ITO 21(3)-2, MUMBAI V. VISHWANTAH TINDADI BAAR, MUMBAI

ITA 908/MUM/2010

• Counselvise Citation: [2011] 134 COUNSELVISE.COM (IT) 8318 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 1 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-03-2011
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: F
• Next Hearing Date: 16-02-2011
• Assessment Year: 2006-2007
• Appeal Filed On: 05-02-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ASHIMA GUPTA
• Keywords: Unexplained investment; Source of fund; Additional evidence; Corroborative evidences
• Section: 143(3); 68

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES F, MUMBAI BEFORE SHRI D.K. AGARWAL (J.M.) AND SHRI J. SUDHAKA R REDDY (A.M.) ITA NO. 908/MUM /2010 ASSESSMENT YEAR : 2006-07 INCOME TAX OFFICER , WARD - 21(3)(2), OFFICE OF THE ITO-21(3)-2, C-11 BLDG, 5 TH FLOOR, PRATYAKSH KAR BHAWAN, BKC, BANDRA (E), MUMBAI 400 051. VS. SHRI VISHWANATH TINDADI BAAR, SHOP NO. 437A, TATA NAGAR CIRCLE, GOVANDI (W), MUMBAI 400 043. PAN : AABPB0025D (APPELLANT) (RESPONDENT) APPELLANT BY : SMT. ASHIMA GUPTA RESPONDENT BY : NONE O R D E R PER D.K. AGARWAL, J.M. THIS APPEAL PREFERRED BY THE REVENUE IS DIRECTED AG AINST THE ORDER DATED 26.11.2009 PASSED BY THE LD. CIT (A) FOR THE A.Y. 2006-07. 2. AT THE TIME OF HEARING, NONE APPEARED ON BEHALF OF THE ASSESSEE NOR FILED ANY APPLICATION FOR ADJOURNMENT OF THE CASE D ESPITE THE FACT THAT THE NOTICE FIXING THE DATE OF HEARING FOR 3.3.2011 HAS BEEN DULY SERVED ON THE ASSESSEE AS PER INTIMATION GIVEN BY THE A.O. IT WA S, THEREFORE, DECIDED TO DISPOSE OF THE APPEAL EX PARTE QUA THE ASSESSEE ON MERITS AFTER HEARING THE LD. D.R. ITA NO.908 /MUM/2010 SHRI VISHWANATH TINDADI BAAR. 2 3. BRIEFLY STATED FACTS OF THE CASE ARE THAT THE AS SESSEE IS AN INDIVIDUAL ENGAGED IN THE BUSINESS AS A GARMENT EXP ORTER. THE RETURN WAS FILED DECLARING TOTAL INCOME AT ` 2,59,300/-. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE A.O. ON THE BASIS OF IN FORMATION RECEIVED FROM THE DEPARTMENT THAT THE ASSESSEE HAS PURCHASED A RESIDENTIAL PROPERTY SITUATED AT NAVI MUMBAI FOR AN AMOUNT OF ` 41,62,700/- WHICH IS ALSO APPEARING IN THE BALANCE SHEET OF THE PROPR IETARY CONCERN OF THE ASSESSEE M/S MEGHA EXPORTS INC. AT ` 44,35,160/- ACCORDINGLY THE ASSESSEE WAS ASKED TO EXPLAIN THE INVESTMENT IN THE SAID PROPERTY. IN RESPONSE, THE ASSESSEE STATED AS UNDER PARA NO. 4.2 OF THE ASSESSMENT ORDER):- WITH REFERENCE TO YOUR LETTER DT. 13.10.08 REGARDI NG THE PENDING SCRUTINY ASSESSMENT U/S 143(3) OF THE I.T. ACT 1961 I HEREWI TH INFORM YOU THAT, I HAVE SUBMITTED ALL THE DETAILS WHICH ARE REQUIRED B Y YOU IN TIME TO TIME AND I ONCE AGAIN CLARIFY THE SAME. THE RESIDENTIAL FLAT WAS PURCHASED FOR ` 43,77,564/- WHICH IS PURCHASED AS PER AGREEMENT OF FLAT PURCHASE AND THE SAME AMOUNT USED FROM BY OUTSTANDING DEBTORS RE ALIZED AND MY CAPITAL WAS USED ONLY AFTER A LAY PERIOD OF MY BUSI NESS THAT IS THE ONLY ONE FLAT IN MUMBAI. SO THE CLARIFICATION WHICH WAS REQUIRED BY YOU IN THIS REGARD I HAVE ALREADY EXPLAINED AND SUPPORTING DOCUMENTS GIVEN TO YOU ALONG WITH FUND FLOW STATEMENT AS PER BANKS ST ATEMENT. THE BANK STATEMENT CLEARLY SHOWING THE FUND USED WHEREAS MY REALIZATION OF SENDING DEBTORS AND I HAVE REALIZED MY SENDING DEBT ORS AND PURCHASED THE FLAT FOR RESIDENTIAL PURPOSE AND ALSO I HAVE A REGULAR ASSESSEE FROM THE LAST MORE THAN 20 YEARS AND THERE NO DOUBTFUL C ASE OR ANY MISUNDERSTANDING BY ME. EVEN AFTER A LARGE TIME BU SINESS I HAVE MY OWN RESIDENCE FROM MY SOURCES OF CAPITAL A/C. HOPE AND TRUST YOU WILL DO THE NEEDFUL AND GIVEN A N OPPORTUNITY TO GIVE FURTHER CLARIFICATION IF YOU REQUIRE IN THI S REGARD. KINDLY CONSIDER THE MATTER AND PLEASE SCRUTINIZE THE SAME AND SETTL E THE PENDING MATTER AS SOON AS POSSIBLE. HOWEVER, THE A.O. OBSERVED THAT AS PER THE AUDITED BALANCE SHEET OF M/S MEGHA EXPORTS FOR THE YEAR ENDING 31 ST MARCH, 2005 THERE WAS A SOLE DEBTOR M/S BLUE ORBIT FASHION LLC (DUBAI) AND THE O UTSTANDING WAS ` 69,31,938/-. NOW AS PER THE AUDITED BALANCE SHEET F OR THE YEAR ENDING 31 ST MARCH, 2006 THE DEBTORS ARE (I) M/S BLUE ORBIT FAS HION LLC AND (II) ITA NO.908 /MUM/2010 SHRI VISHWANATH TINDADI BAAR. 3 M/S KAMANGO WASTE PAPER. THE OUTSTANDING AMOUNT IS ` 53,63,591/- AND ` 81,021/- RESPECTIVELY. THE A.O. FURTHER OBSERVED T HAT IF THE ARGUMENT OF THE ASSESEE IS TAKEN THAT HE REALIZED D EBTORS THEN ONLY AN AMOUNT OF ` 15,68,347/- CAN BE SAID TO BE QUALIFYING FOR THE A RGUMENT OF THE ASSESSEE. SAVE FOR THIS, THERE IS NO SOURCE LEF T THAT CAN BE SAFELY SAID TO HAVE REALIZED AND INVESTED IN THE PROPERTY. THE BALANCE SHEET OF THE ASSESSEE DOES NOT STAND TO THE TESTIMONY OF THE ARG UMENTS OF THE ASSESSEE. RESTRICTING THE AMBIT OF THE ISSUE TO THE SOURCE OF FUNDING TO THE RESIDENTIAL PROPERTY IT CAN SAFELY BE SAID THAT THE ASSESSEE HAS WHOLLY AND SQUARELY FAILED TO DISCHARGE HIS ONUS OF RESPON SIBILITY TO CLARIFY THE INVESTMENT THROUGH A CASH FLOW STATEMENT WHICH WAS TO BE SUPPORTED BY SUPPORTING EVIDENCE AND ACCORDINGLY THE A.O. HELD T HAT THE ASSESSEE HAS NOT PROVED THE SOURCE OF INVESTMENT IN THE RESIDENT IAL PROPERTY, HENCE, HE ADDED A SUM OF ` 44,35,160/- AS UNEXPLAINED INVESTMENT U/S 68 OF TH E I.T. ACT , 1961 (THE ACT). 4. ON APPEAL BEFORE THE LD. CIT(A), IT WAS SUBMITT ED BY THE ASSESSEE THAT ` 5,12,700/- WAS PAID BY CHEQUES IN A.Y. 2005-06 AND ONLY ` 37,00,000/- WAS PAID TO THE VENDOR BY BANK PAY ORDE R IN THE CURRENT ASSESSMENT YEAR. IN RESPECT OF PAYMENT OF ` 37,00,000/- MADE ON 16.06.2005, THE ASSESSEE PRODUCED HIS BANK STATEMEN T AND SUBMITTED XEROX COPY THEREOF TO PROVE THAT THE ASSESSEE HAD R ECEIVED ` 34,94,653/- ON 10.06.2005 BEING RECEIPT OF EXPORT PROCEEDS FROM M/S BLUE ORBIT FASHION LLC (DUBAI) AND ALSO PRODUCED BANK ADVICE IN RESPECT THEREOF AND SUBMITTED THAT OUT OF THOSE PROCEEDS CREDITED T O ASSESSEES BANK ACCOUNT ON 10.06.2005, PAY ORDER FOR ` 37,00,000/- WAS OBTAINED FROM UCO BANK ON 15.06.2005. AS SUCH THE ASSESSEE EXPLAI NED PAYMENT DURING THE YEAR TO THE VENDOR AND THERE IS NO JUSTI FICATION FOR REJECTING THAT EXPLANATION ON MISREADING OF THE BALANCE SHEET . IT WAS FURTHER SUBMITTED THAT THE ASSESSEE HAD RECEIVED ADDITIONAL PACKING CREDIT AND ITA NO.908 /MUM/2010 SHRI VISHWANATH TINDADI BAAR. 4 POST SHIPMENT CREDIT AT (52,36,695/ - (-) 10,29,145 /-) = ` 42,07,550/- DURING THE YEAR AND AS SUCH CLOSING DEBTORS ARE AT ` 54,44,612/-. HE FURTHER SUBMITTED THAT HAD THE A.O. INTERPRETED THE BALANCE SHEET CORRECTLY, HE COULD NOT HAVE MADE ANY ADDITION ON A CCOUNT OF PURCHASE OF FLAT. HE FURTHER SUBMITTED THAT ` 2,22,400/- WAS PAID FOR STAMP DUTY AND REGISTRATION CHARGES. HE ALSO PRODUCED COPY OF REGISTERED PURCHASE DEED AND BANK STATEMENTS. HE FURTHER POINTED OUT TH AT THE A.O. COMMITTED AN ERROR IN INTERPRETING THE BALANCE SHEE T BY NOT APPRECIATING THE FACT THAT SECURED LOANS AS ON 31.03.2005 WERE A T ` 10,29,140/- WHEREAS SECURED LOANS AS ON 31.3.2006 WERE AT ` 52,36,695/-. ON THAT ACCOUNT THE EXPORT DEBTORS AS ON 31. 03.2006 COULD BE ` 54,44,612/-. IT WAS FURTHER SUBMITTED THAT APART FROM ABOVE, THE DO CUMENTARY UNCHALLENGEABLE EVIDENCE SUBMITTED IN FORM OF DEBT TO HIS BANK ACCOUNT IN RESPECT OF PURCHASE CONSIDERATION MADE CANNOT BE BRUSHED ASIDE. RECEIPT OF SALE CONSIDERATION OF ` 34,94,653/- ON 10.6.2005 IS NOT CHALLENGED BY A.O. AS THE PAYMENT OF ` 37,00,000/- WAS MADE DURING THE ACCOUNTING YEAR FROM THE SAID BANK ACCOUNT, THE ASSESSEES EXPLANATION IS TRUE AND CORRECT AND THE SAME WAS WR ONGLY REJECTED. THE A.O. FAILED TO REALIZE THAT THERE WERE FURTHER EXPO RTS DURING THE YEAR AND AS SUCH DEBTORS AS ON 31.3.2006 WERE AT ` 54,44,612/-. SINCE THE WHOLE OF PURCHASE CONSIDERATION IS PAID BY CHEQUES IN TWO ASSESSMENT YEARS AND THAT THE SAID PURCHASE CONSIDERATIONS STAND DEB ITED TO HIS BANK ACCOUNTS, THERE IS NO SCOPE FOR MAKING ANY ADDITION U/S 68 ON ACCOUNT