UNI DESIGN ELITE JEWELLERY P.LTD, MUMBAI V. DCIT CEN CIR 9, MUMBAI

ITA 2821/MUM/2017

• Counselvise Citation: [2018] 112 COUNSELVISE.COM (IT) 6019 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 8 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-12-2018
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: Not Allotted
• Assessment Year: 2012-2013
• Appeal Filed On: 19-04-2017
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: RAJIV GUBGOTRA
• Assessee Lawyers: RAKESH MOHAN
• Keywords: Unexplained investment; Opportunity of being heard; Earning of tax free income; Rule 8D; Set aside
• Section: 143(3); 14A; 69B; 69A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH F MUMBAI BEFORE SHRI C.N. PRASAD (JUDICIAL MEMBER) AND SHRI N.K. PRADHAN (ACCOUNTANT MEMBER) ITA NO. 2821/MUM/2017 ASSESSMENT YEAR: 2012 - 13 UNI DESIGN ELITE JEWELLERY P. LTD. 401 - 402, TOWER NO. II, SEEPZ, ANDHERI (E), MUMBAI - 400096. VS. THE DEPUTY COMMISSIONER OF INCOME TAX, (CENTRAL CIRCLE ) - 1(2), OLD CGO BUILDING, M.K. ROAD, MUMBAI - 400020. PAN NO. AAACK3499E APPELLANT RESPONDENT ASSESSEE BY : MR. RAKESH MOHAN, AR REVENUE BY : MR. RAJIV GUBGOTRA, DR DATE OF HEARING : 25/10/2018 DATE OF PRONOUNCEMENT : 31/12/2018 ORDER PER N.K. PRADHAN, AM THIS IS AN APPEAL FILED BY THE ASSESSEE. THE RELEVANT ASSESSMENT YEAR IS 2012 - 13. THE APPEAL IS DIRECTED AGAINST THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS) - 52, MUMBAI [IN SHORT CIT(A)] AND ARISES OUT OF THE ASSESSMENT COMPLETED U/S 143(3) OF T HE INCOME TAX ACT 1961, (THE ACT). 2. THE 1 ST GROUND OF APPEAL IS GENERAL IN NATURE. WE BEGIN WITH THE 2 ND GROUND OF APPEAL WHICH READS AS UNDER: WITHOUT PREJUDICE TO THE ABOVE, ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) HAS ERRED IN CONFIRMING THE ADDITION MADE UNI DESIGN ELITE ITA NO. 2821/MUM/2017 2 BY THE A.O. OF RS.4,91,789/ - U/S 14A OF THE INCOME TAX ACT 1961 ('THE ACT'). 3 . DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER (AO) OBSERVED THAT THE ASSESSEE WAS HAVING INVESTMENT, THE I NCOME FROM WHICH IS EXEMPT U/S 10(34) OF THE ACT. IN RESPONSE TO A QUERY RAISED BY THE AO TO EXPLAIN WHY DISALLOWANCE SHALL NOT BE MADE U/S 14A R.W. RULE 8D, THE ASSESSEE SUBMITTED INTER ALIA THAT IT HAS NOT EARNED ANY EXEMPT INCOME AND THEREFORE, NO DISAL LOWANCE SHOULD BE MADE. HOWEVER, THE AO WAS NOT CONVINCED WITH THE SAID EXPLANATION OF THE ASSESSEE AND MADE A DISALLOWANCE OF RS.4,91,789/ - U/S 14A R.W. RULE 8D OF THE INCOME TAX RULES, 1962 (THE RULES). 4. AGGRIEVED BY THE ORDER OF THE AO, THE ASSESSE E FILED AN APPEAL BEFORE THE LD. CIT(A). WE FIND THAT THE LD. CIT(A) AGREED WITH THE CALCULATION MADE BY THE AO U/S 14A R.W. RULE 8D AND CONFIRMED THE DISALLOWANCE OF RS.4,91,789/ - . 5. BEFORE US, THE LD. COUNSEL OF THE ASSESSEE SUBMITS THAT THE ASSESSEE H AS NOT EARNED ANY EXEMPT INCOME DURING THE YEAR UNDER CONSIDERATION AND THEREFORE, THE AO SHOULD NOT HAVE RESORTED TO DISALLOWANCE U/S 14A R.W. RULE 8D. ON THE OTHER HAND, THE LD. DR SUPPORTS THE ORDER PASSED BY THE LD. CIT(A). 6. WE HAVE HEARD THE RIVA L SUBMISSIONS AND PERUSED THE RELEVANT MATERIALS ON RECORD. IT IS FOUND FROM PARA 5 AT PAGE 4 OF THE ASSESSMENT ORDER DATED 30.03.2014 PASSED BY THE AO, THAT THE ASSESSEE HAD FILED A UNI DESIGN ELITE ITA NO. 2821/MUM/2017 3 SUBMISSION STATING THAT IT HAD NOT EARNED ANY EXEMPT INCOME DURING THE IM PUGNED ASSESSMENT YEAR. THERE IS NO DISPUTE ON THE ABOVE FACTS. IN VIEW OF THE DECISION OF THE HONBLE DELHI HIGH COURT IN THE CASE OF CHEMINVEST LTD. V. CIT 378 ITR 33, NO EXPENSES CAN BE DISALLOWED U/S 14A AS THE ASSESSEE HAS NOT EARNED ANY EXEMPT INCOME. SAME VIEW HAS BEEN TAKEN BY THE HONBLE BOMBAY HIGH COURT IN THE CASE OF PR. CIT V. BALLARPUR INDUSTRIES LTD . (ITA NO. 51 OF 2016). WE, THEREFORE, DELETE T HE DISALLOWANCE OF RS.4,91,789/ - SUSTAINED BY THE LD. CIT(A). 7. THE 3 RD GROUND OF APPEAL WITHOUT PREJUDICE TO THE GROUND NO. 1 , ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) HAS ERRED IN CONFIRMING THE ADDITION MADE BY THE A.O. OF RS.8,55,704/ - UNDER SECTION 69A OF THE ACT TREATING THE SAME AS OUT OF BOOK SALE. THE 4 TH GROUND OF APPEAL WITHOUT PREJUDICE TO THE GROUND NO. 1, ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) HAS ERRED IN CONFIRMING THE ADDITION MADE BY THE A.O. OF RS.18,41,439/ - UNDER SECTION 69B OF THE ACT TREATING THE SAME AS UNEXPLAINED INVESTMENTS. 8. THE 3 RD AND 4 TH GROUND OF APPEAL RELATE TO THE ADDITION OF RS.8,55,704/ - AND RS.18,41,439/ - MADE BY THE AO ON ACCOUNT OF DISCREPANCY IN STOCK OF GOLD, SILVER, PLATINUM AND DIAMOND JEWELLERY. WHILE ADDITION OF RS.8,55,704/ - HAS BEEN MADE BY THE AO ON ACC OUNT OF SHORTAGE OF STOCK OF DIAMOND, GOLD AND PLATINUM JEWELLERY BY TREATING THE SAME AS SOLD OUTSIDE THE BOOKS OF ACCOUNTS, THE AMOUNT OF RS.18,41,439/ - HAS BEEN ADDED AS EXCESS STOCK OF SILVER AND COLOURED UNI DESIGN ELITE ITA NO. 2821/MUM/2017 4 STONES FOUND VIS - - VIS STOCK APPEARING THE BOOK S OF ACCOUNTS OF THE ASSESSEE AND ADDITION OF THE SAME HAS BEEN MADE AS UNEXPLAINED INVESTMENT U/S 69B OF THE ACT. WHILE COMPLETING THE ASSESSMENT, THE AO HAS WORKED OUT THE SHORTAGE OF DIAMOND, GOLD AND PLATINUM JEWELLERY VIS - - VIS THE BOOK STOCK AS ON TH E DATE OF SEARCH AS UNDER: DETAILS ADJUSTED PHYSICAL STOCK AS ABOVE ADJUSTED BOOK STOCK AS ON DATE OF SEARCH I.E. 08.08.2011 ACTUAL DIFFERENCE IN THE STOCK RATE* VALUATION DIAMOND 12,085.34 12,114.95 (29.61) 17,500 5,18,175 GOLD 30,523.39 30,633.27 (109.88) 2,585 2,84,040 PLATINUM 1,886.24 1,906.892 (20.652) 2,590 53,489 SIMILARLY, THE AO WORKED OUT THE EXCESS STOCK IN RESPECT OF SILVER AND COLOURED STONES VIS - - VIS THE BOOKS OF ACCOUNTS AT RS.18,41,439/ - AS UNDER: DETAILS ADJUSTED PHYSICAL STOCK AS ABOVE ADJUSTED BOOK STOCK AS ON DATE OF SEARCH I.E. 08.08.2011 ACTUAL DIFFERENCE IN THE STOCK RATE* VALUATION SILVER 2,07,750.78 2,06,333.02 1,417.76 58 82,230 COLOUR STONES 87,291.78 62,160.22 25,131.56 70 17,59,209 IN APPEAL, THE LD. CIT(A) OBSERVED THAT THE ASSESSEE COULD NOT FURNISH ANY EVIDENCE OR EXPLANATION AS TO WHY THE WORKING MADE BY THE AO WAS UNFAIR OR UNJUSTIFIED. IN ABSENCE OF ANY EVIDENCE TO THE CONTRARY, THE LD. CIT(A) CONFIRMED THE ADDITION OF RS.8,55, 704/ - AND 18,41,439/ - MADE BY THE AO U/S 69A AND 69B RESPECTIVELY OF THE ACT. UNI DESIGN ELITE ITA NO. 2821/MUM/2017 5 9. BEFORE US, THE LD. COUNSEL OF THE ASSESSEE SUBMITS THAT A CHART RECONCILING THE DIFFERENCE BETWEEN THE PHYSICAL STOCK AND THE STOCK AS PER THE BOOKS FOR EACH OF THE CATEGORY OF GOODS ALONG WITH NECESSARY DOCUMENTARY EVIDENCE IN SUPPORT OF THE SAME WERE FILED BEFORE THE AO. HOWEVER, THE AO IGNORED THE RECONCILIATION OF THE DIFFERENCE AND MADE THE ADDITION. ON THE OTHER HAND, THE LD. DR SUPPORTS THE ORDER PASSED BY THE LD. CI T(A) STATING THAT THE ASSESSEE FAILED TO FILE ANY EVIDENCE CONTRARY TO THE FINDINGS BY THE AO. 10. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE RELEVANT MATERIALS ON RECORD. WE FIND THAT THE ASSESSEE HAS SUBMITTED A CHART BEFORE THE AO, RECONCILING THE DIFFERENCE BETWEEN THE PHYSICAL STOCK AND STOCK AS PER BOOKS OF ACCOUNTS FOR EACH OF THE CATEGORY OF GOODS. WE ARE OF THE CONSIDERED VIEW THAT THE MATTER PERTAINING TO THE ABOVE ISSUES NEED TO BE EXAMINED IN DETAILS BY THE AO. THEREFORE, WE SET ASIDE THE ORDER OF THE LD. CIT(A) AND RESTORE THE MATTER TO THE FILE OF THE AO TO MAKE A FRESH ORDER AFTER GIVING REASONABLE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. WE DIRECT THE ASSESSEE TO FILE THE RELEVANT DOCUMENTS/EVIDENCE BEFORE THE AO. THUS THE 3 RD AN D 4 TH GROUND OF APPEALS ARE ALLOWED FOR STATISTICAL PURPOSES. 1 1 . IN THE RESULT, THE APPEAL IS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 31/12/2018. SD/ - SD/ - (C.N. PRASAD) (N.K. PRADHAN) JUDICIAL MEMBER ACCOUNTANT MEMBER UNI DESIGN ELITE ITA NO. 2821/MUM/2017 6 MUMBAI ; DATED: 31/12/2018 RAHUL SHARMA, SR. P.S. COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT 2. THE RESPONDENT. 3. THE CIT(A) - 4. CIT 5. DR, ITAT, MUMBAI 6. GUARD FILE . BY ORDER, //TRUE COPY// (SR. PRIVATE SECRETARY) ITAT, MUMBAI