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IN THE INCOME TAX APPELLATE TRIBUNAL "D" BENCH, MUMBAI
BEFORE S/SHRI B.R.BASKARAN, AM AND AMARJIT SINGH, JM
./I.T.A. No.514/Mum/2011
( / Assessment Year: 2007-08)
Income Tax Officer 4(1)(4), / M/s Dresswala Fashions Pvt Ltd.,
th
Room No.637A, 6 Floor, Vs.
95, Shantiniketan, Marine Drive,
Aayakar Bhavan, M K Road, Mumbai-400002
Mumbai-400020
( /Appellant) .. ( / Respondent)
CO No.219/Mum/2014
Arising out of I.T.A. No.514/Mum/2011
( / Assessment Year: 2007-08)
M/s Dresswala Fashions Pvt / Income Tax Officer 4(1)(4),
Ltd.,
Vs.
( /Appellant) .. ( / Respondent)
./ ./PAN. :AADCD0607L
/ Revenue by Shri A Ramchandran
/Assessee by Shri Sameer G Dalal
/ Date of Hearing : 16.9.2015
/Date of Pronouncement: 7.10.2015
/ O R D E R
Per B R Baskaran, AM:
The revenue has filed this appeal and the assessee has filed the
cross objection challenging the order dated 28.10.2010 passed by Ld
CIT(A)-10, Mumbai for assessment year 1997-98.
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2. The Revenue is aggrieved by the decision of ld.CIT (A) in reducing
the income estimated by the AO to Rs.50,000/-, thus granting a relief of
Rs.17.50 lakhs to the assessee.
3. The facts are that the assessee did not file return of income for the
year under consideration and hence the AO completed the assessment u/s
144 of the Income Tax Act, 1961(the Act) on 31.3.2000 determining the
total income of the assessee at Rs.1.42 crores. In the appellate
proceedings, the ld.CIT(A) set aside the matter to the file of the AO to
redo the assessment. Since the assessee did not cooperate with the AO,
he again completed the assessment by determining the total income at
Rs.1.42 crores. The assessee challenged the same by filing appeal before
the ld. CIT(A), who deleted the entire addition. Aggrieved, the revenue
filed this appeal before the ITAT and the Tribunal, vide its order dated
18.12.2007 passed in ITA No.2665/Mum/2003, restored the matter to the
file of the AO with a direction to make the assessment afresh.
4. In the setting aside proceedings, the AO determined the total
income at Rs.18 lakhs, which consisted of business income of Rs.16.00
lakhs and interest income of Rs.2.00 lakhs. The assessee challenged the
assessment order by filing the appeal before the ld.CIT(A) who reduced
the income of the assessee to Rs.50,000/-. Aggrieved with this order, the
revenue has filed this appeal before us. In the cross objection, the
assessee is challenging the addition of Rs.50,000/- sustained by Ld CIT(A).
5. We heard the parties and perused the record. The stand of the
assessee before Ld CIT(A) was that it did not carry on any business during
the year under consideration and hence it did not generate any income t
all. However, we notice that the assessee, during the course of original
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assessment proceedings, had stated that the books of account of the year
under consideration are under preparation by the Accountant. The AO
also noticed that the assessee had shown closing stock of Rs.1.40 crores
in the balance-sheet filed for the immediately preceding year i.e.
assessment year 2006-07. There should not be any doubt that the closing
stock shown in AY 2006-07 shall appear as opening stock in the year
under consideration. We notice that the assessee did not offer any
explanation about the disposal of stock stated above. Further, we notice
that the assessee did not furnish any details before the AO and hence the
AO was constrained to compute the business income at Rs.16 lakhs and
interest income of Rs.2 lakhs, both aggregating to Rs.18 lakhs.
6. The ld. CIT(A), however, has noticed that the assessee has shown the
net profit at around Rs.50,000/- only in the immediately preceding years.
Further, the ld. CIT(A) has accepted the contentions of the assessee that it
did not carry on any business during the year under consideration.
Accordingly, the ld. CIT(A) has taken the view that the AO did not bring
any material on record to show that the assessee was carrying on any
business during the year under consideration. Accordingly, he has
determined total income at Rs.50,000/-.
7. There should not be any dispute that the initial burden to prove that
it did not carry on any business lies upon the assessee. Further, in the
present case, neither the assessee nor the ld. CIT(A) could bring anything
to show that the closing stock available as on 31.3.1996 was not sold
during the year under consideration. Under normal business
circumstances, it is unlikely that the opening stock of Rs.1.40 crores shall
be kept idle by any business man. Hence the contention of the assessee
that it did not carry on the business during the year under consideration,
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in our view, defies the logic. We further notice that the assessee did not
bring any material on record to show that it did not carry on the business
during the year under consideration. The assessee, being a private limited
company, is required to maintain proper books of account, get the same
audited and passed in the AGM. Further, it is required to submit the same
with Registrar of Companies. However, the assessee has failed to furnish
the books of account before the AO. It was also not shown that the
Annual report was not filed before the Registrar of Companies also.
8. Under these set of facts, we are not able to agree with the
observation of ld. CIT(A) that the AO should have brought any material on
record to show that the assessee was carrying on business. Rather, in our
view, the assessee should have brought some material on record to show
that it did not carry on business during the year under consideration and it
did not generate any income at all. It is pertinent to note that the Ld
CIT(A), having held so, has himself estimated the income at Rs.50,000/-,
which is in contradiction to the stand taken by him.
9. Since the assessee has failed to furnish any material before the AO
and since the assessee has failed to offer any explanation about the
opening stock of Rs.1.40 crores, the assessing officer had no other option,
but to estimate the income of the assessee. During the course of hearing,
it was pointed out that the business income of the assessee was estimated
at Rs.8.00 lakhs in the first found (original assessment proceedings).
Hence, the income of Rs.16.00 lakhs estimated by the AO in the set aside
proceeding is on the higher side. We further notice that the assessee
company has been in the process of winding up and the bank has initiated
legal proceedings against the assessee. Hence, on a conspectus of the
matter, we are of the view that this issue shall meet the ends of justice, if
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the income of the assessee for the year under consideration is estimated
at Rs.5.00 lakhs. We order accordingly. The order of Ld CIT(A) stands
modified accordingly.
10. Since we have enhanced the estimate by Ld CIT(A), the cross
objection filed by the assessee deserves to be dismissed.
11. In the result, the appeal of the revenue is partly allowed and the
cross objection of the assessee is dismissed.
Pronounced accordingly on 7th Oct, 2015.
7th Oct, 2015
Sd sd
(AMARJIT SINGH) ( B.R. BASKARAN)
JUDICIAL MEMBER ACCOUNTANT MEMBER
Mumbai: 7th Oct, 2015.
.../ SRL , Sr. PS
/Copy of the Order forwarded to :
1. / The Appellant
2. / The Respondent.
3. () / The CIT(A)- concerned
4. / CIT concerned
5. , , /
DR, ITAT, Mumbai concerned
6. / Guard file.
/ BY ORDER,
True copy
(Asstt. Registrar)
, /ITAT, Mumbai
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