ITO, Chandigarh V. M/s Swami Auto Sales, Chandigarh

ITA 681/CHANDI/2015

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 5182 (ITAT-CHANDIGARH)
• Duration Of Justice: 1 year(s) 9 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-04-2017
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: Not Allotted
• Next Hearing Date: 16-08-2016
• Assessment Year: 2011-2012
• Appeal Filed On: 09-07-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: MANJIT SINGH
• Keywords: Additional evidence; Reasonable cause

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH, CHANDIGARH BEFORE SHRI CHANDRA MOHAN GARG, JUDICIAL MEMBER AND MS. ANNAPURNA GUPTA, ACCOUNTANT MEMBER ITA NO.681/CHD/2015 ASSESSMENT YEAR: 2011-12 ITO WARD-2(1), AREA CHANDIGARH M/S. SWAMY AUTO SALES PLOT NO.26, INDUSTRIAL PHASE-I, CHANDIGARH (REVENUE) VS. (RESPONDENT ) P.A. NO.AAQFS8273H REVENUE BY SHRI MANJIT SINGH, (DR) RESPONDENT BY SHRI PARIKSHIT AGGARWAL (AR) DATE OF HEARING: 23.01.2017 DATE OF PRONOUNCEMENT: 24.04.2017 O R D E R PER CHANDRAMOHAN GARG, J.M: THIS APPEAL HAS BEEN FILED BY THE REVENUE AGAINST T HE ORDER OF LD. COMMISSIONER OF INCOME TAX(APPEALS)-1, CHANDIGARH [IN SHORT CIT(A)], DATED 27.04.2015 FO R THE A.Y. 2011-12. 2. IN THIS APPEAL, THE REVENUE HAS RAISED THE FOLLOWI NG GROUNDS OF APPEAL: 1. ON FACTS AND CIRCUMSTANCES OF THE CASE THE LD CIT(A) HAS ERRED IN ADMITTING ADDITIONAL EVIDENCE IN TOTAL DISREGARD OF RULE 46A OF THE INCOME TAX RULES AND CONDITIONS SPECIFIED THEREIN, ON THE BASIS OF THE ASSESSEE' S VERSION THAT 'OWNERS OF THE APPELLANT GROUP' WERE O N THE RUN HAVING DEFAULTED SWAMY AUTO SALES 2 ON BANK LOANS AND PAYMENTS TO SUPPLIERS, WHEN SUCH CIRCUMSTANCES CANNOT BE REGARDED AS SUFFICIENT CAUSE WITHIN THE M EANING OF RULE 46A GIVEN THAT THE ASSESSEE WAS DULY REPRESENTED BY A C HARTERED ACCOUNTANT AND SEVERAL OPPORTUNITIES WERE AFFORDED TO THE ASSESSEE TO PROVIDE DOCUMENTARY EVIDENCE AS CALLED UPON BY THE AO. 2. ON FACTS AND CIRCUMSTANCES OF THE CASE THE LD C1 T(A) HAS ERRED IN ADMITTING ADDITIONAL EVIDENCE IN TOTAL DISREGARD OF RULE 46A OF THE INCOME TAX RULES AND CONDITIONS SPECIFIED THEREIN, WITHOUT APPRECIATING THAT NONE OF THE CIRCUMSTANCES LAID DOWN BY THE SAI D RULE, NAMELY REFUSAL OF THE AO TO ADMIT EVIDENCE OR ASSESSEE BEI NG PREVENTED BY SUFFICIENT CAUSE FROM PRODUCING THE EVIDENCE CALLED UPON BY THE AO / EVIDENCE RELEVANT TO ANY GROUND OF APPEAL OR THE AS SESSEE BEING NOT GIVEN SUFFICIENT OPPORTUNITY BY THE AO, ARE PRESENT IN TH E CASE. 3. IT IS PRAYED THAT THE ORDER OF THE LD CLT(A) B E CANCELLED AND THAT OF THE ASSESSING OFFICER MAY BE RESTORED. 