Fem Carting Pvt. Ltd., Surat V. The Income Tax Officer, Ward 1(2), Surat

ITA 2158/AHD/2013

• Counselvise Citation: [2017] 130 COUNSELVISE.COM (IT) 9326 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 year(s) 5 month(s) 8 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-01-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Next Hearing Date: 19-01-2017
• Assessment Year: 2005-2006
• Appeal Filed On: 22-08-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ROOP CHAND
• Keywords: Unexplained cash credit; Principle of natural justice; Condonation of delay
• Section: 142(1); 144; 68

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD SMC BENCH AHMEDABAD BEFORE SHRI S.S. GODARA, JM & SHRI MANISH BORAD, AM. ITA NO.2158/AHD/2013 ASST. YEAR: 2005-06 FEM CARTING PVT. LTD., 103, KRISHNA RESIDENCY, OPP. KATHOR BUS STAND, KAMREJ, SURAT. VS. ITO, WD-1(2), SURAT. APPELLANT RESPONDENT PAN AAACF 6757A APPELLANT BY SHRI MEHUL SHAH, AR RESPONDENT BY SHRI ROOP CHAND, SR. DR DATE OF HEARING: 19/01/2017 DATE OF PRONOUNCEMENT: 31/01/2017 O R D E R PER MANISH BORAD, ACCOUNTANT MEMBER . THIS APPEAL OF ASSESSEE FOR ASST. YEAR 2005-06 IS DIRECTED AGAINST THE ORDER OF LD. CIT(A)-1, SURAT, DATED 20. 06.2013 VIDE APPEAL NO.CAS-1/509/12-13 ARISING OUT OF ORDER U/S 144 OF THE I.T. ACT, 1961 (IN SHORT THE ACT) DATED 30.11.2007 PASSED BY ITO, WD-1(2), SURAT. ASSESSEE HAS RAISED FOLLOWING GROUNDS OF APPEAL :- 1. THE LD. CIT(A) HAS ERRED BOTH IN LAW AND ON THE FACTS OF THE CASE IN NOT APPRECIATING THE FACTS THAT FOR THE FIRST TIME THE ASSESSMENT ORDER WAS RECEIVED BY THE APPELLANT ON 29/10/2012 AND ACCORDI NGLY, THE ID. CIT(A) ERRED IN HOLDING THAT THERE WAS A DELAY OF FIVE YEA RS IN FILING AN APPEAL BY THE APPELLANT BEFORE THE CIT(A). ITA NO. 2158/AHD/2013 ASST. YEAR 2005-06 2 2. THE LD. CIT(A) HAS FURTHER ERRED BOTH IN LAW AND ON THE FACTS OF THE CASE IN NOT APPRECIATING THE SUFFICIENT CAUSES AS FURNIS HED BY THE APPELLANT FOR THE ALLEGED DELAY IN FILING AN APPEAL BEFORE THE CI T(A) AND ACCORDINGLY, LD. CIT(A) HAS ERRED IN NOT CONDONING THE ALLEGED DELAY AND PASSED THE ORDER WITHOUT ADJUDICATING THE GROUNDS ON MERITS. 3. THE LD. CIT(A) HAS ERRED BOTH IN LAW AND ON THE FACTS OF THE CASE IN NOT ADJUDICATING THE FOLLOWING GROUNDS RAISED IN THE GR OUNDS OF APPEAL FILED BEFORE HIM : (A) LEARNED ASSESSING OFFICER HAS ERRED IN LAW AND FACT BY MAKING ADDITION U/S 68 OF RS. 5,00,000/-. (B) LEARNED ASSESSING OFFICER HAS ERRED IN LAW AND FACT BY MAKING OF RS.32,54,2 50/-. 