DCIT, CC-I, CHANDIGARH vs. M/S HANSA TUBES PVT. LTD., CHANDIGARH

आदेश/Order

Per Sanjay Garg, Judicial Member:

With this common order, we will dispose of the appeal of the

Revenue for assessment year 2012-13 and corresponding Cross

objections of the assessee of assessment year 2012-13 preferred against

the order dated 18.10.2017 of the Commissioner of Income Tax

(Appeals)-3, Gurgaon [hereinafter referred to as CIT(A)] and the appeal

of the assessee for 2013-14 preferred against the order dated

31.10.2017 of the CIT(A).

for the assessment year 2012-13.

ITA No. 6/Chd/2018 for A.Y. 2012-13.

i. Whether on the facts & in the circumstances of the case, the Ld. CIT(A), has erred in deleting the addition of Rs. 1,85,23,135/- made as Gross Profit addition by rejecting the books results of the assessee. ii. Whether on the facts & in the circumstances of the case, the Ld. CIT(A), has erred in holding that the assessee has produced the receipts of transportation of goods, during the assessment proceedings which is away from the facts. iii. Whether on the facts & in the circumstances of the case, the Ld. CIT(A) has erred in ignoring the fact that the stock position of the assessee on the date of search did not match with the stock position as per the books of accounts.

ITA No.6 & 7-chd-2018 & C.O. 12-c-2018 M/s Hansa Tubes Pvt. Ltd, Chandigarh 3

iv. Whether on the facts & in the circumstances of the case, the Ld. CIT(A) has erred in deleting the disallowance made u/s 14A of the Act ignoring the fact that earning of exempt income in that year in not a pre-requisite for the disallowance. v. Whether on the facts & in the circumstances of the case, the order of the Ld. CIT(A) may be quashed and that the order of the AO may be restored.

vi. That the appellant craves to add, amend, alter or modify any ground of appeal at the time of hearing.

Initially, the Assessing Officer in the assessment proceedings 2.

carried out u/s 153A read with section 143(3) of the Income Tax Act,

1961 (in short 'the Act') had made the addition of Rs. 1,85,23,135/- on

account of bogus purchases. Further, an amount of Rs. 4,38,400/- in

respect of agreement to sale and amount of Rs. 7,59,628/- on account of

disallowance u/s 14A of the Act was made totaling the addition of a

sum of Rs. 1,97,21,563/- , which was challenged by the assessee before

the Ld. CIT(A). Subsequently the assessee filed a rectification

application to the Assessing Officer pleading that there was a

calculation mistake in computing the gross profit and the Assessing

Officer passed rectification order u/s 154 of the Act dated 31.7.2015

and deducted the excess addition made of Rs. 1,24,85,445/- from the

total addition made of Rs. 1,85,23,135/- on account of gross profit

determined in respect of bogus purchases. Though, the Ld. CIT(A)

deleted the additions on merits, however, the figures were not correctly

taken by the Ld. CIT(A) in the impugned order. If the correct figures

ITA No.6 & 7-chd-2018 & C.O. 12-c-2018 M/s Hansa Tubes Pvt. Ltd, Chandigarh 4 are taken, then the addition challenged by the Revenue in respect of

ground Nos.1 to 3 will be Rs. 60,37,699/-. The second addition

deleted by the Ld. CIT(A) is in respect of disallowance u/s 14A of the

Act amounting to Rs. 7,59,628/-.

under the circumstances, the total tax effect involved in this appeal is

less than Rs. 50 lacs i.e. below the monetary limit prescribed by the

CBDT Circular No. 17/2019. It is, thus, noticed that this appeal filed

by the Department is not maintainable in view of the recent Circular No.

17/2019 dt. 08/08/2019 issued by CBDT, wherein, the monetary limit

for filing the appeals by the Department before the ITAT has been

increased to Rs. 50,00,000/- from Rs. 20,00,000/- as specified in the

earlier circular No. 3/2018 dated 11.07.2019.

