Shri Chetan Ashokbhai Desai, Bilimora V. The Income tax Officer,Ward-1, Navsari

ITA 18/AHD/2011

• Counselvise Citation: [2011] 134 COUNSELVISE.COM (IT) 6669 (ITAT-AHMEDABAD)
• Duration Of Justice: 4 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-05-2011
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Next Hearing Date: 06-04-2011
• Assessment Year: 2007-2008
• Appeal Filed On: 04-01-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: RAJEEB JAIN
• Assessee Lawyers: R M UPADHYAY
• Keywords: Principle of natural justice; Additional evidence; Third party statement
• Section: 133(6)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCH 'C' BEFORE SHRI D K TYAGI, JM & SHRI A N PAHUJA,AM ITA NO.18/AHD/2011 (ASSESSMENT YEAR:-2007-08) SHRI CHETAN ASHOKBHAI DESAI, PROP. DHARMISTHA ENTERPRISE, VANKAR FALIA, BILIMORA-396321 V/S INCOME-TAX OFFICER, WARD- 1, NAVSARI PAN: AAKPD 7447 G [APPELLANT] [RESPONDENT] ASSESSEE BY :- SHRI R M UPADHYAY, AR REVENUE BY:- SHRI RAJEEB JAIN, DR O R D E R A N PAHUJA: THIS APPEAL BY THE ASSESSEE AGAINST AN ORDER DATE D 17-11-2010 OF THE LD. CIT(APPEALS), VALSAD FOR THE ASSESSMENT YEAR 2007-08, RAISES THE FOLLOWING GROUND: [1] LEARNED AO HAS ERRED IN LAW AND ON FACTS TO ADD AN AMOUNT OF RS.26,56,261/-, DIFFERENCE IN CLOSING BAL ANCE OF TRADE CREDITORS AS COMPARED THEM WITH THOSE IN H IS BOOKS OF ACCOUNTS. CIT(A) HAS ALSO ERRED IN CONFIRM ING THIS ADDITION . 2 FACTS, IN BRIEF, AS PER RELEVANT ORDERS ARE THAT RETURN DECLARING INCOME OF RS.1,63,710/- FILED ON 31-10-2007 BY AN A SSESSEE, SELLING PROVISIONS & GENERAL ITEMS, AFTER BEING PROCESSED O N 12.6.2008 U/S 143(1) OF THE INCOME-TAX ACT, 1961 [HEREINAFTER REF ERRED TO AS THE ACT], WAS SELECTED FOR SCRUTINY WITH THE ISSUE OF A NOTICE U/S 143(2) OF THE ACT ON 30.8.2008. DURING THE COURSE OF ASSE SSMENT PROCEEDINGS, THE ASSESSING OFFICER[AO IN SHORT]ASK ED THE ASSESSEE TO ESTABLISH IDENTITY AND CREDITWORTHINESS AS ALSO GENUINENESS OF TRANSACTIONS WITH THE FOLLOWING CREDITORS:- SR. NO. NAME OF THE PARTY SUNDRY CREDITOR AS SHOWN IN BALANCE SHEET (RS.) 1 DEYS MEDICALS 176309 2 KUNJ CORPORATION 491904 3 PERFECT TRADERS 1311470 ITA NO.18/AHD/2011 2 4 J B MARKETING 566155 5 HENKAL MARKETING 162377 6 MIRASU MARKETING 160583 7 DABUR INDIA 580200 TOTAL 3448998 HOWEVER, THE ASSESSEE DID NOT FURNISH ANY REPLY. A NOTICE U/S 133(6) WAS ISSUED TO THE ABOVE CREDITORS FOR VERIFI CATION OF TRANSACTIONS. ON RECEIPT OF DETAILS, THE AO NOTICE D THAT THE ASSESSEE HAD SHOWN BALANCE IN THE ACCOUNT OF SUNDRY CREDITORS AT RS.34,48,998/- WHILE CONTRA CONFIRMATIONS RECEIVED FROM CREDITORS REVEALED ONLY AN AMOUNT OF RS.8,52,737/-, AS EVIDEN T FROM THE FOLLOWING DETAILS: SR. NO. NAME OF THE PARTY SUNDRY CREDITOR AS SHOWN IN BALANCE SHEET (RS.) AS SHOWN IN DETAILS SUBMITTED (RS.) DIFFERENCE (RS.) 1 DEYS MEDICALS 176309 4001 172308 2 KUNJ CORPORATION 491904 2320 489584 3 PERFECT TRADERS 1311470 0.68 1311469 4 J B MARKETING 566155 596155 30000 5 HENKAL MARKETING 162377 165 162212 6 MIRASU MARKETING 160583 0 160583 7 DABUR INDIA 580200 250095 330105 TOTAL 3448998 852737 2656261 SINCE THE ASSESSEE FAILED TO RECONCILE THE ACCOUNT S NOR ESTABLISHED CREDIT WORTHINESS OF THE CREDITORS OR GENUINENESS O F TRANSACTIONS, THE AO BROUGHT TO TAX THE AMOUNT OF RS.26,56,261/- U/S 41(1) OF T HE ACT. 4 ON APPEAL, THE LEARNED CIT(A) UPHELD THE ADDITION IN THE FOLLOWING TERMS:- 3. GROUND NO.1. THIS GROUND RELATES TO THE ADDITION OF RS.26,56,26 1/- ON ACCOUNT OF DIFFERENCE FOUND IN THE BALANCE OF SU NDRY CREDITORS. THE AO WHILE SCRUTINIZING THE R/I NOTICED THAT THE SUNDRY CREDITORS SHOWN IN THE BALANCE SHEET WAS RS.34,48,998/-. THE APPELLANT WAS ASKED TO FURNISH THE DETAILS OF SUNDRY CREDITORS SUCH AS IDENTITY, GENUI NENESS OF TRANSACTIONS AND THE CREDITWORTHINESS OF THE CREDITORS BUT FAILE D TO DO SO. THE AO, ITA NO.18/AHD/2011 3 FURTHER MADE ENQUIRY BY ISSUING 133(6) NOTICE TO TH E PARTIES FOR CONFIRMING THE BALANCES. HE OBTAINED THE DETAILS FROM THE CRED ITORS AND NOTICED THAT THERE WAS A DIFFERENCE OF RS.26,56,261/-. THAT MEAN S THE APPELLANT HAD SHOWN EXCESS SUNDRY CREDITORS OF RS.26,56,261/- AS PER PARA AND SUB-PARA (4) OF ASSESSMENT ORDER. THE AO AFFORDED OPPORTUNIT Y TO THE APPELLANT TO EXPLAIN THE DIFFERENCE WHICH THE APPELLANT FAILED T O DO SATISFACTORILY BEFORE THE AO AND HENCE THE AO MADE THE ADDITION OF RS.26, 56,261/-. ON THE OTHER HAND THE APPELLANT MADE GENERAL SUBMISSION BE FORE ME WITHOUT TOUCHING THE CORE POINTS. I HAVE GIVEN AMPLE OPPORT UNITY TO THE APPELLANT TO DEFEND THE CONTENTION RAISED BEFORE ME BUT I DID NO T RECEIVE THE DESIRED EXPLANATIONS. IN THIS CIRCUMSTANCES AND TAKING INTO THE CONSIDERATION OF THE CLEAR FINDINGS OF THE AO IN THE ASSESSMENT ORDER I HAVE TO CONCUR THE ADDITIONS MADE BY THE AO. THUS, THIS GROUND OF APPE AL IS DISMISSED. 5 THE ASSESSEE IS NOW IN APPEAL BEFORE US AGAINST T HE AFORESAID FINDINGS OF THE LEARNED CIT(A). THE LEARNED AR ON B EHALF OF THE ASSESSEE WHILE REITERATING THEIR SUBMISSIONS BEFORE THE LEARNED CIT(A) CONTENDED THAT THOUGH THE ASSESSEE HAD SUBM ITTED RECONCILIATION OF ACCOUNTS PLACED AT PAGES 31 TO 80 OF THE PAPER BOOK BEFORE THE LD. CIT(A), THE LATTER DID NOT CON SIDER THE ADDITIONAL EVIDENCE AND INSTEAD, UPHELD THE FINDINGS OF THE A O ON THE GROUND THAT DESIRED EXPLANATION WAS NOT FILED. TO A QUERY BY THE BENCH, THE LD. AR COULD NOT CLARIFY AS TO WHETHER OR NOT ANY A PPLICATION FOR ADMISSION OF ADDITIONAL EVIDENCE U/R 46A OF THE IT RULES,1962 WAS FILED BEFORE THE LD. CIT(A).THE LEARNED DR, ON THE OTHER HAND, SUPPORTED THE FINDINGS OF THE LEARNED CIT(A). 6. WE HAVE HEARD BOTH THE PARTIES AND GONE THROUGH THE FACTS OF THE CASE. ADMITTEDLY, THE ASSESSEE DID NOT SUBMIT ANY RECONCILIATION OF ACCOUNTS OF THE AFORESAID SEVEN CREDITORS BEFORE THE AO NOR EVEN THE DOCUMENTS PLACED AT SL. NO. 3 TO 12 OF TH E PAPER BOOK PLACED BEFORE US. EVEN WHEN THESE DOCUMENTS WERE PL ACED BEFORE THE LD. CIT(A), THE LATTER DID NOT RECORD ANY FIND INGS ON THE RECONCILIATION OF ACCOUNTS OR ON ADMISSION OF ADDIT IONAL EVIDENCE IN ACCORDANCE WITH PROCEDURE LAID DOWN IN RULE 46A OF THE IT RULES,1962. ON THE OTHER HAND, THE LD. CIT(A) OBSER VED THAT DESPITE SUFFICIENT OPPORTUNITY ALLOWED , THE ASSESSEE DID N OT SUBMIT THE DESIRED ITA NO.18/AHD/2011 4 EXPLANATION . TO A QUERY BY THE BENCH, THE LD. AR DID NOT REPLY AS TO WHETHER PAYMENT OF CASH OR EVEN THROUGH DDS CREDITE D BY THE RESPECTIVE PARTIES AND REFLECTED IN THE RECONCILIAT ION AT PAGES 34,37 & 41 OF THE PAPER BOOK, WAS DULY ACCOUNTED FOR IN T HEIR BOOKS. INDISPUTABLY, THE ASSESSEE SUBMITTED ADDITIONAL EV IDENCE [SL. NO.2 TO 12 ,PAGE 31 TO 80 OF THE PAPER BOOK]BEFORE THE L D. CIT(A).THERE IS NO DISCUSSION REGARDING ADMISSION OF ADDITIONAL EV IDENCE NOR ANY FINDINGS HAVE BEEN RECORDED BY THE LD. CIT(A) IN TH E LIGHT OF RECONCILIATIONS PLACED IN THE PAPER BOOK IN THE FOR M OF ADDITIONAL EVIDENCE. THE LD. CIT(A) EVEN DID NOT ALLOW ANY O PPORTUNITY TO THE AO NOR CONFRONTED THE DOCUMENTS PLACED IN THE PAPER BOOK TO HIM BEFORE DECIDING THE MATTER. ORDINARILY THE APPEAL WOULD BE DECIDED ON T HE EVIDENCE RECORDED IN THE COURSE OF ASSESSMENT PROCEEDINGS. ANY EVIDENCE SUB MITTED AFTER COMPLETION OF THE ASSESSMENT , WOULD BE ADDITIONAL EVIDENCE AND NOTHING ELSE. THE ADMISSION OF ADDITIONAL EVIDENCE IS GOVERNED BY RULE 46A OF THE IT RULES, 1962, THE RELEVANT PROVISIONS WHEREOF READ AS UNDER: (1) THE APPELLANT SHALL NOT BE ENTITLED TO PRODUCE BEFORE THE DEPUTY COMMISSIONER (APPEALS) OR, AS THE CASE MAY BE, THE COMMISSIONER (APPEALS), ANY EVIDENCE, WHETHER ORAL OR DOCUMENTARY, OTHER TH AN THE EVIDENCE PRODUCED BY HIM DURING THE COURSE OF PROCEEDINGS BEFORE THE ASS ESSING OFFICER, EXCEPT IN THE FOLLOWING CIRCUMSTANCES, NAMELY:-- (A) WHERE THE ASSESSING OFFICER HAS REFUSED TO ADMI T EVIDENCE WHICH OUGHT TO HAVE BEEN ADMITTED;OR (B) WHERE THE APPELLANT WAS PREVENTED BY SUFFICIENT CAUSE FROM PRODUCING THE EVIDENCE WHICH HE WAS CALLED UPON TO PRODUCE BY THE ASSESSING OFFICER; OR (C) WHERE THE APPELLANT WAS PREVENTED BY SUFFICIENT CAUSE FROM PRODUCING BEFORE THE ASSESSING OFFICER ANY EVIDENCE WHICH IS RELEVAN T TO ANY GROUND OF APPEAL; OR (D) WHERE THE ASSESSING OFFICER HAS MADE THE ORDER APPEALED AGAINST WITHOUT GIVING SUFFICIENT OPPORTUNITY TO THE APPELLANT TO A DDUCE EVIDENCE RELEVANT TO ANY GROUND OF APPEAL. (2) NO EVIDENCE SHALL BE ADMITTED UNDER SUB-RULE ( 1) UNLESS THE DEPUTY COMMISSIONER (APPEALS) OR AS THE CASE MAY BE, THE C OMMISSIONER (APPEALS) RECORDS IN WRITING THE REASONS FOR ITS ADMISSION. ITA NO.18/AHD/2011 5 (3)THE DEPUTY COMMISSIONER(APPEALS) OR, AS THE CA SE MAY BE, THE COMMISSIONER (APPEALS) SHALL NOT TAKE INTO ACCOUNT ANY EVIDENCE PRODUCED UNDER SUB-RULE (1) UNLESS THE INCOME-TAX OFFICER HA S BEEN ALLOWED A REASONABLE OPPORTUNITY (A) TO EXAMINE THE EVIDENCE OR DOCUMENT OR TO CROSS-EXAMINE THE WITNESS PRODUCED BY THE APPELLANT, OR (B) TO PRODUCE ANY EVIDENCE OR DOCUMENT OR ANY WITN ESS IN REBUTTAL OF THE ADDITIONAL EVIDENCE PRODUCED BY THE APPELLANT. (4) NOTHING CONTAINED IN THIS RULE SHALL AFFECT THE POWER OF THE DEPUTY COMMISSIONER (APPEALS) OR, AS THE CASE MAY BE, THE COMMISSIONER (APPEALS) TO DIRECT THE PRODUCTION OF ANY DOCUMENT, OR THE EXAMI NATION OF ANY WITNESS, TO ENABLE HIM TO DISPOSE OF THE APPEAL, OR FOR ANY OTH ER SUBSTANTIAL CAUSE ILNCLUDING THE ENHANCEMENT OF THE ASSESSMENT OR PENALTY (WHETH ER ON HIS OWN MOTION OR ON THE REQUEST OF THE ASSESSING OFFICER) UNDER CLAUSE (A) OF SUB SECTION (1) OF SECTION 251 OR THE IMPOSITION OF PENALTY UNDER SECT ION 271.' 7. IT IS EVIDENT FROM THE AFORESAID PROVISIONS THAT TH E LD. CIT(A) CAN NOT TAKE INTO ACCOUNT ANY EVIDENCE PRODUCED UNDER SUB-R. (1) OF R ULE 46A OF THE IT RULES, 1962 UNLESS THE AO HAD BEEN ALLOWED A REASONABLE OPPORTU NITY TO EXAMINE THE EVIDENCE OR TO CROSS-EXAMINE THE WITNESS WHOSE EVIDENCE WAS TAKEN ON RECORD OR TO PRODUCE ANY EVIDENCE IN REBUTTAL OF THE ADDITIONAL EVIDENCE PRODUCED BY THE ASSESSEE. MOREOVER, THE LD. CIT(A) HAVE TO RECORD HIS REASONS IN WRITING BEFORE ADMISSION OF THE ADDITIONAL EVIDENCE IN TERMS OF RULE 46A(2) OF THE IT RULES, 1962. IT IS, THEREFORE, OBVIOUS THAT THE LD. CIT(A) BEFORE ADMITTING ADDIT IONAL EVIDENCE HAS TO ALLOW OPPORTUNITY TO THE AO. THE MERE FACT THAT NOTICE OF HEARING OF THE APPEAL WAS GIVEN TO THE AO WOULD NOT MEET THE REQUIREMENTS OF THE ABOVE RULE. EVEN IF NO SUCH RULE WAS IN EXISTENCE, ENDS OF JUSTICE AND FAIR PLAY DEMAND THAT WHEN AN ASSESSEE PRODUCES ADDITIONAL EVIDENCE IN HIS APPEAL, AN OPPORTUNITY I S GIVEN TO THE AO TO TEST THE EVIDENCE OR TO COUNTER THE EFFECT OF THE EVIDENCE B Y PRODUCING EVIDENCE IN REBUTTAL OR OTHERWISE. AO HAS A RIGHT TO OBJECT TO THE PRODUCTI ON OF ADDITIONAL EVIDENCE. SINCE SOMETHING ADVERSE TO THE AO WAS SOUGHT TO BE DONE I N THE COURSE OF THE APPEAL BY WAY OF AUGMENTING THE RECORD, THE AO OUGHT TO HAVE BEEN HEARD AND GIVEN AN OPPORTUNITY TO MEET WITH THE ADDITIONAL MATERIAL BY WAY OF CROSS-EXAMINATION, COUNTER EVIDENCE AND URGING SUBMISSIONS IN THE CONTEXT OF T HE AUGMENTED RECORD. IN THE CASE UNDER CONSIDERATION, WE FIND THAT THOUGH ADDITIONA L EVIDENCE IS STATED TO HAVE BEEN FILED BEFORE THE LD. CIT(A), HE DID NOT FOLLOW THE PROCEDURE LAID DOWN IN RULE 46A OF THE IT RULES, 1962 NOR ALLOWED ANY OPPORTUNITY TO T HE AO. WHENEVER ADDITIONAL ITA NO.18/AHD/2011 6 EVIDENCE IS SOUGHT TO BE ADMITTED, IT IS AN INDEPEN DENT AND SUBSTANTIVE APPLICATION SEEKING A NEW RIGHT. NOTICE OF SUCH APPLICATION WAS NECESSARY TO THE AO AND HE OUGHT TO HAVE BEEN AFFORDED BOTH AN OPPORTUNITY TO OPPOSE IT AND TO TEST THE ADDITIONAL EVIDENCE OR COUNTER THE EFFECT THEREOF O R PRODUCE EVIDENCE IN REBUTTAL. NO SUCH ORDER GRANTING THE REQUEST CAN BE PASSED BEHIN D THE BACK OF THE AO IN VIOLATION OF THE PRINCIPLES OF NATURAL JUSTICE. IT MAY BE REI TERATED THAT A NOTICE OF APPEAL CANNOT BE EQUATED WITH THE NOTICE OF A FUTURE APPLICATION TO LEAD ADDITIONAL EVIDENCE WHICH NO ONE COULD HAVE ANTICIPATED OR REASONABLY FORESEE N. ORDINARILY, THE APPEAL WOULD BE DECIDED ON THE EVIDENCE RECORDED IN THE COURSE O F ASSESSMENT PROCEEDINGS. THE AO, THEREFORE, MAY NOT, IN A GIVEN CASE, THINK IT N ECESSARY TO REMAIN PRESENT AT THE HEARING OF THE APPEAL. HE, HOWEVER, CANNOT BE EXPEC TED TO ANTICIPATE THAT ADDITIONAL EVIDENCE MIGHT BE PRODUCED BY THE ASSESSEE IN HIS A PPEAL. IN THE CASE UNDER CONSIDERATION, THERE IS NOTHING TO SUGGEST AS TO W HETHER OR NOT ANY INDEPENDENT INQUIRIES WERE MADE OR BOOKS OF ACCOUNTS AND DOCUME NTS EXAMINED IN ORDER TO ASCERTAIN THE VERACITY OF THE FRESH EVIDENCE/WRITTE N SUBMISSION FILED BY THE ASSESSEE. IT IS FOR THIS REASON THAT IT IS NECESSARY TO GIVE HIM AN OPPORTUNITY TO MEET THE ADDITIONAL EVIDENCE. SINCE IN THE CASE UNDER CONSID ERATION, ADMITTEDLY, THE ADDITIONAL EVIDENCE/DOCUMENTS WERE FILED BEFORE THE LEARNED C IT(A)AND HAVE NOT BEEN CONFRONTED TO THE AO NOR THE LD. CIT(A) SEEMS TO HA VE RECORDED ANY REASONS IN WRITING FOR ADMITTING SUCH EVIDENCE , IN THE INTER EST OF JUSTICE AND FAIR PLAY, WE VACATE THE FINDINGS OF THE LD. CIT(A) AND RESTORE THE MATT ER TO HIS FILE, WITH THE DIRECTIONS TO FOLLOW THE MANDATE IN TERMS OF RULE 46A OF THE IT R ULES, 1962 AND THEREAFTER, DISPOSE OF THE APPEAL IN ACCORDANCE WITH LAW AFTER ALLOWI NG SUFFICIENT OPPORTUNITY TO BOTH THE PARTIES. WITH THESE DIRECTIONS, GROUND RAISED IN THIS APPEAL IS DISPOSED OF AS INDICATED HEREINBEFORE.. ITA NO.18/AHD/2011 7 8. IN THE RESULT, APPEAL IS ALLOWED, BUT FOR STA TISTICAL PURPOSES ORDER PRONOUNCED IN THE COURT TODAY ON 19 -05-2011 SD/- SD/- (D K TYAGI) JUDICIAL MEMBER (A N PAHUJA) ACCOUNTANT MEMBER DATED : 19-05-2011 COPY OF THE ORDER FORWARDED TO: 1. CHETAN ASHOKBHAI DESAI, PROP. DHARMISTHA ENTERPR ISE, VANKAR FALIA, BILIMORA-396321 2. THE ITO, WARD-1, NAVSARI 3. CIT CONCERNED 4. CIT(A), VALSAD 5. DR, ITAT, AHMEDABAD BENCH-C, AHMEDABAD 6. GUARD FILE BY ORDER DEPUTY REGISTRAR ASSISTANT REGISTRAR ITAT, AHMEDABAD