Bluecross Marketing Pvt Ltd , Bangalore V. Deputy Commissioner of Income Tax Circle-11(2), Bangalore

ITA 2517/BANG/2018

• Counselvise Citation: [2018] 118 COUNSELVISE.COM (IT) 9922 (ITAT-BANGALORE)
• Duration Of Justice: 3 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 07-12-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Assessment Year: 2007-2008
• Appeal Filed On: 03-09-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: K R NARAYANA
• Assessee Lawyers: CHATTARAJ B
• Keywords: Source of fund; Additional evidence; Reasonable cause; Condonation of delay
• Section: 68; 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL SMC - C BENCH : BANGALORE BEFORE SHRI JASON P BOAZ , ACCOUNTANT MEMBER ITA NO. 2517 /BANG/201 8 ASSESSMENT YEAR : 20 07 - 08 M/S. BLUE CROSS MARKETING PVT. LTD., # 12, 1 ST FLOOR, D. R. LANE, S. J. P ROAD CROSS, BANGALORE 560 001. PAN : AABCB 6606 M VS. DEPUTY COMMISSIONER OF INCOME-TAX, CIRCLE II(2), BANGALORE. APPELLANT RESPONDENT ASSESSEE BY : SHRI. CHATTARAJ B, ADVOCATE REVENUE BY : SHRI. K. R. NARAYANA, JCIT DATE OF HEARING : 07 . 1 1 .201 8 DATE OF PRONOUNCEMENT : 07 . 1 2 .201 8 O R D E R PER JASON P BOAZ, ACCOUNTANT MEMBER THIS APPEAL BY ASSESSEE IS DIRECTED AGAINST THE ORDER OF CIT(A)-3, BANGALORE DATED 19.02.2018 FOR ASSESSMENT YEAR 2007-08. ORDER ON CONDONATION OF DELAY IN FILING APPEAL BEFORE THE TRIBUNAL 2.1 THE IMPUGNED ORDER OF THE CIT (APPEALS) DT.19.2.2018 WAS ADMITTEDLY RECEIVED BY THE ASSESSEE ON 25.2.2018 AND THEREFORE, AS PER LAW; THE PRESENT APPEAL OUGHT TO HAVE BEEN FILED BEFORE THE TRIBUNAL WITHIN 60 DAYS OF RECEIPT OF THE ORDER I.E. ON OR BEFORE 26.4.2018. THIS APPEAL, HOWEVER, WAS FILED ON 3.9.2018, THEREBY LEADING TO A DELAY OF 134 DAYS. ALONG WITH THE APPEAL, THE ASSESSEE HAS FILED AN AFFIDAVIT ITA NO. 2517/BANG/2018 PAGE 2 OF 8 DT.31.8.2018 SWORN TO BY THE MANAGING DIRECTOR OF THE ASSESSEE COMPANY SEEKING CONDONATION OF THE AFORESAID DELAY OF 134 DAYS. THE SUBMISSIONS IN THE ASSESSEE'S AFFIDAVIT ARE AS UNDER : 'ACCORDING TO THE LD. AR, THE MANAGING DIRECTOR SHRI. MOHD. HASNAIN AJANI, AGED 80 YEARS OLD HAD BEEN SERIOUSLY SUFFERING FROM GENETIC DISEASES FOR QUITE SOME TIME AND COULD NOT ATTEND TO THE AFFAIRS OF THE ASSESSEE COMPANY. COPY OF MEDICAL CERTIFICATE IN THIS REGARD ALONG WITH AFFIDAVIT IS ENCLOSED. IT IS PRAYED THAT IN VIEW OF THIS, THE DELAY IN FILING APPEAL WAS NOT DELIBERATE AND WAS DUE TO SUFFICIENT AND REASONABLE CAUSE AND THEREFORE MAY BE CONDONED.' 