ACIT, CHENNAI V. Shri R.S.Sivaprakasam, CHENNAI

ITA 1278/CHNY/2011

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 64677 (ITAT-CHENNAI)
• Duration Of Justice: 1 year(s) 5 month(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-12-2012
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 12-12-2012
• Assessment Year: 1995-1996
• Appeal Filed On: 07-07-2011
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Assessee Lawyers: R SIVARAMAN
• Keywords: Unexplained cash credit; Depreciation; Principle of natural justice
• Section: 68; 148; 144

Judgement Text

IN THE INCOME-TAX APPELLATE TRIBUNAL A BENCH, CHENNAI. BEFORE ABRAHAM P. GEORGE, ACCOUNTANT MEMBER & SHRI S.S. GODARA, JUDICIAL MEMBER I.T.A. NO.1278/MDS/2011 ASSESSMENT YEAR: 1995-96 THE ASSISTANT COMMISSIONER OF INCOME TAX, COMPANY CIRCLE IV (2), AAYAKAR BHAVAN, MAIN BUILDING, IV FLOOR, 121, M.G. ROAD, NUNGAMBAKKAM, CHENNAI 600 034. VS. SHRI R.S. SIVAPRAKASAM, NO. 7/7 BELLY AREA (FIRST FLOOR), PONNY COLONY MAIN ROAD,H. BLOCK, ANNA NAGAR, CHENNAI 600040. [PAN:AVMPS5375B] (APPELLANT) (RESPONDENT) A PPELLANT BY : SHRI SHAJI P. JACOB, ADDL. CIT RESPONDENT BY : SHRI R. SIVARAMAN, ADVOCATE DATE OF HEARING : 12.12.2012 DATE OF PRONOUNCEMENT : 19.12.2012 ORDER PER S.S. GODARA, JUDICIAL MEMBER THIS REVENUES APPEAL CHALLENGES THE ORDER PASSED BY THE COMMISSIONER OF INCOME TAX (APPEALS) V, CHENNAI DAT ED 07.04.2011 IN ITA NO. 204/2009-10 FOR THE ASSESSMENT YEAR 1995-96 IN PROCEEDINGS UNDER SECTION 144 R.W.S. 147 OF THE INCOME TAX ACT 1961 [ IN SHORT THE ACT]. 2. THE FOLLOWING GROUNDS HAVE BEEN PLEADED BY THE REVENUE: I.T.A. I.T.A. I.T.A. I.T.A. NO. NO. NO. NO.1278 1278 1278 1278/M/ /M/ /M/ /M/11 1111 11 2 1. THE ORDER OF THE LEARNED CIT(A) IS CONTRARY TO LAW AND FACTS OF THE CASE. 2.1 THE LEARNED CIT(A) HAS ERRED IN DELETING THE FO LLOWING ADDITIONS: (A). ADDITION MADE TOWARDS SHARE CAPITAL BY BOTH P ARTIES ON A SUM OF ` . 21,00,000/-. (B) ADDITION MADE TOWARDS INTRODUCTION OF SHARE CA PITAL BY SHRI S K RAJU ON A SUM OF ` . 12,58,000/-. (C) ADDITION MADE TOWARDS INTRODUCTION OF SHARE CA PITAL BY SHRI THIRUVENGADAM ON A SUM OF ` . 10 LAKHS. (D) ADDITION MADE TOWARDS INTRODUCTION OF SHARE CA PITAL FROM BANK ACCOUNTS OF FAMILY MEMBERS ON A SUM OF ` .16 LAKHS. 2.2 THE LD. CIT(A) FAILED TO NOTE THAT THE FOUR PA RTIES WERE NOT CREDIT WORTHY TO HAVE ADVANCED THE AMOUNTS TO THE A SSESSEE. 2.3 THE LEARNED CIT(A) OUGHT TO HAVE NOTED THAT TH E ASSESSMENT WAS FRAMED BASED ON THE MATERIAL FOUND AND FACTS UN EARTHED DURING THE COURSE OF SEARCH U/S 132. 2.4 THE LD. CIT(A) DID NOT APPRECIATE THE FACT THA T THE CRUCIAL LINK BETWEEN THE CASH FLOW FROM THE INDIVIDUALS TO THE C OMPANY AS CLAIMED BY THE ASSESSEE HAS NEITHER BEEN PROVED DUR ING THE ASSESSMENT PROCEEDINGS NOR IN THE APPEAL PROCEEDING S,. 2.5 THE LD. CIT(A) OUGHT TO HAVE CONSIDERED THE FA CT THAT THE BASIC CONDITIONS OF ESTABLISHING THE IDENTITY, GENUINENES S AND CREDIT WORTHINESS OF THE SOURCE OF CASH CREDITS HAVE NOT B EEN PROVED BY THE ASSESSEE 3.1 IT IS SUBMITTED THAT THE LD. CIT(A) ERRED IN A DMITTING THE ASSESSEE'S APPEAL BY CONDONING THE DELAY IN FILING OF APPEAL BY THE ASSESSEE FOR A PERIOD OF SIX YEARS. 3.2 THE LD. CIT(A) OUGHT TO HAVE CONSIDERED THE FA CT THAT THE MEDICAL GROUND STATED BY THE 'ASSESSEE FOR NOT FILI NG THE APPEAL IN TIME DID NOT DETER THE ASSESSEE IN CARRYING OUT ITS BUSINESS ACTIVITIES IN THE NORMAL COURSE. I.T.A. I.T.A. I.T.A. I.T.A. NO. NO. NO. NO.1278 1278 1278 1278/M/ /M/ /M/ /M/11 1111 11 3 3.3 THE LD. CIT(A) FAILWED TO CONSIDER THE FACT TH AT THE ASSESSEE MADE AN INVESTMENT OF ` . 1.46 CRORES IN M/S SIVAMATHI ANIMATION SOFTWARE AND ELECTRONICS AND THE ASSESSEE IS ALSO A PARTNER IN THE M/S SKP METALS. THUS THE MEDICAL GRO UNDS DID NOT PREVENT THE ASSESSEE FROM MAKING THE HUGE INVES TMENTS OR CARRYING OUT HIS DIFFERENT BUSINESS ACTIVITIES BUT IT IS CLAIMED THAT ONLY FILING OF APPEAL COULD NOT BE DONE ON ACCOUNT OF MEDICAL REASONS . 4. FOR THESE AND OTHER GROUNDS THAT MAY BE ADDUCED AT THE TIME OF HEARING, IT IS PRAYED THAT THE ORDER OF THE LEARNED CIT(A) MAY BE SET ASIDE AND THAT OF THE ASSESSING OFFICER RESTORE D. 3. BRIEF FACTS PERTAINING TO THE GROUNDS ARE THAT THE ASSESSEE INDIVIDUAL IS PROMOTER-CUM-MANAGING DIRECTOR OF A COMPANY NAME LY M/S. METRONAX CARS AND BIKES LTD. WHICH IS ENGAGED IN THE BUSINES S OF HIRING OUT SELF DRIVEN CARS TO DIFFERENT PERSONS. 4. ON 15.12.1994, A SEARCH TOOK PLACE IN THE COM PANYS BUSINESS PREMISES AND ASSESSEES RESIDENTIAL PREMISES WHICH LEAD TO COLLATION OF SOME INCRIMINATING MATERIALS QUA COMPANY SHARE CAPI TALS AND REFUNDABLE DEPOSITS IN ITS VARIOUS BANK ACCOUNTS. IT TRANSPIRE S FROM THE ASSESSMENT ORDER THAT THE COMPANY DID NOT FILE ANY RETURN IN FURTHERANCE TO THE SEARCH. THE DEPARTMENT ISSUED NOTICE UNDER SECTION 148 OF T HE ACT ON 20.01.1998. STILL, NO RETURN CAME. CONSEQUENTLY, THE ASSESSING OFFICER COMPLETED EX- PARTE ASSESSMENT AGAINST THE COMPANY ON 21.03.1998 AND ASSESSED TOTAL INCOME AS ` .24,37,569/- RESULTING IN ADDITION OF ` .28,86,500/- TOWARDS REFUNDABLE DEPOSITS AND UNEXPLAINED CREDIT UNDER SE CTION 68 OF THE ACT AS ` .63,70,000/- TOWARDS SHARE CAPITAL. THE SAID ASSESS MENT HAD BEEN I.T.A. I.T.A. I.T.A. I.T.A. NO. NO. NO. NO.1278 1278 1278 1278/M/ /M/ /M/ /M/11 1111 11 4 COMPLETED BY THE ASSESSING OFFICER ON THE BASIS OF PROFIT AND LOSS ACCOUNT, BALANCE SHEET AS ON 30.09.1994 AS WELL AS MATERIAL SEIZED IN SEARCH (SUPRA). 