WALTAIR TRADERS,VISAKHAPATNAM vs. NEAC, DELHI

This appeal is filed by the assessee against the order of Learned Commissioner of Income Tax (Appeals), National Faceless Appeal Centre (NFAC), Delhi [hereinafter in short “Ld.CIT(A)”] vide DIN & Order No.

Briefly stated the facts of the case are, assessee is engaged in the business of coal trading and has filed return of income for the A.Y. 2018-19 on 31.10.2018 admitting a total income of Rs. 2,95,50,830/-. The case was selected for complete scrutiny for examining the business expenses. Thereafter statutory notices under section 143(2) and 142(1) of the Act were issued and served on the assessee. Assessee did not respond to the above notices. Later, the case was referred to verification unit for physical verification and it was noticed that letter dated 26.02.2021 has been served physically on assessee on 27.02.2021. In response, assessee furnished information called for. On verification of the information furnished by the assessee, the Ld. Assessing Officer [hereinafter in short “Ld. AO"] observed that there has been substantial increase in the sales and purchases when compared to previous year. Assessee furnished the details regarding sales and purchases above Rs.10,00,000/-. Ld. AO thereafter issued notice under section 133(6) of the Act to six parties seeking details from them regarding the purchases made by the assessee. The Ld. AO found that the following three parties have not responded or partly responded: -

Ld. AO thereafter concluded that these transactions are nothing the paper transactions and treated the same as non-genuine by adding an amount of Rs.25,31,95,262/- to the total income of the assessee.

Further, Ld. AO also noticed that assessee has claimed to have made purchase of Rs.46,06,78,644/- from M/s. Adani Enterprises Ltd., and therefore issued notice under section 133(6) of the Act to the party seeking details. In response, M/s. Adani Enterprises Ltdfurnished the requisite details. On going through the ledger account furnished by the party, Ld. AO observed that M/s.Adani Enterprises Ltd has made sales of Rs.87,08,56,625/- to the assessee and therefore the Ld AO considered the balance amount of Rs.41,01,77,981/- as unexplained under section 69C of the Act.

Further, Ld. AO also noticed that the assessee has received interest under section 194A of the Act of Rs.4,26,634/- and Rs. 28,89,339/- from Shri Brajrang Power &Ispat Ltd., and Shri Girija Alloy & Power (I) P. Ltd., respectively. Ld.AO observed that that the interest income has not been offered

Further on going through Form 26AS data, Ld. AO observed that assessee has received contract receipts under section 194C of the Act for Rs.48,70,809/- and Rs.7,99,730/- from M/s. Delta Paper Mills Ltd., and M/s.Waltair Traders respectively. Ld. AO observed that assessee has not offered income of Rs.56,70,539/- and therefore added the same to the total income of the assessee. Further on going through the 26AS, Ld. AO observed that an amount of Rs.1,17,68,558/- has been deducted as TCS where the assessee claimed Rs.1,18,97,704/- as TCS in the return of income and therefore added the difference of Rs. 1,29,146/- to the total income of the assessee.

Further, Ld. AO also noticed that assessee has deposited cash of Rs.63,00,000/- in its current account with HDFC Bank Limited and vide notice under section 142(1) dated 03.12.2020 asked the assessee to furnish the source of deposits with documentary evidences. Since the assessee did not furnish any details Ld. AO treated the cash deposits as unexplained credits under section 68 of the Act and added to the total income of the assessee.

Further, Ld. AO also observed difference in commission of sales amounting to Rs. 10,67,285/- and added the same to the total income of the assessee. Further Ld. AO also noticed that assessee has claimed Rs.95,42,395/-

Ld. AO issued a show-cause notice dated 21.04.2021 asking the assessee to show cause why the assessment should not be completed as per the draft assessment order as discussed in the earlier paragraphs. Since the assessee did not respond to the notices, the Ld. AO proceeded to add an amount of Rs.68,18,77,051/- to the total income of the assessee.

Feeling aggrieved by the additions made by the Ld. AO, assessee filed an appeal before Ld. CIT(A). During the appellate proceedings, the assessee was asked to furnish its submissions on the additions made by the Ld. AO. The submissions of the assessee were forwarded to the Ld. AO for his comments and observations since the assessee has claimed that no proper opportunity was given to the assessee during the assessment proceedings. The Ld. AO submitted the Remand Report dated 13.11.2023. Considering the Remand Report furnished by the Ld. AO, the Ld. CIT(A) sustained the additions of the Ld. AO and partly allowed the appeal of the assessee.

On being aggrieved by the order of the Ld. CIT(A), assessee is in appeal before us by raising the following grounds of appeal : -

Ground Nos. 1 and 8 are general in nature and needs no specific adjudication.

Per contra, Ld. DR heavily relied on the orders of the Ld. CIT(A). He also further submitted that the Ld. CIT(A) has not passed a reasoned order with respect to the addition made by the Assessing Officer.

Ground No. 3 is with respect to considering the purchases amounting to Rs. 25,31,95,262/- as non-genuine by the Revenue. Ld.AR submitted that to prove the purchases are genuine assessee has furnished the GST Returns in Form 2A and also Form 26AS and the status report of vendors where the purchase transactions are reflected. She submitted that since the party did not Page. No 8

Per contra, Ld. DR heavily relied on the orders of the Revenue Authorities. He also conceded that the Ld. CIT(A) has not passed the reasoned observations while sustaining the additions made by the Ld. AO.

