Parth Food Products Pvt. Ltd., Ahmedabad V. The ACIT, Circle-5, Ahmedabad

ITA 274/AHD/2016

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 1309 (ITAT-AHMEDABAD)
• Duration Of Justice: 4 month(s) 25 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-06-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: D
• Next Hearing Date: 29-06-2016
• Assessment Year: 2010-2011
• Appeal Filed On: 04-02-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: K D RATNOO
• Assessee Lawyers: S N SOPARKAR
• Keywords: Unexplained cash credit; Principle of natural justice; Additional evidence; Reasonable cause; Corroborative evidences
• Section: 143(3); 142(1); 68

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD A BENCH AHMEDABAD BEFORE SHRI S. S. GODARA, JM, & SHRI MANISH BORA D, AM. ITA NO.274/AHD/2016 ASST. YEAR: 2010-11 PARTH FOOD PRODUCTS P. LTD., C-401, VICEROY VILLA, NR. JUDGES BUNGALOW CROSS ROAD, BODAKDEV, AHMEDABAD. VS. ACIT, CIRCLE-5, AHMEDABAD. APPELLANT RESPONDENT PAN AACCP 2335G APPELLANT BY SHRI S. N. SOPARKAR, AR RESPONDENT BY SHRI K. D. RATNOO, SR.DR DATE OF HEARING: 29.6.2016 DATE OF PRONOUNCEMENT: 30/6/2016 O R D E R PER MANISH BORAD, ACCOUNTANT MEMBER . THIS APPEAL OF ASSESSEE IS DIRECTED AGAINST THE OR DER OF LD. CIT(A)-9, AHMEDABAD, DATED 9.12.2015 IN APPEAL NO.C IT(A)- 9/164/ACIT CIR.5/14-15, PASSED AGAINST ORDER U/S 14 3(3) R.W.S. 148 OF THE IT ACT, 1961 (IN SHORT THE ACT) FRAMED ON 24.03 .2014 BY ACIT, CIRCLE-5, AHMEDABAD. FOLLOWING GROUNDS HAVE BEEN RA ISED IN THIS APPEAL :- 1.1 THE ORDER PASSED U/S.250 ON 09.12.2015 FOR A.Y. 2010- 11 BY CIT(A)-9, ABAD AN EX-PARTE AND UPHOLDING THE ITA NO. 274/AHD/2016 ASST. YEAR 2010-11 2 ADDITIONS MADE BY AO IS WHOLLY ILLEGAL, UNLAWFUL AN D AGAINST THE PRINCIPLES OF NATURAL JUSTICE. 1.2 THE LD. CIT(A) HAS GRIEVOUSLY ERRED IN LAW AND OR ON FACTS IN HOLDING THE APPELLANT WAS NOT INTERESTED I N PURSUING THE APPEAL IN VIEW OF NON-COMPLIANCE TO TH E SEVERAL OPPORTUNITIES OF HEARING GRANTED. THE CHRONOLOGY OF EVENTS AND THE NARRATION AS GIVEN IN APPEAL MEMO CLEARLY PROVES THAT THE APPELLANT WAS VERY MUCH INTEREST IN PROSECUTING THE APPEAL AND TH E IMPUGNED ORDER PASSED EX-PARTE WAS NOT ONLY ILLEGAL BUT IN GROSS VIOLATION OF THE PRINCIPLES OF NATURAL JUSTICE. THE LD. CIT(A) OUGHT TO HAVE GRANTED SUFFICIENT OPPORTUNITY IN VIEW OF THE CHANGE IN OFFICE AS WELL AS THE EARLIER ADJOURNMENT APPLICATION CONSIDERED FOR A REASONABLE CAUSE. 2.1 THE LD.CIT(A) HAS GRIEVOUSLY ERRED IN LAW AND O N FACTS IN CONFIRMING THE FOLLOWING ADDITIONS: (A) CASH DEPOSITS IN BANK A/C RS.1,01,26,790/- (B) ACCRUED INTEREST ON FDRS RS. 1,36,762/- 2.2 THAT IN THE FACTS AND CIRCUMSTANCES OF THE CASE AS WELL AS IN LAW, THE LD.CIT(A) OUGHT NOT TO HAVE UPHELD THE ABOVE SAID DISALLOWANCES. 3.1 THE LD.CIT(A) HAS FAILED TO APPRECIATE THAT THE IMPUGNED CASH V DEPOSITS IN THE BANK ACCOUNT WERE REALIZATION OF DUES FROM THE SUNDRY DEBTORS OF GOOD S SOLD IN PAST AND THERE BEING NO BUSINESS IN THIS YEAR, THE IMPUGNED CASH DEPOSITS COULD NOT BE HELD AS UNEXPLAINED CASH CREDIT U/S.68 SO THAT THE ADDITION OF RS.1,01,26,790/- WAS WHOLLY UNJUSTIFIED BOTH ON FACTS AND IN LAW. IT IS, THEREFORE, PRAYED THAT THE EX-PARTE ORDER AS WELL AS ADDITION OF RS.1,01,26,790/-AS UNEXPLAINED CASH DEPOSITS IN BANK AND ACCRUED INTEREST OF RS.1,36,76 2/- UPHELD BY THE CIT(A) MAY KINDLY BE DELETED. ITA NO. 274/AHD/2016 ASST. YEAR 2010-11 3 2. BRIEF FACTS OF THE CASE AS CULLED OUT FROM THE A SSESSMENT RECORDS ARE THAT THE ASSESSEE IS A LIMITED COMPANY. IN VIEW OF AIR INFORMATION RECEIVED BY LD. ASSESSING OFFICER ABOUT HUGE CASH DEPOSITS MADE IN ACCOUNT WITH THREE BANKS, A NOTICE U/S 148 WAS ISSUED ON 11.03.3013. INITIALLY, THE ASSESSEE SOUGH T TIME IN VIEW OF BOOKS OF ACCOUNTS, BILLS, VOUCHERS ETC. WHEREIN POS SESSION OF THE PURCHASER OF THE ASSESSEE COMPANY AND DISPUTES GOIN G ON WITH IT. ULTIMATELY, THE AFORESAID RETURN WAS FILED ON 12.03 .2014 DECLARING TOTAL INCOME AT RS.NIL. THE RETURN WAS PROCESSED UN DER SECTION 143(2) OF THE ACT. NOTICE U/S 143(2) ALONG WITH NOT ICE U/S 142(1) WAS ISSUED ON 12/03/2014 AND SERVED ON ASSESSEE. IN RES PONSE TO NOTICE U/S 142(1) OF THE ACT DATED 12.3.2014 AND ORDER SHE ET ENTRY DT.18.03.2014 ASSESSEE FILED ITS SUBMISSION DATED 2 0.3.2014 ON 21.03.2014. DURING ASSESSMENT PROCEEDINGS ASSESSEE VIDE ITS SUBMISSION SUBMITTED AS UNDER :- 'DETAILS OF SUNDRY DEBTORS ALONG WITH COPY OF ACCOU NTS IN WHICH THE TRANSACTIONS HAVE BEEN MADE DURING THE PREVIOUS YEAR RELEVANT TO THE ASSESSMENT YEAR UNDER REFERENCE IS ENCLOSED HEREWITH. ALL THESE PARTIES A RE STANDING IN THE BOOKS OF THE COMPANY AS DEBTORS IN RESPECT OF SALES MADE TO THEM AND SUCH SALES IS ACCOUNTED IN THE BOOKS AS REVENUE IN THE RESPECTIVE EARLIER YEARS-AND- A/SO TAXED AS REVENUE INCOME. DURING THE PREVIOUS YEAR RELEVAN T TO THE ASSESSMENT YEAR UNDER REFERENCE, THE MONEY RECEIVED FROM THE DEBTOR S IS DEPOSITED IN THE BANK. THUS CREDIT TO THE DEBTORS ACCOUNTS STANDS FULLY EX PLAINED.' AFTER CONSIDERING THE SUBMISSIONS OF ASSESSEE, ASSE SSING OFFICER COMPLETED THE ASSESSMENT AT RS.1,02,63,552/- AFTER MAKING FOLLOWING ADDITIONS :- (I) ADDITION U/S 68 RS.1,01,26,790/- (II) ADDITION OF ACCRUED INTEREST RS. 1,36,7 62/- ITA NO. 274/AHD/2016 ASST. YEAR 2010-11 4 LD. ASSESSING OFFICER, WITHOUT APPRECIATING THE FAC TS COMPLETED THE ASSESSMENT AFTER MAKING ADDITIONS OF RS.1,01,26,790 /- U/S 68 AND RS.1,36,762/- ON ACCOUNT OF ACCRUED INTEREST. 