2.2 I HAVE HEARD THE RIVAL CONTENTIONS, PERUSED AND CAREFULLY CONSIDERED THE MATERIAL ON RECORD IN RESPECT OF THE CONDONATION OF DELAY OF 134 DAYS IN FILING THE APPEAL FOR ASSESSMENT YEAR 2007-08 BEFORE THE TRIBUNAL. TAKING INTO ACCOUNT THE SUBMISSIONS PUT FORTH BY THE ASSESSEE IN THE AFFIDAVIT FOR CONDONATION OF DELAY, THE ACCOMPANYING MEDICAL CERTIFICATE ENCLOSED AND RESPECTFULLY FOLLOWING THE PRINCIPLES LAID DOWN BY THE HON'BLE APEX COURT IN THE CASE OF MST KATIJI & OTHERS (1987) 167 ITR 471 (SC), FOR DEALING WITH MATTERS OF CONDONATION OF DELAY, I.E. THAT SUBSTANTIAL JUSTICE SHOULD PREVAIL OVER TECHNICAL CONSIDERATIONS, I AM OF THE VIEW THAT THE ASSESSEE'S DEFAULT IN FILING THIS APPEAL BELATEDLY WAS NEITHER DELIBERATE NOR INTENTIONAL BUT WAS ON ACCOUNT OF SUFFICIENT AND REASONABLE CAUSE. IN THIS VIEW OF THE MATTER AND IN THE INTEREST OF SUBSTANTIAL JUSTICE, I AM OF THE OPINION THAT THIS IS A FIT CASE FOR CONDONATION OF DELAY AND ACCORDINGLY CONDONE THE DELAY OF 134 DAYS IN FILING THE APPEAL FOR A.Y. 2007-08 BEFORE THE TRIBUNAL. CONSEQUENTLY, THE APPEAL FOR ASSESSMENT YEAR 2007-08 IS ADMITTED FOR HEARING AND ADJUDICATION. ORDER 3. THE FACTS OF THE CASE AS BORNE OUT FROM THE RECORDS ARE AS UNDER: ITA NO. 2517/BANG/2018 PAGE 3 OF 8 3.1 THE ASSESSEE COMPANY IS ENGAGED IN BUSINESS AS DISTRIBUTOR TO VARIOUS COMPANIES FOR SUPPLY OF MANUFACTURING PRODUCTS FOR BUILDERS/INTERIORS IN THE CONSTRUCTION INDUSTRY. THE MANAGING DIRECTOR IS SHRI. MOHD. HASNAIN AJANI. FOR ASSESSMENT YEAR 2007-08, THE ASSESSEE FILED ITS RETURN OF INCOME ON 21.11.2007 DECLARING INCOME OF RS.20,95,197/-. THE RETURN WAS PROCESSED U/S 143(1) OF THE INCOME TAX ACT, 1961 (IN SHORT THE ACT) AND THE CASE WAS SUBSEQUENTLY TAKEN UP FOR SCRUTINY. THE ASSESSMENT WAS CONCLUDED U/S 143(3) OF THE ACT VIDE ORDER DATED 11.12.2009, WHEREIN THE ASSESSEES INCOME WAS DETERMINED AT RS.36,63,415/- IN VIEW OF AN ADDITION OF RS.15,86,218/- TO THE RETURNED INCOME, IN VIEW OF UNSECURED LOANS AMOUNTING TO RS.15,68,218/-, BEING TREATED AS UNEXPLAINED BY THE ASSESSING OFFICER (AO). 3.2 AGGRIEVED BY THE ORDER OF ASSESSMENT DATED 11.12.2009 FOR ASSESSMENT YEAR 2007-08, THE ASSESSEE PREFERRED AN APPEAL BEFORE THE CIT(A)-3, BANGALORE. THE CIT(A) DISPOSED THE APPEAL VIDE ORDER DATED 19.02.2018, ALLOWING THE ASSESSEE PARTIAL RELIEF OF RS.3,00,000/- FROM OUT OF THE ADDITION OF RS.15,68,218/- MADE BY THE AO ON ACCOUNT OF UNEXPLAINED UNSECURED LOANS U/S 68 OF THE ACT. 4.1 THE ASSESSEE, BEING AGGRIEVED BY THE ORDER OF THE CIT(A)-3, BANGALORE DATED 19.02.2018 FOR ASSESSMENT YEAR 2007-08 HAS PREFERRED THIS APPEAL, WHEREIN IT HAS RAISED THE FOLLOWING GROUNDS: 1. THE ORDER OF LD. COMMISSIONER OF INCOME TAX APPEAL IS OPPOSED TO LAW IN SO FAR AS, IT IS PREJUDICIAL TO THE INTEREST OF THE APPELLANT COMPANY. 2. THE LD. CIT (APPEAL ) ERRED BOTH IN FACTS AND LAW TO CONFIRM THE ADDITION OF RS. 12,68,218/-OUT OF TOTAL ADDITION OF RS. 15,68,218/- MADE BY THE LEARNED AO. 3. THE LEARNED CIT APPEAL ERRED IN FACT IN FAILING TO APPRECIATE THAT ALL THE LOANS WERE TAKEN FROM THE DIRECTORS AND THE MEMBERS OF HIS FAMILY ITA NO. 2517/BANG/2018 PAGE 4 OF 8 NAMELY, WIFE SON & DAUGHTERS WHO WERE ALL TRACEABLE AND HAD SUFFICIENT SOURCES TO ADVANCE THE LOANS. 4. THE LEARNED CIT (APPEALS) ERRED IN TAILING TO APPRECIATE THAT THE CASH WAS WITHDRAWN FROM THE BANK ACCOUNT MAINTAINED BY THE CREDITORS AND ADVANCED TO THE APPELLANT COMPANY TO MEET THE EXTREME EMERGENCIES ARISING OUT OF RECOVERY PROCESS INITIATED BY KARNATAKA STATE FINANCE CORPORATION. 5. THE APPELLANT CRAVES TO LEAVE TO MODIFY / ADD / ALTER ANY OTHER GROUNDS OF APPEAL DURING THE COURSE OF HEARING. 4.2.1 THE LEARNED AR WAS HEARD IN SUPPORT OF THE GROUNDS OF APPEAL RAISED (SUPRA), WHEREIN THE ASSESSEE HAS ASSAILED THE ORDERS OF THE AUTHORITIES BELOW IN FAILING TO APPRECIATE THAT ALL THE LOANS AMOUNTING TO RS.20,14,778/- WERE TAKEN FROM THE DIRECTOR MR. MOHD. HASNAIN AJANI AND HIS FAMILY MEMBERS NAMELY, WIFE, SON AND DAUGHTER WHO WERE EXISTENT AND IDENTIFIABLE AND HAD SUFFICIENT SOURCES OF INCOME; AS THE SAID CASH INTRODUCED AS LOANS WERE WITHDRAWN BY THEM FROM THEIR BANK ACCOUNTS AND ADVANCED TO THE ASSESSEE COMPANY TO MEET EXTREME EMERGENCIES ARISED OUT OF RECOVERY PROCESS INITIATED BY KARNATAKA STATE FINANCE CORPORATION (KSFC). IT IS SUBMITTED THAT THIS NEGATED THE AOS OBSERVATION THAT THE DIRECTOR AND HIS FAMILY HAD NO SOURCES OF INCOME TO ADVANCE THE LOANS. 