SHRI Y.D. GOHIL DCIT 25(1), MUMBAI V. SANJAY H. DHOKAD, MUMBAI

ITA 4903/MUM/2008

• Counselvise Citation: [2010] 136 COUNSELVISE.COM (IT) 2225 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 9 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 07-05-2010
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: E
• Next Hearing Date: 14-10-2009
• Assessment Year: 2005-2006
• Appeal Filed On: 04-08-2008
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: NAVEEN GUPTA
• Keywords: Procedural lapse
• Section: 133(6); 250; 148

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES, E, MUMBAI BEFORE SHRI R V EASWAR, SENIOR VICE PRESIDENT AND SHRI R K PANDA, ACCOUNTANT MEMBER I T A NO: 4903/MUM/2008 (ASSESSMENT YEAR: 2005-2006) DEPUTY COMMISSIONER OF INCOME TAX 25(1) APPELLANT MUMBAI VS SHRI SANJAY H DHOKAD, MUMBAI RESPONDENT (PAN: ADFPD2155F) APPELLANT BY: SHRI NAVEEN GUPTA RESPONDENT BY: SHRI BHUPENDRA SHAH O R D E R R V EASWAR, SENIOR VICE PRESIDENT: THIS IS AN APPEAL BY THE REVENUE AND IT PERTAINS T O THE ASSESSMENT YEAR 2005-06. THE ASSESSEE IS AN INDIVI DUAL ENGAGED IN THE BUSINESS OF CIVIL CONTRACTOR UNDER THE NAME AND STYLE OF M/S HI- ROCK CONSTRUCTION. 2. THE FIRST TWO GROUNDS ARE IN RELATION TO THE DIS ALLOWANCE OF THE PURCHASES OF RS.13,32,386/- FROM M/S SUMER TRADERS. WHILE COMPLETING THE ASSESSMENT UNDER SECTION 143(3), THE ASSESSING OFFICER INVOKED SECTION 133(6) OF THE INCOME TAX AC T, 1961, AND ISSUED A LETTER TO M/S SUMER TRADERS DIRECTING IT TO FURNI SH THE FOLLOWING INFORMATION: - (I) NATURE OF THE TRANSACTIONS ENTERED INTO WITH TH E ASSESSEE AND COPY OF AGREEMENT, IF ANY. (II) THE COPY OF ASSESSEES ACCOUNT IN ITS BOOKS OF ACCOUNT. (III) AMOUNT PAID OR PAYABLE OR RECEIVED OR RECEIVA BLE WITH DETAILS OF DATE AND MODE OF PAYMENT. 2 IN RESPONSE TO THE LETTER, M/S SUMER TRADERS STATED THAT IT DID NOT HAVE ANY TRANSACTION WITH THE ASSESSEE AND ACCO RDINGLY THIS WAS BROUGHT TO THE ASSESSEES NOTICE AND HE WAS ASKED T O FURNISH DOCUMENTARY EVIDENCE TO SUPPORT THE PURCHASES SUCH AS PURCHASE BILLS, ETC. DESPITE SEVERAL OPPORTUNITIES THE ASSE SSEE DID NOT FURNISH ANY DOCUMENTARY EVIDENCE EXCEPT SAYING THAT HE HAD PAID M/S SUMER TRADERS BY CHEQUES. THE ASSESSING OFFICER WAS NOT SATISFIED WITH THE ASSESSEES REPLY AND, THEREFORE, DISALLOWED THE PUR CHASES OF RS.13,32,386/-. 3. THE ASSESSEE FILED AN APPEAL TO THE CIT(A) AND F URNISHED COPIES OF THE BILLS ISSUED BY M/S SUMER TRADERS AND BANK STATEMENTS SHOWING PAYMENT THROUGH ACCOUNT PAYEE CHEQUES. SIN CE THESE DOCUMENTS HAD NOT BEEN PRODUCED BEFORE THE ASSESSIN G OFFICER, THE CIT(A) CALLED FOR A REMAND REPORT FROM THE ASSESSIN G OFFICER BY LETTER DATED 27.03.2008. HE ALSO DIRECTED THE ASSESSING O FFICER TO CALL FOR THE BOOKS OF ACCOUNT AND BANK ACCOUNT OF M/S SUMER TRADERS AND VERIFY THE SAME VIS--VIS THE ASSESSEES CLAIM. HE FURTHER DIRECTED THE ASSESSING OFFICER TO ISSUE NOTICE UNDER SECTION 148 TO M/S SUMER TRADERS IF HE FOUND THAT IT HAD CONCEALED THE RECEI PT FROM THE ASSESSEE. TIME WAS GIVEN TO THE ASSESSING OFFICER TO SUBMIT THE REPORT BY 09.04.2008. FOLLOWING THE DIRECTION, THE ASSESSING OFFICER ISSUED A LETTER TO THE BANKER OF M/S SUMER TRADERS, ASKING HIM TO FURNISH DETAILS SUCH AS THE ADDRESS OF M/S SUMER TR ADERS, INCOME TAX FILE NUMBER, ZEROX COPIES OF THE CHEQUES ISSUED BY THE ASSESSEE, COPY OF BANK STATEMENTS FROM 01.04.2004 TO 31.03.20 05. IN RESPONSE 3 TO THE LETTER, THE SENIOR MANAGER OF THE WORLI BRAN CH OF ABHYUDAYA COOPERATIVE BANK LTD. FURNISHED CERTAIN DETAILS TO THE ASSESSING OFFICER. THEREUPON THE ASSESSING OFFICER FORWARDED THE COPY OF HIS LETTER TO THE BANK MANAGER AND THE REPLY OF THE BAN K MANAGER TO THE CIT(A) WITHOUT SENDING ANY SEPARATE REMAND REPORT. THE ASSESSING OFFICER ASKED FOR 15 DAYS TIME TO SUBMIT HIS REMAND REPORT AND A COPY OF THE ASSESSING OFFICERS LETTER SEEKING FURTHER T IME WAS FILED BEFORE US. HOWEVER, THE CIT(A), WITHOUT WAITING FOR THE R EMAND REPORT, EXAMINED THE BANK STATEMENTS SENT BY THE MANAGER OF ABHYUDAYA COOPERATIVE BANK LTD. AND HELD THAT THE GENUINENESS OF THE PURCHASES MADE BY THE ASSESSEE FROM M/S SUMER TRADERS IS PROV ED FROM THE PURCHASE BILLS AS WELL AS THE CHEQUE PAYMENTS. HE ALSO HELD THAT IT MAY BE THAT M/S SUMER TRADERS IS TRYING TO EVADE PA YMENT OF TAX ON THE SALES MADE BY IT TO THE ASSESSEE. HE ALSO RECO RDED A FINDING THAT THE PURCHASES MADE BY THE ASSESSEE WERE REFLECTED I N HIS STOCK REGISTER AND UTILIZED FOR SALES. HE ALSO WROTE A L ETTER DATED 10.06.2008 TO THE ASSESSING OFFICER THAT THE APPEAL HAS ALREAD Y BEEN DECIDED BY HIM TAKING INTO CONSIDERATION THE DETAILS SUBMITTED BY THE BANK MANAGER AND THE OTHER DOCUMENTS PRODUCED BY THE ASS ESSEE. WHAT THE CIT(A) DID WAS TO DELETE THE DISALLOWANCE OF TH E PURCHASES FROM M/S SUMER TRADERS. 4. THE DEPARTMENT HAS TAKEN OBJECTION TO THE PROCED URE ADOPTED BY THE CIT(A) AND IT IS CONTENDED THAT THERE WAS A VIOLATION OF RULE 46A OF THE INCOME TAX RULES INASMUCH AS THE ASSESSING O FFICER DID NOT HAVE ANY OPPORTUNITY TO EXAMINE THE PURCHASE BILLS SUBMITTED BY THE 4 ASSESSEE BEFORE THE CIT(A). IT IS FURTHER CONTENDE D THAT IN ANY CASE THE CIT(A), HAVING DIRECTED THE ASSESSING OFFICER T O SUBMIT HIS REMAND REPORT, OUGHT TO HAVE WAITED FOR THE SAME INSTEAD O F DISPOSING OFF THE APPEAL ON THE BASIS OF THE EVIDENCE ADDUCED BY THE ASSESSEE EVEN BEFORE THE ASSESSING OFFICER COULD SUBMIT THE REMAN D REPORT. WE SEE MERIT IN THE OBJECTION. IT IS NO DOUBT TRUE THAT U NDER SUB-SECTION (4) OF SECTION 250 OF THE INCOME TAX ACT, THE CIT(A) HIMSE LF COULD MAKE SUCH FURTHER ENQUIRY AS HE THINKS FIT. HOWEVER, IN THE PRESENT CASE THIS COURSE HAS NOT BEEN OPTED FOR BY THE CIT(A). UNDER THE SAME SUB- SECTION, AN ALTERNATIVE COURSE CAN BE FOLLOWED BY T HE CIT(A) WHICH IS TO DIRECT THE ASSESSING OFFICER TO MAKE FURTHER ENQUIR Y AND REPORT THE RESULT OF THE SAME TO HIM. IF THE CIT(A) HAS OPTED FOR THIS COURSE OF ACTION, WE WOULD THINK THAT IT WAS INCUMBENT ON HIM TO WAIT FOR THE REPORT TO BE SUBMITTED BY THE ASSESSING OFFICER. I N THE PRESENT CASE THOUGH THE CIT(A) HAS OPTED FOR THE ALTERNATIVE COU RSE OF ASKING THE ASSESSING OFFICER TO EXAMINE THE FACTS AND FILE A R EPORT, HE HAS NOT CHOSEN TO WAIT FOR THE REPORT AND AS SOON AS HE REC EIVED THE COPIES OF THE BANK MANAGERS LETTER, HE HAD PROCEEDED TO DECI DE THE APPEAL ON THE BASIS OF THE SAME AS WELL AS THE PURCHASE BILLS PRODUCED BY THE ASSESSEE BEFORE HIM, WHICH WERE NOT TESTED BY THE A SSESSING OFFICER. IN VIEW OF THE PROCEDURAL IRREGULARITY, WE SET ASID E THE DECISION OF THE CIT(A) DELETING THE DISALLOWANCE OF RS.13,32,386/- AND RESTORE THE MATTER TO THE FILE OF THE ASSESSING OFFICER FOR BEI NG DECIDED AFRESH IN ACCORDANCE WITH LAW AND AFTER GIVING ADEQUATE OPPOR TUNITY OF BEING 5 HEARD TO THE ASSESSEE. THE FIRST TWO GROUNDS ARE T HUS ALLOWED FOR STATISTICAL PURPOSES. 5. THE THIRD GROUND IS AGAINST THE DECISION OF THE CIT(A) TO DELETE THE DISALLOWANCE OF THE INTEREST OF RS.2,41,468/-. THE ASSESSING OFFICER DISALLOWED THE INTEREST ON THE GROUND THAT THE BORROWED FUNDS WERE NOT UTILIZED FOR THE BUSINESS BUT WERE DIVERTE D AS INTEREST FREE LOANS FOR NON BUSINESS PURPOSES. THE CIT(A), HOWEV ER, EXAMINED THE DETAILS FILED BY THE ASSESSEE SHOWING THE NEXUS BET WEEN THE BORROWED FUNDS AND THE UTILIZATION OF THE SAME FROM 01.04.20 02. HE FOUND FROM THE ASSESSEES SUBMISSIONS THAT ALL THE LOANS WERE UTILIZED FOR THE PURPOSE OF THE BUSINESS EXCEPT FOR A FEW AND ACCORD INGLY DELETED THE DISALLOWANCE OF RS.2,41,468/- OUT OF THE DISALLOWAN CE OF RS.2,81,175/- MADE BY THE ASSESSING OFFICER. BEFORE US THE REVEN UE WAS NOT ABLE TO POINT OUT ANY ERROR OR INFIRMITY IN THE MANNER I N WHICH THE CIT(A) HAD EXAMINED THE SUBMISSION OF THE ASSESSEE REGARDING T HE UTILIZATION OF THE LOANS AND THE NEXUS BETWEEN THE LOANS AND THE U TILIZATION FOR THE PURPOSE OF THE BUSINESS. WE ACCORDINGLY UPHOLD THE DECISION OF THE CIT(A) AND DISMISS THE GROUND. 6. GROUND NOS. 4 AND 5 ARE GENERAL AND REQUIRE NO D ECISION. 7. IN THE RESULT, THE APPEAL OF THE REVENUE IS PART LY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 7 TH MAY 2010. SD/ SD/- (R K PANDA) (R V EASWAR) ACCOUNTANT MEMBER SENIOR VICE PRESI DENT MUMBAI, DATED 7 TH MAY 2010 SALDANHA 6 COPY TO: 1. SHRI SANJAY H DHOKAD HI-ROCK CONSTRUCTION COMPANY, 903-A, GURUKUL TOWER S J S ROAD, DAHISAR (WEST), MUMBAI 400 068 2. DCIT 25(1) 3. CIT-25 4. CIT(A)-XXV 5. DR E BENCH TRUE COPY BY ORDER ASSTT. REGISTRAR, ITAT, MUMBAI