DCIT 9(2), MUMBAI V. HAKOBA LIFESTYLE LTD, MUMBAI

ITA 2489/MUM/2013

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 84338 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 7 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-11-2014
• Appeal Filed By: Department
• Bench Allotted: H
• Next Hearing Date: 28-08-2014
• Assessment Year: 2008-2009
• Appeal Filed On: 02-04-2013
• Court: TRIBUNAL
• Department Lawyers: N PADMANABAN
• Keywords: Principle of natural justice
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL H BENCH, MUMBAI BEFORE SHRI VIJAY PAL RAO, JUDICIAL MEMBER AND SHRI D. KARUNAKARA RAO, ACCOUNTANT MEMBER ./I.T.A. NO. 2489/M/2013 (2008 - 2009) DCIT 9(2), R.NO.218, 2 ND FLOOR, AAYAKAR BHAVAN, M.K.ROAD, MUMBAI 400 020. / VS. HAKOBA LIFESTYLE LTD, WESTERN EXPRESS HIGHWAY, BORIVALI, MUMBAI 400 066. ./ PAN: AAACM5851C ( / APPELLANT) .. ( / RESPONDENT ) / APPELLANT BY : SHRI N. PADMANABAN, DR / RESPONDENT BY : SHRI RAKESH JOSHI / DATE OF HEARING : 20 .10.2014 / DATE OF PRONOUNCEMENT : 26 .11.2014 / O R D E R PER D. KARUNAKARA RAO, AM: THIS APPEAL FILED BY THE REVENUE ON 2.4.2013 IS AGAINST THE ORDER OF THE CIT (A) - 20, MUMBAI DATED 23.1.2013 FOR THE ASSESSMENT YEAR 2008 - 2009. 2. IN THIS APPEAL, REVENUE RAISED THE FOLLOWING GROUND WHICH READS AS UNDER: WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE OF THE CASE AND IN LAW, THE LD CIT (A) IS CORRECT IN ALLOWING THE ASSESSEES CLAIM FOR GROSS LOSS OF RS. 3,15,87,824/ - WITHOUT APPRECIATING THAT THE ASSESSEE HAS NOT ESTABLISHED ITS CLAIM OF LOSS EVEN THOUGH THE ONUS OF THE SAME LIES FIRST ON THE ASSESSEE. 3. BRIEFLY STATED RELEVANT FACTS OF THE CASE ARE THAT THE ASSESSEE IS ENGAGED IN THE BUSINESS OF MANUFACTURING / RETAILING IN TEXTILES AND GARMENTS. ASSESSEE FILED THE RETURN OF INCOME DECLARING THE LOSS OF RS. 27,89,12, 932/ - . ASSESSMENT WAS COMPLETED U/S 143(3) OF THE ACT AND THE ASSESSED INCOME WAS DETERMINED AT LOSS OF RS. 24,66,87,392/ - . IN THE ASSESSMENT, ASSESSING OFFICER MADE CERTAIN DISALLOWANCES AND RS. 3,15,87,824/ - IS ONE OF SUCH DISALLOWANCES. DURING THE AS SESSMENT PROCEEDINGS, ASSESSING OFFICER NOTICED FROM THE P&L ACCOUNT OF THE 2 ASSESSEE THAT THE ASSESSEE MADE SALES OF RS. 66,61,92,427/ - AND PURCHASES OF RS. 69,77,80,251/ - . IN THIS REGARD, ASSESSEE WAS ASKED TO SUBSTANTIATE THE LOSS CLAIMED BY THE ASSESSE E WITH DOCUMENTARY EVIDENCES. NOT SATISFIED WITH THE ASSESSEES EXPLANATION, ASSESSING OFFICER DISALLOWED AN AMOUNT OF RS. 3,15,87,824/ - . AGGRIEVED, ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE THE FIRST APPELLATE AUTHORITY. 