R.Anbukkarasu, Gudiyatham V. ACIT, CHENNAI

CO 88/CHNY/2011

• Counselvise Citation: [2013] 122 COUNSELVISE.COM (IT) 8449 (ITAT-CHENNAI)
• Duration Of Justice: 1 year(s) 10 month(s) 30 day(s)
• Appeal Type: Cross Objection
• Pronouncement Date: 29-04-2013
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: D
• Next Hearing Date: 02-04-2013
• Assessment Year: 2004-2005
• Appeal Filed On: 30-05-2011
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: T VASUDEVAN
• Assessee Lawyers: VIDISHA KALRA
• Keywords: Unexplained investment; Business income; Income from undisclosed sources; Search and seizure; Period of limitation; Condonation of delay; Bonafide mistake
• Section: 44AD; 143(3); 153A; 132

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH, CHENNAI BEFORE DR. O.K. NARAYANAN,VICE-PRESID ENT AND SHRI VIKAS AWASTHY, JUDICIAL MEM BER ITA NOS.1978 TO 1982/MDS/2010 (ASSESSMENT YEARS: 2000-01, 2001-02, 2004-05 TO 200 6-07) & CROSS OBJECTION NOS. 85 TO 90/MDS/2011 ( IN ITA NOS.1978 TO 1982/MDS/2010) (ASSESSMENT YEARS:2000-01,2001-02, 2 003-04 TO 2006-07) THE ASSISTANT COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE-II(2), 46, M.G.ROAD, CHENNAI-600 034. VS. SHRI R.ANBUKKARASU, 8, PERIABBU MUDALI STREET, GUDIYATHAM-632 602. PAN:AAHHM2008K (HUF) (APPELLANT) (RESPONDENT/CROSS OBJECTOR) APPELLANT BY : MS. VIDISHA KALRA, CIT RESPONDENT BY : MR. T.VASUDEVAN, ADVOCATE DATE OF HEARING : 2 ND APRIL, 2013 DATE OF PRONOUNCEMENT : 29 TH APRIL, 2013 O R D E R PER BENCH: THE REVENUE HAS FILED SET OF FIVE APPEALS IMPUGNIN G THE ORDER OF THE CIT(A)-II, CHENNAI FOR THE ASSESSMEN T YEARS 2000-01, 2001-02, 2004-05, 2005-06 AND 2006-07. SIN CE ITA NOS.1978 TO 1982/MDS/2010 & C.O.NOS.85 TO 90/MDS/2011 2 SOME OF THE ISSUES IN THE APPEALS FILED BY THE REVE NUE ARE COMMON, THEY ARE TAKEN UP TOGETHER FOR ADJUDICATION . FOR THE RESPECTIVE ASSESSMENT YEARS, THE ASSESSEE HAS FILED CROSS OBJECTIONS. ALL THE FIVE CROSS OBJECTIONS ARE TAKEN UP FOR ADJUDICATION ALONG WITH THE APPEALS. 2. THE ASSESSEE HAS ALSO FILED CROSS OBJECTION NO.87/MDS/2011 IMPUGNING THE ORDER OF THE CIT(A)-II , CHENNAI DATED 21.06.2010 FOR THE ASSESSMENT YEAR 2 003- 04. THERE IS A DELAY OF 161 DAYS IN FILING OF CROSS OBJECTION. WE FIND THAT THE REVENUE HAS NOT FILED ANY APPEAL A GAINST THE ORDER OF THE CIT(A) FOR THE ASSESSMENT YEAR 2003-04 . SINCE NO APPEAL HAS BEEN FILED BY THE REVENUE FOR THE ASS ESSMENT YEAR 2003-04, THE CROSS OBJECTION NO.87/MDS/2011 OF THE ASSESSEE IS DISMISSED AS NOT MAINTAINABLE. 3. ALL THE FIVE APPEALS OF THE REVENUE ARE FILED BE YOND THE PERIOD OF LIMITATION. AFFIDAVITS FOR CONDONATION O F DELAY CITING REASONS CAUSING DELAY IN FILING APPEALS HAVE BEEN F ILED BY THE DEPARTMENT. AFTER PERUSAL OF THE AFFIDAVITS, WE AR E SATISFIED ITA NOS.1978 TO 1982/MDS/2010 & C.O.NOS.85 TO 90/MDS/2011 3 THAT THE DELAY CAUSED IN FILING OF APPEALS IS NOT I NTENTIONAL. WE, THEREFORE, IN THE INTEREST OF JUSTICE CONDONE T HE DELAY AND ADMIT THE APPEALS FOR HEARING ON MERITS. 4. THE ASSESSEE HAS FILED CROSS OBJECTIONS CORRESPO NDING TO THE APPEALS FILED BY THE REVENUE. THE ASSESSEE HAS FILED ALL THE CROSS OBJECTIONS BEYOND THE PERIOD OF LIMIT ATION. PETITIONS FOR CONDONATION OF DELAY IN FILING OF CR OSS OBJECTIONS HAVE BEEN FILED. THE PETITIONS FOR RESPECTIVE ASS ESSMENT YEARS ARE SUPPORTED BY AFFIDAVIT. WE ARE SATISFI ED THAT THE DELAY IN FILING OF CROSS OBJECTIONS IS UNINTENTIONA L AND HAS OCCURRED BECAUSE OF BONAFIDE MISTAKE ON THE PART OF THE ASSESSEE. THE DELAY IN FILING OF CROSS OBJECTIONS IS CONDONED AND THE ALL THE FIVE CROSS OBJECTIONS ARE TAKEN UP FOR DISPOSAL ON MERITS ALONG WITH THE APPEALS FOR THE RESPECTIVE ASSESSMENT YEARS. 5. THE BRIEF FACTS OF THE CASE ARE THAT A SEARCH WA S CONDUCTED UNDER SECTION 132 OF THE INCOME TAX ACT I N THE PREMISES OF THE ASSESSEE ON 18.1.2006. THE ASSESSEE IS ENGAGED IN THE BUSINESS OF CINEMA THEATRES AND IS H AVING ITA NOS.1978 TO 1982/MDS/2010 & C.O.NOS.85 TO 90/MDS/2011 4 INCOME FROM LITTLE LAKSHMI THEATRE AND MAHALAKSHM I THEATRE AT GUDIYATHAM. AS A RESULT OF SEARCH AND SEIZURE, A SSESSMENT WAS COMPLETED UNDER SECTION 153A READ WITH SECTION 143(3) OF THE ACT. ADDITIONS WERE MADE IN THE INCOME RETU RNED BY THE ASSESSEE ON ACCOUNT OF: 1) SUPPRESSION OF THEATRE COLLECTIONS; 2) INCOME FROM CANTEEN RECEIPTS; 3) UNACCOUNTED CASH AND JEWELLERY; 4) CAPITATION FEE (EDUCATION EXPENSES) PAID BY THE ASSESSEE FOR EDUCATION OF HIS DAUGHTER 5) UNEXPLAINED INVESTMENT IN CONSTRUCTION OF THE THEATRE; 6) DEEMED PROFITS UNDER SECTION 28(IV); 7) REPAYMENT OF BANK LOAN; ITA NO.1978 & 1979/MDS/2011 & C.O.NOS.85 & 86/MDS/2011 (A.Y.2000-01 & 2001-02): 6. THE COMMON QUESTION WHICH HAS BEEN RAISED BY THE REVENUE IN BOTH THE APPEALS RELATES TO SUPPRESSION OF THEATRE COLLECTIONS AMOUNTING TO ` 13,73,081/- IN THE ASSESSMENT YEAR 2000-01 AND ` 41,22,890/- IN THE ASSESSMENT YEAR 2001-02. ITA NOS.1978 TO 1982/MDS/2010 & C.O.NOS.85 TO 90/MDS/2011 5 THE ASSESSING OFFICER HAD MADE ADDITION OF THE AFOR ESAID AMOUNTS IN THE RESPECTIVE ASSESSMENT YEARS. THE CIT (A) ALLOWED 40% OF THE SUPPRESSED RECEIPTS TOWARDS PROB ABLE EXPENSES AFTER ANALYZING THE RECORDED TRANSACTION S AND ESTIMATED 60% OF THE GROSS SUPPRESSED RECEIPTS I.E ` 8,23,858/- FOR THE ASSESSMENT YEAR 2000-01 AND ` 13,31,658/- FOR THE ASSESSMENT YEAR 2001-02 AS INCO ME LIABLE TO BE TAXED. 7. MS. VIDISHA KALRA APPEARING ON BEHALF OF THE REVENUE SUBMITTED THAT THERE IS NO DISPUTE WITH RES PECT TO SUPPRESSION OF INCOME. THE DISPUTE IS WITH REGARD TO EXPENDITURE CLAIMED BY THE ASSESSEE ON UNDISCLOSED INCOME. THE CIT(A) HAS ALLOWED 40% OF SUCH INCOME AS EXPENDITURE, MERELY ON ASSUMPTION. THE ONUS IS ON T HE ASSESSEE TO PROVE THE EXPENDITURE. 8. ON THE OTHER HAND, SHRI T.VASUDEVAN APPEARING ON BEHALF OF THE ASSESSEE SUBMITTED THAT THE ASSESSEE IS NOT CLAIMING ANY EXPENDITURE IN RESPECT OF THE INCOME A LREADY DISCLOSED. THE EXPENDITURE CLAIMED IS CORRESPONDING TO THE ITA NOS.1978 TO 1982/MDS/2010 & C.O.NOS.85 TO 90/MDS/2011 6 UNDISCLOSED INCOME. THE ASSESSING OFFICER HAS NOT ALLOWED ANY EXPENSES OUT OF UNACCOUNTED RECEIPTS. THE ASSE SSEE HAS INCURRED EXPENDITURE TOWARDS PAYMENTS MADE TO DISTRIBUTORS OF THE FILMS. 9. WE HAVE HEARD THE SUBMISSIONS MADE BY BOTH THE PARTIES AND HAVE PERUSED THE ORDERS OF THE AUTHORIT IES BELOW. THERE IS NO DISPUTE WITH REGARD TO QUANTUM OF THEAT RE COLLECTION BASED ON THE SEIZED MATERIAL. THE DISPU TE IS ONLY WITH REGARD TO EXPENDITURE INCURRED FOR EARNING UND ISCLOSED INCOME. IT IS ALSO AN ADMITTED FACT THAT THE ASSES SEE HAS BEEN SHARING PART OF ITS RECEIPTS FROM THEATRE BUSI NESS WITH DISTRIBUTORS. THE COUNSEL FOR THE ASSESSEE HAS GI VEN DETAILS OF THE EXPENDITURE TOWARDS THE DISTRIBUTORS SHARE, WHICH ARE REPRODUCED HEREIN BELOW:- NAME OF THE THEATRE GROSS COLLECTION ACCOUNTED IN THE BOOKS DISTRIBUTORS SHARE ACCOUNTED IN THE BOOKS PERCENTAGE LAKSHMI TALKIES ` 26,14,509 ` 13,38,700 51.20% LITTLE LAKSHMI ` 25,43,495 ` 12,32,420 48.45% ITA NOS.1978 TO 1982/MDS/2010 & C.O.NOS.85 TO 90/MDS/2011 7 10. A