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

ITA 4049/MUM/2018

AI Insights

Sudar Industries Ltd. appealed against the order passed by the Commissioner of Income Tax (Appeals)-53, Mumbai, which upheld the Deputy Commissioner of Income Tax's actions regarding the issuance of a notice under section 148 of the Income Tax Act, 1961, and various additions and disallowances made during the assessment year 2014-15. The Tribunal heard the appeal ex-parte due to the absence of representation from the assessee and proceeded based on the material available on record and the arguments presented by the learned Departmental Representative. The Tribunal dismissed all grounds of appeal, confirming the validity of the notice under section 148, the absence of notice under section 143(2), and the additions and disallowances made by the Assessing Officer.

• Counselvise Citation: [2022] 140 COUNSELVISE.COM (IT) 299449 (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; Validity of assessment; Block assessment; Capital expenditure; Rule 8D
• Section: 147; 148; 143(3); 14A; 250; 143(2)

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.4049/Mum./2018 (Assessment Year : 2014–15) 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 2014–15. 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.4049/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 notice under sections 148 of the Act. The appellants contend that the CIT(A) ought not to have upheld the action of the Assessing Officer inasmuch as the notice issued under section 148 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 order framed is bad in law and needs to be quashed. 2. The Assessing Officer erred in framing the impugned order of assessment without issuing a notice under section 143(2) of the Act. The appellants contend that on the facts and in the circumstances of the case and in law, the impugned assessment is bad in law inasmuch as the order is framed without issue of notice under section 143(2) of the Act. 3. The CIT(A) erred in upholding the action of the Assessing Officer in making an addition Rs 19,26,196 as income from business and profession. The appellants 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. 4. The CIT(A) erred in upholding the action of the Assessing Officer in making an addition of Rs 37,26,57,550 on account of alleged non-genuine purchases. The appellants 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. Sudar Industries Ltd. ITA no.4049/Mum./2018 Page | 3 5. The CIT(A) erred in upholding the action of the Assessing Officer in making a disallowance of Rs. 1,89,190 under section 14Ar.wr 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 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 the same is not per the prescription of section 14A r.w.r. 8D(2)(iii) and hence, ought to be deleted. 6. The CITIA) erred in upholding the action of the Assessing Officer in making a disallowance of depreciation at 15% on capital expenditure of Rs 6,34,720 incurred during the previous year relevant to income-tax assessment year 2013-14 on the ground that the said capital expenditure is bogus. The appellants contend that on 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. The appellants crave leave to add, to, alter or amend the aforestated grounds of appeal.” 4. The brief facts of the case are: The assessee is engaged in the job working of readymade garments and intermediate chemicals. Pursuant to information received during the course of search action at the office premises of Dr. Datsons Labs Ltd., proceedings under section 147 were initiated in the case of the assessee, and accordingly, notice under section 148 of the Act was issued on 19/02/2016. In response to notice under section 148 of the Act, the assessee filed its return of income on 29/02/2016, declaring total income at INR nil under normal provisions of the Act and declared a book profit of INR 41,07,20,000. Thereafter, notices under section 143(2)/142(1) of the Act were issued and served upon the assessee for necessary compliance. After considering the submissions of the assessee, the Assessing Officer (‘AO’) vide order passed under section 147 read with section 143(3) of Sudar Industries Ltd. ITA no.4049/Mum./2018 Page | 4 the Act computed the total income of the assessee at INR 43,72,33,440. The learned CIT(A) vide impugned order, inter-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 147 of the Act. 6. The brief facts of the case as emanating from the record are: As noted above based on the information received during the course of search action at the office premises of Dr. Datsons Labs Ltd., proceedings under section 147 of the Act were initiated in the case of the assessee. In the reasons recorded while reopening the assessment, forming part of the assessment order on page 2, it is noted that the search action resulted in the seizure of documentary evidence with regard to cash transactions of the assessee. Further, Mr. Deepak Shenoy, Executive Director of the assessee in his statement recorded on oath on 27/06/2014, disclosed that the cash transaction as additional income amounting to INR 1.5 crore for the assessment year 2013–14 in the hands of the assessee. Further, in the reasons, it has been noted that during the block assessment of the assessee for assessment years 2008–09 to 2013–14, it has been noticed that the assessee was doing transaction with entities that are suspicious as per the statement recorded during the course of aforesaid search action. Further, it has been noticed that as per the financials available in the public domain for the financial year 2013–14 the assessee is showing income chargeable to tax. Since the assessee has filed no return of income till the date of issuance of notice under section 148 of the Act, despite the fact that it has income Sudar Industries Ltd. ITA no.4049/Mum./2018 Page | 5 chargeable to tax, therefore, proceedings under section 147 of the Act were initiated and notice under section 148 of the Act was issued. The learned CIT(A) vide impugned order dismissed the ground raised by the assessee on this issue. From the evidence available on record, it is discernible that the AO had tangible material based on which the brief was formed that income chargeable to tax has escaped assessment for the year under consideration, therefore, the initiation of proceedings under section 147 of the Act in the present case is upheld. As a result, ground No. 1, raised in assessee’s appeal is dismissed. 7. The issue arising in ground No. 2, raised in assessee’s appeal is pertaining to the validity of assessment without the issuance of notice under section 143(2) of the Act. 8. As noted in the assessment order in paragraph 5, notices under section 143(2)/142(1) of the Act dated 01/03/2016, were issued and served upon the assessee for necessary compliance. In response to the above notices, the authorised representative of the assessee attended the proceedings, filed details, produce documents, and discussed the case with the AO. Thus, from the record, it is evident that the statutory notices were issued and the same were duly complied with by the assessee without raising any dispute regarding the non-issuance of notice under section 143(2) of the Act. As a result, ground No. 2 raised in assessee’s appeal is dismissed. Sudar Industries Ltd. ITA no.4049/Mum./2018 Page | 6 9. The issue arising in ground No. 3 raised in assessee’s appeal is pertaining to the addition of INR 19,26,196, as income from business and profession. 10. The brief facts of the case as emanating from the record are: While dismissing assessee’s appeal on this issue, the learned CIT(A) observed as under: “5.2 The appellant has not explained the nature of addition that is disputed and the basis for making such a claim. No submission has been Bed in the appellate proceedings. A perusal of the assessment order shows that the amount of Rs. 19,26,196/- has been considered as Income from Business & Profession. This is apparently based on the copy of accounts led in the assessment proceedings. The appellant has not shown how this amount should not be assessed. In the absence of any explanation filed, this ground of appeal no.3 is dismissed.” Being aggrieved, the assessee is in appeal before us. 11. Having considered the submissions of the learned DR and perused the material available on record, in absence of any material being brought on record to controvert the findings of learned CIT(A), we find no infirmity in the impugned order passed on this issue. As a result, ground No. 3 raised in assessee’s appeal is dismissed. 12. The issue arising in ground No. 4, raised in assessee’s appeal, is pertaining to the addition of INR 37,26,57,550, on account of alleged non- genuine purchases. 13. The brief facts of the case as emanating from the record are: During the course of assessment proceedings, it was noticed that the assessee company was dealing with suspicious entities therefore, the assessee was asked about Sudar Industries Ltd. ITA no.4049/Mum./2018 Page | 7 dealing with the suspicious 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 INR 149,06,30,202, 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 dismissed the appeal filed by the assessee on this issue by observing as under: “6.3 In the appellate proceedings also, there is no evidence filed by the appellant to establish the genuineness of the purchases. The disallowance made by the Assessing Officer at 25% of such purchases is not without basis. In these facts, 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. 4 raised in assessee’s appeal is dismissed. 15. The issue arising in ground No. 5, raised in assessee’s appeal, is pertaining to disallowance under section 14A read with Rule 8D(2)(iii). 16. 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 Sudar Industries Ltd. ITA no.4049/Mum./2018 Page | 8 mutual funds to the tune of INR 5,36,25,000. 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 the assessee, the AO computed disallowance of INR 1,89,190, 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 by observing as under: “7.2 This has been dealt in para 12 of the assessment order. The appellant had shown investment in equity shares and mutual funds to the tune of Rs.5,36,25,000/-. No disallowance u/s.14A had been made. The AO disallowed an amount of Rs.1,89,190/- under Rule 8D(2)(ii). The disallowance is based on Rule 8D which clearly applies to the facts of the case. This has been computed at the rate of 0.5% of the average investments. No specific argument or basis has been given by the appellant to dispute this. Accordingly, ground of appeal no.5 is dismissed.” Being aggrieved, the assessee is in appeal before us. 17. 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. 18. Insofar as ground No. 6 is concerned, the learned CIT(A) vide impugned order upheld the disallowance of depreciation on capital expenditure, which was held to be bogus in the assessment year 2013–14. In assessee’s appeal being ITA No.4048/Mum./2018, for the assessment year 2013–14, the disallowance of depreciation on capital expenditure has been upheld. Sudar Industries Ltd. ITA no.4049/Mum./2018 Page | 9 Therefore, in view of the above, ground No. 6 raised in assessee’s appeal is dismissed. 19. 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 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