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Judgment
PER S. RIFAUR RAHMAN, AM :
This appeal is filed by the assessee against the order of the Ld. Commissioner of Income-tax (Appeals)-XXVI, New Delhi [hereinafter referred to as ‘ld. CIT (A)] dated 19.11.2018 for the Assessment Year 2015-16.
Brief facts of the case are, assessee filed its return of income on 30.09.2015 declaring total income of Rs.7,271/-. The case of the assessee was selected for scrutiny through CASS under the category limited scrutiny. Notices under section 143(2) and 142(1) of the Income-tax Act, 1961 (for short ‘the Act’) were issued and served on the assessee. In response, ld. AR of the assessee attended from time of time and filed the relevant information as called for. Assessee has earned the income from sale of Cotton Knitted Fabrics. During the course of hearing, the AO verified the details of bank and bank statement and other evidences submitted by the assessee on test check basis. On verification of the statement of affairs of the assessee company for the year under consideration as well as earlier assessment year for which dates are available on record, he observed that assessee has hardly made any business during the past few years. Sales and purchases of fabric and shares were purchased and sold to selective parties and maintained huge sundry debtors in the Balance Sheet, despite having stock of cotton knitted fabrics, no expenses on account of rent, maintenance etc. were claimed and despite some sales claimed to have made during the year no transportation cost found as debited in the Profit & Loss Account. Considering the above facts on record, he observed that assessee is a mere name lender and acts as a conduit for parties /beneficiaries behind the company and he proceeded to treat the sundry debtors of Rs.39,00,000/- shown in the Balance Sheet as fictitious from sale made during the year. Accordingly, he proceeded to make the addition of the same.
Aggrieved, assessee preferred an appeal before the ld. CIT (A)-XXVI, New Delhi and filed detailed submissions. After considering the submissions of the assessee, ld. CIT (A) sustained the addition made by the AO.
Aggrieved with the above order, assessee is in appeal before us raising following grounds of appeal :-
“1 . That on the facts and in the circumstances of the case the action of the Ld. CIT(A) to confirm the addition made by the A.O. of Rs.39,90,000/- as unexplained investments on the reason that the Sundry Debtors are fictitious is contrary to the settled principles of law and the addition is arbitrary, excessive and illegal.
2.That on the facts and in the circumstances of the case the action of the Ld. CIT(A) to hold that the sales for A.Y. 2015-16 were not genuine on the basis of expenses debited in the Profit & Loss Account is contrary to the material evidences on record and contrary to the expenses claimed and debited in the Profit & Loss Account and therefore, the addition confirmed by the Ld CIT(A) of Rs.39,90,000/- is illegal and bad in law.
3.That on the facts and in the circumstances of the case the action Ld CIT(A) to confirm the assessment made by the AO by rejecting the scope of limited scrutiny having being expanded by the AO without prior permission is in violation of the provisions u/s 119 of the Act and the assessments is illegal and bad in law.
4.That the assessment framed by the AO and confirmed by the Ld.CIT(A) is unjust, illegal, arbitrary and excessive.
5.That the above grounds of appeal will be argued in detail at the time of hearing and the appellant crave leave to submit additional grounds of appeal, if any, and/or alter, verify, modify or rectify any grounds of appeal at or before the time of hearing.”
At the time of hearing, ld. AR brought to our notice page 2 of the assessment order and submitted that the AO has proceeded to treat both purchases and sales as non-substantiated and treated the sundry debtors as bogus and made addition of the whole outstanding sundry debtors as income of the assessee. In this regard, he brought to our notice page 13 of the paper book which is the Profit & Loss account wherein assessee has declared revenue from operation of Rs.39,90,000/- and further brought to our notice page 16 of the paper book which is the trade receivables which is declared as nil (Note No.7) and further brought to our notice page 17 of the Schedule to the Balance Sheet and specifically brought to our notice Note 10 wherein assessee has sold cotton fabric of Rs.1,77,500/- and sold shares of Rs.38,12,500/-. The total sales come to Rs.38,19,900//-. He submitted that AO has doubted the sale transaction on the basis of no movement of stock and there is no expenditure claimed by the assessee. In this regard, he submitted that there is no requirement for maintaining any staff and assessee has only purchased and sold shares and declared the same as income of the assessee. He objected to the findings of the lower authorities that the assessee has already declared an income and the same income cannot be added twice.
On the other hand, ld. DR of the Revenue relied on the orders of the lower authorities below.
Considered the rival submissions and material placed on record. We observed that assessee has sold fabric of Rs.1,77,500/- and shares of Rs.38,12,500/- and both the sales are already declared in the books of account and no doubt assessee has not carried out any transaction in the year under consideration. We noticed that assessee has purchased shares worth of Rs.37,27,100/- and sold the same at Rs.38,12,500/-. At the same time, we observed that assessee also purchased cotton knitted fabric to the extent of Rs.38,09,750/- and after sale of cotton fabric of Rs.1,77,500/-, the difference of purchase was added to the closing stock of the assessee. Therefore, the additions made by the AO are without there being any proper reasons. Accordingly, we are inclined to delete the additions made by the AO and the grounds taken by the assessee are allowed.
In the result, the appeal filed by the assessee is allowed.