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TMI Blog2020 (3) TMI 423X X X X Extracts X X X X X X X X Extracts X X X X ..... company is a Private Limited Company engaged in the business of real estate development. During the course of assessment proceedings, assessee could not produce the confirmation of balances from 4 creditors in the balance sheet as on 31.3.2012 amounting to Rs. 6,21,454/- i.e. in respect of (i) M/s Megicle India Tour Rs. 1,33,704/- (ii) M/s Gromor Food Nursery Rs. 2,16,600/- (iii) M/s TZ Enterprises Rs. 1,40,000/- & (iv) M/s Wing Travels Rs. 1,31,150/-. Assessee submitted certain account statement in support of sundry creditors, but could not produce supporting bills amounting to Rs. 2,345,750/- i.e. in respect of (i) Neutral Publication Home Limited Rs. 1,34,750/- and (ii) Sahara India Mass Communication Rs. 1,00,000/-. During the assessment year the assessee has shown the addition on account of generator set amounting to Rs. 2,38,000/- and the same was reflected under the head 'Plant & Machinery'. Assessee was unable to produce the bill of such addition and in the absence of the documentary evidences of this addition amounting to Rs. 2.38 lacs, the AO added the same to the income of the assessee, after considering all the details and documents filed by the assessee. The AO finall ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... unsel for the assessee containing pages no. 1-518 in which he has attached the various documentary evidences for nullifying the impugned order passed by the Ld. CIT(A) and he requested that the appeal filed by the assessee may be accepted and the impugned order dated 29.10.2018 of the Ld. CIT(A) wherein he has enhanced the addition may be cancelled. For the sake of convenience, the synopsis filed by the Ld. Counsel for the assessee before me is reproduced as under:- "1. The Appellant is a corporate assessee engaged in the business of real estate development. The returned income declaring loss at (-) 494,0011- under section 139 was filed. The case was selected for scrutiny and the ld. AO made additions of Rs. 10,94,204/- and thus assessed the total income at Rs. 6,00,200/-. 2. The Assessee preferred appeal u/s 246A before the ld. CIT(A), Noida, against the assessment order. 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 the und ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... otice of enhancement under section 251(2) of the Income Tax Act, 1961 and thus the impugned enhancement so made in the said order is without jurisdiction. 6. As your honour will kindly appreciate from the show cause notice dated 16.05.2016, the same is illegal, arbitrary and legally untenable, as under :- (i) The said show cause notice was issued by the Inspector of Income Tax, directing the assessee to furnish reply thereof before him being the undersigned, having no authority in law to make any enhancement in appellate proceedings and thus he illegally assumed the function of CIT(A), which is bad iri law and thus the said show cause notice is null and void ab-initio. (ii) The said show cause notice was absolutely unfounded; as no iota of any enquiries or findings were made by office of CIT -A nor any iota of any circumstances exist warranting issue of such notice and thus the same is absolutely arbitrary, bald, unwarranted and without any basis and thus bad and untenable in law, because issue of said show cause notice is not merely a ritual, but it is very vital and essential being pre-requisite to assume jurisdiction for enhancement of assessment and therefore such impugne ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ble and explained and the same was also verified by the ld. AO and accepted as such and thus the same does not warrant to make any additions/enhancement under any circumstances and by no stretch of imagination, section 69C has any applicability to the same and therefore the same is liable to be deleted. (ii) Rs. 12,75,00,000 made u/s 68 relating to 'Short term Borrowings' as appearing in the Audited Balance Sheet:- Para 24 of CIT(A) order dated 27.09.2016, starting at Page 7 thereof The ld. CIT -A made the afore--said impugned enhancement in most arbitrary and mechanical manner without any basis, grossly ignoring all requisite and cogent documentary evidences furnished on records to prove the identity, the genuineness of transactions and creditworthiness ofthe lender, as under :- (a) Written Confirmation - - Page 17 of paper book (b) Ledger statement - Page 18-19 of paper book ( c) Income Tax PAN Card - Page 20 of paper book (d) Income Tax Returns - Page 21-22 of paper book ( e) Bank Statements - Page 23-53 of paper book (f) Partnership Deed - Page 494-498 of paper book All such documents were fully examined and verified by the ld. AO. The said short ter ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee, the same is liable to be deleted/ quashed. (iii) Rs. 20,49,08,002 made uls 69 relating to 'work-inprogress' as appearing under 'Current Assets' in the Audited Balance Sheet:- Para 25 of CIT(A) order dated 