ACIT, Madurai V. M/s. Hari Lubricants, Tirunelveli

ITA 1385/CHNY/2010

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 64243 (ITAT-CHENNAI)
• Duration Of Justice: 2 year(s) 20 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 14-09-2012
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Next Hearing Date: 22-08-2012
• Assessment Year: 2007-2008
• Appeal Filed On: 24-08-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: S DAS GUPTA IRS
• Assessee Lawyers: G BASKAR
• Keywords: Income from undisclosed sources
• Section: 133A; 132

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH CHENNAI BEFORE DR. O. K. NARAYANAN, VICE PRESIDENT AND AND SHRI V. DURGA RAO, JUDICIAL MEMBER ------- ITA NO. 1385/MDS/2010 ASSESSMENT YEAR : 2007-08 THE ASST. COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE-III, MADURAI. V. M/S. HARI LUBRICANTS, 28, SECOND STREET, PERUMALPURAM, TIRUNELVELI. (PAN : AAEFH3584Q) (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI S. DAS GUPTA, IRS, JCIT RESPONDENT BY : SHRI G. BASKAR, ADVOCATE DATE OF HEARING : 22.0 8.2012 DATE OF PRONOUNCEMENT : 14.09.201 2 O R D E R PER V. DURGA RAO, JUDICIAL MEMBER : THIS APPEAL BY THE REVENUE IS DIRECTED AGAINST T HE ORDER OF THE CIT(APPEALS)-II, MADURAI DATED 01-06-2010 FO R THE ASSESSMENT YEAR 2007-08. ITA NO.1385 /MDS/ 2010 2 2. FACTS IN BRIEF ARE THAT THE ASSESSEE IS ENGAGED IN THE BUSINESS OF DEALERSHIP IN PREMIER VEHICLES AND SALE OF LUBRICANT OILS AND GREASE. A SEARCH WAS CARRIED OUT U/S 132 OF THE INCOME TAX ACT, 1961 (('THE ACT' FOR SHORT) ON 04-0 7-2006 IN THE RESIDENTIAL PREMISES OF DIRECTOR, SRI R. PURUSH OTAMAN AND HIS WIFE, SMT. P. JANARTHANA SIMULTANEOUSLY AND A S URVEY U/S 133A WAS CONDUCTED IN THE BUSINESS PREMISES OF M/S. SUSEE AUTO, M/S. SUSEE VEHICLE DEALERS P. LTD., M/S. SUSE E AUTO ZONE, M/S. SUSEE ENGINEERING & AUTOMOBILES P. LTD. AND M/S. HARI LUBRICANTS, TIRUNELVELI ON THE SAME DAY. THE ASSESSEE FOR THE YEAR UNDER CONSIDERATION FILED A RETURN OF INCO ME DECLARING TOTAL INCOME OF ` 14,100/-. DURING THE COURSE OF THE ASSESSMENT PROCEEDINGS THE ASSESSING OFFICER OBSERV ED THAT THE ASSESSEE HAS COLLECTED SOME AMOUNT FROM THE CUS TOMERS, WHO PURCHASED VEHICLES FROM THE ASSESSEE, FOR THE P URPOSE OF REGISTRATION OF VEHICLES WITH THE RTO AND THE AMOUN T SO COLLECTED PER VEHICLE IS MORE THAN WHAT IS PAID TO THE RTO. A SMALL PORTION OF THE EXPENSES COLLECTED IS PAID TO THE RTO BUT THE ENTIRE EXPENSES COLLECTED WERE CLAIMED AS REGIS TRATION EXPENSES. ACCORDINGLY THE EXCESS AMOUNT COLLECTED WAS TO