PERUSAL OF THE ABOVE TABLE SHOWS THAT THE ASS ESSEE IS SHARING APPROXIMATELY 50% OF THE GROSS COLLECTIONS WITH THE DISTRIBUTORS. THE CIT(A) HAS ALLOWED 40% FOR THE SA ME. THE ASSESSEE IN CROSS OBJECTIONS HAS OBJECTED TO THE AM OUNT CONFIRMED BY THE CIT(A). AS PER ASSESSEES OWN A DMISSION, THE ASSESSEE IS SHARING APPROXIMATELY 50% OF GROSS RECEIPTS FROM THEATRE COLLECTION WITH DISTRIBUTORS. THE REVE NUE HAS NOT REBUTTED THE SAME. WE, ACCORDINGLY, MODIFY THE ORDE R OF THE CIT(A) FOR THE ASSESSMENT YEARS 2000-01 AND 2001-02 AND ALLOW 50% OF THE UNACCOUNTED GROSS RECEIPTS TOWARD S EXPENDITURE ON ACCOUNT OF DISTRIBUTORS SHARE. 11. THUS, BOTH THE APPEALS OF THE REVENUE ARE DISMI SSED AND THE CROSS OBJECTIONS OF THE ASSESSEE ARE PARTLY ALLOWED IN THE AFORESAID TERMS. ITA NO.1980/MDS/2011& C.O.NO.88/MDS/2011 (A.Y.2004-05):- 12. THE REVENUE HAS ASSAILED THE ORDER OF THE CIT(A ) DATED 21.6.2010 ON FIVE EFFECTIVE GROUNDS. THE SIXTH GROU ND OF APPEAL IS GENERAL IN NATURE AND IS THUS NOT TAKEN U P FOR ADJUDICATION. ITA NOS.1978 TO 1982/MDS/2010 & C.O.NOS.85 TO 90/MDS/2011 8 13. THE FIRST GROUND OF APPEAL OF THE REVENUE RELAT ES TO TELESCOPING THE EDUCATIONAL EXPENSES AMOUNTING TO ` 30,000/- THE ASSESSEE HAD PAID A SUM OF ` 1,05,000/- DURING THE A.YS. 2003-04 AND 2004-05 TOWARDS EDUCATION EXPENSES OF HIS DAUGHTER. THE STAND OF THE ASSESSEE IS THAT FOR ED UCATION OF HIS DAUGHTER, HE HAS PAID AMOUNT FROM THE CONTRIBUT ION FROM FAMILY MEMBERS AND SALE PROCEEDS OF AGRICULTURAL LA ND. THE ASSESSING OFFICER HAS MADE ADDITION TO THE TUNE OF ` 75,000/- FOR THE A.Y 2003-04 AND RS.30,000/- FOR THE A.Y 20 04-05. FOR THE A.YS. 2003-04 & 2004-05, THE CIT(A) HAS CONFIR MED THE ADDITION MADE BY THE ASSESSING OFFICER. THE ASSESSE E HAS FILED CROSS OBJECTION TO THE CONFIRMATION OF THE SA ID AMOUNT BY THE CIT(A). HOWEVER, WHILE CONFIRMING THE ADDITION MADE BY THE ASSESSING OFFICER, THE CIT(A) HAS HELD THAT THE EXPENDITURE TOWARDS CAPITATION FEE OF ` 30,000/- FOR THE A.Y. 2004-05 HAS BEEN MADE OUT OF UNACCOUNTED INCOME EA RNED BY THE ASSESSEE DURING THE A.YS.2000-01 AND 2001-02 . 14. THE COUNSEL FOR THE ASSESSEE CONTENDED THAT THE ASSESSEE HAS LARGE AGRICULTURAL ITA NOS.1978 TO 1982/MDS/2010 & C.O.NOS.85 TO 90/MDS/2011 9 HOLDINGS AND HAS BUSINESS INCOME AND AS SUCH HAS S UFFICIENT INCOME TO MEET THE EDUCATIONAL EXPENSES OF HIS DAUG HTER. THE DR COULD NOT CONTROVERT THE SUBMISSIONS OF THE COUNSEL FOR THE ASSESSEE. WE, THEREFORE, DISMISS THE GROUN D OF APPEAL OF THE REVENUE AND ALLOW THE GROUND RAISED I N THE CROSS OBJECTION OF THE ASSESSEE. 15. THE SECOND GROUND OF APPEAL OF THE REVENUE IS WITH REGARD TO INCOME RECEIVED BY THE ASSESSEE FROM SALE PROCEEDS OF THE CANTEENS. THE ASSESSEE IS RUNNING T WO CANTEENS IN HIS THEATRES I.E. MAHALAKSHMI AND LITT LE LAKSHMI THEATRE. THE ASSESSEE HAD LEASED OUT THE CANTEENS T ILL THE YEAR 2003-04 AND THE INCOME FROM LEASE WAS ADMITTED BY THE ASSESSEE AS LEASE RENTAL INCOME UP TO THE ASSESSMEN T YEAR 2003-04. FROM THE ASSESSMENT YEAR 2004-05 ONWARDS T HE ASSESSEE STARTED RUNNING CANTEENS ON HIS OWN. AS PE R THE ASSESSEES OWN ADMISSION, DAILY COLLECTION FROM BOT H THE CANTEENS IS AMOUNTING TO ` 2,500/- PER DAY. HOWEVER, IN THE INCOME RETURNED BY THE ASSESSEE, THE ASSESSEE DID NOT OFFER THE SAID INCOME FOR THE ASSESSMENT. THE ASSESSEE C HANGED ITA NOS.1978 TO 1982/MDS/2010 & C.O.NOS.85 TO 90/MDS/2011 10 HIS STANCE AND SUBMITTED THAT THERE WAS A FAMILY PA RTITION ACCORDING TO WHICH THE ASSESSEE IS ONLY ENTITLED TO RECEIVE 