4. AGGRIEVED, THE ASSESSEE WENT IN APPEAL BEFORE LD . CIT(A). DURING THE COURSE OF APPELLATE PROCEEDINGS ASSESSEE SOUGHT VARIOUS ADJOURNMENTS BUT DID NOT APPEAR ON THE DATE OF HEAR ING AND LD. CIT(A) PASSED EX PARTE ORDER ON THE BASIS OF MATERA L AVAILABLE ON RECORD BY OBSERVING AS UNDER :- 4. THE FIRST GROUND OF APPEAL IS AGAINST THE ADDIT ION OF RS.1,01,26,790/-MADE BY THE A.O U/S.68 OF THE I T. ACT. THE A.O DEALTL WITH THI S ISSUE VIDE PARA-4 OF THE ASESSMENT ORDER. THE RELEVANT EXTRACT FROM THE OBSE RVATION OF THE A.O IS AS UNDER :- 4.3 ON PERUSAL OF CHART SHOWING DETAILS OF SOURCES OF CASH AND APPLICATION OF CASH IT IS SEEN THAT THE ASSESSOR HAS SHOWN OPENING CASH BALANCE AS ON 1.4,2009 OF RS. 19.69.494/- WHICH WAS ALSO SOURCE O F CASH DEPOSITED IN NARODA NAGRIK CO. OP. BANK LTD. THE CLAIM OF THE ASSESSEE IS DUBIOUS AS PER HIS REPLY VIDE DTD. 5,3.2014, THE ASSESSEE HAS ITSELF STATED THAT ALL THE BOOKS OF ACCOUNTS ALONG WITH ALL VOUCHERS, BILLS AND DOCUMENTS ARE IN THE POSSESSION OF THE PURCHASER PARTY OF THE COMPANY, THAN HOW THE CASH B ALANCE OF THE COMPANY WAS LYING WITH THE CURRENT DIRECTORS OF THE COMPANY WHO DEPOSITED IT IN HANK ACCOUNTS. 4.4 IN VIEW OF THE ABOVE, IT IS EVIDENT THAT THE AS SESSEE COMPANY IS NOT IN A POSITION TO EXPLAIN THE CREDIT OF RS. 1.01,26, 790/ ~ IN BANK ACCOUNTS. IN ABSENCE OF SUPPORTING EVIDENCE, THE CREDIT REFLECTED IN BAN K ACCOUNT IS TREATED AS UNEXPLAINED CREDIT AND AN ADDITION OF RS, 1,01.26 7 90/~ IS MADE U/S.68 OF THE ACT.' 4.1 THE A.O HAS MADE AN ADDITION OF RS, 1.01,26',79 0/- J/S.68 OF THE I. T. ACT. THE A.O HAS OBSERVED AT PARA-4 OF THE ORDER THAT THE TO TAL TRANSACTION IN THE BANK. ACCOUNT AT NARODA NAGARIK CO. OP. BANK LTD. WAS OF RS. 1,01,26,790/- FOR F.Y.2009- 10. OUT OF THIS, THERE HAVE BEEN TOTAL CASH DEPOSIT OF RS. 62,45,000/-. THE A.O IN ORDER TO VERIFY THESE CREDITS, ASKED THE APPELLANT TO SUBMIT THE COMPLETE EXPLANATORY DETAILS OF CREDIT ENTRIES IN THE BANK ACCOUNT. THE APPELLANT FAILED- TO PRODUCE ANY SUPPORTING EVIDENCE IN THE MATTER. FURTHER, THE A.O HAS ALSO OBSERVED THAT THE APPELLANT HAS NOT FILED RETURN OF INCOME SINCE A. Y . 2006-07, IN ABSENCE OF ANY RECORDS BEFORE THE A.O, THE A.O IS NOT ABLE TO VERI FY THE DEBTORS WHO HAVE REPAID THE APPELLANT DURING THE YEAR UNDER CONSIDERATION AND \ REFLECTED AS CREDIT ENTRIES IN ITS BANK ACCOUNT. THE A.O HAS ALSO MENTIONED AT PARA 4.2 OF THE ORDER THAT THE APPELLANT WAS NOT VERY MUCH EAGER TO FILE THE RETURN OF INCOM E FOR A.Y.11-12 AND THE APPELLANT FILED ITA NO. 274/AHD/2016 ASST. YEAR 2010-11 5 ITS RETURN OF INCOME AFTER THE CONSTANT EFFORTS OF THE A.O. DURING THE COURSE OF HEARING AS WELL AS IN THE GROUND OF APPEAL, THE APPELLANT HAS SUBMITTED THAT ALL ITS BOOKS OF ACCOUNTS ALONG WITH VOUCHERS, BILLS AND DOCUMENTS WORE IN PO SSESSION OF THE PURCHASER OF THE FACTORY PREMISES WITH WHOM THE APPELLANT HAD DISPUT ES AND LITIGATIONS WERE .INVOLVED. THE A.O IS UNABLE TO UNDERSTAND IF SO IS THE CASE T HEN HOW THE CASH BALANCE R OF THE COMPANY WAS LYING WITH THE CURRENT DIRECTORS OF THE COMPANY WHO HAD DEPOSITED THE SAME IN THE BANK ACCOUNT OF THE COMPANY. 4,2 I AGREE WITH THE REASONING GIVEN BY THE A .O. THE APPELLANT HAS FAILED IN PROVING THE GENUINENESS, CREDITWORTHINESS AS WELL AS THE ID ENTITY OF ITS CREDITORS OR THE CREDITS IN THE BANK ACCOUNT DURING THE ASSESSMENT PROCEEDINGS AS WELL AS THE APPELLATE PROCEEDINGS. THEREFORE, I HEREBY CONFIRMED THE ADDI TION OF RS. 1,01,26,7907- MADE BY THE AO U/S.68 OF THE ACT. THIS GROUND OF APPEAL IS DISMISSED 5. VIDE GROUND NO.2, THE APPELLANT HAS CHALLENGED T HE ADDITION ON ACCOUNT OF INTEREST INCOME OF RS. 1,36,762/- MADE BY THE A.O THE A.O DE ALT WITH THIS ISSUE VIDE PARA-5 OF THE ASSESSMENT ORDER. ! HO OBSERVATION OF THE A.O O N THIS ISSUE IS REPRODUCED AS UNDER:- . 'ON VERIFICATION OF AUDITED BALANCE SHEET AND HONK ACC OUNTS, IT IS SOON THAT THE ASSESSEE HAS BANK BALANCE OF RS. 17.09.525/- IN FIXED DEPOSIT AND TERM DEPOSITS BUT THE ASSESSEE HAS NOT OFFERED ANY INTEREST INCOME IN THIS REGARD. B EING A COMPANY, THE ASSESSEE IS FOLLOWING MERCANTILE SYSTEM OF ACCOUNTING. THEREF ORE, IT IS NECESSARY TO OFFER ANY INCOME? ON ACCRUAL BASIS. SO, INTEREST ACCRUED ON AFORESAID DEPOSIT AMOUNT OF RS. 17.09.525/- IS REQUIRED TO BE TAXED IN R ESPECTIVE A.Y I.E. 2010-11. CONSIDERING THE PREVALENT RATE OF INTEREST @8%, WHICH COMES TO RS. 1 ,36,762/- IS ADDED TO THE INCOME OF THE ASSESSES AS ACCRUED INTEREST INCOME,' 5.1 THE A.O HAS MADE AN ADDITION ON ACCOUNT OF INTE REST ACCRUED TO THE APPELLANT ON ITS FIXED DEPOSIT IN THE BANK: AS THE APPELLANT HAS NOT OFFERED THE INTEREST INCOME IN THIS REGARD, THOUGH IT WAS FOLLOWING THE MERCANTILE SYST EM OF ACCOUNTING, THE A.O HAS APPLIED PREVALENT RATE OF INTEREST AT THE RATE OF 8 % AND ADDED AN AMOUNT OF RS. 1,36,762/- AS THE INTEREST INCOME OF THE APPELLANT, I AGREE WITH THE ACTION TAKEN BY THE A.O. THE BANKS HAVE TO CREDIT INTEREST TO THE ACCOUNT OF ITS CUSTOMER AT THE HAND OF THE YEAR, WH EN IT HAS TO DEDUCT THE TAX AT SOURCE ON THE SAME. THE APPELLANT SHOULD HAVE OFFER ED THE INTEREST AS ITS INCOME. DURING THE APPELLATE PROCEEDINGS, THE APPELLANT HAS NOT ATTENDED. HENCE, I HAVE RELY UPON THE MATERIALS AVAILABLE ON RECORD, THEREFORE, THE ADDITION OF RS. 1.36.762/- IS HEREBY CONFIRMED ARID THIS GROUND OF APPEAL IS DISM ISSED. 5. AGGRIEVED, ASSESSEE IS NOW IN APPEAL BEFORE THE TRIBUNAL. 6. THE LD. AR SUBMITTED THAT ASSESSEE IS A PRIVATE LTD. COMPANY AND ENGAGED IN THE BUSINESS AS MANUFACTURER AND PRO CESSORS OF SPICES. IT FILED ITS RETURN OF INCOME FOR ASST. YEA R 2010-11 ON ITA NO. 274/AHD/2016 ASST. YEAR 2010-11 6 12.03.2014 DECLARING LOSS AT RS.1,66,136/-. IT IS A FACT THAT ON SEVERAL OCCASIONS, THE CASE WAS FIXED FOR HEARING BUT DUE T O DELAY IN COLLECTION OF MATERIAL, THE HEARING COULD NOT BE AT TENDED. LD. CIT(A) HAS PASSED AN EX PARTE ORDER U/S 250 OF THE ACT CON FIRMING THE ORDER PASSED U/S 143(3) R.W.S.147 OF THE ACT FRAMED BY AS SESSING OFFICER, WITHOUT APPRECIATING THE FACTS AND AFFORDING REASON ABLE OPPORTUNITY OF HEARING. THEREFORE, LD. AR SUBMITTED THAT THE MATTE R MAY KINDLY BE RESTORED BACK TO LD. CIT(A) FOR FRESH DECISION WHER EIN THE ASSESSEE WILL ITS FULL CO-OPERATION. 6. ON THE OTHER HAND, LD. DR SUPPORTED THE ORDERS O F LOWER AUTHORITIES AND SUBMITTED THAT THE ASSESSEE IS NON- CO-OPERATIVE. 9. AFTER CONSIDERING THE RIVAL SUBMISSIONS AND GOIN G THROUGH THE MATERIAL ON RECORD, WE FIND THAT ASSESSEES MAIN GR IEVANCE IS THAT LD. CIT(A) HAS PASSED AN EX PARTE ORDER U/S 250 OF THE ACT WITHOUT AFFORDING PROPER OPPORTUNITY OF HEARING AND CONFIRM ED THE ADDITIONS MADE BY LD. ASSESSING OFFICER. WE OBSERVE THAT THOU GH LD. CIT(A) HAD GIVEN OPPORTUNITIES OF HEARING ON SEVERAL OCCAS IONS, BUT DUE TO DELAY IN COLLECTION OF MATERIAL, ASSESSEE COULD NOT ATTEND THE HEARINGS. THEREFORE, IN THE INTEREST OF NATURAL JUS TICE, WE ARE OF THE VIEW THAT THE MATTER SHOULD BE RESTORED BACK TO THE FILE OF LD. CIT(A) FOR FRESH DECISION, WITH THE DIRECTION THAT LD. CIT (A) WILL PROVIDE REASONABLE OPPORTUNITY OF HEARING TO THE ASSESSEE A ND TO ENTERTAIN ADDITIONAL EVIDENCES WITHIN THE PARAMETERS OF PROVI SIONS OF RULE 46A OF THE IT RULES AND ASSESSEE WILL ALSO EXTEND ITS F ULL CO-OPERATION IN ITA NO. 274/AHD/2016 ASST. YEAR 2010-11 7 THE DECISION MAKING PROCESS. THE APPEAL IS ALLOWED FOR STATISTICAL PURPOSES. 10. IN THE RESULT, APPEAL OF ASSESSEE IS ALLOWED FO R STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 30 TH JUNE, 2016 SD/- SD/- (S. S. GODARA) JUDICIAL MEMBER (MANISH BORAD) ACCOUNTANT MEMBER DATED 30/6/2016 MAHATA/- COPY OF THE ORDER FORWARDED TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT CONCERNED 4. THE CIT(A) CONCERNED 5. THE DR, ITAT, AHMEDABAD 6. GUARD FILE BY ORDER ASST. REGISTRAR, ITAT, AHMEDABAD 1. DATE OF DICTATION: 29/06/2016 2. DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE T HE DICTATING MEMBER: 30/06/2016 OTHER MEMBER: 3. DATE ON WHICH APPROVED DRAFT COMES TO THE SR. P. S./P.S.: 4. DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE TH E DICTATING MEMBER FOR PRONOUNCEMENT: __________ 5. DATE ON WHICH THE FAIR ORDER COMES BACK TO THE S R. P.S./P.S.: 6. DATE ON WHICH THE FILE GOES TO THE BENCH CLERK: 30/6/16 7. DATE ON WHICH THE FILE GOES TO THE HEAD CLERK: 8. THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT REGISTRAR FOR SIGNATURE ON THE ORDER: 9. DATE OF DESPATCH OF THE ORDER: