TALPADY UMASHANKER SHENAVA, MUMBAI V. ACIT 6(1), MUMBAI

ITA 3792/MUM/2011

• Counselvise Citation: [2012] 119 COUNSELVISE.COM (IT) 8516 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 4 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 03-10-2012
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: E
• Next Hearing Date: 26-09-2012
• Assessment Year: 2006-2007
• Appeal Filed On: 10-05-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Unexplained investment; Gift; Depreciation; Opportunity of being heard; Principle of natural justice; Additional evidence; Deemed dividend
• Section: 143(3); 69; 56

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH E MUMBAI BEFORE SHRI DINESH KUMAR AGARWAL, JUDICIAL MEMBER A ND SHRI N.K. BILLAIYA, ACCOUNTANT MEMBER ITA NO. 3792/MUM/2011 ASSESSMENT YEAR-2006-07 SHRI TALPADY UMASHANKER SHENAVA, 602, SIBYLE, 65 WORLI HILL, MUMBAI-400 018 PAN-AGLPS 5429C VS. THE ACIT 6(1), MUMBAI (APPELLANT) (RESPONDENT) ITA NO. 3890/MUM/2011 ASSESSMENT YEAR-2006-07 THE ACIT 6(1), MUMBAI VS. SHRI TALPADY UMASHANKER SHENAVA, 602, SIBYLE, 65 WORLI HILL, MUMBAI-400 018 (APPELLANT) (RESPONDENT) ASSESSEE BY: SHRI MANDAR VAIDYA DEPARTMENT BY: SHRI N.K. MEHTA DATE OF HEARING :26.09.2012 DATE OF PRONOUNCEMENT: 3.10.2012 O R D E R PER N.K. BILLAIYA, AM: THESE CROSS APPEALS BY THE ASSESSEE AND THE REVENU E ARE DIRECTED AGAINST THE SAME ORDER OF LD. CIT(A)-14, MUMBAI DT. 21.2.2011 PERTAINING TO ASSESSMENT YEAR 2006-07. FOR THE SAKE OF CONVENIENC E, WE HEARD THESE APPEALS TOGETHER AND DISPOSE OFF THE SAME BY THIS C OMMON ORDER. ITA NO. 3792/MUM/2011 ASSESSEES APPEAL 2. THE SUM AND SUBSTANCE OF THE ASSESSEES GRIEVANC E IS THAT THE LD. CIT(A) WAS NOT JUSTIFIED IN CONFIRMING THE DISALLOW ANCE OF EXPENSES AND DEPRECIATION AMOUNTING TO RS. 15,91,802/- BY HOLDIN G THAT NO BUSINESS ACTIVITY WAS CARRIED ON BY THE ASSESSEE. ITA NOS. 3792 &3890/M/2011 2 3. THE FACTS GIVING RISE TO THIS GRIEVANCE SHOW THA T DURING THE COURSE OF THE ASSESSMENT PROCEEDINGS U/S. 143(3) OF THE ACT, THE ASSESSING OFFICER OBSERVED THAT IN THE COMPUTATION OF INCOME, THE ASS ESSEE HAS CLAIMED SET OFF OF LOSSES OF A PROPRIETARY CONCERN M/S. CUPRO TUBES ENTERPRISES TO THE EXTENT OF RS. 16,25,814/-. THE AO FURTHER OBSERVED THAT THE ASSESSEE HAS DEBITED EXPENSES OF RS. 15,91,802/- WHICH INCLUDED DEPRECIATION AT RS. 10,67,436/-. THE AO FURTHER OBSERVED THAT THE ASSES SEE HAS NOT ATTACHED ANY BALANCE SHEET OR STATEMENT OF FIXED ASSETS ALONG WI TH THE RETURN OF INCOME, WHICH COULD SUBSTANTIATE THAT THE ASSESSEE HAS ANY FIXED ASSETS. THE AO CONCLUDED THAT IN THE ABSENCE OF ANY EVIDENCE TO SU BSTANTIATE THE OWNERSHIP OF THE ASSETS THE DEPRECIATION AMOUNTING TO RS. 10, 67,436/- CANNOT BE ALLOWED. THE AO FURTHER CONCLUDED THAT AS THERE WA S NO BUSINESS ACTIVITY DURING THE YEAR UNDER CONSIDERATION, THE EXPENSES D EBITED BY THE ASSESSEE ARE ALSO TO BE DISALLOWED AND WENT ON TO DISALLOW A TOTAL SUM OF RS. 15,91,802/- WHICH INCLUDED THE DEPRECIATION CLAIMED . 4. THE ASSESSEE AGITATED THIS MATTER BEFORE THE LD. CIT(A) BUT WITHOUT ANY SUCCESS. THE LD. CIT(A) AT PARA-8, PAGE-5 OF H IS ORDER HELD THAT AS FAR AS THIS PROPRIETARY CONCERN IS CONCERNED, THE APPE LLANT HAS NOT SHOWN ANY BUSINESS ACTIVITY DURING THE YEAR AND THE ASSESSEE ALSO FAILED TO FURNISH ANY DETAILS OF ASSETS ON WHICH DEPRECIATION HAS BEEN CL AIMED. ACCORDINGLY, THE DISALLOWANCE MADE BY THE AO FOR RS. 15,91,802/- WAS CONFIRMED. 5. BEFORE US, THE LD. COUNSEL FOR THE ASSESSEE SUBM ITTED A PAPER BOOK EXHIBITING FINANCIAL STATEMENTS AND COMPUTATION OF INCOME FOR A.Y. 2003-04 TO 2009-10 ALONG WITH AUDITED STATEMENT OF ACCOUNTS AN D AUDIT REPORT. IT IS THE SAY OF THE COUNSEL THAT THE ASSESSEE WAS GOING THRO UGH BAD PHASE AND THERE WAS A LULL IN THE BUSINESS. IT IS NOT A CASE WHERE THE ASSESSEE HAS ABANDONED THE BUSINESS. THE EXPENSES INCURRED WERE NECESSARY TO MAINTAIN BUSINESS AND ASSETS OF THE ASSESSEE. PER CONTRA, THE LD. DE PARTMENTAL REPRESENTATIVE SUPPORTING THE FINDING OF THE LOWER AUTHORITIES SUB MITTED THAT THE ASSESSEE ITA NOS. 3792 &3890/M/2011 3 HAS GROSSLY FAILED TO FURNISH DETAILS AS CALLED FOR BY THE AO AT THE ASSESSMENT STAGE. 6. WE HAVE CONSIDERED THE RIVAL SUBMISSION AND PERU SED THE ORDERS OF LOWER AUTHORITIES. THE FINDINGS OF THE AO SHOW THA T THE ASSESSEE HAS NOT FURNISHED NECESSARY DETAILS DURING THE COURSE OF TH E ASSESSMENT PROCEEDINGS. HOWEVER, A PERUSAL OF THE PAPER BOOK SUBMITTED BY T HE ASSESSEE AND THE FINANCIAL STATEMENT SUGGESTS THAT THE ISSUE NEEDS F URTHER VERIFICATION AT THE ASSESSMENT STAGE. WE, THEREFORE, RESTORE THIS ISSU E BACK TO THE FILE OF THE AO. THE ASSESSEE IS DIRECTED TO FILE ALL THE RELEV ANT DOCUMENTS/FINANCIAL STATEMENTS INCLUDING THE FIXED ASSETS CHART. THE A O IS DIRECTED TO EXAMINE THE ISSUE DENOVO IN THE LIGHT OF THE FINANCIAL STAT EMENT AND THE FIXED ASSETS CHART AND DECIDE THE ISSUE AFRESH AFTER GIVING REAS ONABLE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. 7. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE I S ALLOWED FOR STATISTICAL PURPOSES. ITA NO. 3890/MUM/2011- REVENUES APPEAL 8. THE REVENUE HAS RAISED FOLLOWING THREE SUBSTANTI VE GROUNDS OF APPEAL: 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW, THE LD. CIT(A) ERRED IN DELETING THE ADDITION MADE U/S. 69 OF THE I.T. ACT, 1961 AMOUNTING TO RS. 60,00,000/- BY ADMITTING ADDITIONAL EVIDENCE IN CONTRAVENTION OF THE PROVISIONS OF RULE 46A. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW, THE LD. CIT(A) ERRED IN DELETING THE ADDITION MADE U/S. 56 OF THE I.T. ACT, 1961 AMOUNTING TO RS. 3,55, 955/- BY ADMITTING ADDITIONAL EVIDENCE IN CONTRAVENTION OF THE PROVISIONS OF RULE 46A. 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW, THE LD. CIT(A) ERRED IN DELETING THE ADDITION ON ACCOUNT OF DIVIDEND RECEIVED FROM ITMPL AMOUNTING TO RS. 38,10,000/- HOLDING THE SAME EXEMPT U/S. 10(34) OF THE ACT BY ADMITTING ADDITIONAL EVIDENCE IN CONTRAV ENTION OF THE PROVISIONS OF RULE 46A. ITA NOS. 3792 &3890/M/2011 4 9. THE SUM AND SUBSTANCE OF THE GRIEVANCE OF THE RE VENUE IS THAT THE LD. CIT(A) HAS ADMITTED ADDITIONAL EVIDENCES DURING THE APPELLATE PROCEEDINGS WHICH ARE IN CONTRAVENTION TO THE PROVISIONS OF RU LE 46A OF THE I.T. RULES. 10. A PERUSAL OF THE ASSESSMENT ORDER SHOW THAT THE AO HAS MADE AN ADDITION OF RS. 60,00,000/- U/S. 69 OF THE ACT BECA USE DURING THE COURSE OF THE ASSESSMENT PROCEEDINGS, THE AO FOUND THAT THE A SSESSEE HAS SHOWN A PLOT OF LAND AT BANGALORE RECEIVED AS GIFT FROM REL ATIVE. HOWEVER, NO DETAILS RELATING TO THE PROPERTY WERE FURNISHED BY THE ASSE SSEE NOR THE ASSESSEE HAD SUBMITTED ANY BALANCE SHEET AS ON 31.3.2006. THE A O FURTHER OBSERVED THAT THE ASSESSEE HAS RECEIVED INTEREST FROM M/S. ITM AM OUNTING TO RS. 3,55,955/- WHICH THE ASSESSEE HAS NOT OFFERED FOR TAXATION. O N RECEIVING NO EXPLANATION, THE AO ADDED THE INTEREST OF RS. 3,55,955/- TO THE TOTAL INCOME OF THE ASSESSEE U/S. 56 OF THE ACT. THE AO FURTHER NOTED THAT THE ASSESSEE HAS RECEIVED DIVIDEND FROM M/S. ITM TO THE TUNE OF RS. 38,10,000/-. A LIST ATTACHED BY THE ASSESSEE SHOW THAT THE ASSESSEE HAS CLAIMED DIVIDEND EXEMPT U/S. 10(34) OF THE ACT BUT THIS DIVIDEND OF RS. 38,10,000/- IS NOT REFLECTED ANYWHERE IN THE EXEMPT DIVIDEND INCOME. THE AO CONCLUDED THAT THE ASSESSEE HAS NOT FURNISHED ANY DETAILS/EXPLANAT ION IN RESPECT OF THIS ITEM OF DIVIDEND. ACCORDINGLY, THE AO TREATED THE DIVID END OF RS. 38,10,000/- AS DEEMED DIVIDEND U/S. 2(22)(E) OF THE ACT. 11. THE MATTER WAS AGITATED BEFORE THE LD. CIT(A). BEFORE THE LD. CIT(A), THE ASSESSEE SUBMITTED A GIFT DEED IN RESPECT OF TH E ADDITION ON ACCOUNT OF UNEXPLAINED INVESTMENT AT RS. 60,00,000/-. THE ASS ESSEE POINTED OUT THAT THERE IS A CONFUSION IN RESPECT OF THE GIFT WHICH I S RS. 32,48,000/- WHICH THE ASSESSEE HAS RECEIVED FROM HIS COUSIN SHRI SUNDARAM SHETTY. THE LD. CIT(A) CONSIDERED THE GIFT DEED SO FILED AND DELETED THE A DDITION WITHOUT CALLING FOR ANY REMAND REPORT IN RESPECT OF THE ADDITIONAL EVID ENCES SUBMITTED BY THE ASSESSEE. 12. IN RESPECT OF THE ADDITION OF INTEREST AMOUNT ING TO RS. 3,55,955/-, THE ASSESSEE CONTENTED THAT THE SAID INTEREST PERTAINS TO A.Y. 2005-06 AND NOT FOR ITA NOS. 3792 &3890/M/2011 5 THE YEAR UNDER CONSIDERATION AND FILED NECESSARY DE TAILS BEFORE THE LD. CIT(A). AFTER CONSIDERING THE COPY OF LEDGER ACCOU NT FOR THE PERIOD 1.4.2004 TO 31.3.2005 OF M/S. ITM, THE LD. CIT(A) WAS CONVIN CED THAT THE AMOUNT PERTAINS TO A.Y. 2005-06 AND ACCORDINGLY DELETED TH E ADDITION. ONCE AGAIN THE LD. CIT(A) RELIED UPON THE ADDITIONAL EVIDENCES FILED BY THE ASSESSEE WITHOUT CALLING FOR ANY REMAND REPORT FROM THE AO. SIMILARLY, ON THE ADDITION OF DEEMED DIVIDEND AT RS. 38,10,000/-, THE LD. CIT( A) ADMITTED ADDITIONAL EVIDENCES AND DELETED THE ADDITION ON THE GROUND TH AT THE COMPANY HAS PAID DIVIDEND DISTRIBUTION TAX ON THE SAID DIVIDEND AND THEREFORE THE SAID DIVIDEND IN THE HANDS OF THE ASSESSEE IS EXEMPT U/S. 10(34) OF THE ACT. 13. WE HAVE CAREFULLY GONE THROUGH THE ORDER OF THE LD. CIT(A) AND THEIR REMAINS NOT EVEN AN IOTA OF DOUBT IN OUR MINDS THA T THE LD. CIT(A) HAS GROSSLY VIOLATED THE PRINCIPLES OF NATURAL JUSTICE BY ADMITTING ADDITIONAL EVIDENCES WHICH WERE NEVER BEFORE THE AO DURING THE COURSE OF THE ASSESSMENT PROCEEDINGS. WE HAVE ALSO FOUND THAT TH E LD. CIT(A) HAS NOT EVEN CALLED FOR ANY REMAND REPORT FROM THE AO. IN T HE INTEREST OF JUSTICE AND FAIR PLAY, ALL THE ISSUES INVOLVED IN REVENUES APP EAL ARE RESTORED BACK TO THE FILE OF THE AO. THE ASSESSEE IS DIRECTED TO FILE A LL THE DETAILS WHICH HE HAS FILED BEFORE THE LD. CIT(A). THE AO IS DIRECTED TO EXAMINE THE CLAIM OF THE ASSESSEE AFRESH AFTER GIVING REASONABLE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. REVENUES APPEAL IS ALLOWED FOR STATISTIC AL PURPOSES. 14. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE AS WELL AS APPEAL FILED BY THE REVENUE ARE ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED ON THIS 3 RD DAY OF OCTOBER, 2012 SD/- SD/- (DINESH KUMAR AGARWAL) (N.K. BILLAIYA ) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI, DATED 3 RD OCTOBER, 2012 RJ ITA NOS. 3792 &3890/M/2011 6 COPY TO : 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT-CONCERNED 4. THE CIT(A)-CONCERNED 5. THE DR E BENCH TRUE COPY BY ORDER ASSTT. REGISTRAR, I.T.A.T, MUMBAI