50% OF THE INCOME FROM THE CANTEENS. MOREOVER, IN T HE SAID CANTEENS MOST OF THE ITEMS SOLD ARE BRANDED ITEMS A ND HAS A MARGIN OF NOT MORE THAN 20%. THE ASSESSEE IN SUPPOR T OF HIS CONTENTIONS HAS PLACED A COPY OF THE ORDER OF THE HONBLE MADRAS HIGH COURT DATED 19.01.1966 AND MEMO OF COMPROMISE AT PAGE 29 TO 37 OF THE PAPER BOOK. AS PER THE ADMISSION OF THE ASSESSEE, TEST CHECKS WERE APPLIE D, ACCORDING TO WHICH ON 13.1.2006, THE RECEIPTS FROM CANTEEN WERE ` 3,107/- AND ON 12.1.2006, THE RECEIPTS AMOUNTED TO ` 3,340/- FROM THE CANTEENS OF BOTH THE THEATRES. S UBSTANTIAL PORTION OF SALES PROCEEDS WERE FROM ITEMS LIKE CIG ARETTE, WATER PACKETS, ICE CREAM, CHIPS ETC. IT WAS ALSO ADMITTED BY THE ASSESSEE THAT THERE WAS VERY LOW GROSS COLLECT IONS ON THE DATE OF TEST CHECKS. THE CIT(A) ON ESTIMATED BASIS ASSUMED GROSS COLLECTION AT RS5,000/- PER DAY. ACCORDINGLY, ANNUAL GROSS COLLECTION WAS CALCULATED AT RS.18,25,000/- W HICH WAS INITIALLY ADMITTED BY THE ASSESSEE. THE CIT(A) ASSU MED AVERAGE RATE OF PROFIT FROM CANTEEN RECEIPT @ 40% A ND ITA NOS.1978 TO 1982/MDS/2010 & C.O.NOS.85 TO 90/MDS/2011 11 CONFIRMED THE TOTAL INCOME OF ` 7,30,000/- AND AFTER ALLOWING 50% SHARE OF MOTHER OF THE ASSESSEE, THE CIT(A) HAS MADE ADDITION OF ` 3,65,000/-. THE DEPARTMENT HAS ASSAILED THE ORDER OF THE CIT(A) ON ACCOUNT OF SHARING OF INCOM E FROM THE INCOME EARNED FROM THE CANTEEN. ON THE OTHER HAND, THE ASSESSEE HAS ASSAILED THE ORDER OF THE CIT(A) IN CR OSS OBJECTION CONFIRMING THE ADDITION TO THE TUNE OF ` 3,65,000/-. 16. A PERUSAL OF THE IMPUGNED ORDER SHOWS THAT THE CIT(A) HAS TAKEN A FAIR VIEW IN ESTIMATING GROSS COLLECTIO N AT ` 5,000/- PER DAY. HOWEVER, KEEPING IN VIEW THE FACT THAT THE RE IS A SALE OF BRANDED ITEMS IN THE CANTEEN, THE GROSS MARGIN O N SALE OF SUCH ITEMS CAN AT BEST BE TAKEN AS 20%. THE ASSESS EE HAS PLACED ON RECORD A COPY OF THE ORDER OF HIGH COURT AND THE COMPROMISE BETWEEN THE FAMILY MEMBERS, ACCORDING TO WHICH THE ASSESSEE IS ENTITLED TO ONLY 50% SHARE IN THE I NCOME FROM THE CANTEENS. HENCE, THE TOTAL INCOME FROM THE CANT EENS WHICH COMES TO THE SHARE OF THE ASSESSEE IS CALCULA TED AS UNDER:- ANNUAL GROSS COLLECTION : ` 18,25,000 GROSS PROFIT 20% OF THE SUM : ` 3,65,000 ITA NOS.1978 TO 1982/MDS/2010 & C.O.NOS.85 TO 90/MDS/2011 12 50% SHARE OF THE ASSESSEE COMES TO ` 1,82,500/- ACCORDINGLY, THIS GROUND OF APPEAL OF THE REVENUE I S DISMISSED AND THE GROUND RAISED IN THE CROSS OBJEC TION OF THE ASSESSEE IS PARTLY ALLOWED. 17. THE THIRD GROUND OF APPEAL OF THE REVENUE IS WI TH REGARD TO UNEXPLAINED INVESTMENT IN THE CONSTRUCTIO N OF M/S.MAHALAKSHMI THEATRE. THE ASSESSING OFFICER MAD E ADDITION OF ` 13,26,006/- TOWARDS UNEXPLAINED INVESTMENT. ON APPEAL, THE CIT(A) GRANTED RELIEF OF ` 8,26,006/- TO THE ASSESSEE AND CONFIRMED ADDITION TO THE TUNE OF ` 5,00,000/-. AGGRIEVED AGAINST THE FINDINGS OF THE CIT(A), BOTH REVENUE AND ASSESSEE HAVE COME IN APPEAL AND CROSS OBJECTIO N BEFORE THE TRIBUNAL. THE STAND OF THE COUNSEL FOR T HE ASSESSEE IS THAT THE ASSESSEE HAS BEEN ABLE TO EXP LAIN EXPENDITURE TO THE EXTENT OF ` 39.53 LAKHS INCURRED TOWARDS CONSTRUCTION OF THE THEATRE. THE MATTER WAS REFERRE D TO DVO UNDER SECTION 142A OF THE ACT. THE DVO VALUED THE COST OF CONSTRUCTION AS ` 49,02,100/-. THE ASSESSEE HAD CLAIMED IN HIS BOOKS OF ACCOUNT, THE COST OF CONSTRUCTION AS ` 39,53,321/- ITA NOS.1978 TO 1982/MDS/2010 & C.O.NOS.85 TO 90/MDS/2011 13 THE ADDITION WAS MADE BY THE ASSESSING OFFICER ON A CCOUNT OF DIFFERENCE ARISING FROM VALUATION GIVEN BY DVO A ND THE VALUE DECLARED BY THE ASSESSEE. THE CIT(A) HELD TH AT SINCE VALUATION MADE BY THE DVO IS ONLY ON ESTIMATE BASIS , THE UNACCOUNTED INVESTMENT IS RESTRICTED TO ` 5,00,000/- ONLY. THE CIT(A) HELD THAT SINCE THERE IS NO SEPARATE INCOME, TELESCOPY OF UNACCOUNTED INVESTMENT IS ALLOWED AGAINST UNACCO UNTED INCOME FOR THE ASSESSMENT YEARS 2000-01 AND 2001-02 . 