Sri V.I.Georgekutty, Kollam V. ITO, Kollam

ITA 138/COCH/2010

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 58208 (ITAT-COCHIN)
• Duration Of Justice: 1 year(s) 10 month(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 06-01-2012
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Next Hearing Date: 06-01-2012
• Assessment Year: 2005-2006
• Appeal Filed On: 23-02-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: VIJAYAPRABHA
• Assessee Lawyers: T M SREEDHARAN SR COUNSE L
• Keywords: Unexplained investment; Reasonable cause

Judgement Text

1 I.T.A. NO 135 TO 143/COCH/2009 ITA NO.326 & 327/COCH/2009 IN THE INCOME TAX APPELLATE TRIBUNAL COCHIN BENCH, COCHIN BEFORE SHRI N.R.S. GANESAN (JM) & SHRI B.R. BASKARA N (AM) ITA NO. 135/COCH/2010 - ASSESSMENT YEAR 2003-04 ITA NO. 136/COCH/2010 - ASSESSMENT YEAR 2005-06 ITA NO. 137/COCH/2010 - ASSESSMENT YEAR 2004-05 ITA NO. 138/COCH/2010 - ASSESSMENT YEAR 2005-06 ITA NO. 139/COCH/2010 - ASSESSMENT YEAR 2006-07 ITA NO. 140/COCH/2010 - ASSESSMENT YEAR 2003-04 ITA NO. 141/COCH/2010 - ASSESSMENT YEAR 2004-05 ITA NO. 142/COCH/2010 - ASSESSMENT YEAR 2005-06 ITA NO. 143/COCH/2010 - ASSESSMENT YEAR 2006-07 ITA NO. 326/COCH/2009 - ASSESSMENT YEAR 2004-05 ITA NO. 327/COCH/2009 - ASSESSMENT YEAR 2006-07 SHRI V.I. GEORGEKUTTY VS THE ITO, WD.1 VARROOR HOUSE KOLLAM PERUNGALLOR, PO AYOOR KOLLAM DIST. PAN : AAGPI4993E (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI T.M. SREEDHARAN, SR.COUNSE L RESPONDENT BY : MS. VIJAYAPRABHA, JR DR DATE OF HEARING : 06-01-2012 DATE OF PRONOUNCEMENT : 06-01-2012 2 I.T.A. NO 135 TO 143/COCH/2009 ITA NO.326 & 327/COCH/2009 O R D E R PER N.R.S. GANESAN (JM) ALL THE APPEALS OF THE ASSESSEE ARE DIRECTED AGAIN ST VARIOUS ORDERS OF THE COMMISSIONER OF INCOME-TAX(A). SINCE COMMON ISSUES ARISE FOR CONSIDERATION, WE HEARD ALL THE APPEALS TOGETHER AND DISPOSE THEM OFF BY THIS COMMON ORDER. 2. LET US FIRST TAKE ITAS NO.135&136/COCH/2010 AND ITA NO.326 & 327/COCH/2009. THE FIRST ISSUE ARISES FOR CONSIDER ATION IN ALL THESE APPEALS IS ESTIMATION OF PROFIT. 3. WE HEARD THE LD.SENIOR COUNSEL FOR THE ASSESSEE AND THE LD.DR. THE COMMISSIONER OF INCOME-TAX(A) FOR THE ASSESSMENT YE AR 2003-04 ESTIMATED THE PROFIT AT 1.25% OF THE TURNOVER; FOR THE ASSESSMEN T YEAR 2004-05 THE PROFIT WAS ESTIMATED AT 1%; FOR THE ASSESSMENT YEARS 2005-06 A ND 2006-07 THE PROFIT WAS ESTIMATED AT 1.25%. AFTER GOING THROUGH THE MATERI ALS AVAILABLE ON RECORD THE COMMISSIONER OF INCOME-TAX(A) ESTIMATED THE PROFIT AFTER TAKING INTO CONSIDERATION THE COMPARABLE CASES AND THE PROFIT R ATIO OF THE SIMILARLY PLACED TRADERS OF THE LOCALITY. THEREFORE, WE DO NOT FIND ANY INFIRMITY IN THE PROFIT RATIO ADOPTED BY THE COMMISSIONER OF INCOME-TAX(A). ACCO RDINGLY THE ORDER OF THE COMMISSIONER OF INCOME-TAX(A) IN ESTIMATING THE PRO FIT IS CONFIRMED FOR ALL THE YEARS. 3 I.T.A. NO 135 TO 143/COCH/2009 ITA NO.326 & 327/COCH/2009 4. THE NEXT GROUND OF APPEAL IS WITH REGARD TO THE UNEXPLAINED INVESTMENT IN THE CONSTRUCTION OF THE BUILDING. THE LD. SENIOR C OUNSEL FOR THE ASSESSEE SUBMITTED THAT THE ASSESSEE BORROWED LOAN FROM THE BANK AND UTILIZED THE SAME FOR CONSTRUCTION. THE ASSESSING OFFICER REJECTED TH E CLAIM OF THE ASSESSEE ON THE GROUND THAT THE LOAN WAS AVAILED AGAINST THE SECURI TY OF THE STOCK IN TRADE AND THEREFORE, IT COULD NOT BE USED FOR CONSTRUCTION OF THE BUILDING. ACCORDING TO THE LD.SENIOR COUNSEL, WHAT IS TO BE SEEN IS WHETHER TH E LOAN IS USED OR NOT. IF THE LOAN IS USED FOR CONSTRUCTION , THEN THERE CANNOT B E ANY ADDITION AS UNEXPLAINED INVESTMENT. THE LD.SENIOR COUNSEL SUBMITTED THAT T HE PROFIT ESTIMATED BY THE COMMISSIONER OF INCOME-TAX(A) IS ALSO AVAILABLE FOR COST OF CONSTRUCTION. WE HEARD MS. VIJAYAPRABHA, THE LD.DR ALSO. AS RIGHTLY SUBMITTED BY THE LD.SENIOR COUNSEL OF THE ASSESSEE MERELY BECAUSE THE LOAN WAS OBTAINED AGAINST THE STOCK IN TRADE, IT CANNOT BE SAID THAT THE ASSESSEE COULD NOT HAVE USED SUCH LOAN FOR CONSTRUCTION OF THE BUILDING. WHAT IS TO BE SEEN I S WHETHER THE ASSESSEE ACTUALLY UTILIZED THE LOAN FOR THE PURPOSE OF CONSTRUCTION. IF THE ASSESSEE IS ABLE TO ESTABLISH THE NEXUS BETWEEN THE BORROWAL OF THE LOA N AND THE CONSTRUCTION OF THE BUILDING, THEN THE ASSESSEE WOULD SUCCEED TO THAT E XTENT IN ESTABLISHING THE SOURCE OR THE INVESTMENT IN THE CONSTRUCTION. SIMI LARLY, THE PROFIT ESTIMATED BY THE ASSESSING OFFICER AS CONFIRMED BY THE COMMISSIO NER OF INCOME-TAX(A) WOULD ALSO BE AVAILABLE FOR INVESTMENT IN THE CONSTRUCTIO N OF COURSE SUBJECT TO PERSONAL DRAWINGS. THEREFORE, IT IS A MATTER FOR VERIFICA TION BY THE ASSESSING OFFICER. ACCORDINGLY, THE ORDERS OF THE LOWER AUTHORITIES WI TH REGARD TO UNEXPLAINED INVESTMENT IN COST OF CONSTRUCTION ARE SET ASIDE AN D THE ISSUE IS REMITTED BACK TO 4 I.T.A. NO 135 TO 143/COCH/2009 ITA NO.326 & 327/COCH/2009 THE FILE OF THE ASSESSING OFFICER. THE ASSESSING O FFICER SHALL EXAMINE THE ISSUE AFRESH IN THE LIGHT OF THE CONTENTIONS OF THE ASSES SEE AND THEREAFTER DECIDE THE SAME IN ACCORDANCE WITH LAW AFTER GIVING REASONABLE OPPORTUNITY OF HEARING TO THE ASSESSEE. 5. THE ASSESSEE ASSESSEE HAS RAISED ONE MORE GROUND WITH REGARD TO ESTIMATION OF INCOME AT RS.84,000 ON ACCOUNT OF TW O LORRIES. 6. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS ON EITH ER SIDE AND ALSO PERUSED THE MATERIAL AVAILABLE ON RECORD. THE ASSESSING OF FICER ESTIMATED THE INCOME FROM LORIES IN THE ABSENCE OF ANY DETAILS. EVEN BE FORE THE TRIBUNAL NO MATERIAL IS PRODUCED BY THE ASSESSEE WITH REGARD TO THE INCOME. THEREFORE, THE LOWER AUTHORITY HAVE NO OTHER WAY EXCEPT TO ESTIMATE THE INCOME IN TERMS OF SECTION 44AE. THE ASSESSING OFFICER HAS RIGHTLY ESTIMATED THE PROFIT IN TERMS OF SECTION 44AE @42,000 PER TRUCK AND FOR TWO TRUCKS IT WAS ES TIMATED AT RS.84,000. THEREFORE, WE DO NOT FIND ANY INFIRMITY IN THE ORDE R OF THE LOWER AUTHORITY. ACCORDINGLY THE SAME IS CONFIRMED. 