DRESSWALA FASHIONS P.LTD, MUMBAI V. ITO 4(1)-4, MUMBAI

CO 219/MUM/2014

• Counselvise Citation: [2015] 123 COUNSELVISE.COM (IT) 1506 (ITAT-MUMBAI)
• Duration Of Justice: 11 month(s) 21 day(s)
• Appeal Type: Cross Objection
• Pronouncement Date: 07-10-2015
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: Not Allotted
• Next Hearing Date: 23-02-2015
• Assessment Year: 1997-1998
• Appeal Filed On: 16-10-2014
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: A RAMCHANDRAN
• Assessee Lawyers: SAMEER G DALAL
• Keywords: Business income; Onus to prove
• Section: 144

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH, MUMBAI BEFORE S/SHRI B.R.BASKARAN , AM AND AMARJIT SINGH , JM ./ I.T.A. NO . 514 / MUM/20 1 1 ( / ASSESSMENT YEA R : 20 0 7 - 08 ) INCOME TAX OFFIC ER 4(1)(4), ROOM NO.637A, 6 TH FLOOR, AAYAKAR BHAVAN, M K ROAD, MUMBAI - 400020 / VS. M/S DRESSWALA FASHIONS PVT LTD., 95, SHANTINIKETAN, MARINE DRIVE, MUMBAI - 400002 ( / APPELLANT ) .. ( / RESPONDENT ) CO NO.219/MUM/2014 ARISING OU T OF I.T.A. NO .514/ MUM/20 11 ( / ASSESSMENT YEA R : 2007 - 08 ) M/S DRESSWALA FASHIONS PVT LTD., / VS. INCOME TAX OFFICER 4(1)(4), ( / APPELLANT ) .. ( / RESPONDENT ) ./ ./PAN. : A ADCD0607L / REVENUE BY SHRI A RAMCHANDRAN / ASSESSEE BY SHRI SAMEER G DALAL / DATE OF HEARING : 16 .9 . 201 5 / DATE OF PRONOUNCEMENT: 7. 10. 201 5 / O R D E R P ER B R BASKARAN, AM : THE REVENUE HAS FILED THIS APPEAL AND THE ASSESSEE HAS FILED THE CROSS OBJECTION CHALLENGING THE ORDER DATED 28. 1 0 .2010 PASSED BY LD CIT(A) - 10 , MUMBAI FOR ASSESSMENT YEAR 1997 - 98 . ITA NO. 514 / MUM/20 1 1 CO NO.219/MUM/2014 2 2. THE REVENUE IS AGGRIEVED BY THE DECISION O F LD.CIT ( A) IN REDUCING THE INCOME ESTIMATED BY THE AO TO RS.50,000/ - , T HUS GRANTING A RELIEF OF RS.17.50 LAKHS TO THE ASSESSEE. 3. THE FACTS ARE THAT THE ASSESSEE DID NOT FILE RETURN OF INCOME FOR THE YEAR UNDER CONSIDERATION AND HENCE THE AO COMPLETE D THE ASSESSMENT U/S 144 OF THE INCOME TAX ACT, 1961(THE ACT) ON 31.3.2000 DETERMINING THE TOTAL INCOME OF THE ASSESSEE AT RS.1.42 C R ORES. I N THE APPELLATE PROCEEDINGS, THE LD.CIT(A) SET ASIDE THE MATTER TO THE FILE OF THE AO TO REDO THE ASSESSMENT. SINCE THE ASSESSEE DID NOT COOPERATE WITH THE AO, H E AGAIN COMPLETED THE ASSESSMENT BY DETERMIN ING THE TOTAL INCOME AT RS.1.42 CRORES. THE ASSESSEE CHALLENGED THE SAME BY FILING APPEAL BEFORE THE LD. CIT(A) , WHO DELETED THE ENTIRE ADDITION. AGGRIEVED, THE RE VENUE FILED THIS APPEAL BEFORE THE I T AT AND THE TRIBUNAL, VIDE ITS ORDER DATED 18.12.2007 PASSED IN ITA NO.2665/MUM/2003, RESTORED THE MATTER TO THE FILE OF THE AO WITH A DIRECTION TO MAKE THE ASSESSMENT AFRESH. 4 . IN THE SETTING ASIDE PROCEEDINGS, THE AO DETERMINED THE TOTAL INCOME AT RS.18 LAKHS , WHICH CONSISTED OF BUSINESS INCOME OF RS . 16.00 LAKHS AND INTEREST INCOME OF RS.2.00 LAKHS. THE ASSESSEE CHALLENGED THE ASSESSMENT ORDER BY FILING THE APPEAL BEFORE THE LD.CIT(A) WHO REDUCED THE INCOME OF THE ASSESSEE TO RS.50,000/ - . AGGRIEV ED WITH THIS ORDER, THE REVENUE HAS FILED THIS APPEAL BEFORE US. IN THE CROSS OBJECTION, THE ASSESSEE IS CHALLENGING THE ADDITION OF RS.50,000/ - SUSTAINED BY LD CIT(A). 5 . WE HEARD THE PARTIES AND PERUSED THE RECORD. THE STAND OF THE ASSESSEE BEFORE LD CIT(A) WAS THAT IT DID NOT CARRY ON ANY BUSINESS DURING THE YEAR UNDER CONSIDERATION AND HENCE IT DID NOT GENERATE ANY INCOME T ALL. HOWEVER, W E NOTICE THAT THE ASSESSEE , DURING THE COURSE OF ORIGINAL ITA NO. 514 / MUM/20 1 1 CO NO.219/MUM/2014 3 ASSESSMENT PROCEEDING S , HAD STATED THAT THE BOOKS OF ACCOUNT OF THE YEAR UNDER CONSIDERATION ARE UNDER PREPARATION BY THE ACCOUNTANT . THE AO ALSO NOTICED THAT THE ASSESSEE HAD SHOWN CLOSING STOCK OF RS.1.4 0 CRORES IN THE BALANCE - SHEET FILED FOR THE IMMEDIATELY PRECEDING YEAR I.E. ASSESSMENT YEAR 2006 - 07. THERE SHOULD NOT BE ANY DOUBT THAT THE CLOSING STOCK SHOWN IN AY 2006 - 07 SHALL APPEAR AS OPENING STOCK IN THE YEAR UNDER CONSIDERATION. WE NOTICE THAT THE ASSESSEE DID NOT OFFER ANY EXPLANATION ABOUT THE DISPOSAL OF STOCK S TATED ABOVE. FURTHER, WE NOTICE THAT THE ASSESSEE DID NOT FURNISH ANY DETAILS BEFORE THE AO AND HENCE THE AO WAS CONSTRAINED TO COMPUTE THE BUSINESS INCOME AT RS.16 LAK HS AND INTEREST INCOME OF RS.2 LAKHS , BOTH AGGREGATING TO RS.18 LAKHS. 6. THE LD. CIT(A), HOWEVER, HAS NOTICED THAT THE ASSESSEE HAS SHOWN THE NET PROFIT AT AROUND RS.50,000/ - ONLY IN THE IMMEDIATELY PRECEDING YEARS. FURTHER, THE LD. CIT(A) HAS ACCEPTED THE CONTENTION S OF THE ASSESSEE THAT IT DID NOT CARR Y ON ANY BUSINESS DURING THE Y EAR UNDER CONSIDERATION. ACCORDINGLY, THE LD. CIT(A) HAS T A K EN THE VIEW THAT THE AO DID NOT BRING ANY MATERIAL ON RECORD TO SHOW THAT THE ASSESSEE WAS CARRYING ON ANY BUSINESS DURING THE YEAR UNDER CONSIDERATION . ACCORDINGLY, HE HAS DETERMINED TOTAL INCO ME AT RS.50,000/ - . 7 . THERE SHOULD NOT BE ANY DISPUTE THAT THE INITIAL BURDEN TO PROVE THAT IT DID NOT CARRY ON ANY BUSINESS LIES UPON THE ASSESSEE. FURTHER, IN THE PRESENT CASE, NEITHER THE ASSESSEE NOR THE LD. CIT(A) COULD BRING ANYTHING TO SHOW THAT T HE CLOSING STOCK AVAILABLE AS ON 31. 