18. WE HAVE HEARD THE SUBMISSIONS MADE BY BOTH THE SIDES AND HAVE PERUSED THE ORDERS OF THE AUTHORITIES BELO W. WE FIND THAT THE AS PER THE REGISTERED VALUER REPORT, THE NET COST OF CONSTRUCTION IS ` 40,00,000/-. THE ASSESSING OFFICER HAD REFERRED TO THE DVO UNDER SECTION 142A OF THE ACT F OR THE VALUATION. THE DVO VALUED THE COST OF CONSTRUCTION AS ` 49,02,100/- BY ADOPTING CPWD RATES. THE ASSESSING OFFICER MADE ADDITION ON THE BASIS OF THE VALUE DETERMINED BY DVO WITHOUT REJECTING THE BOOKS OF ACCOUNTS OF THE ASSE SSEE. IT IS A WELL SETTLED LAW THAT THE COST OF CONSTRUCTION HA S TO BE DETERMINED AS PER STATE PWD RATES AND NOT THE CENTR AL PWD RATES. THIS VIEW HAS BEEN TAKEN BY THE TRIBUNAL IN THE CASE OF ITA NOS.1978 TO 1982/MDS/2010 & C.O.NOS.85 TO 90/MDS/2011 14 M.SELVARAJ VS ITO REPORTED AS 258 ITR (AT) 82 (THIR D MEMBER, CHENNAI). THE JURISDICTIONAL HIGH COURT HA S ALSO BEEN TAKING SIMILAR CONSISTENT VIEW ON THIS ISSUE. ACCORDINGLY, THE FINDINGS OF THE CIT(A) ON THIS ISSUE ARE SET AS IDE AND THE ASSESSING OFFICER IS DIRECTED TO ADOPT VALUE AS PE R REGISTERED VALURERS REPORT. IN VIEW OF OUR ABOVE OBSERVATIONS, THIS GROUND OF APPEAL OF THE REVENUE IS DISMISSED AND THE GROUND RAISED B Y THE ASSESSEE IN ITS CROSS-OBJECTIONS IS ALLOWED. 19. THE FOURTH GROUND OF APPEAL RAISED BY THE REVEN UE IS WITH REGARD TO REPAYMENT OF LOAN AMOUNTING TO ` 14,55,000/-. THE DR POINTED OUT THAT THE CIT(A) HAS ERRED IN DEL ETING THE ADDITION MADE BY THE ASSESSING OFFICER AS THE ASSES SEE HAS FAILED TO PROVE CREDITWORTHINESS OF THE CREDITORS A ND THE GENUINENESS OF THE TRANSACTIONS RELATED TO THE ALLE GED CREDITORS. 20. WE FIND THAT THE CIT(A) HAS DELETED THE ADDITI ON ON THE GROUND THAT THE ASSESSEE HAS BEEN ABLE TO GIVE DET AILS OF ALL ITA NOS.1978 TO 1982/MDS/2010 & C.O.NOS.85 TO 90/MDS/2011 15 THE CREDITORS ALONG WITH THEIR PAN AND DETAILS OF T HE INCOME- TAX ASSESSMENT OF THE SAID CREDITORS. LETTERS UNDER SECTION 132(6) WERE ISSUED TO THE PARTIES CALLING FOR CONF IRMATION. ALL THE PARTIES WHO HAD EXTENDED FINANCIAL ASSISTANCE T O THE ASSESSEE HAD CONFIRMED THE LOAN ADVANCED BY THEM TO THE ASSESSEE. ONCE THE CREDITORS HAD GIVEN CONFIRMATIO N AND THE ASSESSEE HAD GIVEN DETAILS OF ALL THE CREDITORS, TH E ASSESSEE HAS DISCHARGED HIS ONUS. THE ASSESSEE IS NOT BOUND TO GIVE SOURCE OF INCOME OF THE CREDITORS. IT WOULD NOT BE OUT OF PLACE TO MENTION HERE THAT ALL THE CREDITORS HAVE INFORME D THAT THEY ARE COVERED UNDER THE PROVISIONS OF SECTION 44AD OF THE ACT, THEREFORE, THEY DID NOT FILE BALANCE SHEET OR BOOKS OF ACCOUNT BEFORE THE ASSESSING OFFICER. THE CIT(A) HAS ALLOWE D THIS GROUND OF APPEAL OF THE ASSESSEE WITH THE OBSERVATI ONS THAT THE ASSESSEE HAS DISCHARGED HIS ONUS CAST ON HIM AS ALL THE CREDITORS HAVE CONFIRMED THE TRANSACTIONS. WE DO NOT FIND ANY INFIRMITY IN THE FINDINGS OF THE CIT(A) ON THIS ISSUE. THEREFORE, THIS GROUND OF APPEAL OF THE REVENUE IS DISMISSED. ITA NOS.1978 TO 1982/MDS/2010 & C.O.NOS.85 TO 90/MDS/2011 16 21. THE FIFTH GROUND OF APPEAL OF THE REVENUE RELAT ES TO DEEMED PROFITS UNDER SECTION 28(IV) AMOUNTING TO ` 41,49,000/-. THE ASSESSEE WAS A PARTNER IN A CONCE RN UNDER THE NAME & STYLE OF M/S.GOLDEN DISTILLERIES W HICH WAS IN THE BUSINESS OF MANUFACTURING OF IMFL PRODUCTS. SUBSEQUENTLY, THE FIRM WAS TAKEN OVER BY THE COMPAN Y M/S. MIDAS GOLDEN DISTILLERIES P. LTD. 50,000 SHARES HAV ING FACE VALUE OF ` 10/- EACH WERE ALLOTTED TO THE ASSESSEE AND HE WAS MADE PROMOTER DIRECTOR OF THE SAID COMPANY. DURING THE ASSESSMENT YEAR 2004-05 SHARE CAPITAL OF THE COMPAN Y WAS INCREASED AND THE ASSESSEE WAS ALLOTTED 46,100 SHAR ES @ 10 PER SHARE HAVING PRICE OF ` . 100/- PER SHARE WITH FACE VALUE OF ` 10/- AND PREMIUM OF ` 90/- PER SHARE. THE ASSESSING OFFICER HELD THAT THE AMOUNT OF PREMIUM WAIVED OF TO THE ASSESSEE I.E. 46,100 X 90 = RS.41,49,000/- IS DEEME D PROFIT IN THE HANDS OF THE ASSESSEE. . BEFORE PROCEEDINGS FURTHER, IT WOULD BE APPROPRIATE TO SEE THE PROVISIONS OF SEC.28(IV) OF THE ACT, WHICH READS AS UNDER:- ITA NOS.1978 TO 1982/MDS/2010 & C.O.NOS.85 TO 90/MDS/2011 17 SEC.28: THE FOLLOWING INCOME SHALL BE CHARGEABLE T O INCOME- TAX UNDER THE HEAD PROFITS AND GAINS OF BUSINESS O R PROFESSION,- (IV) THE VALUE OF ANY BENEFIT OR PERQUIS ITE, WHETHER CONVERTIBLE INTO MONEY OR NOT, ARISING FROM BUSINESS OR THE EXE RCISE OF A PROFESSION; A BARE PERUSAL OF THE PROVISIONS OF SEC.28(IV) CONN OTES THAT THE VALUE OF ANY BENEFIT OR PERQUISITE WHETHER CONV ERTIBLE INTO MONEY OR NOT, ARISING FROM BUSINESS OR THE EXERCISE OF A PROFESSION IS TAXABLE AS INCOME FROM BUSINESS OR PR OFESSION. THIS RULE IS APPLICABLE IRRESPECTIVE OF WHETHER THE BENEFIT OR PERQUISITES ARE CONTRACTUAL OR GRATUITOUS. THE CON TENTION OF THE AUTHORISED REPRESENTATIVE OF ASSESSEE IS THAT SHARES PURCHASED BY THE ASSESSEE AT A PRICE LOWER THAN THE MARKET VALUE DO NOT CONSTITUTE THE INCOME OF ASSESSEE AND IS, THUS, NOT TAXABLE. ON THE OTHER THE GRIEVANCE OF THE REV ENUE IS THAT THE ASSESSEE HAS PURCHASED SHARES AT A PRICE, WHICH IS MUCH LOWER THAN MARKET PRICE AND AS SUCH, THE DIFFE RENCE BETWEEN THE MARKET VALUE AND THE PURCHASE PRICE IS TAXABLE UNDER THE PROVISIONS OF SEC.28(IV) OF THE ACT. THE ADDITION MADE BY THE ASSESSING OFFICER HAS BEEN DELETED BY T HE ITA NOS.1978 TO 1982/MDS/2010 & C.O.NOS.85 TO 90/MDS/2011 18 CIT(A) FOLLOWING THE ORDER OF THE TRIBUNAL IN THE C ASE OF RUPEE FINANCE MANAGEMENT PVT. LTD., REPORTED AS 310 ITR (AT) 403. THE FACTS OF THE SAID CASE ARE THAT THE ASSES SEE- COMPANY HAD PURCHASED CERTAIN SHARES AT A PRICE BEL OW THE MARKET VALUE. THESE INVESTMENTS MADE BY THE ASSESSE E- COMPANY WERE RECORDED IN THE BOOKS OF ACCOUNTS. THE SHARES WERE PURCHASED AS INVESTMENTS. THE TRIBUNAL HELD TH AT THE PROVISIONS OF SEC.28(IV) ARE NOT APPLICABLE IN THE FACTS AND CIRCUMSTANCES OF THE CASE. THE TRIBUNAL FURTHER OB SERVED THAT : THE CONDITIONS FOR INVOKING SEC.28(IV) IS THAT THE CHARGEABLE INCOME OF THE ASSESSEE SHOULD ARISE FROM THE BUSINESS OR IN THE EXERCISE OF A PROFESSION. T HERE MUST BE A NEXUS BETWEEN THE BUSINESS OF THE ASSESSEE AND THE BENEFIT WHICH THE ASSESSEE HAS DERIVED. THE ASSESSEE IN THIS CASE, PURCHASED CERT AIN SHARES AT A CERTAIN PRICE AND WAS REQUIRED TO HOLD THE SHARES FOR A PERIOD OF 3 YEARS. IT IS NOT IN DISPU TE THAT THIS WAS AN INVESTMENT MADE BY THE ASSESSEE- COMPANY, HENCE, IRRESPECTIVE OF THE FACT AS TO WHE THER THESE INVESTMENTS WERE MADE IN PURSUANCE OF THE MEMORANDUM OF UNDERSTANDING FOR NOT, WE ARE OF THE CONSIDERED OPINION THAT SUCH INVESTMENTS CANNOT BE ITA NOS.1978 TO 1982/MDS/2010 & C.O.NOS.85 TO 90/MDS/2011 19 SAID TO BE A BENEFIT ARISING OUT OF THE BUSINESS OF THE ASSESSEE. A PERUSAL OF THE AFORESAID OBSERVATIONS OF THE TRI BUNAL IN THE CASE OF RUPEE FINANCE MANAGEMENT PVT.LTD., (SUPRA) AND THE PROVISIONS OF SEC.28(IV) OF THE ACT WOULD SHOW THAT FOR THE INCOME TO BE CHARGEABLE UNDER SECTION 28(IV) OF THE ACT, THE INCOME SHOULD ARISE FROM THE BUSINESS OR IN THE EXE RCISE OF A PROFESSION AND THERE SHOULD BE A DIRECT LINK BETWEE N THE BUSINESS OF THE ASSESSEE AND BENEFIT DERIVED THERE FROM. 21A. IN THE INSTANT CASE, IT IS AN ADMITTED FACT THAT THE ASSESSEE WAS ONE OF THE PARTNERS OF M/S.GOLDEN DIS TILLERIES, WHICH WAS SUBSEQUENTLY TAKEN OVER BY M/S. MIDAS GOL DEN DISTILLERIES P. LTD. THE ASSESSEE WAS ALLOTTED 50, 000 SHARES IN THE SAID COMPANY IN LIEU OF GIVING UP HIS SHARE IN PARTNERSHIP FIRM. THE ASSESSEE WAS ALSO MADE PROM OTER DIRECTOR OF THE COMPANY. SUBSEQUENTLY, WHEN THE CO MPANY ISSUED ADDITIONAL SHARE CAPITAL IN THE ASSESSMENT Y EAR 2004- 05, THE ASSESSEE WAS FURTHER ALLOTTED 46,100 SHARE S @ ` ITA NOS.1978 TO 1982/MDS/2010 & C.O.NOS.85 TO 90/MDS/2011 20 10.00 PER SHARE INSTEAD OF ` 100/- THE RATE AT WHICH SHARES WERE ALLOTTED TO OTHERS. THE CONTENTION OF THE A.R . THAT ASSESSEE HAS BEEN ALLOTTED SHARES AT LOWER PRICE TO COMPENSATE HIM FOR GIVING UP HIS SHARE IN THE PARTN ERSHIP, IS NOT TENABLE. 50,000 SHARES WERE ALREADY ALLOTTED TO THE ASSESSEE AT THE TIME OF TAKE-OVER. THERE IS A DIR ECT NEXUS BETWEEN THE BUSINESS OF THE ASSESSEE AND BENEFIT D ERIVED BY THE ASSESSEE FROM ALLOTMENT OF SHARES AT A CONCESSI ONAL RATE. IT IS UNDISPUTED FACT THAT THE ASSESSEE WAS GIVEN A PREFERENTIAL TREATMENT IN THE ALLOTMENT OF SHARES. THERE IS NO PLAUSIBLE REASON FOR ALLOTMENT OF ADDITIONAL SHARES TO THE ASSESSEE AT A CONCESSIONAL PRICE. IT IS ALSO NOT T HE CASE OF THE ASSESSEE THAT THE ASSESSEE HAD PURCHASED ADDITI ONAL SHARES FOR INVESTMENT PURPOSES. EVEN IF THERE IS RE STRICTIVE COVENANTS IN THE ARTICLE OF ASSOCIATION OF THE COMP ANY ON TRANSFER OF SHARE, THE FACT THAT SHARES HAVE BEEN A LLOTTED TO THE ASSESSEE AT CONCESSIONAL RATE IN A COMPANY IN W HICH HE IS A DIRECTOR WILL NOT CHANGE GAMUT FOR APPLICABILI TY OF THE PROVISIONS OF SEC.28(IV). THEREFORE, IN OUR CONSIDE RED OPINION, THE BENEFIT DERIVED BY THE ASSESSEE IN GETTING THE SHARES AT ITA NOS.1978 TO 1982/MDS/2010 & C.O.NOS.85 TO 90/MDS/2011 21 CONCESSIONAL RATE ARE LIABLE TO BE TAXED UNDER THE PROVISIONS OF SEC.28(IV) OF THE ACT. IN VIEW OF OUR AFORESAI D OBSERVATIONS, THIS GROUND OF REVENUE IS ALLOWED. ITA NO.1981/MDS/2011 (A.Y.2005-06) & C.O.NO. 89/MDS/2011:- 22. THE ONLY GROUND OF APPEAL RAISED BY THE REVENUE IS WITH RESPECT TO THE CANTEEN RECEIPTS. THIS GROUND OF APPEAL HAS ALREADY BEEN ADJUDICATED IN THE APPEAL OF THE R EVENUE (ITA NO.1980/MDS/2011) FOR THE ASSESSMENT YEAR 200 4-05 IN PARA 16 HEREINABOVE. FOR THE SAME REASONS, THE APPE AL OF THE REVENUE IS DISMISSED AND THE CROSS OBJECTION OF THE ASSESSEE IS PARTLY ALLOWED. ITA NO. 1982/MDS/2011 (A.Y.2006-07) & C.O.NO.90/MDS/2011: 23. THE REVENUE HAS ASSAILED THE ORDER OF THE CIT(A ) FOR THE ASSESSMENT YEAR 2006-07 ON TWO COUNTS. THE FIR ST GROUND OF APPEAL OF THE REVENUE RELATES TO UNEXPLAINED INV ESTMENT IN JEWELLERY AMOUNTING TO ` 42,63,000/-. THE CIT(A) CONFIRMED THE ADDITION TO THE EXTENT OF ` 30,38,000/- AND ALLOWED TELESCOPY OF ADDITION TO THE EXTENT OF ` 23,37,351/-. THE ITA NOS.1978 TO 1982/MDS/2010 & C.O.NOS.85 TO 90/MDS/2011 22 REVENUE HAS ASSAILED THE ORDER OF CIT(A) ON ACCOUN T OF DELETING ADDITION MADE BY THE ASSESSING OFFICER TO THE EXTENT OF ` 12,25,000/- AND