ACIT 22(1), NAVI MUMBAI V. JINESH N. MEHTA, MUMBAI

ITA 5719/MUM/2010

• Counselvise Citation: [2011] 140 COUNSELVISE.COM (IT) 55351 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 2 month(s) 16 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-09-2011
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: I
• Assessment Year: 2007-2008
• Appeal Filed On: 14-07-2010
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Assessee Lawyers: REEPAL G TRALSHAWALA
• Keywords: Additional evidence; Bad and doubtful debts; Corroborative evidences; Avoidance of tax; Assessment record

Judgement Text

1 ITA NO. 5719/MUM/2010 (ASST YEAR2007-08) IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI I BENCH MUMBAI BENCHES, MUMBAI BEFORE SHRI J SUDHAKAR REDDY, AM & SHRI VIJAY PAL RAO, JM ITA NO. 5719/MUM/2010 (ASST YEAR2007-08) THE ASST COMMR OF INCOME TAX 22(1), VASHI NAVI MUMBAI VS JINESH N MEHTA PROF PRAMUK PAER 202 TRAFFIC LITE M G ROAD GHATKOPAR 9W) MUMBAI 86 (APPELLANT) (RESPONDENT) PAN NO. AACPM1205F ASSESSEE BY SHRI REEPAL G TRALSHAWALA REVENUE BY SHRI SUNIL KUMAR SINGH DT.OF HEARING 22 ND SEPT 2011 DT OF PRONOUNCEMENT 30 TH , SEPT 2011 PER VIJAY PAL RAO, JM THIS APPEAL BY THE REVENUE IS DIRECTED AGAINST THE ORDER DATED 12.4.2010 OF THE CIT(A) FOR THE AY 2007-08. 2 THE REVENUE HAS TAKEN THE FOLLOWING EFFECTIVE GRO UNDS IN THIS APPEAL: 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW THE LD CIT(A) HAS ERRED IN DELETING THE ADDITION OF RS. 7,50,049/- MA DE BY THE AO ON ACCOUNT OF UNEXPLAINED PURCHASES MADE BY THE ASSESSEE FROM M/S V IJAY PACK N PRINT WITHOUT APPRECIATING THE FACT THAT THE ASSESSEE DID NOT PRODUCE ANY SUPPORTING EVIDENCE DURING THE COURSE OF ASSESSMENT PROCEEDINGS TO JUSTIFY HIS CLAIM. II) ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND I N LAW THE LD CIT(A) FAILED TO APPRECIATE THE FACT THAT THE RATES OF PURCHASES F ROM OTHER PARTIES AND FROM SISTER CONCERNS WHICH WERE PRODUCED BEFORE THE CIT(A) W ERE NOT PRODUCED BY THE ASSESSEE BEFORE THE AO DURING THE COURSE OF AP PELLATE PROCEEDINGS. III) ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW THE LD CIT(A) HAS ERRED IN ACCEPTING FRESH EVIDENCE, WHEN THERE WAS NO BONAFIDE REASON FOR 2 ITA NO. 5719/MUM/2010 (ASST YEAR2007-08) THE ASSESSEE FOR NOT PRODUCING THE SAME AT THE TIME OF ASSESSMENT PROCEEDINGS. IV) ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW THE LD CIT(A) HAS ERRED IN DELETING THE ADDITION OF RS. 22,89,596/- M ADE BY THE AO ON ACCOUNT OF UNEXPLAINED LOANS AND INTEREST WITHOUT APPRECI ATING THE FACT THAT THE ASSESSING OFFICER MADE THE SAID ADDITION SINCE THE A SSESSEE FAILED TO PROVE THE GENUINENESS OF LOANS AND CREDITWORTHINESS OF THE LENDERS BEFORE THE ASSESSING OFFICER. V) ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW THE LD CIT(A) HAS ERRED IN DELETING THE ADDITION OF RS.3,75,360/- MAD E BY THE AO ON ACCOUNT OF BAD DEBTS WITHOUT APPRECIATING THE FACT THAT THE AS SESSEE COULD NOT PRODUCE ANY EVIDENCE THAT THE SAID AMOUNT WRITTEN O FF AS BAD DEBTS WAS OFFERED A INCOME IN ANY EARLIER ASSESSMENT YEAR 3 SINCE THE GROUND NOS 2 & 3 RAISED BY THE REVENUE ARE IN RESPECT OF TAKING INTO ACCOUNT THE ADDITIONAL EVIDENCE PRODUCED BY THE ASS ESSEE BEFORE THE CIT(A) WITHOUT GIVING AN OPPORTUNITY TO THE ASSESSING OFFI CER TO COUNTER THE SAID FRESH EVIDENCE. THEREFORE, WE FIRST TAKE UP GROUND NOS 2 & 3. 4 THE LD DR HAS SUBMITTED THAT THE ASSESSING OFFICE R HAS MADE VARIOUS ADDITIONS/DISALLOWANCES WHILE FRAMING THE ASSESSMEN T. HE HAS POINTED OUT THAT AS REGARDS THE PURCHASE FROM M/S VIJAY PACK N PRINT TH E ASSESSING OFFICER HAS RECORDED THAT THE ASSESSEE HAS DEBITED PURCHASE OF RS. 75,00 ,489/- FROM M/S VIJAY PACK N PRINT WHICH IS A SISTER CONCERN OF THE ASSESSEE AND FALLS UNDER SECTION 40A(2)(B) OF THE I T ACT. HE HAS FURTHER SUBMITTED THAT WHEN THE ASSESS EE DID NOT FILE ANY SUPPORTING EVIDENCE AND COMPARABLE RATES CHARGED BY THE SISTE R CONCERN M/S V P AND OTHER OUTSIDE PARTIES, THE ASSESSING OFFICER ESTIMATED T HE CHARGE AT 10% MORE THAN OTHERS AND MADE AN ADDITION OF RS. 7,50,049/- ON TH IS COUNT. WHEREAS THE CIT(A) HAS CONSIDERED THE ADDITIONAL EVIDENCE, AS EVIDENT IN P ARA 5.3 OF THE IMPUGNED ORDER, TO ADJUDICATE THE ISSUE. THE LD DR HAS SUBMITTED TH AT THIS ADDITIONAL EVIDENCE FILED BY THE ASSESSEE WAS NOT CONFRONTED WITH THE ASSESSI NG OFFICER AS TO GIVE AN OPPORTUNITY TO FILE A COUNTER EVIDENCE OR TO CROSS EXAMINE THE SAME. HE HAS FURTHER POINTED OUT THAT IN RESPECT OF THE ADDITION REGARDI NG THE LOAN, THE ASSESSING OFFICER 3 ITA NO. 5719/MUM/2010 (ASST YEAR2007-08) HAS GIVEN A FINDING THAT THE ASSESSEE HAS NOT FURNI SHED THE PAN, SIGNATURE AND COMPLETE ADDRESSES OF THE CREDITORS TO PROVE THE AU THENTICITY, GENUINENESS AND CREDITWORTHINESS OF THE LOAN CREDITORS. ACCORDINGL Y, THE ASSESSING OFFICER DISALLOWED THE LOAN TAKEN DURING THE YEAR OF RS. 8,95,294/ ALO NG WITH THE INTEREST PAID TO THOSE PARTIES AMOUNTING TO RS. 3,70,802/-. THE LD DR, T HUS, POINTED OUT THAT THE CIT(A) HAS RECORDED THAT DOCUMENTARY EVIDENCE PRODUCED IN SUPP ORT OF THE CONTENTION OF THE ASSESSEE AND AFTER CONSIDERING THE EVIDENCES, DELET ED THE ADDITION MADE BY THE ASSESSING OFFICER. 4.1 THE LD DR HAS SUBMITTED THAT THE ASSESSING OFFI CER RECORDED IN THE ASSESSMENT ORDER THAT THE ASSESSEE COULD NOT PRODUCE ANY EVIDE NCE TO SHOW THAT THE SAID AMOUNT WAS OFFERED TO TAX IN EARLIER ASSESSMENT YEA R. WHEREAS THE CIT(A) WHILE DECIDING THE ISSUE OF BAD DEBTS HAS CONSIDERED THE ADDITIONAL EVIDENCE FILED BY THE ASSESSEE. THEREFORE, THE CIT(A) HAS VIOLATED THE PR OVISIONS OF RULE 46A. 4.2 THE LD AR HAS SUBMITTED THAT THE ASSESSING OFFI CER ISSUED NOTICE DT 17.6.2009 TO THE ASSESSEE FOR SUBMITTING THE DETAILS AS REQUI RED IN THE SAID LETTER. HE HAS SUBMITTED THAT AT POINT NO.18 OF THE LETTER, DETAIL S OF PAYMENT MADE TO THE PARTIES COVERED U/S 40A(2)(B) ALONG WITH EXPLANATION ON REA SONABILITY WAS ASKED BY THE ASSESSING OFFICER AND THE ASSESSEE, IN THE REPLY D T 6.11.2009 AT PAGE 19 OF THE PAPER HAS SUBMITTED THAT THE PURCHASE FORM SISTER CONCERN IS AT ARMS LENGTH. THE LD AR HAS SUBMITTED THAT THE ASSESSING OFFICER ASKED ONLY THE DETAILS. THE LD AR OF THE ASSESSEE HAS SUBMITTED THAT IN THE ABSENCE OF SPECIFIC QUERY BY THE ASSESSING OFFICER FOR ANY DOCUMENT, THE ASSESSEE HAD NO OCCASION TO FILE THE DOCUMENTS IN SUPPORT OF THE CLAIM. AFTER THE ASSESSMENT ORDER, THE ASSESSEE FIL ED SUPPORTING EVIDENCE BEFORE THE CIT(A). THEREFORE, WHEN THE ASSESSING OFFICER DID N OT ASK ANY DOCUMENTS THEN, THE PRODUCTION OF THE EVIDENCE BEFORE THE CIT(A) DOES N OT VIOLATE THE PROVISION OF RUL 4 ITA NO. 5719/MUM/2010 (ASST YEAR2007-08) 46A. HE HAS RELIED UPON THE DECISION OF THE HONBL E JURISDICTIONAL HIGH COURT IN THE CASE OF COMMISSIONER OF INCOME-TAX V. INDO SAUDI SE RVICES (TRAVEL) P. LTD, REPORTED IN 310 ITR 306 AND SUBMITTED THAT THE SISTER CONCERN O F THE ASSESSEE ARE ALSO SUBJECTED TO THE SAME RATE OF TAX, THEN THERE IS NO QUESTION OF ANY AVOIDANCE OF TAX. 4.3 AS REGARDS TO THE LOAN ADVANCES, THE LD AR HAS SUBMITTED THAT THE ASSESSEE HAS FILED THE ENTIRE DETAILS BEFORE THE ASSESSING OFFICER ALONG WITH THE AUDIT REPORT. HE HAS REFERRED THE ANNEXURE TO THE AUDIT REPORT AT PAGE 15 OF THE PAPER BOOK AND SUBMITTED THAT ALL THE DETAILS OF THE PARTIES , L OAN AMOUNTS, REPAYMENT OF THE LOAN THE BALANCE WERE FILED AND ARE AVAILABLE BEFORE TH E ASSESSING OFFICER . THEREFORE, THE ASSESSEE HAS NOT FILED ANY ADDITIONAL EVIDENCE BEFORE THE CIT(A) AS REGARDS THE ISSUE OF THE ADDITION ON ACCOUNT OF LOANS. HE HAS FURTHER SUBMITTED THAT ONLY BANK STATEMENT AND THE RETURN OF INCOME OF THE VARIOUS P ARTIES WERE PRODUCED BY THE ASSESSEE BEFORE THE CIT(A) IN FURTHER SUPPORT OF TH E CLAIM OF THE ASSESSEE. THE LD AR HAS ALSO REFERRED THE FORM 15H AND 15-I FILED BEFOR E THE ASSESSING OFFICER AND SUBMITTED THAT ALL THESE DOCUMENTS WERE ALREADY FIL ED BEFORE THE ASSESSING OFFICER ON THE BASIS OF WHICH THE CIT(A) HAS DECIDED THE IS SUE. HE HAS FURTHER POINTED OUT THAT FOR THE ASSESSMENT YEAR 2008-09, THE ASSESSI NG OFFICER HAS ACCEPTED INTEREST PAID ON THE SAID AMOUNT OF LOAN AND IN THE EARLIER YEARS ALSO NO INTEREST WAS DISALLOWED ON THIS AMOUNT. 