Meditation Properties Pvt Ltd, New Delhi V. ITO WARD-16(3), New Delhi

ITA 9394/DEL/2019

AI Insights

The case involves Meditation Properties Pvt. Ltd., which appealed against the order of the CIT(A) enhancing its income for the assessment year 2015-16. The CIT(A) had increased the income by INR 67,33,365/- based on the finding that the shares sold by the assessee did not exist in its name as claimed. The assessee contested the rejection of its books of accounts and the estimation of income by the AO and CIT(A). The Tribunal found that the assessee failed to provide any contrary material to challenge the findings of the CIT(A) and upheld the enhanced assessment.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 131118 (ITAT-DELHI)
• Duration Of Justice: 3 year(s) 6 month(s) 21 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-06-2023
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: SMC
• Next Hearing Date: 21-06-2023
• Assessment Year: 2015-2016
• Appeal Filed On: 05-12-2019
• Other Referred Cases: CIT vs G.K. Contractor (2009) 19 DTR 305 (Raj), Indwell Construction vs CIT 1998, 2321TR 776 AP, Manoj Aggarwal vs DCIT 113 ITD 377, S.D. Traders vs. CIT & Anr. ITA No. 159/2016
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Keywords: Rejection of books of accounts; Opportunity of being heard; Additional evidence; Difference of opinion; Change of opinion
• Section: 68; 271(1)(c); 144; 143(3); 251; 113; 145(3)

Judgement Text

Page | 1 IN THE INCOME TAX APPELLATE TRIBUNAL DELHI “SMC” BENCH: NEW DELHI BEFORE SHRI KUL BHARAT, JUDICIAL MEMBER & DR. B.R.R.KUMAR, ACCOUNTANT MEMBER ITA No.9394/Del/2019 [Assessment Year : 2015-16] Meditation Properties Pvt.Ltd., Flat No.10, C-1/2, Model Town, New Delhi-110009. PAN-AAACM1194N vs ITO, Ward-16(3), New Delhi. APPELLANT RESPONDENT Appellant by None Respondent by Shri Om Parkash, Sr.DR Date of Hearing 22.06.2023 Date of Pronouncement 27.06.2023 ORDER PER KUL BHARAT, JM : The present appeal filed by the assessee for the assessment year 2015-16 is directed against the order of Ld. CIT(A)-6, Delhi dated 27.09.2019. 2. The assessee has raised following ground of appeal:- Before the Income Tax Appellate Tribunal, NEW DELHI IN THE MATTER OF M/S Meditation properties Pvt ltd ASST.YEAR 2015-16 against the order passed u/s 143(3) of the Income Tax Act by ITO ward 16(3) New Delhi 1. “That Ltd Cit(A) and the AO has erred in law and on the facts and circumstances of the case and the order passed by CIT as well as by ITO is bad both on facts and in the eyes of law and deserves to be quashed. 2. That the learned AO and learned CIT erred in the eyes of law and on facts while doing assessment on the basis of estimation by rejecting the books of accounts of the assesses without bringing out any Page | 2 specific discrepancy in the audited books of accounts to justify the rejection of books of accounts. 3. That the learned AO and learned CIT erred in the eyes of law and on facts while making the estimation of the income on guess /percentage basis of 30% without putting on record any cogent evidence to support such profit ratio of 30% or without putting any comparable cases of same trade which shows that in share trading there is a profit of 30% is fixed. 4. That the learned CIT erred on facts and law without appreciating the fact that the learned AO is not allowed to review its findings and further erred in law and on fact while relying upon such review findings. 5. That the learned CIT (A) erred in the eyes of law and on facts where on the basis of review finding it was not in his domain to find out a new source of income. 6. That the learned AO and CIT (A) erred in the eyes of law and on facts wherein it is the settled law when the books of accounts are rejected and estimation of income is done no other addition is allowed in any other section of the income tax act. Reliance is placed upon CIT vs G.K.Conractor (2009) 19 DTR 305 (Raj) and Indwell Construction vs CIT 1998, 2321TR 776 AP. 7. That the learned CIT(A) erred in the eyes of law and on facts wherein he failed to provide opportunity to heard while rejecting the assessee application under rule 46A to adduce additional evidences in the light of the facts wherein he was relying upon the new finding of the learned AO which was never the subject matter of assessment and obviously the assessee had no occasion to submit clarification in such regard. 8. That the learned CIT(A) has erred in law and on facts wherein raised a totally new issue merely on the change of opinion of the learned AO wherein AO was directed by the CIT(A) to compute the book value of Page | 3 the shares however he deviated from main issue of computing the share value and engaged in reviewing its own order by bringing new facts which he never considered in the assessment proceedings. 9. That the learned CIT(A) erred in law and on facts wherein he did not appreciate the fact that there was no actual receipt of money is there in the books of accounts and there is mere book adjustment entry as held by the AO himself in the assessment order while helding that the deal has been done on the basis of barter system. 10. That the learned CIT(A) erred in law and on facts wherein did not appreciate the fact that transaction of credit purchase resulting in a payable could not be equated with a credit entry of a financial transaction involving receipt of money so as to invoke the rigorous of section 68 of the IT act. Reliance is placed upon the Hon'ble Delhi ITAT Special bench judgment in the Case of Manoj Aggarwal vs DCIT reported as 113 ITD 377 wherein the tribunal has explained the difference between the receipt of any sum for the purpose of section 68 of the IT act 1961 versus the liability to pay amount representing outstanding purchase consideration. 11. That the learned CIT(A) has erred in law and on facts wherein he wrongly allowed the AO to change its opinion whereas in the assessment proceedings the learned AO was busy in accepting the sales of the assessee by taxing the sales of the assessee by applying profit ratio of 30% later on such sales however during the appeal proceedings he entirely deviated from his own findings and changed his finding given in the assessment proceedings and jumped to say that such shares being sold was not in existence. How the change of opinion can be allowed by the CIT(A). Review by the AO of the assessment proceeding is not allowed under the law. 12. That the learned CIT(A) as well as AO erred in the eyes of law and on facts wherein he imposed penalty u/s 271(1)(c) on the assessee wherein it is settled position of law that where income is estimated no penalty can be imposed and without looking into the fact that Page | 4 assessee had not filed any inaccurate particulars of income or concealed any income. 13. The appellant craves and reserves its right to alter, add or modify any grounds of appeal or whole grounds of appeal before the final adjudication of this appeal by your honor. The appellant further submits that the detailed written submission will be filed at the time of hearing of this case.” [ 3. At the time of hearing, neither any one attended the proceedings on behalf of the assessee nor any application seeking adjournment filed on behalf of the assessee. Therefore, the appeal is taken up for hearing in the absence of the assessee and is being disposed off on the basis of material available on record. 4. Facts giving rise to the present appeal are that the assessee filed its return of income declaring loss of INR 506/- on 28.09.2015. Thereafter, the case was selected for limited scrutiny. In response to the statutory notices issued to the assessee, Ld.AR for the assessee attended the proceedings from time to time and furnished relevant details and explanation. Thereafter, the Assessing Officer (“AO”) framed the assessment u/s 143(3) of the Income Tax Act, 1961 (“the Act”) order dated 19.12.2017 and made addition on account of gross profits amounting to INR 20,19,480/-. 5. Aggrieved against this, the assessee preferred appeal before Ld.CIT(A), who after considering the submissions and examining the material placed before Ld.CIT(A), enhanced the income by an amount of INR 67,33,365/- and dismissed the appeal of the assessee. Page | 5 6. Aggrieved against the order of Ld.CIT(A), the assessee is in appeal before this Tribunal. 7. Apropos to grounds of appeal, the assessee has challenged the action of Ld.CIT(A) on the basis that when the Assessing Authority has resorted of estimation of gross profit, no further addition should have been made, same being arbitrary and unjustified. 8. On the other hand, Ld. Sr. DR opposed these submissions and supported the orders of the Ld.CIT(A). 9. We have heard Ld. Sr. DR and perused the material available on record and gone through the orders of the authorities below. We find that Ld.CIT(A) has enhanced the income of the assessee by observing as under:- 5.2.6 “The reply of the assessee has been considered and the same is not found to be tenable. In the case under consideration adequate opportunity of being heard has been given to the appellant when, vide letter dated 20/03/2019, a copy of the report received from the AO with respect to M2 Hospitalities Pvt. Ltd. (reproduced at para 4.1 above alongwith the Annexures) was forwarded to the appellant. As noted in para 5.1 above adequate time was given to the appellant to give rejoinder/documentary evidence to rebut the finding of the AO. Subsequently, two more opportunities were given when the report of the AO with respect to Kangaro Exports Pvt. Ltd. was given along with the notice to enhance the income. Further, the contention of the appellant in the final show cause notice that it wishes to submit an application under Rule 46A of the Income Tax Rules, 1962 is not acceptable more so in view of the fact that adequate opportunity of being heard has been given and it was very clearly stated that this was the final opportunity of being heard which was being given failing which the matter would be decided on the basis of material available on record. It is to be noted that the appellant was aware about the result of the inquiry which Page | 6 was conducted in its case since the time the first report was made available to it vide letter dated 20/03/2019 and additional documents, if any, could have been submitted during the time. Further, even in response to the final notice, no additional documents/evidence has been filed and it has merely been stated that the documents are old and would take time. 5.2.7 It has also been contended that the income cannot be enhanced since there is no actual receipt of money in the books of the appellant while conducting the alleged transaction and there is a mere book adjustment entry as has been held by the AO himself in the assessment order. It has also been contended that the AO has rejected the books of account under section 145(3) and resorted to section 144 to estimate the income in the assessment proceedings and hence the matter is limited to the challenging the observation of the AO. It has also been contended that there is no tax advantage to the assessee since the sale made by the assessee is undisputed part of the opening stock. It has also been contended that the appellate proceedings have to be limited to the subject matter of the assessment order and no new source can be brought in. 5.2.8 The above contentions of the assessee are not tenable. It is a fact that income has been recognised even though, as mentioned by the appellant by way of a book adjustment. It is also a fact that revenue from operations has been shown at Rs. 67,33,365/- as per the profit and loss account for the year ended 31/03/2015. The said amount shown as revenue from operations is entirely on account of the sale of shares of Kangaro Exports and Yo Yo consultants (now known as M2 Hospitalities Pvt. Ltd.). It is also to be noted that it was only in view of the fact that details regarding the barter system were neither furnished by the appellant nor by the parties with whom the appellant had entered into the transaction that the AO proceeded to reject the books of account. When the books of account are rejected it means that the opening stock or the closing stock was not accepted and the gross profit was estimated at 30%. Further, when in light of the enquiries made when the balance sheet of M2 Hospitalities Pvt. Ltd. was examined, which was not produced by the appellant during the Page | 7 assessment proceedings before the AO and a direction was given to consider the same in view of the submissions of the appellant. it came to notice that the details of 100% shareholding were given in the balance sheet of M2 Hospitalities Pvt. Ltd. itself with respect to the disclosure regarding details of shares held by each shareholder holding more than 5% shares. From the balance sheet as on 31/03/2014, the extract of which the AO has also reproduced in the remand report and which is at Annexure 1 to this order, it is apparent that the appellant could not have had the opening stock of 33,000 shares as on 01/04/2014. Similarly, with respect to the shares of Kangaro Exports also, from the details of shareholders as on 31/03/2014 (Annexure 2 to this order) it is seen that the name of the appellant does not appear in the said detail. Hence, with respect to this year also there could have been no opening stock. Further, neither the name of the appellant nor the entities to whom the alleged sale of shares had been made appears in the list of shareholders as on 31/03/2015 (Annexure 3 to this order). Hence, in view of the specific finding that the opening stock as claimed could not have existed as on 01/04/2014, which in turn is based on the enquiries made, there is no infirmity in the action of the AO in rejecting the books of account under section 145(3). Once books of account rejected, the income has to be estimated which, in the case under consideration, is on account of the purported sale of shares of Kangaro Exports and M2 Hospitalities Pvt. Ltd. 5.2.9 As regards the contention that in the said case since books of account have been rejected and profit estimated, the provisions of section 68 cannot be invoked, it is to be noted that section 68 is applicable in cases where any sum is found credited in the books of account of an assessee maintained for any previous year and the assessee offers no explanation about the nature and source thereof or the explanation offered by him is not satisfactory. In such cases the sum so credited is to be charged to income tax as the income of the assessee for that previous year. In the case under consideration it is a fact that income has been recognised by the appellant and has been shown as revenue from operations in the P&L account. It is also a fact that the said income has been shown on account of sale of shares which, as noted above, Page | 8 did not exist in the name of the assessee. Hence, the credit in the books of account is an unexplained credit and the provisions of section 68 are applicable on the same. 5.2.10 As is apparent from the discussion in the foregoing paragraphs, the issue under consideration is regarding the sale of shares and during the assessment proceedings the AO had sought details regarding the balance sheet, shareholders etc. of M2 Hospitalities Pvt. Ltd which were neither given by the assessee no or by the said company from whom information had been sought under section 133(6). Further, in view of the submissions made by the appellant, the AO had been directed to compute the value of shares after calling for the balance sheet of M2 Hospitalities Pvt. Ltd. in which it came to light that the assessee was not holding any shares of the said company. Similarly, detailed investigation was done with regard to the shareholding of Kanagro Exports also in which also it was. revealed that the assessee was not holding any shares. Hence, it cannot be said that the notice for enhancement of income is on account of a new source of income In fact in the case under consideration the issue was before the AO and was under the consideration of the AO in the assessment order. In this regard reference is invited to the decision of the Hon'ble Allahabad High Court in the case of S.D. Traders vs. CIT & Anr. in ITA No. 159/2016 wherein on the issue of enhancement of income by the CIT(A), the Hon'ble Court vide order dated 03/09/2019 have held as under: 28. Thus, argument of the counsel for assessee cannot be accepted so as to restrict the power of Commissioner (Appeals) on the ground of new source of income, as Section 251 clearly and researches the power of the appellate authority for considering and deciding any material arising out of proceedings in which order appealed against was passed. In the present case, all the material is looked upon by the appellate authority was before the assessing authority, as such the Commissioner (Appeals) rightly proceeded to decide the same as it arose out of the proceedings of assessment. Page | 9 29. The Apex Court has also found that power of Commissioner (Appeals) cannot be restricted and in the case of Jute Corporation of India Ltd. (supra) held that power of the Commissioner (Appeals) being coterminous with that of the Income Tax Officer, he can do what the Income Tax Officer do and further the section also empowers him to direct the Assessing Officer to do what he had failed to do. The power of the Commissioner is not bridled in any way and the language of the section is plain and simple. 30. Having considered the material on record and the law laid down by the Apex Court in regard to the power of Commissioner (Appeals) exercise appeal under Section 251 of the Act, we are of the considered opinion that the order of the Tribunal leads to interference and the appeal of the assessee is dismissed. 5.2.11 In view of the facts and circumstances of the case, the results of the enquiry made and in view of the fact that the assessee was not holding any shares of either Kangaro Exports or M2 Hospitalities Pvt. Ltd and the credit on account of sale of shares amounting to Rs. 67,33,365/- remains unexplained and instead of 30% of the sales which has been considered by the AO, the entire amount of Rs. 67,33,365/- is considered to be the income of the assessee under section 68 it is to be taxed as per the provisions of section 115BBE. 5.2.12 The AO is directed to recompute the income of the assessee and issue notice of demand and challan. In view of the fact that it has come to notice that the assessee was not holding the shares of Kangaro Exports and M2 Hospitalities Pvt. Ltd as on 01/04/2014, the AO is directed to take remedial action in the assessment year in which the said shares have been shown to be purchased.” 10. The above finding of Ld.CIT(A) is not rebutted by the assessee by placing any contrary material on record. Therefore, we do not see any reason to interfere in the findings of Ld.CIT(A), the same is hereby affirmed. Grounds raised by the assessee are thus, dismissed. Page | 10 11. In the result, the appeal of the assessee is dismissed. Order pronounced in the open Court on 27 th June, 2023. Sd/- Sd/- (DR.B.R.R.KUMAR) (KUL BHARAT) ACCOUNTANT MEMBER JUDICIAL MEMBER * Amit Kumar * Copy forwarded to: 1. Appellant 2. Respondent 3. CIT 4. CIT(Appeals) 5. DR: ITAT ASSISTANT REGISTRAR ITAT, NEW DELHI