ADVANCE CARDIOLOGIX,MUMBAI vs. ASST CIT 11(2), MUMBAI

This appeal, filed by the assessee firm, being 28th September, 2011 passed by learned Commissioner of Income Tax (Appeals)- 3, Mumbai (hereinafter called “the CIT(A)”), for the assessment year 2008-09, the appellate proceedings before the learned CIT(A) arising from the assessment order dated 21st December, 2010 passed by the learned Assessing Officer (hereinafter called “the AO”) u/s 143(3) of the Income Tax Act,1961 (Hereinafter called “the Act”).

The grounds of appeal raised by the assessee firm in the memo of appeal filed with the Income Tax Appellate Tribunal, Mumbai (hereinafter called “the Tribunal”) read as under:-

At the outset learned counsel for the assessee submitted that the assessee did not wish to persue ground no. 3 and 4 and the same may be dismissed as ‘not pressed’. The ld. DR did not objected to the dismissal of ground no. 3 and 4 raised by the assessee in the appeal filed with the Tribunal. After considering the arguments of both the parties, we hereby dismiss ground no. 3 and 4 raised by the assessee in memo of appeal filed with the Tribunal as not being pressed. We order accordingly.

The brief facts of the case are that the assessee is engaged in the business of dealing in cardio logical products, surgical and medical disposables.

The assessment was framed by the AO u/s 143(3) of the Act vide assessment orders dated 21-12-2010 where , inter-alia, additions were made by disallowing commissions payments made by the assessee of Rs. 6,90,500/- to Mr. Chandra P. Pandey and Rs. 6,05,000/- to Sh Motilal ITA 8059/Mum/2011 3 Sharma by treating the same as unexplained expenditure u/s. 69C of the Act on the grounds that despite issue of summons u/s 131 of the Act which summons were returned with postal remarks ‘Not Known’ , these two parties failed to appear before the AO. The assessee was confronted with the return of summons u/s 131 of the Act but the assessee did not produced these two parties nor their new addresses were submitted by the assessee before the AO during course of assessment proceedings u/s 143(3) read with Section 143(2) of the Act. The AO held that identity of these parties and the genuineness of the commission payment could not be proved by the assessee which led to disallowance of these commission expenses claimed as deduction by the assessee in return of income filed with the Revenue. The assessee did filed before the AO during assessment proceedings u/s 143(3) read with Section 143(2) of the Act , the details of commission paid and confirmations from these two parties. During appellate proceedings before the learned CIT(A) , the assessee submitted that these two parties namely Mr. Chandra P. Pandey and Sh Motilal Sharma could not appear before the AO as they were out of station and by the time they could comply with directions of the AO, the assessment order u/s 143(3) of the Act was already passed by the AO. Thus, the assessee requested the learned CIT(A) to admit additional evidences u/r 46A of Income Tax Rules, 1962 in order to establish the genuineness of the transactions and identity of these two parties. The learned CIT(A) forwarded the additional evidences to the AO for remand report. The AO objected to the admission of additional evidences u/r 46A of the Income Tax Rules, 1962 as it did not comply with requirements of Rule 46A of Income Tax Rules, 1962 and on merits the AO observed in his remand report that if the assessee could produce that these two parties were out of station at that time when the AO summoned them u/s. 131 of the Act for personal appearances before the AO, then additional evidences can be admitted. In rejoinder, the assessee submitted that the AO erred in concluding that the sufficient opportunity was given to the assessee during assessment proceedings u/s 143(3) read with ITA 8059/Mum/2011 4 Section 143(2) of the Act. It was submitted that these two parties were at Kolkatta when the AO summoned them u/s 131 of the Act and they sent the documents desired by the AO but by the time documents reached the AO, the assessment order was already framed by the AO. The assessee pleaded that in the interest of justice and fair play, the additional evidences submitted at the appellate stage before the learned CIT(A) be admitted. It was submitted that both these parties are regular income tax payers and onus was sufficiently discharged as details and documents are duly submitted with respect to commission payments to both these parties. The assessee submitted that Section 69C of the Act cannot be invoked as source of payment is explained as payments were made by account payee cheque by the assessee from its bank account and tax was deducted at source before making payment to these parties and the said payees have duly included the said income in their return of income and paid due taxes to the Revenue.

Aggrieved by the appellate order dated 28-09-2011, the assessee filed second appeal before the Tribunal and the learned Counsel for the assessee contended that additional evidences were duly filed before the learned CIT(A) to prove that these commission payments are genuine and to establish the identity of these parties. The authorities below erred in not admitting additional evidences on technical grounds that the same were not produced before the AO during assessment proceedings. It was submitted that both these parties were out of station to Kolkatta when the AO summoned them and there is a new address of these parties which is duly submitted before the learned CIT(A). It was prayed that the issue may be set aside to the file of the AO and the assessee will duly submit all relevant evidences and explanation to prove the identity of parties and these commission payments are genuine. It was submitted that complete details of these parties along with services rendered, invoices, bank statements, TDS certificates, confirmations were submitted as additional evidences but the same were not admitted. The said additional evidences are placed in paper book filed with the Tribunal( page 10-21,43-57/pb). The learned DR relied on the orders of learned CIT(A).It was submitted that both the parties sent all details directly to the AO in response to summons u/s 131 of the Act by speed post which reached after the assessment was concluded by the AO and the same was not taken cognizance by the AO while framing assessment order u/s 143(3) of the Act.

In ground no. 2 raised by the assessee in the memo of appeal filed with the Tribunal, the assessee is aggrieved by the addition of Rs. 7,50,000/- with respect to loans raised by the assessee from two parties namely Sh Pankaj Periwal of Rs. 2,50,000/- and loan of Rs. 5,00,000/- from Sh. Raghulal Laxmi Narayan, vide assessment order dated 21-12-2010 passed u/s 143(3) of the Act on the grounds that the said two lenders have not submitted any response to notices u/s 133(6) of the Act issued by the AO during assessment proceedings u/s 143(3) read with Section 143(2) of the Act which led to AO to come to conclusion that their identity and creditworthiness of these lenders were not proved nor genuineness of the loan transactions were established and thus AO added the said sum as an unexplained deposits u/s 68 of the Act , which addition stood confirmed/upheld by learned CIT(A) in his appellate order dated 28-09-2011. The assessee submitted before the learned CIT(A) that these parties are from Kolkatta and they did send the compliance to notice issued by the AO u/s 133(6) of the Act directly to the AO but the AO has failed to take cognizance of the same. The assessee submitted the said compliance letter as additional evidence before the learned CIT(A) and prayed that the same may be admitted as additional evidence u/r 46A of Income Tax Rules, 1962 despite the fact that the same were sent directly by these parties to the AO in response to notice u/s 133(6) of the Act which AO failed to take cognizance while framing assessment order dated 21-12-2010 u/s 143(3) of the Act. The AO in his remand report stated that the assessee could not prove the identity and capacity of the creditors as well genuineness of the loan transactions could not be proved and no response was received w.r.t. notices u/s. 133(6) of the Act despite sufficient time given to produce the documents. The copies of confirmation letters, copy of income tax return of the creditors,, copy of bank account were submitted as additional evidences . The learned ITA 8059/Mum/2011 8 CIT(A) rejected the contentions of the assessee and confirmed the additions vide appellate order dated 28-09-2011. 9.Aggrieved by the appellate order dated 28-09-2011, the assessee filed second appeal before the Tribunal and the learned Counsel for the ssessee contended that additional evidences were duly filed before the learned CIT(A) to prove that these loans of Rs. 7,50,000/- received from these two parties were genuine and to establish the identity and creditworthiness of these two parties. The authorities below erred in not admitting additional evidences on technical grounds that the same were not produced before the AO during assessment proceedings. It was submitted that both these parties were from Kolkatta and when the AO called the information vide notices u/s 133(6) of the Act, these parties sent the information called for directly to the AO but the same was not taken cognizance by the AO while framing impugned assessment order dated 21-12-2010 u/s 143(3) of the Act . These evidences were filed before the learned CIT(A) as additional evidences u/r 46A of Income Tax Rules, 1962 but the same were not admitted. It was prayed that the issue may be set aside to the file of the AO and the assessee will duly submit all relevant evidences and explanation to prove the identity and creditworthiness of creditors and to prove that these loans are genuine. It was submitted that complete details of these parties such as confirmation of loans from these parties along with TDS certificate, ledger account and bank statements were submitted before the AO during assessment proceedings(pb/page 22-37) and as additional evidences copy of acknowledgement of return of these parties, bank accounts of these parties , TDS certificate were submitted before learned CIT(A) but the same were not admitted by AO/CIT(A). The said additional evidences are placed in paper book filed with the Tribunal( page 58-67/pb). The learned DR relied on the orders of learned CIT(A).

In the result, appeal filed by the assessee in 2008-09 is partly allowed as indicated above.