Sri. Suresh Kumar, Bangalore V. ITO, Bangalore

ITA 1281/BANG/2013

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 0208 (ITAT-BANGALORE)
• Duration Of Justice: 2 year(s) 10 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-07-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Next Hearing Date: 21-06-2016
• Assessment Year: 2009-2010
• Appeal Filed On: 27-08-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SUNIL KUMAR AGARWALA JT
• Assessee Lawyers: V SRINIVASAN
• Keywords: Opportunity of being heard
• Section: 143(3); 234B

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH : BANGALORE BEFORE SMT. ASHA VIJAYARAGHAVAN, JUDICIAL MEMBER AND SHRI INTURI RAMA RAO, ACCOUNTANT MEMBER ITA NO.1281/BANG/2013 ASSESSMENT YEAR : 2009-10 SHRI SURESH KUMAR, C/O. RATHNA ULTRA SOUND SCANING CENTRE, NO.887/A, 7 TH MAIN, JAYANAGAR IV BLOCK, BANGALORE 560 011. PAN: AFPPK 6866E VS. THE INCOME TAX OFFICER, WARD 5(4), BANGALORE. APPELLANT RESPONDENT APPELLANT BY : SHRI V. SRINIVASAN, ADVOCATE RESPONDENT BY : SHRI SUNIL KUMAR AGARWALA, JT. CIT(DR) DATE OF HEARING : 21.06.2016 DATE OF PRONOUNCEMENT : 20.07.2016 O R D E R PER ASHA VIJAYARAGHAVAN, JUDICIAL MEMBER THIS APPEAL IS FILED BY THE ASSESSEE AGAINST THE O RDER DATED 22.7.2013 OF THE CIT(APPEALS)-II, BANGALORE FOR THE ASSESSMENT YEAR 2009-10. 2. THE ASSESSEE IS A RADIOLOGIST AND FILED HIS RET URN OF INCOME FOR THE AY 2009-10 ON 31.3.2010 DECLARING TOTAL INCOME AT R S.5,15,924. AFTER ITA NO.1281/BANG/2013 PAGE 2 OF 9 PROCESSING THE RETURN U/S. 143(1) OF THE I.T. ACT, IT WAS SELECTED FOR SCRUTINY. THE ASSESSMENT WAS COMPLETED U/S. 143(3) VIDE ORDER DATED 29.12.2011 AND THE TOTAL INCOME HAS BEEN DETERMINED AT RS.61,4 8,057 BY BRINGING TO TAX THE FOLLOWING AMOUNTS:- I) UNCONFIRMED SUNDRY CREDITORS RS. 30,00,000 II) INTEREST NOT RELATED TO BUSINESS RS. 12,74,731 III) EXCESS SALARY PAYMENT RS. 4,72,267 IV) DIFFERENCE IN BANK DEPOSITS RS. 14,01,059 TOTAL RS. 61,48,057 3. WITH RESPECT TO UNCONFIRMED SUNDRY CREDITORS OF RS.30 LAKHS, THE AO NOTED THAT THE ASSESSEE HAS SHOWN LOANS OUTSTANDING AS ON 31.3.2009 AT RS.87,14,000 OUT OF WHICH THE AO WAS CONVINCED WITH THE ASSESSEES EXPLANATION THAT ONLY LOANS AMOUNTING TO RS.30 LAKH S WAS BORROWED DURING THE YEAR ENDED 31.3.2009. THE AO ASKED THE ASSESSEE TO PRODUCE THE CONFIRMATION LETTERS FROM THE CREDITORS CONCERNED, BUT THE ASSESSEE FAILED TO COMPLY WITH THE AOS DIRECTION. IN VIEW OF THE ASS ESSEES FAILURE TO FURNISH CONFIRMATION LETTERS FROM THE CREDITORS, THE AO DIS ALLOWED THE ASSESSEES CLAIM TO THE EXTENT OF RS.30 LAKHS AND BROUGHT THE SAME TO TAX. 4. BEFORE THE CIT(APPEALS), THE LD. AR CONTENDED TH AT THE ASSESSEE COULD