KEYUR S. MEHTA, MUMBAI V. INCOME TAX OFFICER-17(2)(1), MUMBAI

ITA 579/MUM/2018

• Counselvise Citation: [2018] 125 COUNSELVISE.COM (IT) 9796 (ITAT-MUMBAI)
• Duration Of Justice: 1 month(s) 21 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-03-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Assessment Year: 2008-2009
• Appeal Filed On: 31-01-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: POOJA SWAROOP
• Keywords: Bogus purchase; Unexplained expenditure; Principle of natural justice; Rule of consistency; Additional evidence
• Section: 69C; 80C; 143(3); 80G; 147; 148; 6; 2

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, BENCH F, MU MBAI BEFORE SHRI SHAMIM YAHYA, ACCOUNTANT MEMBER AND SHRI PAWAN SINGH, JUDICIAL MEMBER ITA NO.579/MUM/2018 (ASSESSMENT YEAR- 2008-09) ITA NO.580/MUM/2018 (ASSESSMENT YEAR- 2009-10) SHRI KEYUR S. MEHTA PROP. OF M/S. SURAJMAL LALLUBHAI & CO., EROS CINEMA BUILDING, 42, M.K. ROAD, MUMBAI-400020 PAN:AFNPM7964P VS. ITO-17(2)(1) R. NO. 123-B, AAYAKAR BHAVAN, M.K. ROAD, MUMBAI-20. (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI PANKAJ R. TOPRANI WITH MS. KRUPA P. TOPRANI (AR) REVENUE BY : MS. POOJA SWAROOP (DR) DATE OF HEARING : 21.03.2018 DATE OF PRONOUNCEMENT : 21.03.2018 ORDER UNDER SECTION 254(1) OF INCOME TAX ACT PER PAWAN SINGH, JUDICIAL MEMBER: 1. THESE TWO APPEAL BY ASSESSEE UNDER SECTION 253 OF I NCOME TAX ACT (THE ACT) ARE DIRECTED AGAINST THE COMMON ORDER OF LD. COMMIS SIONER OF INCOME-TAX (APPEALS)-28, MUMBAI, [FOR SHORT THE LD. CIT(A)] DA TED 23.11.2017 FOR ASSESSMENT YEAR 2008-2009 & 2009-10. THE LD. CIT (A ) DECIDED THE APPEAL OF ASSESSEE FOR BOTH THE ASSESSMENT YEARS BY CONSOL IDATED ORDER. THUS, BOTH THE APPEALS ARE HEARD TOGETHER AND ARE DECIDED BY A COMMON ORDER FOR THE SAKE OF CONVENIENCE. FOR APPRECIATION OF FACT, WE ARE RE FERRING THE FACT FOR ASSESSMENT YEAR 2008-09. THE ASSESSEE HAS RAISED TH E FOLLOWING GROUNDS OF APPEAL: ITA NO . 579 & 580/MUM/2018 - SHRI KEYUR S. MEHTA 2 1. THE LD. COMMISSIONER OF INCOME TAX (APPEALS) - 2 8, MUMBAI [HEREINAFTER REFERRED TO AS 'THE LD. CIT (A)'] ERRED IN LAW AND ON FACTS IN UPHOLDING THE RE- OPENING OF ASSESSMENT PROCEEDINGS MADE BY THE ASSES SING OFFICER (HEREINAFTER REFERRED TO AS 'THE LD. A.O.') UNDER SECTION 147 OF THE I.T. ACT AND IN UPHOLDING THE ISSUANCE OF NOTICE UNDER SECTION 148 OF THE I.T . ACT. 2. THE LD. CIT (A) ERRED IN LAW AND ON FACTS IN NOT ADMITTING THE ADDITIONAL EVIDENCES IN THE FORM OF SUBMISSIONS AND PAPER BOOK FILED BY THE APPELLANT UNDER RULE 46A OF THE I.T. RULES VIDE SEPARATE ORDER DATE D 21. 11. 2017. 3. THE LD. CIT (A) ERRED IN LAW AND ON FACTS IN UPH OLDING THE ACTION OF THE LD. A.O. IN NOT GIVING PROPER OPPORTUNITY OF BEING HEAR D AND THUS VIOLATING THE PRINCIPLES OF NATURAL JUSTICE. 