BAKULESH O. AGARWAL, MUMBAI V. ITO 19(3)(1), MUMBAI

ITA 5447/MUM/2013

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 2825 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 10 month(s) 30 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-07-2016
• Appeal Filed By: Assessee
• Bench Allotted: B
• Next Hearing Date: 02-06-2015
• Assessment Year: 2007-2008
• Appeal Filed On: 12-08-2013
• Court: TRIBUNAL
• Department Lawyers: NEIL PHILIP LD
• Assessee Lawyers: D C SABOO LD
• Keywords: Gift; Principle of natural justice; Earning of tax free income; Additional evidence
• Section: 143(3); 14A; 68

Judgement Text

ITA NO . 5447/M UM/2013 - B - JM BAKULES O.AGARWAL 1 IN THE INCOME TAX APPELLATE TRIBUNAL, B BENCH, MUMBAI BEFORE : SHRI R.C. SHARMA , ACCOUNTANT MEMBER , AND SHRI SANDEEP GOSAIN, JUDICIAL MEMBER ITA NO. 5 447 / MUM/2013 A.Y 200 7 - 08 BAKULESH O. AGARWAL, MUMBAI VS. I NCOME T AX O FFICER PAN: AAAPA 9198D 19(3)(1), MUMBAI ( APPELLANT ) ( RESPONDENT ) FOR THE APPELLANT : SHRI D.C SABOO, LD.AR FOR THE RESPONDENT : SHRI NEIL PHILIP, LD. DR DATE OF HEARING: 11 - 07 - 2016 DATE OF PRONOUNCEMENT: 11 - 07 - 2016 ORDER PER SANDEEP GOSAIN, JM : TH E PRESENT APPEAL HAS BEEN FILED BY THE ASSESSEE AGAINST THE ORDER PASSED BY LEARNED CIT(A) 30, MUMBAI DATED 06 - 06 - 2013 FOR A.Y 2007 - 08 ON THE FOLLOWING GROUNDS: - 1) CIT[A] HAD PASSED ORDER BY VIOLATING THE PRINCIPLE OF NATURAL JUSTICE HE HAS NOT GIVEN OPPORTUNITY TO SUBMIT CASE. 2) CIT[A] HAD CONFIRM ADDITION BY MENTIONING WRONG FACTS IN APPEAL ORDER. 3) CIT(A) HAD ERRED IN NOT ADMITTING NEW EVIDENCE WHICH GOES TO ROOT OF GROUNDS OF APPEAL 4) CIT[A] ERRED IN CONFIRMING GIFT IN KIND U/S 68. CIT[A] ERRED IN CONFIRMING GIFT FROM HUF AND MOTHER INSPITE OF PRODUCING ALL DOCUMENTS 6) CIT [AL ERRED IN CONFIRMING DISALLOWANCE OF PROCESSING CHARGES RS 56272/ - ON LOAN 7) CIT[A] ERRED IN CONFIRMING DISALLOWANCE OF LOSS ON SECURITIES DEALING OF RS 1596551/ - 8) CIT[A] ERRED IN CONFIRMING DISALLOWANCE OUT OF INTEREST U/S 14[A] OF 437828/ - 9) CI T[A] ERRED IN LAW AND FACTS IN APPLYING SEC 14A ON EXEMPT INCOME U/S 10[2A] OF SHARE OF PROFIT FROM FIRM RS 355100/ - AND DIVIDEND INCOME OF RS ITA NO . 5447/M UM/2013 - B - JM BAKULES O.AGARWAL 2 6879/ - 10) CIT[A] ERRED IN CONFIRMING ADDITION OF GIFT OF RS 3363055 RECEIVED FROM RELATIVES U/S 68 11)CIT [ A] ERRED IN CONFIRMING LEVYING OF PENALTY U /S 271[1][C] 12)APPELLANT CRAVES YOUR LEAVE TO ADD. AMEND ,ALTER & MODIFY THESES GROUNDS OF APPEAL. 2 . BRIEF FACTS OF THE CASE ARE THAT THE ORDER OF ASSESSMENT U /S. 143(3) OF THE ACT WAS PASSED BY THE AO THEREBY MAKING ADDITION ON THE FOLLOWING GROUNDS : - I) VEHICLE INSURANCE 14,686 II) LOAN PROCESSING 47,831 III ) LOSS ON SECURITY DEALING 15 , 96,551 IV) DISALLOWANCE U/S. 14A 1,70,498 V) GIFTS ADDED AS INCOME 33,63,055 TOTAL 51,92,622 3 . AGGRIEVED BY THE ORDER O F THE AO , THE ASS ESSEE PREFERRED APPEAL BEFORE LEARNED CIT(A) AND DURING THE PENDENCY OF THE APPEAL BEFORE HIM , THE ASSESSEE MOVED AN APPLICATION FOR ADMISSION OF ADDITIONAL EVIDENCE UNDER RULE 46A OF THE I.T RULES 1962 , B UT THE LEARNED CIT(A) CALLED FOR THE REMAND REPOR T ON THE ADDITIONAL EVIDENCE AS FILED BY THE ASSESSEE BEFORE HIM. AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE, THE LEARNED CIT(A) DISMISSED THE APPLICATION FOR LEADING ADDITIONAL EVIDENCE AS WELL AS APPEAL OF THE ASSESSEE VIDE HIS SAID ORDER DATED 06 - 06 - 2013 . 4 . AGGRIEVED BY THE ORDER OF LEARNED CIT(A) THE ASSESSEE PREFERRED THE PRESENT APPEAL BEFORE US ON THE GROUNDS MENTIONED HEREINABOVE. 5 . AT THE OUTSET, DURING THE COURSE OF ARGUMENTS , THE LEARNED AR APPEARING ON BEHALF OF THE ASSESSEE SUBMI TTED THAT THE ASSESSEE BE ALLOWED ADEQUATE OPPORTUNITY TO LEAD THE SAID ADDITIONAL EVIDENCE , WHICH WAS WRONGLY DENIED BY DISMISSING THE APPLICATION AS WELL AS APPEAL OF THE ASSESSEE UNDER RULE 46A OF THE I.T RULES 1962 BY THE CIT(A) . HE FURTHER SUBMITTED THAT THE ADDITIONAL EVIDENCE SOUGHT TO BE ADDUCED , ITA NO . 5447/M UM/2013 - B - JM BAKULES O.AGARWAL 3 OTHERWISE GO E S TO THE ROOT S OF THE CASE AND IS ESSENTIAL FOR THE SUBSTANTIAL CAUSE OF JUSTICE. ON OTHER HAND, THE LEARNED DR APPEARING ON BEHALF OF REVENUE HAS RELIED ON THE ORDERS OF THE LOWER AUTHOR ITIES. 6 . WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD. WE HAVE NOTED THAT THE LEARNED CIT(A) HAS DISMISSED THE APPLICATION MOVED BY THE ASSESSEE UNDER RULE 46A OF THE I.T RULES 1962 ON LY ON THE GROUND THAT THE GROUN D OF NON AVAILABILITY OF THE DOCUMENTS RAISED BY THE ASSESSEE IS NOT A VALID GROUND UNDER RULE 46A OF I.T RULES, 1962 . IN THIS RESPECT, THE LEARNED CIT(A) PASSED A DETAILED ORDER THEREBY TAKING A SPECIFIC STAND THAT IT IS NOT POSSIBLE TO ACCEPT THE CO NTENTION RAISED BY THE ASSESSEE THAT THERE WAS NON AVAILABILITY OF THE DOCUMENTS WITH THE ASSESSEE. ON THIS PREMISE, LEARNED CIT(A) UPHOLD THE ORDER OF THE AO BY DISMISSING THE APPLICATION FOR ADMISSION OF ADDITIONAL EVIDENCE. 7. ON PERUSAL OF THE ORDE R OF THE LEARNED CIT(A) AND AFTER HEARING BOTH THE PARTIES AT LENGTH, WE ARE OF THE VIEW THAT IT HAS NO WHERE BEEN MENTIONED BY CIT(A) WHILE PASSING THE IMPUGNED ORDER THAT AS TO WHETHER THE DOCUMENTS SO PRODUCED BY THE ASSESSEE AS ADDITIONAL EVIDENCE IN THE APPEAL ARE ESSENTIAL FOR THE JUST DECISION OF THE APPEAL OR FOR THE SUBSTANTIAL CAUSE OF JUSTICE . HOWEVER, THE SAID APPLICATION OF ADDITIONAL EVIDENCE WAS DISMISSED BY THE LEARNED CIT(A) MERELY ON THE GROUND THAT THE REASONS MENTIONED BY THE ASS ESSEE ARE NOT FALLING WITHIN THE AMBIT OF RULE 46A OF THE IT RULES 1962. IN THIS CONNECTION, IT IS IMPORTANT TO REITERATE THAT IT IS A SETTLED PROPOSITION AND PRINCIPLE OF LAW, THAT RULES OF P ROCEDURE ARE HANDMADE OF JUSTICE AND IF IN A GIVEN SITUATION R ULES OF PROCEDURE ARE PITTED AGAINST SUBSTANTIAL CAUSE OF JUSTICE, THEN SUBSTANTIAL CAUSE OF JUSTICE IS TO BE PREFERRED. 7. 1 I N THE IMPUGNED ORDER OF THE LEARNED CIT(A) , NOWHERE IT HAS BEEN CONSIDERED THAT THE DOCUMENTS OUGHT TO BE PRODUCED BY WAY OF A DDITIONAL EVIDENCE ARE EITHER ESSENTIAL FOR THE JUST DECISION OF THE APPEAL OR NOT , BUT THE APPLICATION WAS DISMISSED BY ITA NO . 5447/M UM/2013 - B - JM BAKULES O.AGARWAL 4 THE LEARNED CIT(A) MERELY ON THE GROUND THAT THE REASON MENTIONED IN THE APPLICATION FOR ADDITIONAL EVIDENCE IS NOT FALL ING WITHIN TH E AMBIT OF RULE 46A. THE LEARNED AR ALSO CITED THE JUDGMENT/ORDER DATED 20 - 07 - 2006 OF THE ITAT MUMBAI I BENCH IN ITA NO.202/MUM/2003 IN THE CASE OF SHAHRUKH KHAN VS. DCIT IN SUPPORT OF HIS ARGUMENTS , WHEREIN IT HAS BEEN HELD AS UNDER: - APPEAL (CIT)(A) - ADDITIONAL EVIDENCE - SCOPE OF POWERS OF CIT(A) TO REFUSE ADMISSION - AFTER CALLING OF REMAND REPORT FROM AO ON MERIT AS ENVISAGED IN SUB - R.(3) OF R.46A, CIT(A) HAD NO DISCRETION TO REFUSE TO ADMIT ADDITIONAL EVIDENCE. FROM READING OF R. 46A IT/S DISCERNIB LE THAT SUB - R. (1) CONTEMPLATE CERTAIN CONDITIONS WHICH ARE REQUIRED TO BE FULFILLED BY AN APPELLANT BEFORE PERMISSION TO PRODUCE ADDITIONAL EVIDENCE CAN BE GRANTED TO HIM. SUCH CONDITIONS ARE SPECIFIED IN C/S. (A) TO (D). WHENEVER ANY ADDITIONAL EVIDENCE IS PRODUCED BEFORE THE FIRST APPELLATE AUTHORITY UNDER THE IT ACT THEN THE APPELLATE AUTHORITY I.E. DY. CIT(A) OR CIT(A) WOULD RECORD REASONS IN WRITING FOR ADMITTING SUCH ADDITIONAL EVIDENCE, AS PER THE REQUIREMENT OF SUB - R. (2). AFTER PERMITTING AN ASSES SEE TO ADDUCE ADDITIONAL EVIDENCE NEXT STAGE WOULD COME THAT AO IS TO BE GRANTED AN OPPORTUNITY TO EXAMINE THE EVIDENCE OR THE DOCUMENTS OR TO EXAMINE THE WITNESS PRODUCED BY THE APPELLANT. THE AO WOULD FURTHER BE AT LIBERTY TO PRODUCE ANY OTHER EVIDENCE IN REBUTTAL OF THE ADDITIONAL EVIDENCE PRODUCED BY THE ASSESSEE. THUS ON READING OF ALL THES E THREE SUB - RULES IT IS IMPLICITY CLEAR THAT FIRST STAGE IS THE ASSESSEE SOUGHT PERMISSION FOR THE ADMISSION OF ADDITIONAL EVIDENCE, THE NEXT STAGE WOULD COME TH AT SUCH PERMISSION WOULD BE GRANTED BY RECORDING REASONS AND THEREAFTER THE ADDITIONAL EVIDENCE WOULD BE SENT TO THE AO FOR EXAMINATION. IN THE PRESENT CASE THOUGH FROM THE RECORD IT IS NOT DISCERNIBLE WHETHER PERMISSION TO ADDUCE ADDITIONAL EVIDENCE WAS G RANTED BY RECORDING REASONS IN WRITING, BUT IMPLIEDLY IT IS DISCERNIBLE THAT AFTER FILING THE ADDITIONAL EVIDENCE CIT TOOK STEP PROVIDED IN SUB - R. (3) SO IT GIVES AN INFERENCE THAT THE ADDITIONAL EVIDENCE SOUGHT TO BE PRODUCED BY THE ASSESSEE WAS A RELEVAN T MATERIAL AND THE CIT (A) HAD ENTERTAINED THIS ADDITIONAL EVIDENCE AND ONLY THEREAFTER SENT IT TO THE AO UNDER SUB - R. (3) FOR VERIFICATION. THUS AFTER CALLING OF THE REMAND REPORT ON MERIT AS CONTEMPLATED IN SUB - R. (3) OF R. 46A THE CIT(A) IS PRECLUDED WI TH HIS DISCRETION FOR REFUSING TO ADMIT THE ADDITIONAL EVIDENCE. HE CAN REJECT IT AS NOT SUFFICIENT OR NOT PROVED BUT IT IS TO BE CONSTRUED THAT EVIDENCE HAS BEEN TAKEN ON RECORD. APART FROM ALL THESE THINGS SUB - RULE (4) OF RULE 46A PROVIDE VAST POWERS TO THE CIT(A). HE CAN EXERCISE HIS DISCRETION FOR ENTER ANY EVIDENCE EVEN THOUGH THE CASE OF THE ASSESSEE DOES NOT FALL WITHIN THE EXCEPTIONS PROVIDED IN CLS. (A) TO (D) OF SUB - R (1), THE MOMENT CIT(A) ARRIVE AT A CONCLUSION THAT THE EVIDENCE SOUGHT TO BE PRO DUCED BY THE ASSESSEE IS ESSENTIAL FOR THE JUST DECISION OF THE APPEAL OR FOR THE SUBSTANTIAL CAUSE OF JUSTICE, IT IS NECESSARY TO CALL SUCH MATERIAL ON RECORD. IN THAT SITUATION INTERDICTION PROVIDED IN SUB - RR(1) AND (2) WOULD NOT COME IN ITS WAY. CIT(A) HAS WRONGLY REFUSED TO ADMIT THE ADDITIONAL EVIDENCE PRODUCED BY THE ASSESSEE AND HIS ORDER IS DESERVES TO BE SET ASIDE. ITA NO . 5447/M UM/2013 - B - JM BAKULES O.AGARWAL 5 7 . 