KEYUR S. MEHTA,MUMBAI vs. INCOME TAX OFFICER-17(2)(1), MUMBAI

IN THE INCOME TAX APPELLATE TRIBUNAL, BENCH “F”, MUMBAI BEFORE SHRI SHAMIM YAHYA, ACCOUNTANT MEMBER AND SHRI PAWAN SINGH, JUDICIAL MEMBER ITA No.579/Mum/2018 (Assessment Year- 2008-09) ITA No.580/Mum/2018 (Assessment Year- 2009-10) Shri Keyur S. Mehta ITO-17(2)(1) Prop. Of M/s. Surajmal Lallubhai R. No. 123-B, Aayakar Bhavan, & Co., Eros Cinema Building, M.K. Road, Mumbai-20. Vs. 42, M.K. Road, Mumbai-400020 PAN:AFNPM7964P (Appellant) (Respondent) Assessee by : Shri Pankaj R. Toprani with Ms. Krupa P. Toprani (AR) Revenue by : Ms. Pooja Swaroop (DR) Date of hearing : 21.03.2018 Date of Pronouncement : 21.03.2018

Order Under Section 254(1) of Income Tax Act PER PAWAN SINGH, JUDICIAL MEMBER: 1. These two appeal by assessee under section 253 of Income Tax Act (‘the Act’)

are directed against the common order of Ld. Commissioner of Income-Tax

(Appeals)-28, Mumbai, [for short the ld. CIT(A)] dated 23.11.2017 for

Assessment Year 2008-2009 & 2009-10. The Ld. CIT (A) decided the appeal

of assessee for both the Assessment Years by consolidated order. Thus, both

the appeals are heard together and are decided by a common order for the sake

of convenience. For appreciation of fact, we are referring the fact for

Assessment Year 2008-09. The assessee has raised the following grounds of

appeal:

ITA No. 579 & 580/Mum/2018 - Shri Keyur S. Mehta 1. The Ld. Commissioner of Income Tax (Appeals) - 28, Mumbai [hereinafter referred to as "the Ld. CIT (A)"] erred in law and on facts in upholding the re- opening of assessment proceedings made by the Assessing Officer (hereinafter referred to as "the Ld. A.O.") under section 147 of the I.T. Act and in upholding the issuance of notice under section 148 of the I.T. Act. 2. The Ld. CIT (A) erred in law and on facts in not admitting the additional evidences in the form of submissions and paper book filed by the Appellant under Rule 46A of the I.T. Rules vide separate order dated 21. 11. 2017. 3. The Ld. CIT (A) erred in law and on facts in upholding the action of the Ld. A.O. in not giving proper opportunity of being heard and thus violating the principles of natural justice. 4. The Ld. CIT (A) erred in law and on facts in upholding the disallowance of interest expenditure of Rs. 2,97,302/ - debited to Profit/Loss Account under section 36 (1) (iii) of the I.T. Act on the ground that the interest expenditure was not incurred for the purpose of business of the Appellant. 5. The Ld. CIT (A) erred in law and on facts in upholding the additions on account of alleged Bogus Purchases made from M/s. Jewel Diam and M/s. Daksh Diamond amounting to Rs. 19,62,188/- to the total income of the Appellant as unexplained expenditure under section 69C of the I.T. Act merely on the basis of information received from the DIT (Inv.), Mumbai. 6. The Ld. CIT (A) erred in law and on facts in upholding the disallowance of interest of Rs. 2,48,690/- paid to the bank under section 57 (iii) of the I.T. Act on the ground that the said expenditure was not expended wholly and exclusively for the purpose of earning the income chargeable to tax under the head 'Income from Other Sources'. 7. The Ld. CIT (A) erred in law and on facts in upholding the disallowance of claim of Rs. 1,00,000/- under section 80C of I.T. Act, Rs. 8,200/- under section 80D of I.T. Act and Rs. 15,907/- under section 80G of I.T. Act made by the Appellant under Chapter VIA in his return of income. 8. The Ld. CIT (A) erred in law and on facts in upholding the assessed income of the Appellant at Rs. 30,35,186/- as against the returned income of the Appellant at Rs. 3,02,232/-.

