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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 : 22-2-2016 घोषणा क� तार�ख /Date of Pronouncement : 06-05-2016 आदेश / O R D E R PER RAMIT KOCHAR, Accountant Member
This appeal, filed by the assessee, being 9-8-2010 passed by learned Commissioner of Income Tax (Appeals)- 29, Mumbai (hereinafter called “the CIT(A)” ), for the assessment year 2003-04, the appellate proceedings before the CIT(A) arising from the assessment order dated 17-12-2008 passed by the learned Assessing Officer (hereinafter called “the AO”) u/s 144 read with Section 147 of the Income Tax Act,1961(Hereinafter called “the Act”).
ITA 7333/Mum/2010 2
The revised grounds of appeal raised by the assessee in Income Tax Appellate Tribunal, Mumbai (hereinafter called “the Tribunal”) reads as under:-
“1. On the facts and circumstances of the case, the ld. Assessing Officer erred in passing order u/s 144. The case was attended by authorized representative. 2. On the facts and circumstances of the case, the ld. Assessing Officer erred in invoking section 68 when there is no case of credit entry . 3. On the facts and circumstances of the case, the ld. Assessing Officer erred in not issuing notice u/s 143(2) , thereby rendering entire assessment null and void.”
The brief facts of the case are that during the course of assessment proceedings for the assessment year 2004-05 at the time of recording of the statement of the assessee u/s 131 of the Act, the assessee admitted that he has accepted cash advanced by his father of Rs. 8 lacs for his business purpose. The assessee was not able to produce any evidence with respect to receipt of advance of Rs 8 lacs from his father. This amount was introduced as capital amount for the previous year relevant to the impugned assessment year under consideration for taxation. Notice u/s 148 of the Act was issued by the AO and duly served on the assessee on 30-4-2008. In reply, the assessee vide his letter dated 4th May, 2008 requested to treat the return of income filed u/s 139 of the Act on 30.6.2003 as return of income in response to the notice u/s 148 of the Act.
Notices were issued by the AO to the assessee and adjournments were sought by the assessee from time to time while no details as sought by the AO were submitted by the assessee. Under these circumstances, the A.O. proceeded to complete the assessment u/s 144 read with Section 147 of the Act on the basis of material available on record.
ITA 7333/Mum/2010 3 The A.O. observed that the assessee is proprietor of M/s Prerna Industries and started business with an opening capital of Rs. 9,26,611/- for the first year. The assessee is stated to have set up industrial unit at Mapusa at Goa for assembling of unit watches on job work basis and stated to be partly for sale in local market. The assessee has claimed 100% deduction u/s 80IB of the Act. During the course of assessment for the assessment year 2004-05, the statement was recorded of the assessee u/s 131 of the Act whereby he admitted that he has received Rs. 8 lacs in cash from his father in January, 2002 which was lying with him. It was stated that the money was given by his father to the assessee in the presence of his mother, brothers and his wife. It was submitted by the assessee while recording statement u/s 131 of the Act that his father was a civil contractor and the assessee was not aware whether his father filed income tax returns or not.
Reasonable opportunity of being heard was given to the assessee by the AO to explain the capital amount in the Balance Sheet. It was observed by the AO that the onus is on the assessee to prove the capital amount introduced in the balance sheet with supporting documents. Thus, the A.O. treated the entire capital of Rs. 9,26,611/- introduced by the assessee in his business as unexplained credit u/s 68 of the Act, vide assessment orders dated 17.12.2008 passed by the AO u/s 144 read with Section 147 of the Act.
4.Aggrieved by the assessment order dated 17.12.2008 passed by the AO u/s 144 read with Section 147 of the Act , the assessee filed first appeal before the CIT(A).
Before the CIT(A) , the assessee filed written submissions and submitted that the source of investment was gift from his father. The father was man of scant means and had gifted his savings of 35 years to his son i.e. the assessee.
ITA 7333/Mum/2010 4 However, the CIT(A) rejected the contentions of the assessee and held that there is no evidence that assessee’s father has so much of cash amounting to Rs.8,00,000/- to gift such huge amount of money to the assessee. The assessee could not prove the source of investment to the satisfaction of the Revenue and accordingly the CIT(A) confirmed the orders of the A.O. vide orders dated 09-08-2010.
Aggrieved by the orders dated 09-08-2010 passed by the CIT(A), the assessee filed second appeal before the Tribunal.
At the time of hearing before the Tribunal, none appeared on behalf of the assessee . As per the order sheet entries since 2012, the appeal was adjourned several times from the year 2012 to 2016 as several times adjournments were sought by the assessee or there were non-appearance by the assessee. The assessee has filed written submissions vide letter dated 06- 01-2014 of M/s Paresh Shah and Associates , Chartered Accountants filed with the Registry on 06-01-2014 vide Diary number 331 , which are duly considered by us. Therefore, we are proceeding to dispose of the appeal after hearing the ld. D.R. and after considering the afore-stated written submissions dated 06-01-2014 filed by the assessee and other material available on record including orders of the authorities below.
The ld. D.R. submitted that the A.O. has made ex parte assessment u/s 144/147 of the Act. The assessee has admitted that the amount of Rs.8,00,000/- has been received from his father in cash as gift in January 2002 but no evidence to this effect has been produced. No return of income was filed for the preceding years’ and this is the first year when return of income was filed by the assessee with the Revenue. The capital introduced of Rs. 9,26,611/- in the business as reflected in the Balance Sheet filed with ITA 7333/Mum/2010 5 the Revenue for the assessment year 2003-04 for the first time is an un- explained capital as no return of income was filed for the preceding years’ .
We have considered the submissions of the ld. D.R., the afore-stated written submission filed by the assessee and other material available on record including orders of the authorities below. The assessee has submitted that the said cash of Rs. 8,00,000/- was received from his father in January 2002 as gift. This amount was brought forward in the instant assessment year under appeal and utilized as capital to start the business. The assessee submitted that the assessee has filed the balance sheet as at 31-03-2003 wherein this amount of capital of Rs. 9,26,611/- is duly reflected. The Revenue cannot tax the same amount twice and the tax implication would fall on the assessee’s father. The assessee submitted that the capital account of the assessee has been duly submitted whereby opening balance of Rs. 8,98,601/- which is received in the earlier year. It is an opening balance and not a credit entry and hence section 68 of the Act was wrongly invoked and there is no introduction of fresh capital during the year. If the additions be made, since the amount was received in cash in the preceding assessment year 2002-03 , no addition can be made in this assessment year under appeal i.e. assessment year 2003-04. The assessee submitted that the A.O. never required any details as to how the opening balance was arrived at. The assessee would have been duty bound to furnish the explanation and the A.O. did not ask details regarding the same. The A.O. has ignored altogether the financial statement filed along with the return of income and merely relied upon the statement of the assessee recorded u/s 131 of the Act. While the A.O. was supposed to consider all the material facts available while framing the assessment order and in the instant case the assessment is null and void liable to be quashed. The assessee submitted in the written submissions that the A.O. has, however, treated the sum received by the assessee from his father as income of the instant assessment year while the amount was ITA 7333/Mum/2010 6 received in the preceding assessment year. The assessee has not maintained books of account, hence, section 68 of the Act is not applicable. The A.O. has treated the statement recorded u/s 131 of the Act as books of account which is not correct. The assessee submitted that the A.O. has chosen convenient para’s from the statement recorded u/s 131 of the Act and interpreted as per his own assumptions and surmises. The A.O. hurriedly passed the assessment orders u/s 144 read with Section 147 of the Act although there were time of 13 days available with the AO before matter was getting time barred and the AO should have given proper opportunity. During the course of proceedings before the CIT(A), it was submitted that the details of loan taken from the father was business advance. The father of the assessee was a labourer. The father earned the money over 35 years of his working and the same was handed over to his son in January 2002 and the father died in the year 2004. The copy of return of income was not available as the income was below exemption limit. The father of the assessee never believed in banking system and kept cash with him as he trusted no one. The assessee submitted that there is no PAN of the father available with him. The assessee has relied upon the decision of Hon’ble Supreme Court in the case of Sumati Dayal v. CIT, [1995] 214 ITR 801 (SC) and Hon’ble Gauhati High Court decision in the case of Nemi Chand Kothari v. CIT (2004) 136 taxman 213(Gau.).
We have observed that the assessee has filed return of income for the first time during the impugned assessment year 2003-04. The assessee has filed capital account with the Revenue with opening balance of Rs. 8,98,601/. Since the assessee has filed the capital account with the Revenue for the first time and claimed that the opening balance is Rs. 8,98,601/- and no return has been filed in the earlier years, It was incumbent on the assessee to explain satisfactorily with cogent evidence as to how the aforesaid amount of Rs. 8,98,801/- being opening capital has been arrived at and the sources thereof. The amount is credited in the capital account of the ITA 7333/Mum/2010 7 assessee which has been produced before the Revenue for the first time and hence provisions of Section 68 of the Act are attracted. The assessee has given the explanation that assessee has received Rs. 8 lacs in January, 2002 from his father which was given as gift to his son in the presence of brothers, mother and assessee’s wife. The assessee submitted that his father was a laborer and a man of scant means. We find that the assessee has given the statements and submissions to this effect but no cogent evidence was brought on record to substantiate the claim and discharge the primary onus u/s 68 of the Act. Since the assessee has tried to explain the capital amount of Rs. 9,26,611/- introduced in the business by way of gift of Rs.8,00,000/- received from his father in January 2002 i.e. preceding year, satisfactory evidence should have been produced by the assessee to comply with the ingredients of Section 68 of the Act i.e. identity, creditworthiness and genuineness of the transaction of the gift of Rs.8,00,000/- by his father to him. In our considered view and in the interest of justice, this matter needs to be set aside and restored to the file of the A.O. for de-novo determination of the issue by the AO on merits after considering the evidences and explanations submitted by the assessee on facts and on law. The assessee is directed to file necessary supporting material, evidences and explanation before the A.O. to substantiate his claim of having introduced capital in the business to satisfy the mandate of the Act. Needless to say, the assessee be granted sufficient and adequate opportunity by the AO of being heard in accordance with the principles of natural justice in accordance with law.
Regarding the claim of the assessee vide ground no 1 regarding challenge to the framing of the assessment u/s 144 of the Act, it is observed that no details and explanations were submitted by the assessee before the AO in response to the queries of the AO and hence ex-parte orders were passed u/s 144 of the Act. Several opportunities were given by the AO as per the facts as are emerging from the orders of the authorities below and material before us ITA 7333/Mum/2010 8 while the assessee only sought adjournments while no details were filed before the AO. In our considered view, the AO has rightly passed the assessment orders dated 17.12.2008 passed by the AO u/s 144 read with Section 147 of the Act. Thus, we reject the ground of appeal no 1 of the assessee .We order accordingly.
With respect to ground no 3 raised by the assessee with respect to non issue of notice u/s 143(2) of the Act before framing the assessment order 17.12.2008 passed by the AO u/s 144 read with Section 147 of the Act, the assessee is allowed to raise the same before the AO as it requires examination of the facts and records. The assessee has not appeared before us when the appeal was called for the hearing nor any further details /submissions/ evidences whatsoever are submitted in the written submissions filed before us with respect to this ground of appeal no 3 raised by the assessee . This ground of appeal raised by the assessee is thus kept open and the assessee is allowed to raise the same during the set aside proceedings for framing of de- novo assessment and shall also be adjudicated by the AO on merits after examining the records and in accordance with law.
In the result, the appeal filed by the assessee in ITA N0. 7333/Mum/2010 for the assessment year 2003-04 is partly allowed for statistical purposes.
Order pronounced in the open court on 6th May , 2016. आदेश क� घोषणा खुले �यायालय म� �दनांकः 06-05-2016 को क� गई ।