ITO 3(3)3, MUMBAI V. INSUTECH FINANCE & SECURITIES LTD ( FORMERLY KNOWN AS M.S, TIBREWALA TRADERS P. LTD), NASHIK

ITA 7744/MUM/2011

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 78657 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 4 month(s) 21 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 07-04-2014
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: I
• Next Hearing Date: 07-04-2014
• Assessment Year: 2007-2008
• Appeal Filed On: 16-11-2011
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: ASHOK SURI
• Assessee Lawyers: RAJESH CHAND
• Keywords: Additional evidence; Corroborative evidences; Onus to prove
• Section: 144; 11

Judgement Text

, INCOME TAX APPELLATE TRIBUNAL,MUMBAI - I BENCH. .. , ! , BEFORE S/SH.I.P.BANSAL, JUDICIAL MEMBER & RAJENDRA,ACCOUNTANT MEMBER /. ITA NO.7744/MUM/2011, ' ' ' ' # # # # / ASSESSMENT YEAR-2006-07 INCOME TAX OFFICER, 3(3)3 R.NO. 672, AAYAKAR BHAVAN, M.K.ROAD, MUMBAI-400020 VS. INSUTECH FINANCE & SECURITIES LTD. (FORMERLY KNOWN AS M.S. TIBREWALA TRADERS PVT. LTD.), PLOT NO. 24, JAIPUR HOUSE PARIJAT NAGAR, NASIK, NASIK-422005 PAN: AAACT1612J ( $% / APPELLANT) ( &'$% / RESPONDENT) &'( &'( &'( &'( /. CO NO.224/MUM/2012, ' ' ' ' # # # # / ASSESSMENT YEAR-2007-08 INSUTECH FINANCE & SECURITIES LTD. (FORMERLY KNOWN AS M.S. TIBREWALA TRADERS PVT. LTD.), PLOT NO. 24, JAIPUR HOUSE PARIJAT NAGAR, NASIK, NASIK-422005 VS. INCOME TAX OFFICER, 3(3)3 R.NO. 672, AAYAKAR BHAVAN, M.K.ROAD, MUMBAI-400020 PAN: AAACT1612J ( $% / APPELLANT) ( &'$% / RESPONDENT) ) * / REVENUE BY : SHRI ASHOK SURI '+, '+, '+, '+, * * * * / ASSESSEE BY : SHRI RAJESH CHAND ' ' ' ' ) )) ) ,- ,- ,- ,- / DATE OF HEARING : 07-04-2014 ./# ) ,- / DATE OF PRONOUNCEMENT : 07-04-2014 ' ' ' ' , 1961 ) )) ) 254 )1( ,0, ,0, ,0, ,0, 1 1 1 1 ORDER U/S.254(1)OF THE INCOME-TAX ACT,1961(ACT) PER RAJENDRA,AM ! ! ! ! ' ' ' ' : CHALLENGING THE ORDER DT.29.07.2011OF THE CIT(A)-7, MUMBAI,ASSESSING OFFICER (AO)HAS RAISED FOLLOWING GROUNDS OF APPEAL: 1.ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW, THE LD. CIT(A) HAS ERRED IN DELETING THE ADDITION OF RS.82,000/- MADE ON ACCOUN T OF DISALLOWANCE OF COMPENSATION PAID TO MS. NEETA TEKRIWAL,WITHOUT APPRECIATING THE FACT THAT T HE ASSESSEE HAS FAILED TO ESTABLISH THAT THE PAYMENTS WERE WHOLLY AND EXCLUSIVELY FOR THE BUSINE SS PURPOSE AND NO ANY SUPPORTING EVIDENCE HAVE BEEN PRODUCED FOR ITS CLAIM. 2.ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD.CIT(A) ~HAS ERRED IN DELETING THE ADDITION OF RS.25,50,000/-MADE ON ACCO UNT OF DIFFERENCE IN OPENING STOCK BY ADMITTING FRESH EVIDENCE WITHOUT PROVIDING ANY OPPO RTUNITY TO THE AO AS PROVIDED UNDER RULE 46-A OF THE IT. RULES. 3.ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD.CIT(A) HAS ERRED IN DELETING THE ADDITION OF RS.9,43,111/- MADE ON ACCOUNT OF D IRECT EXPENSES BY ADMITTING FRESH EVIDENCES WITHOUT PROVIDING ANY OPPORTUNITY TO THE AO AS PROV IDED UNDER RULE 46-A OF THE IT. RULES. 4.ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD.CIT(A) HAS ERRED IN DELETING THE ADDITION OF RS 9,892/- MADE ON ACCOUNT OF NEGA TIVE CASH BALANCE BY ADMITTING FRESH EVIDENCES WITHOUT PROVIDING ANY OPPORTUNITY TO THE AC AS PROVIDED UNDER RULE 46-A OF THE IT. RULES. 5.THE APPELLANT PRAYS THAT THE ORDER OF CIT(A) ON T HE ABOVE GROUND ASIDE AND THAT OF THE ASSESSING OFFICER BE RESTORED. 2 ITA NO. 7744/MUM/2011 & C.O. 224/MUM/2012 INSUT ECH FINANCE & SECURITIES LTD. 6THE APPELLANT CRAVES LEAVE TO AMEND OR ALTER ANY G ROUND OR ADD GROUND WHICH MAY BE NECESSARY. ASSESSEE-COMPANY HAS ALSO FILED CROSS OBJECTION AND THE GROUNDS OF CO READ AS UNDER: 1.GROUND OF APPEAL- COMPENSATION TO MISS NEETA TEKR IWAL OF RS. 82,000/- RESPONSE- A SUM OF RS. 82,000/-WAS PAID TOWARDS COMPENSATION TO MS. NEETA TEKRIWAL AND THE SAME WAS OFFERED BY HER, AS INCOME, IN HER ITR.HENC E. THERE WAS NO LOSS OF REVENUE,AS SUPPORTED BY THE ITR OF MS. NEETA TEKRIWAL ALREADY SUBMITTED AT THE TIME OF SCRUTINY TO THE LD. AO AS WELL AS IA. CIT (A). FURTHER, THE BUSINESS OF THE COMPANY I S DEALING IN LAND & PROPERTIES AS ALSO DISCLOSED IN THE BALANCE SHEET ABSTRACT ATTACHED IN THE ANNUAL REPORT OF THE COMPANY FOR THE RESPECTIVE AY. 2. GROUND OF APPEAL- DIFFERENCE IN OPENING STOCK RS. 2 5,50,000/- RESPONSE- AS WE ALREADY MADE SUBMISSION ON DATES, AS REFERRED ABOVE, IN WHICH WE HAD ELABORATED THE FACTS ON THE BASIS OF EVIDENCE ALREA DY SUBMITTED WITHOUT ANY ADDITIONAL EVIDENCE THAT WE ARE MAINTAINING BOOKS ON MERCANTILE BASIS & OPENING STOCK IS IN CONTINUATION SO THERE IS NO QUESTION OF DIFFERENCE IN OPENING STOCK. THUS, N O ADDITIONAL EVIDENCE WAS PROVIDED TO THE LD. CIT (A), HENCE, THE INFORMATION REITERATED ALONG WI TH THE WORKSHEET BEFORE THE LD. CIT (A) CAN NOT BE TREATED AS ADDITIONAL EVIDENCE PRODUCED BEFORE T HE ADJUDICATING AUTHORITY. HENCE, THE GROUND MADE BY THE LD. AO THAT THE LD. CIT (A) HAS ACCEPTE D FRESH EVIDENCE WITHOUT PROVIDING ANY OPPORTUNITY TO THE AO U/R 46A OF THE IT RULES IS NO T CORRECT AND BAD IN LAW. 3.GROUND OF APPEAL- DIRECT EXPENSES RS. 9,43,111/ - RESPONSE- AS WE ALREADY MADE SUBMISSION ON DATES, AS REFERRED ABOVE, IN WHICH WE HAD ELABORATED THE FACTS ON THE BASIS OF EVIDENCE ALREA DY SUBMITTED, WITHOUT ANY ADDITIONAL EVIDENCE, THE DETAILED BREAKUP OF DIRECT EXPENSES FIRST BEFOR E THE LD. AO WHO IGNORED OUR SUBMISSION MADE ON 29/12/2009 AND THEREAFTER BEFORE THE LD. CIT (A) . THUS, NO ADDITIONAL EVIDENCE WAS PROVIDED TO THE LD. CIT (A), HENCE, THE INFORMATION REITERATED ALONG WITH THE WORKSHEET BEFORE THE LD. CIT (A) CANNOT BE TREATED AS ADDITIONAL EVIDENCE PRODUCED B EFORE THE ADJUDICATING AUTHORITY. HENCE, THE GROUND MADE BY THE LD. AO THAT THE LD. CIT (A) HAS ACCEPTED FRESH EVIDENCE WITHOUT PROVIDING ANY OPPORTUNITY TO THE AO U/R 46A OF THE IT RULES I S NOT CORRECT AND BAD IN LAW. 4. GROUND OF APPEAL- NEGATIVE CASH BALANCE RS, 9,892/- RESPONSE- AS WE ALREADY MADE SUBMISSION ON DATES, AS REFERRED ABOVE , IN WHICH WE HAD ELABORATED THE FACTS ON THE BASIS OF EVIDENCE ALREA DY SUBMITTED, WITHOUT ANY ADDITIONAL EVIDENCE, THE DAILY BREAKUP OF CASH LEDGER FIRST BEFORE THE L D. AU AND THEREAFTER BEFORE THE LD. CIT (A). THUS, NO ADDITIONAL EVIDENCE WAS PROVIDED TO THE LD . CIT (A), HENCE, THE INFORMATION REITERATED ALONG WITH THE WORKSHEET BEFORE THE LD.CIT (A) CANN OT BE TREATED AS ADDITIONAL EVIDENCE PRODUCED BEFORE THE ADJUDICATING AUTHORITY. HENCE, THE GROUND MADE BY THE LD. AU THAT THE LD. CIT (A) HAS ACCEPTED FRESH EVIDENCE WITHOUT PROVIDI NG ANY OPPORTUNITY TO THE AU U/R 46A OF THE IT RULES IS NOT CORRECT AND BAD IN LAW, SIR, WE THEREFORE REQUEST YOUR HONOR TO KINDLY CONS IDER THIS CROSS OBJECTION FOR ALL CONSEQUENTIAL RELIEFS ALONG WITH ACCEPTANCE / UPHELD THE ORDER PA SSED BY LD. CIT (A) U/S. 250 OF THE IT ACT, 1961 IN TO-TO & THE APPEAL FILED BY THE REVENUE MAY BE D ISMISSED, FOR WHICH WE SHALL REMAIN EVER GRATEFUL. WE RESERVE THE RIGHT TO ADD, ALTER, DELETE ANY PORT ION OF THIS CROSS OBJECTION IF NEED ARISES AND ADD FURTHER MORE DOCUMENTS IN SUPPORT OF THIS CROSS OBJ ECTION DURING THE COURSE OF THE HEARING. 2. ASSESSEE-COMPANY,ENGAGED IN THE BUSINESS OF PROPERT Y DEVELOPMENT, FILED ITS RETURN OF INCOME ON 11.11.2007DECLARING TOTAL INCOME OF RS.10,770/- .AO FINALISED THE ASSESSMENT ORDER U/S.144 OF THE ACT,ON 29.12.2009,DETERMINING ITS TOTAL INCOME AT RS.35,95,770/-. 2.1. FIRST GROUND OF APPEAL PERTAINS TO ADDITION OF RS.8 2,000/- MADE ON ACCOUNT OF DISALLOWANCE OF COMPENSATION PAID TO MS. NEETA TEKRIWAL.DURING THE ASSESSMENT PROCEEDINGS,AO FOUND THAT THE ASSESSEE HAD DEBITED A SUM OF RS.82,000/-PAID AS CO MPENSATION TO MS. NEETA TEKRIWAL,THAT THE COPY OF HER LEDGER ACCOUNT DID NOT SHOW THAT THAT A NY TAX HAD BEEN DEDUCTED AT SOURCE,THAT THE SCRUTINY OF HER PROFIT AND LOSS ACCOUNT AND BALANCE SHEET SHOWED THAT SHE DID NOT HAVE ANY ASSET OTHER THAN A CAR.AO HELD THAT THE PURPOSE COMPENSAT ION PAID TO HER WAS NOT EXPLAINED BY THE 3 ITA NO. 7744/MUM/2011 & C.O. 224/MUM/2012 INSUT ECH FINANCE & SECURITIES LTD. ASESSEE-THOUGH HE HAD ISSUED A SPECIFIC SHOW CAUSE NOTICE IN THAT REGARD,THAT THE EXPENSE WAS DISALLOWABLE AS INCURRED FOR NON BUSINESS PURPOSES, THAT IF THE PAYMENT WAS IN THE NATURE OF CONTRACT, COMMISSION OR PROFESSIONAL RECEIPT,IT REQ UIRED DEDUCTION OF TAX AT SOURCE, WHICH HAD NOT BEEN DONE BY THE ASSESSEE.FINALLY,HE MADE A DISALLO WANCE OF RS.82,000/-. 2.2. AGAINST THE ORDER OF THE AO ASSESSEE PREFERRED AN A PPEAL BEFORE THE FIRST APPEAL AUTHORITY (FAA).AFTER CONSIDERING THE SUBMISSIONS OF THE ASSE SSEE AND THE ASSESSMENT ORDER HE HELD THAT MS.NEETA TEKRIWAL HAD PAID TAX ON THE SUM RECEIVED FROM THE ASSESSEE,THAT IT WAS PAYMENT OF COMPENSATION,THAT THE AO WAS NOT JUSTIFIED IN MAKIN G THE ADDITION. 2.3. BEFORE US,AUTHORISED REPRESENTATIVE(AR) SUBMITTED T HAT THE PAYMENT WAS MADE TO MS.TAKRIWAL AS ASSESSEE COULD NOT DELIVER THE POSSE SSION OF A PROPERTY TO HER AND SHE WAS TO BE PAID COMPENSATION FOR THE SAID TRANSACTION.ON A QUE RY BY THE BENCH HE ADMITTED THAT PURPOSE OF THE PAYMENT WAS NOT FURNISHED BEFORE THE AO.DEPARTM ENTAL REPRESENTATIVE (DR) SUBMITTED THAT THE ASSESSEE HAD NOT PRODUCED ANY EVIDENCE BEFORE T HE AO ABOUT THE PAYMENT MADE,THAT FAA HAD DECIDED THE ISSUE IN FAVOUR OF THE ASSESSEE WITHOUT CONSIDERING SAID FACT. 2.4. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL BEFORE US.BEFORE PROCEEDING FURTHER WE WOULD LIKE TO MENTION THE CIRCUMSTANCES IN WHICH THE ASSESSMENT WAS PASSED.AO HAD ISSUED A SHOW CAUSE NOTICE TO THE ASSESSEE ON 18.12 .2009 ASKING IT AS TO WHY CERTAIN ADDITIONS SHOULD NOT BE MADE.ASSESSEE WAS GIVEN TIME FOR FURN ISHING REPLY BY 24.12.2009.AS PER THE AO IT DID NOT FILE ANY REPLY TO THE SHOW CAUSE NOTICE.ON 29.12.2009 ASSESSEE SENT THREE EMAILS TO THE AO.ONE OF THE E MAIL IS INCORPORATED IN THE ORDER O F THE AO.THE ORDER IS ALSO PASSED ON 29.12.2009.WE HAVE MENTIONED THESE FACTS,BECAUSE SA ME WILL HAVE BEARING ON OUTCOME OF THE APPEAL.WE FIND THE BASIS OF PAYMENT WAS NOT EXPLAIN ED BY THE ASSESSEE.MERE MAKING A CLAIM IS NOT SUFFICIENT-IT HAS TO BE SUPPORTED BY THE ASSESS EE WITH SOME EVIDENCES.AS PER THE ESTABLISHED PRINCIPLES OF TAXATION ONUS OF PROVING THE FACTUM O F INCURRING OF EXPENDITURE WHOLLY AND EXCLUSIVELY FOR THE BUSINESS PURPOSES LIES ON THE A SSESSEE AND IT HAS TO DISCHARGE.IT.WE FIND THAT THE FAA HAS COMPLETELY IGNORED THIS VERY VITAL ISSU E.PAYMENT OR NON-PAYMENT OF TAX BY THE RECIPIENT DO NOT DECIDE THE ALLOWABILITY OR OTHERWI SE OF AN EXPENDITURE INCURRED BY THE ASSESSEE.THEREFORE,IN THE INTEREST OF JUSTICE,WE AR E REMITTING BACK THE MATTER TO THE FILE OF THE AO FOR FRESH ADJUDICATION.HE IS DIRECTED TO AFFORD REA SONABLE OPPORTUNITY OF HEARING TO THE ASSESSEE AND ASSESSEE IS DIRECTED TO PLACE ALL THE RELEVANT FACTS AND DOCUMENTS BEFORE THE AO.GROUND NO.1 IS DECIDED IN FAVOUR OF THE AO,IN PART. 3. SECOND GROUND OF APPEAL RELATES TO ADDITION OF RS25 ,50,000/- ON ACCOUNT OF DIFFERENCE IN OPENING STOCK.DURING THE ASSESSMENT PROCEEDINGS AO FOUND THAT THE CASE OF THE ASSESSEE WAS NOT SCRUTINISED FOR LAST SO MANY YEARS.VIDE ORDER SHEET NOTING DT.03.11.2009, THE AR OF THE ASSESSEE WAS ASKED TO FILE THE DETAILS OF SALE & PURCHASE OF LAND AS APPEARING IN P & L ACCOUNT,IN ORDER TO VERIFY THE OPENING STOCK,PURCHASES AND SALES ON THE DATE OF NEXT HEARING I.E. 23.11.2009.AS PER THE AO THE DETAILS WERE FILED BY THE ASSESSEE,BUT S AME WERE INCOMPLETE.AS THE AR OF THE ASSESSEE HAD PRODUCED EXTRACT OF AGREEMENTS AND NOT THE COMP LETE AGREEMENTS,SO HE DIRECTED THE ASSESSEE TO FILE COMPLETE SETS OF AGREEMENTS.AFTER GOING THR OUGH THE AGREEMENTS,HE HELD THAT THE VALUATION OF OPENING STOCK AS PER PURCHASE AGREEMENT IN RESPE CT OF THREE PLOTS DIFFERED SIGNIFICANTLY,THAT THERE WAS HUGE DIFFERENCE OF RS.25,50,000/- IN VALUE ADOPTED AS OPENING STOCK AND VALUE AS PER THE AGREEMENTS.THESE FACTS WERE POINTED OUT TO THE ASSESSEE VIDE HIS SHOW CAUSE NOTICE DATED 18. 12.2009.BUT,THE ASSESSEE DID NOT FILE EXPLANATION I N THAT REGARD.HE HELD THAT THE ONUS TO PROVE THE GENUINENESS OF ANY CLAIM IN THE RETURN OF INCOME WA S ON THE ASSESSEE WHICH HAD NOT BEEN DISCHARGED FULLY,THAT THERE HAD BEEN NO ATTEMPT TO RECONCILE THE DIFFERENCE. THE DIFFERENCE IN VALUATION OF STOCK OF RS.25,50000/- WHICH REMAINS U NEXPLAINED WAS THEREFORE ADDED TO THE TOTAL INCOME OF THE ASSESSEE. 3.1. ASSESSEE PREFERRED AN APPEAL BEFORE THE FAA.AFTER C ONSIDERING THE SUBMISSIONS OF THE 4 ITA NO. 7744/MUM/2011 & C.O. 224/MUM/2012 INSUT ECH FINANCE & SECURITIES LTD. ASSESSEE AND THE ASSESSMENT ORDER,FAA HELD THAT THA T THE ASSESSEE WAS INDULGED IN THE BUSINESS OF DEVELOPMENT OF LAND AND PLOTS,THAT IT HAD GIVEN COM PLETE DETAILS ON ACCOUNT OF SALE AFFECTED AS WELL AS THE ADDITIONAL CONSTRUCTION WORK CARRIED OU T IN RESPECT OF STOCK IN TRADE,THAT THE ASSESSEE HAD SUBSEQUENTLY MADE THE ADDITION TO THE DIFFERENT STOCK IN TRADE IN THE FORM OF DEVELOPMENT OR ADDITION IN THE FORM OF CONSTRUCTION MADE THEREIN, THAT IT HAD SUBSEQUENTLY REDUCED THEIR SALES AFFECTED OUT OF SUCH STOCK-IN-TRADE,THAT THE ASSESS EE WAS GETTING ITS BOOKS OF ACCOUNTS AUDITED AND MAINTAINED AS PER THE REGULAR METHOD FOLLOWED UNDER MERCANTILE SYSTEM OF ACCOUNTING,THAT AO HAD MADE ADDITION ON PRESUMPTIONS ONLY. 3.2. BEFORE US, DR SUBMITTED THAT WHILE DECIDING THE APP EAL FAA HAD RELIED UPON THE EXPLANATION FILED BEFORE HIM DURING THE APPELLANT PROCEEDINGS, THAT HE DID NOT CALL FOR ANY REMAND REPORT FROM THE AO,THAT AO HAD GIVEN A CLEAR FINDING THAT ASSES SEE HAD NOT RECONCILED THE DIFFERENCE POINTED OUT BY THE AO -VIDE HIS SHOW CAUSE DATED 18.12.2009 ,THAT DECIDING THE APPEAL WITHOUT HEARING THE AO WAS CONTRVENTION OF PROVISIONS OF RULE 46A OF TH E INCOME-TAX RULES 1962 (RULES).DR ALSO SUBMITTED THE COPIES OF THE LETTERS SENT BY THE ASS ESSEE VIA E-MAIL TO THE AO.AR SUBMITTED THAT ASSESSEE HAD FILED THE EXPLANATION BEFORE THE AO BY E-MAIL ON 29.12.2009, THAT AO HAD MENTIONED ABOUT THE E-MAIL WAS SENT BY THE ASSESSEE, THAT ASS ESSEE WAS GIVEN VERY LITTLE TIME TO EXPLAIN HIS STAND. 3.3. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL BEFORE US,INCLUDING THE DOCUMENTS SENT THROUGH E-MAIL.WE FIND THAT FIRST E- MAIL WAS SENT WAS ABOUT OBJECTIONS OF THE ASSESSEE TO ASSESS THE INCOME U/S. 144 OF THE ACT. THE SECOND E-MAIL REGARDING RECONCILIATION IN DIFFERENCE OF VALUATION OF THE PLOTS OF LAND WAS SE NT BY THE ASSESSEE AT ABOUT 15 HOURS ON 29.12.2009.WE FIND THAT ASSESSEE WAS SERVED A SHOW- CAUSE NOTICE ON 18.12.2009,BUT NO PROPER EXPLANATION WAS FILED BY IT ON 24.12.2009 WHEN THE CASE WAS FIXED FOR HEARING.WE ARE OF THE OPINION THAT IN ABSENCE OF ADEQUATE TIME PROPER ASS ESSMENT COULD NOT BE FRAMED,AS THE REPLY OF THE ASSESSEE WAS NOT AVAILABLE TO THE AO. FAA WAS AWARE THAT ASSESSMENT WAS PASSED U/S. 144 OF THE ACT BECAUSE OF THE NON AVAILABILITY OF THE EXPLANAT ION OF THE ASSESSEE.FAA HAD ACCESS TO THE DOCUMENTS AND REPLIES FILED BY THE ASSESSEE.IN OUR OPINION, HE SHOULD HAVE CALLED FOR COMMENTS OF THE AO/REMAND REPORT BEFORE FINALISING THE ISSUE.DE CIDING THE ISSUE WITHOUT FOLLOWING THE PROCEDURE LAID DOWN BY THE RULE 46 A OF THE RULES,I N OUR OPINION,WAS IMPROPER.CONSIDERING THE FACTS AND CIRCUMSTANCES OF THE CASE, WE ARE OF THE OPINION THAT,IN THE INTEREST OF JUSTICE,MATTER SHOULD BE RESTORED BACK TO THE FILE OF THE AO FOR F RESH ADJUDICATION. ASSESSEE IS DIRECTED TO SUBMIT ALL THE EVIDENCES BEFORE AO WHO WOULD PASS A SPEAKI NG ORDER AFTER CONSIDERING THE DOCUMENTS SUBMITTED BY THE ASSESSEE-COMPANY. GROUND OF APPEAL NO.2 IS PARTLY ALLOWED IN FAVOUR OF THE AO. 4. THIRD GROUND OF APPEAL IS ABOUT DELETING THE ADDITI ON OF RS.9,43,111/-MADE ON ACCOUNT OF DIRECT EXPENSES.DURING THE ASSESSMENT PROCEEDINGS,AO FOUND THAT ASSESSEE HAD DEBITED EXPENSES TO ITS P&L ACCOUNT OF RS.10.08 LACS.ON VERIFICATION,HE FOU ND THAT ASSESSEE HAD CLAIMED COMPENSATION TO TAPOVAN PLOTS OF RS. 2.32 LACS. HE FURTHER FOUND THAT TAPOVAN PLOTS HAD NOT BEEN SOLD DURING THE YEAR UNDER CONSIDERATION. THEREFORE, HE HELD TH AT COMPENSATION RELATING TO UNSOLD STOCK OR THE EXPENSES INCURRED THEREON WOULD GO ON TO INCREASE T HE VALUE OF CLOSING STOCK, THAT THE EXPENDITURE OF SUCH NATURE IN KEEPING THE STOCK IN SALABLE COND ITION WOULD BE ALLOWABLE AS DEDUCTION IN THE YEAR IN WHICH STOCK WAS SOLD.HE FURTHER FOUND THAT ASSESSEE HAD NOT ADDED RS. 3.85 LACS UNDER THE HEAD COMPENSATION PAID AND CORPORATION EXPENSES FOR PLOT NO. S-281, THAT ASSESSEE HAD SOLD ONLY PART OF THE SAID PLOT.THEREFORE, HE HELD THAT EXPEN SES INCURRED IN RELATION TO THE ABOVE PLOTS SHOULD