Pradeep Kumar Chaudhary, Muzaffarnagar V. ITO, Roorkee

ITA 5847/DEL/2016

• Counselvise Citation: [2017] 130 COUNSELVISE.COM (IT) 6493 (ITAT-DELHI)
• Duration Of Justice: 3 month(s) 16 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 03-03-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Next Hearing Date: 10-01-2017
• Assessment Year: 2004-2005
• Appeal Filed On: 16-11-2016
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Assessee Lawyers: PREM PRAKASH
• Keywords: Unexplained investment; Opportunity of being heard; Set aside
• Section: 32; 147; 131; 68; 246; 69; 145; 27; 148; 54; 37; 6; 56; 263; 63; 132; 12; 28; 144; 10; 90; 154; 2; 11; 15; 40A(3); 271(1)(b); 139; 92

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH SMC, NEW DELHI BEFORE SHRI H.S. SIDHU, JUDICIAL MEMBER ITA NO.5847/DEL/2016 A.Y. : 2004-05 SH. PRADEEP KUMAR CHAUDHERY, C/O SH. PREM PRAKASH ADVOCATE, 183/2, NORTH CIVIL LINES, MUZAFFARNAGAR-251001 (PAN: ANVPP8280H) VS. ITO, WARD 2, ROORKEE UTTARAKHAND (APPELLANT) (RESPONDENT) ASSESSEE BY : SH. PREM PRAKASH, ADV. DEPARTMENT BY : SH. RAKESH KUMAR, SR. DR ORDER THE ASSESSEE HAS FILED THE PRESENT APPEAL AGAINST THE IMPUGNED ORDER DATED 16/12/2010 PASSED BY THE LD. COMMISSIO NER OF INCOME TAX (APPEALS-I), DEHRADUN ON THE FOLLOWING GROUNDS:- 1. THAT THE ORDER IS AGAINST LAW AND FACTS ON THE RECO RD. 2. THAT LD. CIT(A) WAS WRONG IN CONFIRMING THE ADDITI ON OF RS. 6,49,910/-. 3. THAT LD. CIT(A) WAS WRONG IN CONFIRMING THE ADDITIO N OF RS. 3,69,889/- U/S. 40A(3). 4. THAT LD. CIT(A) WAS WRONG IN NOT GIVING ALLOWANCE O F ADDITION ON ACCOUNT OF NET PROFIT AGAINST ADDITIO N OF RS. 6,49,910/- AND RS. 3,69,889/-. 2. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSES SEE FILED THE ORIGINAL RETURN ON 31.3.2006, DECLARING INCOME OF RS. 1,03,4 50/-. THE AO OBSERVED THAT ASSESSEE HAD MADE PAYMENTS AGGREGATIN G RS. 18,49,449/- 2 IN VIOLATION TO SECTION 40A(3) OF THE I.T. ACT, 196 1. CONSEQUENTLY, AO ADDED 20% OF THE SAID SUM I.E. RS. 3,69,889/- TO T HE ASSESSEES INCOME, AS PER THE PROVISIONS OF THAT SECTION. AO FURTHER O BSERVED THAT AN AMOUNT OF RS. 6,49,910/- WAS PAID BY THE ASSESSEE TO THE E XCISE AUTHORITY TOWARDS EXCISE DUTY AND LICENSE FEE IN THE MONTH OF MAY, 2003 WAS HELD TO BE UNEXPLAINED BY THE AO AS THE ASSESSEE HAD NEI THER HIS OWN CAPITAL AVAILABLE FOR THAT PURPOSE NOR WAS THERE ANY TANGIB LE SOURCE OF CASH. ACCORDINGLY, THE ASSESSMENT WAS MADE ON TOTAL INCO ME OF RS. 18,93,850/- ON 22.12.2006 U/S. 144 OF THE I.T. ACT, 1961. 3. AGGRIEVED WITH THE AFORESAID ORDER DATED 22.12.2 006, ASSESSEE FILED THE APPEAL BEFORE THE LD. CIT(A), WHO IMPUGNE D ORDER DATED 16.12.2010 HAS PARTLY ALLOWED THE APPEAL OF THE ASS ESSEE. 4. AGAINST THE AFORESAID ORDER DATED 16.12.2010 PAS SED BY THE LD. CIT(A), ASSESSEE IS IN APPEAL BEFORE THE TRIBUNAL. 5. AT THE TIME OF HEARING LD. COUNSEL OF THE ASSESS EE HAS STATED THAT ASSESSEE HAD MADE PAYMENTS AGGREGATING RS. 18,49,44 9/- IN VIOLATION TO SECTION 40A(3) OF THE I.T. ACT. CONSEQUENTLY, AO A DDED 20% OF THE SAID SUM I.E. RS. 3,69,889/- TO THE ASSESSEES INCOME BY APPLYING NP RATE OF 8%. HE FURTHER STATED THAT IT IS SETTLED LAW THAT WHEN THE GROSS PROFIT/NET PROFIT IS APPLIED, THAT WOULD TAKE CARE OF EVERYTHI NG AND THERE WAS NO NEED FOR THE AO TO MAKE SCRUTINY OF THE AMOUNT INC URRED ON THE PURCHASE MADE BY THE ASSESSEE. THEREFORE, HE REQUESTED TH AT THE ADDITION OF RS. 3,69,889 MAY BE DELETED AND GROUND NO. 3 MAY BE AL LOWED. TO SUPPORT HIS CONTENTION HE RELIED UPON THE VARIOUS CASE LAWS :- - CIT VS. BANWARI LAL BANSHIDHAR (229 ITR 229-ALL) 3 6. WITH REGARD TO GROUND NO. 2 RELATING TO CONFIRMA TION OF ADDITION OF RS. 6,49,910/- IS CONCERNED, LD. COUNSEL OF THE ASS ESSEE HAS STATED THAT AN AMOUNT OF RS. 6,49,910/- WHICH WAS PAID BY THE A SSESSEE TO THE EXCISE AUTHORITY TOWARDS EXCISE DUTY AND LICENSE FE E IN THE MONTH OF MAY, 2003 WAS HELD TO BE UNEXPLAINED BY THE AO AS THE AS SESSEE HAD NEITHER HIS OWN CAPITAL AVAILABLE FOR THAT PURPOSE NOR WAS THERE ANY TANGIBLE SOURCE OF CASH. HENCE, HE REQUESTED THAT ADDITION I N DISPUTE MAY BE DELETED AND GROUND NO. 3 MAY ALSO BE ALLOWED IN FAV OUR OF THE ASSESSEE OR IN THE ALTERNATIVE THE ISSUE MAY BE SET ASIDE TO THE FILE OF THE AO TO DECIDE THE SAME AFRESH UNDER THE LAW, BECAUSE SUFFI CIENT OPPORTUNITY WAS NOT GRANTED BY BOTH THE LOWER AUTHORITIES. 7. ON THE OTHER HAND, LD. DR RELIED UPON THE ORDER PASSED BY THE REVENUE AUTHORITIES AND OPPOSED THE REQUEST OF THE LD. COUNSEL OF THE ASSESSEE ON BOTH THE ISSUES. 8. I HAVE HEARD BOTH THE PARTIES AND PERUSED THE R ELEVANT RECORDS ESPECIALLY THE ORDER PASSED BY THE REVENUE AUTHOR ITIES. I FIND THAT ASSESSEE HAD MADE PAYMENTS AGGREGATING RS. 18,49,44 9/- IN VIOLATION TO SECTION 40A(3) OF THE I.T. ACT. CONSEQUENTLY, AO A DDED 20% OF THE SAID SUM I.E. RS. 3,69,889/- TO THE ASSESSEES INCOME BY APPLYING NP RATE OF 8%. I FURTHER NOTE THAT THE HONBLE ALLAHABAD HIG H COURT IN THE CASE OF CIT VS. BANWARILAL BANSHIDHAR REPORTED IN 229 ITYR 0229 HAS HELD AS UNDER:- WHEN INCOME OF THE ASSESSEE WAS COMPUTED APPLYING THE GROSS PROFIT RATE AND WHEN NO DEDUCTION WAS ALLOWED IN REGARD TO THE PURCHASES OF THE ASSESSEE, THERE WAS NO NEED TO LOOK INTO THE PROVISIONS OF S. 40A(3) AND R. 6DD(J). NO DISALLOWANCE COULD HAVE BEEN MADE IN VIEW OF THE PROVISION OF S ECTION 40A(3) R/W R. 6DD(J) AS NO DEDUCTION WAS ALLOWED T O AND CLAIMED BY THE ASSESSEE IN RESPECT OF THE PURCHASE. WHEN GROSS PROFIT RATE IS APPLIED, THAT WOULD TAKE CARE OF EVERYTHING AND THERE WAS NO NEED FOR THE AO TO MAKE SCRUTINY OF THE AMOUNT INCURRED ON THE PURCHASES BY THE ASSE SSEE. 4 9. IN THE BACKGROUND OF THE AFORESAID DISCUSSIONS AND RESPECTFULLY FOLLOWING THE PRECEDENT AS AFORESAID, I AM OF THE CONSIDERED VIEW THAT ACTION OF THE AO IN MAKING THE ADDITION IN DISPUTE AND CONFIRMATION THEREOF BY THE LD. CIT(A) IS CONTRARY TO LAW AND HE NCE, I DELETE THE ADDITION IN DISPUTE AND ALLOW THE GROUND NO. 3 OF THE APPEAL OF THE ASSESSEE. 10. WITH REGARD TO GROUND NO. 2 RELATING TO CONFIRM ATION OF ADDITION OF RS. 6,49,910/- IS CONCERNED, I FIND THAT AN AMOUNT OF RS. 6,49,910/- WAS PAID BY THE ASSESSEE TO THE EXCISE AUTHORITY TOWARD S EXCISE DUTY AND LICENSE FEE IN THE MONTH OF MAY, 2003 WAS HELD TO B E UNEXPLAINED BY THE AO AS THE ASSESSEE HAD NEITHER HIS OWN CAPITAL AVA ILABLE FOR THAT PURPOSE NOR WAS THERE ANY TANGIBLE SOURCE OF CASH. THE LD. CIT(A) CONFIRMED THE ACTION OF THE AO. ON PERUSAL OF THE RECORD, IT R EVEALED THAT THE ASSESSEE MADE THE PAYMENT OF RS. 6,49,910/- WAS MADE IN THE MAY, 2003. AO OBSERVED THAT THE SOURCE OF INVESTMENT IN SUCH PAYM ENTS REMAINS UNEXPLAINED IN THE ABSENCE OF ANY EXPLANATION AND D OCUMENTARY EVIDENCES IN SUPPORT OF THE SAME. HENCE, HE ADDED RS. 6,49,910/- TO THE INCOME OF THE ASSESSEE FOR THE YEAR AS UNEXPLAINED INVESTMENT TOWARDS INITIAL PAYMENT OF EXCISE DUTY/ LICENSE FEE AND OTH ER CHARGES. I ALSO NOTE THAT LD. CIT(A) ALSO UPHELD THE ACTION OF THE AO BY HOLDING THAT THE THEORY OF UNSECURED LOANS ITSELF IS IMPLAUSIBLE; EV EN THEN, A FRESH OPPORTUNITY OF BEING HEARD WAS GIVEN TO THE ASSESSE E IN THE COURSE OF APPEAL AND COMPLIANCE WAS YET NOT MADE BY HIM AND CONFIRMED THE ADDITION. HOWEVER, LD. COUNSEL OF THE ASSESSEE HAS STATED DURING THE 5 HEARING THAT LOWER AUTHORITIES HAVE NOT GRANTED SUF FICIENT OPPORTUNITY OF BEING HEARD TO THE ASSESSEE TO PRODUCE THE RELEVANT DOCUMENTS. KEEPING IN VIEW THE ABOVE FACTS AND CIRCUMSTANCES OF THE CA SE, I AM OF THE VIEW THAT SUFFICIENT DOCUMENTS WERE NOT PRODUCED BEFORE THE LOWER AUTHORITIES, AS A RESULT THE ADDITION WAS MADE AND LATER CONFIRM ED BY THE LD. CIT(A). THEREFORE, THE ISSUE IN DISPUTE IS SET ASIDE TO THE FILE OF THE AO TO DECIDE THE SAME AFRESH UNDER THE LAW, AFTER GIVING ADEQUAT E OPPORTUNITY OF BEING HEARD TO THE ASSESSEE TO SUBSTANTIATE ITS CAS E BEFORE THE AO. THE ASSESSEE IS ALSO DIRECTED TO PRODUCE ALL THE RELEVA NT DOCUMENTS RELATED WITH THAT ISSUE BEFORE THE AO IN ORDER TO DECIDE TH E SAME AFRESH. 11. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS A LLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 03/03/2017. SD/- [H.S. SIDHU] JUDICIAL MEMBER DATE 03/03/2017 SRBHATNAGAR COPY FORWARDED TO: - 1. APPELLANT - 2. RESPONDENT - 3. CIT 4. CIT (A) 5. DR, ITAT TRUE COPY BY ORDER, ASSISTANT REGISTRAR, ITAT, DELHI BENCHES