RUPANI DYES INTERMEDIATES P.LTD, MUMBAI V. ITO 10(3)(3), MUMBAI

ITA 4467/MUM/2016

• Counselvise Citation: [2018] 125 COUNSELVISE.COM (IT) 1694 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 2 month(s) 2 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-08-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: H
• Assessment Year: 2011-2012
• Appeal Filed On: 28-06-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: MAJOJ KUMAR SINGH
• Keywords: Principle of natural justice; Additional evidence; Bad and doubtful debts
• Section: 6; 144

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL H , BENCH MUMBAI BEFORE SHRI R.C.SHARMA, AM & SHRI SANDEEP GOSAIN , JM ITA NO. 4467 /MUM/20 16 ( ASSESSMENT YEAR : 2011 - 12 ) RUPANI DYES INTERMEDIATES PVT. LTD. 312, EXIM LINK BUILDING, OPP INDIRA CONTAINER YARD, MULUND GOREGAON LINK ROAD, NAHUR (W), MUMBAI 400 076 VS. ITO WARD - 10(3)(3) AAYAKAR BHAVAN, M.K. ROAD, CHURCHGATE, MUMBAI 400 020 PAN: AAACR2944R APPELLANT ) .. RESPONDENT ) ASSESSEE BY SHRI PARESH SHAPARIA (AR) REVENUE BY SHRI MAJOJ KUMAR SINGH (DR) DATE OF HEARING 21/08 /2018 DATE OF PRONOUNCEMENT 31 /08 /2018 / O R D E R PER R.C.SHARMA (A.M) : THIS IS AN APPEAL FILED BY THE ASSESSEE AGAINST THE ORDER OF CIT(A) - 24, MUMBAI DATED 11/03 / 2016 FOR A.Y.2011 - 12, IN THE MATTER OF EX - PARTE ORDER PASSED BY THE AO U/S.144 OF THE IT ACT. 2. RIVAL CONTENTIONS HAVE BEEN HEARD AND RECORD PERUSED. 3. FACTS IN B RIEF ARE THAT ASSESSEE IS ENGAGED IN THE BUSINESS OF MANUFACTURING AND TRADING OF DYES AND CHEMICALS. DURING THE YEAR UNDER CONSIDERATION, THE ASSESSEE HAS NOT CARRIED ANY BUSINESS. HOWEVER, IT HAS INCURRED SOME ADMINISTRATIVE EXPENDITURE AND ALSO W/OFF SOME SUNDRY DEBTORS ON BECOMING UNRECOVERABLE. THEREB Y INCURR ING A LOSS OF RS. ITA NO. 4467 MUM 2016 RUPANI DYES INTERMEDIATES PVT. LTD. 2 7,56,542/ - IN THE PROFIT & LOSS ACCOUNT. THE BOOKS OF ACCOUNTS HAVE BEEN PRESENTED TO THE AO FOR VERIFICATION. BANKS STATEMENT WAS SUBMITTED. THE MAIN DIRECTOR OF THE ASSESSEE M R. B. K. VIG HAS EXPIRED A FEW MONTHS BACK AND SI NCE THE COMPANY WAS NOT IN OPER ATION SOME OF THE DOCUMENTS AND STATEMENTS SOUGHT BY AO COULD NOT BE TRACED AND SUBMITTED AND AS SUCH DETAILS OF THE SALE OF THE IMMOVABLE PROPERTY WAS NOT FILED. 4. THE AO PA SSED EX - PARTE ORDER UNDER SECTION 144 AND MADE VARIOUS ADDITIONS ON ACCOUNT OF BAD DEBTS WRITTEN OFF, SHORT TERM CAPITAL GAIN, DISALLOWANCE UNDER SECTION 41(1) ETC. BY THE IMPUGNED ORDER, THE CIT(A) CONFIRMED THE ACTION OF THE AO, AGAINST WHICH ASSESSEE IS IN FURTHER APPEAL BEFORE US. 5. AT THE OUTSET, THE AR PLACED ON RECORD AN AFFIDAVIT EXPLAINING THE REASONS FOR NOT APPEARING BEFORE THE AO. HE CONTENDED THAT MANAGING DIRECTOR OF THE COMPANY EXPIRED ON 18. 04.2013 AFTER PROLONGED ILLNESS THEREFORE, APPEARANCE BEFORE THE AO COULD NOT BE EFFECTED WITH THE DOCUMENTS ASKED BY HIM. HE ALSO INVITED OUR ATTENTION TO THE COMPUTATION OF INCOME FILED FOR IMMEDIATELY PRECEDING A.YS, WHEREIN CAPITAL GAIN WAS ALREADY OFFERED, AND THE SAME WAS AGAIN TA XED BY THE AO DURING THE YEAR WHILE PASSING EX - PARTE ORDER UNDER SECTION 144. 6 . ON THE OTHER HAND, DR RELIED ON THE ORDER OF THE LOWER AUTHORITIES. 7 . WE HAVE CONSIDERED THE RIVAL CONTENTIONS AND CAREFULLY GONE THROUGH THE ORDERS OF AUTHORITIES BELOW. THE AFFIDAVIT FILED BY THE ASSESSEE ITA NO. 4467 MUM 2016 RUPANI DYES INTERMEDIATES PVT. LTD. 3 FOR EXPLAINING THE REASONS FOR NON - APPEARANCE BEFORE THE AO READS AS UNDER: I, SELVA LAKSHMANAN PERUMAL, DIRECTOR OF RUPANI DYES IN TERMEDIATES PVT LTD, HAVING OFFICE AT 312, EXIM LINK BUILDING, OPP INDIRA CONTAINER YARD, MULUND GOREGAON LINK ROAD, NAHUR (WEST), M UMBAI - 400076, AGED ABOUT 37 YEARS, DO SOLEMNLY AFFIRM THAT: 1. RUPANI DYES INTERMEDIATES PVT LTD., (HEREINAFTER REFERRED AS APPELLANT) IS REGULARLY ASSESSED T O TAX VIDE PAN. AA ACR2944R IN THE CHARGE OF ITO, WARD - 1 0(3)(3), MUMBAI 2. THE RETURN OF INCOME WAS E FILED ON 16.11.2011 DECLARING LOSS OF RS. 7,11,646/ - . 3. MG DIRECTOR OF THE COMPANY, MR. B K VIG AT THE AGE OF 70 YEARS EXPIRED ON 18.04.2013 AFTER PROLONGED ILLNESS. MR. B K VIG AND HIS FAMILY MEMBERS WERE THE SUBSTANTIAL SHAREHOLDERS OF THE COMPANY HOLDING 99.9 % SHARES. 4. THE APPELLANT HAD NO SALES TURNOVER FOR THE YEAR UNDER CONSIDERATION. THE BUSINESS OF THE APPELLANT W AS AFFECTED DUE TO THE I LL HEALTH OF LATE MR. B K VIG WHO WAS THE MG. DIRECTOR AND INVOLVED IN THE DA Y TO DAY OPERATIONS, FINANCE, ACCOUNTS OF THE APPELLANT. 5. DUE TO THE DEATH OF MR. B K VIG THE BUSINESS OF THE APPELLANT HAD COME TO A STANDSTILL AND THERE WERE NO EMPLOYEES O F THE COMPANY. DUE TO NO EMPLOYEES OF THE APPELLANT AND SINCE THE RECORDS WERE NOT READILY AVAILABLE, IN THE COURSE OF ASSESSMENT PROCEEDINGS AND APPELLATE PROCEEDINGS BEFORE THE CIT (A), THE APPELLANT COULD NOT PRODUCE EVIDENCE AND RECORDS. 6. THE ORDER WAS PASSED U/S 144 ON 20.3.2014 ASSESSIN G THE INCOME AT RS. 1,23,89,000/ - . THE DIFFERENCE BETWEEN THE RETURNED INCOME AND ASSESSED INCOME WAS ON ACCOUNT OF: A) DISALLOWANCE OF BAD DEBTS AMOUNTING TO RS.6,45,925/ - . B) TREATMENT OF OUTSTANDING STATUTORY DUES OF ESIC AS INCOME U/S 2(24)(X) OF RS. 1,25,335/ - . C) TREATING THE SALE CONSIDERATION ON SALE OF IMMOVABL E PROPERTIES OF RS. 1,03,35,500/ - AS SHORT TERM CAPITAL GAINS. D) ADHOC DISALLOWANCE U/S 41(1) OF RS. 19,94,788/ - BEING 10% OF THE OUTSTANDING SU NDRY CREDITORS OF RS. 1,99,47,876/ - . 7 . THE CIT (A) PASSED ORDER DATED 11.3.2016 C ONFIRMING ALL THE DISALLOWANCES/ADDITIONS DUE, TO NON - SUBMISSION OF RECORDS TO ITA NO. 4467 MUM 2016 RUPANI DYES INTERMEDIATES PVT. LTD. 4 SUBSTANTIATE THE GROUNDS OF APPEAL. AN APPEAL WAS FILED BEFORE THE HON. IT AT ON 11.03.2016 AGAINST THE ORDER OF THE CIT (A). 8 . AN AFFIDAVIT IS BEING MADE TO ADMIT THE NEW EVIDENCES AS THE APPELLANT WAS PREVENTED BY SUFFICIENT CAUSE FROM PRODUCING THE EVIDENCE WHICH IT WAS CALLED UPON TO PRODUCE BY THE LOWER AUTHORITIES. 9. THE NEW ADDITIONAL EVIDENCES ARE AS PER THE PAPER BOOK. IN PAPER BOOK, NEW EVIDENCES ARE PRODUCED FO R ADJUDICATING THE GROUNDS OF APPEAL. 10. IN THE INTE REST OF NATURAL JUSTICE AND REASO NABLE CAUSE, IT WAS REQUEST ED TO KINDLY ADMIT THE NEW EVIDENCES. 8 . IT IS CLEAR FROM THE AFFIDAVIT THAT NON - APPEARANCE BEFORE THE AO AND NOT FURNISHING THE INFORMATION REQUIRED BY THE AO WAS ATTRIBUTABLE TO THE LONG ILLNESS OF THE MANAGING DIRECTOR OF THE COMPANY WHO ULTIMATELY EXPIRED ON 18.04.2013. DURING THE YEAR UNDE R CONSIDERATION, THERE WAS NO SALES TURNOVER, SINCE BUSINESS WAS AFFECTED DUE TO LONG ILLNESS OF B.K. VIG, M ANAGING DIRECTOR OF THE COMPANY. DUE TO THE DEATH OF MANAGING DIRECTOR AFTER LONG ILLNESS, THERE WERE NO EMPLOYEES OF THE COMPANY. THUS, AT THE TIME, AO ASKED FOR THE DOCUMENTS, SAME WERE NOT TRACEABLE AND READILY AVAILABLE. WE ALSO FOUND THAT M A JOR ADDITION MADE ON ACCOUNT OF CAPITAL GAIN HAVE ALREADY BEEN OFFERED BY THE ASSESSEE IN THE IMMEDIATELY PRECEDING YEAR, WHICH REQUIRE EXAMINATION AND VE RIFICATION ON THE PART OF THE AO. CONSIDERING THE TOTALITY OF THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN THE SUBSTANTIAL INTEREST OF JUSTICE, WE RESTORE THE MATTER BACK TO THE FILE OF THE AO FOR DECIDING AFRESH AFTER GIVING DUE OPPORTUNITY TO THE ASSES SEE. WE FURTHER DIRECT THE ASSESSEE TO APPEAR BEFORE THE AO WITHIN A ITA NO. 4467 MUM 2016 RUPANI DYES INTERMEDIATES PVT. LTD. 5 PERIOD OF TWO MONTHS FROM THE DATE OF RECEIPT OF THIS ORDER. WE DIRECT ACCORDINGLY. 7. IN THE RESULT, APPEAL IS ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 31 /08 /2018 SD/ - ( SANDEEP GOSAIN ) SD/ - (R.C.SHARMA) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI ; DATED 31 /08 /2018 SK PS COPY OF THE ORDER FORWARDED TO : BY ORDER, (ASSTT. REGISTRAR) ITAT, MUMBAI 1. THE APPELLANT 2. THE RESPONDENT. 3. THE CIT(A), MUMBAI. 4. CIT 5. DR, ITAT, MUMBAI 6. GUARD FILE. //TRUE COPY//