PRAKASH H. MUTHA,KALYAN V. DCIT CENT. CIR. 1, THANE, THANE

MA 251/MUM/2020

AI Insights

The case involves Shri Prakash H Mutha, the proprietor of Mutha Jewellers, who filed Miscellaneous Applications against the orders of the Income Tax Appellate Tribunal concerning the assessment years 2005-06 to 2007-08. The applications were based on the grounds that the Tribunal's earlier decision did not consider crucial documentary evidence and legal arguments presented, particularly regarding jurisdictional issues and the estimation of gross profit. The Tribunal acknowledged the oversight and the absence of the paper book during the initial hearing, which led to a decision to recall the impugned order and re-evaluate the case with all relevant materials.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 40340 (ITAT-MUMBAI)
• Appeal Type: Miscellaneous Application
• Pronouncement Date: 29-01-2025
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: D
• Assessment Year: 2007-2008
• Other Referred Cases: State Bank of India, ITA No.1481 of 2012, HONDA SIEL POWER PRODUCTS LTD, 295 ITR 466, SAURASHTRA KUTCH STOCK EXCHANGE LIMITED, 305 ITR 227
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: MAHITA NAIR
• Assessee Lawyers: PIYUSH CHHAJED
• Keywords: Set aside; Opportunity of being heard; Unexplained investment; Principle of natural justice
• Section: 254(2); 153A; 43; 69; 153C; 72; 20

Judgement Text

" IN THE INCOME TAX APPELLATE TRIBUNAL, ‘D’ BENCH MUMBAI BEFORE: SHRI B R BASKARAN, ACCOUNTANT MEMBER & SHRI AMIT SHUKLA, JUDICIAL MEMBER MA No.249-251/Mum/2020 (Arising out of ITA Nos.5982-5984/Mum/2016) (Assessment Year : 2005-06 – 2007-08) Shri Prakash H Mutha Prop: M/s. Mutha Jewellers, 301 3rd Floor Mutha House, Opp. Welcome Hotel, Shivaji Chowk, Kalyan (W) Vs. DCIT, Cent Cir-1, Thane Ashar IT Park, R.N. 16Z Wagle Industrial Estate Thane- 400 604 PAN/GIR No.ADRPS0274J (Appellant) .. (Respondent) Assessee by Shri Piyush Chhajed Revenue by Smt. Mahita Nair Date of Hearing 02/02/2024 Date of Pronouncement 29/01/2025 आदेश / O R D E R PER AMIT SHUKLA (J.M): The aforesaid Miscellaneous Applications have been filed by the assessee against order dated 01/07/2019 in ITA No.5982/Mum/2016, 5983/Mum/2016 & 5984/Mum/2016 for the A.Y.2005-06 to 2007-08. 2. The contents in all the Miscellaneous Applications are similar, hence all the Miscellaneous Applications are being disposed of by way of this consolidated order. MA No. 249-251/Mum/2020 Prakash H Mutha 2 2. The Miscellaneous Application filed by the assessee in MA No.250/Mum/2020 reads as under:- “1. The above Appeal No.ITA-5982/M/2016 of the Appellant for A.Y. 2005-06 was disposed of by the Honourable 'D' Bench vide its Impugned Order dated 01.07.2019 received by the appellant on 20-9-2019. (hereinafter referred to as 'Impugned Order'). The said impugned order is consolidated order for Assessee's Appeal for AY 2005-06, 2006-07 and AY 2007-08. 2. The Appellant above named, begs to present this Miscellaneous Application for rectification of certain mistakes which are apparent from record in the said Impugned Order 3. The above Appeal was heard by Honourable 'D' Bench on 07.05.2019 along with other two Appeals for A.Y 2006-07 & 2007-08. The said Appeals were filed against the Order passed by Commissioner of Income Tax (Appeals) confirming certain additions made in impugned assessment order passed U/s.143(3) r.w.s. 153C 4. During the course of hearing, the Honourable Bench pointed out that, they are not in a possession of the paper book and therefore, it was suggested that since the ground No. 1 is the additional ground taken for the first time, the appeal may be set aside to Commissioner of Appeals. 5. The Appellant's AR on the above suggestion of the Honourable Bench requested to dispose of the legal ground rather that setting aside since, the same was a legal issue and though was not taken before the CIT Appeals, it would be appropriate for the Hon'ble Bench to take and decide the legal position under the law and in absence of the paper book in the record of the Honourable Bench which was filed by the Appellant on 30.05.2018, the same may be adjourned so that Appellant can file a fresh paper book without which it would be difficult to decide the Appeal on the merits. 6. In response to the Appellants request, the Honourable Bench continued with the hearing the legal issue and also the issue MA No. 249-251/Mum/2020 Prakash H Mutha 3 on the merits without the paper book filed by the Appellant being on the record. 7. Subsequent to the hearing, the Assessee vide its letter dated 09.05.2019, filed the duplicate copy of paper book so that the same can be pursued while finalization of the impugned order. But when Appellant tried to file the copy of the paper book which was very important for deciding the Appeal on the merits, the same was not accepted by the Honourable Bench and therefore the impugned order has been finally passed without considering the documentary evidences filed in the paper book. 8. In view of the above, it would be in the interest of justice to recall the impugned order which has been passed without even considering the documentary evidence that were filed with the ITAT due to which the impugned order suffers from mistakes and the natural justice which should be available to Appellant. Due to the same it renders the impugned order completely erroneous since while deciding the issues on merits, the important documentary evidences which were placed before the lower authorities was not available on record of the Honourable Bench. 9. In view of the above, we request your honors to kindly recall the above impugned order which has been passed without considering documentary evidences, which is also from the Impugned order itself wherein, none of the documentary evidences placed in the paper book has been referred, relied, discussed or commented upon. 10. It would be appreciated that all the ground on the merits have been disposed of in a single ground wise Para's for all the three assessment years without bringing out the reasoning, distinguishing the Judgments or referring to documentary evidences placed in the paper book. The Honourable ITAT being the last fact finding authority on factual issues deciding without documentary factual evidences being on record has resulted into grave injustice which needs to be rectified. In the circumstances, it is humble prayer before your honor to kindly recall the impugned order. MA No. 249-251/Mum/2020 Prakash H Mutha 4 11. The Appellant hereby place reliance on the Judgement rendered by the Jurisdictional Honourable Bombay High Court in case of State Bank of India, ITA No.1481 of 2012 decided on 17.12.2014 wherein Para 10 of the Impugned Order, it has been held as under: \"That we do not think that interest of justice and equity is served by non- consideration of vital materials by the last fact finding authority, namely the Income Tax Appellate Tribunal. That Tribunal was required to recall its earlier impugned orders and for the reasons which have been assigned by it would indicate that it failed to apply it a mind at the initial stage to the grounds raised in the appeal and in their entirety. It omitted from consideration crucial documentary evidence as well. In such circumstances, such partial revival of appeal would not meet the ends of justice. We modify the impugned orders passed on the Miscellaneous Application and direct that Appeal shall be heard on its own merits and in accordance with law, permitting the Assessee to raise all grounds that are to be found in the Memo of Appeal. Without Prejudice to above 12. The Appellant had filed the Revised Grounds of Appeal for AY 2005-06 and the Ground No 1 been as under, \"The Learned Assessing Officer, DCIT, Central Circle - 1, Thane erred in assuming jurisdiction on the basis of Centralization Impugned Order passed w/s.127 of the Income Tax Act, 1961 without giving reasonable opportunity of being heard.\" 13. The said ground of Appeal which goes to the route of Jurisdiction has been dealt in the impugned order in Para 38 to Para 41. In Para of the impugned order, it is concluded as under: \"Upon careful consideration on this issue, we find that there is no material on record, which can cogently show that there was any infirmity in the Jurisdiction of the Assessing Officer pursuant to the impugned order passed U/s 127 of the Act. This was never raised before any of the authorities below. Issue is being raised by the Assessee without any basis MA No. 249-251/Mum/2020 Prakash H Mutha 5 whatsoever. In this circumstances, this ground raised by Assessee is stands dismissed\" 14. In this regard, your honor will appreciate that the above ground of Appeal was admitted for the purpose of hearing and extensive argument took place in regard to Non-provision of opportunity of being heard as required U/s 127 of the Income Tax Act. 15. During the course of hearing, the Appellant filed a Case Law Paper Book containing 8 Judgment's including 3 of Honourable Supreme Court, 3 of Jurisdictional Honourable Bombay High Court, I of Honourable Gujarat High Court and 1 Honourable of Madhya Pradesh High Court. The said Case Law Paper Book included following Judgment's on the ground raised for Non-Compliance with Section 127 as under: 1 Ajantha Industries, [1976] 102 ITR 281(SC), Supreme Court of India 2 Noorul Islam Educational Trust, [2016] 76 taxmann.com 144 (SC), Supreme Court of India 3 Global Energy (P) Ltd., (2013) 31 taxmann.com 183 (Bombay), High Court of Bombay 4 Shikshana Prasaraka Mandali, 32 taxmann.com 129 (Bombay), High Court 5 Sahara Hospitality Ltd., [2012] 25 taxmann.com 299 (Bom.), High Court of Bombay 6 Lalabhal Kamabhal Bharwad, [2016] 72 taxmann.com 184 (Gujarat), Gujarat High Court 7 Dev Bhumi Industries, [2017] 80 taxmann.com 191, Supreme Court of India 8 Gudstar Builders, [2014] 53 taxmann.com, 53, Madhya Pradesh High Court 16. During the course of hearing, the Appellant's AR also pointed out the details of Assesses Jurisdiction before the MA No. 249-251/Mum/2020 Prakash H Mutha 6 search took place and the Jurisdiction of the Central Circle were it was transferred post such. 17. The Assessee also relied upon the definition of \"City\" under the Maharashtra Municipal Corporation Act, and also placed the copy of Wikipedia which shows that place of original Jurisdiction and the transferred Jurisdiction are in two different cities and therefore, the department ought to have complied with the provisions of Section 127 and granted an opportunity to the Appellant before passing the impugned order U/s 127 18. Along with the documentary evidences, the Assessee extensively relied upon the above Judgment and the arguments was made in length on the said issue. 19. Your honor will appreciate that; the said ground has been dealt with on Page 15 of the impugned order in Para 38 to 41. In the Para 39, the Hon'ble Bench has observed that this ground has been taken for the first time and was never taken before the CIT Appeal and finally in Para 41, the said ground has been dismissed observing that there is no material on record as to infirmity in the order passed U/s 127. 20. Your honor will appreciate that as reiterated above, the Appellant had placed the details of Jurisdiction where the Appellant was assessed before the search and where Jurisdiction was transferred pursuant to order U/s 127 and ultimately, transferor Jurisdiction passed the Assessment order. The Jurisdiction was transferred between two cities and therefore, as per Section 127, and the various Judgments of Honourable Supreme Court and the Jurisdictional Bombay High Court, which has held that the said transfer cannot be done without giving an opportunity of hearing to the Assessee, without which the Jurisdiction acquired by the transferor Assessing officer is bad in law resulting into nullity. 21. In Para 38 to 41 of the Impugned order whereby the said ground has been disposed does not brings out the facts placed by the Appellant. It does not bring out as to why the ground of Appeal raised by the Assessee does not fall within the provisions of Section 127 and therefore, should be either allowed or dismissed. MA No. 249-251/Mum/2020 Prakash H Mutha 7 22. More importantly nowhere in the impugned order, the judgments placed before the bench have been discussed, referred or distinguished as to why those judgments do not apply to the facts of the case before the Honourable Bench. 23. Your honor will appreciate that, Non-consideration of the judgments of the Highest Authority i.e. Honourable Supreme Court and of Hon'ble Jurisdictional Bombay High Court, renders the Judgments erroneous and therefore, it is a mistake apparent from record which requires to be rectified. 24. At the stage, the Appellant places reliance upon the various judgments wherein the various authorities including apex court has held that Non consideration of Judgments relied upon by the Appellant his mistake apparent from the record and requires to be rectified. 25. In this regard, we hereby invite your honours attention to Judgment rendered by Honourable Supreme Court in case of HONDA SIEL POWER PRODUCTS LTD, 295 ITR 466 wherein it is held that; \"Rule of precedent\" is an important aspect of legal certainty in rule of law. That principle is not obliterated by Section 254(2) of the IT Act, 1961. When prejudice results from an impugned order attributable to the Tribunal's mistake, error or omission, then it is the duty of the Tribunal to set it right. Atonement to the wronged party by the Court or Tribunal for the wrong committed by it has nothing to do with the concept of inherent power to review. In the present case, the Tribunal was justified in exercising its powers under Section 254(2) when it was pointed out to the Tribunal that the judgment of the co- ordinate Bench was placed before the Tribunal when the original impugned order came to be passed but it had committed a mistake in not considering the material which was already on record. The Tribunal has acknowledged its mistake, it has accordingly rectified its impugned order.\" 26. The Appellant also places reliance on the Judgment rendered by Honourable Supreme Court in case of SAURASHTRA KUTCH STOCK EXCHANGE LIMITED, 305 ITR 227 wherein it is held that \"The core issue, therefore, is whether non-consideration of a decision of Jurisdictional Court (in this case a decision of the High Court of Gujarat) or of the MA No. 249-251/Mum/2020 Prakash H Mutha 8 Supreme Court can be said to be a \"mistake apparent from the record\"? In our opinion, both - the Tribunal and the High Court - were right in holding that such a mistake can be said to be a \"mistake apparent from the record\" which could be rectified under section 254(2).\" 27. The Appellant respectfully prays that the above Impugned Order suffers from mistake that is apparent from the record as far as Ground no.1 is concerned due to Non-consideration of direct Judgments & decisions of the Honourable Supreme Court and High Court and therefore the Appellant prays before your honour to kindly rectify the same. 28. Subsequent to the arguments on the ground No. I which was a legal issue, the Appellant argued the matter on the merits of the case l.e. from Ground No. 2 to Ground No. 5. 29. Grounds No 2 \"The Learned Commissioner of Income Tax (Appeals) erred in confirming the addition to the extent of Rs.32,35,216/- estimating the Gross Profit at 35% against the Gross Profit of 18.31% already offered by the appellant, without any basis.\" Ground No 3 \"The learned commissioner of income Tax (Appeals) erred in not even giving credit to the extent of amount already offered to tax @18.31% in the return filed in response to 153A\" 30. The Impugned order in Para 2 to Para 14 brings out the various ground taken by the Appellant for the respective Assessment year i.e. A.Y. 2005-06, 2006-07 and 2007-08 and also the grounds raised by the revenue in its Appeal for A.Y. 2007- 08. From Para 15 to Para 36, the brief facts adopted from the order of the Commissioner of Income Tax (Appeal) and how the Commissioner of Income Tax (Appeal) has dealt with are summarized. 31. The observations of the Honourable Bench are from Para 38 to Para 52, on page no 15-17 of the impugned order wherein, the legal issues as well as the Grounds on merits have been disposed of MA No. 249-251/Mum/2020 Prakash H Mutha 9 32. As far as ground No. 2 and 3 are concerned, the same is dealt with in a single Para No. 42 as under: \"Another issue raised in these appeals is that learned CIT(A) estimated gross profit at 35% which did not allow for the gross profit already declared by the assessee. We find considerable cogency in the submissions of the assessee in this regard. When addition is being estimated @ 35% on sales, profit in this regard which is already offered deserves to be reduced.\" 33. Your honours has directed to allow the deduction of Gross Profit already declared by the Assessee and accordingly, ground No. 3 of the Appellant is allowed. 34. But, as far as ground No. 2 is concerned wherein, the Appellant had challenged the estimation of the gross profit at 35%, there is no discussion or findings whatsoever as to how the 35% is the correct rate against the 18.31% adopted by the Appellant which was as per the Audited Books of Accounts for A.Y. 2007-08 35. During the course of hearing the Appellant relied upon the paper book which unfortunately was not available before the Honourable Bench as mentioned above. At Page 125 of the paper book, the Appellant had submitted the Average Operating Margin ratio and Net Margin ratio of Jewellery Industry 36. During the course of hearing the Appellant explained that the Net Margins offered by Appellant at 18.31% is more than two times the Gross Margins of the Industry Average and four times the Net Margin of the Industry Average and therefore, there was no need to estimate the Gross Profit at higher rate of 35% without any basis. 37. The Impugned order does not discuss or distinguish the comparative Gross Profit of an Industry relied upon during the course of hearing and in fact, nowhere in the impugned order it has been commented as to why 35% of Gross profit is a reasonable and appropriate estimate of profit which is not in accordance with the law. The Commissioner of Income Tax MA No. 249-251/Mum/2020 Prakash H Mutha 10 (Appeals) has not brought out any comparative before applying the estimated rate of 35%. 38. In fact, the above ground No. 2 which is in regard to estimation of Gross Profit without any basis has not been adjudicated itself The Para 42 only adjudicates, ground No. 3 in favour of Assessee allowing the credit of Gross Profit already offered by the Assessee 39. The Non Adjudication of Ground No. 2 in regard to estimation of Gross Profit at 35% without any basis render's the impugned order erroneous which is a mistake apparent from the record and therefore, it is the humbly prayed that impugned order may be modified to that extent. 40. The Appellant places the reliance upon the Judgment of Honourable Bombay High Court in case of State Bank of India (Supra) wherein it is held that Non Adjudication of the particular ground requires the complete recall of the impugned order so that, the same can be adjudicated on the merits of the case. 41. Grounds No 4 & 5 \"The Learned Commissioner of Income Tax (Appeals) erred in enhancing the income to the extent of Rs. 15,09,208/- in respect of initial investment in the stock without giving any opportunity/show cause notice during the appellate proceedings.\" \"The Learned Commissioner of Income Tax (Appeals) erred in enhancing the addition of Rs.15,09,208/- incurred in regard to initial investment on the estimated basis without any evidences or basis and completely on the irrelevant considerations.\" 42. The above ground No. 4 and 5 are in respect of addition of Rs. 15,09,208/- which was an enhancement of Income by the Commissioner of Income Tax Appeals. The ground No. 4 specifically deals with the enhancement done by the Commissioner of Income Tax Appeals without providing an opportunity to show cause. MA No. 249-251/Mum/2020 Prakash H Mutha 11 43. The said ground has been dealt with in Para 43 of the impugned order concluding that there is no enhancement what is sustained is only an addition on account of Initial Investments. 44. Your honours will appreciate that addition on account of Gross Profit and addition on account of Initial Investments / Unexplained Investments are two different additions which cannot be co-related. The Unexplained Investments is an addition under deeming provisions of Section 69 whereas the Gross Profit addition is an estimated addition resorted in the circumstances when the Books of Accounts are not complete. 45. Your honour will appreciate that observation there is no enhancement of Income is factually incorrect. The Appellant invites attention to the Para 20 of the Commissioner of Income Tax (Appeal) impugned order which clearly mentions that estimation has been made for the Initial Investments at the 25% of the unaccounted sales and it is added to Appellant Income for the A.Y. 2005-06. It would be appreciated, the addition to the Appellants Income itself denotes that it was the new source of Income and therefore, an enhancement was done had the same not been the new source of Income there could have been no further addition once the addition has been estimated on Gross Profit basis. It is a well-known fact that once the addition had been made at the Gross Profit there cannot be any further additions. 46. In fact, addition as confirmed by the Commissioner of Income Tax Appeals amounts to an enhancement. This addition was not made by the Assessing officer which has been confirmed by the Commissioner of Income Tax Appeal, but it is a case of fresh addition on account of unexplained Investments. 47. In view of the above, your honours observation that there was no enhancement in Para 43 of the impugned order is not in conformity with the factual position and therefore, it is a humble prayer that the Impugned order may be modified accordingly. 48. In regard to ground No. 5 where the appellant has challenged the addition of Rs. 15,09,208/ on the merits, your MA No. 249-251/Mum/2020 Prakash H Mutha 12 honours has in last line of Para 43 observed that, \"Assessee has not made any submissions on merits of the above\" 49. Your honours will appreciate that during the course of hearing the Appellant had specifically pointed out that the figures adopted in the Para 15 are incorrect figures Once the figures are adopted as per the return file under 153A your honour will appreciate that the figures and the basis adopted in Para 15 of the Commissioner of Income Tax (Appeal) order itself is incorrect and therefore, the estimation of Initial Investments is incorrect and without any basis 50. Thus, the fact remains that there was an argument made on the merits of the case and the incorrect figures adopted by the Commissioner of Income Tax (Appeals) were pointed out specifically because the fact remains that the stock recorded in the Books of Accounts was sufficient for making the sales and same was duly covered. In view of the same the question of any unaccounted stock/ un explained investment in stock does not arise. The same is also fortified by, that no addition was made on account of unaccounted stock for the A.Y. 2006-07 or 2007-08. 51. The Appellant therefore respectfully prays that the Impugned Order dated 1st July 2019 suffers from mistake that is apparent from record and therefore prays to suitably recall / modify the above Impugned Order. 3. First and foremost the contention which has been raised that the Tribunal at the time of hearing, was not in possession of the paper book which was already filed and secondly, assessee has raised additional ground No.1 which at that time suggested that appeal may be set aside to the ld. CIT(A) which assessee had stated that same was a legal issue, and can be raised at the appellate stage also. However, the Bench proceeded with the hearing despite assessee requested that assessee has to file a fresh paper book for merits, however, the appeal was decided without the paper book MA No. 249-251/Mum/2020 Prakash H Mutha 13 being filed, but when the paper book is filed, same was ignored. Thereafter, assessee has highlighted various points has raised above highlighting various mistakes which has occurred either not considering factual aspects or other inconsistencies. 4. After hearing both the parties we feel that if the assessee had filed paper book and had requested the Bench at the time of hearing and once it was filed, then in the interest of justice matter should have been discussed on the basis of paper book filed. Without going into the various other aspects which have been raised in the Miscellaneous Application on various grounds, we deem fit that the order should be recalled and be heard afresh on the basis of material brought on record in the paper book on merits. Accordingly, appeal of the assessee for A.Y.2005-06 is recalled and the Miscellaneous Application filed by the assessee is allowed. 5. In the result, all the Miscellaneous Applications filed by the assessee are allowed. Order pronounced on 29th January, 2025. Sd/- (B R BASKARAN) Sd/- (AMIT SHUKLA) ACCOUNTANT MEMBER JUDICIAL MEMBER Mumbai; Dated 29/01/2025 KARUNA, sr.ps Copy of the Order forwarded to : 1. The Appellant MA No. 249-251/Mum/2020 Prakash H Mutha 14 BY ORDER, (Asstt. Registrar) ITAT, Mumbai 2. The Respondent. 3. CIT 4. DR, ITAT, Mumbai 5. Guard file. //True Copy// "