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Income Tax Appellate Tribunal, RAJKOT BENCH, RAJKOT
Before: SMT. ANNAPURNA GUPTA & SHRI SIDDHARTHA NAUTIYAL
PER SIDDHARTHA NAUTIYAL - JUDICIAL MEMBER:
This appeal has been filed by the Revenue against the order passed by the Ld. CIT(Appeals), Jamnagar in Appeal No. CIT(A)/Jam/190/1011/924 vide order dated 21.01.2016 passed for Assessment Year 2008-09.
The Revenue has taken the following grounds of appeals:-
“1. Whether, on facts and the circumstances of the case, the ld. CIT(A) was justified in deleting the addition made u/s.69C of the I. T. Act, 1961.
DCIT vs. Shri Rasiklal Khimji Modi Asst.Year –2008-09 - 2 - 2. Whether, on facts and the circumstances of the case, the ld. CIT(A) was justified in deleting the addition made u/s. 68C of the I. T. Act, 1961.
On the basis of the facts and circumstances of the case, the learned CIT(A) ought to have upheld the order of the Assessing Officer.
4. That the revenue craves leaves to add, amend, alter or withdraw any ground of appeal.
5. It is therefore prayed that the order of the CIT(A), Jamnagar may kindly be set aside and that of Assessing Officer be restored.”
3. Ground No.1:- The CIT(Appeals) erred in deleting additions made under Section 69C of the Act.
The brief facts in relation to this ground of appeal are that during the course of assessment, Assessing Officer observed that the assessee had claimed expenditure totaling to Rs. 48,18,072/-, however, the assessee was not able to proof the genuineness of the above expenditure. Accordingly, the said expenditure of Rs. 48,18,072/- was treated as non-genuine by the Assessing Officer under Section 69C and added back to the total income of the assessee. Subsequently, the Assessing Officer reduced the disallowance to Rs. 29,84,412/- after allowing credit of Rs. 18.33 lakhs on account of Securities Transaction Tax (in short “STT”) already disallowed by the assessee in the computation to the return of income.
The assessee filed appeal before the CIT(Appeals) in respect of aforesaid disallowance of Rs. 29.84 lakhs. In appeal, Ld. CIT(A) deleted
DCIT vs. Shri Rasiklal Khimji Modi Asst.Year –2008-09 - 3 - the addition made by the Assessing Officer under Section 69C of the Act with the following observations:-
“7.1 So far as addition of direct & indirect expenses of Rs.48,18,072/- is concerned, the AO vide order u/s,154 dtd. 31-01-2011 has reduced the addition to Rs.29,84,412/-. Thus the total addition remains at Rs. 29,84,412/-.
On going to the comparable chart it is noticed that out of Rs. 29,34,412/-, there is a Share Demat Expenses of Rs. 14,81,958.69 for which full details have been submitted. The Appellant has also submitted full details regarding interest expenses of Rs.11,66,465/- which is mostly to the family members paid on last day of accounting year and details of TDS also available in audit report. Hence addition made on above both the expenses is deleted. Thus balance expenses remains at Rs. 3,35,988/-. On going to the comparison of expenses it is found that during the year total motor car expenses is at Rs. 1,42,960/- and motor car insurance of Rs. 27,380/-, total motor car expenses at Rs. 1,70,340/- as against last year expenses of Rs. 56,080/-. Likewise there is also increase in travelling expenses at Rs. 21,973/- as against Rs. 5,487/- of A.Y. 2012-13. It is also noticed that during the year the appellant has purchased a new motor car. Under the circumstances out of total motor car expenses and travelling expenses of Rs. 1,92,313/-, 15% of the expenses and travelling expenses at Rs. 38,463/- are confirmed to be added to the total income considering for personal in nature. All other expenses are comparable with expenses of A.Y. 2007-08 in which assessment order u/s 143(3) of the I. T. Act. 1961, hence, out of that no disallowance is called for. Thus
DCIT vs. Shri Rasiklal Khimji Modi Asst.Year –2008-09 - 4 - out of total addition of Rs. 29,84,412/-, out of motor car expenses and travelling expenses at 20% Rs. 38,463/- is confirmed to be added to the total income and balance addition made to total income is deleted.”
