WHITE CUBE RETAILS P.LTD,MUMBAI vs. ITO WD 8(3)(4), MUMBAI

This is an appeal filed by the assessee. The relevant assessment year 2010-11. The appeal is directed against the order of the Commissioner (Appeals) – 18, Mumbai and arises out of the order under section 143(3) of the Income Tax Act, 1961 (the “Act’’).

The 1st ground raised by the assessee in this appeal is that the learned CIT(A) has erred in law and in facts in confirming the addition of Rs. 1,29,43,157/- made by the AO under section 41(1) of the Act. The 2nd ground raised by the assessee in this appeal is that the learned CIT(A) has erred in confirming the addition of Rs. 1,98,57,926/- made by the AO u/s 28(iv) in respect of undischarged liabilities on account of deposits from the debtors.

The assessee filed its return of income for the A.Y. 2010-11 on 08.10.2010 declaring total income of Rs. 13,07,643/- The Assesing Officer (AO) made addition of (i) Rs. 1,29,43,157/- [cessation of liabilities u/s 41(1)] (ii) Rs. 1,98,57,926/- [deemed income u/s 28(iv), (iii) Rs. 10,47,95,882/-[ unproved / unsubstantiated purchases; (iv) Rs. 20,87,278/- [disallowance u/s 40(a)(ia)]; Rs. 3,68,35,330/- [disallowance towards outlet operating and maintenance expenses]; (v) Rs. 50,82,055/- [unproved commission expenses]; (vi) Rs. 1,24,88,000/- [share application money u/s 68] and Rs. 24,03,705/- [difference in the amount of purchases] 4. The assessee preferred an appeal before the learned CIT(A). During the appellate proceedings, the learned AR of the assessee submitted before the learned CIT(A) additional evidences and stated that due to major fire at the business premises of the assessee, many documents could not be produced before the AO. The learned CIT(A) was convinced that the case was covered under rule 46A of the Income Tax Rules, 1962 and therefore he sent the additional evidences submitted by the assessee to the AO for examination and thus called for a remand report. The AO submitted a remand report to the learned CIT(A) on 08.01.2015. The learned CIT(A) was not convinced with the explanations given by the assessee against the additions made by the AO, and therefore he dismissed the appeal filed by the assessee.

Before us, the learned counsel of the assessee submits with regard to ground no 1 of the appeal that since the assessee has not written off the balances in the books of accounts, the question of invoking the provisions of section 41(1) does not arise and more so when the sundry creditors have been paid in the subsequent years and necessary evidences were furnished. It is stated that during the course of hearing, the learned AR had submitted sample invoices of creditors and their repayment schedule before the learned CIT(A). 5.1 Regarding ground no 2 of the appeal, the learned counsel of the assessee submits that whenever the assessee gives any franchisee license to sale its goods, it obtains deposits from franchisees. In the case of the assessee it is with regard to these deposits. These deposits are payable on cancellation of franchisee agreement. It is submitted that during the course of hearing before the learned CIT(A), sample agreement were filed. 5.2 As regards the 3rd ground of appeal, the learned counsel of the assessee submits that during the course of appellate proceedings before the learned CIT(A), the assessee had submitted sample invoices with delivery challan and payment books. 5.3 As regards the 4th ground of appeal it is stated that during the course of appellate proceedings before the learned CIT(A), it was submitted that the concerned expenses were reimbursement to franchisee on which TDS provisions were not applicable. Also it is stated that the learned AR of the assessee had attached sample bills in this regard. 5.4 As regards the 5th & 6th ground of appeal it is stated that during the course of appellate proceedings before the learned CIT(A), it was submitted that the concerned expenses were reimbursement to the franchisee for the expenses incurred by them and the assessee had filed copies of the agreements which provide for reimbursement of the said expenses along with proof in the bank statements which reflect payment of the expenses. It is submitted as these expenses were reimbursement, the same should not be added to income for non-deduction of TDS nor for inability to prove the expenses as requested by AO. 5.5 As regards the 7th ground of appeal it is stated that during the course of appellate proceedings before the learned CIT(A), it was submitted that the assessee had made TDS on the concerned amount and duly deposited the same, the said challans were duly submitted before the AO for verification during the course of assessment. 5.6 As regards the 8th ground of appeal it is stated that during the course of appellate proceedings before the learned CIT(A), it was stated that the assessee had submitted before the AO the following documents:

We have heard the rival submissions and perused the relevant material on record. We find that the assessee had filed before the learned CIT(A) (i) a list of creditors and sample invoices and their repayment schedule in respect of ground no 1 of the appeal, (ii) sample agreement in respect of ground no 2 of the appeal (iii) sample invoices along with delivery challan and payment proofs in respect of ground no 3 of the appeal, (iv) sample bills indicating reimbursement of expenses to franchisee in respect of ground no 4 of the appeal, (v) copy of the agreements which provide for reimbursement of expenses along with proof in the bank statement which reflects payment of the said expenses in respect of ground no 5 & 6 of the appeal, (vi) bank statement reflecting payments in respect of ground no 7 of the appeal, (vii) related documents in respect of ground no 8 of the appeal, (viii) the details clarifying the discrepancy and bank statements in respect of ground no 9 of the appeal. 7.1 We find that the learned CIT(A) has not examined the above details filed by the assessee during the course of appellate proceedings before him. These details are having a direct bearing on the additions / disallowances made by the AO. In view of the above, we set aside the order of the learned CIT(A) and restore the matter to the file of the AO to make a fresh assessment as per the provisions of the Act, after giving reasonable opportunity of being heard to the assessee. The assessee is also directed to furnish before the AO the relevant details.

In the result, the appeal filed by the assessee is allowed for statistical purpose. Order pronounced in the open court on 31/01/2017