DCIT CIR 2(2)(2), MUMBAI V. ORIENT SHIP AGENCY P.LTD, MUMBAI

ITA 487/MUM/2016

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 0222 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 6 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-08-2017
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: Not Allotted
• Assessment Year: 2008-2009
• Appeal Filed On: 02-02-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: HEENA DOSHI
• Assessee Lawyers: POOJA SWAROOP
• Keywords: Unexplained cash credit; Bad and doubtful debts; Difference of opinion; Corroborative evidences; Tax effect; Change of opinion; Reassessment proceedings
• Section: 143(3); 68; 148

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL F BENCH, MUMBAI BEFORE SHRI SHAMIM YAHYA , ACCOUNTANT MEMBER AND SHRI SANDEEP GOSAIN , JUDICIAL MEMBER ITA NO. 487/MUM./2016 (ASSESSMENT YEAR: 200 8 - 0 9 ) DCIT CIR 2(2)(2) R.NO.549, AAYAKAR BHAVAN M.K. ROAD, MUMBAI 400 020 . APPELLANT V/S M/S. ORIENT SHIP AGENCY PVT. LTD., ORIENT HOUSE, 4 TH FLOOR, ADI MARZBEN PATH, BALLARD ESTATE MUMBAI 400 038 PAN NO: AAACO0426B . RESPONDENT ASSESSEE BY : MS. POOJA SWAROOP REVENUE BY : MS. HEENA DOSHI DATE OF HEARING 09/08/2017 DATE OF ORDER - 18 .08 .2017 O R D E R PER: SHAMIM YAHYA THIS APPEAL BY THE REVENUE IS DIRECTED AGAINST ORDER OF LD. CIT - A DATED 29.10.2015 AND PERTAINS TO ASSESSMENT YEAR 2008 - 0 9 . 2. GROUNDS OF THE APPEAL ARE AS UNDER: - 1. THE ORDER OF THE CIT(A) IS OPPOSED TO LAW AND FACTS OF THE CASE. 2. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE CIT(A) HAS ERRED IN DELETING THE ADDITION MADE U/S.68 IN REASSESSMENT PROCEEDINGS ON THE GROUND THAT AO HAD REOPENED THE ASSESSM ENT MADE EARLIER OR THERE WAS A ITA NO.487/MUM/2016 M/S. ORIENT SHIP AGENCY PVT. LTD., 2 CHANGE OF OPINION ON THE PART OF THE AO REGARDING THE SAME ISSUE WHICH IS NOT PERMITTED. 2. IN THIS CASE, THE REASSESSMENT WAS OPENED BY MAKING FOLLOWING OBSERVATIONS: - IN THIS CASE SCRUTINY ASSESSMENT FOR AY 2008 - 09 WAS PASSED ON 15.12.2010 ASSESSING THE TOTAL INCOME AT RS.37,02,720/ - AS AGAINST THE RETURNED INCOME OF RS.21,02,231/ - . IT IS SEEN FORM THE P & L A/C THAT THE ASSESSEE CLAIMED SUNDRY DEBTORS WRITTEN OFF AMOUNTING TO RS. 6,75,01, 570/ - IN RESPECT OF THE FOLLOWING PARTIES: (1) GANESH CONTAINER MOVERS SYNDICATE OF RS.3,30,95,566/ - AND (2) ORNATE MODAL CARRIER P LTD. OF RS.3,44,06,604/ - . IT IS SEEN FROM THE BALANCE SHEET, SCHEDULE 7 THAT THE ABOVE MENTIONED SUNDRY DEBTOR AT SR. NO.2 AND THE ASSESSEE COMPANY WERE HAVING COMMON MANAGEMENT AND CONTROL WHEREIN DIRECTORS ARE INTERESTED. THE AS SESSEE COMPANY IS THE SISTER CONCERN OF M/S ORNATE MULTI MODAL CARRIER PVT LTD AND ASSESSEE HAS CLAIMED SUNDRY DEBTORS WRITTEN OFF AMOUNTING TO RS.34406,004/ - AND IT HAS SHOWN THIS AMOUNT RECEIVABLE IN EARLIER YEARS BUT ASSESSEE HAS NOT SHOWN ANY EVIDENCE OR REASON FOR NON COLLECTING THIS AMOUNT IT IS SEEN FROM THE P & L A/C OF M/S ORNATE MULTI MODAL CARRIER P LTD THAT ITS TOTAL TURNOVER DURING THE PREVIOUS YEAR WAS OF RS11 CRORES AND THAT FOR THE PRECEDING PREVIOUS YEAR WAS OF RS.12 CRORES. THE ASSESSEE CO MPANY HAD GIVEN ADVANCE OF RS.16 CRORES DURING THE YEAR AND RS. 14 CRORES IN PRECEDING PREVIOUS YEAR TO VARIOUS PARTIES. IT IS SEEN FROM THE BALANCE SHEET AND P & L A/C OF M/S ORNATE MULTI MODAL CARRIER P LTD THAT THEY WERE FINANCIALLY SOUND AND THAT THE A MOUNT CAN BE RECOVERED AT ANY STAGE AND AS SUCH ASSESSEE'S CLAIM THAT IT CANNOT BE RECOVERED IS NOT JUSTIFIABLE. THE ABOVE SISTER CONCERN COMPANY OF THE ASSESSEE WAS SHOWN AS DEBTORS AND BAD DEBTS WAS CLAIMED AGAINST ASSESSEE COMPANY'S CAPITAL GAIN WHICH A RISEN ON ACCOUNT OF SALE OF PROPERTIES. FROM THE RECORDS IT IS SEEN THAT THE ASSESSEE COMPANY HAS PASSED A RESOLUTION NON 28 TH MARCH 2008 WITH THE SIGNATURE OF ONE DIRECTOR MR. JAMIL JALALI, ON A SIMPLE PAPER STATING THAT 'THE BOARD HEREBY APPROVE THE WRIT ING OFF SUNDRY DEBTORS NAMELY M/S GANESH CONTAINERS MOVERS SYNDICATE OF RS. 33095566/ - AND M/S ORNATE MULTI MODAL CARRIER P LTD AS BAD DEBTS. FURTHER RESOLVES THAT EFFORTS SHOULD BE CONTINUE TO RECOVER THE SAME EVEN THOUGH THE CHANCES OF ITA NO.487/MUM/2016 M/S. ORIENT SHIP AGENCY PVT. LTD., 3 RECOVERY DUE IS NE GLIGIBLE. THUS, THE BOARD CONFIRM THE AMOUNT DUE FROM M/S GANESH CONTAINERS MOVERS SYNDICATE RS.33095566/ - AND M/S ORNATE MULTI MODEL CARRIER PVT. LTD RS.34406004/ - IS W/OFF AS BAD DEBTS IN ACCOUNTINGS OF THE YEAR ENDING 31.3.2008. FROM THE ABOVE IT IS CLE AR THAT THE ASSESSEE HAS MANIPULATED ITS ACCOUNTS SO AS TO CLAIM THE BAD DEBTS OF RS.3,44,06,004/ - AND TO SET OFF THE CAPITAL GAINS EARNED OUT OF THE SALE OF PROPERTY. THE CLAIM OF ASSESSEE DOES NOT SATISFY THE CONDITIONS LAID DOWN FOR ALLOWANCE OF A DEBT AS B AD DEBIT AS PER PROVISIONS OF SEC. 36(1)(VII) RW SEC. 