Khushbu Vinyl Pvt. Ltd ( Formerly Khushbu Sales P. Ltd), Panchmahal V. DCIT, Circle-2(1)(2), Ahmedabad

ITA 1563/AHD/2018

• Counselvise Citation: [2018] 119 COUNSELVISE.COM (IT) 4624 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 17-10-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 2012-2013
• Appeal Filed On: 20-06-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: S N DIVETIA; MEHUL TALERA ARS
• Keywords: Unexplained cash credit; Principle of natural justice; Proportionate interest
• Section: 143(3); 133(6); 68

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD B BENCH BEFORE: SHR I MAHAVIR PRASAD , JUDICIAL MEMBER AND SHRI AMARJIT SINGH, ACCOUNTANT MEMBER KHUSHU VINYL PVT. LTD. (FORMERLY KHUSHBU SALES PVT. LTD.), BLOCK NO. 28, VILLAGE UJETI, BASKA - UJETI ROAD, TAL HALOL, DIST: PANCHMAHAL - 389350 PAN: AAACK6182G (APPELLANT) VS THE D CIT, CIRCLE - 2( 1 )(2) , AHMEDABAD (RE SPONDENT) REVENUE BY : S H RI MUDIT NAGPAL , SR. D . R. ASSESSEE BY: SHRI S.N. DIVETIA & SHRI MEHUL TALERA, ARS DATE OF HEARING : 09 - 1 0 - 2 018 DATE OF PRONOUNCEMENT : 17 - 10 - 2 018 / ORDER P ER : AMARJIT SINGH, ACCOUNTANT MEMBER : - THIS ASSESSEE S APPEAL FOR A. Y. 2012 - 13 , ARI SES FROM ORDER OF THE CIT(A) - 2, AHMEDABAD DATED 29 - 08 - 2 016 , IN PROCEEDINGS UNDER SECTION 143(3) OF THE INCOME TAX ACT, 1961; IN SHORT THE ACT . 2. THE A SSESSEE HAS RAISED FOLLOWING GROUNDS OF APPEAL: - 1.1 THE EX - PARTY ORDER PASSED U/S.250 ON 29.08.2016 FOR A.Y.2012 - 13 BY CIT(A) - 2, A'BAD, CONFIRMING THE ADDITION OF RS.70 LAKHS U/S.68 MADE BY AO IS WHOLLY ILLEGAL, UNLAWFUL AND AGAINST THE PRINCIPLES OF NATURAL JUSTICE. I T A NO . 1563 / A HD/2 0 18 A SS ESSMENT YEAR 2012 - 13 I.T .A NO. 1563 /AHD/20 1 8 A.Y. 2012 - 13 PAGE NO KHUSHBU VINYL PVT. LTD. VS. D CIT 2 1.2 THE LD. CIT(A) HAS FAILED TO APPRECIATE THAT THE APPELLANT COULD NOT COMPLY TO THE NOTICES RELATING TO THE APPEAL PROCEEDINGS BECAUSE ONE SHRI DEEP PATEL STATIONED AT AHMEDABAD WAS LOOKING AFTER TAXATION AND ACCOUNTS OF THE APPELL ANT COMPANY DID NOT ATTEND/COMPLY WITH THE SAID NOTICES AND GAVE INCORRECT REPORTING TO THE MANAGEMENT. THUS, THERE WAS SUFFICIENT CAUSE FOR FAILURE TO COMPLY TO THE NOTICES ISSUED OF PENALTY PROCEEDINGS. 2.1 THE LD. CIT(A) HAS GRIEVOUSLY ERRED IN LAW AND ON FACTS IN UPHOLDING THE UNSECURED LOAN OF RS.40 LAKHS FROM SHRI RAJPUT AND RS.30 LAKHS FROM SHRI CHANDRAKANT PATEL, AGGREGATING TO RS.70 LAKHS AS UNEXPLAINED CREDIT U/S.68 IN SPITE OF THE BURDEN CAST UPON THE ASSESSEE FULLY DISCHARGED. 2.2 THAT I N THE FACTS AND CIRCUMSTANCES OF THE CASE AS WELL AS IN LAW, THE LD. CIT(A) OUGHT NOT TO HAVE UPHELD THE ADDITION OF RS. 70 LAKHS TOWARDS UNEXPLAINED CASH CREDIT IN RESPECT OF CASH CREDIT IN RESPECT OF AFORESAID LOANS. 3.1 THE LD. CIT(A) HAS GRIEVOUSLY ERRED IN LAW AND ON FACTS IN CONFIRMING THE DISALLOWANCE OF INTEREST EXP. TO THE EXTENT OF RS.32,26,977/ - . 3.2 THAT IN THE FACTS AND CIRCUMSTANCES OF THE CASE AS WELL AS IN LAW, THE LD. CIT(A) OUGHT NOT TO HAVE UPHELD THE DISALLOWANCE OF INTEREST EXP. TO THE EXTENT OF RS.32,26,977/ - 3. THE BRIEF FACT OF THE CASE IS THAT RETURN OF INCOME DECLARING INCOME OF RS. 77 , 72 , 33/ - WAS FILED ON 2 9 TH SEP, 2012. SUBSEQUENTLY, THE CASE WAS SELECTED UNDER SCRUTINY BY ISSUING OF NOTICE U/S. 143(2) OF THE ACT ON 14 T H AUGUST, 2013. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER NOTICED THAT ASSESSEE HA D OBTAINED UNSECURED LOAN TO THE AMOUNT OF OF RS. 70 LACS( RS. 30 LACS FROM SHRI CHANDRAKANT D. PATEL A ND RS. 40 LACS FROM SHRI RAJESH SINGH RAJP UT ) DURING THE YEAR UNDER CONSIDERATION. THE ASSESSEE WAS ASKED TO ESTABLISH THE IDENTITY, CREDITWORTHINESS AND GENUINENE SS OF THE IMPUGNED UNSECURED LOAN AND STATED THAT THE ASSESSEE HA D MERELY FURNISHED THE COP IES OF CONFIRMATION FROM THESE TWO PARTI ES. THERE AFTER , THE ASSESSING OFFICER HAS ISSUED NOTICE U/S. 133(6) TO THE LENDERS TO VERIFY THE IDENTITY, CREDITWORTHINESS AND GENUINENESS OF THE TRANSACTIONS. ON VERIFICATION OF THE INFORMATION RECEIVED FROM PARTIES A ND INQUIRIES CONDUCTED FROM THE B ANKS, THE ASSESSING OFFICER OBSERVED THAT THE CREDITWORTHINESS OF THE LOAN TRANSACTION S WERE NOT PROVED BY THE ASSESSEE AND HE HAS ALSO NOTICED TRANSACTIONS OF SAME DAY DEPOSIT /TRANSFER OF FUNDS FROM THE BANK ACCOUNT OF THE LENDERS TO THE ASSESSEE. CONS EQUENTLY, T HE ASSESSING OFFICER CONCLUDED THAT ASSESSE E HAS NOT PRODUCED ANY RELEVANT DOCUMENTARY EVIDENCES TO SUBSTANTIATE THE GENUINENESS OF THE TRANSACTIONS , THEREFORE, HE H AS MADE ADDITION OF RS . 70 LACS TO THE TOTAL INCOME OF THE ASSESSEE AS UNEXPLA INED CASH CREDIT U/S. 68 OF THE I.T. ACT. I.T .A NO. 1563 /AHD/20 1 8 A.Y. 2012 - 13 PAGE NO KHUSHBU VINYL PVT. LTD. VS. D CIT 3 DISALLO WANCE OF INTEREST U/S. 36(1) (III) 4. THE ASSESSING OFFICER NOTICED THAT ASSESSEE HAS SHOWN CAPITAL WORK IN PROGRESS AMOUNTING TO RS. 3 , 38 , 91 , 480/ - AS ON 31 ST MARCH, 2012 AND INTEREST EXPENSES INCURRED DU RING THE YEAR AMOUNTING TO RS. 94 , 41 , 998/ - . THE ASSESSEE WAS ASKED TO FURNISH THE DETAILS AND WORK IN PROGRESS SHOWN DURING THE YEAR UNDER CONSIDERATION AND ASSESSEE . AFTER EXAMINATION OF THE DETAIL FILED THE ASSESSEE WAS ASKED TO EXPLAIN WHY PROPORTION ATE INTEREST SHOULD NOT BE CAPITALIZED AS PER PROVISION OF SECTION 36(1)(III ) OF THE ACT. THE ASSESSEE EXPLAINED THAT TOTAL WORK IN PROGRESS OF RS. 3 , 38 , 91 , 480/ - WAS LOWER THAN ITS OWN FUND THEREFORE THE QUESTION OF DISALLOWANCE ON PROPORTIONATE INTERE ST DOES NOT ARISE. THE ASSESSING OFFICER HAS NOT ACCEPTED THE SUBMISSION OF THE ASSESSEE D STAT ING THAT ASSESSEE HAS FAILED TO SUBSTANTIATE WITH ANY COGENT MATERIAL EVIDENCE THAT T HE FUND DEPLOYED FOR CAPITAL WORK IN PROGRESS WAS UTILIZED EXCLUSIVELY OUT OF INTEREST FREE FUND. THEREFORE, THE ASSESSING OFFICER HAS WORKED OUT PROPORTIONATE INTEREST @ 12% ON CWIP OF RS. 3 , 38 , 91 , 480/ - TO THE AMOUNT OF RS. 40 , 66 , 977/ - AND ADDED TO THE TOTAL INCOME OF THE ASSESSEE. 