ITO 6(2)(1), MUMBAI V. CALCULUS PROPERTIES P.LTD, MUMBAI

ITA 4010/MUM/2016

• Counselvise Citation: [2018] 118 COUNSELVISE.COM (IT) 7820 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 6 month(s) 14 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-12-2018
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: Not Allotted
• Assessment Year: misc
• Appeal Filed On: 13-06-2016
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Assessee Lawyers: M C NANIWADELKAR; RITURAJ GURJAR ARS
• Keywords: Unexplained expenditure; Question of law; Accommodation entries; Onus to prove
• Section: 143(3); 68; 148

Judgement Text

IN THE INC OME TAX APPELLATE TRIBUNAL C BENCH, MUMBAI BEFORE HONBLE SH. R. C. SHARMA, AM & HONBLE SH. SANDEEP GOSAIN, JM ./ I.T.A. NO . 4010 /MUM/201 6 ( / ASSESSMENT YEAR: 2011 - 12 ) ITO - 6(2) (1) R. NO. 562 , AAYAKAR BHAVAN, M. K. ROAD, MUMBAI - 400020 / VS. M/S CALCULUS PROPERTIES PVT. LTD. 115 REWA CHAMBERS, 31, NEW MARINE LINES, MUMBAI - 4000 09 ./ ./ PAN NO. AA DCC5951E ( / APPELLANT ) : ( / RESPONDENT ) / APPELLANT BY : SHRI ABI RAMA KARTHIKEYAN , DR / RESPONDENTBY : SHRI M. C. NANIWADELKAR & SH. RITURAJ GURJAR, ARS / DATE OF HEARING : 04.10 .2018 / DATE OF PRONOUNCEMENT : 27.12.2018 / O R D E R PER SANDEEP GOSAIN, J UDICIAL MEMBER : THE P RESENT APPE AL FILED BY THE REVENUE IS AGAINST THE ORDER OF LD. CIT (APPEAL) 12, MUMBAI DATED 21.03 .16 F OR AY 20 11 - 12 ON THE GROUNDS MENTIONED HEREIN BELOW: - 2 I.T.A. NO. 4010 /MUM/201 6 M/S CALCULUS PROPERTIES PVT LTD. 1. 'ON FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) ERRED IN DELETING THE ADDITION OF RS.75 LAKHS IGNORING THE FACTS THAT ONLY THE CONFIRMATIONS OF THE BOOK ENTRIES FROM THE BOOKS MAINTAINED BY THE PARTIES DOES NOT SUFFICE THE CRITERIA SPECIFIED U/S.68 OF THE ACT TO PROVE GENUINENESS OF THE TRANSACTION, HAV ING REGARD TO THE SURROUNDING CIRCUMSTANCES TO THESE TRANSACTIONS AND THE FACTS AVAILABLE ON RECORD.' 2. 'ON FACTS AND IN CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT (A) ERRED IN DELETING THE ADDITION OF RS.75 LAKHS IGNORING THE FACTS THAT THE ASSESS EE AVAILED THE BOOK ENTRY BY PAYMENT OF ITS OWN CASH WHICH WAS NOT RECORDED IN THE BOOKS AND NO TAX HAD BEEN PAID ON SUCH CASH AMOUNT. THE AMOUNT OF CREDIT SHOWN AS LOAN IS NOTHING BUT ASSESSEE'S OWN INCOME AND THE SOURCE AND NATURE OF THE SAME HAS BEEN NO T BEEN EXPLAINED AND PROVED BY THE ASSESSEE.' 3. ON FACTS AND IN CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) ERRED IN DELETING THE ADDITION OF RS.953322/ - IGNORING THE FACTS THAT THE ASSESSEE FAILED TO PROVE THE ALLOW ABILITY OF THE EXPENSES UNDER THE IT ACT AND ACCORDINGLY THE ABOVE AMOUNT OF INTEREST CLAIMED IN THE P&L A/C WAS TREATED AS UNEXPLAINED EXPENDITURE. 