C.M. Anitha, Hassan V. ITO, Hassan

ITA 1028/BANG/2009

• Counselvise Citation: [2010] 136 COUNSELVISE.COM (IT) 8601 (ITAT-BANGALORE)
• Duration Of Justice: 2 month(s) 26 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 05-02-2010
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 04-02-2010
• Assessment Year: 2006-2007
• Appeal Filed On: 09-11-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: JACINTA ZIMIK VASHAI
• Assessee Lawyers: RAMASUBRAMANIAN
• Keywords: Opportunity of being heard
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL BANGALORE BENCH SMC A BEFORE SHRI K.K. GUPTA, ACCOUNTANT MEMBER ITA NO.1028(BNG)/09 (ASSESSMENT YEAR : 2006-07) SMT. C.M. ANITHA, M/S. S.N.M. HANDLOOMS, DODDA GARADI STREET, HASSAN. . .... APPELLANT. VS. INCOME TAX OFFICER, WARD 1, HASSAN. ..... RESPONDENT. APPELLANT BY : SHRI RAMASUBRAMANIAN. RESPONDENT BY : SMT. JACINTA ZIMIK VASHAI. O R D E R THE ASSESSEE IS IN APPEAL AGITATING T HE ACTION OF THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) IN CONFIRMING THE FINDINGS OF THE ASSESSING OFFICER DURING THE COURSE OF ASSESSMENT PROCEEDINGS UNDER SECTION 143( 3) WHEN THE ASSESSING OFFICER SOUGHT TO BRING TO TAX A SUM OF RS.3,20,080 REPAID TO ONE SRI C J ASHWATHANARAYANA SETTY DURING THE FINANCIAL YEAR RELEVANT TO THE ASS ESSMENT YEAR 2006-07 AS UNEXPLAINED. THE LEARNED CIT(A) DID NOT AFFORD ADEQ UATE OPPORTUNITY TO THE APPELLANT TO CONSIDER THE MATTER AT LENGTH UNDER THE PROVISIO NS OF INCOME TAX ACT, 1961 AS HE SOUGHT TO CONFIRM THE ASSESSING OFFICERS TAKING ST ATEMENT ON OATH OF THE CREDITOR VIS- -VIS THE STATEMENT OF AFFAIRS FILED BY THE ASSESSE E ALONG WITH THE RETURN OF INCOME IN AN EX-PARTE ORDER. THE MISMATCHING THEREFORE REQUI RED EXPLANATION IS NOW BEFORE THE TRIBUNAL. ITA NO.1028(BNG)/09 - 2 - 2. THE BRIEF FACTS AS HAVE BEEN CONSIDER ED BY THE AUTHORITIES BELOW ARE THAT THE ASSESSEE FILED THE RETURN OF INCOME DECLARING I NCOME OF RS.148225 BEFORE THE ITO. THE RETURN WAS TAKEN UP FOR SCRUTINY AND THE ASSESSMENT WAS COMPLETED UNDER SECTION 143(3) ON 31.12.2008. THE ASSESSEES ONLY SOURCE OF INCOME WAS THAT OF INCOME FROM TEXTILE BUSINESS AT HASSAN WHICH SHE COMMENCED IN THE YEAR 2001. EARLIER TO THE COMMENCEMENT OF THIS BUSINESS IN HASSAN, SHE WAS RE SIDING AT CHINTHAMANI IN KOLAR DISTRICT. WHILE RESIDING AT CHINTHAMANI SHE WAS MA INTAINING HER BOOKS FOR ALL HER TRANSACTIONS AT CHINTHAMANI AND FOR WHICH SEPARATE PROFIT AND LOSS ACCOUNT AND BALANCE SHEETS WERE PREPARED