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Income Tax Appellate Tribunal, DELHI BENCH ‘C% NEW DELHI m si tr 3tk anr =spnr, #srr g-sfr ^swr riTcjerr,
Before: MS. SUSHMA CHOWLA
The present appeal filed by aeeessee is against order of CIT(A)-2, New Delhi dated 31.08.2015 relating to assessment year 2011-12 against order passed under, section 143(3) of the Income Tax Act, 1961.
The Revenue has raised following grounds of appeal which read as under:
1. Whether the Ld. CIT (A) has erred on facts and in lau> in deleting the addition of Rs. 10,20,64,174/- on account of amount credited in bank account of the assessee in excess of receipts as per' books of account and also allowing the assessee appeal against the rejection of the books of accounts of the assessee.
2. Whether the Ld. CIT (A) has erred on facts and in law in deleting the addition of Rs. 23,02,705/- made on account of difference in brokers' account submitted by assessee and party wise gross receipts in assessee's books of accounts.
3. Whether the Ld. CIT(A) has erred on facts and in law in deleting the addition of Rs. 2, 76,200/- made on account of non deduction of TDS on professional charges.
4. Whether the Ld. CIT(A) has erred on facts and in law in deleting the . disallowance of Rs. 6,25,265/- made as per rule 8D (i) (ii) & (Hi) r/w/s 14A of the Act.
The Revenue has also raised an additional ground of appeal which reads as under
The Ld. CIT(A) has erred in admitting additional evidences without' affording any opportunity to the AO which is violation of Rules 46A.
Briefly in the facts of the case, the assessee had furnished return of income declaring income of Rs. 42,43,39,960/-. The case of the assessee was selected for scrutiny. The assessee was engaged in the business of equity trading, derivatives trading and in real estate investment. The AO noted from the perusal of bank statement that the amount credited into bank account of the assessee was Rs. 59,71,35,900/- whereas the receipts of the year amounted to Rs. 49,50,71,726/-. The AO also analyzed the withdrawals made by the AO and the share transactions entered into by the assessee with different breakers and added the difference of 10,20,64,174/- between the deposits in the bank and the receipts shown by the assessee and further added difference of Rs. 23,02,705/- i.e. the difference between the broker’s statement and the receipt shown in the books of accounts of the assessee. The AO on the basis of certain
information was of the view that the assessee was not trading in shares but was only an entry operator hence addition of Rs. 10,43,66,879/- was made.
The next addition made in the hands of the assessee was on account
of deemed dividend under .section 2(22)(e) of the Act at Rs. 29,27,178/-.
The assessee had claimed ROC expenses of Rs.2,50,91/- for enhancing its authorized share capital. However, the same was disallowed. The AO also disallowed the deduction claimed on account of professional fee paid of Rs.
2,76,200/- for non deduction of tax at source. Another addition made in the hands of the assessee was the disallowance under section 14A of the Act at Rs. 6,25,265/-.
Before the CIT(A), the assessee furnished written submissions and the CIT(A) dealt with each of the issue. The first issue which was decided was the addition made after rejection of books of accounts. The CIT(A) from para 3.0 to 3.1.9 dealt with the aforesaid issue and was of the view that the rejection of books of accounts was not sustainable.
Coming to the consequent addition made of Rs. 10,20,64,174/- on account of alleged difference in receipts as per the bank account of the assessee and receipts as per its books of account. The contention of the assessee in this regard was noted vide para 4.1.3, which reads as under:-
Credit entries appearing into Amount deposited into Capital Receipts and Difference added Explanation on difference revenue receipts shown in by the assessing which is corroborated from the bank along with narration Bank Account o f the bank statement, etc. appellant B/s and P&L A/c during officer the year against amount deposited into bank
A B - A-B
Cash deposited in previous Cash deposited 10,000 10,000 year on 25.11.2009 Capital Receipts shown in Balance sheet
Amount received as loan and Indo Gulf Diagnostics & 77,600,000 69,650,000 7,950,000 shown in balance sheet under Research Centre Pvt. Ltd. the head "Loans & advances”
Rs. 40,000,000 - is refund oj Unibros Manufacturing 40,000,000 40,000,000 loan given to M/s Unibros Company Pvt. Ltd. Manufacturing Company Pvt. Ltd. O f Rs 150,000,000 on 25.08.2010 shown under Loans & advances.
2,02,850 Contra Entiy on account of DD Roc Exp. (Company Secretary) 202,850 cancelled us shown in bank account on 09.08.2010 Revenue from Trading in Equity (F&O) and commodity derivative (net)
121,667,277 10,500,000 Rs. 10,500,000/- (Rs Zaljog Commodities Trade Pvt. 132,667,277 50,00,000 + Rs 55,00,000) Ltd. dated 05.07.2010 Contra entry as shown in bank statement on account oj Cheque dishonored on 06.07.2010 Difference o f amount appeared in bank account on account of cash deposit, 58,662,850 contra entry, loan received back, loans & advances given duly accounted into books of accounts
5,00,000 Rs 5,00,000/- paid as Margin Zaljog Commodities Trade Pvt. money on 26.06.2010 by the Ltd. appellant which is received back and not considered as part o f revenue or expense
189,494,543 500,000 Rs. 500,000 paid as Margin R. K. Commodities Services Pvt. 189,994,543 money on 05.07.2010 by the Ltd. appellant which is received back and not considered as part of revenue or expense
5,00,000 Rs 500,000 paid as Margin money 14.000,000 13,593,195 Kumar Share Brokers Ltd. on 12.07.2010 by the appellant which is received back and^ not considered as part o f revenue or expense
Rs 89,246 Debit closing balance (89,246) as shown in Balance sheet under the head "Advance to Parties”. '*
(3,950) Rs 3,950 other charges shown vr separately in Profit & loss account
Capital Wizard Stock 22,155,231 22,155,231 Broking Pvt. Ltd.
Difference o f amount received from Brokers with whom trading 14,06,805 in Equity (F&O) and Commodity Derivative is done
Total revenue 346,910,246 from trading
Revenue fro m Real Estate
Supertech Limited 120,506,000 70,506,000 50,000,000 Rs. 50,000,000/- given advance against booking to M/s Supertech Limited hence, net revenue considered in P&L A/ c while total receipts shown in bank account
Total Difference without considering interest accrued 110,069,655
Revenue fro m Interest Income
Interest income not actually 8,005,480 (8,005,480) Interest accrued on loan credited received into bank in Profit & loss account not received in bank N et difference added by 597,135,900 49,50,71,726 102,064,174 the learned assessing officer
The CIT(A) further observed as under 4:1.6 In my considered view, addition made of Rs 10,20,64,174/- on account of amount credited in bank account of the appellant in excess of receipts as per books of account is not sustainable in view of documentary evidences already available on record to substantiate the said difference. The AO has failed to make any sincere effort regarding the same and made addition only on the basis of doubt, suspicion, conjecture or surmises without affording proper opportunity of being heard to the appellant which is in violation of principles of natural justice. Hence, considering the entire facts and circumstances of the case of the appellant, addition made by AO is liable to be deleted.
The learned DR for the Revenue has failed to controvert the findings of CIT(A) in this regard. We find no merit in the issue raised vide ground of appeal
no.'
1. Before parting, we may also point out that no additional evidence was produced before the CIT(A) and hence there is no merit in the'"' additional ground of appeal raised by the Revenue.
10. Now coming to next issue i.e. against addition of Rs. 23,02,705/- made on account of alleged difference in brokers’ accounts and party wise gross receipts submitted by .the appellant. The assessee duly explained the said difference and the tabulated details read as under:-
As p er Party - wise detail Difference Explanation /Remarks Name o f Party As p er Accounts o f Broker submitted by o f Gross receipts(net off income not toss before deducting disclosed Assessee STT)
6,56,365 = (5,00,000 paid 19,00,94,585 18,94,94,592 5,99,993 R.K. Commodities as Margin Money and not Services Pvt. Ltd. Actually Rs a part o f gross (Correct Fig Rs. 19,01,50,957 gross 6,56,365 consideration + 1,56,365 Loss not considered by receipts) AO)
6,00,000 Rs 5,00,000 paid as 12.22.67.276 12,16,67,276 Zaljog Commodities Margin Money and not a Trade Pvt. Ltd. (Actually Rs part o f gross consideration (Correct Fig Rs 12.21.67.276 net o f 5,00,000) loss)
2,30,578 Rs 5,00,000 paid as 1,41,47,171 1,39,16,593 Kumar Share Brokers Margin Money and not a Ltd. A dually Rs part o f gross consideration (Correct Fig Rs 1,44,16,594 gross 5,00,000) receipts)
Rs 8,72,134 = (Rs 2,27,83,194 8,72,134 Capital Wizard Stock 2,36,55,328 (net o f 15,00,000 contra entry on Broking Pvt. Ltd. loss and STT) account ofD D cancelled as shown in ledger account of M/s Capital Wizard less Rs 6,27,867 STT not deducted in gross receipts by appellant)
34,78,61,655 23,02,705 35,01,64,360 Total
The CIT(A) deleted the said addition made by the AO observing that the said difference in party wise detail and brokers’ account is due to Margin Money and STT. In view of the findings of the CIT(A) with regard to the aforesaid addition, we find no merit in the grounds of appeal no. 2
raised by the Revenue and the same is dismissed.
12. Now coming to the .next issue of the deletion of addition of Rs.
2,76,200/-, the CIT(A) noted that the assessee had not claimed the said professional expenses in its profit & loss account and had capitalized the same under work in progress i.e. “Building under Construction” in fixed assets schedule. The CIT(A) thus deleted the addition. We find merit in the order of the CIT(A) and uphold that the provisions of section 40(a)(ia) of the Act are attracted only if expenses are claimed in the profit & loss account and not when the same are capitalized.
The last addition made in the hands of the assessee was on account of disallowance made under section 14A r.w.r. 8D. The CIT(A) noted that the assessee had made investment only in share application money of Rs. 2.69 Crores as on 31.03.2011 and hence there was no merit in invoking the provisions of section 14A of the Act. We uphold the order of CIT(A) in this regard and dismiss the ground of appeal no. 3 raised by the Revenue.