INCOME TAX OFFICER-6(1)(2), MUMBAI V. M/S.AROMA TELECOM PRIVATE LIMITED, MUMBAI

ITA 1311/MUM/2018

• Counselvise Citation: [2021] 108 COUNSELVISE.COM (IT) 3452 (ITAT-MUMBAI)
• Duration Of Justice: 3 year(s) 6 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-03-2021
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 2013-2014
• Appeal Filed On: 05-03-2018
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: BRAJENDRA KUMAR
• Keywords: Unexplained cash credit; Set aside
• Section: 250; 68

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH, MUMBAI BEFORE SHRI SHAMIM YAHYA, ACCOUNTANT MEMBER & SHRI PAVAN KUMAR GADALE, JUDICIAL MEMBER ITA NO. 1311/MUM/2018 (A.Y: 2010-11) INCOME TAX OFFICER 6(1) (2), R. NO. 508, 5 TH FLOOR, AAYKAR BHAVAN, M.K. ROAD, MUMBAI - 400020 / VS. M/S AROMA TELECOM PVT. LTD., 7, CAMA INDUSTRIAL ESTATE, SUNMILL COMPOUND, MUMBAI - 400013 ./ ./ PAN/GIR NO. : AAHCA9734D ( / APPELLANT ) .. ( / RESPONDENT ) / APPELLANT BY : SHRI BRAJENDRA KUMAR , D R / RESPONDENT BY : NONE / DATE OF HEARING 04 /02 /20 2 1 / DATE OF PRONOUNCEMENT 11 /03 /202 1 / O R D E R PER PAVAN KUMAR GADALE: ITA NO . 1311/MUM/2018 M/S AROMA TELECOM PVT. LTD. - 2 - THE REVENUE HAS FILED THE APPEAL AGAINST THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS) - 12, MUMBAI, PASSED U/S. 143 (3) AND 250 OF THE INCOME TAX ACT, 1961. 2. THE REVENUE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL:- 1. 'ON THE FACTS AND IN THE CIRCUMSTANCES OF THE C ASE AND IN LAW, THE LD. CITA) CRIED IN DELETING THE ADDITIO N OF RS.8,00,00,000/- MADE U/S 68 OF THE ACT IN RESPECT OF UNEXPLAINED CASH CREDIT, WITHOUT APPRECIATING THE F ACT THAT THE SOURCES OF FUNDS IN THE HANDS OF THE CREDITORS WERE NOT PROVEN. ' 2. ON THE FACTS AND CIRCUMSTANCES OF CASE AND IN LA W, THE LD. CIT(A) HAS ERRED IN DELETING THE ADDITION OF RS. 80 0,00,000/- MADE U/S. 68 OF THE ACT IN RESPECT OF UNEXPLAINED L OAN CREDIT, WITHOUT APPRECIATING THE FACT THAT THE GENU INENESS OF THE CASH CREDIT IS NOT PROVED AS NO BREAK UP OF THE ENTRIES IN WIP OF M/S. HOTEL HORIZON PVT. LTD WERE PROVIDED TO THE AO AS NOTED ON PAGE NO.3 OF THE ASSESSMENT ORDER.' 3. THE APPELLANT PRAYS THAT THE ORDER OF THE LD. CI T(A) ON THE ABOVE GROUNDS BE SET ASIDE TO THE FILE OF THE AO OR CONFIRM THE ORDER OF THE AO ' 4. THE APPELLANT CRAVES LEAVE TO AMEND OR ALTER ANY GROUND OR ADD A NEW GROUND WHICH MAY BE NECESSARY.' ITA NO . 1311/MUM/2018 M/S AROMA TELECOM PVT. LTD. - 3 - 3. AT THE TIME OF HEARING, NONE APPEARED ON BEHALF OF THE ASSESSEE. ON PERUSAL OF THE RECORD, THE CASE WAS FI RST POSTED FOR HEARING ON 05.03.2019 AND NONE APPEARED ON BEHA LF OF THE ASSESSEE. SIMILARLY, WHEN THE CASE WAS POSTED ON24.04.2019,18.6.2019,4.09.2019,20.01.2020,04.11.2 020 AND 17.12.2020 ALSO NONE APPEARED ON BEHALF OF THE ASSESSEE. WE CONSIDERING THE ACTION OF THE ASSESSEE FOR NON PROSECUTING THE APPEAL, IN SPITE OF PROVIDING ADEQU ATE OPPORTUNITIES, WE HEARD THE LD.DR AND PERUSED THE MATERIAL ON RECORD. 4. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSE E COMPANY IS ENGAGED IN THE BUSINESS OF DEALING IN MOBILE AND MOBILE ACCESSORIES AND FILED THE RETURN OF INCOME ON 30.09 .2013 DECLARING THE TOTAL LOSS AT RS. 3,79,813/-.SUBSEQUE NTLY, THE CASE WAS SELECTED FOR SCRUTINY AND NOTICE U/S 143 ( 2) AND 142 (1) OF THE ACT ALONG WITH QUESTIONNAIRE WERE IS SUED. IN COMPLIANCE, THE LD.AR FOR THE ASSESSEE ATTENDED FRO M TIME TO TIME AND FILED THE EXPLANATIONS. THE A.O. ON PER USAL OF FINANCIAL STATEMENTS FOUND THAT THE ASSESSEE HAS OB TAINED UNSECURED LOAN AGGREGATING TO RS 8 CRORES FROM M/S HOTEL HORIZON PVT. LTD. THE A.O. TO EXAMINE THE CORRECTNE SS OF ITA NO . 1311/MUM/2018 M/S AROMA TELECOM PVT. LTD. - 4 - THE LOAN, HAS ISSUED NOTICE U/S 133 (6) OF THE ACT ON THE LOAN CREDITOR. WHEREAS M/S HOTEL HORIZON PVT LTD(LO AN CREDITOR) VIDE LETTER DATED 03.03.2016 SUBMITTED VA RIOUS STATEMENTS INCLUDING BANK STATEMENTS, LEDGER AND TH E FINANCIAL STATEMENTS. THE A.O. ON VERIFICATION O F FINANCIAL STATEMENTS FOUND THAT THE DETAILS OF UNSECURED LOA N PROVIDED TO THE ASSESSEE COMPANY IS NOT REFLECTED IN THE BALANCE SHEET OF M/S HOTEL HORIZON PVT. LTD. THE AO OBSERVED THAT THE TRANSACTION OF RS. 8 CRORES IN TH E BANK ACCOUNT OF M/S HOTEL HORIZON PVT. LTD. IS ALSO NOT REFLECTED IN THE BALANCE SHEET. THEREFORE, THE A.O. ISSUED SH OW CAUSE NOTICE. IN RESPONSE, THE ASSESSEE COMPANY FILED EXPLANATIONS, MENTIONING THAT THAT M/S HOTEL HORIZ ON PVT. LTD. HAS DISCLOSED RS. 8 CRORES UNDER THE CAPITAL W ORK IN PROGRESS (WIP) AS IT IS RUNNING THE BUSINESS OF THE HOTEL AS PER THE ACCOUNTING SYSTEM ADOPTED. THE AO OBSERVED THAT THE ASSESSEE COMPANY HAS FAILED TO PROVIDE BREAK UP OF WORK IN PROGRESS (WIP) IN THE BOOKS OF ACCOUNTS OF M/S HOTEL HORIZON PVT. LTD. FURTHER THERE IS NO BUSINES S CONNECTION BETWEEN THE ASSESSEE AND THE LOAN CREDIT OR WHICH IS ENTIRELY INTO HOTEL BUSINESS. THE AO ALSO OBSERVED THAT LOANS AND ADVANCES BEING LONG TERM OR SHORT T ERM HAS TO BE DISCLOSED IN THE BALANCE SHEET. WHEREAS THE ITA NO . 1311/MUM/2018 M/S AROMA TELECOM PVT. LTD. - 5 - ADJUSTMENT OF LOANS AND ADVANCES BY M/S HOTEL HORIZ ON PVT. LTD UNDER THE WORK IN PROGRESS IS AGAINST TH E PRINCIPLES OF ACCOUNTANCY. SINCE THE ASSESSEE FAILE D TO SUBMIT THE DETAILS OF WORK IN PROGRESS (WIP) AND EV IDENCES TO PROVE THE GENUINENESS OF TRANSACTION, IN SPITE O F PROVIDING SEVERAL OPPORTUNITIES, THE A.O. TREATED T HE UNSECURED LOAN AS UN EXPLAINED CASH CREDIT U/S 68 OF THE ACT AND ASSESSED THE TOTAL INCOME OF RS.7,96,20,190 /-AND PASSED THE ORDER U/SEC143(3) OF THE ACT DATED 22-03 -2016. 6. AGGRIEVED BY THE ORDER, THE ASSESSEE HAS FILED T HE APPEAL WITH THE LD.CIT (A).IN THE APPELLATE PROCEEDINGS TH E LD.CIT (A) CONSIDERED THE GROUNDS OF APPEAL, FINDINGS OF T HE A.O. AND WRITTEN SUBMISSIONS REFERRED AT PAGE 4 PARA 12 OF THE ORDER. THE CIT(A) ON THE DISPUTED ISSUE, FOUND THA T LOAN/ADVANCES PROVIDED TO THE ASSESSEE COMPANY HAS BEEN CAPITALIZED AND REFLECTED IN THE CAPITAL WORK IN PROGRESS(WIP) IN THE FINANCIAL STATEMENTS OF THE LE NDER COMPANY. FURTHER, THE LD. CIT (A) OBSERVED THAT THE ABOVE LOAN WAS REPAID IN THE SUBSEQUENT FINANCIAL YEARS WHICH IS EVIDENT FROM THE COPY OF THE BANK STATEMENTS AND AC COUNTS FILED. FURTHER, IN THE ASSESSMENT PROCEEDINGS, NOTI CE 133 (6) OF THE ACT WAS ISSUED BY A.O. ON THE LOAN CREDITOR. THE ITA NO . 1311/MUM/2018 M/S AROMA TELECOM PVT. LTD. - 6 - LENDER COMPANY SUBMITTED THE LEDGER ACCOUNT COPY OF LOAN TRANSACTIONS AND DETAILS. BUT THE A.O. HAS DOUBTED THE GENUINENESS OF THE LOAN TRANSACTION AS IT WAS NOT R EFLECTED IN THE BALANCE SHEET OF THE LENDER COMPANY. FURTHER , THE ASSESSEE COMPANY HAS SUBMITTED DETAILS AND THE LOAN HAS BEEN DISCLOSED BY THE LENDER IN THE BOOKS OF ACCOUN TS UNDER THE HEAD WORK IN PROGRESS (WIP). THE LD.CIT (A) A LSO OBSERVED THAT, THE LOAN WAS REPAID IN THE FINANCIAL YEAR 2013-14 TO THE EXTENT OF RS 6.36 CRORES AND IS EVID ENT FROM FINANCIAL STATEMENTS AND THE LEDGER ACCOUNT OF THE ASSESSEE COMPANY. FURTHER, THE ASSESSEE COMPANY HAS SATISFIE D THE GENUINENESS OF TRANSACTION AND THE CREDITWORTHINESS HAS BEEN ESTABLISHED. HENCE, THE LD.CIT(A) HAS DELETED THE ADDITION AND PARTLY ALLOWED THE APPEAL OF THE ASSES SEE. AGGRIEVED BY THE CIT(A)ORDER, THE REVENUE HAS FILED THE APPEAL BEFORE THE HONBLE TRIBUNAL AND NONE APPEAR ED ON BEHALF OF THE ASSESSEE. 7. WE HAVE HEARD THE LD. DR SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. THE LD.DR EMPHASIZED THAT THE L D. CIT(A) ERRED IN DELETING THE UNEXPLAINED CASH CREDI T WITHOUT CONSIDERING THE FACTUAL ASPECTS THAT THE ASSESSEE H AS FAILED ITA NO . 1311/MUM/2018 M/S AROMA TELECOM PVT. LTD. - 7 - TO SUBSTANTIATE SOURCES OF FUNDS OF LENDER COMPANY. AS PER THE OBSERVATIONS OF LD. CIT (A), THE ASSESSEE HAS P ROVIDED A CERTIFICATE OF THE AUDITOR OF LENDER COMPANY THAT T HE LOANS AND ADVANCES MADE TO THE ASSESSEE COMPANY ARE DISCL OSED IN WORK-IN-PROGRESS. BUT ON PERUSAL OF ASSESSMENT O RDER, THE A.O MENTIONED THAT THE ASSESSEE HAS NOT PROVED OR PROVIDED BREAK UP OF WORK IN PROGRESS (WIP). SINCE THE OBSERVATIONS OF BOTH THE REVENUE AUTHORITIES ARE CONTRADICTORY, AND SUCH INFORMATION PLAYS A VITAL R OLE IN DECISION MAKING OF AUTHORITIES. WE ARE OF THE VIEW THAT THE LDCIT(A) CONSIDERING THE MATERIAL FILED IN THE APPE LLATE PROCEEDINGS BY THE ASSESSEE COMPANY SHOULD HAVE CAL LED FOR COMMENTS OF THE ASSESSING OFFICER OR REMAND REPORT . ACCORDINGLY, WE SET ASIDE THE CIT(A)ORDER AND RESTO RE THE ENTIRE DISPUTE TO THE FILE OF LD. CIT (A) TO ADJUDI CATE AFRESH AND PROVIDE ADEQUATE OPPORTUNITY OF HEARING TO THE ASSESSEE AND THE ASSESSEE SHOULD COOPERATE IN SUBMI TTING THE INFORMATION FOR EARLY DISPOSAL OF THE APPEAL. A ND WE ALLOW THE GROUNDS OF APPEAL OF THE REVENUE FOR STAT ISTICAL PURPOSES. ITA NO . 1311/MUM/2018 M/S AROMA TELECOM PVT. LTD. - 8 - 8. IN THE RESULT, THE APPEAL FILED BY THE REVENUE I S TREATED AS ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 11.03.2021. SD/- SD/- (SHAMIM YAHYA) (PAVAN KUMAR GA DALE ) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI, DATED 11.03.2021 AK, 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. *-. / / GUARD FILE. / BY ORDER, ( + //TRUE COPY// 1. / ( ASST. REGISTRAR)