Shri Vinodbhai Virjibhai Godhani, Surat V. The Income Tax Officer, Ward-3(2)(4), Surat

ITA 2431/AHD/2016

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 5922 (ITAT-AHMEDABAD)
• Duration Of Justice: 7 month(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 01-05-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 13-04-2017
• Assessment Year: 2012-2013
• Appeal Filed On: 26-09-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: K MADHUSUDHAN
• Assessee Lawyers: P M MEHTA
• Keywords: Unexplained cash credit; Salary income; Earning of tax free income; Additional evidence
• Section: 142(1); 133(6); 68

Judgement Text

, - IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD - BENCH A BEFORE SHRI RAJPAL YADAV, JUDICIAL MEMBER AND SHRI AMARJIT SINGH, ACCOUNTANT MEMBER ./ ITA NO.2431/AHD/2016 / ASSTT. YEAR: 2012-2013 SHRI VINODBHAI VIRJIBHAI GODHANI 65, KANTARESHWAR SOCIETY KATARGAM ROAD SURAT 395 004. PAN : ABAPG 3870 D VS. ITO, WARD-3(2)(4) AHMEDABAD. / (APPELLANT) / (RESPONDENT) ASSESSEE BY : SHRI P.M. MEHTA, AR REVENUE BY : SHRI K. MADHUSUDHAN, SR.DR ! / DATE OF HEARING : 13/04/2017 '#$ ! / DATE OF PRONOUNCEMENT: 01/05/2017 %& / O R D E R PER RAJPAL YADAV, JUDICIAL MEMBER: ASSESSEE IS IN APPEAL BEFORE THE TRIBUNAL AGAINST O RDER OF THE LD.CIT(A)-3, SURAT DATED 27.7.2016 PASSED FOR ASSTT .YEAR 2012-13. 2. GROUNDS OF APPEAL TAKEN BY THE ASSESSEE READ AS UNDER: 1. IN LAW AND IN THE FACTS AND CIRCUMSTANCES OF TH E CASE, THE ID. CIT (A) HAS GROSSLY ERRED IN NOT ADJUDICATING THE RELIE F CLAIMED BY THE APPELLANT VIDE GROUND NO 1 OF THE GROUNDS OF APPEAL ; BEING THAT IN THE ITA NO.2431/AHD/2016 2 FACTS AND CIRCUMSTANCES OF THE APPELLANTS CASE THE ORDER PASSED BY THE ID.AO IS BAD IN LAW AND DESERVED TO BE ANNULLED. 1.1 IN LAW AND IN FACTS AND CIRCUMSTANCES OF THE CA SE, THE ORDER PASSED BY THE ID.AO IN THIS CASE IS BAD IN LAW AND DESERVES TO BE ANNULLED. 2. IN LAW AND IN FACTS AND CIRCUMSTANCES OF THE CAS E, THE ID.AO GROSSLY ERRED IN NOT CONSIDERING THE ADDITIONAL EVI DENCES SUBMITTED BEFORE HIM UNDER RULE 46 A OF THE INCOME TAX RULES. 3. IN LAW AND IN THE FACTS AND CIRCUMSTANCES OF THE CASE, THE ID. CIT (A) HAS GROSSLY ERRED IN UPHOLDING THE IMPUGNED DIS ALLOWANCE OF INTEREST EXPENSE AMOUNTING TO RS. 45,68,876/- MADE BY THE ID .AO UNDER SECTION 14 A OF THE ACT. 4. IN LAW AND IN THE FACTS AND CIRCUMSTANCES OF THE CASE, THE ID. CIT (A) HAS GROSSLY ERRED IN SUSTAINING THE DISALLOWANC E OF RS. 2,45,00,000/- MADE BY THE ID.AO UNDER SECTION 68 OF THE ACT. 5. THE APPELLANT CRAVES LEAVE TO ADD, ALTER, AMEND, AND/OR WITHDRAW ANY GROUNDS OF APPEAL, EITHER AT THE COURSE OF HEAR ING OF APPEAL OR BEFORE SUCH HEARING. 