Shadawal Enterprises Vs CIT (ITAT Mumbai)
Addition of unexplained expenses on failure to establish evidence for eviction of encroacher should be made after providing opportunity of hearing to assessee
Conclusion: Shri Ganesh Vithal Indore was the appropriate person to establish his possession over the encroached property/land by submitting the relevant documents and/or other direct or indirect evidence, thus for the just decision of the case and for real adjudication of the issue, it would be appropriate to remand the instant issue to the file of AO for decision afresh by summoning Shri Ganesh Vithal Indore and in case he will not appear then by taking appropriate measures as prescribed under the law and also by giving one more opportunity to assessee to corroborate its stand qua encroached land and to establish the transaction as genuine, with direct-indirect or circumstantial evidence etc.. accordingly addition as unexplained expenses should be made.
Held: Search and survey operation under Section 133A was conducted in the business premises of assessee, wherein a statement of Shri Rajaram Ganpat Vichare, partner of assessee-firm was recorded, in which a voluntary declaration of Rs. 1,10,06,000/- as per the discrepancies detected was made based on provisional income and expenditure account. Assessee-firm has debited total amount of Rs. 3,30,66,526/- and therefore, assessee was asked to furnish complete details of the purchases along with ledger confirmations, bank details and income tax details of the parties. AO summoned one of the party Ganesh Vithal Indore, however, inspite of the service of summons under Section 131, Shri Ganesh Vithal neither appeared nor filed any details/reply, and therefore the AO by taking into consideration the facts “that assessee failed to establish/bring to have made any efforts for eviction of encroacher, installation of electricity and water connection on the said land, reporting of encroachment with the Government authorities, permission for construction, photographs of encroachment and activities of the encroachers and possession of encroachers in any form”, doubted the said transaction of Rs. 1,30,00,000/- allegedly paid to Shri Ganesh Vithal Indore for vacating the alleged encroached land and therefore, the addition had also been affirmed by the Commissioner. It was held that as per the details furnished by assessee before the AO, Shri Ganesh Vithal Indore has shown the said amount of Rs. 1,30,00,000/- as deemed consideration under section 50C, therefore, Shri Ganesh Vithal Indore was also the appropriate person to establish his possession over the encroached property/land by submitting the relevant documents and/or other direct or indirect evidence, thus for the just decision of the case and for real adjudication of the issue and to unearth the real controversy, it would be appropriate to remand the instant issue to the file of AO for decision afresh by summoning Shri Ganesh Vithal Indore and in case he will not appear then by taking appropriate measures as prescribed under the law and also by giving one more opportunity to assessee to corroborate its stand qua encroached land and to establish the transaction as genuine, with direct-indirect or circumstantial evidence etc.. Hence, the issue in hand stood remanded to the file of AO for de-novo decision. Hence, considering peculiar facts and circumstances in totality as grounds raised remained un-adjudicated and the Assessee candidly accepted its mistake, the issue should be remanded qua addition on account of opening stock and adhoc disallowance of labor charges and purchase expenses, to the file of the Commissioner but subject to deposit of Rs. 11,000/- in the account of the Revenue/Department within 30 days of this order.
FULL TEXT OF THE ORDER OF ITAT MUMBAI
The Assessee/Appellant herein has preferred this appeal against the order dated 20.02.2020 impugned herein, passed by Ld. Commissioner of Income Tax (Appeals)-3, Thane {in short ‘Ld. Commissioner)’} under section 143(3) of the Income Tax Act 1961 (in short ‘the Act’).
2. At the outset, we observe that there is a delay of 623 days in filing of the instant appeal, on which the Assessee by filing a petition dated 09.08.2023 claimed that due to Covid-19 restrictions in the Nation, the appeal could not be filed within the prescribed period of 60 days from the date of the receipt of the impugned order. The business of the Assessee was also substantially affected and some of the working staff left the Assessee’s office and therefore on the aforesaid reasons, the delay of 623 days has been occurred. We observe that in the instant case, the impugned order was passed on 20.02.2022 which was served upon the Assessee on dated 15.05.2020, as it appears in Form-36. Therefore the Assessee was supposed to file its appeal on or before 15th of July 2020 which was admittedly Covid-19 period when the entire Nation was on hold. The Assessee, however, filed its appeal on 04.01.2022 with a delay of 539 days. The Hon’ble Apex Court vide its order dated 10.01.2022 in the suo-moto writ petition (C) No. 3 of 2020 in [Re:- Cognizance for extension of limitation] excluded the period from 15.03.2020 to 28.02.2022 in computing the periods prescribed for filing proceedings before the Courts including the Tribunals and given a time of 90 days from 01.03.2022 onwards for filing/instituting the appropriate proceedings. Thus in view of the Hon’ble Apex Court directions, we are inclined to condone the delay of 539 days in filing the instant appeal, consequently the same is condoned accordingly.
3. Now coming to the merits of the case, we observe that a search and survey operation under section 133A of the Act was conducted in the business premises of the Assessee on dated 03.02.2015, wherein statement of Shri Rajaram Ganpat Vichare, partner of the Assessee-firm was recorded, in which a voluntary declaration of Rs. 1,10,06,000/- as per the discrepancies detected was made on the basis of provisional income and expenditure account for the period 01.04.2014 to 03.02.2015 (till the date of survey). Subsequently, the case of the Assessee was selected for scrutiny as per the scrutiny selection guidelines for survey cases issued by Central Board of Direct Taxes, New Delhi, (in short ‘CBDT’). Accordingly statutory notices along with the detailed questionnaire were issued, in response to which the Assessee attended the assessment proceedings and furnished the details. The Assessing Officer (AO) vide assessment order dated 26.12.2017 under section 143(3) of the Act ultimately made various additions inter-alia of Rs. 1,30,00,000/- which was only agitated by the Assessee and has been affirmed by the Ld. Commissioner, hence, for the sake of brevity, we are inclined to adjudicate the instant issue first.
4. It appears from the assessment order that on perusal of list of expenses towards party wise purchases, it was observed by the AO that the Assessee-firm has debited total amount of Rs. 3,30,66,526/- and therefore, the Assessee was asked to furnish complete details of the purchases along with ledger confirmations, bank details and income tax details of the parties. On perusal of party wise purchases, it was further observed by the AO that the Assessee has debited expenses towards purchase from following two parties:
