GANAYAKA STEEL PVT. LTD., MUMBAI V. ITO 9(1)(4), MUMBAI

ITA 971/MUM/2019

• Counselvise Citation: [2020] 110 COUNSELVISE.COM (IT) 4788 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 7 month(s) 26 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-10-2020
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: G
• Assessment Year: 2010-2011
• Appeal Filed On: 20-02-2019
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: V VINOD KUMAR
• Keywords: Unexplained expenditure; Business income; Opportunity of being heard; Principle of natural justice; Corroborative evidences; Set aside
• Section: 143(3); 133(6); 143(1); 250; 251; 143(2); 246A

Judgement Text

ITA NO. 971/MUM/2019 A.Y. 2010 - 11 M/S GANAYAKA STEEL PVT. LTD. VS. ITO - 9(1)(4) 1 IN THE INCOME TAX APPELLATE TRIBUNAL G BENCH, MUMBAI BEFORE SHRI N.K . PRADHAN, ACCOUNTANT MEMBER AND SHRI RAVISH SOOD, JUDICIAL MEMBER ITA NO.971/MUM/2019 (ASSESSMENT YEARS: 2010 - 11) M/S GANAYAKA STEEL PVT. LTD. 4C, OFFICE NO.1, GIRIRAJ BUILDING, 73, S.T. ROAD, MASJID BUNDAR, MUMBAI 400 009 VS. ITO - 9(1)(4) ROOM NO. 224, AAYAKAR BHAVAN, MUMBAI 4000 20 PAN AADCG3686N (APPELLANT) (RESPONDENT) APPELLANT BY: NONE RESPONDENT BY: SHRI V. VINOD KUMAR , D.R DATE OF HEARING: 14 .10.2020 DATE OF PRONOUNCEMENT: 16 .10.2020 O R D E R PER RAVISH SOOD, JM THE PRESENT APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER PASSED BY THE CIT(A) - 20, MUMBAI, DATED 02.01.2017, WHICH IN TURN ARISES FROM THE ORDER PASSED BY THE A.O UNDER SEC. 143(3) OF THE INCOME TAX ACT, 1961 (FOR SHORT ACT), DATED 26.03.2013 FOR A.Y. 2010 - 11. THE ASSESSEE HAS ASSAILED THE IMPUGNED ORDER ON THE FOLLOWING GROUN DS OF APPEAL BEFORE US: 1. (A) THE ID. COMMISSIONER OF INCOME TAX (APPEALS) - 20, MUMBAI ('THE ID. CIT(A)') ERRED IN FACTS AND LAW IN DISMISSING THE APPEAL FILED BY THE ASSESSEE ON THE GROUND ON NON APPEARANCE, WITHOUT PROPERLY SERVING THE NOTICES FOR HEARING. (B) THE ORDER PASSED BY THE L D. CIT(A) BE SET ASIDE TO HIS FILE FOR WANT OF PROPER ADJUDICATION, IN LIGHT OF PRINCIPLES OF NATURAL JUSTICE. 2. THE ID. CIT(A) ERRED IN FACTS AND LAW IN CONFIRMING THE ACTION OF THE ID. ASSESSING OF FICER IN MAKING AN ADDITION OF RS. 2,23,51,193/ - BEING COMMISSION INCOME @ 2% ON SALES, ON HIS OWN SURMISES AND CONJECTURES. ITA NO. 971/MUM/2019 A.Y. 2010 - 11 M/S GANAYAKA STEEL PVT. LTD. VS. ITO - 9(1)(4) 2 3. THE ID. CIT(A) ERRED IN FACTS AND LAW I N CONFIRMING THE ACTION OF THE L D. ASSESSING OFFICER IN MAKI NG AN ADHOC DISALLOWANCE OF RS. 35,494/ - ON ACCOUNT OF ALLEGED UNEXPLAINED EXPENDITURE, ON HIS OWN SURMISES AND CONJECTURES. 4 . ALL THE ABOVE GROUNDS ARE INDEPENDENT AND WITHOUT PREJUDICE TO THE OTHER GROUNDS OF APPEAL. 5. YOUR APPELLANT CRAVES LEAVE TO ADD, ALTER, AMEND, DELETE OR MODIFY ANY OR ALL THE GROUNDS OF APPEAL. 2. BRIEFLY STATED, THE ASSESSEE COMPANY HAD FILED ITS RETURN OF INCOME FOR A.Y. 2010 - 11 ON 15.10.2010, DECLARING ITS TOTAL INCOME AT RS. NIL. THE RETURN OF INCOME FILED BY THE ASSESSEE COMPANY WAS PROCESSED AS SUCH UNDER SEC. 143(1) OF THE ACT. SUBSEQUENTLY, THE CASE OF THE ASSESSEE WAS SELECTED FOR SCRUTINY ASSESSMENT UNDER SEC. 143(2) OF THE ACT . 3. DURING THE COURSE OF THE ASSESSMENT PROCEEDINGS THE A.O IN ORDER TO VERIFY THE VERACITY OF THE SALE S AND PURCHASES OF GOODS OF RS.1,11,75,59,692/ - AND RS.1,11,73,31,063/ - , RESP ECTIVELY, THEREIN ISSUED NOTICES UNDER SEC. 133(6) TO THE CONCERNED P ARTIES THEREIN CALLING UPON THEM TO FURNISH C ERTAIN INFORMATION W.R.T THEIR TRANSACTION S WITH THE ASSESSEE COMPANY DURING THE YEAR UND ER CONSIDERATION. ON A PERUSAL THE REPLIES FILED BY T HE AFOREMENTIONED PARTIES, IT WAS OBSERVED BY THE A.O THAT NEITHER OF THEM HAD FILED ANY SUPPORTING EVIDENCE WITH REGARD TO MOVEMENT OF GOODS AS REGARDS THEIR RESPECTIVE TRANSACTIONS WITH THE ASSESSEE COMPANY. IN THE BACKDROP OF THE AFORESAID FACTS THE A.O CALLED UPON THE ASSESSEE TO EXPLAIN AS TO WHY THE SALE S /PURCHASE S UNDERTAKEN DURING THE YEAR UNDER CONSIDERATION MAY NOT BE CONSIDERED AS STRUCTURED TRANSACTION S, AND ACCORDINGLY, DEEMED PROPORTIONATE COMMISSION RECEIVED ON THE TOTAL SALES MAY NOT BE ADDE D TO ITS TOTAL INCOME. IN REPLY, THE ASSESSEE EMPHASIZED ON THE GENUINENESS OF THE TRANSACTIONS AND DECLINED OF HAVING CARRIED OUT ANY STRUCTURED TRANSACTIONS. HOWEVER, THE A.O AFTER DELIBERATING ON THE F ACTS AVAILABLE ON RECORD REJECTED THE AFORESAID CLAI M OF THE ASSESSEE. HOLDING A CONVICTION THAT THE ASSESSEE COMPANY HAD CARRIED OUT STRUCTURED TRANSACTIONS ON COMMISSION BASIS, THE A.O WORKED OUT ITS COMMISSION INCOME FROM PROVIDING OF ENTRIES OF SALES AMOUNTING TO RS.1,11,75,59,692/ - @ 2%, AND THEREIN, C OMPUTED ITS COMMISSION INCOME AT RS.2,23,51,193/ - . APART FROM THAT, THE A.O OBSERVING THAT THE ASSESSEE HAD ITA NO. 971/MUM/2019 A.Y. 2010 - 11 M/S GANAYAKA STEEL PVT. LTD. VS. ITO - 9(1)(4) 3 FAILED TO RECONCILE THE DISCREPANCY AND THE CLOSING BALANCE S OF TWO SUPPLIER PARTIES, THEREIN, MADE AN ADDITION OF RS.8,883/ - . ALSO, THE A.O DISALLOWED 20% OUT OF THE TOTAL EXPENSES OF RS.1,77,471/ - CLAIMED BY THE ASSESSEE, FOR THE REASON, THAT THE GENUINENESS OF THE SAME HAD REMAINED UNPROVED . ACCORDINGLY, THE DISALLOWANCE OF RS.35,494/ - I.E @ 20% OF ITS TOTAL CLAIM OF EXPENSES OF RS.1,77,471/ - WAS MADE BY THE A.O. ON THE BASIS OF HIS AFORESAID OBSERVATIONS THE A.O ASSESSED THE TOTAL INCOME OF THE ASSESSEE COMPANY AT RS.2,24,46,730/ - . 