Smt. Divyashree Sanjay, Mysore V. ITO, Mysore

ITA 126/BANG/2011

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 60761 (ITAT-BANGALORE)
• Duration Of Justice: 1 year(s) 4 month(s) 2 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-06-2012
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 13-06-2012
• Assessment Year: 2006-2007
• Appeal Filed On: 11-02-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: SRINIVASAN
• Keywords: Depreciation; Salary income; Reasonable cause
• Section: 143(3); 68

Judgement Text

PAGE 1 OF 6 ITA NO.1 26/BANG/2011 1 IN THE INCOME TAX APPELLATE TRIBUNAL, BANGALORE BENCH A BEFORE SHRI N BARATHVAJA SANKAR, VICE PRESIDENT AND SHRI GEORGE GEORGE K, J.M ITA NO.126/BANG/2011 (ASSESSMENT YEAR 2006-07) SMT. DIVYASHREE SANJAY, #15, TEMPLE ROAD, JAYALAKSHMIPURAM, MYSORE. PA NO. AHMPD 1821F VS THE INCOME TAX OFFICER, WARD-1(2), MYSORE. (APPELLANT) (RESPONDENT) DATE OF HEARING : 13.06.2012 DATE OF PRONOUNCEMENT : 13.06.2012 APPELLANT BY : SHRI SRINIVASAN, C.A. RESPONDENT BY : SHRI SARAVANAN B, JCIT ORD ER PER GEORGE GEORGE K : THIS APPEAL INSTITUTED BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF THE CIT(A), MYSORE DATED 26.11.2010. THE R ELEVANT ASSESSMENT YEAR IS 2006-07. 2. THE SOLITARY ISSUE THAT ARISES FOR OUR CONSIDERA TION IS WHETHER THE CIT(A) IS JUSTIFIED IN SUSTAINING THE ADDITION OF RS.3,79,810/- SHOWN AS SUNDRY CREDITORS IN THE NAME OF SHRI PHANIRAJ RAMA R AO. PAGE 2 OF 6 ITA NO.1 26/BANG/2011 2 3. BRIEF FACTS OF THE CASE ARE AS FOLLOWS:- THE ASSESSEE IS AN INDIVIDUAL. SHE FILED THE RET URN OF INCOME FOR THE CONCERNED ASSESSMENT YEAR DISCLOSING AN INCOME O F RS.1,94,409/- COMPRING OF INCOME FROM SALARY, HOUSE PROPERTY AND BU SINESS. SCRUTINY ASSESSMENT WAS COMPLETED VIDE ORDER DATED 10/9/2008 UNDER SECTION 143(3) OF THE ACT FIXING THE TOTAL INCOME AT RS.7,30,180/- . THE ASSESSING OFFICER MADE AN ADDITION OF RS.3,79,810/- BEING UNEXPLAINED SUNDRY CREDITORS. THE ASSESSEE HAD SHOWN THE ABOVE CREDIT BALANCE IN THE NAME OF ONE SHRI PHANIRAJ RAMA RAO. IT IS THE CASE OF THE ASSESSEE THAT SHE WAS RUNNING A HOTEL IN BANGALORE AND SHRI PHANIRAJ RAMA RAO WAS A CTUALLY MANAGING/CONDUCTING THE HOTEL BUSINESS. IT IS FURT HER STATED BY THE ASSESSEE THAT SHRI PHANIRAJ RAMA RAO HAD BROUGHT CE RTAIN FIXED ASSETS, SUCH AS, FURNITURE, KITCHEN EQUIPMENTS ETC. AT HIS COST IN THE HOTEL BUSINESS. THE COST OF SUCH ASSETS TO THE TUNE OF RS.3,79,810/- WA S CREDITED TO THE ACCOUNT OF SHRI PHANIRAJ RAMA RAO. THE ASSESSING OFFICER C ALLED FOR THE LEDGER ACCOUNT OF SHRI PHANIRAJ RAMA RAO . SINCE THE LEDG ER ACCOUNT WAS NOT PRODUCED, THE SAID SUM WAS ADDED TO THE TOTAL INCOM E. 4. AGGRIEVED BY THE ADDITION, AMONG OTHER ISSUES, T HE ASSESSEE FILED APPEAL BEFORE THE FIRST APPELLATE AUTHORITY. 5. BEFORE THE FIRST APPELLATE AUTHORITY, THE ASSESS EE RAISED THE FOLLOWING CONTENTIONS :- IN RESPECT OF RS.3,79,810/- DISALLOWED : THE BUSI NESS IN HOTEL WAS COMMENCED DURING FINANCIAL YEAR 2004-05. THE CREDIT RELATES TO THAT YEAR (I.E. ASSESSMENT YEAR PAGE 3 OF 6 ITA NO.1 26/BANG/2011 3 2005-06). THE ASSESSEE HAD APPOINTED ONE SHRI PHAN IRAJ RAMA RAO TO RUN THE HOTEL CALLED BARTONS COURT IN VYALIKAVAL, BANGALORE. HE WAS RUNNING THE HOTEL AND FOR THE SAID PURPOSE HE HAD INSTALLED CERTAIN EQUIPMENTS AND INCURRED CERTAIN EXPENSES AND THESE CAME TO A SUM OF RS.3,79,810/- AND AS THESE SUMS WE RE DUE TO HIM AND HENCE THE SAID SUM APPEARED AS THE S UM DUE TO HIM. ON THE GROUND THAT THE LEDGER EXTRACTS WERE NOT PRODUCED, THE SAID SUM WAS DISALLOWED. IT IS RESPECTFULLY SUBMITTED THAT THE EXTRACTS WERE IN THE COMPUTER FORMAT AND THE SAID PERSON WHEN HE LEFT TH E SERVICE OF THE APPELLANT TOOK HIS COMPUTER AWAY AND IN SPITE OF MANY EFFORTS THE SAME COULD NOT BE OBTAINED . ONLY NOW IT HAS BEEN POSSIBLE FOR THE APPELLANT TO O BTAIN THE SAID LEDGER EXTRACT WHICH IS NOW PRODUCED FOR INSPECTION. IT IS SUBMITTED THAT AS THE APPELLANT WAS PREVENTED BY REASONABLE CAUSE FROM PRESENTING THE SA ME TO THE LEARNED ASSESSING OFFICER IT IS PRAYED THAT T HE APPELLATE AUTHORITY BE PLEASED TO ADMIT THE SAME UND ER THE RULES IN THE INTERESTS OF SUBSTANTIVE JUSTICE. IT WILL BE SEEN THERE FROM THAT IT WAS HE WHO HAD INCURRED THESE EXPENSES FOR AND ON BEHALF OF THE ASSESSEE AN D AS THE SAID SUM WAS DUE TO HIM DURING FINANCIAL YEAR 20 04- 05 (ASSESSMENT YEAR 2005-06), THE SAID BALANCE WAS BROUGHT FORWARD AND REMAINING DUE TO HIM ON THE LAS T DAY OF THE PREVIOUS YEAR 2005-06 (ASSESSMENT YEAR 2006- 07), IT HAD BEEN CORRECTLY DECLARED AS A DEBT DUE TO HIM. IN THE CIRCUMSTANCES, IT IS SUBMITTED THAT THE PROV ISIONS OF SECTION 68 HAVE NO APPLICATION AT ALL. 6. THE APPEAL OF THE ASSESSEE WAS DISMISSED BY THE FIRST APPELLATE AUTHORITY. THE RELEVANT FINDING OF THE CIT(A) READS AS FOLLOWS:- 5.3 I HAVE EXAMINED THESE EVIDENCES. IT IS TRUE T HAT THE APPELLANT HAD NOT FILED BALANCE SHEET OR ASSET LIABILITY STATEMENT OR ANY OTHER DETAILS FOR THE F.Y. 2004-05 ALONG WITH THE RETURN OF INCOME FOR A.Y. 2005-06. THE PAGE 4 OF 6 ITA NO.1 26/BANG/2011 4 APPELLANT ALSO FAILED TO FURNISH THE ORIGINAL VOUCH ERS IN RESPECT OF THE ENTRIES IN THE LEDGER ACCOUNT OF SRI PANI