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Income Tax Appellate Tribunal, “D” BENCH, MUMBAI
स्थधमी रेखध सं./जीआइआय सं./PAN. :AADCD0607L अऩीरधथी ओय से / Revenue by Shri A Ramchandran प्रत्मथी की ओय से/Assessee by Shri Sameer G Dalal सुनवधई की तधयीख / Date of Hearing : 16.9.2015 घोषणध की तधयीख /Date of Pronouncement: 7.10.2015 आदेश / O R D E R
Per B R Baskaran, AM:
The revenue has filed this appeal and the assessee has filed the cross objection challenging the order dated 28.10.2010 passed by Ld CIT(A)-10, Mumbai for assessment year 1997-98.
CO No.219/Mum/2014 2. The Revenue is aggrieved by the decision of ld.CIT (A) in reducing the income estimated by the AO to Rs.50,000/-, thus granting a relief of Rs.17.50 lakhs to the assessee.
The facts are that the assessee did not file return of income for the year under consideration and hence the AO completed the assessment u/s 144 of the Income Tax Act, 1961(the Act) on 31.3.2000 determining the total income of the assessee at Rs.1.42 crores. In the appellate proceedings, the ld.CIT(A) set aside the matter to the file of the AO to redo the assessment. Since the assessee did not cooperate with the AO, he again completed the assessment by determining the total income at Rs.1.42 crores. The assessee challenged the same by filing appeal before the ld. CIT(A), who deleted the entire addition. Aggrieved, the revenue filed this appeal before the ITAT and the Tribunal, vide its order dated 18.12.2007 passed in restored the matter to the file of the AO with a direction to make the assessment afresh.
In the setting aside proceedings, the AO determined the total income at Rs.18 lakhs, which consisted of business income of Rs.16.00 lakhs and interest income of Rs.2.00 lakhs. The assessee challenged the assessment order by filing the appeal before the ld.CIT(A) who reduced the income of the assessee to Rs.50,000/-. Aggrieved with this order, the revenue has filed this appeal before us. In the cross objection, the assessee is challenging the addition of Rs.50,000/- sustained by Ld CIT(A).
We heard the parties and perused the record. The stand of the assessee before Ld CIT(A) was that it did not carry on any business during the year under consideration and hence it did not generate any income t all. However, we notice that the assessee, during the course of original
CO No.219/Mum/2014 assessment proceedings, had stated that the books of account of the year under consideration are under preparation by the Accountant. The AO also noticed that the assessee had shown closing stock of Rs.1.40 crores in the balance-sheet filed for the immediately preceding year i.e. assessment year 2006-07. There should not be any doubt that the closing stock shown in AY 2006-07 shall appear as opening stock in the year under consideration. We notice that the assessee did not offer any explanation about the disposal of stock stated above. Further, we notice that the assessee did not furnish any details before the AO and hence the AO was constrained to compute the business income at Rs.16 lakhs and interest income of Rs.2 lakhs, both aggregating to Rs.18 lakhs.
The ld. CIT(A), however, has noticed that the assessee has shown the net profit at around Rs.50,000/- only in the immediately preceding years. Further, the ld. CIT(A) has accepted the contentions of the assessee that it did not carry on any business during the year under consideration. Accordingly, the ld. CIT(A) has taken the view that the AO did not bring any material on record to show that the assessee was carrying on any business during the year under consideration. Accordingly, he has determined total income at Rs.50,000/-.
There should not be any dispute that the initial burden to prove that it did not carry on any business lies upon the assessee. Further, in the present case, neither the assessee nor the ld. CIT(A) could bring anything to show that the closing stock available as on 31.3.1996 was not sold during the year under consideration. Under normal business circumstances, it is unlikely that the opening stock of Rs.1.40 crores shall be kept idle by any business man. Hence the contention of the assessee that it did not carry on the business during the year under consideration,
CO No.219/Mum/2014 in our view, defies the logic. We further notice that the assessee did not bring any material on record to show that it did not carry on the business during the year under consideration. The assessee, being a private limited company, is required to maintain proper books of account, get the same audited and passed in the AGM. Further, it is required to submit the same with Registrar of Companies. However, the assessee has failed to furnish the books of account before the AO. It was also not shown that the Annual report was not filed before the Registrar of Companies also.
Under these set of facts, we are not able to agree with the observation of ld. CIT(A) that the AO should have brought any material on record to show that the assessee was carrying on business. Rather, in our view, the assessee should have brought some material on record to show that it did not carry on business during the year under consideration and it did not generate any income at all. It is pertinent to note that the Ld CIT(A), having held so, has himself estimated the income at Rs.50,000/-, which is in contradiction to the stand taken by him.
Since the assessee has failed to furnish any material before the AO and since the assessee has failed to offer any explanation about the opening stock of Rs.1.40 crores, the assessing officer had no other option, but to estimate the income of the assessee. During the course of hearing, it was pointed out that the business income of the assessee was estimated at Rs.8.00 lakhs in the first found (original assessment proceedings). Hence, the income of Rs.16.00 lakhs estimated by the AO in the set aside proceeding is on the higher side. We further notice that the assessee company has been in the process of winding up and the bank has initiated legal proceedings against the assessee. Hence, on a conspectus of the matter, we are of the view that this issue shall meet the ends of justice, if CO No.219/Mum/2014 the income of the assessee for the year under consideration is estimated at Rs.5.00 lakhs. We order accordingly. The order of Ld CIT(A) stands modified accordingly.
Since we have enhanced the estimate by Ld CIT(A), the cross objection filed by the assessee deserves to be dismissed.
In the result, the appeal of the revenue is partly allowed and the cross objection of the assessee is dismissed.