Income Tax Appellate Tribunal - Agra
Acit Circle 2(1), Gwalior vs M/S Gahoi Dal & Oil Mills P Ltd, Gwalior on 8 June, 2018
IN THE INCOME TAX APPELLATE TRIBUNAL
AGRA BENCH: AGRA
BEFORE SHRI A. D. JAIN, JUDICIAL MEMBER, AND
DR. MITHA LAL MEENA, ACCOUNTANT MEMBER
I.T.A Nos. 58 to 64/Agra/2017
(ASSESSMENT YEARs-2005-06 to 2011-12)
Asstt. CIT, Circle-2(1), Vs..M/s Gahoi Dal & Oil
Gwalior. Mills Pvt. Ltd. Mohan
Transport, Naya Bazar,
Lashkar, Gwalior.
PAN No.AACCG7037N
(Revenue) (Assessee)
C.O. Nos. 03 to 09/Agra/2017
(In I.T.A Nos. 58 to 64/Agra/2017)
(ASSESSMENT YEARs-2005-06 to 2011-12)
M/s Gahoi Dal & Oil Mills Vs..Asstt. CIT, Circle-2(1),
Pvt. Ltd. Mohan Transport, Gwalior.
Naya Bazar, Lashkar, Gwalior.
PAN No.AACCG7037N
(Assessee) (Revenue)
Revenue by Shri Inderjit Singh, CIT. DR.
Assessee by Shri Anurag Sinha, AR.
Date of Hearing 10.04.2018
Date of Pronouncement 08.06.2018
I.T.A Nos. 58 to 64/Agra/2017
2
C.O. Nos. 03 to 09/Agra/2017
(In I.T.A
(In I.T.A Nos.
Nos. 58
58 to
to 64/Agra/2017)
64/Agra/2017)
ORDER
PER BENCH:
I.T.A Nos. 58 to 62/Agra/2017 & C.O. Nos. 03 to 07/Agra/2017 These are Department's appeals and assessee's cross-objections for Assessment Years 2005-06 to 2009-10. The common grounds of the Department are against the deletion of the various additions for all these years. The common Cross-objection is that the additions u/s 153A of the IT Act were not based on any incriminating material found in the search and so, they are not sustainable.
2. The Cross-objections raise a legal issue going to the root of the matter. So, they are being taken-up first. The assessee, in this regard, placed reliance on:
(a) 'PCIT vs. Meeta Gutgutia', 82 taxmann.com 287 (Delhi).
(b) 'PCIT vs. Mrs. Lata Jain', 81 taxmann.com 83 (Delhi).
(c) 'PCIT vs. Deepak J. Panchal', ITA No.134 of 2017 (Gujarat).
(d) 'CIT vs. Deepak K. Agarwal', ITA No.1709 of 2014 (Bombay).
(e) 'PCIT vs. Saumya Constructions (P) Ltd.', 81 taxmann.com 292 (Gujarat).
(f) 'Chintels India Limited vs. DCIT', 84 taxmann.com 57 (Delhi).
I.T.A Nos. 58 to 64/Agra/2017 3 C.O. Nos. 03 to 09/Agra/2017 (In I.T.A Nos. 58 to 64/Agra/2017)
3. The ld. DR, on the other hand, has placed strong reliance on the impugned orders.
4. Heard. The factum of the addition not being based on any incriminating material found during the search is not disputed. The assessments for these years were completed u/s 153A of the IT Act. All the assessments are based on returned figures and the balance sheet, profit & loss accounts filed with the respective returns and there is no finding or material to suggest that any of the additions or disallowances was based on any incriminating material found during the course of search proceedings. The assessments for assessment year 2005-06 to 2009-10 were not pending as on the date of search (i.e., 7.10.2010) and thus had not abated as the result of search proceedings. The question is as to whether such additions are sustainable in law.
5. The ratios of all the decisions relied on by the assessee are to the effect that no addition can be made while completing assessment u/s 153A of the Act, if no incriminating material was found in the search conducted.
6. In 'CIT vs. Kabul Chawla', 380 ITR 573 (Del), the legal position in this regard has been considered as follows:
I.T.A Nos. 58 to 64/Agra/2017 4 C.O. Nos. 03 to 09/Agra/2017 (In I.T.A (In I.T.A Nos.Nos. 58
58 to to 64/Agra/2017) 64/Agra/2017) "37. On a conspectus of Section 153A(1) of the Act, read with the provisos thereto, and in the light of the law explained in the aforementioned decisions, the legal position that emerges is as under:
i. Once a search takes place under Section 132 of the Act, notice under Section 153 A (1) will have to be mandatorily issued to the person searched requiring him to file returns for six AYs immediately preceding the previous year relevant to the AY in which the search takes place.
ii. Assessments and reassessments pending on the date of the search shall abate. The total income for such AYs will have to be computed by the AOs as a fresh exercise.
iii. The AO will exercise normal assessment powers in respect of the six years previous to the relevant AY in which the search takes place. The AO has the power to assess and reassess the 'total income' of the. aforementioned six years in separate assessment orders for each of the six years. In other words there will be only one assessment order in respect of each of the six AYs "in which both the disclosed and the undisclosed income would be brought to tax".
iv. Although Section 153 A does not say that additions should be strictly made on the basis of evidence found in the course of the search, or other post-search material or information available with the AO which can be related to the evidence found, it does not mean that the assessment "can be arbitrary or made without any relevance or nexus with the seized material. Obviously an assessment has to be made under this Section only on the basis of seized material."
v. In absence of any incriminating material, the completed assessment can be reiterated and the abated assessment or reassessment can be made. The word 'assess' in Section 153 A is relatable to abated proceedings (i.e. those pending on the date of I.T.A Nos. 58 to 64/Agra/2017 5 C.O. Nos. 03 to 09/Agra/2017 (In I.T.A Nos. 58 to 64/Agra/2017) search) and the word 'reassess' to completed assessment proceedings.
vi. Insofar as pending assessments are concerned, the jurisdiction to make the original assessment and the assessment under Section 153A merges into one. Only one assessment shall be made separately for each AY on the basis of the findings of the search and any other material existing or brought on the record of the AO.
vii. Completed assessments can be interfered with by the AO while making the assessment under Section 153 A only on the basis of some incriminating material unearthed during the course of search or requisition of documents or undisclosed income or property discovered in the course of search which were not produced or not already disclosed or made known in the course of original assessment."
7. 'Kabul Chawla', (supra) has been followed in all the other decisions relied on by the assessee.
8. The ld. DR has placed reliance on 'CIT vs. Kesarwani Zarda Bhandar', order dated 06.09.2016, passed by the Hon'ble Allahabad High Court, in ITA 270 of 2014, over which 'Kabul Chawla' (supra) and the cases following it are to be preferred, since the Hon'ble Allahabad High Court is not the jurisdictional High Court qua the assessee.
9. In view of the above, the Cross-objections raised by the assessee are found to be justified. They are accepted as such. The additions for all these years are, I.T.A Nos. 58 to 64/Agra/2017 6 C.O. Nos. 03 to 09/Agra/2017 (In I.T.A (In I.T.A Nos.
Nos. 58
58 to to 64/Agra/2017) 64/Agra/2017) thus, deleted. Nothing further survives for adjudication, nor was anything else argued.
10. Therefore, all the Cross-objections are allowed and all the appeals are dismissed.
I.T.A Nos. 63 & 64/Agra/2017 & C.O. Nos. 08 to 09/Agra/2017
11. These are Department's appeals and assessee's Cross-objections for A.Ys. 2010-11 and 2011-12. The Department challenges the CIT(A)'s action of deleting the additions of Rs.40,76,269/- and Rs.38,45,663/- made by the AO on account of unexplained sundry creditors and the additions of Rs.43,53,647/- and Rs.38,49,826/- on account of discount and other charges and brokerage. In the Cross-objections, the assessee states that the additions were not based on any incriminating material found in the search and that so, the additions, made u/s 153A of the Act, are not sustainable.
12. The Cross-objections are not pressed. Rejected as not pressed.
13. Apropos the issue of unexplained sundry creditors, the CIT(A), for A.Y. 2010-11, has held as under:
I.T.A Nos. 58 to 64/Agra/2017 7 C.O. Nos. 03 to 09/Agra/2017 (In I.T.A Nos. 58 to 64/Agra/2017) "4.1.4. DECISION: I have carefully considered the facts of the case, the finding of the Assessing Officer, written submissions of the appellant, the remand report and the rejoinder thereon as well as the material placed on record. The impugned addition of Rs.
40,76,269/- has been made by the Assessing Officer with the observation that 'despite giving so many opportunity, the assessee company has failed to furnish the bills vouchers, name , address, PAN nature of credits, confirmation of creditor, TDS details etc. The assessee company has failed copy of ledger accounts of the various creditors in its books of accounts. Therefore the assessee company has failed to prove the creditors and the same is added in the total income of the assessee" Now in the remand report, the Assessing Officer has reported that the requisite information and details as furnished by the appellant company are placed on record. He has not drawn any adverse inference in this regards. 4.1.5. The addition of Rs. 40,76,269/ - on account of unproved sundry creditors has been made with general observations without bringing any material on record. The fact that it is not based on any incriminating document or material found or seized during search proceedings is evident from record. Further, the fact that the addition is based on conjectures and surmises and not based on any corroborative material placed on record is evident from the remand report. It is a case where the appellant had furnished the requisite details regarding the sundry creditors during assessment I.T.A Nos. 58 to 64/Agra/2017 8 C.O. Nos. 03 to 09/Agra/2017 (In I.T.A (In I.T.A Nos.
Nos. 58
58 to to 64/Agra/2017) 64/Agra/2017) proceedings, but the Assessing Officer has not recorded proper findings and made the addition, in a casual manner. The addition made by the Assessing Officer on account of unproved sundry creditors at Rs. 40,76,269/- is deleted."
14. The CIT(A)'s order for A.Y. 2011-12 is, mutatis mutandis, similarly worded.
15. The ld. DR contends that the ld. CIT(A) has erred in deleting the additions correctly made by the A.O. on account of unexplained sundry creditors, in spite of the fact on record that the assessee had failed to produce any admissible evidence during the course of the assessment proceedings.
16. Per contra, the ld. Counsel for the assessee has placed strong reliance on the impugned orders.
17. Heard. In the assessment orders, the AO held that despite giving many opportunities, the assessee company had failed to furnish the bills, vouchers, name, address, PAN, nature of credits, confirmation of creditor, and TDS details, etc.; that the assessee company had failed to file copy of ledger accounts of the various creditors in its books of account; and that therefore, the assessee company had failed to prove the creditors.
I.T.A Nos. 58 to 64/Agra/2017 9 C.O. Nos. 03 to 09/Agra/2017 (In I.T.A Nos. 58 to 64/Agra/2017)
18. Before the ld. CIT(A), for A.Y. 2010-11, the assessee submitted that the addition had been made in respect of the entire sundry creditors appearing in the balance sheet as at 31.3.2011 at Rs 47,86,711/-. It was submitted that out of this amount, the sundry creditors outstanding of Rs. 40,76,269/- were against purchases, that the assessee had filed copy of ledger A/c of all the creditors with name, address & TIN Nos. and had also mentioned the date of receipt of material, as well as the date of payment; that all the purchases were genuine purchases and the books of account were also audited; that the ratio of sundry creditors to purchases had been stated to be only 2.70% of the raw material purchased, at Rs. 15,08,22,637/- and the sundry creditors as on 31.03.06 were only at Rs. 40,76,269/-; that the payments of the bills were also made within the time allowed; that all the creditors have their TIN Nos. and the parties are registered with the commercial Sales Tax Deptt.; and that further, they are also presumed to be assessee's of income tax. As regards the remaining sum of Rs. 7,10,442/-, it was submitted before the ld. CIT(A), that they were not sundry, creditors, but liability of dalali expenses; that the assessee has claimed Dalali / brokerage expenses; and that the settlement of account of broker had been done at the end of the year, when the transactions were duly completed, which is relevant for both purchases and I.T.A Nos. 58 to 64/Agra/2017 10 C.O. Nos. 03 to 09/Agra/2017 (In I.T.A (In I.T.A Nos.
Nos. 58
58 to to 64/Agra/2017) 64/Agra/2017) sales. As for the dalali account of Rs. 7,10,442/.-, it had been pointed out before the CIT(A), that the Assessing Officer disallowed 100% brokerage expenses claimed on sales Rs 5,08,968/-, and that to this extent, it was a double addition. It was also contended that such expenses of Rs. 7,10,442/- could not be added u/s 68 of the I.T. Act. It was further submitted that the assessee had filed TDS details which show the particulars, i.e., names, addresses and PANs of all the brokers, whose outstandings appear in the books as on 31.3.2010 and having creditors only Rs 5,000/-, and that in even in the search, incriminating document / paper was found to establish that the sundry creditors or dalali expenses payable were bogus. It was also submitted that after filing his submissions the assessee requested for time for verification of bills, etc., but no such opportunity was given.
19. Similar contentions were raised by the assessee before the ld. CIT(A) for A.Y. 2011-12.
20. The ld. CIT(A) called for remand reports from the AO.
21. In the remand report for A.Y. 2010-11, the AO commented that 'Ground No.
1. Related to addition of 100% sundry creditors appearing in the balance-sheet as at 31.03.2010 of Rs. 47,86,711/-. Sundry creditors are only actually Rs.
I.T.A Nos. 58 to 64/Agra/2017 11 C.O. Nos. 03 to 09/Agra/2017 (In I.T.A Nos. 58 to 64/Agra/2017) 40,76,269/-. The remaining amount of Rs. 7,10,442/- is liabilities towards Dalali expanse being payable at the end of the year. Reply of ground-1. On the above submission of the assessee, it is submitted that it is a fact that out of Rs. 47,86,711/-, Rs. 40,76,269/- is on account of creditors of goods and balance of Rs:
7,10,442/- is on count of creditors for dalali. It is also found from the assessment records that during the assessment proceedings, in the written submission dated 26.02.2013 made during the course of assessment proceedings; the assessee filed ledger account of all the Sundry Creditors for goods in its books of accounts along with their TIN No. and addresses. Further, regarding the Sundry creditors on account of dalali expenses, it is submitted that during the course of assessment proceedings in the written submission dated 26.02.2013 the assessee had submitted that TDS on the expenses has been deducted wherever necessary and in the written submission before the Appellate authority, the assessee has submitted names & addresses of the dalal and details of the dalali paid and TDS made on the said payments'.
22. A similar remand report was furnished by the AO for A.Y. 2011-12.
23. In the rejoinder to the remand report, for A.Y. 2010-11 the assessee stated that 'Ground No.1. It is verified from the assessment record that the appellant has I.T.A Nos. 58 to 64/Agra/2017 12 C.O. Nos. 03 to 09/Agra/2017 (In I.T.A (In I.T.A Nos.Nos. 58
58 to to 64/Agra/2017) 64/Agra/2017) furnished details of all the sundry creditors for Rs. 40,76,269/- and Rs. 5,44,550/-
of dalali-. All these were furnished during the assessment proceedings. It seems that due to many time barred assessments u/s 153A pending before ACIT, such reference has been made in the order. However in this remand these facts as mentioned by the appellant are confirmed and therefore the addition of Rs 40,76,269/- be deleted'.
24. A similar rejoinder was filed to the remand report for A.Y. 2011-12
25. It was on the basis of the above, that the ld. CIT(A) deleted the additions.
26. In the remand reports, as correctly noted by the ld. CIT(A), the AO has reported the information as furnished by the assessee to be correct. All these details were filed in the assessment proceedings also. As such, the additions were not legally sustainable and they have been correctly deleted. Accordingly, the ld. CIT(A)'s action is confirmed. The Department's grievance for both these years in this regard is rejected.
27. So far as regards the additions on account of discount and other charges on sales, the AO made the additions because the assessee had failed to file the confirmations from the persons to whom discount & other charges on sales have I.T.A Nos. 58 to 64/Agra/2017 13 C.O. Nos. 03 to 09/Agra/2017 (In I.T.A Nos. 58 to 64/Agra/2017) been paid. Further-more, the assessee had also failed to furnish the details of the services rendered by the persons to whom the discount & other charges have been paid. The bills / vouchers & confirmation had not been filed by the assessee company. The assessee had also not furnished the TDS details on these expenses.
28. Before the ld. CIT(A), the assessee contended that the entire sum debited in this account is not actually paid by the assessee, but they are deducted by the debtors against the payment of bills of the assessee's sale. The assessee contended that the detail of such deductions is regularly maintained in a register and photo- copies of some pages thereof had been filed. In the remand report for A.Y. 2010- 11, the AO stated that 'Ground No. 2. Related to disallowance of Rs. 37,85,889/- being claim of expenses is selling and distribution expenses referred to as discounted and other charges on sales. The appellant is engaged in business of manufacturing of Dal & Oil and selling them to the wholesalers. Reply of ground No. 2. On the above submission of the assessee, it is submitted that it is a fact that the assessee has claimed to have incurred expenses on account of Discount & Other Charges on sales to the tune of Rs. 37,85,889/- under the Selling and distribution expenses. It is found from the assessment records that in the written submission dated 26.02.2013 made during the course of assessment proceedings, it I.T.A Nos. 58 to 64/Agra/2017 14 C.O. Nos. 03 to 09/Agra/2017 (In I.T.A (In I.T.A Nos.
Nos. 58
58 to to 64/Agra/2017) 64/Agra/2017) had furnished detailed copy of these accounts showing the balance as on 31.03.2010 amounting to Rs. 37,85,889/-'.
29. A similar remand report was furnished for A.Y. 2011-12. The ld. CIT(A) has deleted the additions.
30. Here, the ld. CIT(A) has correctly held that in 'Dy. CIT Vs. Agarwal Transport Corporation Pvt. Ltd.', (2016) 27 ITJ 21 (Trib-Indore), where regular books of account were maintained by the assessee and the AO had not given any specific instance where the expenses were not supported by vouchers/bills, and similar ad-hoc disallowance made in the assessee's own case for A.Y. 2005-06 were deleted by the CIT(A) and the said relief had also been endorsed by ITAT Indore Bench, and the ld. DR could not bring anything contrary to the finding of the CIT(A), the ITAT upheld the action of the CIT(A); and that in the instant case, there is no finding that the expenditure is not covered u/s 37(1) of the Act, in as much as it is personal or capital in nature.
32. Similar findings have been recorded by the ld. CIT(A) for A.Y. 2011-12.
33. No error is found in the impugned orders on this issue. In the remand reports, the AO did not report any adverse inference to the submissions of the I.T.A Nos. 58 to 64/Agra/2017 15 C.O. Nos. 03 to 09/Agra/2017 (In I.T.A Nos. 58 to 64/Agra/2017) assessee. Accordingly, the ld. CIT(A)'s action is upheld and the grievance of the Department is rejected for both the years.
34. Concerning the additions on account of brokerage charges, the AO made the additions as, according to him, relevant details and confirmations had not been filed. In the remand reports, the AO admitted that all the details regarding brokerage payments were furnished during the assessment proceedings themselves. No expense was found to be unverifiable. No adverse comment was made in the remand reports. No material was brought to show that the brokerage was either bogus, or excessive, or unreasonable. Thus, the ld. CIT(A)'s action in this regard is also upheld, while rejecting the grievance sought to be raised for both years by the Department.
35. Accordingly, both the Cross-Objections are dismissed as not pressed, whereas both the appeals are dismissed.
36. In the result, Cross-objection Nos. 3 to 7/Agra/2017, for A.Ys. 2005-06 to 2009-10 are allowed. The appeals in ITA Nos. 58 to 62/Agra/2017, for A.Ys. 2005-06 to 2009-10 are dismissed. The appeals in ITA Nos. 63 and 64/Agra/2017, I.T.A Nos. 58 to 64/Agra/2017 16 C.O. Nos. 03 to 09/Agra/2017 (In I.T.A (In I.T.A Nos.
Nos. 58
58 to to 64/Agra/2017) 64/Agra/2017) for A.Ys. 2010-11 and 2011-12 are dismissed. Cross-Objection Nos. 08 & 09/Agra/2017, for A.Ys. 2010-11 and 2011-12 are dismissed as not pressed. Order pronounced in the open court on 08/06/2018.
Sd/- Sd/-
(DR. MITHA LAL MEENA) (A.D. JAIN)
ACCOUNTANT MEMBER JUDICIAL MEMBER
*AKV*
Copy forwarded to:
1. Appellant
2. Respondent
3. CIT
4. CIT(Appeals)
5. DR: ITAT
ASSISTANT REGISTRAR