ARS SYSTEMS & COMMUNICATIONS LTD, NAVI MUMBAI V. ITO 9(1)(1), MUMBAI

ITA 5591/MUM/2013

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 1052 (ITAT-MUMBAI)
• Duration Of Justice: 3 year(s) 8 month(s) 2 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 05-05-2017
• Appeal Filed By: Assessee
• Bench Allotted: A
• Next Hearing Date: 17-02-2017
• Assessment Year: 2005-2006
• Appeal Filed On: 02-09-2013
• Court: TRIBUNAL
• Department Lawyers: M RAJGURU
• Assessee Lawyers: SANJAY R PARIKH
• Keywords: Unexplained expenditure; Opportunity of being heard; Additional evidence; Tax effect
• Section: 69C; 143(3); 133(6)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES A , MUMBAI BEFORE S HRI R.C. SHARMA (AM) AND SHRI RAM LAL NEGI (JM) ITA NO. 5591 /MUM/20 1 3 ASSESSMENT YEAR: 2005 - 06 M/S ARS SYSTEMS & COMMUNICATIONS LTD., 102, SUNIL APARTMENT, 17, MEENA BAUG, TALMIKI R OAD, SANTACRUZ (W), MUMBAI - 400054 PAN: AAACA9352Q VS. THE ITO 9(1) (1), ROOM NO. 226, 2 ND FLOOR, AYAKAR BHAVAN, M.K. ROAD, MUMBAI - 400020 (APPELLANT) (RESPONDENT) & ITA NO. 5170/MUM/2013 ASSESSMENT YEAR: 2005 - 06 THE ITO 9(1) (1), ROOM NO. 2 26, 2 ND FLOOR, AYAKAR BHAVAN, M.K. ROAD, MUMBAI - 400020 VS. M/S ARS SYSTEMS & COMMUNICATIONS LTD., 102, SUNIL APARTMENT, 17, MEENA BAUG, TALMIKI ROAD, SANTACRUZ (W), MUMBAI - 400054 PAN: AAACA9352Q (APPELLANT) (RESPONDENT) APPELLANT BY : SHR I SANJAY R. PARIKH RESPONDENT BY : SHRI M. RAJGURU DATE OF HEARING: 17/03 /201 7 DATE OF PRONOUNCEMENT: 05 / 0 5 /201 7 2 ITA NO S . 5591 & 5170/MUM/2013 ASSESSMENT YEAR: 2005 - 06 O R D E R PER RAM LAL NEGI, JM THESE ARE THE CROSS APPEALS FILED BY THE A SSESSEE AND THE REVENUE AGAINST ORDER DATED 17/05/2013 PASSED BY THE LD. CIT (A) - 19 , MUMBAI , FOR THE ASSESSMENT YEAR 2005 - 06, WHEREBY THE LD. CIT (A) HAS PARTLY ALLOWED THE APPEAL FILED BY ASSESSEE AGAINST ASSESSMENT ORDER PASSED UNDER SECTION 143(3) READ WITH SECTION 254 OF THE INCOME TAX ACT, 1961. (FOR SHORT THE ACT) ITA NO. 5591/MUM/2013 (ASSESSMENT YEAR: 2005 - 06 ) 2. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE COMPANY FILED ITS RETURN OF INCOME FOR THE ASSESSMENT YEAR UNDER CONSIDERATION DE CLARING THE TOTAL INCOME OF RS. 21,31,650/ - . THE RETURN WAS PROCESSED U/S 143(3) OF THE ACT AND AFTER MAKING CERTAIN DISALLOWANCES INCLUDING DISALLOWANCE OF RS. 51,86,235/ - ON ACCOUNT OF UNEXPLAINED EXPENDITURE U/S 69C R.W.S.133(6) OF THE ACT. IN FIRST APP EAL, THE LD. CIT(A) CONFIRMED THE SAID DISALLOWANCE. AGAINST THE ORDER OF THE LD. CIT(A) , THE ASSESSEE PREFERRED SECOND APPEAL BEFORE THE ITAT. THE ITAT SET ASIDE THE ISSUE TO THE FILE OF AO FOR FRESH ADJUDICATION IN THE LIGHT OF THE ADDITIONAL EVIDENCE PR ODUCED BY THE ASSESSEE DURING THE APPELLATE PROCEEDINGS BEFORE THE LD. CIT(A). 