ITO, New Delhi v. M/s National Insulated Cable Co., New Delhi

ITA 515/DEL/2011 | 2007-2008
Pronouncement Date: 08-07-2011 | Result: Dismissed

Appeal Details

RSA Number 51520114 RSA 2011
Assessee PAN AADFN6960H
Bench Delhi
Appeal Number ITA 515/DEL/2011
Duration Of Justice 5 month(s) 7 day(s)
Appellant ITO, New Delhi
Respondent M/s National Insulated Cable Co., New Delhi
Appeal Type Income Tax Appeal
Pronouncement Date 08-07-2011
Appeal Filed By Department
Order Result Dismissed
Bench Allotted E
Tribunal Order Date 08-07-2011
Date Of Final Hearing 06-07-2011
Next Hearing Date 06-07-2011
Assessment Year 2007-2008
Appeal Filed On 31-01-2011
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH E NEW DELHI BEFORE SHRI C.L. SETHI JUDICIAL MEMBER & SHRI SHAMIM YAHYA ACCOUNTANT MEMBER ITA NO. 421/DEL/2011 ASSESSMENT YEAR: 2007-08 NATIONAL INSULATED CABLE CO. VS. ITO C/O DINESH MOHAN SINHA WARD 36(3) 75-A VISHWAS NAGAR NEAR ARJUN GALI NEW DELHI. SHAHDARA NEW DELHI. AADFN6960H (APPELLANT) (RESPONDENT) & ITA NO. 515/DEL/2011 ASSESSMENT YEAR: 2007-08 ITO VS. NATIONAL INSULATED CABLE CO. WARD 36(3) C/O DINESH MOHAN SINHA NEW DELHI. 75-A VISHWAS NAGAR NEAR ARJUN GALI SHAHDARA NEAR DELHI. AADFN6960H (APPELLANT) (RESPONDENT) APPELLANT BY : SH. D.M. SINHA ADV. RESPONDENT BY : MRS. SRUJANI MOHANTY S R. DR ORDER PER C.L. SETHI J.M. BOTH ASSESSEE AND REVENUE ARE IN APPEAL AGAINST TH E ORDER DATED 8 TH SEPTEMBER 2010 OF LD. CIT(A) PASSED IN THE ITA NOS. 421 & 515/D/2011 2 MATTER OF AN ASSESSMENT MADE U/S 143(3) OF THE INCO ME TAX ACT 1961 FOR A.Y. 2007-08. ITA NO. 515/DEL/2011 : - 2. WE SHALL FIRST TAKE THE APPEAL FILED BY THE REVE NUE: - IN THIS APPEAL THE ONLY ISSUE RAISED BY REVENUE IS AGAINST CIT(APPEALS) ORDER IN DELETING THE ADDITION OF RS. 12 05 268/- DISALLOWED BY THE AO AS UNCONFIRMED CREDITORS U/S 6 9 OF THE ACT. 3. THE ASSESSEE FILED ITS RETURN OF INCOME ON 15.11 .2007 DECLARING TOTAL INCOME AT RS. 16 570/-. THE CASE W AS SELECTED FOR SCRUTINY AND NOTICE U/S 143(2) WAS DULY ISSUED AND SERVED UPON THE ASSESSEE ON 26.09.2008. IN THE COURSE OF ASSESSMENT PROCEEDINGS AN INFORMATION U/S 133(6) W AS CALLED FOR FROM THE FOLLOWING CREDITORS: - I) ASTHA METAL RS. 4 05 258/- II) CAPITAL ASSOCIATES RS. 8 00 010/- TOTAL RS. 12 05 268/- THE NOTICES ISSUED U/S 133() BY THE AO WERE RETURNE D UN- SERVED. THE ASSESSING OFFICER THEREFORE ASKED THE ASSESSEE TO EXPLAIN WHY THE AFORESAID AMOUNT SHOWN AS PAYABL E TO THE ABOVE CREDITORS SHOULD NOT BE ADDED TO THE INCOME O F THE ASSESSEE. IN RESPONSE TO THIS SHOW-CAUSE NOTICE N O ITA NOS. 421 & 515/D/2011 3 EXPLANATION WAS OFFERED BY THE ASSESSEE. THE AO T HEREFORE TREATED THE AMOUNT OF RS. 12 05 268/- AS UNCONFIRME D CREDITORS AND ADDED THE SAME TO THE ASSESSEES TOTA L INCOME. 4. ON AN APPEAL LD.CIT(A) DELETED THE ADDITION AFT ER GIVING A FINDING THAT THE CREDITORS WERE OLD AND DID NOT P ERTAIN TO THE YEAR UNDER SCRUTINY. 