TMI Blog2020 (3) TMI 423X X X X Extracts X X X X X X X X Extracts X X X X ..... ch notice. Even otherwise, on perusing the documentary evidences filed by assessee in the shape of paper book on the issues in dispute which I have discussed in the preceding paragraphs, AO has examined all the issues with supporting evidences filed by the assessee which is a matter of record. Therefore, the enhancement notice is not sustainable in the eyes of law and resultantly the enhancement made by the Ld. CIT(A) is not tenable, therefore Cancel the impugned order dated 29.10.2018 by accepting the appeal filed by the assessee. - ITA No. 2110/Del/2019 - - - Dated:- 2-3-2020 - Shri H.S. Sidhu, Judicial Member For the Assessee : Sh. Sunil Kumar Tyagi, CA For the Department : Sh. Pradeep Singh Gautam, Sr.DR. ORDER This appeal filed by the assessee is directed against the order passed by the Ld. CIT(A)-I, Noida on 29.10.2019 in relation to the assessment year 2012-13. 2. The brief facts of the case are that assessee filed its return income for the assessment year 2012-13 declaring income at Rs. NIL on 31.3.2014. Later on, the case of the assessee was selected for scrutiny and accordingly, notice u/s. 143(2) of the Income Tax Act, 1961 (in s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Tribunal and the Tribunal vide its order dated 31.5.2018 passed in ITA No. 6272/Del/2016, after hearing both the parties, set aside the issues in dispute to the Ld. CIT(A) to decide the same in dispute afresh, after considering the evidences filed by the assessee as discussed in Tribunal s order dated 31.5.2018 i.e. the assessee s paper book containing page 1-518 and provide adequate opportunity of being heard to the assessee for substantiating its claim. The Bench also directed the assessee to submit all the documentary evidences before the Ld. CIT(A) in order to substantiate its claim. 2.2 In compliance of the Tribunal s order dated 31.5.2018 passed by the ITAT, Delhi Bench, SMC, New Delhi, as aforesaid, the Ld. CIT(A) passed the impugned order dated 29.10.2018 by stating that income of the assessee was earlier determined by this office at ₹ 33,35,52,203/- in accordance with the provisions of section 251(1)(a) of the I.T. Act, 1961 and disposed off the appeal of the assessee by passing the impugned order dated 29.10.2018. Now the assessee is aggrieved against the impugned order dated 29.10.2018 passed by the Ld. CIT(A)-I, Noida and filed the present appeal before th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... this transaction. 4 You have shown work-in-progress of ₹ 20,49,08,0021-. In this regard, you are required to explain why this amount should not transferred to your P L Alc. 5 Hence, you are therefore in person or through a representative duly authorized required to show cause why an enhancement of your income by ₹ 33,29,52,003/- (i.e. ₹ 20,49,08,002/- + ₹ 12,75,50,000/- + ₹ 494,00/-) should not be made. In this regard, I am directed to request you to furnish the reply of this notice within 2 weeks of the receipt of this notice before the undersigned. Sd/- (Himanshu Soni) Inspector For Commissioner of Income Tax (A)-I Noida 3. Following the afore-said show cause notice dated 16.05.2016 issued by the Inspector of Income Tax, the ld CIT -A passed the appellate order dated 27.09.2016 making aggregate enhancement as mentioned in above show-cause notice. 4. The aforesaid Order of the ld CIT(A) was set aside by the Hon'ble SMC Bench of ITAT, Delhi vide judgment dated 31.05.2018, in ITA 62721DEL/2016, remitting the matter back to the ld. CIT -A to decide the issue in dispute afresh after co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (iv) The other basis of the show cause notice are also absolutely unwarranted and preposterous as the same were wholly misconceived; as the said show cause notice says that 'the balance of reserve and surplus can't be negative' and that why the balance of 'work-in-progress' should not be transferred to profit and loss account; which having no basis or relevancy for any enhancement as per law. ' 7. Without prejudice to the above legal position, the assessee furnished all requisite and cogent documentary evidences on records and has fully discharged its burden in accordance with law by furnishing all requisite documents before the ld. AO, which are neither disproved nor controverted by the ld. CIT(A). 8. The ld. CIT -A made following enhancement in his order, for which assessee hereby submits as under :- (i) Rs. (-) 4,94,001 made u/s 69C relating to negative balance of Reserve Surplus as per the Audited Balance Sheet Para 23 of CIT(A) order dated 27.09.2016, starting at Page 6 thereof. The very premise of the ld. CIT(A) that the balance in reserve and surplus cannot be in negative, is preposterous and frivolous; becaus ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... IT(A) did not make any iota of any enquiries at his end nor he took any recourse of section 133(6) or 131 and therefore he did not have any iota of any basis or findings to make such enhancement. The fact remains that the assessee has fully discharged its onus in accordance with law, duly supported with requisite cogent documentary evidences placed on records, which are neither disproved nor controverted by the ld. CIT(A). The ld. CIT -A abruptly and baldly