IQBAL USMANGANI KHATRI, MUMBAI V. DCIT CEN CIR 2(3), MUMBAI

ITA 724/MUM/2018

• Counselvise Citation: [2020] 110 COUNSELVISE.COM (IT) 0199 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 9 month(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 04-12-2020
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: C
• Assessment Year: 2008-2009
• Appeal Filed On: 06-02-2018
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Assessee Lawyers: HARI S RAHEJA
• Keywords: Unexplained cash credit; Opportunity of being heard; Deemed to accrue or arise in india; Set aside
• Section: 143(3); 69A; 48; 69; 68

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES C , MUMBAI BEFORE S HRI RAJESH KUMAR (AM ) AND SHRI RAM LAL NEGI (JM) ITA NO. 724/MUM/2018 ASSESSMENT Y EAR: 2008 - 09 MR. IQBAL USMANGANI KHATRI, SHOP NO. 5 AND 6, C WING, SUYOG CHS LTD., PANDIT KULKAR NI ROAD, NEAR DON BOSCO SCHOOL, BORIVALI (WEST), MUMBAI - 400092 PAN: AAQPK7940M VS. THE ACIT, CIRCLE 2(3), 5 TH FLOOR, NEW BLOCK, 121, M.G. ROAD, NUNGAMBAKKAM, CHENNAI - 600034 (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI HARI S RAHEJA (A R) RE VENUE BY : MS. NEHA THAKUR ( D R ) DATE OF HEARING: 25/09 /2020 DATE OF PRONOUNCEMENT: 04 / 12 /2020 O R D E R PER RAM LAL NEGI, JM T HE ASSESSEE HAS FILED THE PRESENT APPEAL AGAINST THE ORDER DAT ED 19.12.2017 PASSED BY THE COMMISSIONER OF INCOME TAX (APPEALS) - 48 (FOR SHORT THE CIT(A) , MUMBAI, WHICH PERTAINS TO THE T HE ASSESSMENT YEAR 2008 - 09 , VIDE WHICH, THE LD. CIT(A) HAS DISMISSED T HE APPEAL FILED BY THE ASSESSEE , AGAINST THE ASSESSMENT ORDER P ASSED U/S 143 (3) R.W.S. 147 OF THE INCOME TAX ACT, 1961 (FOR SHORT THE ACT). 2. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSE E ENGAGED IN THE BUSINESS OF PROPERTY DEVELOPMENT , UNDERTAKING CIVIL CONTRACT WORK AND TRADING IN BUILDING MATERIAL, FILED ITS R ETURN OF INCOME FOR THE ASSESSMENT YEAR UNDER CONSIDERATION DECLARING TOTAL INCOME OF RS. 15,55,937/ - . THE RETURN WAS PROCESSED AND ASSESSMENT ORDER WAS PASSED U/S 143 (3) OF THE ACT. SUBSEQUENTLY, THE AO REOPENED THE ASSESSMENT , BAS ED ON THE INFORMATION R ECEIVED FROM DDIT ( I NV.) 2 ITA NO. 724 / MUM/2018 ASSESSMENT YEAR: 2008 - 09 TO THE EFFECT THAT THE ASSESSEE HAD DEPOSITED CHEQUE OF RS. 2 CRORE IN HIS ACCOU NT , MAINTA INED WITH HSBC ON 23.01.2008 AND THE SAME WAS WITHDRAWN ON 29.01.2008 . FURTHER, THE ASSESSEE HAD DEPOSITED RS. 12,50,000/ - IN ACCOUNT MAINTAI NED WITH DEUTSCHE BANK, KHAR, MUMBAI ON VARIOUS DATES AND ALSO WITHDRAWN THE CASH FROM TIME TO TIME. ACCORDINGLY, THE AO PASSED THE ASSESSMENT ORDER U/S 143(3) R.W.S. 147 OF THE ACT, DETERMINING TOTAL INCOME OF THE ASSESSEE AT RS. 2,19,55,940/ - (ROUNDED OF F) , AFTER MAKING ADDITION OF RS. 2,00,00,000/ - U/S 68 AND ADDITION OF RS. 3,00,000/ - U/S 69A OF THE ACT. THE ASSESSEE CHALLENGED THE ASSESSMENT ORDER BEFORE THE LD.CIT (A). THE LD.CIT (A) AFTER HEARING THE ASSESSEE DISMISSED THE ASSESSEES APPEAL AND CONF IRMED THE ACTION OF THE AO. AGAINST THE SAID ORDER, THE ASSESSEE IS IN APPEAL BEFORE THIS TRIBUNAL. 3 . THE ASSESSEE HAS CHALLENGED THE IMPUGNED ORDER PASSED BY THE LD. CIT (A) ON THE FOLLOWING EFFECTIVE GROUNDS : - GROUND NO. 1: UNEXPLAINED CASH CREDIT U/S 68 ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. DY. CIT (AO) ERRED IN MAKING ADDITION OF RS. 2,00,00,000/ - (RUPEES TWO CRORES) ARBITRARILY BY TREATING THE ADVANCE RECEIVED FROM YASH BIRLA CONSTRUCTION GROUP AS UNEXPLAINED CASH CRE DIT U/S 68 OF THE I.T. ACT 1961 BY IGNORING THE CONFIRMATION OF ACCOUNT AND WITHOUT ASSIGNING ANY VALID REASONS. THE LEARNED CIT (APPEAL) - 48 MUMBAI UPHELD THE ORDER OF ASSESSING OFFICER DY. CIT - 2(3) MUMBAI IN TOTAL DISREGARD TO FACTS OF THE CASE AND EVIDEN CE AND MATERIAL ON RECORD FILED BEFORE THE A.O. AND CIT (APPEAL) BY STATING IN HER ORDER IN PARA 5.1 THAT ONLY ONE DOCUMENT CONSISTING OF CONFIRMATION IS FILED AND NO OTHER DETAIL REGARDING GENUINENESS OF TRANSACTION AND CREDIT WORTHINESS OF THE PARTY HAVE BEEN FILED. APPELLANT PRAYS ADDITION OF RS. 2 CRORES MAY PLEASE BE DELETED. GROUND NO. 2: UNEXPLAINED CASH CREDIT U/S 69A ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. DY. CIT (AO) ERRED IN MAKING ADDITION OF RS. 3,00,000/ - (R UPEES THREE LACS) ARBITRARY BY TREATING THE PEAK OF CASH CREDIT OF RS. 3,00,000/ - AS DEEMED INCOME OF APPELLANT. THE 3 ITA NO. 724 / MUM/2018 ASSESSMENT YEAR: 2008 - 09 LEARNED CIT (APPEAL) - 48 MUMBAI UPHELD THE ORDER OF ASSESSING OFFICER DY CIT 2(3) BY STATING IN HER ORDER IN PARA 5.2 SINCE ASSESSE COULD NOT EXPLAIN SOURCE OF THIS PEAK, THE ADDITION WAS MADE BY THE AO. APPELLANT PRAYS ADDITION OF RS. 3 LACS MAY PLEASE BE DELETED. GROUND NO. 3: PENALTY U/S 271 (1) (C) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. DY. CIT (AO) ERR ED IN INITIATING PENALTY PROCEEDING U/S 271 (1) (C) FOR INACCURATE PARTICULARS OF INCOME (RELEVANT TO GROUND NO. 1) AND CONCEALMENT OF INCOME (RELEVANT TO GROUND NO. 1) AND CONCEALMENT OF INCOME (RELEVANT TO GROUND NO. 2.) THE LD. CIT (A) WAS NOT JUSTIFIE D TO DISMISS THIS GROUND OF APPEAL BY MERELY STATING IN HER ORDER IN PARA 5.4, PENALTY PROCEEDINGS ARE SEPARATE PROCEEDINGS AND MERELY ON INITIATING NO INJURY OCCURRED TO ASSESSEE. APPELLANT PRAYS PROCEEDINGS INITIATED MAY PLEASE BE QUASHED. GROUND NO. 4 : INTEREST U/S 234 A, 234B, 234C & 234D ON THE FACTS AND IN CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT (AO) ERRED IN CHARGING INTEREST U/S 234A, 234B, 234C AND 234D OF THE IT ACT, 1961. THE LD. CIT (A) WAS NOT JUSTIFIED TO DISMISS THIS GROUND OF APPEAL BY STATING IN HER ORDER IN PARA 5.3 CHARGING OF INTEREST U/S 234A, 234B, 234C AND 234D IS MANDATORY AND IS CONSEQUENTIAL APPELLANT PRAYS INTEREST CHARGED MAY PLEASE BE CANCELLED. 4. AT THE OUTSET, THE LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT T HE LD. CIT (A) HAS PASSED THE IMPUGNED ORDER WITHOUT TAKING INTO CONSIDERATION, THE SUBMISSIONS MADE AND DOCUMENTS SUBMITTED DURING THE ASSESSMENT PROCEEDINGS AND THE APPELLATE PROCEEDINGS. THE LD. COUNSEL POINTED OUT THAT THE LD. CIT (A) IN ITS ORDER HAS NOT REFERRED/DISCUSSED ANY OF THE EVIDENCE ADDUCED BY THE ASSESSEE AND DISMISS ED THE APPEAL SUMMARILY BY AFFIRMING THE ACTION OF THE AO. THE LD. COUNSEL FURTHER POINTED OUT THAT THE FIRST GROUND PERTAINS TO ADDITION OF RS. 2,00,00,000/ - MADE U/S 68 OF THE ACT. THE LD. COUNSEL SUBMITTED THAT THE ASSESSEE HAD TAKEN ADVANCE TO RS. 2,00,00,000/ - 4 ITA NO. 724 / MUM/2018 ASSESSMENT YEAR: 2008 - 09 FROM YASH BIRLA CONSTRUCTION GROUP AND DU RING THE ASSESSMENT PROCEEDINGS , T HE ASSESSEE FURNISHED CONFIRMATION AND OTHER DOCUMENT ARY EVIDENCE TO ESTABLISH GENUINENESS OF THE TRANSACTION , H OWEVER, THE AUTHORITIES BELOW HAVE MADE /CONFIRMED ADDITION AND ADDED TO THE INCOME OF THE ASSESSEE WITHOUT CONSIDERING THE EVIDENCE ON RECORD . SIMILARLY, VIDE GROUND NO. 2 THE ASSESSEE HAS CHALLENGED THE ACTION OF THE LD. CIT(A) IN CONFI RMING THE ADDITION OF RS. 3,00,000/ - TREATING THE PEAK OF CASH CREDIT AS DEEMED INCOME OF THE ASSESSEE. THE LD. COUNSEL FURTHER SUBMITTED THAT THE ASSESSEE HAS FURNISHED ACKNOWLEDGMENT OF RETURN OF INCOME, COMPUTATION AUDITED PROFIT AND LOSS ACCOUNT, AUDIT ED BALANCE SHEET AND AUDIT REPORT ALONG WITH THE SUBMISSIONS. HOWEVER, THE AUTHORITIES BELOW HAVE MADE /SUSTAINED THE ADDITION U/S 69 OF THE ACT WITHOUT TAKING INTO CONSIDERATION, THE EVIDENCE ADDUCED BY THE ASSESSEE. THE LD. COUNSEL INVITED OUR ATTENTION T O THE IMPUGNED ORDER AND POINTED OUT THAT THE LD. CIT(A) HAS MERELY ENDORSED THE FINDINGS OF THE AO WITHOUT DISCUSSING THE MERITS OF THE CASE. ACCORDINGLY, THE LD. COUNSEL SUBMITTED THAT , SINCE THE LD. CIT(A) HAS PASSED THE IMPUGNED ORDER IN A MECHANICAL M ANNER WITHOUT APPRECIATING THE EVIDENCE ON RECORD, THE SAME IS LIABLE TO BE SET ASIDE . THEREFORE, THE ADDITIONS SUSTAINED MAY BE DELETED OR IN ALTERNATIVE, THE APPEAL MAY BE SET ASIDE TO THE FILE OF LD. CIT (A) FOR DECIDING AFRESH ON MERITS TAKING INTO CON SIDERATION, THE SUBMISSIONS MADE AND THE DETAILS FURNISHED. 5. ON THE OTHER HAND, THE LD. DEPARTMENTAL REPRESENTATIVE (DR) SUPPORTING THE ORDERS PASSED BY THE AUTHORITIES BELOW SUBMITTED THAT SINCE THE AO HAS PASSED A DETAILED AND REASONED ORDER, THE LD. CIT (A) HAS ENDORSED THE SAME. HENCE, THERE IS NO INFIRMITY IN THE ORDER PASSED BY THE LD. CIT (A). 6. WE HAVE HEARD THE RIVAL SUBMISSIONS OF THE PARTIES AND PERUSED THE MATERIAL ON RECORD. IN THIS CASE, AO HAD MADE ADDITION OF RS. 2,00,00,000/ - U/S 68 OF THE ACT, ON THE GROUND THAT THE ASSESSEE HAS FAILED TO PROVE THE CREDITWORTHINESS OF THE TRANSACTION. THE ASSESSEE CHALLENGED THE FINDINGS OF THE AO ON THE GROUND THAT THE AO HAS MADE THE ADDITIONS WITHOUT CONDUCTING ANY ENQUIRY TO ASCERTAIN THE GENUINENE SS OF THE TRANSACTION. WE NOTICE THAT THE LD. 5 ITA NO. 724 / MUM/2018 ASSESSMENT YEAR: 2008 - 09 CIT(A) HAS NOT ADDRESSED THIS GRIEVANCE OF THE ASSESSEE IN ITS ORDER. WE FURTHER NOTICE THAT THE LD. CIT (A) HAS ENDORSED THE FINDINGS OF THE AO HOLDING THAT THE NEWLY INTRODUCED PROVISO TO SECTION 68 BY FINANC E ACT LAYS DOWN A MORE STRINGENT TEST FOR THE COMPANIES WHERE PUBLIC ARE NOT SUBSTANTIALLY INTERESTED. THE LD. CIT (A) HAS NOWHERE DISCUSSED THE PLEA OF THE ASSESSEE AND THE REASONS FOR REJECTING THE SAME. SIMILARLY, THE LD. CIT (A) HAS CONFIRMED THE ADDIT ION OF RS. 3,00,000/ - AS DEEMED INCOME MERELY STATING THAT THE ASSESSEE COULD NOT EXPLAIN THE SOURCE OF THE CASH CREDIT IN QUESTION EVEN DURING THE APPELLATE PROCEEDINGS . THE LD. CIT(A) HAS NOT DISCUSSED THE REASONS FOR NOT ACCEPTING THE EXPLANATION REGARD ING SOURCE OF CASH CREDIT IN QUESTION . WE FURTHER NOTICE THAT THE LD. CIT (A) HAS NOT EVEN DISCUSSED THE PLEA OF THE ASSESSEE AND THE REASONS FOR REJECTING THE SAME . AS POINTED OUT BY THE LD. COUNSEL, DURING ASSESSMENT PROCEEDINGS NO T EVEN A SINGLE NOTICE WAS ISSUED TO THE PARTY , FROM WHOM THE ASSESSEE HA D TAKEN LOAN OF RS. 2,00,00,000/ - . T HE LD. CIT (A) HAS ALSO IGNORED THIS ASPECT WHILE PASSING THE IMPUGNED ORDER. THESE FACTS SUGGEST THAT THE LD. CIT(A) HAS PASSED THE IMPUGNED ORDER IN A MECHANICAL MANNER . HENCE, I N ALL FAIRNESS , WE ARE OF T HE CONSIDERED VIEW THAT THE ISSUES INVOLVED IN THE PRESENT APPEAL REQUIRE FRESH ADJUDICATION BY THE LD. CIT (A) ON MERITS. ACCORDINGLY, WE SET ASIDE THE IMPUGNED ORDER IN THE INTEREST OF JUSTICE AND REMIT THIS APPEAL BA CK TO THE LD. CIT (A) FOR PASSING A REASONED ORDER ON MERITS AFTER AFFORDING A REASONABLE OPPORTUNITY OF BEING HEARD TO THE APPELLANT/ASSESSEE. IN THE RESULT, APPEAL FILED BY THE ASSESSEE FOR ASSESSMENT YEAR 2008 - 2009 IS ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED ON 4 TH DECEMBER , 2020 UNDER RULE 34 (4) OF THE INCOME TAX APPELLATE TRIBUNAL RULES, 1963. SD/ - SD/ - ( RAJESH KUMAR ) ( RAM LAL NEGI ) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI ; DATED: 04 / 12 /2020 6 ITA NO. 724 / MUM/2018 ASSESSMENT YEAR: 2008 - 09 ALINDRA, PS / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. ( ) / THE C IT(A) - 4. / CIT 5. , , / DR, ITAT, MUMBAI 6. / GUARD FILE . / BY ORDER, //TRUE COPY// / (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI