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Income Tax Appellate Tribunal, ‘A’ BENCH, CHENNAI
Before: SHRI MAHAVIR SINGH, VICE- & SHRI G. MANJUNATHA
PER G.MANJUNATHA, AM: This appeal filed by the assessee is directed against order passed by the learned Commissioner of Income Tax (Appeals)- 5, Chennai dated 04.12.2018 and pertains to assessment year 2015-16.
We find that appeal filed by assessee is barred by limitation of 70 days for which necessary petition for condonation of delay explaining the reasons for the delay has been filed. The assessee submitted that he could not file appeal within the time allowed under the Act, therefore delay may be condoned. Having heard both sides and considered the petition filed by the assessee for condonation of delay, we are of the considered view that reasons given by assessee for not filing the appeal within the time allowed under the Act comes under reasonable cause as provided under the Act for condonation of delay and hence, delay in filing of above appeal is condoned and appeal filed by the assessee is admitted for adjudication.
The assessee has raised following grounds of appeal:-
“1. The Impugned order levying an addition of Rs.50,00,000 under Section 68 of the Act is erroneous, contrary to Law, Facts, and Circumstances of the case, and thereby in gross violation to the principles of Natural justice.
2. Section 68 cannot be invoked with respect to a commercial transaction undertaken in the normal course of business, except under exceptional circumstances.
3. The A.O. has in Para 8 of the impugned order, mentioned that the Appellant has failed to prove identity of the person and genuineness of the transaction. This is contrary to facts as explained below. 3.1 The Trade advance of Rs.50,00,000 has been received from Juniper Vinimay (P) Ltd. hence forth called (JVPL) a Company registered under Companies Act and regulated by Registrar of Companies. The Registration number, PAN and its Bank statement has been filed with A.O. The A.O. has examined Mr. Thirunavukarasu, under Oath in the capacity of representative of the Company. The A.O. herself has acknowledged the existence and identity of the Company in Para 7(5) and 7(6) of the Order. Hence the stand taken by A.O. that identity of the person was not proved is contrary to facts. 3.2 The Appellant has filed copy of bank statement of JVPL maintained with Indian Bank, Chetpet, Chennai. It clearly shows that there was a favourable balance of Rs.
1,48,99,445/- in the account at the time of giving advance to the Appellant. The A.O. has admitted in Para 7(7) of the Order that gross debits in Bank account of JVPL is Rs.38,62,05,150/- and gross credits of Rs.39,63,69,825/-. The above facts are ample proof of credit worthiness of JVPL in relation to the trade advance of Rs.50 lakhs received by Appellant.
3.3 The Appellant is engaged in trading of gold having a turnover of Rs. 483 crores. The trade advance of Rs.50 lakhs taken as per customary practice for business safety is to be viewed against the overall background.
The entire amount of advance was returned back within 2 months due to non availability of stock. This is a pure commercial transaction. The A.O. has failed to understand genuineness of the transaction purely based on suspicion and preconceived notion.
4 Section 68 has been legislated to check wrongful infusion of unaccounted money into business through a colourable device. In the instant case, the advance of Rs.50 lakhs has been taken and returned to the same party within 2 months. The A.O ought to have realized that no purpose (whatsoever alleged) can be achieved by the Appellant by taking money and returning it to the same person within 2 months through banking channels. Hence this is not fit case to invoke Section 68 of the Act.
5 The A.O. has in Para 7(3) of the Order formed opinion that Mr. Thirunavukarasu, who was examined under Oath is not a director of the Company (JVPL). It is surprising that she has conducted an infructuous exercise without conviction about his status as director and relied on his statements in a sworn affidavit, and attempted to use the same against the Appellant. This is a clear case of self contradiction on the part of the A.O.
6 The Learned A.O. ought to have given an opportunity to the Appellant by confronting him with the statement made by Mr.Thirunavukarasu regarding the nature of the payment. The Appellant has been denied an opportunity to prove that Rs.50 lakhs was only a trade advance and not loan, as stated by representative of the Company.
7 The observations of the A.O. in Para 7(1) of the Order that there is contradiction between statement made by Appellant and the one made by JVPL regarding the nature of the receipt (loan I trade advance) is not relevant to the case, as both are covered under Section 68. Without prejudice to the above, the Appellant wishes to submit that Mr.Thirunavukarasu has joined the Party (JVPL) only in November 2017 and had given a general reply when coerced to clarify a transaction that happened in 2015 (i.e.) 2 years before he joined.
8 The observations of the A.O. in Para 7(2) of the Order regarding the fact that the Appellant did not know the identity of the creditor does not impact the genuineness of the transaction in any way, especially in the modern days where large volume of trade across the world happens through internet and virtual platforms. Moreover it is common practice in business to get customer introductions through common contacts, and the Appellant did not find the need to be more intrusive, as his risk was totally insulated by receipt of advance.
9 The Learned A.O. has mentioned about non filing of Forms with R.O.C., without being aware that filing is merely an intimation to R.O.C. and not proof of an event, which is why even R.O.C. accepts such filings belatedly with payment of additional fees.
10 It is surprising to note in Para 7(3) of the Order that A.O. has drawn conclusion regarding non existence of Company by visiting a private web site by name “Zauba Corp”. A catena of Judicial pronouncements have often held that conclusion based on search of internet is bad in Law.
11 The observations of the Learned A.O. in Para 7(7) of the order that the Party (JVPL) has not filed its return income has no bearing on the case and it is beyond the scope and control of the Appellant. It is for the Department to take up the case with the Party and not punish the Appellant for purported non filing of returns of their customers.
12 The observation of the A.O. in Para 7(5) of the Order that the R.O.C. has struck off the name of the Party on 07-04-2017 taken at face value is an independent event between the Party and the R.O.C. It has no direct bearing on the case of the Appellant. It however only strengthens the case of Appellant that the Party had a valid juridical existence at the time of giving advance to the Appellant.
13 The observation of the A.O. in Para 7(6) of the Order regarding non intimation of Branch office to R.O.C. exhibits her inadequate knowledge of Company Law, as there is no necessity under the said Law to intimate R.O.C. about existence of a branch. It is a feeble attempt by the A.O. to strengthen an otherwise weak case. 14 The observation of the A.O. in Para 3 of the Order regarding non availability of the Party at the address is answered by the fact that three years have lapsed and change of address is a common phenomenon. The visit of the Inspector has been mentioned to add flavour to the imagination. Her conclusion has come to a nullity when the Appellant after great effort has managed to track down the company and produced their representatives, and the A.O. herself had chosen to examine the Party under Oath. 15 There are several Judicial pronouncements with respect to cases similar to the Appellant, which have been decided in favour of the Assessee and will be produced during the course of Appellate proceedings. For the grounds and further additional grounds or modifications thereof, or withdrawal that may be permitted during the appeal proceeding it is prayed that the Learned Appellate Authority pass order, as deemed appropriate to direct the Assessing Officer delete the additions.”
Brief facts of the case are that the assessee is an individual engaged in the business of trading in gold bars and ornaments in the name & style of M/s. Marudhar Trading, filed his return of income for assessment year 2015-16 on 07.09.2015 admitting total income of Rs.4,18,310/-. The case has been taken up for scrutiny and during the course of assessment proceedings, the Assessing Officer noticed that the assessee has squared up unsecured loans taken from M/s.
Juniper Vinimay Pvt. Ltd. amounting to Rs.50 lakhs, hence, called upon the assessee to file necessary evidence. In response, the assessee neither appeared nor filed any details.
Therefore, summon was issued to the assessee on 23.11.2017 to appear and produce necessary details. Thereafter, sworn statement was recorded from the assessee on 05.12.2017.
The Assessing Officer, on basis of information furnished by the assessee and also taken into account sworn statement recorded from the assessee, opined that the assessee has failed to file necessary evidence to prove identity of the person, genuineness of transaction and creditworthiness of parties and made addition of Rs.50 lakhs u/s.68 of the Income Tax Act, 1961.
Being aggrieved by the assessment order, the assessee filed an appeal before the learned CIT(A). Before the learned CIT(A), despite various dates of hearing was provided, the assessee neither appeared nor filed any submissions to justify his case. Therefore, the learned CIT(A) based on evidences available on record sustained additions made by the Assessing Officer towards unsecured loan taken from M/s. Juniper Vinimay Pvt. Ltd. u/s.68 of the Income Tax Act, 1961. Being aggrieved by order passed by the learned CIT(A), the assessee is in appeal before us.
None appeared for the assessee. We have heard learned DR and perused relevant materials available on record. We find that despite number of opportunities was given to the assessee to represent his case, the assessee neither appeared nor furnished any details. Further, notice issued to the assessee was returned unserved. Therefore, we are of the considered view that there is no purpose in keeping appeal filed by the assessee and hence, appeal filed by the assessee is set aside to the file of Assessing Officer and direct the Assessing Officer to serve proper notice to the assessee by using his office and reframe assessment in accordance with law.