Shri Murgesh R. Nirani., V. The Asst. Comm. Of Income-Tax. Central Circle, Panaji., Panaji

ITA 289/PAN/2014

• Counselvise Citation: 28924114 RSA 2014
• Duration Of Justice: 6 month(s) 30 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-03-2015
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Next Hearing Date: 16-03-2015
• Assessment Year: 2002-2003
• Appeal Filed On: 25-08-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: MANJUNATH I PUJAR
• Assessee Lawyers: ASHOK A KULKARNI
• Keywords: Unexplained cash credit; Income from undisclosed sources; Principle of natural justice; Reasonable cause; Deemed dividend; Condonation of delay
• Section: 132

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PANAJI BENCH, PANAJI BEFORE SHRI P. K. BANSAL, HONBLE ACCOUNTANT MEMBER AND SHRI D.T. GARASIA, HONBLE JUDICIAL MEMBER ITA NO. 289 /PNJ/2014 (ASST. YEAR : 200 2 - 0 3 ) SRI MURUGESH R NIRANI , A - 916 , BASAVA NAGAR, MUDHOL, BAGALKOT . VS. A CIT, CENTRAL CIRCLE, PANAJI. PAN NO. AALPN 3890 L (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI ASHOK A. KULKARNI. DEPARTMENT BY : SHRI MANJUNATH I. PUJAR D . R . DATE OF HEARING : 16 / 0 3 /2015 . DATE OF PRONOUNCEMENT : 24 / 0 3 /201 5 . O R D E R PER D.T. GARASIA , J .M TH IS APPEAL BY THE ASSESSEE AGAINST THE ORDER DATED 2 8/0 3 /2014 OF L D . CIT(A) - VI , B ANGALORE FOR A.Y. 200 2 - 0 3 . 2 THE REGISTRY HAS POINTED OUT THAT THE APPEAL BY THE ASSESSEE IS BARRED BY LIMITATION BY 71 DAYS. AN AFFIDAVIT IN THIS REGARD HAS BEEN 2 FILED BY THE ASSESSEE FOR CONDONATION OF DELAY BY STATING THEREIN AS UNDER: - 2. I STATE THAT SOMETIME DURING LAST WEEK OF APRIL, 2014 I RECEIVED BUNCH OF APPELLATE ORDERS RELATING TO M/S. NIRANI SUGARS LTD, SHRI MURGESH R. NIRANI (AOP) AND SHRI.MURGESH R. NIRANIFMY OWN) FROM OUR CHARTERED ACCOUNTANTS M/S. SHIVANGI AND LATKAR, CHARTERE D ACCOUNTANTS, BELGAUM. ON PERUSAL OF THE APPELLATE ORDERS . I INSTRUCTED OUR CHARTERED ACCOUNTANTS TO FILE APPEALS IN THE CASE OF NIRANI SUGARS LTD AND FOR A.Y.2002 - 03 AND 2004 - 05IN MY INDIVIDUAL CASE. ACCORDINGLY, 1 FORWARDED COPIES OF THE APPELLATE ORDER S TO OUR CHARTERED ACCOUNTANTS AT BELGAUM TO TAKE FURTHER STEPS. 3. I STATE THAT I PERSONALLY DELIVERED THE CONSOLIDATED APPELLATE ORDERS RELATING TO VARIOUS ASSESS EES TO MR. DEEPAK KUL KARNI WORKING IN M/S. SHIVANGI & LATKAR , CHARTERED ACCOUNTANTS, BELGAUM IN THE LAST WEEK OF MAY 2014 WITH INSTRUCTION TO PREPARE APPEAL MEMO'S. I STATE THAT IN MY CASE I DID NOT MENTION THE ASSESSMENT YEAR FOR WHICH THE APPEAL WAS REQUIRED TO BE FILED. I FURTHER STATE THAT IN MY CASES THE COMMI SSIONER OF INCOME TAX (APPEALS) - VI, BANGALORE HAS PASSED A CONSOLIDATED APPELLATE ORDER COVERING ASSESSMENT YEARS 2001 - 02 TO 2004 - 05. THEREFORE, OUR