HEMENDRA SANGHANI, MUMBAI V. I.T.O.WD 20(1)(3), MUMBAI

ITA 7249/MUM/2011

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 2930 (ITAT-MUMBAI)
• Duration Of Justice: 4 year(s) 7 month(s) 30 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-06-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: H
• Next Hearing Date: 26-04-2016
• Assessment Year: 2006-2007
• Appeal Filed On: 25-10-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Unexplained cash credit; Opportunity of being heard; Principle of natural justice

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL H BENCH, MUM BAI BEFORE SHRI D. KARUNAKARA RAO, AM AND SHRI AMARJIT SINGH, JM / I.T.A. NO.7249/MUM/2011 & I.T.A.7502/MUM/11 ( / ASSESSMENT YEAR: 2006-07 & 2007-08) SHRI HEMENDRA SANGHANI M/S. INTERNATIONAL AGENCIES B-303, RATNA TARANG, PARSI PANCHAYAT ROAD, OLD NAGARDAS ROAD, ANDHERI(E), MUMBAI 400069 / VS. THE INCOME TAX OFFICER WARD 20(1)(3) MUMBAI ./ ./ PAN/GIR NO. : ARCPS9439G ( / APPELLANT ) .. ( / RESPONDENT ) / DATE OF HEARING: 03.05.2016 !' /DATE OF PRONOUNCEMENT:24.06.2015 #$ / O R D E R PER AMARJIT SINGH, JM: THE ASSESSEE HAS FILED THE ABOVE SAID APPEALS AGAI NST THE ORDER DATED 11.08.2011 PASSED BY THE COMMISSIONER OF INCO ME TAX (APPEALS) 31, MUMBAI [HEREINAFTER REFERRED TO AS THE CIT(A)] R ELEVANT TO THE A.Y.2006- 07 AND 2007-08. SINCE IN THE PRESENT APPEALS THE P ARTIES ARE THE SAME AND THE MATTER OF CONTROVERSY LINKED WITH EACH OTHER, T HEREFORE, THESE APPEALS ARE BEING TAKEN UP TOGETHER FOR ADJUDICATION FOR THE SA KE OF CONVENIENCE. ASSESSEE BY: SHRI MADAN DEDIA DEPARTMENT BY: SHRI A.N.SONTAKKE ITA NO7249&7502/M/11 A.Y. 2007-08 2 ITA NO.7249/M/2011:- 2. THE FACTS OF THE CASE ARE THAT THE ASSESSEE FILE D THE RETURN OF INCOME OF RS.1,86,272/- FOR A.Y.2006-07 ON 30.10.2006 THE RE TURN WAS ACCOMPANIED WITH THE COMPUTATION OF INCOME, TRADING PROFIT AND LOSS ACCOUNT, BALANCE SHEET AND TAX AUDIT REPORT U/S.44AB OF THE INCOME T AX ACT, 1961 ( IN SHORT THE ACT) IN FORM NO.3CB AND 3CD ALONG WITH ITS ENCLOSURES. THE RETURN WAS PROCESSED U/S.143(1) OF THE ACT. THE CA SE WAS SELECTED FOR SCRUTINY AND NOTICE U/S.143(2) OF THE ACT WAS ISSUE D ON 08.10.2007 FOR A.Y. 2006-07 AND SERVED UPON THE ASSESSEE. SUBSEQUENTLY NOTICES U/S.142(1) OF THE ACT WERE ISSUED AND SERVED UPON THE ASSESSEE. IN ENQUIRY THE ASSESSEE WAS FOUND TO GET THE LOAN FROM DIFFERENT PARTIES TO THE TUNE OF RS.25,10,000/- WHICH WAS NOT VERIFIED, THEREFORE THE SAID LOANS WA S TREATED AS UNEXPLAINED CASH CREDIT U/S.68 OF THE ACT. THE ASSESSING OFFIC ER ASSESSED THE INCOME OF THE ASSESSEE BY HOLDING HIS TAX LIABILITY TO THE TU NE OF RS.61,74,427/-. THEREAFTER THE ASSESSEE CHALLENGED THE SAID ASSESSM ENT ORDER BEFORE THE CIT(A), WHO ALSO CONFIRMED THE SAID UNEXPLAINED CAS H CREDIT U/S.68 OF THE ACT. THEREFORE, THE ASSESSEE HAS FILED THE PRESENT APPEAL BEFORE US. 3. THE ASSESSEE HAS RAISED THE FOLLOWING ISSUED IN THE ASSESSMENT YEAR 2006-07:- 1. DISALLOWANCE OF UNSECURED LOAN OF RS.25,10,000/ - TREATING AS UNEXPLAINED CASH CREDIT U/S.68 OF INCOM E TAX ACT, 1961. 2. DISALLOWANCE OF PURCHASES OF GOODS RS.1,14,73,07 2/- TREATED AS UNPROVED PURCHASES AND CONSIDERED BY CIT(A) AS UNDISCLOSED INCOME U/S.69. ITA NO7249&7502/M/11 A.Y. 2007-08 3 ISSUE NO.1:- 4. THE ASSESSEE HAS CHALLENGED THE ORDER OF CIT(A) WHO CONFIRMED THE DISALLOWANCE OF UNSECURED LOAN OF RS.25,10,000/-TRE ATED AS UNEXPLAINED CASH CREDIT U/S.68 OF THE ACT. THE CONTENTION OF THE AS SESSEE IS THAT HE TOOK LOAN FROM THE NINE PERSON WHO WERE HIS RELATIVES AND WER E RESIDING AT AHMADABAD, GUJARAT AND PROVED THEIR IDENTITIES, CRE DITWORTHINESS, GENUINENESS OF THE TRANSACTION BUT CIT(A) HAS WRONG LY CONFIRMED THE ADDITION. HOWEVER, THE DETAILS OF THE SAID PERSONS ARE HEREBY MENTIONED BELOW:- SR. NO NAME DATE LOAN PAN 1 KAMLABEN M. SHAH 06.12.2005 3,60,000/- AZLPS4005P 2 KANTABEN V. SHAH 06.12.2005 3,50,000/- 3 BINA J. SHAH 15.12.2005 2,50,000/- AZAPS6108G 4 MANDIBEN D. SHAH 15.12.2005 3,00,000/- BEDPS6897H 5 KANCHAN R. SHAH 14.12.2005 2,50,000/- AWAPS2855F 6 SAUMIL B. SHAH 14.12.2005 2,50,000/- BEDPS7560H 7 MRUDULA H. SHAH 14.12.2005 2,50,000/- AZAPS6107K 8 NITA A. SHAH 14.12.2005 2,50,000/- APPLIED 9 NITA V. SHAH 15.12.2005 2,50,000/- AYPPS7100J TOTAL 25,10,000/- 4.1 THE LEARNED REPRESENTATIVE OF THE ASSESSEE HAS ARGUED THAT THE ASSESSEE HAD DISCHARGED THE PRIMARY ONUS U/S.68 OF THE ACT B Y EXPLAINING THE NATURE AND SOURCE OF THE SAID AMOUNT AND BY PROVING PRIMA FACIE I.E. (1) IDENTITY OF CREDITORS (2) CREDITWORTHINESS OF THE CREDITORS (3) GENUINENESS OF TRANSACTIONS BY FILING RELEVANT DETA ILS AND DOCUMENTARY EVIDENCES. IT IS ALSO ARGUED THAT THE ASSESSEE REC EIVED THE MONEY THROUGH ITA NO7249&7502/M/11 A.Y. 2007-08 4 ACCOUNT PAYEE CHEQUE, OR DRAFT OR ANY OTHER MODES B UT THE CIT(A) HAS FAILED TO CONSIDER THE CLAIM OF THE ASSESSEE WRONGLY AND I LLEGALLY. ON THE OTHER HAND THE LEARNED REPRESENTATIVE OF THE DEPARTMENT R ELIED UPON THE ORDER PASSED BY THE CIT(A) IN QUESTION. KEEPING IN VIEW O F THE ARGUMENT ADVANCED BY THE LD REPRESENTATIVE OF THE PARTIES AN D PERUSING THE RECORD, IT CAME INTO THE NOTICE THAT THE ASSESSEE HAS PRODUCED THE COPY OF BANK STATEMENT OF THE CREDITORS WHICH IS LYING AT PAGE N O.1 OF THE PAPER BOOK. THE ASSESSEE ALSO PRODUCED THE COMMON AFFIDAVIT OF 9 CR EDITORS WHOSE NAMES AND DETAILS HAVE BEEN PROPERLY MENTIONED AT PAGES 2 AND 3 OF THE PAPER BOOK. MOST OF THE CREDITORS WERE HAVING THEIR PAN NUMBER. DETAILED INCOMES OF THE CREDITORS HAVE ALSO BEEN FILED. ALL THE TRANSACTIONS HAVE BEEN REJECTED BY THE ASSESSING OFFICER ON THE GROUND THA T THE NOTICE U/S.133(3) OF THE ACT WERE NOT SERVED TO THE CREDITORS AND FEW O F THEM DID NOT ANSWER TO THEIR NOTICES. NO FURTHER ENQUIRY WAS DONE BY THE ASSESSING OFFICER. ANYHOW, WHEN SUFFICIENT IDENTITY OF THE CREDITORS A ND THEIR PAN NUMBERS AND THEIR ADDRESS IS ON RECORD, THEREFORE, IN THE SAID CIRCUMSTANCES IT IS NECESSARY TO INQUIRE THE MATTER PROPERLY. IN THE INSTANT CAS E NO PROPER INQUIRY WAS CONDUCTED. THERE SHOULD BE SOME REASONABLE GROUND TO DECLINE THE EVIDENCE PRODUCED BEFORE HIM. THE CLAIM OF THE ASSESSEE WAS DECLINED ON THE GROUND OF THAT THE ASSESSEE FAILED TO PRODUCE THEM AND SOM E OF THE NOTICES RECEIVED BACK UNSERVED. IT IS NOT THE SUFFICIENT GROUND TO DECLINED THE CLAIM OF THE ASSESSEE, SPECIFICALLY IN THE CIRCUMSTANCES WHEN TH E EVIDENCE PRODUCED BY THE ASSESSEE HAS NOT BEEN EXAMINED AND DISCUSSED PR OPERLY TO DENIED THE CLAIM IF ANY. IN VIEW OF THE EVIDENCE PRODUCED BE FORE US, WE ARE OF THE VIEW THAT CIT(A) DID NOT PASS THE ORDER CORRECTLY A ND JUDICIOUSLY. ITA NO7249&7502/M/11 A.Y. 2007-08 5 THEREFORE, WE SET ASIDE THE ORDER ON THIS ISSUE AND FILE IS HEREBY ORDERED TO BE RESTORED BEFORE THE ASSESSING OFFICER TO RECONSI DER THE CLAIM OF THE ASSESSEE BY GIVING AN OPPORTUNITY OF BEING HEARD TO THE ASSESSEE IN THE INTEREST OF NATURAL JUSTICE. ACCORDINGLY, THIS ISS UE IS DECIDED IN FAVOUR OF THE ASSESSEE AGAINST THE REVENUE. ISSUE NO.2:- 5. THE SECOND ISSUE IS IN CONNECTION WITH THE DISAL LOWANCE OF PURCHASES OF GOODS TO THE TUNE OF RS.1,14,73,072/- TREATED AS UNPROVED AS UNDISCLOSED INCOME U/S.69 OF THE ACT WHICH HAS BEEN CONFIRMED B Y THE CIT(A). THE CONTENTION OF THE ASSESSEE IS THAT THE ASSESSING OF FICER VERIFIED THE PURCHASES FROM WRONG ADDRESSES I.E. M/S. ARCH PHARM A LABS