Shri Indrajeet Singh Nenawati, BHILWARA V. ITO, BHILWARA

ITA 418/JODH/2016

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 9631 (ITAT-JODHPUR)
• Duration Of Justice: 2 month(s) 13 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 02-03-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Next Hearing Date: 27-02-2017
• Assessment Year: 2005-2006
• Appeal Filed On: 20-12-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: S K MEENA J
• Keywords: Opportunity of being heard; Principle of natural justice; Source of fund; Additional evidence; Procedural lapse

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL JODHPUR BENCH JODHPUR BEFORE SMT. DIVA SINGH, JUDICIAL MEMBER ITA NO.418/JODH/2016 ASSESSMENT YEAR 2005-06 SHRI INDRAJEET SINGH NENAWATI, PROP. TULSI FABRICS, 6/9, KASHIPURI, BHILWARA. PAN: ABGPN 4534K VS ITO, WARD-2, BHILWARA. (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI AMIT KOTHARI, CA RESPONDENT BY : SHRI S.K. MEENA, JCIT-DR. / DATE OF HEARING : 27/02/2017 / DATE OF PRONOUNCEMENT: 02/03/2017 ORDER THE PRESENT APPEAL HAS BEEN FILED BY THE ASSESSEE A SSAILING THE CORRECTNESS OF THE ORDER DATED 13.10.2016 BY CIT(A), AJMER PERT AINING TO ASSESSMENT YEAR 2005-06 ON FOLLOWING GROUNDS: 1. THE ORDER PASSED BY THE LD. CIT(A) IS BAD IN LA W AND BAD ON FACTS, AND IS CONTRARY TO THE PRINCIPLES OF NATURAL JUSTICE. 2. THE ORDER SO PASSED IS CONTRARY TO THE DIRECTION S OF ORDER OF HON'BLE ITAT PASSED IN ORIGINAL APPELLATE PROCEEDINGS. 3. THE LD. CIT(A) HAS ERRED IN OBSERVING THAT ADDIT IONAL EVIDENCE CANNOT BE ACCEPTED, WHICH IS CONTRARY TO THE DIRECTIONS OF HO N'BLE ITAT AND IS ALSO CONTRARY TO THE FINDING IN THE ORIGINAL APPELLATE PROCEEDINGS. 4. THE LD. CIT(A) HAS ERRED IN SUSTAINING ADDITION OF RS.15,01,000/- ON ACCOUNT OF CAPITAL INTRODUCED, FOR WHICH THE SOURCE OF FUNDS W AS BEING DULY EXPLAINED. B. THE LD. CIT(A) HAS ERRED IN NOT APPRECIATING THE FACTS THAT EVEN IN THE ORIGINAL PROCEEDINGS ASSESSING OFFICER HAD DULY EXAMINED ALL THE CREDITORS AND STATEMENTS WERE RECORDED AND DUE OPPORTUNITY WAS GIVEN BEFORE ADMIS SION OF ADDITIONAL EVIDENCE. C. THE LD. CIT(A) HAS ERRED IN OBSERVING THAT ADDI TIONAL EVIDENCES CANNOT BE ACCEPTED PARTICULARLY IN VIEW OF THE FACT THAT ON S UCH ISSUE REMAND REPORT WAS ALREADY CALLED FOR. D. THE ENTIRE ADDITION SUSTAINED IS BAD IN LAW AND BAD ON FACTS. 5. THE APPELLANT PRAY FOR SUITABLE COST. ITA NO.418-JODH-2016 A.Y. 2005-06 2 2. LEARNED AR SUBMITTED THAT THIS WAS THE SECOND RO UND OF APPEAL BEFORE THE ITAT AS IN THE ORIGINAL PROCEEDINGS THE REVENUE HAD COME IN APPEAL REQUESTING THAT THERE WAS A VIOLATION OF SUB-RULE (2) OF RULE 46A AS WITHOUT CONFRONTING THE FRESH EVIDENCES THEY WERE RELIED UPON TO DELETE THE ADDITION. ADDRESSING THE BACKGROUND, IT WAS SUBMITTED THAT THE ASSESSING OFF ICER MADE THE ADDITION OF RS.15,01,000/- HOLDING THAT THE ASSESSEE COULD NOT EXPLAIN FRESH INTRODUCTION OF CAPITAL. 