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Income Tax Appellate Tribunal, DELHI BENCH ‘F’, NEW DELHI
Before: Sh. N. K. ChoudhryDr. B. R. R. Kumar
Per Dr. B. R. R. Kumar, Accountant Member:
The present appeal has been filed by the Revenue against the order of ld. CIT(A)-7, New Delhi dated 24.01.2019.
Following grounds have been raised by the Revenue:
“1. On the facts and under the circumstances of the case, the ld. CIT(A) has erred in law and on facts in admitting the additional evidences submitted before it by t he assessee company ignoring the provisions of Rule 46A of the Income Tax Rules, 1962 and ignoring the fact the sufficient opportunity was accorded to the assessee company to present its case before the Assessing Officer during the assessment proceedings.
2. Whether the ld. CIT(A) is justified in deleting the addition made by the Ld. AO on account of sum amounting to Rs.2,22,22,350/- received from Spiral Infrastructure Pvt. Ltd. in respect of unsecured loan ignoring the fact that the creditworthiness of the source company could not be established beyond doubt?
Whether the ld. CIT(A) is justified in deleting the addition made by the Ld. AO on account of commission expenses amounting to Rs.40,86,431/- ignoring the fact that these should have been capitalized as the corresponding revenue was not recognized during the year as was also noted in the remand report?
4. Whether the ld. CIT(A) is justified in deleting the addition made by the Ld. AO on account of other expenses amounting to Rs.14,70,575/- which include
(i) Interest on scheme – Rs.9,11,555/- (ii) Advertisement and publicity – Rs.1,51,668/- (iii) Business promotion of Rs.6,965/- (iv) Professional charges – Rs.4,00,387/-
Ignoring the fact that these should have been capitalized as the corresponding revenue was not recognized during the year as was also noted in the remand report?”
3. Brief facts of the case are that the assessee filed return of income on 18.09.2015 declaring loss of Rs.1,30,66,524/-. The return was selected for limited scrutiny under CASS. Order u/s 143(3) was passed on 27.12.2017, Assessing the total income at Rs.1,47,12,830/- after addition of Rs.2,22,22,350/- u/s 68 on account of short term loan and advances received from M/s Spiral Infrastructure (P) holding company, addition of Rs.40,86,431/- on account of commission expenses and addition of Rs.14,70,575/- on account of other expenses. The ld. CIT(A) deleted the additions. Aggrieved, the Revenue filed appeal before us.
Ground No. 1 Admission of Additional Evidences: Rule 46A
We find that the ld. CIT(A) has duly accorded opportunity to the Assessing Officer and the additions have been made entirely based on the report of the Assessing Officer and hence this ground raised by the revenue is liable to be dismissed.
Ground No. 2 Unsecured Loans:
The AO made addition of Rs.2.20 crores received by the assessee from one entity namely M/s Spiral Infrastructure Pvt. Ltd. Before the ld. CIT(A), the assessee submitted additional evidences which have been duly forwarded to the Assessing Officer and called for a report. The AO in his Remand Report has observed that:
“5.1.3 On perusal of their ITRs, it is observed that Mrs. Oona Singh, one of the directors, who gave 1,22,22,350/- to M/s Spiral Infrastructure Pvt. Ltd. had filed her ITR at a Gross Total Income of Rs.5,25,69,592/- and paid income tax of Rs.1,27,01,732/- for that year. Similarly, for the A.Y. 2014- 15, she filed her return at a Gross Total Income of Rs.2,24,96,051/- and paid income tax of Rs. 72,03,829/. The ITRs and the credit-worthiness of the Director seem genuine and sound.
5.1.4 Likewise, Mr. Udayan Anand, one the Directors, who gave 1,00,00,000/- to M/s Spiral Infrastructure Pvt. Ltd. filed his ITR for the A. Y. 2014-15 at a Gross Total Income of Rs. 1,98,36,962/- and paid tax of Rs. 66,19,894/- and similarly, for the A. Y. 2015-16, he had filed ITR at a Gross Total Income of Rs. 5,27,35,619/- and paid total income tax of Rs. 1,27,35,533/ Thus, the source of funds to M/s Spiral Infrastructure Pvt. Ltd. from its Directors seems genuine and out of disclosed sources. The ITRs of the Directors point to the credit-worthiness of the parties involved. Page | 3 5.1.5 Similar analysis can be drawn for M/s Contemporary Furnitures Pvt. Ltd. who gave Rs.40,00,000/- to Spiral Infrastructure Pvt. Ltd. which filed ITR for the A. Y. 2015-16 at GTI of Rs. 39,59,249/- 5.1.6 The submissions filed have been verified and the source of funds to M/s Royce Promoters and Developers Pvt. Ltd. from its Holding Company, M/s Spiral Infrastructure Pvt. Ltd. seem to be from disclosed sources."
In view of the above observations of the Assessing Officer, the addition of Rs.2,22,22,350/- u/s 68 on account of short term loan and advances has been deleted by the ld. CIT(A). Since, the addition has been deleted based on the remand report of the Assessing Officer, we decline to interfere with the order of the ld. CIT(A).
Ground No. 3 & 4 Commission Expenses: Other Expenses:
The AO disallowed the commission expenses on the grounds that the genuineness of the commission expenses is not established as there were no details of evidence of service provided by the commission agents and also the said expenses needed to be capitalized as the expenses were incurred by the assessee on the sale of flats during the year consideration.
The ld. CIT(A) deleted the addition after obtaining the remand report from the AO who categorically observed that “now the appellant company has submitted the ledger account and the bills/vouchers along with the memorandum of understanding between the appellant and the commission agents. These have been verified and seem to be genuine.” Since, the order of the ld. CIT(A) is based on the remand report of the AO, we decline to interfere with the order of the ld. CIT(A). With regard to capitalization of brokerage expenses, since they have been paid against the sale and payment received by the assessee, based on the judgment of the Hon’ble jurisdictional High Court in the case CIT Vs. Samsung Electronics India Ltd. wherein it was held that business will commence with first purchase and expenses incurred thereafter were duly allowable.
The ld. CIT(A) deleted the addition based on the remand report of the Assessing Officer and hence similar ratio with regard to other expenses applies mutatis mutandis.
The appeal of the revenue on this ground is dismissed.
In the result, the appeal of the Revenue is dismissed. Order Pronounced in the Open Court on 03/02/2023.