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Facts
The case involves appeals for AY 2012-13 against a Section 144 assessment due to the assessee's non-receipt of notices after an address and director change. The AO made additions for unexplained unsecured loans and sundry creditors under Section 68 and rejected books under Section 145(3), leading to a total income determination of Rs 2,88,40,422/-.
Held
The Tribunal upheld the CIT(A)'s admission of additional evidence under Rule 46A and the deletion of additions for unsecured loans and sundry creditors, finding them properly explained with supporting documents and confirmations. Consequently, the penalty proceedings initiated under Section 271(1)(c) were also dismissed as the quantum additions were deleted.
Key Issues
Whether the CIT(A) was justified in admitting additional evidence and deleting additions for unsecured loans and sundry creditors, and the fate of consequential penalty proceedings.
Sections Cited
144, 271(1)(c), 68, 145(3), Rule 46A
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, DELHI BENCH “G”: NEW DELHI
Before: SHRI VIKAS AWASTHY & SHRI M. BALAGANESH
O R D E R PER M. BALAGANESH, A. M.: 1. The appeal in & 9189/Del/2019 for AY 2012-13, arise out of the ld. Commissioner of Income Tax (Appeals)-XXV, New Delhi [hereinafter referred to as „ld. CIT(A)‟, in short] dated 04.09.2019 and 17.09.2019 against the order of assessment passed u/s 144 of the Income-tax Act, 1961 (hereinafter referred to as „the Act‟) dated 20.03.2015 and u/s 271(1)(c) dated 29.09.2015 by the Assessing Officer, ACIT, Circle-22(2), New Delhi (hereinafter referred to as „ld. AO‟). Since these are quantum and penalty appeals, they are heard together and disposed of by this common order for the sake of convenience.
– Quantum proceedings– Revenue Appeal & 9189/Del/2019 SB Infosoft India Pvt. Ltd
The revenue has raised the following grounds of appeal before us:-
“1. Whether in facts and circumstances of the case, the Ld. CIT(A) was right in allowing the submission of additional evidences by the assessee company without proper appreciating the facts and findings of AO during the course of proceedings. assessment 2. Whether on the facts and circumstances of the case, the Ld. CIT(A) erred in deleting the additions of Rs. 24,30,000/- on account of unexplained increase in unsecured loans liability and Rs. 2,98,74,317/- on account of unexplained increase in sundry creditors current liabilities merely relying on the additional evidences furnished by the assessee company at the time of appeal proceedings and ignoring the facts that the AO has made this addition as the assessee company had failed to satisfactorily explain these increases in credit amounts.
The Ld. CIT(A) admitted the additional evidences ignoring the objections raised by the AO in remand report dated 18.02.2019.
The appellant craves to amend, modify, alter, add or forego any ground of appeal
at any time before or during the hearing of this appeal.”
3. We have heard the rival submissions and perused the materials available on record. The return of income was filed by the assessee for the Assessment Year 2012-13 by mentioning the address as B-151, Okhla Industrial Area, New Delhi 110020. The Learned AO during the course of scrutiny assessment proceedings had issued the notices to the said address of the assessee company between 8-10-2013 to 17-12-2014 and thereafter a show cause notice dated 3- 3-2015 was also issued to the assessee in the same address. The notice was also sent by the Learned AO to the address of the two directors namely Mr. Om Prakash and Mr. Ramesh Chander. The assessee company had shifted its office from Delhi to SCO 13, second floor, sector 5, Panchkula, Haryana which fact was not intimated to the income tax department by the then directors of the assessee company. Further, the two directors Mr. Om Prakash and Mr. Ramesh Chander also resigned from the directorship of the assessee company with effect from 13- 9-2013 and in their place Mr. Bishan Das and Mr. Jatinder Singh were appointed directors of the assessee company and that they were not aware of the fact that Page | 2 & 9189/Del/2019 SB Infosoft India Pvt. Ltd the shifting of the office to Panchkula was not informed to the income tax department. All these factors collectively contributed to non-receipt of notices by the assessee company which eventually led to framing of assessment under Section 144 of the Act on 20-3-2015 by the Learned AO.
4. The return of income was filed on 30-9-2012 declaring loss of Rs 34,63,895/-. The assessment was completed determining total income at Rs 2,88,40,422/- after making addition on account of increase in unsecured loan, sundry creditors and other liabilities under section 68 of the Act in the sum of Rs 3,23,04,317/- by the Learned AO. This addition was made after rejection of books of accounts of the assessee under section 145(3) of the Act by the Learned AO. Before the Learned CIT(A), the assessee filed additional evidences to counter the additions made by the Learned AO on account of increase in unsecured loan, sundry creditors and other liabilities. The assessee also furnished the complete audited books of accounts and the audited financial statements before the Learned CIT(A). All these documents were filed in the form of additional evidences under Rule 46A of the Income Tax Rules. The Learned CIT(A) sought a remand report from the Learned AO with regard to those additional evidences. The Learned AO furnished remand report twice before the Learned CIT(A). But in both those remand reports, the Learned AO merely objected to the admission of additional evidences on the ground that sufficient opportunities were indeed given to the assessee during the course of assessment proceedings itself. No finding was given by the Learned AO on the merits of the evidences submitted by the assessee before the Learned CIT(A) in the remand report. Since sufficient opportunities were given to the Learned AO by seeking a remand report and that the Learned AO had not sought to utilize the same to examine the additional evidences filed by the assessee under Rule Page | 3 & 9189/Del/2019 SB Infosoft India Pvt. Ltd 46A of the Rules, the Learned CIT(A) first observed that those additional evidences filed by the assessee go to the root of the matter and are very much relevant and crucial for the purpose of adjudication of the disputes pending before him. Accordingly those additional evidences were admitted duly by the Learned CIT(A). Since no examination was carried out on the merits of the evidences submitted by the assessee by the Learned AO in the remand proceedings, the Learned CIT(A) sought to examine the same on his own. The Learned CIT(A) on examination of the evidences submitted observed that the Learned AO had made an addition of Rs 24,30,000/- on account of increase in unsecured loan liability. The Learned CIT(A) observed that this is only a continuing loan account and that no fresh loan was received during the year. The loan had also suffered interest expenditure by the assessee which has been duly subjected to deduction of tax at source. The Learned CIT(A) duly appreciated the confirmation of balance filed by the lender by giving the complete address as well as its PAN to substantiate the balance outstanding and the interest outstanding there on. The Learned CIT(A) finally on verification of all the evidences concluded that this is not a fresh loan and accordingly proceeded to delete the addition made in the sum of Rs 24,30,000/- under section 68 of the Act.