4. AGGRIEVED, THE ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE THE CIT(A). OBSERVING, THAT THE ASSESSEE HAD ADO PTED A CASUAL APPROACH AND HAD FAILED TO PUT UP AN APPEARANCE DESPITE HAVING BEEN AFFORDED SUFFICIENT OPPORTUNITY, THE CIT(A) DISMISSED THE APPEAL ON THE GROUND OF NON - ATTENDANCE BY THE ASSESSEE. AT THIS STAGE, WE MAY HEREIN OBSERVE , THAT THE CIT(A) WHILE DISMISSING THE APPEAL OF THE ASSESSEE HAD FAILED TO ADVERT TO AND THEREIN ADJUDICATE THE APPEAL ON MERITS IN THE BACKDROP OF THE GROUND S ON WHICH THE ADDITION S /DISALLOWANCES MADE BY THE A.O WERE ASSAILED BY THE ASSESSEE BEFORE HIM. 5. THE ASSESSEE BEING AG GRIEVED WITH THE ORDER OF THE CIT(A) HAS CARRIED THE MATTER IN APPEAL BEFORE US. WE FIND THAT THE ASSESSEE DESPITE HAVING BEEN INTIMATED ABOUT THE HEARING OF THE APPEAL HAD HOWEVER FAILED TO PUT UP AN APPEARANCE BEFORE US. IN THE BACKDROP OF THE AFORESAID FACTS, WE ARE CONSTRAI NED TO PROCEED WITH AND DISPOSE OFF THE APPEAL AS PER RULE 24 OF THE APPELLATE TRIBUNAL RULES, 1963 AFTER HEARING RESPONDENT REVENUE AND PERUSING THE ORDER S O F THE LOWER AUTHORITIES. 6 . WE HAVE HEARD THE LD. DEPARTMENTAL REPRESENTATIVE (FOR SHORT D.R) , PERUSED THE ORDERS OF THE LOWER AUTHORITIES AND THE MATERIAL AVAILABLE ON RECORD. ON A PERUSAL OF THE ORDER OF THE CIT(A), WE FIND, THAT HE HAD SUMMARILY DISMISSED THE APPEAL OF THE ASSESS EE FOR NON - PROSECUTION AND HAD FAILED TO APPLY HIS MIND TO THE ISSUES WHICH AROSE FROM THE IMPUGNED ORDER AND WERE ASSAILED BY THE ASSESSEE BEFORE HIM. BE THAT AS IT MAY, WE ARE NOT IMPRESSED ITA NO. 971/MUM/2019 A.Y. 2010 - 11 M/S GANAYAKA STEEL PVT. LTD. VS. ITO - 9(1)(4) 4 WITH THE DISMISSAL OF THE APPE AL BY THE CIT(A) FOR NON - PROSECUTION, WITHOUT APPLICATION OF MIND BY HIM TO THE ISSUES WHICH WERE ASSAILED BY THE ASSESSEE BY PREFERRING THE APPEAL BEFORE HIM. IN OUR CONSIDERED VIEW ONCE AN APPEAL IS PREFERRED BEFORE THE CIT(A) THEN IT IS OBLIGATORY ON HI S PART TO DISPOSE OFF THE SAME ON MERITS. WE ARE OF A STRONG CONVICTION THAT IT IS NOT OPEN FOR THE CIT(A) TO SUMMARILY DISMISS THE APPEAL ON ACCOUNT OF NON - PROSECUTION OF THE SAME BY THE ASSESSEE. RATHER, A PERUSAL OF SEC.251(1)(A) AND (B), AS WELL AS THE EXPLANATION TO SEC. 251(2) REVEALS THAT THE CIT(A) REMAINS UNDER A STATUTORY OBLIGATION TO APPLY HIS MIND TO ALL THE ISSUES WHICH ARISES FROM THE IMPUGNED ORDER BEFORE HIM. IN OUR CONSIDERED VIEW , THE CIT( A) IS NOT VESTED WITH ANY POWER TO SUMMARILY DISMISS THE APPEAL FOR NON - PROSECUTION. OUR AFORESAID VIEW IS FORTIFIED BY THE JUDGMENT OF THE HONBLE HIGH COURT OF BOMBAY IN THE CASE OF CIT VS. PREM KUMAR ARJUNDAS LUTHRA (HUF) (2017) 297 CTR 614 (BOM) . IN TH E AFOREMENTIONED CASE THE HONBLE JURISDICTIONAL HIGH COURT HAD OBSERVED AS UNDER: 8. FROM THE AFORESAID PROVISIONS, IT IS VERY CLEAR ONCE AN APPEAL IS PREFERRED BEFORE THE CIT(A), THEN IN DISPOSING OF THE APPEAL, HE IS OBLIGED TO MAKE SUCH FURTHER INQU IRY THAT HE THINKS FIT OR DIRECT THE AO TO MAKE FURTHER INQUIRY AND REPORT THE RESULT OF THE SAME TO HIM AS FOUND IN SEC. 250 OF THE ACT. FURTHER, SEC. 250(6) OF THE ACT OBLIGES THE CIT(A) TO DISPOSE OF AN APPEAL IN WRITING AFTER STATING THE POINTS FOR DE TERMINATION AND THEN RENDER A DECISION ON EACH OF THE POINTS WHICH ARISE FOR CONSIDERATION WITH REASONS IN SUPPORT. SEC. 251(1)(A) AND (H) OF THE ACT PROVIDE THAT WHILE DISPOSING OF APPEAL THE CIT(A) WOULD HAVE THE POWER TO CONFIRM, REDUCE, ENHANCE OR ANNUL AN ASSESSMENT AND/OR PENALTY. BESIDES EXPLANATION TO SUB - S. (2) OF S. 251 OF THE ACT ALSO MAKES IT CLEAR THAT WHILE CONSIDERING THE APPEAL, THE CIT(A) WOULD BE ENTITLED TO CONSIDER AND DECIDE ANY ISSUE ARISING IN THE PROCEEDINGS BEFORE HIM IN APPEAL FILED FOR ITS CONSIDERATION, EVEN IF THE ISSUE IS NOT RAISED BY THE APPELLANT IN ITS APPEAL BEFORE THE CIT(A). THUS ONCE AN ASSESSEE FILES AN APPEAL UNDER S. 246A OF THE ACT, IT IS NOT OPEN TO HIM AS OF RIGHT TO WITHDRA W OR NOT PRESS THE APPEAL. IN FACT THE CIT(A) IS OBLIGED TO DISPOSE OF THE APPEAL ON MERITS. IN FACT W.E.F. 1ST JUNE, 2001 THE POWER OF THE CIT(A) TO SET ASIDE THE ORDER OF THE AO AND RESTORE IT TO THE AO FOR PASSING A FRESH ORDER STANDS WITHDRAWN. THEREFO RE, IT WOULD BE NOTICED THAT THE POWERS OF THE CIT(A) ARE CO - TERMINUS WITH THAT OF THE AO I.E. HE CAN DO ALL THAT A.O COULD DO. THEREFORE, JUST AS IT IS NOT OPEN TO THE AO TO NOT COMPLETE THE ASSESSMENT BY ALLOWING THE ASSESSEE TO WITHDRAW ITS RETURN OF INCOME, IT IS NOT OPEN TO THE ASSESSEE IN APPEAL TO WITHDRAW AND/OR THE CIT(A) TO DISMISS THE APPEAL ON ACCOUNT OF NON - PROSECUTION OF THE APPEAL BY THE ASSESSEE. THIS IS AMPLY CLEAR FROM THE S. 251(1)(A) AND (B) AND EXPLA NATION TO SEC. 251(2) OF THE ACT WHICH REQUIRES THE CIT(A) TO APPLY HIS MIND TO ALL THE ISSUES WHICH ARISE FROM THE IMPUGNED ORDER BEFORE HIM WHETHER OR NOT THE SAME HAS BEEN RAISED BY THE APPELLANT BEFORE HIM. ACCORDINGLY, THE LAW DOES NOT EMPOWER THE CIT (A) TO DISMISS THE APPEAL FOR NON - PROSECUTION AS IS EVIDENT FROM THE PROVISIONS OF THE ACT. ITA NO. 971/MUM/2019 A.Y. 2010 - 11 M/S GANAYAKA STEEL PVT. LTD. VS. ITO - 9(1)(4) 5 7 . WE THUS NOT BEING PERSUADED TO SUBSCRIBE TO THE DISMISSAL OF THE APPEAL BY THE CIT(A) FOR NON - PROSECUTION, THUS, SET ASIDE THE SAME TO HIS FILE WITH A DIRECTION TO DISPOSE OFF THE APPEAL ON MERITS. NEEDLESS TO SAY, THE CIT(A) SHALL AFFORD A REASONABLE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE IN THE COURSE OF THE DE NOVO APPELLATE PROCEEDINGS. THE GROUNDS OF APPEAL RAISED BY THE ASSESSEE ARE DISPOSED OFF IN TERMS OF OUR AFORESAID OBSERVATIONS. 8 . THE APPEAL OF THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED UNDER RULE 34(4) OF THE INCOME TAX (APPELLATE TRIBUNAL) RULES, 1963 , BY PLACING THE DETAILS ON THE NOTICE BOARD. SD/ - SD/ - N.K. PRADHAN RAVISH SOOD (ACCOUNTANT MEMBER) ( JUDICIAL MEMBER) MUMBAI, DATE: 16 .10.2020 R. KUMAR COPY OF THE ORDER FORWARDED TO : 1. ASSESSEE 2. RESPONDENT 3. THE CONCERNED CIT(A) 4. THE CONCERNED CIT 5. DR G BENCH, ITAT, MUMBAI 6. GUARD FILE BY ORDER, DY./ASST. REGISTRAR ITAT, MUMBAI