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Income Tax Appellate Tribunal, DELHI “C” BENCH: NEW DELHI
Before: SHRI G.S.PANNU & SHRI KUL BHARAT
ORDER
PER KUL BHARAT, JM :
This appeal filed by the Revenue for the assessment year 2012-13 is directed against the order of Ld. CIT(A)-28, New Delhi dated 23.02.2017. The Revenue has raised following grounds of appeal:-
1. “Whether on the facts and circumstances of the case and in law, the Ld.CIT(A) has erred in deleting the addition of Rs. 44,83,73,000/- added as Unexplained Cash Credit u/s 68 of the Income Tax Act, 1961 as the assessee tailed to substantially explain the creditworthiness and genuineness of the transactions.
Whether on the facts and circumstances of the case and in law, the Ld. CIT(A) has erred in deleting the addition of Rs.7,91,155/- added as disallowance u/s 14A of the Income Tax Act,1961. 3. Whether on the facts and circumstances of the case and in law, the Ld.CIT(A) has erred in reducing the rate of expenses from 30% to 15% and thereby allowing relief to the extent of Rs.93,450/-. 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.”
2. Facts giving rise to the present appeal are that in this case, return declaring income of Rs.34,281/- was filed on 30.09.2012 for Assessment Year 2012-13. The case was selected for scrutiny assessment under CASS. The Assessing Officer (“AO”) issued notice u/s 143(2)/142(1) of the Income Tax Act, 1961 (“the Act”). The AO observed that despite various opportunities, the assessee did not file any supporting evidences therefore, he proceeded to frame the assessment u/s 144 of the Act. Thereby, the AO made addition of Rs.2,90,23,08,000/- in respect of short term provisions, trade receivable and loan & advances. Further, the Assessing Officer invoked the provision u/s 14A of the Act and computed the disallowance and made addition of Rs.7,91,155/-. The AO also made disallowance of expenses on adhoc basis related to salaries & allowances, filling fees, general expenses, legal & professional fees, printing & stationary, rent, staff welfare, freight & transportation, data processing, on the ground that the assessee did not produce supporting bills and vouchers therefore, he disallowed 30% of the expenditure on adhoc basis. Thus, the Assessing Officer assessed and computed income at Rs.2,90,33,20,340/- against the income declared as per return of income at Rs.34,281/-.
3. Aggrieved against this, the assessee preferred an appeal before the Ld.CIT(A) who after considering the submissions of the assessee, partly allowed the appeal. Thereby, he restricted the addition of Rs.93,450/- out 2 | P a g e
Rs.1,86,900/- and deleted rest of the additions namely addition made on account of unexplained cash credit of Rs.2,90,23,08,000/- and the disallowance made by invoking the provision of section 14A of the Act.
Aggrieved against the order of Ld.CIT(A), the Revenue is in appeal before this Tribunal against deletion of addition of Rs.44,83,73,000/- as cash credit in respect of Suryamani Financing Company Ltd., adhoc disallowance of expense and disallowance made u/s 14A of the Act.
Ground No.1 is against the deletion of addition of Rs.44,83,73,000/- added as unexplained cash credit u/s 68 of the Act as the assessee failed to substantially explain the creditworthiness and genuineness of the transactions.
Ld. Sr. DR vehemently argued that Ld.CIT(A) was not justified in deleting the addition made on account of short term provision of Rs. 44,83,73,000/-. He submitted that no supporting evidences were filed. He submitted that Ld.CIT(A) has recorded the fact wrongly by stating that copy of account of Suryamani Financing Company Limited to which an amount of Rs.44,83,73,000/- had been owed. The confirmation on their behalf also had been filed alongwith reply during the assessment proceedings. He submitted that merely filing of confirmation would not be sufficient to prove the correctness of the claim of the assessee. He submitted that ex-facie Ld.CIT(A) has mechanically allowed the claim of the assessee without making verification from the concerned party.
On the other hand, Ld. Counsel for the assessee opposed these submissions and supported the orders of Ld.CIT(A). He contended that the requisite details were supplied to the AO. He without bring any adverse material on record, made the impugned addition.
We have heard the rival submissions and perused the material available on record and gone through the orders of the authorities below. We find that Ld.CIT(A) has deleted the two additions i.e. Rs.44,83,41,000/- and Rs.32,000/- in respect of short term provision and other current liability respectively, by observing as under:-
4.2. “As far as the addition of Rs.44,83,41,090/- on account of short term provision is concerned, it is noted that during the assessment proceeding a specific question has been raised by the assessing officer with regard to the Sundry Creditors vide questionnaire dated 21.01.2015 at Sr. No. 10 and assessee was required to file confirmation thereof. The appellant in response to the same had duly filed a copy of account of Suryamani Financing company Limited (PAN AADCS5559E) to which an amount of Rs. 44,83,41,000/- had been owed. The confirmation on their behalf was filed along with reply during the assessment proceeding. In the circumstances it is not understood as to what more was required from the appellant to satisfy the AO regarding the genuineness of the transaction of credits as recorded in the balance sheet. It is also seen that no adverse evidence has been brought on record to doubt the submissions of the appellant with regard to the Sundry Creditors. Hence it is held that there is no merit for making addition of Rs.44,83,73,000/- on account of short term provision. 4.3. Further regarding the addition of Rs.32,000/ on account of other current liability. It is noted that during the course of the 4 | P a g e assessment proceeding complete detail of the same was furnished by the assessee, the liability in question is on account of audit fee and legal expenses payable. Considering above there is no merit for making addition of Rs. 32,000/- on account other current liability under section 68 of the Act. In result the addition of Rs.2,90,23,08,000/- made by the assessing officer under the head "Addition on account of unexplained cash credit under section 68" is deleted. The appellant will get necessary relief accordingly.”
From the above finding of Ld.CIT(A), it is evident that according though the copy of account of the concerned creditor and the confirmation was filed by the assessee, but the AO failed to make any enquiry. The Ld. CIT(A) accepted the impugned sum of credit as explained considering evidences filed by the assessee in the form of confirmation by the concerned party by merely noticing that the AO did not specify what more was required for him to be satisfied. In our considered opinion, the Ld.CIT(A) has erred in accepting the claim inasmuch as there is no positive finding as to how the ingredients of section 68 of the Act are satisfied. Section 68 of the Act is a rule of evidence and the onus is on the assessee to establish the source and nature of the credits in question. In the impugned order, the Ld.CIT(A) has accepted the claim without any verification exercise or opining about the quality of the evidences. In our considered opinion, it would meet the ends of justice, if the matter is sent back to the file of the AO for carrying out the necessary verification exercise and to thereafter decide the same afresh as per law. Needless to say the AO shall allow the assessee adequate opportunity of being heard and then
decide as per law. Thus, Ground No.1 raised by the Revenue is allowed for statistical purposes.
Ground No.2 is against the deletion of addition of Rs.7,91,155/- by invoking the provision of section 14A of the Act.
Ld. Sr. DR supported the order of AO.
On the contrary, Ld. Counsel for the assessee submitted that Ld.CIT(A) has given a finding on fact that could not be rebutted by the Revenue that no exempt income was earned during the year.
We have heard the rival submissions and perused the material available on record and gone through the orders of the authorities below. We find that Ld.CIT(A) has decided the issue in para 5.1 by observing as under:-
5.1. “I have carefully considered the fact of the case, finding of the assessing officer and the submission of the Ld A.R . There is no dispute that during the year under consideration no exempt income has been earned by the assessee. It is a settle issue after the decision of the jurisdictional High Court in the case of Cheminvest V CIT (ITA 749/2014) order dated 2.09.2015 that no disallowance under section 14A in a year in which no exempt income has earned or received by the assessee. Considering above the disallowance Rs.7,91,155/- made by the A.O under Section 14A of the Act is deleted.”
We do not see any infirmity in the above finding of Ld.CIT(A) as the Revenue has not disputed the fact that the assessee has not earned any exempt income during the year under consideration. Therefore, Ld.CIT(A)
Hon’ble Delhi High Court in the case of Cheminvest vs CIT in order dated 02.09.2015. This ground raised by the Revenue is thus, dismissed.
Ground No.3 is against the restricting the adhoc disallowance @ 15 % as against 30% made by the Assessing Officer.
Ld. Sr. DR relied upon the assessment order.
On the contrary, Ld. Counsel for the assessee supported the order of Ld.CIT(A). He submitted that the disallowance is purely on adhoc basis and cannot be sustained in view of the judicial pronouncements in this regard.
We have heard the rival submissions and perused the material available on record and gone through the orders of the authorities below. We find that Ld.CIT(A) has decided the issue by observing as under:-
6.2. “I have carefully considered the fact of the case, finding of the assessing officer and the submission of the Ld A.R. In this case the A.O has made disallowance of Rs.l,86,900/- being 30% of the expenses of Rs.6,23,000/- claimed on account of Salary, Freight, rent, legal and professional fee, data processing and other misc expenses. It is noted that the major expenses is on account of salary fright transportation and legal and professional fee and other expenses are routine office expenditure. Considering above and taking into account the nature of expenditure claimed, the disallowance made by the A.O is restricted 15% of the total expenditure claimed. In result the disallowance of Rs.1,86,900/ made by the A.O is restricted to Rs. 93,450/. The appellant will get relief accordingly.”
There is no dispute with regard to the fact that the disallowances have been made on adhoc basis. The AO has not pointed out any specific instance of non-providing of bills and vouchers in support of his claim. Therefore, we do not see any reason to interfere in the finding of Ld.CIT(A). Thus, Ground No.3 raised by the Revenue is rejected.
In the result, the appeal of the Revenue is partly allowed for statistical purposes. Order pronounced in the open Court on 29th April, 2022.