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Income Tax Appellate Tribunal, [ DELHI BENCH: ‘E’ NEW DELHI ]
Before: SHRI ANIL CHATURVEDI & SHRI YOGESH KUMAR U.S.
This appeal is filed by the assessee against the order dated 30/06/2009 passed by the Commissioner of Income Tax (Appeals)- Meerut, for assessment year 2005-06.
The assessee has raised the following grounds of appeal :-
“1. That the penalty order under appeal is without jurisdiction as the issue with reference to which penalty proceeding were initiated by the Id. CIT was set aside by the Hon’ble ITAT, New Delhi to the file of the Id. A.O. for further examination and hence the penalty proceedings initiated u/s 263 during the course of penalty proceedings did not survive.
2. That the penalty order dated 19.06.2017 is barred by limitation as the section 263 order was passed on 30.06.2009, order u/s 254/143(3) was passed by the Id. A.O. on 24.12.2010 and appeal against the said order u/s 254/143(3) was decided by the Id. CIT(A) vide order dated 28.01.2013 and therefore the penalty order under appeal is barred by limitation and deserves to be cancelled.
Without prejudice to above grounds, the imposition of penalty with reference to Section 40A(3) disallowance, full particulars of which were duly disclosed in the Tax audit report as well as on the face of the Computation of total income filed with the department, is totally unlawful and unjust as the appellant had not furnished the wrong particulars of its income as alleged by the CIT in section 263 order.
4. Without prejudice to above, the disallowance being a statutory disallowance did not call for imposition of penalty in view of various judicial pronouncements on this issue.
3. Brief facts of the case as mentioned in the order of the CIT, Meerut passed u/s 263 of the Act are that the assessee filed a return of income disclosing an income of Rs.53,90,710/-. Assessment was made under section 143(3) on 14.12.2007 at an income of Rs. 54,56,710/-. On an examination of the record, the Ld.CIT , Meerut found that :- i . As per column 17(h) of the Tax Audit Report cashpayments of Rs. 17,72,693/- were made in violation of the provisions of section 40A(3). As per the Audit Report an additional disallowance of Rs.3,54,539/- should have been made, but no such disallowance was made by the AO. This included a sum of Rs.5 lakhs which was paid in cash for land purchase on which also disallowance u/s 40A(3) was not made. ii The case was selected to verify sundry creditors of Rs.53.44 but no such verification was carried out. iii. The assessee has sold lands at a much lesser ratesthan Meerut Development Authority but sale instances have not been scrutinized. iv) Closing stock of land was also valued at lower than MDA rates while the cost of projects has been estimated at MDA rates.
In view of the above, the assessment order passed by the Addl. ClT. Range-1. Meerut appeared to be erroneous and prejudicial to revenue.
The notice u/s 263 of the Act was issued to the assessee and ultimately by exercising the power conferred u/s 263 of the Act, the Ld.CIT, Meerut set aside the assessment order and remanded the matter to the file of the A.O. for de-novo adjudication of the issues.
Aggrieved by the order of CIT, the assessee preferred the present Appeal. The present Appeal is filed on 31/07/2017 several notices have been issued by the registry to the assessee and the assessee failed to appear before the Tribunal. The power of attorney has also been filed on behalf of the representative of the assessee, who also not appeared assisted the Tribunal. Therefore, without having any other alternative, we deem it fit to decide the Appeal and on hearing Ld. DR on perusal of the material on record.
We have heard the Ld. DR and perused the material available on record and our findings are as under: The Commissioner of Income Tax, Meerut while exercising power conferred u/s 263 held as under:
“4.3. With great respect, I am unable to subscribe to the above view' because the provisions of Rule 6DD, as it is existed at that time, admitted a number of exceptions. At the present moment, the said Rule does not mention of genuineness or proof of identity of the payee as an ameliorating circumstance. Moreover, if the payment is demonstrably non genuine it would not be allowable at all.. The- entities to which payment in cash is allowed in full are enumerated in Rule 6DD(a). Significantly, MDA is not mentioned in this sub-rule. Rule 6DD(b) exempts those payments made to Government which are required to be made in legal tender. In the instant case, there was no such requirement. Thus, here also the assessee’s case fails. The AO is, therefore, directed to make a further addition of Rs.3,54,539/- and modify the assessment order accordingly. 5.1. Along with the return of income the assessee. submitted names of sundry creditors and suppliers (Rs.53,44,404) (as per Schedule IVA) names of sundry payable (Rs.l.87,88,548)(as per Schedule IV. The case was selected solely to verify the above. However, from the records, it appears that no such verification was carried out so much so that only the copies of accounts of suppliers were obtained. Addresses were available only in some cases. In no case PAN was obtained. 5.2. In the submissions made before me, the id. counsel has stated that - “The complete details containing names and addresses of all sundry creditors, the nature of transactions entered into with them, total amount of purchases made during the year and the total amount outstanding as* at year end were duly filed so that only the copies of accounts of suppliers were obtained. Addresses were available only in some cases. In no case PAN was obtained. 5.2. In the submissions made before me, the Id. counsel has stated that - “The complete details containing names and addresses of all sundry creditors, the nature of transactions entered into with them, total amount of purchases made during the year and the total amount outstanding as at year end were duly filed during the assessment proceedings along with letter dated 5.11.2007. Copies of all sundry creditors were also filed before the Id. AO along with letter dated 16.8.2007 at si.no.8 thereof. The amounts due to all creditors were on account of purchases made from them in due course of business and the Id. AO being satisfied regarding the genuineness of the transactions entered into with them, no adverse view was taken by him and. therefore, the assessment order under reference cannot be said to be erroneous arid prejudicial to the interests of Revenue on this issue.” The counsel’s statement is partially incorrect because only some addresses were' given and no verification was carried out. The assessment order is, therefore, set aside on this point. The AO will now obtain the addresses of sundry creditors and verify them. As regards sale of land and valuation of stock at low rates the Id. counsel, has stated – i) That the sales were recorded in the books of account of the assessee on actual amount of the transactions entered into by it. The rates fixed by the District Authorities as Circle rates are not relevant in the case of the persons carrying on the business. There are no MDA rates as are referred to in para v) of notice by our good self. ii) Conclusion “Sec.50C is applicable only for the purpose of determining the sale consideration for computation of capital gains and it cannot be applied for determining the income under other heads.” iii) The valuation of closing stock has been made at cost i.e. on the basis normally accepted by all assessee for valuing of closing stock i.e. cost or market value whichever is lower land the closing stock under any circumstances cannot be assessed at market value thereof or the rate fixed by any authority. The method of valuation of stock and details of costing thereof has duly been given in the Schedules forming part of the Balance-sheet on record and no deficiency therein is pointed out by the Ld. A.O.. There is no provision under Income tax Act to value the closing stock on the rates fixed by any authority. It is however submitted that no rates whatsoever are fixed by MDA as also stated herein above. The cost of project is also not estimated by MDA.
The above said observations and findings of the Ld.CIT Meerut found to be reasonable and we do not find any infirmity and find no reason to interfere with the order passed by CIT Meerut u/s 263 of the Act. Therefore, the grounds of Appeal of the assessee are dismissed.
In the result, the Appeal of the assessee is dismissed.
Order pronounced in the open court on : 31/05/2023.