ROCHEM SEPARATION SYSTEMS (I) P. LTD, MUMBAI V. ACIT CEN CIR 10, MUMBAI

ITA 1566/MUM/2012

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 0262 (ITAT-MUMBAI)
• Duration Of Justice: 5 year(s) 5 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-08-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: D
• Next Hearing Date: 24-03-2015
• Assessment Year: 2008-2009
• Appeal Filed On: 06-03-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: O P MEENA
• Assessee Lawyers: GOURAV BANSAL
• Keywords: Opportunity of being heard; Onus to prove
• Section: 143(3); 14A; 68

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH D MUMBAI BEFORE SHRI SAKTIJIT DEY (JUDICIAL MEMBER) AND SHRI N.K. PRADHAN (ACCOUNTANT MEMBER) ITA NO. 1566 / MUM/20 12 ASSESSMENT YEAR: 2008 - 09 M/S. ROCHEME SEPARATION SYSTEMS VS. A CIT CEN CIR 10 INDIA PVT. LTD. 8 TH FLOOR, CGO BLDG. 101 HDIL TOWER, ANANT KANEKAR MARG, ANNEX, M.K. MARG BANDRA (EAST) MUMBAI - 400020 MUMBAI 40005 0 PAN NO. AABCR1955P (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI GOURAV BANSAL, AR REVENUE BY: SHRI O.P. MEENA, DR DATE OF HEARING : 12/05/2017 DATE OF PRONOUNCEMENT: 09/08/2017 ORDER PER N.K. PRADHAN, A . M . THIS IS AN APPEAL FILED BY THE ASSESSEE . THE RELEVANT ASSESSMENT YEAR IS 2008 - 09 . THE APPEAL IS DIRECTED AGAINST THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS) - 37, MUMBAI AND ARISES OUT OF ORDER U/S 143(3) OF THE INCOME TAX ACT, 1961 (THE ACT). 2 . THE GROUNDS OF APPEAL FILED BY THE ASSESSEE READ AS UNDER: - 1. THE CIT(A) ERRED IN LAW AND ON FACTS I N CONFIRMING AN ADDITION OF RS. 36,58,400/ - U/S 68 OF THE INCOME TAX ACT FOR THE SALE PROCEEDS OF THE GOLD WHICH WAS A PART OF THE PURCHASES OF GOLD MADE AFTER SEARCH ITA NO. 1566 /MUM/201 2 2 PROCEEDINGS OUT OF THE AMOUNTS RECEIVED IN CASH AGAINST BOGUS TRADE PURCHASES SURRENDERED AND HAS ALREADY BEEN EXPLAINED IN THE ASS ESSMENT PROCEEDINGS FOR THE A.Y. 2000 - 01 TO 2006 - 07 FOR THE SEARCH PERIOD. THEREFORE, THE ADDITION MADE U/S 68 OF THE INCOME TAX ACT SHOULD BE DELETED. 2. WITHOUT PREJUDICE TO THE ABOVE GROUND OF APPEAL NO. 1, THE CIT(A) ERRED IN LAW AND ON FACT S I N MAKING AN ADDITION FOR RS. 36,58,400/ - DESPITE THE FACT THAT OUT OF THIS AMOUNT A SUM OF RS. 4,09,970/ - HAD ALREADY BEEN OFFERED AND TAXED AS SHORT TERM CAPITAL GAIN BEING THE DIFFERENCE OF THE PURCHASE PRICE OF THE GOLD AND THE SALE AMOUNT RECEIVED. THERE FORE, IT IS PRAYED THAT THE ADDITION AT THE MOST COULD BE MADE FOR RS.32,48,430/ - AND NOT FOR RS. 36,58,400/ - . 3. THE CIT(A) ERRED IN LAW AND ON FACTS IN CON FIRMING THE DISALLOWANCE OF RS. 5,32,845/ - MADE U/S 14A OF THE INCOME TAX ACT WITHOUT APPRECIATING THE W ORKING OF THE DISALLOWANCE SUBMITTED BY THE APPELLANT AS PER WHICH ONLY RS. 58,141/ - COULD BE THE DISALLOWANCE AS PER RULE 8D BECAUSE THE INVESTMENT IN GOLD IS NOT COVERED BY THE PROVISION AND THE INCORRECT INTEREST EXPENDITURE. THUS, THE DISALLOWANCE MADE U/S 14A OF THE INCOME TAX ACT SHOULD BE RESTRICTED TO RS. 58,141/ - APPLYING RULE 8D OF THE INCOME TAX RULES. 3. WE BEGIN WITH THE 1 ST AND 2 ND GROUND OF APPEAL AS THEY ADDRESS A COMMON ISSUE. BRIEFLY STATED, THE FACTS OF THE CASE ARE THAT DURING THE COURSE O F ASSESSMENT PROCEEDINGS THE AO WAS NOT SATISFIED WITH THE CLAIM OF THE ASSESSEE REGARDING PURCHASE OF GOLD BARS OUT OF UNDISCLOSED INCOME OFFERED DURING THE COURSE OF SEARCH. THE ASSESSEE FILED A LETTER DATED 05.11.2007 BEFORE THE AO IN WHICH DETAILS OF A PPLICATION OF UNDISCLOSED INCOME OF RS.699.56 LAKHS AND PURCHASE OF GOLD BARS WEIGHING 12.8 KG. FOR A TOTAL VALUE OF RS.124.50 LAKHS WAS MENTIONED. HOWEVER, ALONG WITH THE ABOVE LETTER THE ASSESSEE DID NOT FILE ANY EVIDENCE/BILL FOR PURCHASE OF GOLD BARS. A PART OF THE GOLD BARS WAS CLAIMED TO HAVE BEEN SOLD IN THE PREVIOUS YEAR RELEVANT TO THE ITA NO. 1566 /MUM/201 2 3 IMPUGNED ASSESSMENT YEAR. AS THE AO WAS NOT SATISFIED WITH THE GENUINENESS OF SALE, BILLS PRODUCED FOR THE SAME WERE IMPOUNDED AND SUMMONS WERE ISSUED TO THE THREE P ARTIES. THE INSPECTOR DEPUTED BY THE AO TO SERVE THE SUMMONS COULD DO IT ON ONLY ONE PARTY, NAMELY JAYANTILAL M. THADESHWAR AND IN RESPECT OF REMAINING TWO PERSON S , HE REPORTED THAT NO SUCH PERSON S EXISTED ON THE ADDRESS APPEARING IN THE PURCHASE BILLS GIVEN AS EVIDENCE BY THE ASSESSEE. THE AO THEN ISSUED A SHOW CAUSE NOTICE TO THE ASSESSEE REQUESTING TO PRODUCE THE REMAINING TWO JEWELLERS ALONG WITH EVIDENCE IN SUPPORT OF THEIR CLAIM OF HAVING PURCHASED THE GOLD BARS FROM THE ASSESSEE. THE ASSESSEE SUBM ITTED BEFORE THE AO THAT THOSE TWO JEWELLERS WHO HAD PURCHASED THE GOLD BAR S WERE AVAILABLE IN MUMBAI. THEREFORE, THE AR OF THE ASSESSEE SUBMITTED BEFORE THE AO THAT HE WAS NOT ABLE TO PRODUCE THEM BEFORE THE AO FOR EXAMINATION AS THE JEWELLERS WERE UNWILL ING TO APPEAR BEFORE THE DEPARTMENT. THE AO THEN HELD THE SAID PURCHASE OF GOLD BARS BY THE ASSESSEE AS SHAM TRANSACTION FOR THE FOLLOWING REASONS: I. THERE WAS A