Shri.T.S.Ranjit Kumar, Bangalore V. ITO, Ward-14(5), Bangalore

ITA 1307/BANG/2016

• Counselvise Citation: [2018] 126 COUNSELVISE.COM (IT) 5661 (ITAT-BANGALORE)
• Duration Of Justice: 1 year(s) 6 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-01-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Next Hearing Date: 14-03-2017
• Assessment Year: 2010-2011
• Appeal Filed On: 08-07-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: DR G MANOJ KUMAR
• Assessee Lawyers: G S PRASHANTH
• Keywords: Unexplained investment; Business income; Opportunity of being heard
• Section: 69

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL SMC-C BENCH : BANGALORE BEFORE SHRI ARUN KUMAR GARODIA, ACCOUNTANT MEMBER ITA NO. 1307 / BANG/201 6 ASSESSMENT YEAR : 20 1 0 - 11 SHRI T.S. RANJIT KUMAR, NO. 9/1, 2 ND FLOOR, 4 TH B CROSS, INDUSTRIAL TOWN, RAJAJINAGAR, BANGALORE 560 010. PAN: AEDPT 9512P VS. THE INCOME TAX OFFICER, WARD 14(5), BANGALORE. APPELLANT RESPONDENT APPELLANT BY : SHRI G.S. PRASHANTH, CA RESPONDENT BY : DR. G. MANOJKUMAR, ADDL. CIT (DR) DATE OF HEARING : 1 1 .01.2018 DATE OF PRONOUNCEMENT : 19 .0 1 .201 8 O R D E R PER SHRI A.K. GARODIA, ACCOUNTANT MEMBER THIS APPEAL IS FILED BY THE ASSESSEE WHICH IS DIREC TED AGAINST THE ORDER OF LD. CIT(A) 5, BANGALORE DATED 28.04.2016 FOR ASSESSME NT YEAR 2010-11. 2. THE GROUNDS RAISED BY THE ASSESSEE ARE AS UNDER. THE APPELLANT FILED HIS RETURN OF INCOME FOR THE AS ST. YR. 2010-11 ON 30/07/2010 DECLARING TOTAL INCOME OF RS.2.58,530/-. THE SAID RETURN WAS PROCESSED U/S.143(1) ON 19/07/2011. THE CASE WA S SELECTED FOR SCRUTINY. THE ASSESSMENT WAS CONCLUDED BY THE I.T.O WARD-14(5) U/S.143(3) ON 28/03/2013 DETERMINING THE TOTAL INCO ME AT RS.11,81,890/- THEREBY MAKING THE FOLLOWING TWO ADD ITIONS: 1. RS.2,28,460/- BEING 8% OF BUSINESS RECEIPTS OF RS.2 8,55,200/- BROUGHT TO TAX U/S.44AF OF THE ACT AS THE BUSINESS INCOME AND 2. RS.2,25,045/- BEING PAYMENTS MADE AGAINST CREDIT CA RD BILLS WITH DEUTSCHE BANK TREATING IT AS UNEXPLAINED INCOM E FROM OTHER SOURCES BEING AGGRIEVED BY THE ABOVE ACTION OF THE AO, THE APPELLANT PREFERRED AN APPEAL U/S.246A(1)(A) OF THE ACT BEFOR E THE CIT ITA NO.1307/BANG/2016 PAGE 2 OF 7 (APPEALS) AND THE CIT(APPEALS)-V, BANGALORE VIDE HI S ORDER IN ITA NO.78/SAL/CIT(A)-5/2013-14 DATED 28/04/2016 ENHANCE D THE INCOME BY DIRECTING THE AO TO TREAT ENTIRE CASH DEPOSIT U/ S.44AF AS INCOME UNEXPLAINED APART FROM TREATING THE CASH DEPOSIT OF RS.28,55,200/- AS UNEXPLAINED U/S.69 OF THE ACT, ON THE PREMISE THAT THE APPELLANT WAS NOT AT ALL CARRYING ANY BUSINESS AND CONSEQUENTLY T HE PROVISIONS OF SEC.44AF WAS NOT ATTRACTED. BEING AGGRIEVED BY THE ABOVE ACTION OF THE CIT(APPE ALS), THE APPELLANT PREFERS THIS APPEAL U/S.253(1)(A) OF THE ACT ON THE FOLLOWING AMONG OTHER GROUNDS OF APPEAL. 1. THE IMPUGNED ORDER IS ILLEGAL. IMPROPER, INJURED AN D MUCH AGAINST ALL CANONS OF LAW. 2. THE CIT (APPEALS) AT PARAGRAPH 5 (PAGE 6) OF HIS OR DER HA STATED AS UNDER: 'THEREFORE, BY VIRTUE OF POWER U/S. 251 (2). 1 HERE BY PROPOSE TO ENHANCE THE INCOME BY TREATING THE BALANCE CASH DEP OSIT AS UNEXPLAINED AND ASSESSED U/S. 69 OF THE ACT'. 3. SEC.251(2) STATES AS UNDER: THE CIT(APPEALS) SHALL NOT ENHANCE AN ASSESSMENT O R A PENALTY FULL UNLESS THE APPELLANT HAS HAD REASONABLE OPPORT UNITY OF SHOWING CAUSE AGAINST SUCH ENHANCEMENT.' IN THE INSTANT CASE. THE CIT(APPEALS) HAS NEVER WHI SPERED OR ISSUED ANY SHOW CAUSE NOTICE PROPOSING TO ENHANCE THE INCO ME ASSESSED. THUS, ON THIS VERY COUNT ITSELF THE APPEL LATE ORDER REQUIRES TO BE ANNULLED. 4. THE CIT(APPEALS) HAS FURTHER HELD THAT THE AO OUGHT NOT TO HAVE INVOKED THE PROVISIONS OF SEC.44AF OF THE ACT. IN T HIS CONNECTION, THE AO IN HER ORDER CLEARLY STATED THAT THE BALANCE UNEXPLAINED CASH DEPOSITS IS TREATED AS ASSESSEE'S BUSINESS RECEIPTS U/S.44AF OF THE ACT 1961 AND 8% OF SUCH RE CEIPTS IS BROUGHT TO TAX AS ASSESSEE'S BUSINESS INCOME (PARAG RAPH 6 OF ASSESSMENT ORDER). 5. IN OTHER WORDS THE APPELLANTS EXPLANATION THAT HE H AS EXPLAINED HIS SOURCES WERE CASH DEPOSITS BY WAY OF CONFIRMATI ON BEING RECEIPTS FROM FRIENDS AS OUT OF EARLIER WITHDRAWALS AND THE BALANCE AMOUNT OF CASH DEPOSITS MAY BE ADOPTED ON T AX HAS BEEN ACCEPTED BY THE AO. IN THIS VIEW OF THE MATTER , THE CIT'S OPINION FORMED WITHOUT EVEN PROVIDING AN OPPORTUNIT Y TO EXPLAIN AS TO HOW THIS WILL NOT AMOUNT TO BUSINESS ACTIVITY IS IMPROPER. 6. THE APPELLANT HAS PAID APPEAL FEES OF RS.10,000/- V IDE CHALLAN ENCLOSED. ITA NO.1307/BANG/2016 PAGE 3 OF 7 7. WITHOUT PREJUDICE TO THE ABOVE, THE APPELLANT SUBMITS THAT THE CIT'S OPINION THAT SEC.69 ATTRACTE D IS ILLEGAL SINCE THE RECEIPTS HAVE BEEN EXPLAINED DULY SUPPORT ED BY CONFIRMATION LETTERS ON WHOSE BEHALF THE APPELLANT HAS CARRIED ON THESE TRANSACTIONS. HOWEVER, SOLELY WITH THE INT ENTION OF PURCHASING PEACE AND TO AVOID PROTRACTED LITIGATION , THE APPELLANT HAS AGREED FOR ADOPTION OF 8% NET PROFIT. 8. WHEREFORE, THE APPELLANT PRAYS THAT FOR THE REASONS STATED ABOVE AND WHICH ARE GOING TO BE URGED AT THE TIME O F HEARING. THIS AUTHORITY MAY BE PLEASED TO ANNUL THE 1 ST APPELLATE ORDER AND DIRECTING THE AO TO ACCEPT THE INCOME RETURNED IN THE INTEREST OF JUSTICE AND EQUITY. 3. BRIEF FACTS ARE THAT THE ASSESSEE FILED RETURN O F INCOME ON 30.07.2010 DECLARING A TOTAL INCOME OF RS. 2,58,530/-. THE CASE WAS TAK EN UP FOR SCRUTINY UNDER CASS AND ACCORDINGLY, NOTICE U/S. 143(2) WAS ISSUED BY THE AO AND SERVED ON THE ASSESSEE. FURTHER NOTICE U/S. 142 (1) WAS ISSU ED BY THE AO AND IT WAS ALSO SERVED ON ASSESSEE. IT IS NOTED BY THE AO IN PARA NO. 5 OF THE ASSESSMENT ORDER THAT THE ASSESSEE APPEARED ON 28.03.2013 AND FURNISHED A LETTER STATING THAT SINCE HE HAD EXPLAINED SOURCES FOR THE CASH DE POSITS BY WAY OF CONFIRMATION FROM FRIENDS TO THE EXTENT OF RS. 9,92 ,408/- AND RS. 16,42,075/- AS OUT OF EARLIER WITHDRAWALS, THE BALANCE AMOUNT OF U NEXPLAINED CASH DEPOSITS OF RS. 17,05,162/- MAY BE TREATED AS BUSINESS RECEIPTS U/S. 44AF OF THE IT ACT AND A NET PROFIT AT 8% MAY BE ADOPTED AND TAXED. IN TH E SUBSEQUENT PARA, THE AO HAS STATED THAT IN RESPECT OF CASH DEPOSITS IN CITI BANK, N.A., OUT OF THE TOTAL CASH DEPOSITS OF RS. 17,92,800/-, CASH DEPOSITS STA NDS EXPLAINED AS OUT OF EARLIER WITHDRAWALS TO THE EXTENT OF RS. 5.31 LAKHS AND THE BALANCE UNEXPLAINED CASH DEPOSITS WITH CITI BANK N.A. IS RS. 12,61,800/ -. 4. REGARDING CASH DEPOSIT IN ICICI BANK, IT IS NOTE D BY AO THAT OUT OF RS. 22,50,900/- BEING TOTAL CASH DEPOSITS, RS. 6,57,500 /- STANDS EXPLAINED AS OUT OF EARLIER WITHDRAWALS AND HENCE, THE BALANCE UNEXPLAI NED CASH DEPOSITS WITH ICICI BANK IS RS. 15,93,400/-. THEREAFTER, THE AO HAS NOTED IN PARA NO. 6.3 OF THE ASSESSMENT ORDER THE NAMES OF TEN PERSONS ALONG WITH THEIR PAN FROM WHOM THE ASSESSEE HAS FURNISHED CONFIRMATION IN RES PECT OF RECEIPT OF MONEY OF RS. 9,92,043/-. THEREAFTER, IN THE NEXT PARA, H E HAS STATED THAT OUT OF THESE ITA NO.1307/BANG/2016 PAGE 4 OF 7 CONFIRMATIONS, CASH CONFIRMATIONS ARE ONLY TO THE E XTENT OF RS. 3,25,789/- AND THE ASSESSEE HAS MERELY FURNISHED THE NAMES OF THE LENDERS ALONG WITH PAN WITHOUT FURNISHING ANY EVIDENCE AS TO HOW THE ABOVE PERSONS HAVE SOURCED THESE FUNDS. IN THIS MANNER, THE AO HELD IN PARA N O. 6.4 OF ASSESSMENT ORDER THAT OUT OF THE TOTAL CASH DEPOSITS OF RS. 40,43,70 0/- WITH ICICI BANK AND CITI BANK N.A., THE ASSESSEE HAS EXPLAINED SOURCES TO TH E EXTENT OF RS. 11,88,500/- AND HE HAS HELD THAT BALANCE AMOUNT IS UNEXPLAINED CASH DEPOSITS OF RS. 28,55,200/-. THE AO MADE AN ADDITION OF RS. 2,28,4 16/- U/S. 44AF OF THE IT ACT AT THE RATE OF 8% ON THIS AMOUNT OF ALLEGED UNEXPLA INED CASH DEPOSIT IN BANK. 5. IN ADDITION TO THIS, THE AO HAS MADE ADDITION OF RS. 2,95,045/- IN RESPECT OF EXPENDITURE INCURRED THROUGH CREDIT CARD BILLS WITH DEUTSCHE BANK AG STATING THAT THE ASSESSEE HAS NOT FURNISHED A PROPER COPY O F THE STATEMENT NOR EXPLAINED THE SOURCES. BEING AGGRIEVED WITH THESE TWO ADDITIONS, THE ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE CIT(A). BEFORE CIT(A), THIS CONTENTION WAS ALSO RAISED THAT ONCE THE ASSESSEE HAS FURNISHED PA N AND NAMES, THE ONUS CAST ON THE ASSESSEE IS DISCHARGED AND THE AO OUGHT TO HAVE EXAMINED FURTHER GENUINENESS AND CREDIT WORTHINESS OF SUCH PARTIES, IF DOUBTED. IN SPITE OF THIS, LD. CIT(A) HAS NOT GIVEN ANY FINDING ON THIS ASPECT OF THE MATTER THAT HOW THE EXPLANATION GIVEN BY THE ASSESSEE BY FILING CONFIRM ATION OF VARIOUS PERSONS ALONG WITH THEIR PAN IS NOT ACCEPTABLE AS EXPLANATI ON OF SOURCES OF CASH DEPOSIT IN BANK. THE LD. CIT(A) HAS HELD IN PARA N O. 7 OF ITS ORDER THAT THE ASSESSEE BEING A SALARIED EMPLOYEE WITH M/S. THOMAS REUTERS, IT IS SURPRISING TO SEE THAT THE AO TREATED THE BALANCE UNEXPLAINED CASH DEPOSITS IN THE BANK AS BUSINESS INCOME, COMPUTING PROFITS AND GAINS U/S . 44AF OF THE ACT AS IF THERE WAS RETAIL BUSINESS CARRIED OUT BY THE ASSESS EE, INSTEAD OF TREATING THE BALANCE CASH DEPOSITS OF RS. 28,55,200/- AS UNEXPLA INED U/S. 69 OF THE IT ACT. HE HAS FURTHER STATED THAT THE AO BY JUST PRESUMING THAT THE ASSESSEE IS ENGAGED IN SOME BUSINESS ACTIVITY AND THEREBY INVOK ING THE PROVISIONS U/S. 44AF HAS ACCEPTED THIS AMOUNT AS BUSINESS RECEIPTS AND ADDED ONLY 8% THEREOF U/S 44AF.. HE HAS FURTHER NOTED THAT IN TH E APPELLATE PROCEEDINGS, THE ASSESSEE WAS ASKED AS TO WHETHER HE WAS CARRYING OU T ANY BUSINESS IN THE YEAR UNDER CONSIDERATION, THE ASSESSEE DENIED FOR H AVING DONE ANY BUSINESS. ITA NO.1307/BANG/2016 PAGE 5 OF 7 THE LD. CIT(A) HAS FURTHER NOTED IN PARA NO. 6 OF H IS ORDER THAT NOTICE WAS ISSUED TO THE ASSESSEE TO EXPLAIN AS TO WHY THE ASS ESSMENT SHOULD NOT BE ENHANCED. THEREAFTER, HE ENHANCED THE ASSESSMENT B Y MAKING ADDITION OF RS. 28,55,200/- AS UNEXPLAINED INVESTMENT U/S. 69 OF TH E IT ACT. IN ADDITION TO THIS, ADDITION MADE BY THE AO OF RS. 2,28,416/-, THERE IS NO FINDING GIVEN BY HIM REGARDING THE OBJECTION OF THE ASSESSEE IN RESPECT OF ADDITION MADE IN RESPECT OF CREDIT CARD PAYMENTS AND RECEIPT ON ACCOUNT OF S ECURED LOAN FROM SEVERAL PERSONS FROM WHOM CONFIRMATION WITH PAN WAS FILED B EFORE THE AO. NOW THE ASSESSEE IS IN FURTHER APPEAL BEFORE THE TRIBUNAL. 6. AT THE VERY OUTSET, IT WAS SUBMITTED BY LD. AR O F ASSESSEE THAT EVEN AS PER THE ORDER OF CIT(A), SHRI N. SURYANARAYANA THE LD. AR O F ASSESSEE HAD APPEARED BEFORE THE CIT(A). HE SUBMITTED THAT MR. SURYANARA YANA HAS EXPIRED ON 19.02.2017 AND THE ASSESSEE IS NOT AWARE AS TO WHET HER ANY NOTICE U/S. 251 WAS SERVED BY CIT(A) ON HIM BUT NO SUCH NOTICE WAS SERVED ON THE ASSESSEE. HE SUBMITTED AN AFFIDAVIT OF THE ASSESSEE DATED 09. 01.2018 IN WHICH IT IS STATED BY THE ASSESSEE THAT THE CIT(A) HAS STATED IN HIS O RDER DATED 28.04.2016 THAT THE SHOW CAUSE NOTICE FOR ENHANCEMENT OF ASSESSMENT WAS ISSUED AND THAT THE ASSESSEE HAS MADE SUBMISSIONS IN RESPONSE TO TH E SAME. THE ASSESSEE HAS FURTHER STATED IN THE AFFIDAVIT THAT HE IS NOT AWARE OF THE NOTICES RECEIVED AND REPLIES FILED BY THE LD. AR OF ASSESSEE. BUT N O SUCH NOTICE WAS SERVED ON THE ASSESSEE PERSONALLY. HE HAS FURTHER STATED THA T HE WAS ONLY SIGNING THE REPLIES BY LATE SHRI SURYANARAYANA AND HE IS NOT AW ARE ABOUT THE CONTENTS OF THE REPLIES FILED BY HIM BEFORE CIT(A). THE LD. AR OF ASSESSEE SUBMITTED THAT UNDER THESE FACTS, IN THE INTEREST OF JUSTICE, THE MATTER MAY BE RESTORED BACK TO THE FILE OF AO FOR FRESH DECISION AFTER PROVIDING A DEQUATE OPPORTUNITY OF BEING HEARD TO ASSESSEE SO THAT THE ASSESSEE CAN BRING TH E REQUIRED MATERIAL ON RECORD AND ISSUE MAY BE DECIDED AFTER CONSIDERING A LL THOSE MATERIALS. THE LD. DR OF REVENUE SUPPORTED THE ORDER OF CIT(A). 7. I HAVE CONSIDERED THE RIVAL SUBMISSIONS. I FIND THAT AS PER THE ORDER OF CIT(A), SHRI SURYANARAYANA THE LD. AR OF ASSESSEE HAS APPEA RED BEFORE CIT(A) IN THE COURSE OF APPELLATE PROCEEDINGS. AS PER THE AFFIDA VIT OF THE ASSESSEE BROUGHT ITA NO.1307/BANG/2016 PAGE 6 OF 7 ON RECORD BY THE LD. AR OF ASSESSEE, THE SAID AR SH RI SURYANARAYANA HAD EXPIRED ON 19.02.2017 AND AS PER THE ASSESSEE, HE I S NOT AWARE ABOUT ANY ENHANCEMENT NOTICE ISSUED AND SERVED BY CIT(A) BECA USE THE SAME WAS NOT SERVED ON HIM PERSONALLY AND IF IT IS SERVED ON LAT E SHRI SURYANARAYANA, THE ASSESSEE WAS NOT AWARE ABOUT THAT. IT IS ALSO SEEN THAT NO CATEGORICAL FINDING IS GIVEN BY CIT(A) REGARDING THE CLAIM OF THE ASSES SEE THAT AN AMOUNT OF RS. 9,92,043/- IS RECEIVED BY HIM AS LOAN FROM TEN VARI OUS PERSONS OF WHOM THE NAME AND PAN IS AVAILABLE ON PAGE NO. 3 OF THE ASSE SSMENT ORDER AND OUT OF THAT, ONLY RS. 3,25,789/- HAS BEEN ACCEPTED BY THE AO WITHOUT MAKING ANY FURTHER ENQUIRY FROM THE CONCERNED