THE ITO 7(1)(1), MUMBAI V. M/S. NIRANT HOMES PVT. LTD, MUMBAI

ITA 4111/MUM/2008

• Counselvise Citation: [2011] 140 COUNSELVISE.COM (IT) 55239 (ITAT-MUMBAI)
• Duration Of Justice: 3 year(s) 3 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-09-2011
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: B
• Next Hearing Date: 05-09-2011
• Assessment Year: 2004-2005
• Appeal Filed On: 09-06-2008
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: P C MAURYA
• Keywords: Presumptive income
• Section: 44AD; 69C; 133(6); 68

Judgement Text

IN THE INCOME TAX APPELLATE TRIB UNAL MUMBAI BENCHES B, MUMBAI BEFORE SHRI R.S.SYAL, AM AND SHRI VIJAY PAL RAO, JM ITA NO.4111/MUM/2008 : ASST.YEAR 2004-2005 THE INCOME TAX OFFICER WARD 7(1)(1) MUMBAI. VS. M/S.NIRANT HOMES PRIVATE LIMITED 9/170, JAIN BUILDING, DR.S.S.ROAD LALBAUG, MUMBAI 400 012. PAN : AABCN1990N. (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI P.C.MAURYA RESPONDENT BY : SHRI PRAKASH JHUNJHUNWALA DATE OF HEARING : 05.09.2011 DATE OF PRONOUNCEMENT : 09.09.2011 O R D E R PER R.S.SYAL, AM : THIS APPEAL BY THE REVENUE IS DIRECTED AGAINST THE ORDER PASSED BY THE COMMISSIONER OF INCOME-TAX (APPEALS) ON 14.02.2008 IN RELATION TO THE ASSESSMENT YEAR 2004-2005. 2. THE FIRST GROUND IS AGAINST THE DELETION OF ADDI TION U/S 68 IN RESPECT OF THREE ITEMS. FIRST AMOUNT IS RS.32,90,000. THE FACTS APRO POS THIS ISSUE ARE THAT THE ASSESSEE RECEIVED LABOUR CHARGES OF RS.32.90 LAKH F ROM THE FOLLOWING TWO PARTIES:- (I) MATURE TRADING & INVESTMENT PVT. LTD. RS.12, 00,000 (II) SANWA FINANCE PRIVATE LIMITED RS.20,90,000 ---------------- TOTAL RS.32,90,000 ========== 3. THIS AMOUNT SHOWN AS INCOME. THE ASSESSING OFFI CER HELD THE VIEW THAT THE ASSESSEE DID NOT DO ANY WORK AND THE CREDIT OF RS.3 2.90 LAKH TO THE PROFIT AND LOSS ACCOUNT WAS DONE ONLY TO NULLIFY THE DEBIT ENTRY OF RS.33,09,273 OF M/S. IMSONS SYSTEMS PRIVATE LIMITED WHICH WAS FICTITIOUS AS THE ASSESSEE WAS UNABLE TO ITA NO.4111/MUM/2008 M/S.NIRANT HOMES PRIVATE LIMITED. 2 PRODUCE ITS CORRECT ADDRESS ETC. THE ASSESSING OFFI CER ISSUED SUMMONS U/S 133(6) TO M/S. IMSONS SYSTEMS PRIVATE LIMITED FROM WHOM TH E ASSESSEE CLAIMED TO HAVE GOT THE WORK DONE AS SUB-CONTRACTOR. THE SAID NOTIC E WAS RETURNED UNSERVED. INSOFAR AS THE AMOUNT OF RS.32.90 LAKH IS CONCERNED , THE ASSESSEE PRODUCED CONFIRMATIONS FROM THESE TWO PARTIES WHO ACCEPTED T HAT THE ASSESSEE HAD DONE WORK FOR THEM. THE