OSWAL ENTERPRISES, MUMBAI V. ITO 24(3)(1), MUMBAI

ITA 490/MUM/2020

• Counselvise Citation: [2021] 107 COUNSELVISE.COM (IT) 2807 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 9 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-10-2021
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Assessment Year: 2013-2014
• Appeal Filed On: 21-01-2020
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SMITA VERMA
• Keywords: Gross profit estimation; Unexplained cash credit; Opportunity of being heard; Principle of natural justice; Revised return
• Section: 142(1); 143(2); 13; 68

Judgement Text

THE INCOME TAX APPELLATE TRIBUNAL SMC BENCH, MUMBAI SHRI SHAMIM YAHYA (AM) I.T.A. NO. 490/MUM/2020 (ASSESSMENT YEAR 2013-14) OSWAL ENTERPRISES 9/340, D.N. NAGAR J.P. ROAD, ANDHERI-W MUMBAI-400 053. PAN : AACFO3152H VS . ITO-24(3)(1) ROOM NO. 415 4 TH FLOOR PIRMAL CHAMBERS LALBAUG, PAREL MUMBAI-400 012. ( APPELLANT ) ( RESPONDENT ) ASSESSEE BY NONE DEPARTMENT BY MS. SMITA VERMA DATE OF HEARING 11.10.2021 DATE OF PRONOUNCEMENT 21.10.2021 O R D E R PER SHAMIM YAHYA (AM) :- THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF LEARNED COMMISSIONER OF INCOME TAX (APPEALS) [IN SHORT LEAR NED CIT(A)] DATED 15.3.2016 PERTAINING TO ASSESSMENT YEAR 2013-14. 2. THE GROUNDS OF APPEAL READ AS UNDER :- 1. THE CIT(A) HAS ERRED IN LAW AND IN FACTS TO CONF IRM ACTION OF AO TO ADD RS. 8,38,850/- BEING THE AMOUNT RECEIVED FOR SALE OF PLOT AS CASH CREDIT SPECIALLY WHEN THE SALE DEED ITSELF FOR THE SAME RECEIPT WAS SU BMITTED BEFORE CIT(A). 2. THE CIT(A) HAS ERRED IN LAW AND IN FACTS TO CONFIR M ACTION OF AO WITHOUT ANY FINDING FROM HIS PART AND ALSO FAILED TO CONSIDER THE FACT THAT THE CREDITOR WAS TRADE CREDITOR AS APPARENT FROM SALE DEED AND SE CTION 68 CANNOT BE APPLIED TO TRADE CREDITORS. 3. THE CIT(A) HAS ERRED IN LAW AND IN FACTS TO CONFI RM ACTION OF AO WITHOUT ANY FINDING FROM HIS PART THAT THE HOW APPELLANT HAS F AILED TO PROVE ITS ONUS AND IN FACT IT IS AO WHO HAS FAILED TO PROVE ITS ONUS . 4. THE CIT(A) HAS ERRED IN LAW AND IN FACTS TO CONFI RM ACTION OF AO WITHOUT ANY FINDING FROM HIS PART THAT THE HOW THE APPELLANT H AS FAILED TO PROVE GENUINENESS, CREDIT WORTHINESS AND IDENTITY OF THE CRE DITOR AND SPECIALLY WHEN IT WAS A TRADE CREDITOR DULLY SUPPORTED BY SALE DEED. OSWAL ENTERPRISES 2 5. THE CIT(A) HAS ERRED IN LAW AND IN FACTS TO CONFI RM ACTION OF AO EVEN WHEN THE AMOUNT IS DULLY EXPLAINED WITH ALL