Appeal details
Counselvise Citation
[2012] 122 COUNSELVISE.COM (IT) 7369 (ITAT-CHENNAI)
Assessee PAN
Bench
Appeal Number
Duration Of Justice
2 year(s) 1 month(s) 12 day(s)
Appellant
Respondent
Appeal Type
Cross Objection
Pronouncement Date
24-07-2012
Appeal Filed By
Assessee
Order Result
Partly Allowed
Bench Allotted
C
Next Hearing Date
12-06-2012
Assessment Year
1997-1998
Appeal Filed On
11-06-2010
Judgement Text
IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH, CHENNAI BEFORE DR. O.K. NARAYANAN, VICE-PRESIDENT, AND SHRI VIKAS AWASTHY, JUDICIAL MEMBER ITA NO.741/MDS/2010 & C.O. NO.42/MDS/2010 (ASSESSMENT YEAR: 1997-98) ASSISTANT COMMISSIONER OF INCOME TAX, COMPANY CIRCLE-V(4), MAIN BUILDING, 4 TH FLOOR, CHENNAI-34. VS. DR.(MRS) ANDAL ARUMUGAM, NO.101/52, CHAMIERS ROAD, R.A.PURAM, CHENNAI-600 028. PAN:AAEPA4528P (APPELLANT) (CROSS OBJECTOR/RESPONDENT) APPELLANT BY : MS. ANUPAMA SHUKLA, IRS CIT D R RESPONDENT BY : MR. R.ME ENAKSHISUNDARAM, ADVOCATE DATE OF HEARING : 12 TH JUNE, 2012 DATE OF PRONOUNCEMENT : 24 TH JULY 2012 O R D E R PER VIKAS AWASTHY, JUDICIAL MEMBER: THE APPEAL HAS BEEN FILED BY THE REVENUE ASSAILING THE ORDER OF THE CIT(A)-V, CHENNAI DATED 25.02.2010 WHE REBY THE APPEAL OF THE ASSESSEE WAS PARTLY ALLOWED. THE ASSE SSEE HAS ALSO FILED CROSS OBJECTION TO THE APPEAL IMPUGNING THE FINDINGS OF THE CIT(A) DECIDED AGAINST HER. 2. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSE E FILED HER RETURN OF INCOME RELEVANT TO THE ASSESSMENT YEA R 1997-98 ON 31.10.1997 DECLARING INCOME OF ` 12,32,500/- ALONG WITH ITA NO. 741/MDS/2010 & C.O.NO.42/MDS/2010 2 THE RETURN, THE ASSESSEE HAD FILED TAX AUDIT REPORT IN THE PRESCRIBED FORM. AN INTIMATION VIDE LETTER DATED 5. 4.2000 ALONG WITH A COPY OF THE ASSESSMENT ORDER DATED 27. 03.2000 FOR THE ASSESSMENT YEAR 1997-98 IN THE CASE OF SHRI N.P.V. RAMASAMY UDAYAR (HUF) WAS RECEIVED BY THE ASSESSING OFFICER OF THE ASSESSEE ON 10.11.2000 FROM DCIT., COMPANY CIRCLE-I(1), CHENNAI STATING THAT, OUT OF ` 95,80,935/- ALLEGED TO HAVE BEEN RECEIVED AS GIFTS BY THE ASSESSEE ON T HE OCCASION OF HER MARRIAGE ON 15.9.1996 A SUM TO THE TUNE OF ` 90,00,000/- WERE FOUND TO BE UNEXPLAINED. 3. THE ASSESSING OFFICER ON THE BELIEF THAT INCOME CHARGEABLE TO TAX HAD ESCAPED ASSESSMENT IN THE HAN DS OF THE ASSESSEE INITIATED PROCEEDINGS UNDER SECTION 1 47 OF THE ACT. NOTICE UNDER SECTION 148 WAS ISSUED TO THE ASS ESSEE ON 29.6.2001. THE ASSESSEE VIDE LETTER DATED 15.7.2002 STATED THAT THE RETURN ALREADY FILED ON 30.1.1997 MAY BE T REATED AS RETURN IN RESPONSE TO NOTICE UNDER SECTION 148. TH E ASSESSING OFFICER VIDE ASSESSMENT ORDER DATED 28.3. 2003 HAD MADE THE FOLLOWING ADDITIONS:- ITA NO. 741/MDS/2010 & C.O.NO.42/MDS/2010 3 (1) UNEXPLAINED GIFTS U/S.68 ` 90,00,000 (2) DISALLOWANCE OF INTEREST ` 23,20,861 (3) SUPPRESSED SALES OF WHEAT HUSK ` 3,00,000 (4) TREATING REVENUE EXPENDITURE AS CAPITAL EXPENDITURE ` 20,000 4. AGGRIEVED AGAINST THE ASSESSMENT ORDER, THE ASS ESSEE PREFERRED AN APPEAL BEFORE THE CIT(A) ASSAILING THE ADDITIONS/DISALLOWANCES MADE BY THE ASSESSING OFFIC ER. THE CIT(A) VIDE ORDER DATED 25.2.2010 PARTLY ALLOWED TH E APPEAL OF THE ASSESSEE. WHILE DOING SO, THE CIT(A) DELETED THE ADDITION OF ` 90.00 LAKHS ATTRIBUTABLE TO THE GIFTS RECEIVED BY THE ASSESSEE ON THE OCCASION OF HER MARRIAGE AND AL SO DELETED INTEREST DISALLOWANCE TO THE TUNE OF ` 23.21 LAKHS MADE ON ACCOUNT OF DIVERSION OF INTEREST BEARING FU NDS FOR NON-BUSINESS PURPOSES. AGGRIEVED AGAINST THE ORDER OF THE CIT(A) IN DIRE CTING THE ASSESSING OFFICER TO DELETE THE ADDITION OF ` 90 LAKHS, THE REVENUE HAS COME IN APPEAL BEFORE THE TRIBUNAL. THE ASSESSEE HAS FILED CROSS OBJECTION IN THE APPEAL ON THE GROUND THAT THE CIT(A) HAS ERRED IN HOLDING THAT TH E ASSESSING ITA NO. 741/MDS/2010 & C.O.NO.42/MDS/2010 4 OFFICER HAS VALIDLY ASSUMED JURISDICTION TO REOPEN THE ASSESSMENT. 5. MS. ANUPAMA SHUKLA, REPRESENTING THE DEPARTMENT SUBMITTED THAT THE ORIGINAL RETURN WAS FILED BY THE ASSESSEE ON 31.10.1997. THE INFORMATION FROM DCIT., COMPANY CI RCLE-I(1) WAS RECEIVED BY THE ASSESSING OFFICER ON 10.11.2000 THAT THE ASSESSEE HAD RECEIVED GIFTS TO THE TUNE OF ` 95,80,935/- DURING HER MARRIAGE. HOWEVER, THE ASSESSEE WAS ABLE TO EXPLAIN SOURCE OF GIFTS TO THE TUNE OF ` 5,80,935/- ONLY. THEREFORE, ADDITION OF ` 90.00 LAKHS WAS MADE UNDER THE PROVISIONS OF SECTION 68 OF THE ACT. THE ASSESSING OFFICER IN THE ORDER HAS SPECIFICALLY STATED THAT THE SAID AMO UNT WAS CREDITED IN THE BANK ACCOUNT OF THE ASSESSEE. 6. THE LEARNED D.R. FURTHER SUBMITTED THAT THE CIT( A) HAS ALSO DISALLOWED THE INTEREST AMOUNTING TO ` 23,20,861/-. THE ASSESSEE HAD DIVERTED THE BORROWED FUNDS FOR NON-BU SINESS PURPOSES. THEREFORE, THE ASSESSEE WAS NOT ENTITLED TO CLAIM THE BENEFIT OF THE INTEREST PAID THEREON. ITA NO. 741/MDS/2010 & C.O.NO.42/MDS/2010 5 7. ON THE OTHER HAND, SHRI R.MEENAKSHISUNDARAM, COUNSEL APPEARING ON BEHALF OF THE ASSESSEE SUBMITT ED THAT THE AMOUNT OF ` 90.00 LAKHS RECEIVED AS GIFTS SHOULD NOT BE ASSESSED IN