It has been further clarified by the CBDT vide F.No.

279/Misc./ITJ dated 20.08.2019 that the revised monetary limit

mentioned in Circular No. 17 of 2019 is applicable to all the pending

SLPs/ appeals/ cross-objections / references and that all such pending

appeals within the revised limit shall be withdrawn by the Department

on or before 31.10.2019.

by the Department is dismissed due to low tax effect. It is,

however, clarified that the dismissal of the above appeal shall not be

taken to be affirmation of the order of the CIT(A) on merits. The legal

ITA No.6 & 7-chd-2018 & C.O. 12-c-2018 M/s Hansa Tubes Pvt. Ltd, Chandigarh 5 issue raised by the Revenue is being left open to be adjudicated in an

appropriate case.

In view of this the appeal of the Revenue is dismissed due to low tax

effect.

year 2012-13.

C.O. 12/Chd/2018:

objections:-

the action of the CIT(A) in confirming the addition of Rs. 4,38,800/- in

respect of agreement to sell found during search conduced u/s 132 of the Act

at the premises of the assessee. An agreement dated 4.11.2011 entered into

by the assessee with Shri Harjeet Singh and Shri Major Singh was found for

ITA No.6 & 7-chd-2018 & C.O. 12-c-2018 M/s Hansa Tubes Pvt. Ltd, Chandigarh 6 purchase of land as Village Daria vide which the assessee had paid to the

seller an amount of Rs. 5 lacs in cash as ‘earnest money’. To further enquire

about the matter, the Assessing Officer recorded the statement of one of the

seller namely Shri Harjeet Singh, whereby, he admitted that he had taken a

sum of Rs. 10 lacs in cash from Shri Arun Gupta and handed over the same to

Shri Major Singh for purchase of land. When confronted with the aforesaid

statement of Shri Harjeet Singh, Shri Arun Gupta, director of the company

stated that he had paid Rs. 5.6 lacs in cash to purchase the stamp papers to

Shri Harjeet Singh and that no other cash payments had been paid by him. He

further stated that the copy of the agreement seized was a rough draft and not

actual agreement. Shri Arun Gupta also produced a copy of the agreement

dated 3.11.2011 which contained the same terms and conditions except the

payment of Rs. 5 lacs in cash.

However, the Ld. Assessing Officer did not agree with the contention

of the assessee and made the addition of the remaining amount of Rs.

4,38,800/- out of Rs. 10 lacs stated to be paid by Shri Arun Gupta in cash

out of which Rs. 5,61,200/-, paid for stamp papers was duly reflected in the

books of account. In appeal, the Ld. CIT(A) confirmed the addition so made

by the Assessing Officer.

made by the Assessing Officer on assumption and presumption basis. He has

further invited our attention to the statement recorded of Shri Harjeet Singh.

A perusal of the said statement reveals that in fact Shri Harjeet Singh was not

ITA No.6 & 7-chd-2018 & C.O. 12-c-2018 M/s Hansa Tubes Pvt. Ltd, Chandigarh 7 owner of the said land, rather, the same was owned by some ‘Dera Sai Lok

Sant Sukha Singh’ of Rawalpindi. Shri P.B. Singh General Secretary of the

Dera who was also Power of Attorney holder for the land in question came

into contact with one Dr. Major Singh for sale of said land. Dr. Major Singh

further asked Shri Harjeet Singh to be partner in that transaction of sale and

purchase of land. Thus, Shri Harjeet Singh was entered as a party (proposed

purchaser) on the asking of Dr. Major Singh, for the purchase of said land by

them from Shri P.B. Singh. He did not know the exact amount of money paid

by Shri Arun Gupta. Shri Harjeet Singh was neither owner nor actual seller

of the land and even he was not aware of the full facts relating to the

transaction as is revealed from his statement.

payment of Rs. 5.6 lacs for purchase of stamp paper which was duly

accounted for in the books of account. Under the circumstances, the addition

made by the Assessing Officer on the basis of rough agreement to sell cannot

be held to be justified and the same is accordingly ordered to be deleted.

been pressed by the Ld. Counsel for the assessee, the same is accordingly

dismissed as ‘not pressed’.

In the result, the Cross objections of the assessee are partly allowed.

ITA No. 7/Chd/2018 (A.Y. 2013-14)

ITA No.6 & 7-chd-2018 & C.O. 12-c-2018 M/s Hansa Tubes Pvt. Ltd, Chandigarh 8 1. That the Ld. CIT(A) has wrongly upheld the addition of Rs. 2,73,562/- on account of negligible difference of 0.33% in stock found during the course of search. 2. That the appellant craves leave to add, amend, alter or withdrawn any ground of appeal before final hearing. 12. A perusal of the above grounds of appeal reveals that the assessee has

agitated the action of the Ld. CIT(A) in confirming the addition made by the

Assessing Officer on account of estimation of profits on account of

difference in the amount of stock found on physical verification and the stock

as per the books. On valuation, it was found that there was 10.55 MT excess

stock which was valued as Rs. 2,73,562/-. The Assessing Officer added the

said amount as unexplained investment of the assessee.

The Ld. CIT(A) confirmed the addition so made by the Assessing

Officer.

stock of the assessee was 3805.625 MT and that the excess stock was just

0.33% of the stock as per books. That it was a minor difference which may

occur while weighing the stock. In fact, the Department had not weighed the

stock but had taken the weight only on counting the bundles. That the scrap

was also taken on estimation basis in the books, whereas, it is actually

weighed at the time of sale. Further, the assessee also gave item wise

explanation of the difference of stock. Considering the explanation of the

assessee and also considering the minor variation as compared to the actual

ITA No.6 & 7-chd-2018 & C.O. 12-c-2018 M/s Hansa Tubes Pvt. Ltd, Chandigarh 9 stock of the assessee, we find force in the contention of the assessee that in

such a huge stock minor variation in weight / valuation may occur. Moreover,

the assessee has also explained that the weight of the stock material and

furnished goods is taken on estimation basis which are actually weighed at

the time of the sale. Furthermore, the total stock was not actually weighed,

rather, the same was taken by counting the bundles. Considering the overall

facts, we agree that the contention raised by the assessee that the minor

difference in the stock may be due to some weighing and valuation error.

In view of this, the addition made by the lower authorities on this issue

is ordered to be deleted. This appeal of the assessee is hereby allowed.

In the result, the appeal of the Revenue in ITA 6/Chd/2019 is dismissed

and the corresponding cross objection is partly allowed. The appeal of the

assessee in ITA Nos. 7/Chd/2019 stands allowed.

Order pronounced in the Open Court on 30.10.2019.

Sd/- Sd/- (अ�नपूणा� गु�ता / ANNAPURNA GUPTA) (संजय गग� / SANJAY GARG) लेखा सद�य/ Accountant Member �या�यक सद�य/ Judicial Member

Dated : 30.10.2019 “आर.के.”

आदेश क� ��त�ल�प अ�े�षत/ Copy of the order forwarded to : 1. अपीलाथ�/ The Appellant 2. ��यथ�/ The Respondent 3. आयकर आयु�त/ CIT 4. आयकर आयु�त (अपील)/ The CIT(A)

ITA No.6 & 7-chd-2018 & C.O. 12-c-2018 M/s Hansa Tubes Pvt. Ltd, Chandigarh 10 5. �वभागीय ��त�न�ध, आयकर अपील�य आ�धकरण, च�डीगढ़/ DR, ITAT, CHANDIGARH 6. गाड� फाईल/ Guard File

आदेशानुसार/ By order, सहायक पंजीकार/ Assistant Registrar