3 . DURING SET ASIDE PROCEEDINGS THE ASSESSEE SUBMITTED THE DETAILS CALLED FOR BY THE AO. THE AO ISSUED NOTICES UNDER SECTION 133(6) OF THE ACT AND ON THE BASIS OF THE RESPONSE S OF THE PARTIES CONCERNED REDUCED THE DISALLOWANCE TO RS. 22,80,512/ - AND ACCORDINGLY DETERMINED THE TOTAL INCOME OF THE ASSESSEE. THE ASSESSEE CHALLENGED THE ASSESSMENT ORDER BEFORE THE CIT(A) IN THE SECOND ROUND OF APPEAL. THE LD. CIT(A) AFTER HEARING T HE GRIEVANCE OF THE ASSESSEE OBTAINED REMAND REPORT FROM THE AO AND PASSED ORDER DIRECTING THE 3 ITA NO S . 5591 & 5170/MUM/2013 ASSESSMENT YEAR: 2005 - 06 AO TO DELETE THE ADDITION OF RS. 19,84,682/ - MADE ON ACCOUNT OF PURCHASES FROM FOUR PARTIES. STILL AGGRIEVED, THE ASSESSEE IS IN APPEAL BEFORE THE TRIBUNAL. T HE ASSESSEE HAS RAISED THE FOLLOWING EFFECTIVE GROUNDS OF APPEAL AGAINST THE IMPUGNED ORDER PASSED BY THE LD. CIT (A): - A) ADDITION U/S. 69C ON ACCOUNT OF ALLEGED UNACCOUNTED EXPENDITURE RS. 2,95,995/ - 1) THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) - 19, M UMBAI [CIT (A)] ERRED ON FACTS AND IN LAW IN CONFIRMING THE ADDITION MADE BY THE INCOME TAX OFFICER - 9(1) - 1, MUMBAI (AO) U/S 69C TO THE EXTENT OF RS. 2,95,995/ - AS UNDER WITH RESPECT TO THE DIFFERENCE IN PURCHASES SHOWN BY THE APPELLANT AND BY THE SELLER P ARTIES: A) THE BEST - RS. 2,83,511/ - B) M/S S & S EXIM - RS. 4,165/ - C) M/S PARASURAM M. BADI RS. 8,319/ - 2) THE APPELLANT PRAYS THAT THE ADDITION OF RS. 2,95,995/ - AS MADE BY THE AO AS UNDER AND AS CONFIRMED BY THE CIT (A) MAY BE DELETED: A) THE BEST - RS. 2,83,511/ - B) M/ S S & S EXIM - RS. 4,165/ - C) M/S PARASURAM M. BADI RS. 8,319/ - B) GENERAL 3) THE ABOVE GROUNDS OF APPEAL ARE WITHOUT PREJUDICE TO ONE ANOTHER AND THE APPELLANT CRAVES LEAVE TO ADD, ALTER, AMEND, DELETE OR MODIFY ANY OF THE ABOVE GROUNDS OF APPEAL. 4 . BEFORE U S , THE LD. C OUNSEL FOR THE ASSESSEE SUBMITTED THAT THE ASSESSEE DOES NOT WANT TO CONTEST THE ADDITION OF RS. 4,165/ - AND RS. 8,318/ - MADE ON ACCOUNT OF PURCHASES MADE FROM M/S S & S EXIM AND M/S PARASURAM M. BADI RESPECTIVELY , FOR THE REASON THAT THE AMOUNT S ARE TOO SMALL. AS REGARDS THE ADDITION OF RS. 2,83,511/ - MADE ON ACCOUNT OF PURCHASES FROM THE BEST , THE LD. COUNSEL SUBMITTED THAT THE DIFFERENCE OF RS. 2,83,511/ - NOTICED BY THE 4 ITA NO S . 