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Judgment
PER MAHAVIR SINGH, VP
These cross-appeals, one by the assessee and one by the Revenue, are arising out of the order of learned CIT(A)-24, New Delhi in appeal No.CIT(A), Delhi-36/10097/2018-19 dated 8th August, 2024. Assessment was framed by the Assistant Commissioner of Income-tax, Circle-54(1), New Delhi for the assessment year 2015-16 under Section 143(3) of the Income-tax Act, 1961 (hereinafter referred to as ‘the Act’) vide his order dated 29th December, 2017.
The first two interconnected issues in the appeal of the assessee is as regards the order of learned CIT(A) confirming the addition of `34,79,000/- on account of fictitious creditors and also confirming the addition of `68,00,000/- on account of construction expenditure paid to M/s Navneet Dawar (HUF) being addition made by the Assessing Officer of `1,02,11,000/- being addition under Section 68 of the Act out of the total addition made by the Assessing Officer of `2,78,01,317/-.
Learned Counsel for the assessee, first of all, took us through the assessment order at page 2 paragraph 2.1, wherein complete tabulation is given and the addition made during the year under the head Navneet Dawar HUF of `1,02,11,000/- is depicted at item 8. Learned Counsel explained that this amount of `34.79 lakhs added by the Assessing Officer on account of fictitious creditors is arising out of `34.11 lakhs being credit received on account of unsecured loan received through proper banking channel from Navneet Dawar HUF in earlier year i.e., assessment year 2014-15 relevant to financial year 2013-14. Learned Counsel for the assessee also explained the balance sum of `68,000/- is the TDS amount. When it was asked to explain from the documentary evidence that this amount pertained to earlier year i.e., financial year 2013-14 relevant to assessment year 2014-15, learned Counsel for the assessee stated that presently he is not having documents but he made a request that the issue can be remanded to the file of the Assessing Officer for verification of this entry. To this proposition, learned Senior DR agreed that the issue can be remanded to the file of the Assessing Officer for verification.
After hearing both the sides and going through the facts of the case, we direct the Assessing Officer to verify by taking documents from the assessee whether this entry of `34.11 lakhs pertains to financial year 2013-14 relevant to assessment year 2014-15 and on this, an amount of `68,000/- is depicted as TDS thereby making total entry of `34.79 lakhs added by the Assessing Officer. The Assessing Officer will verify this entry and in case it pertains to financial year 2013-14, he will delete the addition and in case it does not pertain to financial year 2013-14, he will confirm the addition. With these directions, the issue is remanded to the file of the Assessing Officer.
The next issue pertains to the addition of `68,00,000/- made by the Assessing Officer made on account of construction expenditure paid to Navneet Dawar HUF. The learned Counsel took us through the assessment order, paragraph 3.3 of which reads as under:-
“3.3If it is to be believed that there is some work was done by the Navneet Dawar HUF for the assessee in the relevant year and giving assessee the benefit of doubt, the expenses paid to other parties and 50% of the expenses claimed to be paid to Navneet Dawar HUF are accepted and rest are being disallowed u/s 37 of the Income Tax Act, 1961. Hence 50% of the expenses claimed i.e. 50% of Rs.68,00,000/- is Rs.34,00,000/- being disallowed.”
Learned Counsel for the assessee explained that the Assessing Officer himself admitted this position of `68,00,000/- being expenses paid to other parties and allowed 50% of expenses paid to Navneet Dawar HUF and 50% was disallowed on adhoc basis. He argued before us that this tantamount to double addition and learned CIT(A) has accepted 50% of expenditure as explained and 50% already added which is part of Revenue’s appeal. The learned Counsel argued that there is no question of any addition as the expenses were paid on account of construction to Navneet Dawar HUF and there is no doubt about the nature of expenditure and genuineness of expenditure. When these facts were confronted to learned Senior DR, she could not controvert the above fact situation.
After hearing both the sides and going through the material placed before us, we are of the view that the addition made by the Assessing Officer of `68,00,000/- on account of construction expenditure paid to Navneet Dawar HUF, which is retained by learned CIT(A) at `34,00,000/-, is without any basis and hence, we delete the addition and allow this ground of assessee’s appeal.
The two interconnected issues in the appeal of the Revenue are raised by way of ground No.1, which reads as under:-
“1.On the basis of facts and circumstances of the case, whether the ld.CIT(A) was right in deleting the addition of Rs.1,68,00,000/- on account of unexplained cash credit under section 68 of the Act even when the assessee has failed to make valid submissions, thus failing to discharge its onus during assessment proceedings?”
Brief facts are that the Assessing Officer in his assessment order has drawn a table consisting of eight parties on page 22 but now the issue is only in respect of two parties viz., Duggal Builders Pvt.Ltd. and Gurinder Singh Duggal. Therefore, the table, insofar as these two persons are concerned, is reproduced hereunder:-
| S.No. | Name | Opening Balance as on 01.04.2014 | Additions during the year | Payments during the year | Balance as on 31.03.2015 |
| 1 | Duggal Builders Pvt.Ltd. | 1,28,00,000 | 0 | 1,28,00,000 | 0 |
| 2 | Gurinder Singh Duggal | 1,00,00,000 | 1 | 40,00,000 | 60,00,000 |
Learned CIT(A) deleted the addition by observing as under:-
“4.1.6Section 68 of the Income Tax Act is applicable only when there is a credit entry during the year under consideration. In the present case, it is clear that the amounts of Rs. 1,28,00,000/- and Rs. 40,00,000/- were repayments of loans/credits taken in earlier years.AO has not produced any evidence that out of undisclosed money of assessee payment has been made whereas these 2 creditors confirmed receipt of amounts through account confirmations. There is copy of bank statement also on record evidencing the repayment. The appellant has provided ample documentary Evidence, including bank statements and confirmations, to support the genuineness of these transactions thus it could not be considered as bogus creditors.
4.1.7The Delhi High Court. in CIT v. Vrindavan Farms (P.) Ltd. [2015] 65 taxmann.com 265 (Delhi), held that where the identity of the creditors was established, and the transactions were conducted through banking channels, merely non-appearance of the creditors in response to notices under section 133(6) cannot be a ground for invoking section 68. Similarly, in CIT v. Lovely Exports (P.) Ltd. (2008) 216 CTR 195 (SC), the Supreme Court held that once the identity of the creditors is established and transactions are genuine, the burden shifts to the department to prove otherwise which is not discharged by Assessing Officer.
4.1.8.In light of the above findings and judicial precedents, the addition of Rs. 1,68,00,000/- u/s 68 of Income Tax Act is deleted. The remand report's contention that the creditors are bogus based solely on non-compliance with notices u/s 133(6) is not sustainable, especially when the appellant has provided sufficient evidence to establish the genuineness of the transactions.”
Learned Counsel for the assessee before us now stated that these pertain to earlier year repayments and not the addition during the year as is depicted from the chart above. When it was confronted to the learned Senior DR, she could not controvert the above fact situation that this was opening balance as on 1st April, 2014 and not the new additions during the year. Rather, these cannot be treated as credit entries, these are repayments made by the assessee during the year and hence, these cannot be added under Section 68 of the Act. Accordingly, learned CIT(A) has rightly deleted the addition and we confirm his order on this issue.
The next issue in the appeal of the Revenue is as regards the order of learned CIT(A) deleting the addition of 34,00,000/-representing 50% of expenditure representing `68,00,000/-construction work done by Navneet Dawar HUF. For this, the Revenue has raised following ground No.2:-
“2.On the basis of facts and circumstances of the case, whether the Ld. CIT(A) was right in deleting the addition of Rs.34,00,000/- on account of disallowance u/s 37 of the Act even when the assessee has failed to make valid submissions, thus failing to discharge its onus during assessment proceedings?”
We have heard the submissions of both the sides and perused the material placed before us. We noted that this issue has already been adjudicated by us while adjudicating assessee’s appeal in ITA No.4424/Del/2024 vide paragraph 5 & 6 of this order. Hence, as we have already deleted the addition of `68,00,000/-, therefore, there cannot be double addition. Hence, we confirm the order of learned CIT(A) on this issue and accordingly, dismiss this ground of appeal of the Revenue.
In the result, the appeal of the assessee is partly allowed for statistical purposes and the appeal of the Revenue is dismissed.