Grand Consolidated Finance(Gujarat) Ltd., Ahmedabad V. ITO, Ward-2(1)(1), Ahmedabad

ITA 2279/AHD/2018

AI Insights

The case involves two appeals by Grand Consolidated Finance (Gujarat) Ltd. against the orders of the Income Tax Officer (ITO) and the Commissioner of Income Tax (Appeals) for the assessment years 2012-13 and 2015-16. The primary issues in the appeals were the disallowance of commission expenses claimed by the assessee and the addition of unaccounted cash receipts. The Tribunal noted the absence of the assessee's representation during the hearings and proceeded ex parte. The Tribunal found the additions made by the AO and confirmed by the CIT(A) to be just and proper, citing the lack of sufficient evidence and documentation from the assessee to substantiate their claims.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 125401 (ITAT-AHMEDABAD)
• Duration Of Justice: 4 year(s) 6 month(s) 21 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-06-2023
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: C
• Next Hearing Date: 31-05-2023
• Assessment Year: 2012-2013
• Appeal Filed On: 18-11-2018
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Keywords: Principle of natural justice; Additional evidence
• Section: 37; 271(1)(c); 144; 143(3); 142(1); 143(1); 143(2)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL “C” BENCH, AHMEDABAD BEFORE SMT.ANNAPURNA GUPTA, ACCOUNTANT MEMBER & Ms. MADHUMITA ROY, JUDICIAL MEMBER आयकर अपील सं./ I. T. A. Nos. 2279 & 228 0/Ahd/2018 ( नधा रण वष / A ss es sment Years : 2012 -1 3 & 20 15-16) Gr an d Co ns ol id at e d Fi na n ce ( G u j a r a t ) L t d . 40 1/4 /A , Ma r d ia P l az a , O p p. J a su bh a i J e w e lle r s , C . G . R oa d , N a v r a n gp ur a , A h me da ba d बनाम/ Vs . In co m e T ax Of f ice r W ar d 2 ( 1 ) (1 ), Ah m e da b a d थायी लेखा सं./जीआइआर सं./P A N/ G I R N o . : A A C C E 1 2 5 7 A (अपीलाथ /Appellant) . . ( यथ / Respondent) अपीलाथ ओर से /Appellant by : None यथ क ओर से/Respondent by : Shri Atul Pandey, Sr. DR स ु नवाई क तार ख / D a t e o f H e a r i ng 01/06/2023 घोषणा क तार ख /D a t e o f P ro n o u nc e me n t 09/06/2023 O R D E R PER Ms. MADHUMITA ROY - JM: Both appeals filed by the assessee are directed against the order dated 28.09.2018 & 12.09.2018, passed by the Ld. Commissioner of Income Tax (Appeals)-6, Ahmedabad (in short ‘the CIT(A)) arising out of the order dated 27.02.2015 & 20.12.2017 passed by the ITO, Ward-2(1)(1), Ahmedabad under section 144 & 143(3) of the Income Tax Act, 1961 (hereinafter referred ITA Nos.2279 & 2280/Ahd/2018 (Grand Consolidated Finance (Gujarat) Ltd.) A.Ys.– 2012-13 & 2015-16 - 2 - as to ‘the Act’) for Assessment Year 2012-13 & 2015-16; respectively. Since, both appeals relate to same assessee, these are heard analogously and are being disposed of by a common order for the sake of convenience. 2. At the time of hearing of the appeal, none appears on behalf of the assessee neither any adjournment has been sought for. It further appears from the records that in past nobody appears on behalf of the assessee neither any adjournment has been asked for so many occasions. Even today, no adjournment application has been filed on behalf of the assessee. Having no other alternative, we have decided to proceed with the matter ex parte. ITA No. 2279/Ahd/2018 – A.Y. 2012-13 3. We have heard the Ld. DR and perused the order passed by the authorities below. 4. The issue relates to addition of Rs.52,79,599/- on account of commission expenses under Section 37 of the Act. Upon perusal of the order passed by the Ld. AO, it appears that the assessee filed its return of income on 31.03.2014 declaring total income at Rs.14,490/-, which was processed under Section 143(1) of the Act and upon selection for scrutiny under Section 143(2) of the Act was served upon the assessee. In spite of repeated notice served upon the assessee, none appeared. However, a letter of authority of one Mr. Rakshit Shah to represent the case of the assessee was submitted at the fag end of the year i.e. 08.01.2015. Directions were also issued to produce details of commission expenses. Since, nothing was forthcoming, the Ld. AO proceeded to initiate the assessment under Section 144 of the Act. ITA Nos.2279 & 2280/Ahd/2018 (Grand Consolidated Finance (Gujarat) Ltd.) A.Ys.– 2012-13 & 2015-16 - 3 - 5. The brief facts leading to the case is this that the assessee company engaged in the business of finance shown total revenue of Rs.55,64,339/-, which comprised of revenue from operations of Rs.52,70,410/- and other income of Rs.2,93,929/- against expenses of Rs.55,49,849/-. The assessee has declared profit before tax of Rs.14,990/-. So far as the commission expenses is concerned, the assessee has shown gross revenue from the operations amounting to Rs.52,70,410/- against which it has claimed commission expenses of Rs.52,79,599/-, almost 100% of gross receipt. Since, no details in respect of such claim under Section 37 of the Act was furnished, it was directed further to satisfy that expenditure incurred in the previous year, not of personal nature and the same was wholly and exclusively for the purpose of business or profession. As nothing was forthcoming, entire commission expenses were disallowed treating the same as non-genuine which was, in turn, confirmed by the First Appellate Authority. 6. Before the First Appellate Authority, additional evidences under Section 46A of the Act were filed, upon which, remand report was called for from the Addl. CIT, Range-2(1), Ahmedabad. Upon receipt of the said remand report, the same was forwarded to the appellant for its comment but without any result. However, keeping in view the principle of natural justice, those additional evidences were filed by the assessee was admitted by the First Appellate Authority. So far as the commission expenses is concerned, during appellate proceeding, the appellant filed the copy of the agreement with Somnath Foods & Chemicals Ltd., Sundervan Bhoomi Vikas Ltd. and Tropical Green Fruits Exports Ltd. for payment of commission and investment as additional evidence. The agreement reads as follows: ITA Nos.2279 & 2280/Ahd/2018 (Grand Consolidated Finance (Gujarat) Ltd.) A.Ys.– 2012-13 & 2015-16 - 4 - "AGREEMENT/ MEMORANDUM OF UNDERSTANDING (MOU) This agreement made on date 02/04/2010 by 1. Investor: Shantilal M. Patel Advocate, Gujarat High Court. (party No. 1) Financial consultant, Age: 65, Resident at: F/102. Indraprasth Tower, Mr. Drive in Cinema, Memnaqar Ahmedabad- 380052 BETWEEN: 2. Borrower Companies: (2.1)Grand Consolidated Finance (Guj) Ltd (Party No. 2) A-410, Maradia Plaza, Opp. Canara Bank G.G Road, Navarangpura, Ahmedabad-380009. : (2.2) Somnath Foods & Chemicals Ltd. Rajkot/Ahmedabad : (2.3) Sundervan Bhumi Vikas Ltd. Ahmedabad/Rajkot : (2.4) Tropical Green Fruits' Exports Ltd. Surat/Ahmedabad Agreement for commission on investment from Party No. 1 to Party No. 2 as per below terms: (3.3) In discussion with Board of Directors of Grand Consolidated Finance (Guj) Ltd. Ahmedabao and its associate companies at India and other rest of India. (3.4) Party No. 1. And party No. 2 both are agreed for raising fund and develop company for its client's projects and own project. The Fund raised by S.M. Patel and his personal fund will be invested as per following terms: (4) The investment of party No.1 whatever amount deposited in party No. 2 & in other associate companies, i.e. in company by S.M.Patel (by S.M.Patel personal) The amount of deposit will be payable 10% of every year to borrowers companies i.e. party No.2. (8) The party No. 2.1 i.e. GCFGL is the company of investment and Finance consultant's company and also investment consultant and Projects Consultant from 1986 and various projects develops in Gujarat and Maharashtra &all over the world. (9) The executive Chairman of party No. 1 from party No. 2, the expertise knowledge of investment & Finance and advocate also in party No. 1 (10) Whatever amount from any sources by personal or its associate companies, the amount raised by party No. 1 with commission payable to party No. 2. It will be payable as per terms and condition. (8) (i) The commission on fix deposit in GCFGL 10% of investment for One year and maturity as per F.D. agreed terms 8(ii) The current investment of party No. 1 will be payable 10% per annum to borrowers company i.e. party No. 2 annually to party No. 1. 8 (iii) Other associate company investment by Finance company investment i.e. borrower company party No. 2 investment in GCFGL, same rate is applicable. Those companies i.e. Sundervan Bhoomi Vikas Ltd. and other associate companies. 9. Party No. 1 having right to recover the money on asset of party No. 2 as a priority creditor in GCFGL. ITA Nos.2279 & 2280/Ahd/2018 (Grand Consolidated Finance (Gujarat) Ltd.) A.Ys.– 2012-13 & 2015-16 - 5 - 13. This agreement is applicable to Ahmedabad Jurisdiction and this is internal agreement. The dispute arise with company will be solved by arbitration act and no party is going to the court. All the disputes will be settled by arbitration. 14. In the year of investment 31st March,2012 investment of Rs. 4,74,71,391/- and commission of 10% i.e. Rs. 52,74,599/- =Investment of Rs. 5,27,45,990/-by S.M.Patel in GCFGL and short term loan of Rs. 52,74,5997- as a commission payable to S.M.Patel from Somnath Foods & Chemicals Ltd., outstanding amount as per books of accounts. 15. This agreement continuation from 2010 to 2030 as per agreed terms of party No. 1 & party No 2 and if agreement breaks, any party liable for consequences of recovery act both the parties.” 7. The Ld. CIT(A) was, however, not satisfied in regard to modus of business and the justification of payment of commission expenses from the submission and documents filed by the assessee. In fact, the complete details of the respective parties to whom the commission was paid and the rate at which commission was paid and the details of service rendered by those parties for which commission was paid was not filed and therefore, the addition made by the Ld. AO was found to be justifiable by the Ld. CIT(A). 8. Upon considering the entire aspect of the matter, we find that the addition made by the Ld. AO and the confirmation of the said addition made by the Ld. CIT(A) is just and proper for the reason mentioned therein and also explained by us hereinbefore. The same is found to be without any ambiguity, particularly in the absence of any assistance rendered by the assessee before us. The same is hereby upheld. Thus, the appeal preferred by the assessee is found to be devoid of any merit and hence, dismissed. ITA No. 2280/Ahd/2018 A.Y. 2015-16 8. The assessee filed return of income for the year under consideration on 31.03.2017 declaring total income at Rs. Nil. Upon selection for scrutiny under CASS, notice under Section 143(2) of the Act dated 18.09.2017 ITA Nos.2279 & 2280/Ahd/2018 (Grand Consolidated Finance (Gujarat) Ltd.) A.Ys.– 2012-13 & 2015-16 - 6 - followed by notice under Section 142(1) of the Act along with questionnaire dated 24.10.2017 was duly served upon the assessee. It was gathered from the bank statement that the assessee made cash deposits of Rs.3Lakhs, Rs.4Lakhs & Rs.3Lakhs on 27.09.2014, 01.10.2014 & 11.10.2014 with Karnataka Bank Ltd. As the assessee failed to prove whether such deposit reflected in the books of account, the same was added as unaccounted cash receipts. Further that, it appears from the statutory audit report that the assessee has made investment of Rs.11Lakhs, Rs.49,85,000/- and Rs.3,75,000/- with Somnath Foods & Chemicals Ltd., Tropical Green Fruits Exports Ltd. and Santilal M. Patel UK Investment, respectively. The first two investments were made for shares and the last one was investment in the account of the said company. The evidence for source of such investment made by the assessee though asked for no cogent document was filed. It was further found that the investment has increased by Rs.64,60,000/- during the year under consideration whereupon show cause was issued to the assessee in reply whereof the following submissions were made: “With regards to asking us to furnish details of Non-Current Investment during the Financial Year are not increase. In view of non current investment are as per submitted as per conformation, and compare with last year Balance Sheet Because non current investment bought forward since 2010-11. So no possibility to additional in Non- current addition Rs. 64,60,000/- which should be added to the total income. Further explanation no question to addition required in Total Income with regards we are submit herewith copy of Balance Sheet from F.Y 2011-12 to 2012-13 for your kinds consideration Rs. 11,00,000/- and 49,85,000/- are brought forward from 2010-11 & Rs, 3,75,000/- are related to 2014-15 already submitted. Further we are submit balance sheet from 2010-11 to 2012-13 for your kinds consideration with ITR-IV. Non Current Investment We have already submitted conformation of account for your kinds consideration Account of Shri Shantilal M. Patel U.K Investment A/c Rs.3,75,000/- we hereby submit herewith balance sheet of last year for your kinds consideration. As per Annexure-1." ITA Nos.2279 & 2280/Ahd/2018 (Grand Consolidated Finance (Gujarat) Ltd.) A.Ys.– 2012-13 & 2015-16 - 7 - 9. The Ld. A.O., however, found the source of such investment of Rs.64,60,000/- failed to have been proved by the assessee and thus added the same to the total income of the assessee with the following observation: “5.4 The submission of the assessee is duly considered but not found to be acceptable. It is or.us on the assessee to submit the rectified balance sheet for F.Y.2Q13-14 to substantiate its claim. But, the assessee failed to submit rectified balance sheet for F.Y.2013-14. Hence, I have no option other than to rely on the balance sheet figure as on 31.03.2014 as reflected in balance sheet submitted for F.Y.2013-14 & F.Y.2014-15. The assessee also failed to submit monetary trail of earlier years closing balance of investments to substantiate its claim that it had invested in Somnath Foods & Chemicals Ltd. Shares and Tropical Green Fruits Exports Ltd. shares in earlier years. As regards to investments made in Santilal M Patel UK Investment A/c is concerned, there must be corresponding entries in Liabilites side of Balance Sheet as the assesssee submitted that payment made by Shantilal M. Patel director of the company. But, the assesseee company failed to submit whether source of investment details reflected in books of accounts. 5.5 Since the assessee failed to prove source for investments of Rs.64,60,000/-, I am left with no option but to treat the source for investments of Rs.64,60,000/- as unaccounted/unexplained and added to the total income of the assessee. Penalty proceedings u/s 271(1)(c) of the Income tax Act are separately initiated for concealing true particulars of income." 10. In appeal, though the assessee was directed to appear on the date of hearing fixed by the Ld. CIT(A) on four occasions, neither the assessee attended the hearing nor the adjournment has been sought for. Having no other alternative, the order passed by the Ld. AO has been confirmed by the First Appellate Authority. Even before us today, none appeared on behalf of the assessee, when the matter was called for hearing. On the other hand, the order passed by the Ld. AO, confirmed by the First Appellate Authority, the Ld. AO noted that the appellant failed to submit monetary trail of earlier years closing balance of investments to substantiate its claim that it had invested in three companies as mentioned hereinabove The status whereof remained unchanged before the First Appellate Authority. Needless to mention that ITA Nos.2279 & 2280/Ahd/2018 (Grand Consolidated Finance (Gujarat) Ltd.) A.Ys.– 2012-13 & 2015-16 - 8 - source of such investment made by the assessee was not demonstrated neither proved by the assessee. Hence, in the absence of any assistance rendered by the assessee, the order passed by the authorities below, is found to be just and proper so as to warrant interference. We, therefore, confirm the impugned order passed by the Ld. CIT(A). The assessee’s appeal, therefore, fails. 11. In the combined result, both appeals of assessee are dismissed. This Order pronounced on 09/06/2023 Sd/- Sd/- (ANNAPURNA GUPTA) (MADHUMITA ROY) ACCOUNTANT MEMBER JUDICIAL MEMBER Ahmedabad; Dated 09/06/2023 True Copy S. K. SINHA आदेश क त ल प अ े षत/Copy of the Order forwarded to : 1. अपीलाथ / The Appellant 2. यथ / The Respondent. 3. संबं%धत आयकर आय ु 'त / Concerned CIT 4. आयकर आय ु 'त(अपील) / The CIT(A)- 5. *वभागीय -त-न%ध, आयकर अपील य अ%धकरण, अहमदाबाद / DR, ITAT, Ahmedabad 6. गाड3 फाईल / Guard file. आदेशान ु सार/ BY ORDER, उप/सहायक पंजीकार (Dy./Asstt. Registrar) आयकर अपील$य अ%धकरण, अहमदाबाद / ITAT, Ahmedabad