4.2.2 IN WRITTEN SUBMISSIONS FILED, THE LEARNED AR OF THE ASSESSEE PUT FORTH THE FOLLOWING CONTENTION AND SUBMISSIONS: MOHAMMED HASNAIN AJANI STARTED A PROPRIETARY CONCERN UNDER THE STYLE M/S BLUECROSS AGENCIES. THE MAIN FUNCTION OF THE AGENCY WAS TO ARRANGE FOR COMPUTER PROGRAMME EDUCATION AS A FRANCHISE OF ZAP INFOTECH BUT ONLY AFTER 02 YEARS OF BUSINESS THERE WAS LOT OF COMPLAINTS AGAINST THE PRINCIPAL ZAP INFOTECH AND THE BUSINESS HAD TO BE WOUND UP AFTER SUFFERING A HUGE LOSS. MOHAMMED HASNAIN AJANI, THE MANAGING DIRECTOR OF THE PRESENT ASSESSEE COMPANY STARTED THE BUSINESS OF DISTRIBUTOR OF HARDWARE OF BUILDING CONSTRUCTIONS WITH HIS WIFE AND OTHER 02 PERSONS AS CO-DIRECTORS. WHILE RUNNING THE EARLIER AGENCY BUSINESS MOHAMMED AJANI HAD ACCEPTED LOAN FROM KARNATAKA STATE FINANCIAL CORPORATION A SUM OF RUPEES 35,00,000.00. AFTER SUFFERING HUGE LOSS HE FAILED TO PAY OFF THE INSTALMENTS OF LOAN AND INTEREST TO . KSFC. IN THE MEAN TIME THE OTHER 02 ITA NO. 2517/BANG/2018 PAGE 5 OF 8 DIRECTORS ALSO LEFT THE BUSINESS. M/S KSFC INITIATED COERCIVE MEASURES TO RECOVER THE LOANS AND EVEN THREATENED TO AUCTION THEIR RESIDENTIAL HOUSE WHICH WAS PLEDGED AS COLLATERAL SECURITY. UNDER THESE CIRCUMSTANCES THE MANAGING DIRECTOR HAD TO COLLECT MONEY FROM WHATEVER SOURCE AVAILABLE AND BORROWED FROM THE ACCOUNT OF HIS WIFE AND MINOR CHILDREN A SUM OF RUPEES 6,89,244.00 APART FROM CONTRIBUTING FROM SELF A SUM OF RUPEES 13,25,534.00 IN THE FACE OF PREDICAMENT DESCRIBED ABOUT MOHAMMED HASNAN AJANI FAILED TO APPOINT A COMPETENT PROFESSIONAL TO EXPLAIN THE MATTER BEFORE THE AUTHORITIES BELOW. AS A RESULT A SUM OF RUPEES 15,68,218.00 WAS ADDED BACK U/S 68 FOR A. Y 2007-08. BUT THE FACTS OF THE MATTER IS THIS THE FAMILY MEMBERS OF MOHAMMED HASNAIN AJANI HAD FOLLOWING FUNDS AVAILABLE FOR EXTENDING LOANS TO THE COMPANY. MOHAMMED HASNAIN AJANI WITHDRAWAL / DRAWINGS AS PER CAPITAL A/C FILED ALONG WITH RETURNS OF INCOME 2004-05 5,73,788.00 2005-06 14,46,560.00 2006-07' 6,00,000.00 TOTAL (A) 26,20,348.00 MRS. SABIHA BANU AJANI 2005-06 3,00,000.00 2006-07 1,30,000.00 TOTAL (B) 4,30,000.00 SABA AJANI (MINOR) 2005-06 2,08,000.00 2006-07 4,00,000.00 6,08,000.00 CASH DEPOSITED 2,44,000.00 TOTAL (C) 3,64,000.00 TOTAL (A+B+C) 34,14,348.00 OUT OF THE AFORESAID 34,14,348.00 EVEN IT IS ASSUMED THAT THE ASSESSEE SPEND A SUM OF RS. 14,00,000.00 FOR PERSONAL DRAWING, THE FAMILY WILL BE LEFT WITH SUFFICIENT CASH BALANCE TO MEET UP THE REQUIREMENT. IT IS PERTINENT TO NOTE THAT THE LOAN CREDITORS WERE ALL FROM THE SAME FAMILY AND ARE EASILY IDENTIFIABLE. THE SOURCE OF THE CREDIT IS ALSO EXPLAINABLE. IN VIEW OF THIS IT IS PRAYED THAT THE RELIEF ASKED FOR BY THE ASSESSEE MAY KINDLY BE GRANTED AND THE APPEAL IS ALLOWED. THE CAPITAL ACCOUNT AND BANK STATEMENTS OF MRS. SABIHA BANU AJANI AND SABA AJANI ARE ENCLOSED. ITA NO. 2517/BANG/2018 PAGE 6 OF 8 4.2.3 IN THE COURSE OF HEARING, THE LEARNED AR FOR THE ASSESSEE FILED AN APPLICATION UNDER RULE 29 OF THE INCOME TAX (APPELLATE TRIBUNAL) RULES, 1963 (IN SHORT THE RULES), PRAYING FOR GRANT OF PERMISSION TO FILE ADDITIONAL EVIDENCE (PAGE 1 TO 22) AND ADMISSION THEREOF; SUBMITTING THEREIN AS UNDER: DURING THE COURSE OF OUR ARGUMENT BEFORE YOUR HONOUR ON 5 TH NOVEMBER, 2018, WE CONTENDED THAT THE APPELLANT COMPANY COULD NOT BE REPRESENTED BY COMPETENT PROFESSIONAL BEFORE THE AUTHORITIES BELOW. AS A RESULT, PROPER EVIDENCE IN THE FORM OF THE DRAWINGS OF THE MEMBERS OF THE FAMILY OF THE MD TO EXTEND LOANS TO THE APPELLANT COMPANY TO APPRECIATE THE FACTS OF THE CASE COULD NOT BE PRESENTED BEFORE THEM. THE DETAILS OF THE DRAWINGS AND THE BANK WITHDRAWALS SUPPORTING THE AVAILABILITY OF FUNDS TO EXTEND THE LOAN ARE NOW BEING PRODUCED. SINCE THE APPELLANT COMPANY WAS PREVENTED FROM ADDUCING THE RELEVANT EVIDENCES BEFORE THE HONOURABLE AO AND CIT(A) WHICH PREVENTED THE APPELLANT FROM GETTING THE JUSTICE, YOU ARE, THEREFORE, BEING PRAYED TO GRANT US PERMISSION TO PRODUCE THE NECESSARY EVIDENCES WHICH ARE IN FACT ADDITIONAL EVIDENCES BEFORE YOUR HONOUR BY INVOKING PROVISIONS OF RULE 29 OF INCOME-TAX (APPELLATE TRIBUNAL) RULES - 1963. 4.2.4 IT WAS PRAYED THAT SINCE THE ADDITIONAL EVIDENCE SOUGHT TO BE ADMITTED GOES TO THE ROOT OF THE ISSUE OF ESTABLISHING THE GENUINENESS OR OTHERWISE OF THE SUBJECT MATTER OF DISPUTE IN THIS APPEAL; THE SAME BE ADMITTED FOR CONSIDERATION AND ADJUDICATION OF THIS APPEAL AS THE OMISSION TO FILE THEM WAS NEITHER DELIBERATE NOR INTENTIONAL, BUT WAS DUE TO INCOMPETENT PROFESSIONAL GUIDANCE. 4.3 PER CONTRA, THE LEARNED DR FOR REVENUE SUPPORTED THE ORDERS OF THE AUTHORITIES BELOW. IT WAS SUBMITTED THAT IF THE ADDITIONAL EVIDENCE BE ADMITTED FOR CONSIDERATION; SINCE THESE DETAILS/EVIDENCES WERE NEVER BEFORE THE AUTHORITIES BELOW, THE MATTER MAY BE SET ASIDE TO THE FILE OF THE AO FOR CONSIDERATION AND FRESH ADJUDICATION THEREON. 4.4.1 I HAVE HEARD AND CONSIDERED THE RIVAL CONTENTIONS AND PERUSED THE MATERIAL ON RECORD. THE ONLY ISSUE OF DISPUTE IN THIS APPEAL IS IN RESPECT OF THE ADDITION OF ITA NO. 2517/BANG/2018 PAGE 7 OF 8 RS.15,68,218/- MADE BY THE AO ON ACCOUNT OF UNEXPLAINED UNSECURED LOANS; WHICH HAS BEEN SUSTAINED TO THE EXTENT OF RS.12,68,218/- BY THE CIT(A) IN THE IMPUGNED ORDER. 4.4.2 IN THIS REGARD, THE ASSESSEES APPLICATION FOR ADMISSION OF ADDITIONAL EVIDENCE UNDER RULE 29 OF THE RULES (PAGES 1 TO 20) HAS BEEN CAREFULLY PERUSED AND IT IS SEEN THAT IT PERTAINS TO THE ONLY ISSUE OF DISPUTE I.E., THE GENUINENESS OR OTHERWISE OF THE UNSECURED LOANS IN QUESTION. IN MY CONSIDERED VIEW, THE SAID ADDITIONAL EVIDENCE IS TO BE ADMITTED IN THE INTEREST OF SUBSTANTIAL JUSTICE, AS IT GOES TO THE VERY ROOT OF THE MATTER OF DISPUTE IN THIS APPEAL AND DO SO. 4.4.3 ADMITTEDLY, THE ADDITIONAL EVIDENCE FILED AND EXPLANATIONS PUT FORTH IN THIS REGARD HAVE NOT BEEN EXAMINED BY OR PLACED BEFORE THE AUTHORITIES BELOW. IN THE LIGHT OF THE ABOVE DISCUSSION, I AM OF THE FIRM VIEW THAT IMPUGNED ORDERS OF THE AUTHORITIES BELOW I.E., AO/CIT(A) FOR ASSESSMENT YEAR 2007-08 ARE TO BE SET ASIDE AND DO SO. THE ISSUE IN RESPECT OF UNSECURED LOANS AMOUNTING TO RS.20,14,778/- FROM THE PERSONS AS LISTED OUT IN PARA 3 ON PAGE 2 OF THE ORDER OF ASSESSMENT IS RESTORED TO THE FILE OF THE AO FOR ADJUDICATION AFTER EXAMINATION AND VERIFICATION OF THE ADDITIONAL EVIDENCES FILED. NEEDLESS TO ADD, THE AO SHALL AFFORD THE ASSESSEE ADEQUATE OPPORTUNITIES OF BEING HEARD AND TO FILE FURTHER DETAILS/SUBMISSIONS AS MAY BE REQUIRED BEFORE DECIDING THIS ISSUE. IT IS ACCORDINGLY ORDERED. 5. CONSEQUENTLY, THE GROUNDS OF APPEAL RAISED BY THE ASSESSEE ON MERITS (SUPRA) ARE RENDERED ACADEMIC AND THEREFORE NOT ADJUDICATED AT THIS JUNCTURE. 6. IN THE RESULT, THE ASSESSEES APPEAL FOR ASSESSMENT YEAR 2007-08 IS ALLOWED FOR STATISTICAL PURPOSES. ITA NO. 2517/BANG/2018 PAGE 8 OF 8 ORDER PRONOUNCED IN THE OPEN COURT ON THIS 7 TH DAY OF DECEMBER, 2018. SD/- SD/- BANGALORE. DATED: 7 TH DECEMBER, 2018. /NS/* COPY TO: 1. APPELLANTS 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR 6. GUARD FILE BY ORDER ASSISTANT REGISTRAR, ITAT, BANGALORE. ( N. V. VASUDEVAN ) ( JASON P BOAZ ) VICE PRESIDENT ACCOUNTANT MEMBER