Shri S.Ganesh Kumar, CHENNAI V. ITO, Pollachi

ITA 1295/CHNY/2010

• Counselvise Citation: [2011] 135 COUNSELVISE.COM (IT) 0923 (ITAT-CHENNAI)
• Duration Of Justice: 7 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-03-2011
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: D
• Next Hearing Date: 17-03-2011
• Assessment Year: 2006-2007
• Appeal Filed On: 06-08-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: K E B RANGARAJANJR STA NDING
• Assessee Lawyers: D ANAND
• Keywords: Unexplained expenditure; Business income; Document seized; Documents seized
• Section: 69C

Judgement Text

IN THE INCOME-TAX APPELLATE TRIBUNAL:D- BENCH: CHENNAI (BEFORE SHRI HARI OM MARATHA, JM & SHRI AB RAHAM P GEORGE, AM) ITA NO.1295/MDS/10 ASST. YEAR 2006-07 SHRI S.GANESH KUMAR, VS. THE ITO, 5. AISWARYA NAGAR. 7 TH ST., UDUMALPET. WARD I(1), POLLACHI 642126 . (PAN AEKPG1840E) (APPELLANT) (RESPONDENT) APPELLANT BY: SHRI D.ANAND RESPONDENT BY: SHRI K.E.B.RANGARAJAN,JR.STANDI NG COUNSEL ORDER PER ABRAHAM P.GEORGE, ACCOUNTANT MEMBER ASSESSEE IN THIS APPEAL HAS RAISED TWO GRIEVANCES. FIRST OF ITS GRIEVANCE COVERED IN GROUNDS 2 TO 5, ARE THAT THE CIT(A) SUSTAINED AN ADDITION OF ` 110000/- MADE BY AO UNDER SEC.69C OF THE INCOME-TAX ACT, 1961 (THE ACT FOR SHORT). SECOND GRIEVANCE COVERED BY GROUNDS 6 TO 8 IS THAT THE CIT(A) SUSTAI NED AN ADDITION OF ` 150000/- MADE BY AO UNDER THE HEAD CHIT CONTRIBUTION AGAIN RELY ING ON SEC.69C OF THE ACT. 2. SHORT FACTS APROPOS ARE THAT ASSESSEE, WHO WAS R UNNING A FRANCHISEE BUSINESS FOR M/S PROFESSIONAL COURIERS WAS SUBJECTED TO A SE ARCH ON 23-01-2007. IT SEEMS ASSESSEE DESPITE NOTICE UNDER SEC.153A OF THE ACT, FAILED TO FILE THE RETURN FOR THE IMPUGNED AY. HOWEVER, ASSESSEE HAD ALREADY FILED R ETURNS FOR AYS. 2000-01, 2002-03. 2003-04. 2004-05 AND 2005-06. SINCE NO RETURN WAS F ILED BY ASSESSEE, AO RELYING ON A ITA NO.1295/MDS/10 2 SWORN STATEMENT RECORDED FROM ONE SHRI S.ANGAPPAN, OFFICE-IN-CHARGE OF THE FRANCHISEE BUSINESS OF THE ASSESSEE, ESTIMATED THE INCOME FROM SUCH FRANCHISEE BUSINESS AT ` 9 LAKHS. FURTHER ADDITION WAS MADE ON TWO ACCOUNTS . ONE BASED ON A SEIZED DOCUMENT, WHICH SHOWED THAT ASSESSEE HAD SPE NT ` 485000/-FOR THE ACTIVITY OF A POLITICAL PARTY CALLED DMDK. AT THIS JUNCTURE IT IS NECESSARY TO NOTE THAT ASSESSEE WAS ASST. SECRETARY OF THAT POLITICAL PARTY. AO OBSERVE D THAT OUT OF ` 485000/-, EXPENSES OF ` 268450/- PERTAINED TO THE RELEVANT PREVIOUS YEAR AN D ASSESSEE HAVING NOT GIVEN ANY EXPLANATION TREATED THIS AMOUNT AS UNEXPLAINED EXPE NSES UNDER SEC. 69C OF THE ACT. AO ALSO FOND FROM THE SWORN STATEMENT RECORDED FROM SHRI S.ANGAPPAN THAT ASSESSEE WAS SUBSCRIBING TO A CHIT FUND FOR WHICH ` 500/- WAS BEING PAID DAILY AND PAYMENT TOWARDS SUCH CHIT CALCULATED AT THE RATE OF ` 500/- PER DAY FOR THE RELEVANT PREVIOUS YEAR CAME TO ` 150000/-. THIS WAS ALSO CONSIDERED FOR ADDITION UN DER SEC. 69C OF THE ACT. 3. IN HIS APPEAL BEFORE THE CIT(A) SUBMISSION OF T HE ASSESSEE WAS THAT THE ESTIMATION OF GROSS PROFIT AT 30% OF THE GROSS RECE IPTS FROM COURIER BUSINESS WAS NOT JUSTIFIED. ACCORDING TO ASSESSEE, HE HAD