ITO, WARD- 16(4), NEW DELHI vs. METAL TECH MOTORS (PVT.) LTD., NEW DELHI

This appeal filed by the Revenue is directed against the order dated 09.07.2018 passed by the Commissioner of Income Tax (Appeals)-33, New Delhi relating to Assessment Year 2012-13.

Brief facts of the case as culled out from the material on record are as under :-

Assessee is a company stated to be engaged in the business of Automobile Dealership and service centers and also authorized

During the course of assessment proceedings, AO noticed that as per the return of income, assessee had claimed TDS of 3 Rs.4,59,856/- whereas as per 26AS the amount of TDS was Rs.4,65,256/- resulting to a difference of Rs.5400/-. The assessee was asked to reconcile the difference and submit a reconciliation statement. AO noted that assessee did not reconcile the difference but only submitted a copy of form 26AS. AO noted that assessee was generally getting income from service charges on which TDS was deducted @2%. He thereafter applying the applicable rate of TDS to be 2% worked out the income to be Rs.2,70,000/- in respect of the difference of TDS of Rs.5,400/-. He thus treated the sum of Rs.2,70,000/- as being not accounted by the assessee as income and made its addition.

Aggrieved by the order of AO, assessee carried the matter before CIT(A). CIT(A) after considering the submissions of the assessee noted that the entire turnover cannot be considered income of the assessee but the only income embedded in the turnover can be taxed. In the absence of necessary details, CIT(A) considered the gross profit @ 10% on Rs.2,70,000/- and accordingly granted relief to the extent of Rs.27,000/- and upheld the addition of balance Rs.2,43,000/-. Aggrieved by the order of CIT(A), Revenue is now before us.

Before us, Learned DR supported the order of AO.

On the other hand, Learned AR reiterated the submissions before the lower authorities and supported the order of CIT(A).

During the course of assessment proceedings, AO notice that assessee debited various expenses in the Profit and Loss account on account of Sales Promotions, business development/promotion expenses, staff welfare expenses etc. On verification of the bills and vouchers, he was of the view that there was a probability that the assessee has debited some personal expenses and the personal elements cannot be ruled out. He accordingly considered 10% of the total expenses aggregating to Rs.49,21,788/- to be not allowable on account of personal use and accordingly made its additions.

Before us, Learned DR supported the order of AO.

On the other hand, Learned AR supported the order of CIT(A).

We have heard the rival submissions and perused the material available on record. The issue in the present ground is with respect to the disallowance of 10% of expenditure by holding it to be personal in nature. We find that the disallowance has been made by AO at 10% on ad-hoc basis by holding the expenditure to be personal in nature. We find that CIT(A) while deleting the addition has noted that AO has not placed any material on record to support its contention about the expenditure being personal in nature. Considering the totality of the facts and in the absence of any proof of expenditure to be personal in nature and in the absence of any fallacy being pointed

Ground No.3 is with respect to treating the interest on FDR as income from business instead of income from other sources.

During the course of assessment proceedings, AO noticed that assessee received a sum of Rs.3,23,815/- as interest on FDR which was reflected under the head “Income from Business or Profession”. AO was of the view that interest income was chargeable under the head “Income from Other Source”. He accordingly considered it to be an income from other sources.

Aggrieved by the order of AO, assessee carried the matter before CIT(A). Before CIT(A), it was inter alia submitted that the interest income earned from the FDR was from the FDRs which had been taken by the assessee for providing the bank guarantee, to avail of bank limit for the purpose of business. After considering the submissions of the assessee, CIT(A) noted that AO has not placed any material on record to demonstrate that the FDRs taken by the assessee was not for the purpose of gurarantee and for the purpose of business. He therefore, held the change of head made by AO to be not sustainable and accordingly allowed the ground of assessee. Aggrieved by the order of CIT(A), Revenue is now before us.

Learned AR on the other hand supported the order of lower authorities.

We have heard the rival submissions and perused the material available on record. We find that before CIT(A) it was inter alia submitted that the interest was earned from the fixed deposits which assessee was required to take for obtaining bank guarantees for the purpose of working capital and for the purpose of business. Before us, Revenue has not placed on record any material to controvert the findings of CIT(A). We therefore find no reason to interfere with the order of CIT(A) and thus the ground of Revenue is dismissed.

Ground No.4 & 5 are interconnected and considered together and is with respect to the deletion of addition made u/s 68 of the Act.

During the course of assessment proceedings, AO noticed that assessee had issued 2,39,100 equity shares of Rs.10/- each at Share Premium of Rs.40/- per share and had thus collected Rs.95,64,000/- on account of share premium. AO noted that assessee was asked to furnish complete details of the applicants who applied for the shares and justify the receipt of premium. AO noted that assessee had only furnished the list of applicants who

AO also noted that assessee had also received unsecured loans of Rs.58,01,000/-. AO noted that assessee did not furnish the complete postal address of the lender to prove the identity and nor had produced the copy of their ITRs and bank accounts. He accordingly treated the sum of Rs.58,01,000/- to be income from undisclosed sources and made its addition u/s 68 of the Act.

Aggrieved by the order of AO, assessee carried the matter before CIT(A). CIT(A) deleted the addition made by AO. While deleting the addition with respect to Rs.58,01,000/- being the loan, CIT(A) after considering the submissions of the assessee, remand the report received from the AO and the assessee’s reply to the remand report noted that out of the addition of Rs.58,01,000/-, Rs.27,69,000/- was old loan and only fresh loan of Rs.30,32,000/- was received during the year from the Directors of the Company and their family members. He has further noted

With respect to the addition on account of share application money, CIT(A) noted that assessee had filed additional evidences in the form of Balance sheet, copy of ledger account, confirmation of the share applicants and which was also forwarded to AO for his comments but no adverse comments have been made by AO. He has further noted that the shares were allotted to the persons against the share applicant money pending allotment received in earlier financial years. He has further given a findings that newly inserted provisions of 56(2)(viib) of the Act which is inserted by Finance Act, 2012 w.e.f 01.04.2013 was not applicable for the year under consideration. He accordingly deleted the addition of Rs.95,64,000/-.

Aggrieved by the order of CIT(A), Revenue is now in appeal before us.

Before us, Learned DR supported the order of AO.

Learned AR on the other hand reiterated the submissions made before the CIT(A) and supported his order.

We have heard the rival submissions and perused the material available on record. The issue in the present appeal is with respect to the addition made by AO on account of share premium and loans but deleted by CIT(A). We find that CIT(A) after considering the additional evidences submitted by assessee, the comments of the AO on the additional evidences and with respect to share premium has given a finding that share application money was not received in the year under consideration and but was received in the earlier financial year but only the allotment was done in the year under consideration. He has further given a finding that all the share allottees have been identified and creditworthiness has been proved.

With respect to the addition on account of loan, we find that CIT(A) after considering the material on record given a finding that out of the total addition of Rs.58,01,000/-, Rs.30,32,000/- was new loan received by the assessee, the loan was received from the Directors who are tax payer, their identities have been proved as they have given their confirmation along with the postal address and PAN No. Before us, no fallacy in the findings of 11 CIT(A) has been pointed out by Revenue. We therefore find no reason to interfere with the order of CIT(A) and thus the grounds of Revenue are dismissed.

In the result, appeal of the Revenue is dismissed.