SWASTIK DEVELOPERS,MUMBAI vs. ASST CIT 32(3), MUMBAI
What did the Tribunal hold?
The Tribunal held that while it is the assessee's duty to produce evidence before the AO, the CIT(A) should have admitted the additional evidence in the interest of justice. The Tribunal set aside the CIT(A)'s order and remanded the case back to the AO.
What were the facts?
The assessee, a developer, received Rs. 55,00,000 from a joint venture partner, M/s Acme Metal Industries Pvt. Ltd., which was not shown in its total income. The Assessing Officer (AO) treated this as undisclosed income and made an addition. The assessee's appeal before the CIT(A) was dismissed as additional evidence was not accepted.
What were the issues?
Whether the CIT(A) was correct in rejecting additional evidence produced during appeal proceedings, and whether the AO should have utilized other remedies before treating the receipt as undisclosed income.
Which sections of the Income-tax Act were involved?
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, MUMBAI BENCHES “E”, MUMBAI
Before: SHRI SHAMIM YAHYA (AM) & SHRI RAM LAL NEGI (JM)
O R D E R
PER RAM LAL NEGI, JM
1. This appeal has been filed by the assessee against the order dated 05.01.2016 passed by the Commissioner of Income Tax (Appeals)-44, Mumbai, for the assessment year 2011-12, whereby the Ld. CIT (A) has dismissed the appeal filed by the assessee against assessment order passed u/s 143 (3) of the Income Tax Act, 1961 (for short ‘the Act’).
Brief facts of the case are that the assessee a partnership firm engaged in the business of building construction, development and consultation, filed its return of income for the assessment year under consideration declaring ‘nil’ income. The return was processed u/s 143 (1) of the Act. Since, the case was selected for scrutiny, notice u/s 143 (2) and 142 (1) were served upon the assessee. In response to the said notices, the authorized representative of the assessee attended the proceedings and filed the details called for. It was 2 Assessment Year: 2011-12 noticed that the assessee had entered into a joint venture agreement with M/s Acme Metal Industries Pvt. Ltd. to develop a property. M/s Acme Metal Industries Pvt. Ltd and the assessee agreed to bear the entire cost of development and the expenses in the ratio of 70% and 30% respectively. It was further noticed that the assessee had received an amount of Rs. 55,00,000/- from M/s Acme Metal Industries Pvt. Ltd. but the assessee had not shown the same in its total income. Since, the assessee did not submit any detail in respect of the said transaction, the AO treated the said amount as undisclosed receipts in the hands of the assessee and accordingly an addition of Rs. 55,00,000/- was made to the total income of the assessee.
3. The assessee challenged the assessment before the Ld.CIT (A). During the appellate proceedings, the assessee submitted bank account of M/s Acme for the relevant period, balance sheet profit and loss account with all schedule and schedule of Director Report of M/s Acme Metal Pvt. Ltd. as additional evidence under Rule 46A. However, the Ld. CIT(A) rejected submissions of the assessee holding that since the assessee has failed to furnish the aforesaid documents before the AO despite specifically asked to submit the same, the said documents cannot be taken into account as additional evidence. Accordingly, the ld. CIT (A) dismissed the appeal of the assessee and confirmed the addition made by the AO.
Aggrieved by the order of Ld. CIT (Appeals), the assessee has preferred this appeal before the Tribunal on the following effective grounds:-
“Whether commissioner of income tax is correct in and in fact in confirming assessment of receipt of Rs. 55.00 lacs from Joint Venture A/c either as share of profit from the firm or as undisclosed income (1), where identity of the person giving money and source etc. is known, as undisclosed income (2) whether non-reply u/s 133 (6) by the third party M/s ACME metal Industries, though notice is properly 3 Assessment Year: 2011-12 served, is valid ground of making receipt from that party as undisclosed income of the assessee where assessing officer has not utilized other remedies available under the Income Tax Act to get reply?
2. Whether commissioner of Income tax (A) is correct in law and in fact in not accepting additional evidences produced during appeal proceedings which were in support of details already filed and which were crucial in deciding correct income of the assessee, where assessing officer had made no extra effort except issuing notice u/s 133(6) to the third party M/s ACME Metal Industries to obtain the required details.
Whether commissioner of Income Tax (A) is correct in law and in fact in holding that the best judgment order u/s 143
(3) instead of section 144 of the Income Tax Act, 1961. 4. Whether assessing officer is correct in holding the receipt of Rs. 55.00 lacs from ACME Industries Pvt. Ltd. as share of profit of the firm in the assessment order and at the same time as undisclosed receipt in computation of total income in assessment order.”
At the very outset, the Ld. counsel for the assessee submitted that the impugned order passed by the Ld. CIT (A) is bad in law as the same has been passed against the principles of natural justice. The Ld. CIT (A) has wrongly rejected the additional evidence produced by the assessee during the appellate proceedings. The Ld. counsel further contended that the assessee has furnished the details as asked by the AO during the assessment proceedings. Since M/s Acme Metal Industries Ld. failed to produce these documents in response to the notice issued by the AO u/s 131 of the Act, the Ld. CIT(A) ought to have admitted the documents produced by the assessee as additional evidence under rule 46A of the Income Tax Rules.
4 Assessment Year: 2011-12
On the other hand, the Ld. Departmental Representative (DR) relying on the order passed by the Ld. CIT (A) submitted that since the onus of furnishing accurate particulars of income is upon the assessee, it was incumbent upon the assessee to furnish each and every details to justify the return of income filed by it. Since, the assessee in this case has failed to discharge the onus of establishing the genuineness of the return by producing each and every detail before the AO, the Ld. CIT (A) has rightly rejected the request for admitting the additional evidence during the appellate proceedings and dismissed the appeal of the assessee.
We have heard the rival submissions and also gone through the material on record. The contention of the assessee is that since the AO had not asked to submit the documents in question during the assessment proceedings, the same were produced during the appellate proceedings. We notice that during assessment proceedings AO summoned certain details u/s 131 of the Act, including copy of agreement, audit report of the company, copy of sale deeds etc. however, the said company did not respond to the said notice. Again the assessee was asked to produce the said documents but the assessee could not produce the complete documents, may be due to the reason that the same were not instantly available with the assessee. Accordingly, the AO made the addition without receiving any information from the assessee. No doubt, it is the duty of the assessee to produce each and every document/evidence before the AO during the assessment proceedings to justify its return of income, yet, in the present case, since the assessee has failed to produce the same before the Assessing Officer under the aforesaid circumstances, the Ld. CIT (A) ought to have admitted the same as additional evidence in the interest of justice. In our considered view, no prejudice is going to be caused to the revenue, in case the documents in 5 Assessment Year: 2011-12 question are admitted as additional evidence. We therefore set aside of the order of the Ld. CIT (A) in the interest of justice and send the file back to the AO with the direction to pass the assessment order afresh after taking into consideration, the documents submitted before the Ld. CIT (A) as additional evidence under rule 46A. Accordingly, we direct the AO to pass the assessment order afresh in the light of the additional evidence produced by the Ld. CIT(A), after giving a reasonable opportunity of being heard to the assessee. In the result, appeal filed by the assessee for assessment year 2011- 2012 is allowed for statistical purposes.
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