ASSESSING OFFICER WAS NOT CONVIN CED WITH THE ASSESSEES SUBMISSIONS AND MADE THE ADDITION OF RS.32.90 LAKH. THE LEARNED CIT(A) OBSERVED THAT THE ASSESSEE HAD EVIDENTLY PROVED AGAINST THE RECEIPT OF INCOME OF RS.32.90 LAKH. AS THERE WAS DISPUTE ABOUT THE SUB-CONTRACT C HARGES FOR WHICH THE ASSESSEE HAD CLAIMED DEDUCTION OF RS.33.09 LAKH, THE LEARNED CIT(A) HELD THAT SUCH DEDUCTION WAS NOT PROPERLY PROVED. CONSIDERING THE FACT THAT THE RECEIPTS WERE ON ACCOUNT OF CIVIL CONSTRUCTION CONTRACTS, THE LEARNE D CIT(A) HELD THAT THE PROVISIONS OF SECTION 44AD COULD BE APPLIED. BY APPLYING PROFI T RATE OF 8% ON THE PRESUMPTIVE TAXATION BASIS, HE HELD THAT ADDITION O F RS.3.07 LAKH WAS SUSTAINABLE. THE REMAINING AMOUNT OF ADDITION WAS DELETED IN THE FIRST APPEAL. 4. AFTER CONSIDERING THE RIVAL SUBMISSIONS AND PERU SING THE RELEVANT MATERIAL ON RECORD IT IS NOTICED THAT THE ASSESSEE ITSELF SHOWE D RS.32.90 LAKH AS ITS INCOME AND CREDITED SUCH AMOUNT TO PROFIT AND LOSS ACCOUNT. IN SUCH A SITUATION THERE CANNOT BE ANY QUESTION OF MAKING ADDITION OF RS.32.90 LAKH WH ICH WAS ALREADY SHOWN AS INCOME BY THE ASSESSEE. IN OUR CONSIDERED OPINION T HE LEARNED CIT(A) WAS JUSTIFIED IN NOT ACCEPTING THE LOSS ON ACCOUNT OF SUCH CONTRA CT WORK WHICH WAS CLAIMED BY THE ASSESSEE BY DEDUCTING RS.33.09 LAKH AS SUB-CONT RACT CHARGES FROM THE CONTRACT RECEIPT OF RS.32.90 LAKH. A VERY REASONABLE APPROAC H HAS BEEN ADOPTED BY THE LEARNED CIT(A) IN ESTIMATING THE INCOME FROM CIVIL CONTRACT WORK BY APPLYING 8% PROFIT RATE AS APPLICABLE U/S 44AD OF THE ACT. THE LEARNED A.R. HAS ADMITTED THAT THERE IS NO APPEAL FILED BY THE ASSESSEE, THEREBY A CCEPTING THE SUSTENANCE OF ADDITION IN THE FIRST APPEAL. IN SUCH CASE WE UPHOL D THE IMPUGNED ORDER ON THIS ISSUE. ITA NO.4111/MUM/2008 M/S.NIRANT HOMES PRIVATE LIMITED. 3 5. THE SECOND COMPONENT OF THIS GROUND IS THE DELET ION OF ADDITION OF RS.33,69,250. THE ASSESSEE SOLD SHARES IN THE YEAR IN QUESTION BY SHOWING RS.19 LAKH AS HAVING BEEN RECEIVED FROM AMINS ON BEHALF O F M/S.PADMAVATI INVESTMENTS. ANOTHER SUM OF RS.14,69,250 WAS RECEIV ED BY THE ASSESSEE FROM M/S.P.C.INDUSTRIES TOWARDS SALE OF SHARES OF M/S.RA VI RAJ DEVELOPERS PRIVATE LIMITED.THE ASSESSING OFFICER CALLED FOR THE COPY O F SHARE APPLICATION FORM, COPY OF RESOLUTION OF THE BOARD OF DIRECTORS APPROVING T RANSACTION OF SALE, PROOF OF INCORPORATION OF THE COMPANIES WHOSE SHARES WERE SO LD, MEMORANDUM AND ARTICLES OF ASSOCIATION OF THESE COMPANIES ETC. THE ASSESSEE STATED THAT RS.19 LAKH WAS RECEIVED FROM AMINS ON ACCOUNT OF M/S.PADMAVATI INV ESTMENTS TOWARDS TRANSFER OF 1,75,000 SHARES OF M/S.LAXMI OIL & VANASPATI (P) LTD. THE REMAINING AMOUNT WAS RECEIVED DIRECTLY FROM M/S.PADMAVATI INVESTMENT S. THE A.O. DID NOT ACCEPT THE GENUINENESS OF THESE TRANSACTION PARTLY AND MAD E ADDITION OF RS.33.69 LAKH U/S 68 OF THE ACT. SUCH ADDITION CAME TO BE DELETED IN THE FIRST APPEAL. 6. AFTER CONSIDERING THE RIVAL SUBMISSIONS AND PERU SING THE RELEVANT MATERIAL ON RECORD IT IS NOTICED THAT THE ASSESSEE PURCHASED TH E SHARES OF M/S.LAXMI OIL & VANASPATI (P) LTD. AND ALSO OF M/S.RAVI RAJ DEVELOP ERS PRIVATE LIMITED DURING THE YEAR ITSELF AND SHOWED INVESTMENT BY WAY OF WIT HDRAWAL FROM ITS BANK ACCOUNT. THEREAFTER SUCH SHARES WERE SOLD TO M/S.PADMAVATI I NVESTMENTS AND M/S.P.C.INDUSTRIES. INSOFAR AS THE TRANSACTION WITH M/S.PADMAVATI INVESTMENTS IS CONCERNED, THE TOTAL SALE CONSIDERATION WAS RECEIVE D AT RS.35.60 LAKH OUT OF WHICH AN AMOUNT OF RS.16.60 LAKH RECEIVED FROM M/S.PADMAV ATI INVESTMENTS DIRECTLY HAS BEEN ACCEPTED BY THE A.O. AND THE ADDITION HAS BEEN MADE FOR RS.19 LAKH WHICH WAS RECEIVED BY THE ASSESSEE FROM AMINS ON ACCOUNT OF M/S.PADMAVATI INVESTMENTS. WE ARE UNABLE TO APPRECIATE THE VIEW P OINT OF THE ASSESSING OFFICER FOR THE OBVIOUS REASON THAT THE PURCHASE OF THESE S HARES DURING THE YEAR HAS NOT BEEN DENIED BY THE ASSESSING OFFICER AND WHEN SUCH SHARES CAME TO BE SOLD THE ITA NO.4111/MUM/2008 M/S.NIRANT HOMES PRIVATE LIMITED. 4 ASSESSING OFFICER HELD THAT IT WAS A CASE OF CASH C REDIT U/S 68. SUCH A VIEW IS UNSUSTAINABLE ON THE GROUND THAT THE ASSESSEE IN FA CT PARTED WITH THE SHARES WHICH DO NOT FIGURE IN THE BALANCE SHEET AT THE YEAR ENDI NG. FURTHER THE A.O. HAS ACCEPTED THE GENUINENESS OF THE TRANSACTION TO THE EXTENT OF RS.16.60 LAKH WHICH WAS RECEIVED FROM M/S.PADMAVATI INVESTMENTS DIRECTLY BU T DOUBTED THE OTHER AMOUNT OF RS.19 LAKH WHICH WAS RECEIVED FROM AMINS ON ACCOUNT OF M/S.PADMAVATI INVESTMENTS. IT IS NOT PERMISSIBLE TO ACCEPT A PART OF THE TRANSACTION AND REJECT THE OTHER. SIMILAR IS THE POSITION REGARDING PURCHASE O F THE SHARES OF M/S.RAVI RAJ DEVELOPERS PRIVATE LIMITED, WHICH WERE ALSO PURCHAS ED DURING THE YEAR BY WITHDRAWING THE PURCHASE PRICE FROM THE BANK. THESE SHARES ALSO CAME TO BE SOLD DURING THE YEAR TO M/S.P.C.INDUSTRIES AND AS SUCH A RE NOT APPEARING IN THE BALANCE SHEET AS AT THE END OF THE YEAR. IN OUR CONSIDERE D OPINION THE LEARNED CIT(A) WAS JUSTIFIED IN DELETING THIS ADDITION. 7. THE LAST COMPONENT OF THIS GROUND IS THE DELETIO N OF ADDITION OF RS.4,05,900 MADE BY THE ASSESSING OFFICER U/S 68 OF THE ACT. TH E ASSESSEE SHOWED TO HAVE RECEIVED A SUM OF RS.4,05,900 FROM THE FOLLOWING TW O PARTIES:- (I) BALMATI HOTEL & PROPERTIES (P) LTD. RS.3,25,0 00 (II) PADMAVATI INVESTMENT RS. 80,900 -------------- TOTAL RS.4,05,900 ========= 8. IN THE ABSENCE OF THE ASSESSEE FURNISHING LOAN C ONFIRMATIONS, THE A.O. MADE ADDITION FOR THE SAID SUM. THE LEARNED CIT(A) DELET ED THIS ADDITION. 9. AFTER CONSIDERING THE RIVAL SUBMISSIONS AND PERU SING THE RELEVANT MATERIAL ON RECORD IT IS SEEN THAT INSOFAR AS RS.80,900 RECEIVE D FROM M/S.PADMAVATI INVESTMENT IS CONCERNED, THE SAME IS ONLY DUE TO WRONG CLASSIF ICATION OF ACCOUNT. ITA NO.4111/MUM/2008 M/S.NIRANT HOMES PRIVATE LIMITED. 5 M/S.PADMAVATI INVESTMENT IS THE SAME PARTY WHICH PU RCHASED THE SHARES OF M/S.LAXMI OIL & VANASPATI (P) LTD. FROM THE ASSESS EE DURING THE YEAR. INSTEAD OF RECORDING THE TRANSACTION IN ONE ACCOUNT, THE ASSES SEE, BY MISTAKE, TWO ACCOUNTS. THERE IS, IN FACT, NO CASH CREDIT ON THIS ACCOUNT. INSOFAR THE SECOND AMOUNT OF RS.3.25 LAKH IS CONCERNED, THE ASSESSEE SHOWED TO H AVE RECEIVED IT FROM M/S.BALMATI HOTEL & PROPERTIES (P) LTD. FOR WHICH N O CONFIRMATION WAS FILED AT THE STAGE OF ASSESSMENT. DURING THE COURSE OF FIRST APP ELLATE PROCEEDINGS, THE ASSESSEE FURNISHED LOAN CONFIRMATION FROM M/S.SACHIN COTSPIN LTD. BY STATING THAT M/S.BALMATI HOTEL & PROPERTIES (P) LTD. GAVE LOAN T O THE ASSESSEE-COMPANY AS PER INSTRUCTIONS OF M/S.SACHIN COTSPIN LTD. WE ARE UNAB LE TO CO-RELATE M/S.BALMATI HOTEL & PROPERTIES (P) LTD. WHO WAS SHOWN AS CREDIT OR IN THE ASSESSEES BALANCE SHEET WITH M/S.SACHIN COTSPIN LTD. FROM WHOM THE CO NFIRMATION WAS FILED BEFORE THE LEARNED CIT(A) FOR THE FIRST TIME. IN OUR CONS IDERED OPINION, THE ENDS OF JUSTICE WILL MEET ADEQUATELY IF THE IMPUGNED ORDER ON THIS ISSUE IS SET ASIDE AND THE MATTER RESTORED TO THE FILE OF A.O. WE ORDER ACCORDINGLY A ND DIRECT HIM TO DECIDE THIS ISSUE AFRESH AS PER LAW AFTER ALLOWING A REASONABLE OPPOR TUNITY OF BEING HEARD TO THE ASSESSEE. 10. THE SECOND GROUND IS AGAINST THE DELETION OF AD DITION OF RS.30,30,635 ( SIC RS.33,69,250 ). FROM THE BALANCE SHEET OF THE ASSESSEE FILED ALO NG WITH THE RETURN OF INCOME FOR THE IMMEDIATELY PRECEDING YEAR I.E. ASSE SSMENT YEAR 2003-2004, THE ASSESSING OFFICER NOTED THAT AN AMOUNT OF RS.30,30, 635 SHOWN AS SUNDRY CREDITOR IN THE PRECEDING YEAR DID NOT APPEAR AS OPENING BAL ANCE IN THE BALANCE SHEET FILED ALONG WITH THE RETURN FOR ASSESSMENT YEAR 2004-2005 . ON BEING CALLED UPON TO EXPLAIN THE REASON THE ASSESSEE STATED THAT CERTAIN PURCHASES WERE MADE FROM M/S. BRILLIANT DYECHEM PRIVATE LIMITED AND SUBMITTED BIL LS AND VOUCHERS. IT WAS STATED THAT THE GOODS SO PURCHASED WERE DIRECTLY DELIVERED TO M/S. IMSONS SYSTEMS PRIVATE LIMITED. NOT CONVINCED WITH THE ASSESSEES SUBMISSI ONS, THE A.O. MADE ADDITION ITA NO.4111/MUM/2008 M/S.NIRANT HOMES PRIVATE LIMITED. 6 OF RS.30,30,635 U/S 69C OF THE ACT. THE LEARNED CIT (A) ORDERED FOR THE DELETION OF ADDITION. 11. HAVING HEARD THE RIVAL SUBMISSIONS AND PERUSED THE RELEVANT MATERIAL ON RECORD IT IS OBSERVED THAT THE SUM OF RS.30,30,635 REPRESENTED THE CLOSING BALANCE OF M/S. BRILLIANT DYECHEM PRIVATE LIMITED, WHICH A PPEARED AS SUNDRY CREDITOR IN THE PRECEDING YEAR. THE FACT IS THAT THE ASSESSEE D ID TAKE IT AS OPENING BALANCE AS WELL BUT ADJUSTED IT WITH THE TRANSACTIONS TAKING P LACE DURING THE YEAR. THE ASSESSING OFFICER HAS DULY ACCEPTED THE TRANSACTION S IN THIS ACCOUNT IN THE CURRENT YEAR. WE FAIL TO APPRECIATE AS TO HOW ANY ADDITION ON ACCOUNT OF OPENING BALANCE CAN BE MADE FOR THE REASON THAT THE CORRESPONDING D EBIT AGAINST THIS UNSECURED LOAN MUST HAVE APPEARED IN THE ACCOUNTS FOR THE PRECEDIN G YEAR WHEN THIS ENTRY WAS GENERATED. THIS AMOUNT OF RS.30.30 LAKH WAS OUTSTAN DING AT THE END OF THE YEAR FROM M/S.BRILLIANT DYECHEM PRIVATE LIMITED. THE ASS ESSEE TRANSACTED WITH THIS PARTY DURING THE YEAR, WHICH REDUCED THE OPENING BA LANCE. IN SUCH A SITUATION THERE CANNOT BE ANY QUESTION OF MAKING ANY ADDITION ON AC COUNT OF OPENING BALANCE IN THIS ACCOUNT. WE, THEREFORE, UPHOLD THE IMPUGNED OR DER ON THIS ISSUE. 12. IN THE RESULT, THE APPEAL IS PARTLY ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 09 TH DAY OF SEPTEMBER, 2011. SD/- SD/- (VIJAY PAL RAO) (R.S.SYAL) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI : 09 TH SEPTEMBER, 2011. DEVDAS*` COPY TO : 1. THE APPELLANT. 2. THE RESPONDENT. 3. THE CIT CONCERNED ITA NO.4111/MUM/2008 M/S.NIRANT HOMES PRIVATE LIMITED. 7 4. THE CIT(A) - IX, MUMBAI. 5. THE DR/ITAT, MUMBAI. 6. GUARD FILE. TRUE COPY. BY ORDER ASSISTANT REGISTRAR, ITAT, MUMBAI.