ITO 9(1)(4), MUMBAI V. FARGO SALES P.LTD, MUMBAI

ITA 8220/MUM/2010

• Counselvise Citation: [2012] 119 COUNSELVISE.COM (IT) 9184 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 07-12-2012
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: F
• Next Hearing Date: 29-11-2012
• Assessment Year: 2007-2008
• Appeal Filed On: 26-11-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: A B KOLI
• Assessee Lawyers: VIJAY KOTHARI
• Keywords: Principle of natural justice; Additional evidence; Corroborative evidences

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCH F , MUMBAI BEFORE SHRI RAJENDRA SINGH, ACCOUNTANT MEMBER AND SHRI VIJAY PAL RAO, JUDICIAL MEMBER ITA NO. 8220/MUM/2010 ASSESSMENT YEAR : 2007-08 INCOME TAX OFFICER WARD 9(1)(4), ROOM NO.224 AAYAKAR BHAVAN MUMBAI-400 020. VS. M/S. FARGO SALES PVT. LTD. 21, SHAKTI NIWAS RAMCHANDRA LAN, MALAD(W) MUMBAI-400 064. PAN NO.AAACF 1705 C (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI A.B. KOLI RESPONDENT BY : SHRI VIJAY KOTHARI DATE OF HEARING : 29.11.2012 DATE OF PRONOUNCEMENT : 07.12.2012 O R D E R PER RAJENDRA SINGH, AM: THIS APPEAL BY THE REVENUE IS DIRECTED AGAINST THE ORDE R DATED 9.9.2010 OF CIT(A) FOR THE ASSESSMENT YEAR 2007-08. THE ONLY DISPUTE RAISED IS WHETHER CIT(A) WAS JUSTIFIED IN DELETING THE ADDITIONS MADE BY AO RELYING ON ADDITIONAL EVIDENCE IN VIOLATION OF SECTION 46A OF THE INCOME TAX RULES, 1962. 2. THE FACTS IN BRIEF ARE THAT THE AO DURING THE ASSESSM ENT PROCEEDINGS NOTED THAT THE ASSESSEE HAD SHOWN QUANTITY OF GAS ITA NO.8220/M/10 A.Y. 07-08 2 MANTLES AT 315995 AS PER BOOKS BUT AS PER INFORMATION O BTAINED FROM FARGO MANTLE PRODUCTS PVT. LTD., THEY HAD SOLD ONLY 21 0667 MANTLES. THERE WAS THUS A DIFFERENCE OF 105328. THE AO VIDE LET TER DATED 19.11.2009 ASKED THE ASSESSEE TO EXPLAIN THE DIFFERENCE W HICH WAS SERVED ON 24.11.2009. THE ASSESSEE VIDE LETTER DATED 26. 11.2009 SUBMITTED THAT 105328 MANTLES WERE THOSE OF OTHER BRAN DS AND NOT OF FARGO BRAND AND THEREFORE THERE WAS NO DISCREPANCY. THE AO HOWEVER IN THE ASSESSMENT ORDER OBSERVED THAT THE ASSESSEE HAD BEEN ASKED TO RECONCILE THE QUANTITIES WITH SUPPORTING EVIDENCE AND DO CUMENTS. BUT THE ASSESSEE IN REPLY DATED 26.11.2009 WAS SILENT ON THE ISSUE. THE AO THEREFORE, MADE AN ADDITION OF RS.4,32,23,156/- O N ACCOUNT OF UNACCOUNTED PURCHASES. 2.1 THE AO ALSO NOTED THAT THE ASSESSEE HAD TRANSFERRED A FLAT AT SIDHI APARTMENT AT RS.1,46,500 AND FOUR FLATS AT SHA KTI NIWAS AT RS.20,75,250/- TO THE INVESTMENT ACCOUNT. HOWEVER THE ASSE SSEE HAD NOT SHOWN ANY INCOME UNDER THE HEAD INCOME FROM HOUSE PROPERTY. THE AO THEREFORE, ASKED THE ASSESSEE AS TO WHY THE HOUSE P ROPERTY INCOME SHOULD NOT BE ASSESSED AT FAIR MARKET RENT UNDER SE CTION 23(1)(A). THE ASSESSEE VIDE LETTER DATED 12.10.2009 SUBM ITTED THAT THE TWO FLATS AT SHAKTI NIWAS WERE BEING USED FOR OFFI CE PURPOSE. HOWEVER DUE TO REDEVELOPMENT OF THE PROPERTY BY THE SOCIETY THERE WAS INCREASE IN FSI AND THE ASSESSEE GOT FOUR FLATS IN LIEU OF TWO FLATS ITA NO.8220/M/10 A.Y. 07-08 3 ON PAYMENT OF CONSIDERATION OF ADDITIONAL AREA. THESE ADDITIONAL FLATS WERE NEITHER GIVEN ON RENT NOR WERE SELF OCCUPIED AND THEREFORE, NO INCOME COULD BE ASSESSED. THE AO HOWEVER COULD NOT ACCEPT TH E CONTENTION RAISED. HE ASSESSED THE FAIR RENT IN RESPECT OF T HE FLAT AT SIDHI APARTMENT AT RS.1,20,000/- AND IN RESPECT OF FOU R FLATS AT SHAKTI NIWAS @ RS.25/- PER SQ.FT. AND COMPUTED THE HOUSE PROPE RTY INCOME ACCORDINGLY. 3. THE ASSESSEE DISPUTED THE DECISION OF AO AND SUBMITTED B EFORE CIT(A) THAT THE ASSESSEE HAD PURCHASED BOTH FORGO AND OT HER BRANDS FROM ITS SISTER CONCERN AND DIFFERENCE OF RS.1,05,328/- RE PRESENTED OTHER BRANDS. IT WAS POINTED OUT THAT THIS FACT HAD BE EN BROUGHT TO THE NOTICE OF THE AO VIDE LETTER DATED 26.11.2009. THE A SSESSEE VIDE APPLICATION UNDER RULE 46A WAS REQUESTED TO PRODUCE OTH ER DETAILS AND FACTS SUCH AS PURCHASE REGISTER, SALES REGISTER, ETC. TO EXPLAI N QUANTITATIVE DIFFERENCE. CIT(A) ADMITTED THE ADDITIO NAL EVIDENCES IN THE INTEREST OF NATURAL JUSTICE AND REMANDED THE MATTER T O THE AO FOR VERIFICATION AND REPORT. THE AO VIDE REMAND REPORT D ATED 19.8.2011 SUBMITTED THAT EXAMINATION OF RECORDS DID NOT REVEAL ANY DISCREPANCY IN QUANTITIES. CIT(A) AFTER CONSIDERING THE REMAND REP ORT DELETED THE ADDITION MADE. ITA NO.8220/M/10 A.Y. 07-08 4 3.1 SIMILARLY IN RESPECT OF ADDITION ON ACCOUNT OF H OUSE PROPERTY INCOME, THE ASSESSEE SUBMITTED THAT THE FLAT AT SIDHI AP ARTMENT WAS BEING USED AS GUEST HOUSE BY EMPLOYEES AND THEREFORE, NO INCOME COULD BE ASSESSED ON ACCOUNT OF HOUSE PROPERTY AND IN RESPECT OF FLATS AT SHAKTI NIWAS, IT WAS SUBMITTED THAT FOUR FLATS WER E UNDER CONSTRUCTION IN THE YEAR 2006-07 AND ASSESSEE HAD RECEIVED OCCUPATION CERTIFICATE ONLY ON 8.1.2008. THEREFORE, THE RE WAS NO QUESTION OF ASSESSING RENTAL INCOME IN ASSESSMENT YEAR 2007- 08. CIT(A) HAD REMANDED THE SUBMISSION OF THE ASSESSEE TO THE AO FOR EXAMINATION AND REPORT. THE AO IN THE REMAND REPORT OBSERVED THAT DURING THE ASSESSMENT PROCEEDINGS THE ASSESSEE HAD SUBMITTED T HAT THE FLATS WERE USED EITHER FOR BUSINESS PURPOSES OR WERE L YING VACANT BUT DURING APPELLATE PROCEEDINGS, A CONTRADICTORY STATE MENT WAS MADE. THE AO REPORTED THAT THERE WAS NO EVIDENCE OF U SE OF SIDHI APARTMENT FLAT FOR GUEST HOUSE AND THEREFORE INCOME FR OM THE SAME WAS CHARGEABLE TO TAX AS HOUSE PROPERTY INCOME. AS REGARD S OTHER FOUR FLATS, THE AO REPORTED THAT THE PROPERTY WAS RE-DEVE LOPED AFTER DEMOLITION IN SEPTEMBER 2006 AND COMPLETED IN JANUAR Y 2008. THEREFORE NO INCOME COULD BE ASSESSED IN RESPECT OF THESE FL ATS. CONSIDERING THE REMAND REPORT OF THE AO, CIT(A) CONFI RMED THE ADDITION MADE ONLY IN RESPECT OF ONE FLAT AT SIDHI AP ARTMENTS AND ITA NO.8220/M/10 A.Y. 07-08 5 DELETED THE ADDITION IN RESPECT OF OTHER FLATS. AGGRI EVED BY THE DECISION OF CIT(A) REVENUE IS IN APPEAL BEFORE THE TRIBUNAL. 