3. BRIEFLY STATED, THE FACTS OF THE CASE ARE THAT DURI NG THE COURSE OF ASSESSMENT PROCEEDINGS, THE AO MADE THE A LLOWING ADDITIONS ONLY ON THE GROUND THAT INSPITE OF SUFFIC IENT OPPORTUNITIES, THE ASSESSEE FAILED TO SUBSTANTIATE HIS CLAIM WITH REGARD TO THESE ADDITIONS:- (I) RS.3,88,54,486/- ON ACCOUNT OF LIABILITY SHOWN IN THE BALANCE SHEET WHICH ID DETAILED AS UNDER:- A) RS.3,500,00,000/- - ADVANCE AGAINST SALE OF PROP ERTY B) RS.24,77,062/- - SWAMI COACHED AND ENGG. PVT LTD. C) RS.11,37,422/- - SUNDRY CREDITORS (II) RS.25,00,000/- ON ACCOUNT OF GP/NP ON ESTIMATE D BASIS. THE ASSESSEE CARRIED THE MATTER BEFORE LD. CIT(A) W HO GRANTED RELIEF TO THE ASSESSEE BY ADMITTING AND CONSIDERING AN ADDITIONAL EVIDENCE BY THE ASSESSEE UNDER RULE 46A OF THE INCOME TAX RULES, 1962, ( FOR SHORT THE RULES). N OW THE AGGRIEVED REVENUE HAS FILED THIS APPEAL ONLY AGITAT ING THE ISSUE OF ADMISSION AND CONSIDERATION OF ADDITIONAL EVIDEN CE AGAINST SWAMY AUTO SALES 3 THE MANDATED OF RULE 46A OF THE RULES WITH THE GROU NDS AS REPRODUCED HEREINABOVE. 4. BEFORE US, THE LD. DR SUBMITTED THAT THE ASSESSEE WAS REGULARLY ATTENDING THE PROCEEDINGS BUT IT DID NOT INTIMATE THE DEPARTMENT THAT THE PARTNERS OF THE ASSESSEE FIRM O WNED A COMPANY NAMELY, M/S. SWAMI COACHES AND ENGG. PVT. L TD AND THIS COMPANY SUFFERED HUGE LOSSES BECAUSE OF WHICH THE OWNERS BECAME DEFAULTERS OF BANK, FINANCIAL INSTITU TION AND SUPPLIERS. THE ASSESSEE ALSO DID NOT INTIMATE THAT THE BANKERS ISSUED NOTICE UNDER SARFAESI ACT, 2002 AND PROPERTI ES WERE ATTACHED AND MAJOR PORTION WAS SOLD TO MEET FINANCI AL CRISES. THE LD. DR FURTHER SUBMITTED THAT BEFORE THE LD. CI T(A) IT WAS STATED BY THE ASSESSEE THAT IT(PARTNER) WAS UNDER D EPRESSION AND AVOIDING EACH AND EVERY LITIGATION DURING THESE 6-7 MONTHS PERIOD WHICH WERE NEVER DISCLOSED TO THE AO. THE LD. DR CONTENDED THAT UNDER SUCH CIRCUMSTANCES THE AO W AS LEFT WITH NO OPTION TO TREAT THESE AS UNEXPLAINED TRANSA CTIONS, WHICH IS QUITE JUSTIFIED. THUS THE MAIN GROUND IN T HIS CASE WAS TAKEN ONLY ON THE ISSUE OF RULE 46A RULES. THE LD. DR REITERATED THAT THE REASONS TAKEN BY THE ASSESSEE F OR ADDITIONAL EVIDENCE UNDER RULE 46A OF THE RULES BEFORE THE LD. CIT(A) WERE NOT INTIMATED TO THE AO DURING THE COURSE OF A SSESSMENT PROCEEDINGS. IN VIEW OF THE ABOVE, THE LD. DR PRAYE D THAT THE ORDER OF THE LD. CIT(A) MAY BE SET ASIDE AND THE CA SE MAY BE RESTORED TO THE FILE OF THE LD. CIT(A) TO THE FIRST APPELLATE STAGE AS THERE WAS NO GOOD CAUSE FOR THE ASSESSEE WHICH P REVENTED SWAMY AUTO SALES 4 THE APPELLANT TO FILE ADDITIONAL EVIDENCE DURING TH E ASSESSMENT PROCEEDINGS. 5. PER CONTRA, THE LD. AR SUBMITTED THAT THE LD. CIT( A) WAS QUITE JUSTIFIED IN ADMITTING THE ADDITIONAL EVIDENC E AS THE PARTNERS OF THE ASSESSEE WERE ON THE RUN AND UNDER DEPRESSION DUE TO HAVING DEFAULT ON BANK LOANS AND PAYMENTS TO SUPPLIERS WHICH WAS A SUFFICIENT CAUSE WHICH PRE VENTED THE ASSESSEE FROM FILING THE ADDITIONAL EVIDENCE DURING THE FIRST APPELLATE PROCEEDINGS. HE ALSO SUBMITTED THAT AS TH E CONCLUSION DRAWN BY THE LD. CIT(A) ON MERITS ON THE BASIS OF ADDITIONAL EVIDENCE WHICH DELETED THE ADDITION HAS NOT BEEN CHALLENGED BY THE REVENUE IN THIS APPEAL, HENCE, I T HAS TO BE PRESUMED THAT THE REVENUE HAS ACCEPTED IT. THE LD. AR SUBMITTED THAT AS PER PARA 8.3.2 TO 8.3.12 AND SUBM ITTED THAT THE LD. CIT(A) HAS CALLED REMAND REPORT FROM THE AO AND AFTER AFFORDING ASSESSEE TO PLACE REJOINDER TO THE REMAND REPORT ADMITTED THE ADDITIONAL EVIDENCE AS PER PROVISIONS OF RULE 46A OF THE RULES. THEREFORE, HE SUBMITTED THAT CONCLUSI ON DRAWN BY THE LD. CIT(A) SUSTAINABLE AND THE SAME CANNOT B E DISPUTED. HE ALSO CONTENDED THAT THE APPEAL OF THE REVENUE IS BASELESS THUS THE SAME MAY KINDLY BE DISMISSED. 6 . WE HAVE CONSIDERED THE RIVAL SUBMISSION AND HAVE PERUSED THE RELEVANT MATERIAL ON RECORD. AT THE VERY OUTSET , WE FIND IT APPROPRIATE TO REPRODUCE PARA 8.3.3 OF THE ORDER OF THE LD. CIT(A): SWAMY AUTO SALES 5 8.3.3 THE LD. COUNSEL HAS SUBMITTED THAT THE APPEL LANT COULD NOT APPEAR BEFORE THE ASSESSING OFFICER IN TH E MONTHS OF JANUARY AND FEBRUARY, 2014 AND COULD NOT FILE THESE DOCUMENTS IN THE ASSESSMENT PROCEEDINGS, SINC E THE PARTNERS OF THE APPELLANT FIRM WERE OWNING A COMPAN Y, NAMELY M/S SWAMI COACHES AND ENGG. (P) LTD (HEREINA FTER REFERRED AS A SCEPL) AND THIS COMPANY SUFFERED HU GE LOSSES, BECAUSE OF WHICH THE OWNERS BECAME DEFAULTE RS OF BANK, FINANCIAL INSTITUTIONS AND SUPPLI9ERS. THE BA NKERS ISSUED NOTICE UNDER SARFAESI ACT, 2002 TO THE APPELLA NT GROUP AND THE PROPERTIES WERE ATTACHED. THE MAJOR P ORTION OF THE ASSETS OF THE APPELLANT FIRM AS WELL AS SCEP L WAS SOLD TO MEET THE FINANCIAL CRISIS. ACCORDING TO THE APPELLANT, THERE WERE REGULAR BOUNCING AND DISHONORING OF CHEQ UES IN CASE OF ALL THE GROUP CONCERNS AND THE OWNERS WENT INTO DEPRESSION & HIDING IN THE MONTH OF JANUARY AND THEREAFTER. AS PER THE SUBMISSION, IN MAY, 2014; THE BANKERS ISSUED A PUBLIC NOTICE IN THE NEWSPAPER THA T THE OWNERS WERE HEAVY DEFAULTERS OF BANKERS. THE APPELL ANT HAS FILED A COPY OF SUCH NOTICE WHICH PREPARED IN HINDUSTAN TIMES NEWSPAPER ON 04.05.2014. IT HAS BE EN SUBMITTED BY THE APPELLANT THAT DUE TO THESE REASON S, THE OWNERS OF THE APPELLANT GROUP EVADED SEVERAL LITIGA TION DURING THOSE 6-7 MONTHS PERIOD, IN WHICH THE IMPUGN ED INCOME TAX ASSESSMENT WAS ALSO COMMENTED. ACCORDING TO THE LD. COUNSEL, THIS WAS A REASONABLE CAUSE, WHICH PREVENTED THE APPELLANT FROM NON APPEARANCE AND CONSEQUENTIAL NON FILING OF DOCUMENTS IN THE ASSESS MENT PROCEEDINGS AND SO THESE DOCUMENTS