Sri.C.O.Johny, Angamally V. DCIT, Ernakulam

CO 34/COCH/2013

• Counselvise Citation: [2013] 124 COUNSELVISE.COM (IT) 7391 (ITAT-COCHIN)
• Duration Of Justice: 3 month(s) 10 day(s)
• Appeal Type: Cross Objection
• Pronouncement Date: 31-12-2013
• Appeal Filed By: Assessee
• Bench Allotted: DB
• Assessment Year: 2008-2009
• Appeal Filed On: 20-09-2013
• Court: TRIBUNAL
• Department Lawyers: M ANIL KUMAR
• Assessee Lawyers: T JOHN GEORGE
• Keywords: Principle of natural justice; Additional evidence; Cost of acquisition; Onus to prove
• Section: 69C; 153A; 68; 69

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL COCHIN BENCH, COCHIN BEFORE S/SHRI N.R.S.GANESAN, JM AND B.R.BASKAR AN, AM I.T.A. NOS. 442 & 443/COCH/2013 ASSESSMENT YEARS : 2009-10 & 2010-11 SHRI C.O. JOHNY, CHERUMADATHIL HOUSE, NAZARETH ROAD, ANGAMALY-683 572. [PAN: AEIPJ 4123M] VS. THE DEPUTY COMMISSIONER OF INCOME-TAX, CENTRAL CIRCLE-1, ERNAKULAM. (ASSESSEE -APPELLANT) (REVENUE-RESPONDEN T) I.T.A. NOS. 493-496/COCH/2013 ASSESSMENT YEARS : 2007-08 -2010-2011 THE DEPUTY COMMISSIONER OF INCOME-TAX, CENTRAL CIRCLE-1, ERNAKULAM. VS. SHRI C.O. JOHNY, CHERUMADATHIL HOUSE, NAZARETH ROAD, ANGAMALY-683 752. (REVENUE -APPELLANT) (ASSESSEE-RESPONDEN T) C.O. NOS. 33-36/COCH/2013 (ARSG. OUT OF I.T.A. NOS. 493-496/COCH/2013) ASSESSMENT YEARS : 2007-08 -2010-11 SHRI C.O. JOHNY, CHERUMADATHIL HOUSE, NAZARETH ROAD, ANGAMALY-683 752. [PAN: AEIPJ 4123M] VS. THE DEPUTY COMMISSIONER OF INCOME-TAX, CENTRAL CIRCLE-1, ERNAKULAM. (ASSESSEE -APPELLANT) (REVENUE-RESPONDEN T) ASSESSEE BY SHRI T. JOHN GEORGE, ADV. REVENUE BY SHRI M. ANIL KUMAR, CIT(DR) DATE OF HEARING 28/11/2013 DATE OF PRONOUNCEMENT 31/12/2013 I.T.A. NOS. 442&443& 493-496/COCH/2013 & C.O. NOS. 33-36/COCH/2013 2 O R D E R PER B.R.BASKARAN, ACCOUNTANT MEMBER: THE APPEALS FILED BY THE REVENUE AND THE CROSS OBJ ECTIONS FILED BY THE ASSESSEE RELATE TO THE ASSESSMENT YEARS 2007-08 TO 2010-11. THE APPEALS FILED BY THE ASSESSEE PERTAIN TO THE ASSESSMENT YEARS 200 9-10 TO 2010-11. ALL THE APPEALS ARE DIRECTED AGAINST THE COMMON ORDER DATED 25-04-2013 PASSED BY LD CIT(A)-I, KOCHI. 2. THE FACTS RELATING TO THE CASE ARE STATED IN BRI EF. THE ASSESSEE WAS WORKING AS A HEAD LOAD WORKER IN FCI DEPOT AT ANGAM ALY. HE STARTED BUSINESS IN REAL ESTATE. HE WAS SUBJECTED TO SEARCH AND SEIZUR E OPERATION BY THE REVENUE ON 19-02-2010. CONSEQUENT TO THE SEARCH OPERATIONS, T HE ASSESSEE FILED RETURNS OF INCOME IN RESPONSE TO THE NOTICE ISSUED BY THE AO U NDER SECTION 153A OF THE ACT. THE ASSESSING OFFICER COMPLETED THE ASSESSMENTS BY MAKING VARIOUS ADDITIONS. IN THE APPELLATE PROCEEDINGS, THE LD. CIT(A) ALLOWE D THE APPEALS FULLY IN SOME YEARS AND PARTLY IN OTHER YEARS BY PASSING A COMMON ORDER FOR ALL THE YEARS. AGGRIEVED BY THE ORDER OF THE LD. CIT(A), BOTH THE ASSESSEE AND THE REVENUE HAVE FILED THESE APPEALS BEFORE US. THE ASSESSEE H AS ALSO FILED CROSS OBJECTIONS TO SUPPORT THE ORDER OF THE LD. CIT(A) AGAINST THE APPEALS FILED BY THE REVENUE. 4. WE SHALL FIRST TAKE UP THE APPEAL FILED BY THE R EVENUE FOR THE ASSESSMENT YEAR 2007-08 WHEREIN THE REVENUE IS CONTESTING THE FOLLOWING ISSUES: (A) ENHANCEMENT OF OPENING CASH BALANCE. (B) ACCEPTANCE OF CLAIM OF AVAILABILITY O F AGRICULTURAL INCOME. (C) ACCEPTANCE OF LOAN OF RS. 12.00 LAKH S. I.T.A. NOS. 442&443& 493-496/COCH/2013 & C.O. NOS. 33-36/COCH/2013 3 4.1 THE FACTS RELATING TO THE ABOVE SAID THREE ISSUES ARE STATED IN BRIEF. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE AS SESSING OFFICER ASKED THE ASSESSEE TO FURNISH CASH FLOW STATEMENTS FOR ALL TH E YEARS. IN THE CASH FLOW STATEMENT FILED FOR THE YEAR RELEVANT TO THE ASSESS MENT YEAR 2007-08, THE ASSESSEE DECLARED OPENING CASH AND BANK BALANCE AT RS.3,63,992/-. THE CLOSING CASH AND BANK BALANCE AS ON 31.3.2006 IS TAKEN AS T HE OPENING CASH AND BANK BALANCE AS ON 1.4.2006 IN THE IMMEDIATELY PRECEDI NG YEAR, THE ASSESSING OFFICER HAD RECAST THE CASH FLOW STATEMENT AND ACCO RDINGLY DETERMINED THE CASH AND BANK BALANCE AS AT 31.3.2006 AT RS. 95,500/-. HENCE THE ASSESSING OFFICER, WHILE PREPARING RECAST CASH FLOW STATEMENT, TOOK TH E OPENING CASH AND BANK BALANCE AS RS. 95,500/- IN PLACE OF RS.3,63,992/-. 4.2 BEFORE THE ASSESSING OFFICER, THE ASSESSEE HAD CLAIMED ABOUT AVAILABILITY OF AGRICULTURAL INCOME OF RS.1.00 LAKH DURING THIS YEA R. THE ASSESSING OFFICER NOTICED THAT THE ASSESSEE DID NOT DECLARE THE AGRIC ULTURAL INCOME AS AN ITEM OF CASH INFLOW IN THE CASH FLOW STATEMENT. FURTHER THE ASSESSEE DID NOT PRODUCE ANY MATERIAL BEFORE THE AO TO SUBSTANTIATE THE CLAI M OF AVAILABILITY OF AGRICULTURAL INCOME. HENCE THE ASSESSING OFFICER REJECTED THE S AID CLAIM. 