3 .1996 WAS NOT SOLD DURING THE YEAR UNDER CONSIDERATION . UNDER NORMAL BUSINESS CIRCUMSTANCES, IT IS UNLIKELY THAT THE OPENING STOCK OF RS.1.40 CRORES SHALL BE KEPT IDLE BY ANY BUSINESS MAN. HENCE THE CONTENTION OF THE A SSESSEE THAT IT DID NOT CARRY ON THE BUSINESS DURING THE YEAR UNDER CONSIDERATION, ITA NO. 514 / MUM/20 1 1 CO NO.219/MUM/2014 4 IN OUR VIEW, DEFIES THE LOGIC. WE FURTHER NOTICE THAT THE ASSESSEE DID NOT BRING ANY MATERIAL ON RECORD TO SHOW THAT IT DID NOT CARRY ON THE BUSINESS DURING THE YEAR UNDER CONSIDERATION. THE ASSESSEE, BEING A PRIVATE LIMITED COMPANY, IS REQUIRED TO MAINTAIN PROPER BOOKS OF ACCOUNT, GET THE SAME AUDITED AND PASSED IN THE AGM. FURTHER, IT IS REQUIRED TO SUBMIT THE SAME WITH REGISTRAR OF COMPANIES. HOWEVER, THE ASSESSEE HAS FAILED TO FURNISH THE BOOKS OF ACCOUNT BEFORE THE AO. IT WAS ALSO NOT SHOWN THAT THE ANNUAL REPORT WAS NOT FILED BEFORE THE REGISTRAR OF COMPANIES ALSO. 8. UNDER THESE SET OF FACTS, WE ARE NOT ABLE TO AGREE WITH THE OBSERVATION OF LD. CIT(A) THAT THE AO SHOULD HAVE BROUGHT ANY MATERIAL ON RECORD TO SHOW THAT THE ASSESSEE WAS CARRYING ON BUSINESS. RATHER, IN OUR VIEW, THE ASSESSEE SHOULD HAVE BROUGHT SOME MATERIAL ON RECORD TO SHOW THAT IT DID NOT CARRY ON BUSINESS DURING THE YEAR UNDER CONSIDERATI ON AND IT DID NOT GENERATE ANY INCOME AT ALL. IT IS PERTINENT TO NOTE THAT THE LD CIT(A), HAVING HELD SO, HAS HIMSELF ESTIMATED THE INCOME AT RS.50,000/ - , WHICH IS IN CONTRADICTION TO THE STAND TAKEN BY HIM. 9. SINCE THE ASSESSEE HAS FAILED TO FURN ISH ANY MATERIAL BEFORE THE AO AND SINCE THE ASSESSEE HAS FAILED TO OFFER ANY EXPLANATION ABOUT THE OPENING STOCK OF RS.1.40 CRORES, THE ASSESSING OFFICER HAD NO OTHER OPTION, BUT TO ESTIMATE THE INCOME OF THE ASSESSEE. DURING THE COURSE OF HEARING, IT W AS POINTED OUT THAT THE BUSINESS INCOME OF THE ASSESSEE WAS ESTIMATED AT RS.8.00 LAKHS IN THE FIRST FOUND (ORIGINAL ASSESSMENT PROCEEDINGS). HENCE, THE INCOME OF RS.16.00 LAKHS ESTIMATED BY THE AO IN THE SET ASIDE PROCEEDING IS ON THE HIGHER SIDE. WE FUR THER NOTICE THAT THE ASSESSEE COMPANY HAS BEEN IN THE PROCESS OF WINDING UP AND THE BANK HAS INITIATED LEGAL PROCEEDINGS AGAINST THE ASSESSEE. HENCE, ON A CONSPECTUS OF THE MATTER, WE ARE OF THE VIEW THAT THIS ISSUE SHALL MEET THE ENDS OF JUSTICE, IF ITA NO. 514 / MUM/20 1 1 CO NO.219/MUM/2014 5 THE INCOME OF THE ASSESSEE FOR THE YEAR UNDER CONSIDERATION IS ESTIMATED AT RS.5.00 LAKHS. WE ORDER ACCORDINGLY. THE ORDER OF LD CIT(A) STANDS MODIFIED ACCORDINGLY. 10. SINCE WE HAVE ENHANCED THE ESTIMATE BY LD CIT(A), THE CROSS OBJECTION FILED BY THE ASSESSEE DESERVES TO BE DISMISSED. 11 . IN THE RESULT, THE APPEAL OF THE REVENUE IS PARTLY ALLOWED AND THE CROSS OBJECTION OF THE ASSESSEE IS DISMISSED. PRONOUNCED ACCORDINGLY ON 7TH OCT , 2015. 7TH OCT , 2015 SD SD ( AMARJIT SINGH ) ( B.R. BASKARAN) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI: 7TH OCT , 2015 . . . ./ SRL , SR. PS / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. ( ) / THE CIT(A) - CONCERNED 4. / CIT CONCERNED 5. , , / DR, ITAT, MUMBAI CONCERNED 6. / GUARD FILE. / BY ORDER, TRUE COPY (ASSTT. REGISTRAR) , /ITAT, MUMBAI