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Income Tax Appellate Tribunal, “ B ” BENCH, AHMEDABAD
Before: MS. SUCHITRA KAMBLE & SHRI NARENDRA PRASAD SINHA
आदेश/O R D E R
PER SUCHITRA KAMBLE, JM:
1. The captioned appeal being Revenue against the order dated 09.08.2019 passed by the Ld.CIT(A) arising in the matter of assessment order passed under s. 144 of the Income Tax Act, 1961 (here-in-after referred to as "the Act") and Cross Objection
2 No.24/Ahd/2022 was filed by the assessee relevant to the Assessment Year 2014-15.
The Revenue has raised the following grounds of appeal:
1. 1. Whether the Ld. CIT(A) was correct in deleting the addition made u/s 68 of the Act amounting to Rs. 11,90,49,677/- as the creditworthiness of the persons involved in transactions remains unverified.
2. Whether the Ld. CIT(A) was correct in deleting the disallowance made on account of difference in cash sales amounting to Rs.1.66.81,994/- 3. Whether the L.d. CIT(A) was correct in deleting the disallowance made on account of difference in sales value amounting to Rs.20.71,151/- 4. Whether the Ld. CIT(A) was correct in deleting the addition of Rs.4,39,320/- made on account of non-deduction of tax on expenses u/s 40(a)(ia) of the Act.
5. Whether the Ld. CIT(A) was correct in partly deleting the disallowance made on account of draw expenses on lump sum basis in absence of any concrete evidences. 6 Whether the Ld. CIT(A) was correct in deleling the addition made u/s 36(1) (ii) of the Act on account of interest expenses amounting to Rs.11.33.299/- 7. Whether the Ld. CIT(A) was correct in deleting the addition made u/s 40A(2)(b) of the Act amounting to Rs. 11,21,735/-.
8. Whether the Ld. CII(A) was correct in deleting the disallowance of Capital loss amounting to Rs.3,16,785/- to be carried forward.
9. Whether the Ld. CIT(A) was correct in deleting the addition of Rs. 63.61.066/-on account of brought forward losses.
The assesee has raised the following grounds of Cross Objections.
The Ld. CIT(A) was correct in deleting the addition made u/s. 68 of the Act to the extent of Rs. 11,90,49,677/- considering the validity of the creditworthiness of the parties involved in transactions.
2. The Ld. CIT(A) was correct in deleting the disallowance made on account of difference in cash sales amounting to Rs. 1,66,81,994/- 3. The Ld. CIT(A) was correct in deleting the disallowance made on account of difference in sales value amounting to Rs. 20,71,151/- 3 4. The Ld. CIT(A) was correct in deleting the addition of Rs. 4,39,320/-made on account of non- deduction of tax on expenses u/s. 45(a)(ia) of the Act.
5. The Ld. CIT(A) was correct in deleting the disallowance made on account of draw expenses on lump sum basis in absence of any concrete evidences.
The Ld. CIT(A) was correct in deleting the addition made u/s. 36(1)(iii) of the Act amounting to Rs. 11,33,299/- 7. The Ld. CIT(A) was correct in deleting the disallowance made u/s. 40A(2)(b) of the Act amounting to Rs. 11,21,735/- 8. The Ld. CIT(A) was correct in deleting the addition on account of capital loss amounting to Rs. 3,16,785/- 9. The Ld. CIT(A) was correct in deleting the addition of Rs. 63,61,066/-on account of brought forward loss.
10. On the facts and circumstances of the case, the Ld. CIT(A) has passed the order considering the merits of the case and hence should be upheld.
11. It is therefore, prayed to uphold the order of Ld. CIT(A) for giving substantial relief to the Respondent vide its Appellate Order with regards the aforementioned grounds.
The return of income was filed on 24.11.2014 declaring total income at Rs. Nil by the assessee. The case was selected for scrutiny assessment and notice u/s.143(2) of the Act dated 05.09.2015 was issued and served upon the assessee. The notices u/s.142(1) along with the questionnaire were also issued on 15.09.2015 and 30.06.2016 and the same was served upon the assessee. The assessee has failed to submit the reply and details therefore the AO passed the Assessment Order u/s.144 of the Act, thereby making various additions and assessing the total income at Rs.15,12,98,976/-
Being aggrieved by the Assessment Order, the assessee filed an appeal before the Ld.CIT(A). The Ld.CIT(A) partly allowed the appeal of the assessee.
4 6. As regards to ground no.1 of the Revenue’s appeal the Ld.DR submitted that the addition on account of advance from customers u/s.68 of the Act, amounting to Rs.11,90,49,677/-, the AO has rightly made the addition as the assessee has not given the details in respect of the advances from the customers. The Ld.DR further submitted that there was no specific working or finding given by the Ld.CIT(A) and hence the said addition was not rightly deleted by the Ld.CIT(A).