4.3 IN THE CASH FLOW STATEMENT, THE ASSESSEE HAD SH OWN LOAN AMOUNT OF RS.12.00 LAKHS AS AN ITEM OF CASH INFLOW. WHEN E NQUIRED ABOUT THE DETAILS OF THE LOAN, THE ASSESSEE SUBMITTED THAT THE SAID LOAN OF RS. 12.00 LAKHS WAS RECEIVED FROM A PERSON NAMED KOCHUVARKEY (ALIAS YAC OB) BY WAY OF CHEQUE. HOWEVER, THE ASSESSEE DID NOT PRODUCE ANY CONFIRMAT ION LETTER FROM THE SAID CREDITOR. INSTEAD, THE ASSESSEE PRODUCED COPIES OF CHEQUE LEAVES ISSUED BY THE FOLLOWING PERSONS BEFORE THE ASSESSING OFFICER IN S UPPORT OF THE CLAIM OF RECEIPT OF LOAN AMOUNT OF RS.12.00 LAKHS : (A) K.L. KOCHUVARKEY : RS. 3.50 LAKHS (B) JACOB KANNAMPALLY : RS. 4.50 LAKHS (C) JOHNY KANNAMPALLY AND MARY THOMAS : RS. 4.00 LAKHS I.T.A. NOS. 442&443& 493-496/COCH/2013 & C.O. NOS. 33-36/COCH/2013 4 THE AO NOTICED THAT THE ASSESSEE DID NOT FURNISH TH E ADDRESS OF THE CREDITORS AND ALSO ANY DOCUMENT TO PROVE THEIR CREDITWORTHINESS. ACCORDINGLY, THE ASSESSING OFFICER REFUSED TO ACCEPT THE CLAIM OF RECEIPT OF L OAN OF RS.12.00 LAKHS. ACCORDINGLY, IN THE RE-CAST CASH FLOW STATEMENT, TH E ASSESSING OFFICER DID NOT INCLUDE THE AMOUNT OF RS. 12.00 LAKHS REFERRED ABOV E AS AN ITEM OF CASH INFLOW. IN RE-CAST CASH FLOW STATEMENT, THE ASSESSING OFFIC ER ARRIVED AT A CASH SHORTAGE OF RS. 12,24,500/- AND ASSESSED THE SAME AS THE IN COME OF THE ASSESSEE U/S. 69C OF THE ACT. 5. IN THE APPELLATE PROCEEDINGS, THE ASSESSEE FURNI SHED COPIES OF CASH FLOW STATEMENTS PERTAINING TO THE EARLIER PERIODS BEFORE LD CIT(A) AND SUBMITTED THAT THE OPENING CASH AND BANK BALANCE AS ON 1.4.2006 W AS BROUGHT FORWARD FROM THE EARLIER YEAR. THE ASSESSEE ALSO FILED CERTAIN N EW DOCUMENTS TO SUBSTANTIATE THE CLAIM OF AVAILABILITY OF AGRICULTURAL INCOME. THE LD CIT(A) HAS LISTED THE SAID DOCUMENTS AS COPY OF SALE DEED BEARING NO.4690 DATE D 24.11.2000, COPY OF LAND TAX, COPY OF SALE DEED BEARING NO. 4611 DATED 24-11-2000 AND COPY OF SALE DEED DATED 05-02-1997 IN SUPPORT OF THE CLAIM OF AV AILABILITY OF AGRICULTURAL INCOME. THE ASSESSEE ALSO FILED THE COPIES OF CHEQU E LEAVES TO SUPPORT THE CLAIM OF RECEIPT OF LOAN OF RS. 12.00 LAKHS AND ALSO A CO NFIRMATION LETTER OBTAINED FROM THE CREDITOR. IT WAS ALSO CONTENDED THAT THE ABOVE SAID AMOUNT WAS REPAID BY WAY OF CHEQUE. 5.1 ON THE BASIS OF CASH FLOW STATEMENTS RELATI NG TO THE EARLIER PERIODS, THE LD CIT(A) DIRECTED THE ASSESSING OFFICER TO TAKE THE O PENING BALANCE OF CASH AND BANK BALANCE AT RS.3,63,992/-. THE LD. CIT(A) ACCE PTED THE AVAILABILITY OF AGRICULTURAL INCOME BY CONSIDERING THE FRESH DOCUME NTS FURNISHED BEFORE HIM. THE LD. CIT(A) ACCEPTED THE GENUINENESS OF LOAN OF RS.12 LAKHS BY CONSIDERING THE CONFIRMATION LETTER AND COPIES OF CHEQUE LEAVES FILED BEFORE HIM AND ALSO FOR I.T.A. NOS. 442&443& 493-496/COCH/2013 & C.O. NOS. 33-36/COCH/2013 5 THE REASON THAT THE LOAN HAS BEEN REPAID BY WAY OF CHEQUE THROUGH BANKING CHANNELS. AGGRIEVED, THE REVENUE HAS FILED THIS A PPEAL BEFORE US. 6. WE HAVE HEARD RIVAL CONTENTIONS AND CAREFULL Y PERUSED THE RECORD. THE FIRST ISSUE RELATES TO THE OPENING BALANCE OF CASH AND BA NK BALANCES AS ON 1.4.2006. WE NOTICE THAT THE AO HAS ADOPTED THE OPENING CASH AND BANK BALANCE ON THE BASIS OF CASH FLOW STATEMENT PREPARED BY HIM FOR THE IMMEDIATELY PRECEDING YEAR. ACCORDING TO LD D.R, THE ASSESSEE HAS ACCEPT ED THE SAME AND HENCE HE HAS NOT FILED ANY APPEAL. ACCORDINGLY, THE LD D.R CONTENDED THAT THE CASH FLOW STATEMENT PREPARED BY THE AO HAS ATTAINED FINALITY, IN WHICH CASE, THE LD CIT(A) SHOULD HAVE IGNORED THE CASH FLOW STATEMENT PREPAR ED BY THE ASSESSEE. 6.1 ON THE CONTRARY, THE LD A.R SUBMITTED THAT THE CASH FLOW STATEMENT PREPARED BY THE AO FOR THE EARLIER YEARS SUFFERS FR OM MANY ERRORS AND MISTAKES. HE FURTHER SUBMITTED THAT THE AO FAILED TO RECOGNIZ E MANY SOURCES OF RECEIPTS AND IF ALL OF THEM IS CONSIDERED, THEN THE OPENING CASH BALANCE DECLARED BY THE ASSESSEE WOULD BE ACCEPTED. 6.2 WE ARE UNABLE TO AGREE WITH THE CONTENTIONS OF LD A.R. ADMITTEDLY, THE CASH FLOW STATEMENT PREPARED BY THE AO FOR THE EARL IER YEARS HAVE ATTAINED FINALITY, SINCE THE ASSESSEE DID NOT CONTEST THE SA ME BY FILING APPEALS, IN WHICH CASE, THE CLOSING CASH AND BANK BALANCE AS ON 31.3. 2006 AS DETERMINED BY THE AO IS REQUIRED TO BE TAKEN AS THE OPENING CASH AND BANK BALANCE AS ON 1.4.2006. HENCE, WE FIND MERIT IN THE CONTENTIONS OF LD D.R. HENCE, IN OUR VIEW, IT WAS NOT CORRECT ON THE PART OF THE LD CIT( A) TO PLACE RELIANCE ON THE CASH FLOW STATEMENT PREPARED BY THE ASSESSEE, SINCE IT HAS GOT SUBSTITUTED BY THAT ONE PREPARED BY THE AO. ACCORDINGLY, WE SET A SIDE THE ORDER OF LD CIT(A) ON THIS ISSUE RESTORE THAT DETERMINED BY THE ASSESS ING OFFICER. I.T.A. NOS. 442&443& 493-496/COCH/2013 & C.O. NOS. 33-36/COCH/2013 6 7. THE NEXT TWO ISSUES RELATE TO THE CLAIM OF AVAI LABILITY OF AGRICULTURAL INCOME AND THE GENUINENESS OF LOAN RECEIPT OF RS.12.00 LAK HS. ADMITTEDLY, THE ASSESSEE DID NOT FURNISH MOST OF THE DOCUMENTS, WHICH WERE F ILED BEFORE LD CIT(A) IN THE APPELLATE PROCEEDINGS IN RESPECT OF THE ABOVE SAID TWO ISSUES, BEFORE THE AO. WE ALSO NOTICE THAT THE LD CIT(A) HAS NOT CONFRONTE D THE FRESH EVIDENCES BY CALLING FOR A REMAND REPORT FROM THE AO. HENCE, WE FIND MERIT IN THE CONTENTIONS OF THE LD D.R THAT THERE WAS VIOLATION OF PROVISION S OF RULE 46A OF THE INCOME TAX RULES. WITH REGARD TO THE LOAN AMOUNT OF RS.12 .00 LAKHS, WE NOTICE THAT THE ASSESSEE HAS INITIALLY CLAIMED TO HAVE RECEIVED THE SAME FROM A PERSON NAMED SHRI K.L. KOCHUVARKEY ALIAS YACOB. HOWEVER, HE HAS FURNISHED COPIES OF CHEQUE LEAVES ISSUED BY SOME OTHER PERSONS ALSO. BEFORE L D CIT(A), THE ASSESSEE APPEARS TO HAVE SUBMITTED THAT SHRI K.L. KOCHUVARKE Y AND JOHAN KANNAMPALLY ARE ONE AND SAME PERSON. WE NOTICE THAT THE LD CIT (A) HAS ACCEPTED THE SAME WITH OUT CARRYING ANY VERIFICATION. THUS, THERE IS CONFUSION ABOUT THE IDENTITY OF THE CREDITORS. FURTHER WE NOTICE THAT THE ASSESSEE HAS FAILED TO FURNISH ANY DOCUMENT TO PROVE THE CREDIT WORTHINESS OF THE CRED ITORS. SINCE THE ASSESSEE HAS FURNISHED FRESH EVIDENCES BEFORE THE LD CIT(A) AND SINCE THEY WERE NOT CONFRONTED WITH THE AO, IN OUR VIEW, THESE FRESH DO CUMENTS NEED TO BE EXAMINED AT THE END OF THE ASSESSING OFFICER. ACCO RDINGLY, WE SET ASIDE THE ORDER OF LD CIT(A) ON THE ABOVE SAID TWO ISSUES AND RESTORE THEM TO THE FILE OF THE ASSESSING OFFICER WITH THE DIRECTION TO EXAMIN E THESE TWO ISSUES AFRESH AND TAKE APPROPRIATE DECISION IN ACCORDANCE WITH THE LA W. 8. WE SHALL NOW TAKE UP THE APPEAL FILED BY THE REVENUE FOR THE ASSESSMENT YEAR 2008-09. FOLLOWING ISSUES ARE CONTESTED IN TH IS APPEAL:- (A) ENHANCEMENT OF OPENING CASH AND BANK BALANCE. (B) ACCEPTANCE OF AGRICULTURAL INCOME. (C) DELETION OF EXTRA CONSIDERATION PAID ON PURCH ASE OF LAND. I.T.A. NOS. 442&443& 493-496/COCH/2013 & C.O. NOS. 33-36/COCH/2013 7 8.1 IN RESPECT OF OPENING AMOUNT OF CASH AND BA NK BALANCES, WE HAVE ALREADY HELD THAT THE CASH FLOW STATEMENT PREPARED BY THE AO ONLY IS REQUIRED TO BE CONSIDERED. ACCORDINGLY, WE SET ASIDE THE ORDER OF LD CIT(A) ON THIS ISSUE AND RESTORE THAT OF THE ASSESSING OFFICER. HOWEVER WE MAY STATE THAT, IF THE CASH FLOW STATEMENT PREPARED BY THE ASSESSING OFFICER IS AMENDED TO GIVE EFFECT TO THE ORDER OF THE LD CIT(A) OR THE TRIBUNAL, THEN THE CL OSING CASH BALANCE SO DETERMINED IS REQUIRED TO BE CARRIED FORWARD TO THE NEXT YEAR. THE AO IS DIRECTED TO MAKE SUITABLE ADJUSTMENTS ACCORDINGLY. 8.2 WITH REGARD TO THE AGRICULTURAL INCOME, WE NOTICE THAT THE LD CIT(A) HAS ACCEPTED THE SAME ON THE BASIS OF FRESH DOCUMENTS F ILED BEFORE HIM, WHICH WERE NOT CONFRONTED TO THE AO. ACCORDINGLY, WE SET ASID E THE ORDER OF LD CIT(A) ON THIS ISSUE AND RESTORE THE SAME TO THE FILE OF THE ASSESSING OFFICER WITH THE DIRECTION TO EXAMINE THE SAME AFRESH AND TAKE APPRO PRIATE DECISION IN ACCORDANCE WITH THE LAW. 8.3 THE NEXT ISSUE RELATES TO THE ADOPTION OF L AND PURCHASE COST AT RS.2.72 LAKHS AS AN ITEM OF CASH OUTFLOW IN THE CASH FLOW STATEMENT PREPARED BY THE AO. WE DO NOT FIND ANY DISCUSSION IN THE ASSESSMEN T ORDER ON THIS ISSUE. FROM THE ORDER OF LD CIT(A), WE NOTICE THAT THE ASSESSIN G OFFICER HAS TAKEN THE PURCHASE VALUE OF THE LAND ON THE BASIS OF PROJECT ED CASH FLOW STATEMENT FOR THE YEAR ENDED 31.3.2008 FILED WITH THE BANK AUTHORITI ES, WHEREIN THE PURCHASE COST OF LAND WAS SHOWN AT RS.2,72,000/-. HOWEVER, ACCOR DING TO THE ASSESSEE, THE LAND WAS PURCHASED FOR RS.45,800/- ONLY, WHICH IS E VIDENCED BY THE REGISTERED CONVEYANCE DEED. WE NOTICE THAT THE ASSESSING OFFI CER HAS ADOPTED THE VALUE OF RS.2,72,000/- WITHOUT MAKING ANY ENQUIRY. IT IS AL SO NOT THE CASE OF THE AO THAT THE ASSESSEE HIMSELF HAS ADMITTED THE PURCHASE CONS IDERATION AS RS.2,72,000/-. IT IS IN THE COMMON KNOWLEDGE OF EVERY BODY THAT TH E PROJECTED CASH FLOW STATEMENT IS PREPARED ON THE BASIS OF EXPECTED PROB ABILITIES BY MAKING CERTAIN I.T.A. NOS. 442&443& 493-496/COCH/2013 & C.O. NOS. 33-36/COCH/2013 8 ASSUMPTIONS, I.E., IT IS NOT PREPARED ON THE BASIS OF ANY BOOKS OF ORIGINAL ENTRY. HENCE, IN THE FACTS AND CIRCUMSTANCES OF THE CASE, IN OUR VIEW, THE AO WAS NOT JUSTIFIED IN PLACING RELIANCE ON THE PROJECTED CAS H FLOW STATEMENT. ACCORDINGLY, WE DO NOT FIND ANY INFIRMITY IN THE DECISION OF LD CIT(A) ON THIS ISSUE. ACCORDINGLY, WE DIRECT THE AO TO TAKE THE PURCHASE CONSIDERATION OF THE LAND AT THE VALUE SHOWN IN THE CONVEYANCE DEED, INCREASED B Y THE CONNECTED EXPENSES. 9. WE SHALL NOW TAKE UP THE APPEAL FILED BY THE REVENUE FOR THE ASSESSMENT YEAR 2009-10. FOLLOWING ISSUES ARE CONTESTED IN TH IS APPEAL:- (A) ENHANCEMENT OF OPENING CASH AND BANK BALANCE. (B) ACCEPTANCE OF AGRICULTURAL INCOME TO THE TUNE OF RS.3.00 LAKHS. (C) ACCEPTANCE OF RECEIPT OF RS.20.00 LAKHS FROM T HANKACHAN CHENNAKADAN. 