DETAILS AND IT CANNOT BE TREATED AS UNEXPLAINED AND SPECIALLY WHEN IT HAS BEEN CONVER TED TO SALES IMMEDIATELY AFTER FEW DAYS AND EVIDENCED BY REGISTER ED SALE DEED. 6. THE CIT(A) HAS ERRED IN LAW AND IN FACTS TO CONFIR M ACTION OF AO TO MAKE THE ADDITION PURELY ON THE BASIS OF SUMMARIES AND SUSP ICION IN SPITE OF THE FACTS THAT BOOKS ARE DULY AUDITED AND ACCEPTED BY THE AO U/S 145. 7. THE CIT(A) HAS ERRED IN LAW AND IN FACTS TO COME TO THE CONCLUSION THAT THE APPELLANT HAS NOT BEEN ABLE TO SUBSTANTIATE WITH THE AID O F ANY COGENT MATERIAL AS REGARDS THE TRANSACTION OF SALE OF PLOT AN D WHICH IS CONTRARY TO FACTS AS APPARENT FROM APPEAL ORDER ITSELF AND THE LE ARNED CIT HAS ERRED TO PASS THE ORDER WITHOUT CONSIDERING THE MATERIAL/EVIDEN CES SUBMITTED BEFORE HIM IN THE FORM OF (1) (DETAILS OF NAME ALONGWITH FUL L DETAILS OF PLOT AND ADDRESS VIDE LETTER DATED 23.11.15, (2)THE DETAILS O F SALE FOR A.Y.14-15 VIDE LETTER DATED 11/2/16, (3)CASH BOOK, (4) THE FACT THAT BOOKING AMOUNT HAS BEEN CONVERTED TO SALES ON 8.4.13 VIDE REGISTERED SA LE DEED, (5) BOOKS AUDITED U/S 44AB, (6) SO E DEED DATED 3/4/18 AND WHICH SHOWS THAT CASH RECEIPT OF ABOVE AMOUNT IS DULLY REFLECTED AT PAGE NO. 8 OF SAL E DEED. 8. THE CIT (A) HAS ERRED IN LAW AND IN FACTS NOT QUAS HING THE ORDER WHEN THE AO FAILED TO ISSUE SHOW CAUSE FOR ABOVE ADDITION AND WHICH IS AGAINST THE CONTRAVENTION OF CBDT INSTRUCTION NO. 20/2015, CENTRAL BOARD OF DIRECT DATED 29TH OF DECEMBER, 2015 AND ALSO DUE TO THE FACT TH AT ANY ATTEMPT OF NOT AFFORDING AN OPPORTUNITY TO THE ASSESSEE WOULD BE VIOLATING PRINCIPLES OF NATURAL JUSTICE AND ANY ADDITION MADE IN SUCH A MANNER IN ASSESSMENT IS BAD IN LAW. B) ADDITION OF RS 47.42.9Q5/-BE/NQ 40% OF TURNOVER F OR LOW G.P. 1. THE CIT (A) HAS ERRED IN LAW AND IN FACTS TO CONFI RM ACTION OF AO TO MAKE THE ADDITION OF RS.47,42,905/-BEING 40% OF TURNOVER ON THE GROUND OF LOWER GROSS PROFIT. 2. THE CIT(A) HAS ERRED IN LAW AND IN FACTS TO CONF IRM ACTION OF AO TO HELD THAT NORMAL GP IS AT 40% AS AGAINST SHOWN AT 21.09% WITHO UT ANY BASIS, AND PURELY ON THE BASIS OF SURMISES AND SUSPICION. 