BHARAT BHIMRAJ SHAH, MUMBAI V. ITO WD 14(10(3), MUMBAI

ITA 3044/MUM/2011

• Counselvise Citation: 304419914 RSA 2011
• Duration Of Justice: 10 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-02-2012
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Assessment Year: 2007-2008
• Appeal Filed On: 18-04-2011
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: P C MAURYA
• Assessee Lawyers: D B SANGHVI
• Keywords: Additional evidence
• Section: 44AD; 40A(3); 143(3); 147

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES, B, MUMBAI BEFORE HONBLE PRESIDENT SHRI G.E.VEERABHADRAPPA AND SHRI D.K.AGARWAL (JM) ITA NO.3044/MUM/2011 (ASSESSMENT YEAR:2007-08) M/S BHARAT BHIMRAJ SHAH GROUND FLOOR, 196/198, KIKA STREET, SWAMI NARAYAN BUILDING, MUMBAI-400002 PAN:AMEPS7110B INCOME TAX OFFICER WARD 14(1)(3), 2 ND FLOOR, EARNEST HOUSE, NARIMAN POINT, MUMBAI-400021 APPELLANT V/S RESPONDENT DATE OF HEARING : 13.2.2012 DATE OF PRONOUNCEMENT : 22.2.2012 APPELLANT BY : SHRI D.B.SANGHVI RESPONDENT BY : SHRI P.C.MAURYA O R D E R PER D.K.AGARWAL (JM) THIS APPEAL PREFERRED BY THE ASSESSEE IS DIRECTED A GAINST THE ORDER DATED 18.2.2011 PASSED BY THE LD. CIT(A) FOR THE ASSESSMENT YEAR 2007-08. 2. BRIEFLY STATED FACTS OF THE CASE ARE THAT THE AS SESSEE AN INDIVIDUAL ENGAGED IN THE BUSINESS OF LABOUR JOB AND INCOME FROM OTHER SOURCES. THE RETURN WAS FILED DECLARIN G TOTAL INCOME AT RS.1,48,480/-. DURING THE COURSE OF ASSES SMENT ITA NO.3044/MUM/2011 (ASSESSMENT YEAR:2007-08) 2 PROCEEDINGS, THE ASSESSEE WAS ASKED TO FILE DETAI LS OF SUNDRY DEBTORS AND CREDITORS. THE ASSESSEE MADE PART COM PLIANCE BY FILING THE DETAILS AND STATED THAT HIS TURNOVER IS RS.21,24,750/- ON WHICH THE INCOME AT THE RATE OF 8% HAS BEEN SHOWN AT RS.1,69,980/-, THEREFORE, IN VIEW OF THE PROVISIONS OF SECTION 44AD, THE ASSESSMENT MAY BE C OMPLETED. HOWEVER, THE AO DID NOT ACCEPT THE ASSESSEES EX PLANATION ON THE GROUND THAT THE ASSESSEE HAS NOT CLAIMED T HE INCOME OF RS.1,69,980/- U/S 44AD EVEN THOUGH IT HAS BEEN SHOWN AT 8% OF RS.21,45,750/-. THE ASSESSEE WAS AGAIN ASKE D TO FILE DETAILS OF SUNDRY DEBTORS AND CREDITORS AND TO PROD UCE SUNDRY CREDITORS. HOWEVER, THE ASSESSEE FAILED TO MAKE AN Y PROPER COMPLIANCE. ACCORDINGLY, THE AO ADDED THE SUNDRY CREDITORS AMOUNTING TO RS.29,91,055/- TO THE TOTAL INCOME OF THE ASSESSEE. THE AO AFTER MAKING SOME OTHER ADDITION S COMPLETED THE ASSESSMENT AT AN INCOME OF RS.40,36, 780/- VIDE ORDER DATED 23.12.2009 PASSED U/S 143(3) OF TH E INCOME TAX ACT, 1961 (THE ACT). ON APPEAL, THE LD. CIT( A) AFTER CONSIDERING THE ASSESSEES SUBMISSIONS AND THE REM AND REPORT OF THE AO WHILE AGREEING WITH THE VIEWS OF THE AO FURTHER HELD THAT THE AO IS FREE TO ENQUIRE INTO ORIGIN