SUDAR INDUSTRIES LTD., MUMBAI V. DCIT- CC- 5(2) , MUMBAI

ITA 4048/MUM/2018

AI Insights

Sudar Industries Ltd. appealed against the order of the Commissioner of Income Tax (Appeals)-53, Mumbai, which upheld the additions made by the Deputy Commissioner of Income Tax, Central Circle-5(2), Mumbai. The additions included Rs. 1,50,50,000 for alleged unaccounted cash receipts and Rs. 8,70,46,188 for non-genuine purchases. The Tribunal dismissed the appeal, confirming the validity of the notice under section 153C and the subsequent additions, citing lack of evidence from the assessee to support their claims.

• Counselvise Citation: [2022] 140 COUNSELVISE.COM (IT) 299448 (ITAT-MUMBAI)
• Duration Of Justice: 3 month(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 04-12-2022
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: G
• Next Hearing Date: 07-09-2022
• Assessment Year: misc
• Appeal Filed On: 05-08-2022
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Keywords: Depreciation; Income from undisclosed sources; Document seized; Documents seized; Capital expenditure; Rule 8D
• Section: 131; 132; 143(3); 153A; 14A; 250; 139(1); 13; 153C

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL “G” BENCH, MUMBAI BEFORE SHRI PRASHANT MAHARISHI, ACCOUNTANT MEMBER AND SHRI SANDEEP SINGH KARHAIL, JUDICIAL MEMBER ITA no.4048/Mum./2018 (Assessment Year : 2013–14) Sudar Industries Ltd. 27/29, Paud Village Mazgaon Road, Taluka Khalapur Raigad, 410 222 PAN – AAGCS4668D ................ Appellant v/s Dy. Commissioner of Income Tax Central Circle–5(2), Mumbai ................Respondent Assessee by : None Revenue by : Shri Prabhat Kumar Gupta Date of Hearing – 08/09/2022 Date of Order – 05/12/2022 O R D E R PER SANDEEP SINGH KARHAIL, J.M. The present appeal has been filed by the assessee challenging the impugned order dated 02/02/2018 passed under section 250 of the Income Tax Act, 1961 (‘the Act’) by the learned Commissioner of Income Tax (Appeals)– 53, Mumbai [‘learned CIT(A)’], for the assessment year 2013–14. 2. When this appeal was called for hearing, neither anyone appeared on behalf of the assessee nor was any application seeking adjournment filed. On perusal of the record, it is observed that on previous occasions also no one appeared on behalf of the assessee, apart from some intermittent Sudar Industries Ltd. ITA no.4048/Mum./2018 Page | 2 representation on a few dates of hearing on behalf of the assessee. The learned Departmental Representative (“learned DR”) also furnished proof of service of notice to the assessee through email. Therefore, in view of the above, we proceed to dispose off this appeal ex–parte, qua the assessee after hearing the learned DR and based on the material available on record. 3. In this appeal, the assessee has raised the following grounds: “The following grounds of appeal are independent of, and without prejudice to, one another: 1. The Commissioner of Income-tax (Appeals)-53, Mumbai (hereinafter referred to as the CIT(A)) erred in upholding the action of the Deputy Commissioner of Income-tax Central Circle -5(2), Mumbai (hereinafter referred to as the Assessing Officer) in issuing a notice under section 153C of the Act. The appellants contend that the notice issued under section 153C is ab initio void inasmuch as the jurisdictional conditions for the issue of the said notice have not been complied with and consequently, the assessment framed is bad in law and needs to be quashed. The appellants further, contend that no incriminating documents relatable to the appellants is found during the course of search on a person referred to in section 153A and that the satisfaction required by the provisions of section 153C is not recorded by the Assessing Officer of such person referred to in section 153A and hence, the impugned notice issued under section 153C is ab initio void; consequently, the assessment framed is bad in law and needs to be quashed. 2. The CIT(A) erred in upholding the action of the Assessing Officer in making an addition of Rs 1,50,50,000, on account of alleged cash not recorded in the books of account of the appellants. The appellants contend that the impugned addition is not arising out of any incriminating documents relatable to the appellants that is found during the course of a search on a person referred to in section 153A and the necessary satisfaction required by the provisions of section 153C is not recorded by the Assessing Officer of such person referred to in section 153A and hence, the impugned addition is vitiated in law. Without prejudice, the appellants further, contend that on the facts and in the circumstances of the case and in law, the CIT(A) ought not to have upheld the action of the Assessing Officer in making the impugned addition inasmuch as the CIT(A) and the Assessing Officer have not correctly appreciated the facts of the case in its entirety and hence, the said addition is not tenable in law and requires to be deleted. Sudar Industries Ltd. ITA no.4048/Mum./2018 Page | 3 3. The CIT(A) erred in upholding the action of the Assessing Officer in making an addition of Rs 8,70,46,188, on account of alleged non-genuine purchases. The appellants contend that the impugned addition is not arising out of any incriminating documents relatable to the appellants that is found during the course of search on a person referred to in section 153A and the necessary satisfaction required by the provisions of section 153C is not recorded by the Assessing Officer of such person referred to in section 153A and hence, the impugned addition is vitiated in law. Without prejudice, the appellants further, contend that on the facts and in the circumstances of the case and in law, the CIT(A) ought not to have upheld the action of the Assessing Officer in making the impugned addition inasmuch as the CIT(A) has not correctly appreciated the facts of the case in its entirety and hence, the said addition is not tenable in law and requires to be deleted. The appellants further, contend that the CIT(A) has violated the principles of natural justice in the process of upholding the impugned addition made by the Assessing Officer and hence, the impugned addition ought to be deleted. 4. The CIT(A) erred in upholding the action of the Assessing Officer in making a disallowance of Rs 95,208, being depreciation at 15% on capital expenditure of 6,34,720 on the ground that the said capital expenditure is bogus. The appellants contend that the impugned disallowance is not arising out of any incriminating documents relatable to the appellants that is found during the course of search on a person referred to in section 153A and the necessary satisfaction required by the provisions of section 153C is not recorded by the Assessing Officer of such person referred to in section 153A and hence, the impugned addition is vitiated in law. Without prejudice, the appellants further, contend that on the facts and in the circumstances of the case and in law, the CIT(A) ought not to have upheld the action of the Assessing Officer in making the impugned disallowance inasmuch as there is no capital expenditure which is bogus in nature and hence, the impugned disallowance ought to be deleted. 5. The CIT(A) erred in upholding the action of the Assessing Officer in making a disallowance of Rs.1,12,871 under section 14A r.w.r 8D(2)(iii) on the ground that the appellants have not given any specific argument or basis during the appellate proceedings to dispute the said disallowance. The appellants contend that the impugned disallowance is not arising out of any incriminating documents relatable to the appellants that is found during the course of search on a person referred to in section 153A and the necessary satisfaction required by the provisions of section 153C is not recorded by the Assessing Officer of such person referred to in section 153A and hence, the impugned addition is vitiated in law. Without prejudice, the appellants further, contend that on the facts and in the circumstances of the case and in law, the CIT(A) ought not to have upheld the action of the Assessing Officer in making the impugned disallowance inasmuch Sudar Industries Ltd. ITA no.4048/Mum./2018 Page | 4 as the same is not per the prescription of section 14A r.wr. 8D (2)(i) and hence, the same should be deleted. 6. The CIT(A) erred in upholding the action of the Assessing Officer in making an addition of Rs 4,760, being incidental charges for the alleged bogus capital expenditure which has been worked out at 0.75% of 6,34,720. The appellants contend that the impugned addition is not arising out of any incriminating documents relatable to the appellants that is found during the course of a search on a person referred to in section 153A and the necessary satisfaction required by the provisions of section 153C is not recorded by the Assessing Officer of such person referred to in section 153A and hence, the impugned addition is vitiated in law. Without prejudice, the appellants further, contend that on the facts and in the circumstances of the case and in law, the CIT(A) ought not to have upheld the action of the Assessing Officer in making the impugned addition inasmuch as there is no capital expenditure that is bogus in nature and the Assessing Officer has failed to bring any evidence on record to make the impugned addition; hence, the impugned addition ought to be deleted.” 4. The brief facts of the case are: The assessee is engaged in the job working of readymade garments and intermediate chemicals. A search and seizure action under section 132(1) of the Act was conducted in the Aanjaneya Lifecare Ltd. (Dr. Datson Labs Ltd) group concern on 24/09/2013. The satisfaction for issuance of notice under section 153C of the Act to the assessee was recorded vide order sheet noting dated 19/01/2016. Subsequently, notice under section 153C of the Act was issued to the assessee on the same date. In response to the above notice, the assessee filed its return of income declaring a loss of Rs.1,29,34,011 on 26/02/2016. Thereafter, notices under section 143(2)/142(1) of the Act were issued and served upon the assessee for necessary compliance. After considering the details filed by the assessee, the Assessing Officer (‘AO’) vide order dated 28/03/2016 passed under section 153C read with section 143(3) of the Act made certain disallowances/additions and computed the total income of the assessee at Rs. 16,27,62,750. The learned CIT(A) vide impugned order, inter- Sudar Industries Ltd. ITA no.4048/Mum./2018 Page | 5 alia, dismissed the appeal filed by the assessee. Being aggrieved, the assessee is in appeal before us. 5. The issue arising in ground No.1, raised in assessee’s appeal, is pertaining to the validity of proceedings initiated under section 153C of the Act. 6. The brief facts of the case as emanating from the record are: During the search action on 24/09/2013, in the case of Dr. Datsons Lab Ltd, certain digital evidence with regard to financial transaction involving cash was extracted from the computer of the Managing Director of Dr. Datsons Lab Ltd. Thereafter, when confronted, the Managing Director of Dr. Datsons Lab Ltd in his sworn statement recorded under section 131 of the Act on 23/06/2014, submitted that the said paper belongs to the assessee and the same was downloaded by Mr. Deepak Shenoy, Executive Director of the assessee while accessing email on his computer. In the course of summons proceedings under section 131 of the Act, Mr. Deepak Shenoy confirmed that the said document belongs to the assessee and the same was downloaded by him from his email ID on the computer of the Managing Director of Dr. Datsons Lab Ltd. While explaining the contents of the said document, Mr. Deepak Shenoy submitted that first part of the transaction is regarding the share transaction with respect to promoters holding in assessee company. While the second part of the transaction reflected on the said document indicates cash receipts to the tune of Rs. 1,50,50,000, in the hands of the assessee on various dates between 24/12/2012 to 07/02/2013, generated from the scrap sales. Accordingly, on being satisfied, the seized documents were forwarded and handed over to the Sudar Industries Ltd. ITA no.4048/Mum./2018 Page | 6 AO of the assessee. Thereafter, notice under section 153C of the Act was issued to the assessee after recording the satisfaction. We find that similar ground was raised by the assessee before the learned CIT(A). While dismissing the same, the learned CIT(A) observed as under: “4.5. A perusal of the above shows that there is no infirmity in the assessing officer assuming jurisdiction in issuing notice u/s 153C in the case of the appellant. Once the ingredients for application of section 153C is found in the facts of the case, the assessing officer is mandated to issue notice u/s 153C for the six years as has been done by the assessing officer in this case. It is noticed that no return of income was filed within the time limit stipulated u/s 139(1) of the I.T. Act. Though the accounts were audited on 30-05-2013, the appellant did not file its return of income by 30- 09-2013. Instead, it has filed its return of income only on 26-02-2016 in response to the notice u/s 153C of the I.T. Act. Thus, unlike the earlier AYs, there cannot be any plea that the assessments should not be disturbed and the return filed u/s.139(1) should be accepted as completed assessments and additions can only be based on incriminating material found in the course of search. Thus, for AY 2013-14, the AO is empowered to not only make addition based on the findings of the search but also on all other issues that have been examined in the assessment proceedings. Accordingly, ground of appeal no 2 is dismissed.” Being aggrieved, the assessee is in appeal before us. 7. Having heard the submissions of the learned DR and perused the material available on record, we find that in the present case proceedings under section 153C of the Act were initiated in the case of the assessee pursuant to the document found during the search under section 132 at the office premises of Dr. Datsons Lab Ltd. Accordingly, after recording the satisfaction, as noted by the learned CIT(A) on pages 6–7 of its order, the seized document was forwarded and handed over to the AO of the assessee. Thereafter, after recording the satisfaction, notice under section 153C of the Act was issued to the assessee, as noted by the learned CIT(A) on pages 7–8 of its order. Thus, in view of the above, we are of the considered opinion that Sudar Industries Ltd. ITA no.4048/Mum./2018 Page | 7 jurisdiction under section 153C was validly initiated by the AO in the case of the assessee. 8. Insofar as the plea of the assessee that no incriminating document relatable to the assessee was found during the course of the search, and thus additions made by the AO are void ab initio, we find that in the present case no return of income was filed by the assessee under section 139(1) or section 139(4) of the Act. The assessee only filed the return of income on 26/02/2016, in response to a notice issued under section 153C of the Act. Thus, in the present case, there cannot be any question of pendency of assessment or otherwise at the time of issuance of notice under section 153C of the Act to decide whether the same has been abated or unabated. In view of the above, we find no infirmity in the impugned order passed by the learned CIT(A) on this issue. As a result, ground No. 1 raised in assessee’s appeal is dismissed. 9. The issue arising in ground No. 2, raised in assessee’s appeal, is pertaining to the addition of Rs.1,50,50,000, on account of alleged cash not recorded in the books of accounts of the assessee. 10. The brief facts of the case as emanating from the record are: As noted above, the Executive Director of the assessee in its statement recorded under section 131 of the Act admitted that the 2 nd portion of the seized document indicates cash receipts to the tune of Rs.1,50,50,000, in the hands of the assessee generated from the scrap sales. During the assessment proceedings, vide letter dated 21/03/2016, Mr. Deepak Chennai retracted from his earlier statement recorded under section 131 of the Act and submitted that this Sudar Industries Ltd. ITA no.4048/Mum./2018 Page | 8 transaction is purely a sale of shares of the promoter of the assessee company. Vide another letter dated 21/03/2016, the promoter of the assessee company submitted that to generate the funds for personal medical emergency and family problems the shares of the assessee were sold through the broker in the open market and once the money was received from the proceeds of the sale of shares, the amount of Rs. 1,50,50,000, was given back to the broker and the same was encashed. In the aforesaid letter, it was claimed by the promoter that the said cash was used for personal reasons. In absence of any evidence of cash being used for medical treatment and doubting the submission of the promoter of the assessee, vide assessment order the AO made the addition of Rs. 1,50,50,000, as unaccounted money in the books of the assessee. The learned CIT(A), vide impugned order, dismissed the appeal filed by the assessee on this issue by observing as under: “5.4 In the appellate proceedings, the appellant has not furnished any further explanation or evidence. It is noted that the statement of Shri Deepak Shenoy, admittedly the Executive Director of the appellant company, was recorded on 27-06–2014 which is nearly nine months after the search action in the case of DDLL group of cases. Thus, there cannot be any claim that Shri Deepak Shenoy was under any pressure when he made the admission of unaccounted income of the appellant company. His statement was recorded u/s 131 of the I.T. Act. It is further noted that no evidence was furnished to show that the sale proceeds of sale of shares was transferred by Smt. Valliammal Thevar to any broker and that the broker had returned cash to her as claimed. Even the name of the broker has not been mentioned. The bank statement showing cash withdrawal and linking it to the sale proceeds of the sale of shares of the appellant company is not furnished. Further, the explanation by Smt. Thevar that the cash was required for medical emergency is not corroborated with any evidence such as the hospital records and the payments made for the same. Thus, the AO has correctly held that the amount of Rs. 1,50,50,000/- was received in cash which has not been offered in the hands of the appellant company. Accordingly, ground of appeal no.3 is dismissed.” Being aggrieved, the assessee is in appeal before us. Sudar Industries Ltd. ITA no.4048/Mum./2018 Page | 9 11. Having heard the submissions of the learned DR and perused the material available on record, we find that even now no evidence has been furnished to show that the sale proceeds of shares were transferred by the promoter to the broker and the broker had returned the same in cash. Further, the bank statement showing the cash transaction and linking it to the sale proceeds of the sale of shares is also not available on record. Thus, in view of the above, we find no infirmity in the impugned order passed by the learned CIT(A) on this issue. As a result, ground No.2, raised in assessee’s appeal is dismissed. 12. The issue arising in ground No. 3, raised in assessee’s appeal, is pertaining to the addition of Rs.8,70,46,188, on account of alleged non- genuine purchases. 13. The brief facts of the case as emanating from the record are: During the assessment proceedings, based on the statement recorded during the search, it was observed that the assessee was dealing with suspicious entities, therefore, the assessee was asked about dealing with those entities. In reply, the assessee submitted the quantum of sales and purchases from these parties. As per the details furnished, the assessee has booked purchases of Rs.34,81,84,752, and the assessee claimed that the payment to the suppliers was made through RTGS to establish the genuineness of the transaction. In absence of documentary evidence like invoices, delivery challans, lorry receipts, etc., the AO made an addition of 25% of non-genuine purchases for the year under consideration. The learned CIT(A) vide impugned order Sudar Industries Ltd. ITA no.4048/Mum./2018 Page | 10 dismissed the appeal filed by the assessee on this issue by observing as under: “6.3 In the appellate proceedings, no further submission / evidence has been filed. Considering that the purchases have not been established to be genuine by way of corroborative evidence, the disallowance of such purchases is justified. Further, it is noted that the AO has restricted the disallowance to 25% of the purchases. Such an estimate is reasonable and is therefore upheld in the facts of the case. Accordingly, ground of appeal no.4 is dismissed.” Being aggrieved, the assessee is in appeal before us. 14. Having heard the submissions of the learned DR and perused the material available on record, we find that no documentary evidence in support of alleged purchases has been brought on record by the assessee. Accordingly, we find no infirmity in the impugned order passed by the learned CIT(A) on this issue. As a result, ground No. 3 raised in assessee’s appeal is dismissed. 15. The issue arising in ground No. 4 raised in assessee’s appeal is pertaining to the disallowance of depreciation on capital expenditure. 16. The brief facts of the case as emanating from the record are: During the assessment proceedings, from the bank statement of the assessee, the name of M/s S.M. Construction, was noticed. Since this entity was found to provide bogus capital expenditure entries to Dr. Datsons Lab Ltd. during the course of search proceedings, therefore, the assessee was asked to furnish the details in relation to capital expenditure. In response, the assessee submitted only the Ledger account of M/s S.M. Construction, in its books without specifying the nature of capital expenditure. From the perusal of the Ledger account, it was noticed that the assessee company has booked capital expenditure of Rs. Sudar Industries Ltd. ITA no.4048/Mum./2018 Page | 11 6,34,720, from M/s S.M. construction during the year under consideration. In absence of any documentary evidence, the capital expenditure debited by the assessee was considered bogus, and accordingly, depreciation of Rs. 95,208, being claimed was disallowed which is worked out at the rate of 15% of the aggregate bogus capital expenditure of Rs.6,34,720. The learned CIT(A), vide impugned order, dismissed the appeal filed by the assessee on this issue observing as under: “7.3 in the appellate proceedings, no submission and evidence has been filed to show that the conclusion of the AO is incorrect. These purchases on account of capital expenditure is not shown to be genuine and, therefore, the disallowance of depreciation is justified. Accordingly, ground of appeal no.5 is dismissed.” Being aggrieved, the assessee is in appeal before us. 17. Having heard the submissions of the learned DR and perused the material available on record, we find that there is no evidence on record to justify the claim of the assessee. Therefore, we find no infirmity in the impugned order passed by the learned CIT(A) on this issue. As a result, ground No. 4 raised in assessee’s appeal is dismissed. 18. The issue arising in ground No. 5, raised in assessee’s appeal, is pertaining to disallowance under section 14 A read with Rule 8D(2)(iii). 19. The brief facts of the case as emanating from the record are: For the year under consideration, the assessee has invested in equity shares and mutual funds to the tune of Rs. 2,20,51,410. During the assessment proceedings, the assessee was asked to compute the disallowance under section 14A read with Rule 8D. In absence of any computation submitted by Sudar Industries Ltd. ITA no.4048/Mum./2018 Page | 12 the assessee, the AO computed disallowance of Rs. 1,12,871 under section 14A read with Rule 8D(2)(iii). The learned CIT(A) vide impugned order dismissed the appeal filed by the assessee on this issue in absence of a specific argument or basis given by the assessee to dispute the addition. Being aggrieved, the assessee is in appeal before us. 20. Having considered the submissions of the learned DR and perused the material available on record, we find that nothing has been brought on record to dispute the computation of disallowance made under section 14A read with Rule 8D(2)(iii). Thus, we find no infirmity in the impugned order passed by the learned CIT(A) on this issue. As a result, ground No. 5 raised in assessee’s appeal is dismissed. 21. As regards ground No. 6, raised in assessee’s appeal, the AO made disallowance of Rs.4,760, being the incidental charges for claiming bogus capital expenditure. The learned CIT(A) dismissed the appeal filed by the assessee on this issue. In absence of any material to controvert the findings of the lower authorities, we find no merit in this ground raised by the assessee. Accordingly, ground No. 6 raised in assessee’s appeal is dismissed. 22. In the result, the appeal by the assessee is dismissed. Order pronounced in the open Court on 05/12/2022 Sd/- PRASHANT MAHARISHI ACCOUNTANT MEMBER Sd/- SANDEEP SINGH KARHAIL JUDICIAL MEMBER MUMBAI, DATED: 05/12/2022 Sudar Industries Ltd. ITA no.4048/Mum./2018 Page | 13 Copy of the order forwarded to: (1) The Assessee; (2) The Revenue; (3) The CIT(A); (4) The CIT, Mumbai City concerned; (5) The DR, ITAT, Mumbai; (6) Guard file. True Copy By Order Pradeep J. Chowdhury Sr. Private Secretary Assistant Registrar ITAT, Mumbai