5. HENCE THE REVENUE IS IN APPEAL BEFORE US. 6. THE LD. DEPARTMENTAL REPRESENTATIVE CONTENDED TH AT AO WAS JUSTIFIED IN MAKING THE ADDITION IN AS MUCH AS THE CREDITORS SHOWN IN THE BALANCE SHEET REMAINED UNVERIFIABLE AN D ASSESSEE WAS NO MORE REQUIRED TO PAY THE AMOUNT. H E FURTHER CONTENDED THAT THE LD. CIT(A) HAS WRONGLY D ELETED THE ADDITION. 7. THE LD. COUNSEL FOR THE ASSESSEE REITERATED THE CONTENTIONS THAT WERE MADE BEFORE LD. CIT(A). HE S UBMITTED THAT THE ASSESSEE FIRM WAS HAVING TWO OLD CREDITORS M/S ASTHA METAL (MORE THAN 10 YEARS) AND CAPITAL ASSOCIATES THESE CREDITORS WERE OLD CREDITORS. DETAILED COPY OF ACC OUNT WAS ITA NOS. 421 & 515/D/2011 4 SUPPLIED TO THE ASSESSING OFFICER. HE THEREFORE SUBMITTED THAT U/S 69A OF THE ACT THE AMOUNT CAN BE TREATED T O BE UNEXPLAINED IF THE SAME WAS INTRODUCED IN THE YEAR OF ASSESSMENT. HE PLACED RELIANCE ON THE CASES OF PAT OA BROS. VS. CIT (1982) 133 ITR 672 (GAUH.) AND HARILAL MANN ULAL VS. CIT 147 ITR 11 (M.P). 8. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE MATERIAL ON RECORD. THE FACT THAT THE CREDITORS WE RE OLD CREDITORS BROUGHT FORWARD FROM EARLIER YEARS HAS NO T BEEN DISPUTED BY THE DEPARTMENT. THESE CREDITORS HAVE N OT BEEN INTRODUCED DURING THE YEAR UNDER CONSIDERATION. TH ERE IS NO EVIDENCE OR MATERIAL ON RECORD TO ESTABLISH THAT TH E ASESSEES LIABILITY TO PAY THE AMOUNT TO THE CREDITORS HAVE B EEN CEASED DURING THE YEAR UNDER CONSIDERATION. WE THEREFORE HOLD THAT THE LD. CIT(A) IS JUSTIFIED IN DELETING THE ADDITIO N. THE AMOUNT PAYABLE TO THESE CREDITORS CAN BE ADDED TO THE ASSE SSEES TOTAL INCOME IN THE YEAR IN WHICH THE ASSESSEES LI ABILITY TO PAY THE AMOUNT CEASES OR EXTINGUISHED AND NOT IN THE YE AR UNDER CONSIDERATION WHERE ASSESSEE HAS ADMITTEDLY SHOWN T HE LIABILITY IN THE BALANCE SHEET. THUS THE GROUND RA ISED BY THE REVENUE IS REJECTED. ITA NOS. 421 & 515/D/2011 5 9. IN THE RESULT THE APPEAL FILED BY THE REVENUE I S DISMISSED. 10. NOW WE SHALL COME TO THE APPEAL FILED BY THE AS SESSEE. IN THE COURSE OF HEARING OF THIS APPEAL THE ASSESSE E HAS RAISED CONTENTIONS AGAINST THE FOLLOWING ADDITIONS SUSTAINED BY THE LD. CIT(A): - I) DISALLOWANCE OF SALARY OF RS. 90 000/- PAID TO PARTNERS. II) DISALLOWANCE OF INTEREST OF RS. 1 11 781/- P AID TO PARTNERS. 11. DURING THE COURSE OF ASSESSMENT PROCEEDINGS IT WAS NOTICED BY THE AO THAT THE ASSESSEE HAD PAID THE SU M OF RS. 90 000/- AND RS. 1 11 781/- TOWARDS SALARY AND INTE REST RESPECTIVELY TO THE PARTNERS. A COPY OF THE PARTNE RSHIP DEED WAS EXAMINED BY THE AO. THE AO STATED THAT IN THE PARTNERSHIP DEED NEITHER THERE WAS ANY CLAUSE WHER E THE QUANTUM OF SALARY PAYABLE TO THE PARTNER WAS MENTIO NED NOR MODE AND MANNER OF QUANTIFYING THE SAME WAS MENTION ED. THE AO FURTHER OBSERVED THAT THERE WAS NO MENTIONED OF ANY INTEREST PAYABLE NO RATE OF INTEREST AT WHICH INTE REST WAS ITA NOS. 421 & 515/D/2011 6 PAYABLE TO THE PARTNERS. THE AO THEREFORE DISALLO WED THE ASSESSES CLAIM OF PAYMENT OF SALARY AND INTEREST T O THE PARTNERS. 12. ON AN APPEAL LD. CIT(A) CONFIRMED THE AOS ACT ION BY OBSERVING THAT THE DISALLOWANCE MADE BY THE AO WAS IN CONSONANCE WITH THE TERMS OF THE PARTNERSHIP DEED A ND THE REASONS GIVEN BY THE ASSESSEE ARE NOT CONVINCING. 13. THE LD. COUNSEL FOR THE ASSESSEE HAS SUBMITTED THAT THE LAW PROVIDING PAYMENT OF SALARY AND INTEREST TO THE PARTNERS WAS INTRODUCED IN THE YEAR 1993. THE ASSESSEE FIR M HAD COME TO AN EXISTENCE IN 1983. THEREFORE A SUPPLEM ENTARY DEED OF PARTNERSHIP WAS EXECUTED IN 1993 AND A CER TIFIED COPY OF SUPPLEMENTARY DEED OF PARTNERSHIP WAS SUBMI TTED IN THE FINANCIAL YEAR 1993-94 RELEVANT TO THE A.Y. 199 4-95. THE LD. COUNSEL FOR THE ASSESSEE FURTHER CONTENDED THAT SINCE THEN THE SITUATION IN EVERY ASSESSMENT YEAR HAD RE MAINED THE SAME. A COPY OF SUPPLEMENTARY DEED OF PARTNERSHIP WAS SUBMITTED BEFORE THE LD. CIT(A). ITA NOS. 421 & 515/D/2011 7 14. THE LD. DR ON THE OTHER HAND SUPPORTED THE OR DERS OF THE AUTHORITIES BELOW. 15. WE HAVE CONSIDERED THE RIVAL CONTENTIONS OF BOT H THE PARTIES. ON PERUSAL OF ASSESSMENT ORDER WE FIND T HAT ASSESSING OFFICER DISALLOWED THE ASSESSEES CLAIM O N THE BASIS OF PARTNERSHIP DEED. IT IS NOT CLEAR AS TO W HETHER THE RELEVANT CLAUSE OF SUPPLEMENTARY DEED OF PARTNERSHI P EXECUTED IN 1993 WERE EXAMINED. IT IS THE ASSESSEE S CASE THAT THERE WAS A STIPULATION IN THE SUPPLEMENTARY DEED OF PARTNERSHIP REGARDING PAYMENT OF SALARY AND INTERES T TO THE PARTNERS AS SO PROVIDED U/S 40(B)(V) APPLICABLE FRO M THE A.Y. 1993-94. THE LD. CIT(A) HAS ALSO NOT EXAMINED THE VARIOUS CLAUSES OF SUPPLEMENTARY DEED OF PARTNERSHIP. WE THEREFORE RESTORE THIS MATTER BACK TO THE FILE OF AO FOR HIS FRESH CONSIDERATION AFTER ASCERTAINING AS TO WHETHER A SUPPLEMENTARY DEED OF PARTNERSHIP WAS SUBMITTED BY THE ASSESSEE IN A.Y. 1994-95 AND WHETHER THE SITUATION HAD REMAINED THE SAME TILL THIS ASSESSMENT YEAR. THE A O SHALL ALSO ASCERTAIN WHETHER IDENTICAL CLAIM OF PAYMENT A ND SALARY AND INTEREST HAS BEEN ALLOWED IN EARLIER ASSESSMENT YEARS. THE ASSESSEE SHALL BE AT LIBERTY TO FURNISH A CERTI FIED COPY OF ITA NOS. 421 & 515/D/2011 8 SUPPLEMENTARY DEED OF PARTNERSHIP CLAIMED TO HAVE B EEN SUBMITTED IN THE FINANCIAL YEAR 1993-94 RELEVANT TO THE A.Y. 1994-95. THE AO SHALL EXAMINE THE MATTER FRESH AND DECIDE THE SAME AFTER PROVIDING REASONABLE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. 16. IN THE COURSE OF HEARING OF THIS APPEAL THE AS SESSEE HAS FILED AN APPLICATION FOR ADMISSION OF ADDITIONAL GR OUND STATING THAT CIT(A) HAS ERRED IN NOT DECIDING THE ISSUE OF ADDITION OF RS. 17 99 444/- ON ACCOUNT OF DISALLOWANCE OF EXPEN SES DEBITED TO TRADING/PROFIT AND LOSS ACCOUNT. 17. AFTER HEARING BOTH THE PARTIES THE ADDITIONAL GROUND RAISED BY THE ASSESSEE WAS ADMITTED IN AS MUCH AS T HE IDENTICAL GROUND WAS RAISED BY THE ASSESSEE BEFORE LD. CIT(A) BUT THE ASSESSEE HAS FAILED TO TAKE THIS GROUND BEF ORE US BY MISTAKE. 18. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE MATERIAL ON RECORD. ITA NOS. 421 & 515/D/2011 9 19. IN THE ASSESSMENT THE AO DISALLOWED 5% OF THE T OTAL EXPENSES OF RS. 72 16 907/- DEBITED TO TRADING/PROF IT AND LOSS ACCOUNT IN THE ABSENCE OF BOOKS OF ACCOUNT OR BILLS OR VOUCHERS. 20. BEING AGGRIEVED THE ASSESSEE PREFERRED AN APPE AL BEFORE THE LD. CIT(A) AND TAKEN A GROUND BEFORE HIM THAT COMPLETE SET OF LEDGERS WAS ON RECORD AND THE SAME WAS FILED ALONG WITH THE QUERIES OF THE LD. ITO AND REPLY FIL ED FROM TIME TO TIME. IN THE STATEMENT OF FACTS BEFORE THE LD. CIT(A) THE ASSESSEE HAS MENTIONED THAT COMPLETE SETS OF LEDGER S WAS ON RECORD HOWEVER THE AO HAS DISALLOWED TO THE EXTEN T OF 5% OF THE TOTAL EXPENSES. IT WAS FURTHER MENTIONED THAT AN APPLICATION FOR RECTIFICATION WAS FILED BEFORE THE ITO IN THIS REGARD. LD. COUNSEL FOR THE ASSESSEE FURTHER CONTE NDED THAT AN APPLICATION UNDER RULE 46A OF I.T. RULES 1962 A LONG WITH THE COPY OF BILLS RENT RECEIPTS ELECTRICITY RECEI PTS CARTAGE PURCHASE VOUCHERS AUDIT FEES PROFESSIONAL EXPENSE S VOUCHERS FOR REPAIR AND MAINTENANCE FILED BEFORE TH E LD. CIT(A) BUT HAS NOT BEEN DISPOSED OFF BY HIM. IN TH E LIGHT OF THE WORDING OF GROUNDS AND STATEMENT OF FACTS TAKEN TOGETHER IT IS CLEAR THAT THE ASSESSEE HAD ACTUALLY AGITATED THE AOS ITA NOS. 421 & 515/D/2011 10 ACTION IN DISALLOWING THE EXPENSES. HOWEVER THIS HAS NOT BEEN DEALT WITH BY THE LD.CIT(A). VIDE GROUND NO. 5 THE ASSESSEE HAS STATED THAT THE COMPLETE SET OF LEDGER WAS ON RECORD AND THE SAME WAS FILED ALONG WITH THE QUERIE S OF THE LD. ITO AND REPLIES FROM TIME TO TIME. HOWEVER THIS G ROUND HAS NOT BEEN COMMENTED UPON BY THE LD. CIT(A) BY OBSERV ING THAT THE 5 TH GROUND OF APPEAL IS GENERAL IN NATURE AND CALLS FO R NO COMMENTS. IN THE LIGHT OF THE FACTS AND GROUNDS ST ATED BEFORE THE LD. CIT(A) WE ARE OF THE CONSIDERED VIEW THAT ASSESSEE SHOULD BE ALLOWED TO RAISE THIS GROUND. WE ACCORDI NGLY ADMIT THIS GROUND AND RESTORE THE SAME TO THE FILE OF AO FOR HIS FRESH ADJUDICATION AFTER EXAMINING THE BOOKS OF ACCOUNT O F THE ASSESSEE AND OTHER DETAILS. THE ASSESSEE SHALL PRO DUCE ALL THE BOOKS OF ACCOUNTS AND VOUCHERS BEFORE THE AO IN SUPPORT OF ITS CLAIM. THE AO SHALL DECIDE THE MATTER AS PER LAW AFTER PROVIDING REASONABLE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. WE ORDER ACCORDINGLY. 21. IN THE RESULT THE APPEAL FILED BY THE ASSESSEE IS TREATED TO BE ALLOWED FOR A STATISTICAL PURPOSE. ITA NOS. 421 & 515/D/2011 11 22. IN THE RESULT THE APPEAL FILED BY THE REVENUE IS DISMISSED AND THAT OF THE ASSESSEE IS TREATED TO BE ALLOWED FOR A STATISTICAL PURPOSE. ORDER WAS PRONOUNCED IN THE OPEN COURT ON 8 TH JULY 2011. SD/- SD/- (SHAMIM YAHYA) (C.L. SETHI ) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 8.7.2011 *KAVITA COPY FORWARDED TO: - 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR ITAT TRUE COPY BY ORDER DEPUTY REGISTRAR