M/S JSB DREAM HOMES PVT LTD., MUMBAI V. ITO 12(3)(1), MUMBAI

ITA 1155/MUM/2020

• Counselvise Citation: [2021] 107 COUNSELVISE.COM (IT) 4539 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 7 month(s) 10 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-09-2021
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: F
• Assessment Year: 2016-2017
• Appeal Filed On: 14-02-2020
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: BHUPENDRA SAHU
• Keywords: Business expenditure; Principle of natural justice; Additional evidence; Reasonable cause; Assessment record; Set aside
• Section: 271(1)(c); 143(3); 142(1); 80G; 143(1); 250; 143(2); 13

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL F BENCH, MUMBAI BEFORE SHRI S RIFAUR RAHMAN, ACCOUNTANT MEMBER & PAVAN KUMAR GADALE, JUDICIAL MEMBER ITA NO. 1155/MUM/2020 (A.Y: 2016-17) M/S. JSB DREAM HOMES PVT LTD, 101, PRATIK PLAZA, SV ROAD, NEAR PATEL PETROL PUMP, GOREGAON (W), MUMBAI 401104. VS. ITO 12(3)(1) AAYAKAR BHAVAN, MK ROAD, MUMBAI - 400020 ./ ./ PAN/GIR NO. : AADCJ2836P APPELLANT .. RESPONDENT APPELLANT BY : SHRI BHUPENDRA SAHU . AR RESPONDENT BY : SHRI S .N. KABRA . DR DATE OF HEARING 13 .0 9 .2021 DATE OF PRONOUNCEMENT 17 .0 9 .2021 / O R D E R PER PAVAN KUMAR GADALE JM: THE ASSESSEE HAS FILED THE APPEAL AGAINST THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS)- 20, MUMBA I PASSED U/S 143(3) AND 250 OF THE INCOME TAX ACT, 19 61. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS OF AP PEAL: GROUNDS FOR NOT ADMISSIBLE OF ADDITIONAL EVIDENCE 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE A ND IN LAW THE LEARNED CIT(A) FAILED TO ADMIT THE ADDITION AL EVIDENCES U/R 46A WHEREAS THE SAME IS ADMISSIBLE AS THE APPEL LANT WAS PREVENTED BY SUFFICIENT CAUSE FROM PRODUCING BEFORE THE AD. ITA NO. 1155/MUM/2020 M/S. JSB DREAM HOMES PVT LTD, MUMBAI - 2 - EVIDENCES WHICH ARE RELEVANT TO BUSINESS ADVANCES A ND DONATIONS. THUS ORDER PASSED WITHOUT CONSIDERING EV IDENCES IS BAD IN LAW AND AGAINST THE PRINCIPAL OF NATURAL JUS TICE. THE APPELLANT PRAYS THAT ORDER PASSED IS WITHOUT CO NSIDERING THE EVIDENCES FILED AND OBSERVANCE OF PRINCIPAL OF NATURAL JUSTICE HENCE NEEDS TO BE QUASHED'. GROUNDS FOR DISALLOWANCE OF INTEREST RS.53,72,694/- U/S 36(1) (III) 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE A ND IN LAW THE LEARNED CIT(A) FAILED TO ADMIT THE ADDITION AL EVIDENCES SUBMITTED ON 24/10/2019 WHEREAS THE SAME ARE ADMISS IBLE U/R 46A AS THE APPELLANT WAS PREVENTED BY SUFFICIEN T CAUSE FROM PRODUCING BEFORE THE AD EVIDENCES RELEVANT TO BUSINESS ADVANCES. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW THE LEARNED CIT(A) ERRED IN CONFIRMING T HE DISALLOWANCE OF INTEREST EXPENSE OF RS.53,72,694/WH EREAS THE SAID INTEREST EXPENSE IS INCURRED WHOLLY AND EXCLUS IVELY FOR CONSTRUCTION ACTIVITIES OF THE APPELLANT. 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE A ND IN LAW THE LEARNED CIT(A) ERRED IN ESTIMATING THE NOTI ONAL & FICTITIOUS INTEREST INCOME OF RS.94,72,099/- WORKED OUT @ 12% ON BUSINESS ADVANCE AND THEREBY FULLY DISALLOWED & COMPENSATING THE ACTUAL INTEREST EXPENSE OF RS.53,7 2,694/- AGAINST SUCH NOTIONAL INCOME WITHOUT VERIFYING AND APPRECIATING THE FACT THAT THE ADVANCES PAID ARE BU SINESS ADVANCE DIRECTLY RELATED TO THE APPELLANTS BUSINESS . THE APPELLANT PRAYS THAT INTEREST OF RS 53,72,694/- SHALL BE ALLOWED AND ORDER PASSED IS WITHOUT CONSIDERING THE EVIDENCES FILED AND OBSERVANCE OF PRINCIPAL OF NATURAL JUSTICE HENCE NE EDS TO BE QUASHED'. GROUNDS FOR ADDITION OF INTEREST INCOME OF RS.7,22, 097/- 4. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE A ND IN LAW THE LEARNED CIT(A) ERRED IN MAKING ADDITION OF INTEREST INCOME OF RS.7,22,097/- WHICH IS ALREADY SHOWN IN P ROFIT & ITA NO. 1155/MUM/2020 M/S. JSB DREAM HOMES PVT LTD, MUMBAI - 3 - LOSS A/C OF THE APPELLANT. 5. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW THE LEARNED CIT(A) HAS WRONGLY ESTIMATED AND GU ESS THAT APPELLANT HAD TOTAL INTEREST INCOME OF RS 14,44,194 /- AND OUT OF WHICH ONLY 7,22,097/- WAS SHOWN IN PROFIT & LOSS A/C AND BALANCE RS 7,22,097/- NOT TAKEN WHEREAS THE FACT IS THE APPELLANT HAS INTEREST INCOME ONLY OF RS 7,22,097/- WHICH IS ALSO REPORTED IN 26AS. THE LEARNED CIT(A) HAS MADE THIS ADDITION ON ASSUMP TION BASIS IGNORING THE CLARIFICATION FILED BY AUDITOR DT. 09/ 10/2019 THAT 'BY MISTAKE INTEREST AMOUNT OF RS. 7,22,097/- MENTI ONED IN TAX AUDIT REPORT AT SR. NO.16(D) AND APPELLANT HAS CORR ECTLY SHOWN INTEREST INCOME IN COMPANY'S P&L ACCOUNT'. THE APPELLANT PRAYS THAT INTEREST INCOME OF 7,22,097/- WHICH IS TAXED TWICE SHALL BE DELETED GROUNDS FOR ALLOWANCE OF DEDUCTION U/S 80G OF RS.1,75,500/- 6 THE LEARNED CIT(A) ERRED IN PASSING THE OR DER THAT APPELLANT HAS NOT PRODUCED THE COPY OF THE DONATION RECEIPT IN POINT NO.8.4.2. THE APPELLANT HAS ALREADY SUBMITTED THE COPY OF DONATION RECEIPT IN HIS SUBMISSION DT. 28/12/2018 & 24/10/2019 BEFORE THE AO AND CIT(A) RESPECTIVELY. 7. THE LEARNED CIT(A) HAS ERRED IN GIVING DEDUCTION UN DER SECTION 80G @ 50% ON ELIGIBLE DONATION OF RS.3,51,0 00/- WHICH COMES TO RS.1,75,500/- GROUNDS FOR DELETION OF INTEREST AND PENALTY 8 . ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW THE LD. CIT(A) ERRED IN CHARGING INTEREST U/S 2 34A,B,C&D AND INITIATED PENALTY U/S 271(1)(C) AND 271(1)(B). 2. THE BRIEF FACTS OF THE CASE ARE THAT, THE ASSES SEE COMPANY IS ENGAGED IN THE BUSINESS OF CONSTRUCTION ACTIVITIES. THE ASSESSEE HAS FILED THE RETURN OF I NCOME FOR THE A.Y 2016-17 ON 17.10.2016 DISCLOSING A TOTAL IN COME ITA NO. 1155/MUM/2020 M/S. JSB DREAM HOMES PVT LTD, MUMBAI - 4 - OF RS.26,78,160/-AND THE RETURN OF INCOME WAS PROCE SSED U/S 143(1) OF THE ACT. SUBSEQUENTLY THE A.O. HAS IS SUED NOTICE U/S 143(2) AND 142(1) OF THE ACT ALONG WITH QUESTIONNAIRE. IN COMPLIANCE, THE LD. AR OF THE AS SESSEE FURNISHED THE DETAILS FROM TIME TO TIME. THE A.O