The Ld.AR submitted that for the Assessment Years 2010-11, 2011-12, 2012-13 and 2013-14 the Tribunal in and 1517/Ahd/2019 along with & 1566/Ahd/2019 has decided the matter in favour of the assessee and dismissed the appeal of the revenue in assessee’s own case vide order dated 21.07.2023.
We have heard both the parties and perused the relevant materials available on records. It is pertinent to note that the parties relating to the advance from customers are same as that of the earlier assessment years which was dealt by the Tribunal for AY 2010-11 to 2013-14. The Ld.DR could not distinguish the fact of the parties as related to the present case and therefore the additions made therein was rightly deleted by the Ld.CIT(A). Thus, the ground no.1 of the Revenue’s appeal is dismissed.
As regards to ground no.2 relating to the addition on account of difference in cash sale amounting to Rs.1,66,81,994/-, the Ld.DR submitted that the assessee has declared difference between the estimated sale of Rs.13,00,000/- which comes to around Rs.11,33,18,006/- The difference in 5 cash sales was glaring and the same should have been take into consideration as the AO did not invoke the provision of section 145(3) of the Act and this difference was not taken into account by Ld.CIT(A).
The Ld.AR submitted that the difference between the estimated sales of Rs.13,00,000/- was an estimation on the part of the AO and therefore cash sales to that extent was correctly deleted by the Ld.CIT(A).
We have heard both the parties and perused the materials available on records. It is pertinent to note that there was no specific finding by the AO that the books of account were not properly maintained as well as the AO at no point of time rejected the books of account of the assessee. Beside this the assessee had given exact cash sales and the difference as seen by the AO is merely on the estimation of sales which is not correct as per the accountancy principle. Thus, the Ld.CIT(A) was right in deleting the said disallowance. The Ground no. 2 of the Revenue’s appeal is dismissed.
As regards to ground no.3, relating to difference in sales value amounting to Rs.20,71,151/-, the Ld.DR submitted difference between the value for stamp duty Rs.1,85,81,151/- in response of less sale deed executed value of Rs.1,65,10,000/- should have been confirmed by the Ld.CIT(A).
The Ld.AR submitted that the sale transaction did not pertain to AY 2014-15 but is relevant to the AY 2013-14 and therefore the AO has totally ignored this fact.
6 14. We have heard both the parties and perused the materials available on records. It is pertinent to note that the transaction is not pertaining to AY 2014-15 which is subject matter of present appeal & the same pertains to AY 2013-14 and this fact was not disputed by the Revenue. The AO has arrived at a figure amounting to Rs.1,85,81,151/- but the same is not appearing in the data. The transaction was taken into account for AY 2013-14 and therefore the Ld.CIT(A) has rightly deleted the said disallowance on account of difference in sales value. Thus, the ground no.3 of the Revenue’s appeal is dismissed.
As regards to ground no.4 relating to addition u/s.40(a)(ia) of the Act amounting to Rs.4,49,320/-, the Ld.DR submitted that the AO has rightly made addition of Rs.4,39,320/- in respect of non deduction of tax on expenses u/s.40(a)(ia) of the Act as there was an unpaid TDS in respect of furnished challan copy and the difference thereof. Therefore the Ld.DR submitted that the Ld.CIT(A) was not right in deleting the same.
The Ld.AR relied upon the order of the Ld.CIT(A).
We have heard both the parties and perused the materials available on records. It is pertinent to note that in the assessment order the AO has not pointed out as relates to the particular expenditure which should have been taken into account for TDS and is liable for the same. The absence of the actual quantification of the difference between the unpaid TDS and that of less furnished challan copy has not been pointed out by the AO, but in fact the assessee has given the details of the relevant expenses upon which 7 there is no requirement of quantifying the TDS. Thus, the Ld.CIT(A) was right in deleting the said addition. The ground no.4of the Revenue’s appeal is dismissed.
As regard to ground no.5 relating to disallowance on account of draw expenses on lump sum basis in absence of any concrete evidences. The Ld.DR submitted that the details of TDS applicability and deduction was not provided by the assessee during the assessment proceedings and therefore the addition of Rs.24,29,855/- was rightly done by the AO.
The Ld.AR submitted that the Ld.CIT(A) has restricted this addition to Rs.10,00,000/- being the lump sum basis with the reason that the payment of Rs.5,00,000/- was given to the Director and shareholder of the assessee. The assessee has filed the Cross Objection in response of the said confirmation of the limited addition.
We have heard both the parties and perused the materials available on records. The Ld.CIT(A) has categorically given the reason that addition should be restricted to Rs.10,00,000/- as being the payment of Rs.5,00,000/- to the Director and shareholder of the assessee which required to be as per the provision of TDS and since the details were not furnished to prove no excessive and unreasonable payment made and therefore Ld.CIT(A) has rightly taken the view. Thus, ground no.5 of Revenue’s appeal is dismissed as well as the Cross Objection raised by the assessee relates to said ground is also dismissed.
