ACIT, NEW DELHI vs. M/S. VINAYAK REMEDIES LTD., NEW DELHI

4.1 It is noted from the assessment order that the said share application money and share premium has been received from a single party namely M/s. Times Goods Pvt. Ltd., Kolkatta.

4.2. While making the above addition, in the assessment orders the A.a. has recorded as under:

1. Furnish copy of account of Mis. Vinayak Remedies Lid. for the period 01.04.2009 to 31.03.2010, as per your books. Furnish complete narration of each entry.

2. Furnish copy of acknowledgement of your ITR mention your PAN and ward/circle where you have filed your return along with your computation of income, profit & loss ale balance sheet.

3. Bank statement for the full year along with narration of entries exceeding Rs. 1 lac alongwith the name and address of the parties with whom these transactions have been made.

(a) Please also inform whether as on date you are holding the same or not.

(b) In case, the shares have been sold, the details of the transactions mentioning the number of shares sold, the amount received, premium, if any, received and the name and address of the party to whom sold alongwith PAN number may please also be mentioned

6. Details of the prospectus/or the details of advertisement through which you were made aware of the group M/s. Vinayak Remedies ltd. Till date no reply has been received and a perusal of the website on India Post reveals the following information."

~ The assessment records have been called and examined. It is found that as against the referring to the reply dated 21.02.2013 filed before him as a one page reply, the same is a 32 pages submission. It is apparent that, the A.O. did not examine the said 32 page submission before making the addition.

4.4 It is also noted from the Balance Sheet of M/s. Times Goods Pvt. Ltd. that as on 3l.03.2010, the shareholder's funds with M/s. Times Goods Pvt. Ltd. were 8.69 crores.

4.5 During the appellate proceedings the appellant was asked for justification for a premium of Rs.90 per share of face value Rs. 10. It was submitted by the appellant that during the preceding ye i.e. A.Y. 2009- 10, the company earned Rs.38.5 per equity share of Rs. 10 and as on 3l.03.2009 it had a net worth of Rs.69.88 per share of Rs.69.88 per share of Rs. 10.

4.6. Under the above circumstances, it is apparent that the share applicant viz. M/s. Times Goods Pvt. Ltd. had sufficient funds available with it and there is justification for charging a share premium. In view of these observations, I am unable to uphold the disallowance made by the A.O. The same is deleted.

5. The ground no. 3 pertains to an addition of Rs.29,50,000/- (represented by unsecured loans) as undisclosed income u/s 68. While making the addition, the A.O. has recorded as under.- Further, the assessee has shown fresh unsecured loans raised from the following partners:

S. No. Name Amount 1 Sanjay Kumar Nathani 5,00,000 2 Bal Krishna Tibrawal 8,00,000 3 Ljjawal Kumar Dalmiya 3,00,000 4 Udayan Tibrawal 2,00,000 5 Shashi Kamal Dalmiya 1,00,000 6 Shashi Kamar Dalmiya (HUF) 4,50,000 7 Alka Dalmiya 6,0,0000 The following information called for uls. 133(6) as the assessee had not furnished the creditworthiness of the loans as called for in the questionnaire and subsequent entry dated 21.11.2012.

In case you have not done business, please attach copy of your profit and loss alc and balance sheet.

No reply as called for was received except in the case of Shri U. K Oalmiya wherein it was noticed that there are also cash deposits before issue of cheque. Further, he has just submitted copy of his ITR acknowledgement declaring income of Rs. 2,83,981/-.

The narration of the back entries is not submitted. Further, the assessee's counsel, was again reminded on 08.03.2013 to submit the creditworthiness ofthe loans taken as called for in the original questionnaire and order sheet entry dated 21. 11.2012. He was again reminded for the same on 13.03.2013 and the finally the case was adjourned for 18.03.2013, on 18.03.2013 the counsel attended and filed copy of acknowledgement of ITR of all persons alongwith their bank statements. The Bank statement of Shri B. K. Tibrawal was not submitted.

The other bank accounts of Alka Oalmiya shows cash deposits before the issue of cheque. Similarly in the case of Shri Sanjay Kumar it is seen that before issue of cheques there are cash deposits of Rs. 3 lacs and 1,60,000/- on 14.01.2010 and 05.03.2010 before the issue of heques to company. His returned income is Rs. 1,67, 180/-. Similarly in the case of S.K Dalmiya (HUF) with returned income of Rs. 1,62,010/-. His book account shows cash deposits before issue of Rs. 1,48,000/- there are cash deposits of Rs. 2,05,000/- just before issue of cheque of Rs. 2,00,000/-. The bank statement of Sh. B. K Tibrawal has not been submitted.

In light of the facts mentioned above the creditworthiness of the above mentioned persons has riot been proved and accordingly, an addition of Rs.29,50,000/- is treated as unexplained income and added to the income of the assessee."

5.1 Among other things it is noted from the Assessment records that contrary to the recording by the A.O., the bank statement of Sh. B.K.

Tibrawal was, indeed, submitted before the A.O. on 18.03.2013.

5.2 After considering the reasoning of the A.O. and the submissions of the appellant hold that the action of the A.O. in summarily treating the entire unsecured loans of Rs. 29.50 lacs as undisclosed income uls 68 was premature.

5.3 The following are observed from the submissions made by the appellant before the A.O.

(i) A sum of RsA,60,0001- was deposited in cash in the bank account of Sh. Sanjay Kumar Nathani before cheques were issued by him to the appellant.

(ii) Sh. B.K.Tibrawal, M.Com, aged about 55 yrs. And having an experience of 33 yrs. at the time of the assessment proceedings, had a Net worth of about 60 lacs and had received money through banking channels after which he issued cheque to the appellant.

(iii) Sh. Ujjawal Kumar Dalmiya Aged about 35 years, graduate, having 15 yrs. of experience at the time of assessment had received money through banking channels before giving loan to the appellant.

(iv) Cash amounting to Rs. 2,00,0001- was deposited on different dates in the account of Sh. Udayan Tibrawal before he issued the cheque to the appellant. The capacity of Sh. Udyan Tibrawal to pay is not established.

(v) Sh. Shashi Kamal Dalmiya had issued a cheque of Rs. 1,00,000 to the appellant from out of Rs.l,70,0001- received by him through banking channel on various dates before issuing the cheque. Sh. Shashi Kamal Dalmiya has a work experience of about 20 yrs and is running Shyam Medical Agency. vi) In the bank account of Mis. Shashi Kamal Dalmiya (HUF) cash amounting Rs.4,50,000/- was deposited on different dates before a cheque of the same amount was issued by the HUF to the appellant. vii) Cash amounting to Rs. 1,25,000- is observed to have been deposited in the bank account of Ms. Alka Dalmiya during the period in which she had issued three cheques amounting to Rs.6,00,000/- to the appellant.

The capacity to pay of Ms. Alka Dalmiya, who is neither very qualified nor very experienced, is not established.

5.4 Based on the above discussion, addition amounting to Rs. 12.35 lacs representing cash deposited in different bank accounts before receiving loan from these persons is upheld and the remaining addition of Rs.17.15 is deleted. 6. Ground no. 4 relates to disallowance of expenses amounting to Rs.30 lacs. In the assessment order the A.O. has recorded as under:-

“The assessee was asked to furnish details of expenses on account of advertisement, rent staff welfare, conveyance expenses , sales promotion and commission expenses, breakage and damage and discount vide questionnaire dated 28.9.2012. The assessee vide his letter submitted just the amounts without any details or evidence regarding the amounts expended under these heads. Except rent paid agreement no other detail has been furnished. The assessee was again specifically asked to produce the details of expenses again on 21.11.12, but no details have been filed till date. The copy of the reply Scanned and annexed herewith. The above amounts were already in the profit and loss account.

The above chart shows a total casual and lackadaisical approach of the assessee to the scrutiny proceedings which cannot be accepted.

Accordingly, out of the balance expenses as discussed above of RS.31,94,063/-, a sum of RS.30,00,000/- is added back as unexplained."

6.1. I find that the action of the A.O. of disallowing almost entire amount of expenses (Rs.30,00,000 out of Rs. 31,94,063/-) without any relevant findings or application of mind is clearly unwarranted ..

6.2. .In the context of the appeal I am of the opinion that (i) in the back drop of employment cost amounting to Rs.39 lacs, the staff welfare expenses of 59,728/- is justifiable, (ii) against a Turnover of Rs.8.93 Crore in a the wholesale business in medicine, conveyance expenses of 15,95,677/- and Administrative expenses of Rs. 57,000/- are also justifiable, (iii) The Agreement for rent was submitted by the appellant before the A.O.

6.3 While the disallowance of these expenses in totality is clearly unsustainable, as expenses under these items are bound to be there in the ordinary course of business, in view of appellant's lackadaisical approach to the scrutiny proceedings and non-submission of the relevant details before the A.O., I am unable to wrong the action of the A.O.

6.4 After considering the issue in totality, I hold that even though the relevant details were not submitted to the A.O. as asked by him, the appellant deserves relief in respect of the expenses claimed. Accordingly, the addition of 30 lac is sustained only to the extent of Rs. 5,00,000. The appellant gets a re1ief 25,00,000/-“ 13 5.1 On going through the aforesaid finding of the Ld. CIT(A) , with regard to ground no. 1 relating to deletion of Addition of Rs. 20,00,000/- is concerned, I find that during the appellate proceedings, the assessee was asked for justification for a premium of Rs. 90 per share of face value Rs. 10 and it was submitted by the assessee that during the preceding year i.e. AY 2009-10, the company earned Rs. 38.5 per equity share of Rs. 10 and as on 31.3.2009 it had a net worth of Rs. 69.88 per share of Rs.

5.2 With regard to ground no. 2 reducing the addition of Rs. 29,50,000/- made on account f unsecured loan to Rs. 12,35,000/- is concerned, I find Ld. CIT(A) observed that action of the AO in treating the entire unsecured loans of Rs. 29.50 lacs as undisclosed income u/s. 68 was premature. Ld. CIT(A) observed the following points :-

(i) A sum of Rs4,60,000/- - was deposited in cash in the bank account of Sh. Sanjay Kumar Nathani before cheques were issued by him to the appellant.

(ii) Sh. B.K.Tibrawal, M.Com, aged about 55 yrs. And having an experience of 33 yrs. at the time of the assessment proceedings, had a Net worth of about 60 lacs and had received money through banking channels after which he issued cheque to the appellant.

(iii) Sh. Ujjawal Kumar Dalmiya Aged about 35 years, graduate, having 15 yrs. of experience at the time of assessment had received money through banking channels before giving loan to the appellant.

(iv) Cash amounting to Rs. 2,00,0001- was deposited on different dates in the account of Sh. Udayan Tibrawal before he issued the cheque to the appellant. The capacity of Sh. Udyan Tibrawal to pay is not established.

(v) Sh. Shashi Kamal Dalmiya had issued a cheque of Rs. 1,00,000 to the appellant from out of Rs.l,70,0001- received by him through banking channel on various dates before issuing the cheque. Sh. Shashi Kamal Dalmiya has a work experience of about 20 yrs and is running Shyam Medical Agency. vi) In the bank account of Mis. Shashi Kamal Dalmiya (HUF) cash amounting Rs.4,50,000/- was deposited on different dates before a cheque of the same amount was issued by the HUF to the appellant. vii) Cash amounting to Rs. 1,25,000- is observed to have been deposited in the bank account of Ms. Alka Dalmiya during the period in which she had issued three cheques amounting to Rs.6,00,000/- to the appellant.

The capacity to pay of Ms. Alka Dalmiya, who is neither very qualified nor very experienced, is not established.

5.2.1 In view of the above, ld. CT(A) rightly held that addition of Rs. 12.35 lacs representing cash deposited in different bank accounts before receiving loan from these persons and upheld the same addition and the remaining addition of Rs. 17.15 lacs was deleted. In my view the action of the Ld. CIT(A) is a well a well reasoned one which does not need any interference on my part, hence, I uphold the same. As a result, the ground no. 2 is dismissed.

5.3 With regard to ground no. 3 relating to reducing the addition fo Rs. 30,00,000/- made on account of disallowance of expenses to Rs. 5,00,000/- is concerned, I find the AO has observed as under:-

The assessee was asked to furnish details of expenses on account of advertisement, rent staff welfare, conveyance expenses , sales promotion and commission expenses, breakage and damage and discount vide questionnaire dated 28.9.2012. The assessee vide his letter submitted just the amounts without any details or evidence regarding the amounts expended under these heads. Except rent paid agreement no other detail has been furnished. The assessee was again specifically asked to produce the details of expenses again on 21.11.12, but no details have been filed till date. The copy of the reply Scanned and annexed herewith. The above amounts were already in the profit and loss account. The above chart shows a total casual and lackadaisical approach of the assessee to the 16 scrutiny proceedings which cannot be accepted. Accordingly, out of the balance expenses as discussed above of RS.31,94,063/-, a sum of RS.30,00,000/- is added back as unexplained.

5.3.1 I further find that Ld. CIT(A) has noted that the action of the AO of disallowing almost entire amount of expenses out (Rs.30,00,000 out of Rs. 31,94,063/-) without any relevant findings or application of mind is clearly unwarranted . In the context of the appeal, Ld. CIT(A) was of the opinion that (i) in the back drop of employment cost amounting to Rs.39 lacs, the staff welfare expenses of 59,728/- is justifiable, (ii) against a Turnover of Rs.8.93 Crore in a the wholesale business in medicine, conveyance expenses of 15,95,677/- and Administrative expenses of Rs. 57,000/- are also justifiable, (iii) The Agreement for rent was submitted by the assessee before the A.O. I further find that while the disallowance of these expenses in totality is clearly unsustainable, as expenses under these items are bound to be there in the ordinary course of business, in view of assessee's lackadaisical approach to the scrutiny proceedings and non-submission of the relevant details before the A.O., Ld. CIT(A) was unable to wrong the action of the A.O. After considering the issue in totality, I note that Ld. CIT(A) has rightly held that even though the relevant details were not submitted to the A.O. as asked by him, the assessee deserves relief in respect of the expenses claimed. Accordingly, the addition of 30 lac was sustained only to the extent of Rs. 5,00,000. As a result, the assessee gets a re1ief 25,00,000/-. In view of above, I am of the considered view, that Ld. CIT(A) has passed a well reasoned order which does not need any interference on my part, hence, I uphold the same. As a result, the ground no. 3 is dismissed.

Order pronounced in the Open Court on 26/12/2016.