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Income Tax Appellate Tribunal, DELHI BENCH : B : NEW DELHI
Before: SHRI ANIL CHATURVEDI & SHRI C.M. GARG
IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH : B : NEW DELHI
BEFORE SHRI ANIL CHATURVEDI, ACCOUNTANT MEMBER AND SHRI C.M. GARG, JUDICIAL MEMBER ITA No.2357/Del/2015 Assessment Year: 2008-09 Chinar International, Vs. ACIT, B-9, Housing Society, Circle-32(1), South Extension Part I, New Delhi. New Delhi. PAN: AACFC1770D (Appellant) (Respondent) Assessee by : Dr. Rakesh Gupta, Advocate & Shri Somil Agarwal, Advocate Revenue by : Shri Pankaj Khanna, Sr. DR Date of Hearing : 28.02.2023 Date of Pronouncement : 29.03.2023 ORDER PER C.M. GARG, JM: This appeal filed by the assessee is directed against the order dated 02.03.2015 of the CIT(A)-18, New Delhi, relating to Assessment Year 2008-09.
Grounds of appeal raised by the assessee read as under:- “1. Reg : Issue Regarding unexplained business income That on the basis of facts & circumstances of the case the Ld. CIT(A) has erred in not deleting the additions of Rs.1146695/= made by Ld A.O as bad in law without proper adjudication of assessee's submissions. In any view of the matter & in any case the action of Ld CIT (A) in-L not deleting the Additions/ Setting aside the order of Ld A.O is bad in law as the same was passed contrary to documentary evidence without proper rebuttal of appellant's submissions against the principles of natural justice.
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Reg : Income from undisclosed sources without adequate justification That on the basis of facts & circumstances of the case the Ld. CIT(A) has erred in not deleting the additions made by Ld A.O at Rs.120325/= as assumed income from undisclosed sources. In any view of the matter & in any case the action of Ld CIT(A) in not deleting the Additions/ Setting aside the order of Ld A.O is bad in law as the same was passed without proper application of mind against the principles of natural justice.
Reg : Disallowance of depreciation without proper examination That on the basis of facts & circumstances of the case the Ld. CIT(A) has erred in not taking proper cognizance of Financial Statements and other submissions produced to prove the unsubstantiated claim of Ld . A.O. to disallow depreciation. In any view of the matter & in any case the action of Ld CIT(A) in not taking the cognizance of Financial Statements i.e Balance Sheet including Fixed Assets schedule to prove that no depreciation at Rs.601627/= has been charged to P&L Account without verifying and adjudicating is bad in law, unjustified & against the principals of natural justice. 4. That the applicant craves the leave to add, to modify, to amend or delete any ground of appeal at the time of hearing.”
Apropos ground No.1, the ld. Counsel of the assessee submitted that the addition of Rs.11,46,695/- was made by the AO on the ground that the credit of this amount in the account of M/s Stambh Engineers, sundry creditor was a fictitious liability. The ld. Counsel of the assessee submitted that the ld.CIT(A) has confirmed the addition without considering the relevant material matrix of the issues. The ld. Counsel further submitted that M/s Stambh Engineers supplied the material in respect of building and their accounts were coming from earlier years and purchases were made during the year and payments were also made during the same period and there was a credit of Rs.11,46,695/- at the end of the year which was paid during
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subsequent financial period through banking channel. Therefore, the same cannot be treated as fictitious liability. Drawing our attention to paper book pages 20-22, the ld. Counsel submitted that the copy of accounts of M/s Stambh Engineers in the books of the assessee from 01.07.2006 to 31.03.2007 clearly show that the account was running, payment was made, TDS was deducted and WTC was also payable/paid. The ld. Counsel further submitted that M/s Stambh Engineers issued certificate from bank certifying the payment received by it and copy of account of M/s Stambh Engineering for the year under consideration confirmed the fact of payment by the assessee during subsequent AY 2009-10. The ld. Counsel submitted that the assessee has submitted copy of cheques issued to M/s Stambh Engineers along with copy of bank statement showing the clearing of these cheques and the assessee also filed copies of bills of M/s Stambh Engineers. The ld. Counsel submitted that no expenditure has been claimed by the assessee, hence, there is no question of applying section 41(1) of the Act. Therefore, the addition made by the AO may kindly be deleted.
Replying to the above, the ld. Sr. DR supported the orders of the authorities below and submitted that the AO was right in making the addition in the hands of the assessee.
