K.Venkatesan, CHENNAI V. ITO, CHENNAI

CO 37/CHNY/2013

• Counselvise Citation: [2013] 122 COUNSELVISE.COM (IT) 8664 (ITAT-CHENNAI)
• Duration Of Justice: 3 month(s) 28 day(s)
• Appeal Type: Cross Objection
• Pronouncement Date: 25-06-2013
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 12-06-2013
• Assessment Year: 2008-2009
• Appeal Filed On: 27-02-2013
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: MRS G VARDINI KARHIKAD; MRS PUSHYA SITRAMAN
• Keywords: Unexplained cash credit; Unexplained investment; Gift; Revised return
• Section: 69

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH CHENN AI BEFORE DR.O.K.NARAYANAN, VICE PRESIDENT AND SHRI S.S.GODARA, JUDICIAL MEMBER .. ITA NO.18/MDS./2013 ASSESSMENT YEAR:2008-09 & C.O. NO.37/MDS/2013 INCOME TAX OFFICER, WARD IX(3), CHENNAI. VS. SHRI K.VENKATESAN, NO.46,SEMBUDOSS STREET, PARRYS, CHENNAI 600 001. PAN ACXPV 7160 M (APPELLANT) (RESPONDENT/ CROSS OBJECTOR) APPELLANT BY : SHRI SHAJI P.JACOB ADDL. CIT D.R. RESPONDENT BY : MRS.PUSHYA SITRAMAN, SR.ADVOCATE & MRS.G.VARDINI KARHIK,ADVOCATE DATE OF HEARING : 12.06.13 DATE OF PRONOUNCEMENT : 2 5.06.13 ITA. 18/MDS/13 CO NO.37/MDS./13 2 O R D E R PER S.S.GODARA JUDICIAL MEMBER : THIS REVENUES APPEAL AND ASSESSEES CROSS OBJE CTIONS FOR THE ASSESSMENT YEAR 2008-09, ARISE AGAINST THE ORDE R DATED 28.09.2012 PASSED BY CIT(A)-IX, CHENNAI IN ITA NO.1 91/10-11. THE RELEVANT PROCEEDINGS ARE UNDER SECTION143(3) O F THE INCOME TAX ACT, 1961 (IN SHORT THE ACT). 2. FROM THE PLEADINGS OF THE PARTIES, IT IS APPARE NT THAT THE REVENUES GRIEVANCE IS THAT THE CIT(A) HAS WRONGL Y DELETED THE ADDITIONS MADE BY THE AO OF 12,36,921/- ON ACCOUNT OF GP VARIATION AND OF 6,63,977/- U/S 40(A)(IA) OF THE ACT. ON THE OTHER SIDE, THE ASSESSEE IN HIS CROSS OBJECTIONS PLEADS T HAT CIT(A) HAS WRONGLY CONFIRMED THE ADDITIONS OF 8,60,960/- AS UNEXPLAINED INVESTMENT IN HOUSE PROPERTY UNDER SECTION 69 OF TH E ACT AND ` 10 LAKHS AS UNEXPLAINED CASH CREDIT, MADE BY THE ASSES SING OFFICER. 3. IN THE COURSE OF HEARING, BOTH PARTIES REITERAT E THEIR PLEADINGS AND PRAY FOR ACCEPTANCE OF THEIR RESPECTI VE GROUNDS. AT THE SAME TIME, THEY ALSO SUPPORT THE CIT(A)S ORDER TO THE EXTENT IT GOES IN THEIR FAVOUR. ITA. 18/MDS/13 CO NO.37/MDS./13 3 4. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE I S AN INDIVIDUAL. HE IS A DEALER OF PIPES. FOR THE IMP UGNED ASSESSMENT YEAR, HE HAD FILED HIS RETURN ON 06.02.0 9, DISCLOSING INCOME OF 2,27,522/-. THE SAME WAS SUMMARILY PROCESSED. 