5591 & 5170/MUM/2013 ASSESSMENT YEAR: 2005 - 06 AO IS DUE TO THE REASON THAT CHEQUE S FOR RS. 2,65 , 011/ - ISSUED WERE NOT HONO URED AND IF THE SAID AMOUNT IS REDUCED FROM RS. 2,83,511/ - , THERE REMAINS A DIFFERENCE OF RS. 18,500/ - . THE SAID DIFFERENCE IS MAINLY ON ACCOUNT OF BILL DATED 1.4.2014 WHICH SEEMS TO HAVE BEEN ACCOUNTED IN THE NAME OF SOME OTHER PARTY. THE LD . COUNSEL FURT HER SUBMITTED THAT THIS ASPECT WAS NOT CONSIDERED BY THE AUTHORITIES BELOW. 5 . ON THE OTHER HAND THE LD. DEPARTMENTAL REPRESENTATIVE (DR) RELYING ON THE ASSESSMENT ORDER PASSED BY THE AO SUBMITTED THAT THERE IS NO MERIT IN THE CONTENTION OF THE ASSESSEE. THE ASSESSEE HAS FAILED TO EXPLAIN THE DIFFERENCE IN AMOUNTS MENTIONED BY THE ASSESSEE AND THE AMOUNTS MENTIONED BY THE PARTIES CONCERNED FROM WHOM THE PURCHASES WERE MADE. THE LD. DR FURTHER SUBMITTED THAT THE DEPARTMENT HAS FILED CROSS APPEAL AGAINST THE RELIEF GRANTED BY THE LD. CIT(A) IN RESPECT OF THE PURCHASES FROM THE OTHER PARTIES. 6 . WE HAVE HEARD THE RIVAL SUBMISSIONS AND ALSO PERUSED THE MATERIAL PLACED BEFORE US BY THE PARTIES IN SUPPORT OF THEIR RESPECTIVE CONTENTIONS. WE NOTICE THAT THE DUR ING THE SET ASIDE PROCEEDINGS AO ISSUED NOTICES U/S 133(6) TO THE NINE PARTIES, INCLUDING THE BEST, AFTER OBTAINING THEIR PRESENT ADDRESSES FROM THE ASSESSEE. AFTER RECEIVING RESPONSE FROM THE PARTIES, THE ASSESSEE WAS ASKED TO EXPLAIN AND RECONCILE THE DIFFERENCE IN AMOUNTS MENTIONED BY THE ASSESSEE AND THE AMOUNTS REFLECTED BY THE PARTIES CONCERNED. AFTER CONSIDERING THE EXPLANATION OF THE ASSESSEE THE AO DETERMINED THE DIFFERENCE AT RS. 22,80,512/ - . IN THE FIRST APPEAL THE LD. CIT(A) DELETED THE ADDITI ON OF RS. 19,84,682/ - FOLLOWING THE PRINCIPLES OF LAW LAID DOWN BY THE HONBLE BOMBAY HIGH COURT IN M/S NIKUNJ EXIMP ENTERPRISES PVT. LTD. ITA NO 5604 OF 2010 DATED 17.12.2012 , H OWEVER, CONFIRMED THE REMAINING ADDITION OF RS. 2,95,995/ - . 5 ITA NO S . 5591 & 5170/MUM/2013 ASSESSMENT YEAR: 2005 - 06 7 . THE ASSESSEES GRIEVANCE AGAINST THE ADDITION OF RS. 2,83,511/ - MAD E ON ACCOUNT OF PURCHASES FROM THE BEST. THE CONTENTION OF THE ASSESSEE IS THAT THE DIFFERENCE IN QUESTION HAS OCCURRED DUE TO THE REASON THAT CHEQUE DATED 19.5.2004, 20.7.2004 AND 12.5.2005 FOR RS. 4,850 , RS. 2,50,000/ - AND RS. 10,161/ - WERE NO T HONOURED AND ONE BILL WAS ACCOUNTED IN THE NAME OF SOME OTHER PARTY. THE ASSESSEE HAS POINTED OUT THAT THE AUTHORITIES BELOW HAVE NOT CONSIDERED THIS ASPECT WHILE DECIDING THIS ISSUE. WE ALSO NOTICE THAT THE ASSES SEE HAS EXPLAINED THE SAID REASON IN ITS WRITTEN SUBMISSIONS DATED 19.10 2012 MADE BEFORE THE LD. CIT(A) . UNDER THESE CIRCUMSTANCES WE ARE OF THE CONSIDERED VIEW THAT THIS ASPECT IS REQUIRED TO BE CONSIDERED AFRESH IN THE INTEREST OF JUSTICE. WE, THEREFORE , SET ASIDE THE FINDINGS OF THE LD. CIT(A) AND SEND THIS ISSUE BACK TO THE AO WITH THE DIRECTION TO DECIDE THIS ISSUE AFRESH IN THE LIGHT OF THE AFORESAID CONTENTION, AFTER AFFORDING A REASONABLE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. ITA NO. 5 17 0/MUM/2013 (ASSESSMENT YEAR: 2005 - 06 ) THE DEPARTMENT HAS RAISED THE FOLLOWING EFFECTIVE GROUNDS OF APPEAL AGAINST THE IMPUGNED ORDER PASSED BY THE LD. CIT (A): - 1. WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT (A) WAS RIGHT IN ADMITTING ADDITIONAL EVIDENCE IN FORM OF CERTIFICATE FROM BANK WHEREIN THE BANK CONFIRMED THE PAYMENTS MADE TO THE PARTIES BY THE ASSESSEE COMPANY WITHOUT ALLOWING OPPORTUNITY TO THE ASSESSING OFFICER AS REQUIRED UNDER RULE 46A(3) OF THE IT ACT?. 2. WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT (A) WAS RIGHT IN DELETING THE ADDITION U/S 69C OF THE I.T. ACT AMOUNTING TO RS. 19,84,682/ - IN RESPECT OF THE PURCHASES FROM THE PARTIES WITHOUT APPRECIATING THE FACT THAT T HE PARTIES HAVE NOT CONFIRMED THE SALES TO THE ASSESSEE TO THIS EXTENT IN THEIR REPLIES TO THE NOTICES ISSUED U/S 133 (6) BY THE ASSESSING OFFICER. 6 ITA NO S . 5591 & 5170/MUM/2013 ASSESSMENT YEAR: 2005 - 06 3. THE APPELLANT PRAYS THAT THE ORDER OF THE CIT (A) ON THE GROUNDS BE SET ASIDE AND THAT OF THE ASSESSING OFFI CER BE RESTORED. 4. THE APPELLANT CRAVES LEAVE TO AMEND OR ALTER ANY GROUNDS OR ADD A NEW GROUND WHICH MAY BE NECESSARY. 2 . AT THE OUTSET, THE LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE TAX EFFECT IN THIS CASE IS BELOW RS.10,00,000/ - AND AS PER THE CBDT CIRCULAR NO. 21 OF 2015, DATED 10/12/2015, THE PRESENT APPEAL IS NOT MAINTAINABLE. 3 . THE LD. DR FAIRLY ADMITTED THAT THE TAX EFFECT IN DEPARTMENTS APPEAL IS BELOW RS.10 LAKHS, W E FIND THAT THE ISSUES RAISED IN APPEAL DO NOT FALL UNDER ANY OF T HE EXCEPTIONS SPECIFIED IN PARA 8 OF THE CIRCULAR. SINCE, IT HAS BEEN SPECIFICALLY CLARIFIED IN THE CIRCULAR AFORESAID THAT THE INSTRUCTION WILL APPLY RETROSPECTIVELY TO ALL THE PENDING APPEALS; THE PRESENT APPEAL FILED BY THE REVENUE IS NOT MAINTAINABLE. WE, THEREFORE, DISMISS THE SAME IN LIMINE . 4 . IN THE RESULT, APPEAL FILED BY THE ASSESSEE FOR ASSESSMENT YEAR 2005 - 06 IS PARTLY ALLOWED FOR THE STATISTICAL PURPOSES AND THE APPEAL FILED BY THE REVENUE IS DISMISSED . ORDER PRONOUNCED IN THE OP EN COURT ON 05 TH MAY , 2017 . SD/ - SD/ - ( R.C. SHARMA ) ( RAM LAL NEGI ) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI ; DATED: 05 / 0 5 / 2017 ALINDRA, PS 7 ITA NO S . 5591 & 5170/MUM/2013 ASSESSMENT YEAR: 2005 - 06 / 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