HAVE BEEN APPROPRIATED PRO RATA BASIS TO THE SOLD/U NSOLD STOCK, THE CLAIM OF ENTIRE EXPENDITURE DURING THE YEAR UNDER APPEAL WAS INCORRECT AND HENC E DISALLOWABLE. AO ISSUED A SHOW-CAUSE NOTICE TO THE ASSESSEE ON 18.12.2009 AS STATED EARL IER.BUT,ASSESSEE DID NOT FILE ANY REPLY.THEREFORE,IN ABSENCE OF ANY EXPLANATION,EXPEN SES RELATING TO UNSOLD PLOTS AGGREGATING TO RS. 9,43,111/- WAS ADDED TO THE CLOSING STOCK RESULTING IN EFFECTIVE ADDITION OF THE SAME AMOUNT TO THE 5 ITA NO. 7744/MUM/2011 & C.O. 224/MUM/2012 INSUT ECH FINANCE & SECURITIES LTD. TOTAL INCOME OF THE ASSESSEE. 4.1. IN THE APPELLATE PROCEEDINGS FAA HELD THAT THE ASS ESSEE COMPANY HAD GIVEN DETAILED SUBMISSION IN SUPPORT OF THE SAID EXPENDITURE INCUR RED BY IT,THAT IT HAD FILED NECESSARY DOCUMENTS IN SUPPORT OF ITS CLAIM IN THE FORM OF PAPER BOOK C ONTAINING ANNEXURE X, XI, XII AND XIII, WHEREIN THE APPELLANT COMPANY HAD ADDUCED NECESSARY DOCUMENTS IN SUPPORT OF ITS CONTENTION,THAT SUCH EXPENSES WERE DULY RECORDED IN THE BOOKS OF AC COUNTS OF THE ASSESSEE-COMPANY. 4.2. BEFORE US,DR SUBMITTED THAT THE ASSESSEE HAD NOT FI LED ANY DETAILS BEFORE THE AO,THAT FAA DECIDED THE ISSUE WITHOUT REFERRING THE MATTER TO T HE AO,THAT AO HAD NO OCCASION TO LOOK IN TO THE MERITS OF THE CLAIM MADE BY THE ASSESSEE.AR SUPPORT ED THE ORDER OF THE FAA. 4.3. WE HAVE HEARD THE RIVAL SUBMISSIONS.WE FIND THAT AO HAS SPECIFICALLY MENTIONED THAT THE ASSESSEE HAD NOT FILED ANY EXPLANATION WITH REGARD TO THE QUERIES RAISED BY HIM AND THE FAA HAS HELD THAT ALL DETAILS WERE AVAILABLE.FROM THE ORDER S OF BOTH THE AUTHORITIES IT BECOMES CLEAR THAT THE ASSESSEE HAD FILED THE DETAILS AND EXPLANATION BEFO RE THE FAA,BUT NOT BEFORE THE AO.IN THESE CIRCUMSTANCES,IN THE INTEREST OF JUSTICE WE ARE REM ITTING BACK THE ISSUE TO THE FILE OF THE AO FOR FRESH ADJUDICATION. HE IS DIRECTED TO PASS ORDER AF TER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE AND THE ASSESSEE IS DIRECTED TO PRODUCE NECESSARY D OCUMENTS BEFORE THE AO.GROUND NO.3 IS DECIDED IN FAVOUR OF THE AO,IN PART. 5. LAST GROUND OF APPEAL IS ABOUT NEGATIVE CASH BALANC E.DURING THE COURSE OF ASSESSMENT PROCEEDINGS,VIDE ORDER SHEET NOTING DATED 23.11.200 9,AO DIRECTED THE ASSESSEE TO FILE THE SOURCE OF CASH DEPOSITED IN THE BANK ACCOUNT AND ALSO TO E XPLAIN THE PURPOSE OF NUMEROUS CASH WITHDRAWALS AS APPEARING IN BANK STATEMENT.ON 11.12 .2009,ASSESSEE FILED A SUMMARY OF CASH TRANSACTION SHOWING CASH WITHDRAWAL AND EXPENSES MA DE.ON VERIFICATION OF THE SAME,HE FOUND THAT ON 18. 09.2006 THERE WAS NEGATIVE CASH BALANCE OF RS.9,892/-.VIDE SHOW CAUSE NOTICE DATED 18.12.2009 THE ASSESSEE WAS ASKED TO FILE THE EXPLA NATION OF THE ABOVE MENTIONED ANOMALY.AS PER THE AO THE ASSESS DID NOT FILE ANY REPLY TILL THE DATE OF ORDER.AS A RESUTL,THE SOURCE OF THE NEGATIVE CASH BALANCE OF RS. 9892/- WAS TREATED UNE XPLAINED BY THE AO AND SAME WAS ADDED TO THE TOTAL INCOME OF THE ASSESSEE. 5.1. IN THE COURSE OF APPELLATE PROCEEDINGS,BEFORE THE FAA,THE ASSESSEE-COMPANY FILED DETAILED WRITTEN SUBMISSION IN SUPPORT OF ITS CONTENTION.HE HELD THAT THERE WAS MERITS IN THE ARGUMENTS OF THE ASSESSEE,THAT IT HAD FILED LEDGER ACCOUNT IN RE SPECT OF DAILY BREAK UP OF CASH,THAT THERE WAS NEVER NEGATIVE BALANCE ON ANY SINGLE DAY DURING THE PERIOD UNDER CONSIDERATION.HE DELETED THE ADDITION MADE BY THE ASSESSEE. 5.2. BEFORE US,DR SUBMITTED THAT FAA HAD VIOLATED THE PR OVISIONS OF THE RULE 46A OF THE RULES BY NOT CALLING FOR THE REPORT OF THE AO.AR SUBMITTED T HAT NECESSARY DETAILS WERE FILED. 5.3. AFTER CONSIDERING THE SUBMISSIONS OF BOTH THE SIDES WE ARE OF THE OPINION THAT LIKE OTHER THREE ISSUES THE ISSUE OF NEGATIVE CASH BALANCE WAS NOT H ANDLED BY THE FAA IN ACCORDANCE WITH THE RULE 46A .AO HAD STATED THAT THE ASSESSEE HAD NOT FILED ANY EXPLANATION,WHEREAS FAA HAS DELETED THE ADDITION ON THE GROUND THAT DETAILS WERE FILED.IT I S FACT THAT THE EXPLANATION FILED BY THE ASSESSEE O N 29.12.2009,THROUGH ITS E-MAIL,SENT AT 15 HRS.COULD NOT BE CONSIDERED BY THE AO.THEREFORE,WE WANT TO RESTORE BACK THE ISSUE OF NEGATIVE CASH BAL ANCE ALSO TO THE FILE OF THE AO,WHO WILL DECIDE THE ISSUE AFTER GIVING EFFECTIVE HEARING TO THE ASS ESSEE.GROUND NO.4 IS ALLOWED IN PART IN FAVOUR OF THE AO. 6.IN THE CO ASSESSEE HAS SUPPORTED THE ORDER OF THE FAA.WHILE DECIDING THE APPEAL FILED BY THE AO,WE HAVE RESTORED ALL THE ISSUE TO HIS FILE FOR F RESH ADJUDICATION.AO HAS BEEN DIRECTED TO AFFORD REASONABLE OPPORTUNITY OF HEARING TO THE ASSESSEE-C OMPANY AND THE ASSESSEE HAS BEEN DIRECTED TO FURNISH NECESSARY DOCUMENTS BEFORE THE AO.THEREFORE ,WE ALLOW THE CO,FILED BY THE ASSESSEE,FOR STATISTICAL PURPOSES. 6 ITA NO. 7744/MUM/2011 & C.O. 224/MUM/2012 INSUT ECH FINANCE & SECURITIES LTD. AS A RESULT,APPEAL FILED BY THE AO STANDS PARTLY AL LOWED AND CO FILED BY THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES. 2,3 '+, - 4 5 ) 0 1,3 6 ) , 78 9 '+, &'( 5:) ;< => 6 ? , 78. ORDER PRONOUNCED IN THE OPEN C OURT ON 7 TH APRIL,2014 . 1 ) ./# @ ?' 7 &8 ,201 4 / ) 0 A SD/- SD/- ( .. / I.P. BANSAL) ( ! ! ! ! / RAJENDRA) / JUDICIAL MEMBER /ACCOUNTANT MEMBER / MUMBAI, ?' /DATE: 07.04 . 2014. SK 1 1 1 1 ) )) ) &,B &,B &,B &,B C B#, C B#, C B#, C B#, / COPY OF THE ORDER FORWARDED TO : 1. ASSESSEE / $% 2. RESPONDENT / &'$% 3. THE CONCERNED CIT(A)/ D E , 4. THE CONCERNED CIT / D E 5. DR I BENCH, ITAT, MUMBAI / BF0 &,' , . . . 6. GUARD FILE/ 0 2 'B, 'B, 'B, 'B, &, &,&, &, //TRUE COPY// 1' / BY ORDER, ; / 7 DY./ASST. REGISTRAR , /ITAT, MUMBAI