DCIT Vs Suboli Ice and Cold Storage Pvt. Ltd. (ITAT Delhi)
ITAT Delhi held that genuineness and veracity of the party cannot be doubted merely because the cold storage rent was received in cash. Accordingly, addition u/s. 69 of the Income Tax Act towards unexplained investment unjustified.
Facts- Assessee is in the business of running cold storage facility. Pursuant to search in the case of Rakesh Jain, there was a survey u/s. 133A in the premises of the assessee including its cold storage facility.
In the course of assessment proceedings, a show cause notice was issued to the assessee to furnish supporting evidences, details to establish the genuineness of the parties along with names and addresses from whom the summons were returned back. In response to the show cause notice, the assessee further furnished copies of ledger that payments against storage charges were received through banking channels in respect of 10 parties out of 18 parties, therefore, AO accepted the transactions with the said 10 parties as genuine. However, with regard to the remaining 8 parties, AO treated the stock found mentioned against the said 8 parties as belonging to the assessee for the reasons that the parties have paid storage charges in cash and no evidence was furnished to prove the stock belonged to them.
AO valued the stock taking the rates prevailing as on the date of survey and made an addition of Rs.54,10,76,600/- as an unexplained investment of the assessee u/s. 69 of the Act. CIT(A) deleted the addition. Being aggrieved, revenue has preferred the present appeal.
Conclusion- CIT(A) rightly observed that the goods were directly procured by such party and only kept with the appellant for cold storage purposes. The copies of cold storage bills issued by the appellant to the party have also been impounded and produced. Accordingly, the genuineness and veracity of the party cannot be doubted merely because the cold storage rent was received in cash.
Held that the stocks which were valued by the Assessing Officer belong only to those 8 third-parties and the stock does not belong to the assessee and, therefore, the addition made as unexplained stock is not warranted.
FULL TEXT OF THE ORDER OF ITAT DEL-HI
The appeal and cross-objection are filed by the Revenue and assessee respectively against the order of learned Commissioner of Income-Tax (Appeals)-26, New Delhi dated 15.05.2023 for the assessment year 2018-19.
2. The Revenue in its appeal has raised the following grounds of appeal:
1. Whether on facts of the case and in law, the Ld. CIT(A) hs erred in holding that the assessee has given various documents details of the 8 parties, without appreciating the fact that none of the 8 parties appeared before the Department to confirm that the stock belonged to them.
2. Whether on facts of the case and in law, the Ld. CIT(A) hs erred in deleting the addition of Rs.54,10,76,600/- even when he did not verify these par-ties himself during appeal proceedings, nor gave an opportunity to the AO to examine these 8 par-ties during the remand proceedings.
3. Whether on facts of the case and in law, the Ld. CIT(A) hs erred in accepting the ledgers provided by the assessee of the 8 parties, without appreciating the primary fact that neither did the 8 parties gave any confirmation before the A.O, nor could the assessee provide satisfactory details required for making the inquiries during the assessment proceedings.
4. Whether on facts of the case and in law, the Ld. CIT(A) hs erred in deleting the addition of Rs.54,10,76,600/- even when the facts show that these 8 parties were not paying any rent through banking channel, nor could the assessee prove that the stock belonged to these 8 parties.
3. Briefly stated, the facts are that the assessee which is in the business of running cold storage facility, filed its return of income on 26.10.2018 declaring loss of Rs.10,29,061/-. Pursuant to the search operation under Section 132 of the Income-Tax Act,1961 carried on in the case of Rakesh Jain Group on 01.11.2017 there was a survey under Section 133A of the Act in the premises of the assessee including its cold storage facility. During post survey inquiries, the assessee submitted list of 166 entities who regularly maintained the stock in the cold storage to the Investigation Wing. In the course of assessment proceedings pursuant to the survey, summon were issued to the 166 parties to furnish their month-wise, item-wise sales, purchases and stock details. It appears that the data in the register which was impounded was digitized and found that out of 166 parties, namely, only 88 parties were appearing in the register which impounded during the survey. Out of 88 parties, compliance was made only by 59 entities/parties. Summons were re-turned back from 18 entities and 11 entities did not make any compliance in response to the sum-mons. The assessee was required to furnish further details, like PAN numbers, names of promoters, bank details etc. of the parties in whose case summons had returned back so that the parties could be identified by the Investigation Wing.
4. In the course of assessment proceedings, a detailed show cause no-tice was issued to the assessee to furnish supporting evidences, details to establish the genuineness of the parties along with names and addresses from whom the summons were returned back. In response to the show cause notice, the assessee submitted chart showing reconciliation of transactions appearing in the impounded material to the books of accounts of the assessee company. The assessee further furnished copies of ledger that payments against storage charges were received through banking channels in respect of 10 parties out of 18 parties, therefore, the Assessing Officer accepted the transactions with the said 10 parties as genuine. However, with regard to the remaining 8 parties which are stated in the assessment order, the Assessing Officer treated the stock found mentioned against the said 8 parties as belonging to the assessee for the reasons that the parties have paid storage charges in cash and no evidence was furnished to prove the stock belonged to them:
