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Income Tax Appellate Tribunal, DELHI BENCH: ‘F’: NEW DELHI
Before: SHRI AMIT SHUKLA & SHRI ANADEE NATH MISSHRA
[A] This appeal has been filed by the assessee against the impugned appellate order dated 31.01.2017 passed by Learned Commissioner of Income-Tax (Appeals)-20, New Delhi, [in short, “Ld.CIT(A)”] pertaining to Assessment Year 2013-14. The Assessee has raised following grounds of appeal:-
“1. Disallowance on account of Purchase of Material:- {1.1} Contention of the Assessing Officer:- On perusal of Profit & Loss Account, it is observed that the assessee has debited a sum of Rs. 1,04,40,429/- on account of purchase of material. The assessee was asked to furnish the detail tow whom the same paid. For the Page 1 of 28
ITA- 2293/Del/2017. Shri Rajinder Singh. verification of claim of assessee notices u/s 133(6) were sent. From the following parties notice were returned back/ No reply received
S.No Name of the party Amount Remarks . 1 M/s Balaji marble & Granite, Plot No. E-410, Paryavaran Road, 255000 Returned Indl. Area, Madanganj- Kishangarh (Ajmer) Rajasthan -305801 back M/s Vandana Timbers, 5-A, Rajdhani Park, Main Rohtak Road, 916998 Returned Nagloi, New Delhi back 3 M/s Pal Enterprises, Savitri Nagar, Malviya Nagar, New Delhi- 2400000 Returned 110017 back 4 M/s R.K. Electronics, E-2/9, Malviya Nagar, Delhi-110017 403000 No reply Received 7 M/s Garg Timber Traders, 550, Chirag Delhi, New Delhi-110017 210250 No reply Received M/s Guru Nanak Building Material Store, 33, Corner Market 911811 No reply Malviya Nagar, New Delhi-110017 Received Total 50,97,059
For 133(6) Returned back/No reply received, the AR of the assessee was asked to give the justification that why it should not be added to the income of the assessee. The AR of the assessee replied vide note sheet entry dated 10.02.2016 stating that the addresses are correct. This reply has been considered but not tenable as no reply/confirmation has been received from concerned parties. The above 133(6) issued were returned back or no reply received. Hence, the said parties, payment of Rs.50,97,059/- is disallowed and added back to the total income of the assessee on account of bogus purchases. The AR submitted invoices. As evident from this invoice, there is not TIN / PAN which also raises doubts about its authenticity. Further, there is no name mentioned.
(Refer page-9 Para No 5& 5.1 of the Appellate Order)
{1.2} Appellants Submission:- The assessee went out of the way to attain and file detailed confirmation, with narrated bank statement, acknowledgement of return of income, and PAN of the creditors, on their behalf respectively, which are filed videpage no. 90 to 95 of the paper book for your reference.
ITA- 2293/Del/2017. Shri Rajinder Singh.
That Detailed Ledger account along with all copies of bills/ invoice of purchase of building material during the year under consideration, are enclosed again (vide page no.35 to 88) of the paper book, your ready perusal.
That the AO in his order(page 13 of the paper book) has stated that there is no TIN/PAN on the invoice of M/s Pal Enterprises. The AO neither directed the assessee to submit the same nor noted on the order sheet to make submissions. The AO has not given any opportunity to the assessee to explain the above. Also there are 13. Invoices raised by M/s Pal enterprises during the year, against the Assessee's name. The AO has only pointed out the bill, which did not have purchasing dealer's name [assessee] on it. All the bills, with the creditor's addresses and PAN are enclosed vide page no. 35 to 41 of the paper book.
That "merely because the notices u/s 133(6) could not be served upon/ returned back/ or no reply received from/ to the creditors, does not mean the transaction were bogus". All the transactions with creditors were made through banking channels (bank statement duly narrated is annexed vide page no. 33 to 34 of the paper book) and all documentary evidences prove that the assesse has transacted with the purchasing dealers genuinely.
That the AO issued notice u/s 133(6) to the business creditors on 20/01/2016 only and never again. Meaning thereby, that the AO did not intend to give another opportunity to the said creditors. As explained earlier, all detail vide letter mentioned above were filed and placed on record. Thus, the onus to prove the transaction and its genuineness no more lie upon the assessee. The AO in his order said that 'the counsel stated that the addresses are correct’.
It is vehemently denied. Neither the assessee nor the counsel issued any such statement in regard to the addresses of the creditors. The Ld.AO has made false allegation in his order vide page no. 35 to 43 of the paper book.
That the remarks in the order that, the assessee has furnished inaccurate particulars and concealed the income, because there is no TIN/PN on one creditor's invoice, is baseless. As said in para 7, all the transactions are through banking channels and are genuine. Also all the bills have the TIN and PAN incorporated and enclosed vide page 35-43 of the paper book. Addition of Rs. 50,97,059/- may very kindly be deleted.
(Refer page-10 Para-5.2 of the appellate order)
{1.3} Decision of the Ld. CIT(A)- XX:-
The AO has made an addition of Rs.50,97,059/- on account of purchase of material on the ground that notice under section 133(6) came back un served/no reply received and the invoices were not having TIN/PAN. The Assessing Officer has made this addition by simply writing that the AR of the appellant was asked to justify this and he stated that addresses are correct. During the course of appellate proceedings, the appellant has filed paper book along with the documents, which were filed before the Assessing Page 3 of 28
ITA- 2293/Del/2017. Shri Rajinder Singh. Officer and claimed that confirmation of the purchasers, bank statement, the copy of return of income, PAN etc. were filed before the Assessing Officer vide letter dated 21.10.2015,09.02.2016 and 17.02.16 which were ignored by the Assessing Officer. The appellant has also claimed that all these purchases are made through cheques. That to verify the claim of the appellant, the assessment record was called from the Assessing Officer & verified and it is gathered that during the assessment proceedings, the appellant filed the confirmation of the purchasers, ledger account, bank Statement showing cheque payment to these parties, copies of bill having TIN /PIN but the Assessing Officer has not discussed at all about these documents. It appears that the AO was only guided by the notices issued under section 133(6) which came back unserved or where no reply was received. From the assessment record it is also gathered that in the following cases notices u/s 133(6) came back unserved with the following remarks:-
Sr. Name of the party Remarks No. 1. M/s. Vandana Timbers & granite Unfound
Plot No.E-410, Paryavarana Road, Indl. Area Madanganj Kishangrah(Ajmer) Rajasthan-305801
M/s. Pal Enterprises, Savitri Natar, Malviya Nagar, New Insufficient Delhi Address 3. Balaji Marble SiGrantie Not known address returned back Plot No.E-410, Paryavarana Road, Indl. Area Madanganj Kishangrah (Ajmer) Rajasthan-305801
Further, the following creditors have not responded to the notices u/s 133(6) of the Assessing Officer:- M/s R.K. Electronicals, E-2/9, Malviya Nagar, Delhi-110017
M/s Garg Timber Traders, 550, Chirag Delhi, New Delhi-110017 M/s Guru Nanak Building material store, 33, Corner market, Malviya Nagar, New Delhi-110017
In this light, the claim of the appellant has been considered and found that the Assessing Officer vide notice u/s 142(1) dated 29.07.2015 has asked for the name
ITA- 2293/Del/2017. Shri Rajinder Singh. and address for the party from whom purchases was made of more than Rs. 5 lacs. In compliances to this on 21.10.2015 the appellant has filed these details where the name and address of the appellant has filed these details where the name and address of Gurunanak Building Material, Pal Enterprises, Nav Durga Steel And Sanitary, Ahluwalia Marbles and Vandana Timbers was given. In these accounts only Pal Enterprises and Vandana Timbers credit balance of Rs. 19,12,000/- and Rs.7,67,234/- was shown respectively. On 26.10.2015 vide order sheet entry the Assessing Officer has asked the appellant to file the confirmation to the creditors. Subsequently vide letter dated 07.12.2015 the appellant has filed the confirmed copy of Pal Enterprises and Vandana Timbers. On 20.01.2016 the Assessing Officer vide order sheet entry has asked for purchase voucher & bills and creditors address and confirmation. Vide letter dated 28.01.2016 again confirmed copies of Vandana Timbers, Pal Enterprises, Gurunanak Building Material Store, Bills & vouchers of Pal Enterprises, Vandana Timbers, Gurunanak Builiding Material, Ahluwalia Marbels, R.K. Electricals and Garg Timber Traders as well as ledger copies of these parties in the books of the appellant was produced. Again the appellant vide letter dated 10.02.2016 has mentioned the following:-
"That confirmations from sundry creditors namely M/s Balaji Marbles, M/s Vandana Timber (PAN- AAEFV9228P)-, M/s R.K. Electricals (PAN- AAFFR8583G), M/s Nav Durga Steel, M/s Garg Timber, M/s Gurunanak Building Material (PAN- AAKPM9550H)-, M/s Pal Enterprises (AKHPB4641B)-. All the above confirmation are filed by the assessee vide letter dated 18-11-2015 para 5." On 10.02.2016 vide order sheet entry the Assessing Officer has made the following Entry in relation to the notices which came back unserved:- "He was informed returned 133(6) from vendors. AR stated that address are correct. On AR request, final date 17 Feb 2016"
On 17 Feb the appellant has filed letter along with documents. The relevant portion of the letter dated 17.02.2016 of the appellant is reproduced as under:- "that confirmations from sundry creditors, with their acknowledgement of return of income & PAN, namely: M/s. Gurnanak Building Material (PAN AAKPM9550h), M/s. Pal Enterprises (AKHPB4641B)- are enclosed for your ready reference." On 17th Feb the following order sheet entry has been made:- “Shri Sameer Malhotra AR attended and filed final response from side of assessee. Case was discussed.” On this date no adverse observation was made in the order sheet nor any further query was made by the Assessing Officer in the order sheet.
All the confirmations of the above mentioned six parties are also produced before me during the course of appellate proceedings. Besides this, the copy of ledger account, bank statement showing cheque payment to these parties, PAN etc. are also filed before me which were already filed before Assessing Officer.
ITA- 2293/Del/2017. Shri Rajinder Singh. In this light, the appellant was asked to submit the detail of the gross profit and net profit of the last 3 years which is submitted by the appellant and reproduced as under:-
Assessment Year 2011-12 2012-13 2013-14 Gross Profit 13.60 14.36 18.79
Net Profit 5.92 7.32 15.33
From this it is apparent that the gross profit has increased from 13.60 to 18.79 and net profit has increased from 5.92% to 15.33% from the assessment year 2013-14 which is quite reasonable in this line of business. The AO has not made any effort to make enquiries from bank when the payments were made through cheques and ignored the relevant details and documents filed by the appellant during the course of the assessment proceeding in the form of confirmations, Return of income, PAN, bills and cheque payment through bank statements. In the light of these evidences produced by the appellant and the increased net profit shown by the appellant, I do not find any justification of the addition made by the Assessing Officer regarding purchase. Even when the appellant has filed confirmations of these parties, the AO has not made any adverse observation in the order sheet or any query to the appellant. From the assessment record and order sheet entries, it is also apparent that Assessing Officer has made any query to the appellant regarding the non compliance by the three parties i.e. Gurunanak Building Material, R.K. Electricals and Garg Timber Traders and only asked about the return of notices in the case of another three parties i.e. Pal Enterprises, Vandana Timbers and Balaji Marble & Granite.
Finally, the order u/s 143(3) has been passed on 07.03.2016 by the Assessing Officer without giving any show cause letter or opportunity to the appellant and addition of Rs.50,97,059/- in respect of the purchase made from above six parties was made by the Assessing Officer. But the observation of Assessing Officer regarding the missing name of the appellant as well as PAN/TIN on the invoices of Pal Enterprises are correct and in the following invoices name the appellant has not been given:-
ITA- 2293/Del/2017. Shri Rajinder Singh. S.No. Date Bill No. Amount 02/11/2012 604 187000.00 1. 09/11/2012 236000.00 2. 610 3. 16/11/2012 114400.00 618 4. 19/11/2013 84300.00 621 5. 23/11/2012 99200.00 626 30/11/2012 630 117400.00 6. 7. 05/12/2012 633 184000.00
17/12/2012 642 96000.00 8. 9. 28/12/2012 648 56000.00
04/01/2013 653 14300.00 10. 14/01/2013 98000.00 11. 661 06/02/2013 672 88400.00 12. 13. 26/02/2013 685 73500.00
01/03/2013 689 23900.00
17/03/2013 693 87000.00
29/03/2013 699 55900.00
1615300.00
It is also strange that the appellant is marking cheque payments on regular basis to all the parties including Pal Enterprises, but no payments has been made after 22.10.2012relating to these bills which are outstanding even on 31.03.2013. The frequency of transaction and series no.of bills staring from 604 to 699 is also doubtful as before this the transaction from Pal Enterprises was made through bill no.2188, Page 7 of 28
ITA- 2293/Del/2017. Shri Rajinder Singh. 2254, 2316 and 2361 from 20.06.2012 to 20.102012. As no independent confirmation was received from Pal Enterprises, the transaction of above-mentioned bills where the name of the appellant is missing could not be substantiated. Further, during the course of appellate proceedings the appellant could not produce any evidence of subsequent payments made relating to these bills. Hence, the addition of the amount of Rs.16,15,300/- relating to these bills of Pal Enterprises made by the Assessing Officer is confirmed and the addition of amount of Rs.34,81,759/- (5097059 -1615300) made by the Assessing Officer is deleted. The appellant will get relief accordingly.
(Refer page -11 to 14 Para- 5.3 of the appellate order
{1.4} Contention of the Assessee to the hon'ble bench: -
A. THAT the Ld. CIT(A)- 20 has erred in passing the 'Appellate Order', without affording sufficient opportunity to the assessee. B. THAT it is brought to your honor's kind notice that neither at the time of assessment, nor at the time of hearing of Appeal, the assessee was directed to produce evidence of payments made to M/s Pal Enterprises, post 31/03/2014. C. THAT M/s Pal Enterprises is one of the business creditors of the assessee and has an amount receivable to the tune of Rs, 19,20,000/- from the assessee concern, as on 31/03/2014 (copy of ledger enclosed). The CIT(A)- 20 has only confirmed the addition of the Ld. AO an amount to the tune of Rs. 16,15,300/- because the bills/ invoices (16 nos.) did not have name of the assessee on the same. D. Although, the evidence of payments made to M/s Pal Enterprises post 31/03/2014 are made available to the Hon’ble bench, along post 31/03/2014 are made available to the hon'ble bench, along with copies of all the bills/ invoices, ledger account & confirmation issued by M/s Pal Enterprise, to the assessee during the year under consideration and in the subsequent years. E. THAT Copy of ledger accounts, confirmations, PAN, duly narrated bank statement in regard to the transactions between the assessee and the seller/ sundry creditor, who sold building material to the assessee during the year, namely, M/s Pal Enterprises (AKHPB4641B) are enclosed for your honor's ready perusal. The same were filed during assessment and appellate proceedings vide letter dated 17/02/2016, 18/11/2015 and 21/10/2015. Copies of letters are also enclosed for your reference. F. THAT no opportunity was afforded to the assessee to establish if the payments were made to M/s Pal Enterprises in the subsequent years. G. THAT keeping the facts and circumstances in view, the addition of Rs. 16,15,300/- on the above account may very kindly be deleted.
(2}Disallowance on account of Personal Expenses:-
{2.1) Contention of the Assessing Officer;-
The assessee in his books of A/c's claimed the following expenses which are reproduced as under:
ITA- 2293/Del/2017. Shri Rajinder Singh. Rs.22,932/- (a) Car insurance Rs.50,361/- (b) Interest on car Loan Rs.1,86,507/- Rs.2,59,800/- (c) Car depreciation Total Amount
As possibility of these expenses for non business/personal purpose could not be ruled out, due to the facts that no log book is maintained by the assessee nor is produced from which it can be verified that these expenses were used wholly and exclusively for the business use only.
Therefore, an ad-hoc edition of 20% of the total amount spent on these expenses Rs. 2,59,800/- i.e. Rs. 51,960/- is made and added back to the income of the assessee on account of personal use of these expenses.
{2.2} Appellant's Submission:- 19. THAT disallowance made on for. 20% disallowance of Rs.22,932/- from card insurance, Rs. 50,361/- as Interest on car loon has already been made by the AO in his order vide para IV (page 12 of the paper book). Meaning thereby the AO has made the same addition twice i.e. vide para IV & V both, in his order (refer page 12 of the paper book). Copy of ledger account is filed vide page no. 96 to 99 of the paper book. It also shows the kind of interest taken and the intention of the AO while passing the order.
That 20% of Rs.1,86,507/- claimed as car depreciation is disallowed. The deprecation is claimed at 15% of the total value, i.e. Rs. 1,86,507. The same is allowable under the provisions of the act. In addition to this, the AO has not given any reason before making the addition/disallowance of depreciation claimed. The addition/ disallowance may kindly be deleted.
That it may also be considered that assessee lives close by to his office. He does not use the vehicle for his personal use. He the vehicle to visit construction sites and makes purchase for building material within Delhi/NCR. The use of the said vehicle is completely official. Addition of Rs. 51,96.0/- is totally unjustified.