2 WHILE APPRECIATING THE JUDGMENT IN THE CASE OF SHARUKH KHAN VS. DCIT ( SUPRA ) , WE ARE OF THE CONSIDERED VIEW THAT T HE RATIO LA ID DOWN IN THE CITED CASE IS ALSO APPLICABLE IN THE PRESENT CASE AND WE ARE ALSO OF THE VIEW THAT RULE 46 PROVIDES VAST POWERS TO THE CIT(A) . HE CAN EXERCISE HIS DISCRETION FOR ENTER TAINING ANY EVIDENCE EVEN THOUGH THE CASE OF THE ASSESSEE DOES NOT FALL WITHIN THE EXCEPTIONS PROVIDED IN CLS. (A) TO (D) OF SUB - R ( 1) . I F CIT(A) ARRIVES AT A CONCLUSION THAT THE EVIDENCE SOUGHT TO BE PRODUCED BY THE ASSESSEE, IS ESSENTIAL FOR THE JUST DECISION OF THE APPEAL OR FOR THE SUBSTANTIAL CAUSE OF JUSTICE, IT IS NE CESSARY TO CALL SUCH MATERIAL ON RECORD. IN THAT SITUATION INTERDICTION PROVIDED IN SUB - RR (1) AND (2) WOULD NOT COME IN ITS WAY. 7. 3 IN THE PRESENT CASE, THE CIT(A) HAS WRONGLY REFUSED TO ADMIT THE ADDITIONAL EVIDENCE PRODUCED BY THE ASSESSEE ON THE SOLE GROUND THAT THE REASONS MENTIONED IN THE APPLICATION ARE IMPOSSIBLE TO ACCEPT, WHEREAS IN THE PRESENT CASE THE CIT (A) HAS ALREADY CALLED FOR A REMAND REPORT ON THE ADDITIONAL EVIDENCES FILED BY APPELLANT, THEREFORE, WHILE RELYING UPON THE ORDERS PASSED BY THE C O - ORDINATE BENCH OF MUMBAI ITAT IN THE CASE OF SHARUKH KHAN VS. DCIT (SUPRA) , WE ALSO HOLD THAT SINCE IN THE PRESENT CASE THE CIT(A) HAS ALREADY CALLED FOR THE REMAND REPORT FROM A.O ON MERITS AS ENVISAGED IN SUB R(3) OF R 46A , THEN CIT(A) HAD NO DISCRETION TO REFUSE TO ADMIT ADDITIONAL EVIDENCE. IN VIEW OF THE ABOVE CIRCUMSTANCES , WE ARE REMITTING THE ISSUE/ MATTER BACK TO THE FILE OF THE AO FOR CONSIDERING THE ADDITIONAL EVIDENCE S, IF ANY, AS FILED BEFORE THE CIT(A) AS WELL AS BEFORE HIM. T HE GROUNDS RAISED BY THE ASSESSEE ARE ALLOWED FOR STATISTICAL PURPOSE. ITA NO . 5447/M UM/2013 - B - JM BAKULES O.AGARWAL 6 8 . IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSE AS STATED ABOVE. ORDER PRONOUNCED IN THE OPEN COURT ON 11 - 07 - 2016 1 . THE AP PELLANT: BAKULESH O AGARWAL BANSIDHAR BHAVAN, TURNER ROAD, BANDRA(W), MUMBAI - 50. 2 THE RESPONDENT - INCOME TAX OFFICER, WARD 19(3)(1), PIRAMAL CHAMBER, 3 RD FL, PAREL MUMBAI. 3 / THE CIT, 4.THE CIT(A) 5 . DR, MUMBAI BENCH 6 . GUARD FILE . TRUE COPY, BY ORDER, ASSTT REGISTRAR **PRADIP/SPS SD/ - R .C. SHARMA ACCOUNTANT MEMBER SD/ - SANDEEP GOSAIN JUDICIAL MEMBER DATE 11 - 07 - 2016 COPY OF THE ORDER FORWARDED TO: ITA NO . 5447/M UM/2013 - B - JM BAKULES O.AGARWAL 7 NO. PARTICULARS DATE INITIALS PERSON CONCERNED 1 DICTATION GIVEN ON 11/7 PP SPS 2 DRAFT PLACED BEFORE AUTHOR 1 5 /7 PP SPS 3 DR AFT PROPOSED/PLACED BEFORE THE SECOND MEMBER 4 DRAFT DISCUSSED/APPROVED BY SECOND MEMBER 5 APPROVED DRAFT COMES TO THE SR.PS 20/7 PP SPS 6 KEPT FOR PRONOUNCEMENT ON 11/7 7 FILE SENT TO THE BENCH CLERK 21/7 PP SPS 8 DATE ON WHICH FILE GOES TO THE HEAD CLERK 9 D ATE OF DISPATCH OF ORDER