4. THE ID. CIT(A) OUGHT TO HAVE APPRECIATED THAT TH E ID. AO HAS ERRED IN LAW AND ON THE FACTS OF THE CASE IN FRAMING THE ASSESSM ENT U/S 144 OF THE ACT. 5. THE ID. CIT(A) OUGHT TO HAVE APPRECIATED THAT TH E ID. AO HAS ERRED IN LAW AND ON THE FACTS OF THE CASE IN MAKING HIGH PITCH A DDITION OF RS.33,52,4917- BY ESTIMATING NET PROFIT @ 8% ON TOTAL TURNOVER OF THE BUSINESS OF THE APPELLANT WITHOUT REJECTING BOOKS OF ACCOUNTS OF TH E APPELLANT. 6. THE ID. CIT(A) OUGHT TO HAVE APPRECIATED THAT TH E ID. AO HAS ERRED IN LAW AND ON THE FACTS OF THE CASE IN MAKING OF RS. 5,00, 0007- U/S 68 OF THE ACT. 7. BOTH THE LOWER AUTHORITIES HAVE PASSED THE ORDER S WITHOUT PROPERLY APPRECIATING THE FACT AND THAT THEY FURTHER ERRED I N GROSSLY IGNORING VARIOUS SUBMISSIONS, EXPLANATIONS AND INFORMATION SUBMITTED BY THE APPELLANT FROM TIME TO TIME WHICH OUGHT TO HAVE BEEN CONSIDERED BE FORE PASSING THE IMPUGNED ORDER. THIS ACTION OF THE LOWER AUTHORITIE S IS IN CLEAR BREACH OF LAW AND PRINCIPLES OF NATURAL JUSTICE AND THEREFORE DES ERVES TO BE QUASHED. 8. THE LEARNED CIT(A) HAS ERRED IN LAW AND ON FACTS OF THE CASE IN CONFIRMING ACTION OF THE ID. AO IN LEVYING INTEREST U/S 234A/B/C OF THE ACT. ITA NO. 2158/AHD/2013 ASST. YEAR 2005-06 3 2. BRIEFLY STATED FACTS ARE THAT ASSESSEE IS A PRIV ATE LIMITED COMPANY ENGAGED IN THE BUSINESS OF CARTING AND EART H MOVING. RETURN OF INCOME WAS FILED ON 3010.2005 DECLARING N IL INCOME. RETURN WAS ACCOMPANIED WITH COMPUTATION OF INCOME, COPY OF AUDITED ACCOUNTS, COPY OF TAX AUDIT REPORT. CASE WA S SELECTED FOR SCRUTINY ASSESSMENT AND NOTICE U/S 143(2) OF THE AC T WAS ISSUED ON 4.8.2005 AND WAS DULY SERVED THROUGH SPEED POST. TH EREAFTER THREE MORE NOTICES WERE ISSUED U/S 142(1) OF THE ACT ALON G WITH QUESTIONNAIRE BUT NONE WAS COMPLIED WITH ON BEHALF OF ASSESSEE. AS THE ASSESSMENT WAS GETTING TIME BARRED LD. ASSESSIN G OFFICER PASSED AN EX PARTE ASSESSMENT ORDER U/S 144 OF THE ACT BY APPLYING 8% NET PROFIT RATE ON THE DISCLOSED TURNOVER OF RS.4.19 CR ORES CALCULATED AT RS.33,52,491/- AND MAKING AN ADDITION U/S 68 OF THE ACT TOWARDS UNEXPLAINED CASH CREDIT OF RS.5 LACS ON ACCOUNT OF CREDIT OF RS.2 LACS IN THE NAME OF SHRI CHIMANLAL M. SINGAR AND RS.3 LA CS IN THE NAME OF SHRI MADANLAL M. SINGAR. INCOME WAS ASSESSED AT RS. 38,54,250/-. ASSESSEES APPEAL AGAINST THE IMPUGNED ASSESSMENT O RDER BEFORE LD. CIT(A) WAS TIME BARRED BY AROUND 