3. THE CIT(A) HAS ERRED IN LAW AND IN FACTS TO COME TO THE CONCLUSION THAT THE APPELLANT HAS NOT BEEN ABLE TO SUBSTANTIATE IN DETAIL THE NATURE OF EXPENSES WHICH HAVE BEEN INCURRED ON DEVELOPMENT OF THE PROJE CT AS APPARENT FROM THE DOCUMENTS IN THE FORM OF ALL DETAILS VIDE LETTER DA TED 23.11.15, 6.1.16 & 11.2.16 CONTAINING FOLLOWING DETAILS SPECIFICALLY I. E. (1)THE DETAILS OF DIRECT EXPENSES AND PURCHASES VIDE POINT NO. 15 (3) VIDE AN NEXURE (4) VIDE LETTER DATED 11.2.16 AND ANNEXURE ATTACHED (2) THE DETAIL OF DIRECT EXPENSES- VIDE LETTER DATED 23.11.15 VIDE POINT NO. 15 (3) THE DETAIL S OF PURCHASES VIDE LETTER DATED 23.11.15 VIDE POINT NO.9 (4)THE DETAIL OF EXPEN SES EXCEEDING 50,000/- VIDE LETTER DATED 23.11.15 VIDE POINT NO. 15(5)ALI S TOCK DETAILS AT POINT NO 3 OF LETTER DATED 23.11.15 . OSWAL ENTERPRISES 3 4. THE CIT(A) HAS ERRED IN LAW AND IN FACTS TO CONFI RM ACTION OF AO IN SPITE OF THE FACT THAT THE AO /CIT(A) HAS NOWHERE SPECIFIED WH ICH DETAILS HAVE NOT BEEN SUBMITTED EXCEPT A BALD STATEMENT. 5. THE CIT(A) HAS ERRED IN LAW AND IN FACTS NOT QUA SHING THE ORDER WHEN THE AO FAILED TO ISSUE SHOW CAUSE FOR ABOVE ADDITION AND WHICH IS AGAINST THE CONTRAVENTION OF CBDT INSTRUCTION NO. 20/2015, CENTRAL BOARD OF DIRECT DATED 29 TH OF DECEMBER, 2015 AND ANY ATTEMPT OF NOT AFFORDING A N OPPORTUNITY TO THE ASSESSEE WOULD BE VIOLATING PRINCI PLES OF NATURAL JUSTICE AND ANY ADDITION MADE IN SUCH A MANNER IN ASSESSMEN T IS BAD IN LAW. 6. THE CIT(A) HAS ERRED IN LAW AND IN FACTS TO CON FIRM ACTION OF AO IN SPITE OF THE FACT THAT (1) THE AO HAS NOT REJECTED BOOKS OF ACCOUNTS (2) HAS FIND ANY DEFECTS IN BOOKS OF ACCOUNTS (3)THE ACCOUNT ARE DULLY AUDITED U/S 44AB. 7. THE CIT (A) HAS ERRED IN LAW AND IN FACTS TO PASS THE ORDER WITHOUT CONSIDERING ALL THE MATERIAL IN SPITE OF STATED IN TH E ORDER ITSELF. 3. BRIEF FACTS OF THE CASE AS MADE OUT BY THE ASSES SING OFFICER IS AS UNDER :- RETURN OF INCOME FOR THE YEAR UNDER CONSIDERATION WA S E-FILED ON 24.09.2013 DECLARING TOTAL INCOME OF RS. NIL. SUBSEQUENTLY THE AS SESSEE FILED REVISED RETURN ON 28.05.2014 DECLARING TOTAL LOSS OF RS.7,23, 833/-. IT WAS PICKED UP FOR SCRUTINY UNDER CASS. STATUTORY NOTICE U/S. 143(2) D ATED 23.09.2014 WAS ISSUED AND SERVED ON THE ASSESSEE WITHIN STIPULATED TI ME. THE ASSESSEE IS A PARTNERSHIP FIRM CONSTITUTED OF SIX PARTNERS ENGAGED I N THE BUSINESS AS DEVELOPERS OF LAND AND BUILDING ETC. DURING THE COURS E OF SCRUTINY PROCEEDINGS THE AR OF ASSESSEE FILED VARIOUS DETAILS REQUIRED FOR ASSESSMENT FOR THE PERIOD UNDER CONSIDERATION. IT WAS OBSERVED FROM AIR TRANSACTIONS OF ASSESSEE THA T DURING THE YEAR THERE WERE CASH DEPOSITS OF RS.17,14,003/- IN SAVING ACCOU NT WITH HDFC BANK LTD., SENAPATI BAPTA MARG, MUMBAI, VIDE NOTICE U/S. 24. 