S RAMASWAMY, MUMBAI V. ACIT (OSD-II) CEN RG 7, MUMBAI

ITA 3482/MUM/2014

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 8209 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 9 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-02-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: E
• Assessment Year: 1994-1995
• Appeal Filed On: 15-05-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Unexplained cash credit; Bad and doubtful debts; Corroborative evidences
• Section: 142(1); 234B; 132; 144

Judgement Text

ITA NO. 348 2/M/2014, AY 1994-95 S.RAMASWAM Y 1 IN THE INCOME TAX APPELLATE TRIBUNAL, BENCH E, MU MBAI BEFORE SHRI RAJENDRA, ACCOUNTANT MEMBER AND SHRI PAWAN SINGH, JUDICIAL MEMBER ITA NO.3482/MUM/2014 FOR (ASSESSMENT YEAR : 1994-95 ) SH. S RAMASWAMY , B-11, SWAGAT CHS, J.V.L.R, ANDHERI (E) MUMBAI- 400093 PAN: ACYPS8259D VS. ASSISTANT COMMISSIONER OF INCOME TAX -(OSD- III), CENTRAL RANGE -07 MUMBAI (APPELLANT) (RESPONDENT) ASSESSEE BY : SH. VIMAL PUNAM IYA & BHARAT KUMAR (AR) REVENUE BY : SH. PAWAN KUMAR BEERLA (DR) DATE OF HEARING : 20.01.2017 DATE OF PRONOUNCEMENT : 22.02.2017 ORDER UNDER SECTION 254(1) OF INCOME TAX ACT PER PAWAN SINGH, JM: 1. THIS APPEAL BY ASSESSEE UNDER SECTION 253(1) OF THE INCOME TAX ACT( ACT) IS DIRECTED AGAINST THE ORDER OF COMMISSIONER (APPEALS )-40, DATED 26 .03.2014 FOR ASSESSMENT YEAR 1994-95. THE ASSESSEE HAS RAISED F OLLOWING GROUNDS OF APPEAL. (1) THE LD CIT(A) FAILED TO CONSIDERED THAT ASSESSMENT ORDER PASSED UNDER SECTION 144 IS BAD IN LAW AND REQUIRED TO BE QUASHED. (2) THE LD CIT(A) ERRED IN CONFIRMING THE AMOUNT OF RS. 281680/- AS BROKERAGE INCOME BY ESTIMATING TOTAL BROKERAGE INCOME AT RS. 15,00,000/- WITHOUT ANY BASIS OF MATERIAL OR EVIDENCE. (3) THE LEARNED CIT(A) ERRED IN DISALLOWANCE OF AMOUNT OF RS. 8,42,500/- TOWARDS SUB-BROKERAGE PAYMENT TO M/S ARYAN LEASING & FINAN CING LTD WITHOUT APPRECIATING THE FACTS IN PROPER PERSPECTIVE. (4) THE LEARNED CIT(A) ERRED IN DISALLOWING TRADING LOS S OF RS. 57,09,725/- INCURRED IN PURCHASE AND SALE OF SHARES WITHOUT ASS IGNING PROPER REGION THERE FOR. (5) THE LD CIT(A) ERRED IN ADDITION OF RS. 10,000/-BY E STIMATING THE BROKERAGE INCOME AT RS. 35,000/-FROM THE SHARE TRANSACTION A T BOMBAY AGAINST THE ITA NO. 348 2/M/2014, AY 1994-95 S.RAMASWAM Y 2 ACTUAL BROKERAGE INCOME OF RS. 15,000/-AND THAT TOO WITHOUT ASSIGNING PROPER REGIONS THERE FOR. (6) THE LD CIT(A) ERRED IN ADDITION OF RS. 1 LAKH AS BR OKERAGE INCOME FROM SHARES TRANSACTION AT MADRAS ON ESTIMATION BASIS. (7) THE LD CIT(A) ERRED IN DISALLOWING THE CLAIM OF BAD DEBTS OF RS. 9,50,000/- WITHOUT TAKING INTO CONSIDERATION