SHRI MAYUR PATEL, MUMBAI V. INCOME TAX OFFICER WARD-24(2)(4), MUMBAI

ITA 3371/MUM/2018

• Counselvise Citation: [2018] 112 COUNSELVISE.COM (IT) 6020 (ITAT-MUMBAI)
• Duration Of Justice: 7 month(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-12-2018
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: I
• Assessment Year: 2012-2013
• Appeal Filed On: 18-05-2018
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: MANISH KUMAR SINGH
• Keywords: Unexplained cash credit; Business expenditure; Opportunity of being heard; Additional evidence; Set aside
• Section: 68; 144

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH D MUMBAI BEFORE SHRI SAKTIJIT DEY (JUDICIAL MEMBER) AND SHRI N.K. PRADHAN (ACCOUNTANT MEMBER) ITA NO. 3371/MUM/2018 ASSESSMENT YEAR: 2012 - 13 SHRI MAYUR PATEL C - 3002, METROPOLIS NEX T TO D.N. NAGAR, J.P. ROAD, OPP. GURUDWARA, ANDHERI (W), MUMBAI - 400053. VS. ITO, WARD 24(2)(4): ROOM NO. 610, LALBAUG, PIRAMAL CHAMBERS, MUMBAI. PAN NO. AAGPP3288B APPELLANT RESPONDENT ASSESSEE BY : MR. DEVENDRA JAIN, AR REVENUE BY : MR. MANISH KUMAR SINGH, DR DATE OF HEARING : 11/10/2018 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) - 36 , MUMBAI [IN SHORT CIT(A)] AND ARISES OUT OF THE ASSESSMENT COMPLETED U/S 144 OF THE INCOME TAX ACT 1961, (THE ACT). 2. THE GROUNDS OF APPEAL READ AS UNDER: 1. IN THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED CIT(A) HAS ERRED IN DISMISSING THE APPEAL IN LIMINE, EX - PARTE WITHOUT CONSIDERING THE SAME ON MERITS. SHRI MAYUR PATEL ITA NO. 3371/MUM/2018 2 2. IN THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED CIT(A) HAS ERRED IN CONFIRMING THE ADDITION OF RS.7,43,58,500/ - AS UNEXPLAINED CASH CREDIT U/S 68. 3. WITHOUT PREJUDICE TO GROUND NO.2, IN THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED CIT(A) HAS ERRED IN CONFIRMING THE ADDITION U/S 68 IN RESPECT OF OPENING BA LANCE OF LOAN I.E. LOAN RECEIVED IN PRECEDING YEAR. 4. IN THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED CIT(A) HAS ERRED IN CONFIRMING THE ADDITION OF RS.61,800/ - BEING SERVICE TAX CHARGED ON RENT RECEIVED, AS INCOME FROM HOUSE PROPERTY, DIS REGARDING THE CBDT CIRCULAR AND JUDICIAL PRONOUNCEMENTS. 5. IN THE FACTS AND CIRCUMSTANC ES OF THE CASE AND IN LAW, THE L EARNED CIT(A) HAS ERRED IN CONFIRMING THE ADDITION OF RS.33,09,000/ - BEING RENT FOR 10 MONTHS UNDER THE HEAD INCOME FROM HOUSE PROPERLY MER ELY ON SURMISES AND CONJECTURES DISREGARDING THE FACT THAT THE PROPERTY WAS NOT LET OUT DURING THOSE 10 MONTHS. 6. IN THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED CIT(A) HAS ERRED IN CONFIRMING THE DISALLOWANCE OF RS.8,59,748/ - BEING TAXES P AID TO LOCAL AUTHORITIES UNDER THE HEAD INCOME FROM HOUSE PROPERTY. 7. IN THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED CIT(A) HAS ERRED IN CONFIRMING THE ADDITION OF RS.7,83,476/ - AS PERQUISITE MERELY ON SURMISES AND CONJECTURES. 8. IN THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED CIT(A) HAS ERRED IN CONFIRMING THE DISALLOWANCE OF RS.20,02,352/ - U/S - 43B. 9. IN THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED CIT(A) HAS ERRED IN CONFIRMING THE DISALLOWANCE OF RS.2,63,026/ - BEING ADHOC 20% OF FOLLOWING BUSINESS EXPENSES: PARTICULARS AMOUNT (RS.) SOCIETY M AINTENANCE CHARGES RS.3,75,000/ - ADMINISTRATION EXPENSES RS.5,56,945/ - SHRI MAYUR PATEL ITA NO. 3371/MUM/2018 3 FINANCIAL EXPENSES RS.3,56,575/ - SUNDRY OFFICE EXPENSES RS.26,610/ - TOTAL RS.13,15,130/ - 3. IN THIS CASE, THE ASSESSING OFFICER (AO) HAS MADE THE ASSESSMENT U/S 144 OF THE ACT. INITIALLY THE ARS OF THE ASSESSEE ATTENDED THE PROCEEDINGS BEFORE THE AO. THEREAFTER, THERE WAS CHANGE IN JURISDICTION AND ALSO NON - COMPLIANCE BY THE A SSESSEE. THE ASSESSEE HAD FILED A RETURN OF INCOME FOR THE IMPUGNED ASSESSMENT YEAR ON 30.09.2012 DECLARING INCOME OF RS.7,06,463/ - . THE AO ASSESSED THE INCOME AT RS.8,10,38,120/ - . 4. AGGRIEVED BY THE ORDER OF THE AO, THE ASSESSEE FILED AN APPEAL BEFORE T HE LD. CIT(A). THOUGH THE CASE WAS FIXED FOR HEARING BY THE LD. CIT(A) ON 07.02.2017 AND 08.03.2017 , NEITHER THE ASSESSEE NOR HIS AUTHORIZED REPRESENTATIVE APPEARED BEFORE HIM. IT IS MENTIONED AT PARA 4 OF THE IMPUGNED ORDER THAT THE NOTICE ISSUED ON 18.01.2017 FIXING THE CASE FOR HEARING ON 07.02.2017 WAS RETURNED UNSERVED WITH THE REMARK UNCLAIMED. I T IS ALSO MENTIONED THEREIN THAT THE NOTICE ISSUED ON 08.02.2017 FIXING THE CASE FOR HEARING ON 08.03.2017 WAS ALSO RETURNED UNSERVED WITH THE REMARK NOT KNOWN. AGAIN ANOTHER NOTICE WAS ISSUED ON 02.06.2017 FIXING THE CASE FOR HEARING ON 04.07.2017. NO O NE ATTENDED ON THE ABOVE DATE, HOWEVER, AN ADJOURNMENT LETTER DATED 04.07.2017 WAS FILED BY THE ASSESSEE SEEKING TIME TO FURNISH THE REQUIRED DETAILS. ACCORDINGLY, THE CASE WAS FIXED BY THE LD. CIT(A) FOR HEARING ON 16.08.2017. AGAIN NO ONE ATTENDED AND AN ADJOURNMENT SHRI MAYUR PATEL ITA NO. 3371/MUM/2018 4 LETTER DATED 04.07.2017 WAS FILED BY THE ASSESSEE, SEEKING TIME TO FURNISH THE REQUIRED DETAILS. ACCORDINGLY, THE CASE WAS FIXED ON 01.01.2018. AGAIN NO ONE ATTENDED BEFORE THE CIT(A) ON THE ABOVE DATE. NO ADJOURN LETTER WAS FILED. BECAUSE OF THE REPEATED NON - COMPLIANCE BY THE ASSESSEE, THE LD. CIT(A) DISMISS ED THE APPEAL. 5. BEFORE US, THE LD. COUNSEL OF THE ASSESSEE FILES AN APPLICATION FOR ADMISSION OF ADDITIONAL EVIDENCE ALONG WITH AN AFFIDAVIT STATING THAT (I) T HE ASSESSEE IS THE DIRE CTOR OF SHLOK MEDIA PVT. LTD., INCORPORATED UNDER THE COMPANIES ACT, 1956 , WHICH WAS ENGAGED IN THE BUSINESS OF PROVIDING ADVERTISING AGENCY SERVICE IN INDIA AND IT PROVIDED OUTDOOR ADVERTISING AND UNDERTAKES ACTIVITIES SUCH AS HOARDING AND DISPLAY ADVE RTISING, (II) I N THE YEAR 2012, THERE WERE SERIAL BLASTS IN PUNE. ANTI - TERRORIST SQUAD (ATS) FOUND THE COMPANYS BIKE IN CCTV FOOTAGE, WHICH WAS TAKING PHOTOS OF HOARDINGS ON THE ROAD. THEY WERE UNDER THE IMPRESSION THAT THE BIKE WAS USED AS A TOOL IN THE BLASTS AND ON SUCH MISUNDERSTANDING, THEY TOOK HIM IN CUSTODY SINCE THE BIKE REGISTRATION WAS NOT TRANSFERRED IN THE NAME OF THE PERSON TO WHOM IT WAS ALREADY TRANSFERRED. IN CONNECTION WITH THE SAID INVESTIGATION, ATS MADE VISITS TO HIS BUSINESS PREMISES AND SEARCHED ENTIRE OFFICE AND ALL THE DOCUMENTS. THIS AFFECTED HIS BUSINESS AS WELL AS REPUTATION IN THE MARKET, (III) H E GOT NOTICE FROM THE SERVICE TAX DEPARTMENT FOR REGULAR AUDIT OF THE COMPANY. THEY ASKED HIM FOR THE FILES AND DOCUMENTS WHICH WERE CO MPLETELY IN MESS DUE TO THE SEARCH BY THE ATS. FAILING TO PROVIDE THEM THE NECESSARY DOCUMENT AND JUSTIFICATION, THEY FROZE BANK ACCOUNTS AND SHRI MAYUR PATEL ITA NO. 3371/MUM/2018 5 ISSUED LETTER TO HIS DEBTORS TO PAY THE AMOUNT DIRECTLY TO THE REVENUE TREASURY, WHICH RESULTED INTO FINANCIAL INS TABILITY IN THE BUSINESS FOR A LONG PERIOD, (IV) THE FILES WERE IN COMPLETE MESS DUE TO SEARCH OF THE ATS IN TH E OFFICE AND COULD NOT ARRANGE BACK THE DOCUMENTS AS THERE WERE HIGH TURNOVER OF EMPLOYEES IN THE OFFICE OR ACCOUNT OF FINANCIAL INSTABILITY. IN THE ABSENCE OF ACCOUNTS PERSONNEL AND IMPROPER FILING, HE COULD NOT FURNISH DOCUMENTS TO SERVICE TAX DEPARTMENT, WHICH RESULTE D IN A HUGE TAX LIABILITY, (V) T HE BANK ACCOUNTS AND DEBTORS BEING FROZEN AFFECTED BANK LOANS, PAYMENTS TO CREDITORS, EMPLOYEES AN D SOCIETIES ETC. THIS GRADUALLY LED HIM TO SELL OFF THE ASSETS WHICH WERE GENERATING THE REVENUE. SINCE THE COMPANY WAS UNABLE TO REPAY INTEREST OR PRINCIPAL AMOUNT ON TIME, SEVERAL INVESTORS AND PERSONAL FINANCERS WERE GIVING THREATENING CALLS AND THERE W AS PRESSURE FROM UNSOCIAL ELEMENTS FOR RECOVERY OF MONEY. MR. PARAG SANGHVI, ONE OF THE LENDERS TOOK THE FORCEFUL POSSESSION OF HIS OFFICE PREMISES AS SECURITY OFFICE MONEY. OUT OF 3950 SQ. FT. OF OWNED OFFICE, HE COULD ONLY USE 500 SQ. FT. AREA OF THE OFF ICE. HE HAD EVEN MADE COMPLAINTS TO POLICE AS WELL IN THIS REGARD, (VI) O VER AND ABOVE THIS, THE LENDERS HAD LODGED SUITS U/S 138 OF THE NEGOTIABLE INSTRUMENTS ACT FOR CHEQUE BOUNCING. THE BANKS HAD ALSO S TARTED RECOVERY PROCESS, (VII) H E AND HIS EX - WIFE M RS. SAPNA M. PATEL WERE ALSO IN MENTAL TRAUMA BECAUSE EVERYDAY THEY HAD NEW VISITORS WHO EITHER ABUSE D THEM OR TOOK AWAY THEIR PERSONAL ASSETS. THIS EVENTUALLY LED TO HIS DIV ORCE AND (VIII) I T WAS BECAUSE OF ALL THESE REASONS, THAT HE WAS NOT ABLE TO PROPE RLY APPEAR FOR HEARING BEFORE THE CIT(A) AND THE MATTER WAS HEARD EX - PARTE. SHRI MAYUR PATEL ITA NO. 3371/MUM/2018 6 6. ON THE OTHER HAND, THE LD. DR SUBMITS THAT THERE WAS REPEATED NON - COMPLIANCE BY THE ASSESSEE BEFORE THE LD. CIT(A) ON THE DATES FIXED FOR HEARING. HE DRAWS OUR ATTENTION TO PARA 4 OF THE IMPUGNED ORDER. THUS THE LD. DR SUPPORTS THE ORDER PASSED BY THE LD. CIT(A). 7. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE RELEVANT MATERIALS ON RECORD. AS MENTIONED EARLIER THE ASSESSEE FILED HIS RETURN OF INCOME DECLARING INCOME OF RS.7,06,463/ - . THE AO MADE AN ADDITION OF RS.7,82,68,832/ - COMPRISING OF (I) INC OME FROM BUSINESS RS.8,61,478/ - , (II) DISALLOWANCE OF CREDIT CARD EXPENSES RS.7,83,476/ - , (III) DISALLOWANCE OF DUTIES AND TAXES RS.20,02,352/ - , (IV) DISALLOWANCE OF EXPENSES RS.2,63,026/ - AND (V) ADDITION OF UNEXPLAINED CASH CREDIT RS.7,43,58,50 0/ - . A PERUSAL OF THE ASSESSMENT ORDER CLEARLY INDICATES THAT THE AO HAS RESORTED TO BLANKET DISALLOWANCE OF EXPENSES AND ADDITION OF UNEXPLAINED CASH CREDIT ETC. WHICH LED TO AN ASSESSED INCOME OF RS.8,10,38,120/ - . BEFORE US, THE LD. COUNSEL OF THE AS SESSEE HAS FILED AN ORDER NO. A/87453/2018 DATED 27.09.2018 PASSED BY THE CUSTOMS, EXCISE AND SERVICE TAX APPELLATE TRIBUNAL, MUMBAI (IN SHORT CE & STAT) IN THE CASE OF SHLOK MEDIA PVT. LTD. V. COMMISSIONER OF GST & CENTRAL EXCISE, MUMBAI (APPEAL NO. : ST /87354/2018) . IN SHLOK MEDIA PVT. LTD., THE ASSESSEE AND HIS WIFE ARE DIRECTORS AND SHAREHOLDERS. WE FIND THAT THE FACTS DELINEATED IN THE AFFIDAVIT DATED 08.10.2018 MENTIONED HEREINABOVE WERE ALSO STATED BY THE ASSESSEE IN THE STATEMENT OF FACTS BEFORE C E & STAT. SHRI MAYUR PATEL ITA NO. 3371/MUM/2018 7 THE TRIBUNAL OBSERVED AT PARA 5 THE FOLLOWING : FURTHER HAVING BEEN ACKNOWLEDGED THAT POSSESSION OF THE APPELLANT OFFICE WAS TAKEN OVER BY THE PUNJAB NATIONAL BANK AUTHORIZED OFFICER DURING THE CORRESPONDING PERIOD, THE COMMISSIONER (APPEALS) SHOULD NOT HAVE REFUSED TO CONDONE THE DELAY ON SUCH NARROW TECHNICAL GROUND THAT FLAT NUMBER IS DIFFERENT SINCE THERE MIGHT BE POSSIBILITY THAT BOTH THE FLATS WERE BEING POSSESSED BY THE APPELLANT. IT HAS BEEN HELD BY THE HONBLE SUPREME COURT IN 1987 (2 8) ELT 15 THAT WHEN SUBSTANTIAL JUSTICE AND TECHNICAL CONSIDERATION ARE PITTED AGAINST EACH OTHER, CAUSE OF SUBSTANTIAL JUSTICE DESERVES TO BE PREFERRED FOR THE OTHER SIDE CANNOT CLAIM TO HAVE VESTED RIGHT IN INJUSTICE BEING DONE BECAUSE OF A NON - DELIBERAT E DELAY AND THERE IS NO PRESUMPTION THAT DELAY WAS OCCASIONED DELIBERATELY. 7.1 IN VIEW OF THE ADVERSE SITUATION FACED BY THE ASSESSEE WHICH IS SUPPORTED BY THE STATEMENT OF FACTS FILED BEFORE CE & STAT WHICH IS IN LINE WITH THE AFFIDAVIT FILED BEFOR E US AND THE SUBSEQUENT ORDER DATED 27.09.2018 PASSED BY CE & STAT APPRECIATING THE DIFFICULTIES FACED BY THE ASSESSEE, WE ARE INCLINED TO SET ASIDE THE ORDER OF THE LD. CIT(A) AND RESTORE THE MATTER TO THE FILE OF THE AO TO MAKE A DE NOVO ORDER AFTER GI VING REASONABLE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. WE DIRECT THE ASSESSEE TO FILE THE RELEVANT DOCUMENTS/EVIDENCE ON THE DATES TO BE FIXED FOR HEARING BY THE AO. 8. IN THE RESULT, THE APPEAL IS ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 31/12/2018. SD/ - SD/ - (SAKTIJIT DEY) (N.K. PRADHAN) JUDICIAL MEMBER ACCOUNTANT MEMBER SHRI MAYUR PATEL ITA NO. 3371/MUM/2018 8 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