5. WE NOTICE FROM THE ASSESSMENT ORDER IN THIS CAS E THAT ON 29.03.2000 I.E. THE DATE OF COMPLETION OF ASSESSMENT, THE COMP ANY HAD ALSO SUBMITTED ITS RETURN ESTIMATING ITS INCOME AS ` .7,10,000/- WITH A CLAIM OF DEPRECIATION AMOUNTING TO ` .48.04 LAKHS. HOWEVER, THE ASSESSING OFFICER DID NO T ACT UPON THE SAME AND PROCEEDED TO COMPLETE THE ASSESSMENT A BOVE SAID. AGGRIEVED, IT PREFERRED AN APPEAL BEFORE THE CIT(A) . VIDE ORDER DATED 23.03.2001, THE CIT(A) REMITTED THE MATTER BACK TO THE ASSESSING OFFICER WITH FOLLOWING FINDINGS: (I) THE COMPANY HAD SUBSTANTIAL SOURCES WHICH WAS D IVERTED AND THAT AT PRESENT THE COMPANY HAD LOST ALL THE ASSETS ARE NOT ARGUMENTS THAT CAN BE ACCEPTED WITHOUT VERIFICATION. (II) THE COMPANY HAS TO SHOW THAT THE ADVANCES GRAN TED TO THE RELATIVES OF THE MD WERE IN FACT DIVERTED TOWARDS T HE SHARE CAPITAL OF THE COMPANY. (III) THE BANK ACCOUNTS AND OTHER INVESTMENTS OF TH E INDIVIDUAL CONCERNED WILL HAVE TO BE EXAMINED TO VERIFY THE CL AIM MADE BY THE COMPANY. (IV) THE AVAILABILITY OF THE FUNDS FROM THE CREDITO RS AND DEV APARTMENTS WILL HAVE TO BE EXAMINED WITH REFERENCE TO THE CASH FLOW STATEMENT TO BE PREPARED. SINCE THE ASSESSMENT STOOD REVIVED, THE ASSESSING OFFICER ISSUED NOTICES TO THE COMPANY REGARDING ITS SHARE CAPITAL AND ADVANCES. HE ALSO ISSUED NOTICES TO THE ASSESSEE UNDER SECTION 148 OF THE ACT ON 26.03.2002. I.T.A. I.T.A. I.T.A. I.T.A. NO. NO. NO. NO.1278 1278 1278 1278/M/ /M/ /M/ /M/11 1111 11 5 IT IS REVEALED FROM THE ASSESSMENT ORDER THAT THE A SSESSING OFFICER AGAIN COMPLETED ASSESSMENT UNDER SECTION 144 R.W.S. 147 V IDE ORDER DATED 27.03.2003. THE ASSESSMENT WAS SUBSTANTIVELY FINALI ZED IN THE CASE OF THE ASSESSEE AND PROTECTIVELY IN THE CASE OF THE COMPAN Y ABOVE SAID. IN THE ASSESSMENT ORDER, BY HOLDING THAT THE ASSESSEE HAD FAILED TO PROVE THE AMOUNT OF ` .73,59,025/-, THE ASSESSING OFFICER INVOKED UNEXPLA INED CASH CREDIT PROVISION UNDER SECTION 68 OF THE ACT, AND DISALLOWED AN AMOUNT OF ` .21.00 LAKHS INTRODUCED AS SHARE CAPITAL BY FOUR PA RTIES AFTER AVAILING LOAN FROM INDIAN BANK, ` .12.58 LAKHS INTRODUCED BY SHRI S.K. RAJU AS SHARE CAPITAL, ` .10 LAKHS INTRODUCED AS SHARE CAPITAL ADVANCED BY S HRI THIRUVENGADAM, ` .16 LAKHS INTRODUCED AS SHARE CAPITAL FROM BANK ACC OUNT OF ASSESSEES RELATIVES AND ` .14.01 LAKHS DEPOSITS MADE BY THE ASSESSEE IN THE COMPANY. WHILST ADDING THE ABOVE SAID AMOUNTS T OTALLING ` .73,59,000/-, THE ASSESSING OFFICER OBSERVED THAT GENUINENESS AND CREDIT WORTHINESS OF THE SAME HAD NOT BEEN PROVED BY THE ASSESSEE. 6. THE ASSESSEE TOOK THE MATTER IN APPEAL BEFORE T HE CIT(A). IT IS NOTICED THAT THOUGH THE ASSESSMENT ORDER WAS PASSED ON 27.0 3.2003, THE ASSESSEE FILED APPEAL BEFORE THE CIT(A) ON 31.12.2009 I.E. A FTER A GAP OF MORE THAN SIX YEARS. THE CIT(A) IN THE IMPUGNED ORDER HAS CONDONE D THE DELAY BY OBSERVING AS UNDER: 2. THOUGH THE ORDER WAS SERVED ON 27.03.2003 ITSE LF, THE APPEAL HAS BEEN FILED ON 31.12.2009. IN THIS REGARD, THE A PPELLANT FILED A LETTER I.T.A. I.T.A. I.T.A. I.T.A. NO. NO. NO. NO.1278 1278 1278 1278/M/ /M/ /M/ /M/11 1111 11 6 DATED 21.12.2009 ON 31.12.2009 STATING THAT HE HAD TWO HEART ATTACKS AND ENCLOSING COPIES OF MEDICAL REPORTS. CONSIDERIN G THE REASONS MENTIONED THEREIN, THE DELAY IS CONDONED. ON MERITS, WE FIND THAT THE CIT(A) HAS DELETED ADDI TIONS OF ` .21 LAKHS, ` .12.58 LAKHS, ` .10 LAKHS AND ` .16 LAKHS (SUPRA), BUT CONFIRMED THE ADDITION QUA DEPOSITS MADE BY THE ASSESSEE IN THE COMPANY TO THE TUNE OF ` .14.01 LAKHS. IT IS IN THIS BACKDROP OF THE FACT THAT THE REVENU E IS AGGRIEVED AND IN APPEAL BEFORE US. 7. REITERATING THE SUBMISSIONS MADE IN THE GROUNDS REPRODUCED HEREIN ABOVE, IT IS THE CONTENTION OF THE DR REPRESENTING THE REVENUE THAT THE CIT(A) HAS NOT PROCEEDED ON CORRECT APPRECIATION OF THE FACTS AND LAW. THEREFORE, HE PRAYED FOR ACCEPTANCE OF THE APPEAL. 8. ON THE OTHER HAND, THE SUBMISSIONS ADVANCED BY THE AR MAINLY REVOLVE AROUND STRONGLY SUPPORTING THE ORDER OF THE CIT(A). IN THE LIGHT THEREOF, A PRAYER HAS BEEN MADE ON BEHALF OF THE AS SESSEE TO UPHOLD THE SAME. 9. WE HAVE CONSIDERED THE RIVAL CONTENTIONS AND AL SO GONE THROUGH THE ORDERS OF THE ASSESSING OFFICER AS WELL AS CIT(A). UNDISPUTED FACTS ARE THAT IN THE ASSESSMENT ORDER PASSED SUBSTANTIVELY IN THE CASE OF THE ASSESSEE AND PROTECTIVELY IN THE CASE OF THE COMPANY (SUPRA) , THE ASSESSING OFFICER I.T.A. I.T.A. I.T.A. I.T.A. NO. NO. NO. NO.1278 1278 1278 1278/M/ /M/ /M/ /M/11 1111 11 7 HAD FINALIZED THE ASSESSMENT UNDER SECTION 144 R.W. S. 147 OF THE ACT VIDE ASSESSMENT ORDER DATED 27.03.2003. IN THE ASSESSMEN T ORDER, THE ASSESSING OFFICER HAD TREATED A SUM OF ` .73,59,025/- AS UNEXPLAINED CASH CREDIT UNDER SECTION 68 OF THE ACT BY HOLDING THA T GENUINENESS AND CREDIT WORTHINESS OF THE SAID AMOUNT [BREAK-UP GIVEN HEREI NABOVE] HAD NOT BEEN PROVED