K.Vigneshkumar, Sivakasi V. DCIT, Madurai

ITA 1313/CHNY/2015

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 95936 (ITAT-CHENNAI)
• Duration Of Justice: 3 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 02-09-2015
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: C
• Next Hearing Date: 28-08-2015
• Assessment Year: 2007-2008
• Appeal Filed On: 29-05-2015
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: A B KOLI IRS
• Assessee Lawyers: V RAJASEKARAN
• Keywords: Unexplained investment; Business income; Business expenditure
• Section: 153A; 37; 132

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL C (SMC) BENCH, CHENNAI , BEFORE SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER ./ I.T.A. NO.1313/MDS/2015 ( / ASSESSMENT YEAR : 2007--2008) K. VIGNESHKUMAR, NO.74, VELAYUTHAM ROAD, SIVAKASI 626 123. [PAN:AEJPV 3294A] ( /APPELLANT) VS THE DCIT, CENTRAL CIRCLE III, MADURAI, ( !' /RESPONDENT) / APPELLANT BY : SHRI. V. RAJASEKARAN, C.A. / RESPONDENT BY : SHRI. A.B. KOLI, IRS, JCIT. /DATE OF HEARING : 28.08.2018 ! /DATE OF PRONOUNCEMENT : 02.09.2015 # / O R D E R THIS APPEAL BY THE ASSESSEE IS DIRECT ED AGAINST THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS)-19, CHENNA I, DATED 25.02.2015 FOR THE ASSESSMENT YEAR 2007-2008. 2. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS:- (1) THE RESPECTABLE COMMISSIONER OF INCOME TAX (A PPEALS)- 19, CHENNAI WAS NOT JUSTIFIED WHILE PASSING THE ORD ER CONFIRMING ADDITION TOWARDS DISALLOWANCE OF EXPENSE S I.T.A.NO.1313/MDS/2015 :- 2 -: C42,188/- (SALARY C15,000, TRAVELLING EXPENSES C10, 480/- TELEPHONE C12,450/- AND GENERAL EXPENSES C4,258/-) FOR EARNING THE COMMISSION RECEIPTS C1,29,450/-. (2) THE RESPECTABLE COMMISSIONER OF INCOME TAX (APPEALS)-19, CHENNAI WAS NOT JUSTIFIED WHILE PASSI NG THE ORDER CONFIRMING ADDITION TOWARDS INVESTMENT IN SPN Y STONES PVT. LTD C3,00,000/- MADE OUT OF INCOME AND SAVINGS . 3. THE FACTS OF THE CASE ARE THAT THERE WAS A SEARCH U/S. 132 OF THE ACT IN THE CASE OF SHRI K. VIGNESHKUMAR, SON OF SHRI P. KARVANNAN, MANAGING DIRECTOR OF M/S. SONY FIREWORKS PRIVATE LIMITED. BOOKS OF ACCOUNTS, DOCUMENTS AND OTHER MAT ERIALS RELATING TO THE ASSESSEE AND THE GROUP CONCERNS WER E FOUND AND SEIZED/IMPOUNDED. ORIGINALLY BEFORE THE SEARCH THE ASSESSEE HAD NOT FILED ANY RETURNS OF INCOME. SUBS EQUENTLY, RELEVANT STATUTORY NOTICES WERE ISSUED. IN RESPONSE THE ASSESSEE FILED THE RETURN OF INCOMES AS UNDER: ASST. YEAR . DATE OF FILING INCOME RETURNED 2005-06 31.12.2009 RS.92834/- 2006-07 31.12.2009 RS.96098/- 2007-08 31.12.2009 RS.118936/ - 2008-09 31.12.2009 RS.315452/- DURING THE COURSE OF ASSESSMENT PROCEEDINGS, FOR AL L THE ASSESSMENT YEARS UNDER APPEAL, THE ASSESSEE HAD AD MITTED ADAYAM INCOME, COMMISSION AND INTEREST RECEIPTS AS HIS