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Income Tax Appellate Tribunal, “E” BENCH, MUMBAI
Before: SHRI SAKTIJIT DEY & SHRI RAMIT KOCHAR
सुनवाई क" तार"ख /Date of Hearing : 23-2-2016 घोषणा क" तार"ख /Date of Pronouncement : 18-05-2016 आदेश / O R D E R
PER RAMIT KOCHAR, Accountant Member
1. This appeal, filed by the assessee, being 22-11-2013 passed by learned Commissioner of Income Tax (Appeals)- 35, Mumbai (hereinafter called “the CIT(A)” ), for the assessment year 2009-10, the appellate proceedings before the CIT(A) arising from the assessment order dated 7-12-2011 passed by the learned Assessing Officer (hereinafter called “the AO”) u/s 143(3) of the Income Tax Act,1961(Hereinafter called “the Act”).
ITA 4512/Mum/2015 2
The grounds of appeal raised by the assessee in the memo of appeal filed with the Income Tax Appellate Tribunal, Mumbai (hereinafter called “the Tribunal”) read as under:-
“1) Learned Commissioner of Income Tax [Appeals] [CIT(A)] erred in rejecting additional evidences produced by Appellant along with application for admission of same.
2) CIT(A) further erred in this connection in holding that Appellant's case does not fall within any of the conditions prescribed under Rule 46A of Income tax Rules, 1962. 3) CIT(A) further erred in this connection in making several irrelevant/incorrect/immaterial observations in paragraphs 5 and 5a of pages 4 and 5 of impugned order more particularly, questioning mens rea of Appellant.
4) CIT(A) further erred in this connection in impliedly holding that principles of natural justice were not violated.
5) CIT(A) further erred in this connection in spurning additional evidences on merits after holding that they were inadmissible.
6) CIT(A) further erred in this connection in holding that additional evidences do not explain both additions of Rs.1,44,OOO/- and Rs.3 lacs respectively.
7) CIT(A) erred in confirming addition Rs.1,44,OOO/- to income of Appellant.
8) CIT(A) erred in approving addition Rs.3,OO,OOO/- under Section 68 the Income Tax Act, 1961 [Act].
9) CIT(A) further erred in this connection in holding that:- a) creditworthiness of lender is not proved; b) Appellant first misrepresented facts concerning loan; c) Appellant did not produce correct evidences at time of assessment; d) no cogent explanation is given at time of Appellate proceedings for said amount; and ITA 4512/Mum/2015 3 e) Appellant has been misguiding and providing false information both at assessment and Appellate stage. 10) All grounds of appeal are independent and without prejudice to one another. 11) Appellant craves leave to add to and/or amend and/or delete and/or modify and/or alter aforesaid grounds of appeal as and when occasion demands.”
The brief facts of the case are that the assessee is an individual and the assessee’s income comprises of capital gains and income from other sources. During the course of assessment proceedings u/s 143(3) r.w.s. 143(2) of the Act, the assessee submitted details as called for by the A.O. along with computation of income and bank statements etc. .
It was observed by the A.O. from the bank statement of Bank of India, Borivali Branch , Mumbai that there was a cash deposits in the account to the tune of Rs. 1,44,000/-. The assessee was asked to furnish the details of cash deposits along with sources thereof and also was asked by the AO to furnish cash book and bank book. In response to the explanations sought by the AO, the assessee submitted that said cash deposits were out of embroidery and knitting income in cash , but the assessee failed to show any receipts to show that she has received income in cash. During the assessment proceedings u/s 143(3) read with Section 143(2) of the Act, no documentary evidenced were produced by the assessee to prove that she was doing any such work of knitting and embroidery , hence, cash deposit of Rs. 1,44,000/- was treated as unexplained cash credit u/s 68 of the Act by the AO vide assessment orders dated 07.12.2011 passed u/s 143(3) of the Act.
It was also noticed by the A.O. from the Balance Sheet ,that there were unsecured loans of Rs. 3,40,285/- and accordingly the assessee was asked to furnish the details along with the loan confirmations. In response, the ITA 4512/Mum/2015 4 assessee filed loan confirmations from Mrs. Hansaben Khoshiya wherein the assessee has shown opening balance as on 1st April, 2008 at Rs. 3 lacs. The assessee submitted that this is an old loan. The A.O. on careful perusal of the Balance Sheet filed by the assessee for the assessment year 2008-09 and 2009-10 observed that there was only one loan in the Balance Sheet as at 31- 03-2008 for an amount of Rs. 40,285/- from Mr. Akshil B. Bhinsara , while in the balance sheet for the assessment year 2009-10 , there were two loans, one from Mr. Akshil B. Bhinsara of Rs. 40,285/- and other is from Mrs. Hansaben Khoshiya of Rs. 3 lacs. The AO observed from the above that it was clear that the said loan of Rs. 3 lacs from Mrs. Hansaben Khoshiya has been taken during the year. The assessee failed to provide copy of bank statement of Mrs. Hansaben Khoshiya , reflecting the loan taken from her. The assessee also failed to prove the creditworthiness of the loan creditor. Thus as per the AO, it is clear that the assessee failed to prove the genuineness of the transaction and failed to discharge the primary onus cast upon her u/s. 68 of the Act. The A.O. accordingly added the said amount of Rs. 3 lacs to the total income of the assessee u/s. 68 of the Act , vide assessment orders dated 07.12.2011 passed u/s 143(3) of the Act. The AO relied upon the following decisions while arriving at the conclusion as set out above: a) Aluminium Small Industries Limited v. ITO (2006) 103 ITD 142(Kol.) b) Roshan Di Hatti v. CIT , 107 ITR 938(SC) c) Kale Khan Mohammad Hanif v. CIT , 50 ITR 1(SC) d) CIT v. Devi Prasad Vishwanath Prasad , 72 ITR 194(SC) e) Sumati Dayal v. CIT , 80 Taxman 89(SC) f) CIT v. M Ganapathi Mudaliar , 53 ITR 623(SC) g) A. Govindarajulu Mudaliar v. CIT 34 ITR 807(SC) h) CIT v. Calcutta Agency Limited, 19 ITR 191(SC) i) CIT v. Transport Corporation of India Limited 256 ITR 701(AP HC) j) CIT v. Imperial Chemicals Industries India Private Limited 74 ITR 17 ITA 4512/Mum/2015 5 4.Aggrieved by the assessment orders dated 07.12.2011 passed u/s 143(3) of the Act by the A.O., the assessee filed first appeal before the ld. CIT(A).
Before the ld. CIT(A) , the assessee submitted that there are two additions made by the A.O. . The assessee submitted additional evidences which were filed before the ld. CIT(A) in the form of customer lists purportedly maintained as sales register for the knitting and embroidery work done month-wise and the corrected confirmation for the said loan of Rs. 3lacs taken from Mrs. Hansaben Khoshiya and the assessee also filed the bank statement of the lender, Mrs. Hansaben Khoshiya in the appellate proceedings before the CIT(A). The assessee submitted that proper opportunity was not granted to the assessee by the A.O. to produce the above mentioned documents and asked the CIT(A) to admit the same .
The ld. CIT(A) examined the claim of the assessee and called for the assessment records and looked into the order sheet entry dated 16.11.2011 whereby the assessee’s representative was called upon to explain the source of the cash deposit of Rs.1,44,000/- and also the other details and the matter was adjourned to 27th November, 2011. The assessee did not provide the relevant information at that stage on the basis of which the A.O. could have accepted the explanations of the assessee . The CIT(A) held that the case of the assessee does not fall in any of the conditions laid down in Rule 46A of the Income Tax Rules, 1962. The claim of the assessee to produce additional evidences was rejected by the ld. CIT(A).
The ld. CIT(A) also turned down the evidences with respect to the knitting and embroidery being added as unexplained cash deposit whereby he termed the documents being printed plain paper sales register month wise giving some names against which some work was done was listed out, as are not proper ITA 4512/Mum/2015 6 books of account nor are they supported by any third party evidences. These document as per the CIT(A) appear to be mere afterthought of the assessee to somehow strike the total as required to explain the said cash deposit of Rs.1,44,000/- in the bank account. The CIT(A) held that the mens-rea of the assessee is reflected as the said income was not reflected while filing the return of income with the Revenue and no explanation is forthcoming as to why these documents were not filed before the AO, hence, the ld. CIT(A) upheld the order of the A.O. with respect to the additions of Rs.1,44,000/- made on account of cash deposit in the assessee’s bank account vide appellate orders dated 22.11.2013. Similarly, with respect to the loan amount of Rs. 3 lacs from Mrs. Hansaben Khoshiya, the ld. CIT(A) rejected the contentions of the assessee and upheld the assessment orders dated 07-12-2011 passed u/s 143(3) of the Act by the A.O. holding that the assessee has failed to prove the creditworthiness of the lender . The CIT(A) observed that the disbursement of loan to the assessee by Mrs Hansaben Khoshiya is preceded by deposit of cash in her bank statement. The assessee has not proved the creditworthiness of the lender, Mrs Hansaben Khoshiya. The CIT(A) held that the assessee has not produced the correct evidences during the assessment proceedings and has not given any cogent explanation for misrepresenting the facts before the AO and in fact the assessee is misguiding the Revenue by providing false information even at the appellate proceedings before the CIT(A). The claim of the assessee was accordingly rejected by the CIT(A) vide appellate orders dated 22.11.2013 , thereby sustaining the assessment orders dated 07-12-2011 passed by the AO u/s 143(3) of the Act.
6.Aggrieved by the appellate orders dated 22.11.2013 of the ld. CIT(A), the assessee is in second appeal before the Tribunal.
ITA 4512/Mum/2015 7
The ld. Counsel for the assessee submitted that the assessee has provided detailed evidences to the ld. CIT(A) by way of loan confirmations from the lenders with respect to the loan of Rs. 3 lacs received from Mrs. Hansaben Khoshiya. The loan was received through banking channel from the lender Mrs. Hansaben Khoshiya of Rs. 3 lacs. The bank statement of Mrs. Hansaben Khoshiya was submitted before the ld. CIT(A) along with the copy of income tax return of Mrs. Hansaben Khoshiya , which is also placed in the paper book filed with the Tribunal. These documents were produced before the ld. CIT(A) , but the ld. CIT(A) rejected the same by not admitting the additional evidences which were also not forwarded to the AO for his examination and verification and no remand report was called by the CIT(A) from the AO , as required under Rule 46A(3) of the Income Tax Rules,1962. With respect to the amount of Rs. 1,44,000/- deposited in cash in the bank, the assessee submitted information before the ld CIT(A) regarding knitting and embroidery work done, which has been brushed aside by the ld. CIT(A) treating it as an afterthought by the assessee. The additional evidences submitted were not admitted by the Ld. CIT(A) . The additional evidences were also not forwarded by the ld CIT(A) to the AO for his examination and verification and no remand report was called by the Ld. CIT(A) from the AO , as required under Rule 46A(3) of the Income Tax Rules,1962. The ld. Counsel accordingly prayed that the additional evidences may be admitted under Rule 29 of Income Tax (Appellate Tribunal) Rules,1963 and the matter may be set aside to the file of the AO for de-novo determination of the issues after considering the additional evidences on merits. The ld. Counsel relied upon the following case laws to contend that additional evidences should be admitted.
Rajmoti Industries v. ITO , (1995) 52 ITD 286 (Ahm. Trib.) 2. CIT v. GTL (Bom High Court) dated 4-12-2014 – Appeal No. 1675 of 2012. ITA 4512/Mum/2015 8
3. Mascon Global v. ACIT, (2010)133 TTJ 257 (Chennai((TM), 4. GE Energy Parts Inc. v. ADIT (2014)106 DTR 265 (Del.-Trib.) 5. Abhay Shroff v. ITO, (1997) 63 ITD 144 (1997)(Pat)(TM) approving 52 ITD 286 (Ahm) 6. DCIT v. Oman International Bank SAOG (2006) 100 ITD 285 (Mum)[SB] following the decision of Hon’ble Delhi High Court in Puri v. CIT, 151 ITR 84. 7. Electra Jaipur v. IAC, (1988)26 ITD 236 (Del.-Trib.) and 8. Prabhavati Shah v. CIT, (1998)231 ITR 1 (Bom)
The ld. D.R., on the other hand, relied upon the orders of authorities below.
We have considered the rival contentions and also perused the material available on record . We have also gone through case laws relied upon by both the rival parties. We have observed that additions have been made to the income of the assessee by the A.O. on account of cash deposit of Rs. 1,44,000/- in the Bank of India, Borivali Branch, Mumbai , and also with respect to the loan raised by the assessee to tune of Rs. 3 lacs from Mrs. Hansaben Khoshiya. As per the facts emerging from the orders of the authorities below and the records, information were called by the AO from the assessee at the fag-end of the assessment proceedings u/s 143(3) read with Section 143(2) of the Act on 16th November, 2011 , whereby the assessee was called upon to submit the details on 27th November, 2011. The assessee could not furnish complete information and details so called by the AO by 27th November 2011. The assessment order u/s 143(3) of the Act was framed by the AO on 7th December, 2011. Before the AO during the assessment proceedings u/s 143(3) read with Section 143(2) of the Act, the assessee submitted the details that the cash deposit is out of knitting and embroidery business. The complete details were not furnished by the assessee before the AO during the assessment proceedings u/s 143(3) read with Section 143(2) of the Act. Similarly, with respect to the loan amount of Rs. 3 lacs raised from Mrs. Hansaben Khoshiya , the assessee furnished the loan confirmation ITA 4512/Mum/2015 9 which was not correct as it was stated to be old loan raised in the earlier years , but the said loan of Rs. 3 lacs was in-fact raised during the previous year relevant to the assessment year 2009-10 , as was found by the AO on perusal of Balance Sheet as at 31-03-2008 and 31-03-2009. The bank statements of Mrs. Hansaben Khoshiya were also not furnished during the course of the assessment proceedings before the AO u/s 143(3) read with Section 143(2) of the Act. Since adequate time and opportunity was not given by the AO to the assessee to furnish the details and evidences as desired by the AO as the said details were sought at the fag-end of the assessment proceedings, the sufficient opportunity to the assessee to defend herself was not accorded by the AO in filing the evidences before the AO. Thus in our considered view, the assessee case falls within the ambit of Rule 46A(1)(d) of Income Tax Rules, 1962 and the assessee was not accorded sufficient opportunity by the AO to adduce the relevant evidences before the AO during the course of the assessment proceedings u/s 143(3) read with Section 143(2) of the Act, whereby details were called by the AO on 16-11-2011 asking the assesssee to file the same on 27-11-2011 , while the assessment u/s. 143(3) of the Act was framed immediately thereafter on 07-12-2011. However, the assessee during the course of proceedings before the ld. CIT(A) submitted additional evidences by way of sale register with respect to income from knitting and embroidery business , along with loan confirmations with respect to loan of Rs. 3 lacs raised from Mrs. Hansaben Khoshiya, copy of income tax return and bank statements of Mrs. Hansaben Khoshiya with respect to raising of loan of Rs. 3lacs were furnished before the ld. CIT(A). The ld. CIT(A) had not evaluated these additional evidences on merits in a proper perspective as the same were not admitted by the ld. CIT(A) . The Ld. CIT(A) simply brushed aside the additional evidences filed by the assessee before the ld. CIT(A) as an afterthought. In our considered view and in the interest of substantial justice, the ld. CIT(A) should have admitted these additional evidences filed before the ld CIT(A) in the interest of justice and should have ITA 4512/Mum/2015 10 forwarded these additional evidences to the A.O. for his examination and verification on merits and should have sought the remand report from the AO as provided under Rule 46A(1)(3) of Income Tax Rules, 1962. It is a settled principle of law that when the technicalities are pitted against the substantial justice, the course which advances substantial justice has to be favoured. With the admission of these additional evidences filed before the CIT(A), the appeal at best would have been decided on merits by the CIT(A) instead of being thrown out at the threshold by rejecting the additional evidences , more-so in the instant case the queries were raised by the AO with respect to the knitting and embroidery income as well as raising of loan of Rs. 3 Lacs from Mrs. Hansaben Khoshiya at the fag-end of the assessment proceedings u/s 143(3) read with Section 143(2) of the Act as set out above. Based on the factual matrix of the case as stated above, the proper course for the ld. CIT(A) would had been that the ld. CIT(A) should have admitted these additional evidences filed by the assessee before him for the first time per Rule 46 A(1)(2) of Income Tax Rules, 1962 and examined the case on merits , after forwarding these additional evidences to the AO for his examination and verification and seeking remand report from the AO as provided under Rule 46A(1)(3) of Income Tax Rules, 1962 and , there-after, the CIT(A) should have decided the appeal on merits, which has not been done in the instant case by the CIT(A).
Voluminous documents as additional evidences have been placed by the assessee in the paper book filed before the Tribunal ranging from pages 38 to 414 and prayer has been made by the assessee that proper and adequate opportunity was not given by the authorities below before completing the assessment and during the first appellate proceedings as set out above and it was submitted before the Tribunal that these additional evidences be admitted under Rule 29 of Income Tax (Appellate Tribunal) Rules, 1963 in the interest of substantial justice as the assessee was not accorded adequate , ITA 4512/Mum/2015 11 sufficient and proper opportunity by the AO to file these additional evidences and the CIT(A) did not admit these additional evidences during the first appellate proceedings as set out above , the appeal be decided by the Tribunal on merits after admitting and considering these additional evidences on merits. In our considered view and in the interest of substantial justice, these additional evidences needs to be admitted to advance substantial justice in accordance with Rule 29 of Income Tax (Appellate Tribunal) Rules, 1963 for the reasons and discussions as detailed above and the matter is set aside and restored to the file of the A.O. for de-novo determination of the matter on merits after examination and verification of these afore-stated additional evidences filed before the Tribunal and placed at page 38 to 414 of the paper book. Accordingly, we set aside the order of the ld. CIT(A) and of the AO and the matter is now set aside and restored to the file of the A.O. who shall decide the both the issues de-novo on merits after considering the additional evidences submitted by the assessee on merits in accordance with law. Needless to say that proper and adequate opportunity of hearing will be given to the assessee in accordance with the principles of natural justice in accordance with law to defend herself. We order accordingly.
In the result, the appeal filed by the assessee in ITA N0. 4512/Mum/2015 for the assessment year 2009-10 is allowed for statistical purposes.