(Refer page-18 & Para -9.1 or 9.2 of the Appellate order)
{2.3} Decision of the CIT(A)- XX:-
The AO has made adhoc addition @ 20% of the total amount spent on account of car insurance of Rs.22,932, interest on car loan of Rs.50,361/- and car depreciation of Rs.186507/-. The expenditure on car insurance and interest on car loan are fixed expenditure and has to be incurred by the appellant even if there is no personal element on such expenses. However, the car depreciation has to be disallowed u/s 38(2) of the Act on persona element specially on the ground that during the course of hearing vide order sheet entry dated 06.12.2016 the appellant had accepted this fact that the proprietor is having only one vehicle in his name which is used in the business and there is no vehicle in the name of his wife also for personal use which was claimed earlier. In this light, the personal use of the vehicle cannot be ruled out. However, the disallowance @20% made by Assessing Officer is excessive and it is reasonable to Page 9 of 28
ITA- 2293/Del/2017. Shri Rajinder Singh. restrict the disallowance @ 10% which comes to Rs.18, 650/- and appellant will get relief accordingly. (Refer page -19 & Para -9.3 of the Appellate order) (2.4} Contention of the Assessee to the hon'ble bench: -
A. THAT it is apparent that the gross profit has increased from 13.60 to 18.79 and net profit has increased from 5.92% to 15.33% from the assessment year 2013-14 which is quite reasonable in this line of business. Considering the facts & circumstances of the case, ad hoc addition @10% may very kindly be deleted on the above ground.”
[B] Vide Assessment Order dated 07.03.2016 passed under Section 143(3) of the Income Tax Act, 1961 (in short “the I.T. Act”). The relevant portion of the Assessment Order dated 07.03.2016 is reproduced as under:-
“
ITA- 2293/Del/2017. Shri Rajinder Singh. ITA- 2293/Del/2017. Shri Rajinder Singh. ITA- 2293/Del/2017. Shri Rajinder Singh.
”
ITA- 2293/Del/2017. Shri Rajinder Singh. [C] The Assessee filed appeal before the Ld. CIT(A). Vide impugned appellate order dated 31.01.2017, wherein the Ld. CIT(A) partly allowed the assessee’s appeal. The relevant portion of the order dated 31.01.2017 of the Ld. CIT(A) is reproduced as under:
“
ITA- 2293/Del/2017. Shri Rajinder Singh. ITA- 2293/Del/2017. Shri Rajinder Singh. ITA- 2293/Del/2017. Shri Rajinder Singh. ITA- 2293/Del/2017. Shri Rajinder Singh. ITA- 2293/Del/2017. Shri Rajinder Singh. ITA- 2293/Del/2017. Shri Rajinder Singh. ITA- 2293/Del/2017. Shri Rajinder Singh. ITA- 2293/Del/2017. Shri Rajinder Singh. ITA- 2293/Del/2017. Shri Rajinder Singh. ITA- 2293/Del/2017. Shri Rajinder Singh. ITA- 2293/Del/2017. Shri Rajinder Singh. ITA- 2293/Del/2017. Shri Rajinder Singh.
”
[D] This present appeal has been filed by the assessee against the aforesaid impugned appellate order dated 31.01.2017 of the Ld. CIT(A). At the time of hearing, Revenue was represented by Shri Surender Pal, the learned Senior Departmental Representative (“Ld. Sr. DR”, for short). However, none was present from the assessee’s side. In the absence of any representation from assessee’s side, at the time of hearing before us, we heard the Ld. Sr. DR; who relied upon the order dated 07.03.2016 of the Assessing Officer and the aforesaid impugned appellate order dated 31.01.2017 of the Ld. CIT(A). After perusal of the materials on record, including the order of the AO and the aforesaid impugned order dated 31.01.2017 of the Ld. CIT(A), we find that the Ld. CIT(A) has passed speaking order on merits. Relevant portion of the impugned order of the Ld. CIT(A) has already been reproduced in foregoing paragraph [C] of this order. We find that the Ld. CIT(A) has given detailed reasons for ITA- 2293/Del/2017. Shri Rajinder Singh. his decision on merits in the aforesaid impugned appellate order dated 31.01.2017 of Ld. CIT(A). During appellate proceedings in Income Tax Appellate Tribunal (“ITAT”, for short) no material has been brought for our consideration to persuade us to take a view different from the view taken by the Ld. CIT(A) in the impugned order on merit. After hearing the Ld. Sr. DR and after perusal of materials on record, and further, in view of the foregoing discussion, we decline to interfere with the aforesaid impugned appellate order dated 31.01.2017 of Ld. CIT(A), and accordingly, this appeal is dismissed.
[E] Before we part; we explicitly clarify that the assessee will be at liberty to approach ITAT for restoration of the appeal in accordance with Proviso to Rule 24 of Income Tax (Appellate Tribunal), Rules, 1963. If the assessee does approach ITAT for restoration of the appeals in ITAT, the matter will be considered in accordance with law having regard to the facts and circumstances.
[F] In the result, appeal filed by Assessee is dismissed.
Order pronounced in the open court on 18/12/2019.