DHAMPUR POLYMERS PVT LTD,NEW DELHI vs. ITO WARD - 7(3), NEW DELHI

(A) This appeal by Assessee is filed against the order of Learned Commissioner of Income Tax (Appeals)-15, Delhi [Ld.

CIT(A)”, for short], dated 12.09.2019 for Assessment Year 2014-15.

Grounds taken in this appeal of Assessee are as under:

Dhampur Polymers P. Ltd 1. “The Ld. A.O. as well as Ld. CIT(A) have erred on facts as well as in law in making and sustaining the addition of Rs. 1,80,000/- in respect of loans received from his two Nephews few years ago and returned to his brother on request of Nephews who are residing abroad because their father residing in village needed money. The CIT(A)’s order is bad in law, it having failed to give the fact and arguments of the appellant.

(B) The first Ground of Appeal is regarding the addition of Rs. 1,80,000/- in respect of loan repayments to two related persons named Mr. Sunit and Mr. Punit each amounting to Rs.90,000/-.

This addition was made by the Assessing Officer (“AO”, for short) in assessment order passed u/s 143(3) of Income tax Act, as the Assessing Officer was not satisfied about the source and mode of aforesaid repayments made to Mr. Sunit and Mr. Punit; against loans taken by the assessee in earlier year. The Ld.CIT(A) vide

Dhampur Polymers P. Ltd impugned appellate order dated 12th May, 2019, confirmed the aforesaid addition totaling Rs. 1,80,000/-.

(B.1) At the time of hearing before us, the Ld. Counsel for the assessee submitted that the aforesaid repayments of Rs. 90,000/- each to Mr. Sunit and Mr. Punit; totaling Rs. 1,80,000/-; have been made out of receipts of the assessee from the regular course of business of manufacturing polythene bags etc. He further submitted that these repayments have been duly recorded in the regular books of accounts of the assessee. He further submitted that these amounts are also duly recorded in the respective ledger accounts of Mr. Sunit and Mr. Punit in the books of the assessee.

In view of the same, the Ld. Counsel for the assessee submitted the repayments of the aforesaid amounts of Rs. 90,000/- each to Mr. Sunit and Mr. Punit totaling Rs.1,80,000/- is fully explained.

(B.2) The Ld. Senior Departmental Representative (“Sr. DR”) for Revenue supported the orders of the Assessing Officer and the Ld.CIT(A)’s and relied the same.

Dhampur Polymers P. Ltd (B.2.1) We have perused the materials on record. We have heard both sides. The relevant facts are not in dispute . It is not in dispute that the aforesaid loan repayments totaling Rs. 1,80,000/- have been duly recorded in the books of accounts of the assessee; and further that these amounts are also reflected in the respective ledger accounts of the two persons Mr. Sunit and Mr. Punit. It is also not in dispute that the assessee was in regular business of manufacturing polythene bags etc. Further, it is not in dispute that there were regular receipts in the books of the assessee from the aforesaid business of manufacturing of polythene bags. In view of the foregoing, we are of the view, that the loan repayments of Rs.90,000/- each to Mr. Sunit and Mr. Punit totaling Rs. 1,80,000/- are fully explained in the books of accounts of the assessee. Ld.CIT(A) and the AO to have not brought any material to show that these repayments have been made by the assessee from unexplained sources outside the books of accounts of the assessee.

The addition made by the AO is without any basis and without sound reasoning; and the Ld.CIT(A) erred in confirming this addition totaling Rs. 1,80,000/-. In view of the foregoing, we direct the AO to Dhampur Polymers P. Ltd delete the aforesaid addition totaling Rs.1,80,000/-. Ground No. 1 of Appeal is accordingly allowed.

(C) Ground Nos. 2 & 3 of Appeal are regarding the addition of a total amount of Rs. 37,62,393/- in respect of Sundry Creditors; i.e. the persons from whom purchases were made in earlier years and the amounts were outstanding at the end of the year. The Assessing Officer made these additions on the ground that the field inquiries conducted by the AO by issuing notices u/s 133(6) of Income Tax Act did not yield satisfactory verification. Perusal of assessment order shows that the A.O confronted the assessee with this fact, vide order sheet dated 05/12/2016. Therefore, the AO took adverse view and made the aforesaid addition. Vide impugned appellate order dated 12th May, 2019, the Ld.CIT(A) confirmed the aforesaid addition of Rs. 37,62,393/-, on the ground that field inquires did not yield “result which can work as a savior for the Appellant.”

[Italicised words quoted from the order of the Ld.CIT(A)].

(C.1) At the time of hearing before us, the Ld. Counsel for the assessee submitted that this issue may be restored back to the file of the AO for fresh order in accordance with law. He further

Dhampur Polymers P. Ltd submitted that the assessee will extend full cooperation in verification of the aforesaid amount, to the satisfaction of the Assessing Officer.

(C.2) The Ld. Sr. DR supported the orders of the Assessing Officer and the Ld.CIT(A) and he relied on the same.

(C.2.1) On perusal of the assessment order dated 31/12/2016 u/s 143(3) of Income Tax Act, we find that the notices u/s 133(6) were dated 28/11/2016. It is further noticed that the assessee was confronted with the fact of unsatisfactory result of verification vide note sheet dated 05/12/2016. We observe that between 28/11/2016 and 05/12/2016 there were only six intervening days.

This period of merely six days, in our opinion, in the facts and circumstances of the present case before us, was inadequate for the concerned parties to sent their replies; and for the assessee to submit any explanation/reconciliation in case the inquiries did not result in satisfactory verification. Moreover, if we consider the normal time taken in delivery of mail by the Postal Department, then the aforesaid period of merely six days seems to be grossly

Dhampur Polymers P. Ltd insufficient. We are of the view, that the assessment order was passed in a hasty manner without providing reasonable opportunity to either the assessee or to the parties to whom notices u/s 133(6) of I.T Acts were issued. The Ld.CIT(A) erred in confirming the addition without noticing that the assessee and the concerned parties to whom notices were issued u/s 133(6) of I.T Act did not have adequate opportunity. Therefore, we set aside the impugned appellate order dated 12th May, 2019 of the Ld.CIT(A) on this issue and we restore the dispute regarding the aforesaid amount of Rs. 37,62,393/- to the file of the AO for fresh order in accordance with law after providing reasonable opportunity to the assessee and to all concerned. We also direct the assessee to extend cooperation to AO consistent with the assurance given by the Ld. Counsel for the assessee at the time of hearing before us; as mentioned by us in foregoing paragraph(C.1) of this order. Ground Numbers 2 and 3 of the Appeal are disposed of in accordance with the aforesaid directions. For statistical purposes, ground numbers 2 and 3 of appeal are treated as partly allowed.

Dhampur Polymers P. Ltd (D) In the result, this Appeal is partly allowed.

Order pronounced in open Court on 06th June, 2022.