4. DURING THE PROCEEDINGS BEF ORE THE FIRST APPELLATE AUTHORITY, AFTER CONSIDERING THE SUBMISSIONS MADE BY THE ASSESSEE, CIT (A) DIRECTED THE ASSESSING OFFICER TO DELETE THE DISALLOWANCE OF LOSS. PARA 6.3 OF THE IMPUGNED ORDER IS RELEVANT IN THIS REGARD. AGGRIEVED WITH THE ABOVE DECI SION OF THE CIT (A), REVENUE IS IN APPEAL BEFORE THE TRIBUNAL BY RAISING THE ABOVE MENTIONED GROUND. 5. DURING THE PROCEEDINGS BEFORE US, LD DR RELIED ON THE ORDER OF THE ASSESSING OFFICER. 6. ON THE OTHER HAND, LD COUNSEL FOR THE ASSESSEE HEAVILY RELIED ON THE ORDER OF THE CIT (A) AND REITERATED THE SUBMISSIONS MADE BEFORE THE LOWER AUTHORITIES. 7. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE ORDERS OF THE REVENUE AUTHORITIES AS WELL AS THE RELEVANT MATERIAL PLACED BEFORE US. ON PERUSAL OF THE CIT (A) S ORDER IN GENERAL AND PARA 6.3 IN PARTICULAR, WE FIND THE SAME IS RELEVANT IN THIS REGARD. CONSIDERING THE IMPORTANCE OF THE SAID PARA 6.3 AND FOR THE SAKE OF COMPLETENESS OF THIS ORDER, THE SAME IS EXTRACTED WHICH READ AS UNDER: 6.3. I HAVE CIRCUMSPECT ED THE ENTIRE FACTS AND CIRCUMSTANCES OF THE CASE CAREFULLY AND I HAVE ALSO CONSIDERED THE FINDINGS OF THE ASSESSING OFFICER VIS - - VIS RIVAL SUBMISSION OF THE APPELLANT. I FIND THAT LD ASSESSING OFFICER HAS MADE ADDITION WITHOUT POINTING OUT ANY SPECIFIC DEFECTS OF THE BOOKS OF ACCOUNTS, BILLS AND VOUCHERS. HE HAS MADE DISALLOWANCE OF THE CLAIM OF THE APPELLANT IN A VERY VAGUE AND GENERAL MANNER. HE HAS NOT REFERRED TO ANY EVIDENCE WHICH COULD REVEAL THE INGENUINENESS OF THE CLAIM OF THE APPELLANT. DURI NG THE ASSESSMENT PROCEEDINGS, AS EVIDENT FROM THE RECORD, APPELLANT HAS SUBMITTED DETAILS OF SALES PURCHASES, DETAILS OF EXPENSES, CREDITORS AND DEBTORS AND SAME HAS BEEN ACCEPTED BY THE ASSESSING OFFICER AS IT IS, THEREFORE, NO SUCH BASELESS INTERFEREN CE CAN BE DRAWN WITHOUT POINTING OUT ANY SPECIFIC EVIDENCE IN SUPPORT OF FINDING. IT IS EVIDENT FROM THE RECORD THAT DURING THE ASSESSMENT PROCEEDINGS ITSELF APPELLANT HAD GIVEN REASON FOR INCURRING LOSSES WHICH HAS NOT BEEN PROPERLY APPRECIATED BY THE AS SESSING OFFICER. THEREFORE, I FIND SUBSTANCE IN THE ARGUMENTS THAT APPELLANT COMPANY IS ENGAGED IN RETA IL BUSINESS OF FASHION ORIENTED ITEMS WERE THE VALUE OF STOCK ARE DECREASED OVER A PERIOD OF TIME AND SUCH STOCK WERE SOLD OUT BELOW THE PURCHASE PRICE BECAUSE OF COMPULSION OF CIRCUMSTANCES. THEREFORE, UNLESS CONTRARY EVIDENCE OR MATERIAL IS THERE ON RECORD NO SUCH ADDITIONS CAN BE MADE. THE RELIANCE PLACED BY THE LD AR IN THE CASE OF DCIT VS. NIKKO AUTO (P) LTD 145 TAXMAN 42 (DELHI TRIBUNAL) SUPPORT TH E CONTENTION. IN 3 THAT CASE, IT WAS HELD IF PROFIT SHOWN BY THE ASSESSEE IN HIS RETURN ARE NOT ACCEPTED, IT IS FOR TAXING AUTHORITY TO PROVE THAT ASSESSEE MADE MORE PROFITS AND ITO COULD NOT PROCED TO MAKE AN ARBITRARY ADDITION. IN THE CASE OF ASSESSMEN T AFTER EXAMINATION OF THE EVIDENCE PRODUCED, THE ASSESSMENT ORDER MUST CONTAIN AJ CLEAR INDICATION OF THE MATERIALS ON WHICH THE INCOME IS COMPUTED AND OR ESTIMATED. NO ASSESSMENT CAN BE MADE ON THE BASIS OF GUESS WORK, CONJECTURE, RAGHUBAR MANDAL HARIHA R MANDAL VS. STATE BIHAR (1957) 8 STC 770 (SUPREME COURT), BALKRISHNA VS. STO, (1961) (12 STC 271 (KER). AN ORDER OF THE ASSESSMENT NOT DISCLOSING THE BASIS OR THE MATERIALS ON WHICH IT WAS MADE VIOLAGTES THE PRINCIPLES OF NATURAL JUSTICE AND IS LIABLE TO BE QUASHED ON THAT GROUND ALONE (ESSARDA & COMPANY VS. STATE OF WEST BENGAL, CIVIL REVENUE CASE NO.271 WAS OF 1961 DECIDED BY THE CALCUTTA HIGH COURT; DILIP KUMAR MUKHERJEE VS. CTO, CIVIL RULE NO.344 (W) OF 1961 DECIDED BY THE CALCUTTA HIGH COURT; VUDDAG IRI KANAKARAJU & SONS VS. THE ANDHRA STATE (1956) 7 STC 442 (AP); MUDAPALLI ANJANEYHULU & COMPANY VS. THE STATE (1956) 7 STC 151 (AP). THUS, I DO NOT SEE ANY GENUINE REASON WHATSOEVER TO APPROVE SUCH BASELESS DISALLOWANCE MADE ON CONJECTURE. THEREFORE, I N VIEW OF THE ABOVE DISCUSSION AND JUDICIAL PROPOSITION, I AM OF THE CONSIDERED OPINION THAT ASSESSING OFFICER HAS WRONGLY DISALLOWED LOSS OF RS. 3,15,87,824/ - . ASSESSING OFFICER IS THEREFORE DIRECTED TO DELETE THE DISALLOWANCE OF LOSS. 8. FROM THE ABOVE , THE WHILE ALLOWING THE ASSESSEES APPEAL, THE CIT (A) OPINED THAT WHEN THE ASSESSEE - COMPANY IS ENGAGED IN THE RETAIL BUSINESS OF FASHION ORIENTED ITEMS, THE VALUE OF THE STOCK WILL BE DECREASED OVER A PERIOD OF TIME AND THEREFORE, SUCH STOCK WERE SOLD OU T BELOW THE PURCHASE PRICE BECAUSE OF COMPULSION OF THE CIRCUMSTANCES. THIS VIEW TAKEN BY THE CIT (A) IS BASING ON THE SUBMISSIONS OF THE ASSESSEE IS FAIR AND REASONABLE AS PER THE FACTUAL MATRIX OF THE PRESENT CASE. WE DO NOT APPRECIATE THE BASELESS INF ERENCES OF THE ASSESSING OFFICER WITHOUT POINTING OUT THE SPECIFIC EVIDENCE IN SUPPORT OF HIS FINDING. THEREFORE, IN OUR CONSIDERED OPINION, THE DECISION TAKEN BY THE CIT (A) IS FAIR AND REASONABLE AND IT DOES NOT CALL FOR ANY INTERFERENCE. ACCORDINGLY, GROUNDS RAISED BY THE REVENUE ARE DISMISSED. 9. IN THE RESULT, APPEAL OF THE REVENUE IS DISMISSED. ORDER PRONOU NCED IN THE OPEN COURT ON 2 6 T H NOVEMBER, 2014. S D / - S D / - ( VIJAY PAL RAO ) (D. KARUNAKARA RAO ) / JUDICIAL MEMBER / ACCOUNTANT MEMBER MUMBAI ; 2 6 /11/2014 . . ./ OKK , SR. PS / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 4 2. / THE RESPONDENT. 3. ( ) / THE CIT(A) - 4. / CIT 5. , , / DR, ITAT, MUMBAI 6. / GUARD FILE . //TRUE COPY// / BY ORDER, / (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI