ITO 24(1)(1), MUMBAI V. MANISH GOBINDRAM SAHNI, MUMBAI

ITA 5554/MUM/2013

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 93024 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 9 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-06-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2009-2010
• Appeal Filed On: 26-08-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Unexplained investment; Share purchase agreement
• Section: 133(6); 69; 144

Judgement Text

, INCOME TAX APPELLATE TRIBUNAL,MUMBAI B BENCH , , , BEFORE S/SH. JOGINDER SINGH ,JUDICIA L MEMBER & RAJENDRA,ACCOUNTANT MEMBER /. ITA NO. 5554 /MUM/2013, / ASSESSMENT YEAR - 200 9 - 10 INCOME TAX OFFICER - 24(1)(1) ROOM NO.607, C - 13, 6 TH FLOOR, PRATYAKSHAKAR BHAVAN, B ANDRA KURLA COMPLEX MUMBAI - 51 VS SHRI MANISH GOBINDR AM SAHNI 703, USHA GARDEN, AHIMSA MARG, MALAD LINK ROAD, MALAD (W) MUMBAI - 400 067. PAN: AORPS 9022 B ( / APPELLANT ) ( / RESPONDENT ) /ASSESSEE BY :NONE / REVENUE BY :SHRI SANJAY PUNGLIA - DR / DATE OF HEARING : 23 - 0 6 - 2015 / DATE OF PRONOUNCEMENT : 23 - 0 6 - 2015 , 1961 254 ( 1 ) ORDER U/S.254(1)OF THE INCOME - TAX ACT,1961(ACT) PER RAJENDRA, AM - CHALLENGING THE ORDER DATED 21.6.2013 OF THE CIT(A) - 34, MUMBAI ,THE ASSESSING OFFICER(AO) HAS RAISED FOLLOWING GROUNDS OF APPEAL: 1.WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A.) HAS ERRED IN DELETING THE ADDITION ON ACCOUNT OF UNEXPLAINED INVESTMENT TO THE TUNE OF RS.30,28,875/ - ON THE G ROUND THAT THE A.O. HAD MADE THE ADDITION ON PRESUMPTION BASIS WITHOUT ANY COGENT REASON AND BRINGING ANY EVIDENCE ON RECORD IGNORING THE FACT THAT THE SHARE CERTIFICATE DATED 5.2.2012 WAS ISSUED IN THE NAME OF THE ASSESSEE AND THAT THE ASSESSEE HA D NOT FILED ANY DETAILS BEFORE A.O DURING THE COURSE OF ASSESSMENT PROCEEDINGS. 1.1 WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. C.I.T. (A) ERRED IN DECIDING THE GROUND IN FAVOUR OF THE ASSESSEE WHEN THE ASSESSEE DID NOT DISCHARGE THE ONUS OF PROVING THE THIRD PARTY RIGHT CREATED IN RESPECT OF THE PROPERTY, THE FACT WHICH WAS BROUGHT ON RECORD BY THE LD. C. I. T. (A) HIMSELF IN PARA 2.13 OF HIS ORDER 2. WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND I N LAW, THE LD. CIT(A) ERRED IN DELETING THE DISALLOWANCE OF RS. 32,88,407/ - MADE BY THE AO ON ACCOUNT OF UNVERIFIABLE EXPENSES DESPITE THE ASSESSEE FAILING TO PRODUCE THE PROOF OF EXPENSES INCURRED DESPITE SEVERAL OPPORTUNITIES GIVEN BY THE AO DURI NG THE COURSE OF ASSESSMENT PROCEEDINGS' . ASSESSEE,AN INDIVIDUAL, FILED HIS RETURN OF INCOME ON 30.9.2009 DECLARING TOTAL INCOME OF RS. 1, 19,620/ - . THE AO COMPLETED THE ASSESSMENT U/S. 144 OF THE ACT,ON 21.12. 