The Department is in appeal before us against the aforesaid relief granted by CIT(Appeals). Before us, the D.R. submitted that the assessee has not filed complete details with respect to the aforesaid expenditure. He drew our attention to written submission filed at Page 27 of the Paper Book, wherein assessee has admittedly not filed complete details with respect to the aforesaid expenditure. The D.R. submitted that there is no basis on which CIT(Appeals) allowed the appeal of the assessee. He submitted that in this case the remand report was called thrice and despite several opportunities, the assessee did not furnish the requisite details. The D.R. submitted that as per the assessee’s own letter dated 30.01.2015 the details submitted by the assessee was only a brief summation of facts. Further, even from the submissions dated 19.01.2018 filed by the assessee before ITAT, it can be ascertained that no ledgers were furnished. Accordingly, the order passed by CIT(Appeals) is erroneous since CIT(Appeals) has only relied on the contentions / arguments of the assessee and there is no basis for deleting the additions whatsoever. In response, the Counsel for the assessee relied upon the observation made by Ld. CIT(Appeals) in the appellate order.
We have heard the rival contentions and perused the material with respect to this ground of appeal. In our considered view, we observe that admittedly, the assessee has not filed complete details of expenses with respect to the aforesaid expenditure and yet, Ld. CIT(Appeals) has almost
DCIT vs. Shri Rasiklal Khimji Modi Asst.Year –2008-09 - 5 - given full relief to the assessee. The assessee has also filed before us written submission that the contra account with respect to Share Demat Expenses was submitted vide letter dated 30.01.2015 and 04.12.2015 and accordingly the expenses were correctly held to be genuine. Further, the Counsel for the assessee submitted that interest expenses of Rs. 11,66,465/- was also correctly held to be genuine since as per the Tax Audit Report TDS was duly deducted on interest payments on unsecured loans. However, on going through the material placed on record before us, we are of the considered view that in the instant facts, Ld. CIT(Appeals) has given relief to the assessee without analyzing the supporting documents to establish the genuineness of expenditure claimed. We observe that in written submission dated 04.12.2015, at Page 4, admittedly, the assessee has not furnished all the related bills, vouchers and other supporting evidences in support of the aforesaid expenses. Further, even in the submission before the Assessing Officer in remand report dated 30.01.2015, the assessee has only given a summary table of expenses and the related bills and vouchers have not been produced. Further, with respect to interest payments, the only contention of the assessee is that it has been paid interest to family members and TDS has been duly deducted with respect to the aforesaid expenses. However, we observe that Ld. CIT(Appeals) has not examined the genuineness of the aforesaid expenditure and it is further observed that the assessee has furnished additional details like copy of comparison chart of expenses of A.Y. 2007-08 with A.Y. 2008-09, which were also not confronted by CIT(Appeals) to the Assessing Officer for his comments / observations while allowing relief to the assessee.
DCIT vs. Shri Rasiklal Khimji Modi Asst.Year –2008-09 - 6 - 8. Accordingly, in the interest of justice, this issue is being restored to the file of Ld. CIT(A) to hear the matter afresh after giving the assessee due opportunity to present before him all necessary supporting bills, vouchers, supporting evidences etc. and thereafter also confront the Assessing Officer with the aforesaid details submitted by the assessee, for his review / comments.
In the result, Ground No. 1 of the Department’s appeal is allowed for statistical purposes.
Ground No.2:- Ld. CIT(A) erred in deleting the addition made under Section 68 of the Act.
The brief facts in relation to this ground of appeal
are that during the course of assessment, the Assessing Officer made two additions under Section 68 of the Act. Firstly, the Assessing Officer added a sum of Rs. 65,95,445/- on account of sundry creditors under Section 68 of the Act being the difference of sundry creditors between A.Y. 2007
08. (wherein the figure of sundry creditors were shown at Rs. 57,70,087/-) and the sundry creditors at Rs. 1,23,65,542/- declared by the assessee in A.Y. 2008-09. The Assessing Officer held that since the assessee did not furnish any evidence to support the details of additions to sundry creditors, he added a sum of Rs. 65,95,445/- as unexplained income under Section 68 of the Act. With respect to this addition, the Ld. CIT(Appeals) deleted the addition with the following observations:-
“7.2 So far as addition of Rs.65,95,445/- u/s.68 on account of sundry creditors is concerned, the appellant has rightly pointed out that the DCIT vs. Shri Rasiklal Khimji Modi Asst.Year –2008-09 - 7 - method adopted by the AO for making addition to total income being difference between opening and closing sundry creditors is not correct because name of the creditors may change. On going through the comparable chart submitted it is clear that most of the creditors are new creditors. However the appellant has submitted all the confirmation of creditors during the hearing. Looking to the facts and contra confirmation of sundry creditors submitted by the appellant total addition of Rs. 65,95,455/- made to total income is hereby deleted.”
Before us the Ld. D.R. pointed out that the Ld. CIT(Appeals) has afforded relief to the assessee on the ground that assessee has submitted all the confirmations of creditors during the hearing. However, this fact is incorrect because the assessee has himself admitted at Page 8, Para 10 of CIT(Appeals) order that he would submit the evidence within a week, which shows that the complete evidence has not been submitted. Further, the D.R. submitted that the Ld. CIT(Appeals) has allowed the appeal of the assessee with respect to this ground on the basis of a comparable chart submitted before the CIT(Appeals). However, the aforesaid comparative chart was accepted by the CIT(Appeals) while allowing the assessee’s appeal and the said chart was never confronted by the CIT(Appeals) to the Assessing Officer for his comments / observations. In response, the Counsel for the assessee submitted that substantial portion of the creditors balance are the share broking firms having running balances, with whom the assessee conducts securities transactions. The confirmation of all parties were provided vide submissions dated 30.01.2015 and 04.12.2015. Further, the new sundry creditors for the year amounted to Rs. 1,11,20,685/- for DCIT vs. Shri Rasiklal Khimji Modi Asst.Year –2008-09 - 8 - which all the cross confirmations were provided during the proceedings vide submissions dated 04.12.2015.
On going through the assessment / appellate records we observe that no such confirmations have been placed on record by the assessee. We further observed that no specific confirmation has been furnished by the assessee with respect to Share Demat Expenses of share broking firms with whom the assessee has securities transactions. The share broking firms have not given any specific confirmations / summary of share transaction expenses incurred on their portal during the impugned year under consideration. Further, the Ld. CIT(Appeals) has given relief to the assessee on the basis of comparable chart submitted before him during the course of appellate proceedings. However, we observe that such comparative chart was never given by the CIT(Appeals) to Assessing Officer for his comments / observations. Accordingly, we are of the considered view that Ld. CIT(Appeals) has erred in facts and in law in allowing the appeal of the assessee with respect to this addition in ground No. 2 of Departmental appeal.
However, in the interest of justice, we are restoring the matter to the file of Ld. CIT(Appeals) to allow the assessee to produce all supporting documents in respect of the aforesaid unsecured loans and the CIT(Appeals) may further call for the Assessing Officer’s comments / observations with respect to this addition. Accordingly, the matter is being restored to the file of Ld. CIT(Appeals) with the aforesaid direction with respect to the addition of Rs. 65,95,445/- on account of sundry creditors.
DCIT vs. Shri Rasiklal Khimji Modi Asst.Year –2008-09 - 9 - 15. The second addition made by the Assessing Officer was a sum of Rs. 95,27,323/- under Section 68 of the Act on account of unsecured loans. We observe that while granting relief to the assessee with respect to this addition, CIT(Appeals) has relied upon a comparable chart submitted by the assessee during the course of appellate proceedings. However, we observe that Ld. CIT(Appeals) has not shared / confronted the aforesaid comparative chart with the Assessing Officer for his review / observations and has allowed the appeal of the assessee by simply placing reliance on the comparable chart furnished by the assessee during the course of appellate proceedings without confronting the Assessing Officer with the same for his review / observations. Accordingly, this issue is also restored to the file of the Ld. CIT(Appeals) with a direction to call for complete details of unsecured loans taken by the assessee alongwith supporting evidences during the impugned year under consideration and thereafter, confront the Assessing Officer with all the details furnished by the assessee, alongwith supporting documents, for the Ld. Assessing Officer’s review / observations. Accordingly, the issue with respect to deletion of addition of Rs. 95,27,323/- under Section 68 is restored to the file of Ld. CIT(Appeals) with respect to the aforesaid directions.
We observe that Ld. CIT(Appeals) has also deleted disallowance of payment of municipal taxes of Rs. 46,298/- on the basis that the said payment is not outstanding at the end of the accounting year. Before us the Ld. D.R. submitted that the Ld. CIT(A) has not submitted any proof / receipts before the Assessing Officer in remand report proceedings in order
DCIT vs. Shri Rasiklal Khimji Modi Asst.Year –2008-09 - 10 - to proof that the aforesaid expenditure had been incurred and municipal taxes have been paid by the assessee.
Accordingly, in the interest of justice, this issue is being restored to the file of Ld. CIT(Appeals) with the direction to Ld. CIT(Appeals) to call for necessary proof of payment with respect to the payment of municipal taxes by the assessee and after confronting the Ld. Assessing Officer with the proof submitted by the assessee, relief may be afforded to the assessee, in accordance with law.
In the result, the aforesaid issues are to restored to the file of Ld. CIT(Appeals) with the necessary directions. Accordingly, all grounds of appeal of the Department are allowed for statistical purposes.
In the result, the appeal filed by the Revenue is allowed for statistical purposes. This Order pronounced in Open Court on 26/05/2023