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Income Tax Appellate Tribunal, DELHI BENCH ‘G’, NEW DELHI
IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH ‘G’, NEW DELHI Before Sh. N. K. Saini, AM And Sh. Vijay Pal Rao, JM Asstt. Year : 2008-09 Sany Heavy Industry India Pvt. Ltd. Vs Additional Commissioner of B-1/E-22, Ground Floor, Mohan Income Tax, Range-7, Cooperative Industrial Estate, New Delhi Mathura Road, New Delhi-110044 (APPELLANT) (RESPONDENT) PAN No. AAGCS7754L Assessee by : Sh. Manoj Nagrath, & Sanjoli Maheshwari, CAs Revenue by : Smt. Anima Barnwal, Sr. DR Date of Hearing : 21.12.2015 Date of Pronouncement : 22.12.2015 ORDER PER N. K. Saini, AM:
This is an appeal by the assessee against the order dated 04.02.2013 of ld. ld. CIT(A)-X, New Delhi.
Following grounds have been raised in this appeal:
On account of suppression of alleged sales amounting to Rs.11,34,189 “1. The Ld. CIT(Appeals), on erroneous and insufficient grounds, has gravely erred both on the facts and in law:
2 Sany Heavy Industry India Pvt. Ltd. a. In confirming the actions of the Ld. ACIT in making an addition of Rs.11,34,189 under the head ‘Business and Profession’ on account of alleged suppression of sales; b. In not appreciating that the sales were duly accounted for in the audited books of account in compliance with the Accounting Standard-9 ‘Revenue Recognition’ issued by the Institute of Chartered Accountants of India, as is applicable to the Appellant; c. In adjudicating that acceptance and not further contesting of higher valuation of sales by the custom authorities for the purpose of customs valuation, itself amounts to acceptance of higher value of sales for the purpose of accounting/Income tax, without appreciating that the customs department, for calculating the custom duty on the imported goods, add one percent to the value of goods towards assessable value and then compute the duty; d. In holding that the Appellant has no justification to deny the higher value of sales before the Income tax authorities, if, the same has been accepted by it before the Customs authorities; e. In confirming the addition without appreciating the law on the subject, disregarding the arguments advanced by the Appellant and on the basis of conjectures and surmises. On account of un-reconciled debtors amounting to Rs.19,96,378 3 Sany Heavy Industry India Pvt. Ltd.
2. The Ld. CIT(Appeals), on erroneous and insufficient grounds, has grossly erred both on the facts and in law: a. in upholding the additions made by the Ld. ACIT amounting to Rs.19,96,378 under the head ‘Business and Profession’ on account of un- reconciled debtors; b. in not appreciating and completely ignoring the fact that the said amount so un-reconciled was voluntarily offered to taxation by the Appellant Company in subsequent year, in holding the actions of the Ld. ACIT correct and thus the same amount getting taxed twice in two different financial years; c. In not deleting the addition on the ground of non- exercising of power by the Ld. AO u/s 133(6)/131 of the Act, although requested by the Appellant, thus confirming the addition in gross violation of natural justice. On account of un-explained expenditure amounting to Rs.68,667 3. The Ld. CIT(Appeals), on erroneous and insufficient grounds, has grossly erred both on the facts and in law: a. in upholding the additions made by the Ld. ACIT amounting to Rs.68,667 under the head ‘Business and Profession’ on account of un-explained expenditure; 4 Sany Heavy Industry India Pvt. Ltd. b. in holding that the Ld. ACIT was justified in concluding that the Appellant failed to provide any explanations on the payments made traced through AIR information, failing to appreciate the fact that the Appellant was unable to figure out the given figures, the Ld. ACIT having failing to provide the details of the said expenses though requested for; On account of un-accounted grader rental charges amounting to Rs.12,49,527 4. That the Ld. CIT(Appeals), on erroneous and insufficient grounds, has grossly erred both in law and on the facts, in confirming the addition made by the Ld. ACIT amounting to Rs.12,49,527 on account of wrong TDS information given by a customer in the AIR database which showed an amount of Rs.41,90,350 instead of Rs.29,40,823 actually due from and paid by the customer which fact was duly supported by a confirmation and TDS certificate given by the customer and rather giving directions to the Ld. ACIT to adjudicate afresh after verifying the documents/evidences on record.
5. The Ld. CIT(Appeals), while issuing the impugned order, grossly erred in mentioning wrong name of the Appellant as ‘Sany Heavy Industries Private Limited’ instead of its correct name as ‘Sany Heavy Industry India Private Limited’. That the Appellate order is against the law and the facts of the case and merits to be quashed.
5 Sany Heavy Industry India Pvt. Ltd. That the Appellant craves leave to add, amend and or later the grounds of appeal at a later stage and also adduces evidence during the pendency of the appeal. Further, the Appellant prays for appropriate relief based on the said grounds of appeal and the facts and the circumstances of the case.”
3. Ground Nos. 3 & 4 were not pressed by the ld. Counsel for the assessee, therefore, these grounds are dismissed as not pressed.
4. Vide Ground No. 1, the grievance of the assessee relates to the sustenance of addition of Rs.11,34,189/-.
Facts of the case in brief are that the assessee filed the return of income on 30.09.2008 declaring an income of Rs.26,38,19,674/- which was revised on 23.12.2008 declaring an income of Rs.27,29,68,950/-. The said return was processed u/s 143(1) of the Income Tax Act, 1961 (hereinafter referred to as the Act) at the returned income. Later on, the case was selected for scrutiny. During the course of assessment proceedings the AO noticed that the Directorate of Revenue Intelligence, Mumbai carried out investigation and found that the assessee had imported construction machines of a total declared value of Rs.66.02 crores from its parent company, which were sold to various buyers. These machines were assessed and cleared by the custom authority after adding 1% to the CIF value declared on the suppliers invoice. The AO observed that the assessee had paid additional customs 6 Sany Heavy Industry India Pvt. Ltd. duty of Rs.6.50 crores, on the basis of the valuation done by the custom authorities. The AO asked the assessee to show cause as to why the sales should not be considered on the actual assessable value, which had not been contested by the assessee before the custom authorities. The assessee submitted that this valuation was done by the customs authorities on the basis of CIF value +1% of landing charges. The AO mentioned that no proper document or justification was provided by the assessee with regard to the reasons for the difference in the sale value which had not been contested by the assessee before custom authorities. The AO came to the conclusion that the assessee suppressed the sales to the extent of Rs.11,34,189/-. Accordingly, the said amount was added to the income of the assessee.
Being aggrieved the assessee carried the matter to the ld. CIT(A) and submitted that the assessable value as calculated by the custom authorities was only for the purpose of calculating the customs duty and not the actual sale value and that the sale had been accounted for on the basis of purchase orders, so, there could not have been any suppression of sale. It was further submitted that the assessable value calculated by the customs authorities was on the basis of CIF value +1% of the landing charges but the AO had failed to appreciate that this valuation was done only for the purpose of calculations of customs duty. It was also submitted that the assessee had been following the recognized system of accounting in the books of accounts and, therefore, the 7 Sany Heavy Industry India Pvt. Ltd. addition made by the Assessing Officer only on the basis of customs valuation should not have been considered as suppression of sales.
The ld. CIT(A) after considering the submissions of the assessee sustained the addition made by the AO by observing as under:
“(i) On going through the facts of the case it is clear that the customs valuation of the sales was higher than the amount reflected by the assessee. It is also true that the valuations done by the customs authority was never challenged by the assessee. There is no proper justification given by the appellant as to why this valuation was not challenged before the custom authorities. It is pertinent to note that the valuation done by the custom authorities is based on certain rules and reasonable data back up for making the valuation. The fact that the valuation of sale given by the assessee was not accepted by the custom authorities also clearly indicates that the sale value was not proper. It was on this basis that the assessing officer considered this amount of addition made by the custom authorities as part of suppression of sales. (ii) The A.R. of the appellant has argued that the valuation done by the custom authorities is only for the purposes of custom duty and does not form part of total sales. In this argument also, the A.R. has failed to appreciate that if the sale consideration for custom purposes is accepted by the appellant and not contested before any higher authorities, it amounts to acceptance of higher value of sale. In this case, therefore, the appellant has accepted the higher value of sale. Once the same has been accepted before the custom authorities, there is no justification for the appellant to deny the value of sale before the income tax authorities. Accordingly, the various arguments and submissions made by 8 Sany Heavy Industry India Pvt. Ltd. the A.R. of the appellant are not in consonance of its acceptance at its higher value before the custom authorities.”
Now the assessee is in appeal. The ld. Counsel for the assessee reiterated the submissions made before the authorities below. It was further submitted that 1% landing charges were paid by the customers and those landing charges were added to the sales value to determine the custom duty but it was not the suppressed sales of the assessee. It was also submitted that a consistent method of accounting has been followed by the assessee in the preceding and succeeding years which has been accepted by the department and no such addition was made. It was accordingly submitted that the addition made by the AO and sustained by the ld. CIT(A) was not justified
In her rival submissions the ld. DR strongly supported the orders of the authorities below and reiterated the observations made in the impugned order by the ld. CIT(A).
We have considered the submissions of both the parties and carefully gone through the material available on the record. In the present case, it is noticed that the assessee imported the goods which were sold to the various buyers under high sea sale agreement. Those goods were cleared by the custom authorities after adding 1% landing charges on the CIF value. The said difference of 1% on the sale invoice value amounting to Rs.11,34,189/- was considered as suppressed sales 9 Sany Heavy Industry India Pvt. Ltd. and added to the income of the assessee. The explanation of the assessee is that the landing charges were paid by the customers and not by the assessee, so those could not have been considered as suppressed sales of the assessee. In our opinion, if the landing charges were paid those were the expenses and cannot be equated with the sales. Moreover, nothing is brought on record that the assessee received the amount equivalent to 1% of the CIF value, therefore, the said amount added by the custom authorities to actual assessable value was wrongly added in the hands of the assessee, considering the same as suppressed sale. Moreover, even if it is assumed that the landing charges were paid by the assessee and sales value increased then also the difference of 1% on account of landing charges was Revenue neutral. In other words, on the one hand sale value was to be increased and on the other hand the landing charges were to be allowed, so, it was Revenue neutral and no addition was called for. We, therefore, by considering the totality of the facts, delete the addition of Rs.11,34,189/- made by the AO and sustained by the ld. CIT(A).
The next issue vide Ground No. 2 relates to the sustenance of addition of Rs.19,96,378/- on account of un-reconciled debtors. The AO for making this addition observed that the assessee had shown un- reconciled debtors of Rs.19,96,378/- which had been accrued, received and credited in the books of accounts in the financial year relevant to the assessment year under consideration and the assessee had not shown this 10 Sany Heavy Industry India Pvt. Ltd. amount as the income in the relevant assessment year. The explanation of the assessee was that it had not identified the parties from whom the aforesaid amount was received. The AO made the addition of the impugned amount by observing that the assessee had not offered any explanation about the nature and sources thereof.
Being aggrieved the assessee carried the matter to the ld. CIT(A) and submitted that the amount of Rs.19.96 lakhs actually related to the deposits made by various customers directly in the assessee’s bank account and belonged to the debtors whose income had already been shown in the earlier years. It was further stated that this amount was actually explained amount and related to the debtors of the past years, therefore, there was no justification for making the addition. It was also submitted that the assessee had willingly disclosed the un-reconciled debtors in the notes of accounts and the AO had not issued notices u/s 133(6) or 131 of the Act to make verification regarding those amounts.
The ld. CIT(A) after considering the submissions of the assessee observed that the AO had pointed out the discrepancy of Rs.19.96 lakhs and had provided adequate opportunity to the assessee to explain the difference. He further observed that the assessee had been making general and vague arguments without providing the actual details of the various parties i.e. their names, addresses and the year in which they were debtors. He further observed that the assessee had not clarified as 11 Sany Heavy Industry India Pvt. Ltd. to how and when those amounts had been sown as income in earlier years. The ld. CIT(A) confirmed the addition made by the AO by observing that the assessee had not provided any convincing explanation.
Now the assessee is in appeal. We have considered the submissions of both the parties. The submissions of the ld. Counsel for the assessee was that the said amount of Rs.19,96,378/- had been considered as miscellaneous income in the profit and loss account for the year ending on 31.03.2009. Our attention was drawn towards page no. 56 of the assessee’s paper book which is the copy of notes to the accounts wherein at serial no. 22 it has been mentioned that the receipts amounting to Rs.19,96,378/- have not yet been reconciled by the company and the same had been considered as miscellaneous income in the profit and loss account of the succeeding year. However, it is not clear as to whether this explanation was given by the assessee to the authorities below or any evidence was furnished in respect of the said explanation. We, therefore, deem it appropriate to set aside this issue back to the file of the AO to be adjudicated afresh in accordance with law and if it is found that the assessee had offered the same amount for taxation in the succeeding year then no addition is to be made in this year otherwise it would be a double taxation, which is not permissible because the same income cannot be taxed twice. Accordingly, this issue is set aside to the file of the AO to be adjudicated afresh in accordance 12 Sany Heavy Industry India Pvt. Ltd. with law after providing due and reasonable opportunity of being heard to the assessee.
In the result, the appeal of the assessee is partly allowed for statistical purposes. (Order Pronounced in the Court on 22/12/2015)