2011, DETERMINING INCOME OF THE ASSESSEE AT RS. 64.36 LACS. 2.F IRST GROUND OF APPEAL IS ABOUT DELETING ADDITION ON ACCOUNT OF UNEXPLAINED INVESTMENT TO THE TUNE OF 30.2 8 LACS . AS PER THE AIR INFORMATION THE ASSESSEE HAD PURCHASED IMMOVABLE PROPERTY ON 11.9.2008 FOR AN AM OUN T OF RS. 30.28 LACS. AS P ER THE AO THE ASSESSEE DID NOT APPEAR BEFOR E ITA/ 5554 /MUM/2013,AY. 0 9 - 10 - MANISH G 2 HIM INSPITE OF SERVICE OF NOTICE ON HIM. THE AO ISSUED A SHOW CAUSE NOTICE THAT WAS SERVED UPON THE WIFE OF THE ASSESSEE ON 14.11.2011. A S THE ASSESSEE DID NOT APPEAR BEFOR E HIM,THE AO COMPLETED THE ASSESSMENT U/ S. 144, AS STATED EARLIER AND MADE AN ADDITION OF RS.30 , 28 , 875/ - TO THE TOTAL INCOME OF THE ASSESSEE. HE HELD THAT THE SOURCE OF INVESTMENT HAD NOT BEEN EXPLAINED BY THE ASSESSEE .I NVOKING THE PROVISIONS OF S ECTION 69 OF THE A CT THE AO TREATED IT AS UNEXPL AINED INVESTMENT. 2.1 . AGGRIEVED BY THE ORDER OF THE AO,THE ASSESSEE PREFERRED AN APPEAL BEFORE THE FIRST APPELLATE AUTHORITY(FAA). BEFORE HIM, IT WAS STATED THAT ASSESSEE HAD NOT PURCHASED THE ALLEGED PROPERTY I.E. SHOP NO.2 , BUILDING NO.26 , SHASTRI NAGAR , GOREGAON MUMBAI , DURING THE YEAR UNDER APPEAL , THAT AT THE INITIAL STAGE HE HAD PAID A TOKEN AM OUN T TOWARDS PURCHASE OF A FLAT, THAT AT LATER STAGE THE PROPERTY WAS TRANSFERRED TO OTHER PARTY AS ASSESSEE WAS NOT ABLE TO PAY BALANCE AM OUN T , THAT DURING T HE YEAR UNDER CONSIDERATION HE HAD PAID RS.8.00 LACS TO THE B UILDER AT THE TIME OF REGISTRATION, THAT ON 23.3. 20 09 AN AMOUNT OF RS.3.00 LACS WAS PAID, THAT IN THE SUBSEQUENT Y EA R DUE TO FINANCIAL CRISIS HE COULD NOT PAY FULL AGREEMENT VALUE TO THE B UILDER . THE ASSESSEE FURNISHED COPIES OF PURCHASE AGREEMENT EVIDENCING THE VALUE OF PROPERTY AND PAYMENTS MADE TO THE BUILDER . THE ASSESSEE ALSO BROUGHT TO THE NOTICE OF THE FAA THAT DIVORCE PETITION WAS FILED BY THE ASSESSEE S WIFE DURING THE SAME PERIOD. C ONSID ERING THESE FACTS,T HE FAA DIRECTED THE AO TO FILE A REMAND REPORT AFTER CONSIDERING THE PAPER SUBMITTED BY THE ASSESSEE . IN HIS REMAND REPORT, THE AO MENTIONED THAT AS PER THE INFORMATION REC EIVED FROM J OINT S UB - R EGISTRAR THE ACTUAL COST OF THE PROPER TY WAS RS. 30.00 LACS, THAT ASSESSEE HAD CLAIMED FROM THE A BO VE PAID RS. 11 .00 LACS OUT OF HIS OWN SOURCES AND LOAN, THAT HE HAD NOT FILED LOAN CONFIRMATION, THAT EVIDENCE OF TRANSFERRING THE PROPERTY T O THIRD PARTY WAS NOT PRODUCED.THE