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Facts
The Revenue appealed against the deletion of disallowance of expenditure amounting to Rs. 3,32,86,216/- made by the Assessing Officer (AO) on the grounds that the creditors were not genuine. The AO had issued notices under Section 133(6) to the creditors, who confirmed the transactions and offered the income to tax.
Held
The Tribunal held that the AO had not pointed out any inconsistency in the bills or genuineness of services, and the creditors had offered receipts to tax. The AO's suspicion was not supported by material evidence. Therefore, the disallowance made by the AO was not justified.
Key Issues
Whether the disallowance of expenditure under Section 37(1) is justified when creditors confirmed transactions and offered income to tax, and the AO lacked material evidence to prove otherwise.
Sections Cited
147, 37(1), 133(6), 44AD
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, DELHI BENCH “A”, DELHI
Before: SHRI VIKAS AWASTHY&
ORDER PER VIKAS AWASTHY, JM: These three appeals by the Revenue for assessment years 2014-15, 2015-16 & 2016-17, respectively emanates from same set of facts, therefore, these appeals are taken up together for hearing and are decided by this composite order.
The appeals of Revenue for AY 2014-15 and 2015-16 are time barred by 5 days. The Revenue has filed separate applications seeking condonation of delay in filing of appeals. After perusing the applications for condonation of delay, I am satisfied that delay in filing of present appeals is un-intentional and was for the 4736 & 4742/Del/2024 (AYs 2014-15 to 2016-17) reasons stated in the applications which appear to be bonafide. Hence, delay of 5 days in filing of appeal for AY 2014-15 and 2015-16 is condoned and appeals are admitted for hearing on merits.
For the sake of convenience the facts are narrated from appeal of the Revenue for AY 2014-15.
ITA No 4743/Del/2024 (AY 2014-15)
The Revenue in appeal has assailed the order of CIT(A) on the following ground:-
1. “1. Whether ld. CIT(A) has erred in holding that no specific case has been made for either addition on account of bogus credits or disallowance u/s. 37(1) of the Act, whereas sufficient enquiries and investigation has been made which establish that creditors were not genuine and worked hand in glove with the assessee to deliberately appreciate the expenses.”
5. The solitary issue raised by the Revenue in appeal is against deleting the disallowance of expenditure u/s. 37(1) of the Income Tax Act, 1961(hereinafter referred to as ‘the Act’). The Assessing Officer vide order dated 30.03.2024 passed u/s. 147 of the Act disallowed Rs.3,32,86,216/- u/s. 37 of the Act holding the expenditure to be non genuine. During assessment proceedings, the AO in order to verify the veracity of expenditure issued notice u/s. 133(6) of the Act to the following creditors:-
S.No Name of the Creditor Amount outstanding at the end of the year (in Rs.) 1 AJH Traders 59,08,400/- 2 RLJH Enterprises 96,87,192/- 3 SGH Enterprises 59,11,403/- 4 SJH Traders 58,68,548/- 5 SJHUF International 59,10,673/- 4736 & 4742/Del/2024 (AYs 2014-15 to 2016-17) 6 Sheena Traders 95,63,646/- Total 3,32,86,216/- All the aforesaid creditors replied to notice issued by AO and confirmed the transaction. However, the AO suspected genuineness of the transaction, hence, rejected assessee’s contentions and made addition of the aforesaid amount. The assessee carried the issue in appeal before the CITA). The CIT(A) after considering submissions of the assessee and reconciliation submitted in respect of each of the creditors reversed findings of the AO. The CIT(A) held that as regards genuineness of services rendered by the aforesaid parties, the AO has not pointed any inconsistency in the bills raised or question of the genuineness of nature of services provided by the parties. All the parties have accepted the transaction and have also offered to tax in their respective returns amount received from the assessee. The assessee has also deducted TDS on the payments. Against the aforesaid findings of the CIT(A), the Revenue is in appeal before the Tribunal.
Shri Ashish Tripathi, vehemently defended the assessment order and prayed for reversing findings of the CIT(A) on this issue. The ld. DR submits that the assessee has failed to prove genuineness of the expenditure, hence, the AO made addition of the aforesaid amounts holding the creditors as bogus.
We have heard the submissions made by ld. DR and have examined the orders of authorities below. The Assessing Officer during assessment proceedings had issued notices to all the six creditors u/s. 133(6) of the Act. All the aforesaid six creditors replied to said notice, the assessee furnished reconciliation statements showing outstanding at the end of the year as per the show cause notice issued by AO viz a viz the amount actually shown outstanding in the books. It is an admitted position that all the six parties have shown income received from 4736 & 4742/Del/2024 (AYs 2014-15 to 2016-17) the assessee in their respective return of income filed u/s. 44AD of the Act. On field enquiries by the Inspector though the premises of these parties were found to be in existence but there was no sign board on the premises to establish commercial activity. This fact raised suspicion in the mind of AO regarding the genuineness of the transaction. It is also an undisputed fact that the assessee had deducted tax at source on the payments made to be aforesaid parties. The assessee had also furnished copies of bills invoices raised by these parties. Apart from suspicion there was no material before the AO to reject assessee’s contention.
The Coordinate Bench of the Tribunal in an appeal by the Department in case of the assessee in for AY 2018-19 wherein one of us (i.e. Judicial Member) had occasion to deal with identical issue, after examining the facts of the case held as under:- “5. During assessment proceedings the AO had issued notice u/s. 133(6) of the Act to these parties. In response to said notice, the said parties had filed confirmations and also stated that services were provided by them. The CIT(A) in the impugned order has recorded a finding of fact that the aforesaid parties had offered receipts from assessee to tax in their respective return of income, TDS was deducted by the assessee on the payments made to the parties. These facts have not been refuted by the Assessing Officer. Further, in response to the show cause notice dated 18.03.2024 the assessee had furnished reconciliation, no adverse findings have been given by the AO on the reconciliation. The nature of business carried out by the assessee is highly specialized and so are the services provided by the aforesaid parties. In given facts of the case, the CIT(A) concluded that genuineness of the services rendered by these parties were proved and the AO could not point out any inconstancy in the bills raised by the parties. Hence, no case of addition on account of bogus credits or disallowance u/s. 37(1) of the Act is made out. The Revenue could not controvert findings of the CIT(A), ergo, impugned order is upheld and appeal of the Revenue is dismissed.”
4736 & 4742/Del/2024 (AYs 2014-15 to 2016-17) 9. We find that the reasoning given by the AO for making disallowance u/s. 37(1) of the Act is identical in the impugned assessment year, even some of the creditors in the impugned assessment year are common to AY 2018-19. Thus, in light of our above findings and the decision of the Coordinate Bench, we find no merit in appeal by the Department. Hence, impugned order is upheld and appeal of the Revenue is dismissed being devoid of any merit. & 4742/Del/2024 ( AY 2015-16 & 2016-17) 8. The ld. DR fairly admitted that the facts in these appeals are identical to the facts in appeal of the Revenue for AY 2014-15.
After examining the grounds of appeal
and facts of the case, we find that except for the amount of disallowance made u/s. 37(1) of the Act, the findings of the AO and the CIT(A) are similarly worded on the issue. Even, the creditors in all the three impugned assessment years i.e. AY 2014-15, 2015-16 and 2016-17 are identical. Thus, findings given by us while adjudicating appeal of the Revenue for AY 2014-15 would mutatis mutandis apply to the impugned assessment years i.e. AY 2015-16 & 2016-17. For parity of reasons both appeals are dismissed.