The ITO,Vapi Ward-2, Vapi V. M/s. Sugam Health Care, Vapi

ITA 1090/AHD/2010

• Counselvise Citation: [2010] 136 COUNSELVISE.COM (IT) 5730 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 month(s) 6 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-07-2010
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 02-07-2010
• Assessment Year: 2006-2007
• Appeal Filed On: 09-04-2010
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Assessee Lawyers: ARUN PATEL
• Keywords: Principle of natural justice; Additional evidence; Set aside
• Section: 251; 143(2); 208; 68

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCH 'B' [BEFORE SHRI MAHAVIR SINGH,JM & SHRI A N PAHUJA,AM] ITA NO.1090/AHD/2010 (ASSESSMENT YEAR:-2006-07) INCOME-TAX OFFICER, VAPI WARD-2, VAPI V/S M/S SUGAM HEALTH CARE, PLOT NO.1110, GIDC, SARIGAM, TAL: UMBERGAON [PAN: ABCFS 7584 G] [APPELLANT] [RESPONDENT] REVENUE BY :- SHRI K MADHUSUDAN, DR ASSESSEE BY:- SHRI ARUN PATEL, AR O R D E R A N PAHUJA: THIS APPEAL BY THE REVENUE AGAINST AN ORDER DATED 11- 11-2009 OF THE LD. CIT(APPEALS), VALSAD, RAISES THE FOLLOWING GROUNDS:- (A) ON THE FACTS AND CIRCUMSTANCES OF THE CASE, AN D IN LAW, THE LEARNED CIT(A) HAS ERRED IN RESPECT OF DELETING THE ADDITIO N ON ACCOUNT OF CAPITAL INTRODUCED BY PARTNERS OF RS.7,15,000/-. (B) ON THE FACTS AND CIRCUMSTANCES OF THE CASE, AND IN LAW, THE LEARNED CIT(A) HAS ERRED IN RESPECT OF DELETING THE ADDITIO N OF UNSECURED LOAN U/S 68 OF RS.6,90,000/-. IT IS, THEREFORE, PRAYED THAT THE ORDER OF THE LEAR NED CIT(A) BE SET ASIDE AND THAT THE ORDER OF THE AO BE RESTORED. THE APPELLANT CRAVES LEAVE TO ADD ALTER OR AMEND AN Y GROUNDS OF APPEAL. 2 FACTS, IN BRIEF, AS PER RELEVANT ORDERS ARE THAT RETURN DECLARING INCOME OF RS.72,668/- FILED BY THE ASSESSEE, MANUFA CTURING AYURVEDIC MEDICINES, AFTER BEING PROCESSED U/S 143( 1)(A) OF THE INCOME-TAX ACT, 1961 [HEREINAFTER REFERRED TO AS TH E ACT] WAS SELECTED FOR SCRUTINY WITH THE SERVICE OF NOTICE U/ S 143(2) OF THE ACT ON 19-02-2007.DURING THE COURSE OF ASSESSMENT PROCE EDINGS, THE ASSESSING OFFICER[AO IN SHORT] NOTICED THAT THE PA RTNERS OF THE ASSESSEE FIRM BROUGHT IN FOLLOWING ADDITIONAL CAPIT AL: ITA NO.1090/AHD/2010 FOR AY 2006-07 M/S SUGAM HEALTH CARE 2 SR. NO. NAME OF THE PARTNER NEW CAPITAL INTRODUC ED -------- ------------------------ ---------------- ------------ 1 BALLUBHAI MODHWADIA RS.3,15,000/- 2 SHRI DHARMESH H THANKI RS.4,00,000/- ---------------- RS.7,15,000/- 2.1. BESIDES, LOANS OF RS.7,90,400/- WERE REFLECTED IN THE NAME OF FRIENDS AND RELATIVES. DESPITE REPEATED REQUESTS MA DE, THE ASSESSEE DID NOT PRODUCE CONFIRMATIONS OF THE AFORESAID PART IES OR EVEN PAN, COPIES OF RETURN OF INCOME TOGETHER WITH BALANCE SH EET SHOWING THE NAME OF THE ASSESSEE UNDER THE HEAD