GAUTAM TAYAL & SONS (HUF),G.T. KARNAL INDUSTRIAL AREA vs. ACIT- CIRCLE 36(1), DELHI, E BLOCK MINTO ROAD, CIVIC CENTRE

The assessee has raised the preliminary issue of challenging the assumption of jurisdiction under section 147 of the Act and its consequential reassessment and the validity of

We have heard the rival submissions and perused the materials available on record, The assessee is a HUF and a proprietor of the firm M/s Jaggo Overseas engaged in the manufacturing, importing, exporting and trading of chemicals. The return of income for the assessment year 2012-13 was filed by the assessee on 27-9-2012 under section 139(1) 1 of the Act declaring taxable income of Rs. 29,32,610. The case of the assessee was sought to be reopened by the Learned AO by assuming jurisdiction under section 147 of the Act. During the year under consideration, the assessee paid advance money of Rs. 29 lakhs to M/s Madan Overseas and Rs. 13,30,000 to Kavish Impex. Ltd. towards purchase of DEPB Duty Entitlement Passbook License issued by the Ministry of Commerce, Government of India, New Delhi. The DEPB License is for paying / utilizing customs duty payable on imports. The advance money so given was returned by M/s Madan Overseas and M/s Kavish Impex as they have not been able to provide the DEPB License to the assessee. The assessee made payment on 19-01-2012 to M/s Madan Overseas a sum of Rs. 29 lakhs which was returned back by them on 2- 02-2012. Similarly, the assessee paid a sum of Rs. 13.30 lakhs on 24-06- 2011 to Kavish Impex Pvt . Ltd. which was returned by the said party to the assessee on 8-07-2011. The monies received back by the assessee from these two parties were sought to be treated as accommodation entry and undisclosed income in the hands of the assessee. Consequently the commission expenditure for taking accomodation entry was estimated at 1% of Rs 42 lakhs and an addition on account of unexplained expenditure under section 69C of the Act was also made for Rs 42,000. The Page | 2

The assessee has furnished the bank statements to prove that the payment was made first by the assessee to the aforesaid two parties. The bank statement clearly mentioned the party’s name to whom payment was made. The assessee had also explained the purpose of making payment to the aforesaid two parties. Since the parties could not obtain the DEPB Duty Pass Book Entitlement License in favour of the assessee, the monies were received back from these two parties by the assessee. Similarly, the bank statement duly reflected the name of the person from whom money was received by the assessee. The advance paid to these parties are purely meant for business purposes of the assessee. The monies received back as return of advance cannot be treated as income of the assessee in the facts and circumstances of the instant case. The Learned AO notes in page 3 of the assessment order that the assessee had not given the details of payments made to these parties to prove the point that the very same sums were received back by the assessee later. When the entire bank statements are placed on record before the learned AO, it is incorrect on the part of the learned AO to make this observation. The Learned AO also noted that the assessee had not filed the ledger accounts of these two parties , which is also found to be factually incorrect. The assessee had infact duly furnished the entire ledger accounts of these two parties which are also enclosed in Pages 76 and 77 of the Paper Book. The addition has been made by the learned AO on incorrect assumption of fact and wrong observations. Hence we hold that the source of receipt of monies from the aforesaid two parties are clearly explained by the assessee and the same cannot be treated as income from undisclosed sources of the

Since the additions made are hereby deleted on merits, the adjudication of legal grounds raised by the assessee become academic in nature and they are left open.

In the result, the appeal of the assessee is partly allowed.