27.09.2016, starting at Page 7 thereof The ld. CIT(A) made the afore-said impugned enhancement in most arbitrary, unlawful and mechanical manner U/S 69, which has no applicability to the same as the assessee has duly accounted for and recorded the 'work-in-progress' in its books of account; as fully evident from the audited balance sheet. For ready reference, section 69 of the income Tax Act 1961 is reproduced as under: Unexplained Investments 69. Where in the financial year immediately preceding the assessment year, the assessee has made investments which are not recorded in the books of account, if any, maintained by him for any source of income and the assessee offers no explanation about the nature and source of the investments or the explanation offered by him is not, in opinion of the assessing officer satisfactory, the value of the investments may be deemed to be the income of the assessee for such financial year. Emphasis s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pposed to appear under 'fixed asset schedule' of balance' sheet; whereas in the case of a builder, the land cannot be categorized under fixed asset and therefore such misconceived presumption of ld. CIT -A propelled himself in wrong direction making the impugned unlawful addition/enhancement, which is not legally tenable and is liable to quashed/deleted." 4. On the contrary, Ld. DR relied upon the order of the Ld. First Appellate Authority and stated that assessee remain non-cooperative before the AO as well as Ld. CIT(A) and Ld. CIT(A) has decided the issues in dispute against the assessee, as per law, after giving adequate opportunity of being heard to the assessee, which has not been availed by the assessee. Therefore, he requested that the impugned order passed by the Ld. CIT(A) is as per law, hence, no interference is called for in the well reasoned order passed by the Ld. CIT(A) and the same may be upheld and the appeal of the assessee may be dismissed. 5. I have heard both the parties and carefully considered the rival submissions and perused the orders of the authorities below alongwith the Paper Book containing pages 1-518 alongwith the written synopsis file ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sted that his counsel is down with fever and requested adjournment in the first week of October, 2018. But the Ld. CIT(A) has discussed the adjournment on various technical issues viz. Vakalatnama was undated and as that was on a non-judicial stamp paper of Rs. 100/- which was sold by a registered stamp vendor on 18.8.2018; the appellant could not attend the hearing on the appointed date of hearing on 17.8.2018 and counsel can make a statement on behalf of its client, converse is not permitted in law and a client cannot make a statement on behalf of its counsel. That would amount to putting the cart before the horse. Further, the Vakalatnama mentioned two counsels being Sh. Naresh Bhardwaj, FCA and Sh. Pravind Chand, FCA and both the counsels had accepted and executed the Vakalatnama. The letter of the appellant stated only one counsel being down with fever. Therefore, the other counsel was very well in a position to attend the case of the appellant. This is without prejudice to the fact that the appellant did not enclose any corroborative evidence to prove its contention that the said counsel was down with fever and therefore, was unable to attend the proceedings. Ld. First App ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... had raised queries for loan of Rs. 12.75 crores and work in progress and examined and verified the documents submitted; notice of enhancement dated 16.5.2015 issued by CIT(A); reply of the assessee dated 26.5.2016 informing the CIT(A) about intention of the assessee to avail the benefit of Direct Tax Dispute Resolution Scheme 2016; submission of assessee dated 20.6.2016 reiterating intention to avail the benefit of Director Tax Dispute Resolution Scheme 2016; copy of order sheet maintained by the CIT(A) evidencing that before issuing notice of enhancement dated 16.5.2016 assessment records were called for and seen and Direct Tax Dispute Resolution Scheme 2016. The Bench in its order dated 31.5.2018 has also written that the Ld. Counsel for the assessee has certified that all the aforesaid documentary evidences which is a matter of record and assessee has filed before the Ld. CIT(A) as well as before the AO, but the Ld. CIT(A) has not considered the same in a proper manner which are very essential to be considered and needs to be examined by the ld. CIT(A) afresh. 5.4 Keeping in view of the facts and circumstances of the case, I find that the Tribunal vide its order dated 31.5.2018 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assed the impugned order dated 29.10.2018, which is null and void since the same is passed without issuing any fresh notice of enhancement under section 251(2) of the Income Tax Act, 1961 and thus the impugned enhancement so made in the said order is without jurisdiction and therefore, the same deserve to be cancelled. 5.7 It is also noted that the show cause notice dated 16.05.2016 issued by the Inspector of Income Tax is illegal and untenable, because the said show cause notice was issued by the Inspector of Income Tax, directing the assessee to furnish reply thereof before him, having no authority in law to make any enhancement in appellate proceedings and thus he illegally assumed the function of CIT(A), which is bad in law and thus the said show cause notice is null and void ab-initio. The said show cause notice was absolutely unfounded as no enquiries or findings were made by the Ld. CIT(A) nor any circumstances exist warranting issue of such notice and thus the same is absolutely arbitrary, unwarranted and without any basis and thus bad and untenable in law. It is an admitted fact that issue of said show cause notice is very vital and essential being pre-requisite to assume ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... contesting that you have preferred an appeal against the order of ld. AD and the same is pending is adjudication before this office "2. On examining your balance sheet, it is found that you have shown reserve and surplus of Rs. (-) 494,001, but reserve and surplus can't be negative. In this regard, you are required to explain the same. "3 You have taken an "unsecured loans" of Rs. 12,75,50,0001-. In this regard, you are required to prove the genuineness and creditworthiness of this transaction. "4 You have shown "work-in-progress" of Rs. 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 Rs. 33,29,52,003/- (i.e. Rs. 20,49,08,002/- + Rs. 12,75,50,000/- + Rs. 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 5.8.1 After perusing the aforesaid contents of the orde ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cal manner without any basis, grossly ignoring all requisite and cogent documentary evidences furnished on records to prove the identity, the genuineness of transactions and creditworthiness of the lender, as under :- (a) Written Confirmation - - Page 17 of paper book (b) Ledger statement - Page 18-19 of paper book ( c) Income Tax PAN Card - Page 20 of paper book (d) Income Tax Returns - Page 21-22 of paper book ( e) Bank Statements - Page 23-53 of paper book (f) Partnership Deed - Page 494-498 of paper book All such documents were fully examined and verified by the AO. The said short term borrowings were availed by the assessee from a partnership firm namely Green Field Estates, having Income Tax PAN AAIFG6397 A. Assessee also furnished on records the bank statements of the said party and transactions appearing therein are fully verifiable. The AO also made an independent enquiry by taking recourse of section 133(6) of the Act which was duly complied with by the lender and after all such examination and verification, the AO being satisfied with the explanation given by the assessee, accepted the same. The ld. CIT(A) did not make any enquiry at his end nor he took a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the financial year immediately preceding the assessment year, the assessee has made investments which are not recorded in the books of account, if any, maintained by him for any source of income and the assessee offers no explanation about the nature and source of the investments or the explanation offered by him is not, in opinion of the assessing officer satisfactory, the value of the investments may be deemed to be the income of the assessee for such financial year. The perusal of the above section clearly stipulates that the provisions thereof are applicable only in case of investments which are not recorded in books of account being the transactions outside the books of account. In this case, the balance of 'work-in-progress of Rs. 20,49,08,002/- is duly appearing in the Audited Balance Sheet under the head 'current assets', relevant page 11 of the paper book, and therefore the same stood duly recorded in books 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. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Ld. CIT(A) for the enhancement notice, but the same has not been done by the Ld. CIT(A), which is contrary to law and facts on the file and hence, the impugned order is not sustainable in the eyes of law. Further, the notice dated 16.5.2016 issued by the Inspector of Income Tax where the approval of the Ld. CIT(A)-I, Noida was of dated 17.5.2018, which shows the pre-determined mind of the Inspector and non application of mind of the authorities below and even the Inspector of Income is not competent to issue such notice. Even otherwise, on perusing the documentary evidences filed by the Ld. Counsel for the assessee in the shape of paper book on the issues in dispute which I have discussed in the preceding paragraphs, I am of the view that the 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, I cancel the impugned order dated 29.10.2018 by accepting the appeal filed by the assessee. 7. In the result, the Appeal filed by the Assessee stands allowed. Order pronounced on 02 ..... 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