Shri Ketan Naginbhai Patel, Varachha V. Income Tax Officer Ward-3(1)(4), Surat

ITA 164/SRT/2017

AI Insights

The case involves Ketan Naginbhai Patel, who appealed against the order of the Learned Commissioner of Income Tax (Appeals)-3, Surat, which confirmed the disallowance of certain expenses claimed by the assessee in the assessment year 2008-09. The expenses, amounting to Rs.13,82,322, were disallowed by the Assessing Officer on the basis that they pertained to prior periods. The Tribunal noted that the assessee failed to provide adequate evidence or explanations to substantiate the claim that these expenses were incurred in the relevant assessment year. The Tribunal also observed that the balance sheets and other documents submitted were not authenticated and appeared to be fabricated, leading to the conclusion that they were prepared to defraud the revenue.

• Counselvise Citation: [2022] 140 COUNSELVISE.COM (IT) 302037 (ITAT-SURAT)
• Duration Of Justice: 10 year(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-12-2022
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: DB
• Next Hearing Date: 11-12-2022
• Assessment Year: misc
• Appeal Filed On: 12-12-2012
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Keywords: Business income; Revision of order; Set aside
• Section: 263; 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, SURAT BENCH, SURAT BEFORE SHRI PAWAN SINGH, JM &DR. A.L.SAINI, AM आयकरअपीलसं./ITA No.164/SRT/2017 (िनधाŊरणवषŊ / Assessment Year: (2008-09) (Virtual Court Hearing) Ketan Naginbhai Patel Dakshini Falia, B/h Committee Hall, Nana Varachha & Poonam Joshi (Advocate) B-502, Shreeji Arcade, Anand Mahal Road, Adajan, Surat Vs. Income Tax Officer, Ward-3(1)(4), Surat ̾थायीलेखासं./जीआइआरसं./PAN/GIR No.: BXNPP 7715 A (Appellant ) (Respondent) Ǔनधा[ǐरती कȧ ओर से /Assessee by : None (Written Submission) राजèव कȧ ओर से /Respondent by : Shri Vinod Kumar– Sr.D.R सुनवाईकीतारीख/ Date of Hearing : 12/12/2022 घोषणाकीतारीख/Date of Pronouncement : 20/12/2022 आदेश / O R D E R PER DR. A. L. SAINI, ACCOUNTANT MEMBER: Captioned appeal filed by the assessee, pertaining to assessment year 2008- 09, is directed against the order passed by the Learned Commissioner of Income Tax(Appeals)-3,Surat [‘Ld.CIT(A)’ for short], dated 12.07.2017, which in turn arises out of an order passed by the Assessing Officer under section 143(3) r.w.s. 263 of the Income Tax Act, 1961 (in short ‘the Act’), dated 27.10.2015. 2. The grounds of appeal raised by assessee are as follows:- “1. On the facts and in the circumstances of the case and in law, the ld. CIT(A) erred in confirming the assessment order passed by the AO as the same is bad in law because the AO has not examined the issue of allowances of prior period expenses claimed, thoroughly as per law as directed by the ld. CIT vide order u/s 263.Therefore, the order so passed being bad-in-law may kindly be quashed. 2.Withoug prejudice to the above, on the facts and in the circumstances of the case and in law, the ld. CIT(A) has erred in confirming the addition of Rs.13,82,322/- made by the Page | 2 ITA No.164/SRT/2017 A.Y. 08-09 Ketan N. Patel AO on account of disallowance of the expenses holding that the appellant was not involved in the business as no books of accounts or audit report was maintained and for non submission of books of account even though all the details and the relevant vouchers have been produced before the AO during the original assessment proceedings as well as during the assessment proceedings as per the direction u/s 263. Therefore, the addition so made by the AO and upheld by the ld. CIT(A) may kindly be deleted. 3.Without prejudice to the above, on the facts and in the circumstances of the case and in law, the ld. AO ought to have considered the receipts on sale of land pertaining only to the year under consideration when the AO has disallowed the expenses incurred during the earlier years. The ld. CIT(A) is not justified by not giving any finding on this ground. therefore, if the expenses of previous year are not allowed then the receipt of the year under consideration should only be adopted for working out the profit.” 3. At the time of hearing, none appeared on behalf of assessee nor filed any application for adjournment despite issuance of notice for hearing, on the assessee’s given address by the assessee in Form-36, Column No.10 and Ld.Senior Departmental Representative for the respondent / Revenue was present. In absence of any application filed by the assessee / appellant, the appeal is disposed of ex parte qua the appellant, after hearing Ld.Sr-DR on merits in terms of Rule 24 of Income Tax Appellate Tribunal Rules, 1963. 4. The assessee has submitted paper book before the Bench, therefore we have gone through the paper book filed by the assessee. 5. The finding of Ld. CIT(A) are as follows: “7.1 I have considered and the assessment order u/s 143(3) r.ws.263 of the CIT-3 Surat, submission and verbal arguments of the AR. The appellant along with 4 others sold a property (land) during the year and showed his share of gain as ‘business income’. The ld Assessing Officer disallowed expenses to the extent of Rs.3,37,218/- in the assessment. The ld Commissioner of Income Tax-3 Surat in order u/s263 opined that the expenses pertain to earlier years and hence, requires to be disallowed. He set aside the assessment order and directed the ld Assessing Officer to make afresh assessment. The relevant portion of the order u/s 263 is reproduced below: “Now on perusal of record, it is found that the entire expenses claimed by assessee pertains to prior period therefore, the same is not allowable expenses for the year under question. However, the ld AO has already disallowed expenses to the tune of Rs.3,37,218/- therefore, the remaining expenses of Rs.13,82,322 requires to be disallowed. Page | 3 ITA No.164/SRT/2017 A.Y. 08-09 Ketan N. Patel 3. The above infirmity shows that the order passed by the ld. AO is erroneous and prejudicial to the interest of Revenue as facts available on record were not properly examined by the ld. AO, which requires the revision of order passed for A.Y 2008-09. Considering the fact, a show cause notice dt 19.03.2015 was issued by the undersigned before initiating revisionary action u/s 263 of the Act. 4. In response to the show cause, the assessee neither attended nor filed any written explanation till date. Therefore, I hold that the assessee does not want to avail opportunity and the contents communicated to the assessee vide this office letter dt.19.03.2015 is acceptable to him. 5. In view of the above, I found that the order passed by the AO is erroneous and prejudicial to the revenue to the extent the prior period expenses of Rs.13,82,322/- was allowed the AO. The AO failed to examine the issue from this important angle thereby prejudicing the revenue and passed an erroneous order. Accordingly, the order passed by the AO dt 08.03.2013 u/s143(3) r.w.s 147 of the Act is set side with a direction to make a fresh assessment after examining the issue of allowance of prior period expenses claimed, thoroughly as per law......” 7.2 The assessee did not comply with the notice issued by the ld Commissioner of Income Tax-3 Surat. It is also seen that the assessee has not contested this order u/s 263 by preferring an appeal before the Hon'ble ITAT. In a way the assessee has accepted the findings arrived at by the ld Commissioner of Income Tax-3 Surat. 7.3 In the subsequent proceedings, the ld AO, issued notices to the appellant. In response to which, the appellant filed reply in Gujarati language. The ld assessing officer has reproduced the same in para 5 of his order u/s 143(3) r.w.s.263. In the show cause notice issued by the ld AO, (referred to in para 4 of assessment order), the assessee was clearly asked to show cause as to why the balance expense of Rs.13,82,322/- should not be disallowed and added back to total income treating the same to be pertaining to prior period. However, it is seen the specific question was not answered or explained by the assessee, before the ld AO. In view of this, the ld assessing officer disallowed the above expenses. 7.4 Before me, the AR has submitted the explanation on allowability of the expense. The AR has explained that the assessee is following “Project Completion Method” and hence, the expenses are allowable. But, this plea was not taken – up either before the ld Commissioner of Income Tax or before the ld Assessing Officer in assessment proceedings. There is no books of account or audit report to say that the appellant was involved in Page | 4 ITA No.164/SRT/2017 A.Y. 08-09 Ketan N. Patel this business. The appellant could have submitted balance sheets of the years before the ld Assessing Officer to explain its case. No such effort was made by the appellant as per assessment order. Hence, the explanation of the AR does not inspire confidence. Since all these plea have not been taken before, they appear to be an after thought. 7.5 The AR has not been able to explain clearly why the expenses were not claimed in earlier year, when the assessee had receipts against the same. The balance sheet filed before me do not have any signature or authentication.as already stated they were not submitted before the ld assessing officer. They have not been audited and there is no way of authenticating the same. In view of all the above, I find the AR’s submission is unacceptable. The grounds of appeal are decided against the appellant.” 6. Aggrieved by the order of Ld. CIT(A) the assessee is in appeal before us. 7. We have heard Ld. Sr-DR for the Revenue and have gone through the paper book filed by the assessee. We note that assessee has filed paper book, wherein we have noted that certain ledger accounts and balance-sheets were filed. The assessee has submitted year-wise balance-sheets as on 31.03.2002, 31.03.2003, 31.03.2004, 31.03.2005, 31.03.2006, 31.03.2007 and 31.03.2008. We note that these are photo copy of the balance-sheets and capital accounts and assessee submitted true copy of balance-sheets, capital account, however as noted by Ld. CIT(A) that these balance-sheets were not singed or authenticated by assessee. Before us also only the X-erox copies stating true copy of balance-sheets were filed which were originally not signed or authenticated by the assessee. After going through these balance-sheets, we note that these balance-sheets are fabricated later on to defraud the revenue. Therefore, in absence of the active assistance of the assessee to explain the paper book and balance sheets filed before us, we are not going to accept the figures mentioned in the paper book by way of capital account and respective balance-sheets. Some of the documents were in Gujarati language and assessee has not filed the translated copy from Gujarati to English language before the Bench and moreover, assessee has not explained the correctness of the documents and details. Therefore based on the paper book filed by the assessee it is not possible to adjudicate the assessee’s appeal therefore, we Page | 5 ITA No.164/SRT/2017 A.Y. 08-09 Ketan N. Patel are inclined to accept the order of Ld. CIT(A). Hence, these grounds of assessee’s appeal are dismissed. 8. In the result, the appeal of the assessee is dismissed. Order is pronounced on 20/12/2022 by placing the result on the Notice Board. Sd/- Sd/- (PAWAN SINGH) (Dr. A.L. SAINI) JUDICIAL MEMBER ACCOUNTANT MEMBER Surat/िदनांक/ Date: 20/12/2022 Dkp Outsourcing Sr.P.S. Copy of the Order forwarded to 1. The Assessee 2. The Respondent 3. The CIT(A) 4. Pr.CIT 5. DR/AR, ITAT, Surat 6. Guard File By Order // True Copy // Assistant Registrar/Sr. PS/PS ITAT, Surat