5. IN THE COURSE OF SCRUTINY, THE ASSESSING OFFICE R, INTER ALIA NOTICED THAT ASSESSEES PROFIT AND LOSS ACCOUNT AND BALANCE SHEET HAD STATED THE OPENING BALANCE OF 15,26,090/-, SALES OF ` 39,74,688/- AS WELL AS CLOSING STOCK OF 15,82,339/- , WHEREAS IN CASE OF ONE ENTITY NAMELY MS.SHIVAGANGA POLYMERS P VT LTD. , THE TOTAL TRANSACTIONS IN THE RELEVANT PREVIOUS YEAR WE RE OF 7 4,47,294/-. ON BEING POINTED OUT, THE ASSESSEE FIL ED A REVISED RETURN. THIS TIME, HE INCREASED HIS INCOME TO 2,72,703/- AND REVISED HIS TURNOVER TO 1,75,20,136/-. IN THE ORIGINAL RETURN, THE ASSESSEE HAD DECLARED G.P. @ 23% . THE SAID RATIO IN THE REVISED RETURN WAS OF 12.94%. THE ASSESSEE WOULD ATTRIBUTE THE AFORESAID VARIATION IN GP RATES TO VARIOUS FACTORS . IT IS AN ADMITTED POSITION THAT DESPITE BEING COVERED BY THE PROVISIONS OF SEC.44AB OF THE ACT, HE DID NOT PRODUCE HIS AUDITED BOOKS OF ACCOUNTS. RATHER, HE HAD FILED THE SALES TAX RETUR N AS WELL AS OTHER DOCUMENTS IN THE SHAPE OF BILLS, INVOICES ET C. THE FIVE ITA. 18/MDS/13 CO NO.37/MDS./13 4 ITEMS EXHIBITED HAD DISCLOSED G.P. FROM 5.64% TO 14 .19%. ON BEING PUT UP TO NOTICE QUA DIFFERENCE IN GP STATED HEREINABOVE, THE ASSESSEE PLEADED BEFORE THE ASSESSING OFFICER T O ADOPT A REASONABLE VIEW. ON THIS, THE ASSESSING OFFICER CO MPARED THE PROFIT MARGIN OF THE IMPUGNED ASSESSMENT YEAR VIS- -VIS PREVIOUS ASSESSMENT YEAR. IN THE PRECEDING ASSESSMENT YEAR, THE ASSESSEES GP MARGIN HAD BEEN DECLARED @ 20%. IN TH E ABSENCE OF ANY DISTINGUISHED FEATURES POINTED OUT B Y THE ASSESSEE, ASSESSING OFFICER ADOPTED THE GP MARGIN @ 20% AND WORKED OUT AN ADDITION OF ` 12,36,921/- IN QUESTION QUA DIFFERENCE IN THE REVISED TURNOVER ADMITTED BY THE ASSESSEE. 6. IN ASSESSEES APPEAL, THE CIT(A) HAS DELETED TH E ENTIRE ADDITION BY HOLDING THAT NO ITEMS HAD BEEN SOLD AT THE RATE OF GP MORE THAN 14.19% NOR IT WAS THE CASE OF SUPPRES SION IN SALES OR PURCHASES. THEREFORE, THE REVENUE HAS RAISED THE AFORESAID RELEVANT GROUNDS. 7. WE HAVE HEARD BOTH PARTIES AND PERUSED THE REL EVANT MATERIALS AVAILABLE ON RECORD. THERE IS NO DISPUT E ON FACTS STATED HEREIN ABOVE. THE ASSESSEE DID NOT PRODUCE HIS AUD ITED BOOKS OF ITA. 18/MDS/13 CO NO.37/MDS./13 5 ACCOUNT DESPITE BEING COVERED BY THE PROVISIONS CON TAINED UNDER SECTION 44AB OF THE ACT HAVING TURNOVER OF 1,75,20,136/-. IN THE INITIAL RETURN, THE ASSESSEE HAD STATED THE GP @ 23%, WHICH WAS REDUCED TO 12.94% IN THE REVISED RETURN. HE DID NOT SUBSTANTIATE AS TO HOW AND IN WHAT MANNER