VIPULKUMAR K BHALALA, NAVI MUMBAI V. ITO WD 22(3)(4), NAVI MUMBAI

ITA 1899/MUM/2014

• Counselvise Citation: [2015] 134 COUNSELVISE.COM (IT) 3190 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 6 month(s) 8 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-09-2015
• Appeal Filed By: Assessee
• Bench Allotted: F
• Assessment Year: 2008-2009
• Appeal Filed On: 20-03-2014
• Court: TRIBUNAL
• Department Lawyers: HIRAL SEJPAL ABANI KANTA NAYAK
• Assessee Lawyers: CIRCUMSTANCES OF CASE
• Keywords: Business income; Principle of natural justice; Revenue expenditure; Capital expenditure
• Section: 143(3); 68

Judgement Text

THE INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCH F MUMBAI. BEFORE SHRI SHAILENDRA KUMAR YADAV, JUDICIAL MEMBER AND SHRI RAMIT KOCHAR, ACCOUNTANT MEMBER ITA NO 1899 /MUM/201 4 ASSESSMENT YEAR: - 2008 - 09 SHRI VIPULKUMAR K BHALALA 402 - A, SHRI RAJALDHAM CHS, PLOT NO.22, SECTOR 20, KOPARKHAIRANE NAVI MUMBAI 400 709. V. ITO WARD 22(3)(4), 3 RD FLOOR, TOWER 6, VASHI R S. COMPLEX, NAVI MUMBAI 400 703. PAN/GIR NO. AIHPP387OG ASSESSEE RESPONDENT ORDER PER RAMIT KOCHAR, ACCOUNTANT MEMBER THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER DATED 16.12.2013 OF C OMMISSIONER OF I NCOME T AX (A PPEALS ) (HEREINAFTER CALLED THE CIT (A) ) FOR ASSESSMENT YEAR 2008 - 09 . THE ASSESSEE HAS RAISED FOLLOWING GROUNDS OF APPEAL: GROUND I. 01. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED COMMISSIONER OF I N COME TAX (APPEALS) - 7 ['THE CIT(A)'] ASSESSE E BY SMT. HIRAL SEJPAL REVENUE BY ABANI KANTA NAYAK DATE OF HEARING 09 .09.2015 DATE OF PRONOUNCEMENT 28 .09.2015 ITA NO 1899/MUM/2014 ASSESSMENT YEAR: - 2008 - 09 2 | P A G E ERRED IN CONFIRMING THE ADDITION OF 3,35,134 O N ACCOUNT OF PURCHASES FOR THE PURPOSE OF THE APPEL LANT'S BUSINESS BY COMPLETELY REGARDING THE BASIC FACT THAT NO BUSINESS COULD BE CARRIED OUT WITHOUT EFFECTING PURCHASES . 2. THE APPELLANT THEREFORE PRAYS THAT THE PURCHASES MADE FOR THE PURPOSE OF THE BUSINESS BE ALLOWED AND THE ADDITION OF RS 3,35,134 BE ORDERED TO BE DELETED FROM THE E APPELLANT'S TOTAL INCOME. GROUND II. 1. ON THE FACTS OF THE CASE AND CIRCUMSTANCES AND IN LAW, THE LEARNED CIT(A) ERRED IN CONFIRMING THE ADDITION OF RS. 2,14,000 ON ACCOUNT OF FRIENDLY LOANS FROM THREE RELATIVES ON THE WRONG ASSUMPTION BY THE ID. CIT(A) THAT THE APPELLANT HAD OFFERED THE AMOUNT REPRESENTING SUCH FRIENDLY LOANS FOR TAXAT ION. 2. HE IGNORED THE SUBMISSION OF THE APPELLANT THAT THE AO DID NOT ACCEPT THE CONFIRMATION LETTERS FROM THE RELATIVES DURING THE ASSESSMENT PROCEEDINGS BY TELLING THE APPELLANT'S AR THAT THE ASSESSMENT WILL BE COMPLETED WITH SOME 'MINOR DISALLOWANCE 3. THE APPELLANT THEREFORE PRAYS THAT THE LOAN FROM RELATIVES BE TREATED AS GENUINE AND THE ADDITION OF RS.2,14,000 BE DELETED. ' . 2. THE FACTS OF THE CASE IN BRIEF ARE THAT ASSESSEE IS A SOFTWARE ENGINEER AND DOING WORK FOR ZEE ENTERTAINMENT ENTERPRISE LTD. DURING ASSESSMENT PROCEEDINGS , THE ASSESSING OFFICER OBSERVED THAT ASSESSEE HAS DEBITED PURCHASE OF RS. 3,35,134/ - IN THE PROFIT & LOSS ACCOUNT. THE ASSESSEE WAS ASKED TO EXPLAIN THESE PURCHASES ALONG WITH PROOF THEREOF . THE A SSESSEE SUBMITTED THAT NO PROOF AND DETAILS ARE AVAILABLE IN RESPECT OF THESE PURCHASES AND HE IS UNABLE TO EXPLAIN THE SAME. HENCE THE ASSESSING OFFICER ITA NO 1899/MUM/2014 ASSESSMENT YEAR: - 2008 - 09 3 | P A G E DISALLOWED THESE PURCHASES OF RS.3,35,134/ - AND ADDED TO THE INCOME OF THE ASSESSEE IN THE ASSESSMENT ORDER D ATED 16 TH DECEMBER 2010 PASSED U/S 143(3) OF INCOME TAX ACT,1961(HEREINAFTER CALLED THE ACT). 3. AGGRI E VED , THE ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE THE CIT(A). THE ASSESSEE SUBMITTED THAT ASSESSEE HAS DECLARED NET PROFIT OF RS. 9,73,610/ - ON THE GROSS RECEIPT OF RS. 18 , 62 , 800/ - WHICH WORKED OUT TO NET PROFIT OF 52.62% OF TURNOVER WHEREAS GENERALLY IN THE CASE OF PROFESSIONAL RECEIPT S , THE MAXIMUM PERCENTAGE OF NET PROFIT WILL BE AROUND 25% OR SO . THE A SSESSEE SUBMITTED THAT IT HAD MAD E SUNDRY PURCHASES OF RS. 3,35,134/ - ON READY CASH PAYMENT FROM GREY MARKET AT LAMINGTON R OAD , MUMBAI. SINCE THE PURCHASES ARE MADE FOR SMALL AMOUNT S AND NOT FROM THE ESTABLISHED DEALER, THE ASSESSEE COULD NOT GET THE BILLS BUT THE PURCHASES ARE GENUINE . 4. THE CIT(A) REJECTED THE CONTENTION OF THE ASESSEE AND STATED THAT THE ASSESSEE HAS ALREADY ADMITTED BEFORE THE ASSESSING OFFICER ON 16.12.2010 THAT NO PROOF AND DETAILS ARE AVAILABLE WITH RESPECT TO THESE PURCHASES AND HENCE THE ADDITION OF RS.3,35,134/ - AS M ADE BY THE ASSESSING OFFICER WAS CONFIRMED BY THE CIT(A) . 5. AGGRIEVED BY THE ORDER OF THE CIT(A), THE ASSESSEE IS IN APPEAL BEFORE US. THE ASSESSEE SUBMITTED THAT HE HAS DULY FILED LEDGER ACCOUNT OF PURCHASES BEFORE THE AUTHORITIES BELOW BUT INVOICES FOR THE PURCHASES WERE NOT FILED BEFORE THE AUTHORITIES BELOW . THE ASSESSEE SUBMITTED THAT THE ITA NO 1899/MUM/2014 ASSESSMENT YEAR: - 2008 - 09 4 | P A G E ASSESSING OFFICER HAS NOT EVEN CONSIDERED PAYMENTS FOR PURCHASES AGGREGATING TO RS.61134 / - WHICH ARE MADE THROUGH THE BANK ING CHANNEL BY THE ASSEESSEE AND THE SA ME ARE ALSO BEEN DISALLOWED BY THE ASSESSING OFFICER AND CONFIRMED BY THE CIT(A) . 6. THE LD. DR RELIED UPON THE ORDERS OF AUTHORITIES BELOW. 7. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PERUSED THE RELEVANT MATERIAL ON RECORD. WE HAVE OBSERVED THAT THE ASSESSEE HAS FAILED TO PRODUCE THE DETAILS AS WELL BILLS /INVOICES FOR PURCHASES TO THE TUNE OF RS.3,35,134/ - FOR VERIFICATION BEFORE THE AUTHORIT I ES BELOW RATHER THE ASSESSEE HAS ADMITTED BEFORE THE AUTHORITIES BELOW THAT IT HAS NO DETAILS /INVOICES OF SUCH PURCHASES AS THE SAME WERE PURCHASE FROM GREY MARKET . THE ASSESSEE HAS CLAIMED RS.3,35,134 / - AS REVENUE EXPENDITURE TO BE SET OFF AGAINST BUSINESS INCOME IN THE R ETURN OF INCOME FILED WITH REVENUE, THE PRIMARY AND INITIAL ONUS I S ON THE ASSESSEE TO PROVE