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Facts
The assessee, a proprietor of M/s Goel Lightings, filed a return declaring income of Rs. 1,86,81,750. The Assessing Officer (AO) made an addition of Rs. 4,17,79,999 for Assessment Year 2016-17. The Commissioner of Income Tax (Appeals) [CIT(A)] dismissed the assessee's appeal.
Held
The Tribunal held that the assessee failed to provide proper bifurcation for interest-bearing loans used for business and non-business purposes. The Tribunal also found that the assessee failed to controvert the findings regarding suppressed production and profit, leading to disallowances.
Key Issues
Whether the disallowance of interest expenses for non-business purposes and addition for suppressed profits are justified. Whether the CIT(A) afforded proper opportunity of being heard.
Sections Cited
250, 143(3), 145(3)
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Income Tax Appellate Tribunal, DELHI BENCH ‘B’: NEW DELHI
(ASSESSMENT YEAR 2016-17) Rakesh Kumar Goel, CIT, 289/9, Katra Pedan, NFAC. Tilak Bazar, Delhi-110006. Vs. PAN-AAEPG7376H (Appellant) (Respondent) Assessee by None Department by Shri Rajesh Kumar Dhanesta, Sr. DR Date of Hearing 21/07/2025 Date of Pronouncement 30/07/2025 O R D E R [ PER MANISH AGARWAL, AM: This is an appeal filed by the assessee against the order of the ld. Commissioner of Income Tax (Appeals), National Faceless Appeal Centre, Delhi [CIT(A) in short], in Appeal No. CIT(A), Delhi- 16/10301/2018-19 dated 11.05.2023 passed u/s 250 of the Income Tax Act, 1961 (the Act, in short) for Assessment Year 2016- 17 is arising out from the order of Assessing Officer dated 28.12.2018 passed u/s 143(3) of the Act.
Brief facts of the case are that the assessee is a sole proprietor of M/s Goel Lightings who is earning business income from Rakesh Kumar Goel vs. CIT, NFAC production of CFL and LED products and parts. The return of income for Assessment Year 2016-17 was filed on 16.10.2016 declaring total income of Rs.1,86,81,750/-. The case was selected under CASS for complete scrutiny after considering the submissions made by the assessee. Total addition of Rs.4,17,79,999/- was made to the total income of the assessee. Against such order, the assessee preferred an appeal before Ld. CIT(A) who had dismissed the appeal vide impugned order dated 11.05.2023, thus, the assessee preferred an appeal before the Tribunal.
Before us, none appeared on behalf of the assessee since beginning of the proceedings though the case of the assessee was listed for hearing for more than 10 times. Under these circumstances, we have left no other option but to decide the appeal of the assessee on the basis of the material available before us.
The grounds of appeal No.1 and 2, the assessee has challenged the action of the Ld. CIT(A) in passing the order without affording the proper opportunity of being heard.
Heard the Ld. DR. From the perusal of the appellate order, we find that the Ld. CIT(A) has provided sufficient opportunities to the assessee and assessee has also filed written submissions which are reproduced in para 4 starting from 4 to 18 of the appellate order, thereafter, the Ld. CIT(A) has decide the appeal of the assessee by dismissing both the grounds of appeal. In view of the facts, we find Rakesh Kumar Goel vs. CIT, NFAC no infirmity in the order of Ld. CIT(A) who has provided proper and sufficient opportunities. The assessee has also participated in file the submissions, therefore, this grounds of appeal are dismissed.
6. Ground No.3 to 5 are with respect to the disallowance of Rs.1,65,00,000/- out of interest expenses held as incurred for non- business purposes. Before us, the Ld. SR. DR supports the orders of AO and CIT(A) on this account and requested for the confirmation of the same.
Heard the ld. DR and perused the materials available on record. From the perusal of the assessment order, it is seen that the AO observed that the assessee has diverted the funds for non- business purposes where the assessee had purchased properties for personal use besides giving interest free advances and making investment in shares totaling to Rs.15 crore and interest paid on such loans was claimed as expenses in P & L Account. The AO further observed that the assessee failed to provide a bifurcation of application of interest bearing loan funds for business and non- business purposes. Making hollow statements that the payment of personal expenses was made from capital account can’t stand on its legs without any proofs, which the assessee categorically failed to provide. The bank provided housing loans only to acquire the housing property and any of such loans otherwise than the acquisition of house property which it is not permitted in any case. Before Ld. CIT(A) also the assessee has reiterated the said Rakesh Kumar Goel vs. CIT, NFAC submissions and the Ld. CIT(A) after considering the submissions of the assessee in para 5.1 and 5..1.2 of its order has confirmed the disallowance by observing as under: “5.1 Grounds of Appeal No.1 to 3 adjudicated as under: 5.1.1 I have gone through the grounds of appeal No.1 to 3 filed by the appellant. The grounds pertain to addition made by the AO worth Rs.1,65,00,000/- on account of interest expenses not used for business purposes. The AO has made out the case that there is diversion of funds to the extent of Rs. 15,00,00,000/- for non-business purposes. The AO gave appellant the opportunity to prove that these funds have been used for the purposes of business. But despite several opportunities, the appellant failed to give any evidence in this regard. The AO pointed out that a similar modus operando has been followed by the appellant in A.Y. 2015-16 and A.Υ. 2016-17. The AO also provided appellant the opportunity to produce relevant copies of bank accounts, source of deposits, bank loans, unsecured loans from which such investment is made in non-business assets. The appellant did not provide any details before the Assessing Officer. Hence, the AO made proportionate disallowance of interest expenses worth Rs.1,65,00,000/- as diversion of funds used for non- business purposes. 5.1.2 Before me in the appellate proceedings, various details have been filed before me but still the appellant is unable to controvert the findings of the AO. Reliance has been made on certain case laws, which are clearly distinguishable from the facts of the case. The reliance has been placed by the appellant on the order of the learned CIT(A)-16, Delhi. I have gone through the order. Res judicata does not apply to the Income-tax proceedings. I have gone through the appellate order. Even in the decision para No.5, the contention of the AO has not been demolished in speaking. manner. Hence, I differ from the order of the Ld. CIT(A)-16, Delhi. The order of the AO is confirmed and the grounds of appeal No. 1 to 3 are dismissed.
8. As before us, none appeared on behalf of the assessee to controvert the findings of the AO and CIT(A) on the issue of disallowance of interest, therefore, under these circumstances, we find no reason to interfere in the order of Ld. CIT(A) which is hereby
Ground No.7 with respect to addition of Rs.3,92,06,665/- made by AO on account of suppression of profits by claiming higher expenses and disclosing lower profit rate. From the perusal of the assessment order, we find that the Assessing Officer has considered the goods manufactured vis-à-vis electricity charges, fuel charges paid and, accordingly, pointed out that there was suppression in production. The Assessing Officer has also prepared a table which is appearing at page 9 of the assessment order which has not been controverted by the assessee before the Ld. CIT(A). It is also observed by the Assessing Officer that there is Low gross profit declared by the assessee as compared immediately preceding assessment year and, thus, after considering the facts, the AO has workout the suppressed production of Rs 53,85,53,088/- and the G.P. rate 7.28% declared by the assessee was applied to work out the undisclosed profits of Rs. 3,92,06,665/-. In first appeal, in the submission made before Ld. CIT(A) the assessee contended that considering the production of December 2015 as the benchmark for making estimation of production is incorrect and the assessee had tried to establish that the production declared was proper, however, the Ld. CIT(A) had rejected the contention of the assessee by observing in para 5.2 of its order as under: “5.2.1 The AO has made addition of Rs.3,92,06,665/- on account of separation of profits. The AO made the addition after rejecting the books of accounts of the appellant u/s.145(3) of the Income Tax Act. The AO has Rakesh Kumar Goel vs. CIT, NFAC analyzed the manufacturing expenses of the appellant and found that in various months where production was low, the expenses are very high. The AO provided the table of the expenses on page 9 of the assessment order and made the addition after rejecting the books of the appellant u/s.145(3) of the Income Tax Act. 5.2.2 Now before me in the appellate proceedings, submission has been made that benchmark taken by the AO for December, 2015 production cannot be taken as benchmark for other months. No submission has been made on facts. Only reliance has been made on various case laws. These case laws point out that the AO can't make any estimate without any basis. Hence, these case laws are clearly distinguishable from the facts of the case as the AO has made the calculation on the basis of the various production expenses, as evident from page 9 of the assessment order. Hence, the order of the AO making addition of Rs.3,92,06,665/- is confirmed and ground of appeal
No.4 is dismissed.
10. From the perusal of the facts and the arguments of the Ld. Sr. DR and also considering the order of Ld. CIT(A), we find that the assessee has failed to controvert the findings given by the Assessing Officer and Ld. CIT(A) on account of suppressed of production and profit thereon, and, accordingly, we do find any reason to interfere in the order of lower authorities which is hereby upheld. Accordingly, ground of appeal No.7 of the assessee is dismissed.
In the result, the appeal of the assessee is dismissed. Order pronounced in the open court on 30.07.2025.