02,020/-. The return was processed u/s 143(1) of the I.T. Act, 1961 on 23/02/2009. The case was selected for scrutiny assessment and notice u/s 143(2) was issued on 16/09/2008. The assessee is engaged in the business of export of granite, marble and other natural stones. It also imports food stuff like dry ginger and gum Arabic, processes it and sells it in the local market.
. 2 ITA No. 3847/Del/2012
3. In response to the statutory notices the Authorized
Representative of the assessee appeared in the assessment proceeding but in the last stages of the proceedings, no compliance has been made in this case for the best reasons known to the assessee. The Assessing Officer fixed the case for 22.12.2009 for filing details / explanation and case was adjourned for 23/12/2009, on 23/12/2009, nobody appear nor any adjournment sought. The Assessing Officer completed the assessment u/s 144 of the Act vide order dated 29/12/2009 and assessed the income at Rs. 45,04,793/- after making additions aggregating to Rs. 41,02,774/- to the returned income which includes the following additions :-
liability towards supplier (Shri Shyam Granite & Marbles) Rs. 10,11,900/- Liability towards supplier (Lovely Industries ) Rs. 3,60,000/- Disallowance of director's remuneration Rs. 1,36,000/-
Disallowance of Depreciation Rs. 7850/- Disallowance out of Telephone & electricity Expenses Rs. 20,000/- Trading Addition Rs. 25,67,024/-
4. The Assessee aggrieved by the assessment order dated 29.12.2009 passed by the Assessing Officer filed on appeal before Ld. First Appellate Authority who vide impugned order dated 11.5.2012 deleted the addition in dispute by partly allowing the appeal filed by the assessee.
5. Now the revenue is aggrieved against the impugned order dated 11.5.2012 passed by the CIT(A) and filed the present appeal. Ld Departmental Representative relied upon the order passed by the Assessing Officer and the contention raised by the revenue in its grounds of appeal. On the contrary, Ld. Counsel for the assessee relied upon impugned order passed by the CIT(A) and contended that Ld. First Appellate Authority has deleted the additions in dispute on the basis of . 3 ITA No. 3847/Del/2012 additional evidences filed by the assessee and after taking the remand report from the Assessing Officer for which the Assessing Officer have not raised any objection for the admission of additional evidences filed by the assessee. He requested that appeal filed by the revenue may be dismissed.
6. We have heard both the parties and perused the orders passed by the revenue authority. As per the issue involved in ground no. 1 regarding deletion of addition of Rs. 10,11,900/- on account of liability towards supplier that is Shri Shyam Granite and Marbles. The Assessing Officer has made this addition treating this liability as a bogus. The plea of the assessee that during the year assessee had outstanding creditor of Rs.
34,89,550/- as on 31/03/2007 in the name of M/s. Shree Shyam Granite & Marble (SSGM) against the requisition of A.O. dated 13.11.2009, copy of account alongwith confirmation of the balance from the creditor was submitted before the A.O. during the course of proceeding. The A.O. also issued notice u/s 133(6) of the Act to M/s. SSGM to confirm the balance outstanding in the books of account of M/s SSGM. But no reply was received from SSGM against the said notice.
7. As stated in the order, on enquiry from the assessing officer of SSGM i.e. ITO Sikar, it was learnt that the case of SSGM was also undergoing scrutiny for Assessment Year 2007-08 and that SSGM had shown the debit balance of Rs. 24,77,650/- against the assessee company. AS per the assessment order a notice is alleged to have been issued u/s 133(6) from the office of ITO Sikar to M/s Hissaria Impex (Pvt.) Ltd. which was not responded to initially and when the matter was actively pursued, a fax was received on 18.12.2009 at the office of Addl. CIT Sikar (which was alleged to be received from Hissaria Impex (P.) Ltd.) revealing the closing balance at Rs. 24,80,166/-. Thereupon, after deliberations with the ITO Sikar, an affidavit was received by the ITO Sikar from the proprietor of . 4 ITA No. 3847/Del/2012 SSGM stating the debit balance of Hissaria Impex (P.) Ltd. At Rs. 24,77,650/- which in turn was received by the A.O. of the assessee company through fax on 29.12.2009.
8. The assessee contended that no notice issued u/s 136(6) from the office of ITO, Sikar was ever received by assessee company and as such faxing any statement of accounts does not at all arises. The statement of account alleged to be received on 18.12.2009 through fax depicting the closing balance of Rs. 24,80,166/- has no evidentiary value more so when the same is on a plain paper which is undated and even unsigned. On a reconciliation of the account of M/s SSGM as shown in the books of the assessee company with that of the alleged statement which the assessee has filed before the Ld. First Appellate Authority. The assessee contended that it can be proved beyond doubt that the said statement is a forged one and has nothing to do with the assessee company.
9. As regard to the affidavit filed by the M/s SSGM with ITO, Sikar, Sikar is concerned the assessee submitted that SSGM was also undergoing scrutiny and the affidavit was furnished by M/s SSGM in his own case. No affidavit was furnished by M/s SSGM before Assessing Officer of the Assessee Company. Assessee further, stated that copy of Affidavit received by A.O. from the ITO, Sikar only reveals about the closing balance and no statement of account for the year 2006-07 has been ever received from M/s SSGM. Assessee also contended that the copy of affidavit was received by A.O. 29.12.2009 and Assessment order passed on the same day. The assessing officer has not given any opportunity to the assessee nor any effort were made to reconcile the difference. Assessee also contended that alleged the affidavit was never revealed to the assessee during the assessment proceedings. An affidavit affirming all facts form part of paper book of the assessee filed before the Ld. First . 5 ITA No. 3847/Del/2012 Appellate Authority. The assessing officer made the addition of Rs. 10,11,900/- on the basis of these two documents as received through ITO, Sikar which is contrary to the law and facts on the file.
10. Ld. First Appellate Authority has considered the all arguments of the parties and perused the documentary evidences filed by the assessee and has rightly held that addition in dispute has been made on the basis of difference in balances of a particular date. He, further, held that a copy of affidavit was received by A.O. on 29.12.2009 and AO passed an order on the same date without giving opportunity to the assessee and without making an effects to reconcile the difference. He is of the view that said affidavit was never revealed to the appellant during the assessment proceeding. The assessing officer completed the assessment and made the addition in dispute on the basis of these two documents which he has received through ITO, Sikar. The Ld. First Appellate Authority after perusing the documents filed by the assessee has stated that in absence of the statement of account confirming closing balance of Rs. 24,77,650/-, even reconciliation between the statement of account alleged to be received through fax depicting closing balance of Rs. 24,80,166/- and that disclosed by the books of the assessee, it would reveal that three sales invoices as issued by SSGM for an aggregate amount of Rs. 8,49,404/- are not accounted for in the said statement. These are the inter state sale transactions made against Form "H" of the Central Sales Tax Act and the assessee company has issued the required Form H to M/s SSGM against those purchases after obtaining the same from Vat Department, Delhi. There are other differences more particularly shown in the reconciliation statement which forms part of the statement.
11. Further, M/s SSGM confirm the statement of accounts in the books of the assessee up to 31.03.2010. This confirmation further prove the correctness of the balance of Rs. 34,89,550/- as shown by the books of . 6 ITA No. 3847/Del/2012 the assessee company as on 31.03.2007. And three invoices as issued by SSGM for an aggregate amount of Rs. 8,49,404/- are not accounted for in the said statement. These are the inter state sale transactions made against Form "H" of the Central Sales Tax Act and the assessee company has issued the required Form H to M/s SSGM against those purchases after obtaining the same from Vat Department, Delhi. Likewise, there are other differences more particularly shown in the reconciliation statement which forms part of the statement. Further, M/s SSGM confirmed the statement of account in the books of assessee up to 31.3.2010. This confirmation, further, prove the correctness of balance of Rs. 34,89,550 as shown by the books of the assessee company as on 31.3.2007.
12. Ld. First Appellate Authority has perused the two statements which show balances as Rs. 34,89,550/- that balance in the books of account of the assessee, and Rs. 24,77,650/-. As per affidavit from SSGM reconciled the same as stated above and finally has rightly held that there is no discrepancy in the books of accounts of the assessee and deleted the addition in dispute of Rs. 10,11,900/-.