RAJ. IN SUCH A SITUATION, THE COPY OF LEDGER ACCOUN T IN THE BALANCE SHEET NOW FILED CANNOT BE RELIED UPON. THERE ARE APPARENT CONTRADICTIONS IN THE DETAILS FURNISHE D BY THE APPELLANT BEFORE THE ASSESSING OFFICER AND THE STATE OF AFFAIRS SHOWN IN THE BALANCE SHEET. IT IS SEEN FROM THE BALANCE SHEET AS ON 31.3.2006 FILED ALONG WITH THE RETURN OF INCOME FOR THE ASSESSMENT YEAR 2006-07 THA T SRI PANI RAJ IS SHOWN AS A CREDITOR FOR RS.3,79,810 /-. ON THE ASSET SIDE, THE TOTAL FIXED ASSETS ARE SHOWN AT A GROSS VALUE I.E., BEFORE DEPRECIATION AT RS.2,27,33 8/-. THE OTHER ASSET SHOWN IN THE BALANCE SHEET IS CASH OF RS.1,61,720/-. THE APPELLANT CLAIMS THAT THE CREDI T IN THE ACCOUNT OF SRI PANI RAJ IS BECAUSE OF THE ASSETS PURCHASED BY HIM ON BEHALF OF THE FIRM. THIS EXPLAN ATION DOES NOT TALLY WITH THE DETAILS IN THE BALANCE SHEET . IF WE BELIEVE THE APPELLANT, THEN WE MUST CONCLUDE THA T ALMOST ALL THE ASSETS WERE BROUGHT BY SRI PANI RAJ A ND IN ADDITION, HE ALSO CONTRIBUTED CASH. ALTERNATIVELY, SRI PANI RAJ HAD BORNE THE EXPENDITURE INCURRED BY THE FIRM. BOTH THE SITUATIONS APPEAR IMPROBABLE. FURTHER, T HE APPELLANT HAS MORE OR LESS ADMITTED THAT SRI PANI R AJ HAD LEFT WITHOUT ANY ADDRESS OR WHEREABOUTS AND IS NO MO RE IN CONTACT WITH THE APPELLANT. IN OTHER WORDS, SRI PANI RAJ IS NOT GOING TO COME BACK AND CLAIM THIS AMOUNT . A CONCLUSION CAN THEREFORE BE DRAWN THAT THE OUTSTAND ING AMOUNT HAS BECOME APPELLANTS INCOME UNDER SECTION 41(1) BECAUSE THE LIABILITY IN PANI RAJS NAME APPARENTLY REPRESENTS EITHER THE EXPENDITURE INCURRED OR THE C ASH BALANCE SHOWN ON THE ASSETS SIDE. 5.4 CONSIDERING ALL THE ABOVE ASPECTS OF THE CASE, I FIND THAT THE EXPLANATION OFFERED BY THE APPELLANT REGARDING THE CREDIT BALANCE IN THE NAME OF SRI PAN I RAJ IS NOT SATISFACTORY. THE APPELLANT HAS NOT BEEN ABL E TO FURNISH THE CONFIRMATION OR PAN OF SRI PANI RAJ. T HE APPELLANT HAS ALSO FAILED TO PRODUCE THE PRIMARY VOU CHERS PAGE 5 OF 6 ITA NO.1 26/BANG/2011 5 TO SUPPORT HER CLAIM THAT SRI PANI RAJ HAD BROUGHT ANY ASSETS FOR THE APPELLANT. THE FACTS NARRATED BY THE APPELLANT ARE NOT IN CONSISTENCY WITH THOSE APPEARIN G IN THE BALANCE SHEET. THE ADDITION MADE BY THE ASSESSI NG OFFICER IS THEREFORE CONFIRMED. THIS GROUND OF APP EAL IS DISMISSED. 7. THE LEARNED COUNSEL FOR THE ASSESSEE HAS FILED A PAPER BOOK COMPRISING OF 21 PAGES, INTER ALIA, CONTAINING COPY OF THE ACKNOWLEDGEMENT OF RETURN OF INCOME, COMPUTATION OF TOTAL INCOME, PROF IT AND LOSS ACCOUNT AND BALANCE SHEET FOR THE ASSESSMENT YEAR 2006-07, COPY O F THE LEDGER ACCOUNT OF SHRI PHANIRAJ RAMA RAO FOR THE PERIOD 1/4/2004 T O 31/3/2005, COPY OF THE REMAND REPORT OF THE ITO, COPY OF THE REJOINDER TO THE REMAND REPORT OF ITO ETC. THE LEARNED AR REITERATED THE SUBMISS IONS MADE BEFORE THE INCOME TAX AUTHORITIES. 8. THE LEARNED DR, ON THE OTHER HAND, SUPPORTED TH E FINDINGS OF THE CIT(A). 9. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIALS ON RECORD. IT IS NOT IN DISPUTE THAT ALONG WITH TH E RETURN OF INCOME FOR THE ASSESSMENT YEAR 2005-06, ONLY A STATEMENT OF INCOME W AS FILED AND NO BALANCE SHEET WAS FILED. THE AMOUNT OF SUNDRY CREDI TORS, IT IS THE CLAIM OF THE ASSESSEE, WAS NOT A CREDIT INTRODUCED DURING TH E YEAR IN APPEAL BUT THE TOTAL SUM EXPENDED BY SHRI PHANIRAJ RAMA RAO AND THE REMAINING TO BE PAID TO HIM AS ON 31/3/2005. THE COPY OF THE LEDGER ACCO UNT OF SHRI PHANIRAJ RAMA RAO WHICH IS FURNISHED IN THE PAPER BOOK AT PA GES 5 TO 9, CLEARLY INDICATE THAT MANY OF THE EXPENSES INCURRED, RELATES TO VARIOUS ITEMS LIKE, COMPUTER, ELECTRIFICATION, UPS, FURNITURE AND FITTI NGS, KITCHEN EQUIPMENTS, PAGE 6 OF 6 ITA NO.1 26/BANG/2011 6 KITCHEN UTENSILS AND OTHER PLANT AND EQUIPMENT WHIC H FIGURES IN THE BALANCE SHEET FOR THE ASSESSMENT YEAR 2006-07, WHICH ACCORDI NG TO THE ASSESSEE, WAS ACQUIRED IN THE EARLIER YEAR. ON PERUSAL OF THE LEDGER ACCOUNT, MANY OF THE ITEMS OF EXPENSES ARE ON THE REVENUE FRONT AND SOME OF THE ITEMS ARE ON THE CAPITAL ACCOUNT. IF THE ASSESSEE PRODUCES THE NECESSARY PROOF TO SHOW THAT THESE EXPENSES ARE INCURRED BY SHRI PHANIRAJ RA MA RAO ON BEHALF OF HOTEL BUSINESS, THE EXPENSES RELATING TO CAPITAL FR ONT CANNOT BE ADDED. IN THE INTEREST OF JUSTICE AND FAIR PLAY, WE FEEL ONE M ORE OPPORTUNITY SHOULD BE GRANTED TO THE ASSESSEE TO CONCLUSIVELY PROVE HER CA SE. THE LEDGER EXTRACT NOW PRODUCED IN THE NAME OF SHRI PHANIRAJ RAMA RAO SHOULD BE SUPPORTED WITH CREDIBLE EVIDENCE/CONFIRMATION FOR THE AMOUNT OF EXPENDITURE INCURRED BY SHRI PHANIRAJ RAMA RAO AND OUTSTANDING DURING THE RELEVANT ASSESSMENT YEAR. THE ASSESSEE SHALL COOPERATE WITH THE ASSESSI NG OFFICER FOR THE EXPEDITIOUS DISPOSAL OF THE MATTER AND FURNISH NECE SSARY MATERIAL CALLED FOR WITHOUT SEEKING UNNECESSARY ADJOURNMENT. IT IS ORDE RED ACCORDINGLY. 10. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES. THE ORDER PRONOUNCED ON THE 13 TH DAY OF JUNE, 2012 AT BANGALORE. SD/- SD/- (N BARATHVAJA SANKAR) (GEORGE GEORGE K) VICE PRESIDENT JUDICIAL MEMBER COPY TO : 1. THE REVENUE 2. THE ASSESSEE 3. THE C IT CONCERNED. 4. THE CIT(A) CONCERNED. 5. DR 6. GF MSP/ BY ORDER SENIOR PRIVATE SECRETARY, ITAT, BA NGALORE.