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Income Tax Appellate Tribunal, AHMEDABAD “B” BENCH
Before: Shri T.R. Senthil Kumar & Shri Narendra Prasad Sinha
Assessment Year 2017-18 Ambani Builders Pvt. Ltd., The ACIT, 204, Sagrika Complex, Circle-1(1)(1), Opp. Cenera Office House, Vs Vadodara Dandia Bazar Char Rasta, Vadodara, Gujarat-390001 (Respondent) PAN: AAJCA2001P (Appellant) Assessee Represented: None (Submission) Revenue Represented: Shri Sudhendu Das, CIT-DR Date of hearing : 12-08-2024 Date of pronouncement : 05-09-2024 आदेश/ORDER PER : T.R. SENTHIL KUMAR, JUDICIAL MEMBER:-
This appeal is filed by the Assessee as against the ex-parte appellate order dated 29.12.2023 passed by the Commissioner of Income Tax (Appeals), National Faceless Appeal Centre, Delhi, (in short referred to as “CIT(A)”), arising out of the assessment order passed under section 143(3) of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act’) relating to the Assessment Year 2017-18.
A.Y. 2017-18 Page No 2 Ambani Builders Pvt. Ltd. vs. ACIT
The Grounds of Appeal
raised by the Assessee reads as under:
7. The Ld. assessing officer completed under section 143(3) making and erred in making addition to the returned income as follow. a. under section 68 on account of addition to capital Rs.2,45,00,000/- b. on account of disallowance of interest Rs.64,68,238/- c. on account of cash deposit in bank under section 69A Rs.63,70,000/- d. estimating profit on closing stock at 27.02%( para 7.2 on page 18 of body of assessment order) amounting to Rs.1,45,53,566/- e. on account of disallowance of expenses under section 37(1) amounting to Rs.97,983/- may be deleted in view of evidences produced at the time of hearing.
2. Your petitioner could not respond before Hon’ble C.I.T.(Appeal) (National Faceless Appeal Centre (NFAC) due to non-availability of documentary evidences lying with senior advocate (supreme court) due to litigation in the court and therefore (NFAC) adjudicated an appeal as dismissed ex-parte. Therefore, your petitioner may be afforded an opportunity de novo to represent the case.
3. Your appellant craves leave to add, alter, amend, modify or delete any of the above grounds of appeal.
Today is the 6th time of hearing of this appeal, None appeared on behalf of the assessee, though Letter of Authority in favour of Shri Chandresh I. Shah, Advocate, he has not appeared even in the previous hearings however filed application under Rule 29 for fresh evidences and filed written submissions which reads as follows:
MOST RESPECTFULLY SHOWETH: I humbly submit and pray your majesty that While framing the assessment order the ld. assessing officer erred in making addition to the returned income as follow. 1. Addition on account of addition to share capital under section 68 Rs.2,45,00,000/-. 2. Disallowance of interest working at 14% amounting to Rs.64,68,238/- on advances by the petitioner.
A.Y. 2017-18 Page No 3 Ambani Builders Pvt. Ltd. vs. ACIT
Cash deposit in the bank account arisen out of business transaction amounting to Rs.63,70,000/- a withdrawal from the bank (contra entries). 4. on account of adopting novel method to workout profit at 27.02% on closing stock of Rs.5,38,62,200/-,shown in books of account, and making addition on account of profit on closing stock of Rs.1,45,53,566/-. 5. on account of disallowance of interest on T.DS and service tax.RS.97,983/-. Your honour sir, your petitioner had another opportunity to represent his case before THE COMMISSIONER OF INCOME TAX (APPEALS)-V NATIONAL FACELESS APPEAL CENTRE (NFAC) DELHI. however, your petitioner could not produce the required details since there was litigation going on against the petitioner in HON'ABLE GUJARAT HIGH COURT AND later on with HON'ABLE SUPREME COURT OF INDIA. Your honour sir, since the papers were lying with the senior counsel, your petitioner could not represent his case before the first stage of appeal. Letter from the senior counsel Shri, Paresh S Adhvaryu is enclosed herewith marked as annexure-1 paper book page 9 later on the matter was taken up with HON'ABLE SUPREME COURT OF INDIA. Sir, I have also enclosed herewith the copy of order from HON'ABLE GUJARAT HIGH COURT marked as annexure 2 paper book page 10 (A) REGARDING THE ADDITION UNDER SECTION 68 ON ACCOUNT OF ADDITION TO SHARE CAPITAL. Your honour sir, the addition, to the share capital, was made out of bank account of Shri Dipak Ambani to whom the shares were allotted. Originally the amount was given by Dipak Ambani a director and share holder to the company by way of unsecured loan which was returned by the company and it was reintroduces as share capital in the company. Sir, the copy of account in the books of AMBANI BUILDERS PRIVATE LIMITED AND copy of account in the books of AMBANI ASSOCIETES A Proprietory concern of Shri Dipak Ambani is annexed marked as annexure-3, paper book page.31 Your honour sir, the copy of acknowledgement of income tax Return and confirmation letter and bank statement is also enclosed marked as annexure-4, paper book page no 70 Sir, regarding the second addition on account of introduction of capital Rs.50,000/- as share capital in the name of Shri Indravadan Ambani, I have enclosed herewith the copy of acknowledgement of income tax return, confirmation of account marked as annexure-5, paper book page.77.
A.Y. 2017-18 Page No 4 Ambani Builders Pvt. Ltd. vs. ACIT
1, therefore urge, your honour, the entire addition may please be deleted since all element under section 68 A. Credit worthiness of the person B. identity of the person and C. bonafide ness of the transaction is established. B REGARDING SECOND ADDITION ON ACCOUNT OF DISALLOWANCE OF INTEREST AMOUNTING TO Rs.64,68,238/- Your honour sir, the advances was given to the different persons with out interest as rightly observed by the Id. Assessing officer on para 5.2, para 5.3 and para 5.4 of body of assessment order page no.13 and 14 of assessment order paper book page 83 Your honour sir, regarding this addition, I have enclosed herewith the list of the persons to whom the advances was given and the purpose for which the same was given marked as annexure -6 paper book page 84. Your honour sir, the advances was given to different agencies for the purpose of purchases of various material required for the purpose of business and also against purchase of land. It was business expediency. Sir, these are the expenses incidental to the business of this type (industry). An advance given for the purchase or booking amount/against purchases can never call for charging of interest on it. Sir, it is therefore no interest was charged on the same. Sir, it's a matter of business practice. 1, therefore, request your honor that entire addition on this count may please be deleted. C.REGARDING THE THIRD ADDITION ON ACCOUNT OF CASH DEPOSIT AMOUNTING TO Rs.63,70,000/- Your honour sir, the amount deposited in the bank was out of withdrawal from the CENTRAL BANK, HDFC BANK and SHREE CO OPERATIVE BANK. All the entries are contra entry. Sir, I have enclosed herewith the copy of CASH BOOK AND BANK STATEMENT clearly marked with highlighter (yellow) (pink) in the cash book and bank statement with chronological order marked as annexure- 7 paper book page.85 Your honour sir I urge your court, the entire addition may be deleted since all entries are CONTRA entries and from the books of the account. REGARDING THE ADDITION, AT THE RATE OF 27.02% ON CLOSING STOCK, OF THE PROFIT AMOUNTING TO Rs.1,45,53,566/- Your honour sir, the company, your petitioner is having its books of account audited under the provisions of companies Act 2013. Sir, at the year end March 2017 the company had closing stock of Rs.20,47,62,650/- consisting of land Rs.5.38,62,200/- and work in progress Rs. 15,36,00,450/-.
A.Y. 2017-18 Page No 5 Ambani Builders Pvt. Ltd. vs. ACIT Ld. Assessing officer worked out profit on land at the rate of 27.02% on land portion considering the same as advance received from the customer. Kindly refer para 7.3 of assessment order page 18 and 19 paper book page 108 Your honour sir, by no stretch of imagination, the profit can be worked out on value of land appearing as stock in trade. Sir, I have enclosed herewith the certificate of architect marked as annexure-B page 112 of the paper book to substantiate the work in progress. Your honour sir I urge your court, the entire addition may be deleted since it was profit worked out on stock of land which was never sold and meant for sale at a future date. REGARDING THE ADDITON ON ACCOUNT OF INTEREST PAID ON T.D.S. AND SERVICE TAX OF Rs.97,983/-, I AM NOT PRESSING THIS GROND OF APPEAL. PRAYER I therefore, pray your honour that the addition so made to the returned income in light of evidences be deleted OR Since the petitioner, because of the proceeding with GUJARAT HIGH COURT AND SUPREME COURT and papers were lying with respective counsels, during the proceeding before COMMISSIONER OF INCOME TAX (APPEALS)-V NATIONAL FACELESS APPEAL CENTRE (NFAC) DELHI, could not be produced and the same could not be appraised at first stage of appeal, the matter may be set back to the first stage of appeal afresh denovo.”
Per contra, Ld. CIT-DR Shri Sudhendu Das appearing for the Revenue submitted that the Ld. A.O. had given nine opportunities before framing the assessment. In one occasion, the assessee filed partial reply without proper documents. Even before Ld. CIT(A), the assessee has not appeared and also not responded to the hearing notices issued. The assessee’s claim that the books of accounts, bank statements and other documents were lying with the Gujarat High Court and later on in Supreme Court are not substantiated properly by the assessee. Since the assessment order was passed A.Y. 2017-18 Page No 6 Ambani Builders Pvt. Ltd. vs. ACIT dated 12-12-2019 and opportunity of hearings were given to the assessee between 09-08-2018 to 05-12-2019, whereas the Hon’ble Gujarat High Court vide its Judgment dated 27-06-2017 disposed of the matter. Further Assessee is also not placed before this Tribunal copy of Supreme Court judgment and pleading that the documents, books of accounts could not be produced before the Lower Authorities and not substantiated with proper evidences. Whereas Ld.CIT(A) considered the case on merits and pass a detailed order which does not require any interference. Thus the Ld. CIT-DR pleaded that the appeal filed by the assessee is liable to be dismissed.
We have given our thoughtful consideration and perused the materials available on record. Though the assessee Counsel filed Paper Books with 8 Annexures with letter from his Counsel, and Gujarat High Court Judgment and bank statements. It is seen at Page Nos. 56 to 68 of the Paper Book namely the bank statements of Mr. Dipak P Ambani with HDFC Bank which was taken print out only on 13-03-2023 at 11:39 A.M. Similarly Shree Cooperative Bank Ltd. Bank statement of Shri Dipak Praveenchandra Ambani was taken print out on 25-06-2024 which is available at Page No. 69 of the Paper Book. The plea made by the Ld. Counsel that the documents could not be produced before the Assessing Officer are thus without basis. The assessee simply filed a Paper Book and do not choose to appear and explain the contents therein in the Paper Book and substantiate the Grounds of Appeal raised before this Tribunal. Further the Grounds raised before this Tribunal is also very general in nature without relevant materials. Whereas Ld.
A.Y. 2017-18 Page No 7 Ambani Builders Pvt. Ltd. vs. ACIT CIT(A) has considered each addition and dismissed the same by observing as follows: “5.1 Addition of Rs.2,45,00,000/- on account of unexplained cash credits: During the year under consideration, the AO noticed that there was an increase of Rs.2,45,00,000/- in the share capital. The AO asked the assessee to provide the relevant details relating to increase in Share Capital with supporting documents such as details of Share-holders along with their complete ITR for AY 2017-18 and bank statements for FY 2016-17. In response, the assessee submitted details of shareholding which were verified by the AO wherein no acknowledgement of the shareholder as claimed by the assessee, was submitted by the assessee. Keeping in view the fact that no evidences with regard to the creditworthiness or genuineness of the transaction established by the assessee, the AO held an amount of Rs 2,45,00,000/- credited in the books of account of the assessee in the form of Share Capital, as unexplained Cash Credit u/s 68 of the Act and add the same to the total income of the assessee and also initiated the penalty proceedings u/s 271AAC of the Income tax Act, 1961 in respect of unexplained Cash Credit. 5.2 Disallowance of corresponding interest: During the course of assessment proceedings, the AO noticed that the assessee has reported assets of Rs.4,62.01,701/- under the head, Loans and Advances. The AO vide notice u/s 142(1) asked the assessee to provide details of such Loans and Advances, the rate of interest charged by it on such loans and advances and source of funds for these advances. However, in spite of sufficient opportunities, the assessee failed to furnish requisite details with regard to source of such advances and interest charged on such advances and also failed to substantiate its claim of not charging of interest on advances and also to prove the source of such loans and advances. In view of the above, the AO considered an amount of Rs.64,68,238/- being interest @14% (the rate at which the assessee has taken a loan from the bank) on total Loans and Advances of Rs.4,62,01,701/- to have escaped taxation and the added the same to the total income of the assessee. 