4. THE LD. CIT (A) ERRED IN LAW AND ON FACTS IN UPH OLDING THE DISALLOWANCE OF INTEREST EXPENDITURE OF RS. 2,97,302/ - DEBITED TO PROFIT/LOSS ACCOUNT UNDER SECTION 36 (1) (III) OF THE I.T. ACT ON THE GROUND THAT THE INTEREST EXPENDITURE WAS NOT INCURRED FOR THE PURPOSE OF BUSINESS OF THE APP ELLANT. 5. THE LD. CIT (A) ERRED IN LAW AND ON FACTS IN UPH OLDING THE ADDITIONS ON ACCOUNT OF ALLEGED BOGUS PURCHASES MADE FROM M/S. J EWEL DIAM AND M/S. DAKSH DIAMOND AMOUNTING TO RS. 19,62,188/- TO THE TOTAL I NCOME OF THE APPELLANT AS UNEXPLAINED EXPENDITURE UNDER SECTION 69C OF THE I. T. ACT MERELY ON THE BASIS OF INFORMATION RECEIVED FROM THE DIT (INV.), MUMBAI. 6. THE LD. CIT (A) ERRED IN LAW AND ON FACTS IN UPH OLDING THE DISALLOWANCE OF INTEREST OF RS. 2,48,690/- PAID TO THE BANK UNDER S ECTION 57 (III) OF THE I.T. ACT ON THE GROUND THAT THE SAID EXPENDITURE WAS NOT EXPEND ED WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF EARNING THE INCOME CHARGEABLE TO TAX UNDER THE HEAD 'INCOME FROM OTHER SOURCES'. 7. THE LD. CIT (A) ERRED IN LAW AND ON FACTS IN UPH OLDING THE DISALLOWANCE OF CLAIM OF RS. 1,00,000/- UNDER SECTION 80C OF I.T. A CT, RS. 8,200/- UNDER SECTION 80D OF I.T. ACT AND RS. 15,907/- UNDER SECTION 80G OF I.T. ACT MADE BY THE APPELLANT UNDER CHAPTER VIA IN HIS RETURN OF INCOME . 8. THE LD. CIT (A) ERRED IN LAW AND ON FACTS IN UPH OLDING THE ASSESSED INCOME OF THE APPELLANT AT RS. 30,35,186/- AS AGAINST THE RET URNED INCOME OF THE APPELLANT AT RS. 3,02,232/-. 2. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE IS A PROPRIETOR OF M/S SURAJMAL LALLUBHAI & CO. THE ASSESSEE IS DEALS IN DIAMONDS A ND JEWELLERY. THE ASSESSEE FILED HIS RETURN OF INCOME FOR ASSESSMENT YEAR 2008-09 ON 30.09.2008. THE RETURN OF INCOME WAS PROCESSED AND ACCEPTED UNDER SECTION 143 (1) OF THE ACT. SUBSEQUENTLY, THE ASSESSMENT WAS RE-OPENED UNDER SECTION 147 OF T HE ACT. A NOTICE UNDER SECTION ITA NO . 579 & 580/MUM/2018 - SHRI KEYUR S. MEHTA 3 148 DATED 31.03.2015 WAS SERVED UPON THE ASSESSEE. THE ASSESSMENT WAS COMPLETED UNDER SECTION 143(3) R.W.S. 147 OF THE ACT ON 05.03 .2016 [REFERRED BY ASSESSING OFFICER UNDER SECTION 143(3)]. THE ASSESSING OFFICE R WHILE PASSING THE RE-ASSESSMENT ORDER MADE DISALLOWANCE UNDER SECTION 36(1)(III) FO R RS. 2,97,302/-, ADDITION UNDER SECTION 69C ON ACCOUNT OF BOGUS PURCHASE OF RS. 19, 62,188/-, FROM JEWEL DIAM AND DAKSHA DIAMONDS, DISALLOWED INTEREST EXPENSES OF R S. 2,48,690/- UNDER SECTION 57(3) AND DISALLOWED RS. 1,00,000/- UNDER SECTION 80C, RS. 8200/- UNDER SECTION 80D AND RS. 15,907/- UNDER SECTION 80D. ON APPEAL B EFORE THE LD. CIT(A), THE RE- OPENING OF THE ASSESSMENT AS WELL AS ALL ADDITIONS /DISALLOWANCES WERE SUSTAINED. HENCE, FURTHER AGGRIEVED BY THE ORDER OF LD. CIT(A) , THE ASSESSEE HAS FILED THE PRESENT APPEAL BEFORE US. 3. WE HAVE HEARD THE LD. AUTHORIZED REPRESENTATIVE (AR ) OF THE ASSESSEE AND LD. DEPARTMENTAL REPRESENTATIVE (DR) FOR THE REVENUE AN D PERUSED THE MATERIAL AVAILABLE ON RECORD. GROUND NO.1 RELATES TO RE-OPEN ING OF THE ASSESSMENT PROCEEDING. AT THE OUTSET OF HEARING, THE LD. AR OF THE ASSESSE E SUBMITS THAT HE HAS NOT PRESSED THE GROUND NO.1 OF APPEAL. CONSIDERING THE SUBMISSI ON OF LD. AR OF THE ASSESSEE, GROUND NO.1 OF THE APPEAL IS DISMISSED AS NOT PRESS ED. 4. GROUND NO.2 RELATES TO NOT ADMITTING THE ADDITIONAL EVIDENCE BY THE LD. CIT(A). THE LD. AR OF THE ASSESSEE SUBMITS THAT DURING THE FIRS T APPELLATE PROCEEDING, THE ASSESSEE FILED WRITTEN SUBMISSION ON 30.11.2007 AND ALSO AN APPLICATION UNDER RULE 46A. THE ADDITIONAL EVIDENCE FURNISHED BEFORE THE LD. CIT(A) CONSIST OF THE DOCUMENTS MENTIONED IN PAPER BOOK FROM SERIAL NO. 5 TO 34. TH E ADDITIONAL EVIDENCES FURNISHED BY ASSESSEE WERE RELEVANT FOR ADJUDICATION OF VARIO US ADDITIONS/DISALLOWANCES MADE BY ASSESSING OFFICER. THE LD. CIT(A) DISMISSED THE APPLICATION OF ASSESSEE UNDER ITA NO . 579 & 580/MUM/2018 - SHRI KEYUR S. MEHTA 4 RULE 46, HOLDING THAT NO SUFFICIENT CAUSE IS DISCLO SED IN THE APPLICATION. THE LD. AR OF THE ASSESSEE FURTHER SUBMITS THAT THE ASSESSEE H AS NOW FILED AN APPLICATION UNDER RULE 29 OF INCOME TAX ( APPELLATE TRIBUNAL) RULES, 1963, FOR ADMISSION OF ADDITIONAL EVIDENCE. THE ASSESSEE HAS ALSO FILED THE AFFIDAVIT OF DHIRAJLAL M. MEHTA, CHARTERED ACCOUNTANT WHO WAS REPRESENTING THE ASSESSEE BEFORE THE ASSESSING OFFICER. THE LD. AR OF THE ASSESSEE FURTHER SUBMITS THAT THE REPRESE NTATIVE/CHARTERED ACCOUNTANT OF THE ASSESSEE HAS GIVEN AFFIDAVIT DISCLOSING THE SUF FICIENT CAUSE. THE LD AR FOR THE ASSESSEE PRAYED THAT THE ADDITIONAL EVIDENCES FURNI SHED BY THE ASSESSEE ARE RELEVANT AND MATERIAL FOR ADJUDICATION OF THE ISSUES INVOLVE D IN THE PRESENT APPEAL AND MAY BE ADMITTED. 5. ON THE OTHER HAND, THE LD. DR FOR THE REVENUE STRO NGLY OPPOSED THE ADMISSION OF ADDITIONAL EVIDENCE. THE LD. DR FOR THE REVENUE FUR THER SUBMITS THAT DESPITE PROVIDING OPPORTUNITY BY THE ASSESSING OFFICER, THE ASSESSEE HAS NOT FURNISHED SUFFICIENT EVIDENCE. THE ASSESSEE AS A MATTER OF RI GHT CANNOT BE SEEKING THE ADMISSION OF ADDITIONAL EVIDENCE. 