BE TREATED AS INCOME OF THE ASSESSEE. ACCORDING TO TH E ASSESSING ITA NO.1385 /MDS/ 2010 3 OFFICER THE ASSESSEE HAS SOLD 57 VEHICLES. FOR THE PURPOSE OF REGISTRATION THE ASSESSEE COLLECTED ` 1450/- PER VEHICLE. THE EXPENSES INCURRED FOR REGISTRATION CHARGES WAS ` 450/- ONLY AND THE BALANCE AMOUNT OF ` 1000/- WAS THE INCOME OF THE ASSESSEE. ACCORDINGLY, THE ASSESSING OFFICER ADDED ` 57,000/- WAS INCOME OF THE ASSESSEE. 3. THE ASSESSEE CARRIED THE MATTER BEFORE THE CIT(A ). IT WAS SUBMITTED BEFORE THE LEARNED CIT(APPEALS) THAT THE ASSESSEE WAS NOT CARRYING ON THE BUSINESS OF GETTIN G REGISTRATION WITH THE RTO. IT IS ONLY AN ADDED SER VICE PROVIDED TO THE CUSTOMERS. WHATEVER AMOUNT IS RECEIVED FROM THE BUYER WAS CREDITED TO THE P&L ACCOUNT AND THE EXPEN DITURE INCURRED WAS ALSO DEBITED TO THE P&L ACCOUNT. THE NET RESULT FROM THIS SOURCE OF INCOME AT BEST COULD BE TREATED AS INCOME FROM OTHER SOURCES AND NOT AS INCOME FROM BUSINESS. THE LEARNED CIT(APPEALS) AFTER CONSIDERING THE SUBMISSI ONS OF THE ASSESSEE AND BY RELYING ON THE DECISION OF THE TRIB UNAL IN THE CASE OF M/S. SUSEE AUTO PLAZA MOTORS P. LTD. MADURA I IN ITA NO. 1378 TO 1380 DATED 29-01-2010 DATED 29-01-2010 HAS OBSERVED THAT THERE IS NO UNACCOUNTED INCOME EARNED BY THE ASSESSEE. THE LEARNED CIT(APPEALS) HELD THAT THE ITA NO.1385 /MDS/ 2010 4 DISALLOWANCE MADE BY THE ASSESSING OFFICER WAS ON ESTIMATE BASIS AND IN SEARCH ASSESSMENT MAKING ESTIMATION WI THOUT RELYING ON THE SEIZED MATERIAL WAS NOT CORRECT. HE FURTHER OBSERVED THAT MOREOVER ON THE VERY SAME ISSUE THE T RIBUNAL HAS DELETED THE ADDITION MADE IN THE ABOVE MENTIONE D CASE WITH DETAILED STUDY OF THE FACTS AND THE LEGAL POSI TION. ACCORDINGLY, HE DELETED THE ADDITION MADE BY THE AS SESSING OFFICER. 4. IN BEING AGGRIEVED THE REVENUE HAS CARRIED THE M ATTER BEFORE THE TRIBUNAL. THE LEARNED DR SUPPORTED THE ORDER PASSED BY THE ASSESSING OFFICER. ON THE OTHER HAND , THE LEARNED COUNSEL FOR THE ASSESSEE SUPPORTED THE ORDE R PASSED BY THE LEARNED CIT(APPEALS) AND ALSO PLACED RELIED ON THE ORDER OF THE TRIBUNAL IN THE CASE OF M/S. SUSEE AUT O PLAZA MOTORS P. LTD., MADURAI (SUPRA). 5. WE HAVE HEARD BOTH THE SIDES, PERUSED THE RECORD S AND GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW. THE ONLY ISSUE FOR CONSIDERATION IS WHETHER THE ASSESSEE HAS INCURRED ALL THE AMOUNTS COLLECTED FOR THE PURPOSE OF REGISTRATI ON OF EACH VEHICLE AMOUNTING TO ` 1450/-. ACCORDING TO THE ASSESSING OFFICER THE ASSESSEE HAS SOLD 57 VEHICLES. IT HAD COLLECTED ` ITA NO.1385 /MDS/ 2010 5 82,650/- AS VEHICLE REGISTRATION EXPENSES. IT HAD ONLY SPENT ` 25,650/-. THE REMAINING AMOUNT WAS ADDED BY THE AS SESSING OFFICER AS THE INCOME OF THE ASSESSEE. ACCORDING T O THE LEARNED CIT(APPEALS) IT IS ONLY MERE ESTIMATION AND THERE IS NO MATERIAL BEFORE THE ASSESSING OFFICER TO COME TO TH E CONCLUSION THAT THE ASSESSEE HAS ONLY SPENT ` 450/- PER VEHICLE FOR REGISTRATION PURPOSE AND THE BALANCE AMOUNT WAS UNDISCLOSED INCOME OF THE ASSESSEE. AFTER CAREFUL CONSIDERATION OF THE ENTIRE FACTS OF THE CASE WE FI ND THAT THERE IS NOTHING ON RECORD TO SHOW THAT THE ASSESSEE HAD ONLY INCURRED ` 450/- PER VEHICLE FOR REGISTRATION. IT IS ONLY A MERE ESTIMATION. THE LEARNED CIT(APPEALS) BY FOLLOWING THE DECISION OF THE TRIBUNAL IN THE CASE OF M/S. SUSEE AUTO PLAZA MOTORS PVT. LTD., MADURAI (SUPRA) HAS DELETED THE A DDITION MADE BY THE ASSESSING OFFICER. WE FIND NO INFIRMIT Y IN THE ORDER PASSED BY THE LEARNED CIT(APPEALS). HIS ORDE R IS THEREFORE CONFIRMED. THE GROUND RAISED BY THE REVE NUE IS ACCORDINGLY DISMISSED. 6. THE SECOND GROUND OF APPEAL RELATES TO THE UNACC OUNTED INCOME OF ` 8 LAKHS. DURING THE COURSE OF THE ASSESSMENT PROCEEDINGS THE ASSESSING OFFICER HAS OBSERVED THAT THE ITA NO.1385 /MDS/ 2010 6 ASSESSEE FIRM HAS CURRENT ACCOUNT WITH TAMILNADU ME RCANTILE BANK, TIRUNELVELI. THE EXTRACTS OF THE BANK ACCOUNT SHOWED THE FOLLOWING CASH REMITTANCES ON VARIOUS DATES : DATE CASH DEPOSIT 05-06-2006 84,10 0 21-06-2006 4,00,000 21-06-2006 4,00,000 21-06-2006 4,00,000 21-06-2006 4,00,000 21-06-2006 4,00,000 22-06-2006 2,31,000 29-06-2006 1,33,310 IT IS ONLY FROM THE EXTRACTS OF THE BANK ACCOUNTS O F THE PARTNERS SMT. P. JANARTHANA AND SHRI HARIPRATHAN TH AT THEY HAD BEEN SANCTIONED A LOAN OF ` 4 LAKHS EACH WHICH HAD BEEN DEPOSITED IN THE FIRMS ACCOUNT ON 21-06-2006. THE SOURCE FOR THE OTHER CREDITORS ON THE SAME DATE WAS ASKED. IT WAS REPLIED THAT 3 CREDITORS, NAMELY SHRI R. SELVA SING H, SHRI FRANCIS SIDDHAR AND SMT. HARRIET MALINI HAD EACH OB TAINED PERSONAL LOAN FROM TAMILNADU MERCANTILE BANK, TIRUNE LVELI AND HAD LENT THE SAME TO THE FIRM. THIS SUM OF ` 20 LAKHS WAS USED TO PURCHASE THE DEALERSHIP OF M/S. HARI PREMIE R. IT IS UNDERSTANDABLE THAT THE PERSONAL LOAN GRANTED TO TH E PARTNERS HAD BEEN DEPOSITED INTO THE FIRMS ACCOUNT. THIS H AS NO ITA NO.1385 /MDS/ 2010 7 RELEVANCE. WHEN THE ASSESSEE WAS ASKED WHY IT CANN OT BE TREATED AS THE UNACCOUNTED INCOME OF THE PARTNERS, IN PARTICULAR THAT OF THE SENIOR PARTNER SMT. P. JANAR THANA, IT WAS REPLIED THAT THIS AMOUNT REPRESENTED THE LOAN FROM