M/s. Thirumurugan Traders, Erode V. ITO, Erode

CO 151/CHNY/2012

• Counselvise Citation: [2013] 122 COUNSELVISE.COM (IT) 8463 (ITAT-CHENNAI)
• Duration Of Justice: 7 month(s) 22 day(s)
• Appeal Type: Cross Objection
• Pronouncement Date: 15-04-2013
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 15-04-2013
• Assessment Year: 2009-2010
• Appeal Filed On: 24-08-2012
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: S SRIDHAR
• Assessee Lawyers: SHAJI P JACOB IRS
• Keywords: Gift; Income from undisclosed sources
• Section: 143(3); 133A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH, CHENNAI BEFORE DR. O.K.NARAYANAN, VICE-PRESIDENT AND SHRI S.S.GODARA, JUDICIAL MEMBER ITA NO.1550(MDS)/2012 & C.O. NO.151(MDS)/2012 ASSESSMENT YEAR : 2009-10 THE INCOME-TAX OFFICER, WARD I(2), ERODE. VS. M/S.THIRUMURUGAN TRADERS, NO.17(11B) EAST KONGALAMMAN KOIL STREET, ERODE 638 001. PAN AABFT2766P. (APPELLANT) ( RESPONDENT/CROSS OBJECTOR) APPELLANT BY : SHRI SHAJI P JACOB, IRS, ADDL.CIT RESPONDENT BY : SHRI S.SRIDHAR, ADVOCAT E DATE OF HEARING : 15 TH APRIL, 2013 DATE OF PRONOUNCEMENT : 15 TH APRIL, 2013 O R D E R PER DR.O.K.NARAYANAN, VICE PRESIDENT THE APPEAL IS FILED BY THE REVENUE AND THE CROSS OBJECTION BY THE ASSESSEE. THEY RELATE TO THE ASSE SSMENT YEAR 2009-10. THEY ARE DIRECTED AGAINST THE ORDER OF TH E COMMISSIONER OF INCOME-TAX(APPEALS)-I AT COIMBATORE , DATED - - ITA 1550/12 & CO 151/12 2 15-5-2012. THE APPEAL AND THE CROSS OBJECTION ARIS E OUT OF THE ASSESSMENT COMPLETED UNDER SECTION 143(3) OF THE IN COME-TAX ACT, 1961. 2. THE ASSESSEE IS A FIRM ENGAGED IN THE BUSINESS OF TRADING IN GROCERY. IT RETURNED AN INCOME OF ` 2,14,280/- FOR THE ASSESSMENT YEAR UNDER APPEAL. 3. IN THE COURSE OF SCRUTINY ASSESSMENT PROCEEDING S, THE ASSESSING OFFICER SCANNED THROUGH THE RESULTS O F THE SURVEY CONDUCTED ON 12-10-2009 IN THE BUSINESS PREMISES OF THE ASSESSEE UNDER SECTION 133A OF THE ACT. IT IS THE CASE OF THE ASSESSING OFFICER THAT THE ASSESSEE-FIRM HAD ADMITT ED TWO AMOUNTS AS REPRESENTING UNDISCLOSED INCOME OF THE A SSESSEE- FIRM. THE FIRST AMOUNT WAS ` 90,23,600/-, REPRESENTING THE FUNDS UTILIZED BY THE ASSESSEE-FIRM TO PAY OFF THE SUNDRY CREDITORS. THE OTHER AMOUNT WAS ` 30,00,000/-, STATED TO BE UTILIZED BY SHRI S.RAJASELVAN, ONE OF THE PARTNERS OF THE ASSESSEE-F IRM, TO CONSTRUCT A BUILDING. 4. INSPITE OF THE DETAILED OBJECTIONS AND EXPLANAT IONS FILED BY THE ASSESSEE, THE ABOVE SAID TWO AMOUNTS W ERE ADDED - - ITA 1550/12 & CO 151/12 3 BY THE ASSESSING OFFICER TO THE INCOME RETURNED BY THE ASSESSEE-FIRM. 5. THESE ADDITIONS WERE TAKEN IN FIRST APPEALS. 6. REGARDING THE PAYMENTS OF ` 90,23,600/- MADE TO THE SUNDRY CREDITORS, THE ASSESSEE FILED THE DETAIL S BEFORE THE COMMISSIONER OF INCOME-TAX(APPEALS). THE ASSESSEE PRODUCED THE ACCOUNT STATEMENTS OF EACH OF THE CREDITORS AND THE CORRESPONDING PAYMENTS MADE BY THE ASSESSEE THROUGH ITS BANK ACCOUNT. THE COMMISSIONER OF INCOME-TAX(APPEALS) F OUND THAT ALL THESE INFORMATION WERE VERY MUCH AVAILABLE BEFO RE THE ASSESSING OFFICER IN THE COURSE OF ASSESSMENT PROCE EDINGS ITSELF. THE COMMISSIONER OF INCOME-TAX(APPEALS) FO UND THAT THE DETAILS FURNISHED BY THE ASSESSEE REFLECTED THE DET AILS OF PURCHASES MADE BY THE ASSESSEE FIRM UPTO OCTOBER, 2 009 AND THE CORRESPONDING PAYMENTS MADE UPTO THAT DATE. IT WAS ALSO NOTICED BY THE COMMISSIONER OF INCOME-TAX(APPEALS) THAT OPENING BALANCES WERE ALSO PAID OFF BY THE ASSESSEE -FIRM. IN THE LIGHT OF THE ABOVE DOCUMENTARY EVIDENCES, THE COMMI SSIONER OF INCOME-TAX(APPEALS) FOUND THAT THE ASSESSING OFFICE R HAS GONE WRONG IN BLINDLY RELYING ON THE STATEMENTS GIVEN BY THE - - ITA 1550/12 & CO 151/12 4 ASSESSEE-FIRM AT THE TIME OF SURVEY. THE COMMISSIO NER OF INCOME-TAX(APPEALS) FOUND THAT THE PAYMENTS HAVE BE EN PROVED BY THE ASSESSEE AND AS SUCH THE ADDITION OF ` 90,23,600/- WAS NOT CALLED FOR. THE SAID ADDITION WAS DELETED. 7. REGARDING THE ADDITION OF ` 30 LAKHS RELATING TO THE CONSTRUCTION OF A BUILDING BY SHRI S.RAJASELVAN, ON E OF THE PARTNERS OF THE ASSESSEE-FIRM, THE COMMISSIONER OF INCOME- TAX(APPEALS) FOUND THAT THE TOTAL COST OF CONSTRUCT ION INCLUDING THE LAND VALUE WAS ` 76,96,195/-. THE COMMISSIONER OF INCOME- TAX(APPEALS) FOUND THAT AS ON 31-3-2009, SHRI S.RAJ ASELVAN HAS SHOWN THE COST OF CONSTRUCTION OF THE BUILDING AT ` 41 LAKHS. HIS WIFE SMT. D.SATHYA HAS GIVEN A GIFT OF ` 5 LAKHS TO SHRI S.RAJASELVAN IN THE PREVIOUS YEAR RELEVANT TO THE A SSESSMENT YEAR 2009-10. SHE HAS MADE ANOTHER GIFT OF ` 3 LAKHS IN THE PREVIOUS YEAR RELEVANT TO THE ASSESSMENT YEAR 2010- 11. THE COMMISSIONER OF INCOME-TAX(APPEALS) FOUND THAT WITH THE MONEY AVAILABLE WITH SHRI RAJASELVAN AND THE MONEY PROVID ED BY HIS WIFE, PRIMA FACIE IT WAS POSSIBLE FOR HIM TO CONSTR UCT THE BUILDING UPTO THE STAGE AS IT STOOD ON THE CLOSE OF THE PREV IOUS YEAR RELEVANT TO THE ASSESSMENT YEAR UNDER APPEAL. THE - - ITA 1550/12 & CO 151/12 5 COMMISSIONER OF INCOME-TAX(APPEALS) FELT THAT MAKIN G AN ADDITION AT THIS STAGE, WHEN THE BUILDING WAS STILL UNDER CONSTRUCTION, WAS PREMATURE AND THE COST OF CONSTRU CTION OF THE BUILDING CAN BE EXAMINED BY THE ASSESSING OFFICER A FTER COMPLETION OF THE CONSTRUCTION. THE COMMISSIONER O F INCOME- TAX(APPEALS) OPINED THAT THE COST OF CONSTRUCTION C AN BE REFERRED TO THE VALUATION CELL AND THE ASSESSING OFFICER CAN ACT ACCORDING TO THE RESULT EMERGING OUT OF THE VALUATION. ACCOR DINGLY, HE DELETED THE ADDITION OF ` 30 LAKHS ALSO. 8. THE REVENUE IS AGGRIEVED AND, THEREFORE, THE APPEAL BEFORE US. 9. THE RELEVANT GROUNDS RAISED BY THE REVENUE IN T HE PRESENT APPEAL READ AS BELOW:- 1. THE LEARNED CIT(A) HAS ERRED IN HOLDING THAT TH E SURVEY TEAM HAS NOT