HARISH MEHTA, MUMBAI V. ITO 21(1)(2), MUMBAI

ITA 4082/MUM/2013

• Counselvise Citation: [2015] 134 COUNSELVISE.COM (IT) 1903 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 6 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-12-2015
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: H
• Next Hearing Date: 14-12-2015
• Assessment Year: 2007-2008
• Appeal Filed On: 21-05-2013
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: C N ANGOLKAR
• Keywords: Onus to prove
• Section: 142(1); 144

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES H, MUMBAI BEFORE SHRI JASON P. BOAZ (AM) AND SHRI AMIT SHUKLA (JM) ITA NO. 4082 /MUM/2013 ASSESSMENT YEAR: 2007-08 SHRI. HARISH MEHTA. 33-A, SAI CHINTA. PRARTHANASAMAJ ROAD, VILEPARLE (E), MUMBAI- 400057. PAN : A APPM5685E VS. THE ITO 21 (1)(2), MUMBAI. (APPELLANT) (RESPONDENT) APPELLANT BY : NONE RESPONDENT BY : SHRI. C.N.ANGOLKAR DATE OF HEARING: 14/12/2015 DATE OF PRONOUNCEMENT: 18/12/2015 O R D E R PER JASON P. BOAZ, AM THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINS T THE ORDER OF THE CIT(APPEALS)-32, MUMBAI DT. 18/03/2013 FOR ASST. YE AR 2007-08. 2. THE FACTS OF THE CASE, BRIEFLY, ARE AS UNDER:- 2.1 THE ASSESSEE (PROPRIETOR OF M/S. MONARCH INDU STRIES) ENGAGED IN THE BUSINESS OF TRADING IN IRON & STEEL, FILED HIS RETURN FOR ASST. YEAR 2007-08 ON 31/10/2007 DECLARING INCOME OF RS. 2,79, 170/- THE RETURN WAS PROCESSED U/S 143(1) OF THE INCOME TAX ACT, 1961 ( IN SHORT THE ACT) AND THE CASE WAS TAKEN UP FOR S CRUTINY . IT IS SEEN FROM THE RECORD OF ASSESSMENT PROCEEDINGS THAT DESP ITE ISSUE AND SERVICE OF NOTICES U/S 143(2) AND 142(1) OF THE ACT BY THE ASSESSING OFFICER (AO), THE ASSESSEE, APART FROM APPEARING FOR HEARING ON ONE OR 2 ITA NO. 4082 /MUM/2013 ASSESSMENT YEAR: 2007-08 TWO OCCASIONS, DID NOT FURNISH THE DETAILS CALLED F OR. IN THESE CIRCUMSTANCES, THE AO ISSUED A SHOW CAUSE NOTICE CA LLING FOR DETAILS AND INFORMING THE ASSESSEE THAT NON-COMPLIANCE THER EWITH WILL RESULT IN THE ASSESSMENT BEING COMPLETED EX-PARTE U/S 144 OF THE ACT. SINCE THERE WAS NO COMPLIANCE THERE TO BY THE ASSESSEE, T HE AO PROCEEDED TO COMPLETE THE ASSESSMENT EX-PARTE U/S 144 OF THE ACT VIDE ORDER DT. 17/12/2009 BASED ON THE MATERIAL ON RECORD AND DET ERMINED THE INCOME OF THE ASSESSEE AT RS. 32,03,000/- AS AGAINS T THE RETURNED INCOME OF RS. 2,79,170/- 2.2 AGGRIEVED BY THE ORDER OF ASSESSMENT DT. 17/12/ 2009 FOR ASST. YEAR 2007-08, THE ASSESSEE PREFERRED AN APPEAL BEFO RE THE CIT (APPEALS)-32, MUMBAI. THE LD CIT (A) DISMISSED THE ASSESSEES APPEAL VIDE ORDER DT. 18/03/2013 UPHOLDING THE FOLLOWING ADDITIONS/DISALLOWANCES MADE BY THE AO (I) ESTIMATION OF ADDL. PROFITS- RS. 10,00,000/- (II) ADDITION U/S 41(1) OUT OF SUNDRY CREDITORS RS. 20,00,000/- 