The Pr. Commissioner Of Income Tax, Rajkot 1 v. Hema Mahendra Mehta

IN THE HIGH COURT OF GUJARAT AT AHMEDABADR/TAX APPEAL NO. 131 of 2019 =============================================THE PR. COMMISSIONER OF INCOME TAX, RAJKOT 1 Versus HEMA MAHENDRA MEHTA ============================================= Appearance: MRS MAUNA M BHATT(174) for the Appellant(s) No. 1 for the Opponent(s) No. 1============================================= CORAM: HONOURABLE MR.JUSTICE J.B.PARDIWALAand HONOURABLE MR.JUSTICE A.C. RAO Date : 18/06/2019 ORAL ORDER (PER : HONOURABLE MR.JUSTICE J.B.PARDIWALA) 1.This Tax Appeal under Section 260A of the Income Tax Act, 1961 (for short “the Act, 1961”) is at the instance of the Revenue and is directed against the order passed by the Appellate Tribunal, Rajkot Bench dated 27.11.2018 in ITA No.997/RJT/2010 for the Assessment Year 2006-07. 2.The Revenue has proposed the following three questions as the substantial questions of law arising in this tax appeal : “[A] Whether the Appellate Tribunal has erred in law and on facts in upholding the decision of CIT(A) thereby restricting the addition to Rs.11,27,363/- as against disallowance of Rs.37,57,877/- made by the Assessing Officer? [B] Whether the Appellate Tribunal has erred in law and on facts in upholding the decision of CIT(A) in deleting the addition of Rs.1,34,64,887/- made on account of bogus Sundry Creditors? [C] Whether the Appellate Tribunal has erred in law and on facts in upholding the decision of CIT(A) in deleting the addition of Rs.1,02,29,487/- made on account of unexplained bank deposit?” 3.With regard to the first proposed question i.e. with respect to restricting the addition to Rs.11,27,363/- as against disallowance of Rs.37,57,877/- made by the Assessing Officer, the findings recorded by the Tribunal are as under : “Apropos these cross grounds being related to a single issue, we have heard the arguments of both sides and carefully perused the relevant material placed on record of the Tribunal. The ld. Assessee’s Representative (AR) submitted that the assessee stranded housing project for low income category people, which was approved by the Govt. of Gujarat. He further submitted that the AO disallowed all the expensed debited to the P & L a/c despite the fact that the assessee property explained the nature and purpose of expenses along with genuineness of expenses with supporting documentary evidence and also establish and prove that the same has been incurred for the purpose of business of the assessee pertaining to the said project. The ld. AR also submitted that the expenses incurred has been shown as working progress in the books of accounts and balance sheet became the construction activity have been carried out from present year to subsequent years. The ld. AR also drew our attention towards Page 3 to 5 of assessee’s paper book (APB) and submitted that all required details and supporting evidence along with relevant copies of the sample bills, vouchers and contra accounts of important expenses were submitted before the authorities below. The ld. AR submitted that ld. CIT(A) issued notices to some creditors and called for confirmation and after considering the entire facts and circumstances deleted the major part of addition by partly allowing the grounds of the assessee in this regard but restricted the disallowance to 30% of total claimed amount i.e. Rs.11,27,363/- without any justified reasonandbasistherefore,theentire disallowance/addition made by the AO may kindly be deleted. The ld. AR has also placed reliance on the decision of ITAT, Allahabad in the case of JCIT vs. Mathura Das Ashok Kumar reported in 101 TTJ 810 (All.) and order of ITAT, Hyderabad in the case of Vishal Infrastructure Ltd. reported in 107 TTJ 484 (Hyd.) and submitted that the claim of the assessee has to be allowed in toto without any addition or restriction therefore, ground of the assessee may kindly be allowed and that of the Revenue may kindly be dismissed on this count. Replying to the above, the ld. Departmental Representative (DR) supported the action of the AO and contenting the ground of the assessee submitted that the assessee has not produce any books of accounts and therefore, any claim made by the assessee remain unexplained. The assessee was also requested to produce any number of persons in support of her claim. The assessee has not produced even a single person in support of her claim therefore, the AO was right in holding that the claim made by the assessee remains unexplained therefore, he was right in making addition/disallowance in this regard. The ld. DR also submitted that the ld. CIT(A) has granted relief to the assessee without any basis and justified reason therefore, impugned order may kindly be set aside by restoring that of the AO. Placing rejoinder to the