Assistant Commissioner of Income-tax, Ratnagiri Circle, Ratnagiri V. Sagar Sawali Beach Resorts, Ratnagiri

ITA 1246/PUN/2019

• Counselvise Citation: [2020] 111 COUNSELVISE.COM (IT) 0186 (ITAT-PUNE)
• Duration Of Justice: 10 month(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-06-2020
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: SMC
• Next Hearing Date: 04-03-2020
• Assessment Year: 2009-2010
• Appeal Filed On: 19-08-2019
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Business income; Audit objection; Deemed to accrue or arise in india; Tax effect
• Section: 69C; 143(3); 69B; 192; 13; 69

Judgement Text

] IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH SMC, PUNE (THROUGH VIRTUAL COURT) BEFORE SHRI D. KARUNAKARA RAO, AM . / ITA NO.1246/PUN/2019 / ASSESSMENT YEAR : 2009-10 THE ASST.COMMISSIONER OF INCOME TAX, RATNAGIRI CIRCLE, RATNAGIRI. . / APPELLANT V/S M/S. SAGAR SAWALI BEACH RESORTS, A/P. KARDE, TAL. DAPOLI, DIST. RATNAGIRI. PAN : ABNFS9923N. . / RESPONDENT ASSESSEE BY : SHRI PRAMOD SHINGTE. REVENUE BY : SHRI PRASHANT GADEKAR. / ORDER PER SHRI D. KARUNAKARA RAO THE APPEAL IS FILED BY THE REVENUE AGAINST THE ORDER OF COMMISSIONER OF INCOME TAX (APPEALS) 2, KOLHAPUR, DATED 07 .06.2019 FOR THE ASSESSMENT YEAR 2009-10. 2. BRIEFLY STATED THE RELEVANT FACTS INCLUDE THAT ASSESSE E IS A FIRM WHO FILED ITS RETURN OF INCOME FOR A.Y 2009-10 ON 29.09.2009 DE CLARING TOTAL INCOME OF RS.16,91,540/-. THE CASE WAS SELECTED FOR SCRUTIN Y AND THEREAFTER ASSESSMENT WAS FRAMED U/S 143(3) OF THE ACT VIDE ORDER DATED 02.05.2011 DETERMINING THE TOTAL INCOME AT RS.30,27,780/-. SUBSEQUENTLY, THE CIT-II, KOLHAPUR INVOKED THE PROVISIO NS OF SEC.263 OF / DATE OF HEARING : 2 4. 06.2020 / DATE OF PRONOUNCEMENT : 24 .06.2020 2 THE ACT AND PASSED A REVISION ORDER DT.17.09.2013 AND C IT DIRECTED THE AO TO DETERMINE THE INCOME AFRESH, AS THE ORIGINAL ASSESSMENT MADE WAS ERRONEOUS IN SO FAR AS PREJUDICIAL TO THE INTEREST OF THE REVENUE. GIVING EFFECT TO THE SAME, THE AO PASSED ORDER U/S 143(3) R.W.S. 263 OF THE AC T ON 26.03.2015 DETERMINING THE TOTAL INCOME OF THE ASSESSEE AT RS.30,27,7 80/-. AGGRIEVED BY THE ORDER OF AO, ASSESSEE CARRIED THE MATT ER BEFORE CIT(A), WHO GRANTED RELIEF TO THE ASSESSEE ON THE MERITS. THERE FORE, THE REVENUE IS IN APPEAL BEFORE ME. THE TAX EFFECT IS BELOW RS.50,00,000/-. 3. BEFORE ME, AT THE OUTSET, SHRI PRAMOD SHINGTE, LEARNED C OUNSEL FOR THE ASSESSEE SUBMITTED THAT THIS IS A LOW TAX EFFECT APPE AL AND COVERED BY THE CIRCULAR NO.17 OF 2019 DATED 08.08.2019. THEREFORE, THE APPEAL SHOULD BE DISMISSED. BRINGING MY ATTENTION TO THE FRESH AS SESSMENT ORDER MADE BY THE AO U/S 143(3) R.W.S. 263 OF THE ACT, LEARNED C OUNSEL FOR THE ASSESSEE SUBMITTED THAT THE ASSESSED TAX IN THIS ORDER IS ONLY RS.30,27,780/-. TRACING THE BACKGROUND OF THE FRESH ASSES SMENT AND THE REVISION ORDER BY THE CIT U/S 263 OF THE ACT, LEARNED COUNSEL FOR THE ASSESSEE BROUGHT MY ATTENTION TO PAPER BOOK AND SUBM ITTED THAT AN AUDIT OBJECTION WAS RAISED BY THE REVENUE AND THE SAME IS TH E IS THE STARTING POINT FOR THE ABOVE SAID ORDER OF THE CIT AS WELL AS THE AO. TAKING THE AUDIT OBJECTIONS INTO CONSIDERATION, WHICH IS OF-COURSE DE LETED BY THE CIT(A), THE TAX EFFECT WILL NEVER INCREASE TO THE SET LIMIT OF RS.50 LAKHS. THEREFORE, THE CIRCULAR NO.17 OF 2019 WILL BARS THE REVENUE FROM FILING SUCH APPEALS. ON MERITS ALSO, THE CASE IS COVERED IN FAVOU R OF THE ASSESSEE AND THE ORDER OF CIT(A) IS FAIR AND REASONABLE. 3 4. ON THE OTHER HAND, SHRI PRASHANT GADKARE, LEARNED CO UNSEL FOR THE REVENUE HEAVILY RELIED ON THE SAID CIRCULAR AND SUBMITTED THAT THIS IS NOT THE CASE OF APPEAL TO DISMISS. IT IS A CASE OF APPEAL WHE RE THE FACTS ARE LIMITED. THE TAX EFFECT CIRCULAR APPLIES TO THE CASE OF THIS APPEAL. 5. ON MERITS, I ALSO FIND THE CIT(A) HAS RIGHTLY DELETED THE ADDITION MADE BY THE AO AFTER CONSIDERING THE OBJECTIONS. IN THIS REGA RD, I PERUSE THE CONTENTS OF PARA 6.2 ON PAGE 7 OF THE ORDER OF CIT(A) AND FIND IT RELEVANT TO EXTRACT THE SAME WHICH ARE AS UNDER : 6.2 I AM INCLINED WITH THE SUBMISSION OF THE APPEL LANT AS ABOVE. IN VIEW OF THE CONTENTION OF THE APPELLANT THAT PUNE I TAT IN THE CASE OF SILVER PALACE IN ITA NO. 893/PUN/2016, ORDER DATED 29/06/2018 HAS DISCUSSED ABOUT THE APPLICABILITY OF THE DECISI ON OF HON'BLE CHATTISGHAD HIGH COURT IN THE CASE OF DHANUSH GENER AL STORES (SUPRA) AND HELD THAT IN THE ABSENCE OF DECISION ON THE ISSUE BY THE JURISDICTIONAL HIGH COURT THE DECISION OF KARNA TAKA HIGH COURT IN THE CASE OF CIT VS. S. K. SHRIGIRI AND BROS. (2008) 298 ITR 13 (KAR) WHICH WAS IN FAVOUR OF THE ASSESSEE IS TO HE APPLIE D FOLLOWING THE DECISION OF THE HON'BLE SUPREME COURT IN THE CASE O F VEGETABLE PRODUCTS, REPORTED IN 88 ITR 192 (SC), THE APPELLANT WAS ENTITLED TO GET THE DEDUCTION OF REMUNERATION PAID TO PARTNERS SINCE THE ADDITIONAL INCOME DECLARED WAS TO BE TREATED AS BUSINESS INCOME. THE APPELLANT ALSO QUOTED PARA 13 OF THE ORDER OF THE PUNE ITAT IN THE WRITTEN SUBMISSION AS BELOW: - '13. THUS IN CASE WHERE SOURCE OF INVESTMENT/EXPEND ITURE IS DEARLY IDENTIFIABLE AND ALLEGED UNDISCLOSED ASSET HAS NO I NDEPENDENT EXISTENCE OF ITS OWN OR THERE IS NO SEPARATE PHYSIC AL IDENTITY OF SUM INVESTMENT/EXPENDITURE THEN FIRST WHAT IS TO BE TAX ED IS THE UNDISCLOSED BUSINESS RECEIPT INVESTED IN UNIDENTI FIABLE UNACCOUNTED ASSET AND ONLY ON FAILURE IT SHOULD BE CONSIDERED TO BE TAXED UNDER SECTION 69 ON THE PREMISES THAT SUCH EXCESS INVESTMENT IS NOT RECORDED IN THE BOOKS OF ACCOUNTS AND ITS N ATURE AND SOURCE IS NET IDENTIFIABLE. ONCE SUCH EXCESS INVESTMENT IS TAXED AS UNDECLARED BUSINESS RECEIPTS THEN TAXING IT FURTHE R AS DEEMED INCOME UNDER SECTION 69 WOULD NOT BE NECESSARY. THEREFORE, THE FIRST ATTEMPT OF THE ASSESSING AUTHORITY SHOULD BE TO FIND OUT LINK OF UNDECLARED INVESTMENT/ EXPENDITURE WITH THE KNOWN HEAD, GIVE OPPORTUNITY TO THE ASSESSEE TO ESTABLISH NEXUS AND IF IT IS SATISFACTORILY ESTABLISHED THEN FIRST SUCH INVESTM ENT SHOULD BE CONSIDERED AS UNDECLARED RECEIPTS UNDER THAT PARTIC ULAR HEAD. IT IS ONLY WHERE NO NEXUS IS ESTABLISHED WITH ANY HEAD THEN IT SHOULD BE CONSIDERED AS DEEMED INCOME UNDER SECTION 69, 69A, 69B & 69CAS THE CASE MAY BE. IT IS BECAUSE WHEN ASSESSEE FAILS TO EXPLAIN SATISFACTORILY THE SOURCE OF THE SUCH INVESTMENT TH EN IT SHOULD BE TAXED UNDER SECTION 69, 69A, 698 & 69C AS THE CASE MAY BE. IT SHOULD NOT BE DONE AT THE FIRST INSTANT WITHOUT GI VING OPPORTUNITY TO THE ASSESSEE TO ESTABLISH NEXUS. THEREFORE THERE IS NO CONFLICT WITH THE DECISION OF HON. GUJARAT HIGH COURT IN THE CASE OF FAKIR MOHMED HAJI HASAN (SUPRA) WHERE INVESTMENT IN AN ASSET OR EXPENDITURE IS 4 NOT IDENTIFIABLE AND NO NEXUS WAS ESTABLISHED THEN WITH ANY HEAD OF INCOME AND THUS WAS NOT AVAILABLE FOR SET OFF A GAINST ANY LOSS UNDER ANY OTHER HEAD. THEREFORE, WE HOLD THAT WHERE ASSET IN WHICH UNDECLARED INVESTMENT IS SOUGHT TO BE TAXED IS NOT CLEARLY IDENTIFIABLE OR DOES NOT HAVE INDEPENDENT IDENTITY BUT IS INTEGR AL AND INSEPARABLE (MIXED) PART OF DECLARED ASSET FALLING UNDER A PARTICULAR HEAD, THEN THE DIFFERENCE SHOULD BE TREATED AS UNDE CLARED BUSINESS INCOME EXPLAINING THE INVESTMENT. ' 6. CONSIDERING THE ABOVE SAID NATURE OF THE ISSUE, I FIND CO MMISSIONER OF INCOME TAX (APPEALS) GRANT RELIEF TO THE ASSESSEE AFTER DULY RELYING ON THE VARIOUS JUDGMENTS OF THE HONBLE APEX COURT, HIGH COURTS AND THE TRIBUNALS WHICH ARE MENTIONED IN PARA 6.2 EXTRACTED ABOV E. IN MY VIEW, THE ORDER OF THE CIT(A) IS FAIR AND REASONABLE. ACCORDINGLY , THE GROUNDS RAISED BY THE REVENUE NEEDS TO BE DISMISSED. 7. IN THE RESULT, THE APPEAL OF THE REVENUE IS DISMISSED. ORDER PRONOUNCED ON 24 TH DAY OF JUNE, 2020. SD/- ( D. KARNUKARA RAO) ACCOUNTANT MEMBER PUNE; DATED : 24 TH JUNE, 2020. YAMINI ' #$%& '& $ / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT 3. 4. 5. 6. CIT(A)-2, KOLHAPUR. PR.CIT-2, KOLHAPUR. '#$ %%&',) &', + / DR, ITAT, SMC PUNE; $-.// GUARD FILE. / BY ORDER , // TRUE COPY // 012%3&4 / SR. PRIVATE SECRETARY ) &', / ITAT, PUNE.