THE SUBMISSION MA DE IN THIS RESPECT AND THAT TOO WITHOUT ASSIGNING PROPER REASON THERE FOR. (8) THE LD CIT(A) ERRED IN ALLOWING AN AMOUNT OF RS. 10 ,000/- BEING TELEPHONE EXPENSES INCURRED FOR BUSINESS PURPOSE. (9) THE LD CIT(A) ERRED IN MAKING ADDITION OF RS. 91,63 ,075/-AS UNEXPLAINED CREDIT WITHOUT ASSIGNING PROPER REASONS THERE FOR. (10) THE LD CIT(A) ERRED IN CHARGING INTEREST UNDER SECT ION 234B AND 234C OF THE ACT (11) THE LD CIT(A) ERRED IN INITIATING PENALTY (WRONGLY TYPED AS CHARGING INTEREST) UNDER SECTION 271(1) OF THE INCOME TAX A CT. 2. BRIEF FACTS OF THE CASE AS GATHERED FROM THE RECORD ARE THAT THE ASSESSEE WAS A MEMBER OF MADRAS STOCK EXCHANGE AND PROPRIETOR OF M/S EXCEL & COMPANY. A SEARCH WAS CONDUCTED BY CBI ON 23 JUNE 1992 AT THE RESIDENCE AND OFFICE OF ASSESSEE ON THE ALLEGATION THAT ASSESSEE WAS INVOLV ED IN MULTICRORE SECURITIES SCAM. THEREAFTER, A SEARCH UNDER SECTION 132 WAS CO NDUCTED BY REVENUE AT THE PREMISES OF THE ASSESSEE ON 16 OCTOBER 1992. THE RE TURN OF INCOME FOR ASSESSMENT YEAR 1994 - 95 WAS DUE ON 30 TH NOVEMBER 1994. NO RETURN OF INCOME WAS FILED BEFORE DUE DATE, THUS NOTICE UNDER SECTION 142 (1) WAS ISSUED TO THE ASSESSEE ON 12 TH JANUARY1995 REQUIRING THE ASSESSEE TO FURNISH RETU RN OF INCOME FOR RELEVANT ASSESSMENT YEAR BY 30 JANUARY 1 995. THE NOTICE WAS SERVED ON ASSESSEE ON 27 JANUARY 1995. NO RETURN OF INCOME WAS FILED TILL 30 JANUARY 1995. AGAIN, THE ASSESSEE WAS SERVED NOTICE ON 12 J ULY 1996 INTIMATING THE ASSESSEE ABOUT HIS NON-COMPLIANCE OF NOTICE UNDER S ECTION 142(1) DATED 12 JANUARY 1995. THE ASSESSEE WAS INFORMED THAT NON-CO MPLIANCE OF THE NOTICE MAY LEAD TO EX-PARTE ASSESSMENT UNDER SECTION 144, LEVY OF PENALTY UNDER SECTION 271(1)(B) AND PROSECUTION PROCEEDING UNDER SECTION 276 CC. THE ASSESSEE FILED RETURN OF INCOME FOR RELEVANT ASSESSMENT YEAR ON 17 TH FEBRUARY 1997 DECLARING INCOME NIL. ON RECEIPT OF RETURN OF INCOME THE AO A SKED THE ASSESSEE TO FILE THE DETAILS AS PER NOTICE DATED 17 FEBRUARY 1997 BY 21 FEBRUARY 1997. THE ASSESSEE FURNISHED THE DETAIL OF EXPENSES DEBITED TO THE PRO FIT AND LOSS ACCOUNT, RENT ITA NO. 348 2/M/2014, AY 1994-95 S.RAMASWAM Y 3 RECEIPTS, BAD DEBTS ETC. THE ASSESSEE WAS AGAIN ASK ED TO PRODUCE THE BOOKS OF ACCOUNT ON 3 FEBRUARY 1997. AS NO BOOKS OF ACCOUNT WERE FILED ON THE FIXED DATE, THE AO PROCEEDED TO FRAME THE ASSESSMENT ORDE R. WHILE FRAMING ASSESSMENT THE ASSESSING OFFICER OBSERVED THAT THAT ASSESSEE WAS UNDER OBLIGATION TO GET HIS BOOKS OF ACCOUNT AUDITED AND TO SUBMIT A REPORT OF ALL SUCH AUDIT ALONG WITH RETURN OF INCOME ON 30 TH NOVEMBER 1994. AS THE ASSESSEE FAILED TO DO SO, ACCORDINGLY, PENALTY UNDER SECTION 271B W ERE PROPOSED TO BE INITIATED. THE ASSESSEE FILED AUDITED REPORT ON 27 FEBRUARY 19 95, AUDITED BY M/S RAMESH & RAMCHANDRAN CA DATED 30 SEPTEMBER 1994. THE AO CO NCLUDED THAT ASSESSEE HAD NOT GOT AUDITED HIS ACCOUNTS BY 30 SEPTEMBER 19 94 AND THE AUDITED REPORT FURNISHED BY ASSESSEE IS BACKDATED. DUE TO THE COMP LEXITY OF TRANSACTION THE AO DIRECTED THE ASSESSEE TO GET AUDITED HIS PERSONAL ACCOUNTS AS WELL AS THE ACCOUNTS OF HIS PROPRIETARY CONCERN BY M/S J. K. SHAH & CO., SPECIAL AUDITORS APPOINTED BY COMMISSIONER OF INCOME TAX CENTRAL-I. HOWEVER, THE SAID AUDITORS DECLINE TO GIVE THEIR REPORT ABOUT THE VER ACITY OF THE PROFIT AND LOSS ACCOUNT AND BALANCE-SHEET OF THE ASSESSEE. THE SPEC IAL AUDITOR DECLINES TO EXPRESS THEIR OPINION AND OPINED THAT MAINTAINED BY THE ASSESSEE IS INCOMPLETE. THE AO FURTHER OBSERVED THAT THE ASSESSEE WAS REQUI RED TO PRODUCE THE BOOKS OF ACCOUNT AND SUPPORTING EVIDENCE; DESPITE REPEATED O PPORTUNITIES THE ASSESSEE NOT PRODUCED THE LEDGER AND BANK ACCOUNTS AND OTHER REC ORDS TILL 25 MARCH 1997. NO CONTRACTS, DELIVERY ORDERS, DEALER SLIPS, OTHER BIL LS AND VOUCHERS WERE PRODUCED BY THE ASSESSEE. THE AO FORMED THE OPINION THAT LIK E IN EARLIER FINANCIAL YEAR, THE SITUATION IN NOT DIFFERENT IN THE YEAR UNDER CONSID ERATION. THOUGH, THE ASSESSEE CONTENDED THAT THE RELEVANT BOOKS HAVE BEEN SEIZED BY THE CBI AND THE COPIES OF RECORD ARE NOT AVAILABLE WITH HIM. THE ASSESSING OF FICER ON THE BASIS OF INFORMATION REGARDING THE BUSINESS OF ASSESSEE IN R ESPECT OF SECURITY TRANSACTION IN EARLIER YEARS, WHICH WAS COLLECTED FROM VARIOUS BANKS, FINANCIAL INSTITUTION AND BROKERS, CONCLUDED THAT ASSESSEE HAS NOT DISCLO SED ALL THE RECEIPT OF BROKERAGE IN HIS BOOKS OF ACCOUNT. THEREFORE, THE A O PROCEEDED TO COMPLETE THE ITA NO. 348 2/M/2014, AY 1994-95 S.RAMASWAM Y 4 ASSESSMENT TO HIS BEST JUDGMENT. THE ASSESSING OFFI CER MADE THE FOLLOWING ADDITION; 1 UNDISCLOSED BROKERAGE RS.7,81,680/- 2 DISALLOWED BROKERAGE RS.8,42,500/- 3 UNDISCLOSED INTEREST RS.3,12,08,239/- 4 DISALLOWED TRADING LOSS RS.57,09,725/- 5 UNDISCLOSED BROKERAGE FROM SHARES RS.35,000/- 6 UNDISCLOSED BROKERAGE FROM SHARES RS.2,73,361/- 7 DISALLOWANCE OF TELEPHONE EXPENSES RS.10,000/- 8 UNPROVED BAD DEBTS RS.9,50,000/- INCOME FROM OTHER SOURCES 1 DIVIDEND AND INTEREST AS PER THE STATEMENT RS. 70,744/- 2 BANK INTEREST RS. 461/- 3 UNEXPLAINED CREDITS RS. 91,63,075/- THE AO ASSESSED THE INCOME OF ASSESSEE AT RS.4,91,5 0,680/- AGAINST NILL INCOME, VIDE ASSESSMENT ORDER DATED 31.03.1997 PASSED UNDER SECTION 144OF THE ACT. ON APPEAL BEFORE COMMISSIONER (APPEALS) THE ADDITIO N OF UNDISCLOSED INTEREST OF RS. 3,12,08,239/-WAS DELETED. THE ADDITION OF RS.7 ,81,690/- ON UNDISCLOSED BROKERAGE INCOME FROM SECURITY TRANSACTION WAS REST RICTED TO RS.2,81,680/-. THE REST OF THE ADDITION/DISALLOWANCE WAS SUSTAINED. FU RTHER, AGGRIEVED BY THE ORDER OF COMMISSIONER (APPEALS) THE ASSESSEE HAS FILED PR ESENT APPEAL BEFORE US. 3. WE HAVE HEARD THE LD AR OF THE ASSESSEE AND THE LD DR FOR REVENUE AND PERUSED THE MATERIAL AVAILABLE ON RECORD. A FIRST GROUND OF APPEAL RELATES TO THAT THE ASSESSMENT UNDER SECTION 144 IS BAD IN LAW AND REQU IRED TO QUASH. THE LD AR OF THE ASSESSEE ARGUED THAT SEARCH WAS CONDUCTED BY CB I ON 23 RD OF JUNE 1992 AND ACTION UNDER SECTION 132 OF INCOME TAX WAS CONDUCTE D BY THE REVENUE AT THE OFFICE AND RESIDENTIAL PREMISES OF ASSESSEE ON 16 TH /17 TH OF OCTOBER 1992 AT CHENNAI AS WELL AS IN MUMBAI. ALL THE AVAILABLE DOC UMENTS AT THE RESIDENTIAL PREMISES AS WELL AS OFFICE WERE SEIZED BY BOTH THE AGENCIES. HUGE ADDITIONS AND ITA NO. 348 2/M/2014, AY 1994-95 S.RAMASWAM Y 5 DISALLOWANCES WERE MADE BY AO WITHOUT SUPPORTING EV IDENCE. WHICH HAVE BEEN CONFIRMED BY LD CIT(A) WITHOUT CONSIDERING THE FACT S OF THE CASE. THE ASSESSEE CA ISSUED AUDIT REPORT ON 30 SEPTEMBER 1994 WHICH I S THE DUE DATE PRESCRIBED UNDER SECTION 139(1). THE ASSESSEE OBTAINED THE AUD IT REPORT ON TIME BUT COULD NOT FURNISHED BEFORE AO ON TIME. HOWEVER, DUE TO NO N FILING OF AUDITED REPORT IN TIME, THE AO CANNOT PRESUME THAT AUDIT REPORT IS IN VALID OR WAS BACKDATED. THE BEST JUDGMENT ASSESSMENT CANNOT BE PASSED USING MAT ERIAL, WHICH WAS GATHERED FROM THE ASSESSEE AND ON THE BASIS OF INFORMATION P ROVIDED BY ASSESSEE DURING THE ASSESSMENT PROCEEDING. THE NON-FILING OF AUDITE D REPORT IN TIME WAS DUE TO THE REASONS BEYOND THE CONTROL OF ASSESSEE. THE LD AR PRAYED THAT ALL THE ADDITIONS WERE MADE WITHOUT ANY BASIS. IT WAS FURTH ER ARGUED THAT DURING THE FIRST APPELLATE STAGE THE LD CIT(A) PASSED ORDER UNDER SE CTION 250(4) DATED 18.03.2004 AND DIRECTED THE AO TO EXAMINE CERTAIN I SSUE. THE ASSESSEE WAS APPROACHING THE AO TIME AND AGAIN TO FURNISH REQUIR ED INFORMATION AND DOCUMENTS, DESPITE THE DIRECTION OF LD CIT(A) NO RE MAND REPORT WAS FILED, THUS ALL THE ADDITIONS AND DISALLOWANCE UNDER CHALLENGED , BASED ON MARE ESTIMATION ARE LIABLE TO BE DELETED. ON THE OTHER HAND THE L D DR FOR THE REVENUE SUPPORTED THE ORDER OF LD CIT(A) AND WOULD ARGUE THAT THE APP EAL ORDER WAS PASSED ON THE BASIS OF MATERIAL AVAILABLE ON RECORD. 4. WE HAVE CONSIDERED THE RIVAL CONTENTION OF THE PART IES AND FURTHER GONE THROUGH THE ORDERS OF AUTHORITIES BELOW. WE HAVE NO TICED THAT THE ASSESSEE FILED FIRST APPEAL BEFORE COMMISSIONER (APPEAL) WIT HIN TIME I.E. ON 30 TH APRIL 1997; THE APPEAL WAS DECIDED ONLY ON 26 TH MARCH 2014. THE AO PASSED THE ASSESSMENT ORDER UNDER SECTION 144OF THE ACT. DURI NG THE FIRST APPELLATE STAGE, AS PER THE ORDER UNDER SECTION 250(4), THE A SSESSEE FURNISHED EVIDENCE WITH REGARD TO THE ADDITION OF RS.91,63,075/- ON AC COUNT OF UNEXPLAINED CREDIT , ADDITION OF RS.57,09,725/- ON ACCOUNT OF S HARE TRADING LOSS, ESTIMATED BROKERAGE INCOME OF RS.20,00,000/-, DISALLOWANCE OF SUB-BROKERAGE OF RS. 8,42,500/-. THE LD CIT (A) CALLED THE REPORT OF AO ON THE EVIDENCE FURNISHED BY ASSESSEE. WE HAVE FURTHER SEEN THAT DESPITE THE REPEATED ORDERS AND ITA NO. 348 2/M/2014, AY 1994-95 S.RAMASWAM Y 6 REMINDERS OF LD CIT(A) DATED 25.10.2012, 09.01.2013 , 04.07.2013& 14.010.2013 NO REMAND REPORT WAS SUBMITTED BY AO. WE HAVE NOTICED THAT THE LD CIT(A) IN PARA 4 OF ITS ORDER RECORDED THAT AO SUBMITTED A LETTER DATED 21/02/2014 STATING THEREIN THAT THE ASSESSEE HAD AS KED CERTAIN DOCUMENTS. THE AO FURTHER MENTIONED THAT, HE ASKED THE ASSESSE E TO ARRANGE HIS OWN XEROX MACHINE AND OPERATOR, BUT AFTER THAT THE ASSE SSEE DID NOT TURN UP. WE, INSTEAD OF GOING IN TO THE CONTROVERSY AS TO WHY TH E AO ASKED THE ASSESSEE TO ARRANGE THE XEROX MACHINE AND OPERATOR FOR OBTAININ G COPY OF THE DOCUMENTS WHICH WERE IN POWER AND POSSESSION OF REV ENUE AND NOT FURNISHING REMAND REPORT BY AO, DEEM IT APPROPRIATE TO RESTORE ALL GROUND OF APPEAL RAISED BEFORE TRIBUNAL TO THE FILE OFF AO FO R FRESH ADJUDICATION IN ACCORDANCE WITH LAW. NEEDLESS TO ORDER THE AO SHALL PROVIDE SUFFICIENT OPPORTUNITY TO THE ASSESSEE BEFORE PASSING THE ORDE R AFRESH. THE AO SHALL PROVIDE ALL THE NECESSARY ASSISTANCE TO THE ASSESSE E FOR SUPPLY THE COPY OF THE DOCUMENTS IF REQUIRED BY ASSESSEE, WHICH WERE SEIZE D DURING THE SEARCH UNDER SECTION 132 BY REVENUE AT THE PREMISES OF THE ASSESSEE ON 16 OCTOBER 1992. AS THE PRESENT APPEAL IS RELATES TO AY 1994-9 5, THUS THE AO IS FURTHER DIRECTED TO MAKE HIS ENDEAVOR TO PASS THE ORDER WIT HIN 12 MONTHS OF RECEIPT OF THIS ORDER. WITH THESE DIRECTIONS THE APPEAL OF THE ASSESSEE IS DISPOSED OFF. NO ORDER AS TO COST. IN THE RESULT APPEAL FILED BY ASSESSEE IS ALLOWED F OR STATISTICAL PURPOSE. ORDER PRONOUNCED IN OPEN COURT ON 22 ND DAY OF FEBRUARY 2017. SD/- SD/- (RAJENDRA) (PAWAN SINGH) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI; DATED 22/02/2017 S.K.PS COPY OF THE ORDER FORWARDED TO : BY ORDER, (ASSTT.REGISTRAR) ITAT, MUMBAI 1. THE APPELLANT 2. THE RESPONDENT. 3. THE CIT(A), MUMBAI. 4. CIT 5. DR, ITAT, MUMBAI 6. GUARD FILE. //TRUE COPY/