4. BEFORE US, THE LD. CIT-DR APPEARING FOR THE REVEN UE ASSAILED THE ORDER OF CIT(A). IT WAS ARGUED THAT THE AO HAD GIVEN SUFFICIENT OPPORTUNITY TO THE ASSESSEE AT THE TIME OF ASSESSMENT AND T HEREFORE, ADMISSION OF ADDITIONAL EVIDENCE BY CIT(A) WAS IN VIOL ATION OF RULE 46A. IT WAS ALSO SUBMITTED THAT THE ASSESSEE HAD MADE CONT RADICTORY STATEMENT IN RESPECT OF INCOME FROM FOUR FLATS AT SHAKTI NIWAS. IT WAS ACCORDINGLY URGED THAT THE ORDER OF CIT(A) SHOULD BE SET ASIDE. 4.1 THE LD. AR ON THE OTHER HAND SUBMITTED THAT THER E WAS NO VIOLATION OF RULE 46A. IT WAS POINTED OUT THAT IN RE LATION TO DISCREPANCY IN GAS MANTLES, THE ASSESSEE HAD SUBMITTED REPLY DATED 26 .11.2009 AND WAS OF THE IMPRESSION THAT THE AO WAS SATISFIED BY TH E EXPLANATION. ONLY WHEN THE ADDITION HAD BEEN MADE T HE ASSESSEE FILED ADDITIONAL EVIDENCE BEFORE CIT(A) WHICH WERE ADMITTED AS PER RULES. IN RESPECT OF FLATS ALSO, THE ASSESSEE HAD GIVEN EXPLANATION THAT THE PROPERTY HAD BEEN REDEVELOPED WHICH WAS ONLY FURTHER ELABORATED DURING APPELLATE PROCEEDINGS. THERE WAS THEREFORE, NO ERROR IN THE ORDER OF CIT(A) IN ADMITTING THE ADDITIONAL EVIDENCE WHICH WAS NECESSARY FOR DECIDING THE ISSUE RAISED BEFORE HIM. ITA NO.8220/M/10 A.Y. 07-08 6 5. WE HAVE PERUSED THE RECORDS AND CONSIDERED THE MATTE R CAREFULLY. THE LIMITED DISPUTE RAISED IN THIS APPEAL IS WHETHER CIT(A) WAS JUSTIFIED IN ALLOWING RELIEF TO THE ASSESSEE BASED ON ADDITIONAL EVIDENCE IN VIOLATION OF RULE 46A. THE AO IN THE ASSESSM ENT HAD MADE ADDITIONS ON TWO COUNTS, I.E., ONE ON ACCOUNT OF QUANTIT ATIVE DISCREPANCY OF 105328 MANTLES AND SECONDLY ON ACCOUNT OF H OUSE PROPERTY INCOME IN RESPECT OF ONE FLAT AT SIDHI APARTM ENT AND FOR FLATS AT SHAKTI NIWAS. THE ASSESSEE SUBMITTED FURTHER MATERIAL SUCH AS PURCHASE REGISTER, SALES REGISTER ETC. TO SHOW THAT DISCREPA NCY OF 105328 MANTLES WAS ON ACCOUNT OF OTHER BRANDS PURCHASED B Y THE ASSESSEE WHEREAS AO HAD CONSIDERED THE ENTIRE PURCHASE AS TH AT OF FARGO BRAND. AS PER THE ASSESSEE SINCE THE AO HAD NOT ASKED FOR ANY FURTHER EVIDENCE TO SUBSTANTIATE THE CLAIM OF OTHER BR ANDS, ASSESSEE HAD NOT FILED ANY SUPPORTING EVIDENCE WHICH WERE FILE D BEFORE CIT(A) AFTER THE ASSESSEE CAME TO KNOW ABOUT THE ADDITION. ON CA REFUL PERUSAL OF RECORD WE FIND ADMISSION OF ADDITIONAL EVID ENCE UNDER RULE 46A QUITE JUSTIFIED AS NO SUFFICIENT OPPORTUNITY