KLT AGRO FOODS LTD, MUMBAI V. DCIT 9(2), MUMBAI

ITA 841/MUM/2013

• Counselvise Citation: [2017] 126 COUNSELVISE.COM (IT) 9412 (ITAT-MUMBAI)
• Duration Of Justice: 4 year(s) 7 month(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-09-2017
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Next Hearing Date: 16-05-2017
• Assessment Year: 2009-2010
• Appeal Filed On: 31-01-2013
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: RAJESH KUMAR YADAV
• Assessee Lawyers: HEMANT BAHEDIA
• Keywords: Unexplained cash credit; Opportunity of being heard; Principle of natural justice
• Section: 143(3); 68

Judgement Text

A IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH, MUMBAI BEFORE SHRI JOGINDER SINGH, JUDICIAL MEMBER AND SHRI RAMIT KOCHAR, ACCOUNTANT MEMBER ./ I.T.A. NO. 841/ MUM/2013 ( / ASSESSMENT YEAR : 2009-10) KLT AGRO FOODS LTD. B-1/1 MAYUR MA KRUPA CHSL, SHIMPOLI ROAD, R.D BORIVALI (W) MUMBAI 400092 / V. DCIT 9(2) R.NO. 218, 2 ND FLOOR AAYKAR BHAVAN, M.K. ROAD MUMBAI 400020 ./ PAN : AAACT3894Q ( / APPELLANT ) .. ( / RESPONDENT ) ASSESSEE BY: HEMANT BAHEDIA REVENUE BY : SHRI RAJESH KUMAR YADAV / DATE OF HEARING : 18.09.2017 / DATE OF PRONOUNCEMENT : 28.09.2017 / O R D E R PER RAMIT KOCHAR, ACCOUNTANT MEMBER THIS APPEAL, FILED BY THE ASSESSEE, BEING ITA NO. 841/MUM/2013, IS DIRECTED AGAINST THE APPELLATE ORDER DATED 17.10.2 012 PASSED BY LEARNED COMMISSIONER OF INCOME TAX (APPEALS)-20, MUMBAI (HE REINAFTER CALLED THE CIT(A)), FOR ASSESSMENT YEAR 2009-10, APPELLATE PR OCEEDINGS HAD ARISEN BEFORE LEARNED CIT(A) FROM THE ASSESSMENT ORDER DAT ED 22.12.2011 PASSED BY LEARNED ASSESSING OFFICER (HEREINAFTER CALLED THE AO) U/S 143(3) OF THE INCOME-TAX ACT, 1961 (HEREINAFTER CALLED THE ACT) . 2. THE GROUNDS OF APPEAL RAISED BY THE ASSESSEE IN THE MEMO OF APPEAL FILED WITH THE INCOME-TAX APPELLATE TRIBUNAL, MUMB AI (HEREINAFTER CALLED THE TRIBUNAL) READ AS UNDER:- PART II: GROUNDS OF APPEAL I.T.A. NO. 841/MUM/2013 2 THE GROUNDS OF APPEAL ARE:- THE 'LD. DYCIT' HAS ERRED IN MAKING ADDITIONS O F RS. 22,47,378/- U/S. 41 (1) GIVING REASONS THAT TRAD ING LIABILITY IS NOT PAYABLE. THE 'LEARNED DYCIT' HAS ERRED IN MAKING ADDITIONS OF RS. 16,60,000/- ON ACCOUNT OF UNEXPLAINED CASH CREDIT (UNSECURED LOANS). 3. THE BRIEF FACTS OF THE CASE ARE THAT THAT ASSESS EE DURING THE SUBJECT YEAR UNDER CONSIDERATION HAS NOT CARRIED OUT ANY BU SINESS ACTIVITY . IT WAS OBSERVED BY THE A.O THAT ASSESSEE HAS SHOWN LIABILI TY OUTSTANDING FOR PAYMENTS OVER A PERIOD OF TIME IN RESPECT OF FOLLOW ING PARTIES: THE A.O ASKED THE ASSESSEE TO EXPLAIN AS TO WHY TH E SAME SHOULD NOT BE ADDED TO INCOME OF THE ASSESSEE BY INVOKING PROVISI ONS OF SECTION 41(1) OF THE ACT . THE ASSESSEE IN RESPONSE SUBMITTED CONFIR MATION LETTERS FROM M/S. PREFAB DWELLING (I) LTD., M/S. THAKKARSONS ROLL FOR MING P. LTD., M/S. KLT AUTOMOBILES & TUBULAR PRODUCTS LTD. AND M/S. TRIPUR I TRADERS P. LTD., WHILE IN RESPECT OF OTHERS OUTSTANDING , THE ASSESSEE SUB MITTED THAT ASSESSEE IS YET TO RECEIVE CONFIRMATION LETTERS FROM THE OTHER CREDITORS . IT WAS SUBMITTED THAT THE LIABILITY HAS NOT CEASED TO EXIST WHICH AL SO CONTINUES TO EXISTS IN THE BOOKS OF ACCOUNTS AND SAME IS PAYABLE ON DEMAND . T HE ASSESSEE PRAYED THAT NO ADDITION SHOULD BE MADE TO THE INCOME OF TH E ASSESSEE U/S. 41 (1) OF THE ACT. THE A.O REJECTED THE CONTENTIONS OF THE AS SESSEE AS ASSESSEE FALIED TO GIVE COGENT REASONS AS TO WHY SUNDRY CREDITORS A RE OUTSTANDING FOR S.NO. NAME OF THE PARTY AMOUNT 1. M/S. J P STEEL 45000 2. M/S. METCRAFT ENGG. CORPN 403208 3. M/S. METFFROM CORPN 10227 4. MS/. PREFAB DWELLING PVT. LTD 195378 5. M/S. THAKKARSON ROLL FORMING P. LTD. 894706 6. M/S. THAKKARSON AUTO ANCILLARY (I) LTD. 7816454 7. M/S. TRUOYRU TRADERS P. LTD 200000 8. SUNDRY CREDITORS 1770318 TOTAL 11335291 I.T.A. NO. 841/MUM/2013 3 PAYMENT FOR LONG TIME AND ALMOST STAGNANT. IT WAS O BSERVED BY THE AO THAT THE ASSESSEE HAS NOT EVEN SUBMITTED ANY DETAILS AS TO THE NATURE OF SAID CREDITORS . IT WAS OBSERVED BY THE AO THAT THERE WA S NO BUSINESS TRANSACTION SINCE LAST SO MANY YEAR AS THE BALANCES CONTINUED T O REMAIN STAGNANT AND ASSESSEE IS NOT ABLE TO CONTACT CREDITORS FOR CONF IRMATION . THE A.O CONCLUDED THAT THESE LIABILITIES NO LONGER EXISTS T O BE PAID AND HENCE THE ADDITION WERE MADE BY THE AO U/S. 41(1) OF THE ACT TO THE TUNE OF RS. 22,47,378/- AS THE ASSESSEE FAILED TO PROVE GENUINE NESS OF THESE CREDITORS , VIDE ASSESSMENT ORDER DATED 22-12-2011 PASSED BY TH E AO U/S 143(3), WHICH ADDITIONS WERE LATER CONFIRMED BY LEARNED CIT (A) IN THE FIRST APPEAL AND THE ASSESSEE APPEAL ON THIS ISSUE WAS DISMISSED BY LEARNED CIT(A), VIDE APPELLATE ORDER DATED 17-10-2012. 4. AGGRIEVED BY THE APPELLATE ORDER DATED 17-10-20 12 PASSED BY THE LEARNED CIT(A), THE ASSESSEE CARRIED THIS MATTER IN APPEAL BEFORE THE TRIBUNAL AND ASSESSEES COUNSEL HAS EXPRESSED HIS INABILITY TO C ONFIRM WHETHER THE SAID AMOUNT OF RS.22,47,378/- PAYABLE BY THE ASSESSEE WA S ON ACCOUNT OF TRADING OR BUSINESS LIABILITY AND ALSO HAS EXPRESSE D HIS INABILITY TO PRODUCE CONFIRMATIONS OR GET THE TRANSACTIONS VERIFIED . 5. THE LD. D.R ON THE OTHER HAND SUBMITTED THAT TH E ASSESSEE HAS MISERABLY FAILED TO PROVE THAT THESE AMOUNTS WERE STILL PAYAB LE TO THESE CREDITORS . THE ASSESSEE HAS ALSO FAILED TO PROVE BUSINESS NEXUS OF THESE OLD TRANSACTIONS WITH THESE CREDITORS AS THE BALANCE IS STAGNANT FOR LAST SO MANY YEARS. IT WAS ALSO SUBMITTED THAT THE ASSESSEE HAS NOT CARRIED OU T BUSINESS DURING THE SUBJECT YEAR UNDER CONSIDERATION. IT WAS PRAYED THA T THE ADDITION MAY BE CONFIRMED AS WAS DONE BY THE AO AND LATER CONFIRMED BY LEARNED CIT(A). 6. WE HAVE CONSIDERED RIVAL CONTENTIONS AND ALSO PE RUSED THE MATERIAL ON RECORD . WE HAVE OBSERVED THAT THE ASSESSEE HAS NO T CARRIED OUT ANY BUSINESS ACTIVITY DURING THE YEAR UNDER CONSIDERATI ON WHICH IS AN ADMITTED AND UNDISPUTED FACT BETWEEN RIVAL PARTIES. THE ASSE SSEE HAS OUTSTANDING CREDITORS REFLECTED OF RS. 1.13 CRORES AS PER DETAI LS WITH AO AS AT 31 ST MARCH, 2009 OF WHICH ADDITIONS WERE MADE TO THE TUNE OF RS . 22,47,378/- BY THE AO U/S 41(1) AS THE ASSESSEE HAS NOT BEEN ABLE TO PROV E THE NATURE OF THESE CREDITORS WHICH WERE STAGNANT FOR LAST SO MANY YEAR S NOR THE GENUINENESS OF THE TRANSACTIONS WAS PROVED . THE ASSESSEE COULD NO T PRODUCE CONFIRMATION I.T.A. NO. 841/MUM/2013 4 FROM THESE PARTIES NOR THE ASSESSEE COULD PROVE THA T THESE LIABILITIES ARE EXISTING TO BE PAYABLE AND HAS NOT CEASED TO EXIST. THE ASSESSEE COUNSEL HAS ALSO EXPRESSED THE ASSESSEES INABILITY TO PRODUCE ANY FURTHER DOCUMENTS ETC., WITH RESPECT TO THESE CREDITORS FOR PROVING G ENUINENESS AND BONA FIDE OF THESE CREDITORS AND ALSO TO ESTABLISH NEXUS WITH TH E BUSINESS TRANSACTIONS OF THE ASSESSEE. HENCE , IN VIEW OF THE INABILITY OF THE ASSESSEE IN PROVING THAT THE LIABILITY OF RS. 22,47,378/- IS STILL EXISTING TO BE PAYABLE TO THE CREDITORS AS AT 31 ST MARCH, 2009 AND THE STATUS QUO AS WAS THERE BEFORE THE AUTHORITIES BELOW IS STILL EXISTING EVEN BEFORE US AS TO THE CONTENTIONS OF THE ASSESSEE WITH NO CHANGES IN FACTUAL MATRIX, WE ARE NOT INCLINED TO INTERFERE WITH THE CONCURRENT FINDINGS OF THE AUTHORITIES BEL OW AS IT COULD NOT BE SHOWN BY THE ASSESSEE THAT THE SAID FINDING OF LOWE R AUTHORITIES WAS PERVERSE OR REQUIRES OUR INTERFERENCE DUE TO ANY SPECIAL CIR CUMSTANCES OR CHANGED FACTS BEFORE THE TRIBUNAL . THE ASSESSEE DID NOT F ILE LOAN CONFIRMATIONS EVEN BEFORE US NOR EXPLAINED THE NATURE OF THESE CREDITO RS AND THEIR NEXUS WITH BUSINESS OF THE ASSESSEE EVEN BEFORE US. THUS, THE APPEAL OF THE ASSESSEE WITH REGARD TO THIS ISSUE STANDS DISMISSED. THE ASS ESSEE FAILS ON THIS GROUND.WE ORDER ACCORDINGLY. 7. SECOND ISSUE IS WITH REGARD TO THE UNSECURED LOA NS OF RS. 16,60,000/- APPEARING IN THE BALANCE SHEET AS AT 31 ST MARCH, 2009 . THE ASSESSEE WAS ASKED BY THE AO TO FURNISH CONFIRMATION OF LOANS AN D PROVE AUTHENTICITY AND GENUINENESS OF THESE LENDERS . THE ASSESSEE COULD N OT FILE LOAN CONFIRMATIONS AND ASSESSEE ALSO COULD NOT DISCHARGE THE BURDEN AS CAST U/S. 68 OF THE ACT. THE ASSESSEE ALSO DID NOT FURNISH CURRENT ADDRESS O F THESE LENDERS. THE AO MADE ADDITIONS OF RS. 16,60,000/- U/S. 68 OF THE A CT VIDE ASSESSMENT ORDER DATED 22-12-2011 PASSED U/S 143(3). THE ASSESSEE FI LED FIRST APPEAL BEFORE THE LEARNED CIT-A AND MADE FOLLOWING CONTENTIONS:- THE APPELLANT COMPANY HAS TAKEN LOAN FROM LATE MR. KISHORE THAKKAR OF RS.16,60,000/-. HOWEVER, DURING THE COURSE OF AS SESSMENT PROCEEDINGS, THE APPELLANT COULD NOT GET THE CONFIR MATIONS FROM THE PARTY SINCE THE PERSON WHO HAS GIVEN THE LOAN HAS D IED. HOWEVER, APPELLANT HAS GOT THE CONFIRMATIONS FROM HIS LEGAL HEIR MR. SUSHILA K. THAKKAR, WHO HAS, CONFIRMED THAT THE AMOUNT IS STIL L OUTSTANDING AND PAYABLE TO HER. WE ARE ENCLOSING HEREWITH THE COPY OF CONFIRMATION FOR YOUR REFERENCE IN ANNEXURE III. WE NEED TO SUBMIT T HAT THE ABOVE LOAN TAKEN WAS GENUINE AND HENCE ADDITIONS MADE BY THE L D. DCIT BE DELETED.' I.T.A. NO. 841/MUM/2013 5 THE LD. CIT(A) DIRECTED THE A.O TO RE-VERIFY WHETHE R THE SAID LOANS PERTAINS TO FINANCIAL YEAR UNDER CONSIDERATION OR TO AN EARL IER YEARS, BY HOLDING AS UNDER:- 4.3 I HAVE CONSIDERED THE FINDINGS OF THE A.O. AND RIVAL SUBMISSION OF THE AR, CAREFULLY. I FIND THAT APPELLANT HAS FAILED TO FURN ISH NECESSARY EVIDENCES BEFORE THE A.O. OF THE UNSECURED LOAN OF RS.16,60,0 00/-. IF LOAN WAS TAKEN FROM ONE MR. KISHORE L. THAKKAR WHO DIED ON 29-10-2 004, AS PER THE SUBMISSION OF THE LD. AR. IT MEANS THIS LOAN IS NOT OF THIS YEAR.HOWEVER, THE CONFIRMATION OF MRS. SUSHILA K. THAKKAR CLAIMED TO BE LEGAL HEIR IS FOUND UNBELIEVABLE, BECAUSE ON COMPUTER PRINT OUTS SOME S IGNATURE HAS BEEN OBTAINED WITHOUT ANY FULL ADDRESS OF MRS. SUSHILA K . THAKKAR. FURTHER, THERE IS NO EVIDENCE ON RECORD TO SHOW THAT SHE IS THE ONLY LEGAL HEIR FOR CONFIRMING SUCH LOAN. IT IS ALSO NOT CLEAR THAT SUCH LOAN PERT AINS TO THIS FINANCIAL YEAR. IF THIS IS NOT THE LOAN OF F.Y. 2008-09, A.Y. 2009-10, SUCH ADDITION CANNOT BE MADE U/S 68 IN THIS YEAR BUT SUCH ADDITION CAN BE M ADE IN THE YEAR IN WHICH SUCH LOAN WAS TAKEN. APPELLANT HAS NOT CLARIFIED TH E EXACT DATE OF LOAN WHEREAS AS PER REFERENCE IT WAS TAKEN BY ONE MR. KI SHORE LAXMIDAS THAKKAR, WHO EXPIRED ON 29-10-2004. IF HE HAD GIVEN SUCH LOA N, DEFINITELY IT WOULD BE IN EARLIER YEAR. FURTHER, A.O. HAS NOT MADE ANY ADDITI ON U/S 41, HENCE IT IS IN THE NATURE OF JUSTICE TO DIRECT THE A.O. TO REVERIFY AN D SEE WHETHER LOAN PERTAINS TO THIS F.Y. IF SO, THIS ADDITION SO MADE SHOULD BE TA KEN AS CONFIRMED. IF NOT, AND IF SUCH LOAN PERTAINS TO EARLIER PERIOD, THEN SUCH ADDITION IS REQUIRED TO BE DELETED IN THIS YEAR AND IN THAT SITUATION AO SHALL BE AT HIS LIBERTY TO TAKE APPROPRIATE ACTION IN CORRESPONDING YEAR. 8. AGGRIEVED BY THE APPELLATE ORDER OF LEARNED CIT( A) , THE ASSESSEE HAS COME IN APPEAL BEFORE THE TRIBUNAL. LD. A.R SUBMITT ED THAT THE OPENING BALANCE AND CLOSING BALANCE OF THE LOAN WAS SAME AS PER AUDITED BALANCE SHEET AS AT 31-03-2008 AND 31-03-2009 AND NO LOAN W ERE RAISED DURING THE YEAR UNDER CONSIDERATION AND HENCE ADDITION COULD N OT BE MADE IN THIS YEAR U/S. 68 OF THE ACT, HE DREW OR ATTENTION