THE CASE OF THE ASSESSEE. INSTEAD IT SH OULD HAVE BEEN ASSESSED IN THE HANDS OF SHRI N.P.V.RAMASAMY U DAYAR (HUF). SUCH ADDITION WAS MADE IN THE INCOME OF HUF BY THE ASSESSING OFFICER. HOWEVER, THE SAME WAS DELETED BY THE CIT(A). AGAINST THE SAID ORDER THE DEPARTMENT HAS N OT FILED ANY APPEAL. THUS, THE ORDER OF THE CIT(A) HAS ATTAI NED FINALITY. NOW, THE DEPARTMENT HAS MADE ADDITION OF ` 90.00 LAKHS IN THE HANDS OF THE ASSESSEE IN AN ARBITRARY AND UNJUS TIFIED MANNER. THE COUNSEL FOR THE ASSESSEE FURTHER SUBMI TTED THAT THE CIT(A) HAS RIGHTLY DELETED THE ADDITION OF ` 90.00 LAKHS MADE IN THE ASSESSMENT. AS REGARDS INTEREST AMOUNT OF ` 23,20,861/- THE COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE INTEREST WAS PA ID BY THE ASSESSEE ON THE BORROWINGS MADE IN THE PROPRIETARY BUSINESS. THE FUNDS ADVANCED BY HER, ARE FROM HER P ERSONAL ACCOUNT AND NOT FROM THE FUNDS OF THE BUSINESS. TH E COUNSEL ITA NO. 741/MDS/2010 & C.O.NO.42/MDS/2010 6 FOR THE ASSESSEE STRONGLY SUPPORTED THE FINDINGS O F THE CIT(A) ON THE ISSUE. 8. HOWEVER, WITH REGARD TO THE ISSUE OF REOPENING, THE COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE CIT(A) HAS ERRED IN HOLDING THAT THE ASSESSING OFFICER HAD NO RIGHT TO REOPEN THE ASSESSMENT UNDER SECTION 148. HE SUBMITTED THAT AFTER THE AMENDMENT, NO ASSESSMENT WHETHER MADE UNDER SEC TION 143(1) OR 143(3) CAN BE REOPENED, UNLESS THE CONDIT IONS STIPULATED FOR VALID ASSUMPTION OF JURISDICTION ARE SATISFIED. IN ORDER TO SUPPORT HIS CONTENTIONS, HE RELIED ON THE JUDGEMENT OF THE HONBLE SUPREME COURT OF INDIA IN THE CASE O F DCIT VS. RAJESH JHAVERI STOCK BROKERS LTD., REPORTED AS 291 ITR 500. HE FURTHER SUBMITTED THAT IN RESPECT OF ADDITIONS M ADE DURING REOPENING PROCEEDINGS, THE ASSESSING OFFICER HAS MADE ADDITIONS ON THE BASIS OF THE FINDINGS OF THE ASSES SING OFFICER IN THE CASE OF N.P.V.RAMASAMY UDAYAR(HUF) CASE. THE SAME ARE WITHOUT APPLICATION OF MIND WITHOUT DETER MINING ITS ASSESSABILITY IN THE HANDS OF THE PRESENT ASSESSEE. 9. WE HAVE HEARD THE SUBMISSIONS MADE BY THE PARTIE S AND HAVE GONE THROUGH THE ORDERS OF THE LOWER AUTHO RITIES. ITA NO. 741/MDS/2010 & C.O.NO.42/MDS/2010 7 THE FIRST ISSUE IS WITH REGARD TO REOPENING OF THE ASSESSMENT UNDER SECTION 147 OF THE ACT. THE ASSESSEE HAD FIL ED RETURN ON 31.10.1997. THE RETURN WAS PROCESSED UNDER SECTI ON 143(1)(A) ON 02.11.1998 AND SUBSEQUENTLY RECTIFIED UNDER SECTION 154 OF THE ACT ON 3.10.2000. ON THE BASIS O F AN INTIMATION RECEIVED BY THE ASSESSING OFFICER ON 10. 11.2000 FROM THE DCIT., COMPANY CIRCLE-I(1), CHENNAI ALONG WITH A COPY OF ASSESSMENT ORDER DATED 27.03.2000 FOR THE ASSESSMENT YEAR 1997-98 IN THE CASE OF SHRI N.P.V.RAMASAMY UDAYAR(HUF), WHEREIN IT WAS STATED T HAT OUT OF ` 95,80,935/- AS GIFTS RECEIVED BY THE ASSESSEE ON THE OCCASION OF HER MARRIAGE ON 15.9.1996, A SUM OF ` 90.00 LAKHS HAS BEEN ADDED IN THE INCOME OF THE HUF AS UNEXPLAINED INVESTMENT UNDER THE PROVISIONS OF SECT ION 69/69A OF THE ACT. THE ASSESSING OFFICER INITIATED PROCEEDINGS UNDER SECTION 147 AGAINST THE ASSESSEE BY ISSUING NOTICE UNDER SECTION 148. INITIALLY, THE AF ORESAID AMOUNT OF ` 90.00 LAKHS WAS ASSESSED AS INCOME OF THE HUF I.E. ASSESSEES FATHER SHRI N.P.V. RAMASAMY UDAYAR. ITA NO. 741/MDS/2010 & C.O.NO.42/MDS/2010 8 HOWEVER, ON APPEAL TO CIT(A) BY THE AFORESAID HUF, THE CIT(A) DELETED THE SAID ADDITION AND THEREAFTER THE DEPARTMENT DID NOT FILE ANY APPEAL IMPUGNING THE OR DER OF THE CIT(A). THE INCOME HAD ESCAPED IN THE ORIGINAL ASSE SSMENT ALTHOUGH THE AMOUNT OF ` 90.00 LAKHS WAS CREDITED IN THE BANK ACCOUNT OF THE ASSESSEE. PRIOR TO THE AMENDMEN T, TWO CONDITIONS HAD TO BE COMPLIED WITH FOR INITIATING R EASSESSMENT. AFTER THE AMENDMENT ONLY ONE CONDITION HAS TO BE SA TISFIED I.E. THE ASSESSING OFFICER HAS REASONS TO BELIEVE THAT ANY INCOME CHARGEABLE TO TAX HAD ESCAPED ASSESSMENT. IN THE PRESENT CASE, THE INCOME CHARGEABLE TO TAX HAD ESCA PED ASSESSMENT IN THE HANDS OF THE ASSESSEE AND WAS WRO NGLY ASSESSED IN THE HANDS OF SHRI N.P.V.RAMASAMY UDAYA R, HUF, FATHER OF THE ASSESSEE. AS IS EVIDENT FROM PAR A 3.6 OF THE ASSESSMENT ORDER A SUM OF ` 90.00 LAKHS WAS CREDITED IN THE BANK ACCOUNT OF THE ASSESSEE. THEREFORE, THE CI T(A) HAD RIGHTLY DELETED THE ADDITIONS MADE IN THE INCOME OF SHRI N.P.V.RAMASAMY UDAYAR, HUF. THE ASSESSEE CANNOT TAK E ADVANTAGE OF THE OBSERVATIONS MADE BY THE CIT(A) DE LETING ITA NO. 741/MDS/2010 & C.O.NO.42/MDS/2010 9 THE ADDITIONS MADE IN THE INCOME OF SRI N.P.V.RAMAS AMY UDAYAR, HUF. THE FINDINGS OF THE CIT(A) IN ORDER D ELETING THE ADDITIONS WAS WITH RESPECT TO THE TAXABILITY OF THE AMOUNT IN THE HANDS OF SHRI N.P.V.RAMASAMY UDAYAR, HUF. THE F ACT THAT THE ASSESSEE HAD RECEIVED GIFTS OF ` 90.00 LAKHS AT THE TIME OF HER MARRIAGE IS NOT DISPUTED. THE ASSESSING OFFICER OF SHRI N.P.V.RAMASAMY UDAYAR, HUF HAD PASSED INFORMA TION TO THE ASSESSING OFFICER OF THE PRESENT ASSESSEE TO INITIATE PROCEEDINGS AGAINST THE ASSESSEE AND TO PROTECT TH E INTEREST OF THE REVENUE. ACCORDINGLY, THE ASSESSING OFFICER HAD INITIATED PROCEEDINGS UNDER SECTION 148 OF THE ACT AGAINST THE PRESENT ASSESSEE. THE REOPENING PROCEEDINGS WERE IN ITIATED WITHIN THE TIME LIMIT AS PRESCRIBED UNDER THE ACT. THEREFORE, WE HOLD THAT THE REOPENING PROCEEDINGS INITIATED AG AINST THE ASSESSEE ARE VALID. THE ISSUE IS DECIDED AGAINST TH E ASSESSEE. ACCORDINGLY, THE CROSS OBJECTIONS OF THE ASSESSEE ARE DISMISSED. 10. THE REVENUE HAS ASSAILED THE ORDER OF THE CIT(A ) ON THE GROUND THAT THE CIT(A) HAS DELETED THE ADDITIO N MADE UNDER SECTION 68 OF THE ACT ON ACCOUNT OF GIFTS REC EIVED BY THE ITA NO. 741/MDS/2010 & C.O.NO.42/MDS/2010 10 ASSESSEE TO THE TUNE OF ` 90.00 LAKHS ON THE FOLLOWING GROUNDS:- (A) AS CONTENDED BY THE LEARNED AR OF THE APPELLANT, THE APPELLANT WAS NOT SUPPLIED WITH COPIES OF STATEMENTS WHICH WERE RECORDED AT THE ASSESSMENT STAGE OF N.P.V. RAMASAMY UDAYAR (HUF) AND THE SAME INFORMATION WAS USED AGAINST THE APPELLANT TO HOLD THAT ` 90 LAKHS IS UNEXPLAINED GIFT U/S.68 OF THE ACT. (B) THE LEARNED ASSESSING OFFICER HAS SOLELY RELIED ON THE ASSESSMENT ORDER OF NPV RAMASAMY UDAYAR (HUF) FOR PASSING THE ORDER AGAINST THE APPELLANT AND THE SAME HUF ASSESSMENT ORDER WAS TREATED AS FORMING PART OF THE ORDER BY ANNEXING ALONG WITH THE APPELLANTS ASSESSMENT ORDER. (C) ON THE STRENGTH OF THOSE SWORN STATEMENTS, THE LEARNED ASSESSING OFFICER HAS PASSED THE ORDER IN THE CASE OF THE APPELLANT BUT COPIES WERE NOT SUPPLIED TO THE APPELLANT. (D) THE LEARNED CIT(A)-I HAS ALREADY GIVEN A FINDING THAT THE LEARNED ASSESSING OFFICER HAS NOT BROUGHT OUT ENOUGH MATERIAL TO HOLD THAT ` 90 LAKHS IS UNACCOUNTED INCOME OF NPV RAMASWAMY UDAYAR (HUF) WHICH WERE ITA NO. 741/MDS/2010 & C.O.NO.42/MDS/2010 11 CONVERTED INTO MARRIAGE GIFTS IN THE FORM OF DEMAND DRAFTS, CHEQUES AND CASH, WHEREAS THE LEARNED ASSESSING OFFICER HAS PASSED THE ASSESSMENT ORDER OF THE APPELLANT ON THE STRENGTH OF THE ASSESSMENT ORDER OF NPV RAMASWAMY UDAYAR(HUF) ONLY. (E) FURTHER, THE LEARNED ASSESSING OFFICER HAS PASSED THE ORDER ON THE PRESUMPTION THAT THE APPELLANT COULD HAVE EARNED ` 90 LAKHS FROM HER FLOUR BUSINESS THOUGH SHE WAS A STUDENT AT THE TIME OF MARRIAGE. (F) APART FROM RELYING ON THE ASSESSMENT ORDER OF NPV RAMASWAMY UDAYAR(HUF) THE ASSESSING OFFICER HAS NOT BROUGHT ANY NEW MATERIAL OR INDEPENDENT ENQUIRY FOR PASSING SUCH AN ASSESSMENT ORDER. WE DO NOT CONCUR WITH THE FINDINGS OF THE CIT(A). N ON-SUPPLY OF COPIES OF THE STATEMENTS WHICH WERE RECORDED AT THE ASSESSMENT STAGE OF NPV RAMASWAMY UDAYAR(HUF) IS O NLY PROCEDURAL LAPSE. THE ASSESSING OFFICER OF NPV RAMA SWAMY UDAYAR(HUF) HAD CONDUCTED A DETAILED ENQUIRY. HOWE VER, THE ADDITIONS WERE WRONGLY MADE IN THE INCOME OF TH E HUF. AS PER THE FINDINGS OF THE ASSESSING OFFICER A SUM OF ` 90.00 ITA NO. 741/MDS/2010 & C.O.NO.42/MDS/2010 12 LAKHS WAS CREDITED IN THE BANK ACCOUNT OF THE ASSES SEE. THEREFORE, THE SAME WAS LIABLE TO BE TAXED IN THE H ANDS OF THE ASSESSEE AND NOT IN THE HANDS OF THE HUF. THE FIND INGS OF THE CIT(A) IN THE CASE OF APPEAL FILED BY NPV RAMAS WAMY UDAYAR(HUF) CANNOT BE APPLIED IN THE PRESENT CASE FOR THE REASONS THAT PRIMA-FACIE THE AMOUNT OF ` 90.00 LAKHS WAS NOT TAXABLE IN THE HANDS OF HUF. BUT, AT THE SAME TIME, THAT AMOUNT CANNOT ESCAPE TAX LIABILITY. NON-SUPPLY OF DOCUMENTS/STATEMENTS BY THE ASSESSING OFFICER TO TH E ASSESSEE CAN BE TERMED AS PROCEDURAL LAPSE, BUT IT CANNOT VITIATE THE ENTIRE PROCEEDINGS. THEREFORE, THE AMOU NT OF ` 90.00 LAKHS IS LIABLE TO THE TAXED IN THE HANDS OF THE ASSESSEE. WE THEREFORE, ALLOW THIS GROUND OF APPEAL OF THE REVENUE. 11. THE SECOND GROUND OF APPEAL OF THE REVENUE IS W ITH RESPECT TO DISALLOWANCE OF INTEREST AMOUNTING TO ` 23,20,861/-. THE ASSESSEE HAD CONTENDED THAT THE MONIES WERE ADV ANCED TO HER FAMILY MEMBERS AND TO A TRUST WHEREIN SHE IS A TRUSTEE OUT OF HER OWN FUNDS AND BORROWED FUNDS WERE NOT U TILIZED ITA NO. 741/MDS/2010 & C.O.NO.42/MDS/2010 13 FOR LENDING INTEREST FREE LOANS. IT WAS CATEGORICAL LY STATED THAT THE PERSONAL ACCOUNTS AND BUSINESS ACCOUNTS WERE SEPARATELY MAINTAINED BY THE ASSESSEE AND THERE WAS NO INTER-CONNECTION TRANSACTION BETWEEN PERSONAL AND B USINESS ACCOUNTS. THE ASSESSEE HAD ADVANCED MONIES FROM HE R PERSONAL ACCOUNT. THIS FACT IS REFLECTED FROM BANK STATEMENT OF THE INDIAN BANK, WITH WHOM THE ASSESSEE HAD MAIN TAINED PERSONAL BANK ACCOUNT. THEREFORE, WE ARE OF THE VI EW THAT THE CIT(A) HAS APTLY DELETED THE ADDITION MADE BY THE ASSESSING OFFICER ON ACCOUNT OF DISALLOWANCE OF INTEREST AMOU NTING TO ` 23,20,861/-. THIS GROUND OF APPEAL OF THE REVENUE I S DISMISSED. 12. IN THE RESULT, THE APPEAL OF THE REVENUE IS PAR TLY ALLOWED AND THE CROSS OBJECTIONS OF THE ASSESSEE ARE DISMIS SED. ORDER PRONOUNCED IN THE OPEN COURT ON TUESDAY, THE 24 TH DAY OF JULY, 2012 AT CHENNAI. SD/- SD/- (DR. O.K.NARAYANAN) (VIKAS AWASTHY) VICE PRESIDENT JUDICIAL MEMBER CHENNAI, DATED THE 24 TH JULY, 2012. SOMU ITA NO. 741/MDS/2010 & C.O.NO.42/MDS/2010 14 COPY TO: (1) APPELLANT (4) CIT(A) (2) RESPONDENT (5) D.R. (3) CIT (6) G.F.
Mehul