NOT FURNISH ANNEXURE-I DURING THE ASSESSMENT PROCEEDINGS DUE TO PAUCITY OF TIME AND THEREFORE THE CIT(APPEALS) REMA NDED THE MATTER UNDER RULE 46A OF THE I.T. RULES TO THE AO. THE AO GAVE AN ELABORATE REMAND REPORT WHICH IS EXTRACTED AT PARA 3.4 OF THE CIT(A) S ORDER AS FOLLOWS:- ITA NO.1281/BANG/2013 PAGE 3 OF 9 1. SUNDRY CREDITORS ADDITIONS RS.30,00,000/- IN THE COURSE OF REMAND PROCEEDINGS, SUMMONS WERE I SSUED TO SOME OF THE CREDITORS AND THE ASSESSEE PRODUCED SOM E OF THE CREDITORS, PURPORT TO HAVE ADVANCED LOANS TO THE AS SESSEE. I.E. DR. SURESH KUMAR. THE ALLEGED CREDITORS WERE EXAMINED O N OATH AND STATEMENT RECORDED. FOR THE SAKE OF CLARITY, THE GI ST OF THE STATEMENT IS ENCLOSED SEPARATELY AS ANNEXURE-1. THE SAME IS SELF EXPLANATORY. AS COULD BE SEEN FROM THE ABOVE, MAJORITY OF THE CR EDITORS, EXCEPT ONE, DO NOT HAVE SUFFICIENT SOURCE FOR ADVANCING LO AN TO THE ASSESSEE DR. V. SURESH KUMAR. SOME OF THE CREDITORS STATED THAT THEY HAVE PAID CASH TO DR. V. SURESH KUMAR IN DIFFE RENT FINANCIAL YEAR AND NOT AS SHOWN BY DR. V. SURESH KUMAR. THE A SSESSEE HAS NOT PROVED THE CREDIT WORTHINESS OF THE CREDITORS A ND GENUINENESS OF THE TRANSACTION. MERELY PRODUCING A LETTER FROM A THIRD PARTY, THE A SSESSEE COULD NOT BE SAID TO HAVE DISCHARGED THE INITIAL ON US CASH ON IT. 70 ITR 407(CAL) MERELY IDENTIFYING THE CREDITOR DOES NOT DISCHARGE THE BURDEN. WHAT IS FURTHER REQUIRED IS SUFFICIENT EVIDENCE TO SHOW THAT THE ENTRY FOUND IN THE BOOKS OF ACCOUNT OF THE ASSE SSEE IS GENUINE. MERELY ESTABLISHING IDENTITY OF CREDITOR IS NOT ENO UGH. THE ASSESSEE CO., FAILED TO PROVE GENUINENESS: OF CASH CREDIT AND GENUINENESS OF THE TRANSACTION. THIS VIEW IS WELL S UPPORTED BY THE DECISION OF ALLAHABAD BENCH OF ITAT IN 84 IT D 289 (ALL. TRIB) IF THERE IS AN ENTRY IN THE ACCOUNT BOOKS OF THE AS SESSEE WHICH SHOWS THE RECEIPT OF A SUM, THE INITIAL BURDEN IS O N ASSESSEE TO EXPLAIN THE NATURE AND SOURCE OF SUCH CREDIT-SREELE KHA BANERJEE V CIT (1963) 49 ITR 112(SC). THE ASSESSEE IS REQUIRED TO ESTABLISH PROOF OF IDEN TITY OF HIS CREDITORS, CAPACITY OF THE CREDITOR TO ADVANCE MONE Y AND GENUINENESS OF THE TRANSACTIONS. IN THE INSTANT CAS E, THE ASSESSEE HAS FAILED TO EXPLAIN SATISFACTORILY THE CREDIT WOR THINESS OF THE CREDITORS AND GENUINENESS OF THE TRANSACTIONS. MAJO RITY OF THE ITA NO.1281/BANG/2013 PAGE 4 OF 9 CREDITORS STATED THAT THEY HAVE NO BANK ACCOUNT AND NO PERMANENT ACCOUNT NUMBER. IN VIEW OF THE FOREGOING, THE ADDITION OF RS.27,50, 000/- OUT OF RS. 30,00,000/- REQUIRES TO BE UPHELD, SINCE ONE CREDIT OR BY NAME SRI. B.V. RAMDAS HAD FILED HIS RETURN OF INCOME WITH HIS JURISDICTIONAL OFFICER SHOWING DR. V. SURESH KUMAR AS HIS DEBTOR FOR A SUM OF RS.2,50,000/-. 5. THE CIT(APPEALS) AFTER CONSIDERING THE MATERIAL ON RECORD, REMAND REPORT BY THE AO AND THE ASSESSEES REJOINDER ON TH E REMAND REPORT HELD THAT THE ASSESSEE IS EXPECTED TO PRODUCE SOLID PROO F AND THE CREDITORS FOR EXAMINATION AND HE HAS FAILED TO DO SO, HE HELD THA T THE CREDITORS TO THE EXTENT OF RS.27,50,000 TO BE UNPROVED. HE HELD TH AT THE ONLY CREDITOR, SHRI B.V. RAMDAS IN WHOSE NAME A CREDIT OF RS.2,50,000 W AS SHOWN BY THE ASSESSEE, HAS SHOWN THE ASSESSEE AS A DEBTOR FOR RS .2,50,000 IN HIS RETURN OF INCOME WITH HIS JURISDICTIONAL AO. THERE FORE, THE CIT(APPEALS) SUSTAINED THE ADDITION TO THE EXTENT OF RS.27,50,00 0. 6. AGGRIEVED, THE ASSESSEE IS IN APPEAL BEFORE US. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE MATERIAL ON RECORD . 7. THE LD. COUNSEL FOR THE ASSESSEE SUBMITTED BEFOR E US THAT THE ASSESSEE HAS GIVEN THE DETAILS OF ALL THE CREDITORS FROM WHOM HE HAS RECEIVED A SUM OF RS.30 LAKHS DURING THE YEAR. HE SUBMITTED THAT THERE ARE AS MANY AS 29 CREDITORS AND IN RESPECT OF ALL T HE CREDITORS THE ASSESSEE HAS FILED CONFIRMATION LETTERS AND THE CREDITORS WE RE ALSO EXAMINED BY THE AO IN THE COURSE OF ASSESSMENT PROCEEDINGS AND THUS IDENTITY OF THE ITA NO.1281/BANG/2013 PAGE 5 OF 9 CREDITORS IS NOT DOUBTED. IT WAS SUBMITTED THAT AF TER EXAMINATION OF THE CREDITORS, THE AO HAS REPORTED THAT THESE CREDITORS DO NOT HAVE SUFFICIENT CREDITWORTHINESS TO MAKE THE IMPUGNED LOANS TO THE ASSESSEE. IT WAS POINTED OUT THAT THE CREDITORS WERE ALL NOT FRESH C REDITORS, BUT OLD CREDITORS WHO HAVE ADVANCED MONEY TO THE ASSESSEE EVEN IN THE EARLIER YEARS. THE LD. COUNSEL FOR THE ASSESSEE FURTHER SUBMITTED THAT THE ASSESSEE HAS GIVEN DETAILS OF ALL THE CREDITORS FROM WHOM HE HAS RECEI VED A SUM OF RS.30 LAKHS DURING THE YEAR AND THE EXTENT OF LOANS RECEIVED FR OM THESE CREDITORS DURING THE YEAR UNDER APPEAL IS SOUGHT TO BE DISBELIEVED B Y THE AO ON PURE SUSPICION AND SURMISES. IT WAS PRAYED THAT THE ENT IRE ISSUE HAS TO BE RECONSIDERED AFTER EXAMINING ALL THE CREDITORS ONCE MORE. 8. THE LD. DR RELIED ON THE ORDER OF THE CIT(APPEAL S). 9. WE FIND THAT THE AO HAS DISBELIEVED THE CREDITWO RTHINESS OF THE CREDITORS, THOUGH IDENTITY OF THE CREDITORS IS NOT DOUBTED. IN THESE CIRCUMSTANCES, IN THE INTEREST OF JUSTICE, WE DEEM IT FIT THAT ONE MORE OPPORTUNITY IS TO BE GIVEN TO THE ASSESSEE TO PROVE THE CREDITWORTHINESS OF THE CREDITORS TO THE SATISFACTION OF THE AO. ACCOR DINGLY, WE SET ASIDE THE ORDER OF THE CIT(APPEALS) AND REMIT THE ISSUE TO TH E FILE OF THE ASSESSING OFFICER, WHO SHALL DECIDE THE ISSUE DE NOVO IN ACCORDANCE WITH LAW AFTER AFFORDING OPPORTUNITY OF BEING