2.1 THE ASSESSEE IT WAS SUBMITTED HAD CHALLENGED TH E SAID FINDING BEFORE THE CIT(A) PLEADING LACK OF OPPORTUNITY AS NO SPECIFIC NOTICE REQUIRING THE ASSESSEE TO FURTHER EXPLAIN THE ISSUE WAS GRANTED BY THE ASSESS ING OFFICER. ACCEPTING THIS PRAYER THE CIT(A) ADMITTED FRESH EVIDENCE AND CONSI DERING THE REMAND REPORT DELETED THE ADDITION. THIS ORDER WAS CHALLENGED BY THE REVENUE IN APPEAL BEFORE THE ITAT. THE ITAT VIDE ITS ORDER DATED 27.03.2009 SET ASIDE THE ISSUE TO THE CIT(A) BY HOLDING AS UNDER: 13. WE, THEREFORE, SET ASIDE THE DECISION REACHED BY LD. CIT(A) AND REMIT THE MATTER BACK TO HIM FOR PLUGGING THE PROCEDURAL LAPSES COMM ITTED BY HIM, SO THAT HE CAN ADHERE TO THE REQUIREMENT OF SUB-RULE(2) OF RULE 46A OF TH E INCOME TAX RULES, 1962 BEFORE USING ANY EVIDENCE FOR REACHING CONCLUSION AND TAKING DEC ISION THEREON. NEEDLESS TO ADD, EFFECTIVE OPPORTUNITY OF BEING HEARD SHALL BE ALLOW ED TO BOTH THE PARTIES BEFORE TAKING DECISION IN ACCORDANCE WITH LAW, SO THAT SUBSTANTIA L JUSTICE IS RENDERED TO THE PARTIES. WE, THEREFORE, FIND OURSELVES UNABLE TO AGREE WITH SHRI KOTHARI, LD. COUNSEL FOR THE ASSESSEE THAT THE DIRECTIN TO ASSESSING OFFICER TO EXAMINE THE LOAN CREDITORS AND REQUIRING HIM TO SUBMIT HIS REPORT, GIVES HIM SUFFICIENT OPPO RTUNITY AND IS A SUBSTANTIVE COMPLIANCE OF LAW MORE SO BECAUSE THE LD. CIT(A) IS FOUND TO H AVE ACTED ARBITRARILY WITHOUT CONFORMING TO THE JUDICIAL REQUIREMENT CONTAINED IN SUB-RULE (2) OF RULE 46A OF THE IT RULES. 2.2 INVITING ATTENTION PAGE 14 OF THE CIT(A)S ORDE R, IT WAS SUBMITTED THAT THE ASSESSEE HAD STATED IN THE SET ASIDE PROCEEDINGS BE FORE THE CIT(A) THAT THE ADDITIONAL EVIDENCE WHICH HAD BEEN SUBMITTED DURING THE COURSE OF THE ORIGINAL ASSESSMENT PROCEEDINGS WERE NOT AVAILABLE WITH THE ASSESSEE, AND THE ASSESSEE REQUESTED THE PARTIES WHO ARE CLOSE FRIENDS AND REL ATIVES WHO HAD GIVEN FINANCIAL SUPPORT TO COMMENCE HIS NEW BUSINESS TO GIVE THE CO NFIRMATION AND THE APPELLANT ITA NO.418-JODH-2016 A.Y. 2005-06 3 DULY SUBMITTED THE SAME IN APPEAL PROCEEDINGS WITH A REQUEST FOR ENTERTAINING SUCH ADDITIONAL EVIDENCES . ACCORDINGLY IT WAS HIS SUBMISSION THAT IN THE SE T ASIDE PROCEEDINGS IT WAS AGAIN ARGUED THAT THE ADDITIONAL EVIDENCES MAY KINDLY BE ADMITTED AS THE PURPOSE OF THE LAW WAS TO TAX THE R EAL AND TRUE INCOME AND NOT TAX THE TECHNICAL LAPSES OF THE ASSESSEE. HOWEVER CONSI DERING THE OBJECTION OF THE ASSESSING OFFICER, THE CIT(A) REJECTED THE EVIDENCE S HOLDING THAT AMPLE OPPORTUNITY HAD BEEN GIVEN BY THE ASSESSING OFFICER . IN THE SAID BACKGROUND ATTENTION WAS INVITED TO THE ASSESSMENT ORDER PARAG RAPH 3. READING FROM THE SAID PARAGRAPH, IT WAS SUBMITTED THAT QUESTIONNAIRE ADMI TTEDLY WAS ISSUED TO THE ASSESSEE ON 28.01.2007 TO EXPLAIN THE SOURCE OF INT RODUCTION OF CAPITAL AND IN RESPONSE TO THE SAME, COPY OF LEDGER OF M/S. TULSI SUITINGS ETC. WAS FILED. SINCE NO FURTHER COMMUNICATION WAS MADE