ACIT, NEW DELHI vs. M/S PIRON DESIGNS (P) LTD., DELHI

O R D E R

PER H.S. SIDHU, JM

2. The Ld. Commissioner of Income Tax (Appeals) has erred in law as well as on facts in deleting the addition of Rs. 24,37,500/- made by AO on account of unexplained cash deposits u/s 68 of the Income Tax Act. 3. The Ld. Commissioner of Income Tax (Appeals) has erred in law as well as on facts in deleting the addition of Rs. 19,75,000/- made by AO on account of unexplained share premium u/s 69A of the Income Tax Act. 4. The Ld. Commissioner of Income Tax (Appeals) has erred in law as well as on facts in deleting the addition of Rs. 36,30,143/- made by AO on account of bogus expenses and unaccounted income u/s 69C of the Income Tax Act. 5. (a)The order of the CIT(A) is erroneous and not tenable in law and on facts. (b)The appellant craves leave to add, alter or amend any / all of the grounds of appeal before or during the course of the hearing of the appeal.

3. The ground raised in the assessee’s cross objection read as under:

1. On the facts and circumstances of the case, the order passed by the learned Commissioner of Income Tax (Appeals) [CIT(A)] is bad both in the eye of law and on facts. 2

2. (i) On the facts and circumstances of the case, the learned CIT (A) has erred both on facts and in law, in confirming the addition made by AO amounting to Rs. 16,54,500/- being 50% of the amount of income from services rendered to M/s ESAJV D-Art Indo India P Ltd. (ii) That the addition has been confirmed arbitrarily @50% without there being any basis for the same 3. On the facts and circumstances of the case, the learned CIT (A) has erred both on facts and in law, in confirming the addition by grossly indulging in surmises and conjectures without there being any direct adverse material against the assessee, based only on suspicion. 4. The respondent craves leave to add amend on alter any of the grounds of cross objection.

4. The brief facts of the case are that the assessee is a company engaged in the business of manufacturing, trading, assembly, designing, installation of furniture and also providing architecture services. The assessee has filed its return of income on 29.09.2011 declaring an income of Rs. 6,45,030/-. The AO has completed the assessment at Rs. 1,19,96,670/- u/s. 143(3) of the Income Tax Act, 1961 (in Short “Act”) vide his order dated 28.01.2014 by making various addition and disallowances. Against the order of the AO, the assessee appealed before the Ld. CIT(A), who vide his impugned order dated 25.03.2015 deleted the various additions except the one where he gave a partial relief. Aggrieved by the order of the Ld. CIT(A), the Revenue is in appeal before the Tribunal. The assessee has also filed cross objection in respect of the addition confirmed by the Ld. CIT(A).

5. The ground no. 1 in Revenue’s appeal and ground no. 2 and 3 in assessee’s cross objection is common which is relating to addition of Rs.33,09,000/- made by the Assessing Officer in respect of the service

charges received by the assessee from M/s ESAJV D-Art Indo India Pvt. Ltd. The CIT(A) has given relief of 50% of the total addition. A similar addition was made by the Assessing Officer in the case of Piron Education Pvt. Ltd. a sister concern of the assessee company on the same reasoning as stated by the assessing officer in the assessment order. The Ld. CIT(A) in that case has also given relief of 50% of the total addition. We have decided the appeal in the case of ACIT vs. Piron Education Pvt. Ltd. (ITA NO. 3699/Del/2015) (AY 2011-12) vide our order dated 31.10.2018, whereby we have held that this addition is unsustainable on the ground that the assessee having included the service charges in its income, the same amount cannot be added again. It was agreed by both the learned DR and AR that the facts of the present case are identical to the facts in the case of Piron Education Pvt. Ltd. This entire amount of Rs. 33,09,000/- forms part of the receipt declared by the assessee as its income in the Profit & Loss account of the year under consideration. Accordingly following the reasoning given in our order dated 31.10.2018 in the case of ACIT vs. Piron Education Pvt. Ltd.(supra), we direct the Assessing Officer to delete the entire addition on this account. In the result ground no. 1 of Revenue’s appeal is dismissed and ground no. 2 and 3 of assessee’s cross objection is allowed.

6. Ground no. 2 in Revenue’s appeal is regarding the deletion of the addition of Rs. 24,37,500/- made by the AO on account of unexplained cash deposits. It was agreed by both the parties that this issue is identical to the issue in the case of ACIT vs. Piron Education Pvt. Ltd. (ITA NO. 3699/Del/2015) (AY 2011-12), where the Assessing Officer has made similar addition on the same reasoning. In the said appeal in the case of ACIT vs. Piron Education Pvt. Ltd. (AY 2011-12) vide order dated 31.10.2018, we have held that the addition is unsustainable as the cash deposited is as per the books of accounts being regularly maintained by the assessee. Since the facts are identical following our order and the reasoning in the above said order we uphold the order of the Ld. CIT(A) in deleting this addition and accordingly, this ground is dismissed.

7. Ground no. 3 in Revenue’s appeal is regarding deletion of addition of Rs. 19,75,000/- made by AO on account of unexplained share premium. As per the assessment order the assessee has paid up capital of Rs. 1,25,000/- however it has security premium of Rs. 19,75,000/-. Since the assessee has not given details of equity share holder of the company and has also not provided any justification as to on what basis and how the value of each share has attracted a premium of Rs. 148. The Assessing Officer on this basis held the share premium represents unaccounted income of the assessee. The Ld. CIT(A) has deleted this addition holding that this share premium of Rs. 19,75,000/- is opening balance coming from the earlier years. The assessee has given explanation to the AO but the AO has not even cared to go through the balance sheet of the assessee company. Before us the Ld. DR could not controvert the above facts. From the balance sheet of the assessee company it is evident that there is no increase in the share capital as well as share premium during the year. Since no amount has been received during the year, the provision of section 68 are not applicable. In view of the above facts and circumstances, we uphold the order of the Ld. CIT(A) on the issue in dispute of deleting this addition and accordingly this ground no. 3 of Revenue’s appeal is dismissed.

8. Ground no. 4 in Revenue’s appeal is regarding deletion of addition of Rs. 36,30,143/- made by AO on account of bogus expenses. On the issue of the observations made by the Assessing Officer in the assessment order that the assessee was not carrying out any activities on the basis of the survey report it was submitted by the learned AR that the observations of the AO are factually incorrect. The assessee has been carrying on its activities and it has provided all the details in support thereof as asked for 5 by the AO during the course of the assessment proceedings which included the list of faculty, training program, course material and supporting bills etc. It was further submitted that the AO has not pointed out any specific error or mistake in the details submitted by the assessee. It was further argued that the AO is making a general observation ignoring the facts and the evidences on record. It was also submitted that all the details and information were available at the time of survey also and it is not the case of the assessing officer that the books of accounts and other details were not available at the time of survey. In fact survey report if any has not been shared or confronted to the assessee at any time. It was also submitted that no incriminating material or evidence what so ever was found during the course of the survey. It was submitted that the allegation of the AO in the assessment order is totally false. We have examined the order passed by the authorities below and the details placed on records. Ongoing through the same we find that the contention of the learned AR is correct. The assessee is carrying on regular business and all the expenses have been actually incurred. Further the assessing officer has made the disallowance arbitrarily ignoring the fact that assessee has actually carried out the business. As regard the survey report on going through the assessment order we note that though the assessing officer is making a reference to the survey report but is ignoring the fact that the allegations made are generic and in the light of evidences submitted by the assessee before him how he has ignored the same. It is important to point out that the assessing officer has not rejected the books of accounts nor has held that the assessee is not carrying any business. The expenses incurred are accounted for in the books of account and there is no material brought on the record that these expenses have not been actually incurred. Since the facts are identical following our order and the reasoning in the above said order we uphold the order of the Ld. CIT(A) in deleting this addition. And this ground is dismissed.

9. Ground no. 5 in Revenue’s appeal and Ground no. 1 and 4 in assessee’s cross objection are general in nature and hence need no adjudication.

Order pronounced on 05-11-2018.