ITO, NEW DELHI vs. M/S. GLORIOUS CLUB PVT. LTD., NEW DELHI

This appeal by the revenue has been directed against the order of the Learned CIT(Appeals)-XXVI, New Delhi dated 25.08.2015 for A.Y. 2009-10, challenging the deletion of addition of Rs. 1,68,92,620/-.

The brief facts of the case are that a search and seizure operation u/s 132 of the I.T. Act was carried out in the cases of Shri Page 1 of 7 B.K. Dhingra, Mrs. Poonam Dhingra and M/s. Madhusudan Buildcon Pvt. Ltd. on 20.10.2008 and during the course of the search at the residential premises at F-6/5, Vasant Vihar, New Delhi certain documents belonging to the assessee were seized. The Assessing Officer issued statutory notices for completion of the assessment. However, none attended on behalf of the assessee. Assessee company belongs to the Thapar Group of cases. One of the main allegation against the group is that several concerns have been routed by the group with dummy directors and share holders. These concerns are basically capital formations concerns which have build up huge reserve and surpluses over the years. These reserves surpluses are declared invested in stocks of textiles. As and when the cash is required the stocks are sold and the money are utilized for other purposes as per requirement. The Assessing Officer noted that as the facts of the case remained the same for current year also, keeping in view, the past history of the assessee, income of the assessee was assessed at Rs. 1,68,92,620/-. Therefore, the Assessing Officer assessed the income of the assessee for assessment year under the appeal by increasing 30% income taken last year. The Assessing Officer completed the assessment u/s 144 of the I.T. Act dated 30.12.2010. The assessee challenged the addition before the Learned CIT(Appeals) and written submissions of the assessee is Page 2 of 7 reproduced in the appellate order in which it was explained that the assessee was engaged in the business of trading of textile goods since inception. The assessee filed his return of income declaring nil income because of the loss which has been assessed at Rs. 1.68 crore on ad hoc basic. The assessee maintained bank accounts and other details of purchases etc. The assessee filed audited accounts. In the case of the assessee neither even single penny of unaccounted money/asset has been found nor has any paper of incriminating nature has been found, to justify addition to the declared income. The assessee has also filed application under Rule 46A for admission of the additional evidences which are audited accounts, copy of cash book, ledger stock register, details of expenses, details of purchases and sales along with bank statement. It was submitted that the Assessing Officer made an addition without any justification.

The Learned CIT(Appeals) found that apparently only one opportunity in the real sense has been granted by the Assessing Officer for giving a period of less than 10 days to file the information at assessment stage. The Learned CIT(Appeals) in the absence of reasonable opportunities could not be granted by the Assessing Officer to the assessee at assessment stage admitted additional evidence under Rule 46A of the Income Tax Rules. The Learned CIT(Appeals) also found from the history of the assessee. there was a Page 3 of 7 loss to the assessee. It was also found that addition made by the Assessing Officer for A.Y. 2003-04 to 2008-09 in the case of the assessee on the issue of disallowance of bogus purchases and disallowance of expenses have been deleted by the Learned CIT(Appeals) and order of the Learned CIT(Appeals) have been confirmed by the Tribunal. The order of the Tribunal is reproduced in the appellate order. The Learned CIT(Appeals) following the order of the Tribunal in the case of the assessee held that there was no basis to hold that the purchases debited in the profit and loss account or the purchases claimed therein were bogus. The Assessing Officer in fact based the actual addition by enhancing income of the last year by 30% which has no legs to stand on especially in view of the decision of the Tribunal in the earlier years, the entire addition has been deleted. The appeal of the assessee has been allowed.

The Ld. DR has relied upon the orders of the Assessing Officer and contended that the Learned CIT(Appeals) has erred in admitting the additional evidences. However Ld. DR was not able to support the addition made by the Assessing Officer. The Ld. DR could not point out any basis on which the Assessing Officer computed the income of the Assessing Officer at Rs. 1,68,92,620/- and also did not point out as to on what account addition has been made in the assessment order. Even if the assessee remained ex parte before the Page 4 of 7 Assessing Officer it is his duty of the Assessing Officer to bring the evidence and material on record and point out the basis for which addition has been made. The assessment order revealed that even the Assessing Officer has not mentioned in the assessment year as on what account the addition has been made in the hands of the assessee. The addition made by the Assessing Officer is purely ad hoc in nature without discussing any evidence or incriminating material against the assessee which prompted the Assessing Officer to compute the income by increasing income by 30%. Even it is not discussed in the assessment order as to what addition has been made in the earlier years and how it has any relevancy to the assessment order under appeal. On this reason itself when there was no basis for the Assessing Officer to make the addition against the assessee, the Learned CIT(Appeals) was justified in deleting the entire addition. Further, the Learned CIT(Appeals) found that the Assessing Officer has not given sufficient opportunities of being heard to the assessee at assessment stage for producing the documents. Therefore, the admission of additional evidence in such circumstances is wholly justified. The Learned CIT(Appeals) also found that the Learned CIT(Appeals) deleted the similar addition in assessment years 2003-04 t 2008-09 and order of the Learned CIT(Appeals) have been confirmed by the Tribunal. In the absence of Page 5 of 7 any infirmity pointed out in the order of the Learned CIT(Appeals), we do not find any justification to interfere with the order of the Learned CIT(Appeals) in deleting the entire addition.