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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).
First, we take up the appeal of the Revenue’s in ITA No. 6/Chd/2018
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/-.
Both the Ld. Representatives of the parties have submitted that,
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.
In view of the aforesaid discussion, the present appeal filed
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.
Now coming to the Cross objections of the assessee for the assessment
year 2012-13.
C.O. 12/Chd/2018:
Following grounds have been raised by the assessee in its cross
objections:-
That the learned CIT (A) has wrongly upheld the addition of Rs. 4,38,800/-simply on the basis of oral statement without any incriminating material found during the course of search .
That the addition of Rs 60,37,689/- has been wrongly made by AO on account of low gross profit without any incriminating material found during course of search & therefore the addition on account of low gross profit is beyond scope of assessment framed u/s 153A of Income Tax Act consequent upon search under section 132(1) of Income Tax .
The assessee through its cross objections (ground No.1) has agitated
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.
Before us, Ld. AR has submitted that the aforesaid addition has been
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.
On the other hand, the Shri Arun Gupta had duly explained for cash
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.
Since the ground No.2 of the cross objections raised above has not
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)
The assessee in this appeal has taken following grounds of appeal:-
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.
Before us, the Ld. Counsel for the assessee has submitted that the total
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