09.2015 THE ASSESSEE WAS ASKED TO SUBMIT DETAILS OF CASH DEPOSIT S MADE INTO THE BANK ACCOUNTS DURING THE YEAR ALONG WITH ITS SOURCE. IN RES PONSE VIDE LETTER DATED 23.11.2015 THE ASSESSEE SUBMITTED HIS REPLY. THE SUBM ISSION MADE BY THE ASSESSEE WAS CONSIDERED BUT NOT FOUND TO BE ACCEPTABLE. THE ASSESSEE WAS SPECIFICALLY ASKED TO SUBMIT DETAILS OF SOURCE OF CAS H DEPOSITS, IT IS PERTINENT TO NOTE THAT VIDE LETTER DATED 25.02.2016 THE ASSESSEE SUBMITTED CASH BOOK FOR THE FY 2012-13. THE PATTERN OF RECEIPTS FROM BABULAL JAIN RELATIVES A T THE FAG END OF FY IN DENOMINATION OF RS. 1,95,000/- EACH FOR CASH DEPOSI T IN BANK ACCOUNT TO BE REPORTED IN AIR IS HIGHLY SUSPICIOUS. THE ASSESSEE DID NOT SUBMIT THE DETAILS AT THE FIRST INSTANCE IN HIS LETTER DATED 23.11.2015 AND SUBSEQUENTLY, SUBMITTED THE CASH BOOK AFTER MORE THAN THREE MONTHS O N 25.02.2016 SHOWING SOME RECEIPTS AGAINST SALE OF PLOTS, INCLUDIN G THE ABOVE. IT APPEARS THAT AFTER GETTING THE QUERY IN REGARD TO SOURCES OF CAS H DEPOSIT IN BANK, THE ASSESSEE SOMEHOW MANAGED TO SHOW THE RECEIPTS AGAINST S ALE OF PLOTS. THE USE OF WORD RELATIVES AGAINST PLOT NO. 13 BABULAL JAIN ALSO PROVES THAT THE SAID PARTY DID NOT HAVE CASH BALANCE AT HIS OWN. FOR ANY CASH CREDIT OSWAL ENTERPRISES 4 TRANSACTIONS THE ONUS WAS ON THE ASSESSEE TO PROVE THE I DENTITY & CREDITWORTHINESS OF PARTY AND GENUINENESS OF TRANSAC TIONS IN WHICH THE ASSESSEE GROSSLY FAILED. HENCE, THE ENTIRE AMOUNT OF RS.38,850/- RECEIVED FROM BABULAL JAIN-RELATIVES WAS CONSIDERED FOR ADDITI ON AS UNEXPLAINED CASH CREDIT U/S. 68 OF THE ACT IN HANDS OF ASSESSEE. ACCOR DINGLY, THE ADDITION COMES TO RS.8,38,850/- WHICH WAS ADDED TO TOTAL INCOME OF THE ASSESSEE UNDER INCOME FROM OTHER SOURCES. LOWER GROSS PROFIT SHOWN ON SALE OF PLOTS :- IT WAS OBSERVED THAT THE ASSESSEE HAD SHOWN SALES OF R S. 294.37 LAKHS AGAINST WHICH COST OF GOODS SOLD WAS CHARGED AT RS.242 .50 LAKHS. AFTER CHARGE OF VARIOUS EXPENDITURES THE ASSESSEE HAD SHOWN NET LOSS OF RS. 7.38 LAKHS. VIDE NOTICE U/S. 142(1) DATED 24.09.2015 THE ASSESSEE WAS ASKED TO SUBMIT VARIOUS DETAILS INCLUDING DETAILS OF PROJECT-1( 1007) AND PROJECT-2(807), DETAILS OF SALES PURCHASES ALONG WITH NAME & ADDRESS OF THE PARTIES, DETAILS OF INVENTORY OF OPENING STOCK AND CLOSING STOCK, DETAIL S OF DIRECT EXPENSES ALONG WITH NAME AND ADDRESS OF THE PARTIES TO WHOM SU CH PAYMENTS WERE MADE ALONGWITH COPIES OF SAMPLE BILLS AND COPIES OF LEDGER ACCOUNTS ETC. IN RESPONSE THE ASSESSEE SUBMITTED DETAILS VIDE LETTER DATED 23.11.2015, 06.01.2016 & 11.02.2016 WHICH WERE PLACED ON RECORD . THE DETAILS SUBMITTED BY ASSESSEE WERE CAREFULLY PERUS ED. THE ASSESSEE HAS SHOWN REVENUE FROM TWO PROJECTS I.E. PROJECT 1 & PROJ ECT 2 UNDER BOTH THESE PROJECTS THE ASSESSEE HAD PURCHASED LAND AND SOLD SO ME PLOTS OUT OF SUCH LAND. THE SALE IS MADE AT RS.2500/- PER SQ. MTRS. AN D THE COST OF SALES WAS COMPUTED AT RS.2060.66 & RS.1786.63 PER SQ. MTRS. R ESPECTIVELY. LOOKING AT THE PROJECT COST CLAIMED BY THE ASSESSEE IN SEVERAL MULTIPLES OF LAND COST I.E. MORE THAN 32 TIMES IN PROJECT 1 AND MO RE THAN 5 TIMES IN PROJECT 2 THE PROJECT COST ESCALATION BY THE ASSESSEE C ANNOT BE RULED OUT. ALSO THE ASSESSEE HAS GROSSLY FAILED IN ITS ONUS TO SUBMIT COMPLETE DETAILS TO PROVE THE GENUINENESS OF EXPENSES CLAIMED. IN THESE CIRCUM STANCES THERE WAS NO OTHER ALTERNATIVE BUT TO MAKE THE ADDITION ON ADHOC BAS IS. ON A CONSERVATIVE BASIS, THE AO ESTIMATED A REASONABLE GROSS PROFIT HAVI NG EARNED BY ASSESSEE @ 50% ON SALES. SUCH GROSS PROFIT @50% ON SALES OF RS.2,05,07,778/- COMES TO RS.1,02,53,889/- AGAINST WHICH THE ASSESSEE HAD ALR EADY SHOWN GROSS PROFIT AT RS,43,25,253/-. HENCE, THE BALANCE AMOUNT OF RS.1,02,53,889/- 43,25,253 = 59,28,636/- WAS ADDED TO THE TOTAL INCOME OF THE ASSESSEE. 4. UPON ASSESSEE APPEAL LEARNED CIT(A) CONFIRMED TH E SAME HOLDING AS UNDER :- 4.1.4 THE GROUND OF APPEAL NOS. 1 TO 5 RELATE TO DEPO SIT OF CASH IN THE BANK ACCOUNT OF THE APPELLANT WHICH THE ASSESSING OFFICER HAS ADDED UNDER SECTION 68 OF THE ACT. THE APPELLANT HAS TRIED TO PROVE THE SOURCE OF THE SAID CASH DEPOSITED IN THE BANK ACCOUNT BY EXPLAINING TH AT THE CASH IS RECEIVED ON SALE OF PLOT. THE APPELLANT HAS NOT BEEN ABLE TO SUB STANTIATE WITH THE AID OF ANY COGENT MATERIAL AS REGARDS THE TRANSACTION OF S ALE OF PLOT AND THUS, THE OSWAL ENTERPRISES 5 RECEIPT OF CASH FROM ONE MR. BABULAL JAIN. AS A RES ULT, THE GROUND OF APPEAL NOS. 1 TO 5 OF THE APPELLANT IS HEREBY DISMISSED. 4.2.1 THE GROUND OF APPEAL NOS. 6 TO 8 RELATE TO THE AD DITION MADE BY THE ASSESSING OFFICER ON AD-HOC BASIS @50% OF THE SALES . THE CASE OF THE ASSESSING OFFICER IS THAT THE APPELLANT IS A DEVELOPER OF PLOTS WHEREIN HE BUYS PLOT OF BIG SIZE AND THEN DEVELOPS THEM AND SELLS THEM OF SMALL SIZE AND THUS, THE PROFITS EARNED WOULD BE LARGE. THE DETAILS OF EXP ENSES INCURRED ON THE DEVELOPMENT OF THE PLOT HAVE BEEN ASKED FOR BY THE ASSE SSING OFFICER DURING THE