MAHAVIR ENTERPRISES,MUMBAI vs. ITO WARD 41(3)(1), MUMBAI

IN THE INCOME TAX APPELLATE TRIBUNAL “D” BENCH MUMBAI BEFORE SHRI SATBEER SINGH GODARA, JUDICIAL MEMBER AND SHRI GIRISH AGRAWAL, ACCOUNTANT MEMBER

ITA Nos.133 & 134/MUM/2024 Assessment Year: 2011-12

Mahavir Enterprises Income Tax Officer – 41(3)(1), 11/12. Anuraj Building, Mumbai Daftary Road, Next to Agarwal Vs. Hospital, Malad East, Mumbai – 400 097 (PAN : AAKFM6017F) (Appellant) (Respondent)

Present for: Assessee : Shri Shailesh Parmar Revenue : Smt. Mahita Nair, Sr. DR

Date of Hearing : 10.07.2024 Date of Pronouncement : 24.07.2024

O R D E R PER GIRISH AGRAWAL, ACCOUNTANT MEMBER: These two appeals filed by the assessee are against the orders of Ld. CIT(A), National Faceless Appeal Centre (NFAC), Delhi, vide order nos. i) ITBA/NFAC/S/250/2023-24/1058211893(1), dated 24.11.2023 passed against the assessment order by the Income Tax Officer – 24(2)(4), Mumbai, u/s. 143(3) of the Income-tax Act, 1961 (hereinafter referred to as the “Act”), dated 26.03.2014 for Assessment Year 2011-12.

2 ITA Nos.133 & 134 /MUM/2024 Mahavir Enterprises, AY 2011-12 ii) ITBA/NFAC/S/250/2023-24/1058212299(1), dated 24.11.2023 passed against the penalty order by the Income Tax Officer – 30(2)(3), Mumbai, u/s. 271(1)(c) of the Income- tax Act, 1961 (hereinafter referred to as the “Act”), dated 23.09.2014 for Assessment Year 2011-12.

3 ITA Nos.133 & 134 /MUM/2024 Mahavir Enterprises, AY 2011-12

3.1. From the above chart, items at Sr.No.2 and 4 are accepted by the ld. Counsel in the course of hearing for which it is submitted that income is short credited to the extent of TDS done of Rs.2,014/- and Rs.8,189/- for which credit of the same is to be granted. For the remaining item at Sr. No.7, it is contended that this amount of Rs.87,260/- was never received by the assessee and is a result of data punching error by the Vodafone India Ltd. In this respect, reference was made to page 34 of the paper book containing email from the said company written to the assessee whereby it was affirmed that due to error while filing its TDS return for Quarter-II of financial year 2010-11 relevant to Assessment Year 2011-12, the said company had inadvertently quoted the PAN of the assessee whereas it actually and correctly belonged to another concern with similar name, i.e., Mahavir Enterprise, Govandi. In the said letter, the company had assured to revise its TDS return for the mistake committed by it. In this respect, Sr. DR placed reliance on the order of Ld. CIT(A). 3.2. Considering above stated facts we are in agreement with the submissions made before us by the ld. Counsel and thus delete the

4 ITA Nos.133 & 134 /MUM/2024 Mahavir Enterprises, AY 2011-12 addition of Rs.87,260/- which is on account of error of data punching of PAN of the assessee against payment made to another concern with similar name. For the remaining two amounts, since the assessee itself has accepted the same, these are sustained with a direction to grant credit of TDS for the same. Accordingly, ground No.3 is partly allowed.

4.1. For commission received by the assessee from Aircel, it is contended that for the difference of Rs.1,79,766/- arising out of the amount as per Book of Accounts and as taken by the ld. Assessing Officer, the correct increase in income is Rs. 56,431/- only. Out of the total stated difference, Rs.1,23,335/- has not been received by the

5 ITA Nos.133 & 134 /MUM/2024 Mahavir Enterprises, AY 2011-12 assessee therefore cannot be added as its income. Similarly, for the difference of Rs.1,10,187/- relating to commission from Videocon Telecommunication, it is submitted that Rs.86,640/- has been offered as income in Assessment Year 2012-13 and the balance difference of Rs.23,547/- is to be taken as correct increase in the income. To substantiate these claims of the assessee, ld. Counsel referred to the letter of full and final settlement from Vodafone SR Ltd. along with its computation and ledger extracts, all placed in the paper book.

4.2. Considering these facts as submitted before us and the documents placed in the paper book, we find it appropriate that this issue be remitted back to the file of ld. Jurisdictional Assessing Officer (JAO) for the limited purpose of verification of the contentions made by the assessee about part of the additions offered as income in AY 2012- 13, part of it not received by the assessee and the balance to be considered as correct increase in income. We direct the ld. JAO to verify the details furnished by the assessee in the chart submitted by it and allow the claim of the assessee after being satisfied thereon in accordance with the provisions of law. Accordingly, ground no. 4 taken by the assessee is allowed for statistical purposes.

Assessee has not produced the loan parties for verification. In view of the facts, it is seen that the assessee has failed to offer any explanation about the source of unsecured loans in his books, Accordingly, the sum of Rs 26,77,172/-

6 ITA Nos.133 & 134 /MUM/2024 Mahavir Enterprises, AY 2011-12 credited to the books as unsecured loans is added to the total income of the assessee as unexplained cash credits u/s 68 of the I t act. penalty proceedings u/s 271(1)(c) of the IT Act is initiated for concealment of income and furnishing inaccurate particulars of income.” 5.1. From the above quoted observations and findings of ld. Assessing Officer, it is indiscernible as to how this figure of Rs.26,77,172/- has been arrived at from the balance sheet since ld. Counsel has taken us through the balance sheet of the assessee, where the amount of unsecured loan reported is Rs.39,07,173/-. This balance sheet is placed at page 26 of the paper book. Furthermore, ld. Assessing Officer has nowhere noted about as to whom these amounts belong to, i.e., who are the parties from whom the assessee has received these unsecured loans for which the addition has been made. He has mentioned that assessee has failed to offer any explanation about the source of unsecured loans. Contrary to this, assessee has furnished a detailed chart which is reproduced below:

5.2. Assessee demonstrated that it had received Rs.42,00,000/- during the year as unsecured loans which included loan from father, mother and friends of partner of the assessee firm. Assessee had also demonstrated that these loans had been repaid during the year itself or in subsequent years. It has also placed on record loan confirmation

7 ITA Nos.133 & 134 /MUM/2024 Mahavir Enterprises, AY 2011-12 letters along with bank statements and ITR acknowledgements for the returns filed by the lender parties to demonstrate their identity and credit worthiness as well as to establish the genuineness of the transactions. Taking into consideration the details furnished by the assessee along with the documentary evidences, it is indiscernible as to how and from where ld. AO has taken note of the figure of Rs.26,77,172/- towards unsecured loans received by the assessee during the year or the amount reported in the balance sheet for which addition has been made. Under these given set of facts, we are compelled to delete the addition so made by the ld. AO which demonstrates nothing but his non-application of mind and casual approach adopted in this respect. The addition of Rs.26,77,172/- is thus deleted. Ground No.5 taken by the assessee is allowed.

8 ITA Nos.133 & 134 /MUM/2024 Mahavir Enterprises, AY 2011-12 Accountant Member is the author) identical issue was dealt with by considering the decisions of Hon’ble Jurisdictional High Court of Bombay in the case of Mohd. Farhan A. Shaikh Vs. DCIT (2021)125 taxmann.com 253 (Bom) and Veena Estate (P) Ltd. Vs. CIT (2024) 158 taxmann.com 341 (Bom).

8.1. The relevant observations and findings from the said decision of the Coordinate Bench are extracted below:

“2.1 Assessee has also raised an additional ground by application dated 19.06.2024 which is purely legal in nature and does not require examination of additional facts. The said additional ground is reproduced as under:

“1. In the facts and circumstances of the case and in law, the Learned Assessing Officer had erred in initiating the penalty proceeding by issuing the impugned show cause notice dated 30.11.2017 under section 274 read with section 271(1)(c)- without striking off the irrelevant/in-applicable limb; thereby issuing a defective notice which is bad in the eyes of law as held by Hon'ble Jurisdictional High Court in the case of Mohd. Farhan A. Shaikh vs. DCIT [2021] 125 taxmann.com 253 (Bombay) and several other binding judicial precedents.”

9 ITA Nos.133 & 134 /MUM/2024 Mahavir Enterprises, AY 2011-12 according to her, there is no defect in the notice so issued and the penalty so imposed is rightfully done by the Ld. Assessing Officer.

“The question is as to whether an alleged defect in the notice issued to the appellant u/s.271(1)(c) r.w.s.274 of the Act, in regard to which the appellant had never raised an objection from the very inception, i.e., since last 30 years (from 19.08.1993) can now be permitted to be raised, in the absence of any prejudice being caused to the appellant assesse.”

7.1. He further pointed out from para 3 of the said order that the appeal was admitted by the Hon’ble Court by order dated 14.09.2004 on the substantial question of law raised therein. He further referred to para 4 to point out that during the pendency of the hearing, it was only by oral application that a technical plea of vagueness in the notice was raised before the Hon’ble Court, thereby the question was recorded by passing an order on 13.07.2023 which is almost 20 years after the admission of the appeal along with its substantial question of law.

7.2. Ld. Counsel then referred to para 34 on the observation made by the Hon’ble Court where the Court questioned itself as to-

“Should the Court now after more than 20 years of the order being passed by the Tribunal accept the contention as urged on behalf of the assessee that in these circumstances, the Court should accept the notice as issued to the assessee u/s.274 of IT Act was defective, and hence the proceedings would stand covered by the decision of the Coordinate Bench in this Court in Ventura Textiles Ltd. (Supra)”.

7.3. On this above questions raised by the Hon’ble Court unto itself, it expressed its opinion in para 35 to point out that case of Ventura Textile Ltd. was a case wherein the Court was considering an appeal u/s.260A of the IT Act, whereby for the first time an issue was raised as to whether the order passed u/s.271(1)(c) of the IT Act was bad in view of the fact that both, at the time of initiation as well as at the time of imposition of the penalty, the Assessing Officer was not clear as to which limb of section 271(1)(c) was attracting. It is in this context, the Division Bench of this Court considered the decision in regard to the two ingredients of Section 271(1)(c) being attracted in a notice to be issued for invoking the provisions for levy of penalty.

7.4. Ld. Counsel, further pointed out from para 63, the observation made by the Hon’ble Court -

“Certainly such grievance cannot be raised, i.e., after 23 years, to be new invention, after the Assessing Officer had decided the issue.”

7.5. Thus, by pointing out the above referred peculiarities of facts and circumstances in the case of Veena Estates (P) Ltd. (Supra), Ld. Counsel distinguished its applicability in the present case of the assessee, as contended

10 ITA Nos.133 & 134 /MUM/2024 Mahavir Enterprises, AY 2011-12 by the Ld. Sr.DR. He further submitted that at the time of issuing the notice u/s.274 r.w.s. 271(1)(c), Assessing Officer is not aware of the fact as to whether assessee is going in appeal or not on the quantum additions made. Hence, the notice so issued for initiating penalty proceedings must contain a specific charge out of the two charges contained in section 271(1)(c) for imposing a penalty on the assessee. 8. We note that in the present case before us, the facts and circumstances are altogether different from the peculiar set of facts as contained in the case of Veena Estates (P) Ltd. pointed out by the Ld. Counsel, narrated above. The observations and findings arrived at by the Hon’ble Court in that case are specific to those peculiar set of facts. In the case of Mohd. Farhan A. Shaikh (Supra), the Hon’ble Jurisdictional High Court of Bombay had held that – “a contravention of a mandatory condition or requirement for a communication to be valid communication is fatal, with no further proof. That said, even if the notice contains no caveat that the inapplicable portion be deleted, it is in the interest of fairness and justice that the notice must be precise. It should give no room for ambiguity.” 9. We therefore, respectfully following the judicial precedent in the case of Hon’ble Jurisdiction High Court of Bombay in the case of Mohd. Farhan A. Shaikh (Supra) delete the penalty imposed in the present case, since similar facts are present in this appeal. Accordingly, grounds taken by the assessee in this respect are allowed.

Order is pronounced in the open court on 24 July, 2024

Sd/- Sd/- (Satbeer Singh Godara) (Girish Agrawal) Judicial Member Accountant Member

Dated: 24 July, 2024 MP, Sr.P.S.

11 ITA Nos.133 & 134 /MUM/2024 Mahavir Enterprises, AY 2011-12 Copy to : 1 The Appellant 2 The Respondent 3 DR, ITAT, Mumbai 4 Guard File 5 CIT BY ORDER,

(Dy./Asstt.Registrar) ITAT, Mumbai