DCIT, NEW DELHI vs. M/S. ACCURATE METERS LTD., DELHI

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ITA 5312/DEL/2011Status: DisposedITAT Delhi02 September 2021AY 2003-046 pages

In favour of the assessee: the Revenue's appeal was dismissed. From the AI summary of this appeal.

AI SummaryDismissed

What did the Tribunal hold?

The Tribunal held that most additions were not based on incriminating material seized during the search. For bogus purchases, the Tribunal noted a factual inaccuracy in the AO's assessment, which was corrected in the remand report, invalidating the basis for the addition.

What were the facts?

The Revenue appealed against the CIT(A)'s deletion of additions made by the Assessing Officer (AO) concerning unaccounted scrap sales, speed money, commission, unvouched expenses, and bogus purchases. The AO's additions were primarily based on material found during a search action.

What were the issues?

Whether additions made by the AO were based on seized material and whether the CIT(A) erred in deleting these additions.

Which sections of the Income-tax Act were involved?

Section 37,Section 153A

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, DELHI BENCH ‘A’, NEW DELHI

Before: Sh. Amit ShuklaDr. B. R. R. Kumar

Hearing: 01.07.2021Pronounced: 02.09.2021

Heard together (2 matters)

ITA No. 5866/Del/2011
ITA No. 5312/Del/2011

Read from the judgment's own cause title. This page is filed under one of them.

Per Dr. B. R. R. Kumar, Accountant Member:

1.

The present appeals have been filed by the revenue against the orders of ld. CIT(A)-III, Delhi dated 15.09.2011 and 05.10.2011.

2.

Since, the issues involved in both the appeals are identical, which were heard together.

3.

In , following grounds have been raised by the revenue:

“1. On the facts and in the circumstances of the case, the CIT(A) has erred in law and on facts in deleting & 5866/Del/2011 2 Accurate Meters Ltd. the addition of Rs.13,51,500/- made by the Assessing Officer on account of unaccounted sale of scrap.

2. On the facts and in the circumstances of the case, the CIT(A) has erred in law and on facts in holding that the Assessing Officer was not justified in estimating speed money expensed at 17,94,500.

3. On the facts and in the circumstances of the case, the CIT(A) has erred in law and on facts in deleting the addition of Rs.1,03,12,050/- made by the Assessing Officer on account of disallowance of commission.

4. On the facts and in the circumstances of the case, the CIT(A) has erred in law and on facts in deleting the addition of Rs. 1,00,000/- made by the Assessing Officer on account of unvouched expenses.

5. On the facts and in the circumstances of the case, the CIT(A) has erred in law and on facts in deleting the addition of Rs.2,94,98,958/- made by the Assessing Officer on account of bogus purchase.”

4.

Brief facts of the case are that search & seizure action u/s 132 of the Income Tax Act, 1961 was carried out in Accurate Group of cases on 26.07.2006 relevant to the assessment year 2007-08.

5.

The issues before us pertain to assessment years 2002-03 and 2003-04 wherein the assessee filed original return of income on 31.10.2002 and 02.12.2003. Hence it is hereby held that the assessments before us are to be treated as completed assessments but not abated assessments which create an obligation on the revenue to make any addition only based on the material and documents found and seized during the search action. & 5866/Del/2011 3 Accurate Meters Ltd.

6.

The grounds raised by the revenue have been mentioned above.

7.

We have gone through the record before us and heard the arguments of ld. DR.

8.

The addition made on account of sale of scrap is not based on any seized material. The seized material reflecting the scrap belongs to the financial year 1999-2000 and also doesn’t belong to the assessee. The ld. CIT (A) has given a categorical finding that the addition is based on estimation. In the absence of any seized material produced before us proving contra, we decline to interfere with the order of the ld. CIT (A).

9.

With regard to the speed money, the AO made addition of amount @ 0.5% on the sales of Rs.35.69 Crores made to SEBs. The ld. CIT (A) gave a categorical finding that the amount has been added on estimate basis and no incriminating material is found or seized. The ld. CIT (A) has also held that the expenses have not been claimed in the books of accounts and hence no disallowance is attracted as per Section 37 of the Income Tax Act, 1961. In the absence of any seized material produced before us proving contra, we decline to interfere with the order of the ld. CIT (A).

10.

Apropos, disallowance of commission, we find that the addition has been made based on the information received from the Addl. CIT, Range-3, Kolkata that the case of one of the recipients of commission has been reopened u/s 148. This issue has been examined during the proceedings u/s 143(3). Duly considering this fact on record, still the issue doesn’t cross the & 5866/Del/2011 4 Accurate Meters Ltd. threshold of being emanated from the seized material. Hence, in the absence of any seized material no addition is called for. The action of the ld. CIT (A) is not interfered with.

11.

In relation to the unvouched expenses of Rs. 1,00,000/-, the AO made the addition on the grounds that the assessee has not produced bills & vouchers. Such disallowance made do not fall under the purview of Section 153A. Hence, we decline to interfere with the order of the ld. CIT (A).

12.

In connection with the bogus purchases and wrong claim of CENVAT while the claim of the assessee was that the addition has been made merely based on the show cause notice issued by the Excise Authorities the finality of which was still pending. The ld. CIT (A) deleted the addition after obtaining the remand report from the AO. For the sake of ready reference, the remand report and the findings of the ld. CIT (A) is reproduced as under:

“In the remand report dated 15.07.2011, the Assessing Officer has stated as under:

Bogus Trading Loss (AY 2003-04)

On perusal of case records it is seen that in the assessment order, addition of Rs.2,93,61,596/- has been made by the then assessing officer by taking the trading purchase at Rs. 3,11,23,930/- and sales at Rs. 17,62,334/-. As per the details available on records, the trading purchases are shown at Rs. 3,11,23,930/- and sales at Rs. 3,23,83,313/- and if these & 5866/Del/2011 5 Accurate Meters Ltd. figures are taken for computation then the resultant profit comes to Rs. 12,59,383/-.

Finding of the ld. CIT (A):

From the finding in assessment order with respect to above ground of appeal it is seen that the AO has disallowed the huge loss of Rs.2,93,61,596/- incurred by assessee during the year on trading as the list of trading purchases and corresponding sales amounted to Rs.3,11,23,930/-and Rs.17,62,334/-, respectively. The AO has noted that there appears no reasonable cause for having incurred huge loss on the trading transactions. That the assessee has not furnished any details of stock inventory to show that any trading stock was included in the inventory. From the above facts the AO is of the view that the assessee had made bogus trading purchases and sales to reduce the taxable profit.

On receipt of the remand report on the issue it is observed that there has been a factual inaccuracy in the order of the AO which is now been correctly reported in the remand report which shows that the trading purchases are at Rs.3,11,23,930/-and corresponding sales are at Rs.3,23,83,313/- which results in a profit of Rs.12,59,383/-.

The basic reason for disallowance of the loss for Rs.2,93,61,593/- by the A.O. is on account of the fact that there was no reasonable cause for having incurred huge loss on the trading transactions and that the assessee had made bogus trading purchases and sales to reduce it’s taxable profit. Now as factually the above state of affairs is proved to be incorrect therefore the basic premise on which the addition to income is made goes off. In a result the said disallowance and thereby addition to income for Rs.2,93,61,593/-, is also directed to be deleted.” & 5866/Del/2011 6 Accurate Meters Ltd.

13.

Since, the finding of the ld. CIT (A) could not be controverted on facts and as well as on jurisdictional issue, we hereby affirm the order of the ld. CIT (A).

14.

In the result, both the appeals of the revenue are dismissed. Order Pronounced in the Open Court on 02/09/2021.

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