THAT THE SAID EXPENSES(NOT BEING CAPITAL EXPENDITURE OR PERSONAL EXPENSES OF THE ASSESSEE) OF RS.3,35,134/ - ARE GENUINE AND THE SAME ARE INCURRED OR LAID OUT WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF THE BUSINESS OR PROFESSION CA RRIED ON BY THE ASSESSEE. MERELY SAYING THAT THE PURCHASE OF RS 61134 / - OUT OF TOTAL PURCHASES OF RS.3,35,134 / - ARE INCURRED THROUGH BANKING CHANNELS IS NOT SUFFICIENT UNTIL THE ASSESSEE PROVE BY COGENT EVIDENCE S THAT THE EXPENSES ARE INCURRED WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF BUSINESS OR PROFESSION CARRIED ON BY THE ASSESSEE . SINCE , THE ASSESSEE COULD NOT PRODUCE ANY COGENT MATERIAL EVEN BEFORE US TO ESTABLISH THAT THE SAID ITA NO 1899/MUM/2014 ASSESSMENT YEAR: - 2008 - 09 5 | P A G E EXPENDITURE IS NEITHER CAPITAL EXPENDITURE N OR PERSONAL EXPENSES OF TH E ASSESSEE AND IS INCURRED WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF BUSINESS OR PROFESSION CARRIED ON BY THE ASSESSEE , WE FIND NO ERROR OR ILLEGALITY IN THE ORDER S OF THE AUTHORITIES BELOW AND THE SAME ARE HEREBY UPHELD AND THE CONTENTIONS OF THE ASSESSEE ARE HEREBY REJECTED . THUS, THE ADDITION OF RS.3,35,134/ - MADE BY THE ASSESSING OFFICER AND AS CONFIRMED BY THE CIT(A) IS HEREBY CONFIRMED . WE ORDER ACCORDINGLY. 8. THE GROUND II RAISED BY THE ASSESSEE IN THE MEMO OF A PPEAL FILED RELATES TO FRIENDLY LOANS AGGREGATING TO RS. 2,14,000/ - RAISED BY THE ASSESSEE FROM THREE RELATIVES. DURING ASSESSMENT PROCEEDINGS, T HE ASSESSEE WAS ASKED BY THE ASSESSING OFFICER TO SUBMIT PROOF OF LOAN S RAISED FROM THE FRIENDS AND RELATIVE S AND ALSO TO PRODUCE PARTIES FOR VERIFICATION . THE ASSESSEE NEITHER FILE D ANY PROOF OF LOAN NOR PRODUCED PARTIES FOR VERIFICATION BEFORE THE ASSESSING OFFICER . THE ASSESSEE STATED BEFORE THE ASSESSING OFFICER THAT HE IS UNABLE TO PRODUCE THE PARTIES BEFO RE THE ASSESSING OFFICER AS HE DOES NOT WANT TO EMBARRASS THE FRIENDS AND RELATIVES WHO HELPED THE ASSESSEE IN NEED. THEREFORE, THE ASSESSEE OFFERED THE AMOUNT OF RS. 2,14,000/ - REPRESENTING LOAN S FROM FRIENDS AND RELATIVES FOR TAXATION AS ADDITIONAL INCOM E. SINCE THE ASSESSEE COULD NOT PRODUCE ANY PROOF OF LOANS NOR PRODUCED PARTIES FOR VERIFICATION AND FURTHER THE ASSESSEE OFFERED THE SAME AS ADDITIONAL INCOME , THE CLAIM OF THE LOAN OF RS.2,14,000/ - WAS NOT ACCEPTED BY THE ASSESSING OFFICER AND WAS ADDED TO THE INCOME OF THE ITA NO 1899/MUM/2014 ASSESSMENT YEAR: - 2008 - 09 6 | P A G E ASSESSEE IN THE ASSESSMENT ORDER DATED 16 TH DECEMBER 2010 PASSED BY THE ASSESSING OFFICER U/S 143(3) OF THE ACT. 9. AGGRIEVED, THE ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE THE CIT(A). 10. CIT( A) REJECTED THE CONTENTION OF ASSESSEE ON THE GROUND THAT ASSESSEE HAS ALREADY ADMITTED BEFORE THE ASSESSING OFFICER THAT THIS LOAN OF RS.2,14,000/ - MAY BE ADDED TO THE INCOME OF THE ASSESSEE AND THE ASSESSEE IS NOT ABLE TO PRODUCE LOAN CONFIRMATIONS NOR P ARTIES ARE PRODUCED FOR VERIFICATI ON BEFORE THE ASSESSING OFFICER AND HENCE THE ADDITIONS MADE BY THE ASSESSING OFFICER WAS CONFIRMED BY CIT(A) . 11. AGGRIEVED BY THE ORDER OF CIT(A), THE ASSESSEE IS IN APPEAL BEFORE US AND REITERATED ITS SUBMISSIONS AND ST ATED THAT THESE LOANS WERE TAKEN FROM CLOSE RELATIVES AND HE HAS SUBMITTED THE INFORMATION SUCH AS CONFIRMATION LETTER S BEFORE THE CIT(A) AND THE ASSESSING OFFICE WHILE THE SAME HAS NOT BEEN TAKEN ON RECORD BY BOTH THE AUTHORITIES BELOW. 12. LD. DR RELIED UPON THE ORDER OF AUTHORITIES BELOW. 13. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND CAREFULLY CONSIDERED THE RELEVANT MATERIAL ON RECORD. T HE ASSESSEE HAS CLAIMED THAT HE FILED THE LOAN CONFIRMATIONS OF RS.1,95,000.00 BEFORE THE CIT(A) AS PART OF ADDI TIONAL EVIDENCE UNDER RULE 46A OF INCOME TAX RULES,1962 WITH RESPECT TO LOANS AVAILED FROM CLOSE RELATIVES AS PER CONFI RMATIONS AT PAGES 31 TO 33 OF PAPER BOOK SUBMITTED BEFORE US . THE CIT(A) CALLED FOR THE REMAND REPORT FROM THE ASSESSING OFFICER WHICH W AS SUBMITTED BY THE ASSESSING OFFICER VIDE REMAND ITA NO 1899/MUM/2014 ASSESSMENT YEAR: - 2008 - 09 7 | P A G E REPORT DATED 02 ND AUGUST 2013. HOWEVER, THE ORDERS OF AUTHORITIES BELOW DOES NOT CONTAIN ANY DISCUSSIONS ABOUT THESE LOAN CONFIRMATIONS AND ABOUT SATISFACTION THAT INGREDIENTS OF SECTION 68 OF THE ACT ARE COMPLIED WITH. T HESE LOAN CONFIRMATION S OF RS.1,95,000.00 FILED BY THE ASSESSEE NEED VERIFICATION S BY THE AUTHORITIES BELOW AND ALSO ASSESSEE HAS TO DISCHARGE THE PRIMARY ONUS/ BURDEN CAST U/S 68 OF THE ACT WITH RESPECT TO LOANS OF RS 1,95,000/ - RAISED FR OM CLOSE RELATIVES. THE INTEREST OF JUSTICE WILL BE BEST SERVED IF THE MAT T ER IS RESTORED TO THE FILE OF ASSESSING OFFICER FOR DE - NOVO CONSIDERATION WITH RESPECT TO THESE LOANS OF RS.2,14,000 / - ADDED BY THE ASSESSING OFFICER IN THE ASSESSMENT ORDER U/S 143(3) OF THE ACT AND AS CONFIRMED BY THE CIT(A) IN THE FIRST APPELLATE PROCEEDINGS AND THE ASSESSEE IS DIRECTED TO APPEAR BEFORE THE ASSESSING OFFICER TO SATISFY THAT ALL THE INGREDIENTS OF THE S ECTION 68 OF THE ACT ARE DULY COMPLIED WITH BY THE ASSESSEE ABOUT THE IDENTITY, CREDITWORTHINESS AND GENUINENESS OF THE SE LOAN TRANSACTION. NEEDLESS TO SAY THAT THE ASSESSING OFFICER WILL GIVE PROPER AND ADEQUATE OPPORTUNITY OF HEARING TO THE ASSESSEE IN ACCORDANCE WITH PRINCIPLES OF NATURAL JUSTICE AS ENSHRINED IN THE DOCTRINE OF AUDI ALTERAM PARTEM. WE ORDER ACCORDINGLY. ITA NO 1899/MUM/2014 ASSESSMENT YEAR: - 2008 - 09 8 | P A G E 12. IN THE RESULT APPEAL OF THE ASSESSEE IS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 2 8 T H DAY OF SEPTEM BER 2015 . S D / - S D / - (SHAILENDRA KUMAR YADAV) ( RAMIT KOCHAR ) (JUDICIAL MEMBER) (ACCOUNTANT MEMBER) MUMBAI DATED 2 8 - 09 - 2015 SKS SR. P.S COPY TO: THE APPELLANT THE RESPONDENT THE CONCERNED CIT(A) THE CONCERNED CIT THE DR, G BENCH, ITAT, MUMBAI BY ORDER ASSISTANT REGISTRAR INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCHES, MUMBAI