OF PURCHASE OF FLAT. THE LD. CIT(A) AFTER CONSIDERING THE ASSESSEES EXPLANATION AND MATERIAL AVAILABLE ON RECORD, DELET ED THE ADDITION OF ` 44,35,160/-. WITH REGARD TO THE OTHER ADDITION OF ` 60,000/-, THE LD. CIT(A) OBSERVED THAT THE A.O. HAS NOT POINTED OUT A NY SPECIFIC EXPENDITURE WHICH HE DOUBTED, ADHOC ADDITION CANNOT BE MADE WITHOUT THERE BEING ANY JUSTIFICATION FOR THAT, THEREFORE, HE ALSO DELETED THE DISALLOWANCE OF ` 60,000/- MADE BY THE A.O. ITA NO.908 /MUM/2010 SHRI VISHWANATH TINDADI BAAR. 5 5. BEING AGGRIEVED BY THE ORDER OF THE LD. CIT(A), THE REVENUE IS IN APPEAL BEFORE US TAKING FOLLOWING GROUNDS:- 1. (I) ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN L AW, THE LEARNED CIT(A) HAS ERRED IN DELETING THE ADDITION O F ` 44,35,160/- MADE BY THE A.O. U/S 68 ON ACCOUNT OF NON FURNISHIN G OF PROOF OF INVESTMENT IN THE SAID FLAT. (II) ON THE FACTS AND CIRCUMSTANCES OF THE CASE A ND IN LAW, THE LEARNED CIT(A) HAS ERRED IN DELETING THE ADDITION O F ` 44,35,160/- U/S 68 AND ` 60,000/- BEING ESTIMATED ADHOC DISALLOWANCE OF INDIRECT EXPENSES MADE BY THE A.O. BY ADMITTING FRE SH EVIDENCE BEFORE HIM THEREBY VIOLATING THE PROVISIONS LAID DO WN U/R 46A OF THE I.T. RULES. (III) BY DOING SO, THE LEARNED CIT(A) HAS ERRED U/ R 46A BY NOT PROVIDING AN OPPORTUNITY TO THE A.O. TO EXAMINE THE ADDITIONAL EVIDENCE SUBMITTED BY THE ASSESSEE DURING THE APPEL LATE PROCEEDINGS. 2. THE APPELLANT PRAYS THAT THE ORDER OF THE LD. CI T(A) ON THE ABOVE GROUNDS BE SET ASIDE AND THAT OF THE ASSESSING OFFI CER BE RESTORED. 6. AT THE TIME OF HEARING, THE LD. D.R. SUBMITS THA T FOR THE REASONS AS MENTIONED IN THE ASSESSMENT ORDER AND THE PLEA TAKE N IN THE GROUNDS OF APPEAL, THE LD. CIT(A) WAS NOT JUSTIFIED IN DELETIN G THE ADDITION OF ` 44,35,160/- U/S 68 AND ADHOC DISALLOWANCE OF ` 60,000/- OUT OF INDIRECT EXPENSES. SHE, THEREFORE, SUBMITS THAT THE ADDITIO N MADE BY THE A.O. BE RESTORED. 7. WE HAVE CAREFULLY HEARD THE SUBMISSIONS OF THE L D. D.R. AND PERUSED THE MATERIAL AVAILABLE ON RECORD. WE FIND THAT BEFORE THE A.O., THE ASSESSEE HAS EXPLAINED THE SOURCE OF INVESTMENT OF THE PROPERTY AND HAS ALSO PRODUCED SUPPORTING DOCUMENTARY EVIDENCE A LONG WITH FUND FLOW STATEMENT AS PER BANK STATEMENTS WHICH CLEARLY SHOW THAT THE PROPERTY WAS PURCHASED AFTER REALIZATION OF THE AMO UNT FROM SUNDRY DEBTORS. THE EXPLANATION OF THE ASSESSEE HAS DULY B EEN REPRODUCED BY ITA NO.908 /MUM/2010 SHRI VISHWANATH TINDADI BAAR. 6 THE A.O. IN PARA NO. 4.2 OF THE ASSESSMENT ORDER WH ICH HAS BEEN REPRODUCED IN PARA NO. 3 OF THIS ORDER ALSO. SINCE THE ASSESSEE HAS FILED RELEVANT MATERIAL BEFORE THE A.O. AND SAME WAS ALSO FILED BEFORE THE LD. CIT(A) AND IN THE ABSENCE OF ANY MATERIAL TO SHOW T HAT SOME NEW EVIDENCE WAS FILED BEFORE THE LD. CIT(A), WE ARE OF THE VIEW THAT THE OBJECTION RAISED BY THE REVENUE IN THIS REGARD THAT THE LD. CIT(A) HAS VIOLATED THE PROVISIONS LAID DOWN U/R 46A OF THE IN COME TAX RULES IS DEVOID OF ANY MERIT. THIS BEING SO, AND IN THE ABS ENCE OF ANY CONTRARY MATERIAL PLACED ON RECORD BY THE REVENUE AGAINST TH E FINDING OF THE LD. CIT(A) TO SHOW THAT THE ASSESSEE HAS NOT RECEIVED ` 34,94,653/- ON 10.6.2005 BEING RECEIPT OF EXPORT PROCEEDS FROM M/S BLUE ORBIT FASHION LLC (DUBAI) OR THE SAME HAS NOT BEEN CREDITED IN TH E BANK ACCOUNT/BOOKS OF ACCOUNT, WE ARE OF THE VIEW THAT T HE ASSESSEE HAS SATISFACTORILY PROVED THE INVESTMENT IN THE IMMOVAB LE PROPERTY AND THE A.O. WITHOUT CONSIDERING THE EVIDENCE FILED BY THE ASSESSEE, WAS NOT JUSTIFIED IN MAKING ADDITION OF ` 44,35,160/- U/S 68 OF THE ACT. IN THIS VIEW OF THE MATTER, WE ARE INCLINED TO UPHOLD THE F INDINGS OF LD. CIT(A) IN DELETING THE ADDITION OF ` 44,34,160/- MADE BY THE A.O. 8. WITH REGARD TO THE DELETION OF ADHOC DISALLOWANC E OF ` 60,000/-, WE FIND THAT IN THE ABSENCE OF ANY MATERIAL TO SHOW TH AT THE ASSESSEE HAS NOT FILED ANY DETAILS OR EXPENSES INCURRED BY THE A SSESSEE ARE PERSONAL OR CAPITAL IN NATURE, WE ARE OF THE VIEW THAT THE ADHO C DISALLOWANCE OF EXPENSES OF ` 60,000/- WITHOUT POINTING OUT ANY ITEM OF DISALLOW ABLE NATURE IS NOT SUSTAINABLE IN LAW AND ACCORDINGLY WE INCLINED TO UPHOLD THE FINDINGS OF THE LD. CIT(A) IN DELETING THE SAME . THE GROUNDS TAKEN BY THE REVENUE ARE THEREFORE REJECTED. ITA NO.908 /MUM/2010 SHRI VISHWANATH TINDADI BAAR. 7 9. IN THE RESULT, THE REVENUES APPEAL STANDS DISMI SSED. ORDER PRONOUNCED ON THIS 9 TH OF MARCH, 2011. SD/- (J. SUDHAKAR REDDY) ACCOUNTANT MEMBER SD/- (D.K. AGARWAL) JUDICIAL MEMBER MUMBAI, DATED 9 TH MARCH, 2011. RK COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. COMMISSIONER OF INCOME TAX (APPEALS)- 32, MUMBA I 4. COMMISSIONER OF INCOME TAX, 21, MUMBAI 5. DEPARTMENTAL REPRESENTATIVE, BENCH F, MUMBAI //TRUE COPY// BY ORDER ASSTT. REGISTRAR, ITAT, MUMBAI ITA NO.908 /MUM/2010 SHRI VISHWANATH TINDADI BAAR. 8 1 DRAFT DICTATED ON 3 .3.11 SR PS 2 DRAFT PLACED BEFORE AUTHOR ON 4.4.11 SR PS 3 DRAFT PROPOS ED & PLACE BEFORE THE 2 ND MEMBER JM/AM 4 DRAFT DISCUSSED/APPROVED BY 2 ND MEMBER JM/AM 5 APPROVED DRAFT COMES TO THE SR PS SR.PS 6 KEPT FOR PRONOUNCEMENT ON SR PS 7 FILE SENT TO THE BENCH CLERK SR PS 8 DATE ON WHICH FILE GOES TO THE HEAD CLERK 9 DATE ON WHICH FILE GOES TO THE AR 10 DATE OF DESPATCH SR PS