TaxTMI 
TaxTMI 
2019 (9) TMI 1076
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....ions stipulated in rule 46 A are satisfied. 3. That the order of Ld. CIT (A) is perverse and fit to be set aside as she has completely overlooked the reasons mentioned in the assessment order for making additions. 4. That the Ld. CIT(A) failed to provide any opportunity to the AO to appear personally during hearing despite the fact that a request was made by the Addl. CIT, Range-39, vide letter dated 01.06.2012 while forwarding Remand Report of AO to allow the AO to appear in hearing. 5. That the Ld. CIT (A) erred in deleting the addition of Rs. 1,31,761/- on account of income from house property merely on the submission of the assessee completely ignoring the reason mentioned in the assessment order. 6. That the Ld. CIT(A) erred in deleting the addition of Rs. 1,31,761/- on account of income from house property on the basis of additional evidence submitted by the assessee without providing AO opportunity of rebuttal under rule 46 A. 7. That the Ld. CIT (A) erred in deleting the addition of Rs. 20,69,898/- made on account of bogus purchases merely on the submission of the assessee completely ignoring the fact that assessee failed to furn....
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....nt of claim of depreciation on the basis of additional evidence submitted by the assessee without providing AO opportunity of rebuttal under rule 46 A. 17. That the Ld. CIT (A) erred in deleting the addition of Rs. 45,29,191/- made on account of deemed dividend u/s. 2(22)(e) merely on the submission of the assessee completely ignoring the reasons mentioned by the AO. 18. That the Ld. CIT(A) erred in deleting the addition of Rs. 44,32,000/- made on account of unexplained addition in capital on the basis of additional evidence submitted by the assessee without providing AO opportunity of rebuttal under rule 46 A. 19. That the Ld. CIT (A) erred in deleting the addition of Rs. 1,20,239/- on account of interest payment on housing loan on the submission of the assessee that this has not been claimed in P&L A/c. despite the fact that the assessee filed to establish above by producing the books of account." (A.1) subsequently, the grounds of appeal were revised. The revised grounds of appeal are as under: "1. The Ld. CIT (A) erred in admitting additional evidences under rule 46A of I.T. Rules, 1962 despite the fact that the repeated opportunities were....
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....e books of account. 10. That the grounds of appeal arc without prejudice to one another. 11. The appellant craves to add, amend or modify the grounds of appeal at any time." (B) At the time of hearing before us, the Ld. Departmental Representative ("DR", for short) appearing for Revenue, did not press the aforesaid grounds no.- 2, 5 and 9 of the Revised Grounds of appeal. Assessment Order was passed Under Section 144 of the Income Tax Act, 1961 ("I.T. Act", for short) on 28.12.2011 in which total income was determined at Rs. 2,16,95,055/- as against the returned income of Rs. 36,20,086/-; as per following computation: S.No Description Amount 1. INCOME FROM HOUSE PROPERTY 1,31,761 2. INCOME FROM BUSINESS AND PROFESSION i. Net profit from business as show by the assessee : Rs. 37,29,547 ii. Add: bogus purchase : 20,69,898 iii. Add: Claim of depreciation : Rs. 4,83,994 iv. Add: Interest Payment disallowed : Rs. 1,20,213 v. Add: Personal expenses : Rs. 18,482 3. INCOME FROM OTHER SOURCES 1,52,50,621 i. As per the return : NIL ii. Unexplained Sundry Creditor: Rs. 54,29,787 ....
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....se. 2) Kindly explain why the purchase of Car (26,06,500/-), mobile phone (21 6,700/-), AC (2.25,312/-), Computer (21,04,500) and water dispenser (216,076) should not be treated as personal expenditure not incurred wholly and exclusively for the purpose of business u/s 37(1) of the Income-tax Act as you have failed to furnish any evidence in support of your claim despite getting repeated opportunities. 3) It also appears that you have taken housing loan from the Union Bank of India keeping your property A-313, Shivalik, Malviya Nagar, New Delhi as per the details submitted by the bank. Kindly furnish the complete details regarding the housing loan taken, complete address of the property purchased. Kindly also explain why you have not disclosed this fact in your return of income or in your submissions. Kindly also explain how you have submitted in your submission dated 10.08.2011 that you have no immovable asset. Kindly also explain why the annual rent from the above property should not be estimated as you have failed to furnish your personal balance sheet for the F. Y. 2007-08 and 2008-09. 4) The details regarding the notices issued to the assessee and fa....
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....planation of the non-production of books of account as the Authorized Representative appeared on 02.08.2011 and 0.08.2011 and he was directed to produce the books of account vide order sheet entry. Since, books of account have not been produced despite getting reasonable opportunities and adequate time, hence, question of rejecting the books of account does not arise. Moreover, it is also evident that the assessee has not maintained books of account as per the provision of section 44AA of the Income-tax act, 1961, thus, penalty proceedings u/s 271A of the Income-tax Act, 1961 are initiated for non-maintenance of books of account as required by section 44AA of the Income-tax Act, 1961. Now the only option left is to complete the assessment u/s 144 of the Income-tax act, 1961, on the basis of the information available on record. The Hon'ble SC has elaborated about the powers and duty of the Assessing Officer making the best judgement in the following judgement :- CST v. H.M. Esufali, H.M. Abdulai [1973} 32 STC 77 (SC) CST v. H.M. Esufali, H.M. Abdulai [1973} 90 ITR 271 (SC) The relevant portion of the judgment is:- "It is a well settled law t....
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....sible among several other possible conclusions, the estimate of the A.O cannot be disturbed; and (vii) While making best judgment assessment:- (a) the conclusion drawn should be unbiased and rationally made, (b) the authority should not be vindictive or capricious (c) estimate should be bona fide. (viii) Good proof is not required while making an estimate provided the accounts are rightly rejected and estimate is fair and reasonable." (B.2) To justify the various additions made in the Assessment Order, the AO has also included detailed discussion in the Assessment Order in respect of the various additions made by him in the aforesaid order dated 28.12.2011 Under Section 144 of I.T. Act. The relevant portion of the Assessment Order is reproduced as under: "5. EVIDENCE OF MANIPULATION IN ACCOUNTS As mentioned above, the assessee has not submitted the relevant details with an obvious intent ion to avoid deeper scrutiny of his accounts and business affairs. The complete information about his business is in the exclusive knowledge of the assessee which he has deliberately not furnished with malafide motive , hence, I am l....
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....Income-tax, Delhi (Central)- III v. Yamu Industries Ltd. [2007] [2008] 167 TAXMAN 67 (DELHI), that where notice was sent by registered post at correct address of assessee had not been received back 'unserved' within period of thirty days of its issuance, there was a presumption under law that said notice had been duly served upon assessee. Thus, the assessee not only deliberately failed to furnish the relevant information in his own case but also in the case of the company in which he is a Director. Assessee has shown debit balance of Rs. 45,29,191/- from M/s Swaran Wood Products (I) Pvt. Ltd. in which he himself is Director and a majority shareholder. The above company was a Sundry Creditor with outstanding credit balance of Rs. 1,24,24,934/- as on 31.03.2008. However, in the balance sheet as on 31.03.2009 the above company appeared as Sundry Debtor with a debit balance of Rs. 45,29,191/-. The case becomes even more fascinating by the fact the above company was not a debtor till 28.02.2009, as per the information furnished by the Union Bank of India. How the above company was transformed from a Sundry Creditor with credit balance of Rs. 1,24,24,934/- to a Sundry Debtor wi....
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.... evidence only and to establish the evasion beyond doubt as in criminal proceedings. He can assessee on consideration of material available on record, surrounding circumstances, human conduct, preponderance of probabilities and nature of incriminating information/ evidence available on record; (v) As regards the burden of proof, if the AO comes across material indicating accrual or receipt of income in the hands of the assessee, he is empowered to investigate the matter and ask relevant questions. The AO's burden is initial in nature. Thereafter, the assessee has to give a proper explanation and disclose facts which are in his exclusive knowledge. The assessee has no option to remain selective, elusive, evasive or restrained in disclosure. After such explanation, the AO has to ascertain the correctness of the assessee's submissions on the basis of material available on record, the surrounding circumstances, the conduct of the assessee, the preponderance of probabilities and the nature of incriminating information,' evidence available with him. From the bare perusal of the facts discussed above, any prudent and reasonable person would conclude that the figures ....
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....the Income-tax act, 1961, was issued to this company but the notice came back unserved with postal remarks -"left without address." From the perusal of the details of TDS/TCS deducted as per the information available in the ITD Systems, it has been observed that the Tax has been collected at source by the above company on total purchases of Rs. 3,87,37,975/- by the assessee. Though, TCS has been collected by the above company but that does not make the above transaction genuine. It is a common knowledge that even entry operators accept payment by cheque and deduct appropriate tax on the payments to show the transaction as genuine. Hon'ble Courts have held in plethora of judgements that simply because transactions are by cheques, it cannot be said that the transactions are genuine. Reliance is placed on the following judgements:- i. M.A. UNNERI KUTTY vs. C.I.T. : S.L.P.(Civil) No.4789 of 199312 - Supreme Court. ii. Precision Finance Pvt. Ltd. v. CIT - (1994) 208 ITR 465 (Cal.) iii. United Commercial & Industrial Co. Pvt. Ltd. v. CIT -(1991) 187 ITR 596 (cal.) iv. Nizam Wool Agency v. CIT - Allahabad High Court (1992) 193 ITR 318 (All.) ....
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....urnish copy of bank statement to the assessing officer and he most certainly has something to hide. Under these circumstances, it is extremely logical and reasonable to believe that the source of the above addition in capital is unexplained. Thus, Rs. 44,32,000/- is treated as income from undisclosed sources. Penalty proceedings u/s 271(l)(c) of the Income-tax Act, 1961, are initiated for furnishing of inaccurate particulars of his income and concealment of income by the assessee. 9. UNEXPLAINED INVESTMENT IN FIXED ASSETS AND CLAIM OF DEPRECIATION ON PURCHASE OF ASSETS DURING THE YEAR The assessee has claimed the purchase of following depreciable assets during the F.Y. 2008-09:- Name of Assets Addition Before 30/09/2008 After 30/09/2008 Rate of DEP FURNITURE & FIXTURE - 23,348.00 10% T.V. - 5,600.00 15% AIR CONDITIONER 25,312.00 - 15% COMPUTER 68,100.00 - 60% MOBILE PHONE 16,700 - 15% WATER DISPENSER 16,076.00 - 15% CAR 608,500.00 - 15% CAMERA 10,000.00 - 15% DVD PLAYER 8,200.00 - 15% FIRE CYLINDER 23,907.00 15% ....
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....er of Union Bank of India vide letter dated 16.07.2011, the assessee has paid interest on the two housing loans. The details are given below:- Month During (FY) (2008-09) Interest Accrued Housing Loan I Interest Accrued Housing Loan II April 6,116.00 Loan was May 6,277.00 Sanctioned in June 6,088.00 December, 2008 July 6,149.00 August 6,129.00 September 5,870.00 October 5,993.00 November 5,757.00 December 5,899.00 7,572.00 January 5,837.00 17,982.00 February 5,309.00 11,261.00 March 5,746.00 12,254.00 71,170 49,069 Since, the interest paid on housing loans cannot be qualified as expenditure incurred wholly and exclusively for the purpose of business as per the provision of section 37(1) of the4pt«(r)e-tax Act, 1961, hence, the above interest payments i.e. Rs. 1,20,239/- are disallowed and added back to the total income. Penalty proceedings u/s 27l(l)(c) of the Income-tax Act, 1961, are initiated for furnishing of inaccurate particulars of his income and concealment of income by the assessee. ....
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....n the ownership of assessee, for which he can claim NIL annual value as per the provision of section 23 of the Income-tax Act, 1961. Because of the failure on the part of assessee, complete details regarding actual rent received/receivable is not available, from the above residential property, hence, I reasonably estimate the annual rent to be Rs. 3,60,000/- per annum i.e. Rs. 30,000/- per month keeping in view the fact that the property is located in posh South Delhi locality. The income from house property is computed as below: i. Annual value : Rs. 3,60,000/- ii. Less: Deduction (30%) : Rs. 1,08,000 iii. Less: Interest paid : Rs. 1,20,239/- Income from house property : Rs. 1,31,761/- Thus, income from house property is estimated at Rs. 1,31,761/-. Penalty Proceedings u/s 271(1)(c) of the Income-tax Act, 1961, are initiated for furnishing of inaccurate particulars of his income and concealment of income by the assessee. 13. EXPENSES OF PERSONAL NATURE The assessee has claimed expenses of Rs. 77,460/- on staff welfare, Rs. 5,330/- on vehicle maintenance, Rs. 55,590/- on conveyance and travel....
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....mpliance on 02/08/11 02/08/11 G.S. Kohli CA attended, case adjourned for 10/08/11 10/08/11 Partly detail filed. Case discussed and was asked to complete the reply of questionnaire letter. It could have admitted fact that the month of August was not the period of holding of speedy assessments. But simultaneously it could not be denied that the (A.O) might have ended the matter by giving the impression that the fresh notice would be served upon after 31st December, thus, in these circumstances the assessee is not to be treated as assessee in default. 2. Notice dated 24/03/11 for hearing on 08/04/11 It is not fair to say that the record does not reveal that on which date hard copy of Profit & Loss Account was filed. The A.O. has also not given any comment that the proceedings u/s 271(1 )(b) vide notice dated 11/05/05 was also dropped where the written submission was placed on the record that the hard copy of Profit & Loss Account had already been filed. It is evident that it was filed in compliance to the notice dated 24/03/11. 3. Notice dated 16/06/11 for the hearing on 27/06/11 It is admitted by the A.O. that it was a....
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....The earlier two immediate assessment year has also been completed u/s 143(3) where the assessee has fully co-operated. An adjournment was sought by giving the sufficient cause which was accepted by the A.O., thus, such remarks are morally wrong. ' 5. Notice dated 08/11/11 for hearing on 14/11/11 It is an admitted fact that due to short of time-gap in between service of notice and its hearing it could not be attended on the fixed date, however, it was attended on the next day and the impression was given that the fresh notice would be served 6. Notice dated 19/12/11 for its compliance on 22/12/11 Again the time-gap was short in between the date of notice and its hearing that it could not be attended on the fixed date. It was attended on the next date, but this time the appellant was not entertained and was told that an ex-parte order had been passed while as per the assessment order it were framed on 28/ 12/11. In the remand report dated 1.06.2012 the Assessing Officer has stated as under: - *. "In view of the above additional evidence filed before you deserves to be rejected on merits as well as on the ground that the assess....
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....oes not prove that he was hospitalized was morally wrong. It is also quite admitted that headache and backache temporarily does not indicate any serious matter as stated by the A.O. But sometimes keeping in view the age of the appellant who is about 45 years not only the assessee, the entire family was in shock and disturbed and at the moment one must bear in mind that health is above all from all other matters. Further the contents in an "affidavit" as item no.4 along with documentary evidence that due to his ill-health the business was conducted in qr. ending 31st Dec, 2011 only to the tune of Rs. 79,436/- while for the corresponding period of the previous year it were amounting to Rs. 4,80,74,708/-, thus, it evidently proves that the entire activities of the humble appellant were freezed. III] It is submitted the sole purpose of judiciary as well as of the revenue is to get at the truth. There should be no objection to consider any evidence produced to test its authenticity relevant and then to act on it as held by I.T.A.T. Delhi-A Bench [26 ITD 236] in the case of Electra (Jaipur) Pirt. Ltd. V. Inspecting Assistant Commissioner "The sole purpose of ju....
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....the case of Commissioner of Income Tax vs. Virgin Securities & Credits Pvt. Ltd. 332 ITR 396 "The assessee produced requisite material before the Commissioner (Appeals) for the first time justifying the claims. The Commissioner (Appeals) called for a remand report from the Assessing Officer and thereafter deleted the addition and observed that the Assessing Officer in his remand report had not specifically commented upon the additional evidence submitted by the assessee. " It is submitted that the sufficient cause placed before you along with documentary evidence that even the business of the appellant was freezed in qr. ending 31/12/11 it was conducted only Rs. 79,436/- as compared to corresponding period of the previous year where it were to the tune of Rs. 4,80,74,708/-. It evidently proves the sufficient cause which prevented him from attending the case otherwise there was no reason to deprive their selves from the assessment proceedings particularly where all the documents have been placed on the record, thus, it deserves to be entertained for the disposal of an appeal on merits. In view of the facts and circumstances of the case, above discussion, j....
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....idential house) and thus the determination of annual value was not justified. E] Photocopy of Trading, Profit & Loss Account for the year ending 31st March, 2009 and Balance Sheet on that date along with Audit Report on the prescribed Form 3CD for the audit held u/s 44AB of the Income Tax Act, 1961. 7. Explanation/ confirmation of the parties where the notice u/s 133(6) were uncompleted. M/s Neelkanth Enterprises M/s Mittal Timber Products Pvt. Ltd. M/s Jyoti Enterprises M/s Keshav International The explanation of other parties are given in the written submission on page............ 8 a] Photocopy receipts for filing of VAT returns (Sales Tax returns) along with its "Summary" for the financial year 2008-09 to prove that the declared purchase and sales has been accepted by the concerned department. b] For an instance the detail for the month of August, 2008 on the prescribed proforma DVAT 30 and DVAT 31 related to purchase and sales which are regularly filed with the departmental to establish that it leaves to scope of suspicion in respect of purchase and sales as the full particulars ae to be filed wit....
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....cedents referred to in the records or brought to our attention at the time of hearing before us. The statutory provisions regarding admission of Additional Evidence by Commissioner of Income (Appeals) are contained in Rule 46A of I.T. Rules, and are reproduced below for ease of reference: "46(A). (1) the appellant shall not be entitled to produce before the [Deputy Commissioner of (Appeals) [or, as the case may be commissioner (Appeals)], any evidence, whether oral or documentary, other than the evidence produced by him during the course of proceedings before the [Assessing Officer], except in the following circumstances, namely:- (a) whether the [Assessing Officer] has refused to admit evidence which ought to have been admitted; or (b) where the appellant was prevented by sufficient cause from producing the evidence which he was called upon to produce by the [Assessing Officer]; or (c)whether the appellant was prevented by sufficient cause from producing before the [Assessing Officer]any evidence which is relevant to any ground of appeal; or (d) whether the [Assessing Officer ] has made the order appealed against without giving sufficie....
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....), (c) and (d) of Rule 46A(1) of I.T. Rules. However, on perusal of the impugned order of Ld. CIT(A) we find that she has nowhere commented which of the aforesaid clauses of Rule 46A(1) of I.T. Rules were applicable in the instant case. Moreover, we find that under Rule 46A(3) of I.T. Rules, the Ld. CIT(A) is duty bound, once the Ld. CIT(A) admits the Additional Evidences, to allow a reasonable opportunity to the AO, as per clauses (a) and (b) of Rule 46A(3) of I.T. Rules. However, after admitting the Additional Evidences, Ld. CIT(A) failed to provide such opportunity to the AO as has been prescribed under Rule 46A(3) of I.T. Rules. After commissioner of Income Tax (Appeals) admits Additional Evidences produced by assessee, scrutiny of such Additional Evidences admitted by Commissioner of Income Tax (Appeals) is the statutory right of the AO, conferred under Rule 46A(3) of I.T. Rules. For our aforesaid views we take support from order of Co-ordinate Bench of ITAT, Delhi in the case of ITO vs. Pardeepa Rani [2016] 73 taxmann.com 392 (Delhi- Trib.) and order of Hon'ble Jurisdictional High Court in the case of CIT vs. Manish Build Well (P) Ltd [2011] 16 taxmann.com 27 (Delhi). In the ....
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.... of cheques. Rule 46A is a provision in the Income Tax Rules, 1962 which is invoked, on the other hand, by the assessee who is in an appeal before the CIT (A). Once the assessee invokes Rule 46A and prays for admission of additional evidence before the CIT (A), then the procedure prescribed in the said rule has to be scrupulously followed. The fact that sub-Section (4) of Section 250 confers powers on the CIT (A) to conduct an enquiry as he thinks fit, while disposing of the appeal, cannot be relied upon to contend that the procedural requirements of Rule 46A need not be complied with. If such a plea of the assessee is accepted, it would reduce Rule 46A to a dead letter because it would then be open to every assessee to furnish additional evidence before the CIT (A) and thereafter contend that the evidence should be accepted and taken on record by the CIT (A) by virtue of his powers of enquiry under sub-Section (4) of Section 250. This would mean in turn that the requirement of recording reasons for admitting the additional evidence, the requirement of examining whether the conditions for admitting the additional evidence are satisfied, the requirement that the assessing officer sh....
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....m producing before the [Assessing Officer] any evidence which is relevant to any ground of appeal ; or (d) where the [Assessing Officer] has made the order appealed against without giving sufficient opportunity to the appellant to adduce evidence relevant to any ground of appeal. (2) No evidence shall be admitted under sub-rule (1) unless the [Deputy Commissioner (Appeals)] [or, as the case may be, the Commissioner (Appeals)] records in writing the reasons for its admission. (3) The [Deputy Commissioner (Appeals)] [or, as the case may be, the Commissioner (Appeals)] shall not take into account any evidence produced under sub-rule (1) unless the [Assessing Officer] has been allowed a reasonable opportunity (a) to examine the evidence or document or to cross-examine the witness produced by the appellant, or (b) to produce any evidence or document or any witness in rebuttal of the additional evidence produced by the appellant. (4) Nothing contained in this rule shall affect the power of the [Deputy Commissioner (Appeals)] [or, as the case may be, the Commissioner (Appeals)] to direct the production of any document, or the examinati....
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....onal evidence was admitted and accepted as genuine without the Assessing Officer furnishing his comments and without verification. Since this is an indispensable requirement, we are of the view that the Tribunal ought to have restored the matter to the CIT (A) with the direction to him to comply with sub-rule (3) of Rule 46A. In our opinion and with respect, the error committed by the Tribunal is that it proceeded to mix up the powers of the CIT (A) under sub-section (4) of Section 250 with the powers vested in him under Rule 46A. The Tribunal seems to have overlooked sub-rule (4) of Rule 46A which itself takes note of the distinction between the powers conferred by the CIT (A) under the statute while disposing of the assessee's appeal and the powers conferred upon him under Rule 46A. The Tribunal erred in its interpretation of the provisions of Rule 46A vis-Ã-vis Section 250(4). Its view that since in any case the CIT (A), by virtue of his conterminous powers over the assessment order, was empowered to call for any document or make any further enquiry as he thinks fit, there was no violation of Rule 46A is erroneous. The Tribunal appears to have not appreciated the dist....
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....tion (4) of section 250 and has to be exercised by the CIT (A). The Hon'ble Court has held that in order to show that the power under Sub-section (4) to section 250 is being exercised there should be material on record to show that while disposing of the appeal, the CIT(A) had directed further enquiry and called for the confirmation letters from the assessee even in respect of receipt of monies from customers by way of cheques. Rule 46A, it was observed was a provision in the Income Tax Rules, 1962 which is invoked, on the other hand, by the assessee who is in an appeal before the CIT (A). Once the assessee invokes Rule 46A and prays for admission of additional evidence before the CIT (A), then the procedure prescribed in the said rule it has been held has to be scrupulously followed. The fact that sub-Section (4) of Section 250 confers powers on the CIT (A) to conduct an enquiry as he thinks fit, while disposing of the appeal the Hon'ble Court held cannot be relied upon to contend that the procedural requirements of Rule 46A need not be complied with. Their Lordships have held that if such a plea of the assessee is accepted then it would reduce Rule 46A to a dead letter be....
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....onance with the principle stated in the aforesaid judgment of the Apex Court, exceptions have been carved out setting out under what circumstances it would be open to the CIT (A) to admit additional evidence. The Court held that additional evidence can only then be produced at the first appellate stage when conditions stipulated in the Rule 46A are satisfied and a finding is recorded to that extent which makes it clear in unambiguous language that firstly the conditions prescribed in Rule 46A must be shown to exist before additional evidence can be admitted and thereafter every procedural requirement mentioned in the Rule has to be strictly complied with so that the Rule is meaningfully exercised and not exercised in a routine or cursory manner. Their Lordships have held that a distinction should be recognized and maintained between a case where the assessee invokes Rule 46A to adduce additional evidence before the CIT (A) and a case where the CIT (A), without being prompted by the assessee, while dealing with the appeal, considers it fit to cause or make a further enquiry by virtue of the powers vested in him under sub-Section (4) of Section 250. It is only when the CIT(A) exercis....