SHREE KRISHNA CORPORATION, THANE V. ASST CIT CIR 2, THANE

CO 24/MUM/2014

• Counselvise Citation: [2015] 123 COUNSELVISE.COM (IT) 0426 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 29 day(s)
• Appeal Type: Cross Objection
• Pronouncement Date: 20-02-2015
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: H
• Next Hearing Date: 09-09-2014
• Assessment Year: 2007-2008
• Appeal Filed On: 21-01-2014
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: JEETENDRA KUMAR
• Assessee Lawyers: DINESH R SHAH
• Keywords: Unexplained expenditure; Opportunity of being heard; Principle of natural justice; Additional evidence
• Section: 69C

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL H , BENCH MUMBAI , BEFORE SHRI I. P. BANSAL, J M & SHRI R.C.SHARMA , A M ITA NO. 58 2 / MUM/20 1 1 ( ASSESSMENT YEAR : 200 7 - 08 ) ACIT, CIR - 2, THANE (WEST) - 400602, VS. M/S SHREE KRISHNA CORPORATION, B - 003 SANGHVI TOWER, MIRA BHAYANDER ROAD, MIRA ROAD, THANE PAN/GIR NO. : A A FFS 68 78 J ( APPELLANT ) .. ( RESPONDENT ) AND CO NO. 24/ MUM/20 14 ( ASSESSMENT YEAR :2007 - 08 ) M/S SHREE KRISHNA CORPORATION, B - 003 SANGHVI TOWER, MIRA BHAYANDER ROAD, MIRA ROAD, THANE VS. ACIT, CIR - 2, TH ANE (WEST) - 400602, PAN/GIR NO. : A AFFS 6878 J ( APPELLANT ) .. ( RESPONDENT ) /REVENUE BY : SHRI JEETENDRA KUMAR /ASSESSEE BY : SHRI DINESH R.SHAH DATE OF HEARING : 4 TH FEBRUARY , 201 5 DATE OF PRONOUNCEMENT 20 TH FEBRUARY,2015 O R D E R PER R.C.SHARMA (A.M) : THE REVENUE HAS FILED APPEAL AND THE ASSESSEE HAS FILED CROSS OBJECTION AGAINST THE ORDER OF CIT(A), FOR THE ASSESSMENT YEAR 200 7 - 08 , IN THE MATTER OF ORDER PASSED U/S.143(3) OF THE ACT . ITA NO. 582 / 1 1 & CO NO.24/14 2 2. THE REVENUE IN ITS APPEAL HAS TAKEN THE FOLLOWING GROUNDS : - 1. ON THE FACTS OF THE CASE AND IN LAW, WHETHER THE LEARNED CLT ( A) WAS RIGHT IN ADMITTING FRESH EVIDENCE REGARD ING GENUINENESS 'OF SUNDRY CREDITORS WITHOUT GIVING ANY OPPORTUNITY TO THE A.O. TO REBUT THE ADDITIONAL EVIDENCE PRODUCED BEFORE THE LEARNED CLT ( A) UNDER RULE 46A(3) OF THE LT. RULES 1962. 2. THE LEARNED CIT{A) ERRED ON FACTS OF THE CASE SPECIFICALLY WHE N THE CIT{A) WAS HAVING KNOWLEDGE OF THE FACT THAT THE ASSESSEE WAS ASKED TO PRODUCE THE PROOF REGARDING GENUINENESS OF CREDITORS AMOUNTING TO RS. 79,21,999/ - DURING THE COURSE OF ASSESSMENT PROCEEDINGS. HOWEVER, THE ASSESSEE HAS NOT PRODUCED THE DOCUMENTA RY EVIDENCES IN REGARD TO THE CREDITORS OF RS. 65,71,531/ - BEFORE ASSESSING OFFICER. 3. THE LEARNED CLT ( A) ERRED ON FACTS REGARDING THE EVIDENCES PRODUCED BEFORE THE CLT ( A) WHICH IS AN AFTERTHOUGHT EXERCISE. THEREFORE, THE CLT ( A) SHOULD HAVE NOT ENTERTAI NED AT THE APPELLATE STAGE WITHOUT GIVING OPPORTUNITY TO THE ASSESSING OFFICER. DESPITE THE FACT THAT CIT{A) IS APPARENTLY CONVINCED THAT THE CREDITS INTRODUCED IN THE BOOKS OF ACCOUNT ARE NOT GENUINE, THE ADDITION OF RS. 65,71,531/ - HAS BEEN DELETED MEREL Y ON THE GROUND THAT ASSESSING OFFICER HAS NOT GRANTED OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. THUS, IT CAN BE SEEN FROM THE ORDER OF CIT{A) THAT AT ONE HAND CIT{A) SAYS THAT ASSESSING OFFICER HAS CALLED FOR DETAILS OF SUNDRY CREDITORS AND ON THE OTHER HAND CLAIMS THAT NO OPPORTUNITY HAS BEEN GIVEN TO THE ASSESSEE FOR PROVING THE GENUINENESS OF CREDITS. 3 . THE CROSS OBJECTION FILED BY THE ASSESSEE IS JUST SUPPORT THE ACTION OF THE CIT(A). 4 . WE HAVE CONSIDERED RIVAL CONTENTIONS AND FOUND THAT THE ASSE SSEE FIRM IS A BUILDERS AND DEVELOPERS ENGAGED IN THE BUSINESS OF CONSTRUCTION ACTIVITIES AND LABOUR CONTRACT. DURING THE YEAR UNDER CONSIDERATION, THE ASSESSEE HAS SHOWN TOTAL TURNOVER OF RS.59.55 LAKHS AND AFTER CLAIMING VARIOUS EXPENSES, GROSS PROFIT TH EREON HAS BEEN SHOWN AT 16.42% AN D NET PROFIT AT 12.53% OF THE TURNOVER RESPECTIVELY. THE AO OBSERVED THAT THE ASSESSEE HAS SHOWN SUNDRY CREDITORS OF RS. 79,21,999/ - . THE ITA NO. 582 / 1 1 & CO NO.24/14 3 ASSESSEE H AS SUBMITTED THE CONFIRMATION ONLY FOR SEVEN PARTIES. THE ASSESSEE WAS SPEC IFICALLY ASKED TO SUBMIT THE DETAILS REGARDING SUCH CREDITORS. FOR THE FOLLOWING PARTIES, THE ASSESSEE HAS NOT SUBMITTED ANY DETAIL : - NAME OF SUNDRY CREDITORS AMOUNT (RS.) A.A.ENTERPRISES 124627 A.K.ELECTRIC WORKS - 520 AFREEN TRADING CO. 335186 AQUA P LUMBINGS PVT. LTD. 53222 BHAGATI CERAMICS 40591 BHIMJI & CO. 366621 DARSHAN ENTERPRISES 5310 ESKAY ELEVETORS I. LTD. - 100000 INDORAMA CEMENT LTD. 157981 KRISHNA ELECTRIC & HARDWARE STORE 4000 KRISHNA WOOD KRAFT - 3981 KWALITY ENTERPRISES 4582 MAHAR ASHTRA PIPE FITTING STORE 5722 MAHAVIR PLYWOOD 2370 MEHTA ENGINEERING 1181 MONA ENTERPRISES 70031 NAIN TRADING 210328 NEW NATIONAL PLASTER 21632 POWER POINT ELECTRICAL 4900 RAJGURU CORPORATION 397743 RAPID ENTERPRISES PVT. LTD. 9688 SAHIL TRANSP ORT 68554 SAM ENTERPRISES 401440 SANJAY BOREWELLS 4430 SHIRVI ENTERPRISES 104500 SHREE NATH DEVELOPERS 4268613 SIDDHARTH INDUSTRIES 3837 SARVODAY TRADING CO. 1815 V.K.INDUSTRIES 3828 V.S.ENTERPRISES 500 ZYREX ENTERPRISES 2800 TOTAL 65,71,531 I N RESPECT OF ABOVE PARTIES, THE AO MADE ADDITION U/S.69C OF THE ACT. ITA NO. 582 / 1 1 & CO NO.24/14 4 5 . BY THE IMPUGNED ORDER, THE CIT(A) DELETED THE ADDITION AFTER HAVING THE FOLLOWING OBSERVATIONS : - 17. I HAVE PERUSED THE ASSESSMENT ORDER OF THE AO AND HAVE ALSO CONSIDERED THE ABOV E SUBMISSIONS OF THE APPELLANT. THE ABOVE ARGUMENT OF THE APPELLANT ARE NOT WITHOUT MERIT. THE AO HAD THE NAMES AND ADDRESSES OF THESE OUTSTANDING CREDITORS AND INDEPENDENT INVESTIGATION SHOULD HAVE BEEN MADE AND EVIDENCE PLACED ON RECORD TO PROVE THAT THE SE ARE NOT OUTSTANDING OR ARE BOGUS, BEFORE DISALLOWING THE SAME. THE AO HAS NOT PLACED ANY EVIDENCE ON RECORD TO PROVE THAT THE OUTSTANDING LIABILITIES OF THE CREDITORS AMOUNTING TO RS. 65,71,531/ - IS NOT GENUINE. ALTHOUGH THE AMOUNT IN QUESTION APPEARING IN THE BALANCE SHEET AS ON 31/03/2007 IS SHOWN AS OUTSTANDING LIABILITY BUT THIS FACT ALONE CANNOT MAKE THE OUTSTANDING LIABILITY AS NON - GENUINE. THE AO HAS NOT EXAMINED ANY CREDITOR BEFORE TAKING THE DE:CISION OF DISALLOWING AN ENTIRE GROUP OF CREDITORS. THE SECTION 69C ENVISAGES THAT IF THERE IS DISPUTE REGARDING THE SOURCE OF THE EXPENDITURE WHICH IS SUBSTANTIATED BY THE EVIDENCE, ONLY IN SUCH SITUATION THAT THE PROVISIONS OF THE SECTION CAN BE INVOKED. MERELY BECAUSE THE LIABILITY OF THE CREDITORS IS O UTSTANDING AS ON 31/03/2007 DOES NOT EMPOWER THE AO TO DISALLOW THE SAME, SUCH A DECISION HAS TO BE BACKED BY THE EVIDENCE PLACED ON RECORD. 18. DURING THE COURSE OF APPELLATE PROCEEDINGS, THE APPELLANT HAS PLACED ON RECORD THE CONFIRMATION WITH PAN OF T HE OUTSTANDING CREDITORS WHICH ARE PLACED AT PAGES 1 TO 31 OF THE PAPER BOOK. THE APPELLANT HAS ALSO PLACED ON RECORD THE COPY OF THE BANK STATEMENT A/C NO. CA - 29284 MAINTAINED WITH UNION BANK, MIRA ROAD BRANCH FOR THE PERIOD 01.04.2007 TO 31,03.2008 FROM WHERE THE PAYMENTS TO THE OUTSTANDING CREDITORS WERE MADE THROUGH CHEQUES IN THE SUBSEQUENT YEAR. THE EVIDENCES PRODUCED BY THE APPELLANT CLEARLY PROVES THAT THE OUTSTANDING CREDITORS WERE GENUINE. 19. THE APPELLANT HAS ALSO VEHEMENTLY ARGUED THAT THE A O HAS NOT PROVIDED THEM OPPORTUNITY OF BEING HEARD BEFORE MAKING THE ABOVE ADDITION OF OUTSTANDING CREDITORS, THUS VIOLATING THE PRINCIPLES OF NATURAL JUSTICE. THE CONTENTION OF THE APPELLANT IS NOT WITHOUT MERIT. FROM THE PERUSAL OF THE ASSESSMENT ORDER, IT CAN BE OBSERVED THAT THERE IS NO MENTION OF ANY FINAL NOTICE BEING ISSUED BY THE AO TO THE APPELLANT PROPOSING THE ADDITIONS TO BE MADE ON ACCOUNT OF OUTSTANDING LIABILITY OF THE BUSINESS CREDITORS. THE ADDITION WAS MADE WITH THE OBSERVATION THAT THE AR OF THE APPELLANT WAS SPECIFICALLY ASKED TO PRODUCE THE DETAILS OF SUNDRY CREDITORS ALONG WITH THEIR PAN ADDRESS BUT ASSESSEE ITA NO. 582 / 1 1 & CO NO.24/14 5 FAILED TO FURNISH ANY DETAILS IN THIS REGARD. IT IS CLEAR FROM THE ABOVE THAT NO FINAL OPPORTUNITY OF BEING HEARD OR NOTICE PROPOS ING THE ABOVE ADDITIONS HAS BEEN ISSUED BY THE AO. IN THE ABSENCE OF SUCH AN OPPORTUNITY BEING AFFORDED TO THE APPELLANT, THE ASSESSMENT ORDER IS VITIATED. 20. IN THE CASE OF J.T. (INDIA) EXPORTS VS. UNION OF INDIA, (2003) 262 ITR 269 (DEL)(FB), IT HAS B EEN HELD THAT 'THE ADHERENCE TO PRINCIPLE OF NATURAL JUSTICE AS RECOGNISED BY ALL CIVILIZED STATES IS OF SUPREME IMPORTANCE WHEN A QUASI JUDICIAL BODY EMBARKS ON DETERMINING DISPUTES BETWEEN THE PARTIES. THESE PRINCIPLES ARE WELL - SETTLED. THE FIRST AND F OREMOST PRINCIPLE IS WHAT IS COMMONLY KNOWN AS AUDI ALTERAM PARTEM RULE. IT SAYS THAT NONE SHOULD BE CONDEMNED UNHEARD. NOTICE IS THE FIRST LIMB OF THIS PRINCIPLE. IT MUST BE PRECISE AND UNAMBIGUOUS. IT SHOULD APPRAISE THE PARTY DETERMINATIVELY THE CASE HE HAS TO MEET. TIME GIVEN FOR THE PURPOSE SHOULD BE ADEQUATE SO AS TO ENABLE SUCH REASONABLE OPPORTUNITY, THE ORDER PASSED AGAINST THE PERSON IN ABSENTIA BECOMES WHOLLY VITIATED. THUS, IT IS BUT ESSENTIAL THAT A PARTY SHOULD BE PUT ON NOTICE OF THE CASE BEF ORE ANY ADVERSE ORDER IS PASSED AGAINST HIM. THIS IS ONE OF THE MOST IMPORTANT PRINCIPLES OF NATURAL JUSTICE. IT IS AFTER ALL AN APPROVED RULE OF FAIRPLAY. 21. IN THE CASE OF TIN BOX CO. VS. COMMISSIONER OF INCOME TAX, (2001) 249 ITR 216 (SC), IT HAS BEEN HELD BY THE APEX COURT THAT 'ASSESSMENT ORDER MUST BE MADE AFTER THE ASSESSEE HAS BEEN GIVEN REASONABLE OPPORTUNITY OF SETTING OUT HIS CASE; ASSESSMENT MADE WITHOUT GIVING THE ASSESSEE SUCH AN OPPORTUNITY WAS LIABLE TO BE SET ASIDE AND REMANDED FOR FRES H CONSIDERATION. 22. IN VIEW OF THE FACTS AND CIRCUMSTANCES EXPLAINED ABOVE, IN MY OPINION, THE ACTION OF THE AO ADDING BACK THE CREDITORS TO THE INCOME OF THE APPELLANT IS NOT JUSTIFIED AND THE SAME CANNOT BE SUSTAINED. THE ADDITION MADE THEREFORE AMOUN TING TO RS.65, 71,531/ - IS DELETED. 6. AGAINST THE ABOVE ORDER OF CIT(A), THE REVENUE IS IN APPEAL BEFORE US AND IN THE CROSS OBJECTION, THE ASSESSEE SUPPORTS THE ACTION OF THE CIT(A). 7. RIVAL CONTENTIONS HAVE BEEN HEARD AND RECORD PERUSED. FROM THE REC ORD WE FOUND THAT ASSESSEE HAD SHOWN SUNDRY CREDITORS OF ITA NO. 582 / 1 1 & CO NO.24/14 6 RS.79,21,999/ - IN ITS BOOKS OF ACCOUNTS. THE AO ASKED RELEVANT CONFIRMATION, PAN AND ADDRESS OF THE CREDITORS. HOWEVER, THE ASSESSEE FAILED TO FURNISH THESE DETAILS IN RESPECT OF CREDITORS AMOUNTING TO RS. 65,71,531/ - AS PER LIST GIVEN ABOVE. EVEN THE ASSESSEE FAILED TO REPLY AOS QUERY REGARDING SINCE WHEN THE AMOUNT IN QUESTION WAS OUTSTANDING. BY OBSERVING THAT ASSESSEE COULD NOT FURNISH THE CONFIRMATION ALONG WITH REQUIRED INFORMATION IN SPITE OF REPEATED REQUESTS, THE AO ADDED THE SAME AS UNEXPLAINED EXPENDITURE U/S.69C OF THE I.T.ACT. THE CIT (A) DELETED THE SAME JUST BY OBSERVING THAT THE AO HAS NOT PLACED ANY EVIDENCE ON RECORD TO PROVE THAT THE OUTSTANDING LIABILITY OF CREDITORS AMOUNTING TO RS .65,71,531/ - WAS NOT GENUINE. WE DO NOT FIND ANY MERIT IN THE ACTION OF CIT(A) INSOFAR AS INITIAL ONUS IS ON THE ASSESSEE TO FURNISH THE CONFIRMATION OF CREDITORS ALONG WITH OTHER DETAILS REQUIRED BY THE AO, WHICH ARE NECESSARY TO INQUIRE INTO THE GENUINE OF THE CREDITORS I.E. THEIR PANS, ADDRESS AND THE YEARS SINCE WHEN IT WAS OUTSTANDING. ONLY AFTER SUPPLYING THESE INFORMATION, ONUS IS SHIFTED ON THE AO TO MAKE ENQUIRY , IF HE WANTS. WITHOUT FURNISHING ALL THESE INFORMATION, THE AO CANNOT UNDERTAKE ANY ENQ UIRY TO FIND OUT GENUINENESS OF SUCH CREDITORS. THE CIT(A) IN HIS APPELLATE ORDER ITSELF HAS OBSERVED THAT DURING THE COURSE OF APPELLATE PROCEEDINGS, THE ASSESSEE HAS PLACED ON RECORD CONFIRMATION AND PAN OF OUTSTANDING CREDITORS ALONG WITH COPY OF THE BA NK STATEMENT MAINTAINED WITH UNION BANK OF INDIA FROM WHERE PAYMENT TO THE OUTSTANDING CREDITORS WERE MADE THROUGH CHEQUES IN THE SUBSEQUENT ITA NO. 582 / 1 1 & CO NO.24/14 7 YEAR. THESE DOCUMENTS WERE NOT FILED BEFORE THE AO NOR THE CIT(A) HAS GIVEN ANY OPPORTUNITY TO THE AO TO EXAMINE TH E INFORMATION SO SUPPLIED AND SUBMIT REMAND REPORT . THE REVENUE HAS TAKEN A GROUND FOR VIOLATION OF RULE 46A. WE ARE IN AGREEMENT WITH THE CONTENTION OF LD. DR SHRI JEETENDRA KUMAR THAT THE CIT(A) HAS CLEARLY VIOLATED THE RULE 46A IN NOT GIVING OPPORTUNITY TO THE AO IN RESPECT OF THE DOCUMENTS FURNISHED FOR THE FIRST TIME BEFORE THE CIT (A) . LD. DR FURTHER CONTENDED THAT NO FINDING HAS BEEN GIVEN BY THE CIT(A) WITH REGARD TO THE FACT THAT HE HAS EXAMINED THOSE CREDITORS TO FIND OUT THEIR GENUINENESS. WE AGR EE WITH THE CONTENTION OF LD. DR THAT POWERS OF CIT(A) ARE COTERMINOUS WITH THE POWER OF AO, WHAT THE AO HAS FAILED TO DO, THE CIT(A) SHOULD HAVE DONE. THUS, WITHOUT RECORDING HIS FINDING ON THE GENUINENESS OF CREDITOR THE CIT(A) WAS NOT JUSTIFIED IN DELET ING THE ADDITION. 8. IN VIEW OF THE ABOVE DISCUSSION, WE ARE IN AGREEMENT WITH THE LD. DR, SHRI JEETENDRA KUMAR THAT THE CIT(A) WAS NOT JUSTIFIED IN DELETING THE ADDITION OF RS. 65,71,531/ - ON THE BASIS OF ADDITION AL DOCUMENT FILED BEFORE HIM ON WHICH THE CIT(A) HAS NOT CALLED FOR ANY REMAND REPORT NOR HAS GIVEN HIS OWN FINDING TO ESTABLISH GENUINENESS OF THE ALLEGED CREDITORS. HENCE, WE SET ASIDE THE ORDER OF CIT(A) AND MATTER IS RESTORED BACK TO THE FILE OF AO FOR DECIDING AFRESH AFTER CONSIDERING THE DET AILS FILED BY THE ASSESSEE BEFORE THE CIT(A) WITH REGARD TO AMOUNT OF RS.65,71,531/ - . WE DIRECT ACCORDINGLY. ITA NO. 582 / 1 1 & CO NO.24/14 8 9 . IN THE RESULT, AP PEAL OF THE REVENUE IS ALLOWED FOR STATISTICAL PURPOSES AND THE CROSS OBJECTION FILED BY THE ASSESSEE IS DISMISSED. ORDER PRON OUNCED IN THE OPEN COURT ON THIS 20/02/ 201 5 . SD/ - SD/ - ( ) ( I. P. BANSAL ) ( ) ( R.C.SHARMA ) / JUDICIAL MEMBER / ACCOUNTANT MEMBER MUMBAI ; DATED 20/02 /201 5 /PKM , PS COPY OF THE ORDER FORWARDED TO : / BY ORDER, ( ASSTT. REGISTRAR) / ITAT, MUMBAI 1. / THE APPELLANT 2. / THE RESPONDENT. 3. / THE CIT(A), MUMBAI. 4. / CIT 5. / DR, ITAT, MUMBAI 6. GUARD FILE. //TRUE COPY//