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Income Tax Appellate Tribunal, “D” BENCH, MUMBAI
Before: SHRI PAVAN KUMAR GADALE & SHRI AMARJIT SINGH
O R D E R
PER PAVAN KUMAR GADALE JM:
The assessee has filed the appeal against the order of the Commissioner of Income Tax (Appeals) – 38, Mumbai passed u/s 143(3) r.w.s 147 r.w.s 263 and 250. The assessee has raised the following grounds of appeal:
I. Reopening Of Assessment U/S 147 Is Bad In Law 1. That Ld. Assessing Officer erred in passing the Assessment order dated 30.03.2015 under section 147.of the Income Tax Act, 1961.
Rizwan Rehan Malik., Mumbai. - 2 -
2. The Appellant strongly objects to the various additions and disallowances made in the assessment order. II. Addition on Account of Disallowance of Rent u/s. 40 (a)(ia) not justified - Rs.16,01.790/-
1. 1. The Learned CIT(A) erred in confirming disallowance of Rs.16,01,790/- to the tune of 100% on which no TDS was deducted.
2. The said provisions the disallowance under section 40 (a)(ia) should be restricted to only 30% of Rs 16,01,790/- (i.e. R$.4,30,587) . As per ratio laid down in Dilip Kumar Roy V. ITO 68 taxmann.com 129, the Second proviso inserted in sub- clause (ia) of clause (a) of section 40 by the Finance Act, 2014, is declaratory and curative in nature and, therefore, should be given retrospective effect from 1-4-2005, being date from which sub-clause (ia) of section 40(a) was inserted by the Finance (No. 2) Act, 2004 3. In case of CIT V. Alom Extrusions 185 Taxman 416 (SC) the Apex Court held that the amendment to act which are curative in nature there should be a retrospective effect. Ill. Addition on Account of Unexplained expenditure under thehead Rent paid unjustified.
1. The Learned CIT(A) erred in disallowing Rent paid to the tune of Rs.5,00,000/- 2. The Appellant does not have enough stock to generate Rent income of Rs. 91,15,274/- on its own. The appellant has shown a good margin of 36.35% that come to Rs. 33,13,484/- which is also seen in Audited Balance Sheet And Profit and Loss Statement.
3. Appellant could not have earned that income if he did not made the said revenue expenses. All the transactions between the appellant and the aforementioned parties are purely bonafide and genuine in nature, which are entered into during the course of business.
4. The appellant is maintaining regular books of accounts which are audited. The books of accounts of the appellant
Rizwan Rehan Malik., Mumbai. - 3 - are not rejected by the Learned AO. Also, there are no undisclosed cash or incriminating material or documents found and no additional evidence or information gathered by the Learned AO in the assessment proceeding to treat the purchases as bogus.
Based on the above documentary evidences and records it is established that material has been received and have been utilized for the project specifically form which income has been derived and sales have been accepted as genuine. IV.Initiation Of Penalty Proceedings U/S 271(1)(C) The Learned AO erred in initiating penalty proceedings Uls. 271(1)(c) of the Income Tax Act, 1961.
2. The Learned AO ought not to have initiated penalty proceedings U/s. 271(1)(c) of the Income Tax Act, 1961. V. The Appellant Prays Your Honour:
1. 1. Re-opening u/s 147 is Bad in law and must be set aside.
2. To restrict disallowance of Sec. 40 (a) (ia) to Rs. 4,30,587/- on account of non deduction of TDS on rent paid as explained above.
3. To delete wrongful addition of Rs. 5,00,000/- on account of unexplained cash expenses (Rent Paid) as explained above.
4. The penalty initiated u/s 271 (1)(c) may please be dropped. VI. The Ld. Assessing Officer erred in levying interest under Sections 234B, 234C, 234D without appreciating the fact that the appellant denies his liability to the same. VII. The Appellant craves leave to add to, alter, amend, modify, substitute or rescind any of the Grounds of Appeal.
On perusal of the facts, the appeal was filed by the assessee on 19-04-2017 and the case was posted for Rizwan Rehan Malik., Mumbai. - 4 - hearing on 19-09-2018,10-10-2018,13-12-2018,18-02- 2019,25-04-2019,27-08-2019,6-10-2020,7-122020,12- 07-2021, 06-09-2021, 05-10-2021, 25-11-2021, 06-01- 2022,05-05-2022,28-06-2022, and today i.e 01.08.2022, none appeared on dates of hearing nor any application was filed for adjournment. On considering the facts and the action of the assessee in non appearance on dates of hearing. The presumption is that after filling the appeal, the assessee is not inclined/ interested to prosecute the appeal. Accordingly, we heard the Ld. DR submissions and considered the material information available on record.
The brief facts of the case are that, the assessee is an individual and is a proprietor of M/s. National Enterprises and is engaged in the business of letting out the materials such as bamboo, jack clamps, centering, plates etc. The assessee has filed the return of income for the A.Y 2009-10 on 30.09.2009 disclosing a total income of Rs. 9,66,930/- and assessment order u/s 143(3) of the Act was passed on 8-11-2011 determining a total income of Rs. 9,66,930/-.Subsequently the A.O has received
Rizwan Rehan Malik., Mumbai. - 5 - information from the sales tax department regarding the transactions of bogus purchases without actual delivery of goods, were the assessee has obtained bogus bills of Rs.4,16,000/- from M/s R.K.Ispat and the Assessing Officer (A.O.) has issued the notice u/s 148 of the Act. In compliance to notice, the Ld. AR of the assessee filed a letter dated 02.09.2014 to consider the return of income filed on 30.09.2009 as a due compliance.
The A.O. observed that for the same assesseement year, the CIT-12 has passed the revision order U/sec 263 of the Act setting aside the order U/sec143(3) of the Act dated 8-11-2011with directions to the A.O. to decide the afresh on the issues referred at Para 4 of the order. Accordingly, the A.O. has issued notice u/s 143(2) and 142(1) of the Act. In compliance to the notice, the Ld. AR of the assessee appeared from time to time and submitted the details. The A.O. to test check the genuineness of the purchase transactions has issued notice u/s 133(6) of the Act on the party, which was returned un-served by the postal authorities. The A.O has called for additional details to support the genuineness of transactions with invoices
Rizwan Rehan Malik., Mumbai. - 6 - and the transport details etc. (i) The assessee has filed the submissions, which are not satisfactory and hence a show cause notice was issued on the assessee to produce the records to substantiate the genuineness of the purchases. Since the assessee has not discharged the burden of genuineness of the purchases, the A.O has made addition of purchase transactions of Rs.4, 16,000/-. 5.(ii) on the disputed issue of expenses of Rs. 58,01,790/-, the A.O found that the assessee has paid rent of Rs. 16,01,790/- to M/s S.V traders without deduction of TDS and invoked the provisions of section 40(a)(ia) of the Act and disallowed the claim. (iii) the A.O found from the bank account of the assessee that the total cash withdrawals and the payments made to the parties does not supplement the transactions and found that the assessee has claimed a bogus rent payments. The A.O. has issued notice u/s 133(6) of the Act on the parties, whereas, these notices were returned back and the assessee was asked to produce the parties with copy of income tax return, copy of ledger, copy of bills, copy of bank statement in respect of the rent paid to the extent of Rs.42 lakhs and the Rizwan Rehan Malik., Mumbai. - 7 - assessee has expressed the inability to submit and produce the parties and the A.O. has disallowed the claim of Rs.42 lakhs. 6. (iv) the A.O found that the assessee has outstanding creditors payable of Rs. 11,77,725/-, which were disclosed from the earlier years. The A.O. has asked to produce the confirmations with regard to sundry creditors along with ledger account, copy of income tax return and the balance sheet. Whereas, the Assessee could not substantiate the information/ details and the A.O made an addition of Rs. 11,77,725/-. (v) the A.O found that the assessee has made the payment of MVAT of Rs.5,06,291/- and the assessee has produced challan copies of MVAT to the extent of Rs. 4,44,291/- and the A.O. made the disallowance of difference amount of Rs. 62,000/-. Finally, the A.O. has assessed the total income of Rs. 84,01,770/- and passed the order u/s 143(3) r.w.s 147 r.w.s 263 of the Act dated 30.03.2015.
Aggrieved by the order, the assessee has filed an appeal before the CIT(A). Whereas the CIT(A) considered the grounds of appeal, submissions of the Rizwan Rehan Malik., Mumbai. - 8 - assessee and findings of the AO and in respect of two issues (i) the bogus purchases, the CIT(A) has relied on the judicial decisions and considering the profit element has sustained the addition to the extent of @12.5%. (ii) Second disputed issue is with respect to disallowance of rent u/s 40(a)(ia) of Rs. 16,01,790/-, the CIT(A) has dealt on the facts and the provisions of Sec. 44AB of the Act, since the assessee was not able to furnish details has confirmed the addition. Whereas in respect of other disputed issues, the CIT(A) has granted partial relief and partly allowed the assessee appeal. Aggrieved by the CIT(A) order, the assessee has filed an appeal before the Hon’ble Tribunal. At the time of hearing, none appeared on behalf of the assessee and the Ld. DR has supported the order of the CIT(A).
We heard the Ld. DR submissions and perused the material on record. On the first disputed issue of disallowance of rent u/s 40(a)(ia) of the Act, we found that the AO has made disallowance of rent of Rs. 16,01,790/-. The assessee has raised the submissions in the ground of appeal on the amendment u/s 40(a)(ia) of the Act and relied on the decision of the Rizwan Rehan Malik., Mumbai. - 9 - Honble Supreme Court in CIT Vs. Alom Extrusions 185 Taxman 416 (SC), where the amendment to Act which are curative in nature and should be applied retrospectively. We Considering the facts, circumstances and judicial decisions direct the Assessing Officer to restrict the addition to the extent @30% and partly allow the ground of appeal
. The next disputed issue, is with respect to restriction of addition pertaining to the rent payment to the extent of Rs.5,00,000/- The assessee could not substantiate with any material or information even before the Tribunal and we confirm the action of the CIT(A). Accordingly, the grounds of appeals are partly allowed in favour of the assessee.
9. In the result, the appeal filed by the assessee is partly allowed.
Order pronounced in the open court on 08.08.2022.