Sri Bharath Kumar G Jain , Bangalore V. The Income TAx Officer Ward-5(2)(3), Bangalore

ITA 1266/BANG/2018

• Counselvise Citation: [2019] 117 COUNSELVISE.COM (IT) 1343 (ITAT-BANGALORE)
• Duration Of Justice: 1 year(s) 1 month(s) 26 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 14-06-2019
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Next Hearing Date: 29-04-2019
• Assessment Year: 2012-2013
• Appeal Filed On: 18-04-2018
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: VIMAL ANAND
• Assessee Lawyers: MALLAH RAO
• Keywords: Principle of natural justice; Commercial expediency; Set aside
• Section: 143(3); 234B; 250; 68

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH, BENGALURU BEFORE SHRI B.R. BASKARAN, ACCOUNTANT MEMBER AND SHRI PAVAN KUMAR GADALE, JUDICIAL MEMBER ITA NO. 1266 /BANG/201 8 (ASSESSMENT YEAR: 2012-13) SHRI BHARAT KUMAR G JAIN, G-15, HEERA PANNA MARKET, NAGARATHPET, BENGALURU-560002. PAN:ABDPB 4172 C VS. APPELLANT INCOME - TAX OFFICER, WARD 5(2)(3), BENGALURU. RESPONDENT APPELLANT BY : SHRI MALLAH RAO, ADVOCATE. RESPONDENT BY : SHRI VIMAL ANAND, ADDL.CIT(DR) DATE OF HEARING: 02/05/2019 DATE OF PRONOUNCEMENT: 14/06/2019 O R D E R PER PAVAN KUMAR GADALE, JM : THE ASSESSEE HAS FILED APPEAL AGAINST THE ORD ER OF THE CIT(A), BENGALURU PASSED U/S 143(3) AND 250 OF THE INCOME- TAX ACT,1961 ['THE ACT' FOR SHORT]. 2. THE ASSESSEE RAISED THE FOLLOWING GROUNDS OF APPEAL: 1. THE LEARNED CIT (APPEALS) ERRED IN PASSING THE ORD ER IN THE MANNER HE DID. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LEARNED CIT (APPEALS) FAILED TO APPRECIATE THAT WRI TTEN ITA NO.1266/BANG/2018 PAGE 2 OF 8 SUBMISSIONS WERE FILED ALONG WITH ANNEXURES WHEREIN IT WAS CLEARLY BROUGHT TO THE NOTICE OF THE CIT (APPEA LS) THAT THE APPELLANT HAS RECEIVED MONEY FROM SRI PRAKASH C HAND MEHTA AND THE SAME WAS RETURNED TO HIM BY THE APPEL LANT AND THEREFORE THE CIT (APPEALS) OUGHT TO HAVE APPRE CIATED THAT THE ENTIRE TRANSACTION WAS GENUINE AND REFRAIN ED FROM UPHOLDING THE ASSESSMENT ORDER. 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LEARNED CIT (APPEALS) OUGHT TO HAVE APPRECIATED THA T THE APPELLANT RECEIVED MONEY THROUGH BANK AND THE REPAYMENT OF THE SAME WAS ALSO MADE THROUGH BANK AN D THEREFORE THE LEARNED CIT (APPEALS) HELD THAT BOOKS OF ACCOUNT OF SRI PRAKASH CHAND MEHTA WAS UNABLE TO BE PRODUCED BY THE APPELLANT IS NOT CORRECT AND ONLY R ELYING ON THE BOOKS OF ACCOUNT OF SRI PRAKASH CHAND MEHTA AND DISALLOWED THE CLAIM OF THE APPELLANT IS AGAINST TH E PRINCIPLES OF NATURAL JUSTICE AND THEREFORE THE ORD ER OF THE CIT (APPEALS) IS LIABLE TO BE SET ASIDE. 4. ON THE FACTS AND IN THE CIRCUMSTANCES, THE LEARNED CIT (APPEALS) OUGHT TO HAVE ACCEPTED THE EXPLANATION OF THE APPELLANT AND HELD THAT THE LOAN OBTAINED FROM SRI PRAKASH CHAND MEHTA WAS GENUINE AND THE PROVISIONS OF SECTION 68 OF THE ACT WERE INAPPLICABLE IN THE CASE OF THE APPELLANT AND CONSEQUENTLY HE OUGHT TO HAVE REFRAINED FROM MAKING THE IMPUGNED ADDITION WHICH IS REQUIRED TO BE DELETED. 5. THE LEARNED CIT (APPEALS) ERRED IN CONFIRMING THE IMPUGNED ADDITION BY APPLYING THE PROVISIONS OF SECTION 68 OF THE ACT ON MERE SURMISES AND SUCH ADDITION ACCORDINGLY IS UNSUSTAINABLE. 6. THE LEARNED CIT (APPEALS) HAVING FOUND THAT THE CREDITOR HAS CONFIRMED THE LOAN TO THE APPELLANT AND ALSO HAD REFLECTED THE SAME IN HIS ACCOUNTS AND FURTHER THE CREDITOR WAS ALSO AN INCOME-TAX ASSESSEE AND ACCORDINGLY THE APPELLANT HAD DISCHARGED THE ONUS OF PROVING THE GENUINENESS OF THE LOAN AND CONSEQUENTLY THE IMPUGNED ADDITION IN THE HANDS OF THE APPELLANT WAS UNWARRANTED. 7. ON THE FACTS, THE LEARNED CIT (APPEALS) OUGHT TO HAVE APPRECIATED THAT IN CASE OF DISBELIEF OF THE STATEM ENT OF THE CREDITOR, NO ADDITION WAS REQUIRED TO BE MADE I N THE ITA NO.1266/BANG/2018 PAGE 3 OF 8 HANDS OF THE APPELLANT AND IN ANY CASE THE CIT (APP EALS) OUGHT TO HAVE HELD THAT THE APPELLANT SHOULD HAVE B EEN GIVEN A REASONABLE OPPORTUNITY TO REBUT THE PRESUMPTIONS OF THE ASSESSING OFFICER IN THE INTERE ST OF NATURAL JUSTICE AND HAVING FAILED TO DO SO, THE IMP UGNED ADDITION AS CONFIRMED BY HIM IS OPPOSED TO LAW AND TO THE PRINCIPLES OF NATURAL JUSTICE, AND ACCORDINGLY THE IMPUGNED ADDITION IS LIABLE TO BE DELETED. 8. WITHOUT PREJUDICE, THE ADDITION AS CONFIRMED BY THE LEARNED CIT (APPEALS) IS ARBITRARY, EXCESSIVE AND OUGHT TO BE DELETED IN TOTO. 9. THE LEANED CIT (APPEALS) ERRED IN CONFIRMING THE LEVY OF INTEREST UNDER SECTIONS 234A, 234B & 234C OF THE ACT. 10. FOR THESE AND OTHER GROUNDS THAT MAY BE URGED AT THE TIME OF HEARING OF THE APPEAL, THE APPELLANT PRAYS THAT THE APPEAL MAY BE ALLOWED. 3. BRIEF FACTS OF THE CASE ARE THAT THE ASSESS EE IS ENGAGED IN THE BUSINESS OF GARMENTS AND ALSO DERIVES INCOME FROM GOLDSMITH SERVICES AND FILED THE RETURN OF INCOME F OR THE ASSESSMENT YEAR 2012-13 ON 25/3/2013 WITH TOTAL INC OME OF RS.9,78,370/-. SUBSEQUENTLY, THE CASE WAS SELECTED FOR SCRUTINY UNDER CASS AND NOTICES U/S 143(2) AND 142( 1) WERE ISSUED. IN RESPONSE TO NOTICES, THE LEARNED AR APP EARED FROM TIME TO TIME AND FURNISHED DETAILS. IN THE COURSE OF ASSESSMENT PROCEEDINGS AO FOUND THAT THE ASSESSEE H AS DISCLOSED UNSECURED LOAN OF RS.1,32,44,595/- FROM PRAKASH CHAND MEHTA AND LD.AO CALLED FOR INFORMATION OF U NSECURED LOAN. IN RESPONSE, THE ASSESSEE FILED LETTER DATED 23/12/2014 WITH DETAILS OF BANK ACCOUNT, STATEMENT OF LOAN CRE DITORS, ITA NO.1266/BANG/2018 PAGE 4 OF 8 LEDGER ACCOUNT ETC. WHEREAS THE AO, ON VERIF ICATION OF BANK STATEMENT FOUND THAT THE LOAN CREDITOR HAD DEPOSITE D CASH PRIOR TO ISSUING CHEQUE TO THE ASSESSEE AND ALSO CA SH COMPONENT IS EQUAL TO THE CHEQUE VALUE AND ALSO LEN DERS INCOME IS MARGINAL AS PER INCOME-TAX RETURN AND THE SOURCE OF HUGE CASH DEPOSIT IN THE BANK ACCOUNT IS NOT JUSTIF IED. WHEREAS ON 4/3/2015 LETTER WAS FURNISHED WITH THE A O BY PRAKASH CHAND MEHTA MENTIONING THAT HE IS INTO MONE Y LENDING BUSINESS AND HAS CASH ON HAND. BUT THE AO WAS NOT SATISFIED WITH THE FINANCIAL STATEMENTS AND THE COM PUTATION OF INCOME AND THE LOAN CONFIRMATION AND OBSERVED THAT PRAKASH CHAND MEHTA HAS NOT SHOWN ANY INCOME FROM MONEY LEN DING BUSINESS IN THE COMPUTATION OF INCOME FILED WITH TH E INCOME- TAX AUTHORITIES. FINALLY, AO MADE ADDITION OF RS.1 ,20,00,000/- TO THE RETURN OF INCOME AS ASSESSEE FAILS TO PROVE THE GENUINENESS AND PASSED THE ORDER U/S 143(3) DATED 27/3/2015 WITH ASSESSED INCOME OF RS.1,29,78,370/-. 4. AGGRIEVED BY THE ORDER, THE ASSESSEE HAS FI LED AN APPEAL WITH THE CIT(A) WHEREAS THE CIT(A) CONSIDERI NG THE GROUNDS OF APPEAL, FINDING OF THE AO AND THE SUBMIS SIONS OF THE ASSESSEE, DEALT ON THE DISPUTED ISSUE AT PARA 5 OF HIS ORDER BUT FINALLY CONCLUDED THAT THE ASSESSEE IS NO T ABLE TO PROVE THE CAPACITY OF THE LENDER REFERRED AT PARA 5 .4 OF THE ITA NO.1266/BANG/2018 PAGE 5 OF 8 ORDER AND CONFIRMED THE ADDITION MADE BY THE AO AND DISMISSED THE ASSESSEES APPEAL. 5. AGGRIEVED BY THE ORDER, THE ASSESSEE HAS F ILED APPEAL WITH THE TRIBUNAL. THE LEARNED AR ARGUED THAT THE CIT(A) HAS ERRED IN CONFIRMING THE ADDITION MADE BY THE AO WIT HOUT VERIFICATION OF THE FACTS AND THE INFORMATION FILED IN THE COURSE OF HEARING PROCEEDINGS. THE CONTENTION OF THE LEAR NED AR THAT SOURCE OF SOURCE NEED NOT BE EXPLAINED AND THE AMEN DMENT TO SECTION 68 OF THE ACT EFFECTIVE FROM 1/4/2013 I. E. ASSESSMENT YEAR 2013-14. THE LEARNED AR FURTHER EMP HASISED THAT THE CIT(A) HAS NOT PROVIDED REASONABLE OPPORT UNITY TO REBUT THE PRESUMPTIONS OF THE AO AND SUPPORTED HIS STAND WITH THE PAPER BOOK 2 WITH DETAILS ON SUBMISSIONS B EFORE THE CIT(A), COPY OF INCOME-TAX RETURN, CONFIRMATION LET TER, LENDERS BANK STATEMENT AND LEDGER ACCOUNT OF THE A SSESSEE IN THE BOOKS OF LENDER AND BANK STATEMENT OF THE ASSES SEE REFLECTING PAYMENTS RECEIVED AND SUBMITTED THAT SIN CE THE ASSESSEE HAS SATISFIED THE REQUIREMENTS OF PROVISIO NS OF SECTION 68 OF THE ACT, OF GENUINENESS, CREDIT WORTH INESS AND IDENTITY PRAYED FOR ALLOWING THE APPEAL. 6. CONTRA, LEARNED DR SUPPORTED THE ORDERS OF THE C IT(A) AND VEHEMENTLY OBJECTED TO THE SUBMISSIONS AND THE MATERIAL ITA NO.1266/BANG/2018 PAGE 6 OF 8 FILED IN THE COURSE OF HEARING PROCEEDINGS AND PRAY ED FOR DISMISSAL OF THE APPEAL. 7. WE HEARD THE RIVAL SUBMISSIONS AND PERUSE D THE MATERIAL ON RECORD. PRIMA FACIE, THE DISPUTED ISSUE IS WITH RESPECT TO UNSECURED LOAN OBTAINED BY THE ASSESSEE FROM PRAKAS H CHAND MEHTA RS.120 LAKHS. IN THE ASSESSMENT PROCEEDINGS, THE ASSESSEE HAS FILED INFORMATION SUPPORTING THE LOAN WITH CONFIRMATION AND FINANCIAL STATEMENTS OF LENDER AND ALSO THE ASSESSEE IS PAYING INTEREST ON LOAN WHICH IS DISCLO SED IN THE INCOME-TAX RETURN OF THE LENDER REFERRED AT PAGES 2 2 TO 28 OF THE PAPER BOOK 2. FURTHER, LD.AR SUBMITTED THAT LO AN WAS REPAID TO THE LENDER IN THE SUBSEQUENT YEAR ALONG W ITH INTEREST. THE LD.AR REFERRED TO THE BANK STATEMENT OF THE LEN DER AT PAGES 1 TO 12 OF THE PAPER BOOK 2 WHICH DISCLOSES THAT ON VARIOUS OCCASIONS CASH WAS DEPOSITED INTO LOAN ACCOUNT AND CHEQUES WERE ISSUED IN FAVOUR OF THE ASSESSEE. WE FIND THE ASSESSEE HAS FILED CONFIRMATION LETTER BEFORE THE AO WHICH I S REFERRED AT PARA 10 OF THE ASSESSMENT ORDER WHERE LENDER WAS IN VOLVED IN MONEY LENDING BUSINESS AND HAS OBTAINED LOANS FROM RELATIVES AND HAS LEND TO OTHERS INCLUDING THE ASSESSEE. 8. ON PERUSAL OF COMPUTATION OF INCOME OF PRAKASH CHAND MEHTA AND CONFIRMATION LETTER DATED 4/3/2015 WE FIN D THAT THE LENDER HAS DISCLOSED INCOME FROM BUSINESS BUT NO IN COME FROM ITA NO.1266/BANG/2018 PAGE 7 OF 8 FINANCE BUSINESS WAS DISCLOSED. WHEN A QUESTION WA S RAISED TO THE LD. AR ON THIS PERTINENT ISSUE, THE EXPLANATION S ARE VAGUE AND UNSATISFACTORY. WHEREAS THE LEARNED AR HAS BEE N HARPING ON THAT SOURCE OF SOURCE NEED NOT BE EXPLAINED AND RELIED ON JUDICIAL DECISIONS. BUT IN THE PRESENT CASE, THE A O REQUIRED THE ASSESSEE TO SUBSTANTIATE THE LOAN AMOUNT AND COMPLY WITH THE PROVISIONS OF SECTION 68 OF THE ACT. THE OBSERVA TIONS OF THE AO ARE VERY VITAL TO THE PRESENT CASE AS THE ASSESS EE HAS FILED INCOMETAX RETURNS OF THE LENDER SHRI PRAKASH CHAND METHA BUT THERE IS NO DISCLOSURE OF ANY INCOME FROM MONEY LEN DING BUSINESS. WE ARE OF THE OPINION THAT THE CIT(A) HA VING CONSIDERED THE INFORMATION HAS NOT GIVEN A CLEAR PI CTURE ON THE EVIDENCES FILED TO SUBSTANTIATE THE CLAIM OF THE AS SESSEE. WE ALSO FOUND THE ASSESSEE HAS OBTAINED LOAN FOR BUSIN ESS PURPOSE WHICH IS NOT DISPUTED. BUT THE DUTY CAST UPON THE ASSESSEE TO PROVE AND SUBSTANTIATE THE GENUINENESS OF THE TRANS ACTION AND CREDIT WORTHINESS. THESE FACTS PLAY A VITAL ROLE I N DETERMINING THE COMMERCIAL EXPEDIENCY BETWEEN THE ASSESSEE AND THE LENDER. WE ARE OF THE SUBSTANTIVE OPINION THAT THE CIT(A) SHOULD HAVE CALLED FOR REMAND REPORT FROM THE AO ON THIS DISPUTED ISSUE. WHEREAS THE ASSESSEE HAS FILED DET AILS IN THE APPELLATE PROCEEDINGS WHICH THE AO WAS DEPRIVED TO VERIFY THE EVIDENCE AND MAKE ENQUIRIES ON THE GENUINENESS OF T HE ITA NO.1266/BANG/2018 PAGE 8 OF 8 TRANSACTION. ACCORDINGLY, TO MEET THE ENDS OF JUST ICE, WE PROVIDE AN OPPORTUNITY TO THE ASSESSEE TO SUBSTANTI ATE ITS CLAIM AND SET ASIDE THE ORDER OF THE CIT(A) AND RESTORE T HE ENTIRE DISPUTED ISSUE TO THE FILE OF THE CIT(A) TO ADJUDIC ATE AFRESH AND CALL FOR REMAND REPORT ON THE EVIDENCES FILED AND P ASS A SPEAKING AND REASONED ORDER. IT IS NEVERTHELESS TO MENTION THAT ASSESSEE SHOULD BE PROVIDED WITH ADEQUATE OPPO RTUNITY OF HEARING AND SHALL CO-OPERATE IN SUBMITTING INFORMAT ION FOR EARLY DISPOSAL OF THE APPEAL AND THE GROUNDS OF APPEAL OF THE ASSESSEE ARE ALLOWED FOR STATISTICAL PURPOSES. 9. IN THE RESULT, THE ASSESSEES APPEAL IS ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 14 TH JUNE, 2019. SD/- SD/- (B.R. BASKARAN) (PAVAN KUMAR GADALE) ACCOUNTANT MEMBER JUDICIAL MEMBER PLACE : BENGALURU D A T E : 14/06/2019 SRINIVASULU, SPS COPY TO : 1 APPELLANT 2 RESPONDENT 3 CIT(A)- 4 CIT 5 DR, ITAT, BANGALORE. 6 GUARD FILE BY ORDER ASSISTANT REGISTRAR INCOME-TAX APPELLATE TRIBUNAL BANGALORE