HEARD TO THE ASSESSE E. 10. THE NEXT ISSUE IS WITH RESPECT TO DISALLOWANCE OF INTEREST OF RS.12,74,731 U/S. 36(1)(III) OF THE ACT. THE AO OB SERVED THAT THE ASSESSEE ITA NO.1281/BANG/2013 PAGE 6 OF 9 HAD AVAILED MOST OF THE LOANS DURING THE PREVIOUS Y EARS RELEVANT TO AYS 2006-07 & 2007-08 FOR WHICH YEARS RETURNS OF INCOME WERE NOT FILED. A HONDA CIVIC CAR IS THE ONLY ASSET PURCHASED FOR THE ASSESSEES PROFESSIONAL USE AND MOST OF THE LOANS TAKEN DURING THE PREVIOUS YEAR RELEVANT TO AY 2009-10 HAD BEEN USED FOR PERSONAL P URPOSE I.E., ACQUISITION OF RESIDENTIAL SITES. THE AO THEREFORE DISALLOWED A SUM OF RS.12,74,731 OUT OF THE INTEREST CLAIMED AS BEING U NRELATED TO THE ASSESSEES PROFESSION AND BROUGHT THE SAME TO TAX. 11. BEFORE THE CIT(APPEALS), IT WAS SUBMITTED THAT THE ASSESSEE HAS TAKEN THE LOANS IN THE EARLIER YEARS AND THE SAME W AS USED FOR THE PURPOSE OF PROFESSION CARRIED ON BY THE ASSESSEE, WHICH WAS INVESTED IN VARIOUS ASSETS AND THE INTEREST PAID BY THE ASSESSEE IS WHO LLY AND EXCLUSIVELY FOR THE PURPOSES OF THE BUSINESS OF THE ASSESSEE. THE CIT(APPEALS) CALLED FOR A REMAND REPORT AND THE AO IN HIS REMAND REPORT ST ATED AS FOLLOWS:- INTEREST CLAIMED RS.12,74,731/- IN THE COURSE OF REMAND PROCEEDINGS, THE ASSESSEE P RODUCED BOOKS OF ACCOUNTS (CASH BOOK) AND FILED STATEMENTS IN SUPPORT OF HIS CLAIM. THE CASH BOOK AND STATEMENTS ARE VERIFI ED. VERIFICATION OF THE CASH BOOK AND STATEMENT REVEALE D THAT THERE ARE DISCREPANCIES IN THE FIGURE FURNISHED IN THE ST ATEMENT WITH REFERENCE TO CASH BOOK (CLOSING BALANCES). SUCH DI SCREPANCIES ARE AS UNDER: NAME OF THE BANK AS PER CASH BOOK CLOSING BALANCE (RS) AS PER STATEMENT CLOSING BALANCE (RS) INTEREST PAID RS. CENTURION BANK 3,16,082 3,32,781 52,230 CHOLAMANDALAM LOAN ACCOUNT 3,97,151 3,63,704 64,937 ITA NO.1281/BANG/2013 PAGE 7 OF 9 CITI BANK 2,87,369.83 3,51,128 46,473 CITI BANK NIL 1,54,405 23,008 ICICI BANK 1,28,573 5,91,926 55,180 KMPL 24,913 52,830 14,490 ICICI BANK FINANCE NIL 3,86,846 55,940 TOTAL 3,12,258 INTEREST PAID ON THE ABOVE LOANS (WHERE DISCREPANCI ES ARE THERE WITH REFERENCE TO BOOK AND STATEMENT) ARE AMOUNTING TO RS.3,12,258/-. THE ADDITION TO THIS EXTENT BE SUST AINED AND WITH REGARD TO BALANCE INTEREST PAID AND USING OF LOAN F OR BUSINESS PURPOSES MAY BE DECIDED ON MERITS. 12. THE CIT(APPEALS) AFTER CONSIDERING THE REMAND R EPORT AND ASSESSEES REJOINDER, OBSERVED THAT IN THE REMAND R EPORT THE AO HAS CONCEDED THAT INTEREST PAID TO THE EXTENT OF RS.3,1 2,258 WHICH DO NOT PERTAIN TO AY 2009-10 ARE DISALLOWABLE. THE INTERES T TO THE EXTENT OF RS.9,62,473 PERTAINING TO AY 2009-10 WAS ALLOWABLE. THE CIT(A) THEREFORE ALLOWED THE DEDUCTION OF INTEREST TO THE EXTENT OF RS.9,62,473 OUT OF RS.12,74,731. 13. IN THE APPEAL BEFORE US, THE LD. COUNSEL FOR TH E ASSESSEE SUBMITTED THAT THE ASSESSEE HAD CLAIMED DEDUCTION OF INTEREST OF RS.12,74,731 AND THE SAME WAS DISALLOWED FOR WANT OF DETAILS. IN TH E COURSE OF REMAND PROCEEDINGS, THE ASSESSEE PRODUCED BOOKS OF ACCOUNT AND STATEMENT IN RESPECT OF INTEREST PAID AND THE SAME WAS VERIFIED BY THE AO. THE AO NOTICED THAT THERE WERE DISCREPANCIES IN THE CLOSIN G BALANCES OF LOANS AS PER CASH BOOK AND STATEMENT ISSUED BY BANKS. THE I NTEREST PAID ON LOANS ITA NO.1281/BANG/2013 PAGE 8 OF 9 WHERE THERE WAS DISCREPANCY COMES TO RS.3,12,258 TO WHICH THE AO WAS OF THE OPINION THAT IT SHOULD BE SUSTAINED. WITH R EGARD TO THE BALANCE, THE AO WAS SATISFIED AS HE HAS REPORTED THAT THE ISSUE MAY BE DECIDED ON MERITS. THE LD. COUNSEL FOR THE ASSESSEE SUBMITTE D THAT THE ENTIRE INTEREST CLAIM OF RS.12,74,731 REQUIRES TO BE ALLOWED, AS TH E ENTIRE AMOUNT WAS FOR BUSINESS PURPOSES AND IN SO FAR AS THE DISCREPANCIE S REPORTED BY THE AO ARE CONCERNED, IT IS WITH RESPECT TO CLOSING BALANC E AS PER THE BOOKS AND THE STATEMENTS OF LOAN FROM THE BANKS, WHICH DOES N OT RELATE TO ALLOWABILITY OF INTEREST. 14. HAVING CONSIDERED THE RIVAL SUBMISSIONS AND THE MATERIAL ON RECORD, WE ARE OF THE VIEW THAT THE CLOSING BALANCE OF THE LOANS AS PER THE CASH BOOK AND THE STATEMENTS ISSUED BY THE BANKS IS NOT RELEVANT TO THE ISSUE OF DECIDING WHETHER THE BORROWED FUNDS HAVE BEEN APPLI ED FOR BUSINESS PURPOSES. HOWEVER, IN THE INTEREST OF JUSTICE, WE ARE OF THE VIEW THAT ONE MORE OPPORTUNITY IS TO BE PROVIDED TO THE ASSESSEE TO ESTABLISH ITS CLAIM BEFORE THE AO. ACCORDINGLY, WE SET ASIDE THE ORDER OF THE CIT(APPEALS) ON THIS ISSUE AND REMIT THE SAME TO THE FILE OF THE AS SESSING OFFICER TO EXAMINE WHETHER THE BORROWED FUNDS HAVE BEEN UTILIZED FOR B USINESS PURPOSES AND DECIDE THE ISSUE IN ACCORDANCE WITH LAW, AFTER PROV IDING OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. THEREFORE, THIS ISSU E IS ALLOWED FOR STATISTICAL PURPOSES. ITA NO.1281/BANG/2013 PAGE 9 OF 9 15. AS REGARDS THE GROUND RAISED REGARDING LEVY OF INTEREST U/S. 234A, 234B AND 234C OF THE ACT IS CONCERNED, THE AO IS DI RECTED TO GIVE CONSEQUENTIAL EFFECT. 16. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS AL LOWED FOR STATISTICAL PURPOSES. PRONOUNCED IN THE OPEN COURT ON THIS 20 TH DAY OF JULY, 2016. SD/- SD/- ( INTURI RAMA RAO ) (ASHA VIJAYARAGHAVAN ) ACCOUNTANT MEMBER JUDICIAL M EMBER BANGALORE, DATED, THE 20 TH JULY, 2016. /D S/ COPY TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR, ITAT, BANGALORE. 6. GUARD FILE BY ORDER ASSISTANT REGISTRAR, ITAT, BANGALORE.