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Income Tax Appellate Tribunal, DELHI BENCH: ‘D’: NEW DELHI
Before: SH. H.S. SIDHU & SH. O.P. KANT
ORDER PER O.P. KANT, A.M.: These two appeals by the assessee are directed against two separate orders dated 20/12/2010 and 28/09/2012 of the learned Commissioner of Income-tax (Appeals), Muzaffarnagar for assessment year 2007-08. The first appeal is in respect of the additions made in the assessment under section 143(3) of the Income-tax Act, 1961 (in short ‘the Act’) and the second appeal is in respect of penalty levied under section 271(1)(c) of the Act. As both the appeals are interconnected, same are heard together and decided by this consolidated order.
First we take up, the appeal in ITA No. 1411/Del/2011 wherein following grounds have been raised:
1. Ld. CIT (Appeal) is not justified in law and facts and circumstances of the case in confirming the action of assessing officer in rejecting the audited books of account 6276/Del/2012 AY: 2007-08 of appellant and estimating the gross receipt of freight of Rs. 68,00,000/- against the receipt of Rs. 65,78,869/- declared by the appellant.
2. Ld CIT(A) is not justified in law and facts and circumstances of the case in confirming the action of assessing officer in rejecting the audited books of account of appellant and in estimation of income at the rate of 5 %.
Ld. CIT (Appeal) is not justified in law and facts and circumstances of the case in confirming the addition of Rs.5,00,000/- under section 68 of the I.T. Act.
Assessee has every right to make, add, delete, modify or alter any grounds of appeal
at the time of hearing.
3. The facts in brief are that the assessee, an individual was deriving income from transport business under the name and style of M/s Maruti Road Lines. The assessee filed return of income on 31/10/2007 declaring income of Rs. 1,54,760/-. During the assessment proceeding, the Assessing Officer observed introduction of capital of Rs. 70,000/-. The assessee was asked to produce books of accounts, source of capital contribution and details of various bank accounts maintained by the assessee. The Assessing Officer observed non-compliance by the assessee as recorded in para-6 of the assessment order. In view of non- compliance, the Assessing Officer proceeded to make the assessment on the basis of the material and information available before him, which has been summarized by the Assessing Officer in para-9 of the assessment order as under: “9. The sum and substance of the above facts is: (a) That there is no proper explanation for the addition of Rs. 70000/-. (b) That the withdrawal is for Rs. 60000/- from the capital but the LIP paid is for Rs. 40451/-. Thus the house hold expenses are not explained. (c) That in the personal bank account with PNB cash deposits total to Rs 186000/ for which there is no plausible explanation (Excluding Rs 5,00,000/- considered separately). (d) That no details indicating the name and addresses of the truck owners, truck number, date of payment, mode of payment, amount paid, rate of payment for freight paid to trucks at Rs 64,31,813/-have been furnished for verification. (e) That no name and address of the employee to whom salary paid at Rs 40552/- have been furnished. (f) That the copy of bank account relating to M/s Maruti Road Lines has not been furnished. Even the bank account no name of Bank and Branch Code have been furnished. In view of the above facts the books of account are not such from which true and correct income can be deduced. Consequently the books of account are rejected.”
6276/Del/2012 AY: 2007-08 4. In view of above observations, the Assessing Officer rejecting the books of accounts under section 145(3) of the Act, estimated the receipt from freight at Rs. 68,00,000/- as against receipt of Rs. 65,78,869/- declared by the assessee and applied the net profit rate of 5% resulting into net profit of Rs. 3,40,000/- as against profit of Rs. 1,87,510/- declared by the assessee which resulted in addition of Rs. 1,52,490/-. The Assessing Officer noted that no separate addition on account of unexplained deposits in bank account of Rs. 1,86,000/- and fresh capital contribution of Rs. 70,000/- was made as the above addition to net profit would take care of these investments/expenditures. The Assessing Officer also observed cash deposits of Rs. 6,88,464/- in bank account No. 3157 with PNB Sadar Bazar, Muzaffarnagar which included a deposit of Rs. 5,00,000/- , the source of which was not explained by the assessee and, therefore, the Assessing Officer added the same as undisclosed income of the assessee.
