NAVIN SHAMJI VIRA,MUMBAI V. ITO 22(2)(7), PIRAMAL CHAMBERS

ITA 998/MUM/2024

AI Insights

The case revolves around the reassessment of Navin Shamji Vira for the assessment year 2012-13, where the Income Tax Officer (ITO) reopened the assessment based on information from a search operation at M/s. Evergreen Enterprises, leading to allegations of unaccounted cash transactions involving the assessee. The ITO made additions to the assessee's income as unexplained investments and unaccounted interest income. The assessee contested the reassessment and the additions, arguing that the reopening was unjustified and that he was not given a fair opportunity to contest the materials used against him. The Commissioner of Income Tax (Appeals) upheld the ITO's decision, leading to the appeal at the Tribunal, which found procedural lapses and quashed the reassessment order.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 471341 (ITAT-MUMBAI)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 03-01-2025
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Assessment Year: 2012-2013
• Other Referred Cases: Andaman Timber Industries vs CCE, H.R.Mehta vs CIT
• Laws Referred To: Income Tax Act
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ASSESSEE OBTAINS A RETRACTION STATEMENT OF THOSE; PRADNYA GHOLAP
• Assessee Lawyers: DHARAN GANDHI
• Keywords: Set aside; Reassessment proceedings; Unexplained investment; Retraction; Reopening of assessment; Principle of natural justice; Opportunity of cross examination
• Section: 148; 142(1); 143(2); 69; 69B; 72

Judgement Text

"IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH “SMC” MUMBAI BEFORE SMT. BEENA PILLAI (JUDICIAL MEMBER) ITA No. 998/MUM/2024 Assessment Year: 2012-13 Navin Shamji Vira, 9 Tejraj Apartment, BWP Marg, Shivaji Park, Dadar West, Mumbai-400028. Vs. ITO 22(2)(7), Piramal Chambers, Lalbaug, Mumbai-400016. PAN NO. AAAPV 7750 N Appellant Respondent Assessee by : Mr. Dharan Gandhi Revenue by : Ms. Pradnya Gholap, Sr. DR Date of Hearing : 03/12/2024 Date of pronouncement : 03/01/2025 ORDER PER BEENA PILLAI, JM Present appeal is filed by assessee’s order dated 05/01/2024 passed by Ld.CIT(A)-51, Mumbai for assessment year 2012-13 on following grounds of appeal: 1) On the facts and circumstances of the case as well as in law the Learned CIT(A) erred in confirming the action of the Learned A.O. of passing re-assessment order U/s.147 of the IT Act. Reasons assigned by him for doing the same are wrong and insufficient. Appellant contends that the issuance of notice U/s. 148 of the I T Act for reopening of the assessment was itself illegal and unjustified and consequently the reassessment order so passed liable to be quashed. 2) On the facts and circumstances of the case as well as in law the Learned CIT(A) erred in confirming the action of the Learned A.O. on Navin Shamji Vira 2 ITA No. 998/MUM/2024 addition of Rs. 17,50,000/- as unexplained investment under section 69 of the I T Act. 3) On the facts and circumstances of the case as well as in law the Learned CIT(A) erred in confirming the action of the Learned A.O. on addition of interest income of Rs. 2,10,000/- under section 69B of the IT Act. 4) On the facts and circumstances of the case the Ld AO erred in completing the assessment without providing an opportunity of cross examination against the principles of natural justice. 5) The order passed by the Learned A.O. is devoid of any merit, arbitrary, uncalled for and bad in law, the appellant be given such relief or relief's as prayed for. Brief facts of the case are as under: 2. The assessee is an individual and filed its return of income for your under consideration on 14/09/2012 declaring total income of ₹8,63,862/-. Subsequently, upon search action carried out in case of M/s.Evergreen Enterprises on 11/10/2017, undisclosed activity of lending and borrowing of unaccounted cash was unearthed. The investigation wing identified various individuals and business concerns had lent cash to/through M/s. Evergreen Enterprises and on the basis of some documentary evidences, it was concluded that assessee was also involved in on genuine activity of money lending and borrowing of unaccounted money. 2.1. On the basis of statement recorded on of Shri Nilesh Bharani, partner in M/s.Evergreen Enterprises and statement of Shri Ashwin Amritlal Rathod, accountant of M/s.Evergreen Enterprises, it was inferred that assessee had given cash loan amounting to ₹17,50,000/- through M/s. Evergreen Enterprises. It was noted by Navin Shamji Vira 3 ITA No. 998/MUM/2024 the investigating wing that the parties to the transactions and their controlling persons categorically admitted by the statements under oath being involved in cash loan lending/borrowing business thereby earning brokerage income when interest was paid by the borrower party to the lender party. Accordingly the investigating team had impounded/seized books of M/s.Evergreen Enterprises wherein the name of assessee also appeared which clearly indicated that assessee had lent cash loan of ₹ 17,15,000/-. 2.2. On receipt of such specific information from the investigating wing, wide letter dated 19/03/2019 in respect of the assessee, the Ld. AO of assessee reopened the assessment by showing notice under section 148 of the act on 13/03/2019 after recording the reasons. In response to the notice under section 148, assessee filed its return of income as generally filed declaring total income of ₹8,63,860/-. The assessee also filed its objections for reopening that was disposed of by the Ld.AO by way of a separate order dated 12/12/2019. 2.3. The Ld.AO the initial statutory notices under section 143(2) of the act and 142(1) of the act of the assessee in response to which the assessee reply and details stating that assessee had not given any loan to or through Sri.Nilesh Bharani/Evergreen Enterprises. 2.4. The Ld.AO did not have the submissions of the assessee based on the data received during the course of the search at the premises Navin Shamji Vira 4 ITA No. 998/MUM/2024 of methods evergreen Enterprises. The Ld.AO of ₹17,50,000/- as unexplained investment u/s.69 of the act. The Ld.AO also made an addition of ₹2,10,000/- as interest that was not accounted for against the cash loans u/s.69B as unexplained income. Aggrieved by the order of the Ld.AO assessee preferred appeal before the Ld.CIT(A). 3. Before the Ld.CIT(A), assessee challenged the validity of notice issued u/s.148 of the act, by submitting that the assessment was reopened without application of mind and without jurisdiction. It was also contested that the addition made by the assessing officer was based on materials, copy of which was not furnish to the assessee. It was also submitted that the statements recorded of the partner and account was also not furnished to the assessee in order to cross examine them. The assessee submitted that, additions are made by violating principles of natural justice. 3.1. The Ld.CIT(A) dismissed the legal issues raised by the assessee summarily without carrying out any verification. The addition made by the Ld.AO was also confirmed similarly. Aggrieved by the order of the Ld.CIT(A), the assessee is in appeal before the Tribunal. 4. The Ld.AR submitted that ground number 1 raised by the assessee is challenging the reassessment proceedings and the order Navin Shamji Vira 5 ITA No. 998/MUM/2024 passed u/s.143(3) r.w.s.147 of the act, on 13/12/2019 to be bad in law. He submitted that he had sought for the statements recorded on oath of Mr.Nilesh Bharani and the accountant of M/s.Evergreen Enterprises, vide letter dated 06/12/2019, along with objections to the reopening of assessment was raised. The Ld.AR submitted that, in para 5 of the assessment order, Ld. AO records the letter filed by the assesseewherein he also rejects the cross-examination of the persons who statements were used to make addition in the hands of the assessee. The Ld.CIT(A).AR thus submitted that, even the material that was seized/impounded from the searched premises was also not provided to the assessee. 4.1. The Ld.AR submitted that Ld. AO disposed of the objections filed by the assessee in letter dated 06/12/2019 wide order dated 12/12/2019. He submitted that while disposing of the objections raised by the assessee, in para 4 of the order dated 12/12/2019, the Ld.AO undertook to provide materials/statement as desired by the assessee before concluding the assessment proceedings or before taking the action against the assessee that is along with the show because if the assessing officer proceeds with the action as deemed fit. The Ld.AR is submitted that such details/statements/materials was never provided that formed the basis for making addition in the hands of the assessee. 4.2. Placing reliance on the decision of Hon’ble Supreme Court in case of Andaman Timber Industries vs CCE, reported in (2015) 281 Navin Shamji Vira 6 ITA No. 998/MUM/2024 CTR 241, the Ld.AR submitted that as the addition is based on such materials/statements which was never confronted to the assessee even though the same was sought for, was in violation of principles of natural justice. 4.3. The Ld.AR also placed reliance on the decision of Hon’ble Bombay High Court in case of H.R.Mehta vs a CIT reported in (2016) 72 taxman.com 110 wherein the assessment order was set aside and quashed as an opportunity to cross examine the fitness was not granted to the assessee therein. 4.4. On the contrary, the Ld.DR relied on the orders passed by on the by authorities below. I have perused the submissions advanced by both sides in the light of records placed before me. 5. On perusal of clarify of the assessment order, it is noted that there is a sheer violation of principles of natural justice. Further 9.3 of the impugned order it is recorded that the assessee had filed attract and statement by Shree.Nilesh Bharani and therefore it is reasonable to presume that the assessee was aware about the statements made by Sri Nilesh Bharani. It is noted from the various submissions of the assessee before authorities below that the statements that has been reproduced in the assessment order has been denied by the assessee. Navin Shamji Vira 7 ITA No. 998/MUM/2024 5.1. Be that as it may, assessee was never served with the copy of the statement of the partner as well as the accountant of methods evergreen Enterprises which is an admitted fact that categorically has been recorded in paragraph 5 of the assessment order that reads as under: “5.0. The assessee filed its objection to reopening of assessment quite letter dated 06.12.2019 and also claimed that he had not given any loan to/through Nilesh Barnei/Evergreen Enterprises. Further, the con tension of the assessee was duly considered and founder not sustainable in law and the same was duly disposed of by the undersigned wide order dated 12.12.2019. Further the assessee also demanded a physical verification in cross-examination of the details available with the undersigned on which the reasons for reopening was formed. The request of the assessee for physical verification of documents/details and request for cross- examination of the details of that opponent who have given confessional statement has been rejected.” 5.2. Admittedly the materials that were relied on by the assessing officer to make addition in the hands of the assessee were not provided to the assessee and the statements of the persons that was recorded were not subjected to cross objection to the assessee. Subsequently for assessee obtains a retraction statement of those individuals who were subjected to search, will not lead to the presumption that assessee was already aware of the statement recorded. Rejection of deeply is totally untenable. It is a bounden duty of the assessing authority to provide the materials that has been used against assessee to make addition in the hands of such assessee. Navin Shamji Vira 8 ITA No. 998/MUM/2024 5.3. It is also noted that there is nothing other than the statement recorded of the partner and the accountant of methods evergreen Enterprises in the possession of the revenue to justify the addition made in the hands of the assessee it is also noted that no further enquiries has been carried out by the Ld. AO to unearth any other circumstantial evidence is to support the statements that was relied upon to make addition in the hands of the assessee. 5.4. It is no doubt a settled rule that the Ld.CIT(A) or the assessing officer is not bound by the technical rules of the Law of Evidence and that, it is open to them to collect materials, record statements etc, to facilitate an assessment even through private enquiry. But if the assessing officer desires to use such materials/statements against the assessee, the assessee must be informed of the material and must be given adequate opportunity to explain the same. 5.6. Under such circumstances,respectfully following the ratio laid down by Hon’ble Supreme Court and Hon’ble Bombay High Court in the decisions referred to herein above, I’m of the opinion that, the reassessment order passed in the present facts of the case is in violation of principles of natural justice, and deserves to be quashed. Accordingly ground number 1 raised by the assessee stands allowed. Navin Shamji Vira 9 ITA No. 998/MUM/2024 As the reassessment order has been quashed, the grounds raised by the assessee on merits of the addition becomes academic at this stage. In the result appeal filed by the assessee stands allowed. Order pronounced in the open Court on 03/01/2025. Sd/- BEENA PILLAI JUDICIAL MEMBER Mumbai; Dated: 03/01/2025 Rahul Sharma, Sr. P.S./Dragon Copy of the Order forwarded to : 1. The Appellant 2. The Respondent. 3. CIT 4. DR, ITAT, Mumbai 5. Guard file. BY ORDER, //True Copy// (Assistant Registrar) ITAT, Mumbai "