We have heard both the sides and perused the material available on record. It is an admitted and undisputed fact that the purchases made by the assessee are duly reflected in the GST records of the assessee as well as the vendors. It was also the submission of the Ld.AR that sample invoices were also furnished before the Revenue Authorities. It is not justifiable on the part of the revenue to make the addition based on the non-response by the vendors in respect to the notice issued under section 133(6) of the Act whereas the other evidences proves the genuineness of the transactions entered into by the assessee. Ld.AR also demonstrated before us the copies of sample invoices and Page. No 9

Ground No. 4 is with respect to the confirming the addition of Rs.33,15,970/- towards interest income stating that the assessee has failed to declare the income while filing the return of income. On this issue, Ld.AR submitted that the interest reflected in Form 26AS pertains to amount received from Shri Brajrang Power &Ispat Ltd., and Shri Girija Alloy & Power (I) P. Ltd., towards Letter of Credit (LC) discounting charges. She also submitted that since the LC discounting charges paid is more than the LC discounting charges received and hence the net amount of Rs.5,82,641/- is disclosed as expenditure on the debit side in the Profit & Loss Account. She also referred to Page No. 94 of the paper book wherein the Profit & Loss Account is enclosed. She referred to the debit side of the Profit & Loss Account wherein the “interest & financial charges” is disclosed at Rs.32,66,957.02. Thereafter she also invited the attention to Page No. 92 of the paper book wherein the “schedule for interest and financial charges” is computed. She submitted that the “interest received”

Per contra, Ld. DR relied on the orders of the Revenue Authorities and submitted that the Ld. CIT(A) has not passed a reasoned order.

We have heard both the sides and perused the material available on record. It is an admitted fact that the assessee has netted off the interest received from the LC discount as displayed in Page No. 92 of the paper book which is reproduced below: -

The net amount of Rs.32,66,957.02 is claimed as expenditure in the Profit & Loss Account submitted by the assessee in Paper Book Page No. 94 which is extracted below:-

Ground No. 5 is with respect to treating the entire contract receipts amounting to Rs. 56,70,739/- as reflected in Form 26AS as income of the assessee. On this issue, Ld.AR submitted that the contract income is in the nature of customs and handling charges received by the assessee which is being netted off against the customs and handling charges paid by the assessee during the impugned assessment year. She referred to Paper Book Page No. 100 wherein the Profit & Loss Account of the assessee is furnished. She referred to coal handling charges debited to the Profit & Loss Account amounting to Rs.95,42,395/-. She also referred to Page No. 98 of the paper book wherein the “Schedule regarding coal handling charges” paid and received has been netted off disclosing in the net figure in the Profit & Loss Account of the assessee. She therefore pleaded that addition made by the Ld. AO is not justifiable and hence deserves to be deleted.

Per contra, Ld. DR relied on the orders of the Revenue Authorities and submitted that Ld. CIT(A) has not passed the reasoned order.

From the above extraction, we notice that assessee has accounted for the coal and handling charges received amounting to Rs. 57,61,650.73 as against the coal and handling charges paid and has disclosed a net expenditure of Rs.95,42,394.51/- in the Profit & Loss Account of the assessee. Hence there is no merit in the addition made by the Revenue Authorities and we direct the Ld.AO to delete the additions of contract receipts of Rs.56,70,539/-. Thus, the ground raised by the assessee is allowed.

Ground No. 6 is with respect to the addition under section 68 of the Act on the cash deposits amount of Rs. 63,00,000/-. On this issue Ld.AR submitted that assessee frequently withdraws cash from the bank account to meet the handling and loading expenses in cash and the balance cash will be later redeposited into the bank account. She also submitted that the bank statements

Per contra, Ld. DR relied on the order of the Revenue Authorities and submitted that Ld. CIT(A) has not passed a reasoned order.

We have heard both the sides and perused the material available on record. Considering the nature of business of the assessee we find merit in the argument of the Ld.AR that the assessee regularly withdrawing cash from the bank account for meeting the loading and handling expenditure in cash. She also referred to various entries in the cash book regarding cash deposits made by the assessee which is reflecting in the books of accounts. The only grievance of the assessee is that the Ld.AO has not properly verified the cash book and the bank statements filed by the assessee wherein the cash withdrawals and cash deposits are reflected. In these circumstances, we consider it deem fit to remit the matter back to the file of Ld. AO to verify the cash withdrawals, cash book and bank statements submitted by the assessee and decide the issue on merits by providing one more opportunity to the assessee. Accordingly, this ground is allowed for statistical purposes.

She submitted that the Ld.CIT(A) has wrongly considered the amount paid towards custom duty as Rs.10,09,936/- as against Rs.13,49,610/- this being a clerical error by the Revenue, the Ld.AR pleaded that the addition cannot be justified.

Per contra, Ld. DR relied on the orders of the Revenue Authorities.

We have heard both the sides and perused the material available on record. On verification of the submissions made by the Ld.AR and Page Nos.137 and 138 of the paper book, assessee has incurred the following expenditure: -

In the result, appeal of the assessee is partly allowed for statistical purposes.