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Income Tax Appellate Tribunal, DELHI BENCH “E”, NEW DELHI
Before: SMT. BEENA A. PILLAI & SH. PRASHANT MAHARISHI
ORDER
PER BEENA A. PILLAI, JM:
The present appeal has been preferred by assessee 1. against order dated 31.10.2016 passed by Ld. CIT appeal 16, New Delhi for assessment year 2012-13 on the following grounds of appeal:
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(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 of Rs.1,80,23,832/- made by AO on account of sundry creditors. (ii) On the facts and circumstances of the case, the learned CIT(A) has erred both on facts and in law in not admitting the additional evidences filed by the assessee under Rule 46A, despite the fact that the assessee had reasonable cause for not filing such evidences before the AO. 3(i) On the facts and circumstances of the case, the learned CIT(A) has erred both on facts and in law in confirming the abovesaid addition made by AO invoking the provisions of Section 41(1) of the Act, despite the fact that this not being a case of remission or cessation of liability, provisions of Section 41(1) cannot be applied to the same. (ii) That the amounts payable having appearing in the books of the assessee as well as that of creditors, it does not amount to cessation or remission of liability.
4. On the facts and circumstances of the case, the learned CIT(A) has erred both on facts and in law in confirming the addition on account of creditors ignoring the explanation brought on record by the assessee including replies directly filed by the creditors to the AO in response to notice under section 133(6) of the Act..
5. On the facts and circumstances of the case, the learned CIT(A) has erred both on facts and in law in confirming the action of the AO in making addition of Rs.47,000/- on account of less household withdrawals.
6(i) On the facts and circumstances of the case, the learned CIT(A) has erred both on facts and in law in confirming the disallowance of 1/6th of the following expenses made by AO on account of personal element:- Vehicle running & maintenance Rs.1,98,293/- Conveyance expenses Rs. 59,290/- Travelling expenses Rs.2,01,967/- Entertainment expenses Rs. 54,945/- Rs.5,60,140/- (ii) That the addition has been confirmed despite the expenses having been incurred wholly and exclusively for the purposes of business.
7. The appellant craves leave to add, amend or alter any of the grounds of appeal
2. The brief facts of the case are as under:
Assessee filed its return of income declaring a total income of Rs.56,76,730/- on 29.09.2012. The case was selected for scrutiny and notices under section 143(1) along with questionnaire under section 143(2) were issued to assessee. During assessment proceedings, Ld. AO observed that assessee is running a proprietorship concern with name and style of M/s Micky Automobiles, which is engaged in the business of wholesale trading of Tractor parts. Subsequently Ld. AO observed that, during the year under consideration, assessee had a large amount of sundry creditors. Ld. AO called for the list of creditors along with the details and confirmations from the creditors. It is recorded by Ld. AO that lists of creditors along with their addresses were filed by assessee but PAN members and confirmations were not provided. Ld. AO completed the assessment under section 143(3) by making following additions:
S.No Particulars Amount 1. Addition u/s 41(1) of Income Tax Act Rs.1,80,23,832/ - 2. Addition on account of low house-hold Rs.47,000/- claiming 3. Adhoc Disallowances of Various expenses Rs.1,27,389/- Total Rs.1, 81,98,221/-
Aggrieved by the order passed, the assessee preferred appeal before Ld. CIT (A).
Before Ld. CIT(A) assessee filed certain documents under rule 46A being confirmations from the parties that were received subsequent to assessment proceedings. It was submitted before Ld. CIT(A) that same creditors were appearing in the succeeding assessment years (2013-14) in the books of accounts of assessee. Ld. AO had issued summons under section 133(6) of the Act to these creditors for which the replies were also received. He had submitted that copy of ledger account of M/s Data Metrics Technology Ltd., being the major creditor, was filed for assessment year 2012-13 alongwith confirmation. Ld. CIT(A) called for a remand report in respect of these confirmations from the Ld. AO.
