IN THE INCOME TAX APPELLATE TRIBUNAL
(DELHI BENCH ‘F’ NEW DELHI)
BEFORE SHRI R.P. TOLANI, JUDICIAL MEMBER
SHRI T.S. KAPOOR, ACCOUNTANT MEMBER
Assessment year: 2001-02
M/s Polo Leasing & Finance,
Rohini, New Delhi.
Appellant by: Shri R.S. Adlakha, Advocate.
Respondent by: Shri Bhim Singh, Sr. DR.
PER TS KAPOOR, AM:
This is an appeal filed by the assessee against the order of Ld CIT(A) dated 4.10.2010. The grounds of appeal taken by the assessee are as under:-
1. That the enhancement made by the CIT(A) is against the facts and circumstances of the case.
2. That the appellant was not afforded a reasonable opportunity of showing cause against enhancement.
3. That the CIT(A) was not justified in making addition of `.58,01,218/- by disallowing direct expenses debited to P&L A/c.
4. The CIT(A) was wrong in enhancing the income of the assessee from `.2,00,000/- to `.60,01,218/-.
5. The CIT(A) was wrong in disallowing the entire direct expenses of `.60,01,218/- as the disallowance is without any basis.
6. That the CIT(A) exceeded in his powers in enhancing the disallowance of direct expenses to `.60,01,218/-.
7. That the CIT(A) was not justified in confirming the application of commission rate of 2% on the total deposits in the bank account.
8. That the CIT(A) was wrong in sustaining addition of commission of `.5,33,490/- made by the Assessing Officer by applying rate of 2% on the total deposits in the bank accounts.
9. That no interest u/s 234S & 34B is leviable.
2. The brief facts of the case are that the case of the assessee was reopened on information received from Directorate of (Investigation) which revealed that assessee was indulging in providing accommodation entries/bogus share application money/bogus capital gain. A questionnaire dated 28.8.2008 along with statutory notice u/s 142(1) of the Act was issued for hearing on 11.,9.2008 on which date nobody attended and case was fixed for 24.11.2008 and nobody attended. Thus, the assessee was given final notice on 26.11.2008 and the case was fixed for final hearing on 4.12.2008 wherein in the notice it was clearly stated that the case of the assessee will be decided u/s 144 if no compliance was made. A letter dated 11.12.2008 was received by the Assessing Officer in which assessee stated that the return originally filed may be treated as return filed in response to notice u/s 148. On 1.12.2008, the Ld AR of the assessee contended that company was an entry operator and it was submitted that deposits in the books of accounts was not from its own sources. The assessee was asked to produce books of accounts, bills & vouchers etc. to which the assessee stated that books of accounts cannot be produced as these were very old. Therefore, the Assessing Officer estimated the income of the assessee at `.2,00,000/- instead of `.5193/- as declared by the assessee. The Assessing Officer further made an addition of `.5,33,490/- being 2% on the amount of `.2,6,74,500/- being aggregate of credit balances in Federal Bank & Vijaya Bank.
3. Dissatisfied with the order, the assessee filed appeal before Ld CIT(A) and submitted that amount of income estimated by the Assessing Officer was without any basis and was arbitrary in view of the fact that assessee company was maintaining regular books of accounts and these were duly audited by the firm of C.As. and report u/s 4AB had already been filed along with the return of income. It was also submitted that estimate made by the Assessing Officer was not supported by any material or record as the Assessing Officer has failed to bring any evidence or material on record to support his contentions. It was also argued that income from commission worked out at `.5,33,490/- was unjustified and arbitrary. The Ld CIT(A) after going through the submissions and on the basis of material placed on record upheld the addition made by the Assessing Officer in respect of commission income and also enhanced the income estimated by the Assessing Officer by an amount of `.58,01,218/- by holding as under:-
“Enhancement of income: It is seen from the P&L A/c that the appellant has claimed direct expenses of `.60,01,218/- as against the direct expenses of `.25,07,691/- during A.Y. 2000-01. The Assessing Officer asked the assessee to produce the books of accounts and bills and vouchers for verification of the expenses claimed by the appellant. However, the same were not produced before the Assessing Officer. Therefore, the Assessing Officer should have disallowed the entire amount of `.60,01,218/-. The Ld AR could not give any detail of these expenses. Therefore, a notice u/s 251(2) of the IT Act, 1961 was issued to the appellant on 17.9.2010. For the sake of convenience, the same is reproduced hereunder:-
“The Principal Officer,
M/s Polo Leasing & Finance Ltd.
A-4/81, Sector-17, Rohini
Sub: Notice u/s 251(2) of the Income Tax Act, 1961 in the case of M/s Polo Leasing & Finance (P) Ltd. for the assessment year 2001-02 – reg.