9.1 IN RESPECT OF OPENING AMOUNT OF CASH AND BA NK BALANCES, WE HAVE ALREADY HELD THAT THE CASH FLOW STATEMENT PREPARED BY THE AO ONLY IS REQUIRED TO BE CONSIDERED. ACCORDINGLY, WE SET ASIDE THE ORDER OF LD CIT(A) ON THIS ISSUE AND RESTORE THAT OF THE ASSESSING OFFICER. HOWEVER WE MAY STATE THAT, IF THE CASH FLOW STATEMENT PREPARED BY THE ASSESSING OFFICER IS AMENDED TO GIVE EFFECT TO THE ORDER OF THE LD CIT(A) OR THE TRIBUNAL, THEN THE CL OSING CASH BALANCE SO DETERMINED IS REQUIRED TO BE CARRIED FORWARD TO THE NEXT YEAR. THE AO IS DIRECTED TO MAKE SUITABLE ADJUSTMENTS ACCORDINGLY. 9.2 WITH REGARD TO THE AGRICULTURAL INCOME, WE NOTICE THAT THE LD CIT(A) HAS ACCEPTED THE SAME ON THE BASIS OF FRESH DOCUMENTS F ILED BEFORE HIM, WHICH WERE NOT CONFRONTED TO THE AO. ACCORDINGLY, WE SET ASID E THE ORDER OF LD CIT(A) ON THIS ISSUE AND RESTORE THE SAME TO THE FILE OF THE ASSESSING OFFICER WITH THE DIRECTION TO EXAMINE THE SAME AFRESH AND TAKE APPRO PRIATE DECISION IN ACCORDANCE WITH THE LAW. I.T.A. NOS. 442&443& 493-496/COCH/2013 & C.O. NOS. 33-36/COCH/2013 9 10 THE THIRD ISSUE RELATES TO THE CLAIM OF RECE IPT OF LOAN OF RS.20.00 LAKHS. THE FACTS RELATING TO THE SAME ARE DISCUSSED IN BRI EF. IN THE CASH FLOW STATEMENT, THE ASSESSEE DECLARED LOAN AMOUNT OF RS.20.00 LAKHS CLAIMED TO HAVE BEEN RECEIVED FROM SHRI THANKACHAN CHENNAKADAN, AS AN IT EM OF CASH INFLOW. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSEE FILED A CONFIRMATION LETTER OBTAINED FROM THE ABOVE SAID CREDITOR, WHERE IN IT IS STATED THAT THE AMOUNT WAS PAID FOR PURCHASE OF LAND. HOWEVER, IN THE SUBMISS IONS GIVEN BY THE ASSESSEE ON 14.12.2011, IT WAS STATED THAT THE LOAN WAS TAKEN F OR PURCHASING A NEWLY CONSTRUCTED HOUSE. HOWEVER, ACCORDING TO THE AO, T HE ASSESSEE HAS FAILED TO PROVE THE IDENTITY AND CREDIT WORTHINESS OF THE CRE DITOR. ACCORDINGLY, THE AO IGNORED THE LOAN AMOUNT CITED ABOVE IN THE RECAST C ASH FLOW STATEMENT PREPARED BY HIM. 10.1 THE LD CIT(A) CONSIDERED THE EXPLANATIONS GIVEN BY THE ASSESSEE AND ALSO THE DOCUMENTS FURNISHED BEFORE HIM. BEFORE LD CIT(A), IT WAS SUBMITTED THAT THE IMPUGNED LOAN AMOUNT HAS BEEN REPAID SUBSE QUENTLY BY WAY OF CHEQUES. IT WAS ALSO SUBMITTED THAT ALL THE EVIDENC ES FURNISHED BEFORE LD CIT(A) HAVE ALREADY BEEN GIVEN TO THE AO. THE LD CIT(A) A PPEARS TO HAVE CONVINCED WITH THE GENUINENESS OF LOAN RECEIPT, SINCE THE ASS ESSEE HAD REPAID IT SUBSEQUENTLY. ACCORDINGLY, THE FIRST APPELLATE AUT HORITY DIRECTED THE AO TO VERIFY THE CLAIM OF REPAYMENT OF THE LOAN AMOUNT AND ALLOW THE CLAIM OF THE ASSESSEE, IF IT IS FOUND CORRECT. THE REVENUE IS AGGRIEVED B Y THE SAID DECISION. 10.2 WE HAVE HEARD THE RIVAL CONTENTIONS AND CA REFULLY PERUSED THE RECORD. WE NOTICE THAT THE CONFIRMATION LETTER WAS GIVEN ON 16.8.2010 BY SHRI THOMAS CHENNIKADAN. IN THE SAID LETTER, HE HAS ONLY STATE D THAT THE AMOUNT WAS PAID OUT OF HIS NRE ACCOUNT. WE NOTICE THAT THE ASSESSEE DID NOT FURNISH THE COPIES OF BANK ACCOUNT AND OTHER DOCUMENTS TO PROVE THE CR EDIT WORTHINESS OF SHRI I.T.A. NOS. 442&443& 493-496/COCH/2013 & C.O. NOS. 33-36/COCH/2013 10 THOMAS. HOWEVER, IT SEEMS THAT THE LD CIT(A) WAS C ARRIED AWAY BY THE FACT OF REPAYMENT OF LOAN CITED ABOVE. IT IS A WELL SETTLE D PROPOSITION OF LAW THAT THE REPAYMENT OF LOAN WILL NOT DISCHARGE THE ASSESSEE F ROM THE PRIMARY BURDEN OF PROOF PLACED UPON HIM UNDER SEC. 68 OF THE ACT. UN DER THE PROVISIONS OF SEC. 68 OF THE ACT, THE PRIMARY BURDEN TO PROVE THE CASH CR EDIT IS PLACED UPON THE ASSESSEE, I..E, IT IS THE DUTY OF THE ASSESSEE TO P ROVE THREE MAIN INGREDIENTS VIZ., THE IDENTITY OF THE CREDITOR, THE CREDIT WORTHINESS OF THE CREDITOR AND THE GENUINENESS OF TRANSACTIONS. HENCE, THE ADDITIONS MADE U/S 68 OF THE ACT REQUIRE TO BE EXAMINED WITH THE THREE PARAMETERS CI TED ABOVE. ADMITTEDLY, THE LD CIT(A) HAS NOT EXAMINED THE LOAN RECEIPT CITED A BOVE UNDER THE THREE PARAMETERS REFERRED ABOVE. HENCE, IN OUR VIEW, THE LD CIT(A) WAS NOT RIGHT IN LAW IN DIRECTING THE AO TO ACCEPT THE LOAN BY VERIF YING THE DETAILS OF REPAYMENT OF LOAN. 10.3 HOWEVER, WE ARE OF THE VIEW THAT THE VERY FACT THAT THE ASSESSEE HAS REPAID THE AMOUNT CANNOT BE ALTOGETHER IGNORED, SIN CE IT THROWS SOME LIGHT ON THE GENUINENESS OF THE LOAN RECEIPT. WE NOTICE TH AT THE LOAN AMOUNT WAS GIVEN OUT OF NRE ACCOUNT, MEANING THEREBY, THE CREDITOR WA S AN NRI, IN WHICH CASE, THE POSSIBILITY OF HAVING ENOUGH MEANS CANNOT BE AL TOGETHER RULED OUT. HOWEVER, AS STATED EARLIER, THE ASSESSEE HAS ALSO F AILED TO BRING ON RECORD THE DOCUMENTS TO SHOW THE CREDIT WORTHINESS OF THE CRED ITORS. ACCORDINGLY, IN THE INTEREST OF NATURAL JUSTICE, WE ARE OF THE VIEW THA T THIS ISSUE REQUIRES FRESH EXAMINATION AT THE END OF THE ASSESSING OFFICER BY DULY CALLING FOR NECESSARY EVIDENCES. ACCORDINGLY, WE SET ASIDE THE ORDER OF LD CIT(A) ON THIS ISSUE AND RESTORE THIS ISSUE TO THE FILE OF THE ASSESSING OFF ICER WITH THE DIRECTION TO EXAMINE THIS ISSUE AFRESH AND TAKE APPROPRIATE DECISION IN ACCORDANCE WITH THE LAW. THE ASSESSEE IS ALSO DIRECTED TO FURNISH EVIDENCES TO P ROVE THE IDENTITY AND CREDIT WORTHINESS OF THE CREDITOR AND THE GENUINENESS OF T HE TRANSACTION. I.T.A. NOS. 442&443& 493-496/COCH/2013 & C.O. NOS. 33-36/COCH/2013 11 11. WE SHALL NOT TAKE UP THE APPEAL FILED BY TH E REVENUE FOR THE ASSESSMENT YEAR 2010-11. FOLLOWING ISSUES ARE CONTESTED IN TH IS APPEAL:- (A) ENHANCEMENT OF OPENING CASH AND BANK BALANCE. (B) ACCEPTANCE OF AGRICULTURAL INCOME TO THE TUNE OF RS.3.00 LAKHS. (C) DELETION OF ADDITIONS MADE ON ACCOUNT OF LIC AMOUNT RECEIPT, TIMBER SALES, GOLD SALES AND CHITTY RECEIPTS. 11.1 IN RESPECT OF OPENING AMOUNT OF CASH AND B ANK BALANCES, WE HAVE ALREADY HELD THAT THE CASH FLOW STATEMENT PREPARED BY THE AO ONLY IS REQUIRED TO BE CONSIDERED. ACCORDINGLY, WE SET ASIDE THE ORDER OF LD CIT(A) ON THIS ISSUE AND RESTORE THAT OF THE ASSESSING OFFICER. HOWEVER WE MAY STATE THAT, IF THE CASH FLOW STATEMENT PREPARED BY THE ASSESSING OFFICER IS AMENDED TO GIVE EFFECT TO THE ORDER OF THE LD CIT(A) OR THE TRIBUNAL, THEN THE CL OSING CASH BALANCE SO DETERMINED IS REQUIRED TO BE CARRIED FORWARD TO THE NEXT YEAR. THE AO IS DIRECTED TO MAKE SUITABLE ADJUSTMENTS ACCORDINGLY. 11.2 WITH REGARD TO THE AGRICULTURAL INCOME, WE NOTICE THAT THE LD CIT(A) HAS ACCEPTED THE SAME ON THE BASIS OF FRESH DOCUMENTS F ILED BEFORE HIM, WHICH WERE NOT CONFRONTED TO THE AO. ACCORDINGLY, WE SET ASID E THE ORDER OF LD CIT(A) ON THIS ISSUE AND RESTORE THE SAME TO THE FILE OF THE ASSESSING OFFICER WITH THE DIRECTION TO EXAMINE THE SAME AFRESH AND TAKE APPRO PRIATE DECISION IN ACCORDANCE WITH THE LAW. 12.1 THE LAST ISSUE RELATES TO THE ACCEPTANCE O F CLAIM OF RECEIPT OF MONEY FROM LIC, TIMBER SALES, GOLD SALES AND CHITTY. TH E AO NOTICED THAT THE ASSESSEE HAD GIVEN AN ADVANCE OF RS.20.00 LAKHS TO PURCHASE OF A RICE MILL NAMED NAVARATHAN RICE MILL ALONG WITH THREE OTHER PERSONS . THOUGH THE ASSESSEE HAD DECLARED THE SAID PAYMENT IN THE BALANCE SHEET, YET THE AO NOTICED THAT THE I.T.A. NOS. 442&443& 493-496/COCH/2013 & C.O. NOS. 33-36/COCH/2013 12 ASSESSEE HAD ALSO INTRODUCED, INTER ALIA, FOLLOWING CASH CREDITS IN THE BOOKS TO EXPLAIN THE SOURCE:- LIC AMOUNT RECEIVED 1,00,000 TIMBER SALES 1,00,000 GOLD SALES 2,00,000 CHITTY RECEIPTS 3,80,000 ------------- 7,80,000 ======= ACCORDING TO AO, THE ASSESSEE DID NOT FURNISH ANY P ROOF FOR THE RECEIPT OF LIC AND CHITTY AMOUNTS. THE COPIES OF BILLS SUBMITTED FOR TIMBER SALES WERE DATED 04.8.09 AND 08.9.09 AND ACCORDING TO AO, THEY WERE BILLS FOR PURCHASE OF TIMBERS BY THE ASSESSEE. THE GOLD WAS CLAIMED TO HAVE BEEN SOLD TO A PERSON NAMED JAISY ANTORY AND HE HAD GIVEN A CONFIRMATION LETTER . ACCORDING TO THE AO, THE MODE OF PAYMENT WAS NOT SPECIFIED IN THE LETTER AND FURTHER THE SAID SALE IS AGAINST HUMAN PROBABILITIES, I.E., THE NORMAL PRACT ICE IS TO EXCHANGE OLD GOLD FOR PURCHASE OF NEW ONES. ACCORDINGLY THE AO REJECTED THE CLAIM OF RECEIPT OF MONEY FROM LIC, TIMBER SALES AND SALE OF GOLD. ACC ORDINGLY, THE AO ASSESSED THE ABOVE SAID CASH CREDITS ALONG WITH THE AGRICULTURAL INCOME OF RS.6.00 LAKHS, AS THE INCOME OF THE ASSESSEE. 12.2 BEFORE LD CIT(A), THE ASSESSEE SUBMITTED C OPIES OF DOCUMENTS EVIDENCING THE RECEIPT OF ALL THE AMOUNTS LISTED AB OVE AND THE FIRST APPELLATE AUTHORITY ACCEPTED THE SAME. THE REVENUE IS AGGRIE VED BY THIS DECISION OF LD CIT(A). THE REVENUE IS ALSO CONTENDING THAT LD CIT (A) HAS VIOLATED RULE 46A OF THE INCOME TAX RULES BY ACCEPTING FRESH DOCUMENTS. HOWEVER, THE ASSESSEE IS CONTESTING THIS CLAIM IN THE CROSS OBJECTION. 12.3 WE NOTICE THAT THE AO HAS SPECIFICALLY OBS ERVED IN THE ASSESSMENT ORDER THAT THE ASSESSEE DID NOT FURNISH PROOF FOR RECEIPT OF LIC AMOUNT AND CHITTY AMOUNT, MEANING THEREBY THE AO DID NOT EXAMINE THES E EVIDENCES. THOUGH THE LD A.R SUBMITTED THAT THE RELEVANT DOCUMENTS WERE F ILED BEFORE THE AO AND IT I.T.A. NOS. 442&443& 493-496/COCH/2013 & C.O. NOS. 33-36/COCH/2013 13 MAY ALSO BE TRUE ALSO, YET THE FACTS REMAIN THAT TH E AO DID NOT EXAMINE THOSE DOCUMENTS AND IT MIGHT HAVE ESCAPED THE ATTENTION O F THE ASSESSING OFFICER. THOUGH THE AO HAS MADE SPECIFIC OBSERVATION THAT TH E EVIDENCES SUPPORTING RECEIPT OF MONEY FROM LIC AND CHITTY WERE NOT FURNI SHED BEFORE HIM, YET THE LD CIT(A) HAS PROCEEDED TO CONSIDER THEM WITHOUT CONFR ONTING THE SAME TO THE AO. ACCORDINGLY, IN OUR VIEW, THE EVIDENCES RELATING TO LIC AND CHITTY RECEIPTS REQUIRE EXAMINATION AT THE END OF THE AO. ACCORDINGLY, WE SET ASIDE THE ORDER OF LD CIT(A) ON THESE TWO ISSUES AND RESTORE THE SAME TO THE FILE OF THE AO WITH THE DIRECTION TO EXAMINE THESE TWO RECEIPTS AFRESH AND TAKE APPROPRIATE DECISION IN ACCORDANCE WITH THE LAW. 12.4 THE BILLS PRODUCED IN SUPPORT OF SALE OF T IMBER WERE INTERPRETED AS PURCHASE BILLS BY THE AO, WHERE AS ACCORDING TO THE ASSESSEE, THEY REPRESENT SALES BILLS BY THE ASSESSEE AND PURCHASE BILLS BY T HE TRADER. THUS, IN OUR VIEW, IT IS A MATTER OF INTERPRETATION OF THE BILLS, WHICH M AY BE DECIDED BY MAKING NECESSARY ENQUIRIES WITH THE CONCERNED TRADER. WE NOTICE THAT THE LD CIT(A) HAS ACCEPTED THE SUBMISSIONS OF THE ASSESSEE WITHOUT MA KING NECESSARY VERIFICATION. ACCORDINGLY, IN OUR VIEW, THIS ISSUE ALSO REQUIRES FRESH EXAMINATION AT THE END OF THE AO. ACCORDINGLY, WE SET ASIDE THE ORDER OF LD CIT(A) ON THIS ISSUE AND RESTORE THE SAME TO THE FILE OF THE AO WITH THE DIR ECTION TO EXAMINE THE SAME AFRESH AND TAKE APPROPRIATE DECISION IN ACCORDANCE WITH THE LAW. 12.5 THE CONFIRMATION LETTER FILED FOR SALE OF GOLD WAS ALSO REJECTED BY THE AO ON THE GROUND THAT THE MODE OF PAYMENT WAS NOT GIVE N IN THE CONFIRMATION LETTER AND ALSO ON FURTHER PRESUMPTION THAT SUCH KIND OF S ALE TO PRIVATE PARTIES WOULD NOT NORMALLY TAKE PLACE. THE ASSESSEE HAS PLACED A COPY OF CONFIRMATION LETTER IN THE PAPER BOOK FILED BY HIM. ON A PERUSAL OF TH E SAME, WE NOTICE THAT THE PURCHASER OF GOLD HAS STATED THAT THE PAYMENT OF RS .2,00,000/- WAS MADE IN TWO INSTALMENTS VIZ., ON 15.3.2010 RS.1,75,000/- AND ON 31.3.2010 I.T.A. NOS. 442&443& 493-496/COCH/2013 & C.O. NOS. 33-36/COCH/2013 14 RS.25,000/-. IT IS FURTHER STATED THAT THE ABOVE S AID PAYMENTS WERE GIVEN BY CASH DRAWN FROM NRE ACCOUNT. HENCE, WE NOTICE THAT THE OBSERVATION MADE BY THE AO IS NOT CORRECT. FURTHER WE NOTICE THAT THE VIEW EXPRESSED BY THE AO THAT THE OLD GOLD IS USUALLY EXCHANGED FOR PURCHASE OF N EW ONES IS NOT BASED UPON ANY MATERIAL, BUT ON SURMISES ONLY. HENCE, IN OUR VIEW, THERE IS NO REASON TO SUSPECT THE CLAIM OF RECEIPT OF RS.2.00 LAKHS ON SA LE OF GOLD IN THE FACTS AND CIRCUMSTANCES OF THE CASE AND ACCORDINGLY WE UPHOLD THE DECISION OF LD CIT(A) ON THIS ISSUE. 13. WE SHALL NOW TAKE UP THE CROSS OBJECTIONS FI LED BY THE ASSESSEE. WE NOTICE THAT THE ASSESSEE IS SUPPORTING THE ORDER OF LD CIT(A) IN ALL THE THREE YEARS ON THE ISSUES DECIDED IN HIS FAVOUR. WE HAVE ADJUDICATED ALL THE ISSUES IN THE APPEALS FILED BY THE REVENUE. ACCORDINGLY, WE DISMISS CROSS OBJECTIONS FILED FOR ALL THE THREE YEARS. 14. WE SHALL NOW TAKE UP THE APPEAL FILED BY THE ASSESSEE FOR THE ASSESSMENT YEAR 2009-10. THE FIRST AND SIXTH GROUNDS ARE GENE RAL IN NATURE AND THEY DO NOT REQUIRE ANY ADJUDICATION. 14.1 IN THE SECOND GROUND, THE ASSESSEE IS CONTE NDING THAT THE ASSESSING OFFICER HAS ADDED THE CASH SHORTAGE COMPUTED BY H IM BY INVOKING A WRONG SECTION, VIZ., SEC. 69C OF THE ACT. ACCORDING TO T HE ASSESSEE, THE ADDITION MADE BY INVOKING WRONG PROVISIONS IS NOT SUSTAINABLE IN LAW. 14.2 WE HEARD THE RIVAL CONTENTIONS ON THIS LEG AL ISSUE. ACCORDING TO THE LD A.R, THE ADDITIONS MADE BY INVOKING WRONG PROVISION S OF LAW ARE NOT SUSTAINABLE IN LAW. HOWEVER, WE ARE UNABLE TO AGREE WITH THE S AID CONTENTIONS. THERE IS NO DISPUTE THAT THE AO HAS ASSUMED JURISDICTION TO MAK E THE ASSESSMENTS FOR THE YEARS UNDER CONSIDERATION IN ACCORDANCE WITH THE LA W. THE NATURE OF ITEMS I.T.A. NOS. 442&443& 493-496/COCH/2013 & C.O. NOS. 33-36/COCH/2013 15 DESCRIBED UNDER SECTION 68 TO 69D ARE CONSIDERED AS INCOME OF THE ASSESSEE BY LEGAL FICTION AND THE PRIMARY BURDEN TO PROVE THAT THEY DO NOT CONSTITUTE INCOME IS ALWAYS PLACED UPON THE ASSESSEE. IF THE ASSESSE E FAILS TO DISCHARGE THE PRIMARY BURDEN OF PROOF SO PLACED UPON HIM, THE AMO UNTS MENTIONED IN SEC. 68 TO 69D ARE ASSESSABLE AS INCOME IN HIS HANDS. 14.3 IN THIS REGARD, ONE MAY MAKE GAINFUL REFER ENCE TO DECISION RENDERED BY THE DELHI SPECIAL BENCH, A LARGER BENCH CONSISTING OF FIVE MEMBERS, IN THE CASE OF MANOJ AGGARWAL VS. DCIT (2008)(113 ITD 377). I N THE CASE BEFORE THE LARGER BENCH OF SPECIAL BENCH, THE DEPOSITS FOUND IN BANK ACCOUNTS WERE ASSESSED U/S 68 OF THE ACT. ACCORDING TO THE ASSESSEE THEREIN, THE PROVISIONS OF SEC. 68 CAN BE INVOKED ONLY IF THE CASH CREDITS ARE FOUND IN TH E BOOKS OF ACCOUNT. THE ASSESSEE THEREIN DID NOT MAINTAIN BOOKS OF ACCOUNT AND ACCORDINGLY, IT WAS CONTENDED THAT THE AO WAS NOT RIGHT IN LAW IN INVOK ING THE PROVISIONS OF SEC. 68 OF THE ACT FOR MAKING ADDITION RELATING TO UNEXPLAI NED BANK DEPOSITS. THE SAID CONTENTIONS DID NOT FIND FAVOUR WITH THE SPECIAL BE NCH OF THE TRIBUNAL. FOR THE SAKE OF CONVENIENCE, THE RELEVANT OBSERVATIONS/DECI SION GIVEN BY THE SPECIAL BENCH AT PARA 26 OF ITS ORDER ARE EXTRACTED BELOW:- THE ARGUMENT ADVANCED ON BEHALF OF THE ASSESSEE BE FORE US WAS THAT THE ASSESSEE WAS NOT MAINTAINING ANY BOOKS OF ACCOUNT A ND THE DEPOSITS WERE FOUND ONLY IN THE ASSESSEES BANK STATEMENT WHICH C ANNOT BE CONSIDERED AS THE BOOKS OF ACCOUNT OF THE ASSESSEE AND, THEREF ORE, S. 68 WAS NOT APPLICABLE. OUR ATTENTION WAS DRAWN TO THE CONFIRMA TION LETTERS PLACED AT PP. 159 AND 160 OF THE PAPER BOOK. WE ARE HOWEVER U NABLE TO ACCEPT THE ARGUMENT. THOUGH S. 68 OF THE ACT MAY NOT BE STRICT LY APPLICABLE SINCE THE ASSESSEE WAS NOT MAINTAINING ANY BOOKS OF ACCOUNT A ND THE BANK STATEMENT CANNOT BE CONSIDERED AS