This document provides a detailed summary of the case Sam Overseas vs ACIT, Circle-28(1), Delhi, with case number ITA 169/DEL/2021, concerning the assessment year 2011-12. The appellant, Sam Overseas, New Delhi, challenged the final order issued by the Assistant Commissioner of Income Tax (ACIT), Circle-28(1), Delhi. The case was filed on March 1, 2021, with the order pronounced on June 22, 2023.
Sam Overseas, New Delhi
ACIT, Circle-28(1), New Delhi
2011-12
ITA 169/DEL/2021
Final Tribunal Order
June 22, 2023
June 22, 2023
The case revolves around the disallowance of expenses and additions made to the income of Sam Overseas by the Assessing Officer (AO). The primary issues in contention were:
The appellant argued that the commission paid to foreign agents was not taxable in India as per the respective Double Taxation Avoidance Agreements (DTAAs) and should not be subjected to TDS under section 195 of the Income Tax Act, 1961.
The addition of Rs. 28,78,632 was challenged on the grounds that the AO failed to serve summons to the concerned parties, leading to an erroneous conclusion.
Regarding the interest expense disallowance, the appellant contended that the funds were utilized for business purposes and sufficient interest-free funds were available, referring to the judgment in CIT vs Reliance Utilities [313 ITR 340 (Bom)]
The appellant provided detailed reconciliation of the stock, proving that the discrepancies were due to unrecorded transactions and pending entries in the books of accounts.
The Revenue contended that the CIT(A) erred in deleting the addition of disallowed interest expenses and in restricting the addition towards unexplained stock to Rs. 28,78,632.
The Revenue argued that the stock discrepancies were significant and the explanations provided by the appellant were unsatisfactory.
The Tribunal upheld the CIT(A)’s decision to delete the disallowance of Rs. 63,70,992, citing the judgment in CIT vs Reliance Utilities, which stated that if there are sufficient interest-free funds available, it can be presumed that investments were made from these funds.
Regarding the addition of Rs. 4,29,63,309 towards unexplained stock, the Tribunal examined the detailed submissions and evidence provided by the appellant, including the reconciliation statements and supporting documents. The Tribunal noted that the AO failed to provide substantial evidence to prove that the books of accounts were manipulated or that the transactions were fictitious. Consequently, the Tribunal agreed with the CIT(A)’s decision to restrict the addition to Rs. 28,78,632.
The Tribunal found merit in the appellant’s argument that the commission paid to foreign agents was not chargeable to tax in India and should not be subjected to TDS under section 195. The Tribunal directed the AO to reconsider the disallowance in light of the respective DTAAs.
The Tribunal concluded that the appellant, Sam Overseas, successfully demonstrated that the stock discrepancies were due to pending entries and unrecorded transactions, not undisclosed income. The Tribunal upheld the CIT(A)’s order to delete the disallowance of interest expenses and restricted the addition towards unexplained stock to Rs. 28,78,632. The matter of commission paid to foreign agents was remanded to the AO for reconsideration.
Case Summary: Sam Overseas vs ACIT, Circle-28(1), Delhi, ITA 169/DEL/2021
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