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Income Tax Appellate Tribunal, F Bench, Mumbai
Before: Shri Jason P. Boaz & Shri Sandeep Gosain
This appeal by the assessee is directed against the order of the CIT(A)-6, Mumbai dated 17.04.2012 for A.Y. 2007-08.
The facts of the case, briefly, are as under: - 2.1 The assessee filed its return of income for A.Y. 2007-08 declaring Nil income. The return was processed under section 143(1) of the Act vide order dated 30.12.2009, wherein the income of the assessee was determined at `12,09,64,680/- in view of the following additions/ disallowances: - ` 3,90,000/- (i) On account of Agri. Products trading `2,80,55,000/- (ii) Addition under section 69A and 41(1) (iii) Addition under Chapter VI/69A `9,26,35,000/- 2.2 Aggrieved by the order of assessment dated 31.12.2009 for A.Y. 2007- 08, the assessee preferred an appeal before the CIT(A)-6, Mumbai. The learned CIT(A) disposed off the assessee’s appeal vide order dated M/s. Vesta India Limited 17.04.2012 allowing the assessee partial relief by deleting the additions made at S. Nos. (ii) & (iii) (supra) and upheld the addition at S.No. (i) (supra). 3. Aggrieved by the order of the CIT(A)-6, Mumbai, the assessee has preferred this appeal before the Tribunal raising the following grounds: - “
1) The learned Commissioner of Income Tax Appeals-6 erred in confirming the addition made by the Assessing Officer in estimating the income out of trading in agricultural product at `3,90,000/- by invoking provisions of Sec. 145 of the Income Tax Act, 1961 as against 1,15,318/- as declared by Your Appellant. 2) While deleting the addition of `2,80,55,000/- on the ground that income did not pertain to Assessment Year 2007-08, the Commissioner of Income Tax Appeals-6 erred in not holding that the Assessing Officer could not have invoked the provisions of section 41(1) or 69A and the impugned addition was never the income of the Appellant and such an addition was never justified under any of the provisions of Income Tax Act, 1961. 3) While deleing the and of `9,26,35,000/- on the ground that income did not pertain to assessment Year 2007-08, the Commissioner of Income Tax Appeals-6 erred in not holding that the Assessing Officer could not have invoked the provisions of section 69A and the impugned addition was never the income of the Appellant and such an addition was never justified under any of the provisions of Income Tax Act, 1961. 4) Your appellant craves, leave to add, alter, amend or delete any of the grounds of this appeal at the time of hearing or at any other time as the circumstances of this appeal may require.”
4. The case was fixed for hearing at least 16 times, but none appeared on behalf of the assessee, nor was any letter for adjournment filed on its behalf. On the dates the Bench did not function, the hearings were adjourned by informing the next date for hearing through the notice board. Even notices issued by RPAD evoked no response from the assessee. When the case was called for hearing today, i.e. 26.05.2016, none was present for the assessee, but the learned D.R. for Revenue was present and ready to argue the case. In these circumstances, we are of the considered opinion that the assessee is not interested in pursuing this appeal seriously and therefore proceed to dispose off this appeal with the assistance of the learned D.R. and the material on record.
M/s. Vesta India Limited 5. Ground No. 1 5.1 In this ground the assessee contends that the learned CIT(A) erred in confirming the addition of `3,90,000/- made by the Assessing Officer (AO) by invoking the provisions of section 145 of the Act as income out of trading in agricultural products as against `1,15,318/- declared by the assessee. 5.2.1 We have heard the learned D.R. in the matter and perused and carefully considered the material on record. In the impugned order, the learned CIT(A) has addressed this issue as under at paras 2 to 2.3.2 as under : - “2. Ground 2 is regarding estimating the income out of trading in agricultural product at `3,90,000/- by invoking the provisions of section 145. 2.1 The AO has discussed this issue at Para 4 Page 2 of the assessment order, The AO observed that the appellant has submitted quantity and value wise purchase and sale of 154 metric tons of agro products but the assessee has failed to give details of (i) The persons from whom the agro products were purchased, (ii) Purchase bills and mode of payment as well as mode of receipt towards sale. Though, in the audit report at clause-IV it is mentioned that the company has sold agricultural products and the gross margin on sale of such product is taken to P & L A/c as other income, however, in the P & L A/c the assessee has shown other income at ` Zero and sale at `11,72,500/- as against which purchase is shown at `10,88,373/- and the expenditure at `1,99,455/-. The AO observed that the gross profit shown by assessee is between 26 to 27% whereas in the agricultural products the margins are 50-70%. The AO estimated the income of the assessee by adopting 60% as the margin of agricultural products trading and added `3,90,000/- to the income of the appellant. 2.2 The appellant submitted that it is a small trader in agricultural goods. The AO has no given any reason or any comparable case as to how he has arrived at the margin of 60% and his addition is based on the basis of conjecture and surmise. 2.3 I have gone through the order of the AO and submission of the appellant. 2.3.1 The appellant has shown the gross profit margin in between 26 to 27%. The appellant has failed to provide evidence regarding purchase and mode of payment of purchase and also regarding sale and mode of M/s. Vesta India Limited sale. Thus, the appellant has failed to substantiate that its gross profit margin is in between 26 to 27%. 2.3.2 The onus is on the appellant is to establish the claim it makes and as the appellant itself has failed to give the very basic evidence of purchase and sale of agricultural goods, the AO has no option but to make estimation. No estimate can be perfect and to find out a comparable case and to believe that comparable case may be correct, may not necessarily result in a proper estimation. On the given set of facts the AO's estimation is found to be reasonable. Ground 2 is, therefore, dismissed.” 5.2.2 We find that the learned CIT(A) has addressed the issue by examining the matter in a detailed and judicious manner based on the averments of the assessee and material on record, before dismissing the assessee’s appeal. It is seen that apart from raising this ground before us, the assessee has failed to place on record any material evidence to controvert the findings of the learned CIT(A) (supra). In that view of the matter, we find no reason to interfere with or deviate from the findings of the learned CIT(A) (supra) and therefore uphold the same. Consequently ground No. 1 of the assessee’s appeal is dismissed.
Ground No. 2 6.1 In this ground, the assessee contends that while deleting the addition of `2,80,55,000/- on the ground that the income did not pertain to A.Y. 2007-08, the learned CIT(A) erred in not holding that the AO could not have invoked the provisions of section 41(1) or 69A and the impugned addition was never the income of the assessee and that such an addition was never justified under any provisions of the Act. 6.2 The learned D.R. submitted that there was no error in the impugned order while deleting the aforesaid addition as has been contended by the assessee. In this regard, the learned D.R. drew our attention to the ground No. 3 raised by the assessee before the learned CIT(A) and submitted that a perusal thereof would reveal that the assessee had only sought deletion of the disallowance of `2,80,55,000/- made under section 41(1) of the Act for A.Y. 2007-08 which was allowed by the learned CIT(A). According to the learned D.R., since the averments of the assessee in ground No. 2 of the instant appeal; that the learned CIT(A) was required to hold that such an M/s. Vesta India Limited addition was never justified as assessee’s income under any provisions of the Act, were never part of the grounds raised
before the learned CIT(A), this ground is not maintainable and ought to be dismissed in limine. 6.3.1 We have heard the learned D.R. for Revenue and perused and carefully considered the material on record. Ground No. 3 raised by the assessee in the appeal before the learned CIT(A), is extracted hereunder: - 3) The learned Assessing Officer erred in making the addition of Rs.2,80,55,000/- u/s. 41(1) being payments made to L.K. Medical Trust: When: a) Having invoking provisions of u/s. 145(1) & rejecting the trading results no separate disallowance can be made by the Assessing Officer. b) The assessing officer has wrongly invoked provision of sec. 41(1) of the Income Tax Act, 1961. c) The disputed payments were made by your appellant in the earlier previous years & were not debited to Profit & Loss Account for the year ended 31st March, 2007 & therefore question of disallowance u/s. 41(1) for the Assessment Year 2007-08 does not arise.” 6.3.2 The learned CIT(A) has considered the material and disposed/ allowed the assessee’s appeal by deleting the addition of `2,80,55,000/- under section 41(1)/69A of the Act, holding as under at para 3 to 3.4 of the impugned order: - “3. Ground 3 is regarding making the addition of `2,80,55,000/- u/s 41(1) being payments made to L.K.M. Medical Trust. 3.1 The AO has discussed this issue at Para 5 Pages 2 to 6. At Page 3, 4 & 5 the AO has given details of cheques received and payments made as recorded in appellant's book, utilization of amounts received from L.K.M. Medical Trust and at Page 5 last Para the AO observed that the payments to the tune of `2,80,55,000/- made by assessee and claimed to have been made to unrelated parties is nothing but an attempt by the assessee to withdraw money through bank channels by using dubious tactics and means and the amounts are treated as unexplained cash holding/expenses not reflected in the books of accounts and accordingly treated as income of the assessee. The AO observed alternatively, that the amount can be treated as addition u/s 41(1) on account of contradictory stances taken by L.K.M. Medical Trust vis-a-vis the assessee and the assessee vis-à-vis L.K.M. Medical M/s. Vesta India Limited Trust. The AO attached details of the so-called payments to the assessment order. 3.2 The appellant submitted as under: - (i) Having invoking provisions of u/s. 145(1) & rejecting the trading results no separate disallowances can be made by the Assessing Officer. (ii) The assessing officer has wrongly invoked provision of section 41(1) of the Income Tax Act, 1961. (iii) The disputed payments were made by your appellant in the earlier previous years & were not debited to Profit & Loss Account for the year ended 31st March, 2007 & therefore question of disallowance u/s 41(1) for the A. Y2007-08 does not arise. 3.2.1 Vide letter dated 13.07.2010 at Para 5, the appellant submitted as under: 5. The Assessing Officer made the first major addition of `2,80,55,0001-. (a) On Pg.3 of the Assessment order the Assessing Officer has given a chart of amount received from & repaid by Your Appellant to L. K. M. Medical which is reproduced as under: S.No. Financial Amount Amount Year Received Repaid 1 2001-02 9,21,93,955 81,00,000 `2,80,55,000 2 2002-03 3,00,00,000 1,01,50,000 3 2003-04 2,00,00,000 98,05,000 4 2004-05 0 7,35,25,000 - 5 2005-06 0 2,13,10,000 - 14,21,93,988 12,46,90,000 - On the foregoing chart it is clear that the Assessing Officer: i) Taxed the sum of `2,80,55,0001- being the payments made to LKM Medical Trust by Your appellant in the earlier years i.e. between Assessment Years 2001-02 to 2003-04. ii) This addition has been made from the ground that these payments have been made by bearer cheques. iii) It was never the case of the Assessing Officer that Your Appellant did not receive the sum of `14,21,93,988/- from LKM Medical Trust. iv) It was never the case of the Assessing Officer that this sum was received by Your Appellant from LKM Medical Trust as a trading liability. v) Thus, the assessing officer has wrongly invoked the provisions of sec. 41(1) & or Sec. 69A for which we have made a detailed submission in our Letter No. 0130 dtd, 24.06.20 10. "
M/s. Vesta India Limited 3.3 I have gone through the order of the AO and submission of the appellant. At Page 3 in the table of summary of year wise receipts and payments, the receipts have taken place between April- March 02 to April-March 04 and payments have been made from April-March 02 to April-March 06. In the second table at Page 3, the amounts received by the appellant from Lilavati have taken place during the period April- March 02 to April-March 04. At Page 4 of the assessment order the table showing transaction of the appellant with LKM Medical Trust indicate that the period of transaction is from 9.3.02 to 14.04.2003. 'The details of amount received and payments made' attached to the assessment order shows transactions have taken place during the period 09.03.02 to 27.01.2004. 3.3.1 The amount chargeable for the present AY 2007-08 has to be of the period of previous year i.e. 01.04.2006 to 31.03.2007. As no transaction has taken place during the previous year relevant to the present assessment year, the AO’s action regarding addition u/s 69A and 41(1) is not justified and the addition of `2,8055,000/- is deleted.” 6.3.3 From a perusal of the grounds NO. 3 raised by the assessee before the learned CIT(A) (supra) and the findings thereon at paras 3 to 3.3.1 of the impugned order (supra), we are of the view that the learned CIT(A) has addressed the assessee’s grievance by deleting the addition of `2,80,55,000/- made under section 41(1) and 69A of the Act by the AO for A.Y. 2007-08. The assessee’s claim that the learned CIT(A) was required to hold that such an addition was not justified under any provisions of the Act, we find, was never part of the grounds raised before the learned CIT(A). Since except for raising the ground in this appeal, the assessee has not established before us the requirement for such a finding to be rendered. We find no merit in the assessee’s claim and dismiss this ground No. 2 raised by the assessee.
7. Ground No. 3 7.1 In this ground, the assessee contends that while deleting the addition of `9,26,35,000/- on the ground that the income of `9,26,35,000/- did not pertain to A.Y. 2007-08, the CIT(A) erred in not holding that the AO could not have invoked the provisions of section 69A and the impugned addition as income of the assessee was never justified under any provisions of the Act. 7.2 The learned D.R. was heard and submitted that there was no error in the impugned order while deleting the aforesaid addition as has been contended by the assessee. In this regard, the learned D.R. drew the attention of the Bench to ground No. 4 raised by the assessee before the learned CIT(A) and submitted that a perusal thereof would reveal that the assessee has only sought deletion of the disallowance of `9,26,35,000/- M/s. Vesta India Limited made under section 69A of the Act for A.Y. 2007-08, which was allowed to the assessee thereby addressing the assessee’s grievance. According to the learned D.R., since the averments of the assessee in ground No. 2 of the instant appeal, that the learned CIT(A) was required to hold that the above addition was never justified as the assessee’s income under any provisions of the Act, were never part of the grounds raised before the learned CIT(A) this ground is not maintainable and ought to be dismissed in limine. 7.3.1 We have heard the learned D.R. for Revenue and perused and carefully considered the material on record. Ground No. 4 raised by the assessee before the learned CIT(A) is extracted hereunder: - “4) The learned Assessing Officer erred in making addition of Rs.9,26,35,000/- u/s 69A of the Income Tax Act, 1961: When: a) Having invoking provisions of u/s. 145 & rejecting the trading results no separate disallowances can be made by the Assessing Officer. b) The Assessing Officer has wrongly invoked provision of sec. 69A of the Income Tax Act, 1961 c) It was the onus of the Assessing Officer to prove that your appellant was found to the owner of `9,26,35,000/-” 7.3.3 The learned CIT(A) has considered the material on record and allowed the assessee’s appeal by deleting the addition of `9,26,35,000/- made under section 69A of the Act, holding as under at para 4 to 4.3 of the impugned order:- “4. Ground 4 is regarding addition of `9,26,35,000/- u/s 69A. 4.1 The AO has discussed this issue at Page
6. The AO observed that the assessee has admitted that M/s. Vivata Ltd., M/s. Bovindo Impex Pvt. Ltd. and Shell Mercantile Corporation Ltd. has made payments on behalf of assessee which clearly infers that these money which were due to the assessee but diverted by and at the instance of assessee would also constitute the income in the hands of the assessee and has been added accordingly at `9,26,35,000. 4.2 The appellant vide letter 13.07.2010 submitted that the transactions with M/s. Vivata Ltd., M/s. Bovindo Impex Pvt. Ltd. and Shell Mercantile Corporation Ltd. has taken place during FYs 2001-02, 2002-03 & 2003-04 and the same does not constitute income for AY 2007-08.