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Income Tax Appellate Tribunal, DELHI BENCH: “A” NEW DELHI
Before: SHRI R.K. PANDA & SHRI K.NARASIMHA CHARY
Challenging the order dated 24/6/2016 in appeal No. 174/14- 15/17/15-16 passed by the learned Commissioner of Income Tax (Appeals)-25, Delhi (“CIT”) in the case of M/s AGS Retail Private Limited (“the assessee”) for the assessment year 2011-12, Revenue filed this appeal.
Brief facts of the case as could be culled out from the record and documents, are that the assessee is engaged in the business activities in India or elsewhere as traders, merchants, retailers, listeners, stockist, distributors, importers etc under the name and style of M/s AGS Retails Private Limited. There was search and seizure operations under section 132/133A of the Income Tax Act, 1961 (for short “the Act”) on 17/08/2011 in the case of the group at various residential and business premises. Assessee filed return of income declaring an income of Rs.3,55,164/-. Learned Assessing Officer noted that during the search proceedings at the office of the AGS group of offices at Gurgaon documents impounded as Annexure A-5 page No. 57 and Annexure A-8 page No. 58. According to the learned Assessing Officer Annexure A5 shows that the assessee had raised an invoice dated 31/3/2011 for Rs.1,97,15,545/-as commission for supply of medicines to M/s Vivek Formchem (India) Ltd, Ajmer, Jaipur, Rajasthan whereas Annexure 8 shows that the assessee raised another invoice for Rs. 60.41 Lacs in the name of M/s Master Capital Service Limited on 31/3/2011 for services provided during the Financial Year 2010-11, but no details of service was mentioned in the invoice.
Assessee pleaded before the learned Assessing Officer that the assessee has not booked any bogus expenditure and in fact in the books of assessee this transaction whereby the assessee has earned income was shown and taxes were paid. Assessee also submitted the complete details of the contract and invoices are appearing in the books of accounts of the assessee. In support of its claim the assessee also submitted the copy of Ledger account of the party in the books of the assessee, copy of AS-26 reflecting the TDS deduction by the party and the copy of bank statement and other relevant documents. Assessee also pleaded that without prejudice to the said contention, if for any reason the Revenue considers the transaction to be bogus and treats the expenses as bogus/unexplained, the corresponding receipts should also not be treated as actual receipts.
Learned Assessing Officer, however, did not find the explanation of the assessee as convincing and stated that the assessee has not furnished any documentary evidence on which reliance could be placed such as any copy of agreement signed between the parties or any such other document which has not been prepared by the assessee company on its own. In respect of the bank account, learned Assessing Officer noted that the relationship between the parties and the manner in which the transaction was not entered is not clear from this document. Learned Assessing Officer, therefore, treated the invoice amount as bogus expenses and brought to tax a sum of Rs. 2,61,56,545/-.
Aggrieved by the said addition, assessee preferred an appeal before the Ld. CIT(A) and contended that, apart from other activities, the assessee also acts as a liasoners, stockists and broker which is verifiable from the Memorandum of Association placed on record during the assessment proceedings. According to the assessee during the year under consideration the assessee raised the invoice amount into Rs.1,97,15,545/-to M/s Vivek Pharmachem against providing liaison services to them. Assessee submitted the copy of agreement between M/s Vivek Pharmachem and the assessee. Assessee further submitted that a similar addition was made in the case of receipts from M/s Capital Services Ltd against the brokerage services provided amounting to Rs. 64.61 Lacs solely on the basis of invoice marked as Annexure P-8. According to the assessee, the learned Assessing Officer was not justified in making the addition because the receipts from the invoices raised on the concerned parties were being duly recorded in the books of accounts and if the same amount is added again, it would lead to double taxation.
Ld. CIT(A) considered the contentions of the assessee in the light of the documents produced by the assessee and also reappraised the evidence on record. Ld. CIT(A) observed that the two invoices in question do not represent expenses, but rather represent income. According to the Ld. CIT(A) if the learned Assessing Officer suspects that bogus expenses were booked against the income from invoices, the learned Assessing Officer should have gathered evidence without which the addition could not be sustained. Ld. CIT(A) further found that the observations of the learned Assessing Officer that the amounts in question as per the two invoices were not finding place in the accounts/books of assessee are baseless. Ld. CIT(A) was also of the opinion that form AS-26 is an independent document prepared by a government agency of the Income Tax Department and such form AS-26 reflects the deduction of TDS by both the parties in question. On these facts and circumstances, Ld. CIT(A) reached to conclusion that there was no justification for the addition of Rs. 2,61,56,545/-and, therefore, directed the deletion of the same.
Revenue is, therefore, aggrieved of such findings of the Ld. CIT(A) and preferred this appeal. Contention of the Ld. DR is that when the Ld. CIT(A) was relying on the agreement between M/s Vivek Pharmachem and the assessee which was submitted during the proceedings before Ld. CIT(A), in all fairness Ld. CIT(A) should have sought the remand report from the learned Assessing Officer before reaching a conclusion as to the genuineness of the document and the transaction. He therefore prayed that the matter may be remanded to the file of the learned Assessing Officer in order to verify the veracity this document. Ld. DR placed reliance on the decision reported in CIT vs. JansamparkAdvertising &Marketing (P) Ltd (2015) 56 taxmann.com 286 (Delhi) in support of his contention that it is incumbent on the Ld. CIT(A) to ensure that the matter of assessment reaches finality with all the requisite facts on record and if for any reason the Ld. CIT(A) feels that the assessing officer went wrong in gathering the facts necessary for the final assessment, Ld. CIT(A) in all fairness should have called for a remand report.
Ld. AR submitted that the assessee has no objection for the remand of the matter for verification at the end of the learned Assessing Officer but submitted that the enquiry may be directed to be limited for such verification. He further submitted that the learned Assessing Officer was in a confused state of mind while dealing with the amount covered by these 2 invoices, inasmuch as the Assessing Officer was of the opinion that the assessee using such invoices for taking a turnover entry are for booking bogus expenses against the certain income or for providing bogus bill of expenses to other parties, whereas he brought the entire amount covered by the invoices to tax, which was already shown in the books of accounts for the tax purposes and taxes were paid.
We have gone through the record in the light of the submissions made on either side. Assessee admitted to have received the amounts covered by the invoices. There is no comment on the books of accounts of the assessee by the learned Assessing Officer, but according to the learned Assessing Officer there is no document which has not been prepared by the assessee company on its own in support of the contentions of the assessee. It is also an admitted fact that the party who paid the sums to the assessee have deducted TDS on such amounts as reflected in form AS-26. These receipts of the assessee, as observed by the Ld. CIT(A), are reflected in the books of accounts of the assessee. Finally, learned Assessing Officer was of the opinion that the bogus expenses booked and such bogus expenses were to be disallowed. On this premise learned Assessing Officer added the receipts of Rs. 2,61,56,545/-to the income of the assessee. It is, therefore, clear that the Assessing Officer is not sure whether he was adding the income or disallowing the expenses. It is not that the assessee claimed the expenses to the tune of Rs. 2,61,56,545/-which the learned Assessing Officer wanted to disallow.
In view of the fact that the veracity of the agreement between M/s Vivek Pharmachem and the assessee needs to be verified by the learned Assessing Officer, as submitted by both the counsel, we are of the considered opinion that this is a fit matter to set aside the impugned order and to remand the issue to the file of the learned Assessing Officer for verification of the agreement and to reach a right conclusion. We order so. Grounds of appeal of the Revenue are accordingly allowed for statistical purpose.
In the result, appeal of the Revenue is allowed for statistical purpose.