5.3 On the issue of Cash deposits in bank accounts: During the course of assessment proceedings, the assessee has deposited cash of Rs.63,70,000/- in the bank accounts, including Rs.36,36,000/- during demonetization period. However, despite allowing enough time and sufficient opportunities to substantiate the claim and source of cash deposit during the year and especially during demonetization period, the assessee has failed to provide any details and also supporting documents. Thus, the AO found and held that the assessee has failed to produce any proof for the source of funds that has been A.Y. 2017-18 Page No 8 Ambani Builders Pvt. Ltd. vs. ACIT deposited in its bank accounts. No cash flow statement has been filed by the assessee. In the submission filed, the assessee has only stated that the reflected cash deposits are out of the funds which were withdrawn from the bank accounts, but the purpose of such withdrawal has not been substantiated and above all, if the amounts were actually withdrawn, reason's for the same being unutilized and for redepositing the same in the bank account. In view of the same, since there was no proof to substantiate the contention, the AO held that the cash deposit to the tune of Rs.63,70,000/- are unexplained money u/s 69A of the Act. 5.4 Revenue recognition out of unexplained Closing Stock of finished goods: The AO noticed that during the year, the assessee has reported substantially high Closing Stock of Rs 20,74,62,650/- (Constituting finished goods of Rs.5,38,62.200/- plus Work-in-Progress of Rs.15,36.00,450/-) Verification of genuineness of such closing stock and whether the assessee has done correct accounting of its income is one of the reasons for selection of the assessee's case for scrutiny for the year. Therefore, notice u/s 142(1) of the Act was issued to the assessee. However, in spite of availing sufficient opportunities, the assessee failed to substantiate its claim with regard to liabilities appearing in books with supporting documents. Further, the assessee itself has in its own case for the year under reference, has reported GP at 27.02% of total turnover, it is found reasonable to recognize revenue @27.02% of Rs.5,38,62,200/- as income on account of booking advance received by the assessee. Accordingly, the revenue amounting to Rs 1,45,53,566/- being 27.02% of Rs.5,38,62,200/-, was considered as revenue not recognized for FY 2016-17 by the AO and added the same to the assessee's total income in addition to the revenue from operations already reported by the assessee. 5.5 Disallowance out of Other Expenses: On perusal of Profit & Loss account, the AO noticed that under the head 'Other Expenses', the assessee has claimed expenses of Rs.43,983/- towards Interest on TDS and Service Tax and Rs.54,000/- towards TDS 234E fees. Considering the nature of expenses, vide notice u/s 142(1) of the Act, the AO asked the assessee to furnish complete details of such Other expenses incurred. However, in view of non- compliance on the part of the assessee, the AO proceeded to disallow the expenses of Rs.97,983/- incurred towards Interest on TDS and Service tax and towards TDS 234E fees, holding the same as penal in nature and not allowable u/s 37(1) of the Act and added the same to the assessee's total income. Aggrieved, the appellant has filed the present appeal.”
A.Y. 2017-18 Page No 9 Ambani Builders Pvt. Ltd. vs. ACIT 5.1. Thus the assessee has not clarified the additions with proper evidences and not appeared before this Tribunal to explain the reference in the Paper Book. In the above circumstances, we do not find any infirmity in the order passed by the Lower Authorities. Thus the appeal filed by the assessee is devoid of merits and liable to be dismissed in the absence of proper explanation with supporting materials before this Tribunal.
In the result, the appeal filed by the Assessee is hereby dismissed.
Order pronounced in the open court on 05-09-2024 Sd/- Sd/- (NARENDRA PRASAD SINHA) (T.R. SENTHIL KUMAR) ACCOUNTANT MEMBER True Copy JUDICIAL MEMBER Ahmedabad : Dated 05/09/2024 आदेश क� ��त�ल�प अ�े�षत / Copy of Order Forwarded to:- 1. Assessee 2. Revenue 3. Concerned CIT 4. CIT (A) 5. DR, ITAT, Ahmedabad 6. Guard file. By order/आदेश से,
उप/सहायक पंजीकार आयकर अपील�य अ�धकरण, अहमदाबाद