KUBER AUTO GENERAL FINANCE & LEASING LTS ( THROUGH OFFICICAL LIQUIDATOR),NEW DELHI vs. ACIT, CIRCLE-5(1), NEW DELHI

ITSSA 1/DEL/2022Status: DisposedITAT Delhi14 May 202418 pages
AI SummaryPartly Allowed

What were the facts?

This appeal by the assessee, Kuber Auto General Finance & Leasing Ltd. (through Official Liquidator), is against the order dated 10.02.2011 of the CIT(A)-XVIII, New Delhi, concerning Block Assessment Years 01.04.1987 to 08.05.1997. A search and seizure operation under Section 132 of the Income Tax Act, 1961, was conducted on 08.05.1997. The assessee filed a block return declaring NIL income. The initial assessment order under Section 158BC was set aside by the CIT(A) for de novo assessment. Subsequent assessments were made, and appeals were filed before the ITAT. The present appeal is against the third assessment order dated 31.12.2009.

What did the Tribunal hold?

The Tribunal decided the issues as follows: 1. Regarding the addition of Rs. 1,51,062/- (Issue 1), the Tribunal found that the seized Day book itself supported the assessee's claim. It showed a total cash of Rs. 2,84,928/-, with Rs. 1,19,126/- given to staff for petty expenses, leaving physical cash of Rs. 1,53,866/-. The Tribunal noted that the AO had not doubted other entries in the Day book, implying it was part of regular accounts. The Tribunal also acknowledged the prior deletion of this addition by the CIT(A) which was not challenged by the revenue. Thus, the addition was deleted. 2. Regarding the additions of Rs. 10,54,765/- and Rs. 6,25,800/- under Section 69C (Issue 2), the Tribunal allowed the assessee's claim for deduction. It relied on the amendment to Section 69C effective from 01.04.1999 and the interpretation by CBDT Circular No. 772, as well as the decision in P. Ram Gopal Varma (Andhra Pradesh HC). The grounds raised by the assessee on this count were allowed. 3. Regarding the addition of Rs. 1.25 crores for FDRs (Issue 3), the Tribunal held that the sources of the FDRs were duly explained as they were obtained from the assessee's regular bank account, with dates and amounts specified. The bank statements showed the balances as the source, and the amounts were in the audited balance sheet, which was not questioned. The Tribunal agreed that Section 69C was not applicable as the source of expenditure was available in the books. The addition was directed to be deleted. 4. Regarding surcharge (Issue 4), the Tribunal allowed the assessee's ground. It noted the concession by the DR and relied on the Supreme Court judgment in Vatika Township Pvt Ltd (Supra), which held that the proviso to Section 113, inserted by the Finance Act, 2002, operates prospectively from 01.06.2002. As the search occurred on 08.05.1997, prior to this date, no surcharge was leviable. Ground No. 11 was general and needed no adjudication. The operative direction was to delete the additions related to issues 1, 2, 3, and 4.

What were the issues?

1. Whether the addition of Rs. 1,51,062/- on account of unexplained cash is justified, considering the assessee's contention that the correct difference is Rs. 1,31,062/- and that the seized Day book entries are part of regular books of account, and further, that a previous CIT(A) order deleting this addition was not challenged by the revenue. 2. Whether the addition of Rs. 10,54,765/- and Rs. 6,25,800/- as unaccounted expenditure under Section 69C is justified, and if not, whether the assessee is entitled to a deduction for similar amounts as per the proviso to Section 69C, as clarified by CBDT Circular No. 772, applicable from A.Y. 1999-2000. 3. Whether the addition of Rs. 1,25,00,000/- for FDRs, claimed to be from regular books of account and declared, is sustainable. 4. Whether surcharge should have been charged on the undisclosed income, considering the search date was prior to 01.06.2002. Assessee's arguments: - For issue 1: The AO mistakenly calculated the difference; the correct difference is Rs. 1,31,062/-. The Day book is part of regular books. A prior CIT(A) deletion of this addition was accepted by the revenue. Section 69A is not applicable as it pertains to investments not recorded in books. Reliance on Sarika Jain (Allahabad HC). - For issue 2: The proviso to Section 69C is applicable from A.Y. 1999-2000, and a deduction should be allowed. The CIT(A) failed to adjudicate this point based on the CBDT Circular. - For issue 3: FDRs were obtained from regular bank accounts, declared in the audited balance sheet, and their source is proved. The CIT(A) wrongly stated books were not produced. Section 69C is not applicable as the expenditure source is in the books. The addition is outside the scope of Section 158BC as FDRs are part of regular books. - For issue 4: Surcharge is not leviable for searches conducted prior to 01.06.2002, relying on Rajeev Bhatara (SC) and Vatika Township Pvt Ltd (SC). Revenue's arguments: - For issue 1: The assessee did not provide evidence that the Day book was part of regular books, and the CIT(A) noted the failure to substantiate from regular books. - For issue 3: The source of FDRs was not explained, justifying the AO's and CIT(A)'s actions. - For issue 4: The DR conceded that surcharge is applicable only from 01.06.2002.

Which sections of the Income-tax Act were involved?

Section 132,Section 158BC,Section 69,Section 69C,Section 69A,Section 143(3),Section 113

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, DELHI ‘C’ BENCH,

Before: MS. MADHUMITA ROY & SHRI NAVEEN CHANDRA

For Appellant: Shri Raj Kumar Gupta, CA, Shri Suraj Gupta, Adv
For Respondent: Ms. Monika Dhami, CIT-DR
Hearing: 02.05.2024Pronounced: 14.05.2024

PER NAVEEN CHANDRA, ACCOUNTANT MEMBER:

-

This appeal by the assessee is preferred against the order of the ld. CIT(A)-XVIII, New Delhi dated 10.02.2011 pertaining to Block A.Y.

01.04.

1987 to 08.05.1997

2.

The grievances of the assessee read as under:

“1. That no proper and reasonable opportunity of hearing has been allowed by Ld. AO.

2.

That no proper and reasonable opportunity of hearing has been allowed by Ld. CIT (A).

3.

That under the facts and circumstances, the Asstt. Order is barred by limitation.

4.

That in the absence of search warrant in the name of Mis. Kuber

The order continues below.

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