2014 (6) TMI 476 - HC - Income Tax

High Court affirms Tribunal's decision on unaccounted income, requires evidence for firm's Rs. 11,00,000/- addition

M/s. Mukand Cold Storage Versus Commissioner of Income Tax

The High Court upheld the Tribunal's decision to add Rs. 11,00,000/- in the firm's hands, dismissing the appeals due to the appellant's failure to produce ... Failure to provide opportunity of being heard – Relevant materials could not be produced - Addition made in the hands of firm – Money belonged to individual partners or not - Held that:- The Tribunal was rightly of the view that no further evidence was furnished before the tribunal and it has been noted and an addition has been upheld by the Tribunal - The Tribunal has limited power of correcting any apparent mistake of record while deciding the miscellaneous application filed u/s 254(2) of the Act - the second plea of the applicant that it has not provided sufficient opportunity of hearing is not correct - the money introduced in the names of the partners was in fact earned by the firm from its business of Cold Storage and was its unaccounted income - no material had been produced to show that partners had independent source of income. The assessee-firm in spite of several opportunities having been provided to it to produce the partners so that confirmation of introduction of cash by them could be verified, had failed to comply with it - the assessee had not furnished the addresses of the farmers from whom Cold storage rent is alleged to have been received as the assessee had been carrying on the business of cold storage for the last at least more than 10 years - no receipts in support of the receipt of rent from the farmers had been produced – thus, the order of the Tribunal is upheld – Decided against Assessee. Issues Involved:1. Reasonable opportunity of being heard.2. Dismissal of the miscellaneous petition.3. Erroneous addition of capital introduced by partners.4. Justification of Rs. 11,00,000/- addition in the hands of the firm.5. Gap in withdrawal and investment.6. Perverse findings and unsustainable opinion of the Tribunal.Issue-wise Detailed Analysis:1. Reasonable Opportunity of Being Heard:The appellant contended that the ITAT disposed of the appeal without giving a reasonable opportunity to be heard, which is against the principles of natural justice. The Tribunal dismissed the appeal without allowing the appellant to argue its case or refer to the paper book, written submissions, and evidence filed before the authorities below. This issue questions whether the appellant was condemned unheard.2. Dismissal of the Miscellaneous Petition:The appellant argued that the ITAT dismissed the miscellaneous petition without appreciating that during the initial hearing, the Tribunal had observed that the matter was wrongly decided against the firm. The Tribunal should have recalled its initial order dated 1.6.2010, considering the judgments of the Jurisdictional High Court and the M.P. High Court, which state that capital introduced by partners should be added in the hands of the partners, not the firm.3. Erroneous Addition of Capital Introduced by Partners:The appellant claimed that the ITAT erred in making the addition of the impugned amount in the hands of the firm, contrary to the judgments of the Jurisdictional High Court and the M.P. High Court. The appellant argued that the capital introduced by the partners should be added to the partners' hands, not the firm, making the Tribunal's findings erroneous.4. Justification of Rs. 11,00,000/- Addition in the Hands of the Firm:The appellant contended that the ITAT upheld the addition of Rs. 11,00,000/- in the hands of the firm, despite evidence showing that the money belonged to individual partners, who had withdrawn it from their accounts in the firm in earlier years. The appellant provided ledger accounts and books of the firm as ample evidence.5. Gap in Withdrawal and Investment:The appellant argued that the ITAT's decision was against well-settled law by the High Court in the case of Ghuna Ram and Sons, which addressed the gap in withdrawal and investment. The appellant claimed that the gap should not justify the addition in the firm's hands.6. Perverse Findings and Unsustainable Opinion of the Tribunal:The appellant asserted that the Tribunal's findings were perverse and its opinion unsustainable in law. The appellant argued that the Tribunal's order was legally unsustainable and bad in law, influenced by irrelevant factors and erroneous criteria under the Income Tax Act, 1961.Detailed Analysis:Reasonable Opportunity of Being Heard:The High Court noted that the Tribunal provided several opportunities to the appellant to produce the relevant material to substantiate that the addition was not exigible in the firm's hands. Despite these opportunities, the appellant failed to produce any material. The Tribunal's decision was based on the appellant's non-compliance and lack of evidence, upholding the addition made by the Assessing Officer and the CIT(A).Dismissal of the Miscellaneous Petition:The Tribunal dismissed the miscellaneous petition, stating that no further evidence was furnished, and the addition of Rs. 11,00,000/- was upheld. The Tribunal found no merit in the appellant's allegations and concluded that the Tribunal had limited power to correct any apparent mistake of record under section 254(2) of the Act. The Tribunal also noted that sufficient opportunities of hearing were provided to the appellant.Erroneous Addition of Capital Introduced by Partners:The Tribunal observed that the partners did not confirm the introduction of cash in their respective accounts. The CIT(A) and the Tribunal found that the appellant failed to produce the partners or any confirmation from them. The Tribunal concluded that the money introduced in the partners' names was, in fact, the firm's unaccounted income from its cold storage business.Justification of Rs. 11,00,000/- Addition in the Hands of the Firm:The Tribunal upheld the addition of Rs. 11,00,000/- in the firm's hands, noting that the appellant failed to produce any material to show that the partners had an independent source of income. The Tribunal found that the appellant did not furnish the addresses of the farmers from whom cold storage rent was alleged to have been received, nor did it produce any receipts supporting the alleged rent.Gap in Withdrawal and Investment:The Tribunal found that the appellant's claim that the money belonged to the partners remained unsubstantiated. The Tribunal noted that the appellant did not produce any evidence to support the gap in withdrawal and investment, and the addition was justified based on the facts and circumstances of the case.Perverse Findings and Unsustainable Opinion of the Tribunal:The High Court concluded that the Tribunal's findings were not shown to be perverse or illegal in any manner. The Tribunal's decision was based on the appellant's failure to produce evidence and comply with the opportunities provided. The High Court found no substantial question of law arising from the Tribunal's decision and dismissed the appeals accordingly.Conclusion:The High Court dismissed the appeals, upholding the Tribunal's decision to add Rs. 11,00,000/- in the firm's hands. The Tribunal's findings were based on the appellant's failure to produce evidence and comply with the opportunities provided. The High Court found no substantial question of law arising from the Tribunal's decision, concluding that the money introduced in the partners' names was the firm's unaccounted income from its cold storage business.