SHOULD BE ADMITT ED UNDER RULE 46A OF THE INCOME TAX RULES, 1962. SINCE O N FACTS AND CIRCUMSTANCES OF THE APPELLANT, THE APPEL LANT WAS PREVENTED BY SUFFICIENT CAUSE FROM PRODUCING EVIDENCES, WHICH IT WAS CALLED UPON TO PROFUCE AND THE EVIDENCES ARE RELEVANT TO THE GROUND OF APPEAL, THE SAME WERE ADMITTED AND FORWARDED TO THE ASSESSING OFFICE R FOR COMMENTS AND THE ASSESSING OFFICER HAS OBJECTED TO T HE ADMISSION OF THE ADDITIONAL EVIDENCES ON THE GROUND THAT THE APPELLANT WAS PROVIDED AMPLE OPPORTUNITIES IN T HE ASSESSMENT PROCEEDINGS, BUT THIS OBJECTION OF THE ASSESSING OFFICER IN NOT SUSTAINABLE, CONSIDERING TH E FACTS DISCUSSED HEREINABOVE. SWAMY AUTO SALES 6 7. IN VIEW OF ABOVE, FROM THE RELEVANT OPERATIVE PART OF THE IMPUGNED ORDER I.E. PARA 8.3.3, AS REPRODUCED HEREI NABOVE, IT IS CLEAR THAT THE ASSESSEE SUBMITTED FOLLOWING REAS ONS DUE TO WHICH THE ASSESSEE COULD NOT APPEAR BEFORE THE AO A ND COULD NOT FILE RELEVANT DOCUMENTS DURING THE ASSESSMENT PROCEEDINGS WHICH WERE FILED SUBSEQUENTLY BEFORE TH E LD. CIT(A) AS ADDITIONAL EVIDENCE UNDER RULE 46A OF THE RULES, REASON CAN BE SUMMARIZED AS UNDER: (I) THE ASSESSEE COULD NOT APPEAR BEFORE THE AO AND COULD NOT FILE DOCUMENTS DURING THE ASSESSMENT PROCEEDINGS BE CAUSE PARTNERS OF THE APPELLANT FIRM WERE ALSO OWNING A C OMPANY NAMELY M/S SWAMI COACHES AND ENGG. (P) LTD (SCEPL) WHICH SUFFERED HUGE LOSSES, BECAUSE OF WHICH THE OWNERS B ECAME DEFAULTERS OF BANK, FINANCIAL INSTITUTIONS AND SUPP LIERS. (II) THE BANKERS ISSUED NOTICE UNDER SARFAESI ACT, 2002 TO THE ASSESSEE GROUP AND THE PROPERTIES WERE ATTACHED . (III) THE MAJOR PORTION OF THE ASSETS OF THE ASSESS EE FIRM AS WELL AS SCEPL WAS SOLD TO MEET THE FINANCIAL CRISIS. (IV) THERE WERE REGULAR BOUNCING AND DISHONORING OF CHEQUES IN CASE OF ALL THE GROUP CONCERNS AND THE OWNERS WE NT INTO DEPRESSION & HIDING IN THE MONTH OF JANUARY 2014 AN D THEREAFTER. (V) IN THE MONTH OF MAY, 2014; THE BANKERS ISSUED A PUBLIC NOTICE IN THE NEWSPAPER THAT THE OWNERS WERE HEAVY DEFAULTERS OF BANKERS. (VI) DUE TO ABOVE REASONS, THE OWNERS OF THE APPELL ANT GROUP EVADED SEVERAL LITIGATION DURING THOSE 6-7 MONTHS P ERIOD, SWAMY AUTO SALES 7 DURING WHICH THE IMPUGNED INCOME TAX ASSESSMENT WAS PASSED ON 14.03.2014. 8. DURING THE ARGUMENT BEFORE US ON BEING ASKED BY TH E BENCH THE LD. DR COULD NOT CONTROVERT ABOVE STATED REASONS, TAKEN BY THE LD. CIT(A) AS REASONABLE CAUSE WHICH P REVENTED THE ASSESSEE FROM FILING THE ADDITIONAL EVIDENCE DU RING THE ASSESSMENT PROCEEDINGS, THEREFORE, THESE CAUSES CAN NOT BE DISMISSED AND DISBELIEVED. AS PER SCHEME OF RULE 46 A OF THE RULES THE APPELLANT SHALL NOT BE ENTITLED TO PRODUC E BEFORE THE LD. CIT(A), ANY EVIDENCE, WHETHER ORAL DOCUMENTARY