O F IMPUGNED CREDITORS AND IF HE FINDS THAT THE IMPUGNED CREDIT ORS PERTAIN TO ANY EARLIER YEARS, HE IS DUTY BOUND TO TAKE N ECESSARY ITA NO.3044/MUM/2011 (ASSESSMENT YEAR:2007-08) 3 ACTION U/S 147 OR SECTION 147 R.W.S.150 AND THE A O IS ALSO FREE TO EXAMINE THE APPLICABILITY OF THE PROVISIONS OF SECTION 40A(3) OF THE ACT. 3. BEING AGGRIEVED BY THE ORDER OF THE LD. CIT(A), THE ASSESSEE IS IN APPEAL BEFORE US CHALLENGING IN GR OUND NOS.1.1 TO 1.3 THE SUSTENANCE OF ADDITION OF SUNDRY CREDIT ORS OF RS.28,91,055/-. 4. AT THE TIME OF HEARING, THE LD. COUNSEL FOR THE ASSESSEE WHILE REITERATING THE SAME SUBMISSIONS AS SUBMITTE D BEFORE THE AO AND THE LD. CIT(A) FURTHER SUBMITS THAT TH E ASSESSEE HAS FILED RETURN U/S 44AD SHOWING INCOME AT THE RA TE OF 8% OF THE TOTAL TURNOVER OF RS.21,24,750/-. THE LD. COU NSEL FOR THE ASSESSEE WHILE REFERRING TO THE REMAND REPORT DATE D 8.2.2001 OF THE AO SUBMITS THAT ALL THE SUNDRY CREDITORS WH ICH HAVE BEEN ADDED BY THE AO ARE NOT PERTAINING TO THE YEA R UNDER CONSIDERATION AND IT HAS ALSO BEEN CONFIRMED BY THE AO IN THE REMAND REPORT, THEREFORE, NO ADDITION FOR THE YEAR UNDER CONSIDERATION IS CALLED FOR. HE FURTHER SUBMITS THA T THE ASSESSEE HAS MADE PAYMENTS TO ALL THE SUNDRY CREDITORS IN T HE SUBSEQUENT YEARS I.E FROM 1.4.2007 TO 31.3.2010, TH EREFORE, THERE IS NO OUTSTANDING LIABILITY OF THE SUNDRY CRE DITORS WITH THE ASSESSEE AND THIS FACT HAS BEEN DULY RECORDED AT PA GE 2 OF THE ITA NO.3044/MUM/2011 (ASSESSMENT YEAR:2007-08) 4 APPELLATE ORDER. HE, THEREFORE, SUBMITS THAT THE A DDITION MADE BY THE AO AND SUSTAINED BY THE LD. CIT(A) BE DELET ED. THE RELIANCE WAS ALSO PLACED IN (A) DSA ENGINEERS (BO MBAY) V/S ITO (2009) 30 SOT 31(MUMBAI), (B) CIT V/S SMT.SITA DEVI JUNEJA (2010) 325 ITR 593 (P&H), (C) ITO V/S BHAVES H PRINTS (P) LTD. (2011) 46 SOT 268(AHD), (D) NITIN S. GARG V/S ACIT (2010) 40 SOT 253(AHD), AND ACIT V/S POPULAR VEHIC LES AND SERVICES LTD.(2006) 5 SOT 739 (COCH). 5. ON THE OTHER HAND, THE DR WHILE RELYING ON THE O RDER OF THE AO AND LD. CIT(A) FURTHER SUBMITS THAT SINCE THE ASSESSEE HAS NEITHER FILED CONFIRMATORY LETTER NOR PRODUCED THE SUNDRY CREDITORS AND IN PAST THE ASSESSEE HAS CLAIMED DED UCTION OF LIABILITY IN ITS PROFIT AND LOSS ACCOUNT, THEREFORE , THE LD. CIT(A) WAS FULLY JUSTIFIED IN UPHOLDING THE ADDITION MADE BY THE AO AND THEREFORE, THE ORDER PASSED BY THE AO BE UPHE LD. 6. WE HAVE CAREFULLY CONSIDERED THE SUBMISSIONS OF THE RIVAL PARTIES AND PERUSED THE MATERIAL AVAILABLE ON RECOR D. WE FIND THAT THE FACTS ARE NOT IN DISPUTE INASMUCH AS IT I S ALSO NOT IN DISPUTE THAT THE AO HAS ADDED THE AMOUNT OF SUNDRY CREDITORS APPEARING IN THE BALANCE SHEET OF THE ASSESSEE AMO UNTING TO RS.28,91,055/- AS UNEXPLAINED ON THE GROUND THAT THE ASSESSEE HAS NEITHER FILED CONFORMITY LETTERS FROM THE CREDITORS ITA NO.3044/MUM/2011 (ASSESSMENT YEAR:2007-08) 5 NOR PRODUCED FOR VERIFICATION AND THE LD. CIT(A) U PHELD THE VIEWS OF THE AO. HOWEVER, WE FIND THAT THE AO IN THE REMAND REPORT HAS ACCEPTED THAT THE UNEXPLAINED SUNDRY CRE DITORS FALL UNDER EARLIER ASSESSMENT YEAR 2006-07. MERELY BEC AUSE THE ASSESSEE HAS FAILED TO FILE CONFIRMATION LETTER OR TO PRODUCE THE SUNDRY CREDITORS DOES NOT MEAN THAT THE LIABILITY D OES NOT EXISTS. THE REVENUE HAS BROUGHT NO MATERIAL ON RE CORD TO SHOW THAT SUNDRY CREDITORS HAVE DENIED SUCH LIABIL ITY OR THE ENTRIES RECORDED IN THE BOOKS OF ACCOUNTS SHOWING SUCH LIABILITY WERE FOUND TO BE FALSE. IN THE ABSENCE THEREOF IT IS NOT OPEN TO THE AO TO MAKE SUCH ADDITION WITHOUT PROVI NG THAT THERE WAS CESSATION OF LIABILITIES. HOWEVER, SINCE THE ASSESSEE HAS NEITHER FILED CONFIRMATORY LETTERS NOR PRODUCE D THE SUNDRY CREDITORS AND KEEPING IN VIEW THAT THE ASSESSEE H AS FILED ADDITIONAL EVIDENCE AT THIS STAGE TO SHOW THAT THE SUCH LIABILITY HAS BEEN PAID BY THE ASSESSEE IN THE SUBSEQUENT YEA RS I.E DURING THE PERIOD FROM 1.4.2007 TO 31.3.2010, THERE FORE, WE, IN THE INTERESTS OF JUSTICE CONSIDER IT FAIR AND REASO NABLE THAT THE MATTER SHOULD GO BACK TO THE FILE OF THE AO TO VER IFY THE SAME AND IF HE FINDS THAT THE ASSESSEE HAS DISCHARGED IT S LIABILITY IN MAKING THE PAYMENTS TO SUNDRY CREDITORS EITHER BY CHEQUE OR IN CASH, HE SHOULD ALLOW THE SAME AFTER DUE EXAMINA TION AND ACCORDING TO LAW AFTER PROVIDING REASONABLE OPPORT UNITY OF ITA NO.3044/MUM/2011 (ASSESSMENT YEAR:2007-08) 6 BEING HEARD TO THE ASSESSEE. ACCORDINGLY, THE GROU NDS TAKEN BY THE ASSESSEE ARE, PARTLY ALLOWED FOR STATISTICAL PURPOSES. 7. GROUND NO.2 IS AGAINST THE DIRECTION OF THE LD.C IT(A) TO TAKE ACTION U/S 147 R.W.S.150 AND TO EXAMINE THE AP PLICABILITY OF SECTION 40A(3). 8. AT THE TIME OF HEARING, THE LD. COUNSEL FOR THE ASSESSEE SUBMIT THAT HE DOES NOT WANT TO PRESS THE ABOVE GRO UND WHICH WAS NOT OBJECTED TO BY THE LD. DR. 9. THAT BEING SO AND IN THE ABSENCE OF ANY OTHER SU PPORTING MATERIALS PLACED ON RECORD BY THE LEARNED COUNSEL F OR THE ASSESSEE, THE GROUND TAKEN BY THE ASSESSEE IS, THER EFORE, REJECTED BEING NOT PRESSED. 10. IN THE RESULT, THE ASSESSEES APPEAL STANDS PA RTLY ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 22ND FEB., 2012. SD SD (G.E.VEERABHADRAPPA) (D.K.AGARWAL ) PRESIDENT JUD ICIAL MEMBER MUMBAI, DATED 22ND FEBRUARY,2012. ITA NO.3044/MUM/2011 (ASSESSMENT YEAR:2007-08) 7 SRL: COPY TO: 1. APPELLANT 2. RESPONDENT 3. CIT CONCERNED 4. CIT(A) CONCERNED 5. DR CONCERNED BENCH 6. GUARD FILE. BY ORDER TRUE COPY ASSTT. REGISTRAR, ITAT, MUM BAI