Up Bones Mills Pvt Ltd vs Dcit Circle-18(1)

PER MANISH AGARWAL, A.M.:

The captioned appeals are filed by assessee against the different orders passed by Ld. Commissioner of Income Tax (A), New Delhi [“Ld. CIT(A)”] u/s 250 of the Income Tax Act, 1961 [“the Act”] arising out of different assessment orders pertaining to Assessment Years 2011-12, 2014-15 to 2015-16 respectively tabulated as under:-

During the course of hearing despite of repeated opportunities and notice served through revenue, none appeared on behalf of the assessee therefore, ld. Sr. DR was heard at length and all appeals of the assessee was decided as under:-

Before us, the ld. Sr. DR has fairly admitted that facts involved in all these appeals are common, therefore, they are taken together and decided by a common order.

First we take assessee’s appeal for Assessment Year 2011-12 in ITA No.4355/Del/2019.

Heard the ld. Sr. DR at length and perused the material available on record. Grounds of appeal Nos. 2 & 6 raised by the assessee are with respect to the order of ld. CIT(A) in not admitting the additional evidences filed by the assessee under Rule 46A of the Income Tax Rules, 1962. It is seen that in the assessment order, the AO has observed that one Shri Lalit Kumar, CA was appeared only on occasion on behalf of the assessee and other details were received through post from time to time. Therefore, the order was passed based on the details so filed and the AO has treated the agricultural income of INR 35,73,978/- as business income and further disallowed rebate and discounts claimed at INR 12,62,900/-. Besides the addition of INR 74,02,856/- was made being outstanding balances in the name of Five creditors who had filed confirmations without PAN. Before ld. CIT(A), none appeared for the assessee despite of providing as many as thirteen opportunities of hearing though additional evidences were filed with respect to the credit balances of creditors which were held as unexplained. It is further observed that ld. CIT(A) has not admitted the said additional evidence by holding that the assessee has not been able to submit the reasonable cause for filing these evidences at the appellate stage. These additional evidences are the ledger accounts and confirmations of creditors and placed at pages 32 to 39 of the Paper Book. Since the assessee had not filed these evidences before the AO and since they are most crucial to decide the issue in hand therefore, in the interest of justice, we admit the additional evidences so filed and remand the matter back to the file of AO for making verifications of the additional evidences so filed and decide the issue in accordance with law. This will cover the addition of INR 74,02,856/- made u/s 68 of the Act which has been challenged by the assessee in the Grounds of appeal Nos. 2 & 6. Accordingly, Ground of appeal Nos. 2 & 6 of the assessee are allowed for statistical purposes.

Ground of appeal No.3 is general in nature, needs no separate adjudication.

Ground of appeal No.4 is with respect to the confirmations of action of AO in holding the agricultural income as business income.

Before us, ld. Sr. DR for the Revenue vehemently supported the orders of the lower authorities and submits that the assessee has not filed any details. He further submits that as per the Audit Report submitted, assessee was engaged in the business of manufacturing of M.S. Ingots and no activity was stated about the agricultural income. The assessee in the computation of income has declared agricultural income of INR 35,73,978/- and claimed the same as exempt. As per ld. Sr. DR, since no details were filed with respect to the agricultural income and therefore, requested for the confirmations of the same.

Heard the contention of ld. Sr. DR at length and perused the material available on record. On careful consideration of the facts and financial statements of the assessee placed before us, it is observed that assessee in its Profit & Loss Account has declared total turnover at INR 29,94,113/- which inter-alia includes the agricultural income of INR 98,01,898/-. The same is appearing in the Schedule-3 to the Profit & Loss Account placed at page 20 of the Paper Book. It is further observed that in Schedule-21 of administration and selling expenses, the assessee has claimed agricultural expenses of INR 62,27,920/-. From the perusal of the submissions made before ld. CIT(A), it is observed that the claim of the assessee during the course of assessment proceedings, was that the agricultural income was exempted. Considering the entirety of the facts and from the perusal of the details filed before us, it is clear that assessee has not stated the nature of agricultural activity carried out nor any details of the agricultural land was filed therefore, in the larger interest of justice, we remand this matter back to the file of AO with the directions to examine the agricultural activities carried out and the assessee is directed to file all the necessary details with respect to the agricultural income earned and expenditure claimed. The AO is further directed to verify the details filed and decide the issue in accordance with law. With these directions, Ground of appeal No.4 raised by the assessee is allowed for statistical purposes.

Ground of appeal No.5 raised by the assessee is with respect to the confirmation of disallowance of INR 12,62,900/- made out of rebate and discount.

Heard the contention of ld. DR at length and perused the material available on record. The AO observed that the assessee has given rebate and discount however, no details were filed and therefore, the disallowance was made. Before ld. CIT(A), it was the claim of the assessee that the goods were sold to M/s. Rana Grider Pvt Ltd., 7^th K. M. Stone, Meerut Road, Muzaffarnagar in FY 2010-11 however, the goods were of inferior quality therefore rebate was given and was debited to “Discounts & Rebate Account”. For this, confirmations of the party were also filed before ld. CIT(A) as additional evidence. While deciding the Grounds of appeal No.2 & 6 of the assessee, we have admitted these additional evidences and remand the matter back to the file of AO for verification of the evidences.

Considering these facts, we this issue is also remanded back to the file of AO with the directions to consider the additional evidence filed by the assessee and decide the issue as per law after making verification of the evidences so filed. Thus, Ground of appeal No.5 raised by the assessee is allowed for statistical purposes.

The remaining Ground of appeal Nos. 7 to 10 of the assessee are in support of the Ground of appeal Nos. 3 to 6 and required no separate adjudication.

Ground of appeal No.11 of the assessee is with respect to the levy of interest u/s 234A, 234B and 234C of the Act which is consequential in nature and AO is directed to charge the interest on the income finally computed after giving effect to this order.

Ground of appeal No.12 is with respect to the initiation of penalty u/s 271(1)(c) of the Act which is premature at this stage and hence, dismissed.

In the result, appeal of the assessee is partly allowed for statistical purposes.

Now we take up the assessee’s appeal for Assessment Year 2014-15 in ITA No.6185/Del/2019.

Heard the contention of ld. Sr. DR for the Revenue at length and perused the material available on record. In respect of Ground of appeal Nos. 3 & 4 of the assessee, the assessee has shown gross agricultural income of INR 31,08,826/- and after claiming expenditure of INR 10,08,826/-remaining amount was declared as income from other sources. The AO observed that the assessee though had filed the details of agricultural income earned and expenses claimed however, neither the copies of sale bills were produced nor certificate of the local authorities that the land used was meant for agricultural use was filed. Apart from this, no any supporting vouchers of expenses claimed were filed. Since the assessee itself has shown the income under the head “Income from Other Sources”, the AO disallowed the expenses claimed at INR 10,08,826/- for want of necessary bills and vouchers. Before ld. CIT(A), the assessee has reiterated the same arguments as are taken before the AO however, no details were filed with respect to the expenses claimed. In view of these facts, we find no error in the order of ld. CIT(A) in confirming the disallowances made by AO. Accordingly, Grounds of appeal 3 & 4 raised by the assessee are dismissed.

Ground of appeal Nos. 5 to 9 of the assessee are with respect to the disallowance of short term capital gain of INR 93,93,600/-.

Heard the ld. Sr. DR for the Revenue at length and perused the material available on record. The AO observed that under the head “other current investment”, the assessee has shown investment in M/s. Rana News India Pvt. Ltd. of INR 81.00 Lakhs as on 31.03.2013 which was reduced to INR 19.20 Lakhs in 31.03.2014 and since no income or loss on such reduction of investment was declared therefore, the assessee was asked to explain the reason for the same. It was the claim of the assessee that it had made application for allotment of shares of INR 81.00 Lakhs out of which INR 61,80,000/- were received back and INR 19,20,000/- was the closing balance. Since the amount was kept in share application money therefore, there was no loss or gain on the refund of such application money. The AO had not accepted this plea of the assessee and worked out the intrinsic value of shares of M/s. Rana News India Pvt. Ltd. based on its Balance Sheet as at 31.03.2013 and worked out the deemed sale consideration at INR 4,11,12,685/- and computed Short Term Capital Gain (“STCG”) of INR 93,93,600/-.

It appears that these facts have not been appreciated by the lower authorities while making/confirming the additions. Further, the assessee has not filed any confirmation of M/s. Rana News India Pvt. Ltd. from which it could be established that the said amount was given as the share application money or shares were actually allotted to the assessee.

Considering these facts, we set aside this issue to the file of AO with the directions to make verification of the facts from M/s. Rana News India Pvt. Ltd. that whether any shares were allotted to the assessee against the share application made and decide the issue in accordance with law. Grounds of appeal Nos. 5 to 9 of the assessee are thus, allowed for statistical purposes.

Ground of appeal No.10 of the assessee is with respect to the levy of interest u/s 234A, 234B, 234C and 234D of the Act which is consequential in nature and AO is directed to charge the interest on the income finally computed after giving effect to this order.

Ground of appeal No.11 is with respect to the initiation of penalty u/s 271(1)(c) of the Act which is premature at this stage and hence, dismissed.

In the result, appeal of the assessee is partly allowed.

Now we take up the assessee’s appeal for Assessment Year 2015-16 in ITA No.6234/Del/2019.

Ground of appeal Nos.1 & 2 raised by the assessee are general in nature hence, not adjudicated.

Ground of appeal Nos. 3 to 10 of the assessee are with respect to the disallowance of expenses of INR 7,45,238/- claimed against the agricultural income. The AO observed that during the year under appeal, the assessee has declared total agricultural income of INR 24,87,400/- against which expenses of INR 1,25,600/- was claimed which comes to 0.5% as against average expenses claimed in preceding two assessment years and accordingly, the AO computed the average expenditure at INR 8,70,838/- and differential amount of INR 7,45,238/- held as the expenses which should have been incurred for earning such agricultural income and addition for the same was made as income of the assessee. Before ld. CIT(A), it was the claim of the assessee that it had actually incurred expenses of INR 1,25,600/- only mainly for the reason that assessee grew popular trees and cost of plants were incurred in the preceding years and only maintenance expenses were incurred during the year under appeal therefore, expenses are not at all comparable. However, ld. CIT(A) observed that the assessee has not adduced any cogent evidence with respect to the claim made therefore, he confirmed the addition.

On careful consideration of the facts, it is observed that the additions have been made solely on the allegation that very meager expenses were claimed in the previous year as compared to preceding years. However, the AO has not appreciated the fact that cost of planation was incurred in preceding AYs and during the year, only maintenance charges were paid. Considering these facts, we remand this issue back to the file of AO for making necessary verification of facts and directed the AO to decide the issue in accordance with law.

In the result, appeal of the assessee is partly allowed.

In the final result, all captioned appeals of the assessee in ITA No. 4355, 6185 & 6234/Del/2019 for Assessment Years 2011-12, 2014-15 & 2015-16 respectively, are partly allowed.