13. In view of the aforesaid discussion, we are of the view that Ld. First Appellate Authority has rightly reconciled the two statement and finally has rightly held that there is no discrepancy in the books of account of the assessee and has rightly deleted the addition in dispute. We uphold the impugned order on the issue involved in ground no.1.
14. As regard to the deletion of addition of Rs. 3,,60,000/- on account of liability outstanding towards one of the suppliers M/s Lovely Industry. The assessee contended that during the year under appeal ,assessee had outstanding credit to Rs. 3,60,000/- in the name of one M/s Lovely Industries. The assessing Officer issue notice u/s 133(6) of the Act . 7 ITA No. 3847/Del/2012 asking for balance confirmation and received statement of account confirming nil balance on the basis of difference between to account. The Assessing Officer made the addition of Rs. 3,60,000/- considering this as a bogus liability.
15. After hearing the both parties, Ld. First Appellate authority has held that assessee was dealing with M/s Lovely Industry through the mediator only and on some occasion payment was made to Lovely Industries by these mediator. During the year also payment of Rs. 1,80,000/- by cheque dated 28.8.2006 was made by one SDB Granites P. Ltd. to M/s Lovely Industries on behalf of the assessee as shown by confirmation statement received from M/s Lovely Industries. Assessee is having regular business with SDB Granites P. Ltd., this adjustment entry somehow, got a miss and could not be passed through the books of account of the appellant company leaving a similar difference in the account of M/s SDB Granites P. Ltd. Assessee filed its necessary evidences for substantiating its claim before the Ld. First Appellate Authority as an additional evidences under Rule 46A of IT Rules, 1962.
16. Ld. First Appellate Authority has taken a remand report dated 11.4.20012 from the assessing officer in which the Assessing Officer has written that he has cross verified the confirmations and copies of accounts submitted by these entities from the books of accounts of the assessee and he has not raised any objection for the admission of addition evidences. On the basis of remand reports as well as the additional evidences filed by the assessee, ld. First Appellate Authority has held that the payment of Rs. 1,80,000/- made by cheque dated 28.8.2006 was made by SDB Granites P. Ltd. to M/s Lovely Industry on assessee's behalf as shown by the confirmation statement of M/s Lovely Industry. The payments were received by M/s Lovely Industries RB Enterprises, assessee has acknowledged these amount as due to RB Enterprises. Now since this . 8 ITA No. 3847/Del/2012 entry of Rs. 1,50,000/- and 30,000/- has been interest with the account of M/s RB enterprises. The assessing officer in the remand report has stated that these confirmations of copy of account, account submitted by these entities have been cross verified from the accounts books of the assessee.
17. On the basis of additional evidences filed by the assessee and the remand report taken from the assessing officer. Ld. First Appellate Authority fully satisfied with the explanation of the assessee and has rightly held that the amount of Rs. 3,60,000 has fully been explained by the assessee during the course of appeal and he deleted the addition of Rs. 3,60,000/-. We are of the view that Ld. First Appellate Authority after appreciating the additional evidences filed by the assessee and on the basis of remand report has rightly deleted the addition of Rs.3,60,000/-. We uphold the impugned order on this issue involve in ground no. 2.
18. As regards to the issue involved in ground no. 3 in which the revenue has challenged the deletion finding out of the Ld. first Appellate Authority wherein the remuneration of the Director amounting to Rs. 1,36,000/- has been allowed. The Assessing Officer asked the assessee to produce Smt. Sarita Aggarwal for personal deposition but assessee could not produce her before him and the assessing officer has disallowed the remuneration of Rs. 1,36,000/- paid to the Director of the Assessee Company. But in the appellate proceeding the assessee contended that Smt. Sarita Aggarwal is a Promotor Director of the company since 3rd October, 2009 and is looking after the administration of the company in general and is a regular income tax assessee in Circle 12(1), New Delhi. The assessee has also produced the copy of resolution passed in the meeting of Board of Director of the Company on 25.4.2006 as well as ITR copy of Smt. Sarita Aggarwal in the assessment proceeding. Assessee has also contended that Smt. Sarita Aggarwal was away to her home town at . 9 ITA No. 3847/Del/2012 Pilani, her native place for some rituals and she was expected to come back after 23.12.2009. Assessee requested for adjournment of the case for 24.12.2009 but the Assessing Officer rejected the request of assessee and adjourn the hearing on 23.12.2009 and refused to entertain the Directors when they appeared before the Assessing Officer on 24.12.2009. Ld. First Appellate Authority after appreciating the facts and circumstances of the case on the issue in dispute has allowed of remuneration of Rs. 1,36,000/- paid to Smt. Sarita Aggarwal and has held that non-deposition before the Assessing Officer could not be ground for disallowing remuneration paid to the Director of the assessee company which otherwise is supported by sufficient evidences and offered for tax in her income tax return. We are fully with the agreement of the findings given by the Ld. First Appellate Authority in which he has allowed the remuneration of Rs. 1,36,000/- paid to Smt. Sarita Aggarwal and dismissed this ground no. 3 raised by the revenue.
19. As regard to deletion of addition of Rs. 25,7,024/- on account of discrepancies found and overall margin in the trading by adopting the GP rate of 10% by the Assessing Officer against the GP rate shown by the Assesee at the rate of 6.02% of the total shares of Rs. 64,45,7,811 by applying the provision of Section 145(3) of the IT Act.
20. Ld. First Appellate Authority after considering the additional evidences filed by the assessee on the issue in dispute as well as comparative chart showing GP rate for earlier years has deleted the disallowance to the tune of Rs. 25,7,024/-.
21. After hearing both the parties and perusing the order passed by the revenue authority, we are of the view that the Assessing Officer mainly rejected the books of accounts for the reason that certain confirmations from the parties could not be submitted or that the certain . 10 ITA No. 3847/Del/2012 replies could not be received against issue of notice u/s 133(6) of the Act as well as certain differences in the accounts of two parties. As a matter of record the notice u/s 133(6) were issued on 01.12.2009 and the assessment was getting time barred on 31.12.2009. Certain notice was returned answer for the reason that the addressees have shifted their offices or for closed their business. Assessee tried his best to get the confirmations from the parties but could not gather the same within time as most of the parties were resident outside Delhi. Assessing Officer has not given sufficient opportunity to the assessee and completed assessment on the Section 144 of the Act on 29.12.2009.The contention of the assessee, is that the Assessing Officer was not justified in rejecting the declaring results and assuming the gross profit at Rs. 64,45,781/-, computed @ 10% of the turn over of Rs. 6,44,57,811/- resulting in addition of Rs. 25,67,024/- which is on the purely on the basis of assumption and hypothetical and incomplete disregard to the financial position and history of the assessee especially against the comparable on the showing GP rate of earlier years even for AY 2006-07, GP rate 5.02% has been accepted in assessment u/s 143(3) of the IT Act.
22. Ld. Counsel for the assessee has cited various case law before the Ld. First Appellate Authority which has been considered by the Ld. First Appellate Authority in the impugned order and finally the Ld. First Appellate Authority has held that the assessing officer was not justified in rejecting the books of accounts by applying Section 145(3) of the IT Act and estimating net profit at the rate of 10% of the gross receipts. Ld. First Appellate Authority has also held that GP rate during the year under consideration is better as compared to the previous years . The assessee has shown its GP rate as 6.02 % in the year under consideration as compared to 5.02% in the previous year and 5.91 in the year previous to previous year.
. 11 ITA No. 3847/Del/2012
23. Keeping in view the facts and circumstances of the present case as discussed above, the Ld. First Appellate Authority has deleted the addition disallowance of Rs. 25,67,024/- on the basis of documentary evidences filed by the assessee as well as various case law relied upon by the assessee. We are of the view that Ld. First Appellate Authority has passed the well reasoned order on the basis of documentary evidences filed by the assessee and has rightly deleted the addition in dispute. Therefore, no interference is called for in the impugned order and we uphold the same by dismissing the appeal filed by the revenue.
24. In the result appeal filed by the revenue is dismissed.
Order pronounced in the open court on 27th June, 2014.
Sd/- Sd/-
(G.D.Agarwal) (H.S.Sidhu)
VICE PRESIDENT JUDICIAL MEMBER
Dated 27th June, 2014
B.Rukhaiyar
Copy forwarded to: -
1. Appellant
2. Respondent
3. CIT
4. CIT(A)
5. CIT (ITAT), New Delhi