THE ABOVE THREE PERSONS AND THEY HAD PAID INTEREST ON THE ABO VE LOANS. CONFIRMATION LETTERS FROM THE CREDITORS HAD BEEN FU RNISHED BY THE ASSESSEE. IT WAS FOUND THAT THE CREDITORS ARE ASSESSED TO INCOME-TAX AND ON VERIFICATION OF THEIR INCOME-TAX RECORDS IT WAS FOUND THAT EXCEPT IN THE CASE OF SHRI R. SELVA SINGH, THE ABOVE LOAN WAS NOT ACCOUNTED IN THE INCOME-TAX STAT EMENTS OF SHRI FRANCIS SIDDHAR AND SMT. HARRIET MALINI. SIN CE THE LOAN OF ` 4 LAKHS LENT BY SHRI R. SELVA SINGH TO THE ASSESSE E FIRM IS ACCOUNTED FOR IN HIS INCOME-TAX STATEMENTS, THE LOA N GIVEN BY HIM WAS ACCEPTED. WHEREAS, THE LOAN IN THE NAMES O F THE OTHER TWO CREDITORS WAS NOT EXPLAINED BEYOND DOUBT AND THE SUM OF ` 8 LAKHS WAS TREATED AS BOGUS CREDITS AND ASSESSED AS THE UNACCOUNTED INCOME OF THE ASSESSEE. 7. ON BEING AGGRIEVED, THE ASSESSEE CARRIED THE MAT TER BEFORE THE LEARNED CIT(APPEALS). IT WAS SUBMITTED BEFORE THE LEARNED CIT(APPEALS) THAT FOR THE PURPOSE OF WORKIN G CAPITAL THE PARTNERS HAD APPROACHED THEIR RELATIVES, NAMELY SHRI R. ITA NO.1385 /MDS/ 2010 8 SELVA SINGH,SRI FRANCIS SIDDHAR AND SMT. HARRIET MA LINI AND RAISED PERSONAL LOAN OF ` 4 LAKHS EACH FROM TAMILNADU MERCANTILE BANK LTD. THE ASSESSEE HAD ALSO PRODUCED BANK LOAN STATEMENT TO SHOW THE SOURCES FOR THEM TO LEND THE FUNDS TO THE ASSESSEE AND THE ASSESSEE HAD ALSO FILED CON FIRMATION LETTERS FROM THE ABOVE SAID PARTIES. THE LEARNED C IT(APPEALS) AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE O BSERVED THAT THE ADDITION MADE BY THE ASSESSING OFFICER IS NOT CORRECT BASED ON THE FACT THAT THE OTHER 2 PARTIES HAD NOT ACCOUNTED THE LOAN RECEIVED FROM THE BANK. CONFIRMATION LETTE RS WERE FILED BEFORE THE ASSESSING OFFICER. THE LEARNED CIT (APPEALS) OBSERVED THAT AS THE LOANS WERE UTILIZED BY THE ASS ESSEE, THE CREDITORS HAVE NOT ACCOUNTED THESE LOANS IN THEIR R ETURNS. IT WAS ALSO CLAIMED BY THE ASSESSEE THAT THE LOANS RAI SED BY THE CREDITORS WERE REPAID BY THE ASSESSEE ONLY. THE AS SESSING OFFICER DID NOT MAKE ANY INDEPENDENT ENQUIRY WITH T HE TWO CREDITORS TO FIND OUT THE TRUTH AND WITHOUT SUPPORT ING EVIDENCE THE ADDITION COULD NOT BE SUSTAINED. THUS THE LEAR NED CIT(APPEALS) DELETED THE ADDITION MADE BY THE ASSES SING OFFICER. ITA NO.1385 /MDS/ 2010 9 8. THE REVENUE CARRIED THE MATTER BEFORE THE TRIBUN AL. THE LEARNED DR SUBMITTED THAT THE ASSESSEE HAS NOT FILED ANY SUPPORTIVE EVIDENCE THAT THE ASSESSEE HAS BORROWED THE FUNDS FOR THE PURPOSE OF ITS BUSINESS AND THAT THE PARTIE S HAD NOT ACCOUNTED THESE AMOUNTS IN THEIR INCOME-TAX RECORDS AND THEREFORE THE ASSESSING OFFICER HAS RIGHTLY MADE TH E ADDITION. 9. ON THE OTHER HAND, THE LEARNED COUNSEL FOR THE A SSESSEE SUBMITTED THAT THESE AMOUNTS WERE BORROWED FOR THE PURPOSE OF THE BUSINESS AND CONFIRMATIONS WERE FILED AND TH ESE AMOUNTS WERE ALSO REPAID. THEREFORE, NO ADDITION C AN BE MADE. 10. WE HAVE HEARD BOTH THE SIDES, PERUSED THE RECOR DS AND GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW. THE CASE OF THE ASSESSEE IS THAT THE ASSESSEE HAS BORROWED ` 12,00,000/- FROM 3 PARTIES, NAMELY, SHRI R. SELVA SINGH, SHRI F RANCIS SIDDHAR AND SMT. HARRIET MALINI. ACCORDING TO THE ASSESSING OFFICER, ONLY ONE PARTY NAMELY SHRI R. SELVA SINGH HAD RECORDED THE SAME IN THE INCOME-TAX STATEMENT. THE REMAINING 2 PARTIES HAD NOT ACCOUNTED IN THE INCOME TAX STATEMENTS. ACCORDINGLY, HE CAME TO THE CONCLUSION THAT THE AMOUNTS BORROWED FROM THE TWO PARTIES WERE UNACCOUN TED ITA NO.1385 /MDS/ 2010 10 INCOME OF THE ASSESSEE. ACCORDING TO THE LEARNED CIT(APPEALS) IDENTITY OF THE PARTIES HAD BEEN PROVE D, CONFIRMATIONS WERE FILED AND THE PARTIES FROM WHOM THE ASSESSEE HAD BORROWED THE AMOUNT HAD THE CAPACITY T O LEND THE AMOUNT. THE ONLY THING IS THAT THEY HAD NOT AC COUNTED FOR THE SAME IN THE INCOME-TAX STATEMENT. THE LEARNED CIT(APPEALS) THEREFORE DELETED THE ADDITION. WE FI ND THAT IN THIS CASE THE ASSESSEE HAS BORROWED THE MONEY FOR T HE PURPOSE OF ITS BUSINESS. THE ASSESSEE HAS BORROWED THE AMOUNT FROM THREE PARTIES. ONE PARTY, NAMELY SHRI R. SELVA SINGH ACCOUNTED THIS AMOUNT IN HIS INCOME-TAX STATE MENT. THE REMAINING 2 PARTIES DID NOT RECORD IT IN THEIR INCOME-TAX STATEMENTS. THAT IS THE ONLY DOUBT ON WHICH THE AS SESSING OFFICER HAS COME TO THE CONCLUSION THAT IT IS THE U NACCOUNTED MONEY OF THE ASSESSEE. THE ASSESSEE HAS FILED CONF IRMATION FROM THE PARTIES. IDENTITY OF THE PARTIES HAS BEEN PROVED AND THE CAPACITY IS NOT DOUBTED. UNDER THESE CIRCUMSTA NCES, WE ARE OF THE OPINION THAT THE ASSESSEE HAS DISCHARGED THE ONUS CAST UPON IT AND THEREFORE NO ADDITION CAN BE MADE ON THIS COUNT. WE THEREFORE FIND NO INFIRMITY IN THE ORDER PASSED BY ITA NO.1385 /MDS/ 2010 11 THE LEARNED CIT(APPEALS). ACCORDINGLY, WE CONFIRM HIS ORDER AND DISMISS THE REVENUES APPEAL ON THIS GROUND. 11. IN THE RESULT, THE APPEAL FILED BY THE REVENUE IS DISMISSED. ORDER PRONOUNCED ON FRIDAY, THE 14 TH OF SEPTEMBER, 2012, AT CHENNAI. SD/- SD/- (DR. O. K. NARAYANAN) ( V.DURGA RAO ) VICE PRESIDENT JUDICIAL MEMBER CHENNAI, DATED THE 14 TH SEPTEMBER, 2012. H. COPY TO: ASSESSEE/AO/CIT (A)/CIT/D.R./GUARD FILE