Loading judgment…
No AI summary yet for this case.
Income Tax Appellate Tribunal, DELHI BENCH “G”: NEW DELHI
Before: SHRI H.S.SIDHU & SHRI PRASHANT MAHARISHI
ITA 3396_DEL_2013 AY 2008-09 SHIVANGI INTERNATIONAL MEERUT V CIT _263
INCOME TAX APPELLATE TRIBUNAL DELHI BENCH “G”: NEW DELHI BEFORE SHRI H.S.SIDHU, JUDICIAL MEMBER AND SHRI PRASHANT MAHARISHI, ACCOUNTANT MEMBER ITA No. 3396/Del/2013 (Assessment Year: 2008-09)
Shivangi International, Vs. CIT, Meerut Cold Storage Building, Aayakar Bhawan, Delhi Road, Meerut Bhaisali Ground, Meerut PAN: AADFS3912Q (Appellant) (Respondent)
Assessee by : Sh. CS Anand, Adv Revenue by: Sh. SS Rana, CIT DR Date of Hearing 01/05/2017 Date of pronouncement 03/05/2017
O R D E R PER PRASHANT MAHARISHI, A. M. 1. This appeal is preferred by the assessee against the order passed by the ld CIT, Meerut u/s 263 of the Act on 18.03.2013 holding that order passed by the ld ACIT, Circle-2, Meerut u/s 143(3) of the Act dated 22.11.2010 for AY 2008-09 is erroneous and prejudicial to the interest of revenue. 2. In all assessee has raised 15 grounds of appeal as under:- “1. That the order passed u/s 263 of the IT Act 1961 by the ld CIT Meerut, is barred by limitation. 2. That the ld CIT Meerut has wrongly assumed jurisdiction to initiate proceedings u/s 263 and to pass and order u/s 263. 3. That the order passed u/s 263 of the IT Act 1961 by the ld CIT Meerut, is bad on various factual and legal grounds. 4. That the ld CIT Meerut, is incorrect in stating that the order passed by the AO is erroneous as well as prejudicial to the interest of revenue. The observation of ld CIT Meerut are either factually incorrect or legally untenable. 5. That on the facts/ circumstances of the case and under the laws, the ld CIT Meerut has erred in directing the AO to verify from the audit report
[1]
ITA 3396_DEL_2013 AY 2008-09 SHIVANGI INTERNATIONAL MEERUT V CIT _263 as to whether the assessee had paid interest on unsecured loans or not. 6. That the ld CIT Meerut has erred in recording that proper confirmations regarding unsecured loans were not furnished nor the AO made any inquiry in this regards. 7. That the ld CIT Meerut has erred in recording that all kinds of credits appearing in the books of account are liable to be added u/s 68 as unexplained cash credits. 8. That on the facts/ circumstances of the case and under the laws, the ld CIT(A) has erred in directing the AO to verify addition to the fixed assets from the bills and also look into the source of investment, allowability of depreciation etc. 9. That the ld CIT Meerut has erred in recording that the books of account have also not been produced. 10. That on the facts/ circumstances of the case and under the ld CIT(A) has erred in holding that the books of account are totally unreliable and on that basis, in rejecting in books of account. The observation of ld CIT Meerut are either factually incorrect or legally untenable. 11. That the facts/ circumstances of the case and under the laws, the ld CIT Meerut has erred in (a) applying NP @5% on the turnover of Rs. 6227887/- and (b) holding that other income of Rs. 597135/- being not related to the business is taxable as such. The observation of ld CIT Meerut are either factually incorrect or legally untenable. 12. That on the facts/ circumstances of the case and under the law, the ld CIT(A) has erred in directing the ld AO to verify that the amount of rs. 38000/- on account of charity and the amount of Rs. 39809/- on account of freight paid was added back or not. 13. That on the facts/ circumstances of the case and under the laws, the ld CIT(A) has erred in directing the AO to verify as to whether there is violation of TDS provisions r.w.s 40(a)(ia) wrt claim of expenses of Rs. 872180/- on account of freight expenses and if yes, to add back such amount u/s 40(a)(ia). 14. That on the facts/ circumstances of the case and under the law, ld CIT(A) has erred in directing the AO to verify as to whether there is violation of TDs provisions rws 40(a)(ia) wrt claim of expenses of Rs. 18787/- and if yes, to add back such amount u/s 40(a)(ia). 15. That on the facts/ circumstances of the case and under the law, the ld CIT(A) has erred in partly setting aside the assessment order passed by the ld AO.” 3. Though the assessee has raised above 15 grounds of appeal, however the crux of the matter is that assessee is contending that the order passed by the ld CIT u/s 263 of the Income Tax Act is not sustainable as the original order passed by the ld Assessing Officer u/s 143(3) of the Act was passed [2]
ITA 3396_DEL_2013 AY 2008-09 SHIVANGI INTERNATIONAL MEERUT V CIT _263 after due enquiry and neither erroneous nor prejudicial to the interest of revenue. 4. The brief facts of the case is that the assessee is a partnership firm carrying on the business of export of bidi, filed its return of income showing loss of Rs. 1089040/- on 28.09.2008. The assessee is maintaining its books of account on mercantile system of accounting. In response to various notices issued by the ld Assessing Officer during the course of assessment proceedings, it produced the books of accounts, bills and vouchers etc before him which were examined by the ld Assessing Officer on test check basis and accepted the trading results of the assessee. Consequently, the assessment order u/s 143(3) of the Act was passed on 22.11.2010 determining the net taxable loss of Rs. 1026344/- against the return loss of Rs. 1089043/-. The Assessing Officer disallowed expenses out of various expenses claimed by the assessee of Rs. 62699/-. The assessee accepted this assessment order. 5. Subsequently, on examination of records by the ld CIT, it was found by her that assessment was completed by the ld Assessing Officer without proper enquiry on following counts :- a. During the year under consideration the assessee has not paid any interest on unsecured loans and therefore, she directed the LD Assessing Officer to conduct enquiry on this point with respect of unsecured loan of Rs. 1608215/- . Further proper confirmation regarding unsecured loan were not furnished nor the LD Assessing Officer made any enquiry in this regard. b. There is an addition of Rs. 1.24 crores in the capital account of the partners, which remain to be verified. c. The addition to the fixed assets, the LD Assessing Officer was directed to verify from the bills and look into the sources of investments. d. The assessee has shown a net loss of Rs. 1116439/- against the turnover of Rs. 6227887/- and the Assessing Officer has accepted such huge loss despite being other income which have been set off against that loss. Further, the books of account are totally unreliable because the assessee maintained only cash book, ledger, purchase bills and vouchers and no stock register or stock details, as well as
[3]
ITA 3396_DEL_2013 AY 2008-09 SHIVANGI INTERNATIONAL MEERUT V CIT _263 inventory of closing stock was maintained. Further, the quantitative details also remain unverified. Therefore, according to the LD CIT business, results are not at all acceptable, hence, she rejected it u/s 145(3) of the Act and net profit of 5% is ascertained. It was further held that other income not being directly related to the business of Rs. 597135/- is also separately taxable. e. It has been also observed that TDS on amount to Rs. 872180/- being freight paid was not deposited until the end of the year and therefore, it is disallowable.
In views of the above finding she held that order passed by the ld Assessing Officer is erroneous and prejudicial to the interest of the revenue vide order u/s 263 of the Act dated 18..03.2013. 7. The ld AR vehemently contested that order passed by the ld CIT u/s 263 of the Act is not sustainable because assessment order u/s 143(3) of the Act was passed after examination of the books of account produced during the course of assessment proceeding before the AO who raised detailed query on the various aspect on which the ld CIT has revised his order. He submitted that assessee has not paid any interest on unsecured loan; therefore, the direction of the LD CIT on this count is erroneous. With respect to the unsecured loan, he submitted that the assessee has taken loans from two parties out of that in case of one party the outstanding is opening balance of the year and assessee has not borrowed during the year. With respect to the second party, he submitted that specific queries were raised during the assessment proceedings and assessee submitted copy of the account of the other party, copy of acknowledgement of return of income of that party and bank statement of that party to show that amounts are received and paid by the parties by account payee cheques and assessee is creditworthy and transactions are genuine. With respect to the addition to the capital account of the partners, he submitted that this fact was examined by the ld Assessing Officer by asking a specific query and in response to that query the assessee has filed confirmation, copy of income tax returns and bank statement of those partners to explain fresh capital introduced by them. With respect to the fixed assets purchased during the years, he submitted
[4]
ITA 3396_DEL_2013 AY 2008-09 SHIVANGI INTERNATIONAL MEERUT V CIT _263 that during the course of assessment proceeding the assessee produced the bills and vouchers of the addition to the fixed assets and the claim of depreciation. He further submitted that rental income of Rs. 481116/- out of which Rs. 597135/- is already shown as income from house property and set off the same is not claimed by the assessee. With respect to the books results of the assessee, he submitted that there is no opening or closing stock during the year and the assessee has purchased only 750 bags of bidis each containing 40,000 pieces of bidi and it were exported. Therefore, there is no inventory and hence its valuation is not required. He further submitted that LD CIT has rejected the books of account without pointing out any latent, patent, and glaring defects in the books of accounts. Regarding the quantitative details, he submitted that total 750 bags of bidi were exported during the year and therefore there complete quantitative details are available. In view of this, he submitted that order of the LD AO is neither erroneous nor prejudicial to the interest of the revenue as it is finalized after proper enquiry. With respect to the other issues, he specifically referred to the pages of the paper book showing that query was raised by the Assessing Officer during the assessment proceedings which were replied to by the assessee with supporting evidences and therefore according to him it is not a case of lack of enquiry even otherwise. He further relied upon the several judicial precedents of various high courts to support its case. He specifically referred to the decision of Hon'ble Delhi High Court in case of LD CIT vs. Sunbeam Auto Ltd 189 Taxmann 136 and CIT vs. Vikas Polymer 194 taxmann 57. 8. The ld CIT DR vehemently supported the order of the ld CIT relying upon the decision of Hon'ble Supreme Court in case of Malabar Industrial Co. Ltd. Vs. CIT 243 ITR 83 and also of the Hon'ble Kolkata High Court in case of Raj Mandir Estates Pvt. Ltd Vs. Pr. CIT 386 ITR 162 against which the Hon'ble Supreme Court has dismissed the SLP of the assessee. He further referred to the various issues involved and submitted that ld Assessing Officer has not carried out any enquiry but merely believed and accepted whatever is stated before him. In view of this he submitted that ld CIT is fully justified in assuming jurisdiction u/s 263 of the Act as the order passed by the ld
[5]
ITA 3396_DEL_2013 AY 2008-09 SHIVANGI INTERNATIONAL MEERUT V CIT _263 Assessing Officer is erroneous and prejudicial to the interest of the revenue as it is passed without making proper and due enquiry. 9. We have carefully considered the rival contentions and perused the orders of the LD Assessing Officer passed u/s 143(3) of the Act and the order of the LD CIT passed u/s 263 of the Act. According to the provisions of section 263 of the Income Tax Act, if the LD CIT on examination of the records is of an opinion that the order passed by the LD Assessing Officer is erroneous and prejudicial to the interest of the revenue then he can revise the order of the Assessing Officer. Therefore, it is necessary to examine whether the order of the LD Assessing Officer was erroneous and prejudicial to the interest of the revenue or not. the Hon'ble Delhi High Court in CIT Vs. Sunbeam Auto Ltd 189 Taxmann 436 has held that where the income tax officer examines the accounts, makes enquiries and applies his mind to the facts and circumstances of the case and then frames an assessment order then in view of the quasi judicial power vested into him, it cannot be said to have been exercised in an erroneous manner which has caused prejudice to the revenue. Further, if the AO has made queries during the course of assessment proceeding in a reasonable manner raising queries, calling for requisite details, examining those details and then framing an assessment order it cannot be said that the order passed by the Assessing Officer is erroneous or prejudicial to the interest of the revenue unless it is shown that it is unsustainable under the law. In this backdrop, the fact of the present case is required to be examined. With respect to the unsecured loan of the assessee the ld Assessing Officer issued notice u/s 142(1) of the Act dated 01.02.2010 and the notice was also annexed with the query letter asking for the details of loans squared up or repaid during the year and details of all loans accepted and repaid. In the same query letter, a query was raised with respect to the capital account of the partners. In response to that, assessee submitted letter on 29.10.2010 wherein detailed copy of the capital account of the partners stating their PAN, acknowledgement copy of return of income and the copy of the bank statement of the partners were filed. These facts are evident as per letter placed at page no. 23 and 24 of the paper book and the query letter of the AO is placed at page No. 21 of the paper book. With respect to the unsecured loan it was submitted that
[6]
ITA 3396_DEL_2013 AY 2008-09 SHIVANGI INTERNATIONAL MEERUT V CIT _263 a sum of Rs. 40577/- is outstanding in the name of M/s Viswanath Trust as an opening balance and no fresh loans is taken during the year. With respect to a loan of Rs. 1567638/- from M/s Deepak Seth and Sons the assessee submitted its PAN and where the lender is assed the tax along with copy of the acknowledgement of return of income filed by the party. Assessee also submitted the copy of the bank statement of that party from which the debit and credit entries pertaining to loan taken by the assessee and repaid during the year is verifiable. It if further stated that this party is regularly assessed to income tax and none of the loan is accepted or repaid in violation of provisions of section 269SS and 269T of the Act. Therefore, assessee has established the identity, creditworthiness, and genuineness of the transaction. Vide query letter dated 08.11.2010 the ld Assessing Officer vide para No. 5 and 7 also asked about the similar details which were further given by the assessee vide letter dated 16.11.2010. Vide same letter the ld Assessing Officer asked for assessment details of the partners which was also furnished by the assessee and stated that addition in the partners account are by cheques and for verification copies of the bank statement of the partners were also furnished. On 18.03.2011 the assessee produced the books of account along with purchase, sales bills and vouchers before the ld Assessing Officer, letter demonstrating that is also placed page No. 32 of the paper book. Further with respect to chargeability of the other income, it was submitted by the assessee vide letter dated 18.11.2010 that a rent of Rs. 481117/- has already been shown as income from house property. A complete detail of the carry forward losses was also given by that letter. With respect to purchases of fixed assets, it was submitted that during the year, assessee has purchased small fixed assets, which are at page No. 15 of the paper book, and the source of such addition is from the regular sources of the income. During the year, assessee has purchased mobile phone, computers, and printers for which the dates of the addition are mentioned. Further, the books of account along with the vouchers and bills were produced before the LD Assessing Officer. Vide letter dated 18.11.2010 the assessee submitted the ledger account of the assets in which the additions have been made and further the copies of the bills of such addition were also produced for verification. These evidences are available as per page no.
[7]
ITA 3396_DEL_2013 AY 2008-09 SHIVANGI INTERNATIONAL MEERUT V CIT _263 34 of the paper book. Coming to the fact of the maintenance of the books of account and the stock register, it was stated by the assessee that during the year assessee has purchased and exported Rs. 750 bags of bidis and each of the bags is consisting of 40000 pieces of bidis. Therefore, the quantitative details of the trading operation of the assessee are available. The assessee did not have any opening or closing stock and therefore its question of its valuation does not arise. The books of accounts were produced during the course of hearing, no defects were pointed out by the LD AO, and book results were accepted. The assessee has submitted the copy of the purchase account at page No. 107 of the paper book which shows that during the year the purchase of the assessee is consisting of only 6 purchase bills where the number of quantity of bags purchased is also mentioned and the copies of the bills are also submitted. The assessee has exported the goods by 6 consignments for which the invoices are also placed at page No 114 to 120 of the paper book, which also shows the quantity, and the rate of export of goods. In view of this it is demonstrated by the assessee before the AO that purchases are also duly accounted for and are subject to excise duty and sales are out of India for which remittance has been received. In view of this, there is no defect in the books of account maintained by the assessee, which are also audited and supported by quantitative details. Merely non-maintenance of the stock register does not make the books of account of the assessee defective, when complete quantity details are available. The LD Assessing Officer has specifically raised the query with respect to the gross profit and net profit of the assessee for the year and its comparison with previous three years. Therefore, based on the above enquiry, on verification of the purchase and sale bills of the material and audited books of accounts, the LD Assessing Officer accepted the books results. With respect to non deduction of tax at sources and its payment in time, ld AO in reframed assessment u/s 143(3) rws 263 of the act, the additions were not made hence it is apparent that same is not erroneous. Therefore, according to us the order of the LD Assessing Officer cannot be said to have been passed without proper enquiry. Further, the order of the LD CIT in estimating the 5% of the net profit is devoid of any merit because of the reason that no defects have been
[8]
ITA 3396_DEL_2013 AY 2008-09 SHIVANGI INTERNATIONAL MEERUT V CIT _263 pointed out by LD CIT in the books of account leaving aside any latent, patent, or glaring defect. The purchase price of the bidis which is supported by the proper bills and which are subject to excise duty is not questioned and same way the sale of goods, which is, exported same was also not questioned. Further, the LD CIT did not give any reason to estimate the net profit of the assessee @5% and by not putting any comparable cases. The LD CIT also could not point out that how the order of the LD Assessing Officer is erroneous with respect to the unsecured loans and partners capital balances. She also could not show that where is the error in the order of the LD Assessing Officer with respect to the additions of the fixed assets for which bills have been verified by the AO and depreciation allowance granted. It is also not the case of the LD CIT that what enquiry AO should have conducted has not been conducted. Further, with respect to the claim of interest expenses as well as the treatment of income from house property the LD AR has stated that facts have been wrongly perused by the LD CIT. undisputedly, the assessee has not claimed any deduction of interest expenses as well as the rental income has been shown as income from other sources. In view of this we are of the opinion that ld Assessing Officer has conducted the proper enquiry looking to the facts and circumstances of the case and further none of the points on which ld CIT has assumed jurisdiction are proved to have been dealt with by the ld Assessing Officer erroneously. Therefore, no prejudice is caused to the revenue. Further, the reliance placed by the ld CIT DR on the decision of the Hon'ble Supreme Court in case of Malabar Industrial Co. ltd. Vs. CIT (supra) and submitting that where the AO has accepted entry in the statement of account filed by the assessee, in absence of any supportive material, without making any enquiry, exercise of jurisdiction by ld CIT u/s 263 is justified. Examining on the same principle the facts of the case before us, it is apparent that increase in the capital is supported by the bank statement and the income tax returns of the partners. The increase in loan is supported by the income tax returns and bank statement of the depositors, addition to the fixed assets is supported by the bills of purchases of those fixed assets, the purchases and sales are supported by purchase and sales bills along with quantitative details and payment by
[9]
ITA 3396_DEL_2013 AY 2008-09 SHIVANGI INTERNATIONAL MEERUT V CIT _263 account payee cheques for purchases and receipt of foreign remittance on export sales , it cannot be said that the ld Assessing Officer has accepted the entries in the books of account which are not supported by any material. It is not stated before us or in the order u/s 263 that what kind of enquiry should have been conducted by the AO in view of the overwhelming supporting material produced by the assessee. Further the ld CIT DR also relied upon the decision of the Hon'ble Kolkata High Court in case of Rajmandir Estate Private Limited Vs. Pr CIT (supra) submitting that AO passed assessment without carrying out requisite enquiry then the CIT is justified in treating assessment order as erroneous and prejudicial to the interest of the revenue. We have considered the facts of that case where the shares were issued to 39 corporate subscribers who also got the share application money and wherein the sums were found credited in the account of the depositors prior to receipt of money by that company and further the prima facie, the share holders are mere name lenders. In view of this, the Hon'ble Kolkata High Court upheld the jurisdiction of LD CIT u/s 263 of the Act. In the present case, neither the partners as well as the sundry creditors are held to be name lenders. Further, it is not the case that sums deposited by the partners as well as unsecured lenders, source of such sum is dubious, no such finding is available in the order of ld CIT. In view of this the facts of this case decided by the Hon'ble Kolkata High Court is distinguishable. Hence, we do not agree with the LD CIT DR on reliance on the above two cases. 10. In the result, we set aside the order passed by the LD CIT u/s 263 of the Act revising the order of the LD AO passed u/s 143(3) of the Act in absence of finding that the order so passed by the LD AO is erroneous and prejudicial to the interest of the revenue. 11. In the result, appeal of the assessee is allowed. Order pronounced in the open court on 03/05/2017. -Sd/- -Sd/- (H.S.SIDHU) (PRASHANT MAHARISHI) JUDICIAL MEMBER ACCOUNTANT MEMBER Dated: 03/05/2017 A K Keot
[10]
ITA 3396_DEL_2013 AY 2008-09 SHIVANGI INTERNATIONAL MEERUT V CIT _263