THE ASSESSEES BO OKS OF ACCOUNT, ON THE BASIS OF THE JUDGMENT OF THE SUPREME COURT IN T HE CASE OF A. GOVINDARAJULU MUDALIAR VS. CIT (1958) 34 ITR 807 (S C) , IT IS THE ONUS OF THE ASSESSEE TO EXPLAIN THE CASH RECEIVED BY HIM AN D IF THERE IS NO EXPLANATION OR ACCEPTABLE EVIDENCE TO PROVE THE NATURE AND SOURCE OF THE RECEIPT, THE AMOUNT MAY BE ADDED AS T HE ASSESSEES INCOME ON GENERAL PRINCIPLES AND IT IS NOT NECESSAR Y TO INVOKE S. 68, NOR IS IT NECESSARY FOR THE IT AUTHORITIES TO P OINT OUT THE SOURCE OF THE MONIES RECEIVED. EVEN IF S. 68 IS NOT APPLICABLE, THE I.T.A. NOS. 442&443& 493-496/COCH/2013 & C.O. NOS. 33-36/COCH/2013 16 CASH DEPOSIT IN THE BANK CAN BE ASKED TO BE EXPLAIN ED BY THE ASSESSEE UNDER S. 69 OR S. 69B OF THE ACT. NO DOUBT THE ASSESSEE HAD TRIED TO FILE ADDITIONAL EVIDENCE BEFORE THE CIT(A) IN THE FORM OF CONFIRMATION LETTERS AND IT RETURNS BUT THESE WERE NOT ADMITTED BY THE CIT(A) AND NO REASONS HAVE BEEN SHOWN BEFORE US AS TO WHY THEY SHOULD HAVE BEEN ADMITTED. IN THE ABSENCE OF ANY CLINCHING EVIDENCE TO SHOW THE NATURE AND SOURCE OF THE MONIES DEPOSITED INTO THE BANK ACCOUNT WHICH BELONGS TO THE ASSESSEE, THE AO WAS JUSTIFIED IN AD DING THE AMOUNT OF RS. 15 LACS AS THE ASSESSEES UNEXPLAINED INCOME. WE CO NFIRM THE ADDITION AND DISMISS THE GROUND. IT CAN BE SEEN THAT THE UNEXPLAINED RECEIPTS/INVEST MENTS/EXPENDITURE ETC., AS PER THE VIEW EXPRESSED BY THE LARGER BENCH OF THE S PECIAL BENCH OF THE TRIBUNAL, CAN BE ASSESSED AS THE INCOME OF THE ASSESSEE ON GE NERAL PRINCIPLES, IF THE ASSESSEE HAS FAILED TO OFFER SATISFACTORY EXPLANATI ON. IT WAS FURTHER HELD THAT THE SAID INCOME, IF NOT ASSESSABLE UNDER ONE SECTION CA N BE ASSESSED BY INVOKING APPLICABLE SECTION. ACCORDINGLY, IN OUR VIEW, MERE MENTIONING OR INVOKING OF WRONG SECTION FOR ASSESSING A PARTICULAR ITEM OF IN COME MAY NOT VITIATE THE ASSESSMENT PROCEEDINGS, IF THE AO HAD OTHERWISE ASS UMED JURISDICTION FOR ASSESSING THE INCOME OF THE ASSESSEE IN A LEGALLY P ERMISSIBLE MANNER. 14.4 IN THE INSTANT CASE, WE HAVE ALREADY NOTICE D THAT THE CASH SHORTAGE DETERMINED BY THE ASSESSING OFFICER IS THE CUMULATI VE EFFECT OF VARIOUS ADJUSTMENTS MADE BY THE ASSESSING OFFICER IN THE CA SH FLOW STATEMENTS FURNISHED BY THE ASSESSEE. FOR EXAMPLE, THE ASSESSING OFFICE R HAS (A) REDUCED THE OPENING CASH BALANCE. (B) DISREGARDED CASH CREDITS. (C) ENHANCED THE VALUE OF INVESTMENTS EACH OF THE ADJUSTMENTS SO MADE MAY BE ASSESSABLE UN DER DIFFERENT SECTIONS INCLUDING SECTION 69C OF THE ACT. SINCE THE CASH SHORTAGE REPRESENTS UNEXPLAINED MONEY OUTFLOW, THE AO APPEARS TO HAVE INVOKED SEC. 69C OF THE ACT, FOR THE SAKE OF CONVENIENCE. IN VIEW OF THE D ISCUSSIONS MADE IN THE PRECEDING PARAGRAPHS, WE ARE UNABLE TO ACCEPT WITH THE CONTENTIONS OF THE LD I.T.A. NOS. 442&443& 493-496/COCH/2013 & C.O. NOS. 33-36/COCH/2013 17 A.R THAT MENTIONING OF WRONG SECTION WOULD VITIATE THE ADDITIONS MADE. ACCORDINGLY, WE REJECT THE LEGAL GROUND CITED ABOVE . 15. THE THIRD ISSUE RELATES TO THE EXTRA CONSID ERATION PAID IN THE PURCHASE OF A PROPERTY NAMED NELLAI PROPERTY. THE FACTS RELATI NG TO THE SAME ARE DISCUSSED IN BRIEF. THE ASSESSEE ALONG WITH THREE OTHER PERS ONS NAMED SHRI E.N. GOPAKUMAR, SHRI C.O. JOHNY AND SHRI JOBY, PURCHASED 1 ACRE AND 95 CENTS OF LAND AT A PLACE CALLED NELLAI, THRISSUR. THE PURCH ASE CONSIDERATION WAS SHOWN IN THE CONVEYANCE DEED AT RS.25.00 LAKHS. AS PER THE AO, A SWORN STATEMENT WAS TAKEN FROM SHRI E.N. GOPAKUMAR, ONE OF THE CO-PURCHA SERS AND HE CONFESSED THAT THE ABOVE SAID PROPERTY WAS PURCHASED FOR RS.5 0.00 LAKHS AND FURTHER EXPENSES OF RS.3.00 LAKHS WAS ALSO INCURRED. BY PL ACING RELIANCE ON THE SAID STATEMENT, THE AO WORKED OUT THE SHARE OF THE ASSES SEE IN THE PURCHASE COST AT RS.13.25 LAKHS, WHICH WAS MORE THAN THAT DECLARED B Y THE ASSESSEE IN THE CASH FLOW STATEMENT. THE AO OFFERED AN OPPORTUNITY TO TH E ASSESSEE TO CROSS EXAMINE SHRI GOPAKUMAR. HOWEVER, THE ASSESSEE APPEARS TO H AVE NOT AVAILED THE SAID OPPORTUNITY AND HENCE THE AO INCLUDED THE DIFFERENC E AMOUNT OF RS.6.25 LAKHS (IN THE GROUNDS OF APPEAL, IT IS MENTIONED AS RS.6. 30 LAKHS) AS CASH OUTFLOW IN THE CASH FLOW STATEMENT. SINCE THE ASSESSEE DID N OT AVAIL THE OPPORTUNITY TO CROSS EXAMINE SHRI GOPAKUMAR, THE LD CIT(A) ALSO CO NFIRMED THE ACTION OF THE AO. 15.1 THE LD COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE ASSESSING OFFICER HAS TAKEN THE ADVERSE DECISION WITHOUT EXAMINING THE OT HER CO-OWNERS AND SELLER OF THE PROPERTY. ACCORDING TO LD A.R, THE ASSESSING O FFICER SHOULD HAVE ALSO EXAMINED THE SUB-REGISTRAR AND WITNESSES ALSO TO CO RROBORATE THE STATEMENT GIVEN BY SHRI GOPAKUMAR. I.T.A. NOS. 442&443& 493-496/COCH/2013 & C.O. NOS. 33-36/COCH/2013 18 15.2 WE ALSO HEARD LD D.R ON THIS ISSUE. THERE IS NO DISPUTE WITH REGARD TO THE FACT THAT THE ASSESSEE HAS PURCHASED THE NELLAI PROPERTY ALONG WITH SHRI GOPAKUMAR AND TWO OTHER PERSONS. THUS SHRI GOPAKUM AR IS ONE OF THE CO- OWNERS OF THE NELLAI PROPERTY. THE DEPARTMENT HAS TAKEN A SWORN STATEMENT FROM SHRI GOPAKUMAR, WHEREIN HE HAS ADMITTED THAT T HE CONSIDERATION PAID FOR THE PURCHASE OF NELLAI PROPERTY WAS RS.50.00 LAKHS AND FURTHER A SUM OF RS.3.00 LAKHS WAS INCURRED TOWARDS EXPENSES. ADMITTEDLY, T HESE FACTS WERE BROUGHT TO THE NOTICE OF THE ASSESSEE DURING THE COURSE OF ASS ESSMENT PROCEEDINGS AND THE AO ALSO OFFERED AN OPPORTUNITY TO THE ASSESSEE TO C ROSS EXAMINE SHRI GOPAKUMAR. ADMITTEDLY, THE ASSESSEE DID NOT AVAIL THE SAID OPPORTUNITY, MEANING THEREBY THE ASSESSEE DID NOT HAVE ANY OTHER EXPLANATION AT THAT POINT OF TIME. NOW BEFORE LD CIT(A) AS WELL AS BEFORE US , THE ASSESSEE IS CHALLENGING THE STATEMENT GIVEN BY SHRI GOPAKUMAR. HOWEVER, W E NOTICE THAT THE ASSESSEE HAS ALSO NOT BROUGHT ANY MATERIAL ON RECORD TO DISP ROVE THE SWORN STATEMENT GIVEN BY ONE OF THE CO-PURCHASERS OF THE NELLAI PRO PERTY. IT IS A FACT THAT THE DETAILS OF ON-MONEY TRANSACTIONS ARE WITHIN THE PER SONAL KNOWLEDGE OF THE PARTIES ENTERING INTO THE PROPERTY TRANSACTIONS. H ENCE, IN OUR VIEW, THE STATEMENT GIVEN BY SHRI GOPAKUMAR, BEING ONE OF THE CO-PURCHASERS, CANNOT BE BRUSHED ASIDE. IN THE ABSENCE OF ANY OTHER MATERIAL TO CONTRADICT THE STATEMENT GIVEN BY SHRI GOPAKUMAR, IN OUR VIEW, THE TAX AUTHO RITIES ARE JUSTIFIED IN PLACING RELIANCE ON IT. ACCORDINGLY, IN OUR VIEW, THE LD C IT(A) WAS JUSTIFIED IN CONFIRMING THE ACTION OF THE AO IN INCLUDING THE EXTRA CONSIDE RATION AS AN ITEM OF CASH OUTFLOW IN THE CASH FLOW STATEMENT. 16. IN GROUND NO.4 AND 5, THE ASSESSEE IS CONTES TING THE DECISION OF LD CIT(A) IN REDUCING THE AMOUNT OF AGRICULTURAL INCOME DECLA RED BY THE ASSESSEE AND ALSO IN NOT CONSIDERING THE SAME AS AN ITEM OF CASH INF LOW. WE HAVE ALREADY SET ASIDE THE MATTER RELATING TO THE AGRICULTURAL INCOM E TO THE FILE OF THE ASSESSING OFFICER, WHILE CONSIDERING THE APPEAL FILED BY THE REVENUE. THE CONTENTION OF THE I.T.A. NOS. 442&443& 493-496/COCH/2013 & C.O. NOS. 33-36/COCH/2013 19 ASSESSEE IS THAT THE AGRICULTURAL INCOME SHOULD BE TAKEN AS AN ITEM OF CASH INFLOW IN THE CASH FLOW STATEMENT. WE FIND MERIT IN THE SAID CLAIM AND ACCORDINGLY, WE DIRECT THE AO TO CONSIDER THE AGRIC ULTURAL INCOME, IF ANY, DETERMINED BY HIM AS AN ITEM OF CASH INFLOW IN THE CASH FLOW STATEMENT PREPARED BY HIM. 17. WE SHALL NOW TAKE UP THE APPEAL FILED BY TH E ASSESSEE FOR THE ASSESSMENT YEAR 2010-11. THE FIRST AND FOURTH GROUNDS ARE GEN ERAL IN NATURE AND HENCE THEY DO NOT REQUIRE ADJUDICATION. 17.1 THE SECOND GROUND RELATE TO THE DETERMINATI ON OF AGRICULTURAL INCOME. WHILE CONSIDERING THE APPEAL FILED BY THE REVENUE, WE HAVE ALREADY SET ASIDE THIS ISSUE TO THE FILE OF THE AO FOR HIS FRESH CONSIDERA TION IN THE LIGHT OF MATERIALS FILED BY THE ASSESSEE BEFORE THE LD CIT(A). 18. THE LAST ISSUE RELATES TO THE DISALLOWANCE OF PAYMENT MADE TO SUB-BROKERS. THE AO NOTICED THAT THE ASSESSEE HAS CLAIMED EXPENS ES TO THE TUNE OF RS.7.11 LAKHS AGAINST THE BROKERAGE INCOME OF RS.15.60 LAKH S. THE MAJOR COMPONENT OF EXPENSES CONSISTED OF PAYMENT MADE TO OTHER BROKERS TO THE TUNE OF RS.5.00 LAKHS. SINCE THE ASSESSEE DID NOT PRODUCE ANY EVID ENCE TO SUPPORT THE CLAIM OF THE ABOVE SAID PAYMENT, THE AO DISALLOWED 50% OF TH E SAME. THE LD CIT(A), HOWEVER, RESTRICTED THE DISALLOWANCE TO RS.1,25,000 /- (I.E. 25%). ASSESSEE IS AGGRIEVED BY THE SAID DECISION. 18.1 WE HAVE HEARD THE PARTIES ON THIS ISSUE. ADMITTEDLY, THE ASSESSEE DID NOT PRODUCE EVIDENCES TO SUPPORT THE CLAIM OF PAYME NT OF BROKERAGE TO OTHER BROKERS. THE ASSESSEE HAS ALSO NOT MAINTAINED REGU LAR BOOKS OF ACCOUNTS. UNDER THESE CIRCUMSTANCES, IN OUR VIEW, THE LD CIT( A) WAS JUSTIFIED IN PARTIALLY I.T.A. NOS. 442&443& 493-496/COCH/2013 & C.O. NOS. 33-36/COCH/2013 20 SUSTAINING THE DISALLOWANCE MADE BY THE AO. ACCORD INGLY WE UPHOLD HIS ORDER ON THIS ISSUE. 19. IN THE RESULT, THE APPEALS FILED BY THE DEP ARTMENT FOR THE ASSESSMENT YEARS 2007-08 AND 2009-10 ARE TREATED AS ALLOWED. THE OTHER TWO APPEALS FILED BY THE REVENUE ARE TREATED AS PARTLY ALLOWED. THE APPEAL FILED BY THE ASSESSEE FOR THE ASSESSMENT YEAR 2009-10 IS TREATED AS ALLOW ED. THE OTHER APPEAL FILED BY THE ASSESSEE IS TREATED AS PARTLY ALLOWED. ALL THE CROSS OBJECTIONS OF THE ASSESSEE ARE DISMISSED. PRONOUNCED ACCORDINGLY ON 31ST DEC., 2013 SD/- SD/- (N.R.S.GANESAN) (B.R.BASKARAN) JUDICIAL MEMBER ACCOUNTANT MEMBER PLACE: KOCHI DATED: 31ST DECEMBER, 2013 GJ COPY TO: 1. SHRI C.O. JOHNY, CHERUMADATHIL HOUSE, NAZARETH R OAD, ANGAMALY-683 572. 2. THE DEPUTY COMMISSIONER OF INCOME-TAX, CENTRAL C IRCLE-1, ERNAKULAM. 3. THE COMMISSIONER OF INCOME-TAX(APPEALS)-I, KOCHI . 4. THE COMMISSIONER OF INCOME-TAX, CENTRAL, KOCHI. 5. D.R., I.T.A.T., COCHIN BENCH, COCHIN. 6. GUARD FILE. BY ORDER (ASSISTANT REGISTRAR) I.T.A.T, COCHIN