PINKESH D DOSHI, MUMBAI V. ITO 26(3)(1), MUMBAI

ITA 4912/MUM/2009

• Counselvise Citation: [2010] 136 COUNSELVISE.COM (IT) 1389 (ITAT-MUMBAI)
• Duration Of Justice: 10 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-06-2010
• Appeal Filed By: Assessee
• Bench Allotted: C
• Next Hearing Date: 22-06-2010
• Assessment Year: 2005-2006
• Appeal Filed On: 26-08-2009
• Court: TRIBUNAL
• Department Lawyers: DEVADASAN
• Assessee Lawyers: S C TIWARI
• Keywords: Unexplained expenditure; Business income; Income from undisclosed sources; Opportunity of being heard; Reasonable cause
• Section: 69C

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCH C,MUMBAI BEFORE SHRI D.K. AGARWAL (JM) & SHRI R.K. PANDA (AM ) ITA NO. 4912/MUM/2009 (A.Y. 2005-06) SHRI PINKESH D. DOSHI, 322, PAREKH MARKET, OPERA HOUSE,MUMBAI-400 004. ADGPD6938H VS. INCOME-TAX OFFICER-16(3)(1), MATRU MANDIR,MUMBAI. APPELLANT RESPONDENT APPELLANT BY SH RI S.C. TIWARI. RESPONDENT BY SHRI DEVADASAN. O R D E R PER R.K. PANDA, AM : THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAIN ST THE ORDER DATED 11-02- 2009 OF THE CIT(A)-XVII, MUMBAI, RELATING TO ASST. YEAR 2005-06. 2. THE ASSESSEE HAS TAKEN AS MANY AS 9 GROUNDS IN H IS GROUNDS OF APPEAL CHALLENGING THE VARIOUS ADDITIONS MADE BY THE AO AN D COMPLETING THE ASSESSMENT ON A TOTAL INCOME OF RS.68,81,300/- AGAINST THE RET URNED INCOME OF RS.81,135/-. 3. THE FACTS OF THE CASE, IN BRIEF, ARE THAT THE AS SESSEE IS AN INDIVIDUAL WHO HAS DECLARED THE BUSINESS INCOME AT RS.46,082/- FRO M THE PROPRIETARY CONCERN KNOWN AS M/S. PINKUDIAM EXPORTS, INCOME FROM OTHER SOURCES AT RS.41,267/- AND THE GROSS TOTAL INCOME HAS BEEN DECLARED AT RS.87,3 49/-. CHAPTER VIA DEDUCTIONS ARE CLAIMED AT RS.6,214/- AND THE TOTAL INCOME HAS BEEN DECLARED AT RS.81,135/-. 3.1 FROM THE MANUFACTURING AND PROFIT & LOSS A/C. O F M/S. PINKUDIUM EXPORTS, THE AO NOTED THAT EXPORT SALES ARE DECLARED AT RS.7 0,07,573/- AND THE GROSS PROFIT THEREON AT RS.65,333/-, WHICH WORKS OUT TO 0 .93%. THE NET PROFIT HAS BEEN DECLARED AT RS.46,082/- WHICH WORKS OUT TO 0.65% OF SALES TURNOVER. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE AO ASKED THE ASSESSEE TO FURNISH THE FULL IT A 4912/M/09 PINKESH D.DOSHI 2 DETAILS OF SALES & PURCHASES AS WELL AS OPENING STO CK AND CLOSING STOCK. FROM THE DETAILS FURNISHED BY THE ASSESSEE, THE AO NOTED THA T THE PURCHASE INVOICE IN RESPECT OF 547.05 CARATS OF CUT & POLISHED DIAMONDS VALUED AT RS.44,00,000/-/- (ACTUAL TOTAL OF 2 ITEMS WORKING OUT TO RS.1,50,38, 000/-) IS AT PAGE 7 OF THE DETAILS FURNISHED ON 07-12-2007. SINCE THIS PURCHAS E INVOICE IS DATED 10-07-2005 (WHICH FALLS IN THE FINANCIAL YEAR RELEVANT TO A.Y. 2006-07), THE DATE OF ACTUAL SALE AND ACTUAL DELIVERY OF GOODS, AND THE CORRECTNESS A ND COMPLETENESS OF THE INFORMATION CONTAINED THEREIN ARE ALL DEFECTIVE. TH E ONLY POSSIBLE INFERENCE WHICH CAN BE DRAWN FROM THIS PURCHASE INVOICE, ACCORDING TO THE AO, IS THAT THE SAME PERTAINS TO PURCHASES OF 547.05 CARATS OF CUT & POL ISHED DIAMONDS BY THE ASSESSEE FROM M/S.UTTAM GEMS IMPORTS & EXPORTS ON 1 0-07-2005 FOR A TOTAL VALUE OF RS.1,50,38,000/- DURING THE F.Y. ENDED ON 31-03-2006 RELEVANT TO A.Y. 2006-07. SINCE THE ASSESSEE HAS BEEN UNABLE TO FURN ISH ANY EVIDENCE WHATSOEVER IN RESPECT OF THE PURCHASES OF CUT AND P OLISHED DIAMONDS VALUED AT RS.44,00,000/-, THE SAID CLAIM FOR PURCHASES OF CUT & POLISHED DIAMONDS TO THE EXTENT OF RS.44,00,000/- REMAINS UNSUBSTANTIATED AN D HAS TO BE TREATED AS UNEXPLAINED EXPENDITURE WITHIN THE MEANING OF SEC. 69C AND ADDED BACK AS SUCH. HE, HOWEVER, NOTED THAT THE SALE INVOICE OF THE AS SESSEE IS THE ONLY INSTANCE OF SALE AND THE SAME IS DATED 12-10-2004 WHEREAS THE P URCHASE BILL IS DATED 10-07- 2005. THE AO SIMILARLY MADE ADDITION OF RS.1,45,294 /- ON ACCOUNT OF SUPPRESSED CLOSING STOCK. THE AO FURTHER MADE ADDITION OF RS.2 1,96,125/- AS INCOME FROM UNDISCLOSED SOURCES BEING INVESTMENTS IN VARIOUS IP OS, CASH DEPOSIT IN BANK ACCOUNT AND FOREIGN TRAVEL EXPENSES. 4. ALL ADDITIONS MADE BY THE AO WERE CONFIRMED BY T HE CIT(A), FOR WHICH THE THE ASSESSEE IS IN APPEAL BEFORE THE TRIBUNAL. IT A 4912/M/09 PINKESH D.DOSHI 3 5. THE LD. COUNSEL FOR THE ASSESSEE, AT THE OUTSET, SUBMITTED THAT ALTHOUGH A NUMBER OF NOTICES WERE ISSUED BY THE AO FOR COMPLET ION OF THE ASSESSMENT, THE EFFECTIVE DATE OF HEARING WAS 07-12-2007. HE SUBMIT TED THAT ON THAT DATE, THE ASSESSEE HAS REPLIED TO ALL THE POINTS AS PER THE Q UESTIONNAIRE ISSUED BY THE AO ALONG WITH NOTICE U/S.142(1) DATED 08-08-2007. HOW EVER, THE AO PASSED THE ORDER ON 11-12-2007 WITHOUT CONFRONTING THE REPLY G IVEN BY THE ASSESSEE, MEANING THEREBY THAT NO ADEQUATE OPPORTUNITY WAS G IVEN TO THE ASSESSEE TO MAKE HIS SUBMISSIONS BEFORE THE ADDITIONS WERE MADE . HE SUBMITTED THAT THE LD. CIT(A) DID NOT ACCEPT THE FRESH EVIDENCES FILED BEF ORE HIM CHALLENGING THE VARIOUS ADDITIONS AND TO EXPLAIN THAT THE INVOICES OF SUBS EQUENT YEAR WERE INADVERTENTLY GIVEN. HOWEVER, HE DISMISSED THE APPEAL OF THE ASSE SSEE WITHOUT ADMITTING THE FRESH EVIDENCES. HE ACCORDINGLY SUBMITTED THAT THE MATTER MAY BE RESTORED BACK TO THE FILE OF THE AO FOR FRESH ADJUDICATION AFTER GIVING DUE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. 5. THE LD. D.R., ON THE OTHER HAND, WHILE SUPPORTIN G THE ORDER OF CIT(A), SUBMITTED THAT THE ASSESSEE WAS ALL ALONG NON-CO-OP ERATIVE WITH THE DEPARTMENT. REFERRING TO THE ORDERS OF THE AO AND THE CIT(A), H E DREW THE ATTENTION OF THE BENCH TO THE NUMBER OF OPPORTUNITIES GIVEN TO THE A SSESSEE. HE ACCORDINGLY SUBMITTED THAT NO PURPOSE WILL BE SERVED BY AGAIN R ESTORING THE MATTER TO THE FILE OF THE AO OR CIT(A) AND THE APPEAL FILED BY THE ASS ESSEE SHOULD BE SUMMARARILY DISMISSED. 6. THE LD. COUNSEL FOR THE ASSESSEE, IN HIS REJOIND ER, SUBMITTED THAT IF THE ASSESSEE IS NON-CO-OPERATIVE, THEN ADDITIONS CAN BE MADE ON BEST JUDGEMENT BASIS AS PER LAW. HOWEVER, THE AO CANNOT MAKE WILD ASSESSMENT. HE SUBMITTED THAT EVEN IN BEST JUDGEMENT ASSESSMENT ALSO REASO NABLE ADDITION HAS TO BE MADE AND NO HIGH-PITCH ASSESSMENT SHOULD BE MADE A S HELD IN VARIOUS JUDICIAL IT A 4912/M/09 PINKESH D.DOSHI 4 PRONOUNCEMENTS. HE SUBMITTED THAT AS AGAINST THE R ETURNED INCOME OF RS.81,135/-, ASSESSMENT HAS BEEN COMPLETED AT AN AS TRONOMICAL FIGURE OF RS.68,81,300/- WHICH SHOWS THAT THE ASSESSMENT ITSE LF IS A HIGH-PITCH ASSESSMENT. 7. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS MADE BY BOTH THE SIDES AND PERUSED THE ORDERS OF THE AO AND THE CIT(A). WE FIN D DESPITE VARIOUS OPPORTUNITIES GIVEN BY THE AO, THE ASSESSEE ALL LON G WAS NON-CO-OPERATIVE WITH THE DEPARTMENT. WE FIND ON 07-12-2007 THE FATHER OF THE ASSESSEE PERSONALLY APPEARED BEFORE THE AO AND SUBMITTED A LETTER DATED 08-08-2007 ALONG WITH A BUNCH OF PAPERS STATED TO BE THE DETAILS REQUIRED AS PER THE QUESTIONNAIRE DATED 08-08-2007, A FACT BROUGHT ON RECORD BY THE AO IN P ARA-2 OF HIS ORDER. WE FIND FROM THE COPY OF THE ASSESSMENT ORDER THAT THE ASSE SSMENT HAS BEEN PASSED ON 11-12-2007 I.E. 4 DAYS AFTER THE ASSESSEE FILED THE DETAILS AS REQUIRED BY THE AO AS PER HIS QUESTIONNAIRE. WE FURTHER FIND THAT AFTE R THE ASSESSEE SUBMITTED THE DETAILS ON 07-12-2007 THE AO HAS NOT CONFRONTED THE DISCREPANCIES TO THE ASSESSEE BEFORE MAKING THE HUGE ADDITIONS. WE, THER EFORE, FIND MERIT IN THE SUBMISSION OF THE LD. COUNSEL FOR THE ASSESSEE THAT NO EFFECTIVE OPPORTUNITY WHATSOEVER WAS GIVEN TO THE ASSESSEE TO THE DOUBTS, IF ANY, IN THE MINDS OF THE AO. WE FURTHER FIND THE CIT(A) IN PARA 3.4 OF HIS O RDER HAS MENTIONED THAT FRESH EVIDENCE CANNOT BE ADMITTED NOW WITHOUT REASONABLE CAUSE, MEANING THEREBY THAT HE HAS NOT ADMITTED FRESH EVIDENCES PRODUCED B EFORE HIM. IT IS THE SETTLED PROPOSITION OF LAW THAT IF THE ASSESSEE DOES NOT CO -OPERATIVE WITH THE DEPARTMENT, THE AO IS AT LIBERTY TO MAKE THE ASSESS MENT TO THE BEST OF HIS JUDGEMENT. AT THE SAME TIME, SUCH ASSESSMENT SHOULD BE REASONABLE. IN THE INSTANT CASE, WE FIND AS AGAINST THE RETURNED INCOM E OF RS.81,135/-, THE AO HAS IT A 4912/M/09 PINKESH D.DOSHI 5 COMPLETED THE ASSESSMENT ON A TOTAL INCOME OF RS.68 ,81,300/-WITHOUT CONFRONTING THE DETAILS FILED BEFORE HIM. 8. CONSIDERING THE TOTALITY OF THE FACTS OF THE CA SE, WE, IN THE INTERESTS OF JUSTICE, DEEM IT PROPER TO RESTORE THE MATTER BACK TO THE FILE OF THE AO FOR FRESH ADJUDICATION. THE AO SHALL GIVE ADEQUATE OPPORTUNIT Y OF BEING HEARD TO THE ASSESSEE AND DECIDE THE ISSUE AS PER LAW. WE HOLD A ND DIRECT ACCORDINGLY. THE GROUNDS RAISED BY THE ASSESSEE ARE ACCORDINGLY ALLO WED FOR STATISTICAL PURPOSES. 9. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED ON THE 30TH DAY OF JUNE, 2010. SD/- SD/- (D.K. AGARWAL) (R.K. PANDA) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI: 30TH JUNE, 2010. NG: COPY TO : 1. ASSESSEE. 2.DEPARTMENT. 3 CIT(A)-XVII,MUMBAI. 4 CIT-16,MUMBAI. 5.DR,C BENCH,MUMBAI. 6.MASTER FILE. (TRUE COPY) BY ORDER, ASST.REGISTRAR, ITAT, MUMBAI. IT A 4912/M/09 PINKESH D.DOSHI 6 DETAILS DATE INITIALS DESIGNATION 1 DRAFT DICTATED ON 22-06-2010 SR.PS/ 2 DRAFT PLACED BEFORE AUTHOR 23-06-2010 SR.PS/ 3 DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER JM/AM 4 DRAFT DISCUSSED/APPROVED BY SECOND MEMBER JM/AM 5. APPROVED DRAFT COMES TO THE SR.PS/PS SR.PS/ 6. KEPT FOR PRONOUNCEMENT ON SR.PS/ 7. FILE SENT TO THE BENCH CLERK SR.PS/ 8 DATE ON WHICH THE FILE GOES TO THE HEAD CLERK 9 DATE OF DISPATCH OF ORDER