Loading judgment…
No AI summary yet for this case.
Income Tax Appellate Tribunal, DELHI BENCH “G”: NEW DELHI
Before: DR. BRR KUMAR & MS. ASTHA CHANDRA
PER ASTHA CHANDRA, JM
This appeal is filed by the assesee against the order passed by the Ld. Commissioner of Income Tax (Appeals)-18, New Delhi (“CIT(A)”) dated 26.4.2016 pertaining to assessment year (“AY”) 2011-12.
The assessee is an individual. He is proprietor of M/s. Crafts India dealing in items of arts and crafts. He filed his return of income for the AY
ITA No. 3781/Del/2016 Surinder Malhotra vs ACIT 2 2011-12 declaring income of Rs. 66,82,095/- on 29.9.2011. The case was selected for scrutiny after initial processing under section 143(1) of the Income Tax Act, 1961 (the “Act”). In response to the notice under section 143(2) and 142(1) along with questionnaire, the assessee furnished written submissions and required details called for which were examined by the Ld. Assessing Officer (“AO”). The Ld. AO completed the assessment under section 143(3) on total income of Rs. 88,24,470/- including therein addition of Rs. 19,98,352/- under section 68, disallowance of Rs. 44,967/- under section 14A, disallowance of Rs. 33,956/- under section 37 and disallowance of Rs. 65,099/- under section 32 against which the assessee filed appeal before the Ld. CIT(A) but without success. This has brought the assessee before us challenging the order of the Ld. CIT(A) confirming the impugned addition / disallowances and all the grounds of appeal relate thereto. The Ld. CIT(A) has deleted the addition made by the Ld. AO on account of disallowance of Rs. 44,967/- under section 14A, hence ground no.1 is dismissed as infructuous.
During the assessment proceedings, the Ld. AO noticed from the balance sheet sundry creditors of Rs. 45,44,232/- in the name of 16 parties (para 2.1 of the Ld. AO’s order). He required the assessee to furnish the details of the creditors and to establish the genuineness of the credits. Simultaneously he issued notices under section 133(6) of the Act to the sundry creditors having outstanding balance of more than Rs. 1 lac as on 31.3.2011. Notices under section 133(6) of the Act issued to ten parties were
ITA No. 3781/Del/2016 Surinder Malhotra vs ACIT 3 returned (para 2.3 of the Ld. AO’s order) and though notices were served on six parties but they did not reply (para 2.4 of the Ld. AO’s order).
3.1 Before the Ld. AO, the assessee produced ledger account and bills of transactions with two parties namely Dev Art & Handicrafts and Kangsiya Art Place. The Ld. AO also noted that in case of four parties viz. Art and Plast Jodhpur, Chopsani Art & Emporium, Pehlaj Art Jodhpur and Delux Wood Works Delhi, similar additions were made in earlier years.
3.2 The Ld. AO made the impugned addition of Rs. 19,98,352/- under section 68 with the following findings and observations in para 2.6 of his order:
“2.6 Taking into account all the submissions of the assessee, results of enquiries conducted and facts of the case, it is evident that the assesee failed to provide authentic documentary evidence to support his claim in respect of the below mentioned outstanding sundry creditors so as to establish their identity, genuineness and creditworthiness :
Mughal Art Palace Rs. 1,97,600/- Prajapati Arts Rs. 1,38,610/- Singhal Exports Rs. 2,88,670/- Mithila Art and Crafts Rs. 1,30,250/- Madan Traders Rs. 1,13,630/- Bharat Mughal Handicrafts Rs. 1,97,010/- Razzak Handicrafts Rs. 3,01,332/- Manish Art Handicrafts Jodhpur Rs. 3,55,000/- Monika Art & Craft Jodhpur Rs. 99,000/- Piyush & Co. Rs. 1,77,250/- __________________ Rs. 19,98,352/- __________________
ITA No. 3781/Del/2016 Surinder Malhotra vs ACIT 4 Hence, the same are liable to be treated as the income of the assessee as per the provisions of section 68 of the Act.”
Aggrieved, the assessee appealed. Before the Ld. CIT(A) assessee submitted that non-filing of confirmation of the creditors alone should not be the ground for addition. To substantiate the genuineness of transactions, the assessee produced before the Ld. CIT(A) copy of purchase bills; copy of ledger accounts and copy of the bank statements from which payments were made to the creditors for the purpose of verification. It was brought to the notice of the Ld. CIT(A) that huge addition with regard to sundry creditor was deleted by the ITAT for the AY 2005-06. The submissions of the assessee did not find favour with the Ld. CIT(A) who confirmed the impugned addition.
At the very outset, the Ld. AR drew our attention to a chart appearing at page 2 of the paper book which is reproduced below:-
S. Name of the Opening Debit Credit Closing No. Party Balance Balance 1. Mughal Art 1,97,600 - - 1,97,600 Palace 2. Prajapati Arts 1,77,110 38,500 - 1,38,610 3. Singhal 3,32,170 43,500 - 2,88,670 Exports 4. Mithla Arts & 1,82,250 52,000 - 1,30,250 Crafts 5. Madan 1,68,130 54,500 - 1,13,630 Traders 6. Bharat Mughal 2,32,010 35,000 - 1,97,010 Handicrafts 7. Razzak 3,59,832 58,500 - 3,01,332 Handicrafts
ITA No. 3781/Del/2016 Surinder Malhotra vs ACIT 5 8. Manish Aits 4,10,550 55,550 - 3,55,000 Handicrafts Jodhpur 9. Monika Arts & 1,98,000 99,000 - 99,000 Crafts, Jodhpur 10. Piyush & Co. 2,56,250 79,000 - 1,77,250 25,13,895 5,15,550 - 19,98,345
The Ld. AR argued that no credit entry appears in the name of any of the ten parties in the year of account and the debit entries are on account of partial payments made to the creditors during the year. He submitted that the provisions of section 68 apply where any sum is found credited in books of accounts of the previous year of the assessee and not in any other year. He pointed out that the assessee submitted before the Ld. AO/CIT(A) ledger account of the creditors, copy of relevant bank statements and copy of audited balance sheet for Financial Year 2009-10 and Financial Year 2010- 11 showing the opening and closing balances of the creditors to prove that there is no credit entry in the name of any of the ten sundry creditors in the previous year relevant to the AY 2011-12. He, therefore, submitted that the impugned addition under section 68 is not justified and cited judicial precedents in support of his arguments. The Ld. DR could not controvert the submissions of the Ld. AR.
We have carefully considered the arguments of the rival parties and perused the records. In our opinion the assessee deserves to succeed. Section 68 reads as under:
ITA No. 3781/Del/2016 Surinder Malhotra vs ACIT 6 “Cash credits. 68. Where any sum is found credited in the books of an assessee maintained for any previous year, and the assessee offers no explanation about the nature and source thereof or the explanation offered by him is not, in the opinion of the Assessing Officer, satisfactory, the sum so credited may be charged to income-tax as the income of the assessee of that previous year:”
A bare reading of the provisions of section 68 would reveal that credit of any sum in the books of the assessee for the relevant previous year is sine-qua-non for its applicability. The case of the assessee is that no sum is credited in the books of the assessee in the previous year relevant to the assessment year under appeal in the name of any of the ten creditors in respect of whom the impugned addition has been made. No material has been brought on record by the Revenue to controvert this position. According to us, the primary condition of applicability of section 68 is not satisfied in the case of the assessee. If that be so, insistence by the Ld. AO/ CIT(A) upon production of confirmatory letters by the creditors is irrelevant. No doubt, the onus of proving the identity, creditworthiness and genuineness of transaction lies upon the assesee but only if the provision of section 68 applies to him. In the case at hand, the provision of section 68 itself is inapplicable to him. We, therefore, hold that the impugned addition is not based on solid legal ground and is deleted.
ITA No. 3781/Del/2016 Surinder Malhotra vs ACIT 7 8. Regarding disallowance of Rs. 33,956/- under section 37 and disallowance of Rs. 65,099/- under section 32 of the Act, the Ld. AO made the impugned disallowances out of telephone, internet, travelling, car maintenance, car insurance and depreciation on car expenses claimed by the assessee on account of possible element of personal use. The Ld. CIT(A) confirmed the disallowances.
Before us the Ld. AR submitted that all the expenses have been incurred only for business purposes of the assessee. It was stressed that the assessee had provided the Ld. AO the copy of ledger account and also relevant vouchers/invoices towards incurring of such expenses. The Ld. AO did not question the genuineness of the expenses. After hearing the Ld. Representatives of the parties, we are of the view that the impugned disallowances are based only on surmises and conjectures and not on any adverse material brought on record. We, therefore, delete the impugned disallowances.
In the result, appeal of the assessee is allowed.
Order pronounced in the open court on 23rd February, 2022.
sd/- sd/- (DR. BRR KUMAR) (ASTHA CHANDRA) ACCOUNTANT MEMBER JUDICIAL MEMEBR Dated: 23/02/2022 Veena Copy forwarded to-
ITA No. 3781/Del/2016 Surinder Malhotra vs ACIT 8 1. Applicant 2. Respondent 3. CIT 4. CIT (A) 5. DR:ITAT ASSISTANT REGISTRAR ITAT, New Delhi