WALL STREET FINANCE LTD,MUMBAI vs. ITO 9(3)(4), MUMBAI

In this appeal, the only issue is with regard to addition of ` 89,40,500/- made to the returned income on account of unexplained investment u/s. 69 of the Act. Briefly put relevant facts are that the appellant is a company incorporated under the Companies Act, 1956, inter alia, engaged in the business of financial services with forex and money remittances as its core activities. For the assessment year under consideration, it filed its return of income declaring ‘nil’ income but in assessment finalised u/s. 143(3)(ii) of the Act the total income was assessed by making a disallowance of ` 89,40,500/- on account of unexplained investment.

Before us learned representative for the assessee vehemently pointed out that both the lower authorities have failed to appreciate the facts in their proper perspective and, that, the addition is uncalled for. The learned representative pointed out that before the Assessing Officer assessee had clearly brought out that the concerned properties situated at Indore were sold by the assessee company in the previous year relevant to A.Y. 2007-08 itself and the asset was reduced in the block of fixed assets. Our attention was drawn to para 9 of the order of the CIT(A), wherein CIT(A) had called for remand report from the Assessing Officer qua the assessee’s claim of having sold the asset and its reflection in the accounts relating to A.Y. 2007-08 itself. The learned representative pointed out that CIT(A) has wrongly noted that the assessee did not appear before the Assessing Officer in the remand proceedings. On the contrary, our attention was invited to page A-45 to A- 47 of the paper-book wherein, is placed a copy of the order sheet of the remand proceedings conducted by the Assessing Officer, which clearly show that all requisite details were furnished by the assessee after putting in due appearances before him. Be that as it may, the learned representative referred to an application dated 05.04.2018 seeking admission of additional evidence under Rule 29 of the Appellate Tribunal Rules, 1963, in support of the contention that the said properties were sold by the assessee in A.Y. 2007-08 itself and the transactions were declared in books of account of the relevant period. The additional evidence is in the form of a copy of the petition filed by Mr. Asgar Shakoor Patel in Miscellaneous Criminal Case before the Hon’ble Madhya Pradesh High Court, Indore Bench, wherein averments have been made by him that the said properties at Indore have been sold to him by the assessee during the period relevant to A.Y. 2007-08 itself. In the said petition, Mr. Asgar Shakoor Patel has also averred that he has further sold the properties as per the sale agreement dated 28.06.2010, which has been referred in the AIR Information, and the fact of said sale has been disclosed in his income tax return filed for A.Y. 2011-12 at the stamp duty Ready Reckoner value of ` 89,40,500/-. In sum and substance, the plea of the appellant is that the said additional evidence be admitted as it supports the assertions made by the assessee all along that the transaction of sale reported in the AIR Information is not relatable to the assessee as seller since the assessee has sold the two properties and accounted for the same in the previous year relevant to A.Y. 2007-08 itself. Therefore, it is pointed out that if the said additional evidence is admitted, the matter may be remitted to the file of the Assessing Officer for an appraisal afresh.

On the other hand, the learned DR appearing for the Revenue defended the action of the Assessing Officer but did not oppose the plea for admission of additional evidence and the remanding the matter back to the file of the Assessing Officer.

We have carefully considered the rival submissions. The sum and substance of the dispute in this case arises from AIR Information received by the Assessing Officer from the Registration Authority, Indore, Madhya Pradesh, in connection with sale transactions of two properties dated 07.07.2010 amounting to ` 89,40,500/-. The plea of the assessee before the lower authorities as well as before us continues to be that the sale transactions dated July 2010, do not pertain to it, in as much as, assessee had sold these two properties to Mr. Asgar Shakoor Patel during the previous year relevant to A.Y. 2007-08. In support, assessee also asserted that the property being depreciable asset, was classified for depreciation purpose in block of building having depreciation rate of 10% and, thus, on its sale the sale consideration have been reduced from the respective block. The reply of the assessee before the Assessing Officer reveals that the relevant extract of the books of account giving effect to the aforesaid transaction was also furnished, which showed that the total sale consideration was to the tune of ` 1 crore (Rupees One Crore). However, the Assessing Officer as well as the CIT(A) did not accept the explanation of the assessee and have primarily gone by AIR Information. At the time of hearing, the learned representative for the assessee was asked to take us through the sale agreement by which the assessee had sold the properties, a copy of which has been placed at pages A55 to A60 of the paper-book as also the sale agreement obtained by the Assessing Officer in the AIR Information, which showed the sale of the properties during the instant year. Copy of the latter sale agreement have been placed at pages A74 to A91 of the paper-book. A perusal of the sale agreement obtained in the AIR Information shows the name of the assessee company as the seller. On being confronted, the learned representative pointed out that the assessee company has been mentioned as a confirming party but this too has been done in a fraudulent manner. It was pointed out that Mr. Asgar Shakoor Patel was a promoter, Director and holder of 70% of the share holding, which was sold to the present management in 2009 and, thereafter the control of the assessee company is with the present management since then. It was pointed out that the sale deeds obtained in the AIR Information containing name of the assessee as confirming party has been fraudulently executed by said Mr. Asgar Shakoor Patel on a day when he had no locus standi viz-a-viz the company having given up the management position control from October 2009 itself. In support of said assertions reference has been made to the copy of the petition filed Mr. Asgar Shakoor Patel, before the Hon’ble Madhya Pradesh High Court, a material which is sought to be admitted as additional evidence. Further, our attention was also invited to the earlier sale agreement pertaining to A.Y. 2007-08, whereby the assessee had sold the two properties to Mr. Asgar Shakoor Patel. Our attention was also invited to page A61 and A62 of the paper-book, which show that sale transactions have been given effect to by the assessee in A.Y. 2007-08 itself. On a prima facie basis, in our view, we find enough merit in the plea of the assessee that additional evidence sought to be produced under Rule 29 of the Appellate Tribunal Rules, deserves to be admitted as the same is germane to decide the purchase of properties by Mr. Asgar Shakoor Patel from the assessee; payment of consideration by Mr. Asgar Shakoor Patel to the assessee; and, subsequent sale of properties by Mr. Asgar Shakoor Patel in June 2010 and disclosure of same in his return of income for A.Y. 2011-12.

In the result, for statistical purposes the appeal of the assessee is allowed as above.