GAGAN ENTERPRISES, MUMBAI V. ITO 15(3)(2), MUMBAI

ITA 3116/MUM/2017

• Counselvise Citation: [2018] 119 COUNSELVISE.COM (IT) 0839 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 6 month(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-11-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: Not Allotted
• Assessment Year: 2010-2011
• Appeal Filed On: 01-05-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: CHAUDHARY ARUN KUMAR SINGH
• Assessee Lawyers: R C JAIN
• Keywords: Opportunity of being heard; Principle of natural justice; Proportionate interest; Corroborative evidences

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES G, MUMBAI BEFORE SHRI SAKTIJIT DEY, JUDICIAL MEMBER & SHRI RAMIT KOCHAR, ACCOUNTANT MEMBER ITA NO.3116/MUM/2017 ASSESSMENT YEAR : 2010-11 GAGAN ENTERPRISES, 112 SHANTIVAL CHS LTD., A WING, DEVIDAS ROAD, NEAR ST. LAWRANCE SCHOOL, BORIVALI, MUMBAI 400 092 PAN AADFG7027Q VS. THE ITO 15 ( 3 )( 2 ) , MUMBAI (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI R C JAIN RESPONDENT BY : SHRI CHAUDHARY ARUN KUMAR SINGH DATE OF HEARING : 1 5 . 11 .201 8 DATE OF PRONOUNCEMENT : 30 .11 .201 8 O R D E R PER SAKTIJIT DEY, JUDICIAL MEMBER THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF THE LEARNED CIT(A)-44, MUMBAI, DATED 09.02.2017, FOR THE ASSESS MENT YEAR 2010-11. 2. THE ISSUE IN DISPUTE IN THE PRESENT APPEAL IS IN RELATION TO CONFIRMATION OF CERTAIN DISALLOWANCE MADE BY THE ASSESSING OFFIC ER. BRIEFLY, FACTS ARE, THE ASSESSEE - A PARTNERSHIP FIRM, IS ENGAGED IN THE BU SINESS OF REAL ESTATE DEVELOPMENT. FOR THE ASSESSMENT YEAR UNDER DISPUTE , THE ASSESSEE FILED ITS RETURN OF INCOME ON 25.09.2010 DECLARING NIL INCO ME. DURING THE ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER WHILE EXAMINING THE BALANCE ITA NO.3116/MUM/2017 GAGAN ENTERPRISES 2 SHEET OF THE ASSESSEE NOTICED THAT IT HAS GIVEN ADV ANCES OF ` 81,66,893/- TO SISTER CONCERNS/RELATED PARTIES WITHOUT CHARGING AN Y INTEREST. FURTHER, THE ASSESSING OFFICER NOTICED THAT THE ASSESSEE HAS TAK EN BOTH INTEREST BEARING AND INTEREST FREE UNSECURED LOANS OF ` 74,74,451/- ON WHICH ASSESSEE HAS PAID INTEREST AMOUNTING TO ` 4,82,395/-. THUS, THE ASSESSING OFFICER BEING OF THE VIEW THAT THE ASSESSEE HAS ADVANCED INTEREST FR EE LOANS TO SISTER CONCERNS/RELATED PARTIES OUT OF INTEREST BEARING FU NDS, CALLED UPON THE ASSESSEE TO EXPLAIN WHY PROPORTIONATE INTEREST EXPE NDITURE SHOULD NOT BE DISALLOWED. AS OBSERVED BY THE ASSESSING OFFICER, THE ASSESSEE WITHOUT MAKING ANY COMMENT ON THE PROPOSED DISALLOWANCE OF EXPENDITURE SIMPLY STATED THAT INTEREST BEARING LOANS AVAILED BY THE A SSESSEE WAS ` 24,24,451/-. THE ASSESSING OFFICER DID NOT FIND ANY MERIT IN THE SUBMISSIONS OF THE ASSESSEE AND, HENCE, WORKED OUT PROPORTIONATE DISAL LOWANCE OUT OF INTEREST EXPENDITURE AT ` 4,80,925/- AND ADDED IT TO THE INCOME OF THE ASSES SEE. IN ADDITION TO THE AFORESAID DISALLOWANCE, THE ASSESSI NG OFFICER ON EXAMINATION OF THE ACCOUNTS OF THE ASSESSEE FOUND THAT AS AGAIN ST THE TOTAL WORK-IN- PROGRESS SHOWN OF ` 11,05,05,942/- AS ON 31.03.2010, THE ASSESSEE HAS SHOWN ADVANCES RECEIVED OF ` 9.45 CRORES AGAINST SALE OF FLAT. HE ALSO FOUND THAT THE PROJECT DEVELOPED BY THE ASSESSEE CONSISTS OF THREE WINGS OUT OF WHICH TWO WINGS WERE COMPLETED DURING THE YEAR. TH E ASSESSING OFFICER OBSERVED THAT AS PER THE REVISED COMMENCEMENT CERTI FICATE DATED ITA NO.3116/MUM/2017 GAGAN ENTERPRISES 3 15.05.2007, THE ASSESSEE HAS COMPLETED CONSTRUCTION OF 75% OF THE PROJECT AS ON 31.03.2010. WHEREAS, THE ASSESSEE HAS NOT DEC LARED PROFIT ON THE COMPLETED PROJECT IN THE ASSESSMENT YEAR UNDER CONS IDERATION IN TERMS OF ACCOUNTING STANDARDS AS-9. HE, THEREFORE, ASKED TH E ASSESSEE TO SHOW CAUSE AS TO WHY PROFIT RELATING TO THE COMPLETED PART OF THE HOUSING PROJECT SHOULD NOT BE ADDED TO THE INCOME OF THE YEAR. THOUGH, TH E ASSESSEE OBJECTED TO THE PROPOSED ADDITION, HOWEVER, THE ASSESSING OFFIC ER REJECTED THE OBJECTION OF THE ASSESSEE AND PROCEEDED TO DETERMINE THE PROF IT FROM THE HOUSING PROJECT AT ` 1,07,52,715/- AND ADDED IT BACK TO THE INCOME OF T HE ASSESSEE. BEING AGGRIEVED OF THE SAID ADDITION, ASSESSEE PREF ERRED APPEAL BEFORE THE LEARNED CIT(A). HOWEVER, LEARNED CIT(A) ALSO CONFI RMED THE ADDITION MADE BY THE ASSESSING OFFICER. 3. THE LEARNED AR CONTESTED THE ORDER PASSED BY THE LEARNED CIT(A) ON THE PRELIMINARY ISSUE OF VIOLATION OF RULES OF NATU RAL JUSTICE. HE SUBMITTED, IN THE COURSE OF PROCEEDINGS BEFORE THE FIRST APPELLAT E AUTHORITY THE ASSESSEE HAS NOT ONLY FILED ELABORATE WRITTEN SUBMISSIONS CO NTESTING THE ADDITIONS MADE BY THE ASSESSING OFFICER BUT HAS ALSO FURNISHE D NUMBER OF EVIDENCES IN SUPPORT OF ITS CLAIM. HE SUBMITTED, LEARNED CIT(A) WITHOUT PROPERLY CONSIDERING THE SUBMISSIONS OF THE ASSESSEE AND EXA MINING THE EVIDENCES PRODUCED, CONFIRMED THE ADDITIONS MADE BY THE ASSES SING OFFICER IN A MECHANICAL AND PERFUNCTORY MANNER. HE FURTHER SUBM ITTED, WITHOUT AFFORDING ITA NO.3116/MUM/2017 GAGAN ENTERPRISES 4 A PROPER OPPORTUNITY TO THE ASSESSEE TO EXPLAIN ITS CASE, THE LEARNED CIT(A) HAS DISMISSED THE APPEAL OF THE ASSESSEE BY UPHOLDI NG THE ADDITIONS MADE BY THE ASSESSING OFFICER. THUS, HE SUBMITTED, THE ISS UES RELATING TO THE ADDITIONS MADE BY THE ASSESSING OFFICER SHOULD BE RESTORED TO THE CIT(A) FOR DECIDING AFRESH AFTER CONSIDERING THE SUBMISSIONS AND EVIDEN CES FURNISHED BY THE ASSESSEE. 4. THE LEARNED DEPARTMENTAL REPRESENTATIVE, THOUGH, JUSTIFIED THE ADDITIONS MADE BY THE ASSESSING OFFICER, HOWEVER, H E HAS NO OBJECTION IF THE ISSUES ARE RESTORED TO THE CIT(A) FOR DENOVO ADJUDI CATION. 5. WE HAVE CONSIDERED RIVAL SUBMISSIONS AND PERUSED MATERIAL ON RECORD. THE MAJOR GRIEVANCE OF THE ASSESSEE IN THE PRESENT APPEAL IS, THE LEARNED CIT(A) WITHOUT AFFORDING REASONABLE OPPORTUNITY OF BEING HEARD HAS DISMISSED THE APPEAL. IT HAS ALSO BEEN SUBMITTED BY THE LEAR NED AR THAT THOUGH ELABORATE WRITTEN SUBMISSIONS WITH SUPPORTING EVIDE NCES WERE FILED, THE CIT(A) HAS COMPLETELY IGNORED THEM. CAREFUL PERUSA L OF THE IMPUGNED ORDER OF THE CIT(A), PARTICULARLY THE FACTS NARRATED IN P ARA 3 OF THE ORDER, REVEALS THAT FOR THE FIRST TIME THE CASE WAS FIXED FOR HEAR ING BEFORE THE CIT(A) ON 03.11.2014. THEREAFTER, THE CASE WAS ADJOURNED FRO M TIME TO TIME AND, ULTIMATELY, IT WAS FIXED ON 24.02.2016. AS MENTION ED BY THE LEARNED CIT(A), VIDE LETTER DATED 19.02.2016, ASSESSEE SOUGHT ADJOU RNMENT TO ANOTHER DATE. IT IS EVIDENT, PURSUANT TO THE AFORESAID APPLICATIO N FILED BY THE ASSESSEE ITA NO.3116/MUM/2017 GAGAN ENTERPRISES 5 SEEKING ADJOURNMENT FOR A PERIOD OF FORTNIGHT THE C ASE WAS NOT FIXED AND ONLY GOT REFIXED MUCH LATER ON 07.02.2017 I.E. ALMOST ON E YEAR AFTER THE LAST DATE OF HEARING. SINCE, ON THE SAID DATE, AS ALLEGED BY THE CIT(A), NO ONE APPEARED ON BEHALF OF THE ASSESSEE HE PROCEEDED TO DISPOSE OF THE APPEAL ON THE BASIS OF THE MATERIAL ON RECORD. IN THE COURSE OF HEARING, THE LEARNED AR HAD SUBMITTED BEFORE US THAT THE ASSESSEE NEVER REC EIVED THE NOTICE ISSUED BY THE CIT(A) FIXING THE APPEAL FOR HEARING 07.02.2 017. BE THAT AS IT MAY, IT IS A FACT ON RECORD THAT AFTER 24.02.2016 THE CASE WAS FINALLY FIXED FOR HEARING ON 07.02.2017, THAT TOO, ON THE BASIS OF APPLICATIO N FOR ADJOURNMENT FILED BY THE ASSESSEE. THE LEARNED CIT(A) HAS NOT CLEARLY S TATED IN THE ORDER AS TO WHY THE DELAY OF ONE YEAR OCCURRED IN FIXING THE FI NAL DATE OF HEARING. IT FURTHER APPEARS FROM RECORD, IN THE COURSE OF APPEA L HEARING THOUGH THE ASSESSEE HAD FILED WRITTEN SUBMISSIONS AND FURNISHE D SUPPORTING EVIDENCES, LEARNED CIT(A) HAS APPARENTLY NOT CONSIDERED THEM O N MERIT, WHICH IN OUR VIEW, INFRINGES RULES OF NATURAL JUSTICE. IN VIEW OF THE AFORESAID, WE ARE INCLINED TO RESTORE THE ISSUES RELATING TO THE DISP UTED ADDITIONS TO THE CIT(A) FOR DENOVO ADJUDICATION AFTER PROPERLY CONSIDERING THE SUBMISSIONS MADE BY THE ASSESSEE AND EVIDENCES BROUGHT ON RECORD. NEED LESS TO MENTION, LEARNED CIT(A) MUST AFFORD REASONABLE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE IN STRICT COMPLIANCE TO RULES OF NATURAL JUSTICE. IF LEARNED CIT(A) HAS ANY DOUBT WITH REGARD TO THE DISPUTED ISSUES AND REQUIRES FUR THER CLARIFICATION, HE MUST ITA NO.3116/MUM/2017 GAGAN ENTERPRISES 6 BRING SUCH FACT TO THE NOTICE OF THE ASSESSEE AND A FFORD OPPORTUNITY TO THE ASSESSEE TO EXPLAIN THEM. WITH THE AFORESAID OBSER VATIONS, THE GROUNDS ARE ALLOWED FOR STATISTICAL PURPOSE. 6. BEFORE PARTING, WE MUST OBSERVE THAT WE HAVE NOT EXPRESSED ANY OPINION WITH REGARD TO THE MERITS OF THE ADDITIONS/ DISALLOWANCES MADE BY THE ASSESSING OFFICER. THE LEARNED CIT(A) IS AT LIBERT Y TO DECIDE THE ISSUE ON THEIR OWN MERITS AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE AND EVIDENCES BROUGHT ON RECORD. 7. IN THE RESULT, APPEAL IS ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON THIS DAY OF 3 0 TH NOVEMBER, 2018. SD/- SD/- (RAMIT KOCHAR) (SAKTIJIT DEY) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI, DATED : 30 TH NOVEMBER, 2018. SA COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT. 2. THE RESPONDENT. 3. THE C I T(A), MUMBAI. 4. THE C I T 5. THE DR, G BENCH, ITAT, MUMBAI BY ORDER, //TRUE COPY// (ASSISTANT REGISTRAR) INCOME TAX APPELLATE TRIBUNAL, MUMBAI