CHANDRASHEKAHAR ASHOK JOSHI,,NASHIK vs. DEPUTY COMMISSIONER OF INCOME-TAX, CIRCLE - 1,, NASHIK

At the outset of physical hearing, the learned representative of the assessee [for short “AR”] withdrawn the ground number 3 as not pressed and ground number 4 being general remained quiescent. Insofar as the ground number 1 is concerned, it is submitted that, both the lower tax authorities [for short “LTA”] erred in disallowing a pre- existing sales tax liability claimed in the impugned AY in terms of section 43B of the Act, which arose on account of ITAT-Pune Page 3 of 12 Chandrashekhar A Joshi Maharashtra State Value Added Taxes [for short “M-VAT”] on alleged hawala purchase transactions undertaken for preceding years i.e. AY 2009- 10 & 2010-11. Concerning ground number 2, Ld. AR adverting to additional evidence laid first time before bench candidly submitted that, these self-made cash memos are prepared in the absence of third party evidences and having regard to nature of business & the percentage of URD purchases same may be considered. Au contraire, the learned departmental representative [for short “DR”] strongly contrasted the submission of the appellant on the ground that, M-VAT Credit set-off denial by the State Sales Tax Authorities were relating to hawala purchases which ispo-fact an illegitimate business activity and for the reason is hit by the explanation to section 37(1) of the Act, hence such claim of expenditure being penal in nature fails the test of allowability, consequently claim is contra legem to section 43B r.w.s. 37(1) of the Act. Coming to the ground number 2, the Ld. DR fervidly objected the admission of additional evidence for dual reasons, firstly these are brought first time on record ITAT-Pune Page 4 of 12 Chandrashekhar A Joshi Ld. LTA and secondly it is an afterthought when the additions on this count was agreed before both the tax authorities below. To drive home the meritorious contention, Ld. DR adverting to shred of additional evidences also argued that, the expense relating to URD purchases in consideration are invariably made in cash at the flag end i.e. on 31/03/2012, most of which figured in the range of ₹18,000 to ₹20,000 and in the absence of third party valid evidences same cannot be relied upon as genuine & legitimate expense incurred wholly and exclusively for the purpose of business in terms of section 37(1) of the Act.

After hearing to the rival contentions of both the parties on substantive grounds; and subject to the provisions of rule 18 of Income Tax Appellate Tribunal Rules, 1963 [for short “ITAT, Rules”] perused the material placed on records, case laws relied upon by the appellant as well the respondent and duly considered the facts of the case in the light of settled legal position forewarned to parties present. ITAT-Pune Page 5 of 12 Chandrashekhar A Joshi

We shall now deal with ground number 1 first; 7.1 From the perusal of record, it ostensibly transpired that, the claim of ₹25Lakhs is disallowed by the Ld. LTA for dual reasons viz; firstly it relates to preceding years & if allowed in the impugned year again then it would amount to double deduction, and secondly, such amount was recovered by the sales tax department as a penalty and hence hit by explanation to section 37(1) of the Act. Per contra, the Ld. AR contending it as allowable u/s 43B r.w.s. 37(1) demonstrating the discharge of liability as taxes and not as penalty. We are heedful to state that, both the parties to this appeal failed to prove the case in their favour with necessary submission and shred of evidences.

Coming to substantive ground of disallowance of URD purchases which was debited on the last day of the year i.e. 31/03/2012 (AO Page 3/15), the Ld. AO disallowed entire amount of cash URD purchase expenses in the absence of third party evidences and after it is offered to tax by the appellant. During the physical hearing, the appellant adducing the additional evidence, though being agreed for disallowance before both the tax authorities below, has reagitated the disallowance before this Tribunal on the premise of Hon’ble Apex Court decision in the case of “Swami Krishnanand Govindananad Vs MD ITAT-Pune Page 9 of 12 Chandrashekhar A Joshi Oswal Hosiery” reported in 3 SCC 39, for the reason it is appropriate to reproduce the text of Rule 29 of ITAT Rules which deals with the issue as; “29. Production of additional evidence before the Tribunal. – The parties to the appeal shall not be entitled to produce additional evidence either oral or documentary before the Tribunal, but if the Tribunal requires any documents to be produced or any witness to be examined or any affidavit to be filed to enable it to pass orders or for any other substantial cause, or if the Income-tax Officer has decided the case without giving sufficient opportunity to the assessee to adduce evidence either on points specified by them or not specified by them, the Tribunal (for reasons to be recorded) may allow such document to be produced or witness to be examined or affidavit to be filed or may allow such evidence to be adduced.”

Since the rule is couched negatively by restricting rights of either party to produce additional oral or documentary evidence before the Tribunal, consequently the question of the appellant claiming a right to adduce additional evidence cannot arise. The Tribunal can, ITAT-Pune Page 10 of 12 Chandrashekhar A Joshi however after recording the reasons, is empowered to call and require any document to be produced or any witness to be examined or any affidavit to be filed so to enable it to pass order or for any other sufficient cause. It is evident that in the present case without the direction and leave from the Tribunal, the appellant adduced the additional evidences (Paper Book Page 1 to 64) comprising of revised ledger account (Page 1-2) and self-made cash memos (Page 3-64) which de-facto are inconsonance with rule 18(3) and rule 29 of ITAT Rules, for that count alone it deserves repudiation.

Secondly, the ratio laid by Hon’ble Supreme Court in “Swami Krishnanand Govindananad Vs MD Oswal Hosiery” (Supra) holds good where concession was tendered with respect to mixed question of facts and law, and whereas in the present case, the addition before both the Ld. LTA admitted merely on facts and not mixed with law, hence in applicable in the present case.

Thirdly, the appellant did not establish with the evidential documents as to what precluded him to adduce ITAT-Pune Page 11 of 12 Chandrashekhar A Joshi Ld. LTA. And finally the self- made cash-memos and revised ledger account claiming the expenditure is incurred throughout the year being perverse to the findings of Ld. LTA and in the absences of third party supporting have lost its evidential value, and for these composite reasons we do not find any support to entertain the additional evidence in the light of decision rendered by Hon’ble Bombay High Court in “CIT Vs Kamal C Mehboobbani” reported at 214 ITR 15, thus the ground number 2 is dismissed.

Resultantly, the appeal of the appellant assessee is partly allowed in above terms. In terms of rule 34 of ITAT Rules, the order pronounced in the open court on this Wednesday 09th day of November, 2022.