ASSISTANT COMMISSIONER OF INCOME TAX-24, MUMBAI V. BRICK AND BYTE INNOVATIVE PRODUCTS PRIVATE LIMITED, MUMBAI

ITA 4545/MUM/2017

• Counselvise Citation: [2019] 112 COUNSELVISE.COM (IT) 2309 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 5 month(s) 14 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 05-12-2019
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2012-2013
• Appeal Filed On: 21-06-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Income from undisclosed sources; Opportunity of being heard; Principle of natural justice; Corroborative evidences; Validity of assessment; Set aside
• Section: 143(3); 143(2); 68

Judgement Text

ITA NO.4545/MUM/2017 ASSESSMENT YEAR:2012-13 M/S. BRICK & BYTE INNOVATIVE PRODUCTS PRIVATE LIMITED 1 IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH, MUMBAI , , BEFORE HONBLE SHRI MAHAVIR SINGH, JM AND HONBLE SHRI MANOJ KUMAR AGGARWAL, AM ./ I.T.A. NO.4545/MUM/2017 ( / ASSESSMENT YEAR : 2012-13) A CIT - 15 (1)2 ROOM NO. 483A, 4 TH FLOOR AAYKAR BHAVAN MUMBAI- 400 020 / VS. BRICK & BYTE INNOVATIVE PRODUCTS P VT . LTD. R-102, TTC INDUSTRIAL AREA MIDC RABALE, NAVI MUMBAI-400 701. ./ ./PAN/GIR NO. AADCK-2280-J ( # $ /APPELLANT ) : ( %& $ / RESPONDENT ) & C.O. NO.309/MUM/2018 ( ARISING OUT OF ITA NO. 4545/MUM/2017) ( / ASSESSMENT YEAR : 2012-13) BRICK & BYTE INNOVA TIVE PRODUCTS P VT . LTD. R-102, TTC INDUSTRIAL AREA MIDC RABALE, NAVI MUMBAI-400 701. / VS. A CIT - 15 (1)2 ROOM NO. 483A, 4 TH FLOOR AAYKAR BHAVAN MUMBAI- 400 020 ./ ./PAN/GIR NO. AADCK-2280-J ( # $ /APPELLANT ) : ( %& $ / RESPONDENT ) ASSESSEE BY : SHRI K. GOPAL & MS. NEHA PARANJAPE LD. ARS REVENUE BY : MS. KAVITA P. KAUSHIK LD. DR / DATE OF HEARING : 27/11/2019 / DATE OF PRONOUNCEMENT : 05/12/2019 ITA NO.4545/MUM/2017 ASSESSMENT YEAR:2012-13 M/S. BRICK & BYTE INNOVATIVE PRODUCTS PRIVATE LIMITED 2 / O R D E R MANOJ KUMAR AGGARWAL (ACCOUNTANT MEMBER) 1. AFORESAID APPEAL BY REVENUE FOR ASSESSMENT YEAR [IN SHORT REFERRED TO AS AY] 2012-13 CONTEST THE ORDER OF LD. COMMIS SIONER OF INCOME- TAX (APPEALS)-24, MUMBAI, [IN SHORT REFERRED TO AS CIT(A)], APPEAL NO. CIT(A)-24/ACIT-15(1)(2)/IT-133/2015-16 DATED 31/03/ 2017 ON FOLLOWING GROUNDS OF APPEAL: - 1. 'ON THE FACTS AND CIRCUMSTANCES OF THE CASE AN D IN LAW, THE LD.CIT(A) ERRED IN DELETING THE ADDITION OF RS.4,14,09,894/- MADE U/S. 68 OF THE ACT, IN RESPECT OF FRESH UNSECURED LOANS RECEIVED FROM FOUR PARTIES, HOLDING THAT THE ASSESSEE HAD PROVED THREE INGREDIENTS OF IDENTITY, CREDIT WORTHINESS OF SHARE APPLICANTS AND GENUINENESS OF TRANSACTION AS THE SAME WERE PAID THROUGH THEIR RUNNING BANK ACCOUNTS, WITHOUT APPRECIATING THE FACT THAT ASSESSEE HAS FAILED TO D ISCHARGE ITS ONUS OF PROVING THE CREDITWORTHINESS OF PARTIES WHO ADVANCED THE LOANS. ' 