above, the ld. AR submitted that from the relevant para 3 of the assessment order, it is amply clear that the assessee made a claim relating to expenditure but the AO in the show cause notice considered the wrong aspect of claim and in the show cause notice alleges the claim as purchases by the assessee and ignoring the reply of he assessee dated 15.12.2008 in the last operative part further made disallowance alleging the sane as unexplained purchases, which shows casual approach of AO regarding facts of the case while making disallowance/addition and such action of the AO based on irrelevant and incorrect facts cannot be held as valid and sustainable. The ld. AR also contended that the ld. CIT(A) accepted all the contentions of the assessee and noted that the accounts maintained by the assessee in accordance with the method consistently followed and accepted by the Department for the last seven years and the same could not be rejected without there being any material change in the facts. He further submitted that when no specific defect or discrepancy has been pointed out by the authorities below in the audited books of accounts of the assessee then, no disallowance or 30% of total claim of expenses without any basis cannot be disallowed therefore, entire claim of the assessee may kindly be allowed.” 4.So far as the second proposed question of law with regard to deleting the addition of Rs.1,34,64,887/- made on account of bogus Sundry Creditors is concerned, the findings recorded by the Tribunal are as under : accepted by the Department for the last seven years and the same could not be rejected without there being any material change in the facts. He further submitted that when no specific defect or discrepancy has been pointed out by the authorities below in the audited books of accounts of the assessee then, no disallowance or 30% of total claim of expenses without any basis cannot be disallowed therefore, entire claim of the assessee may kindly be allowed.” 4.So far as the second proposed question of law with regard to deleting the addition of Rs.1,34,64,887/- made on account of bogus Sundry Creditors is concerned, the findings recorded by the Tribunal are as under : “Apropos this ground, we have heard the arguments of both sides and carefully perused the material available on the record of the Tribunal. The ld. DR submitted that the Ld. CIT(A)-II, Rajkot has erred in law and on facts of the case in deleting the addition of Rs.1,34,64,877/- made by the Assessing Officer on account of alleged sundry creditors proved bogus. Supporting the assessment order, the ld. DR submitted that the assessee has not produced any books of accounts and therefore, any claim made by the assessee remains unexplained, the AO requested the assessee to produce relevant persons/sundry creditors to produce in support of her claim but the assessee has not produced even a single creditor to support the claim. Therefore, the AO was right in disallowing the entire amount of sundry creditors shown by the assessee in the balance sheet being the bogus claim of the assessee. The ld. DR further submitted that the ld. CIT(A) has granted relief to the assessee without any reasonable cause and therefore, the impugned order may kindly be set aside by restoring that of the AO. Replying to the above, the ld. AR supported the first appellate order and submitted that the AO has made addition of all the creditors shown in the balance sheet despite the fact that the assessee submitted all relevant details to prove the genuineness of sundry creditors and primary onus has been duly discharge by the appellant. The ld. AR submitted that at Page No.6, the ld. CIT(A) has reproduced detailed table showing the claim of the assessee and major amounts has been received on account of booking of residential units/flats from various allottees and sale of respective units/flats have been made to these parties in the subsequent assessment years. The ld. AR also submitted that from para (ca) at Page 11 of the first appellate order, it is clear that the ld. CIT(A) issued notice u/s. 133(6) of the Act and the relevant parties confirmed the transactions with the assessee therefore, the same cannot be doubted. The ld. AR also submitted that the first appellate authority has granted relief to the assessee after verification of all relevant documents and evidences therefore, conclusion recorded by the ld. CIT(A) may kindly be upheld by dismissing appeal/ground of Revenue. We also placed reliance on the decision of ITAT, Delhi in the case of Shri Vardhman Overseas Ltd. vs. ACIT reported in 24 SOT 393 (Del.) and decision of Hon’ble High Court of Madhya Pradesh in the case of CIT vs. Nevendram Ahuja reported in 290 ITR 453 (MP) and also sought strong support from the preposition rendered by ITAT, Ahmedabad in the case of ITO vs. PIC (Gujarat) Ltd. reported in 119 TTJ 410 (Ahd.) On careful consideration of above rival submissions, in the present case, the AO has not brought on record any adverse finding or allegation to show that the impugned depositors/sundry creditors, in fact, did not represent the sale proceeds and represents the unaccounted income of the assessee shown in the balance sheet in the garb of sundry creditors on account of booking or allotment or sales of units/flats. Therefore, the ld. CIT(A) was right in holding that without any concrete material or evidence showing unexplained or unaccounted income of the assessee introduced in the cover of sundry creditors, the addition made by the AO merely on the basis of suspicion, presumption and assumption cannot be held as sustainable. At the same time, it is relevant to note that from para 3 of the impugned order, we observe that the ld. CIT(A) has called the assessee to submit all the details of transaction with each and every creditor which was submitted by the assessee and reproduced by the ld. first appellate authority in para (c) at pages 6 to 11 of the first appellate order. Thereafter, the ld. CIT(A) issued notices u/s. 133(6) of the Act to nine major parties/sundry creditors and all the parties replied to the notice and copies of their replies were verified by the ld. CIT(A) in the subsequent paras of impugned order, which shows the exercise and examination undertaken by the ld. CIT(A) before granting relief to the assessee. In the last operative of the impugned order, the ld. CIT(A) referred to the ratio of the decision of Hon’ble Madhya Pradesh High Court in the case of CIT vs. Navendram Ahuja (supra) and thereafter, recorded as finding that the addition/disallowance made on the basis of presumption and assumption is not sustainable and correct in view of the absence of concrete and sustainable allegation and evidence or adverse material against the assessee. In view of above, we are unable to see any valid reason to interfere with the findings arrived by the ld. CIT(A) and thus, we uphold the same. Accordingly, ground No.2 of Revenue is dismissed.” 5.So far as the third question is concerned with regard to upholding the decision of CIT(A) in deleting the addition of Rs.1,02,29,487/- made on account of unexplained bank deposit, the findings recoded by the Tribunal are as under : “In view of above findings recorded by the ld. CIT(A), first of all, we may point out that the ld. CIT(A) has called all the details from the assessee regarding deposing to all three bank accounts which were submitted by the assessee and have been reproduced in para (cb) at page 18 to 21 of the first appellate order. The ld. CIT(A) thereafter, noted that the assessee deposited total Rs.48,83,460/- cash amount to these three bank accounts and the source of the same has been explained as the amounts received on account of advances received from the prospective buyers of flats/units in the two projects of the assessee. The ld. CIT(A) in para 3 (cd) has mentioned a table showing the amounts shown by the assessee as sundry creditors totaling to Rs.1,34,64,887/- (addition on this count made by the AO has been deleted by the ld. CIT(A) and findings of the ld. First appellate authority has been confirmed by us in the earlier part of this order). Further, in the said table, the ld. CIT(A) has also considered and noted the amount of Rs.1,02,29,487/- which is the impugned amounts deposited to the said three bank accounts of the assessee. These factual findings have not been controverted by the AO or ld. DR during arguments before us. Therefore, these factual findings supported the conclusion arrived by the ld. CIT(A) that the amounts added and assessed as unexplained sundry creditors includes the impugned amount of Rs.1,02,29,487/- which was deposited to the three bank accounts of the assessee therefore, the same cannot be treated as unexplained bank deposits in absence of any adverse or positive incriminating evidence or material. Thus, we are inclined to hold that the findings recorded by the ld. CIT(A) are quite correct and we are unable to see any valid reason to interfere with the same and hence, we uphold the same. Consequently, ground No.3 of Revenue is also stands dismissed.” 6.Having heard Ms. Bhatt, the learned senior standing counsel appearing for the Revenue and having gone through the materials on record, we are of the view that none of the three proposed questions could be framed as substantial questions of law. They are more on facts and we are convinced with the reasonings assigned by the Tribunal. No error much less any error of law could be said to have been committed by the Tribunal in passing the impugned order. In the result, this appeal fails and is hereby dismissed. (J. B. PARDIWALA, J) (A. C. RAO, J)