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Income Tax Appellate Tribunal, “A” BENCH, AHMEDABAD
Before: SHRI RAJPAL YADAV & PRADIP KUMAR KEDIA
आदेश/O R D E R
PER PRADIP KUMAR KEDIA - AM:
The captioned appeal has been filed at the instance of the assessee against the order of the CIT(A)-II, Baroda (‘CIT(A)’ in short), dated 24.04.2014 arising in the assessment order dated 30.12.2011 passed by the Assessing Officer (AO) u/s.143(3) of the
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Income Tax Act, 1961; (the Act) concerning assessment year 2009- 10.
The grounds of appeal raised by the assessee is reproduced hereunder:
“1. (a) The Ld. CIT(A)-II, Baroda has erred in law and in facts in not admitting the additional evidences and explanation in relation to the loan of Rs. 20,00,000/- obtained from Shri Vijaysinh Sisodiya and Shri Mahendrasinh Sisodiya.
(b) The Ld. CIT(A)-II, Baroda has further erred in law and in facts in confirming the addition of Rs. 20,00,000/- received as loan from the persons above named, treating the same as unexplained.
(a) The Ld. CIT(A)-II, Baroda has erred in law and in facts in not admitting the additional evidences and explanation in relation to the claim of interest expenses of Rs. 14,29,790/- explained to have been incurred on the borrowing utilized for purchase of land for trading purposes.
(b) The Ld. CIT(A)-II, Baroda has further erred in law and in facts in confirming the disallowance of expense of Rs. 14,29,790/- incurred as interest on borrowings made and utilized for purchase of land for trading purposes.
(a) The Ld. CIT(A)-II, Baroda ought to have accepted the of the appellant that the provisions of sec. 40(a)(ia) could be invoked only in a case where the payment liable to deduction of tax at source remained payable and not in
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respect of the payments where the amount has already paid.
(b) The Ld. CIT(A)-II, Baroda has erred in law and in facts in not accepting the above contention in respect of the disallowance of expenditure of Rs. 14,11,839/-incurred and paid to NBFC as interest.
The Ld. CIT(A)-II, Baroda has erred in law and in facts in confirming the disallowance of an amount of Rs.1,09,000/- paid to Maruti Tyres for retreading of tyres by invoking the provisions of sec. 40(a)(ia).”
In the course of hearing, the learned AR for the assessee fairly stated on behalf of the assessee that he does not seek to press ground nos. 3 & 4 of the assessee’s appeal concerning disallowance u/s.40(a)(ia). Therefore, ground nos. 3 & 4 are dismissed as not pressed.
We shall now advert to ground no.1 of the assessee’s appeal concerning addition of Rs.20 Lakh towards unexplained credit under s.68 of the Act.
4.1 Briefly stated, it was observed by the AO in the course of assessment proceedings u/s.143(2) of the Act that the assessee has statedly obtained loans from one Shri Ashwini Singh. Thereafter, the further loan of Rs.10 Lakhs was claimed to be raised from the above named person resulting in aggregate loan amount of Rs.20 Lakhs. The AO observed that the assessee has failed to furnish the confirmation, the address, identification, bank/PAN details and creditworthiness are of the aforesaid creditor. It was further
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observed by the AO that not a single requirement was fulfilled by the assessee. The AO thus, on account of failure of the assessee to discharge the onus which lay upon him, invoked Section 68 of the Act and added Rs.20 Lakhs to the total income of assessee.
4.2 Aggrieved, the assessee preferred the appeal before the CIT(A).
4.3 Before the CIT(A), the assessee changed the stand towards source of loan altogether and submitted that Rs.10 Lakhs was received from Vijaysinh Sisodiya and another Rs.10 Lakhs was received from Mahendrasinh Sisodiya. The assessee contended that Shri Ashwini Singh was merely a facilitator for procurement of loan from these two parties. The assessee accordingly sought to file additional evidences to support the changed stand before the CIT(A). The CIT(A) declined to admit the additional evidences on the ground that the assessee was given ample opportunities to furnish the basic documents to satisfy the AO towards the genuineness and creditworthiness of the loan. The assessee has totally failed before the AO to do so. The CIT(A) further noted that even bank statements of these two persons have not been furnished. The CIT(A) found that the whole explanation of the assessee is unsupported and only an afterthought. The CIT(A) accordingly declined to grant any relief to the assessee on the aforesaid addition.
4.4 The relevant operative para of the order of the CIT(A) is extracted hereunder:
“3.3. I have considered the submissions of the learned Authorized Representative and the order of the Assessing Officer. From the assessment order, it clearly transpires that the Assessing Officer had
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given ample opportunities to the appellant to furnish the confirmation, address, identification, bank/PAN details and also requested to prove creditworthiness of the depositor. To prove the genuineness of the unsecured loans, not a single requirement was fulfilled by the assessee. The Assessing Officer contended that it is well settled law that burden of proof lies on the shoulder of the assessee and if the assessee failed to file identify and prove the creditworthiness of the depositor, the amount of unsecured loans was to be considered as income of the assessee from unexplained sources. Now before me also the Appellant has contended that in fact, the lender has also raised money from two villagers namely Sisodiya Vijaysinh Amarsang and Sisodiya Mahendrasinh Nathubha and has filed documents in respect of their identity and land holding to prove their creditworthiness. However, the bank statements of these two persons are not furnished and apparently, the cash of Rs.10,00,000/- was paid by each of them to Shri Ashwini Singh who allegedly paid this amount to the appellant. As mentioned above, during the assessment proceedings, the appellant has not filed any document before the Assessing Officer to prove the creditworthiness of Shri Ashwini Singh and now he is trying to file documents relating to the creditworthiness of two new persons namely Sisodiya Vijaysinh Amarsang and Sisodiya Mahendrasinh Nathubha whose names never figured anywhere during assessment proceedings. Moreover, the bank statements of these persons are not furnished which indicate that all these explanations are only afterthought. The Appellant has contended that these documents (relating to the identity & creditworthiness of two new persons namely Sisodiya Vijaysinh Amarsang and Sisodiya Mahendrasinh Nathubha) were not submitted before the ld. Assessing Officer as the appellant, under bonafide belief, was pursuing with Shri Ashwini Singh and only at a later point of time, it was realized that the amount, though procured through his reference, is actually from different persons, the particulars of which is as furnished above. This statement is totally vague and devoid of any merit. The appellant wants to produce the additional evidences referred above under Rule 46A of the I.T. Rules on the ground that at the time of assessment, the appellant was prevented by sufficient cause for being unable to do so. What are those causes and how the appellant was prevented in cooperating with the Assessing Officer to furnish the confirmation, address, identification, bank/PAN details and to prove creditworthiness of Shri Ashwini Singh is not clear. Under these circumstances, the Additional Evidences referred above and being filed by the appellant in violation of provisions of Rule 46A of the I.T. Rules, cannot be accepted.
3.4. After considering the submissions of the learned Authorized Representative and the order of the Assessing Officer, it is held that appellant has heavily relied on the additional evidence which is filed before me without any application for admitting the same and
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without citing any reasonable cause that prevented him to produce such evidence before the Assessing Officer during the assessment proceedings. Allahabad High Court in the case of Ram Prasad Sharma Vs CIT [1979] 119 ITR 867 (All.) has held that the production of additional evidence either before the first appellate authority or the Tribunal was not as a matter of right and in case a discretion was exercised in accordance with law there was no occasion to interfere. Similar view has been taken by Rajasthan High Court in the case of CIT Vs Rao Raja Hanut Singh [2001] 252 ITR 528 (Raj.). Hon'ble Gujarat High Court has also affirmed these decisions in the case of Fairdeal Filaments Ltd. Vs CIT [2008] 302 ITR 173 (Guj.). After considering the facts of the case and the submissions of the AR which are not based on plausible explanation, the Additional Evidences being filed are not admitted as the same are in clear violation of Rule 46A. Considering the fact that the appellant has never been able to satisfactorily explain the source of Rs.20,00,000/- allegedly received from Shri Ashwini Singh with proof or confirmation and address, identification, bank/PAN details to prove creditworthiness of Shri Ashwini Singh, the action of the AO in making addition under section 68 of the Act is fully justified and the same is confirmed. This ground of appeal is dismissed.”
4.5 Further aggrieved, the assessee preferred appeal before the Tribunal.
4.6 Learned AR for the assessee Mr. Mukund Bakshi requested for a direction to the CIT(A) for admission of additional evidences at the outset. The learned AR submitted that while the assessee was not holding the key particulars towards source of loan, the same were obtained post assessment and filed by way of additional evidences before the CIT(A) in terms of Rule 46A. The learned AR submitted that the CIT(A) was duty bound to admit the additional evidences in terms of Rule 46A of the Income Tax Rules, 1962 and was obliged to determine the issue on merits.
4.7. Learned DR, on the other hand, relied upon the order of AO and CIT(A) and contended that the assessee ought to have come out with the correct picture on facts at the threshold before the
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Assessing Officer. Learned DR contended that the CIT(A) has rightly rejected the plea towards admission of additional evidences at belated stage in the absence of any demonstrably reasonable ground.
We have carefully considered the rival submissions and perused the material available on record. The assessee has impugned the order of the CIT(A) for confirming the action of the AO towards addition of Rs.20 Lakhs under s.68 without recognizing the additional evidences in this regard. As noted by the CIT(A), the assessee has modified its stand before the CIT(A) that loans were taken from Vijaysinh Sisodiya and Mahendrasinh Sisodiya instead of Shri Ashiwni Singh wrongly informed to the AO. It is the case of the assessee that the loan confirmation and other documentary evidences filed as additional evidence before the CIT(A) ought to have been admitted in terms of Rule 46A of the Income Tax Rules, 1962 in the interest of justice and matter ought to have been decided on merits. It is thus insisted on behalf of the assessee that the issue is required to be remanded back to the lower authorities for its examination on merits in the light of additional evidences. A perusal of the order of the CIT(A) reproduced above clearly shows that the CIT(A) has observed that ample opportunities were given to the assessee to support the credits appearing in the books of accounts. The assessee has totally failed in this regard before the AO. Clearly, the entire process of inquiry was scuttled before the AO. Before the CIT(A), the assessee came out with an altogether new version that the loans were received from different parties and not from the person named before the AO. The assessee has failed to substantiate the reasons for divergent stand. The bank statements of
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the lenders were also not furnished. Needless to say, the benefit of Rule 46A for admission of additional evidences can be granted to an assessee only when one of the four conditions specified in Rule 46A is satisfied. The assessee has not shown as to what prevented him for filing the evidence before the AO which is now sought to be introduced before the CIT(A). It is also not a case where the opportunity was not given to the assessee for doing so. The admission of additional evidences before the lower authorities is not a matter of right but is dependent upon the exercise of discretion of the CIT(A) having regard to the facts and circumstances of the case. We are unable to see that the CIT(A) has acted arbitrarily while denying the admission of additional evidences. On the contrary, the assessee has not come with clean hands before the AO. Before the CIT(A) too, the information placed were half baked without the bank statement of the creditor or their balance sheet. We do not see any compelling reason for the CIT(A) to admit the additional evidence at the whims of the assessee. In the absence of any proper justification for change in stand and for non production of supporting evidence before the AO, the action of the CIT(A) cannot be faulted. We thus endorse the action of the CIT(A) and decline the interfere.
In the result, ground no.1 of the assessee’s appeal is dismissed.
Ground no.2 concerns disallowance of interest expenses of Rs.14,29,790/- which is claimed by the assessee as business expenditure relatable to purchase of land for trading purposes.
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7.1 In this regard, the assessee before the AO submitted that notwithstanding the fact that the aforesaid interest amount was claimed as business expenses against the road line business, the borrowed fund were utilized for purchase of land acquired for trading purposes. The assessee accordingly justified his claim of expenditure from Revenue operations. The AO did not find any merit in the aforesaid plea. The AO observed that the assessee is not found to be engaged in any land trading business per se. The assessee has not supported its plea on facts in any manner. Even the balance sheet of the assessee was not filed. The AO further observed that assessee has failed to prove any nexus between the borrowed funds and purchase of land. On these broader facts, the AO declined to accept the claim of interest expenditure is allowable expenditure.
7.2 Aggrieved, the assessee preferred the appeal before the CIT(A).
7.3 Before the CIT(A), the assessee once again sought admission of certain additional evidences to support its claim towards interest expenses. The CIT(A) declined to admit the additional evidences on the ground that neither any application was moved for admitting the same nor was it shown that reasonable opportunity was not provided to the assessee for production of such additional evidences. The CIT(A) thus concluded that in the absence of any land trading business shown by the assessee and in the absence of any nexus established before the AO towards borrowed funds utilized for business purposes the expenses are not allowable. The CIT(A) thus declined to interfere with the action of the AO.
