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Income Tax Appellate Tribunal, DELHI BENCH: ‘E’ NEW DELHI
Before: SHRI N. K. BILLAIYA & SHRI YOGESH KUMAR U.S.
This appeal is filed by the Revenue for assessment year 2013-14 against the order of the ld. Commissioner of Income Tax (Appeals)–9, New Delhi, [hereinafter referred to CIT (Appeals)], dated 15.11.2018.
Shri Mohsin Ali Vakil, New Delhi.
The Revenue has raised the following substantive grounds of appeal :-
“1. On the facts and circumstances of the case the Ld. CIT (A) erred in deleting the loss from share market and commodity market amounting to Rs.4,84,06,022/- without appreciating the detailed reasons given by the AO and without appreciating that the above loss is contingent in nature as the assessee has not admitted its liability.
2. On the facts and circumstances of the case the Ld. CIT (A) erred in deleting the addition of Rs.1,17,18,396/- made u/s. 41(1) on account of cessation of liability from three creditors without appreciating the detailed reasons given by the AO and without appreciating that the assessee failed to furnish their confirmations or address and the assess failed to produce the bools of accounts.
3. On the facts and circumstances of the case the Ld. CIT (A) erred in deleting the addition of Rs.3,30,47,364/- made on account of receipt of payments for rendering services (as evident from the Service Tax Return) by holding that the above receipts are advances in nature without appreciating that the assessee failed to produce books of account.
On the facts and circumstances of the case the order of the Ld. CIT (A) is perverse.”
During the year under consideration, the assessee was engaged in the business of land/site development and sale of land, construction and sale of commercial and residential property. The assessee was also engaged in the Shri Mohsin Ali Vakil, New Delhi.
share market commodity market transactions, the assessee has also declared salary income from house property and income from other sources. Return of income declaring total income of Rs. 3,04,94,470/- was filed, the return was processed u/s 143(1) of the Act, notices and questionnaires were issued the representative of the assessee has duly participated in the assessment proceedings.
4. The assessment order came to be passed on 29/01/2016 by making an addition of Rs. 4,84,06,022/- by disallowing loss of Rs. 4,48,24,908/- on account of derivate trading and religare and loss of Rs. 35,81,120/- on account of currency derivative trading. Further, made addition of Rs. 1,17,18,396/- by treating three creditors as profit chargeable to the tax by invoking provision of Section 40(1) of the Act and also made addition of Rs. 3,30,47,364/- by treating as revenue of the assessee.
As Against the assessment order, the assessee has preferred the Appeal before CIT(A). The Ld.CIT(A) partly allowed the Appeal by deleting the loss from share market and commodity market amounting to Rs. 4,84,06,022/-, deleted the addition of Rs. 1,17,18,396/- made u/s 41(1) of the Act on account of cessation of liability from three creditors. Further also deleted an addition of Rs. 3,30,47,364/- made on account of receipt of payments for rendering services.
Aggrieved by the order dated 15/11/2018, the Department has filed the present Appeal on the grounds mentioned above.
Ground No. 1 The Ground No. 1 of the Revenue is in respect of deleting the loss from the share market and commodity market amounting to Rs. 4,84,06,022/- which Shri Mohsin Ali Vakil, New Delhi.
was made by the A.O ignoring the fact that the said loss is contingent in nature as the assessee has not admitted its liability. The Ld. DR vehemently argued and relied on the order of the A.O.
Per contra, the Ld. Counsel for the assessee has relied on the order of the Ld.CIT(A) and submitted that the findings and conclusion of the Ld.CIT(A) requires no interference by this Tribunal.
We have heard the parties, perused the material on record and gave our thoughtful consideration. The assessee has claimed the loss of Rs. 4,84,06,022/- on the reason that the assessee has incurred said loss on account of unauthorized trading carried out in recognized exchanges. The Ld.CIT(A) deleted the addition on the ground that the said loss is not a contingent loss and more so the assessee claim has already rejected by the Tribunal and the Appellate Tribunal as per the admission of the assessee.
On perusal of the records it is found that the assessee herein has suffered an arbitration award dated 06/05/2015, which has been challenged by the assessee before the City Civil Court, Bangalore, in AS No. 133/2015 which has been transferred to the Commercial Court Bengaluru and renumbered as COM. AS 133/2015. The dispute between the assessee and Religare Securities Ltd. are still pending for adjudication before the Court of Law. Therefore, in the interest of justice we inclined to remit the issue to the file of A.O to decide the same on the basis of the final outcome of the pending dispute before the Commercial Court at Bengaluru. Accordingly, the Ground No. 1 of the Revenue is allowed for statistical purpose.
Shri Mohsin Ali Vakil, New Delhi.
Ground No. 2 of the Revenue is in respect of deleting the addition of Rs. 1,17,18,396/- made u/s 41(1) of the Act on account of cessation of liability from three creditors. The ld. A.O by invoking the provisions of Section 41(1) made addition in respect of existing liabilities with regard to three creditors/deposits aggregating to Rs. 1,17,18,396/-. On the ground that creditors were lying static for more than three years and that resulted in cessation of liability. It is admitted fact that the said amount has been by the assessee as the creditor in the books of accounts and also reflected in the balance sheet. The balance sheet has been signed by the statutory auditor and also by the assessee which is nothing but acknowledgment of the debt. Being so invocation of Section 41(1) of the Act is err nous by the Ld. A.O. Thus, we do not find any infirmity in the order of Ld.CIT(A) in deleting the addition made by the A.O u/s 41(1) of the Act. Accordingly, the Ground No. 2 of the assessee is allowed.
Ground No. 3 is in respect of deleting the addition of Rs. 3,30,47,364/- made on account of receipt of payment of rendering service. The said amount of Rs. 3,30,47,364/- is appearing in the service tax return filed by the assessee, but not reflected in the P & L Account. The assessee has not produced the books of account and reconciled the said figure with the P & L Account figure of sales. However, the Ld.CIT(A) deleted the addition observing that the assessee has reconciled the same in following manners:-
“7.2. I have carefully considered the facts of the case and submissions of the appellant. The undisputed fact emerging from the impugned order as well as submission of the appellant is that the appellant has filed the Service Tax Return declaring taxable services of Rs. 33,047,364/- based on the recognition of taxable services as Shri Mohsin Ali Vakil, New Delhi. laid down under the Service Tax Act. The appellant has duly filed a reconciliation of receipts as per the Service Tax return and recognition of those receipts in his books of accounts. From the stated reconciliation filed by the appellant it is evident that the Maintenance Repair and Other Taxable Services aggregating to Rs. 1,28,16,229/- is duly recognized in the books of account of the appellant. Out of the alleged amount an amount of Rs. 62,10,443/- is recognized as income in the Profit and Loss account and the balance amount of Rs. 61,73,694/- is recognized as advance from customers. Further, the appellant had work contract receipts of Rs. 2,02,31,135/- as per the Service Tax return. However, as against the receipts of Rs. 2,02,31,135/- the appellant had recognized revenue of Rs. 16,42,51,884/- and explained that the receipts are recognized as advances from customers and revenue is recognized in the books of account as per Accounting Standard on percentage of completion of projects.”
It is specific case of the Revenue is that the assesses has failed to produced books of accounts before the authorities. There is nothing comes out of the order of the Ld. CIT(A) regarding production of books of account even before the CIT(A). Therefore, in our opinion, it is an appropriate to remit the issue to the file of A.O with a direction to produce all the materials whatever produced before the CIT(A) including the books of accounts of the assessee in respect of issue in hand. Accordingly, the issue in question is remitted to the file of the A.O for Denovo consideration. Accordingly, we allow Ground No. 3 for statistical purpose.
Shri Mohsin Ali Vakil, New Delhi.
In result, the Appeal of the Revenue is partly allowed for statistical purpose.
Order pronounced in the open court on : 25/08/2022.