7. NOW COMING TO ITAS NO.140, 141, 142 & 143/COCH/2 010, THESE APPEALS ARE AGAINST THE ORDER OF THE COMMISSIONER OF INCOME-TAX (A) CONFIRMING THE LEVY OF PENALTY U/S 271(1)(C) OF THE ACT. IN THE EARLIER P ART OF THIS ORDER, WE HAVE REMITTED BACK THE ADDITION MADE WITH REGARD TO INVE STMENT IN THE COST OF CONSTRUCTION AND IN RESPECT OF ESTIMATION OF PROFIT FROM THE BUSINESS AND INCOME 5 I.T.A. NO 135 TO 143/COCH/2009 ITA NO.326 & 327/COCH/2009 FROM LORRIES WAS CONFIRMED BY THIS TRIBUNAL. IN VI EW OF THE ORDER OF THIS TRIBUNAL REMANDING BACK THE MATTER TO THE FILE OF THE ASSESS ING OFFICER WITH REGARD TO THE INVESTMENT IN COST OF CONSTRUCTION, THE ASSESSING O FFICER HAS TO NECESSARILY RECONSIDER THE ISSUE AFTER COMPLETING THE ASSESSMEN T IN THE LIGHT OF DIRECTION OF THIS TRIBUNAL. ACCORDINGLY, THE ORDER OF LOWER AUT HORITIES WITH REGARD TO LEVY OF PENALTY IS SET ASIDE AND THE ENTIRE ISSUE IS REMITT ED BACK TO THE FILE OF THE ASSESSING OFFICER. THE ASSESSING OFFICER SHALL EXA MINE THE ISSUE AFRESH IN THE LIGHT OF THE ABOVE OBSERVATION OF THE TRIBUNAL AND THEREA FTER DECIDE THE SAME IN ACCORDANCE WITH LAW AFTER GIVING REASONABLE OPPORTU NITY OF HEARING TO THE ASSESSEE. 8. NOW COMING TO ITAS NO.137, 138 & 139/COCH/2010; THESE APPEALS ARE AGAINST THE ORDERS OF COMMISSIONER OF INCOME-TAX(A) CONFIRMING THE PENALTIES LEVIED U/S 271B OF THE ACT. THE LD.SENIOR COUNSEL SHRI T.M. SREEDHARAN SUBMITTED THAT THE ASSESSEE COULD NOT GET THE AUDIT REPORT IN ALL THE THREE YEARS. WE HAVE HEARD MS VIJAYAPRABHA ALSO. SINCE THE ASSESSEE COU LD NOT GET THE AUDIT REPORT FOR THE ASSESSMENT YEAR 2004-05 WE FIND NO JUSTIFIAB LE CAUSE FOR NOT OBTAINING THE AUDIT REPORT. THE EXPLANATION OF THE ASSESSEE FOR NOT OBTAINING THE AUDIT REPORT IS NOT JUSTIFIABLE. THEREFORE, WE CONFIRM TH E LEVY OF PENALTY U/S 271B OF THE ACT FOR THE ASSESSMENT YEAR 2004-05. HOWEVER, FOR THE ASSESSMENT YEARS 2005-06 AND 2006-07 THE ASSESSEE COULD NOT GET THE AUDIT REPORT SINCE THE ACCOUNTS OF ASSESSMENT YEAR 2004-05 WERE NOT FINALI ZED. UNLESS AND UNTIL THE ACCOUNTS OF ASSESSMENT YEAR 2004-05 ARE FINALIZED T HE ASSESSEE COULD NOT GET 6 I.T.A. NO 135 TO 143/COCH/2009 ITA NO.326 & 327/COCH/2009 THE AUDIT REPORT FOR THE ASSESSMENT YEARS 2005-06 A ND 2006-07. THEREFORE, THE ASSESSEE WAS PREVENTED BY SUFFICIENT CAUSE FOR NOT GETTING THE AUDIT REPORT FOR THESE TWO YEARS. THEREFORE, THIS TRIBUNAL HOLDS TH AT THE ASSESSEE WAS PREVENTED BY SUFFICIENT AND REASONABLE CAUSE FROM GETTING THE ACCOUNTS OF THE ASSESSEE AUDITED FOR THE ASSESSMENT YEARS 2005-06 AND 2006-0 7. IN VIEW OF THE ABOVE, WE DO NOT FIND ANY JUSTIFICATION FOR LEVY OF PENALTY U/ S 271B FOR THE ASSESSMENT YEARS 2005-06 AND 2006-07. ACCORDINGLY THE PENALTY LEVIE D FOR ASSESSMENT YEARS 2005- 06 AND 2006-07 ARE CANCELLED. 9. IN THE RESULT ITA NOS 135, 136/COCH/2010 & ITA N O.326 & 327/COCH/2009 ARE PARTLY ALLOWED; ITA NOS 140, 141, 142 & 143/COC H/2010 ARE ALLOWED, FOR STATISTICAL PURPOSE; ITA NO.137/COCH/20`10 IS DISMI SSED AND ITA NO.138 & 139/COCH/2010 ARE ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 06 TH DAY OF JANUARY, 2012 SD/- SD/- (B.R. BASKARAN) (N.R.S. GANESAN) ACCOUNTANT MEMBER JUDICIAL MEMBER COCHIN, DT : 06 TH JANUARY, 2012 PK/- COPY TO: 1. P.D. ABRAHAM ALIAS APPACHAN, SWARGACHITRA, JAIL ROA D, KOZHIKODE 2. THE A.C.I.T., CIR.1(1), KOZHIKODE 3. CIT, KOZHIKODE 4. THE DR (TRUE COPY) BY ORDER ASSTT. REGISTRAR, INCOME-TAX APPELLATE TRIBUNAL, COCHIN BENCH