THE GROS S RECEIPT RATIO IN THE IMPUGNED ASSESSMENT YEAR HAD CAME DOWN IN TH E TWO RETURNS(SUPRA). IT IS NOT THE CASE OF THE ASSESSEE THAT THE TRADING ITEMS HE DEALS WITH HAD UNDERGONE ANY CHANGE IN TH E PRECEDING AND IMPUGNED ASSESSMENT YEAR REDUCING GP FROM 20% T O 14.19%. IT IS ONLY IN THESE CIRCUMSTANCES THAT TH E ASSESSING OFFICER HAD ASCERTAINED THE GROSS PROFIT MARGIN OF THE IMPUGNED ASSESSMENT YEAR AT THE RATE WHICH WAS ADOPTED IN T HE PRECEDING ASSESSMENT YEAR. THE CIT(A) IN APPEAL HAS DELETED THE ENTIRE GROSS PROFIT MARGIN WITHOUT DRAWING SUPPORT FROM AN Y MATERIAL ON RECORD. COMING TO THE PROFIT RATIO DECLARED BY THE ASSESSEE HIMSELF @ 14.19% , THERE IS NO MATERIAL BEFORE US TO SUPPORT THE FINDINGS OF THE CIT(A) WHEREIN THE ENTIRE GP ADDITI ON HAS BEEN DELETED. IN THESE CIRCUMSTANCES, WE ARE OF THE VIE W THAT THE CIT(A) HAS ERRED IN DELETING THE ENTIRE GP ADDITIO NS MADE BY THE ASSESSING OFFICER @ 20% ADOPTED IN THE PRECEDING AS SESSMENT YEAR. THEREFORE, THE RELEVANT GROUNDS OF REVENUE ST AND ACCEPTED. ITA. 18/MDS/13 CO NO.37/MDS./13 6 8. NOW, WE COME TO SECOND GRIEVANCE OF THE REVENUE THAT THE CIT(A) HAS WRONGLY DELETED THE DISALLOWANCE OF TRAN SPORT CHARGES AND COMMISSION OF 6,63,977/- , WHICH WAS MADE BY THE ASSESSING OFFICER BY INVOKING SEC.40(A)(IA) OF THE ACT QUA TRANSPORT CHARGES AND COMMISSION PAID BY THE ASSESS EE. IT IS TO BE SEEN THAT THE CIT(A) HAS DRAWN SUPPORT FROM THE VISAKHAPATINAM SPECIAL BENCH DECISION OF TRIBUNAL IN CASE OF MERILYN SHIPPING & TRANSPORTS IN 16 ITR (TRIBUNAL) 1 WHEREIN IT HAD BEEN HELD THAT THE PROVISION IN SEC 40(A)(IA) O NLY APPLIES TO THE EXPENSES WHICH ARE PAYABLE BEFORE THE END OF TH E RELEVANT PREVIOUS YEAR INSTEAD OF THOSE ALREADY PAID. 9. BEFORE US, THE REVENUE REFERS TO THE CASE LAW O F HONBLE CALCUTTA HIGH COURT IN ITAT 20 OF 2013, GA 190 OF 2 013 IN CIT, KOLKATA VS. CRESCENT EXPORT SYNDICATE DATED 28 TH MARCH, 2013 AND SUBMITS THAT THE DISTINCTION DRAWN BY THE SPECI AL BENCH OF THE TRIBUNAL BETWEEN PAID AND PAYABLE CHARGES NO MORE HOLDS GOOD LAW. 10. THE A.R REPRESENTING THE ASSESSEE IS VERY FAIR TO SUBMIT THAT THE ISSUE IN QUESTION STANDS DECIDED AGAINST T HE ASSESSEE BY ITA. 18/MDS/13 CO NO.37/MDS./13 7 THE HONBLE CALCUTTA HIGH COURT. IN THIS VIEW OF TH E MATTER, WE ACCEPT THE CONTENTIONS OF THE REVENUE AND ANSWER RE LEVANT GROUNDS AGAINST THE ASSESSEE. THEREFORE, THE REVENUES APPEAL STANDS ACCEPTED. 