JITENDRA POPATLAL PATEL, MUMBAI v. ITO WD 25(3)(2), MUMBAI

IN THE INCOME TAX APPELLATE TRIBUNAL J BENCH: MUMBAI BEFORE SHRI R V EASWAR SENIOR VICE PRESIDENT AND SHRI R K PANDA ACCOUNTANT MEMBER ITA NO 1020/MUM/2009 (ASSESSMENT YEAR: 2005-06) JITENDRA POPATLAL PATEL FLAT NO 1404 VASANT ARADHANA NEAR PANCHASHEEL HEIGHTS MAHAVIR NAGAR KANDIVALI (WEST) MUMBAI -400 067 PAN: AAAPP 3558 Q VS ITO-WARD 25(3)(2) BANDRA KURLA COMPLEX MUMBAI APPELLANT RESPONDENT APPELLANT BY: SHRI RAJESH S SHAH RESPONDENT BY: SHRI S K MADHEEK ORDER PER R K PANDA ACCOUNTANT MEMBER THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAIN ST THE ORDER DATED 20.11.2008 OF THE CIT (A) XXV RELATING TO ASSESSME NT YEAR 2005-06. 2. IN GROUNDS OF APPEAL NO.1 & 2 THE ASSESSEE HAS CHALLENGED THE ORDER OF THE CIT (A) IN SUSTAINING THE ADDITION OF RS 11 50 734/ - OUT OF ADDITIONS OF RS 12 74 724/- MADE BY THE ASSESSING OFFICER ON ACCOUN T OF SUNDRY CREDITORS U/S 41(1) OF THE INCOME-TAX ACT. 3. FACTS OF THE CASE IN BRIEF ARE THAT THE ASSESS ING OFFICER DURING THE COURSE OF ASSESSMENT PROCEEDINGS OBSERVED THAT THE ASSESSEE I N ITS BALANCE SHEET HAS SHOWN LIABILITY ON ACCOUNT OF SUNDRY CREDITORS AT RS 12 7 4 727/-. HE OBSERVED TOTAL PURCHASES DURING THE YEAR WAS SHOWN AT RS 8 02 152/ - THEREFORE SUBSTANTIAL AMOUNT OF SUNDRY CREDITORS WERE CARRIED FORWARD. T HE ASSESSING OFFICER ASKED THE ASSESSEE TO GIVE FULL DETAILS OF THE SUNDRY CREDITO RS IN THE PRESCRIBED FORMAT SUCH AS ADDRESSES NATURE AND DATE OF CREDIT PAYMENT TILL DATE AND BALANCE ON THE DATE OF REPORTING. HOWEVER THE ASSESSEE FORWARDED ALL OTH ER DETAILS EXCEPT THE DETAILS OF PURCHASES AND SUNDRY CREDITORS. THE ASSESSING OFFI CER OBSERVED THAT THE ASSESSEE ITA 1020/M/09 JITENDRA POPATLAL PATEL 2 DELIBERATELY DID NOT PROVIDE THE IDENTIFICATION DET AILS OF THE CREDITORS AND PURCHASES. HE FURTHER OBSERVED THAT THE CREDITORS WERE OLD. N OT BEING SATISFIED WITH THE EXPLANATION GIVEN BY THE ASSESSEE AND IN ABSENCE OF FURNISHING OF DETAILS TO SUBSTANTIATE THE CREDITORS THE ASSESSING OFFICER I NVOKED THE PROVISIONS OF SECTION 41(1) AND MADE THE ADDITION OF RS 12 74 727/- TO TH E TOTAL INCOME OF THE ASSESSEE. 4. DURING THE COURSE OF APPELLATE PROCEEDINGS THE CIT (A) ASKED THE ASSESSEE VIDE ORDER-SHEET ENTRY DATED 9TH SEPTEMBER 2008 TO FILE COPY OF ACCOUNT OF ALL THE CREDITORS SINCE BEGINNING AND DETAILS WITH PROOF OF SUNDRY CREDITORS WRITTEN OFF BY THE ASSESSEE BEFORE PASSING OF THE ASSESSMENT ORDER BY THE ASSESSING OFFICER. THE COPIES OF RETURN FOR ASSESSMENT YEAR 2006-07 AND 20 07-08 WERE SENT BY THE ASSESSEE BY POST SHOWING THAT THE CREDITORS OF RS 8 12 610/- WERE WRITTEN OFF IN THE ASSESSMENT YEAR 2006-07 AND RS 75 414/- DURING ASSE SSMENT YEAR 2007-08. THE CIT (A) OBSERVED THAT THE WRITTEN OFF OF CREDITORS WERE DONE AFTER THE ASSESSING OFFICER ISSUED QUESTIONNAIRE U/S 142(1) IN ASSESSME NT YEAR 2005-06 ASKING THE NAMES ADDRESSES AND COPY OF ACCOUNT OF CREDITORS. HE OBSERVED THAT THE ASSESSEE ON ONE HAND IS SHOWING WRITE OFF OF CREDITORS IN PR OFIT AND LOSS ACCOUNT IN ASSESSMENT YEAR 2006-07 AND 2007-08 WHILE ON THE OTHER HAND T HE ASSESSEE IS DEBITING SAME AMOUNT OR MORE AMOUNT AS BAD DEBTS WRITTEN OFF. HE OBSERVED THAT THE ASSESSEE AND HIS COUNSEL TRIED TO EVADE HEARING AT THE TIME OF ASSESSMENT PROCEEDINGS BEFORE THE ASSESSING OFFICER AS WELL AS PERSONAL HEARING A T THE TIME OF APPELLATE PROCEEDINGS. THE CIT (A) OBSERVED FROM THE SUBMISS IONS FURNISHED BY THE ASSESSEE THAT AN AMOUNT OF 1 23 993/- ONLY ARE NOT VERY OLD AND THE BALANCE AMOUNT IS OUTSTANDING FOR LAST SO MANY YEARS. SINCE THE ASSE SSEE NEITHER FURNISHED THEIR ADDRESSES NOR THE REASONS AS TO WHY THE CREDITORS W ERE APPEARING IN THE BALANCE SHEET DESPITE THE FACT THAT THEY HAVE BECOME BARRED BY LIMITATION THE CIT (A) HELD THAT THE ISSUE IS COVERED AGAINST THE ASSESSEE BY V ARIOUS DECISIONS OF THE TRIBUNAL EXCEPT THE AMOUNT OF RS 1 23 993/-. HE ACCORDINGL Y SUSTAINED ADDITION TO THE TUNE OF RS 11 50 734/- (BEING THE DIFFERENCE BETWEEN RS 12 74 727 AND RS 1 23 993). HOWEVER HE DIRECTED THE ASSESSING OFFICER TO ALLOW THE RELIEF OF RS 8 12 610/- DURING ASSESSMENT YEAR 2006-07 AND RS 75 414/- DURING ASSE SSMENT YEAR 2007-08 ON ACCOUNT OF CREDITORS SHOWN WRITTEN OFF AFTER RECEIP T OF NOTICE FROM THE ASSESSING ITA 1020/M/09 JITENDRA POPATLAL PATEL 3 OFFICER / AFTER ASSESSING OFFICER PASSED ORDER U/S 143(3) DURING ASSESSMENT YEAR 2005-06. HE FURTHER OBSERVED THAT RELIEF MIGHT BE GRANTED IN ASSESSMENT YEAR 2006- 07 AND 2007-08 WHEN THE ORDER FOR ASSESSMENT YEAR 2 005-06 REACHES FINALITY. AGGRIEVED BY SUCH ORDER OF CIT (A) THE ASSESSEE IS IN APPEAL BEFORE US. 5. THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED T HAT THE ENTIRE OUTSTANDING LIABILITY RELATED TO TRADE CREDITORS AND NOT LOANS. ALTHOUGH THE ASSESSEE DID NOT FILE FULL DETAILS BEFORE THE ASSESSING OFFICER HOWEVER HE HAS FILED ALL THE DETAILS BEFORE THE CIT (A) WHICH WAS IGNORED BY HIM. HE FURTHE R SUBMITTED THAT THE ASSESSEE HAS FILED THE RETURNS FOR SUBSEQUENT ASSESSMENT YEARS B EFORE THE NOTICES WERE ISSUED. HE ACCORDINGLY SUBMITTED THAT THE MATTER MAY BE S ET ASIDE TO THE ASSESSING OFFICER FOR FRESH ADJUDICATION. THE LEARNED DEPARTMENTAL R EPRESENTATIVE ON THE OTHER HAND STRONGLY RELIED ON THE ORDER OF THE ASSESSING OFFIC ER AND CIT (A). 6. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS MADE BY BOTH THE SIDES PERUSED THE ORDERS OF THE ASSESSING OFFICER AND THE CIT (A) AND THE VOLUMINOUS PAPER-BOOK FILED BEFORE US. THERE IS NO DISPUTE TO THE FACT THAT TH E ASSESSING OFFICER MADE AN ADDITION OF RS 12 74 727/- U/S 41(1) ON ACCOUNT OF SUNDRY CR EDITORS APPEARING IN THE BALANCE SHEET FOR A LONG TIME WHICH COULD NOT BE SUBSTANTI ATED BY THE ASSESSEE. WE FIND THAT THE CIT (A) SUSTAINED ADDITION OF RS 11 50 734 /- SINCE THE ASSESSEE NEITHER FURNISHED THEIR ADDRESSES NOR THE REASONS AS TO WHY THE CREDITORS WERE APPEARING IN THE BALANCE SHEET DESPITE THE FACT THAT THEY HAVE B ECOME BARRED BY LIMITATION. IT IS THE SUBMISSION OF LEARNED COUNSEL FOR THE ASSESSEE THAT IT HAS MADE SUBMISSION BEFORE CIT (A) VIDE LETTER DATED 5TH AUGUST 2008 RE QUESTING HIM TO ADMIT THE FRESH EVIDENCES UNDER RULE 46A OF THE INCOME-TAX RULES. HOWEVER WE FIND THAT THERE IS NO SUCH REFERENCE IN THE ORDER OF THE CIT (A) FOR A DMISSION / REJECTION OF THE ADDITIONAL EVIDENCES UNDER RULE 46A OF THE INCOME-T AX RULES. FURTHER THE SUBMISSION OF THE LEARNED COUNSEL FOR THE ASSESSEE THAT THE ASSESSEE HAS FILED THE RETURNS BEFORE THE NOTICES WERE ISSUED ALSO NEEDS V ERIFICATION. CONSIDERING THE TOTALITY OF THE FACTS OF THE CASE AND IN THE INTERE ST OF JUSTICE WE DEEM IT PROPER TO RESTORE THE MATTER BACK TO THE FILE OF THE ASSESSIN G OFFICER WITH A DIRECTION TO GIVE ONE MORE OPPORTUNITY TO THE ASSESSEE TO SUBSTANTIAT E WITH EVIDENCE TO HIS ITA 1020/M/09 JITENDRA POPATLAL PATEL 4 SATISFACTION REGARDING THE GENUINENESS OF CREDITORS AS ON 31ST MARCH 2005. THE ASSESSING OFFICER SHALL DECIDE THE ISSUE AFRESH AND IN ACCORDANCE WITH THE LAW AFTER GIVING DUE OPPORTUNITY OF BEING HEARD TO THE ASSESS EE. WE HOLD AND DIRECT ACCORDINGLY. GROUNDS OF APPEAL NO.1 & 2 ARE ACCORD INGLY ALLOWED FOR STATISTICAL PURPOSES. 7. GROUNDS OF APPEAL NO.3 THE ASSESSEE HAS CHALLEN GED THE ORDER OF THE CIT (A) IN CONFIRMING THE ADDITION OF RS 1 10 945/- U/S 41( 1) OF THE INCOME-TAX ACT ON ACCOUNT OF OUTSTANDING COMMISSION. 8. AFTER HEARING BOTH THE SIDES WE FIND THE ASSESSE E HAS SHOWN OUTSTANDING COMMISSION OF RS 1 10 955/- IN THE BALANCE-SHEET. THE ASSESSING OFFICER ASKED THE ASSESSEE TO FILE FULL DETAILS THEREOF. THE ASSESSE E IN ITS SUBMISSION SIMPLY PROVIDED THE NAMES OF THE CREDITORS AND THE AMOUNT. IN ABSE NCE OF FURNISHING FURTHER DETAILS THE ASSESSING OFFICER ADDED THE AMOUNT OF RS 1 10 9 45/- U/S 41(1) OF THE INCOME-TAX ACT. BEFORE CIT (A) IT WAS SUBMITTED THAT SUCH OUT STANDING COMMISSION OF RS 1 10 945/- RELATES TO THOSE THREE PARTIES WITH REGA RD TO WHOM ASSESSEE IS NOT ABLE TO RECOVER THE AMOUNT FROM THE DEBTORS TO WHOM THE GOO DS WERE SOLD. HOWEVER IN ABSENCE OF NAMES AND ADDRESSES OF THE COMMISSION AG ENTS AND IN ABSENCE OF PROOF THAT ASSESSEE COULD NOT RECOVER THE AMOUNTS FROM TH E PARTIES THE CIT (A) UPHELD THE ACTION OF THE ASSESSING OFFICER. FROM VARIOUS DETA ILS FURNISHED BEFORE THE ASSESSING OFFICER A COPY OF WHICH IS PLACED AT PAPER BOOK PA GE 6 & 7 WE FIND THAT THE COMMISSION OF RS 1 10 945/- PERTAINED TO THREE PART IES NAMELY COMBATTA RS 4 452.06 CORON INDIA RS 19 666.32 S E INDUSTRIAL SYN (P) LTD RS 86 827.25. WE FIND NO OTHER DETAILS AS ASKED BY THE ASSESSING OF FICER HAS BEEN FURNISHED. CONSIDERING THE TOTALITY OF THE FACTS OF THE CASE A ND IN THE INTEREST OF JUSTICE WE DEEM IT PROPER TO RESTORE THE MATTER TO THE FILE OF THE ASSESSING OFFICER WITH A DIRECTION TO GIVE ONE MORE OPPORTUNITY TO THE ASSES SEE TO SUBSTANTIATE WITH EVIDENCE TO HIS SATISFACTION THAT THE COMMISSION PAYABLE SHO WN IN THE BALANCE-SHEET IS GENUINE. THE ASSESSING OFFICER SHALL DECIDE THE IS SUE AFRESH AND IN ACCORDANCE WITH THE LAW AFTER GIVING DUE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. WE HOLD AND ITA 1020/M/09 JITENDRA POPATLAL PATEL 5 DIRECT ACCORDINGLY. GROUNDS OF APPEAL NO.3 IS ACC ORDINGLY ALLOWED FOR STATISTICAL PURPOSES. 9. GROUNDS OF APPEAL NO.4 THE CIT (A) CONFIRMING T HE DISALLOWANCE TO THE EXTENT OF 10% OF THE EXPENSES INCURRED OF RS 3 88 021/- ON ADHOC BASIS. 10. AFTER HEARING BOTH THE SIDES WE FIND OUT OF T HE TOTAL EXPENSES OF RS 3 88 021/- THE ASSESSING OFFICER DISALLOWED 25% OF SUCH EXPENSES IN ABSENCE OF FULL DETAILS AND SUPPORTING BILLS AND VOUCHERS. IN APPE AL THE LEARNED CIT (A) RESTRICTED SUCH DISALLOWANCE TO 10% OF SUCH EXPENSES OF CLAIM. WE FIND UNDISPUTEDLY THE ASSESSEE DID NOT PROVIDE FULL DETAILS OF THE EXPENS ES WITH SUPPORTING EVIDENCES FOR THE CLAIM. IT IS THE SETTLED POSITION OF LAW THAT FOR CLAIMING ANY EXPENDITURE AS GENUINE THE ONUS IS ALWAYS ON THE ASSESSEE TO SUBS TANTIATE WITH EVIDENCE TO THE SATISFACTION OF THE ASSESSING OFFICER THAT SUCH EXP ENDITURE IS WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF BUSINESS. IN THE INSTANT CASE UNDISPUTEDLY THE ASSESSEE FAILED TO DISCHARGE THE ONUS CAST UPON IT. WE FIND THE LEARN ED CIT (A) HAS ALREADY GIVEN SUBSTANTIAL RELIEF BY SUSTAINING ONLY 10% OF THE EX PENSES AS AGAINST 25% MADE BY THE ASSESSING OFFICER WHICH IN OUR OPINION IS QUI TE REASONABLE AND DOES NOT CALL FOR ANY INTERFERENCE. ACCORDINGLY THE SAME IS UPHELD. THIS GROUND RAISED BY THE ASSESSEE IS ACCORDINGLY DISMISSED. 11. IN THE RESULT APPEAL FILED BY THE ASSESSEE IS PARTLY ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED ON 7TH DAY OF APRIL 2010. SD/- (R V EASWAR) SR VICE PRESIDENT SD/- (R K PANDA) ACCOUNTANT MEMBER MUMBAI DATE: 7TH APRIL 2010 COPY TO:- 1) THE APPELLANT. ITA 1020/M/09 JITENDRA POPATLAL PATEL 6 2) THE RESPONDENT. 3) THE CIT (A) XXV MUMBAI. 4) THE CIT MUMBAI CITY-25 MUMBAI. 5) THE D.R. J BENCH ITAT MUMBAI BY ORDER / / TRUE COPY / / ASSTT. REGISTRAR CHAVAN* I.T.A.T. MUMBAI ITA 1020/M/09 JITENDRA POPATLAL PATEL 7 SR.N. EPISODE OF AN ORDER DATE INITIALS CONCERNED 1 DRAFT DICTATED ON 05.04.2010 SR.PS 2 DRAFT PLACED BEFORE AUTHOR 05.04.2010 06.04.2010 SR.PS 3 DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER JM/AM 4 DRAFT DISCUSSED/APPROVED BY SECOND MEMBER JM/A M 5 APPROVED DRAFT COMES TO THE SR.PS SR.PS 6 KEPT FOR PRONOUNCEMENT ON SR.PS 7 FILE SENT TO THE BENCH CLERK SR.PS 8 DATE ON WHICH FILE GOES TO THE HEAD CLERK 9 DATE OF DISPATCH OF ORDER