SHOBIKA,K.P.COMPLEX, TUTICORIN V. THE INCOME TAX OFFICER,WARD-4, INCOME TAX OFFICE, TUTICORIN

ITA 2131/CHNY/2024

AI Insights

The case involves M/s. Shobika, the appellant, who appealed against the order of the Learned Commissioner of Income Tax (Appeals) for the Assessment Year 2017-18. The appeal was initially delayed due to technical glitches in the assessee's email, which was condoned by the Tribunal. The main issues in the appeal included the proper opportunity of hearing provided to the assessee, the admission of additional evidences, and the reassessment of various additions and disallowances made by the AO. The Tribunal found that the assessee was not given a proper opportunity to present its case before the AO and admitted additional evidences that were crucial for a fair assessment.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 106938 (ITAT-CHENNAI)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-01-2025
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 2017-2018
• Other Referred Cases: State Of Rajasthan vs Asharam @ Ashumal [2023] 6 SCC 314, TIN Box Co. v. CIT [2001] 249 ITR 216 (SC)
• Laws Referred To: Income Tax Act
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: P.K. SENTHIL KUMAR
• Assessee Lawyers: P.M. KATHIR
• Keywords: Set aside; Opportunity of being heard; Additional evidence; Unexplained cash credit; TDS; Recovery proceedings
• Section: 143(3); 250; 64; 68; 22; 73; 40A(3); 40(a)(ia); 72

Judgement Text

"आयकर अपीलीय अिधकरण, ‘ए’ \u0001यायपीठ, चे ई। IN THE INCOME TAX APPELLATE TRIBUNAL ‘A’ BENCH: CHENNAI \u0001ी एबी टी. वक , ाियक सद\u0011 एवं एवं एवं एवं \u0001ी जगदीश, लेखा सद क े सम\u0015 BEFORE SHRI ABY T. VARKEY, JUDICIAL MEMBER AND SHRI JAGADISH, ACCOUNTANT MEMBER आयकर अपील सं./ITA No.2131/Chny/2024 िनधा\u0010रणवष\u0010/Assessment Year: 2017-18 M/s.Shobika, 74-A, K.P. Complex, Palayamkottai Road, Tuticorin-628 002. v. The ITO, Ward-4, Tuticorin. [PAN: AALFS 7671 N] (अपीलाथ\u000e/Appellant) (\u000f\u0010यथ\u000e/Respondent) अपीलाथ\u000e क\u0012 ओर से/ Appellant by : Mr. P.M. Kathir, Advocate \u000f\u0010यथ\u000e क\u0012 ओर से /Respondent by : Mr. P.K. Senthil Kumar, Addl.CIT सुनवाईक\u0012तारीख/Date of Hearing : 12.11.2024 घोषणाक\u0012तारीख /Date of Pronouncement : 08.01.2025 आदेश / O R D E R PER ABY T. VARKEY, JM: This is an appeal preferred by the assessee against the order of the Learned Commissioner of Income Tax (Appeals)/NFAC, (hereinafter in short \"the Ld.CIT(A)”), Delhi, dated 18.10.2023 for the Assessment Year (hereinafter in short \"AY”) 2017-18. 2. At the outset, it is noted that there is a delay of ‘237’ days in filing of the appeal. The assessee has filed a condonation application along ITA No.2131/Chny/2024 (AY 2017-18) M/s.Shobika :: 2 :: with the affidavit before this Tribunal seeking condonation of delay. According to the Ld.AR, the impugned order dated 18.10.2023 was forwarded to the registered e-mail ID of the assessee which was inoperative due to technical gliches and due to which assessee was not aware of the impugned order of the Ld.CIT(A); and only when the recovery proceedings were initiated by the AO by letter dated 25.07.2024, the assessee came to know that its appeal has been dismissed and thereafter, immediately took steps to file the appeal and in this process, there is a delay of ‘237’ days in filing of this appeal; and since, the assessee was of bona fide belief that the e-mail account of the assessee was operative, the delay caused is not deliberate. Therefore, assessee pleads for condoning the delay. The Ld.DR opposed condoning the delay. However, it has been brought to our notice that the assessee was unaware of the outcome of the impugned order of the Ld.CIT(A) due to technical glitches/e-mail being inoperative. Therefore, it can’t be said that the delay caused was deliberate; and in any event, assessee wouldn’t gain from delaying the filing of this appeal. Therefore, we are inclined to condone the delay and proceed with the adjudication of the appeal. 3. At the outset, the Ld.AR of the assessee has filed petition for admission of the following additional evidences under Rule 29 of the Income Tax Appellate Tribunal Rules, 1963: ITA No.2131/Chny/2024 (AY 2017-18) M/s.Shobika :: 3 :: 1. It is submitted the above appeal is preferred by the appellant against the order u/s 250 of the Act of CIT(A) dated 18.10.2023, wherein the order of assessment passed u/s 143(3) of the Act dated 31.12.2019 was challenged. 2. The AO during the assessment proceedings has made various additions and disallowance same was challenged in the appeal before the CIT(A). In the impugned order the Ld CIT(A) sustained the additions made by the AO. Pertaining to addition towards unexplained cash credits of Rs. 13,53,565/-, the Petitioner submitted detailed written submissions before the Ld CIT (A) explaining that these entries are not from the book of accounts of the assessee. The petitioner now in order to substantiate the claim submits cash book of Shobika Mens for the AY 2017-18 and Bank Statement C.J Riyaz Ahamed for AY 2017-18, where these entries are present 3. It is submitted that the non-filing of the above documents before the AO and the CIT(A) was neither willful nor wanton and only due to the reasons stated above. It is further submitted that if the above documents are not admitted as evidence, the Petitioner / Appellant would be put to great hardship and irreparable loss. It is thus just and necessary that the above documents are admitted as additional evidence and taken on file in this appeal before this Hon'ble Tribunal. 4. In these circumstances, it is humbly prayed that the above mentioned documents may be admitted as additional evidence and thus render justice. 4. It is noted that following documents have been filed by the assessee for the first time before this Tribunal: 1. TMB bank account statement of CJ Riyaz Ahamed (Page Nos.102-105 of the PB). 2. Cash Book ledger of Shobika Mens for AY 2017-18 (Page Nos.106-167 of the PB) 5. However, the Ld.DR opposes admission of the additional evidences. Regarding admission of evidence at the appellate stage, let us take guidance from the decision of the Hon’ble Supreme Court in the case of State Of Rajasthan vs Asharam @ Ashumal [2023] 6 SCC 314 wherein their Lordship’s had an occasion to answer the question - What is the test for determining if additional evidences can be taken at the appellate stage? Is it the impossibility or inability to pronounce the judgment in the absence of such evidence? Held. ‘No, test is to see if there would be a failure of justice without such additional evidence. And once it is found ITA No.2131/Chny/2024 (AY 2017-18) M/s.Shobika :: 4 :: that there will be failure of justice, any kind of evidence formal or substantial can be received’. Testing on the touch stone of the aforesaid ratio of the Hon’ble Supreme Court and having gone through the documents filed from Page Nos.102-167 of the Paper Book, we are of the opinion that there will be failure of justice if these evidences couldn’t be admitted and considered while adjudicating the issues raised in the appeal. However, since we find that these documents were not before the authorities below especially in the hands of the AO while framing the assessment, for the interest of justice and fair play, we are inclined to admit the evidences. 6. The next grievance of the assessee is that it didn’t get proper opportunity before the AO. In this regard, it was brought to our notice that the assessee received only one notice dated 16.04.2019, pursuant to which assessee filed reply, P & L A/c, balance sheet, Form No.26AS. However, the AO didn’t ask for any other clarification till 22.12.2019 and asked for clarification only “9” days before the assessment order was framed i.e. on 31.12.2019 which fact is discernable from Page No.2 of the assessment order; and since, the assessee couldn’t file all the documents on 24.12.2019 while filing its reply to the clarification sought by the AO on 22.12.2019, we are of the view that the AO has made additions without giving proper opportunity to the assessee. The assessee has ITA No.2131/Chny/2024 (AY 2017-18) M/s.Shobika :: 5 :: cited the decision of the Hon’ble Supreme Court in the case of TIN Box Co. v. CIT reported in [2001] 249 ITR 216 (SC) and prayed that since assessee didn’t get proper opportunity before the AO and that the additional evidences has a bearing on the income of the assessee, the assessment be set aside back to the file of the AO for de novo assessment. Per Contra, the Ld DR doesn’t want us to give one more innings to assessee. 7. Having heard both sides, we find that the assessee had filed Return of Income [RoI] for AY 2017-18 on 24.08.2017 admitting total income at Rs.82,950/- which RoI was selected for complete scrutiny under CASS since there was huge cash deposits during demonetization period and abnormal increase in sale with decrease in profitability as compared to preceding year. It is noted that notice u/s.143(2) was issued on 24.09.2018, and thereafter, a letter was issued to the assessee through e-processing portal on 14.01.2019 calling for certain documents, and in response, assessee filed a letter dated 16.04.2019 which fact the AO acknowledges that the assessee has filed the P&L A/c, balance sheet, Form No.26AS and filed reply/details regarding source of cash deposits. However, thereafter the AO issued a letter dated 22.12.2019 calling for clarification in respect of i) advertisement expenses (ii) rent paid (iii) interest payment towards unsecured loan 4) unsecured loan 4) difference ITA No.2131/Chny/2024 (AY 2017-18) M/s.Shobika :: 6 :: in creditors balance 6) Cash credit in partner’s capital account 7) Disallowance u/s.40A(3) on purchase, 8) EPF belated payments. Pursuant to which, the assessee filed reply on 24.12.2019 but couldn’t file the relevant documents which led to the AO drawing adverse inference against assessee. It is noted that assessee couldn’t file relevant evidence before the Ld.CIT(A) due to technical glitches, because of which, assessee has filed additional evidences before us which we have admitted (supra) and since, the assessee didn’t get proper opportunity because clarification was asked at the fag end of the assessment viz nine days before framing assessment as noted supra, we taking note of the order of the Hon’ble Supreme Court in the case of TIN Box Co. (supra) wherein their Lordships while reversing the order of the Hon’ble High Court, the Tribunal and CIT(A) has restored the assessment back to the file of the AO since the assessee didn’t get proper opportunity before the AO. The Hon’ble Supreme Court has held in the case of TIN Box Co., as under: 1. It is unnecessary to go into great detail in these matters for there is a statement in the order of the Tribunal, the fact-finding authority, that reads thus : \"We will straightaway agree with the assessee's submission that the Income-tax Officer had not given to the assessee proper opportunity of being heard.\" 2. That the assessee could have placed evidence before the first appellate authority or before the Tribunal is really of no consequence for it is the assessment order that counts. That order must be made after the assessee has been given a reasonable opportunity of selling out his case. We, therefore, do not agree with the Tribunal and the High Court that it was not necessary to set aside the order of assessment and remand the matter to the assessing authority for fresh assessment after giving to the assessee a proper opportunity of being heard. ITA No.2131/Chny/2024 (AY 2017-18) M/s.Shobika :: 7 :: 3. Two questions were placed before the High Court, of which the second question is not pressed. The first question reads thus: \"1. Whether, on the facts and in the circumstances of the case, the Tribunal was justified in not setting aside the assessment order in spite of a finding arrived at by it that the Income-tax Officer had not given a proper opportunity of hearing to the assessee?\" 4. In our opinion, there can only be one answer to this question which is inherent in the question itself: in the negative and in favour of the asses- see. 5. The appeals are allowed. The order under challenge is set aside. The assessment order, that of the Commissioner (Appeals) and of the Tribunal are also set aside. The matter shall now be remanded to the assessing authority for fresh consideration, as aforestated. No order as to costs. 8. In the light of the aforesaid discussion, we set aside the impugned order of the Ld.CIT(A) and restore the assessment back to the file of the AO with a direction to assess the income of the assessee, except the disallowance of advertisement expenses of Rs.1,84,489/- and addition made of Rs.46,256/- on EPF payment made belatedly since assessee has not challenged or filed any grounds, against such addition; Therefore, we confirm the disallowance on both counts. And the assessee is noted to have filed written submissions in the form of chart which is reproduced as under: ITA No.2131/Chny/2024 (AY 2017-18) M/s.Shobika :: 8 :: Gro und No Addition by the AO Submission Submissions to be made before the AO 2 Disallowance of Rs. 1,44,000 was made u/s 40(a)(ia) Disallowance was made as no TDS was deducted.The monthly rent paid was Rs.40,000/- and the same was paid to a single person. Total rent paid during the year was Rs.4,80,000/-. The Rent was paid to 4 Co-owners who each held 1/4th share in the property under their names in individual capacity; Each of them received their 1/4th share of the monthly rent and thus the total rent paid during the year to each owner only came to Rs.1,20,000/- which was less then the statutory limit to deduct TDS u/s.194I of the Act. Sale deed Showing Purchases by the 4 owners under their name i. Rafic Ahamed – Pgs 1 to 7 PB ii. Rashi Ahamed - Pgs 8 to 15 PB iii. Riyaz Ahamed - Pgs 16 to 22 PB iv. Rakeef Ahamed – Pgs 23 – 29 PB ROI of the 4 partners offering their ¼th share of the rental income i. Rafic Ahamed – Pgs 30 & 32 PB ii. Rashi Ahamed - Pgs 33 to 36 PB iii. Riyaz Ahamed - Pgs 37 to 39 PB iv. Rakeef Ahamed –Pgs 40 to 57 PB Rental Leger in Appellants Book of Account - Pg 59 of PB 3 Supposed difference in unsecured loan of Rs.80,28,704/- was added to the income as certain transactions with the creditors appearing in the appellant’s bank statement were not reflected in the books of Shobika.Same were treated as unexplained cash credit u/s 68 of the Act. All the credits are either the relatives of Assessee’s partners or the Assessee’s sister concern or Partners’ Proprietorship concern.The receipts from the creditors were towards the capital of the partners in the appellant firm. i. Uslama Begum – Rs. 27,48,074 Mother of the partners in appellant firm Rs.3,48,704 to Rafic Ahmed Rs.6,00,000 to Rakeef Ahamed Rs.6,00,000 to Riyaz Ahamed Rs.6,00,000 to Rashi Ahamed Rs.6,00,000 returned back Loan ledger of C.J. Umshalma Begum in the books of Appellant - Pg 63 of the PB Relevant Transaction in the Bank statement of C.J Umshalma begum -Pgs 64 - 66 of the PB Ledger of the partner’s capital account in the appellant’s books showing credit of these amounts to their capital i. Rafic Ahmed - Pg 79 of PB ii. Rakeef Ahamed – Pg 86 of PB iii. Riyaz Ahamed – Pg 91 of PB iv. Rashi Ahmed – Pg 93 of PB ii. Rithika – Rs.18,00,000 Sister concern Rs 4,50,000 to Rafic Ahmed Rs 4,50,000 to Rakeef Ahamed Rs.4,50,000 to Riyaz Ahamed Rs.4,50,000 to Rashi Ahamed Loan ledgers of Ritika in the books of Appellant – Pg 67 of PB Ledgers of the Appellant in the Books of Ritika – Pg 68 of PB Ledger of the partner’s capital account in the appellant’s books showing credit of these amounts to their capital i. Rafic Ahmed - Pg 80 of PB ii. Rakeef Ahamed – Pg 86 of PB iii. Riyaz Ahamed – Pg 91 of PB iv. Rashi Ahmed – Pg 93& 94 of PB iii. Shobika Dot Com – Rs.10,80,000 Proprietorship concern of Riyaz Ahmed Loan ledgers of Shobika dot com in the books of Appellant – Pg 69 of PB ITA No.2131/Chny/2024 (AY 2017-18) M/s.Shobika :: 9 :: Payments of Rs.6,90,000 and Rs.3,90,000 to Rashi Ahamed’s capital Ledgers of the Appellant in the Books of Shobika dot com – Pg 70 of PB Ledger of Rashi Ahamed’s capital account in appellant’s books showing credit of these amounts to his capital - Pg. 93 of PB iv. Shobika Mens – Rs7,20,000 Proprietorship concern of Rakeef Ahmed Payment of Rs. 6,00,000 + 1,20,000 towards capital ofRakeef Ahamed Loan ledgers of Shobika Mens in the books of Appellant – Pg 71 of PB Ledgers of the Appellant in the Books of Shobika Mens – Pg 72 of PB Ledger of Rakeef Ahamed’s capital account in appellant’s books showing credit of these amounts to his capital -Pg. 86 of PB v. Rashi Silk Palace – Rs 2,40,000 A partnership firm of Rafic Ahamed and Thasneem Banu Loan ledgers of Rashi Silk Palace in the books of Appellant – Pg 73 of PB Ledgers of the Appellant in the Books of Rashi Silk Palace – Pg 74 of PB Relevant Transaction in Capital Account of Rafic Ahamed in the appellant’s books - Pg79 of PB vi. Maharaja Silks – Rs. 5,40,000 Sister concern Rs 1,35,000 to Rafic Ahmed Rs 1,35,000 to Rakeef Ahamed Rs.1,35,000 to Riyaz Ahamed Rs.1,35,000 to Rashi Ahamed Loan ledgers of Maharaja Silks in the books of Appellant – Pg 75 of PB Ledgers of the Appellant in the Books of Maharaja Silks – Pg 76 of PB Relevant Transaction in Capital Account of Partners in the appellant’s books i. Rafic Ahmed - Pg 80 of PB ii. Rakeef Ahamed – Pg 87 of PB iii. Riyaz Ahamed – Pg 91 of PB iv. Rashi Ahmed – Pg 94 of PB vii. Madurai Blazer –Rs. 9,00,000 Proprietorship concern of Rakeef Ahmed Payment of Rs. 3,00,000 + 6,00,000 Loan ledgers of Madurai Blazer in the books of Appellant – Pg 77 of PB Ledgers of the Appellant in the Books of Madurai Blazer – Pg 78 of PB Relevant Transaction in Capital Account of Pg 86 of PB 4 Difference of Credit balance of Rs. 1,88,391 pertaining to “Madurai Tavakkal Traders and Surat – Aagam Silks” was added as the goods purchased during the year have to be accounted for in the same year in mercantile system. The Goods were dispatched by the sellers only on 31.03.2017.They were accounted for in the Purchases and stock account of the appellant only in the next year (F.Y 2017-18) and not under the year under appeal. Ledger Account of “Madurai Tavakkal Traders and Surat – Aagam Silks” for the FY 16-17 along with the confirmation letters will besubmitted before the AO The Appellant will be Producing the Ledgers of MaduraiTavakkal Traders and Surat – Aagam Silks” for the FY 17-18 before the AO to provide reconciliationthat the purchases were accountedduring the next year 5 Cash Credit in Partner Riyaz Ahmed’s individual bank Account of Rs. 13,53,565/- treated as unexplained cash credits u/s 68 of the Act. This cash was deposited by Riyaz Ahamed in his ownTamilnaduMercantile Bank – SB Account out of the payments receivedby him from SHOBIKA MENS, which is a proprietorship concern of Mr. Rakeef Ahmed. Riyaz Ahmed is maintaining the SB account under his individual capacity and deposits were made by him. The Action of The Assessee has produced two additional documents before the Hon’ble ITAT i. TMB Bank Statement of Riyaz Ahmed – Pgs 102 – 105 of PB ii. Cash book of SHOBIKA MENS- Pgs 106 – 167 of PB Above two documents will be explained before the AO ITA No.2131/Chny/2024 (AY 2017-18) M/s.Shobika :: 10 :: And which may be considered by the AO before framing the assessment. 9. In the light of the aforesaid discussion, the AO is directed to frame the assessment after considering the written submissions filed by assessee including additional evidences admitted supra and after hearing the assessee frame the assessment in accordance to law except the two issues as noted at para 8. Riyaz Ahamed has no way connected to SHOBIKA 6 Disallowance of Purchase of R. 4,92,171 u/s 40A(3) – For reason the assesee has paid the same by exceeding cash payments of Rs. 20,000 Payments through Agents The assesee has directly deposited cash into the bank accounts of the Agents , which was then paid by the agents to procure goods from the following sellers Creative Enterprise, Maher Creation, Aarev Traders, MGM & Sons, Shab AshokumarMethmla. Bank deposit slips to the respective agents - Pgs 176 to 178 of PB Payments of various bills The Assessee has paid the same to Madurai Sri Handlooms under 3 separate bills Three Separate Bills regarding Purchases from Madurai Sri Amman Handlooms -Pgs 180 to 182 of PB Payment through RTGS The payment of Rs. 1,25,255 to Elampillai VPS Silk was through RTGS on 04.11.2016 – from TMB Bank account of Shobika Relevant bank Statement @ Pg 179 of PB Geniune Payments towards i. Erode Mahavir Tex – Rs. 25,920 ii. Madurai Bismi – Rs. 20,559 The Assessee will be submitting relevant documents connected to this payments before the AO All other documents will be put forth and emphasised before the AO ITA No.2131/Chny/2024 (AY 2017-18) M/s.Shobika :: 11 :: 10. In the result, appeal filed by the assessee is allowed for statistical purposes. Order pronounced on the 08th day of January, 2025, in Chennai. Sd/- Sd/- (जगदीश) (JAGADISH) लेखा सद /ACCOUNTANT MEMBER (एबी टी. वक ) (ABY T. VARKEY) \u0001याियक सद\bय/JUDICIAL MEMBER चे ई/Chennai, दनांक/Dated: 08th January, 2025. TLN, Sr.PS आदेश क\u0012 \u000fितिलिप अ\"ेिषत/Copy to: 1. अपीलाथ\u0018/Appellant 2. \u0019\u001aथ\u0018/Respondent 3. आयकरआयु /CIT, Chennai / Madurai / Salem / Coimbatore. 4. िवभागीय\u0019ितिनिध/DR 5. गाड\u0010फाईल/GF "