The case between Shivangi Remedies Pvt Ltd (the appellant) and the Deputy Commissioner of Income Tax (DCIT), Circle-23(1), New Delhi (the respondent), pertains to the Assessment Year (AY) 2013-14. The case was filed on 13th June 2019 and concluded with a final order on 20th September 2023. The case was heard by the Income Tax Appellate Tribunal (ITAT) Delhi Bench “B”.
Shivangi Remedies Pvt Ltd is a private limited company engaged in the business of trading drugs and medicines. The company filed its return of income on 2nd September 2014, declaring a total income of Rs. 67,70,300/-. The return was taken up for scrutiny, and the Assessing Officer (AO) issued a notice under section 143(2) of the Income Tax Act, 1961 (the Act). The AO examined the issue of sundry creditors and made additions of Rs. 2,88,636/- on account of unexplained sundry creditors from M/s Sun Pharmaceuticals Industries Ltd. and Aditya Medisales Ltd. Additionally, an addition of Rs. 3,60,000/- was made by invoking section 14A of the Act.
The assessee challenged the order dated 6th May 2019 passed by the Commissioner of Income Tax (Appeals)-XXV, New Delhi, raising the following grounds:
The appellant’s representative submitted that no exempt income was earned during the year. This fact was not controverted by the Departmental Representative (DR). The Tribunal noted that the CIT(A) gave preference to a CBDT Circular over judicial pronouncements cited by the assessee. It is a settled proposition of law that Section 14A cannot be invoked where the assessee’s own funds far exceed the investment made, and there is no exempt income. Reliance was placed on CIT v. Corrtech Energy Pvt Ltd. and CIT v. Holcim India Pvt. Ltd. Thus, the finding of the CIT(A) was not sustained, and the ground was allowed.
The AO doubted the genuineness of the creditors, particularly M/s Sun Pharmaceuticals Industries Limited and Aditya Medisales Ltd., due to non-compliance of notice under section 133(6) and discrepancies in outstanding balances. The appellant’s representative provided a reconciliation statement explaining that the differences were adjusted by the customer in AY 2014-15 through a credit note. The Tribunal found that disbelieving sundry creditors of prominent companies without pointing out specific defects in the books of account was not justified. The reconciliation statement for Aditya Medisales Ltd. was submitted, showing adjustments, which were not considered by the tax authorities. The Tribunal restored this issue to the AO for verification of the reconciliation statement, allowing ground no. 3 for statistical purposes and ground no. 4 in favor of the assessee.
The appeal by Shivangi Remedies Pvt Ltd against the DCIT Circle-23(1), New Delhi, was allowed by the ITAT. The Tribunal found that the CIT(A)’s findings on Section 14A disallowance and the additions for unexplained sundry creditors were not justified. The case was partly restored to the AO for verification, with the remaining issues decided in favor of the assessee.
Order pronounced in open court on 20th September 2023.
Accountant Member: Shri Shamim Yahya
Judicial Member: Shri Anubhav Sharma
Date of Order: 20.09.2023
Copy forwarded to:
Assistant Registrar, ITAT, New Delhi
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