AT CHINTHAMANI. AFTER STARTIN G HER BUSINESS AT HASSAN SHE STARTED MAINTAINING SEPARATE BOOKS OF ACCOUNTS FOR TEXTILE BUSINESS AT HASSAN AND ALSO SET OF BOOKS AT CHINTHAMANI AND PREPARED SEPARATE PROFIT AND LOSS ACCOUNT AND BALANCE SHEET. HOWEVER FROM THE A.Y. 2005-06 THE ASSESSEE DISPENSED WITH MAINTENANCE OF BOOKS AT CHINTHAMANI BUT PREPARED INCOME AND EXPEN DITURE STATEMENT AND BALANCE SHEETS THROUGH HER ACCOUNTANT ON THE BASIS OF THE F IGURES FURNISHED BY HER. SUCH BALANCE SHEETS FOR THE YEAR ENDED 31.3.2005 AND 31. 3.2006 WERE ALSO FILED BEFORE THE ASSESSING OFFICER AT THE TIME OF SCRUTINY ASSESSMEN T. FROM THE SAID BALANCE SHEETS, THE ASSESSING OFFICER POINTED OUT THE REDUCTION IN THE CREDIT BALANCE IN THE ACCOUNT OF SRI C J ASHWATHANARAYANA SETTY FROM RS.420080 FOR T HE YEAR ENDED 31.3.2005 TO RS.95,000 FOR THE YEAR ENDED 31.3.2006. SUCH REDUC TION IN CREDIT BALANCE, BY RS.325080 WAS BROUGHT TO TAX BY THE ASSESSING OFFIC ER AS UNEXPLAINED PAYMENTS, THOUGH NO SUCH PAYMENTS WERE MADE BY THE ASSESSEE A ND ALSO RECONCILING THE DIFFERENCE AND EXPLAINING REASONS FOR SUCH REDUCTION IN CREDIT BALANCE. THE EXPLANATION WAS NOT ITA NO.1028(BNG)/09 - 3 - ACCEPTED AND THE ADDITION WAS MADE TO THE RETURNED INCOME AS PER THE STATEMENT OF THE CREDITOR. 3. THE LEARNED COUNSEL FOR THE ASSESSEE SUB MITTED THAT DUE TO LACK OF PROFESSIONAL GUIDANCE THE ASSESSEE-APPELLANT WAS NOT ABLE TO PRE SENT HERSELF PROPERLY BEFORE THE LEARNED CIT(A) WHO MERELY CONFIRMED THE ACTION OF T HE ASSESSING OFFICER HOLDING THAT THE ASSESSING OFFICER HAD NOT FOUND THE EXPLANATION SATISFACTORY HAVING GIVEN DETAILED REASONS IN HIS ASSESSMENT ORDER. 4. IN SUPPORT OF HIS CONTENTION, H E FILED THE COPIES OF STATEMENT OF AFFAIRS AS ON 31.3.2005 AND 31.3.2006 WHICH ARE MERELY STAT EMENT OF AFFAIRS AND WOULD INDICATE THE MISTAKE COMMITTED BY THE ACCOUNTANT OF THE ASSE SSEE WHO WAS TO COMPILE THE DETAILS IN THE BOOKS OF ACCOUNTS MAINTAINED FOR THE BUSINESS CARRIED OUT IN TEXTILES AT HASSAN. THE AMOUNT OWED THEREFORE WAS SHOWN AS REC EIVED AT HASSAN IN A BALANCING FIGURE OF THE CAPITAL ACCOUNT OF THE ASSESSEE IN TH E BUSINESS ALONG WITH THE STATEMENT OF AFFAIRS WHICH WERE PREPARED AS AT 31.3.2005 AND 31.3.2006. THEY INDICATE THAT THE ACCOUNT OF M/S. S.N.M. HANDLOOMS, HASSAN HAS BEEN S HOWN AS DEBTOR AS WELL AS AN ASSET IN THE FORM OF CAPITAL ACCOUNT IN SMT. C.M. ANITHA S STATEMENT OF AFFAIRS. THIS DISCLOSURE WAS CORRECTED IN THE IMPUGNED ASSESSMENT YEAR BUT HAS BEEN CONSIDERED AS AN UNEXPLAINED REPAYMENT BY THE LEARNED ASSESSING O FFICER AND CONFIRMED WITHOUT ASSIGNING ANY REASON BY THE LEARNED CIT(A) DISPOSIN G THE APPEAL EX-PARTE. HE PRAYED THAT THE MATTER BE RESTORED TO THE AUTHORITIES BELO W FOR RECONSIDERATION IN THE LIGHT OF THE FACT THAT A DEBTOR AND CAPITAL BALANCE GOT INTE RPOLATED IN THE STATEMENT OF AFFAIRS AS A GENUINE MISTAKE BY THE ACCOUNTANT WHEN THE AMO UNT OWED TO SRI C J ITA NO.1028(BNG)/09 - 4 - ASHWATHANARAYANA SETTY WAS ACTUALLY OWED BY M/S. S. N.M. HANDLOOMS, HASSAN STOOD ADJUSTED IN THE CAPITAL OF THE ASSESSEE WHICH OTHER WISE WAS SHOWN AS AMOUNT OWED BY M/S. S.N.M. HANDLOOMS, HASSAN TO THE ASSESSEE MAKIN G IT AS DOUBLE AMOUNT OWED TO SRI C J ASHWATHANARAYANA SETTY. THE REPAYMENT WAS LESS THAN THE TWO AMOUNTS SHOWN TOGETHER CLINCHES THE ISSUE IN FAVOUR OF THE ASSESS EE. 5. THE LEARNED DEPARTMENTAL REPRESE NTATIVE SUPPORTED THE ORDERS OF THE AUTHORITIES BELOW AND FURNISHED THE COPIES OF THE SWORN STATEMENT OF SRI C J ASHWATHANARAYANA SETTY, HIS COPY OF RETURN OF INCOM E FOR THE A.Y. 2006-07 AND THE STATEMENT OF AFFAIRS ALONG WITH THE BALANCE SHEET A S ON 31.3.2005 AND 31.3.2006 WHICH SUPPORT THE CASE OF THE REVENUE. SHE SUBMITTED THA T THE AMOUNT OWED BY THE ASSESSEE TO SRI C J ASHWATHANARAYANA SETTY AMOUNTING TO RS.3 ,20,080 WAS RIGHTLY BROUGHT TO TAX AS UNEXPLAINED REPAYMENT BY THE ASSESSEE IN THE IMPUGNED ASSESSMENT YEAR, ON THE BASIS OF THESE STATEMENTS CONFIRMED ORALLY AS WELL. 6. I HAVE HEARD THE RIVAL CONTENTIO NS AND PERUSED THE MATERIAL AVAILABLE ON RECORD. ON PERUSAL OF THE STATEMENT OF AFFAIRS FOR THE YEAR ENDING 31.3.2005 AND THE YEAR ENDING 31.3.2006 OF THE ASSESSEE AS WELL AS SR I C J ASHWATHANARAYANA SETTY, IT TRANSPIRES THAT THE STATEMENT TAKEN ON OATH DOES NO T DENY THE FACT THAT THE AMOUNT HAS BEEN REPAID IN THE IMPUGNED ASSESSMENT YEAR WAS FROM THE VERY CAPITAL ACCOUNT WHICH HAS BEEN SHOWN AS HER ASSET ALONG WITH AN AMO UNT SHOWN AS A DEBTOR NAMELY M/S. S.N.M. HANDLOOMS, HASSAN (SOLE PROPRIETARY BUSINESS ) BY THE ASSESSEES ACCOUNTANT. THE LEARNED COUNSEL BEFORE ME HAS SUBMITTED THAT NO BOOKS OF ACCOUNTS ARE MAINTAINED FOR PREPARING THE STATEMENT OF AFFAIRS AS FURNISHED TO THE ASSESSING OFFICER, THE ITA NO.1028(BNG)/09 - 5 - ENTRIES INCORPORATING THE AMOUNT OWED TO SRI C J AS HWATHANARAYANA SETTY WAS REFLECTED THROUGH THE BALANCING FIGURE IN THE CAPIT AL ACCOUNT. THE AMOUNT OWED TO THE ASSESSEE BY M/S. S.N.M. HANDLOOMS, HASSAN THEREFORE SHOULD NOT HAVE APPEARED