36(2) OF THE IT ACT. HENCE THERE IS INCORRECT CLAIM OF BAD DEBITS OF RS.34406004/ - WHICH HAS BEEN ERRONEOUSL Y ALLOWED IN THE ASSTT. ORDER. THEREFORE THERE IS UNDERASSESSMENT OF RS.3,44,06,004/ - . TAX EFFECT OF THIS CASE COMES TO RS.1,16,94,600/ - . II) IT WAS OBSERVED THAT AS PER AIR INFORMATION ASSESSEE HAD DEPOSITED THE TOTAL CASH OF RS.4087789/ - ON DIFFERENT DATES DURING THE PREVIOUS YEAR. THE CASH DEPOSIT OF RS.19 LAKHS MADE ON 6.7.2007 HAS BEEN EXPLAINED BY THE ASSESSEE. IN RESPECT OF BALANCE AMOUNT ASSESSEE HAS STATED THAT THE CASH DEPOSIT IS OUT OF CASH BALANCE. AS REGARDS THE CASH DEPOSIT OF RS.21,87,489/ - , ASSESSEE HAS NEITHER EXPLAINED NOR ANY SUPPORTING EVIDENCE LIKE CASH BOOK, BANK BOOK, ETC., IS AVAILABLE ON RECORD. THIS NEEDS TO BE EXAMINED. 3. IN THE REASSESSMENT AO MADE THE ADDITION ON ACCOUNT OF CASH DEPOSITS BY OBSERVING AS UNDER: - 5.1 IT WAS N OTICED THAT DURING THE PREVIOUS YEAR, THERE ARE CASH DEPOSITS IN THE ASSESSEE'S BANK ACCOUNT AMOUNTING TO RS.40,87,489/ - . WHEN AN OPPORTUNITY WAS GIVEN TO THE ASSESSEE TO ESTABLISH THE SOURCE OF CASH THAT WAS DEPOSITED IN THE BANK ACCOUNTS OF THE ASSESSEE, THE ASSESSEE HAS STATED THAT THE A.I.R. STATEMENT DATED 06 - 12 - 2010 WAS GIVEN BACK TO THE ASSESSING OFFICER DURING THE COURSE OF ASSESSMENT UNDER SECTION 143(3) AND THE SOURCE OF CASH WAS EXPLAINED. 5.2 HOWEVER, IT IS SEEN THAT THE ASSESSEE HAS FURNISHED EXPLANATION FOR THE CASH AMOUNTING TO RS.19,00,000/ - WHICH IS STATED TO HAVE BEEN RECEIVED ON ACCOUNT OF SALE OF SCRAP VEHICLES. THE BALANCE AMOUNT DEPOSITED IN ABN AMRO BANK IS STATED TO BE THE CASH IN HAND DEPOSITED IN THE BANK. 5.3. AFTER GOING THROUGH THE REPLY OF THE ASSESSEE AND THE EVIDENCE PRODUCED, IT IS CLEAR THAT THE ASSESSEE HAS NOT BEEN ABLE TO SUBSTANTIATE THE AVAILABILITY ITA NO.487/MUM/2016 M/S. ORIENT SHIP AGENCY PVT. LTD., 4 OF CASH IN HAND AMOUNTING TO RS.21,87,489/ - . THE EXPLANATION REGARDING CASH AMOUNTING TO RS. 19,00,000/ - STAT ED TO HAVE BEEN RECEIVED ON ACCOUNT OF SALE OF SCRAP VEHICLES ALSO DOES NOT STAND THE TEST OF EVIDENCE, AS THE VEHICLES WHICH ARE SHOWN TO BE SOLD AS SCRAP BELONGED TO THE SISTER CONCERN OF THE ASSESSEE COMPANY, M/S. ORNATE MULTI - MODEL CARRIERS PVT. LTD. A ND IT IS HIGHLY UNLIKELY THAT THE ASSESSEE WOULD DEPOSIT THE CASH PROCEEDS IN ITS OWN BANK ACCOUNT AND THEN TRANSFER THE SUM TO THE SISTER CONCERN. FURTHER, WHEN THE ASSESSEE HAD A SUBSTANTIAL AMOUNT TO BE RECOVERED FROM THE SISTER CONCERN, NO PRUDENT BUSI NESSMAN WOULD HAVE PARTED WITH THE AMOUNT. THEREFORE, THE EXPLANATION GIVEN BY THE ASSESSEE IS NOT ACCEPTABLE AND THE CASH DEPOSIT IN BANK ACCOUNTS IS ADDED TO THE INCOME OF THE ASSESSEE COMPANY AS UNEXPLAINED CASH CREDITS. ACCORDINGLY, A SUM OF RS.40,87,4 897 - IS ADDED TO THE INCOME OF THE ASSESSEE AS PER PROVISIONS OF SECTION 68 OF THE INCOME TAX ACT, 1961. PENALTY PROCEEDINGS UNDER SECTION 271(L)(C) OF THE INCOME TAX ACT, 1961 ARE ALSO INITIATED FOR CONCEALING THE PARTICULARS OF INCOME AND FURNISHING INAC CURATE PARTICULARS OF INCOME. 4. UPON ASSESSEES APPEAL, LEARNED CIT - A DELETED THE SAID ADDITION BY OBSERVING THAT THE ISSUE OF CASH DEPOSITS WAS ALREADY EXAMINED BY THE ASSESSING OFFICER IN THE ORIGINAL ASSESSMENT, HENCE, REOPENING ON THAT ACCOUNT WAS A MERE CHANGE OF OPINION, HENCE ANY ADDITION BASED UPON CHANGE OF OPINION WAS BAD IN LAW. 5. THE OBSERVATIONS OF LEARNED CIT - A ARE REPRODUCED HEREUNDER: - 4. I HAVE CONSIDERED THE APPELLANT'S SUBMISSION. IN THIS CASE AO HAD REOPENED THE ASSESSMENT AN D ADDED TO THE INCOME CASH DEPOSITS IN THE BANK ACCOUNTS AMOUNTING TO RS.40,87,4897 - U/S 68 OF THE I.T. ACT. ACCORDING TO THE APPELLANT THESE CASH DEPOSITS WHERE DETAILS WERE OBTAINED, THE SAME WERE MADE AVAILABLE TO THE AO DURING THE ORIGINAL ASSESSMENT, THAT THE APPELLANT HAD FILED EVIDENCES AND DETAILS REGARDING THE CASH DEPOSITS. IN THIS CASH DEPOSITS THE EVIDENCE SUBMITTED BY THE APPELLANT ARE FOR RS.19,00,000/ - . THE APPELLANT HAD SUBMITTED THAT THIS AMOUNT IS RECEIVED FROM SALE OF SCRAP VEHICLES B ELONGING TO THE SISTER CONCERN M/ S ORNATE MULTI - MODEL CARRIERS PVT. LTD. AND REGARDING THE OTHER AMOUNT IE. RS. 21,87,4897 - APPELLANT HAD SUBMITTED THAT THIS IS THE AVAILABLE CASH WITHIN THE BUSINESS WHICH WAS DEPOSITED IN THE BANK. ITA NO.487/MUM/2016 M/S. ORIENT SHIP AGENCY PVT. LTD., 5 THESE SUBMISSIONS AND EVIDENCES FILED DURING THE ORIGINAL ASSESSMENT WAS ACCEPTED BY THE AO AND NO ADDITION WAS MADE ON THIS COUNT. LATER AO HAD REOPENED THE ASSESSMENT BY RECORDING REASONS. IN THE REASONS AO MAINLY REOPENED THIS ASSESSMENT REGARDING CLAIM OF BAD DEBT S OF RS.3,44,06,004/ - OF M/S ORNATE MULTI - MODEL CARRIERS PVT. LTD. AND SECOND ISSUE REGARDING CASH DEPOSITS OF RS. 40,87,489/ - IN THE BANK. IN THE REOPENED ASSESSMENT, AO IS CONVINCED ONLY WITH THE DETAILS SUBMITTED BY THE APPELLANT ON BAD DEB TS AND NO ADDITION WAS MADE. HOWEVER, AS AO WAS NOT SATISFIED WITH THE EVIDENCE FILED BY APPELLANT REGARDING CASH DEPOSITS, HE MADE AN ADDITION OF RS.40,87,489/ - U/S 68 OF THE I.T ACT. THE APPELLANT'S MAIN ARGUMENT IN THE SUBMISSION IS THAT THOUGH THIS I SSUE REGARDING CASH DEPOSITS WAS RAISED IN THE ORIGINAL ASSESSMENT AFTER SUBMITTING THE DETAILS AND EVIDENCE, AO HAS ACCEPTED THE SAME AND NO ADDITION WAS MADE. LATER AO HAD REOPENED THE ASSESSMENT U/S 148 ON THE SAME ISSUE. THE EVIDENCE FILED EARLIER WAS NOT ACCEPTED AND ADDITION OF RS.40,87,489/ - WAS MADE U/S 68 OF THE I.T. ACT. ACCORDING TO THE APPELLANT THIS IS ILLEGAL AND ABINITO. WHEN WE EXAMINE THE REASONS FOR ADDING CASH DEPOSITS BY AO WHICH IS IN THE PAPER BOOK, IT STATES AS UNDER : 'IT IS OB SERVED THAT AS PER AIR INFORMATION ASSESSEE HAD DEPOSITED THE TOTAL C A SH OF RS.40,87,7891 - ON DIFFERENT DATES DURING THE PREVIOUS YEAR. THE CASH DEPOSIT OF RS.19 LAKHS MADE ON 6.7.2007 HAS BEEN EXPLAINED BY THE ASSESSEE. IN RESPECT OF BALANCE AMOUNT AS SESSEE HAS STATED THAT THE CASH DEPOSIT IS OUT OF CASH BALANCE. AS REGARDS THE CASH DEPOSIT OF RS.21,87,489/ - ASSESSEE HAS NEITHER EXPLAINED NOR ANY SUPPORTING EVIDENCE LIKE CASH NOOK, BANK BOOK, ETC. IS AVAILABLE ON RECORD. THIS NEEDS TO BE EXAMINED.' IT IS EVIDENT FROM THE ABOVE REASONS RECORDED THAT THIS ISSUE WAS CONSIDERED IN THE ORIGINAL ASSESSMENT AND AFTER ACCEPTING THE SUBMISSIONS OF THE ASSESSEE NO ADDITION WAS MADE. ON THE SAME ISSUE IN THE REOPENED ASSESSMENT AO HAS NOT ACCEPTED THE SUBMISSIONS OF THE ASSESSEE AND ADDED THE TOTAL CASH DEPOSITS OF RS. 40,87,489/ - . THE ISSUE TO BE EXAMINED IN THIS CASE IS IF THE AO HAD EXAMINED THE CASH DEPOSITS IN ORIGINAL ASSESSMENT , LATER ON THE SAME ISSUE CAN THE AO REOPEN THE ASSESSMENT AND MAKE ADDITION IN R EASSESSMENT PROCEEDINGS. THIS ISSUE IS ANSWERED IN FAVOUR OF THE APPELLANT IN SUPREME COURT IN THE DECISIONS OF CIT VS KELVINATOR LTD, 320 ITR 560 SUPREME COURT AND AVANTI PHARMA VS. CIT 323 ITR 570 (BOM) WHERE IT IS HELD THAT 'MERE CHANGE OF OPINION OR TO REVIEW COMPLETED ASSESSMENT WITHOUT ANY NEW MATERIAL FACTS DOES NOT CONFER JURISDICTION FOR REASSESSMENT' WHEN WE EXAMINE THE FACTS OF THE ABOVE CASE WHICH WAS ORIGINALLY ACCEPTED, WAS LATER REOPENED AND MADE ITA NO.487/MUM/2016 M/S. ORIENT SHIP AGENCY PVT. LTD., 6 AN ADDITION. THIS IS NOT PERMITTED BY LAW IN V IEW OF THE ABOVE SUPREME COURT DECISION. HERE IT APPEARS THAT THE AO HAD REOPENED THE ASSESSMENT MADE EARLIER OR THERE WAS A CHANGE OF OPINION ON THE PART OF THE AO REGARDING THE SAME ISSUE WHICH IS NOT PERMITTED. HENCE, IN VIEW OF ABOVE DECISION OF BOMBAY HIGH COURT AND SUPREME COURT, THE ADDITION MADE BY AO IS DELETED 6. AGAINST THE ABOVE ORDER, REVENUE IS IN APPEAL BEFORE US. 7. WE HAVE HEARD BOTH THE COUNSEL AND PERUSED THE RECORD. 8. UPON CAREFUL CONSIDERATION, WE FIND THAT THE ASSESSING OFFICER IN THIS CASE HAS DULY EXAMINED THE CASH DEPOSITS IN THE BANK IN THE ORIGINAL ASSESSMENT. THIS IS EVIDENT BY THE ASSESSEES SUBMISSIONS MADE TO THE ASSESSING OFFICER IN THE ORIGINAL ASSESSMENT AS REFLECTED IN PAPER BOOK PAGE NO. 4 & 5 WHICH WAS THE ASSESSEES RESPONSE TO THE REVENUE ON THE ISSUE OF CASH DEPOSITED IN THE BANK , A S PER A I R INFORMATION . I T IS EVIDENT THAT ASSESSEE HAS DULY EXPLAINED THAT CASH DEPOSIT WAS OUT OF CASH BALANCE. AFTER HAVING EXAMINED THE SAME, AO CHOSE NOT TO MAKE ANY ADDITION IN THE O RIGINAL ASSESSMENT. HENCE, SUBSEQUENT REASONING OF ASSESSING OFFICER REGARDING REOPENING BASED UPON THE SAME, AIR INFORMATION OF CASH DEPOSITS IS WITHOUT ANY DOUBT A CHANGE OF OPINION NOT SUSTAINABLE IN LAW. 9. IN THIS CASE, THE FOLLOWING CASE LAWS HAVE BE EN RELIED UPON BY THE LEARNED COUNSEL OF THE ASSESSEE: - 1. CIT VS. KELVINATOR OF INDIA LTD., REPORTED IN 320 ITR 561 (SC) 2. NYK LINE (INDIA) LTD., VS. DY. CIT REPORTED IN 346 ITR 361 (BOM) ITA NO.487/MUM/2016 M/S. ORIENT SHIP AGENCY PVT. LTD., 7 3. OHM STOCK BROKERS PVT. LTD., VS. CIT REPORTED IN 351 ITR 443 (BOM) 10. THE ABOVE CASE LAWS DULY MANDATE THAT REASSESSMENT BASED UPON CHANGE OF OPINION IS NOT PERMISSIBLE AND RESPECTFULLY FOLLOWING THE PRECEDENT AS ABOVE, WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF CIT - A ON THIS ISSUE. HENCE, WE UPHOLD THE SAME. 11 . IN THE RESULT, THIS APPEAL FILED BY THE REVENUE STANDS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 1 8 .0 8 .2017 S D / - S D / - SANDEEP GOSAIN SHAMIM YAHYA JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI, DATED: 1 8 .0 8 .2017 COPY OF THE ORDER FORWARDED TO : (1) THE ASSESSEE; (2) THE REVENUE; (3) THE CIT(A); (4) THE CIT, MUMBAI CITY CONCERNED; (5) THE DR, ITAT, MUMBAI; (6) GUARD FILE. BY ORDER KARUNA SR. PRIVATE SECRETARY (DY./ASSTT.REGISTRAR) ITAT, MUMBAI