3 I.T.A. NO. 4010 /MUM/201 6 M/S CALCULUS PROPERTIES PVT LTD. 4. ON FACTS AND IN CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT (A) ERRED IN DELETING THE ADDITION OF RS.75/ - LAKHS AND RS.953322/ - IGNORING THE FACTS THAT DURING THE COURSE OF SEARCH SHRI. PRAVIN AGARWAL HAD CATEGORICALLY ADMITTED HAVING GIVEN ACCOMMODATION ENTRIES THROUGH HIS COMPANIES FOR COMMISSION OF 1% AND THE ASSESSEE COMPANY IS ONE OF THE BENEFICIARIES TO SUCH ACCOMMODATION ENT RIES PROVIDED BY AGARWAL' 5. THE APPELLANT PRAYS THAT THE ORDER OF THE ID (CIT (A) ON THE ABOVE GROUNDS BE SET ASIDE AND CONFIRM THE ORDER OF THE AO. 6. THE APPELLANT CRAVES LEAVE TO AMEND OR ALTER ANY GROUND OR TO SUBMIT ADDITIONAL NEW GROUND, WHICH MAY B E NECESSARY 2. THE BRIEF FACTS OF THE CASE ARE THAT ASSESSEE IS ENGAGED IN THE BUSINESS OF PROPERTY/PROJECT DEVELOPMENT, TRADING IN SHARES/STOCKS. THE ASSESSEE COMPANY HAS FILED ITS RETURN OF INCOME ON 26.9.2011 DECLARING TOTAL LOSS OF RS.2,97,997/ - . THE ASSESSMENT ORDER UNDER SECTION 143(3) OF THE INCOME TAX ACT WAS PASSED ON 28.3.2014 BY THE ITO 6(2)(1) MAKING CERTAIN DISALLOWANCES. 4 I.T.A. NO. 4010 /MUM/201 6 M/S CALCULUS PROPERTIES PVT LTD. AGGRIEVED BY THE ORDER OF AO, ASSESSEE PREFERRED APPEAL BEFORE LD. CIT(A) AND LD. CIT(A) AFTER CONSIDERING THE CASE OF BOT H THE PARTIES, PARTLY ALLOWED THE APPEAL OF THE ASSESSEE. NOW BEFORE US, THE REVENUE HAS PREFERRED THE PRESENT APPEAL BY RAISING THE ABOVE GROUNDS. GROUND NO. 1 & 2 3 . THESE GROUND RAISED BY THE REVENUE ARE INTER CONNECTED AND INTER RELATED AND RELATES TO CHALLENGING THE ORDER OF LD. CIT (A) IN DELETING THE ADDITION OF RS.75 LAKHS MADE U/S 68 OF THE ACT BY AO , IGNORING THE FACTS OF THE PRESENT CASE, THEREFORE WE THOUGHT IT FIT TO DISPOSE OF THE SAME BY THIS COMMON ORDER. 4 . WE HAVE HEARD THE COUNSELS FOR BOTH THE PARTIES AT LENGTH AND WE HAVE ALSO PERUSE D THE MATERIAL PLACED ON RECORD, JUDGME NT CITED BY THE PARTIES AS WELL AS THE ORDERS PASSED BY THE REVENUE AUTHORITIES. WE FIND FROM THE RECORDS THAT THE ADDITIONS WERE MADE BY THE AO U/S 68 O F THE I.T. ACT OF RS. 75 LAKHS BY CONSIDERING THE STATEMENT OF PRAVEEN AGARWAL ON OATH BY THE 5 I.T.A. NO. 4010 /MUM/201 6 M/S CALCULUS PROPERTIES PVT LTD. IN VESTIGATION WING, WHEREIN HE HAD CATEGORICALLY ADMITTED THAT HE WAS PROVIDING BOGUS BILLS, BOGUS SU B - CONTRACTS, BOGUS COMMISSION, BOGUS COMMISSION FEES AND ACCO MMODATION ENTRIES, PURCHASE AND SALE OF UN - QUOTED SHARES, ETC AND FURTHER SUBMITTED THAT ALISHAN ESTATE PVT. LTD., LINKPOINT INFRASTRUCTURE PVT. LTD AND SURYAMUKHI PROJECTS PVT. LTD. W ERE HIS GROUP COMPANIES AND A S PER THE FACTS OF THE PRESENT CASE, THE ASSESSEE HAD RECEIVED UNSECURED LOANS FROM THE ABOVE COMPANIES. THE AO MADE THE ADDITIONS AS THE ASSESSEE HAS FAILED TO DISCHARGE HIS ONUS TO PROVE IDENTITY, CREDITWORTHINESS AND GENUINENESS. 5. ON APPEAL, LD. CIT(A) HAD DELETED THE ADDITIONS MADE BY AO BY HOLDING THAT ASSESSEE HAD DISCHARGED ITS ONUS BY FURNISHING CONFIRMATION OF PARTIES FROM WHOM LOAN WAS ACCEPTED. THE AO IN SUCH CIRCUMSTANCES, COULD NOT MADE ADDITIONS WITHOUT BRINGING ON RECORD EVIDENCE TO PROVE THAT LOANS WERE NOT GENUINE. ACCORDI NG TO LD. CIT(A), ADDITIONS WERE MADE BY THE AO ONLY BY MERELY RELYING UPON THE STATEMENT RECORDED BY INVESTIGATING WING. LD. AR IN ORDER TO SUPPORT ITS CASE, HAD RELIED UPON THE ORDER OF COORDINATE BENCH OF ITAT IN THE CASE OF KLR 6 I.T.A. NO. 4010 /MUM/201 6 M/S CALCULUS PROPERTIES PVT LTD. INDUSTRIES LTD. VRS. DCI T IN ITA NO.1480/HYD/2014 AND THE ORDER OF JURISDICTIONAL BOMBAY HIGH COURT IN THE CASE OF M/S RUSHAB ENTERPRISES VRS. ACIT (WRIT PETITION NO. 167 OF 2015). 6 . ON THE CONTRARY, LD. DR RELIED UPON THE ORDERS PASSED BY AO AND ALSO RELIED UPON THE JUDGMENT OF HONBLE GUJRAT HIGH COURT IN THE C A SE OF PAVANKUMARM SANGHVI VRS. ITO(TAX APPEAL NO. 1037 OF 2017). 7 . AFTER HAVING GONE THROUGH THE FACTS OF THE PRESENT CASE, CONSIDERING THE JUDGMENTS CITED BY THE PARTIES, WE FIND THAT DURING THE COURSE OF APPELLATE PROCEEDING, ASSESSEE SUBMITTED THAT THE AMOUNT BORROWED AS LOAN FROM THE PARTIES WERE ALREADY REPAID BY THE ASSESSEE. THIS FACT HAD NOT BEEN CONSIDERED BY EITHER AO OR BY LD. C IT(A). LD. DR ALSO POINTED OUT THAT BANK STATEMENTS OF THE PARTIES/COMPANIES FR OM WHOM THE LOAN WAS RECEIVED BY THE ASSESSEE WERE ALSO NOT CALLED FOR BY THE AO TO VERIFY THE TRANSACTIONS AND THE FINANCIAL CREDENTIALS OF THE PARTIES. IT IS TRUE THAT THE POWERS OF LD. CIT(A) ARE CO - TERMINUS WITH THAT 7 I.T.A. NO. 4010 /MUM/201 6 M/S CALCULUS PROPERTIES PVT LTD. OF THE AO AND THE LD. CIT(A) COULD HIMSELF CARRIED OUT FURTHER INVESTIGATION WHICH OUGHT TO HAVE BEEN CARRIED OUT BY THE AO, BUT IN THE PRESENT CASE, WE HAVE OBSERVED THAT LD. CIT(A) HAD ONLY POINTED OUT THE SHORT COMINGS OF THE AO AND HAS NOT CARRIED OUT FURTHER INVESTIGATIONS. THE LD. CIT (A) HAD NOT CONTROVERTED THE FINDINGS OF AO BY ELABORATING THE DOCUMENTARY EVIDENCE. MOREOVER, THE FINDINGS OF LD. CIT(A) ARE NOT SUPPORTED BY ANY DOCUMENTARY EVIDENCES. 8. BE THAT AS IT MAY, IT IS PRIMARY DUTY BESTOWED UPON LD. CIT( A) THAT THE COMPLETE AND ALL RELEVANT FACTS OF THE CASE MUST BE BROUGHT ON RECORD AND DISCUSSED WHILE DECIDING THE APPEAL. IT WOULD BE RELEVANT HERE TO QUOTE FROM HONBLE DELHI HIGH COURT IN THE CASE OF CIT VRS. JANSAMPARK ADVERTISING AND MARKETING PVT. LT D. DATED 11.03.15, WHEREIN IT WAS HELD AS UNDER: - 35. ASSESSMENT PROCEEDINGS UNDER THE INCOME TAX ACT ARE NOT A GAME OF HIDE AND SEEK. THE INQUIRY IN THE WAKE OF A NOTICE UNDER SECTION 148 IS NOT AN EMPTY FORMALITY. IT MUST BE EFFECTIVE AND WITH A SENSE OF PURPOSE. THERE IS AN ELABORATE PROCEDURE SET OUT WHICH 8 I.T.A. NO. 4010 /MUM/201 6 M/S CALCULUS PROPERTIES PVT LTD. REQUIRES