ACIT, NEW DELHI vs. M/S PIRON LEARNING & TRAINING (P) LTD.,, DELHI

O R D E R PER H.S. SIDHU, JM

The Revenue has filed this appeal against the impugned order dated 25.3.2015 relevant to assessment year 2011-12 on the following grounds:-

3. The Ld. Commissioner of Income Tax (Appeals) has erred in law as well as on facts in deleting the addition of Rs. 6,00,000/- made by AO U/S 40a(2)(b)ii of the Income Tax Act on account of salary remuneration to Director.

4. The Ld. Commissioner of Income Tax (Appeals) has erred in law as well as on facts in deleting 50% of the total addition of Rs. 38,60,500/- made by AO on account of bogus expenses and receipts from M/s ESAJV. 5. The Ld. Commissioner of Income Tax (Appeals) has erred in law as well as on facts in deleting the addition of Rs. 65,78,666/- made by AO on account of unexplained investment u/s 69 of the Income Tax Act. 6. The Ld. Commissioner of Income Tax (Appeals) has erred in law as well as on facts in deleting the addition of Rs. 4,65,000/- made by AO on account of unexplained cash credit u/s 68 of the Income Tax Act. 7. The Ld. Commissioner of Income Tax (Appeals) has erred in law as well as on facts in deleting the addition of Rs. 1,31,863/-, Rs. 6,76,299/- being false expenses and Rs. 8,48, 803/- made by AO on account of unexplained credit of money. 8. (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.

2. The brief facts of the case are that the assessee is a company engaged in the business of providing consultancy services in the field of business consultancy, project consultancy etc. The assessee filed its return of income on 21.07.2011 declaring an income of Rs. 3,04,990/-. The AO has completed the assessment at Rs. 2,33,70,560/- vide order his order 2 dated 26.2.2014 passed u/s. 143(3) of the Income Tax Act, 1961 (in short “Act”) and made various addition and disallowances. Against the order of the AO, the assessee appealed before the Ld. CIT(A) who vide his impugned order dated 25.3.2015 deleted the various additions except the one where he gave a partial relief. Aggrieved with the impugned order of the Ld. CIT(A), the Revenue is in appeal before the Tribunal.

3. Ground no. 1 in Revenue’s appeal is regarding the deletion of the addition of Rs. 54,08,275/- made by the AO on account of unexplained cash receipts. It was agreed by both the Ld. DR and Ld. AR that this issue is identical to the issue in the case of 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. in (AY 2011-2) 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. The Assessing Officer has not pointed out which cash receipt or deposited in the bank is unaccounted for. From the documents filed before the Assessing Officer placed at Paper book Page 217 it is evident that assessee has given explanation for each receipt and deposit in the bank. Since the facts are identical following our order dated 31.10.2018 and the reasoning in the above said order we uphold the order of the Ld. CIT(A) deleting this addition and this ground is dismissed accordingly.

4. Ground no. 2 in Revenue’s appeal is relating to deletion of addition of Rs. 44,96,163/- 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 3 it has provided all the details in support thereof as asked for 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. On going 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 by the AO that these expenses have not been actually incurred. In view of the above facts we uphold the order of the CIT(A) on the issue in dispute and accordingly this ground of appeal raised by the Revenue.

5. Ground no.3 in Revenue’s appeal is regarding the deletion of addition of Rs. 6,00,000/- made by AO under section 40A(2)(b) on account of remuneration to director. The AO has made the above disallowance in respect of payment made to Mr. Abhishek Asthana who holds only 5% share of the assessee company. The CIT(A) has deleted the addition holding that the remuneration paid is neither excessive nor unreasonable. Mr. Abhishek Asthana is a qualified Chartered Accountant and looking after the overall affairs. The learned DR could not controvert the above facts. The remuneration paid to Mr. Ashthana being a Chartered Accountant can’t be said to be excessive. Further he is looking after the overall affairs. The observation the assessing officer on this issue is factually incorrect. In view of the above facts we uphold the order of the CIT(A) on the issue in dispute and this ground no. 3 of Revenue’s appeal is dismissed.

6. The ground no. 4 in Revenue’s appeal is relating to addition of Rs. 38,60,500/- 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 Ld. 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 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 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 Ld. DR and Ld. AR that the facts of the present case are identical to the facts in the case of Piron Education Pvt. Ltd. 5 (Supra). This entire amount of Rs. 38,60,500/- 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. 4 of Revenue’s appeal is dismissed.

7. Ground no 5 in Revenue’s appeal is relating to deletion of addition of Rs. 65,78,666/- made by AO on account of unexplained investment under section 69 of the Act. The Assessing Officer made the above addition on the ground that assessee has paid back the loan received from the following parties during the year:

Sl. Name of the party Total amount Total amount Interest Closing No. from whom loan has received during paid back during Paid balance as on been accepted A.Y 2011-12 A. Y. 2011-12 31.03.2011 1. M/s Dolphin Space Rs. 1,54,500/- Rs. 1,54,500/- Nil Nil Systems 2. M/s Indo Solutions Pvt. Rs. 50,03, 066/- Rs. 50,03,066/- Nil Nil Ltd.

“13.1 Ongoing through the assessment order we note that the AO has made addition in respect of the amount paid back by the assessee to the following parties not the amount received from these parties:

S.No. Name of the Total amount Total amount paid Intere Closing balance party from received during back during AY st as on 31.3.2011 whom loan AY 2011-12 2011-12 paid has been accepted 1 M/s Dolphin Rs. 23,58,400 Rs. 23,58,400 NIL NIL Space Systems 2 M/s Piron Rs. 8,94,100 Rs. 89,41,000 NIL NIL Consulting Pvt. Ltd. 3 M/s Indo Rs. Rs. 85,28,000 NIL Rs. 40,90,000 Solutions Pvt. 1,25,52,000 Ltd. Rs. 36,25,000 4 M/s Piron Rs. 42,14,000 Rs. 5,89,000 NIL Design Pvt. Ltd. 5 Sh. Ashish Rs. 7,64,453 Rs. 7,64,453 NIL NIL Aggarwal 6 Sh. Ankur Rs. 36,63,500 Rs. 22,46,500 NIL Rs. 14,17,000 Aggarwal Total Rs. 2,44,46,453 Rs. 1,53,80,453/- NIL Rs. 54,51,000/-

13.2 In respect of the first party namely M/s Dolphin Space System, the assessee has received a sum of Rs. 23,58,400/- and paid back the same amount during the year. The documents filed before the AO in respect of this creditor is placed in PB. Pg. 266-287 which include confirmation, copy of ledger account, copy of bank statement and copy of audited financials. This is a proprietorship concern of one of the director Mr. Ashish Aggarwal. As per the profit and loss account it has made a sale of Rs. 4,98,28,165/-. It has filed the income tax return declaring a taxable income of Rs. 10,19,401/- which include profit from this concern of Rs. 8,87,582/-. This concern has got loan from banks and other financial institutions which include NSIC Ltd. The payment has been made from its regular bank account maintained with Vijaya Bank. It has a running account being a sister concern with assessee as is evident from the copy of account placed at PB. Pg. 267.

13.3 The second case is that of Piron Consulting Pvt. Ltd. This is a sister concern of the assessee. The assessee has received a sum of Rs. 8,94,100/- during the year and paid the same back during the year. The documents filed before the AO in respect of this creditor is placed in the PB. Pg. 288-306 which include confirmation copy of ledger account, bank statement and audited balance sheet and ITR. This company is being assessed with the same AO and in fact assessment order for the same year under consideration has been passed by the AO on 26th February, 2014 under Section 143(3) and no adverse inference has been drawn in respect of this amount received and paid back during the year in that order. The copy of account is placed at PB. Pg. 289 which is a running account. The AO has simply added the aggregate amount of the credit without even considering that this is a running account between the two concerns. The payments have been made and received from the regular bank account and there is nothing abnormal in the bank statement so as to draw any adverse inference about the transactions entered into with this company.

13.4 The third case is that of Indo Solution Pvt. Ltd. In this account there was an opening debit balance of Rs. 36,15,000/- and assessee has received Rs. 1,25,52,000/- and paid back Rs. 85,28,000/- during the year with the result that there was a closing credit balance of Rs. 4,09,000/-. The documents filed in respect of this account before the AO are placed at PB. Pg. 315 to 388 which include confirmation, ledger account, bank statement, ITR and audited Balance sheet. This is also a sister concern of the assessee. This account is also a running account. The AO in this case also has simply added the entire aggregate credit without even considering the fact that this is a current account between the two related concerns. All the payment have been made and received through the running bank account. This company has filed its ITR for the year under consideration of Rs. 41,60,505/-. It has a gross income from operation of 18,52,99,273/-. There is nothing abnormal in the transacitons entered in to by the assessee with this company and also in the bank account of this company.

13.5 The fourth case is that of Piron Design Pvt. Ltd. which again is a group company. The assessee has received a sum of Rs. 14,42,000/- and has paid back Rs. 5,89,000/- with the result that there is a closing credit balance of Rs. 36,25,000/-. Interestingly the AO has made addition of Rs. 5,89,000/- only being the amount paid back by the assessee during the year. The documents filed in respect of this account before the AO are placed at PB. Pg. 389 – 410 which include confirmation, copy of ledger account, bank statement, ITR and audited financials. This is also a running account as per the copy of account placed at PB. Pg.

13.6 The fifth case is that of Mr. Ashish Aggarwal, Director of assessee company. The assessee company has received a sum of Rs. 7,64,453/0 and paid back Rs. 7,64,453/-. The documents 9 filed before the AO in respect of this account are placed at PB. Pg. 256 to 265 which include confirmation, copy of ledger account, bank statement and ITR. The assessee has also filed audited balance sheet and profit and loss account of the proprietorship firm of Mr. Ashish Aggarwal also. As per the ITR the taxable income declared is 10,19,400/-. This is also a running account with a director Mr. Ashish Aggarwal as is evident from the copy of account placed at PB. Pg.

13.7 The sixth and the last case is that of Mr. Ankur Aggarwal, Director of the assessee company. Assessee has received a sum of Rs. 36,63,500/- during the year and has paid back Rs. 22,46,500/- with the result that there was a credit balance of Rs. 14,17,000/-. The AO interestingly has made addition not of the amount received by the assessee company but of the amount paid back i.e. Rs. 22,46,500/-. The documents in support of this account are placed in PB. Pg. 307 to 314 which include confirmation, ledger account, ITR and bank statement. Mr. Ankur Aggarwal has also filed his return declaring income of Rs. 9,01,940/-. He is also having a running account as is evident from the copy of account placed at PB. Pg.

13.8 The above analysis of each of the creditors shows that assessee has filed sufficient evidences so as to establish identity, creditworthiness and genuineness of the transactions. As discussed above, there is nothing abnormal so as to draw any adverse inference against the assessee. It may be relevant to point out that he AO has made addition without application of mind. This fact gets established that AO has made addition of the amount paid back and not that of the amount received by the assessee. In fact, the above analysis clearly demonstrate that the assessee has discharged its onus fully in respect of the credit. The observation made by the AO in the assessment order are factually incorrect. The AO has not brought any material so as to draw any adverse inference. He has indulged into surmises. The CIT(A) has rightly deleted the addition and accordingly we uphold the order of the CIT(A) deleting the addition. In the result the ground no 5 is dismissed.” 7.2 Both the parties agreed that the facts and the reasoning for making this addition is exactly the same as in the case of ACIT vs. Piron Education Pvt. Ltd. We have examined this issue in detail in the case of Piron Education Pvt. Ltd (ITA NO. 3699/Del/2015) (AY 2011-12) and has deleted the addition. Since the facts in the present case are identical to the above case following the order in the above said case we uphold the order of the Ld. CIT(A) in deleting the above addition and this ground no. 5 of the Revenue is dismissed.