POWER HOUSE FITNESS LTD, MUMBAI V. ITO 4(3)(1),

ITA 1398/MUM/2017

• Counselvise Citation: [2021] 107 COUNSELVISE.COM (IT) 9507 (ITAT-MUMBAI)
• Duration Of Justice: 4 year(s) 4 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 01-07-2021
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: Not Allotted
• Assessment Year: misc
• Appeal Filed On: 28-02-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: V SREEKAR
• Assessee Lawyers: HIMANK D ESAI
• Keywords: Opportunity of being heard; Principle of natural justice; Additional evidence
• Section: 271(1)(c); 274; 145(3); 68

Judgement Text

THE INCOME TAX APPELLATE TRIBUNAL C BENCH, MUMBAI SHRI SHAMIM YAHYA (AM) & SHRI PAVANKUMAR GADALE ( JM) I.T.A. NO. 1398/MUM/2017 (ASSESSMENT YEAR 2012-13) POWER HOUSE FITNESS LTD. 18, SURTI CHAMBERS2ND DHOBI TALAO LANE MARINE LINES MUMBAI-400 002. PAN : AACCN0015B VS. ITO-4(3)(1) AAYAKAR BHAVAN M.K. ROAD MUMBAI-20. (APPELLANT) (RESPONDENT) ASSESSEE BY SHRI HIMANK DESAI DEPARTMENT BY SHRI V. SREEKAR DATE OF HEARING 06 .0 5 .2021 DATE OF PRONOUNCEMENT 01.07.2021 O R D E R PER SHAMIM YAHYA (AM) :- THIS IS AN APPEAL BY THE ASSESSEE IS DIRECTED AGAI NST THE ORDER OF LEARNED CIT(A) DATED 23.12.2016 FOR ASSESSMENT YEAR 2012-13 . 2. THE GROUNDS OF APPEAL READ AS UNDER :- 1) ON FACTS AND IN CIRCUMSTANCES OF THE CASE AND IN LAW THE LEARNED CIT(A) ERRED IN CONFIRMING IN ADDITION OF SUNDRY CREDITORS RELATED TO AY 2012-2013 WITHOUT IDENTIFYING SUNDRY CREDITORS AND WITHOUT QUA NTIFYING AMOUNT. 2) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW THE LEARNED CIT(A) ERRED IN NOT CONSIDERING CONFIRMATIONS AND BAL ANCE SHEETS FILED OF SUNDRY CREDITORS. 3) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW THE LEARNED CIT(A) ERRED IN CONFIRMING APPLICABILITY OF SECTION 41(1) OF THE IT ACT EVEN THOUGH CONFIRMATIONS WERE FILED AND THERE WAS NO CESSA TION OF LIABILITY. 4) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW THE LEARNED CIT(A) ERRED IN CONFIRMING APPLICABILITY OF SECTION 41(1) OF THE IT ACT WHEN PURCHASES WERE FOUND TO BE GENUINE. 5) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW THE LEARNED CIT(A) ERRED IN GIVING DIRECTION TO AO FOR RE-OPENIN G OF ASSESSMENT OF PREVIOUS YEARS. POWER HOUSE FITNESS LTD. 2 6) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW THE LEARNED CIT(A) ERRED IN CONFIRMING ADDITION OF RS. 6,50,000 U/S 68 OF THE IT ACT 7) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW THE LEARNED CIT(A) ERRED IN CONFIRMING ADDITION OF RS. 20,00,32 4 U/S 68 OF THE IT ACT PRAYERS IT IS THEREFORE PRAYED THAT ADDITIONS BE DELETED APPELL ANT CREVES LEAVE TO ADD, AMEND, MODIFY AND OR DELETE ANY GROUNDS OF APPEAL. 3. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSING O FFICER NOTED THAT DURING THE COURSE OF ASSESSMENT PROCEEDINGS, AS PER THE OR DER SHEET NOTING DATED 03.02.2015 THE ASSESSEE WAS ASKED TO SUBMIT THE DET AILS OF CREDITORS AND CONFIRMATION FOR THE AMOUNT OF RS. 21,20,74,676/- A ND UNSECURED LOANS OF RS. 26,50,324/-. THE ASSESSEE HAS SUBMITTED THE CON FIRMATIONS OF THE CREDITORS. IN THIS REGARD THE ASSESSEE HAS BEEN ASK ED TO SUBMIT THE ITR, BALANCE SHEET AND CONFIRMATION OF UNSECURED LOANS. 4. THEREAFTER HE REFERRED TO VARIOUS SHOW-CAUSE LET TERS ISSUED AND REPLIES OF THE ASSESSEE, WHICH INTER ALIA OBJECTED TO ADDITION UNDER SECTION 41(1) OF THE ACT. THE ASSESSING OFFICER DID NOT MAKE ANY INDEPEN DENT INQUIRY OF HIS OWN WITH THE PARTIES. HE CONCLUDED AS UNDER : UNDER THESE CIRCUMSTANCES, AFTER CONSIDERING THE SU BMISSION AND PERUSING THE MATERIAL AVAILABLE ON RECORD AND IN VIEW OF LACK OF MATERIAL DEFICIENCIES. I HOLD THAT UNSECURED LOANS AND CREDITORS SHOWN BY THE AS SESSEE DURING THE YEAR REMAINED UNVERIFIABLE; THERE IS A POSSIBILITY OF LEAKAGE OF REVENUE. THEREFORE, I HAVE NO HESITATION TO INVOKE THE PROVISI ONS OF SECTION 145(3) OF THE I.T. ACT, 1961 FOR REJECTING THE BOOKS OF ACCOUNT S. ACCORDINGLY, IT IS RELEVANT TO BRING OUT THAT DURING THE COURSE OF THE ASSE SSMENT PROCEEDING, THE UNSECURED LOANS AND CREDITORS ALLEGEDLY SHOWN BY THE ASSESSEE WERE METICULOUSLY EXAMINED AND IT WAS REVEALED THAT THE TOTAL AMOUNT OF UNSECURED LOANS WORKS OUT TO RS. 26,50,324/- AND THE TOTAL AMOUNT OF CREDITORS WORK; OUT TO RS.21,20,74,676/- AND THE SAME IS ADDED BACK TO THE TOTAL INCOME. PENALTY PROCEEDINGS UNDER SECTION 274 R .W.S. 271(1)(C) ARE SEPARATELY INITIATED FOR CONCEALING PARTICULARS OF INCOME. 5. UPON ASSESSEES APPEAL LEARNED CIT(A) REJECTED A DDITIONAL PAPERS FILED BY THE ASSESSEE WITHOUT GIVING ANY COGENT REASONING. H IS ORDER IN THIS REGARD IS AS UNDER : DURING THE COURSE OF APPELLATE PROCEEDINGS, THE APPE LLANT HAS ENCLOSED CERTAIN CONFIRMATION OF ACCOUNTS FROM VARIOUS PARTIE S WHICH AGAIN IS NOT COMPLETE FOR THE ENTIRE ADDITIONS MADE BY THE AO HOW EVER, AT THE SAME TIME POWER HOUSE FITNESS LTD. 3 THE APPELLANT HAS NOT FILED ANY SPECIFIC LETTER PRAYIN G FOR ADMISSION OF ADDITIONAL EVIDENCE UNDER RULE 46A. FURTHER, THE APPE LLANT HAS NOT FILED ANY CONSOLIDATED PAPER BOOK CONTAINING WHATEVER DOCUMEN TS IT WANTED TO RELY INCLUDING CONFIRMATION OF ACCOUNTS FROM VARIOUS PARTIE S AND WHICH NEEDED TO BE DULY CERTIFIED BY THE APPELLANT THAT SUCH DOCUMENTS W ERE FILED BEFORE THE AO DURING THE COURSE OF ASSESSMENT PROCEEDINGS. THE REFORE, IN VIEW OF THESE FACTS AND FAILURE OF THE APPELLANT TO FILE ITS SPECIFI C LETTER FOR ADMISSION OF ADDITIONAL EVIDENCE, SOME INCOMPLETE NUMBER OF CONFI RMATIONS OF ACCOUNTS FILED BY THE APPELLANT DURING THE COURSE OF APPELLATE PROCEEDINGS, CANNOT BE TAKEN ON RECORD. 6. THEREAFTER LEARNED CIT(A) PASSED A PECULIAR ORDE R. HE FOUND SOME ERRORS MADE BY THE ASSESSING OFFICER. REALISING THAT SOME OF THE ADDITIONS CANNOT BE MADE DURING THE YEAR HE DIRECTED THAT EARLIER YEAR ASSESSMENT SHOULD BE REOPENED. HIS ORDER MAY BE REFERRED AS UNDER :- AFTER CONSIDERING THE FACTUAL PART OF THE SUBMISSIONS OF THE APPELLANT HAS REPRODUCED ABOVE, IT IS SEEN THAT THE AO HAS ADDED RS.2 1,20,74,646/- AS DISALLOWANCE OF CREDITORS. HOWEVER, FROM PARA 5.2 (P AGE 4 & 5 OF THE ASSESSMENT ORDER) IT IS FOUND THAT THE AO HAS ADDED UP THE ENTIRE AMOUNT OF SUNDRY CREDITORS WHICH WAS THE CLOSING BALANCE AS O N 27.03.2015 WHEREAS, AMOUNT OF SUNDRY CREDITORS AS PER CLOSING BALANCE OF CONFIRMATION OF CREDITORS FILED ON 12.02.2015, STOOD AT RS.18,23,01,1 98/-. IT IS FURTHER SEEN THAT THE APPELLANT HAS NOT BEEN ABLE TO PROVE THE ENTIRE SUNDRY CREDITORS WERE GENUINE AND WERE EXISTING. AT THE SAME TIME, THE AO HAS ALSO NOT GIVEN ITS BREAK UP FOR THE DIFFERENT ASSES SMENT YEARS TO WHICH THESE CREDITORS BELONG AND HAS ADDED THE ENTIRE AMOUNT A S APPEARING IN THE COLUMN OF CLOSING BALANCE OF CONFIRMATION ON 27.03.2 015, NEITHER THE AO HAS GIVEN ANY FINDING THAT THE ENTIRE CREDITORS WERE RELAT ED TO THE CURRENT ASSESSMENT YEAR WHICH IS UNDER APPEAL. IN VIEW OF TH IS, IT WILL BE DIFFICULT TO UPHOLD THE ENTIRE ADDITION MADE BY THE AO AND AT THE SAM E TIME IT WILL BE ALSO DIFFICULT TO DELETE ANY SPECIFIC AMOUNT OUT OF TH IS ADDITION SINCE THE APPELLANT HAS ALSO NOT GIVEN BIFURCATION OF FIGURES. BUT ONE THING IS VERY CLEAR THAT THE APPELLANT HAS NOT BEEN ABLE TO JUSTIFY AND SUBSTAN TIATE THE CLAIM OF THE ENTIRE SUNDRY CREDITORS. ACCORDINGLY, THE ADDITION S RELATED TO CREDITORS FOR ASSESSMENT YEAR 2012-13 IS BEING UPHELD AND THE BAL ANCE WILL BE NEEDED TO BE ADDED IN THEIR RESPECTIVE ASSESSMENT YEARS AND THE AO IS DIRECTED TO TAKE THE REMEDIAL MEASURES FOR THE SAME BY RE-OPENING THE CASE OF PRECEDING ASSESSMENT YEARS AFTER VERIFYING THE ASSESSMENT REC ORD FOR A Y 2012-13. WITH THIS DIRECTION, THE VARIOUS GROUND RELATED TO ADDIT ION OF RS. 21,20,74,676/- IS BEING DISPOSED OFF AND THESE GROUN DS ARE TO BE TREATED AS PARTLY ALLOWED SUBJECT TO ABOVE DIRECTIONS TO THE AO. AS REGARDS ADDITION OF RS. 26,50,324/-, IT IS SEEN F ROM PARA 5.4 OF THE ASSESSMENT ORDER THAT THE AO HAS ADDED RS.26,50,324/- B EING UNSECURED LOANS. HOWEVER, FROM PARA 5.3 OF THE ASSESSMENT ORDER ITSELF, IT IS SEEN THAT THE AO HAS BROUGHT CERTAIN FACTS FROM NOTE 3 OF BALAN CE SHEET OF THE