Referred Sections:
Section 68 of the IT Act
Section 250(6) of the Income Tax Act, 1961
Referred Cases / Judgments:
Rajkamal Associates Ltd.,vs ITO, (ITA No. 704/DeI/2014)
Dharmendra Sevantilal Shah vs ITO (2019), 103 Taxmann.com 394 (Surat ITAT) order pronounced on 20-06-2018.
Silent Business Solutions Limited vs DCIT, (ITA No. 6297/Del/2013-14) order pronounced on 19-05-2017.
IN THE INCOME TAX APPELLATE TRIBUNAL
DELHI BENCH `B', NEW DELHI
BEFORE SH. R. K. PANDA, ACCOUNTANT MEMBER
AND.
MS. SUCHITRA KAMBLE, JUDICIAL MEMBER
ITA No.3569/Del/2019
Assessment Year: 2015-16
Dynamix India Drill Con Co. Vs. DCIT
G-4, 208-209, Sector-16, Circle 62 (1)
Rohini, New Delhi-110085 New Delhi
PAN No. AADFD2170K
(APPELLANT) (RESPONDENT)
Appellant by Dr. M. K. Bhatt & Malav
Goswami, CA's
Respondent by Ms. Ashima Neb, Sr. DR.
Date of hearing: 26/08/2019
Date of Pronouncement: 15/10/2019
ORDER
PER R.K PANDA, AM:
This appeal filed by the assessee is directed against the
order dated 15.03.2019 of CIT(A)-38, New Delhi relating to A.Y.
2015-16.
2. Facts of the case, in brief, are that the assessee is a
partnership firm engaged in construction business. It filed its
return of income on 29.09.2015 declaring total income of
Rs.80,16,210/-. During the course of assessment proceedings the
AO noted from the balancesheet that the assessee has shown
unsecured loan of Rs.3 lacs from Sumit Gas Agency in the head
current liabilities. Since the assessee failed to furnish the bank
details or income tax return of the said loan creditor, the AO
invoking the provision of section 68 of the IT Act made addition of
Rs.3 lacs to the total income of the assessee.
2.1 The AO noted from the profit & Loss account that the
assessee has debited an amount of Rs.5,94,45,793/- as sub-
contractor expenses. Since the assessee could not substantiate
the above expenses with adequate supporting bills and vouchers
and since a large number of payments were made in cash for
which these were not verifiable, the AO made ad-hoc disallowance
of Rs.5 lacs out of sub contractor expenses to plug the leakage of
revenue. The AO also made addition of Rs.5,90,550/- on account
of discrepancy in the figure mentioned as per Form 26 AS and the
amount shown in the profit and loss account by invoking the
provision of section 68 of the IT Act as undisclosed income of the
assessee. Similarly, the AO made addition of Rs.3,50,000/- on
estimate basis out of the various expenses debited in the Profit &
Loss account in absence of supporting bills and vouchers. The
AO also made addition of Rs.70,903/- on estimate basis out of
telephone expenses, Diwali expenses and travelling and
conveyance expenses total of which comes to Rs. 7,09,030/- for
want supporting bills and vouchers.
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3. In appeal the Ld. CIT(A) dismissed the appeal filed by the
assessee for which the assessee is in appeal before the Tribunal
by raising the following grounds :-
1. "That the learned CIT (Appeals) has erred in law and on the
fact while confirming the additions made by the learned AO,
without even discussing the matter at once and affording even a
single reasonable opportunity to the assessee/appellant to
represent its case, which is against the law of natural justice. Thus,
violated the principles as laid down in the matter by the
Jurisdictional ITAT (Delhi) Bench-F, in case of Rajkamal Associates Ltd.,vs
ITO, (ITA No. 704/DeI/2014) order pronounced on 19-02-2015.
2. That the learned CIT (Appeals) has erred in law and on the
fact while rejecting the additional evidences adduced by the
assessee/appellant under Rule 46A of the Income Tax Rules 1962
before her, without affording an opportunity to be heard to the
assessee/appellant on the remand received from the office of the
learned AO despite knowing the vital facts that the evidences so
produced were relates to the roots of the matter before her. Thus,
violated the principles as laid down recently in the matter of
Dharmendra Sevantilal Shah vs ITO (2019), 103 Taxmann.com 394 (Surat
ITAT) order pronounced on 20-06-2018.
3. That order passed by the learned CIT (Appeals) under
section 250(6) of the Income Tax Act, 1961 is against law and facts,
as the Learned Commissioner of Income Tax (Appeals), was not
justified to arbitrarily uphold the addition of Rs. 3,00,000/- on
account of unsecured loan, ignoring the fact that appellant
produced substantive evidence to prove the identity,
creditworthiness and genuiness of the transaction as condition laid
down under section 68 of the Act.
4. That order passed by the learned CIT (Appeals) under
section 250(6) of the Income Tax Act, 1961 is against law and facts,
as she was not justified to arbitrarily uphold the Disallowance out
of the following expenses :
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a. Rs. 5,00,000/-, out of Sub contractors expenses, due to non-
production of bills and vouchers,
b. Rs. 3,50,000/- out ofRepairs and maintenance, Business
promotion, Food and conveyance expenses, on account of
unverifiable expenses,
c. Rs. 70,903/-, 1/10 of Telephone Expenses, Diwali Expenses,
Travelling Expenses and Conveyance expenses being the personal
expenses.