COURSE OF THE ASSESSMENT PROCEEDINGS WHICH THE ASS ESSING OFFICER HAS CLAIMED HAVE NOT BEEN FILED BY THE APPELLANT AND THUS, HAVING NO CHOICE LEFT WITH HIM, AN ESTIMATION HAS BEEN DONE BY HIM AT 50% O F THE SALES 4.2.2 CONSIDERING THE FACTS IN THE PRESENT CASE TOGETHER WITH THE SUBMISSIONS OF THE APPELLANT AND PRIMARILY SUBMISSION OF THE APPEL LANT THAT ALL THE DETAILS AS REGARDS EXPENSES INCURRED ON DEVELOPMENT OF PLOT H AVING BEEN FILED WITH THE ASSESSING OFFICER AND ALSO THE ASPECT OF NON REJEC TION OF THE BOOKS OF ACCOUNT OF THE APPELLANT AND THUS, THE ADDITION OF AD-H OC DISALLOWANCE BEING UNWARRANTED BY LAW; I FIND THAT THERE IS MERIT IN THE ARGUMENT OF THE APPELLANT' HOWEVER, THE CASE OF THE ASSESSING OFFIC ER CANNOT BE REJECTED IN ITS ENTIRETY IN AS MUCH AS THE APPELLANT HAS NOT BEEN ABLE TO SUBSTANTIATE IN DETAIL THE NATURE OF EXPENSES WHICH HAVE BEEN INCURRE D ON DEVELOPMENT OF THE PROJECT AND HAVING NOT DONE SO AND CONSIDERING ALL THE FACTS OF THE CASE IN MIND I DIRECT 40% OF ADDITION AS REGARDS GROSS PROFI T BE MADE AND DIRECT BALANCE 10% TO BE DELETED. AS A RESULT, THE GROUND O F APPEAL NOS. 6 TO IS PARTLY ALLOWED. 5. AGAINST THE ABOVE ORDER ASSESSEE IS IN APPEAL BE FORE THE ITAT. 6. I HAVE HEARD LEARNED DEPARTMENTAL REPRESENTATIVE AND PERUSED THE RECORD. I FIND THAT THE ASSESSING OFFICER HAS PASSE D AN ORDER BASED ON SURMISES AND CONJECTURE. HIS ORDER IS BEREFT ON COG ENT MATERIAL ON WHICH ADDITION IS BASED. LEARNED CIT(A) HIMSELF HAS FURTH ER PASSED A CONTRADICTORY ORDER WHERE HE CLAIMED THAT ASSESSEE AND THE ASSESS ING OFFICER BOTH ARE CORRECT. THE DEFECT IN ASSESSING OFFICERS APPROACH POINTED OUT BY LEARNED CIT(A) THAT BOOKS HAVE NOT BEEN REJECTED, WOULD NOT WARRANT SUSTAINING THE ADDITION. I FURTHER NOTE THAT THE ASSESSEE IN GROUN DS OF APPEAL HAS ALSO RAISED THE ISSUE OF LACK OF OPPORTUNITY. ACCORDINGLY IN TH E FACTS AND CIRCUMSTANCES OF THE CASE I DEEM IT APPROPRIATE TO REMIT THE ISSUE T O THE FILE OF THE ASSESSING OFFICER. THE ASSESSING OFFICER SHOULD PASS AN ORDER AFRESH AFTER GIVING THE ASSESSEE PROPER OPPORTUNITY OF BEING HEARD. OSWAL ENTERPRISES 6 7. IN THE RESULT, APPEAL IS ALLOWED FOR STATISTICAL PURPOSES. PRONOUNCED IN THE OPEN COURT ON 21.10.2021. SD/- (SHAMIM YAHYA) ACCOUNTANT MEMBER MUMBAI; DATED : 21/10/2021 COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT(A) 4. CIT 5. DR, ITAT, MUMBAI 6. GUARD FILE. BY ORDER, //TRUE COPY// ( ASSISTANT REGISTRAR) PS ITAT, MUMBAI