POWER HOUSE FITNESS LTD. 4 APPELLANT. IT IS SEEN THAT IN FIRST TABLE OF PARA 5.3, RS. 6,50,000/- WAS SHOWN BY THE APPELLANT AS ICICI LOAN, HOWEVER, FROM THE SUB SEQUENT CHART IN PARA 5.3 ITSELF, IT IS SEEN THAT THE APPELLANT HAS SHOWN UNS ECURED LOAN OF RS. 6,50,000/- HAVING BEEN RECEIVED FROM SANTOWIN CORP L TD. SIMILARLY, WITH REGARD TO UNSECURED LOAN FROM POWER HOUSE GYM, THE AP PELLANT HAS NOT FILED ANY DETAILS/CONFIRMATIONS TO PROVE THE GENUINENESS OF THE SAID LOAN. ACCORDINGLY, THE SAME IS DIRECTED TO BE UPHELD. IT IS AN ESTABLISHED LAW THAT TO PROVE THE GENUINENESS O F LOAN ONUS IS ON THE APPELLANT TO PROVE THE IDENTITY OF THE CREDITOR, GENUIN ENESS OF TRANSACTION THROUGH BANKING CHANNEL AND CREDIT WORTHINESS OF THE LO AN CREDITOR WHICH HAS NOT BEEN PROVED BEFORE THE AO DURING THE ASSESSMEN T PROCEEDINGS NOR DURING THE APPELLATE PROCEEDINGS. ACCORDINGLY, BOTH THE ADDITIONS MADE BY THE AO ARE UPHELD. 7. AGAINST THE ABOVE ORDER ASSESSEE IS IN APPEAL BE FORE US. 8. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE R ECORDS. WE FIND THAT THE ASSESSING OFFICER HAS PROCEEDED TO ADD UNSECURE D LOAN AND CREDITORS WITHOUT REFERRING IN DETAIL TO THE INQUIRY INDEPEND ENTLY DONE BY HIM. HE HAS ALSO NOT EXAMINED WHETHER THESE PERTAIN TO ASSESSME NT YEAR OR EARLIER YEAR. THOUGH IT IS ALSO TRUE THAT THE ASSESSEE HAS NOT SU BMITTED THE PROPER DTAIL AS REQUIRED BY THE ASSESSING OFFICER. LEARNED CIT(A) B ASED ON UNCONVINCING REASON HAS REJECTED THE ADDITIONAL PAPERS. HE HAS R EJECTED THEM MERELY ON THE GROUND THAT COVERING PAPER FOR THE REQUEST IS NOT T HERE. IT IS SETTLED LAW THAT EVEN ADMINISTRATIVE ORDERS HAVE TO BE CONSISTENT WI TH RULES OF NATURAL JUSTICE. MOREOVER, LEARNED CIT(A) HAS MADE FURTHER ERROR BY DIRECTING THAT EARLIER YEAR ASSESSMENT BE REOPENED, WHEN HE REALISED THAT ADDIT ION CANNOT BE MADE DURING THE YEAR AS INGREDIENTS OF ADDITION UNDER SE CTION 41(1) ARE NOT THERE. IN THIS VIEW OF THE MATTER IN OUR CONSIDERED OPINION I NTEREST OF JUSTICE WILL BE SERVED THE ISSUE IS REMITTED TO THE ASSESSING OFFIC ER TO PASS AN ORDER AFRESH AFTER CONSIDERING THE ADDITIONAL PAPER AND SUBMISSI ON OF THE ASSESSEE. NEEDLESS TO ADD THE ASSESSEE SHOULD BE GRANTED ADEQ UATE OPPORTUNITY OF BEING HEARD. POWER HOUSE FITNESS LTD. 5 9. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALL OWED FOR STATISTICAL PURPOSES. PRONOUNCED IN THE OPEN COURT ON 1.7.2021. SD/- SD/- (PAVANKUMAR GADALE) (SHAMIM YAHYA) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI; DATED : 01/07/2021 COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT(A) 4. CIT 5. DR, ITAT, MUMBAI 6. GUARD FILE. BY ORDER, //TRUE COPY// ( ASSISTANT REGISTRAR) PS ITAT, MUMBAI