AND OTHER THEN EVIDENCE PRODUCED BY HIM DURING THE COURSE OF ASSESSMENT PROCEEDINGS. HOWEVER, IN THIS RULE 46A F OUR EXCEPTIONAL CIRCUMSTANCES HAVE BEEN GIVEN WHEREIN C LAUSE (B) PROVIDES THAT WHERE THE ASSESSEE WAS PREVENTED BY S UFFICIENT CAUSE FROM PRODUCING THE EVIDENCE WHICH HE WAS CALL ED UPON TO PRODUCE BY THE AO AND AS PER CLAUSE(C), WHERE TH E APPELLANT WAS PREVENTED BY SUFFICIENT CAUSE, FROM PRODUCING B EFORE THE AO, ANY EVIDENCE WHICH IS RELEVANT TO ANY GROUND OF APPEAL, THEN, THE ADDITIONAL EVIDENCE MAY BE ADMITTED AND C ONSIDERED BY THE LD. CIT(A). 9. IN THE PRESENT CASE THE ASSESSEE SUBMITTED RELEVAN T ADDITIONAL EVIDENCE AS LISTED BY THE LD. CIT(A) IN PARA 8.3.2 WHICH WAS RELEVANT FOR THE GROUND TAKEN BY THE ASSE SSEE BEFORE THE LD. CIT(A). SO FAR AS THE REASONS ADVANC ED BY THE ASSESSEE AS NOTED ABOVE, WE ARE SATISFIED THAT THER E WERE SUFFICIENT MULTIPLE REASONS OF FINANCIAL CRISIS AND CONSEQUENT PROCEDURE OF LITIGATION UPON THE ASSESSEE DUE TO WH ICH SWAMY AUTO SALES 8 PARTNERS OF THE APPELLANT FIRM WERE HIDING THEMSELV ES FROM THE SOCIETY AND OTHER AUTHORITIES TO OVERCOME FROM THE DETERRENT SITUATION. 10. IN THIS SITUATION WHEN THE PARTNERS OF THE ASSESSE E FIRM WERE HIDING THEMSELVES DURING THE PERIOD FROM JANUA RY, 2014 AND THEREAFTER UP TO NUMBER OF MONTHS AND DURING TH IS PERIOD ON 14.03.2014 ASSESSMENT ORDER WAS PASSED BY THE AO AND THE RELEVANT EVIDENCE COULD NOT BE SUBMITTED BEFORE HIM DURING THE ASSESSMENT PROCEEDINGS. THEN, IN THE GIV EN SITUATION AND CIRCUMSTANCES AS NOTED ABOVE, WE ARE OF THE VIEW THAT THERE WAS A SUFFICIENT CAUSE WHICH PREVENTED T HE ASSESSEE TO FALLS RELEVANT DOCUMENTS DURING THE ASSESSMENT PROCEEDINGS, THEREFORE, THE SAME FALSE WITHIN THE A MBIT OF EXCEPTIONS (B) & (C) OF RULES 46A OF THE RULES. IN THIS SITUATION, WE ARE DECLINED TO ACCEPT THE CONTENTION OF THE LD. DR THAT THE LD. CIT(A) ADMITTED AND CONSIDERED ADDI TIONAL EVIDENCE IN VIOLATION OF PROVISION OF UNDER RULE 46 A OF THE RULES. AT THE SAME TIME, WE HAVE NO HESITATION TO H OLD THAT THE LD. CIT(A) PROPERLY FOLLOW THE PROCEDURE AND MANDAT E OF RULES 46A OF THE RULES BEFORE ADMITTING AND CONSIDERING T HE ADDITIONAL EVIDENCE FILED BY THE ASSESSEE WHICH COU LD NOT BE FILED, DUE TO SUFFICIENT REASONABLE CAUSE, DURING T HE ASSESSMENT PROCEEDINGS. ACCORDINGLY, WE HOLD THAT T HERE IS NO VIOLATION OF MANDATE OF RULES 46A OF THE RULES AND THUS, BOTH GROUNDS OF THE ASSESSEE BEING DEVOID OF MERITS ARE DISMISSED. SWAMY AUTO SALES 9 11. IN THE RESULT, THE APPEAL OF THE REVENUE IS DISMIS SED. ORDER WAS PRONOUNCED IN THE OPEN COURT ON 24.04.201 7. SD/- (ANNAPURNA GUPTA) SD/- (CHANDRA MOHAN GARG) ACCOUNTANT MEMBER JUDICIAL MEMBER CHANDIGARH; DATED :24/04/2017 CTX? P.S/.