BROUGHT ON RECORD TO SHOW THAT THE ASSESSEE HAS EARNED UNACCOUNTED INCOME. HE HAS FAILED TO APPRECIATE THAT THE PARTNER SHRI RAJASELVAN OF THE ASSESSEE FIRM HAD GIVEN A STATEMENT DURING SURVEY THAT HE HAD TAKEN - - ITA 1550/12 & CO 151/12 6 ` 30,00,000/- FROM THE FIRM DURING THE F.Y. 2008-09 WHICH REPRESENTS UNACCOUNTED INCOME OF THE FIRM. 2. THE LEARNED CIT(A) OUGHT NOT TO HAVE RELIED ON THAT STATEMENT RETRACTED BY THE PARTNER SHRI RAJASELVAN OF THE ASSESSEE WHO HAD EARLIER ACCEPTED DURING SURVEY THAT THEY HAD MADE MONEY NOT REFLECTED IN THE BOOKS OF ACCOUNT TO THE TUNE O F ` 90,23,600/- WHICH WERE USED FOR SETTLING THE CREDITORS. 3. THE LEARNED CIT(A) OUGHT TO HAVE CONSIDERED THAT THE CREDIT BALANCES SHOWN TO THE TUNE OF ` 90,23,600/- WILL NOT STAND THE TEST OF VERIFICATIO N SINCE SUCH CREDITORS WERE SETTLED OUTSIDE THE BOOKS FROM INCOME GENERATED BY THE FIRM IN ITS BUSINESS. 4. THE LEARNED CIT(A) OUGHT TO HAVE APPRECIATED THAT THE ADDITION OF ` 90,23,600/- WAS MADE BY THE A.O. ONLY AFTER VERIFICATION OF THE ADDRESS OF THE CREDITORS SHOWN BY THE ASSESSEE TO WHICH THE A.O. HAD SENT LETTERS OF CONFIRMATION BUT WERE RETURNED WITH REMARKS LEFT WITHOUT INTIMATION . - - ITA 1550/12 & CO 151/12 7 10. WE HEARD SHRI SHAJI P JACOB, THE LEARNED COMMISSIONER OF INCOME-TAX APPEARING FOR THE REVENU E AND SHRI S.SRIDHAR, THE LEARNED COUNSEL APPEARING FOR T HE RESPONDENT-ASSESSEE. ON GOING THROUGH THE ORDERS O F THE ASSESSING OFFICER AND THE COMMISSIONER OF INCOME- TAX(APPEALS), WE FIND THAT THE ADDITIONS WERE MADE BY THE ASSESSING OFFICER SOLELY RELYING ON THE STATEMENTS FURNISHED BY THE PARTNERS OF THE ASSESSEE-FIRM AT THE TIME OF SU RVEY. IF THE ADMISSION MADE IN THE COURSE OF SURVEY IS KEPT ASID E FOR A MOMENT, IT IS VERY PERTINENT TO NOTE THAT THE ASSES SEE FIRM HAS PROVED THE PAYMENTS MADE TO SUNDRY CREDITORS FROM T HE ACCOUNTED FUNDS AVAILABLE WITH THE ASSESSEE-FIRM. THE ASSESSEE FIRM HAS FURNISHED THE DETAILS OF PURCHASE S IT HAD MADE FROM DIFFERENT CREDITORS. THE ACCOUNT COPIES OF TH E SUNDRY CREDITORS WERE PRODUCED BEFORE THE ASSESSING OFFICE R AND THE COMMISSIONER OF INCOME-TAX(APPEALS). ALL THE PURCH ASE ENTRIES ARE SUPPORTED BY PURCHASE INVOICES AND OTHER DOCUME NTS. THE PURCHASES ARE NOT AT ALL DOUBTED BY THE ASSESSING O FFICER. THE DOUBT IS ONLY IN RESPECT OF THE PAYMENTS MADE TO TH OSE PARTIES FROM WHOM THE ASSESSEE HAD PURCHASED THE GOODS, I.E ., THE - - ITA 1550/12 & CO 151/12 8 SUNDRY CREDITORS. THE ASSESSEE HAS ALSO FURNISHED THE DETAILS OF THE PAYMENTS MADE BY THE ASSESSEE-FIRM TO THOSE CRE DITORS, WHICH SHOWED THAT THE PAYMENTS WERE MADE THROUGH TH E BANK ACCOUNT OF THE ASSESSEE-FIRM. ALL SUCH PAYMENTS MA DE TO THE SUNDRY CREDITORS ARE REFLECTED IN THE REGULAR ACCOU NTS MAINTAINED BY THE ASSESSEE FIRM. WHEN THE PAYMENTS ARE REFLEC TED IN THE REGULAR ACCOUNTS OF THE ASSESSEE-FIRM, THE SIMPLE C ONCLUSION COMING OUT IS THAT ALL SUCH PAYMENTS MADE BY THE AS SESSEE TO THE SUNDRY CREDITORS ARE ACCOUNTED PAYMENTS. WHEN THE PAYMENTS ARE ACCOUNTED IN THE BOOKS AND THE SOURCES ARE AUTOMATICALLY EXPLAINED AS THE BUSINESS FUNDS OF TH E ASSESSEE- FIRM, THERE IS NO REASON TO TREAT SUCH PAYMENTS AS UNACCOUNTED INCOME. LIKEWISE, IT IS QUITE PREMATURE ON THE PAR T OF THE ASSESSING OFFICER TO MAKE ADDITION AGAINST THE COST OF CONSTRUCTION OF THE BUILDING WHICH WAS STILL UNDER CONSTRUCTION. THE COST OF CONSTRUCTION OF THE BUILDING, WHICH WAS INCOMPLETE, HAS NOT BEEN ASCERTAINED BY VALUATION. THE FINAL P ICTURE WOULD EMERGE ONLY WHEN THE CONSTRUCTION IS COMPLETE. DUR ING THE PERIOD OF CONSTRUCTION, THE PARTNER OF THE ASSESSEE , WHO IS THE OWNER OF THE BUILDING, HAD SPENT MONEY FROM TIME TO TIME, FOR - - ITA 1550/12 & CO 151/12 9 WHICH HE HAS EXPLAINED THE CORRESPONDING FUNDS AVAI LABLE IN HIS HANDS. IN ADDITION TO HIS OWN FUNDS, THE FUNDS GIV EN BY HIS WIFE BY WAY OF GIFTS WERE ALSO AVAILABLE. THOSE GIFTS H AVE BEEN DISCLOSED IN THE RETURNS FILED BY THE WIFE OF THE P ARTNER. IN SUCH CIRCUMSTANCES IT IS NOT POSSIBLE TO IMPUTE A CASE O F UNDISCLOSED INVESTMENT AGAINST AN INCOMPLETE BUILDING. 11. THEREFORE, WE FIND THAT BOTH THE ADDITIONS WER E MADE ONLY ON THE BASIS OF EXTEMPORE STETEMENTS/ADMI SSIONS MADE BY THE PARTNERS AT THE TIME OF SURVEY. THE HO NBLE HIGH COURT OF KERALA IN THE CASE OF PAUL MATHEWS & SONS VS CIT, 263 ITR 101 HAS HELD THAT ADMISSIONS AND STATEMENTS OBT AINED IN THE COURSE OF SURVEY ARE NOT SUBSTANTIAL EVIDENCES. TH EY ARE NOT CONCLUSIVE PROOF TO HOLD AGAINST THE ASSESSEE. WHE REVER THE ASSESSEES ARE HAVING MATERIALS TO REBUT THE STATEME NTS AND ADMISSIONS GIVEN IN THE COURSE OF SURVEY, SUCH ADMI SSIONS AND STATEMENTS CANNOT BE ACTED UPON AS EVIDENCE AGAINST THE ASSESSEE TO MAKE ADDITIONS. WHATEVER IS PROVED BY MATERIAL EVIDENCE HAS TO BE ACCEPTED. THEREFORE, AS FAR AS THE PRESENT CASE IS CONCERNED, WE FIND THAT THE COMMISSIONER OF INCOME- TAX(APPEALS) IS JUSTIFIED IN DELETING BOTH THE ADDI TIONS MADE BY - - ITA 1550/12 & CO 151/12 10 THE ASSESSING OFFICER. THE APPEAL FILED BY THE REV ENUE IS LIABLE TO BE DISMISSED. 12. AS FAR AS THE CROSS OBJECTION FILED BY THE ASS ESSEE IS CONCERNED, IT IS ONLY SUPPORTING THE ORDER PASSE D BY THE COMMISSIONER OF INCOME-TAX(APPEALS). THE APPEAL FI LED BY THE REVENUE HAVING BEEN DISMISSED, THE CROSS OBJECTION FILED BY THE ASSESSEE BECOMES INFRUCTUOUS. 13. IN RESULT, THE APPEAL FILED BY THE REVENUE AND THE CROSS OBJECTION FILED BY THE ASSESSEE ARE DISMISSED . ORDERS PRONOUNCED ON MONDAY, THE 15 TH OF APRIL, 2013 AT CHENNAI. SD/- SD/- (S.S.GODARA) (DR. O.K.NARAYANAN) JUDICIAL MEMBER VICE-PRESIDENT CHENNAI, DATED, THE 15 TH APRIL, 2013. V.A.P. COPY TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR 6. GF.