CHARTERED ACCOUNTANTS PREPARED APPEALS FOR ALL THE ASSESSMENT YEARS I.E., 2001 - 02 TO 2004 - 05. ON RECEIPT OF THE APPEAL MEMOS, WHILE SEGREGATING, I REMOVED INADVERTENTLY, THE APPEAL MEMOS, RELATING TO ASSESSMENT YEAR 2002 - 03 AND INADVERTENTLY FORWARDED THE APPEAL PAPERS RELATING TO ASSESSMENT YEARS 2004 - 05 ONLY FOR FILING. IT WAS IN THESE C IRCUMSTANCES, I TOTALLY MISSED THE FINALIZATION OF APPEAL MEMO. 4. I STATE THAT I RECEIVED THE HEARING NOTICE FOR A.Y.2004 - 05 FROM THE HON'BLE APPELLATE TRIBUNAL, PANAJI BENCH, PANAJI POSTING THE APPEAL FOR HEARING ON 01/09/2014. WHEN I TRIED TO FOLLOW UP THE APPEAL RELATING TO A.Y. 2002 - 03 WITH OUR CHARTERED ACCOUNTANTS AND OUR ADVOCATES M/S K.R. PRASAD AT BANGALORE I REALIZED T HAT THE APPEAL ITSELF WAS NOT FILED. ON REALIZING THE MIS TAK E I IMME D IATELY TOOK STEPS TO MAKE ADEQUATE COPIES OF THE IMPUGNED ORDERS, PAID FILING FEES AND FORWARDED TO THE APPEAL MEMO'S TO OUR ADVOCATES M/S K.R. PRAS A D AT BANGALORE TO DO THE NEEDFUL. 3 3. DURING THE COURSE OF HEARING, LEARNED AR REITERATED THE CONTENTS OF THE AFORESAID APPLICATION FOR CONDONATION OF DELAY AND REQUESTED TO CONDONE THE DELAY. 4. IN HIS RIVAL SUBMISSIONS, LEARNED DR OPPOSED THE APPLICATION AND STATED THAT THE DELAY MAY NOT B E CONDONED. 5. WE HAVE HEARD RIVAL CONTENTIONS OF BOTH THE PARTIES AND CAREFULLY GONE THROUGH THE MATERIAL AVAILABLE ON RECORD. IN OUR OPINION, THERE WAS A REASONABLE CAUSE FOR FILING THE APPEAL BELATED LY . WE, THEREFORE, CONDONE THE DELAY AND THE APPEAL IS ADMITTED FOR HEARING . 6 . THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS : - 1. THE ORDER OF THE HONBLE COMMISSIONER OF INCOME TAX (APPEALS) IS OPPOSED TO LAW AND FACTS OF THE CASE. 2. THE HONBLE COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN UPHOLDING THE ADDITION OF RS. 9,62,382/ - AS INCOME FROM UNDISCLOSED SOURCES AND NOT AS AGRICULTURAL INCOME. 3. THE HONBLE COMMISSIONER OF INCOME TAX (APPEALS) OUGHT TO HAVE DELETED THE ADDITION OF RS. 10,00,000 / - BY ACCEPTING THE EXPLANATION AND ON THE APPRECIATION OF EVIDENCE PRODUCED BY THE APPELLANT. 4. THE COMMISSIONER OF INCOME TAX (APPEALS) OUGHT TO H A VE HELD THAT THE ADDITION ON ACCOUNT OF REPAYMENT OF LAND IN SUM OF RS. 30,00,000/ - IS NOT IN ACCORDANCE WITH LAW. 5. THE HONBLE COMMISSIONER OF INCOME TAX (APPEALS) OUGHT TO HAVE HELD THAT THE ADDITION OF RS. 2,15,000/ - BEING INVESTMENT IN SHARES IS BAD IN LAW. 6. THE HONBLE COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN UPHOLDING THE ADDITION OF RS. 12,65,620/ - ON AN ALTOGETHER A NEW GROUND. 4 7. THE ORDER OF THE HONBLE COMMISSIONER OF INCOME TAX (APPEALS) TREATING THE SUM OF RS. 12,65,620/ - AS DEEMED DIVIDED U/S. 2(22)(E) OF THE IT ACT IS IN VIOLATION OF THE PRINCIPLES OF NATURAL JUSTICE AND ALSO WITHOUT ANY AUTHORITY OF LAW. 8. THE APPELLANT CRAVES FOR LEAV E TO, ADD TO, DELETE FROM OR AMEND THE GROUNDS OF APPEAL. 7 . SHORT FACTS OF THE CASE ARE THAT A SEARCH U/S. 132 OF THE INCOME TAX ACT, 1961 (HEREINAFTER REFERRED TO AS THE 'ACT', FOR SHORT) WAS CARRIED OUT . SIMULTANEOUSLY , SEARCH WAS ALSO CONDUCTED IN M/S. NIRANI SUGAR MILLS , IN WHICH THE ASSESSEE WAS THE CHAIRMAN . DURING THE COURSE OF SEARCH, SOME BOOKS OF ACCOUNTS WERE FOUND AND SEIZED . ON THE BASIS OF LEDGER ACCOUNTS FOUND IN THE SEIZED NO.2 BOOKS OF ACCOUNTS FOUND FROM THE RESIDENCE OF SHRI NAROTTAM PAREKH, ACCOUNTANT OF NIRANI SUGARS LTD. , THE ASSESSING OFFICER HAS ARRIVE D AT THE PEAK CASH CREDIT FOR THE CAPTIONED YEAR OF RS. 12,65,620/ - . DURING THE COURSE OF SEARCH , NO.2 ACCOUNTS WERE FOUND AND SEIZED ALONG WITH SUPPORTING DOCUMENTS. THESE DOCUMENTS CLEARLY INDICATE THAT A GROUP OF DIRECTORS HAVE COME TOGETHER AND MADE THE SALE OF SUGAR OUTSIDE THE REGULAR BOOKS OF ACCOUNTS . SUBSTANTIAL EVIDENCE HAS BEEN FOUND TO ESTABLISH THIS FACT. SINCE, THE SOURCE OF CASH CREDIT APPEARING IN THE LEDGER ACCOUNT OF THE ASSESSEE IN NO.2 BOOKS IS OUT OF THE PROFIT MADE ON UNACCOUNTED SALES MADE BY AOP , CONSISTING OF THE ASSESSEE SHRI SHRIKANT BAHETI AND SHRI BHAGWANDAS M. JAJU . THE PROFIT ON 5 UNACCOUNTED SALES QUANTIFIED IN THE CASE OF AOP IS BEING SUB STANTIALLY ASSESSED IN THE HANDS OF THE AOP. HOWEVER, TO PROTECT THE INTEREST OF REVENUE, THE PEAK CASH CREDITS APPEARING IN THE LEDGER ACCOUNT OF THE ASSESSEE ARE ASSESSED HERE ON PROTECTIVE BASIS. 8 . THE MATTER WAS CARRIED TO THE LD. CIT(A) AND THE LD. CIT(A) HAS ENHANCED THE ASSESSMENT BY OBSERVING AS UNDER: - 6.5 UNEXPLAINED CASH CREDITS SIMILAR TO THE ADDITION AT PARA 4.1 ABOVE, FOR A.Y. 2001 - 02, ADDITION OF RS. 5,620/ - WAS MADE FOR A.Y. 2002 - 03 AFTER GIVING CREDIT TO THE ADDITION ALREADY I. E . FOR A.Y. 2001 - 02. THIS ADDITION WAS ON THE BASIS OF LEDGER ACCOUNTS FOUND SEIZED FROM THE ACCOUNTANT OF M/S NIRANI SUGARS LTD. AN ADDITION IN RESPECT OF U NDISCLOSED PROFIT FROM UNACCOUNTED SALES IN HANDS O F M/S NIRANI SUGARS LTD RS. 2,60,55,620/ - FOR A.Y. 2002 - 2003 HAS BEEN UPHELD BY ME IN MY ORDER IN NOS.TR.41/42/43/44/ACIT,CCPANAJI/CIT(A) - V I /BNG/ 2013 - 2014 IN A.YS 2001 - 02 TO 2004 - 05 OF EVEN DATE. THE APPELLANT IS CHAIRMAN OF THE APPELLANT COMPANY AND A MAJOR SH AREHOLDER. IT IS ALSO APPARENT THAT FOR THE ASSESSMENT YEARS IN QUESTION, THE ID COMPANY, M/S NIRANI SUGARS LTD HAD PROFITS (TOTAL INCOME RS. 2,05,96,698 / - ). TH EREFORE, THIS AMOUNT OF RS. 2,65,620 / - IS CLEARLY TAXABLE AS THE INCOME OF THE AP PELLANT ALS O, AS DEEMED DIVIDEND U/S. 2(22) (E) OF THE INCOME TAX ACT. THE ADDITION IS THEREFORE UPHELD FOR A.Y. 2002 - 03 IN HANDS OF THE APPELLANT AS WELL. IT IS RELEVANT TO NOTE THAT THE SAID COMPANY, M/S NIRANI SUGARS L TD, THOUGH A PUBLIC LTD CO., HAS NOT TAKEN ANY STEPS EITHER TO BRING N O T ITS BOOKS THE UNACCOUNTED INCOME EARNED OR TO RECOVER THE SAM E FROM THE SAID PERSONS TO WHOM THE 'PROFITS' ARE CREDITED AS PER THE UNACCOUNTED BOOKS. WITH THESE FINDINGS, THE ADDITION MADE IS UPHELD. 9 . DURING THE COURSE OF HEARING, LEARNED AR SUBMITTED THAT LD. CIT(A) IN HIS ORDER UPHELD THE ADDITION ON THE GR O UND THAT THIS AMOUNT 6 OF RS. 12,65,620/ - IS CLEARLY TAXABLE AS THE INCOME OF THE ASSESSEE ALSO, AS DEEMED DIVIDEND U/S. 2(22)(E) OF THE ACT. LEARNED AR FURTHER SUBMITTED THAT BEFORE MAKING ENHANCEMENT , NO NOTICE WAS GIVEN TO THE ASSESSEE . ASSESSEE MUST BE GIVEN OPPORTUNITY OF HEARING BEFORE MAKING ANY ENHANCEMENT. LEARNED AR SUBMITTED THAT T HE MATER MAY BE RESTORED TO LD. CIT(A) AND LD. CIT(A) SHOULD BE DIRECTED TO GIVE OPPORTUNITY OF HEARING BEFORE MAKING THIS OBSERVATION, HENCE, APPEAL MAY BE ALLOWED FOR STATISTICAL PURPOSE. 10 . LEARNED DR HAS NO OBJECTION, IF MATTER IS RESTORED TO THE LD. CIT(A) . 11 . WE HAVE HEARD RIVAL CONTENTIONS OF BOTH THE PARTIES. LOOKING TO THE FACTS AND CIRCUMSTANCES OF THE CASE, WE FIND FROM THE ASSESSMENT ORDER THAT THE ASSESSING OFFICER HAS MADE THE ADDITION IN THE HANDS OF AOP , CONSISTING OF SHRI SHRIKANT BAHE TI AND SHRI BHAGWANDAS M. JAJU . THE PROFIT ON UNACCOUNTED SALES QUANTIFIED IN THE CASE OF AOP IS BEING SUBSTANTIALLY ASSESSED IN THE HANDS OF THE AOP . TO PROTECT THE INTEREST OF THE REVENUE, THE PEAK CASH CREDITS APPEARING IN THE LEDGER ACCOUNT OF THE ASSESSEE ARE ASSESSED HERE ON PROTECTIVE BASIS. LEARNED CIT(A) HELD THAT ADDITION WAS MADE ON THE BASIS OF LEDGER ACCOUNT FOUND AND SEIZED FROM THE ACC OUNTANT OF M/S. NIRANI SUGARS LTD. THIS ADDITION IS 7 IN RESPECT OF UNDISCLOSED PROFIT FROM UNACCOUNTED SALES IN THE HANDS OF M/S. NIRANI SUGARS LTD. , HENCE, THIS TOTAL INCOME IS OF M/S. NIRANI SUGARS LTD. THEREFORE , THIS AMOUNT IS CLEARLY TAXABLE AS DEEMED DIVIDEND IN THE CASE OF THE ASSESSEE . WE FIND THAT BEFORE MAKING THIS OBSERVATION, LD. CIT(A) HAS NOT GIVEN ANY OPPORTUNITY OF HEARING TO THE ASSESSEE. THEREFORE, IN THE INTEREST OF JUSTICE AND FAIR PLAY, WE REVERSE THE FINDINGS OF LD. CIT(A) AND RESTORE THIS MATTER BACK TO THE FILE OF THE LD. CIT(A) TO GIVE PROPER OPPORTUNITY OF HEARING TO THE ASSESSEE . 12 . IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSE . ( ORDER PRONOUNCED IN THE OPEN COURT ON 2 4 T H MARCH , 201 5 ). S D / - S D / - (P.K. BANSAL) (D.T. GARASIA) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED : 2 4 T H MARCH , 201 5 . VR/ - COPY TO: 1 . THE APPELLANT 2 . THE RESPONDENT 3 . THE LD. CIT 4 . THE CIT(A) 5 . THE D.R 6 . GUARD FILE. BY ORDER ASSISTANT REGISTRAR I.T.A.T., PANAJI