DCIT, NEW DELHI vs. M/S. NARULA MILK UDYOG PVT. LTD., NEW DELHI

Revenue by : Ms. Nirupama Katru, CIT DR Assessee by: Sh. Bhupesh Kr. Dhingra, CA Date of Hearing 23/02/2017 Date of pronouncement 10/04/2017 O R D E R PER PRASHANT MAHARISHI, A. M. 1. This appeal is preferred by the revenue against the order of the ld CIT(A)-II, New Delhi dated 31.03.2014 for the Assessment Year 2008-09. 2. The revenue has raised the following grounds of appeal:- “1. That the Commissioner of Income Tax (Appeals) erred in law and on facts of the case in deleting the addition of Rs. 77,74,542/- made by the AO on account of unexplained purchase u/s 69C of the IT. Act. 2 That the Commissioner of Income Tax (Appeals) erred in law and on facts of the case in deleting the addition of Rs. 4,14,608/- made by the AO by way of disallowance of expenses.

3. That the Commissioner of Income Tax (Appeals) erred in law and on facts of the case in adopting the working of peak amounts submitted by the appellant.

4. That the Commissioner of Income Tax (Appeals) erred in law and on facts of the case in relying on Cash Book and Bank Book for telescoping, whereas CIT(A) has herself recorded reasons in the appellate order for confirming the rejection of books of account of the assessee.

5. (a) The order of the CIT (A) is erroneous and not tenable in law and on facts.”

Page 2 of 4 The brief fact of the cases that assessee is a private limited company 3. related to M/s Harper homes group of cases. The main allegation against the group is that the group has floated several concerns with the main directors and shareholders and consequently, it is engaged in capital formation etc. Allegedly the assessee remained engaged in the business of dealing in wholesale business of trading of fabrics and clothes and for the current year, it is shown profit of Rs. 2 409/– but it has a huge reserve and surplus of Rs. 5 927422/–. The assessee filed its return of income on 14th made 2008 declaring income of Rs. 2 640/– and the case of the assessee was picked up for scrutiny. The Ld. assessing officer noted that assessee has shown purchases of rupees 777 4542/– and net sales of Rs. 4 134277/–. As all the purchases and sales are declared to have been made in cash only and as assessee has not maintained any bank account, the assessee was directed to prove its trading activities and to produce sales tax records. The assessee contended that since it deals with tax-free goods only. There is no necessity for it to file sales tax returns. As the assessee did not maintained any stock record as well as according to the assessee no proper vouchers or bills on evidences were provided the books of accounts produced by the assessee are not verifiable and not reliable. And, therefore he rejected the books of account under section 145 of the income tax act and the entire purchase and administrative expenses were held to be unexplained expenditure under section 69C of the income tax act and has made an addition of Rs. 7 774542/– on account of purchases and Rs. 4 14608/– on account of administrative expenses. Consequently, against the returned income of Rs. 2 640 the assessment was made under section 143 (3) of the income tax act on 31st. December 2010 at Rs. 2 819 1790/–. Aggrieved by the order of the Ld. assessing officer the assessee preferred an appeal before the Ld. 1st appellate authority who in turn deleted the addition under section 69C of the income tax act, however , since the appellant company along with other companies are all in-house to the Thapar/Dhingra group and there is a widespread web of inter-Se transactions amongst them, keeping their separate juridical entity in mind, the hands of the Justice