SHORTAGE OF CASH OF RS.3,92,90,217/ - ON THE DATE OF SEARCH. II. THE APPELLANT HAD NOT GIVEN ANY DET AILS REGARDING THE APPLICATION OF THE AMOUNT ADMITTED U/S 132(4) BEFORE THE DDIT (INV.). III. THE PURCHASE OF GOLD BARS IN AY 2007 - 08 WAS NOT ESTABLISHED BY THE APPELLANT AS GENUINE TRANSACTION. THE APPELLANT WAS NOT ABLE TO GIVE THE DATE OF PURCHASE AND WAS U NABLE TO SUBSTANTIATE PURCHASE OF GOLD BARS WEIGHING 12.8 KG. THE APPELLANT HAD DECLINED TO PROVIDE THE DETAILS. IV. FAILURE OF THE APPELLANT TO ESTABLISH THE GENUINENESS OF THE SALE OF GOLD BARS. V. THE BILLS FOR SALE OF GOLD BARS DID NOT CARRY ANY BILL NUMBER S. VI. THE JEWELLERS WHO ISSUED THE BILLS NOT FOUND ON THE GIVEN ADDRESS AND THEIR REFUSAL TO APPEAR BEFORE THE LD. AO. ITA NO. 1566 /MUM/201 2 4 VII. THE DISCREPANCY IN THE BILL OF JAYANTILAL M. THANDESHWAR WHERE THE AO HAS ESTABLISHED THAT ON THE VERIFICATION OF THE ORIGINAL BILL BOOK, BILL NO. 98 DATED 14.12.2007 ISSUED TO THE APPELLANT WAS INTERPOLATED AND NEXT NUMBER WAS GIVEN AS 98 - A ON THE SAME DATE. IN VIEW OF THE ABOVE THE AO CONCLUDED THE PURCHASE AND SALE OF GOLD BARS AS SHAM TRANSACTION AND MADE AN ADDITION OF RS.36,58,900/ - U/S 68 OF THE ACT. 4. AGGRIEVED BY THE ORDER OF THE AO, THE ASSESSEE FILED AN APPEAL BEFORE THE LD. CIT(A). THE LD. CIT(A) OBSERVED THAT THE AO HAD METICULOUSLY BROUGHT ABOUT THE SHAM SALE TRANSACTION OF NON - EXISTENT GOLD BARS BY ISSUING SUMMONS TO THE S O CALLED PURCHASERS. THE AR OF THE ASSESSEE FAILED TO PRODUCE ANY OTHER EVIDENCE BEFORE THE LD. CIT(A) OTHER THAN WHAT WAS SUBMITTED DURING THE COURSE OF ASSESSMENT PROCEEDINGS. THEREFORE, THE LD. CIT(A) CONFIRMED THE ADDITION OF RS.36,58,900/ - MADE BY THE AO. 5. BEFORE US, THE LD. COUNSEL OF THE ASSESSEE SUBMITS THAT EVERY UNDISCLOSED INCOME HAS TO BE UTILIZED IN THE FORM OF UNDISCLOSED INVESTMENT, RECEIVABLE OR EXPENDITURE WHETHER EVIDENCE WAS FOUND AT THE TIME OF SEARCH OR NOT. IT IS SUBMITTED BY HIM TH AT THE SALE PROCEEDS OF THE GOLD WAS A PART OF THE PURCHASE OF GOLD MADE AFTER SEARCH PROCEEDINGS OUT OF THE AMOUNT RECEIVED IN CASH AGAINST BOGUS TRADE PURCHASES SURRENDERED AND HAD ALREADY BEEN EXPLAINED IN THE ASSESSMENT PROCEEDINGS FOR THE AY 2000 - 01 T O 2006 - 07 FOR THE SEARCH PERIOD. THUS THE LD. COUNSEL SUBMITS THAT THE ADDITION MADE BY THE AO U/S 68 BE DELETED. 6. ON THE OTHER HAND, THE LD. DR SUPPORTS THE ORDER PASSED BY THE LD. CIT(A) CONFIRMING THE ADDITION OF RS.36,58,900/ - MADE BY THE AO. ITA NO. 1566 /MUM/201 2 5 7. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE RELEVANT MATERIALS ON RECORD. WE FIND THAT THE FACTS FOUND OUT BY THE AO AS DELINEATED AT PARA 3 HERE - IN - ABOVE REQUIRE VERIFICATION. SECTION 68 PLACES THE BURDEN OF PROOF ON THE TAXPAYER TO EXPLAIN THE NATURE AND THE SOURCE OF ANY CREDIT FOUND IN THE BOOKS 7.1 IN VIEW OF THE ABOVE, WE SET ASIDE THE ORDER OF THE LD. CIT(A) ON THE ABOVE ISSUES AND RESTORE THE MATTER TO THE FILE OF THE AO TO MAKE A FRESH ASSESSMENT AFTER EXAMINING THE FACTS MENTIONED AT P ARA 3 HERE - IN - ABOVE AND GIVING REASONABLE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. THE ASSESSEE IS ALSO DIRECTED TO FILE THE REQUIRED DETAILS BEFORE THE AO. 7.2 THUS THE 1 ST & 2 ND GROUND OF APPEAL ARE ALLOWED FOR STATISTICAL PURPOSES. 8. NOW WE TURN T O 3 RD GROUND OF APPEAL. DURING THE IMPUGNED ASSESSMENT YEAR, THE ASSESSEE - COMPANY RECEIVED A DIVIDEND OF RS.4,64,321/ - . I T FILED A LETTER DATED 16.12.2010 BEFORE THE AO FURNISHING WORKING OF DISALLOWANCE OF RS.9,939/ - U/S 14A. THE AO MADE AN ADDITION OF RS.5,32,845/ - U/S 14A R.W. RULE 8D OF THE IT RULES 1962. IN APPEAL THE LD. CIT(A) CONFIRMED THE ABOVE DISALLOWANCE MADE BY THE AO. 8.1 BEFORE US, THE LD. COUNSEL OF THE A SSESSEE SUBMITS THAT INVESTMENT IN GOLD IS NOT COVERED BY PROVISIONS OF SECTION 14A AND THEREFORE, THE DISALLOWANCE OF INTEREST EXPENDITURE BY THE AO IS INCORRECT. ON THE OTHER HAND, THE LD. DR SUPPORTS THE ORDER PASSED BY THE LD. CIT(A). 8.2 WE HAVE HEAR D THE RIVAL SUBMISSIONS AND PERUSED THE RELEVANT MATERIALS ON RECORD. WE FIND THAT WHILE MAKING DISALLOWANCE U/S 14A, ITA NO. 1566 /MUM/201 2 6 THE ASSESSEE WAS NOT GIVEN SUFFICIENT OPPORTUNITY BY THE AO TO FILE THE DETAILS PERTAINING TO DISALLOWANCE U/S 14A. THEREFORE, THE ORDER O F THE LD. CIT(A) ON THE ABOVE ISSUE IS SET ASIDE AND MATTER IS RESTORED TO THE FILE OF THE AO TO MAKE A FRESH ASSESSMENT AFTER GIVING REASONABLE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. THE ASSESSEE IS ALSO DIRECTED TO FILE THE RELEVANT DETAILS BEFORE T HE AO. THUS THE 3 RD GROUND OF APPEAL IS ALLOWED FOR STATISTICAL PURPOSES. 9. IN THE RESULT, THE APPEAL IS ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN C OURT ON 09/08/2017. SD/ - SD/ - ( SAKTIJIT DEY ) (N.K. PRADHAN) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI ; DATED: 09/08/2017 RAHUL SHARMA , SR. P.S. 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// (DY./ASSTT. REGISTRAR) ITAT, MUMBAI