On careful consideration of the above submissions, we are of the view that copy of the account available at pages 38 and 39 of the assessee’s paper book clearly show that there it was a running account between the assessee and M/s Stambh Engineers and all payments have been made through cheques and at the end of financial year 2007-08 there was a balance of Rs.11,46,695/- which was picked up by
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the AO for making addition in the hands of the assessee. Page 39 clearly reveals that the said amount was brought forward by the assessee as opening credit balance to M/s Stambh Engineers and on 31.03.2009 the account was tallied and no balance was left. Page 39, which is ledger account of M/s Stambh Engineers clearly show that the assessee has made payments to M/s Stambh Engineers through banking channel after deducting TDS and WCT and such transactions cannot be doubted in any manner. Therefore, we are inclined to hold that the AO made addition in the hands of the assessee without any justified basis and reasoning and without bringing out any positive adverse material against the assessee to establish that the liability was fictitious. Therefore, the ground No.1 of the assessee is allowed and the AO is directed to delete the addition.
Apropos ground No.2 of the assessee, the ld. Counsel of the assessee submitted that the AO made addition of Rs.1,20,325/- on the ground that the depreciation disallowed aggregating to Rs.6,01,627/- was the fund towards some other income on which the assessee has earned 20%, i.e., Rs.1,20,325/-. The ld. Counsel submitted that the AO has made addition without any basis, material or evidence and the same has been made merely on the basis of surmises and conjectures, therefore, keeping in view the submissions of the assessee available at pages 14 and 15 of the assessee’s paper book, the addition may kindly be deleted.
The ld. Counsel apropos ground No.3 submitted that no depreciation was claimed by the assessee, so no disallowance can be made in this regard. He drew our attention to top para at page 9 of the appellate order and submitted that the ld. First appellate authority has noted that no depreciation has been claimed on the capital
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work-in-progress and the expenditure account pending capitalization has been carried out in 2007-08. The ld. Counsel submitted that when the assessee has not made any claim of depreciation on capital work-in-progress, the AO was not justified in making disallowance on account of depreciation claimed and on the allegation that the depreciation disallowed was the funds towards some other income. The ld. Counsel submitted that the addition and disallowance made by the AO may kindly be deleted.
The ld. Sr. DR relied on the orders of the authorities below and submitted that the addition/disallowance made by the AO was not sustainable. Thus, grounds No.2 and 3 of the assessee may kindly be dismissed.
On careful consideration of above rival submissions, we are of the considered view that the AO firstly proceeded to make disallowance of Rs.11,46,695/- on account of credit found at the end of the year in the account of M/s Stambh Engineers who supplied the material in respect of building. By the earlier part of this order, we have since allowed ground No.1 of the assessee deleting the addition made by the AO. When we proceed to consider the addition made by the AO on account of disallowance of depreciation and further disallowance of 20% of depreciation claimed by the assessee on the allegation that the amount of Rs.6,01,627/- was found towards some other income on which the assessee has earned 20%.
From the relevant paras 3 and 4 of the first appellate order, we observe that the ld.CIT(A) has noted some discrepancies and, thereafter, held that the AO was right in making the addition. But, we are unable to see any positive or adverse finding against the assessee on this factual aspect that no depreciation has been claimed by
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the assessee on the capital work-in-progress which also includes the transactions noted by the ld.CIT(A) in para 4.2 of the first appellate order. It is not the case of the AO or the ld.CIT(A) that the assessee has wrongly claimed the depreciation. But, the disallowance of depreciation has been made solely on the allegation that the assessee has claimed excess contract payment towards the addition to building. But, there is no findings of the authorities below that the assessee has claimed some depreciation thereon. In such a situation, the disallowance of depreciation amounting to Rs.6,01,627/- and further disallowance of 20% of the said amount, amounting to Rs.1,20,325/- on the baseless allegation that the amount pertaining to the depreciation disallowed was the funds towards some other income on which the assessee has earned 20%. In our considered opinion, when the assessee has not claimed any depreciation, then, no disallowance can be made in the hands of the assessee on this account. Therefore, disallowance of depreciation of Rs.6,01,627/- is set aside. When the disallowance of depreciation has no legs to stand, then, further disallowance of Rs.1,20,325/- on baseless allegation is also not found to be sustainable. AO is directed to delete the addition. Grounds No.2 and 3 of the assessee are also allowed.
In the result, the appeal filed by the assessee is allowed. Order pronounced in the open court on 29.03.2023. Sd/- Sd/- (ANIL CHATURVEDI) (C.M. GARG) ACCOUNTANT MEMBER JUDICIAL MEMBER Dated: 29th March, 2023. dk
ITA No.2357/Del/2015