Genuineness & Veracity Of Party Can't Be Doubted To Make Addition U/s 69 Merely Because Rent Was Received In Cash: Delhi ITAT

The Bench of Challa Nagendra Prasad (Judicial Member) and Dr. BRR Kumar (Accountant Member) observed that “the material impounded in the course of survey on 01.11.2017 also contains copies of inward and outward ledger showing the moments of goods in and goods out belonging to the parties. Evidences also contain to gate passes for goods in and goods out which are all recorded in the names of the parties only. It is not in dispute that the income received from the parties in the form of cold storage charges is recorded as income by the assessee”. (Para 17)

As per the brief facts of the case, the assessee, engaged in the business of running cold storage facility, filed its return declaring loss of Rs.10,29,061/-. Pursuant to the search operation carried on in the case of Rakesh Jain Group, there was a survey in the premises of assessee including its cold storage facility. During post survey inquiries, the assessee submitted list of 166 entities. Accordingly, summon were issued to the 166 parties to furnish their stock details. Also, out of 166 parties, 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. The Assessing Officer 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 under Section 69 of the Act.

The Bench found from the evidences on record that the assessee company is providing only cold storage services and collects storage charges from the customers who desired to store their goods in the cold storage facility maintained by the assessee company.

The Bench also noted that the sale of such goods lying at the cold storage is the sole prerogative of such parties to whom such goods belong to, and the assessee is only a custodian of the goods storage in its cold storage facility like clock room, luggage room at railway stations/metros/airports etc. for keeping the goods.

The assessee is only entitled for storage charges for the period the goods stored in the cold storage, added the Bench.

The Bench observed that even though the assessee furnished documentary evidences such as GST registration, ledger account and import documents of the parties evidencing that the goods were directly procured by the parties and stored in the cold storage belonging to the assessee, the AO ignored all these evidences and disbelieved that the transactions with the said 8 parties are not genuine merely because the assessee received storage charges in cash.

Hence, the ITAT refused to reason to interfere with the findings of the CIT (Appeals) in holding 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.

Counsel for Appellant/ Revenue: Amisha Gupta

Counsel for Respondent/ Assessee: Mohit Gupta

Case Title: DCIT verses Suboli Ice and Cold Storage Pvt Ltd

Case Number: ITA No.2143/Del/2023

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