AT RS.3,51,300 AS ON 31.3.2005 WHICH OBVIOUSLY HAD ALR EADY BEEN ROUTED THROUGH HER CAPITAL ACCOUNT. THE AUTHORITIES BELOW THEREFORE HA D NOT ONLY ADHERED TO THE VERBAL STATEMENT TO THE ERRONEOUS DOUBLE ENTRY INFLATING T HE AMOUNT OWED ON 31.3.2005 WHICH STOOD RECTIFIED ON 31.3.2006 CORRESPONDING TO THE A SSETS. APPROPRIATE TAXES HAVE BEEN PAID BY THE ASSESSEE FOR THE A.YS 2005-06 AND 2006- 07 ON THE CAPITAL INCREASE. THE LEARNED DEPARTMENTAL REPRESENTATIVE RELYING ON BALA NCE SHEET OF SRI C J ASHWATHANARAYANA SETTY AS ON 31.3.2005 AND 31.3.200 6 INDICATE THAT THE AMOUNT HAS BEEN RECEIVED FROM THE ASSESSEE NAMELY SMT. C.M. AN ITHA THEREFORE WAS RIGHTLY NOTED BY THE ASSESSING OFFICER AS HAVING BEEN RECEIVED BA CK BUT HAS BEEN TAKEN COGNIZANCE OF AS FROM UNEXPLAINED SOURCES. THE SOURCE AS SUBM ITTED BY THE ASSESSEE WAS FROM THE BOOKS OF ACCOUNTS AS MAINTAINED FOR THE BUSINESS BU T THE AMOUNT ALSO SHOWN AS DEBTOR NAMELY M/S. S.N.M. HANDLOOMS, HASSAN WAS TO BALANCE THE AMOUNT OWED AND CONFIRMED BY THE CREDITOR IN HIS STATEMENT. THE STATEMENT OF AFFAIRS ONLY REQUIRED RECTIFICATION AS ON 31.3.2006. HOWEVER, AS THE LEARNED CIT(A) HA S DECIDED THE ISSUE AGAINST THE ASSESSEE EX-PARTE, I CONSIDER IT APPROPRIATE TO RES TORE THE ISSUE TO HIS FILE FOR CONSIDERATION IN THE LIGHT OF THESE FACTS WHICH ARE SELF-CLARIFICATORY AND CANNOT BE SUBJECTED TO ADDITION. THESE FACTS HAVE BEEN EXTEN SIVELY CONSIDERED BY THE ASSESSING OFFICER TO THE EXTENT THAT HE WAS ABLE TO COME TO T HE CONCLUSION THAT THE UNEXPLAINED AMOUNT REMAINING TO BE HELD AS LIABILITY BY THE ASS ESSEE AMOUNTS TO ONLY RS.68,780 ITA NO.1028(BNG)/09 - 6 - WHICH OBVIOUSLY STANDS RETURNED BY THE ASSESSEE AS INCOME AND IS ASSESSED BY HIM. THEREFORE THE ISSUE IS RESTORED TO THE FILE OF LEAR NED CIT(A) FOR CONSIDERATION AFRESH AND TO ALIGN THE FACT AS CONSIDERED BY THE ASSESSIN G OFFICER TO THE DETAILS FURNISHED BY THE ASSESSEE BEFORE HIM AND BEFORE ME IN THE PAP ER BOOK BY THE ASSESSEE AS WELL AS THE DEPARTMENT. HE IS DIRECTED TO AFFORD REASONABL E OPPORTUNITY OF BEING HEARD. IN THE RESULT THE APPEAL IS CONSIDERED AS ALLOWED FOR STATISTICAL PURPOSE. PRONOUNCED IN THE OPEN COURT ON 5 TH FEBRUARY, 2010. SD/- (K.K.GUPTA) A CCOUNTANT MEMBER BANGALORE, DT.05-02-2010. COPY TO : 1. THE ASSESSEE. 2. THE ASSESSING OFFICER. 3. CIT(APPEALS) 4. CIT 5. DEPARTMENTAL REPRESENTATIVE, ITAT, BANGALORE. 6. GUARD FILE, ITAT, BANGALORE. 7. GUARD FILE, ITAT, NEW DELHI. GPR* BY ORDER ASSISTANT REGISTRAR, ITAT