Income Tax Appellate Tribunal - Mumbai
Asst. Commissioner Of Income Tax- ... vs Foodlink Services India Pvt Ltd, Mumbai on 30 January, 2025
IN THE INCOME TAX APPELLATE TRIBUNAL
MUMBAI BENCH "F" MUMBAI
BEFORE SHRI OM PRAKASH KANT (ACCOUNTANT MEMBER)
AND
SHRI SANDEEP SINGH KARHAIL (JUDICIAL MEMBER)
ITA Nos. 4851, 4863 & 4854/MUM/2024
Assessment Years: 2017-18 & 2018-19
Asst. CIT-14(1)(2), Foodlink Services India Pvt. Ltd.,
Room No. 455, 4th floor, 301, 3rd floor, Safal Pride Sion
Aayakar Bhavan, Churchgate, Vs. Trombay Road, Deonar,
Mumbai-400020. Mumbai-400088.
PAN NO. AAACF 7690 L
Appellant Respondent
Assessee by : Mr. Ravikant Pathak
Revenue by : Mr. Raj Singh Meel, Sr. DR
Date of He aring : 21/11/2024
Date of pronouncement : 30/01/2025
ORDER
PER OM PRAKASH KANT, AM
The captioned appeals by the Revenue for assessment years 2017-18 and 2018-19 are directed against separate orders passed by the Commissioner of Income-tax (Appeal)-National Faceless Appeal Centre(NFAC), Delhi [in short the Ld. CIT(A)] . The appeals for assessment year 2017-18 are arising from scrutiny assessment order under section 143(3) of the Income-tax Act, 1961 ( in short Foodlink Services India Pvt. Ltd. 2 ITA Nos. 4851, 4863 & 4854/MUM/2024 the Act) and subsequent rectification order passed passed under section ct, whereas the appeal for assessment year 2018-19 154 of the Act, 2018 is arising from scrutiny assessment order under section 143( 143(3) of the Act.. As common issues-in-dispute issues dispute are involved in these appeals and therefore same were heard together and disposed off by way of this common order for sake of convenience.
2. Firstly, we take up the appeal for as assessment 2017 sessment year 2017-18 m assessment order u/s 143(3) of the Act. The grounds arising from raised by the Revenue reproduced as under:
Whether on the facts and in the circumstances of the case and
1.Whether in law, the Ld. CIT(A) was justified in deleting the addition of Rs.
2,58,78,235/ made by the 2,58,78,235/- he AO on account of cash credit u/s 68 of the Act of the Income Income-tax Act, 1961.
2 Whether on the facts and in the circumstances of the case and in law, the Ld. CIT(A) has erred in ignoring the fact that the assessee failed to discharge the onus to prove the genuineness of source of the cash deposit in its account.
3 Whether on the facts and in the circumstances of the case and in law, the Ld. CIT(A) was justified in holding that once the book results are accepted by the AO, the sale reflected in those book esults cannot be doubted otherwise it amounts to double results taxation while there is no such provision as per Income Income-tax Act, 196l to reject the books of account while making certain addition(s)/disallowance(s).
4 The appellant prays that the order of the CIT(A) on the above grounds be set aside and that of the Assessing Officer be restored.
3. The learned departmental representative (DR) submitted that this appeal is filed with a delay of seven days. The learned DR Assessing Officer for condoning the referred to the application of the Assessing Foodlink Services India Pvt. Ltd. 3 ITA Nos. 4851, 4863 & 4854/MUM/2024 delay in filing the appeal and submitted that due to time barring matters, gazetted holidays and shortage of staff, there was short delay of seven days in filing the appeal. We have heard rival submission of the parties on the application for condonation of the delay in filing the appeal. In our opinion there is a sufficient and bonafide reason for delay in filing the appeal, accordingly, we condone the delay in the filing the appeal and admit the same for adjudication.
4. Briefly efly stated facts of the case are that the assessee, a private limited company, was incorporated in the year 1998 and since then engaged in the business of restaurants, banquets and outdoor tw catering and food parcels. During the year under consideration, two companies namely M/s Foodlink Restaurant India Private Limited and M/s Foodlink Banquet and Catering India Private Limited got merged with the assessee. For the captioned assessment year, the assessee filed return of income on 30/10/2017 declaring total income at ₹1,64,23,340/ 340/-.. Subsequent to the merger, the assessee revised its return of income on 08/02/2019 declaring the total income at ₹80,83,490/ 490/-.. The return of income filed by the assessee was selected for scrutiny assessment a nd statutory notices un and under the Act ct were issued and complied with. During scrutiny proceedings, the Assessing Officer observed cash deposit of ₹3,86,99,991/- during the period from 08/11/2016 to 31/12/2016 ( i.e. the demonetization period) in its bank accounts, out of which Foodlink Services India Pvt. Ltd. 4 ITA Nos. 4851, 4863 & 4854/MUM/2024 ₹3,23,84,000/- were in specified banknotes (SBN) and remaining was legal tender notes. The assessee was asked to explain source of the cash deposited including SBN. The assessee explained that cash deposited was generated out of its business activities. The assessee ass explained that on 08/11/2016, cash balance of ₹3,44,11, 3,44,11,199/- was appearing in its books of accounts and cash has been deposited during the demonetization period out of the cash available in books of accounts. But the Assessing Officer rejected the contention co of the assessee and in the assessment order passed under section 143(3) ade addition of ₹2,58,78,235/- as unexplained cash credit of the made under section 68 of the A ct. On further appeal, the Ld. CIT(A) after Act.
considering the submission and analysing facts and evidence evidences, deleted the addition made by the Assessing Assessing Officer. Aggrieved, the Revenue Income Tax Appellate Tribunal (in evenue is on appeal before the Income-Tax short the 'Tribunal') by way of raising grounds as reproduced above.
5. The learned counsel for the assessee assessee filed a paper book containing pages 1 to 44.
6. Revenue, the sole issue is In the grounds raised by the R regarding the cash deposits of ₹ 2,58,78,235/- which was held by the Assessing Officer as unexplained cash credit, but same has been deleted by the Ld. CIT(A). The brief facts qua the issue in dispute are that in the instant case the assessee was engaged in the business of providing restaurant services, outdoor catering and services, Foodlink Services India Pvt. Ltd. 5 ITA Nos. 4851, 4863 & 4854/MUM/2024 management of food and beverages. The assessee had made total cash deposit of ₹3,23,84, 3,23,84,000/- in a specified banknotes (SBN) during the demonetization period. The assessee explained that cash deposited was generated out of its business activities. The assessee business explained that on 08/11/2016, cash balance of ₹3,44,11, 3,44,11,199/- was appearing in its books of accounts and cash has been deposited during the demonetization period out of the cash available in books of accounts. But the Assessing Officer Officer did not accept the explanation of the assessee due to following reasons:
(i) by way of late filing of VAT and service tax returns for the period from April 2016 to September 2016, the assessee had sufficient time to manipulate its sales and therefore oted it is unaccounted money in the bank account by rooted exaggerating its sales.
(ii) late payment of VAT and service tax liability for the period from April 2016 to September 2016
(iii) huge cash balance of ₹3,44,11,199/-shown shown in the books of accounts as on 08/11/2016 i i.e. prior to demonetization demonetization.
(iv) Variation in cash flows compared to the previous years 6.1 The assessee was having cash in hand of ₹43,24, 43,24,459/-as on 01/04/2016, therefore the Assessing Officer allowed benefit of the Foodlink Services India Pvt. Ltd. 6 ITA Nos. 4851, 4863 & 4854/MUM/2024 said amount of opening cash in hand and made made addition for the remaining amount of ₹2,58,78,235/- [ = 3,23,84,000 - 43,24,459].
6.2 The Assessing Officer noted that service tax challan of ₹ 93911/- for month of April,, 2016 which was due on 06/05/2016 was deposited on 28/04/2017 after a delay of 357 days. Similarly the service tax challan for June 2016 for an amount of ₹ 1,55, 258/- which was due on 06/07/2016 but was deposited on 28/04/2017 after a delay of 296 days. Similarly, Similarly the service tax, for August, 2016 for amount of ₹2,34,173/- which was due on 06/09/2016, was deposited on 28/04/ 2017 i.e. after a delay of 234 days. The assessee explained that service tax returns for the period from April to September 2016 of amalgamating companies and amalgamated company were filed late due to huge quantum of o data and lack of sufficient manpower to compile the same. Similarly the Gujarat VAT returns of M/s Foodlink banquet and catering India Private Limited for the period from September to February 2016 and Karnataka and Telegna VAT returns of Fodlink restaurants ants India Private Limited were filed late due to huge quantum of data and lack of sufficient manpower to compile the same. The service tax, and VAT paid late due to typographical error while computing the net tax liability. The error was pointed out by e statutory auditor and accordingly the liability was paid along the with interest for the mon months from June 2016 to August, August 2016. The contentions of the assessee were rejected mainly on the ground that Foodlink Services India Pvt. Ltd. 7 ITA Nos. 4851, 4863 & 4854/MUM/2024 assessee failed to furnish service tax and VAT returns of the relevant period along with challan payments.
6.3 Further, the Assessing Officer asked the assessee to justify keeping of huge cash in hand as compared to very less cash expenses or cash purchases. The Assessing Officer also noticed high cash sales to total sales ratio during the period from April to October ber 2016 (i.e. 35.85%) 35.85%).. But the assessee explained that its revenue is received in cash therefore its cash balance was always high in and around month of November. The assessee provided cash balance for the month of November for preceding three years and sales in the month of October preceding three years as under:
7.6 Further, the appellant had claimed that the business of the "7.6 appellant is that its revenue is in cash and its cash balance is always high in and around November months. The appellant has provided the details of Cash balance in the month of November in preceding three years and sales in the month of October of preceding three years as under:
Date Sales in the Cash % of cash
Month of Oct Balance balance
08-Nov-13 1,95,97,165 78,24,967 40%
08-Nov-14 2.26.06,011 2,12.32.249 94%
08-Nov-15 3,67,73,840 3,03,72,738 83%
6.4 Similarly, the assessee explained average cash sales to total sales for preceding and subsequent years as under :
Foodlink Services India Pvt. Ltd. 8 ITA Nos. 4851, 4863 & 4854/MUM/2024 7.7 The Appellant has furnished the average cash sales of previous and subsequent years as under:
FY Total sales Cash Sales %
2013-14 35,23,12,513 6,90,95,830 20%
2014-15 46,89,67,475 12,54,19,364 27%
2015-16 76,93,45,659 15,32,17,841 20%
2016-17 1.03.98,84,240 24.89,84,302 24%
2017-18 1,25,26,32,473 27,55,07,891 22%
2018-19 1,84,33,02,952 18,92,54,346 10%
2019-20 1,37.04,93,850 20,26,84,883 15%
6.5 After considering submission of the assessee the Ld. CIT(A) deleted the addition of observing as under:
"8.
8. The details available in assessment order and the written submission of the appellant filed during the appellate proceedings has been carefully verified.
8.1 It is found that the addition related to the cash deposit made during the demonetization period treating it as unexplained cash credit by AO u/s 68 of the Act has no correlations with the delay in filing VAT and Service Tax results and delay in payment of liability of VAT and service tax. The period for which VAT and ST returns have been filed belatedly are from April, 2016 to September, 2016. Further, no one in the country has knowledge about the demonetization which happened on the evening of 08/11/2016. 16. Therefore, it cannot be said that the Appellant delayed filing of VAT and service tax return to manipulate sales and show it higher. Further, the average month wise service tax payment remains similar for most of the months.
8.2 It is seen that it is not the first time the appellant was having cash balance. Considering the business of the Appellant, it Foodlink Services India Pvt. Ltd. 9 ITA Nos. 4851, 4863 & 4854/MUM/2024 always had cash balance. Looking at the nature of business of the appellant, it has more business activity in the month of November, therefore, the Appellant needs to maintain the cash Appellant balance.
8.3 From the details provided by the appellant the cash sales during the year under consideration is more or less in line with cash sale in all preceding years. Therefore the reason provided sales has increased drastically during the by AO that the cash sales year is not found tenable.
8.4 From the details provided by the appellant it is ascertained that the appellant was regularly depositing the huge cash in its bank account in previous years as well as subsequent years.
year It substantiates that the cash is having a major role in sales of the business of the Appellant which is deposited regularly in bank account:
8.5 The cash sales as on 08.11.2013 has been shown at Rs.1,95,97,165/ and cash balance has been shown at Rs.1,95,97,165/-
8,24,967/- which works out to 40% cash balance. The cash Rs.78,24,967/ sales as on 08.11.2014 has been shown at Rs.2,26,06,011/-
Rs.2,26,06,011/ and cash balance has been shown at Rs.2,12,32,249/ Rs.2,12,32,249/- which works out to 94% cash balance. The cash sales as on 08.11.2015 has been shown at Rs.3,67,73,840/-
Rs and cash balance has been Rs.3,03,72,738/ which works out to 83% cash shown at Rs.3,03,72,738/-
balance. The book results of earlier years have not been doubted by the Department. The judicial decisions relied upon by the appellant lay that where the books of accounts and the contention of the appellant have not been rejected based on enquiry or any valid reason, the partially disbelieving the contention of the appellant was not permissible and the same context, disbelieving the cash held in the cash books o of the appellant before the demonetization would amount to double taxation.
8.6 It is a fact that the auditor has not pointed out any discrepancy in the accounts of the appellant. Further, the books of account have not been rejected by the AO u/s.145(3) of the IT Act, 1961. The purchases and the stock position depicted in the books have thus been accepted by the AO and the cash sales Foodlink Services India Pvt. Ltd. 10 ITA Nos. 4851, 4863 & 4854/MUM/2024 were made out of accounted stock. The sales recorded in the books of accounts having been accepted by the AO, the ng cash deposit made out of such cash sales cannot corresponding be rejected. There is merit in the submission of the appellant that the entries in the books of accounts depict a true state of affairs unless some contrary evidence is found and the books are rejected by the AO. In the instant case, there is no such finding regarding any evidence about bogus sales or bogus purchase by the appellant. The AO has made the addition by not accepting the cash balance available in the regular books of accounts. Thus making an add addition ition on account of deposit of cash which is duly accounted for in the books of accounts without rejecting the books of accounts, is totally unwarranted. In the instant case, the cash deposited was duly recorded in the books of account of the appellant and the appellant offered an explanation regarding the nature & source being the cash sales. In the present case, the money was duly recorded and accounted in the books of accounts and the source was also explained as cash sales. It appellant failed to give satisfactory cannot be said that the appellant explanation about the nature & source of cash deposit. The fact that the appellant deposited many times more cash in the bank account in the earlier year, shows that it was a regular feature of its business to deposit thethe cash in the bank even during the period prior to the announcement of demonetization on 08.11.2016 and these facts have not been negated by the AO. It is also a fact that the appellant's business is of restaurant, banquets & catering and parcel sales wher where e there are cash sales in abundance. Thus the track records of deposit of cash in immediate preceding year justify the genuineness of the cash deposit during the demonetization period. Further, the approach of the AO have resulted in double addition becaus becausee these sales have already been accounted for while arriving at gross profit in the trading account and then adding them separately also as unaccounted cash. This means that sales of Rs.2,58,78,235/-
Rs.2,58,78,235/ have once been credited in the trading account forming part p of gross profit and then also adding them separately treating as Rs.2,58,78,235/-.. If sales are to be doubted unaccounted cash of Rs.2,58,78,235/ then it has to be shown that these are bogus sales and there is either no corresponding purchases with the appellant or there th were no such purchases against these sales.
Foodlink Services India Pvt. Ltd. 11 ITA Nos. 4851, 4863 & 4854/MUM/2024 8.7 The Hon'ble Supreme Court of India in the case of Lalchand Bhagat Ambica Ram v. Commissioner of Income-tax, Income tax, [1959] 37 ITR 288 (SC) has held as under: -
"Section 143 of the Income Income-tax Act, 1961 - Assessmentent - Addition to income - Assessment year 1946 1946-47 - Assessee carried on extensive business in grain as merchant and commission agent - Assessee maintained its books of account according to mercantile system and there were maintained in its cash books two accounts: one showing cash balances from day to day and other known as "Almirah account" wherein were kept large balances which were not required for day-to-day day day working of business - It filed its return showing loss in business - However, ITO noticed that assessee had encashed high denomination notes of value of Rs. 2.91 lakhs on 19-1-1946 19 - Assessee's explanation that those notes formed part of its cash balances including cash balances in Almirah account was rejected by ITO who took into account several surrounding rrounding circumstances and included said sum in its total income - ITO also found that portions of entries in assessee's accounts to effect that money's had been received in high denomination notes were subsequent interpolations - Before Tribunal assessee stated that said entries were made in nervousness after coming into force of High Denomination Bank Notes (Demonetization) Ordinance, 1946 on 12 1946, as it did 12-1-1946, not know it had specific proof in its possession of having high denomination notes as part of of its cash balances - Tribunal accepted assessee's explanation in respect of said interpolations and held that there was no other reason to suspect genuineness of account books - It was also found that as per book entries cash balance on 1212-1-1946 aggregated ed to more than Rs. 3.1 lakh
- However, examining cash book and taking into account all circumstances adverted to by ITO, Tribunal held that assessee might be expected to have possessed as part of its business cash shape of high denomination balance of at least Rs. 1.5 lakhs in shape notes on date when said ordinance was promulgated but nature of source from which it derived remaining high denomination notes remained unexplained - Accordingly, Tribunal reduced addition - Whether when entries in books of account in i regard to cash balances were held to be genuine, there was no escape from conclusion that assessee had offered reasonable Foodlink Services India Pvt. Ltd. 12 ITA Nos. 4851, 4863 & 4854/MUM/2024 explanation as to source of all high denomination notes which it encashed on 19-1-1946 19 1946 and it was not open to Tribunal to accept uineness of those books and accept assessee's explanation in genuineness part and reject same in regard to balance sum - Held, yes - Whether, therefore, it was clear that Tribunal in arriving at its conclusion indulged in suspicions, conjectures and surmises and acted without any evidence or upon a view of facts which could not reasonably be entertained or finding was perverse which could not be sustained and Supreme Court was entitled to interfere with such finding - Held, yes - Whether, therefore, addition made was liable l to be deleted - Held, yes"
8.8 The Hon'ble High Court of Delhi in the case of Principal Commissioner of Income Tax, 20, Delhi v. Akshit Kumar IT Appeal 348 of 2019, [2021] 124 taxmann.com 123 (Delhi) has held as under: -
"Section 56, read with sectsections Income ions 68 and 133, of the Income-tax Act, 1961 - Income from other sources (Sale of opening stock) - Assessment year 2014-15 2014 - Assessee was engaged in business of textiles - All sales undertaken by assessee were in cash only -
Revenue decided for spot verification at Noting such peculiarities, Revenue place from where assessee purportedly carried on business - Survey revealed that business premises was abandoned and that there was no proof of any business undertaken by assessee Officer concluded that entire
- Based on survey report, Assessing Officer cash deposit found in assessee's bank account was unexplained income and not sale proceeds - Additions were thus made towards unexplained income - On appeal, Tribunal recorded that assessee had closed business in July, 2015 and survey s was carried out in November, 2016 - It was also noted that entire opening stock, sales and closing stock of assessee was accepted during scrutiny assessment of previous year - Based on such findings, Tribunal deleted additions made - Whether where antum figure and opening stock was accepted in previous quantum years during scrutiny assessments, receipt from sales made by assessee proprietary concern out of its opening stock could not be treated as unexplained income to be taxed as 'income from other sources' - Held, yes [Para 11] [In favour of assessee]"
Foodlink Services India Pvt. Ltd. 13 ITA Nos. 4851, 4863 & 4854/MUM/2024 8.9 The appellant has relied on the decision rendered in the case of Ramlal Jewellers (P.) Ltd. IT Appeal No. 1600 (MUM.) of 2023, [2023] 154 taxmann.com 584 (Mumbai - Trib.). The Hon'ble Tribunal has held as under: -
"Section 68 of the Income-tax Income Act, 1961 - Cash credit (Cash deposit in bank) - Assessment year 2016-17 - Assessee-company Assessee was engaged in jewellery business - During assessment proceedings, Assessing Officer noted that immediately after ization assessee had shown inflated cash sales and demonetization also made deposits in bank account which was completely abnormal as compared to earlier year and also subsequent year - He, therefore, taxed cash deposits under section 68 - It was seen that assessee had m aintained regular books of account which maintained was subject to audit and had produced entire sale bills, stock register and purchases and also quantitative tally of sales and corresponding stock - Addition under section 68 on account of cash deposits could not be made simply on reason that during vis vis cash sales ratio demonetization period, cash deposits vis-a-vis was higher - Whether once, it had been established that sales representing outflow of stocks was duly accounted in books of account and there was no abnormal profit during year, then there was no justification to treat deposits made in bank account out of cash sales to be income from undisclosed sources - Held, yes - Whether, therefore addition made under section 68 was to be deleted - Held, yes [Para 14] [In favour of assessee]"
8.10 The AO while not considering the cash in hand of the appellant has pointed out that though the appellant had claimed huge cash as on 08.11.2016 it has deposited cash regularly during the demonetization period i.e. the cash was deposited de not in one go but deposited during whole demonetization period regularly. In the early years also the cash sales have been made by the appellant. There is nothing on record to indicate that the books of accounts have been disturbed in the earlier y years. Therefore, the same have been accepted year after year. The opening stock, purchases, sales and closing stock have been accepted and no addition has been made on these grounds in the F.Y.2013-14 2015 16. The AO has not rejected the audited 14 to 2015-16.
F.Y.2016 17 relevant to A.Y.2017-18 books off account for F.Y.2016-17 A.Y.2017 u/s.145(3) of the IT Act, 1961. Hence, once the book results are Foodlink Services India Pvt. Ltd. 14 ITA Nos. 4851, 4863 & 4854/MUM/2024 accepted by the AO, the sale reflected in those book results cannot be doubted otherwise it amounts to double taxation.
balance available as on 08/11/2016 and Therefore the cash balance deposits thereof in the bank account cannot be doubted. From the above facts, it is seen that the cash has been deposited by the Appellant out of the cash balance available with it which has course of business. Further, the AO been earned during regular course has not pointed out any discrepancy in the books of accounts. The AO has not brought out anything on record to indicate deficiency if any in the opening stock, purchases, sales, etc. 8.11 In view of the discussion in the preceding para and the facts of the case it is apparent that the AO has accepted the book results with the purchases, stock as well as the sales of the appellant. The AO failed to notice that the appellant had consistently high cash sales in all the years which were almost proportionate. The books of accounts were not rejected by the Assessing Officer and he has just concluded and conjectures that the cash sales have been inflated to cover the cash deposits during the demonetization period. In fact this hashas resulted in double taxation of the amount of Rs.2,58,78,235/-, Rs.2,58,78,235/ , since the sales having part of the book result.
8.12 In view of the above discussion and decision relied upon by 2,58,78,235/ made by AO on the appellant the addition of Rs. 2,58,78,235/- account of unex plained cash credit is hereby deleted. Ground no.
unexplained 1,2,3 of appeal are allowed."
allowed.
6.6 We have heard rival submissions of the parties and perused the relevant material on record. The issue in dispute is whether the 2,58,78,235/ is received in cash against the sales amount of Rs. 2,58,78,235/-
for the period from April 2016 to October 2016 as claimed by the ccording to the Assessing Officer the assessee has assessee or not. According manipulated its cash sales figures for the period from April 2016 to 8/11/2016 without correspondi corresponding ng purchases in the books of accounts and therefore the cash deposited of ₹2,58, 2,58,78,235/- was Foodlink Services India Pvt. Ltd. 15 ITA Nos. 4851, 4863 & 4854/MUM/2024 unexplained and undisclosed money of the assessee, liable to be Act as unexplained cash credit. But taxed under section 68 of the Act we find that the Ld. CIT(A) has rebutted all the finding of the Assessing Officer in relation to holding the cash deposit as unexplained cash credit. The finding of the learned Assessing Officer that assessee manipulated the cash sales by way of delayed filing of VAT and service tax returns and payments, has been returns rejected by the Ld. CIT(A) observing that no one in the country had knowledge about the demonetisation which happened on the evening of 08/11/2016 and therefore it could not be said that the assessee delayed filing of the VAT and service tax returns to manipulate the sales. Further the learned CIT(A) observed that every month the service tax payment remains similar for most of the months of the financial year 2016-17 2016 17 i.e. the current assessment year. explained that the business The Ld. CIT(A) has further explained activity of the assessee was such that it was having more volume in the month of the November and therefore the assessee needed to maintain the cash balance. The Ld. CIT(A) has further noted that the cash sales during the year und under er consideration, is more or less in line with the cash sales of the preceding assessment years, therefore he rejected the finding of the Assessing Officer that cash sales of the assessee had increased drastically during the year under consideration. The Ld. L CIT(A) has further noted that books of accounts of the assessee for a year under consideration has not Foodlink Services India Pvt. Ltd. 16 ITA Nos. 4851, 4863 & 4854/MUM/2024 been rejected by the Assessing Officer and the cash sales and a stock registers have been accepted by the Assessing Officer and held that in such circumstances, circumstances, on one side the Assessing Officer is accepting the cash sales recorded in the books of accounts, but on the other hand making addition for the same as unexplained cash credit is not justified. We agree with the contention of the Ld. CIT(A) that this approach of the Assessing Officer has resulted into double addition in the hands of the assessee. The learned counsel for the assessee relied on the decision of the coordinate bench of the tribunal in the case of Bina Goenka The Jewellers LLP in ITA No. N 737/Mum/2014 for AY 2017 2017-18, wherein the Tribunal ribunal held as under:
6. The explanation in relation to the cash deposit of ₹ 34,50,000/-
34,50,000/ of the assessee has not been found to be satisfactory by the Assessing Officer and therefore he treated the credit in books books of accounts corresponding to cash deposit of ₹ 34,50,000/-as as unexplained cash credit in terms of section 68 of the Act. Therefore, the issue in dispute precipitated before us is whether the cash sales shown by the 28/10/2016, amounting to ₹ assessee in its books of accounts on 28/10/2016, 34,50,000/-toto explain the source of the cash deposits are genuine or not.
7. We find that firstly, the Assessing Officer held the cash sales as source of cash deposits as unexplained for the reason that all the cash sales of ₹ 34,50,000/ 50,000/-has has been booked in the books of accounts on 28/10/2016 i.e. one date and no other cash sales are appearing in the books of accounts either prior or after this date, which according to the Assessing Officer was not believable in normal course of con conduct of business. The learned counsel for assessee however has explained that the firm was constituted only in the preceding assessment year, having sales of ₹ 136.19 lakhs and no long history of sales for comparison with the sales for the year under consi deration. He further consideration.
explained that those cash sales of ₹ 34,50,000/-was was made on 28/10/2016 in view of the 'Diwali' festival. He also explained that 000/ constituted 1.74% of the total said cash sales of Rs. 34,50, 000/-constituted Foodlink Services India Pvt. Ltd. 17 ITA Nos. 4851, 4863 & 4854/MUM/2024 year. According to the learned turnover of ₹ 1978.87 lakhs during the year. counsel for assessee cash sales being included in the total turnover of the assessee for the year under consideration, sales offered to value-
value added tax (VAT) as per the invoices issued and the assessee paid tax liability and no loss has been caused to the coffers of the revenue either VAT or Income tax, hence, the source of the deposit of ₹ Income-tax, 34,50,000/- stands explained.
7.1 Secondly, the Assessing Officer noticed that all the cash sales were below ₹ 2 lakhs but aggregate of which which being more than ₹ 2 lakhs, the assessee has not complied to Rule 114E of Income-tax Income-
Income rules, 1962, according to which the assessee was required to report cash transactions exceeding the specified sum of ₹ 2 lakh for sale of the goods or services. However the assessee referred to Central Board of Direct Taxes (CBDT), circular dated 22/12/2016 and submitted that said limit was applicable for each transaction and not on aggregate cash sales, and therefore, there was no requirement for reporting such cash saless under rule 115E of Income tax rules,1962.
7.2 Thirdly, the learned counsel for the assessee submitted that all the comparative details of cash deposit and cash sales, copy of cash memo in respect of cash sales, ledger account of purchases correspondingg to the cash sales, stock of finished goods for the entire previous year corresponding to the assessment year under consideration, copy of cash book was filed before the lower authorities, but the Ld. CIT(A) recorded incorrectly that no cash book for the period was filed and he sustained the addition for this reason.
7.3 In view of observation of the facts in the case of the assessee, we are of the opinion that the only basis for treating the cash deposit as unexplained cash credit by the Assessing OfficeOfficerr is cash sales recorded in the books of accounts immediately prior to the demonetization period as compared to no cash sales either before or after that period. Therefore the addition has been mainly on the suspicion that cash sales are bogus or non-genuine.
non ne. In our opinion just because no other cash sales were recorded in the previous year, it cannot be presumed that such cash sales made in the year under consideration are bogus. The Assessing Officer has ignored the fact that cash sales are out of stock g enuinely held and acquired by the genuinely assessee through purchase invoices, which were duly produced before the Assessing Officer, but same were not doubted by him. The learned DR also could not controvert the copy of purchases corresponding to ck register, filed by the assessee in the paper book. the sales and stock Probably, the Assessing Officer suspected on the cash sales for the reason that same are below ₹ 2 lakhs and made on the same date, however in our opinion in view of the festival season of 'Diwali', such suc cash sales cannot be ruled out unless proved to be otherwise. It is for Foodlink Services India Pvt. Ltd. 18 ITA Nos. 4851, 4863 & 4854/MUM/2024 the Assessing Officer to bring on record evidences to support his allegations. The finding of the Assessing Officer is based on the merely suspicion and no documentary evidence have been brought on record by the Assessing Officer to establish that such cash sales were not genuine. In our opinion, suspicion, howsoever strong, cannot take place of the evidences. Similar finding has been given by the Coordinate Bench of Tribunal in the case case of Alchemist Touchnology Vs ACIT in .ITA No. 1689/Del/2022, which is reproduced as under:
"10.
10. We find that from perusal of the records, there is no evidence to prove that the „amounts sent‟sent shown in the hard disk is actually amounts sent by assessee company in hawala route which had ultimately found its way in the form of share capital and share premium under FDI route. The revenue had completely addressed this issue and made an addition pur purely ely on suspicion and surmise without any basis thereby making the addition totally unsustainable in the eyes of law. On the contrary, the assessee had stated that LGF had sent 19500000 USD from Cyprus and after deduction of LC charges and other overseas bank nk charges , the assessee could ultimately receive only 18621973.93 USD equivalent to Rs 100 crores in India under FDI route as share capital and share premium. In support of this, the assessee had duly provided all the necessary documents as listed above. The assessee from the inception had always taken the stand that it had not sent any monies abroad in hawala route. The assessee cannot be asked to prove the negative. It is for the revenue to prove the same with cogent evidences, which is not done in the instant case. We find that the revenue had merely proceeded to make the addition on suspicion. It is trite law that suspicion howsoever strong would not partake the character of legal evidence and hence a greater onus is casted on the revenue to bring on record ecord cogent evidences to justify its suspicion, which is conspicuously absent in the instant case. The only material that is relied upon by the revenue is the hard disk seized during search which only contained Page | 9 Alchemist Touchnology the details off „amounts sent‟ sent and „amounts received‟.
received Nowhere the said material even suggested that the amounts were sent by assessee company in illegal route which in turn had surfaced back in the form of share capital and premium under FDI route from Cyprus. Though the t presumption u/s 292C of the Act would go in favour of the revenue, it cannot be brushed aside that the said presumption is a rebuttable presumption and assessee had duly discharged its onus on the same. same. Moreover, the present assessee herein is an assessee proceeded u/s 153C of the Act and hence it is all the more necessary for the revenue to arrive at the satisfaction that income or materials or Foodlink Services India Pvt. Ltd. 19 ITA Nos. 4851, 4863 & 4854/MUM/2024 cuments does not belong or pertain to the searched person and documents indeed belongs to third person (i.e 153C assessee). Viewed from this angle, it could be safely concluded that presumption u/s 292C of the AcActt would apply only to the person proceeded u/s 153A of the Act and not for the assessee u/s 153C of the Act."
Act.
7.4 In view of facts of instant case, respectfully, following the coordinate bench (supra), we reject the finding of the lower authorities that cash sales of the assessee are not genuine. Once the cash sales are accepted to be genuine, the cash received thereon and later account by crediting the cash and debiting the deposited into bank account bank account satisfactorily explain the credit entry in the books of accounts and therefore no addition in terms of section 68 of the Act is warranted for corresponding cash deposit of ₹ 34,50,000/-in in the case off the assessee. The ground Nos. 2 to 4 of the appeal of the assessee accordingly allowed."
allowed.
6.7 In view of the aforesaid discussion, we are of considered opinion that the order of the Ld. CIT(A) on the issue in dispute is well reasoned and we do not find any infirmity in the same, accordingly, we uphold the same. The grounds of the appeal of the revenue are accordingly dismissed.
7. Now, we take up, the appeal of the Revenue for assessment 18 arising from rectification order passed by the year 2017-18 Assessing ing Officer rectifying the quantum of addition additio made under ct while passing the assessment order under section 68 of the Act section 143(3) of the Act.. The grounds raised by the Revenue are reproduced as under:
1. Whether on the facts and in the circumstances of the case and in law, the La, CIT(A) failed to appreciate that an addition of Rs.
2,58,78,235/ was required to be made in the order u/s 143(3) 2,58,78,235/-
dated 30.12.2019 u/s 68 of the Act, 1961 for the reasons discussed in the said order, whereas the addition was made to 2,58,78,235/ only resulting in the total income the tune of Rs. 2,58,78,235/-
being assessed lower by Rs. 21,81,306/ 21,81,306/-?
Foodlink Services India Pvt. Ltd. 20 ITA Nos. 4851, 4863 & 4854/MUM/2024
2. Whether on the facts and in the circumstances of the case, the Ld. CIT(A) was correct in law in holding that the addition of Rs. 21,81,306/- made vide order u/s 154 dated 26.03.2024 also stands deleted on the ground that the additions made u/s 68 in the order u/s 143(3) dated 30.12.2019 has been directed to be deleted for detailed reasons in the appellate order against the order u/s 143(3)P
3. Whether on the facts and in the circumstances of the case and in law, the order of the Ld. CIT(A) 16.07.2024 in the appeal against the order u/s 143(3), deleting the addition made u/s 68 2,58,78,235/ is erroneous as the assessee has failed to of Rs. 2,58,78,235/-
discharge scharge the onus to prove the genuineness of the source of the cash deposit in its accounts and, consequently, the addition of 21,86,306/ being the computation mistake in the addition Rs. 21,86,306/-
made u/s 68 is also required to be confirmed?
7.1 We have heard rival rival submission of the parties and perused the relevant material on record. We find that in the rectification order, the Assessing Officer has merely rectified the arithmetical mistake and increased the amount of addition under sections sections 68 by the amount of Rs.21,81,306/-.
Rs.21,81, . The Ld. CIT(A) has deleted the said enhancement of the addition in view of the additi addition on under section ct deleted by him. The relevant finding of the Ld. 143(3) of the Act CIT(A) is reproduced as under:
12. The appellant has filed appeal vide appeal no. NFAC/2016-
"12. NFAC/2016 17/10361725 on 20.04.2024 against order u/s 154 of the Act dated 26.03.2024 for A.Y. 2017 2017-18.
18. The issue in this appeal is related to 2,58,78,235/ made by AO vide order u/s 143(3) the addition of Rs. 2,58,78,235/-
of the Act dated 30.12.2019 on acco unt of unexplained cash credit.
account The AO has enhanced the addition of Rs. 2,58,78,235/ 2,58,78,235/- by Rs.
21,81,306/- vide order u/s 154 of the Act dated 26.03.2024 stating that there is a mistake apparent on record while calculating the total cash deposit made by appellant appellant during the demonetization period. The cash deposited by the appellant in specified bank notes was of 3,23,84,000/ and as on 01.04.2016 the appellant was having Rs. 3,23,84,000/-
43,24,459/ . The AO while giving credit cash in hand balance of Rs. 43,24,459/-.
Foodlink Services India Pvt. Ltd. 21 ITA Nos. 4851, 4863 & 4854/MUM/2024 hand balance of Rs. 43,24,459/- made the addition of to the cash in ha Rs. 2,58,78,235/-
2,58,78,235/ instead of Rs. 2,80,59,541/-.. Therefore, the AO held that incorrect addition was made. Therefore, the mistake in apparent on record was rectified u/s.154 of the IT Act and addition of Rs.21,81,306/ 21,81,306/- was made.
13. The rectification order, submission of the appellant and the facts of the case have been carefully considered. The addition made by AO in order u/s 154 of the Act dated 26.03.2024 is part of the addition of Rs.2,58,78,235/-
Rs.2,58,78,235/ made in A.Y.2017-18 18 vide order dated 30.12.2019. The facts of the case being the same as quantum addition made in the order dated 30.12.2019 for A.Y.2017-18, A.Y.2017 this appeal is taken up along with the quantum addition. After detailed discussion in the foregoing par as, the addition of Rs.2,58,78,235/-
paras, Rs.2,58,78,235/ u/s 68 of the Act on account of unexplained cash credit has been deleted vide para no. 8.12. In view of the detailed discussion made in the above order, addition made vide order u/s 154 of the Act 26.03.2024 of Rs. 21,8 21,81,306/- also stands deleted. The ground no.
NFAC/2016 17/10361725 are 1,2 and 3 of appeal filed in appeal no. NFAC/2016-17/10361725 allowed."
7.2 We are of the opinion that since the main addition made in the assessment order er under section 143(3) of the A ct has been deleted Act by the Ld. CIT(A), we do not find any infirmity in the order of the Ld. CIT(A) in deleting the rectified addition for the cash deposits. The Th grounds of the appeal of the Revenue R are accordingly dismissed.
8. Revenue for asse Now, we take up the appeal of the Revenue assessment year 2018-19.
19. The grounds raised by the Revenue in its appeal are reproduced as under:
1. Whether on the facts and in the circumstances of the case and in law, the Ld. CIT(A) was justified in deleting the addition of Rs.
10,44,64,764/ - made by the AO on account of cash credit u/s 68 of the Act of the Income-tax Income Act, 1961.
Foodlink Services India Pvt. Ltd. 22 ITA Nos. 4851, 4863 & 4854/MUM/2024
2. Whether on the facts and in the circumstances of the case and in law, the Ld. CIT(A) has erred in ignoring the fact that the assessee genuineness of source of the failed to discharge the onus to prove the genuineness Share Premium received from 10 parties who did not comply to the notices issued u/s 133(6) of the Act.
3. Whether on the facts and in the circumstances of the case and in law, the Id CIT(A) has erred in deleting the disallowance of Rs. 54,63,632/- made on account of disallowance of rent expenses u/s 40(a)(ia) on the basis of additional evidences which were not submitted before the assessing officer during the assessment proceedings despite multiple opportunities given to the assessee.
asse
4. Whether on the facts and in the circumstances of the case and in law, the Ld. CIT(A) has erred in accepting the additional evidences ignoring the fact that the assessee has not claimed any sufficient cause that may have prevented him from filing the evidence during the assessment procedure.
5. The appellant prays that the order of the CIT(A) on the above grounds be set aside and that of the Assessing Officer be restored.
8.1 The ground No. 1 and 2 of the appeal relate to addition of ₹10,44,64,764/-deleted deleted by the Ld. CIT(A) which was made by the Assessing Officer treating the share capital including share premium received from 14 parties as unexplained cash credit in terms of section 68 of the Act.
8.2 Briefly stated facts qua the issue in dispu te are that during dispute the year under consideration consideration the assessee issued 2,43,379 2,43, No. of equity shares to 67 shareholders and received aggregate amount of ₹79,10,06,636/- (₹24,73,790/- towards share capital and ₹78,85,26,46/- towards security premium). The share shar capital was received through a Portfolio Management Company (PMC) named as Foodlink Services India Pvt. Ltd. 23 ITA Nos. 4851, 4863 & 4854/MUM/2024 Alpha Capital Advisors Private Limited wherein the shareholders had given the irrevocable power of attorney to the PMC to make and manage their investment. Accordingly, the PMC entered en into agreement dated 09/06/2017 with the assessee on behalf of all the 67 shareholders and pursuant to which shares were issued. All the 67 shareholders transferred their money from their account to the account who in turn transferred the funds to the PMC's bank account, assessee's bank account. During the assessment proceeding, account. proce the assessee filed details of shareholders along with their documents supporting the three ingredients required for discharging onus under section 68 of the Act.
A A list of said documents
cuments have been
reproduced on page 17 para 3.1.3 of the order of ld CIT(A). For ready reference, said list is reproduced as under:
3.1.3 In addition to the above, the Appellant filed following documents on also:
Confirmation from the 11 shareholders [referer point 14 of paper book] ITR Financial statement of few shareholders (refer page 289-289 369 of paper book] Copy of PAS 3 filed with Ministry of Corporate Affairs towards issue of Share Capital [refer [r page 370-414 414 of paper book] Copy of Board Resolutions of the Appellant company towards issue of share capital [refer page 415 436 of paper book| 415-436 PMS Registration Certificate of Alpha Capital Advisors Pvt. Ltd and Certificate of incorporation change in name refer page 437-439 439 of paper book] Submission of Disclosure Disclosure Report filed by PMC with SEBI wherein it has been categorically stated that the PMC is making investment in Appellant Company. The said disclosure Foodlink Services India Pvt. Ltd. 24 ITA Nos. 4851, 4863 & 4854/MUM/2024 given at page no. 1121 of the disclosure document [refer page 440-485 485 of paper book] 8.3 The AO issued no ce under section 133(6) of the A notice Act to all the 67 shareholders for verification of their identity and creditworthiness but only 53 shareholders complied with said notices and remaining 14 shareholders having share capital 10,44,64,764/ did not respond to the notice amounting to Rs. 10,44,64,764/-
issued Act. The AO accordingly added ed under section 133(6) of the A the said sum as unexplained cash credit u/s 68 of the Act. The sum received from the shareholders which was held as unexplained cash credit is reproduced as under:
"8.3.1 8.3.1 The AO made addition u/s.68 of the IT Act in respect of the following parties Sr. No. Name Amount
1. BHATIA SLIRESH 2381081
2. GAWANDE CONSULTANTS PVT LTD 2381081
3. FALCON MARINE EXPORTS LTD 4758975
4. ASHISH HARESH JAGTIANI 1906140 5 AMIN WAHID GOPALANI & 1906140 SUNEETA WAHIDGOPALANI
6. SUMEET BALDEV CHOPRA 4758975
7. WELSPUN GROUP MASTER TRUST 42840341 428
8. SAVE POWER LLP 9521138
9. PINK Ginger ARTS LLP 9521138
10. PROTOS ENGINEERING CO PRIVATE 953070 LIMITED Foodlink Services India Pvt. Ltd. 25 ITA Nos. 4851, 4863 & 4854/MUM/2024
11. JAYABEN JITENDRAJHAVERI 3066399 30663 12 PRASHANT SUBHASH PRATAP 9517950 13 VIVEK MADANLAL HINDUJA 4762162 14 DALMIA ENTERPRISE HOLDINGS 6190174 TOTAL 104464764 8.4 Before the ld CIT(A), the assessee submitted that assessment assess was carried out during Covid period, therefore few shareholders could not respond to the notice u/s 133(6) of the Act. Before the AO, the he assessee requested for providing list of the shareholders who failed to comply notice u/s 133(6) of the Act but despite three reminders,, list of shareholders was not provided and assessment order was passed.. Therefore, the assessee obtained reply from those CIT(A) as additional shareholders and submitted before the ld CIT(A) evidences. The Ld CIT(A) called for remand report from the AO but the AO didn't give any adverse remark on the additional evidences. The ld CIT(A) after taking into consideration comparison of the documents in respect of 53 shareholders shareholder which were accepted in assessment proceeding and documents in respect of 14 shareholders filed during appellate proceedings as additional evidences, deleted the addition observing as under:
"9.11 9.11 Perusal of the assessment order reveals that the AO has not mentioned anything about any information available with him to arrive at the conclusion that the parties did not have creditworthiness. No inquiries were conducted to bring on records, Foodlink Services India Pvt. Ltd. 26 ITA Nos. 4851, 4863 & 4854/MUM/2024 any material to arrive at the conclusion of holding that the transactions ansactions were not genuine. The AO has not mentioned anything in the body of order to suggest whether he had any information or any incriminating evidences in his possession to come to the conclusion that the investment in shares were ungenuine. In this this regards, the AO failed to bring on records, any positive evidence of flow of cash or cash exchanged between the appellant and/or the final beneficiary. Further, the AO has nowhere discussed the issue or the modus operandi alleged to be carried out by the appellant. The AO has also not zeroed down on the specific modus operandi employed if any for carrying out the unexplained investment. The AO has not made any inquiries to establish that the investment was from a nonexistent entity. No have been brought on record to indicate that the evidences have investment in shares was not a genuine transaction. On the other hand the appellant has furnished all the documentary evidences during the assessment proceedings as well as appellate proceedings to support its contention to substantiate that it is a genuine transactions where various investors have applied for shares and the have been duly allotted these shares. Further, as laid down by the Hon'ble High Court as well as Supreme Court the addition u/s.68 o off the IT Act was not justified, without making proper inquiries and bringing on records any adverse findings in non receipt of reply u/s.133(6) was respect of the parties. Mere non-receipt not sufficient ground for making the addition.
9.12 In view of the facts of the case and decisions rendered by various courts on this issue, the addition of Rs. 10,44,64,764/-
10,44,64,764/ u/s.68 of the IT Act made by AO on account of share premium unconfirmed by the parties is hereby deleted. Ground no.3(a) & 3(b) of appeal are allowed."
allowed 8.5 We have heard rival submission of parties and perused the relevant material on record. The issue in dispute is regarding share capital received from 14 shareholders out of the 67 shareholders treated by the Assessing Officer as unexplained cash credit cred for the reason that those 14 shareholders did not respond to the notice Foodlink Services India Pvt. Ltd. 27 ITA Nos. 4851, 4863 & 4854/MUM/2024 issued under section 133(6) 133(6 of the Act.
ct. During the remand proceedings, the assessee filed documents in respect of the 14 shareholders, identical to the documents which were filed in respect of 53 shareholders out of the 67 shareholders. The share capital received from those 53 shareholders was already accepted by the Assessing Officer as genuine and no addition was made in respect of share capital received from those shareholders in assessment order. The assessee has filed copy of the documents in respect of all the shareholders before us also, which are available on pages 486 to 553 of the paperbook. We are of the opinion that when the Assessing Officer has accepted share capital received received from the 53 shareholders on the basis of a set of documents, then identical documents filed in respect of remaining 14 shareholders, shareholders the Ld. CIT(A) is justified in deleting the addition made by the Assessing Officer. In view of the above facts and circumstances, we do not find any error in the order of the Ld. CIT(A) on the issue in dispute.
The ground Nos. 1 and 2 of the appeal of the Revenue
R are
accordingly dismissed.
9. three and four of the appeal, the Revenue In ground No. three R has mainly objected for admitting the additional evidence in respect of the disallowance of rent expenses amounting to ₹ 54, 63, 632/ 632/-.
9.1 The brief facts qua the issue in dispute are that the assessee incurred ₹13,37,04,073/ 073/- towards rent and conducting charges.
ch As Foodlink Services India Pvt. Ltd. 28 ITA Nos. 4851, 4863 & 4854/MUM/2024 no tax was deducted on the rent payment, the Assessing Officer in draft assessment order proposed as why the 30% of ₹13,37,04,073/- i.e. 4,01,11,222/ 4,01,11,222/- might not be disallowed provisions of section 40(a)(ia) of the A invoking the provisions Act. In response etail in respect of rooms taken the assessee claimed to have filed detail on rent for the staff and Permanent Account Number (PAN) of the owners to whom rent was paid. The Assessing Officer after taking into consideration of the submissions of assessee, disallowed rent expenses amounting to Rs. 54,63,632/- instead of making Act. Before the Ld. CIT(A) disallowance under section 40(a)(ia) of the Act. the assessee filed additional evidences, evidence , however same were not found satisfactory by the Assessing Officer and he opposed the t admission of the additional evidences. The Ld. CIT(A) has summarized the facts in relation to the issue in dispute , which are reproduced as under:
10. Ground no. 4 of appeal is related to the disallowance of rent 54,63,632/ . In respect of the expenses to the tune of Rs. 54,63,632/-. disallowance of rent expenses the appellant has raised the following issues:
(a) The AO erred in making the disallowance of Rs. 54,63,632/-
54,63,632/ being rent paid for accommodation of employees on the ground the Appellant allegedly failed to substantiate the expenses by providing the addresses of premises and Permanent Account Number (PAN) of owner of premises taken on rent. The Appellant claimed that it has duly substantiated that the rent expenses have been incurred wholly and exclusively forfor the business purposes, therefore, the disallowance made by the AO shall be deleted.
Foodlink Services India Pvt. Ltd. 29 ITA Nos. 4851, 4863 & 4854/MUM/2024
(b) The AO erred in making the disallowance of Rs. 54,63,632/-
54,63,632/ without providing an opportunity of being heard to the Appellant.
consideration, the Appellant has 10.1 During the year under consideration, incurred expenses of Rs.13,37,04,073/ Rs.13,37,04,073/- being rent and conducting charges. The appellant had made the payment of rent without deducting any TDS. Therefore the AO in para 10 of draft assessment order proposed the disallowance u/s 40(a)(ia) 40(a)(ia being 13,37,04,073/ i.e. Rs. 4,01,11,222/- as it had failed 30% of Rs. 13,37,04,073/-
13,37,04,073/ . In response, to deduct TDS on the payment of Rs. 13,37,04,073/-. the appellant furnished particulars of staff rooms taken for rent and the PAN number of the owner to whom the rent waswa paid. The AO after considering the reply of the appellant made the 54,63,632/- instead of disallowance of rent expenses by Rs. 54,63,632/- making the disallowance u/s 40(a)(ia) of the Act as proposed in the draft assessment order. The main reason of making disallowance 54,63,632/ provided by AO nce of rent expenses of Rs. 54,63,632/- is as under:
"As per draft assessment order vide para No.10 it is proposed for addition of Rs.4,01,11,222 for failure of deduction of TDS on rent & conducting charges. This addition was proposed U/s.40(a)(ia) @30% on total claim of expenditure. This proposal was communicated to the assessee vide draft assessment order dated.30/04/2021. In response to this show cause the assessee furnished the information, after going through the information, it wass noticed that the assessee failed to furnish the particulars of staff rooms taken for rent and the pan number of the owner to whom the rent was paid. Even though the claim for these staff rooms is less than the ceiling limit for collection of TDS as the assessee ssessee failed to substantiate the claim of payment by providing the particulars of address of the staff rooms and PAN number of owner, it is construed that the claim is not genuine. Hence it resulted as addition of Rs. 54,63,632/-
54,63,632/ as under-
Foodlink Services India Pvt. Ltd. 30 ITA Nos. 4851, 4863 & 4854/MUM/2024 Foodlink Services India Pvt. Ltd. 31 ITA Nos. 4851, 4863 & 4854/MUM/2024 Foodlink Services India Pvt. Ltd. 32 ITA Nos. 4851, 4863 & 4854/MUM/2024 Foodlink Services India Pvt. Ltd. 33 ITA Nos. 4851, 4863 & 4854/MUM/2024 Foodlink Services India Pvt. Ltd. 34 ITA Nos. 4851, 4863 & 4854/MUM/2024 Foodlink Services India Pvt. Ltd. 35 ITA Nos. 4851, 4863 & 4854/MUM/2024 10.2 During the appellate proceedings, the appellant had submitted that it had incurred rent expenses of Rs. 13,37,04,073/ for the subjected year. The AO, in the 13,37,04,073/-
assessment proceeding through draft assessment order, proposed to make the disallowance u/s u/s 40(a)(ia) of the Act on the ground that the Appellant has not deducted the TDS on rent.
The Appellant claimed that it had filed complete details related to rent expenses on 02/05/2021, explaining the AO that the TDS have been deducted by it wherever applicable. On consideration of the submission of the Appellant, the AO made a disallowance 54,63,632/ out of the total rent of Rs. 13,37,04,073/-
of Rs. 54,63,632/- 13,37,04,073/ stating that the PAN of the landlord or the premises address are not given by the Appellant. The appellant further claimed that claimed that these amounts represents the rent which is below Act."
threshold limit as prescribed in section 194I of the Act."
9.2 After considering the remand report of the Assessing Officer and rejoinder of the assessee, the Ld. CIT(A) deleted the addition observing as under:
10.3 During the appellate proceedings the appellant has "10.3 submitted that the business of the appellant company is that of running restaurants, outdoor catering, and management services.
claimed that it has hotels / restaurants across The Appellant has claimed the country. It also takes the contract of outdoor catering across the country throughout the year. Therefore, the Appellant needs various staff (i.e. serving staff, cook, attendant etc) who are hired Foodlink Services India Pvt. Ltd. 36 ITA Nos. 4851, 4863 & 4854/MUM/2024 llant. The Appellant provides accommodation to the by the Appellant.
staff in addition to salary. The appellant has submitted details of rent paid along with the Name of the parties, PAN and premises for which rent has been paid and amount paid along with the sample rent agreement ag of following parties:
i) Sangita Raj Bhagat
ii) Charushila Patil
iii) Rosy Paul Chettiar
iv) Jagdish Talreja
v) Savio Vareed
vi) Shevanta Bhavku
vii) Sunanda Tatoba More
viii) Kamalakar Takale
ix) Raju Jaiswal
x) Arun Kisan Londhe
xi) K Shanakriah
xii) K Vanaja
xiii) K Raghavender
xiv) K Edu Kondalu
xv) K Narsamma xvi) K Venkata Ramana xvii) Sharda Sanjay Parte xviii) Surekha Nagesh Sakpal xix) P Lakshmi 10.4 As these were the additional evidences filed by the appellant before the appellate authority in respect to the addition of disallowance of rent expenses of Rs. 54,63,632/-
54,63,632/-, a remand report was called for from the AO for the examination of the above details provided by the appellant. The AO in reply to the remand report has submitted that the veracity of the claim of the appellant cannot be ascertained from just the sample rent Foodlink Services India Pvt. Ltd. 37 ITA Nos. 4851, 4863 & 4854/MUM/2024 agreement and the additional evidence submitted by the appellant does not answer the issue raised by the AO in the assessment order.
10.5 The report submitted by the AO has been considered however, the AO has not brought out any deficiency or discrepancy in respect to the documents or additional evidences submitted by the the appellant. The main reason on the basis of 54,63,632/ is as under:
which the AO made addition of Rs. 54,63,632/-
"Even though the claim for these staff rooms is less than the ceiling limit for collection of TDS as the assessee failed to substantiate the claim of payment by providing the particulars of address of the staff rooms and PAN number of owner."
The appellant following the reason which led the AO for making 54,63,632/ has submitted disallowance of rent expenses of Rs. 54,63,632/- the details and documentary evidences evidences to justify its stand.
10.6 Further, as per the draft assessment order issued to the appellant the AO proposed to make the disallowance u/s 40(a)(ia) of the Act on the ground that the Appellant has not deducted the TDS on rent. However, the addi tion was finalized addition making disallowance of rent expenses to the tune of Rs. 54,63,632/-.. If such addition was required to be made, the AO ought to have been given an opportunity of being heard before making such disallowance to the appellant.
10.7 In viewiew of the above discussion and the details, documentary evidences submitted by the appellant the addition 54,63,632/- made on account of disallowance of rent of Rs. 54,63,632/ expenses of Rs. 54,63,632/ 54,63,632/- is hereby deleted. Ground no. 4 of appeal is allowed."
allowed.
9.3 We have heard rival submission of the parties and perused the relevant material on record. The issue in dispute is in respect of the genuineness of the rent expenses claimed by the assessee. The ld Assessing Officer in the remand report has submitted that PAN of the landlord or the addresses of the premises were not given by the assessee in the additional evidence and therefore the claim of the assessee of the genuineness of the expenses could not be verified.
Foodlink Services India Pvt. Ltd. 38 ITA Nos. 4851, 4863 & 4854/MUM/2024 The Ld. CIT(A) however deleted the addition forr violation of principle of natural justice. The Ld. CIT(A) noted that in the draft assessment order the Assessing Officer proposed disallowance invoking inv section 40(a)(ia) of the Act ct whereas in the final assessment order made genu neness of the rental expenses. The ld disallowance for lacking genuineness CIT(A) held that addition made by the AO without opportunity to However, we disagree with the the assessee, as not sustainable. However finding of the Ld. CIT(A) on the issue in dispute. We note that in the remand preceding the Assessing Officer specifically pointed out that address of the rooms leased for staff and PAN of the owners was not available and therefore said expenses could not have been possible n such circumstances, the Ld. CIT(A) should have called to verify. In for such information from the assessee or should have directed the assessee to file such information before the AO in remand proceeding. Since the Ld. CIT(A) has deleted the addition without verifying the said information, information we feel it appropriate to set aside the finding of the Ld. CIT(A) on the issue in dispute and restore the matter back to the file of the Assessing Officer, with the direction to the assessee to file the details of complete address of the properties/rooms which were taken on lease for staffs and PAN and address of the owner of those properties for verification by the sing Officer. The ground No. three and four of the appeal are Assessing accordingly, allowed for the statistical purposes.
Foodlink Services India Pvt. Ltd. 39 ITA Nos. 4851, 4863 & 4854/MUM/2024
10. In the result, the appeals of the Revenue for assessment year 2017-18 are dismissed whereas appeal for the assessment year 2018-19 19 is partly allowed for statistical purposes.
Order pronounced nounced in the open Court on 30/01/2025.
/01/2025.
Sd/
d/- Sd/-
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(SANDEEP SINGH KARHAIL
KARHAIL) OM PRAKASH KANT)
(OM KANT
JUDICIAL MEMBER ACCOUNTANT MEMBER
Mumbai;
Dated: 30/01/2025
Dragon Legal/Rahul Sharma, Sr. P.S. Copy of the Order forwarded to :
1. The Appellant
2. The Respondent.
3. CIT
4. DR, ITAT, Mumbai
5. Guard file.
BY ORDER, //True Copy// (Assistant Registrar) ITAT, Mumbai