8 21. As regard to ground no.6 of Revenue’s appeal relating to interest components amounting to Rs.11,33,299/-, the Ld.DR relied upon the assessment order.
The Ld.AR relied upon the order of the Tribunal for AY 2010-11 to 2013-14, wherein the Tribunal has confirmed the order of the Ld.CIT(A) therein.
We have heard both the parties and perused the materials available on records. It is pertinent to note that the Ld.CIT(A) has rightly observed that the AO has not proved any nexus between interest bearing fund with the interest free advances made along with the interest free fund available in the form of advance from the customers. In the AY 2014-15 the said nexus was not taken into account by the AO and in fact the Ld.DR could not point out the same. Thus, the issue raised in the earlier AY is also stand covered in favour of the assessee. Thus, the ground no.6 of the Revenue is dismissed.
As regards to ground no.7 relating to addition of Rs.11,21,735/- u/s.40A(2)(b) of the Act, the Ld.DR submitted that the Director remuneration & commission to relative was also a part of the details given by the assessee but since the details were not presented before the AO the same should have been confirmed by the Ld.CIT(A).
The Ld.AR relied upon the order of the Ld.CIT(A). The AO has not examined the issue of unreasonable of the expenses of the excessive payment made to the Directors.
We have heard both the parties and perused the materials available on records. It is pertinent to note that relating to commission to relative and Director remuneration, though the Ld.DR pointed out that the same was not mentioned in Form 3CA-3CD the Ld.CIT(A) has categorically mentioned in para 13.3 that merely because assessee did not furnished the required data in the desired format cannot automatically lead to addition as the said remuneration was paid to the Director. But this finding by the Ld.CIT(A) is contrary to the observation made in para 13.3 it is that the Director was not paid remuneration but the commission and therefore taking advantage of section 40(A)(2)(b) of the Act, is not justifiable. This aspect needs verification. Therefore, the same is remanded back to the file of the Assessing Officer for proper adjudication after verifying the details. Needless to say, the assessee be given opportunity of hearing by following the Principles of natural justice. Therefore, the ground no.7 of the Revenue’s appeal is partly allowed for statistical purpose.
As regard to ground no.8 relating to disallowance of capital amounting to Rs.3,16,785/- to be carried forward. The Ld.DR relied upon the assessment order & submitted that no comments was called upon by CIT(A) from the Assessing Officer.
The Ld.AR relied upon the order of the Ld.CIT(A), and submitted that the working of capital loss was already there at the time of filing of income-tax return.
10 29. We have heard both the parties and perused the material available on records. The contention of the Ld.DR that no deduction is reflected in schedule of fixed assets appears to be not correct as the capital loss was worked out by the assessee while filing the income-tax return but the same was not verified by the Assessing Officer or by the CIT(A). Therefore the Ld.CIT(A) was not rightly deleted the said disallowance. Thus, this aspect needs verification. Therefore, the issue is remanded back to the file of the Assessing Officer for proper verification & adjudication. Needless to say, the assessee be given opportunity of hearing by following principles of natural justice. Thus, the ground no.8 of the Revenue’s appeal is partly allowed for statistical purpose.
As regards to ground no.9 relating to addition of Rs.63,61,066/- on account of brought forward losses, there was no loss brought forward in the AY 2010-11 as submitted by the Ld.DR.
The Ld.AR submitted that the Ld.CIT(A) has taken into account earlier order of the Ld.CIT(A) wherein the substantial relief was granted.
We have heard both the parties and perused the materials available on records. It is pertinent to note that the Tribunal for AY 2010-11 to 2013-14 has allowed the brought forward losses and this principle will be applicable in the present assessment year 2014-15 as well. Therefore, the issue needs to be remanded back to the file of the Assessing Officer for verification after taking into account the order of the Tribunal and the order of the CIT(A) in previous assessment year. Needless to say, the assessee be given
11 opportunity of hearing by following the Principles of natural justice. Thus, the ground no.9 of the Revenue’s appeal is partly allowed for statistical purpose.
As regards to the grounds of Cross Objection filed by the assessee there appears to be a delay of 862 days in the present CO which was explained by the assessee through the application as well as affidavit stating therein that assessee was not aware of filing of the appeal by the Department and came to know about the same and immediately filed after knowing that appeal being filed by the Revenue. The filing of appeal by the Revenue was sent to the old address of the assessee and therefore the same was not received by the assessee within the stipulated time. The reasons given by the assessee appears to be genuine therefore we condoned the delay, but the C.O especially that of ground no.5 is to be dismissed as observed by us herein above while dealing with ground no.5 of Revenue’s appeal. Thus, the C.O of the assessee is basically supporting the order of the Ld.CIT(A), hence, the same is partly allowed for statistical purpose.
In the result, the appeal of the Revenue and the Cross Objection filed by the assessee are partly allowed for statistical purpose.
Order pronounced in the Open Court on 23rd September, 2024 at Ahmedabad.