11. THIS LEAVES US WITH THE CROSS OBJECTIONS FILED BY THE ASSESSEE. THE FACTS COMMON TO BOTH THE SUBSTANTIVE GROUNDS RAISED IN THE CROSS OBJECTIONS ARE THAT QUA THE UNE XPLAINED INVESTMENTS IN HOUSE PROPERTY OF 8,60,960/- AS WELL AS UNEXPLAINED CASH CREDIT OF 10 LAKH(SUPRA), THE ASSESSEES EXPLANATION IN THE COURSE OF SCRUTINY WAS THAT IN DECEMBER, 2005, HIS MOTHER HAD SOLD ANCESTRAL AGRICULTURAL L AND AND PARKED AN AMOUNT OF 18 LAKHS WITH HIM. PER ASSESSEE, THE LAND HAD BEEN SOLD IN DECEMBER, 2005 AND HE HAD UTILIZED TH E SAME IN RAISING CONSTRUCTION AND ALSO DEPOSED IT IN HIS BA NK ACCOUNT. FOR WANT OF SUFFICIENT EXPLANATION AND EVIDENCE, THE AS SESSING OFFICER MADE THE ADDITION, WHICH HAS ALSO BEEN CONFIRMED BY THE CIT(A). 12. REGARDING THE AMOUNT IN QUESTION OF ` 8,60,960/- ADDED BY THE ASSESSING OFFICER AS UNEXPLAINED INVESTMENT IN HOUSE PROPERTY UNDER SECTION 69, THE ASSESSEE SUBMITS THA T THE ASSESSING OFFICER HAD TO CALCULATE THE COST INCURR ED DURING THE ITA. 18/MDS/13 CO NO.37/MDS./13 8 RELEVANT PREVIOUS YEAR AND NOT THOSE INCURRED DURIN G PREVIOUS YEAR RELATING TO SUCCEEDING ASSESSMENT YEAR. WE MA KE IT CLEAR THAT ONLY DOCUMENTS FILED BEFORE US BY THE ASSESSEE ARE COPY OF HIS BANK STATEMENT, GENERAL POWER OF ATTORNEY FOR S ALE OF LAND (TAMIL VERSION), ASSESSEES AFFIDAVIT, ASSESSMENT ORDER UNDER TNVAT ACT AND UNDER CENTRAL SALES TAX ACT. IN O THER WORDS, THE AVERMENTS OF THE ASSESSEE ARE NOT SUPPORTED BY ANY COGENT EVIDENCE SO AS TO CONTROVERT THE FINDINGS OF THE AS SESSING OFFICER AS WELL AS THE CIT(A). THEREFORE, COST OF CONSTRUC TION ADDED BY THE ASSESSING OFFICER OF 2,60,960/- IS CONFIRMED. 13. COMING TO THE OTHER AMOUNT OF CASH GIFT OF 18 LAKHS, WHICH IS A PART OF BOTH ADDITIONS IN CROSS OBJECTIONS, A GAIN THERE IS NO EVIDENCE ADDUCED BY THE ASSESSEE AS TO HOW THE AMOU NT WHICH WAS REALIZED BY EXECUTING SALE DEED IN DECEMBER, 20 05 HAD REMAINED UNUTILIZED TILL THE IMPUGNED ASSESSMENT YE AR I.E. 2008- 09 WHOSE ACCOUNTING PERIOD IS FROM 01.04.07 TO 31.0 3.2008. HENCE, FOR THE FAILURE OF THE ASSESSEE IN DISCHARGI NG THE ONUS OF HAVING RECEIVED THE AMOUNT OF 18 LAKHS FROM HIS MOTHER, WE UPHOLD THE FINDINGS OF THE CIT(A). ITA. 18/MDS/13 CO NO.37/MDS./13 9 14. CONSEQUENTLY, THE REVENUES APPEAL IS ALLOWED AND ASSESSEES CROSS OBJECTIONS ARE DISMISSED. ORDER PRONOUNCED ON TUESDAY, THE 25 TH JUNE, 2013 AT CHENNAI. SD/- SD/- (DR.O.K.NARAYANAN) (S.S.GODARA ) VICE PRESIDENT JUDICIAL MEMBER CHENNAI, DATED 25 TH JUNE, 2013. K S SUNDARAM COPY TO: ASSESSEE/AO/CIT (A)/CIT/D.R./GUARD FILE ITA. 18/MDS/13 CO NO.37/MDS./13 10