made the said impugned enhancement, which is made in mechanical manner by taking the balance appearing in balance sheet as on 31.03.2012, which also comprised opening balance of ₹ 701,00,000/-, as evident from the ledger statement placed at Page 18 of the paper book, supported with transactions in bank statements, placed at Page 25-28 of paper book, which at any rate without prejudice, cannot be made subject matter of any additions in this year. The fact remains that the Assessee has furnished on records bonafide, legitimate and verifiable explanation about the nature and source of. the said borrowings duly supported with cogent documentary evidences and therefore it is wrong to suggest at the part of ld. CIT(A) that the e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of account, as also admitted by the ld. CIT -A, who himself picked this figure from the Balance Sheet itself and therefore by no stretch of imagination, the said balance of work-in-progress' can be made any basis of any addition/enhancement u/s 69. Without prejudice to the above, it is also pertinent to point out that para 4 of the show cause notice to the said effect comprised as under :- You have shown work-in-progress of ₹ 20,49,08,0021-. In this regard, you are required to explain why this amount should not transferred to your P L Alc. It may therefore abundantly clear that the show cause notice was only to re-categorize the said amount so as to transfer the same to profit and loss Alc, which is nothing but a compilation of the books of account and there was no whisper about invoking provisions of section 69 nor about any part of such expenses being outside books of account and therefore at any rate without prejudice the said enhancement is beyond the scope of show cause notice and therefore is legally untenable on this count too. Without prejudice to the all above, it is categorically submitted that the assessee furnished on records the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sessee preferred appeal before the ld. CIT(A), Noida and during the course of appellate proceedings, the assessee was in receipt of a show cause notice dated 16.05.2016, issued u/s 251(2), read with section 251(1)(a), signed by the Inspector of Income Tax, regarding enhancement of assessment, directing the assessee to furnish reply to the said notice before him being the Inspector of Income Tax. 5.1 In compliance of the show cause notice dated 16.5.2016 issued by the Inspector, the Assessee filed a reply and given his explanation with the documentary evidences, but the Ld. CIT(A) feeling dissatisfied with the explanation and documentary evidences and vide his order dated 27.09.2016 enhanced the income of the assessee by ₹ 4,94,001/- u/s. 69C of the I.T. Act, 1961; by ₹ 12,75,00,000/- u/s. 68 of the Act and by ₹ 20,49,08,002/- u/s. 69 of the Act and finally computed the income at ₹ 33,35,52,203/- directing the AO to issue necessary demand notice, as per law. Aggrieved with the order dated 27.9.2016, assessee filed the appeal before the Tribunal which came up for hearing before the SMC ITAT, Bench, New Delhi in ITA No. 6272/Del/2016 and the Tribunal vide ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ope in which the notice was sent by the office of the Ld. CIT(A). Again notice was issued for 29.10.2018 which was received by the assessee and on 26.9.2018 another letter was received from the appellant on the letter head of the appellant itself and signed by the Director stating that counsel for the appellant had requested the adjournment preferably hearing in the 2nd week of November, 2018, but again the Ld. CIT(A) not satisfied with the reasons mentioned by the assessee and the Ld. CIT(A) has determined the income of the assessee on already determined income at ₹ 33,35,52,203/- vide impugned order dated 29.10.2018. 5.3 I have perused the impugned order dated 29.10.2018 passed by the Ld. CIT(A), Noida as well as the Tribunal s order dated 31.5.2018 wherein the Tribunal has set aside the issues in dispute to the Ld. CIT(A) with the specific directions to decide the same afresh, after considering all the evidences as discussed in the Tribunal s order dated 31.5.2018 i.e. paper book containing pages 1-518 in which the assessee has attached the copy of income tax return and computation; balance sheet and profit and loss account; letter dated 23.1.2015 filed before AO givi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... about the ITAT order and in para 2 3 written about the issue of notice to the assessee which was received by the assessee and requested for adjournment. The adjournment of the assessee has been rejected on technical grounds as discussed above and finally refused the adjournment sought by the ld. Counsel for the assesee, which is contrary to the principle of natural justice. In my view Ld. CIT(A) starts its proceedings vide notice dated 03.08.2018 and disposed of the appeal of the assessee by passing the impugned order dated 29.10.2018 which is very short period in passing the impugned order which shows that the same is passed in a haste manner without compliance of the specific directions of the ITAT given vide its order dated 31.5.2018 to the Ld. CIT(A) to decide the issues in dispute afresh, after considering the documentary evidences which the assessee has filed before the Tribunal in the shape of paper book containing pages 1-518 as discussed above. But the Ld. CIT(A) did not bother to examine the same which was already on record as certified by the Ld. Counsel for the assessee. The impugned order has been passed by the Ld. CIT(A) in contravention of the directions of the Tr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... documents/evidences available on records, which are fully verifiable and accepted by the AO after making all enquiries and thus assessee discharged its onus in terms of section 68 of the Act, proving the genuineness, identity and creditworthiness in relation to such transactions and thus no iota of any circumstances existed to warrant issue of any such show cause notice. The other basis of the show cause notice are also absolutely unwarranted as the said show cause notice says that 'the balance of reserve and surplus can't be negative' and that why the balance of 'work-in-progress' should not be transferred to profit and loss account; which having no basis or relevancy for any enhancement as per law. The assessee has furnished all requisite documentary evidences on records and has fully discharged its burden in accordance with law by furnishing all requisite documents before the AO, which are neither disproved nor controverted by the ld. CIT(A). 5.8 I have also perused the page no. 513 of the Paper Book which is a copy of order sheet 16.5.2016 of the Inspector, Sh. Himanshu Soni and the approval dated 17.5.2016 of the Ld. CIT(A)-I and the copy of the show ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 016, which shows that approval was granted by the Ld. CIT(A)-I, Noida on 17.5.2016 and the notice was issued on 16.5.2016 i.e. one day before the approval granted by the Ld. CIT(A), which is contrary to law and facts of the case, meaning thereby that the Inspector is pre-determined to issue the notice without application of mind. Even otherwise, the Inspector is not competent to issue the notice, hence, the notice dated 16.5.2016 issued by the Inspector of Income Tax on which the enhancement was made by the Ld. CIT(A), is invalid and void ab initio and deserve to be canceled. 5.9 As regards, the merits of the case, the Ld. CIT(A) made following enhancement in his order:- (i) Rs. (-) 4,94,001 made u/s 69C relating to negative balance of Reserve Surplus as per the Audited Balance Sheet. Para 23 of CIT(A) order dated 27.09.2016, starting at Page 6 thereof. The very premise of the ld. CIT(A) that the balance in reserve and surplus cannot be in negative, is preposterous and frivolous; because the negative reserves and surplus represents losses suffered by the assessee, which are fully evident from the profit and loss account as well as from the returned income of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ment. The fact remains that the assessee has fully discharged its onus in accordance with law, duly supported with requisite cogent documentary evidences placed on records, which are neither disproved nor controverted by the ld. CIT(A). The ld. CIT(A) abruptly made the said impugned enhancement, which is made in mechanical manner by taking the balance appearing in balance sheet as on 31.03.2012, which also comprised opening balance of ₹ 701,00,000/-, as evident from the ledger statement placed at Page 18 of the paper book, supported with transactions in bank statements, placed at Page 25-28 of paper book, which at any rate without prejudice, cannot be made subject matter of any additions in this year. The fact remains that the Assessee has furnished on records bona-fide, legitimate and verifiable explanation about the nature and source of the said borrowings duly supported with cogent documentary evidences and therefore it is wrong to suggest at the part of ld. CIT(A) that the explanation of the assessee is allegedly not satisfactory and the said purported premise of Ld. CIT(A) is contrary to the documentary evidences on records, which proves that the assessee has been s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... work-in-progress of ₹ 20,49,08,002/-. In this regard, you are required to explain why this amount should not transferred to your P L Alc. It may therefore abundantly clear that the show cause notice was only to re-categorize the said amount so as to transfer the same to profit and loss Alc, which is nothing but a compilation of the books of account and there was no whisper about invoking provisions of section 69 nor about any part of such expenses being outside books of account and therefore at any rate without prejudice the said enhancement is beyond the scope of show cause notice and therefore is legally untenable on this count too. The assessee furnished on records the nature and source of the said 'work-in-progress' duly verified by the ld. AO, supported with all cogent and documentary evidences placed on records, copies at pages 54-498 of the paper book, comprising the following documents :- I. Break-up of 'work-in-progress' and title deed of land. Pages 56-96 of paper book II. Ledger and vouchers pertaining to expenses incurred towards 'work-in- progress'. Pages 99-487 of paper book III. Location Map and approved Map of the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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