5. With regard to addition made in the sum of Rs 2,98,74,317/- on account of increase in sundry creditors, the assessee submitted that it includes receipt of advances from M/s L S Industry. It was submitted that the Learned AO had made an addition of Rs 2,98,74,317/- on the premise that the assessee had claimed credits of Rs 6,33,54,126/- as on 31-3-2012. The Learned CIT(A) noted that as per the return of income for assessment year 2011-12 (i.e. immediately preceding assessment year), the credits has been claimed at Rs Page | 4 & 9189/Del/2019 SB Infosoft India Pvt. Ltd 3,34,79,809/-. The assessee made detailed submission in support of its case before the Learned CIT(A) in this regard. It was submitted that the Learned CIT(A) noted that increase in sundry creditors was mainly due to the fact that there was an increase in the volume of business whereby the purchases had increased from Rs 3,38,29,693/- to Rs 4,71,61,169/- as per note 19 to the profit and loss account and creditor for purchases also increased from Rs 3,23,64,019/- to Rs 3,74,89,309/- as per note 7 of the balance sheet. The Learned CIT(A) further noted that assessee had received advance from L S industries limited to the tune of Rs 2,38,39,227/- out of total advance outstanding of Rs 2,40,39,424/-. All these details were cross verified by the Learned CIT(A) with the audited financial statements and the books of accounts of the assessee company. The Learned CIT(A) noted that assessee filed the confirmation copy of account of the main sundry creditor namely M/s ESYS Information Technologies Limited to whom a sum of Rs 2,62,57,730/- was payable as on 31-03-2012 as against the total outstanding balance of sundry creditors of Rs 3,74,89,309/- which also included a sum of Rs 78,170/- payable as sundry creditors to M/s L S Industries Limited duly confirmed by that party. The assessee also filed the confirmation copy of account of the main party having made advance namely M/s L S Industries Limited to whom a sum of Rs 2,39,17,397/- was shown payable as on 31-03-2012 as against the total outstanding balance of advances received of Rs 2,40,39,424/- which also included a sum of Rs 1,26,891/- received from M/s ESYS Information Technologies Limited duly confirmed by that party also which was appearing under the head other current liabilities as on 31-3-2012. Apart from these figures, the other liabilities included statutory dues such as audit fees, bonus and other expenses payable as per note 8 of the balance sheet. The assessee also & 9189/Del/2019 SB Infosoft India Pvt. Ltd furnished the complete reconciliation of the figures taken in the assessment order towards increase in credit balances and as appearing in the balance sheet as on 31-03-2012 before the learned CIT(A) which is also reproduced in page 25 of the order of the learned CIT(A). On complete verification of the same, the learned CIT(A) concluded that assessee had maintained complete record of the expenses incurred and have also deducted tax at source of Rs 8,77,700/- wherever applicable, and filed the TDS returns with the income tax department after duly depositing the tax so deducted. The learned CIT(A) also noted that the learned AO had completely ignored these facts. The learned CIT(A) concluded that assessee had furnished the complete name and addresses of the sundry creditors/ current liabilities and also had filed confirmed copy of accounts giving their PAN as well as invoices and linking the same with the audited balance sheet of the company who had also made an advance in respect of all the sundry creditors and current liabilities including the party who had made an advance of Rs 2,38,39,227/-. The learned CIT(A) noted that the books of accounts of the assessee company had been rejected by the learned AO under section 145(3) of the Act without pointing out any defects in any manner whatsoever there on. With these observations, the learned CIT(A) proceeded to delete the addition made on account of increase in sundry creditors / current liabilities in the sum of Rs 2,98,74,317/-. None of these factual observations made by the learned CIT(A) could be controverted by the revenue before us. Hence, we do not find any infirmity in the order of the learned CIT(A). Accordingly, the grounds raised by the revenue are hereby dismissed.
6. Since the quantum proceedings are decided in favour of the assessee, the penalty proceedings would have no legs to stand. Accordingly, the grounds raised by the revenue in are hereby dismissed. Page | 6 & 9189/Del/2019 SB Infosoft India Pvt. Ltd
To sum up, both the appeals of the revenue are hereby dismissed.
Order pronounced in the open court on 04/06/2025.