HAD BEEN GIVEN BY THE AO TO THE ASSESSEE .THE AO ONLY VIDE LETTER DATED 19.1 1.2009 HAD ASKED THE ASSESSEE TO EXPLAIN THE DIFFERENCE AND THE ASSESSEE VIDE LETTER DATED 26.11.2009 HAD EXPLAINED DISCREPANCY ON A CCOUNT OF OTHER BRANDS. THEREAFTER AO HAD PASSED THE ORDER ON 27.11.20 09 WITHOUT ANY FURTHER OPPORTUNITY TO THE ASSESSEE TO SUBSTANTIATE T HE CLAIM. ITA NO.8220/M/10 A.Y. 07-08 7 THEREFORE, WE DO NOT FIND ANY VIOLATION OF RULE 46A IN ADMITTING ADDITIONAL EVIDENCE. 5.1 IN RELATION TO ADDITION ON ACCOUNT OF HOUSE PROPER TY INCOME FROM FLATS, CIT(A) HAS CONFIRMED ADDITION IN RESPECT OF FLAT S AT SIDHI APARTMENTS. IN RESPECT OF ADDITION ON ACCOUNT OF FOUR F LATS AT SHAKTI NIWAS, THE SAME HAD BEEN DELETED BASED ON THE REMAND R EPORT AS DURING THE RELEVANT PERIOD FLATS WERE UNDER CONSTRUCTIO N AND THERE WERE NO FLATS IN EXISTENCE FROM WHICH HOUSE PROPERTY IN COME COULD BE ASSESSED. THE OBJECTION OF THE DEPARTMENT IS THAT CIT(A) WAS NOT JUSTIFIED IN ADMITTING ADDITIONAL EVIDENCE TO SUBSTANT IATE THE CLAIM THAT FLATS WERE UNDER CONSTRUCTION WHEN NO SUCH CLAIM WAS MAD E BEFORE AO. HOWEVER, WE FIND THAT THE ASSESSEE HAD RAISED THE ISSU E OF RE- DEVELOPMENT OF THE PROPERTY AND ACQUISITION OF ADDITI ONAL FLATS DUE TO INCREASE IN FSI BEFORE THE AO. HOWEVER, THE EXPLANATIO N WAS NOT FULLY ELABORATED THAT FLATS WERE STILL UNDER CONSTRUCTION WHIC H WAS DONE BEFORE CIT(A). IN ANY CASE CIT(A) UNDER PROVISIONS OF R ULE 46A (4) HAS POWER TO DIRECT PRODUCTION OF ANY DOCUMENT IN ORDER TO ENABLE HIM TO DISPOSE OFF THE APPEAL OR FOR ANY SUBSTANTIAL CAUSE. IN THIS CASE THE EVIDENCE SHOWING THAT THE FLATS WERE UNDER CONSTRUCTION W AS NECESSARY FOR PROPER DISPOSAL OF THE APPEAL AND THEREFOR E ADMISSION OF THE SAME IN OUR VIEW WAS NOT IN VIOLATION OF RULE 46A . MOREOVER AS CLAIMED BY THE ASSESSEE IT WAS UNDER THE BONFIDE BELIEF T HAT AO WAS ITA NO.8220/M/10 A.Y. 07-08 8 SATISFIED BY THE EXPLANATION GIVEN AND ACCORDINGLY DID NOT PRODUCE ANY FURTHER EVIDENCE WHICH HAS TO BE CONSIDERED AS SUFFICIENT CA USE FOR NOT PRODUCING THE EVIDENCE BEFORE THE AO. THEREFORE, ON T HE FACTS AND CIRCUMSTANCES OF THE CASE WE ARE SATISFIED THAT ADMISSION OF A DDITIONAL EVIDENCE BY CIT(A) WAS PROPER AND ACCORDINGLY REJECT THE GROUND RAISED BY THE REVENUE. ON MERIT OF RELIEF, THERE IS N O DISPUTE AS CIT(A) HAS ALLOWED RELIEF BASED ON REMAND REPORT OF THE AO. 6. IN THE RESULT, APPEAL OF THE REVENUE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 07.12.2012 SD/- SD/- (VIJAY PAL RAO ) JUDICIAL MEMBER (RAJENDRA SINGH) ACCOUNTANT MEMBER MUMBAI, DATED: 07.12.2012. JV. COPY TO: THE APPELLANT THE RESPONDENT THE CIT, CONCERNED, MUMBAI THE CIT(A) CONCERNED, MUMBAI THE DR F BENCH TRUE COPY BY ORDER DY/ASSTT. REGISTRAR, ITAT, MUMBAI.