BY THE ASSESSING OFF ICER THE ASSESSEE IT WAS SUBMITTED CONCLUDED THAT THE EVIDENCE WAS SUFFICIEN T AND COMPLETE. ONLY ON THE RECEIPT OF THE ASSESSMENT ORDER THE ASSESSEE LEARNT THAT EVIDENCE WAS CONSIDERED TO BE INCOMPLETE. CONSIDERING THE SAID REQUEST EVIDENC E HAD BEEN ADMITTED AND AFTER OBTAINING REMAND REPORT THE ADDITION HAD BEEN DELET ED. IT WAS CLARIFIED THAT SINCE THE ASSESSEE MAINTAINED PERSONAL SETS OF BOOKS AS W ELL AS BOOKS OF THE BUSINESS ALSO, I.E., M/S. TULSI FABRICS AS PROPRIETOR. ACCOR DINGLY TO EXPLAIN THE INTRODUCTION OF CAPITAL, THE ASSESSEE HAD SUBMITTED BOTH THE BAL ANCE SHEET, CAPITAL ACCOUNT (PERSONAL AND BUSINESS) AND REMAINED UNDER THE IMPR ESSION THAT SINCE IN THE CASE OF PERSONAL ACCOUNTS THE FUNDS HAVE BEEN RECEIVED F ROM THE FAMILY MEMBERS, RELATIVES THROUGH CHEQUES /CASH AND HAVE BEEN INTRO DUCED/TRANSFERRED TO BUSINESS HENCE THE REQUIREMENT SOUGHT BY THE ASSESSING OFFIC ER WAS FULFILLED. COMPLETE BANK ACCOUNT, CASH BOOK, LEDGER AND OTHER RECORDS O F THE BUSINESS, IT WAS SUBMITTED WERE PRODUCED BEFORE ASSESSING OFFICER AN D WHEN NO DEFECTS THEREIN OR ANY QUERY WAS MADE BY THE AO FROM THE ASSESSEE, HE REMAINED IGNORANT ABOUT THE DOUBTS IN THE MIND OF THE ASSESSING OFFICER. IT IS ONLY AFTER THE ADDITIONS MADE IN THE ASSESSMENT ORDER THAT THE ASSESSEE OBTAINED THE NECESSARY DETAILS BY WAY OF ITA NO.418-JODH-2016 A.Y. 2005-06 4 CONFIRMATION ETC. THE SITUATION AROSE ON ACCOUNT OF BONA FIDE IGNORANCE OF THE ASSESSEE AND LACK OF PROPER COMMUNICATION BY THE AO . ACCORDINGLY IT WAS HIS PRAYER THAT THE ADDITIONAL EVIDENCES MAY BE ADMITTE D AND CONSIDERING THE SAME THE ADDITIONS MAY BE DELETED. 3 LEARNED SENIOR D.R. RELYING UPON THE IMPUGNED ORD ER SUBMITTED THAT MORE THAN SUFFICIENT OPPORTUNITY HAS BEEN GIVEN BY THE A SSESSING OFFICER. ACCORDINGLY, IT WAS HIS PRAYER THAT THE ADDITIONAL EVIDENCES MAY NOT BE ADMITTED. 4. I HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED T HE MATERIAL AVAILABLE ON RECORD. BEFORE ADDRESSING THE ARGUMENTS OF THE PART IES BEFORE THE BENCH IT IS APPROPRIATE TO FIRST EXTRACT THE SPECIFIC RULE WHIC H IS UNDER CONSIDERATION. 46A. (1) THE APPELLANT SHALL NOT BE ENTITLED TO PR ODUCE BEFORE THE [DEPUTY COMMISSIONER (APPEALS) [OR, AS THE CASE MAY BE, THE COMMISSIONER (APPEALS)], ANY EVIDENCE, WHETHER ORAL OR DOCUMENTARY, OTHER THAN T HE EVIDENCE PRODUCED BY HIM DURING THE COURSE OF PROCEEDINGS BEFORE THE [ASSESS ING OFFICER], EXCEPT IN THE FOLLOWING CIRCUMSTANCES, NAMELY : (A) WHERE THE [ASSESSING OFFICER] HAS REFUSED TO ADMIT EVIDENCE WHICH OUGHT TO HAVE BEEN ADMITTED; OR (B) WHERE THE APPELLANT WAS PREVENTED BY SUFFICIENT CAUSE FROM PRODUCING THE EVIDENCE WHICH HE WAS CALLED UPON TO PRODUCE BY THE [ASSESSING OFFICER]; OR (C) WHERE THE APPELLANT WAS PREVENTED BY SUFFICIENT CAU SE FROM PRODUCING BEFORE THE [ASSESSING OFFICER] ANY EVIDENCE WHICH IS RELEVANT TO ANY GROUND OF APPEAL; OR (D) WHERE THE [ASSESSING OFFICER] HAS MADE THE ORDER AP PEALED AGAINST WITHOUT GIVING SUFFICIENT OPPORTUNITY TO THE APPELLANT TO ADDUCE EVIDENCE RELEVANT TO ANY GROUND OF APPEAL. (2) NO EVIDENCE SHALL BE ADMITTED UNDER SUB-RULE (I) UN LESS THE [DEPUTY COMMISSIONER (APPEALS)] [OR, AS THE CASE MAY BE, TH E COMMISSIONER (APPEALS)] RECORDS IN WRITING THE REASONS FOR ITS ADMISSION. (3) THE [DEPUTY COMMISSIONER (APPEALS)] [OR, AS THE CAS E MAY BE, THE Y COMMISSIONER (APPEALS)] SHALL NOT TAKE INTO ACCOUNT ANY EVIDENCE PRODUCED UNDER SUB-RULE (1) UNLESS THE [ASSESSING OFFICER] HAS BEE N ALLOWED A REASONABLE OPPORTUNITY (A) TO EXAMINE THE EVIDENCE OR DOCUMENT OR TO CROSS-EXA MINE THE WITNESS PRODUCED BY THE APPELLANT, OR (B) TOPRODUCE ANY EVIDENCE OR DOCUMENT OR ANY WITNESS I N REBUTTAL OF THE ADDITIONAL EVIDENCE PRODUCED BY THE APPELLANT. (EMPHASIS PROVIDED) ITA NO.418-JODH-2016 A.Y. 2005-06 5 4.1 IN THE FACTS AND CIRCUMSTANCES OF THE PRESENT C ASE ADMITTEDLY THE ASSESSEE WAS REQUIRED TO EXPLAIN THE FRESH INTRODUCTION OF C APITAL AND THE DETAILS PERTAINING TO M/S. TULSI SUITINGS ADMITTEDLY WERE MADE AVAILAB LE TO THE AO. THE ASSESSEE BEFORE THE ITAT HAS REITERATED THE SUBMISSION MADE BEFORE THE CIT(A) THAT HE REMAINED IN CONFUSION AND WAS UNDER A BONA FIDE BELIEF THAT BY PROVIDING THE DETAILS OF M/S. TULSI SUITINGS IN THE BOOKS OF M/S. TULSI FABRICS THE ENTIRE FACTS STOOD EXPLAINED. CONSIDERING THE EXPLANATION AND TH E PECULIAR FACTS OF THE PRESENT CASE, I FIND NO GOOD REASON TO DISBELIEVE THE BONA FIDE BELIEF ENTERTAINED BY THE ASSESSEE. THE EVIDENCES COLLECTED FROM CLOSE FRIEND S AND FAMILY AFTER THE ADDITION WAS MADE IN THE ASSESSMENT ORDER ADMITTEDLY WAS EVI DENCE WHICH WAS NOT AVAILABLE WITH THE ASSESSEE AT THE ASSESSMENT STAGE . HENCE THE CIRCUMSTANCES VISUALIZED BY THE STATUTORY RULES IN TERMS OF SUB C LAUSE (B) AND (D) OF SUB RULE (1) OF RULE 46A CAN OPERATE IN FAVOUR OF THE ASSESSEE. ACCORDINGLY REJECTING THE CONCLUSION OF THE CIT(A) THAT SUFFICIENT OPPORTUNIT Y WAS GIVEN AT THE ASSESSMENT STAGE ON FACTS IS FOUND TO BE INCORRECT. THE ADDITI ONAL EVIDENCE IS DIRECTED TO BE ADMITTED AND THE ISSUE ON MERITS IS RESTORED BACK T O CIT(A) TO DECIDE THE SAME IN ACCORDANCE WITH LAW TAKING INTO ACCOUNT THE FRESH E VIDENCES RELIED UPON BY THE ASSESSEE IN SUPPORT OF HIS CLAIM. NEEDLESS TO SAY T HAT THE ADEQUATE OPPORTUNITY OF BEING HEARD SHALL BE GRANTED TO THE ASSESSEE BY THE CIT(A). THE ORDER WAS PRONOUNCED IN THE OPEN COURT AT THE TIME OF HEARING ITSELF. 8. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALL OWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE COURT ON THIS DAY, THE 02/0 3/2017 AT JODHPUR AT THE TIME OF HEARING. SD/- (SMT. DIVA SINGH) JUDICIAL MEMBER DATED: 02/03/2017 PRABHAT KUMAR KESARWANI, SR.P.S. COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT ITA NO.418-JODH-2016 A.Y. 2005-06 6 3. CIT 4. CIT(APPEALS) 5. DR: ITAT AS SISTANT REGISTRAR