Shri K.Rajkumar, CHENNAI V. ACIT, CHENNAI

CO 38/CHNY/2010

• Counselvise Citation: [2010] 122 COUNSELVISE.COM (IT) 5071 (ITAT-CHENNAI)
• Duration Of Justice: 2 month(s) 16 day(s)
• Appeal Type: Cross Objection
• Pronouncement Date: 23-08-2010
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 23-08-2010
• Assessment Year: 2006-2007
• Appeal Filed On: 07-06-2010
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: P B SEKARAN
• Assessee Lawyers: N RAMESH
• Keywords: Principle of natural justice; Additional evidence
• Section: 69C

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL BENCH B CHENNAI (BEFORE SHRI ABRAHAM P. GEORGE, ACCOUNTANT MEMBER AND SHRI GEORGE MATHAN, JUDICIAL MEMBER) ..... I.T.A. NO. 228 / MDS/2010 ASSESSMENT YEAR : 2006-07 THE ASSISTANT COMMISSIONER OF INCOME TAX, CIRCLE IV, CHENNAI - 600 034. (APPELLANT) V. SH. K. RAJKUMAR K. ARUNA, NEW NO.5, OLD NO.2, 3 RD MAIN ROAD, GANDHINAGAR, ADYAR, CHENNAI - 600 020. PAN : ADPR9489F (RESPONDENT) C.O. NO. 38 / MDS/2010 (IN I.T.A. NO. 228/MDS/2010) ASSESSMENT YEAR : 2006-07 SH. K. RAJKUMAR K. ARUNA, NEW NO.5, OLD NO.2, 3 RD MAIN ROAD, GANDHINAGAR, ADYAR, CHENNAI - 600 020. (CROSS OBJECTOR) V. THE ASSISTANT COMMISSIONER OF INCOME TAX, CIRCLE IV, CHENNAI - 600 034. (RESPONDENT) REVENUE BY : SHRI P.B. SEKARAN ASSESSEE BY : SHRI N. RAMESH O R D E R PER ABRAHAM P. GEORGE, ACCOUNTANT MEMBER : THESE ARE APPEAL BY REVENUE AND CROSS OBJECTION BY ASSESSEE ARISING OUT OF THE ORDER OF THE COMMISSION ER OF INCOME TAX (APPEALS)-VIII, CHENNAI FOR ASSESSMENT YEAR 2006-07 . I.T.A. NO. 228/MDS/10 C.O. NO. 38/MDS/10 2 2. EFFECTIVE GROUNDS OF THE REVENUE ARE NUMBERED AS 2, 3 & 4. ACCORDING TO THESE GROUNDS, CIT(APPEALS) HAD DELETE D AN ADDITION OF ` 11,34,597/- BASED ON FRESH EVIDENCE FILED FIRST TI ME BEFORE HIM, IN VIOLATION OF RULE 46A OF INCOME-TAX RULES, 1962. F URTHER, AS PER THE REVENUE, EXCEPTIONAL CIRCUMSTANCES MENTIONED IN RUL E 46A WERE ABSENT IN ASSESSEES CASE AND FRESH EVIDENCE WAS CO NSIDERED WITHOUT GIVING AN OPPORTUNITY TO THE ASSESSING OFFI CER. IT IS ALSO STATED THE CIT(APPEALS) DELETED THE ADDITION BY CON SIDERING THE LOANS TAKEN FROM BANKS AS A SOURCE FOR EXPLAINING THE ADD ITION, WITHOUT VERIFYING THE PURPOSE FOR WHICH THE LOANS WERE ADVA NCED BY THE BANKS. 3. SHORT FACTS APROPOS ARE THAT ASSESSEE A COMMISSI ON AGENT HAD FILED HIS RETURN FOR IMPUGNED ASSESSMENT YEAR DECLA RING INCOME OF ` 7,11,670/-. IT WAS NOTICED BY THE A.O. FROM THE AN NUAL INFORMATION REPORT (AIR) THAT SUBSTANTIAL AMOUNTS WERE SPENT BY THE ASSESSEE USING HIS CREDIT CARDS AND FOR PURCHASE OF IMMOVABL E PROPERTY. ASSESSEE WAS REQUIRED TO EXPLAIN ON THESE. VIS--V IS THE ALLEGED PURCHASE OF IMMOVABLE PROPERTY, SUBMISSION OF THE A SSESSEE WAS THAT HE WAS NOT HOLDER OF ANY SUCH ASSET MENTIONED IN THE AIR. 4. AS FOR THE USE OF CREDIT CARD, CERTAIN PARTICULA RS WERE SUBMITTED BY THE ASSESSEE. ASSESSEE HAD USED CREDIT CARDS OF ICICI BANK, CITY I.T.A. NO. 228/MDS/10 C.O. NO. 38/MDS/10 3 BANK AND SBI FOR PURCHASE OF VARIOUS ITEMS AND THE PARTICULARS SUBMITTED BY THE ASSESSEE SUBSTANTIATED PURCHASES T O THE EXTENT OF ` 11,10,770/-. HOWEVER, THE TOTAL AMOUNT SHOWN IN TH E AIR AGAINST CREDIT CARD USAGE CAME TO ` 22,45,367/-. THEREFORE, THE ASSESSEE WAS REQUIRED TO SUBMIT EXPLANATION FOR THE BALANCE AMOUNT ALSO, ALONG WITH RECEIPT AND PAYMENT ACCOUNT, BANK ACCOUN T OF CENTRAL BANK OF INDIA AND HIS STATEMENT OF AFFAIRS. SINCE NOTHING WAS FORTHCOMING, THE DIFFERENCE AMOUNT OF ` 11,34,597/- WAS CONSIDERED AS EXPENSES FOR WHICH NO SATISFACTORY EXPLANATION W AS OFFERED AND HENCE DEEMED TO BE INCOME OF ASSESSEE UNDER SECTION 69C OF THE INCOME-TAX ACT, 1961 (IN SHORT THE ACT). 5. BEFORE THE CIT(APPEALS), SUBMISSION OF THE ASSES SEE WAS THAT THE DIFFERENTIAL AMOUNT WHICH WAS CONSIDERED BY THE A.O. UNDER SECTION 69C OF THE ACT, WAS MET OUT OF VARIOUS PERS ONAL LOANS AVAILED FROM VARIOUS BANKS AND FINANCIAL INSTITUTIONS TOTAL ING TO LITTLE ABOVE ` 22 LAKHS. ASSESSEE FILED BEFORE THE CIT(APPEALS) S TATEMENTS OF BANK BORROWINGS, COPIES OF LOAN DETAILS, LETTERS AND DET AILS FROM DEVELOPMENT CREDIT BANK LTD., KOTAK MAHINDRA BANK L TD., ING VYSYA BANK LTD., CENTURIAN BANK LTD., ICICI BANK, CHOLAMA NDALAM INVESTMENT AND FINANCE CO. LTD. AND HDFC BANK. SUB MISSION OF THE ASSESSEE WAS THAT THESE LOANS EXPLAINED THE CREDIT CARD UTILIZATION AS PER THE AIR AND HENCE THERE WAS NO QUESTION OF ANY ADDITION UNDER I.T.A. NO. 228/MDS/10 C.O. NO. 38/MDS/10 4 SECTION 69C OF THE ACT. FURTHER, SUBMISSION WAS TH AT A SUM OF ` 4,25,450/- WAS DRAWN BY THE ASSESSEE FOR PERSONAL U SE FROM THE RETURNED PROFIT OF ` 7,31,477/- FOR THE IMPUGNED ASSESSMENT YEAR, FROM HIS BUSINESS AS A FRANCHISE FOR THE HINDU NE WSPAPER. ACCORDING TO ASSESSEE, SUCH DRAWINGS WERE UTILIZED FOR PAYING THE MONTHLY INSTALMENTS OF VARIOUS LOANS. LD. CIT(APPE ALS) AFTER CONSIDERING ABOVE SUBMISSIONS OF THE ASSESSEE WAS O F THE OPINION THAT THE DETAILS OF LOANS FILED BY THE ASSESSEE SAT ISFIED THE REQUIREMENT OF SOURCE FOR MEETING THE SPENDINGS AS PER THE CREDIT CARD. THEREFORE, HE DELETED THE ADDITION MADE BY T HE A.O. 6. NOW, BEFORE US, IT IS ARGUED BY THE LEARNED D.R. THAT ASSESSEE HAD NOT FILED ANY DETAILS REGARDING THE BANK LOANS ALLEGED TO HAVE BEEN RECEIVED BY HIM BEFORE THE ASSESSING OFFICER, BUT, HE HAD FILED SUCH RECORDS FOR THE FIRST TIME BEFORE THE CIT(APPE ALS). ACCORDING TO LEARNED D.R., THERE WAS A CLEAR VIOLATION OF RULE 4 6A OF INCOME-TAX RULES, 1962 SINCE A.O. WAS NEVER PUT ON NOTICE REGA RDING SUCH ADDITIONAL EVIDENCE SUBMITTED BEFORE THE CIT(APPEAL S). IT WAS FORCEFULLY SUBMITTED BY THE LEARNED D.R. THAT THE L D. CIT(APPEALS) SHOULD NOT HAVE ACCEPTED SUCH EVIDENCE, SINCE NONE OF THE CIRCUMSTANCES MENTIONED IN RULE 46A WERE THERE. FU RTHER, THE LD. CIT(APPEALS) HAD ERRED IN CONSIDERING SUCH EVIDENCE WITHOUT INVITING THE COMMENTS OF THE A.O. I.T.A. NO. 228/MDS/10 C.O. NO. 38/MDS/10 5 7. PER CONTRA, LEARNED A.R. SUBMITTED THAT THE DETA ILS SUBMITTED BEFORE THE CIT(APPEALS) WERE IN CONTINUATION OF THE RECORD SUBMITTED BEFORE THE A.O. DURING THE COURSE OF ASSESSMENT. A CCORDING TO LEARNED A.R., DUE TO PROLONGED ILLNESS OF THE ASSES SEE HE WAS UNABLE TO FURNISH RECORDS REGARDING PERSONAL LOANS RECEIVE D BEFORE THE A.O., AND CIT(APPEALS) WAS WELL WITHIN HIS POWERS TO CONS IDER SUCH RECORDS AND DELETE THE ADDITION MADE UNDER SECTION 69C OF THE ACT. 8. WE HAVE PERUSED THE ORDERS AND HEARD THE RIVAL C ONTENTIONS. FOR THE CREDIT CARD PAYMENTS OF ` 22,45,367/- THAT CAME TO LIGHT FROM THE AIR, ASSESSEE HAD SUBMITTED BEFORE THE A.O. DET AILS ONLY TO THE EXTENT OF ` 11,10,770/-. IN RESPECT OF THE BALANCE AMOUNT, AS SESSEE DID NOT GIVE ANY EXPLANATION BEFORE THE A.O. NEVER THELESS BEFORE THE CIT(APPEALS) HE PRODUCED VARIOUS RECORDS SHOWING BA NK BORROWINGS TO THE EXTENT OF ` 22,67,159/- WHICH, AS PER THE ASSESSEE, EXPLAINED THE DIFFERENTIAL AMOUNT OF ` 11,34,597/-. CIT(APPEALS) ACCEPTED SUCH RECORDS AND HELD THAT THE AMOUNT OF ` 11,34,597/- WAS PROPERLY EXPLAINED. HOWEVER, THE RECORDS RELATING TO BANK B ORROWINGS WERE ACCEPTED BY THE CIT(APPEALS) WITHOUT CALLING FOR AN Y COMMENTS FROM THE A.O. RULE 46A OF INCOME-TAX RULES, 1962 DOES E MPOWER THE CIT(APPEALS) TO ACCEPT ADDITIONAL EVIDENCE DURING T HE COURSE OF PROCEEDINGS BEFORE HIM, ONLY IN CASES WHERE ASSESSI NG OFFICER HAD I.T.A. NO. 228/MDS/10 C.O. NO. 38/MDS/10 6 REFUSED TO ADMIT EVIDENCE, OR ASSESSEE WAS PREVENTE D BY SUFFICIENT CAUSE FROM PRODUCING EVIDENCE, OR WHERE SUFFICIENT OPPORTUNITY WAS NOT GIVEN TO THE ASSESSEE BY THE A.O. TO ADDUCE EVI DENCE. THERE IS NO CASE FOR THE ASSESSEE THAT ASSESSING OFFICER HAD REFUSED TO ADMIT THE EVIDENCE. THERE IS ALSO NO CASE FOR THE ASSES SEE THAT THE ORDER APPEALED AGAINST WAS PASSED WITHOUT GIVING SUFFICIE NT OPPORTUNITY TO HIM. SO, THE ONLY QUESTION IS WHETHER THE ASSESSEE WAS PREVENTED BY SUFFICIENT CAUSE FROM PRODUCING THE RECORDS RELATIN G TO LOANS TAKEN BY HIM FROM VARIOUS BANKS AND OTHER INSTITUTIONS, BEFO RE THE A.O. SUBMISSION OF THE ASSESSEE IS THAT HE WAS DOWN DUE TO A PROLONGED ILLNESS AND THUS DISABLED FROM FILING THE PARTICULA RS BEFORE THE A.O. DURING THE COURSE OF ASSESSMENT. THE FIRST DATE OF HEARING AS PER THE ASSESSMENT ORDER WAS ON 1.12.2008 AND ASSESSING OFF ICER WAS BY LAW REQUIRED TO COMPLETE THE ASSESSMENT BY 30.12.20 08. ASSESSEE WAS REQUIRED TO FURNISH RECORDS FOR THE SHORTFALL O F ` 11,34,597/- ON 8.12.2008. IN SUCH CIRCUMSTANCES, WE FEEL THAT ASS ESSEES DISABILITY DUE TO ILLNESS MIGHT HAVE PREVENTED HIM FROM FILING THE RECORDS BEFORE THE A.O. THIS, IN OUR OPINION, WAS SUFFICIENT CAUS E WHICH PREVENTED ASSESSEE FROM PRODUCING THE EVIDENCE BEFORE THE A.O . WE CANNOT, THEREFORE, FIND ANY FAULT WITH THE ASSESSEE IN PROD UCING SUCH EVIDENCE BEFORE THE CIT(APPEALS) FOR THE FIRST TIME. NEVERT HELESS, SUB-RULE (3) OF RULE 46A CLEARLY MANDATES THAT THE CIT(APPEALS) HAD TO GIVE A I.T.A. NO. 228/MDS/10 C.O. NO. 38/MDS/10 7 REASONABLE OPPORTUNITY TO THE ASSESSING OFFICER TO EXAMINE THE EVIDENCE OR DOCUMENTS PRODUCED BY THE ASSESSEE AND ALSO TO PRODUCE ANY EVIDENCE OR DOCUMENT IN REBUTTAL. THES E RULES ACTUALLY EMBODY THE RULES OF NATURAL JUSTICE WHICH CANNOT BE GIVEN GO-BYE. THE A.O. HAS A RIGHT TO EXAMINE THE EVIDENCE PRODUC ED BEFORE THE CIT(APPEALS) AND TO GIVE HIS OPINION THEREON. OBVI OUSLY THESE RULES OF NATURAL JUSTICE HAVE NOT BEEN FOLLOWED. HENCE, IN THE INTEREST OF JUSTICE, WE ARE OF THE OPINION, THE MATTER NEEDS TO BE REVERTED BACK TO THE A.O. FOR FRESH CONSIDERATION. WE, THEREFORE, S ET ASIDE THE ORDERS OF THE AUTHORITIES BELOW AND REMIT THE MATTER BACK TO A.O. FOR CONSIDERING AFRESH THE EVIDENCE FILED BY THE ASSESS EE BEFORE HIM AS WELL AS CIT(APPEALS) AND TO DECIDE THE ISSUE REGARD ING ADDITION UNDER SECTION 69C OF THE ACT, IN ACCORDANCE WITH LAW. 9. IN THE RESULT, THE REVENUES APPEAL IS ALLOWED F OR STATISTICAL PURPOSES. 10. NOW, WE TAKE UP THE CROSS OBJECTION FILED BY TH E ASSESSEE. THE CROSS OBJECTION OF THE ASSESSEE IS IN SUPPORT O F THE ORDER OF LD. CIT(APPEALS). WE HAVE ALREADY SET ASIDE THE ORDER OF THE CIT(APPEALS) AND REMITTED THE ISSUE BACK TO A.O. FO R FRESH CONSIDERATION. FOR REASONS MENTIONED SUPRA, WE ARE OF THE OPINION THAT THE CROSS OBJECTION OF THE ASSESSEE HAS BECOME INFRUCTUOUS. I.T.A. NO. 228/MDS/10 C.O. NO. 38/MDS/10 8 ASSESSEE IS FREE TO STATE HIS GROUNDS AND PRODUCE E VIDENCE BEFORE THE A.O. WHEN THE ASSESSMENT PROCEEDINGS ARE REDONE . 11. IN THE RESULT, THE CROSS OBJECTION FILED BY THE ASSESSEE IS DISMISSED AS INFRUCTUOUS. 12. TO SUMMARISE THE RESULT, THE APPEAL OF THE REVE NUE IS ALLOWED FOR STATISTICAL PURPOSES, WHEREAS CROSS OBJECTION O F THE ASSESSEE IS DISMISSED AS INFRUCTUOUS. THE ORDER WAS PRONOUNCED IN THE OPEN COURT ON 23.08 .2010. SD/- SD/- (GEORGE MATHAN) (ABRAHA M P. GEORGE) JUDICIAL MEMBER ACCOUNTANT MEMBER CHENNAI, DATED THE 23 RD AUGUST, 2010. KRI. COPY TO: ASSESSEE/ASSESSING OFFICER/CIT(A)-VIII, CH ENNAI/ CIT-VI, CHENNAI/D.R./GUARD FILE