SHRI NARAYAN R .PASARI, MUMBAI V. INCOME TAX 24(3)(1), MUMBAI

ITA 2531/MUM/2018

• Counselvise Citation: [2019] 115 COUNSELVISE.COM (IT) 4293 (ITAT-MUMBAI)
• Duration Of Justice: 10 month(s) 18 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-03-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Assessment Year: 2009-2010
• Appeal Filed On: 25-04-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: V K CHATURVEDI
• Assessee Lawyers: H N MOTIWALA
• Keywords: Reopening of assessment; Unexplained cash credit; Search and seizure; Opportunity of being heard; Principle of natural justice; Accommodation entries
• Section: 147; 68

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL SMC BENCH, MUMBAI BEFORE SHRI SAKTIJIT DEY , JUDICIAL MEMBER ITA NO. 2531 / MUM . /2018 ( ASSESSMENT YEAR : 20 09 10 ) SHRI NARAYAN R. PASARI C/O H.N. MOTIWALLA & CO. 508, SHARDA CHAMBERS 33, NEW MARINE LINES MUMBAI 400 020 PAN AAGPP0460M . APPELLANT V/S INCOME TAX OFFICER WARD 24 ( 3 )(1), MUMBAI . RESPONDENT ASSESSEE BY : SHRI H.N. MOTIWALA REVENUE BY : SHRI V.K. CHATURVEDI DATE OF HEARING 26 . 1 2 .201 8 DATE OF ORDER 13.03.2019 O R D E R A FORESAID APPEAL HA S BEEN FILED BY THE ASSESSEE CHALLENGING THE ORDER DATED 26 TH MARCH 2 0 1 8 , PASSED BY THE LEARNED COMMISSIONER (APPEALS) 36 , MUMBAI , FOR THE ASSESSMENT YEAR 20 09 10 . 2 . T HE GROUNDS RAISED BY THE ASSESSEE ARE REPRODUCED BELOW: 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) - 36, MUMBAI, ERRED IN NOT CONSIDERING THE ADDITIONAL GROUNDS RAISED BY THE APPELLANT AT THE TIME OF HEARING VIDE HIS AUTHORIZED REPRESENTATIVE'S LETTER NO. P 1/IT/92/2017 - 18 DATED MARCH 14, 2018 WHICH ARE AS UNDER: 2 SHRI NARAYAN R. PASARI A) THE SAID LEARNED COMMISSIONER OF INCOME TAX HAS ALSO ERRED IN CONFIRMING THE ORDER OF THE ASSESSING OFFICER IN RESPECT OF REOPENING OF ASSESSMENT UNDER SECTION 147 OF THE ACT, ON THE BASIS OF INFO RMATION RECEIVED FROM DIT (I NVESTIGATION) II, MUMBAI, WITHOUT MAKING ANY INDEPEN DENT ENQUIRY HOW ANY INCOME CHARGEABLE TO TAX HAS ESCAPED THE ASSESSMENT. B) T HE SAID LEARNED COMMISSIONER OF INCOME TAX HAS ALSO ERRED IN CONFIRMING THE ORDER OF THE ASSESSING OFFICER IN RESPECT OF NOT REBUTTING THE CONTENTION OF THE APPELLANT THAT SHRI PRAVIN KUMAR JAIN IS NOT A DIRECTOR OF M/S. DUKE BUSINESS PVT. LTD AND WITHOUT SUPPLYING THE STATEMENT OF SHRI PRAVIN KUMAR JAIN ON WHICH THE ASSESSING OFFICER HAS RELI ED. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE SAID LEARNED COMMISSIONER OF INCOME TAX HAS ALSO ERRED IN CONFIRMING THE ORDER OF THE ASSESSING OFFICER IN RESPECT OF LOAN TAKEN AMOUNTING TO RS. 5,00,000/ - FROM DUKE BUSINESS PVT. LTD, UNDER S ECTION 68 OF THE ACT, PARTICULARLY WHEN THE APPELLANT HAD PROVED THE IDENTITY AND CAPACITY OF THE LENDER AS WELL AS GAMINESS OF TRANSACTION BY DEMONSTRATING THAT THE LOAN WAS REPAID BY CHEQUES ON JULY 17,2009 AND SEPTEMBER 04, 2009. 