Shri. P.V. Sita Rama Srinivas, Bangalore V. ITO, Bangalore

ITA 1301/BANG/2012

• Counselvise Citation: [2013] 140 COUNSELVISE.COM (IT) 68276 (ITAT-BANGALORE)
• Duration Of Justice: 10 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-08-2013
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Assessment Year: 2005-2006
• Appeal Filed On: 05-10-2012
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: GANSH RAO A K
• Keywords: Unexplained expenditure; Salary income; Principle of natural justice
• Section: 69C; 142(1); 234B; 144

Judgement Text

ITA NO.1301 OF 2012 PV SITARAM SRINIVAS BANGALORE PAGE 1 OF 8 IN THE INCOME TAX APPELLATE TRIBUNAL BANGALORE B BENCHES, BANGALORE BEFORE SHRI GEORGE GEORGE K. JUDICIAL MEMBER AND SHRI JASON P. BOAZ, ACCOUNTANT MEMBER ITA NO. 1301/BANG/2012 (ASSESSMENT YEAR: 2005-06) P.V. SITA RAMA SRINIVAS NO.180, 3 RD CROSS PANDURANGA NAGAR, BANNERGHATTA ROAD, BANGALORE PAN: ALQPS 2552 L VS. INCOME TAX OFFICER WARD 7(3) BANGALORE (APPELLANT) (RESPONDENT) ASSESSEE BY: SMT. PRATHIBHA R. ADV. DEPARTMENT BY: SHRI GANSH RAO A.K. DR DATE OF HEARING: 31/07/2013 DATE OF PRONOUNCEMENT: 08/08/2013 O R D E R PER GEORGE GEORGE K. J.M. THIS APPEAL OF THE ASSESSEE IS DIRECTED AGAINST TH E ORDER OF THE CIT (A)-LTU, BANGALORE, DATED 28.3.2012. THE R ELEVANT ASSESSMENT YEAR IS 2005-06. 2. THE ASSESSEE HAS, IN HIS MEMORANDUM OF APPEAL, RAISED EIGHT GROUNDS. GROUND NO.7 IS NOT MAINTAINABLE AS CHARGING OF INTEREST U/S 234B AND 234C OF THE ACT IS MANDATORY AND CONSEQUENTIAL IN NATURE. THE REMAINING GROUNDS RELA TE TO TWO MAIN ISSUES, NAMELY: (1) THAT THE CIT (A) ERRED IN CONFIRMING THE EX-PARTE O RDER PASSED BY THE ITO U/S 144 OF THE ACT; & (2) THAT THE CIT (A) ERRED IN TREATING THE EXPENDITURE INCURRED ON CREDIT CARD TRANSACTIONS OF RS.4,02,950 /- AS UNEXPLAINED EXPENDITURE U/S 69C OF THE ACT. ITA NO.1301 OF 2012 PV SITARAM SRINIVAS BANGALORE PAGE 2 OF 8 3. BRIEFLY STATED, THE FACTS OF THE ISS UE ARE AS UNDER: 3.1. THE ASSESSEE IS AN INDIVIDUAL. HE IS A SA LARIED EMPLOYEE OF M/S WIPRO TECHNOLOGIES, BANGALORE. AS COULD BE SEE N FROM THE DETAILS FURNISHED, THE ASSESSEE IS REGULARLY FURNIS HING HIS RETURNS OF INCOME FROM THE ASSESSMENT YEAR 2001-02 ONWARDS WIT H HIS JURISDICTIONAL ASSESSING OFFICER SALARY CIRCLE. IN THE MEANWHILE, THE INCOME-TAX OFFICER (ITO), WARD 7(3), BANGALORE, BAS ED ON AIR INFORMATION ISSUED NOTICE U/S 142(1) OF THE ACT DAT ED 17.9.2007 REQUIRING THE ASSESSEE TO FURNISH A RETURN OF INCOM E. THE AIR INFORMATION WAS WITH REGARD TO CREDIT EXPENDITURE I NCURRED BY THE ASSESSEE. ACCORDING TO ASSESSING OFFICER THE NOTICE U/S 142(1) WAS SERVED ON THE ASSESSEE ON 24.09.2007. AS THERE WAS NO COMPLIANCE, THE ITO, IN HIS LETTERS DATED 23.10.2007 AND AGAIN ON 18.12.2007 WHICH WAS SERVED ON THE ASSESSEE ON 1.11.2007 AND 2 9.12.2007 RESPECTIVELY, REQUESTED THE ASSESSEE TO FILE HIS RE TURN OF INCOME ETC. AS THERE WAS AGAIN NO COMPLIANCE, THE ITO CONCLUDED THE ASSESSMENT U/S 144 OF THE ACT ON 31.12.2007, TREATI NG THE CREDIT CARD TRANSACTION, AMOUNTING TO RS.4.02 LAKHS AS UNE XPLAINED EXPENDITURE U/S 69C OF THE ACT. 4. AGGRIEVED, THE ASSESSEE TOOK UP THE ISSUE BEFOR E THE THEN CIT (A) FOR RELIEF. THE THEN CIT (A)-III VIDE THEIR LETTERS DATED 9.3.2009 AND AGAIN ON 23.2.2011 REQUIRED THE ITO, W ARD 7(3) TO FURNISH HIS COMMENTS (REMAND REPORT), IF ANY, ON TH E BASIS OF THE DETAILS FURNISHED BY THE ASSESSEE ETC. HOWEVER, IT APPEARS THAT THERE WAS NO RESPONSE FROM THE ITO CONCERNED. IN THE MEA NWHILE, THE ASSESSEES APPEAL WAS TRANSFERRED TO THE CIT (A)-LT U, BANGALORE FOR FURTHER ACTION. ITA NO.1301 OF 2012 PV SITARAM SRINIVAS BANGALORE PAGE 3 OF 8 4.1. THE CIT (A)-LTU, DISMISSED THE ASSES SEES APPEAL AFTER HAVING CONSIDERED THE EXPLANATION OFFERED BY THE AS SESSEE DURING THE COURSE OF APPELLATE PROCEEDINGS. THE RELEVANT P ORTIONS OF HER FINDINGS ARE EXTRACTED AS UNDER: 4.1 DESPITE.ON THE OTHER HAND, THE APPELLANT FILED COPIES OF THE ACKNOWLEDGMENTS FOR H AVING FILED HIS RS/I FOR AYS 2003-04, 2004-05 & 2005-06 W HICH CONTAINED THE FOLLOWING PARTICULARS: S.NO A.Y DATE OF FILING R/I AO BEFORE WHOM FILED INCOME DECLARED (IN RS.) 01. 2003-04 26.9.2003 ACIT, C 14(2) 8,88,640 02 2004-05 26.7.2004 ITO W-14(4) 6,00,660 03 2005-06 30.7.2005 ITO W 14(7) 7,62,580 AS PER THE COPY OF THE FORM 16 FILED ALONG WITH THE R/I FOR AY 2005-06, IT IS APPARENT THAT THE APPELLANT E ARNED INCOME FROM SALARY AS AN EMPLOYEE OF M/S WIPRO TECHNOLOGIES WHICH WAS HIS ONLY SOURCE OF INCOME DURING THESE YEARS. 4.1.1. INCIDENTALLY, THE MERE FACT OF FILING RS/I DOES NOT AUTOMATICALLY LEAD TO THE PRESUMPTION THAT THE EXPENDITURE INCURRED ON CREDIT CARD TRANSACTIONS CONSTITUTED INCOME ON WHICH TAX HAD ALREADY BEEN PA ID. THE APPELLANT HAS FAILED TO DISCHARGE HIS PRIMARY O NUS IN ESTABLISHING THE NEXUS BETWEEN THE EXPENDITURE INCURRED ON CREDIT CARD TRANSACTIONS EFFECTED DURIN G FY RELEVANT FOR AY 2005-06 AND THE INCOME EARNED BY HI M. IT IS ALSO AN IRREFUTABLE FACT THAT THE APPELLANT H AS NOWHERE DENIED THAT THE SAID NOTICES/LETTERS WERE N OT SERVED ON HIM. THE APPELLANT HAS SIMULTANEOUSLY FA ILED TO ESTABLISH THAT AN EXPLANATION AS TO THE SOURCE O UT OF WHICH THE EXPENDITURE ON CREDIT CARD TRANSACTIONS W AS MET HAD BEEN ACTUALLY FILED BEFORE THE AO. IN FACT , THE AO HAS GONE A STEP FURTHER BY ISSUING A SHOW-CAUSE LETTER DT. 18.12.2007 WHICH WAS SERVED ON THE APPEL LANT ON 29.12.2007 PROPOSING TO COMPLETE THE ASSESSMENT IN AN EX-PARTE MANNER U/S 144 BY TREATING THE EXPENDIT URE INCURRED ON CREDIT CARD TRANSACTIONS TO THE TUNE OF RS.4,02,950/- AS UNEXPLAINED EXPENDITURE U/S 69C THEREBY AFFORDING THE APPELLANT AN OPPORTUNITY TO COUNTER OR REBUT ANY ADVERSE MATERIAL THAT THE AO M AY ITA NO.1301 OF 2012 PV SITARAM SRINIVAS BANGALORE PAGE 4 OF 8 HAVE RELIED UPON BEFORE MAKING THE BEST JUDGMENT ASSESSMENT. IN MY CONSIDERED OPINION, THE PRINCIPL ES OF NATURAL JUSTICE HAVE BEEN CLEARLY UPHELD BY THE AO AND THE CONDITIONS OF THE PROVISO TO SEC. 144(1) HAVE B EEN OBVIOUSLY FULFILLED BY THE AO. CONSEQUENTLY, DUE T O THE APPELLANTS FAILURE TO COMPLY WITH ANY OF THE NOTICES/LETTERS WHICH WERE CLEARLY SERVED ON HIM DU RING THE EX-PARTE PROCEEDINGS AND HIS INABILITY TO SUBSTANTIATE HIS CLAIM THAT HIS A R HAD FILED AN EXPLANATION BEFORE THE AO REGARDING THE SOURCE OF T HE EXPENDITURE INCURRED ON CREDIT CARD TRANSACTIONS TO THE TUNE OF RS.4,02,950/- AND ON THE BASIS OF THE FACTU AL POSITION CLEARLY ELUCIDATED ABOVE, I HAVE NO OTHER OPTION BUT TO UPHOLD THE AOS STAND IN TREATING THE SUM OF RS.4.02,950/- AS UNEXPLAINED EXPENDITURE U/S 69C. 5. AGGRIEVED, THE ASSESSEE HAS COME U P BEFORE US WITH THE PRESENT APPEAL. THE SUBMISSIONS MADE BY THE LEARNE D AR ARE SUMMARIZED AS UNDER: - THAT THE EX-PARTE ORDER CONFIRMED BY THE CIT (A) IS OPPOSED TO LAW AND TO THE PRINCIPLES OF NATURAL JUSTICE AND, T HUS, LIABLE TO BE CANCELLED; - THAT WITHOUT PREJUDICE, THE CIT (A) OUGHT TO HAV E APPRECIATED THAT THE ASSESSEE WAS PREVENTED BY SUFFICIENT CAUSE IN RESPONDING TO THE NOTICES ISSUED AND SERVED ON THE ASSESSEE AFTER THE EXPIRY OF INTENDED DATE AND THUS THE CIT (A) OUGHT TO HAVE REFRAINED FROM CONFIRMING THE EX-PARTE ORDER; - THAT THE CIT (A) ERRED IN TREATING THE EXPENDITUR E INCURRED ON CREDIT CARD TRANSACTION TO THE TUNE OF RS.4.02 LAKH S AS UNEXPLAINED EXPENDITURE U/S 69C OF THE ACT; - THAT THE CIT (A) OUGHT TO HAVE APPRECIATED THAT ALL THE TRANSACTIONS WERE FULLY VERIFIABLE AND HAD THERE BE EN A PROPER OPPORTUNITY, THE ASSESSEE WOULD HAVE SATISFIED WITH ALL EVIDENCE TO JUSTIFY THE CLAIM OF DEDUCTION; - THAT WITHOUT PREJUDICE, THE CIT (A) OUGHT TO HAVE APPRECIATED THAT THE PAYMENT MADE TOWARDS CREDIT CARD WAS NOTHI NG BUT A BORROWALS FROM BANK AND AS PER THEIR AGREEMENT THE SAME HAS TO BE REMITTED BACK. THUS, IF THE ASSESSEE HAS GOT SUFFICIENT OPPORTUNITY, THEN HE WOULD HAVE GIVEN AL L THE DETAILS BEFORE THE ASSESSING AUTHORITY AND, THEREFO RE, THE SAID ADDITION CONFIRMED BY THE CIT (A) REQUIRE TO BE DEL ETED. ITA NO.1301 OF 2012 PV SITARAM SRINIVAS BANGALORE PAGE 5 OF 8 5.1. TO SUBSTANTIATE THE ASSESSEES CLA IMS, THE LEARNED AR HAD FURNISHED A PAPER BOOK WHICH CONTAINED, INTER A LIA, COPIES OF (I) BANK STATEMENTS ; (II) RETURNS OF INCOME FOR THE AY S FROM 2000-01 TO 2006-07 ETC., 5.2. ON THE OTHER HAND, THE LEARNED D R SUPPORTED THE STAND OF THE ITO AS WELL AS THE CIT (A) ON THE ISSUE. IT WAS, FURTHER, SUBMITTED THAT SINCE THE ASSESSEE HAD FAILED TO RES POND TO THE STATUTORY NOTICES OF THE ITO, THE ITO WAS JUSTIFIED IN CONCLUDING THE ASSESSMENT U/S 144 OF THE ACT. THE LEARNED D R ALS O SUPPORTED THE FINDINGS OF THE CIT (A) THAT THE ASSESSEE HAD FAILE D TO PRODUCE ANY EVIDENCE TO PROVE THE SOURCE OF EXPENDITURE INCURRE D BEFORE FINALIZATION OF THE ASSESSMENT. IT WAS, THEREFORE, PLEADED THAT THE STAND OF THE AUTHORITIES BELOW REQUIRES TO BE SUSTA INED. 6. WE HAVE CAREFULLY CONSIDERED THE CON TENTIONS OF THE EITHER PARTY AND DULY PERUSED THE RELEVANT CASE RECORDS. ON RECEIPT OF AIR INFORMATION THAT THE ASSESSEE HAD SPENT AN EXPENDIT URE OF RS.4.02 LAKHS THROUGH HIS CREDIT CARD TRANSACTIONS, THE ITO , WARD 7(3) HAD ISSUED A NOTICE U/S 142(1) OF THE ACT, REQUIRING TH E ASSESSEE TO FURNISH HIS RETURN OF INCOME FOR THE RELEVANT PERIO D SO AS TO FACILITATE HIM TO SCRUTINIZE AS TO WHETHER THE EXPE NSES HAVE BEEN DULY ACCOUNTED FOR. AS THERE WAS NO COMPLIANCE FROM THE ASSESSEE WHATSOEVER IN SPITE OF REPEATED REMINDERS ETC., THE ITO WAS APPARENTLY LEFT WITH NO ALTERNATIVE, BUT, TO CONCLU DE THE ASSESSMENT U/S 144 OF THE ACT BY TREATING THE CREDIT CARD TRAN SACTIONS OF RS.4.02 LAKHS AS ALLEGED UNEXPLAINED INCOME OF THE ASSESSEE U/S 69C OF THE ACT. THE ASSESSEE, EVEN AT THIS STAGE, HAD FAILED TO PRODUCE ANY CREDIBLE DOCUMENTARY EVIDENCE TO SHOW T HAT HE HAD, IN FACT, RESPONDED TO THE ITOS QUERIES BY FURNISHING THE RELEVANT PARTICULARS. TO THAT EXTENT, WE ARE OF THE CONSIDE RED VIEW, THE ITO, ITA NO.1301 OF 2012 PV SITARAM SRINIVAS BANGALORE PAGE 6 OF 8 WARD 7(3) WAS WITHIN HIS REALM TO CONCLUDE THE ASSE SSMENT U/S 144 OF THE ACT. THEREFORE, THE ASSESSEES PLEA THAT TH E CIT (A)S STAND IN CONFIRMING THE EX-PARTE ORDER OF THE ITO IS OPPOSED TO LAW ETC., DOESNT STAND THE TESTIMONY OF LAWS. ACCORDINGLY, THIS PLEA OF THE ASSESSEE DESERVES TO BE REJECTED. 6.1. WE SHALL NOW ANALYSE AS TO WHETHER THE CIT (A ) WAS JUSTIFIED IN HER STAND IN DISMISSING THE ASSESSEES APPEAL IN ITS ENTIRETY. ADMITTEDLY, THE CIT (A) HERSELF HAD CONCE DED THAT THE ASSESSEE IN FACT, FURNISHED HIS RETURNS OF INCOME F ROM THE ASSESSMENT YEAR 2001-02 WITH HIS JURISDICTIONAL ASS ESSING OFFICER (S) SALARY CIRCLE AS HIS ONLY SOURCE OF INCOME BEIN G SALARY. THUS, THE ASSESSEES SOURCE OF INCOME AND EXPENDITURE CLA IM IS SUBJECTED TO SCRUTINY BY THE RESPECTIVE JURISDICTIONAL AO(S). WHEN THE CIT (A) WAS FULLY CONVINCED THAT THE ASSESSEE WAS A SALARIE D EMPLOYEE AND WAS REGULARLY FILING HIS RETURNS OF INCOME WITH THE JURISDICTIONAL ASSESSING OFFICER (S), WHAT PROMPTED THE CIT (A) TO PURSUE THE EX- PARTE ORDER OF THE ITO AND TO HOLD AGAINST THE ASSE SSEE IS QUITE SURPRISING. NO DOUBT, THE ASSESSEE OUGHT TO HAVE C OMPLIED WITH THE QUERIES MADE BY THE ITO, WARD 7(3). HAD THE ASSES SEE RESPONDED TO THE STATUTORY NOTICES BY FURNISHING THE RELEVANT PARTICULARS, SUCH AS, HIS SOURCE OF INCOME, THE JURISDICTIONAL ASSESS ING OFFICER WITH WHOM HE HAS BEEN FILING HIS RETURNS OF INCOME ETC., THE WHOLE UNNECESSARY FUTILE EXERCISE COULD HAVE BEEN AVOIDED THEN AND THERE ITSELF. 