5. AGGRIEVED ASSESSEE FILED APPEAL BEFOR E THE LD. CIT(A). DURING THE COURSE OF APPELLATE PROCEEDINGS BEFORE THE LD. CIT(A), THE ASSSESSEE HAS NOT ATTENDED THE HEARING IN SPITE OF THE FACT THAT LD. CIT(A) HAS ISSUED A NUMBER OF NOTICES AND GRANTED NUMB ER OF ADJOURNMENTS AS STATED BELOW: - DATE O F ISSUE OF NOTICE DATE OF HEARING FIXED RESPONSE FROM APPELLANT 04/03/2016 06/04/2016 AR OF THE APPELLANT SOUGHT FOR ADJOURNMENT VIDE LETTER DATED 04/04/2016 AND THE HEARING WAS REFIXED ON 29/04/201 6. 29/04/2016 AR OF THE APPELLANT SOUGHT FOR A DJOURNMENT VIDE LETTER DATED 29/04/206 AND THE HEARING WAS REFIXED ON 12/05/201 6. I.T .A NO. 1563 /AHD/20 1 8 A.Y. 2012 - 13 PAGE NO KHUSHBU VINYL PVT. LTD. VS. D CIT 4 12/05/2016 AR OF THE APPELLANT SOUGHT FOR ADJOURNMENT VIDE LETTER DATED 1 2/05/20 1 6 AND THE HEARING WAS REFIXED ON 31/05/201 6. 31/05/2016 AR OF THE APPELLANT SOUGHT FOR ADJOURNMENT VIDE LETTER DATED 04/04/20 1 6 AND THE HEARING WAS REFIXED ON 09/06/201 6. 09/06/2016 AR OF THE APPELLANT SOUGHT FOR ADJOURNMENT VIDE LETTER DATED 09/06/2016 AND THE HEARING WAS REFIXED ON 23/06/201 6. 23/06/2016 NO COMPLIANC E MADE. 27/06/2016 05/07/2016 AR OF THE APPELLANT SOUGHT FOR ADJOURNMENT VIDE LETTER DATED 05/07/2016 AND THE HEARING WAS REFIXED ON 18/07/201 6. 18/07/2016 NO COMPLIANCE MADE. 19/07/2016 29/07/2016 NO COMPLIANCE MADE. 29/07/2016 AR OF TH E APPELLANT SOUGHT FOR ADJOURNMENT VIDE LETTER DATED 29/07/2016 AND THE HEARING WAS REFIXED ON 09/08/201 6. 09/08/2016 NO COMPLIANCE MADE. 10/08/2016 22/08/2016 NO COMPLIANCE MADE. IN THE ABSENCE OF ANY SUBMISSION AND COMPLIANCE THE LD. CIT(A) HAS ADJUDICATED THE APPEAL OF THE ASSESSEE EX - PARTE HOLDING THAT CREDITWORTHINESS OF THE CREDITORS AND SOURCE OF THE UNSECURED LOANS WERE REMAINED UNPROVED THEREFORE, CONFIRMED THE ADDITION MADE BY THE ASSESSING OFFICER. IN RESPECT OF DISALLOWANCE OF INTEREST RELATING TO THE AMOUNT INVESTED IN THE CAPITAL WORK IN PROGRESS THE ADDITION WAS RESTRICTED TO RS.32,26.977/. 6. DURING THE COURSE O F APPELLATE PROCEEDINGS BEFORE US, THE LD. COUNSEL HAS SUBMITTED A PAPER BOOK CONTAINING DETAIL OF SUBMISSION MADE BEFORE THE ASSESSING OFFICER DURING THE COURSE OF ASSESSMENT PROCEEDINGS . HE HAS I.T .A NO. 1563 /AHD/20 1 8 A.Y. 2012 - 13 PAGE NO KHUSHBU VINYL PVT. LTD. VS. D CIT 5 CONTENDED THAT THE COMPLIANCE TO THE APPELLATE PROCEEDINGS BEFORE THE LD. CIT(A) , COULD NOT BE MADE BECAUSE THE TAX CONSULTANT OF THE ASSESSEE SHRI DEEP PATEL HA S SUD DENLY LEFT THE WROK WITHOUT INFORMING THE MANAGEMENT ABOUT THE STATUS OF PENDING APPELLATE PROCEEDINGS OF THIS CASE BEFORE THE LD. CIT(A). THEREFORE HE HAS REQUESTED THAT THE CASE OF THE ASSESSEE BE DECIDED ON MERIT AFTER PROVIDING ANOTHER OPPORTUNITY. ON THE OTHER HAND , LD. DEPARTMENTAL REPRESENTATIVE HAS SUPPORTED THE ORDER OF ASSESSING OFFICER AND CONTENDED THAT IN SPITE OF GIVING A NUMBER OF OPPORTUNITIES THE ASSESSEE HAS NEITHER ATTENDED THE HEARING NOR FURNISHED ANY WRITTEN SUBMISSION , THEREFORE, T HE DECI SION OF THE LD. CIT(A) IS JUSTIFIED IN SUSTAINING THE ADDITION MADE BY THE ASSESSING OFFICER. 7. WE HAVE HEARD THE BOTH THE SIDES AND PERUSED THE MATERIAL ON RECORD CAREFULLY. W E HAVE NOTICED THAT LD. CIT(A) HAS PROVIDED SUFFICIENT NUMBER OF OPPORTUNITY A ND NOW DURING THE COURSE OF APPELLATE PROCEEDINGS BEFORE US IT IS CLAIMED THAT THE COMPLIANCE TO T HE APPELLATE PROCEEDINGS COULD NOT BE MADE AS THE TAX CONSULTANT OF THE ASSESSEE HAS SUDDENLY LEFT THE WORK WITHOUT PRIOR INTIMATION. AFTER TAKING IN TO CONS IDERATION THAT LD. CIT(A) HAS ISSUED A NUMBER OF NOTICES AND GRANTED NUMBER OF ADJOURNMENTS WE OBSERVE THAT THE ASSESSEE HAS NOT SUPPORTED ITS INABILITY TO ATTEND THE HEARING WITH ANY EVIDENCE . HOWEVER, KEEPING IN VIEW THE ASSURANCE GIVEN BY THE LD. COUN SEL OF THE ASSESSEE THAT THE ASSESSEE WILL MAKE NECESSARY COMPLIANCE IN THE APPELLATE PROCEEDINGS BEFORE THE LD CIT(A) WE ARE OF THE CONSIDERED OPINION THAT TO DECIDE THE CASE ON MERIT IT WILL BE APPROPRIATE TO RESTORE THIS CASE TO THE FILE OF THE LD.CIT(A ) SUBJECT TO LEVY OF COST OF RS.10 , 000/ . ACCORDINGLY THE CASE IS RESTORED TO THE FILE OF THE LD.CIT(A) TO PROVIDE FINAL OPPORTUNITY TO THE ASSESSEE TO SUBSTANTIATE ITS CASE ON MERIT .THE ASSESSEE IS DIRECTED TO PRODUCE THE CHALLAN OF DEPOSITING RS.10,000/ BEFORE THE LD.CIT(A) AHEAD OF THE SET ASIDE PROCEEDINGS. AFTER CONSIDERING THE ABOVE FACTS AND CIRCUMSTANCES , WE SET ASIDE THE MATTER TO THE FILE OF LD. CIT(A) FOR DECIDING AFRESH AFTER EXAMINATION/VERIFICATION OF THE INFORMATION / MATERIAL FURNISHED BY THE ASSESSEE. THE ASSESSEE IS ALSO DIRECTED TO ATTEND THE HEARING WITHOUT ANY FAILURE I.T .A NO. 1563 /AHD/20 1 8 A.Y. 2012 - 13 PAGE NO KHUSHBU VINYL PVT. LTD. VS. D CIT 6 B EFORE THE LD. CIT (A) IN THE SE T A SIDE PROCEEDINGS. ACCORDINGLY, THE APPEAL OF THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSE SUBJECT TO THE CONDITION AS CITED ABOVE. 8. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSE. ORDER PR ONOUNCED IN THE OPEN C OURT ON 17 - 10 - 201 8 SD/ - SD/ - ( MAHAVIR PRASAD ) ( AMARJIT SINGH ) JUDICIAL MEMBER ACCOUNTANT MEMBER AHMEDABAD : DATED 17 /10 /2018 / COPY OF ORDER FORWARDED TO: - 1. ASSESSEE 2. REVENUE 3. CONCERNED CIT 4. CIT (A) 5. DR, ITAT, AHMEDABAD 6. GUARD FILE. BY ORDER/ , / ,