SHOWN REAS ONABLE INCOME FROM SUCH COURIER BUSINESS IN HIS PROFIT AND LOSS ACCOUNT AND AO HAD WITHOUT ANY REASON ENHANCED THE AMOUNT. CIT(A) NOTED THAT FOR THE EARLIER YEARS ONL Y 10% OF EXPENSES DISALLOWED AND BASED ON SUCH FINDING HE GAVE RELIEF TO THE ASSESSE E. VIS--VIS ADDITION OF ` 268450/- ASSESSEE SUBMITTED THAT THESE WERE OUT OF COLLECTIO NS FROM POLITICAL PARTY OF WHICH HE WAS ASST. SECRETARY AND NOT OUT OF HIS INCOME. AS P ER THE ASSESSEE, A SUM OF ` 110000/- OUT OF THE SAID AMOUNT WAS PAID FOR PURCHA SE OF A CAR REGISTRATION OF WHICH ITA NO.1295/MDS/10 3 WAS IN THE NAME OF ONE SHRI K.MUJIBIR RAHIMAN. CIT (A) WAS OF THE OPINION THAT THE ADDITION COULD BE SUSTAINED ONLY TO THE EXTENT OF ` 158450/- OUT OF ` 268450/-. IN SO FAR AS ADDITION MADE FOR CHITTY PAYMENT WAS CONCERNED, LD. CIT(A) CONFIRMED IT. 4. NOW BEFORE US LD.AR ASSAILING THE ORDERS OF THE AUTHORITIES BELOW, SUBMITTED THAT LD.CIT(A) HIMSELF HAD ADMITTED THERE WAS A DISALLOW ANCE OF 10% OF EXPENSES DONE IN EVERY ONE OF THE EARLIER ASST. YEARS FOR WHICH NOTI CE UNDER SEC.153A OF THE ACT WAS ISSUED AND THEREFORE, SUCH DISALLOWANCE MORE THAN C OVERED THE EXPENDITURE. IN ANY CASE, ACCORDING TO HIM COLLECTION RECEIVED FROM THE POLITICAL PARTY AND USED BY SUCH PARTY COULD NOT BE CONSIDERED AS INCOME OF THE ASSE SSEE. IN SO FAR AS THE ISSUE RELATING TO CHIT CONTRIBUTION IS CONCERNED, SUBMISSION OF TH E LD. AR WAS THAT THESE WERE ALSO PROPERLY EXPLAINED BY THE ADDITIONS MADE BY THE AO AGAINST THE FRANCHISEE BUSINESS INCOME AND OUGHT HAVE BEEN TELESCOPED. 5. WE HAVE PERUSED THE ORDERS AND HEARD THE RIVAL S UBMISSIONS. THE ADDITION OF ` 268450/- MADE BY AO WAS BASED ON A SEIZED DOCUMENTS WHICH SHOWED THAT ASSESSEE HAD SPENT ` 485000/- FOR ACTIVITIES OF A POLITICAL PARTY CALLED DMDK. IT IS ALSO AN ADMITTED POSITION THAT ASSESSEE WAS ASST. SECRETARY OF THE S AID PARTY. THEREFORE THE EXPLANATION OF THE ASSESSEE THAT IT HAD COME OUT OF CONTRIBUTIO NS RECEIVED BY THE SAID PARTY IS VERY MUCH PROBABLE. ASSESSEE AS AN OFFICE BEARER OF THE PARTY WOULD HAVE RECEIVED CONTRIBUTIONS FOR SUCH PARTY AND OUT OF IT MONEY SP ENT MONEY FOR THE WORKING OF THE SAID PARTY. IN ANY CASE, AS POINTED OUT BY LD. CIT( A) AT PARA 2.8 OF HIS ORDER, THERE WAS A 10% DISALLOWANCE OF CLAIM OF EXPENSES FOR EARLIER AYRS. SUCH DISALLOWANCE FOR ITA NO.1295/MDS/10 4 IMPUGNED ASST. YEAR ALONE CAME TO `125509/- AS PER PARA 5.2.8 OF THE ORDER OF THE LD. CIT(A). I F WE CONSIDER IT ALONGWITH THE EARLIER DISALLOWANCE S IT WOULD MORE THAN COVER THE ALLEGED UNEXPLAINED EXPENDITURE OF ` 268450/- FOR POLITICAL ACTIVITY AND ALLEGED CHITTY PAYMENT OF ` 150000/-. WE ARE OF THE OPINION THAT BOTH THESE ADD ITIONS UNDER SEC. 69C WERE NOT WARRANTED IN THE FACTS AND CIRCUM STANCES OF THE CASE. THESE ADDITIONS ARE DELETED. 6. IN THE RESULT APPEAL OF THE ASSESSEE STANDS ALLO WED. ORDER PRONOUNCED IN OPEN COURT ON 25 - 03-2011. .SD/- SD/- (HARI OM MARATHA) (ABRAHAM P. GEORGE) JUDICIAL MEMBER ACCOUNTANT MEMBER CHENNAI: 25TH MARCH, 2011. CC: THE ASSESSEE 2)THE ASSESSING OFFICER 3)THE C IT(A) 4) THE CIT, 5)THE D.R 6)GUARD FILE. NBR ITA NO.1295/MDS/10 5