LAXMI VENTURES (BOMBAY)PVT.LTD. vs. ITO-6(3)(2), MUMBAI

The captioned appeal by the assessee is directed against the order of the CIT(A)-12, Mumbai dated 11.05.2011, pertaining to the Assessment Year 2005-06, which in turn has arisen from the order passed by the Assessing Officer dated 29.12.2008 under section 144 r.w.s. 147 of the Income Tax Act, 1961 (in short ‘the Act’).

“1. Addition on account of sale of property situated at Andheri, Mumbai

To be dealt with Head Office Mumbai situated at 36/40, Mahalaxmi Bridge Arcade, Post Box No.7979, Mahalaxmi, Mumbai - 400034.

2. Addition of Rs.54860/- as Profit on sale of vehicle:

The Learned Commissioner of Income Tax (Appeals) [Ld. CIT (A)] erred in upholding addition of profit on sale of vehicle made by Assessing Officer. He should have appreciated the fact that profit showing in Profit and loss account is book profit and not taxable profit. Further, the Ld. CIT (A) ought to have considered that proceeds from sale of vehicle does not exceeds block of assets (vehicle) in the AY 2005-06, hence there is no taxable profit.

The Ld. CIT(A) erred in relying on the order of the Assessing Officer and disallowed the statutory assessment dues such as Sales tax, Excise duty and Entry tax paid during the F.Y. 2004-05 which are otherwise allowable expenses.”

3. Before we come to the specific Grounds of appeal raised, we may briefly refer to the background of the dispute. In this case, the Assessing Officer noted that no return of income was filed by the assessee u/s 139(1) of the Act. Subsequently, the Assessing Officer initiated proceedings under Sec. 147/148 of the Act in order to bring to tax Capital Gains on sale of property which had escaped assessment. The Assessing Officer notes that even in response to the notice issued u/s 148 of the Act dated 12.02.2008, no return of income was filed by the assessee. The relevant discussion in the assessment order reveals that show cause notices were issued to the Directors of the company, Shri Anil Agarwal and Shri Sunil Agarwal who also expressed inability in the matter on the ground that there was a dispute going on within the family and intra-company, the matter was before the Company Law Board (CLB). It transpires that the CLB had appointed one, Shri Deepak Batra, C.A for audit and preparation of accounts for the previous year relevant to the Assessment Year 2005-06, i.e., the assessment year under consideration. For the said reason, the Assessing Officer issued a communication to the C.A, Shri Deepak Batra u/s 133(6) of the Act calling for details including the Balance-sheet and Profit & Loss Account along with the schedules in order to complete the assessment. The Assessing Officer also issued letters to both the Directors to furnish copies of details and relevant information available with them with respect to the units under their respective control. The Assessing Officer records that in response, one Director, Shri Anil Agarwal responded and, inter-alia, furnished copies of the bank statement of HDFC Bank as also the sale agreement of gala sold on 24.02.2005 to Shri Chhotelal Agrawal and Shri Vrijesh Chhotelal Agarwal. The other Director, Shri Sunil Agarwal did not submit any details. The Assessing Officer also received certain details and information from the C.A, which he has detailed in para 3 of the assessment order. Thereafter, the Assessing Officer issued detailed show cause notices to both the Directors of the company, which has been reproduced in para 4 of the assessment order and, in response, no explanation whatsoever was received. In this background, the Assessing Officer proceeded to finalise the assessment ex parte and on the basis of the material available on record. With regard to sale of two galas on 24.02.2005, the total consideration of Rs.65,62,000/- was brought to tax in the absence of any details of the WDV of the said assets. Secondly, the Assessing Officer noted from the schedule of fixed assets that the M/C Division was sold to Newtech Foundry which included building factory, electrical installation, furniture and fixtures and H.T furnace for a consideration of Rs.15,00,000/-. The Assessing Officer notes that in the absence of the requisite documents evidencing the transaction, applicability of Sec. 50C of the Act to the sale of the immoveable property could not be ascertained and, therefore, he estimated the profit @ Rs.19,34,884/-. Thirdly, profit on sale of vehicles at Jabalpur was taxed at Rs.54,860/- in terms of schedule of fixed assets. The expenses debited to the Profit & Loss Account of Rs.2,95,325/- was disallowed in the absence of the requisite details. In this manner, the total income was assessed at Rs.85,09,744/-, which was carried in appeal before the CIT(A). The order of the CIT(A) reveals that there was no effective compliance put in by the appellant- assessee and the CIT(A) proceeded to dispose off the appeal on the basis of the material available on record. The CIT(A) disposed-off the appeal by confirming the additions, except in relation to addition of Rs.19,34,884/- made on account of sale of fixed assets of M/C Division to Newtech Foundry, which was restricted to Rs.4,34,883/-. Against such an action of CIT(A), assessee is in further appeal before the Tribunal.

4. The captioned appeal before the Tribunal was filed in the year 2011 and since July, 2012, the appeal has come up for hearing several times. On each of the occasion, adjournment has been sought on behalf of the appellant citing the dispute between the Director brothers regarding management of the affairs of the company. Accordingly, it has been stated that assessee was not in a position to proceed to argue the grounds raised in the appeal. Even on the abovementioned appointed date of hearing, i.e. 19.03.2018, a request has been made that the relevant records were not forthcoming as the other Director, Shri Anil Agarwal and family was not co- operating in providing the requisite records. Notably, apart from a written communication dated 16.03.2018, no authorised representative appeared on behalf of the appellant. Noticing the above state of affairs, the ld. DR put forth that no useful purpose would be served by allowing more time to the appellant and keeping the appeal pending before the Tribunal.

Order pronounced in the open court on 23rd March, 2018.