BY THE ASSESSEE, WHO IS ALSO THE MANAGING DI RECTOR OF THE COMPANY. WE FIND FROM THE CIT(A)S ORDER THAT IN APPEAL, THE ASSESSEE ALSO SUBMITTED CONFIRMATION LETTERS FROM FOUR PARTIES REGARDING IN TRODUCTION OF SHARE CAPITAL BY LOAN FROM INDIAN BANK TO THE TUNE OF ` .21 LAKHS. REGARDING INTRODUCTION OF SHARE CAPITAL AS ADVANCED FROM SHRI THIRUVENGADAM T O THE TUNE OF ` .10 LAKHS, THE ASSESSEE HAD PRODUCED COPY OF AN AGREEME NT QUA SALE DEED EXECUTED BY HIM FOR PURCHASE OF PLOT FROM M/S. SIVA MATHI ARCADES & ESTATES DURING THE APPELLATE PROCEEDINGS. REGARDING INTRODU CTION OF SHARE CAPITAL BY RELATIVES OF THE ASSESSEE TO THE TUNE OF ` .16 LAKHS AS WELL, THE ASSESSEE HAD SUBMITTED PARTY-WISE DETAILS BEFORE THE CIT(A) AND ALSO THEIR BANK STATEMENT TO PROVE THE IDENTITY OF THE PARTY, GENUINENESS AS WELL AS CREDITWORTHINESS. THE CIT(A) HAS TAKEN COGNIZANCE OF THE SAID MATERIA L ADDUCED IN EVIDENCE AND DELETED THE ADDITION MADE BY THE ASSESSING OFFI CER, THAT TOO, WITHOUT AFFORDING THE REVENUE AN OPPORTUNITY OF HEARING. TH IS IN OUR OPINION IS NOT IN COMPLIANCE OF PRINCIPLES OF NATURAL JUSTICE. EVEN I N IT RULE 46, IT IS A CONDITION PRECEDENT THAT BEFORE ANY EVIDENCE IS ADM ITTED OR TAKEN NOTE OF FOR THE FIRST TIME IN APPEAL BEFORE THE CIT(A), THE ASS ESSING AUTHORITY IS TO BE I.T.A. I.T.A. I.T.A. I.T.A. NO. NO. NO. NO.1278 1278 1278 1278/M/ /M/ /M/ /M/11 1111 11 8 GIVEN AN OPPORTUNITY OF HEARING. SIMILARLY, WE NOTI CE THAT THE CIT(A) HAS ALSO CONDONED THE HUGE DELAY OF MORE THAN SIX YEARS IN C ASUAL MANNER ON HEALTH GROUNDS WITHOUT ASKING THE COMMENTS OF THE ASSESSIN G OFFICER. THE CONTENTION OF THE REVENUE IN THIS REGARD IS THAT IN THE INTERVENING PERIOD, THE ASSESSEE HAD MADE CERTAIN INVESTMENTS AS STATED IN GROUNDS HEREINABOVE. IN OUR OPINION, WHILE CONDONING THE DELAY, A BALANC E APPROACH HAS TO BE ADOPTED DRAWING A FINE BALANCE BETWEEN THE LAW OF L IMITATION AS WELL AS CASE OF THE LITIGANT ON MERITS WHICH HAS NOT BEEN FOLLOW ED BY THE CIT(A). HENCE, WE ARE OF THE VIEW THAT THE INTEREST OF JUSTICE WOU LD BE MET IN CASE THE GROUNDS ARE RESTORED BACK TO THE CIT(A) WITH DIRECT ION TO PASS ORDER AFRESH IN ACCORDANCE WITH LAW AFTER AFFORDING OPPORTUNITY OF HEARING TO THE ASSESSEE AS WELL AS THE REVENUE. 10. CONSEQUENT TO OUR ABOVE DISCUSSIONS, THE REVEN UES APPEAL IS ALLOWED FOR STATISTICAL PURPOSE. ORDER PRONOUNCED ON WEDNESDAY, THE 19 TH OF DECEMBER, 2012 AT CHENNAI. SD/- SD/- (ABRAHAM P. GEORGE) ACCOUNTANT MEMBER (S.S. GODARA) JUDICIAL MEMBER CHENNAI, DATED, THE 19.12.2012 VM/- TO: THE ASSESSEE//A.O./CIT(A)/CIT/D.R.