I.T.A.NO.1313/MDS/2015 :- 3 -: INCOME, BUT CLAIMED EXPENSES TOWARDS SALARIES, FORE IGN TRAVEL EXPENSES AND OTHERS. THESE EXPENSES, AS PER THE ASSESSING OFFICER COULD NOT BE ATTRIBUTED TO HAVE BEEN INCURRED FOR EARNING THE ABOVE INCOME. AS THE ASSES SEE COULD NOT PROVIDE PROPER EXPLANATION, THE ASSESSING OFFICER COMPLETED THE ASSESSMENT BY MAKING AN ADDITION ON A CCOUNT OF EXPENSES CLAIMED BY THE ASSESSEE TOWARDS SALARIES, FOREIGN TRAVEL EXPENSES AND OTHERS AS THE Y WERE NOT INCURRED FOR THE PURPOSE OF EARNING THE INCOME AND ONLY EXPENSES THAT ARE INCURRED FOR THE PURPOSE OF EARNI NG THE INCOME CAN BE ALLOWED AS INCOME. FOR THE ASSESSMENT YEAR 2007-08, IN ADDITION TO THE ABOVE, THE ASSESSEE HAD INVESTED C8 LAKHS AS SHARE CAPITAL AND C5 LAKHS AS ADVANCES. ON VERIFICATION, IT WAS FOUND THAT THERE WAS NO SUFFICIENT CASH BALANCE IN HIS PERSONAL ACCO UNTS TO SOURCE FOR C3 LAKHS. FOR C3 LAKHS, THE ASSESSEE COU LD NOT EXPLAIN THE SOURCES FOR THE INVESTMENT AND HENCE TH E ASSESSING OFFICER ADDED THE SAME AS UNEXPLAINED INVESTMENT TO THE TOTAL INCOME OF THE ASSESSEE. THE DETAILS OF ASSESSMENT ORDER PASSED U/S.143(3) RWS 153A ARE GIVEN BELOW: I.T.A.NO.1313/MDS/2015 :- 4 -: ASST. YEAR DATE OF ASST.ORDER INCOME ASSESSED 2005-06 06.12.2010 RS.118850/- 2006-07 06.12.2010 RS.130850/- 2007-08 06.12.2010 RS.461124/ - 2008-09 06.12.2010 RS.363310/- AGGRIEVED, THE ASSESSEE PREFERRED AN APPEAL BEFORE THE COMMISSIONER OF INCOME TAX (APPEALS). 4. REGARDING FIRST ISSUE THE COMMISSIONER OF INC OME TAX (APPEALS) OBSERVED THAT THE REASON OF THE ASSESSING OFFICER FOR DISALLOWING THE EXPENSES CLAIMED AGAINST ADAYAM/ CO MMISSION RECEIPTS. THOUGH THE ASSESSEE HAD EXPLAINED THE NA TURE OF HIS BUSINESS, HOWEVER, NO DETAILS, AS CALLED FOR WI TH REGARD TO EARNING OF INCOME AND INCURRING OF EXPENDITURE H AD BEEN FURNISHED. THE ASSESSEE EXPLAINS THAT MANY NORTH I NDIAN CONSUMERS WHO ARE NOT REGULAR/FIXED COME TO SIVAKAS I TO PLACE ORDERS WITH FIREWORKS FACTORIES AT SIVAKASI A ND THAT THE ASSESSEE HIMSELF OR THROUGH A PART-TIME EMPLOYEE B OOKS FIREWORKS ORDERS TO OTHER FIREWORKS FACTORIES & FOR THE PURPOSE HE GOES ALONG WITH THE CUSTOMERS TO OTHER FIREWORKS FACTORIES ADVISE THEM TO SELECT VARIETIES AND BARGAINING THEM WITH PRICE ETC. THE CUSTOMERS MAY N OT BE I.T.A.NO.1313/MDS/2015 :- 5 -: REGULAR OR FIXED, HOWEVER, THE PLACES OR THE FIREWO RKS FACTORIES AT SIVAKASI WOULD CERTAINLY BE KNOWN TO T HE ASSESSEE AS THE ASSESSEE HIMSELF BELONGS TO A FAM ILY OWNING A BIG BRAND FIREWORKS FACTORIES UNDER THE BR AND NAME OF 'SONY FIREWORKS'. SINCE THE ASSESSEE WOULD BE RECEIVING ADAYARRI/ COMMISSION FROM THOSE 'OTHER FIREWORKS FACTORIES', IT IS NOT KNOWN AS TO WHY THE DETAILS O F THOSE 'OTHER FIREWORKS FACTORIES', HAS BEEN WITHHELD AND NOT PROVIDED EVEN WHEN SPECIFICALLY CALLED FOR. IT IS A LSO NOT KNOWN AS TO WHY THE ASSESSEE BOOKS ORDER FOR 'OTHE R FIREWORKS FACTORIES' AND NOT FOR HIS OWN GROUP COMP ANIES DOING THE SAME BUSINESS. IN THE ABSENCE OF ANY DETA ILS FURNISHED BY THE APPELLANT, THE SUBMISSIONS CANNOT BE ACCEPTED AS THERE IS NO DETAIL OR EVIDENCE BROUGHT ON RECORD BY THE ASSESSEE TO SHOW THAT THE INCOME HAS BEEN E ARNED BY THE ASSESSEE BY CARRYING ON THE BUSINESS THE AS SESSEE CLAIMED TO HAVE BEEN DOING. IT IS ALSO PERTINENT TO MENTION HERE THAT ORIGINALLY, BEFORE THE SEARCH I.E., 21.10 .2008, THE ASSESSEE HAD NOT FILE ANY RETURN OF INCOME FOR ANY OF THE ASSESSMENT YEARS UNDER APPEAL, THOUGH THE SAME WERE DUE BEFORE THE DATE OF SEARCH. NO EVIDENCE WITH REGARD TO ACTUAL I.T.A.NO.1313/MDS/2015 :- 6 -: INCURRING OF EXPENDITURE HAS BEEN FURNISHED AND TH US WHEN THE ACTUAL SOURCE OF INCOME, CLAIMED TO BE BUSINESS INCOME, IS NOT KNOWN, THEN THE EO-RELATION OF THE EXPENSES WITH THE SOURCE OF INCOME AND THE EXPENSES HAVING BEEN INCUR RED WHOLLY AND EXCLUSIVELY FOR SUCH BUSINESS IS NOT EST ABLISHED . IT WAS PERTINENT TO MENTION HERE THAT THE ASSESSEE STATES THAT THE CUSTOMERS ONLY VISIT HIS PLACE OF BUSINESS , I.E. SIVAKASI THEN IT WAS NOT KNOWN AS . TO HOW AND WHY THE ASSESSEE WOULD BE INCURRING TRAVELLING EXPENSES, IN CLUDING FOREIGN TRAVEL EXPENSES. NO BILLS OR VOUCHERS, WITH REGARD TO ANY EXPENDITURE HAS BEEN BROUGHT ON RECORD BY THE ASSESSEE EVEN DURING THE COURSE OF APPEAL PROCEEDIN GS. IT WAS A SETTLED LAW THAT FOR MAKING A CLAIM OF EXPEND ITURE TO BE ALLOWABLE AS BUSINESS EXPENDITURE UNDER SECTION 37 OF THE ACT, THE ONUS IS ON THE CLAIMANT ASSESSEE TO PR OVE THAT THE EXPENDITURE HAD BEEN INCURRED WHOLLY AND EXCLUS IVELY FOR THE PURPOSE OF ITS BUSINESS. IT IS CONSIDERED R ELEVANT TO REPRODUCE-THE EXTRACTS OF THE DECISION OF HIGH COU RT OF BOMBAY IN THE CASE OF RAMANAND SAGAR V. DCIT [2002] 122 TAXMAN 152 (BOM.), WHEREIN THE DISALLOWANCE OF BUSINESS EXPENDITURE HAD BEEN UPHELD ON ACCOUNT OF FAILURE O N THE I.T.A.NO.1313/MDS/2015 :- 7 -: PART OF THE ASSESSEE TO PROVE THAT THE SAME HAD BEE N INCURRED WHOLLY AND EXCLUSIVELY FOR THE BUSINESS OF THE ASSESSEE. IN THE PRESENT CASE, THE ASSESSEE HAS NOT EVEN PROVED THE INCURRING OF THE EXPENDITURE CLAIMED AS BUSINESS EXPENDITURE, LET ALONE IT BEING WHOLLY AND IT'S USU ALLY FOR THE BUSINESS OF THE ASSESSEE. THE ASSESSEE THEREFORE, H AS FAILED TO DISCHARGE THE ONUS CAST ON IT BY LAW. THEREFORE THE CLAIM OF ASSESSEE WITH REGARD TO THE AFORESAID EXPENSES D EBITED TOWARDS SALARIES, FOREIGN TRAVEL & OTHERS ETC., CANNOT BE ALLOWED. ACCORDINGLY, THE COMMISSIONER OF INCOME TA X (APPEALS) UPHELD THE ORDER OF THE ASSESSING OFFICER . AGAINST THIS, THE ASSESSEE IS IN APPEAL BEFORE US. 5. HEARD BOTH PARTIES AND PERUSED THE MATERIAL ON RECO RD. THE ASSESSEE HAS NOT PLACED