LOANS AND ADVAN CES. SINCE THE ASSESSEE DID NOT ESTABLISH IDENTITY OR CREDITWO RTHINESS OF THE CREDITORS OR EVEN THE GENUINENESS OF TRANSACTIONS NOR ESTABLISHED THAT THE PARTNERS INDEED HAD BROUGHT IN THE CAPITAL IN THE FIRM, RELYING UPON DECISIONS IN THE CASE OF CIT V. KISHO RILAL SANTHOSHILAL (1995) 216 ITR 9( RAJASTHAN ), CIT VS. DURGA PRASAD MORE [ 1971] 82 ITR 540 (SC), SUMATI DAYAL V. CIT [1995] 214 ITR 801/80 TAXMAN 89 (SC) AND CIT V. PRECISION FINANCE (P.) LTD. [1994] 208 ITR 465(CAL.) , THE AO ADDED THE ENTIRE AMOUNT OF CAPITAL INTRODUCED BY THE PARTNERS OF RS.7,15,000/- AND UNSECURED LOAN OF RS.7,90,400/- U/S.68 OF THE ACT. 3. ON APPEAL, THE LD. CIT(A), WITHOUT ASCERTAINING THE IDENTITY OR CREDITWORTHINESS OF THE CREDITORS OR EVEN GENUINENE SS OF THE TRANSACTIONS ,ADMITTED ADDITIONAL EVIDENCE IN CONTR AVENTION OF RULE 46A OF THE IT RULES, 1962 AND DELETED THE ADDITIONS IN THE FOLLOWING TERMS: GROUND 1. WITH REGARDS TO THE DISALLOWANCE ON ACCO UNT OF CAPITAL INTRODUCED BY THE PARTNERS OF RS.7,15,000- THE APPE LLANT FURNISHED DETAILS THAT RS.3,15,000/- WAS INTRODUCED BY MR. BALLUBHAI MODHWADIA AND RS.4,00,000/- BY MR. DHARMESH H. THANLD. THE ID. AR FURTHER SUBMITTED PARTNERS INCOME TAX ACKNOWLEDGEMENT AND RESPECTIVE BANK A/C SHOWING PAYMENT MADE TO THE PARTNERSHIP FIRM. I AM SATISFIE D THAT THE CAPITAL ITA NO.1090/AHD/2010 FOR AY 2006-07 M/S SUGAM HEALTH CARE 3 INTRODUCTION BY THE PARTNER IS EXPLAINED. OTHERWISE ALSO IN CASE THE EXPLANATION IS UNSATISFACTORY THE SAID AMOUNT CAN N OT BE ASSESSED IN THE HAND OF THE FIRM BUT IN THE INDIVIDUAL HANDS. AO IS DIRECTED TO DELETED THE ADDITION MADE IN THIS ACCOUNT. THIS GROUND OF APPEA L IS ALLOWED. 3.1 LIKE WISE, ADDITION OF RS. 7,90,400/- WAS RED UCED TO RS. 1 LAC IN THE FOLLOWING TERMS: 6. GROUND NO.2 AS PER THE THIRD GROUND OF APPEAL, THE LEARNED AO HAS ERRED IN ADDING FOR UNSECURED LOAN AMOUNTING TO RS. 7,90,400/- U/S 68 OF THE INCOME-TAX ACT, 1961. AS PER THE ASSESSMENT ORD ER, THE LOAN IS TAKEN FROM THE VARIOUS PARTIES AND ASSESSEE FAILED TO SUB MIT CONFIRMATION, TAX ACKNOWLEDGEMENT OF THE PARTIES TO CROSS CONFIRM THE LOANS. AGAIN ADDITION IS MADE U/S 68 OF THE INCOME TAX ACT, 1961. ASSESSE E SUBMITTED DETAILS OF LOAN TAKEN WITH INCOME TAX RETURN OF FOLLOWING PART IES:- U N S E C U R E D L O A N NO. NAME OF THE PARTY ADDRESS AMOUNT ENCLOSURE 1 THANKI NILES MADHAVJI ASHAPURA FARM OPP AIRPORT P ORBANDAR 19000 IT RETURN COPY 2 THANKI JIGNESH MADHAVJI ASHAPURA FARM OPP AIRPORT PORBANDAR 19000 IT RETURN COPY 3 THANKI JITESH MADHAVJI ASHAPURA FARM OPP AIRPORT PORBANDAR 19000 IT RETURN COPY 4 THANKI MANSUKH MADHAVJI ASHAPURA FARM OPP AIRPORT PORBANDAR 18500 IT RETURN COPY 5 PANKAJKUMAR N PATEL C/O OM SHIV IND. GIDC, ANKLE SHWAR 18500 IT RETURN COPY 6 KESHU JIVABHAI GAREJA LABHDIP SOCIETY, S T ROAD, RAJKOT 18500 IT RETURN COPY 7 NARANJI RAMJI NANDU CHAR RASTA, GIDC, SARIGAM 18 500 IT RETURN COPY 8 RESHMA MANOJBHAI DESAI G-1, JAYSHREE KRUPA CO-OP . SOCI. VAPI 18500 IT RETURN COPY 9 KARA BHOJA AT CHHAYA, PORBANDAR 19500 7/12 10 RANMAL BHOJA AT CHHAYA, PORBANDAR 19500 7/12 11 CHHAGAN B MODHVADIYA AT CHHAYA, PORBANDAR 19500 7/12 12 THANKI SHANTILAL RAMJI AT DIGVIJAYGADH, RANAVAV , PORBANDAR 19500 7/12 AND 8A 13 THANKI ATULBHAI RAMJI AT DIGVIJAYGADH, RANAVAV, PORBANDAR 19500 7/12 AND 8A 14 JOSHI KANTILAL DAMJIBHAI OM SHIVAM, CHHAYA PLOT , PORBANDAR 18500 IT RETURN COPY 15 BACHU NARAN LADVA STATION RD., NR. ARYA SAMAJAN I, PORBANDAR 18000 IT RETURN COPY 16 HANSABEN PRADIP THANKI GEETA NAGAR, CHHAYA, POR BANDAR 18000 IT RETURN COPY 17 ARJAN BHOJA MODHVADIYA AT CHHAYA, PORBANDAR 19 500 8-A 18 YOGESH B PATEL B/H PATICHAWL, UDWADA R S 18000 IT RETURN COPY 19 JOSHI VAIKUNTHVAV SHANTILAL B-409, VRUNDAVAN PAR K, CHALA, VAPI 18500 IT RETURN COPY 20 THANKI ATUL VASRAM PLOT NO.49/3, WARD-4-A, ADIP UR, GANDHIDHAM 19500 IT RETURN COPY 21 THANKI PRAFUL MADHAVJI ASHAPURA FARM OPP AIRPOR T, PORBANDAR 19500 IT RETURN COPY 22 S N DOSHI 405 SARVODAY NAGAR MULUND (W) 50000 - 23 LAXMI PHARMACEUTICALS 4, SAI RAM APAT., MULLUND (W) MUMBAI 50000 - IN THE CASE OF LOAN OF RS.50,000/- EACH FROM M/S S N DOSHI AND LAXMI PHARMACEUTICALS, ASSESSEE COULD NOT SUBMIT THEIR TA X ACKNOWLEDGEMENT AND ANY OTHER SUPPORTING TO JUSTIFY HIS CLAIM. CONS IDERING THIS FACT, OUT OF THE ADDITION OF RS.7,90,400/-, THE ADDITION OF RS.6 ,90,400/- IS DELETED AND ITA NO.1090/AHD/2010 FOR AY 2006-07 M/S SUGAM HEALTH CARE 4 ADDITION OF BALANCE OF RS.1,00,000/- IS CONFIRMED. THIS GROUND OF APPEAL IS PARTLY ALLOWED. 4. THE REVENUE IS NOW IN APPEAL BEFORE US AGA INST THE AFORESAID FINDINGS OF THE LD. CIT(A), DELETING/REDUCING THE ADDITIONS. TH E LD. DR WHILE INVITING OUR ATTENTION TO THE IMPUGNED ORDERS AND STATEMENT OF F ACTS ENCLOSED WITH THE APPEAL SUBMITTED THAT THE BEFORE THE AO, THE ASSESSEE DID NOT SUBMIT ANY DETAILS/DOCUMENTS DESPITE OPPORTUNITY ALLOWED NOR E STABLISHED IDENTITY OR CREDITWORTHINESS OF THE CREDITORS WHILE THE LD. CIT (A) ADMITTED FRESH EVIDENCE IN CONTRAVENTION OF RULE 46A OF THE IT RULES, 1962 AND DELETED/REDUCED THE ADDITIONS. ON THE OTHER HAND, THE LD. AR MERELY SUP PORTED THE FINDINGS OF THE LD. CIT(A). 5. WE HAVE HEARD BOTH THE PARTIES AND GONE TH ROUGH THE FACTS OF THE CASE. UNDISPUTEDLY, THE LD. CIT(A) DELETED THE ADDITION ATTRIBUTED TO AN AMOUNT OF RS. 7,15,000/- TO PARTNERS CAPITAL ON THE STRENGTH OF PARTNERS INCOME-TAX ACKNOWLEDGEMENT AND RESPECTIVE COPIES OF BANK ACCOU NTS, PRODUCED BEFORE HIM. LIKEWISE ,ADDITION OF RS. 7,90,400/- WAS REDUCED TO RS. 1 LAC MERELY ON THE BASIS OF COPIES OF IT RETURNS OR 7/12 EXTRACTS PRODUCED B EFORE HIM , WITHOUT RECORDING ANY FINDINGS AS TO HOW CREDITWORTHINESS OF THE CRED ITORS OR GENUINENESS OF TRANSACTIONS WAS ESTABLISHED. EVEN THE FINDINGS OF THE AO IN THE ASSESSMENT ORDER HAVE NOT BEEN CONTROVERTED. IN NUTSHELL, THE LD. CIT(A) REDUCED/DELETED THE ADDITIONS ON THE BASIS OF ADDITIONAL EVIDENCE SUBMI TTED BEFORE HIM, WITHOUT FOLLOWING THE PROCEDURE LAID DOWN UNDER RULE 46A OF THE IT RULES,1962 AND WITHOUT EVEN GRANTING ANY OPPORTUNITY TO THE AO. AS IS APPARENT FROM THE FACTS OF THE CASE, THE LD. CIT(A) ARRIVED AT THE CONCLUSIONS WITHOUT ASCERTAINING AS TO WHETHER OR NOT THE ASSESSEE WAS PREVENTED BY SUFFIC IENT CAUSE FROM SUBMITTING THE AFORESAID ADDITIONAL DOCUMENTS/INFORMATION BEF ORE THE AO, AS PER PROVISIONS OF RULE 46A OF THE IT RULES, 1962 NOR THE LD. CIT(A ) SEEMS TO HAVE RECORDED ANY REASONS BEFORE ADMITTING THE AFORESAID DOCUMENTS IN EVIDENCE. HERE WE MAY HAVE A LOOK AT THE RELEVANT PROVISIONS OF RULE 46 A OF THE IT RULES 1962, WHICH READS AS UNDER: ITA NO.1090/AHD/2010 FOR AY 2006-07 M/S SUGAM HEALTH CARE 5 (1) THE APPELLANT SHALL NOT BE ENTITLED TO PRODUCE BEFORE THE DEPUTY COMMISSIONER (APPEALS) OR, AS THE CASE MAY BE, THE COMMISSIONER (APPEALS), ANY EVIDENCE, WHETHER ORAL OR DOCUMENTARY, OTHER TH AN THE EVIDENCE PRODUCED BY HIM DURING THE COURSE OF PROCEEDINGS BEFORE THE ASS ESSING OFFICER, EXCEPT IN THE FOLLOWING CIRCUMSTANCES, NAMELY:-- (A) WHERE THE ASSESSING OFFICER HAS REFUSED TO ADMI T EVIDENCE WHICH OUGHT TO HAVE BEEN ADMITTED;OR (B) WHERE THE APPELLANT WAS PREVENTED BY SUFFICIENT CAUSE FROM PRODUCING THE EVIDENCE WHICH HE WAS CALLED UPON TO PRODUCE BY THE ASSESSING OFFICER; OR (C) WHERE THE APPELLANT WAS PREVENTED BY SUFFICIENT CAUSE FROM PRODUCING BEFORE THE ASSESSING OFFICER ANY EVIDENCE WHICH IS RELEVAN T TO ANY GROUND OF APPEAL; OR (D) WHERE THE ASSESSING OFFICER HAS MADE THE ORDER APPEALED AGAINST WITHOUT GIVING SUFFICIENT OPPORTUNITY TO THE APPELLANT TO A DDUCE EVIDENCE RELEVANT TO ANY GROUND OF APPEAL. (2) NO EVIDENCE SHALL BE ADMITTED UNDER SUB-RULE (1 ) UNLESS THE DEPUTY COMMISSIONER (APPEALS) OR AS THE CASE MAY BE, THE C OMMISSIONER (APPEALS) RECORDS IN WRITING THE REASONS FOR ITS ADMISSION. (3)THE DEPUTY COMMISSIONER(APPEALS) OR, AS THE CA SE MAY BE, THE COMMISSIONER (APPEALS) SHALL NOT TAKE INTO ACCOUNT ANY EVIDENCE PRODUCED UNDER SUB-RULE (1) UNLESS THE INCOME-TAX OFFICER HA S BEEN ALLOWED A REASONABLE OPPORTUNITY (A) TO EXAMINE THE EVIDENCE OR DOCUMENT OR TO CROSS-EXAMINE THE WITNESS PRODUCED BY THE APPELLANT, OR (B) TO PRODUCE ANY EVIDENCE OR DOCUMENT OR ANY WITN ESS IN REBUTTAL OF THE ADDITIONAL EVIDENCE PRODUCED BY THE APPELLANT (4) NOTHING CONTAINED IN THIS RULE SHALL AFFECT THE POWER OF THE DEPUTY COMMISSIONER (APPEALS) OR, AS THE CASE MAY BE, THE COMMISSIONER (APPEALS) TO DIRECT THE PRODUCTION OF ANY DOCUMENT, OR THE EXAMI NATION OF ANY WITNESS, TO ENABLE HIM TO DISPOSE OF THE APPEAL, OR FOR ANY OTH ER SUBSTANTIAL CAUSE INCLUDING THE ENHANCEMENT OF THE ASSESSMENT OR PENALTY (WHETH ER ON HIS OWN MOTION OR ON THE REQUEST OF THE ASSESSING OFFICER) UNDER CLAUSE (A) OF SUB SECTION (1) OF SECTION 251 OR THE IMPOSITION OF PENALTY UNDER SECT ION 271..' 5.1 IT IS EVIDENT FROM THE AFORESAID PROVISIONS THAT THE LD. CIT(A) CAN TAKE INTO ACCOUNT ANY EVIDENCE PRODUCED UNDER SUB-R. (1)(B) & (C) OF RULE 46A OF THE IT RULES, 1962 IF THE ASSESSEE WAS PREVENTED BY SUFFI CIENT CAUSE .IN THE CASE UNDER CONSIDERATION, THE ASSESSEE PLACED BEFORE THE LD. C IT(A) THE AFORESAID COPIES OF IT RETURNS,7/12 EXTRACTS AND COPIES OF BANK ACCOUN T AND THERE IS NO EVIDENCE ITA NO.1090/AHD/2010 FOR AY 2006-07 M/S SUGAM HEALTH CARE 6 BEFORE US THAT THE SAID DETAILS/DOCUMENTS WERE EVER SUBMITTED BEFORE THE AO. MOREOVER, THERE IS NOTHING TO SUGGEST AS TO WHETHER OR NOT THE LD. CIT(A) RECORDED ANY REASONS BEFORE ADMITTING THE AFORESAI D DOCUMENTS BY WAY OF ADDITIONAL EVIDENCE. SINCE IN THE CASE UNDER CONSID ERATION, THE ADDITIONAL EVIDENCE/DOCUMENTS FILED BEFORE THE LEARNED CIT(A) HAVE BEEN ADMITTED WITHOUT RECORDING ANY FINDINGS AS TO WHETHER OR NOT THE ASSESSEE WAS PREVENTED BY SUFFICIENT CAUSE FROM PRODUCING THE SAID EVIDENC E/DOCUMENTS BEFORE THE AO AND WITHOUT RECORDING ANY REASONS IN TERMS OF RULE 46A(2) OF THE IT RULES,1962, WE FIND MERIT IN THE UNDISPUTED CONTENTIONS OF THE LEARNED DR AND THEREFORE, IN THE INTEREST OF JUSTICE AND FAIR PLAY, VACATE THE FINDINGS OF THE LD. CIT(A) AND RESTORE THE ISSUES RAISED IN VARIOUS GROUNDS OF APP EAL BEFORE US TO HIS FILE, WITH THE DIRECTIONS TO FOLLOW THE MANDATE IN TERMS OF RU LE 46A OF THE IT RULES, 1962 AS ALSO PRINCIPLES OF NATURAL JUSTICE AND THEREAFTER, DISPOSE OF THE MATTER IN ACCORDANCE WITH LAW AFTER ALLOWING SUFFICIENT OPPOR TUNITY TO BOTH THE PARTIES. WITH THESE DIRECTIONS, GROUND NOS. A) & B) RAISED IN THE APPEAL ARE DISPOSED OF AS INDICATED HEREINBEFORE. 6. NO ADDITIONAL GROUND HAVING BEEN RAISED IN TERM S OF THE RESIDUARY GROUND, ACCORDINGLY, THE SAME IS DISMISSED. . 7. IN THE RESULT, THE APPEAL FILED BY THE REVENUE I S ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE COURT TODAY ON 16 -07-2010 SD/- SD/- (MAHAVIR SINGH) JUDICIAL MEMBER (A N PAHUJA) ACCOUNTANT MEMBER DATE : 16 -07-2010 COPY OF THE ORDER FORWARDED TO: 1. M/S SUGAM HEALTH CARE, PLOT NO.1110, GIDC, SARIG AM, TAL: UMBERGAON ITA NO.1090/AHD/2010 FOR AY 2006-07 M/S SUGAM HEALTH CARE 7 2. THE ITO, VAPI WARD-2, VAPI 3. CIT CONCERNED 4. CIT(A), VALSAD 5. THE DR, BENCH-B, ITAT, AHMEDABAD 6. GUARD FILE BY ORDER DEPUTY REGISTRAR ASSISTANT REGISTRAR ITAT, AHMEDABAD