IN THE INCOME TAX APPELLATE TRIBUNAL
DELHI BENCH: `D' NEW DELHI
BEFORE SHRI G.D. AGRAWAL, HON'BLE VICE-PRESIDENT AND
SHRI I.C.SUDHIR, JUDICIAL MEMBER
I.T.A. NO. 1290/Del/2011
Assessment Year: 2003-04
Katt Special Machines (P) Dy. CIT
Ltd. M-96B/7, Shastri Nagar Vs. Circle 5 (1)
New Delhi-110052 New Delhi-110002
PAN: AABCK9818L
(ASSESSEE) (REVENUE)
I.T.A. NO. 1401/Del/2011
Assessment Year: 2003-04
ACIT, Circle (1), Vs. Katt Special Machines(P)
New Delhi. Ltd. M-96B/7, Shastri
NagarNew Delhi-
110052
(REVENUE) (ASSESSEE)
Assessee by: Shri B.K. Anand, CA
Revenue by: Shri R.S. Negi, Sr. DR
Hearing on: 3/07/2012
Order Pronounced on the Date: ...........
ORDER
PER I.C.SUDHIR, JM:
These are the cross appeals preferred by the parties against the first
appellate order. The assessee has questioned first appellate order on the
following grounds:
2 ITA NO. 1290 & 1401/Del/2011
1. "That on the facts and in the circumstances of the case the learned
Commissioner of Income Tax (Appeals) erred in confirming the
disallowance of Rs.17,90,558 being commission paid by the
assessee company to its selling agents with complete disregard to
the details filed before him supporting the expenditure by the
assessee.
2. That the learned Commissioner of Income Tax (Appeals) erred in
not holding that the letter filed before the AO related only to
specific queries raised by the latter during remand proceedings in
which he had not asked for any further evidence relating to the said
commission payment.
3. That the learned Commissioner of Income Tax (Appeals) erred in
not considering the confirmations of specific agents filed before
him in terms of sub-rule (4) of Rule 46A directing the assessee to
file such confirmations which the assessee duly complied with.
4. That the learned Commissioner of Income Tax (Appeals) erred in
not holding that the assessee having furnished requisite details in
respect of Rs.98,421 being amounts written-off under "Short &
Excess Recoveries", which are inherent in trading operations, the
3 ITA NO. 1290 & 1401/Del/2011
write-off called for no disallowance and further erred in not
deleting the disallowance made by the AO.
5. That the learned Commissioner of Income Tax (Appeals) erred in
partially confirming the ad-hoc addition out of expenses made by
the AO with complete disregard to the details and documents
furnished before the AO during the assessment proceedings."
6. The revenue on the other hand has questioned first appellate order on
the following grounds:
1. The order of the learned CIT (APPEALS) is erroneous &
contrary to facts & law.
2. On the facts and in the circumstances of the case and in law,
the learned CIT (A) ignored the finding recorded by the AO
and the fact that the assessee did not discharge the onus of
proving the existence/creditworthiness of the creditors and
genuineness of the transactions.
3. On the facts and in the circumstances of the case and in law,
the learned CIT (A) has erred in deleting the addition of
Rs.57,000/- made account of unexplained cash credits.
3.1 The ld. CIT (A) ignored the finding recorded by the AO and
the fact that the assessee did not file the requisite evidence
4 ITA NO. 1290 & 1401/Del/2011
during the course of assessment proeceeding despite having
been provided with ample opportunities.
4. On the facts and in the circumstances of the case and in law,
the learned CIT (A) has erred in deleting the addition of
Rs.3,00,097/-made on account of disallowance of
depreciation on old sewing machines.
4.1 The ld. CIT (A) ignored the finding recorded by the AO and
the fact that the assessee did not file the requisite evidence
during the course of assessment proceeding to substantiate its
claim.
5. On the facts and in the circumstances of the case and in th
law, the learned CIT (A) has erred in deleting the addition of
Rs.89,703/- made on account of disallowance of non moving
credits.
5.1 The ld. CIT (A) ignored the finding recorded by the AO and
the fact that the assessee did not file the requisite evidence
during the course of assessment proceeding to substantiate its
claim.
6. On the facts and in the circumstances of the case and in law,
the learned CIT (A) has erred in restricting the addition on
5 ITA NO. 1290 & 1401/Del/2011
account of disallowance to Rs.8,87,557/- as against
Rs.73,26,507/-made by the AO.
6.1 The ld. CIT (A) ignored the finding recorded by the AO and
the fact that the assessee did not file the requisite evidence
during the course of assessment proceeding to substantiate its
claim."
3. Since some grounds raised in the appeals are having common facts,
these are being dealt with simultaneously.
Ground No. 1 (Assessee)
4. The authorities below have made and upheld the disallowance of
Rs.17,90,558/- on account of commission on sales. The relevant facts are
that the assessee company claimed to have made payment of Rs.17,90,558/-
on account of commission on sales. The AO noted that in the immediately
preceding year i.e. assessment year 2005-06 no commission payment was
claimed by the assessee. He therefore, asked the assessee to furnish full and
complete details of the persons to whom commission has been paid along
with the detailed ledger account of all the parties for the relevant assessment
year. On perusal of the commission account the AO also found that in
certain cases commission was also paid in cash. Under these circumstances
the AO afforded opportunities to the assessee to furnish confirmations of the
6 ITA NO. 1290 & 1401/Del/2011
concerned parties so as to ensure his payment has actually been made and
that the concerned parties have disclosed the commission receipts in their
returns of income. The assessee however, failed to avail such opportunities.
The AO thus made disallowance of the claimed commission payment of
Rs.17,90,558/- on the sales. Since the assessee could not improve its case
before the Ld. CIT (A), the Ld. CIT (A) has upheld the addition in question.
5. Before the Tribunal in support of the ground the Ld. AR has
submitted that before the Ld. CIT (A) it was made clear that a detailed
ledger account of commission payment was filed before the AO, wherein the
names and details of the respective sales bills in respect of which the
commission was paid were duly given. In compliance of the direction of the
AO vide order sheet entry dated 8.12.2008, confirmation of M/s Lucky
Enterprises, M/s Shiva Enterprises, M/s Sanjeev International, M/s Rajesh
Associates, Shri Anuj Jain and Shri Jain Enterprises were sent to him along
with letter dated 22.12.2008. The AO however, did not consider those
documents. The Ld. DR on the other hand placed reliance on the orders of
the authorities below in this regard.
6. Having gone through the orders of the authorities below we find that
the assessee could not be able to improve its case before the Tribunal.
Undisputedly onus lies on the claimant to establish its claim. The AO was
7 ITA NO. 1290 & 1401/Del/2011
having every right to verify the claimed payment of commission and he was
justified in asking the assessee to furnish confirmations of concerned parties
so as to ensure that (i) the payment has actually been made and (ii) that the
concern parties have disclosed the commission receipts in their returns of
income. Despite all opportunities the assessee could not comply this
direction of the AO. Before the Ld. CIT (A) the assessee contended that
incompliance of the direction of the AO vide order sheet entry dated
8.12.2008 the assessee had furnished confirmations of M/s Lucky
Enterprises, M/s Shiva Enterprises, M/s Sanjeev International, M/s Rajesh
Associates, Shri Anuj Jain and M/s Jain Enterprises along with letter dated
22.12.2008 and the AO did not consider those confirmations while
adjudicating the issue on payment of commission. In the interest of justice
the Ld. CIT (A) remanded the matter to the file of the AO to examine the
above contention of the assessee. The AO reported that the claim of the
assessee that the confirmation of M/s Lucky Enterprises etc. were filed along
with letter dated 22.12.2008 was factually incorrect as no such letter was
filed in the course of assessment proceedings. He also submitted that if at all
confirmations of the persons to whom commission was paid were available
with assessee, same could have been filed in the course of remand
proceedings. The AO noted further that in spite of number of opportunities
8 ITA NO. 1290 & 1401/Del/2011
granted in the course of hearing no compliance was made by the assessee
company. Under these facts we are of the view that the Ld. CIT (A) was
having no option but to affirm the disallowance of the claimed commission
payment of Rs.17,90,558/-. Since the assessee could not improve its case
even before the Tribunal, we are not inclined to interfere with the finding of
Ld. CIT (A) in this regard. The same is upheld. The ground No. 1 is
accordingly rejected.
Ground No. 2 (Assessee)
7. The AO made an addition of Rs.98421/- representing short and excess
recovery. The AO has made this addition in absence of details in respect of
short and excess recoveries for the assessment year under consideration. In
absence of improvement of the case of the assessee before the Ld. CIT (A),
the Ld. CIT (A) has upheld the addition.
8. The contention of the Ld. AR before the Tribunal remained that the
amount in question represented short recovery from the regular customers
from whom small balances remained outstanding and over a period of time
the same are written off in the books of accounts of the assessee. The Ld.
AR submitted that such rights are of normal business incidence. The Ld. DR
on the other hand tried to justify the orders of the authorities below.
9 ITA NO. 1290 & 1401/Del/2011
9. Having gone through the orders of the authorities below, we find that
the Ld. CIT (A) has upheld the addition with this finding that there is no
rebuttal of the finding of the AO that no details/information was furnished
before him in respect of the alleged short and excess recoveries and
consequent writing off the said amount. Even before the Tribunal the
assessee has failed to rebut the said findings recorded by the AO that no
details/information was furnished before him in respect of the claimed
writing off. The assessee has not improved its case even before the Tribunal
on the issue. We thus do not find reason to interfere with the first appellate
order in this regard. The same is affirmed. Ground No. 2 is accordingly
rejected.
Ground No. 3 (Assessee) & Ground No. 6 (Department)
10. The relevant facts are that the AO made addition of Rs.73,26,507/- out
of the expenses claimed as per the profit and loss account of the assessee
company. The AO made the said addition on the basis that in spite of
numbers of opportunities allowed, no books of accounts were produced by
the assessee before him. The AO noted further that as per Para 14 of the
notes to accounts in schedule 15, it was stated that some of the expenses
were not properly supported. The AO therefore, in view of the disallowance
made in the immediate preceding assessment year disallowed 10% of the
10 ITA NO. 1290 & 1401/Del/2011
entire expenses (excluding depreciation, preliminary expenses, filing fees,
short an excess recoveries and commission expenses) claimed in the profit
and loss account of the assessee.
11. Before the first appellate authority the assessee contended that the AO
did not exercise his quashi judicial powers while making the addition in
question. It was submitted that the assessment in the present case was
handled more than one Assessing Officers and the books of accounts were
produced with the predecessor officer and the same were examined on test
check basis. Therefore, it is factually incorrect to say that books of account
were not produced before the AO. It was submitted that the account of the
assessee are duly audited u/s 44 AB of the Act and the audit report was filed
along with the return of income. It was contended that the amount of
Rs.7,32,65,067/-, 10% of which has been considered for disallowance, also
included costs of goods sold by the assessee. It was submitted further that
the assessee is dealing in items which are identifiable, quantifiable and were
duly confirming part of the trading account. The assessee thus objected the
disallowance of 10% of the cost of goods sold amounting to
Rs.6,43,89,507/-. Regarding other expenses, the assessee submitted that
details called for by the AO were submitted before him from time to time
and only specific requirements noted on 8.12.2008 could not be fulfilled
11 ITA NO. 1290 & 1401/Del/2011
because of paucity of time. It was submitted that on 8.12.2008 no issue with
regard to the purchase of Sewing machines spare parts and accessories was
raised. Regarding unsecured loans, non-moving activities, addition on
account of be share capital, payment of commission, interest payment on
taxes etc. separate additions were made by the AO and therefore, according
to the assessee an ad hoc disallowance @ 10% over and above specific
disallowance was not justifiable. Considering these submissions the Ld. CIT
(A) has restricted the addition to Rs.8,87,557/- out of the addition of
Rs.73,26,507/- made by the AO. In result both the parties are in appeal
before the Tribunal.
12. In support of ground no. 3 of the appeal preferred by the assessee, the
Ld. AR has reiterated the submissions made before the authorities below.
The Ld. DR on the other hand placed reliance on the assessment order. He
submitted further that the Ld. CIT (A) was not justified in deleting the
addition to the extent of Rs.64,38,950/- being 10% of cost of sales of
Rs.6,43,89,507/-.
13. In view of the above submissions we have gone through the orders of
the authorities below. We find that the AO had made an addition of
Rs.73,26,507/- out of the expenses claimed in the profit and loss account of
the assessee on the basis that in spite of number of opportunities allowed, no
12 ITA NO. 1290 & 1401/Del/2011
books of accounts were furnished by the assessee before him. The AO noted
further that some of the expenses admittedly (as per Para 14 of the notes to
grounds in scheduled 15) were not properly supported with evidence. The
Ld. CIT (A) has however, examined the claim of the assessee from the
details of purchases of sewing machine, spare parts, needles and
miscellaneous items made available in the assessment records. He has noted
that as per the details of opening stock, purchases, sales and closing stock of
the aforesaid items, the assessee had 148 sewing machines as opening stock
as on 1.4.2005 and the assessee thereafter made purchases of 5,178
machines, out of which 2845 machines were sold leaving a closing stock of
2400 and 81 as on 31.3.2006. Similar information was available in respect of
spare parts needles miscellaneous items as well. The Ld. CIT (A)
accordingly agreed with the assessee that the disallowance out of cost of
goods sold could not have been considered on ad hoc basis without pointing
out any discrepancies in the details filed before the AO. The Ld. CIT (A) has
observed further that the items traded in by the assessee are such that the
same are quantifiable in pieces and there cannot be any justification for any
ad hoc disallowance. Under these unrebutted facts noted by the Ld. CIT(A),
we do not find infirmity in the first appellate order coming to the conclusion
that addition to the extent of Rs.64,38,950/- being 10% of cost of sales of
13 ITA NO. 1290 & 1401/Del/2011
Rs.6,43,89,507/- was justified. In our view the Ld. CIT (A) under the above
circumstances has rightly deleted the addition to the extent of Rs.64,38,950/-
. In result ground no. 6 and 6.1 of the appeal preferred by the revenue are
rejected.
14. The Ld. CIT (A) has upheld the balance disallowance of Rs.8,87,557/-
out of the claimed expenses under the head salaries and wages, directors;
remuneration, administrative expenses, interest and financial charges and
selling, business promotion etc. The Ld. CIT (A) has sustained this
disallowance on the basis that before the AO, the assessee failed to furnish
necessary bills and vouchers in support. The Ld. CIT (A) has further noted
that even during the course of remand proceedings there was no compliance
to the directions of the AO to produce the necessary evidence justifying the
claim of expenditure under the aforesaid heads. Since the assessee could not
improve its case before the Tribunal we do not find reason to interfere with
the finding of the Ld. CIT (A) in this regard. The same is affirmed. The
ground no. 3 of the appeal preferred by the assessee is thus rejected.
The ground no. 1 (Department) is general in nature hence does not need
independent adjudication.
Ground Nos. 2 & 2.1 (Department)
14 ITA NO. 1290 & 1401/Del/2011
The AO made addition of Rs.97,20,420/- on account of fresh share capital
brought into books of account during the year. The facts in brief are that the
assessee company engaged in the business of trading, hiring and repairing of
industrial sewing machines, spare parts and accessories had made an
arrangement with M/s V.S. Mechanical Works and M/s V.S. Sales
Corporation, proprietorship concerns of Sh. Tarkeshwar Yadav and Smt.
Phoolwati Yadav, respectively whereby all the assets and liabilities of the
proprietorship concerned were taken by the assessee company at the book
value. Sh. Tarkeshwar Yadav, and his wife Smt. Phoolwati Yadav are also
the directors of the assessee company. As per the said agreement between
Assessee Company and the proprietors of the aforesaid concern the
liabilities including the outstanding loans and credit balances were to be
settled by way of allotment of shares of the assessee company to the concern
persons according to their outstanding balances as on 1.4.2005. As per this
arrangement only fresh share capital of Rs.97,20,420/- was introduced
during the year under consideration in lieu of outstanding liabilities which
inter alia included creditors of Rs.57,09,240/- deposits of Rs.8,43,500/-,
value of proprietor's net assets Rs.18,49,430/- and credit balances
outstanding in its books at Rs.13,18,250/-. While examining the assets and
liabilities shown by the assessee company for the year under consideration,
15 ITA NO. 1290 & 1401/Del/2011
the AO asked the assessee to file necessary details of the persons who had
contributed to the fresh capital to Rs.97,20,420/-. In response the assessee
filed a detailed list of all the 31st share holders which also included both the
directors, their HUF and childrens. The AO noted that the address shown in
the cases of almost all the shareholders were of the assessee company itself.
The AO thus doubted the existence and identity of the shareholders and he
decided to conduct further enquiry in this regard in order to ascertain the
correct factual position. On spot enquiries, the inspector found that none of
the shareholders were available at the given address. The AO issued
summons u/s 131 of the Act to 21 shareholders excluding the directors and
their family members. No response/compliance was made thereto. It was
brought to the notice of the assessee during the course of assessment
proceeding and the assessee was required to produce all the 21 persons for
examination. The assessee failed to comply with the same. The assessee
subsequently filed affidavits in cases of 10 persons. On examination of those
affidavits the AO found that in all the cases the source of income was shown
as agricultural income ranging between Rs.70,000/- to 95,000/- their
creditworthiness was thus doubted by the AO. The assessee was asked to
explain as to why the increase in the share capital could not be treated as
unexplained u/s 68 of the Act. The assessee was also asked to furnish
16 ITA NO. 1290 & 1401/Del/2011
necessary details regarding mode of payment of share capital, cheque nos.
and bank statements of the share applicants. The assessee did not comply
with the same. The AO accordingly made addition of Rs.97,20,420/- after
regarding his findings in detail at page nos. 5 to 9 of the assessment order.
15. The assessee questioned the above additions made by the AO before
the Ld. CIT (A) mainly on the basis that the AO has failed to appreciate the
fact that the increase in the share capital did not involve any monetary
transactions in terms of receipt on payment of actual money. It was
contended that the increase in share capital was a consequence of takeover
of assets and liabilities of M/s V.S. Mechanical Works and M/s V.S. Sales
Corporation i.e. proprietorship concerns of both the directors of the assessee
company. The assessee also raised other contentions. Considering these
contentions, the Ld. CIT (A) has deleted the addition of Rs.97,20,420/- on
the basis that the amount has been received by the assessee company as a
result of takeover of assets and liabilities of M/s V.S. Sales Corporation and
M/s V.S. Mechanical Works and represented outstanding balances in their
cases as on 1.4.2005. The Ld. CIT (A) noted that neither the money in
question was directly received by the assessee nor the same was received in
the year under consideration. The revenue has questioned this action of the
Ld. CIT (A).
17 ITA NO. 1290 & 1401/Del/2011
16. The Ld. DR has basically placed reliance on the assessment order with
the submissions that neither identity of the shareholders nor the genuineness
of transactions have been established by the assessee. He pointed out that the
addresses given by the shareholders were shown at the address of assessee
itself. The Ld. AR on the contrary tried to justify the first appellate order on
the issue.
17. Having gone through the orders of the authorities below as discussed
above, we find that the Ld. CIT (A) has deleted the addition in question
mainly on the basis that increase in the amount in question was received by
the assessee company as a result of take over of assets and liabilities of M/s
V.S. Sales Corporation and M/s V.S. Mechanical Works, the proprietorship
concerns of the directors and that the amount represented outstanding
balances in their cases as on 1.4.2005. Thus neither the money in question
was directly received by the assessee company nor the same was received in
the year under consideration. The increase in share capital was a result of
book entries passed consequent to the take over of assets and liabilities of
the aforesaid two concerns. The AO did not find anything wrong with the
take over of the assets and liabilities of the said concerns. The AO had made
addition u/s 68 of the Act on the basis that the assessee had failed to
establish identity and creditworthiness of the share applicants and the
18 ITA NO. 1290 & 1401/Del/2011
genuineness of the transaction to which the Ld. CIT (A) agreed upon with
this finding in Para no. 4.7 of the first appellate order that the amount of
Rs.97,20,420/- is not entirely explainable. The Ld. CIT (A) in this
Paragraph has held that the action is certainly called for to bring the same to
tax as per the provisions of law in the hands of proprietors of M/s V.S.
Mechanical Works and M/s V.S. Sales Corporation. It has been noted that in
the books of the above stated two proprietor concerns, there were creditors
of Rs.57,09,240/- (Rs.31,75,600 + Rs.25,33,640) and credit balance/deposits
of Rs.8,43,500/-(Rs.800000 + Rs.43,500) in addition to proprietors' net sale
consideration (Assets Liabilities) of Rs.18,49,430/- (Rs.1350630 +
Rs.498800) which were taken over by the assessee company and there was
credit balance of Rs.1318250/- in the books of the assessee company in the
name of 5 parties in lieu of all these credit balances as on 1.4.2005
(Rs.57,09,240 + Rs.8,43,500 + Rs.18,49,430 + Rs.13,18,250) shares of
Rs.97,20,420/- were allotted. The AO made addition of all these amounts of
Rs.97,20,420/- u/s 68 of the Act treating it as bogus share capital in respect
of all the 31 parties as assessee failed to prove identity and capacity of all
these persons and genuineness of these transactions. The basis on which the
Ld. CIT (A) has deleted the addition that the amount of Rs.97,20,420/- in the
hands of the assessee company has been received by the assessee company
19 ITA NO. 1290 & 1401/Del/2011
as a result take over of assets and liabilities of M/s V.S. Sales Corporation
and M/s V.S. Mechanical Works and represented outstanding balances in
their cases as on 1.4.2005, has not been rebutted by the revenue. The
revenue has also not rebutted the relevant findings of the Ld. CIT (A) that
neither the money in question was directly received by the assessee company
nor the same was received in the year under consideration, we thus do not
find infirmity in the first appellate order in this regard. Undisputedly, the
increase in share capital was as a result of book entities passed consequent to
the take over of assets and liabilities of the aforesaid two concerns. The
action of the first appellate authority in deleting the addition of
Rs.97,20,420/- in the hands of the assessee does not require interference.
The same is upheld. The ground no. 1 of the appeal preferred by the
department is thus rejected.
Ground No. 3 (Department)
18. The AO made addition of Rs.57,000/- on account of unexplained cash
credit. The AO had asked for necessary confirmations etc. in respect of two
cash credits appearing in the names of Sh. Vijay Kumar, (Rs.50,000/-) and
Sh. Santosh Mishra (Rs.7,000/-). The AO had made addition on the basis
that the assessee failed to make proper compliance. The Ld. CIT (A) has
deleted the addition on the basis that before the AO the assessee had filed
20 ITA NO. 1290 & 1401/Del/2011
confirmations of both the creditors and the transactions were made by means
of banking channels, hence the AO without verifying those documents was
not justified in making the addition.
19. In support of the ground the Ld. DR has placed reliance on the
assessment order. He submitted that the assessee failed to file statements and
income tax returns of the said two creditors before the AO, hence the
assessee failed to establish the genuineness of the transaction. The Ld. AR
on the contrary tried to justify the first appellate order.
20. Considering the above submissions we find that by filing
confirmations of the above said two creditors with this submission that the
transactions were made through the banking channel, we are of the view that
the assessee had discharged primary onus to establish the claimed credits.
Thus in absence of finding of the AO that information furnished in those
confirmations were false or unverifiable, we are of the view that the AO was
not justified in making the addition of the amount in question u/s 68 of the
Act and the same has been rightly deleted by the Ld. CIT (A). The action of
the first appellate authority in this regard is thus upheld. The ground no. 3
and 3.1 are accordingly rejected.
Ground Nos. 4 & 4.1
21 ITA NO. 1290 & 1401/Del/2011
21. The AO made disallowance of Rs.3,97,000/- being depreciation on
old sewing machines. The AO has made disallowance on the basis that the
sewing machines and other accessories constitute the stock- in- trade of the
assessee company and the business activities carried on by it do not require
any use of such machines. The Ld. CIT (A) has deleted disallowance
accepting the contention of the assessee that apart from trading in industrial
sewing machines, the assessee was also engaged in repairs, job work and
hiring of sewing machines.
22. In support of ground the Ld. DR has placed reliance on the assessment
order. The Ld. AR had tried to justify the first appellate order in this regard.
23. We find that during the year the assessee had disccussed rental
income of Rs.24,42,186/-. Thus the Ld. CIT (A) has accepted the contention
of the assessee that apart from trading in industrial sewing machines, the
assessee was also engaged in repairs job work and hiring of sewing
machines. As disclosed above the AO had disallowed Rs.3,00,097/- being
depreciation on old sewing machines on the basis that the sewing machines,
other accessories constitute the stock- in- trade of the assessee company and
the business activities carried on do not require any use of such machines.
These observations of the AO was contrary to the facts in the case. We thus
do not find infirmity in the first appellate order, whereby the Ld. CIT (A)
22 ITA NO. 1290 & 1401/Del/2011
has deleted the disallowance. The same is upheld. The ground nos. 4 and 4.1
are thus rejected.
Ground No. 5 (Department)
24. The AO made additions of Rs.40,069/- and Rs.49,634/- on account of
non-moving creditors. The AO called for details of non-moving creditors
and on examination thereof found that in the case of Rashi Wear Pvt. Ltd.
and M/s Singer India Ltd. there were credit balances of Rs.40,069/- and
Rs.49,634/- respectively. Since the assessee failed to furnish any
confirmations the AO made the addition. The Ld. CIT (A) has however,
deleted the same being convinced with the submission of the assessee.
25. In support of ground the Ld. DR has placed reliance on the assessment
order. The Ld. CIT (A) has tried to justify the first appellate order in this
regard.
26. Considering the above submissions we find that before the Ld. CIT
(A) the assessee contended that the AO has made addition without
appreciating the real nature of transactions with the concern parties in
correct prospective. It was submitted that in the case of M/s Singer India
Ltd. the amount of Rs.49,634/- is infact a debit balance receivable by the
assessee company. Similarly, in the case of M/s Rashi Wear Pvt. Ltd.. the
amount of Rs.40,069/-is the amount which has been brought into the books
23 ITA NO. 1290 & 1401/Del/2011
of accounts of the assessee on account of merger of M/s V.S. Mechanical
Works. It was submitted further that in case of M/s Rashi Wear Pvt. Ltd. the
amount was still outstanding as on 31 March, 2006 and there was no
cessation or remission of the liability and therefore the same could not have
been treated as income of the assessee company. Under these circumstances,
the Ld. CIT (A) in our view has rightly deleted the additions. The same is
upheld. Ground nos. 5 and 5.1 are rejected.
Ground Nos. 6 & 6.1 (Department)
27. Issue raised in this ground has already been adjudicated upon herein
above while dealing with ground no. 3 of the appeal preferred by the
assessee. Following the decision taken therein these grounds are rejected.
28. In result both the appeals are dismissed.
29. The orders are pronounced in the open Court on the day 21/09/2012.
Sd/- Sd/-
G.D.AGRAWAL ) (I.C.SUDHIR)
VICE-PRESIDENT JUDICIAL MEMBER
Dated: 21/09/2012
*AK VERMA*
Copy forwarded to:
1. Appellant
2. Respondent
3. CIT
4. CIT(Appeals)
5. DR: ITAT
ASSISTANT REGISTRAR
24 ITA NO. 1290 & 1401/Del/2011
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