MAHENDRA SILK MILLS P. LTD, MUMBAI V. ITO WD 6(3)(3), MUMBAI

ITA 2607/MUM/2010

• Counselvise Citation: [2011] 134 COUNSELVISE.COM (IT) 7959 (ITAT-MUMBAI)
• Duration Of Justice: 11 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-03-2011
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Assessment Year: 2006-2007
• Appeal Filed On: 05-04-2010
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: S T BIDARI
• Keywords: Unexplained cash credit
• Section: 142(1); 133(6); 28

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH B MUMBAI BEFORE SHRI R.S. SYAL (AM) AND SMT. ASHA VIJAYARAGH AVAN (JM) ITA NO. 2607/MUM/2010 ASSESSMENT YEAR- 2006-07 M/S. MAHENDRA SILK MILLS PVT. LTD., 105-107, TAMBA KANTA, MUMBADEVI ROAD, MUMBAI-400 003 PAN-AACCM 3121F VS. THE ITO, WARD 6(3)(3), AAYAKAR BHAVAN, MUMBAI-400 020 (APPELLANT) (RESPONDENT) APPELLANT BY: SHRI SATISH R. MODY RESPONDENT BY: SHRI S.T. BIDARI O R D E R PER ASHA VIJAYARAGHAVAN (JM) THIS APPEAL PREFERRED BY THE ASSESSEE IS DIRECTED A GAINST THE ORDER DATED 5.11.2009 PASSED BY THE LD. CIT(A)- 12 FOR TH E ASSESSMENT YEAR 2006-07. 2. THE FIRST ISSUE RAISED BY THE ASSESSEE RELATES T O DISALLOWANCE OF RS. 11,825/- MADE BY AO BY INVOKING THE PROVISION OF SE C. 14A. 3. WE FIND THAT THE DECISION OF THE SPECIAL BENCH I N THE CASE OF DAGA CAPITAL MANAGEMENT PVT. LTD HAS BEEN SET ASIDE BY T HE JURISDICTIONAL HIGH COURT IN THE CASE OF GODREJ & BOYCE MFG CO LTD VS DCIT (2010 TIOL-564-HC-MUM-IT). IN THE CIRCUMSTANCES, WE SET A SIDE THE ORDER OF AO AND CIT(A) ON THIS ISSUE AND REMIT THE MATTER BA CK TO THE FILES OF THE AO TO DECIDE THE ISSUE AFRESH IN LINE WITH THE RATI O OF THE DECISION OF THE ITA NO. 2607/M/10 2 JURISDICTIONAL HIGH COURT. THIS GROUND IS ALLOWED F OR STATISTICAL PURPOSES. 4. THE 2 ND & 3 RD GROUND RAISED BY THE ASSESSEE READS AS FOLLOWS: 2. THE LD. CIT(A) HAS ERRED IN ADDING RS. 4,00,001 /- U/S. 68 OF THE I.T. ACT, 1961, WITHOUT GIVING NOTICE TO THE APPELLANT OF HIS INTENTION TO DO SO AND THUS NO OPPORTUNITY WAS GIVEN TO THE APPELLANT TO GIVE ITS SUBMISSION ON THE SAME. 3. WITHOUT PREJUDICE TO ABOVE, THE CIT(A) HAS ERRED IN ADDING RS. 4,00,001/- U/S. 68 OF THE I.T. ACT, AS B EING AN UNEXPLAINED CREDIT BALANCE, WHEN FULL FACTS RELA TING TO RS. 4,00,001/- BEING THAT PAYABLE TO A SUNDRY CREDITOR M/S. YOGESHWAR CORPN. WAS AVAILABLE WITH T HE AO AND THERE WAS NO DOUBT ON THE NATURE OF THE TRANSACTION (TRANSPIRED IN 1987) RESULTING IN THE C REDIT BALANCE IN THE BOOKS OF THE APPELLANT, AND THUS NO DISALLOWANCE WAS MADE BY THE AO U/S. 68 OF THE I.T. ACT, 1961. 5. THE FACTS OF THE CASE ARE THAT THE ASSESSEE IS A COMPANY. A NOTICE DT. 12.9.2008 ISSUED U/S. 133(6) THROUGH SPEED POST IN THE CASE OF CREDITOR PARTY NAMED M/S. YOGESHWAR CORPN., AT ITS GIVEN ADDRESS AT 1, NILKANTH NAGAR, GOVARDHANVADI TEKRA, KANKARIA, AHME DABAD, REMAINED TO BE COMPLLED BY THE SAID PARTY. IN VIEW OF THIS , ASSESSEE, VIDE NOTICE U/S. 142(1) DT. 1.10.2008 WAS ISSUED A SHOW CAUSE A S TO WHY THE AMOUNT OF RS. 4,00,001/- SHOULD NOT BE DISALLOWED AS ENVIS AGED BY THE PROVISIONS OF SEC. 41(1) AS THERE IS A CESSATION OF LIABILITY. THE ASSESSEE WAS REQUESTED TO FURNISH CONFIRMATION OF THIS CREDI TOR PARTY FOR ITS BALANCES FOR THE LAST THREE YEARS. HOWEVER, ASSESS EE COMPANY FAILED TO COMPLY TO THIS NOTICE ALSO ON THE DATE AND TIME SO FIXED ON 8.10.2008 AT 10.30 P.M. IT WAS ALSO SPECIFICALLY MENTIONED IN T HE SAID NOTICE U/S. 142(1) THAT NO ADJOURNMENT WILL BE GRANTED. IN VIE W OF THE SAME, THE ADDITION OF RS. 4,00,001 IS MADE TO THE TOTAL INCOM E U/S. 41(1) OF THE I.T. ACT. ITA NO. 2607/M/10 3 6. AGGRIEVED, ASSESSEE PREFERRED AN APPEAL BEFORE T HE LD. CIT(A) AND SUBMITTED AS FOLLOWS: THE APPELLANT SUBMITTED THAT IT WAS BROUGHT TO THE NOTICE OF THE AO THAT THE AMOUNT REPRESENTED THE AMOUNT RECEI VED FROM M/S. YOGESH CORPN. FOR SALE OF PROPERTY IN 1987. IN 200 1, THE COMPANY, HOWEVER, SOLD THE LEASEHOLD RIGHTS OF THE LAND TO A NOTHER PARTY. THE ADVANCE RECEIVED FOR SALE OF PROPERTY IS NOT AN EXP ENDITURE OF TRADING LIABILITY, CESSATION OF WHICH CAN BE TAXED U/S. 41(1). THE APPELLANT RELIED ON THE DECISION INS THE CASE OF MA HINDRA & MAHINDRA 261 ITR 501. IT IS, FURTHER SUBMITTED THA T ON THE 7 TH OF OCT. 2008, ONE DAY BEFORE THE DATE FOR HEARING FIXED IN THE SHOW CAUSE NOTICE ISSUED DURING THE ASSESSMENT PROCEEDINGS, TH E APPELLANTS AR HAD APPEARED BEFORE THE AO AND ORALLY REQUESTED FOR SHORT ADJOURNMENT WHICH WAS ALLOWED. TO THE SURPRISE OF THE APPELLANT, THE ASSESSMENT ORDER WAS PASSED ON THE NEXT DAY I.E . 8 TH OCTOBER 2008 WITHOUT WAITING FOR THE REPLY. THE APPELLANT, HOWEVER, HAD SUBMITTED A LETTER ON 13 TH OCTOBER 2008 TO THE ITO GIVING THE FACTS RELATING TO THE ISSUE. 7. THE LD. CIT(A) HELD AS FOLLOWS: I HAVE CONSIDERED THE SUBMISSIONS. THE ADDITION H AS BEEN MADE U/S. 41(1). THIS IS ERRONEOUS SINCE THE LIABILITY HAS NOT BEEN WRITTEN BACK BY CREDIT TO THE P&L A/C IN T HE BOOKS OF THE APPELLANT. IN A RECENT CASE OF CIPLA INVESTMEN T LTD. (33 SOT 317), THE ITAT, MUMBAI HAS HELD THAT WHERE NO D EDUCTION IN ANY MANNER WAS CLAIMED IN RESPECT OF THE LIABILI TY, REMISSION CANNOT BE BROUGHT TO TAX EITHER U/S. 41(1 ) OR EVEN U/S. 28(4). THE PROVISIONS OF SEC. 28 DOES NOT APP LY, SINCE THERE IS NO BENEFIT OF PERQUISITE ARISING TO THE AS SESSEE. MOREOVER, THE ASSESSEE HAD STILL TO WRITE OFF THE AMOUNT IN THE BOOKS OF ACCOUNTS. IT IS PERTINENT TO NOTE THAT THE ADDITION HAS BEEN MADE BY THE AO PRIMARILY ON THE GROUND THAT THE CREDIT B ALANCE WAS NOT CONFIRMED BY THE CREDITOR INSPITE OF NOTICE BEI NG ISSUED U/S. 133(6). EVEN IN ITS REPLY, THE APPELLANT DID N OT FURNISH ANY CONFIRMATION FROM THE CREDITOR TO PROVE THE GEN UINENESS OF THE LIABILITY AND THE AMOUNT OUTSTANDING. THE APPE LLANT SIMPLY ARGUED WITH RESPECT TO THE APPLICABILITY OF SEC. 41(1). THE CLAIM OF THE APPELLANT THAT THE MONEY WAS RECEI VED FROM YOGESH CORPN. TOWARDS SALE OF PROPERTY, HAS NOT ACT UALLY ITA NO. 2607/M/10 4 BEEN PROVED BY ANY DOCUMENTARY EVIDENCE. EVEN DURI NG APPELLATE PROCEEDINGS, CONFIRMATION OF THE CREDIT B ALANCE HAS NOT BEEN OBTAINED OR FILED. AT THE SAME TIME, IT I S SEEN THAT THE LAND AND BUILDING HAVE BEEN SOLD TO ANOTHER PAR TY. IN SUCH CIRCUMSTANCES, THE APPELLANT WAS EXPECTED TO H AVE BEEN RETURNED THE MONEY TO SO CALLED YOGESH CORPN. IN AS BACK IN THE YEAR 2001. THE APPELLANT HAS GIVEN NO PLAUSIBL E EXPLANATION OF WHY THE MONEY WAS NOT RETURNED AND N OT EVEN CLAIMED BY YOGESH CORPN. IT COULD BE A CASE OF FOR FEITURE OF THE AMOUNT FOR SOME REASON. IN THE ABOVE CIRCUMSTANCES, THE CREDIT ITSELF IN TH E BOOKS HAS TO BE TREATED AS AN UNEXPLAINED CREDIT SI NCE THE EXPLANATION GIVEN BY THE APPELLANT IS NOT SUPPORTED BY DOCUMENTARY EVIDENCE. THE AMOUNT CAN ALSO BE ADDED TO THE INCOME OF THE APPELLANT U/S. 68. THE ADDITION MADE BY THE AO IS BEING CONFIRMED AS A N UNEXPLAINED CREDIT IN THE BOOKS OF THE APPELLANT U/ S. 68 OF THE I.T. ACT. IN THE RESULT, THE APPEAL IS DISMISSED. 8. AGGRIEVED BY THE ORDER OF THE LD. CIT(A) ASSESSE E PREFERRED AN APPEAL BEFORE US AND SUBMITTED AS FOLLOWS: AGAINST THE ADDITION OF RS. 4,00,001, THE LD. CIT( A) AGREED TO THE SUBMISSION OF THE APPELLANT THAT THE ADDITION M ADE U/S. 41(1) OF THE I.T. ACT IS WRONG. BUT WITHOUT GIVING NOTICE TO THE APPELLANT OF HIS INTENTION TO ADD RS. 4,00,001/- U/ S. 68 OF THE I.T. ACT, MADE THE ADDITION AND THUS PREVENTED THE APPELLANT AN OPPORTUNITY TO GIVE THEIR SUBMISSIONS ON THE APP LICABILITY OF SEC. 68 TO THE FACTS OF THE CASE. 9. WE FIND THAT THE SECTION 68 IS NOT APPLICABLE TO THE ASSESSEE WITH REFERENCE TO THE CREDIT BALANCE OF RS. 4,00,001/- D UE TO M/S. YOGESHWAR CORPN. THE AMOUNT IS DUE BY THE ASSESSEE AS EXPLAI NED ABOVE AGAINST THE SALE OF PROPERTY WHICH TRANSPIRED IN 1987, AND THIS IS WELL UNDERSTOOD BY THE AO. THUS NO DISALLOWANCE WAS MAD E BY THE AO U/S. 68 OF THE I.T. ACT. HENCE WE OVERTURN THE ORDER O F THE LD. CIT(A) AND ALLOW ASSESSEES APPEAL. ITA NO. 2607/M/10 5 10. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS PARTLY ALLOWED. ORDER PRONOUNCED ON THIS 25 TH DAY OF MARCH, 2011 SD/- SD/- (R.S. SYAL) (ASHA VIJAYARAGHAVAN) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI, DATED 25 TH MARCH, 2011 RJ COPY TO : 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT-CONCERNED 4. THE CIT(A)-CONCERNED 5. THE DR B BENCH TRUE COPY BY ORDER ASSTT. REGISTRAR, I.T.A.T, MUMBAI ITA NO. 2607/M/10 6 DATE INITIALS 1 DRAFT DICTATED ON: 2 2 . 0 3 .201 1 SR. PS/PS 2. DRAFT PLACED BEFORE AUTHOR: 2 3 .0 3 .2011 ______ SR. PS/PS 3. DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER: _________ ______ JM/AM 4. DRAFT DISCUSSED/APPROVED BY SECOND MEMBER: _________ ______ JM/AM 5. APPROVED DRAFT COMES TO THE SR. PS/PS: _________ ______ SR. PS/PS 6. KEPT FOR PRONOUNCEMENT ON: _________ ______ SR. PS/PS 7. FILE SENT TO THE BENCH CLERK: _________ ______ SR. PS/PS 8. 9. DATE ON WHICH FILE GOES TO THE HEAD CLERK: DATE ON WHICH FILE GOES TO AR _________ ______ 10 . DATE OF DISPATCH OF ORDER: _________ ______