ITO 20(2)(2), MUMBAI V. MANISHA JAIN, MUMBAI

ITA 1316/MUM/2010

• Counselvise Citation: [2010] 119 COUNSELVISE.COM (IT) 6311 (ITAT-MUMBAI)
• Duration Of Justice: 9 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-11-2010
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: J
• Assessment Year: 2005-2006
• Appeal Filed On: 17-02-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: R S SRIVASTAVA
• Keywords: Additional evidence; Notional interest
• Section: 144

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES J: MUMBAI BEFORE SHRI D. MANMOHAN, VICE PRESIDENT AND SHRI B. RAMAKOTAIAH, ACCOUNTANT MEMBER I.T.A. NO. 1316/MUM/2010 (ASSESSMENT YEAR 2005-2006) ITO 20(2)(2) ROOM NO. 611, 6 TH FLOOR PIRAMAL CHAMBERS MUMBAI-400 012. VS. SMT. MANISHA JAIN 3/101, MANISH DARSHAN BUILDING J.B. NAGAR, ANDHERI EAST MUMBAI. PAN : ACDPJ6117C (APPELLANT) (RESPONDENT) FOR APPELLANT : SHRI R.S. SRIVASTAVA FOR RESPONDENT : NONE ORDER PER D. MANMOHAN, V.P . :- THIS APPEAL, FILED AT THE INSTANCE OF THE REVENUE, IS DIRECTED AGAINST THE ORDER DATED 30.11.2009 OF LEARNED CIT(A )-31, MUMBAI AND IT PERTAINS TO A.Y. 2005-06. 2. THOUGH, THE NOTICE WAS SENT TO THE ASSESSEE BY R PAD, NONE APPEARED ON BEHALF OF THE ASSESSEE. WE THEREFORE PR OCEED TO DISPOSE OF THE APPEAL, EX-PARTE, QUA THE ASSESSEE. 3. FOLLOWING GROUNDS WERE URGED BY THE REVENUE :- 1) THE LEARNED CIT(A) HAS ERRED ON FACTS AND IN LAW AND IN THE CIRCUMSTANCES OF THE CASE IN DELETING THE ADDITION OF RS. 2,70,996/- ON ACCOUNT OF UNEXPLAINED PURCHASES, RS. 1,73,172/- ON ACCOUNT OF UNEXPLAINED EXPENSES, RS. 72,666/- ON ACCOUNT OF NOTIONAL INTEREST ON INTEREST FREE LOAN AND RESTRICTING THE ADDITION ACCOUNT OF LOW HOUSEHOLD WITHDRAWAL TO RS. 34,550/-. 2) THE LEARNED CIT(A) HAS ERRED IN NOT FORWARDING ANY MATERIAL BROUGHT ON RECORD AT THE APPELLATE STAGE BEFORE HIM TO THE ASSESSING OFFICER FOR HIS SMT. MANISHA JAIN 2 COMMENTS AND EXAMINATION, WHICH HAS CLEARLY CONTRAVENED THE PROVISION OF RULE 46A OF THE INCOME TAX RULES. 4. WE HAVE HEARD LEARNED DR AND CAREFULLY PERUSED T HE RECORD. FACTS IN SHORT ARE THAT THE ASSESSEE WAS ENGAGED IN THE BUSINESS OF TRADING IN READYMADE GARMENTS IN THE NAME AND STYLE OF M/S. ARIHANTS. FOR THE YEAR UNDER CONSIDERATION, THE ASS ESSEE DECLARED TOTAL INCOME OF RS. 1,03,285/-. SINCE THE ASSESSEE HAS NOT RESPONDED TO THE NOTICES ISSUED BY THE ASSESSING OFFICER, ASS ESSMENT CAME TO BE MADE U/S. 144 OF THE ACT. IT WAS SUBMITTED THE NOTI CES ISSUED BY THE ASSESSING OFFICER, FROM TIME TO TIME, WERE HANDED O VER TO THE ACCOUNTANT, WHO WAS FILING ASSESSEES INCOME TAX RE TURNS BUT SURPRISINGLY THE ACCOUNTANT NEVER ATTENDED THE HEAR ING SINCE HE HAS ALSO STARTED HIS OWN BUSINESS. EVEN OTHERWISE THERE IS NO CASE FOR MAKING ANY ADDITIONS, SINCE THERE IS SUFFICIENT PRO OF TO EXPLAIN PURCHASES ETC. AND IN THIS REGARD DETAILS WERE FURN ISHED BEFORE LEARNED CIT(A). 5. LEARNED CIT(A) OBSERVED THAT THE ASSESSEE HAVING ADMITTED THAT THE NOTICES WERE SERVED UPON HER, THERE IS NO CASE FOR CHALLENGING THE JURISDICTION OF THE ASSESSING OFFICER IN COMPLETING THE ASSESSMENT U/S. 144 OF THE ACT. HOWEVER, ON MERITS OF THE ADDITIONS LEARNED CIT(A) WAS OF THE OPINION THAT THE ADHOC ADDITIONS/DISALLOWANC ES WERE MADE PURELY ON SURMISES AND CONJECTURE. HOWEVER, HE AFFI RMED THE ORDER OF THE ASSESSING OFFICER IN PART. 6. AS REGARDS DISALLOWANCE OF ENTIRE PURCHASES AND EXPENSES DEBITED IN THE PROFIT AND LOSS ACCOUNT LEARNED CIT( A) NOTICES THAT THE DISALLOWANCES WERE MADE BY THE ASSESSING OFFICER ON LY ON ACCOUNT OF THE FACT THAT THE ASSESSEE COULD NOT ATTEND THE PRO CEEDINGS, IGNORING THE FACT THAT IT IS NOT A FIT CASE FOR DISALLOWANCE OF ENTIRE PURCHASES SMT. MANISHA JAIN 3 AND EXPENSES INCURRED BY THE ASSESSEE AS SHOWN IN H ER PROFIT AND LOSS ACCOUNT. GROSS PROFIT SHOWN ON SALES WORKED OUT AT 40.66% IN THE TRADING BUSINESS OF READYMADE GARMENTS WHICH IS COM PARABLE AND BETTER THAN MOST OF THE TRADERS DEALING IN THE SAME LINE OF BUSINESS. LEARNED CIT(A) FURTHER NOTICED THAT THE ASSESSING O FFICER HAS NOT BROUGHT ON RECORD ANY ADVERSE EVIDENCE OR MATERIAL BEFORE DISALLOWING THE ENTIRE EXPENSES DEBITED IN HER PROFIT AND LOSS ACCOUNT. HAVING REGARD TO THE FACT THAT THERE CANNOT BE ANY BUSINES S IN WHICH NO EXPENSES IS INCURRED, LEARNED CIT(A) ACCEPTED THE P LEA OF THE ASSESSEE THAT THE DISALLOWANCE IS NOT CALLED FOR. REGARDING THE ADDITION ON ACCOUNT NOTIONAL INTEREST , CASE OF THE ASSESSEE WAS THAT MAJOR PORTION OF INVESTMENT WAS I N HER OWN PROPRIETARY CONCERN AND THEREFORE THERE IS NO QUEST ION OF CHARGING OF ANY INTEREST ON THE SAME. SIMILARLY, A SUM OF RS. 2 LAKHS WAS GIVEN ON SHORT TERM LOAN BECAUSE OF BUSINESS EXIGENCIES. HEN CE NO INTEREST WAS CHARGED. MOREOVER, TOTAL INTEREST DEBITED TO P & L ACCOUNT IS ONLY RS.4421/- WHICH HAS NO NEXUS TO THE LOAN GIVEN TO H ER HUSBAND. UPON VERIFICATION OF THE FACTUAL MATRIX, LEARNED CI T(A) AGREED WITH THE PLEA OF THE ASSESSEE. AS REGARDS ADDITION ON ACCOUNT OF LOW WITHDRAWALS, BEARING IN MIND THE FACT THAT SHE IS NOT THE SOLE BREAD WINNER OF THE FAMILY. LEARNED CIT(A) RESTRICTED THE ADDITION TO RS. 34,55 0/-. 7. AGGRIEVED, THE REVENUE IS IN APPEAL BEFORE US. LEARNED DR SUBMITTED THAT ADDITIONAL EVIDENCE WAS AT THE STAGE OF LEARNED CIT(A), IN CONTRAVENTION OF RULE 46A OF THE INCOME TAX RULE S, AND FURTHER SUBMITTED THAT IN THE ABSENCE OF FURNISHING EVIDENC E BEFORE THE ASSESSING OFFICER DISALLOWANCE OF EXPENDITURE/ADDIT IONS MADE ON SMT. MANISHA JAIN 4 ESTIMATE BASIS IN A BEST JUDGEMENT ASSESSMENT WOULD NOT HAVE BEEN CALLED IN QUESTION BY LEARNED CIT(A). 8. WE HAVE CAREFULLY CONSIDERED THE SUBMISSIONS AND PERUSED THE RECORD. IT IS NOT IN DISPUTE THAT THE ASSESSEE HAS NOT FURNISHED ANY MATERIAL BEFORE THE ASSESSING OFFICER WHICH RESULTE D IN MAKING THE BEST JUDGEMENT ASSESSMENT U/S. 144 OF THE INCOME TA X ACT, 1961. HOWEVER, HAVING REGARD TO THE PECULIAR CIRCUMSTANCE S OF THE CASE, IN OUR OPINION LEARNED CIT(A) WAS JUSTIFIED IN EXERCIS ING HIS JUDICIAL DISCRETION WHILE ENTERTAINING THE ADDITIONAL EVIDEN CE U/S. 46A OF THE INCOME TAX RULES. IT MAY NOT BE OUT OF PLACE TO NOT ICE THAT EVEN DE- HORS THE ADDITIONAL EVIDENCE, IMPUGNED ADDITIONS AR E MADE IN AN ARBITRARY MANNER AND HENCE DESERVE TO BE SET ASIDE. IT IS NOT THE CASE OF LEARNED DR THAT IN THE CASE OF RETAIL TRADE, ANY ASSESSEE WOULD EARN GROSS PROFIT OF MORE THAN 40%. EVEN IN A BEST JUDGE MENT ASSESSMENT ADDITIONS SHOULD NOT BE MADE ON PURE GUESS WORK LEA DING TO ARBITRARINESS. LEARNED CIT(A) HAD TAKEN NOTE OF THE FACTUAL MATRIX OF THE CASE TO HIGHLIGHT THAT THE ADDITIONS MADE BY TH E ASSESSING OFFICER WERE FANCIFUL AND ARBITRARY. HE WAS JUSTIFIED IN GR ANTING PART RELIEF TO THE ASSESSEE VIS--VIS CERTAIN ADDITIONS/DISALLOWAN CES MADE BY THE ASSESSING OFFICER. IN THE ABSENCE OF ANY MATERIAL F URNISHED BY LEARNED DR TO CONTRADICT THE FINDINGS OF LEARNED CIT(A), WE DO NOT FIND ANY MERIT IN THE APPEAL FILED BY THE REVENUE. WE THEREF ORE UPHOLD THE ORDER OF LEARNED CIT(A) AND DISMISS THE APPEAL FILED BY T HE REVENUE. PRONOUNCED ACCORDINGLY ON 24 TH DAY OF NOVEMBER, 2010. SD/- SD/- (B. RAMAKOTAIAH) (D.MANMOHAN) ACCOUNTANT MEMBER VICE PRESIDENT MUMBAI, DATE 24 TH NOVEMBER, 2010 PS/- SMT. MANISHA JAIN 5 COPY TO : 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT(A)-CONCERNED. 4. THE CIT, CONCERNED. 5. THE DR CONCERNED, MUMBAI 6. GUARD FILE (TRUE COPY) BY ORDER ASST. REGISTRAR, ITAT, MUMBAI.