PERSONS, HE HAS REJECTED THE CLAIM OF THE ASSESSEE REGARDING THE RECEIPT OF LOAN FROM THESE P ERSONS. CONSIDERING THE FACTS OF THE PRESENT CASE IN ITS ENTIRETY AND IN TH E INTEREST OF JUSTICE, I FEEL IT PROPER TO RESTORE THE ENTIRE MATTER BACK TO THE FIL E OF AO FOR FRESH DECISION AND ACCORDINGLY, I SET ASIDE THE ORDER OF CIT(A) AND RE STORE THE ENTIRE MATTER BACK TO THE FILE OF AO FOR FRESH DECISION. THE ASSESSEE HA S TO BRING THE EVIDENCE ON RECORD IN SUPPORT OF ITS EXPLANATION REGARDING SOUR CES OF CASH DEPOSIT IN THE BANK IN THE FORM OF EARLIER WITHDRAWALS FROM BANK I N AND THE FORM OF RECEIPT OF VARIOUS LOANS FROM VARIOUS PERSONS. IF ANY CLAIM I S NOT ACCEPTED BY THE AO, HE SHOULD PASS A SPEAKING AND REASONED ORDER AS TOWHY HE HAS NOT ACCEPTED THE CLAIM OF THE ASSESSEE. REGARDING THE CLAIM OF THE ASSESSEE THAT THE REMAINING UNEXPLAINED CASH DEPOSIT SHOULD BE TREATED AS BUSIN ESS RECEIPTS AND INCOME SHOULD BE ADDED TO THE EXTENT OF 8% OF THE SAID REC EIPTS U/S. 44AF OF THE IT ACT, I FEEL THAT THIS OBJECTION OF THE CIT (A) IS NOT VA LID THAT SINCE THE ASSESSEE AS A SALARIED EMPLOYEE, THERE CANNOT BE ANY BUSINESS TRA NSACTION. A SALARIED PERSON CAN ALSO BE DOING A PART-TIME BUSINESS IN TH E REMAINING TIME WHEN HE IS NOT IN THE OFFICE AND THEREFORE, MERELY BECAUSE A P ERSON IS A SALARIED EMPLOYEE, IT CANNOT BE STATED THAT THERE CANNOT BE ANY BUSINESS RECEIPT OF SUCH AN ASSESSEE. REGARDING THE ADDITION MADE BY THE AO OF RS. 2,95,045/- IN RESPECT OF PAYMENT MADE AGAINST CREDIT CARD BILLS W ITH DEUTSCHE BANK, I FIND THAT THE ORDER OF AO IS ALSO VERY CRYPTIC AND THE C IT(A) HAS NOT EVEN REFERRED TO THIS ISSUE IN THE IMPUGNED ORDER AND THEREFORE, ON THIS ISSUE, A SPEAKING AND REASONED ORDER SHOULD BE PASSED BY THE AO AFTER CON SIDERING THE EXPLANATION OF THE ASSESSEE IN THIS REGARD. ITA NO.1307/BANG/2016 PAGE 7 OF 7 8. I DIRECT THE AO TO PASS NECESSARY ORDER AS PER L AW IN THE LIGHT OF ABOVE DISCUSSION AFTER PROVIDING REASONABLE OPPORTUNITY O F BEING HEARD TO ASSESSEE AND THE ORDER PASSED BY HIM SHOULD BE A SPEAKING AN D REASONED ORDER. 9. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE STANDS ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON THE DATE MENT IONED ON THE CAPTION PAGE. SD/- (ARUN KUMAR GARODIA) ACCOUNTANT MEMBER BANGALORE, DATED, THE 19 TH JANUARY, 2018. /MS/ COPY TO: 1. APP ELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR, ITAT, BANGALORE. 6. GUARD FILE BY ORDER SENIOR PRIVATE SECRETARY, INCOME TAX APPELLATE TRIBUNAL, BANGALORE.