FAA FORWARDED THE C OPY OF THE REMAND REPORT TO THE ASSESSEE WHO FILED DETAILED EXPLANATION OF THE IMMOVABLE PROPERTY PURCHASED. AFTER CONSIDERING THE SUBMISSION OF THE ASSESSEE AND THE REMAND REPORT THE FAA HELD THAT THE AO HAD NOT CALLED FOR ANY FURTHER INFORMATION, THAT TH E AO WAS DIRECTED TO EXAMINE AS TO WHETHER THE ASSESSEE HAD PAID RS. 19 .00 LACS OVER AND ABOVE RS.11 .00 LACS ACTUALLY CLAIMED TO HAVE BEEN PAID, THAT THE AO WAS DIRECTED SPECIFICALLY TO GIVE A FINDING AS TO WHETHER ANY EVIDENCE HAD BEEN GATHER E D DURING THE COURSE OF ASSESSMENT PROCEEDINGS /R EMAND PROCEEDINGS TO SHOW THAT THE ASSESSEE HAD PAID ENTIRE CONSIDERA - TION OF RS.30.00 LACS TO THE BUILDER. THE FAA PERUSED THE BANK ACCOUNT AND OBSERVED THAT THE AO HAD NOT EXAMINED THE STATEMENT OF BANK ACCOUNT PROPERL Y WHILE SENDING THE SECOND REMAND REPORT, THAT THE CONTENTION OF THE ASSESSEE ABOUT PAYING RS. 11 .00 LACS WAS FOUND TO BE CORRECT , THAT THE ASSESSEE HAD INTERNAL ACCRUALS TO THE EXTENT OF RS. 8 .00 LACS, THAT IT WAS THE SOURCE OF PART PAYM EN T OF RS. 8 .00 LAC S MADE TO THE B UILDER AT THE TIME OF ENTERING INTO T H E AGREEMENT, THAT SOURCE FOR THE PART PAYMENT OF RS. 8 .00 LACS STOOD EXPLAINED BY THE ASSESSEE , THAT TH E BALANCE OF RS.3.00 LACS WERE PAID BY CHEQUE, THAT THE ASSESSEE HAD EXPLAINED TH E SOURCE OF ENTIRE RS.11 .00 LACS PAID TO THE BUILDER, THAT THE AGREEMENT FOR A TOTAL CONSIDERATION OF RS. 30 .00 LACS, THAT THE ASSESSEE HAD MADE PART PAYMENT OF RS. 8 .00 LACS ON THE DATE OF AGREEMENT, THAT THE AO HAD FAILED TO MAKE ANY ENQUIRY WITH THE BUILDER AND TO ASCERTAIN WHETHER BAL ANCE PAYMENT OF RS. 1 9 LACS WAS PAID TO THE ASSESSEE OR NOT, THAT AO HAD RELIED ON SHARE CERTIFICATE ISSUED BY HOUSING SOC IETY,T HAT SHARE CERTIFICATE WAS OBTAINED DURING ASSESSMENT PROCEEDINGS , T HAT DURING REMAND PROCEEDIN G S NO FRESH MATERIAL WA S GATHER TO ESTABLISH THAT THE ASSESSEE HAD MADE FULL PAYMENT TO T H E BUILDER, THAT THE FINDING OF THE AO WAS WITHOUT ANY BASIS OR EVIDENCE. ITA/ 5554 /MUM/2013,AY. 0 9 - 10 - MANISH G 3 2. 2. B EFORE US, DEPARTMENTAL REPRESENTATIVE(DR) SUPPORTED THE ORDER OF AO AND CONTENDED THAT AGREEMENT WAS FOR RS. 30 . 00 LACS, THAT THE SHARE CERTIFICATE WAS IN THE NAME OF THE ASSESSEE . AS STATED EARLIER, N ONE APPEARED ON BEHALF OF THE ASSESSEE. 2. 3. WE HAVE PERUSED THE MATERIAL AVAILABLE ON RECORD .WE FIND THAT AO HAD PASSED THE ASSESSMENT ORDER U/S. 144 OF THE ACT, THAT THE ASSESSEE SUBMITTED RE QUISITE DETAILS BEFORE THE FAA, THAT THE AO HAD SUBMITTED THROUGH REMAND REPORTS TO FAA , THAT THE AO WAS DIRECTED TO MAKE ENQUIRIES ABOUT TOTAL PAYMENT MADE BY THE ASSESSEE TO THE BUILDER , THAT AO DID NOT MAKE ANY FRESH ENQUIRIES IN THAT REGARD. THE FAA HAD GIVE N A CATEGORICAL FINDING THAT ASSESSEE HAD PAI D RS. 11 .00 LACS TO THE BUILDER AND THAT THE AO HAD NO EVIDENCE TO PROVE THAT BALANCE RS.19 .00 LACS WAS ALSO PAID TO THE BUILDER. IT IS STRANGE THAT THE AO DID NOT MAKE ANY ENQUIRY WITH THE B UILDER ABOUT THE PA Y MENT REC EIVE D FROM THE ASSESSEE EVEN THOUGH HE GOT TWO CHANCES DURING THE R EMAND PROCEEDINGS. THEREFORE, WE ARE OF THE OPINION THAT THE FAA WAS JUSTIFIED IN HOLDING THAT THE ADDITION MADE BY THE AO WERE WITHOUT ANY BASIS. TH E AO COULD HAVE SUMMONED/OBTAINED COPY OF LEDGER ACCOUNT OF THE ASSESSEE MAINTAINED BY THE BUILDER BEFORE SUBMITTING THE REPORT BUT HE DID NOT ISSUE A SUMMON TO THE BUILDER OR MADE ANY OTHER ENQUIRY. IN THESE CIRCUMSTANCES , WE ARE OF THE OPINION THAT THE OR DER OF THE FAA DOES NOT SUFFER FROM ANY LEGAL OR FACTUAL INFIRMITY. THEREFORE, CONFIRMING HIS ORDER WE DECIDE FIRS T GROUND OF APPEAL AGAINST THE AO. 3 . NEXT GROUND OF APPEAL IS ABOUT DELETING DISALLOWANCE OF RS.32.88 LACS MADE BY THE AO ON ACCOUNT OF UNVERI FIABLE EXPENSES. 3.1 AS STATED EARLIER THE ASSESSEE HAD NOT APPEARED BEFORE THE AO AND ORDER WAS PASSED U/S. 144 OF THE ACT. DURING THE ASSESSMENT PROCEEDINGS THE AO FOUND THAT ASSESSEE CLAIMED EXPENSES OF RS.65.76 LACS UNDER VARIOUS HEA DS. HE HELD THAT THE GENUINENESS OF THE EXPENSES COULD NOT BE VERIFIED, THAT 50% OF THE EXPENSES HAD TO BE DISALLOWED FOR WANT OF PROPER VERIFICATION. 3.2 . CHALLENGING THE ORDER OF THE AO, THE ASSESSEE PLEADED BEFORE THE FAA THAT HE HAD NOT RECEIVED ANY NOTICES FROM THE DEPARTM ENT.A S THE ASSESSEE HAD FILED CERTAIN DETAIL S REGARDING EXPENSES BEFORE THE FAA, SO HE CALLED FOR REMAND REPORT FROM THE AO. DURING THE REMAND PROCEEDINGS THE ASSESSEE FILED THE DETAILS OF PURCHASES, COPY OF PURCHASE INVOICES, COPY OF BANK STATEMENT, DETAILS OF EXPENSES, COPY OF BANK STATEMENT OF S WASTIK A UTO D EAL (SAD) . THE AO CALLED FOR INFORMATION U/S. 133(6) OF THE ACT FROM M/S. GUPTA MOTORS INDIA P. LTD. A ND SAD .IT WAS ARGUED THAT APART FROM PURCHASES , OTHER EXPENSES WERE DEBITED TO P&L ACCOUNT WHICH INCLU DED EXPENDITURE ON SALARY, PRINTING AND STATIONERY, TELEPHONE EXPENSES, ELECTRIC ITY CHARGES ETC., THAT EXPENDITURE OF THESE KINDS HAD TO BE TREATED AS NORMAL EXPENDITURE, THAT PURCHASE AS WELL AS OTHER EXPENSES WAS 100% VERIFIED BY AO THROUGH THE DETAILS SU BMITTED OF BANK STATEMENTS AND OTHER PARTY CONFIRMATIONS . THE FAA RECIEVED TWO REMAND REPORT S IN THAT REGARD. HE HELD THAT SAD HAD RESPONDED TO THE NOTICES ISSUE BY AO THOUGH IT WAS CLOSED BY THAT TIME, THAT SAD CONFIRMED THE PURCHASES .HE DIRECTED THE AO T O EXAMINE THE GENUINENESS OF PURCHASE MADE FROM SAD BY THE ASSESSEE . A S PER THE FAA THE AO WAS SILENT IN HIS REMAND REPORT , DT.11.6.13 , ABOUT THE PURCHASES MADE, THAT HE DID NOT DISCUSS ANYTHING ABOUT THE PURCHASES, THAT THERE WAS NO MATERIAL ON THE FILE T O SHOW THAT PURCHASES FROM SAD WAS BOGUS. H E TOOK INTO CONSIDERATION THE FACT THAT EXPENSES INCURRED BY THE ASSESSEE INCLUDED VARIOUS CHARGES LIKE, ELECTRICITY CHARGE RENT, INTEREST PAID TO BANK ETC. AND HELD THAT THE ASSESSEE HAD MADE MOST OF THE PAYMENT BY WAY OF CHEQUE, THAT THE BANK STATEMENT SUBMITTED BY THE ASSESSEE PROVED THE CLAIM MADE BY HIM.I N A BSENCE OF ANY POSITIVE EVIDENCE, THE FAA HELD THAT THERE WAS NO MATERIAL EVIDENCE IN THE ITA/ 5554 /MUM/2013,AY. 0 9 - 10 - MANISH G 4 POSSESSION OF THE AO TO HOLD THAT THE EXPENDITURE INCURRED WAS EITH ER FOR NON - BUS INESS OR FOR PERSONAL PURPOSES. THE FAA DELETED THE ADHOC ADDITION MADE BY THE AO. 3.3 . BEFORE US, THE DR SUPPORTED THE ORDER OF THE AO. WE FIND THAT THE AO HAD DISALLOWED THE EXPENDITURE @50%, THAT THE EXPENSE ALSO INCLUDED VARIOUS MISC ELLAN EOUS EXPENSES, THAT AO HAD NOT GIVEN ANY REASON FOR MAKING THE DISALLOWANCE, THAT THE PARTIES FROM WHOM ASSESSEE HAD PURCHASED THE GOODS HAD CONFIRMED THE TRANSACTIONS. FROM THE ORDER OF THE FAA IT IS CLEAR THAT THE AO WAS DIRECTED TO MAKE FRESH ENQUIRIES ABOUT THE PURCHASES MADE. THE FAA MENTIONED THAT THE AO HAD NOT CARRIED OUT ANY ENQUIRY IN THAT REGARD. IN OUR OPINION IF THE AO HAD DOUBT ABOUT THE PURCHASES MADE HE SHOULD HAVE MADE FURTHER ENQUIRIES. AS FAR AS THE OTHER EXPENSE S ARE CONCERNED, WE FIND TH AT AO HAD NOT OFFERED ANY COMMENT IN HIS REMAND REPORT. THER E FORE , WE HOLD THAT ORDER OF FAA IS BASED ON FACTS AND PROPER APPRECIATION OF THE MATERIAL MADE AVAILABLE TO HIM. CONFIRMING HIS ORDER WE DECIDE THE GROUND NO.2 AGAINST THE AO. AS A RESULT,APPEAL FILED BY THE AO STANDS DISMISSED. . ORDER PRONOUNCED IN THE OPEN COURT ON 23 RD , JUNE ,2015. 23 , 2015 SD/ - SD - ( / JOGINDER SINGH ) ( / RAJENDRA) / JUDICIAL MEMBER / ACCOUNTANT MEMBER / MUMBAI, /DATE: 23.06. 2015 . . . JV . SR.PS. / COPY OF THE ORDER FORWARDED TO : 1. APPELLANT / 2. RESPONDENT / 3. THE CONCERNED CIT(A)/ , 4. THE CONCERNED CIT / 5. DR A BENCH, ITAT, MUMBAI / , , . . . 6. GUARD FILE/ //TRUE COPY// / BY ORDER, / DY./ASST. REGISTRAR , / ITAT, MUMBAI.