Dy. Commissioner of Income Tax, Hyderabad V. Shri R.A. Alagar Raja, Bangalore

ITA 1139/HYD/2013

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 87278 (ITAT-HYDERABAD)
• Duration Of Justice: 1 year(s) 5 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-01-2015
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 2003-2004
• Appeal Filed On: 02-08-2013
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: D SUDHAKAR RAO
• Assessee Lawyers: RUPALI J
• Keywords: Unexplained investment; Search and seizure; Opportunity of being heard; Corroborative evidences
• Section: 143(3); 68; 132

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCHES B : HYDERABAD BEFORE SHRI B.RAMAKOTAIAH, ACCOUNTANT MEMBER AND SHRI SAKTIJIT DEY, JUDICIAL MEMBER ITA.NO.1139/HYD/2013 ASSESSMENT YEAR 2003-2004 DCIT, C.C. 3 HYDERABAD VS. R.A. ALAGAR RAJA BENGALURU PAN AFRPR8206D (APPELLANT) (RESPONDENT) FOR REVENUE : MR. D. SUDHAKAR RAO FOR ASSESSEE : MS. RUPALI J DATE OF HEARING : 26.11.2013 DATE OF PRONOUNCEMENT : 22.01.2014 ORDER PER B. RAMAKOTAIAH, A.M. THIS APPEAL BY REVENUE AGAINST THE ORDER OF THE CIT(A)-V, HYDERABAD DATED 25.03.2013. THE REVENUE HAS RAISED THE FOLLOWING TWO MATERIAL GROUNDS FOR CONSIDERING THE ISSUE. 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED CIT(A) ERRED IN DELETING THE UNEXPLAINED INVESTMENT IN CAPITAL ACCOUNT AMOUNTING TO RS.17,50,369/-, FOR WHICH THE A HAS NOT FILED ANY EVIDENCES SUPPORTING THE CLAIM. 2. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED CIT(A) ERRED IN NOT CONSIDERING THE FACT THAT ASSESSEE HAS PREPARED CAPITAL ACCOUNT AND BALANCE SHEET FOR THE FIRST TIME DURING THE ASSESSMENT PROCEEDINGS IN ORDER TO MAKE THE ASSESSING OFFICER ACCEPT THE OPENING BALANCE OF RS.26,15,109/- ON 01.04.2002. 2 ITA.NO.1139/HYD/2013 SHRI RA ALAGAR RAJA, BENGALURU. 2. BRIEFLY SATED FACTS ARE THAT AS PART OF SEARCH AND SEIZURE OPERATIONS CONDUCTED UNDER SECTION 132 OF THE I.T. ACT, 1961 IN THE GROUP CASES OF AMR CONSTRUCTIONS ON 16.12. 2008., ASSESSEE WAS ALSO COVERED. CONSEQUENTLY, ASSESSMENTS WERE COMPLETED UNDER SECTION 143(3) READ WITH SECTION 153 A OF THE ACT. IN THE IMPUGNED A.Y. THE TOTAL INCOME WAS DETERMI NED AT RS.18,31,969/- BY MAKING ADDITION OF RS.17,50,369/-. THIS AMOUNT WAS ARRIVED AT BY THE A.O. AS STATED IN PARA 1.1 ONWARDS IN THE ASSESSMENT ORDER WHICH READS AS UNDER : 1.1 DURING THE COURSE OF ASSESSMENT PROCEEDINGS, TH E ASSESSEE WAS REQUESTED TO FURNISH THE BREAK UP AND DETAILS OF THE OPENING CAPITAL OF RS.26,15,109/- ALONG WITH THE SOURCES FOR THE SAME. IN RESPONSE TO THE SAME, THE ASSESSEE HAS STATED THAT THE AMOUNT OF OPENING BALANCE OF RS.26,15,109/- REPRESENT PAST SAVINGS ACCUMULATED DURING PREVIOUS YEARS PRIOR TO ASST. YEAR 2003-04 FROM OUT OF PROFESSIONAL INCOME EARNED AS GOLDSMITH. 1.2 THE REPLY FILED BY THE ASSESSEE IS CAREFULLY EXAMINED. ON CLOSE VERIFICATION OF THE ORIGINAL RETURNS OF INCOME FILED BY THE ASSESSEE FOR THE RELEVANT ASST YEARS AND THE INFORMATION FURNISHED BY THE ASSESSEE, IT IS NOTICED THAT THE ASSESSEE HA S NOT PREPARED AND SUBMITTED ANY CAPITAL ACCOUNT AND BALANCE SHEETS ALONG WITH THE ORIGINAL RETURNS SO AS TO JUSTIFY THE BASIS FOR THE OPENING CAPITAL OF RS.26,15,109/-. CONSEQUENT UPON SEARCH OPERATIONS IN THE ASSESSEE'S CASE, HE HAS FOR THE FIRST TIME PREPARED CAPITAL ACCOUNT AND BALANCE SHEET AND SUBMITTED THE SAME DURING THE COURSE OF ASSESSMENT PROCEEDINGS TRYING TO EXPLAIN THE SOURCES FOR THE INVESTMENTS LIKE FIXED ASSETS AND CASH ON HAND. IN RESPECT OF SOURCES FOR THE FIXED ASSETS, THE EXPLANATION OF THE ASSESSEE THAT THE SAME WERE INVESTED FROM OUT OF ACCUMULATION OF THE CAPITAL PRIOR TO THE ASSESSMENT YEAR 2003-04 CAN BE ACCEPTED ON THE GROUND THAT THE MONEY WAS AVAILABLE WITH THE ASSESSEE IN REAL TERMS AND THE SOURCES FOR SUCH INVESTMENT COULD BE ACCEPTED TO BE 3 ITA.NO.1139/HYD/2013 SHRI RA ALAGAR RAJA, BENGALURU. EXPLAINED, AT BEST. HOWEVER, WITH REGARD TO SOURCES FOR THE ADVANCES GIVEN OF RS.8,00,000/ - AND CASH ON HAND OF RS.9,50,369/- SHOWN BY THE ASSESSEE ON THE ASSETS SIDE OF THE BALANCE SHEET, IT IS CLEAR LY EVIDENT THAT THE ALLEGED EXPLANATION OF THE ASSESSEE THAT IT WAS FROM OUT OF ACCUMULATION TO OPENING CAPITAL AS ON 01-04-2002 IS WITHOUT ANY BASIS AND NOT PROPERLY EXPLAINED WITH SUPPORTING EVIDENCE. ONLY AFTER SEARCH OPERATION IN THE ASSESSEE'S CASE, IN ORDER TO MAKE THE ASSESSING OFFICER BELIEVE THAT MATCHING SOURCES FOR CASH ON HAND WAS AVAILABLE BY WAY OF OPENING CAPITAL, THE ASSESSEE HAS FOR THE FIRST TIME PREPARED AN ADJUSTED CAPITAL ACCOUNT AND BALANCE SHEET AND TRIED TO SUBSTANTIATE THAT THE SOURCES FOR THE ABOVE ASSETS WERE PROPERLY EXPLAINED. THE BURDEN OF PROVING THE SOURCES FOR THE INVESTMENTS MADE TO THE SATISFACTION OF THE ASSESSING OFFICER LIES ON THE ASSESSEE. 1.3. SINCE THE ASSESSEE HAS FAILED TO DISCHARGE THE BURDEN OF PROVING THE SOURCES FOR THE CASH ON HAND WITH CORROBORATIVE EVIDENCE, AN ADDITION OF RS.17,50,369/- (ADVANCES OF RS.8,00,000/- AND CASH ON HAND OF RS.9,50,369/-) IS MADE TO THE TOTAL INCOME OF THE ASSESSEE. 3. THE ASSESSEE EXPLAINED BEFORE THE CIT(A) THAT TH IS OPENING CAPITAL CANNOT BE BROUGHT TO TAX AS WAS DONE BY THE A.O. AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE, THE LEARNED CIT(A) DELETED THE ADDITION BY STATING AS UND ER : 5.2 I HAVE GONE THROUGH THE ASSESSMENT ORDER, SUBMISSIONS OF THE APPELLANT AND THE CASE LAWS RELIED UPON. IT IS A SETTLED LAW THAT WHERE ANY CREDIT STANDS UNEXPLAINED, THE SAME SHOULD BE BROUGHT TO TAX IN THE VERY YEAR IN WHICH IT WAS CREDITED. IN THE CASE ON HAND, THE ASSESSING OFFICER BROUGHT OUT THE OPENING FIGURE AS ON 0L.04.2002, WHICH IS A CLOSING BALANCE AS ON 3L.03.2002. IF THE ASSESSING OFFICER IS OF THE OPINION THAT THE SAME IS UNEXPLAINED BY THE APPELLANT THEN IT HAS TO BE TREATED AS UNEXPLAINED IN THE ASSESSMENT YEAR 2002-03 ONLY AND THIS CLOSING BALANCE CANNOT BE BROUGHT 4 ITA.NO.1139/HYD/2013 SHRI RA ALAGAR RAJA, BENGALURU. TO TAX FOR THE YEAR UNDER CONSIDERATION. IT DOES NOT REQUIRE ANY ELABORATE ARGUMENT THAT A CARRIED FORWARD AMOUNT OF THE PREVIOUS YEAR DOES NOT BECOME AN INVESTMENT GENERATED DURING THE RELEVANT ASSESSMENT YEAR, I.E., AY 2003-04 IN THE INSTANT CASE. 5.3 IN THE CASE OF CIT V. ASHOK TIMBER INDUSTRIES REPORTED IN 125 ITR 336 (CAL), THE CALCUTTA HIGH COURT HELD THAT WHERE AN AMOUNT IS CREDITED IN ASSESSEE'S ACCOUNT ON VERY FIRST DAY OF ACCOUNTING YEAR AND EXPLANATION OFFERED BY ASSESSEE IS NOT ACCEPTED, SUCH AMOUNT MAY BE ASSESSED AS INCOME OF ASSESSEE FOR THAT VERY YEAR AND NOT IN THE NEXT YEAR. THIS STAND IS FURTHER FORTIFIED BY THE DECISION OF THE RAJASTHAN HIGH COURT IN THE CASE OF CIT V PARAMESHWAR BOHRA (2007) 208 CTR (RAJ) 218. THEREFORE, THE ADDITION MADE BY THE ASSESSING OFFICER DO NOT HAVE LEGS TO STAND AND THE ASSESSING OFFICER IS DIRECTED TO DELETE THE ADDITION OF RS.17,50,369/-. 4. REFERRING TO THE ASSESSMENT ORDER AND THE CIT(A) ORDER, THE LEARNED D.R. SUBMITTED THAT THE A.O. HAS BROU GHT TO TAX THE UNEXPLAINED ADVANCES OF RS. 8 LAKHS AND CAS H OF RS.9,50,369/- WHICH ARE AVAILABLE AT THE END OF THE Y EAR AS THERE IS NO SUPPORTING EVIDENCE FOR THE OPENING CASH BA LANCE. IT WAS FURTHER SUBMITTED THAT ASSESSEE HAS NOT JUSTIFIE D OPENING CASH BALANCE, EITHER FURNISHING NECESSARY SOURC E OF INCOMES OR EVIDENCE. THEREFORE, GIVING CREDIT TO THE UNSUBSTANTIATED CARRY FORWARD BALANCE IS NOT CORRECT AND ACCORDINGLY, THE ORDER OF THE CIT(A) SHOULD BE SET ASID E. 5. LEARNED COUNSEL IN RETURN, REFERRING TO THE PAPER BOOK FILED AND DOCUMENTS AVAILABLE ON RECORD, SUBMITTED THAT CONSEQUENT TO THE SEARCH, THE ASSESSEE HAS PREPARED STA TEMENT OF AFFAIRS AS ON 31.03.2002 AND ONWARDS EXPLAINING VARIOU S INCOMES AND INVESTMENTS. IT WAS THE SUBMISSION THAT TH E 5 ITA.NO.1139/HYD/2013 SHRI RA ALAGAR RAJA, BENGALURU. ASSESSEE HAS SHOWN ADVANCES OF RS. 8 LAKHS IN CASH IN HAND AT RS.9,25,069/- AS ON 31.03.2002. THE OPENING BALANCE REPRESENT ACCUMULATED SAVINGS/INCOME PRIOR TO THAT YEAR. AO HAS NOT BROUGHT ANY EVIDENCE TO SUPPORT THAT THIS IS I NCOME OF ASSESSEE. THERE ARE NO FURTHER CREDITS IN LATER YEARS EXCE PT THE INCOMES OFFERED. OPENING CREDIT BALANCE CAN NOT BE CAL LED UNEXPLAINED INVESTMENT. THIS AMOUNT CAN NOT BE TAXED AS INCOME EITHER U/S 68 OR U/S 69. THEREFORE, THE ORDER OF THE CIT(A) IS CORRECT. SHE SUPPORTED THE ORDERS OF THE CIT(A). 6. WE HAVE CONSIDERED THE RIVAL CONTENTIONS AND PERUSED THE DOCUMENTS PLACED ON RECORD. EVEN THOUGH ASSESSEE WAS REGULARLY ASSESSED AND WAS SHOWING INCOME FROM SHEET METAL CRAFTS ON ESTIMATE BASIS IN EARLIER YEARS, THERE WAS NO BALANCE SHEET OR ANY REFERENCE TO THE VARIOUS ASSETS A ND LIABILITIES IN ANY OF THE ENCLOSED DOCUMENTS FILED WITH THE RETURNS EARLIER. IN THE ABSENCE OF SUCH EVIDENCE, A.O. WAS IN A WAY JUSTIFIED IN DISBELIEVING THE CASH BALANCE WHICH IS ALMOST TEN TIMES THE INCOME. EVEN FOR THE ADVANCES ALSO, THE RE WERE NO DETAILS AND NO EXPLANATION ABOUT NATURE AND SOURCE. THEREFORE, A.O. COULD HAVE BEEN JUSTIFIED IN CONSIDERING ONLY THESE TWO AMOUNTS FOR ADDITION IN THE YEAR. HOWEVER, THE A.O. DID NOT TAKE INTO CONSIDERATION THAT THESE ADVANCES A ND CASH BALANCE SHOWN TO HAVE BEEN AVAILABLE WITH THE ASSESSEE FROM 31.03.2002 WERE CARRIED-OVER FROM THAT YEAR TO LATER YEA RS ALSO WITHOUT THERE BEING ANY INVESTMENT UP TO 31.03.2004. ADVANCES WERE NOT SHOWN IN THE YEAR ENDING 31-03-2005 WHEREAS, CASH BALANCE WAS INCREASED IN THAT YEAR. WHEN A.O. WAS COMPLETING THE ASSESSMENTS IN A BLOCK, HE IS SUP POSED TO CONSIDER THE CASH FLOW OVER A PERIOD OF TIME VIS--VIS TH E INVESTMENTS AND ASSETS FOUND IN THE COURSE OF SEARCH. THE RE IS 6 ITA.NO.1139/HYD/2013 SHRI RA ALAGAR RAJA, BENGALURU. NOTHING ON RECORD TO EXAMINE, WHETHER ASSESSEE HAS MADE AN Y INVESTMENTS OR HAS ANY UNEXPLAINED INVESTMENTS OR ASS ETS OR EVEN UNEXPLAINED SOURCES FOR MAKING ANY INVESTMENTS. A.O . SEEMS TO HAVE NOT EXAMINED ANY OF THE ISSUES AND SINCE , OTHER YEARS ASSESSMENTS ORDERS ARE ALSO NOT BEFORE US, WE ARE ALSO UNABLE TO EXAMINE TO GIVE ANY FINDINGS ON THIS ISSUE. THEREFORE, IN THE INTEREST OF JUSTICE, WE SET ASIDE THE ORDER OF THE CIT(A) AND RESTORE THE ISSUE TO THE FILE OF THE A.O. TO CONSID ER AFRESH THE CASH FLOW STATEMENT SHOWN BY THE ASSESSEE VIS- -VIS ANY OTHER DOCUMENTS AVAILABLE IN THE COURSE OF SEARCH OR ANY OT HER DETAILS OF BANK ACCOUNTS ETC., WHICH ASSESSEE CAN RELY ON IN ORDER TO EXAMINE THE CASH FLOW STATEMENT. WITH THESE DIRECTIONS, WE SET ASIDE THE ORDER OF THE CIT(A) AND RESTO RE THE ISSUE TO THE FILE OF THE A.O. FOR REDOING AFRESH BY GIVIN G DUE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. 7. IN THE RESULT, APPEAL OF THE REVENUE IS ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 22.01.2014. SD/- SD/- (SAKTIJIT DEY) (B. RAMAKOTAIAH) JUDICIAL MEMBER ACCOUNTANT MEMBER HYDERABAD, DATE 22 ND JANUARY, 2014 VBP/- COPY TO : 1. DCIT, CENTRAL CIRCLE-3, HYDERABAD. 2. MR. R A ALAGAR RAJA, NO.185, 23 RD CROSS KENSANHALLI, RAJESWARI NAGAR, BENGALURU. 3. CIT(A)-V, HYDERABAD 4. CIT, CENTRAL, HYDERABAD 5. D.R. ITAT B BENCH, HYDERABAD.