6.2. ON MERITS THE ASSESSEES CLAIM IS ON SOUND FOOTING. ON PERUSAL OF ASSESSEES EXPENSES INCURRED BY CREDIT C ARD, WE FIND THAT THE SAME WERE PAID THROUGH ACCOUNT PAYEE CHEQUES DR AWN ON ASSESSEES CITI BANK AND ICICI BANK ACCOUNTS. THE S TATEMENT OF ASSESSEES BANK ACCOUNT WITH CITI BANK AND ICICI BA NK CLEARLY REFLECT THE SAID PAYMENTS. THE ASSESSEES BANK STAT EMENTS ARE ITA NO.1301 OF 2012 PV SITARAM SRINIVAS BANGALORE PAGE 7 OF 8 ENCLOSED AT PAGE 7 TO 17 OF THE PAPER BOOK FILED BY THE ASSESSEE. THE PAYMENTS MADE FOR CREDIT CARD EXPENDITURE FROM ASSESSEES CITI BANK A/C AMOUNTS TO RS.3,00,088 WHEREAS FROM ICICI BANK A/C IS TO THE TUNE OF RS.1,04,673. THE DETAILS OF THE ABOV E SAID PAYMENTS ARE AS FOLLOWS: CITI BANK: A/C NO.5118829807 DATE CHEQUE NO. AMOUNT (RS.) 18.03.2004 662110 9,453 18.03.2004 662109 29,100 20.05.2004 805191 513 20.05.2004 805192 8,804 22.05.2004 805193 40,733 17.06.2004 805195 405 20.07.2004 805205 18,902 23.08.2004 805209 13,866 30.08.2004 805215 76,712 23.10.2004 805228 1,600 12.11.2004 805237 28,800 16.11.2004 805239 21,660 15.02.2005 345952 13,114 15.03.2005 345978 17,905 19.04.2005 345981 18,491 3,00,088 ICICI BANK: A/C NO.000201002302 DATE CHEQUE NO. AMOUNT (RS.) 17.06.2004 132715 24,325 20.07.2004 132716 8,945 23.09.2004 132719 850 23.09.2004 132720 1,600 25.09.2004 132718 22,517 26.10.2004 132722 25,238 02.11.2004 132723 2,858 16.11.2004 132724 16,730 18.12.2004 117577 1,610 1,04,673 GRAND TOTAL: 4,04,761 7. TAKING INTO ACCOUNT THE FACTS OF THE IS SUE AS DISCUSSED ABOVE, WE ARE OF THE CONSIDERED VIEW THAT THE EXPEN DITURE MADE ITA NO.1301 OF 2012 PV SITARAM SRINIVAS BANGALORE PAGE 8 OF 8 THROUGH CREDIT CARDS IS OUT OF TAX SUFFERED INCOME AND THE CIT (A) WAS NOT JUSTIFIED IN UPHOLDING THE STAND OF THE AO IN TREATING THE SUM OF RS.4.02 LAKHS AS UNEXPLAINED EXPENDITURE U/S 69C OF THE ACT. IN SUBSTANCE, THE ASSESSEE GETS A RELIEF OF RS .4.02 LAKHS. 8. IN THE RESULT, THE ASSESSEES APPEA L IS PARTLY ALLOWED. ORDER PRONOUNCED AT THE END OF THE HEARING ON 8 TH AUGUST, 2013. SD/- SD/- (JASON P. BOAZ) (GEORGE GEORGE K) ACCOUNTANT MEMBER JUDICIAL MEMBER BANGALORE, DATED 8 TH AUGUST, 2013. VNODAN/SPS COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CONCERNED CIT(A) 4. THE CONCERNED CIT 5. THE DR, ITAT, BANGALORE BY ORDER SENIOR PRIVATE SECRETARY INCOME TAX APPELLATE TRIBUNAL, BANGALORE BENCHES, BANGALORE