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7.4 The relevant operative para of the order of the CIT(A) is reproduced hereunder:
“4.3. 1 have considered the submissions of the learned Authorized Representative and the order of the Assessing Officer. The Appellant has contended that these documents relating to the trading in land were not submitted before the Ld. Assessing Officer as the appellant was not provided with sufficient opportunity during the assessment proceedings. The appellant wants to produce the additional evidences referred above under Rule 46A of the I.T. Rules on the ground that at the time of assessment, the appellant was prevented by sufficient cause for being unable to do so. What are those causes and how the appellant was prevented in cooperating with the Assessing Officer to furnish the details of transactions already available with him is not clear. From the assessment order, it is clear that sufficient opportunity was granted by the Assessing Officer to the Appellant and he also issued show-cause notice for filing of details of interest expenses. Under these circumstances, the Additional Evidences referred above and being filed by the appellant in violation of provisions of Rule 46A of the I.T. Rules, cannot be accepted.
4.4. After considering the submissions of the learned Authorized Representative and the order of the Assessing Officer; it is held that appellant has heavily relied on the additional evidence which is filed before me without any application for admitting the same and without citing any reasonable cause that prevented him to produce such evidence before the Assessing Officer during the assessment proceedings. Allahabad High Court in the case of Ram Prasad Sharma Vs C1T [1979] 119 ITR 867 (All.) has held that the production of additional evidence either before the first appellate authority or the Tribunal was not as a matter of right and in case a discretion was exercised in accordance with law there was no occasion to interfere, Similar view has been taken by Rajasthan High Court in the case of CIT Vs Rao Raja Hanut Singh [2001] 252 ITR 528 (Raj.). Hon'ble Gujarat High Court has also affirmed these decisions in the case of Fairdeal Filaments Ltd. Vs CIT [2008] 302 ITR 173 (Guj.). After considering the facts of the case and the submissions of the AR which are not based on plausible explanation, the Additional Evidences being filed are not admitted as the same are in clear violation of Rule 46A. Considering the fact that the appellant has never been able to satisfactorily explain the justification of expenditure of Rs.14,29,790/- claimed as interest expenses paid to Dena Bank, the assessee only explained that this amount though claimed as interest against the road lines business, the fund has been utilized for purpose of land purchase and hence the same may be allowed as expense, against the land trading business. The contention of the assessee was not accepted by the
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Assessing Officer as no land trading business of the assessee was shown. In fact the assessee has not even shown any land in the balance sheet and the information of purchase of two pieces of land was gathered from AIR details. Thus, the it is held that the Assessing Officer has correctly observed that the assessee has failed to prove nexus between purchase/trading of land and claim of interest expenses of Rs.14,29,790/-. The action of the Assessing Officer in making addition of this amount is fully justified and the same is confirmed. This ground of appeal is also dismissed.”
7.5 Further aggrieved, the assessee preferred appeal before the Tribunal.
7.6 The learned AR for the assessee at the outset requested for a direction from the bench to the lower authorities for admission of additional evidences to adjudicate the issue. However, on inquiry from the bench, the learned AR drew blank on the reasons which prevented the assessee from furnishing such evidences before the Assessing Officer.
7.7 The learned DR, on the other hand, submitted that the action of the CIT(A) is well reasoned and does not call for any interference. The learned DR contended that the admission of additional evidences cannot be made in a light hearted manner to accommodate a defaulting assessee before the AO. The assessee is duty bound to show reasons for non-compliance before the AO.
We have carefully considered the rival submissions and perused the material available on record. A perusal of the order of the CIT(A) shows that the assessee has failed to show lack of opportunities made available to support its claim of business expenditure on account of interest. The assessee has further failed to show the reasons which prevented him from furnishing evidences
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relevant to its claim at the initial stage. A reading of the order of the CIT(A) reproduced above shows that the action of CIT(A) is not arbitrary. Thus, in the absence of any irregularity in exercise of discretion vested with the CIT(A), we do not see any good reason to interfere thereof. We thus endorse the action of the CIT(A) in toto without further deliberation thereon.
In the result, ground no.2 of the assessee’s appeal is dismissed.
In the result, the appeal of the assessee is dismissed.
This Order pronounced in Open Court on 31/05/2018
Sd/- Sd/- (RAJPAL YADAV) (PRADIP KUMAR KEDIA) ACCOUNTANT MEMBER JUDICIAL MEMBER Ahmedabad: Dated 31/05/2018