RIZWAN REHHAN MALIK, MUMBAI V. ITO 26(2)(5), MUMBAI

ITA 2816/MUM/2017

• Counselvise Citation: [2022] 106 COUNSELVISE.COM (IT) 8602 (ITAT-MUMBAI)
• Duration Of Justice: 5 year(s) 3 month(s) 22 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-08-2022
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: D
• Assessment Year: 2009-2010
• Appeal Filed On: 18-04-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Reopening of assessment; Bogus purchase; Retrospective amendment; Initiation of penalty proceedings; TDS
• Section: 271(1)(c); 143(3); 142(1); 40(a)(ia); 133(6); 143(2)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL “D” BENCH, MUMBAI BEFORE SHRI PAVAN KUMAR GADALE, JUDICIAL MEMBER & SHRI AMARJIT SINGH, ACCOUNTANT MEMBER ITA No. 2816/Mum/2017 (A.Y: 2009-10) Rizwan Rehan Malik 18, Friends Housing Society, LBS Marg, Sakinaka, Mumbai –400072 Vs. ITO – 26(2)(5) Mumbai. PAN/GIR No. : AMQPM7948D Appellant .. Respondent Appellant by : None Respondent by : Smt. Mahita Nair.DR Date of Hearing 01.08.2022 Date of Pronouncement 08.08.2022 आदेश / O R D E R PER PAVAN KUMAR GADALE JM: The assessee has filed the appeal against the order of the Commissioner of Income Tax (Appeals) – 38, Mumbai passed u/s 143(3) r.w.s 147 and 250. The assessee has raised the following grounds of appeal: I. Reopening Of Assessment U/S 147 Is Bad In Law 1. That Ld. Assessing Officer erred in passing the Assessment order dated 30.03.2015 under section 147.of the Income Tax Act, 1961. ITA No. 2816/Mum/2017 Rizwan Rehan Malik., Mumbai. - 2 - 2. The Appellant strongly objects to the various additions and disallowances made in the assessment order. II. Addition on Account of Disallowance of Rent u/s. 40 (a)(ia) not justified - Rs.16,01.790/- 1. The Learned CIT(A) erred in confirming disallowance of Rs.16,01,790/- to the tune of 100% on which no TDS was deducted. 2. The said provisions the disallowance under section 40 (a)(ia) should be restricted to only 30% of Rs 16,01,790/- (i.e. R$.4,30,587) . As per ratio laid down in Dilip Kumar Roy V. ITO 68 taxmann.com 129, the Second proviso inserted in sub- clause (ia) of clause (a) of section 40 by the Finance Act, 2014, is declaratory and curative in nature and, therefore, should be given retrospective effect from 1-4-2005, being date from which sub-clause (ia) of section 40(a) was inserted by the Finance (No. 2) Act, 2004 3. In case of CIT V. Alom Extrusions 185 Taxman 416 (SC) the Apex Court held that the amendment to act which are curative in nature there should be a retrospective effect. Ill. Addition on Account of Unexplained expenditure under thehead Rent paid unjustified. 1. The Learned CIT(A) erred in disallowing Rent paid to the tune of Rs.5,00,000/- 2. The Appellant does not have enough stock to generate Rent income of Rs. 91,15,274/- on its own. The appellant has shown a good margin of 36.35% that come to Rs. 33,13,484/- which is also seen in Audited Balance Sheet And Profit and Loss Statement. 3. Appellant could not have earned that income if he did not made the said revenue expenses. All the transactions between the appellant and the aforementioned parties are purely bonafide and genuine in nature, which are entered into during the course of business. 4. The appellant is maintaining regular books of accounts which are audited. The books of accounts of the appellant ITA No. 2816/Mum/2017 Rizwan Rehan Malik., Mumbai. - 3 - are not rejected by the Learned AO. Also, there are no undisclosed cash or incriminating material or documents found and no additional evidence or information gathered by the Learned AO in the assessment proceeding to treat the purchases as bogus. 5. Based on the above documentary evidences and records it is established that material has been received and have been utilized for the project specifically form which income has been derived and sales have been accepted as genuine. IV.Initiation Of Penalty Proceedings U/S 271(1)(C) The Learned AO erred in initiating penalty proceedings Uls. 271(1)(c) of the Income Tax Act, 1961. 2. The Learned AO ought not to have initiated penalty proceedings U/s. 271(1)(c) of the Income Tax Act, 1961. V. The Appellant Prays Your Honour: 1. Re-opening u/s 147 is Bad in law and must be set aside. 2. To restrict disallowance of Sec. 40 (a) (ia) to Rs. 4,30,587/- on account of non deduction of TDS on rent paid as explained above. 3. To delete wrongful addition of Rs. 5,00,000/- on account of unexplained cash expenses (Rent Paid) as explained above. 4. The penalty initiated u/s 271 (1)(c) may please be dropped. VI. The Ld. Assessing Officer erred in levying interest under Sections 234B, 234C, 234D without appreciating the fact that the appellant denies his liability to the same. VII. The Appellant craves leave to add to, alter, amend, modify, substitute or rescind any of the Grounds of Appeal. 2. On perusal of the facts, the appeal was filed by the assessee on 19-04-2017 and the case was posted for ITA No. 2816/Mum/2017 Rizwan Rehan Malik., Mumbai. - 4 - hearing on 19-09-2018,10-10-2018,13-12-2018,18-02- 2019,25-04-2019,27-08-2019,6-10-2020,7-122020,12- 07-2021,06-09-2021,05-10-2021,25-11-2021,06-01- 2022,05-05-2022,28-06-2022, and today i.e 01.08.2022, none appeared on dates of hearing nor any application was filed for adjournment. Onconsidering the facts and the action of the assessee in nonappearance on date of hearing. The presumption is that after filling the appeal, the assessee is not inclined/ interested to prosecute the appeal. Accordingly, we heard the Ld. DR submissions and considered the material information available on record. 3. The brief facts of the case are that the assessee is an individual and is a proprietor of M/s. National Enterprises and engaged in the business of letting out the materials such as bamboo, jack clamps, centring, plates etc. The assessee has filed the return of income for the A.Y 2009-10 on 30.09.2009 disclosing a total income of Rs. 9,66,930/-. Subsequently the case was completed and assessment order u/s 143(3) was passed with a total income of Rs. 9,66,930/-. Subsequently the AO was received incriminating ITA No. 2816/Mum/2017 Rizwan Rehan Malik., Mumbai. - 5 - information from the sales tax department regarding the transactions of bogus purchases without actual delivery of goods and out of the list of beneficiaries the assessee has obtained bogus bills of Rs. 4,16,000/- from M/s RK Ispack. The A.O has issued the notice u/s 148 of the Act. In compliance to notice the Ld. AR of the assessee filed a letter dated 02.09.2014 to considered the return of income filed on 30.09.2009 as a due compliance, the A.O issued notice u/s 143(2) and 142(1) of the Act was issued. In compliance to the notice the Ld. AR of the assessee appeared from time to time and submitted the details. The AO to test check the genuineness of the transaction has issued notice u/s 133(6) of the Act on the party which was returned un-served by the postal authorities. The A.O has called for additional details to supporting the genuineness of transactions with invoices and also the transport details and in fact that the transactions has been taken place with any charges paid. The assessee has filed the submission which are not satisfactory and a show cause notice was issued and the assessee was called to produce the records to substantiate the genuineness of the purchases. Since the assessee has ITA No. 2816/Mum/2017 Rizwan Rehan Malik., Mumbai. - 6 - not discharged the burden of genuineness of the purchases the AO observed that the bogus purchases has treated as alleged party transactions of Rs. 4,16,000/- and made the addition. Further in respect of expenses, the assessee has claimed to the extent of Rs. 58,01,790/- which was paid to 40 parties, and the A.O found that the assessee has paid rent of Rs. 16,01,790/- to one M/s S.V traders and the TDS was not deducted while making the payment of Rs. 16,01,790/- and made the applicable provision u/s 40(a)(ia) of the Act and made addition. Further, the A.O found from the bank account of the assessee that the total cash withdrawals and also payments made to the parties does not supplement the transactions and found that the assessee has claimed a bogus rent and issued notice u/s 133(6) on the parties. Whereas, these notices were returned back and the assessee was asked to produce the parties with a copy of income tax return, copy of ledger, copy of bills, copy of bank statement in respect of the rent paid to the tune of 42 lakhs and was disallowed. Similarly on the third disputed issue the A.O has found that the assessee has creditors which were also disclosing the earlier years to ITA No. 2816/Mum/2017 Rizwan Rehan Malik., Mumbai. - 7 - the extent of Rs. 11,77,725/-. The AO asked to produce the confirmations with regard to sundry creditors along with ledger account, copy of income tax return and the balance sheet. The Ld. AR submitted that the confirmations has already been filed during the assessment proceedings and produced the ledger of the parties. On verification, the A.O found that the no confirmation of M/s. Chirag Ispat industries and assessee shows in inability to produce the same. In view of the above facts the A.O made addition of Rs. 11,77,725/-. Finally the A.O found that the assessee has made the payment of MVAT of Rs. 5,06,291/- and the assessee has produced challan copies of MVAT of Rs. 4,44,291/-. The A.O made the disallowance of difference amount of Rs. 62,000/- and assessed the total income of Rs. 84,01,770/- and passed the order u/s 143(3) r.w.s 147 of the Act dated30.03.2015.3 3. Aggrieved by the order the assessee has filed an appeal before the CIT(A). Whereas the CIT(A) considered the grounds of appeal, submissions of the assessee and findings of the AO and whereas as in respect of two issues with respect to bogus purchases the CIT(A) has restricted bogus purchases considering ITA No. 2816/Mum/2017 Rizwan Rehan Malik., Mumbai. - 8 - the judicial decisions to the extent of 12.5%. Second disputed issue with respect of disallowance of rent u/s 40(a)(ia) of Rs. 16,01,790/-, the CIT(A) has dealt on the facts and also the decisions and the provisions of Sec. 44AB of the Act and since the assessee has not able to furnish any details to substantiate the information and the CIT(A) confirmed the addition of 100% made by the A.O. Whereas in respect of other disputed issues the CIT(A) granted partial relief and partly allowed the assessee appeal. Aggrieved by the order the assessee has filed an appeal before the Hon’ble Tribunal. 4. At the time of hearing none appeared on behalf of the assessee and the Ld. DR has supported the order of the CIT(A). We heard the Ld. DR submissions and perused the material on record. On the first disputed issue disallowance u/s 40(a)(ia), we found that the AO has made disallowance of rent u/s 40(a)(ia) of the Act of Rs. 16,01,790/- whereas the provisions of Sec. 40(a)(ia) applicable to A.Y 2009-10 the amendment which is made u/s 40(a)(ia) is a retrospective and supported with the decisions of CIT Vs. Alom Extrusions 185 Taxman 416 (SC), where the amendment of Act which is cumulative in nature and ITA No. 2816/Mum/2017 Rizwan Rehan Malik., Mumbai. - 9 - should be retrospectively effected. Considering the facts and circumstances and judicial decisions we are of the considered opinion that the based on the information available on record and applicability of provisions we restricted the addition to the extent of 30% of Rs. 16,01,790/- and partly allowed the ground of appeal. The next disputed issue with respect to unexplained expenditure under the head rent paid unjustified. The assessee could not substantiated with any material or information as there is nothing new information filed before the Tribunal. Accordingly we found that the unexplained cash expenses which was paid by the assessee though the regular books of accounts submitted and the books of accounts are entered by the assessee, considering the submissions of the assessee we do not find any infirmity in the order of the CIT(A) and dismissed the assessee ground on this disputed issue. In respect of other grounds of appeal since there was no material on record filed by the assessee to make any decision we affirm the order of the CIT(A) order of the CIT(A) and partly allowed the assessee grounds of appeal. ITA No. 2816/Mum/2017 Rizwan Rehan Malik., Mumbai. - 10 - 5. In the result, the appeal filed by the assessee is partly allowed. Order pronounced in the open court on 08.08.2022. Sd/- Sd/- ( AMARJIT SINGH) (PAVAN KUMAR GADALE) ACCOUNTANT MEMBER JUDICIAL MEMBER Mumbai, Dated 08.08.2022 KRK, PS Copy of the Order forwarded to : 1. The Appellant 2. The Respondent. 3. The CIT(A) 4. Concerned CIT 5. DR, ITAT, Mumbai 6. Guard file. आदेशान ु सार/ BY ORDER, //True Copy// 1. ( Asst. Registrar) ITAT, Mumbai