JALAN SYNTHETICS, MUMBAI V. ADDL CIT 14(1), MUMBAI

ITA 4822/MUM/2014

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 9791 (ITAT-MUMBAI)
• Duration Of Justice: 3 year(s) 6 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-07-2017
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: J
• Next Hearing Date: 17-11-2016
• Assessment Year: 2011-2012
• Appeal Filed On: 18-07-2014
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: ANJU GARODIA
• Keywords: Principle of natural justice; Additional evidence
• Section: 143(3); 68

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, BENCH J, MUM BAI BEFORE SHRI RAJENDRA, ACCOUNTANT MEMBER AND SHRI PAWAN SINGH, JUDICIAL MEMBER ITA NO. 4822/MUM/2014 (ASSESSMENT YEAR- 2011-12) M/S JALAN SYNTHETICS C/O. D.C. JAIN & CO., 75, BOMBAY MUTUAL BLDG., 293, DR. D.N. ROAD, FORT, MUMBAI-400001. PAN: AAAFJ2849L VS. ACIT 14(1 ), EARNEST HOUSE, 2 ND FLOOR, NARIMAN POINT, MUMBAI-400021. (APPELLANT) (RESPONDENT) ITA NO. 5620/MUM/2014 (ASSESSMENT YEAR- 2011-12) ACIT 14(1 ), EARNEST HOUSE, 2 ND FLOOR, NARIMAN POINT, MUMBAI-400021 . VS. M/S JALAN SYNTHETICS C/O. D.C. JAIN & CO., 75, BOMBAY MUTUAL BLDG., 293, DR. D.N. ROAD, FORT, MUMBAI-400001. PAN: AAAFJ2849L (APPELLANT) (RESPONDENT) ASSESSEE BY : NONE REVENUE BY : MS ANJU GARODIA (DR) DATE OF HEARING : 24.07.2017 DATE OF PRONOUNCEMENT : 24.07.2017 ORDER UNDER SECTION 254(1) OF INCOME TAX ACT PER PAWAN SINGH, JUDICIAL MEMBER: 1. THESE CROSS APPEAL UNDER SECTION 253 OF INCOME TAX ACT (ACT) ARE DIRECTED AGAINST THE ORDER OF LD. COMMISSIONER OF INCOME-TAX (APPEALS) (CIT(A)-25, MUMBAI DATED 10.06.2014 FOR ASSESSMENT YEAR (AY) 20 11-12. ITA NO.482 2 & 5620/M/2014- M/S JALAN SYNTHETICS 2 2. THE BRIEF FACTS OF THE CASE ARE THAT ASSESSEE IS A PARTNERSHIP FIRM, ENGAGED IN THE BUSINESS OF TEXTILE TRADING, FILED ITS RETURN O F INCOME FOR RELEVANT AY ON 17.09.2011 DECLARING TOTAL INCOME OF RS. 72,77,390/ -. THE ASSESSMENT WAS COMPLETED ON 21.03.2014 U/S 143(3) R.W.S. 145 OF TH E ACT. THE ASSESSING OFFICER (AO) WHILE PASSING THE ASSESSMENT ORDER BES IDES THE OTHER ADDITION AND DISALLOWANCE MADE THE ADDITION OF RS. 86,136/- ON ACCOUNT OF NON- GENUINE CREDITORS, WHOSE CREDIT WERE MORE THAN THRE E YEARS ON 31.03.2011, ADDITION OF RS. 10,00,000/- ON ACCOUNT OF CASH EXPE NSES. ADDITION OF RS. 2,30,85,000/- ON ACCOUNT OF CASH CREDIT U/S 68 OF T HE ACT BEING ADDITION TO PARTNERS CAPITAL BY WAY OF CASH AND FURTHER MADE T HE ADDITION OF RS. 2,73,48,477/- ON THE BASIS OF GROSS PROFIT RATIO @ 6% AFTER REJECTING BOOKS OF ACCOUNT. ON APPEAL BEFORE THE LD. CIT(A), THE AD DITION ON CASH CREDIT OF RS. 2,30,85,000/- U/S 68 OF THE ACT AND ADDITION ON ACCOUNT OF GROSS PROFIT RATIO @ 6% OF RS. 2,73,48,277/- WAS DELETED. HOWEVE R, THE ADDITION ON ACCOUNT OF CREDITORS WAS RESTRICTED TO RS. 58,814/- . AND ADDITION ON ACCOUNT OF CASH EXPENSES WAS RESTRICTED TO RS. 8,00,000/-. THUS, FURTHER AGGRIEVED BY THE ORDER OF LD. CIT(A), BOTH THE PARTIES HAVE FILE D CROSS APPEAL. THE REVENUE HAS CHALLENGED THE DELETION OF ADDITION ON ACCOUNT OF CASH CREDIT OF RS. 2,30,85,000/- U/S 68 OF THE ACT AND DELETING TH E ADDITION ON ACCOUNT OF GROSS PROFIT RATIO OF RS. 2,73,48,477/-. THE ASSESS EE IS ALSO AGGRIEVED BY PARTIAL SUSTAINING THE ADDITION ON ACCOUNT OF NON-G ENUINE CREDITOR AS WELL AS CASH EXPENSES. ITA NO.482 2 & 5620/M/2014- M/S JALAN SYNTHETICS 3 3. BOTH THE APPEAL WERE LISTED TODAY I.E. ON 24.07.201 7. NONE APPEARED ON BEHALF OF ASSESSEE DESPITE WAITING FOR SUFFICIENT T IME. NO APPLICATION FOR ADJOURNMENT IS FILED ON BEHALF OF ASSESSEE. PERUSAL OF RECORD REVEALS THAT ASSESSEE HAS AVAILED AS MANY AS NINE ADJOURNMENTS O N ONE PRETEXT OF THE OTHER. TODAY, NONE APPEARED ON BEHALF OF ASSESSEE N OR FILED ANY APPLICATION FOR ADJOURNMENT, HENCE WE LEFT NO OPTION EXCEPT TO HEAR THE SUBMISSION OF LD. DR FOR THE REVENUE AND TO PROCEED ON THE BASIS OF M ATERIAL AVAILABLE ON RECORD. THE LD. DR FOR THE REVENUE ARGUED THAT IN A SSESSEES APPEAL IN ITA NO. 4822/MUM/14 THE ASSESSEE HAS RAISED TWO GROUNDS OF APPEAL. GROUND NO. 1 RELATES TO SUSTAINING THE ADDITION ON ACCOUNT OF SUNDRY CREDITORS AND GROUND NO.2 RELATES TO ADDITION ON ACCOUNT OF CASH EXPENSES. IT WAS ARGUED THAT ASSESSEE HAS SHOWN THE CREDITORS FROM 01.01.20 00 OR PRIOR THERETO. |THE ASSESSEE HAS NOT SHOWN THE GENUINENESS OF CREDITORS NOR FURNISHED THE LEDGER ACCOUNT OF SUBSEQUENT YEARS. WITH REGARD TO THE PAR TIAL SUSTAINING OF ADDITION ON ACCOUNT OF CASH EXPENSES, IT WAS ARGUED THAT THE ASSESSEE WAS SHOWING THE HUGE EXPENSES IN CASH. THE ENTIRE SALARY EXPEND ITURE WAS SHOWN IN CASH, THE OTHER EXPENSES SHOWN TO HAVE INCURRED ON EMPLOY EES WHO WERE ALSO IN CASH. THE ASSESSEE HAS NOT FURNISHED CASH BOOK. THE ASSESSEE FURNISHED THE CD IN SUCH A FORMAT WHICH COULD NOT BE OPENED FOR P ERUSAL. THUS, THE ASSESSEE FAILED TO FURNISH AND SUBSTANTIATE THE CLA IM OF CASH EXPENSES. THE LD. DR FOR THE REVENUE FURTHER ARGUED THAT THE LD. CIT(A) HAS ALREADY GIVEN SUBSTANTIAL RELIEF TO THE ASSESSEE ON BOTH THE GROU NDS. ITA NO.482 2 & 5620/M/2014- M/S JALAN SYNTHETICS 4 4. WE HAVE CONSIDERED THE SUBMISSION OF LD. DR FOR THE REVENUE AND GONE THROUGH THE ORDERS OF AUTHORITIES BELOW AND THE MAT ERIAL PLACED BEFORE US. DURING THE FIRST APPELLATE PROCEEDING, THE ASSESSEE FURNISHED WRITTEN SUBMISSION ON 23.04.2014. THE LD. CIT(A) AFTER CONS IDERING THE SUBMISSION CONCLUDED THAT THE CREDITORS NAMELY CHENNUR TEXTILE , S. HENIL & CO. AND ISHTIYAK AHMED, THE ASSESSEE WAS UNABLE TO PROVE TH E GENUINENESS ABOUT THE CREDITORS. THE ASSESSEE HAS PROVED GENUINENESS WITH RESPECT OF SANTHIL KUMAR TEXTILE KPM AGAINST WHOM A LIABILITY OF RS. 2 7322/- WAS SHOWN. THE LD. CIT(A) CONSIDERING THE FACT DELETED THE ADD ITION TO THE EXTENT OF RS. 27322/- AND SUSTAINED THE REMAINING ADDITION. WE HA VE NOTICED THAT THE FINDING OF LD. CIT(A) IS BASED ON MATERIAL FACT AVA ILABLE ON RECORD AND DO NOT REQUIRE ANY FURTHER INTERFERENCE AT OUR END. TH US, GROUND NO.1 RAISED BY ASSESSEE IS DISMISSED. 5. SO FAR AS GROUND NO.2 RAISED BY ASSESSEE IS CONCERN ED. WE HAVE SEEN THAT THE AO MADE THE ADHOC DISALLOWANCE. THE ASSESSEE FAILED TO SUBSTANTIATE H IS CLAIM EVEN BEFORE THE LD. CIT(A). THE LD. CIT(A) OB SERVED THAT THE SALARY EXPENDITURE OF RS. 264.44 LAKHS (EXCEPT EXPENDITURE OF RS. 25,000/- BY CHEQUE) HAS BEEN SHOWN IN CASH. SINCE THE ASSESSEE HAS TO FAILED TO SUBSTANTIATE AND PROVIDE THE DETAILS BEFORE THE AO AS WELL AS BEFORE THE LD. CIT(A). THE LD. CIT(A) HOWEVER, RESTRICTED THE DISA LLOWANCE TO RS. 8,00,000/-. BEFORE US, THE ASSESSEE FAILED TO SUBST ANTIATE HIS CLAIM AS TO WHY THE ADDITION BE DELETED. AS THE ASSESSEE HAS NEITHE R COME FORWARD NOR ITA NO.482 2 & 5620/M/2014- M/S JALAN SYNTHETICS 5 SUBSTANTIATE HIS CLAIM. THUS, WE DO NOT FIND ANY IL LEGALITY OR INFIRMITY IN THE ORDER PASSED BY LD. CIT(A). 6. IN THE RESULT, APPEAL FILED BY ASSESSEE IS DISMISSE D. 7. THOUGH, THE REVENUE IN ITS APPEAL HAS RAISED AS MAN Y AS FIVE GROUNDS OF APPEAL. HOWEVER, AS PER OUR CONSIDERED VIEW, THERE IS ONLY THREE SUBSTANTIAL GROUND OF APPEAL WHICH WE SUMMARIZED AS UNDER: (I) WHETHER LD. CIT(A) ERRED IN ACCEPTING THE ADDITIONA L EVIDENCE DURING THE APPELLATE STAGE WITHOUT PROVIDING OPPORTUNITY TO AO . (II) WHETHER LD. CIT(A) ERRED IN DELETING THE ADDITION O F RS. 27348477/- ON ACCOUNT OF ESTIMATE OF G.P. @ 6%. (III) WHETHER LD. CIT(A) ERRED IN DELETING THE ADDITION U /S 68 OF THE ACT OF RS. 23085000/-. 8. THE LD. DR FOR THE REVENUE ARGUED THAT THE LD. CIT( A) DURING THE APPELLATE STAGE ACCEPTED THE ADDITIONAL EVIDENCE WITHOUT ADHE RING THE PROCEDURE TO ALLOW THE ADDITIONAL EVIDENCE WITHOUT GIVING THE OP PORTUNITY TO THE AO. NO OPPORTUNITY WAS GIVEN TO THE AO TO VERIFY THE ADDIT IONAL EVIDENCES FURNISHED DURING THE APPELLATE STAGE FOR THE FIRST TIME, DESP ITE THE FACT THAT ASSESSEE FAILED TO PRODUCE THE SAID EVIDENCE ON SERVICE OF V ARIOUS NOTICES. IT WAS ARGUED THAT THE LD. CIT(A) VIOLATED THE PRINCIPLE O F NATURAL JUSTICE BY NOT GIVING THE OPPORTUNITY TO THE AO. IT WAS ARGUED THA T THE MATTER MAY BE REMANDED TO THE FILE OF AO FOR EXAMINING SUCH EVIDE NCE WHICH WAS FILED BEFORE THE LD. CIT(A). ON MERIT, IT WAS FURTHER ARG UED THAT THE LD. CIT(A) DELETED THE ADDITION ON THE BASIS OF G.P. WITHOUT A NY COGENT REASON. FOR DELETING THE ADDITION U/S 68 OF THE ACT, IT WAS ARG UED THAT ADDITION WAS DELETED WITHOUT GIVING OPPORTUNITY TO THE AO. ITA NO.482 2 & 5620/M/2014- M/S JALAN SYNTHETICS 6 9. WE HAVE CONSIDERED THE SUBMISSION OF LD. DR FOR THE REVENUE AND PERUSED THE MATERIAL AVAILABLE ON RECORD. THE ASSESSEE FILE D WRITTEN SUBMISSION DATED 23.04.2014. BESIDES THE WRITTEN SUBMISSION, THE ASS ESSEE FURNISHED THE COPIES OF OPENING STOCK AS ON 01.04.2010 AND CLOSIN G STOCK AS ON 31.03.2011, WHEREIN THE ASSESSEE FURNISHED THE DETA ILS BY GIVING THE NAMES OF SUPPLIERS, INVOICE NUMBER, BILL DATE, AMOUNT AND NUMBER OF BALES. THE ASSESSEE ALSO FURNISHED ITS OPENING STOCK, NAME OF SUPPLIER, INVOICE NUMBER, BILL DATE, AMOUNT AND NUMBER OF BALES. THE ORDER OF LD. CIT(A) DOES NOT REVEALS, IF ALL THESE DOCUMENTS WERE REFERRED TO TH E AO FOR VERIFICATION FOR SEEKING HIS COMMENT. THE LD. CIT(A) AFTER CONSIDERI NG THE G.P. RATIO FOR AY 2009-10 & 2010-11 DECLARED BY ASSESSEE GRANTED FULL RELIEF TO THE ASSESSEE BY DELETING THE ENTIRE ADDITION. IN OUR CONSIDERED VIEW, THE APPROACH OF LD. CIT(A) WAS NOT FAIR. THE AO WAS NOT GIVEN AN OPPORT UNITY FOR VERIFICATION OF THE DOCUMENTS. SIMILARLY, FOR DELETING THE ADDIT ION U/S 68 OF THE ACT OF RS. 2,30,85,000/-. THE ASSESSEE RELIED UPON THE I.T . RETURNS OF THE PARTNERS AND LEDGER ACCOUNT OF PARTNERS IN FIRM AND CONCLUDE D THAT THE ASSESSEE HAS LARGELY EXPLAINED THE CASH DEPOSIT. THE DOCUMENTS O N WHICH THE LD. CIT(A) RELIED WERE NOT FURNISHED BEFORE THE AO. THE DOCUME NTS WERE FILED FOR THE FIRST TIME BEFORE THE LD. CIT(A). WE ARE OF THE VIE W THAT LD. CIT(A) CONSIDERED AND RELIED UPON THE DOCUMENTS WHICH WERE NOT FILED BEFORE THE AO DURING THE ASSESSMENT PROCEEDING. CONSIDERING TH E SUBMISSION OF LD. DR FOR THE REVENUE, WE ARE OF THE VIEW THAT THE DOCUME NTS FURNISHED BEFORE THE ITA NO.482 2 & 5620/M/2014- M/S JALAN SYNTHETICS 7 LD. CIT(A) FOR THE FIRST TIME REQUIRED VERIFICATION BY THE AO. HENCE, THE APPEAL OF THE REVENUE IS ALLOWED. THE ORDER OF LD. CIT(A) TO THE EXTENT OF DELETING THE ADDITION U/S 68 OF THE ACT AND DELETIN G THE ESTIMATE G.P. @ 6% ARE RESTORED TO THE FILE OF AO. THE AO IS DIRECTED TO PASS THE ORDER AFRESH IN ACCORDANCE WITH LAW. NEEDLESS TO SAY THAT THE AO SH ALL GRANT ADEQUATE AND SUFFICIENT OPPORTUNITY TO THE ASSESSEE BEFORE PASSI NG THE ORDER. 10. IN THE RESULT, APPEAL OF THE REVENUE IS ALLOWED FOR STATISTICAL PURPOSE. ORDER PRONOUNCED IN THE OPEN COURT ON 24 TH DAY OF JULY 2017. SD/- SD/- ( RAJENDRA ) (PAWAN SING H) ACCOUNTANT MEMBER JU DICIAL MEMBER MUMBAI; DATED 24/07/2017 S.K.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/