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MGF Automobiles Ltd., 4/17-B, MGF House, Asaf Ali Road, New Delhi. Vs Asstt.Commissioner of Income Tax, Central Circle-7, New Delhi.
November, 17th 2014
ITA No. 4602/Del/2011
Asstt. Year: 2008-09

                IN THE INCOME TAX APPELLATE TRIBUNAL
                       DELHI BENCH `E' NEW DELHI

            BEFORE SHRI G.D. AGRAWAL, VICE PRESIDENT
                               AND
           SHRI CHANDRA MOHAN GARG, JUDICIAL MEMBER

                           I.T.A.No.4602/Del/2011
                          Assessment Year : 2008-09

MGF Automobiles Ltd.,          vs Asstt.Commissioner of Income Tax,
4/17-B, MGF House,                Central Circle-7, New Delhi.
Asaf Ali Road,
New Delhi.
(Appellant)                           (Respondent)
                                           Appellant by: Shri V.K. Aggarwal
                                 Respondent by : Shri Gunjan Prashad, CIT DR

                                ORDER


PER CHANDRA MOHAN GARG, JUDICIAL MEMBER

       This appeal has been preferred by the assessee against the order of

CIT(A)-I, New Delhi dated 0.08.2011 in Appeal No.378/09-10 for AY 2008-09.


2.     Ground no. 1, 3 and 4 of the assessee are general in nature which need no

adjudication on merits. The sole ground no. 2 of the assessee reads as under:-


               "2. The Ld. CIT (A) has grossly erred on facts as well
        as in law in confirming the addition of Rs. 33,90,5501- on
        account of cash found during the search especially in view of
        the following: -
        a) By holding that during the search, neither confirmation
        was filed nor books of account of M/s MGF Development Ltd.
        were produced.



                                                                                 1
ITA No. 4602/Del/2011
Asstt. Year: 2008-09

        b) In ignoring the fact that imprest was taken for business
        purposes.
        c) In holding that the appellant has failed to explain why
        imprest was taken without providing any opportunity to
        explain the same.
        d) In referring to section 269SS and 40A(3) which are not
        applicable in respect of imprest."
3.     Briefly stated, the fact giving rise to this appeal are that a search and

seizure operation u/s 132 of the Income Tax Act was carried out in the case of

the assessee on 12.09.2007. Subsequently, all related cases of the assessee were

transferred and centralised by the CIT, Delhi-II vide order dated 13.02.2008.

The assessee filed a return for the year under consideration on 29.9.2008

declaring an income of Rs.68,21,192/- showing income from business and

profession. Notices u/s 143(2) and 142(1) along with a questionnaire were

served on the assessee. The AO noticed that during the search and seizure

operation, cash amounting to Rs.48,46,130 was found from the office premises

of the company. The assessee was asked to justify the cash found in its premises

by showing cash in hand in the books. The AO further observed that the books

produced in support of the same were not reflecting cash in hand of Rs.

48,00,000/- despite the fact that assessee was given sufficient opportunity to

explain the existence of above cash in its premises as per the books of accounts.

With these observations, the AO made an addition of Rs. 48 lakh as unexplained

cash found during the search.







                                                                               2
ITA No. 4602/Del/2011
Asstt. Year: 2008-09

4.     The aggrieved assessee preferred an appeal before the CIT(A) which was

partly allowed deleting the addition of Rs.14,09,450/- and remaining amount of

addition of Rs.33,90,550/- was upheld and confirmed.


5.     Now, the aggrieved assessee is before this Tribunal with the main ground

as reproduced hereinabove.


6.     We have heard arguments of both the sides and carefully perused the

record. Ld. Counsel for the assessee submitted that as per remand report dated

06.06.2011 submitted to CIT(A) by the AO, it has been mentioned that

regarding balance cash of Rs.33,90,550/-, the assessee had furnished

confirmation during the course of assessment proceedings to the effect that this

amount belonged to M/s MGF Development Ltd. and the confirmatory letter

dated 13.11.2009 was placed on record. Ld. Counsel vehemently contended that

the AO, despite the confirmation, wrongly held that the alleged confirmation

was furnished more than two years after the date of search and the same appears

to be an afterthought on the part of the assessee to explain the cash found at the

time of search.


7.     Ld. counsel submitted that the AO could have verified this very factum

from the assessment record of M/s MGF Development Ltd. who gave

confirmation but without making any exercise, the AO was not justified in

rejecting the explanation and confirmation of the assessee. Ld. Counsel of the

assessee has also drawn our attention towards paper book page no. 3 para 5 and
                                                                                3
ITA No. 4602/Del/2011
Asstt. Year: 2008-09

submitted that the assessee also submitted during the assessment proceedings

that the cash balance of Rs.33,90,550 belonged to MGF Developers Ltd. as the

said cash of the company was found lying in the premises of the assessee

company on the date of search as the same was given to the assessee company

as imprest amount for business purposes. This letter is dated 15.12.09. Ld.

Counsel for the assessee has also drawn our attention towards paper book page

no. 31 and submitted that as per cash in hand account of M/s MGF Developers

Ltd., there was an entry of payment to the assessee on 8.9.2007 which clearly

reflects that the amount of Rs.33,90,450/- was given as imprest to the assessee

company which further gets confirmed from the imprest ledger account of MGF

Automobile Paper book page 33.

8.     Ld. Counsel of the assessee has further drawn our attention towards Paper

Book page no. 57 and submitted that on statement recorded on oath on

16.10.2007 u/s 131 of the Act, Shri Shravan Gupta s/o Shri Rajeev Gupta, MD

of MGF Group of Companies stated that the cash withdrawal in the various

companies has been done for meeting the various expenses related to land

acquisition and with land acquisition team as per books of accounts.        Ld.

Counsel further stated that the Mr. Shravan Gupta clearly replied to the

questions of the revenue authorities that the relevant details would be provided

for verification. Ld. Counsel has also drawn our attention towards paper book

page 42 and submitted that the same impugned amount has been returned by the


                                                                              4
ITA No. 4602/Del/2011
Asstt. Year: 2008-09

assessee to M/s MGF Developers Ltd. on 15.2.2007 which also fortifies the

explanation of the assessee that the impugned amount of addition upheld and

confirmed by the CIT(A) was returned by the assessee to M/s MGF Developers

Ltd.

9.     Ld. Counsel of the assessee submitted that during the course of

assessment proceedings as well as first appellate proceedings, the assessee

clearly submitted a sustainable explanation that the amount of cash seized was

inclusive of imprest amount received from MGF Development Ltd. and this

amount was returned to the respective MGF Development Ltd. 15.2.2007. Ld.

Counsel submitted that the assessee could get an opportunity to submit the

explanation before the authorities when the same was asked for during the

assessment and appellate proceedings. The assessee cannot submit the same on

his own without any proceeding. Ld. counsel has again drawn our attention

towards paper book page no. 57 and submitted that MD of the company Shri

Shravan Gupta clearly replied that relevant detail would be provided for

verification. Ld. Counsel finally prayed that the impugned addition may kindly

be deleted and AO may be directed accordingly.


10.    Replying to the above, ld. DR submitted that no books of accounts were

found at the time of search and seizure operation. The DR further submitted that

to verify the justification of cash amount of Rs. 48 lakh, the onus was on the

assessee to submit proper and justified explanation that the impugned amount of

                                                                              5
ITA No. 4602/Del/2011
Asstt. Year: 2008-09

Rs.33,90,450/- was imprest amount given by M/s MGF Development Ltd. Ld.

DR vehemently contended that this kind of explanation requires deep inquiry of

books of accounts and bank statement of both the parties which were not

produced, therefore, addition was justified.

11.    On careful consideration of above, we are of the view that during the

statement recorded u/s 131 of the Act, the MD of the company Mr. Shravan

Gupta stated that the required detail and other information will be submitted for

verification as and when the same will be required. During the assessment

proceedings, the assessee stated that the cash amount of Rs.33,90,550 belonged

to M/s MGF Development Ltd. This letter dated 15.12.2009 was submitted to

the AO. Further, during first appellate proceedings, the AO admitted that the

assessee had furnished confirmation during the course of assessment proceeding

to the effect that the impugned amount of cash belonged to M/s MGF

Development Ltd. and the AO also alleged that the confirmation has been

furnished after more than two years of search, therefore, it appears to be an after

thought which cannot be the basis for rejection of confirmation without any

further examination and verification from the assessment records of M/s MGF

Development Ltd.


12.    We also note that the DR has not disputed the point that the impugned

amount was returned by the assessee to M/s MGF Development Ltd. on

15.9.2007 which is clearly reflected from the books of accounts of the assessee




                                                                                 6
ITA No. 4602/Del/2011
Asstt. Year: 2008-09

as well as cash in hand and assessee's account in the books of M/s MGF

Development Ltd. Under these circumstances, we reach to a conclusion that the

assessee also explained the amount of cash found during the course of search

that an amount of Rs.33,90,450/- belonged to M/s MGF Development Ltd.

which was returned in due course of business. Hence, we are inclined to hold

that the authorities below were not justified in making and confirming the

addition on this amount in the hands of the assessee. Accordingly, sole ground

of the assessee is hereby allowed. Before we part with the order, we also make

it clear that the assessee made a legal objection that referring to section 269SS

and 40A(3) of the Act is wrong as these are not applicable in respect of imprest.

Since we are hearing the appeal regarding quantum proceedings, therefore, we

refuse to comment on the applicability of these provisions and ground no. 2(d)

of the assessee is dismissed as irrelevant and premature. Remaining ground

no.2(a) (b) and (c) are allowed as indicated above.


13.     In the result, the appeal of the assessee is partly allowed.


        Order pronounced in the open court on 14.11.2014.

      Sd/-                                                    Sd/-

(G.D. AGRAWAL)                                  (CHANDRAMOHAN GARG)
VICE PRESIDENT                                       JUDICIAL MEMBER

DT. 14th NOVEMBER, 2014
`GS'



                                                                               7
ITA No. 4602/Del/2011
Asstt. Year: 2008-09




Copy forwarded to:-

   1.   Appellant
   2.   Respondent
   3.   C.I.T.(A)
   4.   C.I.T.
   5.   DR
                        By Order



                        Asstt.Registrar




                                          8

 
 
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