SCRUPULOUS ADHERENCE AND FOLLOWED UP ON. IN THE HIERARCHY OF THE AUTHORITIES, THE AO IS PLACED AT THE BOTTOM RUNG. THE TWO LAYERS OF APPEALS, BEFORE THE MATTER ENGAGES THE APPELLATE JURISDICTION OF THIS COURT, ARE AUTHORITIES VESTED WITH THE JURISDICTION, POWER AND OBLIGATION TO REACH APPROPRIATE FINDINGS ON FACTS. NOTICEABLY, IT IS ONLY THE APPEAL TO THE HIGH COURT, UNDER SECTION 260 - A , WHICH IS RESTRICTED TO CONSIDERATION OF 'SUBSTANTIAL QUESTION OF LAW', IF ANY ARISING. AS WOULD BE SEEN FROM THE DISCUSSION THAT FOLLOWS, THE OBLIGATION TO M AKE PROPER INQUIRY AND REACH FINDING ON FACTS DOES NOT END WITH THE AO. THIS OBLIGATION MOVES UPWARDS TO CIT (APPEALS), AND ALSO ITAT, SHOULD IT COME TO THEIR NOTICE THAT THERE HAS BEEN DEFAULT IN SUCH RESPECT ON THE PART OF THE AO. IN SUCH EVENT, IT IS TH EY WHO ARE DUTY BOUND TO EITHER THEMSELVES PROPERLY INQUIRE OR CAUSE SUCH INQUIRY TO BE COMPLETED. IF THIS WERE NOT TO BE DONE, THE POWER UNDER SECTION 148 WOULD BE RENDERED PRONE TO ABUSE. 38. THE PROVISION OF APPEAL, BEFORE THE CIT (APPEALS) AND THEN BEFORE THE ITAT, IS MADE MORE AS A CHECK ON THE ABUSE OF POWER AND AUTHORITY BY THE AO. WHILST IT IS TRUE THAT IT IS THE OBLIGATION OF THE AO TO CONDUCT PROPER SCRUTINY OF THE MATERIAL, GIVEN THE FACT 9 I.T.A. NO. 4010 /MUM/201 6 M/S CALCULUS PROPERTIES PVT LTD. THAT THE TWO APPELLATE AUTHORITIES ABOVE ARE ALSO FORUMS FOR FACT - FINDING, IN THE EVENT OF AO FAILING TO DISCHARGE HIS FUNCTIONS PROPERLY, THE OBLIGATION TO CONDUCT PROPER INQUIRY ON FACTS WOULD NATURALLY SHIFT TO THE DOOR OF THE SAID APPELLATE AUTHORITY. FOR SUCH PURPOSES, WE ONLY NEED TO POINT OUT ONE STEP IN THE PROCEDURE IN APPEAL AS PRESCRIBED IN SECTION 250 OF THE INCOME TAX ACT WHEREIN, BESIDES IT BEING OBLIGATORY FOR THE RIGHT OF HEARING TO BE AFFORDED NOT ONLY TO THE ASSESSEE BUT ALSO THE AO, THE FIRST APPELLATE AUTHORITY IS GIVEN THE LIBERTY TO MAKE, OR CAUSE TO BE MADE, 'FURTHER INQUIRY', IN TERMS OF SUB - SECTION (4) WHICH READS AS UNDER: - THE COMMISSIONER (APPEALS) MAY, BEFORE DISPOSING OF A NY APPEAL, MAKE SUCH FURTHER INQUIRY AS HE THINKS FIT, OR MAY DIRECT THE ASSESSING OFFICER TO MAKE FURTHER INQUIRY AND REPORT THE RESULT OF THE SAME TO THE COMMISSIONER (APPEALS). 42. THE AO HERE MAY HAVE FAILED TO DISCHARGE HIS OBLIGATION TO CONDUCT A P ROPER INQUIRY TO TAKE THE MATTER TO LOGICAL CONCLUSION. BUT CIT (APPEALS), HAVING NOTICED WANT OF PROPER INQUIRY, COULD NOT HAVE CLOSED THE CHAPTER SIMPLY BY ALLOWING THE APPEAL AND DELETING THE ADDITIONS MADE. IT WAS ALSO THE OBLIGATION 10 I.T.A. NO. 4010 /MUM/201 6 M/S CALCULUS PROPERTIES PVT LTD. OF THE FIRST APPEL LATE AUTHORITY, AS INDEED OF ITAT, TO HAVE ENSURED THAT EFFECTIVE INQUIRY WAS CARRIED OUT, PARTICULARLY IN THE FACE OF THE ALLEGATIONS OF THE REVENUE THAT THE ACCOUNT STATEMENTS REVEAL A UNIFORM PATTERN OF CASH DEPOSITS OF EQUAL AMOUNTS IN THE RESPECTIVE A CCOUNTS PRECEDING THE TRANSACTIONS IN QUESTION. 