TELESCOPY OF THE CONFIRMED ADDITION OF ` 23,37,351/-. ON THE OTHER HAND, THE ASSESSEE IN CRO SS OBJECTION HAS ASSAILED THE ORDER OF THE CIT(A) IN CONFIRMING THE ADDITION TO THE TUNE OF ` 30,38,000/-. AT THE TIME OF SEARCH,THE TOTAL JEWELLERY WAS RECORDED AS 6090 GMS . THE ASSESSING OFFICER MADE ADDITION OF THE ENTIRE JEWEL LERY CALCULATING IT @ ` 700/- PER GRAM. BEFORE THE CIT(A), THE COUNSEL FOR THE ASSESSEE GAVE DETAILS OF JEWELLERY OWNED BY THE ASSESSEE AND ITS FAMILY MEMBERS. OUT OF THE T OTAL JEWELLERY FOUND, GOLD JEWELLERY TO THE EXTENT OF 17 50 GMS WAS TAKEN TO BE EXPLAINED IN ACCORDANCE WITH THE CBDT C IRCULAR NO. 1916 DATED 11.5.1996. THE BALANCE 4340 GMS WAS TREATED TO BE AS UNEXPLAINED. THE CIT(A) CONFIRMED THE REMAINING JEWELLERY @ RS.700/- PER GRAM AMOUNTING T O ` 30,38,000/-. HOWEVER, IN VIEW OF UNACCOUNTED INCOME EARNED BY THE ASSESSEE IN THE ASSESSMENT YEAR 2000-01, 200 1-02, 2004-05 AND 2005-06, THE CIT(A) GAVE BENEFIT OF TEL ESCOPY TO THE EXTENT OF ` 23,37,351/-. AFTER GRANTING THE BENEFIT OF ITA NOS.1978 TO 1982/MDS/2010 & C.O.NOS.85 TO 90/MDS/2011 23 TELESCOPING, THE REMAINING AMOUNT OF ` 7,00,649/- WAS CONFIRMED AS UNACCOUNTED INCOME ON ASSET BASIS. TH E COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE SOURCE OF ACQUISITION OF JEWELLERY HAS BEEN EXPLAINED BEFORE THE AUTHORITIES, BUT THE SAME HAS NOT BEEN ACCEPTED BY THEM. WE FIND THAT THE CIT(A) WHILE PARTLY CONFIRMING T HE ADDITION MADE BY ASSESSING OFFICER HAS TAKEN INTO CONSIDERATION THE SOCIAL STATUS OF THE ASSESSEE, NU MBER OF FAMILY MEMBERS AND THE CBDT CIRCULAR. THE ORDER O F THE CIT(A) ON THE ISSUE IS WELL REASONED AND DETAILED. WE THEREFORE, DO NOT DEEM IT APPROPRIATE TO INTERFERE WITH THE SAME. THEREFORE, THIS GROUND OF APPEAL OF THE REVE NUE AND THE GROUND RAISED IN THE CROSS OBJECTION OF THE ASS ESSEE ARE DISMISSED. 24. THE SECOND GROUND OF APPEAL RAISED BY THE REVEN UE IS WITH REGARD TO EDUCATION EXPENSES OF THE DAUGHTER O F THE ITA NOS.1978 TO 1982/MDS/2010 & C.O.NOS.85 TO 90/MDS/2011 24 ASSESSEE AMOUNTING TO ` 9,34,900/-. THE ASSESSEE HAS EXPLAINED THAT EDUCATION EXPENSES OF HIS DAUGHTER H AS BEEN INCURRED FROM THE SALE OF AGRICULTURAL LAND ON 25.3 .2004 FOR ` 9.34 LAKHS. THE COUNSEL SUBMITTED THAT THE ASSESSEE HAD LARGE AGRICULTURAL HOLDING. THE ASSESSEE HAD SUFFI CIENT SOURCE OF INCOME TO MEET EDUCATIONAL EXPENSES OF THE DAUG HTER. APART FROM AGRICULTURE INCOME, THE ASSESSEE HAS INC OME FROM BUSINESS. WE ARE SATISFIED THAT THE ASSESSEE HAS BE EN ABLE TO EXPLAIN SOURCE OF EXPENDITURE ON THE EDUCATION OF H IS DAUGHTER. THEREFORE, THIS GROUND OF APPEAL OF THE REVENUE IS DISMISSED AND THE GROUND RAISED IN THE CROSS OBJECT ION IS ALLOWED. ACCORDINGLY, THE APPEAL OF THE REVENUE IS DISMISSED AND THE CROSS OBJECTION OF THE ASSESSEE IS PARTLY A LLOWED IN THE AFORESAID TERMS. 25. IN THE RESULT, ITA NOS.1978,1979,1981 & 1982/MD S./11 OF THE REVENUE ARE DISMISSED & APPEAL OF REVENUE IN ITA NO.1980/MDS./11 IS PARTLY ALLOWED AND CROSS OBJECTI ON ITA NOS.1978 TO 1982/MDS/2010 & C.O.NOS.85 TO 90/MDS/2011 25 NOS.85, 86, 88, 89 & 90/MDS/2011 ARE PARTLY ALLOWED . C.O.NO.87/MDS/2011 IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON MONDAY, THE 29 TH DAY OF APRIL, 2013 AT CHENNAI. SD/- SD/- ( DR. O.K.NARAYANAN ) (VIKAS AWASTHY) VICE-PRESIDENT JUDICIAL MEMBER CHENNAI, DATED THE 29 TH APRIL, 2013. SOMU /K S SUNDRAM COPY TO: (1) APPELLANT (4) CIT(A) (2) RESPONDENT (5) D.R. (3) CIT (6) G.F. ITA NOS.1978 TO 1982/MDS/2010 & C.O.NOS.85 TO 90/MDS/2011 26