6. WE HAVE CONSIDERED THE SUBMISSION OF BOTH THE PARTI ES AND PERUSED THE ORDERS OF AUTHORITIES BELOW. PERUSAL OF ASSESSMENT ORDER SHOW S THAT THE ASSESSMENT WAS RE- OPENED ON 31.03.2015. THE ASSESSMENT ORDER FURTHER REVEALS THAT THE ASSESSING OFFICER VIDE ORDER DATED 26.02.2016 ASKED THE ASSES SEE TO SUBSTANTIATE THE GENUINENESS OF PURCHASES JUSTIFIED THE CLAIM OF INT EREST PAID TO BANK OF RS. 2,48,690/-. THE ASSESSEE FURNISHED ITS SUBMISSION ON 04.03.2016. THE ASSESSMENT ORDER IS PASSED ON 05.03.2016. BEFORE THE LD. CIT(A ), THE ASSESSEE FILED AN APPLICATION FOR ADMISSION OF ADDITIONAL EVIDENCE. T HE LD CIT(A) DISMISSED THE APPLICATION FOR SEEKING THE PERMISSION TO FILED TH E EVIDENCES/ DOCUMENT. THE ITA NO . 579 & 580/MUM/2018 - SHRI KEYUR S. MEHTA 5 ASSESSEE IS NOW SEEKING THE PERMISSION FOR FILING T HE FOLLOWING DOCUMENTS AS ADDITIONAL EVIDENCE; SR.NO. PARTICULARS PAGE NO. OF PB 1. INVOICE OF M/S. MOHIT ENTERPRISES DATED 5TH MA Y, 2008 FOR RS. 9,84,750/-. 30 2. LEDGER ACCOUNT OF M/S. MOHIT ENTERPRISES IN THE BOOKS OF THE ASSESSEE. 31 3. ITEM REGISTER -DIAMOND CODE NO. 747 FOR THE YEA R ENDED 31ST MARCH 2009. 32 4. ITEM REGISTER - DIAMOND CODE NO. 747 FOR THE Y EAR ENDED 31ST MARCH 2010. 33 5. INVOICE OF M/S. SURAJMAL LALLUBHAI & CO. ISSUED TO M/S. DIAMOND CREEK DATED 13TH JUNE, 2008 FOR RS. 9,57,94 0/- 34 6. INVOICE OF M/S. SURAJMAL LALLUBHAI & CO. ISSUED TO M/S. MINDA ENTERPRISES DATED 22ND OCTOBER, 2008 FOR RS. 3,56,776/-. 35 7. INVOICE OF M/S. SURAJMAL LALLUBHAI & CO. ISSUED TO MR. UDIT SHETH DATED 3RD DECEMBER, 2008 FOR RS. 20,51,3 10/-. 36 8. INVOICE OF M/S. SURAJMAL LAL1UBHAI & C O. ISSUED TO MR. M. P. BHARUCHA DATED 9TH MARCH, 2009 FOR RS. 6,27, 200/- 37 9. INVOICE OF M/S. SURAJMAL LALLUBHAI & CO. ISSUED TO MS. ADITI SHAH DATED 30TH APRIL, 2009 FOR RS. 1,29,195/ -. 38 10. INVOICE OF M/S. SURAJMAL LALLUBHAI & CO. ISSUE D TO M / S. DIAFINI DATED 2ND SEPTEMBER, 2009 FOR RS. 4,15, 700/-. 39 11. INVOICE OF M/S. SURAJMAL LALLUBHAI & CO. ISSUED TO MRS. SUCHENTA SAHANI DATED 25TH SEPTEMBER, 2009 FOR RS. 1,72,660/-. 40 12. INVOICE OF M/S. SURAJMAL LALLUB HAI & CO. ISSUED TO MR. NIMIT SANGHVI DATED 1ST OCTOBER, 2009 FOR RS. 61,9 73/-. 41 13. INVOICE OF M/S. SURAJMAL LALL UBHAI & CO. ISSUED TO MR. M.P. BHARUCHA DATED 12TH OCTOBER, 2009 FOR RS. 8,31,230/-. 42 14. DETAILS OF PURCHASES OF DIAMONDS FROM M/S. MOHI T ENTERPRISES AND SALE OF THE SAME BY THE ASSESSEE AND PROFIT EARNED IN RUPEE AND PERCENTAGE GIVEN IN THE FORM OF A TABLE. 43 15. DETAILS OF CURRENT ASSETS. 44 16. LEDGER ACCOUNT OF MR. SHANTILAL S. MEHTA IN THE BOOKS OF THE ASSESSEE FOR THE YEAR ENDED 31ST MARCH, 2009 . 45 17. LEDGER ACCOUNT OF SHRI. V. J. SARAIYA IN THE BO OKS OF THE ASSESSEE FOR THE YEAR ENDED 31 ST MARCH, 2009. 46 18. RECEIPT OF MEDICLAIM INSURANCE PREMIUM OF RS. 14,843/- PAID BY THE ASSESSEE. 47 19. RECEIPTS OF CONTRIBUTION TO PPF OF RS. 50,000/- . 48 - 52 20. INVESTMENT IN MUTUAL FUND UNITS U/S. 80C OF RS. 50,000/-. 53 - 54 21. RECEIPTS OF DONATION OF RS. 5,000/- EACH TO M/S . THELMA J. R. D. TATA ANAND KENDRA TRUST DATED 9 TH MAY, 2008 55 - 58 ITA NO . 579 & 580/MUM/2018 - SHRI KEYUR S. MEHTA 6 AND 2ND JANUARY, 2009. 22. RECEIPTS OF DONATION OF RS. 1 LAKH TO M/S. VIDH YA JYOTHI TRUST DATED 26 TH DECEMBER, 2008. 59 - 61 7. CONSIDERING THE FACTS THAT THE EVIDENCES FURNISHED BY THE ASSESSEE WERE NOT FILED BEFORE THE ASSESSING OFFICER. MOREOVER, THE A PPLICATION FILED BY ASSESSEE FOR FILING ADDITIONAL DOCUMENTS WAS DISMISSED BY LD CIT(A). IN OUR VIEW, THE DOCUMENTARY EVIDENCE FILED BY THE ASSESSEE ARE VITA L AND RELEVANT FOR ADJUDICATION OF VARIOUS ADDITIONS/DISALLOWANCES MAD E BY ASSESSING OFFICER AND CONFIRMED BY LD. CIT(A). THUS, THE APPLICATION OF T HE ASSESSEE UNDER RULE 29 DESERVES TO BE ALLOWED. THUS, KEEPING IN VIEW THE P RINCIPLE OF NATURAL JUSTICE THE APPLICATION UNDER RULE 29 AND THE GROUND NO.2 O F APPEAL RAISED BY ASSESSEE IS ALLOWED. IN THE RESULT THE GROUND NO.2 OF THE APPEAL IS ALLOWED. 8. SINCE WE HAVE ALLOWED THE GROUND NO.2 OF THE APPEAL . CONSEQUENTLY ALLOWING THE APPLICATION UNDER RULE 29 OF INCOME-TAX (APPELL ATE TRIBUNAL) RULES, HENCE ALL THE REMAINING GROUNDS OF APPEAL RAISED BY THE A SSESSEE ARE RESTORED TO THE FILE OF ASSESSING OFFICER TO CONSIDER THE EVIDENCES FURNISHED BY THE ASSESSEE AND PASS THE ORDER AFRESH IN ACCORDANCE WITH LAW. N EEDLESS TO SAY THAT BEFORE DECIDING THE ISSUE, THE ASSESSING OFFICER SHALL GRA NT ADEQUATE AND SUFFICIENT OPPORTUNITY TO THE ASSESSEE. IN THE RESULT THE DIS CUSSIONS ON ALL THE OTHER GROUNDS OF APPEAL SEPARATELY HAVE BECOME ACADEMIC. IN THE RESULT THE APPEAL OF THE ASSESSEE IS ALLOWED STATISTICALLY. ITA NO. 580/MUM/20018 FOR A.Y. 2009-10 BY ASSESSEE ITA NO . 579 & 580/MUM/2018 - SHRI KEYUR S. MEHTA 7 9. THE ASSESSEE HAS RAISED THE IDENTICAL GROUNDS OF AP PEAL IN THE APPEAL FOR THIS ASSESSMENT YEAR AS RAISED IN APPEAL FOR A.Y. 2008-0 9. AS WE ALREADY RESTORED THE APPEAL OF EARLIER YEAR TO THE FILE OF ASSESSING OFFICER FOR FRESH ADJUDICATION ON VARIOUS ADDITIONS/ DISALLOWANCE. THEREFORE, FOLL OWING THE PRINCIPLE OF CONSISTENCY, THE APPEAL FOR THIS ASSESSMENT YEAR IS ALSO RESTORED TO THE FILE OF ASSESSING OFFICER WITH SIMILAR DIRECTION. 10. IN THE RESULT, BOTH THE APPEAL FILED BY ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSE. ORDER PRONOUNCED IN THE OPEN COURT ON 21 ST DAY OF MARCH 2018. SD/- SD/- ( SHAMIM YAHYA ) (PAWAN SINGH) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI; DATED 21/03/2018 S.K.PS COPY OF THE ORDER FORWARDED TO : BY ORDER (ASSTT.REGISTRAR) ITAT, MUMBAI 1. THE APPELLANT 2. THE RESPONDENT. 3. THE CIT(A), MUMBAI. 4. CIT 5. DR, ITAT, MUMBAI 6. GUARD FILE. C