5 YEARS AS IT WAS FILED ON 5.12.2012 AGAINST THE ASSESSMENT ORDER U/S 144 OF THE ACT DATED 13.12.2007. ASSESSEES REQUEST FOR CONDONATION OF D ELAY COULD NOT CONVINCE LD. CIT(A) AND HE ACCORDINGLY REJECTED THE CONDONATION APPLICATION AND DID NOT ADMIT THE ASSESSEES APPEAL AND DISMISSED THE SAME. 3. FIRST WE TAKE UP GROUND NOS.1 & 2 RAISED BY THE ASSESSEE ASSAILING THE ORDER OF LD. CIT(A) FOR NOT CONDONING THE ALLEGED DELAY ITA NO. 2158/AHD/2013 ASST. YEAR 2005-06 4 EVEN WHEN THERE WERE SUFFICIENT AND REASONABLE CAUS E WHICH PREVENTED THE ASSESSEE TO FILE THE APPEAL. 4. LD. AR SUBMITTED THAT DURING THE COURSE OF ASSES SMENT PROCEEDINGS THE ASSESSEE WAS IN DEEP TROUBLE BOTH O N FRONT OF FAMILY HEALTH AND ON FRONT OF BUSINESS. FURTHER SON OF ONE OF THE DIRECTORS WAS SEVERELY SICK DUE TO FAILURE OF BOTH KIDNEYS AN D WAS ON CONTINUOUS DIALYSES FOR LIVING AND AT THE LATER STA GE DIED ON 1 ST MARCH, 2013 AT AN AGE OF 17 YEARS. HE ALSO SUBMITTED THAT ONE OF THE DIRECTORS MR. MADANLAL SINGAR WHO WAS SUFFERING FRO M DEPRESSION ALSO DIED ON 9.1.2013 BY HEART ATTACK DUE TO FINAN CIAL TROUBLE. DUE TO THESE CONDITIONS ASSESSEE COULD NOT PROPERLY REPRES ENT ITS CASE DURING ASSESSMENT PROCEEDINGS DUE TO WHICH BEST JUD GMENT ASSESSMENT WAS MADE U/S 144 OF THE ACT AFTER MAKING HEAVY ADDITION OF RS.33,52,491/- BY WAY OF ESTIMATION OF NET PROFI T @ 8% ON THE TOTAL TURNOVER EVEN WHEN ASSESSEES BOOKS OF ACCOUNTS WER E REGULARLY AUDITED AND ADDITION ON ACCOUNT OF UNEXPLAINED CASH CREDIT U/S 68 OF THE ACT WAS ALSO MADE AT RS.5 LACS ON ACCOUNT OF R S.2 LACS AND RS.3 LACS RECEIVED FROM SHRI CHIMANLAL M. SINGAR AND SHR I MADANLAL M. SINGAR RESPECTIVELY WHO HAPPENED TO BE THE DIRECTOR S OF THE COMPANY. FURTHER LD. AR SUBMITTED THAT ASSESSEE WAS IN A PATHETIC SITUATION AT THAT TIME AND HAD TO RUN HERE AND THER E TO SAVE HIMSELF FROM CREDITORS AND HE COULD NOT FILE THE APPEAL IN TIME. 5. LD. AR FURTHER SUBMITTED THAT EVEN DURING THE CO URSE OF ASSESSMENT PROCEEDINGS IT WAS MENTIONED IN THE LETT ER FOR ADJOURNMENT ABOUT THE ILLNESS OF DIRECTORS SON DUL Y SUPPORTED BY ITA NO. 2158/AHD/2013 ASST. YEAR 2005-06 5 MEDICAL FILES EVIDENCING THAT MR. DINESH CHIMANLAL SINGAR WAS UNDER DIALYSIS SINCE LONG TIME. FURTHER WITH REGARD TO FI NANCIAL PROBLEMS FACED BY THE ASSESSEE IT WAS SUBMITTED THAT THERE W AS A MISUNDERSTANDING WITH ONE OF THE CLIENT M/S SADBHAV ENGINEERING LTD. REGARDING ROAD MEASUREMENT BILLING WHICH ENDED UP INTO LITIGATION INCURRING BUSINESS LOSS AND INABILITY TO MAKE THE P AYMENT TO THE CREDITORS AND AS A RESULT OF WHICH ASSESSEE COMPANY S DIRECTORS USED TO REMAIN OUTSTATION AND WERE NOT ABLE TO CARRY OUT REGULAR BUSINESS OPERATION. FOR THE ABOVE FACTORS THE CONTROLLER OF ASSESSEES BUSINESS I.E. THE DIRECTORS WERE IN DEEP TROUBLE DUE TO MEDI CAL ILLNESS AND FINANCIAL TROUBLE AND HAD NO OPTION BUT TO RUN AWAY FROM THE BUSINESS PLACE TO THEIR NATIVE PLACE AND ALL ITS BUSINESS GO T INSOLVENT. THEREFORE, HE REQUESTED THAT DELAY IN FILING THE AP PEAL BEFORE LD. CIT(A) MAY BE CONDONED AND THE MATTER BE RESTORED B ACK TO THE FILE OF LD. CIT(A) FOR FRESH ADJUDICATION ON MERITS. 6. ON THE OTHER HAND, LD. DR STRONGLY OBJECTED TO T HE SUBMISSIONS OF LD. AR AND SUPPORTED THE ORDER OF LD. CIT(A). 7. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE RECORD PLACED BEFORE US. IN THESE GROUND NOS. 1 & 2 ASSESS EE HAS CHALLENGED THE ORDER OF LD. CIT(A) WHEREIN APPEAL O F THE ASSESSEE HAS BEEN DISMISSED AS IT WAS TIME BARRED BY MORE TH AN 5 YEARS. WE FIND THAT ASSESSEE IS A PRIVATE LIMITED COMPANY AND HAVING A TURNOVER OF RS.4.19 CRORES AND RETURN OF INCOME WAS FILED IN TIME ACCOMPANIED WITH COPY OF AUDITED ACCOUNTS, TAX AUDIT REPORT AND COMPUTATION OF INCOME/ NOTICES U/S 143(2) AS WELL AS 142(1) OF THE ACT WERE NOT ITA NO. 2158/AHD/2013 ASST. YEAR 2005-06 6 COMPLIED WITH BY THE ASSESSEE AS A RESULT OF WHICH BEST JUDGMENT ASSESSMENT ORDER U/S 144 OF THE ACT WAS PASSED ON 3 0.11.2007. AGAINST THIS IMPUGNED ORDER ASSESSEE PREFERRED APPE AL BEFORE LD. CIT(A) ON 5.12.2012 WHICH WAS DELAYED BY 5 YEARS AF TER DATE OF IMPUGNED ASSESSMENT ORDER. IN ORDER TO EXAMINE THE REASONS FOR THIS DELAY OF FILING THE APPEAL BEFORE LD. CIT(A) WE FIN D THAT ASSESSEE HAS FILED AN AFFIDAVIT OF ONE OF THE DIRECTORS MR. CHIM ANLAL SINGAR WHEREIN IT HAS BEEN STATED AS FOLLOWS :- 1) WE HAVE BEEN SERVED THE ASSESSMENT ORDER PASSED U/S. 144 ON 13.12.2007. WE HAVE FILED AN APPEAL BEFORE CIT(A) ON 05.12.2012 CAUSING DELAY OF ALMOST 5 YEARS. 2) ASSESSEE FILED THE APPLICATION FOR CONDONATION O F DELAY BEFORE C1T(A) VIDE LETTER DATED 07.11.2012 ATTACHED WITH THE APPE AL MEMO FILED BEFORE CIT(A). 3) THE LD. CIT(A) REJECTED THE ASSESSEES APPLICATI ON FOR CONDONATION OF DELAY BY OBSENING THAT THE REASONS MENTIONED IN THE APPLICATION COULD NOT BE ACCEPTED AS SUFFICIENT CAUSE FOR DELAY FOR ALMOST 5 YEARS. HOWEVER, LD. CIT(A) DIDN'T GIVE ANY REASONS FOR MAKING SUCH O BSERVATION. 4) THE APPEAL COULD NOT BE FILED IN TIME AS THE BUS INESS OF THE ASSESSEE WAS CLOSED AFTER A.Y, 2005-06 AND DIRECTORS MOSTLY RESI DED IN THEIR NATIVE PLACE RAJASTHAN OWING TO HEAVY LOSS AND BANKRUPTCY TO AVO ID CREDITORS. 5) THE MANAGING DIRECTOR OF THE ASSESSEE COMPANY SH RI CHIMANLAL SINGAR WAS UNDER THE MENTAL TROUBLE OWING TO FAILURE OF BO TH THE KIDNEYS OF HIS SON MR. DINESH SINGAR SINCE 2007 WHO WAS AGED ONLY 17 Y EARS AND HE ULTIMATELY DIED ON 01.03.2013. 6) ONE OF THE DIRECTOR SHRI MADANLAL SINGAR WAS ALS O SUFFERING FROM DEPRESSION AND HE ULTIMATELY DIED ON 09.01.2013 BY HEART ATTACK OWING TO FINANCIAL TROUBLE. ITA NO. 2158/AHD/2013 ASST. YEAR 2005-06 7 7) THE ASSESSEE BEGS CONDONE THE DELAY IN FILING TH E APPEAL BEFORE CIT(A). 8) THE ASSESSEE SUBMITS THAT THE CASE IS A MERITORI OUS ONE AND CONSIDERATION. ASSESSING OFFICER HAS NOT ONLY MADE THE ADDITION BUT ALSO DIDN'T ALLOW THE SET OFF OF UNABSORBED LOSS. IF THE DELAY IS NOT CONDONED, IT WOULD CAUSE IRREPARABLE LOSS TO THE APPLICANT. 8. FROM GOING THROUGH THE ABOVE AFFIDAVIT WE FIND T HAT LATE MR. DINESH SINGAR SON OF SHRI CHIMANLAL SINGAR DIED ON 1.3.2013 DUE TO KIDNEY FAILURE AND WAS UNDERGOING TREATMENT SINCE 2 007. WE FURTHER OBSERVE THAT ANOTHER DIRECTOR MR. MADANLAL SINGAR A LSO DIED ON 9.1.2013 DUE TO HEAR ATTACK OWING TO FINANCIAL TROU BLE. APART FROM THESE TWO REASONS ASSESSEE HAS ALSO SUBMITTED THAT HEAVY LOSSES WERE INCURRED IN THE BUSINESS AND THERE WAS A SITUA TION OF BANKRUPTCY DUE TO WHICH THE COMPANY DIRECTORS HAD TO LEAVE THE IR BUSINESS AND RESIDE AT THEIR NATIVE PLACE IN RAJASTHAN. THE FACT S NARRATED BY LD. COUNSEL AS WELL AS MENTIONED IN THE AFFIDAVIT GIVEN BY THE DIRECTOR HAVE NOT BEEN CONTROVERTED BY THE LD. DEPARTMENTAL REPRESENTATIVE. 9. FURTHER HAVING AN OVERVIEW ON THE MERITS OF THE CASE WE OBSERVE THAT LD. ASSESSING OFFICER HAS ESTIMATED NE T PROFIT BY APPLYING 8% ON THE DISCLOSED TURNOVER OF RS.4.19 CR ORES EVEN WHEN THE GIVEN FACTS WHEREIN ASSESSEE HAS DULY FURNISHED AUDITED FINANCIAL STATEMENTS INCLUDING TAX AUDIT REPORT IN SUPPORT OF PROVISIONS OF SECTION 44AB OF THE ACT. AS REGARDS ADDITION U/S 68 OF THE ACT TOWARDS UNEXPLAINED CASH CREDIT WE FIND THAT THE IMPUGNED A MOUNT OF RS.5 LACS (RS. 2 LACS + RS.3 LACS) HAS BEEN RECEIVED FRO M THE DIRECTORS OF THE COMPANY WITH SELF EXPLAINED SOURCE OF CREDIT. W E OBSERVE THAT IF ITA NO. 2158/AHD/2013 ASST. YEAR 2005-06 8 THE MATTER IS SET ASIDE FOR FRESH ADJUDICATION TO T HE LD. CIT(A) ASSESSEE MAY HAVE A FAIR CHANCE TO SUCCEED AND IF T HE DELAY IN FILING THE APPEAL BEFORE LD. CIT(A) IS NOT CONDONED ASSESS EE WILL BE DEPRIVED OF GETTING DUE JUSTICE ON MERITS. 10. WE ARE, THEREFORE, OF THE VIEW THAT IN THE GIVE N REASONS MENTIONED IN THE AFFIDAVIT MAINLY RELATING TO DEATH OF SON OF A DIRECTOR AND DEATH OF ANOTHER DIRECTOR OF THE COMPANY AND TH E LONG PROCESS OF ILLNESS IS CONTINUED FROM 2007 TILL 2013 AND SEVER E FINANCIAL PROBLEMS FACED DUE TO LITIGATION WITH THE BUSINESS PARTIES A ND INSUFFICIENT FUNDS TO PAY TO THE CREDITORS,ARE SUFFICIENT AND REASONAB LE CAUSE WHICH MIGHT HAVE PREVENTED THE ASSESSEE COMPANY TO FILE T HE APPEAL IN TIME BEFORE LD. CIT(A). IN VIEW OF ABOVE REASONS AN D IN THE INTEREST OF NATURAL JUSTICE WE ARE OF THE VIEW THAT LD. CIT(A) WAS NOT JUSTIFIED IN NOT CONDONING THE DELAY AND DISMISSING THE APPEAL. WE, THEREFORE, DIRECT THE LD. CIT(A) TO CONDONE THE DELAY AND ADJU DICATE THE APPEAL ON MERITS AND PASS A FRESH ORDER. 11. AS THE REMAINING GROUNDS ARE RELATING TO MERITS OF THE CASE, WE FIND NO REASON TO ADJUDICATE THE SAME AS WE HAVE AL READY DIRECTED LD. CIT(A) TO CONDONE THE DELAY AND ADJUDICATE THE ISSU ES RAISED BY THE ASSESSEE IN THE APPEAL. ACCORDINGLY, THE APPEAL FIL ED BY THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES. 12. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWE D FOR STATISTICAL PURPOSES. ITA NO. 2158/AHD/2013 ASST. YEAR 2005-06 9 ORDER PRONOUNCED IN THE OPEN COURT ON 31 ST JANUARY, 2017 SD/- SD/- (S. S. GODARA) JUDICIAL MEMBER (MANISH BORAD) ACCOUNTANT MEMBER DATED 31/01/2017 MAHATA/- COPY OF THE ORDER FORWARDED TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT CONCERNED 4. THE CIT(A) CONCERNED 5. THE DR, ITAT, AHMEDABAD 6. GUARD FILE BY ORDER ASST. REGISTRAR, ITAT, AHMEDABAD 1. DATE OF DICTATION: 30/01/2017 2. DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE T HE DICTATING MEMBER: 31 /01/2017 OTHER MEMBER: 3. DATE ON WHICH APPROVED DRAFT COMES TO THE SR. P. S./P.S.: 4. DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE TH E DICTATING MEMBER FOR PRONOUNCEMENT: __________ 5. DATE ON WHICH THE FAIR ORDER COMES BACK TO THE S R. P.S./P.S.: 6. DATE ON WHICH THE FILE GOES TO THE BENCH CLERK: 1/2/17 7. DATE ON WHICH THE FILE GOES TO THE HEAD CLERK: 8. THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT REGISTRAR FOR SIGNATURE ON THE ORDER: 9. DATE OF DESPATCH OF THE ORDER: