Himgiri Enterprises (P) Ltd., Delhi v. ITO, New Delhi

ITA 2476/DEL/2013 | 2007-2008
Pronouncement Date: 17-04-2014 | Result: Partly Allowed

Appeal Details

RSA Number 247620114 RSA 2013
Assessee PAN AAACH6941G
Bench Delhi
Appeal Number ITA 2476/DEL/2013
Duration Of Justice 11 month(s) 21 day(s)
Appellant Himgiri Enterprises (P) Ltd., Delhi
Respondent ITO, New Delhi
Appeal Type Income Tax Appeal
Pronouncement Date 17-04-2014
Appeal Filed By Assessee
Order Result Partly Allowed
Bench Allotted C
Tribunal Order Date 17-04-2014
Date Of Final Hearing 25-02-2014
Next Hearing Date 25-02-2014
Assessment Year 2007-2008
Appeal Filed On 26-04-2013
Judgment Text
1 IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH `C NEW DELHI BEFORE SHRI G.D. AGRAWAL VICE PRESIDENT AND SHRI CHANDRA MOHAN GARG JUDICIAL MEMBER I.T.A.NO.2476/DEL/2013 ASSESSMENT YEAR : 2007-08 HIMGIRI ENTERPRISES (P) LTD. VS INCOM E TAX OFFICER C/O KAPIL GOEL ADV. WARD-12(4) A-1/25 SECTOR-15 NEW DELHI. ROHINI DELHI-110085 (PAN: AAACH6941G) (APPELLANT) (RESPONDENT ) APPELLANT BY: SHRI KAPIL GOEL RESPONDENT BY : SHRI SATPAL SINGH SR.DR O R D E R PER CHANDRAMOHAN GARG J.M. THIS APPEAL HAS BEEN PREFERRED BY THE ASSESSEE AGA INST THE ORDER OF COMMISSIONER OF INCOME TAX(A)-XXVII NEW DELHI DATE D 09.01.2013 IN APPEAL NO. 530/09-10 FOR AY 2007-08. 2. ALTHOUGH THE ASSESSEE HAS TAKEN AS MANY AS SIX GROUNDS IN THIS APPEAL AT THE OUTSET WE FIND IT APPROPRIATE TO TAKE UP GROUN D NO.1 2 AND 3 WHICH READ AS UNDER:- 1. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE THE LD. CIT(A) HAS ERRED IN LEAVING THE M ATTER MIDWAY AND ERRED IN NOT ASSESSING THE APPELLANT ON BASIS OF UNIMPEACHED AUDITED BOOK RESULTS AND ESTIMATING 2 INCOME IN ADHOC FASHION NOT SUPPORTED BY PRINCIPLES OF LAW. (SC 5 ITR 170; 76 ITR 690; 336 ITR 400) 2. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF TH E CASE AND IN LAW LEARNED CIT-A ERRED IN UPHOLDING THE BE ST JUDGMENT ADDITION BY. LD AO OF RS 10 00 000 TO ASSESSEE'S INCOME WHICH IS NOT SUPPORTED BY COGENT MATERIAL MUCH LESS COMPARABLE CASES FROM WHICH DEPRECIATION NEEDS TO BE SEPARATELY CONSIDERED AND ALLOWED ETC. 3. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF T HE CASE AND IN LAW LEARNED CIT-A ERRED IN UPHOLDING THE INDIVIDUAL DISALLOWANCES AND ADDITIONS ON BASIS OF REJECTED BOOKS U/S 145(3) WHICH APPROACH IS NOT IN ACCORDANCE WITH LAW NAMELY: A) ADHOC TRADING ADDITION RS. 10 00 000/- B) DISALLOWANCE OUT OF DONATION RS. 26 100/- C) DISALLOWANCE OF LOSS ON SALE OF CAR RS. 34 178/- D) DISALLOWANCE OF INTEREST ON TDS RS. 162/- E) DISALLOWANCE OF CLAIM OF EXCISE DUTY RS. 19 55 3 26/- F) DISALLOWANCE OF TOUR AND TRAVELING RS. 96 850/- G) DISALLOWANCE OF PROFESSIONAL CHARGES RS. 39 000 H) DISALLOWANCE OF SALARY EXPENSES RS 200 000 3. BRIEFLY STATED THE FACTS GIVING RISE TO THIS APPEAL ARE THAT THE ASSESSEE IS ENGAGED IN THE BUSINESS OF MANUFACTURING OF ELECTRI CAL ACCESSORIES. THE ASSESSEE ALSO WORKS AS COMMISSION AGENT FOR SALE OF SCIENTIFIC INSTRUMENTS TO VARIOUS HOSPITALS. THE ASSESSEE FILED A RETURN DEC LARING A LOSS OF RS. 2 24 751/- AND THE SAME WAS PROCESSED U/S 143(1) OF THE INCOME TAX ACT 1961 (FOR SHORT THE ACT) ON 03.03.2009. SUBSEQUENT LY THE CASE WAS SELECTED FOR SCRUTINY UNDER CASS AND INITIAL STATUTORY NOTIC E U/S 143(2) OF THE ACT 3 WAS SERVED ON THE ASSESSEE. THE ASSESSING OFFICER MADE CERTAIN DISALLOWANCES ON ACCOUNT OF DONATION SALE OF CAR INTEREST OF TDS TOURS AND TRAVELING EXPENSES SALARY EXPENSES PROFESSIONAL C HARGES OTHER EXPENSES RENT CLAIMED AND CUSTOMS AND EXCISE DUTY. BESIDES THESE DISALLOWANCES THE ASSESSING OFFICER ALSO REJECTED BOOKS OF ACCOUNTS O F THE ASSESSEE U/S 145(3) OF THE ACT AND MADE ADDITION OF RS. 10 LAKH IN ADDI TION TO THE GROSS PROFIT AS ALREADY DECLARED BY THE ASSESSEE. 4. THE AGGRIEVED ASSESSEE PREFERRED AN APPEAL BEFOR E THE COMMISSIONER OF INCOME TAX(A) WHICH WAS PARTLY ALLOWED BUT THE C OMMISSIONER OF INCOME TAX(A) UPHELD PART DISALLOWANCES MADE OUT OF DONATION LOSS ON SALE OF CAR INTEREST ON TDS CLAIM OF EXCISE DUTY TOUR S AND TRAVELING EXPENSES PURCHASE CHARGES SALARY EXPENSES AND AD HOC TRADIN G ADDITION OF RS. 10 LAKH WAS ALSO UPHELD. NOW THE AGGRIEVED ASSESSEE IS AG AIN BEFORE THIS TRIBUNAL IN THE SECOND APPEAL. GROUND NO. 1 TO 3 5. APROPOS THESE GROUNDS WE HAVE HEARD RIVAL ARGUM ENTS OF BOTH THE PARTIES AND CAREFULLY PERUSED THE ENTIRE RECORD INC LUDING DECISIONS OF HONBLE HIGH COURT AND COORDINATE BENCHES OF THE TR IBUNAL AS RELIED BY BOTH THE PARTIES. LD. COUNSEL OF THE ASSESSEE HAS PLACED DETAILED SUBMISSIONS WHICH CAN BE SUMMARIZED ON FOLLOWING POINTS:- 4 I) THE COMMISSIONER OF INCOME TAX(A) ERRED IN NOT ASSE SSING THE INCOME OF THE ASSESSEE ON THE BASIS OF UNIMPEACHED AUDITED BOOK RESULTS AND ESTIMATING THE INCOME ON AD HOC BA SIS. II) THE COMMISSIONER OF INCOME TAX(A) ERRED IN UPHOLDIN G THE BEST JUDGMENT ADDITION MADE BY THE ASSESSING OFFICE R WHICH WAS NOT SUPPORTED BY COGENT AND RELEVANT MATERIAL MUCH LESS PREVIOUS AND SUBSEQUENT YEARS RESULT OF THE ASSESS EE AS WELL AS COMPARABLE CASES AND THAT TOO FROM WHICH DEPRECIATI ON NEEDS TO BE SEPARATELY ALLOWED. III) THE COMMISSIONER OF INCOME TAX(A) ERRED IN UPHOLDIN G THE INDIVIDUAL DISALLOWANCES ON CERTAIN CLAIMS OF THE A SSESSEE AND THESE ADDITIONS CANNOT BE MADE IN VIEW OF REJECTION OF BOOKS U/S 145(3) OF THE ACT AND ESTIMATION OF AD HOC LUMP SUM TRADING ADDITION IS NEITHER SUPPORTED BY ANY MATERIAL NOR I S BASED ON PREVIOUS YEAR OR SUBSEQUENT YEARS RESULTS OF THE A SSESSEE AND ALSO NOT BASED ON COMPARABLE CASES. 6. REPLYING TO THE ABOVE LD. DR SUBMITTED THAT WHEN THE ASSESSING OFFICER OBSERVED MANY ANOMALIES AND DISCREPANCIES I N THE BOOKS OF ACCOUNTS OF THE ASSESSEE THE ASSESSING OFFICER RIGHTLY PRO CEEDED TO REJECT THE BOOKS OF ACCOUNTS OF THE ASSESSEE U/S 145(3) OF THE ACT A S THE SAME DID NOT SHOW 5 TRUE RESULTS FOR THE FINANCIAL YEAR UNDER CONSIDERA TION. THE DR FURTHER CONTENDED THAT THE DISALLOWANCES AND AD HOC LUMP SU M TRADING ADDITIONS WERE MADE ON THE BASIS OF DETAILED DISCUSSION AND D EPRECIATION AND AFTER CONSIDERING THE EXPLANATION OF THE ASSESSEE THE O BSERVATIONS AND FINDINGS OF THE ASSESSING OFFICER WERE RIGHTLY UPHELD BY THE CO MMISSIONER OF INCOME TAX(A). LD. DR SUPPORTED THE ORDERS OF THE AUTHORI TIES BELOW AND SUBMITTED THAT THE APPEAL OF THE ASSESSEE IS DEVOID OF MERITS . 7. ON CAREFUL CONSIDERATION OF ABOVE SUBMISSIONS OF BOTH THE PARTIES WE OBSERVE THAT THE ASSESSING OFFICER HAS MADE CERTAIN DISALLOWANCES ON VARIOUS COUNTS AND IN ADDITION TO THAT THE ASSESSI NG OFFICER HAS ALSO MADE LUMP SUM AD HOC TRADING ADDITION OF RS. 10 LAKH. T HE LD. COUNSEL OF THE ASSESSEE DURING THE ARGUMENT SUBMITTED A COPY OF SC HEDULE XI OF FINAL ACCOUNTS OF THE ASSESSEE AS ON 31.3.2006 AND SUBMIT TED THAT THE ASSESSEE SUBMITTED SECURITY WITH THE CENTRAL EXCISE DEPARTME NT ON ACCOUNT OF BASIC EXCISE DUTY (BED) AMOUNTING TO RS. 20 LAKH AND OUT OF WHICH RS.19 55 326 WERE ADJUSTED AND DEBITED AS ADDITIONAL EXCISE DUTY AS DETERMINED BY THE SETTLEMENT COMMISSION OF THE EXCISE DEPARTMENT. TH E COUNSEL OF THE ASSESSEE HAS ALSO DRAWN OUR ATTENTION TOWARDS PAGES 4 & 5 OF THE PAPER BOOK AND SUBMITTED THAT CARRIED FORWARD AMOUNT OF BED FR OM PREVIOUS YEAR TO THE PRESENT YEAR WAS RS.20 LAKH ON 1.4.2006 AND OUT OF WHICH ADDITIONAL EXCISE 6 DUTY WAS ADJUSTED DURING THE FINANCIAL YEAR UNDER C ONSIDERATION. LD. COUNSEL OF THE ASSESSEE PLACED RELIANCE ON THE DECISION OF HONBLE JURISDICTIONAL HIGH COURT OF DELHI IN THE CASE OF COMMISSIONER OF INCOME TAX VS INSILCO LTD. [2010] 320 ITR 322[2009] WHEREIN IT HAS BEEN HELD THAT WHEN THE ASSESSEE HAD BEEN MAINTAINING MERCANTILE SYSTEM OF ACCOUNTING THEN PROVISIONS BASED ON ACTUARIAL CALCULATIONS ARE ALLO WABLE AND DEDUCTIBLE U/S 37 OF THE ACT. IN VIEW OF ABOVE WE HOLD THAT WHEN THE ASSESSEE MADE PURCHASES DURING THE PREVIOUS FINANCIAL YEAR AND SH OWN THAT AMOUNT AS RECEIVABLES IN ITS FINAL ACCOUNT THE SAME AMOUNT W AS CARRIED FORWARD TO THE FINANCIAL YEAR UNDER CONSIDERATION AND DURING THE S AME PERIOD I.E. AY 2007- 08 ADDITIONAL EXCISE DUTY WAS PAID TO THE EXCISE D EPARTMENT BEING EXCISE DUTY AS DETERMINED BY THE SETTLEMENT COMMISSION OF THE CENTRAL EXCISE DEPARTMENT. WHEN THE LIABILITY WAS ACTUALLY CRYSTA LLIZED DURING THE RELEVANT FINANCIAL YEAR IN QUESTION THEN THE CLAIM OF THE A SSESSEE IS ALLOWABLE AND NO DISALLOWANCE CAN BE MADE IN THIS REGARD. 8. WE ALSO OBSERVE THAT WHEN THE ASSESSING OFFICER HAS MADE A LUMP SUM TRADING ADDITION BY ESTIMATING AD HOC INCOME OF ASSESSEE AT RS.10 LAKH AFTER REJECTION OF BOOKS OF ACCOUNTS U/S 145(3) OF THE ACT THEN IT IS NOT OPEN TO THE ASSESSING OFFICER TO UPHOLD OTHER DISALLOWAN CES AND ADDITION ON OTHER COUNTS AND ON THE BASIS OF RESULTS OF REJECTED BOOK S OF ACCOUNTS. 7 ACCORDINGLY EXCEPT LUMP SUM AD HOC TRADING ADDITIO N OF RS. 10 LAKH OTHER DISALLOWANCES AND ADDITION MADE THEREUNDER ARE NOT SUSTAINABLE AND WE SET ASIDE THE FINDINGS OF THE AUTHORITIES BELOW AND ASS ESSING OFFICER IS DIRECTED TO DELETE THIS ADDITION. 9. COMING TO THE ISSUE OF LUMP SUM AD HOC TRADING A DDITION OF RS.10 LAKH WE ARE OF THE VIEW THAT WHEN THE ASSESSING OF FICER HAS FOUND MANY ANOMALIES AD DISCREPANCIES AS DISCUSSED IN THE ASSE SSMENT ORDER THEN THE ASSESSING OFFICER WAS RIGHT IN REJECTING THE BOOKS OF ACCOUNTS OF THE ASSESSEE U/S 145(3) OF THE ACT. AT THE SAME TIME FROM THE ASSESSMENT ORDER WE ALSO OBSERVE THAT THE ASSESSING OFFICER HAS MADE IMPUGNED LUMP SUM TRADING ADDITION BY SIMPLY OBSERVING AS UNDER:- KEEPING IN VIEW THE ABOVE BOOKS OF ACCOUNT ARE REJECTED U/S 145(3). KEEPING IN VIEW TOTALITY OF F ACTS IT IS VERY REASONABLE TO MAKE ADDITION OF RS.10 LACS IN A DDITION TO THE GROSS PROFIT AS ALREADY DECLARED BY THE ASSESSE E. (TRADING ADDITION OF RS.1000000/-) 10. FROM ABOVE FINDINGS OF THE ASSESSING OFFICER W E CLEARLY OBSERVE THAT THE ASSESSING OFFICER HAS NEITHER CONSIDERED PROVIS IONS OF SUBSEQUENT YEAR RESULTS OF THE ASSESSEE NOR ANY COMPARABLE WHILE MA KING IMPUGNED LUMP SUM TRADING ADDITION OF RS.10 LAKH WHICH IS NOT A P ROPER AND JUSTIFIED APPROACH OF A TAX AUTHORITY. ON THIS ISSUE WE ARE OF THE CONSIDERED VIEW THAT SINCE THE ASSESSING OFFICER FOUND ANOMALIES AN D DISCREPANCIES IN THE 8 BOOKS OF ACCOUNTS OF THE ASSESSEE AND ON THIS BASI S THE ASSESSING OFFICER REJECTED BOOKS OF ACCOUNTS OF THE ASSESSEE U/S 145( 3) OF THE ACT THE ASSESSING OFFICER IS EMPOWERED TO MAKE A TRADING AD DITION ON THE BASIS OF BEST JUDGMENT ASSESSMENT AND IT SHOULD BE EITHER BA SED ON THE PREVIOUS YEAR OR SUBSEQUENT YEAR RESULTS OF THE ASSESSEE OR SOME SUITABLE COMPARABLES BUT IN THE PRESENT CASE THE ASSESSING OFFICER HAS NOT MADE ANY EXERCISE TO CONSIDER PREVIOUS OR SUBSEQUENT RESULTS OF THE ASSE SSEE OR ANY OTHER SUITABLE COMPARABLES. ACCORDINGLY ESTIMATION OF IMPUGNED L UMP SUM TRADING ADDITION WAS NOT BASED ON COGENT AND JUSTIFIED BASI S. THEREFORE WE ARE INCLINED TO SET ASIDE THE ORDER OF ASSESSING OFFICE R PERTAINING TO ESTIMATED TRADING ADDITION AND THIS ISSUE IS RESTORED TO THE FILE OF ASSESSING OFFICER WITH A DIRECTION THAT THE ESTIMATED TRADING ADDITIO N SHALL BE MADE AFTER CONSIDERING PREVIOUS AND SUBSEQUENT YEAR BOOK RESUL TS OF THE ASSESSEE OR IN THE LIGHT OF SUITABLE COMPARABLE. NEEDLESS TO SAY THAT THE ASSESSING OFFICER SHALL PROVIDE SUITABLE OPPORTUNITY OF HEARING FOR T HE ASSESSEE DURING THIS PROCEEDING AND ASSESSEE SHALL COOPERATE WITH THE AS SESSING OFFICER. TO SUM UP THE ACTION OF THE ASSESSING OFFICER IN REJE CTING THE BOOKS OF ACCOUNTS OF THE ASSESSEE U/S 145(3) OF THE ACT IS U PHELD. THE DISALLOWANCE AND ADDITION INCLUDING LUMP SUM TRADING ADDITION OF RS.10 LAKH MADE BY THE ASSESSING OFFICER ARE SET ASIDE BY RESTORING THE IS SUE OF ESTIMATION OF TRADING 9 ADDITION TO THE FILE OF ASSESSING OFFICER FOR A FRE SH ADJUDICATION IN THE LIGHT OF OUR DIRECTIONS AS MENTIONED HEREINABOVE. ACCORD INGLY GROUND NO. 1 2 AND 3 OF THE ASSESSEE ARE DISPOSED OF AND DEEMED TO BE TREATED AS ALLOWED FOR STATISTICAL PURPOSES. GROUND NO. 4 5 & 6 11. SINCE MAIN GRIEVANCE OF THE ASSESSEE HAS BEEN RESOLVED BY DELETING ALL DISALLOWANCES AND TRADING ADDITION MADE BY THE ASSE SSING OFFICER THEREFORE GROUND NO. 4 5 AND 6 BECOME ACADEMIC IN NATURE AND DO NOT SURVIVE FOR ADJUDICATION ON MERITS AND WE DISMISS THE SAME. 12. IN THE RESULT THE APPEAL OF THE ASSESSEE IS PA RTLY ALLOWED AND MAY BE TREATED AS PARTLY ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 17.4.2014. SD/- SD/- (G.D. AGRAWAL) (CHANDRA MOHAN GARG) VICE PRESIDENT JUDICIAL MEMBER DT. 17 TH APRIL 2014 GS COPY FORWARDED TO:- 1. APPELLANT 2. RESPONDENT 3. CIT(A) 4. CIT 5. DR BY ORDER ASSTT. REGISTRAR