Lallubhai & Co. The assessee is deals in Diamonds and Jewellery. The assessee filed

his return of income for Assessment Year 2008-09 on 30.09.2008. The return of

income was processed and accepted under section 143(1) of the Act. Subsequently,

the assessment was re-opened under section 147 of the Act. A notice under section

ITA No. 579 & 580/Mum/2018 - Shri Keyur S. Mehta 148 dated 31.03.2015 was served upon the assessee. The assessment was completed under section 143(3) r.w.s. 147 of the Act on 05.03.2016 [referred by Assessing Officer under section 143(3)]. The Assessing Officer while passing the re-assessment order made disallowance under section 36(1)(iii) for Rs. 2,97,302/-, addition under section 69C on account of bogus purchase of Rs. 19,62,188/-, from Jewel Diam and Daksha Diamonds, disallowed interest expenses of Rs. 2,48,690/- under section 57(3) and disallowed Rs. 1,00,000/- under section 80C, Rs. 8200/- under section 80D and Rs. 15,907/- under section 80D. On appeal before the Ld. CIT(A), the re- opening of the assessment as well as all additions/disallowances were sustained. Hence, further aggrieved by the order of Ld. CIT(A), the assessee has filed the present appeal before us. 3. We have heard the Ld. Authorized Representative (AR) of the assessee and Ld. Departmental Representative (DR) for the Revenue and perused the material available on record. Ground No.1 relates to re-opening of the assessment proceeding. At the outset of hearing, the Ld. AR of the assessee submits that he has not pressed the Ground No.1 of appeal. Considering the submission of Ld. AR of the assessee, Ground No.1 of the appeal is dismissed as not pressed. 4. Ground No.2 relates to not admitting the additional evidence by the Ld. CIT(A). The Ld. AR of the assessee submits that during the first appellate proceeding, the assessee filed written submission on 30.11.2007 and also an application under Rule 46A. The additional evidence furnished before the Ld. CIT(A) consist of the documents mentioned in Paper Book from Serial No. 5 to 34. The additional evidences furnished by assessee were relevant for adjudication of various additions/disallowances made by Assessing Officer. The Ld. CIT(A) dismissed the application of assessee under 3

ITA No. 579 & 580/Mum/2018 - Shri Keyur S. Mehta Rule 46, holding that no sufficient cause is disclosed in the application. The Ld. AR of the assessee further submits that the assessee has now filed an application under Rule 29 of Income tax ( Appellate Tribunal) Rules, 1963, for admission of additional evidence. The assessee has also filed the affidavit of Dhirajlal M. Mehta, Chartered Accountant who was representing the assessee before the Assessing Officer. The Ld. AR of the assessee further submits that the representative/Chartered Accountant of the assessee has given affidavit disclosing the sufficient cause. The ld AR for the assessee prayed that the additional evidences furnished by the assessee are relevant and material for adjudication of the issues involved in the present appeal and may be admitted. 5. On the other hand, the Ld. DR for the Revenue strongly opposed the admission of additional evidence. The Ld. DR for the Revenue further submits that despite providing opportunity by the Assessing Officer, the assessee has not furnished sufficient evidence. The assessee as a matter of right cannot be seeking the admission of additional evidence. 6. We have considered the submission of both the parties and perused the orders of authorities below. Perusal of assessment order shows that the assessment was re- opened on 31.03.2015. The assessment order further reveals that the Assessing Officer vide order dated 26.02.2016 asked the assessee to substantiate the genuineness of purchases justified the claim of interest paid to Bank of Rs. 2,48,690/-. The assessee furnished its submission on 04.03.2016. The assessment order is passed on 05.03.2016. Before the Ld. CIT(A), the assessee filed an application for admission of additional evidence. The ld CIT(A) dismissed the application for seeking the permission to filed the evidences/ document. The 4

ITA No. 579 & 580/Mum/2018 - Shri Keyur S. Mehta assessee is now seeking the permission for filing the following documents as

additional evidence;

Sr.No. Particulars Page No. of PB 1. Invoice of M/s. Mohit Enterprises dated 5th May, 2008 30 for Rs. 9,84,750/-. 2. Ledger account of M/s. Mohit Enterprises in the books 31 of the assessee. 3. Item Register -Diamond Code No. 747 for the year ended 32 31st March 2009. 4. Item Register - Diamond Code No. 747 for the year 33 ended 31st March 2010. 5. Invoice of M/s. Surajmal Lallubhai & Co. issued to M/s. 34 Diamond Creek dated 13th June, 2008 for Rs. 9,57,940/- 6. Invoice of M/s. Surajmal Lallubhai & Co. issued to M/s. 35 Minda Enterprises dated 22nd October, 2008 for Rs. 3,56,776/-. 7. Invoice of M/s. Surajmal Lallubhai & Co. issued to Mr. 36 Udit Sheth dated 3rd December, 2008 for Rs. 20,51,310/-. 8. Invoice of M/s. Surajmal Lal1ubhai & Co. issued to Mr. 37 M. P. Bharucha dated 9th March, 2009 for Rs. 6,27,200/- 9. Invoice of M/s. Surajmal Lallubhai & Co. issued to Ms. 38 Aditi Shah dated 30th April, 2009 for Rs. 1,29,195/-. 10. Invoice of M/s. Surajmal Lallubhai & Co. issued to M / 39 s. Diafini dated 2nd September, 2009 for Rs. 4,15,700/-. 11. Invoice of M/s. Surajmal Lallubhai & Co. issued to Mrs. 40 Suchenta Sahani dated 25th September, 2009 for Rs. 1,72,660/-. 12. Invoice of M/s. Surajmal Lallubhai & Co. issued to Mr. 41 Nimit Sanghvi dated 1st October, 2009 for Rs. 61,973/-. 13. Invoice of M/s. Surajmal Lallubhai & Co. issued to 42 Mr. M.P. Bharucha dated 12th October, 2009 for Rs. 8,31,230/-. 14. Details of purchases of diamonds from M/s. Mohit 43 Enterprises and sale of the same by the assessee and profit earned in Rupee and Percentage given in the form of a table. 15. Details of current assets. 44 16. Ledger account of Mr. Shantilal S. Mehta in the books 45 of the assessee for the year ended 31st March, 2009. 17. Ledger account of Shri. V. J. Saraiya in the books of the 46 assessee for the year ended 31st March, 2009. 18. Receipt of mediclaim insurance premium of Rs. 14,843/- 47 paid by the assessee. 19. Receipts of contribution to PPF of Rs. 50,000/-. 48 - 52 20. Investment in mutual fund units u/s. 80C of Rs. 50,000/-. 53 - 54 21. Receipts of donation of Rs. 5,000/- each to M/s. Thelma 55 - 58 J. R. D. Tata Anand Kendra Trust dated 9th May, 2008 5

ITA No. 579 & 580/Mum/2018 - Shri Keyur S. Mehta and 2nd January, 2009. 22. Receipts of donation of Rs. 1 Lakh to M/s. Vidhya Jyothi 59 - 61 Trust dated 26th December, 2008.

filed before the assessing officer. Moreover, the application filed by assessee

for filing additional documents was dismissed by ld CIT(A). In our view, the

documentary evidence filed by the assessee are vital and relevant for

adjudication of various additions/disallowances made by Assessing Officer and

confirmed by Ld. CIT(A). Thus, the application of the assessee under Rule 29

deserves to be allowed. Thus, keeping in view the principle of natural justice

the application under Rule 29 and the Ground No.2 of appeal raised by

assessee is allowed. In the result the ground No.2 of the appeal is allowed. 8. Since we have allowed the Ground No.2 of the appeal. Consequently allowing

the application under Rule 29 of Income-tax (Appellate Tribunal) Rules, hence

all the remaining grounds of appeal raised by the assessee are restored to the

file of Assessing Officer to consider the evidences furnished by the assessee

and pass the order afresh in accordance with law. Needless to say that before

deciding the issue, the Assessing Officer shall grant adequate and sufficient

opportunity to the assessee. In the result the discussions on all the other

grounds of appeal separately have become academic. In the result the appeal of

the assessee is allowed statistically.

ITA No. 580/Mum/20018 for A.Y. 2009-10 by assessee

ITA No. 579 & 580/Mum/2018 - Shri Keyur S. Mehta 9. The assessee has raised the identical grounds of appeal in the appeal for this

assessment year as raised in Appeal for A.Y. 2008-09. As we already restored

the appeal of earlier year to the file of Assessing Officer for fresh adjudication

on various additions/ disallowance. Therefore, following the principle of

consistency, the appeal for this assessment year is also restored to the file of

Assessing Officer with similar direction.

Order pronounced in the open court on 21st day of March 2018.

Sd/- Sd/- (SHAMIM YAHYA) (PAWAN SINGH) ACCOUNTANT MEMBER JUDICIAL MEMBER Mumbai; Dated 21/03/2018 S.K.PS Copy of the Order forwarded to : 1. The Appellant 2. The Respondent. 3. The CIT(A), Mumbai. 4. CIT 5. DR, ITAT, Mumbai Guard file.�ािपत�ितC 6.

BY ORDER (Asstt.Registrar) ITAT, Mumbai