WAMAN HARI PETHE SONS, MUMBAI V. DCIT 15(1),

ITA 7105/MUM/2012

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 4566 (ITAT-MUMBAI)
• Duration Of Justice: 3 year(s) 1 month(s) 8 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 07-01-2016
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: G
• Next Hearing Date: 07-01-2016
• Assessment Year: 2008-2009
• Appeal Filed On: 29-11-2012
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: SHRIKANT NAMDEO
• Assessee Lawyers: S C TIWARI UMA MAHADEOKAR
• Keywords: Rectification of order; Opportunity of being heard; Principle of natural justice
• Section: 143(3); 68; 154

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL G BENCH, MUMBAI BEFORE SHRI SAKTIJIT DEY, JUDICIAL MEMBER AND SHRI N.K . BILLAIYA, ACCOUNTANT MEMBER / I .T A NO. 5152/MUM/2010 ( / ASSESSMENT YEAR : 2005 - 06 / I .T A NO.7105/MUM/2012 ( / ASSESSMENT YEAR : 2008 - 09 A N D / I .T A NO.6159/MUM/2013 ( / ASSESSMENT YEAR : 2009 - 10 WAMAN HARI PETHE SONS, 110, VIKAS PARADISE, L.B.S. ROAD, MULUND (W), MUMBAI - 400 080 / VS. ACIT, CIR 15(1), MATRU MANDIR, TARDEV, MUMBAI ./ ./ PAN/GIR NO. ( / APPELLANT ) .. ( / RESPONDENT ) / A PPELLANT BY: SHRI S.C. TIWARI UMA MAHADEOKAR / RESPONDENT BY: SHRI SHRIKANT NAMDEO / DATE OF HEARING : 0 7 . 01 . 201 6 / DATE OF PRONOUNCEMENT : 07 . 0 1 .201 6 / O R D E R PER N.K. BILLAIYA, AM: THESE ARE APPEALS BY THE ASSESSEE PREFERRED AGAINST THREE SEPARATE ORDERS OF THE LD. CIT(A) - 26, MUMBAI DATED 5.4.2010, 14.9.2012 AND 13.8.2013 PERTAINING TO ASSESSMENT YEARS 2005 - 06, WAMAN HARI PETHE SONS 2 2008 - 09 AND 2009 - 10. ALL THESE APPEALS WERE HEARD TOGETHER AND ARE DI SPOSED OF BY THIS COMMON ORDER FOR THE SAKE OF CONVENIENCE. ITA NO. 5152/M/2010 A.Y. 2005 - 06 2. THE ASSESSEE HAS RAISED TWO GROUNDS OF APPEAL IN FORM NO. 36. GROUND NO. 1 RELATES TO THE GRIEVANCE THAT THE LD. CIT(A) HAS ENHANCED THE INCOME BY RS. 61, 27,898/ - AND THE OTHER GROUND RELATES TO THE ADDITION OF RS. 19,11,084/ - ON ACCOUNT OF ADVANCES FROM CUSTOMERS. 3. THE ASSESSEE HAS ALSO RAISED ADDITIONAL GROUNDS OF APPEAL BY WHICH IT HAS QUESTIONED THE ENHANCEMENT MADE BY THE LD. CIT(A) STATING THAT THE SAME IS IN CONTRAVENTION OF THE PROVISIONS OF THE LAW AND IN GROSS VIOLATION OF THE PRINCIPLES OF NATURAL JUSTICE INASMUCH AS THE LD. CIT(A) HAS NOT GIVEN ANY NOTICE OF ENHANCEMENT. 4. WE WILL FIRST TAKE UP THE ADDITIONAL GROUND OF APPEAL AS IT GOES TO THE ROOT OF THE MATTER. 