3. THE LD.COUNSEL FOR THE ASSESSEE AT THE VERY OUTS ET CHALLENGED ACTION OF THE CIT(A) FOR NOT TAKING ANY COGNIZANCE OF THE APPLICATION MOVED BY THE ASSESSEE UNDER RULE 46A OF THE INCOME TAX RULES, 1962. IN OTHER WORDS, HE PRESSED GROUND NO.2 FIRST. 4. BEFORE ADVERTING TO THIS GROUND, WE WOULD LIKE T O MAKE REFERENCE TO THE FACTS IN BRIEF. THE ASSESSEE HAS FILED HIS RETURN OF INCOME ON 4.9.2012 DECLARING TOTAL INCOME AT RS.9,66,860/-. THE RETURN OF THE ASSESSEE WAS SELECTED FOR SCRUTINY ASSESSMENT AND N OTICE UNDER SECTION 143(2) OF THE ACT DATED 23.9.2013 WAS ISSUED AND SE RVED UPON THE ASSESSEE. THE AO THEREAFTER, ISSUED NOTICE UNDER S ECTION 142(1) ON 1.10.2014. ACCORDING TO THE AO, THERE WAS A CADRE RESTRUCTURING EXERCISE AND THIS CASE WAS ASSIGNED TO THE ITO, WAR D-3(2)(4), SURAT. ACCORDINGLY, HE ISSUED SHOW CAUSE NOTICE UNDER SECT ION 142(1) OF THE ACT ON 24.12.2014. A PERUSAL OF THE ASSESSMENT ORD ER WOULD INDICATE THAT ULTIMATELY SHOW CAUSE NOTICE WAS ISSUED ON 10. 3.2015 AND ITA NO.2431/AHD/2016 3 ASSESSMENT ORDER WAS PASSED ON 30.3.2015. THE AO H AS MADE BASICALLY TWO ADDITIONS TO THE INCOME OF THE ASSESS EE. THE ASSESSMENT ORDER IS IN HINDI. COMPUTATION MADE BY THE AO HAS BEEN REPRODUCED BY THE ASSESSEE IN THE STATEMENT OF FACTS FILED BEFORE US AND THAT COMPUTATION READS AS UNDER: PARTICULARS AMOUNT (RS.) INCOME AS PER RETURN OF INCOME 9,66,860 ADDITIONS: VIDE PARA-5 OF THE ASSESSMENT INTEREST EXPENSE 45,68,876/- HOUSE PROPERTY LOSS 1,50,000/- ADDITIONS: VIDE PARA-6 OF THE ASSESSMENT ORDER: UNEXPLAINED CASH CREDIT U/S.68 OF THE ACT 2,45,00,000/- ASSESSMENT INCOME (ROUNDED OFF U/S.288A) 3,01,85,740/- 5. A PERUSAL OF THE ASSESSMENT WOULD INDICATE THAT THE LD.AO HAS DISALLOWED INTEREST EXPENDITURE OF RS.45,68,876/- W HOSE DISALLOWANCE HAS BEEN CHALLENGED BY THE ASSESSEE IN GROUND NO.3 BEFORE US. IT IS PERTINENT TO MENTION THAT THE ASSESSEE HAS CLAIMED THIS INTEREST EXPENDITURE FOR THE REASON THAT HE HAS MADE INVESTM ENT IN THE SHARES OF GODHANI GEMS PVT. LTD. ACCORDING TO THE ASSESSE E HE HAS NOT MADE INVESTMENT FOR EARNING EXEMPT INCOME, RATHER, HE HA S MADE INVESTMENT FOR THE PURPOSE OF BUSINESS. THE LD.AO DID NOT CON SIDER SINGLE ASPECT WITH REGARD TO THIS ISSUE. REPLY OF THE ASSESSEE IN RESPONSE TO THE SHOW CAUSE NOTICE HAS BEEN RUNNING INTO SIX PAGES AND TH E AO HAS JUST RECORDED FINDING IN THREE LINES. HE OBSERVED THAT INTEREST EXPENDITURE CANNOT BE CLAIMED AGAINST SALARY INCOME WHICH IS BE ING DRAWN BY THE ASSESSEE AS DIRECTOR IN GODHANI GEMS PVT. LTD. IN OTHER WORDS, THE AO HAS NOT TOUCHED ANY OF THE EXPLANATION GIVEN BY THE ASSESSEE. ITA NO.2431/AHD/2016 4 SIMILARLY, PERUSAL OF ACCOUNTS IT REVEALED TO THE A O THAT THE ASSESSEE HAS TAKEN LOANS/DEPOSITS FROM THREE CONCERNS VIZ. G ITABEN TEJANI OF RS.20.00 LAKHS, BAHUBALI EXIM PVT. LTD. OF RS.1.00 CRORES AND MARINE GEMS PVT.LTD. OF RS.1.45 LAKHS. THE ASSESSEE HAS F ILED CONFIRMATION AND OTHER DETAILS. THE LD.AO WAS NOT SATISFIED WIT H THE EXPLANATION OF THE ASSESSEE PARTICULARLY WITH REGARD TO THE EVIDEN CE SUBMITTED BY BAHUBALI EXIM PVT.LTD. AND MARINE GEMS PVT.LTD. THE LD.AO HAS MADE AN ADDITION OF RS.2.45 CRORES. APART FROM THAT THE LD.AO HAS MADE ONE MORE ADDITION OF RS.1.50 LAKHS WHICH HAS BEEN DELET ED BY THE LD.CIT(A). 6. THE LD.COUNSEL FOR THE ASSESSEE WHILE IMPUGNING THE ORDER OF THE LD.CIT(A) CONTENDED THAT AS FAR AS ADDITION OF RS.2 .45 CRORES WITH THE AID OF SECTION 68 OF THE ACT IS CONCERNED, THE ASSE SSEE HAS SUBMITTED CONFIRMATION AND COPIES OF BANK ACCOUNTS OF THE CRE DITORS. THE AO HAS BASICALLY DID NOT ACCEPT THIS EVIDENCE FOR NOT FULF ILLING THE INGREDIENTS OF SECTION 68 ON THE GROUND THAT NOTICE ISSUED UNDER S ECTION 133(6) OF THE ACT TO THESE LENDERS RECEIVED BACK UNSERVED. THE L D.AO FURTHER OBSERVED THAT THE ASSESSEE FAILED TO SUBMIT COPY OF THE INCOME TAX RETURN AND OTHER EVIDENCES. THE LD.COUNSEL POINTE D OUT THAT THE AO HAS STARTED INQUIRY IN THE MONTH OF MARCH, 2015. S HOW CAUSE NOTICE IS DATED 10.3.2015 AND HE PASSED ASSESSMENT ORDER ON 3 0.3.2015. THE AO HAS NEVER INTIMATED THE ASSESSEE THAT SUMMONS HA VE NOT BEEN SERVED TO THE CREDITORS. HE HAS ALSO NOT DIRECTED THE ASSESSEE TO PRODUCE THEIR INCOME TAX RETURNS. IN THIS SITUATIO N, THE ASSESSEE HAS FILED AN APPLICATION UNDER RULE 46A OF THE INCOME T AX RULES BEFORE THE LD.CIT(A) FOR PERMISSION TO ADDUCE ADDITIONAL EVIDE NCE. BY WAY OF THIS APPLICATION, THE ASSESSEE SOUGHT TO PRODUCE COPY OF CONFIRMATION FROM WHOM THE ASSESSEE HAS TAKEN UNSECURED LOANS ALONG W ITH ACKNOWLEDGE RECEIPTS AND RETURN OF INCOME AND BANK STATEMENTS. THIS APPLICATION IS AVAILABLE ON PAGE NO.34 OF THE PAPER BOOK. THE LD. CIT(A) FAILED TO TAKE COGNIZANCE OF THIS APPLICATION. IT HAS NEITHER BEE N REJECTED NOR ALLOWED. THUS, THE ORDER OF LD.CIT(A) IS NOT SUSTAINABLE. HE PRAYED THAT THE ISSUE ITA NO.2431/AHD/2016 5 BE SET ASIDE TO THE FILE OF THE CIT(A) FOR RE-ADJUD ICATION AFTER ENTERTAINING ADDITIONAL EVIDENCE. THE LD.DR, ON TH E OTHER HAND, RELIED UPON THE ORDERS OF THE REVENUE AUTHORITIES. BUT HE COULD NOT CONTROVERT THE CONTENTIONS RAISED BY THE LD.COUNSEL FOR THE AS SESSEE WITH RESPECT TO NON-ADJUDICATION OF THE APPLICATION MOVED UNDER RUL E 46 OF THE INCOME TAX RULES, 1962. 7. IN GROUND NO.2 THE ASSESSEE HAS CHALLENGED THE A CTION OF THE LD.CIT(A) VIDE WHICH THE LD.CIT(A) FAILED TO TAKE C OGNIZANCE OF THE APPLICATION OF THE ASSESSEE MOVED UNDER RULE 46A. 8. WE FIND THAT THIS APPLICATION WAS FILED BEFORE T HE LD.CIT(A) FOR PERMISSION TO LEAD ADDITIONAL EVIDENCE. BEFORE DEC IDING THE APPEAL OF THE ASSESSEE, THE LD.CIT(A) OUGHT TO HAVE DECIDED T HIS APPLICATION. A PERUSAL OF RULE 46A WOULD INDICATE THAT IF AN ASSES SEE FULFILLS THE CONDITIONS ENUMERATED IN SUB-CLAUSE (A) TO (D) OF R ULE 46A(1) THEN THE LD.CIT(A) WOULD PERMIT AN ASSESSEE TO PRODUCE ADDIT IONAL EVIDENCE. THAT ADDITIONAL EVIDENCE WOULD BE CONFRONTED TO THE AO FOR REBUTTAL, AND THEREAFTER ISSUE WOULD BE DECIDED ON MERIT. CO NDITIONS ENUMERATED IN CLAUSE (A) TO (D) UNDER RULE 46A READS AS UNDER: 46A. (1) THE APPELLANT SHALL NOT BE ENTITLED TO PR ODUCE BEFORE THE [DEPUTY COMMISSIONER (APPEALS)] [OR, AS THE CASE MAY BE, THE COMMISSIONER (APPEALS)], ANY EVIDE NCE, WHETHER ORAL OR DOCUMENTARY, OTHER THAN THE EVIDENC E PRODUCED BY HIM DURING THE COURSE OF PROCEEDINGS BE FORE THE [ASSESSING OFFICER], EXCEPT IN THE FOLLOWING CIRCUMSTANCES, NAMELY : (A) WHERE THE [ASSESSING OFFICER] HAS REFUSED TO ADMIT 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 RELEVANT TO ANY GROUND OF ITA NO.2431/AHD/2016 6 APPEAL ; OR (D) WHERE THE [ASSESSING OFF ICER] HAS MADE THE ORDER APPEALED AGAINST WITHOUT GIVING SUFFICIENT OPPORTUN ITY TO THE APPELLANT TO ADDUCE 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 C ASE MAY BE, THE COMMISSIONER (APPEALS)] RECORDS IN WRIT ING THE REASONS FOR ITS ADMISSION. (3) THE [DEPUTY COMMISSIONER (APPEALS)] [OR, AS T HE CASE MAY BE, THE COMMISSIONER (APPEALS)] SHALL NOT TAKE INTO ACCOUNT ANY EVIDENCE PRODUCED UNDER SUB-RULE (1) UN LESS THE [ASSESSING OFFICER] HAS BEEN ALLOWED A REASONA BLE 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 WITNESS 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 M AY BE, THE COMMISSIONER (APPEALS)] TO DIRECT THE PRODUCTION OF ANY DOCUMENT, OR THE EXAMINATION OF ANY WITNESS, TO ENA BLE HIM TO DISPOSE OF THE APPEAL, OR FOR ANY OTHER SUBSTANTIAL CAUSE INCLUDING THE ENHANCEMENT OF THE ASSESSMENT OR PENALTY (WHETH ER ON HIS OWN MOTION OR ON THE REQUEST OF THE [ASSESSING OFFI CER]) UNDER CLAUSE (A) OF SUB-SECTION (1) OF SECTION 251 OR THE IMPOSITION OF PENALTY UNDER SECTION 271.] 9. A PERUSAL OF THE ASSESSMENT ORDER WOULD INDICAT E THAT THE AO HAS NEVER ASKED ASSESSEE TO PRODUCE COPIES OF ACKNOWLED GE EXHIBITING RETURN FILED BY THE LENDERS. HE HAS ISSUED ONE SHO W CAUSE NOTICE TO THE ASSESSEE AND THEREAFTER ISSUED SUMMONS UNDER SECTIO N 133(6). HE DID NOT CONFRONT THE ASSESSEE WHETHER SUMMONS HAVE BEEN SERVED UPON LENDER OR ANY OTHER EVIDENCE WOULD BE REQUIRED. TH E REASON FOR THIS FAILURE WAS PAUCITY OF TIME WITH THE AO. HE CONCLU DED THE ASSESSMENT PROCEEDINGS WITHIN 20 DAYS AFTER SERIOUSLY TAKING C OGNIZANCE OF THE ISSUES CONSIDERED IN THE ASSESSMENT ORDER. TO OUR MIND CONDITIONS ITA NO.2431/AHD/2016 7 ENUMERATED AT SUB-CLAUSE (A) TO (D) OF RULE 46A ARE AVAILABLE IN THE PRESENT CASE. APART FROM THAT AN IRREGULARITY HAS CREPT IN THE PROCEEDINGS BEFORE THE LD.CIT(A) VIDE WHICH THE LD. CIT(A) FAILED TO TAKE COGNIZANCE OF THE APPLICATION MOVED FOR PERMISSION TO LEAD ADDITIONAL EVIDENCE. CONSIDERING THIS ASPECT, WE ARE OF THE V IEW THAT THIS IRREGULARITY IS REQUIRED TO BE REMOVED AND PROCEEDI NG IS TO BE INSTITUTED AT THE STAGE WHERE THIS IRREGULARITY HAS HAPPENED. THEREFORE, WE SET ASIDE THE ORDER OF THE LD.CIT(A AND DIRECT THE LD.C IT(A) TO ADMIT ADDITIONAL EVIDENCE SOUGHT TO BE PRODUCED BY THE AS SESSEE ON RECORD AND CONFRONT THE AO WITH THAT EVIDENCE, AND THEREAF TER CONSIDER THE EVIDENCE ON RECORD FOR DECIDING THE APPEAL OF THE A SSESSEE AFRESH. 10. AS FAR AS ADDITION WITH REGARD TO DISALLOWANCE OF INTEREST EXPENDITURE IS CONCERNED, WE FIND THAT THERE IS NO ANALYTICAL DISCUSSION MADE BY THE AO IN THE ASSESSMENT ORDER. SIMILARLY, THE FINDING OF THE LD.CIT(A) ARE NOT EXHAUSTIVE. THEREFORE, WE SET AS IDE ALL THE ISSUES TAKEN IN THE GROUNDS OF APPEAL TO THE FILE OF THE L D.CIT(A) FOR RE- ADJUDICATION. 11. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS AL LOWED FOR STATISTICAL PURPOSE. ORDER PRONOUNCED IN THE COURT ON 1 ST MAY, 2017 AT AHMEDABAD. SD/- SD/- (AMARJIT SINGH) ACCOUNTANT MEMBER (RAJPAL YADAV) JUDICIAL MEMBER AHMEDABAD; DATED 01/05/2017