NIAZE AHMED MURTAZA CHOUDARY, MUMBAI V. ITO 23(1)(3), MUMBAI

ITA 643/MUM/2012

• Counselvise Citation: [2013] 120 COUNSELVISE.COM (IT) 1731 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 13 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 15-02-2013
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 2007-2008
• Appeal Filed On: 01-02-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: AJEET MANWANI
• Keywords: Business income; Opportunity of being heard
• Section: 143(3); 68

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH, MUMBAI , ! '# $ $ $ $ '% &', ( '# ') BEFORE SHRI DINESH KUMAR AGARWAL, JM AND SHRI SANJAY ARORA, AM './ I.T.A. NO. 643/MUM/2012 ( ! , -, ! , -, ! , -, ! , -, / / / / ASSESSMENT YEAR : 2007-08) NIAZE AHMED MURTAZA CHOUDHARY, CHOUDHARI HOUSE, L.B.S. MARG, SONAPUR LANE, BHANDUP (WEST), MUMBAI 400 078. / VS. INCOME TAX OFFICER 23(1)(3), MUMBAI. #. ( './ PAN : ADBPC5915A ( ./ / // / APPELLANT ) .. ( 01./ / RESPONDENT ) ./ 2 3 ' / APPELLANT BY : SHRI AJEET MANWANI 01./ 2 3 ' / RESPONDENT BY : SHRI MOHIT JAIN ' 2 4 ( / // / DATE OF HEARING : 06-02-2013 5&- 2 4( / DATE OF PRONOUNCEMENT : 15-02-2013 / O R D E R PER DINESH KUMAR AGARWAL, JM. : THIS APPEAL PREFERRED BY THE ASSESSEE IS DIRECTED A GAINST THE ORDER DTD. 22-12-2011 PASSED BY THE LD. CIT(A)- 36, MUMBAI FOR THE ASSESSMENT YEAR 2007-08. 2. BRIEFLY STATED FACTS OF THE CASE ARE THAT THE AS SESSEE, AN INDIVIDUAL ENGAGED IN THE BUSINESS OF SCRAP MACHINERY AND HOTE L. THE RETURN WAS FILED DECLARING TOTAL INCOME AT RS. 2,55,430/-. DURING T HE COURSE OF ASSESSMENT ITA NO.643/MUM/2012 2 PROCEEDING, ON VERIFICATION OF THE BALANCE SHEET, T HE A.O. OBSERVED THAT THE ASSESSEE, DURING THE YEAR, HAS TAKEN UN-SECURED LOA NS OF RS. 18,85,000/-. HE FURTHER OBSERVED THAT THE ASSESSEE HAS SUBMITTED LO AN CONFIRMATIONS IN RESPECT OF THESE LOANS. HE FURTHER OBSERVED THAT O N VERIFICATION OF ONE OF THE CONFIRMATIONS OF SHRI ASHOK PAREKH, IT IS NOTICED T HAT MR. PAREKH HAS ADVANCED A LOAN OF RS. 3 LACS IN CASH ON 18-12-2006 AND RS. 5 LACS BY THE SYNDICATE BANK ON 18-12-2006 TOTALLING TO RS. 8 LAC S. ON BEING ASKED AS TO WHY THE CASH LOAN OF RS. 3 LACS SHOULD NOT BE DISAL LOWED BY INVOKING THE PROVISIONS OF SECTION 269 SS OF THE INCOME TAX ACT, 1961 (THE ACT), THE ASSESSEE SUBMITTED THAT MR. ASHOK PAREKH IS A TRANS PORTER AND IN THE COURSE OF HIS BUSINESS ACTIVITIES THERE ARE HUGE CASH DEPO SITS AND WITHDRAWALS DONE FROM HIS ACCOUNT AND OUT OF THE CASH WITHDRAWAL, HE HAS GIVEN THE SAID LOAN TO THE ASSESSEE. IT WAS FURTHER SUBMITTED THAT A SYMP ATHETIC VIEW MAY BE TAKEN AND THE ASSESSEE MAY NOT BE PENALIZED FOR THE DEFAU LT OF SECTION 269 SS OF THE ACT. HOWEVER, THE A.O. DID NOT ACCEPT THE ASSESSEE S EXPLANATION. ACCORDINGLY THE A.O. ADDED THE CASH LOAN OF RS. 3 LACS TO THE T OTAL INCOME OF THE ASSESSEE AS PER SECTION 269 SS OF THE ACT. FURTHER, ON EXAM INATION OF THE DETAILS OF SUNDRY CREDITORS, THE ASSESSEE WAS ASKED AS TO WHY SUNDRY CREDITORS OF BHARAT STEEL ENTERPRISES AMOUNTING TO RS. 2,75,600/- SHOUL D NOT BE DISALLOWED. IN THE ABSENCE OF ANY EXPLANATION, THE A.O. DISALLOWED THE SAME U/S 41(1) OF THE ACT. THE A.O. AFTER MAKING SOME OTHER DISALLOWANCES, COM PLETED THE ASSESSMENT AT AN INCOME OF RS. 10,41,530/- VIDE ASSESSMENT ORDER DTD. 29-12-2009 PASSED U/S 143(3) OF THE ACT. ON APPEAL, THE LD. CIT(A) I N RESPECT OF THE ADDITION OF ITA NO.643/MUM/2012 3 RS. 3 LACS OBSERVED THAT THE INITIAL ONUS WHICH IS CAST UPON THE ASSESSEE TO PROVE THE IDENTITY OF THE CREDITOR, SOURCE OF MONEY AND CREDITWORTHINESS OF THE CREDITOR AND GENUINENESS OF THE TRANSACTION WERE NO T FULFILLED AND THE CONFIRMATION OF THE LOAN IS WITHOUT GIVING THE DETA ILS OF THE GENERATION OF THE CASH, CONFIRMED THE ADDITION MADE BY THE A.O. WITH REGARD TO THE DISALLOWANCE OF SUNDRY CREDITORS RS. 2,75,600/- MADE U/S 41(1) O F THE ACT, THE LD. CIT(A) WHILE POINTING OUT THAT THE CONFIRMATION IS WITHOUT PAN AND DOES NOT MENTION ANYTHING ABOUT THE MACHINERY ETC., UPHELD THE DISAL LOWANCE MADE BY THE A.O. 3. BEING AGGRIEVED BY THE ORDER OF THE LD. CIT(A) T HE ASSESSEE IS IN APPEAL BEFORE US. 4. GROUND NO. 1 & 2 ARE AGAINST THE SUSTENANCE OF A DDITION OF RS. 3 LACS. 5. AT THE TIME OF HEARING THE LD. COUNSEL FOR THE A SSESSEE SUBMITS THAT THE ASSESSEE HAS FILED LOAN CONFIRMATION AND THE AMOUNT OF RS. 8 LACS HAS BEEN REPAID BY CHEQUES AS PER COPY OF CONFIRMATION ACCOU NTS AND BANK ACCOUNTS APPEARING AT PAGE 15 TO 17 OF THE ASSESSEES PAPER BOOK. HE FURTHER SUBMITS THAT THE ASSESSEE HAS ALSO FILED THE PHOTOCOPY OF T HE PAN OF MR. ASHOK PAREKH. HE FURTHER SUBMITS THAT THE A.O. ON THE SAID CASH T RANSACTION OF RS. 3 LACS HAS ALSO IMPOSED PENALTY U/S 271D R.W.S. 269 SS OF THE ACT VIDE ORDER DTD. 27-6- 2012. HE, THEREFORE, SUBMITS THAT THE ADDITION MADE BY THE A.O. AND SUSTAINED BY THE LD. CIT(A) BE DELETED. ITA NO.643/MUM/2012 4 6. ON THE OTHER HAND, THE LD. D.R. SUPPORTS THE ORD ER OF THE A.O. AND THE LD. CIT(A). 7. WE HAVE CAREFULLY CONSIDERED THE SUBMISSIONS OF THE RIVAL PARTIES AND PERUSED THE MATERIAL AVAILABLE ON RECORD. WE FIND T HAT BEFORE THE A.O. THE ASSESSEE EXCEPT FILING THE CONFIRMATION LETTER AND PAN OF THE LOAN CREDITOR, HAS NOT FURNISHED ANY MATERIAL TO SHOW THE CAPACITY, CR EDITWORTHINESS OF THE PARTY AND GENUINENESS OF THE TRANSACTION. HOWEVER, THE A .O. WITHOUT APPLYING THE PROVISION OF SECTION 68 OF THE ACT HAS MADE ADDITIO N IN VIEW OF THE PROVISION OF SECTION 269 SS OF THE ACT WHICH IS NOT VALID IN LAW . ON APPEAL, THE LD. CIT(A) WHILE APPLYING THE PROVISION OF SECTION 68 OF THE A CT HAS HELD THAT THE ASSESSEE HAS FAILED TO PROVE THE IDENTITY OF THE CREDITOR, S OURCE OF MONEY, CREDITWORTHINESS OF THE CREDITOR AND GENUINENESS OF THE TRANSACTION AND, HENCE, CONFIRMED THE ADDITION MADE BY THE A.O. AFT ER CONSIDERING THE TOTALITY OF THE FACTS AND CIRCUMSTANCES OF THE CASE, WE ARE OF THE VIEW THAT THE A.O. HAS NOT EXAMINED THE ISSUE PROPERLY AND THE LD. CIT(A) WHILE APPLYING THE PROVISIONS OF SECTION 68 OF THE ACT HAS NOT PROVIDE D ANY OPPORTUNITY OF BEING HEARD TO THE ASSESSEE IN THIS REGARD, THEREFORE, IN THE INTEREST OF JUSTICE, WE CONSIDER IT FAIR AND REASONABLE THAT THE MATTER SHO ULD GO BACK TO THE FILE OF THE A.O. AND ACCORDINGLY WE SET ASIDE THE ORDER PASSED BY THE REVENUE AUTHORITIES ON THIS ACCOUNT AND SEND THE MATTER BACK TO THE FIL E OF THE A.O. TO DECIDE THE SAME AFRESH IN THE LIGHT OF OUR OBSERVATIONS HEREIN ABOVE AND ACCORDING TO LAW AFTER PROVIDING REASONABLE OPPORTUNITY OF BEING HEA RD TO THE ASSESSEE. THE ITA NO.643/MUM/2012 5 GROUNDS TAKEN BY THE ASSESSEE ARE, THEREFORE, PARTL Y ALLOWED FOR STATISTICAL PURPOSE. 8. GROUND NO. 2 IS AGAINST THE SUSTENANCE OF DISALL OWANCE OF RS. 2,75,600/- MADE U/S 41(1) OF THE ACT. 9. AT THE TIME OF HEARING, THE LD. COUNSEL FOR THE ASSESSEE REITERATES THE SAME SUBMISSIONS AS SUBMITTED BEFORE THE LD. CIT(A) THAT THE ASSESEE IS IN BUSINESS OF SCRAP WHEREIN HE PURCHASED THE MATERIAL FROM AUCTION WHICH CONSISTS OF SECOND HAND MACHINES AND ITS ACCESSORIE S. SINCE THE MACHINERY SUPPLIED BY M/S BHARAT STEEL ENTERPRISES AMOUNTING TO RS. 2,75,600/- WAS NOT AS PER SPECIFICATION, THE PAYMENT WAS WITHHELD. THE NEGOTIATIONS FOR THE SAME WERE GOING ON AND THEN THE PARTY SUPPLIED THE MACHINERY AS PER SPECIFICATION AND THE PAYMENT WAS RELEASED IN THE S UBSEQUENT YEAR I.E. ON 26-12-2007 AND, THEREFORE, THE ADDITION SHOULD BE D ELETED. 10. ON THE OTHER HAND, THE LD. D.R. SUPPORTS THE OR DER OF THE A.O. AND THE LD. CIT(A). 11. WE HAVE CAREFULLY CONSIDERED THE SUBMISSIONS OF THE RIVAL PARTIES AND PERUSED THE MATERIAL AVAILABLE ON RECORD. WE FIND T HAT THE FACTS ARE NOT IN DISPUTE INASMUCH AS IT IS ALSO NOT IN DISPUTE THAT THE AMOUNT DUE TO SUNDRY CREDITOR M/S BHARAT STEEL ENTERPRISES HAD BEEN ALLO WED IN THE EARLIER ASSESSMENT YEARS IN COMPUTING THE BUSINESS INCOME O F THE ASSESSEE. IT IS ALSO NOT IN DISPUTE THAT THE ASSESSEE HAD NOT UNILATERAL LY WRITTEN BACK THE ACCOUNT OF THE CREDITOR THE M/S BHARAT STEEL ENTERPRISES IN ITS P&L ACCOUNT. THE ITA NO.643/MUM/2012 6 LIABILITY WAS SHOWN IN THE BALANCE SHEET AS ON 31-3 -2007 WHICH SHOWS THAT THE LIABILITY IS SUBSISTED AND DID NOT CEASE NOR WAS IT REMITTED BY THE CREDITOR. THE LIABILITY WAS ENFORCEABLE IN A COURT OF LAW. IN TH IS VIEW OF THE MATTER AND KEEPING IN VIEW THAT THE ASSESSEE HAS MADE THE REPA YMENT OF THE SAID LIABILITY TO THE CREDITOR IN SUBSEQUENT ASSESSMENT YEARS, WHI CH WAS NOT CONTROVERTED BY THE REVENUE, WE ARE OF THE VIEW THAT THE AMOUNT OF RS. 2,75,600/- IS NOT ASSESSABLE U/S 41(1) OF THE ACT AND ACCORDINGLY WE DELETE THE SAME. THE GROUND TAKEN BY THE ASSESSEE IS, THEREFORE, ALLOWED . 12. IN THE RESULT, ASSESSEES APPEAL STANDS PARTLY ALLOWED FOR STATISTICAL PURPOSE. 6 47 ! ,64 2 '82 9:; <$ < #4 = 2 %4 >? ORDER PRONOUNCED IN THE OPEN COURT ON 15-02-2013. . 2 5&- ( 7 15-02-2013 & 2 F SD/- SD/- (SANJAY ARORA) (DINE SH KUMAR AGARWAL) ( '# / ACCOUNTANT MEMBER ! '# / JUDICIAL MEMBER MUMBAI; DATED 15-02-2013. ITA NO.643/MUM/2012 7 .!.'./ R.K. , SR. PS 2 0!4 % '> % '> % '> % (DY./ASSTT. REGISTRAR) , , , , / ITAT, MUMBAI