Ld. AO on 08.07.2016 submitted remand reports wherein he has accepted confirmations submitted by M/s Data Metrics Technology Ltd., for assessment year 2013-14. It has further been observed by Ld. AO that opening balance in case of M/s Data Metrics Technology Ltd., was Rs.10,33,81/-, which has been added to the income of the assessee in assessment year 2012-13 and same has been reduced to financial year relevant to assessment year 2013- 14 at Rs.9,98,89/-. Ld. AO, therefore, did not make any addition for assessment year 2013-14 on account of creditors, as it was already added in the year under consideration.
Ld. CIT(A) without admitting additional evidence, confirmed additions made by assessing officer.
7. Aggrieved by order passed by Ld. CIT(A), assessee is in appeal before us now.
8. Ld. AO submitted that authorities below had made addition under section 41(1) of the Act, by invoking provisions of section 69C, without there being any allegation of bogus purchase and trading results having been accepted by Ld. AO. He submitted that major creditor that was outstanding was M/s Data Matics Technology Ltd., amounting to Rs.1,44,10,910/-. He submitted that as creditor responded to the summons issued by Ld. AO for assessment year 2013-14, it cannot be said that assessee has failed to establish creditworthiness and genuineness of creditor. He emphasised that evidences produced by assessee before Ld. CIT(A)s are very much crucial for the purpose of deciding this issue. Ld. AR thus requested for set aside in order to consider the issue in the light of the documents filed.
Ld. DR does not object for the set aside.
We have considered the rival submissions advanced by both the parties in the light of the records placed before us.
From the application filed by assessee before Ld. CIT(A) it is observed that, assessee had produced requisite material, though for the first time, to justify the claim. Ld. CIT(A) called for remand report from Ld. AO, wherein he makes certain categorical observations in respect of the same creditor in the subsequent assessment years. Ld. AO admits that, creditor under consideration before us has filed confirmation in respect of outstanding amount for assessment year 2013-14. This makes it amply clear that the assessing officer do not doubt the genuineness and creditworthiness of the creditor, as he has not made any addition in the hands of the assessee in the subsequent assessment year’s in respect of this creditor. Therefore, to our mind the additional evidence filed was crucial to the disposal of appeal, and had a direct bearing on the claim made by the assessee.
Rule 46A of the Income-Tax Rules, 1962, permits this Tribunal to admit additional evidence, if it finds that crucial for disposal of the appeal. We are accordingly inclined to admit the additional evidences filed by the assessee and set aside this issue to the file of Ld. CIT(A), who will now examine this issue on merits in the light of these evidences as per law. Ld. CIT(A) is directed to give a clear finding in respect of impugned addition.
As we are setting aside this issue in ground No. 3 & 4, raised by the assessee, ground No.2 being interlinked, is also set aside to Ld. CIT (A).
Ground No. 5
This ground has been raised by assessee in respect of addition made by assessing officer on account of less household withdrawals amounting to Rs. 47,000.
Ld. AR submits that assessing officer has arbitrarily made addition without there being any justified reason. He submitted that during assessment proceedings assessing officer observed that assessee made cash drawings of Rs.1,05,000, his son made cash drawings of Rs.1,48,000/- and his daughter was self dependent. Ld. AR submits that assessing officer estimated household drawing of Rs. 25,000 per month, without any basis and after considering the drawings already made by assessee, addition of Rs.47,000 has been made.
Ld. DR on the contrary supported the orders passed by authorities below.
We have considered the submissions of both the sides, in the light of records placed before us. We agree with Ld. AR that estimation made by assessing officer has no basis. In our view, in absence of any material to suspect or conclude that though household expenses were higher, a lesser expense was shown. We are accordingly inclined to delete the addition made by Ld. AO.
In the result the ground stands allowed.
Ground No. 6
This ground is in respect of an ad hoc disallowance of 1/6 expenditure incurred by assessee. Ld. AO has disallowed various expenses on the ground that there is a possibility of personal element embedded in these expenditure. On an appeal, Ld. CIT(A) deleted the inclusion of depreciation on car, car insurance paid and staff welfare expenses being, purely official in nature. However, he sustained addition in part, as in respect of remaining expenditure incurred by assessee of their being a personal element embedded cannot be over looked.