4.4 AS REGARDS THE BAD DEBTS, THE LD AR OF THE ASSE SSEE HAS SUBMITTED THAT IN RESPONSE TO THE QUERY OF THE ASSESSING OFFICER, THE ASSESSEE IN ITS REPLY DATED 6.11.2009 HAS EXPLAINED THE TWO PARTIES I.E. M/S NI PS PACKING PVT LTD AND MUNDRA PRINTING & PACKING ARE ABSCONDING AND THE DUES WER E MORE THAN THREE YEARS OLD AGAINST THEM BECOME TIME BARRED; THEREFORE, THE ASS ESSEE WRITTEN OFF THE SAME. HE HAS ALSO REFERRED THE LEDGER ACCOUNT OF THE PARTIES AND SUBMITTED THAT THESE 5 ITA NO. 5719/MUM/2010 (ASST YEAR2007-08) AMOUNTS WERE STANDING IN THE NAME OF THE PARTIES FO R THE LAST THREE YEARS AND WHEN THERE WAS NO POSSIBILITY OF THE RECOVERY OF THE SAM E, THE ASSESSEE WRITTEN OFF THE SAME. SINCE THESE WERE TREATED AS SUNDRY DEBTS; TH EREFORE, WERE DULY TAKEN IN THE ACCOUNT IN THE EARLIER YEAR BEING PART OF THE P&L A CCOUNT. 5 WE HAVE CONSIDERED THE RIVAL CONTENTION AND CAREF ULLY PERUSED THE RELEVANT MATERIAL ON RECORD. AS REGARDS THE DISALLOWANCE ON ACCOUNT OF PURCHASE FROM THE SISTER CONCERN FALLING U/S 40A(2)B) OF THE I T ACT , EVIDENTLY, THE ASSESSEE HAS PRODUCED FRESH EVIDENCE BEFORE THE CIT(A) IN THE S HAPE OF BILLS AND ON THE BASIS OF SUCH EVIDENCE, THE CIT(A) HAS ADJUDICATED THE ISSUE . UNDISPUTEDLY, THE SAID EVIDENCE FILED BY THE ASSESSEE WAS NOT CONFRONTED W ITH THE ASSESSING OFFICER AND THE ASSESSING OFFICER WAS NOT GIVEN ANY OPPORTUNITY TO FILE COUNTER EVIDENCE OR TO CROSS EXAMINE THE SAME. 5.1 SIMILARLY, ON THE ISSUE OF CLAIM OF BAD DEBTS, THE ASSESSEE HAS PRODUCED THE ADDITIONAL EVIDENCE IN THE SHAPE OF COPIES OF LEDGE R ACCOUNT OF THE DEBTORS TO SHOW THAT THESE ARE AMOUNTS MORE THAN THREE YEARS O LD AND ALREADY TAKEN INTO ACCOUNT IN THE EARLIER YEARS. IT IS TO BE NOTED T HAT THE ASSESSING OFFICER DISALLOWED THE CLAIM OF THE ASSESSEE ON THE GROUND THAT THE AS SESSEE COULD NOT PRODUCE ANY EVIDENCE TO SHOW THAT THE SAID AMOUNT WAS OFFERED A S INCOME IN THE EARLIER ASSESSMENT YEAR. IT IS TRITE LAW THAT ONUS IS ON T HE ASSESSEE TO PROVE THE CLAIM BY PRODUCING THE RELEVANT EVIDENCE. THE CONTENTION OF THE ASSESSEE IS NOT CONVINCING THAT THE ASSESSING OFFICER SHOULD HAVE ASKED SPECIF IC EVIDENCE BEFORE DISALLOWING THE CLAIM. WE FIND THAT VIDE LETTER DATED 17.6.2009 , THE ASSESSING OFFICER ASKED THE ASSESSEE TO SUBMIT THE DETAILS AND ALSO REQUESTED T HAT ALL THE DOCUMENTS HAS TO BE ATTESTED BY THE ASSESSEE. THEREFORE, IT IS CLEAR T HAT THE ASSESSING OFFICER VIDE LETTER 6 ITA NO. 5719/MUM/2010 (ASST YEAR2007-08) DATED 17.6.2009 ASKED THE ASSESSEE TO SUBMIT DETAIL S AND ATTESTED DOCUMENTS IN THIS REGARD. 5.2 AS REGARDS THE ISSUE OF PURCHASE FROM SISTER CO NCERN M/S NIPS PACKING PVT LTD AND MUNDRA PRINTING & PACKING, THE ASSESSING OFFICE R SPECIFICALLY ASKED THE DETAILS OF PAYMENT ALONG WITH EXPLANATION ON THE REASONABILITY . THE ASSESSEE IS UNDER OBLIGATION TO PROVE THE REASONABLENESS OF THE PURCH ASE PRICE WITH ALL THE RELEVANT DETAILS AND EVIDENCES, WHICH THE ASSESSEE HAS NOT F ILED BEFORE THE ASSESSING OFFICER BUT FILED BEFORE THE CIT(A). 5.3 AS REGARDS THE ISSUE OF BAD DEBTS IS CONCERNED, THE ASSESSEE FILED LEDGER ACCOUNT, SALES DETAILS OF THE PARTIES ALONG WITH A REQUEST FOR ADMISSION OF THE SAME AS ADDITIONAL EVIDENCE. THESE FACTS HAVE BEEN RECOR DED BY THE CIT(A) IN PARA 7.2 AS UNDER: THE LEDGER A/C SALES BILLS OF THESE PARTIES FROM 200 4 ONWARDS ARE ATTESTED AT PAPER BOOK PAGE 122 TO 142. THESE SALES WERE ACCOUNT ED FOR AS INCOME IN THOSE YEARS. THESE ARE IN THE NATURE OF ADDITIONAL E VIDENCE WHICH MAY BE TAKEN ON RECORD AS NO OPPORTUNITY WAS GIVEN TO ASSES SEE TO PRODUCE THE SAME. THE DIGESTED DELHI HIGH COURT JUDGMENT IN THE CASE OF CIT VS DCM LTD IS GIVEN OF PAGE NO.122 WHICH STATES AS UNDER; THEREFORE, THERE IS NO AMBIGUITY ABOUT THE FACT THA T THE EVIDENCE, WHICH WAS PRODUCED BEFORE THE CIT(A) WAS NOT BEFORE THE ASSES SING OFFICER. HAVING REGARD TO THE FACTS , WE ARE OF THE CONSIDERED OPINION THAT T HE CIT(A) HAS VIOLATED RULE 46A BY ACCEPTING THE ADDITIONAL EVIDENCE WITHOUT GIVING O PPORTUNITY TO THE ASSESSING OFFICER TO EXAMINE THE EVIDENCE/DOCUMENTS OR TO CR OSS EXAMINE THE WITNESSES OR TO FILE EVIDENCE OR DOCUMENTS IN REBUTTAL OF TH E ADDITIONAL EVIDENCE PRODUCED BY THE ASSESSEE. ACCORDINGLY, WE SET ASIDE THE ISSUE O F UNEXPLAINED PURCHASE OF SISTER CONCERN AND BAD DEBTS TO THE RECORD OF THE AO FOR F RESH ADJUDICATION AS PER LAW AFTER CONSIDERING EVIDENCE FILED BY THE ASSESSEE. 7 ITA NO. 5719/MUM/2010 (ASST YEAR2007-08) 6 AS REGARDS THE ISSUE OF DISALLOWANCE OF LOAN, WE FIND THAT WHEN THE ASSESSEE HAS FILED ALL THE DETAILS AND DOCUMENTS AS ANNEXURE TO THE AUDIT REPORT, WHICH WERE AVAILABLE IN THE ASSESSMENT RECORDS BEFORE THE ASSE SSING OFFICER. FURTHER, FORM 15H & 15G WERE FILED BEFORE THE ASSESSING OFFICER AND THE REFORE AVAILABLE TO THE ASSESSING OFFICER. THUS, WHEN THE ASSESSING OFFICER HAS NOT P OINTED OUT ANY INFIRMITY OR DEFECT IN THE EVIDENCE PRODUCED BY THE ASSESSEE THEN, THE GRO UND THAT THE ADDITION MADE FOR WANT OF PAN, COMPLETE DETAILS OF THE PARTIES AS NOT PRODUCED IS CONTRARY TO THE RECORDS. IT IS EVIDENCE FROM THE RECORDS THAT PAN, COMPLETE ADDRESS AND DETAILS OF REPAYMENT AND INTEREST PAYMENT ARE AVAILABLE ON REC ORDS; THEREFORE, WE DO NOT FIND ANY ILLEGALITY IN THE ORDER OF THE CIT(A), QUA, THI S ISSUE AND THE SAME IS UPHELD. 7 IN THE RESULT, THE APPEAL FILED BY THE REVENUE IS ALLOWED FOR STATISTICAL PURPOSE. ORDER PRONOUNCED ON THE 30 TH , DAY OF SEPT 2011. SD/ S D/ ( J SUDHAKAR REDDY ) ACCOUNTANT MEMBER ( VIJAY PAL RAO ) JUDICIAL MEMBER PLACE: MUMBAI : DATED:30 TH SEPT 2011 RAJ* COPY FORWARDED TO: 1 APPELLANT 2 RESPONDENT 3 CIT 4 CIT(A) 5 DR /TRUE COPY/ BY ORDER DY /AR, ITAT, MUMBAI