NECESSARY EVIDENCE FOR SUPP ORT OF THE CLAIM. WHENEVER THE ASSESSEE INCURS ANY EXPENDITURE, IT IS THE DUTY OF THE ASSESSEE TO PROVE THAT EXPENDITURE WAS INCURRED WHO LLY AND EXCLUSIVELY FOR THE PURPOSE OF BUSINESS AND ALSO TH E ASSESSEE SHALL PRODUCE RELEVANT EVIDENCE FOR THE SAME. SINCE, THE ASSESSEE HAS NOT PRODUCED REQUIRED EVIDENCE, THE LOWER AUTHORITIES A RE JUSTIFIED IN I.T.A.NO.1313/MDS/2015 :- 8 -: DISALLOWING THE CLAIM OF THE ASSESSEE. THIS GROUND OF THE ASSESSEE IS DISMISSED. 6. THE NEXT GROUND RAISED BY THE ASSESSEE IS WITH REG ARD TO INVESTMENT IN SQNY STONES PVT. LTD. 7. THE FACT OF THE CASE ARE THAT THE ASSESSEE HAD INVE STED C8 LACS AS SHARE CAPITAL AND C5 LAKHS AS ADVANCE. THE SOUR CES FOR THE INVESTMENT WERE EXAMINED BY THE ASSESSING OFFICER. THE ASSESSEE FURNISHED NECESSARY BANK ACCOUNT COPIES AND THE SOU RCES AS BELOW: (I) LIC POLICY LOAN FROM SBI : C5,00,000/- (II) WITHDRAWAL FROM M/S. SQNY GREMITES : C5,00,000 /- (III) WITHDRAWAL FROM PERSONAL FUNDS : C3,00,000/- ON VERIFICATION, IT WAS FOUND THAT THERE WAS NO SUF FICIENT CASH BALANCE IN HIS PERSONAL ACCOUNTS TO SOURCE FOR C3 LACS. T HE ASSESSEE HAS NOT BROUGHT ANY MATERIAL ON RECORD TO EXPLAIN THE SOURC ES FOR THE INVESTMENT. NO MATERIAL OR EVIDENCE WAS FURNISHED TO SUBSTANTIATE THE AVAILABILITY OF FUNDS FOR C3 LAKHS. THE ASSESSING O FFICER ADDED A SUM OF C3 LAKHS TO THE RETURNED INCOME AS ASSESSEES UNEXP LAINED INVESTMENT. AGGRIEVED, THE ASSESSEE PREFERRED AN APPEAL BEFORE THE COMMISSIONER OF INCOME TAX (APPEALS). THE COMMISSIONER OF INCOM E TAX (APPEALS) UPHELD THE ORDER OF THE ASSESSING OFFICER. AGAINST THIS, THE ASSESSEE IS IN APPEAL BEFORE US. I.T.A.NO.1313/MDS/2015 :- 9 -: 8. HEARD BOTH PARTIES AND PERUSED THE MATERIAL ON RECO RD. THE ASSESSEE HAS PLEADED THAT THE AMOUNT WAS CONTRIBU TED FROM OWN CAPITAL AND RESERVE AND SURPLUS. HOWEVER, THE ASSE SSEE HAS NOT FILED A COPY OF THE BALANCE SHEET FOR MY CONSIDERATION. HENCE, I AM NOT IN A POSITION TO APPRECIATE THE ARGUMENT OF THE ASSESS EE COUNSEL. ACCORDINGLY, THIS ISSUE IS REMITTED BACK TO THE FIL E OF THE ASSESSING OFFICER FOR FRESH CONSIDERATION WITH A DIRECTION TO THE ASSESSEE TO FILE THE BALANCE SHEET AS ON 31.03.2007 BEFORE THE ASSES SING OFFICER EXPLAINING THE INVESTMENT AND THE ASSESSING OFFICER WOULD DECIDE THE ISSUE AFRESH. THIS GROUND OF THE ASSESSEE IS PARTL Y ALLOWED FOR STATISTICAL PURPOSES. 9. IN THE RESULT, THE APPEAL OF THE ASSESSEE IN ITA NO.1313/MDS/2015 IS PARTLY ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED ON WEDNESDAY, THE 2ND DAY OF S EPTEMBER, 2015, AT CHENNAI. SD/- ( ) (CHANDRA POOJARI) / ACCOUNTANT MEMBER '# /CHENNAI. $% /DATED:02 .09.2015. KV %& '( )( /COPY TO: 1. * APPELLANT 2. / RESPONDENT 3. + ( )/CIT(A) 4. + /CIT 5. (,- . /DR 6. -/ 0 /GF. I.T.A.NO.1313/MDS/2015 :- 10 -: