M/s. Maruti Cable Network, Vadodara V. The DCIT, Circle-5, Vadodara

ITA 1876/AHD/2019

AI Insights

M/s. Maruti Cable Network appealed against the order of the Commissioner of Income Tax (Appeals)-3, Vadodara, which had sustained certain additions made by the Assessing Officer under sections 143(3) r.w.s. 263 of the Income Tax Act, 1961 for the Assessment Year 2009-10. The additions pertained to salary expenses claimed to be paid in cash without proper vouchers and unexplained credits in the partners' capital accounts. The Tribunal examined the submissions and evidence provided, partially allowing the appeal by deleting some additions while upholding others due to insufficient substantiation by the assessee.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 114214 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 year(s) 9 month(s) 13 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 05-10-2023
• Appeal Filed By: Assessee
• Order Result: PartlyAllowed
• Bench Allotted: C
• Next Hearing Date: 16-08-2023
• Assessment Year: 2009-2010
• Appeal Filed On: 22-12-2019
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Principle of natural justice
• Section: 68; 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD “C” BENCH Before: Shri Ramit Kochar, Accountant Member And Shri T.R. Senthil Kumar, Judicial Member M/s. Maruti Cable Network, 108, Ambalal Park Society, B/h Aryakanya Vidhyalaya, Karelibaug, Vadodara PAN: AAGFM2712H (Appellant) Vs The DCIT, Circle-5, Vadodara (Respondent) Assessee Represented: None Revenue Represented: Shri Ravindra, Sr. D.R. Date of hearing : 17-08-2023 Date of pronouncement : 06-10-2023 आदेश/ORDER PER : T.R. SENTHIL KUMAR, JUDICIAL MEMBER:- This appeal is filed by the Assessee as against the appellate order dated 09.10.2019 passed by the Commissioner of Income Tax (Appeals)-3, Vadodara arising out of the assessment order passed under section 143(3) r.w.s. 263 of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act’) relating to the Assessment Year (A.Y) 2009-10. ITA No. 1876/Ahd/2019 Assessment Year 2009-10 I.T.A No. 1876/Ahd/2019 A.Y. 2009-10 Page No M/s. Maruti Cable Network vs. DCIT 2 2. The brief facts of the case is that the assessee is engaged in the business of cable network services and providing entertainment to the customers through the cable operators. For the Assessment Year 2009-10, the assessee filed its Return of Income declaring total income of Rs. 42,78,410/-. The return was taken up for scrutiny assessment and made a disallowance of salary expenses of Rs. 60,000/- since the same were paid by cash and there is no vouchers/salary register in support of its claim. This assessment order was revised by Ld. CIT-III, Baroda invoking section 263 on the ground that the assessment order passed by the A.O. was an erroneous and prejudicial to the interest of Revenue. Since the Assessing Officer made an adhoc disallowance of Rs. 60,000/- only, when the assessee failed to maintain salary ledger and vouchers thereby directed to make addition of salary paid by cash of Rs.2,44,000/-. Further the Assessing Officer failed to verify the Partners capital account wherein an addition of Rs. 72,29,762/- during the year. Following the direction, the Assessing Officer after verification of records and calling explanation from the assessee made an addition on account of salary paid by cash of Rs. 1,84,000/-. Regarding Partners Capital account, the assessee could explain Rs. 16,73,997/- and source thereon, thereby the Assessing Officer made an addition on the remaining addition Rs.55,55,765/- where the source is not explained. 3. Aggrieved against this order, the assessee field an appeal before Ld. CIT(A). The Ld. CIT(A) deleted the addition of Rs. 1,00,000/- on account of Salary expenses, however retained balance Rs. 84,000/- as not properly explained. Similarly Partner’s Capital account, Ld. I.T.A No. 1876/Ahd/2019 A.Y. 2009-10 Page No M/s. Maruti Cable Network vs. DCIT 3 CIT(A) deleted Rs. 12,04,000/- wherein the source was explained and retained balance addition of Rs. 43,51,765/- observing as follows: “......3.3.1 During the appellate proceedings, the appellant had filed written submission and documents in support of its claim. It main contention was that the expenses are supported by vouchers and verifiable form the salary register maintained by the appellant and also the fact that the total salary paid to all the employees is hardly Rs. 28,600/- per month. On verification of the vouchers and other details filed in support of the salary expenses during current proceedings, it is noticed that the vouchers submitted are to the extent of Rs.3,11,100/- as against the total expenses claimed of Rs.3,43,600/-. Further, it has been found that there is no voucher numbers in any of the vouchers and also voucher without mentioning any amount received but having the signature of receiver were also found. So after considering all the facts and circumstance of the case, observation of AO, submission of the assessee and its nature of business, in order to meet the end of natural justice out of addition of Rs.1,84,000/- addition to the extent of Rs.84,000/- is upheld and balance Rs.1,00,000/- is directed to be deleted. Thus, appellant succeeds partly on this ground. ........................... 4.3.1 During the appellate proceedings, the appellant had filed written submission and documents in support of its claim. Out of capital introduced of Rs.72,29,762/-, Rs. 31,00,000/- is claimed to be introduced as goodwill received from Den Digital in partners individual capacity and Rs.41,29,765/- is being addition to the current account of the firm maintained by Shri Kamleshbhai Patel and Shri Manojbhai Patel. There are 12 partners in this Firm. Out of 31,00,000/- introduced by way of goodwill17,73,997/- was accepted by the AO. For the remaining Rs.14,26,003/- on this count, the appellant had furnished return of income, ledger etc. in the case of three partners viz. Ashishbhai Shukla, Manishbhai P. Desai and Patel Hiteshbhai. It has also filed copy of return of income of Smt. Bina Ashish Shukla wife of Shri Ashishbhai Shukla claiming that the capital gain on goodwill is shown at her hand. For the remaining partners, it has not furnished any details. On verification of the details filed it is noticed that none of the above three partners had offered the alleged receipt of goodwill in their return of income nor paid any capital gain on this account. Regarding the claim in the case of Shri Ashishbhai Shukla that the capital gain is offered in the hand of his wife is also not acceptable technically. If he has earned any income or gain in his capacity that should have been offered in his return. Even otherwise on verification of the return of Smt. Bina Ashish Shukla no such capital gain is found to be offered for taxation in the return of income. For the remaining partners details, it has been stated that since the other partners are no longer in business with the existing partners and are not having good and cordial relations with them it is not possible to obtain copies of their ITR. From the foregoing discussion it is clear that the appellant had failed to prove the I.T.A No. 1876/Ahd/2019 A.Y. 2009-10 Page No M/s. Maruti Cable Network vs. DCIT 4 introduction of capital with supporting documents in respect of Rs. 14,26,003/- Thus, the addition to the extent of Rs.14,26,003/- is upheld and the appellant fails on this issue. 4.3.2 So far as Rs.41,29,765/-being introduction of fund in current account by Shri Kamlesh Patel and Shri Manojbhai Patel, the appellant had filed respective ledger accounts, bank statement of The Baroda City Co- operative Bank Ltd., cash book, etc. The addition in respect of Shri Kamleshbhai Patel is of Rs. 25,59,500 The bank statement, ledger etc. filed in support of this claim has been verified. On the basis of verification of the documents filed, source of capital to the extent of Rs 9,14,000 is verifiable from the bank statement as the same has been transferred from Shri Kamleshbhai Patel's bank account no. 2249 with The Baroda City Co- op Bank Lal, the details of such entries are as under: Date Amount(Rs.) Remarks 03.04.2008 2,50,000 Transferred from The Baroda City Co-op Bank to Maruti Cable Network. 03.07.2008 4,05,000 04.12.2008 99,000 On this date Rs,4,33,000/- is introduced in the Firm. However, Rs.99,000/- is from the above bank account and Rs.3,34,0007- is stated to be given by Smt. Anjanaben K. Patel on behalf of the Kamleshbhai Patel. Except ledger no other document is furnished to support this claim 06.01.2009 6,000 Transferred from The Baroda City Co-op Bank to Maruti Cable Network. 19.01.2009 1,01,000 On account of payment made by Kamleshbhai R. Patel on behalf of firm from his SBI account 26.03.2009 50,000 Transferred from The Baroda City Co-op Bank to Maruti Cable Network. 27.03.2019 3,000 4.3.3 Out of Rs.25,59,500/-, the above payments amounting to Rs. 9,14,000/- is through banking channel and the balance is introduced by way of cash transaction and is not verifiable. However, on verification of his bank statement it is noticed that total cash withdrawal of Rs.2,90,000/- is made out of The Baroda City Co-op. Bank on 4.8.08 - Rs.2,00,000, 25.08.08 - Rs. 50,000 and on 13.03.08 - Rs.40,000/-. Thus considering the fact that after these withdrawals also capital was introduced by cash, which is much higher than the withdrawal. So in order to meet the end of natural justice this withdrawal amounting to Rs.2,90,000/- is considered as source of introduction of fund to that extent. Thus, the source to the extent of Rs. 12,04,000/- I.T.A No. 1876/Ahd/2019 A.Y. 2009-10 Page No M/s. Maruti Cable Network vs. DCIT 5 (9,14,000+2,90,000) is proved. In view of the foregoing discussion out of Rs.25,59,500/-, addition to the extent of Rs. 12,04,000/- is directed to be deleted and balance Rs.13,55,500/- is upheld. 4.3.4 So far as the addition in Manjobhai Patel's account of Rs.15,59,765/- is concerned, it is contended that these were amount receivable from sundry debtors of the firm which were collected in cash by Shri Manoj Patel and he made out a Demand Draft in favour of Star India Ltd. for Rs.2,00,000 and ESPN Software Pvt. Ltd. for Rs.13,59,765/- which were payable by the Firm. The said amount through oversight were recorded in his current account instead of reducing the sundry debtors account by that amount. In support relevant ledgers were filed. This claim, that is mistake by oversight is not tenable as the appellant's accounts are audited by the Chartered Accountant and if the sundry debtors are reduced this should have the bearing in its books of account automatically and the mistake should have been pointed out by the Auditors at the auditing stage itself. Thus, this claim is nothing but an after-thought to cover up the issue. Regarding the alleged payment made by Shri Manoj Patel in favour of Star India Ltd. for Rs.2,00,000 and ESPN Software Pvt. Ltd. for Rs.13,59,765/- which were payable by the Firm, the appellant had not filed any supporting documents to establish the said transaction. On verification of ledger of sundry debtor collection account it is noted that all the transactions are in cash, thus it is not fully verifiable. Thus, considering the facts and circumstances of the case and material available on record I am of the considered view that the appellant had failed to prove the source or support its claim with any cogent evidence with regard to the introduction of capital to the extent of Rs.15,59,765/- by the partner Shri Manojbhai Patel. As such there is no reason to interfere in the order on this issue and the addition is upheld. 4.3.5 To sum up, out of addition of Rs.55,55,765/- made out of introduction to the capital account/current account, addition to the extent of Rs.43,51,765/- is upheld and balance Rs.12,04,000/- is directed to be deleted. Thus the appellant succeeds partly on this ground.” 4. Aggrieved against the same, the assessee is in appeal before us raising the following Grounds of Appeal: 1. The Ld. CIT(A) erred at law and on facts in confirming the order of the Ld.AO making an addition to the extent of Rs.84,000/- out of the total amount of Salary expenses. The CIT(A) ought not to have confirmed the additions without assigning any justifiable reasons for making such additions and. also without going into the facts of the case and submission made/filed before him. I.T.A No. 1876/Ahd/2019 A.Y. 2009-10 Page No M/s. Maruti Cable Network vs. DCIT 6 2. The Ld. CIT(A) erred at law and on facts in confirming the order of the Ld.AO making an addition to the extent of Rs. 43,51,765/- treating additions to partners capital account as unexplained. The CIT(A) ought not to have confirmed the additions without assigning any justifiable reasons for making such additions and. also without going into the facts of the case and submission made/filed before him. 3. The Appellant reserves right to add, amend or alter any or all the grounds of appeal on or before the date of hearing. 5. Today is the 17 th time of hearing of the above appeal, even in the previous occasions, None appeared on behalf of the assessee in spite of service of notices to the assessee. It is further seen on record, the assessee has appointed Mr. Harjot Singh Kassowal, Advocate to represent the above appeal by giving Vakalatnama dated 02-02-2023. However None appeared. When this appeal was listed for hearing on 14-08-2023, notice was again sent by RPAD and registered e-mail address available on record, posting the case to 17 th August, 2023. In spite of service of notice, None appeared on behalf of the assessee and no request for adjournment or written submission from the assessee side. Therefore we have no option to decide the appeal exparte, with available materials on record. 5.1. It is an admitted case of the assessee, the original assessment order for the Assessment Year 2009-10 was revised u/s. 263 on account of Salary expenses made through cash and addition on account of Partner’s Capital account were not explained properly. As against the giving effect order, assessee challenged the same before Ld. CIT(A) who deleted Rs. 1,00,000/- amount of Salary expenses and Rs. 12,04,000/- amount of Partner’s Capital account thereby sustained the addition of Rs. 84,000/- on account of Salary I.T.A No. 1876/Ahd/2019 A.Y. 2009-10 Page No M/s. Maruti Cable Network vs. DCIT 7 expenses and Rs. 43,51,765/- on account of Partner’s Capital account. 6. We have observed that the assessee has not filed complete details before the Lower Authorities. We also find from the order of Ld. CIT(A) that the assessee filed written submissions and documents in support of its claim with respect to Salary Expenses. The assesse claimed before ld. CIT(A) that the salary expenses are supported by vouchers and verifiable from the salary register maintained by the assessee and that the salary paid to the employees is merely Rs. 28,600/- per month . The ld. CIT(A) after verifying the vouchers and other details filed in support of the salary expenses , noticed that vouchers submitted were to the tune of Rs. 3,11,100/- as against the total expenses claimed of Rs. 3,43,600/- There were some discrepancies found by ld. CIT(A) in these vouchers. The ld. CIT(A) deleted additions to the tune of Rs. 1,00,000/- while ld. CIT(A) upheld the additions to the tune of Rs. 84,000/. The assesse did not appeared before Tribunal. We have observed that adhoc disallowance to the tune of Rs. 84,000/- is upheld by ld. CIT(A). The assesse has claimed total salary of Rs.3,43,600/- and the assesse on its part produced vouchers and details. We have observed that the assesse is in the business of cable network services and the total turnover of the assesse was Rs. 5,06,29,889/-, while total salary claimed was Rs.3,43,600/- which is a meager sum vis-à-vis total turnover. No specific defect has been pointed by the authorities below and adhoc disallowance is made. Keeping in view smallness of the amount vis-à-vis turnover achieved and on preponderance of probabilities also I.T.A No. 1876/Ahd/2019 A.Y. 2009-10 Page No M/s. Maruti Cable Network vs. DCIT 8 keeping in view that adhoc disallowance is made by the authorities below, we are inclined to delete the addition of Rs. 84,000/- as sustained by ld. CIT(A). The assesse succeeds on this issue. We order accordingly. 6.2. The next issue relates to addition sustained by ld. CIT(A) on account of Rs.43,51,765/- towards additions to Partner’s Capital account. Out of the above disallowance of Rs.43,51,765/-, we have observed that additions sustained by ld. CIT(A) to the tune of Rs. 14,26,003/- were towards goodwill earned from Den Digital which stood credited to the capital accounts of the partners for which no taxes were paid. The amount is credited in the books of the assesse, and the onus is on the assesse to substantiate that the said amount has suffered taxation, which assesse fails to prove and bring on record cogent evidences to substantiate that said amount has already suffered taxation. Thus, we don’t find any infirmity in the well-reasoned appellate order passed by ld. CIT(A) confirming additions to the tune of Rs. 14,26,003/-, which we sustain. The assesse fails on this issue. We order accordingly. 6.4. So far as the remaining amount of additions to the tune of Rs.13,55,000/- and Rs. 15,59,765/- are concerned as sustained by Ld.CIT(A), it is observed that the cash stood credited in the Partners Current Account namely Mr. Kamlesh Patel and Mr. Manojbhai Patel respectively, for which the assesse could not explain sources of cash credits in the Partners Current Account. Thus, it is a case of cash being received by the assesse ostensibly from Partners, for which no cogent explanation was forthcoming I.T.A No. 1876/Ahd/2019 A.Y. 2009-10 Page No M/s. Maruti Cable Network vs. DCIT 9 from the assesse to substantiate the sources of cash and the amount stood credited in the books of accounts of the assesse. Thus, the onus is squarely on the assesse to prove and substantiate with cogent evidences as to sources of the cash receipts as well as to satisfy the mandate of Section 68 to the satisfaction of the authorities, which does not stood satisfied as the assesse failed to substantiate. Before us, the assesse did not appear and based on material on record, we have no hesitation in upholding this addition as was sustained by Ld. CIT(A) as we do not find any infirmity in the well-reasoned appellate order passed by Ld. CIT(A), which we sustain. The assesse fails on this issue. We order accordingly. 7. In the result, the appeal filed by the Assessee is partly allowed as indicated above. Order pronounced in the open court on 06 -10-2023 Sd/- Sd/- (RAMIT KOCHAR) (T.R. SENTHIL KUMAR) ACCOUNTANT MEMBER True Copy JUDICIAL MEMBER Ahmedabad : Dated 06/10/2023 आदेश कȧ ĤǓतͧलͪप अĒेͪषत / Copy of Order Forwarded to:- 1. Assessee 2. Revenue 3. Concerned CIT 4. CIT (A) I.T.A No. 1876/Ahd/2019 A.Y. 2009-10 Page No M/s. Maruti Cable Network vs. DCIT 10 5. DR, ITAT, Ahmedabad 6. Guard file. By order/आदेश से, उप/सहायक पंजीकार आयकर अपीलȣय अͬधकरण, अहमदाबाद