TO PAGE 13 OF THE PAPER BOOK WHEREIN AUDITED BALANCE SHEET/SCHEDULE 2 OF THE ASSESSEE IS PLACED. LD. D.R ON THE OTHER HAND SUBMITTED THAT LEARNED CIT(A) HAS ALREA DY DIRECTED A.O TO REVERIFY WHETHER THE SAID LOANS PERTAINED TO EARLIE R YEARS . IT WAS SUBMITTED BY LEARNED DR THAT IT IS NOT KNOWN HOW THE ASSESSEE IS PREJUDICED BY THE DIRECTIONS OF LEARNED CIT(A) TO THE AO TO REVERIFY CONTENTIONS OF THE ASSESSEE. ON BEING ASKED BY THE BENCH , LD. A.R SUBMITTED THA T THE ASSESSEE HAS NO OBJECTION IF THIS PLEA OF THE ASSESSEE THAT IT HAS NOT ACCEPTED ANY LOAN DURING THE SUBJECT YEAR UNDER CONSIDERATION CAN BE VERIFIE D BY THE A.O AND HENCE IT WAS PRAYED THAT NO ADDITION CAN BE MADE U/S. 68 OF THE ACT. I.T.A. NO. 841/MUM/2013 6 9. WE HAVE CONSIDERED RIVAL CONTENTIONS AND WE HAVE PERUSED THE MATERIAL ON RECORD . WE HAVE GONE THROUGH THE ASSESSEES AUD ITED BALANCE SHEET AS AT 31-03-2009 AND 31-03-2008 WHICH IS FILED AS PART OF THE PAPER BOOK AT PAGE NO. 13(SCHEDULE2 TO BALANCE SHEET IS DETAILS OF UNS ECURED LOANS FROM SHAREHOLDERS). WE HAVE OBSERVED THAT THE ASSESSEE H AS RAISED LOANS FROM SHARE HOLDERS OF RS. 16,60,000/- WHERE IN THE BALAN CE AS 31 ST MARCH, 2008 AND 31 ST MARCH, 2009 WAS CONSTANT AT RS. 16,60,000/- AND TH ERE IS NO CHANGE IN THE BALANCES OF UNSECURED LOAN DURING THE YEAR UNDER CONSIDERATION. HENCE, PRIMA FACIE WE ARE IN AGREEME NT THAT THERE IS NO MOVEMENT IN THE SAID UNSECURED LOANS FROM SHAREHOLD ER WHICH REMAINED STAGNANT DURING THE YEAR AT RS.16,60,000/-. HOWEVER , THIS CONTENTION OF THE ASSESSEE REQUIRE VERIFICATION OF THE BOOKS OF ACCOU NTS OF THE ASSESSEE BY THE AO TO SEE ANY MOVEMENT DURING THE YEAR WHICH CAN BE VERIFIED ONLY AFTER GOING THROUGH THE BOOKS OF ACCOUNTS AND MAY NOT BE DISCERNIBLE FROM THE FACE OF THE BALANCE SHEET AND HENCE WE ARE INCLINED TO RESTORE THIS MATTER/ISSUE TO THE FILE OF THE A.O FOR NECESSARY V ERIFICATIONS AND DE-NOVO DETERMINATION OF THE ISSUE ON MERITS IN ACCORDANCE WITH LAW AFTER VERIFICATION OF BOOKS OF ACCOUNTS. NEEDLESS TO SAY PROPER AND AD EQUATE OPPORTUNITY OF BEING HEARD SHALL BE PROVIDED TO THE ASSESSEE BY TH E A.O IN ACCORDANCE WITH PRINCIPLES OF NATURAL JUSTICE IN ACCORDANCE LAW IN DE-NOVO PROCEEDINGS. WE ORDER ACCORDINGLY. 10. IN THE RESULT, APPEAL OF THE ASSESSEE IN ITA NO . 841/MUM/2013 FOR ASSESSMENT YEAR 2009-10 IS PARTLY ALLOWED FOR STATI STICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 28.09.2017 !' # $ 28.09.2017 SD/- SD/- (JOGINDER SINGH ) (RAMIT KOCHAR) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI, DATED: 28.09.2017 I.T.A. NO. 841/MUM/2013 7 COPY TO 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT(A) CONCERNED, MUMBAI 4. THE CIT- CONCERNED, MUMBAI 5. THE DR BENCH, E 6. MASTER FILE // TUE COPY// BY ORDER DY/ASSTT. REGISTRAR ITAT, MUMBAI