9. APART FROM ABOVE, WE FIND THAT HONBLE APEX COURT IN THE CASE OF KAPURCHAND SHRIMAL VRS. CIT 1981 131(ITR) PAGE 451 HAS HELD THAT T HE DUTY OF THE TRIBUNAL DOES NOT END WITH MAKING A DECLARATION THAT THE ASSESSMENTS ARE ILLEGAL AND IT IS DUTY BOUND TO ISSUE FURTHER DIRECTIONS. THE APPELLATE AUTHORITY HAS THE JURISDICTION AS WELL AS THE DUTY TO CORRECT ALL ERRORS IN THE PROCEED INGS UNDER APPEAL AND TO ISSUE, IF NECESSARY, APPROPRIATE DIRECTIONS TO THE AUTHORITY AGAINST WHOSE DECISION THE APPEAL IS PREFERRED TO DISPOSE OF THE WHOLE OR ANY PART OF THE MATTER AFRESH UNLESS FORBIDDEN FROM DOING SO BY THE STATUTE AND THE STA TUTE DOES NOT SAY THAT SUCH A DIRECTION CANNOT BE ISSUED BY THE APPELLATE AUTHORITY IN A CASE OF THIS NATURE. 11 I.T.A. NO. 4010 /MUM/201 6 M/S CALCULUS PROPERTIES PVT LTD. 10. THEREFORE, KEEPING IN VIEW THE INTEREST OF JUSTICE, WE SET ASIDE THE ORDER OF LD. CIT(A) AND REMIT THE MATTER BACK TO THE FILE OF AO WITH A DIRECTION TO CARRY OUT FURTHER NECESSARY INVESTIGATIONS /VERIFICATION AS TO WHETHER THE AMOUNT OF LOAN ALONG WITH INTEREST , IF ANY, WAS REPAID BY THE ASSESSEE OR NOT AND THEREAFTER PASS AFRESH ORDER. THE AO IS ALSO AT LIBERTY TO BRING ON RECORD ANY OTHER E VIDENCE TO PROVE THAT LOANS WERE NOT GENUINE. IT IS NEEDLESS HERE TO MENTION THAT BEFORE PASSING AFRESH ORDER OF ASSESSMENT, THE AO SHALL PROVIDE SUFFICIENT OPPORTUNITY OF HEARING TO THE ASSESS E E. 11. BEFORE PARTING, WE MAY MAKE IT CLEAR THAT OUR DECISI ON TO RESTORE THE MATTER BACK TO THE FILE OF AO SHALL IN NO WAY BE CONSTRUED AS HAVING ANY REFLECTION OR EXPRESSION ON THE MERITS OF THE DISPUTE, WHICH SHALL BE ADJUDICATED BY THE AO INDEPENDENTLY IN ACCORDANCE WITH LAW. WITH THESE DIRECTIONS, THESE GROUND S O F APPEAL FILED BY THE REVENUE ARE PARTLY A LLOWED FOR STATISTICAL PURPOSES. 12 I.T.A. NO. 4010 /MUM/201 6 M/S CALCULUS PROPERTIES PVT LTD. GROUND NO. 3 & 4 . 12 . THESE GROUNDS RAISED BY THE REVENUE ARE CONSEQUENTIAL IN NATURE , NEEDS NO SPECIFIC ADJUDICATION AS WE HAVE ALREADY DECIDED GROUND NO. 1 & 2 ON MERITS. GROUND NO. 5 & 6 . 13 . THESE GROUNDS RAISED BY THE REVENUE ARE GENERAL IN NATURE, THUS REQUIRES NO SPECIFIC ADJUDICATION. 14 . IN THE NET RESULT, THE APPEAL FILED BY THE REVENUE STANDS PARTLY ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 27 DEC , 2018 . SD/ - SD/ - ( R. C. SHARMA ) (SANDEEP GOSAIN) / A COUNTANT MEMBER / JUDICIAL MEMBER MUMBAI ; DATED : 27 . 12 .201 8 SR.PS . DHANANJAY 13 I.T.A. NO. 4010 /MUM/201 6 M/S CALCULUS PROPERTIES PVT LTD. / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT 3. ( ) / THE CIT(A) 4. / CIT - CONCERNED 5. , , / DR, ITAT, MUMBAI 6. / GUARD F I LE / BY ORDER, . / (DY./ASSTT.REGISTRAR) , / ITAT, MUMBAI