ACIT Central Circle-21 New Delhi Vs. Glorious Club Pvt. Ltd., M-78/A, Basement, Malviya Nagar, New Delhi
April, 03rd 2014
INCOME TAX APPELLATE TRIBUNAL
DELHI BENCH "C": NEW DELHI
BEFORE SHRI B.C.MEENA, ACCOUNTANT MEMBER
SHRI A. T. VARKEY, JUDICIAL MEMBER
ITA No. 4147/Del/2012 to 4152/Del/2012
(Assessment Years: 2003-04 to 2008-09)
ACIT Glorious Club Pvt. Ltd.,
Central Circle-21 Vs. M-78/A, Basement,
New Delhi Malviya Nagar,
C. O. No. 355-360/Del/2012
(In ITA No. 4147/Del/2012 to 4152/Del/2012)
(Assessment Years: 2003-04 to 2008-09)
Glorious Club Pvt. Ltd., ACIT
M-78/A, Basement, Central Circle-21
Malviya Nagar, Vs. New Delhi
Appellant by : R. S. Gill, CIT DR
Respondent by : Anil Jain, Adv
PER A. T. VARKEY, JUDICIAL MEMBER
These appeals filed by the Revenue and the corresponding cross-objections filed by
the assessee against the order of the ld CIT(A)-II, Delhi for the Assessment Years 2003-04 to
2. The ground of appeal in all the assessment years are same, so, we are reproducing
the ground of appeal of the year i.e. Assessment Year 2002-03.
3. The grounds of the appeals In ITA No. 4147/Del/2012 are as under:-
"1. That the Commissioner of Income Tax (Appeals) erred in law and on facts of
the case in deleting the addition of Rs. 8,03,063/- made by the Assessing
Officer on account of unexplained purchases u/s 69C of the Income Tax Act,
2. That the Commissioner of Income Tax (Appeals) erred in law and on facts of
the case in deleting the addition of Rs. 2,08,002/- made by the Assessing
Officer by way of disallowance of 100% of expenditure and depreciation
claimed by the assessee.
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3. (a) The order of the CIT(A) is erroneous and not tenable in law and on
(b) The appellant craves leave to add, alter or amend any/ all of the
grounds of appeal before or during the course of the hearing of the
4. Common grounds of the Cross Objection of the assessee in C.O. Nos. 355-
360/Del/2012 are as under:-
"1. That in view of the facts and circumstances of the case and in law the CIT(A)
has erred in not holding that the notice issued u/s 153C and the assessment
order passed u/s 153C/ 143(3) are illegal, bad in law, without jurisdiction and
barred by time limitation.
2. That the documents found during search proceedings, as referred to in the
satisfaction note, do not belong to assessee as the same were part of working
paper of the C.A. Sh. B.K. Dhingra in whose office the search was conducted.
Hence, the notice issued u/s 153C, based on said documents, is illegal, bad in
law and without jurisdiction.
3. That admittedly, as recorded in the satisfaction note, no seized document
related to the relevant assessment year was found and the seized paper
referred in the said satisfaction note were duly reflected in the regular books of
A/c and no incriminating material was found.
4. That in view of the facts and circumstances of the case the CIT(A) has erred on
facts and in law in holding that the assessment has been framed in conformity
with statutory provision of section 153C r/w Section 153A of the Act.
5. That in view of the facts and circumstances of the case the CIT(A) has erred in
facts and on law in upholding the validity of assessment particularly when the
assessment had been made without complying with the law and the additions
made are illegal, bad in law & without jurisdiction.
6. That on the facts and circumstances of the case and the provisions of the law,
the ld CIT(A) has erred in not considering the fact that the assessment
proceeding for the year under appeal was not pending on the date of the
recording of satisfaction u/s 153C of the Act and accordingly the same did not
abate for the purpose of initiation of proceedings u/s 153C and as such the
assessment being bad in law deserves to be quashed."
5. Apropos Ground No. 1 and 2 which are the common grounds of Appeal in all the
appeals of revenue, which are in respect of deletion of addition on account of
unexplained purchases u/s 69C of the Income Tax Act, 1961 (herein after `the Act') and
deletion of addition of disallowance of 100% on expenditure and depreciation claimed by
6. Brief facts of the case are that search and seizure operation u/s 132 of the Act was
conducted in the premises of Shri B. K. Dhingra, CA, Smt. Poonam Dhingra and M/s.
Madhusudan Builcon Pvt. Ltd. on 20th October, 2008. During the course of the search at
residential premises at F-6/5, Vasant Vihar, New Delhi, certain documents belonging to the
assessee were seized. Consequently, in response to notice u/s 153C read with section 153A
of the Act, assessee filed the following returned income for the aforesaid six assessment
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2004-05 Rs. 1,040/-
2005-06 Rs. 3,420/-
2006-07 Rs. 12,220/-
2007-08 Rs. 23,990/-
2008-09 Rs. 23,190/-
7. The Assessing Officer made addition on account of unexplained purchases,
disallowance on expenditure, among other additions/ disallowances. The ld CIT(A) in his
impugned order has deleted these additions on merits. Aggrieved by the said order of the
ld CIT(A) the revenue in before us.
8. At the outset of the hearing, the ld AR submitted that the issue raised in appeal by
revenue raised in Ground Nos. 1 & 2 are covered in favor of the assessee by three decisions
of the Co-ordinate Benches of the ITAT, Delhi Bench. According to the ld AR, these decided
cases also stemmed out from the very same search conducted on the aforesaid premises,
which triggered the 153C proceeding in assessee's case. In those cases also the Assessing
Officer was of the Central Circle 21 and the appellate authority ld CIT(A)-II was also the
same. According to the ld AR, like in those cases decided by the Tribunal the Assessing
Officer and the ld CIT(A) are same in assessee's case. The ld AR submitted that like in those
cases, the impugned additions were also made on account of the very same reasoning
and findings; and conclusions as arrived by the Assessing Officer in assessee 's case. In all
these cases, the trade was textile; and books of account and registers filed were not
rejected. Identical is the case of the assessee. Ld AR made available the copies of these
three decisions of ITAT in the case of ACIT, Central Circle21, New Delhi Vs. Blue Luxury
Implex Pvt. Ltd. in ITA No. 5495 to 5500/Del/2011, ACIT Vs. Anupama Links Pvt. Ltd., ACIT Vs
AA Testronics Solutions Pvt. Ltd.
9. We have heard both the sides and carefully perused the records and the case laws
cited by both the parties. We find that similar issue which was decided by the same
Assessing Officer and ld CIT(A) stemming out of the same search and seizure proceedings
had come up before `A' Bench of the Tribunal in the case of the ACIT, Central Circle-21 Vs.
Blue Luxury Index Pvt. Ltd. in ITA Nos. 5495-5500/Del/2011 with CO. Nos. 31-36/Del/2011
order dated 13.06.2012. Both parties agree that the finding of the Tribunal in the case of
M/s. Blue Luxury Index Pvt. Ltd. (Supra) cover the issue in hand.
10. The Tribunal at para 6to para 8 of the order in ITA No. 5495-5500/Del/2011has held as
"6. We have heard the learned DR and have gone through the facts of the case.
Indisputably & as pointed out by the ld CIT(A), the entire purchases added by the
Page No. 4
Assessing Officer are accounted for the books of account. The Assessing Officer,
without rejecting the books results added the entire purchases, source of which,
according to the learned CIT(A), was duly explained. Likewise, the learned CIT(A)
found that sales had been made by account payee cheques and duly reflected in
stock registers and supported by sale and purchase vouchers. The ld CIT(A) ITA No.
5495-5500/Del/2011 & CO Nos. 31 to 36/Del/2011 also found that the Assessing
Officer in his remand report did not comment adversely on the submissions of the
assessee in respect of purchases and sales. Accordingly, the ld CIT(A) deleted the
aforesaid additions in these six assessment years. While interpreting the provisions of
section 69C of the Act, Honble jurisdictional High court in Radhika Creation (supra)
held that the focus of section 69C is on the "source" of such expenditure and not on
the authenticity of the expenditure itself.
In that case also it was an admitted position that the expenditure was shown by the
assessee in its regular books of account and it was because of this reason that the
ITAT observed as under:-
"As the expenditure was accounted in the regular books, the source is
obviously explained. The provisions of section 69C are not applicable as there
as no unaccounted expenditure. (Emphasis supplied)"
6.1 Honble High Court, accordingly, held that section 69C refers to the ,,source of
the expenditure and not to be expenditure itself. Consequently, the Assessing
Officer was clearly wrong in treating the said expenditure as unexplained
expenditure under section 69C of the said Act and the lower appellate authorities
were right in their conclusions in deleting the said additions, Honble Court
6.2 In the instant case before us, indisputably, the purchases and sales are
accounted for in the books of accounts. Thus, source of the expenditure incurred in
purchases is obviously explained. In the light of the view taken in their aforesaid
decision by the Honble jurisdictional High Court, especially when the Revenue did
not place any material before us, controverting the aforesaid findings of facts
recorded by the ld CIT(A) so as to enable us to take a different view in the matter,
we have no basis to interfere. In view thereof, ground Nos. 1 & 2 in the appeal are
7. As regards disallowance of expenses in these six assessment years, the ld
CIT(A) found that in the assessment of the assessee for Assessment Year 2002-03, no
disallowance of expenses was made while the Assessing Officer, in the years under
consideration, did not point out any item of expenditure, warranting disallowance.
In these circumstances, and in the absence of any basis, when the Revenue did not
even identify any specific amount of expenditure, which was not related to the
business of the assessee, we are not inclined to interfere. Therefore, ground No. 3 in
these appeals is also dismissed.
8. In view of our aforesaid findings, rejecting the appeals of the Revenue, the
grounds raised by the assessee in their COs become purely academic and
therefore, do not survive for our adjudication."
11. This decision was followed by the ITAT in the case of Anupma Links Pvt. Ltd. in ITA No.
4135-4140/Del/2011 order dated 12.10.2012 as well as in the case of AA Testronics Solutions
in ITA No. 4233-4228/Del/2010 order dated 20.10.2012 and was followed by the ITAT Delhi
Bench in ITA Nos. 1068-1073/Del/2012 and CO Nos. 173-178/Del/2012 by order dated
31.10.2012. Hence on merit the issue is covered in favour of the assessee.
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12. The ITAT in the case of ACIT Vs. AA Testronics Solutions Pvt. Ltd, cited has held as
"8. Having considered the written submission filed on behalf of the assessee and
the contentions of the ld DR, it is seen that the matter is indeed covered in favour of
the assessee by "Anupama Links Pvt. Ltd" (supra). The first and foremost, the search
in the case of the assessee is the same as that in "Anupama Links Pvt. Ltd.". The
Assessing Officer in the two cases is also the same. The trade of both the assessee is
one and the same i.e., trade of textiles. Then, in both cases, books and stock register
were filed and the Assessing Officer did not reject the same. The ld CIT(A) has, as
noted hereinabove, taken into account the fact that all the sales made by the
assessee stood recorded in the assessees books of account, which included the
sales and purchase vouchers and stock registers maintained by the assessee on a
day-to-day basis. These books of account were duly produced before the Assessing
Officer and the Assessing Officer examined them, on examination, no negative
observation thereagainst was recorded by the Assessing Officer. Complete names
and address of the parties to whom the goods were sold were available with the
Assessing Officer. Most of the customers were assessed to income-tax. Sales were
made against the opening stock. The purchases made during the year and the sales
were but conversion of stock. The profit therefrom had already been taxed. The
Assessing Officer did not bring anything on record to indicate that the sale proceeds
represented the assessees income from undisclosed sources. The s ale transactions
with M/s. Micron Textiles were not confirmed by the Assessing Officer on a test check
basis. No more inquiries were made by the Assessing Officer thereafter. The
assessees books of account were audited books of account. The tax audit repo rt
was on record. The auditors had not made any negative observations therein. All
these facts were duly taken into consideration by the ld CIT(A) and it was thereupon
that the issue was decided in favour of the assessee.
9. So far as it regards "Anupama Links Pvt. Ltd." (supra), under similar facts and
circumstances, the Tribunal following "CIT Vs. M/s. Radhika Creation", a judgment
dated 30.04.2010, rendered by the Honble Delhi High Court, held the provisions of
Section 69C of the Act to be not applicable. Further, the matter is also covered by
"Banulal C. Borana", 282 ITR 251 (Bom), which is on similar lines.
In view of the above, we do not find any error in the orders passed by the ld CIT(A)
and , accordingly, the same are confirmed. The grievance raised by the
department by way of the grounds of appeal taken is, therefore, rejected."
13. Since the facts involved are similar, and since Revenue did not place any material
before us to controvert the finding of the facts recorded by the ld CIT(A), so as to enable
us to take a different view in the matter, we have no basis to interfere with the impugned
order of the ld CIT(A), therefore respectfully following the decision of Hon'ble jurisdictional
High Court and also the decisions of co-ordinate Bench, we dismiss the revenue's appeal
both the grounds and confirm the order of the ld CIT(A).
14. On the legal issue, raised in C.O. by the assessee, we find that the assessee had
raised these very same objection in the C.O.'s filed in the aforesaid three appeals decided
by the co-ordinate benches, however, these grounds were not pressed before it and
therefore it was dismissed; and the fact remains that after relief have been granted to the
assessee on merits, the said grounds raised in the C.O. would become academic and an
Page No. 6
exercise in futility, hence following the co-ordinate bench order (supra), we dismiss the
grounds of the assessee.
15. In the result the appeal of the Revenue as well as cross objection of the assessee are
Order pronounced in the open court on 28.03.2014.
(B.C.MEENA) (A. T. VARKEY)
ACCOUNTANT MEMBER JUDICIAL MEMBER
A K Keot
Copy forwarded to
4. CIT (A)
ITAT, New Delhi