LTD. WHEREAS THE ASSESSEE PURCHASED GOODS AMOUNTING TO RS.1,14,7 3,072/- FROM M/S. ARCH PHARMA LABS, PROP. KUMARPAL SHAH, SITUATED AT A-9, A.V.COMPLEX, PALDI, AHMEDABAD. IT IS CONTENTED THAT THE NAME OF THE S UPPLIER WAS WRONGLY MENTIONED AS M/S. ARCH PHARMA LABS LTD. INSTEAD OF M/S. ARCH PHARMA LABS. IT IS NOT DISPUTED THAT THE ASSESSING OFFICE R DECLINED THE PURCHASES WHEN HE RECEIVED LETTER FROM M/S. ARCH PHARMA LABS LTD. WITH REGARD TO THE NON-TRANSACTION WITH THE ASSESSEE. THE CONTENTION OF THE ASSESSEE WITH REGARD TO THE PURCHASES OF GOODS FROM M/S. ARCH PHA RMA LABS WAS NOT VERIFIED EVEN AT THE STAGE OF APPEAL. THE ACCOUNT OF THE ASSESSEE WAS AUDITED U/S.44AB OF THE ACT AND WAS HAVING SUFFICIENT RECOR D WITH REGARD TO THE PURCHASES. THE ASSESSEE HAS FILED COPIES OF PURCHA SE BILLS OF M/S. ARCH PHARMA LABS, AHEMADABAD AND ITS CONFIRMATION OF AC COUNT, TRANSPORTATION RECEIPT, BANK STATEMENT CONFIRMING PAYMENT MADE TO M/S.ARCH PHARMA ITA NO7249&7502/M/11 A.Y. 2007-08 6 LABS, COPY OF VAT RETURNED FILED WITH SALES TAX DEP ARTMENT REFLECTING SAID PURCHASES. COPY OF SALES TAX REGISTRATION CERTIFIC ATE OF M/S.ARCH PHARMA LTD. WITH SALES TAX DEPARTMENT GUJARAT STATE HOLDIN G REGISTRATION NO:24073604147 W.E.F. 01.02.2006. IT IS ALSO OBSER VED THAT M/S.ARCH PHARMA LABS IS SITUATED IN AHMEDABAD WHEREAS M/S. ARCH PHARMA LABS LTD. IS SITUATED AT ANDHERI (E), MUMBAI. THE ADDRES SES OF BOTH THE FIRM ARE TOTALLY DIFFERENT. IN VIEW OF THE SAID CIRCUMSTANCE S WE ARE OF THE VIEW THAT THIS ISSUE NEEDS PROPER VERIFICATION AT THE END THE ASSESSING OFFICER IN VIEW OF THE EVIDENCE PRODUCED IN THE INTEREST OF NATURAL JUSTICE. IN VIEW OF THE SAID CIRCUMSTANCES WE SET ASIDE THE ORDER PASSED BY THE CIT(A) ON THIS ISSUE AND RESTORE THE ISSUE TO THE FILE OF THE ASSESSING OFFICER TO DECIDE THE MATTER AFRESH IN VIEW OF THE EVIDENCE PRODUCED AFTER GIV ING HIM AN OPPORTUNITY OF BEING HEARD IN ACCORDANCE WITH LAW. THIS ISSUE IS DECIDED IN FAVOUR OF THE ASSESSEE AND AGAINST THE REVENUE. ITA NO.7502/MUM/2011 (2007-08):- 6. THE FACTS OF THE CASE OF THE PRESENT CASE ARE QU ITE SIMILAR WITH THE FACTS MENTIONED ABOVE FOR THE A.Y.2006-07. HOWEVER, THE FIGURE ARE DIFFERENT. IN THE SAID ASSESSMENT YEAR THE ASSESSEE HAS CHALLENGE D THE DISALLOWANCE OF INTEREST CLAIMED TO THE TUNE OF RS.3,76,648/- ON UN SECURED LOAN TO THE TUNE OF RS.25,10,000/- OF THE A.Y.2006-07. THE SAID DELET ION WAS CONFIRMED BY THE CIT(A) VIDE ORDER DATED 11.08.2011, THEREFORE THE A SSESSEE FILED THE PRESENT APPEAL BEFORE US. 7. THE ASSESSEE HAS RAISED THE FOLLOWING ISSUED IN THE ASSESSMENT YEAR 2007-08:- ITA NO7249&7502/M/11 A.Y. 2007-08 7 1. THE FIRST GROUND IS RELATING ADDITION MADE BY A O DISALLOWING CLAIM OF ENTIRE INTEREST EXPENSES OF RS.3,76,648/- STATING INTEREST CANNOT BE CONSIDERED AS INCURRED BY ASSESSEE AS UNSECURED LOANS WERE TREATE D AS UNEXPLAINED CASH CREDIT U/S.68 OF THE INCOME TAX ACT, 1961 IN A.Y. 2006-07. THE CIT(A)-31 ERRED IN CONFIRMING DISALLOWANCE OF INTEREST EXPENSES CLAIME D DURING THE YEAR UNDER CONSIDERATION. 2. THE SECOND POINT IS RELATING NOT PROVIDING SUFFI CIENT OPPORTUNITY OF HEARING TO APPELLANT AND LD. AO FAIL ED IN MAKING PROPER ENQUIRY OF CASE. AND LD. CIT(A) ERRED IN CONFIRMING ACTION OF AO. ISSUE NO.1 &2:- 8. SO FAR AS THE ISSUE NO.1 IN THE A.Y.2007-08 IS C ONCERNED, THE ASSESSEE HAS RAISED THE ISSUE OF DISALLOWANCE CLAIM OF INTER EST EXPENSES OF RS.3,76,648/- ON UNSECURED LOAN OF RS.25,10,000/-. THIS INTEREST WAS CLAIMED BY THE ASSESSEE AGAINST THE UNSECURED LOANS OF RS.25,10,000/- IN THE A.Y.2006-07. SINCE IN DECIDING THE APPEAL OF THE A SSESSEE FOR A.Y.2006-07 THE ISSUE OF UNSECURED LOAN OF RS.25,10,000/- HAS B EEN REMANDED BEFORE THE ASSESSING OFFICER TO RE-EXAMINE THE MATTER AFRESH I N THE LIGHT OF EVIDENCES ADDUCED BY THE ASSESSEE, THEREFORE IN THE SAID CIRC UMSTANCES THE INTEREST UPON THE UNSECURED LOAN HAS BECAME UNCERTAIN NO DOU BT THE SAME WOULD BE CONSEQUENTIAL AND WOULD CAME INTO IN EXISTENCE AFTE R THE DECISION TAKEN BY THE ASSESSING OFFICER WHILE DECIDING THE ASSESSMENT OF THE A.Y.2006-07. ACCORDINGLY, THE FINDING OF THE CIT(A) ON THIS ISSU E IS ALSO IS HEREBY SET ASIDE WHICH WOULD BE CONSEQUENTIAL ON ACCOUNT OF FI NDING OF THE ASSESSMENT ITA NO7249&7502/M/11 A.Y. 2007-08 8 FOR THE YEAR A.Y.2006-07. ACCORDINGLY THIS ISSUE IS DECIDED IN FAVOUR OF ASSESSEE. 9. IN THE RESULT BOTH THE APPEALS FILED BY THE ASSESSEE IS HEREBY ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 24 TH JUNE , 2016. SD/- SD/- (D.KARUNAKARA RAO) (AMARJIT SINGH) # / ACCOUNTANT MEMBER %& # /JUDICIAL MEMBER ' ( MUMBAI; )# DATED : 24 TH JUNE,2016 MP MP MP MP !' # $%&' (!'% / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. * ( ) / THE CIT(A)- 4. * / CIT 5. -./ &&01 , 01' , ' ( / DR, ITAT, MUMBAI 6. /34 5 / GUARD FILE. !' ) / BY ORDER, - & //TRUE COPY// */)+ , (DY./ASSTT. REGISTRAR) , ' ( / ITAT, MUMBAI