1. It is seen from the records that in the P&L A/c a sum of `.60,01,218/- has been debited towards direct expenses. But no details of these expenses have been submitted before the Assessing Officer. The Assessing Officer asked to produce books of accounts for the verification of expenses repeatedly. However, the books of accounts were not produced before him.
2. Since neither books of accounts nor the bills and vouchers for the expenses were produced before the Assessing Officer for scrutiny, the Assessing Officer ought to have disallowed entire expenses of `.60,01,218/- being non verifiable for want of reasons stated earlier and also in the absence of any detail relating to the same. However, the Assessing Officer has disallowed an amount of `.2,00,000/- only. Thus, the balance amount of `.58,01,218/- remains to be disallowed.
3. In view of the above facts, in exercise of powers vested in me by virtue of provisions contained in sc. 251(1)(a) of the Income Tax Act, 1961, I propose to enhance the assessed income by disallowing the aforesaid amount of `.58,01,218/-.
4. You may submit your explanation, evidence, if any, in writing and also produce books of accounts and bills and vouchers in respect of the above expenses of `.60,01,218/- in my office on 29.9.2010 at 11.00 AM either personally or through an authorized representative.”
The notice was sent by speed post vide postal receipt No.ED140515061N dated 21.9.2010. However, on 21.9.2010 neither the appellant nor the authorized representative attended. Therefore, it is presumed that the appellant has no explanation to offer. From perusal of the P&L A/c it is seen that the claim has been made under the head direct expenses. However, no detail or head wise break up of these expenses have been given, although as per schedule VI of the Companies Act, 1956, company is specifically required to give such details. The non disclosure of these details in the P&L A/c coupled with the fact that the appellant is not coming forward to give detail and supporting evidence of these expenses strengthen my belief that these expenses are not genuine and therefore not allowable and appellant has made a fictitious and bogus claim. IN view of the above facts, since the appellant has failed to give even the basic details of the expenses and has also failed to produce books of accounts and bills and vouchers whatsoever in support of the expenses claimed either before the Assessing Officer or before me, I hold that deduction of expenses of `.60,01,218/- cannot be allowed. Hence, the addition on account of disallowance of expenses is enhanced from `.2,00,000/- to `.60,01,218/-. The Assessing Officer is directed to issue revised notice of demand, alter, verification of tax calculation and applicable interest as per law.
4. Dissatisfied by the order, the assessee is in appeal before us.
5. At the outset, the Ld AR argued that notice dated 17.9.2010 for enhancement of income was not received by the assessee and therefore the Ld CIT(A) passed the order of enhancement without affording an opportunity to the assessee and an affidavit signed and sworn by Director of the company was placed on record. Our attention was invited to the contents of affidavit filed by the Director of the company. Our attention was also invited to the fact that the notice was dated 17.9.2010 and appellate order was passed on 4.10.2010. In view of the above, it was argued that within a period of 15 days Ld CIT(A) gave enhancement notice and passed order enhancing the income of the assessee. In view of the above, it was argued that opportunity was not given to the assessee.
6. The Ld DR, on the other hand, argued and read out from page 6 of Ld CIT(A)’s order and in view of the above, he argued that books of accounts were not even produced before the Assessing Officer and assessee had clearly stated before Assessing Officer that books of accounts cannot be produced and in the absence of books of accounts Ld CIT(A) has rightly enhanced the addition after giving clear notice dated 17.9.2010.
7. We have heard the rival submissions of both the parties and have gone through the material available on record. We find that between issuance of notice of enhancement and passing of appellate order there was only a period of 15 days which is a very short period and assessee had stated on oath that they have not received notice for enhancement of income. Sub section (2) of section 251 requires that Commissioner (appeals) shall not enhance the assessment or a penalty or reduce the amount of refund unless the appellant had a reasonable opportunity of showing cause against such enhancement. In the present case, though notice of enhancement was given by Ld CIT(A) but assessee has stated that it has not received the notice. Therefore, we are of the considered view that necessary opportunity was not given to the assessee. Therefore, in the interest of justice, we are of the opinion that case may be re-adjudicated by Ld CIT(A). Needless to say, that assessee will be provided a reasonable opportunity of being heard.
8. In view of the above, the appeal filed by the assessee is allowed for statistical purposes.
9. Order pronounced in the open court on 24th day of May, 2013.
(R.P. TOLANI) (T.S. KAPOOR)
JUDICIAL MEMBER ACCOUNTANT MEMBER
Copy forwarded to:-
1. The appellant
2. The respondent
3. The CIT
4. The CIT (A)-, New Delhi.
5. The DR, ITAT, Loknayak Bhawan, Khan Market, New Delhi.
(ITAT, New Delhi).
Date of hearing 20.3.2013
Date of Dictation 22.5.2013
Date of Typing 22.5.2013
Date of order signed by both the Members & pronouncement. 24.5.2013
Date of order uploaded on net & sent to the Bench concerned. 24.5.2013