Thus, violated the principles as laid down recently in the matter by the
Jurisdictional ITAT (Delhi) Bench-G, in case of Silent Business
Solutions Limited vs DCIT, (ITA No. 6297/Del/2013-14) order
pronounced on 19-05-2017.
5. That the learned CIT (Appeals) has erred in law and on the
fact in confirming the additions on account of difference in contract
receipts of Rs. 5,90,550/- with remark "Dismissed for statistical
purposes", ignoring the all possible reconciliation submitted during
the course of the assessment as well as in the appeal.
6. That the appellant craves leave to add or amend the grounds
of appeal before the appeal is heard or disposed of."
4. The Ld. Counsel for the assessee at the time of hearing
submitted that no proper opportunity was granted by the AO at
the time of hearing. Even before the CIT(A) no adequate
opportunity was granted to the assessee to make rejoinder to the
remand report received from the office of the AO. He further
submitted that when the accounts of the assessee are audited
and auditors have not found any defect in the books of accounts,
the AO without specifically pin pointing any defect in any bills
and vouchers or books of accounts could not have made addition
on estimate basis. Relying on various decisions the Ld. Counsel
for the assessee submitted that the revenue authorities cannot
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comment on the reasonableness of the expenses and it is the
assessee who has the privilege to conduct his business and
revenue authorities cannot sit on the arm chair of the assessee.
Further in order to disallow any expenditure the AO has to
establish that the same was not incurred for carrying out
business. Merely because certain expense was incurred in cash
cannot be the basis for making any disallowance. Referring to
various decisions he submitted that where the AO failed to give
details of expenses which were found unverifiable and made ad-
hoc disallowance, the said disallowance has to be deleted. He
accordingly submitted that the various additions made by the AO
and upheld by the CIT(A) should be deleted.
5. The Ld. DR on the other hand strongly relied on the order
of the CIT(A). Referring to the order of the CIT(A) she submitted
that a perusal of the confirmation of Sumit Gas Agency shows
that it is a private limited company, copy of which is placed at
page 23 of the paper book. The assessee in his confirmations has
given the name of the lender as M/s. Sumit Gas Agency, Sh.
Raman Lamba (partner). Therefore, the assessee was himself not
giving the correct details for which no other option is left to the
AO and the CIT(A) but to make the addition. So far as the
disallowance of various expenses are concerned, she submitted
that the assessee had not filed the requisite details and, therefore,
the AO was fully justified in making ad-hoc disallowance. She
accordingly submitted that the order of the CIT(A) be upheld.
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6. We have considered the rival arguments made by both the
sides, perused the orders of the AO and the CIT(A) and the paper
book filed on behalf of the assessee. We have also considered the
various decisions cited before us. We find the AO in the instant
case made addition of Rs.3 lacs being the unsecured loan from
Sumit Gas Agency on the ground that no bank details or copy of
income tax return was filed. Further a perusal of the confirmation
given by the loan creditor shows the name of the lender as Sumit
Gas Agency Private Limited whereas the assessee before the
CIT(A) had given the name of the lender as M/s. Sumit Gas
Agency and Raman Lamba as partner. Therefore, it is not coming
out clearly as to whether who has given the loan to the assessee
i.e. whether it is a private limited company or a partnership firm.
Unless the Income Tax return copy and bank account of the said
lender is furnished it is difficult for anybody to verify the
creditworthiness and identity of the said parties. Similarly, when
the assessee failed to substantiate with evidence to the
satisfaction of the AO regarding the allowability of certain
expenses, he cannot take the shelter of various case decisions to
say that the AO cannot make ad-hoc disallowance without
pinpointing the details of certain expenses which according to
him are unverifiable. However, it is also an argument by the Ld.
Counsel for the assessee that the assessee was not given
adequate opportunity to file a rejoinder to the copy of the remand
report of the AO. It is also his grievance that the Ld. CIT(A) had
rejected the additional evidences submitted by the assessee under
Rule 46 A of the Income Tax Rules 1962 which go to the roots of
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the matter. Considering the totality of the facts of the case and in
the interest of justice we deem it proper to restore the issue to the
file of the AO with a direction to decide the issue afresh and in
accordance with law after giving due opportunity of being heard
to the assessee. We hold and direct accordingly. The grounds
raised by the assessee are accordingly allowed for statistical
purpose.
7. In the result, the appeal filed by the assessee is allowed for
statistical purpose.
Order pronounced in the open court on 15.10.2019.
Sd/- Sd/-
(SUCHITRA KAMBLE) (R.K PANDA)
JUDICIAL MEMBER ACCOUNTANT MEMBER
*Neha*
Date:- 15.10.2019
Copy forwarded to:
1. Appellant
2. Respondent
3. CIT
4. CIT(Appeals)
5. DR: ITAT
ASSISTANT REGISTRAR
ITAT NEW DELHI
Date of dictation 14.10.2019
Date on which the typed draft is placed before the dictating 15.10.2019
Member
Date on which the approved draft comes to the Sr.PS/PS 15.10.2019
Date on which the fair order is placed before the Dictating 15.10.2019
Member for Pronouncement
Date on which the fair order comes back to the Sr. PS/ PS 15.10.2019
Date on which the final order is uploaded on the website of 15.10.2019
ITAT
Date on which the file goes to the Bench Clerk 16.10.2019
Date on which file goes to the Head Clerk.
The date on which file goes to the Assistant Registrar for
signature on the order
Date of dispatch of the Order
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