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Facts
The case involves cross-appeals for AY 2014-15. The assessee challenged the CIT(A)'s confirmation of 20% disallowance on furniture purchases and disallowance of depreciation on vehicles due to lack of proper bills. The Revenue challenged the CIT(A)'s deletion of an addition of Rs. 7,83,00,000/-, which the AO had treated as undisclosed capital introduced by a member, Sh. Avtar Singh Kochar, arguing that its source was unexplained and the individual assessment order was not binding.
Held
The Tribunal dismissed the assessee's appeals, upholding the CIT(A)'s decisions regarding furniture and vehicle depreciation, finding no reason to interfere as proper bills were not produced. The Tribunal also dismissed the Revenue's appeal, sustaining the CIT(A)'s deletion of the Rs. 7,83,00,000/- addition, on the basis that the source of capital had been accepted in the individual assessment of Sh. Avtar Singh Kochar, and such accepted deposits could not be treated as undisclosed income of the AOP.
Key Issues
1. Whether the disallowance of expenditure on furniture and depreciation on vehicles was justified due to the assessee's failure to produce proper bills. 2. Whether the deletion of an addition for capital introduced by a member was proper when the source of funds had been accepted in the member's individual assessment.
Sections Cited
143(3), 147, 148, 263
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Income Tax Appellate Tribunal, DELHI BENCH “A”NEW DELHI
Before: SHRI CHALLA NAGENDRA PRASAD & SHRI S RIFAUR RAHMAN
आदेश /O R D E R
PER C.N. PRASAD, J.M.
These appeals are filed by the Assessee as well as Revenue against the order of the Ld. CIT(Appeals)-14, New Delhi dated 16.12.2019 for the AY 2014-15. In spite of issue of several notices, none appeared on behalf of the assessee nor any adjournment was sought. Record before us shows that the assessee sought number of adjournments till September, 2024 and thereafter several opportunity were given to the assessee but in none of the occasion where the appeal was proceeded for several times the assessee appeared nor any adjournment was sought. Therefore, we dispose of these appeals by hearing the Ld. DR. The assessee in its appeal raised the following grounds:
1. On the facts and circumstances of the case, the order passed by the learned CIT(A) is bad both in the eye of law and on facts.
2. On the facts and circumstances of the case, the learned CIT(A) has erred both on facts and in law in restricting the addition of an amount of Rs.9,41,693/- being 20% of the furniture purchased by the assessee along with depreciation (although Ld AO made addition of 40% of the furniture purchased by the assessee along with depreciation j.treating the same as bogus purchase based on surmise and conjectures and contrary to the facts and circumstances of the case.
On the facts and circumstances of the case, the learned CIT(A) has erred both on facts and in law in confirming the addition of 20% without giving any basis as to how CIT(A) has arrived at the figure of 20% 4. On the facts and circumstances of the case, the learned CIT(A) has erred both on facts and in law in enhancing the addition on account of depreciation on the vehicles purchased by the assessee though addition made by Ld AO was Rs.1,71,350/- ignoring the audited financial statements of the assessee.
On the facts and circumstances of the case, the learned CIT(A) has grossly erred both on facts and in law in 2 confirming the above addition by indulging in surmises without bringing on any direct evidence against the assessee, only on the basis of presumption and assumption.
6. On the facts and circumstances of the case, the learned CIT(A) has erred both on facts and in law in confirming the addition of Rs.9,41,693/- and enhancing the depreciation to be disallowed on vehicles to Rs.2,05,322/- treating the same as bogus purchase without there being any basis for the same.
7. That the appellant craves leave to add, amend or alter any of the grounds of appeal.
We have heard the Ld. DR on merits. Ground nos. 2 & 3 of grounds of appeal relates to addition made in respect of furniture purchased by the assessee. The AO while completing the assessment noticed that the assessee purchased assets worth Rs.43.14 lakhs and claimed depreciation of Rs.3,94,468/- the assessee was required to produce the bills, however, the assessee has submitted only the debit notes and the assessee failed to produce even a single bill. Therefore, the AO disallowed 40% of the purchases of the furniture and also disallowed the corresponding depreciation claimed by the assessee. On appeal the Ld. CIT(A) considering the submissions of the assessee and also since the assessee has not produced proper bills in support of the purchase of furniture used to operate 62 liquor vends during the year under consideration restricted the disallowance to 20% as against 40% made by the AO. We see no valid reason to interfere with the findings of the Ld. CIT(A). Grounds 2 & 3 are dismissed.
3. Ground no.4 is in respect of disallowance of depreciation on vehicles. On perusal of the assessment order shows that the assessee purchased vehicles worth Rs.17,11,315/- during the assessment year under consideration and had claimed depreciation at Rs.2,05,322/-. The assessee was required to furnish bills in support of these purchases. However, the assessee has submitted only the debit note and that to the AO noted that the debit note shows that the vehicle was purchased on 16.7.2013 was in fact manufactured in April, 2016, therefore, the AO concluded that the assessee has manipulated these debit notes and the purchases are not genuine and they are bogus. On appeal, the Ld. CIT(A) held that the depreciation on such vehicle claimed by the assessee is not allowable and quantified depreciation at Rs.2,05,322/- as was claimed by the assessee but the AO disallowed only Rs.1,71,350/-.
We see no good reason to interfere with the findings of the Ld.CIT(A). Ground no.4 & 5 are dismissed. Ground no.6 is interconnected to other grounds and therefore the same is also dismissed.
Coming to Revenue’s appeal. The grounds are as under: 4
(1) The Ld. CIT(A) has erred in deleting the addition of Rs.7,83,00,000/- made by the AO without passing speaking order and just mentioning that in the case of the individual who has introduced the sum of Rs.7.83 crores, the AO of the said individual was duly satisfied and in view of these facts and circumstances the very basis of addition has gone. (2) The Ld. C1T(A) has erred in deleting the addition of Rs.7,83,00,000/- made by the AO just relying on sketchy order of some other AO who had passed the said order accepting the capital in the hands of the member as explained without considering and examining the facts properly and the said order of the stated AO is neither final nor acceptable since action u/s 263 in respect of the said order has been recommended separately. Moreover, the stated order passed by the said AO was not binding on the Ld CIT(A), more so given the facts that the said order was passed without examination of facts on record. (3) The Ld. CTT(A) has erred in deleting the addition of Rs.7,83.00,000/- made by the AO without examination of the facts at his own and without considering the facts/reasons stated by the AO in the order under appeal. (4) The appellant craves leave to add. alter or amend any/all of the grounds of appeal before or during the course of the hearing of the appeal.
5. The AO while completing the assessment made addition of Rs.7,83,00,000/- which represents the capital introduced by Shri Avtar Singh Kochar into the account of AOP the assessee. The AO observed that Shri Avtar Singh Kochar introduced Rs.7,83,00,000/- as his share of capita into AOP though the Income tax return for the AY 2014-15 shows an income of Rs.24,76,945/-. Further the AO on 5 examination of the bank statement of Sh. Avtar Singh Kochar he noticed that Sh. Avtar Singh Kochar has taken loan of Rs.4.90 crores from Chawla Mandlam Finance, and there were huge cash deposits into bank account from which the assessee transferred to AOP account. The assessee was required to furnish explanation submitting that Sh. Avtar Singh Kochar in the FY 2010-11 AY 2011-12 disclose an income of Rs.20 crores and the assessment was also completed accordingly and the cash deposits in the bank account were from the same income as was disclosed by Sh. Avtar Singh Kochar. However, the AO concluded that Sh. Avtar Singh Kochar did not have much cash with him at the beginning of the AY 2014-15 either in the hand or in the bank. The loans and advances given out by him are also constant at Rs.2,50,000/- and therefore the only logical conclusion that can be drawn is that this cash that he has given out to the assessee AOP through his bank account never belong to him. With these observations the AO treated the capital introduced by Sh. Avtar Singh Kochar capita of Rs.7,83,00,000/- introduced by Sh. Avtar Singh Kochar into assessee AOP as undisclosed income of the assessee. On appeal the Ld. CIT(A) deleted the addition based on the findings of the AO while completing the assessment in the case of Sh. Avtar Singh Kochar, wherein the AO accepted the sources explained by Sh. Avtar Singh 6 Kochar in respect of cash deposits made by him into his bank account observing as under:
“5.1 Ground No. 1 & 2 relate to the same addition of Rs.7,83,00,000/- hence they are taken together for the sake of convenience. i have carefully considered the facts of the case, material on record as well as the submission of the appellant. 5.2 Brief facts of the case: The appellant AOP derives income from business & profession. It is engaged in the business of retail & wholesale liquor contractor in the state of Haryana. The return for A.Y. 2014-15 was filed on 28.11.2014. The case was selected for limited scrutiny through CASS. 5.2.1 In this case, one of the members of the appellant's AOP is Sh. Avtar Singh Kochar. During the year under consideration, he has introduced Rs.7,83,00,000/- as his share of capital. AO asked the AR to explain the source of cash that was deposited in the account of Avtar Singh Kochar before it was introduced by way of capital in the appellant's account. The AO had however noticed during the course of assessment proceeding that Sh. Kochar had taken a loan of Rs. 4.9 Crores from Cholamandalam Finance, As the AO was not satisfied with the explanation and documents submitted in order to establish creditworthiness of Shri Kochar, he added bad entire capital introduced by Sh, Kochar. Thus, addition of Rs, 7,83 Crore was added as unexplr income. 5.2.2 During the course of appeal, the AR filed his submissions wherein he explained that th had ignored the documents filed by him at the time of assessment proceeding to establish identity, genuineness and creditworthiness of the said member of AOP. He also submitted that it was an undisputed fact that Sh. Avtar Singh Kochar had taken a loan of Rs.4.90 Crore Cholamandalam Finance while another Rs. 20 Crores was surrendered by him in a se conducted by the income Tax Department, and was assessed as such vide the 7 assessment order passed by his AO. In this regard, the appellant has also relied upon the Case Law of Jurisdict1 High Court in the case of CIT vs Divine Leasing and Finance Ltd. (299 ITR 268) and CIT vs Dhooti Pearls and Investment Ltd. 64taxmann.com 329 (Delhi). Further fie has contended the the basis of AO's report, the assessing officer of Sh, Avtar Singh Kochar reopened the assessment u/s 148 on 20.03.2017. Further while passing the assessment order, the matter of investment of Rs.7.83 crores was intensively investigated and discussed by the said AO, who finally accepted the investment made by Sh. Kochar In the case of appellant AOP. 5.2.3 Para 10 of the assessment order passed in the case of Sh. Kochar u/s 143(3)/147 of the Act, 1961 is reproduced below: 10. "the assesse has explain in his reply that the entire amount of Rs.20 Crores which determined on the basis of seized documents including seized cash of Rs.1,21,00,000/-, wet motto offered for taxation by the assesse during search assessment for year 2011-12 and the same was accepted by the department. The assessee has submitted Sanction letter (documentary evidence from Cholamandalam Investment & Finance Company wherein loan of Rs. 5 crores was sanctioned and an amount of Rs.4,90,47,019/- was disbursed on 08.06.2013 and the same amount has transferred to ADS Associated Group. This has been verified from bank statement. The assessee has submitted bank statement from date of search to 07.05.2015 duly depicting the cash deposit entries in the bank account. Similarly, the assessee has submitted chaiians of tax deposit in cash. It is pert to mention here that the assessee has made cash deposit of Rs.4,52,00,000/- lakh only during the under consideration while the surrendered amount was 20 chores. Therefore, taking consideration the natural justice, the income which has already been assessed once and the assessee has paid due taxes on the same income, cannot be taxed twice.
On the basis of the AO's order in the case of Shri Kochar, it is clear that in the case of individual who has introduced the sum of Rs.7,83,00;000/- crores , the AO of the said individual was duly satisfied and found it to be explained. In view of the above facts and circumstances, the very basis of addition has gone. Therefore, the addition of Rs.7,83,00,000/- is found to be unjustified and hence deleted Grounds No. 1 & 2, are therefore allowed. 5.3 Ground No. 3 relates to addition of Rs.18,83,387/- being 40% of furniture purchased during the year under consideration along with corresponding depreciation. In para 3 of the assessment order AO has discussed the details of the above addition. The appellant has purchased assets worth Rs.43,14,000/- during the year under consideration and claimed depreciation of Rs.3,94,468/-. The AO asked the AR to produce the bills for the said furniture and fixture, but the AR submitted only debit notes of the purchases. In view of the fact that no bills could be produced and the payment was made in cash, and that it was the first year of business of the AOP, the AO concluded that some furniture would have been purchased. However, an ad-hoc disallowance of 40% of the purchases along with corresponding depreciation totaling Rs.18,83,387/- was made at the time of assessment.”
On careful reading of the Ld. CIT(A) order, we observed that in the assessment of Sh. Avtar Singh Kochar the AO accepted the sources for the deposits made by Sh. Avtar Singh Kochar in his bank account and therefore such cash deposits which were accepted in the hands of Sh. Avtar Singh Kochar as genuine cannot be treated as undisclosed income of the assessee the AOP. Thus, we sustain the order of the Ld. CIT(A) and reject the grounds raised by the Revenue.
In the result, appeal of the assessee is dismissed and appeal of the Revenue is also dismissed.
Order pronounced in the open court on 25/06/2025