5. THE ASSESSEE IS IN THE BUSINESS OF MANUFACTURING , RETAI L TRADING AND SERVICING OF G OLD ORNAMENTS AND SILVER JEWELLERY. RETURN FOR THE YEAR WAS FILED ON 28.10.2005 DECLARING TOTAL INCOME AT RS. 1,02,5,317/ - . THE RETURN WAS SELECTED FOR SCRUTINY ASSESSMENT AND VIDE ORDER DATED 26.12.207 MADE U/S. 143(3) OF THE ACT, FOLLOWING ADDITIONS WE RE MADE TO THE RETURNED INCOME. ( I ) DISALLOWANCE U/S. 40 A(3) RS. 10,59,776/ - ( II ) DISALLOWANCE FOR NOT ESTABLISHING THE GENUINENESS OF 3 PARTIES RS. 24,97,699/ - ( III ) SUPPRESSION OF CLOSING STOCK RS. 50,00,000/ - WAMAN HARI PETHE SONS 3 ( IV ) ADDITION ON ACCOUNT OF GOLD HELD AS OWNED BY THE ASSESSEE OUT OF GOLD DEPOSIT FROM CUSTOMERS RS. 19,11,084/ - 6. THE ADDITIONS WERE CONTESTED BEFORE THE LD. CIT(A). IN THE MEANTIME, THE ASSESSING OFFICER ISSUED NOTICE U/S. 154 VIDE NOTICE DATED 4.1.2008 FOR RECTIFICATION OF MISTAKE APPA RENT FROM RECORD AND VIDE ORDER DATED 28.1.2008 MADE U/S. 154 OF THE ACT, ADDITION U/S. 68 WAS MADE TO THE TUNE OF RS. 61,27,898/ - . THE ASSESSEE PREFERRED AN APPEAL AGAINST THIS ORDER ALSO. THE LD. CIT(A) DIRECTED THE AO TO DELETE THE ADDITION MADE U/S. 6 8 OF THE ACT IN RECTIFICATORY ORDER. IT WOULD BE PERTINENT TO MENTION HERE THE VERY RELEVANT OBSERVATION OF THE LD. CIT(A) WHICH READ AS UNDER: IT IS ALSO RELEVANT TO MENTION THAT QUANTUM APPEAL IS PENDING IN WHICH REMAND REPORT HAS BEEN SOUGHT HENCE, A O CAN BRING TO THE NOTICE THE FULL FACTS AND EVIDENCES ON RECORD TO COVER UP THIS ISSUE IN QUANTUM APPEAL WHICH IS STILL IN THE PROCESS OF HEARING. 7. THIS ORDER OF THE LD. CIT(A) WAS CONFIRMED BY THE TRIBUNAL IN ITA NO. 2277/M/09 VIDE ORDER DATED 25.3.2010. 7.1. DURING THE COURSE OF THE APPELLATE PROCEEDINGS PREFERRED AGAINST THE ORDER DATED 26.12.2007 MADE U/S. 143(3) OF THE ACT AND IN PURSUANT TO TH E DIRECTIONS OF THE LD. CIT(A) GIVEN DURING THE APPELLATE PROCEEDINGS AGAINST THE ORDER MADE U/S. 154 OF THE ACT THE AO SUBMITTED A LETTER NO. ADDL. CIT 15(1)/REMAND REPORT/09 - 10 DATED 2.4.209 REQUESTING FOR ENHANCEMENT OF INCOME IN RESPECT OF ADVANCES FR OM CUSTOMERS REMAIN TO BE ADDED TO THE TOTAL INCOME AMOUNTING TO RS. 61,27,898/ - . THE PROPOSAL OF THE AO WAS FORWARDED WAMAN HARI PETHE SONS 4 TO THE ASSESSEE FOR HIS COMMENTS. THE ASSESSEE FILED A DETAILED REPLY STRONGLY OBJECTING TO THE PROPOSALS MADE BY THE AO AND OBJECTED T O THE PROPOSED ENHANCEMENT OF RS. 61,27,898/ - . 7.2. TAKING A LEAF OUT OF THE PROPOSAL MADE BY THE AO AND AFTER CONSIDERING THE REPLY OF THE ASSESSEE, THE LD. CIT(A) DELETED THE FIRST THREE ADDITIONS AS MENTIONED AT PARA - 5 OF THIS ORDER AND CONFIRMED THE FOURTH ADDITION OF RS. 19,11,084/ - AND ALSO ENHANCED THE ASSESSMENT BY MAKING AN ADDITION OF RTS. 61,27,898/ - . 8. AGGRIEVED BY THIS, THE ASSESSEE IS BEFORE US. THE LD. COUNSEL FOR THE ASSESSEE VEHEMENTLY SUBMITTED THAT THE ENHANCEMENT MADE BY THE LD. CIT(A) IS WITHOUT NOTICE AND IS AGAINST THE SETTLED PROPOSITION OF LAW LAID DOWN BY THE HONBLE SUPREME COURT IN THE C ASE OF CIT VS RAI BAHADUR HARDUTROY MOTILAL CHAMARIA 6 6 ITR 4 43 (SC) , GEDORE TOOLS PVT. LTD. VS CIT 238 ITR 268 (DEL). IT IS THE SAY OF THE LD. COUNSEL THAT THE ENHANCEMENT MADE BY THE LD. CIT(A) IS BAD IN LAW AND ON THIS COUNT ONLY THE APPELLATE ORDER N EED TO BE QUASHED. 9. PER CONTRA, THE LD. DEPARTMENTAL REPRESENTATIVE STRONGLY SUPPORTED THE FINDINGS OF THE AO AND ALSO RELIED UPON THE FINDINGS OF THE LD. CIT(A). 10. WE HAVE GIVEN A THOUGHTFUL CONSIDERATION TO THE ORDERS OF THE AUTHORITIES BELOW AND WITH THE ASSISTANCE OF THE LD. COUNSEL, WE HAVE GONE THROUGH THE RELEVANT DOCUMENTARY EVIDENCES BROUGHT ON RECORD AND REFERRED TO DURING THE COURSE OF THE PROCEEDINGS. AS MENTIONED ELSEWHERE, AFTER COMPLETING THE ASSESSMENT U/S. 143(3) OF THE ACT, THE AO ISSUED NOTICE FOR THE RECTIFICATION OF MISTAKE APPARENT FROM WAMAN HARI PETHE SONS 5 RECORD AND MADE AN ADDITION OF RS. 61,27,898/ - . THE MATTER WAS CONTESTED BEFORE THE LD. CIT(A) AND THE CIT(A) DELETED THE ADDITION SUGGESTING THAT SINCE APPEAL AGAINST THE QUANTUM ADDITION IS PE NDING, THE SAME SHOULD BE PROPOSED BEFORE THE FIRST APPELLATE AUTHORITY. THIS ORDER OF THE LD. CIT(A) WAS CONFIRMED BY THE TRIBUNAL. IT IS ALSO AN UNDISPUTED FACT THAT DURING THE APPELLATE PROCEEDINGS AGAINST THE ORDER MADE U/S. 143(3) OF THE ACT, THE LD . CIT(A) EXTENSIVELY CONSIDERED THE PROPOSAL MADE BY THE AO QUA THE DIRECTIONS GIVEN DURING THE APPELLATE PROCEEDINGS AGAINST THE RECTIFICATION ORDER. IT IS ALSO AN UNDISPUTED FACT THAT THE ASSESSEE WAS ASKED TO SUBMIT THE REPLY AGAINST THE PROPOSAL OF TH E AO. THERE IS ALSO NO DENYING THAT THE ENTIRE APPELLATE PROCEEDINGS BEFORE THE FIRST APPELLATE AUTHORITY REVOLVED AROUND THE PROPOSAL OF THE AO AND THE REPLY OF THE ASSESSEE. 10.1. A PERUSAL OF THE ORDER OF THE FIRST APPELLATE AUTHORITY SHOWS THAT THE APPELLATE AUTHORITY HAS SIMPLY IMBIBED THE RECTIFICATION ORDER OF THE AO. THERE IS NO DENYING THAT AT NO POINT OF TIME, THE FIRST APPELLATE AUTHORITY HAS ISSUED NOTICE OR ASKED INDEPENDENTLY THE ASSESSEE TO EXPLAIN WHY ENHANCEMENT SHOULD NOT BE MADE TO TH E ASSESSED INCOME. THIS IS NOTHING BUT GROSS DENIAL OF NATURAL JUSTICE. SEC. 251 OF THE ACT GIVES POWER TO THE LD. CIT(A) FOR ENHANCEMENT BUT SEC. 251(2) PUTS A RIDER ON SUCH POWER PROVIDING THAT THE LD. CIT(A) SHALL NOT ENHANCE AN ASSESSMENT UNLESS TH E APPELLANT HAS HAD A REASONABLE OPPORTUNITY OF SHOWING CAUSE AGAINST SUCH ENHANCEMENT. 10.2. IN THE PRESENT CASE AS PER THE FACTUAL MATRIX MENTIONED HEREINABOVE, THE FIRST APPELLATE AUTHORITY HAS SIMPLY PROCEEDED IN THE LIGHT OF THE PROPOSALS OF THE A O AND IN OUR UNDERSTANDING OF THESE WAMAN HARI PETHE SONS 6 FACTS QUA THE RELEVANT PROVISIONS OF THE LAW, IT CANNOT BE SAID THAT THE LD. CIT(A) HAS GIVEN A REASONABLE OPPORTUNITY TO THE ASSESSEE TO SHOW CAUSE AS TO WHY THE ENHANCEMENT SHOULD NOT BE MADE. 10.3. THIS ACT OF THE LD. CIT(A) MAKES THE ORDER ERRONEOUS. HOWEVER, IN THE INTEREST OF JUSTICE AND FAIR PLAY, WE RESTORE THIS ISSUE TO THE FILE OF THE LD. CIT(A) WITH A DIRECTION THAT THE LD. CIT(A) SHALL GIVE A PROPER NOTICE TO THE ASSESSEE CLEARLY MENTIONING THE POINTS ON W HICH HE INTENDS TO ENHANCE THE ASSESSMENT AND DECIDE THE ISSUES AFRESH AS PER THE PROVISIONS OF THE LAW. THE ADDITIONAL GROUND RAISED BY THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSE. 12. IN SO FAR AS THE ADDITION OF RS. 19,11,084/ - IS CONCERNED, SINC E WE HAVE RESTORED THE ISSUE TO THE FILE OF THE LD. CIT(A), THE LD. CIT(A) IS DIRECTED TO DECIDE THIS ISSUE ALSO AFRESH AFTER GIVING REASONABLE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. 13. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS TREATED AS ALLOWED FOR STATISTICAL PURPOSE. ITA NO. 7105/M/2012 A.Y. 2008 - 09 14. THE FIRST GRIEVANCE OF THE ASSESSEE RELATES TO THE ADHOC DISALLOWANCE MADE BY THE AO AND CONFIRMED BY THE LD. CIT(A) BEING OUT OF MOTOR CAR EXPENSES 10%, OUT OF GENERAL EXPENSES 5 % AND OUT OF SALES PROMOTION 5%. 14.1. WHILE SCRUTINIZING THE RETURN OF INCOME AT PARA - 3 OF THE ASSESSMENT ORDER, THE AO HAS SIMPLY MENTIONED THAT THOUGH FBT HAS BEEN PAID UNDER VARIOUS HEADS, YET CERTAIN DISALLOWANCES ARE WAMAN HARI PETHE SONS 7 REQUIRED HOLDING THAT THE EXP ENSES ARE NEITHER FULLY OPEN TO VERIFICATION NOR PERSONAL ELEMENT CAN BE ASCERTAINED. THE AO MADE THE FOLLOWING DISALLOWANCES. A) MOTOR CAR EXPENSES OUT OF RS. 7,60,205/ - EXPENSES DISALLOWED RS. 1,20,000/ - B) OUT OF GENERAL EXPENSES OF RS. 23,27,059/ - EXPENSES DISALLOWED RS. 1,25,000/ - C) OUT OF SALES PROMOTION OF RS. 25,32,167/ - EXPENSES DISALLOWED RS. 1,30,000/ - 14.2. WHEN THE MATTER WAS AGITATED BEFORE THE LD. CIT(A), THE CIT(A) RESTRICTED THE DISALLOWANCE TO 10% OUT OF MOTOR CAR EXPENSES AND 5% EACH OUT OF GENERAL EXPENSES AND SALES PROMOTION EXPENSES. 14.3. BEFORE US, THE LD. COUNSEL FOR THE ASSESSEE COULD NOT ADD ANYTHING NEW TO WHAT HAS BEEN STATED BEFORE THE LOWER AUTHORITIES. 15. THE LD. DR SIMPLY RELIED UPON THE FINDINGS OF THE LOWER AUTHORITIES. 16. WE HAVE PERUSED THE ORDERS OF THE AUTHORITIES BELOW. THERE IS NO DENIAL THAT THE EXPENSES ARE NEITHER FULLY OPEN TO VERIFICATI ON NOR PERSONAL ELEMENT CAN BE RULED OUT. THERE IS ALSO NO DENIAL THAT THE DISALLOWANCES MADE BY THE AO ARE PURELY BASED ON ASSUMPTIONS AND SURMISES. HOWEVER, WE FIND THAT THE LD. CIT(A) HAS RESTRICTED THE DISALLOWANCES TO 10% AND 5% AS MENTIONED ELSEWHE RE. IN OUR CONSIDERED OPINION, THIS SHOULD MEET THE ENDS OF JUSTICE, THEREFORE, WE DECLINE TO INTERFERE. WAMAN HARI PETHE SONS 8 17. THE SECOND GRIEVANCE OF THE ASSESSEE RELATES TO THE ADDITION MADE U/S. 68 OF THE ACT AMOUNTING TO RS. 1,88,965/ - . 17.1. THIS ISSUE FIND PLACE A T PARA - 4 OF THE ASSESSMENT ORDER WHEREIN THE AO HAS OBSERVED THAT THE ASSESSEE HAS SHOWN ADVANCES RECEIVED FROM CUSTOMERS OUT OF WHICH A SUM OF RS. 3,84,010/ - HAS NEITHER BEEN ADJUSTED TOWARDS SALES SHOWN NOR ASSESSEE COULD FURNISH ANY EVIDENCE OF CONFIR MATION FROM ANY OF THE CUSTOMERS. THE AO ACCORDINGLY ADDED RS. 3,84,010/ - . 17.2. THE ASSESSEE CARRIED THE MATTER BEFORE THE LD. CIT(A) AND THE CIT(A) HAS CONSIDERED THIS ISSUE ON PAGE - 3 AT PARA - 4 OF HIS ORDER. AFTER CONSIDERING THE FACTS AND THE SUBMIS SIONS, THE LD. CIT(A) AT PARA - 4.1 OBSERVED THAT CONSIDERING THE NATURE OF BUSINESS OF THE ASSESSEE , IT CANNOT BE RULED OUT THAT CUSTOMERS DO DEPOSIT SOME ADVANCES AT THE TIME OF GIVING ORDERS OF PURCHASE OF JEWELLERY WHICH IS LATE R ADJUSTED WITH THE SALE S. THE LD. CIT(A) FURTHER FOUND THAT THE ASSESSEE COULD FURNISH FULL PARTICULARS OF ONLY 40 CREDITORS INVOLVING AN AMOUNT OF RS. 1,95,045/ - . THE LD. CIT(A) ACCORDINGLY ACCEPTED THE GENUINENESS TO THIS EXTENT AND RESTRICTED THE ADDITION ON ACCOUNT OF SUCH ADVANCES TO RS. 1,88,965/ - . 17.3. AGGRIEVED BY THIS, THE ASSESSEE IS BEFORE US. 17.4. THE LD. COUNSEL FOR THE ASSESSEE COULD NOT BRING THE COMPLETE DETAILS OF THE REMAINING CUSTOMERS TO SUBSTANTIATE ITS CLAIM. 18. WE HAVE CAREFULLY PERUSED THE FINDIN GS OF THE LD. CIT(A). WE FIND THAT THE LD. CIT(A) HAS ACCEPTED THE ADVANCES OF CUSTOMERS WHOSE FULL NAME AND ADDRESSES WERE PROVIDED. WE ALSO FIND THAT THE WAMAN HARI PETHE SONS 9 FINDINGS OF THE LD. CIT(A) IS WELL REASONED AND RESEARCHED. WE, THEREFORE, DO NOT FIND ANY REASON TO INTERFERE WITH SUCH FINDINGS, ADDITION OF RS. 1,88,965/ - IS UPHELD FOR WANT OF NECESSARY EVIDENCES. 19. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS DISMISSED. ITA NO. 6159/M/2013 A.Y. 2009 - 10 20. THE SOLE GRIEVANCE OF THE ASSESSEE RELATES TO THE ADHOC DISALLOWANCE MADE OUT OF MOTOR CAR EXPENSES, GENERAL EXPENSES AND SALES PROMOTION. 21. A SIMILAR ISSUE HAS BEEN CONSIDERED BY US IN ITA NO. 7105/M/2012 QUA GROUND NO. 1 OF THAT APPEAL. FOR OUR DETA ILED REASON THEREIN, THIS GROUND IS DISMISSED. 22. IN THE RESULT, THE APPEALS FILED BY THE ASSESSEE IN ITA NOS. 7105/M/2012 FOR A.Y. 2008 - 09 & 6159/M/2013 FOR A.Y. 2009 - 10 ARE DISMISSED AND ITA NO. 5152/M/2010 FOR A.Y. 2005 - 06 IS ALLOWED FOR STATISTICAL PURPOSE. ORDER PRONOUNCED IN THE OPEN COURT AT THE TIME OF HEARING ON 7 TH JANUARY , 201 6 . SD/ - SD/ - ( SAKTIJIT DEY ) (N.K. BILLAIYA) /JUDICIAL MEMBER / ACCOUNTANT MEMBER MUMBAI ; DATED : 7 TH JANUARY , 201 6 . . ./ RJ , SR. PS WAMAN HARI PETHE SONS 10 / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. ( ) / THE CIT(A) - 4. / CIT 5. , , / DR, ITAT, MUMBAI 6. / GUARD FILE . / BY ORDER, //TRUE COPY// / (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI