SUVIKAS ALLOYS STEEL P. LTD, MUMBAI V. ITO 8(3)(2), MUMBAI

ITA 5058/MUM/2011

• Counselvise Citation: [2018] 121 COUNSELVISE.COM (IT) 7498 (ITAT-MUMBAI)
• Duration Of Justice: 6 year(s) 9 month(s) 13 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-04-2018
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: E
• Next Hearing Date: 21-10-2015
• Assessment Year: 2007-2008
• Appeal Filed On: 28-06-2011
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: V JUSTIN
• Keywords: Unexplained investment; Opportunity of being heard; Additional evidence
• Section: 143(3); 68

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH E, MUMBAI BEFORE SHRI G.S.PANNU, ACCOUNTANT MEMBER AND SHRI RAM LAL NEGI, JUDICIAL MEMBER ITA NO.5058/MUM/2011, (A.Y. 2007-08) SUVIKAS ALLOYS STEEL P. LTD. 103, GANRAJ TOWER, PRASHANT NAGHAR, OPP. SHIVSENA SHAKHA, NAUPADA, THANE (W) PAN: AAICS 1717R ...... APPELLANT VS. THE ITO-8(3)(2) AAYKAR BHAVAN,M.K.ROAD, MUMBAI-400 020 ..... RESPONDENT ITA NO.4278/MUM/2011, (A.Y. 2007-08) THE ITO-8(3)(2) AAYKAR BHAVAN,M.K.ROAD, MUMBAI-400 020 ..... APPELLANT VS. SUVIKAS ALLOYS STEEL P. LTD. 103, GANRAJ TOWER, PRASHANT NAGHAR, OPP. SHIVSENA SHAKHA, NAUPADA, THANE (W) PAN: AAICS 1717R ...... RESPONDENT ASSESSEE BY : MS.DINKLE HARIYA RESPONDENT BY : SHRI V. JUSTIN DATE OF HEARING : 19/01/2018 DATE OF PRONOUNCEMENT : 11 /04/2018 2 ITA NO.5058& 4278/MUM/2011, (A.Y. 2007-08) ORDER PER G.S.PANNU,A.M: THESE ARE CROSS-APPEALS FILED BY THE ASSESSEE AND THE REVENUE AGAINST THE ORDER OF CIT(A)-18, MUMBAI DATED 17/03/ 2011, PERTAINING TO THE ASSESSMENT YEAR 2007-08, WHICH IN TURN HAS ARIS EN FROM THE ORDER PASSED BY THE ASSESSING OFFICER DATED 30/12/2009 UN DER SECTION 143(3) OF THE INCOME TAX ACT, 1961 (IN SHORT THE ACT). 2. THE GROUNDS OF APPEAL RAISED BY THE ASSESSEE AS WELL AS REVENUE READ AS UNDER:- ASSESSEES GROUNDS OF APPEAL:- 1.1 THE LEARNED COMMISSIONER OF INCOME -TAX ( APPEALS) - 18 [('THE CIT (A)'] ERRED IN NOT GRANTING PROPER, SUFFICIENT AND ADEQUA TE OPPORTUNITY OF BEING HEARD TO THE APPELLANT WHILE PASSING THE APPELLATE ORDER. 1.2 IT IS SUBMITTED THAT IN THE FACTS AND THE CIRCUMSTANCES OF THE CASE, AND IN LAW, THE APPELLATE ORDER SO PASSED BE HELD AS BAD A ND ILLEGAL, AS THE SAME IS PASSED IN BREACH OF THE PRINCIPLES OF NATURAL JUSTI CE. WITHOUT PREJUDICE TO THE ABOVE: 2.1 THE ID. CIT (A) ERRED IN CONFIRMING THE ASSESSM ENT PASSED BY THE INCOME - TAX OFFICER - 8 (3) - 2 ['THE A.O.'] WITHOUT PROVID ING PROPER, SUFFICIENT AND ADEQUATE OPPORTUNITY OF BEING HEARD TO THE APPELLAN T. 2.2 IT IS SUBMITTED THAT IN THE FACTS AND THE CIRCUMSTANCES OF THE CASE, AND IN LAW, THE ASSESSMENT ORDER SO PASSED BY THE A.O. BE HELD AS BAD AND ILLEGAL, AS THE SAME IS PASSED IN BREACH OF THE PRINCIPLES OF N ATURAL JUSTICE. ' WITHOUT FURTHER PREJUDICE TO THE ABOVE: 3.1 THE A.O. ERRED IN MAKING ADDITION OF RS.7 ,80,95,318/-, BEING THE UNSECURED LOANS RECEIVED BY THE APPELLANT DURING TH E PREVIOUS YEAR, TO THE INCOME OF THE APPELLANT BY TREATING THE SAME AS INC OME FROM UNDISCLOSED SOURCES. 3 ITA NO.5058& 4278/MUM/2011, (A.Y. 2007-08) 3.2 WHILE DOING SO, THE CIT (A) ERRED IN - (I) NOT GIVING SUFFICIENT AND PROPER OPPORTUNITY TO THE APPELLANT TO SUBSTANTIATE HIS CASE; (II) FAILING TO APPRECIATE THAT THE APPELLANT WAS PREVENTED BY BEYOND HIS CONTROL TO GET COMPLIANCE FROM THE LENDERS; AND (III) FAILING TO APPRECIATE THAT THE LOANS WAS A GENUINE LOANS, TAKEN BY THE APPELLANT IN THE COURSE OF ITS NORMAL BUSINESS ACTIVITIES. 3.3 IT IS SUBMITTED THAT IN THE FACTS AND THE CIRCUMSTANCES OF THE CASE AND IN LAW, NO SUCH ADDITION WAS CALLED FOR. 4.1 THE ID. CIT (A) ERRED IN PARTLY CONFIRMING THE ADDITION ON ACCOUNT OF UNEXPLAINED INVESTMENT IN FIXED ASSETS, TO THE EXTE NT OF RS. 1,94,04,718/-. 4.2 WHILE DOING SO, THE CIT (A) ERRED IN: (I) BASING HIS ACTION ONLY ON SURMISES, SUSPI CION AND CONJECTURE; AND (II) TAKING INTO ACCOUNT IRRELEVANT AND EXTR ANEOUS CONSIDERATIONS. 4.3 IT IS SUBMITTED THAT IN THE FACTS AND THE CIRCUMSTANCES OF THE CASE, AND IN LAW, NO SUCH ADDITION WAS CALLED FOR. REVENUES GROUNDS OF APPEAL:- 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF T HE CASE AND IN LAW, THE CIT(A) ERRED IN DELETING THE ADDITION MADE ON ACCOUNT OF I NCREASE IN FIXED ASSETS TO THE EXTENT OF RS.7,80,95,318/- ON THE GROUNDS THAT THE ADDITION TO THE FIXED ASSETS TO SUCH EXTENT IS COVERED BY ADDITION OF LIKE AMOUN T CONFIRMED BY HIM U/S.68 OF THE ACT, WITHOUT APPRECIATING THAT THERE IS NO CORR ELATION BETWEEN THE UNSECURED LOANS AND INCREASE IN FIXED ASSETS. 3. BEFORE WE PROCEED TO ADDRESS SPECIFIC GROUNDS RA ISED, A BRIEF BACKGROUND OF THE DISPUTE CAN BE SUMMARIZED AS FOLL OWS. IN THIS CASE, A RETURN OF INCOME WAS FILED BY THE ASSESSEE COMPANY ON 23/10/2007 DECLARING AN INCOME OF RS.15,49,628/-, WHICH WAS SU BJECT TO A SCRUTINY ASSESSMENT. IN THE ASSESSMENT ORDER, THE ASSESSING OFFICER NOTED THAT ONE SHRI ANIL SINGH, DIRECTOR OF THE ASSESSEE COMPA NY ATTENDED FROM TIME TO TIME BUT EXPRESSED INABILITY TO FURNISH THE DET AILS CALLED FOR. THE REASON ADVANCED WAS THAT ALL THE RELEVANT DOCUMENTS OF THE ASSESSEE 4 ITA NO.5058& 4278/MUM/2011, (A.Y. 2007-08) COMPANY WERE SEIZED BY DIRECTOR GENERAL OF CENTRA L EXCISE INTELLIGENCE, MUMBAI ON 28/07/2007 IN PURSUANCE TO A SEARCH ACTIO N. CONSIDERING THE INABILITY OF THE ASSESSEE TO PRODUCE RECORDS SUPPOR TING THE RETURN OF INCOME, THE ASSESSING OFFICER ASSESSED THE FINAL I NCOME AT RS.20,17,89,440/- AFTER MAKING CERTAIN ADDITIONS/DI SALLOWANCES. FIRSTLY, THE ASSESSING OFFICER NOTED THAT UNSECURED LOANS H AD INCREASED SINCE LAST YEAR TO THE EXTENT OF RS.7,80,95,318/- AND IN THE ABSENCE OF ANY EXPLANATION, THE SAID AMOUNT WAS TREATED AS UNEXPLA INED CASH CREDIT UNDER SECTION 68 OF THE ACT. SECONDLY, THE ASSES SING OFFICER NOTED THAT THERE IS INCREASE IN THE BLOCK OF FIXED ASSETS IN THE INSTANT YEAR TO THE EXTENT OF RS.9,75,00,036/- AND IN THE ABSENCE OF AN Y EVIDENCE TO SUPPORT THE SAME, THE SAID AMOUNT WAS ADDED TO THE RETURNED INCOME. THIRDLY, IN THE ABSENCE OF ANY DETAILS OF EXPENSES, 25% OF POWE R, FUEL AND OTHER EXPENSES, AMOUNTING TO RS.2,44,27,097/- WAS DISALL OWED AND ADDED TO THE RETURNED INCOME. THE THREE ADDITIONS SO MADE W ERE CARRIED IN APPEAL BEFORE THE CIT(A), WHERE ALSO ASSESSEE WAS REPRESEN TED BY ITS DIRECTOR, SHRI ANIL SINGH, WHO FAILED TO FURNISH ANY CREDIBLE INFORMATION. HOWEVER, THE CIT(A) WHILE CONFIRMING THE ADDITION OUT OF UNS ECURED LOANS UNDER SECTION 68 OF THE ACT OF RS.7,80,95,318/- NOTED THA T THE SAME WAS AVAILABLE AS TO BE THE SOURCE OF INCREASE IN THE F IXED ASSETS DURING THE YEAR OF RS.9,75,00,036/- AND, THEREFORE, THE ADDITI ON ON ACCOUNT OF FIXED ASSETS WAS CONFIRMED TO THE EXTENT OF RS.1,94,04,71 8/- ONLY. THE THIRD ADDITION WITH REGARD TO THE ADHOC DISALLOWANCE OUT OF EXPENSES HAVE BEEN DELETED BY THE CIT(A). NOT BEING SATISFIED, THE ASS ESSEE IS IN FURTHER APPEAL BEFORE US. IN THE CROSS-APPEAL, REVENUE HAS CHALLEN GED THE ACTION OF THE 5 ITA NO.5058& 4278/MUM/2011, (A.Y. 2007-08) CIT(A) IN DELETING THE ADDITION OUT OF FIXED ASSETS TO THE EXTENT OF RS.7,80,95,318/-. 4. BEFORE US, THE LD. REPRESENTATIVE FOR THE ASSESS EE POINTED OUT THAT THE BUSINESS OF THE ASSESSEE COMPANY HAS BEEN CLOSE D SINCE LAST FIVE YEARS AND ITS PLANT AND MACHINERY IS NON-FUNCTIONAL SI NCE THAT TIME. IT HAS ALSO BEEN POINTED OUT THAT LIQUIDATION PROCEEDINGS HAD B EEN INITIATED AGAINST THE ASSESSEE AND THE OLD MANAGEMENT OF ASSESSEE CO MPANY WAS NOT CONTACTABLE AND CO-OPERATIVE WITH THE PRESENT DIREC TORS. IT WAS POINTED OUT THAT THE ASSESSMENT PROCEEDINGS WERE ATTENDED B Y THE EARLIER DIRECTOR SHRI ANIL SINGH AND THAT THE PRESENT DIREC TOR SHRI JAGDISH P. AGARWAL WAS APPOINTED ON 05/11/2008. THE LD. REPRES ENTATIVE FOR THE ASSESSEE EXPLAINED THAT THE ASSESSEE HAS ALSO BEEN MAKING EFFORTS TO OBTAIN THE COPIES OF THE BOOKS OF ACCOUNT SEIZED BY THE DIRECTOR GENERAL OF CENTRAL EXCISE INTELLIGENCE, MUMBAI. BEFORE US, AN APPLICATION FOR ADMISSION OF ADDITIONAL EVIDENCE HAS ALSO BEEN MADE POINTING OUT THAT ASSESSEE HAD OBTAINED SOME OF THE DETAILS WHICH ARE RELEVANT TO MAKE THE ASSESSMENT, INASMUCH AS, THE DETAILS OF ADDITION OF FIXED ASSETS AS WELL AS THE DETAILS AND CONFIRMATIONS FROM THE LOAN CREDITO RS HAVE ALSO BEEN OBTAINED. IN THIS CONTEXT, A PAPER BOOK HAS BEEN F ILED CONTAINING PAGES 1 TO 36 AND IT IS CONTENDED THAT SUCH EVIDENCES WHICH WERE NOT BEFORE THE LOWER AUTHORITIES BE ADMITTED FOR ADJUDICATION AS T HE SAME IS RELEVANT TO DECIDE THE CORRECT TAX LIABILITY OF THE ASSESSEE. IT WAS ALSO PRAYED BY THE LD. REPRESENTATIVE FOR THE ASSESSEE THAT THE ASSESS EE WOULD BE SATISFIED, IF THE MATTER IS RESTORED BACK TO THE FILE OF ASSES SING OFFICER TO PASS AN ASSESSMENT ORDER AFRESH AFTER CONSIDERING THE F RESH EVIDENCE PRESENTLY BEING RELIED UPON. 6 ITA NO.5058& 4278/MUM/2011, (A.Y. 2007-08) 5. ON THE OTHER HAND, THE LD. DEPARTMENTAL REPRESEN TATIVE DID NOT SERIOUSLY OPPOSE THE PRAYER OF THE ASSESSEE FOR SET TING-ASIDE THE MATTER TO THE ASSESSING OFFICER BUT POINTED OUT THAT ASSESSEE WAS ALLOWED ADEQUATE OPPORTUNITIES BY THE ASSESSING OFFICER AS WELL AS T HE CIT(A) TO PRODUCE SUCH EVIDENCE AS WAS REQUIRED TO MAKE THE ASSESSMEN T. WITH REGARD TO THE APPEAL OF THE REVENUE, IT HAS BEEN POINTED OUT THAT THE ADDITION HAS BEEN DELETED BY THE CIT(A) WITHOUT ANY BASIS. 6. WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSIO NS. FACTUALLY SPEAKING, IT IS QUITE CLEAR THAT INABILITY OF THE A SSESSEE TO FURNISH REQUISITE DETAILS AND INFORMATION CALLED FOR BY THE ASSESSING OFFICER WAS PRIMARILY BECAUSE OF THE SEARCH ACTION UNDERTAKEN BY THE GENE RAL OF CENTRAL EXCISE INTELLIGENCE, MUMBAI IN JULY, 2007. BEFORE US A PA NCHNAMA DATED 28/07/2007 DRAWN UP BY THE INTELLIGENCE WING OF GEN ERAL OF CENTRAL EXCISE INTELLIGENCE, MUMBAI HAS ALSO BEEN PRODUCED TO SHOW THAT VARIOUS ACCOUNTS BOOK, NAMELY PURCHASE BILL, SALE BILL, PUR CHASE REGISTERS, BALANCE SHEET, ETC. WERE SEIZED. IT HAS ALSO BEEN CANVASSE D BEFORE US THAT DUE TO THE CHANGE IN THE DIRECTORS, THE ASSESSEE HAS NO T BEEN ABLE TO GET THE ORIGINALLY SEIZED MATERIAL BACK. THE LD. REPRESENT ATIVE FOR THE ASSESSEE POINTED OUT THAT EVEN A LEGAL NOTICE HAS ALSO BEEN ISSUED BY THE PRESENT MANAGEMENT TO SHRI ANIL SINGH, THE EARLIER DIRECTOR WHO WAS MANAGING THE AFFAIRS, A COPY OF SUCH NOTICE DATED 24/01/2013 HAS ALSO BEEN PLACED ON RECORD. IN THIS CONTEXT, WE ALSO FIND THAT THE ADD ITIONAL EVIDENCE IN THE SHAPE OF INVOICES OF THE FIXED ASSETS ACQUIRED DURI NG THE YEAR AND THE DETAILS AND CONFIRMATION OF THE LOAN CREDITORS, WHI CH HAVE BEEN PLACED IN THE PAPER BOOK AT PAGES 1 TO 34 AND 35 TO 36 RESPEC TIVELY ARE QUITE GERMANE TO ASSESS THE CORRECT TAX LIABILITY IN T HE HANDS OF THE ASSESSEE. 7 ITA NO.5058& 4278/MUM/2011, (A.Y. 2007-08) THEREFORE, CONSIDERING THE ENTIRETY OF FACTS AND CI RCUMSTANCES, IN OUR VIEW, IT WOULD BE IN THE FITNESS OF THINGS THAT THE ENTIRE ASSESSMENT IS REMANDED BACK TO THE FILE OF THE ASSESSING OFFICER WHO SHALL ALLOW THE ASSESSEE A REASONABLE OPPORTUNITY TO SUPPORT ITS RE TURN OF INCOME AND THEREAFTER, MAKE A DENOVO ASSESSMENT AS PER LAW. O UR AFORESAID DIRECTION SHALL ALSO COVER THE GROUND RAISED BY THE REVENUE R ELATING TO ADDITION OF RS.7,80,95,318/- ON ACCOUNT OF COST OF FIXED ASSETS . OSTENSIBLY, THERE IS NO MATERIAL FOR THE CIT(A) TO PRESUME THAT THE UNSECUR ED LOANS CONSIDERED UNEXPLAINED UNDER SECTION 68 OF THE ACT ARE UTILIZE D FOR ACQUIRING THE FIXED ASSETS, AND THEREFORE, THE ADDITION DELETED BY THE CIT(A) IS ON A WRONG FOOTING. 6.1 IN THE RESULT, WITHOUT GOING INTO ANY OF THE S PECIFIC GROUNDS OF APPEAL RAISED BY THE ASSESSEE, THE ORDER OF THE CIT (A) IS SET-ASIDE AND THE ASSESSMENT IS RESTORED BACK TO THE FILE OF ASSESS ING OFFICER IN TERMS OF OUR OBSERVATIONS ABOVE. 9. IN THE RESULT, BOTH THE APPEALS ARE TREATED AS ALLOWED FOR STATISTICAL PURPOSES, AS ABOVE. ORDER PRONOUNCED IN THE OPEN COURT ON 11/04/2018. SD/- SD/- (RAM LAL NEGI) (G.S. PANNU) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI, DATED 11 /04/2018 VM , SR. PS 8 ITA NO.5058& 4278/MUM/2011, (A.Y. 2007-08) 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// (DY./ASSTT. REGISTRAR) ITAT, MUMBAI