ON PERUSAL OF THE FINANCIAL STATEMENTS FOUND THAT THE ASSESSEE HAS CLAIMED THE INTEREST ON LOANS IN THE P ROFIT AND LOSS ACCOUNT AND PROVIDED INTEREST FREE LOANS T O THE RELATED CONCERNS OUT OF THE INTEREST BEARING LOANS. THE A.O. HAS ISSUED SHOW CAUSE NOTICE FOR DISALLOWANCE OF CLAIM AND THE ASSESSEE HAS FILED EXPLANATIONS BY LE TTER DATED 18-12-201 REFERRED AT PARA 3.2 OF THE ORDER. THE A.O DEALT ON THE PROVISIONS OF SEC. 36(1)(III) OF T HE ACT AND THE JUDICIAL DECISIONS AND CALCULATED THE PROPORTIO NATE DISALLOWANCE U/S 36(1)(III) OF THE ACT BY APPLYING THE RATE @ 12% ON INTEREST FREE LOANS AND ADVANCES AND REST RICTED DISALLOWANCE TO RS.53,72,694/-. 3. SIMILARLY, ON PERUSAL OF THE TAX AUDIT REPORT TH E A.O FOUND THAT THE ASSESSEE HAS NOT DISCLOSED THE INTER EST INCOME AND THE A.O IS OF THE OPINION THAT THE INCOM E IS NOT OFFERED FOR TAXATION AND MADE ADDITION OF RS. 7,22,097/-. FURTHER, THE A.O. MADE THE DISALLOWANCE OF DONATIONS CLAIMED AS BUSINESS EXPENDITURE AS THE ASSESSEE HAS FAILED TO SUBMIT ORIGINAL RECEIPTS OF RS. 4,51,000/- AND ASSESSED THE TOTAL INCOME OF RS. ITA NO. 1155/MUM/2020 M/S. JSB DREAM HOMES PVT LTD, MUMBAI - 5 - 93,99,450/- AND PASSED THE ORDER U/S 143(3) OF THE ACT DATED 28.12.2018. 4. AGGRIEVED BY THE ORDER THE ASSESSEE HAS FILED AN APPEAL BEFORE THE CIT(A). IN THE APPELLATE PROCEEDINGS TH E CIT(A) CONSIDERED THE GROUNDS OF APPEAL, FINDINGS OF THE A .O AND THE SUBMISSIONS. WHEREAS IN RESPECT OF THE DISALLOW ANCE OF INTEREST U/S 36(1)(III) OF THE ACT, THE CIT(A) H AS CONFIRMED THE ADDITION AS THE ASSESSEE COULD NOT FI LE THE SATISFACTORY EXPLANATIONS. FURTHER, IN RESPECT OF I NTEREST INCOME THE CIT(A) HAS CONFIRMED THE ACTION OF THE A .O. WHEREAS, WITH RESPECT TO DISALLOWANCE OF DONATION S, THE CIT(A) HAS GRANTED THE PARTIAL RELIEF. FURTHER THE CIT(A) HAS REJECTED THE ADDITIONAL EVIDENCE FILED IN THE C OURSE OF APPELLATE PROCEEDINGS AS THE EVIDENCES WERE NOT FIL ED EXPLANING THE SUFFICIENT AND REASONABLE CAUSE AND PARTLY ALLOWED THE ASSESSEE APPEAL. AGGRIEVED BY THE ORD ER OF THE CIT(A), THE ASSESSEE HAS FILED AN APPEAL BEFORE THE HONBLE TRIBUNAL. 5. AT THE TIME OF HEARING, THE LD. AR MADE SUBMISSI ONS ON THE ADMISSION OF THE ADDITIONAL EVIDENCE WHICH W AS REJECTED BY THE CIT(A). THE CONTENTION OF THE LD. AR THAT THE CIT(A) HAS ERRED IN NOT ADMITTING THE ADDITIONA L EVIDENCE U/R 46A OF I T RULES. FURTHER THE ASSESSEE WAS PREVENTED BY A SUFFICIENT CAUSE IN SUBMITTING THE ITA NO. 1155/MUM/2020 M/S. JSB DREAM HOMES PVT LTD, MUMBAI - 6 - INFORMATION BEFORE THE A.O IN RESPECT OF BUSINESS ADVANCES, INTEREST INCOME AND DONATIONS DUE TO MEDI CAL EMERGENCIES. THE LD. AR MADE SUBMISSIONS ON THE MER ITS OF THE CASE AND PRAYED FOR AN OPPORTUNITY OF HEARIN G TO SUBSTANTIATE THE CASE WITH THE EVIDENCES BEFORE THE LOWER AUTHORITIES. CONTRA, THE LD. DR RELIED ON THE ORDER OF THE CIT(A). 6. WE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. THE SOLE CRUX OF THE DISPUTED ISSUE IS IN RESPECT OF ADMISSION OF ADDITIONAL EVIDENCE WHIC H WAS REJECTED BY THE CIT(A) FOR VARIOUS REASONS.THE CONT ENTIONS OF THE LD. AR ARE THAT THE ADDITIONAL EVIDENCE PLAY A VITAL ROLE IN DECISION MAKING AND IN THE ASSESSMENT PROCEEDINGS, THE ASSESSEE COULD NOT SUBMIT THE DETA ILS IN RESPECT OF THE INTEREST PAYMENTS, LOANS AND ADVANCE S, INTEREST FREE LOANS AND THE DONATIONS RECEIPTS AS T HE ASSESSEE LEGAL REPRESENTATIVE (LR) COULD NOT APPEAR ON PARTICULAR DAY BEFORE THE ASSESSING OFFICER(A.O) I N THE SCRUTINY PROCEEDINGS AS HIS FATHER WAS HOSPITALIZED AND WAS EXPIRED ON 28.12.2018. FURTHER THERE WAS A GST SURVEY OPERATIONS IN THE ASSESSEES OFFICE ON 11.12 .2018 TO 31.12.2018 AND THE ACCOUNTANT OF THE ASSESSEE HA S ATTENDED BEFORE THE A.O AND SUBMITTED THE INFORMATI ON AND THE A.O.HAS PASSED THE ASST ORDER ON 28-12-2018 .THE CIT(A) HAS CALLED FOR THE ASSESSMENT RECORDS AND F OUND ITA NO. 1155/MUM/2020 M/S. JSB DREAM HOMES PVT LTD, MUMBAI - 7 - THAT THE ASSESSEE HAS NOT SUBMITTED THE DETAILS IN THE COURSE OF ASSESSMENT PROCEEDINGS. THE ASSESSEE HAS FILED THE ADDITIONAL EVIDENCES BEFORE THE CIT(A) BUT WERE NOT ACCEPTED BY THE CIT(A). THE CONTENTIONS OF THE LD.A R THAT THE EVIDENCES FILED U/R 46A OF THE I T RULES ARE IN RESPECT OF BUSINESS LOANS AND ADVANCES AND DONATIONS WHICH ARE RELEVANT AND PLAY A VITAL ROLE IN DECISION MAKING. 7. WE CONSIDERED THE FACTS, CIRCUMSTANCES, ADDITION AL EVIDENCES AND THE PAPER BOOK FILED IN SUPPORT OF NON SUBMISSION OF THE EVIDENCE DUE TO REASONS BEYOND TH E CONTROL OF THE ASSESSEE. WE FIND THE REASONABLE CAU SE EXPLAINED BY THE ASSESSEE IN RESPECT OF THE DEATH O F THE FATHER OF THE CA/ AR WHO APPEARED BEFORE THE ASSESS ING OFFICER CANNOT BE OVERRULED. ACCORDINGLY WE ARE OF THE OPINION THAT THE ASSESSEE SHOULD NOT SUFFER FOR NON FILING OF MATERIAL INFORMATION, AS THE EVIDENCES PLAYED VI TAL ROLE AND WE ADMIT THE ADDITIONAL EVIDENCE. ACCORDINGLY, TO MEET THE ENDS OF JUSTICE AND CONSIDERING THE PRINCI PLES OF NATURAL JUSTICE, WE SET ASIDE THE ORDER OF THE CIT( A) AND RESTORE THE ENTIRE DISPUTED ISSUE ALONG WITH THE AD DITIONAL EVIDENCE TO THE FILE OF THE CIT(A) TO ADJUDICATE FR ESH ON MERITS AND THE ASSESSEE SHOULD BE PROVIDED ADEQUAT E OPPORTUNITY OF HEARING. THE ASSESSEE SHOULD COOPERA TE IN FILLING THE INFORMATION FOR EARLY DISPOSAL OF THE A PPEAL AND ITA NO. 1155/MUM/2020 M/S. JSB DREAM HOMES PVT LTD, MUMBAI - 8 - ALLOW THE GROUNDS OF APPEAL OF THE ASSESSEE FOR STA TISTICAL PURPOSES. 8. IN THE RESULT, APPEAL FILED BY THE ASSESSEE IS A LLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 17.09.2021. SD/- SD/- (S RIFAUR RAHMAN ) (PAVAN KUMAR GADALE) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI, DATED 17.09.2021 KRK, PS / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. / THE CIT(A) 4. ( ) / CONCERNED CIT 5. '#$%&&' , )* , / DR, ITAT, MUMBAI 6. %-./0 / GUARD FILE. / BY ORDER, '& //TRUE COPY// 1. ( ASST. REGISTRAR) ITAT, MUMBAI