Aggrieved, the assessee filed appeal before the learned Commissioner of Income-tax(Appeals), who upheld the rejection of books of accounts by the Assessing Officer as the assessee did not produce copies of bank accounts of M/s Maruti Road Lines and confirmed the addition to the net profit of the assessee. Regarding the unexplained cash credit of Rs. 5 lakh, the assessee filed confirmation from M/s Dynamic Infra Projects Private Limited, New Delhi certifying that it had advanced said sum of rupees, along with copy of bank account of M/s Dynamic Intra-Developers Private Limited. The Authorised Representative of M/s Dynamic Infra Projects Private Limited appeared before the Assessing Officer in remand proceedings and confirmed the issue of draft of Rs. 5 lakh dated 27/09/2006 by M/s Dynamic Infra Developers Private Limited i.e. a sister concern on behalf of M/s Dynamic Infra Projects Private Limited. In remand proceedings the assessee stated that said sum of Rs. 5 lakh was withdrawn on 03/10/2006 for making advance for purchase of land, however, said land deal could not be executed and the amount was also not received back even after a lapse of four years. The learned Commissioner of Income 6276/Del/2012 AY: 2007-08 Tax(Appeals) did not accept the submission of the assessee and held that sum of Rs. 5 lakh was not refundable to the aforesaid company and was paid to the assessee for services rendered and thus confirmed the addition. Aggrieved, the assessee is in appeal before the Tribunal raising the grounds reproduced.
In grounds No. 1 and 2, the assessee has challenged rejection of books of accounts and estimating the freight receipts at Rs. 68,00,000/-and net profit rate at 5% of the receipt. 6.1 Before us, the learned Authorised Representative of the assessee submitted that all the relevant documents were produced before the learned Commissioner of Income-tax(Appeals) and, therefore, the rejection of books of accounts was not justified. 6.2 On the other hand, learned Sr. Departmental Representative relying on the orders of authorities below submitted that before the Assessing Officer despite providing number of opportunities, the assessee failed to produce bills/vouchers, explain the source of capital of Rs. 70,000/- and insufficient withdrawals etc. and even before the learned Commissioner of Income-tax(Appeals), the assessee failed to produce copy of bank accounts of the business concern, namely, Mrs Maruti Road lines and dependants of the assesse. Accordingly, she submitted to uphold the findings of the learner Commissioner of Income-tax( Appeals). 6.3 We have heard the rival submissions and perused the material on record. We find from the order of the Assessing Officer that number of opportunities were provided to the assessee by the Assessing Officer to justify the net profit declared and produce copy of bank accounts and bills and vouchers of the business concern namely M/s Maruti Road Lines, however, due to failure on the part of the assessee to produce details, the Assessing Officer rejected the books of accounts and estimated freight receipts at Rs. 68,00,000/- and net profits at the rate of 5% on such receipts. The learned Commissioner of Income-tax (Appeals) upheld the findings of the Assessing Officer with following observations:
6276/Del/2012 AY: 2007-08 “3.1 Ground of appeal No.2 is against estimation of net profit at Rs.3,40,000/-. As per the appellant the business is that of transport agency i.e. he is supplying trucks to the factories for transportation of their products to various parts of the country and charging his commission on G.R. charges. The freight1 as mentioned in G.R. of goods transported are paid by the consignee directly to the truck drivers/owners on delivery of the goods after deducting the amount of T.D.S. where applicable. Certificate of the amount of T.D.S. were received by the assessee and taken into accounts. It has further been contended that the assessee was in fact taking into account the freight charges actually paid by the consignee on the basis of Form No. l6A received from the truck drivers/owners. The A.O. has taken estimate of freight charges of Rs.68,00,000/- as against Rs.65,78,889/-(based on Form N0.I6A taken by the appellant) Thus addition made by the A.O. on estimate basis is not correct and therefore be deleted. The facts of the case as well as submissions made by the appellant have been carefully considered. It is observed that the A.O. rejected book results and estimated net profit on the basis of fact that certain queries were not complied by the appellant and the books of account i.e. cash book and ledger as well as copy of bank account of the appellant were produced very late whereas, copy of bank accounts of the M/s Maruti Road Lines, and dependents were not furnished. Further, no bills and vouchers were produced for examination. During appellate proceedings also the appellant has neither been, able to produce copies of bank accounts of M/s Maruti Road Lines and dependents nor any explanation has been put-forth by the appellant for non-production of copies of bank accounts. Thus, the conduct of the appellant has remained doubtful.. The A.O. in the assessment order has discussed the reasons for rejection of book results which not repeated here for the sake of brevity. The reasoning elucidated for rejection of books of account are upheld. Thus it is held that the A.O. was perfectly justified in estimating net profit at Rs. 3,40,000/-. The same is hereby confirmed. Ground No.2 is dismissed.”
6.3 We find from the observation of the Assessing Officer and learned Commissioner of Income-tax (Appeals) that no bills and vouchers were produced for examination by the Assessing Officer and bank accounts of the business concern were also not produced even before the learned Commissioner of Income-tax (Appeals). In our opinion, in absence of bills and vouchers and bank statements and other defects mentioned by the Assessing Officer in the 6276/Del/2012 AY: 2007-08 assessment order, the Assessing Officer was justified in rejecting books of accounts and estimating the receipt of the assessee at Rs. 68,00,000/- as against receipt of Rs. 65,78,869/- declared by the assessee. As far as applying the net profit rate of 5% on the estimated receipt is concerned, we find that no comparable case has been cited by the Assessing Officer, however, in section 44AD of the Act, the legislature has itself provided net profit rate of 8% in case of eligible retail business, and therefore, in our view, the net profit rate of 5% applied by the Assessing Officer is reasonable and accordingly the findings of the learned Commissioner of Income-tax(Appeals) on the issue in dispute are upheld. The grounds No. 1 and 2of the appeal are dismissed.
In ground No. 3, the assessee has challenged addition of Rs. 5 lakhs made by the Assessing Officer and confirmed by the learned Commissioner of Income-tax( Appeals). 7.1 Before us, the learned Authorised Representative of the assessee referring to the pages 5 and 7 of the assessee’s paper book submitted that M/s. Dynamic Infra Projects Private Limited in their confirmations and in copy of books of accounts has clearly accepted that said amount of Rs. 5 lakh was given as advance to the assessee for purchase of land and the transaction was also confirmed from the bank statement of the aforesaid company and the certificate issued by the banker enclosed respectively on page 8 and 6 of the assessee’s paper book. He also referred to the copy of statement of the assessee recorded by the Assessing Officer in remand proceedings placed at pages 10 to 12 of the assessee’s paper-book and submitted that on behalf of the company he made a deal for purchase of land and paid said sum to one broker. He also further referred to the statement of the assessee that this was the first and last deal in the land and the assessee did not turn any income in the deal. In view of above, the ld. Authorized Representative submitted that the assessee has discharged the onus as required under section 68 of the Act and, therefore, no addition was justified in the case of the assessee.
6276/Del/2012 AY: 2007-08 7.2 On the other hand, ld. Sr. Departmental Representative relying on the orders of the lower authorities submitted that the said advance has not been returned by the assessee even after a lapse of number of years, which established that it was an income of the assessee which was not disclosed in the return of income. 7.3 We have heard the rival submissions and perused the material on record including the paper book of the assessee. The learned Commissioner of Income- tax (Appeals) has made following observations in respect of the addition: (i) The appellant has not been able to produce copies of bank accounts o f the proprietary concern namely M/s Maruti Road Lines from where the debit/credit entries could be verified and also the appellant has no explanation regarding the same. (ii) The Director of the company making advance of Rs.5,00,000/- has not been produced before the A.O. for examination despite the plea taken by the appellant during the appellate proceedings that he would be produced before the A.O. during remand proceedings. (iii) The confirmation of advance made at Rs.5,00,000/- has been filed by Dynamics Infraprojects Pvt. Ltd. while the D.D. has been prepared by Dynamic Infradevelopers Pvt. Ltd regarding which the appellant has no explanation. (iv) The appellant has deposed that the advance of Rs.5,00,000/- was made to one Sh. Tohid Ahmed. Village Ram Nagar, Roorkee for purchase of land but despite of the fact that the dealing could not be executed, the amount has not been returned by the aforesaid person even after the lapse of 4 years and no efforts have been made by the appellant to recover the said amount. It remains a concocted story as no evidences with regard to further passing on of the amount has been furnished. Further no documentary evidence has been furnished to prove that the appellant made advance to Sh. Tohid Ahmed, Village Ram Nagar, Roorkee for purchase of land. The company who issued the D.D. in favour of the appellant also have not stated when they received back Rs.5 lac from the appellant. The fact of receipt of Rs.5 lac from the aforesaid company is admitted. However, the fact of advance to Sh. Tohid Ahmed is not proved by any document. (v) No correspondence for the recovery of sum of Rs.5 lac by the appellant from Sh. Tohid Ahmed and vice versa by the company issuing D.D. for recovery of impugned sum from the appellant have been furnished at all. (vi) From the statement on oath of the appellant recorded by the A.O. during remand proceedings it is observed that the appellant was engaged in the business of real estate but never admitted the said business before the A.O. and at the time of appellate proceedings, but only at the time of remand proceedings. It is apparent that the amount of Rs.5 lac has been received by the appellant from M/s DIDPL as brokerage/commission for arranging land at Roorkee. (vii) Without prejudice to what has been held in para (vi) above, it is important to note that M/s DIDPL has not admitted that the amount of Rs.5 lac given by it to the appellant was returnable/refundable. Even , if the appellant was showing it the liability, the same stood ceased during the same year. Thus non-refundable advance/deposit or ceased liability definitely constitutes the income of the 6276/Del/2012 AY: 2007-08 appellant.
7.4 We find that observation in point No. (i) of the CIT(A) was having effect on the profit of the business concern, namely, M/s Maruti Road Lines, and which he have already considered while deciding the grounds No. 1 and 2 of the appeal. As regard to the point No. (ii) is concerned, we find that the company M/s. Dynamic Infra Projects Private Limited had duly authorized Sh. Ajay K. Singhal to appear before the Assessing Officer and he explained the source of Rs. 5 lakh given as advance to the assessee and therefore the summons were duly complied by the aforesaid company. As regard to point No. (iii), we find that the demand draft was prepared from the bank account of M/s Dynamic Infra Developers Private Limited whereas the confirmation of advance was given by M/s Dynamic Infra Projects Private Limited. But we do not find anything wrong as in the business, the sister concern may give advance on behalf of the another concern. It is a matter which is between two sisters concern, how do they manage their cash flow efficiently and it is not for the Revenue authority to decide how to conduct the business activity. As regard to points No. (iv) and (v) of advance to Tohid Ahmed is concerned, we find that as far as discharging of onus under section 68 of the Act was concerned, it was not relevant how the money was utilized. The assessee has explained all the three ingredients of the transaction, i.e., identity and creditworthiness of the person and genuineness of the transaction and therefore the fact of advance to Sh Tohid Ahmed, whether proved or not, was not relevant. As regard to point No. (vi), the conclusion of the learned Commissioner of Income-tax (Appeals) that the assessee was engaged in the real estate business and amount of Rs. 5 lakh received from M/s. Dynamic Infra Developers Private Limited was a brokerage commission for arranging land deals at Roorkee is without any basis or any supporting evidence. The assessee in its statement recorded by the Assessing Officer in remand proceeding, has duly stated that it was a first deal of purchase of land and which did not result any in any income and therefore arriving at conclusions by the 6276/Del/2012 AY: 2007-08 learned Commissioner of Income Tax(Appeals) without any evidence is not justified. As regard to point (vii) is concerned the finding of the learned Commissioner of Income-tax (Appeals) are without proper appreciation of the documents. In the confirmation submitted by M/s. Dynamic Infra Projects Private Limited and the copy of the account of the assessee in the books of M/s Dynamic Infra Projects Private Limited, which are appearing at page 7 and 5 of the assessee’s paper book, it is evident that said sum was given by the aforesaid company as advance for purchase of land. Further, the observation of the learned Commissioner of Income-tax (Appeals) that the said advance was non- refundable, is also without any supporting evidence. In our opinion, the assessee has discharged its onus under section 68 of the Act as it has already provided all documents in respect of identity and creditworthiness of the person who advanced the money and genuineness of the transaction by providing the copy of the bank account and a certificate from the bank that said amount of demand draft was issued from the bank account of the company. In view of the above discussion, we hold that said addition of Rs. 5 lakh is not justified in the hands of the assessee and accordingly it is deleted. The ground of the appeal is allowed.
Ground No. 4 being general in nature, it is not required to adjudicate upon at our end.
In the result, the appeal of the assessee is partly allowed.
The grounds of appeal
raised the assessee in the appeal are as under:
1. Learned Commissioner of Income Tax(Appeals) is not justified in law and facts and circumstances of the case in confirming the penalty under Section 271(1)(c) on the amount of addition of Rs. 5,00,000/- under Section 68 of the I.T. Act, 1961 made by the Assessing Officer.
2. Assessee has every right to make, add, delete, modify or alter any grounds of appeal at the time of hearing.
11. We find that the addition in respect of which penalty under section 271(1)(c) of the Act was levied, has already been deleted by us in ground No. 3 6276/Del/2012 AY: 2007-08 of ITA no. 1411/Del/2011 in paras no. 7 to 7.4 above. As the addition itself has been deleted, the penalty levied under section 271(1)(c) of the Act also cannot survive and, therefore, the same is deleted. Accordingly, the ground No. 1 of the appeal is allowed.
12. Ground No. 2 of the appeal being general in nature not required to adjudicate upon by us.
13. In the result, the appeal of the assessee is allowed. The decision is pronounced in the open court on 14th June, 2016.