3 . BRIEF FACTS ARE, THE ASSESSEE IS AN INDIVIDUAL. FOR THE ASSESSMENT YEAR UNDER DISPUTE, THE ASSESSEE FILED ITS RETURN OF INCOME ON 29 TH SEPTEMBER 2009, DECLARING TOTAL INCOME OF ` 6,89,600. THE RETURN OF INCOME FILED BY THE ASSESSEE WAS INITIALLY PROCESS ED UNDER SECTION 14 3(1) OF THE INCOME TAX ACT, 1961 (FOR SHORT THE ACT ). SUBSEQUENTLY, ON THE BASIS OF A LETTER RECEIVED FROM THE DIT (INV.) II, MUMBAI, INTIMATING THAT THE ASSESSEE IS ONE OF THE BENEFICIARIES OF THE ACCOMMODATION ENTRIES PROVIDED BY A FRONT COMPANY OF PRA VIN KUMAR JAIN GROUP, THE ASSESSING OFFICER RE OPENED THE ASSESSMENT UNDER SECTION 147 OF THE ACT. IN THE REASONS RECORDED F OR RE OPENING OF ASSESSMENT , THE ASSESSING OFFICER NOTED THAT THE ASSESSEE HAS 3 SHRI NARAYAN R. PASARI RECEIVED ACCOMMODATION ENTRY BY WAY OF LOAN OF ` 5 LA KH FROM M/S. DUKE BUSINESS PVT. LTD. (J.P.K. TRADING INDIA PVT. LTD.). HE, THEREFORE, CALLED UPON THE ASSESSEE TO PROVE THE GENUINENESS OF THE SAID LOAN TRANSACTION. IN RESPONSE, THE ASSESSEE SUBMITTED ITS REPLY ON 12 TH JANUARY 2016, JUSTIFYING THE LOAN TR ANSACTION TO BE GENUINE ON THE GROUND THAT IT WAS ROUTED THROUGH BANKING CHANNEL AND ALSO ON THE GROUND THAT SHRI PRAVIN KUMAR JAIN, WHOSE STATEMENT THE ASSESSING OFFICER HAS RELIED UPON , IS NOT A D IRECTOR /PROMOTOR OF THE LENDER COMPANY. THE ASSESSING OFFICER, HOWEVER, DID NOT FIND MERIT IN THE SUBMISSIONS OF THE ASSESSEE. HE OBSERVED , IN THE COURSE OF SEARCH AND SEIZURE OPERATION CONDUCTED IN CASE OF SHRI PRAVIN KUMAR JAIN AND HIS GROUP CONCERNS, IT WAS FOUND THAT HE HAD FLOATED A NUMBER OF DUMMY ENTITIES THROUGH WHOM HE WAS CONDUCTING HIS ACTIVITY OF PROVIDI NG ACCOMMODATION ENTRIES WAY OF LOANS, S HARE TRANSFER, ETC. HE OBSERVED, TO A CHIEVE HIS OBJECT , SHRI PRAVIN KUMAR JAIN, HAS MADE HIS TRUSTED PERSONS , EMPLOYEES, RELATIVES, ETC., D IRECTORS /PROPRIETORS/P ARTNER S OF THE FRONT ENTITIES. HOWEVER, SHRI PRAVIN KUMAR JAIN, WAS CONTROLLING ALL THESE ENTITIES. ACCORDINGLY, HE REJECTED THE EXPLANATION OF THE ASSESSEE AND TREATED THE AMOUNT OF ` 5 LAKH AS UNEXPLAINED CASH CRE DIT UNDER SECTION 68 OF THE ACT AND ADDED BACK TO THE INCOME OF THE ASSESSEE. BEING AGGRIEVED WITH THE AFORESAID ADDITION, THE ASSESSEE PREFERRED APPEAL BEFORE THE FIRST APPELLATE AUTHORITY. 4 SHRI NARAYAN R. PASARI 4 . AS IT APPEARS, BEFORE THE LEARNED COMMISSIONER (APPEALS), BESIDE S THE MAIN GROUND, THE ASSESSEE ALSO RAISED CERTAIN ADDITIONAL GROUNDS CHALLENGING THE VALIDITY OF RE OPENING OF ASSESSMENT UNDER SECTION 147 OF THE ACT AS WELL AS VIOLATION OF RULES OF NATURAL JUSTICE. WHILE DECIDING ASSESSEES APPEAL, THE LEARNED COMMISS IONER (APPEALS) NOT ONLY UPHELD THE VALIDITY OF RE OPENING OF ASSESSMENT UNDER SECTION 147 OF THE ACT, BUT HE ALSO SUSTAINED THE ADDITION MADE BY THE ASSESSING OFFICER BY TREATING THE LOAN AMOUNT OF ` 5 LAKH AS UNEXPLAINED CASH CREDIT UNDER SECTION 68 OF T HE ACT. 5 . THE LEARNED AUTHORISED REPRESENTATIVE SUBMITTED , THOUGH THE ASSESSEE HAD RAISED ADDITIONAL GROUND S BEFORE LEARNED COMMISSIONER (APPEALS), HOWEVER, HE HAS COMPLETELY IG NORED THEM WHILE DECIDING THE APPEAL. TH E LEARNED AUTHORISED REPRESENTA TIVE SUB MITTED , WHILE RE - OPENING THE ASSESSMENT UNDER SECTION 147 OF THE ACT, AS EVIDENT FROM THE REASONS RECORDED, THE ASSESSING OFFICER HAS HEAVILY RELIED UPON THE STATEMENT OF SHRI PRAVIN KUMAR JAIN. HE SUBMITTED , IN COURSE OF ASSESSMENT PROCE EDINGS, THOUGH, THE ASSESSEE HAD REQUESTED THE ASSESSING OFFICER TO FURNISH THE REASONS RECORDED AS WELL AS ALL OTHER ADVERSE MATERIALS INCLUDING THE STATEMENT OF SHRI PRAVIN KUMAR JAIN, HOWEVER, THE ASSESSING OFFICER SIMPLY COMMUNICATED THE REASONS RECORDED TO THE ASSESS EE WITHOUT PROVIDING A COPY OF THE STATEMENT RECORDED FROM SHRI PRAVIN KUMAR JAIN. HE SUBMITTED , IN COURSE OF 5 SHRI NARAYAN R. PASARI ASSESSMENT PROCEEDINGS ALSO DESPITE ASSESSEES CONTENTION THAT THE LOAN TRANSACTION IS GENUINE, THE ASSESSING OFFICER NEVER CONDUCTED ANY INDEPEND ENT ENQUIRY TO VERIFY ASSESSEES CLAIM AND SIMPLY RELYING UPON THE INFORMATION SUPPLIED BY THE OFFICE OF THE DIT (INV.) II, MUMBAI, HAS TREATED THE LOAN RECEIVED AS UNEXPLAINED CASH CREDIT. THUS, HE SUBMITTED , THE ASSESSMENT ORDER PASSED WITHOUT FOLLOWING THE RULES OF NATURAL JUSTICE IS INVALID. AS REGARDS THE MERITS OF THE ADDITION MADE, THE LEARNED AUTHORISED REPRESENTATIVE SUBMITTED , NOT ONLY THE LOAN AMOUNT IS ROUTED THROUGH BANKING CHANNEL, BUT THE LENDER IS IDENTIFIABLE WITH A VALID PAN. HE SUBMITTED , THE ENTIRE LOAN TRANSACTION IS CARRIED OUT THROUGH BANKING CHANNEL WHICH IS EVIDENT FROM THE BANK ACCOUNT OF THE LENDER AS WELL AS THE ASSESSEE. HE SUBMITTED , THE ASSESSEE HAS EVEN REPAID THE LOAN AMOUNT SUBSEQUENT LY THROUGH B ANKING CHANNEL. HE SUBMITTED , THE ACCOUNT CONFIRMATION OF THE LENDER WAS ALSO FILED BEFORE THE ASSESSING OFFICER. THUS, HE SUBMITTED , WITHOUT PROPERLY VERIFYING THE FACTS AND MATERIAL BROUGHT ON RECORD, THE ADDITION MADE IS UNJUSTIFIED. I N SUPPORT OF HIS CONTENTION, LEARNED AUTHORISED REPRESENTATIVE RELIED UPON THE FOLLOWING DECISIONS: I ) H.R. MEHTA V/S ACIT, [2016] 72 TAXMANN.COM 110 (BOM.); II ) ITO V/S M/S. SHREEDHAM CONSTRUCTION PVT. LTD., ITA NO. 3754/MUM./2017 ETC., ORDER DATED 14.11.2017; AND III ) PAVANKUMAR M. SANGHVI V/S ITO, ITA NO.24 47/AHD./2016, DATED 17.05.2017. 6 SHRI NARAYAN R. PASARI 6 . THE LEARNED DEPARTMENTAL REPRESENTATIVE STRONGLY RELIED UPON THE OBSERVATIONS OF THE LEARNED COMMISSIONER (APPEALS) AND THE ASSESSING OFFICER. 7 . I HAVE CONSIDERED RIVAL SUBMISSIONS AND PERUSED MATERIAL ON RECORD. FROM THE REASONS RECORDED FOR RE OPENING OF ASSESSMENT REPRODUCED IN THE ASSESSMENT ORDER, IT IS EVIDENT THAT ON THE BASIS OF INFORMATION OBTAINED IN COURSE OF A SEARCH AND SEIZURE OPERATION CONDUCTED IN CASE OF SHRI PRAVIN KUMAR JAIN AND GROUP, IT WAS FOUND THAT T HE C ONCERNED PERSON THROUGH HIS FRONT COMPANIES/ENTITIES WAS PROVIDING ACCOMM ODATION ENTRIES BY WAY OF LOANS/ SALE OF SHARES, COMMODITIES, ETC. IT IS ALSO EVIDENT , DURING SUCH SEARCH OPERATION AND POST SEARCH PROCEEDINGS, A STATEMEN T WAS RECORDED FROM SHRI PRAVIN KUMAR JAIN, WHEREIN, HE SUPPOSEDLY ADMITTED OF HAVING PROVID ED ACCOMMODATION ENTRIES TO VARIOUS PERSONS THROUGH ENTITIES CONTROLLED BY HIM. UNDISPUTEDLY, THE INFORMATION OBTAINED DURING THE SEARCH AND SEIZURE OPERATION IN CASE OF SHRI PRAVIN KUMAR J AIN, AND THE STATEMENT RECORDED FROM HIM FORMS THE BASIS OF THE IMPUGNED ADDITION MADE BY THE ASSESSING OFFICER. FROM THE ASSESSMENT ORDER, IT IS EVIDENT , THE ASSESSING OFFICER HAS NOT MADE ANY INDEPENDENT ENQUIRY TO ASCERTAIN THE VERACITY OF ASSESSEES CL AIM THAT THE LOAN TRANSACTION BETWEEN THE ASSESSEE AND THE LENDER COMPANY IS GENUINE. EVEN IF SUCH ENQUIRY HAS BEEN MADE BY THE ASSESSING OFFICER, IT IS NOT FORTHCOMING FROM THE 7 SHRI NARAYAN R. PASARI DISCUSSIONS MADE IN THE ASSESSMENT ORDER. IT IS ALSO RELEVANT TO OBSERVE , EXCEPT COMMUNICATING THE REASONS RECORDED, AS IT APPEARS, THE ASSESSING OFFICER HAS NOT PROVIDED THE ADVERSE MATERIALS TO THE ASSESSEE INCLUDING THE STATEMENT RECORDED FROM SHRI PRAVIN KUMAR JAIN. THEREFORE, TO THAT EXTENT, THERE IS VIOLATION OF RULES OF N ATURAL JUSTICE, AS THE ASSESSEE HAS NOT BEEN PROVIDED A FAIR OPPORTUNITY TO REBUT THE ALLEGATIONS MADE AGAINST HIM. FURTHER, THOUGH, FROM THE IMPUGNED ORDER OF THE LEARNED COMMISSIONER (APPEALS), IT IS EVIDENT THAT THE ADDITIONAL LEGAL GROUNDS WERE RAISED BY THE ASSESSEE, HOWEVER, HE HAS NOT RENDERED ANY SPECIFIC FINDING ON THE ADDITIONAL GROUNDS. IN VIEW OF THE AFORESAID, I AM INCLINED TO RESTORE ALL THE ISSUES TO THE ASSESSING OFFICER FOR DE NOVO ADJUDICATION AFTER DUE OPPORTUNITY OF BEING HEARD TO THE AS SESSEE. IT IS MADE CLEAR , THE ASSESSING OFFICER MUST CONFRONT/ COMMUNICATE ALL ADVERSE MATERIALS IN HIS POSSESSION INCLUDING THE STATEMENT OF PRAVIN KUMAR JAIN, WHICH HE INTENDS TO RELY UPON , TO THE ASSESSEE AND PROVID E ADEQUATE OPPORTUNITY TO REBUT/EXPLAIN THE ADVERSE MATERIAL/ CHARGE BROUGHT AGAINST HIM . SINCE , I AM RESTORING THE ISS UE TO THE ASSESSING OFFICER FOR FRAMING DE NOVO ASSESSMENT AFTER COMPLYING TO THE REQUIREMENTS OF RULES OF NATURAL JUSTICE, THERE IS NO NEED TO DELIBERATE UPON THE DECISIONS REL IED UPON BY THE LEARNED AUTHORISED REPRESENTATIVE. HOWEVER, WHILE DECIDING THE ISSUE, THE ASSESSING OFFICER MUST KEEP IN VIEW THE RATIO LAID DOWN IN THE DECISIONS WHICH ARE TO BE CITED BEFORE 8 SHRI NARAYAN R. PASARI HIM BY THE ASSESSEE. WITH THE AFORESAID OBSERVATIONS, THE GROUND S ARE ALLOWED FOR STATISTICAL PURPOSES. 8 . I N THE RESULT, ASSESSEES APPEAL IS ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 13.03.2019 SD/ SAKTIJIT DEY JUDICIAL MEMBER MUMBAI, DATED: 13.03.2019 COPY OF THE ORDER FORWARDED TO : ( 1 ) THE ASSESSEE; ( 2 ) THE REVENUE; ( 3 ) THE CIT(A); ( 4 ) THE CIT, MUMBAI CITY CONCERNED; ( 5 ) THE DR, ITAT, MUMBAI; ( 6 ) GUARD FILE . TRUE COPY BY ORDER PRADEEP J. CHOWDHURY SR. PRIVATE SECRETARY (SR. PRIVATE SECRETARY) ITAT, MUMBAI