2. 'ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD.CIT(A) ERRED IN HOLDING THAT THE ASSESSEE COMPANY HAS PROV ED THE IDENTITY, CREDITWORTHINESS AND GENUINENESS OF THE UNSECURED L OAN PARTIES, IGNORING THE RECENT DECISION OF THE HON'BLE SUPREME COURT IN THE CASE O F NAVODAYA CASTLE (P) LTD [2015] 56 TAXMAN. COM 18 (SC) WHEREIN THE APEX COUR T HAS HELD THAT CERTIFICATE OF INCORPORATION, PAN, ETC., WERE NOT SUFFICIENT FOR P URPOSE OF IDENTIFICATION OF SUBSCRIBER COMPANY, WHEN THERE IS MATERIAL TO SHOW THAT THE SUBSCRIBER WAS A PAPER COMPANY AND NOT A GENUINE INVESTOR.' 3. 'THE APPELLANT PRAYS THAT THE ORDER OF LD.CIT( A), MUMBAI ON THE ABOVE DIRECTIONS BE SET ASIDE AND THAT OF THE ASSESSING O FFICER BE RESTORED.' THE ASSESSEE, UPON RECEIPT OF NOTICE OF HEARING, HA S FILED CROSS- OBJECTIONS AGAINST THE SAME ON FOLLOWING GROUNDS: - 1. THE LD. C1T (A) FAILED TO APPRECIATE THAT THE CO NDITION PRECEDENT TO PROCEED WITH SCRUTINY ASSESSMENT PROCEEDINGS WAS NOT SATISFIED A S THE NOTICE UNDER SECTION 143(2) OF THE ACT, DATED 07.08.2013 WAS NOT SERVED ON THE APPELLANT. THUS, THE PROCEEDINGS CONDUCTED PURSUANT TO THE NOTICE DATED 07.08.2013 AND THE SUBSEQUENT ASSESSMENT ORDER DATED 31.03.2015 ARE BAD IN LAW AN D VOID AB INITIO. 2.1 FACTS IN BRIEF ARE THAT ASSESSEE BEING RESIDENT CORPORATE ASSESSEE STATED TO BE ENGAGED IN THE BUSINESS OF MANUFACTURI NG OF ENGINEERING ITEMS AND CARRYING OUT JOB WORK WAS ASSESSED FOR YE AR UNDER ITA NO.4545/MUM/2017 ASSESSMENT YEAR:2012-13 M/S. BRICK & BYTE INNOVATIVE PRODUCTS PRIVATE LIMITED 3 CONSIDERATION U/S 143(3) ON 31/03/2015 WHEREIN THE INCOME OF THE ASSESSEE WAS DETERMINED AT RS.75.95 LACS AFTER CERT AIN ADDITIONS U/S 68 FOR RS.414.09 LACS AS AGAINST NIL RETURN E-FILED BY THE ASSESSEE ON 25/09/2012. THE CASE WAS PICKED UP FOR SCRUTINY NOT ICE BY ISSUANCE OF NOTICE U/S 143(2) ON 07/08/2013 BY ERSTWHILE ITO-10 (3)(2) WHICH WAS DULY SERVED UPON THE ASSESSEE. THE ASSESSEE RAISED OBJECTION THAT THE SAID NOTICE WAS NOT RECEIVED. HOWEVER, THE ASSESSEE WAS SHOWN COPY OF DISPATCH REGISTER WHEREIN THE ASSESSEES NAME WAS A PPEARING AT SR. NO.-656, A COPY OF WHICH FORMS PART OF QUANTUM ASSE SSMENT ORDER. ACCORDINGLY, THE CASE WAS PROCEEDED WITH AFTER REJE CTING THE SAID OBJECTIONS RAISED BY THE ASSESSEE. 2.2 DURING ASSESSMENT PROCEEDINGS, IT TRANSPIRED TH AT THE ASSESSEE RECEIVED FRESH UNSECURED LOANS AGGREGATING TO RS.41 4.09 LACS FROM 4 ENTITIES AS PER THE FOLLOWING DETAILS: - NO. NAME OF LENDER AMOUNT (RS.) 1. RESUN ENERGY PRIVATE LIMITED 2,79,354/- 2. TERANUOVA INDUSTRIAL PARTS P. LTD 14,55,026/- 3. SHRI PRASHANT KAMAT 1,94,85,514/- 4. SHRADHA ENERGY & INFRAPROJECT P.LTD. 2,01,90,000 /- TOTAL 4,14,09,894/ - AFTER EXAMINING THE SUPPORTING DOCUMENTARY EVIDENCE S FURNISHED BY THE ASSESSEE, LD. AO CAME TO A CONCLUSION THAT ALTHOUGH THE ASSESSEE ESTABLISHED THE IDENTITY OF THE LENDERS BUT FAILED TO ESTABLISH THE CREDITWORTHINESS OF THE LENDERS AND ALSO GENUINENES S OF THE SAID TRANSACTIONS SINCE THE ASSESSEE DID NOT FURNISH NEC ESSARY DOCUMENTARY EVIDENCES SUCH AS COPY OF RETURN OF INCOME OF THE L ENDERS, STATEMENT OF TOTAL INCOME, BALANCE SHEET & PROFIT & LOSS ACCOUNT ETC. OF THE LENDERS. ITA NO.4545/MUM/2017 ASSESSMENT YEAR:2012-13 M/S. BRICK & BYTE INNOVATIVE PRODUCTS PRIVATE LIMITED 4 ACCORDINGLY, THE SAID AMOUNTS WERE TREATED AS UNEXP LAINED CASH CREDIT U/S 68 AND ADDED TO THE INCOME OF THE ASSESSEE. 3.1 BEFORE LEARNED FIRST APPELLATE AUTHORITY, THE A SSESSEE RAISED A PLEA OF VIOLATION OF NATURAL JUSTICE AND INTER-ALIA, SUBMITTED THAT THE ADDITIONS WERE NOT JUSTIFIED SINCE THE THREE ENTITIES WERE RE LATED / ASSOCIATED PARTIES WHEREAS ONE OF THE ENTITIES WAS ASSESSEES BUSINESS ASSOCIATES. IN SUPPORT OF THE LOAN TRANSACTIONS, THE ASSESSEE F ILED COPIES OF INCOME TAX RETURNS, STATEMENT OF TOTAL INCOME, LEDGER CONF IRMATIONS, COPY OF BANK STATEMENTS ETC. TO SUBMIT THAT THE SAID LOANS WERE GENUINE TRANSACTIONS. THE ASSESSEES SUBMISSIONS WERE SUBJE CTED TO REMAND PROCEEDINGS BEFORE LD. AO VIDE REMAND REPORT DATED 26/10/2016, A COPY OF WHICH HAS BEEN PLACED ON RECORD. 3.2 IN THE REMAND REPORT, THE ASSESSEES OBJECTION AS TO ISSUANCE OF NOTICE U/S 143(2) WERE AGAIN REJECTED IN THE BACKGR OUND OF OBSERVATIONS MADE IN THE QUANTUM ASSESSMENT ORDER AS ENUMERATED BY US IN PRECEDING PARA 2.1. REGARDING ADDITIONS ON MERITS, THE ATTENTION WAS DRAWN TO ORDER SHEET ENTRIES DATED 03/03/2015 WHERE IN IT WAS NOTED BY ASSESSING AO THAT THE COMPANIES FROM WHOM THE LOANS WERE OBTAINED, DID NOT HAVE ANY INCOME TO SUBSTANTIATE THE LOANS G IVEN TO THE ASSESSEE AND THEREFORE, THE ADDITIONS WERE MADE U/S 68 AND T HE SAME WERE JUSTIFIED. 3.3 THE ASSESSEE OBJECTED TO THE REMAND REPORT BY S UBMITTING THAT LD. AO MECHANICALLY REPEATED THE CONTENTS OF THE ASSESS MENT ORDER WITH REGARD TO ISSUANCE OF NOTICE U/S 143(2) WHICH WAS N EVER SERVED UPON THE ASSESSEE. ANOTHER OBJECTION WAS THAT LD. AO DID NOT EVEN BOTHER TO SERVE ANY NOTICE TO THE ASSESSEE BEFORE SUBMITTING THE REMAND REPORT ITA NO.4545/MUM/2017 ASSESSMENT YEAR:2012-13 M/S. BRICK & BYTE INNOVATIVE PRODUCTS PRIVATE LIMITED 5 AND FURTHER, NO VERIFICATION WAS MADE TO EXAMINE TH E GENUINENESS OF THE LOAN TRANSACTIONS WHICH WAS IN VIOLATION OF PRINCIP AL OF NATURAL JUSTICE. IT WAS ALLEGED THAT ASSESSMENT ORDER AS WELL AS REMAND REPORT WERE FURNISHED WITH BIASED MIND. VIDE OTHER SUBMISSIONS DATED 17/03/2017, THE ATTENTION WAS DRAWN TO THE DOCUMENTARY EVIDENCE S FILED BY THE ASSESSEE SO AS TO DEMONSTRATE THE FULFILMENT OF PRI MARY INGREDIENTS OF SECTION 68 AND THEREFORE, A PRAYER WAS MADE TO DELE TE THE IMPUGNED ADDITIONS. 3.4 THE LEARNED FIRST APPELLATE AUTHORITY, AFTER DU E CONSIDERATION OF SUBMISSIONS AND MATERIAL ON RECORD, DISMISSED ASSES SEES LEGAL OBJECTION AS TO ISSUANCE OF NOTICE U/S 143(2) SINCE LD. AO HAD DULY FOLLOWED THE LAW AND PROCEDURE AND ISSUED STATUTORY NOTICES AFTER AFFORDING OPPORTUNITY OF BEING HEARD TO THE ASSESSE E. 3.5 PROCEEDING ON MERITS, LD. CIT(A), AFTER APPRECI ATING THE DOCUMENTARY EVIDENCES, NOTED THAT THE TRANSACTIONS WERE ROUTED THROUGH BANKING CHANNELS AND THE SOURCE THEREOF COULD NOT B E DOUBTED. WHATEVER MAY BE THE STRENGTH OF PRESUMPTION, THE SA ME COULD NOT SUBSTITUTE THE EVIDENCES. FURTHER, LD. AO MADE NO E FFORTS TO SHOW THAT THE STATED TRANSACTIONS WERE SHAM, FICTIOUS OR ARTI FICIAL EXCEPT DOUBTING THAT THE LOANS AMOUNTS WERE NOTHING BUT UNACCOUNTED INCOME OF THE ASSESSEE. HE FAILED TO GATHER ANY EVIDENCE TO SHOW THAT THE UNACCOUNTED CASH OF THE ASSESSEE CHANGED HANDS CONS EQUENT TO CHEQUE PAYMENTS. NO CORROBORATIVE EVIDENCES WERE BR OUGHT ON RECORD TO SUPPORT THE FINDINGS. RELIANCE WAS PLACED ON THE DECISION OF THIS TRIBUNAL RENDERED IN ANANT SHELTERS PVT. LTD. (20 TAXMANN.COM 153 2012) & THE RATIO OF DECISION OF HONBLE APEX COURT RENDE RED IN LOVELY ITA NO.4545/MUM/2017 ASSESSMENT YEAR:2012-13 M/S. BRICK & BYTE INNOVATIVE PRODUCTS PRIVATE LIMITED 6 EXPORTS PVT. LTD. (216 CTR 195) . SINCE THE ASSESSEE, IN THE OPINION OF LEARNED FIRST APPELLATE AUTHORITY, FURNISHED REQUIS ITE DOCUMENTS TO PROVE THE FULFILMENT OF PRIMARY INGREDIENTS OF SECTION 68 , THE LOAN CREDITS COULD NOT BE DOUBTED AND THE ADDITIONS MADE U/S 68 COULD NOT SURVIVE. AGGRIEVED BY THE SAID ADJUDICATION, THE REVENUE IS UNDER FURTHER APPEAL BEFORE US. 4. WE HAVE CAREFULLY HEARD THE ARGUMENTS ADVANCED B Y RESPECTIVE REPRESENTATIVES, PERUSED RELEVANT MATERIAL ON RECOR D INCLUDING DOCUMENTS PLACED IN THE PAPER BOOK AND JUDICIAL PRO NOUNCEMENTS AS CITED BEFORE US. 5.1 THE BASIC FACTS AS ENUMERATED IN PRECEDING PARA GRAPHS ARE NOT UNDER DISPUTE. IT IS QUITE EVIDENT THAT NO INDEPEND ENT INQUIRY HAS BEEN MADE BY LD. AO TO ASCERTAIN THE GENUINENESS OF THE TRANSACTIONS FROM LOAN CREDITORS EITHER IN ORIGINAL ASSESSMENT PROCEE DINGS OR IN REMAND PROCEEDINGS. IT TRANSPIRES THAT THE ADDITIONS WERE MADE BY LD. AO MERELY ON DOUBTS WITHOUT BRINGING ON RECORD ANY COR ROBORATIVE MATERIAL WHICH WOULD SUGGEST THAT THE LOANS REPRESENTED ASSE SSEES UNACCOUNTED MONEY. IN FACT, THE IDENTITY OF THE LOA N CREDITORS WAS ACCEPTED BY LD. AO IN THE ASSESSMENT PROCEEDINGS IT SELF. THE DOCUMENTS FURNISHED BY THE ASSESSEE WITH RESPECT TO LOAN CREDITORS INCLUDE COPIES OF RETURN OF INCOME OF THE LENDERS, COMPUTATION OF INCOME, BALANCE SHEET, LEDGER EXTRACTS AND BANK STATEMENTS ETC., WHICH WE HAVE CAREFULLY PERUSED. 5.2 THE FIRST ENTITY I.E. M/S RESUN ENERGY PVT. LTD . IS A CORPORATE ENTITY WHOSE ACCOUNTS ARE SUBJECTED TO AUDIT FOR YEAR UNDE R CONSIDERATION. THIS ENTITY HAS DULY FILED ITS RETURN OF INCOME FOR THE YEAR UNDER CONSIDERATION ITA NO.4545/MUM/2017 ASSESSMENT YEAR:2012-13 M/S. BRICK & BYTE INNOVATIVE PRODUCTS PRIVATE LIMITED 7 AND THE AMOUNTS ADVANCED BY THIS ENTITY TO THE ASSE SSEE IS DULY REFLECTED AS OUTSTANDING AMOUNT IN ITS BALANCE SHEE T. THE LEDGER CONFIRMATION IS ON RECORD. THE PERUSAL OF BANK STAT EMENT SHOWS THAT THERE ARE NO IMMEDIATE CASH DEPOSITS BEFORE ADVANCI NG MONEY TO THE ASSESSEE. SIMILAR ARE THE DOCUMENTS & OBSERVATIONS WITH RESPECT TO M/S TERRANOVA INTEGRATED INDUSTRIAL PARK PRIVATE LIMITE D. THE ASSESSEE HAS RECEIVED FRESH LOAN OF RS.6 LACS ONLY FROM THIS ENT ITY DURING THE YEAR AND THE BALANCE AMOUNT OF RS.8.55 LACS REPRESENT OPENIN G BALANCE. REGARDING LOANS FROM SHRI PRASHANT KAMAT, THE ASSES SEE HAS PLACED ON RECORD INCOME TAX RETURN OF THE SAID LENDER, COMPUT ATION OF INCOME, FINANCIAL STATEMENTS AND LEDGER CONFIRMATIONS WHICH MATCHES WITH THE OUTSTANDING BALANCE REFLECTED BY THE ASSESSEE. REGA RDING LAST ENTITY I.E. M/S SHARDHA ENERGY & INFRAPROJECT PRIVATE LIMITED, THE ASSESSEE HAS PLACED ON RECORD THE COPY OF INCOME TAX RETURN, AUD ITED FINANCIAL STATEMENTS, LEDGER CONFIRMATION. IN FACT, NO FRESH LOANS HAVE BEEN OBTAINED BY THE ASSESSEE FROM THIS ENTITY DURING TH E YEAR UNDER CONSIDERATION AND THE AMOUNT OF RS.211.71 LACS REPR ESENT OPENING BALANCE. THE PERUSAL OF ALL THESE DOCUMENTS WOULD E STABLISH THAT THE ASSESSEE WAS SUCCESSFUL IN DEMONSTRATING THE FULFIL MENT OF PRIMARY INGREDIENTS OF SECTION 68. 5.3 THEREFORE, THE GIVEN FACTUAL MATRIX DOES NOT PR OVIDE US ANY REASON TO INTERFERE IN THE IMPUGNED ORDER AND WE SEE NO RE ASON TO DEVIATE FROM THE SAME. RESULTANTLY, THE REVENUES APPEAL STANDS DISMISSED. 6. THE ASSESSEE, IN ITS CROSS-OBJECTIONS, HAS CHALL ENGED THE VALIDITY OF ASSESSMENT PROCEEDINGS ON THE GROUND THAT NOTICE U/ S 143(2) WAS NOT SERVED ON THE ASSESSEE. HOWEVER, NO COGENT MATERIAL HAS BEEN PLACED ITA NO.4545/MUM/2017 ASSESSMENT YEAR:2012-13 M/S. BRICK & BYTE INNOVATIVE PRODUCTS PRIVATE LIMITED 8 BEFORE US TO DEMONSTRATE THE SAID FACT. THEREFORE, FINDING NO MERIT IN THE SAME, WE ARE INCLINED TO DISMISS THE SAME AND CONCU R WITH THE STAND OF LOWER AUTHORITIES, IN THIS REGARD. 7. FINALLY, THE APPEAL AS WELL AS CROSS-OBJECTIONS STANDS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 5 TH DECEMBER, 2019. SD/- SD/- (MAHAVIR SINGH) (MAN OJ KUMAR AGGARWAL) / JUDICIAL MEMBER / ACCOUNTANT MEMBER MUMBAI; DATED : 05/12/2019 SR.PS, JAISY VARGHESE ,-./01-0 / COPY OF THE ORDER FORWARDED TO : 1. # $ / THE APPELLANT 2. %& $ / THE RESPONDENT 3. !!; ( # ) / THE CIT(A) 4. !!; / CIT CONCERNED 5. <=%6> , !#> , / DR, ITAT, MUMBAI 6. =?@A / GUARD FILE / BY ORDER, / (DY./ASSTT.REGISTRAR) , / ITAT, MUMBAI.