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Income Tax Appellate Tribunal, DELHI BENCH ‘A’, NEW DELHI
Before: Sh. Kul BharatDr. B. R. R. Kumar
Per Dr. B. R. R. Kumar, Accountant Member:
The present appeal filed by the revenue against the order of the ld CIT(A)-30, New Delhi dated 30.03.2016 for Assessment Years 2012-13. Though the appeals for both the A.Y. 2010-11 and A.Y. 2012-13 were said to be involving the similar issues during the hearing held on 30.07.2021, we find that the issues involved for the A.Y. 2012-13 viz. disallowance u/s 14A deemed dividend u/s 2(22)(e) and addition on account of silver can be dealt independently and hence the grounds for the A.Y. 2012-13 are being adjudicated in the instant order. The grounds for the Assessment Year 2010-11 involve other issues and hence the separate adjudication would be required.
The Revenue has raised the following grounds of appeal:
“(a) On the facts and in the circumstances of the case, the Ld. CIT(A) had erred in law and facts in deleting the disallowance u/s 14A read with rule 8D of the Income Tax Rules ignoring the fact that the provisions of section 14A are mandatory. (b) On the facts and in the circumstances of the case, the Ld. CIT(A) had erred in law and acts is not appreciating the content of CBDT Circular no. 05/2014 dated 11-02-2014 which clarifies that Rule 8D read with section 14A of the Act provides for disallowance of the expenditure even where taxpayer in particular year has not earned any exempt income. (c) On the facts and in the circumstances of the case, the Ld. CIT(A) had erred in law and on facts by deleting the addition of Rs. 24,90,47,028/- made on account of deemed dividend u/s 2(22)(e) of the Act. (d) On the facts and in the circumstances of the case, the Ld. CIT(A) had erred in law and on facts by holding that the sale of silver recorded in the diary seized is duly accounted for in the books/ cash sale.”
Disallowance u/s 14A:
During the year, the Assessing Officer disallowed an amount of Rs.1.76 Crores on account of Section 14A of the Income Tax Act, 1961. It is a matter of record that no exempt income has been earned by the assessee. Hence, following the principle of no disallowance in the absence of any exempt income, placing reliance on the judgments in the case of PCIT Vs. IL&FS Energy Development Pvt. Ltd. 399 ITR 483 (Del.), Chem Investment Ltd. Vs. CIT 378 ITR 33 (Del.), PCIT Vs Kohinoor Projects Pvt. Ltd. 121 Taxmann.com 177, CIT Vs. ESSAR Teleholdings Ltd. (2018) 3 SCC 253 and CIT Vs. Oil Industry Development Board (SLP) (Civil) No. 2755/2019 dated 08.02.2019, we hold that no disallowance is called for.
Dividend u/s 2(22)(e):
At the outset, we find that this matter stands covered by the order of the ITAT in the assessee’s own case in for A.Y. 2011-12.
We have gone through the facts on record, the ld. DR could not get anything contrary to the view taken in the earlier year. The business operation of the assessee and the transactions remains similar in nature. Hence, in the absence of change in the legal proposition, the addition made by the AO is directed to be deleted. The order of the ld. CIT(A) on this issue is affirmed.
Sale of Silver:
The entire part of the Assessment Order on this issue is as under:
”During the course of search at the premises of group at Mahavir enclave New Delhi, a small diary Annexure A-4 was found and seized. The diary was found from the position of Shri Duni Chand who is a trusted employee of the group. The diary was in coded form in which last two zeros of the figures have been removed. Shri Duni Chand in his statement recorded under section 132 (4) accepted that the figure are indeed camouflaged with last two zeros of figures removed. During the course of assessment proceeding, the assessee group was asked to explain the entries in the Seized document.
In response to this the assessee submitted vide letter dated 13- 03-2015 in which it was explained that the diary Annexure A-4 is a manual cash book in respect of sale proceeds of silver made by Gen X Commodities limited. It was explained that the assessee company purchased silver from MMTC. Substantial part of the silver is sold in cash from the office of assessee at Chandni Chowk, New Delhi. It is also explain that the cash sale of silver is routine part of assessee business. The assessee identified the certain debit entries regarding the cash deposited in the bank of the assessee company and explained that the cash was generated out of cash sales of silver and the same is deposited in the bank account of the assessee. The copy of bank book is submitted in support of contention. The assessee was asked to furnish the copy of bank statement, sale register and copy of cash book. It was found that the diary contains entries from 17-11-2011 to March 2012. In the diary Annexure A-4 the total of credit side is Rs.8,52,38,000/-. The cash book submitted by assessee was examined for the period under consideration that is from 17th November 2011 to 31st March, 2012. It was found that the total cash sale during the period was Rs.6,25,19,994/- thus there was difference of Rs.2,27,18,006/- between the figure of sale mentioned in the diary Annexure A-4 and as shown in the sale ledger. The assessee could not explain the difference satisfactory. Therefore, it is held that amount of Rs.2,27,18,006/- represent the undisclosed sale of assessee, which is not entered in the books of account. Therefore, the amount of Rs. 2,27,18,006/- is added to the income of assessee as undisclosed sale.”
The ld. CIT(A) deleted the addition. The entire portion of the order of the ld. CIT(A) deleting the addition is as under:
“7.4 I have carefully considered assessment order, written submissions and oral arguments of Ld. AR. The objections/arguments of the appellant are discussed as under:-
(i) In the assessment order, the A.O. has considered that the difference in sale of silver Rs. 8,52,38,000/- for the period 17.11.2011 to 31.3.2012, based on diary inventorized as A-4 and the cash sales recorded in the cash book of Rs.6,25,19,994/-, amounting to Rs. 2,27,18,000/-.
(ii) During assessment proceedings, the assessee stated that the sales of Rs.8,52,38,000/-, for the period 17.11.2011 to 31.3.2012, are duly recorded in the cash book and was also reconciled all the entries of diary, are duly recorded in the cash book. However, same did not find favor with the A.O.
(iii) During the appellate proceedings, the appellant has stated that they have filed the details of entries made in the diary with the cash book and therefore, A.O. has wrongly made the addition on account of alleged difference in the sales recorded in the diary and the cash book.
(iv) It has also been submitted by the appellant, that not a single entry of diary, which is not recorded in the cash book / cash sale. The total sale of silver for the A.Y. 2011-12, is Rs. 184,03,81,165/-, which includes sales of Rs. 8,52,38,000/- also and therefore, alleged unaccounted sales of Rs. 2,27,18,000/-, considered by the A.O. is not correct.
From the above, it is clear that the sale of silver recorded in the diary, are duly accounted for in the books of the accounts of the appellant. Accordingly, I hold that the sale of silver of Rs.8,52,38,000/-, is duly recorded in the regular books of accounts and therefore findings of the A.O. are erroneous and accordingly, addition made on this account, cannot be sustained.
In view of the above, addition of Rs.2,27,18,000/- made by the AO on account of alleged unrecorded sale of silver is deleted.”
As per the observation of the ld. CIT(A), the amount of cash sales and the bank deposits have already been reconciled. The same has been reflected at page no. 208 of the paper book along with the bank statement at page no. 204 to 207 reflecting the cash sales shown in the seized material placed at page no. 195 to 203. Since, the cash sales as per seized material have been duly reflected in the bank account, we decline to interfere with the order of the ld. CIT(A) in deleting the addition.
In the result, the appeal of the revenue is dismissed. Order Pronounced in the Open Court on 03/01/2023.