2.3 THE LD. CIT(A) PASSED THIS IMPUGNED ORDER AFTE R CALLING FOR A REMAND REPORT IN THE MATTER OF THE AFORESAID TWO AD DITIONS. IT WAS REPORTED BY THE AO THAT IN SPITE OF MANY OPPORTUNIT IES AND ADJOURNMENTS BEING AFFORDED TO THE ASSESSEE DETAILS CALLED FOR WERE NOT FILED. THE AO FILED TWO REMAND REPORTS ONE DT. 25/1 0/2010 AND THE SECOND DT. 13/02/2013 REPORTING THE NON CO-OPERATIV E ATTITUDE OF THE ASSESSEE. ALL THESE DETAILS HAVE BEEN RECORDED AT T HE PARA 2.2 AND 2.3 OF THE IMPUGNED ORDER. THE LD. CIT (A) ALSO NOTES T HAT IN SPITE OF A COPY OF THE REMAND REPORT DT. 13/02/2013 BEING SENT TO THE ASSESSEE CALLING FOR HIS COMMENTS IN THE MATTER, THERE WAS N O RESPONSE THERETO BY THE ASSESSEE. 3 ITA NO. 4082 /MUM/2013 ASSESSMENT YEAR: 2007-08 3. AGGRIEVED BY THE ORDER OF THE CIT (APPEALS)-32 M UMBAI DT. 18/03/2013 FOR ASST. YEAR 2007-08, THE ASSESSEE HAS PREFERRED THIS APPEAL RAISING THE FOLLOWING GROUNDS. 1) THE LEARNED CIT(A) ERRED IN CONFIRMING THE LUMP SUM ADDITION ON ACCOUNT OF NET PROFIT AT RS.10,00,000/-. 2) THE LEARNED CIT(A) ERRED IN CONFIRMING THE AD-HO C ADDITIONS MADE ON ACCOUNT OF SUNDRY CREDITORS TOTALING TO RS 20,00 ,000/- AS UNCONFIRMED AND AS NON-EXISTING LIABILITY. 3) THE APPELLANT PRAYS THAT: (I). LEARNED COMMISSIONER OF INCOME TAX (APPEALS) E RRED IN CONFIRMING THE ADDITION MADE BY THE ASSESSING OFFICER OF UNDIS CLOSED INCOME OF RS 1000000/-. THE AD HOC ADDITIONS MAY KINDLY BE DE LETED. II. THE ASSESSING OFFICER HAS NOT CONSIDERED THE MA NUFACTURING ACTIVITY OF THE APPELLANT AND WITHOUT GOING INTO TH E DETAILS AVAILABLE WITH HIM, HE HAS ABRUPTLY ADDED A SUM OF RS 10,00,0 00/- AS NET PROFIT. THE ADHOC ADDITIONS MAY KINDLY BE DELETED. THE APPELLANT CRAVES LEAVE TO ADD, ALTER, AMEND OR DELETE ANY OF THE ABOVE GROUNDS OF APPEAL. 4. THIS APPEAL WAS FIXED FOR HEARING ON MORE THAN T EN OCCASIONS AND NO ONE APPEARED BEFORE THE TRIBUNAL ON BEHALF OF TH E ASSESSEE EVEN ONCE. ON OCCASIONS WHEN THE BENCH DID NOT FUNCTION, THE MATTER WAS ADJOURNED THROUGH THE NOTICE BOARD. NOTICES OF HEAR ING SENT BY RPAD ALSO HAVE BEEN RETURNED BACK. WE, THEREFORE, DISPOS E OFF THIS APPEAL WITH THE HELP OF THE LD. DR AND THE MATERIAL ON REC ORD. ESSENTIALLY 4 ITA NO. 4082 /MUM/2013 ASSESSMENT YEAR: 2007-08 THERE ARE ONLY TWO MATERIAL GROUNDS IN THIS APPEAL WHICH WE DISPOSE OFF HERE UNDER. 5.0 GROUND NO. 1 ESTIMATION OF ADDL. PROFIT OF RS. 10 ,00,000/- 5.1 IN THE IMPUGNED ORDER THE LD. CIT(A) HAS DISPOSED O FF THIS GROUND AT PARA 2.4 THEREOF HOLDING AS UNDER:- THE AO HAS ESTIMATED THE ADDITIONAL PROFIT AT RS. 1 0 LACS IN ABSENCE OF ANY BOOKS OR OTHER DETAILS PRODUCED DURI NG ASSESSMENT PROCEEDINGS. THE BOOKS AND OTHER DETAILS HAVE NOT B EEN PRODUCED DURING REMAND PROCEEDINGS ALSO. IN VIEW OF THESE FA CTS AND CIRCUMSTANCES, THE AUDITED P&L ACCOUNT AND BALANCE SHEET FILED BY THE ASSESSED CANNOT BE COMPLETELY RELIED UPON AS TRUE AND CORRECT AND THE SAME ARE REJECTED U/S 145. ON A TUR NOVER OF RS. 96.96 LACS THE ASSESSED HAS SHOWN GROSS PROFIT OF 8 .02% AND NET PROFIT OF 0.79% WHICH SEEMS TO BE VERY LOW. RECENTL Y THE RACKET OF BOGUS BILLS FOR PURCHASE AND SALE OF IRON AND STEEL FOR TAKING BOGUS VAT CREDIT HAS BEEN NOTED BY SALES TAX AND INCOME T AX DEPT. IN THE BACKDROP OF THE FACTS OF THE APPELLANT WHERE NEITHE R THE BOOKS/BILLS ETC. HAVE BEEN PRODUCED NOR ANY OTHER DETAILS OF PU RCHASES AND SALES BEING FILED, THE APPELLANT BEING INVOLVED IN SIMILAR RACKET CANNOT BE RULED OUT AND THE PURCHASES AND SALES OF THE ASSESSED CANNOT BE ACCEPTED TO BE TRUE & CORRECT. FURTHER, I N ABSENCE OF ANY DETAILS BEING FURNISHED TO SUPPORT PURCHASES, EXPEN DITURE AND THE VALUATION OF CLOSING STOCK ALSO IN THE P&L A/C THE PROFIT DISCLOSED IN P & L A/C CANNOT BE RELIED UPON, HENCE, THE ESTIMAT ION OF ADDITIONAL PROFIT BY THE AO TO THE EXTENT OF RS. 10 ,00,000/- OVER AND ABOVE GROSS PROFIT DECLARED BY THE APPELLANT IN THE P & L A/C APPEARS TO BE REASONABLE AND HENCE SAME IS CONFIRME D. 5 ITA NO. 4082 /MUM/2013 ASSESSMENT YEAR: 2007-08 5.2 WE HAVE HEARD THE LD. DR FOR REVENUE IN THE MAT TER AND CAREFULLY CONSIDERED THE MATERIAL ON RECORD. FROM THE DETAILS ON RECORD, WE FIND THAT THE ASSESSEE HAS BEEN UNABLE TO REBUT THE FIND INGS OF THE LD. CIT(A) (SUPRA) AND THEREFORE, DO NOT FIND ANY REASO N TO INTERFERE WITH OR DEVIATE FROM THE FINDINGS AS RECORDED BY THE L D.CIT(A) AND ACCORDING CONFIRM THE SAME. 6.0 GROUND NO. 2 ADDITION U/S 41(1) OF THE ACT 6.1 IN THE IMPUGNED ORDER THE LD. CIT(A) HAS DISPO SED OFF THIS GROUND AT PARA 2.5 THEREOF HOLDING AS UNDER:- AS REGARDS THE ADDITION OF RS. 20 LACKS U/S 41(1) O UT OF THE SUNDRY CREDITORS, IT IS ALSO NOTED THAT THE PURCHASES OF C URRENT YEAR IS ONLY RS. 96.96 LACS AS AGAINST THE SUNDRY CREDITORS APPE ARING IN THE BALANCE SHEET AT RS. 1.28 CRORES WHICH SUGGESTS THA T THE CREDITORS OUTSTANDING IN THE BALANCE SHEET ARE OUT OF THE PUR CHASES MADE IN THE CURRENT YEAR AS WELL AS IN THE EARLIER YEARS. C ONSIDERING THE PURCHASES AND SALES THE SUNDRY CREDITORS ARE HIGH. IN THE BUSINESS OF TRADING IN STEEL & IRON WHERE PROFIT MARGINS ARE LOW, IT IS UNLIKELY THAT SUCH LARGE CREDITS SHALL BE ALLOWED BY SUPPLIE RS FOR LONG PERIOD EVEN EXTENDING FOR MORE THAN 1 YEAR. RECENTLY THE R ACKET OF BOGUS BILLS FOR PURCHASE AND SALE OF IRON AND STEEL FOR T AKING BOGUS VAT CREDIT HAS BEEN NOTED BY SALES TAX AND INCOME TAX D EPTT. IN THE BACKDROP OF THE FACTS OF THE APPELLANT WHERE NEITHE R THE BOOKS/BILLS ETC HAVE BEEN PRODUCED NOR ANY OTHER DETAILS OF PUR CHASES AND SALES BEING FILED, THE APPELLANT BEING INVOLVED IN SIMILAR RACKET CANNOT BE RULED OUT AND THE PURCHASES AND SALES OF THE ASSESSEE CANNOT BE ACCEPTED TO BE TRUE & CORRECT. IF THAT BE SO, THEN THE SUNDRY CREDITORS APPEARING IN THE BALANCE SHEET ALS O CANNOT BE 6 ITA NO. 4082 /MUM/2013 ASSESSMENT YEAR: 2007-08 STATED TO BE TRUE AND CORRECT. NO DETAILS/CONFIRMAT IONS OR ANY COMMUNICATION WHATSOEVER HAS BEEN GIVEN TO PROVE TH AT ALL THE CREDITORS APPEARING IN BALANCE SHEET ARE GENUINE AN D ARE STILL CLAIMING THE AMOUNTS FROM THE APPELLANT AND THEY HA VE NOT WAIVED THE BALANCES UNILATERALLY. BY NOT FILING ANY COMMUN ICATION FROM THOSE PARTIES THE ASSESSEE HAS NOT BEEN ABLE TO PRO VE THAT THESE PARTIES HAVE NOT WRITTEN OF THE AMOUNTS IN THEIR BO OKS. THE BURDEN TO PROVE THESE FACTS IS ON THE ASSESSEE WHICH HAS N OT BEEN DISCHARGED BY GIVING ANY EVIDENCE/DETAILS. HENCE TH E MERE FACT THAT THE CREDITORS ARE APPEARING IN BALANCE SHEET D OES NOT BY ITSELF MEANS THAT THERE HAS BEEN NO UNILATERAL WRITE OFF F ROM THE SIDE OF THE CREDITORS. ONCE THE PARTY IS ALSO NOT PRESSING OR MADE ANY CORRESPONDENCE WITH ASSESSEE SUGGEST THAT THEY ARE STILL SHOWING THE SUMS AS RECOVERABLE FORM THE ASSESSEE, AND THE PERIOD UNDER THE LIMITATION ACT HAS ALSO EXPIRED THEN IN VIEW OF THE RATIO OF DECISION IN THE CASE OF AGARPARA CO. LTD. 158 ITR 7 8(CAL), HIDES & LEATHER PVT. LTD. 101 ITR 61 (GUJ), IT MAY NOT BE U NREASONABLE TO PRESUME THAT A PART OF THE LIABILITY DOES NOT EXIST OR THERE IS UNILATERAL WRITE OFF IN SUBSTANCE, BY THE CREDITORS . SINCE THIS CREDITOR IS IN RESPECT OF EXPENDITURE WHICH HAS BEEN CLAIMED AS DEDUCTION IN EARLIER YEARS, THE SAME CAN BE DISALLOWED U/S 41(1) . HENCE THE DISALLOWANCE BY PRESUMING THAT THE PART OF LIABILIT IES DO NOT EXIST OR HAVE BEEN UNILATERALLY WRITTEN OFF BY CREDITORS THE MSELVES IS JUSTIFIED. THE ADDITION OF RS. 20,00,000 U/S 41(1) MADE BY AO IS CONFIRMED. 7 ITA NO. 4082 /MUM/2013 ASSESSMENT YEAR: 2007-08 6.2 WE HAVE HEARD THE LD.DR FOR REVENUE IN THE MA TTER AND CAREFULLY CONSIDERED THE MATERIAL ON RECORD. FROM THE DETAILS ON RECORD, WE FIND THAT THE ASSESSEE HAS BEEN UNABLE TO REBUT THE FIND INGS OF THE LD. CIT(A) (SUPRA) AND THEREFORE, DO NOT FIND ANY REASO N TO INTERFERE WITH OR DEVIATE FROM THE FINDINGS AS RECODED BY THE LD .CIT(A) AND ACCORDING CONFIRM THE SAME. 7. IN THE RESULT, THE ASSESSEES APPEAL FOR ASST.Y EAR 2007-08 IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON DECEMBER18TH, 2015 SD/- SD/- ( AMIT SHUKLA ) (JASON P.BOAZ) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI; DATED:18/12/2015 / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. ( ) / THE CIT(A)- 4. / CIT 5. !' , $ !' % , / DR, ITAT, MUMBAI 6. &' ( / GUARD FILE. / BY ORDER, ) //TRUE COPY// / (DY./ASSTT. REGISTRAR) , / ITAT, M PRAMILA